B-126921, MAR. 12, 1956

B-126921, MAR. 12, 1956

TO DAWES ENGINEERING:

UNDER DATE OF FEBRUARY 3, 1956, CONGRESSMAN CHARLES S. GUBSER FORWARDED TO US YOUR LETTER OF DECEMBER 13, 1955, REQUESTING RECONSIDERATION OF YOUR CLAIMS FOR $5,000 AND $40,068.80, WHICH WERE DISALLOWED BY OUR CLAIMS DIVISION SETTLEMENT DATED JUNE 10, 1955, REPRESENTING ADDITIONAL AMOUNTS ALLEGED TO BE DUE UNDER CONTRACT NO. DA-11-009-QM-18421, DATED MAY 13, 1952.

THE FIRST CLAIMED ITEM OF $5,000 REPRESENTS AN ADJUSTMENT OF $0.50 EACH OF 10,000 LOCKER BOXES, THUS REDUCING THE CONTRACT UNIT PRICE ON THAT QUANTITY FROM $6.333 TO $5.833. SUCH REDUCTION WAS PROPOSED BY THE CONTRACTING OFFICER PURSUANT TO AUTHORITY FROM THE QUARTERMASTER GENERAL IN CONNECTION WITH THE ACCEPTANCE OF THE INITIAL SHIPMENTS OF UNITS WHICH WERE SUBSTANDARD, RATHER THAN REJECT THE ABOVE QUANTITY FOR FAILURE TO MEET THE SPECIFICATIONS. YOUR LETTER OF OCTOBER 2, 1954, ADMITS THAT THE MILL SOURCE OF THE PLYWOOD USED IN THE CONSTRUCTION OF THE BOXES HAD FURNISHED YOU "D" CORE PLYWOOD, WHICH GRADE ALLOWS GREATER FAULTS AND VOIDS THAN THE "C" GRADE SPECIFIED IN THE CONTRACT. BUT, NOTWITHSTANDING THAT FACT, YOU CONTEND IN YOUR LETTER OF DECEMBER 13, 1955, THAT YOU NEVER AGREED TO A REDUCTION IN THE CONTRACT PRICE, AND THAT THE UMPQUA MILL HAD NO AUTHORITY TO ACT FOR YOU IN THE MATTER. WHILE THE CORRECTNESS OF THE LATTER STATEMENT IS NOT QUESTIONED, IT IS DIFFICULT TO RECONCILE YOUR FIRST CONTENTION WITH THE FACTS OF RECORD.

UNDER DATE OF OCTOBER 27, 1952, THE CONTRACTING OFFICER TELEGRAPHED YOU THAT "* * * AUTHORITY HAS BEEN RECEIVED TO ACCEPT QUANTITY OF 10,000 EACH LOCKER BOX AT A REDUCTION IN UNIT PRICE OF ?50 EACH TO COMPENSATE FOR DEVIATION IN SPECIFICATION.' YOUR REPLY DATED OCTOBER 31, 1952, WAS AS FOLLOWS: "RE YOUR WIRE 27 AUTHORITY HAS BEEN RECEIVED FROM MILL TO ACCEPT DEVIATION.' WHILE SUCH REPLY MAY NOT BE ENTIRELY CLEAR, IT COULD NOT BE VIEWED AS CONSTITUTING A REJECTION BY YOU OF THE ABOVE OFFER MADE BY THE PROCUREMENT OFFICIAL. A REASONABLE CONSTRUCTION OF THAT RESPONSE WOULD APPEAR TO BE THAT AN AGREEMENT HAD BEEN REACHED BETWEEN YOU AND THE MILL RELATIVE TO THE ASSUMPTION OF RESPONSIBILITY FOR THE PARTIAL PRICE REDUCTION IN YOUR CONTRACT. SUCH CONCLUSION FINDS SUPPORT IN YOUR LETTER OF SEPTEMBER 5, 1952, WHEREIN YOU NOTIFIED THE CONTRACTING OFFICER THAT THE MILL HAD FURNISHED "D" CORE PLYWOOD TO YOUR SUPPLIER WHICH WAS BEING PROCESSED IN AN AMOUNT SUFFICIENT TO FABRICATE 12,000 LOCKERS INSTEAD OF 10,000. THE THIRD PARAGRAPH OF YOUR SAID LETTER IS AS FOLLOWS: "MR. JACK HIGGINS PHONED ME TODAY THAT HE HAD TALKED TO THE MILL AND THEY REQUESTED THAT WE ASK FOR A DEVIATION TO USE D CORE ON 15,000 UNITS AND THAT THEY WOULD STAND ANY REASONABLE EXPENSE THAT WOULD BE INVOLVED. WE ARE THEREFORE PLACED IN THE POSITION OF HAVING TO ASK FOR A DEVIATION ON WHATEVER AMOUNT YOU SEE FIT TO GRANT.' IN ANY EVENT, CHANGE ORDER NO. 1, DATED NOVEMBER 7, 1952, WAS DULY ISSUED BY THE CONTRACTING OFFICER, ON HIS INTERPRETATION OF YOUR QUOTED ANSWER AND PURSUANT TO AUTHORITY CONTAINED IN PARAGRAPH 5 OF GENERAL CONDITIONS OF THE CONTRACT. THERE IS NOTHING IN THE RECORD TO INDICATE YOUR REFUSAL TO ACCEPT SUCH PRICE MODIFICATION. HENCE, SUCH AMENDMENT TO THE CONTRACT BECAME BINDING UPON THE PARTIES, AND THERE IS NO LEGAL BASIS UPON WHICH THE CHANGE ORDER MAY BE RESCINDED. THEREFORE, NO AUTHORITY EXISTS TO REIMBURSE YOU FOR ANY AMOUNT IN EXCESS OF THE AMENDED PRICE FOR THE 10,000 BOXES, AND THE DISALLOWANCE OF YOUR CLAIM FOR $5,000 MUST BE SUSTAINED.

THE SECOND ITEM CLAIMED, $40,068.80, REPRESENTS YOUR PRODUCTION COSTS IN EXCESS OF THE CONTRACT CONSIDERATION RECEIVED, INCLUDING ANY ELEMENT OF PROFIT, IN THE FABRICATION OF THE 35,000 LOCKER BOXES. IT IS NOTED FROM YOUR COMPUTATION IN LETTER OF SEPTEMBER 27, 1954, THAT THE AMOUNT OF $40,068.80, INCLUDES THE $5,000 CLAIMED IN LETTER DATED OCTOBER 2, 1954, THUS CONSTITUTING A DUPLICATION TO THE EXTENT OF THE LATTER AMOUNT. IT IS YOUR CONTENTION THAT YOU WERE REQUIRED TO PERFORM CERTAIN WORK IN EXCESS OF THE CONTRACT TERMS, AND THAT YOU WERE DELAYED, AND OTHERWISE INCONVENIENCED, DURING PRODUCTION OF THE BOXES, WHICH RESULTED IN A NET LOSS TO YOU IN COMPLETING THE UNDERTAKING.

SPECIFICALLY, YOU ALLEGE THAT THE CONTRACT DID NOT SPECIFY THE USE OF "D" CORE PLYWOOD, AND THEREFORE YOU WERE NOT REQUIRED TO FILL THE VOIDS APPEARING ON THE EDGES OF THE PLYWOOD, PARTICULARLY SINCE THE SPECIFICATIONS STIPULATED THAT THE PLYWOOD WAS NOT TO BE EDGE SEALED. THE CONTRACT CALLED FOR 35,000 LOCKER BOXES, TYPE II, PLYWOOD BOX, IN ACCORDANCE WITH MILITARY SPECIFICATION MIL-L-10798, AS AMENDED, WITH THE EXCEPTIONS INDICATED IN THE BID. THE EXCEPTIONS WERE THAT THE PLYWOOD NEED NOT BE EDGE SEALED OR MILL OILED. BY AMENDMENT NO. 1, DATED MARCH 26, 1952, ISSUED PRIOR TO THE DATE OF OPENING OF THE BIDS, THE SPECIFICATIONS WERE ALTERED TO READ IN PERTINENT PART,"PLYWOOD USED IN FABRICATION * * * SHALL BE DOUGLAS-FIR INTERIOR TYPE, GRADE B B * * * CONFORMING TO SPECIFICATION MIL-P-66.' THE SPECIFICATION CURRENT AT THE TIME OF THIS TRANSACTION, MIL-P-66A, SPECIFIED, AMONG OTHER THINGS, THAT SUCH PLYWOOD SHALL CONFORM TO COMMERCIAL STANDARD CS45. THE SUCCESSOR CONTRACTING OFFICER'S REPORT OF MAY 11, 1955, STATES IN PART AS FOLLOWS:

"IT IS NOTED THAT THE INNER PLIES OF ALL INTERIOR TYPES, EXCEPT B B, CALL FOR GRADE "D," A ,UTILITY" TYPE PLYWOOD, AS DEFINED ON PAGE 2 OF THE CITED CS45. B-B, INTERIOR, IS THE ONE EXCEPTION REQUIRING "C" TYPE CASES, AS DEFINED ON PAGE 1 OF THE CITED CS45. THE LANGUAGE OF CS45 IS CLEAR AND UNAMBIGUOUS THAT THE B-B, INTERIOR, TYPE PLYWOOD CALLED FOR IN THE SPECIFICATION REQUIRES "C" CORES.

"THE CONTRACTOR, IN ITS CLAIM, ATTEMPTS TO QUALIFY THIS CLEAR REQUIREMENT BY MEANS OF STATEMENTS OF THE DOUGLAS FIR PLYWOOD ASSOCIATION THAT 1) THE QUARTERMASTER GENERAL'S OFFICE AGREED, VERBALLY, WITH THE DOUGLAS FIR PLYWOOD ASSOCIATION BEFORE AWARD WAS MADE UNDER THE SUBJECT IFB, THAT "D" CORE WOULD BE ACCEPTABLE AND THAT 2) "D" CORE IS ACCEPTABLE UNDER A PROPER READING OF THE COMMERCIAL STANDARD ON THE THEORY THAT SINCE THE EDGES WERE NOT TO BE MILL-OILED AND EDGE-SEALED, THE PLYWOOD WAS NOT TO BE USED FOR CONCRETE FORM WORK AND THE "D" CORE WOULD SUIT EVERY OTHER PURPOSE. * *

THE SITUATION CREATED BY THE ASSOCIATION WAS BROUGHT TO THE ATTENTION OF THE QUARTERMASTER GENERAL, AND BY FIRST INDORSEMENT DATED OCTOBER 10, 1952, THE CHICAGO QUARTERMASTER DEPOT WAS ADVISED, IN PART, AS FOLLOWS:

"FOR SOME UNKNOWN REASON AN ERRONEOUS INTERPRETATION HAS BEEN MADE BY THE DOUGLAS FIR PLYWOOD ASSOCIATION THAT GRADE "D" VENEERS FOR THE CORE OR INNER-PLY WOULD BE ACCEPTABLE. THIS GRADE "D" PERMITS OPEN KNOTHOLES 2 1/2 INCHES IN DIAMETER AND OPEN PITCH POCKETS UP TO 2 INCHES WIDE AND 4 INCHES LONG. THIS GRADE IS NOT CONSIDERED SATISFACTORY FOR USE IN A BOX OF THIS TYPE FOR THE REASON THAT LARGE UNSUPPORTED AREAS MAY PREVAIL THROUGHOUT THE PANEL AND MAY BE BROKEN THROUGH WHEN PRESSURE IS APPLIED ON THE "B" OR SOLID VENEER FACES.'

IT IS APPARENT FROM THE FOREGOING THAT THE SPECIFICATIONS INCORPORATED INTO THE CONTRACT BY REFERENCE STIPULATED THE GRADE "C" PLYWOOD WAS TO BE USED IN THE CONSTRUCTION OF THE BOXES, AND THAT THOSE SPECIFICATIONS DO NOT NEED ANY INTERPRETATION AS SUGGESTED BY THE ASSOCIATION. ALSO, IT SEEMS CLEAR FROM YOUR CORRESPONDENCE THAT YOU WERE AWARE OF SUCH REQUIREMENTS AT THE TIME OF PERFORMANCE; THAT ONLY THE ASSOCIATION THEN CONSIDERED THE SPECIFICATIONS SUBJECT TO MORE THAN ONE INTERPRETATION; AND THAT "D" GRADE PLYWOOD COULD BE FURNISHED. (SEE YOUR REFERRED-TO LETTER OF SEPTEMBER 5, 1952).

MUCH EMPHASIS IS PLACED UPON THE ALLEGATION THAT YOU WERE REQUIRED BY THE ADMINISTRATIVE OFFICE TO FILL ALL VOIDS IN EXCESS OF ONE SIXTEENTH INCH APPEARING ON THE EDGES OF THE PLYWOOD PANELS WHICH REQUIREMENT WAS BEYOND THE PROVISIONS OF THE CONTRACT SINCE IT WAS AGREED THAT THE EDGES WERE NOT TO BE SEALED. THE OBLIGATION TO FILL SERIOUS VOIDS ON THE EDGES HAD NO CONNECTION WITH THE COMMERCIAL PRACTICE OF EDGE-SEALING PANELS INTENDED FOR OTHER USES. SUCH CONTRACT REQUIREMENT WAS MADE A PART OF THE AGREEMENT, BY REFERENCE, TO INSURE DELIVERY OF AN ACCEPTABLE ARTICLE. THE PURPOSE WAS TO ELIMINATE OPEN VOIDS WHICH APPEAR ON A PANEL EDGE AFTER IT IS CUT TO SIZE. IF THOSE MATERIAL DEFECTS WERE NOT CORRECTED THE SURFACE PLIES WOULD COLLAPSE FROM OUTER PRESSURE OR FROM A RIVET BEING DRIVEN INTO SUCH A VOID. YOU WERE, OR SHOULD HAVE BEEN, AWARE OF THAT REQUIREMENT, AND THERE IS NO LEGAL BASIS FOR CONSIDERING SUCH OPERATION AS BEING BEYOND THE CONTRACT TERMS.

TWO FURTHER COMPLAINTS INVOLVING THE REQUIRED DEGREE OF MOISTURE CONTENT OF THE WOOD, AND THE SIZE OF THE RIVETS USED, ALSO ARE STATED TO HAVE BEEN CONTRIBUTING FACTORS IN INCREASING YOUR PRODUCTION COSTS. IN BOTH INSTANCES THE MILITARY SPECIFICATIONS WHICH CONSTITUTED A PART OF THE CONTRACT SET FORTH THE SPECIFIC TOLERANCES OF FROM 5 TO 12 PERCENT FOR MOISTURE CONTENT, AND FROM .146 TO .150 INCH FOR THE RIVETS. THE FACT THAT THOSE SPECIFICATIONS WERE NOT REALISTIC AS YOU SUGGEST, OR WERE MORE EXACTING THAN THOSE USED IN COMMERCIAL PRACTICE, IS IMMATERIAL AND DOES NOT CONSTITUTE A LEGAL BASIS FOR THE PAYMENT OF ANY ADDITIONAL COMPENSATION, EVEN THOUGH THE TOLERANCES LATER WERE RELAXED.

CASES INVOLVING SIMILAR CIRCUMSTANCES HAVE BEEN CONSIDERED BY THE COURTS AND IT HAS BEEN HELD REPEATEDLY THAT VALID CONTRACTS ARE TO BE PERFORMED AS WRITTEN AND THE FACT THAT SUPERVENING OR UNFORESEEN CAUSES RENDERED PERFORMANCE MORE BURDENSOME OR LESS PROFITABLE, OR EVEN OCCASIONED A LOSS, IS NOT SUFFICIENT TO AFFORD A CONTRACTOR RELIEF. AMONG THE MANY DECISIONS RENDERED, SEE SUN PUBLISHING CO. V. MOORE, 183 U.S. 642; PENN BRIDGE CO. V. UNITED STATES, 59 C.CLS. 892; SIMPSON V. UNITED STATES, 31 C.CLS. 244; AND PACIFIC HARDWARE CO. V. UNITED STATES, 49 C.CLS. 327. THE ACCEPTANCE OF YOUR UNQUALIFIED BID RESULTED IN A BINDING CONTRACT, AND SINCE IT IS WELL SETTLED THAT THE RIGHTS AND LIABILITIES OF THE PARTIES THERETO ARE LIMITED BY THE EXPRESS TERMS OF THE UNDERTAKING, THERE VESTED IN THE UNITED STATES THE RIGHT TO HAVE THE CONTRACT PERFORMED AT THE PRICE AGREED TO BETWEEN THE CONTRACTING PARTIES. BRAWLEY V. UNITED STATES, 96 U.S. 168. IT IS REGRETTED THAT A LOSS HAS BEEN SUSTAINED BY YOU IN THE PERFORMANCE OF THE CONTRACT; HOWEVER, SUCH FACT CREATES NO LEGAL BASIS FOR THE PAYMENT OF ANY AMOUNT IN EXCESS OF THE CONTRACT PRICE, AS AMENDED.