B-127981, AUG. 17, 1956

B-127981: Aug 17, 1956

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INC.: REFERENCE IS MADE TO YOUR ATTORNEY'S LETTER DATED MAY 2. ALL MATERIAL FURNISHED WAS TO BE INSPECTED BY THE BUREAU OF FEDERAL SUPPLY OR ITS DESIGNEE. THE CONTRACTOR WAS TO BE PAID 75 PERCENT OF THE INVOICE PRICE UPON DELIVERY OF ANY PORTION OF THE CONTRACT MATERIALS TO THE GOVERNMENT OR ITS DESIGNEE. IT WAS PROVIDED THAT THE CONTRACTOR SHOULD PROMPTLY ELECT TO REPLACE THE MATERIAL OR REPAY THE AMOUNT COLLECTED. WHILE INSPECTION OF THE FIRST TWO SHIPMENTS OF QUARTZ WAS PERFORMED BY THE MATERIAL LABORATORY. WERE INSPECTED BY THE UNITED STATES TESTING COMPANY. PAID THE CONTRACTOR 75 PERCENT OF THE INVOICED VALUE OF THE MATERIAL WHEN IT WAS RECEIVED. SUCH A LARGE PERCENTAGE OF THE MATERIAL WAS REJECTED THAT THE CONTRACT PRICE FOR THE ACCEPTED CRYSTALS WAS LESS THAN THE AMOUNT ADVANCED.

B-127981, AUG. 17, 1956

TO THE BRAZILIAN TRADING CO., INC.:

REFERENCE IS MADE TO YOUR ATTORNEY'S LETTER DATED MAY 2, 1956, RELATIVE TO YOUR INDEBTEDNESS TO THE UNITED STATES IN THE AMOUNT OF $66,638.28 FOR OVERPAYMENTS IN CONNECTION WITH THE PURCHASE OF BRAZILIAN QUARTZ CRYSTALS UNDER CONTRACT NO. SCM-TS-2173.

THE RECORD BEFORE THIS OFFICE INDICATES THAT THE BRAZILIAN TRADING COMPANY ENTERED INTO THE ABOVE CONTRACT WITH THE BUREAU OF FEDERAL SUPPLY (THEN A PART OF THE TREASURY DEPARTMENT), ON OCTOBER 29, 1947, THEREBY AGREEING TO FURNISH 79,350 POUNDS OF QUARTZ CRYSTALS FOR VARIOUS UNIT PRICES ACCORDING TO SIZE AND GRADE OF CRYSTALS FURNISHED. UNDER THE PROVISIONS OF PARAGRAPH 8 OF THE TERMS, CONDITIONS AND SPECIFICATIONS, ATTACHED TO AND MADE A PART OF THE CONTRACT, ALL MATERIAL FURNISHED WAS TO BE INSPECTED BY THE BUREAU OF FEDERAL SUPPLY OR ITS DESIGNEE, AND UNDER THE PROVISIONS OF PARAGRAPH 9, AS AMENDED, THE CONTRACTOR WAS TO BE PAID 75 PERCENT OF THE INVOICE PRICE UPON DELIVERY OF ANY PORTION OF THE CONTRACT MATERIALS TO THE GOVERNMENT OR ITS DESIGNEE, THE REMAINING 25 PERCENT OF THE INVOICE PRICE TO BE PAID AFTER INSPECTION AND DETERMINATION THAT THE MATERIAL COMPLIED WITH THE CONTRACT SPECIFICATIONS. IN THE EVENT OF REJECTION, IT WAS PROVIDED THAT THE CONTRACTOR SHOULD PROMPTLY ELECT TO REPLACE THE MATERIAL OR REPAY THE AMOUNT COLLECTED.

WHILE INSPECTION OF THE FIRST TWO SHIPMENTS OF QUARTZ WAS PERFORMED BY THE MATERIAL LABORATORY, NEW YORK NAVAL SHIPYARD, BROOKLYN, NEW YORK, THE NECESSITY TO UTILIZE SPACE OCCUPIED BY THAT FACILITY FOR OTHER PURPOSES FORCED THE DISCONTINUANCE OF SUCH SERVICES AND REMAINING SHIPMENTS BEGINNING AUGUST 20, 1948, WERE INSPECTED BY THE UNITED STATES TESTING COMPANY, INC., UNDER AN INSPECTION CONTRACT ENTERED INTO WITH THE GOVERNMENT IN JULY 1948. THIS CHANGE RESULTED IN THE ACCUMULATION OF LARGE QUANTITIES OF UNINSPECTED CRYSTALS FOR WHICH THE GOVERNMENT, UNDER THE PROVISIONS OF THE ABOVE-MENTIONED PARAGRAPH 9, PAID THE CONTRACTOR 75 PERCENT OF THE INVOICED VALUE OF THE MATERIAL WHEN IT WAS RECEIVED. UPON SUBSEQUENT INSPECTION, SUCH A LARGE PERCENTAGE OF THE MATERIAL WAS REJECTED THAT THE CONTRACT PRICE FOR THE ACCEPTED CRYSTALS WAS LESS THAN THE AMOUNT ADVANCED, THE OVERPAYMENTS BEING COMPUTED BY THE FEDERAL SUPPLY SERVICE AT $66,638.28, THE AMOUNT OF THE INDEBTEDNESS PRESENTLY ASSESSED AGAINST THE CONTRACTOR. UNDER DATE OF NOVEMBER 2, 1949, THE CONTRACTOR WAS REQUESTED TO REMIT SUCH AMOUNT TO THE BUREAU OF FEDERAL SUPPLY.

ON DECEMBER 28, 1949, YOU PROTESTED BY LETTER TO THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, AGAINST ALLEGED CHANGES IN INSPECTION METHODS AND REQUESTED AN ADJUSTMENT OF THE CONTRACT PAYMENT ACCOUNT. THIS LETTER WAS FORWARDED TO THE CONTRACTING OFFICER WHO ADVISED ON JANUARY 31, 1950, AS FOLLOWS:

"* * * THERE HAVE BEEN NO CHANGES IN INSPECTION METHODS OR PROCEDURES AT EITHER OF THE TWO INSPECTION FACILITIES SINCE THE INITIATION OF THE QUARTZ PROGRAM. TO ASSURE UNIFORMITY OF INSPECTION FREQUENT CHECKS OF THE FACILITIES WERE MADE BY QUARTZ EXPERTS AND IT HAS BEEN ESTABLISHED THAT ALL QUARTZ RECEIVED WAS INSPECTED IN ACCORDANCE WITH THE PURCHASE SPECIFICATIONS.

"SINCE THE INSPECTION OF ALL MATERIAL DELIVERED UNDER YOUR CONTRACT WAS CAREFULLY AND PROPERLY PERFORMED IN ACCORDANCE WITH THE CONTRACT TERMS AND SPECIFICATIONS, THERE APPEARS TO BE NO ADEQUATE GROUND FOR ANY READJUSTMENT OF THE AMOUNT DUE THE GOVERNMENT AS A RESULT OF YOUR FAILURE TO DELIVER MATERIAL MEETING THE SPECIFICATIONS. ACCORDINGLY, NO ALTERNATIVE EXISTS EXCEPT THAT OF DENYING YOUR REQUEST.'

YOU APPEALED FROM THIS DECISION TO THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, ON FEBRUARY 23, 1950, CONTENDING THAT CERTAIN REJECTED CRYSTALS ACTUALLY MET THE SPECIFICATIONS SET FORTH IN THE CONTRACT, THAT THE INSPECTION PROCEDURE WAS INCORRECT, AND THAT CRYSTALS ACTUALLY ACCEPTED AFTER INSPECTION SHOULD BE UPGRADED. THE ADMINISTRATOR APPOINTED A SPECIAL REVIEW BOARD, WHICH HELD EXTENDED HEARINGS ON THE APPEAL AND HAD FOUR CASES CONTAINING APPROXIMATELY 400 POUNDS OF THE REJECTED CRYSTALS REINSPECTED BY THE NATIONAL BUREAU OF STANDARDS, WHICH AGENCY REPORTED THAT THREE OF THE CASES CONTAINING APPROXIMATELY 366 POUNDS, CONTAINED MATERIAL OF WHICH ONLY 1 PERCENT MET SPECIFICATIONS, WHILE THE FOURTH CASE, WEIGHING 34 POUNDS, CONTAINED CRYSTALS OF WHICH 66 PERCENT MET SPECIFICATIONS.

BASED ON EVIDENCE INTRODUCED AT THE HEARINGS, AS WELL AS THE RESULT OF REINSPECTION OF REJECTED CRYSTALS BY THE NATIONAL BUREAU OF STANDARDS, THE SPECIAL REVIEW BOARD ON DECEMBER 12, 1950, RECOMMENDED DENIAL OF THE CLAIM IN THE ABSENCE OF COMPLETE REINSPECTION OF THE REJECTED MATERIAL. HOWEVER, FOR REASONS NOT APPARENT FROM THE PRESENT RECORD, THE ADMINISTRATOR NEITHER APPROVED NOR REJECTED SUCH REPORT. SUBSEQUENTLY, ON FEBRUARY 24, 1953, THE ACTING ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, FORWARDED THE FILE TO THE PERMANENT BOARD OF REVIEW FOR INVESTIGATION, REVIEW, AND RECOMMENDATIONS. BASED ON THE WRITTEN RECORD COMPILED BY THE SPECIAL BOARD OF REVIEW, THE PERMANENT BOARD OF REVIEW CONCLUDED THAT THE TESTING AND INSPECTION METHODS AND PROCEDURES USED BY THE U.S. TESTING COMPANY WERE ADEQUATE TO INSURE REASONABLY ACCURATE RESULTS, THAT THE ACCEPTED CRYSTALS WERE PROPERLY GRADED, THE REJECTED CRYSTALS WERE PROPERLY REJECTED, AND NO EQUITABLE RELIEF COULD BE GRANTED UNDER THE TERMS OF THE CONTRACT. THE ACTING ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, APPROVED THE CONCLUSIONS AND RECOMMENDATIONS OF THE REVIEW BOARD AND NOTIFIED YOU BY LETTER DATED APRIL 29, 1953, THAT YOUR APPEAL WAS THEREFORE DENIED. THE RESULTING INDEBTEDNESS WAS REFERRED TO THIS OFFICE FOR COLLECTION ON SEPTEMBER 9, 1953.

IN EFFECT, THE LETTER OF MAY 2, 1956, REQUESTS THIS OFFICE TO REVIEW THE DECISION OF THE ACTING ADMINISTRATOR AND TO RELIEVE YOU OF THE INDEBTEDNESS RESULTING FROM SUCH DECISION.

ARTICLE 10 OF CONTRACT NO. SCM-TS-2173 READS AS FOLLOWS:

"DISPUTES. EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THIS CONTRACT, ALL DISPUTES CONCERNING QUESTIONS OF FACT ARISING UNDER THIS CONTRACT SHALL BE DECIDED BY THE CONTRACTING OFFICER, SUBJECT TO WRITTEN APPEAL BY THE CONTRACTOR WITHIN THIRTY (30) DAYS TO THE SECRETARY OF THE TREASURY OR HIS DULY AUTHORIZED REPRESENTATIVE, WHOSE DECISION SHALL BE FINAL AND CONCLUSIVE UPON THE PARTIES HERETO. IN THE MEANTIME THE CONTRACTOR SHALL DILIGENTLY PROCEED WITH PERFORMANCE.'

THE ONLY MATERIAL ISSUE IN THE PRESENT CASE IS WHETHER OR NOT THE REJECTED CRYSTALS MET THE CONTRACT SPECIFICATIONS. THAT CLEARLY APPEARS TO BE A QUESTION OF FACT, WHICH BY THE EXPRESS TERMS OF THE CONTRACTING OFFICER, SUBJECT TO APPEAL TO THE SECRETARY OF THE TREASURY--- WHOSE POWERS AND AUTHORITY WITH RESPECT TO THE BUREAU OF FEDERAL SUPPLY WERE SUBSEQUENTLY TRANSFERRED TO THE ADMINISTRATOR OF GENERAL SERVICES. UNDER THE EXPRESS TERMS OF THE CONTRACT, READ IN THE LIGHT OF PUBLIC LAW 356, 83D CONGRESS, APPROVED MAY 11, 1954, 68 STAT. 81, THE FINDINGS AND DETERMINATIONS OF THE ADMINISTRATOR ARE FINAL AND CONCLUSIVE ON THIS OFFICE AND THE COURTS UNLESS THEY MAY BE SAID TO BE FRAUDULENT, CAPRICIOUS OR ARBITRARY, SO GROSSLY ERRONEOUS AS NECESSARILY TO IMPLY BAD FAITH, OR ARE NOT SUPPORTED BY SUBSTANTIAL EVIDENCE.

ON THE BASIS OF THE RECORD PRESENTLY BEFORE THIS OFFICE A CONCLUSION THAT THE DECISION OF THE ADMINISTRATOR IN THE INSTANT CASE IS SUBJECT TO QUESTION FOR ANY OF THE REASONS ENUMERATED IN PUBLIC LAW 356 WOULD NOT BE JUSTIFIED.

ACCORDINGLY, YOUR REQUEST FOR CANCELLATION OF THE INDEBTEDNESS MUST BE DENIED, AND YOU ARE ADVISED THAT, IN THE ABSENCE OF PAYMENT WITHIN 30 DAYS OF THE FULL AMOUNT OF THE DEBT AS STATED ABOVE, THE MATTER WILL BE REFERRED TO THE DEPARTMENT OF JUSTICE FOR COLLECTION.