B-156813, JUN. 30, 1965

B-156813: Jun 30, 1965

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DEFENSE SUPPLY AGENCY: REFERENCE IS MADE TO A REPORT DATED JUNE 15. TO DELIVER TO MACDELL AN ITEM OF SURPLUS PROPERTY ON WHICH MACDELL WAS THE HIGH BIDDER. WAS LISTED FOR SALE AS ITEM 63 IN INVITATION FOR BIDS NO. 41-S-65-45. THE GOVERNMENT HEREBY WARRANTS AND GUARANTEES THAT THE PROPERTY TO BE DELIVERED TO THE PURCHASER UNDER ANY CONTRACT RESULTING FROM THIS INVITATION FOR BIDS WILL BE AS DESCRIBED IN THE INVITATION FOR BIDS. THE PURCHASE PRICE OR SUCH PORTION OF THE PURCHASE PRICE AS THE GOVERNMENT MAY HAVE RECEIVED. THE CONTRACT PRICE WILL NOT BE ADJUSTED AND THE PROPERTY MAY NOT BE RETURNED TO THE GOVERNMENT PURSUANT TO THIS CLAUSE UNLESS THE PURCHASER MAILS OR OTHERWISE FURNISHES TO THE CONTRACTING OFFICER A WRITTEN NOTICE.

B-156813, JUN. 30, 1965

TO VICE ADMIRAL JOSEPH M. LYLE, DIRECTOR, DEFENSE SUPPLY AGENCY:

REFERENCE IS MADE TO A REPORT DATED JUNE 15, 1965, FROM YOUR ASSISTANT COUNSEL, RELATIVE TO THE PROTEST OF THE MACDELL CORPORATION OF CHICAGO, ILLINOIS, AGAINST THE REFUSAL OF THE DEFENSE SURPLUS SALES OFFICE, DEFENSE DEPOT, OGDEN, UTAH, TO DELIVER TO MACDELL AN ITEM OF SURPLUS PROPERTY ON WHICH MACDELL WAS THE HIGH BIDDER.

THE PROPERTY IN QUESTION, A GRINDING MACHINE, WAS LISTED FOR SALE AS ITEM 63 IN INVITATION FOR BIDS NO. 41-S-65-45, ISSUED MARCH 24, 1965, WITH A BID OPENING DATE OF APRIL 14, 1965. THE SALES DESCRIPTION READS AS FOLLOWS:

"GRINDING MACHINE, EXT, CYL, SEMI-AUTO, 30 DEGREE AGLR WHL SLIDE, 10 INCH SWG, 36 INCH CC, WITH WESTINGHOUSE RATED 3/4 HP, 3 PHASE, 60 CYCLE, 220/440 VOLT ELECTRIC MOTOR AND WESTINGHOUSE RATED 15 HP, 3 PHASE, 60 CYCLE, 220/440 VOLT ELECTRIC MOTOR. NORTON NO. C, SERIAL NO. 24430. MFD. 1952. FSN: 3415-406-5199 (LOC: BLDG. T-679- UNPACKED--- USED)

GOVERNMENT'S OPINION AS TO:

CHART

CONDITION: APPEARS TO BE FAIR

TOT COST: $25,751.00

EST. WT: 10,600 LBS. 1 EACH"

THE GUARANTEED DESCRIPTIONS CLAUSE, INCLUDED AS A SPECIAL CONDITION OF THE IFB, READS, IN PERTINENT PART, AS FOLLOWS:

"/1) EXCEPT AS PROVIDED IN SUB-PARAGRAPHS (2) AND (3) OF THIS CLAUSE, AND WITH THE EXCEPTION OF STATED OPINIONS AS TO THE CONDITION OF THE PROPERTY, AND NOTWITHSTANDING ANY OTHER TERMS AND CONDITIONS OF THIS INVITATION FOR BIDS TO THE CONTRARY, THE GOVERNMENT HEREBY WARRANTS AND GUARANTEES THAT THE PROPERTY TO BE DELIVERED TO THE PURCHASER UNDER ANY CONTRACT RESULTING FROM THIS INVITATION FOR BIDS WILL BE AS DESCRIBED IN THE INVITATION FOR BIDS. IN THE EVENT THAT THE PROPERTY DELIVERED OR OFFERED FOR DELIVERY DOES NOT CORRESPOND TO THE DESCRIPTION SET OUT IN THE INVITATION FOR BIDS, THE GOVERNMENT, AT ITS OPTION, SHALL EITHER: (A) DIRECT THE RETURN OF THE PROPERTY AT GOVERNMENT EXPENSE TO THE CLOSEST MILITARY INSTALLATION, REIMBURSING THE PURCHASER FOR ALL REASONABLE TRANSPORTATION CHARGES INCURRED IN SHIPPING THE PROPERTY TO THE ORIGINAL DESTINATION SPECIFIED IN THE PURCHASER'S SHIPPING INSTRUCTIONS (EXCLUDING ANY TRANSPORTATION COSTS INCURRED IN SHIPPING THE PROPERTY OUTSIDE THE CONTINENTAL UNITED STATES) AND REFUNDING TO THE PURCHASER, THE PURCHASE PRICE OR SUCH PORTION OF THE PURCHASE PRICE AS THE GOVERNMENT MAY HAVE RECEIVED, OR (B) MAKE AN EQUITABLE ADJUSTMENT IN THE CONTRACT PRICE. IN THE EVENT THE GOVERNMENT ELECTS TO ADJUST THE CONTRACT PRICE AND AN AGREEMENT CANNOT BE REACHED WITH THE PURCHASER AS TO THE AMOUNT OF THE ADJUSTMENT, THE CONTRACTING OFFICER SHALL UNILATERALLY DETERMINE THE AMOUNT OF THE ADJUSTMENT, WHICH DETERMINATION SHALL BE IN THE FORM OF A FINDING OF FACT AND SHALL BE APPEALABLE UNDER THE DISPUTES ARTICLE OF THE CONTRACT (GENERAL SALE TERMS AND CONDITIONS NUMBER 15, SF 114 C). THE CONTRACT PRICE WILL NOT BE ADJUSTED AND THE PROPERTY MAY NOT BE RETURNED TO THE GOVERNMENT PURSUANT TO THIS CLAUSE UNLESS THE PURCHASER MAILS OR OTHERWISE FURNISHES TO THE CONTRACTING OFFICER A WRITTEN NOTICE, WITHIN 20 CALENDAR DAYS FROM THE DATE OF REMOVAL OF THE PROPERTY, THAT HE CONSIDERS THAT THE PROPERTY WAS MIS-DESCRIBED. FURTHER, THE CONTRACT PRICE WILL NOT BE ADJUSTED AND THE PROPERTY MAY NOT BE RETURNED TO THE GOVERNMENT PURSUANT TO THIS CLAUSE UNLESS THE PURCHASER HAS MAINTAINED THE PROPERTY SUFFICIENTLY INTACT TO PERMIT IDENTIFICATION OF THE PROPERTY BY THE GOVERNMENT AS THE SAME PROPERTY WHICH WAS DELIVERED TO THE PURCHASER.

"/2) ESTIMATES AS TO "WEIGHT" OF PROPERTY OFFERED FOR SALE BY THE "UNIT" ARE NOT GUARANTEED. HOWEVER, ESTIMATES AS TO THE QUANTITY OF PROPERTY OFFERED FOR SALE BY THE "LOT" ARE GUARANTEED TO BE ACCURATE WITHIN THE FOLLOWING LIMITS: (A) ESTIMATED QUANTITIES OF LESS THAN 25 ARE GUARANTEED TO BE ACCURATE, (B) WHEN THE ESTIMATED QUANTITIES ARE 25 OR MORE, THE GOVERNMENT GUARANTEES THAT IT WILL DELIVERY NO LESS THAN 75 PERCENT OF THE ESTIMATED QUANTITIES. WHILE ESTIMATED SHIPPING WEIGHTS ARE NOT GUARANTEED, IN THE EVENT THAT THE PROPERTY IS OFFERED FOR SALE BY THE "LOT" AND THAT LOT IS DESCRIBED BY WEIGHT AND NOT BY ESTIMATED QUANTITIES, THE GOVERNMENT GUARANTEES THAT IT WILL DELIVER NO LESS THAN 75 PERCENT OF SUCH WEIGHT. PROVIDED, HOWEVER, THAT NO ADJUSTMENT WILL BE MADE UNDER THE PROVISIONS OF THIS SUB-PARAGRAPH UNLESS THE CLAIM OF SHORTAGE IS MADE PRIOR TO THE REMOVAL OF THE PROPERTY.

"/3) IN THE EVENT THAT THE GOVERNMENT USES A MANUFACTURER'S PART OR REFERENCE NUMBER OR A FEDERAL STOCK NUMBER IN THE ITEM DESCRIPTION AND THERE IS A DISCREPANCY BETWEEN THE DETAILED DESCRIPTIVE DATA USED IN THE ITEM DESCRIPTION ITSELF AND THE DETAILED DESCRIPTIVE DATA APPLICABLE TO SUCH REFERENCED NUMBER, ONLY THE DESCRIPTIVE DATA USED IN THE ITEM DESCRIPTION SHALL BE GUARANTEED. PROVIDED, HOWEVER, THAT ITEMS DESCRIBED SOLELY BY A NOUN NOMENCLATURE, MANUFACTURER'S PART NUMBER AND FEDERAL STOCK NUMBER, AND THE DESCRIPTIVE DATA APPLICABLE TO SUCH NUMBERS ARE INCONSISTENT, ONLY THE DESCRIPTIVE DATA APPLICABLE TO THE MANUFACTURER'S PART NUMBER SHALL BE GUARANTEED.'

UNDER PARAGRAPH 3 OF THE GENERAL SALE TERMS AND CONDITIONS OF THE IFB, STANDARD FORM 114-C, THE GOVERNMENT RESERVED THE RIGHT TO REJECT ANY OR ALL BIDS IN THE INTEREST OF THE GOVERNMENT. UNDER ARTICLE N OF THE SPECIAL CONDITIONS OF THE IFB, THE GOVERNMENT RESERVED THE RIGHT TO WITHDRAW ANY PROPERTY SHOULD A BONA FIDE REQUIREMENT FOR PROPERTY EXIST OR DEVELOP PRIOR TO ITS REMOVAL FROM GOVERNMENT CONTROL.

BIDS WERE OPENED ON APRIL 14, AS SCHEDULED. THERE WERE 15 QUOTATIONS ON ITEM 63, RANGING FROM MACDELL'S HIGH BID OF $8,217 TO $210.

AFTER BID OPENING, THE SALES CONTRACTING OFFICER RECEIVED PROTESTS FROM TWO OF THE BIDDERS STATING THAT THE ITEM WAS MISDESCRIBED BECAUSE IT WAS MISSING A HYDRAULIC PUMP AND RESERVOIR. ONE BIDDER PLACED A VALUE OF $2,500 TO $3,000 ON THE MISSING PARTS, WHILE THE OTHER BIDDER ESTIMATED THAT THE ACQUISITION COST OF THE PARTS WOULD BE $4,500 TO$5,000. AFTER VERIFICATION OF THE FACT THAT THE HYDRAULIC TANK AND PUMP ASSEMBLY WERE MISSING FROM THE GRINDER, AND THAT THEY APPARENTLY WERE CONSIDERED BY THE MANUFACTURER AS NECESSARY PARTS FURNISHED WITH NEW MACHINES, THE CONTRACTING OFFICER WITHDREW THE ITEM FROM SALE. MACDELL WAS NOTIFIED OF THE WITHDRAWAL BY LETTER DATED MAY 11, WHICH RETURNED ITS DEPOSIT AND ADVISED THAT THE ITEM WOULD BE REOFFERED FOR SALE.

IT IS MACDELL'S POSITION THAT IT SHOULD BE AWARDED THE GRINDER AT ITS BID PRICE OF $8,217. MACDELL CONTENDS (1) THAT SINCE THE DESCRIPTION DID NOT CONTAIN ANY REFERENCE TO THE HYDRAULIC PUMP OR RESERVOIR, ALTHOUGH IT DID SPECIFICALLY LIST EQUALLY ESSENTIAL MOTORS, THERE WAS NO MISDESCRIPTION; (2) THAT ALL OF THE STANDARD ITEMS INCLUDED IN THE BASE PRICE OF A NEW GRINDING MACHINE ARE RARELY, IF EVER, FOUND ON USED GRINDING MACHINES, GOVERNMENT SURPLUS OR OTHER, A FACT WHICH IS KNOWN TO THE BUYING PUBLIC; AND (3) THAT THE MISSING PARTS CAN BE PURCHASED NEW FROM THE GRINDER MANUFACTURER, NORTON COMPANY, FOR $375, OR LESS THAN ONE PERCENT OF THE CURRENT PURCHASE PRICE (APPROXIMATELY $42,000) OF A NEW MACHINE, OR FOR APPROXIMATELY $75 USED. IN ADDITION, MACDELL MAKES THE POSITIVE STATEMENT THAT IT WAS FULLY AWARE OF THE LACK OF THE HYDRAULIC ITEMS AND BID ON THAT BASIS, AND ALLEGES THAT OTHER BIDDERS ALSO DID. IN THIS CONNECTION IT IS NOTED THAT A REPRESENTATIVE OF ONE OF THE PROTESTING BIDDERS STATED AT THE BID OPENING THAT THESE ITEMS WERE MISSING BUT IT IS NOT STATED THAT HE ASKED TO WITHDRAW HIS FIRM'S BID. FINALLY, MACDELL OFFERS TO WAIVE ANY LIABILITY ON THE PART OF THE GOVERNMENT FOR THE MISSING PARTS.

THE SALES ACTIVITY REPORTS THAT THE ACTION OF THE SALES CONTRACTING OFFICER WAS BASED ON OUR DECISION, B-146100, DATED SEPTEMBER 21, 1961, WHICH HELD THAT AN AWARD MADE AFTER THE CONTRACTING OFFICER HAD NOTICE THAT PROPERTY DESCRIBED IN THE SALES INVITATION AS UNUSED WAS ACTUALLY USED AND THEREFORE MISDESCRIBED DID NOT CREATE A VALID AND BINDING CONTRACT. IT IS OUR VIEW THAT THAT DECISION IS NOT DETERMINATIVE OF THIS CASE. IN THAT CASE AWARD HAD BEEN MADE BY THE CONTRACTING OFFICER WITH NOTICE OF THE FACT THAT THE DESCRIPTION OF ARTICLES AS "UNUSED" WAS NOT CORRECT AND DID NOT AGREE WITH THE TURN-IN DOCUMENTS COVERING THEM, AND THE BIDDER TO WHOM AWARD HAD BEEN MADE REQUESTED RESCISSION OF THE AWARD. HERE THERE IS AT LEAST SUBSTANTIAL DOUBT THAT THERE WAS A MISDESCRIPTION, SINCE THE SALES DESCRIPTION DID NOT MENTION THE MISSING PARTS, THE VALUE OF WHICH IS BUT A FRACTION OF EITHER THE ACQUISITION COST ($25,751) OR THE ALLEGED CURRENT PURCHASE PRICE ($42,000), OF THE PROPERTY. ALSO, THERE IS SOME MERIT TO MACDELL'S CONTENTION THAT A PURCHASER OF A USED MACHINE CANNOT ORDINARILY EXPECT IT TO BE EQUIPPED WITH ALL OF THE PARTS AND ACCESSORIES WHICH ARE INCLUDED IN THE BASE PRICE OF A NEW MACHINE, ESPECIALLY WHERE THE DESCRIPTION SPECIFICALLY LISTS SOME, BUT NOT ALL, OF SUCH PARTS. WE DO NOT BELIEVE THAT IT WOULD BE REASONABLE TO REQUIRE THE GOVERNMENT TO LIST SPECIFICALLY EACH AND EVERY PART OR COMPONENT MISSING FROM A COMPLEX PIECE OF MACHINERY OFFERED FOR SALE, OR TO CONSTRUE THE NAMING OF THE MACHINE WITHOUT SUCH LISTING AS A WARRANTY THAT IT WAS COMPLETE IN EVERY DETAIL.

SINCE THE GOVERNMENT HAS NO NEED FOR THE GRINDER, CLEARLY THE WITHDRAWAL PROVISIONS OF ARTICLE N OF THE SPECIAL CONDITIONS OF THE IFB ARE NOT FOR APPLICATION.

THERE IS NO QUESTION THAT THE GOVERNMENT MAY REJECT ANY OR ALL BIDS UNDER THE PROVISIONS OF PARAGRAPH 3 OF THE GENERAL SALES TERMS AND CONDITIONS OF THE IFB. HOWEVER, SUCH RIGHT IS TO BE EXERCISED ONLY IN THE BEST INTEREST OF THE GOVERNMENT AND FOR SOME REASONABLE CAUSE.

IN SUCH A SITUATION AS THIS, WHERE AN ARTICLE OFFERED FOR SALE APPEARS IN SOME WAY TO FALL SHORT OF WHAT IT WAS REPRESENTED TO BE, THE PRICES WHICH THE GOVERNMENT COULD EXPECT TO RECEIVE UPON READVERTISEMENT UNDER A CORRECTED DESCRIPTION WOULD ORDINARILY BE LOWER THAN THE PRICES OFFERED ON THE ERRONEOUS DESCRIPTION. READVERTISING ON A CORRECTED DESCRIPTION THUS WOULD OBVIOUSLY NOT BE IN THE GOVERNMENT INTEREST, UNLESS THE PRICE RECEIVED WOULD BE SUBJECT TO REDUCTION BY REASON OF LIABILITY ON THE PART OF THE GOVERNMENT FOR BREACH OF WARRANTY. ASIDE FROM THE QUESTION WHETHER IN THIS CASE THERE IS A MISDESCRIPTION WITHIN THE PURVIEW OF THE GUARANTEED DESCRIPTIONS CLAUSE, WE DO NOT BELIEVE THAT THE CLAUSE COULD BE INVOKED BY A BIDDER WHO BID WITH FULL KNOWLEDGE OF THE MISDESCRIPTION, AS MACDELL ADMITTEDLY DID. IN ANY EVENT, THE CLAUSE CONFERS NO RIGHTS ON ANYONE EXCEPT THE BIDDER TO WHOM AWARD IS MADE, AND WE SEE NO REASON WHY AN OFFER BY A HIGH BIDDER TO WAIVE ANY RIGHTS THEREUNDER MAY NOT BE ACCEPTED, ON THE SAME BASIS THAT ANY BIDDER IN LINE FOR AWARD MAY BE PERMITTED TO OFFER TERMS MORE FAVORABLE TO THE GOVERNMENT. SEE ALECK LEITMAN V. UNITED STATES, 104 CT.CL. 324; B 74013, MARCH 9, 1948.

IN THE CIRCUMSTANCES, WE CONCLUDE THAT THE WITHDRAWAL OF THE GRINDER IN QUESTION FROM SALE WAS NOT JUSTIFIED, AND WE SEE NO LEGAL OBJECTION TO ACCEPTANCE OF MACDELL'S OFFER TO WAIVE ANY CLAIM OF MISDESCRIPTION OR TO AN AWARD OF THE GRINDER TO MACDELL AT ITS BID PRICE OF $8,217.