A-55498, MAY 17, 1934, 13 COMP. GEN. 366

A-55498: May 17, 1934

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CONTRACTS - TERMINATION - MISTAKE IN BID - CODES OF FAIR COMPETITION THERE IS NO LEGAL BASIS WHATEVER FOR THIRD PARTIES TO GIVE NOTICE TO EITHER THE GOVERNMENT OR ITS CONTRACTORS THAT THERE MUST BE CANCELED A GOVERNMENT CONTRACT BECAUSE PRICES ARE BELOW THE CODE PRICES. A GOVERNMENT CONTRACTOR MAY NOT BE RELIEVED OF ITS LIABILITY UNDER A GOVERNMENT CONTRACT ON THE GROUND THAT THE ACCEPTED BID PRICE IS BELOW CODE PRICES. THE BIDS WERE OPENED AND THE BID OF THE CITIES SERVICE COMPANY. IN THE AMOUNT OF 10 1/2 CENTS PER GALLON BEING THE LOWEST RECEIVED WAS ON MARCH 20. THAT IT CANNOT ACCEPT THIS BUSINESS ON THE BASIS OF ITS BID AND THE ONLY DISCOUNT THAT IT IS PERMITTED TO GIVE IS ON THE QUANTITY DISCOUNT BASIS.

A-55498, MAY 17, 1934, 13 COMP. GEN. 366

CONTRACTS - TERMINATION - MISTAKE IN BID - CODES OF FAIR COMPETITION THERE IS NO LEGAL BASIS WHATEVER FOR THIRD PARTIES TO GIVE NOTICE TO EITHER THE GOVERNMENT OR ITS CONTRACTORS THAT THERE MUST BE CANCELED A GOVERNMENT CONTRACT BECAUSE PRICES ARE BELOW THE CODE PRICES, OR OTHERWISE. A GOVERNMENT CONTRACTOR MAY NOT BE RELIEVED OF ITS LIABILITY UNDER A GOVERNMENT CONTRACT ON THE GROUND THAT THE ACCEPTED BID PRICE IS BELOW CODE PRICES.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF COMMERCE, MAY 17, 1934:

THERE HAS BEEN RECEIVED YOUR LETTER OF MAY 7, 1934, AS FOLLOWS:

ON MARCH 2, 1934, THE BUREAU OF LIGHTHOUSES, OF THIS DEPARTMENT, ADVERTISED FOR BIDS FOR FURNISHING MOTOR GASOLINE, FOR USE IN POWER BOAT AND KOHLER GENERATING UNIT AT ASHTABULA, OHIO, IN QUANTITIES AS MAY BE REQUIRED FROM DATE OF ACCEPTANCE OF BID TO JUNE 30, 1934. ON MARCH 18, 1934, THE BIDS WERE OPENED AND THE BID OF THE CITIES SERVICE COMPANY, ASHTABULA, OHIO, IN THE AMOUNT OF 10 1/2 CENTS PER GALLON BEING THE LOWEST RECEIVED WAS ON MARCH 20, 1934, ACCEPTED.

ON APRIL 5, 1934, THE CONTRACTOR INFORMED THIS DEPARTMENT THAT THE PLANNING AND COORDINATION COMMITTEE FOR THE PETROLEUM INDUSTRY SERVED NOTICE ON ALL OIL COMPANIES THAT THEY MUST CANCEL ALL GOVERNMENT CONTRACTS FOR MOTOR GASOLINES BY TANK WAGONS, EFFECTIVE IMMEDIATELY. THE CONTRACTOR FURTHER STATES THAT IN ACCORDANCE WITH THE PRESIDENT'S ORDER OF MARCH 15, 1934, EXECUTIVE ORDER NO. 6646, THAT IT CANNOT ACCEPT THIS BUSINESS ON THE BASIS OF ITS BID AND THE ONLY DISCOUNT THAT IT IS PERMITTED TO GIVE IS ON THE QUANTITY DISCOUNT BASIS. THE CONTRACTOR HAS MADE TWO DELIVERIES, UNDER THIS CONTRACT, ONE ON APRIL 5, 1934, AND THE OTHER ON APRIL 6, 1934, AND HAS BILLED THE GOVERNMENT AT 12 1/2 CENTS PER GALLON, INSTEAD OF 10 1/2 CENTS PER GALLON AS CALLED FOR UNDER THE CONTRACT.

IN VIEW OF THE ABOVE YOUR EARLY DECISION IS RESPECTFULLY REQUESTED AS TO WHETHER THIS DEPARTMENT MAY CANCEL THIS CONTRACT AND ENTER INTO A CONTRACT ON A QUANTITY DISCOUNT BASIS. ALSO ON WHAT BASIS PAYMENT SHOULD BE MADE FOR GASOLINE ALREADY DELIVERED.

ALL PAPERS IN CONNECTION WITH THIS CASE ARE TRANSMITTED HEREWITH AND IT IS REQUESTED THAT THEY BE RETURNED WHEN THEY HAVE SERVED THEIR PURPOSE.

AS STATED IN THE OPINION OF THE SUPREME COURT OF THE UNITED STATES IN ROCK ISLAND, ARKANSAS AND LOUISIANA RAILROAD CO. V. UNITED STATES, 254 U.S. 141, 143,"MEN MUST TURN SQUARE CORNERS WHEN THEY DEAL WITH THE GOVERNMENT," AND THIS APPLIES NOT ONLY TO CONTRACTORS BUT TO THIRD PARTIES WHO MAY UNDERTAKE, WITHOUT ANY LEGAL BASIS WHATEVER, TO SERVE NOTICE ON EITHER THE UNITED STATES OR ONE OF ITS CONTRACTORS THAT A CONTRACT WITH THE GOVERNMENT MUST BE CANCELED.

THE CONTRACT WAS LET IN THIS CASE AS A RESULT OF COMPETITIVE BIDS AS REQUIRED UNDER SECTION 3709, REVISED STATUTES, AND BINDS THE CITIES SERVICE CO. TO MAKE DELIVERIES IN ACCORDANCE WITH THE TERMS THEREOF. SEE UNITED STATES V. NEW YORK AND PUERTO RICO STEAMSHIP CO., 239 U.S. 88. THERE IS NO LEGAL BASIS UNDER THE FACTS DISCLOSED FOR THE CANCELATION OF THIS CONTRACT AND NO LEGAL BASIS FOR CHARGING APPROPRIATED MONEYS WITH ANY AMOUNT IN EXCESS OF THE CONTRACT PRICE FOR THE GASOLINE DELIVERED THEREUNDER.

MOREOVER, AS HELD IN DECISION OF APRIL 26, 1934, A-55132, THE EXECUTIVE ORDER NO. 6646, DATED MARCH 14, 1934, IS CLEARLY PROSPECTIVE, AND NOT RETROSPECTIVE IN ITS OPERATION AND HAS NO APPLICATION TO INVITATIONS FOR BIDS ISSUED PRIOR TO MARCH 14, 1934, AS IN THIS CASE. THE FACT THAT THE BIDS WERE OPENED MARCH 18, 1934, AND THE BID OF THE CITIES SERVICE CO. ACCEPTED ON MARCH 20, 1934, DOES NOT MAKE THIS TRANSACTION SUBJECT TO THE REQUIREMENTS OF THE EXECUTIVE ORDER OF MARCH 14, 1934.

ACCORDINGLY, YOU ARE ADVISED THAT THE CITIES SERVICE CO. IS LEGALLY REQUIRED TO PERFORM IN ACCORDANCE WITH THE TERMS OF ITS CONTRACT OF MARCH 20, 1934; THAT IT IS NOT ENTITLED TO ANY AMOUNT IN EXCESS OF THE CONTRACT PRICE FOR DELIVERIES UNDER THE CONTRACT; AND THAT SHOULD THE CONTRACTOR REFUSE TO PERFORM, A CONTRACT SHOULD BE ENTERED INTO IN ACCORDANCE WITH LAW FOR THE BALANCE OF THE CONTRACT PERIOD, THE EXCESS COST, IF ANY, TO BE CHARGED TO SAID CITIES SERVICE CO. SEE 7 COMP. GEN. 193, AS TO THE PROCEDURE TO BE FOLLOWED.