B-175550, DEC 19, 1972

B-175550: Dec 19, 1972

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THE FACT THAT THE PRIME CONTRACT WAS A COST REIMBURSEMENT TYPE DOES NOT ESTABLISH ANY RIGHT OF PAYMENT BY THE GOVERNMENT TO A SUBCONTRACTOR. ONLY THE REASONABLE VALUE OF SERVICES PERFORMED AT THE GOVERNMENT'S REQUEST AFTER THE PRIME CONTRACTOR CEASED OPERATIONS WILL BE ALLOWED. THERE IS NO AUTHORITY FOR PAYMENT OF INTEREST ON CLAIMS AGAINST THE GOVERNMENT EXCEPT WHERE A CONTRACT SO STIPULATES OR IT IS PROVIDED FOR IN THE STATUTE. 45 COMP. SUBCONTRACTOR MAY NOT ASSERT A CLAIM AGAINST THE GOVERNMENT WHEN THE CHECKS OF A PRIME CONTRACTOR ARE RETURNED UNPAID. TO SPECIFICATION PACKAGING CORPORATION: REFERENCE IS MADE TO YOUR LETTERS OF MAY 23. C. TOOL CORPORATION WAS AWARDED THE ABOVE-MENTIONED COST-REIMBURSABLE CONTRACTS FOR OVERHAULING CERTAIN EQUIPMENT.

B-175550, DEC 19, 1972

CONTRACTS - COST REIMBURSEMENT - GOVERNMENT OBLIGATIONS TO SUBCONTRACTORS - LACK OF PRIVITY DECISION AFFIRMING THE SETTLEMENT OF THE CLAIM OF SPECIFICATION PACKAGING CORPORATION FOR PROVIDING PACKAGING SERVICES AND MATERIALS AS A SUBCONTRACTOR UNDER CERTAIN AIR FORCE CONTRACTS AFTER THE PRIMARY CONTRACTOR CEASED OPERATIONS. THE FACT THAT THE GOVERNMENT APPROVES A SUBCONTRACT DOES NOT ESTABLISH ANY PRIVITY OF CONTRACT BETWEEN THE SUBCONTRACTOR AND THE GOVERNMENT. CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST CO. OF CHICAGO V. UNITED STATES, 112 CT. CL. 563, 566 (1949). MOREOVER, THE FACT THAT THE PRIME CONTRACT WAS A COST REIMBURSEMENT TYPE DOES NOT ESTABLISH ANY RIGHT OF PAYMENT BY THE GOVERNMENT TO A SUBCONTRACTOR. ACCORDINGLY, ONLY THE REASONABLE VALUE OF SERVICES PERFORMED AT THE GOVERNMENT'S REQUEST AFTER THE PRIME CONTRACTOR CEASED OPERATIONS WILL BE ALLOWED. ALSO, THERE IS NO AUTHORITY FOR PAYMENT OF INTEREST ON CLAIMS AGAINST THE GOVERNMENT EXCEPT WHERE A CONTRACT SO STIPULATES OR IT IS PROVIDED FOR IN THE STATUTE. 45 COMP. GEN. 169 (1965). FINALLY, SUBCONTRACTOR MAY NOT ASSERT A CLAIM AGAINST THE GOVERNMENT WHEN THE CHECKS OF A PRIME CONTRACTOR ARE RETURNED UNPAID. AEROVOX CORPORATION V. UNITED STATES, 89 F. SUPP. 873 (1950).

TO SPECIFICATION PACKAGING CORPORATION:

REFERENCE IS MADE TO YOUR LETTERS OF MAY 23, JULY 10 AND 20 AND SEPTEMBER 9, 1972, REQUESTING REVIEW OF THE SETTLEMENT CERTIFICATE ISSUED ON MAY 4, 1972, BY THE TRANSPORTATION AND CLAIMS DIVISION IN CONNECTION WITH YOUR CLAIM FOR PROVIDING PACKAGING SERVICES AND MATERIALS AS A SUBCONTRACTOR UNDER AIR FORCE CONTRACTS NOS. F41608-69-D 5687, -8955 AND -2987.

THE RECORD INDICATES THAT THE A. C. TOOL CORPORATION WAS AWARDED THE ABOVE-MENTIONED COST-REIMBURSABLE CONTRACTS FOR OVERHAULING CERTAIN EQUIPMENT, AND THAT YOU PROVIDED PACKING AND SHIPPING SERVICES AS A SUBCONTRACTOR TO A. C. TOOL. IN JANUARY 1970, A. C. TOOL BECAME INSOLVENT AND CEASED DOING BUSINESS, AND THE THREE CONTRACTS WITH THE AIR FORCE WERE TERMINATED FOR DEFAULT ON FEBRUARY 18, 1970. YOU THEN CLAIMED THAT THE GOVERNMENT OWED YOU $11,310.20 FOR LABOR AND MATERIAL FURNISHED UNDER THE CONTRACTS AND FOR WHICH YOU WERE NEVER PAID BY A. C. TOOL.

THE SETTLEMENT CERTIFICATE DISALLOWED THE BULK OF YOUR CLAIM BECAUSE THERE WAS NO PRIVITY OF CONTRACT BETWEEN YOU AND THE GOVERNMENT. HOWEVER, THE AMOUNT OF $1,252.50 WAS ALLOWED AS A REASONABLE VALUE OF SERVICES YOU PERFORMED AT THE REQUEST OF THE GOVERNMENT AFTER THE PRIME CONTRACTOR CEASED OPERATIONS. YOU CLAIM THAT ALL THE SERVICES YOU RENDERED WERE BASED ON THE REQUESTS OR INSTRUCTIONS OF GOVERNMENT PERSONNEL. YOU ALSO CLAIM THAT THE GOVERNMENT HAS NOT PAID THE PRIME CONTRACTOR FOR PACKAGING AND SHIPPING SERVICES AND THAT ITS FAILURE TO PAY YOU WOULD RESULT IN THE GOVERNMENT IMPROPERLY OBTAINING BENEFITS WITHOUT PAYING FOR THEM.

OUR FILE CONTAINS MANY DOCUMENTS FROM THE VARIOUS LEVELS WITHIN THE AIR FORCE THAT WERE CONCERNED WITH THE CONTRACTS INVOLVED IN THIS MATTER. INCLUDED IN THESE DOCUMENTS ARE STATEMENTS FROM THE INDIVIDUALS YOU CLAIM AUTHORIZED YOU TO PERFORM SERVICES FOR THE GOVERNMENT. ALTHOUGH WE DO NOT DOUBT THAT GOVERNMENT OFFICIALS WERE IN CONTACT WITH YOU PRIOR TO THE TIME A.C. TOOL CEASED OPERATIONS, THE RECORD DOES NOT ESTABLISH THAT THESE CONTACTS WERE INCONSISTENT WITH YOUR PERFORMANCE AS A SUBCONTRACTOR UNDER THE PRIME CONTRACTS WITH A.C. TOOL. SEE 32 COMP. GEN. 174 (1952). FURTHERMORE, THE FACT THAT THE GOVERNMENT APPROVED YOUR SUBCONTRACT AND YOUR PERFORMANCE UNDER IT DOES NOT ESTABLISH ANY PRIVITY OF CONTRACT BETWEEN YOU AND THE GOVERNMENT. CONTINENTAL ILLINOIS NATIONAL BANK AND TRUST CO. OF CHICAGO V. UNITED STATES, 112 CT. CL. 563, 566 (1949); D. A. SULLIVAN AND SONS, INC., ET AL. V. UNITED STATES, 129 CT. CL. 63 (1954); SEE ALSO TRW, INC., ASBCA NO. 11373, 68-2 BCA 7099 (JUNE 25, 1968).

YOU POINT OUT THAT THIS SITUATION INVOLVED COST-REIMBURSEMENT CONTRACTS AND YOU ASSERT THAT THE AIR FORCE HAS NOT PAID FOR THE COST OF YOUR SERVICES BECAUSE THE PRIME CONTRACTOR DID NOT SUBMIT INVOICES FOR YOUR BILLS. HOWEVER, THE FACT THAT THE PRIME CONTRACTOR HAD COST REIMBURSEMENT TYPE CONTRACTS WITH THE GOVERNMENT DOES NOT ESTABLISH YOUR RIGHT TO PAYMENT BY THE GOVERNMENT. THE AIR FORCE HAS ADVISED US THAT FROM APRIL 4, 1969, TO JANUARY 23, 1970, IT PAID A TOTAL OF $5,438.79 FOR REIMBURSABLE DIRECT MATERIALS USED IN PACKING UNDER CONTRACTS -5687 AND - 8955. WHILE YOUR FIGURES SUGGEST THAT THE GOVERNMENT HAS NOT BEEN BILLED FOR THE ENTIRE COST OF PACKING AND SHIPPING UNDER THE THREE CONTRACTS, WE ARE NOT AWARE OF ANY LEGAL AUTHORITY THAT WOULD PERMIT PAYMENT DIRECTLY TO YOU FOR ANY SUCH UNPAID BILLS. AS POINTED OUT ABOVE, THE GOVERNMENT'S CONTRACTUAL OBLIGATION TO REIMBURSE FOR CERTAIN COSTS EXTENDS ONLY TO THE PRIME CONTRACTOR AND NOT TO SUBCONTRACTORS.

YOU ALSO REQUEST THAT THE GOVERNMENT PURCHASE FROM YOU AT COST THE MATERIALS YOU HAVE ON HAND THAT WERE ORIGINALLY ACQUIRED FOR PERFORMANCE UNDER THE CONTRACTS. IT APPEARS FROM THE RECORD AND FROM YOUR OWN STATEMENTS THAT THESE MATERIALS WERE ACQUIRED PRIOR TO THE PRIME CONTRACTOR'S SHUTDOWN, AND THEREFORE WERE OBTAINED UNDER YOUR CONTRACTUAL ARRANGEMENT WITH A. C. TOOL RATHER THAN IN RESPONSE TO DIRECT INSTRUCTIONS FROM THE GOVERNMENT. UNDER THESE CIRCUMSTANCES, THERE IS NO BASIS FOR GRANTING YOUR REQUEST.

YOU CLAIM THAT WE ARE NOT CONSISTENT IN ALLOWING AN AMOUNT FOR CERTAIN SHIPMENTS BUT NOT OTHERS YOU MADE DURING JANUARY 1970. THE DOCUMENTATION FURNISHED US BY THE AIR FORCE INDICATES THAT THE PRIME CONTRACTOR CLOSED ITS PLANT ON JANUARY 23, 1970. THE INVOICES YOU SUBMITTED SHOW THAT YOU PROVIDED SERVICES WORTH $1,252.50 AFTER THAT DATE, AND THE RECORD REVEALS THAT SUCH SERVICES WERE PROVIDED AT THE REQUEST OF THE GOVERNMENT. WHILE YOU DID PROVIDE ADDITIONAL SERVICES DURING THAT MONTH, THESE SERVICES WERE RENDERED PRIOR TO THE PRIME CONTRACTOR'S SHUTDOWN DATE AND ACCORDINGLY ARE VIEWED AS COMING UNDER YOUR CONTRACTUAL RELATIONSHIP WITH THE PRIME CONTRACTOR. THEREFORE, ALLOWANCE OF YOUR CLAIM ONLY IN THE AMOUNT OF $1,252.50 IS DEEMED PROPER.

YOUR CLAIM FOR INTEREST ON THE AMOUNT ALLOWED MUST BE DENIED AS THERE IS NO AUTHORITY FOR PAYMENT OF INTEREST ON CLAIMS AGAINST THE GOVERNMENT, EXCEPT WHERE A CONTRACT SO STIPULATES OR IT IS PROVIDED FOR BY STATUTE. 45 COMP. GEN. 169 (1965).

FINALLY, CITING THE BAD CHECKS YOU RECEIVED FROM THE PRIME CONTRACTOR, YOU ASSERT THAT THERE WAS FRAUD INVOLVED ON THE PART OF A. C. TOOL AND THAT THIS PROVIDES A BASIS FOR DIRECT REIMBURSEMENT TO YOU BY THE GOVERNMENT. WHILE IT APPEARS THAT TWO CHECKS MADE OUT TO YOU FROM A. C. TOOL CORPORATION WERE RETURNED BY THE BANK UNPAID, IT HAS BEEN HELD THAT A SUBCONTRACTOR MAY NOT ASSERT A CLAIM AGAINST THE GOVERNMENT WHEN THE CHECKS OF A PRIME CONTRACTOR ARE RETURNED UNPAID. AEROVOX CORPORATION V. UNITED STATES, 89 F. SUPP. 873 (1950).

ACCORDINGLY, OUR SETTLEMENT CERTIFICATE OF MAY 4, 1972, IS AFFIRMED.

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