B-145756, MAY 18, 1961

B-145756: May 18, 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 A LETTER DATED MAY 1. BIDS WERE REQUESTED FOR THE PURCHASE FROM THE GOVERNMENT OF. THE ORIGINAL ACQUISITION COST OF WHICH WAS STATED TO BE $60. THE BID OF THE CORPORATION WAS ACCEPTED AS TO ITEMS 59 AND 129 ON JUNE 2. THAT THE MATERIAL COULD BE PROCURED IN THE OPEN MARKET AT A PRICE OF $0.10 PER POUND AND THAT ITS BID PRICE FOR THE MATERIAL WAS BASED ON THE ACQUISITION COST SHOWN IN THE INVITATION. THE PROPERTY DISPOSAL OFFICER ADVISED THE CORPORATION THAT THE ACQUISITION COST OF ITEM 59 AS STATED IN THE INVITATION WAS NOT ERRONEOUS AND THAT THE CORPORATION SHOULD TRANSMIT THE BALANCE DUE UNDER ITS CONTRACT. THE PROPERTY DISPOSAL OFFICER ADVISED THE CORPORATION THAT HE WAS WITHOUT AUTHORITY TO FORFEIT ITS BID DEPOSIT ON ITEM 59 IN VIEW OF THE PROVISIONS OF PARAGRAPH 5 OF THE GENERAL SALE TERMS AND CONDITIONS OF THE CONTRACT WHICH PROVIDE THAT IF THE SUCCESSFUL BIDDER FAILS TO MAKE FULL AND FINAL PAYMENT.

B-145756, MAY 18, 1961

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO A LETTER DATED MAY 1, 1961, WITH ENCLOSURES, FROM THE DEPUTY THE QUARTERMASTER GENERAL, REQUESTING A DECISION WITH RESPECT TO A REQUEST BY THE ACETO CHEMICAL CO., INC., FOR AN ADJUSTMENT OF THE PRICE OF ITEM 59 OF CONTRACT NO. O.I. 18-035-60-166S BECAUSE OF AN OVERSTATEMENT OF THE ACQUISITION COST OF THE PROPERTY COVERED BY THAT ITEM.

BY INVITATION NO. 18-035-S-60-12, BIDS WERE REQUESTED FOR THE PURCHASE FROM THE GOVERNMENT OF, AMONG OTHER ITEMS, 551,815 PIECES OF GRIPLOCK 4 FOOT TENNANT UNUSED WIRE STRAP, THE ORIGINAL ACQUISITION COST OF WHICH WAS STATED TO BE $60,699.65, ITEM 59. IN RESPONSE THE ACETO CHEMICAL CO., INC., SUBMITTED A BID DATED MAY 23, 1960, OFFERING TO PURCHASE THE WIRE STRAP COVERED BY ITEM 59 AT A UNIT PRICE OF $0.002 EACH OR FOR A TOTAL PRICE OF $1,103.63. THE ONLY OTHER BIDDER ON ITEM 59 QUOTED A TOTAL PRICE OF $368. THE BID OF THE CORPORATION WAS ACCEPTED AS TO ITEMS 59 AND 129 ON JUNE 2, 1960.

BY LETTER DATED JUNE 7, 1960, THE ACETO CHEMICAL CO., INC., ADVISED THAT THE ACQUISITION COST OF ITEM 59 HAD BEEN GROSSLY OVERSTATED APPROXIMATELY 10 TIMES; THAT THE MATERIAL COULD BE PROCURED IN THE OPEN MARKET AT A PRICE OF $0.10 PER POUND AND THAT ITS BID PRICE FOR THE MATERIAL WAS BASED ON THE ACQUISITION COST SHOWN IN THE INVITATION. THE CORPORATION REQUESTED THAT ITEM 59 OF THE CONTRACT BE CANCELLED AND THAT ITS BID DEPOSIT ON THAT ITEM BE REFUNDED.

IN A LETTER DATED JUNE 9, 1960, THE PROPERTY DISPOSAL OFFICER ADVISED THE CORPORATION THAT THE ACQUISITION COST OF ITEM 59 AS STATED IN THE INVITATION WAS NOT ERRONEOUS AND THAT THE CORPORATION SHOULD TRANSMIT THE BALANCE DUE UNDER ITS CONTRACT. IN A LETTER DATED JUNE 24, 1960, THE CORPORATION REQUESTED THAT IT BE PERMITTED TO FORFEIT 20 PERCENT OF ITS BID DEPOSIT ON ITEM 59. BY LETTER DATED JULY 6, 1960, THE PROPERTY DISPOSAL OFFICER ADVISED THE CORPORATION THAT HE WAS WITHOUT AUTHORITY TO FORFEIT ITS BID DEPOSIT ON ITEM 59 IN VIEW OF THE PROVISIONS OF PARAGRAPH 5 OF THE GENERAL SALE TERMS AND CONDITIONS OF THE CONTRACT WHICH PROVIDE THAT IF THE SUCCESSFUL BIDDER FAILS TO MAKE FULL AND FINAL PAYMENT, THE GOVERNMENT RESERVES THE RIGHT TO SELL OR OTHERWISE DISPOSE OF THE PROPERTY IN THE GOVERNMENT'S POSSESSION AND TO CHARGE THE LOSS, IF ANY, TO THE ACCOUNT OF THE DEFAULTING BIDDER.

IN A LETTER DATED NOVEMBER 1, 1960, THE CORPORATION STATED THAT IT HAD BEEN ADVISED BY THE MANUFACTURER OF THE WIRE STRAP COVERED BY ITEM 59 THAT THE MATERIAL COVERED BY THAT ITEM WAS WORTH APPROXIMATELY $6,000 INSTEAD OF $60,699.65, AND THAT IF THE ACQUISITION COST OF THE ITEM HAD BEEN CORRECTLY STATED IN THE INVITATION ITS TOTAL BID PRICE WOULD HAVE BEEN $110.36.

IN A LETTER DATED DECEMBER 15, 1960, THE CORPORATION REQUESTED THAT IT BE REFUNDED THE SUM OF $993.27, THE DIFFERENCE BETWEEN THE PRICE QUOTED AND THE PRICE THAT ALLEGEDLY WOULD HAVE BEEN QUOTED HAD THE ACQUISITION COST OF ITEM 59 BEEN CORRECTLY STATED. IN SUPPORT OF ITS ALLEGATION OF ERROR, THE CORPORATION SUBMITTED ITS WORKSHEET, WHICH SHOWS A BID PRICE OF $0.002 EACH FOR ITEM 59 AND INDICATES THAT SUCH PRICE REPRESENTS APPROXIMATELY 2 PERCENT OF THE ACQUISITION COST AS STATED IN THE INVITATION.

THE GENERAL SALE TERMS AND CONDITIONS MADE A PART OF THE AGREEMENT PROVIDED THAT THE MATERIALS LISTED WERE OFFERED WITH THE FOLLOWING RESERVATION--- QUOTING FROM PARAGRAPH 2---

"ALL PROPERTY LISTED HEREIN IS OFFERED FOR SALE "AS IS" AND "WHERE IS," AND WITHOUT RECOURSE AGAINST THE GOVERNMENT. * * * THE DESCRIPTION IS BASED ON THE BEST AVAILABLE INFORMATION, BUT THE GOVERNMENT MAKES NO GUARANTY, WARRANTY, OR REPRESENTATION, EXPRESSED OR IMPLIED, AS TO QUANTITY, KIND, CHARACTER, QUALITY, WEIGHT, SIZE, OR DESCRIPTION OF ANY OF THE PROPERTY, OR ITS FITNESS FOR ANY USE OR PURPOSE, AND NO CLAIM WILL BE CONSIDERED FOR ALLOWANCE OR ADJUSTMENT OR FOR RESCISSION OF THE SALE BASED UPON FAILURE OF THE PROPERTY TO CORRESPOND WITH THE STANDARD EXPECTED; THIS IS NOT A SALE BY SAMPLE.'

THE COURTS MANY TIMES HAVE CONSIDERED SUCH CONTRACT STIPULATIONS IN CASES INVOLVING THE SALE OF GOVERNMENT-OWNED SURPLUS GOODS, AND HAVE HELD CONSISTENTLY THAT SUCH PROVISIONS CONSTITUTE AN EXPRESS DISCLAIMER OF WARRANTY, PRECLUDING ANY CLAIM FOR NONCONFORMITY OF THE GOODS WITH THE DESCRIPTIONS. SEE W. E. HEDGER CO., V. UNITED STATES. 52 F.2D 31, CERTIORARI DENIED, 284 U.S. 76; LIPSHITZ AND COHEN V. UNITED STATES, 269 U.S. 90; TRIAD CORPORATION V. UNITED STATES, 63 CT.CL. 151; SILBERSTEIN AND SON V. UNITED STATES, 69 CT.CL. 412. THESE CASES AND OTHERS CONCLUDE THAT UNDER SUCH PROVISIONS BUYERS HAVE NO RIGHT TO EXPECT, HAVE NOTICE NOT TO EXPECT, AND CONTRACT NOT TO EXPECT, ANY WARRANTIES WHATEVER. IN THE CASE OF OVERSEAS NAVIGATION CORPORATION V. UNITED STATES, 131 CT.CL. 70, THE COURT OF CLAIMS HELD THAT THE TERMS OF THE SALES CONTRACT THERE UNDER CONSIDERATION, INCLUDING ITS "AS IS, WHERE IS" PROVISIONS, SPOKE FOR THEMSELVES AND THE PLAINTIFF WAS LEGALLY BOUND BY THEM.

IN THE ADMINISTRATIVE REPORT DATED MARCH 24, 1961, IT IS INDICATED THAT THE PROPERTY DISPOSAL OFFICER HAS STATED THAT PRIOR TO PLACING ITEM 59 ON SALE, ITS ACQUISITION COST WAS QUESTIONED BY HIS OFFICE AND THAT AN EXAMINATION OF THE PROPERTY RECORDS OF THE ORDNANCE ASSEMBLY PLANT AT THE ARMY CHEMICAL CENTER, THE OWNER OF ITEM 59, THEREAFTER REVEALED THE ACQUISITION COST WAS POSTED ON ITS PROPERTY RECORDS AT $60,699.65 WHICH WAS SHOWN IN THE INVITATION FOR BIDS. HOWEVER, SUBSEQUENT INVESTIGATION DISCLOSED THAT, WHILE THE ACTUAL ACQUISITION COST COULD NOT BE DEFINITELY ESTABLISHED, THERE IS REASON TO BELIEVE THAT THE COST WAS SUBSTANTIALLY OVERSTATED.

BUT EVEN IF THE GOVERNMENT AND THE CORPORATION WERE MISTAKEN AS TO THE ACQUISITION COST OF ITEM 59, SUCH FACT WOULD NOT ENTITLE THE CORPORATION TO RELIEF SINCE THE COURTS HAVE HELD THAT THE DISCLAIMER OF WARRANTY CLAUSES EMPLOYED IN GOVERNMENT CONTRACTS SUCH AS HEREIN INVOLVED PRECLUDE RECOVERY ON THE THEORY OF MUTUAL MISTAKE. SEE AMERICAN SANITARY RAG CO., V. UNITED STATES, 142 CT.CL. 293. SEE, ALSO, 36 COMP. GEN. 612.

ON THE RECORD, THEREFORE, IT MUST BE HELD THAT THE DESCRIPTION OF THE PROPERTY, INCLUDING ITS ACQUISITION COST, WAS BASED ON THE BEST AVAILABLE INFORMATION AND THAT THERE IS NO REASONABLE BASIS FOR CONCLUDING THAT THE REPRESENTATIVES OF THE GOVERNMENT DID NOT ACT IN GOOD FAITH.

ACCORDINGLY, THERE APPEARS TO BE NO LEGAL BASIS FOR AUTHORIZING ANY ADJUSTMENT IN THE PRICE FIXED IN THE CONTRACT FOR THE MATERIAL INVOLVED.