Recovering for Pre-Award Unilateral Mistakes 

Upon being awarded federal contracts, contractors sometimes find that they made a mistake in their bid or proposal regarding the level of effort required for performance. In such situations, contractors may seek relief in the form of a pricing adjustment or change in performance requirements under the theory of unilateral mistake. To obtain recovery for a unilateral mistake, contractors must present evidence establishing that: (1) a mistake in fact occurred prior to contract award; (2) the mistake was a clear-cut, clerical or mathematical error or a misreading of the specifications and not a judgmental error; (3) prior to award the government knew, or should have known, that a mistake had been made and, therefore, should have requested bid verification; (4) the government did not request bid verification or its request for bid verification was inadequate; and (5) proof of the intended bid is established. Contractors must meet all five elements with clear and convincing evidence. If contractors can satisfy these elements with the required burden of proof, the contract may be reformed to reflect the correction, and relief may be obtained either through a pricing adjustment or a change in performance requirements. 

In Info. Int’l Associates, Inc. v. United States, 74 Fed. Cl. 192 (2006), the Court of Federal Claims (COFC) determined that the contractor was entitled to reformation of its contract with the U.S. Air Force because it had established the presence of a unilateral mistake in its price proposal. The contract was issued for the management of libraries on five Air Force bases, with the request for proposals (RFP) requiring offerors to submit pricing for each base separately for the five-year contract. After the contractor was included in the competitive range, the agency required it to submit a final price proposal, in which the contractor reduced its proposed price from its initial submission. During the final price evaluation, the contracting officer (CO) checked the contractor’s pricing schedule and compared it with the pricing of the other remaining offeror in the competitive range. Notably, however, the CO did not compare the contractor’s initial proposed pricing to its final pricing and failed to recognize that while there was only a 4.5% overall price reduction in the contractor’s pricing, its pricing for one of the five bases, the Malmstrom Air Force Base (AFB), had reduced by almost 25%. 

Following the award, the contractor discovered that its final price proposal for the Malmstrom AFB erroneously omitted the salary for a Library Assistant from all five contract years, except for the first two months of the base year. The contractor notified the CO of the error and later filed a claim, which was deemed denied. In the ensuing lawsuit at the COFC, the contractor moved for summary judgment, arguing that the error was a unilateral mistake, and sought reformation of the contract to recover the Library Assistant’s wages with interest. Meanwhile, the government cross-moved for summary judgment, arguing that the contractor could not establish that the CO had constructive notice of the mistake before making the award. Additionally, the government took the position that the contractor could not establish the correct bid amount with clear and convincing evidence. Thus, the government contended that the contractor was barred from recovering under the theory of unilateral mistake because it could not satisfy elements (3) and (5) with the necessary burden of proof. The COFC analyzed all five elements of a unilateral mistake and disagreed with the government.

The First element was satisfied as the parties agreed that the contractor had committed the mistake before the contract was awarded. Specifically, the contractor erroneously entered incorrect numbers for the Library Assistant position into its bid sheet before submitting its best and final offer. The Second element was met because the parties agreed that the mistake was a clear-cut clerical error, as the omission resulted from incorrect numbers being copied from a backup sheet into the best and final pricing sheet submitted to the government. For the Third element, which requires that the government have pre-award actual or constructive knowledge of the mistake, the Court determined that the CO should have known that there was a possible error in the contractor’s pricing for the Malmstrom AFB. The decision explained that when the CO compared the final pricing of the contractor with that of the other remaining offeror in the competitive range, she should have noticed that the contractor’s final pricing was up to 10% higher for four of the five bases but between 33% to 39% lower for the Malmstrom AFB. In addition, the Court found that no other factors, apart from a mistake, could reasonably explain the difference in the offerors’ pricing. As a result, the Third element was satisfied as the Court determined that the government had pre-award constructive knowledge of the mistake. 

Next, the Fourth element was met because the CO failed to request that the contractor verify its final proposed pricing for Malmstrom AFB. Finally, the Court determined that the Fifth element was also satisfied because the contractor had successfully established what the correct amount of its bid would have been but for the mistake in its best and final Malmstrom AFB pricing. In this regard, the record showed that the salary for the Library Assistant in the contractor’s backup pricing sheet for the initial and final price proposal was the same for the first two months of the contract. Furthermore, the number of hours for the Library Assistant position included in the contractor’s backup spreadsheet was identical to the actual hours worked by the Library Assistant at the Malmstrom AFB for the duration of the contract. Therefore, the backup spreadsheets were clear and convincing evidence that the contractor’s final bid should have been $174,882 higher than it was had it not been for the mistake. As the Fifth and final element was also met, the contractor was granted summary judgment as the COFC reformed the contract to reflect the correct bid amount.

Contractors may recover when they discover a unilateral mistake in their bid after contract award. To successfully recover under the common law theory of unilateral mistake in government contracts, contractors must satisfy five elements. These elements require contractors to prove that: (1) a mistake in fact occurred prior to contract award; (2) the mistake was a clear-cut, clerical or mathematical error or a misreading of the specifications and not a judgmental error; (3) prior to award the government knew, or should have known, that a mistake had been made and, therefore, should have requested bid verification; (4) the government did not request bid verification or its request for bid verification was inadequate; and (5) proof of the intended bid is established. Contractors must meet all five elements by presenting clear and convincing evidence. Once the elements of unilateral mistake are established, the contract may be reformed to reflect the correct bid amount, or performance may be excused.

This Federal Contract Claims Insight is provided as a general summary of the applicable law in the practice area and does not constitute legal advice. Contractors wishing to learn more are encouraged to consult the TILLIT LAW PLLC Client Portal or Contact Us to determine how the law would apply in a specific situation.