Prestex Inc. v. The United States
162 Ct. Cl. 620, 1963 U.S. Ct. Cl. LEXIS 121, 320 F.2d 367 (1963)
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Rule of Law:
A government contract is invalid if awarded based on a bid that substantially deviates from the advertised specifications in price, quantity, or quality. Furthermore, a contractor cannot recover in quasi-contract for costs incurred under such an invalid contract unless the government has accepted or retained a tangible benefit from the contractor's performance.
Facts:
- The United States Military Academy issued an invitation for bids to supply white duck cloth that conformed to a specific military specification, MIL-D-1645.
- The plaintiff, a company that had previously supplied cloth meeting this exact specification, submitted a bid in response to the invitation.
- In its bid, the plaintiff inserted a handwritten note stating it was 'Bidding on enclosed sample,' and included a cloth sample.
- This sample substantially deviated from the MIL-D-1645 specification in ways not immediately visible, including being lighter, having a lower thread count, and using two-ply instead of four-ply yarn, making it cheaper to produce.
- The government's contracting officer, believing the only deviation was in width, awarded the contract to the plaintiff based on its non-conforming bid.
- Before receiving approval of a required preproduction sample, the plaintiff manufactured the entire contract quantity of 25,000 yards of the non-conforming cloth.
- Upon testing the plaintiff's submitted sample, the government discovered the significant deviations from the specification.
- The government rejected the preproduction sample and refused to accept delivery of any of the manufactured cloth.
Procedural Posture:
- The contracting officer rejected the plaintiff's preproduction sample and refused delivery.
- Plaintiff appealed the contracting officer's decision to the Armed Services Board of Contract Appeals.
- The Board of Contract Appeals dismissed the appeal for lack of jurisdiction.
- The Comptroller General issued a decision finding the contract was invalid and that no recovery was possible.
- Plaintiff filed a petition in the U.S. Court of Claims, suing the United States for breach of contract or, alternatively, recovery on a quasi-contract theory.
- The defendant (United States) moved for summary judgment, and the plaintiff filed a cross-motion for summary judgment.
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Issue:
Is a government contract valid when awarded based on a bid that substantially deviates from the advertised specifications, and if not, can the contractor recover its manufacturing costs on a quasi-contractual basis if the government received no tangible benefit from the performance?
Opinions:
Majority - Jones, Chief Judge
No. A government contract is invalid if it is based on a bid that substantially deviates from the advertised specifications, and a contractor cannot recover its costs on a quasi-contract theory if the government has not accepted or retained any benefit from the performance. The Armed Services Procurement Act requires that contracts be awarded to the responsible bidder whose bid conforms to the invitation. A contracting officer lacks the authority to waive a substantial deviation—one that affects the price, quantity, or quality of the goods. Here, the plaintiff's bid sample was substantially different in quality and price from the specified cloth, rendering the bid non-responsive and the resulting contract invalid ab initio. To allow such an award would undermine the integrity of the competitive bidding system. Regarding the alternative claim, recovery in quasi-contract against the government is only permitted to prevent unjust enrichment, which requires that the government receive and retain a benefit. Because the government promptly discovered the non-conformity, rejected the sample, and never accepted or used any of the cloth, it received no benefit and was not unjustly enriched. Therefore, the plaintiff is not entitled to any recovery.
Analysis:
This decision reinforces the strict compliance required in public contracting and underscores the limited authority of government contracting officers. It establishes that a contractor's detrimental reliance on a contracting officer's mistake in accepting a non-conforming bid does not create an enforceable contract. The ruling also clarifies the narrow grounds for quasi-contractual recovery against the government, limiting it strictly to cases of unjust enrichment where a tangible benefit is retained, thereby protecting the public treasury from paying for goods or services it never actually received.
