B-152775, OCTOBER 9, 1964, 44 COMP. GEN. 200

B-152775, OCTOBER 9, 1964, 44 COMP. GEN. 200

CONTRACTS - DISPUTES - APPEALS - EXCESS COST ASSESSMENT CONSIDERATION TO INCLUDE OTHER MATTERS THE DISMISSAL OF AN APPEAL FROM THE ASSESSMENT OF EXCESS COSTS BY THE BOARD OF CONTRACT APPEALS, GENERAL SERVICES ADMINISTRATION, FOR LACK OF TIMELINESS, WITHOUT CONSIDERING THE PROPRIETY OF THE DEFAULT TERMINATION FOR THE FAILURE OF THE CONTRACTOR TO SUBMIT SAMPLES COMPLYING WITH THE SPECIFICATIONS, BUT FINDING THAT THE EXCESS COSTS ASSESSED UNDER THE REPLACEMENT REPURCHASE WERE REASONABLE, WAS ERRONEOUS AND CONTRARY TO THE "FULFORD DOCTRINE"--- ASBCA NO. 2143, 2144, MAY 20, 1955--- HOLDING THAT A CONTRACTOR MAY HAVE AN ISSUE RELATING TO THE EXCUSABILITY OF A DEFAULT CONSIDERED ON APPEAL FROM AN ASSESSMENT OF EXCESS COSTS, EVEN THOUGH A PRIOR TIMELY APPEAL FROM THE DEFAULT TERMINATION HAD NOT BEEN SUBMITTED, AND THE DEFAULT CLAUSE IN THE FULFORD CASE, WHICH HAS GENERAL ACCEPTANCE, BEING SIMILAR TO THE CLAUSE IN THE CONTRACT CONSIDERED BY THE GENERAL SERVICES ADMINISTRATION APPEALS BOARD, THE INTERPRETATION OF THE CLAUSES-- - A MATTER OF LAW--- SHOULD BE CONSISTENT, ACCORDINGLY, THE APPEAL MAY PROPERLY CONSIDER WHETHER THE PRODUCT OFFERED MET THE SPECIFICATIONS AND THAT THE CONTRACT TERMINATION WAS ERRONEOUS.

TO THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, OCTOBER 9, 1964:

REFERENCE IS MADE TO LETTER DATED DECEMBER 9, 1963, WITH ENCLOSURES FROM THE GENERAL COUNSEL, GENERAL SERVICES ADMINISTRATION, RELATIVE TO THE MATTER OF THE ASSESSMENT OF EXCESS COSTS AGAINST ALLIED PAINT AND COLOR WORKS, INC., BY REASON OF ITS FAILURE IN PERFORMANCE OF CONTRACT NO. GS- 048-7493 WITH THE GENERAL SERVICES ADMINISTRATION CALLING FOR THE SUPPLY TO THE GOVERNMENT OF TRAFFIC PAINT AND FLOOR ENAMEL.

IT APPEARS THAT TWO PURCHASE ORDERS WERE ISSUED UNDER THE CONTRACT; AS TO THE FIRST ORDER, TWO SAMPLES WERE SUBMITTED AND REJECTED AS NONCONFORMING; NO SAMPLE WAS SUBMITTED ON THE SECOND ORDER ALTHOUGH REQUIRED BY THE TERMS OF THE CONTRACT. THE CONTRACTOR WAS ADVISED BY LETTER OF NOVEMBER 18, 1959, THAT HE WAS IN DEFAULT FOR FAILURE TO SUBMIT SAMPLES MEETING SPECIFICATIONS ON ONE PURCHASE ORDER AND FAILED TO SUBMIT SAMPLES ON THE SECOND PURCHASE ORDER. HE WAS ALSO ADVISED THAT HE WOULD BE CHARGED WITH EXCESS COSTS ON REPURCHASE. ON DECEMBER 18, 1959, ALLIED PAINT WAS ADVISED THAT EACH OF THE PURCHASE ORDERS WAS CANCELED BY AMENDMENT STATING THAT VENDOR WAS PLACED IN DEFAULT AND THAT REPLACEMENT PURCHASE HAD BEEN MADE. BY LETTER DATED FEBRUARY 9, 1960, ALLIED PAINT WAS REQUESTED TO REMIT THE SUM OF $1,626 AS EXCESS COSTS INCURRED IN THE REPLACEMENT PURCHASE, INCLUDING COSTS FOR REPLACEMENT TESTING CHARGES.

BY LETTER DATED FEBRUARY 15, 1960, ALLIED PAINT TOOK ISSUE WITH THE CONTRACTING OFFICER'S FINDINGS CONCERNING THE TESTS AND REJECTIONS OF ITS PAINTS. IN LETTER OF MARCH 4, 1960, THE ACTING CHIEF, BUYING DIVISION, REVIEWED THE EVENTS WHICH RESULTED IN THE DEFAULT ACTION AND THE NOTICE THEREOF, AND STATED THAT THE ACTION WAS IN ACCORD WITH SUBPARAGRAPH A (II) OF ARTICLE 11 OF THE GENERAL PROVISIONS OF THE CONTRACT. IN A TELEGRAM DATED MARCH 8, 1960, TO THE ADMINISTRATOR OF GENERAL SERVICES, ALLIED PAINT APPEALED FROM THE "FINDINGS AND DECISION OF THE CONTRACTING OFFICER DATED FEBRUARY 9, 1960.'

IN ITS DECISION DATED APRIL 18, 1962, THE BOARD OF CONTRACT APPEALS, GENERAL SERVICES ADMINISTRATION, DISMISSED THE APPEAL STATING THAT "THE APPEAL MUST BE DISMISSED FOR LACK OF JURISDICTION BECAUSE OF THE APPELLANT'S FAILURE TO ASSERT ITS RIGHT TO APPEAL IN THE MANNER AND WITHIN THE TIME LIMIT SPECIFIED IN THE CONTRACT.' HOWEVER, THE BOARD CONSIDERED THE QUESTION OF THE REASONABLENESS OF THE EXCESS COSTS, SINCE THE DEFAULTING CONTRACTOR HAD NO KNOWLEDGE, PRIOR TO FEBRUARY 9, 1960, CONCERNING THE AMOUNT OF EXCESS COSTS RESULTING FROM THE DEFAULT. THE BOARD FOUND THE COSTS REASONABLE, AND PROPERLY ASSESSED.

ALLIED PAINT, THE APPELLANT, THEN MOVED FOR RECONSIDERATION OF THE MATTER BY THE BOARD, PREDICATING ITS MOTION ON THE DECISION OF THE ARMED SERVICES BOARD OF CONTRACT APPEALS IN FULFORD MANUFACTURING CO., INC., ASBCA NO. 2143, 2144, MAY 20, 1955, ASSERTING THAT THE GSA BOARD ERRED IN FAILING TO CONSIDER THE ISSUES AS TO THE PROPRIETY OF THE DEFAULT TERMINATION ON ITS APPEAL FROM A DETERMINATION OF EXCESS COSTS. IN ITS OPINION OF SEPTEMBER 11, 1963, THE BOARD DENIED THE REAPPEAL, AND AFFIRMED ITS INITIAL DECISION, STATING:

IN DECIDING THIS CASE WE DO NOT FIND IT NECESSARY TO TOTALLY ADOPT OR REJECT THE DOCTRINE LAID DOWN IN THE FULFORD CASE. THE ISSUE HERE RAISED BY APPELLANT IS, SIMPLY, WHETHER ITS FAILURE TO PERFORM WAS DUE TO EXCUSABLE CAUSE AS DEFINED IN PARAGRAPH 11 (B) OF THE DEFAULT ARTICLE. FIND THAT NO SUCH EXCUSABLE CAUSE HAS BEEN PRESENTED.

BY LETTER DATED OCTOBER 12, 1963, ATTORNEYS FOR ALLIED PAINT AND COLOR WORKS REQUESTED OUR OFFICE TO REVIEW THE BOARD'S DECISION AND DETERMINE WHETHER IT IS ENTITLED TO A DECISION WHETHER OR NOT ITS PRODUCT MET THE SPECIFICATIONS, AND FOR RELIEF FROM THE EXCESS COSTS OF REPROCUREMENT.

IN HIS LETTER OF DECEMBER 9, 1963, TO OUR OFFICE, THE GENERAL COUNSEL OF YOUR AGENCY STATED:

THE GSA BOARD DISMISSED THE APPEAL ON THE GROUND THAT THE CONTRACTOR HAD NOT FILED ITS NOTICE OF APPEAL IN A TIMELY MANNER. IN VIEW OF THE FACT THAT THE APPEAL OF THE CONTRACTOR WAS DISMISSED FOR LACK OF TIMELINESS, THE BOARD DID NOT CONSIDER THE FURTHER ISSUE AS TO WHETHER SAMPLES SUBMITTED BY THE CONTRACTOR COMPLIED WITH SPECIFICATIONS. IN ESSENCE, THE BOARD'S DECISION IS BASED SOLELY ON A POINT OF LAW, WHICH IS WHETHER THE APPEAL OF THE CONTRACTOR HAD BEEN PERFECTED IN A TIMELY MANNER. THE BOARD, THEREFORE, DID NOT HAVE OCCASION BY REASON OF THE NATURE OF ITS RULING TO CONSIDER ANY FACTUAL ISSUE RELATING TO THE PERFORMANCE RENDERED OR PROPOSED TO BE RENDERED BY THE CONTRACTOR.

COUNSEL FOR THE CONTRACTOR IN HIS LETTER OF OCTOBER 12, 1963, ADDRESSED TO THE COMPTROLLER GENERAL ASSERTS THAT THE "DECISION OF THE BOARD IS HIGHLY ERRONEOUS IN POINT OF LAW.' COUNSEL ALSO ASKS THE COMPTROLLER GENERAL TO UNDERTAKE THE CONSIDERATION OF A FACTUAL ISSUE RELATING TO COMPLIANCE OF CONTRACTOR'S SAMPLES WITH SPECIFICATIONS IF THE COMPTROLLER GENERAL SHOULD RULE THAT THE BOARD ERRED ON THE BASIC LEGAL ISSUE OF TIMELINESS.

WE RECOGNIZE THAT NO FINALITY ATTACHES TO THE DECISION OF AN ADMINISTRATIVE BOARD RENDERED ON BEHALF OF THE HEAD OF AN AGENCY WHERE SUCH DECISION RELATES SOLELY OR PRIMARILY TO A QUESTION OF LAW. IN THIS INSTANCE, THE ISSUE OF TIMELINESS DOES NOT INVOLVE ANY ASPECT OTHER THAN A LEGAL PRINCIPLE. HENCE, SUCH ISSUE MAY IN OUR VIEW BE TREATED AS A QUESTION OF LAW. HOWEVER, WE DO NOT AGREE WITH COUNSEL'S SUGGESTION THAT THE COMPTROLLER GENERAL SHOULD FOLLOW THE PROCEDURE OF IMMEDIATELY EXAMINING A FACTUAL ISSUE ONCE HE HAS DETERMINED THAT THE BOARD ERRED IN ITS RULING ON A BASIC QUESTION OF LAW.

IF THE COMPTROLLER GENERAL SHOULD REACH THE CONCLUSION THAT THE BOARD ERRED ON A QUESTION OF LAW, THE APPROPRIATE PROCEDURE, IN OUR VIEW, WOULD BE TO RETURN THE CASE TO THE HEAD OF THE AGENCY FOR A CONSIDERATION OF REMAINING ISSUES AND SO THAT THE LATTER MIGHT REVIEW THE ORIGINAL RULING OF THE CONTRACTING OFFICER ON ANY ISSUE OF FACT (SUCH AS WHETHER THE SAMPLES SUBMITTED BY THE CONTRACTOR COMPLIED WITH GOVERNMENT SPECIFICATIONS).

IN COMMENTING ON THE PRINCIPLE OF THE DECISION OF THE ARMED SERVICES BOARD OF CONTRACT APPEALS IN THE FULFORD CASE, THE GENERAL COUNSEL CONTINUED:

UNDER THAT RULING THE ARMED SERVICES BOARD HAS HELD THAT A CONTRACTOR MIGHT HAVE AN ISSUE RELATING TO THE EXCUSABILITY OF HIS DEFAULT CONSIDERED ON AN APPEAL FROM AN ASSESSMENT OF EXCESS COSTS EVEN THOUGH THE CONTRACTOR DID NOT SUBMIT A PRIOR TIMELY APPEAL FROM THE DEFAULT TERMINATION ITSELF. IN OTHER WORDS, THE ARMED SERVICES BOARD PRIMARILY BY REASON OF THE WORDING OF THE DEFAULT CLAUSE AS IT APPEARED IN A STANDARD DEFENSE SUPPLY CONTRACT HAS RULED THAT WHERE A CONTRACTOR HAD NOT PREVIOUSLY RAISED THE SPECIFIC ISSUE OF "EXCUSABILITY," HE COULD STILL RAISE THIS ISSUE ON AN APPEAL FROM A LATER ASSESSMENT OF EXCESS COSTS.

THE GSA BOARD HAS INDICATED IN ITS MOST RECENT DECISION THAT IT WAS NOT NECESSARY FOR IT TO CONSIDER WHETHER IT SHOULD FOLLOW FULFORD DOCTRINE OF THE ARMED SERVICES BOARD. THE REASON FOR THIS IS AS FOLLOWS: THE GSA BOARD HAS CONCLUDED THAT THE APPEAL IN QUESTION DOES NOT INVOLVE AN ISSUE OF EXCUSABILITY. THE ISSUE OF COMPLIANCE WITH SPECIFICATIONS IS AN ISSUE WHICH DOES NOT EMBRACE EXCULPATORY CIRCUMSTANCES OR ANY OTHER EXCUSE FOR DELAY. ACCORDINGLY, THE GSA BOARD REFUSED TO TREAT THE APPEAL AS TIMELY ON THE GROUND THAT THE SITUATION BEFORE THE GSA BOARD WAS NOT COVERED BY THE FULFORD DOCTRINE. THE GSA BOARD TOOK THE POSITION THAT THE DOCTRINE (EVEN IF IT WERE TO BE ADOPTED BY GSA) WOULD BE INAPPLICABLE TO THE PARTICULAR SITUATION.

THE FULFORD CASE BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS WAS CONCERNED WITH TWO APPEALS: THE FIRST WAS ALLEGED TO BE FROM THE DECISION OF THE CONTRACTING OFFICER WHEREIN HE TERMINATED THE CONTRACT FOR DEFAULT AND THE SECOND WAS FROM THE ASSESSMENT OF EXCESS COSTS. AS TO THE FIRST APPEAL, THE BOARD FOUND THAT NO TIMELY APPEAL WAS TAKEN FROM THE NOTICE OF TERMINATION AND DISMISSED THIS APPEAL. IT THEN STATED THAT "THE SECOND JURISDICTIONAL QUESTION IS WHETHER THE CONTRACTOR MAY RAISE, IN ITS APPEAL FROM THE ASSESSMENT OF EXCESS COSTS, THE SAME ALLEGED CAUSES FOR DELAY WHICH IT HAD PREVIOUSLY PRESENTED TO THE CONTRACTING OFFICER AND WHICH WERE FOUND BY HIM TO BE NONEXCUSABLE IN HIS DECISION TERMINATING THE CONTRACT FOR DEFAULT BUT FROM WHICH FINDING THE CONTRACTOR DID NOT APPEAL.' THE BOARD HELD---

UNDER THE CIRCUMSTANCES THE ONLY FAIR AND REASONABLE CONSTRUCTION TO BE GIVEN THE QUOTED PARAGRAPHS OF THE "DEFAULT" ARTICLE IS THAT THEY SPECIFICALLY AUTHORIZE THE ISSUE OF EXCUSABILITY TO BE RAISED AFTER THE TERMINATION NOTICE HAS BEEN SERVED. THE TIME THE CONTRACTOR HAS TO APPEAL FROM THE NOTICE OF DEFAULT ON THE ISSUE OF EXCUSABLE DELAY IS NOT 30 DAYS FROM THE RECEIPT OF SUCH NOTICE BUT 30 DAYS FROM THE RECEIPT OF NOTICE OF THE ASSESSMENT OF EXCESS COSTS. UNDER THE WORDING OF THE "DEFAULT" ARTICLE EXCUSABLE DELAY ONLY DIRECTLY CONCERNS EXCESS COSTS AND RELATES TO THE NOTICE OF DEFAULT ONLY UNDER PARAGRAPH (E) ONCE EXCESS COSTS HAVE BEEN ASSESSED. THEREFORE, THE CONTRACTOR HAS UNTIL 30 DAYS AFTER NOTICE OF THE ASSESSMENT OF EXCESS COSTS TO APPEAL FROM BOTH IT AND THE NOTICE OF DEFAULT. SINCE THAT IS SO, PURSUANT TO THE FIRST CLAUSE OF THE "DISPUTES" ARTICLE FINALITY WOULD NOT ATTACH TO AN UNAPPEALED DECISION OF A DISPUTE INVOLVING EXCUSABLE CAUSE THAT WAS INCLUDED IN THE TERMINATION FOR DEFAULT NOTICE. * * *

IT MAY BE NOTED AT THIS POINT THAT THE DEFAULT CLAUSE IN THE FULFORD CASE, SO FAR AS CAN BE DETERMINED FROM PROVISIONS QUOTED IN THE BOARD'S OPINION, IS EXACTLY THE CLAUSE APPEARING IN STANDARD FORM 32, APPROVED NOVEMBER 1949. THE DEFAULT CLAUSE APPEARING IN THE ALLIED CONTRACT IS THAT INCLUDED IN STANDARD FORM 32, APPROVED OCTOBER 1957. THE CLAUSES ARE IN SUBSTANCE THE SAME UNDER THE FULFORD CONTRACT AND THE ALLIED CONTRACT. HENCE, IF THE PROVISIONS OF THE CLAUSE CONSIDERED IN THE FULFORD CASE MAY PROPERLY BE REGARDED AS REASONABLY SUBJECT TO THE INTERPRETATION ADOPTED IN THAT CASE, THE SAME INTERPRETATION COULD REASONABLY BE APPLIED TO THE CASE UNDER CONSIDERATION HERE. IT CANNOT BE SERIOUSLY CONTENDED THAT THE SAME CLAUSE NEED NOT BE INTERPRETED THE SAME WAY BY DIFFERENT CONTRACT APPEALS BOARDS. THE INTERPRETATION IS A MATTER OF LAW AND ITS APPLICATION MUST BE CONSISTENT IN ALL CASES.

SINCE ITS INCEPTION IN 1955, THE FULFORD INTERPRETATION OR "DOCTRINE" HAS BEEN CITED AND ENDORSED MANY TIMES BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS. FOR EXAMPLE, IN THE APPEAL OF UNITED MICROWAVE COMPANY, ASBCA NO. 7947, MARCH 15, 1963, IN AGREEING TO CONSIDER ON ITS MERITS AN APPEAL FROM THE ASSESSMENT OF EXCESS COSTS IN WHICH THE CONTRACTOR CONTENDED THAT THE ARTICLES DELIVERED HAD BEEN IMPROPERLY REJECTED BECAUSE THE GOVERNMENT'S INSPECTION WAS TOO RIGID AND IMPROPERLY CONDUCTED, THE ARMED SERVICES BOARD HELD THAT THE PROPRIETY OF A DEFAULT TERMINATION MAY BE CONSIDERED ON AN APPEAL FROM A LATER DEMAND FOR EXCESS COSTS.

FOR OTHER CASES TO THE SAME EFFECT, SEE THE APPEAL OF OXGEN EQUIPMENT SERVICE COMPANY, ASBCA NO. 5690, JANUARY 20, 1960, AND THE APPEAL OF CAPSON MANUFACTURING CO., ASBCA NO. 6105, SEPTEMBER 30, 1960.

IT THUS APPEARS THAT FOR MORE THAN 9 YEARS THE SO-CALLED "FULFORD DOCTRINE" HAS BEEN APPLIED TO THE CIRCUMSTANCES HERE UNDER CONSIDERATION IN CASES BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS AND IT HAS BEEN ACCEPTED BY THE CONTRACTING COMMUNITY AS THE PROPER INTERPRETATION TO BE PLACED ON THE CLAUSES HERE CONCERNED. WE ARE OF THE OPINION THAT THE ARMED SERVICES BOARD'S INTERPRETATION, HAVING ATTAINED GENERAL ACCEPTANCE BY THE PASSAGE OF TIME, SHOULD BE THE INTERPRETATION APPLIED BY ALL BOARDS IN SIMILAR CASES WHERE THE DEFAULT CLAUSE IS IN SUBSTANCE THE SAME AS THE CLAUSES HERE CONSIDERED.

IT WOULD APPEAR NEEDLESS TO POINT OUT THAT WHERE AN AGENCY OF THE GOVERNMENT WISHES TO AVOID THE CONCLUSIONS HERE REACHED, AND ADOPT A STRINGENT POLICY CONCERNING THE TIMELINESS OF AN APPEAL OR THE MATTERS TO BE CONSIDERED ON AN APPEAL, THE REMEDY LIES IN THE REWORDING OF THE LANGUAGE OF THE DEFAULT AND DISPUTES CLAUSES. THE BIDDERS AND PROSPECTIVE CONTRACTORS SHOULD BE MADE AWARE, IN SUCH CASES, OF THE PRECISE MATTERS FORECLOSED TO THEM ON AN APPEAL AS TO ASSESSMENT OF EXCESS COSTS, WHICH COULD HAVE BEEN BUT WERE NOT TIMELY APPEALED ON A DEFAULT DETERMINATION.

ACCORDINGLY, IN THE PRESENT MATTER, WE ARE OF THE OPINION THAT THE APPEAL OF THE ALLIED PAINT AND COLOR WORKS, INC., FROM THE ASSESSMENT OF EXCESS COSTS, MAY PROPERLY INCLUDE CONSIDERATION OF ITS CONTENTION THAT ITS PRODUCT DID IN FACT MEET SPECIFICATIONS AND THAT THE TERMINATION OF THE CONTRACT WAS ERRONEOUS.