A-30577, MARCH 1, 1930, 9 COMP. GEN. 378

A-30577: Mar 1, 1930

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IT IS CLAIMED THAT THE COST OF MANUFACTURE. OF THESE MACHINES WAS $272. THAT THE CONTRACT PRICE PAID WAS $269. IT SEEMS THAT WHEN IT WAS CONCLUDED TO CHANGE THE CURRENCY ISSUES TO NEW AND SMALLER CURRENCY. IT WAS NECESSARY TO DESIGN AND PURCHASE FOR THAT PURPOSE NEW NUMBERING. THE DEVELOPMENT OF A PRESS OF THIS TYPE WAS SOMETHING NEW TO BOTH THE BUREAU OF ENGRAVING AND PRINTING AND TO PRESS MANUFACTURERS. AMONG THE FUNCTIONS DESCRIBED IN THE SPECIFICATIONS WAS OUTLINING THE SERIAL NUMBER ARRANGEMENT AND THE MANNER IN WHICH THE COMPLETED NOTES WERE TO BE DELIVERED FROM THE PRESS. THE ENSUING FACTS IN THE MATTER ARE STATED IN A REPORT DATED DECEMBER 19. FROM THE SECRETARY OF THE TREASURY AS FOLLOWS: WHEN THE BIDS WERE OPENED.

A-30577, MARCH 1, 1930, 9 COMP. GEN. 378

CONTRACTS - ADDITIONAL PAYMENTS THE ACT OF APRIL 10, 1928, 45 STAT. 413, DOES NOT AUTHORIZE OR JUSTIFY ANY REPORT OR RECOMMENDATION THAT A CONTRACTOR BE PAID ANY SUM IN EXCESS OF THE CONTRACT PRICE FOR THE PERFORMANCE OF GOVERNMENT WORK SIMPLY BECAUSE BY THE PERFORMANCE OF THE CONTRACT ENTERED INTO AFTER COMPETITION, THE CONTRACTOR INCURRED A LOSS RATHER THAN A PROFIT.

DECISION BY COMPTROLLER GENERAL MCCARL, MARCH 1, 1930:

THE MIEHLE PRINTING PRESS AND MANUFACTURING CO. ALLEGED IN LETTER DATED FEBRUARY 4, 1930, SUPPORTED BY REPORT OF A FIRM OF CERTIFIED PUBLIC ACCOUNTANTS, THAT IT HAD INCURRED A LOSE OF $3,400.58 IN THE PERFORMANCE OF CONTRACTS TEP-110, DATED JULY 20, 1927, AND TEP-317, DATED AUGUST 16, 1928, IN THE MANUFACTURE AND DELIVERY TO THE BUREAU OF ENGRAVING AND PRINTING, TREASURY DEPARTMENT, RESPECTIVELY, OF 10 AND 7 AUTOMATIC NUMBERING, SEALING, SEPARATING, AND COLLATING PRESSES FOR THE NEW ISSUES OF CURRENCY. IT IS CLAIMED THAT THE COST OF MANUFACTURE, ETC. OF THESE MACHINES WAS $272,775.58; THAT THE CONTRACT PRICE PAID WAS $269,375; THAT THE GOVERNMENT SHOULD PAY IT A PROFIT ON THE COST OF THE MACHINES OF 10 PERCENT, OR $27,277.55, TOGETHER WITH THE LOSS OF $3,400.58, OR AN AGGREGATE OF $30,678.13.

IT SEEMS THAT WHEN IT WAS CONCLUDED TO CHANGE THE CURRENCY ISSUES TO NEW AND SMALLER CURRENCY, IT WAS NECESSARY TO DESIGN AND PURCHASE FOR THAT PURPOSE NEW NUMBERING, SEALING, SEPARATING, AND COLLATING PRESSES, AND THAT IT BECAME NECESSARY TO DEVELOP A NUMBERING AND SEALING PRESS WHICH WOULD HANDLE A 12-SUBJECT CURRENCY SHEET. THE DEVELOPMENT OF A PRESS OF THIS TYPE WAS SOMETHING NEW TO BOTH THE BUREAU OF ENGRAVING AND PRINTING AND TO PRESS MANUFACTURERS. ACCORDINGLY, ADVERTISEMENTS WEREISSUED JUNE 13, 1927, FOR 10 SUCH MACHINES, THE SPECIFICATIONS INCORPORATING A GENERAL DESCRIPTION OF THE WORK TO BE HANDLED. AMONG THE FUNCTIONS DESCRIBED IN THE SPECIFICATIONS WAS OUTLINING THE SERIAL NUMBER ARRANGEMENT AND THE MANNER IN WHICH THE COMPLETED NOTES WERE TO BE DELIVERED FROM THE PRESS. THE ENSUING FACTS IN THE MATTER ARE STATED IN A REPORT DATED DECEMBER 19, 1929, FROM THE SECRETARY OF THE TREASURY AS FOLLOWS:

WHEN THE BIDS WERE OPENED, PROPOSALS WERE RECEIVED FROM TWO BIDDERS. THE MIEHLE COMPANY QUOTED A PRICE OF $135,000 FOR THE TEN NUMBERING PRESSES, WHILE THE OTHER BIDDER QUOTED A PRICE OF $237,750. THE CONTRACT WAS AWARDED TO THE LOW BIDDER ON JUNE 29, 1927, ORDER NO. 3-4147-TEP 110.

UPON RECEIPT OF THE ORDER THE MIEHLE COMPANY SENT A CORPS OF ENGINEERS TO THE BUREAU FOR THE PURPOSE OF DEVELOPING A DESIGN FOR A PRESS. BY THE CLOSE OF THE YEAR 1927 THE BUREAU LEARNED THAT MOST OF THE DETAIL DRAWINGS HAD BEEN COMPLETED, AND A GREAT NUMBER OF THE PARTS PRODUCED. IN ANSWER TO AN INQUIRY, DATED FEBRUARY 23, 1928, REGARDING THE PROGRESS BEING MADE, THE VICE PRESIDENT OF THE MIEHLE COMPANY REPLIED AS FOLLOWS:

"WE FIND THAT THE PARTS FOR THE ENTIRE MACHINES ARE ABOUT 75 PERCENT MACHINED AND FINISHED, READY FOR ASSEMBLY. ONE SET OF FRAMES HAS BEEN ASSEMBLED AND SHIPPED TO THE DEXTER COMPANY FOR THEIR USE IN FITTING THE FEEDERS TO THE MACHINES. ASSEMBLY OF THE SECOND SET OF FRAMES WILL BEGIN IN OUR SHOP ON TUESDAY NEXT, AND WE EXPECT TO HAVE THE FIRST MACHINE READY FOR OUR SHOP TESTS ABOUT APRIL 1ST. THIS WILL BE FOLLOWED IMMEDIATELY BY OTHERS. IN FACT, THERE WILL BE FOUR MACHINES ON WHICH WE WILL START ERECTING ON TUESDAY NEXT, BUT WE WILL PUT ONE OF THEM THROUGH AHEAD OF THE OTHERS FOR TEST PURPOSES.'

ABOUT MARCH 1, 1928, REPRESENTATIVES OF THE OFFICE OF THE TREASURER OF THE UNITED STATES RAISED AN OBJECTION TO THE SERIAL NUMBER SCHEME, WHICH HAD PREVIOUSLY BEEN APPROVED AND INCORPORATED IN THE SPECIFICATIONS COVERING THE CONSTRUCTION OF THE NEW PRESSES. THE PROPOSITION OF REVISING THE SERIAL NUMBER ARRANGEMENT WAS TAKEN UNDER CONSIDERATION BY OFFICIALS OF THE BUREAU. AFTER SOME EXPERIMENTS THE NUMBERING HEAD MANUFACTURER ANNOUNCED THAT HE COULD BUILD A SKIP-SIX HEAD. WITH THIS ANNOUNCEMENT IT DEVELOPED THAT THE SAME SCHEME OF NUMBERING OF OLD NOTES COULD BE APPLIED TO THE NUMBERING OF THE NEW NOTES. THIS CHANGE WAS APPROVED.

ON MARCH 23, 1928, BIDS WERE INVITED FOR THE CONSTRUCTION OF COLLATING DEVICES TO BE ATTACHED TO THE PARTIALLY COMPLETED NUMBERING PRESSES. THE MIEHLE COMPANY, THE ONLY BIDDER, QUOTED A PRICE OF $18,875. ORDER NO. F- 3417-TEP 252 WAS PLACED WITH THIS COMPANY UNDER DATE OF APRIL 26, 1928. IT IS IN CONNECTION WITH THIS ORDER THAT THE CONTRACTOR SUBMITS HIS CLAIM FOR A LOSS.

THE FIRST PRESS WAS SHIPPED TO THE BUREAU FOR TRIAL ON MAY 24, 1928. THIS PRESS WAS PRACTICALLY COMPLETED BEFORE THE ORDER FOR THE COLLATORS WAS PLACED, IT WAS RECEIVED HERE WITHOUT A COLLATING DEVICE. AFTER A THOROUGH TEST, SEVERAL SUGGESTIONS WERE MADE COVERING MINOR CHANGES. THE PRESS WAS THEN RETURNED TO THE CONTRACTOR FOR COMPLETION.

DURING THE PERIOD THE MIEHLE COMPANY WAS ENDEAVORING TO CONSTRUCT A COLLATING DEVICE THAT COULD BE ATTACHED TO THE PRESSES THEN PARTIALLY COMPLETED, WHICH WOULD WORK SATISFACTORILY, REPRESENTATIVES OF THE BUREAU VISITED THE PLANT OF THE MANUFACTURER TO PASS UPON THE SEVERAL DESIGNS UNDER CONSIDERATION. AT ONE TIME IT APPEARED VERY DOUBTFUL THAT A COLLATING DEVICE COULD BE SUCCESSFULLY HOOKED UP WITH THE NUMBERING PRESS AS DESIGNED. IT IS KNOWN TO REPRESENTATIVES OF THE BUREAU THAT THE MIEHLE COMPANY EXPENDED CONSIDERABLE TIME AND EFFORT IN THE DEVELOPMENT OF A DEVICE WHICH WOULD FUNCTION SATISFACTORILY.

THE DELIVERIES OF THE PRESSES WERE NOT IN ACCORDANCE WITH THE TERMS OF THE CONTRACT. THE DELAYS, HOWEVER, WERE OCCASIONED TO A LARGE EXTENT BY THE CHANGE IN THE SERIAL NUMBER ARRANGEMENT, TOGETHER WITH OTHER DIFFICULTIES ENCOUNTERED BY THE MANUFACTURER IN DEVELOPING AN ENTIRELY NEW DEVICE.

IN AUGUST, 1928, PROPOSALS WERE INVITED FOR SEVEN ADDITIONAL NUMBERING PRESSES. THE LOW AND ONLY BIDDER WAS THE MIEHLE COMPANY, AT A PRICE OF $115,500. ORDER NO. G-403, TEP-317, DATED AUGUST 16, WAS PLACED WITH THIS COMPANY.

THE BUREAU OF ENGRAVING AND PRINTING CAN FIND NO MISSTATEMENTS OF THE FACTS IN THE CASE AS PRESENTED BY THE MIEHLE COMPANY IN ITS LETTER OF NOVEMBER 25, 1929, NOR IN THE STATEMENT PREPARED BY PRICE, WATERHOUSE AND COMPANY, DATED NOVEMBER 6, 1929.

NOTWITHSTANDING THE BID AND ACCEPTED PRICE WHICH WAS INCORPORATED INTO THE CONTRACTS AND SUBSEQUENTLY PAID BY THE GOVERNMENT, TOGETHER WITH THE AGREED ADDITIONAL SUM FOR THE CONSTRUCTION OF COLLATING DEVICES, IT SEEMS CONTENTION OF THE MANUFACTURER THAT, DUE TO THE DIFFICULTIES ENCOUNTERED IN THE DESIGN AND CONSTRUCTION OF THE COMPLETED MACHINES KNOWN AT THE TIME OF CONTRACTING TO BE EXPERIMENTAL, THE GOVERNMENT SHOULD DISREGARD THE STIPULATED PRICES AND, IN EFFECT, CONVERT THE CONTRACTS INTO COST PLUS ONES, PAYING THE COST OF $272,775.58 PLUS 10 PERCENT PROFIT THEREON. SEEMS TO BE ADMITTED THAT THERE IS NO LEGAL BASIS FOR THIS CONTENTION; RATHER, THE CLAIM HAS BEEN SUBMITTED AS AN EQUITABLE ONE FOR REPORT AND RECOMMENDATION TO THE CONGRESS PURSUANT TO THE ACT OF APRIL 10, 1928, 45 STAT. 413.

SUCH CONTENTION OVERLOOKS THE BASIS FOR GOVERNMENT CONTRACTS. THE LAW HAS LONG PROVIDED--- NOW SECTION 3709, REVISED STATUTES--- THAT IN ORDER TO PREVENT FAVORITISM IN THE AWARDING OF GOVERNMENT CONTRACTS AND THAT THE GOVERNMENT MAY SECURE THE BENEFITS OF COMPETITION, THERE SHALL BE ADVERTISING OF THE NEEDS OF THE GOVERNMENT. THIS REQUIREMENT OF LAW CONTEMPLATES THAT PROSPECTIVE CONTRACTORS SHALL SUBMIT THEIR PROPOSALS FOR DOING THE WORK AND IT WOULD NOT ONLY BE UNJUST TO THE GOVERNMENT, BUT UNJUST TO COMPETING BIDDERS TO DISREGARD THE CONTRACT PRICE AFTER THE WORK HAS BEEN DONE AND PAY FOR SAME ON THE BASIS OF COST, PLUS PROFIT WHEN IT DEVELOPED THAT THE ACCEPTED BID WAS NOT SUFFICIENT TO ALLOW THE CONTRACTOR A PROFIT. THE LAW IS SETTLED THAT A CONTRACT WITH THE UNITED STATES MAY NOT BE MODIFIED PREJUDICIAL TO THE INTERESTS OF THE GOVERNMENT WITHOUT CONSIDERATION THEREFOR. THE RULE WAS STATED IN PREIS AND COMPANY V. UNITED STATES, 58 CT.CLS. 81, PAGE 87, THAT IN ATTEMPT TO INCREASE THE CONTRACT PRICE:

THE TEST IN SUCH CASES IS WHETHER OR NOT THERE WAS ANY BENEFIT TO BE DERIVED BY THE UNITED STATES FROM THE EXECUTION OF THE SUPPLEMENTAL OR MODIFIED CONTRACT. IN THE CASE AT BAR NO SUCH BENEFIT IS PROVIDED FOR IN THE SUPPLEMENTAL CONTRACT.

THERE WERE NO SUPPLEMENTAL CONTRACTS ATTEMPTED HERE AND THE GOVERNMENT MERELY OBTAINED THE 17 MACHINES CONTRACTED FOR. THE PAYMENT OF ANY SUM IN ADDITION TO THE CONTRACT PRICES AS INCREASED ON ACCOUNT OF THE EXTRA COLLATING DEVICES, WOULD NOT CONFER ANY BENEFIT ON THE GOVERNMENT; ON THE CONTRARY, SUCH PAYMENT WOULD BE PREJUDICIAL NOT ONLY TO THE OTHER BIDDERS WHO COMPETED FOR THESE CONTRACTS, BUT TO THE UNITED STATES AS WELL. WAS SAID BY THE SUPREME COURT OF THE UNITED STATES IN WELLS BROTHERS COMPANY V. UNITED STATES, 254 U.S. 83, 87, IN "DEALING WITH A WRITTEN CONTRACT" AS HERE,"PLAIN AND COMPREHENSIVE IN ITS TERMS" THAT:

MEN WHO TAKE MILLION-DOLLAR CONTRACTS FOR GOVERNMENT BUILDINGS ARE NEITHER UNSOPHISTICATED NOR CARELESS. INEXPERIENCE AND INATTENTION ARE MORE LIKELY TO BE FOUND IN OTHER PARTIES TO SUCH CONTRACTS THAN THE CONTRACTORS, AND THE PRESUMPTION IS OBVIOUS AND STRONG THAT THE MEN SIGNING SUCH A CONTRACT AS WE HAVE HERE PROTECTED THEMSELVES AGAINST SUCH DELAYS (OR EXPENSE) AS ARE COMPLAINED OF BY THE HIGHER PRICE EXACTED FOR THE WORK.

THE ACT OF APRIL 10, 1928, MAY NOT BE INVOKED TO OVERTURN THESE SETTLED PRINCIPLES OF LAW AND TO AUTHORIZE OR JUSTIFY THIS OFFICE IN MAKING REPORT AND RECOMMENDATION TO THE CONGRESS THAT AN APPROPRIATION BE MADE TO PAY A CONTRACTOR ANY EXCESS OVER THE CONTRACT PRICE BECAUSE THAT CONTRACTOR INCURRED A LOSS RATHER THAN A PROFIT IN THE PERFORMANCE OF GOVERNMENT CONTRACTS FOR THE PRICES VOLUNTARILY NAMED AND STIPULATED THEREIN. THEREFORE, THE CLAIM MUST BE, AND IS, DENIED.