B-163456, APR. 19, 1968

B-163456, APR. 19, 1968

TO MR. HARRISON:

YOUR LETTER OF JANUARY 30, 1968, WITH ENCLOSURES, REQUESTS OUR ADVICE AS TO THE PROPRIETY OF THE GOVERNMENT PRINTING OFFICE'S PROPOSED SETTLEMENT WITH HUTCHESON DISPLAYS, INC., INCIDENT TO THE GOVERNMENT'S TERMINATION FOR CONVENIENCE OF PURCHASE ORDER NO. 53922 (JACKET 256-438), DATED APRIL 12, 1967.

THE PURCHASE ORDER REQUIRED THE PRODUCTION OF 150,006, PLUS OR MINUS 1 PERCENT, WATER-APPLIED DECALS, ENTITLED "MAIL MOVES THE COUNTRY - ZIP CODE MOVES THE MAIL" FOR USE BY THE POST OFFICE DEPARTMENT. IN ACCORDANCE WITH THE SPECIFICATIONS, GPO WAS REQUIRED TO FURNISH A CAMERA COPY, AND IT WAS PROVIDED THAT THIS MATERIAL WAS SCHEDULED TO BE AT THE CONTRACTOR'S PLANT ON OR BEFORE APRIL 14, 1967. SUBMISSION OF PROOFS FOR APPROVAL BEFORE PRINTING WAS REQUIRED "AS SOON AS POSSIBLE TO ALLOW FOR THE POSSIBILITY OF NECESSARY CORRECTIONS.' PROOFS WERE SCHEDULED TO BE BACK AT THE CONTRACTOR'S PLANT "WITHIN 5 WORKING DAYS AFTER RECEIPT AT THE GPO.' ALL APPLICABLE TERMS AND CONDITIONS OF CONTRACT TERMS NO. 1 (REV. 11-1-65), AND THE SPECIAL TERMS AND CONDITIONS, FORM GPO 2459D (REV. 7-1-65) WERE INCORPORATED BY REFERENCE, AND IT WAS STATED THAT IN THE EVENT OF CONFLICT THE SPECIFICATIONS WOULD CONTROL. COMPLETE SHIPMENT OF ALL DECALS WAS REQUIRED ON OR BEFORE MAY 19, 1967.

ON APRIL 13, 1967, THE CAMERA COPY WAS SENT UNDER SEPARATE COVER TO THE CONTRACTOR, AND APPARENTLY ARRIVED AT ITS PLANT ON APRIL 19, 1967. THE CONTRACTOR SHIPPED THE PROOFS FOR APPROVAL ON APRIL 26, 1967. THE PROOFS WERE RECEIVED BY GPO ON APRIL 28, 1967, AND WERE SUBMITTED TO THE POST OFFICE DEPARTMENT FOR APPROVAL ON MAY 1, 1967.

BY TELEGRAM DATED MAY 2, 1967, THE CONTRACTOR REQUESTED A DECISION ON THE ACCEPTABILITY OF THE PROOFS, AND WAS INFORMED BY TELEPHONE ON MAY 5, 1967, THAT THE PROOFS HAD NOT BEEN RETURNED BY THE POST OFFICE DEPARTMENT. SUBSEQUENTLY, BY LETTER DATED MAY 31, 1967, HUTCHESON DISPLAYS RENEWED ITS INQUIRY. ON JUNE 12, 1967, THE CONTRACTING OFFICER ADVISED THAT THE PROOFS HAD NOT BEEN APPROVED, AND THAT IT COULD NOT BE DETERMINED WHEN APPROVAL WOULD BE RECEIVED. FINALLY, ON AUGUST 17, 1967, THE CONTRACTOR WAS ADVISED THAT THE ORDERING AGENCY HAD CANCELLED THE REQUEST, AND TO SUBMIT COSTS INCURRED "UP TO AND INCLUDING THE SUBMISSION OF PROOFS.' THIS REGARD, WE HAVE BEEN INFORMALLY ADVISED THAT CANCELLATION WAS PREDICATED ON THE FACT THAT DURING THIS PERIOD THE POST OFFICE DEPARTMENT WAS CONSIDERING DISCONTINUING THE PRACTICE OF PAINTING MAIL BOXES THREE COLORS, AND THAT IN THE EVENT THE PRACTICE WAS DISCONTINUED THE DECALS WOULD NOT BE NEEDED. FURTHER, IT APPEARS THAT THE CONTRACTOR WAS NEVER INFORMED OF THE REASON FOR THE DELAY.

BY LETTER DATED AUGUST 18, 1967, HUTCHESON DISPLAYS SUBMITTED AN INVOICE LISTING ITS COSTS, AS FOLLOWS:

"1. 3 FILM POSITIVES AND NEGATIVES STRIPPED 21-UP ON

24 INCH X 41 INCH FILM .................................. $185.00

2. 3 SINGLE POSITIVES AND NEGATIVES AND SILK SCREENS FOR

PROOFS PLUS SCREENING ................................... 215.00

3. EXPENSE IN RETURNING SIMPLEX DECAL STOCK AND INK .... 50.00

$450.00"

IN RESPONSE TO A TELEPHONE CONVERSATION ON SEPTEMBER 26, 1967, WITH THE CONTRACTING OFFICER ADVISING THAT THE PRICES WERE CONSIDERED EXCESSIVE, THE CONTRACTOR BY LETTER DATED SEPTEMBER 26, 1967, REAFFIRMED ITS COSTS AS SUBMITTED, ADVISING THAT THEY REPRESENTED "NET OUT OF POCKET" COSTS. OCTOBER 16, 1967, THE CONTRACTING OFFICER INFORMED THE CONTRACTOR THAT NO PAYMENT WOULD BE ALLOWED FOR ITEM ONE SINCE THE CONTRACTOR WAS NOT AUTHORIZED TO PROCEED WITH THIS TASK WITHOUT APPROVAL OF THE PROOFS; THAT PAYMENT OF MORE THAN $115.00 FOR ITEM TWO COULD NOT BE CONSIDERED FAIR AND REASONABLE; AND THAT THE COSTS ATTRIBUTABLE TO ITEM THREE WERE PROPERLY FOR PAYMENT.

INITIALLY, WE NOTE THAT THE QUESTION PRESENTED IS CONFINED TO A DETERMINATION OF THE PROPRIETY OF THE AMOUNT CLAIMED PURSUANT TO A TERMINATION FOR CONVENIENCE. THERE IS NO SUGGESTION BY HUTCHESON DISPLAYS THAT THE GOVERNMENT IMPROPERLY EXERCISED ITS RIGHT TO TERMINATE; AND IN ANY EVENT ON THE BASIS OF THE RECORD BEFORE US WE COULD NOT SUSTAIN SUCH A CONCLUSION. SEE JERRY LIBRACH V UNITED STATES, 147 CT. CL. 605 (1959).

WHILE THE PROPOSED LEGAL BASIS FOR DISALLOWANCE OF ITEM ONE COSTS IS NOT WITHOUT MERIT (B-92042, MARCH 24, 1950, COPY ENCLOSED), IT DOES NOT APPEAR FROM THE RECORD BEFORE US AS IMPLEMENTED BY INFORMAL ADVICE FROM YOUR OFFICE, THAT THE PROCEDURAL REQUIREMENTS OF THE TERMINATION FOR THE CONVENIENCE CLAUSE HAVE BEEN FOLLOWED. SEE ARTICLE 16 OF CONTRACT TERMS NO. 1 (REV. 11-1-65).

CONSISTENT WITH THE CONTRACTING OFFICER'S BROAD DISCRETION IN NEGOTIATING TERMINATION SETTLEMENTS (44 COMP. GEN. 466), A DETERMINATION OF THE "PROPER COMPENSATION FOR THE WORK PERFORMED" REQUIRES A CONSIDERATION OF THE COSTS REASONABLY AND ACTUALLY INCURRED, INCLUDING AN ALLOWANCE FOR PROFIT. IN THIS REGARD, WE NOTE THAT THE CONTRACTOR HAS LIMITED ITS CLAIM TO UNAUDITED AND ALLEGEDLY "OUT OF POCKET" EXPENSES. MOREOVER, WE WOULD POINT OUT THAT IN THE EVENT OF AN INABILITY TO AGREE UPON A SETTLEMENT OF THE TERMINATION CLAIM, THE MATTER SHOULD BE DISPOSED OF IN ACCORDANCE WITH ARTICLE 29 OF CONTRACT TERMS NO. 1 (REV. 11-1-65), ENTITLED ,DISPUTES.' BOTH THE GOVERNMENT AND THE CONTRACTOR ARE BOUND TO FOLLOW THE PROCEDURES SET FORTH IN THE CONTRACT FOR SETTLEMENT OF TERMINATION CLAIMS AND FOR RESOLVING DISPUTED QUESTIONS OF FACT ARISING THEREFROM, AND IT WOULD NOT BE PROPER FOR OUR OFFICE TO CONSIDER THE MERITS OF THE CONTRACTOR'S CLAIM IN THE ABSENCE OF COMPLIANCE WITH THESE PROCEDURES. SEE B 146038, MARCH 9, 1964.

ACCORDINGLY, AND SINCE THE CLAIM RELATES, AT THIS TIME, TO A MATTER OF CONTRACT ADMINISTRATION AS TO WHICH OUR OFFICE CUSTOMARILY DEFERS TO THE JUDGMENT OF THE CONTRACTING AGENCY, WE MAY NOT ADVISE YOU AS TO THE AMOUNT PROPERLY PAYABLE TO THE CONTRACTOR UNDER THE TERMINATION CLAUSE OF THE CONTRACT. THE FILE SUBMITTED WITH YOUR LETTER IS RETURNED.