B-135528, JUNE 10, 1958, 37 COMP. GEN. 826

B-135528, JUNE 10, 1958, 37 COMP. GEN. 826

CONTRACTS - TERMINATION - AMERICAN FLAG VESSEL REQUIREMENT A CONTRACTOR WHO, AFTER AWARD OF CONTRACT TO SUPPLY COAL TO KOREA, FAILS TO FURNISH THE NAMES OF AMERICAN FLAG VESSELS ON WHICH THE COAL WAS TO BE SHIPPED, AS REQUIRED BY THE INVITATION AND CONTRACT, HAS MATERIALLY BREACHED THE CONTRACT SO AS TO JUSTIFY TERMINATION BY THE GOVERNMENT. THE FACT THAT AT THE TIME OF ISSUANCE OF AN INVITATION WHICH REQUIRED SHIPMENT OF COAL TO KOREA TO BE MADE ON AMERICAN FLAG TRAMP VESSELS THE TONNAGE TRANSPORTED ON FOREIGN VESSELS WAS FAR IN EXCESS OF THAT WHICH HAD MOVED ON AMERICAN VESSELS MADE IT MANDATORY, UNDER 46 U.S.C. 1241 (B) WHICH REQUIRES THAT AT LEAST 50 PERCENT OF THE GROSS TONNAGE OF CERTAIN SHIPMENTS BE CARRIED ON AMERICAN FLAG VESSELS, TO REQUIRE AMERICAN VESSELS, AND REFUSAL OF THE PROCURING AGENCY TO PERMIT THE CONTRACTOR TO USE A FOREIGN VESSEL MAY NOT BE REGARDED AS AN ARBITRARY DETERMINATION NOT IN THE INTEREST OF THE UNITED STATES.

TO THE GREAT LAKES COAL CO., JUNE 10, 1958:

REFERENCE IS MADE TO YOUR LETTERS OF MARCH 12 AND MAY 15, 1958, WHEREIN YOU PROTEST AGAINST THE ACTION OF THE GENERAL SERVICES ADMINISTRATION IN TERMINATING YOUR RIGHT TO PROCEED PURSUANT TO CONTRACT NO. GS-OOS-17675, AWARDED UNDER TELEGRAPHIC INVITATION FN-7N 8236-F-N-2-24-58, AND CONTEND THAT THE GOVERNMENT IS LIABLE TO YOU IN THE AMOUNT OF $471,000 BY REASON THEREOF.

THE REPORT REQUESTED FROM THE ADMINISTRATIVE OFFICE IN THIS MATTER HAS BEEN RECEIVED, AND IT APPEARS THEREFROM THAT UNDER THE INVITATION INVOLVED THE FEDERAL SUPPLY SERVICE, GSA, REQUESTED TELEGRAPHIC OFFERS FOR RECEIPT BY ROBERT A. NOLAN, CHIEF, BUYING BRANCH NO. 7, NATIONAL BUYING DIVISION, FSS, GSA, WASHINGTON, D.C., BY 2:00 P.M. EST FEBRUARY 24, 1958, FOR FURNISHING UP TO FOUR CARGOES (A CARGO IS DEFINED IN THE INVITATION AS 9,500 LONG TONS, 10 PERCENT MORE OR LESS) OF BITUMINOUS RUN OF MINE COAL ON A COST AND FREIGHT BASIS "* * * FOR MOVEMENT ON PRIVATELY OWNED U.S. FLAG DRY BULK CARRIERS ( FULL CARGO TRAMP VESSELS) ONLY * * *" FOR EXPORT TO KOREA. TWO CARGOES WERE TO BE LOADED AT THE PORT OF EXPORT BETWEEN THE DATES OF MARCH 17 AND MARCH 24, 1958, AND TWO CARGOES BETWEEN THE DATES OF MARCH 25 AND MARCH 31, 1958. BIDDERS WERE REQUIRED TO STATE THE NUMBER OF CARGOES OFFERED AND TO FURNISH CERTAIN OTHER INFORMATION WITH THEIR BIDS.

THE ADMINISTRATIVE DETERMINATION TO REQUEST OFFERS FOR FURNISHING THE COAL ON THE BASIS OF MOVEMENT ON U.S. TRAMP VESSELS ONLY REPORTEDLY WAS MADE BY WAY OF IMPLEMENTATION OF PUBLIC LAW 664, 83RD CONGRESS, 68 STAT. 832 (46 U.S.C. 1241 (B) (, WHICH REQUIRES THAT AT LEAST 50 PERCENT OF THE GROSS TONNAGE OF CERTAIN SHIPMENTS MADE BY THE GOVERNMENT BE CARRIED IN UNITED STATES-FLAG COMMERCIAL VESSELS, PROVIDED THEY ARE AVAILABLE AT FAIR AND REASONABLE RATES.

ON FEBRUARY 22, 1958, YOU SUBMITTED THE FOLLOWING OFFER VIA TELEGRAM TO THE FEDERAL SUPPLY SERVICE OFFICIAL SPECIFIED:

PURSUANT TO TERMS INVITATION ON FN-7N-8236F-N-2-24-58 ONE CARGO PRIVATELY OWNED U.S. FLAG VESSEL MARCH 18TH ONE CARGO MARCH 30TH ABSTON AND MICHELL MINE MILLDALE BROOKWOOD SEAM ABSTON COLE GRIFFCO ALABAMA TOWNLEY MINE MARY LEE SEAM MOSS AND MCCORMICK MINING COMPANY PORT OF MOBILE LOAD 3,600 TONS PER RUNNING DAY. SIZE 6X0 MAX 30 THRUOGH 1/4 INCH SCREEN MOISTURE FIVE PERCENT ASH 10 PERCENT SULPHUR 1.5 BTU 13,500 C AND F (A) $23.55 (B) $24.55 (C) $25.55 ACCEPTANCE WITHIN TEN CALENDAR DAYS.

BY TELEGRAM WHICH IS STATED BY YOU TO HAVE BEEN RECEIVED ON MARCH 5, 1958, THE FEDERAL SUPPLY SERVICE OFFICIAL CONCERNED ADVISED YOU WITH REFERENCE TO YOUR OFFER AS FOLLOWS:

YOUR OFFER OF TWO CARGOES OF COAL ON TELEGRAPHIC INVITATION NO. FN 7N- 8236-F-N-2-24-58 AT $23.55 PER TON FOR SHIPMENT ON U.S. FLAG TRAMP VESSEL C AND F KOREA FOR THE PERIOD ONE CARGO TO BE LOADED MARCH 18 AND ONE CARGO TO BE LOADED MARCH 30 ACCEPTED. CONTRACT FOLLOWS. SUBMIT NAME OF VESSEL FOR APPROVAL BY 2:99 PM EST MARCH 7.

THE CONTRACT THUS CREATED WAS DESIGNATED AS GS-OOS-17675.

IN A LETTER DATED MARCH 6, 1958, ADDRESSED TO THE ACTING CHIEF, PROCUREMENT DIVISION, INTERNATIONAL COOPERATION ADMINISTRATION, YOU STATED THAT DUE TO THE DRASTIC CHANGE IN THE AMERICAN TRAMP SHIPPING MARKET " AMERICAN TRAMP SHIPPING FROM THE GULF FOR THIS COAL IS NOT AVAILABLE NOR FEASIBLE.' IN SUPPORT OF SUCH STATEMENT, YOU ENCLOSED A CLIPPING FROM THE MARCH 6, 1958, ISSUE OF THE JOURNAL OF COMMERCE. HENCE, YOU REQUESTED PERMISSION TO SHIP ONE OR BOTH CARGOES OF THE COAL THROUGH THE PORT OF MOBILE, ALABAMA, UNDER FOREIGN FLAG AND/OR ONE CARGO THROUGH THE SAME PORT UNDER AMERICAN LINER FURNISHED BY LYKES STEAMSHIP COMPANY, NEW ORLEANS, LOUISIANA. IN CONSIDERATION OF THE GRANT OF SUCH REQUEST, YOU STATED THAT THE CONTRACT PRICE FOR THE COAL WOULD BE REDUCED TO $20.80 PER TON FOR THE AMERICAN LINER AND $17.75 PER TON FOR THE FOREIGN FLAG SHIPMENT. HOWEVER, BY TELEGRAM OF MARCH 6, THE CONTRACTING OFFICER ADVISED YOU WITH RESPECT TO YOUR REQUEST AS FOLLOWS:

HAVE BEEN ADVISED BY ICA OF YOUR REQUEST FOR SUBSTITUTION ONE FOREIGN FLAG TRAMP AND ONE AMERICAN FLAG LINER IN LIEU OF TWO AMERICAN FLAG VESSELS FULL CARGO AS AWARDED ON CONTRACT GS-OOS-17675. UNDER NO CIRCUMSTANCES WILL SHIPMENT OTHER THAN ON AMERICAN TRAMP BE PERMITTED. NAMES OF AMERICAN FLAG TRAMP VESSELS WILL BE REQUIRED BY TWO PM EST MARCH 7.

ON MARCH 7, YOU WIRED THE CONTRACTING OFFICER REQUESTING THAT YOU BE GIVEN UNTIL MONDAY, MARCH 10, 4:00 P.M., EASTERN STANDARD TIME, FOR SUBMITTING NAMES OF AMERICAN TRAMP VESSELS FOR APPROVAL. THE CONTRACTING OFFICER REPLIED, APPARENTLY THE SAME DATE, BY TELEGRAM ADVISING YOU THAT YOUR REQUEST WAS GRANTED, BUT STATED: " NO FURTHER CONCESSION ON THIS CONTRACT CAN BE CONSIDERED.'

BY TELEGRAM OF MARCH 10, WHICH BEARS A STAMP SHOWING THAT IT WAS RECEIVED BY BUYING BRANCH NO. 7 AT 11:15 ON THAT DATE, YOU REQUESTED RECONSIDERATION OF YOUR APPLICATION OF MARCH 6 FOR FLAG SUBSTITUTION UNDER THE CONTRACT. THE CONTRACTING OFFICER REPLIED BY TELEGRAM OF THE SAME DATE ADVISING THAT UNDER NO CIRCUMSTANCES WOULD SHIPMENT OF THE COAL OTHER THAN ON AMERICAN FLAG TRAMP VESSEL BE PERMITTED. ALSO, ON THE SAME DATE, THE CONTRACTING OFFICER ADVISED YOU BY TELEGRAM WITH REFERENCE TO THE CONTRACT AS FOLLOWS:

* * * BECAUSE OF YOUR FAILURE TO COMPLY WITH THE PROVISIONS OF THIS CONTRACT WHICH PROVIDES FOR THE BIDDER TO SUBMIT THE NAMES OF PRIVATELY OWNED AMERICAN FLAG TRAMP VESSELS, FULL CARGO, WITHIN SEVENTY-TWO (72) HOURS OF RECEIPT OF NOTICE OF CONTRACT AWARD, WHICH EXPIRED MARCH 7 5 PM AND FURTHER EXTENDED TO MARCH 10 4 PM, YOU ARE HEREBY NOTIFIED THAT WITHOUT PREJUDICE TO OTHER RIGHTS WHICH THE GOVERNMENT MAY HAVE AS A RESULT OF YOUR BREACH OF CONTRACT PROVISIONS, YOUR RIGHT TO PROCEED WITH ANY OF THE DELIVERY IS TERMINATED.

IT SEEMS APPARENT FROM THE TELEGRAPHIC COMMUNICATIONS SET OUT ABOVE THAT YOU, AND NOT THE GOVERNMENT, ARE THE PARTY WHICH COMMITTED A BREACH OF CONTRACT IN THE PRESENT INSTANCE--- THE BREACH CONSISTING OF YOUR FAILURE TO SUBMIT THE NAMES OF PRIVATELY OWNED U.S. TRAMP VESSELS ON WHICH THE COAL WAS TO BE SHIPPED AS REQUIRED--- AND THAT THE GOVERNMENT ACTED FULLY WITHIN ITS RIGHTS IN TERMINATING THE CONTRACT FOR THE BREACH, WHICH WAS MATERIAL. IT FOLLOWS THAT YOUR CLAIM FOR $471,000 MUST BE DISALLOWED IN ITS ENTIRETY.

RELATIVE TO YOUR COMPLAINT TO THE EFFECT THAT GSA ACTED ARBITRARILY AND NOT IN THE INTERESTS OF THE GOVERNMENT IN REFUSING TO ACCEDE TO THE AMENDMENT OF THE CONTRACT WHICH YOU PROPOSED, INASMUCH AS SECTION 201.6 (N) (1) OF THE GOVERNING REGULATIONS OF THE INTERNATIONAL COOPERATION ADMINISTRATION, 22 F.R. 8459, REQUIRED ONLY 50 PERCENT OF THE SHIPMENTS OF THE TYPE INVOLVED TO BE TRANSPORTED BY PRIVATELY OWNED U.S. FLAG COMMERCIAL VESSELS, THE CONTRACTING AGENCY HAS FURNISHED US WITH A TABULATION OF THE SHIPMENTS OF COAL MADE BY IT FROM JULY 1, 1957, THROUGH THE DATE OF ISSUANCE OF THE INSTANT INVITATION. THE TABULATION SHOWS THAT ON THE LATTER DATE THE TONNAGE WHICH HAD BEEN TRANSPORTED BY FOREIGN TRAMP VESSELS WAS FAR IN EXCESS OF THAT WHICH HAD MOVED IN U.S. FLAG TRAMP VESSELS AND THAT IN ORDER TO COMPLY WITH THE STATUTE AND REGULATIONS AS TO THE TYPE OF VESSELS USED IN THE MOVEMENT OF COAL DURING THE CURRENT FISCAL YEAR, IT WAS, AS THE AGENCY STATES, MANDATORY THAT IMMEDIATE STEPS BE TAKEN TO BALANCE THE SHIPMENTS OF COAL BETWEEN FOREIGN AND U.S. TRAMP VESSELS. IN OTHER WORDS, IT WAS NECESSARY TO REQUIRE THAT THE ENTIRE TONNAGE OF COAL PROCURED UNDER THE INSTANT INVITATION BE TRANSPORTED ON U.S. FLAG TRAMP VESSELS. THE INFORMATION IN THE CLIPPING FROM THE JOURNAL OF COMMERCE ENCLOSED WITH YOUR LETTER OF MARCH 6, 1958, FAILS TO ESTABLISH THAT YOU WOULD HAVE BEEN UNABLE TO PROCURE THE REQUIRED TYPE OF VESSEL FOR TRANSPORTATION OF THE COAL IF YOU HAD MADE TIMELY APPLICATION THEREFOR. MOREOVER, EVEN IF THE LACK OF AVAILABLE TRANSPORTATION OF THE KIND STIPULATED IN THE CONTRACT MADE IT IMPOSSIBLE FOR YOU TO COMPLY WITH THE SPECIFIED TERMS, THAT FACT COULD NOT OBLIGATE THE GOVERNMENT TO AGREE TO TERMS DIFFERING FROM THOSE CLEARLY STATED IN THE INVITATION AND IN YOUR ACCEPTED OFFER.