B-113711, MAR 31, 1953

B-113711: Mar 31, 1953

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REQUESTING THAT AN ADVANCE DECISION BE RENDERED AS TO WHETHER PAYMENT THEREON IS AUTHORIZED. SUCH PROPERTY WAS OFFERED FOR SALE "AS IS" AND "WHERE IS" AND WITHOUT RECOURSE AGAINST THE GOVERNMENT. WHICH READS AS FOLLOWS: "18 CEILING PRICES. ** THE PURCHASER WARRANTS THAT THE PRICES SHOWN HEREIN ARE NOT IN EXCESS OF APPLICABLE CEILING PRICES ESTABLISHED BY THE OFFICE OF PRICE STABILIZATION ECONOMIC STABILIZATION AGENCY OR OTHER AUTHORIZED GOVERNMENT AGENCIES AND IN EFFECT UPON THE DATE HEREOF. ADVISED THE ROCK ISLAND ARSENAL AS FOLLOWS: "THE FIRST CAR OF THIS MATERIAL THAT WE RECEIVED WAS USED TO DETERMINE THE PERCENT OF RUBBER INCLUDED IN THE WEIGHT OF THESE SHIPMENTS. THIS CAR WAS WEIGHED FOR GROSS.

B-113711, MAR 31, 1953

PRECIS-UNAVAILABLE

MAJOR J. A. ESTOCK, F.C., U.S. ARMY:

THERE HAS BEEN RECEIVED BY REFERENCE FROM THE CHIEF OF FINANCE YOUR LETTER OF SEPTEMBER 29, 1952, TRANSMITTING UNPAID VOUCHER IN THE AMOUNT OF $2,006.91, IN FAVOR OF THE ALTER COMPANY, 1701 ROCKINGHAM ROAD, DAVENPORT, IOWA, REPRESENTING REFUND OF A PORTION OF THE PURCHASE PRICE PAID FOR SCRAP MATERIAL UNDER CONTRACT NO. DAS) 11-070-AV-25, AND REQUESTING THAT AN ADVANCE DECISION BE RENDERED AS TO WHETHER PAYMENT THEREON IS AUTHORIZED, IN VIEW OF THE CIRCUMSTANCES HEREINAFTER RELATED.

IT APPEARS THAT UNDER THE FOREGOING CONTRACT, DATED NOVEMBER 21, 1951, THE ALTER COMPANY, AS AGENT FOR NORTHWESTERN STEEL & WIRE COMPANY, STERLING, ILLINOIS, AGREED TO PURCHASE FROM THE GOVERNMENT 200 GROSS TONS OF UNPREPARED IRON AND STEEL WITH RUBBER ATTACHED IN THE FORM OF TANK TRACK, AT A UNIT PRICE OF $30.34, OR FOR A TOTAL CONTRACT PRICE OF $6,068. SUCH PROPERTY WAS OFFERED FOR SALE "AS IS" AND "WHERE IS" AND WITHOUT RECOURSE AGAINST THE GOVERNMENT; THE CONTRACT CONTAINED THE USUAL PROVISION WITH REGARD TO INSPECTION, AND ALSO CARRIED A PARAGRAPH WITH RESPECT TO CEILING PRICES, WHICH READS AS FOLLOWS:

"18 CEILING PRICES. ** THE PURCHASER WARRANTS THAT THE PRICES SHOWN HEREIN ARE NOT IN EXCESS OF APPLICABLE CEILING PRICES ESTABLISHED BY THE OFFICE OF PRICE STABILIZATION ECONOMIC STABILIZATION AGENCY OR OTHER AUTHORIZED GOVERNMENT AGENCIES AND IN EFFECT UPON THE DATE HEREOF, FOR THE MATERIAL BEING SOLD HEREUNDER."

AFTER RECEIVING THE MATERIAL, THE CONTRACTOR-PURCHASER IN A LETTER DATED MAY 27, 1952, ADVISED THE ROCK ISLAND ARSENAL AS FOLLOWS:

"THE FIRST CAR OF THIS MATERIAL THAT WE RECEIVED WAS USED TO DETERMINE THE PERCENT OF RUBBER INCLUDED IN THE WEIGHT OF THESE SHIPMENTS. THIS CAR WAS WEIGHED FOR GROSS, UNLOADED, EMPTY WEIGHED FOR ACTUAL TARE, THE RUBBER BURNED FROM THE METAL, RELOADED AND WEIGHED. WE FOUND THAT 22% OF THE ORIGINAL WEIGHT WAS RUBBER. USING THIS AS A BASIS, WE HAVE FOUND THAT ON THE SIX CARS WE RECEIVED, WHICH ARE LISTED BELOW, THERE WAS A TOTAL OF 135,555# ON WHICH WE PAID FREIGHT OF $2.50 GROSS TON PLUS 6% PLUS 3% TAX OR $171.13:"

IN VIEW OF THE ATTENDANT DOUBT AS TO THE PROPRIETY OF ENTERTAINING SUCH CLAIM, THE QUESTION WAS SUBMITTED TO THE OFFICE OF PRICE STABILIZATION, WHICH AGENCY BY LETTER DATED JULY 30, 1952, FOUND, IN PERTINENT PART, AS FOLLOWS:

"INSOFAR AS THE CLAIM FOR ADJUSTMENT BASED UPON THE ALLEGED RUBBER CONTENT OF MATERIAL DELIVERED TO NORTHWESTERN STEEL & WIRE CO. IS CONCERNED, YOU ARE REFERRED TO SECTION 23 OF CEILING PRICE REGULATION 5, AS AMENDED, WHICH STATES:

"'STEEL GRADES OF DEALER AND INDUSTRIAL ORIGIN. ALL GRADES MUST BE FREE OF DIRT, NON-FERROUS METALS OR FOREIGN MATERIAL OF ANY KIND AND FREE OF EXCESSIVE RUST AND CORROSION.'

"*** YOU ARE THEREFORE ADVISED THAT IF THE MATERIAL SHIPPED TO NORTHWESTERN STEEL & WIRE COMPANY DID CONTAIN RUBBER, ADJUSTMENT SHOULD BE MADE TO THE EXTENT OF THE RUBBER CONTAINED THEREIN."

SUBSEQUENTLY, BY LETTER DATED SEPTEMBER 3, 1952, THE PURCHASER ENLARGED ITS CLAIM BY REQUESTING REFUND IN THE AMOUNT OF $2,007.17, COMPRISING 135,555 POUNDS AT $30.34 PER GROSS TON, OR $1,836.04, PLUS FREIGHT ON 135,555 POUNDS AT $2.59 PER GROSS TON, PLUS 6 PERCENT, PLUS 3 PERCENT OR $171.13, OF WHICH AMOUNT THE SUM OF $2,006.91 IS PROPOSED FOR ALLOWANCE BY THE CONTRACTING OFFICER, BASED UPON THE FOREGOING DECISION BY THE OFFICE OF PRICE STABILIZATION.

SECTION 1(B)(1) OF CEILING PRICE REGULATION 5 (IRON AND STEEL SCRAPS) STATES, IN PERTINENT PART, AS FOLLOWS:

"ON AND AFTER OCTOBER 30, 1951, REGARDLESS OF ANY CONTRACT OR OTHER OBLIGATION:

"(1) NO PERSON SHALL SELL, DELIVER, BUY, RECEIVE, OR PREPARE IRON OR STEEL SCRAP OR AGREE, OFFER, SOLICIT, OR ATTEMPT TO DO ANY OF THE FOREGOING AT PRICES ABOVE THOSE ESTABLISHED IN THIS REGULATION; ***"

INTERPRETATION 2 OF THE FOREGOING REGULATION PROVIDES THE FOLLOWING CLARIFICATION:

"*** BROKERS SUBMIT BIDS FOR THE PURCHASE OF SCRAP FROM THE VARIOUS MILITARY DISPOSAL DEPOTS. THE BIDS ARE BASED ON THE GRADE OF SCRAP SET FORTH IN THE GOVERNMENT'S INVITATION TO BID. OCCASIONALLY CONSUMERS HAVE REFUSED TO ACCEPT THE SCRAP AT THE GRADE CLASSIFIED BY THE GOVERNMENT, REQUESTING THAT IT BE DOWNGRADED TO THE GRADE ACTUALLY RECEIVED.

"THE QUESTION IS RAISED AS TO WHETHER, UNDER THE ABOVE-CITED REGULATIONS, THE GOVERNMENT MAY CHARGE AND THE CONSUMER PAY FOR THE SCRAP AT THE PRICE CALLED FOR BY THE GRADING IN THE INVITATION TO BID WHEN IT IS HIGHER THAN THE CEILING PRICE FOR THE GRADE OF SCRAP ACTUALLY DELIVERED.

"WHERE THE SCRAP ACTUALLY DELIVERED IS OF LOWER GRADE THAT THAT FOR WHICH BIDS WERE MADE, THE PARTIES ARE BOUND BY THE CEILINGS ESTABLISHED FOR THE GRADE OF THE SCRAP ACTUALLY DELIVERED, DESPITE THE LANGUAGE OF PARAGRAPH 1 OF THE STANDARD FORM 114 OR ANY OTHER CONTRACT TO THE CONTRARY. ***" SEE, ALSO, SECTION 704, 64 STAT. 816, AS AMENDED.

THUS, BASED UPON THE FOREGOING, HAD THE SCRAP MATERIAL HERE IN QUESTION BEEN ADVERTISED AS IRON AND STEEL SCRAP, AND NOTHING MORE, AND LATER FAILED TO CONFORM TO THE SPECIFICATIONS SET FORTH IN CEILING PRICE REGULATION NO. 5 COVERING SUCH IRON AND STEEL SCRAP, THERE WOULD APPEAR TO BE JUSTIFICATION FOR COMPLIANCE WITH THE CONTRACTOR'S REQUEST THAT IT BE REQUIRED TO ACCEPT ONLY THE IRON AND STEEL SCRAP, FREE FROM FOREIGN MATERIAL OF ANY KIND; AND, ACCORDINGLY, ADJUSTMENT WOULD BE REQUIRED TO THE EXTENT OF THE RUBBER CONTAINED THEREIN. HOWEVER, THE FACTUAL SITUATION IN THE INSTANT CASE DIFFERS TO SUCH AN EXTENT AS TO ENTIRELY PRECLUDE THE APPLICATION OF THE FOREGOING RULE AND INTERPRETATION. HERE, THE INVITATION FOR BID VERY PLAINLY DESCRIBED THE MATERIAL AS BEING UNPREPARED IRON AND STEEL WITH RUBBER ATTACHED IN THE FORM OF TANK TRACK, AND MADE NO SUGGESTION OR WARRANTY THAT SUCH SCRAP IN ANY MANNER PURPORTED TO CONFORM TO SECTION 3(A) OF CEILING PRICE REGULATION NO. 5, COVERING GRADE NO. 1 HEAVY MELTING STEEL, WHICH GRADE WAS REQUIRED BY SECTION 23 OF THE REGULATION TO BE FREE OF DIRT, NON-FERROUS METALS FOR FOREIGN MATERIAL OF ANY KIND AND FREE OF EXCESSIVE RUST AND CORROSION. FURTHERMORE, PARAGRAPH 18 OF THE CONTRACT MERELY PROVIDED THAT THE PRICES SHOWN THEREIN WERE NOT IN EXCESS OF THE APPLICABLE CEILING PRICES ESTABLISHED BY THE OFFICE OF PRICE STABILIZATION IN EFFECT AT THE TIME FOR THE MATERIAL BEING SOLD THEREUNDER. THEREFORE, SINCE THE MATERIAL HERE INVOLVED WAS CORRECTLY DESCRIBED AS CONTAINING FOREIGN MATTER - WHICH DESCRIPTION REMOVED IT FROM THE HIGHER CLASSIFICATION - THERE WOULD BE FOR APPLICATION SECTION 3(C)(3) OF CEILING PRICE REGULATION NO. 5, WHICH READS AS FOLLOWS:

"(3) THE CEILING PRICE OF ANY INFERIOR GRADE OF IRON OR STEEL SCRAP NOT LISTED IN SECTION 3(A)(2) HEREOF, SHALL NOT EXCEED THE PRICE OF NO. 1 HEAVY MELTING STEEL LESS $15.00." HENCE, IT WOULD LOGICALLY FOLLOW THAT THERE IS NO SOUND BASIS IN SUPPORT OF THE CONTRACTOR'S CONTENTION THAT IT IS ENTITLED TO A REFUND ON THE PORTION OF THE LOT WHICH CONSISTED OF MATERIAL OTHER THAN IRON AND STEEL. LIKEWISE, SINCE THERE WAS A FAILURE TO REGARD THE SCRAP AS BEING OF AN INFERIOR GRADE NOT SUBJECT TO THE HIGHER CLASSIFICATION, THE COMPUTATION PREPARED BY THE CONTRACTING OFFICER APPARENTLY IS IN ERROR.

IN VIEW OF THE FOREGOING, THEREFORE, IT IS OBVIOUS THAT THE PROPER FORMULA TO BE EMPLOYED IN ARRIVING AT A CONCLUSION AS TO THE AMOUNT OF ADJUSTMENT TO BE MADE - IF ANY - WOULD BE BY FIRST ASCERTAINING THE APPLICABLE CEILING PRICE UPON THE INFERIOR GRADE OF MATERIAL COMPUTED IN ACCORDANCE WITH SECTION 3(C)(3) OF THE REGULATION AND, IN THE EVENT SUCH CEILING IS BELOW THE PRICE QUOTED IN THE CONTRACT, THE BASIS OF AN ADJUSTMENT SHOULD THEN BE MADE ONLY UPON THE DIFFERENCE BETWEEN THOSE PRICES.

YOUR SUBMISSION IS ANSWERED ACCORDINGLY, AND THE UNPAID VOUCHER FORWARDED WITH YOUR LETTER IS RETURNED HEREWITH.