A-58409, DECEMBER 11, 1934, 14 COMP. GEN. 446

A-58409: Dec 11, 1934

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ETC. - CONSIDERATION ONE OF THE FIRST AND MOST IMPORTANT REQUISITES OF A VALID CONTRACT IS THAT THE TERMS THEREOF SHALL BE CERTAIN. 1934: YOUR ATTENTION IS INVITED TO FOUR CONTRACTS. THE PROPOSALS ARE ON STANDARD FORM NO. 33 WITH AN ADDENDA SIGNED BY THE BIDDERS AGREEING THAT THE CONTRACTOR WILL COMPLY WITH THE APPLICABLE CODE OF FAIR COMPETITION OF ITS TRADE OR INDUSTRY. WAS REQUESTED TO REPORT WHY DEFINITE QUANTITIES WERE NOT STATED. IN REPLY THERETO THERE WAS FORWARDED UNDER DATE OF SEPTEMBER 15. SOME OF WHICH FUNDS HAVE ALREADY BEEN ALLOTTED FOR. OTHERS FOR WHICH ALLOTMENTS ARE EXPECTED IN ORDER TO INITIATE WORK AT ANY TIME. THESE PROJECTS ARE SCATTERED THROUGHOUT THE LENGTH AND BREADTH OF LOUISIANA.

A-58409, DECEMBER 11, 1934, 14 COMP. GEN. 446

CONTRACTS - PURCHASE OF GASOLINE, KEROSENE, OILS, ETC. - CONSIDERATION ONE OF THE FIRST AND MOST IMPORTANT REQUISITES OF A VALID CONTRACT IS THAT THE TERMS THEREOF SHALL BE CERTAIN, DEFINITE AND SPECIFIC. IN THE PURCHASE OF GASOLINE, KEROSENE, OILS, ETC., THE PROCEDURE SHOULD BE SUCH AS TO RESULT IN A VALID CONTRACT AND WHERE DEFINITE QUANTITIES CANNOT BE STATED IN THE ADVERTISEMENT AND THE CONTRACT, ESTIMATED QUANTITIES SHOULD BE STATED WITH A VARIANCE OF 10, 20, OR 25 PERCENT, BASED ON PRIOR OR ANTICIPATED NEEDS.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF WAR, DECEMBER 11, 1934:

YOUR ATTENTION IS INVITED TO FOUR CONTRACTS, AS FOLLOWS:

W 614 ENG-878, DATED JUNE 20, 1934, WITH THE CHALMETTE PETROLEUM CORPORATION

W 614 ENG-879, DATED JUNE 20, 1934, WITH THE JACKSON OIL CO., INC.

W 614 ENG-880, DATED JUNE 20, 1934, WITH THE PAN AMERICAN PETROLEUM CORPORATION

W 614-ENG-881, DATED JUNE 20, 1934, WITH THE TEXAS CO.

THE CONTRACTS COVER THE PURCHASE OF GASOLINE, KEROSENE, DIESEL-ENGINE DISTILLATE, LONG-TIME BURNING OIL, AND CUP GREASE FOR THE FIRST NEW ORLEANS ENGINEER DISTRICT FOR THE PERIOD JULY 1 TO SEPTEMBER 30, 1934. THE PROPOSALS ARE ON STANDARD FORM NO. 33 WITH AN ADDENDA SIGNED BY THE BIDDERS AGREEING THAT THE CONTRACTOR WILL COMPLY WITH THE APPLICABLE CODE OF FAIR COMPETITION OF ITS TRADE OR INDUSTRY. THE ADVERTISEMENT FOR BIDS DID NOT INFORM PROSPECTIVE BIDDERS AS TO THE AMOUNT OF OIL, GASOLINE, ETC., REQUIRED. ACCORDINGLY, UPON RECEIPT AND EXAMINATION OF THE CONTRACTS BY THIS OFFICE, THE CHIEF OF ENGINEERS, WAR DEPARTMENT, WAS REQUESTED TO REPORT WHY DEFINITE QUANTITIES WERE NOT STATED, AND IN REPLY THERETO THERE WAS FORWARDED UNDER DATE OF SEPTEMBER 15, 1934, SECOND ENDORSEMENT OF AUGUST 29, 1934, FROM THE EXECUTIVE OFFICER, CORPS OF ENGINEERS, NEW ORLEANS DISTRICT, AS FOLLOWS:

1. IN REPLY TO THE BASIC LETTER, IT MAY BE STATED THAT THIS OFFICE HAS APPROXIMATELY THIRTY PROJECTS AUTHORIZED BY CONGRESS UNDER ITS SUPERVISION, IN ADDITION TO SEVERAL PUBLIC WORKS PROJECTS, SOME OF WHICH FUNDS HAVE ALREADY BEEN ALLOTTED FOR, AND OTHERS FOR WHICH ALLOTMENTS ARE EXPECTED IN ORDER TO INITIATE WORK AT ANY TIME. THESE PROJECTS ARE SCATTERED THROUGHOUT THE LENGTH AND BREADTH OF LOUISIANA. MANY OF THESE PROJECTS CALL FOR THE MAINTENANCE OF CHANNELS, THE DREDGING OF SHOALS, REPAIRS TO JETTIES, DIKES, BULKHEADS, AND OTHER CONSTRUCTIONS ALONG WATERWAYS. IN ADDITION, THIS OFFICE HAS UNDER SUPERVISION THE WORK OF REMOVING THE WATER HYACINTH FROM THE NAVIGABLE WATERS OF THE ENTIRE STATE OF LOUISIANA. EXPERIENCE HAS SHOWN THAT WORK MAY BECOME ESSENTIAL ON ANY ONE OR ALL OF THESE PROJECTS, AT ANY TIME WITHOUT WARNING OR TIME IN WHICH TO MAKE FULL PREPARATION; SUCH WORK FREQUENTLY REQUIRING THE ASSIGNMENT OF FLOATING PLANT OR OTHER EQUIPMENT WHICH WOULD NEED PETROLEUM PRODUCTS FOR THEIR OPERATION. THIS OFFICE HAS LONG MADE IT A POLICY TO ENTER INTO CONTRACTS FOR THE PETROLEUM PRODUCTS NEEDED FOR PERIODS OF THREE MONTHS, AND HAS ATTEMPTED TO OBTAIN UNDER SUCH CONTRACTS DELIVERY POINTS IN THE PROBABLE ZONES OF OPERATIONS COVERED BY THE VARIOUS PROJECTS ON WHICH WORK SEEMS PROBABLE. THIS IS DEEMED NECESSARY TO AVOID THE TYING UP OF FLOATING PLANT WHILE ON THE JOB, WITH CONSEQUENT EXORBITANT EXPENSE AND DELAY WHILE WAITING TO ADVERTISE AND AWARD CONTRACTS FOR PETROLEUM NEEDS AT GIVEN POINTS. THE ONLY OTHER ALTERNATIVE WOULD BE TO ESTABLISH A RECEIVING POINT WITHIN THIS DISTRICT AND THIS OFFICE TO ATTEMPT TO MAKE ALL DELIVERIES TO ALL JOBS IN OUT-OF-THE-WAY PLACES. THIS LATTER ALTERNATIVE HAS BEEN DEEMED UNECONOMICAL, UNWARRANTED, AND INADVISABLE. THE EXISTING PROCEDURE HAS BEEN IN EFFECT FOR A NUMBER OF YEARS AND HAS PROVEN ENTIRELY SATISFACTORY. ALL DEALERS BIDDING ON OUR PETROLEUM NEEDS UNDERSTAND THAT ALL OUR REQUIREMENTS COVERED UNDER THE PROPOSAL WILL BE PROCURED FROM THE LOW BIDDER, TO WHOM THE CONTRACT WILL BE AWARDED, DURING THE ENTIRE LIFE OF THE CONTRACT, AND NO COMPLAINTS OR EVIDENCE OF DISSATISFACTION HAVE BEEN EXPRESSED BECAUSE OF CONTRACTS NOT STATING DEFINITE QUANTITIES.

2. FOR THIS OFFICE TO ATTEMPT TO STATE DEFINITE OR APPROXIMATE QUANTITIES AT THE NUMEROUS POINTS LISTED IN THE SPECIFICATIONS COVERING THE CONTRACTS REFERRED TO IN THE BASIC LETTER, COULD ONLY RESULT IN A WILD SORT OF GUESS AND MIGHT RESULT IN A VARIATION IN ACTUAL ORDERS AS AGAINST THE CONTRACT QUANTITIES OF THREE OR FOUR HUNDRED PERCENT. IT FREQUENTLY BECOMES NECESSARY TO REMOVE A PIECE OF FLOATING PLANT FROM A PROJECT TO ACCOMPLISH SOME EMERGENCY ITEM OF WORK, ONLY TO HAVE IT RECALLED BACK OR MOVED TO A THIRD JOB BECAUSE OF EXCESSIVE SHOALING OR OTHER CONDITIONS. OFTENTIMES OCCURS THAT ALLOTMENTS ARE NOT RECEIVED AT TIMES EXPECTED AND CONSTRUCTION SCHEDULES HAVE TO BE VARIED AND OTHER VARIABLE FACTORS ENTER INTO ESTIMATING THE PETROLEUM NEEDS OF THIS DISTRICT. ATTENTION IS INVITED TO THE FACT THAT COMMUNICATION AND TRANSPORTATION IS EXTREMELY CUMBERSOME AND INADEQUATE, SOMETIMES NOT EXISTING AT ALL, IN THE ISOLATED LOCALITIES IN WHICH THE PLANT OF THIS DISTRICT MUST BE SERVICED WITH PETROLEUM PRODUCTS.

3. IN THE CASE OF THE THREE CONTRACTS REFERRED TO IN THE BASIC LETTER COVERING GASOLINE, KEROSENE, DIESEL-ENGINE DISTILLATE, LONG TIME BURNING OIL AND CUP GREASE, THIS OFFICE ADOPTED THE PRACTICE OF WEIGHTING THE BIDS FOR VARIOUS DELIVERY POINTS, THESE WEIGHTS TO BE MULTIPLIED AGAINST THE UNIT BID PRICE FOR THE PURPOSE OF BRINGING ALL BIDS TO A COMMON DENOMINATOR. THESE WEIGHTS HAVE BEEN SET IN THE LIGHT OF THE EXPECTED NEEDS OF THE DISTRICT AND HAVE BEEN FAR MORE ACCEPTABLE TO THE BIDDERS THAN APPROXIMATE QUANTITIES WHICH MIGHT NOT BE LIVED UP TO COULD HAVE BEEN. IT APPEARS THAT INSTRUCTIONS FROM THE GENERAL ACCOUNTING OFFICE HAVE REQUIRED THAT APPROXIMATE QUANTITIES OR DEFINITE QUANTITIES SHOULD BE STATED IN THE PROPOSAL, IF POSSIBLE. THIS OFFICE HAS NOT DEEMED IT POSSIBLE AND HAS FELT THAT THE SYSTEM OF WEIGHING USED, AS IN THIS INSTANCE, HAS BEEN MORE LOGICAL THAN WOULD BE THE CASE IN ATTEMPTING TO HAPHAZARDLY ESTIMATE THE APPROXIMATE QUANTITIES WHICH WOULD BE ACTUALLY ORDERED FOR ANY THREE-MONTH PERIOD.

4. THIS OFFICE HAS FOUND ON OPENING BIDS FOR PETROLEUM PRODUCTS IN RECENT MONTHS, SINCE PROVISIONS OF THE PETROLEUM CODE INDUSTRY HAVE BEEN IN EFFECT, THAT ALL BID PRICES RECEIVED QUOTED THE SAME UNIT PRICES, EXCEPT IN THOSE CASES IN WHICH THE DEALERS LATER CLAIMED THEY MADE ERRORS. ATTENTION IS INVITED TO THE FACT THAT DISCOUNTS OFFERED ARE STRICTLY REGULATED BY THE PROVISIONS OF THE CODE OF THE PETROLEUM INDUSTRY. APPEARS, FOR INSTANCE, THAT ON MOTOR FUEL V OR GASOLINE THAT A QUANTITY DISCOUNT OF ONE CENT PER GALLON MAY BE ALLOWED, BUT ONLY AS A REBATE, IF IT DEVELOPES THAT THE TOTAL PURCHASES UNDER THE CONTRACT OVER A PERIOD OF A MONTH EXCEED 3,000 GALLONS. IN THE EVENT THESE PURCHASES OVER ANY ONE MONTH EXCEED 10,000 GALLONS, A DISCOUNT IN THE FORM OF A REBATE OF 2 CENTS PER GALLON IS ALLOWED. IT APPEARS FROM THE INFORMATION AVAILABLE TO THIS OFFICE THAT THE OIL COMPANIES WOULD NOT QUOTE A DISCOUNT EXCEPT ON THE TERMS JUST OUTLINED IN THEIR BIDDING. IT, THEREFORE, APPEARS THAT THE DISCOUNT COULD NOT ENTER INTO THE COMPARISON OF BIDS RECEIVED, AND THAT THE ACTUAL DISCOUNTS DUE THE UNITED STATES UNDER THE CONTRACT COULD ONLY BE DETERMINED ON THE BASIS OF THE ACTUAL QUANTITIES ORDERED UNDER THE CONTRACT OVER A GIVEN PERIOD OF TIME. THE MERE FACT THAT AFTER APPROXIMATE QUANTITIES WERE STATED, WHICH IF LEFT UP TO THE ACTUAL ORDERS UNDER THE CONTRACT WOULD WARRANT A GIVEN DISCOUNT, COULD NOT EFFECT THE BASIS ON WHICH ANY OF THE OIL COMPANIES COULD BID. IT, THEREFORE, APPEARS UNDER EXISTING CONDITIONS APPROXIMATE QUANTITIES STATED IN THE PROPOSAL WOULD GAIN NOTHING FOR THE UNITED STATES AND COULD ONLY BE EMBARRASSING TO THIS OFFICE AND TO THE SUCCESSFUL BIDDER IF THEY WERE NOT PROPERLY LIVED UP TO UNDER THE VARYING NEEDS OF THIS OFFICE.

ONE OF THE FIRST AND MOST IMPORTANT REQUISITES OF A VALID CONTRACT IS THAT THE TERMS THEREOF SHALL BE CERTAIN, DEFINITE, AND SPECIFIC. 13 COMP. GEN. 181. SEE ALSO THE CASE OF WILLARD, SUTHERLAND AND CO. V. UNITED STATES, 262 U.S. 489, QUOTING FROM PAGE 493, WHEREIN IT WAS SAID:

THERE IS NOTHING IN THE WRITING WHICH REQUIRED THE GOVERNMENT TO TAKE, OR LIMIT ITS DEMAND, TO ANY ASCERTAINABLE QUANTITY. IT MUST BE HELD THAT, FOR LACK OF CONSIDERATION AND MUTUALITY, THE CONTRACT WAS NOT ENFORCEABLE. COLD BLAST TRANSPORTATION CO. V. KANSAS CITY BOLT AND NUT CO., 114 FED. 77, 81; FITZGERALD V. FIRST NATIONAL BANK, ID. 474, 478; A. SANTAELLA AND CO. V. OTTO F. LANGE CO., 155 FED. 719, 721, ET SEQ.; GOLDEN CYCLE MINING CO. V. RAPSON COAL MINING CO., 188 FED. 179, 182, 183.

IT WAS STATED IN DECISION OF NOVEMBER 9, 1925, 5 COMP. GEN. 342, QUOTING FROM THE SYLLABUS, THAT:

IN VIEW OF THE URGENT NEEDS AND PECULIAR CONDITIONS AFFECTING THE VEHICLE BRANCH OF THE POSTAL SERVICE THROUGHOUT THE COUNTRY, OBJECTION WILL NOT BE MADE TO THE ENTERING INTO OF SLIDING-SCALE CONTRACTS FOR THE PURCHASE OF GASOLINE AND OIL BASED ON THE CURRENT MARKET PRICES AT THE TIME AND PLACE OF DELIVERY, WHERE AN ULTIMATE DIFFERENTIAL IS SHOWN IN FAVOR OF THE UNITED STATES BELOW THE ASCERTAINED TANK-WAGON OR MARKET PRICE, WHEN THE SAME OR BETTER RESULTS CANNOT BE OTHERWISE OBTAINED UNDER FLAT-PRICE CONTRACTS COVERING A REASONABLE PERIOD OF TIME (5 COMP. GEN. 186, MODIFIED).

WHILE IT MAY NOT BE POSSIBLE TO DEFINITELY DETERMINE THE NUMBER OF GALLONS WHICH MAY BE REQUIRED UNDER THE CONDITIONS STATED IN THE ENDORSEMENT OF AUGUST 29, 1934, THERE APPEARS NO REASON WHY THERE SHOULD NOT BE AN ESTIMATED QUANTITY SPECIFIED WITH A VARIANCE OF 10, 20, OR 25 PERCENT. THIS ESTIMATED AMOUNT NO DOUBT COULD BE OBTAINED FROM RECORDS OF CONSUMPTION OF SUCH PRODUCTS DURING A PRIOR OR SIMILAR PERIOD TO THAT COVERED BY THE CONTRACTS IN QUESTION. IN FOLLOWING SUCH PROCEDURE, THERE WOULD BE NO OCCASION FOR HAVING A CENTRAL DELIVERY POINT, AS STATED BY THE EXECUTIVE OFFICER IN HIS ENDORSEMENT, SUPRA, OR ANY CHANGE IN THE PROCEDURE NOW EXISTING WITH REFERENCE TO THE PURCHASE AND DELIVERY OF SUCH SUPPLIES BY THE NEW ORLEANS DISTRICT ENGINEER OFFICE.

HEREAFTER, IN ALL SUCH MATTERS, THE PROCEDURE SHOULD BE SUCH AS TO RESULT IN A VALID CONTRACT AND WHERE DEFINITE QUANTITIES CANNOT BE STATED IN THE ADVERTISEMENT AND CONTRACT, ESTIMATED QUANTITIES SHOULD BE STATED--- BASED ON PRIOR OR ANTICIPATED NEEDS--- WITH PROVISION FOR REASONABLE VARIATION THEREFROM SO AS TO COMPLY WITH THE PRINCIPLES STATED IN THE WILLARD, SUTHERLAND AND CO. CASE, SUPRA. ..END :