B-158145, JAN. 26, 1966

B-158145, JAN. 26, 1966

TO VICE ADMIRAL JOSEPH M. LYLE, DIRECTOR, DEFENSE SUPPLY AGENCY:

REFERENCE IS MADE TO A LETTER (DSAH-G) DATED DECEMBER 6, 1965, WITH ENCLOSURES, FROM R. F. S. HOMANN, ASSISTANT COUNSEL, REQUESTING A DECISION AS TO WHETHER CONTRACT NO. DSA 34-S-5660, DATED JUNE 30, 1965, WITH WABASH SMELTING INC. MAY BE REFORMED. INVITATION FOR BIDS (IFB) 34-S-65-78 ISSUED BY THE DEFENSE SURPLUS SALES OFFICE OFFERED FOR SALE ITEMS OF MISCELLANEOUS GOVERNMENT SCRAP. THE ITEM IN QUESTION, ITEM NUMBER 18, ON PAGE 2 OF THE IFB WAS DESCRIBED AS FOLLOWS:

TABLE

"18. ALUMINUM, SCRAP, CONTAMINATED, DERIVED FROM 40MM

NOSE FUSES THAT HAVE BEEN RUN THROUGH DEACTIVATION FURNACE.

(LOC: OUTSIDE) 100,000 LBS.

SEE SPECIAL CONDITIONS, ARTICLES AH"

IN ADDITION TO THIS INFORMATION, PAGE TWO IN BOLD LARGE TYPE HAD THE FOLLOWING WORDS ,CAUTION--- INSPECT THE PROPERTY" AT THE BOTTOM.

PAGE 11 OF THE IFB WAS ENTITLED "SALE OF GOVERNMENT PROPERTY--- GENERAL SALE TERMS AND CONDITIONS.' AMONG THE CONDITIONS LISTED WERE THE FOLLOWING:

"1. INSPECTION: THE BIDDER IS INVITED, URGED, AND CAUTIONED TO INSPECT THE PROPERTY TO BE SOLD PRIOR TO SUBMITTING A BID. PROPERTY WILL BE AVAILABLE FOR INSPECTION AT THE PLACES AND TIMES SPECIFIED IN THE INVITATION. IN NO CASE WILL FAILURE TO INSPECT CONSTITUTE GROUNDS FOR THE WITHDRAWAL OF A BID AFTER OPENING.

"2. CONDITION AND LOCATION OF PROPERTY: UNLESS OTHERWISE SPECIFICALLY PROVIDED IN THE INVITATION ALL PROPERTY LISTED THEREIN IS OFFERED FOR SALE "AS IS" AND "WHERE IS.' IF IT IS PROVIDED THEREIN THAT THE GOVERNMENT SHALL LOAD, THEN "WHERE IS" MEANS F.O.B. CONVEYANCE AT THE POINT SPECIFIED IN THE INVITATION. THE DESCRIPTION IS BASED ON THE BEST AVAILABLE INFORMATION. HOWEVER, THE GOVERNMENT MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO QUANTITY, KIND, CHARACTER, QUALITY, WEIGHT, SIZE OR DESCRIPTION OF ANY OF THE PROPERTY, OR ITS FITNESS FOR ANY USE OR PURPOSE. EXCEPT AS PROVIDED IN CONDITIONS NO. 8 AND 10, NO REQUEST FOR ADJUSTMENT IN PRICE OR FOR RESCISSION OF THE SALE WILL BE CONSIDERED. THIS IS NOT A SALE BY SAMPLE.

"12. ORAL STATEMENTS AND MODIFICATIONS. ANY ORAL STATEMENT OR REPRESENTATION BY ANY REPRESENTATIVE OF THE GOVERNMENT, CHANGING OR SUPPLEMENTING THIS CONTRACT OR ANY CONDITION THEREOF, IS UNAUTHORIZED AND SHALL CONFER NO RIGHT UPON THE PURCHASER.'

SEVEN BIDS WERE RECEIVED ON ITEM 18 AND RANGED IN PRICE FROM $0.1778 PER POUND TO $0.00135 PER POUND. THE HIGHEST BID RECEIVED ($ .1778) WAS FROM THE WABASH SMELTING COMPANY AND THE SECOND HIGHEST WAS ?0717 FROM ROSENMAN BROS., OTTUMWA, IOWA.

A REVIEW WAS MADE OF THE BIDS AFTER RECEIPT AND IT WAS NOTED THAT A PRICE DIFFERENCE OF $0.105 EXISTED BETWEEN THE BID SUBMITTED BY THE WABASH COMPANY AND THE NEXT HIGHEST BIDDER. IN VIEW OF THE BID DISPARITY, BEFORE MAKING AN AWARD THE MERCHANDISING DIVISION, DEFENSE SURPLUS SALES OFFICE, OKLAHOMA CITY, OKLAHOMA, WAS REQUESTED TO REVIEW THE DESCRIPTION OF ITEM 18 AND TO MAKE A RECOMMENDATION AS TO THE PROPRIETY OF AN AWARD TO WABASH. AWARD WAS RECOMMENDED, BASED PARTLY ON THE FACT THAT SIMILAR PROPERTY HAD NOT BEEN OFFERED FOR SALE ON PREVIOUS OCCASIONS AND THEREFORE A FAIR MARKET APPRAISAL HAD NOT BEEN ESTABLISHED.

ON JUNE 30, 1965, THE AWARD OF CONTRACT DSA 34-S-5660 FOR ITEM 18 OF IFB 34-S-65-78 WAS MADE TO WABASH SMELTING INC., AT ITS BID PRICE OF $0.1778 PER POUND. THEREAFTER ON JULY 28, 1965, THE PROPERTY WAS SHIPPED FROM ITS LOCATION IN HASTINGS NEBRASKA, TO THE SUCCESSFUL BIDDER'S PLANT.

BY LETTER DATED AUGUST 6, 1965, WABASH SMELTING, INC., REQUESTED AN ADJUSTMENT IN PRICE FOR ITEM 18. THEREIN IT WAS POINTED OUT THAT IN A TELEPHONE CONVERSATION WITH A GOVERNMENT EMPLOYEE OF THE PROPERTY DISPOSAL OFFICE, HASTINGS, NEBRASKA, THE PROPERTY WAS DESCRIBED AS BEING CLEAN EXCEPT FOR SOME CONTAMINATION PICKED UP WHEN IT WAS PROCESSED THROUGH A FURNACE. UPON THE ARRIVAL OF THE PURCHASED SURPLUS SCRAP AT ITS PLANT, THE BIDDER FIRST LEARNED OF THE HIGH DEGREE OF CONTAMINATION. IT HAS SINCE BEEN ESTIMATED THAT THE ALUMINUM WAS CONTAMINATED WITH ABOUT 40 PERCENT IRON. IN ITS LETTER OF AUGUST 6 WABASH STATES "WE DO FEEL THAT THE PERCENTAGE OF IRON IS EXCESSIVE AND UNREASONABLE. THE ITEM WAS NOT PROPERLY DESCRIBED, THAT THE CONTAMINATION WAS IN THE FORM OF SURFACE OXIDATION ONLY, THAT THE MATERIAL HAD NOT BEEN MELTED, AND THAT THERE WERE NO OTHER METALS PRESENT.' IT IS CONTENDED BY WABASH THAT THE PRICE DIFFERENTIAL BETWEEN VARIOUS BIDS SHOULD HAVE PUT THE GOVERNMENT ON NOTICE THAT A MISTAKE HAD BEEN MADE. FURTHERMORE, IN ANOTHER LETTER OF SEPTEMBER 14, 1965, THE PURCHASER ASSERTS THAT AN AMBIGUITY EXISTS AS TO THE DEGREE OF CONTAMINATION OF THE ALUMINUM. HE CLAIMS THAT THE IFB SHOULD HAVE REFLECTED THE PERCENTAGE OF CONTAMINATION AS IT DID IN SIMILAR SUBSEQUENT SALES.

BIDS SUBSEQUENTLY ISSUED IFB AFTER IFB 34-S-65-78 FOR IDENTICAL ALUMINUM SCRAP SPECIFY THAT THE SCRAP CONTAINS ABOUT 40 PERCENT CONTAMINATION AND THE BID PRICES RECEIVED RANGE BETWEEN $0.072199 AND $0.075 PER POUND. THIS INFORMATION TENDS TO LEND BELIEF TO THE CONCLUSION THAT THE SALE IN QUESTION SHOULD HAVE STATED 40 PERCENT AS THE DEGREE OF CONTAMINATION.

THE BASIS UPON WHICH THE PURCHASER REQUESTS REFORMATION OF THE CONTRACT IS A MISTAKE IN THE BID WHICH WAS KNOWN TO THE CONTRACTING OFFICER PRIOR TO AWARD. THIS MISTAKE IS ALLEGED TO HAVE BEEN DUE TO THE FACT THAT THE IFB FAILED TO SPECIFY THE DEGREE OF CONTAMINATION OF THE ALUMINUM. SEEMS APPARENT THAT THE BIDDER MADE NO MISTAKE IN ITS BID. NOR WAS THERE A MISTAKE MADE BY THE GOVERNMENT IN DESCRIBING THE SCRAP. FURTHERMORE, SINCE THE DEGREE OF CONTAMINATION WAS NOT INCLUDED IN THE DESCRIPTION, PRESUMABLY BECAUSE IT WAS NOT KNOWN TO THE DISPOSAL OFFICER, IT IS EXCLUDED FROM THE COVERAGE OF THE "GUARANTEED DESCRIPTIONS" CLAUSE.

THE DESCRIPTION OF THE SURPLUS PROPERTY OFFERED FOR SALE UNDER ITEM 18 OF IFB 34-S-65-78 WAS NOT AMBIGUOUS ON ITS FACE. HAD THE PURCHASER INSPECTED THE PROPERTY IN QUESTION AS REQUIRED BY PARAGRAPH 1 ON PAGE 11 OF THE IFB AND THE NOTICE ON THE BOTTOM OF PAGE 2, IT IS BELIEVED THAT AN ESTIMATE OF THE DEGREE OF CONTAMINATION OF THE PROPERTY COULD HAVE BEEN EASILY ASCERTAINED. INSOFAR AS CONCERNS THE CONDITION OF SURPLUS GOODS OFFERED FOR SALE BY THE GOVERNMENT ON AN "AS IS" BASIS WITHOUT WARRANTY OR GUARANTY OF ANY KIND, THE LAW IS CLEAR THAT A BIDDER WHO FAILS TO TAKE ADVANTAGE OF AN OPPORTUNITY TO INSPECT CANNOT SUBSEQUENTLY RECOVER ON THE GROUNDS THAT THE GOODS ARE OF AN INFERIOR QUALITY. 28 COMP. GEN. 306.

THE RELIANCE OF WABASH COMPANY ON THE ORAL REPRESENTATIONS OF A GOVERNMENT EMPLOYEE REGARDING THE DEGREE OF CONTAMINATION OF ITEM 18 IS PRECLUDED BY THE ABOVE-QUOTED PROVISIONS OF PARAGRAPH 12 ON PAGE 11 OF THE IFB.

IN VIEW OF THE FOREGOING, IT MUST BE CONCLUDED THAT NO RELIEF BY WAY OF REFORMATION OF THE CONTRACT PRICE OR OTHERWISE MAY BE GRANTED TO WABASH SMELTING INC., FROM ITS OBLIGATION UNDER THE CONTRACT.