B-86077, JULY 21, 1949, 29 COMP. GEN. 36

B-86077, JULY 21, 1949, 29 COMP. GEN. 36

CONTRACTS - FEDERAL SUPPLY SCHEDULE - AUTHORITY OF GOVERNMENT TO CANCEL ORDERS AND ENTER INTO SETTLEMENT AGREEMENTS WHEN THE PUBLIC INTEREST SO REQUIRES, THE GOVERNMENT MAY TERMINATE OR CANCEL ANY ORDERS PLACED AGAINST A FEDERAL SUPPLY SCHEDULE CONTRACT, AND AGREE WITH THE CONTRACTOR UPON AN AMOUNT TO COMPENSATE IT FOR ANY EXPENSES INCURRED AS A RESULT OF THE CANCELLATION, NOTWITHSTANDING THE FACT THAT THE CONTRACT DID NOT PROVIDE FOR TERMINATION AT THE OPTION OR FOR THE CONVENIENCE OF THE GOVERNMENT, BUT SPECIFICALLY PROVIDED THAT ANY ORDERS PLACED THEREUNDER WOULD NOT BE SUBJECT TO CANCELLATION.

ACTING COMPTROLLER GENERAL YATES TO LT. COL. ROY W. BARTLETT, DEPARTMENT OF THE ARMY, JULY 21, 1949:

THERE HAS BEEN RECEIVED BY REFERENCE FROM THE OFFICE OF THE CHIEF OF FINANCE YOUR LETTER OF MARCH 21, 1949, WITH ENCLOSURES, TRANSMITTING TWO VOUCHERS, EACH IN THE AMOUNT OF $440, IN FAVOR OF TRUCK AND COACH DIVISION, GMC, WITH THE REQUEST THAT AN ADVANCE DECISION BE RENDERED AS TO WHETHER PAYMENT THEREON IS AUTHORIZED.

IT APPEARS THAT THE DETROIT ARSENAL, CENTERLINE, MICHIGAN, ON MAY 28, 1947, ISSUED DELIVERY ORDER 20-089-U47-700 AND ON JUNE 27, 1947, ISSUED DELIVERY ORDER 20-089-W47-22 AGAINST FEDERAL SUPPLY SCHEDULE CONTRACT NO. TPS-76724 WITH THE GENERAL MOTORS CORPORATION, GMC TRUCK AND COACH DIVISION. EACH OF THESE DELIVERY ORDERS CALLED FOR THE DELIVERY OF 275 PIECES OF MANUFACTURER'S PART NO. G.M. 2111434, RADIATOR CORES. THEREAFTER, IT WAS DETERMINED BY THE GOVERNMENT THAT THE RADIATOR CORES WERE NO LONGER NEEDED AND THE CONTRACTOR WAS NOTIFIED BY LETTER DATED MAY 10, 1948, TO EFFECT THE TERMINATION OF THE TOTAL QUANTITY OF RADIATOR CORES CALLED FOR IN THE TWO DELIVERY ORDERS. UPON RECEIPT OF THE NOTICE OF TERMINATION, THE CONTRACTOR NOTIFIED ITS SUBCONTRACTOR, THE MODINE MANUFACTURING COMPANY, TO CANCEL THE PRODUCTION OF THE ITEMS. AS A RESULT OF THE CANCELLATION, THE SUBCONTRACTOR INCURRED A COST OF $880 AND SUBMITTED AN INVOICE IN THAT AMOUNT TO THE CONTRACTOR, WHICH WAS PAID BY THE CONTRACTOR AFTER IT DETERMINED THAT THE AMOUNT WAS FAIR AND REASONABLE. THE INSTANT VOUCHERS COVER THE CONTRACTOR'S CLAIM FOR REIMBURSEMENT OF THE AMOUNT THUS PAID.

IN MEMORANDUM DATED MARCH 21, 1949, THE ORDERING OFFICER STATES THAT THE FEDERAL SUPPLY SCHEDULE CONTRACT AGAINST WHICH THE DELIVERY ORDERS WERE ISSUED DID NOT PROVIDE FOR TERMINATION AT THE OPTION OF OR FOR THE CONVENIENCE OF THE GOVERNMENT AND, IN FACT, SPECIFICALLY PROVIDED THAT ANY ORDERS PLACED THEREUNDER WOULD NOT BE SUBJECT TO CANCELLATION; THAT WHILE THE RADIATOR CORES INVOLVED APPEARED AS A STANDARD COMMERCIAL PART IN THE CONTRACTOR'S PRICE LISTS IN 1943 AND 1946, THIS APPEARANCE WAS IN ERROR; THAT SUCH ITEM IS NEITHER A STANDARD COMMERCIAL PART NOR IS IT AN ,OFF THE SHELF" ARTICLE NORMALLY STOCKED IN SUBSTANTIAL QUANTITIES BY THE CONTRACTOR; AND THAT THE CONTRACTOR WOULD NOT HAVE AN OPPORTUNITY TO DISPOSE OF SUCH PRODUCT ELSEWHERE. IT IS STATED FURTHER THAT THE SUM OF $880 WILL BE ACCEPTED BY THE CONTRACTOR IN COMPLETE AND FINAL SETTLEMENT OF ALL CLAIMS ARISING OUT OF AND INCIDENT TO THE CANCELLATION OF THE ITEMS.

IT IS WELL SETTLED THAT, WHEN THE PUBLIC INTEREST REQUIRES SUCH ACTION, THE GOVERNMENT MAY TERMINATE A CONTRACT NOTWITHSTANDING THE FACT THAT THE CONTRACT DOES NOT PROVIDE FOR THE TERMINATION THEREOF. SEE, GENERALLY, 18 COMP. GEN. 826, AND CASES THERE CITED. IT NECESSARILY FOLLOWS, THEREFORE, THAT THE GOVERNMENT MAY ALSO TERMINATE OR CANCEL ANY ORDERS PLACED AGAINST A FEDERAL SUPPLY SCHEDULE CONTRACT WHEN SUCH ACTION IS DETERMINED TO BE IN THE BEST INTERESTS OF THE GOVERNMENT AND, IN THAT EVENT, THE GOVERNMENT MAY AGREE WITH THE CONTRACTOR UPON AN AMOUNT TO COMPENSATE THE CONTRACTOR FOR EXPENSES INCURRED AS A RESULT OF THE CANCELLATION.

WITH RESPECT TO THE AMOUNT AGREED UPON IN THE INSTANT CASE, IT WOULD SEEM THAT, GENERALLY, THE CANCELLATION OF AN ORDER FOR A STANDARD COMMERCIAL VEHICLE PART LISTED IN A CATALOG WOULD NOT RESULT IN ANY SUBSTANTIAL LOSS OR DAMAGE TO THE CONTRACTOR. HOWEVER, IN THE PRESENT CASE, SINCE IT HAS BEEN ADMINISTRATIVELY DETERMINED THAT THE RADIATOR CORES ARE NOT STANDARD PARTS NORMALLY STOCKED BY THE CONTRACTOR AND THAT THE AMOUNT CLAIMED REPRESENTS AN EQUITABLE ADJUSTMENT FOR THE CANCELLATION OF THE ORDERS, THIS OFFICE PERCEIVES NO OBJECTION TO THE PROPOSED PAYMENT.

ACCORDINGLY, THE VOUCHERS, TOGETHER WITH THE SUPPORTING PAPERS, ARE RETURNED HEREWITH, AND YOU ARE ADVISED THAT PAYMENT THEREON IS AUTHORIZED, IF OTHERWISE CORRECT.