B-157211, B-157266, MAR. 21, 1966

B-157211, B-157266, MAR. 21, 1966

TO PETROF TRADING COMPANY, INC.:

REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 11, 1966 (WHICH WAS RECEIVED IN THIS OFFICE ON MARCH 1), RELATIVE TO AWARDS BY THE DEFENSE SUPPLY AGENCY (DSA) OF CONTRACTS FOR THE SALE OF VARIOUS ITEMS OF SURPLUS EXPLOSIVES AND CHEMICALS LOCATED AT THE NAVAL AMMUNITION DEPOT, CRANE, INDIANA, WHICH WERE ADVERTISED BY THE DEFENSE SURPLUS SALES OFFICE, COLUMBUS, OHIO, UNDER SEALED BID SALE INVITATION (IFB) NO. 27-S-65-75, ISSUED MAY 19, 1965. ALTHOUGH THERE WERE MISTAKES IN THE SALES DESCRIPTIONS OF FOUR OF THE ITEMS, WHICH HAD AN ACQUISITION COST OF $283,335, THE VALIDITY OF THE AWARDS WAS UPHELD FOR THE REASONS SET FORTH IN OUR DECISIONS B-157211, B-157266, DATED SEPTEMBER 3, 1965, AND OCTOBER 25, 1965, ADDRESSED TO YOU AND TO YOUR ATTORNEYS, SHERMAN, COWARD AND MACDONALD, RESPECTIVELY.

OUR RECORDS SHOW THAT FOLLOWING THE ISSUANCE OF OUR OCTOBER 25 DECISION, WHICH AFFIRMED OUR SEPTEMBER 3 DECISION, YOUR PRESIDENT, MR. JULIUS PETROFSKY, MET, AT HIS REQUEST, WITH REPRESENTATIVES OF OUR OFFICE ON NOVEMBER 4, 1965, TO DISCUSS OUR DECISIONS. AT THE MEETING MR. PETROFSKY DISCUSSED NUMEROUS PRIOR SALES IN WHICH GOVERNMENT SURPLUS PROPERTY HAD BEEN MISDESCRIBED AND STATED THAT SUCH MISDESCRIPTIONS WERE COSTLY TO HIS COMPANY AND MAY ALSO HAVE BEEN COSTLY TO THE GOVERNMENT. IT WAS MR. PETROFSKY'S POSITION THAT THE MISDESCRIPTIONS IN SUCH PRIOR SALES WERE PROPERLY FOR CONSIDERATION IN DECIDING THE MERITS OF YOUR PROTEST AGAINST THE AWARDS UNDER IFB NO. 27-S-65-75; THAT A MISDESCRIPTION OF EVEN ONE SALE ITEM NECESSITATES REJECTION OF ALL BIDS AND READVERTISEMENT OF THE SALE; AND THAT, THEREFORE, OUR OFFICE IS REQUIRED TO CANCEL THE AWARDS IN QUESTION. OUR REPRESENTATIVES EXPLAINED TO MR. PETROFSKY THE BASIS FOR OUR DECISIONS DENYING YOUR PROTEST AND THE BASIS FOR OUR VIEW THAT THE PRIOR CASES OF MISDESCRIPTIONS SHOULD BE REGARDED AS EXAMPLES OF POOR DISPOSAL PRACTICES, WHICH MIGHT BE THE SUBJECT OF AN INVESTIGATION BY OUR AUDITORS, RATHER THAN AS EVIDENCE WARRANTING THE CANCELLATION OF CONTRACTS AWARDED IN THE INSTANT CASE. ACCORDINGLY, MR. PETROFSKY WAS URGED TO SUBMIT ANY SUCH INFORMATION IN HIS POSSESSION WITH A REQUEST THAT WE CONDUCT AN AUDIT INVESTIGATION. WITH SPECIFIC REFERENCE TO OUR DECISION OF OCTOBER 25, MR. PETROFSKY WAS ADVISED THAT RECONSIDERATION COULD BE REQUESTED IF IT WAS BELIEVED THAT OUR DECISION WAS BASED UPON ERROR OF FACT OR LAW.

OUR RECORDS FURTHER SHOW THAT REPRESENTATIVES OF OUR REGIONAL OFFICE IN SAN FRANCISCO, CALIFORNIA, HAVE CONTACTED YOUR FIRM SEVERAL TIMES WITH A VIEW TO DISCUSSING WITH MR. PETROFSKY THE SPECIFICS OF THE VARIOUS CHARGES RELATING TO THE CONDUCT BY DSA OF SALES OF EXPLOSIVES GENERALLY WHICH WERE MADE BY HIM AT THE NOVEMBER 4 CONFERENCE. TO DATE MR. PETROFSKY HAS NOT RESPONDED TO ANY OF THE CALLS BY OUR FIELD REPRESENTATIVES. HOWEVER, SHOULD YOU DESIRE TO PURSUE MR. PETROFKSY'S REQUEST FOR AN AUDIT INVESTIGATION OF ANY SUCH SALES, YOU MAY CONTACT OUR REGIONAL OFFICE AT 143 FEDERAL OFFICE BUILDING, 50 FULTON STREET, SAN FRANCISCO, THE TELEPHONE NUMBER OF WHICH IS 556-6200.

IN YOUR LETTER OF FEBRUARY 11, YOU DISCUSS OUR DECISIONS AT LENGTH AND REPEAT THE VARIOUS ALLEGATIONS WHICH WE CONSIDERED IN RENDERING THE DECISIONS. WITH REGARD TO THE DECISION OF OCTOBER 25, YOU QUESTION OUR CONCLUSION THAT THE FACT THAT YOU HAD DISCUSSED THE SALE IN QUESTION WITH THE HOLDING ACTIVITY OFFICER AT CRANE ON MAY 26 INDICATED THAT YOU APPARENTLY HAD READ THE IFB DESCRIPTIONS AT THAT TIME. IN THIS CONNECTION, WE CALL YOUR ATTENTION TO THE FOLLOWING LANGUAGE IN OUR DECISION OF SEPTEMBER 3:

"THE RECORD BEFORE OUR OFFICE SHOWS THAT ON OR ABOUT MAY 26, YOU TELEPHONED THE HOLDING ACTIVITY AT CRANE, INDIANA, AND INQUIRED WHETHER THE EXPLOSIVES COULD BE REMOVED BY TRUCK. AT THAT TIME YOU WERE INFORMED THAT THE MAGAZINES IN WHICH THE POWDER WAS STORED WERE ACCESSIBLE BY RAIL ONLY; THEREFORE, WERE THE USE OF TRUCKS AUTHORIZED THERE WOULD BE AN ADDITIONAL CHARGE TO THE PURCHASER FOR THE TRANSFER OF THE POWDER FROM THE RAIL CARS TO TRUCKS OUTSIDE THE MAGAZINE AREA FOLLOWING THE REMOVAL OF THE POWDER FROM THE MAGAZINES. SUBSEQUENTLY, THE QUESTION OF AMENDING THE IFB TO PERMIT THE USE OF TRUCKS ON SUCH TERMS WAS DISCUSSED BY OFFICIALS OF BOTH THE HOLDING AND SALES ACTIVITIES, AND THE ULTIMATE DETERMINATION WAS THAT LOADING SHOULD BE IN ACCORDANCE WITH THE TERMS OF THE IFB. BY LETTER DATED JUNE 1, YOU WERE SO NOTIFIED.'

THIS INFORMATION, IN OUR OPINION, SUPPORTS THE STATEMENT MADE IN OUR DECISION OF OCTOBER 25,

IN CONNECTION WITH THE MATTER OF THE EXPENSE OF READVERTISEMENT, A SIGNIFICANT FACTOR INVOLVED IN THE DSA DECISION NOT TO READVERTISE, YOU ASK HOW MANY NAMES WERE ON THE BIDDERS' LIST FOR THE SALE INVOLVED. ALSO, YOU QUESTION WHY GOVERNMENT SALES ARE NOT MADE FOR A FIXED PRICE BASED ON THE TRUE VALUE OF THE PROPERTY. FINALLY, ALTHOUGH YOU CITE NO STATUTE, NO REGULATION, NO COURT CASE, NO DECISION BY OUR OFFICE OR ANY OTHER AUTHORITY, YOU DEMAND THAT WE TAKE ACTION TO PREVENT ANY FURTHER DELIVERIES OF PROPERTY UNDER THE CONTRACTS IN QUESTION AS WELL AS ACTION AGAINST THE OFFICIALS CONCERNED WITH THE SALE.

CONCERNING THE NUMBER OF NAMES ON THE BIDDERS' LIST FOR THE ITEMS SOLD, THE SALES CONTRACTING OFFICER REPORTS THAT THE IFB WAS MAILED TO APPROXIMATELY 1,108 PROSPECTIVE BIDDERS. OBVIOUSLY, THEREFORE, THE CONSIDERABLE EXPENSE WHICH WOULD HAVE BEEN INCURRED IN SENDING TO ALL SUCH BIDDERS NOTICES OF CANCELLATION AND COPIES OF A NEW IFB WAS A FACTOR WHICH DSA COULD NOT DISREGARD IN DETERMINING WHETHER WITHDRAWAL OF THE PROPERTY AND READVERTISEMENT WERE WARRANTED IN THE CIRCUMSTANCES.

REGARDING THE USE OF ADVERTISED COMPETITIVE BIDDING FOR THIS TYPE OF SURPLUS GOVERNMENT PROPERTY SALE, THE GOVERNING STATUTE, SECTION 203/E) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED (40 U.S.C. 484 (E) (, PROVIDES FOR SALE BY SUCH METHOD, WITH CERTAIN EXCEPTIONS NOT HERE APPLICABLE, AND FURTHER PROVIDES THAT WHENEVER PUBLIC ADVERTISING IS REQUIRED AWARD SHALL BE MADE WITH REASONABLE PROMPTNESS BY NOTICE TO THE RESPONSIBLE BIDDER WHOSE BID, CONFORMING TO THE INVITATION FOR BIDS, WILL BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED.

WITH RESPECT TO OUR ADVICE TO MR. PETROFSKY ON NOVEMBER 4 THAT RECONSIDERATION COULD BE REQUESTED IF IT WAS BELIEVED OUR OCTOBER 25 DECISION WAS BASED UPON ERROR OF FACT OR LAW, IT WOULD APPEAR THAT FURTHER EXPLANATION IS NECESSARY. THE TERM "BASED UPON ERROR OF FACT OR LAW" NECESSARILY IMPLIES THAT ANY SUCH ERROR MUST BE SUFFICIENTLY MATERIAL TO THE CONCLUSION REACHED IN OUR DECISION SO THAT A DIFFERENT CONCLUSION MUST NECESSARILY HAVE BEEN REACHED HAD THE CORRECT FACTS BEEN CONSIDERED OR HAD THE CORRECT LEGAL PRINCIPLES BEEN APPLIED. IT IS THEREFORE INCUMBENT UPON THE PARTY REQUESTING RECONSIDERATION TO SPECIFICALLY IDENTIFY AND PROVE ERRORS OF FACT OR LAW AND TO EXPLAIN WHY CONSIDERATION OR APPLICATION OF THE CORRECT FACTS OR LEGAL PRINCIPLES MUST NECESSARILY HAVE RESULTED IN A DIFFERENT CONCLUSION THAN THAT EXPRESSED IN OUR DECISION. WE ARE UNABLE TO CONCLUDE THAT YOUR LETTER OF FEBRUARY 11 ESTABLISHES ERROR OF MATERIAL FACT, SUCH AS WOULD CHANGE OUR DECISION. FURTHER, WE ARE UNABLE TO IDENTIFY THE LEGAL PRINCIPLES TO WHICH YOUR LETTER REFERS, AND WE ARE THEREFORE UNABLE TO CONCLUDE THAT OUR DECISION IS BASED UPON ERROR OF LAW.

IN VIEW OF THE FOREGOING, AND ABSENT ANY KNOWLEDGE OF AUTHORITY, STATUTORY OR OTHER, REQUIRING THE CANCELLATION OF SURPLUS GOVERNMENT PROPERTY SALES CONTRACTS IN EVERY CASE IN WHICH A MISDESCRIPTION IS DETECTED BEFORE AWARD, WE MUST ADHERE TO OUR CONCLUSION THAT IN CIRCUMSTANCES SUCH AS THESE--- WHERE THERE IS NO EVIDENCE THAT A MISDESCRIPTION, ADMINISTRATIVELY REGARDED AS MINOR, WAS DELIBERATE, AND WHERE THE HIGH RESPONSIVE, RESPONSIBLE BIDDER, UPON NOTICE OF SUCH MISDESCRIPTION, NEVERTHELESS ELECTS TO ACCEPT THE PROPERTY AT HIS BID PRICE AND FOREGO ANY CLAIM OF MISDESCRIPTION, AND THERE IS A REASONABLE BASIS FOR THE ADMINISTRATIVE DETERMINATION THAT THE COST OF CANCELLATION OF THE SALE AND READVERTISEMENT WOULD NOT BE IN THE BEST INTERESTS OF THE GOVERNMENT--- WITHDRAWALS OF THE PROPERTY FROM SALE IS NOT REQUIRED. ACCORDINGLY, OUR DECISIONS OF SEPTEMBER 3 AND OCTOBER 25, 1965, ARE SUSTAINED, AND WE MUST DENY YOUR REQUEST THAT WE DIRECT WITHDRAWAL OF THE PROPERTY FROM SALE.