B-131239, APR. 12, 1957

B-131239, APR. 12, 1957

TO MR. JOHN Z. MITCHELL, AUTHORIZED CERTIFYING OFFICER, DEPARTMENT OF THE INTERIOR:

REFERENCE IS MADE TO YOUR LETTER OF MARCH 21, 1957, TRANSMITTING FOR ADVANCE DECISION INVOICES NOS. 7039 AND 6694, DATED MARCH 12 AND FEBRUARY 28, 1957, FOR $232.38 AND $186.50, RESPECTIVELY, REPRESENTING AMOUNTS WITHHELD BY THE GOVERNMENT IN MAKING PAYMENT TO THE GRIMES PIPE AND SUPPLY COMPANY, DENVER, COLORADO, FOR A QUANTITY OF SEAMLESS STEEL PIPE FURNISHED THE UNITED STATES DEPARTMENT OF THE INTERIOR, BUREAU OF MINES, PURSUANT TO NEGOTIATED CONTRACT NO. 14-09-060-1539, AND PURCHASE ORDER NO. 657-638, EACH DATED AUGUST 27, 1956.

THE DEDUCTION OF $232.38 REPRESENTS AMOUNTS CLAIMED BY THE CONTRACTOR ON ITS ORIGINAL INVOICE NO. 6022, DATED JANUARY 31, 1957, IN EXCESS OF THE AMOUNT STIPULATED IN THE CONTRACT FOR THE SUPPLIES, AND THE RECLAIMED AMOUNT OF $186.50 REPRESENTS THE CASH DISCOUNT OF 2 PERCENT, COMPUTED ON THE CORRECT CONTRACT VALUE OF THE ITEMS, WHICH WAS OFFERED ON CLAIMANT'S INVOICE NO. 6022 FOR PAYMENT WITHIN 10 CALENDAR DAYS.

IT APPEARS THAT THE INSTANT CONTRACT RESULTED FROM INFORMAL NEGOTIATIONS WHICH WERE CONCLUDED BETWEEN THE PARTIES ON AUGUST 27, 1956. THE SUBSTANCE OF THESE NEGOTIATIONS WAS INCLUDED IN FORMAL CONTRACT NO. 14-09- 060-1539, AND CONFIRMING PURCHASE ORDER NO. 657-638 OF THAT DATE. BY THE TERMS THEREOF, THE GRIMES PIPE AND SUPPLY COMPANY AGREED TO FURNISH F.O.B. ITS MANUFACTURER'S PLANT LOCATED AT LORAIN, OHIO, THE TOTAL ESTIMATED QUANTITY OF 1,000 CFT OF STAINLESS STEEL PIPE, AS SPECIFIED, AT THE UNIT PRICE OF $918.94 CFT, OR FOR THE TOTAL ESTIMATED CONSIDERATION OF $9,189.40.

THE RECORD SHOWS THAT SHIPMENT OF 1,014 3/4 FEET OF PIPE WAS EFFECTED ON JANUARY 24, 1957. THE CONTRACTOR PREPAID THE FREIGHT CHARGES ON THE SHIPMENT, AMOUNTING TO $1,567.23, WHICH AMOUNT WAS ADDED TO THE AMOUNT OF THE CONTRACTOR'S INVOICE FOR $9,557.32, MAKING A TOTAL CLAIM OF $11,124.55. HOWEVER, IN INVOICING THE GOVERNMENT FOR THE 1,014 3/4 FEET OF PIPE DELIVERED, THE CONTRACTOR USED THE INCREASED UNIT PRICE OF $941.84 CFT, INSTEAD OF THE SPECIFIED CONTRACT RATE OF $918.94 CFT, THUS ACCOUNTING FOR THE DISCREPANCY OF $232.38 BETWEEN THE INVOICED AMOUNT, AND THE TRUE CONTRACT VALUE OF THE DELIVERED ITEMS. IN MAKING PAYMENT FOR THE SUPPLIES, THE LATTER AMOUNT WAS DEDUCTED FROM THE CONTRACTOR'S TOTAL INVOICE PRICE, INCLUDING FREIGHT, OF $11,124.55, LEAVING A NET AMOUNT DUE, EXCLUSIVE OF THE DISCOUNT OFFERED, OF $10,892.17.

IN A LETTER DATED FEBRUARY 4, 1957, DIRECTED TO THE CONTRACTING AGENCY, THE CONTRACTOR EXPLAINED THAT ON JANUARY 17, 1957, ITS PROCESSOR, THE NATIONAL TUBE DIVISION OF THE UNITED STATES STEEL CORPORATION, INCREASED THE PRICE OF THE REQUIRED STEEL PIPE BY $4 PER TON, AND SINCE IT ALLEGEDLY WAS UNDERSTOOD BETWEEN THE PARTIES THAT THE PRICES IN EFFECT AT THE TIME OF SHIPMENT WOULD APPLY, THE CLAIMANT FELT THAT IT PROPERLY WAS ENTITLED TO PAYMENT UPON THE BASIS OF THE INCREASED PRICE OF $941.84 CFT.

IT IS NOTED THAT THE FORMAL CONTRACT, AS FINALLY EXECUTED BY THE PARTIES, DOES NOT CONTAIN A PRICE ESCALATION CLAUSE OR ANY OTHER PROVISION AUTHORIZING AN INCREASE IN CONTRACT PRICE OF THE MATERIALS BASED EITHER UPON MANUFACTURER'S PRICE IN EFFECT AT TIME OF SHIPMENT, OR UPON ANY ANTICIPATED INCREASE IN THE COST OF THE SUPPLIES TO THE CONTRACTOR. THE CIRCUMSTANCES, THE CONCLUSION IS INESCAPABLE THAT THE CONTRACT, AS WRITTEN, MERGED ALL PREVIOUS NEGOTIATIONS BETWEEN THE PARTIES, AND EXPRESSED THEIR FINAL UNDERSTANDING AS TO THE AMOUNT PROPERLY PAYABLE THEREFOR. SEE BRAWLEY V. UNITED STATES, 96 U.S. 168, 173; 23 COMP. GEN. 596.

ACCORDINGLY, YOU ARE ADVISED THAT THE ADMINISTRATIVE DEDUCTION OF $232.38 WAS PROPER, AND THE CLAIM THEREFOR MAY NOT BE PAID.

SINCE THE CONTRACT CONTAINS NO PROVISION WITH RESPECT TO DISCOUNT, IT APPEARS THAT THE DISCOUNT DEDUCTION OF $186.50 WAS BASED UPON THE VOLUNTARY DISCOUNT OFFER OF "2 PERCENT 10 DAYS NET 30," AS SHOWN ON THE CONTRACTOR'S ORIGINAL INVOICE OF JANUARY 31, 1957. THERE IS MERIT IN THE VIEW EXPRESSED IN YOUR LETTER THAT, HAD THE ERRONEOUS INVOICE BEEN RETURNED TO THE CONTRACTOR FOR CORRECTION, THE DISCOUNT PROPERLY COULD HAVE BEEN TAKEN UPON THE CORRECTED INVOICE IF TIMELY PAID AFTER ITS RECEIPT. HOWEVER, THE FACT REMAINS THAT THIS WAS NOT DONE, AND THAT PAYMENT ON INVOICE 6022 WAS NOT EFFECTED WITHIN THE 10-DAY DISCOUNT PERIOD SPECIFIED THEREON BY THE CONTRACTOR. IT THEREFORE FOLLOWS THAT THE DISCOUNT OFFERED WAS NOT EARNED BY THE GOVERNMENT AND THAT THE AMOUNT OF $186.50 RECLAIMED ON INVOICE NO. 6694 SHOULD BE REFUNDED TO THE CLAIMANT. CF. 30 COMP. GEN. 125.

THE INVOICES AND RELATED PAPERS WHICH ACCOMPANIED YOUR COMMUNICATION OF MARCH 21, 1957, ARE RETURNED HEREWITH.