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B-160976, JUN 12, 1972

B-160976 Jun 12, 1972
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IT IS THE OPINION OF THE COMP. THAT THE "CURE" NOTICE WAS NOT REQUIRED BUT ISSUED SOLELY AT THE DISCRETION OF THE CONTRACTING OFFICER SINCE. THE GOVERNMENT WAS ENTITLED TO PERFORMANCE "AS AND WHEN REQUIRED.". WHILE THE NOTICE MAY HAVE WAIVED THE GOVERNMENT'S TERMINATION RIGHTS FOR FAILURES WHICH OCCURED PRIOR TO ITS ISSUANCE. ATLANTIC'S FAILURE TO PERFORM DURING THE 10-DAY CURE PERIOD WAS SUFFICIENT TO JUSTIFY IMMEDIATE TERMINATION PURSUANT TO SUBPARAGRAPH (A)(I) OF THE DEFAULT CLAUSE. IT SEEMS OBVIOUS THAT THE CONTRACTOR WAS OBLIGED TO KNOW THE LOCATION OF RAILCARS IRRESPECTIVE OF WHETHER A "DAILY RAILCAR TONNAGE REPORT" WAS EXPLICITLY REQUIRED. SINCE THERE IS NO EVIDENCE TO SUBSTANTIATE THE CONTRACTOR'S CLAIMS THAT ITS FAILURES WERE BEYOND ITS CONTROL.

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B-160976, JUN 12, 1972

PROCUREMENT LAW - DEFAULT TERMINATION - CLAIM FOR DAMAGES AND REPROCUREMENT COSTS WITHHELD BY ASBCA DECISION DENYING THE CLAIM OF ATLANTIC TERMINAL COMPANY FOR DAMAGES AND EXCESS REPROCUREMENT COSTS WITHHELD BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS INCIDENT TO THE TERMINATION FOR DEFAULT OF ITS CONTRACT FOR RAILROAD SERVICES AT THE MILITARY OCEAN TERMINAL IN NORTH CAROLINA. IT IS THE OPINION OF THE COMP. GEN. THAT THE "CURE" NOTICE WAS NOT REQUIRED BUT ISSUED SOLELY AT THE DISCRETION OF THE CONTRACTING OFFICER SINCE, UNDER THE TERMS OF THE AGREEMENT, THE GOVERNMENT WAS ENTITLED TO PERFORMANCE "AS AND WHEN REQUIRED." WHILE THE NOTICE MAY HAVE WAIVED THE GOVERNMENT'S TERMINATION RIGHTS FOR FAILURES WHICH OCCURED PRIOR TO ITS ISSUANCE, ATLANTIC'S FAILURE TO PERFORM DURING THE 10-DAY CURE PERIOD WAS SUFFICIENT TO JUSTIFY IMMEDIATE TERMINATION PURSUANT TO SUBPARAGRAPH (A)(I) OF THE DEFAULT CLAUSE. FURTHER, IT SEEMS OBVIOUS THAT THE CONTRACTOR WAS OBLIGED TO KNOW THE LOCATION OF RAILCARS IRRESPECTIVE OF WHETHER A "DAILY RAILCAR TONNAGE REPORT" WAS EXPLICITLY REQUIRED. IN VIEW OF THE FOREGOING, AND SINCE THERE IS NO EVIDENCE TO SUBSTANTIATE THE CONTRACTOR'S CLAIMS THAT ITS FAILURES WERE BEYOND ITS CONTROL, THE CLAIM MUST BE DENIED.

TO ATLANTIC TERMINAL COMPANY:

THIS IS IN REPLY TO YOUR LETTER OF SEPTEMBER 20, 1971, AND SUBSEQUENT COMMUNICATIONS, CONCERNING THE TERMINATION FOR DEFAULT OF YOUR CONTRACT, NO. DAHC21-68-D-0090, FOR RAILROAD SERVICES AT THE MILITARY OCEAN TERMINAL, SUNNY POINT, SOUTHPORT, NORTH CAROLINA.

THIS MATTER WAS THE SUBJECT OF TWO DECISIONS BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS (ASBCA). IN ASBCA NO. 13269 THE BOARD DENIED YOUR APPEAL AND FOUND THAT YOU HAD NOT SHOWN (1) THAT YOU TIMELY PERFORMED THE CONTRACT IN ACCORDANCE WITH ITS TERMS AND REQUIREMENTS; OR (2) THAT YOUR FAILURE TO PERFORM WAS DUE TO CAUSES BEYOND YOUR CONTROL AND WITHOUT YOUR FAULT OR NEGLIGENCE. IN ASBCA NO. 13699 THE BOARD FOUND THE GOVERNMENT ENTITLED TO EXCESS REPROCUREMENT COSTS AND INTEREST THEREON BUT DENIED THE GOVERNMENT'S RIGHT TO RECOVER COMMON LAW DELAY DAMAGES.

THE PRINCIPAL FUNCTION OF THE TERMINAL'S RAILROAD SERVICE CONTRACTOR, IS TO HAUL FREIGHT CARS TO AND FROM THE LELAND INTERCHANGE AND THE TERMINAL, AND TO COMPLY WITH GOVERNMENT ORDERS CALLING FOR THE TIMELY PERFORMANCE OF NECESSARY INTRATERMINAL RAILWAY SWITCHING, SPOTTING AND SHUTTLING SERVICES INCIDENTAL TO THE PROPER POSITIONING OF THE RAILCARS TO MEET THE TERMINAL'S DAILY OPERATIONAL REQUIREMENTS. THIS INCLUDES HOLDING LOADED CARS IN DESIGNATED CLASSIFICATION AND HOLDING YARDS IN ACCORDANCE WITH SAFETY REQUIREMENTS, MOVING THE CARS TO THE TERMINAL'S THREE WHARVES FOR THE LOADING OF THEIR CARGOS (AMMUNITION AND EXPLOSIVES) ON BOARD VESSELS, THEN MOVING THEM TO AN AREA WHERE THE DUNNAGE IS REMOVED AND RETURNING THE EMPTY CARS TO THE RAIL CARRIER AT THE LELAND INTERCHANGE. THE DELIVERY OF LOADED CARS TO, AND REMOVAL OF EMPTY CARS FROM, THE LELAND INTERCHANGE IS ACCOMPLISHED BY THE RAIL CARRIER, AND THE TRANSFER OF CARGOES FROM THE RAILCARS TO THE VESSELS AT THE TERMINAL IS ACCOMPLISHED BY THE STEVEDORING CONTRACTOR.

ESSENTIALLY, IT IS YOUR POSITION THAT THE GOVERNMENT BREACHED ITS CONTRACT AND THAT YOU ARE ENTITLED TO RECOVER DAMAGES IN ADDITION TO RECOUPING THE EXCESS REPROCUREMENT COSTS WITHHELD BY THE BOARD. YOU ADVANCE SEVERAL REASONS IN SUPPORT OF YOUR POSITION WHICH ARE CONSIDERED BELOW.

FIRST, YOU ARGUE THAT THE TERMINATION FOR DEFAULT WAS PREMATURE AND ERRONEOUS INASMUCH AS IT WAS EFFECTED ONLY SEVEN DAYS AFTER RECEIPT OF NOTICE FROM THE CONTRACTING OFFICER REQUIRING YOU TO "CURE" CERTAIN FAILURES WITHIN TEN DAYS. YOU STATE THAT BY ISSUING THE 10-DAY CURE NOTICE WITH FULL KNOWLEDGE OF ITS RIGHT TO IMMEDIATELY TERMINATE THE CONTRACT FOR DEFAULT, THE GOVERNMENT WAIVED ITS RIGHT TO TERMINATE THE CONTRACT OUTRIGHT FOR THE TEN DAYS OF THE CURE PERIOD.

REGARDING THE AUTHORITY FOR TERMINATION OF THE CONTRACT FOR DEFAULT, THE CONTRACT PROVIDED, IN PART, AS FOLLOWS:

"GP-8. DEFAULT. (JUNE 1964)

"(A) THE GOVERNMENT MAY, SUBJECT TO THE PROVISIONS OF PARAGRAPH (C) BELOW, BY WRITTEN NOTICE OF DEFAULT TO THE CONTRACTOR, TERMINATE THE WHOLE OR ANY PART OF THIS CONTRACT IN ANY ONE OF THE FOLLOWING CIRCUMSTANCES:

"(I) IF THE CONTRACTOR FAILS ... TO PERFORM THE SERVICES WITHIN THE TIME SPECIFIED HEREIN OR ANY EXTENSION THEREOF; OR

"(II) IF THE CONTRACTOR FAILS TO PERFORM ANY OF THE OTHER PROVISIONS OF THIS CONTRACT, OR SO FAILS TO MAKE PROGRESS AS TO ENDANGER PERFORMANCE OF THIS CONTRACT IN ACCORDANCE WITH ITS TERMS, AND IN EITHER OF THESE TWO CIRCUMSTANCES DOES NOT CURE SUCH FAILURE WITHIN A PERIOD OF 10 DAYS (OR SUCH LONGER PERIOD AS THE CONTRACTING OFFICER MAY AUTHORIZE IN WRITING) AFTER RECEIPT OF NOTICE FROM THE CONTRACTING OFFICER SPECIFYING SUCH FAILURE.

"(B) IN THE EVENT THE GOVERNMENT TERMINATES THIS CONTRACT IN WHOLE OR IN PART AS PROVIDED IN PARAGRAPH (A) OF THIS CLAUSE, THE GOVERNMENT MAY PROCURE, UPON SUCH TERMS AND IN SUCH MANNER AS THE CONTRACTING OFFICER MAY DEEM APPROPRIATE ... SERVICES SIMILAR TO THOSE SO TERMINATED, AND THE CONTRACTOR SHALL BE LIABLE TO THE GOVERNMENT FOR ANY EXCESS COSTS FOR SUCH SIMILAR SUPPLIES OR SERVICES ...

"(C) ... THE CONTRACTOR SHALL NOT BE LIABLE FOR ANY EXCESS COSTS IF THE FAILURE TO PERFORM THE CONTRACT ARISES OUT OF CAUSES BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE CONTRACTOR ... .

"(E) IF, AFTER NOTICE OF TERMINATION OF THIS CONTRACT UNDER THE PROVISIONS OF THIS CLAUSE, IT IS DETERMINED FOR ANY REASON THAT THE CONTRACTOR WAS NOT IN DEFAULT UNDER THE PROVISIONS OF THIS CLAUSE, OR THAT THE DEFAULT WAS EXCUSABLE UNDER THE PROVISIONS OF THIS CLAUSE, THE RIGHTS AND OBLIGATIONS OF THE PARTIES SHALL, IF THE CONTRACT CONTAINS A CLAUSE PROVIDING FOR TERMINATION FOR CONVENIENCE OF THE GOVERNMENT, BE THE SAME AS IF THE NOTICE OF TERMINATION HAD BEEN ISSUED PURSUANT TO SUCH CLAUSE

"(F) THE RIGHTS AND REMEDIES OF THE GOVERNMENT PROVIDED IN THIS CLAUSE SHALL NOT BE EXCLUSIVE AND ARE IN ADDITION TO ANY OTHER RIGHTS AND REMEDIES PROVIDED BY LAW OR UNDER THIS CONTRACT."

IN DISCUSSING THE CONTRACT REQUIREMENTS THE BOARD STATED IN ITS DECISION, AS FOLLOWS:

"THE CONTRACT WAS FOR 'RAILROAD SERVICES, AS AND WHEN REQUIRED ... .' THIS WAS NOT A CONTRACT FOR THE DELIVERY OF UNITS OF HARDWARE, BUT WAS A CONTRACT FOR THE SERVICES TO BE PERFORMED ON A TIMELY BASIS SO THAT SHIPS COULD BE LOADED WITHOUT LOSS OF STEVEDORING TIME OR SLIPPAGE OF THE SCHEDULES. THESE SHIPS HAD CARGO OF HIGHLY EXPLOSIVE AMMUNITION AND THE MOVEMENT OF THIS SPECIAL TYPE OF CARGO HAD TO BE DONE PRECISELY ON TIME AND WITH DUE REGARD TO THE VARIOUS SAFETY REGULATIONS WHICH WERE IMPOSED ON THE TERMINAL TO PREVENT A HOLOCAUST. THEREFORE, THE CONTRACTOR WAS OBLIGATED TO PERFORM THE SERVICES, THAT IS, THE MOVEMENT OF THE RAIL CARS, FROM POINT TO POINT WITH SPECIFIED TIMES, AND A FAILURE TO DO THAT WOULD VIOLATE THIS SUBDIVISION (I) (OF THE DEFAULT CLAUSE)."

AS A MATTER OF LAW WE ARE UNABLE TO AGREE THAT THE GOVERNMENT BREACHED THE CONTRACT BY TERMINATING YOU FOR DEFAULT WITHOUT ALLOWING THE FULL 10- DAY CURE PERIOD TO EXPIRE. WHILE THE GOVERNMENT MAY HAVE WAIVED FOR TEN DAYS ITS RIGHT TO TERMINATE THE CONTRACT FOR THE DEFICIENCIES IN PERFORMANCE WHICH HAD OCCURRED PRIOR TO THE NOTICE TO CURE, THE RECORD SHOWS THAT NUMEROUS NEW FAILURES TO TIMELY FURNISH THE REQUIRED SERVICES TOOK PLACE DURING THE CURE PERIOD. WE BELIEVE THE NEW FAILURES TO PERFORM WERE SUFFICIENTLY SUBSTANTIAL TO JUSTIFY IMMEDIATE TERMINATION FOR DEFAULT PURSUANT TO SUBPARAGRAPH (A)(I) OF THE DEFAULT CLAUSE.

WE FIND NO BASIS FOR DISAGREEING WITH THE BOARD'S POSITION THAT YOUR FAILURES IN PERFORMING THE REQUIRED SERVICES CONSTITUTED VIOLATIONS OF SUBPARAGRAPH (A)(I) OF THE CLAUSE, SINCE FAILURES TO TIMELY PERFORM THE SERVICES REQUIRED IN SERVICE CONTRACTS OF THIS NATURE EQUATES TO THE FAILURE TO DELIVER SUPPLIES IN ACCORDANCE WITH THE DELIVERY TIME REQUIRED IN SUPPLY CONTRACTS. AS STATED IN THE BOARD'S DECISION, THE GOVERNMENT WAS ENTITLED TO RECEIVE THE RAILROAD SERVICES IT CONTRACTED FOR "AS AND WHEN REQUIRED" AT THE TIME THEY WERE REQUESTED AND NEEDED. WE ALSO AGREE WITH THE BOARD'S VIEW THAT SINCE YOUR FAILURES TO PERFORM THE SERVICES CAME UNDER SUBPARAGRAPH (A)(I) NO "CURE" NOTICE, AS PROVIDED FOR BY SUBPARAGRAPH (A)(II) FOR OTHER TYPES OF FAILURES, WAS REQUIRED. ADDITION IT DOES NOT SEEM THAT SUCH A "CURE" NOTICE WOULD EVEN BE APPROPRIATE SINCE, AS FURTHER NOTED BY THE BOARD, DEFAULTS IN THE CONTRACTOR'S TIMELY PERFORMANCE OF THE SERVICES COULD NOT BE "CURED" BY SUBSEQUENT ATTEMPTS TO PERFORM THE SERVICES AFTER THE TIME THEY WERE DUE UNDER THE TERMS OF THE CONTRACT. IN OUR VIEW, THE 10-DAY "CURE" NOTICE ISSUED TO YOU ON APRIL 17, 1968, CONSTITUTED NO MORE THAN AN ELECTION BY THE CONTRACTING OFFICER NOT TO TERMINATE THE CONTRACT AT THAT TIME FOR YOUR PRIOR FAILURES IN PERFORMING THE REQUIRED SERVICES AND TO AFFORD YOU A PERIOD OF TEN DAYS IN WHICH TO PERFORM THOSE SERVICES FOR WHICH YOU WERE THEN IN DEFAULT.

WE DO NOT CONSIDER THE EVIDENCE BEFORE THE BOARD TO BE SUFFICIENT TO SHOW THAT THE GOVERNMENT AGREED TO WAIVE, OR LEAD YOU TO REASONABLY BELIEVE THAT IT WOULD WAIVE ANY, OR ALL, NEW PERFORMANCE FAILURES ARISING DURING THE CURE PERIOD. IN OUR OPINION ANY SUCH AGREEMENT OR UNDERSTANDING WOULD BE INCONSISTENT WITH THE NATURE OF SOME OF YOUR PRIOR FAILURES, PARTICULARLY THOSE RELATING TO QUANTITY/DISTANCE SAFETY REQUIREMENTS SET UP FOR CERTAIN TYPES OF EXPLOSIVES SO THAT ONE DETONATION WOULD NOT PRODUCE A CHAIN REACTION OF EXPLOSIONS THROUGHOUT THE TERMINAL. THE BOARD FOUND THAT YOUR PERFORMANCE BECAME STEADILY WORSE DURING THE 10-DAY PERIOD AND NEW FAILURES WERE OCCURRING ON A DAILY BASIS, UNTIL YOUR FAILURES AND DEFICIENCIES BECAME INTOLERABLE AND THE GOVERNMENT COULD NO LONGER ACCEPT THE RISK OF THE TERMINAL OPERATION GRINDING TO A HALT OR THE CHANCE OF A CONFLAGRATION IF THE EXPLOSIVES IGNITED DUE TO YOUR GROSS SAFETY VIOLATIONS. THE BOARD CONSIDERED THAT YOUR DEFICIENCIES AND THE LACK OF PROPER PERFORMANCE JUSTIFIED THE CONTRACTING OFFICER IN TERMINATING YOUR CONTRACT FOR DEFAULT AT THAT TIME, AND WE AGREE WITH THAT CONCLUSION SINCE THE CONTRACTING OFFICER HAD NOT, IN OUR VIEW, EFFECTIVELY WAIVED THE GOVERNMENT'S RIGHT TO TERMINATE THE CONTRACT UNDER SUBPARAGRAPH (A)(I) OF THE DEFAULT CLAUSE FOR ANY NEW OR ADDITIONAL PERFORMANCE FAILURES OCCURRING DURING THE 10-DAY "CURE" PERIOD.

YOU ALSO QUESTION THE SUFFICIENCY OF THE GOVERNMENT'S SPECIFICATION IN THAT IT DID NOT SPECIFICALLY CALL FOR THE FURNISHING OF A "DAILY RAILCAR TONNAGE REPORT," THE PURPOSE OF WHICH, YOU STATE, WOULD BE TO CONTROL THE LOCATION OF LOADED RAILCARS AS TO THE NET EXPLOSIVE CONTENT AND TO PREVENT THE OVERLOADING OF AVAILABLE TRACKAGE. INSOFAR AS THE POINT RAISED IMPLIES THAT THE CONTRACT DID NOT REQUIRE YOU TO KEEP ACCURATE RECORDS OF THE RAILROAD CARS AND THEIR POSITIONS IN THE TERMINAL, WHICH WOULD HAVE EXCUSED YOUR REPEATED FAILURES IN PERFORMING THE REQUIRED SERVICES, WE FEEL YOUR POINT IS NOT WELL TAKEN. IN OUR OPINION IT IS A NECESSARY AND OBVIOUS INCIDENT TO ANY SUCCESSFUL OPERATION OF THE RAILROAD SERVICES AT THE TERMINAL THAT THE CONTRACTOR KEEP HIMSELF APPRISED, THROUGHOUT THE OPERATION, OF THE LOCATION OF THE RAILCARS IRRESPECTIVE OF WHETHER A "DAILY RAILCAR TONNAGE REPORT" WAS REQUIRED BY A SPECIFIC PROVISION OF THE CONTRACT. IN THIS CONNECTION WE NOTE THAT THE TECHNICAL PROVISIONS OF YOUR CONTRACT (TP-2(A)(3)(D)) REQUIRED YOU TO FURNISH A QUALIFIED TERMINAL SUPERVISOR WHO WOULD BE RESPONSIBLE FOR "PLANNING FOR THE RECEIPT OF CARGOES BY RAIL, TO INCLUDE SPOTTING AND SHIFTING WITHIN THE TERMINAL WITH DUE CONSIDERATION TO AND IN ACCORDANCE WITH REQUIREMENTS OF THE OPERATING AGENCIES OF THE TERMINAL, INCLUDING, BUT NOT LIMITED TO, VESSEL LOADING PLANS, COMPATIBILITY FACTORS AND OTHER SAFETY REQUIREMENTS OF THE GOVERNMENT." THE TERMINAL SUPERVISOR WAS ALSO RESPONSIBLE FOR DIRECTING AND SUPERVISING THE MOVEMENT OF RAILCARS TO AND FROM THE WHARVES, INCLUDING ASSEMBLY AND EVACUATION FROM THE TERMINAL. IN CONNECTION WITH THESE RESPONSIBILITIES WE FEEL IT WAS INCUMBENT UPON SUCH SUPERVISOR TO KNOW THE LOCATION OF ALL RAILCARS AT THE TERMINAL IN ORDER TO OBSERVE THE TERMINAL'S SAFETY REQUIREMENTS AND TO FACILITATE THE SWITCHING AND SPOTTING OPERATIONS IN A TIMELY MANNER.

YOU ALSO ARGUE THAT YOU WERE VICTIMIZED BY FRAUDULENT AND CONSPIRATORIAL ACTIONS OF THE STEVEDORING CONTRACTOR, SUCH AS, THE FURNISHING OF DEFECTIVE WORK ORDERS AND ERRONEOUS TIMEKEEPERS REPORTS. IN ADDITION YOU CONTEND THE CONNECTING RAILROAD CARRIER PURPOSELY ACCELERATED RAILCAR MOVEMENTS TO LELAND CAUSING THE DELAY UPON WHICH THE DEFAULT TERMINATION WAS BASED. THE BOARD FOUND NO EVIDENCE TO SUBSTANTIATE YOUR CLAIMS IN THIS REGARD AND, TO THE CONTRARY, WAS ABLE TO CONCLUDE THAT YOUR INEFFICIENCY, LACK OF PROPER SUPERVISION AND GENERAL "KNOW-HOW" MATERIALLY CONTRIBUTED TO YOUR FAILURE IN PERFORMING THE SERVICES AS AND WHEN REQUIRED. OUR REVIEW OF THE ADMINISTRATIVE RECORD OF THIS CASE CONVINCES US THAT THE BOARD'S CONCLUSION THAT YOU HAD NOT SHOWN THAT YOUR FAILURES TO PERFORM WERE BEYOND YOUR CONTROL AND WITHOUT YOUR FAULT OR NEGLIGENCE IS SUFFICIENTLY SUPPORTED.

SINCE, FOR THE REASONS STATED, WE FIND SUBSTANTIAL EVIDENCE JUSTIFYING THE TERMINATION FOR DEFAULT, YOUR CLAIM FOR DAMAGES AND FOR REFUND OF EXCESS REPROCUREMENT COSTS, ON THE BASIS THAT THE GOVERNMENT BREACHED ITS CONTRACT, MUST BE DENIED.

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