B-144907, MAR. 17, 1961

B-144907: Mar 17, 1961

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THAT IS. WHETHER THE CONTRACTOR IS ENTITLED TO ESCALATION ON ANY AMOUNTS EARNED AFTER THE DATE SHIPMENTS WERE REQUIRED UNDER THE CONTRACT. THESE TWO QUESTIONS WILL BE CONSIDERED IN INVERSE ORDER. THE NOTICE OF AWARD WAS RECEIVED BY THE CONTRACTOR ON OCTOBER 10. SHIPMENTS UNDER THE TWO SCHEDULES WERE MADE BEYOND THE DATES FIXED BY THE CONTRACT. THE GENERATOR UNDER SCHEDULE NO. 1 WAS SHIPPED ON NOVEMBER 27. THE FIRST UNIT UNDER SCHEDULE NO. 2 WAS SHIPPED ON FEBRUARY 18. OR 76 CALENDAR DAYS LATE AND THE SECOND UNIT WAS SHIPPED ON MARCH 24. INFORMED THE COMMISSIONER THAT: "NO EXCUSABLE DELAYS HAVE BEEN ALLEGED BY THE CONTRACTOR.'. THAT IS. WHETHER THE CONTRACTOR IS ENTITLED TO ESCALATION ON ANY CONTRACT EARNINGS MATURING AFTER THE DATE OF REQUIRED SHIPMENTS UNDER THE CONTRACT.

B-144907, MAR. 17, 1961

TO THE SECRETARY OF THE INTERIOR:

BY LETTER DATED JANUARY 24, 1961, WITH ENCLOSURES, THE ADMINISTRATIVE ASSISTANT SECRETARY, REQUESTED OUR DECISION ON A CLAIM FOR CONTRACT PRICE ESCALATION BY THE ELECTRIC MACHINERY MANUFACTURING COMPANY UNDER BUREAU OF RECLAMATION CONTRACT NO. 14-06-D-2267 DATED OCTOBER 10, 1956, FOR THE FURNISHING OF THREE HYDRAULIC DRIVEN ELECTRIC GENERATORS FOR THE WANSHIP AND GATEWAY POWERPLANTS ON THE WEBER BASIN PROJECT, UTAH.

THE CLAIM RAISES TWO QUESTIONS FOR CONSIDERATION, THAT IS, THE PROPER INDEX TO BE APPLIED UNDER THE "BASIC MATERIALS INDEX" AND "MATERIALS ADJUSTMENT INDEX" OF PARAGRAPH B-10 (B) OF THE CONTRACT IN COMPUTING THE AMOUNT OF ESCALATION APPLICABLE TO MATERIAL COSTS INCURRED BY THE CONTRACTOR IN THE MANUFACTURE OF THE GENERATORS, AND WHETHER THE CONTRACTOR IS ENTITLED TO ESCALATION ON ANY AMOUNTS EARNED AFTER THE DATE SHIPMENTS WERE REQUIRED UNDER THE CONTRACT. THESE TWO QUESTIONS WILL BE CONSIDERED IN INVERSE ORDER.

THE CONTRACT CONTAINED TWO SCHEDULES: SCHEDULE NO. 1 COVERED THE GENERATOR AND SPARE PARTS FOR THE WANSHIP POWERPLANT AND PROVIDED FOR COMPLETE SHIPMENT WITHIN 360 CALENDAR DAYS AFTER DATE OF RECEIPT OF NOTICE OF AWARD; AND SCHEDULE NO. 2 COVERED TWO GENERATORS FOR THE GATEWAY POWERPLANT AND PROVIDED FOR COMPLETE SHIPMENT OF THE FIRST AND SECOND GENERATORS WITHIN 420 AND 480 CALENDAR DAYS, RESPECTIVELY, AFTER DATE OF RECEIPT OF NOTICE OF AWARD. THE NOTICE OF AWARD WAS RECEIVED BY THE CONTRACTOR ON OCTOBER 10, 1956, THEREBY FIXING THE DATE OF SHIPMENT OF THE GENERATOR UNDER SCHEDULE NO. 1 ON OR BEFORE OCTOBER 5, 1957, AND DECEMBER 4, 1957, AS THE DATE OF SHIPMENT FOR THE FIRST OF THE TWO GENERATORS UNDER SCHEDULE NO. 2 AND FEBRUARY 2, 1958, AS THE DATE OF SHIPMENT OF THE SECOND GENERATOR.

HOWEVER, SHIPMENTS UNDER THE TWO SCHEDULES WERE MADE BEYOND THE DATES FIXED BY THE CONTRACT. THE GENERATOR UNDER SCHEDULE NO. 1 WAS SHIPPED ON NOVEMBER 27, 1957, OR 53 CALENDAR DAYS LATE. THE FIRST UNIT UNDER SCHEDULE NO. 2 WAS SHIPPED ON FEBRUARY 18, 1958, OR 76 CALENDAR DAYS LATE AND THE SECOND UNIT WAS SHIPPED ON MARCH 24, 1958, OR 50 CALENDAR DAYS LATE. IN THAT CONNECTION, THE ACTING ASSISTANT COMMISSIONER AND CHIEF ENGINEER, BUREAU OF RECLAMATION (CONTRACTING OFFICER), BY MEMORANDUM DATED DECEMBER 20, 1960, INFORMED THE COMMISSIONER THAT: "NO EXCUSABLE DELAYS HAVE BEEN ALLEGED BY THE CONTRACTOR.'

AS TO THE BASIC QUESTION INVOLVED, THAT IS, WHETHER THE CONTRACTOR IS ENTITLED TO ESCALATION ON ANY CONTRACT EARNINGS MATURING AFTER THE DATE OF REQUIRED SHIPMENTS UNDER THE CONTRACT, THE ACTING ASSISTANT COMMISSIONER IS OF THE VIEW THAT THE DECISIONS OF OUR OFFICE RELATING TO THIS QUESTION ,LEAVE US IN DOUBT," CITING 38 COMP. GEN. 826; 34 ID. 565; AND B-95061 DATED JUNE 22, 1950.

PARAGRAPH B-9 OF THE SPECIAL REQUIREMENTS OF THE CONTRACT ADVISED THE CONTRACTOR THAT TIME OF DELIVERY WAS URGENT AND THAT ACTUAL DAMAGES WOULD ACCRUE FOR FAILURE TO DELIVER WITHIN THE TIME STATED IN THE SCHEDULES.

THE "ADJUSTMENT FOR CHANGES IN COST" PROVISION OF PARAGRAPH B-10 OF THE SPECIAL REQUIREMENTS OF THE CONTRACT CONTAINS NO LANGUAGE WHICH WOULD EITHER PRECLUDE OR ALLOW ESCALATION FOR PERIODS OF DELAYED DELIVERY. CF. 36 COMP. GEN. 520.

IN B-95061; JUNE 22, 1950, AND 34 COMP. GEN. 565, WE HELD THAT PRICE ESCALATION WAS NOT ALLOWABLE FOR PERIODS OF UNEXCUSABLE DELAY. THE RATIONALE OF SUCH HOLDINGS WAS STATED IN 34 COMP. GEN. 565, 567:

"THE GENERAL ACCOUNTING OFFICE HAS CONSISTENTLY REFUSED TO ALLOW PRICE INCREASES IN CASES SUCH AS THIS EXCEPT WHERE THE DELAY WAS CAUSED BY THE GOVERNMENT OR OTHERWISE WAS EXCUSABLE UNDER THE TERMS OF THE CONTRACT. THE BASIS FOR OUR POSITION IN THIS REGARD IS THAT WE PERCEIVE NO VALID REASON, IN LAW OR EQUITY, FOR REQUIRING THE GOVERNMENT TO ASSUME THE BURDEN OF PRICE INCREASES OCCURRING AFTER THE FINAL DATE DELIVERY WOULD HAVE BEEN MADE BUT FOR THE CONTRACTOR'S OWN FAULT OR NEGLIGENCE. REQUIRE THE GOVERNMENT TO PAY SUCH PRICE INCREASES WOULD PERMIT THE CONTRACTOR TO BENEFIT FROM HIS OWN DELINQUENCY AND WOULD PENALIZE THE GOVERNMENT FOR MINIMIZING THE CONTRACTOR'S LOSS WHICH WOULD HAVE RESULTED HAD THE CONTRACT BEEN TERMINATED BECAUSE OF THE CONTRACTOR'S DEFAULT.'

WHAT WAS SAID THERE IS EQUALLY APPLICABLE TO THE INSTANT CASE. CONSEQUENTLY, SINCE NO EXTENSION OF TIME HAS BEEN GRANTED FOR EXCUSABLE CAUSES AND SINCE IT APPEARS THAT THE CONTRACTOR HAS BEEN PAID ESCALATION TO AND INCLUDING THE CONTRACT DUE DATE IT IS OUR VIEW THAT NO FURTHER ESCALATION PAYMENT IS DUE.

CONCERNING THE FIRST QUESTION, IT APPEARS THAT THE CONTRACTOR HAS COMPUTED ITS CLAIMED ESCALATION FOR MATERIAL COST ADJUSTMENT UNDER PARAGRAPH B-10 OF THE CONTRACT ON THE WHOLESALE PRICE INDEXES FOR "GENERATOR, HYDRAULIC TURBINE DRIVEN" RATHER THAN ON THE BASIS OF THE SPECIAL INDEXES PUBLISHED BY THE BUREAU OF LABOR STATISTICS AND IDENTIFIED IN PARAGRAPH B-10 (B) FOR APPLICATION AS BASIC MATERIAL INDEXES TO "GENERATORS, HYDRAULIC TURBINE DRIVEN.' IT IS UNDERSTOOD THAT THESE SPECIAL INDEXES ARE PUBLISHED MONTHLY BY THE BUREAU OF LABOR STATISTICS FOR THE SPECIFIC PURPOSE OF COMPUTING PRICE ADJUSTMENT ON CONTRACTS BETWEEN CONTRACTORS SUPPLYING ELECTRICAL EQUIPMENT OF THE TYPE HERE INVOLVED AND THE GOVERNMENT. THE CONTRACTOR HAS CONTENDED THAT IT HAD NO NOTICE OF A SPECIAL MATERIALS INDEX FOR "GENERATORS, HYDRAULIC TURBINE DRIVEN" AND, THEREFORE, IS ENTITLED TO RELY UPON THE "WHOLESALE PRICES AND PRICE INDEXES" PUBLISHED MONTHLY BY THE DEPARTMENT OF LABOR.

AS INDICATED IN THE REPORT ACCOMPANYING THE ASSISTANT SECRETARY'S LETTER, THE USE OF THE WHOLESALE PRICE INDEXES WOULD PERMIT THE CONTRACTOR TO RECEIVE DUAL ESCALATION ON LABOR SINCE SUCH INDEXES INCLUDE BOTH LABOR AND MATERIAL COSTS. IT IS OBVIOUS FROM A READING OF PARAGRAPH B-10 (B) THAT LABOR AND MATERIALS WERE TO BE ESCALATED SEPARATELY. THERE WOULD HAVE BEEN NO PURPOSE IN PROVIDING FOR A SEGREGATION OF LABOR AND MATERIALS IF THE WHOLESALE PRICE INDEXES WERE TO BE USED WHICH WERE INCLUSIVE OF LABOR AND MATERIAL COSTS. INASMUCH AS IT MAY NOT BE ASSUMED THAT THE GOVERNMENT INTENDED UNDER PARAGRAPH B 10 TO PERMIT DUAL ESCALATION ON LABOR, THE CONTRACTOR REASONABLY MAY BE SAID TO HAVE BEEN OBLIGATED TO USE THE SEPARATE SPECIAL INDEX FOR MATERIALS, AS INDICATED IN PARAGRAPH B-10 (B), WHICH WERE READILY AVAILABLE TO IT UPON REQUEST FROM THE GOVERNMENT.

ACCORDINGLY, IT IS OUR VIEW THAT NO PROPER BASIS EXISTS FOR COMPUTING MATERIAL COST ESCALATION BY THE USE OF THE INDEXES DERIVED FROM THE WHOLESALE PRICES AND PRICE INDEXES OF THE DEPARTMENT OF LABOR.