A-69522, JANUARY 15, 1936, 15 COMP. GEN. 612

A-69522: Jan 15, 1936

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UNTIL SUCH TIME AS OTHER ARTICLES CONFORMING TO THE SPECIFICATIONS ARE DELIVERED. IF THE REJECTED ARTICLES ARE OTHERWISE SUITABLE FOR THE USE FOR WHICH INTENDED THEY MAY BE ACCEPTED AT A PROPER REDUCTION IN PRICE. TOGETHER WITH A FULL REPORT SHOWING HOW THE REDUCED PRICE WAS DETERMINED. 1936: THERE WAS REFERRED TO THIS OFFICE BY LETTER OF OCTOBER 22. WERE PUBLICLY OPENED. ALL BARRELS TO HAVE 2 INCH BUNGS. BARRELS ARE TO BE ABSOLUTELY FIRST CLASS IN EVERY RESPECT. THE LOW BIDDER MEETING SPECIFICATIONS WAS THE FIRM OF ROBERT L. WHO QUOTED A PRICE WHICH WAS ACCEPTED. THE BARRELS WERE RECEIVED IN TWO SHIPMENTS. THE FIRST SHIPMENT WAS 566 BARRELS OF WHICH THE GOVERNMENT ACCEPTED 181 AND REJECTED 385.

A-69522, JANUARY 15, 1936, 15 COMP. GEN. 612

CONTRACTS - INFERIOR DELIVERIES - PRICE ADJUSTMENT UNDER A CONTRACT PROVIDING THAT MATERIALS OR SUPPLIES NOT CONFORMING TO SPECIFICATIONS MAY BE ACCEPTED AT A PROPER REDUCTION IN PRICE IF PUBLIC NECESSITY REQUIRES, PAYMENT MAY NOT BE MADE TO A CONTRACTOR FOR ARTICLES DELIVERED, MANY OF WHICH DO NOT CONFORM TO DESIGNATED SPECIFICATIONS, UNTIL SUCH TIME AS OTHER ARTICLES CONFORMING TO THE SPECIFICATIONS ARE DELIVERED, BUT IF THE REJECTED ARTICLES ARE OTHERWISE SUITABLE FOR THE USE FOR WHICH INTENDED THEY MAY BE ACCEPTED AT A PROPER REDUCTION IN PRICE, IN WHICH EVENT A VOUCHER STATED IN FAVOR OF THE CONTRACTOR AT THE CONTRACT PRICE FOR THOSE ARTICLES CONFORMING TO THE SPECIFICATIONS AND AT A PROPER LOWER PRICE FOR THE OTHERS, SHOULD BE TRANSMITTED TO THE GENERAL ACCOUNTING OFFICE FOR DIRECT SETTLEMENT, TOGETHER WITH A FULL REPORT SHOWING HOW THE REDUCED PRICE WAS DETERMINED.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF THE INTERIOR, JANUARY 15, 1936:

THERE WAS REFERRED TO THIS OFFICE BY LETTER OF OCTOBER 22, 1935, FROM THE DIVISION OF TERRITORIES AND ISLAND POSSESSIONS, DEPARTMENT OF THE INTERIOR, A REPORT DATED OCTOBER 16, 1935, FROM THE GOVERNOR OF THE VIRGIN ISLANDS, CONCERNING A CLAIM OF ROBERT L. MERWIN AND CO., INC., IN PERTINENT PART, AS FOLLOWS:

UNDER DATE OF MARCH 18, INVITATIONS TO BID WHICH HAD BEEN SENT OUT ON STANDARD FORM 33, WERE PUBLICLY OPENED. THE BIDS CALLED FOR THE FOLLOWING TO BE DELIVERED C.I.F. CHRISTIANSTED, ST. CROIX, VIRGIN ISLANDS.

1,000 49-50 GALLONS RUM BARRELS. BOURBON WHISKEY TYPE. 8 HOOPS, MADE ACCORDING TO THE SPECIFICATIONS OF THE ASSOCIATED COOPERGE INDUSTRIES OF AMERICA. TIGHT BARRELS COOPERS GROUP FOR WHITE OAK BARRELS. STAVES TO BE 7/8 INCHES AND HEAD 1 INCH FINISHED. ALL MATERIAL TO BE AIR DRIED 6 TO 8 MONTHS AND BROUGHT TO A PROPER MOISTURE CONTENT BY KILN DRYING BEFORE MADE UP IN THE FINISHED PACKAGE. ALL BARRELS TO HAVE 2 INCH BUNGS, SAID BUNGS TO BE SECURELY ATTACHED SO AS NOT TO BE LOST IN TRANSIT. ALL BARRELS TO BE UNIFORMLY CHARRED TO SUFFICIENT DEPTH FOR PROPER AGING PURPOSE. BARRELS ARE TO BE ABSOLUTELY FIRST CLASS IN EVERY RESPECT.

THE LOW BIDDER MEETING SPECIFICATIONS WAS THE FIRM OF ROBERT L. MERWIN AND COMPANY, FREDERIKSTED, ST. CROIX, VIRGIN ISLANDS, WHO QUOTED A PRICE WHICH WAS ACCEPTED, AT $6,425.00.

THE BARRELS WERE RECEIVED IN TWO SHIPMENTS. THE FIRST SHIPMENT WAS 566 BARRELS OF WHICH THE GOVERNMENT ACCEPTED 181 AND REJECTED 385. THE SECOND SHIPMENT CONSISTED OF 434 BARRELS OF WHICH THE GOVERNMENT ACCEPTED 86 AND REJECTED 348.

ON APRIL 26, MR. JAMES C. TILY, CHIEF ENGINEER ADVISED THE CONTRACTOR IN REGARD TO THE REJECTION, AND CITED THE REASONS FOR THIS REJECTION. A COPY OF THIS LETTER AS WELL AS LATER CORRESPONDENCE WHICH TOOK PLACE BETWEEN MR. TILY AND THE CONTRACTOR AS WELL AS BETWEEN MR. TILY AND THE KNOX STAVE AND HEADING COMPANY, WHO SUPPLIED THE BARRELS TO THE CONTRACTOR, ARE ATTACHED FOR YOUR INFORMATION.

IN THE LETTER TO ROBERT L. MERWIN AND COMPANY, DATED APRIL 26, WHICH IS MENTIONED ABOVE, REFERENCE IS MADE TO THE GRADE RULES AND SPECIFICATIONS AS PREPARED BY THE ASSOCIATED COOPERAGE INDUSTRIES OF AMERICA, INC. A PRINTED COPY OF THESE RULES IS ENCLOSED FOR YOUR INFORMATION.

WHILE THERE IS ATTACHED A COMPLETE FILE WHICH CONSISTS OF COPIES OF LETTERS THAT ARE IN THEMSELVES SELF-EXPLANATORY, IT IS ALSO BELIEVED TO BE PROPER TO SET FORTH OUR FINAL DECISION IN THIS MATTER. THE SAME IS BRIEFLY STATED BELOW.

BIDS WERE TAKEN AND SPECIFICATIONS CLEARLY SET FORTH. INCLUDED IN THESE SPECIFICATIONS WAS A STATEMENT THAT THE BARRELS WERE TO BE MADE ACCORDING TO THE SPECIFICATIONS OF THE ASSOCIATED COOPERAGE INDUSTRIES OF AMERICA. THESE SPECIFICATIONS STATE THAT NO REGULARLY SAWED OR CUT OFF STAVE 30 INCHES IN LENGTH OR OVER, WHEN JOINTED, SHALL BE LESS THAN 2 1/2 INCHES OR MORE THAN 6 INCHES IN WIDTH. THE SPECIFICATIONS ALSO STATE THAT THE NUMBER OF STAVES PER BARREL SHALL NOT BE MORE THAN 24 IN NUMBER.

ON AN INSPECTION OF THE BARRELS, IT WAS FOUND THAT A GREAT MANY OF THEM CONTAINED STAVES WHICH WERE NARROWER THAN 2 INCHES AND THAT THE MAJORITY OF THE BARRELS THEMSELVES CONTAINED MORE THAN 24 STAVES. BOTH OF THESE DEFECTS ARE IN DIRECT VIOLATION OF THE SPECIFICATIONS THEMSELVES, AND WHILE THE ASSOCIATED COOPERAGE INDUSTRIES OF AMERICA HEDGE ON THESE SPECIFICATIONS IN THEIR LETTER OF AUGUST 8, AND STATE THAT THE SPECIFICATIONS ON BARRELS AS SHOWN ARE MERELY FOR THE INFORMATION OF USERS, IT IS BELIEVED THAT SO LONG AS THEY ARE USED IN THE SPECIFICATIONS PROPER, THAT THEY SHOULD BE ADHERED TO. TO ALLOW ONE MANUFACTURER TO FURNISH ONE THING AND AT THE SAME TIME HAVE OTHER MANUFACTURERS BID ON A SPECIFICATION WHICH IS CLEAR, BUT ON WHICH THEY DID NOT RECEIVE THE AWARD DUE TO THE FACT THAT THEIR PRICES WERE HIGH, PROBABLY BECAUSE THEY WERE ADHERING TO THE SPECIFICATIONS, WOULD NOT BE IN KEEPING WITH REVISED STATUTES 3709 AND WITH SUBSEQUENT COMPTROLLER'S RULINGS COVERING CASES OF THIS KIND.

NO PAYMENT HAS BEEN MADE TO THE CONTRACTOR FOR ANY OF THE BARRELS DELIVERED DUE TO THE FACT THAT THE CONTRACT ITSELF IN NO WAY PROVIDED FOR PARTIAL PAYMENTS AND FURTHER DUE TO THE FACT THAT COMPLETE SHIPMENT HAS NOT BEEN MADE, AND IT IS ENTIRELY POSSIBLE THAT IF THE CONTRACTOR DOES NOT FULFILL HIS CONTRACT, IT WILL BE NECESSARY FOR THE GOVERNMENT TO GO INTO THE OPEN MARKET AND PURCHASE THE BALANCE OF THE BARRELS AGAINST HIS ACCOUNT. WITH THIS IN MIND, IT WAS FELT THAT THE GOVERNMENT WOULD BE BETTER PROTECTED, AND PROPERLY SO, BY REFUSAL TO PAY THE CONTRACTOR WHO HAD NOT LIVED UP TO THE SPECIFICATIONS AS SET FORTH IN THE CONTRACT WHICH HAD BEEN AWARDED TO HIM.

THE INSPECTION OF THE BARRELS HAS BEEN COMPLETE IN ALL RESPECTS, AND THE FINDINGS OF THE GOVERNMENT ARE BORNE OUT BY AN INSPECTION OF FIFTY OF THE BARRELS WHICH WERE RETURNED TO THE CHICKASAW WOOD PRODUCTS COMPANY, WHO WERE THE MANUFACTURERS.

THE INSPECTION AT THEIR PLANT WAS MADE BY THE BURBANK COOPERATE COMPANY, INC., N.J. LONG COOPERAGE COMPANY, AND MR. E. E. RICHARDS. COPIES OF THEIR INSPECTIONS ARE ENCLOSED IN THE ATTACHED FILE.

THESE REPORTS BEAR OUT CHIEF ENGINEER TILY'S ACTION FROM THE STANDPOINT THAT CONSIDERABLE WOOD WANT WAS DISCERNIBLE, THAT MOST OF THE BARRELS CONTAINED 25 STAVES PER BARREL AND STAVES LESS THAN 2 1/2 INCHES.

FROM THE STANDPOINT OF THE GOVERNMENT, WE BELIEVE THAT THE ACTION TAKEN TO DATE HAS BEEN FAIR AND JUST TO THE CONTRACTOR AND BELIEVE THAT HE SHOULD REPLACE THE BARRELS WHICH WERE REJECTED, OR IF HE REFUSES TO DO SO, THEN THE GOVERNMENT SHOULD GO OUT INTO THE OPEN MARKET AND PURCHASE THE BALANCE OF THE BARRELS AGAINST HIS ACCOUNT. NO MONEY SHOULD BE PAID HIM UNTIL THIS MATTER HAS BEEN CLEARED TO THE SATISFACTION OF THE GOVERNMENT.

PARAGRAPH 2 OF THE CONDITIONS OF THE CONTRACT PROVIDED "THAT IF PUBLIC NECESSITY REQUIRED THE USE OF MATERIALS OR SUPPLIES NOT CONFORMING TO THE SPECIFICATIONS THEY MAY BE ACCEPTED AND PAYMENT THEREFOR SHALL BE MADE AT A PROPER REDUCTION IN PRICE.' APPARENTLY BUT 267 OF THE TOTAL OF 1,000 BARRELS SHIPPED CONFORMED TO THE CONTRACT SPECIFICATIONS AND 733 WERE REJECTED AS NOT COMPLYING THEREWITH. THE CONTRACTOR IS NOT, OF COURSE, ENTITLED TO THE CONTRACT PRICE FOR THE 733 BARRELS REJECTED AS NOT COMPLYING WITH THE SPECIFICATIONS, AND IT MAY NOT PROPERLY BE PAID FOR THE 267 BARRELS ACCEPTED UNTIL SUCH TIME AS BARRELS ARE DELIVERED MEETING THE SPECIFICATIONS OR SATISFACTORY ARRANGEMENTS REACHED WITH RESPECT TO THE 733 BARRELS NOT COMPLYING WITH THE SPECIFICATIONS. IF THE REJECTED BARRELS ARE OTHERWISE SUITABLE FOR THE USE OF THE VIRGIN ISLANDS CO. EXCEPT THAT SOME OF THE STAVES ARE SLIGHTLY NARROWER THAN 2 1/2 INCHES AND THAT THE BARRELS HAVE MORE THAN 24 STAVES EACH, IT MAY BE POSSIBLE TO REACH SOME SATISFACTORY AGREEMENT WITH THE CONTRACTOR UNDER WHICH THE 733 REJECTED BARRELS MAY BE ACCEPTED AT A SUITABLE REDUCTION IN THE CONTRACT PRICE--- HAVING IN MIND THE DISTANCE OF THE VIRGIN ISLANDS FROM THE MAINLAND AND THE EXPENSE WHICH WOULD BE INCURRED BY THE CONTRACTOR IN REMOVING AND REPLACING THE 733 BARRELS.

IF SUCH A SATISFACTORY ARRANGEMENT MAY BE REACHED WITH THE CONTRACTOR, THERE SHOULD BE PREPARED AND FORWARDED TO THIS OFFICE FOR DIRECT SETTLEMENT A VOUCHER STATED IN FAVOR OF THE CONTRACTOR AT THE CONTRACT PRICE FOR 267 BARRELS ACCEPTED AND AT A SUITABLE LOWER PRICE FOR THE 733 BARRELS--- THE VOUCHER BEING ACCOMPANIED BY A FULL REPORT AS TO HOW THE AMOUNT OF THE REDUCTION IN PRICE WAS DETERMINED.

IF SUCH SUITABLE ARRANGEMENT CANNOT BE REACHED AS TO THE 733 BARRELS, THE CONTRACTOR SHOULD BE NOTIFIED THAT IT MUST REPLACE THEM WITHIN A STATED PERIOD WITH BARRELS CONFORMING TO THE SPECIFICATIONS AND THAT IF IT FAILS TO DO SO THERE WILL BE FOLLOWED THE PROCEDURE STATED IN PARAGRAPH 3 OF THE CONDITIONS OF THE CONTRACT; THAT IS, THE GOVERNMENT WILL PROCURE THE BARRELS FROM OTHER SOURCES AND HOLD THE CONTRACTOR RESPONSIBLE FOR ANY EXCESS COSTS OCCASIONED THEREBY.