B-135279, JUN. 6, 1958

B-135279: Jun 6, 1958

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INC.: REFERENCE IS MADE TO A LETTER DATED FEBRUARY 4. THE LOWER PRICES WERE APPLICABLE TO SHIPMENTS TO BE MADE ON OR BEFORE SEPTEMBER 1. THE SHIPPING CONTAINERS WERE TO BE MARKED IN ACCORDANCE WITH MILITARY STANDARD MARKING OF SHIPMENTS. WERE FURNISHED WITH EACH OF THE CONTRACTS. IF SUPPLIES WHICH ARE IMPROPERLY MARKED. OR CRATED ARE RECEIVED. THE GOVERNMENT SHALL HAVE THE OPTION. THE REQUIRED MARKINGS WERE TO BE PRINTED OR STENCILED ON SEVEN LINES IN THE UPPER TWO-THIRDS AREA OF ONE END OF THE SHIPPING CONTAINER. PROVISION WAS ALSO MADE FOR PLACEMENT TO THE RIGHT OF THE MARKINGS OF A SOLID COLOR CRESCENT 3 INCHES HIGH AND 2 INCHES WIDE. THE ARMY STOCK NUMBERS WERE NOT PRINTED OR STENCILED ON THE SHIPPING CONTAINERS.

B-135279, JUN. 6, 1958

TO PARAMOUNT MACARONI MANUFACTURING COMPANY, INC.:

REFERENCE IS MADE TO A LETTER DATED FEBRUARY 4, 1958, FROM YOUR ATTORNEY, MR. EDWARD MORRIS, REQUESTING REVIEW OF THE ACTION TAKEN BY OUR CLAIMS DIVISION IN APPROVING DEDUCTIONS OF $2,274.20 AND $3,845.15 ON VOUCHERS PROPOSING FINAL PAYMENTS FOR DELIVERIES OF SPAGHETTI AND EGG NOODLES UNDER YOUR CONTRACTS NOS. DA 11-027-QM-71941 AND 71943, DATED AUGUST 2, 1956, WITH THE DEPARTMENT OF THE ARMY.

THE CONTRACTS REQUIRED DELIVERY OF 834,000 POUNDS OF SPAGHETTI IN 10- POUND PACKAGES AT PRICES OF $0.0950 AND $0.0975 PER POUND, AND 644,000 POUNDS OF EGG NOODLES IN 5-POUND PACKAGES AT PRICES OF $0.1480 AND $0.1495 PER POUND, F.O.B. CARS, YOUR PLANT. THE LOWER PRICES WERE APPLICABLE TO SHIPMENTS TO BE MADE ON OR BEFORE SEPTEMBER 1, 1956. THE SHIPPING CONTAINERS WERE TO BE MARKED IN ACCORDANCE WITH MILITARY STANDARD MARKING OF SHIPMENTS, MIL-STD-129A, DATED FEBRUARY 8, 1954, AND SHIPPING INSTRUCTIONS, CONSISTENT WITH THAT SPECIFICATION, WERE FURNISHED WITH EACH OF THE CONTRACTS. BOTH CONTRACTS PROVIDED FOR THE USE OF A TAPE TO SEAL THE FLAPS OF THE CONTAINER AND INCORPORATED BY REFERENCE THE PROVISIONS OF STANDARD FORM 32, GENERAL PROVISIONS, SUPPLY CONTRACT, 1949 EDITION; FORM OPD 534 A-E, ADDING 21 CLAUSES TO STANDARD FORM 32, DESCRIBED AS "ADDITIONAL GENERAL PROVISIONS FOR NONPERISHABLE SUBSISTENCE; " AND FORM OPD 601 A-E, ENTITLED "ADDITIONAL GENERAL PROVISIONS.' THE PARAGRAPH, NUMBERED 25, OF OPD FORM 534 A-E, PROVIDES, IN PERTINENT PART, AS FOLLOWS:

"CHARGES AGAINST CONTRACTORS FOR REPACKING, REMARKING, OR RECRATING SUPPLIES. IF SUPPLIES WHICH ARE IMPROPERLY MARKED, PACKED, OR CRATED ARE RECEIVED, THE GOVERNMENT SHALL HAVE THE OPTION, NOTWITHSTANDING ANY OF THE PROVISIONS OF THE INSPECTION CLAUSE OF THIS CONTRACT, TO ACCEPT SUCH SUPPLIES AND TO PROCEED WITH REMARKING, REPACKING, AND RECRATING THEM WITHOUT ADVANCE NOTICE TO THE CONTRACTOR. IN THE EVENT OF SUCH ACTION, THE CONTRACTOR AGREES TO PAY CHARGES FOR SUCH REMARKING, REPACKING, OR RECRATING COMPUTED AS FOLLOWS:

"A. DIRECT CHARGES:

(1) MARKING CHARGES:

(A) A CHARGE OF FIVE CENTS FOR EACH CASE TO BD MARKED OR REMARKED. THIS FIVE CENT CHARGE INCLUDES LABOR COSTS AND THE VALUE OF MATERIAL USED IN SUCH MARKING OR REMARKING.

"B. ADMINISTRATIVE AND OVERHEAD CHARGES:

(1)A CHARGE OF TWO CENTS (2 CENTS) FOR EACH CASE MARKED OR REMARKED UNDER A (1) FOR MARKING * * *.'

THE REQUIRED MARKINGS WERE TO BE PRINTED OR STENCILED ON SEVEN LINES IN THE UPPER TWO-THIRDS AREA OF ONE END OF THE SHIPPING CONTAINER, SHOWING NOMENCLATURE, STOCK NUMBER, NOT WEIGHT, NAME OF CONTRACTOR, ORDER NUMBER, DATE PACKED (MONTH AND YEAR), AND GROSS WEIGHT AND CUBE. IF THE AVAILABLE SPACE DID NOT PERMIT THE MARKINGS AS SPECIFIED, THE NAME OF THE CONTRACTOR, ORDER NUMBER AND DATE PACKED COULD BE OMITTED AND STENCILED OR PRINTED ON THE UPPER RIGHT-HAND CORNER OF THE SIDE TO THE RIGHT OF THE MARKED END. PROVISION WAS ALSO MADE FOR PLACEMENT TO THE RIGHT OF THE MARKINGS OF A SOLID COLOR CRESCENT 3 INCHES HIGH AND 2 INCHES WIDE, WITH THE TIPS OF THE CRESCENT POINTING TO THE LEFT.

WITH RESPECT TO SHIPMENTS MADE DURING THE EARLY PART OF THE PERFORMANCE PERIOD OF THE TWO CONTRACTS, THE ARMY STOCK NUMBERS WERE NOT PRINTED OR STENCILED ON THE SHIPPING CONTAINERS. THE STOCK NUMBERS WERE PLACED ON 122,387 PACKAGES BY ARMY PERSONNEL AND IT WAS ESTIMATED THAT THE COST TO THE GOVERNMENT FOR SUCH WORK WAS $0.05 PER PACKAGE, INCLUDING $0.03 FOR LABOR AND MATERIAL COSTS, AND $0.02 FOR ADMINISTRATION AND OVERHEAD. CONSIDERATION WAS GIVEN TO THE MATTER OF ASSESSING AGAINST YOUR COMPANY MARKING CHARGES AT THE CONTRACT RATE OF $0.07 PER PACKAGE. HOWEVER, THE CONTRACTING OFFICER RECOMMENDED THAT THE ASSESSMENT BE LIMITED TO THE ASSUMED ACTUAL COST OF $0.05 PER PACKAGE, WHICH ACCOUNTS FOR THE TOTAL AMOUNT OF $6,119.35 DEDUCTED ON THE VOUCHERS PROPOSING FINAL PAYMENTS UNDER THE TWO CONTRACTS. OUR CLAIMS DIVISION, IN CERTIFYING THE VOUCHERS FOR PAYMENT, DID NOT FOLLOW THE RECOMMENDATION OF THE OFFICE OF THE QUARTERMASTER GENERAL THAT YOU BE CHARGED AT THE CONTRACT RATE OF $0.07 PER PACKAGE WHICH WAS PREDICATED ON THE RULE THAT, WHERE A SPECIFIED AMOUNT HAS BEEN AGREED UPON AS LIQUIDATED DAMAGES FOR A FAILURE TO PERFORM ONE OR MORE OF THE REQUIREMENTS OF A CONTRACT, IT IS IMMATERIAL WHETHER OR NOT THE INJURED PARTY SUFFERED ACTUAL DAMAGES IN A GREATER OR LESSER AMOUNT THAN THAT RECOVERABLE UNDER THE TERMS OF THE CONTRACT.

THE RECORD SHOWS THAT, PRIOR TO THE RECEIPT OF FORMAL NOTICES OF AWARD, BUT AFTER HAVING RECEIVED ORAL ADVICE THAT THE CONTRACTS WOULD BE AWARDED TO YOUR COMPANY, YOUR REPRESENTATIVE DISCUSSED MARKING REQUIREMENTS WITH THE INSPECTOR-IN-CHARGE, NEW YORK QUARTERMASTER INSPECTION OFFICE. IT WAS PROPOSED TO ORDER THE SHIPPING CONTAINERS AS PROMPTLY AS POSSIBLE AND, IN VIEW OF THE SMALL SIZE OF THE CONTAINERS NEEDED FOR MAKING SHIPMENTS (APPROXIMATELY 11 1/4 INCHES BY 8 5/8 INCHES BY 4 3/4 INCHES), IT DID NOT APPEAR THAT ALL OF THE REQUIRED MARKINGS IN THE HEIGHTS OF LETTERING AS SPECIFIED COULD BE PLACED ON ONE END OF THE CONTAINER. BASED UPON A STUDY OF FEDERAL SPECIFICATION N-N-00591 B. MADE A PART OF THE CONTRACT FOR DELIVERY OF EGG NOODLES, THE INSPECTOR-IN-CHARGE ADVISED YOUR REPRESENTATIVE THAT THE STOCK NUMBER COULD BE OMITTED FROM THE MARKINGS.

WITH THAT OMISSION, AND THE USE OF MORE THAN THE UPPER TWO-THIRDS AREA OF ONE END OF THE CONTAINER, TOGETHER WITH THE COMBINATION OF ORDER NUMBER AND DATE PACKED ON ONE LINE OF LETTERING, IT WAS POSSIBLE TO PLACE ALL OTHER REQUIRED MARKINGS, INCLUDING THE 3 INCH CRESCENT, ON ONE END OF THE CONTAINER, MEASURING 11 1/4 INCHES BY 4 3/4 INCHES. THE INSPECTOR-IN- CHARGE WAS NOT AWARE OF THE FACT THAT THE MARKING REQUIREMENTS OF THE PROPOSED CONTRACTS CALLED FOR PLACEMENT OF STOCK NUMBERS ON THE SHIPPING CONTAINERS. WHEN COPIES OF THE CONTRACTS WERE RECEIVED AND IT HAD BEEN INDICATED THAT THE MARKINGS ON PACKAGES PROPOSED TO BE SHIPPED WOULD NOT SHOW THE STOCK NUMBERS, HE SUGGESTED THAT YOU CONTACT THE CONTRACTING OFFICER REGARDING A CHANGE IN THE CONTRACT PROVISIONS WHICH WOULD EITHER PERMIT OMISSION OF STOCK NUMBERS OR THEIR PLACEMENT ON A PART OF THE CONTAINER OTHER THAN ON THE END USED FOR THE MARKING OF OTHER REQUIRED INFORMATION ON THE CONTAINER. HOWEVER, HE APPROVED THE RELEASE OF SEPTEMBER SHIPMENTS (THOSE REQUIRED ON OR BEFORE SEPTEMBER 1, 1956) UNDER THE CONTRACTS WITHOUT ARMY STOCK NUMBER MARKINGS.

THE OMISSION OF ARMY STOCK NUMBERS WAS FIRST BROUGHT TO THE ATTENTION OF THE CONTRACTING OFFICER BY TELEGRAM DATED AUGUST 27, 1956, FROM THE COMMANDING OFFICER, FORT WORTH GENERAL DEPOT, INDICATING THAT 15,800 PACKAGES OF NOODLES HAD BEEN RECEIVED WITHOUT STOCK NUMBER MARKINGS. FOLLOWING A TELEPHONE CONVERSATION WITH YOUR GENERAL MANAGER ON AUGUST 28, 1956, YOU WERE AUTHORIZED BY TELEGRAMS DATED AUGUST 29 AND 30, 1956, TO PLACE THE REQUIRED MARKINGS FOR OCTOBER AND NOVEMBER SHIPMENTS (THOSE REQUIRED FROM OCTOBER 10 TO 20 AND FROM NOVEMBER 10 TO 20, 1956) ON THE TOP AND SIDE OF THE SHIPPING CONTAINERS. WITH REFERENCE TO THE APPARENT FACT THAT YOUR REPRESENTATIVE HAD BEEN ADVISED BY THE INSPECTOR-IN-CHARGE THAT THE STOCK NUMBERS COULD BE OMITTED, YOUR GENERAL MANAGER WAS INFORMED THAT ONLY THE CONTRACTING OFFICER WAS AUTHORIZED TO MAKE CHANGES IN THE CONTRACTS. THIS RESPONSIBILITY OF THE CONTRACTING OFFICER IS CLEARLY SET FORTH IN PARAGRAPH 2 OF OPD FORM 601 A-E, MADE A PART OF THE CONTRACTS.

YOUR ATTORNEY HAS PREVIOUSLY MADE VARIOUS CONTENTIONS IN THE MATTER, WHICH WERE SUMMARIZED AS FOLLOWS:

1. THE MARKING REQUIREMENTS OF THE CONTRACTS WERE PHYSICALLY IMPOSSIBLE OF PERFORMANCE AND SUCH IMPOSSIBILITY OF PERFORMANCE WAS DUE TO THE FAULT OF THE GOVERNMENT.

2. THE CONTAINERS WERE NOT IMPROPERLY MARKED SINCE NO ENFORCEABLE STANDARD FOR PROPER MARKING EXISTED AT THE TIME THE CONTRACTS WERE EXECUTED.

3. THE INSPECTOR EXPRESSLY DIRECTED AND AUTHORIZED THE OMISSIONOF THE STOCK NUMBERS FOR WHICH FAULT THE GOVERNMENT CANNOT BENEFIT TO YOUR DETRIMENT.

4. THE INSPECTOR'S ACT CONSTITUTED A WAIVER OF A MINOR DEFECT, WHICH ACT IS WITHIN THE INSPECTOR'S AUTHORITY.

5. ACCEPTANCE OF THE MERCHANDISE AT ORIGIN IS CONCLUSIVE NOTWITHSTANDING THE "REMARKING" CLAUSE, SINCE THE GOVERNMENT IS UNDER A LEGAL DUTY TO MINIMIZE DAMAGES AND THE "REMARKING" CLAUSE IS INTENDED FOR SITUATIONS WHERE THE GOVERNMENT ACCEPTS MERCHANDISE AT POINTS OTHER THAN THE MANUFACTURER'S PLANT. THE GOVERNMENT CANNOT ACCEPT THE MERCHANDISE AT ONE LOCATION AND THEN AT ANOTHER LOCATION MANY DAYS LATER AT SOME DISTANCE AWAY REMARK THE CONTAINERS.

IN REGARD TO THE FIRST, SECOND, THIRD AND FORTH CONTENTIONS, IT IS APPARENT THAT THE MARKING REQUIREMENTS COULD HAVE BEEN SUBSTANTIALLY COMPLIED WITH IN A MANNER SIMILAR TO THAT EMPLOYED IN THE PRINTING OF FIVE LINES OF MARKINGS ON THE 11 1/4 INCH BY 4 3/4 INCH END OF THE CONTAINER, WITH THE SOLID WATER CRESCENT BEING PLACED TO THE RIGHT OF THE MARKED LINES BELOW THE LETTERING FOR NOMENCLATURE. THE FOUR BELOW THAT USED FOR NOMENCLATURE COULD HAVE MET THE REQUIREMENTS FOR MARKING OF STOCK NUMBER, NET WEIGHT, NAME OF CONTRACTOR, AND GROSS WEIGHT AND CUBE, AND THE REMAINING MARKINGS, ORDER NUMBER AND DATE PACKED, COULD HAVE BEEN PROPERLY PLACED ON THE UPPER RIGHT-HAND CORNER OF THE SIDE OF THE CONTAINER TO THE RIGHT OF THE MARKED END, WITHOUT USING ANY OF THE SPACE REQUIRED FOR SEALING OF THE FLAPS OF THE CONTAINER. OF COURSE, THE USE OF MORE THAN TWO-THIRDS OF THE UPPER AREA OF THE MARKED END AND THE LOWERING OF THE CRESCENT WOULD HAVE BEEN TECHNICALLY IN VIOLATION OF THE MARKING REQUIREMENTS, BUT DEVIATIONS OF SUCH CHARACTER WOULD OBVIOUSLY HAVE BEEN PERMITTED WITHOUT THE NECESSITY FOR A CHANGE IN THE CONTRACT PROVISIONS. IT IS OUR VIEW THAT THE GOVERNMENT INSPECTOR COULD NOT HAVE WAIVED THE OMISSION OF ANY MARKING REQUIRED BY THE CONTRACTS TO BE PLACED ON THE SHIPPING CONTAINERS EXCEPT SO FAR AS THE ABSENCE OF SUCH MARKING WOULD NOT PREVENT AN AUTHORIZATION FOR SHIPMENT TO THE POINT OF DESTINATION. GOVERNMENT INSPECTION AT THE PLANT OF YOUR COMPANY WAS FOR THE PURPOSE PRIMARILY OF INSURING THAT THE SUPPLIES SHIPPED WOULD MEET THE CONTRACT SPECIFICATIONS AS TO QUALITY AND THE APPLICABLE INSPECTION PROCEDURES REQUIRED REJECTIONS FOR MISSING, INCORRECT OR ILLEGIBLE MARKINGS ON PACKAGES ONLY WITH RESPECT TO THE NOMENCLATURE OF A PARTICULAR COMMODITY.

IN REGARD TO THE FIFTH CONTENTION, THE FACTS OF THE PRESENT CASE DO NOT INDICATE ANY FAILURE ON THE PART OF THE INSPECTOR TO MITIGATE DAMAGES. MAY BE TRUE THAT ERRONEOUS ADVICE WAS GIVEN TO YOUR REPRESENTATIVE BEFORE ANY PROPOSED SHIPMENTS WERE INSPECTED AT YOUR PLANT BUT YOU WERE INFORMED BEFORE SHIPMENTS WERE MADE THAT THE CONTRACTS REQUIRED STOCK NUMBER MARKINGS AND THAT YOU SHOULD REQUEST THE CONTRACTING OFFICER TO AUTHORIZE A CHANGE IN THE CONTRACT PROVISIONS. IN SHIPPING THE SUPPLIES WITHOUT SUCH AUTHORIZATION, IT MUST BE CONSIDERED THAT YOU ASSUMED THE RISK THAT THE RECEIVING AGENCIES MIGHT ELECT TO MARK THE STOCK NUMBERS ON THE PACKAGES, WITH THE RESULT THAT CHARGES WOULD BE RAISED AGAINST YOUR COMPANY PURSUANT TO THE PROVISIONS OF PARAGRAPH NUMBERED 25 OF OPD FORM 534 A-E. NOR DO WE BELIEVE THAT THE PROVISIONS OF PARAGRAPH 25 WERE INTENDED SOLELY TO COVER SITUATIONS WHERE THE GOVERNMENT ACCEPTS MERCHANDISE AT POINTS OTHER THAN THE MANUFACTURER'S PLANT. THAT PARAGRAPH PERMITS, IN OUR OPINION, A SO-CALLED SECOND ACCEPTANCE OF SUPPLIES NOT PROPERLY PACKED, MARKED OR CRATED AND CLEARLY NEGATIVES ANY SUGGESTION THAT INSPECTION AND ACCEPTANCE AT THE PLANT OF A CONTRACTOR WOULD BE FINAL AND CONCLUSIVE ON THE PARTIES WITH RESPECT TO THE PACKAGING, MARKING OR CRATING REQUIREMENTS OF A CONTRACT FOR PROCUREMENT OF NONPERISHABLE SUPPLIES.

IN YOUR ATTORNEY'S LETTER, VARIOUS PROVISIONS OF THE CONTRACT SCHEDULES AND THE GENERAL PROVISIONS MADE A PART OF EACH OF THE CONTRACTS ARE SET FORTH AND DISCUSSED IN AN EFFORT TO SHOW THAT IT WOULD BE UNREASONABLE TO HOLD THAT THE PROVISIONS OF PARAGRAPH NUMBERED 25 OF OPD FORM 534 A-E WERE INTENDED TO BE APPLICABLE TO CONTRACTS WHERE INSPECTION AND ACCEPTANCE WERE TO BE ACCOMPLISHED AT A CONTRACTOR'SPLANT. IN THAT CONNECTION, IT IS ASSUMED THAT THE DEPARTMENT OF THE ARMY WOULD PREFER TO INSPECT AT CONTRACTORS' PLANTS MOST OF THE PACKAGED SUBSISTENCE SUPPLIES WHICH IT PURCHASES AND THAT, IF IT HAD INTENDED TO EXEMPT ANY SUCH PURCHASES FROM THE PROVISIONS OF PARAGRAPH 25 OF OPD FORM 534 A-E, SUCH INTENTION WOULD HAVE BEEN CLEARLY EVIDENCED BY AN APPROPRIATE STATEMENT TO THAT EFFECT.

IT IS WELL SETTLED THAT A CONTRACT SHOULD BE INTERPRETED TO GIVE EFFECT TO ALL PROVISIONS OF THE CONTRACT, WHEREVER POSSIBLE, WITHOUT VIOLATING THE PLAIN LANGUAGE OF THE CONTRACT OR THE CLEAR INTENT OF THE PARTIES. BRODERICK WOOD PRODUCTS COMPANY V. UNITED STATES, 195 F.2D 433. COURTS WILL DECLARE A CONTRACT PROVISION MEANINGLESS ONLY WHEN SUCH A CONCLUSION IS LEGALLY OR FACTUALLY COMPELLED. FOX MIDWEST THEATRES V. MEANS, 221 F.2D 173. THAT IS NOT THE SITUATION IN THE PRESENT CASE AND WE ARE, THEREFORE, REQUIRED TO GIVE LEGAL EFFECT TO THE SPECIFIC CONTRACT PROVISION BY WHICH THE GOVERNMENT ACQUIRED THE RIGHT TO ASSESS MARKING CHARGES WHERE IT ELECTED TO ACCEPT SUPPLIES IN PACKAGES NOT MARKED IN ACCORDANCE WITH THE CONTRACT REQUIREMENTS AND TO PROCEED WITH THE MARKING OR REMARKING OF SUCH PACKAGES. THE LEGAL OBLIGATION OF YOUR COMPANY IS CONSIDERED AS HAVING AMOUNTED TO THE SUM OF $8,567.09, INSTEAD OF $6,119.35. THERE EXISTED NO PROPER BASIS FOR REMISSION OF ANY PART OF THE AGREED CHARGE OF $0.07 PER PACKAGE, EVEN THOUGH THE DEVIATION HERE INVOLVED CONSISTED ONLY OF THE OMISSION OF ONE OF THE SEVEN LINES OF REQUIRED MARKINGS. IT WAS NOT NECESSARY FOR THE GOVERNMENT TO PROVE ANY DAMAGE OR LOSS UNDER THE REMARKING CLAUSE BUT ONLY THAT THE STOCK NUMBERS WERE MARKED ON THE PACKAGES BY THE DEPOTS TO WHICH THE SUPPLIES WERE SHIPPED. ACCORDINGLY, IT IS REQUESTED THAT, WITHIN 30 DAYS FROM THE DATE OF THIS LETTER, THE DIFFERENCE BETWEEN THE SUMS OF $8,567.09 AND $6,119.35, OR $2,447.74, BE REMITTED BY CERTIFIED CHECK MADE PAYABLE TO THE U.S. GENERAL ACCOUNTING OFFICE, AND FORWARDED TO THE FOLLOWING ADDRESS: U.S. GENERAL ACCOUNTING OFFICE, P.O. BOX 2610, WASHINGTON 13, D.C. ..END :