A-93271, MAY 21, 1938, 17 COMP. GEN. 964

A-93271: May 21, 1938

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THERE IS PROBABILITY THAT THERE IS BEING BID A HIGHER PRICE FOR THE CHINAWARE WITH THE CRESTS THAN THE PRODUCT IS REASONABLY WORTH ALTHOUGH IT IS EVIDENT THAT A MISTAKE WAS MADE. THERE IS FOR ADMINISTRATIVE CONSIDERATION WHETHER FOREIGN DEALERS IN CHINAWARE SHOULD NOT BE PERMITTED TO SUBMIT BIDS SO THAT THERE MAY BE A DETERMINATION AS TO THE REASONABLENESS OF THE DIFFERENCE IN COST BETWEEN CHINAWARE OF DOMESTIC MANUFACTURE WITH CRESTS AND THAT OF FOREIGN MANUFACTURE WITH CRESTS. 1938: THERE WAS RECEIVED YOUR REPORT OF APRIL 5. IF YOUR COMMUNICATION IS UNDERSTOOD PROPERLY. IS THAT THE CRESTS ARE NOT INCLUDED UNDER THE ABOVE-MENTIONED CONTRACT. WHEREAS YOU APPEAR TO TAKE THE POSITION THAT THESE ARE NOT TO BE FURNISHED BY YOU UNDER THE ABOVE-MENTIONED CONTRACT.

A-93271, MAY 21, 1938, 17 COMP. GEN. 964

ADVERTISING - SOLE DOMESTIC BIDDER - REASONABLENESS OF PRICE DETERMINATION BY INVITATIONS TO FOREIGN BIDDERS WHERE, UNDER READVERTISED SPECIFICATIONS FOR CHINAWARE WITH SPECIAL DESIGN AND RAISED GILDED CREST, THE SOLE BIDDER WHO HAS UNIFORMLY SUBMITTED THE ONLY BID FOR A NUMBER OF YEARS ALLEGES MISTAKE IN BID IN CONNECTION WITH THE CREST, AND THERE IS PROBABILITY THAT THERE IS BEING BID A HIGHER PRICE FOR THE CHINAWARE WITH THE CRESTS THAN THE PRODUCT IS REASONABLY WORTH ALTHOUGH IT IS EVIDENT THAT A MISTAKE WAS MADE, THE BIDDER MAY BE PAID A REASONABLE AMOUNT IN ADDITION TO THE CONTRACT PRICE, BUT THERE IS FOR ADMINISTRATIVE CONSIDERATION WHETHER FOREIGN DEALERS IN CHINAWARE SHOULD NOT BE PERMITTED TO SUBMIT BIDS SO THAT THERE MAY BE A DETERMINATION AS TO THE REASONABLENESS OF THE DIFFERENCE IN COST BETWEEN CHINAWARE OF DOMESTIC MANUFACTURE WITH CRESTS AND THAT OF FOREIGN MANUFACTURE WITH CRESTS.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF STATE, MAY 21, 1938:

THERE WAS RECEIVED YOUR REPORT OF APRIL 5, 1938, CONCERNING AN ALLEGATION OF LENOX, INC., THAT IT HAD MADE A MISTAKE OF $702 IN SUBMITTING ITS BID AND ENTERING INTO CONTRACT SFA-404, DATED SEPTEMBER 4, 1937, FOR THE DELIVERY OF CERTAIN CHINAWARE, AND THERE HAS BEEN NOTED A LETTER OF OCTOBER 6, 1937, FROM THE DEPARTMENT OF STATE TO THIS COMPANY, AS FOLLOWS:

THE DEPARTMENT HAS FOR ACKNOWLEDGEMENT YOUR COMMUNICATION OF SEPTEMBER 27, 1937, SPECIFICALLY IN CONNECTION WITH THE DEPARTMENT'S PURCHASE ORDER NO. 495, AND GENERALLY IN CONNECTION WITH THE DEPARTMENT'S CONTRACT WITH YOU FOR ITS REQUIREMENTS IN YOUR LINE DURING THE PRESENT YEAR.

THE CONTENTION, IF YOUR COMMUNICATION IS UNDERSTOOD PROPERLY, IS THAT THE CRESTS ARE NOT INCLUDED UNDER THE ABOVE-MENTIONED CONTRACT, AND YOUR COMMUNICATION APPEARS TO INDICATE THAT THE DEPARTMENT MAY BE AT FAULT IN THIS MATTER. THE DEPARTMENT'S PURCHASE ORDER NO. 495 CALLED FOR CRESTS, WHEREAS YOU APPEAR TO TAKE THE POSITION THAT THESE ARE NOT TO BE FURNISHED BY YOU UNDER THE ABOVE-MENTIONED CONTRACT.

WE HAVE GONE INTO THIS MATTER CAREFULLY. THIS MATERIAL WAS FIRST ADVERTISED FOR BIDS ON JULY 21, 1937. THE PRICE FROM YOUR COMPANY WAS THE ONLY PRICE SUBMITTED, WHICH CONDITION HAS BEEN UNIFORMLY THE CASE FOR A NUMBER OF YEARS. WITH THE DEPARTMENT'S REQUEST FOR FIGURES THERE WENT TO THE INVITED BIDDERS, INCLUDING YOURSELVES, THE USUAL DOCUMENTS, INCLUDING THE SPECIFICATION. IN THESE SPECIFICATIONS THE QUALITY OF THE WORK REQUIRED IS CLEARLY SET OUT, AND ALL THE CONDITIONS UNDER WHICH PRICES ARE TO BE SUBMITTED ARE DETERMINED.

ON PAGE ONE OF THESE GENERAL SPECIFICATIONS UNDER "CHINAWARE," PARAGRAPH THREE CLEARLY AND DISTINCTLY CALLS FOR THE DECORATIONS, INCLUDING THE CRESTS; THIS PARAGRAPH IS QUOTED VERBATIM:

"EVERY PIECE OF CHINA SHALL HAVE AN ORNAMENTAL, RAISED, AND GILDED BORDER OF STAR AND STRIPE DESIGN AND A RAISED GILDED CREST, A REPRESENTATION OF THE SEAL OF THE UNITED STATES. DIMENSIONS OF CREST TO BE ADJUSTED TO SUIT THE DIFFERENT PIECES OF CHINA; THE CIRCLE AROUND THE SEAL IS TO BE OMITTED.'

UNDER DATE OF JULY 21, 1937, YOUR COMPANY SUBMITTED A BID IN ANSWER TO THE INVITATION. ON CHECKING THIS BID IT WAS FOUND THAT AN ERROR HAD BEEN MADE, WHICH WAS OBVIOUS AND EVIDENTLY UNINTENTIONAL. THIS ERROR CONSISTED IN THE TRANSPOSITION OF THE 9 INCH, 10 INCH, 12 INCH, 14 INCH, AND 20 INCH PLATTERS IN SUCH A MANNER THAT IT MIGHT HAVE BEEN UNDERSTOOD THAT THE HIGHEST PRICE APPLIED TO THE SMALLEST PLATTER WAS VICE VERSA. THE BID WAS REJECTED ON THIS ACCOUNT.

THE ABOVE-MENTIONED BID FOR THE ITEMS SHOWN ON THE SCHEDULE WAS IN THE SUM OF $564.75, PLUS $410.00 NET FOR THE CRESTS, AT THE RATE OF $30 PER DOZEN.

IN DUE COURSE A SECOND INVITATION FOR BIDS WAS SENT OUT AND IN ANSWER TO THIS A BID WAS FORWARDED BY YOU UNDER DATE OF AUGUST 24, IN THE TOTAL SUM OF $562.25, ONE OF THE ITEMS ON THE SCHEDULE BEING CHANGED IN PRICE, I.E. ITEM THIRTEEN "BULLION CUPS AND SAUCERS.' IN THE FIRST BID SUBMITTED THIS ITEM WAS PRICED AT $44.00 PER DOZEN, WHEREAS IN THE SECOND BID THE ITEM WAS REDUCED TO $41.50 PER DOZEN.

IN DUE TIME YOUR SECOND BID WAS ACCEPTED, A CONTRACT WAS SIGNED BETWEEN YOURSELVES AND THE DEPARTMENT, AND A PERFORMANCE BOND IN PROPER FORM WAS FILLED WITH THE DEPARTMENT BY YOUR COMPANY.

THE SECOND INVITATION FOR BIDS WAS SET OUT IN EXACTLY THE SAME FORM AS THE FIRST. THE SAME DOCUMENTS ACCOMPANIED THE INVITATION, INCLUDING THE SPECIFICATIONS, WHICH WERE, OF COURSE, THE BASIS FOR THE BID, AND THESE SPECIFICATIONS, AS NOTED ABOVE, CLEARLY CALLED FOR THE CRESTS.

IT NOW APPEARS TO BE THAT YOU CLAIM YOUR SECOND BID DID NOT INCLUDE THE ITEM FOR THE CRESTS, AND, IF THE DEPARTMENT UNDERSTANDS YOUR LETTER OF SEPTEMBER 27, 1937, ACCURATELY, IT IS EXPECTED BY YOUR COMPANY THAT IF CRESTS ARE DESIRED THEY ARE TO BE PAID FOR AT THE RATE OF $30.00 PER DOZEN IN ADDITION TO THE PRICES SET OUT IN YOUR ACCEPTED BID OF AUGUST 24, 1937.

THE DEPARTMENT CAN FIND NO JUSTIFICATION FOR THE IMPRESSION YOU MENTIONED IN YOUR LETTER OF SEPTEMBER 27, 1937, TO THE EFFECT THAT IT WAS THE INTENTION OF THE DEPARTMENT TO REDUCE THE COST OF THE CHINA BY ELIMINATING THE CRESTS.

THE CRESTS ARE REQUIRED AND, AS NOTED ABOVE, THEY WERE CLEARLY CALLED FOR IN THE SPECIFICATIONS SENT OUT IN CONNECTION WITH THE ORIGINAL INVITATIONS TO BID, AND IN THE SECOND INVITATIONS TO BID. IF THE COST OF THEM WAS NOT INCLUDED IN THE PRICE SUBMITTED BY YOUR COMPANY, THE FAULT DOES NOT APPEAR TO LIE WITH THE DEPARTMENT, BUT WITH YOUR OWN COMPANY.

THE ABOVE APPEARS FROM THE RECORDS OF THE DEPARTMENT TO COVER THE FACTS IN CONNECTION WITH THIS SITUATION.

IT MIGHT BE ADVISABLE THAT A REPRESENTATIVE OF YOUR COMPANY COME TO WASHINGTON FOR A CONFERENCE IN CONNECTION WITH THIS MATTER. IF THIS WOULD MEET WITH YOUR APPROVAL IT WOULD BE APPRECIATED IF YOU WOULD ADVISE THE DEPARTMENT AS TO A DATE WHICH WOULD BE CONVENIENT TO YOURSELVES.

THE PRIOR BID AT THE RATE OF $410 FOR CRESTS WAS AT THE RATE OF $30 PER DOZEN FOR CHINA AGGREGATING A VALUE OF $564.75, CONSISTING APPARENTLY, OF 14 2/3 (EVIDENTLY COMPUTED FOR CREST PURPOSES AS 13 2/3) DOZEN PIECES, WHEREAS THE PRESENT CLAIM RELATES TO AN ORDER FOR THE SAME KIND OF PIECES AND AT THE SAME PRICE PER PIECE OR PER DOZEN, BUT COVERS 26 DOZEN PIECES-- - THE COST OF THE CHINA BEING $1,022.14 AND THE CRESTS AT $27 PER DOZEN OR $702. IN OTHER WORDS, THE CLAIM OF $702 FOR THE CRESTS IS MORE THAN TWO- THIRDS OF THE COST OF THE CHINA ITSELF, AND THERE HAS BEEN NOTED THE ABOVE -QUOTED STATEMENT THAT ONLY THIS CONCERN HAS BEEN SUBMITTING BIDS TO THE DEPARTMENT OF STATE FOR THE DELIVERY OF CHINAWARE. THERE IS AT LEAST AN INFERENCE THAT THE COMPANY MAY BE ATTEMPTING TO CHARGE THE UNITED STATES MORE FOR THE CHINAWARE WITH THE CRESTS THAN THE PRODUCT IS REASONABLY WORTH.

IT SEEMS EVIDENT WHEN THE PRESENT BID IS COMPARED WITH THE PRIOR ONE THAT THE CONTRACTOR MADE A MISTAKE IN FAILING TO INCLUDE A REASONABLE AMOUNT FOR THE CRESTS, APPARENTLY IN THE STATED BELIEF THAT THE DEPARTMENT OF STATE WAS ATTEMPTING TO ECONOMIZE IN THE PURCHASE OF CHINAWARE BY THE ELIMINATION OF THE CRESTS. UNDER THESE CIRCUMSTANCES A REASONABLE AMOUNT MAY BE ALLOWED FOR THE CRESTS IN ADDITION TO THE CONTRACT PRICE FOR THE CHINAWARE, BUT THERE IS SUGGESTED FOR CONSIDERATION WHETHER FOREIGN DEALERS IN CHINAWARE SHOULD NOT BE PERMITTED TO SUBMIT BIDS SO THAT THERE MAY BE A DETERMINATION AS TO THE REASONABLENESS OF THE DIFFERENCE IN COST BETWEEN CHINAWARE OF DOMESTIC MANUFACTURE WITH CRESTS AND CHINAWARE OF FOREIGN MANUFACTURE WITH CRESTS.