B-156980, FEB. 2, 1966

B-156980: Feb 2, 1966

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JOSEPHSON: REFERENCE IS MADE TO YOUR LETTERS OF SEPTEMBER 14 AND NOVEMBER 29. WHICH WAS MADE FOR THE PURPOSE OF DISCUSSING SCIENTIFIC'S PERFORMANCE UNDER CONTRACT DA-18- 064-404-CML-626 (FD1-404-5112). COVERING THE DELIVERY OF 31 STERILIZERS AND WHICH HEREINAFTER WILL BE REFERRED TO AS THE SUPPLY CONTRACT. IT IS REPORTED THAT DURING THIS VISIT SCIENTIFIC PERSONNEL LEARNED THAT THE GOVERNMENT WAS THE OWNER OF 16 STERILIZERS MANUFACTURED BY YOUR CLIENT WHICH WERE NOT BEING USED BECAUSE OF THE POOR PERFORMANCE OF SUCH EQUIPMENT. IT IS REPORTED THAT YOUR CLIENT ENTERED UPON ITS UNDERTAKINGS. FD2-3802 WAS CONSIDERED BY THE DIRECTOR OF PROCUREMENT AND PRODUCTION. DENIED ON THE BASES THAT THERE WAS NO MUTUAL MISTAKE MADE IN THE NEGOTIATION.

B-156980, FEB. 2, 1966

TO MR. SIDNEY B. JOSEPHSON:

REFERENCE IS MADE TO YOUR LETTERS OF SEPTEMBER 14 AND NOVEMBER 29, 1965, CONCERNING THE CLAIM OF YOUR CLIENT, SCIENTIFIC EQUIPMENT MANUFACTURING CORP., LARCHMONT, NEW YORK, FOR ADDITIONAL COMPENSATION IN THE AMOUNT OF $2,500 FOR SERVICES RENDERED IN CONNECTION WITH DEPARTMENT OF THE ARMY PURCHASE ORDER NO. FD2-3802 DATED APRIL 3, 1962, ISSUED BY THE UNITED STATES ARMY CHEMICAL CORPS BIOLOGICAL LABORATORIES, FORT DETRICK, MARYLAND, WHICH CLAIM HAS BEEN DENIED BY A DECISION OF THE ARMED SERVICES BOARD OF CONTRACT APPEALS, ASBCA NO. 10163, DATED APRIL 30, 1965.

UNDER PURCHASE ORDER NO. FD2-3802, HEREINAFTER REFERRED TO AS THE REPAIR CONTRACT, YOUR CLIENT OFFERED TO FURNISH FOR A LOT PRICE OF $1,600 THE FOLLOWING SERVICES:

"1. SERVICES FOR ENCLOSING CONTROL PANELS

WITH SPLASH PROOF STAINLESS STEEL BOX

WITH A GLASS FRONT FOR VIEWING DIALS

AND CONTROLS FOR 16 STERILIZERS. SERVICE

SHALL INCLUDE ALL MATERIAL AND INSTRUCTION

OF GOVERNMENT IN RESTRICTED BUILDINGS IN

THE INSTALLATION OF EQUIPMENT AND UPDATING

EQUIPMENT CONTROLS TO CURRENT STANDARDS. LOT PRICE 1,600.00

(WORK ORDER SECTION - PROPERTY OFFICER)"

IT APPEARS THAT THE ABOVE PROCUREMENT ORIGINATED FROM A RECOMMENDATION BY YOUR CLIENT'S PERSONNEL AFTER A VISIT TO FORT DETRICK, WHICH WAS MADE FOR THE PURPOSE OF DISCUSSING SCIENTIFIC'S PERFORMANCE UNDER CONTRACT DA-18- 064-404-CML-626 (FD1-404-5112), COVERING THE DELIVERY OF 31 STERILIZERS AND WHICH HEREINAFTER WILL BE REFERRED TO AS THE SUPPLY CONTRACT. IT IS REPORTED THAT DURING THIS VISIT SCIENTIFIC PERSONNEL LEARNED THAT THE GOVERNMENT WAS THE OWNER OF 16 STERILIZERS MANUFACTURED BY YOUR CLIENT WHICH WERE NOT BEING USED BECAUSE OF THE POOR PERFORMANCE OF SUCH EQUIPMENT; THAT SCIENTIFIC'S CHIEF ENGINEER ADVISED THAT HIS FIRM WOULD REHABILITATE, MODERNIZE AND BRING THESE UNITS UP TO CURRENT STANDARDS AT NO COST TO THE GOVERNMENT; AND THAT DURING OTHER MEETINGS SCIENTIFIC PERSONNEL AGAIN RECOMMENDED THAT THE GOVERNMENT ACCEPT ITS OFFER FOR THE REHABILITATION OF THE 16 UNITS AT NO COST TO THE GOVERNMENT. THE RECORD INDICATES THAT THESE CONFERENCES TOOK PLACE AT YOUR CLIENT'S PLANT DURING THE LATTER PART OF DECEMBER 1961.

ON APRIL 3, 1962, SCIENTIFIC ENTERED INTO AN AGREEMENT WITH THE UNITED STATES ARMY CHEMICAL CORPS BIOLOGICAL LABORATORIES PURSUANT TO WHICH IT AGREED TO REPAIR 16 STERILIZERS AND UPDATE THE EQUIPMENT CONTROLS TO THE THEN CURRENT STANDARDS FOR THE SUM OF $1,600. THE THEN CURRENT STANDARDS REQUIRED THE STERILIZERS TO SATISFACTORILY PERFORM UNDER AN AMOUNT OF FREON 12 GAS EQUAL TO AT LEAST 4 INCHES OF PRESSURE IN THE ENCLOSED SPACE OF THE UNITS.

IT IS REPORTED THAT YOUR CLIENT ENTERED UPON ITS UNDERTAKINGS, MAKING THE PARTS FOR BOTH THE SUPPLY AND SERVICE CONTRACTS; THAT IN JUNE 1962 IT DELIVERED ONE OF THE REMODELED UNITS FOR TEST; AND THAT SUCH UNIT PASSED THE TIGHTNESS TEST AS PRESCRIBED BY THE CURRENT SPECIFICATIONS BUT THAT GOVERNMENT REPRESENTATIVES OF THE LABORATORIES' SAFETY DIVISION APPLIED GREATER PRESSURE UNTIL, AT FOURTEEN OR SIXTEEN POUNDS, THE UNIT FAILED.

THE RECORD INDICATES THAT PRIOR TO THE ASSERTION OF THE INSTANT CLAIM WITH OUR OFFICE, YOUR CLIENT REQUESTED RELIEF UNDER THE PROVISIONS OF PUBLIC LAW 85-804, APPROVED AUGUST 28, 1958, 50 U.S.C. 1431-1435, AS IMPLEMENTED BY SECTION XVII OF THE ARMED SERVICES PROCUREMENT REGULATION, WHICH AUTHORIZES AMENDING OR MODIFYING CONTRACTS TO FACILITATE THE NATIONAL DEFENSE. THE RECORD FURTHER SHOWS THAT PURSUANT TO SUCH AUTHORITY THE CLAIM FOR ADJUSTMENT OF THE CONTRACT PRICE SPECIFIED IN PURCHASE ORDER NO. FD2-3802 WAS CONSIDERED BY THE DIRECTOR OF PROCUREMENT AND PRODUCTION, MUNITIONS COMMAND, AND DENIED ON THE BASES THAT THERE WAS NO MUTUAL MISTAKE MADE IN THE NEGOTIATION, ISSUANCE, AND ACCEPTANCE OF THE PURCHASE ORDER AND, ALSO, THAT THE NATIONAL DEFENSE WOULD NOT BE FACILITATED BY THE GRANTING OF THE RELIEF REQUESTED BY YOUR CLIENT.

IN YOUR LETTER OF SEPTEMBER 14, 1965, YOU ALLEGE THAT YOUR CLIENT WAS ADVISED BY PERSONNEL OF THE GOVERNMENT THAT THE STERILIZERS WOULD NOT BE USED UNLESS THEY WERE ABLE TO WITHSTAND A PRESSURE OF 20 POUNDS PER SQUARE INCH GAUGE EVEN THOUGH THE SPECIFICATIONS CALLED FOR LESS. YOU ALSO ALLEGE THAT YOUR CLIENT WAS ORALLY DIRECTED BY THE GOVERNMENT PERSONNEL TO MODIFY THE STERILIZERS TO MEET THE 20-POUND TEST AND ASSURED YOUR CLIENT THAT THE GOVERNMENT WOULD PAY ANY INCREASED COSTS INCURRED. IN A REPORT DATED NOVEMBER 1, 1965, A COPY OF WHICH WAS FORWARDED TO YOU WITH OUR LETTER OF NOVEMBER 25, 1965, THE CONTRACTING OFFICER CATEGORICALLY DENIES YOUR ALLEGATIONS.

IN COMMENTING ON THE CONTRACTING OFFICER'S REPORT OF NOVEMBER 1, 1965, YOU STATE IN YOUR LETTER OF NOVEMBER 29, 1965, THAT IT IS BEYOND BELIEF THAT THE CONTRACTING OFFICER WOULD HAVE ACCEPTED STERILIZERS WHICH DID NOT CONFORM TO THE NEW STANDARDS AS SET UP BY THE SAFETY DIVISION. IN OTHER WORDS YOU CONTEND THAT HAD THE STERILIZERS BEEN REPAIRED ONLY TO THE EXTENT OF CONFORMING TO THE CONTRACT SPECIFICATIONS THE GOVERNMENT WOULD HAVE INCURRED AN UNNECESSARY EXPENSE OF REPAIRING STERILIZERS WHICH COULD NOT BE USED. UPON DISPUTED QUESTIONS OF FACT BETWEEN A CLAIMANT AND THE ADMINISTRATIVE OFFICERS OF THE GOVERNMENT THE UNBROKEN RULE OF OUROFFICE IS TO ACCEPT THE ADMINISTRATIVE STATEMENT IN THE ABSENCE OF EVIDENCE TO OVERCOME THE PRESUMPTION OF THE CORRECTNESS THEREOF. NO SUCH EVIDENCE HAS BEEN FURNISHED IN THIS CASE.

APART FROM THE FOREGOING AN EXAMINATION OF THE RECORD INDICATES THAT AT NO TIME DID THE CONTRACTING OFFICER FOR THE "REPAIR CONTRACT" OR ANYONE AUTHORIZED TO ACT FOR HIM, ORDER YOUR CLIENT TO UPGRADE THE STERILIZERS TO 20 P.S.I.G. IT ALSO INDICATES THAT THE CONTRACTING OFFICER REPEATEDLY ADVISED YOUR CLIENT THAT IN NO EVENT WAS THE CONTRACT AMOUNT OF $1,600 TO BE EXCEEDED. IN CONNECTION WITH YOUR CLIENT'S CLAIM OF "ECONOMIC DURESS" BY PERSONNEL OF THE SAFETY DIVISION, UNITED STATES ARMY CHEMICAL CORPS BIOLOGICAL LABORATORIES, THE RECORD CONTAINS STATEMENTS EXECUTED BY MR. MANUEL S. BARBEITO AND MR. GAYLE T. LONG, IN WHICH EACH INDIVIDUAL CATEGORICALLY DENIES THAT PERSONNEL OF THE SAFETY DIVISION SAID THAT THE STERILIZERS BEING REPAIRED WOULD NOT BE USABLE UNLESS SUCH EQUIPMENT COULD WITHSTAND A TEST OF 20 P.S.I.G. EVEN ASSUMING AS TRUE THAT THE REFERRED TO PERSONNEL DID MAKE THE STATEMENT, AS ALLEGED, SUCH STATEMENT CANNOT BE ACCEPTED AS A LEGAL BASIS FOR PAYMENT OF YOUR CLIENT'S CLAIM FOR ADDITIONAL COMPENSATION UNDER THE PURCHASE ORDER IN QUESTION, SINCE SUCH PERSONNEL LACKED THE AUTHORITY TO CHANGE THE SPECIFICATIONS.

IT IS CLEAR FROM THE RECORD THAT AT THE TIME YOUR CLIENT UPGRADED THE OLD STERILIZERS IT WAS AWARE THAT IT WOULD NOT BE PAID IN EXCESS OF $1,600 FOR ALL OF THE WORK PERFORMED ON THAT EQUIPMENT. IT APPEARS THAT ANY WORK DONE IN EXCESS OF THAT CALLED FOR BY THE PURCHASE ORDER WAS PURELY A VOLUNTARY ACT ON ITS PART. WE BELIEVE THAT IT IS CONTRARY TO THE PUBLIC INTEREST AND TO ESTABLISHED PROCUREMENT PROCEDURES TO PERMIT A VOLUNTEER TO CREATE ON ITS BEHALF OBLIGATIONS AGAINST THE GOVERNMENT WHICH THE GOVERNMENT THROUGH ITS AUTHORIZED REPRESENTATIVE HAD AFFIRMATIVELY REJECTED.

IN THE CASE OF CHICAGO, MILWAUKEE AND ST. PAUL RAILWAY CO. V. UNITED STATES, 61 CT.CL. 169, 173, THE COURT HELD FOR THE GOVERNMENT IN A SUIT FOR REIMBURSEMENT OF MONEYS EXPENDED IN CONSTRUCTING A RAILROAD SPUR TO A MILITARY CAMP FOR THE REASONS THAT:

"PLAINTIFF IS SEEKING TO RECOVER ON THE BASIS OF A CONTRACT WITH THE GOVERNMENT FOR THE CONSTRUCTION OF THIS SPUR. IT HAD NO CONTRACT WITH THE GOVERNMENT. THERE IS NO PROOF OF A CONTRACT, EITHER EXPRESS OR IMPLIED, ON THE PART OF THE GOVERNMENT TO PAY FOR THE CONSTRUCTION OF THE SPUR. PLAINTIFF WAS NOT REQUESTED BY ANY REPRESENTATIVE OF THE GOVERNMENT HAVING AUTHORITY TO DO SO TO CONSTRUCT THE SPUR. IT TOOK THE INITIATIVE BY REQUESTING PERMISSION FOR ITS CONSTRUCTION. THE PERMISSION WAS GRANTED WITH THE UNDERSTANDING, AS STATED ABOVE, THAT THE CONSTRUCTING QUARTERMASTER COULD NOT REQUEST THE CONSTRUCTION AND HAD NO AUTHORITY TO DO SO, DID NOT PROMISE THAT THE GOVERNMENT WOULD PAY FOR IT AND HAD NO AUTHORITY TO MAKE SUCH A PROMISE, AND THAT THE PLAINTIFF COULD NOT EXPECT TO BE REIMBURSED BY THE GOVERNMENT FOR ITS EXPENDITURES IN CONSTRUCTING THE SPUR. NO CONTRACT HAS BEEN SHOWN WHICH BINDS THE GOVERNMENT TO PAY AS CLAIMED, AND THE PETITION SHOULD BE DISMISSED. IT IS SO ORDERED.'

SEE, ALSO, EASTERN EXTENSION, AUSTRALASIA AND CHINA TELEGRAPH COMPANY, LIMITED V. UNITED STATES, 251 U.S. 355; BALTIMORE AND OHIO RAILROAD COMPANY V. UNITED STATES, 261 U.S. 385; ID. 592. CF. 18 COMP. GEN. 568.

WE BELIEVE THAT THOSE PRINCIPLES PRECLUDE THE FAVORABLE CONSIDERATION OF YOUR CLIENT'S CLAIM.

IN YOUR LETTER OF SEPTEMBER 15, 1965, YOU CONTEND THAT YOUR CLIENT HAD A RIGHT TO RELY ON THE ORAL INSTRUCTIONS OF PERSONNEL FROM THE SAFETY DIVISION WITH RESPECT TO THE CHANGES DIRECTED, AS WELL AS THE ORAL INSTRUCTIONS BY THE CONTRACTING OFFICER WITH RESPECT TO FILING ITS CLAIM FOR THE ADDITIONAL WORK. YOU STATE THAT TITLE 41 OF THE CODE OF FEDERAL REGULATIONS, PARTICULARLY SECTION 1-17.204-4 ENTITLED "INFORMAL COMMITMENTS" AND SUBSECTION (B) (3) OF SECTION 8-7.652-4 ENTITLED ,PROTECTION OF PROPERTY, SAFETY REQUIREMENTS, ACCIDENT PREVENTION, ETC.' SUPPORT YOUR CONTENTION. IN OUR OPINION THESE ACTIONS ARE NOT FOR APPLICATION BY OUR OFFICE IN THE CONSIDERATION OF YOUR CLIENT'S CLAIM FOR THE FOLLOWING REASONS.

SECTION 1-17.204-4, TITLE 41 OF THE CODE OF FEDERAL REGULATIONS,PROVIDES AS FOLLOWS:

"INFORMAL COMMITMENTS MAY BE FORMALIZED UNDER CERTAIN CIRCUMSTANCES TO PERMIT PAYMENT TO PERSONS WHO HAVE TAKEN ACTION WITHOUT A FORMAL DEFENSE CONTRACT; FOR EXAMPLE, WHERE ANY PERSON, PURSUANT TO WRITTEN OR ORAL INSTRUCTIONS FROM AN OFFICIAL OF AN AGENCY AND RELYING IN GOOD FAITH UPON THE APPARENT AUTHORITY OF THE OFFICIAL TO ISSUE SUCH INSTRUCTIONS, HAS ARRANGED TO FURNISH OR HAS FURNISHED PROPERTY OR SERVICES TO THE AGENCY OR TO A DEFENSE CONTRACTOR OR SUBCONTRACTOR WITHOUT FORMAL CONTRACTUAL COVERAGE FOR SUCH PROPERTY OR SERVICES. FORMALIZATION OF COMMITMENTS UNDER SUCH CIRCUMSTANCES NORMALLY WILL FACILITATE THE NATIONAL DEFENSE BY ASSURING SUCH PERSONS THAT THEY WILL BE TREATED FAIRLY AND PAID EXPEDITIOUSLY.'

THE ABOVE SECTION APPEARS IN PART 1-17 ENTITLED "EXTRAORDINARY CONTRACTUAL ACTIONS TO FACILITATE THE NATIONAL DEFENSE" AND THE AUTHORITY TO TAKE THE TYPES OF CONTRACTUAL ACTIONS DESCRIBED IN THE REGULATION IS DERIVED FROM PUBLIC LAW 85-804, 50 U.S.C. 1431, AND RELATED EXECUTIVE ORDERS. OUR OFFICE IS NOT ONE OF THE GOVERNMENT AGENCIES AUTHORIZED BY THAT ACT AND RELATED EXECUTIVE ORDERS TO AMEND OR MODIFY CONTRACTS ON THE BASIS THAT SUCH ACTION WOULD FACILITATE THE NATIONAL DEFENSE. FURTHERMORE, THE RECORD INDICATES THAT YOUR CLIENT'S CLAIM HAS ALREADY BEEN CONSIDERED AND DENIED BY THE DEPARTMENT OF THE ARMY UNDER THE PROVISIONS OF THE CITED ACT. THE ACTIONS TAKEN BY THE DEPARTMENT UNDER THAT AUTHORITY ARE CONSIDERED BY US TO BE BINDING UPON OUR OFFICE.

IN REGARD TO SECTION 8-7.652-4, TITLE 41 OF CODE OF FEDERAL REGULATIONS, ENTITLED "PROTECTION OF PROPERTY, SAFETY REQUIREMENTS, ACCIDENT PREVENTION, ETC.' CITED BY YOU IN YOUR LETTER OF SEPTEMBER 14, 1965, IT IS NOT APPARENT HOW SUCH SECTION IS PERTINENT TO THE CONSIDERATION OF YOUR CLIENT'S CLAIM SINCE SUCH SECTION SETS FORTH THE CLAUSE WHICH SHOULD BE INSERTED BY PROCUREMENT OFFICIALS OF THE VETERANS ADMINISTRATION IN FIXED- PRICE CONSTRUCTION CONTRACTS.

FROM A CAREFUL CONSIDERATION OF ALL THE INFORMATION AND EVIDENCE OF RECORD IN THE LIGHT OF THE PRINCIPLES BELIEVED TO BE APPLICABLE, YOU ARE ADVISED THAT WE FIND NO REASONABLE BASIS ON WHICH CERTIFICATION OF ANY AMOUNT FOR PAYMENT UNDER THE CLAIM MAY BE JUSTIFIED.