B-158201, APR. 22, 1966

B-158201, APR. 22, 1966

TO COSAN CHEMICAL CORPORATION:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 14, 1965, AND ENCLOSURES, REQUESTING THAT YOU BE RELIEVED OF YOUR OBLIGATIONS UNDER CONTRACT NO. GS-OOP-/S/-23653/AEC), FOR THE PURCHASE OF 600 FLASKS OF MERCURY FROM THE GENERAL SERVICES ADMINISTRATION (GSA).

THE SOLICITATION OF OFFERS AND AWARD OF CONTRACTS FOR DISPOSAL OF THE MERCURY, FROM SURPLUS STOCKS OF THE ATOMIC ENERGY COMMISSION, WAS PURSUANT TO THE AUTHORITY OF SECTION 203/E//5) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, 40 U.S.C. 484/E//5). THE INITIAL OFFERING OF 10,000 FLASKS BY THE DEFENSE MATERIALS SERVICE, GSA, WAS UNDER MERCURY SALES SOLICITATION, DMS-MET-72, DATED FEBRUARY 23, 1965. YOUR OFFER WAS SUBMITTED IN RESPONSE TO ADDENDUM NO. 2 TO THE ORIGINAL SOLICITATION AND WAS FOR 600 FLASKS AT $685 EACH, THE PRICE ESTABLISHED BY GSA ON THE BASIS OF THE ESTIMATED FAIR MARKET VALUE. AFTER IT WAS DETERMINED THAT YOUR FIRM WAS ELIGIBLE TO PURCHASE THE 600 FLASKS, THE CONTRACT WAS EXECUTED BY YOU AND THE GOVERNMENT ON JULY 6 AND 7, 1965, RESPECTIVELY, IN THE TOTAL AMOUNT OF $411,000. UNDER THE TERMS AND CONDITIONS OF THE CONTRACT YOU WERE REQUIRED TO REMOVE THE MERCURY WITHIN 90 DAYS FROM THE DATE OF EXECUTION BY THE GOVERNMENT AND TO PAY THE FULL PURCHASE PRICE PRIOR THERETO, UNLESS OTHERWISE PROVIDED BY INVOICE AT THE TIME OF DELIVERY IN ACCORDANCE WITH PARAGRAPH 1 OF THE SPECIAL TERMS AND CONDITIONS.

BY LETTER DATED SEPTEMBER 17, 1965, YOU REQUESTED THAT THE REMOVAL PERIOD BE EXTENDED UNTIL APRIL 1966. PURSUANT TO THIS REQUEST, A PROPOSED AMENDMENT TO THE CONTRACT EXTENDING THE REMOVAL TIME TO JANUARY 31, 1966, WAS PREPARED AND FORWARDED TO YOU ON OCTOBER 7, 1965, FOR EXECUTION. YOU DID NOT RETURN THE AMENDMENT, BUT WROTE TO GSA ON NOVEMBER 10, 1965, AND REQUESTED THAT THE QUANTITY CALLED FOR UNDER THE CONTRACT BE REDUCED TO THE LOWEST POSSIBLE AMOUNT BECAUSE OF A DECREASE IN BOTH YOUR REQUIREMENTS AND THE MARKET PRICE. ON NOVEMBER 26, 1965, GSA ADVISED YOU THAT THERE WAS NO BASIS UPON WHICH THEY COULD AGREE TO A REDUCTION OF THE CONTRACT QUANTITY AND, SINCE THE DATE FOR REMOVAL HAD EXPIRED, YOUR FAILURE TO REMOVE THE PROPERTY AND MAKE PAYMENT THEREFOR WAS A DEFAULT. FURTHER, THAT UNLESS SUCH DEFAULT WAS CURED WITHIN 15 DAYS, YOU WOULD LOSE ALL RIGHT, TITLE AND INTEREST IN THE PROPERTY AND LIQUIDATED DAMAGES IN A SUM EQUAL TO 20 PERCENT OF THE PURCHASE PRICE ($82,200) WOULD BE ASSESSED, AS PROVIDED FOR IN THE CONTRACT.

YOU HAVE NEITHER PAID FOR AND ACCEPTED DELIVERY OF ANY OF THE MERCURY, NOR PAID THE ACCRUED LIQUIDATED DAMAGES, AND YOU ASK TO BE RELIEVED OF THESE OBLIGATIONS. AS JUSTIFICATION FOR YOUR FAILURE TO ACCEPT DELIVERY OF THE MERCURY AS REQUIRED BY THE CONTRACT, YOU POINT TO THE SHARP DROP IN YOUR SALES VOLUME AND AN ALMOST IMMEDIATE DECREASE IN THE MARKET PRICE OF MERCURY TO $535-$540 A FLASK AFTER THE EXECUTION OF THE CONTRACT. AS TO THE FIRST POINT, YOU STATE THAT YOU WERE UNABLE TO EFFECTIVELY COMPETE WITH YOUR COMPETITORS IN THE PAINT INDUSTRY BECAUSE THEY HAD INVENTORIES OF MERCURY PURCHASED UNDER PREVIOUS GSA DISPOSAL PROGRAMS AT $460-$475 A FLASK. WITH REGARD TO THE SECOND POINT, TO HAVE ACCEPTED AND PAID FOR THE 600 FLASKS OF MERCURY AT $685 A FLASK AS CALLED FOR UNDER THE CONTRACT WOULD HAVE RESULTED IN AN ADDITIONAL COST OF $90,000, WHEN COMPARED TO THE PURCHASE OF THE 600 FLASKS AT THE MARKET PRICE OF $535. YOU STATE THAT EITHER THE LOSS OF $90,000 OR PAYMENT OF LIQUIDATED DAMAGES IN AN AMOUNT OF $82,200 WOULD BE BEYOND THE CAPACITY OF YOUR COMPANY TO SURVIVE SINCE IT HAS A NET WORTH OF ONLY $112,452. YOU ALSO POINT TO THE ANNOUNCED OBJECTIVE OF THE MERCURY DISPOSAL PROGRAM AS FURTHER JUSTIFICATION FOR RELIEVING YOU OF YOUR OBLIGATIONS, AND QUOTE THE FOLLOWING FROM A MEMORANDUM DATED NOVEMBER 13, 1964, OF THE OFFICE OF MINERALS AND SOLID FUELS, DEPARTMENT OF INTERIOR:

"THE OBJECTIVE IN PLANNING AND CARRYING OUT THE MERCURY DISPOSAL OVER A PERIOD OF THREE OR MORE YEARS IS TO MAKE AVAILABLE QUANTITIES OF MERCURY THAT ARE CONSISTENT WITH ANTICIPATED MARKET REQUIREMENTS, ARE ADEQUATE TO MEET THE SHORTAGE OF NEW SUPPLY, AND WILL PERMIT THE BUILDING OF COMMERCIAL OPERATING INVENTORIES TO A REASONABLE LEVEL. DISPOSAL WILL BE MADE IN ACCORDANCE WITH ESTABLISHED DISPOSAL CRITERIA IN SUCH A WAY AS TO MINIMIZE MARKET DISRUPTION AND TO AVOID CREATING HARDSHIPS IN DOMESTIC OR FRIENDLY FOREIGN INDUSTRIES.'

ACCEPTANCE OF YOUR OFFER CONSUMMATED A VALID AND BINDING CONTRACT WHICH FIXED THE RIGHTS AND LIABILITIES OF THE PARTIES THERETO, AND NEITHER OUR OFFICE NOR ANY OFFICER OF THE GOVERNMENT HAS AUTHORITY TO WAIVE OR SURRENDER ANY RIGHT VESTED IN OR ACQUIRED BY THE GOVERNMENT UNDER THE CONTRACT, OR TO MODIFY THE CONTRACT WITHOUT A COMPENSATING BENEFIT TO THE GOVERNMENT. SEE UNITED STATES V. AMERICAN SALES CORPORATION, 27 F.2D 389, AFFIRMED, 32 F.2D 141,CERTIORARI DENIED, 280 U.S. 54; BAUSCH AND LOMB OPTICAL COMPANY V. UNITED STATES, 78 CT.CL. 584, 607, CERTIORARI DENIED, 292 U.S. 654; AND PACIFIC HARDWARE AND STEEL COMPANY V. UNITED STATES, 49 CT.CL. 327, 335. IT IS ALSO THE GENERALLY ACCEPTED RULE THAT SUPERVENING EVENTS OR UNFORESEEN CAUSES WHICH RENDER CONTRACT PERFORMANCE MORE BURDENSOME OR LESS PROFITABLE, OR EVEN OCCASION A LOSS, NEITHER EXCUSE NONPERFORMANCE NOR ENTITLE THE CONTRACTOR TO AN ADJUSTMENT IN THE CONTRACT PRICE. SEE UNITED STATES V. SPEARIN, 248 U.S. 132, 136; KANSAS TURNPIKE AUTHORITY V. ABRAMSON, 275 F.2D 711; J. J. PREIS AND COMPANY V. UNITED STATES, 58 CT.CL. 81, 86.

IT IS OUR UNDERSTANDING THAT SUBSTANTIALLY ALL OF THE OTHER PURCHASERS UNDER MERCURY SALES SOLICITATION DMS-MET-72 HAVE TAKEN DELIVERY AND MADE PAYMENT AT THE OFFER PRICE OF $685 PER FLASK.

IN VIEW THEREOF, AND SINCE THE ADMINISTRATIVE ACTION IN DECLARING YOU IN DEFAULT AND ASSESSING LIQUIDATED DAMAGES WAS IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE CONTRACT, THERE IS NO LEGAL BASIS UPON WHICH THIS OFFICE MAY GRANT YOU THE RELIEF REQUESTED, AND YOUR REQUEST MUST THEREFORE BE DENIED.