B-138539, FEBRUARY 12, 1959, 38 COMP. GEN. 546

B-138539: Feb 12, 1959

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CONTRACTS - FREIGHT CHARGES - COSTS GREATER THAN CONTEMPLATED ALTHOUGH THE ACTUAL TRANSPORTATION COSTS FOR DEDUCTION FROM A CONTRACT PAYMENT BY REASON OF THE ELECTION BY THE GOVERNMENT TO EXERCISE ITS RIGHT TO SHIP THE EQUIPMENT UNDER A GOVERNMENT BILL OF LADING ARE CONSIDERABLY IN EXCESS OF THE TRANSPORTATION COSTS SPECIFIED IN THE CONTRACTOR'S BID BASED ON DELIVERY F.O.B. THE DEDUCTION COMPUTED ON THE BASIS OF THE SPECIFIED FREIGHT CLASSIFICATION IS IN ACCORDANCE WITH THE TERMS OF THE CONTRACT AND HARDSHIP DOES NOT AFFORD ANY BASIS FOR THE RELIEF OF THE CONTRACTOR. 1959: WE HAVE YOUR LETTER OF JANUARY 26. SHIPMENTS WERE MADE ON GOVERNMENT BILLS OF LADING AND THE CONTRACTOR HAS PROTESTED THE PROPOSED DEDUCTION TO BE MADE IN ACCORDANCE WITH THE CONTRACT PROVISIONS MAINLY BECAUSE IT ALLEGES THAT IT UNDERESTIMATED THE FREIGHT COSTS IN COMPUTING ITS DESTINATION PRICE.

B-138539, FEBRUARY 12, 1959, 38 COMP. GEN. 546

CONTRACTS - FREIGHT CHARGES - COSTS GREATER THAN CONTEMPLATED ALTHOUGH THE ACTUAL TRANSPORTATION COSTS FOR DEDUCTION FROM A CONTRACT PAYMENT BY REASON OF THE ELECTION BY THE GOVERNMENT TO EXERCISE ITS RIGHT TO SHIP THE EQUIPMENT UNDER A GOVERNMENT BILL OF LADING ARE CONSIDERABLY IN EXCESS OF THE TRANSPORTATION COSTS SPECIFIED IN THE CONTRACTOR'S BID BASED ON DELIVERY F.O.B. CARS AT DESTINATION, THE DEDUCTION COMPUTED ON THE BASIS OF THE SPECIFIED FREIGHT CLASSIFICATION IS IN ACCORDANCE WITH THE TERMS OF THE CONTRACT AND HARDSHIP DOES NOT AFFORD ANY BASIS FOR THE RELIEF OF THE CONTRACTOR.

TO THE SECRETARY OF THE INTERIOR, FEBRUARY 12, 1959:

WE HAVE YOUR LETTER OF JANUARY 26, 1959, WITH ENCLOSURES, WITH REGARD TO THE DEDUCTION TO BE MADE FROM THE CONTRACT F.O.B. DESTINATION PRICE OF CERTAIN PUMPING UNITS FURNISHED THE BUREAU OF RECLAMATION AT VENTURA, CALIFORNIA, UNDER CONTRACT NO. 14-06-D-2713, DATED AUGUST 20, 1957, WITH THE FOOD MACHINERY AND CHEMICAL CORPORATION, PEERLESS PUMP DIVISION. SHIPMENTS WERE MADE ON GOVERNMENT BILLS OF LADING AND THE CONTRACTOR HAS PROTESTED THE PROPOSED DEDUCTION TO BE MADE IN ACCORDANCE WITH THE CONTRACT PROVISIONS MAINLY BECAUSE IT ALLEGES THAT IT UNDERESTIMATED THE FREIGHT COSTS IN COMPUTING ITS DESTINATION PRICE.

THE INVITATION FOR BIDS PERMITTED BIDS EITHER ON THE BASIS OF DELIVERY F.O.B. CARS AT THE SHIPPING POINT SPECIFIED BY THE BIDDER OR F.O.B. CARS AT DESTINATION, VENTURA, CALIFORNIA. THE EQUIPMENT HERE INVOLVED WAS COVERED BY THE SCHEDULE NO. 1 OF THE INVITATION AND WAS DIVIDED INTO THREE ITEMS. LUMP-SUM PRICES UNDER EACH ITEM WERE REQUESTED AND IN APPROPRIATE SPACES UNDER EACH ITEM THE BIDDER WAS REQUIRED TO STATE (1) THE SHIPPING POINT, WHICH IN THIS CASE WAS INDIANAPOLIS, INDIANA; (2) THE SHIPPING WEIGHT, STATED AS APPROXIMATELY 107,560 POUNDS UNDER ITEM 1, 41,950 POUNDS UNDER ITEM 2 AND 21,540 POUNDS UNDER ITEM 3; AND (3) THE FREIGHT CLASSIFICATION, WHICH WAS STATED AS "2ND.' PARAGRAPH B-8 OF SPECIAL REQUIREMENTS PROVIDED THAT UNDER BIDS PROVIDING FOR DELIVERY F.O.B. CARS AT THE RAILROAD DESTINATION ALL EQUIPMENT SHALL BE SHIPPED ON COMMERCIAL BILLS OF LADING AND THE COST OF TRANSPORTATION FROM THE SHIPPING POINTS OR POINTS TO THE RAILROAD DESTINATION SHALL BE PAID BY THE CONTRACTOR AND INCLUDED IN THE PRICE BID IN THE SCHEDULE; HOWEVER, THE GOVERNMENT RESERVED THE RIGHT TO SHIP ON GOVERNMENT BILLS OF LADING, IN WHICH CASE THE GOVERNMENT WOULD DEDUCT FROM ANY PAYMENT DUE THE CONTRACTOR THE COST OF TRANSPORTATION FROM THE SHIPPING POINT OR POINTS STATED IN THE SCHEDULE TO THE RAILROAD DESTINATION, OF THE TOTAL SHIPPING WEIGHTS STATED IN THE SCHEDULE, AT ALL-RAIL REGULAR COMMERCIAL RAILROAD RATES FOR THE FREIGHT CLASSIFICATION STATED IN THE SCHEDULE, UNLESS OTHER RATES AND THE AMOUNT THEREOF WERE PARTICULARLY SPECIFIED BY THE BIDDER IN HIS BID. SUBPARAGRAPH (B) OF PARAGRAPH B-8 PROVIDED FURTHER IN PART AS FOLLOWS:

IN ALL CASES WHERE SHIPMENT IS MADE ON GOVERNMENT BILLS OF LADING, AND THE ACTUAL TOTAL COST OF TRANSPORTATION FROM THE SHIPPING POINT OR POINTS TO THE RAILROAD DESTINATION, AS LATER DETERMINED BY THE FREIGHT BILLS, EXCEEDS THE TOTAL COST OF SUCH TRANSPORTATION COMPUTED ON THE BASIS OF THE TOTAL SHIPPING WEIGHTS, FREIGHT CLASSIFICATIONS, AND SHIPPING POINTS STATED BY THE SUCCESSFUL BIDDER IN HIS BID, THE GOVERNMENT WILL DEDUCT FROM ANY PAYMENT DUE THE CONTRACTOR, THE EXCESS OF THE ACTUAL TOTAL COST OF TRANSPORTATION OVER AND ABOVE THE TOTAL COST OF TRANSPORTATION SO COMPUTED.

THE CONTRACTOR'S BID IN THE AMOUNT OF $212,206 FOR SCHEDULE 1 ON THE BASIS OF F.O.B. CARS AT DESTINATION WAS ACCEPTED. THE COST OF TRANSPORTATION COMPUTED ON THE BASIS OF THE INFORMATION FURNISHED AS TO THE FREIGHT CLASSIFICATION IS REPORTED AS TOTALING $14,180.05. IT IS REPORTED THAT THE GOVERNMENT EXERCISED ITS RIGHT TO SHIP ON GOVERNMENT BILLS OF LADING, RESULTING IN ACTUAL TRANSPORTATION COSTS OF $8,658.36. IT IS INDICATED THAT THE DIFFERENCE BETWEEN $14,180.05 AND $8,658.36, OR $5,521.69, IS THE AMOUNT THAT IS IN CONTROVERSY AND SINCE FINAL PAYMENT HAS NOT BEEN MADE YOU REQUEST TO BE ADVISED AS TO WHAT AMOUNT SHOULD BE DEDUCTED BECAUSE OF THE FACT THAT THE GOVERNMENT MADE SHIPMENT ON GOVERNMENT BILLS OF LADING.

IT APPEARS FROM THE ENCLOSURES FORWARDED WITH YOUR LETTER THAT THE CONTRACTOR ALLEGED THAT IT HAD INCLUDED IN ITS DESTINATION PRICE TRANSPORTATION COSTS TOTALING $5,868. HOWEVER, IN ITS LETTER OF NOVEMBER 18, 1958, THE CONTRACTOR ADMITTED THAT IT COULD NOT VERIFY THE RATE AND STATES THAT ONLY THE ABOVE AMOUNT OF $5,521.69 IS IN CONTROVERSY. THE CONTENTION IN THIS CASE IS IN EFFECT THAT THE FREIGHT CLASSIFICATION OF "2ND" (CLASS) SHOWN IN THE SCHEDULE IS NOT APPLICABLE SINCE THAT CLASSIFICATION REPRESENTS LESS THAN THE CARLOAD RATE OF $8.29 PER CWT., WHEREAS THE LOWEST APPLICABLE RATE WAS THE CARLOAD RATE, STATED TO HAVE BEEN $4.27 PER CWT., 40,000 POUNDS MINIMUM, OR $4.39 PER CWT., 24,000 POUNDS MINIMUM.

IT IS NOT SERIOUSLY CONTENDED THAT THE PROPOSED REDUCTION OF $14,180.05 IS CONTRARY TO THE PROVISIONS OF THE CONTRACT; BUT RATHER THAT SUCH PROVISIONS ARE UNUSUALLY HARSH ON THE CONTRACTOR SINCE IT HAD ERRONEOUSLY INCLUDED ONLY $5,868 AS TRANSPORTATION COSTS IN COMPUTING ITS DESTINATION PRICE. THE EVIDENCE OF RECORD DOES NOT ESTABLISH NOR IS IT ALLEGED THAT THE AMOUNT OF BID WAS SO DISPROPORTIONATE AS TO PUT THE CONTRACTING OFFICER ON NOTICE OF POSSIBLE MISTAKE IN BID BEFORE AWARD, AND FOR WHICH THE CONTRACTOR MIGHT BE ENTITLED TO RELIEF IF THE CONTRACTING OFFICER HAD NOT REQUESTED VERIFICATION OF THE BID. CLEARLY, THE PROPOSED DEDUCTION COMPUTED ON THE BASIS OF THE FREIGHT CLASSIFICATION "2ND" (CLASS) IS IN STRICT ACCORDANCE WITH THE PROVISIONS OF THE CONTRACT AND THERE APPEARS NO LEGAL BASIS FOR DIFFERING WITH YOUR RECOMMENDATION THAT THE DEDUCTION BE SO COMPUTED.