B-133615, OCTOBER 15, 1957, 37 COMP. GEN. 249

B-133615, OCTOBER 15, 1957, 37 COMP. GEN. 249

CONTRACTS - SPECIFICATIONS - AMBIGUOUS - LIABILITY FOR GOVERNMENT FURNISHED MATERIALS A CLOTHING MANUFACTURING CONTRACT WHICH INCLUDES IN THE BID SCHEDULE A PROVISION RELIEVING THE CONTRACTOR OF LIABILITY FOR THE RETURN OF SCRAP OR WASTE FROM THE GOVERNMENT-FURNISHED MATERIALS AND INCLUDES IN A MIMEOGRAPHED FORM MADE A PART OF THE GENERAL PROVISIONS A REQUIREMENT THAT THE CONTRACTOR ACCOUNT FOR THE WASTE MATERIALS IS AMBIGUOUS AND, IN ABSENCE OF EVIDENCE OF THE ACTUAL INTENT OF THE PARTIES, MUST BE CONSTRUED AGAINST THE GOVERNMENT; THEREFORE, THE CONTRACTING AGENCY MAY NOT ASSESS THE CONTRACTOR FOR THE VALUE OF THE SCRAP ON HAND AT THE TIME OF COMPLETION OF THE CONTRACT.

TO THE SECRETARY OF THE NAVY, OCTOBER 15, 1957:

REFERENCE IS MADE TO LETTER DATED AUGUST 16, 1957, FROM THE ASSISTANT SECRETARY OF THE NAVY ( FINANCIAL MANAGEMENT), REQUESTING A DECISION AS TO THE LIABILITY OF MYRNA KNITWEAR, INC., NEW YORK CITY, FOR THE VALUE OF SCRAP MATERIALS UNACCOUNTED FOR UNDER CONTRACT NO. N140-62236S-39778B, DATED JUNE 11, 1952.

THE CONTRACT, AS AMENDED, PROVIDED FOR THE MANUFACTURE BY THE CONTRACTOR, OUT OF GOVERNMENT-FURNISHED MATERIALS, OF APPROXIMATELY 350,000 PAIRS OF DRAWERS, COTTON, SHORT, FOR THE TOTAL ESTIMATED CONSIDERATION OF $50,715. THE GOVERNMENT WAS OBLIGATED TO FURNISH AND DELIVER TO THE CONTRACTOR SUFFICIENT CLOTH TO FABRICATE THE ITEMS, BUT ANY ADDITIONAL AMOUNT REQUIRED WOULD BE AT THE EXPENSE OF THE CONTRACTOR.

UPON COMPLETION OF THE CONTRACT, LATE IN 1953, THE CONTRACTOR HAD ON HAND AT ITS PLANT, AND UNACCOUNTED FOR, A TOTAL OF 2,396 REJECTED GARMENTS, ALONG WITH 8,875.51 POUNDS OF SCRAP MATERIALS WHICH HAD BEEN GENERATED IN THE PERFORMANCE OF THE CONTRACT SERVICES. IT IS ADMINISTRATIVELY PROPOSED TO CHARGE THE CONTRACTOR WITH $922.56, OF WHICH $548.78 REPRESENTS THE VALUE OF THE GOVERNMENT-FURNISHED MATERIALS UTILIZED IN THE MANUFACTURE OF THE 2,396 REJECTED GARMENTS, COMPUTED AT $0.27 PER YARD, AND $433.78 THE FAIR MARKET VALUE OF THE 8,875.51 YARDS OF SCRAP ON HAND AT THE COMPLETION OF THE CONTRACT, COMPUTED AT $0.05 PER YARD.

THE CONTRACTOR HAS DISCLAIMED LIABILITY FOR THE SCRAP MATERIALS GENERATED UNDER THE CONTRACT, BASING HIS ACTION UPON THE FOLLOWING STIPULATION WHICH APPEARS ON PAGE 7 OF THE BID SCHEDULE:

THE CONTRACTOR WILL NOT BE REQUIRED TO RETURN WASTE MATERIALS

OR CLIPPINGS.

CONVERSELY, THE CONTRACTING AGENCY'S POSITION THAT THE CONTRACTOR IS LIABLE FOR THE VALUE OF THESE SCRAP MATERIALS IS BASED UPON CERTAIN STIPULATIONS INCORPORATED INTO A MIMEOGRAPHED FORM, ENTITLED CLAUSE "A," MADE A PART OF THE GENERAL PROVISIONS OF THE CONTRACT, WHICH READ:

(C) TITLE TO THE GOVERNMENT-1FURNISHED PROPERTY SHALL REMAIN IN THE GOVERNMENT. * * *

(H) UPON THE COMPLETION OF THIS CONTRACT * * * THE CONTRACTOR SHALL SUBMIT * * * INVENTORY SCHEDULES COVERING ALL ITEMS OF GOVERNMENT 1FURNISHED PROPERTY NOT CONSUMED IN THE PERFORMANCE OF THIS CONTRACT (INCLUDING ANY RESULTING SCRAP) * * * AND SHALL DELIVER OR MAKE SUCH OTHER DISPOSAL OF SUCH GOVERNMENT-1FURNISHED PROPERTY, AS MAY BE DIRECTED OR AUTHORIZED BY THE CONTRACTING OFFICER. RECOVERABLE SCRAP FROM GOVERNMENT- 1FURNISHED PROPERTY SHALL BE REPORTED * * * AS THE CONTRACTING OFFICER MAY DIRECT. THE NET PROCEEDS OF ANY SUCH DISPOSAL SHALL BE CREDITED TO THE CONTRACT PRICE OR SHALL BE PAID IN SUCH OTHER MANNER AS THE CONTRACTING OFFICER MAY DIRECT.

ARTICLE 29 OF THE ADDITIONAL GENERAL PROVISIONS OF THE CONTRACT, ENTITLED " ORDER OF PREFERENCE" READS:

TO THE EXTENT OF ANY INCONSISTENCY BETWEEN THE SCHEDULE (BIDDING) OR THE TERMS AND CONDITIONS OF THE INVITATION FOR BIDS OR THE GENERAL PROVISIONS, AND ANY SPECIFICATIONS OR OTHER PROVISIONS WHICH ARE MADE A PART OF THIS CONTRACT BY REFERENCE OR OTHERWISE, THE SCHEDULE, THE TERMS AND CONDITIONS OF THE INVITATION FOR BIDS, AND THE GENERAL PROVISIONS SHALL CONTROL. THE EXTENT OF ANY INCONSISTENCY BETWEEN THE SCHEDULE AND THE TERMS AND CONDITIONS OF THE INVITATION FOR BIDS OR THE GENERAL PROVISIONS, THE SCHEDULE SHALL CONTROL.

THE NAVY PURCHASING OFFICE, BROOKLYN, NEW YORK, ALLEGES THAT THE SPECIFIC TYPEWRITTEN CLAUSE ON PAGE 7 OF THE SCHEDULE, PROVIDING THAT THE CONTRACTOR WILL NOT BE REQUIRED TO RETURN WASTE MATERIALS OR CLIPPINGS, WHEN INTERPRETED IN THE LIGHT OF THE CONTRACT AS A WHOLE, MERELY WAS INTENDED TO MEAN THAT THE CONTRACTOR WAS TO BE RELIEVED OF ANY DUTY OR OBLIGATION WITH RESPECT TO THE "PHYSICAL RETURN" OF SUCH MATERIALS TO THE GOVERNMENT. ALSO, THE PURCHASING ACTIVITY MAINTAINS THAT UNDER THE QUOTED PROVISIONS OF CLAUSE "A," THE CONTRACTOR IS REQUIRED, UPON COMPLETION OF THE CONTRACT, (1) TO DELIVER TO THE GOVERNMENT, OR MAKE SUCH OTHER DISPOSAL OF THE MATERIALS (INCLUDING SCRAP NOT CONSUMED IN THE PERFORMANCE OF THE CONTRACT, AS THE CONTRACTING OFFICER MIGHT DIRECT, AND ALSO, (2) ACCOUNT TO THAT AGENCY FOR THE NET PROCEEDS REALIZED FROM ANY DISPOSAL OR SALE OF ALL SCRAP MATERIALS.

WE BELIEVE THAT A REASONABLE INTERPRETATION OF THE QUOTED CLAUSE OF THE CONTRACT IS THAT IT WAS DESIGNED TO RELIEVE THE CONTRACTOR OF ALL LIABILITY WITH RESPECT TO SCRAP OR WASTE MATERIALS GENERATED THEREUNDER. THE CLAUSE IS SPECIFIC IN CHARACTER AND, HAVING BEEN INCORPORATED INTO THE SCHEDULE PORTION OF THE CONTRACT, NECESSARILY MUST BE ACCORDED PRECEDENCE OVER ALL OTHER AMBIGUOUS OR INCONSISTENT PROVISIONS AS PROVIDED IN THE AGREEMENT. SEE ERICKSON V. UNITED STATES, 107 F. 04; SOUTH SURETY COMPANY V. GREENEVILLE, 261 ID. 929.

TRUE, AS WAS POINTED OUT BY THE CONTRACTING OFFICE, THE INTENTION OF THE PARTIES TO A CONTRACT ORDINARILY MAY NOT BE GATHERED FROM A SINGLE CLAUSE OR SENTENCE. CITY OF NEW YORK V. UNITED STATES, 113 F.1SUPP. 645. HOWEVER, THERE IS NO EVIDENCE OF RECORD TENDING TO INDICATE THAT THE SPECIFIC LANGUAGE OF THE SCHEDULE WAS NOT INTENDED TO RELIEVE THE CONTRACTOR OF ALL LIABILITY EITHER WITH RESPECT TO THE PHYSICAL RETURN OF SCRAP MATERIALS, OR THE NECESSITY FOR ACCOUNTING THEREFOR TO THE GOVERNMENT. IN ANY EVENT, THERE CAN BE NO SERIOUS DOUBT BUT THAT THE LANGUAGE OF THE CONTRACT, PARTICULARLY INSOFAR AS IT RELATES TO THE CONTRACTOR'S LIABILITY OR ACCOUNTABILITY FOR SCRAP MATERIALS, IS AMBIGUOUS. THIS BEING SO, AND IN VIEW OF THE ABSENCE OF EVIDENCE ESTABLISHING THE ACTUAL INTENTION OF THE CONTRACTING PARTIES, AS REFERRED TO ABOVE, THERE APPEARS PROPER FOR APPLICATION THE WELL ESTABLISHED LEGAL PRINCIPLE THAT AN AMBIGUOUS CONTRACT SHOULD BE CONSTRUED AGAINST ITS AUTHOR--- THE GOVERNMENT, IN THIS INSTANCE. SEE PHOENIX INSURANCE CO. V. SLAUGHTER, 12 WALL. 404; AMERICAN SURETY COMPANY V. PAULY, 170 U.S. 133, 134; PACIFIC HARDWARE COMPANY V. UNITED STATES, 48 C.1CLS. 399, 407.

ACCORDINGLY, IT IS OUR VIEW THAT, UPON THE BASIS OF THE FACTS REPORTED IN THIS MATTER, MYRNA KNITWEAR, INC., DOES NOT APPEAR LEGALLY OBLIGATED TO ACCOUNT FOR THE SCRAP MATERIALS GENERATED UNDER CONTRACT NO. N 140-62236S- 39778B.