B-168766, AUG. 5, 1970

B-168766: Aug 5, 1970

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WHO WAS AWARE OF THE STANDBY AND PROLONGED STORAGE CLAUSE IN THE BID AND WHO CLAIMS EXCESS STORAGE COST FOR ITEMS OF COATING AND PRIMERS THAT WERE ON STANDBY FOR REPLENISHMENT TO GSA ON A MONTHLY BASIS WHICH CAUSED AN EXTRA COST FOR MAINTAINING AN INVENTROY MUST HAVE CLAIM DISALLOWED. THEREFORE THE CLAIM IS DENIED. INC.: REFERENCE IS MADE TO YOUR LETTER OF JANUARY 7. SUBSEQUENT CORRESPONDENCE IN WHICH YOU HAVE ASSERTED A CLAIM FOR EXCESS STORAGE COSTS AMOUNTING TO $1. WHICHEVER IS LATER. WHICHEVER IS LATER. THE GENERAL SERVICES ADMINISTRATION IS OBLIGATED. THE CONTRACTOR IS OBLIGATED TO DELIVER HEREUNDER ALL SUCH QUANTITIES AS MAY BE SO ORDERED FROM TIME TO TIME. THE QUANTITIES SHOWN AS THE ESTIMATED REQUIREMENTS FOR EACH ITEM DURING THE ORDERING PERIOD ARE FURNISHED ONLY FOR THE INFORMATION OF BIDDERS.

B-168766, AUG. 5, 1970

CONTRACTS -- REQUIREMENTS -- STANDBY STOCK -- EXCESS STORAGE DECISION TO E-BOND EPOXIES, INC., DISALLOWING CLAIM FOR EXCESS STORAGE COSTS AMOUNTING TO $1,632.71, UNDER REQUIREMENT TYPE CONTRACT WITH GSA TO STOCK SUPPLIES FOR REPLENISHMENT REQUIREMENTS ON NINE ITEMS OF COATING AND PRIMERS FROM AUGUST 13, 1968 TO JANUARY 15, 1969. CONTRACTOR, WHO WAS AWARE OF THE STANDBY AND PROLONGED STORAGE CLAUSE IN THE BID AND WHO CLAIMS EXCESS STORAGE COST FOR ITEMS OF COATING AND PRIMERS THAT WERE ON STANDBY FOR REPLENISHMENT TO GSA ON A MONTHLY BASIS WHICH CAUSED AN EXTRA COST FOR MAINTAINING AN INVENTROY MUST HAVE CLAIM DISALLOWED, SINCE THE GOVT. CONTEMPLATED THE POSSIBILITY THAT CONTRACTOR MIGHT BE REQUIRED TO KEEP ITEMS IN STORAGE FOR PERIODS BEYOND THOSE ESTABLISHED BY THE ESTIMATED DELIVERY SCHEDULES, THE CONTRACT DID NOT PROVIDE FOR ADDITIONAL PAYMENT FOR COSTS INCIDENT TO PROLONGED STORAGE OF MATERIAL AND IT DOES NOT APPEAR THAT SUCH STORAGE CONSTITUTED AN UNCONTEMPLATED BENEFIT TO THE GOVT. THEREFORE THE CLAIM IS DENIED.

TO E-BOND EPOXIES, INC.:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 7, 1970, AND SUBSEQUENT CORRESPONDENCE IN WHICH YOU HAVE ASSERTED A CLAIM FOR EXCESS STORAGE COSTS AMOUNTING TO $1,632.71 UNDER GENERAL SERVICES ADMINISTRATION (GSA) CONTRACT NO. GS-003-76409, DATED JUNE 13, 1968. THE CONTRACT COVERED STOCK REPLENISHMENT REQUIREMENTS FOR NINE ITEMS OF COATINGS AND PRIMERS, FSC GROUP 8010, FOR THE PERIOD FROM AUGUST 13, 1968, THROUGH JANUARY 15, 1969, AND CONTAINED A SCHEDULE WHICH LISTED THE ESTIMATED MONTHLY AND TOTAL REQUIREMENTS FOR THE ITEMS.

THE CONTRACT SET FORTH THE FOLLOWING PERTINENT PROVISIONS:

"SCOPE OF CONTRACT

"THIS CONTRACT FOR THE PERIOD MAY 16, 1968, OR DATE OF AWARD, WHICHEVER IS LATER, THROUGH JANUARY 15, 1969, PROVIDES FOR THE NORMAL SUPPLY REQUIREMENTS OF THE GENERAL SERVICES ADMINISTRATION SUPPLY DEPOTS, IDENTIFIED HEREIN DURING THE ORDERING PERIOD BEGINNING JULY 16, 1968, OR 60 DAYS AFTER DATE OF AWARD, WHICHEVER IS LATER, THROUGH JANUARY 15, 1969. THE GENERAL SERVICES ADMINISTRATION IS OBLIGATED, EXCEPT IN EXIGENCIES OR AS MAY BE OTHERWISE PROVIDED HEREIN, TO PURCHASE HEREUNDER SUCH QUANTITIES AS MAY BE NEEDED FROM TIME TO TIME TO FILL ANY SUCH SUPPLY DEPOT REQUIREMENTS DETERMINED IN ACCORDANCE WITH THE CURRENTLY APPLICABLE PROCUREMENT AND SUPPLY PROCEDURES. EXCEPT AS OTHERWISE PROVIDED HEREIN, THE CONTRACTOR IS OBLIGATED TO DELIVER HEREUNDER ALL SUCH QUANTITIES AS MAY BE SO ORDERED FROM TIME TO TIME. THE QUANTITIES SHOWN AS THE ESTIMATED REQUIREMENTS FOR EACH ITEM DURING THE ORDERING PERIOD ARE FURNISHED ONLY FOR THE INFORMATION OF BIDDERS, BUT SHALL NOT BE CONSTRUED TO REPRESENT ANY AMOUNT WHICH THE GOVERNMENT SHALL BE OBLIGATED TO PURCHASE UNDER THE CONTRACT NOR RELIEVE THE CONTRACTOR OF HIS OBLIGATION TO FILL ORDERS WHICH MAY BE PLACED HEREUNDER.

"STANDBY-STOCK

"(A) INITIAL QUANTITY

"FOR EACH ITEM AWARDED TO HIM, THE CONTRACTOR SHALL BY THE BEGINNING DATE OF THE ORDERING PERIOD OR WITHIN 60 DAYS AFTER DATE OF AWARD, WHICHEVER IS LATER, PRODUCE AND HAVE INSPECTED BY THE GOVERNMENT, AS BEING IN COMPLIANCE WITH CONTRACT REQUIREMENTS, 1-1/2 TIMES THE NUMBER OF UNITS SPECIFIED IN THE SCHEDULE AS THE ESTIMATED MONTHLY REQUIREMENT FOR THAT ITEM.

"(B) REPLENISHMENT OF STANDBY-STOCK

WITH RESPECT TO EACH ITEM, THE CONTRACTOR SHALL REPLENISH THE STANDBY STOCK WITH ITEMS INSPECTED BY THE GOVERNMENT, AS BEING IN COMPLIANCE WITH CONTRACT REQUIREMENTS, AT SUCH TIMES AS TO INSURE THAT ALL ORDERS RECEIVED BY THE CONTRACTOR IN ANY ONE CALENDAR MONTH, WHICH ARE WITHIN THE ESTIMATED MONTHLY REQUIREMENT FOR THAT ITEM, ARE SHIPPED WITHIN THE TIME PERIOD SPECIFIED IN (E), BELOW. NO REPLENISHMENT ACTION SHALL BE INITIATED BY THE CONTRACTOR DURING THE LAST 1-1/2 MONTHS OF THE CONTRACT.

"(C) GUARANTEE TO PURCHASE

"THE GOVERNMENT GUARANTEES TO PURCHASE WITH RESPECT TO EACH ITEM AN AMOUNT EQUAL TO THE INITIAL STANDBY-STOCK QUANITY FOR THAT ITEM PLUS THE TOTAL QUANTITY OF ALL DELIVERY ORDERS FOR THAT ITEM WHICH (1) DO NOT EXCEED THE ESTIMATED MONTHLY REQUIREMENT FOR THE ITEM AND (2) ARE RECEIVED BY THE CONTRACTOR PRIOR TO THE LAST 1-1/2 MONTHS OF THE CONTRACT. HOWEVER, WITH RESPECT TO EACH ITEM, THE GOVERNMENT RESERVES THE RIGHT TO NOTIFY THE CONTRACTOR AT ANY TIME DURING THE CONTRACT PERIOD THAT ORDERS RECEIVED IN THE CALENDAR MONTHS SUCCEEDING THE MONTH IN WHICH SUCH NOTICE IS RECEIVED SHALL NOT FALL WITHIN THE ABOVE GUARANTEE. IN SUCH EVENT THE CONTRACTOR'S OBLIGATION TO SHIP IN ACCORDANCE WITH (E) BELOW SHALL CONTINUE ONLY UNTIL SUCH TIME AS THE ORDERS RECEIVED IN SUCCEEDING MONTHS WHICH ARE WITHIN THE ESTIMATED MONTHLY REQUIREMENT EQUAL THE INITIAL STANDBY-STOCK QUANTITY FOR THAT ITEM. ALL OTHER ORDERS SHALL BE SHIPPED IN ACCORDANCE WITH (F), BELOW."

YOU MAINTAIN THAT THE ESTIMATED MONTHLY REQUIREMENTS SET FORTH IN THE INVITATION FOR BIDS AND THE ENSUING CONTRACT WERE WITHOUT SOUND FOUNDATION, AND THAT A GREAT PERCENTAGE OF YOUR STANDBY INVENTORY HAD TO BE WAREHOUSED FAR IN EXCESS OF THE 45 TO 60 DAYS MAXIMUM WHICH YOU CONTEMPLATED IN COMPUTING YOUR BID. AS A RESULT THEREOF, YOU SAY YOU INCURRED EXCESS STORAGE COSTS (WAREHOUSE RENT, UTILITIES AND INSURANCE) IN MAINTAINING THE STANDBY INVENTORY. YOU FURTHER STATE THAT SINCE GSA DID NOT ORDER AND PAY FOR THE MATERIAL IN ACCORDANCE WITH ITS MONTHLY ESTIMATES, YOU INCURRED ADDITIONAL COSTS OF FINANCING THE MATERIAL FOR THOSE PERIODS DURING WHICH IT REMAINED IN STOCK IN EXCESS OF THE ANTICIPATED 60 DAYS. YOU CONTEND THAT THE EXTRA COST OF MAINTAINING THE INVENTORY SHOULD BE BORNE BY THE GOVERNMENT ON THE BASIS THAT IT WOULD HAVE BEEN THE RESPONSIBILITY OF GSA TO PAY FOR, STORE AND PROTECT THE MATERIAL IF IT HAD BEEN SHIPPED IN ACCORDANCE WITH THE ESTIMATES USED IN THE CONTRACT.

GSA HAS ADVISED US THAT THE ESTIMATED REQUIREMENT FOR EACH ITEM WAS COMPUTED AS ACCURATELY AS POSSIBLE, TAKING INTO CONSIDERATION VARIOUS FACTORS, INCLUDING THE QUANTITY OF THE ITEMS ON HAND WHEN THE SOLICITATION WAS PREPARED, THE NET STOCK OF EACH DEPOT, THE LEAD TIME REQUIRED TO OBTAIN REPLACEMENT STOCK, THE QUANTITY DETERMINED TO BE NECESSARY FOR CONTINGENCIES, THE MONTHLY DEMAND FORECAST, ECONOMIC ORDER QUANTITIES, AND THE REORDER POINT QUANTITY. GSA ALSO MADE THE FOLLOWING ANALYSIS OF THE ESTIMATED REQUIREMENTS OF EACH OF THE SUPPLIES CONCERNED, THE INITIAL STANDBY STOCK REQUIREMENT OF EACH, AND THE NUMBER WHICH YOU SHIPPED PURSUANT TO PURCHASE ORDERS:

INITIAL

ESTIMATED STANDBY NUMBER

FSN REQUIREMENT STOCK SHIPPED 8010-082-2434 90 KITS

45 470 8010-082-2435 4290 KITS 2145 2179 8010-082-2436 90 KITS 45 88 8010 -082-2437 1080 KITS

540 2200 8010-082-2439 8040 KITS 5265 6604 8010-082-2440 570 KITS 285 323 8010-082-2450 2070 KITS

1065 4325 8010-082-2477 1020 KITS 510 1400 8010-896-1980 540 KITS 270 750

TOTALS 17,790 KITS 10,170 18,339 THE ESTIMATED MONTHLY REQUIREMENT FOR EACH ITEM (EXCEPT FOR ITEM 8010-082 2450) WAS A THIRD OF THE NUMBER SHOWN AS THE ESTIMATED REQUIREMENT FOR THAT ITEM.

IT SHOULD BE NOTED FROM THE ABOVE TABULATION THAT ALTHOUGH YOU RECEIVED ORDERS FOR LESS THAN THE ESTIMATED REQUIREMENT ON FOUR ITEMS, YOU RECEIVED ORDERS AND ACTUALLY SHIPPED 549 KITS IN EXCESS OF THE TOTAL ESTIMATED REQUIREMENTS COVERED BY YOUR CONTRACT. IN THIS CONNECTION, YOUR COSTS INCIDENT TO MAINTAINING THE STOCK INVENTORY MAY HAVE BEEN INCREASED BY THE LACK OR INSUFFICIENCY OF ORDERS ON ALL ITEMS, PARTICULARLY DURING THE EARLY PART OF THE ORDERING PERIOD, TO PROMPTLY DISPOSE OF THE INITIAL AND REPLENISHING QUANTITIES. HOWEVER, IN A PREVIOUS CASE WE HAVE HELD THAT THERE IS NO BASIS FOR RELIEF WHEN, DURING THE TERM OF A REQUIREMENTS CONTRACT, THE BUYER'S ACTUAL REQUIREMENTS DO NOT CORRESPOND WITH THE ESTIMATED NEEDS, UNLESS IT CAN BE SHOWN THAT THE ESTIMATES WERE NOT BASED ON THE BEST INFORMATION AVAILABLE, OR BAD FAITH, FRAUD OR MISREPRESENTATION WAS EXERCISED IN ESTIMATING THE REQUIREMENTS. B-169037, MAY 4, 1970. THERE IS NO INDICATION IN THE RECORD THAT THE ESTIMATES IN THE SUBJECT CASE WERE BASED ON OTHER THAN THE BEST INFORMATION AVAILABLE AT THE TIME OF THEIR COMPOSITION.

REGARDING YOUR CONTENTION THAT THE PROLONGED STORAGE RESULTED IN AN UNCONTEMPLATED BENEFIT TO THE GOVERNMENT, AND THE GOVERNMENT SHOULD THEREFORE BEAR THE COST OF MAINTAINING THAT STOCK WHICH WAS NOT ORDERED IN ACCORDANCE WITH THE MONTHLY ESTIMATES, IT APPEARS THAT CONTRACTS OF THIS TYPE ARE EMPLOYED BY GSA WHEN DETERMINED TO BE NECESSARY TO ASSURE A MORE ADEQUATE AND READILY AVAILABLE SUPPLY OF STOCK ITEMS TO MEET THE FLUCTUATING NEEDS OF USING AGENCIES ON A TIMELY BASIS. GSA REPORTS:

"THE STANDBY-STOCK CLAUSE WAS DESIGNED IN ORDER TO PROVIDE CERTAIN ADVANTAGES TO THE GOVERNMENT. ONE OF THOSE IS A SAVINGS IN WAREHOUSING COSTS. ALTHOUGH THIS TYPE OF CONTRACT MAY REQUIRE A CONTRACTOR TO KEEP THE ITEMS IN STORAGE LONGER THAN ANTICIPATED, BIDS ARE SUBMITTED WITH THAT KNOWLEDGE AND IT IS PROBABLE THAT, IN MANY, IF NOT ALL CASES, THAT CONTINGENCY IS TAKEN INTO ACCOUNT IN COMPUTING BID PRICES."

IT IS THEREFORE CLEAR THAT THE GOVERNMENT DID CONTEMPLATE THE POSSIBILITY THAT THE CONTRACTOR MIGHT BE REQUIRED TO KEEP ITEMS IN STORAGE FOR PERIODS BEYOND THOSE ESTABLISHED BY THE ESTIMATED DELIVERY SCHEDULES, AND THAT SUCH STORAGE PERIOD, ON ANY INDIVIDUAL ITEM, MIGHT BEGIN WITH THE ORIGINAL WAREHOUSING AND TERMINATE DURING THE LAST ONE AND ONE HALF MONTHS OF THE CONTRACT UNDER PARAGRAPH (C) OF THE STANDBY STOCK PROVISION QUOTED ABOVE.

ACCORDINGLY, SINCE THE CONTRACT DID NOT PROVIDE FOR ADDITIONAL PAYMENT FOR COSTS INCIDENT TO PROLONGED STORAGE OF THE MATERIAL, NOR DOES IT APPEAR THAT SUCH STORAGE CONSTITUTED AN UNCONTEMPLATED BENEFIT TO THE GOVERNMENT, WE PERCEIVE NO APPROPRIATE BASIS ON WHICH YOUR CLAIM MAY BE ALLOWED, AND IT IS THEREFORE DENIED.