B-134277, FEB. 24, 1961

B-134277, FEB. 24, 1961

TO WORTHY CHEMICALS, INC.:

REFERENCE IS MADE TO A LETTER DATED FEBRUARY 3, 1961, FROM YOUR ATTORNEY, SIDNEY HOLZER, ESQUIRE, IN REPLY TO OUR LETTER OF JANUARY 18, 1961, ADVISING YOU THAT THE DEPARTMENT OF JUSTICE HAS REJECTED YOUR OFFER TO PAY FIVE PERCENT OF YOUR INDEBTEDNESS TO THE UNITED STATES IN THE AMOUNT OF $48,027.95, THE OFFER BEING SUBMITTED AS IN FULL SETTLEMENT OF THE REPORTED LIABILITY. WE ALSO ADVISED YOU THAT BY LETTER OF APRIL 13, 1960, THE VETERANS ADMINISTRATION REPORTED A BALANCE OF $48,144.15 TO BE DUE THE UNITED STATES IN THIS CASE AND, IN VIEW OF THE REJECTION BY THE DEPARTMENT OF JUSTICE OF YOUR OFFER OF SETTLEMENT, WE REQUESTED PAYMENT OF THAT AMOUNT.

IN HIS LETTER OF FEBRUARY 3, 1961, MR. HOLZER REQUESTED TO BE ADVISED AS TO THE BASIS FOR THE REJECTION OF YOUR OFFER BY THE DEPARTMENT OF JUSTICE, STATING THAT IN THE ABSENCE OF SUCH INFORMATION AND PREDICATED UPON PERSONAL DISCUSSIONS WITH REPRESENTATIVES OF THE VETERANS ADMINISTRATION AND OUR OFFICE, HE COULD ONLY CONCLUDE THAT THE REJECTION OF THE OFFER WAS MADE WITHOUT REGARD TO THE MATERIAL FACTS. IN REFERRING YOUR OFFER TO THE DEPARTMENT OF JUSTICE WE ENCLOSED FOR THE INFORMATION OF THE DEPARTMENT THE ENTIRE FILE TRANSMITTED HERE BY THE VETERANS ADMINISTRATION. LETTER OF JANUARY 10, 1961,THE DEPARTMENT OF JUSTICE ADVISED OF THE REJECTION OF YOUR OFFER BUT GAVE NO REASON FOR THAT ACTION. IT MAY REASONABLY BE ASSUMED THAT THE DEPARTMENT OF JUSTICE CONCLUDED THAT YOUR OFFER WAS UNACCEPTABLE ON THE BASIS OF THE RECORD BEFORE IT.

AMONG OTHER THINGS, MR. HOLZER MADE REFERENCE TO THE PERTINENT PROVISIONS OF THE SPECIFICATIONS RELATIVE TO THE METHOD OF TESTING AND STATED THAT THE MATERIALS HEREIN WERE SELECTED AT RANDOM, WERE FULLY TESTED BY YOUR CONCERN AND FOUND TO COMPLY WITH THE SPECIFICATIONS. HE THEN WENT ON TO POINT OUT THAT ON "ALL PREVIOUS BIDS" THE GOVERNMENT REQUIRED TWO UNIT PACKAGES AND THAT ALL LATER BIDS RETURNED TO THE REQUIRED TWO PACKAGE UNIT. THIS APPEARS TO HAVE REFERENCE TO THE FACT THAT IN THE INSTANT MATTER, AT LEAST WITH RESPECT TO THE FIRST TWO CONTRACTS, THE SPECIFICATIONS WERE WRITTEN IN SUCH A MANNER AS TO ALLOW THE FIXER AND HARDENER TO BE DELIVERED PRE-MIXED TOGETHER IN ONE BOTTLE, IT BEING REPORTED BY THE VETERANS ADMINISTRATION THAT THE INITIAL USE OF FEDERAL SPECIFICATIONS NO. O-F-400 WAS IN CONFORMITY WITH THE GENERAL GOVERNMENT POLICY OF ADOPTING FEDERAL IN LIEU OF AGENCY SPECIFICATIONS, WHEN PRACTICABLE.

AS A BASIS FOR REQUESTING FURTHER CONSIDERATION OF THIS CLAIM, MR. HOLZER STATED THAT MANY CASES HOLD THAT WHEN A PURCHASER PROVIDES THE SPECIFICATIONS FOR HIS PRODUCT, A MANUFACTURER WHO COMPLIES THEREWITH, EVEN IF HIS PRODUCT IS UNUSABLE, HAS PERFORMED UNDER HIS CONTRACT. WHILE WE WOULD NOT, GENERALLY SPEAKING, DISAGREE WITH THE POSITION TAKEN BY MR. HOLZER, WE ARE UNABLE TO AGREE THAT UNDER THE REQUIREMENTS OF THE SPECIFICATIONS HEREINABOVE REFERRED TO, THE FACT THAT THE MATERIALS INVOLVED APPEAR TO HAVE BEEN MANUFACTURED IN ACCORDANCE WITH PRESCRIBED STANDARDS IS DECISIVE OF THIS MATTER.

FEDERAL SPECIFICATION NO. 0-F-400, DATED AUGUST 3, 1954, WAS INCORPORATED BY REFERENCE INTO THE CONTRACTS INVOLVED IN THIS CASE. PARAGRAPH 3.4 THEREOF PROVIDES AS FOLLOWS:

"3.4 STORAGE LIFE.---THE CONCENTRATED LIQUID FIXER IN UNOPENED CONTAINERS SHALL BE STABLE FOR A PERIOD OF AT LEAST 2 YEARS WHEN STORED AT TEMPERATURES NOT EXCEEDING 90 DEGREES F.'

THE INDEBTEDNESS IN THIS CASE IS PREDICATED UPON THE ASSERTION OF THE VETERANS ADMINISTRATION THAT YOUR FIXER AND DEVELOPER FAILED TO MAINTAIN THEIR STABLE QUALITY FOR THE REQUIRED PERIOD OF TWO YEARS. IN A LETTER DATED MAY 7, 1958, TERMINATING YOUR RIGHT TO PROCEED UNDER PURCHASE ORDER NO. 57-VA-1468, THE VETERANS ADMINISTRATION ADVISED YOUR CONCERN IN SOME DETAIL RESPECTING THE COMPLAINTS RECEIVED FROM ITS VARIOUS INSTALLATIONS CONCERNING THE FAILURE OF THE MATERIALS TO MEET THE SPECIFICATIONS.

THERE IS NOTHING SET FORTH IN MR. HOLZER'S LETTER WHICH MAY BE ACCEPTED AS A DEFENSE TO THE GOVERNMENT'S CLAIM, SINCE THE TEST AS TO YOUR LIABILITY APPEARS NOT TO BE WHETHER THE MATERIALS MET THE CONTRACT REQUIREMENTS PRIOR TO DELIVERY BUT RATHER WHETHER THEY MAINTAINED THEIR "STABLE" QUALITY FOR A PERIOD OF TWO YEARS AFTER DELIVERY, AS REQUIRED BY THE QUOTED PARAGRAPH FROM THE CITED FEDERAL SPECIFICATIONS. THE ADMINISTRATIVE CONTENTION THAT THE MATERIALS DELIVERED FAILED TO MEET THE CONTRACT REQUIREMENTS GAINS SOME SUPPORT FROM THE FACT THAT YOUR CONCERN REPLACED CERTAIN UNUSABLE MATERIAL. FOR YOUR INFORMATION WE INVITE ATTENTION TO THE FOLLOWING LANGUAGE CONTAINED IN A LETTER DATED JANUARY 7, 1958, FROM THE ADMINISTRATOR OF VETERANS AFFAIRS TO OUR OFFICE:

"* * * THE CONTRACT OF MAY 8, 1956 WAS FOR DELIVERY DURING THE QUARTER JANUARY-MARCH 1957, AND THE CONTRACT OF JANUARY 9, 1957 WAS FOR DELIVERY DURING THE QUARTER APRIL-JUNE 1957. REPORTS OF UNSATISFACTORY PERFORMANCE IN USE OF THE LOTS RECEIVED BY THE DEPOTS DURING THE THIRD QUARTER WERE RECEIVED IN JULY 1957, INDICATING THAT AT THE MOST, NOT MORE THAN SIX MONTHS COULD HAVE ELAPSED BETWEEN THE TIME THE FIXER WAS RECEIVED INTO OUR DEPOTS AND THE TIME IT WAS ACTUALLY PUT INTO USE IN OUR FIELD STATIONS.'

UPON THE BASIS OF THE RECORD BEFORE US WE MUST CONCLUDE THAT YOU ARE LEGALLY LIABLE TO THE UNITED STATES FOR THE INDICATED AMOUNT OF $48,144.15, AND WE HAVE NO ALTERNATIVE BUT TO REQUEST THAT AMOUNT BE REMITTED TO OUR OFFICE IT WILL BE APPRECIATED IF YOU WILL INDICATE YOUR INTENTIONS RESPECTING PAYMENT WITHIN TWENTY DAYS FROM THE DATE OF THIS LETTER.