B-151966, FEB. 12, 1964

B-151966: Feb 12, 1964

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EDUCATION AND WELFARE: THIS OFFICE IS IN RECEIPT OF A LETTER DATED OCTOBER 21. THE REPORT WAS REQUESTED IN CONNECTION WITH A PROTEST BY THE G. WITH AN OPTION IN THE GOVERNMENT TO EXTEND THE TERM FOR ADDITIONAL PERIODS OF LIKE OR LESSER DURATION WAS ENTERED INTO WITH THE CASTELL VENDING COMPANY WHO OFFERED TO PAY THE GOVERNMENT 20.6 PERCENT OF GROSS SALES AS COMPARED TO 16.1 PERCENT OFFERED BY MACKE VENDING COMPANY. DETAILED MENU WITH ATTACHED PRICE LIST WAS INCLUDED IN THE SPECIFICATIONS WHICH. SUBMARINE SANDWICHES WERE ALL TO BE OFFERED FOR SALE AT ?35 EACH. CONTENDS THAT INSTALLATION OF THE BANK OF MACHINES WAS BEGUN BUT NOT COMPLETED BY MARCH 1. THAT THE TWO HOT FOOD MACHINES VENDING "TASTY TRAYS" AND CASSEROLES WERE NEVER INSTALLED AND THUS THAT CASTELL HAS NEVER OFFERED FOR SALE ALL THE ITEMS CALLED FOR IN THE MENU.

B-151966, FEB. 12, 1964

TO THE SECRETARY OF HEALTH, EDUCATION AND WELFARE:

THIS OFFICE IS IN RECEIPT OF A LETTER DATED OCTOBER 21, 1963, SIGNED BY THE ADMINISTRATIVE ASSISTANT SECRETARY, FORWARDING A REPORT ON A CONCESSION CONTRACT FOR THE OPERATION OF FOOD VENDING MACHINES IN THE CLINICAL CENTER COFFEE SHOP OF THE NATIONAL INSTITUTES OF HEALTH, AWARDED ON FEBRUARY 27, 1963, TO THE CASTELL VENDING COMPANY OF ALEXANDRA, VIRGINIA. THE REPORT WAS REQUESTED IN CONNECTION WITH A PROTEST BY THE G. B. MACKE VENDING COMPANY OF WASHINGTON, D.C., THE SUPPLANTED CONCESSIONAIRE, AGAINST THE REFUSAL OF THE CHIEF OF THE PROCUREMENT SECTION AT N.I.H. TO CANCEL THE CONTRACT.

A CONTRACT TO INSTALL, MAINTAIN, AND OPERATE THE MACHINES FOR A THREE- YEAR PERIOD BEGINNING MARCH 1, 1963, WITH AN OPTION IN THE GOVERNMENT TO EXTEND THE TERM FOR ADDITIONAL PERIODS OF LIKE OR LESSER DURATION WAS ENTERED INTO WITH THE CASTELL VENDING COMPANY WHO OFFERED TO PAY THE GOVERNMENT 20.6 PERCENT OF GROSS SALES AS COMPARED TO 16.1 PERCENT OFFERED BY MACKE VENDING COMPANY, THE NEXT HIGHEST OFFEROR.

THE SPECIFICATIONS, AS OF THE TIME OF AWARD, REQUIRED THE CONTRACTOR TO INSTALL MACHINES VENDING MILK, ICE CREAM, HOT CANNED SOUP, COFFEE, COLD BEVERAGES, CANDY, PASTRY, COLD FOOD, AND OTHER ITEMS APPROPRIATE TO A LUNCHEON MENU, IN ADDITION TO TWO HOT FOOD VENDING MACHINES DISPENSING ASSORTMENTS OF "TASTY TRAYS" AT ?55 EACH AND CASSEROLES AT ?35 EACH. DETAILED MENU WITH ATTACHED PRICE LIST WAS INCLUDED IN THE SPECIFICATIONS WHICH, AMONG OTHER THINGS, STIPULATED THAT SLICED HAM AND CHEESE SANDWICHES (WITH A MINIMUM FILLING OF 2 OZ.), SLICED ROAST BEEF SANDWICHES (1-1/2 OZ.), SLICED TURKEY SANDWICHES (2 OZ.), AND SUBMARINE SANDWICHES WERE ALL TO BE OFFERED FOR SALE AT ?35 EACH.

THE MACKE VENDING COMPANY, CONTENDS THAT INSTALLATION OF THE BANK OF MACHINES WAS BEGUN BUT NOT COMPLETED BY MARCH 1, 1963, AS CALLED FOR IN THE SPECIFICATIONS; THAT THE TWO HOT FOOD MACHINES VENDING "TASTY TRAYS" AND CASSEROLES WERE NEVER INSTALLED AND THUS THAT CASTELL HAS NEVER OFFERED FOR SALE ALL THE ITEMS CALLED FOR IN THE MENU; THAT HOSPITAL PERSONNEL WERE INCONVENIENCED BY THE INSTALLATION OF ONLY ONE INSTEAD OF TWO COFFEE MACHINES AND PASTRY MACHINES (BOTH ARE REQUIRED TO AFFORD CONTINUOUS SERVICE WHILE ONE IS BEING RESTOCKED OR REPAIRED) DURING THE INITIAL WEEKS OF CASTELL'S INCUMBENCY; THAT THE SANDWICHES ORIGINALLY CONTRACTED TO BE SOLD AT ?35 EACH WERE ACTUALLY BEING OFFERED FOR SALE AT ?40; THAT IT IS UNCERTAIN WHETHER CASTELL HAS INITIATED A CODING SYSTEM FOR CONTROLLING THE WHOLESOMENESS OF FOODSTUFFS IN THE MACHINES AND PREVENTING THE SALE OF SPOILED FOOD AS REQUIRED BY THE SPECIFICATIONS; THAT CONTRARY TO THE TERMS OF THE SPECIFICATIONS CASTELL HAS NOT MAINTAINED AT LEAST ONE UNIFORMED ATTENDANT ON DUTY AT ALL TIMES BETWEEN THE HOURS OF 7:30 A.M. TO 11:30 P.M.; AND FINALLY THAT CASTELL, INSTEAD OF PREPARING ALL FOODS OFFERED FOR SALE IN ITS OWN COMMISSARY AS REQUIRED BY THE SPECIFICATIONS, PURCHASES CASSEROLE DISHES PREPARED BY A FIRM IN CHICAGO, ILLINOIS.

THE ADMINISTRATIVE AGENCY ADVISES THAT THE CONTRACTOR WAS UNABLE TO INSTALL ALL OF THE MACHINES CALLED FOR BY MARCH 1, 1963, SOLELY BECAUSE CERTAIN OF THE MACHINES WERE MISROUTED IN DELIVERY AND THAT SUCH MISROUTING WAS BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE CONTRACTOR AS ESTABLISHED BY COPIES OF ORDERS, ACKNOWLEDGEMENTS AND BILLS OF LADING. IT IS FURTHER NOTED THAT WITH THE EXCEPTION OF THE HOT FOOD MACHINES, DISCUSSED IN MORE DETAIL LATER, ALL MACHINES REQUIRED UNDER THE TERMS OF THE CONTRACT WERE INSTALLED BY MARCH 21, 1963. AS TO THE INCREASE IN THE PRICE OF SANDWICHES, IT HAS BEEN ESTABLISHED THAT THE SANDWICH FILLING SUBSTANTIALLY EXCEEDED THE SPECIFICATIONS. THEREFORE, AND SINCE THE CHANGE APPEARED TO BE WELL RECEIVED BY THE PATRONS, THE CHANGE IN PRICE WAS ADMINISTRATIVELY APPROVED. WE HAVE BEEN ADVISED FURTHER THAT THE CASTELL CODING SYSTEM HAS BEEN DETERMINED TO BE SATISFACTORY AND THAT N.I.H. HAS NOT OBSERVED ANY DELINQUENCY IN THE ATTENDANCE OF CONTRACTOR PERSONNEL IN THE COFFEE SHOP. WE HAVE NO INFORMATION AS TO THE VALIDITY OF THE CHARGE THAT THE CONTRACT REQUIREMENT REGARDING THE SITE OF FOOD PREPARATION IS NOT BEING MET.

THE MATTERS IN CONTROVERSY WHICH ARE DISCUSSED IN THE FOREGOING PARAGRAPH RELATE TO CONTRACT ADMINISTRATION. WE THINK IT IS IMPORTANT TO HAVE CONTRACTS CARRIED OUT IN SUCH MANNER AS TO OBTAIN FOR THE GOVERNMENT ALL OF THE BENEFITS PROVIDED THEREUNDER; OR, IF SOME SUCH BENEFITS ARE DETERMINED NO LONGER TO BE NECESSARY, TO MODIFY THE CONTRACT IN WRITING TO REFLECT THE NEW REQUIREMENT WITH APPROPRIATE CONSIDERATION FLOWING TO THE GOVERNMENT WHERE THE CONTRACT OBLIGATIONS ARE CHANGED TO THE GOVERNMENT'S DISADVANTAGE OR TO THE ADVANTAGE OF THE CONTRACTOR. WE RECOMMEND THAT STEPS BE TAKEN TO INSURE STRICT COMPLIANCE WITH THESE PRINCIPLES.

AS FOR THE MODIFICATION OF THE SPECIFICATIONS TO PERMIT THE SUBSTITUTION OF A REFRIGERATED FOOD VENDING MACHINE AND MICRO-WAVE OVEN FOR THE TWO HOT FOOD VENDING MACHINES ORIGINALLY REQUIRED, THE ADMINISTRATIVE REPORT STATES THAT THE DECISION IN FAVOR OF THE SUBSTITUTION WAS MADE AFTER AWARD AND WAS CONSIDERED JUSTIFIABLE FROM THE GOVERNMENT'S STANDPOINT BECAUSE OF SANITARY ADVANTAGES OFFERED. IT IS FURTHER NOTED THAT THE MODIFICATION WAS ENTERED INTO BY MUTUAL AGREEMENT PURSUANT TO THE TERMS OF THE CONTRACT.

THE SWORN AFFIDAVITS OF TWO OF MACKE'S EMPLOYEES WHO ARE FAMILIAR WITH THE VENDING MACHINE BUSINESS STATE IN SUBSTANCE THAT THE COST OF PURCHASING AND INSTALLING TWO HOT FOOD MACHINES AS PER THE SPECIFICATIONS EXCEEDS THE COST OF PURCHASING AND INSTALLING ONE REFRIGERATED VENDING MACHINE, AND ONE MICRO-WAVE OVEN AND THAT THE COST OF OPERATING THE FORMER IS HIGHER BECAUSE OF HIGHER FOOD SPOILAGE COSTS. IT IS ESTIMATED THAT MANUFACTURING AND INSTALLATION SAVINGS WILL AMOUNT TO APPROXIMATELY $500 IN THIS CASE, AND THE OPERATIONAL SAVINGS TO APPROXIMATELY $1,731.71 (THE COST OF PURCHASING AND PREPARING THE SPOILED FOOD BASED ON THE ACTUAL EXPENSES INCURRED IN RUNNING THE BANK OF MACHINES IN THE N.I.H. CLINICAL CENTER COFFEE SHOP DURING THE PRIOR YEAR WHEN GROSS RECEIPTS AMOUNTED TO $26,239.39.)

WE THINK IT CLEAR FROM THE FOREGOING, IN THE ABSENCE OF A SHOWING TO THE CONTRARY, THAT THE MODIFICATION RESULTED IN A FINANCIAL ADVANTAGE TO THE CONTRACTOR. THERE IS NO INDICATION THAT THE GOVERNMENT OBTAINED ANY EQUIVALENT FINANCIAL ADVANTAGE ALTHOUGH PROCEEDS UNDER THE CONTRACT ARE TO BE DEPOSITED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS. UNDER THE CIRCUMSTANCES THE MODIFICATION CANNOT BE REGARDED AS VALID UNLESS AND UNTIL IT PROVIDES FOR ADEQUATE CONSIDERATION TO THE GOVERNMENT IN EXCHANGE FOR THE VALUABLE VESTED RIGHT WAIVED. 40 COMP. GEN. 234, 239.

IT IS REQUESTED THAT OUR OFFICE BE ADVISED PROMPTLY OF ANY CHANGES IN CONTRACT LANGUAGE OR ADMINISTRATION EFFECTED IN ACCORDANCE WITH THE FOREGOING.