B-154670, OCT. 30, 1964

B-154670, OCT. 30, 1964

TO THE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO A LETTER DATED SEPTEMBER 24, 1964, R1.1, FROM THE ASSISTANT CHIEF FOR PURCHASING, BUREAU OF SUPPLIES AND ACCOUNTS, FURNISHING A REPORT ON THE REQUEST MADE TO OUR OFFICE ON BEHALF OF THE WEST VIRGINIA ARMATURE COMPANY, BLUE FIELD, WEST VIRGINIA, THAT THE COMPANY BE RELEASED FROM ANY OBLIGATION UNDER NAVY CONTRACT NO. N156 43792, DATED SEPTEMBER 13, 1963, COVERING A PROPOSED PROCUREMENT OF 200 RAMP ASSEMBLIES AT DELIVERED PRICES TOTALING THE AMOUNT OF $28,371.90.

THE CONTRACT WAS AWARDED PURSUANT TO INVITATION FOR BIDS NO. 156 005-64, ISSUED ON JUNE 13, 1963, BY THE NAVAL AIR ENGINEERING CENTER, WHICH REQUIRED THE RAMP ASSEMBLIES TO BE MANUFACTURED IN ACCORDANCE WITH CERTAIN DRAWINGS AND SPECIFICATIONS, AND ADVISED BIDDERS THAT THE GOVERNMENT WOULD FURNISH SPECIAL TOOLING CONSISTING OF "ONE (1) SET HARDWOOD PATTERN FOR USE IN THE MANUFACTURE OF RAMP, NAEF PART NO. 606312-2, COMPONENT OF RAMP ASSEMBLY.'

THE ENTIRE PROCUREMENT HAD BEEN SET ASIDE FOR CONTRACT AWARD TO A SMALL BUSINESS CONCERN AND THE RECORD SHOWS THAT THE WEST VIRGINIA ARMATURE COMPANY HAD NO PAST RECORD OF PERFORMANCE ON GOVERNMENT CONTRACTS. VIEW THEREOF, AN APPARENTLY EXTENSIVE SURVEY OF THE FACILITIES OF THAT FIRM WAS CONDUCTED BY THE NAVY THROUGH THE OFFICE OF THE INSPECTOR OF NAVAL MATERIAL, PITTSBURGH, PENNSYLVANIA, IN ORDER TO ASSIST THE CONTRACTING OFFICER IN MAKINGA DETERMINATION AS TO WHETHER THE COMPANY QUALIFIED AS A RESPONSIBLE PROSPECTIVE CONTRACTOR FOR THE PRODUCTION OF THE PARTICULAR SUPPLIES. ON AUGUST 14, 1963, A REPORT OF THE PREAWARD SURVEY WAS SUBMITTED BY MR. T. G. DOYLE, INSPECTOR OF NAVAL MATERIAL, PITTSBURGH, PENNSYLVANIA, EXPRESSING THE OPINION THAT THE COMPANY WAS QUALIFIED TO PRODUCE THE RAMP ASSEMBLIES AND STATING SPECIFICALLY THAT: (A) THE COMPANY HAS NECESSARY FACILITIES AND EQUIPMENT TO SATISFACTORILY PERFORM ON THE PROPOSED CONTRACT; (B) THE COMPANY HAS PERSONNEL AND "KNOW- HOW" FOR SATISFACTORY PERFORMANCE; (C) THE COMPANY HAS A QUALITY CONTROL SYSTEM THAT COULD BE BROUGHT UP TO ACCEPTABLE STANDARDS; (D) THE COMPANY CAN DELIVER THE 200 RAMP ASSEMBLIES 150 DAYS AFTER RECEIPT OF GOVERNMENT SPECIAL TOOLING; (E) THE COMPANY CAN CONFORM WITH THE NONDISCRIMINATION CLAUSE OF THE CONTRACT; (F) THE COMPANY HAS QUALIFIED ENGINEERING PERSONNEL WITH SATISFACTORY BACKGROUND TO PRODUCE THE RAMP ASSEMBLIES; AND (G) THE COMPANY HAS COMMITMENTS FROM SUPPLIERS FOR MATERIAL AND PURCHASED PARTS.

IN OCTOBER 1963 THE WEST VIRGINIA ARMATURE COMPANY ADVISED THE CONTRACTING OFFICER THAT DIFFICULTIES IN CONTRACT PERFORMANCE WERE BEING EXPERIENCED, PARTICULARLY FOR THE REASON THAT THE COMPANY DID NOT HAVE MACHINE MOLDING EQUIPMENT TO USE WITH THE PATTERN FURNISHED BY THE GOVERNMENT, WHICH WAS A TWO-PIECE PATTERN. THE COMPANY ALLEGED THAT IT EXPECTED TO RECEIVE A NON-PIECE PATTERN WHEN IT SUBMITTED ITS BID AND THAT IT HAD BEEN UNSUCCESSFUL IN ATTEMPTS TO USE THE PATTERN WITH ITS EXISTING EQUIPMENT, TO OBTAIN ADDITIONAL MACHINERY WITHIN ITS NORMAL BUSINESS AREA WHICH WOULD BE SATISFACTORY FOR THE PRODUCTION OF THE RAMP ASSEMBLIES WITH THE USE OF THE GOVERNMENT'S PATTERN, AND TO NEGOTIATE A SATISFACTORY SUBCONTRACT FOR SUCH PRODUCTION.

THE CONTRACTING OFFICER ADVISED THE COMPANY OF THE NAMES OF FIVE OTHER BIDDERS AND SUGGESTED THAT THEY MIGHT BE AVAILABLE AS SUBCONTRACTORS. DECEMBER 18, 1963, THE CONTRACTING OFFICER WAS INFORMED THAT THE PRICES QUOTED BY THE POTENTIAL SUBCONTRACTORS WERE SIGNIFICANTLY IN EXCESS OF THE CONTRACT PRICE AND WERE NOT ACCEPTABLE. THE COMPANY ALSO INDICATED THAT NEITHER THE COMPANY NOR THE INSPECTORS WHO PERFORMED THE PREAWARD SURVEY OF ITS FACILITIES ANTICIPATED A NEED FOR ANY ADDITIONAL MACHINE MOLDING EQUIPMENT, AND REQUESTED THAT THE CONTRACT BE TERMINATED FOR THE CONVENIENCE OF THE GOVERNMENT.

THE COMPANY'S APPARENT INABILITY TO PERFORM THE CONTRACT WITH THE USE OF ITS EXISTING FACILITIES AND THE GOVERNMENT'S TWO-PIECE PATTERN WAS CONFIRMED IN A REPORT SUBMITTED BY THE INSPECTOR OF NAVAL MATERIAL, PITTSBURGH, PENNSYLVANIA, WHICH REPORT SUGGESTED THAT IN FUTURE PROCUREMENTS THE SOLICITATIONS SHOULD GIVE GREATER DETAILS CONCERNING GOVERNMENT-FURNISHED PATTERNS SO THAT BIDDERS WOULD READILY KNOW WHETHER THE CAN USE THE PATTERNS WITH THEIR EQUIPMENT.

THE CONTRACT OF SEPTEMBER 13, 1963, WAS TERMINATED FOR DEFAULT ON FEBRUARY 13, 1964. THE COMPANY FILED AN APPEAL FROM THE DEFAULT TERMINATION ACTION ON MARCH 11, 1964, AND THE APPEAL WAS FORWARDED TO THE ARMED SERVICES BOARD OF CONTRACT APPEALS FOR CONSIDERATION. A PREHEARING CONFERENCE WAS HELD BEFORE A MEMBER OF THE BOARD ON JUNE 25, 1964. THE BOARD MEMBER CONSIDERED THAT THE BOARD PROBABLY WOULD NOT FIND THAT THE COMPANY'S FAILURE TO PERFORM WAS DUE TO CAUSES OF TYPES ENUMERATED IN THE "DEFAULT" CLAUSE OF STANDARD FORM 32, SEPTEMBER 1961 EDITION, MADE A PART OF THE CONTRACT, AS PERMITTING A RELEASE OF A CONTRACTOR FROM LIABILITY FOR THE EXPRESS COST OF A REPLACEMENT CONTRACT. IN ACCORDANCE WITH THE BOARD MEMBER'S SUGGESTION, AN ARRANGEMENT WAS MADE WHEREBY THE APPEAL WAS WITHDRAWN WITHOUT PREJUDICE TO ITS REINSTATEMENT IN ORDER THAT THE COMPANY MIGHT REQUEST OUR OFFICE TO CONSIDER THE CASE BEFORE ANY DECISION WAS RENDERED BY THE BOARD OF SUCH APPEAL UNDER THE "DISPUTES" CLAUSE OF STANDARD FORM 32.

IT IS WELL ESTABLISHED THAT A CONTRACTOR'S ADMINISTRATIVE REMEDIES UNDER A DISPUTES CLAUSE OF A GOVERNMENT CONTRACT, DESIGNED FOR THE PURPOSE OF SETTLING DISPUTES CONCERNING QUESTIONS OF FACT ARISING UNDER SUCH A CONTRACT, MUST BE EXHAUSTED BEFORE THERE IS AVAILABLE AN APPEAL TO OUR OFFICE OR THE COURTS. ALSO, IT HAS BEEN HELD THAT THE QUESTION AS TO WHETHER A CONTRACTOR'S DEFAULT IS DUE TO CAUSES BEYOND HIS CONTROL AND WITHOUT HIS FAULT OR NEGLIGENCE IS ONE OF FACT TO BE DETERMINED ADMINISTRATIVELY IN ACCORDANCE WITH THE DISPUTES CLAUSE. SEE WHITLOCK CORPORATION V. UNITED STATES, 159 F.SUPP. 602.

HOWEVER, WHERE THERE IS A POSSIBILITY THAT A CONTRACT IS SUBJECT TO RESCISSION, THERE WOULD BE INVOLVED A SPECIFIC QUESTION OF LAW WHICH WE MAY PROPERLY CONSIDER BEFORE A DECISION HAS BEEN RENDERED BY AN ADMINISTRATIVE APPEAL BOARD UNDER THE DISPUTES CLAUSE OF THE PARTICULAR CONTRACT. SEE ATLANTIC CARRIERS V. UNITED STATES, 131 F.2D 1.

THE CONTRACTING OFFICER HAS EXPRESSED THE OPINION THAT THE ABSENCE OF A DETAILED DESCRIPTION OF THE PATTERN REFERRED TO IN INVITATION FOR BIDS NO. 156-005-64 DOES NOT AFFORD AN ADEQUATE BASIS FOR RELIEVING THE WEST VIRGININA ARMATURE COMPANY FROM OBLIGATIONS UNDER ITS CONTRACT.

THE DESCRIPTION OF "ONE (1) SET HARDWOOD PATTERN" WAS NEVERTHELESS SUSCEPTIBLE TO A MISUNDERSTANDING THAT THE PATTERN WOULD BE IN ONE PIECE. ALSO, WE AGREE WITH THE INSPECTOR OF NAVAL MATERIAL, PITTSBURGH, PENNSYLVANIA, THAT ADVERTISEMENTS FOR BIDS SHOULD PROVIDE GREATER DETAILS CONCERNING PATTERNS WHICH ARE TO BE FURNISHED TO SUCCESSFUL BIDDERS. OUR OPINION, SUCH PATTERNS ARE FOR ALL INTENTS AND PURPOSES TO BE REGARDED AS A PART OF THE ADVERTISED SPECIFICATIONS AND THEY MUST BE ADEQUATELY DESCRIBED TO MEET THE REQUIREMENT OF 10 U.S.C. 2305 (B) THAT "THE SPECIFICATION IN INVITATIONS FOR BIDS MUST CONTAIN THE NECESSARY LANGUAGE AND ATTACHMENTS, AND MUST BE SUFFICIENTLY DESCRIPTIVE IN LANGUAGE AND ATTACHMENTS, TO PERMIT FULL AND FREE COMPETITION.'

THERE IS ATTACHED TO THE CONTRACTING OFFICER'S REPORT AS EXHIBIT 12 A COPY OF THE BOARD MEMBER'S MEMORANDUM OF PREHEARING CONFERENCE IN CONNECTION WITH THE APPEAL WHICH WAS PENDING BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS. THE MEMORANDUM REFERRED TO THE CASE OF HELENE CURTIS INDUSTRIES, INC. V. UNITED STATES, COURT OF CLAIMS NO. 251-56, DECIDED FEBRUARY 6, 1963, AS HAVING INVOLVED A SITUATION WHERE, TO BE ANALOGOUS, THE ENTIRE FOUNDRY INDUSTRY WOULD HAVE BEEN MISLED BY THE GOVERNMENT'S METHOD OF ADVERTISING, WHEREAS THE RECORD OF THIS CASE SHOWS ONLY THAT THE APPELLANT AND CERTAIN FOUNDRIES WITHIN A 300-MILE RADIUS OF THE APPELLANT'S PLANT LACKED THE FACILITIES TO PROCEED WITH THE TYPE OF PATTERN FURNISHED BY THE GOVERNMENT. WE DOUBT, HOWEVER, THAT SUCH DISTINCTION WOULD SERVE AS A BASIS FOR MAINTAINING THAT THE GOVERNMENT IS NOT RESPONSIBLE FOR THE FACT THAT IT FAILED ADEQUATELY TO DESCRIBE THE PATTERN HERE INVOLVED.

IN THE CITED DECISION OF THE COURT OF CLAIMS THE PLAINTIFF WAS ALLOWED A PORTION OF ITS TOTAL CLAIM FOR INCREASED COSTS OF PERFORMING TWO GOVERNMENT CONTRACTS BASED UPON THE CONCLUSIONS: (1) THAT THE GOVERNMENT IS CLEARLY UNDER AN AFFIRMATIVE OBLIGATION AND CANNOT REMAIN SILENT WITH RESPECT TO INFORMATION WHICH IT HAS WHERE A CONTRACTOR CANNOT REASONABLY BE EXPECTED TO SEEK THE FACTS FOR HIMSELF; AND (2) THE SPECIFICATIONS FOR THE FIRST OF THE TWO CONTRACTS WITH THE PLAINTIFF WERE MISLEADING WITH RESPECT TO GRINDING. IN REGARD TO THE SECOND CONCLUSION, THE DECISION OF THE COURT OF CLAIMS STATES IN PART THAT:

"* * * SPECIFICATIONS SO SUSCEPTIBLE OF A MISLEADING READING (OR IMPLICATION) SUBJECT THE DEFENDANT TO ANSWER TO A CONTRACTOR WHO HAS ACTUALLY BEEN MISLED TO HIS INJURY. UNITED STATES V. SPEARIN, 248 U.S. 132, 137 (1918); RAILROAD WATERPROOFING CORP. V. UNITED STATES, 133 CT.CL. 911, 915, 137 F.SUPP. 713, 719 (1956); AROLE MIDWEST CORP. V. UNITED STATES, 125 CT.CL. 818, 113 F.SUPP. 278 (1953).'

WE ARE OF THE OPINION THAT THE SAME PRINCIPLES ARE APPLICABLE WITH RESPECT TO THE APPARENTLY MISLEADING INFORMATION FURNISHED BY THE GOVERNMENT IN THE INVITATION FOR BIDS HERE INVOLVED, CONSIDERING THAT THE DESCRIPTION OF THE GOVERNMENT'S PATTERN DID NOT PROVIDE SUFFICIENT DETAILS AND COULD WELL HAVE BEEN INTERPRETED AS RELATING TO A ONE PIECE PATTERN UNLESS OTHERWISE SPECIFIED. ACCORDINGLY, THERE APPEARS TO BE A SUBSTANTIAL BASIS FOR CONCLUDING THAT NO AFFIRMATIVE ACTION NEED BE TAKEN BY THE GOVERNMENT WITH A VIEW TOWARD COLLECTION FROM THE WEST VIRGINIA ARMATURE COMPANY OF ANY EXCESS COSTS OCCASIONED IN THE PROCUREMENT OF THE RAMP ASSEMBLIES FROM ANOTHER SOURCE. THE COMPANY MAY THEREFORE BE RELEASED FROM LIABILITY UNDER THE CONTRACT IF IT WILL AGREE TO A "NO COST" TERMINATION SETTLEMENT WHICH WOULD PRECLUDE THE POSSIBILITY OF SUIT AGAINST THE UNITED STATES IN THE MATTER. A COPY OF THIS DECISION IS BEING MAILED TO THE ATTORNEYS FOR THE WEST VIRGINIA ARMATURE COMPANY.