B-127201, APR. 30, 1956

B-127201: Apr 30, 1956

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TO THE HONORABLE SECRETARY OF THE NAVY: REFERENCE IS MADE TO LETTER OF APRIL 4. COVERING THE PROPER DISPOSITION TO BE MADE OF THAT PORTION OF THE SUPPLIES REJECTED BY THE DEPARTMENT OF THE NAVY WHICH WERE FURNISHED BY GUILD PRODUCTS CORPORATION UNDER CONTRACT NO. SAMPLES OF THE DRESSINGS WERE TESTED ON THREE DIFFERENT OCCASIONS. IT WAS FOUND THAT THE SUPPLIES FAILED TO MEET THE SPECIFICATIONS IN SEVERAL RESPECTS. WOULD BE ACCEPTED AT A REDUCTION IN THE UNIT PRICE PURSUANT TO THAT AGREEMENT REFUND WAS MADE IN THE AMOUNT OF $3. SINCE THERE IS NO SHOWING IN THE RECORD HERE THAT THE BASIS FOR SUCH REJECTION WAS OTHER THAN THE KNOWN DEFECTS OF MANUFACTURE PREVIOUSLY DISCLOSED BY THE REPORTS ON THE REFERRED-TO TESTS.

B-127201, APR. 30, 1956

TO THE HONORABLE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO LETTER OF APRIL 4, 1956, FROM THE ASSISTANT SECRETARY OF THE NAVY (MATERIAL) REQUESTING CLARIFICATION OF OUR DECISION DATED MARCH 15, 1956, B-127201, COVERING THE PROPER DISPOSITION TO BE MADE OF THAT PORTION OF THE SUPPLIES REJECTED BY THE DEPARTMENT OF THE NAVY WHICH WERE FURNISHED BY GUILD PRODUCTS CORPORATION UNDER CONTRACT NO. MPA- 30-287-MD-4984, WITH THE ARMED SERVICES MEDICAL PROCUREMENT AGENCY.

THE SUPPLIES IN QUESTION, CONSISTING OF 80,664, FIRST-AID DRESSINGS, REPRESENTED APPROXIMATELY ONE-HALF OF THE QUANTITY DELIVERED UNDER THAT ITEM OF THE CONTRACT, THE BALANCE HAVING BEEN SHIPPED TO AND ACCEPTED BY THE DEPARTMENT OF THE ARMY. THE RECORD SHOWS THAT PRIOR TO SHIPMENT OF THE SUPPLIES CONSIGNED TO THE NAVY SUPPLY DEPOT AT MECHANICSBURG, PENNSYLVANIA, SAMPLES OF THE DRESSINGS WERE TESTED ON THREE DIFFERENT OCCASIONS, AND IT WAS FOUND THAT THE SUPPLIES FAILED TO MEET THE SPECIFICATIONS IN SEVERAL RESPECTS. HOWEVER, AFTER DELIVERY AND PAYMENT HAD BEEN MADE FOR THE QUANTITY HERE INVOLVED THE CONTRACTING OFFICER EXECUTED A SUPPLEMENTAL AGREEMENT TO THE CONTRACT, IDENTIFIED AS MODIFICATION NO. 3, DATED JUNE 25, 1951, WHICH PROVIDED THAT THE SUPPLIES, INCLUDING THE NAVY'S PORTION, WOULD BE ACCEPTED AT A REDUCTION IN THE UNIT PRICE PURSUANT TO THAT AGREEMENT REFUND WAS MADE IN THE AMOUNT OF $3,628.48, EQUAL TO THE DIFFERENCE BETWEEN THE ORIGINAL UNIT PRICE AND THE ADJUSTED PRICE FOR THE QUANTITIES FURNISHED.

SINCE THE CONTRACTOR COMPLIED WITH THE TERMS OF THE MODIFICATION BY REFUNDING THE AMOUNT PAID IN EXCESS OF THE ADJUSTED PRICE FOR THE DELIVERED QUANTITIES, AND SINCE THE PROCUREMENT OFFICIAL AGREED THEREBY TO RETAIN THE SUBSTANDARD PRODUCTS, IT APPEARS DOUBTFUL THAT A SUBSEQUENT REJECTION OF A PART OF THE DRESSINGS, AND NOTIFICATION THEREOF TO THE CONTRACTOR APPROXIMATELY TWO YEARS LATER, WOULD LEGALLY JUSTIFY RESCINDING A PART OF THE AGREEMENT, AS AMENDED, PARTICULARLY, SINCE THERE IS NO SHOWING IN THE RECORD HERE THAT THE BASIS FOR SUCH REJECTION WAS OTHER THAN THE KNOWN DEFECTS OF MANUFACTURE PREVIOUSLY DISCLOSED BY THE REPORTS ON THE REFERRED-TO TESTS.

IN VIEW OF THOSE FACTS, AND SINCE THE RECORD ESTABLISHES THAT THE CONTRACTING CORPORATION HAD BEEN DISSOLVED WITHOUT ANY DISTRAINABLE ASSETS PRIOR TO NOTIFICATION OF THE REJECTION, IT WAS OUR CONSIDERED OPINION THAT THE ONLY PRACTICAL RECOURSE AVAILABLE TO THE GOVERNMENT WAS EITHER TO UTILIZE OR DISPOSE OF ALL, OR ANY PART OF THE SUPPLIES, AS MAY BE DEEMED BY THE PROPER NAVY OFFICIALS TO BE APPROPRIATE AND IN THE BEST INTERESTS OF THE UNITED STATES.