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B-128316, OCT. 11, 1957

B-128316 Oct 11, 1957
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TO THE SECRETARY OF THE ARMY: REFERENCE IS MADE TO LETTER DATED SEPTEMBER 9. YOU WERE ADVISED THAT NO LEGAL BASIS EXISTED FOR CANCELLATION OR FOR INCREASING THE CONTRACT PRICE. THE CONTRACT WAS TERMINATED FOR DEFAULT. WAS ENTERED INTO WITH THE DENNEY MANUFACTURING COMPANY. WERE COMPUTED BY THE PROCURING AGENCY AND DEMANDED FROM THE BON MARCHE UNDER THE "DEFAULT" CLAUSE OF ITS CONTRACT AND THE AMOUNT STATED WAS PAID IN OCTOBER 1956. IT IS STATED THAT THE ACTUAL FREIGHT CHARGES INCURRED ON THE CHAIRS DELIVERED UNDER THE REPLACEMENT CONTRACT AMOUNTED TO $2. THE ESTIMATED FREIGHT CHARGES THAT WOULD HAVE BEEN INCURRED BY THE GOVERNMENT IF SHIPMENTS HAD BEEN MADE TO THE SAME DESTINATIONS BY THE BON MARCHE WOULD HAVE AMOUNT TO $7.

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B-128316, OCT. 11, 1957

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO LETTER DATED SEPTEMBER 9, 1957, FROM THE DEPUTY ASSISTANT SECRETARY (LOGISTICS), TRANSMITTING THE CASE OF THE BON MARCHE, SEATTLE, WASHINGTON, A DEFAULTED CONTRACTOR UNDER CONTRACT NO. DA 11-009- QM-25293, O.I. 1612-56, DATED JANUARY 24, 1956, FOR THE FURNISHING OF 2,973 OCCASIONAL CHAIRS F.O.B. CARS, CONTRACTOR'S PLANT, AND ASKING TO BE ADVISED WHETHER YOUR DEPARTMENT MAY REIMBURSE THE BON MARCHE IN THE AMOUNT OF $4,559.40, FOR SAVINGS REALIZED BY THE GOVERNMENT IN TRANSPORTATION CHARGES UNDER THE REPLACEMENT CONTRACT.

THE RECORD INDICATES THAT SUBSEQUENT TO AWARD, THE BON MARCHE ALLEGED ERROR IN ITS BID AND REQUESTED CANCELLATION OF THE CONTRACT. BY DECISION OF OUR OFFICE REPORTED AT 36 COMP. GEN. 27, YOU WERE ADVISED THAT NO LEGAL BASIS EXISTED FOR CANCELLATION OR FOR INCREASING THE CONTRACT PRICE. THEREAFTER, THE CONTRACT WAS TERMINATED FOR DEFAULT, AND REPLACEMENT CONTRACT NO. DA 33-031-QM-19403, O.I. 9772 56Q, DATED JUNE 29, 1956, WAS ENTERED INTO WITH THE DENNEY MANUFACTURING COMPANY, INC., GARDNER, MASSACHUSETTS, FOR THE DELIVERY OF 2,973 OCCASIONAL CHAIRS, F.O.B. CARS, CONTRACTOR'S PLANT.

EXCESS COSTS IN THE AMOUNT OF $9,009.68, COMPUTED AS THE DIFFERENT BETWEEN THE F.O.B. ORIGIN PRICES (NET) SPECIFIED IN THE DEFAULTED CONTRACT AND THE REPLACEMENT CONTRACT, WERE COMPUTED BY THE PROCURING AGENCY AND DEMANDED FROM THE BON MARCHE UNDER THE "DEFAULT" CLAUSE OF ITS CONTRACT AND THE AMOUNT STATED WAS PAID IN OCTOBER 1956. IT IS STATED THAT THE ACTUAL FREIGHT CHARGES INCURRED ON THE CHAIRS DELIVERED UNDER THE REPLACEMENT CONTRACT AMOUNTED TO $2,868.35, WHEREAS, THE ESTIMATED FREIGHT CHARGES THAT WOULD HAVE BEEN INCURRED BY THE GOVERNMENT IF SHIPMENTS HAD BEEN MADE TO THE SAME DESTINATIONS BY THE BON MARCHE WOULD HAVE AMOUNT TO $7,427.78.

IT IS STATED IN THE LETTER OF THE DEPUTY ASSISTANT SECRETARY THAT THE FACTS RELATIVE TO THE INSTANT TRANSPORTATION COSTS ARE SIMILAR TO THOSE INVOLVED IN THE CASE OF NATIONAL FOOD PRODUCTS, INC. V. UNITED STATES, C.CLS. NO. 493-53, DECIDED DECEMBER 5, 1956, 146 F.SUPP. 451, WHEREIN IT WAS HELD THAT THE PLAINTIFF WAS ENTITLED TO CREDIT AGAINST THE EXCESS COSTS OF REPLACEMENT FOR THE SAVINGS IN TRANSPORTATION COSTS, REALIZED BY THE GOVERNMENT, AND ON THAT BASIS AUTHORITY IS REQUESTED FOR PAYMENT TO THE BON MARCHE.

REFERENCE TO THE LETTER OF AUGUST 23, 1956, FROM THE SUCCESSOR CONTRACTING OFFICER TO THE DEFAULTED CONTRACTOR, SHOWS THAT THE CONTRACTOR WAS ADVISED IN DETAIL OF THE REPLACEMENT CONTRACT AND OF THE COMPUTATION OF EXCESS COSTS CLAIMED ON THE BASIS OF THE DIFFERENCE BETWEEN THE NET PRICES F.O.B. FACTORY OF THE ORIGINAL AND THE REPLACING CONTRACT. WHILE IT WAS ALSO STATED THAT THE DEMAND FOR PAYMENT OF THE AMOUNT SO COMPUTED WAS "WITHOUT PREJUDICE TO ANY RIGHTS WHICH THE GOVERNMENT MAY HAVE TO ADDITIONAL SUMS PURSUANT TO THE DEFAULT PROVISION OF THE SUBJECT CONTRACT," THAT STATEMENT FAILS TO FURNISH ANY INDICATION THAT FURTHER ADJUSTMENT WAS CONTEMPLATED ON THE BASIS OF TRANSPORTATION COSTS SUBSEQUENTLY INCURRED. IN THESE CIRCUMSTANCES, WE BELIEVE THAT THE VOLUNTARY PAYMENT OF THE CONTRACTOR OF THE AMOUNT DEMANDED, WHICH WAS MADE THREE MONTHS PRIOR TO THE DECISION OF THE NATIONAL WOOD PRODUCTS CASE, AND APPARENTLY WITHOUT PROTEST OR ARGUMENT OR ATTEMPTED RESERVATION OF RIGHTS BY THE CONTRACTOR, MAY REASONABLY BE VIEWED AS INTENDED TO CONSTITUTE A FULL AND FINAL SETTLEMENT OF THE CONTRACTOR'S OBLIGATION.

WE THEREFORE CONCLUDE THAT ON THE PRESENT RECORD THERE IS NO COMPELLING REASON FOR REOPENING THE SETTLEMENT MADE, AND THAT THE PROPOSED PAYMENT SHOULD NOT BE MADE.

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