B-170920, NOV. 20, 1970

B-170920, NOV. 20, 1970

CONTRACTS - PAYMENTS - SUBCONTRACTOR'S CLAIMS CLAIM OF SUBCONTRACTOR WHO FURNISHED TESTING EQUIPMENT TO CHIMERA CORPORATION FOR PERFORMANCE OF CONTRACTS WITH U.S. ARMY MOBILITY EQUIPMENT COMMAND AND WAS NOT PAID BECAUSE CONTRACTOR BECAME BANKRUPT. THE FACT THAT THE SUBCONTRACTS CONTAINED DEFENSE PRIORITY RATINGS DOES NOT CREATE ANY RELATIONSHIP CONTRACTUAL OR OTHERWISE BETWEEN GOVERNMENT AND A SUPPLIER OF ITS CONTRACTOR. ASSISTANCE IS THEREFORE PRECLUDED.

TO BOUTROS INSTRUMENT LABORATORY:

REFERENCE IS MADE TO CORRESPONDENCE FORWARDED TO OUR OFFICE BY MEMBERS OF CONGRESS CONCERNING YOUR CLAIM IN THE AMOUNT OF $3,819.05, FOR TESTING EQUIPMENT SUPPLIED TO THE CHIMERA CORPORATION.

THE DEFENSE SUPPLY AGENCY HAS REPORTED TO OUR OFFICE THAT ON JUNE 28, 1968, AND ON DECEMBER 30, 1968, CONTRACTS WERE AWARDED TO CHIMERA BY THE UNITED STATES ARMY MOBILITY EQUIPMENT COMMAND. BOTH CONTRACTS WERE FOR MOBILE GENERATOR SETS, AND REQUIRED THE ASSEMBLY OF CONTRACTOR FURNISHED GENERATORS AND GOVERNMENT-FURNISHED ENGINES. DURING THE COURSE OF PERFORMANCE OF THE CONTRACTS, THE CONTRACTOR EXPERIENCED FINANCIAL DIFFICULTIES AND AS A RESULT THEREOF, ON JUNE 21, 1969, FILED A PETITION FOR REORGANIZATION UNDER CHAPTER X OF THE BANKRUPTCY ACT IN THE UNITED STATES DISTRICT COURT, OMAHA, NEBRASKA. THEREAFTER, THE CONTRACTS WERE COMPLETED UNDER THE SUPERVISION OF THE TRUSTEE IN BANKRUPTCY AND PAYMENT MADE TO THE TRUSTEE BY THE GOVERNMENT.

THE CORRESPONDENCE FORWARDED TO OUR OFFICE INDICATES THAT PRIOR TO INSTITUTION OF THE BANKRUPTCY PROCEEDINGS CHIMERA ACQUIRED TEST EQUIPMENT FROM YOUR FIRM FOR TESTS IT WAS REQUIRED TO PERFORM UNDER THE CONTRACTS, AND THAT YOU HAVE NOT RECEIVED PAYMENT FOR SUCH EQUIPMENT. APPARENTLY IT IS YOUR CONTENTION THAT TITLE TO THE TEST EQUIPMENT NEVER PASSED TO CHIMERA BECAUSE PAYMENT WAS NOT MADE AND THE ORDERS UNDER WHICH THE EQUIPMENT WAS FURNISHED WERE ASSIGNED PRIORITY RATINGS UNDER THE DEFENSE MATERIAL SYSTEM (DMS), 32A CFR CH. VI, DMS REG. 1.

IT APPEARS THAT THE TWO CONTRACTS WITH CHIMERA CARRIED PRIORITY RATINGS DO C9- CLASS B, PURSUANT TO APPLICABLE DMS REGULATIONS, WHICH WERE PROMULGATED PURSUANT TO AND ARE IN IMPLEMENTATION OF THE DEFENSE PRODUCTION ACT OF 1950, AS AMENDED, 50 APP. U.S.C. 2061, ET SEQ. ALSO IMPLEMENTING THE DEFENSE PRODUCTION ACT OF 1950 ARE REGULATIONS OF THE BUSINESS AND DEFENSE SERVICES ADMINISTRATION, DEPARTMENT OF COMMERCE. SEE 32A CFR CH. I, BDSA REG. 1. PURSUANT TO THE STATUTE AND IMPLEMENTING REGULATIONS, GOVERNMENT AGENCIES ARE AUTHORIZED TO REQUIRE THAT PERFORMANCE UNDER CONTRACTS OR ORDERS WHICH ARE DEEMED NECESSARY OR APPROPRIATE TO PROMOTE THE NATIONAL DEFENSE SHALL TAKE PRIORITY OVER PERFORMANCE UNDER ANY OTHER CONTRACT OR ORDER, AND, FOR THE PURPOSE OF ASSURING SUCH PRIORITY, TO REQUIRE ACCEPTANCE AND PERFORMANCE OF SUCH CONTRACTS OR ORDERS IN PREFERENCE TO OTHER CONTRACTS OR ORDERS.

UNDER THE REGULATIONS, GOVERNMENT CONTRACTORS ARE AUTHORIZED TO EXTEND ANY PRIORITY RATING TO CONTRACTS WITH THEIR SUPPLIERS, WHO, WITH CERTAIN EXCEPTIONS, MUST ACCEPT AND FILL THE ORDER. ONE SUCH EXCEPTION IS BDSA 10(C)(1), WHICH PROVIDES THAT IF THE GOVERNMENT CONTRACTOR IS UNWILLING OR UNABLE TO MEET REGULARLY ESTABLISHED PRICES AND TERMS OF SALE OF A SUPPLIER, THERE IS NO OBLIGATION TO ACCEPT AND FILL AN ORDER BEARING A RATING. NEITHER THE STATUTE NOR REGULATIONS CREATE ANY RELATIONSHIPS, CONTRACTUAL OR OTHERWISE, BETWEEN THE GOVERNMENT AND A SUPPLIER OF ITS CONTRACTOR, PROVIDE FOR PAYMENT BY THE GOVERNMENT OF ITS CONTRACTOR'S OBLIGATION TO ITS SUPPLIER, OR AFFECT THE TERMS OF SALE, INCLUDING PASSAGE OF TITLE.

IN THESE CIRCUMSTANCES, OUR OFFICE IS UNABLE TO BE OF ASSISTANCE TO YOU IN PURSUANCE OF YOUR CLAIM, WHICH APPEARS TO BE FOR CONSIDERATION BY THE COURT IN THE BANKRUPTCY-PROCEEDINGS. IN THIS CONNECTION, WE UNDERSTAND THAT AT A HEARING ON OCTOBER 5, 1970, THE COURT AGREED TO RULE AT A LATER DATE WHETHER THE EQUIPMENT TO WHICH YOU CLAIM TITLE IS TO BE INCLUDED IN THE PROPOSED SALE OF CHIMERA'S ASSETS.