B-166067, MAR. 5, 1969

B-166067: Mar 5, 1969

Additional Materials:

Contact:

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

 

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

HARRISON: REFERENCE IS MADE TO YOUR LETTER OF JANUARY 31. SIX BIDS FOR THE WORK WERE OPENED ON JANUARY 15. 478 WAS RECEIVED FROM THE CONTRACTOR. THESE REQUIREMENTS WERE THEN CONFIRMED BY CONTRACTOR'S LETTER OF JANUARY 16. YOUR PROCUREMENT OFFICE SUPPLIED THE MATERIAL IN ACCORDANCE WITH THE SPECIFICATIONS AND WAS UNAWARE THAT THE CONTRACT COULD NOT BE ACCOMPLISHED BY THE CONTRACTOR UNTIL RECEIPT OF A LETTER DATED FEBRUARY 1. THE SPECIFICATIONS WERE READVERTISED TO INSURE OBTAINING A QUALIFIED BIDDER WHO COULD MEET THE TIGHT PRODUCTION SCHEDULE AND PRODUCE A QUALITY PRODUCT. FIVE BIDS FOR THE READVERTISEMENT WERE OPENED ON FEBRUARY 15. THE NEW CONTRACT WAS AWARDED TO THE LOW RESPONSIVE BIDDER.

B-166067, MAR. 5, 1969

TO MR. HARRISON:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 31, 1969, WITH ENCLOSURES, CONCERNING THE APPEAL OF THE ALLSTATE PRINTING COMPANY, PHILADELPHIA, PENNSYLVANIA, FROM THE ASSESSMENT OF EXCESS COSTS IN THE AMOUNT OF $3,282 INCURRED BY THE GOVERNMENT IN PROCURING SUPPLIES AND SERVICES SUBSEQUENT TO THE CONTRACTOR'S FAILURE TO COMPLY WITH THE TERMS OF ITS CONTRACT.

THE REQUEST FOR RELIEF, FOLLOWING THE CONTRACTOR'S NOTICE TO THE GOVERNMENT THAT IT DESIRED TO BE HELD IN DEFAULT, RELATES TO JACKET NO. 284-911, PURCHASE ORDER NO. 51401, DATED JANUARY 16, 1968, FOR THE PRINTING AND BINDING OF 11,000 COPIES OF A 124-PAGE, SMYTH-SEWED BOOK WITH THE TEXT AND COVER PRINTING IN FOUR COLOR PROCESS INKS.

SIX BIDS FOR THE WORK WERE OPENED ON JANUARY 15, 1968. THE LOW ACCEPTABLE BID OF $7,478 WAS RECEIVED FROM THE CONTRACTOR. PRIOR TO THE AWARD THE CONTRACTING OFFICER CONTACTED MR. THOMAS CAMERON, THE CONTRACTOR'S MANAGER, BY TELEPHONE ON JANUARY 16, 1968, AND DISCUSSED THE QUALITY REQUIREMENTS CONTAINED IN THE SPECIFICATIONS. THESE REQUIREMENTS WERE THEN CONFIRMED BY CONTRACTOR'S LETTER OF JANUARY 16, 1968. YOUR PROCUREMENT OFFICE SUPPLIED THE MATERIAL IN ACCORDANCE WITH THE SPECIFICATIONS AND WAS UNAWARE THAT THE CONTRACT COULD NOT BE ACCOMPLISHED BY THE CONTRACTOR UNTIL RECEIPT OF A LETTER DATED FEBRUARY 1, 1968, IN WHICH THE CONTRACTOR'S MANAGER ADVISED THE PROCUREMENT OFFICE THAT ITS PRESS EQUIPMENT WOULD BE UNABLE TO PRODUCE A QUALITY PRODUCT WITHOUT EXTENSIVE AND LENGTHY REPAIRS. HE STATED THEY COULD NOT DELIVER THE JOB AND ON FEBRUARY 2, 1968, REQUESTED BY LETTER THAT ITS BID FOR JACKET 284- 911 BE DEFAULTED. THE SPECIFICATIONS WERE READVERTISED TO INSURE OBTAINING A QUALIFIED BIDDER WHO COULD MEET THE TIGHT PRODUCTION SCHEDULE AND PRODUCE A QUALITY PRODUCT. FIVE BIDS FOR THE READVERTISEMENT WERE OPENED ON FEBRUARY 15, 1968, AND THE NEW CONTRACT WAS AWARDED TO THE LOW RESPONSIVE BIDDER, DOUBLE DOT PRESS ON FEBRUARY 15, 1968, IN THE AMOUNT OF $10,760.

ON MARCH 19, 1968, THE CONTRACTOR WAS DECLARED IN DEFAULT OF CONTRACT BY THE PROCUREMENT SECTION OF YOUR OFFICE AND THE FINANCE AND ACCOUNTS DIVISION WAS INSTRUCTED TO RECOVER THE DIFFERENCE IN COST FROM THE CONTRACTOR, WHICH WAS NOTIFIED OF THE DEFAULT ACTION BY LETTER OF MARCH 20, 1968, IN WHICH IT WAS ADVISED THAT THE GOVERNMENT EXERCISED THE RIGHT OF DEFAULT IN THIS CASE TO HAVE THE WORK AS SPECIFIED IN PURCHASE ORDER 51401 PRODUCED ELSEWHERE AND THAT ALL COSTS IN EXCESS OF ITS QUOTATION AS A RESULT THEREOF WOULD BE CHARGED TO AND RECOVERED FROM IT AS THE DEFAULTING CONTRACTOR.

BY LETTER DATED DECEMBER 9, 1968, THE CONTRACTOR PROTESTED THE ASSESSMENT OF EXCESS COSTS ARISING OUT OF ITS DEFAULT, STATING IN PART, THAT A REPLACEMENT PART TO ITS PRESS COULD NOT BE OBTAINED WITHOUT SUBSTANTIAL DELAY AND THAT IT WAS THE DELAY THAT PREVENTED ITS CONTINUANCE WITH THE PRODUCTION OF THE BOOKS. THE CONTRACTING OFFICER REJECTED THE APPEAL ON DECEMBER 19, 1968, BUT AFFORDED THE CONTRACTOR AN OPPORTUNITY TO PRESENT ITS VIEWS AND ANY ADDITIONAL EVIDENCE IN SUPPORT OF A SUBSEQUENT APPEAL. RECONSIDERATION HAS BEEN REQUESTED ON THE BASIS OF THE CONTRACTOR'S PERILOUS FINANCIAL STATUS. AFTER A REEVALUATION OF THE CIRCUMSTANCES, IT IS THE CONTRACTING OFFICER'S OPINION THAT THE CONTRACTOR ACTED IN GOOD FAITH IN BIDDING AND ACCEPTING THE ORDER BELIEVING ITS EQUIPMENT WAS CAPABLE OF OPERATING PROPERLY, THAT THE APPLICATION OF THE DEFAULT PROVISION WILL RESULT IN EXTREME HARDSHIP TO THE CONTRACTOR AND RECOMMENDS THAT THIS ,PENALTY" BE REMITTED, IN WHICH RECOMMENDATION YOUR OFFICE CONCURS.

ARTICLE 18 OF THE UNITED STATES GOVERNMENT PRINTING OFFICE CONTRACT TERMS NO. 1 (GPO FORM NO. 198) PROVIDES, IN PERTINENT PART, AS FOLLOWS:

"DEFAULT. -- (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 MAKE DELIVERY OF THE SUPPLIES OR 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, SUPPLIES OR 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: PROVIDED, THAT THE CONTRACTOR SHALL CONTINUE THE PERFORMANCE OF THIS CONTRACT TO THE EXTENT NOT TERMINATED UNDER THE PROVISIONS OF THIS CLAUSE.

"/C) EXCEPT WITH RESPECT TO DEFAULTS OF SUBCONTRACTORS 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. SUCH CAUSES MAY INCLUDE, BUT ARE NOT RESTRICTED TO, ACTS OF GOD OR OF THE PUBLIC ENEMY, ACTS OF THE GOVERNMENT IN EITHER ITS SOVEREIGN OR CONTRACTUAL CAPACITY, FIRES, FLOODS, EPIDEMICS, QUARANTINE RESTRICTIONS, STRIKES, FREIGHT EMBARGOES, AND UNUSUALLY SEVERE WEATHER; BUT IN EVERY CASE THE FAILURE TO PERFORM MUST BE BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE CONTRACTOR. IF THE FAILURE TO PERFORM IS CAUSED BY THE DEFAULT OF A SUBCONTRACTOR, AND IF SUCH DEFAULT ARISES OUT OF CAUSES BEYOND THE CONTROL OF BOTH THE CONTRACTOR AND SUBCONTRACTOR, AND WITHOUT THE FAULT OR NEGLIGENCE OF EITHER OF THEM, THE CONTRACTOR SHALL NOT BE LIABLE FOR ANY EXCESS COSTS FOR FAILURE TO PERFORM, UNLESS THE SUPPLIES OR SERVICES TO BE FURNISHED BY THE SUBCONTRACTOR WERE OBTAINABLE FROM OTHER SOURCES IN SUFFICIENT TIME TO PERMIT THE CONTRACTOR TO MEET THE REQUIRED DELIVERY SCHEDULE.'

UPON ACCEPTANCE OF THE BID A VALID AND ENFORCEABLE CONTRACT WAS FORMED AND THE GOVERNMENT BECAME VESTED WITH THE RIGHT TO RECEIVE PERFORMANCE STRICTLY IN ACCORDANCE WITH THE TERMS OF THE BID, OR TO ENFORCE THE PROVISIONS THEREOF UPON DEFAULT. BY LETTER OF FEBRUARY 1, 1968, AND BEFORE THE REQUIRED TIME OF DELIVERY, THE CONTRACTOR STATED "I HAVE BEEN INFORMED BY OUR PRESS MECHANIC THAT OUR PRESS CAN NOT WITHOUT EXTENSIVE AND LENGTHY REPAIRS, PRODUCE A JOB THAT WE WOULD CONSIDER FIRST CLASS IN EVERY WAY. WE ARE THEREFORE UNABLE TO DELIVER THIS JOB. WE ARE ASKING YOUR HELP AND ADVICE AS TO HOW OR WHAT, WE CAN DO TO RESOLVE THIS PROBLEM TO YOUR SATISFACTION.' BY LETTER OF FEBRUARY 2, 1968, IT STATED FURTHER,"TO CLARIFY OUR PREVIOUS LETTER, WE WISH TO DECLARE DEFAULT IN BID ON JKT. 284-911. MATERIAL WILL FOLLOW AS SOON AS POSSIBLE.'

THE GOVERNMENT DID NOT CAUSE OR CONTRIBUTE TO THE DIFFICULTIES ENCOUNTERED BY THE CONTRACTOR. THERE IS NOTHING IN THE RECORD TO SUPPORT THE CONTRACTOR'S ALLEGATION THAT THE GOVERNMENT SUGGESTED IT DEFAULT IN THE PERFORMANCE OF THE CONTRACT. THE CONTRACTOR DID NOT ASK FOR AN EXTENSION OF CONTRACT TIME OR ATTEMPT TO EXCUSE AN ANTICIPATED DELAY. SIMPLY STATED IT COULD NOT COMPLY WITH THE CONTRACT. THEREFORE, THE LETTERS OF FEBRUARY 1 AND 2, 1968, CONSTITUTED AN ANTICIPATORY REPUDIATION, SUCH AS TO ENTITLE THE GOVERNMENT TO TREAT IT AS AN ANTICIPATORY BREACH OF CONTRACT. UNDER THE PREVAILING LEGAL AUTHORITIES, A POSITIVE STATEMENT, BY THE PROMISOR TO THE PROMISEE THAT THE PROMISOR CANNOT PERFORM, IS SUFFICIENT TO CONSTITUTE AN ANTICIPATORY REPUDIATION WHICH IS A TOTAL BREACH OF CONTRACT. MOBLEY V NEW YORK LIFE INSURANCE CO., 295 U.S. 632, 638, AND CASES CITED THEREIN; ALSO, RESTATEMENT OF CONTRACTS, SECTION 318 (A). IT IS UNNECESSARY THAT THE PROMISOR IN SUCH CASE STATE THAT HE IS UNWILLING TO PERFORM FOR HE MAKES IT CLEAR THAT HE IN FACT WILL NOT PERFORM. SEE 5 WILLISTON ON CONTRACTS, SECTION 1326 (REVISED). 41 COMP. GEN. 382.

WE BELIEVE THAT THE FAILURE TO PERFORM WAS DUE TO CONTRACTOR'S FAILURE TO TAKE INTO ACCOUNT IN ITS BIDDING THE FORESEEABLE POSSIBILITY OF BREAKDOWN OR MACHINE FAILURE. INDEED IT APPEARS THAT AT THE TIME OF BEGINNING THE WORK ITS PRESS WAS NOT IN CONDITION TO FURNISH THE STANDARD OF QUALITY REQUIRED BY THE CONTRACT AND THAT THIS CONDITION SHOULD HAVE BEEN KNOWN BY THE CONTRACTOR. WE BELIEVE, THEREFORE, THAT THE DEFAULT WAS DUE SOLELY TO THE CONTRACTOR'S OWN FAULT AND NEGLIGENCE.

CONCERNING A REDUCTION, CANCELLATION OR WAIVER OF THE EXCESS COSTS, THERE APPEARS TO BE NO QUESTION AS TO THE PROPRIETY OF SUCH CHARGES IN THESE CIRCUMSTANCES AND THE GOVERNMENT'S RIGHT TO REIMBURSEMENT THEREFOR UNDER THE TERMS OF THE CONTRACT. IT IS WELL ESTABLISHED THAT UNLESS SPECIFICALLY AUTHORIZED BY LAW, AN OFFICIAL OF THE GOVERNMENT MAY NOT GIVE AWAY OR REMIT A CLAIM DUE THE GOVERNMENT. 20 COMP. GEN. 652, 659. THE AUTHORITY VESTED IN THIS OFFICE BY 41 U.S.C. 256A TO REMIT LIQUIDATED DAMAGE DOES NOT EXTEND TO A WAIVER OR REMISSION OF PROPERLY ESTABLISHED EXCESS COSTS, AND WE ARE AWARE OF NO OTHER PROVISION OF LAW WHICH WOULD AUTHORIZE SUCH ACTION. SEE 46 COMP. GEN. 252 AND 45 COMP. GEN. 823.

THE FILES FORWARDED WITH YOUR LETTER OF JANUARY 31, 1969, ARE RETURNED.