B-139650, SEP. 25, 1959

B-139650, SEP. 25, 1959

TO THE HONORABLE FRANKLIN FLOETE, ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION:

WE REFER TO A LETTER OF MAY 11, 1959, SIGNED BY THE CHAIRMAN, TASK FORCE FOR REVIEW OF GOVERNMENT PROCUREMENT POLICIES AND PROCEDURES, REQUESTING OUR COMMENTS ON PROPOSED SUBPART 1-16.2 OF THE FEDERAL PROCUREMENT REGULATIONS WHICH WOULD PRESCRIBE CONTRACT FORMS, INCLUDING PROPOSED STANDARD FORMS Y AND Z, AND RELATED INSTRUCTIONS FOR USE WHEN ENTERING INTO CERTAIN NEGOTIATED SUPPLY CONTRACTS.

FORM Z, CONTAINING GENERAL CONTRACT PROVISIONS, WOULD BE USED ONLY FOR CONTRACTS NOT EXCEEDING $10,000. WE NOTE THAT, UNLIKE STANDARD FORM 32, FORM Z DOES NOT DEFINE THE TERMS "SECRETARY," ,CONTRACTING OFFICER," AND "SUBCONTRACTS.' ALTHOUGH WE ARE NOT AWARE OF ANY ACTUAL SITUATION IN WHICH THE LACK OF SUCH DEFINITIONS IN OTHER CONTRACT FORMS HAS RESULTED IN ANY DIFFICULT, IT DOES APPEAR THAT THE INCLUSION OF THE DEFINITIONS MIGHT SERVE SOME SALUTARY PURPOSE. THE FOREGOING OBSERVATION IS MADE WITH FULL RECOGNITION OF THE ADVANTAGES OF BREVITY WITH RESPECT TO RELATIVELY SMALL DOLLAR VALUE CONTRACTS AND IS CONDITIONED ON THE PRACTICABILITY OF INCLUDING THE DEFINITIONS WITHOUT EXPANDING THE FORM BEYOND ITS PRESENT ONE PAGE SIZE. IN THE ABSENCE OF SUCH DEFINITIONS, IT IS SUGGESTED THAT THE WORDS, "HEAD OF THE CONTRACTING DEPARTMENT OR AGENCY" BE SUBSTITUTED FOR THE WORD,"SECRETARY" WHEREVER THE LATTER PRESENTLY APPEARS.

WE RECOMMEND THAT CONSIDERATION BE GIVEN TO THE INCLUSION IN GENERAL PROVISION NO. 1 OF A STATEMENT SIMILAR TO THAT APPEARING INPROVISION NO. 5/C) OF STANDARD FORM 32 WHICH WOULD RESERVE TO THE GOVERNMENT THE RIGHT TO REIMBURSEMENT BY THE CONTRACTOR FOR ANY ADDITIONAL COSTS INCURRED BY THE GOVERNMENT IN INSPECTION AND TESTING ARISING OUT OF THE CONTRACTOR'S FAILURE TO HAVE THE SUPPLIES READY AT THE AGREED TIME FOR SUCH INSPECTION AND TEST OR WHEN REINSPECTION OR RETEST IS REQUIRED BECAUSE OF A PRIOR JUSTIFIED REJECTION.

GENERAL PROVISION NO. 2 REQUIRED THAT INVOICES BE SUBMITTED IN QUADRUPLICATE UNLESS OTHERWISE SPECIFIED. IT HAS BEEN OUR EXPERIENCE THAT THE NUMBER OF INVOICES REQUIRED IS MORE OFTEN EXCESSIVE RATHER THAN INSUFFICIENT WHICH NOT ONLY IMPOSES AN ADDITIONAL UNNECESSARY BURDEN ON THE CONTRACTOR BUT ALSO ENCOURAGES THE RETENTION OF DUPLICATE RECORDS WHEN NO JUSTIFICATION EXISTS THEREFOR. IN ORDER TO DISCOURAGE THIS TREND IT IS RECOMMENDED THAT CONSIDERATION BE GIVEN IN REVISING THE PARAGRAPH TO REQUIRE ONLY A SINGLE COPY OF EACH INVOICE UNLESS OTHERWISE PROVIDED. THIS CONNECTION, WE FURTHER SUGGEST THAT A SPACE BE PROVIDED ON FORM Y WHERE THE NUMBER OF COPIES TO BE REQUIRED MAY BE INSERTED IF THE REQUIREMENT DIFFERS FROM THE STANDARD PROVISION.

GENERAL PROVISION NO. 6 GIVES THE CONTRACTING OFFICER THE RIGHT TO TERMINATE THE CONTRACT FOR FAILURE OF THE CONTRACTOR TO PERFORM ANY OF THE PROVISION THEREOF. UNDOUBTEDLY SUCH PROVISION WAS INTENDED TO APPLY ONLY TO THE FAILURE OF THE CONTRACTOR TO PERFORM ANY OF HIS OBLIGATIONS UNDER THE CONTRACT. IN ANY EVENT, THERE MAY WELL BE OBLIGATIONS IMPOSED UPON THE CONTRACTOR, UNDER THE TERMS OF THE CONTRACT, OF SUCH MINOR NATURE AS HARDLY TO WARRANT CONSIDERING TERMINATION. IN ORDER TO CLARIFY THE INTENT WE RECOMMEND THAT THE FIRST SENTENCE OF THE PROVISION BE AMENDED TO READ ALONG THE FOLLOWING LINES:

"THE CONTRACTING OFFICER, BY WRITTEN NOTICE, MAY TERMINATE THIS CONTRACT, IN WHOLE OR IN PART, FOR ANY MATERIAL BREACH OF THE CONTRACTOR'S OBLIGATIONS HEREUNDER.'

THE SECOND SENTENCE OF THE SAME PROVISION APPEARS UNCLEAR AS TO WHETHER, TO EXONERATE THE CONTRACTOR FROM LIABILITY FOR DAMAGES, THE FAILURE TO PERFORM MUST BE WITHOUT THE FAULT OR NEGLIGENCE OF BOTH THE CONTRACTOR AND THE SUBCONTRACTOR OR EITHER OF THEM. IN THIS REGARD WE NOTE THAT, UNDER THE MOST RECENT EDITION OF SF 32, UNLESS THE FAILURE TO PERFORM IS WITHOUT THE FAULT OR NEGLIGENCE OF BOTH CONTRACTOR AND SUBCONTRACTOR, AND FURTHER PROVIDING THE CONTRACTOR COULD NOT OBTAIN THE SUPPLIES OR SERVICES TO BE PERFORMED BY THE SUBCONTRACTOR FROM ANOTHER SOURCE IN SUFFICIENT TIME TO PERMIT PERFORMANCE IN ACCORDANCE WITH THE CONTRACT, THE CONTRACTOR IS HELD LIABLE FOR DAMAGES INCLUDING EXCESS COSTS. IT APPEARS THAT THE GOVERNMENT SHOULD MAINTAIN A UNIFORM POLICY AS TO THE CIRCUMSTANCES UNDER WHICH THE CONTRACTOR IS EXCUSED FROM SUCH LIABILITY EXCEPT WHERE SPECIAL CIRCUMSTANCES MIGHT DICTATE AN EXCEPTION. IN ORDER TO MAINTAIN SUCH POLICY IT IS RECOMMENDED THAT THE SECOND SENTENCE OF GENERAL PROVISION NO. 6 BE MODIFIED TO CONFORM WITH THE INTENT OF STANDARD FORM 32 GENERAL PROVISION NO. 11 (C).

PROVISION NO. 8 IN ITS PRESENT FORM DOES NOT, UNLIKE STANDARD FORM 32, AUTOMATICALLY INCLUDE THE NO-SET-OFF PROVISION IF THE CONTRACT IS WITH ONE OF THE AGENCIES HAVING AUTHORITY BY VIRTUE OF STATUTE OR EXECUTIVE ORDER TO USE THE PROVISION. WE HAVE BEEN ADVISED THAT THE PROVISION WAS OMITTED ONLY IN INADVERTENCE. SINCE THE NO-SET-OFF PROVISION MAY (BUT IS NOT REQUIRED TO) BE INCLUDED IN CONTRACTS BY THE DESIGNATED AGENCIES AND SINCE THE PROVISION LIMITS THE RIGHT OF THE UNITED STATES TO SET OFF ITS OWN CLAIMS AGAINST ASSIGNED AMOUNTS DUE OR TO BECOME DUE UNDER THE CONTRACTS, IT APPEARS THAT IT WELL MIGHT BE INCLUDED ONLY IN THOSE CONTRACTS WHERE IT IS DETERMINED TO BE IN THE BEST INTERESTS OF THE GOVERNMENT. RECOMMEND, THEREFORE, THAT CONSIDERATION BE GIVEN TO PERMITTING PROVISION NO. 8 TO REMAIN IN ITS PRESENT FORM, THE NO-SET-OFF PROVISION TO BE MADE TO APPLY BY INSERTION OF A PROVISION IN EACH CONTRACT OF AN AUTHORIZED AGENCY WHERE IT HAS BEEN DETERMINED THAT THE GOVERNMENT'S BEST INTERESTS WILL BE SERVED THEREBY.

WE RECOMMEND ALSO THAT CONSIDERATION BE GIVEN TO MAKING THOSE PORTIONS OF PROVISION NO. 16 NOT DEPENDENT FOR VALIDITY UPON APPROPRIATE LEGISLATION APPLICABLE TO CONTRACTS WITH ANY AGENCY OF THE GOVERNMENT. IT IS RECOGNIZED THAT ADOPTION OF THE RECOMMENDATION WOULD INDICATE THAT SIMILAR CHANGES BE MADE IN OTHER STANDARD PROCUREMENT CONTRACT FORMS.

FINALLY, IN THE CAPTION FOR SUBPARAGRAPH 1-16.202-2, WE SUGGEST THAT THE WORD "SUPPLY" BE INSERTED AFTER "NEGOTIATED" TO MAKE THE CAPTION CONSISTENT WITH THAT USED IN SUBPARAGRAPH 1-16.202-3 IN MAKING REFERENCE TO NEGOTIATED SUPPLY CONTRACTS.

THE FOREGOING SHOULD NOT, OF COURSE, BE REGARDED AS DETERMINATIVE OF OUR CONCLUSIONS WITH RESPECT TO A SPECIFIC MATTER BEFORE US FOR CONSIDERATION.