B-157041, JUL. 7, 1965

B-157041: Jul 7, 1965

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TO FORMEX CORPORATION: REFERENCE IS MADE TO YOUR LETTER OF JUNE 16. YOU STATE THAT A QUOTATION WAS PREPARED AND SUBMITTED BY FORMEX FOR THE FURNISHING OF FLOTURN COMPARTMENTS C AND D FOR THE LANCE MISSILE. YOU STATE THAT THE INTENT WAS TO BECOME QUALIFIED AS THE SOURCE FOR THE COMPONENTS AND TO BE IN A POSITION TO SECURE A LONG-TERM PRODUCTION CONTRACT. WELLER OF EMERSON WAS NOTIFIED AND ATTEMPTED TO SUPPLEMENT THE ORDERS. NO PRICE ADJUSTMENT WAS MADE AND IT IS ALLEGED THAT FORMEX EXPENDED ABOUT $60. IT IS ALSO ALLEGED THAT THE FINAL PART WAS SHIPPED ON JANUARY 30. THAT AT SUCH TIME EMERSON ADVISED YOUR COMPANY THAT THE PICATINNY ARSENAL WAS CHANGING THE MANUFACTURING PROCESS AND YOUR HELP WAS NO LONGER NEEDED.

B-157041, JUL. 7, 1965

TO FORMEX CORPORATION:

REFERENCE IS MADE TO YOUR LETTER OF JUNE 16, 1965, ALLEGING AN ERROR IN YOUR COMPUTATION OF THE PRICE OR PRICES OF CERTAIN EQUIPMENT PURCHASED FROM YOUR COMPANY BY EMERSON ELECTRIC OF ST. LOUIS, MISSOURI, FOR USE IN THE PERFORMANCE OF THAT COMPANY'S CONTRACT WITH THE DEPARTMENT OF THE ARMY, CONTRACT NO. DA-23-017-AMC-1458 (A).

YOU STATE THAT A QUOTATION WAS PREPARED AND SUBMITTED BY FORMEX FOR THE FURNISHING OF FLOTURN COMPARTMENTS C AND D FOR THE LANCE MISSILE. YOU REFER TO THE QUOTATION AS PERHAPS OPTIMISTIC AND PROVIDING FOR LITTLE PROFIT; BUT YOU STATE THAT THE INTENT WAS TO BECOME QUALIFIED AS THE SOURCE FOR THE COMPONENTS AND TO BE IN A POSITION TO SECURE A LONG-TERM PRODUCTION CONTRACT. IT APPEARS THAT YOU RECEIVED ORDERS FROM EMERSON AND, AS THE COST OF DEVELOPMENT OF THE PARTS BEGAN TO EXCEED THE FIXED CONTRACT PRICE, MR. WELLER OF EMERSON WAS NOTIFIED AND ATTEMPTED TO SUPPLEMENT THE ORDERS. HOWEVER, NO PRICE ADJUSTMENT WAS MADE AND IT IS ALLEGED THAT FORMEX EXPENDED ABOUT $60,000 AND RECEIVED $24,500 FROM EMERSON. IT IS ALSO ALLEGED THAT THE FINAL PART WAS SHIPPED ON JANUARY 30, 1965, AND THAT AT SUCH TIME EMERSON ADVISED YOUR COMPANY THAT THE PICATINNY ARSENAL WAS CHANGING THE MANUFACTURING PROCESS AND YOUR HELP WAS NO LONGER NEEDED.

IN VIEW OF THE FOREGOING, AND CERTAIN OTHER INFORMATION FURNISHED IN YOUR LETTER REGARDING THE FINANCIAL CONDITION OF YOUR COMPANY, YOU REQUEST OUR OFFICE TO DETERMINE WHETHER OR NOT FINANCIAL ASSISTANCE CAN BE PROVIDED TO COMPENSATE FOR THE UNDERESTIMATE IN YOUR QUOTATION ON THE FLOTURN COMPONENTS.

IT IS AN ESTABLISHED RULE OF LAW THAT CONTRACTS OR AGREEMENTS TO PERFORM WORK FOR OR TO FURNISH SUPPLIES TO PRIME CONTRACTORS ENGAGED IN THE PERFORMANCE OF CONTRACTS WITH THE GOVERNMENT DO NOT CREATE PRIVITY OF CONTRACT BETWEEN THE SUBCONTRACTORS AND THE UNITED STATES. SEE UNITED STATES V. DRISCOLL (1877) 96 U.S. 421; MERRITT V. UNITED STATES (1925) 267 U.S. 338; AND ARMSTRONG V. UNITED STATES (1959) 169 F.SUPP. 259.

SINCE YOUR COMPANY IS NOT A PARTY TO THE PRIME CONTRACT, YOU HAVE NO BASIS FOR SUBMITTING A CLAIM TO THE GOVERNMENT IN THIS MATTER. THE GOVERNMENT'S ONLY OBLIGATION HERE IS TO PAY THE PRIME CONTRACTOR THE AMOUNT SPECIFIED IN EMERSON'S CONTRACT WITH THE GOVERNMENT. THE PRICE OF PERFORMING THE WORK REQUIRED IN THE ORDERS ISSUED TO YOUR COMPANY BY EMERSON IS A MATTER WHICH YOU, AS A SUBCONTRACTOR, MUST SETTLE WITH THE PRIME CONTRACTOR AND NOT WITH THE GOVERNMENT.