B-149674, SEP. 6, 1962

B-149674, SEP. 6, 1962

TO CAPTAIN R. E. VAN DER LIKE:

YOUR LETTER OF JUNE 13, 1962, REPORTS THAT UNDER THE PRICE SCHEDULE OF THE MILITARY SUBSISTENCE SUPPLY CENTER PURCHASE NOTICE AGREEMENT (HEREINAFTER REFERRED TO AS PURCHASE NOTICE AGREEMENT), SB 10-500-121, KELLOGG SALES COMPANY HAS CONTRACTED TO FURNISH PRODUCTS FOR COMMISSARY RESALE AT YOUR INSTALLATION. YOU FURTHER REPORT THAT PARAGRAPH 2, SB 10- 500,"STATES THAT,"THE SUPPLIER AGREES THAT HE WILL MAKE AVAILABLE TO ALL AUTHORIZED ACTIVITIES HIS PRODUCTS AT A BASE PRICE AS LOW AS OR LOWER THAN THOSE OFFERED TO ANYONE FOR RESALE INCLUDING BUT NOT LIMITED TO, WHOLESALERS AND JOBBERS.'" SINCE KELLOGG OFFERS THE SAME PRODUCTS AT A LOWER PRICE UNDER THE FEDERAL SUPPLY SCHEDULE OF THE GENERAL SERVICES ADMINISTRATION, FSC GROUP 89, PART 1, YOU ASK IF KELLOGG HAS VIOLATED THE INTENT OF THE ABOVE-QUOTED PROVISION OF THE PURCHASE NOTICE AGREEMENT WITH YOUR INSTALLATION.

GENERAL SERVICES ADMINISTRATION REGULATION 1-II-301.01 PROVIDES AS FOLLOWS:

"INCLUDED AS ELIGIBLE TO BUY FROM GSA SOURCES ARE CERTAIN CIVILIAN AND MILITARY COMMISSARIES AND NONAPPROPRIATED FUND ACTIVITIES, GENERALLY BUYING FOR THEIR OWN USE BUT NOT FOR RESALE, EXCEPT AS AUTHORIZED BY THE INDIVIDUAL FEDERAL AGENCY AND CONCURRED IN BY THE ADMINISTRATION.'

IT IS CLEAR FROM THE ABOVE-QUOTED LANGUAGE THAT THE POLICY OF THE ADMINISTRATION IS TO RESTRICT PURCHASES FOR RESALE UNDER THE FEDERAL SUPPLY SCHEDULE. WE HAVE BEEN INFORMALLY ADVISED BY THE GENERAL SERVICES ADMINISTRATION THAT ITS RESTRICTIVE POLICY IN THIS REGARD IS ESPECIALLY APPLICABLE TO CIVILIAN AGENCIES.

SINCE IT IS POSSIBLE THAT KELLOGG COULD BE COMPELLED TO SELL ITS PRODUCTS, UNDER THE FEDERAL SUPPLY SCHEDULE, TO CIVILIAN AGENCIES WHICH WOULD RESELL THE PRODUCT--- WHERE THE PURCHASE IS ,AUTHORIZED BY THE INDIVIDUAL FEDERAL AGENCY AND CONCURRED IN BY THE ADMINISTRATION"--- A STRICT INTERPRETATION OF THE LANGUAGE IN THE PURCHASE NOTICE AGREEMENT WOULD SEEM TO WARRANT THE CONCLUSION THAT KELLOGG WAS REQUIRED TO OFFER A PRICE AT LEAST AS LOW AS THE ONE OFFERED UNDER THE FEDERAL SUPPLY SCHEDULE. HOWEVER, BECAUSE CIVILIAN AGENCIES ARE RARELY PERMITTED TO PURCHASE GOODS FOR RESALE, AND IN VIEW OF THE FACT THAT WE HAVE NO EVIDENCE THAT THE PARTICULAR PRODUCTS UNDER FSC GROUP 89 HAVE BEEN PURCHASED BY CIVILIAN AGENCIES FOR RESALE, WE DO NOT THINK THAT A STRICT INTERPRETATION OF THE QUOTED LANGUAGE IN THE PURCHASE NOTICE AGREEMENT WOULD BE CONSONANT WITH THE TRUE INTENT OF THE CONTRACTING PARTIES. THE CONTRARY, OUR OFFICE BELIEVES THAT IT IS MUCH MORE LIKELY THAT THE CONTRACTING PARTIES CONTEMPLATED A REQUIREMENT THAT KELLOGG OFFER PRICES UNDER THE PURCHASE NOTICE AGREEMENT WHICH WERE AS LOW AS THOSE OFFERED TO ANYONE COMMONLY IN THE BUSINESS OF RESELLING HIS PRODUCTS.

ACCORDINGLY, YOU ARE AUTHORIZED TO MAKE PAYMENT TO KELLOGG AT THE PRICE CHARGED UNDER THE PROVISIONS OF THE PURCHASE NOTICE AGREEMENT.