B-173170, APR 12, 1972

B-173170, APR 12, 1972

SURPLUS SALES CONTRACT - REQUEST FOR REFORMATION OR RECISSION - ALLEGED LEGAL TITLE DECISION DENYING A REQUEST OF SURPLUS TIRE SALES FOR REFORMATION OR RECISSION OF A CONTRACT AWARDED UNDER AN IFB ISSUED BY THE DEFENSE SURPLUS SALES OFFICE, OAKLAND, CALIF. SINCE THE NATURE OF SURPLUS ITEMS IS ORDINARILY NOT KNOWN TO THE DISPOSAL OFFICIALS, THE GOVERNMENT REASONABLY LIMITS ITS LIABILITY BY RELYING ON TURN-IN DOCUMENTS PREPARED BY THE AGENCY WHICH HAD THE PROPERTY IN ITS POSSESSION. 50 COMP. GEN. 28 (1970). IF A MISTAKE DOES OCCUR, THE CONTRACTING OFFICER MAY REOFFER AN ITEM AFTER "KNOCK DOWN," BUT ITEM (4) OF ARTICLE DA, PART 6, OF THE SALE BY REFERENCE PAMPHLET, SPECIFICALLY PRECLUDES A PURCHASER FROM EXERCISING A CORRESPONDING RIGHT AND WITHDRAWING ITS BID. THE FACT THAT THE SUBJECT ITEMS MAY HAVE BEEN INCORRECTLY RELEASED BEFORE PAYMENT IS A MINOR IRREGULARITY WHICH IN NO WAY AFFECTS THE VALIDITY OF THE CONTRACT. FURTHER, LEGAL TITLE MUST BE DISTINGUISHED FROM MERE POSSESSION. UNDER THE CONTRACT TERMS THERE CAN BE NO TRANSFER OF TITLE ABSENT THE COMPANY'S FULL TENDER OF THE PURCHASE PRICE. ACCORDINGLY, SINCE THERE EXISTS NO BASIS FOR ALLOWING THE REQUESTED REFORMATION OR RECISSION, THE BIDDER MAY PAY THE BALANCE OF THE PURCHASE PRICE AND OBTAIN TITLE, OR IT MAY RENOUNCE THE CONTRACT AND FORFEIT ITS 20 -PERCENT BID DEPOSIT.

TO SURPLUS TIRE SALES:

WE REFER TO YOUR LETTERS OF DECEMBER 31, 1971, AND JANUARY 1, 1972, REQUESTING RECONSIDERATION OF OUR DECISION OF DECEMBER 29, 1971, WHICH DENIED YOUR REQUEST FOR RESCISSION OR REFORMATION OF CONTRACT NO. 44 1080- 102, AWARDED UNDER INVITATION FOR BIDS (IFB) NO. 44-1080, ISSUED BY THE DEFENSE SURPLUS SALES OFFICE (DSSO), OAKLAND, CALIFORNIA, FOR THE SALE OF SURPLUS PROPERTY.

AT A SURPLUS PROPERTY SALE CONDUCTED DECEMBER 8, 1970, AT SHARPE ARMY DEPOT, STOCKTON, CALIFORNIA, YOU WERE HIGH BIDDER IN THE AUCTION SALE OF ITEM NO. 149 OF THE IFB, DESCRIBED AS "MARINE FLANGE ASSEMBLY," 87 EACH, ESTIMATED TOTAL WEIGHT 83,000 POUNDS. ALTHOUGH THE ESTIMATED TOTAL WEIGHT OF THE FLANGES WAS INCORRECTLY LISTED IN THE IFB, THE IFB SPECIFICALLY STATED THAT THE FLANGES WERE TO BE SOLD BY THE UNIT AND THAT ESTIMATES OF THE WEIGHT OF PROPERTY SOLD BY THE UNIT WERE EXPRESSLY EXCLUDED FROM WARRANTY BY THE IFB. FURTHERMORE, OUR OFFICE HAS RULED CONSISTENTLY THAT THE HOLDING ACTIVITY IS HELD TO THE STANDARD OF USING THE BEST INFORMATION AVAILABLE WHEN DESCRIBING SURPLUS PROPERTY FOR SALE AND THAT THE STANDARD IS SATISFIED WHEN THE PURCHASE DESCRIPTION IS BASED UPON THE TURN-IN DOCUMENT, AS WAS DONE BY DSSO IN THE PRESENT CASE. FINALLY, ALTHOUGH THE PROPERTY DISPOSAL OFFICER, CONTRARY TO REGULATIONS REQUIRING FULL PAYMENT BEFORE DELIVERY OF SURPLUS PROPERTY, RELEASED THE FLANGES TO YOUR CARRIER BEFORE FULL PAYMENT WAS MADE, WE CONCLUDED THAT SUCH IRREGULARITY DID NOT AFFECT THE STATUS OF THE CONTRACT ALREADY CONSUMMATED BETWEEN YOU AND THE GOVERNMENT. THEREFORE, UNDER THE TERMS OF THE IFB, A VALID AND BINDING OFFER WAS CONSUMMATED BY ACCEPTANCE OF YOUR HIGH BID.

IN YOUR LETTERS OF DECEMBER 31, 1971, AND JANUARY 1, 1972, ALTHOUGH NO NEW ISSUES OF FACT OR LAW ARE RAISED, YOU REPEAT ALLEGATIONS OF YOUR ORIGINAL PETITION AND PRESENT OTHER QUESTIONS RELATED TO OUR DECISION.

WE WISH TO EMPHASIZE THAT YOUR ORIGINAL PETITION RECEIVED OUR CAREFUL CONSIDERATION. ON THE BASIS OF THE FACTS PRESENTED BY YOU, WHICH WERE SUBSTANTIALLY AFFIRMED BY DSSO, WE CONCLUDED, UNDER THE IFB AND THE REGULATIONS GOVERNING SURPLUS SALES, THAT THERE WAS NO GROUND FOR RESCISSION OR REFORMATION OF THE CONTRACT.

YOU ALLEGE THAT WE DID NOT DISCUSS YOUR CONTENTIONS CONCERNING THE FAILURE OF GOVERNMENT EMPLOYEES TO OBSERVE THE TERMS OF PARAGRAPH 8 OF THE GENERAL SALES TERMS AND CONDITIONS OF THE IFB, REQUIRING THAT SURPLUS PROPERTY BE RELEASED TO THE PURCHASER ONLY UPON FULL PAYMENT AND THAT ALL ARRANGEMENTS AND EXPENSE FOR TRANSPORTATION OF THE SURPLUS PROPERTY BE BORNE BY THE PURCHASER. IN THIS REGARD, NEITHER DSSO NOR OUR OFFICE DISPUTED YOUR ALLEGATION THAT, UNDER THE TERMS OF THE IFB, THE FLANGES WERE INCORRECTLY RELEASED BEFORE PAYMENT. HOWEVER, EVEN ASSUMING, AS YOU ALLEGE, THAT YOU GAVE NO AUTHORIZATION TO THE SHIPPER TO REMOVE THE FLANGES FROM GOVERNMENT PROPERTY, THIS AFFORDS NO BASIS TO RESCIND THE SALES CONTRACT.

YOU NEXT CONTEND THAT THE STATEMENT IN OUR DECISION THAT ONCE AN ITEM HAS BEEN "KNOCKED DOWN" BY THE AUCTIONEER, THE PURCHASER MAY NOT THEREAFTER WITHDRAW HIS BID, IS ERRONEOUS. YOU CITE A PERSONAL EXPERIENCE IN WHICH YOU BID ON THE WRONG ITEM BECAUSE THE ITEM ON WHICH YOU INTENDED TO BID WAS NOT PROPERLY IDENTIFIED BY GOVERNMENT PERSONNEL. IN THAT INSTANCE, THE CONTRACTING OFFICER ALLOWED WITHDRAWAL OF YOUR BID EVEN THOUGH THE ITEM HAD BEEN "KNOCKED DOWN." ITEM (4) OF ARTICLE DA, PART 6, OF THE SALE BY REFERENCE PAMPHLET WHICH WAS A PART OF THE INVITATION IN THE SUBJECT CASE AND FROM WHICH OUR QUOTE WAS EXTRACTED, READS IN FULL AS FOLLOWS:

"IN THE EVENT OF A DISPUTE AS TO THE AMOUNT BID, ITEM OR ITEM NUMBER, AND/OR PADDLE NUMBER OF A BIDDER, THE SALES CONTRACTING OFFICER RESERVES THE RIGHT TO REOFFER THE ITEM IN QUESTION. ONCE AN ITEM IS 'KNOCKED DOWN' THE PURCHASER MAY NOT WITHDRAW THE BID."

THUS, WHILE THE CONTRACTING OFFICER RESERVES THE RIGHT TO REOFFER AN ITEM AFTER "KNOCK DOWN" WHERE A MISTAKE HAS BEEN MADE AS WAS THE CASE IN THE EXAMPLE CITED BY YOU, THE BIDDER HAS NO CORRESPONDING RIGHT TO INVALIDATE AN OTHERWISE PROPER AWARD AFTER THE ITEM IS "KNOCKED DOWN."

CONCERNING THE STANDARD TO WHICH THE SALES CONTRACTING OFFICER AND OTHER GOVERNMENT EMPLOYEES SHOULD BE HELD IN PREPARING THE IFB FOR SALE OF SURPLUS PROPERTY, WE AGREE THAT THEY SHOULD MAKE EVERY REASONABLE EFFORT TO HAVE FULL KNOWLEDGE OF THE PROPERTY OFFERED FOR SALE AND TO DESCRIBE IT AS ACCURATELY AS POSSIBLE. HOWEVER, IN MANY DECISIONS ON THE SALE OF SURPLUS PROPERTY, OUR OFFICE HAS HELD THAT THE STANDARD OF REASONABLENESS EXPRESSED IN THE BEST AVAILABLE INFORMATION RULE SET OUT IN THE SALE BY REFERENCE PAMPHLET DOES NOT REQUIRE GOVERNMENT EMPLOYEES CHARGED WITH PREPARING PROPERTY DESCRIPTIONS FOR SURPLUS SALES TO VERIFY THE ACCURACY OF ESTIMATED WEIGHTS BEYOND THE INFORMATION LISTED ON TURN-IN DOCUMENTS PREPARED BY THE GOVERNMENT AGENCY WHICH HAD THE PROPERTY IN ITS POSSESSION. SEE 50 COMP. GEN. 28 (1970). THE REASON FOR THE LIMITATION ON THE GOVERNMENT'S LIABILITY IS BASED ON THE NATURE OF SURPLUS SALES INVOLVING LARGE QUANTITIES OF UNWANTED PROPERTY THE NATURE AND EXTENT OF WHICH IS NOT ORDINARILY KNOWN TO THE DISPOSAL OFFICIALS BY MEANS OTHER THAN THE SO-CALLED "TURN-IN" DOCUMENTS. THEREFORE, THE GOVERNMENT PUTS A REASONABLE LIMITATION, EXPLAINED TO BIDDERS IN THE IFB, ON ITS LIABILITY FOR THE ACCURACY OF WEIGHT ESTIMATES OF PROPERTY SOLD BY THE UNIT. SEE DADOURIAN EXPORT CORPORATION V UNITED STATES, 291 F.2D 178, 182 (1961). IN SPITE OF YOUR CONTENTIONS, WE MUST CONCLUDE THAT THE STANDARD OF USING THE BEST AVAILABLE INFORMATION WAS FOLLOWED WHEN ESTIMATES TAKEN FROM THE TURN IN DOCUMENTS WERE USED IN THE IFB.

YOU ALSO CHALLENGE THE VALIDITY OF THE CONTRACT ON THE BASIS OF THE FOLLOWING PROVISIONS OF THE GENERAL SALE TERMS AND CONDITIONS OF THE IFB:

"7. TITLE. UNLESS OTHERWISE PROVIDED IN THE INVITATION, TITLE TO THE PROPERTY SOLD HEREUNDER SHALL VEST IN THE PURCHASER AS AND WHEN REMOVAL IS EFFECTED. ***

"8. DELIVERY, LOADING, AND REMOVAL OF PROPERTY. (A) UNLESS OTHERWISE PROVIDED IN THE INVITATION, THE PURCHASER SHALL BE ENTITLED TO OBTAIN THE PROPERTY UPON FULL PAYMENT THEREFOR, WITH DELIVERY BEING MADE ONLY FROM THE EXACT PLACE WHERE THE PROPERTY IS LOCATED WITHIN THE INSTALLATION. THE PURCHASER MUST MAKE ALL ARRANGEMENTS NECESSARY FOR PACKING, REMOVAL, AND TRANSPORTATION OF PROPERTY. THE GOVERNMENT WILL NOT ACT AS LIAISON IN ANY FASHION BETWEEN THE PURCHASER AND CARRIER, NOR WILL THE GOVERNMENT RECOMMEND A SPECIFIC COMMON CARRIER. *** "

YOU ARGUE THAT, ALTHOUGH FULL PAYMENT HAS NOT BEEN MADE FOR THE PROPERTY, TITLE IS VESTED IN YOU BECAUSE IT IS IN YOUR POSSESSION, STATING:

"I RESPECTFULLY CONTEND THAT ARTICLE 7, P.2, PT. 2, SALE BY REFERENCE PAMPHLET PROVIDES THAT ALL THAT IS NECESSARY FOR THE PURCHASER TO OBTAIN TITLE TO THE PROPERTY, IS THAT THE PROPERTY BE REMOVED AND THAT TITLE WILL VEST IN THE PURCHASER EFFECTIVE ON REMOVAL. THERE IS NOTHING STATED IN SAID ARTICLE 7 THAT PRIOR TO TITLE BEING VESTED IN THE PURCHASER, THAT PAYMENT IN FULL FOR THE PROPERTY IS A CONDITIONAL PRECEDENT REQUIRED OF THE PURCHASER PRIOR TO OBTAINMENT OF TITLE."

WE DO NOT AGREE. UNDER THE TERMS AND CONDITIONS OF THE CONTRACT OF SALE, THERE CAN BE NO TRANSFER OF TITLE WITHOUT PAYMENT OF THE CONTRACT CONSIDERATION. ALSO, LEGAL TITLE TO PROPERTY MUST BE DISTINGUISHED FROM MERE POSSESSION. SINCE THERE HAS BEEN NO TRANSFER OF TITLE TO YOU, THE GOODS ARE MERELY IN YOUR POSSESSION WITH TITLE IN THE GOVERNMENT UNTIL FULL PAYMENT OF THE PURCHASE PRICE.

ALTHOUGH THERE IS NO BASIS FOR RESCISSION OR REFORMATION OF THE SALES CONTRACT, THE OPTIONS OFFERED BY DEFENSE LOGISTICS SERVICES CENTER ARE AVAILABLE TO YOU IN RESOLUTION OF THE MATTER. YOU MAY PAY THE BALANCE OF THE PURCHASE PRICE UNDER THE CONTRACT AND THEREBY OBTAIN TITLE TO THE FLANGES, OR YOU MAY RENOUNCE THE CONTRACT UNDER ARTICLE 9 AND FORFEIT YOUR 20-PERCENT BID DEPOSIT. IF YOU CHOOSE THE LATTER COURSE, THE FLANGES SHOULD BE RETURNED TO THE GOVERNMENT WHICH WOULD BE RESPONSIBLE UNDER ARTICLE 15 FOR THE TRANSPORTATION AND STORAGE CHARGES ATTRIBUTABLE TO THE MISTAKEN RELEASE OF FLANGES WITHOUT FULL PAYMENT.