With respect to Government contracts, the United States Court of Appeals for the Federal Circuit has stated that a Government contract can be reformed when the Contracting Officer had direct or indirect knowledge that a contractor's bid or proposal contained a clear clerical or mathematical error or misreading of the specifications.5
The Federal Acquisition Regulations (the “FAR”) state that an agency, when it learns of a mistake in bid, is authorized to either (i) rescind a contract; or (ii) reform a contract only on the basis of clear and convincing evidence that a mistake in the bid was made, and if the mistake is made unilaterally by the contractor, the mistake is so obvious as to have charged the Contracting Officer (“CO”) with notice of the probability of the mistake.6
The issue of unilateral mistake in bid was discussed in more detail by the United States Court of Federal Claims (the “Court”) in its opinion concerning Information International Associates, Inc. (“IIA”) v.The United States, No.04-1489C, October 31, 2006. The Air Force issued a request for proposal (“RFP”) to obtain “labor and supplies to man and manage libraries located at five (5) Air Force Bases.” In its Final Proposal Revision (“FPR”) IIA submitted a revised price that was a 4.5% overall decrease and a 24.92% decrease at one Air Force Base. More than four (4) years after award of the contract to IIA, the contractor notified the Contracting Officer of a
mistake in the bid. IIA had discovered that one labor category at one Air Force base had been deleted from the FPR except for the first two months of the base year. IIA submitted a Request for Equitable Adjustment requesting reformation of the contract to increase the price. The CO denied the request citing the reasons stated in FAR Subsection 14.407. Thereafter, a certified claim was submitted by IIA and “deemed denied” by the agency. Consequently, IIA timely appealed the deemed denial to the Court.
The Court listed the five (5) “elements of proof necessary to establish a unilateral mistake in the context of a Government contract” discovered after award of the contact:
1. “The contractor must show by clear and convincing evidence that: 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;
