A-54680, DECEMBER 30, 1935, 15 COMP. GEN. 564

A-54680: Dec 30, 1935

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CONTRACTS - UNSIGNED - DAMAGES FOR NONPERFORMANCE WHERE AWARD IS MADE UNDER A BID SUBMITTED IN CONNECTION WITH ADVERTISED SPECIFICATIONS. WHERE A CONTRACTOR FAILS TO FURNISH SUPPLIES MEETING THE SPECIFICATIONS AND UPON READVERTISEMENT ON IDENTICAL SPECIFICATIONS AWARD IS MADE TO ANOTHER AT A HIGHER PRICE BUT BEFORE DELIVERY IT IS ASCERTAINED THAT THE SECOND CONTRACT COULD NOT BE PERFORMED SATISFACTORILY BECAUSE OF DEFECTIVE SPECIFICATIONS. THERE IS NO BASIS ON WHICH TO RAISE A CHARGE FOR NONPERFORMANCE AGAINST THE ORIGINAL CONTRACTOR. THERE WAS RECEIVED YOUR LETTER OF JULY 20. TWO CONTRACTS ARE INVOLVED. BIDS WERE OPENED PURSUANT TO WHICH THE BARNES CO. WAS AWARDED CONTRACTS NO. BIDS WERE OPENED RESULTING IN AWARD TO THE BARNES CO.

A-54680, DECEMBER 30, 1935, 15 COMP. GEN. 564

CONTRACTS - UNSIGNED - DAMAGES FOR NONPERFORMANCE WHERE AWARD IS MADE UNDER A BID SUBMITTED IN CONNECTION WITH ADVERTISED SPECIFICATIONS, THE FACT THAT THE SUCCESSFUL BIDDER DID NOT SIGN THE FORMAL CONTRACT DOES NOT PREVENT RECOVERY BY THE UNITED STATES FOR DAMAGES SUSTAINED BY REASON OF A BREACH OR FAILURE TO PERFORM. WHERE A CONTRACTOR FAILS TO FURNISH SUPPLIES MEETING THE SPECIFICATIONS AND UPON READVERTISEMENT ON IDENTICAL SPECIFICATIONS AWARD IS MADE TO ANOTHER AT A HIGHER PRICE BUT BEFORE DELIVERY IT IS ASCERTAINED THAT THE SECOND CONTRACT COULD NOT BE PERFORMED SATISFACTORILY BECAUSE OF DEFECTIVE SPECIFICATIONS, THERE IS NO BASIS ON WHICH TO RAISE A CHARGE FOR NONPERFORMANCE AGAINST THE ORIGINAL CONTRACTOR.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF THE NAVY, DECEMBER 30, 1935:

IN REPLY TO MY LETTER OF MAY 19, 1934, THERE WAS RECEIVED YOUR LETTER OF JULY 20, 1935, WITH ENCLOSURES, RELATIVE TO THE REQUEST OF W. O. BARNES CO., INC., FOR RELIEF FROM PAYMENT TO THE GOVERNMENT OF EXCESS COST OF HACKSAW BLADES, OCCASIONED BY ITS FAILURE TO FURNISH BLADES COMPLYING WITH SPECIFICATIONS.

TWO CONTRACTS ARE INVOLVED. UNDER DATE OF JANUARY 4, 1933, BIDS WERE OPENED PURSUANT TO WHICH THE BARNES CO. WAS AWARDED CONTRACTS NO. NOS- 30776, APRIL 1, 1933, REQUIRING DELIVERY OF 24,650 DOZEN ASSORTED HACKSAW BLADES FOR AN AGGREGATE CONTRACT PRICE OF $8,532. MAY 16, 1933, BIDS WERE OPENED RESULTING IN AWARD TO THE BARNES CO. OF CONTRACT NO. NOS-31882, JUNE 20, 1933, PROVIDING FOR DELIVERY OF 24,800 DOZEN ASSORTED HACKSAW BLADES FOR AN AGGREGATE PRICE OF $8,700.

THE CONTRACTOR ENCOUNTERED DIFFICULTY IN PERFORMANCE OF THE EARLIER CONTRACT, DID NOT EXECUTE THE FORMAL CONTRACT OF JUNE 20, 1933, AND LATER CONTENDED IN A LETTER TO THE NAVY DEPARTMENT OF OCTOBER 12, 1933, THAT NEVER HAVING SIGNED THIS CONTRACT, THE COMPANY WAS IN NO WAY OBLIGATED BY ITS CONDITIONS. IT MAY BE STATED IN PASSING THAT THE POSITION OF THE CONTRACTOR IN THIS BEHALF IS UNTENABLE. IN THIS CONNECTION SEE JAMES F. WATERS, INC., V. THE UNITED STATES (75 CT.CLS. 126-136), IN WHICH IT WAS HELD THAT THE FACT THAT NO FORMAL CONTRACT WAS SIGNED DID NOT PREVENT THE UNITED STATES FROM RECOVERING DAMAGES SUSTAINED BY REASON OF A BREACH OR FAILURE TO PERFORM ON THE PART OF THE CONTRACTOR, CITING NUMEROUS SUPREME COURT DECISIONS.

THE INVITATION FOR BIDS IN BOTH INSTANCES STIPULATED THAT THE BLADES SHOULD BE IN ACCORDANCE WITH NAVY DEPARTMENT TENTATIVE SPECIFICATIONS FOR HACKSAW BLADES, DATED DECEMBER 1, 1932; THAT THE RIGHT WAS RESERVED TO REJECT BIDS ON BRANDS OF BLADES WHICH HAD NOT BEEN SUBJECTED TO REQUIRED TESTS AND FOUND SATISFACTORY; AND THAT AWARD WOULD BE MADE TO THE BIDDER OFFERING BLADES HAVING THE LOWEST COST PER UNIT OF WORK VALUE. A 25- PERCENT TOLERANCE FROM THE ESTABLISHED UNIT OF WORK VALUE WAS PERMISSIBLE. THE BIDS OF THE BARNES CO. BORE NOTATIONS IN SUBSTANTIALLY THE SAME LANGUAGE THAT IT WAS TO FURNISH THE "BARNES" BRAND OF REGULAR TUNGSTEN HAND BLADES SIMILAR TO THOSE TESTED AT THE NAVY YARD IN NEW YORK UNDER TEST NO. 2378. CORRESPONDENCE IN THE FILE INDICATES THE UNIT OF WORK VALUE ESTABLISHED BY THE TEST MENTIONED WAS 69.

WHEN THE CONTRACTOR UNDERTOOK MANUFACTURE UNDER CONTRACT NOS-30776 AND THE BLADES WERE SUBJECTED TO TEST SEVERAL TIMES, THEY DID NOT MEET THE SPECIFICATIONS. IT IS TO BE GATHERED THAT THE AVERAGE WORK VALUE ESTABLISHED BY THE TRIAL TESTS WAS 46, WELL BELOW THE CONTRACT REQUIREMENTS. CORRESPONDENCE RELATIVE TO THE MATTER EXTENDED OVER A PERIOD FROM OCTOBER 3, 1933, LONG AFTER THE CONTRACT PERIOD UNDER BOTH CONTRACTS HAD EXPIRED, TO FEBRUARY 15, 1934. IN THE MEANTIME, THE NAVY DEPARTMENT HAD READVERTISED ITS NEEDS AND BIDS OPENED OCTOBER 27, 1933, ON IDENTICAL SPECIFICATIONS DISCLOSED SUBSTANTIALLY HIGHER PRICES. UNDER DATE OF FEBRUARY 15, 1934, BARNES CO. WAS INFORMED THAT CONTRACTS HAD BEEN AWARDED ON THE BIDS OPENED OCTOBER 27, 1933, AS A CHARGE TO ITS ACCOUNT, RESULTING IN AN ACTUAL INCREASED COST TO THE GOVERNMENT OF $1,911.10; THAT THE WORK VALUE OF THE BLADES CONTRACTED FOR ON THIS OCCASION HAD A SELECTIVE VALUE 5.21 PERCENT LESS THAN THOSE ORIGINALLY OFFERED BY THE BARNES CO., NECESSITATING ADDITIONAL PURCHASE TO THAT EXTENT IN ORDER TO OBTAIN AN EQUAL VALUE, AT AN ADDITIONAL COST OF $1,052.17, MAKING A TOTAL CHARGE AGAINST ACCOUNT OF THE BARNES CO. OF $2,963.27, WHICH AMOUNT THE CONTRACTOR WAS REQUESTED TO REMIT.

UNDER DATE OF MARCH 8, 1934, THE CONTRACTOR REPLIED, ADMITTING ITS CONTRACTUAL OBLIGATION, BUT ADVANCING VARIOUS ARGUMENTS WHY IT SHOULD BE RELIEVED OF THE REQUIREMENT TO PAY THE AMOUNT DEMANDED. IT IS SUFFICIENT TO OBSERVE THAT THE ARGUMENTS ADVANCED BY THE BARNES CO. ARE WITHOUT MERIT, AND IN AN ORDINARY CASE COULD NOT SERVE TO RELIEVE THE CONTRACTOR FROM LIABILITY FOR THE EXCESS COST INVOLVED.

HOWEVER, IT NOW IS ADMINISTRATIVELY REPORTED THAT AFTER THE CONTRACTS UPON WHICH EXCESS COSTS CHARGEABLE TO THE BARNES CO. WERE COMPUTED WERE LET TO THE AMERICAN SAW AND MANUFACTURING CO., IT DEVELOPED THAT THE SPECIFICATIONS WERE DEFECTIVE AND THAT THESE SECOND CONTRACTS COULD NOT BE PERFORMED IN A SATISFACTORY MANNER. THEREUPON, THE SPECIFICATIONS WERE CHANGED, THE PERFORMANCE OF THE LATER CONTRACTS WAS NOT REQUIRED, AND ALL SUBSEQUENT PURCHASES HAVE BEEN MADE UNDER THE REVISED SPECIFICATIONS. THUS DEVELOPS THAT NO PURCHASE OF HACKSAW BLADES HAS BEEN MADE UNDER SPECIFICATIONS IDENTICAL WITH THOSE UPON WHICH THE BARNES CO. BID, WHICH HAVE BEEN DISCARDED BY THE NAVY BECAUSE DEFECTIVE. THERE WOULD APPEAR, THEREFORE, TO BE NO BASIS ON WHICH TO RAISE A CHARGE AGAINST THE BARNES CO., SINCE THE BLADES EVENTUALLY PURCHASED DIFFER MATERIALLY FROM THOSE OFFERED BY THE BARNES CO.

UPON THE FACTS PRESENTED, IT DOES NOT APPEAR THAT THIS OFFICE IS REQUIRED TO ATTEMPT COLLECTION FROM THE W.O. BARNES CO., INC., OF THE DIFFERENCE OF $2,963.27 INVOLVED. SEE MY DECISION TO YOU OF NOVEMBER 14, 1933, A- 51587.