B-131730, MAY 20, 1957

B-131730, MAY 20, 1957

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO A LETTER DATED MAY 2, 1957, WITH ENCLOSURES, FROM THE ASSISTANT SECRETARY OF THE ARMY FOR LOGISTICS, REQUESTING A DECISION AS TO THE PROPER ACTION TO BE TAKEN WITH RESPECT TO CONTRACT NO. 11-070-S- 56-28 DATED AUGUST 27, 1956, COVERING THE SALE OF CERTAIN SURPLUS PROPERTY BY THE DEPARTMENT OF THE ARMY TO THE STATE METALS AND STEEL COMPANY, INC.

IN RESPONSE TO AN INVITATION DATED MAY 25, 1956, THE STATE METALS AND STEEL COMPANY, INC., SUBMITTED A BID OFFERING TO PURCHASE, AMONG OTHERS, ITEM NO. 26, COVERING APPROXIMATELY 20 GROSS TONS OF NICKEL STEEL BORINGS AND TURNINGS AT $276.26 PER GROSS TON, OR FOR A TOTAL PRICE OF $5,525.20. THE STATE METALS AND STEEL COMPANY, INC., SUBMITTED ITS BID ON JULY 17, 1956, BUT PRIOR THERETO, OR ON OR ABOUT JUNE 25, 1956, THE CORPORATION REQUESTED AND RECEIVED ADDITIONAL DESCRIPTIVE INFORMATION BY TELEGRAM FROM THE DISPOSAL OFFICE THAT ITEM 26 CONSISTED PRINCIPALLY OF TYPE 303 AND 321 ROD AND BAR STOCK. THE BID OF THE STATE METALS AND STEEL COMPANY, INC., WAS THE HIGHEST BID RECEIVED ON ITEM NO. 26 AND, THEREFORE, WAS ACCEPTED ON AUGUST 27, 1956, CONSUMMATING CONTRACT NO. 11-070-S-56-28. SUBSEQUENTLY SHIPMENT OF 11.7946 TONS OF THE MATERIAL WAS MADE TO THE CORPORATION AND PAYMENT THEREFORE MADE TO THE GOVERNMENT IN THE AMOUNT OF $3,258.39. THE STATE METALS AND STEEL COMPANY, INC., HAD THE MATERIAL TESTED UPON ARRIVAL AND REPORTED THAT IT CONSISTED OF ONLY .66 PERCENT NICKEL AND .49 PERCENT CHROMIUM. A SUBSEQUENT ANALYSIS OF ITEM NO. 26 WAS MADE BY THE ROCK ISLAND ARSENAL AND THE REPORT OF THE ARSENAL SUBSTANTIALLY BEARS OUT THE CONTENTION OF THE STATE METALS AND STEEL COMPANY, INC., REGARDING THE NICKEL AND CHROMIUM CONTENT OF THE MATERIAL. SINCE IT APPEARS THAT TYPE 303 AND 321 ROD AND BAR STOCK CONTAINS FROM 17 TO 19 PERCENT CHROMIUM AND 8 TO 11 PERCENT NICKEL, THE STATE METALS AND STEEL COMPANY, INC., REQUESTS THAT CONTRACT NO. 11-070-S-56-28 BE EITHER RESCINDED OR REFORMED TO THE EXTENT THAT THE CONTRACT PRICE BE REDUCED TO THAT OF THE NEXT HIGHEST BID. STATE METALS AND STEEL COMPANY, INC., ADDITIONAL DESCRIPTIVE INFORMATION WITH RESPECT TO ITEM NO. 26, NAMELY THAT THE MATERIAL WAS PRINCIPALLY TYPE 303 AND 321 ROD AND BAR STOCK, WHICH NOT ONLY APPEARS TO HAVE BEEN IN CONTRADICTION OF THE ORIGINAL DESCRIPTIVE INFORMATION FOR THAT ITEM BUT WAS WHOLLY INCORRECT AS LATER SUBSTANTIATED BY THE ANALYSES PERFORMED ON THE MATERIAL. MOREOVER, THE BID OF THE STATE METALS AND STEEL COMPANY, INC., OF $276.26 PER GROSS TON APPEARS TO HAVE BEEN SO SUBSTANTIALLY IN EXCESS OF ALL OF THE OTHER BIDS RECEIVED, OR $55.02, $27.69, $27, AND $24.09 PER GROSS TON, AS MIGHT VERY WELL HAVE WARRANTED A REQUEST BY THE CONTRACTING OFFICER FOR VERIFICATION OF THE BID PRIOR TO ITS ACCEPTANCE NOTWITHSTANDING THAT A WIDER MARGIN OF BIDS GENERALLY MAY BE EXPECTED IN THE SALE OF SURPLUS PROPERTY THAN IN THE PROCUREMENT OF NEW EQUIPMENT TO BE FURNISHED THE GOVERNMENT. ALSO, WHILE THE PRINTED TERMS OF THE CONTRACT CONTAIN IN PARAGRAPH TWO OF GENERAL SALE TERMS AND CONDITIONS THE USUAL "AS IS, WHERE IS" CLAUSE AND DISCLAIMER OF WARRANTY, IT IS NOTED THAT IN THE MIMEOGRAPHED PORTION OF THE CONTRACT UNDER "DESCRIPTION AND LOCATION OF ROPERTY" SOME ITEMS ARE LISTED AS "AS IS, WHERE IS" ALTHOUGH THE ITEM HERE INVOLVED, NO. 26, DOES NOT CARRY THIS DESIGNATION. IT MIGHT REASONABLY BE INFERRED, THEREFORE, THAT ONLY THOSE ITEMS WITH THE "AS IS, WHERE IS" DESIGNATION WOULD BE SUBJECT TO THE DISCLAIMER OF WARRANTY CLAUSE.

ACCORDINGLY, IN THE CIRCUMSTANCES OUR OFFICE WILL HAVE NO OBJECTION TO A REFORMATION OF CONTRACT NO. 11-070-S-56-28 TO REFLECT THE PRICE OFFERED BY THE NEXT HIGHEST BIDDER, OR $55.02 PER GROSS TON.

A REFERENCE TO THIS DECISION SHOULD BE MADE ON ANY FORMS OR TRANSACTION INVOLVED IN THE ACCOUNTING OF THE MONEYS RECEIVED UNDER THE CONTRACT OF SALE.

THE PAPERS, WITH THE EXCEPTION OF THE STATEMENT OF THE CONTRACTING OFFICER, ARE RETURNED HEREWITH.