B-242019, Aug 5, 1991

B-242019, Aug 5, 1991

DIGESTS 1. Notwithstanding agency failure to comply with procurement regulations in issuing a delivery order for vehicle repairs on a noncompetitive basis, the contractor who performed the repairs may be paid in accordance with the terms of the order. 2. A claim for repair work ordered by an agency official whose contract warrant had expired may be paid on a quantum merit basis since the government received and accepted the benefit of the work, the claimant acted in good faith, and the amount claimed represents reasonable value of the benefits received. 3. Because interest is generally not recoverable against the United States in the absence of express authorization by contract or statute, claimant who recovers from the government under the equitable theory of quantum merit is not entitled to interest.

Maintenance Service & Sales Corporation:

Maintenance Service & Sales Corporation has filed a claim for $255,944, plus interest, for repair work performed for the Army and Air Force National Guard, Lawrenceville, New Jersey. The claim is based on repairs to government-owned vehicles under three delivery orders issued by a contracting officer who failed to follow required procurement procedures and whose contracting authority had expired prior to issuing two of the orders. We conclude that payment may be made under the first order, which was entered into by an authorized contracting official, in accordance with its terms. Interest may be recovered on the amount payable. Maintenance's claim under the two subsequent orders may be paid under the equitable principle of quantum merit. Interest is not recoverable under this principle.

The record indicates that the Guard issued delivery orders Nos. DAHA 28- 88-C-0028, DAHA 28-88-C-0033, and DAHA 28-89-F-0068 to Maintenance in July, September, and October 1988, respectively. A procurement management review in November 1989, however, revealed several improper aspects to these procurements. First, the awarding official issued delivery order Nos. -0033 and -0068 after his contracting warrant had expired in August 1988. Second, he issued delivery order No. DAHA 0068 under a fictitious General Services Administration (GSA) Federal Supply Schedule number. All three orders were issued to Maintenance without competition. Finally, the three orders were funded with annual appropriations, but the work was not completed until after the expiration date of those appropriations. The Guard suggests that this may be inconsistent with section 37.106 of the Federal Acquisition Regulation (FAR), which states that the terms of service contracts funded by annual appropriations shall not extend beyond the end of the fiscal year.

After discovering these defects, the Guard informed Maintenance that because the contracting officer had acted improperly, further repairs would be unauthorized. The Guard instructed Maintenance to complete all work in process and submit invoices, the payment of which is the subject of the claim here.

The Guard determined that all three delivery orders were unauthorized commitments, which had to be ratified before the contractor could be paid. Although the record indicates that the Guard intended to have the vehicles repaired and that the price for the repairs is fair and reasonable, the Guard declined to ratify the unauthorized commitments under FAR section 1.602-3(c)(3). The Guard concluded that ratification was not permissible because the contracting officer issued the delivery orders in violation of the Competition in Contracting Act.

We conclude that ratification of delivery order No. -0028 is not required because when the order was issued in July 1988, the awarding official still had authority to bind the government. The issue with respect to this order, therefore, is not the authority of the awarding official, but rather the effect of his failure to obtain competition prior to issuing the order.

A contract should not be treated as void, even if improperly awarded, unless the illegality of the award is plain or palpable. See John Reiner & Co. v. United States, 325 F.2d 438, 440 (Ct.Cl. 1963), cert. denied, 377 U.S. 931 (1964); Memorex Corp., B-213430.2, Oct. 23, 1984, 84-2 CPD Para. 446. An award is plainly or palpably illegal if the award was made contrary to statutory or regulatory requirements because of some action or statement by the contractor, or if the contractor was on direct notice that the procedures followed were unlawful. 52 Comp.Gen. 215, 218-219 (1972). Here, there is no indication in the record that the impropriety was due to some action or statement by the contractor or that the contractor was on notice that the contracting officer failed to obtain competition. Under these circumstances, we are unable to conclude that the award of delivery order No. 0028 was plainly or palpably illegal and therefore void. Consequently, the contractor may recover under the terms of that contract. Interest on the amount due may be recovered as provided for under the Prompt Payment Act, 31 U.S.C. Secs. 3901-3906 (1988).

Regarding the two delivery orders issued by the contracting officer after his warrant expired, a different theory in support of payment is required. In general, the government is not bound by the actions of unauthorized officials. Thus, where the agency declines to ratify the unauthorized action, a binding contract does not arise. McGraw-Hill Information Systems Co., B-210808, May 24, 1984. This Office may authorize reimbursement to a firm that performed work for the government without a valid written contract on a quantum merit basis. 64 Comp.Gen. 727, 728 (1985). Under the doctrine of quantum merit, the government pays the reasonable value of services it actually received on an implied, quasi -contractual basis. B-234321, Mar. 20, 1989.

The criteria for payment under this equitable principle normally consist of four elements. First, there must be a threshold determination that the goods or services for which payment is sought would have been a permissible procurement had the proper procedures been followed. Second, the government must have received and accepted a benefit. Third, the firm must have acted in good faith. Fourth, the amount to be paid must not exceed the reasonable value of the benefit received. 64 Comp.Gen. at 728.

We conclude that the criteria for payment under the equitable principle of quantum merit have been satisfied. First, there is no question that services for repair of government-owned vehicles could have been procured had proper procedures been followed. See B-234321, supra. Second, the Guard affirms that it received the use and benefit of the services. Third, the Guard apparently has concluded that Maintenance acted in good faith, and there is nothing in the record to suggest otherwise. Fourth, the amount charged appears to have been fair and reasonable based on a comparison with the pricing offered by the GSA Federal Supply Schedule contractor that received a delivery order for the remaining work not completed by Maintenance. The prices offered by the schedule vendor were $45 higher per vehicle than the prices quoted in Maintenance's claim.

As all the elements of a quantum merit claim have been satisfied, we find that the National Guard may pay Maintenance the amount claimed under the September and October delivery orders. Interest on this amount, however, may not be paid. Interest is generally not recoverable against the United States in the absence of an express statutory provision. United States v. Thayer-West Point Hotel Co., 329 U.S. 585, 588 (1947). Although the payment of interest is required under section 12 of the Contract Disputes Act of 1978, this only applies to claims "relating to a contract." U.S.C. Secs. 605(a), 611 (1988). Because we do not view the two orders as enforceable contracts, the provisions of the Act do not apply. See Effective Learning' Inc., B-215505, Feb. 19, 1985, 85-1 CPD Para. 207. Similarly, the duty to pay interest under the Prompt Payment Act, 31 U.S.C. S 3901 et seq. (1988), is premised on the existence of a legally binding contract. See Office of Management and Budget Circular No. A 125 (Revised) --"Prompt Payment," Dec. 21, 1989, which implements the Act. Because no such contract exists here, the interest provisions of the Prompt Payment Act do not apply.

Finally, regarding whether the three orders were funded with annual appropriations in violation of FAR 37.106, which provides that the terms of service contracts funded by such appropriations shall not extend beyond the end of the fiscal year, we note that the orders in question call for repairs of specified vehicles and not for services continuing over a term. Because these contracts do not specify a term of performance, we find no violation of FAR 37.106. Generally a fiscal year appropriation may be obligated in one fiscal year with performance and payment to extend into the following fiscal year, so long as the obligation was made to meet a bona fide need of the fiscal year to be charged. 35 Comp.Gen. 692 (1956). It appears that the Guard had a bona fide need for the repairs in the year for which the appropriations were available and obligated, and thus the annual appropriations may be used to pay the claim.