B-61538, NOVEMBER 22, 1946, 26 COMP. GEN. 358

B-61538: Nov 22, 1946

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THE BASIS UPON WHICH THE PRICE WAS TO BE DETERMINED WAS NOT IN EXISTENCE AT THE TIME OF SHIPMENT. SO THAT THE CONTRACTOR MAY BE PAID WHAT THE MATERIAL REASONABLY IS WORTH. THAT IS. 1946: REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 28. WHICH WAS ACCEPTED AND MADE PART OF THIS CONTRACT. DELIVERIES HAVE BEEN MADE BY THE CONTRACTOR AS FOLLOWS: MAY 29. 000 POUNDS THE ABOVE SCHEDULE INDICATES THAT SHIPMENTS HAVE NOT BEEN MADE IN ACCORDANCE WITH THE CONTRACT SCHEDULE. DEXTRIN WAS PROCURED FROM THE DUTCH EAST INDIES. THE QUALITY OF THIS PRODUCT WAS VERY SATISFACTORY. THEY WERE SUPERIOR TO THE DOMESTIC COMMODITY FOR PRODUCTION PURPOSES. THE FACT THAT THE RESERVE STOCK PILES WERE FAIRLY ADEQUATE.

B-61538, NOVEMBER 22, 1946, 26 COMP. GEN. 358

CONTRACTS - PRICE ADJUSTMENT - EFFECT OF OPA PRICE DECONTROL WHERE, ON THE DATE OF SHIPMENT OF MATERIAL UNDER A CONTRACT PROVIDING,"PRICE TO BE ESTABLISHED CEILING AT DATE OF SHIPMENT," SUCH MATERIAL HAD BEEN "DECONTROLLED" BY THE OFFICE OF PRICE ADMINISTRATION AND, THEREFORE, THE BASIS UPON WHICH THE PRICE WAS TO BE DETERMINED WAS NOT IN EXISTENCE AT THE TIME OF SHIPMENT, SUCH PRICE-FIXING PROVISION MAY NOT BE REGARDED AS CONTROLLING, SO THAT THE CONTRACTOR MAY BE PAID WHAT THE MATERIAL REASONABLY IS WORTH, THAT IS, ITS MARKET PRICE OR VALUE.

ACTING COMPTROLLER GENERAL YATES TO THE SECRETARY OF THE TREASURY, NOVEMBER 22, 1946:

REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 28, 1946, AS FOLLOWS:

ON FEBRUARY 15, 1945, THE BUREAU OF ENGRAVING AND PRINTING, AFTER SOLICITING COMPETITIVE BIDS, AWARDED CONTRACT TEP-3553 (COPY ATTACHED) TO MORNINGSTAR, NICOL, INCORPORATED, NEW YORK, NEW YORK, FOR FURNISHING 480,000 POUNDS OF CASSAVA DEXTRIN, AT A PRICE OF ?1015 PER POUND, F.O.B. HAWTHORNE, NEW JERSEY, TO BE DELIVERED AT A RATE OF ONE 60,000 POUND CAR PER MONTH, STARTING IN MAY, 1945, AND RUNNING THROUGH DECEMBER, 1945. THE CONTRACTOR'S BID CONTAINED THE FOLLOWING QUALIFICATION, WHICH WAS ACCEPTED AND MADE PART OF THIS CONTRACT--- "PRICE TO BE ESTABLISHED CEILING AT DATE OF SHIPMENT.'

DELIVERIES HAVE BEEN MADE BY THE CONTRACTOR AS FOLLOWS: MAY 29, 1945 ---- ------- 60,000 POUNDS JUNE 27, 1945 ---------- 60,000 POUNDS OCTOBER 9, 1945 -------- 60,000 POUNDS FEBRUARY 18, 1946 ------ 60,000 POUNDS APRIL 25, 1946 --------- 59,800 POUNDS MAY 27, 1946 ---------- 60,000 POUNDS OCTOBER 11, 1946 ------- 60,000 POUNDS

THE ABOVE SCHEDULE INDICATES THAT SHIPMENTS HAVE NOT BEEN MADE IN ACCORDANCE WITH THE CONTRACT SCHEDULE. HOWEVER, DURING THE PERIOD OF THE CONTRACT THE BUREAU OF ENGRAVING AND PRINTING HAS BEEN IN CONSTANT CONTACT WITH THE SUPPLIER, AND HE HAS OFFERED A NUMBER OF JUSTIFIABLE EXPLANATIONS CONCERNING DELAYS IN DELIVERY. BRIEFLY, THESE INCLUDE LACK OF SHIPPING FACILITIES FROM SANTO DOMINGO AND BRAZIL, THE QUESTIONABLE QUALITY OF BRAZILIAN DEXTRIN, THE DIFFICULTY OF SECURING CASSAVA DEXTRIN BECAUSE OF ITS OVER-ALL SCARCITY, AND THE CONTAMINATED CONDITION OF SOME OF THE DEXTRIN ARRIVING IN THIS COUNTRY.

BEFORE THE WAR, DEXTRIN WAS PROCURED FROM THE DUTCH EAST INDIES. THE QUALITY OF THIS PRODUCT WAS VERY SATISFACTORY. AS A RESULT OF THE DESTRUCTION OF PROCESSING PLANTS AND FARMING FACILITIES DURING THE WAR, THE PRODUCTION OF EAST INDIAN DEXTRIN HAS NOT BEEN RESUMED. EXPERIMENTS CONDUCTED IN THE BUREAU OF ENGRAVING AND PRINTING IN AN EFFORT TO USE DOMESTIC DEXTRIN SHOW THAT ALTHOUGH SANTO DOMINGAN AND BRAZILIAN PRODUCTS LACK UNIFORMITY, THEY WERE SUPERIOR TO THE DOMESTIC COMMODITY FOR PRODUCTION PURPOSES. IN VIEW OF THIS, AND THE FACT THAT THE RESERVE STOCK PILES WERE FAIRLY ADEQUATE, THE CONTRACTOR WAS GIVEN AUTHORITY BY THE BUREAU OF ENGRAVING AND PRINTING TO MAKE SHIPMENTS AT SUCH TIME AS CASSAVA DEXTRIN COULD BE PROCURED IN THIS HEMISPHERE. THE REPRESENTATIONS MADE BY MORNINGSTAR, NICOL, INCORPORATED, REGARDING THE DIFFICULTY OF SECURING AN ACCEPTABLE PRODUCT WERE CORROBORATED BY OTHER SUPPLIERS IN THE INDUSTRY.

ON SEPTEMBER 11, 1946, MORNINGSTAR, NICOL, INCORPORATED, NOTIFIED THE BUREAU OF ENGRAVING AND PRINTING (COPY ATTACHED) THAT THEY WERE SHIPPING THE CAR OF DEXTRIN DELIVERED OCTOBER 11, 1946, AND THAT "BECAUSE OF THE HIGH COST OF BRAZILIAN TAPIOCA FLOUR, THIS MATERIAL WILL IN ALL PROBABILITY BE BILLED TO YOU AT 10.19 CENTS PER POUND, F.O.B. HAWTHORNE, NEW JERSEY.' THEIR CERTIFIED BILLING IS $0.19 PER POUND. INVESTIGATION OF THIS REVISION IN PRICE WITH THE OFFICE OF PRICE ADMINISTRATION SHOWED THAT THE DEXTRIN INDUSTRY HAD BEEN DECONTROLLED BEFORE THE CONTRACTOR'S NOTICE OF SEPTEMBER 11, 1946, AND THAT $0.19 A POUND, F.O.B. PLANT, IS THE APPROXIMATE CURRENT MARKET PRICE.

DUE TO THE QUALIFICATION ON THIS CONTRACTOR'S BID, THE BUREAU OF ENGRAVING AND PRINTING NOTIFIED HIM THAT IT WOULD BE UNABLE TO PAY THE REVISED PRICE BUT WOULD HAVE TO SUBMIT THE MATTER FOR ADJUDICATION. RATHER THAN SUFFER A CONSIDERABLE FINANCIAL LOSS AND/OR GO THROUGH THE LEGAL PROCEDURE WHICH FILING OF A CLAIM WOULD ENTAIL, THE CONTRACTOR IN A LETTER DATED OCTOBER 18, 1946 HAS REQUESTED THAT THE CARLOAD OF DEXTRIN DELIVERED OCTOBER 11, 1946 BE RETURNED TO HIM.

THE OFFICIALS OF THE BUREAU OF ENGRAVING AND PRINTING ARE OF THE OPINION THAT IT WAS THE INTENTION OF THE CONTRACTOR WHEN HE EXECUTED HIS BID TO SECURE REIMBURSEMENT AT THE CURRENT CEILING PRICE FOR EACH DELIVERY. QUALIFICATION IN THE BID PROBABLY IS NOT AS SPECIFIC AS IT MIGHT HAVE BEEN, DUE TO THE FACT THAT AT THE TIME IT WAS EXECUTED NO ONE EXPECTED THAT DEXTRIN WOULD BE DECONTROLLED WITHIN THE FORESEEABLE FUTURE.

AT THE PRESENT TIME THE STOCK OF THIS COMMODITY AT THE BUREAU OF ENGRAVING AND PRINTING, INCLUDING THE CARLOAD IN QUESTION, REPRESENTS ONLY A FOUR-WEEKS' SUPPLY. IN ORDER TO KEEP THE PLANT IN PRODUCTION ON POSTAGE STAMPS, IT WILL BE NECESSARY TO USE THIS MATERIAL, AND ALSO TO OBTAIN PROMPT DELIVERY OF THE CARLOAD ON THE OUTSTANDING ORDER. YOUR DECISION ON THE FOLLOWING, IS THEREFORE REQUESTED:

1. SHALL THE BUREAU OF ENGRAVING AND PRINTING PAY FOR THE CARLOAD OF DEXTRIN IN QUESTION, AT THE PRICE ESTABLISHED BY THE OFFICE OF PRICE ADMINISTRATION BEFORE DECONTROL, OR AT THE CURRENT MARKET PRICE?

2. IF YOUR DECISION IS THAT THE CONTRACTOR SHOULD BE REIMBURSED AT THE LAST ESTABLISHED CEILING PRICE SET BY THE OFFICE OF PRICE ADMINISTRATION AND THE CONTRACTOR REFUSES TO COMPLETE DELIVERY OF 60,000 POUNDS DUE ON CONTRACT TEP-3553, SHALL HE BE DECLARED IN DEFAULT AND AN ATTEMPT BE MADE TO PURCHASE AGAINST HIS CONTRACT?

IN VIEW OF THE CRITICAL NEED FOR ADDITIONAL QUANTITIES OF DEXTRIN AN EARLY REPLY WILL BE APPRECIATED.

UNDER THE TERMS OF THE CONTRACT HERE INVOLVED, THE CONTRACTOR AGREED TO FURNISH AND DELIVERY F.O.B. HAWTHORNE, NEW JERSEY, 480,000 POUNDS OF CASSAVA DEXTRIN, AT THE RATE OF ONE 60,000-POUND CAR PER MONTH, COMMENCING IN MAY, 1945, AND RUNNING THROUGH DECEMBER, 1945, AT THE ESTABLISHED CEILING PRICE AT DATE OF SHIPMENT. PARAGRAPH 4 OF THE CONDITIONS FORMING A PART OF THE CONTRACT PROVIDES THAT, IN THE EVENT THE CONTRACTOR REFUSES OR FAILS TO MAKE DELIVERIES OF THE MATERIALS OR SUPPLIES WITHIN THE TIME SPECIFIED, OR ANY EXTENSION THEREOF, THE GOVERNMENT MAY BY WRITTEN NOTICE TERMINATE THE RIGHT OF THE CONTRACTOR TO PROCEED WITH DELIVERIES AND PURCHASE THE MATERIALS OR SUPPLIES FROM ANOTHER SOURCE AND CHARGE THE CONTRACTOR WITH THE RESULTING EXCESS COST, UNLESS THE REFUSAL OR FAILURE TO DELIVER IS DUE TO:

* * * UNFORESEEABLE CAUSES BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE CONTRACTOR, INCLUDING, BUT NOT RESTRICTED TO, ACTS OF GOD OR OF THE PUBLIC ENEMY, ACTS OF THE GOVERNMENT, FIRES, FLOODS, EPIDEMICS, QUARANTINE RESTRICTIONS, STRIKES, FREIGHT EMBARGOES, UNUSUALLY SEVERE WEATHER * * *.

THE SCHEDULE OF DELIVERIES SET FORTH IN THE LETTER QUOTED ABOVE INDICATES THAT, EXCEPT FOR THE MONTHS OF MAY AND JUNE 1945, THE CONTRACTOR FAILED TO MAKE DELIVERIES IN THE QUANTITIES AND WITHIN THE TIME LIMITS SPECIFIED IN THE CONTRACT. HOWEVER, IT IS STATED IN SAID LETTER THAT THE CONTRACTOR HAS OFFERED A NUMBER OF "JUSTIFIABLE EXPLANATIONS" AS TO ITS DELAYS IN DELIVERY WHICH INCLUDE THE "LACK OF SHIPPING FACILITIES FROM SANTO DOMINGO AND BRAZIL, THE QUESTIONABLE QUALITY OF BRAZILIAN DEXTRIN, THE DIFFICULTY OF SECURING CASSAVA DEXTRIN BECAUSE OF ITS OVERALL SCARCITY, AND THE CONTAMINATED CONDITION OF SOME OF THE DEXTRIN ARRIVING IN THIS COUNTRY.' WHILE IT MAY BE THAT THE BUREAU OF ENGRAVING AND PRINTING HAD THE RIGHT TO TERMINATE THE RIGHT OF THE CONTRACTOR TO PROCEED WITH DELIVERIES, IT APPEARS THAT, IN VIEW OF THE DIFFICULTIES ENCOUNTERED BY THE CONTRACTOR IN SECURING AND TRANSPORTING DEXTRIN AND PRESUMABLY FOR THE REASON THAT IT WAS DETERMINED THAT THE CONTRACTOR WAS DELAYED BY UNFORESEEABLE AND, THEREFORE, EXCUSABLE CAUSES WITHIN THE MEANING OF PARAGRAPH 4 OF THE CONTRACT CONDITIONS, SUPRA, IT DID NOT DO SO, BUT ELECTED TO CONTINUE THE CONTRACT IN FORCE AND TO EXTEND THE PERIOD OF PERFORMANCE UNTIL "SUCH TIME AS CASSAVA DEXTRIN COULD BE PROCURED IN THIS HEMISPHERE.'

ALTHOUGH IT WAS AGREED THAT THE CONTRACTOR WAS TO BE PAID FOR DEXTRIN FURNISHED BY IT AT THE ESTABLISHED CEILING AT DATE OF SHIPMENT, IT APPEARS THAT THE DEXTRIN INDUSTRY HAD BEEN DECONTROLLED BY THE OFFICE OF PRICE ADMINISTRATION PRIOR TO THE SHIPMENT OF THE CAR OF DEXTRIN DELIVERED ON OCTOBER 11, 1946. SINCE THE BASIS UPON WHICH THE PRICE WAS TO BE DETERMINED WAS NOT IN EXISTENCE AT THE TIME OF SHIPMENT OF THE CARLOAD IN QUESTION, THE CONTRACT PROVISION FIXING THE PRICE AT THE ESTABLISHED CEILING MAY NOT BE REGARDED AS CONTROLLING. IN THIS CONNECTION, IT IS WELL SETTLED THAT A CONTRACT OF SALE WHICH MAKES NO REFERENCE TO PRICE WILL BE CONSTRUED AS IMPLYING AN AGREEMENT THAT THE BUYER SHALL PAY A REASONABLE PRICE OR WHAT THE PROPERTY REASONABLY IS WORTH, OR, IN OTHER WORDS, ITS MARKET PRICE OR VALUE. 55 C.J. 224; 46 AM. JUR. 359; SHIPMAN V. STRAITSVILLE MINING CO., 158 U.S. 356; IN RE PIERCE, BUTLER AND PIERCE MFG. CO. ( C.C.A.), 246 F. 814; S. F. BOWSER AND CO. V. F. K. MARKS AND CO., 96 ARK. 113, 131 S.W. 334; CORTHELL V. SUMMIT THREAD CO., 132 ME. 94, 167 A. 79.

ACCORDINGLY, AND SINCE IT IS STATED THAT $0.19 A POUND, F.O.B. PLANT, IS THE APPROXIMATE CURRENT MARKET PRICE OF CASSAVA DEXTRIN, YOU ARE ADVISED, IN ANSWER TO QUESTION NUMBER 1, THAT PAYMENT MAY BE MADE FOR THE CARLOAD IN QUESTION ON THAT BASIS. IN VIEW THEREOF, IT IS UNNECESSARY TO ANSWER QUESTION NUMBER 2.