B-141589, JAN. 26, 1960

B-141589: Jan 26, 1960

Additional Materials:

Contact:

Ralph O. White
(202) 512-8278
WhiteRO@gao.gov

Kenneth E. Patton
(202) 512-8205
PattonK@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

ATTORNEYS AT LAW: REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 27. YOUR CLIENT IS NOT SATISFIED WITH THE REDUCTION GRANTED IN THE INSTANT CASE. WERE NOT TAKEN INTO CONSIDERATION. YOU ALSO ALLEGE THAT AFTER THE BUTTONS ARE MACHINE-SEWED. YOU ALLEGE FURTHER THAT CONTRACT QM-16480 WAS EQUITABLY ADJUSTED SINCE THE GOVERNMENT ALLOWED THE CONTRACTOR A FURTHER REDUCTION OF $873.76. WAS THE CONTRACTOR. INDICATING THAT HOWARD MANUFACTURING AND HELD-FOSTER ARE AFFILIATED COMPANIES. 437.04 WAS DUE AS SAVINGS ARISING OUT OF PERMISSION TO MACHINE SEW BUTTONS TO COLLARS INSTEAD OF HAND SEWING. WHICH IS THE SAME LABOR CHARGE USED IN DETERMINING THE DEVIATION BY THE HOWARD MANUFACTURING COMPANY. FOR HAND SEWING BUTTONS ON COLLARS AND SHANKING WAS ?036 PER UNIT.

B-141589, JAN. 26, 1960

TO LODGE AND GOLDMAN, ATTORNEYS AT LAW:

REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 27, 1959, REQUESTING RECONSIDERATION OF DETERMINATION BY OUR CLAIMS DIVISION SET FORTH IN LETTER TO YOU DATED NOVEMBER 18, 1959, THAT THE SUM OF $1,030.32--- A REDUCTION, AS ADMINISTRATIVELY RECOMMENDED, OF $430.68 FROM THE AMOUNT OF THE INDEBTEDNESS PREVIOUSLY FOUND DUE--- SHOULD BE PAID PROMPTLY TO THE GOVERNMENT BY THE HOWARD MANUFACTURING COMPANY (A PARTNERSHIP), PHILADELPHIA, PENNSYLVANIA, REPRESENTING SAVINGS FROM DEVIATIONS UNDER CONTRACT NO. DA-30-280-QM-8639 DATED DECEMBER 22, 1950, WITH THE DEPARTMENT OF THE ARMY.

YOU STATE IN YOUR LETTER THAT IN VIEW OF THE ADMINISTRATIVE ADJUSTMENT RECEIVED BY HELD-FOSTER SPORTSWEAR COMPANY, INC., (AN AFFILIATED CONCERN), PHILADELPHIA, PENNSYLVANIA, UNDER CONTRACT NO. DA 30-280-QM-16480, YOUR CLIENT IS NOT SATISFIED WITH THE REDUCTION GRANTED IN THE INSTANT CASE. YOU ALLEGE THAT ALL THE FACTORS CONTAINED IN YOUR LETTER OF JULY 22, 1959, WERE NOT TAKEN INTO CONSIDERATION; THAT WHEREAS HAND SEWING REQUIRES ONE PERSON TO WORK ON THE COLLARS, MACHINE SEWING OF BUTTONS ON COLLARS AND SHANKING MUST BE PERFORMED BY TWO PEOPLE. YOU ALSO ALLEGE THAT AFTER THE BUTTONS ARE MACHINE-SEWED, THE ARTICLE MUST BE SET ON A PILE AND THEN PICKED UP BY ANOTHER MANFOR SHANKING AND, THEREFORE, THE CONTRACTOR DID NOT EFFECT ANY SAVINGS BY THE DEVIATION OR CHANGE. YOU ALLEGE FURTHER THAT CONTRACT QM-16480 WAS EQUITABLY ADJUSTED SINCE THE GOVERNMENT ALLOWED THE CONTRACTOR A FURTHER REDUCTION OF $873.76, WHEREAS IN THIS CASE A REDUCTION OF $430.68 HAS BEEN ALLOWED WHICH YOU STATE DOES NOT APPEAR TO BE AN "EQUITABLE" ADJUSTMENT. YOU ASK THAT UNDER THESE CIRCUMSTANCES WE RECONSIDER YOUR LETTER OF JULY 22, 59,"AND "EQUITABLY" ADJUST THE MATTER IN LINE WITH THE ACTION OF THE ARMY UNDER THE PRIOR CONTRACT.'

IN YOUR LETTER OF JULY 22, 1959, YOU REFERRED TO CERTAIN DOCUMENTS INVOLVING CONTRACT QM-16480 WHEREIN HELD-FOSTER SPORTSWEAR COMPANY, INC., WAS THE CONTRACTOR, INDICATING THAT HOWARD MANUFACTURING AND HELD-FOSTER ARE AFFILIATED COMPANIES. YOU STATED THAT IN CONSIDERING THE DEVIATION BY THE HELD-FOSTER SPORTSWEAR COMPANY, INC., THE SUCCESSOR CONTRACTING OFFICER HAD MADE A FINDING OF FACT THAT THE SUM OF $1,437.04 WAS DUE AS SAVINGS ARISING OUT OF PERMISSION TO MACHINE SEW BUTTONS TO COLLARS INSTEAD OF HAND SEWING, BASED ON A DIRECT LABOR SAVING OF ?0255 PER UNIT, WHICH IS THE SAME LABOR CHARGE USED IN DETERMINING THE DEVIATION BY THE HOWARD MANUFACTURING COMPANY. YOU STATED ALSO THAT HELD-FOSTER FILED AN APPEAL TO THE ARMED SERVICES BOARD OF CONTRACT APPEALS, ASBCA NO. 4673; THAT IN ITS COMPLAINT HELD FOSTER OBJECTED TO (1) THE ?0255 DIRECT LABOR SAVINGS CLAIMED, (2) THE 80 PERCENT OVERHEAD CLAIMED, AND (3) THE SIX PERCENT PROFIT CLAIMED. IN SUPPORT OF THESE OBJECTIONS, YOU QUOTED FROM PARAGRAPH 6 (B) OF THE COMPLAINT AS FOLLOWS:

"THE SUCCESSOR CONTRACTING OFFICER ERRONEOUSLY CALCULATED THE EFFECTIVE SAVINGS BY THE CHANGE FROM HAND SEWING OF BUTTONS ON COLLARS TO THE MACHINE SEWING OF BUTTONS. THE ESTABLISHED RATE IN THE YEAR OF 1951 IN A PHILADELPHIA, PENNSYLVANIA, NO. 1 CLOTHING SHOP, SUCH AS THE CONTRACTOR-S, FOR HAND SEWING BUTTONS ON COLLARS AND SHANKING WAS ?036 PER UNIT. THE HAND SEWING AND SHANKING WAS PERFORMED BY ONE PERSON. THE ESTABLISHED RATE IN THE YEAR OF 1951 FOR THE CONTRACTOR WAS .018 PER UNIT FOR MACHINE SEWING OF BUTTONS ON COLLARS AND ADDITIONAL ?018 PER UNIT FOR SHANKING. THEREFORE, THE COST TO CONTRACTOR WOULD BE THE SAME AS FAR AS THE OPERATION ITSELF WAS CONCERNED. HOWEVER, SINCE THE MACHINE SEWING OF BUTTONS ON COLLARS AND SHANKING WOULD BE PERFORMED BY TWO DIFFERENT PEOPLE THERE WERE ADDITIONAL COSTS NOT INVOLVED IN HAND SEWING OF THE BUTTONS. AFTER THE BUTTONS WERE MACHINE SEWED THE ARTICLE WOULD BE SET ON A PILE AND THEN WOULD HAVE TO BE PICKED UP BY ANOTHER WORKER FOR SHANKING. THEREFORE CONTRACTOR DID NOT EFFECT ANY SAVINGS BY THE CHANGE IN THE METHOD OF SEWING BUTTONS ON THE COLLARS. THE SOLE REASON CONTRACTOR REQUESTED THE CHANGE WAS DUE TO THE SCARCITY IN THE LABOR MARKET OF BUTTON SEWING OPERATORS.'

YOU ALLEGED IN YOUR LETTER OF JULY 22, 1959, THAT AS A RESULT OF THE COMPLAINT IN ASBCA NO. 4673, THE FINDINGS OF FACT WERE AMENDED ON MARCH 7, 1958, WHEREIN THE SUCCESSOR CONTRACTING OFFICER RECOGNIZED THAT THE DIRECT LABOR SAVINGS CLAIMED WERE INCORRECT AND THE LABOR SAVINGS DEMANDED WERE CHANGED TO $0.018 PER UNIT. YOU STATED THAT THIS CHANGE AFFECTED THE OVERHEAD AND PROFIT FACTORS CLAIMED; THAT THERE WERE ALSO INVOLVED SOME 9,000 GARMENTS WHICH HAD ALREADY BEEN PROCESSED WITH HAND SEWING THAT WERE NOT TAKEN INTO ACCOUNT; AND THAT IN THE INSTANT CASE ALSO ,THERE WAS AN UNKNOWN QUANTITY OF GARMENTS ALREADY MANUFACTURED WITH HAND SEWING OF THE BUTTONS TO THE COLLARS.' YOU STATED FURTHER IN THIS LETTER THAT ON OR ABOUT APRIL 25, 1958,"THE GOVERNMENT MADE AN EQUITABLE ADJUSTMENT OF THE ENTIRE CLAIM, REALIZING THAT ITS CLAIM WAS IMPROPER," URGING THAT, UNDER THESE CIRCUMSTANCES THE INSTANT CLAIM UNDER CONTRACT QM-8639 SHOULD BE NULLIFIED ,SINCE THE TWO PROBLEMS ARE EXACTLY SIMILAR AND SINCE THE GOVERNMENT BY PRECEDENT HAS RECOGNIZED ITS ERROR IN COMPUTING THE SAVINGS.' IN SUPPORT OF THESE CONTENTIONS YOU ALLEGED THAT THE CONTRACTOR'S LETTER OF FEBRUARY 21, 1951, SPECIFICALLY NOTIFIED THE GOVERNMENT THAT THERE WOULD BE TWO OPERATIONS INVOLVED IN MACHINE SEWING, NAMELY, THE MACHINE SEWING ITSELF AND ALSO THE HANKING; THAT THESE TWO PROCESSES INVOLVED EXTRA LABOR SINCE THEY WERE DONE BY TWO DIFFERENT OPERATORS, AND SOME EMPLOYEE HAD TO CART THE GARMENTS FROM ONE OPERATOR TO ANOTHER; AND THAT THE TIME PERIOD WAS ALMOST THE SAME IN THE TWO CASES. YOU EXPRESSED THE OPINION IN YOUR LETTER "THAT IF THE GOVERNMENT SEES FIT TO EQUITABLY ADJUST THE SAME PROBLEM IN ONE CASE, IT MUST ALSO DO LIKEWISE IN THIS CASE," ALLEGING FURTHER THAT "* * * THE GOVERNMENT IN EQUITABLY ADJUSTING THE FIRST CASE * * * GAVE NO RECOGNITION TO THE TWO PROCESSES NECESSARY FOR MACHINE SEWING; " THAT THE CONTRACTOR HOWEVER, DID NOT PROCESS ITS APPEAL BEFORE THE BOARD IN VIEW OF THE SMALL AMOUNT INVOLVED AND THE EXPENSE OF PROSECUTING THE APPEAL; AND "THAT THE GOVERNMENT ADMITTED THAT IT OWED THE CONTRACTOR AN ADDITIONAL SUM SO THAT ALL THAT THE CONTRACTOR HAD TO PAY THE GOVERNMENT AS THE RESULT OF THE CLAIM UNDER QM16480 WAS $56.55.' YOUR LETTER CONCLUDED WITH THE REQUEST THAT WE ,TREAT THE CLAIM HEREIN AS EQUITABLY AS THE CLAIM WAS TREATED BY THE GOVERNMENT UNDER QM16480 AND ALSO GIVE RECOGNITION TO THE SHANKING PROCESS REQUESTED AND PERMISSION GRANTED.'

AS INDICATED IN OUR LETTER OF NOVEMBER 18, 1959, IT HAS BEEN ADMINISTRATIVELY DETERMINED THAT OPERATION 45 UNDER CONTRACT QM-8639 AND OPERATION 39 UNDER CONTRACT QM-16480 WERE GOVERNED BY THE SAME SPECIFICATION REQUIREMENTS. THERE FOLLOWS THE EVALUATION MADE OF THE LABOR SAVINGS RESULTING FROM THE DEVIATION PERMITTED UNDER CONTRACT QM 16480:

TABLE

OPERATION NO. 39 PIECE RATE PROD. STD. HRLY RATE SEW AND SHANK WRAP 3 BUTTONS BY HAND .036 28 $1.00 SEW 3 BUTTONS (MACHINE) .0105 95 $1.00 SHANK WRAP 3 BUTTONS (MACHINE) .0075 133 $1.00

TOTAL .0180 SAVINGS ................... .018 PER UNIT

THE AVAILABLE RECORD SHOWS THAT UNDER THE "AMENDED FINDINGS OF FACT AND DECISION" OF MARCH 7, 1958, RELATING TO THE DEVIATION UNDER CONTRACT QM- 16480 A TOTAL SAVINGS OF $995.77 HAD BEEN FOUND DUE THE GOVERNMENT. PENDING THE APPEAL OF ASBCA NO. 4673 YOU PROPOSED A PAYMENT OF $563.28 AS AN EQUITABLE ADJUSTMENT. THEREAFTER, A SUPPLEMENTAL AGREEMENT, MODIFICATION NO. 4 OF THE CONTRACT, WAS ENTERED INTO APRIL 18, 1958, WHEREIN IT WAS MUTUALLY AGREED THAT A DECREASE OF $563.28 IN THE TOTAL CONTRACT PRICE CONSTITUTED AN EQUITABLE REDUCTION FOR THE SPECIFICATION CHANGE INVOLVED, AND THE CONTRACTOR'S APPEAL WAS DISMISSED. THE RECORD ALSO SHOWS THAT THIS ADJUSTMENT WAS MADE IN CONSIDERATION OF THE REVISED LABOR SAVINGS OF ?018 PER UNIT, AS SET OUT ABOVE, APPLIED TO THE APPROXIMATE NUMBER OF UNITS DELIVERED AFTER THE DEVIATION HAD BEEN REQUESTED, INSTEAD OF THE LABOR SAVINGS PREVIOUSLY DETERMINED APPLIED TO THE TOTAL NUMBER OF UNITS INVOLVED. THE RECORD SHOWS FURTHER, CONTRARY TO THE STATEMENT IN YOUR LETTER "THAT ALL THAT THE CONTRACTOR HAD TO PAY THE GOVERNMENT, AS THE RESULT OF THE CLAIM UNDER QM16480 WAS $56.55, THAT THE CONTRACTOR MADE TWO PAYMENTS--- ONE OF $506.73 AND ONE OF $56.55, MAKING A TOTAL PAYMENT OF $563.28 PURSUANT TO THE PROVISIONS OF MODIFICATION NO. 4 OF THE CONTRACT.

IN CONSIDERING THE ADJUSTMENT REQUIRED UNDER CONTRACT QM-8639, THE RECORD SHOWS THAT THE PERFORMANCE OF THE CONTRACT WORK IN QUESTION WAS SUBCONTRACTED TO MINNETTE MANUFACTURING COMPANY (MR. LOUIS RUBINSTEIN, OWNER), 606 MARKET STREET, DONCANNON, PENNSYLVANIA, AND THAT IN BREACH OF THE CONTRACT, MACHINE SEWING OF THE BUTTONS WAS UTILIZED FROM THE VERY INCEPTION OF THIS WORK FOR THE SOLE CONVENIENCE AND BENEFIT OF THE SUBCONTRACTOR. HENCE, YOUR CONTENTION THAT "THERE WAS AN UNKNOWN QUANTITY OF GARMENTS ALREADY MANUFACTURED WITH HAND SEWING OF THE BUTTONS TO THE COLLARS" IS WITHOUT FOUNDATION. MOREOVER, IT IS SEEN THAT THE EVALUATION OF THE DEVIATION UNDER CONTRACT QM-16480, AS SET OUT ABOVE, COVERED BOTH THE SEWING AND SHANKING OPERATIONS AND IN VIEW OF THE EQUITABLE ADJUSTMENT FINALLY AGREED UPON UNDER THE MODIFICATION OF THAT CONTRACT, THERE IS NO JUSTIFICATION FOR A FINDING, AS YOU CONTEND, THAT THE COST OF PERFORMING THE MACHINE SEWING AND SHANKING OPERATIONS WAS THE SAME AS THE COST OF PERFORMING THE HAND SEWING OPERATION REQUIRED BY THE CONTRACT SPECIFICATIONS.

THUS, THE RECORD ESTABLISHES THAT THE BASIS UTILIZED IN DETERMINING THE ADJUSTMENT DUE FOR THE DEVIATION UNDER CONTRACT QM-16480 WAS APPLIED IN OUR LETTER OF NOVEMBER 18, 1959, IN DETERMINING THE ADJUSTMENT FOUND DUE FOR THE DEVIATION UNDER CONTRACT QM-8639, INSOFAR AS THE FACTS AND CIRCUMSTANCES WOULD JUSTIFY SUCH ACTION, AND THE ADJUSTMENT SEEMS EQUITABLE AND REASONABLE. THEREFORE, THE DETERMINATION THAT THE SUM OF $1,030.32 IS DUE THE GOVERNMENT IS SUSTAINED.

IT IS REQUESTED THAT PAYMENT OF THIS INDEBTEDNESS IN THE AMOUNT OF $1,030.32 BE TRANSMITTED TO OUR OFFICE PROMPTLY. SHOULD SUCH PAYMENT NOT BE RECEIVED WITHIN 30 DAYS FROM THE DATE OF THIS LETTER, APPROPRIATE PROCEEDINGS WILL BE INITIATED TO EFFECT COLLECTION.

Oct 26, 2020

Oct 23, 2020

Oct 22, 2020

Oct 20, 2020

Oct 16, 2020

Looking for more? Browse all our products here