B-176386, OCT 24, 1972

B-176386: Oct 24, 1972

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THE RULE THAT AMBIGUOUS PROVISIONS ARE TO BE CONSTRUED AGAINST THE DRAFTER. ONLY APPLIES WHERE THE CONTRACT PARTIES ARE IN DISAGREEMENT. EXERCISE OF THE OPTION ON MONDAY IS IN ACCORDANCE WITH GENERALLY ACCEPTED COMMERCIAL PRACTICE. EXERCISE OF THE OPTION WAS PROPER IN THIS CASE. TO INTERNATIONAL HARVESTER COMPANY: REFERENCE IS MADE TO YOUR PROTEST OF JUNE 27. THE CONTRACT WAS AWARDED BY THE DEFENSE SUPPLY AGENCY. BY MEANS OF THE EXERCISE OF AN OPTION WHICH WAS CONTAINED IN A PRIOR CONTRACT. FINAL DELIVERY WAS TO BE MADE 720 DAYS FROM THE DATE OF AWARD OF THE CONTRACT. IT IS YOUR CONTENTION THAT CERTAIN AMENDMENTS TO THE CONTRACT WHICH ACCELERATED THE FINAL DELIVERY DATE CONCOMITANTLY SHORTENED THE PERIOD IN WHICH THE OPTION COULD BE EXERCISED.

B-176386, OCT 24, 1972

BID PROTEST - OPTIONS - AMBIGUOUS PROVISIONS DECISION DENYING THE PROTEST OF INTERNATIONAL HARVESTER COMPANY AGAINST AWARD OF A CONTRACT TO CATERPILLAR TRACTOR COMPANY BY MEANS OF THE EXERCISE OF AN OPTION CONTAINED IN A PRIOR CONTRACT AWARDED BY THE DEFENSE CONSTRUCTION SUPPLY CENTER, COLUMBUS, OHIO. THE MEANING OF AN AMBIGUOUS PROVISION IN A CONTRACT CAN BE DISCERNED FROM THE PARTIES' SUBSEQUENT ACTIONS. THE RULE THAT AMBIGUOUS PROVISIONS ARE TO BE CONSTRUED AGAINST THE DRAFTER, IN THIS CASE THE GOVERNMENT, ONLY APPLIES WHERE THE CONTRACT PARTIES ARE IN DISAGREEMENT. WHERE THE LAST DAY OF AN OPTION PERIOD FALLS ON A SUNDAY, EXERCISE OF THE OPTION ON MONDAY IS IN ACCORDANCE WITH GENERALLY ACCEPTED COMMERCIAL PRACTICE. SEE 38 COMP. GEN. 445 (1958). THEREFORE, EXERCISE OF THE OPTION WAS PROPER IN THIS CASE.

TO INTERNATIONAL HARVESTER COMPANY:

REFERENCE IS MADE TO YOUR PROTEST OF JUNE 27, 1972, AND SUBSEQUENT LETTERS OF AUGUST 11 AND 18, 1972. YOU PROTEST THE AWARD OF A CONTRACT IN THE AMOUNT OF $14,957,536 FOR 402 TRACTORS TO CATERPILLAR TRACTOR COMPANY, PEORIA, ILLINOIS. THE CONTRACT WAS AWARDED BY THE DEFENSE SUPPLY AGENCY, DEFENSE CONSTRUCTION SUPPLY CENTER, COLUMBUS, OHIO, ON JUNE 5, 1972, BY MEANS OF THE EXERCISE OF AN OPTION WHICH WAS CONTAINED IN A PRIOR CONTRACT, DSA700-70-C-9522, DATED JUNE 25, 1970.

THE CONTRACT INCLUDED THE SEPTEMBER 1969 DEFENSE CONSTRUCTION SUPPLY CENTER CONTRACT PROVISIONS, SECTION 6.103 OF WHICH READS AS FOLLOWS:

"6.103 OPTION FOR INCREASED QUANTITY

(B) THIS OPTION MAY BE EXERCISED AT THE TIME OF AWARD OR FROM TIME TO TIME AFTER THE DATE OF AWARD UP TO TEN DAYS PRIOR TO THE FINAL SPECIFIED DELIVERY DATE FOR THE SUPPLIES AS PROVIDED BY THE CONTRACT OR ANY AMENDMENT THERETO; HOWEVER, THE GOVERNMENT, WITHOUT WAIVING ITS RIGHTS HEREUNDER, RESERVES THE RIGHT TO NEGOTIATE FOR LOWER UNIT PRICES AND EARLIER DELIVERY PRIOR TO THE EXERCISING OF THE OPTION. A WRITTEN NOTICE MAILED OR OTHERWISE FURNISHED BY THE CONTRACTING OFFICER TO THE CONTRACTOR WITHIN THE TIME SPECIFIED SHALL CONSTITUTE AN EXERCISE OF THE OPTION."

ACCORDING TO THE ORIGINAL CONTRACT, FINAL DELIVERY WAS TO BE MADE 720 DAYS FROM THE DATE OF AWARD OF THE CONTRACT, AND THE OPTION COULD THEREFORE BE EXERCISED ANY TIME UP TO AND INCLUDING THE 710TH DAY FROM THE DATE OF AWARD.

IT IS YOUR CONTENTION THAT CERTAIN AMENDMENTS TO THE CONTRACT WHICH ACCELERATED THE FINAL DELIVERY DATE CONCOMITANTLY SHORTENED THE PERIOD IN WHICH THE OPTION COULD BE EXERCISED. IN ANY EVENT, YOU ALSO ARGUE THAT CATERPILLAR AND THE GOVERNMENT INCORRECTLY CALCULATED THE 710-DAY OPTION PERIOD AND THAT SUCH PERIOD EXPIRED ON JUNE 4, 1972, RATHER THAN THE DATE OF EXERCISE, JUNE 5, 1972.

CONCERNING THE EFFECT OF THE CONTRACT AMENDMENTS UPON THE DURATION OF THE OPTION PERIOD, IT IS THE POSITION OF THE CONTRACTING OFFICER THAT THE PHRASE "OR ANY AMENDMENT THERETO" IN THE OPTION CLAUSE REFERS ONLY TO AMENDMENTS WHICH EXTEND THE DELIVERY DATE AND NOT TO ACCELERATIONS THEREOF. HE CONTENDS THAT PHRASE WAS MEANT "TO COVER THE NUMEROUS INSTANCES WHEN EXTENSIONS IN DELIVERY SCHEDULES ARE NECESSARY AND DOES NOT REDUCE THE OPTION PERIOD IN THE EVENT OF ACCELERATION OF DELIVERY." YOU ARGUE, HOWEVER, THAT THE PHRASE IN QUESTION IS UNAMBIGUOUS, AND SHOULD BE READ ONLY IN THE MANNER FOR WHICH YOU CONTEND.

WHILE WE ARE NOT PERSUADED THAT THE LANGUAGE OF SUBSECTION 6.103(B) CLEARLY SUPPORTS THE POSITION OF THE CONTRACTING OFFICER, WE MUST AGREE THAT IT IS REASONABLY SUBJECT TO THE INTERPRETATION FOR WHICH HE CONTENDS. WE THEREFORE BELIEVE THAT THE LANGUAGE IS, AT BEST, AMBIGUOUS AND THAT IT MUST BE INTERPRETED AND CONSTRUED UNDER THE RULES APPLICABLE TO AMBIGUOUS CONTRACT PROVISIONS.

THE AMBIGUITY IN THE INSTANT CONTRACT CONCERNS THE MEANING TO BE GIVEN TO THE PHRASE IN THE OPTION CLAUSE WHICH READS: "THE CONTRACT OR ANY AMENDMENT THERETO." IT IS APPARENTLY YOUR CONTENTION THAT THESE WORDS MEAN THAT THE AMENDMENT WHICH IS LATEST IN TIME, AND WHICH AFFECTS THE DELIVERY DATE, ALSO GOVERNS THE DURATION OF THE OPTION PERIOD.

IT IS A WELL-ESTABLISHED RULE OF CONTRACT INTERPRETATION THAT THE INTENTIONS OF THE PARTIES MAY BE DISCERNED FROM THEIR SUBSEQUENT ACTIONS. 1 CORBIN ON CONTRACTS, SECTION 101 (1963). FROM OUR ANALYSIS, THE DOCUMENTS PERTINENT TO SUCH AN INTERPRETATION APPEAR TO BE MODIFICATION A00001, DATED SEPTEMBER 25, 1971, WHICH ACCELERATED THE FINAL DELIVERY DATE TO JANUARY 1972, AND CATERPILLAR'S LETTER OF OCTOBER 1, 1970, STATING THAT THIS MODIFICATION DID NOT AFFECT THE GOVERNMENT'S RIGHT TO EXERCISE THE OPTION ACCORDING TO THE TENOR OF THE ORIGINAL CONTRACT. WE THINK THAT, ON BALANCE, THE RECORD SUPPORTS THE CONCLUSION THAT IT WAS NOT THE INTENTION OF THE PARTIES TO SHORTEN THE OPTION PERIOD WHEN THEY MODIFIED THE CONTRACT TO ACCELERATE THE DELIVERY DATE. THIS INTENTION IS ALSO REFLECTED IN CATERPILLAR'S LETTER OF APRIL 5, 1972, RESTATING THAT THE OPTION REMAINED IN EFFECT, AND IN THE CONTRACTING OFFICER'S MEMORANDUM OF APRIL 18, 1972, RECOMMENDING THAT THE OPTION BE EXERCISED. BASED UPON THE SUBSEQUENT ACTIONS OF THE PARTIES IT APPEARS THAT BOTH THE GOVERNMENT AND THE CONTRACTOR HAVE INTERPRETED THIS PHRASE TO MEAN THAT THE CONTROLLING DOCUMENT IS THE CONTRACT OR AMENDMENT WHICH ALLOWS THE GOVERNMENT THE LONGEST TIME WITHIN WHICH TO EXERCISE THE OPTION.

IT IS TRUE THAT IT IS ALSO A PRECEPT OF CONTRACT LAW THAT AMBIGUOUS PROVISIONS ARE GENERALLY TO BE CONSTRUED AGAINST THE DRAFTER, HERE THE GOVERNMENT. 51 COMP. GEN. 119, 121 (1971); 1 MCBRIDE & WACHTEL, GOVERNMENT CONTRACTS, SECTION 2.10(6) (1972). HOWEVER, FOR THIS RULE TO APPLY THERE MUST NECESSARILY BE SOME DISAGREEMENT BETWEEN THE PARTIES SO THAT THE CONTRACT CAN BE CONSTRUED AGAINST THE DRAFTER. HERE THE PARTIES ARE IN ACCORD, AND THUS THIS RULE IS CLEARLY INAPPLICABLE.

SINCE WE HAVE CONCLUDED THAT THE ACCELERATION OF THE FINAL DELIVERY DATE TO JANUARY 1972 BY MODIFICATION A00001 WAS NOT INTENDED TO AFFECT THE OPTION PERIOD IN THE ORIGINAL CONTRACT, A FORTIORI, NEITHER SHOULD MODIFICATION A00008, DECEMBER 1, 1971, WHICH SUBSEQUENTLY EXTENDED THE DELIVERY SCHEDULE FROM JANUARY TO FEBRUARY 1972. IT IS OUR CONCLUSION, THEREFORE, THAT THE OPTION WAS PROPERLY EXERCISED AND EXERCISABLE ON JUNE 5, 1972. THE FACT THAT YOU WERE MISINFORMED ON FEBRUARY 8, 1972, THAT THE OPTION WOULD EXPIRE ON FEBRUARY 19 IS A REGRETTABLE ERROR, BUT IT IS INSUFFICIENT TO JUSTIFY A DETERMINATION THAT THE OPTION WAS INVALIDLY EXERCISED.

WITH RESPECT TO YOUR LATTER ALLEGATION, YOU ARE CERTAINLY CORRECT IN YOUR ASSERTION THAT THE 710-DAY OPTION PERIOD EXPIRED ON JUNE 4, 1972. HOWEVER, JUNE 4 WAS A SUNDAY, AND EXERCISE OF THE OPTION ON JUNE 5, THE NEXT BUSINESS DAY, WAS THEREFORE IN ACCORDANCE WITH COMMON LAW AND GENERALLY ACCEPTED COMMERCIAL PRACTICE. SEE 38 COMP. GEN. 445 (1958).

IT IS ALSO YOUR CONTENTION THAT THE GOVERNMENT'S ACTION IN EXERCISING THE OPTION EFFECTIVELY DESTROYED COMPETITIVE BIDDING ON THE PROCUREMENT OF THIS TYPE OF ITEM. THE RECORD INDICATES THAT THE ONLY TWO OTHER KNOWN MANUFACTURERS OF TRACTORS OF THE SIZE IN QUESTION INFORMALLY INDICATED THEIR INABILITY TO COMPETE ON THIS CONTRACT, ONE INDICATING IT WAS UNABLE TO COMPETE WITH CATERPILLAR'S OPTION PRICE AND YOUR COMPANY INDICATING IT WOULD NOT HAVE A TRACTOR MEETING CONTRACT SPECIFICATIONS UNTIL AT LEAST THE LATTER PART OF 1972. IN VIEW THEREOF, WE CANNOT AGREE THAT EXERCISE OF THE OPTION EFFECTIVELY DESTROYED COMPETITIVE BIDDING IN THE INSTANT PROCUREMENT. FURTHER, WE ARE NOT AWARE THAT THE POSSIBILITY OF AN ADVERSE EFFECT ON BIDDING IN FUTURE PROCUREMENTS IS A FACTOR NECESSARILY FOR CONSIDERATION IN DECIDING WHETHER AN OPTION SHOULD BE EXERCISED.

ACCORDINGLY, YOUR PROTEST MUST BE DENIED.

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