B-131934, MAY 28, 1957

B-131934, MAY 28, 1957

TO DOUGLAS AIRCRAFT COMPANY, INC.:

YOUR LETTER OF MAY 2, 1957, YOUR REFERENCE G-LEGAL-393, REQUESTS RECONSIDERATION OF THE GOVERNMENT'S CLAIM OF $152 ARISING OUT OF EXCESS TRANSPORTATION CHARGES ON MATERIAL SHIPPED FROM THE WESTERN PIONEER SALES COMPANY, LOS ANGELES, CALIFORNIA, TO YOUR COMPANY UNDER GOVERNMENT BILL OF LADING AF-876523, IN CONNECTION WITH CONTRACT NO. AF33/038/-18982, A COST TYPE CONTRACT NEGOTIATED WITH YOUR COMPANY BY THE DEPARTMENT OF THE AIR FORCE.

CLAUSE 7, PARAGRAPH E OF THE CONTRACT PROVIDES:

"IN SECURING ALL FACILITIES, PARTS, MATERIALS AND SERVICES REQUIRED FOR THE PERFORMANCE OF THIS CONTRACT FROM SOURCES OTHER THAN THE CONTRACTOR, THE CONTRACTOR SHALL OBTAIN COMPETITION TO THE MAXIMUM PRACTICAL EXTENT AND SHALL TAKE ADVANTAGE OF THE MOST ADVANTAGEOUS PRICES WITH DUE REGARD TO SECURING ADEQUATELY PROMPT DELIVERY OF SATISFACTORY FACILITIES, PARTS, MATERIALS AND RVICES.'

BY LETTER OF JULY 26, 1956, FROM OUR TRANSPORTATION DIVISION,OUR REFERENCE T-SR-07845-LN, YOU WERE ADVISED THAT:

"THE COMMERCIAL BILL OF LADING SHOWS THAT THE SHIPMENT WAS TENDERED TO THE DENVER CHICAGO TRUCKING COMPANY, INC., AT LOS ANGELES WITH INSTRUCTIONS TO FORWARD TO TULSA VIA "DENVER-CHICAGO TR. CO TO KANSAS CITY -M AND D MOTOR FRT-K.C. TO TULSA.' IT APPEARS THAT THE TRANSPORTATION CHARGES NORMALLY APPLICABLE VIA THE DESIGNATED ROUTE WERE $441.94, COMPUTED ON THE BASIS OF A RATE OF 1163 CENTS PER 100 POUNDS, WHICH WAS A COMBINATION OF THE 1 1/4-TIMES-FIRST CLASS RATE OF 928 CENTS PER 100 POUNDS TO KANSAS CITY, MISSOURI, AS PUBLISHED IN ROCKY MOUNTAIN MOTOR TARIFF BUREAU, INC., AGENT-S, TARIFF NO. 5-A, MF I.C.C. NO. 31, AND A RATE OF 235 CENTS PER 100 POUNDS FROM KANSAS CITY TO TULSA AS PUBLISHED IN MIDDLE WEST MOTOR FREIGHT BUREAU, AGENT-S, TARIFF NO. 35, MF-I.C.C. NO. 167. FOR THIS SERVICE, THE M AND D MOTOR FREIGHT LINES, INC., 2508 SOUTH HARWOOD, DALLAS, TEXAS, CLAIMED, PER ITS BILL NO. 2944, THE AMOUNT OF $441.94 AND PAYMENT WAS MADE ACCORDINGLY ON VOUCHER NO. 202285 OF THE FEBRUARY 1952 ACCOUNTS OF ARMY DISBURSING OFFICER S.E. BIGNELL * * *.

"CONTEMPORANEOUSLY WITH THE ABOVE DESCRIBED FREIGHT MOVEMENT, THERE WAS PROVIDED IN THE SAID TARIFF 5-A A 1 1/4 -TIMES-FIRST-CLASS RATE OF 763 CENTS PER 100 POUNDS, WHICH RATE WAS AVAILABLE ON SHIPMENTS ROUTED VIA TRANSCON LINES FROM ORIGIN TO DESTINATION. HAD THIS SHIPMENT BEEN TENDERED TO THE TRANSCON LINES AT POINT OF ORIGIN WITHOUT ROUTING INSTRUCTIONS OR WITH INSTRUCTIONS TO FORWARD VIA ITS LINE TO DESTINATION, THE CHARGES FOR THE TRANSPORTATION SERVICE HERE INVOLVED WOULD HAVE BEEN $289.94 OR $152.00 LESS THAN THE AMOUNT APPLICABLE VIA THE CARRIERS UTILIZED.

" "* * * THEREFORE THE MISROUTING OF REFERENCED SHIPMENT WAS EVIDENTLY AN ERROR OF THE CONTRACTOR'S TRAFFIC DEPARTMENT.' THE RECORD HERE DOES NOT REVEAL THAT THE GOVERNMENT, THROUGH CONTRACT OR OTHERWISE, AUTHORIZED THE DELIVERY OF THIS SHIPMENT TO THE INITIAL CARRIER SHOWN ON THE SHIPPING DOCUMENTS OR DIRECTED THAT ANY PARTICULAR ROUTE BE USED.' THERE FOLLOWED A REQUEST THAT A CHECK FOR $152 BE FORWARDED TO OUR OFFICE.

IN RESPONSE, IT WAS ACKNOWLEDGED BY LETTER OF SEPTEMBER 21, 1956, YOUR REFERENCE D-10-1669, THAT "THE ROUTING AUTHORIZED WAS A CLERICAL ERROR AND AN ASSUMPTION BY A CLERK IN OUR TRAFFIC DEPARTMENT THAT THE TARIFF CHARGES OF TRANS-CON LINES WOULD BE THE SAME AS THAT OF THE CARRIERS THAT WERE UTILIZED.' IT WAS CONTENDED, HOWEVER, THAT NO RECOUPMENT OF THE EXCESS COSTS SHOULD BE MADE BECAUSE (1) THE MATERIALS SHIPPED WERE FACILITY ITEMS AUTHORIZED BY THE WRITTEN APPROVAL OF THE CONTRACTING OFFICER, (2) OUR DECISIONS INDICATE THAT BASICALLY COST REIMBURSEMENT TYPE CONTRACTS CONTEMPLATE THAT THE ACTUAL COST OF THE WORK AND THE RISK THEREOF ARE ASSUMED BY THE GOVERNMENT, (3) THE CONTRACTOR SHOULD NOT BE RESPONSIBLE FOR THE MOMENTARY LAPSE ON THE PART OF ITS USUALLY COMPETENT AND CAREFUL WORKER, (4) THERE IS NO REIMBURSEMENT UNDER THE CONTRACT TO COVER SUCH RISKS AS AN ELEMENT OF COST AND FINALLY (5) THE ERROR WAS NOT THE RESULT OF "ACTION THAT WAS FRAUDULENT, ARBITRARY, CAPRICIOUS OR SO GROSSLY ERRONEOUS AS TO IMPLY BAD FAITH.'

BY LETTER OF APRIL 17, 1957, OUR REFERENCE DW-Z-1809750-NW-4, PAYMENT WAS AGAIN REQUESTED. IN THE LETTER OF MAY 2, RECONSIDERATION OF THE CLAIM IS REQUESTED ON THE FOLLOWING BASIS:

"THE QUESTION OF PRIMARY IMPORTANCE TO CONSIDER IS WHO SHALL BEAR THE LOSS WHERE AN EMPLOYE OF DOUGLAS MAKES AN ASSUMPTION, WHICH LATER PROVES FALLACIOUS, IN CARRYING OUT HIS ROUTINE DUTIES IN THE PERFORMANCE OF A COST TYPE FACILITIES CONTRACT, WHICH PAYS NO FEE OR PROFIT TO DOUGLAS, AND THEREBY DIRECTS A SHIPMENT OF FACILITY CONTRACT ITEMS BY FREIGHT CARRIERS WHO CHARGE A HIGHER RATE BETWEEN LOS ANGELES AND TULSA THAN ANOTHER CARRIER CHARGES BETWEEN THE SAME TWO POINTS, LOS ANGELES AND TULSA, DUE TO A DIFFERENCE IN ROUTING.

"THE DOUGLAS AIRCRAFT COMPANY, INC. IN ITS NEVER CEASING EFFORT TO BE A LOW COST AND EFFICIENT MANUFACTURER FOR THE DEPARTMENT OF DEFENSE HAS A MUTUAL INTEREST WITH THE GOVERNMENT IN ENSURING THAT ITS EMPLOYES ARE QUALIFIED, CAREFUL AND EFFICIENT WORKERS. HOWEVER, IT IS AXIOMATIC THAT EVEN THE BEST WORKER WILL AT SOME TIME OR OTHER MAKE A MISTAKE OR ERROR. THIS FACTOR IS CONSIDERED IN ESTABLISHING PRICES UNDER FIXED PRICE TYPE CONTRACTS. HOWEVER, THIS FACTOR WAS NOT CONSIDERED IN NEGOTIATING THE FACILITIES CONTRACT SINCE THE GOVERNMENT DIRECTED THAT IT SHOULD BE A COST TYPE CONTRACT WITH NO PROVISION FOR PAYMENT OF A FEE AND THERE WAS NO PRICING INVOLVED. ACCORDINGLY, A CAREFUL AND DETAILED EXAMINATION OF AF33/038/-18982 WILL NOT REVEAL ANY CONTRACT PROVISION WHICH CAN BE CONSTRUED TO IMPOSE LIABILITY ON DOUGLAS FOR MINOR MISTAKES AND ERRORS TO THE TYPE HERE INVOLVED.'

YOU CITE IN SUPPORT OF YOUR POSITION OUR DECISION REPORTED AT 20 COMP. GEN. 632 AND 21 COMP. GEN. 149. BOTH DECISIONS CONTAIN LANGUAGE TO THE EFFECT THAT IN THE COST-PLUS-A-FIXED-FEE CONTRACT FORM THERE UNDER CONSIDERATION, THE GOVERNMENT ASSUMES THE ACTUAL COST OF THE WHOLE WORK AND THE RISK THEREOF INCLUDING COSTS ARISING OUT OF "UNAVOIDABLE" NEGLIGENCE. IN BOTH CASES THAT CONCLUSION WAS BASED ON ARTICLE II, PARAGRAPH 1 OF THE CONTRACT FORM PROVIDING IN ESSENCE THAT THE CONTRACTOR SHALL BE REIMBURSED FOR SUCH OF HIS ACTUAL EXPENDITURES IN THE PERFORMANCE OF THE WORK AS ARE APPROVED OR RATIFIED BY THE CONTRACTING OFFICER INCLUDING LOSSES AND EXPENSES, NOT OTHERWISE COMPENSATED, SUSTAINED BY THE CONTRACTOR IN THE PERFORMANCE OF THE WORK AND FOUND BY THE CONTRACTING OFFICER TO BE JUST AND REASONABLE. THERE IS NO REQUIREMENT, AS IN THE PROVISION OF THE PRESENT CONTRACT WHICH IS QUOTED ABOVE, THAT THE CONTRACTOR SHALL TAKE ADVANTAGE OF THE MOST ADVANTAGEOUS PRICES.

FURTHER, THE DECISION AT 20 COMP. GEN. 632 INVOLVED THE RESPONSIBILITY FOR LOSSES WHICH RESULTED FROM THE NEGLIGENCE OF A GOVERNMENT EMPLOYEE AND, THUS, CAN HARDLY BE CONSTRUED AS SUPPORT FOR YOUR POSITION IN THE PRESENT MATTER. AS WE STATED IN DECISION B 42070, MARCH 26, 945:

"WITH REFERENCE TO YOUR LAST CONTENTION, THE DECISION CONTAINED IN 20 COMP. GEN. 632, DEALT SOLELY WITH THE QUESTION OF WHETHER A LOSS ARISING FROM THE DESTRUCTION OF CERTAIN OF THE CONTRACTOR'S EQUIPMENT IN A RAIL COLLISION CAUSED BY THE NEGLIGENCE OF A GOVERNMENT EMPLOYEE WAS REIMBURSABLE UNDER THE PROVISION OF THE CONTRACT THERE INVOLVED, WHICH PROVIDED THAT THE CONTRACTOR WOULD BE REIMBURSED FOR "LOSSES AND EXPENSES, NOT COMPENSATED BY INSURANCE OR OTHERWISE * * * ACTUALLY SUSTAINED BY THE CONTRACTOR IN CONNECTION WITH THE WORK.' MANIFESTLY, THAT DECISION CONSTITUTES NO AUTHORITY FOR SAYING THAT EXPENSES OF THE TYPE HERE INVOLVED, WHEN NOT FOUND TO BE OTHERWISE REIMBURSABLE UNDER THE TERMS OF THE CONTRACT, NEVERTHELESS ARE REIMBURSABLE UNDER THE REFERRED-TO PROVISION. IF THAT WERE TRUE, THE OTHER PROVISIONS IN THE CONTRACT PURPORTING TO LIMIT THE GOVERNMENT'S LIABILITY WITH RESPECT TO ALLOWABLE COSTS WOULD HAVE NO MEANING. MOREOVER, WHILE IT WAS STATED IN 20 COMP. GEN. 632, THAT THE COST-PLUS-A-FIXED-FEE CONTRACT "BASICALLY CONTEMPLATES THAT THE ACTUAL COST OF THE WHOLE WORK AND THE RISK THEREOF ARE TO BE ASSUMED BY THE GOVERNMENT; THAT IS, THAT THE CONTRACTOR IS TO COME OUT WHOLE * * * IN PERFORMING THE WORK IN ACCORDANCE WITH THE CONTRACT," IT WAS NOT INTENDED TO HOLD THEREIN, NOR IS IT THE VIEW OF THIS OFFICE, THAT ANY AND EVERY EXPENSE INCURRED BY A CONTRACTOR INCIDENTAL TO THE PERFORMANCE OF THE WORK REQUIRED UNDER THE CONTRACT, REGARDLESS OF HOW REMOTELY CONNECTED THEREWITH, IS TO BE REIMBURSED BY THE GOVERNMENT.'

WHILE THE DECISION AT 21 COMP. GEN. 149 WOULD SUPPORT YOUR VIEW IF THE SAME CONTRACT FORM HAD BEEN USED, IT WAS SPECIFICALLY STATED IN THAT DECISION:

"THE GENERAL STATEMENT THAT SUCH CONTRACTS BASICALLY CONTEMPLATE THAT THE ACTUAL COST OF THE WHOLE WORK AND THE RISK THEREOF ARE TO BE ASSUMED BY THE GOVERNMENT AND THAT THE CONTRACTOR IS TO COME OUT WHOLE REGARDLESS OF CONTINGENCIES, PLUS ONLY A LIMITED FIXED FEE AS COMPENSATION FOR HIS SERVICES, GENERAL OVERHEAD, ETC., DOES NOT MEAN THAT THE GOVERNMENT IS TO ASSUME THE RISK OF THE CONTRACTOR'S OWN FAULT OR FOLLY, OR THAT THE CONTRACTOR IS TO COME OUT WHOLE REGARDLESS OF CARELESS CONDUCT OF THE WORK OR OTHER DISREGARD OF HIS CONTRACTUAL DUTIES. WHILE SUCH CONTRACTS IN EFFECT GUARANTEE THE CONTRACTOR A LIMITED FIXED FEE FOR HIS SERVICES IN ADDITION TO REIMBURSEMENT OF THE ACTUAL COST OF THE WORK, THE FEE IS PAID TO OBTAIN THE COMPETENT AND FAITHFUL SERVICES OF THE CONTRACTOR; AND THE PROVISIONS FOR REIMBURSEMENT OF ACTUAL COSTS ARE NOT TO BE TAKEN AS A SHIELD FOR INCOMPETENCE OR AN EXCUSE FOR CARELESSNESS. NOR IS IT TO BE INFERRED FROM SUCH BASIC CONCEPT OF THIS TYPE OF CONTRACT THAT THE GOVERNMENT IS TO ASSUME ANY RISKS OR BEAR ANY LOSSES WHICH THE CONTRACTOR HAS EXPRESSLY OR IMPLIEDLY AGREED TO ASSUME OR BEAR UNDER PARTICULAR PROVISIONS OF THE CONTRACT.'

IT IS AXIOMATIC THAT A CONTRACT, OF WHATEVER KIND, IS TO BE PERFORMED IN STRICT ACCORDANCE WITH ITS TERMS. 17 C.J.S. CONTRACTS, SECTION 294. THEREFORE, AND IN VIEW OF THE EXPRESS PROVISION OF THE CONTRACT AND OF THE FOREGOING, NO BASIS IS PERCEIVED FOR RELIEVING YOUR COMPANY OF THE ..END :