B-130996, MAY 23, 1957

B-130996: May 23, 1957

Additional Materials:

Contact:

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

 

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

TO PLYMOUTH WOOD PRODUCTS COMPANY: REFERENCE IS MADE TO A LETTER OF FEBRUARY 26. WHEREIN THERE WAS DISALLOWED YOUR CLAIM FOR $2. WHICH WERE ENTERED INTO BY THE PRIME CONTRACTOR. WERE TERMINATED AS TO CERTAIN SPECIFIED ITEMS FOR THE CONVENIENCE OF THE GOVERNMENT UNDER THE APPLICABLE CONTRACT PROVISIONS. AS ONE OF THE SUBCONTRACTORS OF THE ALGONAC MANUFACTURING COMPANY YOU WERE REQUIRED TO. SUBSEQUENTLY TOOK DELIVERY OF THE PARTS COMPRISING THE WOODEN CRATES UPON WHICH YOUR SETTLEMENT PROPOSAL HERE AT ISSUE WAS BASED. THE ALGONAC MANUFACTURING COMPANY'S TERMINATION CLAIM WHICH WAS SUBMITTED IN DECEMBER 1953. FURTHER TERMINATION NEGOTIATIONS BETWEEN THE GOVERNMENT AND THE ALGONAC MANUFACTURING COMPANY WERE SUSPENDED.

B-130996, MAY 23, 1957

TO PLYMOUTH WOOD PRODUCTS COMPANY:

REFERENCE IS MADE TO A LETTER OF FEBRUARY 26, 1957, IN YOUR BEHALF, FROM MR. JOHN W. BABCOCK, REQUESTING REVIEW OF SETTLEMENT DATED FEBRUARY 4, 1957, WHEREIN THERE WAS DISALLOWED YOUR CLAIM FOR $2,422 UNDER CONTRACTS NOS. DA-20-113-ORD-10179 AND DA-20-113-ORD-10648, WHICH WERE ENTERED INTO BY THE PRIME CONTRACTOR, THE ALGONAC MANUFACTURING COMPANY, WITH THE DEPARTMENT OF THE ARMY ON JUNE 20, AND JUNE 25, 1952, RESPECTIVELY.

ON OR ABOUT OCTOBER 16, 1953, THE ABOVE CONTRACTS, IN ADDITION TO SIX OTHERS WITH THE ALGONAC MANUFACTURING COMPANY, WERE TERMINATED AS TO CERTAIN SPECIFIED ITEMS FOR THE CONVENIENCE OF THE GOVERNMENT UNDER THE APPLICABLE CONTRACT PROVISIONS. THE ALGONAC MANUFACTURING COMPANY, AS PRIME CONTRACTOR, SUBMITTED ITS TERMINATION CLAIM IN DECEMBER 1953, APPLYING FOR A PARTIAL PAYMENT IN THE AMOUNT OF $477,814.71 BASED UPON ITS OWN CLAIM UNDER THE TERMINATED CONTRACTS AS WELL AS THE CLAIMS OF SEVERAL SUBCONTRACTORS. AS ONE OF THE SUBCONTRACTORS OF THE ALGONAC MANUFACTURING COMPANY YOU WERE REQUIRED TO, AND DID, FURNISH WOODEN CRATES USED FOR THE PACKING OF ITEMS UNDER THE PRIME CONTRACTS AND, IN VIEW OF THIS RELATIONSHIP, IT APPEARS THAT YOU SUBMITTED CERTAIN SETTLEMENT PROPOSALS, ONE OF WHICH RECITED A SETTLEMENT OF $2,422 FOR FINISHED COMPONENTS UNDER CONTRACT NO. DA-20-113-ORD-10648. IT APPEARS FURTHER THAT THE DETROIT ORDNANCE DISTRICT, DEPARTMENT OF THE ARMY, SUBSEQUENTLY TOOK DELIVERY OF THE PARTS COMPRISING THE WOODEN CRATES UPON WHICH YOUR SETTLEMENT PROPOSAL HERE AT ISSUE WAS BASED. THE ALGONAC MANUFACTURING COMPANY'S TERMINATION CLAIM WHICH WAS SUBMITTED IN DECEMBER 1953, RESULTED IN A PARTIAL PAYMENT BEING MADE TO THE COMPANY IN THE AMOUNT OF $200,000 ON DECEMBER 21, 1953. A SUBSEQUENT AUDIT AND INVESTIGATION OF THE ALGONAC MANUFACTURING COMPANY'S TERMINATION CLAIM APPARENTLY RESULTED IN TWO FEDERAL GRAND JURY INDICTMENTS BEING RETURNED AGAINST THE COMPANY AND SEVERAL OF ITS OFFICERS AND, IN VIEW OF THIS, FURTHER TERMINATION NEGOTIATIONS BETWEEN THE GOVERNMENT AND THE ALGONAC MANUFACTURING COMPANY WERE SUSPENDED. MOREOVER, THE LAST ADMINISTRATIVE REPORT FROM THE DEPARTMENT OF THE ARMY SHOWS THAT THE GOVERNMENT IS NOW SEEKING TO RECOVER FROM THE COMPANY THE AMOUNT OF $347,699.30 IN CONNECTION WITH THE SUBJECT CONTRACTS. YOUR CLAIM WAS FILED TO RECOVER THE COST OF CERTAIN WOODEN CRATES DELIVERED BY YOU DIRECT TO THE DEPARTMENT OF THE ARMY DURING THE PERIOD FROM MARCH 31 THROUGH APRIL 5, 1954, FOR WHICH YOU STATE THAT PAYMENT THEREFOR NEVER HAS BEEN RECEIVED.

WHILE MR. BABCOCK'S REQUEST FOR REVIEW OF THE SETTLEMENT IS SET FORTH IN CONSIDERABLE DETAIL IT APPEARS THAT HE IS RELYING BASICALLY ON THE CONTENTIONS THAT PAYMENT FOR THE WOODEN CRATES IN QUESTION NEVER HAS BEEN MADE TO YOU EITHER BY THE PRIME CONTRACTOR, THE ALGONAC MANUFACTURING COMPANY, OR BY THE GOVERNMENT AND THAT THE CRATE PARTS, HERE AT ISSUE, NEVER BECAME A PART OF THE PRIME CONTRACTS OF THE ALGONAC MANUFACTURING COMPANY SINCE THE DEPARTMENT OF THE ARMY TOOK POSSESSION OF THE WOODEN CRATES AND HAD THEM SHIPPED ON A GOVERNMENT BILL OF LADING TO ANOTHER ARMY DEPOT IN THE STATE OF OHIO.

A FURTHER REVIEW OF THE ENTIRE FILE IN THIS MATTER SHOWS THAT THE SETTLEMENT PROPOSAL, REFERRED TO BY MR. BABCOCK, WAS EXECUTED BY YOU ON DECEMBER 15, 1953, AND LISTS AN AMOUNT, AMONG OTHERS, OF $2,422 FOR "FINISHED COMPONENTS" UNDER CONTRACT NO. DA-20-113-ORD-10648, WHICH APPEARS TO BE CONTRADICTORY TO THE STATEMENT NOW MADE THAT THESE CRATE PARTS WERE NOT MADE FOR USE IN CONNECTION WITH THE CONTRACT OF ALGONAC MANUFACTURING COMPANY. IN ADDITION, THERE IS IN THE RECORD A SUPPORTING PAPER WHICH ACCOMPANIED THE TERMINATION CLAIM OF THE ALGONAC MANUFACTURING COMPANY FOR PARTIAL PAYMENT IN THE AMOUNT OF $477,814.71, WHICH LISTS AMONG OTHER SUBCONTRACTOR'S CLAIMS, A CLAIM OF PLYMOUTH WOOD PRODUCTS COMPANY FOR $2,422. THUS THERE CAN BE NO DOUBT BUT THAT YOUR CLAIM FOR $2,422 WAS FULLY CONSIDERED BY THE DEPARTMENT OF THE ARMY AND INCLUDED IN THE OVER ALL TERMINATION SETTLEMENT WITH THE PRIME CONTRACTOR, THE ALGONAC MANUFACTURING COMPANY. THE FACT THAT PAYMENT OF THIS PARTICULAR AMOUNT OF $2,422 MAY NOT HAVE BEEN--- IF INDEED IT WAS NOT--- INCLUDED IN THE REMITTANCE OF $8,477.87 WHICH YOU ADMIT WAS RECEIVED FROM THE ALGONAC MANUFACTURING COMPANY ON DECEMBER 22, 1953, OR THAT THIS PARTICULAR CLAIM WAS NEVER OTHERWISE PAID TO YOU EITHER BY THE PRIME CONTRACTOR OR DIRECT BY THE GOVERNMENT DOES NOT CREATE, IN ANY MANNER, AN OBLIGATION OF THE GOVERNMENT TO YOU WITH RESPECT TO THE TERMINATION SETTLEMENT. IT IS CLEAR THAT UNDER ARTICLE 21 OF THE TERMS OF THE PRIME CONTRACT, WHICH THE DEPARTMENT OF THE ARMY ENTERED INTO WITH THE ALGONAC MANUFACTURING COMPANY, AND WHICH COVERS THE CONDITION FOR "TERMINATION FOR THE CONVENIENCE OF THE GOVERNMENT" THE TERMINATION SETTLEMENT IS ONE TO BE FINALLY CONCLUDED BETWEEN THE GOVERNMENT AND THE PRIME CONTRACTOR. THIS THE DEPARTMENT OF THE ARMY ACCOMPLISHED AND IN SO DOING APPEARS TO HAVE PERFORMED FULLY ITS CONTRACTUAL OBLIGATION. THE LEGAL OBLIGATIONS OF THE GOVERNMENT WERE NOT CHANGED BY THE FACT THAT THE DEPARTMENT OF THE ARMY HAD SOME NEGOTIATIONS DIRECT WITH YOU REGARDING CERTAIN DETAILS AS TO THE MERE DELIVERY OF THE WOODEN CRATES, THE ALLOWANCE FOR WHICH PREVIOUSLY HAD BEEN FULLY CONSIDERED WITH THE PRIME CONTRACTOR IN THE TERMINATION SETTLEMENT, NOR BY THE POSSIBILITY THAT YOUR PARTICULAR CLAIM OF $2,422 WAS APPROVED FOR PAYMENT BY THE DEPARTMENT OF THE ARMY IN THE TERMINATION SETTLEMENT BUT ACTUAL PAYMENT THEREOF TO THE ALGONAC MANUFACTURING COMPANY WAS NOT INCLUDED IN THE ORIGINAL PAYMENT OF $200,000 ON DECEMBER 21, 1953, OR WAS NOT OTHERWISE PAID IN VIEW OF CERTAIN UNSETTLED DEBT MATTERS BETWEEN THE COMPANY AND THE UNITED STATES WHICH WERE PENDING AT THAT TIME. THERE IS NO SHOWING THAT YOU RELINQUISHED YOUR POSSESSION OF THE CRATE PARTS WITH THE UNDERSTANDING AT THE TIME, EITHER EXPRESS OR IMPLIED, THAT THE GOVERNMENT WOULD PAY YOU DIRECT RATHER THAN THE PRIME CONTRACTOR.

IN VIEW OF THE FOREGOING, IT APPEARS THAT YOU MUST LOOK TO THE PRIME CONTRACTOR, THE ALGONAC MANUFACTURING COMPANY, TO HONOR ANY CLAIM WHICH YOU FEEL YOU MIGHT HAVE UNDER THE SUBJECT CONTRACTS SINCE, AS ACKNOWLEDGED IN MR. BABCOCK'S LETTER OF FEBRUARY 26, 1957, THERE LEGALLY MAY NOT BE CONSIDERED TO EXIST ANY PRIVITY OF CONTRACT BETWEEN YOU, AS A SUBCONTRACTOR, AND THE GOVERNMENT IN THIS MATTER.

ACCORDINGLY, ON THE PRESENT RECORD THE SETTLEMENT OF FEBRUARY 4, 1957, IS SUSTAINED.