B-134772, SEP. 14, 1959

B-134772: Sep 14, 1959

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INCORPORATED: FURTHER REFERENCE IS MADE TO YOUR LETTER OF MAY 5. RELATIVE TO YOUR CLAIM FOR REIMBURSEMENT OF EXPENSES WHICH YOU ALLEGE WERE INCURRED. AS YOU WERE ADVISED IN YOUR LETTER OF MAY 21. FOR THAT REASON IT APPEARS THAT NEGOTIATIONS WERE TERMINATED AND THE CLAIM NOW HAS BEEN REFERRED TO US FOR CONSIDERATION AND APPROPRIATE DISPOSITION. CHART YOUR CLAIM IS ITEMIZED AS FOLLOWS: 1. WAS THE LOWEST ACCEPTABLE BID. SUCH ARRANGEMENTS PREVIOUSLY HAVE BEEN HELD TO CREATE A CONTRACTUAL RELATIONSHIP BINDING UPON THE PARTIES (SEE. WILL BE CONSIDERED IN THE ORDER SET FORTH ABOVE. ITEM NO. 1 REPRESENTS THE ORGANIZATION COSTS INCURRED IN FORMING THE TWO CORPORATIONS REQUIRED BY THE LETTER OF ACCEPTABILITY AND IS DEEMED TO BE PROPER FOR REIMBURSEMENT.

B-134772, SEP. 14, 1959

TO J. W. BATESON COMPANY, INCORPORATED:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF MAY 5, 1959, WITH ENCLOSURES, RELATIVE TO YOUR CLAIM FOR REIMBURSEMENT OF EXPENSES WHICH YOU ALLEGE WERE INCURRED, AND LOSS OF ANTICIPATORY PROFITS, AS A RESULT OF THE WITHDRAWAL BY THE DEPARTMENT OF THE AIR FORCE OF A LETTER OF ACCEPTABILITY DATED JULY 23, 1957, FOR THE CONSTRUCTION OF A PROPOSED HOUSING PROJECT AT FOSTER AIR FORCE BASE, VICTORIA, TEXAS.

AS YOU WERE ADVISED IN YOUR LETTER OF MAY 21, 1959, WE REQUESTED THE SECRETARY OF THE AIR FORCE TO FURNISH US WITH A REPORT THEREON, AND BY LETTER DATED JUNE 15, 1959, THE DEPUTY SPECIAL ASSISTANT FOR INSTALLATIONS, DEPARTMENT OF THE AIR FORCE, TRANSMITTED A COPY OF AN AUDIT REPORT PREPARED BY THE OFFICE OF THE AUDITOR GENERAL FOR THE AIR FORCE, AND SUPPORTING DOCUMENTS, TOGETHER WITH HIS RECOMMENDATIONS THEREON. THE FILE INDICATES THAT SETTLEMENT OF THE MATTER BY MUTUAL UNDERSTANDING BETWEEN YOUR CORPORATION AND THE ADMINISTRATIVE OFFICE IN THE USUAL MANNER FAILED AS A RESULT OF A DISAGREEMENT REGARDING THE MERITS OF THAT PORTION OF THE CLAIM REPRESENTING ANTICIPATORY PROFITS. FOR THAT REASON IT APPEARS THAT NEGOTIATIONS WERE TERMINATED AND THE CLAIM NOW HAS BEEN REFERRED TO US FOR CONSIDERATION AND APPROPRIATE DISPOSITION.

CHART

YOUR CLAIM IS ITEMIZED AS FOLLOWS:

1. INCORPORATION EXPENSES $400

2. ATTORNEYS FEES 2,500

3. MOBILIZATION EXPENSES 6,000

4. MORTGAGEE COMMITMENT CHARGE 18,379

5. INTEREST ON DEPOSIT AND FEES PAID1,000

6. GENERAL OFFICE OVERHEAD 110,274

7. LOSS OF PROFIT 847,392

THE REFERRED-TO LETTER OF ACCEPTABILITY STATES THAT YOUR BID OF JUNE 20, 1957, OFFERING TO PERFORM ALL THE WORK REQUIRED BY INVITATION FOR BIDS NO 41-656-56-60, WAS THE LOWEST ACCEPTABLE BID. PURSUANT TO THE ACCEPTANCE OF THE BID, AND UNDER THE REQUIREMENTS OF THE INVITATION, YOU UNDERTOOK TO COMPLETE THE SEVERAL PRELIMINARY OBLIGATIONS SET FORTH IN THE DOCUMENT IN CONTEMPLATION OF A FORMAL CONTRACT TO BE EXECUTED BY THE PARTIES. SUCH ARRANGEMENTS PREVIOUSLY HAVE BEEN HELD TO CREATE A CONTRACTUAL RELATIONSHIP BINDING UPON THE PARTIES (SEE, GENERALLY, 3 COMP. GEN. 291), AND THEREFORE, THE SEVERAL ITEMS CONSTITUTING YOUR TOTAL CLAIM FOR $985,945, WILL BE CONSIDERED IN THE ORDER SET FORTH ABOVE.

ITEM NO. 1 REPRESENTS THE ORGANIZATION COSTS INCURRED IN FORMING THE TWO CORPORATIONS REQUIRED BY THE LETTER OF ACCEPTABILITY AND IS DEEMED TO BE PROPER FOR REIMBURSEMENT.

ITEM NO. 2 REPRESENTS ATTORNEY'S FEES FOR SERVICES ALLEGED TO HAVE BEEN RENDERED IN CONNECTION WITH THE PRELIMINARY WORK IMPOSED BY THE LETTER OF ACCEPTABILITY. SINCE THE ACCOUNT FAILS TO SHOW THE NATURE AND EXTENT OF SUCH LEGAL SERVICES, AND IS SUPPORTED ONLY BY AN OFFER FROM THE ATTORNEY TO ACCEPT THE REDUCED AMOUNT BILLED IN VIEW OF THE CANCELLATION OF THE PROJECT, WE FIND NO BASIS FOR AUTHORIZING REIMBURSEMENT OF SUCH CHARGE.

ITEM NO. 3 CONSISTS OF SEVERAL DIRECT AND INDIRECT EXPENSES INCURRED BY YOU IN MOBILIZING MEN AND MATERIAL AT THE SITE OF THE PROPOSED PROJECT WHICH IS REPORTED BY THE ADMINISTRATIVE OFFICE TO HAVE BEEN REDUCED TO $5,885. THE SAID AMOUNT INCLUDES AN ESTIMATED CHARGE OF $1,800 TO COVER DEPRECIATION COSTS ON TRUCKS AND EQUIPMENT. THIS AMOUNT, HOWEVER, APPEARS TO BE A DUPLICATE CHARGE SINCE A CLAIM FOR DEPRECIATION ON TRUCKS, AUTOS, AND EQUIPMENT IN THE SUM OF $46,932 IS INCLUDED IN ITEM 6 ABOVE (PARAGRAPH F OF YOUR LETTER OF MAY 5, 1959), IN THE AMOUNT OF $110,274. SINCE THE BALANCE OF THE CHARGES APPEAR TO BE PROPER THE ITEM WILL BE ALLOWED IN THE REDUCED AMOUNT OF $4,085.

ITEM NO. 4 IS A CHARGE OF $18,379 PRESENTED TO YOU FOR PAYMENT BY THE REPUBLIC NATIONAL BANK OF DALLAS IN ITS LETTER OF SEPTEMBER 16, 1957, STATED TO REPRESENT "INTEREST AND FEES WHICH WE WOULD HAVE COLLECTED IN THE ABSENCE OF CANCELLATION OF OUR COMMITMENT, TOGETHER WITH LEGAL FEES AND OTHER EXPENSES WHICH HAVE BEEN INCURRED BY US.' IN HIS COMMENTS ON THIS ASPECT OF THE CLAIM THE DEPUTY SPECIAL ASSISTANT FOR INSTALLATIONS OBSERVED THAT "THE BANK HAS NOT FURNISHED US WITH A BREAKDOWN AS TO THE EXPENSES ACTUALLY INCURRED IN PROCESSING THE LOAN. NOR HAS THE BANK FULLY DOCUMENTS ITS CLAIM THAT IT HAD ALLOCATED OR SET ASIDE FUNDS FOR USE IN CONNECTION WITH THE PROPOSED BATESON LOAN. IN THIS CONNECTION, IT SHOULD BE NOTED THAT THE BANK IS ONLY REQUIRED TO ADVANCE IN INCREMENTS A PART OF THE CONSTRUCTION MONEY AS THE WORK PROGRESSES AND IS GENERALLY NOT REQUIRED TO ADVANCE THE ENTIRE AMOUNT OF THE LOAN IN A LUMP SUM.' IN VIEW OF THE FACT THAT THIS ITEM IS WHOLLY UNSUPPORTED BY ANY EVIDENCE TENDING TO ESTABLISH THE REASONABLENESS OF THE BANK'S DEMAND, WE CONCUR WITH THE CONCLUSIONS OF THE ADMINISTRATIVE OFFICE THAT NO PART THEREOF IS FOR ALLOWANCE ON THE BASIS OF THE PRESENT RECORD.

ITEM NO. 5 IS A CLAIM FOR LOSS OF INTEREST AT 6 PERCENT ON THE SUM OF $36,128 WHICH YOU WERE REQUIRED TO DEPOSIT, VARIOUSLY, UNDER THE TERMS OF THE INVITATION FOR BIDS AND THE LETTER OF ACCEPTABILITY, AND WHICH WAS REFUNDED IN DUE COURSE UPON TERMINATION OF THE PROJECT. THIS DEMAND DOES NOT REPRESENT AN EXPENSE ARISING OUT OF THE CONTRACT RELATIONSHIP BUT IS A CLAIM FOR DAMAGES FOR THE LOSS OF USE OF THE ABOVE FUNDS WHILE ON DEPOSIT. THIS ITEM HEREINAFTER WILL BE CONSIDERED WITH ITEM NO. 7, LOSS OF PROFIT.

ITEM NO. 6 IS A CLAIM FOR $110.274 TO COVER THAT PORTION OF YOUR GENERAL OFFICE OVERHEAD EXPENSES WHICH YOU ALLEGE IS CHARGEABLE AGAINST THE CANCELLED PROJECT. THIS ELEMENT OF YOUR CLAIM WAS THOROUGHLY EXAMINED BY REPRESENTATIVES OF THE AUDITOR GENERAL'S OFFICE OF THE AIR FORCE IN THE COURSE OF AN AUDIT OF YOUR ACCOUNTS AND RECORDS, AND IN THE REPORT SUBMITTED HERE IT IS STATED THAT THE SUM OF $15,420 WAS FOUND TO BE ALLOCABLE TO THE SUBJECT PROJECT FOR THE PERIOD ELAPSING BETWEEN THE DATE THE INVITATION WAS RECEIVED TO THE DATE OF CANCELLATION OF THE WORK. FIND SUCH AMOUNT REASONABLY SUPPORTED BY THE SAID AUDIT REPORT AND, THEREFORE, IT MAY BE ALLOWED IN THE REDUCED AMOUNT.

ITEM NO. 7 IS A DEMAND FOR PAYMENT IN THE SUM OF $847,392 AS COMPENSATION FOR THE LOSS OF ANTICIPATORY PROFITS WHICH WAS ORIGINALLY STATED TO BE $674,000. THIS ITEM, TOGETHER WITH ITEM NO. 5 (INTEREST), CLEARLY IS AN UNLIQUIDATED CLAIM FOR DAMAGES, AS DISTINGUISHED FROM THE OTHER ELEMENTS WHICH CONSTITUTE DIRECT AND INDIRECT EXPENSES INCURRED UNDER THE AGREEMENT. FURTHERMORE, AS NOW PRESENTED WE FEEL THE AMOUNTS ARE HIGHLY SPECULATIVE AND CONJECTURAL, AND THIS OFFICE HAS NO FACILITIES WITH WHICH IT MIGHT ASCERTAIN WHAT AMOUNTS WOULD BE CONSIDERED FAIR AND REASONABLE. THE PROPER FORUM FOR THE LIQUIDATION OF CLAIMS OF THIS NATURE IS THE COURT OF CLAIMS WHERE THE EVIDENCE MAY BE WEIGHED AND RESOLVED. SEE, IN THIS CONNECTION 18 COMP. GEN. 111, 114, WHEREIN THE FOLLOWING APPLICABLE STATEMENT BY THE COURT OF CLAIMS IN CHARLES V. UNITED STATES (19 C.CLS. 316, 319) IS QUOTED:

"WHEN, IN THE COURSE OF THE EXAMINATION OF ACCOUNTS IN THE DEPARTMENTS, SUSPICIONS ARE AROUSED OR DOUBTS ARE ENTERTAINED AS TO THE VALIDITY OF THE DEMANDS OF CLAIMANTS, THE PARTIES MAY BE SENT TO THIS COURT TO PROVE THEIR CASES UNDER THE RULES AND FORMS OF LAW, UPON LEGAL COMPETENT EVIDENCE, OR THEIR DEMANDS MAY BE REJECTED ALTOGETHER LEAVING THE CLAIMANTS TO PROSECUTE THEM HERE UPON THEIR OWN VOLUNTARY PETITIONS, IF THEY SO DESIRE. THAT IS THE MAIN PROTECTION WHICH THE ACCOUNTING OFFICERS CAN SECURE FOR THEMSELVES AND FOR THE GOVERNMENT IN THE CASE OF CLAIMS OF DOUBTFUL VALIDITY IN FACT OR IN LAW, * * *" ALSO, SEE LONGWILL V. UNITED STATES, 17 C.CLS. 288, 291.

ACCORDINGLY, THERE WILL BE CERTIFIED FOR PAYMENT THE SUM OF $19,905, WITH THE REMAINDER OF YOUR CLAIM BEING DISALLOWED FOR THE REASONS STATED ABOVE, AND IT IS TO BE UNDERSTOOD THAT SUCH ACTION IS TAKEN WITHOUT PREJUDICE TO YOU, OR TO THOSE PARTIES CLAIMING THROUGH YOU, AS TO THE RIGHT TO PURSUE ANY LEGAL REMEDIES AVAILABLE TO RECOVER THE BALANCE DISALLOWED HEREIN.