B-151476, JUN. 17, 1963

B-151476: Jun 17, 1963

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THE LOCOMOTIVES OFFERED FOR SALE WERE DESCRIBED IN THE INVITATION AS FOLLOWS: "ITEM 102. ENGINE SERIAL NO. 33981 IS NOT IN OPERATING CONDITIONS. HEADS AND INJECTORS HAVE BEEN REMOVED. ARE INCLUDED IN THIS ITEM. AS IS WITH COVERING. BIDS WERE RECEIVED AND OPENED ON JANUARY 22. 363.63 FOR ITEM 103 WAS DETERMINED TO BE HIGH BIDDER ON THESE TWO ITEMS. AWARD TO RAILWATER TERMINAL COMPANY ON THE TWO ITEMS MENTIONED WAS MADE ON JANUARY 23. ADVISED THE CONTRACTING OFFICER THAT HE HAD LEARNED THAT EXTENSIVE REPAIRS WERE REQUIRED BEFORE THE LOCOMOTIVES COULD BE MOVED. THIS WAS FOLLOWED BY CORRESPONDENCE AND DISCUSSIONS BETWEEN THE CONTRACTOR AND HIS ATTORNEYS AND THE CONTRACTING OFFICER. THE DEMAND WAS BASED ON THE ALLEGATION THAT THE DEFENSE SURPLUS SALES OFFICE.

B-151476, JUN. 17, 1963

TO RAILWATER TERMINAL COMPANY:

YOUR LETTER OF MARCH 8, 1963, REQUESTING RESCISSION OF CONTRACT NO. DSA- 42-S-625, DATED JANUARY 23, 1963, FOR THE PURCHASE OF CERTAIN GOVERNMENT- OWNED SURPLUS PROPERTY, HAS BEEN FORWARDED HERE BY THE DEFENSE SUPPLY AGENCY, WITH PERTINENT RECORDS AND CORRESPONDENCE.

BY INVITATION NO. 42-S-63-32, DATED DECEMBER 28, 1962, THE SEATTLE DEFENSE SURPLUS SALES OFFICE, SEATTLE, WASHINGTON, SOLICITED BIDS FOR THE PURCHASE FROM THE GOVERNMENT OF TWO SURPLUS LOCOMOTIVES. THE LOCOMOTIVES OFFERED FOR SALE WERE DESCRIBED IN THE INVITATION AS FOLLOWS:

"ITEM 102--- LOCOMOTIVE:

SAME AS ITEM 101, EXCEPT LOCOMOTIVE SERIAL NO. 17881, CUMMINS ENGINE SERIAL NOS. 33712 AND 33981, AND USN 65-00056, AND AS INDICATED BELOW.

QTY.: 1 EA.

USED, ENGINE SERIAL NO. 33981 IS NOT IN OPERATING CONDITIONS; HEADS AND INJECTORS HAVE BEEN REMOVED, BUT ARE INCLUDED IN THIS ITEM; REPAIRS REQUIRED, FAIR.

EST. TOTAL: GR.WT., AS IS WITH COVERING, 133,320 LBS.

"ITEM 103--- LOCOMOTIVE:

120 TON, DIESEL ELEC. CAPACITY: 60,000 LBS. STARTING 25 PERCENT; 72,000 LBS. STARTING 30 PERCENT. STANDARD GAUGE, 4 DRIVE AXLES, AIR BRAKES, 700 GAL. FUEL TANK CAPACITY. BALDWIN-WESTINGHOUSE MODEL M-1, SERIAL NO. 71983, YEAR 1945. POWERED BY BALDWIN DIESEL ENGINE, MODEL V-0, SERIAL NO. 2858, 1000 HP, 625 RPM. USN 65-00062.

QTY: 1 EA.

USED, NOT IN DEHUMIDIFIED STORAGE, REPAIRS REQUIRED, FAIR. TAC: $90,000.00; EST. TOTAL; GR.WT. 238,120 LBS., 7,350 CU.FT.'

BIDS WERE RECEIVED AND OPENED ON JANUARY 22, 1963. RAILWATER TERMINAL COMPANY WHICH SUBMITTED A BID OF $2,136.63 FOR ITEM 102 AND $4,363.63 FOR ITEM 103 WAS DETERMINED TO BE HIGH BIDDER ON THESE TWO ITEMS. AWARD TO RAILWATER TERMINAL COMPANY ON THE TWO ITEMS MENTIONED WAS MADE ON JANUARY 23, 1963.

ON FEBRUARY 6, 1963, MR. LOUIS SCHWARTZ, THE OWNER OF RAILWATER TERMINAL COMPANY, ADVISED THE CONTRACTING OFFICER THAT HE HAD LEARNED THAT EXTENSIVE REPAIRS WERE REQUIRED BEFORE THE LOCOMOTIVES COULD BE MOVED. THIS WAS FOLLOWED BY CORRESPONDENCE AND DISCUSSIONS BETWEEN THE CONTRACTOR AND HIS ATTORNEYS AND THE CONTRACTING OFFICER. ON MARCH 8, 1963, IN A LETTER TO THE COMPTROLLER GENERAL OF THE UNITED STATES THE CONTRACTOR DEMANDED THAT THE CONTRACT BE RESCINDED. THE DEMAND WAS BASED ON THE ALLEGATION THAT THE DEFENSE SURPLUS SALES OFFICE, DEFENSE LOGISTICS SERVICE CENTER, SEATTLE, WASHINGTON, FAILED TO USE THE BEST AVAILABLE INFORMATION IN DESCRIBING THE LOCOMOTIVES OFFERED FOR SALE. THE REASON GIVEN WAS THAT THE RESULTS OF AN INSPECTION REPORT WHICH INDICATED THAT THE LOCOMOTIVES COULD NOT BE MOVED IN ACCORDANCE WITH I.C.C. REQUIREMENTS WERE NOT INCLUDED IN THE INVITATION. THE CONTRACTOR ALSO ALLEGED THAT THE INVITATION WAS DEFECTIVE BECAUSE IT DID NOT PROVIDE FOR PERFORMANCE ON GOVERNMENT PROPERTY OF NECESSARY REPAIR WORK TO THE LOCOMOTIVES, CONTENDING THAT CONTRACTUAL PROVISIONS FOR A COMPLETION BOND, FOR THE MOVEMENT OF MEN AND EQUIPMENT ON AND OFF THE BASE, AND FOR COMPLIANCE WITH FEDERAL EMPLOYMENT STATUTES INCLUDING WAGES AND HOURS LEGISLATION ARE NECESSARY TO ESTIMATE AND SUBMIT A BID REQUIRING THE BRINGING OF MEN AND EQUIPMENT ON TO UNITED STATES MILITARY BASES.

TO SUPPORT THE ALLEGATION THAT THE BEST AVAILABLE INFORMATION WAS NOT USED THE CONTRACTOR REFERS TO AN INSPECTION OF THE LOCOMOTIVES MADE ON OCTOBER 12, 1962, BY A REPRESENTATIVE OF THE NORTHERN PACIFIC RAILWAY COMPANY. IN THE INSPECTION REPORT IT WAS RECOMMENDED THAT THE FOLLOWING REPAIRS BE MADE TO THE ENGINES IN QUESTION:

USN 65-00113

A SMALL PORTER SWITCH ENGINE WITH TRACTION MOTORS GEAR CONNECTED TO THE NO. 2 AND NO. 3 WHEELS AND RODS CONNECTING THE NO. 1 TO NO. 2 AND NO. 4 TO NO. 3. THE FOOTBOARDS ARE DEFECTIVE.

USN 65-00062

A 1888 HP BALDWIN SWITCH ENGINE. 1/4 IN. TREAD WEAR WITH 1 IN. RIM THICKNESS OF WHEELS. ALL WHEELS MUST BE CHANGED OUT ACCOUNT 15/16 IN. RIM THICKNESS ON ONE SIDE OR THE OTHER OF EVERY WHEEL AND TAKE 1 IN. GAUGE ON OPPOSITE SIDE.

IT IS FURTHER RECOMMENDED THE PINION GEARS BE REMOVED ON THESE UNITS FOR ANY LONG DISTANCE HAUL, THE JOURNAL BOXES, BE REPACKED, AND THE ENGINES BE PREPARED FOR MOVEMENT DEAD IN THE TRAIN IN ACCORDANCE WITH STANDARD INSTRUCTIONS.

THE REPORT ALSO CONTAINS THE FOLLOWING STATEMENT:

"IT SHOULD BE UNDERSTOOD THIS PRELIMINARY INSPECTION IS NOT AN AUTHORIZATION FOR THE MOVEMENT OF THESE UNITS BUT IS SUBMITTED AS A GUIDE. THE UNITS MUST STAND A FINAL INSPECTION BEFORE BEING ACCEPTED FOR SHIPMENT.'

THE ADMINISTRATIVE REPORT INDICATES THAT THE WRITER OF THE DESCRIPTION OF THE LOCOMOTIVES KNEW OF THE OCTOBER 12, 1962 INSPECTION BUT AFTER CAREFUL CONSIDERATION DECIDED THAT SINCE THE INSPECTION REPORT WAS NOT A FINAL DETERMINATION BUT WAS TO BE USED ONLY AS A GUIDE, THE DETAILS OF THE REPORT WOULD NOT BE INCLUDED IN THE DESCRIPTION. INSTEAD A GENERAL STATEMENT WAS MADE IN THE INVITATION "REPAIRS REQUIRED--- FAIR.'

CLAUSE 2, OF THE INVITATION, STANDARD FORM 114-C, CONTAINS THE STATEMENT THAT "THE DESCRIPTION IS BASED ON THE BEST INFORMATION AVAILABLE.' THIS CLAUSE ALSO CONTAINS THE STANDARD DISCLAIMER OF WARRANTY PROVISIONS AND STATES THAT THE PROPERTY IS SOLD ON AN "AS IS" "WHERE IS" BASIS. THE STANDARD CLAUSES FURTHER STATE THAT THE BIDDER IS INVITED, URGED AND CAUTIONED TO INSPECT THE PROPERTY PRIOR TO SUBMITTING A BID AND THAT IN NO CASE WILL THE FAILURE TO INSPECT CONSTITUTE GROUNDS FOR WITHDRAWAL OF A BID AFTER OPENING.

THE QUESTION PRESENTED IS WHETHER THE DISPOSAL AGENCY USED THE BEST AVAILABLE INFORMATION IN DESCRIBING THE PROPERTY. MORE SPECIFICALLY, WAS THERE A LACK OF GOOD FAITH IN FAILING TO INCLUDE IN THE DESCRIPTION MORE DETAILED INFORMATION AS TO THE TYPE OF REPAIRS RECOMMENDED BY AN INSPECTION REPORT WHICH WAS KNOWN TO THE DISPOSAL AGENCY, OR TO INDICATE THAT THE PROPERTY PROBABLY COULD NOT BE MOVED OVER COMMON CARRIER TRACKAGE.

THE EFFECT OF THE BEST AVAILABLE INFORMATION CLAUSE WAS CONSIDERED IN THE CASE OF WESTERN NON FERROUS METAL CORP. V. UNITED STATES, 192 F.SUPP. 774. IN REGARD TO THE ABOVE CONTRACT CLAUSE THE COURT STATED AT PAGE 774 AS FOLLOWS:

"/1) THE CONTRACTUAL PROVISION UPON WHICH PLAINTIFF STAKES ITS CLAIM STATES THAT "THE DESCRIPTION IS BASED UPON THE BEST AVAILABLE INFORMATION.' WHEN READ IN THE CONTEXT OF THE UNEQUIVOCAL LANGUAGE IN WHICH IT IS SET, IT IS CLEAR THAT IT WOULD BE ERRONEOUS TO INTERPRET THE PROVISION AS OBLIGATING DEFENDANT TO MAKE ANY EFFORTS WHATEVER TO OBTAIN RELIABLE INFORMATION, OR TO INTERPRET IT AS A WARRANTY THAT THE INFORMATION SUPPLIED IS THE BEST INFORMATION THAT CAN BE OBTAINED. THE REASONABLE AND APPARENT INTERPRETATION IS THAT DEFENDANT REPRESENTS ONLY THAT IT POSSESSES NO INFORMATION BETTER THAN THAT WHICH IS OFFERED. GOOD FAITH IS ALL THAT IS REQUIRED. STANDARD MAGNESIUM CORPORATION V. UNITED STATES, 10 CIR., 1957, 241 F.2D. 677. * * *"

IN THIS CASE IT CANNOT BE SAID THE GOVERNMENT POSSESSED BETTER INFORMATION THAN WAS OFFERED. WHAT THE DESCRIPTION WRITER HAD IN HIS POSSESSION WERE THE RESULTS OF AN INSPECTION THAT WERE TO BE USED AS A GUIDE ONLY. THE DESCRIPTION WRITER WAS NOT CERTAIN THAT THE REPAIRS SPECIFIED IN THE REPORT WERE THE ACTUAL REPAIRS REQUIRED. UNDER THESE CIRCUMSTANCES IT CAN BE CONCLUDED THAT THE DESCRIPTION WRITER DID GIVE ADEQUATE NOTICE FOR THE GUIDANCE OF PROSPECTIVE PURCHASERS BY STATING GENERALLY THAT REPAIRS WERE REQUIRED, THE PROPERTY ITSELF BEING AVAILABLE FOR FULL INSPECTION BY ANYONE INTERESTED.

IT SHOULD BE NOTED THAT THE PROPERTY OFFERED FOR SALE WAS NOT MISDESCRIBED NOR WAS THE CONTRACTOR MISLED IN ANY WAY. THE CONTRACTOR KNEW FROM THE DESCRIPTION GIVEN IN THE INVITATION THAT REPAIRS WERE REQUIRED. HE WAS FREE TO MAKE HIS OWN ESTIMATE AS TO THE EXACT NATURE OF THE REPAIRS BY AN INSPECTION AS WAS URGED BY THE INVITATION. THE FACT THAT A CURSORY INSPECTION MAY NOT HAVE REVEALED THE DEFECTS IS NOT CONTROLLING BECAUSE, AS STATED IN PAXTON-MITCHELL COMPANY V. UNITED STATES, 172 F.SUPP. 463 (1959), THE GOVERNMENT SALES CONTRACT REQUIRES THE BIDDER TO MAKE THE SORT OF INSPECTION THAT IS EFFECTUAL. WE FIND NO BASIS FOR THE ARGUMENT THAT EVEN IF AN INSPECTION HAD BEEN MADE IT WOULD NOT REVEAL THAT THE LOCOMOTIVES DID NOT CONFORM TO I.C.C. STANDARDS SINCE I.C.C. REQUIREMENTS ARE MATTERS OF PUBLIC RECORD OF WHICH THE CONTRACTOR IS PRESUMED TO HAVE KNOWLEDGE. ACCORDINGLY, WE FIND THAT THE CONTRACTOR CANNOT BE RELIEVED OF HIS OBLIGATIONS ON THE THEORY THAT THE GOVERNMENT DID NOT USE THE BEST AVAILABLE INFORMATION.

WE HAVE CONSIDERED THE ARGUMENT THAT THE INVITATION WAS DEFICIENT BECAUSE IT DID NOT PROVIDE FOR CONTROLLING THE CORRECTION WORK OR FOR A COMPLETION BOND OR FOR COMPLIANCE WITH FEDERAL EMPLOYMENT STATUTES INCLUDING WAGES AND HOURS LEGISLATION. WE ARE ADVISED THAT NO OBSTACLES EXIST TO THE PERFORMANCE OF REPAIR WORK ON THE ENGINES AT THE SITE WHERE THEY ARE NOW LOCATED, AND SINCE THE WORK WOULD BE BY THE PURCHASER ON HIS OWN PROPERTY IT IS NOT SUBJECT TO THE LEGAL REQUIREMENTS REFERRED TO, WHICH ARE APPLICABLE TO WORK PERFORMED UNDER CONTRACT WITH THE UNITED STATES.

IN VIEW OF THE FOREGOING, WE FIND THE CONTRACT VALID AND THE CONTRACTOR'S REQUEST FOR RESCISSION IS DENIED.