B-127138, JUNE 13, 1956, 35 COMP. GEN. 695

B-127138: Jun 13, 1956

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IS THE ADDITIONAL COST OCCASIONED FOR PROCUREMENT OF NEW EQUIPMENT. WHICH WAS THE ONLY QUALITY AVAILABLE. 1956: REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 23. THAT THE EXCESS COSTS WHICH WERE CHARGED TO YOU AS DAMAGES TO COMPENSATE THE GOVERNMENT FOR YOUR PARTIAL DEFAULT UNDER CONTRACT NO. ARE EXCESSIVE. THE BASIS FOR SUCH CONTENTION IS THAT YOU FIGURED YOUR ORIGINAL QUOTATION OF MAY 23. CONTAINED THE FOLLOWING PROVISION UNDER PARAGRAPH 11 (F) OF THE GENERAL PROVISIONS: THE RIGHTS AND REMEDIES OF THE GOVERNMENT PROVIDED IN THIS CLAUSE SHALL NOT BE EXCLUSIVE AND ARE IN ADDITION TO ANY OTHER RIGHTS AND REMEDIES PROVIDED BY LAW OR UNDER THIS CONTRACT. IT IS UNDERSTOOD THAT THE CONTINENTAL CHAIN CORPORATION.

B-127138, JUNE 13, 1956, 35 COMP. GEN. 695

CONTRACTS - DEFAULT - EXCESS COSTS - PURCHASE OF NEW MATERIAL FOR SURPLUS MATERIAL THE PROPER MEASURE OF DAMAGES FOR THE CONTRACTOR'S DEFAULT IN DELIVERY OF SURPLUS CHAIN AND FITTINGS, WHEN THE CONTRACTOR'S SUPPLIER EXHAUSTED ITS STOCK BEFORE COMPLETION OF THE CONTRACTOR'S ORDER, IS THE ADDITIONAL COST OCCASIONED FOR PROCUREMENT OF NEW EQUIPMENT, WHICH WAS THE ONLY QUALITY AVAILABLE, FROM THE ONLY KNOWN SOURCE OF SUPPLY.

TO PEERLESS STEEL COMPANY, JUNE 13, 1956:

REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 23, 1956, WHEREIN YOU CONTEND, IN SUBSTANCE, THAT THE EXCESS COSTS WHICH WERE CHARGED TO YOU AS DAMAGES TO COMPENSATE THE GOVERNMENT FOR YOUR PARTIAL DEFAULT UNDER CONTRACT NO. TEG-38947, DATED JUNE 6, 1952, ARE EXCESSIVE.

THE BASIS FOR SUCH CONTENTION IS THAT YOU FIGURED YOUR ORIGINAL QUOTATION OF MAY 23, 1952, FOR THE REQUIRED ITEMS OF ANCHOR CHAIN AND ACCESSORIES ON ITEMS WHICH YOU PREVIOUSLY HAD ACQUIRED FROM GOVERNMENT SURPLUS STOCK, WHEREAS THE COAST GUARD, IN MAKING THE REPLACEMENT PURCHASE, ACQUIRED NEW EQUIPMENT FROM THE MANUFACTURER AT APPROXIMATELY DOUBLE THE AMOUNT WHICH YOU QUOTED.

THE CONTRACT, IN ADDITION TO PROVIDING FOR THE ASSESSMENT OF EXCESS COSTS IN THE EVENT OF DEFAULT BY THE CONTRACTOR AND REPURCHASE BY THE GOVERNMENT OF SIMILAR SUPPLIES AT A HIGHER PRICE, CONTAINED THE FOLLOWING PROVISION UNDER PARAGRAPH 11 (F) OF THE GENERAL PROVISIONS:

THE RIGHTS AND REMEDIES OF THE GOVERNMENT PROVIDED IN THIS CLAUSE SHALL NOT BE EXCLUSIVE AND ARE IN ADDITION TO ANY OTHER RIGHTS AND REMEDIES PROVIDED BY LAW OR UNDER THIS CONTRACT.

IT IS UNDERSTOOD THAT THE CONTINENTAL CHAIN CORPORATION, YOUR SUPPLIER, IS THE PRINCIPAL SOURCE OF SUPPLY OF GOVERNMENT SURPLUS STOCK OF THE KIND HEREIN CONTRACTED FOR AND THAT WHEN THAT FIRM HAD EXHAUSTED ITS SUPPLY OF SUCH MATERIALS BEFORE COMPLETING YOUR CONTRACT OR ORDER, YOU WERE LEFT WITH NO OTHER AVAILABLE SOURCE OF SUPPLY OF COMPARABLE MATERIALS. BY THE SAME TOKEN, IT CAN READILY BE APPRECIATED THAT THE GOVERNMENT WAS LEFT WITH NO ALTERNATIVE IN THE CIRCUMSTANCES BUT TO PROCURE NEW EQUIPMENT FROM THE MANUFACTURER, THE BALDT ANCHOR, CHAIN AND FORGE DIVISION OF THE BOSTON METALS COMPANY, CHESTER, PENNSYLVANIA. OF COURSE, THE REPLACEMENT OF NEW MATERIALS NECESSARILY WAS MADE AT A PRICE CONSIDERABLY IN EXCESS OF THE BID PRICES QUOTED BY YOU ON MATERIALS CONSISTING STRICTLY OF GOVERNMENT SURPLUS STOCK.

CONCERNING THE PROPRIETY OF THE GOVERNMENT'S ACTION IN HAVING ACQUIRED NEW EQUIPMENT IN MAKING THE REPLACEMENT PURCHASE, THE LAW APPEARS TO BE WELL SETTLED THAT WHERE THE CONTRACT ARTICLE IS NOT READILY AVAILABLE IN THE COMMERCIAL MARKETS, OR OTHERWISE IS UNOBTAINABLE, THE INCREASED EXPENSE INCURRED BY THE GRIEVED PARTY IN SECURING THE BEST AVAILABLE SUBSTITUTE, EVEN THOUGH OF A DIFFERENT TYPE OR CHARACTER, MAY BE CHARGED TO THE DEFAULTING CONTRACTOR AS THE CORRECT MEASURE OF DAMAGES RESULTING FROM ITS BREACH. SEE TRI-BULLION SMELTING AND DEVELOPMENT COMPANY V. JACOBSEN, 233 F. 646; BROOKE COUNTY COURT V. U.S. FIDELITY AND GUARANTY CO., 121 S.E. 422; GRUEN V. GEORGE A. OHL AND CO., 80 ATL. 547; B-122410, MAY 31, 1955; AND 78 C.J.S. SALES, SEC. 549.

THE GOVERNMENT IN THIS INSTANCE HAVING PROCURED, ALBEIT AT A HIGHER COST, THE ONLY AVAILABLE SUBSTITUTE FOR THE SURPLUS GOVERNMENT CHAINS AND FITTINGS YOU PROPOSED TO FURNISH, AND UPON WHICH YOU DEFAULTED, THE PROPER MEASURE OF DAMAGES RECOVERABLE BY IT FOR YOUR BREACH IS THE ADDITIONAL COST OCCASIONED THE UNITED STATES IN PROCURING SUBSTITUTE ITEMS FROM THE ONLY OTHER KNOWN SOURCE OF SUPPLY. THE RIGHT TO ASSESS SUCH DAMAGES IS SPECIFICALLY CONFERRED BY PARAGRAPH 11 (F) OF THE CONTRACT GENERAL PROVISIONS, AND THERE IS NO LEGAL AUTHORITY UPON WHICH THAT RIGHT MAY BE WAIVED.

IN THE CIRCUMSTANCES, IT IS SUGGESTED THAT YOU MAKE APPROPRIATE ARRANGEMENTS THROUGH OUR CLAIMS DIVISION TO LIQUIDATE YOUR REMAINING INDEBTEDNESS OF $5,132.43 TO THE UNITED STATES.