B-132936, AUG. 4, 1960

B-132936: Aug 4, 1960

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TO THE SECRETARY OF THE NAVY: REFERENCE IS MADE TO A LETTER DATED APRIL 22. 900 APPLICABLE TO CONTRACT NOAS53-204-F IF THE FINAL PRICING OF CONTRACT NOAS51-640-I IS REOPENED. IT IS OUR UNDERSTANDING THAT THIS PROPOSAL. WILL REQUIRE MCDONNELL TO REFUND $1. IN CONSIDERATION OF SUCH PAYMENT THE DEPARTMENT OF THE NAVY WILL AGREE TO REOPEN NEGOTIATIONS UNDER PARAGRAPH (A) (1) (B). SUBJECT TO THE CONDITION THAT IN SUCH NEGOTIATIONS MCDONNELL WILL NOT CLAIM A FINAL PRICE FOR THIS CONTRACT IN EXCESS OF $202. THAT RIGHTS OF THE GOVERNMENT BECOME VESTED UPON EXECUTION OF CONTRACTUAL INSTRUMENTS AND SUCH RIGHTS ARE NOT SUBJECT TO DIVESTMENT UNLESS ADEQUATE CONSIDERATION. IF THE CLAIMS SUBMITTED BY MCDONNELL IN REDETERMINING THE FINAL CONTRACT PRICE ARE TO BE CONSIDERED AND ALLOWED OR DISALLOWED ON THEIR MERITS.

B-132936, AUG. 4, 1960

TO THE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO A LETTER DATED APRIL 22, 1960, FROM THE ASSISTANT SECRETARY OF THE NAVY (MATERIAL) RELATIVE TO FINAL PRICING OF CONTRACTS NOAS53-204-F AND NOAS51-640-I WITH MCDONNELL AIRCRAFT CORPORATION.

AS INDICATED IN THE ASSISTANT SECRETARY'S LETTER, MCDONNELL HAS NOW OFFERED, SUBJECT TO THE CONCURRENCE OF THIS OFFICE, TO REFUND TO THE BUREAU OF NAVAL WEAPONS $1,396,900 APPLICABLE TO CONTRACT NOAS53-204-F IF THE FINAL PRICING OF CONTRACT NOAS51-640-I IS REOPENED.

IT IS OUR UNDERSTANDING THAT THIS PROPOSAL, IF ACCEPTED, WILL REQUIRE MCDONNELL TO REFUND $1,396,900, REPRESENTING THE BALANCE OF AN EQUITABLE ADJUSTMENT IN THE PRICE OF FIXED-PRICE CONTRACT NOAS53-204 F. IN CONSIDERATION OF SUCH PAYMENT THE DEPARTMENT OF THE NAVY WILL AGREE TO REOPEN NEGOTIATIONS UNDER PARAGRAPH (A) (1) (B), SECTION D, OF CONTRACT NOAS51-640-I ON THE FINAL PRICE TO BE PAID BY THE GOVERNMENT FOR AIRPLANES DELIVERED UNDER THAT CONTRACT AND SET OUT IN AMENDMENT NO. 112 TO THE CONTRACT, BUT SUBJECT TO THE CONDITION THAT IN SUCH NEGOTIATIONS MCDONNELL WILL NOT CLAIM A FINAL PRICE FOR THIS CONTRACT IN EXCESS OF $202,984,967.34, CALCULATED AS FOLLOWS:

CHART

VALUE OF AMENDMENT NO. 112

TO NOAS 51-640-I $201,689,168.34

LESS: OVERSTATEMENT BY CHANGE BD 101,101.00

(FINAL REDETERMINED PRICE) $201,588,067.34

PLUS: CREDIT TO NOAS53-204 1,396,900.00

$202,984,967.34

WHILE ACCEPTANCE OF MCDONNELL'S PROPOSAL THEREFORE COULD NOT RESULT IN LOSS TO THE GOVERNMENT, IN VIEW OF THE FACT THAT REOPENING THE FINAL PRICING OF CONTRACT NOAS51-640-I MAY RESULT IN AN INCREASE ABOVE THE FINAL PRICE PRESENTLY SET OUT IN AMENDMENT NO. 112 TO CONTRACT NOAS51-640-I, OUR OPINION HAS BEEN REQUESTED ON THE LEGAL PROPRIETY OF ACCEPTING THE CONTRACTOR'S OFFER.

ALTHOUGH THE LETTER FROM THE ASSISTANT SECRETARY DOES NOT SO SPECIFY, WE ASSUME THE DOUBT WITH RESPECT TO THE PROPRIETY OF ACCEPTING MCDONNELL'S OFFER ARISES OUT OF THE LEGAL PRINCIPLE, EXPRESSED IN VARIOUS DECISIONS OF THE COURTS AND OF THIS OFFICE, THAT RIGHTS OF THE GOVERNMENT BECOME VESTED UPON EXECUTION OF CONTRACTUAL INSTRUMENTS AND SUCH RIGHTS ARE NOT SUBJECT TO DIVESTMENT UNLESS ADEQUATE CONSIDERATION, IN THE FORM OF A CORRESPONDING BENEFIT, ACCRUES TO THE GOVERNMENT.

IN THE INSTANT CASE, IF THE CLAIMS SUBMITTED BY MCDONNELL IN REDETERMINING THE FINAL CONTRACT PRICE ARE TO BE CONSIDERED AND ALLOWED OR DISALLOWED ON THEIR MERITS, IT IS OUR OPINION THAT THE PAYMENT OF $1,396,900 BY MCDONNELL WOULD CONSTITUTE ADEQUATE CONSIDERATION FOR REOPENING NEGOTIATION OF THE FINAL CONTRACT PRICE, SUBJECT TO THE LIMITATION PROPOSED BY MCDONNELL.

WE ARE AWARE OF NO OTHER LEGAL IMPEDIMENT TO ACCEPTANCE OF THE OFFER AND, SUBJECT TO OUR UNDERSTANDING THAT THE ADDITIONAL CLAIMS OF THE CONTRACTOR WILL BE CONSIDERED ON THEIR MERITS, WE WILL THEREFORE INTERPOSE NO OBJECTION TO REOPENING NEGOTIATIONS ON THE FINAL PRICING OF CONTRACT NOAS51-640-I IN ACCORDANCE WITH THE TERMS OF THE OFFER.