B-156515, AUG. 10, 1965

B-156515: Aug 10, 1965

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HAASS AND SELANDER: REFERENCE IS MADE TO YOUR LETTERS OF MAY 25 AND JULY 21. WHICH WAS AWARDED A CONTRACT (V1006C-600) BY THE VETERANS ADMINISTRATION (VA) IN THE AMOUNT OF $9. WITHOUT REGARD TO DEDUCTIONS OR ADDITIONS FOR ALTERNATE ITEMS WAS $10. THE SELECTION OF ALTERNATES BY THE VA ACCOUNTS FOR THE REDUCTION IN VOLPE'S LOW BASE BID TO THE PRICE AT WHICH THE CONTRACT WAS AWARDED. THAT THE BIDDING WAS SUCH AS NOT TO CAUSE THE CONSTRUCTION CONTRACTING OFFICER TO SUSPECT A MISTAKE IN BID. THE BASIS OF THIS CLAIM IS OUTLINED IN A LETTER DATED APRIL 13. WE HAVE GIVEN FURTHER CONSIDERATION TO THE DISCREPANCIES IN THE QUANTITIES OF THE TY46 UNITS AND THE TY47 UNITS AS SHOWN ON THE ARCHITECT'S PLANS.

B-156515, AUG. 10, 1965

TO MCGRAW, ALLEN, HAASS AND SELANDER:

REFERENCE IS MADE TO YOUR LETTERS OF MAY 25 AND JULY 21, 1965, CONCERNING THE CLAIM OF YOUR CLIENT, KEWAUNEE MANUFACTURING COMPANY, AS A SUBCONTRACTOR TO THE JOHN A. VOLPE CONSTRUCTION CO., INC., WHICH WAS AWARDED A CONTRACT (V1006C-600) BY THE VETERANS ADMINISTRATION (VA) IN THE AMOUNT OF $9,961,000 ON DECEMBER 23, 1963, FOR THE CONSTRUCTION OF A 480 BED GENERAL HOSPITAL AT GAINESVILLE, FLORIDA.

THE RANGE OF THE NINE BIDS RECEIVED ON THE PROJECT, WITHOUT REGARD TO DEDUCTIONS OR ADDITIONS FOR ALTERNATE ITEMS WAS $10,049,000 TO $11,300,000. THE SELECTION OF ALTERNATES BY THE VA ACCOUNTS FOR THE REDUCTION IN VOLPE'S LOW BASE BID TO THE PRICE AT WHICH THE CONTRACT WAS AWARDED. THE VA REPORTS, AND WE AGREE, THAT THE BIDDING WAS SUCH AS NOT TO CAUSE THE CONSTRUCTION CONTRACTING OFFICER TO SUSPECT A MISTAKE IN BID, AND THUS REQUIRE HIM TO VERIFY THE BID SUBMITTED BY THE VOLPE COMPANY.

KEWAUNEE'S CLAIM FOR $109,450.08 RELATES TO THE FURNISHING AND INSTALLATION OF METAL CASEWORK UNDER THE PRIME CONTRACT. THE BASIS OF THIS CLAIM IS OUTLINED IN A LETTER DATED APRIL 13, 1965, FROM KEWAUNEE TO VOLPE AS FOLLOWS:

"SINCE OUR LETTER OF MARCH 19TH, 1965, TO MR. H. J. PICKERSGILL, PROJECT MANAGER ON SUBJECT CONTRACT, WE HAVE GIVEN FURTHER CONSIDERATION TO THE DISCREPANCIES IN THE QUANTITIES OF THE TY46 UNITS AND THE TY47 UNITS AS SHOWN ON THE ARCHITECT'S PLANS. OUR CONTRACT WITH YOUR COMPANY IS FOR $159,387.00 WHICH INCLUDED FURNISHING AND INSTALLING THE METAL CASEWORK PER SECTION 26 PER PLANS AND SPECIFICATIONS. AS PREVIOUSLY STATED IN OUR LETTER OF FEBRUARY 16TH, 1965, THERE IS A DISCREPANCY OF $109,450.08 BETWEEN WHAT WE ESTIMATED AND THE ACTUAL CONTRACT AS NOW REQUIRED. AS YOU CAN IMAGINE, A DIFFERENCE OF 68 PERCENT IS MORE THAN WE CAN BE EXPECTED TO ABSORB.

"AT THE TIME OF ESTIMATING THIS CONTRACT, WE ONLY INCLUDED THOSE UNITS AS SHOWN ON THE PLANS. HOWEVER, BEFORE SUBMITTING OUR FINAL BID, AN ADDENDUM WAS ISSUED CLARIFYING THE NUMBER OF UNITS REQUIRED. HAD WE CONSIDERED THIS ADDENDUM FULLY, AS WE SHOULD HAVE DONE, THE UNIT COUNT WOULD HAVE CHANGED FROM 25 TY46 TO 357 TY46 UNITS AND 33 TY47 TO 485 TY47 UNITS. THIS ADDITIONAL REQUIREMENT IN THE NUMBER OF UNITS ACCOUNTS FOR THE $109,450.00 DISCREPANCY MENTIONED EARLIER.'

YOUR LETTER OF JULY 21, 1965, ALLEGES THAT UNDER SECTION 14 (PAGES G 14 AND 15) OF THE SPECIFICATIONS, THE VA WAS REQUIRED TO SECURE FROM THE GENERAL CONTRACTOR (VOLPE) THE "TRUE COSTS" OF EACH BRANCH AND SUB-BRANCH OF THE CONTRACT WORK, INCLUDING ITEM 26 RELATING TO "CASE WORK" WHICH WAS SUBCONTRACTED TO KEWAUNEE. YOU STATE THAT YOU ARE NOW CONVINCED THE VA DID NOT SECURE THE REQUIRED INFORMATION AND DOES NOT HAVE IT. YOU SAY THAT KEWAUNEE IS IN THE POSITION OF SUPPLYING THE WORK AT A LOSS OF $109,000 ON A BID OF $159,000 AS A CONSEQUENCE OF A MISTAKE WHICH IS EVIDENT AND UNCONTROVERTED, AND THAT THE BENEFICIARY OF THIS "INEQUITABLE WINDFALL" IS THE UNITED STATES GOVERNMENT OR THE GENERAL CONTRACTOR. YOU CONCLUDE THAT SINCE THE VA DID NOT FOLLOW ITS OWN PROCEDURES, IT IS NOT POSSIBLE TO DETERMINE WHAT THE GENERAL CONTRACTOR'S POSITION IS AND THE GOVERNMENT SHOULD ACCEPT THE BURDEN OF RECTIFICATION.

WE HAVE REVIEWED THE RECORD IN THIS CASE ALONG WITH THE CONTENTIONS RAISED IN YOUR LETTER AND FIND NO PRIVITY OF CONTRACT, NOR ANY BASIS FOR ATTRIBUTING SUCH PRIVITY, BETWEEN YOUR CLIENT AND THE GOVERNMENT. IT IS WELL SETTLED THAT CONTRACTS TO FURNISH SUPPLIES TO PRIME CONTRACTORS ENGAGED IN THE PERFORMANCE OF CONTRACTS WITH THE GOVERNMENT ORDINARILY DO NOT RESULT IN PRIVITY OF CONTRACT BETWEEN THE SUBCONTRACTORS AND THE UNITED STATES. JOSEPH PETRIN, ET AL. V. UNITED STATES, 90 CT.CL. 670; UNITED STATES V. DRISCOLL, 96 U.S. 421; AND MERRITT V. UNITED STATES, 267 U.S. 338. SINCE KEWAUNEE IS NOT A PARTY TO THE PRIME CONTRACT WE SEE NO BASIS UPON WHICH THE GOVERNMENT MAY CONSIDER OR PAY KEWAUNEE'S CLAIM. RATHER, IT WOULD APPEAR THAT THE GOVERNMENT'S SOLE OBLIGATION IS TO PAY THE PRIME CONTRACTOR THE AMOUNT SPECIFIED IN ITS CONTRACT WITH THE GOVERNMENT.

NOR DO WE SEE HOW THE FAILURE OF THE VA TO FOLLOW ITS OWN PROCEDURES, ASSUMING SUCH ALLEGATION TO BE TRUE, CAN OPERATE TO PLACE THE GOVERNMENT UNDER AN OBLIGATION TO ASSUME THE BURDEN OF KEWAUNEE'S MISTAKE IN ITS BID TO VOLPE. IN THAT CONNECTION WE HAVE EXAMINED THE PROVISIONS OF SECTION 14 (PAGES G-14 AND 15) OF THE SPECIFICATIONS AND FIND NOTHING THEREIN TO SUPPORT YOUR CONTENTION THAT SUCH PROVISIONS REQUIRED THE VA TO SECURE FROM VOLPE THE "TRUE COSTS" OF CONTRACT ITEM 26 "CASE-WORK.' SECTION 14 PROVIDES, AMONG OTHER THINGS, THAT THE CONTRACTOR MUST SUBMIT TO THE CONTRACTING OFFICER A SCHEDULE OF COSTS OF THE WORK BROKEN DOWN INTO BRANCHES AND SUB-BRANCHES AS ARE NECESSARY TO COVER ALL COMPONENT PARTS OF THE CONTRACT WORK. WE HAVE BEEN ADVISED INFORMALLY THAT THE VA DOES NOT INTERPRET SECTION 14 AS REQUIRING THE CONTRACTOR TO SUBMIT MINUTELY DETAILED COST BREAKDOWNS FOR ITEMS OF EQUIPMENT THAT ARE TO BE INSTALLED IN THE STRUCTURE, BUT ONLY BREAKDOWNS OF THE MORE SIGNIFICANT COMPONENTS OF THE WORK SUCH AS EXCAVATION AND CONCRETE WORK. IN OUR OPINION THIS INTERPRETATION IS PROPER. WE ARE ALSO INFORMED, AS SECTION 14 EXPRESSLY INDICATES, THAT THE PURPOSES OF REQUIRING THE FURNISHING OF THE COST SCHEDULE IS TO REVEAL TO THE GOVERNMENT THE TOTAL AMOUNT OF THE WORK TO BE PERFORMED BY THE PRIME CONTRACTOR WITH ITS OWN FORCES AND, AFTER ITS APPROVAL BY THE CONTRACTING OFFICER, FOR USE AS THE BASIS FOR ESTIMATING MONTHLY PAYMENTS FOR WORK COMPLETED. WE THEREFORE CANNOT CONCLUDE THAT THE VA FAILED TO FOLLOW ITS OWN PROCEDURES WITH RESPECT TO THIS MATTER.

IN VIEW OF THE FOREGOING WE MUST CONCLUDE THAT THE GOVERNMENT'S ONLY OBLIGATION IS TO EFFECT PAYMENT AS PROVIDED IN THE PRIME CONTRACT, AND THAT PAYMENT OF ADDITIONAL COMPENSATION WOULD THEREFORE APPEAR TO BE A MATTER FOR CONSIDERATION BY THE PRIME CONTRACTOR RATHER THAN BY THE GOVERNMENT. ACCORDINGLY, YOUR CLAIM MUST BE DENIED.