B-148305, APR. 18, 1962

B-148305, APR. 18, 1962

TO MR. J. H. LYLE, FINANCE AND ACCOUNTING OFFICER:

BY LETTER DATED FEBRUARY 26, 1962, FROM THE FINANCE CENTER, U.S. ARMY, INDIANAPOLIS, INDIANA, THERE WAS FORWARDED YOUR LETTER OF DECEMBER 22, 1961, REQUESTING AN ADVANCE DECISION AS TO THE PROPRIETY OF MAKING FULL PAYMENT ON BUREAU VOUCHER NO. L 12-61-3, COVERING A CLAIM OF HOFLIGER AND KARG, STUTTGART, GERMANY, IN THE AMOUNT OF $2,000, UNDER CONTRACT NO. DA- 03-050-ENG-3764, DATED JANUARY 19, 1961.

THE CONTRACT PROVIDED FOR DELIVERY OF SIX ITEMS OF EQUIPMENT TO THE PINE BLUFF ARSENAL, ARKANSAS, ON OR BEFORE MARCH 31, 1961, AT A UNIT PRICE OF $10,077 AND AT A TOTAL PRICE OF $60,462. THE UNIT PRICE WAS STATED IN THE CONTRACT AS INCLUDING CHARGES OF $1,117 FOR SHIPMENT BY AIR FREIGHT F.O.B., PINE BLUFF ARSENAL, ARKANSAS. THE SUM OF $58,462 HAS BEEN PAID UNDER THE CONTRACT AND THE BALANCE OF $2,000 WAS WITHHELD FROM PAYMENT TO COVER A POSSIBLE ADJUSTMENT DUE TO THE GOVERNMENT BY REASON OF THE FACT THAT THE EQUIPMENT WAS TRANSPORTED BY MOTOR CARRIER FROM THE IDLEWILD INTERNATIONAL AIRPORT, NEW YORK, TO THE PINE BLUFF ARSENAL.

DURING THE NEGOTIATION OF THE CONTRACT, THE LITTLE ROCK ENGINEER DISTRICT ASSUMED THAT THE EQUIPMENT WOULD BE SHIPPED BY AIR FREIGHT FROM THE FACTORY IN GERMANY TO MEMPHIS, TENNESSEE, AND TRANSPORTED FROM THAT POINT BY MOTOR CARRIER TO THE PINE BLUFF ARSENAL. IN A LETTER DATED MAY 24, 1961, THE DISTRICT ADVISED THE CONTRACTOR THAT A SAVING OF APPROXIMATELY $1,451.42 WAS EFFECTED THROUGH TRANSPORTATION BY MOTOR FREIGHT FROM NEW YORK AND THAT A CREDIT OF $1,451.42 WAS BELIEVED TO BE DUE THE UNITED STATES. IN THE COMPUTATION OF THE ALLEGED SAVING, THE AMOUNT OF $1,749.25 WAS STATED TO BE THE COST OF SHIPMENT BY AIR FREIGHT FROM NEW YORK TO MEMPHIS.

THE CONTRACTOR'S FORWARDING AGENT QUESTIONED THE AMOUNT OF THE ALLEGED SAVING, CONTENDING THAT IN THE INTERNATIONAL AIR FREIGHT BUSINESS THE INTERIOR FREIGHT, WHEN IT COMPRISES PART OF THE WHOLE AIR FREIGHT, IS RATED WITH CONSIDERABLE REDUCTION AVERAGING ABOUT 40 PERCENT. ALSO, THE CONTRACTOR HAS CONTENDED THAT NO ADJUSTMENT IN THE TOTAL CONTRACT PRICE SHOULD BE MADE, INASMUCH AS THE $1,117 ADDITION TO THE UNIT PRICE WAS BASED UPON A QUOTATION FROM THE FORWARDING AGENT AND AIR FREIGHT WAS INTENDED PRIMARILY FOR THE OVERSEAS PORTION OF THE TRANSPORTATION TO INSURE TIMELY DELIVERY OF THE EQUIPMENT. THE RECORD OTHERWISE INDICATES THAT THE CONTRACTOR RECEIVED ONLY ABOUT $251 IN A SETTLEMENT OF THE ACCOUNT WITH THE FORWARDING AGENT.

YOU STATE THAT THERE HAS BEEN FOUND NO BASIS FOR THE CONTENTION THAT THE AMOUNT OF $1,749.25 SHOULD BE REDUCED BY 40 PERCENT WHEN COMPUTING THE COST OF AN OVERSEAS SHIPMENT. HOWEVER, YOU SUGGEST THAT IT IS QUESTIONABLE WHETHER THERE WAS ANY BREACH OF CONTRACT SO AS TO REQUIRE A REDUCTION IN THE AMOUNT TO BE PAID.

WE HAVE ASCERTAINED THAT THE SUM OF $6,702 WHICH WAS ADDED TO THE FACTORY PRICE OF THE SIX ITEMS OF EQUIPMENT IS APPROXIMATELY EQUAL TO THE TRANSPORTATION COSTS WHICH WOULD HAVE BEEN INCURRED BY THE GOVERNMENT IF THE EQUIPMENT HAD BEEN SHIPPED ON GOVERNMENT BILL OF LADING FROM THE FACTORY IN GERMANY TO THE IDLEWILD INTERNATIONAL AIRPORT AND TRANSSHIPPED FROM THAT POINT BY MOTOR CARRIER. AT COMMERCIAL RATES THE COST OF SUCH METHOD OF SHIPMENT WOULD HAVE APPROXIMATED THE SUM OF $8,200, INCLUDING ABOUT $7,700 FOR THE OVERSEAS PORTION OF THE TRANSPORTATION. OUR INVESTIGATION OF THE MATTER FURTHER DISCLOSES THAT THE COST OF INTERNATIONAL AIR FREIGHT TO MEMPHIS, TENNESSEE, WOULD HAVE BEEN ABOUT $15,000, INDICATING THAT THERE IS NO BASIS FOR THE CONTENTION THAT, BY SUCH METHOD OF SHIPMENT, THE SHIPPER WOULD HAVE SAVED A SUBSTANTIAL PART OF THE AMOUNT OF $1.749.25 INCLUDED IN THE COMPUTATION OF THE CREDIT FOR $1,451.42 WHICH THE LITTLE ROCK ENGINEER DISTRICT BELIEVED TO BE DUE THE GOVERNMENT.

THE CONTRACT WAS ENTERED INTO ON A FIXED-PRICE BASIS AND THERE IS NO EVIDENCE TO SHOW THAT A MUTUAL MISTAKE OCCURRED WITH RESPECT TO THE TOTAL SUM OF $6,702 WHICH WAS ADDED TO THE FACTORY PRICE OF THE EQUIPMENT FOR AIR FREIGHT, OR A COMBINATION OF AIR FREIGHT AND MOTOR FREIGHT INVOLVING A TRANSSHIPMENT FROM MEMPHIS, TENNESSEE. HOWEVER, IN THE PARTICULAR CIRCUMSTANCES, CONSIDERING THAT THE CONTRACT WAS HURRIEDLY NEGOTIATED BY CABLEGRAMS WITH A FOREIGN CONCERN WITHOUT ATTEMPTING TO VERIFY THE REASONABLENESS OF THE SUM ADDED TO THE FACTORY PRICE OF EACH UNIT FOR TRANSPORTATION COSTS, THAT THE TOTAL SUM ADDED TO THE FACTORY PRICE OF THE SIX UNITS IS NOT IN EXCESS OF WHAT IT WOULD HAVE COST THE GOVERNMENT TO SHIP THE EQUIPMENT BY THE METHOD USED, AND THAT THE EQUIPMENT WAS DELIVERED ON TIME, WE ARE NOT REQUIRED TO OBJECT TO FULL PAYMENT OF THE CONTRACT PRICE MINUS THE SUM OF $251.78 RECEIVED BY THE CONTRACTOR FROM ITS FORWARDING AGENT AS A FREIGHT ADJUSTMENT.

ACCORDINGLY, PAYMENT OF THE SUM OF $1,748.22 ON BUREAU VOUCHER NO. L 12- 61-3 IS AUTHORIZED. THE VOUCHER AND ITS ACCOMPANYING PAPERS ARE RETURNED HEREWITH.