B-6210, OCTOBER 16, 1939, 19 COMP. GEN. 440

B-6210: Oct 16, 1939

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ONLY WITH MATERIAL USED IN EXCESS OF STATED ALLOWANCES PERMITTED FOR THE FINISHED PRODUCT EVEN THOUGH A PART OF THE FINISHED PRODUCT IS UNACCEPTABLE UNDER THE CONTRACT. REQUESTING DECISION WHETHER YOU ARE AUTHORIZED TO MAKE PAYMENT ON A VOUCHER STATED IN FAVOR OF THE CONRO MANUFACTURING CO. THE VOUCHER IS APPROVED FOR PAYMENT ONLY IN THE NET AMOUNT OF $815.59. ARE SET FORTH IN FINDINGS MADE AUGUST 30. FOR WHICH THE GOVERNMENT WAS TO FURNISH COTTON CLOTH AND COTTON DRILLING IN ACCORDANCE WITH UNIT ALLOWANCES FOR MATERIAL IN QUANTITIES AS LISTED IN THE SCHEDULE OF SUPPLIES ATTACHED TO AND MADE A PART OF THE CONTRACT. IT IS REPORTED THAT BECAUSE OF DELINQUENCIES IN DELIVERY AND GENERALLY UNSATISFACTORY PERFORMANCE.

B-6210, OCTOBER 16, 1939, 19 COMP. GEN. 440

CONTRACTS - CONSTRUCTION - CONFLICTING PROVISIONS - DAMAGES CHARGEABLE TO CONTRACTOR FOR GOVERNMENT PROPERTY SPOILAGE GENERAL PROVISIONS OF A CONTRACT, TO THE EXTENT THEY MAY CONFLICT WITH SPECIFIC PROVISIONS, MUST BE REGARDED AS SUPERSEDED BY THE SPECIFIC PROVISIONS. WHERE A SPECIFIC PROVISION OF A CONTRACT PROVIDES FOR CHARGING A CONTRACTOR, IN CONNECTION WITH MATERIAL FURNISHED BY THE GOVERNMENT FOR PERFORMANCE OF THE CONTRACT, ONLY WITH MATERIAL USED IN EXCESS OF STATED ALLOWANCES PERMITTED FOR THE FINISHED PRODUCT EVEN THOUGH A PART OF THE FINISHED PRODUCT IS UNACCEPTABLE UNDER THE CONTRACT, NO CHARGE MAY BE MADE FOR THE MATERIAL INCLUDED IN THE UNACCEPTABLE FINISHED PRODUCT EXCEPT TO THE EXTENT IT EXCEEDED THE AUTHORIZED ALLOWANCES, NOTWITHSTANDING THE GENERAL PROVISIONS IN THE CONTRACT INDEMNIFYING THE GOVERNMENT FOR ANY LOSS OR DAMAGE TO ALL MATERIAL FURNISHED.

COMPTROLLER GENERAL BROWN TO LT. COL. E. F. ELY, UNITED STATES ARMY, OCTOBER 16, 1939:

THERE HAS BEEN RECEIVED BY FIRST ENDORSEMENT OF SEPTEMBER 20, 1939, FROM THE CHIEF OF FINANCE, YOUR LETTER OF SEPTEMBER 5, 1939, REQUESTING DECISION WHETHER YOU ARE AUTHORIZED TO MAKE PAYMENT ON A VOUCHER STATED IN FAVOR OF THE CONRO MANUFACTURING CO., INC., IN THE NET AMOUNT OF $815.59 FOR JUMPERS, WORKING, DENIM, FURNISHED BY SAID COMPANY UNDER CONTRACT NO. W-669 QM-7451, DATED MARCH 24, 1939.

THE VOUCHER AS STATED SHOWS A GROSS AMOUNT OF $3,794.24 DUE THE CONRO MANUFACTURING CO., INC., FOR JUMPERS FURNISHED UNDER THE CONTRACT OF MARCH 24, 1939, BUT THE VOUCHER IS APPROVED FOR PAYMENT ONLY IN THE NET AMOUNT OF $815.59, IT BEING PROPOSED TO DEDUCT $1.90 AS DISCOUNT FOR PROMPT PAYMENT AND $2,976.75 AS THE VALUE OF GOVERNMENT MATERIALS USED BY THE COMPANY UNDER CONTRACT, NO. W-669 QM-7365, DATED DECEMBER 14, 1938. THE FACTS WITH RESPECT TO THE PROPOSED DEDUCTION OF $2,976.75 UNDER THE CONTRACT OF DECEMBER 14, 1938, ARE SET FORTH IN FINDINGS MADE AUGUST 30, 1939, BY VERE PAINTER, MAJOR, QUARTERMASTER CORPS, THE CONTRACTING OFFICER, AND IN MAJOR PAINTER'S LETTER OF THE SAME DATE TRANSMITTING HIS FINDINGS TO YOU.

UNDER THE TERMS OF THE CONTRACT OF DECEMBER 14, 1938, THE CONRO MANUFACTURING CO., INC., AGREED TO FURNISH AND DELIVER F.O.B. THE PHILADELPHIA QUARTERMASTER DEPOT 105,000 PAIRS OF TROUSERS, FOR WHICH THE GOVERNMENT WAS TO FURNISH COTTON CLOTH AND COTTON DRILLING IN ACCORDANCE WITH UNIT ALLOWANCES FOR MATERIAL IN QUANTITIES AS LISTED IN THE SCHEDULE OF SUPPLIES ATTACHED TO AND MADE A PART OF THE CONTRACT. IT IS REPORTED THAT BECAUSE OF DELINQUENCIES IN DELIVERY AND GENERALLY UNSATISFACTORY PERFORMANCE, THE CONTRACTOR'S RIGHT TO PROCEED WAS TERMINATED AFTER ONLY 57,941 PAIRS OF TROUSERS HAD BEEN FURNISHED AND IT APPEARS THAT THERE HAS BEEN WITHHELD FROM AMOUNTS OTHERWISE DUE THE CONTRACTOR THE SUM OF $9,222.51 TO COVER THE EXCESS COST INCURRED THROUGH PURCHASE ELSEWHERE OF THE BALANCE OF THE CONTRACT QUANTITY, THE ADDITIONAL COST OF INSPECTION RESULTING FROM THE CONTRACTOR'S DELINQUENCY, AND THE VALUE OF GOVERNMENT MATERIALS IRREPARABLY DAMAGED BY THE CONTRACTOR.

FROM THE CONTRACTING OFFICER'S FINDINGS, IT APPEARS THE CONTRACTOR CUT, FROM MATERIALS FURNISHED BY THE GOVERNMENT, 61,071 GARMENTS, BUT THAT ONLY 57,941 OF SUCH GARMENTS WERE ACCEPTABLE. IT FURTHER APPEARS THAT THE CONTRACTOR DELIVERED TO THE DEPOT 1,118 IRREPARABLE GARMENTS, WHICH WERE UNFIT FOR THE PURPOSE INTENDED, AND THE EQUIVALENT OF 2,012 GARMENTS IN GARMENT PARTS AND PARTLY ASSEMBLED GARMENTS WHICH THE CONTRACTOR FOUND IT IMPOSSIBLE TO REPAIR IN SUCH A MANNER AS TO MAKE THEM ACCEPTABLE UNDER THE SPECIFICATIONS. WITH RESPECT TO THE PROPOSED VOUCHER DEDUCTIONS OF $2,976.75 TO COVER THE COST OF GOVERNMENT MATERIALS THUS IRREPARABLY DAMAGED BY THE CONTRACTOR, THE CONTRACTING OFFICER'S ABOVE-MENTIONED LETTER OF AUGUST 30, 1939, IS AS FOLLOWS:

2. THERE IS ATTACHED HERETO PHOTOSTATIC COPY OF AUDIT OF CONTRACTOR'S MATERIAL ACCOUNT, FROM WHICH IT WILL BE NOTED THAT THE CONTRACTOR USED 2,548 2/8 YDS. OF CLOTH, COTTON, KHAKI, AND 713 3/8 YDS. OF DRILLING IN EXCESS OF ALLOWANCES PROVIDED BY THE CONTRACT. IT WILL ALSO BE NOTED FROM THE AUDIT THAT THE CONTRACTOR DELIVERED 1,118 IRREPARABLE GARMENTS AND THE EQUIVALENT OF 2,012 GARMENTS IN GARMENT PARTS AND PARTLY ASSEMBLED GARMENTS. THESE PARTLY ASSEMBLED GARMENTS AND PARTS HAD PREVIOUSLY BEEN COMPLETELY ASSEMBLED BY THE CONTRACTOR INTO GARMENTS AND THEY WERE RIPPED APART WITH THE INTENTION OF MAKING REPAIRS, BUT THE CONTRACTOR FOUND SUCH REPAIRS TO BE IMPRACTICABLE AND ABANDONED THIS PLAN. THEREFORE, THE CONTRACTOR ACTUALLY MANUFACTURED 3,130 IRREPARABLE GARMENTS, AND THIS DEPOT REQUESTED YOU TO TENTATIVELY WITHHOLD $3,771.00 TO COVER THE ESTIMATED VALUE OF THE GOVERNMENT MATERIALS CONTAINED THEREIN.

3. THE CONTRACTOR HAS CALLED AT THIS DEPOT ON SEVERAL OCCASIONS AND VERBALLY MADE VERY VIGOROUS PROTESTS AGAINST WITHHOLDING OF THE ABOVE AMOUNT FOR THE PURPOSE STATED. IT IS THE CONTRACTOR'S CONTENTION THAT UNDER THE TERMS OF THE CONTRACT HE IS ONLY CHARGEABLE WITH THE VALUE OF THE MATERIALS USED IN EXCESS OF THE CONTRACT ALLOWANCES. THIS CHARGE WOULD BE AS FOLLOWS:

CHART

CLOTH, COTTON, DRILLING

KHAKI ------------------------------------------ ------------------------ -------- YARDAGE USED IN EXCESS OF ALLOWANCES ------ 2,548 2/8 713 3/8 UNIT COST ------------------------ ---------

$0.48 $0.1134

1,223.16 80.90 PLUS 10 PERCENT FOR HANDLING AND PACKING --- 122.32 8.09

1,345.48 88.99

TOTAL ------------------- 1,434.47 ---- --------------------------------- ------------------------------------- THE CONTRACTOR EXPLAINS THE REASONS FOR HIS CONTENTIONS IN LETTER REFERRED TO IN PARAGRAPH 1 HEREIN (INCL. NO. 1).

4. THE RECORDS SHOW THAT THE PERCENTAGE OF IRREPARABLE GARMENTS DELIVERED BY THIS CONTRACTOR IS EXCEPTIONALLY HIGH. IT CAN BE SEEN FROM THE AUDIT THAT THE CONTRACTOR CUT 61,071 GARMENTS, OF WHICH 3,130, OR 5.13 PERCENT, ARE IRREPARABLE AND NOT FIT FOR THE PURPOSE INTENDED. THE RECORDS ALSO SHOW THAT THE CONTRACTOR WAS INEXPERIENCED, INEFFICIENT, CARELESS IN HANDLING GOVERNMENT MATERIALS, AND DID NOT USE GOOD JUDGMENT OR SOUND MANUFACTURING PRACTICES ORDINARILY EXPECTED OF A PRUDENT MANUFACTURER (SEE INCLS. NOS. 6 TO 94). ARTICLE 17 OF THE CONTRACT READS AS FOLLOWS:

"ARTICLE 17.--- THE CONTRACTOR AGREES TO INDEMNIFY THE GOVERNMENT FOR ANY LOSS OF OR DAMAGE TO GOVERNMENT PROPERTY FURNISHED THE CONTRACTOR BY THE GOVERNMENT, ARISING FROM ANY CAUSE ATSOEVER.' CONTRACTOR'S PROPOSAL CONTAINS THE FOLLOWING PROVISIONS: SHEET NO. 18 --

"THE PERFORMANCE BOND WILL SERVE AS A GUARANTEE TO PROTECT THE GOVERNMENT AGAINST THE FAILURE OF THE CONTRACTOR TO SATISFACTORILY COMPLETE HIS CONTRACT AND AGAINST ANY LOSS OF OR DAMAGE WHATSOEVER TO THE MATERIALS FURNISHED THE CONTRACTOR BY THE GOVERNMENT AND SHALL BE IN AN AMOUNT EQUAL TO THE VALUE OF THE MAXIMUM QUANTITY OF GOVERNMENT MATERIAL HE WILL REQUIRE TO HAVE IN HIS POSSESSION AT ANY ONE TIME TO ENABLE HIM TO MANUFACTURE THE GARMENTS AND MAKE DELIVERIES CONTRACTED FOR. FOR THE PURPOSE OF ARRIVING AT THE APPROXIMATE SUM OF THE BOND, THE VALUE OF GOVERNMENT MATERIAL SHOULD BE FIGURED AT $1.25 PER PAIR OF TROUSERS, COTTON (FINISHED AND UNFINISHED BOTTOMS).' ( ITALICS SUPPLIED.) SHEET NO. 13---

"UNUSED GOVERNMENT MATERIALS:

"A. UNUSED MATERIALS, VIZ, BULK YARDAGE, SHORT PIECES, REMNANTS, CLIPPINGS, IRREPARABLE REJECTS (INCLUDING ANY MATERIAL SUPPLIED BY THE CONTRACTOR), EXCESS GARMENTS, GARMENT PARTS, COMPONENTS, CLOTH FINDINGS, AND FINDINGS, REMAIN THE PROPERTY OF THE UNITED STATES GOVERNMENT AND SHALL BE SEGREGATED AS TO KIND, IDENTIFYING MARKINGS ATTACHED, PROPERLY PACKED, AND RETURNED TO THE PHILADELPHIA Q.M. DEPOT, 21ST AND JOHNSTON STS., PHILA., PA., ALL TRANSPORTATION CHARGES PREPAID.' FROM THE LANGUAGE OF THE FOREGOING, IT APPEARS THAT THE CONTRACTOR IS REQUIRED TO RETURN ALL IRREPARABLE GARMENTS AND GARMENT PARTS AND IS LIABLE FOR ANY LOSS OF OR DAMAGE TO GOVERNMENT PROPERTY ARISING FROM ANY CAUSE WHATSOEVER. THIS IS SUPPORTED BY LETTER DATED SEPTEMBER 27, 1938, ADDRESSED TO THE CHIEF OF FINANCE, FROM THE GENERAL ACCOUNTING OFFICE, COPY OF WHICH IS ENCLOSED (INCL. NO. 5), REGARDING A CLAIM OF THE LONG WEAR MANUFACTURING COMPANY, CONTRACT NO. ER-W-669-QM-CCC-26, WHEREIN IT APPEARS THAT THE GENERAL ACCOUNTING OFFICE CONTEMPLATES CHARGING THE CONTRACTOR WITH THE VALUE OF GOVERNMENT MATERIALS CONTAINED IN ALL IRREPARABLE GARMENTS. BASED ON THE FOREGOING. THE CHARGES AGAINST THE CONTRACTOR WOULD BE COMPUTED AS FOLLOWS:

CHART

CLOTH, COTTON DRILLING

KHAKI --------------------------------------------------- --------------- ------- AVERAGE NET YARDS USED PER GARMENT ------- 2.070827 10.704266 QUANTITY GARMENTS IRREPARABLE ------------

3,130 3,130

--------- --------- YARDS LOST TO GOVERNMENT ---------------- 6,481 5/8 2,204 3/8 UNIT COST -------------------------------- $0.48 $0.1134

TOTAL COST --------------------------- 3,111.18249.98 PLUS 10 PERCENT FOR HANDLING AND PACKING - 311.12 25.00

3,422.30 274.98

TOTAL CHARGES ------------------------ ---------- 3,697.28 ----- --------

5. HOWEVER, IT HAS BEEN THE EXPERIENCE OF THIS DEPOT THAT ALL GARMENT CONTRACTORS MANUFACTURE GARMENTS CONTAINING DEFECTS WHICH CANNOT BE PROPERLY REPAIRED IN SUCH A MANNER THAT WILL RENDER THEM ACCEPTABLE UNDER THE SPECIFICATION REQUIREMENTS. THIS IS PARTICULARLY APPLICABLE TO CONTRACTS FOR THE MANUFACTURE OF GARMENTS FROM CLOTH, COTTON, KHAKI, AS THIS MATERIAL PRESENTS MANY DIFFICULTIES WHEN MAKING REPAIRS. AS, FOR INSTANCE, WHEN A SEAM IS RIPPED, HOLES MADE BY THE NEEDLE REMAIN VISIBLE, AND UNLESS REPAIRING CAN BE ACCOMPLISHED IN SUCH A MANNER AS TO COVER THE HOLES, THE REPAIR MIGHT CAUSE THE GARMENT TO PRESENT AN UNSIGHTLY APPEARANCE, AND DUE TO THE HOLES BE UNACCEPTABLE UNDER THE TERMS OF THE CONTRACT. THERE IS ATTACHED HERETO STATEMENT ( INCL. NO. 4) SHOWING THE PERCENTAGE OF IRREPARABLE GARMENTS TO GARMENTS CUT ON 13 CONTRACTS WHICH WERE PERFORMED DURING THE FISCAL YEARS 1937 AND 1938, AND ON WHICH AUDITS HAVE RECENTLY BEEN COMPLETED. IT WILL BE NOTED THAT THE HIGHEST PERCENTAGE OF IRREPARABLE GARMENTS IS 1.05 PERCENT, THE LOWEST PERCENTAGE IS 10.45 PERCENT, AND THE AVERAGE FOR THE 13 CONTRACTS IS 10.83 PERCENT. IT IS THE OPINION OF THIS DEPOT THAT IT IS IMPRACTICABLE TO MANUFACTURE TROUSERS, COTTON, KHAKI, IN QUANTITY PRODUCTION WITHOUT PRODUCING A SMALL QUANTITY OF GARMENTS THAT DO NOT COMPLY WITH SPECIFICATIONS.

6. HOWEVER, IT IS ALSO THE OPINION OF THIS DEPOT, BASED ON PAST EXPERIENCE, THAT WITH ORDINARY CARE WHICH COULD REASONABLY BE EXPECTED FROM A PRUDENT MANUFACTURER, THE MAXIMUM QUANTITY OF IRREPARABLE GARMENTS THAT WOULD BE MANUFACTURED WOULD NOT EXCEED 1 PERCENT. IN OTHER WORDS, A QUANTITY NOT EXCEEDING 1 PERCENT OF THE TOTAL QUANTITY CUT COULD BE RENDERED IRREPARABLE IN THE COURSE OF ORDINARY MANUFACTURE AND NOT DUE TO ANY NEGLIGENCE OR CARELESSNESS ON THE PART OF THE CONTRACTOR. IT APPEARS FROM THE LANGUAGE OF THE CONTRACT THAT IRREPARABLE GARMENTS WERE CONTEMPLATED BY BOTH PARTIES (SEE CONTRACTOR'S PROPOSAL, SHEET NO. 13, UNDER CAPTIONS " UNUSED GOVERNMENT MATERIALS" AND " DEFINITIONS," SHEET NO. 15, UNDER CAPTION " USELESS MATERIALS"). HOWEVER, THE CONTRACT DOES NOT SPECIFICALLY STATE THAT ALL OR ANY PORTION OF THE VALUE OF GOVERNMENT MATERIALS CONTAINED IN THE IRREPARABLE GARMENTS IS TO BE CHARGED TO THE CONTRACTOR, AND IN THE ABSENCE OF SUCH A PROVISION IT IS BELIEVED THAT THE CONTRACTOR IS PROPERLY CHARGEABLE FOR THE VALUE OF GOVERNMENT MATERIALS WHICH HAVE BEEN DAMAGED THROUGH NEGLIGENCE OR CARELESSNESS, REGARDLESS OF WHETHER THE CONTRACTOR EXCEEDED ALLOWANCES OF GOVERNMENT MATERIALS OR PERFORMED WITHIN THOSE ALLOWANCES. IN THE CASE UNDER DISCUSSION THE CONTRACTOR DID EXCEED THE CONTRACT ALLOWANCES BUT SUCH EXCESS WAS CAUSED BY THE QUANTITY OF IRREPARABLE GARMENTS DELIVERED FOR WHICH NO CREDIT AGAINST ALLOWANCES WAS GIVEN AND, THEREFORE, THE YARDAGE SHOWN ON THE AUDIT AS BEING IN EXCESS OF ALLOWANCES IS INCLUDED IN ANY CHARGE MADE AGAINST THE CONTRACTOR FOR GOVERNMENT MATERIALS CONTAINED IN IRREPARABLE GARMENTS, SINCE SUCH YARDAGE EXCEEDS THE AMOUNT OF THE EXCESS. BASED ON THIS LINE OF REASONING, THE CHARGES AGAINST THE CONTRACTOR WOULD BE AS FOLLOWS:

TABLE

QUANTITY CUT ------------------------------------- 61,071

1 PERCENT NORMAL LOSS ---------------------------- 610

TOTAL QUANTITY IRREPARABLES ---------------------- 3,130

LESS 610 ----------------------------------------- 610

QUANTITY TO BE CHARGED ---------------------- 2,520 CHART

CLOTH, COTTON, DRILLING

KHAKI --------------------------------------------------------- --------- ------ AVERAGE NET YARDS USED PER GARMENT ------- 2.070827 10.704266 QUANTITY IRREPARABLE GARMENTS CHARGEABLE

TO CONTRACTOR ------------------------- 2,520 2,520

-------- ---------- YARDS LOST TO GOVERNMENT ----- ---------- 5,218.48 1,774.75 UNIT COST -------------------- ----------- $0.48 $0.1134

TOTAL COST --------------------------- 2,504.87 201.26 PLUS 10 PERCENT FOR HANDLING AND PACKING - 250.49 20.13

2,755.36 221.39

TOTAL CHARGES ------------------------ -------- 2,976.75 ----------------

7. THIS DEPOT IS OF THE OPINION THAT NO CHARGE SHOULD BE MADE AGAINST THE CONTRACTOR FOR THE VALUE OF GOVERNMENT MATERIALS CONTAINED IN 610 GARMENTS, WHICH IS THE MAXIMUM LOSS THAT COULD BE EXPECTED UNDER NORMAL CONDITIONS. HOWEVER, IT IS BELIEVED THAT THE CONTRACTOR SHOULD BE CHARGED WITH THE VALUE OF ALL MATERIALS CONTAINED IN GARMENTS WHICH HAVE BEEN DAMAGED THROUGH NEGLIGENCE OR CARELESSNESS. THEREFORE, IT IS REQUESTED THAT PAYMENT TO THE CONTRACTOR BE MADE ON THE BASIS SET FORTH IN PARAGRAPH 6. IF THERE IS ANY DOUBT IN YOUR OFFICE AS TO THE PROPRIETY OF SETTLEMENT MADE UNDER THE BASIS REQUESTED, IT IS RECOMMENDED THAT THE MATTER BE REFERRED TO THE GENERAL ACCOUNTING OFFICE FOR ADVANCE DECISION.

THE PARAGRAPH ENTITLED "EXCESS MATERIALS," TO WHICH REFERENCE IS MADE IN THE ABOVE-QUOTED LETTER, IS CONTAINED IN THE SCHEDULE WHICH WAS MADE A PART OF THE CONTRACT, AND IS AS FOLLOWS:

EXCESS MATERIALS.--- SHOULD THE CONTRACTOR REQUIRE CLOTH SPECIFIED BELOW IN EXCESS OF THE QUANTITIES PROVIDED BY THE ALLOWANCES, FOR THE PURPOSE OF COMPLETING HIS CONTRACT, IT WILL BE FURNISHED BY THE GOVERNMENT, F.O.B. PHILADELPHIA QUARTERMASTER DEPOT, 21ST AND JOHNSTON STREETS, PHILADELPHIA, PA., AND CHARGED TO HIS ACCOUNT AT THE UNIT PRICES STATED BELOW; EXCEPT THAT FOR THE PORTION OF THE EXCESS CLOTH CONTAINED IN REJECTED IRREPARABLE GARMENTS AND/OR CUT GARMENT PARTS, AND ALL OTHER MATERIALS AND FINDINGS FURNISHED IN EXCESS OF THE QUANTITIES PROVIDED BY THE ALLOWANCES LISTED IN STANDARD GOVERNMENT FORM OF BID, THE GOVERNMENT WILL SUPPLY THE SAME TO HIM, F.O.B. PHILADELPHIA, QUARTERMASTER DEPOT, 21ST AND JOHNSTON STREETS, PHILADELPHIA, PA., AND WILL CHARGE HIS ACCOUNT WITH THE VALUE THEREOF AT THE PREVAILING GOVERNMENT PRICES, PLUS 10 PERCENT TO COVER THE COST OF PACKING, HANDLING, ETC.

CHART

CLOTH UNIT UNIT PRICE --------------- ----------------------------------- ----------------------- DRILLING, UNBLEACHED ---------------- YARD ------- --- $0.41 CLOTH, COTTON, KHAKI ---------------- -------DO------- 1.23 ----

UNDER THE PLAIN TERMS OF THE CONTRACT, THE CONTRACTOR WAS OBLIGATED TO MANUFACTURE THE TROUSERS WITHIN THE UNIT ALLOWANCES FOR MATERIALS AS STATED IN THE SCHEDULE, AND TO MAKE PAYMENT FOR ALL MATERIALS USED IN EXCESS OF SUCH ALLOWANCES IN ACCORDANCE WITH ONE OF THE TWO METHODS DESCRIBED IN THE ABOVE-QUOTED PARAGRAPH OF THE SCHEDULE. CONVERSELY, THE GOVERNMENT WAS BOUND TO FURNISH THE CONTRACTOR, WITHOUT CHARGE, MATERIALS IN THE QUANTITIES STATED IN THE UNIT ALLOWANCES LISTED IN THE SCHEDULE.

WHILE IT MAY BE, AS SUGGESTED IN PARAGRAPH 6 OF THE CONTRACTING OFFICER'S ABOVE-QUOTED LETTER, THAT THE GOVERNMENT ACTUALLY WAS DAMAGED TO THE EXTENT OF THE VALUE OF THE MATERIALS CONTAINED IN 2,520 GARMENT CUTTINGS FROM WHICH THE CONTRACTOR MIGHT HAVE PRODUCED ACCEPTABLE GARMENTS BY THE USE OF GREATER CARE AND MORE EFFICIENT METHODS, IT DOES NOT NECESSARILY FOLLOW THAT THE GOVERNMENT MAY RECOVER THE VALUE OF ALL OF THE MATERIALS CONTAINED THEREIN. THE MEASURE OF THE GOVERNMENT'S RECOVERY IS TO BE DETERMINED BY REFERENCE TO THE PROVISIONS OF THE CONTRACT--- WHICH MUST BE REGARDED AS EVIDENCING THE INTENTION OF THE PARTIES AT THE TIME THE CONTRACT WAS ENTERED INTO--- AND NOT BY REFERENCE TO FACTS DEVELOPED AFTER THE CONTRACT HAS BEEN PERFORMED. THAT IS, THE CONTRACT CONTEMPLATED ASSESSMENT OF THE GOVERNMENT'S DAMAGES ON THE BASIS OF CERTAIN SPECIFIED ALLOWANCES FOR MATERIAL, AND THE ASSESSMENT MAY NOT NOW BE BASED ON LESSER ALLOWANCES SIMPLY BECAUSE THE SPECIFIED CONTRACT ALLOWANCES MAY HAVE BEEN TOO GENEROUS.

THE PROVISIONS OF THE CONTRACT RELATIVE TO THE CONTRACTOR'S RESPONSIBILITY FOR ANY LOSS OF OR DAMAGE TO GOVERNMENT PROPERTY OR MATERIALS, AS SET FORTH IN THE CONTRACTING OFFICER'S LETTER OF AUGUST 30, 1939, HAVE REFERENCE NOT ONLY TO LOSS OF OR DAMAGE TO GOVERNMENT MATERIALS OR PROPERTY THROUGH NEGLIGENCE OR INEFFICIENCY IN THE ACTUAL PERFORMANCE OF THE CONTRACT, BUT ALSO TO LOSS OR DAMAGE WHICH MIGHT BE INCURRED BY FIRE, THEFT, FLOOD, OR THE LIKE. AS SUCH, THEY ARE GENERAL PROVISIONS AND, TO THE EXTENT THEY MAY CONFLICT WITH THE SPECIFIC PROVISIONS FOR DETERMINING THE CONTRACTOR'S LIABILITY FOR "THE PORTION OF THE EXCESS CLOTH CONTAINED IN REJECTED IRREPARABLE GARMENTS AND/OR CUT GARMENT PARTS," AS CONTAINED IN THE PARAGRAPH OF THE SCHEDULE ENTITLED " EXCESS MATERIALS," SUCH GENERAL PROVISIONS MUST BE REGARDED AS SUPERSEDED BY THE SPECIFIC PROVISIONS OF SAID PARAGRAPH. SEE ERICKSON V. UNITED STATES, 107 FED. 204; SOUTHERN SURETY CO. V. TOWN OF GREENEVILLE, ET AL., 261 ID. 929.

CONSEQUENTLY, THE CONTRACTOR IS PROPERLY CHARGEABLE ONLY WITH THE VALUE, AT THE PREVAILING GOVERNMENT PRICES, OF MATERIAL IN EXCESS OF THE STATED ALLOWANCES WHICH WAS CONTAINED IN THE REJECTED IRREPARABLE GARMENTS OR CUT GARMENT PARTS, PLUS 10 PERCENT TO COVER COST OF PACKING, HANDLING, ETC. ON THE BASIS OF THE COMPUTATION SET FORTH IN PARAGRAPH 3 OF THE CONTRACTING OFFICER'S ABOVE-QUOTED LETTER, THE AMOUNT CHARGEABLE TO THE CONTRACTOR ON THE ITEM IN QUESTION WOULD BE $1,434.47, RATHER THAN $2,976.75 AS PROPOSED ON THE VOUCHER.

SINCE IT THUS APPEARS THAT THE CONTRACTOR MAY BE ENTITLED TO PAYMENT IN AN AMOUNT GREATER THAN THE AMOUNT APPROVED FOR PAYMENT ON THE VOUCHER, THE VOUCHER WILL BE RETAINED IN THIS OFFICE FOR SETTLEMENT AS A CLAIM.