B-158239, MAR. 11, 1966

B-158239: Mar 11, 1966

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

CONCERNING LOSSES YOU HAVE SUSTAINED UNDER CONTRACT NO. 835 WHICH YOU ESTIMATE YOU HAVE LOST UNDER THE CONTRACT. 1965. * * *" ATTACHED TO THE INVITATION WERE EXHIBITS "A. ON PAGE 3 OF THE INVITATION IT WAS EXPLICITLY STATED THAT "* * * THESE EXHIBITS ARE FOR INFORMATION PURPOSES ONLY.'. IS FURTHER STATED ON PAGE 3 OF THE INVITATION THAT: "* * * IN THE EVENT A BONUS IS OFFERED AND NO CHARGE IS MADE TO THE GOVERNMENT FOR PERFORMING THE SERVICES REQUIRED BY ITEM 1. AWARD WILL BE MADE TO THE FIRM OFFERING THE LARGEST BONUS. * * " INASMUCH AS YOUR FIRM OFFERED THE LARGEST BONUS TO THE GOVERNMENT. FMC-4 WAS AWARDED TO YOU. THIS REQUEST WAS DENIED BY THE COMMISSION IN LETTER TO YOU DATED MAY 6.

B-158239, MAR. 11, 1966

TO HOOVER REPORTING COMPANY, INC.:

WE REFER TO YOUR LETTER OF DECEMBER 16, 1965, CONCERNING LOSSES YOU HAVE SUSTAINED UNDER CONTRACT NO. FMC-4 WITH THE FEDERAL MARITIME COMMISSION FOR REPORTING SERVICES FOR THE PERIOD JULY 1, 1964, THROUGH JUNE 30, 1965. SPECIFICALLY, YOU REQUEST THIS OFFICE TO REPORT YOUR CASE TO THE CONGRESS FOR RELIEF AS A MERITORIOUS CLAIM UNDER THE ACT OF APRIL 10, 1928, 31 U.S.C. 236, IN THE AMOUNT OF $10,835 WHICH YOU ESTIMATE YOU HAVE LOST UNDER THE CONTRACT.

THE FEDERAL MARITIME COMMISSION ISSUED INVITATION FOR BIDS NO. BI FMC 64- 1 ON MAY 13, 1964, ITEM 1 OF WHICH CALLED FOR THE CONTRACTOR TO FURNISH REPORTING SERVICES MEETING "* * * THE REQUIREMENTS OF THE FEDERAL MARITIME COMMISSION FOR REPORTING SERVICES FOR THE PERIOD JULY 1, 1964, THROUGH JUNE 30, 1965. * * *" ATTACHED TO THE INVITATION WERE EXHIBITS "A," "B" AND "C" SHOWING THE APPROXIMATE REQUIREMENTS FOR HEARINGS, DEPOSITIONS, ETC., FOR THE PERIODS AUGUST 12, 1961, THROUGH APRIL 30, 1962; JULY 1, 1962, THROUGH APRIL 30, 1963; AND JULY 1, 1963, THROUGH MARCH 31, 1964, RESPECTIVELY. ON PAGE 3 OF THE INVITATION IT WAS EXPLICITLY STATED THAT "* * * THESE EXHIBITS ARE FOR INFORMATION PURPOSES ONLY.' IN RESPONSE TO THIS INVITATION YOU OFFERED TO SUPPLY THE SOLICITED SERVICES TO THE GOVERNMENT FREE OF CHARGE AND, IN ADDITION, TO PAY A BONUS TO THE GOVERNMENT OF $7,520.95 FOR THE PRIVILEGE OF FURNISHING THE SERVICES. IS FURTHER STATED ON PAGE 3 OF THE INVITATION THAT:

"* * * IN THE EVENT A BONUS IS OFFERED AND NO CHARGE IS MADE TO THE GOVERNMENT FOR PERFORMING THE SERVICES REQUIRED BY ITEM 1, AWARD WILL BE MADE TO THE FIRM OFFERING THE LARGEST BONUS. * * "

INASMUCH AS YOUR FIRM OFFERED THE LARGEST BONUS TO THE GOVERNMENT, CONTRACT NO. FMC-4 WAS AWARDED TO YOU. ON APRIL 13, 1965, YOU REQUESTED THE FEDERAL MARITIME COMMISSION TO REFORM YOUR CONTRACT SO AS TO ALLOW YOU TO INCREASE YOUR PRICE TO THE PUBLIC SO THAT YOU MIGHT ABATE YOUR LOSSES. THIS REQUEST WAS DENIED BY THE COMMISSION IN LETTER TO YOU DATED MAY 6, 1965.

A "REQUIREMENTS" CONTRACT IS VALID UNDER THE THEORY THAT WHERE ONE PARTY AGREES TO LET ANOTHER PARTY FILL ITS ACTUAL REQUIREMENTS DURING A CERTAIN PERIOD AND THE SECOND PARTY AGREES TO FILL SUCH REQUIREMENTS, THESE PROMISES CONSTITUTE A VALID CONSIDERATION TO SUPPORT THE CONTRACT. SEE 1A CORBIN ON CONTRACTS 156; 1 WILLISTON ON CONTRACTS 104A; AND 2 WILLISTON ON SALES 464. IT IS AN ACCEPTED PRINCIPLE OF EQUITY JURISPRUDENCE THAT A CONTRACT VOLUNTARILY ENTERED INTO FREE OF FRAUD, ACCIDENT, OR MISTAKE HAS FULL FORCE AND EFFECT AND THE RIGHTS CREATED THEREBY ARE NOT TO BE IGNORED, DISTURBED OR ALTERED. SEE 30 C.J.S. 62. THEREFORE, A VARIATION IN THE CONTEMPLATED REQUIREMENTS CANNOT BE CONSIDERED AS A VALID REASON FOR EQUITABLE OR LEGAL RELIEF UNLESS THERE WAS BAD FAITH ON THE PART OF THE OFFEREE IN ESTIMATING HIS REQUIREMENTS. IN THIS CASE THE GOVERNMENT FURNISHED TO THE PROSPECTIVE BIDDERS ITS APPROXIMATE PAST REQUIREMENTS FOR THE PERIOD AUGUST 1961 THROUGH MARCH 1964, SO THE BIDDERS COULD ESTIMATE THEIR COSTS AND PERHAPS HAVE SOME IDEA AS TO THE REQUIREMENTS FOR THE COMING YEAR. HOWEVER, AS NOTED ABOVE, THESE FIGURES WERE SOLELY FOR ESTIMATE BY THE FEDERAL MARITIME COMMISSION AS TO WHAT THEIR REQUIREMENTS WOULD BE FOR THE COMING YEAR. FURTHERMORE, THERE IS NO EVIDENCE TO INDICATE BAD FAITH ON THE PART OF THE GOVERNMENT IN PROVIDING THIS INFORMATION OR THAT IT WAS NOT BASED ON THE BEST INFORMATION AVAILABLE. IN 37 COMP. GEN. 688, WHERE THE REQUIREMENTS WERE ESTIMATED BY THE GOVERNMENT, BUT WHERE THE ACTUAL NEEDS AMOUNTED TO APPROXIMATELY 20 PERCENT LESS THAN THE ESTIMATE, RESULTING IN A CONSIDERABLE LOSS TO THE CONTRACTOR, WE HELD THERE WAS NO BASIS FOR REGARDING THE CONTRACTOR'S CLAIM AS CONTAINING SUCH ELEMENTS OF EQUITY AS TO JUSTIFY ITS SUBMISSION TO THE CONGRESS PURSUANT TO THE ACT OF APRIL 10, 1928, 31 U.S.C. 236, ON THE BASIS THAT THE STATED QUANTITIES WERE ONLY ESTIMATES AND WERE NOT TO BE CONSIDERED AS A GUARANTEE OF THE EXACT NUMBER OF ITEMS TO BE FURNISHED; THAT THE GOVERNMENT HAD A RIGHT TO REQUIRE LESS THAN THE STATED ESTIMATE; AND THAT THE CONTRACTOR ASSUMED THE RISK OF VARIATIONS FROM THE ESTIMATES. THEREFORE, THE FACT THAT A REQUIREMENTS CONTRACT HAS BECOME UNPROFITABLE DUE TO A REDUCTION IN QUANTITIES NEEDED DOES NOT JUSTFY A PRICE ADJUSTMENT OF A SUBMISSION TO CONGRESS FOR EQUITABLE RELIEF IN THE ABSENCE OF EVIDENCE THAT THE ESTIMATES WERE BASED ON OTHER THAN THE BEST INFORMATION AVAILABLE. SEE ALSO BRAWLEY V. UNITED STATES, 96 U.S. 168.

IT HAS BEEN STATED TIME AND AGAIN BY THE COURTS THAT EQUITABLE RELIEF IS NOT AVAILABLE MERELY BECAUSE OF ONE OF THE PARTIES TO A CONTRACT HAS MADE A BAD BARGAIN IN THAT IT TURNS OUT TO BE HARD, OPPRESSIVE, AND UNPROFITABLE, IN THE ABSENCE OF BAD FAITH, FRAUD, DISREPRESENTATION, ETC., BY THE OTHER PARTY. SEE MARBLE COMPANY V. RIPLEY, 10 WALL. 339, 356; COLUMBUS RAILWAY, POWER AND LIGHT COMPANY V. COLUMBUS, 249 U.S. 399, 414; AND LENAWEE COUNTY GAS AND ELECTRIC COMPANY V. CITY OF ADRIAN, 176 N.W. 590, 592.

FINALLY, WE FEEL IT IS WELL TO CONSIDER THE GOVERNMENT'S POSITION SHOULD IT ATTEMPT TO RECOVER A PORTION OF THE PROFITS BECAUSE THE CONTRACTOR MAKES MORE THAN WAS ANTICIPATED. IN WESTON V. STATE, 186 N.E. 197, 199, THE COURT IN CONSIDERING WHETHER THERE SHOULD BE EQUITABLE RELIEF FROM AN UNPROFITABLE BARGAIN, SAID:

"* * * IT WOULD BE A STRANGE MORALITY WHICH WOULD PERMIT ONE PARTY TO ESCAPE THE TERMS OF AN UNPROFITABLE CONTRACT WHILE THE OTHER PARTY WAS HELD THERETO. NO ONE WOULD EXTEND A RULE OF MORALITY TO REQUIRE THE HOLDER OF A PROFITABLE CONTRACT TO SURRENDER A PORTION OF HIS LEGITIMATE PROFITS.'

WHILE IT IS REGRETTED YOU HAVE LOST MONEY IN THE PERFORMANCE OF THE CONTRACT, CONSIDERATIONS OF SYMPATHY FOR THE MISFORTUNE OF A CONTRACTOR DO NOT AUTHORIZE AN EXCEPTION TO APPLICABLE LEGAL AND EQUITABLE PRINCIPLES.