B-135334, MARCH 18, 1958, 37 COMP. GEN. 605

B-135334, MARCH 18, 1958, 37 COMP. GEN. 605

CONTRACTS - LIQUIDATED DAMAGES - DELIVERY DELAY - TIME ESTABLISHMENT ASSESSMENT OF LIQUIDATED DAMAGES ON ACCOUNT OF REJECTION OF A PORTION OF MATERIAL WITH RESULTING DELIVERY DELAY AGAINST A CONTRACTOR WHO RECEIVED THE AWARD ON BASIS THAT HIS BID WAS THE ONLY ONE MEETING THE GOVERNMENT'S FULL QUANTITY REQUIREMENTS RATHER THAN ON THE BASIS THAT OTHER BIDDERS MAY NOT HAVE MET THE SHORT DELIVERY REQUIREMENTS OF THE INVITATION IS IMPROPER. UNDER AN INVITATION WHICH SPECIFIED A DEFINITE DATE ON WHICH SUPPLIES WERE TO BE AVAILABLE FOR INSPECTION, A BIDDER WHO DID NOT PROPOSE TO MAKE THE MATERIAL AVAILABLE FOR INSPECTION BEFORE THE DATE SPECIFIED MAY NOT BE REGARDED AS HAVING RECEIVED THE AWARD ON THE BASIS OF A DELIVERY TIME LESS THAN THAT OF ANY OF THE OTHER BIDDERS TO JUSTIFY THE ASSESSMENT OF LIQUIDATED DAMAGES MEASURED ON THE BASIS OF THE DIFFERENCE BETWEEN THE PRICE QUOTED BY ONE OF THE OTHER BIDDERS AND THE CONTRACTOR'S PRICE FOR THE AMOUNT OF MATERIAL WHICH WAS REJECTED ON INSPECTION.

TO THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, MARCH 18, 1958:

REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 21, 1958, REQUESTING A DECISION AS TO THE PROPRIETY OF THE ACTION TAKEN BY YOUR AGENCY IN WITHHOLDING $10,376.32 FROM PAYMENTS OTHERWISE DUE THE LEBANON CHEMICAL COMPANY, LEBANON, PENNSYLVANIA, FOR APPROXIMATELY 975,000 POUNDS OF " DDT- 75 PERCENT WATER-1DISPERSIBLE POWDER," FURNISHED UNDER CONTRACT NO. GS-OOS -2750-ICA, AWARDED TO THAT COMPANY ON MAY 9, 1956, PURSUANT TO INVITATION FOR BIDS NO. FNW-4Q-66332-A-5-1-56, ISSUED APRIL 18, 1956, WITH BIDS SCHEDULED FOR OPENING ON MAY 1, 1956.

WE ARE ADVISED THAT THE INVITATION FOR BIDS WAS ISSUED UPON RECEIPT OF A REQUISITION FROM THE INTERNATIONAL COOPERATION ADMINISTRATION CALLING FOR THE PROCUREMENT OF A LARGE QUANTITY OF DDT ON EXTREMELY SHORT DELIVERY TERMS. THE LEBANON CHEMICAL COMPANY BID ON 975,000 POUNDS OF SUCH MATERIAL, QUOTING A PRICE OF $0.2945 PER POUND. ALTHOUGH THE GOVERNMENT'S TOTAL REQUIREMENT DOES NOT APPEAR TO BE DISCLOSED IN THE INVITATION, BID AND AWARD FORM SUBMITTED WITH YOUR LETTER, IT HAS BEEN ALLEGED IN A MEMORANDUM PREPARED ON BEHALF OF THE CONTRACTOR THAT THE INVITATION REQUESTED PRODUCERS TO SUBMIT BIDS BY MAY 1, 1956, TO SUPPLY 7,840,000 POUNDS OF MATERIAL TO BE AVAILABLE FOR INSPECTION BY MAY 16, 1956, AND THAT A TOTAL OF ONLY 5,935,000 POUNDS WAS OFFERED AT A PRICE LOWER THAN THAT OF THE LEBANON CHEMICAL COMPANY.

DELIVERIES OF THE 975,000 POUNDS OF MATERIAL BY THE LEBANON CHEMICAL COMPANY WERE EVENTUALLY TO BE MADE AS FOLLOWS: 200,000 POUNDS, FAS VESSEL PHILADELPHIA, PENNSYLVANIA; 450,000 POUNDS, FAS VESSEL BALTIMORE, MARYLAND; AND 325,000 POUNDS, FAS VESSEL SAVANNAH, GEORGIA. WITH RESPECT TO TIME OF DELIVERY AND THE POSSIBLE ASSESSMENT OF LIQUIDATED DAMAGES, THE INVITATION PROVIDED AS FOLLOWS:

TIME OF DELIVERY: FOR THE PURPOSE OF THIS INVITATION," TIME OF DELIVERY" MEANS DATE WHEN MATERIAL IS REQUIRED TO BE AVAILABLE AT CONTRACTOR'S PLANT FOR INSPECTION. TIME OF DELIVERY IS OF THE ESSENCE IN EVALUATING BIDS AND MAKING AWARDS FOR THIS REQUIREMENT. MATERIAL IS REQUIRED TO BE AVAILABLE AT CONTRACTOR'S PLANT FOR INSPECTION NOT LATER THAN MAY 16, 1956. ALTHOUGH NOT OF THE ESSENCE IN EVALUATING BIDS AND MAKING AWARDS FOR THIS REQUIREMENT, MATERIAL SHOULD BE SCHEDULED FOR DELIVERY AT U.S. PORTS FOR STEAMSHIP SAILING ON OR ABOUT MAY 22, 1956.

FOR ANY SUPPLIES DELIVERED AFTER THE SPECIFIED TIME OF DELIVERY AND ACCEPTED, THE PRICE PAYABLE TO THE CONTRACTOR, IF HIGHER THAN THAT AT WHICH AWARD WOULD HAVE BEEN MADE IF TIME OF DELIVERY HAD NOT BEEN A FACTOR, SHALL BE SUCH LOWER PRICE IRRESPECTIVE OF WHETHER OR NOT THE DELAY IS EXCUSABLE UNDER ARTICLE 11 OF THE GENERAL PROVISIONS ( STANDARD FORM 32).

IN REGARD TO THE REQUIRED DELIVERY OF 450,000 POUNDS OF DDT FAS VESSEL BALTIMORE, MARYLAND, IT IS REPORTED THAT 198,400 POUNDS OF THIS MATERIAL WERE REJECTED AT THE SUBCONTRACTOR'S PLANT AT ELKTON, MARYLAND, BECAUSE OF THE FAILURE OF THE MATERIAL TO PASS THE TROPICAL STORAGE SUSPENSIBILITY TEST REQUIRED BY APPLICABLE ICA SPECIFICATION. ON ACCOUNT OF THIS REJECTION AND THE RESULTING FAILURE OF THE CONTRACTOR TO MEET THE CONTRACT DELIVERY REQUIREMENTS, THE SUM OF $10,376.32 WAS DEDUCTED FROM THE CONTRACT PRICE AS LIQUIDATED DAMAGES. IT APPEARS THAT SUCH AMOUNT WAS COMPUTED ON THE BASIS OF THE DIFFERENCE BETWEEN A PRICE OF $0.2422 PER POUND QUOTED BY ONE OF THE OTHER BIDDERS AND THE CONTRACT PRICE OF $0.2945 PER POUND FOR 198,400 POUNDS OF MATERIAL.

YOU REFER TO THE VARIOUS CONTENTIONS MADE ON BEHALF OF THE CONTRACTOR IN THE MATTER AND IT HAS BEEN INDICATED THAT THE STATEMENTS MADE IN SUPPORT OF SUCH CONTENTIONS ARE FACTUALLY CORRECT INSOFAR AS YOUR AGENCY CAN DETERMINE. ALSO, FROM THE CONTENTS OF YOUR LETTER IT IS APPARENT THAT YOUR AGENCY BELIEVES IT TO BE VERY QUESTIONABLE WHETHER THE ASSESSMENT OF LIQUIDATED DAMAGES WAS PROPER IN THE CIRCUMSTANCES.

WE CONSIDERED THE QUESTION AS TO THE PROPRIETY OF AN ASSESSMENT MADE AS LIQUIDATED DAMAGES UNDER A CONTRACT COVERING A SIMILAR TYPE OF PROCUREMENT IN THE CITED DECISIONS OF B-131986, JULY 23, 1957, AND B 131986, DECEMBER 6, 1957, 37 COMP. GEN. 392. HOWEVER, IT APPEARS TO BE NECESSARY TO DISCUSS ONLY THE CONTENTION MADE IN THE PRESENT CASE THAT LIQUIDATED DAMAGES WERE NOT PROPERLY ASSESSABLE FOR THE REASON THAT ALL BIDS OFFERING A PRICE LOWER THAN THAT OF THE LEBANON CHEMICAL COMPANY WOULD NOT HAVE MET THE GOVERNMENT'S FULL REQUIREMENTS AND WOULD, IN FACT, HAVE BEEN 1,905,000 POUNDS SHORT OF SUCH REQUIREMENTS. THUS, IF THE STATEMENTS MADE ON BEHALF OF THE CONTRACTOR IN THIS MATTER ARE CORRECT, IT IS OBVIOUS THAT THE AWARD MADE TO THE LEBANON CHEMICAL COMPANY WAS NOT INFLUENCED IN ANY MANNER BY THE FACT THAT SOME OF THE LOW BIDDERS MAY NOT HAVE AGREED TO MAKE THE MATERIALS AVAILABLE FOR INSPECTION ON OR BEFORE MAY 16, 1956, AND, ASSUMING THAT THE TERMS OF THE INVITATION SO REQUIRED, TO REPLACE ANY REJECTED QUANTITIES IN SUFFICIENT TIME TO PERMIT DELIVERY OF ACCEPTABLE MATERIALS TO UNITED STATES PORTS FOR STEAMSHIP SAILING ON OR ABOUT MAY 22, 1956.

IN ADDITION, SO FAR AS THE STATED MEASURE FOR THE ASSESSMENT OF LIQUIDATED DAMAGES IS CONCERNED, IT IS TO BE NOTED THAT THE INVITATION FOR BIDS DID NOT PERMIT THE CONSIDERATION OF OFFERS WHICH PROPOSED TO MAKE THE SUPPLIES AVAILABLE FOR INSPECTION AT ANY TIME SUBSEQUENT TO MAY 16, 1956, AND THAT THE LEBANON CHEMICAL COMPANY DID NOT PROPOSE TO MAKE THE MATERIAL AVAILABLE FOR INSPECTION AT ANY TIME BEFORE THAT DATE. THEREFORE, FOR THIS REASON ALONE, IT COULD NOT REASONABLY BE HELD THAT THE LEBANON CHEMICAL COMPANY RECEIVED AN AWARD ON THE BASIS OF HAVING PROPOSED A DELIVERY TIME WHICH WAS LESS THAN THAT OF ANY OF THE OTHER BIDDERS. AS A MATTER OF FACT, THE AWARD WAS NOT MADE UNTIL MAY 9, 1956, AND IT IS ALSO APPARENT--- SINCE THE DATE OF AVAILABILITY FOR INSPECTION AS REQUIRED IN THE INVITATION WAS ONLY 15 DAYS SUBSEQUENT TO THE SCHEDULED DATE FOR OPENING OF BIDS--- THAT BIDDERS WERE NOT EXPECTED TO SPECIFY AN EARLIER DATE THAN MAY 16, 1956, FOR WHICH THE MATERIAL OFFERED WOULD BE AVAILABLE FOR INSPECTION BY THE GOVERNMENT.

ACCORDINGLY, YOU ARE ADVISED THAT, REGARDLESS OF ANY QUESTION AS TO WHETHER OR NOT THE CONTRACTOR BREACHED THE CONTRACT DELIVERY PROVISIONS, EVEN THOUGH 975,000 POUNDS OF MATERIAL APPEAR TO HAVE BEEN MADE AVAILABLE FOR INSPECTION ON MAY 16, 1956, WE ARE OF THE OPINION THAT THERE EXISTED NO LEGAL BASIS FOR THE ASSESSMENT OF LIQUIDATED DAMAGES IN THIS CASE, AND THAT THE SUM OF $10,376.32 WAS IMPROPERLY WITHHELD FROM PAYMENT UNDER THE CONTRACT.