B-154310, JUN. 23, 1964

B-154310: Jun 23, 1964

Additional Materials:

Contact:

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

 

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

THE CHIEF OF YOUR ACCOUNTING AND REPORTS DIVISION HAS REQUESTED A DECISION WHETHER RHEEM MANUFACTURING COMPANY IS LIABLE UNDER CONTRACT NO. SHIPMENTS WERE TO BE MADE IN CARLOAD OR TRUCKLOAD QUANTITIES. THE RECORD INDICATES THAT SHIPMENTS WERE CONSIGNED TO THE GENERAL SERVICES ADMINISTRATION. STATING THAT 13 DRUMS IN ONE SHIPMENT AND 31 DRUMS IN ANOTHER SHIPMENT WERE RECEIVED IN DAMAGED CONDITION. AN INVESTIGATION OF THE CONSIGNEE'S COMPLAINT DISCLOSED THAT THE CONTRACTOR WAS SHIPPING THE EMPTY DRUMS WITHOUT TIGHTENING THE STEEL LOCKING RING ON TOP OF THE DRUMS. SUBSEQUENT SHIPMENTS THE RINGS WERE BOLTED DOWN TIGHT. IT WAS ADMINISTRATIVELY DETERMINED THAT THERE WAS NO CARRIER LIABILITY FOR THE DAMAGE BECAUSE BOTH SHIPMENTS WERE "SHIPPER'S LOAD AND COUNT.

B-154310, JUN. 23, 1964

TO ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION:

BY LETTER DATED FEBRUARY 25, 1964, THE CHIEF OF YOUR ACCOUNTING AND REPORTS DIVISION HAS REQUESTED A DECISION WHETHER RHEEM MANUFACTURING COMPANY IS LIABLE UNDER CONTRACT NO. GS-00P-22863 (SCM) FOR THE VALUE OF 36 STEEL DRUMS DAMAGED IN TRANSIT BY RAIL BETWEEN THE CONTRACTOR'S PLANT AT CHICAGO, ILLINOIS, AND THE CONSIGNEE'S PLANT AT DOVER, OHIO.

THE CONTRACT, EXECUTED IN SEPTEMBER 1961, COVERED THE PURCHASE OF 5,100 18-GAUGE STEEL DRUMS AT A UNIT PRICE OF $10.32, TOTAL $52,632, TO BE DELIVERED F.O.B. CARRIER'S CONVEYANCE AT THE CONTRACTOR'S PLANT, CHICAGO. SHIPMENTS WERE TO BE MADE IN CARLOAD OR TRUCKLOAD QUANTITIES, COMMENCING ON OR BEFORE OCTOBER 2, 1961, AS DIRECTED BY THE GOVERNMENT ON THE FOLLOWING SCHEDULE:

1000 DRUMS DURING THE MONTH OF OCTOBER 1961

2100 DRUMS DURING THE MONTH OF NOVEMBER 1961

2000 DRUMS DURING THE MONTH OF DECEMBER 1961

SUBPARAGRAPH A. (2) OF PARAGRAPH 5 OF THE SPECIAL TERMS AND CONDITIONS OF THE CONTRACT PROVIDED, IN PART, AS FOLLOWS:

"/A) PACK AND MARK IN SUCH MANNER AS TO AFFORD ADEQUATE PROTECTION AGAINST NORMAL TRANSPORTATION HAZARDS AND SECURE PROMPT DELIVERY TO THE CONSIGNEE, AND COMPLY WITH ALL PACKING AND MARKING SPECIFICATIONS OF THE CONTRACT;

"/C) PROPERLY LOAD, STOW, BLOCK, AND BRACE GOODS ON, OR IN, CONVEYANCE OF CARRIER, IN THE CASE OF CARLOAD OR TRUCKLOAD SHIPMENTS, OR DELIVER SHIPMENTS OF LESS THAN CARLOAD OR LESS THAN TRUCKLOAD IN GOOD ORDER TO CARRIERS FOR LOADING;

"/H) BE RESPONSIBLE FOR ALL DAMAGES (INCLUDING ACCESSORIAL CHARGES) RESULTING FROM NEGLIGENCE OR ERROR IN PACKING, MARKING, AND DELIVERING SHIPMENT TO CARRIER, AND, WHEN LOADED BY CONTRACTOR, IN LOADING, STOWING, BLOCKING OR BRACING OF SHIPMENT ON OR IN CARRIER'S CONVEYANCE, OR RESULTING FROM NEGLIGENCE OR ERROR IN THE COMPLETION OR DISTRIBUTION OF GOVERNMENT BILLS OF LADING OR OTHER TRANSPORTATION RECEIPTS OR DOCUMENTS.'

THE RECORD INDICATES THAT SHIPMENTS WERE CONSIGNED TO THE GENERAL SERVICES ADMINISTRATION, C/O WALLACE AND TIERMAN, INC., HARCHEM DIVISION, DOVER, OHIO. THE CONSIGNEE EXECUTED REPORTS ON NOVEMBER 7 AND 24, 1961, STATING THAT 13 DRUMS IN ONE SHIPMENT AND 31 DRUMS IN ANOTHER SHIPMENT WERE RECEIVED IN DAMAGED CONDITION.

AN INVESTIGATION OF THE CONSIGNEE'S COMPLAINT DISCLOSED THAT THE CONTRACTOR WAS SHIPPING THE EMPTY DRUMS WITHOUT TIGHTENING THE STEEL LOCKING RING ON TOP OF THE DRUMS, AND THAT THE RESULTING LOOSE CONDITION CAUSED OR PERMITTED THE DRUMS TO BECOME EGG-SHAPED AT THE TOP. SUBSEQUENT SHIPMENTS THE RINGS WERE BOLTED DOWN TIGHT, AND THE CONSIGNEE HAD NO DAMAGE PROBLEMS.

THE INVESTIGATION ALSO DISCLOSED THAT THE SHIPMENTS, WHICH HAD BEEN LOADED BY THE CONTRACTOR IN RAILROAD CARS ON WHICH THE CONTRACTOR PLACED SEALS THAT REMAINED INTACT DURING TRANSIT, HAD NOT BEEN INSPECTED AT ORIGIN BY THE CARRIER, NOR HAD THE CARRIER WAIVED INSPECTION. ACCORDINGLY, IT WAS ADMINISTRATIVELY DETERMINED THAT THERE WAS NO CARRIER LIABILITY FOR THE DAMAGE BECAUSE BOTH SHIPMENTS WERE "SHIPPER'S LOAD AND COUNT," AND NO CLAIM WAS MADE AGAINST THE CARRIER.

BY INVOICE DATED SEPTEMBER 17, 1963, THE CONTRACTOR WAS REQUESTED TO REMIT TO THE GOVERNMENT THE AMOUNT OF $399.43, REPRESENTING THE VALUE OF 36 OF THE DRUMS (8 DRUMS WERE RESHAPED AND MADE USABLE) AT THE UNIT PURCHASE PRICE OF $10.32, $371.52, PLUS UNEARNED FREIGHT CHARGES OF $27.91. THE BASES ON WHICH THE CONTRACTOR DISCLAIMS LIABILITY ARE SUMMARIZED AS FOLLOWS:

1. ALTHOUGH THE CONTRACT WAS COMPLETED IN DECEMBER 1961, NO CORRESPONDENCE OR NOTICE OF DAMAGE WAS RECEIVED BY THE CONTRACTOR UNTIL THE INVOICE WAS ISSUED NEARLY TWO YEARS LATER.

2. THE TIGHTNESS OF THE RINGS SHOULD HAVE BEEN ONE OF THE FACTORS FOR CHECKING BY THE GSA INSPECTOR WHO INSPECTED THE DRUMS AT THE CONTRACTOR'S PLANT BEFORE SHIPMENT.

3. SINCE LOADING WAS PERFORMED IN THE SAME MANNER AS HAD BEEN APPROVED BY THE CARRIER ON OTHER SHIPMENTS AND ONLY 36 OF THE 4,200 DRUMS SHIPPED WERE DAMAGED, THE LOADING PROCEDURE SHOULD BE CONSIDERED ADEQUATE.

REGARDING THE TIME AT WHICH THE CONTRACTOR WAS FIRST NOTIFIED OF THE DAMAGE, IT IS REPORTED THAT THE CONTRACTING OFFICER REQUESTED THE CONTRACTOR BY TELEPHONE ON APRIL 18, 1962, TO CHECK WITH LOADING PERSONNEL TO DETERMINE WHETHER THE DRUMS WERE PROPERLY BLOCKED AND BRACED AND THAT THE CONTRACTOR PROMISED TO ADVISE BUT NO RESPONSE WAS RECEIVED. FURTHERMORE, IN A MEMORANDUM DATED MARCH 26, 1962, FROM THE ACTING REGIONAL DIRECTOR, TCS-5T, GSA, REGION 5, CHICAGO, TO THE REGIONAL DIRECTOR, DMS-5M, REFERENCE IS MADE TO A LETTER OF FEBRUARY 19 FROM THE SUPPLIER (CONTRACTOR) REGARDING THE SEALING OF THE RAIL CARS BY THE CONTRACTOR AT ORIGIN WITHOUT INSPECTION BY THE CARRIER. ACCORDINGLY, WHILE WRITTEN NOTICE WAS APPARENTLY FIRST GIVEN TO THE CONTRACTOR IN THE FORM OF THE INVOICE DATED SEPTEMBER 17, 1963, THE CONTRACTOR HAD ACTUALLY BEEN ON NOTICE OF THE DAMAGE SINCE THE EARLY PART OF 1962, OR WITHIN APPROXIMATELY TWO MONTHS AFTER COMPLETION OF THE CONTRACT.

WITH RESPECT TO WHETHER THE GSA INSPECTOR WHO INSPECTED THE DRUMS AT THE CONTRACTOR'S PLANT PRIOR TO SHIPMENT SHOULD HAVE CHECKED THE TIGHTNESS OF THE TOP RINGS, THE PROVISIONS REGARDING INSPECTION BY THE GOVERNMENT ARE CONTAINED IN PARAGRAPH 5 OF THE GENERAL PROVISIONS, STANDARD FORM 32. UNDER SUCH PROVISIONS, THE GOVERNMENT IS AUTHORIZED TO INSPECT THE ITEMS OFFERED BY THE CONTRACTOR PRIOR TO SHIPMENT TO ASSURE COMPLIANCE WITH THE CONTRACT SPECIFICATIONS, BUT SUCH INSPECTION DOES NOT RELIEVE THE CONTRACTOR OF RESPONSIBILITY FOR DEFECTS OR OTHER FAILURES TO MEET CONTRACT REQUIREMENTS WHICH MAY BE DISCOVERED PRIOR TO ACCEPTANCE. THERE WAS NO CONTRACTUAL OBLIGATION ON THE PART OF THE GSA INSPECTOR TO CHECK THE TIGHTNESS OF THE DRUM RINGS, A FACTOR WHICH RELATED TO LOADING AND NOT TO COMPLIANCE OF THE DRUMS WITH THE GOVERNMENT SPECIFICATIONS. FROM THE RECORD PRESENTED IT MUST BE ASSUMED THAT THE DAMAGE OCCURRED SUBSEQUENT TO INSPECTION BY THE GOVERNMENT AT THE CONTRACTOR'S PLANT, AND IT FOLLOWS THAT ANY FAILURE OF THE GOVERNMENT INSPECTOR TO CHECK THE TIGHTNESS OF THE RINGS PRIOR TO SHIPMENT DOES NOT OPERATE TO RELIEVE THE CONTRACTOR OF ITS OBLIGATION TO PROPERLY PREPARE THE DRUMS FOR SHIPMENT.

AS TO THE ALLEGATION THAT THE LOADING WAS PERFORMED IN A MANNER APPROVED BY THE RAILROADS AND USED ON NUMEROUS OTHER SHIPMENTS, THE RECORD CLEARLY ESTABLISHES THAT THE LOADING OF THE SHIPMENTS INVOLVED WAS PERFORMED BY THE CONTRACTOR WITHOUT INSPECTION BY THE CARRIER OR WAIVER OF INSPECTION BY THE CARRIER. IN SUCH CIRCUMSTANCES, THE CARRIER IS NOT REGARDED AS HAVING CONSENTED TO THE MANNER OF LOADING AND IS NOT LIABLE FOR DAMAGES WHICH ARISE FROM DEFECTS IN LOADING. SEE UNITED STATES V. SAVAGE TRUCK LINE, 209 F.2D 442.

AS FOR THE CONTENTION THAT THE SMALL NUMBER OF DRUMS DAMAGED IS EVIDENCE OF PROPER LOADING, THE FACT THAT THE PROBLEM WAS SOLVED IN LATER SHIPMENTS BY TIGHTENING THE RINGS INDICATES THAT THE EARLIER SHIPMENTS WERE NOT PROPERLY PREPARED FOR TRANSPORTATION.

UNDER THE CONTRACT DELIVERY TERMS, THE RESPONSIBILITY FOR DAMAGES RESULTING FROM NEGLIGENCE IN PACKING AND, WHEN LOADED BY THE CONTRACTOR, IN LOADING, ETC., WAS IMPOSED UPON THE CONTRACTOR. THEREFORE, AND SINCE THE CARRIER WAS RELIEVED OF LIABILITY INCIDENT TO IMPROPER LOADING, THE CAUSE OF THE DAMAGE TO THE DRUMS, THE CONTRACTOR MUST BE CHARGED WITH THE DAMAGES. ACCORDINGLY, COLLECTION OF THE DAMAGES SHOULD BE EFFECTED FROM THE CONTRACTOR.