B-154962, MAY 11, 1965

B-154962: May 11, 1965

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TO THE HONORABLE SECRETARY OF THE AIR FORCE: REFERENCE IS MADE TO A LETTER OF JUNE 16. REQUESTING PAYMENT FOR SUPPLIES WHICH ARE BEING HELD FOR DELIVERY UNDER CONTRACT NO. WHICH WERE NOT ORDERED BY THE GOVERNMENT. WAS INTENDED TO COVER THE PERIOD FROM JUNE 16. A QUANTITY WAS SHOWN IN PARENTHESIS AFTER EACH ITEM. PART II OF THE CONTRACT PROVIDES THAT "THE RESULTING CALL CONTRACT WILL BE UTILIZED BY THE FOLLOWING U.S. SUCH SUPPLIES OR SERVICES WILL BE FURNISHED AT THE PRICES SET FORTH IN THE SCHEDULE.'. ORDERS WERE PLACED FOR A TOTAL DOLLAR VALUE OF $11. THE SUBJECT OF WHICH WAS "SUPPLIES AND SERVICES FOR USE OUTSIDE THE UNITED STATES.'. PROCUREMENTS OF SUPPLIES AND SERVICES USING DEPARTMENT OF DEFENSE APPROPRIATED FUNDS THAT WILL RESULT IN DOLLAR EXPENDITURES OUTSIDE THE UNITED STATES.

B-154962, MAY 11, 1965

TO THE HONORABLE SECRETARY OF THE AIR FORCE:

REFERENCE IS MADE TO A LETTER OF JUNE 16, 1964, FROM THE AIR FORCE ACCOUNTING AND FINANCE CENTER, FORWARDING THE CLAIM OF LINCOLN FRASER (LONDON), LTD., REQUESTING PAYMENT FOR SUPPLIES WHICH ARE BEING HELD FOR DELIVERY UNDER CONTRACT NO. AF 61/775/-1310, BUT WHICH WERE NOT ORDERED BY THE GOVERNMENT.

THE ABOVE CONTRACT, WHICH ENUMERATED NUMEROUS ITEMS OF STATIONERY AND OFFICE SUPPLIES, WAS INTENDED TO COVER THE PERIOD FROM JUNE 16, 1962, TO JUNE 15, 1963, BUT DID NOT CALL FOR DEFINITE QUANTITIES OF THE VARIOUS ITEMS. A QUANTITY WAS SHOWN IN PARENTHESIS AFTER EACH ITEM, WHICH REPRESENTED THE ESTIMATED ANNUAL CONSUMPTION OF THE ORDERING ACTIVITIES BASED ON PRIOR YEARS' EXPERIENCE. THE ESTIMATED QUANTITIES AT THE CONTRACT PRICES WOULD AGGREGATE ABOUT $62,000. PART II OF THE CONTRACT PROVIDES THAT "THE RESULTING CALL CONTRACT WILL BE UTILIZED BY THE FOLLOWING U.S. AIR FORCE ORDERING ACTIVITIES" AND THEN LISTS THE NAMES AND LOCATIONS OF ELEVEN "AUTHORIZED ORDERING ACTIVITIES.' CLAUSE 31, ENTITLED "ORDERS," READS IN PART AS FOLLOWS:

"A. THE CONTRACTOR AGREES TO FURNISH TO THE UNITED STATES GOVERNMENT, WHEN ORDERED, THE SUPPLIES OR SERVICES SET FORTH IN THE SCHEDULE UP TO AND INCLUDING THE QUANTITY DESIGNATED IN THE SCHEDULE AS THE "MAXIMUM QUANTITY.' THE UNITED STATES GOVERNMENT AGREES TO ORDER THE QUANTITY OF SUCH SUPPLIES AND SERVICES DESIGNATED IN THE SCHEDULE AS THE "MINIMUM QUANTITY.' SUCH SUPPLIES OR SERVICES WILL BE FURNISHED AT THE PRICES SET FORTH IN THE SCHEDULE.'

THERE APPEARS IN THE CONTRACT NO DESIGNATION OF ANY "MAXIMUM QUANTITY," AND THE ONLY OTHER REFERENCE TO A "MINIMUM QUANTITY" APPEARS IN PART X, HEADED "FIRST ORDER FOR MINIMUM QUANTITIES," WHICH CALLED FOR DELIVERY OF SPECIFIED ARTICLES AT A TOTAL PRICE OF APPROXIMATELY $85. LATER, ORDERS WERE PLACED FOR A TOTAL DOLLAR VALUE OF $11,550.25, OR ABOUT 18 1/2 PERCENT OF THE ESTIMATED REQUIREMENT. HOWEVER, ON JULY 16, 1962, THE SECRETARY OF DEFENSE ISSUED A MEMORANDUM, TO BE EFFECTIVE JULY 27, 1962, THE SUBJECT OF WHICH WAS "SUPPLIES AND SERVICES FOR USE OUTSIDE THE UNITED STATES.' THIS MEMORANDUM PROVIDES THAT "UNTIL FURTHER NOTICE, PROCUREMENTS OF SUPPLIES AND SERVICES USING DEPARTMENT OF DEFENSE APPROPRIATED FUNDS THAT WILL RESULT IN DOLLAR EXPENDITURES OUTSIDE THE UNITED STATES, ITS POSSESSIONS, AND PUERTO RICO, SHALL BE HELD TO AN ABSOLUTE MINIMUM" AND MAY BE MADE ONLY IN CERTAIN ENUMERATED TYPES OF CASES, NONE OF WHICH ARE INVOLVED HERE. IT IS REPORTED THAT, AFTER THE EFFECTIVE DATE OF THE MEMORANDUM SUPPLY OFFICERS ORDERED THE MAJORITY OF THEIR STATIONERY REQUIREMENTS DIRECTLY FROM THE GENERAL SERVICES ADMINISTRATION INSTEAD OF UNDER THE ABOVE CONTRACT. IT FURTHER APPEARS THAT THE CONTRACTOR WAS ADVISED OF THE DIRECTIVE IN JULY 1962, AT WHICH TIME HE REPORTED THAT HE HAD ON HAND A NUMBER OF ITEMS WHICH WERE MANUFACTURED SPECIALLY FOR THE AIR FORCE AND COULD NOT BE DISPOSED OF COMMERCIALLY. WHILE EVERY EFFORT HAS BEEN MADE TO ASSIST THE CONTRACTOR IN DISPOSING OF STOCKS ON HAND, IT IS REPORTED THAT THE CLAIMANT STILL HAS ON HAND ITEMS OF THE TOTAL VALUE OF SOME 1185 POUNDS STERLING WHICH ARE SALEABLE ONLY TO THE AIR FORCE. ALTHOUGH THE AIR FORCE DOES NOT CONSIDER THAT THERE IS ANY LEGAL OBLIGATION TO MAKE ADDITIONAL PAYMENT UNDER THIS CONTRACT, THE CLAIM IS APPROVED FOR PAYMENT ON QUANTUM MERUIT BASIS IN THE AMOUNT OF 1,057.11.5 POUNDS STERLING, LESS ANY DEDUCTIONS FOR APPROVED DELIVERIES OF MATERIALS AFTER APRIL 2, 1964.

IT IS THE POSITION OF THE AIR FORCE THAT THE CONTRACT WAS AN "INDEFINITE QUANTITIES" CONTRACT UNDER PARAGRAPH 3-409/C) OF THE ARMED SERVICES PROCUREMENT REGULATION, IN EFFECT WHEN THE CONTRACT WAS EXECUTED, AND THAT THE GOVERNMENT WAS NOT THEREBY OBLIGATED TO ORDER ANYTHING BEYOND THE ORIGINAL MINIMUM ORDER INCLUDED AS PART X OF THE CONTRACT. IN THE LIGHT OF THE FACT THAT THE CONTRACT PURPORTED TO OBLIGATE THE CONTRACT TO DELIVER WITHIN 30 DAYS ANY QUANTITIES (AT LEAST UP TO THE ESTIMATES) ORDERED DURING A 12-MONTH PERIOD, AND THAT PART II OF THE CONTRACT STATED THAT IT "WILL" BE USED BY THE NAMED ACTIVITIES, AND IN THE ABSENCE OF LANGUAGE DEFINITELY IDENTIFYING THE CONTRACT AS "INDEFINITE QUANTITY," WE BELIEVE THAT THE CONTRACTOR WAS JUSTIFIED IN CONSIDERING IT AS A "REQUIREMENTS CONTRACT," PARTICULARLY IN VIEW OF THE FACT THAT SIMILAR CONTRACTS FOR THE PREVIOUS FOUR YEARS HAD APPARENTLY BEEN CARRIED OUT AS SUCH. SEE GOLDWASSER V. UNITED STATES, 325 F.2D 722. WHETHER OR NOT THE MEMORANDUM OF JULY 16, 1962, WAS INTENDED TO PRECLUDE FURTHER USE OF EXISTING AGREEMENTS, THE ORDERING FROM OTHER SOURCES OF SUPPLIES COVERED BY THIS CONTRACT AMOUNTED EITHER TO A BREACH, OR, IN VIEW OF THE ACTUAL DISCUSSIONS BY THE CONTRACTING OFFICER WITH THE CONTRACTOR, A TERMINATION FOR THE CONVENIENCE OF THE GOVERNMENT, WHICH WAS SPECIFICALLY PROVIDED FOR BY THE CONTRACT TERMS.

UNDER THE CIRCUMSTANCES, WE WILL NOT OBJECT TO SETTLEMENT OF THE CONTRACTOR'S CLAIM BY THE CONTRACTING OFFICER AS ONE FOR TERMINATION FOR CONVENIENCE, THE CONTRACTOR'S INVENTORY OF COMPLETED ARTICLES NOT SALEABLE COMMERCIALLY TO BE TAKEN OVER BY THE GOVERNMENT AND PAID FOR AT THE CONTRACT PRICES.

THE FILE SUBMITTED WITH THE LETTER OF JUNE 16 FROM THE ACCOUNTING AND FINANCE CENTER IS ENCLOSED, AND A COPY OF THIS LETTER SHOULD BE ATTACHED TO THE VOUCHER UPON WHICH PAYMENT IS MADE.