B-165180, OCT. 15, 1968

B-165180: Oct 15, 1968

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THE REQUIREMENT FOR 17 WINCHES WAS COVERED BY ITEM 2 OF THE BIDDING SCHEDULE. THE CONTRACTOR SHALL HAVE READY PREPRODUCTION SAMPLES OF THE ITEMS LISTED BELOW AT ITS PLANT AND BE PREPARED TO PERFORM ALL EXAMINATIONS AND TESTS REQUIRED BY THE SPECIFICATIONS. THE CONTRACTING OFFICER AND THE GOVERNMENT INSPECTING ACTIVITY MUST BE NOTIFIED IN WRITING BY THE CONTRACTOR 15 DAYS PRIOR TO THE DATE THAT THE CONTRACTOR WILL BEGIN THE EXAMINATIONS AND TESTS. IF THE CONTRACTOR IS UNABLE TO PERFORM THE EXAMINATIONS AND TESTS ON THE DATE SPECIFIED IN THE AFORESAID NOTICE. TEN DAYS WILL BE REQUIRED BY THE CONTRACTING OFFICER TO REVIEW THE TEST REPORT AND APPROVE OR DISAPPROVE THE SAMPLE. PENDING APPROVAL OR DISAPPROVAL OF THE SAMPLE PRODUCTION WILL BE SUSPENDED IN ALL AREAS THAT MAY BE AFFECTED BY APPROVAL OR DISAPPROVAL OF THE SAMPLE.

B-165180, OCT. 15, 1968

TO COLONEL CROSS:

BY LETTER DATED AUGUST 30, 1968, THE ASSISTANT COMPTROLLER FOR ACCOUNTING AND FINANCE, AIR FORCE ACCOUNTING AND FINANCE CENTER, DENVER, COLORADO, FORWARDED YOUR UNDATED LETTER, AND ENCLOSURES, REQUESTING AN ADVANCE DECISION AS TO THE LEGALITY OF MAKING PAYMENT ON A VOUCHER STATED IN FAVOR OF HOOVER ELECTRIC COMPANY, LOS ANGELES, CALIFORNIA, IN THE GROSS AMOUNT OF $7,480, REPRESENTING THE COST OF ONE POWER OPERATED DRUM WINCH FURNISHED UNDER CONTRACT NO. DSA-700 10330, AS AMENDED.

THE DEFENSE CONSTRUCTION SUPPLY CENTER, DIRECTORATE OF PROCUREMENT AND PRODUCTION, COLUMBUS, OHIO, BY INVITATION FOR BIDS NO. DSA-764-2540 SOLICITED BIDS FOR FURNISHING 17 POWER OPERATED DRUM WINCHES. THE REQUIREMENT FOR 17 WINCHES WAS COVERED BY ITEM 2 OF THE BIDDING SCHEDULE. ITEM 1 OF THE SCHEDULE CALLED FOR THE MANUFACTURE OF ONE PREPRODUCTION SAMPLE. ITEMS 3, 4, 5 AND 6 CALLED FOR THE FURNISHING OF TECHNICAL DATA FOR ITEMS 1 AND 2, PHOTOGRAPHS, DESCRIPTIVE IDENTIFICATION DATA, AND SPARE PARTS LIST.

THE FOLLOWING NOTES APPEARED ON PAGES 3, 4 AND 5 OF THE INVITATION:

"PREPRODUCTION SAMPLE

---------------------- "1. WITHIN 60 DAYS AFTER DATE OF AWARD, THE CONTRACTOR SHALL HAVE READY PREPRODUCTION SAMPLES OF THE ITEMS LISTED BELOW AT ITS PLANT AND BE PREPARED TO PERFORM ALL EXAMINATIONS AND TESTS REQUIRED BY THE SPECIFICATIONS.

ITEM NUMBER NUMBER OF SAMPLES

1 1 "2. THE CONTRACTING OFFICER AND THE GOVERNMENT INSPECTING ACTIVITY MUST BE NOTIFIED IN WRITING BY THE CONTRACTOR 15 DAYS PRIOR TO THE DATE THAT THE CONTRACTOR WILL BEGIN THE EXAMINATIONS AND TESTS. THE CONTRACTOR MUST FURNISH ALL FACILITIES, EQUIPMENT AND PERSONNEL REQUIRED TO AND MUST PERFORM ALL EXAMINATIONS AND TESTS REQUIRED BY THE SPECIFICATIONS. IF THE CONTRACTOR IS UNABLE TO PERFORM THE EXAMINATIONS AND TESTS ON THE DATE SPECIFIED IN THE AFORESAID NOTICE, THE GOVERNMENT RESERVES THE RIGHT TO CHARGE THE CONTRACTOR FOR ANY AND ALL COSTS INCURRED BY THE GOVERNMENT AS A RESULT OF SUCH FAILURE.

"3. WITHIN FIVE (5) WORKING DAYS AFTER COMPLETION OF THE EXAMINATIONS AND TESTS, THE CONTRACTOR SHALL PREPARE A TEST REPORT IN TRIPLICATE IN ACCORDANCE WITH MILITARY SPECIFICATION MIL-1-9107 AND AMENDMENT NO. 2 THERETO AND SUBMIT TWO COPIES TO THE CONTRACTING OFFICER AND ONE COPY TO THE INSPECTING ACTIVITY. TEN DAYS WILL BE REQUIRED BY THE CONTRACTING OFFICER TO REVIEW THE TEST REPORT AND APPROVE OR DISAPPROVE THE SAMPLE. PENDING APPROVAL OR DISAPPROVAL OF THE SAMPLE PRODUCTION WILL BE SUSPENDED IN ALL AREAS THAT MAY BE AFFECTED BY APPROVAL OR DISAPPROVAL OF THE SAMPLE. NOTICE OF APPROVAL OR DISAPPROVAL OF A SAMPLE WILL BE ISSUED BY THE CONTRACTING OFFICER IN WRITING TO THE CONTRACTOR WITH AN INFORMATION COPY TO THE GOVERNMENT INSPECTING ACTIVITY. APPROVAL OF THE SAMPLE WILL NOT RELIEVE THE CONTRACTOR FROM MEETING ALL THE REQUIREMENTS OF THE SPECIFICATIONS AND THE CONTRACT. IF THE SAMPLE IS NOT APPROVED OR DISAPPROVED WITHIN THE AFORESAID TEN DAY PERIOD, THE CONTRACTING OFFICER, UPON RECEIPT OF A TIMELY WRITTEN REQUEST FROM THE CONTRACTOR, SHALL DETERMINE THE DELAY CAUSED THEREBY AND EQUITABLY ADJUST THE DELIVERY DATE OR THE CONTRACT PRICE AS WELL AS ANY OTHER CONTRACTUAL PROVISION AFFECTED BY THE DELAY IN ACCORDANCE WITH THE PROCEDURE PROVIDED BY ARTICLE 2 OF THE GENERAL PROVISIONS. "4. IF THE INITIAL PREPRODUCTION SAMPLE IS DISAPPROVED, THE CONTRACTOR MUST SUBMIT A CORRECTED SAMPLE WITHIN 30 DAYS AFTER RECEIPT OF WRITTEN NOTICE OF DISAPPROVAL. THE CONTRACTOR SHALL REIMBURSE THE GOVERNMENT FOR ALL COSTS INCURRED WITH THE APPROVAL OR DISAPPROVAL OF THE CORRECTED SAMPLE. IF THE CONTRACTOR FAILS TO SUBMIT A CORRECTED SAMPLE WITHIN THE TIME SPECIFIED OR IF THE CORRECTED SAMPLE IS DISAPPROVED, THE CONTRACT SHALL BE SUBJECT TO TERMINATION FOR DEFAULT UNDER ARTICLE 11 A (1) OF THE GENERAL PROVISIONS OF THE CONTRACT. THE GOVERNMENT RESERVES THE RIGHT TO REQUIRE AN EQUITABLE ADJUSTMENT OF THE CONTRACT PRICE FOR ANY DELAY IN DELIVERY CAUSED BY THE INITIAL SUBMISSION OF AN INCORRECT SAMPLE AND THE SUBMITTING OF A CORRECTED SAMPLE. "5. THE PREPRODUCTION SAMPLES OFFERED MUST HAVE BEEN MANUFACTURED AT THE FACILITIES IN WHICH THE ITEM IS TO BE PRODUCED UNDER THE CONTRACT OR, IF THE PREPRODUCTION SAMPLE IS A COMPONENT, IN THE FACILITIES OF THE SUPPLIER FROM WHOM COMPONENTS WILL BE PURCHASED, AND A CERTIFICATION BY THE CONTRACTOR TO THIS EFFECT MUST ACCOMPANY THE SAMPLES WHICH ARE OFFERED. MATERIALS USED IN THE CONSTRUCTION OF THE PREPRODUCTION SAMPLES MUST BE IN STRICT CONFORMITY WITH THE APPLICABLE SPECIFICATIONS OF THE CONTRACT. ALL SAMPLES FURNISHED SHALL BE AT THE EXPENSE OF THE CONTRACTOR AND UPON THE COMPLETION OF THE EXAMINATIONS AND TESTS SHALL REMAIN THE PROPERTY OF THE CONTRACTOR. "6. THE GOVERNMENT RESERVES THE RIGHT TO WAIVE THE REQUIREMENT FOR PREPRODUCTION SAMPLES. BIDDERS WHO HAVE SUBMITTED AN APPROVED PREPRODUCTION SAMPLE OF THE SUPPLIES UNDER A PRIOR GOVERNMENT CONTRACT MUST FURNISH THE FOLLOWING INFORMATION IN THE SPACE PROVIDED BELOW OR BY SEPARATE ATTACHMENT TO THEIR BIDS.

"A. GOVERNMENT AGENCY APPROVING SAMPLE.

"B. CONTRACT NO.

"C. ATTACH DATA INDICATING COMPLIANCE WITH ALL SPECIFIED TEST CONDITIONS REQUIRED BY THE SPECIFICATION NOW IN EFFECT.

"D. BID PRICE IF PREPRODUCTION SAMPLE REQUIREMENT IS WAIVED.

ITEM NO.UNIT PRICE

"E. ADVANCEMENT IN DELIVERY SCHEDULE IF PREPRODUCTION SAMPLE REQUIREMENT IS WAIVED. "THE BID PRICE GIVEN ABOVE WILL BE USED IN THE EVALUATION OF THE LOWEST BIDDER ONLY IN THE EVENT THAT THE GOVERNMENT DETERMINES AS TO A PARTICULAR BIDDER THAT THE PREPRODUCTION SAMPLE REQUIREMENT WILL BE WAIVED. "APPROVED PREPRODUCTION SAMPLE WILL BE RETAINED AT CONTRACTOR'S PLANT FOR RECONDITIONING, IF NECESSARY, AND USE AS A PROTOTYPE OR OTHER PURPOSES, IF REQUESTED BY CONTRACTOR, WITH FINAL ACCEPTANCE AT CONTRACTOR'S PLANT.'

IN RESPONSE TO THE INVITATION, THE HOOVER ELECTRIC COMPANY SUBMITTED A BID OFFERING TO FURNISH THE PREPRODUCTION SAMPLE UNDER ITEM 1 AND THE 17 WINCHES UNDER ITEM 2 AT A UNIT PRICE OF $7,480. THE BID OF THE COMPANY WAS ACCEPTED ON JUNE 30, 1964.

THE CONTRACT PROVIDES FOR THE FURNISHING OF ONE PREPRODUCTION SAMPLE OF THE POWER OPERATED WINCH UNDER ITEM 1 AND FOR FURNISHING 17 EACH OF THE APPROVED ITEM. YOU STATE THAT THE HOOVER ELECTRIC COMPANY MANUFACTURED AND TESTED ITEM 1 AND THE GOVERNMENT ACCEPTED AND PAID THE COMPANY THE CONTRACT PRICE FOR THAT ITEM, BUT ALLOWED THE ITEM TO BE RETAINED BY THE COMPANY FOR USE AS A PROTOTYPE AS AUTHORIZED BY PARAGRAPH 6E OF THE BASIC CONTRACT. THE RECORD INDICATES THAT ON MARCH 15, 1965, THE CONTRACTING OFFICER ISSUED MODIFICATION NO. 3 TO THE BASIC CONTRACT WHICH PROVIDED AS FOLLOWS:

"THE FOLLOWING SHIP TO ADDRESSES ARE FURNISHED THE CONTRACTOR FOR ITEMS 1 AND 2.' BELOW THIS NOTE WAS LISTED THE ADDRESSES OF THREE AIR FORCE BASES AND A BREAKDOWN OF THE 18 WINCHES TO BE DELIVERED TO EACH OF THESE BASES. UPON RECEIPT OF MODIFICATION NO. 3, THE CONTRACTOR THEN SHIPPED 18 UNITS TO THE VARIOUS LOCATIONS LISTED THEREIN. YOU STATE THAT THE CONTRACTOR WAS PAID FOR 17 OF THE UNITS SHIPPED BUT THAT PAYMENT WAS WITHHELD ON THE 18TH UNIT SINCE IT WAS CONSIDERED TO HAVE BEEN THE PREPRODUCTION SAMPLE WHICH WAS PAID FOR AT THE TIME IT WAS APPROVED AND ACCEPTED BY THE GOVERNMENT. PAYMENT THEREFORE HAS BEEN DENIED ON THE BASIS THAT THE CONTRACTOR HAS RECEIVED PAYMENT FOR 18 UNITS WHICH WAS THE TOTAL REQUIREMENT OF THE CONTRACT.

YOU STATE THAT THE CONTRACTOR'S CLAIM IS BASED ON ITS CONTENTION THAT ITEM 1 WAS FOR THE FURNISHING OF A TEST REPORT AND NOT FOR THE MANUFACTURE AND DELIVERY OF A PREPRODUCTION SAMPLE TO THE AIR FORCE. IT IS ALSO THE CONTENTION OF THE CONTRACTING OFFICER THAT ITEM NO. 1 WAS NOT FOR THE FURNISHING OF A PREPRODUCTION SAMPLE BUT FOR A TEST REPORT ON THAT SAMPLE.

THE QUESTION FOR CONSIDERATION IS WHETHER THE BASIC CONTRACT REQUIRED THE CONTRACTOR TO DELIVER 17 OR 18 UNITS. THE INVITATION SCHEDULE PROVIDED A SPACE UNDER ITEM 1 FOR SHOWING THE PRICE OF THE PREPRODUCTION SAMPLE AND IN THIS SPACE THE HOOVER ELECTRIC COMPANY INSERTED A PRICE OF $7,480. SUBSEQUENT TO AWARD, THE CONTRACTOR BY MODIFICATION NO. 1 AGREED TO DECREASE THE PRICE OF ITEM 1 BY $237 IN CONSIDERATION FOR EXTENSION OF THE DELIVERY SCHEDULE AS TO ITEM NO. 1 FROM SEPTEMBER 1, 1964, TO NOVEMBER 16, 1964. BY MODIFICATION NO. 5 THE PRICE OF ITEM 1 WAS FURTHER REDUCED BY $980 AS TOTAL CONSIDERATION FOR THE ACCEPTANCE OF THE TEST REPORT AS SUBMITTED BY THE CONTRACTOR AND APPROVAL BY THE CONTRACTING OFFICE OF THE INCREASED WEIGHT OF ALL UNITS TO BE DELIVERED UNDER THE CONTRACT.

IN A MEMORANDUM DATED MARCH 31, 1967, FROM THE DEFENSE CONSTRUCTION SUPPLY CENTER, THE PROCURING ACTIVITY, TO THE WARNER ROBINS AIR MATERIEL AREA, ROBINS AIR FORCE BASE, GEORGIA, THE REQUISITIONING ACTIVITY, IT WAS STATED THAT REVIEW OF THE CONTRACT FILE INDICATES THAT THE INTENT OF THE AIR FORCE PURCHASE REQUEST WAS FOR THE PURCHASE OF 18 POWER OPERATED DRUM WINCHES, FSN3950-571-9248, THE FIRST OF WHICH WAS TO BE A PREPRODUCTION OR FIRST ARTICLE AND TO BE INCLUDED IN DELIVERIES TO THE AIR FORCE. WHILE THE INTENT OF THE PURCHASE REQUEST MAY HAVE BEEN THAT 18 UNITS WOULD BE DELIVERED TO THE AIR FORCE, WE ARE OF THE OPINION THAT THE INVITATION, AS DRAWN, PROVIDED FOR DELIVERY OF ONLY 17 UNITS (ITEM 2) RATHER THAN 18 UNITS TO THE AIR FORCE. THIS CONCLUSION IS BASED UPON THE FACT THAT THE INVITATION PROVIDED THAT ALL SAMPLES "UPON COMPLETION OF THE EXAMINATIONS AND TESTS SHALL REMAIN THE PROPERTY OF THE CONTRACTOR.' ALSO, SINCE THE INVITATION CONTAINED A PROVISION FOR WAIVING THE REQUIREMENT FOR A PREPRODUCTION SAMPLE IN CASES INVOLVING BIDDERS WHO HAVE SUBMITTED AN APPROVED PREPRODUCTION SAMPLE OF THE SUPPLIES UNDER A PRIOR GOVERNMENT CONTRACT, IT IS OBVIOUS THAT HAD THE CONTRACT BEEN AWARDED TO A PREVIOUS SUPPLIER OF THE ITEM BEING PROCURED, THE SUPPLIER WOULD HAVE BEEN REQUIRED TO FURNISH ONLY 17 UNITS -- THE QUANITY CALLED FOR UNDER ITEM 2 OF THE INVITATION. THE FACT THAT A DELIVERY DATE FOR THE PREPRODUCTION SAMPLE WAS SPECIFIED IN THE INVITATION IS NOT A SIGNIFICANT FACTOR SINCE A DELIVERY DATE WAS FIXED ONLY FOR THE PURPOSE OF ESTABLISHING A PROSPECTIVE DATE FOR THE BEGINNING OF EXAMINATIONS AND TESTING OF THE PREPRODUCTION SAMPLE.

SINCE THE HOOVER ELECTRIC COMPANY HAS DELIVERED, AND THE GOVERNMENT PRESUMABLY ACCEPTED, 18 UNITS AND WHEREAS IT WAS REQUIRED UNDER THE CONTRACT TO FURNISH ONLY 17 UNITS, THE COMPANY MAY BE PAID FOR THE ADDITIONAL UNIT AT THE CONTRACT PRICE OF $7,480, LESS ANY APPLICABLE DISCOUNT.

ACCORDINGLY, THE VOUCHER, WHICH IS RETURNED HEREWITH, MAY BE PAID IF OTHERWISE CORRECT.