B-182736, DEC 16, 1974

B-182736: Dec 16, 1974

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ASPR SEC. 7-106 DOES NOT HAVE RETROACTIVE EFFECT. THIS WAS A REQUIREMENT TYPE CONTRACT FOR A PERIOD OF APPROXIMATELY 2 YEARS. HOOVER CONTENDS THAT THESE ADDITIONAL COSTS WERE NEITHER CONTEMPLATED NOR FORESEEN AT THE TIME THE CONTRACT WAS ENTERED INTO. IT IS A WELL-SETTLED PROPOSITION THAT WHERE A GOVERNMENT CONTRACT CONTAINS AN EXPRESS STIPULATION AS TO THE AMOUNT OF COMPENSATION TO BE PAID. NO PROVISION IS MADE FOR ANY INCREASE IN THE EVENT PERFORMANCE BECOMES MORE EXPENSIVE OR DIFFICULT. THE FACT THAT THE COST OF PERFORMANCE IS INCREASED BY FACTORS WHICH DO NOT CONSTITUTE UNDUE INTERFERENCE BY THE GOVERNMENT AS A CONTRACTING PARTY PROVIDES NO BASIS FOR EQUITABLE PRICE RELIEF. 53 COMP. AS WAS STATED IN PENN BRIDGE CO.

B-182736, DEC 16, 1974

INCREASED COSTS OF PERFORMANCE DUE TO SPIRALING COSTS OF RAW MATERIALS PROVIDES NO BASIS FOR EQUITABLE PRICE ADJUSTMENT OF FIXED PRICE CONTRACT WHICH CONTAINS NO COST ESCALATION PROVISIONS SINCE THIS FACTOR DOES NOT CONSTITUTE UNDUE INTERFERENCE BY GOVERNMENT AS CONTRACTING PARTY, MOREOVER, ASPR SEC. 7-106 DOES NOT HAVE RETROACTIVE EFFECT.

HOOVER INDUSTRIES:

ON FEBRUARY 14, 1972, HOOVER INDUSTRIES (HOOVER) ENTERED INTO CONTRACT NO. DAAH01-72-D-0132 WITH THE UNITED STATES ARMY MISSILE COMMAND, REDSTONE ARSENAL, ALABAMA. THIS WAS A REQUIREMENT TYPE CONTRACT FOR A PERIOD OF APPROXIMATELY 2 YEARS. THE CONTRACT CONTAINS NO COST ESCALATION PROVISIONS.

HOOVER REQUESTS OUR OFFICE TO AUTHORIZE AN EQUITABLE ADJUSTMENT ON ITS BEHALF FOR ADDITIONAL COSTS OF MATERIALS NECESSARY FOR THE PERFORMANCE OF THE CONTRACT. HOOVER CONTENDS THAT THESE ADDITIONAL COSTS WERE NEITHER CONTEMPLATED NOR FORESEEN AT THE TIME THE CONTRACT WAS ENTERED INTO, AND THEREFORE, A SMALL BUSINESS CONCERN WHICH ACTED IN GOOD FAITH SHOULD NOT BE PLACED INTO A FINANCIALLY VULNERABLE POSITION THROUGH ECONOMIC CONDITIONS ABOVE AND BEYOND ITS CONTROL. ADDITIONALLY, HOOVER POINTS OUT THAT THE REQUESTED RELIEF CAN BE GRANTED PURSUANT TO SECTION I OF THE DEFENSE PROCUREMENT CIRCULAR (DPC) NO. 120 DATED MARCH 11, 1974, PRESENTLY INCORPORATED IN THE 1974 EDITION OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), WHICH ESTABLISHES THE USE OF "ECONOMIC PRICE ADJUSTMENT" CLAUSES.

IT IS A WELL-SETTLED PROPOSITION THAT WHERE A GOVERNMENT CONTRACT CONTAINS AN EXPRESS STIPULATION AS TO THE AMOUNT OF COMPENSATION TO BE PAID, AND NO PROVISION IS MADE FOR ANY INCREASE IN THE EVENT PERFORMANCE BECOMES MORE EXPENSIVE OR DIFFICULT, THE FACT THAT THE COST OF PERFORMANCE IS INCREASED BY FACTORS WHICH DO NOT CONSTITUTE UNDUE INTERFERENCE BY THE GOVERNMENT AS A CONTRACTING PARTY PROVIDES NO BASIS FOR EQUITABLE PRICE RELIEF. 53 COMP. GEN. 157 (1973); B-175674, MAY 30, 1972. AS WAS STATED IN PENN BRIDGE CO. V. UNITED STATES, 59 CT. CL. 892, 896 (1924):

"*** CONTRACTUAL RIGHTS ONCE FIXED IN A PROPER CONTRACT EXECUTED BY AUTHORITY ARE INVIOLATE. THEY MAY BE FORFEITED BY ONE PARTY OR THE OTHER, CONSTRUCTION IS PERMISSIBLE IF THE TERMS ARE AMBIGUOUS, BUT IN THE ABSENCE OF AMBIGUITY OR FORFEITURE OF RIGHTS BY CONDUCT, SUCH A CONTRACT CANNOT BUT BE ENFORCED AS WRITTEN."

SEE MATTER OF AMCA INTERNATIONAL CORPORATION, B-182233, OCTOBER 3, 1974.

AS CONCERNS HOOVER'S CONTENTION THAT DPC NO. 120 WOULD PERMIT A MODIFICATION TO ITS CONTRACT, OUR READING OF THE PERTINENT PORTIONS OF ASPR DOES NOT REVEAL ANY INTENT THAT ESCALATION CLAUSES CAN RETROACTIVELY BE NEGOTIATED FOR INCLUSION IN A FIXED-PRICE CONTRACT.

IN VIEW OF THE FOREGOING, THERE IS NO LEGAL AUTHORITY FOR OUR OFFICE TO GRANT HOOVER THE RELIEF REQUESTED.