B-135442, APR. 2, 1958

B-135442, APR. 2, 1958

TO HONORABLE H. V. HIGLEY, ADMINISTRATOR, VETERANS ADMINISTRATION:

REFERENCE IS MADE TO A LETTER DATED FEBRUARY 26, 1958, WITH ENCLOSURES, FROM MR. JOHN N. MARKOVITZ, CHIEF, FISCAL DIVISION, VETERANS ADMINISTRATION, SUPPLY DEPOT, SOMMERVILLE, NEW JERSEY, TRANSMITTING THE CASE OF THE EALING CORPORATION, A DEFAULTING CONTRACTOR UNDER CONTRACT NO. V1005 P-5435, DATED DECEMBER 26, 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 THAT DEPOT AS STATED IN ITS COLLECTION VOUCHER DATED NOVEMBER 13, 1957.

SINCE THE OFFICIAL OF YOUR AGENCY REQUESTING THE DECISION IS NOT ENTITLED TO A DECISION AND SINCE IT APPEARS THAT AN ANSWER IS REQUIRED, THE DECISION IS BEING ADDRESSED TO YOU. SEE 26 COMP. GEN. 993.

BY INVITATION NO. A-198-57, DATED NOVEMBER 29, 1956, THE VETERANS ADMINISTRATION, PROCUREMENT DIVISION, WASHINGTON, D.C., REQUESTED BIDS FOR QUALITATIVE AND QUANTITATIVE PAPER FILTERS FOR DELIVERY TO VARIOUS DESTINATIONS. PARAGRAPH 7 OF THE SUPPLEMENTARY GENERAL PROVISIONS, MADE A PART OF THE INVITATION, PROVIDED, PURSUANT TO THE ACT OF MARCH 3, 1933, 47 STAT. 1520, AS AMENDED, 41 U.S.C. 110A-D, OTHERWISE KNOWN AS THE BUY- AMERICAN ACT, THAT "WHEN BIDS ARE RECEIVED COVERING MATERIALS OF FOREIGN ORIGIN AT PRICES LOWER THAN BIDS OFFERING MATERIALS OF DOMESTIC ORIGIN, 6 PERCENT WILL BE ADDED TO THE BID PRICE OF FOREIGN MATERIAL FOR COMPARISON PURPOSES WHEN MAKING AN AWARD.' IN RESPONSE, THE EALING CORPORATION AGREED TO DELIVER THE MATERIAL FROM FOREIGN ORIGIN TO THE VARIOUS DESTINATIONS AT CERTAIN UNITS PRICES. THE CONTRACT WAS AWARDED THE COMPANY ON DECEMBER 27, 1956.

THE RECORD SHOWS THAT A PORTION OF THE CONTRACT QUANTITIES WAS TERMINATED DUE TO THE CONTRACTOR'S DEFAULT. AFTER DEFAULT THE GOVERNMENT REPURCHASED THE TERMINATED PORTION OF THE CONTRACT FROM A DOMESTIC SOURCE AND DIRECTED THE EALING CORPORATION TO PAY THE EXCESS COSTS IN THE AMOUNT OF $250.56 INCURRED BY THE GOVERNMENT. SUCH EXCESS COSTS WERE COMPUTED BY THE GOVERNMENT ON THE BASIS OF THE DIFFERENCE BETWEEN THE PRICES STATED IN THE CONTRACT ON THE DEFAULTED ITEMS 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 THE BID PRICES AND THE PRICES PAID BY THE GOVERNMENT ON THE REPURCHASE CONTRACT LESS SIX PERCENT. A DECISION IS REQUESTED AS TO THE PROPER AMOUNT OF THE EXCESS COSTS CHARGEABLE TO THE DEFAULTING CONTRACTOR.

AS STATED IN PARAGRAPH 7 OF THE INVITATION, THE AMOUNT OF SIX PERCENT ADDED TO THE BID PRICE OF FOREIGN MATERIAL WAS FOR COMPARISON PURPOSES IN DETERMINING A BASIS FOR AWARD AS REQUIRED AND EXPLAINED IN EXECUTIVE ORDER NO. 10582, 40 U.S.C. 10D. IN NO WAY DOES THE SIX PERCENT VARIATION EFFECT THE DAMAGES CAUSED THE GOVERNMENT DUE TO THE DEFAULT. 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. MILLER V. ROBERTSON, 266 U.S. 243. 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 STATED IN THE COLLECTION VOUCHER DATED NOVEMBER 13, 1957, ON THE BASIS OF THE DIFFERENCE BETWEEN THE PRICES STATED IN CONTRACT NO. V1005 P-5435 AND THE PRICE PAID BY THE GOVERNMENT ON THE REPURCHASE CONTRACT.