B-132251, AUG. 21, 1957

B-132251: Aug 21, 1957

Additional Materials:

Contact:

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

 

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

TO WYANDOTTE CHEMICALS CORPORATION: REFERENCE IS MADE TO YOUR LETTER OF MAY 28. REPRESENTING COSTS ALLEGED TO HAVE BEEN INCURRED IN EXCESS OF LIMITATIONS SET FORTH IN CONTRACT NO. YOUR REQUEST FOR REVIEW IS BASED ON YOUR CONTENTIONS THAT A PRIOR CLAIM UNDER CONTRACT NO. DA 44-109-QM-1518 WHICH WAS FILED UNDER SIMILAR CIRCUMSTANCES WAS APPROVED AND PAID. THAT THE LAPSE OF TIME BETWEEN THE SUBMISSION OF YOUR 1953 OVERHEAD RATE AND ACCEPTANCE THEREOF BY THE NAVY AUDIT AGENCY WAS BEYOND YOUR CONTROL. HE ADVISED YOU THAT HE HAD DETERMINED THAT THE ESTIMATED COST OF PERFORMING THE CONTRACT WOULD NOT BE INCREASED AND THAT IT WAS INTENDED TO PERMIT YOUR OBLIGATION FOR PERFORMANCE TO EXPIRE IN ACCORDANCE WITH THE PROVISIONS OF THE CONTRACT.

B-132251, AUG. 21, 1957

TO WYANDOTTE CHEMICALS CORPORATION:

REFERENCE IS MADE TO YOUR LETTER OF MAY 28, 1957, REQUESTING RECONSIDERATION OF OUR SETTLEMENT DATED MARCH 11, 1957, WHICH DISALLOWED YOUR CLAIM FOR $3,498.75, REPRESENTING COSTS ALLEGED TO HAVE BEEN INCURRED IN EXCESS OF LIMITATIONS SET FORTH IN CONTRACT NO. NOAS 53-527-C, DATED DECEMBER 31, 1952, ENTERED INTO WITH THE DEPARTMENT OF THE NAVY, UNDER WHICH YOU AGREED TO PERFORM CERTAIN SPECIFIED WORK FOR A TOTAL ESTIMATED COST OF $22,621, PLUS A FIXED FEE OF $1,357.

YOUR REQUEST FOR REVIEW IS BASED ON YOUR CONTENTIONS THAT A PRIOR CLAIM UNDER CONTRACT NO. DA 44-109-QM-1518 WHICH WAS FILED UNDER SIMILAR CIRCUMSTANCES WAS APPROVED AND PAID; THAT THE CONTRACTING AGENCY INDICATED THAT THE CLAIM WOULD BE GIVEN FAVORABLE CONSIDERATION; THAT THE LAPSE OF TIME BETWEEN THE SUBMISSION OF YOUR 1953 OVERHEAD RATE AND ACCEPTANCE THEREOF BY THE NAVY AUDIT AGENCY WAS BEYOND YOUR CONTROL; AND THAT COST OVERRUNS DEVELOPED ON THREE OTHER COST-PLUS-A-FIXED-FEE CONTRACTS HAD BEEN REIMBURSED THROUGH AMENDMENTS TO THE CONTRACTS.

ARTICLE 4 OF THE CONTRACT, ENTITLED "LIMITATION OF ALLOWABLE COSTS," PROVIDED THAT THE CONTRACTOR WOULD NOTIFY THE CONTRACTING OFFICER AT LEAST 60 DAYS IN ADVANCE OF THE ANTICIPATED EXHAUSTION OF FUNDS AND THAT THE CONTRACTOR WOULD NOT BE OBLIGATED TO PERFORM ANY WORK WHICH WOULD CAUSE THE TOTAL AMOUNT EXPENDED BY THE CONTRACTOR TO EXCEED THE TOTAL ESTIMATED COST; NOR WOULD THE GOVERNMENT BE OBLIGATED TO REIMBURSE THE CONTRACTOR FOR ANY EXPENDITURES IN EXCESS OF THE TOTAL ESTIMATED COST. IN THIS REGARD, THE CONTRACTING OFFICER HAS REPORTED THAT YOU FAILED TO GIVE NOTICE OF THE IMMINENT EXHAUSTION OF FUNDS WITHIN THE REQUIRED TIME. FURTHERMORE, BY LETTER DATED SEPTEMBER 19, 1955, HE ADVISED YOU THAT HE HAD DETERMINED THAT THE ESTIMATED COST OF PERFORMING THE CONTRACT WOULD NOT BE INCREASED AND THAT IT WAS INTENDED TO PERMIT YOUR OBLIGATION FOR PERFORMANCE TO EXPIRE IN ACCORDANCE WITH THE PROVISIONS OF THE CONTRACT, REFERRED TO ABOVE.

AS STATED IN THE SETTLEMENT OF MARCH 11, 1957, YOU WERE FULLY COGNIZANT OF THE FACT THAT THE SEVENTY PERCENT (70 PERCENT) OVERHEAD RATE AS AGREED UPON WAS A PROVISIONAL RATE, SUBJECT TO ADJUSTMENT TO ACTUAL RATE. ALSO, YOU WERE AWARE OF THE EXPANSION PROGRAM DESCRIBED IN YOUR LETTER OF JULY 2, 1956, WHICH YOU STATE GAVE RISE TO THE INCREASED OVERHEAD RATES. THE CIRCUMSTANCES, THEREFORE, AND HAVING REGARD FOR THE LAPSE OF TIME BETWEEN THE SUBMISSION AND ACCEPTANCE OF YOUR 1953 OVERHEAD RATE, WE ARE INCLINED TO AGREE WITH THE OBSERVATION MADE BY THE NAVY AUDIT OFFICE THAT IT WAS YOUR RESPONSIBILITY, IN ORDER TO PROTECT YOUR OWN INTERESTS, TO MAINTAIN RECORDS WHICH WOULD AFFORD PROPER CONTROL OF COSTS SO THAT THE PRESCRIBED CONTRACT LIMITATIONS WOULD NOT BE EXCEEDED. HOWEVER THAT MAY BE, AS STATED ABOVE, YOU FAILED TO AVAIL YOURSELF OF THE ADVANCE NOTICE PROVISION OF THE CONTRACT REGARDING ANTICIPATED EXHAUSTION OF FUNDS. THIS, IN ITSELF, IS SUFFICIENT TO BAR RECOVERY OF THE AMOUNT YOU NOW CLAIM. THE LAW IS CLEAR THAT WHERE, AS HERE, PARTIES HAVE AGREED UPON A METHOD OF PROCEDURE FOR THE DETERMINATION OF MATTERS NOT INVOLVING QUESTIONS OF LAW AND THE CONTRACTOR FAILS TO PURSUE AND EXHAUST THE PROCEDURE SO PROVIDED, HIS FAILURE OPERATES AS AN ESTOPPEL AGAINST HIM WITH RESPECT TO SUCH CLAIMS AS MAY HAVE BEEN MADE AND ADJUDICATED UNDER THE TERMS OF THE CONTRACT. SEE UNITED STATES V. JOSEPH A. HOLPUCH CO., 328 U.S. 234. SEE, ALSO, UNITED STATES V. CALLAHAN-WALKER CONSTRUCTION COMPANY, 317 U.S. 56; ALSO, PLUMLEY V. UNITED STATES, 226 U.S. 545; UNITED STATES V. GLEASON, 175 U.S. 558; UNITED STATES V. CUNNINGHAM, 125 F.2D 28; AND 18 COMP. GEN. 232.

WHILE IT MAY BE THAT YOUR CLAIM UNDER CONTRACT NO. DA 44-109-QM-1518 WAS FILED "FOR IDENTICAL REASONS," THE TERMS OF THAT CONTRACT DIFFERED FROM THOSE OF THE ONE HERE IN QUESTION IN THAT THEY DID NOT REQUIRE YOU, AS A CONDITION PRECEDENT, TO GIVE ADVANCE NOTICE OF AN ANTICIPATED EXHAUSTION OF FUNDS. THEREFORE, AND SINCE THAT CONTRACT WAS A TRUE COST CONTRACT WHICH DID NOT PROVIDE FOR A FEE OR PROFIT OF ANY CHARACTER, YOUR CLAIM FOR "ACTUAL COSTS" WAS ALLOWED, AS RECOMMENDED BY THE CONTRACTING AGENCY. THE INSTANT CASE, FAVORABLE CONSIDERATION OF YOUR CLAIM WAS NOT RECOMMENDED BY THE ADMINISTRATIVE OFFICE IN VIEW OF THE REFERRED-TO STATEMENTS OF THE CONTRACTING OFFICER AND THE OPINION OF THE NAVY AREA AUDIT OFFICE.

IN THE CIRCUMSTANCES, AND NOTWITHSTANDING THE FACT THAT YOU WERE REIMBURSED FOR COST OVERRUNS UNDER THREE OTHER COST-PLUS-A-FIXED-FEE CONTRACTS, THERE APPEARS NO LEGAL BASIS FOR ALLOWANCE OF ANY PART OF THE AMOUNT HERE CLAIMED.