A-92880, MAY 5, 1938, 17 COMP. GEN. 911

A-92880: May 5, 1938

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SHOULD NOT BE CONSIDERED WHERE IT IS APPARENT THE GROSSLY INADEQUATE TRADE-IN ALLOWANCE OFFERED IS FOR THE EXPRESS PURPOSE OF CIRCUMVENTING THE STATUTORY LIMITATION ON THE PURCHASE PRICE. PISTON DISPLACEMENT WHICH WERE IN CONTRAVENTION OF NUMEROUS DECISIONS OF THIS OFFICE AND DEFINITELY EXCLUDED FROM COMPETITION ALL MAKES OF AUTOMOBILES REASONABLY COMPETITIVE IN THE CLASS WITHIN THE STATUTORY PURCHASE PRICE LIMIT. THE INVITATION FOR BIDS WAS ISSUED FROM THE UNITED STATES ENGINEER OFFICE. BIDS WERE OPENED DECEMBER 6. THE SERVICE REQUIREMENTS WERE STATED IN THE INVITATION WITH SUFFICIENT DETAIL AND APPEAR ADEQUATE TO JUSTIFY THE PURCHASE OF A SOMEWHAT STURDIER AND ROOMIER VEHICLE THAT THOSE IN THE RECOGNIZED "LIGHT WEIGHT" COMPETITIVE CLASS.

A-92880, MAY 5, 1938, 17 COMP. GEN. 911

VEHICLES - MOTOR - PASSENGER-CARRYING - PURCHASE LIMITATIONS - TRADE-IN ALLOWANCE INADEQUACY A BID TO FURNISH NEW AUTOMOBILES CONDITIONED UPON ACCEPTANCE, ALSO, OF BIDDER'S OFFER ON USED VEHICLES TO BE EXCHANGED, SHOULD NOT BE CONSIDERED WHERE IT IS APPARENT THE GROSSLY INADEQUATE TRADE-IN ALLOWANCE OFFERED IS FOR THE EXPRESS PURPOSE OF CIRCUMVENTING THE STATUTORY LIMITATION ON THE PURCHASE PRICE,"INCLUDING THE VALUE OF ANY VEHICLE EXCHANGED," OF NEW VEHICLES UNDER THE APPROPRIATION INVOLVED, AND WHERE SUCH A BID HAS BEEN ACCEPTED UNDER SPECIFICATIONS CONTAINING REQUIREMENTS AS TO WHEEL BASE, WEIGHT, AND PISTON DISPLACEMENT WHICH WERE IN CONTRAVENTION OF NUMEROUS DECISIONS OF THIS OFFICE AND DEFINITELY EXCLUDED FROM COMPETITION ALL MAKES OF AUTOMOBILES REASONABLY COMPETITIVE IN THE CLASS WITHIN THE STATUTORY PURCHASE PRICE LIMIT, APPROPRIATED FUNDS MAY NOT LEGALLY BE CHARGED FOR ANY PAYMENT UNDER THE CONTRACT AS AWARDED.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF WAR, MAY 5, 1938:

THERE HAS BEEN BROUGHT TO MY ATTENTION CONTRACT NO. W-1092-ENG-6222, JANUARY 12, 1938, WITH THE BLUFF CITY BUICK CO., MEMPHIS, TENN., COVERING THE PURCHASE OF FIVE BUICK FIVE-PASSENGER, FOUR-DOOR SEDAN AUTOMOBILES, MODEL 38-47, AT $749 EACH F.O.B. FLINT, MICH., LESS TRADE IN ALLOWANCE OF $25 ON FIVE USED AUTOMOBILES.

THE INVITATION FOR BIDS WAS ISSUED FROM THE UNITED STATES ENGINEER OFFICE, MEMPHIS, TENN., UNDER DATE OF NOVEMBER 22, 1937, AND BIDS WERE OPENED DECEMBER 6, 1937. THE SERVICE REQUIREMENTS WERE STATED IN THE INVITATION WITH SUFFICIENT DETAIL AND APPEAR ADEQUATE TO JUSTIFY THE PURCHASE OF A SOMEWHAT STURDIER AND ROOMIER VEHICLE THAT THOSE IN THE RECOGNIZED "LIGHT WEIGHT" COMPETITIVE CLASS, AND TO THAT EXTENT WERE IN CONFORMITY WITH THE DECISIONS OF THIS OFFICE. SEE DECISIONS TO YOU A- 83493, MAY 28, 1937, 15 COMP. GEN. 1085, AND RELATED DECISIONS.

THE INVITATION REQUIRED ENGINES WITH PISTON DISPLACEMENT OF 245 CUBIC INCHES, MINIMUM WHEEL BASE OF 122 INCHES, AND APPROXIMATE VEHICLE WEIGHT OF 3,600 POUNDS WITH A PERMISSIBLE DEVIATION OF NOT MORE THAN 10 PERCENT UNDER OR OVER THAT WEIGHT. THERE WERE OFFERED FOR TRADE-IN ALLOWANCE OR CASH BID FOUR FORD SEDANS PURCHASED IN JUNE 1935, AND ONE GRAHAM SEDAN PURCHASED IN OCTOBER 1935.

IT IS CERTIFIED ON STANDARD GOVERNMENT FORM NO. 1036 THAT THE AGREEMENT (PURCHASE) WAS MADE AFTER ADVERTISING BY CIRCULAR LETTERS SENT TO 17 DEALERS AND BY NOTICES POSTED IN PUBLIC PLACES. TWO BIDS WERE RECEIVED, BOTH FROM DEALERS IN MEMPHIS, TENN. THE BIRCH MOTOR CO. OFFERED PONTIAC 8 AUTOMOBILES AT $940 EACH F.O.B. PONTIAC, MICH., WITH AN AGGREGATE TRADE-IN ALLOWANCE OF $1,000 FOR THE FIVE USED VEHICLES. THE BLUFF CITY BUICK CO. OFFERED BUICK 38-47 MODEL VEHICLES AT $749 EACH F.O.B. FLINT, MICH., WITH TRADE-IN ALLOWANCE OF $5 EACH, OR $25 FOR THE FIVE USED MACHINES, AND QUALIFIED ITS BID AS FOLLOWS:

IT IS UNDERSTOOD AND AGREED THAT IF THIS BID IS ACCEPTED, THAT IT WILL BE ACCEPTED ONLY WITH THE PROVISION THAT THE USED CARS WILL BE TRADED IN TO THE BLUFF CITY BUICK COMPANY.

THE BID OF THE BIRCH MOTOR CO., BIDDER NO. 2, WAS REJECTED FOR THE REASON STATED ON THE ABSTRACT OF BIDS THAT "A LOWER COMPARATIVE BID WAS RECEIVED FROM BIDDER NO. 2, BUT IT IS NOT FOR ACCEPTANCE FOR THE REASON THAT THE UNIT PRICE QUOTED, TRADE-IN VALUE CONSIDERED, IS IN EXCESS OF $750.00.' THE REJECTION OF THIS BID WAS PROPER. 17 COMP. GEN. 7. THE CONTRACT WAS AWARDED TO THE BLUFF CITY BUICK CO.

THE SPECIFICATION REQUIREMENTS AS TO WHEEL BASE, WEIGHT, AND PISTON DISPLACEMENT NOT ONLY WERE IN DISREGARD AND CONTRAVENTION OF NUMEROUS DECISIONS OF THIS OFFICE, BUT DEFINITELY EXCLUDED FROM COMPETITION ALL MAKES OF AUTOMOBILES REASONABLY COMPETITIVE WITHIN THE $750 PRICE LIMIT CLASS, OR EVEN APPROXIMATELY SO COMPETITIVE, AND SO WERE VIOLATIVE OF THE MANIFEST INTENT OF THE PRICE LIMITING STATUTES. 16 COMP. GEN. 207; ID. 354; 17 COMP. GEN. 345.

AS STATED ABOVE, THE TRADE-IN ALLOWANCE ON THE FIVE USED CARS WAS $25, OR $5 EACH. A BIDDER ON NEW AUTOMOBILES IS AT LIBERTY TO OFFER AS MUCH OR AS LITTLE BY WAY OF TRADE-IN ALLOWANCE ON USED CARS AS HE SEES FIT, BUT A BID ON A NEW AUTOMOBILES CONDITIONED UPON ACCEPTANCE, ALSO, OF THE BIDDERS OFFER ON THE USED VEHICLES, SHOULD NOT BE CONSIDERED WHERE, AS IN THE PRESENT CASE, IT IS APPARENT THE RIDICULOUSLY LOW TRADE-IN ALLOWANCE OFFERED IS FOR THE EXPRESS PURPOSE OF CIRCUMVENTING THE STATUTORY LIMITATION AS TO THE PURCHASE PRICE WHICH MAY BE PAID FOR NEW VEHICLES PURCHASED UNDER THE APPROPRIATION INVOLVED.

THE BLUE BOOK, ONE HUNDRED AND NINTH EDITION, JANUARY-FEBRUARY 1938, PUBLISHED BY THE NATIONAL USED CAR MARKET REPORT, INC., QUOTES THE FOLLOWING PRICES ON USED CARS FOR THE ZONE IN WHICH MEMPHIS, TENN., IS LOCATED: FORD SEDAN, 1935 MODEL, RETAIL SALES PRICE $291, CASH VALUE $218; GRAHAM SEDAN, STANDARD 6, RETAIL SALES PRICE $337, CASH VALUE $253. MOREOVER, IT IS TO BE NOTED AS A GENERAL PRACTICE OF DEALERS TO OFFER SUBSTANTIALLY LARGER, NOT SMALLER, AMOUNTS FOR USED VEHICLES AS TRADE-IN ALLOWANCE ON NEW AUTOMOBILES THAN AS A CASH PRICE, AS IS EVIDENCED BY NUMEROUS CONTRACTS COVERING MOTOR VEHICLE PURCHASES ON FILE IN THIS OFFICE.

ACCEPTING THE CASH VALUES QUOTED IN THE BLUE BOOK ON 1935 MODEL FORDS AND GRAHAMS AS EVEN APPROXIMATELY CORRECT--- AND CONSIDERING THE TRADE-IN ALLOWANCE OFFERED BY THE ONLY OTHER BIDDER IN THIS INSTANCE-- IT IS PLAIN THAT THE TRADE-IN ALLOWANCE OF $5 EACH FOR THE USED VEHICLES IN THIS INSTANCE HAD NO RELATION WHATEVER TO THE ACTUAL OR SALE VALUE OF SAID VEHICLES BUT WAS FOR THE SOLE PURPOSE OF CIRCUMVENTING THE STATUTORY LIMITATION WITH RESPECT TO THE NEW VEHICLES.

THE ACT OF MAY 14, 1937, 50 STAT. 163, PROVIDES IN PERTINENT SUBSTANCE THAT NO APPROPRIATION FOR THE FISCAL YEAR 1938 SHALL BE AVAILABLE FOR THE PURCHASE OF ANY PASSENGER-CARRYING VEHICLE AT A COST IN EXCESS OF $750, INCLUDING THE VALUE OF ANY VEHICLE EXCHANGED. THE ONLY REASONABLE MEANING OF THE STATUTE WOULD APPEAR TO BE THAT THE EXCHANGE "VALUE" OF USED VEHICLES SHOULD HAVE AT LEAST SOME COMPARABLE RELATION TO THEIR RECOGNIZED COMMERCIAL VALUE AT THE TIME AND PLACE OF EXCHANGE. IT IS HARDLY TO BE CONTENDED THAT IT WAS IN THE CONTEMPLATION OF THE CONGRESS THAT USED GOVERNMENT EQUIPMENT PROPERLY CAN BE DISPOSED OF AT A "GIVE-AWAY" OR LESS- THAN-JUNK PRICE MERELY BECAUSE THAT IS THE TRADE-IN ALLOWANCE OFFERED BY A BIDDER, NOR IS IT TO BE PRESUMED THAT THE STATUTE CONFERS UPON ANY OFFICER OF THE GOVERNMENT AUTHORITY TO ACCEPT SUCH A PRICE FOR USED EQUIPMENT WITHOUT REGARD TO THE ACTUAL OR REASONABLE MONEY VALUE THEREOF, SOLELY BECAUSE AN EXCHANGE IS INVOLVED.

IT HAS BEEN HELD CONSISTENTLY BY THE ACCOUNTING OFFICERS, AND RECOGNIZED BY THE COURTS, THAT THE INTERESTS OF THE GOVERNMENT REQUIRE USED EQUIPMENT TO BE DISPOSED OF AT THE BEST PRICES OBTAINABLE WHETHER IN CASH OR BY WAY OF TRADE-IN ON NEW EQUIPMENT, AND THE FACT THAT A BIDDER DOES NOT OFFER A CASH PRICE FOR USED AUTOMOBILES OR ARBITRARILY QUALIFIES HIS BID, AS IN THIS INSTANCE, DOES NOT ABROGATE THAT RULE, WHICH IS PARTICULARLY FOR APPLICATION WHEN TRADE-IN ALLOWANCES ARE SO PATENTLY AND GROSSLY INADEQUATE AS TO CAST SUSPICION UPON THE BONA FIDES OF A BIDDER OR, IN ANY EVENT, TO SHOW CONCLUSIVELY THAT A NEGLIGIBLE TRADE-IN ALLOWANCE IS QUOTED FOR THE PURPOSE OF ENABLING THE CONTRACTOR TO REALIZE FROM HIS BARGAIN A SUBSTANTIAL INCREASE OVER ITS BID PRICE FOR NEW EQUIPMENT, AT THE EXPENSE OF THE GOVERNMENT. THAT IS TO SAY, IF A PURCHASING OFFICER UNDERTAKES TO BIND THE GOVERNMENT TO PAY A CONTRACTOR $749 IN CASH FOR A NEW VEHICLE, AND IN ADDITION DELIVERS TO HIM PROPERTY WORTH APPROXIMATELY $200 OR MORE FOR A PALTRY $5, THE NET RESULT IS THAT THE GOVERNMENT IS PAYING THE CONTRACTOR APPROXIMATELY $200 IN EXCESS OF THE CONTRACT PRICE FOR THE NEW VEHICLES, AND THE EXORBITANT DISCREPANCY IN TRADE-IN ALLOWANCE IS AN ITEM OF ACTUAL ADDITIONAL COST TO THE UNITED STATES, BRINGING THE REAL PRICE OF THE NEW VEHICLE SUBSTANTIALLY ABOVE THE STATUTORY PRICE LIMIT.

AS SAID BY THE COURT IN BEARD'S CASE, 3 CT.CLS. 122-130:

* * * GROSS INADEQUACY OR GROSS EXORBITANCY OF PRICES, SUCH AS NO MAN ADVISED OF HIS RIGHTS WOULD GIVE ON THE ONE HAND, AND SUCH AS NO HONEST MAN COULD CONSCIENTIOUSLY RECEIVE ON THE OTHER, ARE UNIVERSALLY ACKNOWLEDGED BADGES OF IMPOSITION OR FRAUD. * * * THIS IS PREEMINENTLY SO WHERE THIS CLOUD OF SUSPICIOUS FACTS AND CIRCUMSTANCES HANGS OVER A TRANSACTION WITH A PUBLIC AGENT OR OFFICER.

SEE, ALSO, HUME V. UNITED STATES, 21 CT.CLS. 328, IN WHICH THE COURT SAID---

THAT AN AGREEMENT TO PAY $1,200 A TON FOR SHUCKS, ACTUALLY WORTH NOT MORE THAN $35 A TON IS A GROSSLY UNCONSCIONABLE BARGAIN, DEFINED IN BOUVIER'S LAW DICTIONARY TO BE "A CONTRACT WHICH NO MAN IN HIS SENSES, NOT UNDER DELUSION, WOULD MAKE, ON THE ONE HAND, AND WHICH NO FAIR AND HONEST MAN WOULD ACCEPT ON THE OTHER," NOBODY CAN DOUBT. SUCH A CONTRACT WHETHER FOUNDED ON FRAUD, ACCIDENT, MISTAKE, FOLLY, OR IGNORANCE, IS VOID AT COMMON LAW. IT IS NOT NECESSARY TO INVOKE THE AID OF A COURT OF EQUITY TO REFORM IT. COURTS OF LAW WILL ALWAYS REFUSE TO ENFORCE SUCH A BARGAIN, AS AGAINST THE PUBLIC POLICY OF HONESTY, FAIR DEALING, AND GOOD MORALS.

THE COURT FURTHER SAID IN THAT CASE THAT---

IF IT BE SO IN SUITS ON CONTRACTS BETWEEN PRIVATE PARTIES WHO ACT BY AND FOR THEMSELVES, HOW MUCH MORE IS IT SO IN SUITS ON AGREEMENTS BY THE UNITED STATES, ACTING ALWAYS THROUGH PUBLIC OFFICERS, WHO ARE MERE AGENTS, REQUIRED TO ACT IN GOOD FAITH TOWARDS THEIR PRINCIPAL ACCORDING TO THE LAWS OF THE LAND, AS EVERYBODY DEALING WITH THEM ARE BOUND TO KNOW.

THE RESULT IN THE PRESENT INSTANCE WAS THAT THE ADVERTISED SPECIFICATIONS EXCLUDED FROM COMPETITION ALL MAKES OF AUTOMOBILES REASONABLY COMPETITIVE WITHIN THE $750 STATUTORY PRICE LIMIT CLASS; THAT ONLY TWO BIDS WERE RECEIVED, ONE OF WHICH SHOWED ON ITS FACE IT WAS NOT ACCEPTABLE IN VIEW OF THE STATUTORY LIMITATION; AND THAT THE OTHER BID OFFERED AUTOMOBILES, COMMERCIALLY QUOTED AT A FACTORY DELIVERY PRICE IN EXCESS OF $1,000, AT A PRICE OF $749 EACH CONDITIONED ON THE ACCEPTANCE, ALSO, OF ITS OFFER OF ONLY $25 FOR USED EQUIPMENT, WHICH AT USED CAR PRICES QUOTED FOR THE ZONE IN WHICH THE PURCHASE WAS MADE WAS WORTH IN EXCESS OF $1,000. SUCH GROSS INADEQUACY IN THE PRICE ACCEPTED FOR THE USED VEHICLES IS SUFFICIENT TO RENDER THE WHOLE TRANSACTION EITHER IN CONTRAVENTION OF THE STATUTE OR CONTRARY TO THE INTERESTS OF THE UNITED STATES--- IRRESPECTIVE OF THE MOTIVES WHICH MAY HAVE PROMPTED THE BIDDER TO SUBMIT SUCH UNCONSCIONABLE TRADE-IN PRICES ON THE ONE HAND OR WHICH MAY HAVE INFLUENCED THE CONTRACTING OFFICER IN ACCEPTING THEMON THE OTHER.

ACCORDINGLY, I HAVE TO ADVISE THAT UPON THE FACTS NOW APPEARING, APPROPRIATED MONEYS OF THE UNITED STATES MAY NOT LEGALLY BE CHARGED FOR ANY PAYMENT UNDER THE CONTRACT AS AWARDED.