B-141517, DEC. 30, 1959

B-141517, DEC. 30, 1959

TO CONCO ENGINEERING WORKS, DIVISION OF H. D. CONKEY AND COMPANY:

REFERENCE IS MADE TO A LETTER DATED NOVEMBER 24, 1959, FROM YOUR ATTORNEY, MR. JAMES G. CULBERTSON, REQUESTING REVIEW OF SETTLEMENT DATED NOVEMBER 26, 1958, WHEREIN THERE WAS DISALLOWED THE AMOUNT OF $2,227.23 OF YOUR CLAIM FOR WORK PERFORMED UNDER CONTRACT NO. DA-11-009 QM-25269, DATED MARCH 16, 1956.

THE QUARTERMASTER PURCHASING DIVISION, CHICAGO QUARTERMASTER PURCHASING CENTER, ENTERED INTO THE ABOVE NEGOTIATED CONTRACT. ADMINISTRATION OF THE CONTRACT WAS THEREAFTER MADE THE RESPONSIBILITY OF THE QUARTERMASTER PURCHASING AGENCY, COLUMBUS GENERAL DEPOT, COLUMBUS, OHIO. THE CONTRACT IS A "LAY-AWAY" CONTRACT AND ARTICLE 1 THEREOF PROVIDES IN PERTINENT PART AS FOLLOWS:

"SCOPE OF CONTRACT.

"THE CONTRACTOR SHALL PERFORM THE FOLLOWING WORK AND SERVICES AND FURNISH ALL MATERIAL, LABOR, UTILITIES AND SUPERVISION NECESSARY FOR PERFORMANCE THEREOF:

"/A) UPON RECEIPT OF THE GOVERNMENT-OWNED TOOLING, LISTED IN EXHIBIT "A," ATTACHED HERETO AND MADE A PART HEREOF (THE SAME TO BE SHIPPED TO THE CONTRACTOR'S PLANT, MENDOTA, ILLINOIS, AT GOVERNMENT EXPENSE), THE CONTRACTOR SHALL UNLOAD AND OPEN ALL SHIPPING CONTAINERS AND INSPECT THE SAID GOVERNMENT-OWNED TOOLING; IN THE EVENT THERE IS NO DAMAGE TO THE SAME, THE CONTRACTOR WILL THEN APPLY A PRESERVATIVE THEREON, IN ACCORDANCE WITH GOOD COMMERCIAL PRACTICE AND STORE AS PROVIDED FOR HEREIN. IN THE EVENT DAMAGE TO ANY OF THE SAID GOVERNMENT-OWNED TOOLING IS DISCOVERED, THE CONTRACTOR WILL PROMPTLY NOTIFY THE CONTRACTING OFFICER AND REQUEST INSTRUCTIONS PERTAINING TO SUCH DAMAGED TOOLING. COMPLIANCE BY THE CONTRACTOR OF THE CONTRACTING OFFICER'S INSTRUCTIONS PERTAINING TO ANY DAMAGED TOOLING WILL BE AT THE GOVERNMENT'S EXPENSE.

"/B) THE CONTRACTOR-OWNED TOOLING AND EQUIPMENT LISTED IN EXHIBIT "B," ATTACHED HERETO AND MADE A PART HEREOF, SHALL BE PROCESSED AND PRESERVED IN ACCORDANCE WITH GOOD COMMERCIAL PRACTICE IN ORDER THAT THE SAME MAY BE IN GOOD OPERATING CONDITION.'

WITH REGARD TO PAYMENT FOR THE CONTRACT WORK, ARTICLE 4 PROVIDES IN PART AS FOLLOWS:

"PAYMENT

"/A) UPON COMPLETION OF THE WORK AND SERVICES PROVIDED IN ARTICLE 1A TO 1C INCLUSIVE, AND UPON INSPECTION AND ACCEPTANCE THEREOF BY THE CONTRACTING OFFICER OR HIS DULY AUTHORIZED REPRESENTATIVE, AND UPON THE CONTRACTOR FURNISHING SATISFACTORY EVIDENCE THAT IT HAS MADE PAYMENT OR INCURRED THE COSTS AS THE CASE MAY BE, THE GOVERNMENT SHALL REIMBURSE THE CONTRACTOR FOR THE ACTUAL COSTS THEREOF, AS APPROVED BY THE CONTRACTING OFFICER, BUT IN NO EVENT SHALL SUCH ACTUAL COSTS EXCEED $6,600.00. (THIS SUM DOES NOT INCLUDE ANY COST OF REPAIRS, IF REQUIRED, TO DAMAGED GOVERNMENT-OWNED TOOLING, AS SET FORTH IN ARTICLE 1 (A) ABOVE). * * *.'

YOU HAVE BEEN PAID FOR THE WORK OF PROCESSING AND PRESERVING CONTRACTOR- OWNED TOOLING AND EQUIPMENT FOR STORAGE AS WELL AS FOR THAT WORK IN CONNECTION WITH GOVERNMENT-OWNED TOOLING AND EQUIPMENT. ALTHOUGH THE RECORD DOES NOT DISCLOSE WHETHER ANY AMOUNTS WERE PAID TO YOU FOR REPAIRING GOVERNMENT-OWNED PROPERTY, THE AMOUNT OF $2,227.23 WAS DISALLOWED BECAUSE IT WAS CONSIDERED THAT THE CONTRACT DID NOT PROVIDE FOR REPAIRING YOUR OWN TOOLS AND EQUIPMENT PRIOR TO LAY-AWAY IN STORAGE.

THE CONTENTIONS IN YOUR LETTER OF NOVEMBER 24, 1959, WERE FIRST SET OUT IN YOUR LETTER OF MARCH 13, 1958, AND THEY WERE FULLY CONSIDERED BY THE ADMINISTRATIVE OFFICE IN THEIR REPORT ON YOUR CLAIM AND BY THE CLAIMS DIVISION OF OUR OFFICE WHEN YOUR CLAIM FOR EXPENSES INCURRED IN REPAIRING YOUR TOOLS AND EQUIPMENT WAS DISALLOWED.

THE LANGUAGE IN THE ABOVE-QUOTED PORTIONS OF THE CONTRACT LEAVES NO ROOM FOR DOUBT THAT IT WAS CONTEMPLATED THAT IT MIGHT BE NECESSARY TO REPAIR GOVERNMENT-OWNED EQUIPMENT SINCE IN ARTICLE 1 (A) REFERENCE WAS MADE TO POSSIBLE REPAIRS TO SUCH PROPERTY; HOWEVER, IN ARTICLE 1 (B) RELATING TO PROCESSING AND PRESERVING YOUR OWN PROPERTY, NO REFERENCE TO POSSIBLE REPAIRS WAS MADE. THE REASON FOR THIS FAILURE TO MAKE ANY PROVISION IN THE CONTRACT FOR REPAIRING YOUR TOOLS AND EQUIPMENT BECOMES CLEARER WHEN THE REPORTED FACTS ARE CONSIDERED.

IT IS REPORTED THAT THE LAST GOVERNMENT CONTRACT FOR MANUFACTURE OF GASOLINE CANS WITH YOUR FIRM WAS AWARDED IN APRIL 1952 AND WAS COMPLETED PRIOR TO COMMENCEMENT OF NEGOTIATIONS FOR THE LAY-AWAY CONTRACT HERE INVOLVED. CORRESPONDENCE WHICH DEVELOPED INTO NEGOTIATIONS EVENTUALLY CULMINATING IN THE INSTANT CONTRACT BEGAN IN 1953. BY LETTER DATED NOVEMBER 30, 1954, YOU FURNISHED AN ESTIMATE OF $6,660 FOR THE PREPARATION AND STORAGE OF ITEMS SHOWN IN SCHEDULES A AND B OF YOUR LETTER OF NOVEMBER 23, 1954. IN THE THIRD PARAGRAPH OF YOUR LETTER OF NOVEMBER 30 YOU STATED

"DURING OUR LAST PRODUCTION OF CANS WE PRODUCED A TOTAL OF IN EXCESS OF THREE MILLION 5-GALLON GASOLINE CANS. HOWEVER, THE CONDITION OF OUR TOOLS IS SUCH THAT THEY WOULD ALL BE SERVICEABLE UNTIL SUCH TIME AS THEY COULD BE RECONDITIONED OR REPLACED, IF NECESSARY, WHICH WE WOULD NOT EXPECT TO BE REQUIRED TO DO FOR MANY MONTHS AFTER STARTING BACK IN PRODUCTION.'

THE ADMINISTRATIVE OFFICE HAS REPORTED THAT IT HAS NO RECORD THAT YOUR EQUIPMENT FOR WHICH THE EXPENSES OF REPAIRS ARE CLAIMED WAS USED COMMERCIALLY AFTER THE BEGINNING OF THE INSTANT CONTRACT. IT IS REPORTED FURTHER THAT IT IS NOT KNOWN WHY IT WAS NECESSARY TO MAKE REPAIRS, SINCE YOU HAD STATED IN YOUR LETTER OF NOVEMBER 30, 1954, THAT YOUR TOOLS WERE ALL SERVICEABLE AND THEY DID NOT NEED TO BE RECONDITIONED OR REPLACED FOR MANY MONTHS AFTER STARTING BACK IN PRODUCTION. A GOVERNMENT AUDITOR, IN HIS MEMORANDUM OF JUNE 30, 1958, STATES THAT HE VISITED YOUR PLANT AT MENDOTA, ILLINOIS, ON OR ABOUT DECEMBER 18, 1956, AND REPORTS THAT DURING A CONVERSATION WITH YOUR CHIEF ENGINEER REGARDING YOUR EQUIPMENT THE LATTER STATED THAT IT WAS BETTER TO HAVE THE TOOLING AND EQUIPMENT STORED IN A WAREHOUSE REMOVED FROM YOUR PLANT BECAUSE IT WAS VERY DIFFICULT TO PREVENT EMPLOYEES FROM REMOVING PARTS OF THE EQUIPMENT TO REPAIR OTHER EQUIPMENT BEING USED IN THE PRODUCTION LINE. YOUR ENGINEER STATED FURTHER THAT IN FACT VARIOUS PARTS WERE REMOVED FROM SOME TOOLING AND EQUIPMENT WHICH WOULD NECESSITATE THE REPLACEMENT OF THESE PARTS.

THE REFERENCE IN ARTICLE 4 (A) (I) TO THE EFFECT THAT THE TERM "ACTUAL COSTS" MEANS THE NET INVOICE PRICE OF ALL DIRECT MATERIALS REQUIRED IN PERFORMANCE OF THE CONTRACT MUST BE CONSIDERED WITH THE REST OF THE CONTRACT PROVISIONS. NO PROVISION WAS MADE IN THE CONTRACT FOR THE REPAIR OF YOUR TOOLING AND EQUIPMENT SINCE IT APPEARS FROM THE ADMISSION IN YOUR LETTER OF NOVEMBER 30, 1954, THAT NO REPAIRS WOULD BE REQUIRED AND, PRESUMABLY, THE NEED FOR REPAIRS WAS NOT CAUSED BY WORK ON GOVERNMENT CONTRACTS.

IN VIEW OF THE FOREGOING, IT MUST BE CONCLUDED THERE IS NO LEGAL BASIS FOR THE ALLOWANCE OF YOUR CLAIM FOR EXPENSES INCURRED IN THE REPAIRS OF YOUR TOOLING AND EQUIPMENT. THE DISALLOWANCE OF NOVEMBER 26, 1958, IS SUSTAINED.