B-116400, JAN. 3, 1956

B-116400, JAN. 3, 1956

TO SOUTH PHILADELPHIA DRESSED BEEF COMPANY, INC.:

REFERENCE IS MADE TO A LETTER IN YOUR BEHALF DATED OCTOBER 20, 1955, FROM MR. SAMUEL P. LAVINE, ATTORNEY, FORWARDING A BRIEF AS THE BASIS FOR YOUR REQUEST FOR REVIEW OF SETTLEMENT DATED OCTOBER 14, 1953, WHEREIN THERE WAS DISALLOWED YOUR CLAIM FOR $8,028.41, REPRESENTING AN AMOUNT ALLEGED TO BE DUE AS REFUND FOR DEDUCTIONS MADE FROM THE CONTRACT PRICE FOR DELAYS IN DELIVERIES OF CERTAIN QUANTITIES OF FROZEN BONELESS BEEF TO THE DEPARTMENT OF THE ARMY UNDER THE NINE CONTRACTS SET FORTH IN THE SETTLEMENT, WHICH WERE DATED FROM SEPTEMBER 11 TO SEPTEMBER 28, 1950.

UNDER THE CONTRACTS YOU AGREED TO DELIVER AT THE DESTINATIONS SPECIFIED FROZEN BONELESS BEEF ON THE DATES AND AT THE PRICES STIPULATED IN EACH CONTRACT. AT OR ABOUT THE CONTRACT DELIVERY PERIODS YOU REQUESTED EXTENSIONS OF TIME WITHIN WHICH DELIVERIES COULD BE MADE. AT THAT TIME, A CONDITION UPON WHICH ALL EXTENSIONS OF TIME ADMINISTRATIVELY WERE GRANTED WAS THAT PAYMENT WOULD BE MADE AT THE CURRENT MARKET PRICE OR THE CONTRACT PRICE, WHICHEVER WAS LOWER AT THE TIME OF DELIVERY. SHIPMENTS WERE MADE AND ACCEPTED AFTER THE ORIGINAL SCHEDULED DELIVERY DATES AND SUBSEQUENT DEDUCTIONS IN THE TOTAL AMOUNT OF $8,028.41 WERE MADE FROM VOUCHERS SUBMITTED BY YOU FOR PAYMENT UNDER THE VARIOUS CONTRACTS. THE DEDUCTIONS WERE BASED ON THE CURRENT MARKET PRICES FOR FROZEN BONELESS BEEF WHICH WERE LOWER THAN THE CONTRACT PRICES FOR THE BEEF ON THE VARIOUS DELIVERY DATES. YOUR CLAIM IS FOR REFUND OF THE FULL AMOUNT OF $8,028.41 WHICH YOU CONTEND WAS IMPROPERLY DEDUCTED.

YOUR REQUEST, AS REFLECTED IN THE ATTORNEY'S BRIEF, FOR REVIEW OF THE SETTLEMENT APPEARS TO BE BASED PRIMARILY ON THE CONTENTIONS THAT THE CONTRACT PRICES PROVIDED IN THE WRITTEN CONTRACTS WERE NOT CHANGED BY YOUR LETTERS REQUESTING THE VARIOUS EXTENSIONS OF TIME SINCE NO REPLIES OR ACCEPTANCES WERE EVER RECEIVED TO THOSE LETTERS; THAT THE MARKET PRICES UPON WHICH BASIS PAYMENT WAS MADE WERE NOT ESTABLISHED IN THE USUALLY ACCEPTED MANNER; THAT THE ARMED SERVICES BOARD OF CONTRACT APPEALS FOUND IN YOUR FAVOR ON APPEAL; AND THAT THE VARIOUS SPECIFIED DELIVERY DATES SHOULD BE INTERPRETED OR GOVERNED IN THE LIGHT OF THE ESTABLISHED COURSE OF DEALING BETWEEN THE GOVERNMENT AND YOU OVER A PERIOD OF MANY YEARS.

THE LEGAL ISSUE INVOLVED IS IDENTICAL UNDER THE NINE CONTRACTS. CONSEQUENTLY, THE FOLLOWING DISCUSSION WILL APPLY EQUALLY WELL TO ONE CONTRACT AS TO THE OTHER.

THE RECORD SHOWS THAT IN 1948, WHEN THE CONTINUOUS UPWARD PRICE TREND FOR BEEF ENDED, THE NEW YORK QUARTERMASTER MARKET CENTER BY A NOTICE DATED JULY 13, 1948, AND BY SUBSEQUENT NOTICES IN 1949 AND 1950 INFORMED THE TRADE THAT DELAYS IN DELIVERIES WOULD OBLIGATE THE GOVERNMENT CONTRACTING OFFICER TO EFFECT A PURCHASE AGAINST THE CONTRACT INVOLVED AND THAT EXTENSIONS OF TIME WOULD BE GRANTED ONLY UPON THE CONTRACTOR'S WRITTEN AGREEMENT TO ACCEPT PAYMENT AT THE MARKET PRICE IN EFFECT AT THE DATE OF DELIVERY OR THE CONTRACT PRICE, WHICHEVER WAS LOWER. THE RECORD SHOWS FURTHER THAT WHEN IT BECAME APPARENT THAT ADDITIONAL TIME WOULD BE REQUIRED TO MAKE DELIVERIES UNDER YOUR CONTRACTS HERE INVOLVED YOU COMMUNICATED WITH THE CONTRACTING AGENCY, AT WHICH TIME YOU AGAIN WERE ADVISED THAT ANY EXTENSIONS OF DELIVERY DATES WOULD BE SUBJECT TO THE CONDITION GOVERNING THE POSSIBLE CONTRACT PRICE ADJUSTMENT. THUS, IT MUST BE CONCLUDED THAT BY REASON OF BOTH THE PUBLISHED PUBLIC NOTICES AND YOUR NEGOTIATIONS WITH THE CONTRACTING AGENCY YOU WERE FULLY APPRISED OF ALL PERTINENT CONDITIONS ATTENDING REQUESTS FOR EXTENSIONS OF DELIVERY DATES. WITH THIS KNOWLEDGE, AND THE COMPLETE UNDERSTANDING THEREOF THAT MUST BE IMPUTED TO YOU, LETTERS DATED OCTOBER 21, 1950, AND OCTOBER 25, 1950, WERE ADDRESSED BY YOU TO THE CONTRACTING AGENCY UNDER EACH OF THE NINE CONTRACTS REQUESTING THE EXTENSIONS OF TIME REQUIRED UNDER THE RESPECTIVE CONTRACTS AND EXPRESSLY AGREEING THAT PAYMENT WAS TO BE MADE AT THE CURRENT MARKET PRICE IN EFFECT ON THE NEW DELIVERY DATE OR AT THE CONTRACT PRICE, WHICHEVER WAS LOWER, IF AN EXTENSION WERE GRANTED.

YOUR LETTERS CONSTITUTED AN UNEQUIVOCAL AGREEMENT UPON YOUR PART AS TO THE TERMS GOVERNING THE ADJUSTMENTS TO BE MADE IN THE CONTRACT DELIVERY DATES AND PRICES, AND WHETHER THE PUBLISHED NOTICES, THE PRIOR ORAL NEGOTIATIONS BETWEEN YOU AND THE CONTRACTING AGENCY, OR THE LETTERS REQUESTING THE EXTENSIONS OF TIME ARE TO BE CONSIDERED AS THE OFFERS APPEARS TO BE RELATIVELY IMMATERIAL IN THIS PARTICULAR CASE SINCE, IN ADDITION TO THE ABOVE, AND NOTWITHSTANDING THAT FORMAL EXTENSIONS OF TIME DO NOT APPEAR TO HAVE BEEN GRANTED BY THE GOVERNMENT, DELIVERIES OF THE FROZEN BONELESS BEEF WERE ACCEPTED UNDER THE VARIOUS CONTRACTS AFTER THE ORIGINAL SCHEDULED DELIVERY DATES. SUCH ACCEPTANCE NOT ONLY SHOWS CLEARLY THAT THE GOVERNMENT AGREED TO THE SAID EXTENSIONS OF TIME BUT ALSO IT EFFECTED THE FINAL RESULT FULLY INTENDED BY YOU AND THE CONTRACTING AGENCY UNDER THE CONTRACTS. THE RESULT WOULD HAVE BEEN NO DIFFERENT EVEN IF MORE FORMAL AMENDMENTS TO THE CONTRACTS WERE EXECUTED.

WHILE THE FOREGOING DISCUSSION ENCOMPASSES THE PRIME ISSUE UPON WHICH THE LEGAL CONCLUSION IN THIS CASE MUST BE BASED, REFERENCE IS ALSO MADE TO THE STATEMENT APPEARING IN THE BRIEF THAT THE ARMED SERVICES BOARD OF CONTRACT APPEALS FOUND IN YOUR FAVOR ON APPEAL. IN THIS CONNECTION, A REVIEW OF THE OPINION OF THE BOARD READILY REVEALS THAT THE CONCLUSION REACHED THEREIN WAS PREDICATED PRIMARILY ON WHETHER THERE WAS AN OFFER AND ACCEPTANCE WITH RESPECT TO THE VARIOUS CONTRACTS INVOLVED. SINCE SUCH A QUESTION IS PURELY ONE OF LAW, AS CONTRASTED WITH ONE OF FACT, YOUR ATTENTION IS AGAIN DIRECTED TO THE FACT THAT THE DECISION OF THE ARMED SERVICES BOARD OF CONTRACT APPEALS IS NOT FINAL AND CONCLUSIVE, BUT IS OPEN TO CONTRADICTION BY THE ACCOUNTING OFFICERS OR THE COURTS. SEE S. J. GROVE AND SONS COMPANY V. WARREN, 135 F.2D 264, CERTIORARI DENIED, 319 U.S. 766; MCWILLIAMS DREDGING CO. V. UNITED STATES, 118 C.CLS. 1, 16; B-W CONSTRUCTION CO. V. UNITED STATES, 97 C.CLS. 92, 118; PENKER CONSTRUCTION CO. V UNITED STATES, 96 C.CLS. 1; DAVIS, ET AL. V. UNITED STATES, 82 C.CLS. 334. IN ADDITION, YOUR ATTENTION IS INVITED TO PUBLIC LAW 356, APPROVED MAY 11, 1954, 68 STAT. 81, SECTION 2 OF WHICH PROVIDES:

"NO GOVERNMENT CONTRACT SHALL CONTAIN A PROVISION MAKING FINAL ON A QUESTION OF LAW THE DECISION OF ANY ADMINISTRATIVE OFFICIAL,REPRESENTATIVE, OR BOARD.'

WITH RESPECT TO THE MANNER IN WHICH THE CURRENT MARKET PRICES WERE ESTABLISHED AND THE PRIOR PRACTICE WITH RESPECT TO LATE DELIVERY DATES, THE DEPARTMENT OF THE ARMY REPORTS THAT THE NATURE OF THE COMMODITY--- FROZEN BONELESS BEEF--- AND THE FACT THAT THE GOVERNMENT APPARENTLY IS THE SOLE CONSUMER JUSTIFIED THE METHOD USED FOR COMPUTING THE CURRENT MARKET PRICES FOR THE BEEF. THE METHOD WAS IN ACCORDANCE WITH EXISTING ARMY INSTRUCTIONS WHICH INVOLVE THE USE OF PRICES PREDICATED UPON THE LOWEST BID RECEIVED FROM THE VARIOUS GOVERNMENT SUPPLIERS OF THE PRODUCT AS OF CERTAIN PREDETERMINED DATES BASED ON THE ACTUAL DELIVERY DATES. THEREFORE, SINCE THE METHOD USED MIGHT REASONABLY BE EXPECTED TO BE GENERALLY ACCEPTABLE TO THE TRADE UNDER THE CIRCUMSTANCES, IT APPEARS THAT THE CURRENT MARKET PRICES WERE FAIRLY AND EQUITABLY ESTABLISHED.

THE PROCEDURE FOLLOWED BY THE NEW YORK QUARTERMASTER MARKET CENTER WITH RESPECT TO DELIVERY DATES AND CONTRACT PRICES IN CONNECTION WITH PREVIOUS PURCHASES FROM YOU IN NO MANNER GOVERNS OR CONTROLS THE SUBJECT PURCHASES. IF, UNDER CONDITIONS EXISTING AT CERTAIN TIMES, CONTRACTING AGENCIES DEEM IT ADVISABLE, FOR ONE REASON OR ANOTHER, TO PERMIT LATE DELIVERIES BY GRANTING EXTENSIONS OF TIME WITHOUT AFFECTING THE CONTRACT PRICES BUT LATER, UPON ENCOUNTERING CHANGED CIRCUMSTANCES, SUCH AS CONSTANTLY DECREASING MARKET PRICES, THE AGENCY ALTERS ITS PROCEDURE WHICH RESULTS IN AN ADJUSTMENT OF EITHER OR BOTH THE DELIVERY DATES AND CONTRACT PRICES, SUCH ACTION WOULD APPEAR TO BE A NORMAL EXERCISE OF ADMINISTRATIVE DISCRETION IN THE SAME MANNER AS OTHER CHANGES IN CONTRACT PROCUREMENT DEEMED NECESSARY IN ORDER TO COPE WITH CHANGED CONDITIONS. WHEN THERE ARE CONSIDERED, SUCH AS HERE, ENTIRELY SEPARATE CONTRACTS DURING DIFFERENT PERIODS OF TIME AND INVOLVING DIFFERENT CONDITIONS, NO PARTICULAR CRITERIA WITH RESPECT TO PRIOR PROCEDURES WOULD APPEAR TO BE JUSTIFIED.