B-134810, MARCH 12, 1958, 37 COMP. GEN. 599

B-134810: Mar 12, 1958

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THE FACT THAT AN AWARD OF A CONTRACT FOR THE PURCHASE OF AN ITEM FROM DOMESTIC SURPLUS PROPERTY STOCKS WAS MADE UNPROFITABLE. WAS THE HIGHEST BID RECEIVED ON ITEM 1 OF THE INVITATION. 000 ARMY STEEL FOLDING COTS AT PRICES WHICH WERE APPROXIMATELY 40 PERCENT BELOW YOUR BID PRICE OF $5.04 UNDER INVITATION NO. IT WAS INDICATED THAT THE SOUTHERN TRADING COMPANY HAD PURCHASED SURPLUS ARMY COTS IN JAPAN AND THAT THEY WERE THEN LOCATED ON THE ISBRANDTSEN LINES DOCK IN SAN FRANCISCO. YOU CONTENDED THAT IT IS NOT AT ALL FAIR FOR THE GOVERNMENT TO MAKE AN OFFERING. WHICH IS ACCEPTED IN GOOD FAITH. THE REQUEST FOR PERMISSION TO WITHDRAW THE BID ON ITEM 1 WAS REFERRED TO HIGHER AUTHORITY FOR CONSIDERATION IN ACCORDANCE WITH APPLICABLE ARMY DIRECTIVES AND.

B-134810, MARCH 12, 1958, 37 COMP. GEN. 599

SALES - BIDS - WITHDRAWAL - CHANGED MARKET CONDITIONS - GOVERNMENT PERMITTING IMPORTATION OF SAME ITEM EVEN THOUGH A BIDDER FOR THE PURCHASE OF SURPLUS GOVERNMENT PROPERTY REQUESTS PERMISSION AFTER OPENING TO WITHDRAW HIS HIGH BID BECAUSE OF CHANGED MARKET CONDITIONS, THE ACCEPTANCE OF THE BID IN ACCORDANCE WITH THE TERMS OF THE INVITATION RESULTS IN A BINDING CONTRACT WHICH MAY NOT BE WAIVED OR MODIFIED WITHOUT A COMPENSATING BENEFIT TO THE GOVERNMENT. THE FACT THAT AN AWARD OF A CONTRACT FOR THE PURCHASE OF AN ITEM FROM DOMESTIC SURPLUS PROPERTY STOCKS WAS MADE UNPROFITABLE, DUE TO CHANGED MARKET CONDITIONS CAUSED BY ANOTHER GOVERNMENT AGENCY PERMITTING THE IMPORTATION OF A HUGE QUANTITY OF THE SAME ITEM PURCHASED AT LOWER PRICES FROM FOREIGN EXCESS PROPERTY STOCKS, DOES NOT IMPOSE UPON THE GOVERNMENT AS A CONTRACTOR ANY LIABILITY FOR THE OBSTRUCTION TO THE PERFORMANCE OF THE CONTRACT RESULTING FROM ITS PUBLIC AND GENERAL ACTS AS A SOVEREIGN.

TO THE AMERICAN SALES COMPANY, MARCH 12, 1958:

A REPORT HAS BEEN RECEIVED FROM THE DEPARTMENT OF THE ARMY RELATIVE TO THE PROTEST MADE IN YOUR LETTER OF JANUARY 2, 1958, TO OUR OFFICE, AGAINST THE DEPARTMENT'S REFUSAL TO PERMIT A WITHDRAWAL OF YOUR BID ON 1,619 STEEL FOLDING COTS ADVERTISED FOR SALE UNDER ITEM 1 OF INVITATION FOR BIDS NO. AVI-04-197-S-58-8, ISSUED OCTOBER 10, 1957, BY THE PROPERTY DISPOSAL BRANCH, OAKLAND ARMY TERMINAL, OAKLAND, CALIFORNIA, WITH BIDS HAVING BEEN SCHEDULED FOR OPENING ON OCTOBER 31, 1957.

YOUR BID OF $5.04 EACH, OR A TOTAL OF $8,159.76 FOR THE 1,619 COTS, WAS THE HIGHEST BID RECEIVED ON ITEM 1 OF THE INVITATION. BY LETTER DATED NOVEMBER 5, 1957, YOU REQUESTED PERMISSION TO WITHDRAW YOUR BID ON THAT ITEM, ALLEGING THAT ON THE AFTERNOON OF THE BID OPENING YOUR COMPANY AND OTHER WHOLESALE AND RETAIL SURPLUS DISTRIBUTORS IN CALIFORNIA RECEIVED AN OFFER FROM THE SOUTHERN TRADING COMPANY TO SELL APPROXIMATELY 17,000 ARMY STEEL FOLDING COTS AT PRICES WHICH WERE APPROXIMATELY 40 PERCENT BELOW YOUR BID PRICE OF $5.04 UNDER INVITATION NO. AVI-04-197-S-58-8. IT WAS INDICATED THAT THE SOUTHERN TRADING COMPANY HAD PURCHASED SURPLUS ARMY COTS IN JAPAN AND THAT THEY WERE THEN LOCATED ON THE ISBRANDTSEN LINES DOCK IN SAN FRANCISCO. WITH REFERENCE TO THIS MATTER, YOU CONTENDED THAT IT IS NOT AT ALL FAIR FOR THE GOVERNMENT TO MAKE AN OFFERING, WHICH IS ACCEPTED IN GOOD FAITH, TO DOMESTIC PURCHASERS OF SURPLUS MERCHANDISE, AND AT THE SAME TIME, WITHOUT NOTICE, ALLOW A HUGE QUANTITY OF THE SAME ITEM TO BE PURCHASED OVERSEAS AT FAR LOWER PRICES AND TO BE BROUGHT INTO THE UNITED STATES.

THE REQUEST FOR PERMISSION TO WITHDRAW THE BID ON ITEM 1 WAS REFERRED TO HIGHER AUTHORITY FOR CONSIDERATION IN ACCORDANCE WITH APPLICABLE ARMY DIRECTIVES AND, UPON ITS REVIEW OF THE CASE, THE DEPARTMENT OF THE ARMY DECIDED THAT SUCH REQUEST SHOULD BE DENIED. YOUR BID WAS ACCEPTED BY NOTICE OF AWARD DATED DECEMBER 27, 1957, SHOWING A NET BALANCE OF $6,410.01 AS BEING DUE THE GOVERNMENT AFTER DEDUCTION OF YOUR BID DEPOSIT OF $1,749.75 FROM THE TOTAL SALE PRICE OF $8,159.76. IN THE MEANTIME, THE DEPARTMENT HAD ADVISED THE HONORABLE WILLIAM F. KNOWLAND, UNITED STATES SENATOR, IN A LETTER DATED DECEMBER 19, 1957, THAT THE CONTRACTING OFFICER WAS BEING INFORMED THAT THE CONTRACT FOR ITEM 1 OF INVITATION NO. AVI-04- 197-S-58-8 SHOULD BE AWARDED TO YOUR COMPANY.

IT WAS STATED IN THE LETTER TO SENATOR KNOWLAND THAT THERE IS NO EVIDENCE THAT WOULD INDICATE THAT IT WOULD BE IN THE GOVERNMENT'S BEST INTERESTS TO REJECT ALL BIDS AND READVERTISE THE PROPERTY CONCERNED. THE OPINION WAS EXPRESSED THAT TO ALLOW A BIDDER RELIEF BECAUSE OF A CHANGE IN MARKET CONDITIONS, WHEN OCCASIONED BY AN ACTION OVER WHICH THE ARMY HAS NO CONTROL, WOULD ESTABLISH A PRECEDENT WHICH COULD BE DETRIMENTAL TO FUTURE DISPOSALS OF GOVERNMENT PROPERTY. FURTHERMORE, IT WAS POINTED OUT THAT, AS REQUIRED BY SECTION 402 OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, 40 U.S.C. 512, THE AUTHORITY TO IMPORT FOREIGN EXCESS PROPERTY MUST BE OBTAINED BY THE BUYER FROM THE DEPARTMENT OF AGRICULTURE IN THE CASE OF ANY AGRICULTURAL COMMODITY, FOOD, COTTON OR WOOLEN GOODS, OR FROM THE DEPARTMENT OF COMMERCE IN THE CASE OF ANY OTHER PROPERTY; AND THAT THE DEPARTMENT OF THE ARMY IS NOT INVOLVED AND IN NO WAY RESPONSIBLE FOR THE CONSUMMATION OF SUCH TRANSACTIONS.

WITH RESPECT TO THE INFORMATION FURNISHED TO SENATOR KNOWLAND, IT WAS CONTENDED IN YOUR LETTER OF JANUARY 2, 1958, THAT A WITHDRAWAL FROM SALE OF THE 1,619 STEEL FOLDING COTS WOULD DEFINITELY BE IN THE INTEREST OF THE GOVERNMENT BECAUSE, IF YOUR REQUEST FOR RELIEF SHOULD BE DENIED, THE GOVERNMENT CAN EXPECT TO RECEIVE GENERALLY AND SUBSTANTIALLY LOWER RETURNS FOR A GREAT VARIETY OF ITEMS OFFERED FOR DISPOSAL AS SURPLUS. HOWEVER, THE DEPARTMENT OF THE ARMY HAS NOT CHANGED ITS POSITION IN THIS MATTER AND IT APPEARS THAT THE DEPARTMENT WAS CORRECT IN ASSUMING THAT THE GRANTING OF PERMISSION TO WITHDRAW THE BID IN THIS CASE SOLELY ON ACCOUNT OF CHANGED MARKET CONDITIONS WOULD NOT BE IN THE BEST INTERESTS OF THE UNITED STATES, PARTICULARLY IN VIEW OF THE OBVIOUS PURPOSES OF THE GENERAL RULE THAT PROPOSALS SUBMITTED IN RESPONSE TO A GOVERNMENT ADVERTISEMENT FOR BIDS MAY NOT BE WITHDRAWN AFTER OPENING, EVEN BEFORE AWARD IS MADE, AND THE BIDDER IS BOUND TO ACCEPT THE AWARD. IN THE PRESENT CASE, THE GENERAL SALE TERMS AND CONDITIONS PROVIDE THAT THE BIDDER AGREES THAT "THE BID WILL NOT BE WITHDRAWN WITHIN THE TIME SPECIFIED FOR ACCEPTANCE AFTER THE OPENING OF BIDS (60 CALENDAR DAYS IF NO PERIOD BE SPECIFIED BY THE BIDDER), AND WILL DURING THAT TIME REMAIN FIRM AND IRREVOCABLE.' YOUR BID DID NOT SPECIFY A TIME FOR ACCEPTANCE AND THE AWARD WAS MADE WITHIN 60 DAYS AFTER OPENING OF BIDS.

WITH REFERENCE TO YOUR FURTHER CONTENTION THAT THE DEPARTMENT OF THE ARMY COULD NOT PROPERLY EVADE RESPONSIBILITY FOR THE IMPORTATION OF THE SURPLUS ARMY COTS FROM JAPAN, SINCE THE DEPARTMENT OF COMMERCE, WHICH ALLOWED THE RE-ENTRY OF THE COTS,"IS BUT ANOTHER BRANCH OF THE SAME GOVERNMENT," IT IS WELL SETTLED THAT THE UNITED STATES AS A CONTRACTOR "CANNOT BE HELD LIABLE FOR THE OBSTRUCTION TO THE PERFORMANCE OF THE PARTICULAR CONTRACT RESULTING FROM ITS PUBLIC AND GENERAL ACTS AS A SOVEREIGN.' HOROWITZ V. UNITED STATES, 267 U.S. 458; MAXWELL V. UNITED STATES, 3 F.2D 906, AFFIRMED 271 U.S. 647.

WE ARE OF THE OPINION THAT THE ACCEPTANCE OF YOUR BID ON ITEM 1 OF INVITATION NO. AVI-04-197-S-58-8 RESULTED IN A BINDING CONTRACT AND YOU ARE ADVISED THAT WE HAVE CONSISTENTLY FOLLOWED THE RULE THAT AGENTS AND OFFICERS OF THE GOVERNMENT HAVE NO AUTHORITY TO GIVE AWAY THE MONEY OR PROPERTY OF THE UNITED STATES, OR TO WAIVE CONTRACTUAL RIGHTS WHICH HAVE ACCRUED TO THE UNITED STATES, OR TO MODIFY EXISTING CONTRACTS WITHOUT A COMPENSATING BENEFIT TO THE GOVERNMENT. SEE UNITED STATES V. AMERICAN SALES COMPANY, 27 F.2D 389, AFFIRMED 32 F.2D 141, CERTIORARI DENIED, 280 U.S. 574; PACIFIC HARDWARE COMPANY V. UNITED STATES, 49 C.1CLS. 327; AND BAUSCH AND LOMB OPTICAL CO. V. UNITED STATES, 78 C.1CLS. 584.

ACCORDINGLY, IN THE ABSENCE OF AN ELECTION ON YOUR PART TO PAY THE BALANCE OF THE SALE PRICE AND REMOVE THE PROPERTY WITHIN A REASONABLE TIME, IT IS APPARENT THAT THE DEPARTMENT OF THE ARMY WILL HAVE NO ALTERNATIVE BUT TO PURSUE THE REMEDIES PROVIDED IN PARAGRAPHS 4, 5 AND 7 OF THE GENERAL SALE TERMS AND CONDITIONS FOR BREACH OF THE CONTRACT OF SALE.