B-131802, MAY 27, 1957

B-131802, MAY 27, 1957

TO HAMBURG MACHINERY COMPANY:

REFERENCE IS MADE TO YOUR LETTER OF APRIL 18, 1957, REQUESTING RECONSIDERATION OF THE CLAIM OF HAMBURG MACHINERY COMPANY, NEW YORK CITY, IN THE AMOUNT OF $2,500, REPRESENTING AN ADJUSTMENT IN PRICE ALLEGED TO BE DUE BY REASON OF A MISDESCRIPTION OF CERTAIN ELECTRICAL EQUIPMENT SOLD BY THE NAVAL AIR STATION, JACKSONVILLE, FLORIDA, TO SPERRY AUTO SALES, TAVARES, FLORIDA, UNDER CONTRACT NO. N207S-14580, ENTERED INTO ON SEPTEMBER 25, 1956. IN A LETTER DATED APRIL 12, 1957, YOU WERE ADVISED THAT, FOR LACK OF PRIVITY OF CONTRACT, ANY CLAIM ARISING OUT OF THE CONTRACT OF SALE IS FOR SETTLEMENT BETWEEN YOUR CLIENT AND SPERRY AUTO SALES. ON THE SAME DATE SPERRY AUTO SALES WAS ADVISED THAT THERE IS NO LEGAL BASIS FOR ALLOWING ITS CLAIM FOR ADJUSTMENT OF THE CONTRACT PRICE.

THE RECORD SHOWS THAT, IN RESPONSE TO INVITATION NO. B-25-57, DATED AUGUST 17, 1956, SPERRY AUTO SALES OFFERED TO PURCHASE THE ENTIRE LOT OF ALL MATERIAL LISTED IN THE INVITATION FOR THE SUM OF $10,000 AND THAT THE OFFER WAS ACCEPTED BY THE GOVERNMENT ON SEPTEMBER 25, 1956, THE SUM OF $2,000 HAVING BEEN PAID BY SPERRY AUTO SALES AS A DEPOSIT. THE RECORD FURTHER SHOWS THAT THE CONTRACTOR REQUESTED THAT THE MATERIAL BE RELEASED TO THE HAMBURG MACHINERY COMPANY AND THAT THE AWARD BE CHANGED IN FAVOR OF THE HAMBURG COMPANY INSTEAD OF SPERRY AUTO SALES WITH THE UNDERSTANDING THAT THE HAMBURG COMPANY WOULD PAY THE BALANCE DUE, $8,000. THE CONTRACTING OFFICER INFORMED THE CONTRACTOR THAT THE MATERIAL WOULD BE RELEASED TO THE HAMBURG COMPANY BUT THE CONTRACTOR WOULD BE HELD RESPONSIBLE FOR COMPLETE PERFORMANCE IN ACCORDANCE WITH THE TERMS OF ITS CONTRACT.

YOUR CLAIM ON BEHALF OF HAMBURG MACHINERY COMPANY FOR ADJUSTMENT OF THE CONTRACT PRICE IS BASED UPON AN ALLEGED ASSIGNMENT AS SET FORTH IN COPY OF A LETTER DATED SEPTEMBER 21, 1956, FROM SPERRY AUTO SALES TO YOUR CLIENT. THE PERTINENT PART OF THE LETTER IS AS FOLLOWS:

"THIS WILL ACKNOWLEDGE RECEIPT OF $3,000.00, CHECK NO. 2677, TO COVER PARTIAL PAYMENT AS DEPOSIT FOR BID NO. B-25-57, AT THE U.S. NAVAL AIR STATION AT JACKSONVILLE, FLA. WHICH BID WAS OPENED ON SEPT. 21, 1956, CONSISTING OF 193 PIECES. IF FOR ANY REASON THE ENTIRE EQUIPMENT WILL NOT BE RELEASED TO THE HAMBURG MACHINERY CO. BY THE NAVAL STATION, THEN THE SPERRY AUTO SALES IS TO RETURN THE ENTIRE AMOUNT OF $3,000.00 IMMEDIATELY TO THE HAMBURG MACHINERY CO.'

IT IS CLEAR FROM THE REPORTED FACTS IN THIS CASE THAT THERE WAS NO PRIVITY OF CONTRACT BETWEEN HAMBURG MACHINERY COMPANY AND THE UNITED STATES. SO FAR AS THE UNITED STATES IS CONCERNED HAMBURG MACHINERY COMPANY ACQUIRED NO RIGHT AGAINST THE GOVERNMENT BY REASON OF ITS PAYMENT OF THE BALANCE OF THE CONTRACT PRICE, IT APPEARING THAT SUCH PAYMENT WAS ACCEPTED FOR APPLICATION AGAINST THE BALANCE DUE FROM SPERRY AUTO SALES. NOR DID HAMBURG MACHINERY COMPANY ACQUIRE ANY CLAIM AGAINST THE UNITED STATES ARISING OUT OF THE PURPORTED ASSIGNMENT. SECTION 15 OF TITLE 41 U.S.C. (SECTION 3737, REVISED STATUTES, AS AMENDED) PROVIDES, IN PART, AS FOLLOWS:

"NO CONTRACT OR ORDER, OR ANY INTEREST THEREIN, SHALL BE TRANSFERRED BY THE PARTY TO WHOM SUCH CONTRACT OR ORDER IS GIVEN TO ANY OTHER PARTY, AND ANY SUCH TRANSFER SHALL CAUSE THE ANNULMENT OF THE CONTRACT OR ORDER TRANSFERRED, SO FAR AS THE UNITED STATES ARE CONCERNED. ALL RIGHTS OF ACTION, HOWEVER, FOR ANY BREACH OF SUCH CONTRACT BY THE CONTRACTING PARTIES, ARE RESERVED TO THE UNITED STATES.'

IT HAS BEEN HELD THAT THIS SECTION IS INTENDED FOR THE PROTECTION OF THE GOVERNMENT AND WHERE THERE HAS BEEN AN ASSIGNMENT OF A CONTRACT IT MAY BE TREATED BY THE GOVERNMENT AS ANNULLED OR THE ASSIGNMENT MAY BE RECOGNIZED. DULANEY V. SCUDDER, 94 F. 6. CF. ST. PAUL AND DULUTH RAILROAD COMPANY V. UNITED STATES, 112 U.S. 733. AMONG OTHER THINGS, THE LAW WAS ENACTED IN ORDER TO SECURE TO THE GOVERNMENT THE PERSONAL ATTENTION AND SERVICES OF THE CONTRACTOR; TO RENDER HIM LIABLE TO PUNISHMENT FOR FRAUD OR NEGLECT OF DUTY; AND TO PREVENT PARTIES FROM ACQUIRING MERE SPECULATIVE INTERESTS AND FROM THEREAFTER SELLING THE CONTRACTS AT A PROFIT TO BONA FIDE BIDDERS AND CONTRACTORS. SEE THOMPSON V. C.I.R., 205 F.2D 73.

SO FAR AS THE PRESENT MATTER IS CONCERNED, IT IS CLEAR THAT THE PURPORTED ASSIGNMENT WAS NOT SANCTIONED OR APPROVED BY ANY GOVERNMENT REPRESENTATIVE. HOWEVER, HAD THE CONTRACTING OFFICER AUTHORIZED IN ADVANCE THE ASSIGNMENT OF THE CONTRACT, AS PROPOSED BY THE CONTRACTOR, IT WOULD, WE BELIEVE, HAVE CONSTITUTED A DIRECT VIOLATION OF THE STATUTE, QUOTED ABOVE. AS STATED BY THE ATTORNEY GENERAL IN AN OPINION RENDERED OCTOBER 20, 1888, 19 OP.ATTY.GEN. 186, 187--- "THERE IS NO AUTHORITY GIVEN BY THE STATUTE, OR TO BE INFERRED FROM IT, THAT ANY OFFICER OF THE UNITED STATES CAN, IN ADVANCE, EITHER APPROVE OR RECOGNIZE ANY PROPOSED ASSIGNMENT THUS FORBIDDEN.'

ACCORDINGLY, IT MUST BE HELD THAT THE CLAIM OF HAMBURG MACHINERY COMPANY MAY NOT BE RECOGNIZED AND THAT THE HAMBURG COMPANY'S RIGHT OF ACTION, IF ANY EXISTS, IN AGAINST SPERRY AUTO SALES.