B-135430, MAR. 27, 1958

B-135430, MAR. 27, 1958

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO A LETTER DATED MARCH 5, 1958, WITH ENCLOSURES, FROM THE ASSISTANT SECRETARY OF THE ARMY, REQUESTING A DECISION AS TO THE ACTION TO BE TAKEN RELATIVE TO THE REQUEST OF MIYAZAKI KINZOKU COMPANY, LTD., KAWASAKI, JAPAN, THAT CONTRACT NO. DA/S/92-557-FEC 15867 BE CANCELED ON THE GROUND THAT SUCH CONTRACT DOES NOT COVER THE MATERIAL INSPECTED BY THE COMPANY PRIOR TO AWARD.

THE U.S. ARMY QUARTERMASTER CENTER, TOKYO, JAPAN, BY INVITATION NO. 92- 557-S-57-919, REQUESTED BIDS FOR THE PURCHASE FROM THE GOVERNMENT OF MISCELLANEOUS MATERIALS DESCRIBED UNDER ITEMS 1 TO 11, INCLUSIVE. ITEM 1 COVERED ONE LOT OF UNUSED MISCELLANEOUS SPARE PARTS FOR VARIOUS TYPES OF CONSTRUCTION EQUIPMENT (LOT NO.SP. LOT NO. 5). IN RESPONSE MIYAZAKI KINZOKU COMPANY, LTD., SUBMITTED A BID WHEREIN IT OFFERED TO PURCHASE THE SPARE PARTS OFFERED UNDER ITEM 1 FOR A LOT PRICE OF 13,700,000 YEN. THE BID OF THE COMPANY, WHICH WAS ACCOMPANIED BY A BID GUARANTEE IN THE AMOUNT OF 3,000,000 YEN, WAS ACCEPTED AS TO ITEM 1 ON JUNE 21, 1957.

BY LETTER DATED JUNE 26, 1957, MIYAZAKI KINZOKU COMPANY, LTD., REQUESTED CANCELLATION OF THE CONTRACT ON THE GROUND THAT THE "LOT" AWARDED TO IT WAS NOT THE SAME LOT WHICH WAS INSPECTED BY ITS REPRESENTATIVES PRIOR TO THE SUBMISSION OF ITS BID AND ON WHICH THE COMPANY'S BID PRICE WAS BASED. THE COMPANY STATED THAT PERHAPS ITS REPRESENTATIVES MAY HAVE MIXED UP THE LOTS IN PREPARING THEIR BID PRICE SHEET.

IN A LETTER DATED AUGUST 14, 1957, THE COMPANY REITERATED ITS REQUEST THAT THE CONTRACT BE CANCELED AND REQUESTED THAT ITS BID PRICE BE REFUNDED FOR THE REASON THAT ITS REPRESENTATIVES HAD BEEN MISINFORMED BY GOVERNMENT PERSONNEL AT THE TIME THEY HAD INSPECTED THE SURPLUS MATERIAL COVERED BY ITEM 1. THE COMPANY STATED THAT UPON RECEIPT OF THE INVITATION, REPRESENTATIVES OF THE COMPANY VISITED THE ENGINEER SUPPLY CENTER FOR THE PURPOSE OF INSPECTING THE SURPLUS MATERIAL COVERED BY ITEM 1; AND THAT A GOVERNMENT CHECKER SHOWED THE REPRESENTATIVES A MULTITUDE OF BOXES AND CRATES IN ONE AREA AND THAT THE CHECKER STATED THAT ALL THE BOXES AND CRATES WERE A PART OF LOT NO.SP. LOT NO. 5 (ITEM 1). ALSO, THE COMPANY STATED THAT AFTER THE BID OPENING, WHEN ITS REPRESENTATIVES LEARNED THAT IT HAD SUBMITTED THE HIGHEST BID ON ITEM 1, THEY AGAIN VISITED THE SITE WHERE THE SURPLUS PROPERTY COVERED BY THAT ITEM WAS STORED AND THAT THEY WERE VERY SURPRISED WHEN THEY WERE SHOWN A LOT OF ONLY ABOUT ONE-THIRD THE ORIGINAL AMOUNT PREVIOUSLY INSPECTED, AND WHEN THEY WERE INFORMED THAT SUCH MATERIAL REPRESENTED THE ENTIRE LOT. THE COMPANY CONTENDED THAT A LARGER LOT OF MATERIAL WAS ALSO SHOWN TO THE NEXT HIGHEST BIDDER ON ITEM 1 AND IN SUPPORT OF SUCH CONTENTION, THE COMPANY SUBMITTED A COPY OF A LETTER DATED AUGUST 9, 1957, FROM THE NEXT HIGHEST BIDDER, SANSEI SHOKAI COMPANY. IN ITS LETTER, WHICH WAS ADDRESSED TO THE CONTRACTING OFFICER, THE NEXT HIGHEST BIDDER STATED THAT PRIOR TO SUBMISSION OF ITS BID, ITS REPRESENTATIVES ACCOMPANIED REPRESENTATIVES OF THE MIYAZAKI KINZOKU COMPANY, LTD., IN THE INSPECTION OF THE PROPERTY COVERED BY ITEM 1; THAT SEVERAL DAYS AFTER THE BID OPENING MIYAZAKI KINZOKU COMPANY, TD., CONTACTED THEM AND INQUIRED WHETHER THEY WERE CERTAIN OF THE LOT THEY HAD INSPECTED AS MIYAZAKI KINZOKU COMPANY, LTC., HAD BEEN INFORMED THAT THE ITEM THEY HAD INSPECTED AND BID UPON WAS NOT THE SAME AS THE ITEM AWARDED TO IT; AND THAT REPRESENTATIVES OF THE SANSEI SHOKAI COMPANY CHECKED THE LOT OF MATERIAL AWARDED TO MIYAZAKI KINZOKU COMPANY, LTD., AND DISCOVERED THAT IT WAS ONLY ONE FOURTH THE SIZE OF THE LOT OF MATERIAL IT HAD INSPECTED PRIOR TO THE SUBMISSION OF ITS BID OF 11,200,000 YEN. THE NEXT HIGHEST BIDDER ON ITEM 1 ALSO STATED THAT HAD IT BEEN AWARDED THAT ITEM, IT WOULD HAVE STOOD TO LOSE APPROXIMATELY 5,000,000 YEN ON THE TRANSACTION.

THE ABSTRACT OF BIDS SHOWS THAT FIVE BIDS WERE RECEIVED ON ITEM 1 AND THAT THE BIDS FALL INTO TWO PRICE-RANGE GROUPS. THE LOW PRICE RANGE GROUP CONSISTS OF THREE BIDS IN THE AMOUNTS OF 4,811,250 YEN, 4,365,000 YEN, AND 2,050,000 YEN; AND THAT THE HIGHER-PRICE RANGE GROUP CONSISTS OF THE BIDS OF MIYAZAKI KINZOKU COMPANY, LTD., AND SANSEI SHOKAI COMPANY, WHICH ARE IN THE AMOUNTS OF 13,700,000 YEN AND 11,200,000 YEN, RESPECTIVELY. IT IS REPORTED THAT THE ESTIMATED ACQUISITION COST OF THE PROPERTY COVERED BY ITEM 1 IS $100,000. BOTH OF THE BIDDERS IN HIGHER-PRICE RANGE GROUPS CONTEND THAT THE LOT OF MATERIAL INSPECTED BY THEM PRIOR TO THE SUBMISSION OF THEIR BIDS WAS THREE OR FOUR TIMES LARGER THAN THE LOT OF MATERIAL AWARDED TO MIYAZAKI KINZOKU COMPANY, LTD. WHILE THE CHIEF, PROPERTY DISPOSAL DIVISION, DOES STATE IN HIS MEMORANDUM OF AUGUST 22, 1957, THAT "TO THE BEST OF MY KNOWLEDGE AND BELIEF, ITEM 1, I/B 919, MISCELLANEOUS SPARE PARTS LOT, HAS REMAINED INTACT SINCE ORIGINALLY PREPARED FOR SALE; " SUCH STATEMENT DOES NOT AMOUNT TO A DENIAL THAT PRIOR TO THE SUBMISSION OF THEIR BIDS ON ITEM 1, REPRESENTATIVES OF MIYAZAKI KINZOKU COMPANY, LTD., AND SANSEI SHOKAI COMPANY WERE SHOWN THE WRONG LOT OF MATERIAL OR A LARGER LOT OF MATERIAL BY THE CHECKERS AT THE ENGINEER SUPPLY CENTER. ALSO, THE FACT THAT THE PRICES QUOTED BY MIYAZAKI KINZOKU COMPANY, LTD., AND SANSEI SHOKAI COMPANY FOR ITEM 1ARE ALMOST THREE TIMES MORE THAN THE PRICES QUOTED BY THE NEXT HIGHEST BIDDERS ON THAT ITEM TENDS TO CONFIRM THE CORRECTNESS OF THEIR STATEMENT THAT THEY WERE SHOWN, AT THE TIME OF THE PRELIMINARY INSPECTION, A LOT OF MATERIAL THREE TIMES LARGER THAN THE LOT OF MATERIAL AWARDED TO MIYAZAKI KINZOKU COMPANY, LTD. THERE IS ALSO TO BE CONSIDERED THE FACT THAT THE PRICE QUOTED BY MIYAZAKI KINZOKU COMPANY, LTD., FOR ITEM 1 REPRESENTS A 38.1 PERCENT RETURN ON A TYPE OF ITEM WHICH, THE COMPANY STATES IN ITS LETTER OF AUGUST 14, 1957, HAS BROUGHT IN PREVIOUS SALES A RETURN OF ONLY 6 TO 11 PERCENT.

THUS, THE RECORD INDICATES THAT THERE IS A SUBSTANTIAL BASIS TO CONCLUDE THAT THE PROPERTY OFFERED FOR DELIVERY UNDER THE CONTRACT WAS NOT THAT WHICH REPRESENTATIVES OF MIYAZAKI KINZOKU COMPANY, LTD., AND SANSEI SHOKAI COMPANY INSPECTED PRIOR TO THE SUBMISSION OF THEIR BIDS AND UPON WHICH THEIR BID PRICES WERE BASED. IN THE CIRCUMSTANCES, IT WOULD BE INEQUITABLE TO REQUIRE MIYAZAKI KINZOKU COMPANY, LTD., TO ACCEPT THE MATERIAL COVERED BY ITEM 1 AT ITS BID PRICE. ACCORDINGLY, SINCE IT APPEARS THAT THE COMPANY HAS NOT TAKEN ANY FURTHER STEPS TOWARDS COMPLETION OF THE CONTRACT, CONTRACT NO. DA/S/92-557-FEC-15867 MAY BE CANCELED WITHOUT LIABILITY TO THE COMPANY AND REFUND OF THE BID DEPOSIT MAY BE MADE TO THE COMPANY.