B-175674, FEB 27, 1974

B-175674, FEB 27, 1974

1. ALTHOUGH ISSUANCE OF PURCHASE ORDER BY GOVERNMENT PURSUANT TO SUPPLIER'S QUOTATION ON STANDARD FORM 18 DOES NOT ORDINARILY RESULT IN CONTRACT, SUPPLIER'S REQUEST FOR PAYMENT IN EXCESS OF PURCHASE ORDER PRICES DENIED SINCE PRIOR SHIPMENT OF SUPPLIES ESTABLISHED EXISTENCE OF CONTRACT AT PURCHASE ORDER PRICES. 2. FORMAL DEVALUATIONS OF THE DOLLAR ARE CONSIDERED SOVEREIGN ACTS OF U.S. GOVERNMENT FOR WHICH GOVERNMENT IS NOT PECUNIARILY LIABLE TO CONTRACTORS FOR CONSEQUENCES. GENERALLY, AN INCREASE IN COST OF PERFORMANCE IS NOT COMPENSABLE IN THE ABSENCE OF A SPECIFIC CONTRACTUAL PROVISION THEREFOR.

TO V. MUELLER HOSPITAL SUPPLY CORP.:

THE DIRECTOR, SUPPLY SERVICE, DEPARTMENT OF MEDICINE & SURGERY, VETERANS ADMINISTRATION (VA) HAS TRANSMITTED FOR ADVANCE DECISION THE REQUEST OF V. MUELLER, LINDEN, NEW JERSEY, FOR AN INCREASE IN THE PRICE OF PURCHASE ORDER 2232, DATED APRIL 17, 1973, FOR THE SUPPLY TO THE VETERANS ADMINISTRATION HOSPITAL, CASTLE POINT, NEW YORK, OF AN AV 323404 ZEISS OPERATION MICROSCOPE AND AN AV-30885 HOUSE-URBAN BEAM SPLITTER.

ON APRIL 12, 1973, V. MUELLER FURNISHED THE ADMINISTRATION A QUOTATION ON STANDARD FORM 18, REQUEST FOR QUOTATIONS, IN THE AMOUNT OF $10,325.00, FOR BOTH ITEMS. AN ORDER FOR THE SUPPLIES WAS PLACED ON APRIL 17 AT THE QUOTED PRICES AND THE GOODS WERE SHIPPED TO THE GOVERNMENT ON SEPTEMBER 4, 1973. THEREAFTER, INVOICES WERE SENT, ON SEPTEMBER 12 AND 18, REQUESTING A TOTAL REMITTANCE OF $11,624.38 FOR BOTH ITEMS.

THE CONTRACTOR SUBSEQUENTLY ADVISED THE PROCURING ACTIVITY THAT THE REQUESTED PRICE INCREASE WAS DUE TO THE DEVALUATION OF THE U.S. DOLLAR AND THE CORRESPONDING APPRECIATION OF THE WEST GERMAN DEUTSCHMARK. IT IS CONTENDED THAT THE FEDERAL WAGE AND PRICE CONTROL COMMISSION HAS AUTHORIZED U.S. DEALERS TO SHIFT THE BURDEN OF SUCH PRICE INCREASES TO THEIR CUSTOMERS.

ALTHOUGH ISSUANCE OF A PURCHASE ORDER BY THE GOVERNMENT PURSUANT TO A SUPPLIER'S QUOTATION ON STANDARD FORM 18 DOES NOT ORDINARILY RESULT IN A CONTRACT, THE PURCHASE ORDER IS LEGALLY AN OFFER BY THE GOVERNMENT TO THE SUPPLIER AND A CONTRACT COMES INTO BEING WHEN THE SUPPLIER ACCEPTS THE OFFER, SUCH AS BY FURNISHING THE SUPPLIES ORDERED. FEDERAL PROCUREMENT REGULATIONS 1-16.201-4(A) AND (B). IN THIS CASE WE BELIEVE SHIPMENT BY V. MUELLER OF THE SUPPLIES ORDERED BY THE GOVERNMENT ESTABLISHES THE EXISTENCE OF A CONTRACT FOR THE SUPPLIES IN QUESTION AT THE PRICES STATED IN THE PURCHASE ORDER. THEREFORE WE BELIEVE THAT V. MUELLER'S REQUEST FOR PRICE INCREASES WAS MADE AFTER THE TIME A CONTRACT CAME INTO EXISTENCE.

THE DEVALUATION OF THE DOLLAR BY THE FEDERAL GOVERNMENT IS AN ACT OF THE UNITED STATES IN ITS SOVEREIGN CAPACITY INASMUCH AS IT IS PUBLIC AND GENERAL IN APPLICATION AND EFFECT RATHER THAN AN ACT BY THE UNITED STATES IN ITS CONTRACTUAL CAPACITY WITH A PARTICULAR PRIVATE CONTRACTOR. 175674, MAY 30, 1972. AS WAS STATED IN 53 COMP. GEN. , B-179255, SEPTEMBER 4, 1973:

"*** IT IS WELL SETTLED THAT THE GOVERNMENT IS NOT LIABLE AS A CONTRACTOR FOR THE CONSEQUENCES OF ITS ACTS AS A SOVEREIGN. SEE HOROWITZ V. UNITED STATES, 267 U.S. 458 (1925); THE SUNSWICK CORP. V. UNITED STATES, 75 F. SUPP. 221, 109 CT. CL. 772 (1948). ALSO, WHERE A GOVERNMENT CONTRACT CONTAINS AN EXPRESS STIPULATION AS TO THE AMOUNT OF COMPENSATION TO BE PAID, AND NO PROVISION IS MADE FOR ANY INCREASE IN THE EVENT PERFORMANCE BECOMES MORE EXPENSIVE OR DIFFICULT, THE FACT THAT THE COST OF PERFORMANCE IS INCREASED BY FACTORS WHICH DO NOT CONSTITUTE UNDUE INTERFERENCE BY THE GOVERNMENT AS A CONTRACTOR DOES NOT ENTITLE THE CONTRACTOR TO ADDITIONAL COMPENSATION. SEE B-175674, SUPRA, AND CASES CITED THEREIN. AS WAS STATED IN PENN BRIDGE CO. V. UNITED STATES, 59 CT. CL. 892, 896 (1924)

"'*** CONTRACTUAL RIGHTS ONCE FIXED IN A PROPER CONTRACT EXECUTED BY AUTHORITY ARE INVIOLATE. THEY MAY BE FORFEITED BY ONE PARTY OR THE OTHER, CONSTRUCTION IS PERMISSIBLE IF THE TERMS ARE AMBIGUOUS, BUT IN THE ABSENCE OF AMBIGUITY OR FORFEITURE OF RIGHTS BY CONDUCT, SUCH A CONTRACT CANNOT BUT BE ENFORCED AS WRITTEN.'"

IN VIEW OF THE ABOVE AUTHORITY, THE FACT THAT THE WAGE AND PRICE CONTROL COMMISSION MAY HAVE SANCTIONED THE SHIFT OF SUCH COST INCREASES TO THE CUSTOMER CANNOT BE GIVEN THE EFFECT OF NULLIFYING A VALID CONTRACTUAL COMMITMENT TO SUPPLY THE ITEMS AT A STIPULATED PRICE.

ACCORDINGLY, SINCE THE CONTRACTUAL ARRANGEMENT MADE NO PROVISION FOR INCREASED COST OF PERFORMANCE, AND SINCE THE FORMAL DEVALUATION OF THE DOLLAR CONSTITUTED A SOVEREIGN ACT, IT IS OUR CONCLUSION THAT ADDITIONAL COMPENSATION IS NOT LEGALLY PERMISSIBLE.