B-127761, MAY 22, 1956

B-127761: May 22, 1956

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TO THE SECRETARY OF THE ARMY: REFERENCE IS MADE TO LETTER DATED APRIL 30. KENNEDY LUMBER COMPANY WAS THE SUCCESSFUL BIDDER ON ITEM NO. 1 COVERING 89 PLYWOOD SHELTERS (IGLOOS). ITS BID WAS $552.50 EACH F.O.B. THE ONLY OTHER RESPONSIVE BID RECEIVED ON THE ITEM WAS $2. THE EVIDENCE OF RECORD CLEARLY ESTABLISHES THAT BOTH THE CONTRACTOR AND THE CONTRACTING OFFICER WERE OF THE BELIEF THAT THE EQUIPMENT TO BE FURNISHED WAS NOT SUBJECT TO CUSTOMS DUTY. IT APPEARS THAT SUCH WAS THE EXPERIENCE IN SEVERAL PREVIOUS PROCUREMENTS OF IDENTICAL EQUIPMENT FROM THE SAME SOURCE AND WHERE DELIVERY WAS F.O.B. BOTH THE CONTRACTOR AND THE CONTRACTING OFFICER REFER SPECIFICALLY TO PREVIOUS PROCUREMENTS ACCOMPLISHED BETWEEN THE SAME PARTIES WHEREIN CUSTOMS DUTY WAS EXEMPTED AND THE CONTRACT PRICE WAS THE SAME AS THE CONTRACTOR'S UNIT BID PRICE QUOTED IN THE INSTANT PROCUREMENT.

B-127761, MAY 22, 1956

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO LETTER DATED APRIL 30, 1956, WITH ENCLOSURES, FROM THE DEPUTY ASSISTANT SECRETARY (LOGISTICS), REQUESTING A DECISION AS TO WHETHER CONTRACT NO. DA-36-038-ORD-19512 DATED FEBRUARY 10, 1956, MAY BE REFORMED SO AS TO PROVIDE FOR AN INCREASE IN THE TOTAL CONTRACT PRICE OF $49,172.50, AS SPECIFIED THEREIN, TO COVER SUCH APPLICABLE CUSTOMS DUTY AS MAY BE IMPOSED ON THE 89 UNITS OF EQUIPMENT TO BE FURNISHED.

IN RESPONSE TO INVITATION NO. IFB-ORD-36-038-56-SP-300 ISSUED DECEMBER 6, 1955, THE J.G. KENNEDY LUMBER COMPANY WAS THE SUCCESSFUL BIDDER ON ITEM NO. 1 COVERING 89 PLYWOOD SHELTERS (IGLOOS). ITS BID WAS $552.50 EACH F.O.B. DOCKS, PHILADELPHIA, AN AGGREGATE BID PRICE OF $49,172.50. THE ONLY OTHER RESPONSIVE BID RECEIVED ON THE ITEM WAS $2,050.80 EACH, LESS 2 PERCENT DISCOUNT, A NET AGGREGATE BID OF $178,870.78. THE EVIDENCE OF RECORD CLEARLY ESTABLISHES THAT BOTH THE CONTRACTOR AND THE CONTRACTING OFFICER WERE OF THE BELIEF THAT THE EQUIPMENT TO BE FURNISHED WAS NOT SUBJECT TO CUSTOMS DUTY, SINCE BOTH PARTIES ASSUMED THAT THE GOVERNMENT WOULD OBTAIN DELIVERY OF THE 89 UNITS INVOLVED DUTY FREE BY THE ISSUANCE OF A CUSTOMS DUTY EXEMPTION CERTIFICATE. IT APPEARS THAT SUCH WAS THE EXPERIENCE IN SEVERAL PREVIOUS PROCUREMENTS OF IDENTICAL EQUIPMENT FROM THE SAME SOURCE AND WHERE DELIVERY WAS F.O.B. DESTINATION IN THIS COUNTRY. AS EVIDENCE OF THE ALLEGED PRIOR EXPERIENCE, BOTH THE CONTRACTOR AND THE CONTRACTING OFFICER REFER SPECIFICALLY TO PREVIOUS PROCUREMENTS ACCOMPLISHED BETWEEN THE SAME PARTIES WHEREIN CUSTOMS DUTY WAS EXEMPTED AND THE CONTRACT PRICE WAS THE SAME AS THE CONTRACTOR'S UNIT BID PRICE QUOTED IN THE INSTANT PROCUREMENT. CERTAIN COPIES OF SUCH CONTRACTS WERE FURNISHED AND CONSTITUTE A PART OF THE PRESENT RECORD. NEITHER PARTY TO THE CONTRACT WAS AWARE, PRIOR TO THE AWARD, OF THE FACT, AS TO WHICH THEY WERE SUBSEQUENTLY APPRISED, THAT SINCE THIS PURCHASE WAS NOT AN EMERGENCY PURCHASE OF WAR MATERIAL AS WERE THE PRIOR PURCHASES, THE INSTANT CONTRACT MATERIAL WAS SUBJECT TO THE USUAL DUTY APPLICABLE TO IMPORTED MATERIALS.

THUS, IT APPEARS THAT THE CONTRACT WAS ENTERED INTO UNDER A MUTUAL MISTAKE AS TO A MATERIAL FACT AND, BY REASON THEREOF, THE BID AND THE RESULTANT CONTRACT PRICE ACTUALLY DID NOT INCLUDE CUSTOMS DUTY ON THE EQUIPMENT TO BE FURNISHED. SINCE BOTH THE OFFER AND THE ACCEPTANCE IN THIS CASE WERE BASED ON THE MUTUAL UNDERSTANDING OF THE PARTIES THAT THE MATERIAL WOULD BE EXEMPTED FROM DUTY, THE CONTRACTOR SHOULD NOT NOW BE REQUIRED TO PAY THE DUTY OUT OF THE PRICE SPECIFIED IN THE CONTRACT. WHEN IT CAN BE ESTABLISHED CLEARLY, AS IN THE PRESENT CASE, WHAT THE CONTRACT ACTUALLY WAS OR WOULD HAVE BEEN BUT FOR THE MISTAKE, THERE IS A SUFFICIENT BASIS FOR REFORMING A WRITTEN INSTRUMENT. SEE 30 COMP. GEN. 220; 26 ID. 899; 20 ID. 533 AND CASES THERE CITED. THE INSTANT CONTRACT SHOULD BE VIEWED IN THE LIGHT OF THE TRUE UNDERSTANDING AND AGREEMENT OF THE PARTIES.

ACCORDINGLY, AS ADMINISTRATIVELY RECOMMENDED, PAYMENT IS AUTHORIZED TO BE MADE TO THE J. G. KENNEDY LUMBER COMPANY OF THE SUM OF $49,172.50 ($552.50 EACH) FOR THE 89 SHELTERS (IGLOOS), PLUS A REFUND OF SUCH SUM AS THE COMPANY IS REQUIRED TO PAY AS DUTY THEREON--- SAID PRICE, INCLUDING DUTY, BEING SUBSTANTIALLY LESS THAN THE ONLY OTHER RESPONSIVE BID RECEIVED FOR THE ITEM.