B-156665, MAY 14, 1965

B-156665: May 14, 1965

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JOSEPHSON: FURTHER REFERENCE IS MADE TO YOUR LETTER OF APRIL 12. IT WAS ADMINISTRATIVELY DETERMINED THAT THE UNITS DELIVERED UNDER THE CONTRACT DID NOT MEET THE CONTRACT SPECIFICATIONS. THE CONTRACTING OFFICER ADVISED YOUR CLIENT THAT HIS RIGHT TO PROCEED WAS TERMINATED AND HE WOULD BE CHARGED WITH ANY EXCESS COSTS ON REPROCUREMENT. ACCEPTABLE UNITS WERE PROCURED FROM ANOTHER SOURCE AT AN EXCESS COST OF $328.95. 304 WHICH WAS PAID TO THE REPLACEMENT CONTRACTOR. 975.05 WHICH WOULD HAVE BEEN PAYABLE TO YOUR CLIENT IF ITS EQUIPMENT HAD BEEN ACCEPTED. THE EXCESS COST ACCOUNT WAS NEVERTHELESS REPORTED TO OUR OFFICE AND THE AMOUNT OF $328.95 WAS COLLECTED BY SETOFF AGAINST CLAIMS OF YOUR CLIENT UNDER OTHER TRANSACTIONS WITH THE GOVERNMENT.

B-156665, MAY 14, 1965

TO MR. SIDNEY B. JOSEPHSON:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF APRIL 12, 1965, IN BEHALF OF THE SCIENTIFIC EQUIPMENT MANUFACTURING CORPORATION, LARCHMONT, NEW YORK, CONCERNING THE DISALLOWANCE BY SETTLEMENT DATED APRIL 6, 1965, OF THAT COMPANY'S CLAIM FOR $806.95 UNDER A CONTRACT WITH THE VETERANS ADMINISTRATION HOSPITAL, LINCOLN, NEBRASKA, AWARDED ON NOVEMBER 1, 1963, FOR THE PROCUREMENT OF THREE BEDPAN WASHER AND SANITIZER UNITS AT A TOTAL PRICE OF $1,995, SUBJECT TO AN ALLOWANCE OF A PROMPT PAYMENT DISCOUNT OF ONE PERCENT.

IT WAS ADMINISTRATIVELY DETERMINED THAT THE UNITS DELIVERED UNDER THE CONTRACT DID NOT MEET THE CONTRACT SPECIFICATIONS. BY LETTER OF MARCH 23, 1964, THE CONTRACTING OFFICER ADVISED YOUR CLIENT THAT HIS RIGHT TO PROCEED WAS TERMINATED AND HE WOULD BE CHARGED WITH ANY EXCESS COSTS ON REPROCUREMENT. AFTER RETURN OF THE EQUIPMENT, ACCEPTABLE UNITS WERE PROCURED FROM ANOTHER SOURCE AT AN EXCESS COST OF $328.95, REPRESENTING THE SUM OF $2,304 WHICH WAS PAID TO THE REPLACEMENT CONTRACTOR, LESS THE NET PRICE OF $1,975.05 WHICH WOULD HAVE BEEN PAYABLE TO YOUR CLIENT IF ITS EQUIPMENT HAD BEEN ACCEPTED. IN AGREEING TO THE RETURN OF THE EQUIPMENT, YOUR CLIENT INDICATED THAT CREDIT WOULD BE ALLOWED FOR THE SUM PREVIOUSLY BILLED TO THE GOVERNMENT BUT THAT IT WOULD RESIST ANY ATTEMPT ON THE PART OF THE GOVERNMENT TO COLLECT EH EXCESS COSTS INVOLVED IN A REPROCUREMENT. THE EXCESS COST ACCOUNT WAS NEVERTHELESS REPORTED TO OUR OFFICE AND THE AMOUNT OF $328.95 WAS COLLECTED BY SETOFF AGAINST CLAIMS OF YOUR CLIENT UNDER OTHER TRANSACTIONS WITH THE GOVERNMENT. AFTER THOSE SETOFFS WERE MADE THE CLAIM FOR $806.95 WAS PRESENTED FOR RECOVERY OF THE AMOUNT OF $328.95, PLUS $478 FOR AN ALLEGED LOSS OCCASIONED AS THE RESULT OF TERMINATION OF THE CONTRACT.

YOUR CLIENT OBJECTED TO THE ADMINISTRATIVE INTERPRETATION OF ONE SECTION OF THE CONTRACT SPECIFICATIONS WHICH CALLED FOR COMPLETE AUTOMATIC OPERATION WITH EMERGENCY MANUAL CONTROL. OBJECTION WAS ALSO MADE TO THE ADMINISTRATIVE DETERMINATION THAT THE EQUIPMENT FURNISHED DID NOT MEET THE MATERIALS AND WORKMANSHIP REQUIREMENTS OF "SPECIFICATION E. FINISH.' NEITHER PARTY REFERRED TO THE DISPUTES CLAUSE OF THE CONTRACT UNDER WHICH YOUR CLIENT MIGHT HAVE SUBMITTED AN APPEAL TO THE VETERANS ADMINISTRATION CONTRACT APPEALS BOARD. HOWEVER, WE DO NOT AGREE WITH YOUR CONTENTION THAT YOUR CLIENT DID NOT HAVE AN OPPORTUNITY TO DISPUTE THE DECISION OF THE CONTRACTING OFFICER INVOLVING THE QUESTION AS TO WHETHER YOUR CLIENT'S EQUIPMENT MET SPECIFICATIONS, OR HIS LATER DECISION OF APRIL 20, 1964, THAT PAYMENT FOR THE EXCESS COSTS OF THE REPROCUREMENT WOULD BE REQUIRED.

ORDINARILY, A GOVERNMENT CONTRACTOR CANNOT ESCAPE THE CONSEQUENCES OF HIS FAILURE TO MAKE A TIMELY APPEAL FROM THE FINAL DECISION OF THE CONTRACTING OFFICER, AS PRESCRIBED BY THE CONTRACT. OLSEN V. UNITED STATES, 122 CT.CL. 106. ALSO, WE HAVE CONSISTENTLY ADHERED TO THE PROPOSITION THAT WHETHER EQUIPMENT FURNISHED BY A CONTRACTOR MEETS SPECIFICATIONS IS ESSENTIALLY A MATTER FOR ADMINISTRATIVE DETERMINATION, AND THAT WE SHOULD ACCEPT SUCH DETERMINATIONS IN THE ABSENCE OF CLEAR AND CONVINCING EVIDENCE TO SHOW THAT THEY ARE ARBITRARY OR NOT CAPABLE OF OBJECTIVE SUPPORT. THIS CASE, IT APPEARS THAT THE CONTRACTING OFFICER WAS JUSTIFIED IN CONSIDERING THAT THE SPECIFICATIONS DID NOT PERMIT ACCEPTANCE OF UNITS WHICH COULD BE CONVERTED TO MANUAL OPERATION ONLY BY REMOVING THE SOLENOID VALVE AND INSTALLING A MANUAL CONTROL VALVE WHICH WAS FURNISHED AS A SEPARATE ITEM. ON THE SECOND POINT, IT IS APPARENT THAT ONLY A COMPLETE EXAMINATION OF THE REJECTED EQUIPMENT WOULD HAVE PROVIDED ANY POSSIBLE BASIS FOR TAKING EXCEPTION TO THE CONTRACTING OFFICER'S DETERMINATION THAT THE MATERIALS AND WORKMANSHIP IN "FINISHING" THE UNITS DID NOT MEET SPECIFICATION REQUIREMENTS. IT THEREFORE APPEARS THAT WE WOULD NOT BE WARRANTED IN AUTHORIZING PAYMENT OF ANY PART OF THE CLAIM FOR $806.95 AND, ACCORDINGLY, THE SETTLEMENT DATED APRIL 6, 1965, IS HEREBY SUSTAINED.

YOU ARE ADVISED THAT OUR SETTLEMENT ACTION IN THE MATTER IS NOT INTENDED TO FORECLOSE ANY APPEAL RIGHTS WHICH YOU MAY BELIEVE TO BE STILL AVAILABLE TO YOUR CLIENT UNDER THE DEFAULT AND DISPUTES CLAUSES OF THE CONTRACT. NOTE IN THIS CONNECTION THAT IN JUNE 1964, THE VETERANS ADMINISTRATION ISSUED A REGULATION WHICH REQUIRES A CONTRACTING OFFICER, WHEN RENDERING A DECISION UNDER THE DISPUTES CLAUSE, TO NOTIFY THE CONTRACTOR THAT IT IS HIS FINAL DECISION IN THE MATTER AND THAT THE CONTRACTOR MAY APPEAL THEREFROM WITHIN 30 DAYS TO THE VETERANS ADMINISTRATION CONTRACT APPEALS BOARD. WE ARE NOT AWARE OF ANY PRIOR REGULATION OF THE VETERANS ADMINISTRATION TO THAT EFFECT AND IT IS THEREFORE SUGGESTED THAT YOU CONTACT THE VETERANS ADMINISTRATION IN THE MATTER IF A FORMAL HEARING BEFORE THE BOARD SHOULD BE DESIRED.