A-6693, MARCH 26, 1925, 4 COMP. GEN. 807

A-6693: Mar 26, 1925

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IN THE ABSENCE OF ANY PROVISION IN THE CONTRACT THAT SAID DISCOUNT WAS TO BE TAKEN INTO ACCOUNT IN DETERMINING SUCH EXCESS COST. IS LIABLE FOR THE AMOUNT OF THE OPEN MARKET PURCHASES IN EXCESS OF THE CONTRACT UNIT PRICE FOR THE OIL. THE UNITED STATES IS NOT LEGALLY LIABLE FOR ANY EXPENSE INCURRED BY THE CONTRACTOR IN SECURING THE SERVICES OF A TUG TO CLEAR A WAY THROUGH ICE IN THE SLIP OR DOCK IN ORDER TO MAKE DELIVERY BY BARGE IN TOW. WHEREIN SAID CORPORATION WAS FOUND INDEBTED TO THE UNITED STATES IN THE SUM OF $466.95. THE FACTS ON WHICH SAID SETTLEMENT WAS BASED APPEAR TO BE AS FOLLOWS: UNDER CONTRACT NO. 11103. WAS THE CONTRACTING OFFICER ON BEHALF OF THE UNITED STATES. THE CORPORATION WAS TO FURNISH TO ARMY SUPPLY BASE.

A-6693, MARCH 26, 1925, 4 COMP. GEN. 807

CONTRACTS, INCREASED COSTS - PURCHASES, OPEN-MARKET - PAYMENTS, DISCOUNT WHERE A CONTRACT FOR THE FURNISHING OF FUEL OIL AT A SPECIFIED UNIT PRICE PER BARREL,"DISCOUNT 1 PERCENT 10 DAYS," PROVIDED THAT IN CASE OF DEFAULT TO MAKE DELIVERIES THE UNITED STATES WOULD MAKE PURCHASES IN OPEN MARKET CHARGING ANY EXCESS COST BECAUSE OF SUCH PURCHASES TO THE DEFAULTING CONTRACTOR, THE LATTER, IN THE ABSENCE OF ANY PROVISION IN THE CONTRACT THAT SAID DISCOUNT WAS TO BE TAKEN INTO ACCOUNT IN DETERMINING SUCH EXCESS COST, IS LIABLE FOR THE AMOUNT OF THE OPEN MARKET PURCHASES IN EXCESS OF THE CONTRACT UNIT PRICE FOR THE OIL. WHERE A CONTRACT PROVIDED FOR DELIVERY F.A.S. PIER, VIA BARGE, AND CONTAINED NO PROVISION FOR KEEPING THE WATER-WAY CLEAR IN THE SLIP OR DOCK, THE UNITED STATES IS NOT LEGALLY LIABLE FOR ANY EXPENSE INCURRED BY THE CONTRACTOR IN SECURING THE SERVICES OF A TUG TO CLEAR A WAY THROUGH ICE IN THE SLIP OR DOCK IN ORDER TO MAKE DELIVERY BY BARGE IN TOW.

DECISION BY COMPTROLLER GENERAL MCCARL, MARCH 26, 1925:

REQUEST HAS BEEN MADE FOR A REVIEW OF SETTLEMENT, PER CERTIFICATE NO. U.S. 606-W, DATED OCTOBER 1, 1924, OF THE CLAIM (NO. COL-048614) OF THE UNITED STATES AGAINST DINGWALL PETROLEUM PRODUCTS CORPORATION, WHEREIN SAID CORPORATION WAS FOUND INDEBTED TO THE UNITED STATES IN THE SUM OF $466.95, REPRESENTING LOSS OF 1 PERCENT DISCOUNT OF DEFAULTING CONTRACTOR'S PRICE FOR FURNISHING FUEL OIL UNDER CONTRACT NO. 11103, DATED NOVEMBER 22, 1922, AMOUNTING TO $366.95, AND $100 CHARGED FOR SERVICE OF TUG A. A. MORAN, USED IN CONNECTION WITH CONTRACT NO. 11104, DATED NOVEMBER 22, 1922.

THE FACTS ON WHICH SAID SETTLEMENT WAS BASED APPEAR TO BE AS FOLLOWS:

UNDER CONTRACT NO. 11103, IN WHICH MAJ. A. M. WILSON, QUARTERMASTER CORPS, WAS THE CONTRACTING OFFICER ON BEHALF OF THE UNITED STATES, THE CORPORATION WAS TO FURNISH TO ARMY SUPPLY BASE, BOSTON, MASS., 24,500 BARRELS (42-GALLON BARRELS) OF BUNKER "C" FUEL OIL AT THE UNIT PRICE OF $1.61 PER BARREL,"TERMS: 1 PERCENT 10 DAYS," DELIVERIES TO BE MADE AS CALLED FOR BETWEEN NOVEMBER 23, 1922, AND JUNE 30, 1923, "INSPECTION AT ORIGIN AS TO QUALITY," "BOND WAIVED," AND PAYMENT TO BE MADE BY FINANCE OFFICER, UNITED STATES ARMY, AT FIFTY-EIGHTH STREET AND FIRST AVENUE, BROOKLYN, N.Y., TO WHOM INVOICES WERE TO BE RENDERED. THE SAID CONTRACT WAS ENTERED INTO "IN ACCORDANCE WITH CIRCULAR PROPOSAL RM-626-23-81, (BID NO. 4), DATED NOVEMBER 4, 1922," THE ADVERTISEMENT TO WHICH CALLED FOR PROPOSALS SUBJECT TO STATED CONDITIONS AND INSTRUCTIONS, AMONG WHICH WERE THE FOLLOWING:

THE BIDDER IS INVITED TO STATE THE DISCOUNT WHICH WILL BE ALLOWED IF PAYMENT OF INVOICE IS MADE WITHIN TEN (10) CALENDAR DAYS, WITHIN TWENTY(20) CALENDAR DAYS, AND WITHIN THIRTY (30) CALENDAR DAYS, FROM AND INCLUDING DATE OF DELIVERY OF MATERIAL AND SUPPLIES TO CARRIER, WHEN MATERIAL AND SUPPLIES ARE INSPECTED AND ACCEPTED AT POINT OF ORIGIN, OR FROM AND INCLUDING DATE OF DELIVERY AT DESTINATION, OR DELIVERY TO THE GOVERNMENT AT A PORT OF EMBARKATION, WHEN MATERIAL AND SUPPLIES ARE INSPECTED AND ACCEPTED AT THESE POINTS * * *.

IF COMPLETE DELIVERY IS NOT MADE WITHIN THE TIME HEREIN SPECIFIED, THE UNITED STATES SHALL HAVE THE OPTION (A) OF PURCHASING THE ARTICLES THAT REMAIN TO BE SUPPLIED, ELSEWHERE, CHARGING ANY EXCESS IN COST TO THE CONTRACTOR, OR (B) OF CANCELLING THE ORDER.

AND THE PROPOSAL PROVIDED:

* * * IN THE EVENT OF FAILURE ON THE PART OF THE CONTRACTOR EITHER TO ACCEPT AWARD AT THE PRICE BID OR TO FURNISH MATERIAL STRICTLY IN ACCORDANCE WITH THE PROVISIONS OF THE CONTRACT OR ORDER, THE GOVERNMENT RESERVES THE RIGHT TO PROCURE SUITABLE MATERIAL FROM OTHER SOURCES IN A MANNER DEEMED FOR ITS BEST INTERESTS, CHARGING ANY LOSS OR DAMAGE OCCASIONED THEREBY TO THE CONTRACTOR WHOSE DEFAULT MAKES SUCH ACTION NECESSARY.

CALL BEING MADE UPON THE CONTRACTOR JANUARY 11, 1923, FOR DELIVERY OF 1,200 BARRELS OF FUEL OIL UNDER THE CONTRACT, IT DEVELOPED THAT CONTRACTOR WAS UNABLE TO COMPLY THEREWITH, AND IT WAS AGREED THAT PURCHASE BE MADE IN OPEN MARKET AGAINST THE CONTRACT, THE CONTRACTOR TO BE CHARGED WITH ANY EXCESS COST. OPEN-MARKET PURCHASE WAS ACCORDINGLY MADE OF 1,188.94 BARRELS AT $1.70 PER BARREL, AMOUNTING TO $2,021.20, AND THE CONTRACTOR WAS ADVISED THEREOF JANUARY 24. CONTRACTOR REMITTED JANUARY 29 ITS CHECK FOR $107 AS THE DIFFERENCE BETWEEN ITS CONTRACT PRICE OF $1.61 PER BARREL AND THE PURCHASE PRICE OF $1.70 PER BARREL ON THE 1,188.94 BARRELS. FEBRUARY 1 THE DEPOT QUARTERMASTER, BROOKLYN, N.Y., ACKNOWLEDGED RECEIPT OF THE CHECK, STATED IT WAS BELIEVED THE MATTER OF DISCOUNT HAD BEEN OVERLOOKED, AND REQUESTED REMITTANCE OF AN ADDITIONAL AMOUNT TO COVER 1 PERCENT DISCOUNT OF CONTRACT PRICE OF $1.61 PER BARREL ON THE 1,188.94 BARRELS; ALSO, THAT IN ALL FUTURE DELIVERIES THE DISCOUNT BE TAKEN INTO CONSIDERATION. FEBRUARY 3 CONTRACTOR REPLIED THAT THE CONTRACT PRICE WAS $1.61 PER BARREL, THAT THE 1 PERCENT DISCOUNT WAS STRICTLY A CONCESSION FOR PAYMENT OF INVOICE WITHIN 10 DAYS, AND THAT CASH DISCOUNTS ARE QUITE COMMON PRACTICE, BUT NEVER CONSIDERED AS BEING CONTRACT QUOTATIONS. FEBRUARY 15 THE QUARTERMASTER SUPPLY OFFICER, BROOKLYN, N.Y., TOOK UP THE MATTER OF THE DISCOUNT WITH THE QUARTERMASTER GENERAL.

FURTHER OPEN-MARKET PURCHASES WERE MADE AGAINST THE CONTRACT, THE DEFAULTING CONTRACTOR IN EACH INSTANCE MAKING REMITTANCE OF THE EXCESS OF COST OF OPEN-MARKET PURCHASE OVER ITS CONTRACT PRICE OF $1.61 PER BARREL, WITH THE EXCEPTION OF REMITTANCE IN THE CASE OF PURCHASE ORDER 5926, OF MAY 8, 1923, FROM WHICH IT WITHHELD $100 CLAIMED TO BE DUE IT UNDER CONTRACT NO. 11104.

IN MAKING THE OPEN-MARKET PURCHASES NO DISCOUNT WAS ASKED OF THE DEALERS BY THE GOVERNMENT AGENTS NOR WAS ANY DISCOUNT OFFERED BY THE DEALERS. THE PURCHASE ORDERS PLACED WITH THE DEALERS SPECIFIED THAT TERMS WERE MET.

WITH REFERENCE TO THE DISCOUNT, THE JUDGE ADVOCATE GENERAL STATED JULY 30, 1923:

THE QUESTION HERE PRESENTED IS WHETHER THE UNITED STATES HAS, BY REASON OF THE CONTRACTOR'S DEFAULT, SUFFERED LOSS. IF SO, HOW MUCH IS THAT LOSS? IT IS EVIDENT THAT THE GOVERNMENT HAS BEEN REQUIRED TO PAY MORE THAN THE CONTRACT PRICE, AND THEREFORE THE LOSS MAY BE COMPUTED AS THE DIFFERENCE BETWEEN WHAT THE GOVERNMENT PAID AND WHAT IT WOULD HAVE BEEN REQUIRED TO PAY HAD THE CONTRACTOR FULFILLED HIS ENGAGEMENT. THIS IS A QUESTION OF FACT FOR COMPUTATION FROM THE EVIDENCE.

* * * IT IS RECOMMENDED THAT THE QUARTERMASTER GENERAL BE ADVISED TO COMPUTE THE LOSS WHICH THE UNITED STATES HAS SUSTAINED, INCLUDING THE ONE PERCENT DISCOUNT FOR PAYMENT WITHIN TEN DAYS, AND AFTER DEMAND AND REFUSAL BY THE CONTRACTOR TO MAKE UP THIS LOSS HE SHOULD CERTIFY THAT AMOUNT FOR COLLECTION.

SEPTEMBER 15, 1923, THE QUARTERMASTER SUPPLY OFFICER, BROOKLYN, N.Y., REQUESTED THE CONTRACTOR TO REMIT $366.95 TO COVER 1 PERCENT DISCOUNT OF ITS CONTRACT PRICE AS APPLIED TO THE PURCHASES MADE IN OPEN MARKET AGAINST ITS CONTRACT,"AS PER ATTACHED TABULATION; " AND FURTHER:

IT IS ALSO NOTED THAT YOU ARE WITHHOLDING A SUM OF $100.00, REPRESENTING A CHARGE FOR THE DETENTION OF TUG AND BREAKING ICE IN THE SLIP AT THIS STATION. AS THIS OFFICE CAN NOT EFFECT SETTLEMENT OF A CLAIM OF THIS NATURE, IT IS REQUESTED THAT REMITTANCE BE ALSO MADE IN THIS AMOUNT. YOU STILL CONSIDER THIS A JUST CHARGE, IT IS SUGGESTED THAT YOU PRESENT A CLAIM TO THE GENERAL ACCOUNTING OFFICE, WAR DEPARTMENT DIVISION, WASHINGTON, D.C., SETTING FORTH ALL FACTS.

OCTOBER 18, 1923, CONTRACTOR REPLIED, CONTENDING THAT THE GOVERNMENT'S CLAIM FOR THE DISCOUNT WAS NOT JUSTIFIED AND THAT THE $100 WAS JUSTLY WITHHELD AS DUE IT UNDER CONTRACT NO. 11104.

DECEMBER 14, 1923, THE CHIEF OF FINANCE TRANSMITTED THE PAPERS IN THE CASE TO THIS OFFICE WITH THE RECOMMENDATION THAT UNDER THE PROVISIONS OF SECTION 236, REVISED STATUTES, AS AMENDED BY SECTION 305, ACT OF JUNE 10, 1921, 42 STAT. 24, AN ACCOUNT BE STATED AND NECESSARY STEPS TAKEN TO COLLECT THE SUM OF $466.95 DUE THE UNITED STATES BY THE DEFAULTING CONTRACTOR.

THE CONTRACT SPECIFIED THE UNIT PRICE TO BE $1.61 PER BARREL, AND THE PROVISION,"TERMS: 1 PERCENT 10 DAYS" IS, IN THE ABSENCE OF ANY OTHER EXPRESSED QUALIFICATION, CONSTRUED TO MEAN THAT ALLOWANCE OF THE DISCOUNT WAS CONDITIONED UPON PAYMENT BEING MADE TO THE CONTRACTOR WITHIN 10 DAYS FROM RECEIPT OF INVOICE. WHILE IT WOULD BE THE DUTY OF THE GOVERNMENT'S AGENTS CONCERNED TO ENDEAVOR SO TO MAKE PAYMENT THAT THE GOVERNMENT WOULD GET THE BENEFIT OF THE DISCOUNT, THERE COULD BE NO LEGAL PRESUMPTION THAT INVOICES WOULD BE PAID WITHIN 10 DAYS FROM THEIR RECEIPT, WHICH WAS MADE A CONDITION PRECEDENT TO THE ALLOWANCE OF THE DISCOUNT. PAYMENT BEFORE DELIVERY AND ACCEPTANCE OF THE FUEL OIL WOULD BE UNLAWFUL AND CIRCUMSTANCES COULD POSSIBLY ARISE THAT WOULD MAKE IMPRACTICABLE THE PAYMENT OF INVOICES WITHIN THE DISCOUNT PERIOD. THE CONTRACT DID NOT PROVIDE AS AN ELEMENT OF LOSS OR DAMAGE TO THE GOVERNMENT, IN CASE OF DEFAULT OF THE CONTRACTOR, THAT THE DISCOUNT OF 1 PERCENT WOULD BE CONSIDERED, NOR DID THE GOVERNMENT'S AGENTS, IN MITIGATION OF SUCH LOSS OR DAMAGE, MAKE ANY ATTEMPT TO SECURE A LIKE DISCOUNT FROM THE DEALERS FROM WHOM THE PURCHASES WERE MADE IN OPEN MARKET AGAINST THE CONTRACT. IT MUST BE HELD, THEREFORE, THAT UNDER ITS CONTRACT THE DEFAULTING CONTRACTOR BECAME LIABLE TO THE GOVERNMENT FOR THE EXCESS COST OF SUCH OPEN-MARKET PURCHASES OVER THE COST COMPUTED ON THE BASIS OF THE DEFAULTING CONTRACTOR'S UNIT PRICE OF $1.61 PER BARREL. SUCH EXCESS COST HAS BEEN PAID BY THE DEFAULTING CONTRACTOR, LESS $100, WHICH IT HAS WITHHELD AS DUE IT UNDER CONTRACT NO. 11104.

UNDER CONTRACT NO. 11104, DATED NOVEMBER 22, 1922, IN WHICH CAPT. C. J. W. BLAKE, QUARTERMASTER CORPS, WAS THE CONTRACTING OFFICER ON THEPART OF THE UNITED STATES, THE CONTRACTOR WAS TO FURNISH FUEL OIL F.O.B. TO ARMS SUPPLY BASE, BROOKLYN, N.Y., "VIA BARGE," AS CALLED FOR BETWEEN NOVEMBER 23, 1922, AND JUNE 30, 1923. IT APPEARS THAT ON INVOICE NO. 597, DATED MARCH 5, 1923, AGAINST THE CONTRACT A CHARGE OF $100 WAS MADE FOR DETENTION OF TUG A. A. MORAN AND IN BREAKING A PASSAGE THROUGH THE ICE IN SLIP OR DOCK TO MAKE BARGE DELIVERY AT PIER. CONTRACTOR STATED, APRIL 4, 1923, THAT THE CHARGE WAS NOT UNUSUAL UNDER THE CONDITIONS; THAT---

* * * A CUSTOMER CALLING FOR BARGE DELIVERIES F.A.S. HIS DOCK IS EXPECTED TO PROVIDE OPEN WATER FOR SUCH DELIVERY OR ASSUME THE EXPENSE OF CLEARING A PASSAGE. IT IS A FACT THAT ON THIS DELIVERY THE TUG WAS DELAYED FIVE HOURS, AND WE WERE REQUIRED TO PAY ADDITIONAL AMOUNT OF $100 FOR THE SERVICE.

PAYMENT OF THE $100 SO CHARGED WAS REFUSED BY THE ADMINISTRATIVE OFFICER.

ACCORDING TO REPORT OF THE QUARTERMASTER SUPPLY OFFICER, BROOKLYN, N.Y., NOVEMBER 27, 1923, THE TUG WAS NOT SECURED BY THE CONTRACTOR PRIMARILY FOR THE PURPOSE OF BREAKING ICE, BUT WAS USED IN TOWING THE BARGE FROM THE REFINERY TO THE ARMY BASE.

IN LETTER OF OCTOBER 18, 1923, TO QUARTERMASTER SUPPLY OFFICER, BROOKLYN, N.Y., CONTRACTOR STATED IN PART:

AT THE TIME THE BARGE ARRIVED YOU HAD ADMITTEDLY NO MEANS OR OPPORTUNITY IN CLEARING A PASSAGE. THE TUGGING COMPANY IS AND WAS IN NO WAY INTERESTED IN BREAKING ICE AND CLEARING A PASSAGE. THAT THEY DID SO WAS PLAINLY TO THE ADVANTAGE OF THE GOVERNMENT, AS IT SAVED YOUR OFFICE CONSIDERABLE EXPENSE ASIDE FROM THE POSSIBILITY OF SERIOUS CONSEQUENCES BECAUSE OF YOUR LACK OF OIL.

WITH THE ONLY IDEA OF RENDERING SERVICE UNDER THIS SERIOUS CONDITION AND BECAUSE OF YOUR INABILITY TO EFFECT A PASSAGE THE SERVICE OF THE TUG WAS INDISPENSABLE.

THE CONTRACT PROVIDED FOR DELIVERY F.A.S. PIER. IT CONTAINED NO PROVISION IN REGARD TO KEEPING THE WATERWAY CLEAR FOR DELIVERY BY BARGE, NOR WAS THE EXPENSE IN QUESTION INCURRED UPON THE AUTHORITY OF THE GOVERNMENT'S AGENTS. IT DOES NOT, THEREFORE, APPEAR THAT THE UNITED STATES IS UNDER ANY LEGAL OBLIGATION TO PAY SAID EXPENSE.

UPON REVIEW THE SETTLEMENT IS MODIFIED TO SHOW THAT THE SUM DUE THE UNITED STATES IS $100 (INSTEAD OF $466.95), WHICH AMOUNT SHOULD BE REMITTED TO THIS OFFICER PROMPTLY BY THE DEBTOR.