B-22500, JANUARY 2, 1942, 21 COMP. GEN. 625

B-22500: Jan 2, 1942

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1942: I HAVE YOUR LETTER OF DECEMBER 10. ACCEPTANCE WAS MADE OF BID SUBMITTED BY THE THWING-ALBERT INSTRUMENT COMPANY. WAS ISSUED TO COVER THIS PROPOSED PROCUREMENT. AT THE TIME OUR ORDER WAS PLACED THE OFFICE OF PRODUCTION MANAGEMENT HAD NOT ISSUED THEIR PREFERENCE RATING ORDER NO. AS THE WORK FOR WHICH THIS EQUIPMENT WAS BEING OBTAINED COULD NOT BE HELD UP INDEFINITELY. THE ORDER ON THE THWING-ALBERT INSTRUMENT COMPANY WAS CANCELLED AND AN OPEN MARKET ORDER. WAS PLACED WITH THE BRISTOL COMPANY. THE BRISTOL COMPANY ADVISED THAT THEY WERE PLANNING TO MAKE SHIPMENT WITHOUT A PREFERENCE RATING BUT IN ORDER FOR THEM TO SPECIFY A DEFINITE DATE OF SHIPMENT A PREFERENCE RATING CERTIFICATE WOULD BE NECESSARY.

B-22500, JANUARY 2, 1942, 21 COMP. GEN. 625

CONTRACTS - NATIONAL DEFENSE ACTIVITIES AS EXCUSING NONPERFORMANCE A GOVERNMENT CONTRACTOR MAY NOT BE RELIEVED OF ITS LIABILITY TO PAY EXCESS COST RESULTING FROM ITS DEFAULT BECAUSE CHANGED CONDITIONS BROUGHT ABOUT BY THE GENERAL ACTIVITIES OF THE GOVERNMENT--- AS DISTINGUISHED FROM ACTS DIRECTED PARTICULARLY AGAINST THE CONTRACTOR--- UNDER THE NATIONAL DEFENSE PROGRAM MADE IT DIFFICULT TO PROCURE MATERIALS, OR BECAUSE THE CONTRACTING AGENCY FAILED TO FURNISH A PREFERENCE RATING ORDER ENTITLING THE CONTRACTOR TO PRIORITY IN OBTAINING MATERIALS.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF AGRICULTURE, JANUARY 2, 1942:

I HAVE YOUR LETTER OF DECEMBER 10, 1941, AS FOLLOWS:

UNDER DATE OF MAY 13, 1941, ACCEPTANCE WAS MADE OF BID SUBMITTED BY THE THWING-ALBERT INSTRUMENT COMPANY, 3339 LANCASTER AVENUE, PHILADELPHIA, PENNSYLVANIA, FOR FURNISHING ONE INDICATING CONTROL PYROMETER TO THE BUREAU OF PLANT INDUSTRY OF THIS DEPARTMENT AT A COST OF $139.05 (1 PERCENT--- 10 DAYS), F.O.B. DELIVERED, UNDER BID TRANSACTION U.S.D.A. 2322 -41. REQ. 99493-P, DATED MAY 22, 1941, WAS ISSUED TO COVER THIS PROPOSED PROCUREMENT.

THE SUCCESSFUL BIDDER IN THIS CASE SPECIFIED A DELIVERY DATE OF THIRTY CALENDAR DAYS AFTER RECEIPT OF OFFICIAL ORDER. AFTER RECEIPT OF THE ORDER THE FIRM, IN LETTER DATED JUNE 10, 1941, RETURNED THIS PURCHASE ORDER ADVISING THAT DUE TO CHANGING CONDITIONS AND ALSO TO THE MANY NATIONAL DEFENSE CONTRACTS RECEIVED BY THEM FROM THE WAR AND NAVY DEPARTMENTS, CARRYING HIGH PRIORITY RATINGS, THEY COULD NOT MAKE DELIVERY WITHIN THE TIME SPECIFIED IN THEIR BID AND SUGGESTED THAT WE MAKE THE PROCUREMENT ELSEWHERE. AT THE TIME OUR ORDER WAS PLACED THE OFFICE OF PRODUCTION MANAGEMENT HAD NOT ISSUED THEIR PREFERENCE RATING ORDER NO. P-43, GRANTING AN A-2 PRIORITY RATING, TO RESEARCH LABORATORIES SUPPLIES AND EQUIPMENT. IN REPLYING TO THE FIRM, UNDER DATE OF JUNE 13, 1941, WE REQUESTED THAT THEY FURNISH EVIDENCE OF DEFENSE CONTRACTS WHICH PREVENTED THEM FROM PERFORMING IN ACCORDANCE WITH THEIR CONTRACT WITH THIS DEPARTMENT AND RETURNED OUR ORIGINAL PURCHASE ORDER TO THE CONTRACTOR. UNDER DATE OF JUNE 18, 1941, THE FIRM AGAIN WROTE RETURNING OUR PURCHASE ORDER, SETTING FORTH EVIDENCE OF RECEIPT OF NATIONAL DEFENSE ORDERS CARRYING HIGH PRIORITY RATINGS. IN THEIR LETTER THE FIRM STATED THAT THE SITUATION HAD BECOME SO DIFFICULT THEY COULD NOT EVEN FURNISH AN APPROXIMATE SHIPPING DATE. THEY AGAIN SUGGESTED THAT WE OBTAIN THIS EQUIPMENT ELSEWHERE.

AS THE WORK FOR WHICH THIS EQUIPMENT WAS BEING OBTAINED COULD NOT BE HELD UP INDEFINITELY, THE ORDER ON THE THWING-ALBERT INSTRUMENT COMPANY WAS CANCELLED AND AN OPEN MARKET ORDER, REQ. 821-P, DATED AUGUST 8, 1941, WAS PLACED WITH THE BRISTOL COMPANY, WATERBURY, CONNECTICUT, CALLING FOR THE SAME EQUIPMENT AT A COST OF $159.50 (1 PERCENT--- 10 DAYS) F.O.B. DELIVERED. PRIOR TO DRAWING ORDER, WE ADVISED THE BRISTOL COMPANY THAT THE EQUIPMENT WOULD BE USED FOR NONDEFENSE PURPOSES AND WE WOULD, THEREFORE, BE UNABLE TO FURNISH A PRIORITY RATING. DESPITE THIS FACT, THE FIRM STATED IN LETTER DATED JULY 28, 1941, THAT DELIVERY COULD BE MADE WITHIN FIVE TO SIX WEEKS. HOWEVER, ON SEPTEMBER 11, 1941, THE BRISTOL COMPANY ADVISED THAT THEY WERE PLANNING TO MAKE SHIPMENT WITHOUT A PREFERENCE RATING BUT IN ORDER FOR THEM TO SPECIFY A DEFINITE DATE OF SHIPMENT A PREFERENCE RATING CERTIFICATE WOULD BE NECESSARY. IN ORDER TO FACILITATE DELIVERY THE BRISTOL COMPANY WAS FURNISHED WITH PREFERENCE RATING ORDER NO. P-43, SERIAL NO. 1, IN LINE WITH ORDER OF THE OFFICE OF PRODUCTION MANAGEMENT, PRIORITIES DIVISION, DATED AUGUST 28, 1941, GRANTING SUCH PREFERENCE RATING ORDER TO EQUIPMENT NEEDED BY RESEARCH LABORATORIES, AS THE WORK TO BE PERFORMED WITH THE EQUIPMENT IN QUESTION WAS OF A RESEARCH LABORATORY NATURE.

FROM THE FOREGOING, IT WOULD APPEAR THAT THE ORIGINAL CONTRACTOR, THWING- ALBERT INSTRUMENT COMPANY, WAS PREVENTED FROM PERFORMING IN ACCORDANCE WITH ITS CONTRACT DUE TO NATIONAL DEFENSE CONTRACTS CARRYING HIGH PRIORITY RATINGS. IN VIEW OF THIS, AND THE FURTHER FACT THAT AT THE TIME OUR ORIGINAL ORDER WAS PLACED WITH THE THWING-ALBERT INSTRUMENT COMPANY THIS DEPARTMENT COULD NOT FURNISH A PREFERENCE RATING ORDER, DECISION IS REQUESTED AS TO WHETHER THE THWING-ALBERT INSTRUMENT COMPANY SHOULD BE ASSESSED WITH THE EXCESS COST OF $19.35 OCCASIONED THE GOVERNMENT BY THEIR FAILURE TO PERFORM IN ACCORDANCE WITH THEIR ORIGINAL CONTRACT.

THE LETTER OF JUNE 10, 1941, FROM THE THWING-ALBERT INSTRUMENT CO., IS AS FOLLOWS: SUBJECT: INVITATION U.S.D.A. 2322-41

OPENING DATE APRIL 29, 1941

REQUISITION NO. 99493 (P)

WE RECEIVED YOUR ORDER FOR ONE INDICATING CONTROL PYROMETER ON WHICH WE BID UNDER THE ABOVE NUMBER AND THE REASON WE HAVE NOT ACKNOWLEDGED IT SOONER IS BECAUSE WE HAVE ENCOUNTERED CERTAIN DIFFICULTIES IN FILLING YOUR ORDER WHICH, UNFORTUNATELY WE HAVE NOT BEEN ABLE TO OVERCOME.

FIRST OF ALL THE RAPIDLY CHANGING SITUATION EXISTING AT THIS TIME HAS CHANGED CONDITIONS IN OUR PLANT BETWEEN THE TIME WE BID ON THIS AND THE TIME THE ORDER WAS RECEIVED FROM YOU TO SUCH AN EXTENT THAT, EVEN IF WE HAD ALL THE MATERIALS TO FILL YOUR ORDER, IT WOULD TAKE MONTHS TO DO SO. WE HAVE RECEIVED SO MANY NATIONAL DEFENSE CONTRACTS FROM THE ARMY AND NAVY WITH HIGH PRIORITIES AND THE ITEMS COVERED BY THESE ARE REQUIRED SO URGENTLY THAT WE HAVE PRACTICALLY LAID EVERYTHING ELSE ASIDE.

ANOTHER THING, WHAT STOCK OF MATERIALS WE HAVE ON HAND HAS BEEN ABSORBED SO RAPIDLY THAT IT BECOMES VERY DIFFICULT INDEED TO OBTAIN SUPPLIES EVEN WITH HIGH PRIORITY RATINGS AND FOR THE ABOVE REASONS WE FEEL THAT WE WOULD DELAY THIS SO MUCH THAT IT WOULD INCONVENIENCE YOUR DEPARTMENT CONSIDERABLY.

FOR THIS REASON, RATHER THAN UNDERTAKE TO FILL YOUR ORDER BY A CERTAIN TIME AND THEN DRAG THIS OUT INDEFINITELY, WE FEEL THAT IT IS OUR DUTY TO TELL YOU SO BEFORE HAND SO THAT IF YOU CAN POSSIBLY PLACE THIS ORDER TO YOUR BEST ADVANTAGE ELSEWHERE, WITHOUT WAITING INDEFINITELY FOR THE INSTRUMENT, YOU WILL HAVE AN OPPORTUNITY TO DO SO.

WE REGRET VERY MUCH THAT WE HAVE TO TAKE THIS STEP BUT WE ARE DOING IT IN THE INTEREST OF YOUR DEPARTMENT RATHER THAN OUR OWN INTEREST.

WE ARE RETURNING YOUR ORDER HEREWITH SO THAT YOU MAY TAKE WHATEVER STEPS ARE NECESSARY IN THE INTEREST OF THIS JOB.

THE THWING-ALBERT INSTRUMENT CO.'S LETTER OF JUNE 18, 1941, IS AS FOLLOWS:

THIS WILL ACKNOWLEDGE RECEIPT OF YOUR LETTER OF JUNE 13TH REGARDING YOUR REQUISITION NO. 99493 (P) AND CONTAINING COMMENTS ON OUR LETTER DATED JUNE 10TH REGARDING THIS.

WE HAVE TRIED TO EXPLAIN THIS TO YOU IN OUR PREVIOUS LETTER JUST AS CAREFULLY AS POSSIBLE SO THAT YOU MIGHT TAKE WHATEVER STEPS ARE NECESSARY TO PROCURE THIS INSTRUMENT AS QUICKLY AS POSSIBLE FROM SOME OTHER SOURCE.

THIS COMPANY, ASIDE FROM ITS LINE OF PYROMETERS, COOPERATES WITH THE NAVY DEPARTMENT AND THE ARMY AIR CORPS IN DESIGNING AND BUILDING VARIOUS INSTRUMENTS, MANY OF WHICH ARE OF A SPECIAL NATURE. FOR EXAMPLE, ONE OF THE VERY IMPORTANT JOBS WE HAVE NOW IS THE DEVELOPMENT OF AN ACCELEROMETER TESTER FOR THE ARMY AIR CORPS OF A SPECIAL NATURE WHICH IS VERY URGENTLY REQUIRED. ANOTHER IMPORTANT JOB OF A SPECIAL NATURE IS THAT WHICH WE HAVE FROM THE NAVAL AIRCRAFT FACTORY ON CALOMEL-ELECTRODE UNIT INSTRUMENT ASSEMBLY FOR TESTING SURFACE CONDITIONS OF ALUMINUM WHICH CARRIES AN A-1-C PRIORITY RATING.

ANOTHER IMPORTANT JOB IS FOR 40 TESTERS WHICH WE ARE BUILDING FOR THE NAVAL AIRCRAFT FACTORY WHICH ARE URGENTLY REQUIRED FOR TESTING AIRPLANE THERMOMETERS.

THEN AGAIN WE HAVE AN IMPORTANT JOB FROM THE NAVAL AIRCRAFT FACTORY FOR 25 SPECIALLY BUILT TENSIOMETERS FOR DETERMINING THE TENSION IN AIRCRAFT CABLES WHICH ARE VERY URGENTLY REQUIRED.

AMONG THE OTHER ORDERS WHICH WE HAVE ARE:

U.S. ARMY AIR CORPS, 1,100 TENSIOMETERS, PRIORITY RATING A-1-B.

U.S. NAVY DEPARTMENT, AIRPLANE THERMOMETER LEADS, PRIORITY

RATING A-1-C.

U.S. NAVY DEPARTMENT, PELORUS DRIFT SIGHT OPTICAL HEADS

AND PELORUS DRIFT SIGHT RECORDING BASES, PRIORITY RATING

A-1-B.

CONSOLIDATED AIRCRAFT CORP., TESTING INSTRUMENTS, PRIORITY

RATING A-1-B.

WE HAVE GIVEN YOU A LIST OF ONLY THE LARGER ORDERS WHICH WE HAVE AND THOSE ENUMERATED ABOVE TOTAL MORE THAN $100,000. BESIDES THESE WE HAVE NUMEROUS OTHER SMALL ORDERS HAVING HIGH PRIORITY RATINGS NOT ONLY FOR THE GOVERNMENT BUT FROM VARIOUS AIRCRAFT MANUFACTURING COMPANIES AND OTHERS WHO ARE SUPPLYING MATERIALS TO THE GOVERNMENT, SO THAT YOU CAN SEE WE HAVE QUITE AN ELABORATE PROGRAM HERE.

THE WAY THE SITUATION IS RIGHT NOW, IT IS VERY DIFFICULT TO OBTAIN MATERIALS EVEN FOR THOSE ORDERS WHICH HAVE HIGH PRIORITY RATINGS AND PRACTICALLY IMPOSSIBLE FOR THOSE WITHOUT PRIORITY RATINGS. IT IS UNFORTUNATE THAT WE LACK CERTAIN PARTS WHICH ARE NECESSARY TO SUPPLY THE INSTRUMENT WHICH YOU HAVE ON ORDER AS THIS AGGRAVATES THE CONDITION CONSIDERABLY.

WE BELIEVE IT ONLY FAIR TO TELL YOU THAT IT WILL BE EXTREMELY DIFFICULT FOR US TO SUPPLY YOU WITH THIS TEMPERATURE CONTROLLER AND WE ARE IN A POSITION NOW WHERE WE CANNOT EVEN TELL YOU APPROXIMATELY HOW LONG IT WOULD TAKE TO DO SO.

FOR THIS REASON WE BELIEVE THAT IT WILL BE TO YOUR BEST ADVANTAGE IF YOU WILL PLACE THIS ORDER WITH ANOTHER PYROMETER MANUFACTURER WHO IS NOT SO BUSY SUPPLYING SO MANY SPECIAL ITEMS TO THE GOVERNMENT AT THE PRESENT TIME, SUCH AS WE MAKE.

WE ARE SURE THAT YOU WILL AGREE WITH US THAT THIS IS THE BEST THING FOR YOU TO DO AND WE ACCORDINGLY RETURN YOUR REQUISITION.

IT LONG HAS BEEN ESTABLISHED THAT THE UNITED STATES, AS A CONTRACTOR,"CANNOT BE HELD LIABLE FOR THE OBSTRUCTION OF PERFORMANCE OF A PARTICULAR CONTRACT RESULTING FROM ITS PUBLIC AND GENERAL ACTS AS A SOVEREIGN.' HOROWITZ V. UNITED STATES, 267 U.S. 458; 19 COMP. GEN. 903, 906. AS AN EXAMPLE OF THE APPLICATION OF THIS RULE, SEE MAXWELL V. UNITED STATES, 3 F./2D) 906, AFFIRMED 271 U.S. 647 (MEMORANDUM), HOLDING THE DEFENDANT LIABLE FOR THE EXCESS COST INCURRED BY THE GOVERNMENT AS A RESULT OF HIS FAILURE TO COMPLETE A CONTRACT FOR THE CONSTRUCTION OF A POST-OFFICE BUILDING, NOTWITHSTANDING PERFORMANCE OF THE CONTRACT MAY HAVE BEEN HAMPERED AND RENDERED UNPROFITABLE BY THE GOVERNMENT'S WARTIME ACTIVITIES IN CONSCRIPTING MANPOWER FOR MILITARY SERVICE, IN RAISING THE RATES OF WAGES ON GOVERNMENT CONTRACTS IN THE VICINITY, AND IN GRANTING TO OTHERS PRIORITY ORDERS WHICH MADE IT DIFFICULT OR IMPOSSIBLE FOR THE CONTRACTOR TO OBTAIN TIMELY DELIVERY OF NECESSARY MATERIALS. TO THE SAME EFFECT IS UNITED STATES V. WARREN TRANSPORTATION COMPANY, 7 F./2D) 161, HOLDING THE DEFENDANT COMPANY LIABLE TO THE UNITED STATES FOR DEMURRAGE ACCRUED UNDER A CHARTER PARTY, ALTHOUGH THE DEMURRAGE ACCRUED AS A RESULT OF DELAY BY AN AGENCY OF THE GOVERNMENT IN ISSUING A NEW PERMIT, OR PRIORITY ORDER, FOR THE LOADING OF COAL, TO REPLACE A PERMIT WHICH HAD BEEN ISSUED TO THE DEFENDANT PRIOR TO THE MAKING OF THE CHARTER PARTY, BUT WHICH HAD BEEN REVOKED BY SAID AGENCY DURING THE LIFE OF THE CHARTER PARTY. CF. 19 COMP. GEN. 560; IBID. 965.

IT WILL BE APPARENT FROM THE FOREGOING THAT THE THWING-ALBERT INSTRUMENT CO. MAY NOT BE RELIEVED OF LIABILITY TO PAY THE EXCESS COST RESULTING FROM ITS DEFAULT UPON THE BASIS OF ITS CONTENTION THAT CHANGED CONDITIONS BROUGHT ABOUT BY THE GENERAL ACTIVITIES OF THE GOVERNMENT MADE IT DIFFICULT TO PROCURE MATERIALS, OR BECAUSE YOUR DEPARTMENT FAILED TO FURNISH A PREFERENCE RATING ORDER WHICH WOULD HAVE ENTITLED THE COMPANY TO PRIORITY IN OBTAINING MATERIALS. OF COURSE, ACTS OF THE GOVERNMENT DIRECTED PARTICULARLY AGAINST THIS CONTRACTOR, AS DISTINGUISHED FROM ACTS AFFECTING CONTRACTORS GENERALLY, WOULD AFFORD GROUNDS FOR RELIEF. SEE UNITED STATES V. WARREN TRANSPORTATION COMPANY, SUPRA, AND CASES THERE CITED AT PAGE 163 OF 7 F./2D). SEE, ALSO, THE DISCUSSION OF UNITED STATES V. PECK, 102 U.S. 64, IN MAXWELL V. UNITED STATES, SUPRA. HOWEVER, I DO NOT UNDERSTAND FROM THE COMPANY'S LETTERS THAT THE GOVERNMENT DIRECTLY PREVENTED PERFORMANCE UNDER THE ACCEPTED BID. WHILE THE COMPANY STATES THAT IT HAD "PRACTICALLY LAID EVERYTHING ELSE ASIDE" TO WORK ON DEFENSE CONTRACTS, IT DOES NOT APPEAR THAT THE GOVERNMENT DEMANDED PERFORMANCE OF SUCH CONTRACTS TO THE EXCLUSION OF WORK ON BINDING CONTRACTS VOLUNTARILY MADE BY THE COMPANY FOR FURNISHING ARTICLES EITHER FOR PRIVATE PARTIES OR FOR NONDEFENSE ACTIVITIES OF THE GOVERNMENT. FURTHERMORE, THE COMPANY'S LETTERS DO NOT ESTABLISH THAT THE DEFENSE CONTRACTS DESCRIBED THEREIN WERE NOT EITHER IN EXISTENCE OR UNDER CONSIDERATION AT THE TIME OF THE SUBMISSION OF ITS BID FOR THE CONTRACT HERE INVOLVED, OR THAT THE CONDITIONS WHICH IT RECITES COULD NOT REASONABLY HAVE BEEN ANTICIPATED AT THAT TIME.

THE PAPERS TRANSMITTED WITH YOUR LETTER DO NOT INCLUDE ANY OF THE BID DOCUMENTS INVOLVED IN THE ORIGINAL CONTRACT, AND THE RECORD DOES NOT INDICATE THE PROCEDURE FOLLOWED IN THE CANCELLATION OF THE COMPANY'S ORDER. IT IS NOTED, HOWEVER, THAT THE COMPANY DOES NOT DENY THE VALIDITY OF THE CONTRACT, NOR DOES IT REFER TO ANY PROVISION THEREOF WHICH MIGHT RELIEVE IT FROM EXCESS COSTS INCURRED AS A RESULT OF ITS DEFAULT. ASSUME THAT NOTHING WAS DONE IN CONNECTION WITH THE CANCELLATION OF THE ORDER WHICH WOULD MITIGATE AGAINST THE GOVERNMENT'S RIGHT TO REGARD THE CONTRACT AS BEING IN FULL FORCE AND EFFECT. I ASSUME, ALSO, THAT THE INSTRUMENT PURCHASED FROM THE BRISTOL COMPANY IS SUBSTANTIALLY THE SAME AS THAT WHICH THE THWING-ALBERT INSTRUMENT CO. AGREED TO FURNISH UNDER ITS ACCEPTED BID. UPON THE PRESENT RECORD, I AM UNABLE TO ADVISE YOU MORE DEFINITELY THAN TO STATE THAT THE MATTERS RELATED IN THE ABOVE-QUOTED LETTERS OF THE THWING-ALBERT INSTRUMENT CO. MAY NOT BE ACCEPTED AS ESTABLISHING THAT PERFORMANCE UNDER THIS CONTRACT WAS PREVENTED BY ORDERS FROM THE GOVERNMENT DIRECTING THAT PRIORITY BE GIVEN TO OTHER GOVERNMENT CONTRACTS, OR AS SUFFICIENT OTHERWISE TO RELIEVE THE COMPANY OF THE EXCESS COST INCURRED BY THE UNITED STATES AS A RESULT OF THE DEFAULT.

THE EXCESS COST INCURRED BY THE UNITED STATES APPEARS TO BE $20.95, THE DIFFERENCE BETWEEN THE AMOUNT OF $138.55 FOR WHICH THE PYROMETER COULD HAVE BEEN OBTAINED UNDER THE ORIGINAL CONTRACT ($139.95 LESS 1 PERCENT DISCOUNT), AND THE NET PRICE OF $159.50 SPECIFIED IN THE CONTRACT WITH THE BRISTOL COMPANY. THE COPY OF THE LATTER COMPANY'S BID, TRANSMITTED WITH YOUR LETTER, SPECIFICALLY PROVIDES: " TERMS: NET 30 DAYS. NO CASH DISCOUNT.'