B-135542, APR. 28, 1958

B-135542, APR. 28, 1958

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO A LETTER DATED MARCH 13, 1958, WITH ENCLOSURES, FROM THE ASSISTANT SECRETARY OF THE ARMY (LOGISTICS), SUBMITTING FOR CONSIDERATION AND DECISION A REQUEST OF TULSA ARMY AND NAVY STORE, 209 SOUTH MAIN STREET, TULSA, OKLAHOMA, FOR REFORMATION OR, IN THE ALTERNATIVE, RESCISSION OF THEIR CONTRACT NO. 04-513-OI-/S/-49-58, DATED AUGUST 119, 1957, ON THE GROUNDS IF ALLEGED MISREPRESENTATION OF THE CONDITION OF THE PROPERTY.

BY INVITATION NO. AVI-04-513-S-58-3, ISSUED JULY 19, 1957, SHARPE GENERAL DEPOT, LATHROP, CALIFORNIA, SOLICITED BIDS FOR THE PURCHASE FROM THE GOVERNMENT OF VARIOUS ITEMS OF SURPLUS ,USABLE MATERIAL.' IN RESPONSE TO THE INVITATION, TULSA ARMY AND NAVY STORE SUBMITTED A BID IN THE AMOUNT OF $706.66 ON ITEM NO. 20, ACCOMPANIED BY A BID DEPOSIT OF $150. EIGHT OTHER BIDS ON THAT ITEM WERE RECEIVED, RANGING FROM $40 TO $158.80. THE BID OF TULSA ARMY AND NAVY STORE, BEING THE HIGHEST RECEIVED ON ITEM NO. 20, WAS ACCEPTED AND BECAME THE BASIS OF THE REFERRED-TO CONTRACT. PAYMENT OF $556.66, THE BALANCE OF THE PURCHASE PRICE, WAS MADE ON AUGUST 26, 1957. THE CONTRACT HAS BEEN FULLY PERFORMED AND THE ITEMS COVERED THEREBY DELIVERED.

BY LETTER DATED SEPTEMBER 12, 1957, THE DATE ON WHICH THE SHIPMENT OF THE MATERIAL WAS RECEIVED BY THEM, TULSA ARMY AND NAVY STORE ADVISED THE CONTRACTING OFFICER THAT, WITH THE EXCEPTION OF APPROXIMATELY 50 PERCENT OF THE WHITE PARKA COATS AND TROUSERS, THE MERCHANDISE RECEIVED WAS ,USED," AND THAT THE COTTON SHIRTS ON WHICH THEY BASED PRACTICALLY THEIR ENTIRE BID WERE "USED SOILED AND NEARLY ALL OF THEM TORN" AND SHOULD HAVE BEEN CLASSIFIED AS "USED POOR OR RAGS.' THE CONTRACTOR ALLEGED THAT THE MATERIAL HAD BEEN MISREPRESENTED BECAUSE THE INVITATION ADVERTISED IT AS "UNUSED.' IT APPEARS THAT THE CONTRACTOR DID NOT PERSONALLY INSPECT THE MATERIAL PRIOR SUBMITTING THEIR BID ON ITEM NO. 20, BUT BASED THEIR BID UPON THE DESCRIPTION IN THE INVITATION THAT THE MATERIAL WAS "UNUSED" AND UPON A BREAKDOWN OF THE LOT AS TO QUANTITY, NOMENCLATURE AND SIZE OF THE VARIOUS TYPES OF CLOTHING INCLUDED IN ITEM NO. 20, WHICH WAS FURNISHED BY THE PROPERTY DISPOSAL OFFICER AT THEIR REQUEST FOR USE IN PREPARING THEIR BID. THE CONTRACTOR REQUESTED THAT THE CONTRACT BE CANCELED WITH RETURN OF THE SUPPLIES TO THE DISPOSAL DEPOT AND FREIGHT CHARGES PREPAID TO LATHROP, BUT STATED THAT, UNDER THE CIRCUMSTANCES AND PARTICULARLY BECAUSE OF THE EXCESSIVE FREIGHT CHARGES, THEY PREFERRED A SETTLEMENT ON THE BASIS OF CHARGING THEM WITH THE AMOUNT OF $5 ABOVE THE HIGHEST BID WHICH WAS RECEIVED FROM ANY OTHER BIDDER WHO DID SEE AND EXAMINE THE MERCHANDISE, AND REFUNDING TO THEM THE DIFFERENCE BETWEEN THAT ADJUSTED PRICE AND THEIR BID PRICE.

ON PAGE 9 OF THE INVITATION, THE CLOTHING COMPRISING ITEM NO. 20 WAS DESCRIBED, AS FOLLOWS:

"1 LOT, MISC. CLOTHING CONSISTING OF: TROUSERS, MAN-S; COATS, PARKAS, W/O LINERS; SHIRTS, COTTON, 5 OZ. KHAKI; FRAME, SERVICE CAP., ETC., UNUSED, VARIOURS (SIC) TYPE PACK. T.C. $3,745.20 APPROX. WT. 1,700 LBS.'

THE CONTRACT IN THIS CASE WAS ON STANDARD FORM 114 REVISED AUGUST 1950, AND CONTAINED ON PAGE TWO THEREOF THE USUAL GENERAL SALE TERMS AND CONDITIONS WITH REGARD TO INSPECTION AND DISCLAIMER OF WARRANTY, AND A STATEMENT THAT THE DESCRIPTION WAS "BASED UPON THE BEST AVAILABLE FORMATION.'

REGARDING THE PURCHASER'S ALLEGATION THAT THE MATERIAL WAS MISREPRESENTED AS TO ITS CONDITION, IN THE ADMINISTRATIVE REPORT AND RECOMMENDATION OF CONTRACTING OFFICER, DATED AUGUST 3, 1957, IT IS STATED THAT AN EXAMINATION OF THE TURN-IN SLIP ON WHICH THE QUARTERMASTER SUPPLY SECTION TRANSFERRED ITEM NO. 20 MATERIALS TO THE PROPERTY DISPOSAL OFFICER DISCLOSES THAT THE SEVERAL ITEMS OF CLOTHING COMPRISING THAT ITEM WERE LISTED IN THE "REMARKS" COLUMN AS EITHER CONDITION ,R-3" OR "R-4," AND THAT ACCORDING TO THE DEFINITIONS IN CONDITION CODES IN AR 7566 THESE NOTATIONS INDICATE RESPECTIVELY "USED REPAIRS REQUIRED FAIR" AND "USED REPAIRS REQUIRED POOR.' THE SUCCESSOR CONTRACTING OFFICER STATES THAT, SINCE THE CONDITION OF THE MATERIAL IN QUESTION WAS SHOWN ON THE TRANSFER DOCUMENT AS "USED" AND THIS CONDITION SHOULD HAVE BEEN KNOWN TO THE CONTRACTING OFFICER, THE DESCRIPTION OF THE MATERIAL IN THE INVITATION AS "UNUSED," ALTHOUGH INADVERTENTLY SHOWN, WAS NOT "BASED ON THE BEST AVAILABLE INFORMATION.' IT IS IMPORTANT TO NOTE ALSO THAT NOWHERE IN THE LETTER, DATED JULY 27, 1957, FROM TULSA ARMY AND NAVY STORE TO THE PROPERTY DISPOSAL OFFICER REQUESTING A BREAKDOWN OF THE CLOTHING INCLUDED IN ITEM NO. 20, OR IN THE REPLY THERETO DATED JULY 31, 1957, BY THE ASSISTANT PROPERTY DISPOSAL OFFICER, WAS THE CONDITION "USED" OR "UNUSED" MENTIONED. IT IS ALSO STATED THAT THE DISPARITY BETWEEN THE CONTRACTOR'S BID PRICE OF $706.66 AND THAT OF THE NEXT HIGHEST BIDDER OF $158.58 WAS SO GREAT THAT THE CONTRACTING OFFICER SHOULD HAVE BEEN AWARE THAT A MISTAKE HAD BEEN MADE.

BECAUSE OF THESE FACTS, IT IS THE OPINION OF THE SUCCESSOR CONTRACTING OFFICER THAT, ALTHOUGH PARAGRAPHS 1 AND 2 OF THE GENERAL SALE TERMS AND CONDITIONS WITH REGARD TO INSPECTION AND DISCLAIMER OF WARRANTY WOULD APPEAR TO REQUIRE THE DENIAL OF ANY CLAIM OF THE NATURE HERE MADE, IT WOULD BE UNCONSCIONABLE TO ENFORCE THE CONTRACT AT THE ACCEPTED BID PRICE. THE SUCCESSOR CONTRACTING OFFICER RECOMMENDS DENIAL OF THE CONTRACTOR'S PROPOSAL TO HAVE THE CONTRACT PRICE REDUCED AND ADJUSTED TO $5 ABOVE THE NEXT HIGHEST BID PRICE RECEIVED ON ITEM NO. 20, EXPLAINING THAT, ALTHOUGH TO PERMIT THIS ADJUSTMENT IN PRICE WOULD APPEAR ON ITS FACE TO BE EQUITABLE AND TO RESULT IN A FAIR RETURN TO THE GOVERNMENT, THERE IS NO METHOD FOR ESTABLISHING WHAT PRICE THE CONTRACTOR WOULD HAVE BID HAD THEY KNOWN THAT THE SUPPLIES WERE "USED; " THERE IS NO BASIS FOR ESTABLISHING THE FACTORS UPON WHICH THE OTHER BIDDERS BASED THEIR BIDS; AND, FURTHER, A HIGHER PRICE THAN SUCH ADJUSTED PRICE MIGHT BE OBTAINED BY THE GOVERNMENT ON A RESALE OF THE MATERIAL. IT IS THE SUCCESSOR CONTRACTING OFFICER'S RECOMMENDATION THAT THE CONTRACTOR'S ALTERNATE PROPOSAL BE ACCEPTED, THAT IS, THAT THE CONTRACT BE CANCELED AND THE PURCHASE PRICE BE REFUNDED TO TULSA ARMY AND NAVY STORE, PROVIDED THEY RETURN THE SUPPLIES TO THE DISPOSAL DEPOT AT THEIR OWN EXPENSE.

THE PROPERTY HERE IN QUESTION WAS OFFERED FOR SALE AS SURPLUS. EXAMINATION OF THE RECORD, HOWEVER, CONFIRMS THE CONTRACTOR'S ALLEGATION THAT THE DESCRIPTION IN THE INVITATION OF THE PROPERTY OFFERED FOR SALE UNDER ITEM NO. 20 AS "UNUSED" WAS ERRONEOUS, AND DISCLOSES THAT CORRECT INFORMATION AS TO THE CONDITION OF THE CLOTHING COMPRISING THAT ITEM WAS AVAILABLE WHEN IT WAS LISTED IN THE INVITATION. CONSEQUENTLY, THE ERRONEOUS DESCRIPTION IN THE INVITATION DID NOT FURNISH "THE BEST AVAILABLE INFORMATION" AS STATED IN THE GENERAL SALE TERMS AND CONDITIONS. SEE OUR DECISIONS TO YOU, B 128774, AUGUST 28, 1956, AND B- 129817, JANUARY 7, 1957.

REGARDLESS OF THE FACT THAT TULSA ARMY AND NAVY STORE DID NOT INSPECT THE MATERIAL PRIOR TO SUBMISSION OF THEIR BID--- AS THEY WERE CAUTIONED TO DO- -- AND SUCH NEGLIGENCE CONTRIBUTED TO THE POSITION IN WHICH THEY NOW FIND THEMSELVES, AND NOTWITHSTANDING THE DISCLAIMER OF WARRANTY BY THE GOVERNMENT AS TO THE CONDITION OF THE PROPERTY, IT MUST BE CONCLUDED, IN VIEW OF THE FOREGOING FINDING THAT THE ERRONEOUS DESCRIPTION APPEARING IN THE INVITATION WAS NOT "BASED UPON THE BEST AVAILABLE INFORMATION; " THAT THE ACCEPTANCE OF THE BID OF TULSA ARMY AND NAVY STORE DID NOT RESULT IN A LEGAL AND BINDING CONTRACT; AND THEREFORE RESCISSION OF THE CONTRACT WOULD BE WARRANTED UPON THE RETURN OF THE PROPERTY TO THE DISPOSAL AGENCY. HOWEVER, SINCE THE MATERIAL IS IN THE HANDS OF THE CONTRACTOR A RESCISSION OF THE CONTRACT WOULD PROBABLY INVOLVE A COST TO THE GOVERNMENT OF APPROXIMATELY $114 IN FREIGHT CHARGES FOR THE RETURN OF THE MATERIAL FROM TULSA, OKLAHOMA, TO THE DISPOSAL DEPOT IN LATHROP, CALIFORNIA, AND POSSIBLY THE ADDITIONAL AMOUNT OF $114 ALREADY PAID BY THE CONTRACTOR FOR TRANSPORTATION CHARGES TO TULSA, OKLAHOMA. ALSO, IT IS SPECULATIVE AS TO THE PRICE THE MATERIAL WOULD BRING ON A READVERTISED SALE. CONSIDERING THE LENGTH OF TIME WHICH HAS ELAPSED SINCE THE CONTRACT WAS AWARDED AND, ALSO, THAT THE CONTRACT HAS BEEN COMPLETELY PERFORMED, IT WOULD SEEM TO BE IN THE BEST INTERESTS OF THE GOVERNMENT, IN LIEU OF RESCINDING THE CONTRACT, TO FOLLOW THE RECOMMENDATION OF THE COMMANDER, HEADQUARTERS, SIXTH U.S. ARMY, OF JANUARY 30, 1958, AND ACCEPT THE PROPOSAL OF TULSA ARMY AND NAVY STORE THAT THEIR BID PRICE FOR THE LOT OF MATERIAL IN QUESTION BE REDUCED AND ADJUSTED TO AN AMOUNT $5 MORE THAN THE NEXT HIGHEST BID, NAMELY, $163.58. ACCORDINGLY, THE DIFFERENCE BETWEEN SUCH ADJUSTED CONTRACT PRICE AND THE AMOUNT OF $706.66 ALREADY PAID TO THE GOVERNMENT BY TULSA ARMY AND NAVY STORE MAY BE REFUNDED TO THEM. SEE UNITED STATES V. KOPLIN, 24 F.2D 840, 843; B-121754, NOVEMBER 3, 1954; 37 COMP. GEN. 191, 193, AND CASES CITED THEREIN.

THE PAPERS ACCOMPANYING THE LETTER OF MARCH 13, 1958, WITH THE EXCEPTION OF THE ADMINISTRATIVE REPORT AND RECOMMENDATION OF CONTRACTING OFFICER, DATED AUGUST 3, 1957, ARE RETURNED.