B-140253, OCT. 10, 1960

B-140253, OCT. 10, 1960

TO HALROSE CORPORATION:

REFERENCE IS MADE TO A LETTER DATED MARCH 30, 1959, FROM YOUR ATTORNEYS, RELATIVE TO YOUR INDEBTEDNESS IN THE AMOUNT OF $8,091 REPRESENTING THE CONTRACT PRICE OF 18 CARDIOGRAPHS FURNISHED BY YOU UNDER VETERANS ADMINISTRATION PURCHASE ORDER NO. 57-VA-743, AND PAID FOR, AND THEREAFTER REJECTED AS DEFECTIVE EQUIPMENT. THE INDEBTEDNESS WAS REPORTED TO OUR CLAIMS DIVISION BY THE VETERANS ADMINISTRATION AS UNCOLLECTIBLE ON APRIL 29, 1958.

UNDER THE TERMS OF THE CONTRACT YOU GUARANTEED THE EQUIPMENT AGAINST DEFECTIVE MATERIAL, WORKMANSHIP AND OPERATION FOR A PERIOD OF ONE YEAR FROM THE DATE OF FINAL ACCEPTANCE AND ALSO AGREED TO CORRECT WITHOUT ANY EXPENSE TO THE VETERANS ADMINISTRATION ANY DEFECTS IN MATERIAL, WORKMANSHIP AND OPERATION THAT MIGHT DEVELOP DURING THE GUARANTEE PERIOD, EXCEPT THAT EVACUATED DEVICES (TUBES) WERE GUARANTEED FOR NINETY DAYS.

THE RECORD INDICATES THAT THE CARDIOGRAPHS DELIVERED UNDER THE CONTRACT FAILED TO PERFORM SATISFACTORILY AND THAT YOUR ENGINEER AS WELL AS REPRESENTATIVES OF YOUR SUCCESSOR--- VOLTAR ELECTRONICS--- MADE NUMEROUS TRIPS TO THE HOSPITALS TO ASSIST PERSONNEL IN THE OPERATION OF THE MACHINE. THE VETERANS ADMINISTRATION REPORTS THAT AFTER IMPARTIAL TESTS OF THE EQUIPMENT HAD BEEN MADE AT THE VETERANS ADMINISTRATION FACILITY AT HINES, ILLINOIS, IT WAS ADMINISTRATIVELY DETERMINED THAT THE MACHINES COULD NOT BE MADE TO FUNCTION WITH REASONABLE DEPENDABILITY WITHOUT MAJOR CHANGES AND THAT, THEREFORE, THE HOSPITALS HAVING THE UNITS WERE INSTRUCTED TO RETURN THEM.

YOU CONTEND THAT THE EQUIPMENT FURNISHED WAS THE SAME AS THE UNIT INSPECTED AND ACCEPTED BY THE BUREAU OF STANDARDS AND THAT THE UNITS SHIPPED TO THE VETERANS ADMINISTRATION WERE ALL TESTED AND CHECKED OUT PRIOR TO SHIPMENT. YOU CONTEND FURTHER THAT THE VETERANS ADMINISTRATION WAS NOT INTERESTED IN THE CORRECTION OF THE ALLEGED DEFECTS BUT WANTED TO RETURN THE MACHINES BECAUSE OF THE REFUSAL OF INDIVIDUAL DOCTORS TO WORK WITH A NEW TYPE OF MACHINE WITH WHICH THEY WERE NOT FAMILIAR. SAMPLE TESTIMONIAL LETTERS WERE PRESENTED BY YOU ATTESTING THE FUNCTIONING OF THE MODEL FURNISHED THE VETERANS ADMINISTRATION IN USE BY MEMBERS OF THE MEDICAL PROFESSION.

IT IS A QUESTION OF FACT AS TO WHETHER THE EQUIPMENT DELIVERED BY YOU TO THE VETERANS ADMINISTRATION WAS DEFECTIVE. THUS, YOUR BASIC CONTENTION IN THE MATTER WAS BELIEVED TO BE PROPERLY FOR CONSIDERATION UNDER THE DISPUTES CLAUSE OF THE CONTRACT WHICH IS TO THE EFFECT THAT THE CONTRACTING OFFICER'S DECISION ON ALL QUESTIONS OF FACT INVOLVED IN DISPUTES ARISING UNDER THE CONTRACT SHALL BE FINAL AND CONCLUSIVE ON THE PARTIES, SUBJECT ONLY TO YOUR RIGHT OF APPEAL WITHIN 30 DAYS TO THE HEAD OF THE DEPARTMENT OR HIS DUTY AUTHORIZED REPRESENTATIVE.

SINCE THE CONTRACTING OFFICER HAD MADE NO DECISION, WE REQUESTED AN ADDITIONAL REPORT FROM THE VETERANS ADMINISTRATION RELATIVE TO YOUR INDEBTEDNESS. IT HAS RECENTLY BEEN REPORTED BY THE DEPARTMENT THAT A DECISION OF THE CONTRACTING OFFICER WAS SENT BY CERTIFIED MAIL TO YOUR COMPANY AND THAT THE TIME FOR THE FILING OF AN APPEAL FROM SUCH DECISION HAS EXPIRED. THE RECORD INDICATES THAT THE CONTRACTING OFFICER'S DECISION WAS UNFAVORABLE TO THE POSITION TAKEN BY YOUR COMPANY ON THE FACTUAL ISSUES OF THE CASE.

UPON YOUR FAILURE TO FOLLOW THE APPEALS PROCEDURE AFFORDED BY YOUR CONTRACT, YOU THEREBY WAIVED WHATEVER RIGHTS OR REMEDIES YOU OTHERWISE MIGHT HAVE PURSUED, AND UNDER ESTABLISHED PRINCIPLES OF LAW, MADE THE DECISION OF THE CONTRACTING OFFICER FINAL AND CONCLUSIVE UPON THE PARTIES, AND ALSO PLACED THE MATTER BEYOND THE JURISDICTION OF THE GENERAL ACCOUNTING OFFICE AND THE COURTS. SEE 41 U.S.C. 321; UNITED STATES V. HOLPUCH COMPANY, 328 U.S.C 234; UNITED STATES V. CALLAHAN WALKER COMPANY, 317 ID. 56, 61; UNITED STATES V. BLAIR, 321 ID. 730, 736, AND CASES THERE CITED; PHOENIX BRIDGE COMPANY V. UNITED STATES, 85 CT.CL. 603, 629; 35 COMP. GEN. 512, 517.

ACCORDINGLY, YOU ARE ADVISED THAT UNLESS APPROPRIATE ARRANGEMENTS ARE MADE BY YOU TO LIQUIDATE THE AMOUNT OF THE INDEBTEDNESS, WE SHALL PROCEED WITH COLLECTION PROCEEDINGS IN ACCORDANCE WITH ESTABLISHED PRACTICE.