A-81760, DECEMBER 10, 1936, 16 COMP. GEN. 569

A-81760: Dec 10, 1936

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

ADVERTISING - BIDS - AMBIGUOUS FREIGHT EQUALIZATION OFFERS WHERE A BIDDER'S OFFER COVERING FREIGHT EQUALIZATION IS AMBIGUOUS. A CONTRACT AWARDED ON THE BASIS OF THAT INTERPRETATION MOST FAVORABLE TO THE GOVERNMENT IS PROPER AND NEED NOT BE DISTURBED. 1936: THERE WAS RECEIVED YOUR LETTER OF NOVEMBER 14. AS FOLLOWS: REFERENCE IS MADE TO CONTRACT AWARDED TO THE PITTSBURGH STEEL COMPANY ALREADY FILED WITH YOUR OFFICE UNDER NO. FOR YOUR CONSIDERATION AS TO WHETHER THE PROPER AWARD HAS BEEN MADE THERE ARE TRANSMITTED HEREWITH ALL RESPONSES RECEIVED TO THE DEPARTMENT'S INVITATION FOR BIDS (U.S.D.A. THE BIDS WERE OPENED ON JUNE 25. AWARD WAS MADE ON AUGUST 26. THE DELAY IN MAKING AWARD WAS CAUSED BY THE FACT THAT IT WAS NECESSARY TO REALLOCATE THE EXPENDITURE.

A-81760, DECEMBER 10, 1936, 16 COMP. GEN. 569

ADVERTISING - BIDS - AMBIGUOUS FREIGHT EQUALIZATION OFFERS WHERE A BIDDER'S OFFER COVERING FREIGHT EQUALIZATION IS AMBIGUOUS, A CONTRACT AWARDED ON THE BASIS OF THAT INTERPRETATION MOST FAVORABLE TO THE GOVERNMENT IS PROPER AND NEED NOT BE DISTURBED, PARTICULARLY WHERE THE APPLICABLE SPECIFICATION PROVISION SUPPORTS THE ADMINISTRATIVE INTERPRETATION, AND THE CONTRACTOR ACCEPTS THE AWARD "ON THE BASIS OF OUR QUOTATION.'

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF AGRICULTURE, DECEMBER 10, 1936:

THERE WAS RECEIVED YOUR LETTER OF NOVEMBER 14, 1936, AS FOLLOWS:

REFERENCE IS MADE TO CONTRACT AWARDED TO THE PITTSBURGH STEEL COMPANY ALREADY FILED WITH YOUR OFFICE UNDER NO. A1S-13957.

FOR YOUR CONSIDERATION AS TO WHETHER THE PROPER AWARD HAS BEEN MADE THERE ARE TRANSMITTED HEREWITH ALL RESPONSES RECEIVED TO THE DEPARTMENT'S INVITATION FOR BIDS (U.S.D.A. NO. 5105F) SENT TO EIGHTEEN PROSPECTIVE BIDDERS, AN ABSTRACT OF ALL BIDS RECEIVED, AND CORRESPONDENCE CONDUCTED, SUBSEQUENT TO THE AWARD, WITH THE PITTSBURGH STEEL COMPANY.

THE BIDS WERE OPENED ON JUNE 25, 1936, AT ALBURQUERQUE, NEW MEXICO, AND AWARD WAS MADE ON AUGUST 26, 1936. THE DELAY IN MAKING AWARD WAS CAUSED BY THE FACT THAT IT WAS NECESSARY TO REALLOCATE THE EXPENDITURE, AS THE APPROPRIATION TO WHICH IT WAS ORIGINALLY CHARGEABLE EXPIRED AS OF JUNE 30, 1936.

AN ANALYSIS OF THE CASE DISCLOSED THAT UNDER THE TERMS OF THE BIDDER'S EQUALIZATION OFFER, WHICH READ AS FOLLOWS:

"IF SHIPPED ON A GOVERNMENT BILL OF LADING, FREIGHT CHARGES COLLECT, WE WILL ALLOW FROM MONESSEN, PA., TO ALBUQUERQUE, NEW MEXICO, THE COMMERCIAL RATE OF FREIGHT OF $1.26 PER 100 LBS., PLUS SUCH AN ADDITIONAL AMOUNT AS MAY BE NECESSARY TO EQUALIZE ANY LOWER DELIVERED FREIGHT COST TO THE GOVERNMENT RESULTING FROM THE APPLICATION OF LAND GRANT RATES FROM THE SHIPPING POINT OF ANY OTHER BIDDER AS COMPARED TO THE APPLICATION OF LAND GRANT RATES FROM OUR SHIPPING POINT.' EQUALIZATION IN THE AMOUNT OF $254.29 SHOULD BE CHARGED. THIS AMOUNT WAS DEVELOPED FROM THE FOLLOWING COMPUTATION:

LAND GRANT RATE FROM MONESSEN, PA. ------------------ $0.9818

NET RATE FROM MINNEQUA, COLO. ----------------------- .56

.42918

$0.42918 TIMES 59,250 POUNDS EQUALS $254.29.

UNDER DATE OF SEPTEMBER 8, 1936, THE PITTSBURGH STEEL COMPANY SUBMITTED A LETTER TO THE DEPARTMENT (COPY ATTACHED) QUESTIONING THE AMOUNT OF EQUALIZATION CHARGED, AND A RECHECK OF OUR FIGURES SHOWED THAT AN ERROR HAD BEEN MADE. YOU WILL NOTE THAT IN THE BIDDER'S EQUALIZATION OFFER, HE SPECIFICALLY STATES THAT HE WILL ALLOW EQUALIZATION RESULTING FROM THE APPLICATION OF LAND GRANT RATES, AND THAT EQUALIZATION IN THE AMOUNT OF $254.29 WAS BASED ON THE MINNEQUA RATE OF 0.56, WHICH IS A GOVERNMENT NET RATE CONTAINING NO LAND GRANT DEDUCTION.

THE DEPARTMENT CORRECTED THIS ERROR ON SEPTEMBER 19, 1936, BY ISSUING A STANDARD FORM NO. 1036, CHANGING THE DEDUCTION OF EQUALIZATION FROM $254.29 TO THE CORRECT AMOUNT OF $140.14. THIS NEW FIGURE WAS DETERMINED IN THE FOLLOWING MANNER AND IS BASED ON THE LOWEST LAND GRANT RATE, RATHER THAN ON THE LOWEST NET RATE.

TABLE

LAND GRANT RATE FROM MONESSEN ----------------------- $0.98918

LAND GRANT RATE FROM CHICAGO ------------------------ .75266

DIFFERENCE ------------------------------------- .23652

$0.23652 TIMES 59,250 LBS. EQUALS $140.14.

DELIVERED PRICE ------------------------------------- $2,076.00

COMMERCIAL FRT. ALLOWANCE ($1.26 PER 100 POUNDS)

(FROM MONESSEN) ----------------------------------- 746.55

1,329.45

FRT. PAID BY GOV-T. ).98918 PER 100 POUNDS) --------- 586.09

1,915.54

LESS DISCOUNT --------------------------------------- 34.65

1,880.89

LESS EQUALIZATION ----------------------------------- 140.14

1,740.75

ON OCTOBER 6, 1936, THE PITTSBURGH STEEL COMPANY AGAIN CORRESPONDED WITH THE DEPARTMENT AND TOOK EXCEPTION TO THE NEW EQUALIZATION FIGURE AND STATED THAT THEY COULD NOT AGREE WITH OUR METHOD OF DETERMINING THIS DEDUCTION, AND REQUESTED THAT THEY BE ADVISED IN DETAIL HOW THIS AMOUNT WAS COMPUTED. YOUR ATTENTION IS INVITED TO LETTER OF OCTOBER 6, 1936, FROM THIS FIRM.

UNDER DATE OF OCTOBER 6, 1936, WE REPLIED TO THIS BIDDER, FURNISHING HIM ALL OF THE INFORMATION DESIRED AND REQUESTING THAT THE MATERIAL CALLED FOR UNDER THE SUBJECT INVITATION BE SHIPPED AS SOON AS POSSIBLE. ON OCTOBER 14, 1936, THE PITTSBURGH STEEL COMPANY SUBMITTED A THIRD LETTER WHICH WHEN SUMMARIZED SEEMS TO INDICATE THAT IT WAS THE INTENT OF THE EQUALIZATION OFFER SUBMITTED WITH THEIR BID TO OFFER A DEDUCTION BASED ON LAND GRANT SAVINGS, THAT IS THE DIFFERENCE BETWEEN THE COMMERCIAL RATES AND THE NET GOVERNMENT RATES, WHEREAS THIS OFFICE INTERPRETED THE MEANING OF THEIR OFFER TO BE AN EQUALIZATION ON THE LOWEST LAND GRANT RATE AVAILABLE TO THE GOVERNMENT.

IT WILL BE NOTED FROM THE ABSTRACT ATTACHED HERETO THAT IF THIS BIDDER'S OFFER IS TO BE INTERPRETED AS MEANING AN EQUALIZATION ON SAVINGS, THEIR BID WOULD NOT HAVE BEEN LOW AND CONSEQUENTLY THEY WOULD NOT HAVE BEEN ENTITLED TO THE AWARD.

INFORMATION IS REQUESTED AS TO WHETHER OR NOT THE DEPARTMENT IS CORRECT IN THE INTERPRETATION PLACED UPON THE OFFER BY THE PITTSBURGH STEEL COMPANY IN COMPUTING EQUALIZATION IN THE AMOUNT OF $140.14, AND MAKING AWARD TO THE PITTSBURGH STEEL COMPANY OR, WHETHER CONSIDERATION SHOULD BE GIVEN TO THE BIDDER'S CLAIM THAT OUR EQUALIZATION FIGURE IS INCORRECT AND CONSEQUENTLY AWARD SHOULD NOT HAVE BEEN MADE TO THEM.

THE LANGUAGE COVERING THE EQUALIZATION OFFER OF THE PITTSBURGH STEEL CO. IS THE BIDDER'S OWN LANGUAGE DELIBERATELY ADOPTED AND SUBMITTED IN RESPONSE TO THE INVITATION FOR BIDS AND, THEREFORE, IF IT IS AMBIGUOUS OR SUSCEPTIBLE OF MORE THAN ONE INTERPRETATION THE INTERPRETATION MOST FAVORABLE TO THE GOVERNMENT MUST BE TAKEN AS INTENDED. AMERICAN SURETY CO. V. PAULY, 170 U.S. 133, 144; CALDERON V. ATLAS S.S. CO., 170 U.S. 272, 280-281.

THE BIDDER STATES ITS CONTENTION IN ITS LETTER OF OCTOBER 14, 1936, AS FOLLOWS:

* * * THE WHOLE MATTER SEEMS TO HINGE ON ONE THING, AND THAT IS THE FACT THAT IN OUR BID WE DID NOT RECOGNIZE THE CLAUSE IN YOUR SPECIFICATIONS READING AS FOLLOWS:

"NO CONSIDERATION WILL BE GIVEN TO OFFERS TO EQUALIZE COMMERCIAL FREIGHT RATES WITH COMPETITORS, BUT CONSIDERATION WILL BE GIVEN TO OFFERS TO EQUALIZE LAND GRANT REDUCTIONS FROM COMMERCIAL RATES.'

I GATHER FROM YOUR LETTER THAT IT IS YOUR INTENTION TO HOLD TO THAT CLAUSE OF YOUR SPECIFICATIONS AND IGNORE ANY OFFERS TO EQUALIZE COMMERCIAL RATES. IT IS OUR CONTENTION THAT WE IN MAKING OUR BID STATED VERY CLEARLY JUST EXACTLY THE AMOUNT OF COMMERCIAL FREIGHT WE WOULD ALLOW IF AWARDED THE BUSINESS AND INDICATED CLEARLY THAT WE WOULD ALLOW ONLY SUCH AN ADDITIONAL AMOUNT AS WOULD EQUALIZE THE SAVINGS IN FREIGHT COST TO THE GOVERNMENT RESULTING FROM THE APPLICATION OF A LAND GRANT RATE FROM THE SHIPPING POINT OF SOME OTHER BIDDER AS OPPOSED TO THE COMMERCIAL RATE OF FREIGHT FROM THAT SHIPPING POINT COMPARED WITH THE APPLICATION OF LAND GRANT RATE FROM MONESSEN, PA., AS OPPOSED TO THE COMMERCIAL RATE OF FREIGHT FROM MONESSEN, PA.

IT APPARENTLY IS YOUR CONTENTION THAT WE DID MAKE AN OFFER TO EQUALIZE COMMERCIAL RATES OF FREIGHT AND ALSO MAKE AN OFFER TO EQUALIZE LAND GRANT RATES OF FREIGHT. THIS IS NOT THE CASE IN THAT WE OFFERED ONLY TO EQUALIZE THE SAVINGS BETWEEN THE DIFFERENCE BETWEEN LAND GRANT RATES AND COMMERCIAL RATES FROM TWO DIFFERENT SHIPPING POINTS. IT IS OUR CONTENTION THAT IF THE GOVERNMENT WAS NOT WILLING TO ACCEPT OUR BID ON THE BASIS MADE AND INTENDED TO HOLD STRICTLY TO THE CLAUSE CONTAINED IN YOUR ADVERTISEMENT, THEN YOU SHOULD HAVE CONSIDERED OUR BID INFORMAL AND MADE NO AWARD TO US AT ALL.

IN ITS LETTER OF SEPTEMBER 8, 1936, HOWEVER, THIS BIDDER SAID:

WE ACKNOWLEDGE YOUR PURCHASE ORDER NO. 4912-37 DATED SEPTEMBER 4TH COVERING 750 SPOOLS OF BARBED WIRE AWARDED ON OUR QUOTATION SUBMITTED AGAINST YOUR INVITATION NO. R-8-215, ON JUNE 15TH, WHICH WE ACCEPTED BY OUR TELEGRAM DATED AUGUST 25TH.

WE ARE DISPOSED TO QUESTION THE AMOUNT DEDUCTIBLE AND REPRESENTING EQUALIZATION OF LAND GRANT RATES. NATURALLY, WHEN WE SUBMITTED OUR QUOTATION, WE ANTICIPATED A SMALL ADDITIONAL EQUALIZATION, BUT NOT ANYTHING NEAR THE AMOUNT SHOWN ON YOUR PURCHASE ORDER, NAMELY, $254.29, AND IT IS OUR CANDID OPINION THAT THIS AMOUNT IS SHOWN AS DEDUCTIBLE PROBABLY THROUGH AN ERROR IN CALCULATION SOMEWHERE IN YOUR DEPARTMENT.

WE ARE PROCEEDING WITH THE ORDER, HAVING ACCEPTED IT ON THE BASIS OF OUR QUOTATION, BUT WE WOULD APPRECIATE VERY MUCH BEING FAVORED WITH A MEMORANDUM OF THE LAND GRANT RATES USED BY YOUR DEPARTMENT IN ARRIVING AT THIS EQUALIZATION FIGURE, AND WE TRUST THAT YOU MAY FIND IT POSSIBLE TO LET US HAVE THIS INFORMATION WITHIN THE NEXT FEW DAYS.

THE COMPUTATION--- AS CORRECTED IN THE DEPARTMENT--- OF EQUALIZATION ON THE BASIS OF LOWEST LAND-GRANT RATE AVAILABLE FROM THE SHIPPING POINT OF ANY BIDDER CONFORMS WITH THE LANGUAGE OF THE BIDDER WHEN THAT LANGUAGE IS READ WITH THE LANGUAGE OF THE INVITATION ON WHICH SUBMITTED. ALL THE LANGUAGE OF BOTH MUST BE READ TO ASCERTAIN THE AGREEMENT OF THE PARTIES, AND THE BIDDER IS NOT ENTITLED TO HAVE ANY OF THE LANGUAGE OF THE INVITATION DISREGARDED IN THAT CONNECTION.

THE BIDDER NOT ONLY IS CONTENDING THAT PART OF THE LANGUAGE IN THE INVITATION BE DISREGARDED BUT IS ASKING FOR A CONSTRUCTION OF ITS OWN LANGUAGE IN ITS BID WHICH, LIKE YOU, I AM NOT ABLE TO SEE THAT ITS LANGUAGE SUPPORTS. THE METHOD OF OFFERING EQUALIZATION IS NOT NOW ONE OF FIRST IMPRESSION, PARTICULARLY AS BETWEEN OFFERINGS TO EQUALIZE ON THE BASIS OF SAVINGS OR ON THE BASIS OF LOWEST LAND-GRANT RATES, THE MATTER HAVING RECEIVED MUCH ATTENTION IN RECENT MONTHS IN CONNECTION WITH BIDS SUBMITTED FROM REPRESENTATIVES OF THE STEEL INDUSTRY ON GOVERNMENT INVITATIONS. AMONG OTHERS, SEE 15 COMP. GEN. 1045; 16 ID. 272; A-75336 OF JULY 3, 1936.

THE PITTSBURGH STEEL CO. SHOULD BE REQUIRED TO PERFORM ITS CONTRACT, THE NET PAYMENT DUE UNDER THE APPROPRIATION TO BE ARRIVED AT ON THE BASIS OF THE CORRECTED COMPUTATION YOU HAVE SUBMITTED, SUCH COMPUTATION BEING REQUIRED BY THE TERMS OF THE CONTRACT.