B-144527, MAY 10, 1961

B-144527: May 10, 1961

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

TO THE SECRETARY OF THE ARMY: REFERENCE IS MADE TO LETTER OF APRIL 17. THE FACTS AND CIRCUMSTANCES UNDER WHICH THE CLAIM AROSE ARE DISCUSSED AT LENGTH IN THE REPORT AND NEED NOT BE SET FORTH IN DETAIL AGAIN. A QUANTITY OF TINNED BRASS FLEXIBLE TUBING AND THERMOSTATS WHICH WERE IN NO WAY RELATED TO EXPENDED AMMUNITION AND HAD A COMMERCIAL VALUE APPROXIMATELY ONE-HALF THAT OF THE CARTRIDGE CASES. THE PROPERTY WAS DISPLAYED IN THE SAME ENCLOSURE. THE TUBING AND THERMOSTATS WERE IN A SEPARATE PILE AND WERE NOT MARKED IN SUCH A FASHION AS WOULD CLEARLY INDICATE TO BIDDERS MAKING AN INSPECTION THAT THE TUBING AND THERMOSTATS WERE INCLUDED IN THE ITEM DESCRIBED AS EXPENDED AMMUNITION. THE CONTRACTING OFFICER WAS AWARE.

B-144527, MAY 10, 1961

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO LETTER OF APRIL 17, 1961, FROM THE OFFICE OF THE QUARTERMASTER GENERAL, FORWARDING A REPORT AND RECOMMENDATION REGARDING THE CLAIM OF RENE WEIL, S.A., UNDER CONTRACT DA-/S/-91-620 KUC-299.

THE FACTS AND CIRCUMSTANCES UNDER WHICH THE CLAIM AROSE ARE DISCUSSED AT LENGTH IN THE REPORT AND NEED NOT BE SET FORTH IN DETAIL AGAIN. BRIEFLY STATED, THE CLAIM AROSE FROM THE DESCRIPTION OF ITEM NO. 5, UNDER INVITATION NO. DA-KUC-91-620-S-60-11, ISSUED BY THE UNITED STATES ARMY GENERAL DEPOT, TOUL, FRANCE. ITEM NO. 5 OFFERED FOR SALE AN ESTIMATED QUANTITY OF 58,000 KILOGRAMS OF BRASS SCRAP DESCRIBED AS EXPENDED AMMUNITION, DEMILITARIZED. THE ITEM ACTUALLY CONSISTED OF 23,459 KILOGRAMS OF BRASS CARTRIDGE CASES, SOME OF WHICH HAD STEEL CLIPS ATTACHED, AND A QUANTITY OF TINNED BRASS FLEXIBLE TUBING AND THERMOSTATS WHICH WERE IN NO WAY RELATED TO EXPENDED AMMUNITION AND HAD A COMMERCIAL VALUE APPROXIMATELY ONE-HALF THAT OF THE CARTRIDGE CASES. THE PROPERTY WAS DISPLAYED IN THE SAME ENCLOSURE, BUT THE TUBING AND THERMOSTATS WERE IN A SEPARATE PILE AND WERE NOT MARKED IN SUCH A FASHION AS WOULD CLEARLY INDICATE TO BIDDERS MAKING AN INSPECTION THAT THE TUBING AND THERMOSTATS WERE INCLUDED IN THE ITEM DESCRIBED AS EXPENDED AMMUNITION.

THE CONTRACTING OFFICER WAS AWARE, PRIOR TO BID OPENING, THAT THE ESTIMATED WEIGHT INCLUDED THE WEIGHT OF WOOD PACKING CRATES AND THAT THERE WAS A CONSIDERABLE QUANTITY OF MATERIAL WHICH WAS NOT DERIVED FROM EXPENDED AMMUNITION AND WHICH CONTAINED A HIGH PERCENTAGE OF METAL OTHER THAN BRASS. THE CONTRACTING OFFICER ANNOUNCED THAT THE ITEM CONTAINED MATERIAL OTHER THAN EXPENDED AMMUNITION BUT LIMITED HIS ORAL DESCRIPTION OF THE OTHER MATERIAL TO STEEL CLIPS AND OTHER STEEL. BIDDERS WERE WARNED THAT NO ADJUSTMENT WOULD BE MADE IN QUANTITY EXCEPT FOR BOXES AND CRATES, AND THEY WERE INVITED TO RECHECK THEIR BIDS BEFORE OPENING. THE CONTRACTOR HAD NOTED THE PRESENCE OF THE STEEL CLIPS DURING HIS INSPECTION AND HAD ALLOWED FOR 3 PERCENT CONTAMINATION OF THE BRASS IN COMPUTING HIS BID SO HE DID NOT RECHECK HIS COMPUTATIONS, AND HE WAS THE SUCCESSFUL BIDDER AT A PRICE OF NF 2.5 PER KILOGRAM FOR ITEM NO. 5.

ALTHOUGH THE CONTRACTOR WAS NOT REQUIRED TO ACCEPT THE PROPERTY UNLESS IT WAS WITHIN 10 PERCENT OF THE ESTIMATED WEIGHT, HE ACCEPTED THE 23,459 KILOGRAMS OF CARTRIDGE CASES AND FINALLY ACCEPTED 12,060 KILOGRAMS OF TUBING AND THERMOSTAT, AFTER FIRST REFUSING TO ACCEPT THEM AS NONCONFORMING MATERIAL. THE CONTRACTOR RECEIVED A REFUND OF THE PURCHASE PRICE WHICH HE HAD DEPOSITED FOR THE ENTIRE ESTIMATED QUANTITY OF 58,000 KILOGRAMS, SO HE PAID ONLY FOR THE TOTAL OF 35,519 KILOGRAMS OF MATERIAL WHICH HE ACCEPTED. THE CONTRACTOR SUBMITTED AN ADDITIONAL CLAIM FOR A TOTAL OF NF 21,631.70 AS FOLLOWS:

"A. NF 12,663--- REPRESENTING THE DIFFERENCE BETWEEN THE DISPOSITION PRICE OF THE FLEXIBLE AIR TUBES AND THERMOSTATS AT NF 1.45 PER KG AND THE PURCHASE PRICE OF NF 2.5 PER KG.

"B. NF 3,336.20--- REPRESENTING LOSS OF ANTICIPATED PROFIT ON THE SHORTAGE OF 16,681 KGS.

"C. NF 5,000--- REPRESENTING DAMAGES CLAIMED AGAINST APPELLANT BY THE FIRM OSTROWIAK AS A RESULT OF APPELLANT'S FAILURE TO DELIVER IN ACCORDANCE WITH THE SALES AGREEMENT.

"D. NF 332.50--- REPRESENTING FINANCING CHARGES ON AMOUNT DEPOSITED WITH THE GOVERNMENT AND SUBSEQUENTLY REFUNDED.

"E. NF 300--- REPRESENTING DEMURRAGE CHARGES INCURRED ON THE TRUCK WHICH THE CUSTOMS OFFICIALS REFUSED TO CLEAR ON 29 APRIL 1960.'

THE CONTRACTING OFFICER DENIED THE CLAIM BY LETTER OF JUNE 23, 1960, AND THE CONTRACTOR APPEALED TO THE BOARD OF CONTRACT APPEALS, UNITED STATES ARMY, EUROPE, IN ACCORDANCE WITH THE DISPUTES PROVISIONS OF THE CONTRACT. A HEARING WAS HELD ON SEPTEMBER 29, 1960, AND THE BOARD DISMISSED THE APPEAL FOR LACK OF JURISDICTION IN DECISION NO. 176, DATED NOVEMBER 10, 1960. BY LETTER OF NOVEMBER 23, 1960, THE CONTRACTOR'S ATTORNEY REQUESTED A DECISION IN THIS MATTER FROM OUR OFFICE.

THE REPORT OF THE QUARTERMASTER GENERAL, DATED APRIL 17, 1961, RECOMMENDS RELIEF FOR THE CONTRACTOR FOR THE 12,060 KILOGRAMS OF TUBING AND THERMOSTAT WHICH HE ACCEPTED, BASED ON A PRICE OF NF 1.45 PER KILOGRAM, AND RECOMMENDS DENIAL OF THE REMAINING PORTIONS OF THE CLAIM.

THE RECORD DOES NOT DEMONSTRATE THAT THE CLAIM FOR NF 300 FOR DEMURRAGE AROSE FROM ANY BREACH OF DUTY, CONTRACTUAL OR OTHERWISE, WHICH THE GOVERNMENT OWED THE CONTRACTOR, BUT RATHER THAT THE DEMURRAGE CHARGE RESULTED FROM THE CONTRACTOR'S OWN FAILURE TO COMPLY WITH FRENCH CUSTOMS REGULATIONS. SINCE THIS FAILURE CANNOT BE IMPUTED TO THE GOVERNMENT, WE AGREE THAT THIS PORTION OF THE CLAIM MUST BE DENIED.

THOSE PORTIONS OF THE CLAIM DEALING WITH LOSS OF ANTICIPATED PROFIT, DAMAGES FOR FAILURE TO DELIVER UNDER A RESALE AGREEMENT AND FINANCING CHARGES ON THE AMOUNT DEPOSITED WHICH WAS REFUNDED ARE CLAIMS ARISING FROM THE GOVERNMENT'S FAILURE TO DELIVER A QUANTITY OF MATERIAL WITHIN 10 PERCENT OF THE ESTIMATED AMOUNT. THE GOVERNMENT'S LIABILITY IN THIS RESPECT MUST BE DETERMINED IN ACCORDANCE WITH THE LIMITATION IN PARAGRAPH 11 OF THE GENERAL SALE TERMS AND CONDITIONS WHICH STATES THAT THE GOVERNMENT'S LIABILITY SHALL NOT, IN ANY EVENT, EXCEED REFUND OF THE PURCHASE PRICE. WHEN THE GOVERNMENT REFUNDED THE PURCHASE PRICE FOR THE QUANTITY WHICH IT DID NOT DELIVER, THE CONTRACTOR RECEIVED AN AMOUNT EQUAL TO THE EXTREME MEASURE OF GOVERNMENT'S LIABILITY, AS DEFINED IN THE CONTRACT, FOR THE SHORTAGE IN QUANTITY. WE FIND NO BASIS IN THE CONTRACT FOR CONSIDERING ANY CLAIM FOR ADDITIONAL AMOUNTS DUE TO THIS DELIVERY SHORTAGE.

WITH RESPECT TO THE 12,060 KILOGRAMS OF FLEXIBLE TUBING AND THERMOSTATS, IT IS OUR OPINION THAT THE FACTS OF RECORD SUPPORT THE CONCLUSION THAT THE DESCRIPTION OF THOSE ARTICLES WAS NOT BASED ON THE BEST AVAILABLE INFORMATION. THE CONTRACTING OFFICER TESTIFIED BEFORE THE BOARD THAT THE DESCRIPTION IN THE INVITATION WAS BASED NOT ONLY ON TURN-IN DOCUMENTS BUT ALSO ON INSPECTION BY PROPERTY DISPOSAL PERSONNEL AS WELL. HOWEVER, NEITHER THE DESCRIPTION NOR THE ANNOUNCEMENT PRIOR TO BID OPENING WAS SUFFICIENT TO WARN BIDDERS THAT ITEM NO. 5 CONTAINED A CONSIDERABLE QUANTITY OF MATERIAL NOT DERIVED FROM EXPENDED AMMUNITION, ALTHOUGH THE CONTRACTING OFFICER WAS AWARE OF THAT FACT.

THE REPORT OF THE QUARTERMASTER GENERAL STATES THAT THE PRICE OFNF 1.45 PER KILOGRAM (THE PRICE RECEIVED BY THE CONTRACTOR) REPRESENTS A REASONABLE RETURN TO THE GOVERNMENT. UNDER THE CIRCUMSTANCES OF THIS CASE, SINCE THE CONTRACTING OFFICER DID NOT BASE THE DESCRIPTION ON THE BEST INFORMATION AVAILABLE TO HIM, A REFUND OF THE DIFFERENCE BETWEEN THE CONTRACT PRICE OF NF 2.5 PER KILOGRAM AND THE PRICE OF NF 1.45 PER KILOGRAM, A TOTAL OF NF 12,663, MAY BE MADE AS RECOMMENDED IN FULL AND FINAL SETTLEMENT OF THE CLAIM OF THE CONTRACTOR.