B-132697, AUG. 12, 1957

B-132697, AUG. 12, 1957

TO THE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO A LETTER DATED JULY 24, 1957, WITH ENCLOSURES, FROM THE ASSISTANT CHIEF FOR PURCHASING, BUREAU OF SUPPLIES AND ACCOUNTS, TRANSMITTING THE CASE OF METIMPEX CORPORATION, A DEFAULTING CONTRACTOR UNDER CONTRACT NO. N383-155-39829A, DATED OCTOBER 17, 1956,AND REQUESTING A DECISION AS TO WHETHER THE EXCESS COSTS TO THE GOVERNMENT, WHICH AROSE FROM THE PARTIAL DEFAULT TERMINATION OF THE CONTRACT, WERE PROPERLY COMPUTED BY YOUR DEPARTMENT.

BY INVITATION NO. IFB-383-815-57 THE AVIATION SUPPLY OFFICE, PHILADELPHIA, PENNSYLVANIA, REQUESTED BIDS FOR THE FURNISHING OF 174,900 POUNDS, CUPROUS OXIDE PIGMENT, F.O.B. NORFOLK, VIRGINIA, AND 110,400 POUNDS, F.O.B. MARE ISLAND, CALIFORNIA. THE INVITATION STATED THAT THE BIDS IN RESPONSE THERETO SHOULD NOT INCLUDE CUSTOMS DUTY AND THAT ANY DUTY ON THE MATERIAL WOULD BE FOR THE ACCOUNT OF THE GOVERNMENT. IN RESPONSE, THE METIMPEX CORPORATION AGREED TO DELIVER THE MATERIALS TO NORFOLK FOR $0.5699 PER POUND AND TO MARE ISLAND FOR $0.5764 PER POUND. ALSO, THE BID INDICATED THAT CUSTOMS DUTY IN THE AMOUNT OF $0.0746 PER POUND WAS INCLUDED IN THE BID PRICE AND STATED THAT THE DUTY COULD BE DEDUCTED IF DUTY FREE ENTRY CERTIFICATES WERE ISSUED. THE CONTRACT AWARDED THE COMPANY SPECIFIED THE CONTRACT PRICES OF $0.4953 AND $0.5018 PER POUND FOR THE MATERIAL TO BE DELIVERED TO NORFOLK AND MARE ISLAND, RESPECTIVELY. THE CONTRACT PRICES WERE COMPUTED BY DEDUCTING $0.0746, THE AMOUNT OF THE CUSTOMS DUTY SPECIFIED IN THE BID, FROM THE PER POUND PRICE BID BY THE CONTRACTOR.

THE RECORD SHOWS THAT AFTER CERTAIN CONTRACT QUANTITIES HAD BEEN DELIVERED BY THE CONTRACTOR, A PORTION OF THE REMAINING QUANTITY WAS TERMINATED DUE TO THE CONTRACTOR'S DEFAULT. A DUTY FREE ENTRY CERTIFICATE WAS ISSUED BY THE CONTRACTING OFFICER FOR EACH SHIPMENT MADE BY THE CONTRACTOR. AFTER DEFAULT THE GOVERNMENT REPURCHASED THE TERMINATED PORTION OF THE CONTRACT FROM A DOMESTIC SOURCE AND DIRECTED THE METIMPEX CORPORATION TO PAY THE EXCESS COST INCURRED, IN THE AMOUNT OF $12,700.76. SUCH EXCESS COSTS WERE COMPUTED BY THE GOVERNMENT ON THE BASIS OF THE DIFFERENCE BETWEEN THE PRICES STATED IN CONTRACT NO. N383-155-39829A (WHICH EXCLUDED DUTY) AND THE PRICE PAID BY THE GOVERNMENT ON THE REPURCHASE CONTRACT.

THE CONTRACTOR CONTENDS THAT THE EXCESS COSTS SHOULD HAVE BEEN COMPUTED UPON THE DIFFERENCE BETWEEN HIS BID PRICES OF $0.5699 PER POUND FOR SHIPMENT TO NORFOLK AND $0.5764 PER POUND FOR SHIPMENT TO MARE ISLAND (WHICH PRICES INCLUDED DUTY) AND THE PRICES PAID BY THE GOVERNMENT ON THE REPURCHASE CONTRACT. IF THE CONTRACTOR'S THEORY IS FOLLOWED, THE EXCESS COSTS WOULD BE REDUCED BY $6,743.84 FROM $12,700.76 TO $5,956.92. YOU REQUEST A DECISION AS TO THE PROPER AMOUNT OF THE EXCESS COSTS INCURRED UNDER THE CIRCUMSTANCES.

IT IS WELL SETTLED THAT ONE WHO FAILS TO PERFORM HIS CONTRACT IS JUSTLY BOUND TO MAKE GOOD ALL DAMAGES THAT ACCRUE NATURALLY FROM THE BREACH AND THE OTHER PARTY IS ENTITLED TO BE PUT IN AS GOOD POSITION PECUNIARILY AS HE WOULD HAVE BEEN BY PERFORMANCE OF THE CONTRACT. HILLER V. ROBERTSON, 266 U.S. 243. THE RECORDS INDICATE THAT DUTY FREE ENTRY CERTIFICATES WERE ISSUED IN CONNECTION WITH ALL SHIPMENTS MADE TO THE GOVERNMENT UNDER THE CONTRACT. THEREFORE, WE AGREE WITH YOUR DEPARTMENT'S CONCLUSION THAT SUCH RECORDS WOULD SUSTAIN THE PRESUMPTION THAT DUTY FREE ENTRY CERTIFICATES WOULD HAVE BEEN ISSUED IN CONNECTION WITH THE TERMINATED QUANTITIES, IF THE CONTRACTOR HAD NOT PREVENTED THEIR ISSUANCE BY HIS FAILURE TO MAKE DELIVERIES. THUS, SINCE THE GOVERNMENT IS ENTITLED TO BE PUT IN AS GOOD POSITION PECUNIARILY AS IT WOULD HAVE BEEN BY PERFORMANCE OF THE CONTRACT, IT APPEARS THAT THE EXCESS COSTS SHOULD BE COMPUTED BY THE GOVERNMENT, AS YOU SUGGEST, ON THE BASIS OF THE DIFFERENCE BETWEEN THE PRICES STATED IN THE CONTRACT NO. N383-155-39829A (WHICH EXCLUDED DUTY) AND THE PRICE PAID BY THE GOVERNMENT ON THE REPURCHASE CONTRACT.