B-167868(2), APR. 22, 1970

B-167868(2): Apr 22, 1970

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PRICE ADJUSTMENT BY CHANGE ORDER WAS IMPROPER. IS IRRELEVANT SINCE SAID CLAUSE IS INTENDED TO FIX EXACTLY TOTAL MAXIMUM COST. IS ESSENTIAL FOR ADJUSTMENT. SECRETARY: ENCLOSED IS A COPY OF OUR DECISION OF TODAY TO MR. THIS MATTER WAS THE SUBJECT OF AN ADMINISTRATIVE REPORT DATED NOVEMBER 19. YOU WILL NOTE THAT IN THE LAST PARAGRAPH OF OUR DECISION WE DECLINED TO REVIEW AT THIS TIME KAISER'S CLAIM THAT THE PRICE ADJUSTMENT EFFECTED BY CHANGE ORDER P001. WAS IMPROPER. KAISER ALLEGES THAT NO ADJUSTMENT IS PROPER SINCE THE GOVERNMENT SUSTAINED NO ACTUAL INJURY AS A RESULT OF THE EXCESS CUBIC DISPLACEMENT OF KAISER'S SHIPMENT. THE ADMINISTRATIVE REPORT STATES THAT: "WHETHER ACTUAL INJURY WAS INCURRED BY THE GOVERNMENT IS NOT CONSIDERED RELEVANT.

B-167868(2), APR. 22, 1970

BIDS--EVALUATION--DELIVERY PROVISIONS--GUARANTEED SHIPPING WEIGHT ALTHOUGH GAO DECISION DENIED MISTAKE CLAIM AND DECLINED PRESENT REVIEW OF CONTRACTOR'S CLAIM THAT, ABSENT ANY ACTUAL INJURY TO GOVT. RESULTING FROM DISPLACEMENT OF CONTRACTOR'S SHIPMENT, PRICE ADJUSTMENT BY CHANGE ORDER WAS IMPROPER, NAVY REPORT MISINTERPRETED GUARANTEED SHIPPING WEIGHTS AND DIMENSIONS CLAUSE IN CONCLUDING ACTUAL INJURY TO GOVT. IS IRRELEVANT SINCE SAID CLAUSE IS INTENDED TO FIX EXACTLY TOTAL MAXIMUM COST, INCLUDING FREIGHT, TO GOVT. WITH BIDDER ASSUMING OBLIGATION TO REIMBURSE GOVT. FOR ACTUAL TRANSPORTATION COSTS ON SHIPMENTS IN EXCESS OF GUARANTEE. EXISTENCE OF ACTUAL EXCESS TRANSPORTATION COSTS, THEREFORE, IS ESSENTIAL FOR ADJUSTMENT. SEE COMP. GEN. DECS. CITED.

TO MR. SECRETARY:

ENCLOSED IS A COPY OF OUR DECISION OF TODAY TO MR. EDWARD E. WHALEN, WASHINGTON OFFICE COUNSEL, KAISER INDUSTRIES CORPORATION, DENYING KAISER CEMENT & GYPSUM CORPORATION'S MISTAKE CLAIM UNDER NAVAL FACILITIES ENGINEERING COMMAND, SAN BRUNO, CALIFORNIA, CONTRACT NO. N62864-68-C- 7019. THIS MATTER WAS THE SUBJECT OF AN ADMINISTRATIVE REPORT DATED NOVEMBER 19, 1969, FROM THE MANAGER, CONTRACT PROCEDURES BRANCH.

YOU WILL NOTE THAT IN THE LAST PARAGRAPH OF OUR DECISION WE DECLINED TO REVIEW AT THIS TIME KAISER'S CLAIM THAT THE PRICE ADJUSTMENT EFFECTED BY CHANGE ORDER P001, EFFECTIVE MAY 28, 1968, WAS IMPROPER. HOWEVER, IN THE INTEREST OF EXPEDITIOUS RESOLUTION OF THIS MATTER, WE BELIEVE IT PROPER TO DRAW YOUR ATTENTION TO AN APPARENTLY ERRONEOUS LEGAL INTERPRETATION OF THE GUARANTEED SHIPPING WEIGHTS AND DIMENSIONS CLAUSE.

GENERALLY, KAISER ALLEGES THAT NO ADJUSTMENT IS PROPER SINCE THE GOVERNMENT SUSTAINED NO ACTUAL INJURY AS A RESULT OF THE EXCESS CUBIC DISPLACEMENT OF KAISER'S SHIPMENT. RESPONDING TO THIS ALLEGATION, THE ADMINISTRATIVE REPORT STATES THAT: "WHETHER ACTUAL INJURY WAS INCURRED BY THE GOVERNMENT IS NOT CONSIDERED RELEVANT. ENFORCEMENT OF THE CLAUSE ASSURES THE GOVERNMENT RECEIVES ACCURATE WEIGHTS AND MEASUREMENTS IN ORDER TO EVALUATE ACCURATELY THE OFFEROR'S BID THEREBY RETAINING THE INTEGRITY OF THE COMPETITIVE BID SYSTEM."

WE CANNOT AGREE. THE GUARANTEED SHIPPING WEIGHTS AND DIMENSIONS CLAUSE IS INTENDED TO "FIX EXACTLY THE TOTAL MAXIMUM COST, INCLUDING FREIGHT, TO THE GOVERNMENT." 38 COMP. GEN. 819, 821 (1959). UNDER THE TERMS OF THE CLAUSE, A BIDDER ASSUMES THE OBLIGATION OF REIMBURSING THE GOVERNMENT FOR THE ACTUAL TRANSPORTATION COSTS INCURRED ON SHIPMENTS IN EXCESS OF THE GUARANTEE. AS WE OBSERVED IN B-154291, OCTOBER 6, 1964, THE RESULTING CONTRACT IS, IN EFFECT, "'FOB ORIGIN' FOR TRANSPORTATION COSTS COVERED UNDER THE GUARANTEE AND 'FOB DESTINATION' FOR TRANSPORTATION COSTS EXCEEDING THE GUARANTEE." THE EXISTENCE OF ACTUAL EXCESS TRANSPORTATION COSTS IS ESSENTIAL FOR ADJUSTMENT. THUS, IF THE GOVERNMENT, IN FACT, INCURRED NO ADDITIONAL TRANSPORTATION COSTS AS A RESULT OF THE EXCESS CUBIC DISPLACEMENT OF KAISER'S SHIPMENT, NO PRICE ADJUSTMENT WOULD BE IN ORDER.