B-122701, JUL. 13, 1955

B-122701: Jul 13, 1955

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

TO RICHARDSON LUMBER AND MANUFACTURING COMPANY: REFERENCE IS MADE TO LETTER OF JUNE 14. WITH WHICH WAS FORWARDED A CHECK FOR $504.63 IN PAYMENT OF YOUR INDEBTEDNESS TO THE UNITED STATES REPRESENTING EXCESS COSTS INCURRED AS THE RESULT OF YOUR DEFAULT UNDER A CONTRACT DATED MARCH 26. IN THE LETTER IT IS STATED THAT THE "PAYMENT IS BEING MADE UNDER PROTEST. TO WHICH A COPY OF THIS LETTER IS BEING DIRECTED.'. IN VIEW OF SUCH STATEMENT THE LETTER WILL BE REGARDED AS YOUR REQUEST FOR RECONSIDERATION OF OUR DECISION OF APRIL 28. IN WHICH IT WAS HELD THAT THERE EXISTS NO LEGAL BASIS UPON WHICH YOU MAY BE RELIEVED OF LIABILITY FOR THE EXCESS COSTS INCURRED BY THE GOVERNMENT AS THE RESULT OF YOUR DEFAULT.

B-122701, JUL. 13, 1955

TO RICHARDSON LUMBER AND MANUFACTURING COMPANY:

REFERENCE IS MADE TO LETTER OF JUNE 14, 1955, FROM MR. GLENN POLK, WITH WHICH WAS FORWARDED A CHECK FOR $504.63 IN PAYMENT OF YOUR INDEBTEDNESS TO THE UNITED STATES REPRESENTING EXCESS COSTS INCURRED AS THE RESULT OF YOUR DEFAULT UNDER A CONTRACT DATED MARCH 26, 1952, IDENTIFIED AS ORDER NO. DL2 -376.

IN THE LETTER IT IS STATED THAT THE "PAYMENT IS BEING MADE UNDER PROTEST, AND WITHOUT PREJUDICE TO OUR CLAIM FOR REFUND OF THE ENTIRE AMOUNT THROUGH THE CLAIMS DIVISION, TO WHICH A COPY OF THIS LETTER IS BEING DIRECTED.' IN VIEW OF SUCH STATEMENT THE LETTER WILL BE REGARDED AS YOUR REQUEST FOR RECONSIDERATION OF OUR DECISION OF APRIL 28, 1955, IN WHICH IT WAS HELD THAT THERE EXISTS NO LEGAL BASIS UPON WHICH YOU MAY BE RELIEVED OF LIABILITY FOR THE EXCESS COSTS INCURRED BY THE GOVERNMENT AS THE RESULT OF YOUR DEFAULT.

THE CONTRACT PROVIDED THAT IT COULD BE TERMINATED UPON YOUR FAILURE TO PERFORM IN ACCORDANCE WITH ITS TERMS AND THAT YOU WOULD BE LIABLE TO THE GOVERNMENT FOR ANY EXCESS COSTS INCURRED IN PROCURING THE SUPPLIES ELSEWHERE UPON YOUR DEFAULT.

THE RECORD SHOWS THAT THE BLOCKS FURNISHED BY YOU WERE REJECTED AS NOT MEETING THE CONTRACT SPECIFICATIONS AND THAT, UPON YOUR REFUSAL TO SCREEN THE BLOCKS AND MAKE REPLACEMENT OF THE DEFECTIVE BLOCKS OR TO REPLACE THE FULL CONTRACT QUANTITY, THE CONTRACTING OFFICER NOTIFIED YOU ON AUGUST 28, 1952, THAT YOUR RIGHT TO PROCEED UNDER THE CONTRACT WAS TERMINATED. HIS LETTER OF DECEMBER 2, 1952, THE CONTRACTING OFFICER FURNISHED YOU A STATEMENT SHOWING THE COMPUTATION OF THE EXCESS COSTS INCURRED BY THE GOVERNMENT AS THE RESULT OF YOUR DEFAULT AND MADE DEMAND FOR THE AMOUNT OF SUCH EXCESS COSTS.

YOU HAVE NOT CONTENDED THAT THE CONTRACTING OFFICER ERRONEOUSLY DECLARED YOU IN DEFAULT. ON THE CONTRARY, MR. POLK ADMITTED THAT CERTAIN UNITS OF THE SCRATCH BLOCKS INVOLVED FAILED TO MEET THE SPECIFICATIONS BECAUSE YOU ATTEMPTED TO PRODUCE THEM BY A GANG-SAW METHOD, AND THAT YOU FURNISHED AN ADDITIONAL 30,000 BLOCKS FROM WHICH THE GOVERNMENT COULD HAVE MADE REPLACEMENTS OF THE BLOCKS FOUND TO BE DEFECTIVE. ALSO, MR. POLK ASSERTED THAT YOUR LOW BID PRICE WAS MADE ON THE BASIS OF YOUR ASSUMPTION THAT SPECIFICATION BLOCKS COULD BE PRODUCED BY THE GANG-SAW METHOD AND HAS URGED THAT SINCE YOU INCURRED LOSSES IN ACQUIRING THE GANG SAWS NECESSARY FOR PROCESSING THE REJECTED BLOCKS AND FOR THE LUMBER USED IN PRODUCING THE SAME, FOR WHICH YOU HAVE RECEIVED NOTHING, YOU SHOULD NOT BE FURTHER PENALIZED.

AS WAS STATED IN THE DECISION OF APRIL 28, 1955, TO YOU, THE COURTS HAVE REPEATEDLY HELD THAT SUPERVENING OR UNFORESEEN CAUSES WHICH RENDER PERFORMANCE MORE BURDENSOME OR LESS PROFITABLE THAN ANTICIPATED OR EVEN OCCASION A LOSS DO NOT CONSTITUTE A BASIS FOR EXCUSING PERFORMANCE UNDER A VALID CONTRACT. THUS, THE FACT THAT YOUR BID PRICE WAS BASED UPON AN ERRONEOUS CONCLUSION THAT THE BLOCKS COULD BE PRODUCED BY GANG SAWS OR THAT THE COST OF PRODUCING BLOCKS WHICH WOULD MEET THE SPECIFICATIONS WAS MORE THAN YOU ANTICIPATED, DOES NOT CONSTITUTE A LEGAL BASIS FOR RELIEVING YOU OF THE EXCESS COSTS INCURRED BY THE GOVERNMENT. MOREOVER, SINCE YOU WERE OBLIGATED TO FURNISH THE BLOCKS FOR THE PRICE SPECIFIED IN YOUR CONTRACT, THE EXCESS COST INCURRED BY THE GOVERNMENT IN SECURING REPLACEMENT UPON YOUR DEFAULT, WAS NOT A MERE LOSS ON PAPER, AS ASSERTED BY MR. POLK. ON THE CONTRARY, SINCE THE GOVERNMENT WAS ENTITLED TO RECEIVE THE 353,378 BLOCKS FOR THE NET PRICE OF $527.42 SPECIFIED IN YOUR CONTRACT AND AS THE RESULT OF YOUR DEFAULT WAS REQUIRED TO PAY $1,032.05, THE ACTUAL COST TO THE GOVERNMENT WAS $504.63 IN EXCESS OF YOUR CONTRACT PRICE.

YOU HAVE NOT FURNISHED ANY NEW EVIDENCE WHICH WOULD REQUIRE OR JUSTIFY ANY MODIFICATION OF THE PRIOR ACTION IN THE MATTER. ACCORDINGLY, THERE APPEARS NO LEGAL BASIS FOR RETURNING THE CHECK FORWARDED WITH MR. POLK'S LETTER OF JUNE 14, 1955, OR FOR REFUNDING THE PROCEEDS THEREOF.