B-125650, NOV. 16, 1955

B-125650: Nov 16, 1955

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WITH THE REQUEST THAT AN ADVANCE DECISION BE RENDERED AS TO WHETHER PAYMENT ON THE VOUCHER IS AUTHORIZED. INVITATIONS WERE ISSUED FEBRUARY 23. BIDS WERE REQUESTED ON A REGULAR SUPPLY F.O.B. IN RESPECT TO PACKAGING AND PACKING IT WAS STIPULATED THAT . THE PERTINENT PROVISION OF SUCH SPECIFICATION IS AS FOLLOWS: "3.1.4. A CHOICE OF CUSHIONING MATERIAL IS AT THE OPTION OF THE CONTRACTOR UNLESS OTHERWISE SPECIFIED (SEE 6.1).'. AMENDMENT NO. 3 TO THE INVITATION WAS ISSUED REQUESTING BIDDERS TO INDICATE THE TYPE OF SHIPPING CONTAINER AND CUSHIONING MATERIAL THEY INTENDED TO FURNISH. BIDDERS WERE ADVISED THAT THE AMENDMENT WOULD BE CONSIDERED A PART OF THE ORIGINAL INVITATION FOR BIDS. AN AWARD WAS MADE TO BURRIS PRODUCTS COMPANY FOR A TOTAL OF 260.

B-125650, NOV. 16, 1955

TO CAPTAIN LYLE L. RITCHIE, FINANCE OFFICER, DEPARTMENT OF THE ARMY:

THERE HAS BEEN RECEIVED BY REFERENCE FROM THE CHIEF OF FINANCE A VOUCHER IN THE AMOUNT OF $2,145 STATED IN FAVOR OF BURRIS PRODUCTS COMPANY, CHARLESTON, SOUTH CAROLINA, UNDER CONTRACT NO. DA-28-024-ORD 3531, DATED APRIL 30, 1954, WITH THE REQUEST THAT AN ADVANCE DECISION BE RENDERED AS TO WHETHER PAYMENT ON THE VOUCHER IS AUTHORIZED.

INVITATIONS WERE ISSUED FEBRUARY 23, 1954, FOR THE PURCHASE OF 400,000 GALLONS OF SULPHURIC ACID. BIDS WERE REQUESTED ON A REGULAR SUPPLY F.O.B. ORIGIN BASIS (BID "A") AND A CALL TYPE F.O.B. DESTINATION BASIS (BID "B"). IN RESPECT TO PACKAGING AND PACKING IT WAS STIPULATED THAT ,THE MATERIAL SHALL BE PACKAGED ONE (1) GALLON NET IN A ONE (1) GALLON GLASS BOTTLE IN ACCORDANCE WITH SPECIFICATION MIL P-207A DATED 5 AUGUST 1953.' THE PERTINENT PROVISION OF SUCH SPECIFICATION IS AS FOLLOWS:

"3.1.4.--- CUSHIONING--- EITHER ASBESTOS OR VERMICULITE CUSHIONING MATERIAL MAY BE USED. A CHOICE OF CUSHIONING MATERIAL IS AT THE OPTION OF THE CONTRACTOR UNLESS OTHERWISE SPECIFIED (SEE 6.1).'

ON MARCH 11, 1954, AMENDMENT NO. 3 TO THE INVITATION WAS ISSUED REQUESTING BIDDERS TO INDICATE THE TYPE OF SHIPPING CONTAINER AND CUSHIONING MATERIAL THEY INTENDED TO FURNISH. BIDDERS WERE ADVISED THAT THE AMENDMENT WOULD BE CONSIDERED A PART OF THE ORIGINAL INVITATION FOR BIDS. PURSUANT TO THIS REQUEST, BURRIS PRODUCTS COMPANY EXECUTED THE AMENDMENT ON MARCH 25, 1954, SETTING FORTH BY ATTACHMENT THE TYPES OF PACKING BOXES PROPOSED TO BE FURNISHED AND, IN THE SPACE PROVIDED THEREFOR, STIPULATED ASBESTOS CUSHIONING. ON APRIL 30, 1954, AN AWARD WAS MADE TO BURRIS PRODUCTS COMPANY FOR A TOTAL OF 260,000 GALLONS OF SULPHURIC ACID UNDER BID "B" FOR DELIVERY TO FOUR OF SEVEN DESIGNATED DISTRIBUTION POINTS.

IN COMPLIANCE WITH THE CONTRACTOR'S REQUEST OF JUNE 3, 1954, THE CONTRACTING AGENCY ISSUED A NOTICE OF CONTRACT CHANGE DATED JUNE 17, 1954, WHICH AUTHORIZED THE CONTRACTOR TO SUBSTITUTE VERMICULITE FOR ASBESTOS CUSHIONING. SECTION 1 OF THE CHANGE ORDER, ENTITLED "INSTRUCTIONS TO CONTRACTOR" STATED, IN PERTINENT PART, AS FOLLOWS:

"3. (X.) THIS CHANGE SHOULD RESULT IN PRICE AND/OR DELIVERY CONCESSIONS FAVORING THE GOVERNMENT.

"4. (V.) THIS CHANGE CANNOT RESULT IN ANY INCREASE IN CONTRACT PRICE.'

YOU STATE THAT THE CONTRACTOR HAS BEEN DELIVERING VERMICULITE CUSHIONING MATERIAL UNDER THE CONTRACT IN COMPLIANCE WITH THE CHANGE ORDER BUT THE PARTIES HAVE BEEN IN PROLONGED NEGOTIATION RELATIVE TO WHAT, IF ANY, SHOULD BE THE ADJUSTMENT IN CONTRACT PRICE BY REASON OF THE SUBSTITUTION OF VERMICULITE FOR ASBESTOS CUSHIONING. IN THIS CONNECTION, THERE IS FOR CONSIDERATION YOUR 2ND INDORSEMENT OF OCTOBER 14, 1955, TO THE CHIEF OF FINANCE, THE PERTINENT PORTION OF WHICH IS AS FOLLOWS:

"2. A. WITH REFERENCE TO THE CONTRACTOR'S LETTER DATED 3 JUNE 1954, IN WHICH IT IS STATED: ,THERE IS NO DIFFERENCE IN THE COST OF THE MATERIAL, EACH MATERIAL COSTS $40.00 PER TON.' THIS IS AN INACCURATE STATEMENT. OUR INVESTIGATION SHOWS THAT ASBESTOS, CONFORMING TO THE REQUIREMENTS OF THE SPECIFICATION, RANGES FROM $40.00 TO $37.00 PER TON, F.O.B., MINES, CANADA, PLUS FREIGHT CHARGES PER TON OF $37.94 TO CONTRACTOR'S PLANT, FOR A TOTAL PRICE RANGE OF FROM $74.94 TO $77.94 PER TON. BY THE CONTRACTOR'S OWN ADMISSION, 1497 TONS WOULD BE REQUIRED TO COMPLETE THE CONTRACT.

"B. THIS COMPARES WITH VERMICULITE AT AN ACTUAL INVOICE COST TO THE CONTRACTOR F.O.B., HIS PLANT OF $52.50 PER TON FOR ONLY 871 TONS WHICH WAS THE ENTIRE REQUIREMENT TO COMPLETE THE CONTRACT. THE TONNAGE FIGURES WERE SUPPLIED BY THE CONTRACTOR. THE DIFFERENCE IN TONNAGE IS DUE TO THE COMPOSITION OF THE MATERIAL. IT CAN BE SEEN BY THE USE OF VERMICULITE THERE IS A GREAT DECREASE IN COST OVER THE USE OF ASBESTOS.'

IT WAS RECITED IN NOTICE OF CONTRACT CHANGE DATED JUNE 17, 1954,THAT THE CHANGE WAS MADE IN ACCORDANCE WITH THE CONTRACT ARTICLE ENTITLED "CHANGES.' THIS ARTICLE PROVIDES THAT THE CONTRACTING OFFICER MAY AT ANY TIME MAKE CHANGES WITHIN THE GENERAL SCOPE OF THE CONTRACT AND THAT, IF A CHANGE CAUSES AN INCREASE OR DECREASE IN THE COST OF PERFORMANCE OF THE CONTRACT, AN EQUITABLE ADJUSTMENT SHALL BE MADE IN THE CONTRACT PRICE AND THE CONTRACT SHALL BE MODIFIED ACCORDINGLY. IT FURTHER PROVIDES THAT FAILURE TO AGREE TO AN ADJUSTMENT SHALL BE A DISPUTE CONCERNING A QUESTION OF FACT WITHIN THE MEANING OF THE CLAUSE OF THE CONTRACT ENTITLED SPUTES.' IT IS ASSUMED THAT THE CHANGE ORDER DID NOT REFLECT A CHANGE IN THE CONTRACT PRICE BECAUSE THE DIFFERENCE IN COST BETWEEN ASBESTOS AND VERMICULITE FOR ALL DELIVERIES UNDER THE CONTRACT WAS NOT THEN KNOWN. HOWEVER THAT MAY BE, THE CHANGE ORDER CLEARLY STATED THAT THE CHANGE SHOULD RESULT IN PRICE CONCESSIONS TO THE GOVERNMENT. FURTHERMORE, IN ACCEPTING THE CHANGE ORDER THE CONTRACTOR INITIALED AND PLACED AN "X" IN THE BLANK ON PAGE 2 THEREOF SIGNIFYING THAT THE REVISED REQUIREMENTS PROVIDED BY THE CHANGE ORDER WOULD RESULT IN DECREASED COSTS.

WE CANNOT AGREE WITH THE CONTENTION OF THE CONTRACTOR THAT THE ISSUANCE OF THE CHANGE ORDER WARRANTS NO CHANGE IN THE CONTRACT PRICE BECAUSE UNDER THE SPECIFICATION MIL-P-207A IT HAD THE OPTION OF SUPPLYING EITHER VERMICULITE OR ASBESTOS CUSHIONING MATERIAL AND STILL HAS THAT CHOICE. WITH THE ACCEPTANCE OF THE CONTRACTOR'S BID, INCLUDING AMENDMENT 3, THE GOVERNMENT CLEARLY BECAME ENTITLED TO RECEIVE AND THE CONTRACTOR BECAME OBLIGATED TO FURNISH THE SULPHURIC ACID PACKED WITH ASBESTOS CUSHIONING. IT NECESSARILY FOLLOWS, THEREFORE, THAT ANY DECREASED COSTS RESULTING FROM THE AUTHORIZED SUBSTITUTION OF VERMICULITE FOR ASBESTOS SHOULD BE MADE THE SUBJECT OF AN EQUITABLE ADJUSTMENT OF THE CONTRACT PRICE--- THE POSITION TAKEN BY THE CONTRACTING OFFICER--- UNDER THE "CHANGES" ARTICLE OF THE CONTRACT.

IN VIEW OF THE FOREGOING, AND IN SPECIFIC ANSWER TO THE QUESTION PRESENTED, YOU ARE ADVISED THAT THERE IS PROPERLY FOR DEDUCTION FROM THE BALANCE REMAINING DUE UNDER THE CONTRACT SUCH AMOUNT AS THE CONTRACTING OFFICER DETERMINES TO BE DUE THE GOVERNMENT AS AN EQUITABLE ADJUSTMENT UNDER THE TERMS OF THE CONTRACT, AS AMENDED.

THE VOUCHER, TOGETHER WITH SUPPORTING PAPERS, IS RETURNED HEREWITH AND YOU ARE ADVISED THAT PAYMENT THEREON IS NOT AUTHORIZED.