On the basis of its understanding that it was not the low bidder, the Winona Machine & Foundry Co. by letter dated June 5, 1940, requested the Navy Department to return a certified check for $13,100 which was forwarded with the company's bid. Prior to receipt of the letter, the Navy Department by notice of award, dated June 6, 1940, informed the Winona Machine & Foundry Co. that it was awarded contract NOs-74270 covering schedule 1492. The notice of award was received by the company June 8, 1940. Thereafter, contract NOs-74270 dated June 11, 1942, was executed by the parties. Between May 14, 1940, the date of the opening of the bids, and June 8, 1946, date of receipt of notice of award, war events in western Europe and the decision of the Government to embark upon a tremendous preparedness program caused the price of scrap iron, necessary for the Navy contract, to increase to a point far beyond the prevailing price on the date of submission and opening of bids. Due to the understanding of the Winona Machine & Foundry Co. that it was not low bidder and belief that the contract would not be awarded to it, the company did not undertake to purchase scrap iron or other material, to protect itself, at the then prevailing price upon which the bid was made May 10, 1940. On June 9, 1940 the Winona Machine & Foundry Co. personally contacted the area office at Chicago explaining the situation and were informed that the Navy Department usually allowed adjustment for such increases but that this would have to be an official act at Washington. On June 13, 1940, the Winona Machine & Foundry Co. advised the Navy Department of the increased cost of scrap iron and requested an adjustment of $49.50 added cost per weight. This was approximately equal to the increase on the reletting conducted later in the year. The Navy Department in Washington, on June 24, 1940, notified the company that it was without authority to increase the contract price because of increased cost of raw materials. The Winona Machine & Foundry Co. did not place a covering clause in the original contract because they have had Government bids, though low, refused because of a change in the bid form (bid for castings for canal project, Duluth, Minn.). The Winona Machine & Foundry Co. was told that the Navy Department had a regular practice of allowing for increased cost of material due to unforseen acts of God. May 10, 1940, Hitler invaded the Low Countries. June 1, Roosevelt announced (first) preparedness program with further scrap price increase locally. Chicago Journal of Commerce scrap price lists at "Agricultural $15," and everybody pricing at Chicago price and not local price as before in expectation of further increases in scrap price. A list of prices as purchased by the Iron Age and by Steel are made a part hereof and are attached hereto, marked "Exhibit A," "Exhibit B," and "Exhibit C." A report from Kawin & Co., Chicago foundry metallurgists and technical engineers, indicated that the method we were going to use was correct. Since the total cost of the equipment plus the increased cost of metal more than consumed the profit and the amount allowed for it, it seemed wise to request cancellation inasmuch as the Navy stated they were not in a position to allow for increases beyond our control which increase was to have been used in order to purchase equipment needed to produce the job at reasonable cost. Thereafter, on October 24, 1940, the Winona Machine & Foundry Co. requested cancellation of the contract without penalty upon the ground that performance of the contract was not possible with its present equipment and costs. The company also furnished the Navy Department with the report of the Chas. C. Kawin Co. mentioned above dated October 18, 1940. This report set forth facts as to the company's equipment (substituted because of increased costs of scrap beyond our power to control) and concluded it was impracticable for the company to perform the contract. On November 2, 1940, the Navy Department advised Winona Machine & Foundry Co. that in view of its inability to perform the contract a purchase against the company's account would be made in accordance with the provision of article 5 of the contract and that the company would be informed as to the excess costs, if any. The Navy Department advised that bids for the purchase against the company's account would be opened on November 22, 1940. Following the opening of bids on November 22, 1940, the Navy Department awarded a contract for the stretcher weights to the lowest bidder, American Car & Foundry Co. Thereafter the Navy Department informed the Winona Machine & Foundry Co. that the excess costs resulting from purchase against its account amounted to $7,148.77 and certified the said sum to the Comptroller General as a debt against the Winona Machine & Foundry Co. This amount is approxi mately the amount originally requested by the company within a few days after the notice of award. Exhibits A, B and C, attached hereto, are list-price movements from the date of bidding until the date of letter approximately November 1940. During the war this company decided it was morally right to avoid effort at "war profits" and so conducted its affairs. During this period of time we made $6,000 cash, more or less, and equipment to continue to make war orders principally for the United States Engineer Department through manufacturing customers. This equipment is now being used to employ veterans and others. If a direct denial had been made to our letters requesting a hearing, the copies of such letters being attached hereto, made a part hereof and marked "Exhibits D, E, and F," or an absolute denial of justice of our claim or if the Navy had given Hon. August Andresen to understand that the Navy would refuse to support his previous requests when several previous requests for cancellation were made, this claim could have been settled at a time when excess profits were being paid to the United States through the Department of Internal Revenue. We owe the local bank over $15,000 and owe $35,000 in mortgage bonds. Our working cash at present is $6,000 which with accounts receivable excess over accounts payable gives us around $12,000 to run our business and pay off $45,000 indebtedness plus the Government claim which we have maintained consistently is not justified. ROBERT LEICHT. Subscribed and sworn to before me this 13th day of June 1947. [SEAL] My commission expires May 2, 1954. BELLE KELLER, Notary Public, Winona County, Minn. Mr. R. LEICHT, EXHIBIT A GRAY IRON FOUNDERS' SOCIETY, INC. Secretary-Treasurer, Winona Machine & Foundry Co., Winona, Minn. DEAR BOB: Pursuant to your telephone request of yesterday we are enclosing herewith a list of scrap prices from May through November 1940. Since we do not retain old copies of trade publications in this office for more than 3 or 4 months we have secured the data from the Iron Age from the Cleveland Public Lira y and the prices from Steel were secured through Bull Gude, managing editor of The Foundry. Both lists give prices per net ton delivered at Chicago. If we can be of further assistance in this matter do not hesitate to write us. Yours very truly, GRAY IRON FOUNDERS' SOCIETY, INC., Assistant Executive Vice President. DEAR BILL: Following are the quotations carried by Steel for agricultural cast scrap delivered Chicago per net ton (2,000 pounds) between May and November 1940. Dates shown are the dates of the issue of the magazine (Monday) so prices would be those prevailing the preceding week. Where no dates are shown there was no change in the price from that previously published. 1 The above prices are quoted per net ton to Chicago district consumers. Subject: Contract NOs-72470, schedule 1492, weights, stretcher. GENTLEMEN: We wish to acknowledge receipt of your letter of the above reference and to advise an immediate payment is impossible, even though legally legitimate, and offer the following information together with two alternate suggestions: The entire picture has three aspects, past, present, and future. We will take each in their order. PAST This foundry was financially insolvent in 1930 and has been since that time. What money we have obtained has been used for the purpose of keeping the foundry in operation, keeping 20 to 60 men and their families off the relief roll, and for the building of the men and equipment against the time when it would be needed by the buying public which, at the present time, is principally the Government. We further developed the plant to a point at which it is now-an efficiently operating machine with ability above average for a plant of this size and type. It is now in a position to handle work of the nature that the Government now needs. We are informed the Government is literally sending men to cities even as close as Minneapolis in an effort to establish sources of supply capable of meeting specifications. This jibes with the figures we have which show 30 percent mortality in this industry during the same period we were endeavoring to keep this foundry alive. Thus, with an agreement on the claim of the Government, we both gain what each needs. Through the lack of agreement on the claim, we both lose-we, the foundry, and the Government-another source of supply which they so desperately need. The job in question was bid at a time when we were sadly in need of work. It was bid at a fair price on the day the quotation was made. We had no control over the scrap market. We did not protect our quotation against a raise in the market for the reason that we have in our files bids returned and rejected because we made changes of similar nature. The job could have been run here had we been allowed our requested adjustment. The adjustment by us through your office was less than the price for which the job was relet. PRESENT While we do not think that the claim is justified when all the facts are weighed, if the Government insists on collection we ask only cooperation in its adjustment. We have as a suggested adjustment one of the two following alternatives or combination of them. 1. Placement of work in this plant to its capacity or such portion of this as you desire. The claim to be paid on a percentage of a tonnage basis. 2. A dating of 18 months to 2 years on the claim during which time the increased work coming to the foundry will allow us to lay aside the required amount. Either of the two suggested adjustments will produce the following results: 1. Additional needed foundry supply for the Government. 2. Settlement of the claim. 3. Continue life of this plant which would otherwise be impossible. 4. A continuation of a taxpaying organization for Federal, State, county, and city taxes. 5. Continued regular employment for our men and their families. All of these are for the good of all and to the detriment of none. FUTURE If this claim is pushed for immediate settlement, this organization will cease to exist and all parties concerned will be the losers. In view of the fact that we were second low bidders on this schedule, in view of the fact that through past experience we were not at liberty to protect ourselves against rising market brought about by activities in Europe and by our own Government, in view of the fact that we presented a justifiable claim for adjustment to scrap market the resulting increase being less than the relet figures, and in view of the fact that we ask but consideration in this matter, we feel we are not out of order in asking this matter be referred to an authority in position to make a decision. We ask that we be given an appointment by this authority to present the case with its ramifications-which same is well-nigh impossible in a letter-the purpose of the metting to arrive at the most logical method of settling the obligation. We look forward to your early reply in this connection. If your office is not allowed to consider extenuating circumstances of the nature presented above and is not in a position to make arrangements for a conference such as suggested, please refer this letter to the proper authorities or advise us of the party so that we can get in touch with them direct. Yours very truly, WINONA MACHINE & FOUNdry Co., By R. G. LEICHT, Secretary-Treasurer. (Note by Winona Machine & Foundry Co., May 28, 1947: None of the above requests were answered.) EXHIBIT E NAVY DEPARTMENT, Hon. AUGUST Andresen, BUREAU OF SUPPLIES AND ACCOUNTS, House of Representatives, Washington, D. C. Subject: Contract NOs-74270, schedule 1492, Winona Machine & Foundry Co.request for waiver of penalty in the amount of $7,148.77. MY DEAR MR. ANDRESEN: This will acknowledge your letter of April 6, 1942. The fact which you adduce in your letter in justification of the waiver of the penalty which has been used against the Winona Machine & Foundry Co. have been carefully studied by this office. It is believed that for the sake of a clear record in this matter that the position of this Bureau should be set forth. At no time was the Winona Machine & Foundry Co. notified by the Bureau of Supplies and Accounts that it was not low bidder on schedule 1492, or that award would not be made to it on subject schedule. Any information which the contractor might have received as to its position in the list of bidders came from an unofficial source for which the Bureau, of course, cannot assume responsibility. In view of the fact that the contractor was informed by an unofficial source that it was not low bidder on the subject schedule, it is urged that the contractor was justified in assuming that it would not secure the contract, and in not protecting itself against a rise in cost to it of raw material. It is well known that "ignorance of the law is no excuse." For the statutory requirement at the time of the opening of this schedule was that award be made to the lowest responsible, not to the lowest, bidder. And, therefore, information to a bidder that it was not lowest in price could not assure that it would not be the successful bidder. Further indication to the contractor that its bid has not been rejected could have been found in the fact that its certified check was not returned after opening of the schedule. It is unfortunate that the events of May 1940 dislocated the scrap market, but risk of such occurrence is a known risk and one which can be anticipated. It appears from the record that the rise of the price of scrap iron was not the sole cause for the failure of the contractor to perform his contract. In the letter of the Winona Machine & Foundry Co. of October 24, 1940, to this Bureau it was stated, "We now ask cancelation of the contract without penalty, owing to the impossibility of making this job with present equipment at present costs. Such a course involves bankruptcy." In these circumstances, it is requested that the Government forego a claim against a responsible surety company on a bond, the very purpose of which was to insure the Government against such a loss as occurred in this case. The Navy Department has taken a very lenient attitude in regard to this claim for almost 2 years and is willing to renew its offer to liquidate this claim in the form of partial payments so as not to strain the financial capacity of the contractor. However, in the light of the fact that the General Accounting Office is proper agency for the consideration of requests for remission or penalties of this nature, this Bureau is agreeable to submitting a claim for such remission in the event that the contractor desires such a request. HONORABLE SIR: It is admitted that our information that we were not low bidders was from unofficial sources. Had we waited for official information, we should be in the same position as we are now. As has been pointed out, official information over a signature that they would not award increase in price to compensate for increase in scrap did not arrive until the following November (note 6 months). We did receive a wire earlier than that-not much-but to his own statement it is obvious this was not official because it was not over a written signature. Following paragraph 3, would the Government have financed the cost of a loan made to secure the scrap, had we done so on the assumption that we would be awarded the contract? Likewise, would the Government have accepted the bid had we put in a provision to protect the price of our bid with the prevailing scrap market? We believe you have proof in your file now that they would not have done so. The fact that the certified check was not returned is no indication that the bid might be accepted. We had a check with the Government covering overpayment of social security that was not returned for 2 years although the account was paid twice. It was not returned then until we went to Washington and the President for its return. To our minds * * * this statement on his part is of no great importance. We question that the rise of the scrap market was a known occurrence. In fact it held steady here for years and we certainly did not have advance information that Washington did concerning European activities and Presidential plans. In fact, we venture, Admiral Young knew several months prior to the letting. His next paragraph is a beautiful development of a portion of the sentence. Does he include in his mind the fact that we made the statement on the basis that |