B-143963, OCT. 4, 1960

B-143963: Oct 4, 1960

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THERE WAS SUBMITTED FOR OUR CONSIDERATION THE REQUEST OF GUEVARA'S MERCHANDISING AND SUPPLY. GUEVARA'S MERCHANDISING AND SUPPLY WAS THE SUCCESSFUL BIDDER ON ITEM NO. 24 OF INVITATION FOR BIDS NO. THAT ITEM WAS DESCRIBED IN THE INVITATION AS PLYWOOD (950 SHEETS). THE BID WAS ACCEPTED ON JULY 11. THAT THE RATE WAS INCREASED BY 150 PERCENT. WHICH HAD BEEN ESTIMATED AS THE FIRM'S TOTAL COST PER SHEET WHEN THE BID WAS SUBMITTED. THAT THE REASON GIVEN FOR THE CHANGE IN THE TAX ON DOUGLAS FIR PLYWOOD WAS TO PROTECT LOCAL INDUSTRIES. AFTER POINTING OUT THAT THE NEXT THREE HIGHEST BIDS RECEIVED ON ITEM NO. 24 OF THE INVITATION FOR BIDS WERE IN THE AMOUNTS OF $5.99. $5.75 AND $5 PER SHEET AND THAT THOSE BID PRICES WERE MORE OR LESS REPRESENTATIVE OF THE CURRENT LOCAL COMMERCIAL QUOTATION FOR SIMILAR MATERIAL.

B-143963, OCT. 4, 1960

TO THE SECRETARY OF THE NAVY:

BY LETTER DATED SEPTEMBER 12, 1960, FROM THE ASSISTANT CHIEF FOR PURCHASING, BUREAU OF SUPPLIES AND ACCOUNTS, THERE WAS SUBMITTED FOR OUR CONSIDERATION THE REQUEST OF GUEVARA'S MERCHANDISING AND SUPPLY, MANILA, PHILIPPINES, THAT SALES CONTRACT N62355-2054 BE CANCELED DUE TO THE HEAVY TAX INCREASE IMPOSED BY THE PHILIPPINE BUREAU OF CUSTOMS ON DOUGLAS FIR PLYWOOD.

GUEVARA'S MERCHANDISING AND SUPPLY WAS THE SUCCESSFUL BIDDER ON ITEM NO. 24 OF INVITATION FOR BIDS NO. B-24-60-62355-NSA, ISSUED JUNE 15, 1960, BY THE SALES CONTRACTING OFFICER AT THE U.S. NAVAL STATION, SANGLEY POINT, CAVITE, PHILIPPINES. THAT ITEM WAS DESCRIBED IN THE INVITATION AS PLYWOOD (950 SHEETS), U.S. DOUGLAS FIR, ONE-HALF INCH THICK, 48 INCHES WIDE AND 96 INCHES LONG. GUEVARA'S MERCHANDISING AND SUPPLY QUOTED A LUMP-SUM PRICE OF $9,027, PHILIPPINE CURRENCY, REPRESENTING A PRICE OF APPROXIMATELY $9.50 PER SHEET, AND THE BID WAS ACCEPTED ON JULY 11, 1960. ON JULY 22,1960, THE FIRM REQUESTED THAT THE CONTRACT BE CANCELED STATING THAT AT THE TIME OF BIDDING, INFORMATION HAD BEEN RECEIVED FROM A REPRESENTATIVE OF THE PHILIPPINE BUREAU OF CUSTOMS THAT THE TAX ON THE ITEM WOULD BE 25 PERCENT; THAT THE RATE WAS INCREASED BY 150 PERCENT, THEREBY INCREASING THE COST OF THE ITEM TO APPROXIMATELY $19 PER SHEET INSTEAD OF $11.85, WHICH HAD BEEN ESTIMATED AS THE FIRM'S TOTAL COST PER SHEET WHEN THE BID WAS SUBMITTED; AND THAT THE REASON GIVEN FOR THE CHANGE IN THE TAX ON DOUGLAS FIR PLYWOOD WAS TO PROTECT LOCAL INDUSTRIES.

THE COMMANDING OFFICER, U.S. NAVAL STATION, SANGLEY POINT, RECOMMENDED THAT THE REQUEST FOR THE CANCELLATION OF THE CONTRACT BE GRANTED, AFTER POINTING OUT THAT THE NEXT THREE HIGHEST BIDS RECEIVED ON ITEM NO. 24 OF THE INVITATION FOR BIDS WERE IN THE AMOUNTS OF $5.99, $5.75 AND $5 PER SHEET AND THAT THOSE BID PRICES WERE MORE OR LESS REPRESENTATIVE OF THE CURRENT LOCAL COMMERCIAL QUOTATION FOR SIMILAR MATERIAL.

THE MATTER WAS SUBMITTED FOR OUR CONSIDERATION IN VIEW OF THE EXTREME UNANTICIPATED HARDSHIP THAT WOULD BE SUFFERED BY THE CONTRACTOR IN PERFORMANCE OF THE CONTRACT. IT APPEARS THAT, WITH THE PAYMENT OF A TAX AT THE NEW RATE ESTABLISHED BY THE PHILIPPINE BUREAU OF CUSTOMS, THE COST OF THE ITEM WOULD BE SO HIGH THAT THE CONTRACTOR COULD NOT RESELL THE PLYWOOD ON THE PHILIPPINE MARKET IN COMPETITION WITH SIMILAR MATERIAL PRODUCED IN THE PHILIPPINES, WITHOUT INCURRING A SUBSTANTIAL FINANCIAL LOSS.

THE PLYWOOD OFFERED FOR SALE UNDER ITEM NO. 24 OF THE GOVERNMENT'S INVITATION FOR BIDS WAS DESCRIBED AS "UNUSED, APP. GOOD," AND ITS ACQUISITION COST WAS STATED TO BE $4.10 PER SHEET, WHICH IS EQUIVALENT TO ABOUT $9.02 IN PHILIPPINE CURRENCY. ALSO, THE INVITATION PROVIDED THAT ,THE MATERIAL SOLD WILL NOT BE DELIVERED UNLESS THE PURCHASER PRESENTS A RECEIPT OF THE BUREAU OF CUSTOMS SHOWING APPLICABLE TAXES HAVE BEEN PAID THE PHILIPPINE GOVERNMENT.' EVIDENTLY, THE PLYWOOD WAS BROUGHT INTO THE PHILIPPINES FREE FROM ANY IMPORT DUTY OR TAX WITH THE RESULT THAT A SALE OF THE PLYWOOD BY THE UNITED STATES TO A PHILIPPINE PURCHASER WOULD BE SUBJECT TO A TAX IMPOSED BY THE PHILIPPINE BUREAU OF CUSTOMS.

IN ADVERTISING FOR BIDS, THE UNITED STATES WAS NOT CONCERNED WITH THE AMOUNT OF THE TAX AND IT APPEARS THAT THE CONTRACTING OFFICER REASONABLY COULD NOT HAVE CONSIDERED A BID PRICE OF $9.50 PER SHEET ON ITEM NO. 24 AS BEING TOO HIGH, SINCE THE PLYWOOD HAD NOT BEEN USED AND ITS COST TO THE GOVERNMENT WAS ONLY ABOUT $0.48 PER SHEET LESS THAN SUCH BID PRICE. WITH RESPECT TO THE FACT THAT THE CONTRACTOR'S BID PRICE WAS CONSIDERABLY HIGHER THAN THE THREE NEXT HIGHEST BID PRICES, A MERE DIFFERENCE IN PRICES BID ON SURPLUS GOVERNMENT PROPERTY WOULD NOT NECESSARILY PLACE A CONTRACTING OFFICER ON NOTICE OF THE PROBABILITY OF ERROR IN THE HIGHEST BID. SEE B-137964, DECEMBER 16, 1958, IN WHICH CONSIDERATION WAS GIVEN TO AN ALLEGED MISTAKE IN THE BID OF THE WATERMAN SUPPLY COMPANY, SUBMITTED TO THE U.S. NAVAL SUPPLY DEPOT, SAN DIEGO, CALIFORNIA.

MOREOVER, THE RECORD DOES NOT ESTABLISH THAT THE CONTRACTOR MADE A MISTAKE IN ITS BID AND IT IS APPARENT THAT THE VALIDITY OF THE CONTRACT OF SALE CANNOT BE QUESTIONED ON THE GROUND THAT THE RATE OF TAX APPLICABLE TO THE SALE OF THE ITEMS WAS INCREASED BY THE PHILIPPINE BUREAU OF CUSTOMS. THE POSSIBILITY THAT THE TAX RATE MIGHT BE INCREASED WAS ONE OF THE RISKS ASSUMED BY THE CONTRACTOR WHEN IT OFFERED TO PURCHASE THE PLYWOOD AT A PRICE OF APPROXIMATELY $9.50 PER SHEET.

IN THE CIRCUMSTANCES, IT IS OUR OPINION THAT THE ACCEPTANCE OF THE CONTRACTOR'S BID ON ITEM NO. 24 OF THE GOVERNMENT'S INVITATION FOR BIDS RESULTED IN A VALID AND BINDING CONTRACT AND VESTED IN THE UNITED STATES RIGHTS WHICH NO OFFICER OR AGENT OF THE GOVERNMENT IS AUTHORIZED TO WAIVE OR RELEASE. 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 CT.CL. 327; AND BAUSCH AND LOMB OPTICAL COMPANY V. UNITED STATES, 78 CT.CL. 584.

ACCORDINGLY, THERE IS NO LEGAL BASIS FOR GRANTING THE RELIEF REQUESTED BY GUEVARA'S MERCHANDISING AND SUPPLY WITH RESPECT TO SALES CONTRACT N62355- 2054.

THE CORRESPONDENCE AND DOCUMENTS SUBMITTED WITH THE LETTER DATED SEPTEMBER 12, 1960, ARE RETURNED.