B-116519, OCT 9, 1953

B-116519: Oct 9, 1953

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THE CONTRACT INVOLVED WAS AWARDED TO THE COMPANY ON AUGUST 10. 332) FOR THE MACHINE AND STATED THAT "THE FIRM PRICE WILL BE THAT IN EFFECT AT TIME OF SHIPMENT.". AT THE TIME THE MACHINE WAS SHIPPED. THE PRICE IN EFFECT WAS $19. IT IS STATED. IS SUPPORTED BY CEILING PRICE REGULATION NO. 30. AT THE TIME THE CONTRACT WAS AWARDED. THE ESCALATION APPLICABLE TO THIS TYPE OF PROCUREMENT WAS THAT SET OUT IN APP 7-151.4 ENTITLED. 'PRICE ESCALATION CLAUSE FOR OPEN END CONTRACTS AND INDEFINITE QUANTITY CONTRACTS' AND WAS UTILIZED FOR STANDARD 'OFF THE SHELF' ITEMS. UNDER SUCH A CLAUSE THE LIMITATION OF ANY POSSIBLE INCREASE WAS 10% OF THE CONTRACT PRICE. THIS CLAUSE WAS IN EFFECT SINCE 15 MAR 51. "4.

B-116519, OCT 9, 1953

PRECIS-UNAVAILABLE

COLONEL J. E. ALLEN, F.C., U. S. ARMY:

BY SIXTH INDORSEMENT OF JULY 16, 1953, THE ASSISTANT CHIEF OF FINANCE FORWARDED TO THIS OFFICE YOUR THIRD INDORSEMENT OF JUNE 4, AND ENCLOSURES, REQUESTING A DECISION CONCERNING THE AMOUNT WHICH PROPERLY MAY BE PAID KEARNEY & TRECKER CORPORATION FOR A MILLING MACHINE FURNISHED BY THAT FIRM PURSUANT TO CONTRACT DA-36-038-ORD-6174.

THE RECORD DISCLOSES THAT, FOLLOWING ADVERTISEMENT FOR BIDS, THE CONTRACT INVOLVED WAS AWARDED TO THE COMPANY ON AUGUST 10, 1951. WHILE THE INVITATION FOR BIDS CALLED FOR FIXED PRICE BIDS, THE COMPANY SUBMITTED ITS CURRENT PRICE ($15,332) FOR THE MACHINE AND STATED THAT "THE FIRM PRICE WILL BE THAT IN EFFECT AT TIME OF SHIPMENT." AT THE TIME THE MACHINE WAS SHIPPED, THE PRICE IN EFFECT WAS $19,597.87, WHICH, IT IS STATED, IS SUPPORTED BY CEILING PRICE REGULATION NO. 30, SUPPLEMENTARY REGULATION NO. 2, REVISION NO. 1 AND HAS BEEN CONFIRMED BY THE OFFICE OF PRICE STABILIZATION. THE COMPANY HAS ALREADY BEEN PAID THE SUM OF $15,332 AND YOUR REQUEST IN THE MATTER CONCERNS THE QUESTION AS TO WHAT PART, IF ANY, OF THE $4,265.89 NOW CLAIMED BY THE COMPANY AND REPRESENTING THE DIFFERENCE BETWEEN THE PRICE IN EFFECT ON THE DATE OF THE CONTRACT AND THE PRICE IN EFFECT AT THE TIME OF SHIPMENT, MAY BE PAID TO THE CONTRACTOR.

YOUR QUESTION IN THE MATTER ARISES BY REASON OF THE CIRCUMSTANCES SET FORTH IN A STATEMENT BY THE CONTRACTING OFFICER, AS FOLLOWS:

"3. AT THE TIME THE CONTRACT WAS AWARDED, THE ESCALATION APPLICABLE TO THIS TYPE OF PROCUREMENT WAS THAT SET OUT IN APP 7-151.4 ENTITLED, 'PRICE ESCALATION CLAUSE FOR OPEN END CONTRACTS AND INDEFINITE QUANTITY CONTRACTS' AND WAS UTILIZED FOR STANDARD 'OFF THE SHELF' ITEMS. UNDER SUCH A CLAUSE THE LIMITATION OF ANY POSSIBLE INCREASE WAS 10% OF THE CONTRACT PRICE. THIS CLAUSE WAS IN EFFECT SINCE 15 MAR 51.

"4. AT THE TIME THE CONTRACTOR DELIVERED THE MILLING MACHINE IN QUESTION (23 OCT 52) THERE WAS AUTHORITY FOR THE GOVERNMENT TO PERMIT A MACHINE TOOL CONTRACT ESCALATION IN THE AMOUNT OF 15% FOR DELIVERY MADE IN THE FIRST TWELVE MONTHS AND 20% FOR DELIVERY MADE THEREAFTER. REFERENCE IS HAD TO OPI INTERIM 2-52, CHANGE NO. 1, DATED 4 JUNE 52."

IN VIEW THEREOF YOU REQUEST TO BE ADVISED WHETHER THE CONTRACTOR IS ENTITLED TO -

"A. NO INCREASED PAYMENT AT ALL.

B. INCREASE OF 10% OF THE ORIGINAL CONTRACT PRICE.

C. INCREASE OF 15% OF THE ORIGINAL CONTRACT PRICE.

D. INCREASE OF 20% OF THE ORIGINAL CONTRACT PRICE.

E. THE ENTIRE INCREASE."

IT IS PROVIDED IN ARMY PROCUREMENT PROCEDURES, 32 C.F.R. 591.403(B), THAT THE CONTRACTING OFFICERS SHALL REJECT ALL BIDS CONTAINING STIPULATIONS SIMILAR TO THAT CONSIDERED HEREIN. IN VIEW THEREOF, AND SINCE THE AUTHORITY OF CONTRACTING OFFICERS AS SET FORTH IN THE ARMY PROCUREMENT PROCEDURES IS LIMITED BY THE PROVISIONS OF 32 C.F.R. 590.402(B) TO THE ENTERING INTO CONTRACTS WHICH ARE AUTHORIZED BY LAW AND WHICH COMPLY WITH THE ARMED SERVICES PROCUREMENT REGULATIONS AND THE ARMY PROCUREMENT PROCEDURES WITH RESPECT TO THE USE OF CONTRACT CLAUSES, THE CONTRACT IS INVALID AS BEING IN EXCESS OF THE CONTRACTING OFFICER'S AUTHORITY. SEE, GENERALLY, 14 COMP. GEN. 875; 15 ID. 9; 18 ID. 568. HOWEVER, WHILE THE CONTRACT IS IRREGULAR, IT IS A WELL SETTLED RULE OF LAW THAT WHERE GOODS ARE FURNISHED OR SERVICES ARE RENDERED ON THE REQUEST OR ORDER OF AN OFFICER AUTHORIZED TO CONTRACT FOR THE UNITED STATES AND TO PROCURE GOODS OR SERVICES FOR THE USE OF THE UNITED STATES, THERE IS AN OBLIGATION UNDER AN IMPLIED CONTRACT TO PAY THE REASONABLE VALUE OF THE GOODS AND SERVICES ACTUALLY FURNISHED. SEE 18 COMP. GEN. 568 AND CASES CITED THEREIN.

THE AMOUNT BILLED BY THE CONTRACTOR MAY BE REGARDED AS SOME EVIDENCE OF THE REASONABLE VALUE OF THE MACHINE INVOLVED, AND IF YOUR DEPARTMENT DETERMINES THAT THE PRICE CHARGED IS EQUIVALENT TO THE FAIR MARKET VALUE OF THE MACHINE THE CONTRACTOR MAY BE PAID THE FULL AMOUNT CLAIMED.