B-169731, JUN. 29, 1970

B-169731: Jun 29, 1970

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ON BASIS THAT SETOFF PROVISION IN CONTRACT IS IMPROPER BECAUSE IT CONFLICTS WITH ONE PRESCRIBED IN DEFENSE SUPPLY AGENCY MANUAL 4160.1. IS DENIED CLAIM SINCE SAID MANUAL HAS BEEN UPDATED (DSAM 4160.21M) TO ALLOW CHANGES WHICH ACCORD WITH AFORESAID SALES' PROVISION. SARAH MICHELSON: REFERENCE IS MADE TO YOUR LETTER OF APRIL 30. YOU STATE THAT DSA HAS INFORMED YOU THAT THE SUBJECT FUNDS WERE BEING WITHHELD AS A POSSIBLE SETOFF AGAINST DEBTS DUE THE GOVERNMENT BY MR. YOU CONSIDER THIS ACTION IMPROPER SINCE THE DEBTS ARE IN THE NAME OF ANOTHER INDIVIDUAL. YOU FURTHER MAINTAIN THAT THE WITHHOLDING OF THE ABOVE FUNDS IS IMPROPER SINCE THE SETOFF PROVISION QUOTED ABOVE (APPEARING IN DEFENSE LOGISTICS SERVICES CENTER FORM 436) CONFLICTS WITH THE SETOFF STIPULATION PRESCRIBED IN THE DEFENSE SUPPLY AGENCY MANUAL 4160.1.

B-169731, JUN. 29, 1970

SALES--BIDS--DEPOSITS--REFUND BIDDER CLAIMING AMOUNTS WITHHELD FROM BID DEPOSITS UNDER GOVERNMENT SALES' CONTRACT PROVISION AUTHORIZING GOVERNMENT TO USE ALL OR PORTION OF BID DEPOSIT TO SATISFY ANY DEBT OBLIGATION INCURRED ON BIDDER'S PRIOR TRANSACTIONS WITH SELLING AGENCY, ON BASIS THAT SETOFF PROVISION IN CONTRACT IS IMPROPER BECAUSE IT CONFLICTS WITH ONE PRESCRIBED IN DEFENSE SUPPLY AGENCY MANUAL 4160.1, IS DENIED CLAIM SINCE SAID MANUAL HAS BEEN UPDATED (DSAM 4160.21M) TO ALLOW CHANGES WHICH ACCORD WITH AFORESAID SALES' PROVISION. CF. 45 COMP. GEN. 504, 1966.

TO MRS. SARAH MICHELSON:

REFERENCE IS MADE TO YOUR LETTER OF APRIL 30, 1970, IN WHICH YOU CLAIM THAT THE DEFENSE LOGISTICS SERVICES CENTER OF THE DEFENSE SUPPLY AGENCY (DSA) HAS IMPROPERLY WITHHELD $1,496.45 IN BID DEPOSITS OR REFUNDS DUE YOU IN CONNECTION WITH INVITATIONS FOR BIDS (IFB) NOS. 44 0042 AND 44-0099, AND CONTRACTS NOS. 44-0003-159 AND 44-0010-057.

IT APPEARS THAT THE TERMS AND CONDITIONS INVOLVED IN THE ABOVE TRANSACTIONS CONTAINED A PROVISION WHICH AUTHORIZED THE GOVERNMENT TO USE ALL OR A PORTION OF ANY BID DEPOSIT OR REFUND TO SATISFY ANY DEBTS ARISING OUT OF THE BIDDER'S PRIOR TRANSACTIONS WITH THE SELLING AGENCY, AS FOLLOWS:

"GENERAL SALE TERMS AND CONDITIONS - ALL SALES

"10. SETOFF OF REFUNDS.

"THE BIDDER OR PURCHASER AGREES THAT THE SELLING AGENCY MAY USE ALL OR A PORTION OF ANY BID DEPOSIT OR REFUND DUE HIM, TO SATISFY IN WHOLE OR IN PART, ANY DEBTS ARISING OUT OF PRIOR TRANSACTIONS WITH THE SELLING AGENCY."

YOU STATE THAT DSA HAS INFORMED YOU THAT THE SUBJECT FUNDS WERE BEING WITHHELD AS A POSSIBLE SETOFF AGAINST DEBTS DUE THE GOVERNMENT BY MR. FRED SCHWARTZ OF LOS ANGELES, CALIFORNIA. YOU CONSIDER THIS ACTION IMPROPER SINCE THE DEBTS ARE IN THE NAME OF ANOTHER INDIVIDUAL, AND YOU REQUEST THAT THESE FUNDS BE RELEASED.

YOU FURTHER MAINTAIN THAT THE WITHHOLDING OF THE ABOVE FUNDS IS IMPROPER SINCE THE SETOFF PROVISION QUOTED ABOVE (APPEARING IN DEFENSE LOGISTICS SERVICES CENTER FORM 436) CONFLICTS WITH THE SETOFF STIPULATION PRESCRIBED IN THE DEFENSE SUPPLY AGENCY MANUAL 4160.1, IN THAT THE MANUAL DOES NOT CALL FOR THE APPLICATION OF ANY "REFUND" OR BY THE "PURCHASER."

THE PROVISIONS OF DEFENSE SUPPLY AGENCY MANUAL 4160.1 HAVE BEEN UPDATED AND REDESIGNATED AS DEPARTMENT OF DEFENSE MANUAL 4160.21-M (ENTITLED DEFENSE DISPOSAL MANUAL) WHICH AUTHORIZES THE DEFENSE LOGISTICS SERVICES CENTER (UNDER PART 3, CHAPTER 7, PARAGRAPH A) TO CHANGE THE CONDITIONS FOR SALES OF SURPLUS PROPERTY AS FOLLOWS:

"THE DEFENSE LOGISTICS SERVICES CENTER (DLSC) MAY AUTHORIZE INTERIM DEVIATIONS OR CHANGES TO THESE CONDITIONS FOR SURPLUS AND EXCHANGE/SALE PROPERTY IN CONUS (CONTINENTAL UNITED STATES)." ADDITIONALLY, THE DEFENSE DISPOSAL MANUAL PRESCRIBES UNDER PART 3, CHAPTER 7, PARAGRAPH C, SPECIAL CONDITIONS TO BE USED IN SALES WHICH INCLUDE A PROVISION (ATTACHMENT 1, ARTICLE E) WHEREBY THE BIDDER OR PURCHASER AGREES THAT THE DEPARTMENT OF DEFENSE MAY USE ALL OR ANY PORTION OF ANY REFUND DUE HIM TO APPLY ON ANY DEBT ARISING OUT OF PRIOR TRANSACTIONS WITH THAT DEPARTMENT. IN VIEW THEREOF, WE CANNOT CONCLUDE THAT THE SETOFF PROVISION INCORPORATED IN THE SALES DOCUMENTS BY THE DEFENSE LOGISTICS SERVICES CENTER IS LEGALLY OBJECTIONABLE. COMPARE 45 COMP. GEN. 504 (1966).

CONCERNING YOUR CONTENTION THAT THE FUNDS DUE YOU WERE BEING IMPROPERLY WITHHELD TO APPLY AGAINST A DEBT DUE THE GOVERNMENT BY MR. FRED SCHWARTZ, DSA HAS ADVISED US THAT MR. SCHWARTZ HAS SETTLED CERTAIN OUTSTANDING DEBTS WITH THE GOVERNMENT, AND THAT IN VIEW THEREOF, THE AMOUNTS BEING WITHHELD HAVE BEEN RELEASED, EXCEPT $62.44 WHICH WAS WITHHELD TO SATISFY DEBTS INCURRED IN YOUR OWN NAME UNDER CONTRACTS NOS. 44-9061-068, 44-9137-1778 440058-198, 44-0097-239 AND 41-0050 078. ACCORDINGLY, THE QUESTION AS TO THE PROPRIETY OF THE WITHHOLDING ON ACCOUNT OF THE INDEBTEDNESS OF MR. SCHWARTZ IS ACADEMIC.