APRIL 18, 1923, 2 COMP. GEN. 665

APRIL 18, 1923, 2 COMP. GEN. 665

PURCHASE OF COAL - PRICE ADJUSTMENT IN ADJUSTING THE PRICE OF COAL DELIVERED UNDER A CONTRACT PROVIDING FOR SUCH ADJUSTMENT FOR FAILURE TO MEET THE REQUIRED ANALYSIS, AND IN WHICH THE PRICE IS STATED AT SO MUCH PER TON F.O.B. MINES, PLUS A SPECIFIED FREIGHT RATE WHICH FREIGHT RATE IS SUBJECT TO INCREASE OR DECREASE TO MEET CHANGES IN FREIGHT TARIFFS, THE ADJUSTMENT SHOULD BE MADE ON THE NET PRICE PER TON F.O.B. THE MINES.

COMPTROLLER GENERAL MCCARL TO CAPT. T. S. PUGH, UNITED STATES ARMY, APRIL 18, 1923:

BY LETTER DATED APRIL 4, 1923, FORWARDED THROUGH CHIEF OF FINANCE, YOU TRANSMIT WITH REQUEST FOR DECISION WHETHER PAYMENT THEREON IS AUTHORIZED, A VOUCHER IN FAVOR OF SUPERIOR ROCK SPRINGS COAL CO. FOR $378.06, BEING THE AMOUNT OF THE RETAINED PERCENTAGES ON 541.26 TONS OF COAL DELIVERED AT VANCOUVER BARRACKS, WASH., UNDER CONTRACT DATED AUGUST 6, 1922, LESS A DEDUCTION FOR FAILURE OF THE COAL TO COMPLY WITH THE SPECIFICATIONS.

THE CONTRACT PROVIDES FOR AN ADJUSTMENT IN PRICE SHOULD THE COAL DELIVERED SHOW, UPON ANALYSIS, B.T.U. DEFICIENCY, OR AN EXCESS OF ASH, OR OTHERWISE NOT COMPLY WITH THE SPECIFICATIONS, BUT THE DEDUCTION AS STATED ON THE VOUCHER IS ON THE BASIS OF THE PRICE OF THE COAL AT THE CONTRACTOR'S MINES, TO WIT, $4 PER TON, WHEREAS THE PRICE FIXED IN THE CONTRACT IS $9.515 PER TON F.O.B. CARS VANCOUVER BARRACKS, WASH. ON THE BASIS OF MINE PRICE THE DEDUCTION WOULD APPEAR TO BE $136.94, WHEREAS ON THE BASIS OF DELIVERED PRICE THE DEDUCTION WOULD BE $325.30.

THE ONLY ADJUSTMENT WHICH A DISBURSING OFFICER IS AUTHORIZED TO MAKE UNDER SUCH CONTRACTS ON ACCOUNT OF FAILURE OF THE COAL TO COMPLY WITH THE SPECIFICATIONS IS AN ADJUSTMENT ON THE BASIS OF THE PRICE AS FIXED IN THE CONTRACT, WHICH IN THIS CASE IS $9.515. AND IT WOULD HAVE BEEN PROPER FOR YOU TO HAVE ADVISED THE CONTRACTOR TO THAT EFFECT AND THAT ITS RECOURSE IF DISSATISFIED WITH SUCH ADJUSTMENT WOULD BE TO FILE A CLAIM IN THE GENERAL ACCOUNTING OFFICE FOR DIRECT SETTLEMENT. HOWEVER, SINCE IT APPEARS THAT THERE WILL BE OTHER PAYMENTS UNDER THIS CONTRACT INVOLVING PRICE ADJUSTMENTS, THE QUESTION AS TO WHETHER SUCH ADJUSTMENTS SHOULD BE BASED UPON THE MINE PRICE OR THE DELIVERED PRICE UNDER THIS CONTRACT MAY NOW BE DECIDED UPON YOUR SUBMISSION.

IT IS NOTED THAT THE CONTRACTOR'S PROPOSAL WHICH IS ATTACHED TO AND MADE A PART OF THE CONTRACT DOES NOT QUOTE A DELIVERED PRICE BUT STIPULATES A PRICE OF $4 PER TON F.O.B. MINE AND STATES WHAT THE FREIGHT RATE WOULD BE FROM THE MINE TO VANCOUVER BARRACKS.

PARAGRAPH 13 OF THE CONDITIONS AND SPECIFICATIONS PRINTED ON THE REVERSE SIDE OF THE FORM ON WHICH THE PROPOSAL WAS SUBMITTED--- AND WHICH WERE EXPRESSLY MADE A PART OF THE CONTRACT--- AUTHORIZED THE BIDDER TO QUOTE A PRICE F.O.B. MINES AND REQUIRED THAT A STATEMENT OF THE FREIGHT RATE BE SUBMITTED IN SUCH CASES. PARAGRAPH 14 OF SAID CONDITIONS AND SPECIFICATIONS PROVIDES:

IT IS UNDERSTOOD AND AGREED THAT WHEN THE PRICE QUOTED IS DELIVERED AT ANY ARMY POST, CAMP, OR STATION, SAID PRICE IS BASED ON THE PRESENT FREIGHT RATE AS ESTABLISHED BY THE RAILROAD TARIFFS, AND THAT SAID PRICE IS SUBJECT TO CHANGE TO CORRESPOND WITH ANY CHANGE THAT MAY BE MADE IN THESE FREIGHT RATES DURING THE LIFE OF THE CONTRACT.

IT IS CLEARLY SHOWN IN THIS CASE THAT THE DELIVERED PRICE AS FIXED IN THE CONTRACT WAS MADE UP OF THE BID PRICE OF $4 PER TON PLUS THE FREIGHT RATE.

THE ONLY PROVISION IN THE CONTRACT HERE IN QUESTION UNDER WHICH ADJUSTMENT OF PRICE IS AUTHORIZED IS THAT FOUND IN PARAGRAPH 11 OF THE CONDITIONS AND SPECIFICATIONS WHICH READS:

IF, UPON INSPECTION OF COAL AT TIME OF DELIVERY AT THE CAMP, POST, OR STATION, IT IS FOUND THAT COAL IS OF AN INFERIOR QUALITY, OR HAS NOT RECEIVED CAREFUL AND THOROUGH PREPARATION, THE CONTRACTING QUARTERMASTER WILL HAVE THE RIGHT TO PENALIZE THE CONTRACTOR BY MAKING PAYMENT OF ONLY 90 PERCENT OF THE AMOUNT OF THE INVOICE, BASED ON THE TONNAGE DELIVERED, AT THE CONTRACT PRICE. THE 10 PERCENT WITHHELD IS TO COVER ANY DEDUCTION ON ACCOUNT OF DELIVERY OF COAL WHICH, ON ANALYSIS AND TEST, IS SUBJECT TO AN ADJUSTMENT IN PRICE. * * * IF THE RESULT OF THESE ANALYSES SHOWS AT ANY TIME DURING THE LIFE OF THE CONTRACT 3 PERCENT OF MOISTURE ABOVE THAT SPECIFIED, 2 PERCENT OF ASH ABOVE THAT SPECIFIED, OR 2 PERCENT OF B.T.U. BELOW THAT SPECIFIED IN THE ORIGINAL CONTRACT, THE CONTRACTOR WILL BE PENALIZED ACCORDINGLY.

CONSIDERING THE CONTRACT AS A WHOLE, INCLUDING THE PROPOSAL AND THE CONDITIONS AND SPECIFICATIONS PRINTED ON THE REVERSE SIDE THEREOF, THE INTENT AND PURPOSE WOULD APPEAR TO BE THAT THE ADJUSTMENT BE MADE ON THE BASIS OF THE PRICE F.O.B. MINES AS STATED IN THE PROPOSAL. YOU ARE ADVISED, THEREFORE, THAT ADJUSTMENT ON THE BASIS OF $4 PER TON, RATHER THAN $9.515 PER TON, IS AUTHORIZED.