B-119994, JULY 26, 1954, 34 COMP. GEN. 41

B-119994: Jul 26, 1954

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COST OF INDIVIDUAL ITEMS DEFAULTING CONTRACTOR WHO FAILED TO DELIVER TWO ITEMS WHICH WERE OBTAINED FROM TWO SOURCES. ONE OF WHICH WAS LESS THAN CONTRACT PRICE. IS LIABLE FOR EXCESS COSTS COMPUTED ON BASIS OF COST TO THE GOVERNMENT AS TO THE CONTRACT PRICE AS A WHOLE AND NOT ON THE INDIVIDUAL ITEMS CONCERNED. 1954: REFERENCE IS MADE TO LETTER DATED MAY 4. A DECISION IS REQUESTED AS TO WHETHER THE LIABILITY OF SUCH DEFAULTING CONTRACTOR FOR EXCESS COSTS SHOULD BE COMPUTED ON THE BASIS OF COST TO THE GOVERNMENT AS TO INDIVIDUAL ITEMS CONCERNED. ALL OF WHICH WERE DELIVERED EXCEPT ITEMS SIX AND SEVEN. THE CONTRACT WAS TERMINATED AND THE GAGES WERE PROCURED ELSEWHERE. THE SUPPLIES REQUIRED BY ITEM SEVEN WERE PURCHASED AT A SAVING OF $642.

B-119994, JULY 26, 1954, 34 COMP. GEN. 41

CONTRACTS - DEFAULT - REPLACEMENT CONTRACTS - EXCESS COSTS COMPUTATION - TOTAL PRICE V. COST OF INDIVIDUAL ITEMS DEFAULTING CONTRACTOR WHO FAILED TO DELIVER TWO ITEMS WHICH WERE OBTAINED FROM TWO SOURCES, ONE OF WHICH WAS LESS THAN CONTRACT PRICE, AND THE OTHER IN EXCESS THEREOF, IS LIABLE FOR EXCESS COSTS COMPUTED ON BASIS OF COST TO THE GOVERNMENT AS TO THE CONTRACT PRICE AS A WHOLE AND NOT ON THE INDIVIDUAL ITEMS CONCERNED.

ACTING COMPTROLLER GENERAL WEITZEL TO THE SECRETARY OF THE ARMY, JULY 26, 1954:

REFERENCE IS MADE TO LETTER DATED MAY 4, 1954, FROM THE UNDER SECRETARY OF THE ARMY, TRANSMITTING THE CASE OF THE SOSSNER TOOL AND MACHINE WORKS, 161 GRAND STREET, NEW YORK 13, NEW YORK. THE CASE INVOLVES A DEFAULT BY THAT CONCERN UNDER CONTRACT NO. DA-30-144-ORD 2596, DATED DECEMBER 3, 1951, AND A DECISION IS REQUESTED AS TO WHETHER THE LIABILITY OF SUCH DEFAULTING CONTRACTOR FOR EXCESS COSTS SHOULD BE COMPUTED ON THE BASIS OF COST TO THE GOVERNMENT AS TO INDIVIDUAL ITEMS CONCERNED, OR AS TO THE CONTRACT PRICE AS A WHOLE.

THE RECORD INDICATES THAT UNDER THE CONTRACT THE SOSSNER TOOL AND MACHINE WORKS AGREED TO FURNISH TO THE GOVERNMENT A QUANTITY OF GAGES CHARACTERIZED BY THE CLASSIFICATION OF SEVEN ITEMS OF VARYING DEGREES, ALL OF WHICH WERE DELIVERED EXCEPT ITEMS SIX AND SEVEN. AS A RESULT OF THE DEFAULT, THE CONTRACT WAS TERMINATED AND THE GAGES WERE PROCURED ELSEWHERE. THE SUPPLIES REQUIRED BY ITEM SEVEN WERE PURCHASED AT A SAVING OF $642, WHILE THE SUBSEQUENT REPURCHASE OF SUPPLIES UNDER ITEM SIX WAS EFFECTED AT AN EXCESS COST OF $594.

PARAGRAPH 11 (C) OF THE GENERAL PROVISIONS WHICH BECAME A PART OF THE CONTRACT PROVIDES, IN PERTINENT PART, AS FOLLOWS:

IN THE EVENT THE GOVERNMENT TERMINATES THIS CONTRACT IN WHOLE OR IN PART AS PROVIDED IN PARAGRAPH (A) OF THIS CLAUSE, THE GOVERNMENT MAY PROCURE, UPON SUCH TERMS AND IN SUCH MANNER AS THE CONTRACTING OFFICER MAY DEEM APPROPRIATE, SUPPLIES OR SERVICES SIMILAR TO THOSE SO TERMINATED, AND THE CONTRACTOR SHALL BE LIABLE TO THE GOVERNMENT FOR ANY EXCESS COSTS FOR SUCH SIMILAR SUPPLIES OR SERVICES, * * *. (ITALICS SUPPLIED.)

AS WAS POINTED OUT IN OFFICE DECISION DATED JANUARY 21, 1953, B 111661, PUBLISHED IN 32 COMP. GEN. 328, REFERRED TO IN THE UNDER SECRETARY'S LETTER, THE FOREGOING PROVISION CONTEMPLATED THAT, IN THE EVENT OF A FAILURE TO PERFORM, THE DEFAULTING CONTRACT WOULD STAND LIABLE FOR WHATEVER EXCESS OCCASIONED THE GOVERNMENT IN THE PROCUREMENT OF SUPPLIES SIMILAR TO THOSE COVERED BY THE CONTRACT. AS WAS STATED THERE, NOTWITHSTANDING THE FACT THAT IT BECOME NECESSARY TO AWARD REPLACEMENT TO DIFFERENT FIRMS, THE PARTY INJURED BY A BREACH OF CONTRACT IS ENTITLED ONLY TO FAIR AND JUST COMPENSATION COMMENSURATE WITH THE LOSS SUSTAINED. THERE IS NOTHING IN THE PRESENT CASE TO WARRANT OR JUSTIFY A DEPARTURE FROM THE RULE APPLIED IN THAT DECISION. HENCE, THERE IS PERCEIVED NO LEGAL BASIS FOR COMPUTING THE DAMAGES OR EXCESS COSTS FROM THE DEFAULT UNDER THE INSTANT CONTRACT EXCEPT ON THE CONTRACT AS A WHOLE.