B-173356, SEP 27, 1971

B-173356, SEP 27, 1971

CONTRACTS - ESTIMATED QUANTITIES - GOOD FAITH REQUIREMENT DECISION AUTHORIZING THE DEFENSE SUPPLY AGENCY TO NEGOTIATE A SETTLEMENT OF A CLAIM BY HANDRIE'S, INC., FOR AN INCREASE IN THE PRICES TO BE PAID BY THE GOVERNMENT FOR ICE CREAM AND FROZEN DESSERT PRODUCTS UNDER A CONTRACT ISSUED BY THE DEFENSE PERSONNEL SUPPORT CENTER, NEW YORK. GENERALLY, RELIEF WILL NOT BE GRANTED WHERE HARDSHIP RESULTS FROM SUBSTANTIAL VARIATIONS IN THE ESTIMATES STATED IN REQUIREMENTS CONTRACTS AND SUCH ESTIMATES WERE ARRIVED AT IN GOOD FAITH. HERE, HOWEVER, WHERE GROSSLY OVERSTATED ESTIMATES OF A PRIOR PROCUREMENT WERE CARRIED OVER TO THE PRESENT ESTIMATE WITHOUT ANY REGARD TO THE ACTUAL PAST ORDERING EXPERIENCE, AND THAT PRIOR CONTRACT HAD BEEN FOR 9 MONTHS, NOT 6 MONTHS LIKE THE PRESENT PROCUREMENT, IT CANNOT BE SAID THAT THE ESTIMATES WERE BASED ON THE BEST INFORMATION AVAILABLE, NOTWITHSTANDING THE REPRESENTATION TO THAT EFFECT IN THE IFB. DUE TO THE LACK OF GOOD FAITH, A SETTLEMENT SHOULD BE NEGOTIATED.

TO GENERAL WALLACE H. ROBINSON:

REFERENCE IS MADE TO LETTER DSAH-G DATED AUGUST 16, 1971, FROM THE ASSISTANT COUNSEL, TRANSMITTING A REPORT ON THE REQUEST OF HENDRIE'S INC. FOR AN INCREASE IN THE PRICES TO BE PAID BY THE GOVERNMENT FOR ICE CREAM AND FROZEN DESSERT PRODUCTS UNDER CONTRACT DSA136-71-D-W-514, ISSUED BY THE DEFENSE PERSONNEL SUPPORT CENTER (DPSC), NEW YORK.

THE CONTRACT WAS LET BY DPSC ON BEHALF OF THE NAVAL SUPPLY CENTER (NSC), NEWPORT, RHODE ISLAND, FOR THE ABOVE ITEMS ON A REQUIREMENTS BASIS FOR THE PERIOD FROM APRIL 1 TO SEPTEMBER 30, 1971 - A PERIOD OF 6 MONTHS. THE GIST OF THE REPORT FROM THE ASSISTANT COUNSEL IS THAT THE ESTIMATED QUANTITIES STATED IN THE INVITATION FOR BIDS AND RESULTING CONTRACT WERE GROSSLY OVERSTATED AND NOT BASED ON THE BEST INFORMATION AVAILABLE AS TO THE ACTUAL NEEDS OF NSC. IN THIS CONNECTION, THE REPORT STATES THAT MIDWAY THROUGH THE TERM OF THE CONTRACT ONLY 6,444 GALLONS OF AN ESTIMATED 70,000 GALLONS OF BULK ICE CREAM HAD BEEN ORDERED AND THAT IT IS ANTICIPATED THAT PURCHASES OF THIS MAJOR CONTRACT ITEM WILL NOT GREATLY EXCEED 20 PERCENT OF THE TOTAL ESTIMATED QUANTITY OF 70,000 GALLONS.

MORE IMPORTANTLY, THE REPORT STATES THAT THE ESTIMATED QUANTITIES FOR THE INSTANT PROCUREMENT WERE DERIVED FROM THE ESTIMATES STATED ON THE IMMEDIATELY PRECEDING CONTRACT FOR THE SAME ITEMS. UNFORTUNATELY, THAT CONTRACT WAS FOR 9 MONTHS' REQUIREMENTS RATHER THAN 6. MOREOVER, AN EXAMINATION BY NSC OF ACTUAL PURCHASE EXPERIENCE UNDER THAT CONTRACT WOULD HAVE REVEALED THAT ONLY 36 PERCENT OF THE ESTIMATED QUANTITY REQUIREMENT HAD, IN FACT, BEEN ORDERED.

GENERALLY, THE DECISIONS OF THE COURTS AND OUR OFFICE HAVE INDICATED THAT RELIEF WILL NOT BE GRANTED WHERE HARDSHIP RESULTS FROM SUBSTANTIAL VARIATIONS IN THE ESTIMATES STATED IN REQUIREMENTS CONTRACTS AND SUCH ESTIMATES WERE ARRIVED AT IN GOOD FAITH. SEE BRAWLEY V UNITED STATES, 96 U.S. 168 (1877); 37 COMP. GEN. 688 (1958); 47 ID. 365 (1968). WE BELIEVE, HOWEVER, THAT A SHOWING OF GOOD FAITH REQUIRES THAT A DETERMINATION OF ESTIMATED REQUIREMENTS BE BASED ON THE BEST INFORMATION AVAILABLE AT THE TIME THE ESTIMATES ARE FORMULATED. SEE 37 COMP. GEN., SUPRA.

ON THE RECORD BEFORE US, IT DOES NOT APPEAR THAT NSC MADE ANY BONA FIDE ATTEMPT WHATEVER TO DETERMINE WHAT ITS ACTUAL NEEDS WOULD BE. IT MERELY CARRIED OVER TO THE PRESENT PROCUREMENT THE GROSSLY OVERSTATED ESTIMATES OF A PRIOR PROCUREMENT WITHOUT GIVING ANY REGARD TO THE ACTUAL PAST ORDERING EXPERIENCE. THE FACT THAT THIS PRIOR CONTRACT WAS FOR 9 MONTHS' REQUIREMENTS, NOT 6, MERELY COMPOUNDS THE ERROR AND IS FURTHER EVIDENCE THAT NO REAL CONSIDERATION WAS GIVEN TO ESTABLISHING ACCURATE ESTIMATES FOR THE PRESENT PROCUREMENT EVEN THOUGH THE BASIS FOR SUCH ESTIMATES WAS READILY AT HAND. IT CANNOT BE SAID THAT THE ESTIMATED REQUIREMENTS OF THE INSTANT PROCUREMENT WERE BASED ON THE BEST INFORMATION AVAILABLE EVEN THOUGH AN EXPRESS REPRESENTATION TO THAT EFFECT WAS MADE IN THE INVITATION FOR BIDS. THE GOVERNMENT, THEN, HAS NOT ONLY EVIDENCED A LACK OF GOOD FAITH IN ESTABLISHING ITS ESTIMATED REQUIREMENTS BUT HAS MISREPRESENTED THE ACCURACY OF THOSE REQUIREMENTS TO HENDRIE'S.

IN SUCH CIRCUMSTANCES WE HAVE PREVIOUSLY HELD THAT THE CONTRACTOR IS ENTITLED TO DAMAGES. B-169037, MAY 4, 1970. ACCORDINGLY, YOUR AGENCY IS HEREBY AUTHORIZED TO NEGOTIATE A SETTLEMENT OF THE CLAIM OF HENDRIE'S.