B-146894, AUG. 18, 1965

B-146894, AUG. 18, 1965

TO THE SECRETARY OF DEFENSE:

WE HAVE RECEIVED A LETTER DATED JULY 28, 1965, FROM THE DEPUTY ASSISTANT SECRETARY OF DEFENSE (PROCUREMENT) FORWARDING A COPY OF WHAT IS STATED TO BE A QUANTUM MERUIT EVALUATION MADE IN CONNECTION WITH WORK PERFORMED BY THE LANE CONSTRUCTION COMPANY AT ANDREWS AIR FORCE BASE (OSD CASE NO. 1863), AS REQUESTED BY OUR LETTER OF OCTOBER 12, 1964. THE LETTER OF JULY 28, 1965, STATES THAT THE QUANTUM MERUIT STUDY INDICATES THE REASONABLE VALUE OF THE WORK PERFORMED EXCEEDS BY $5,323 THE CONTRACT PRICE OF $12,229,196.37 UNDER CONTRACT NO. DA-49 080-ENG-4182. IT IS THEREFORE PROPOSED TO COMPLETE PAYMENTS UNDER THE CONTRACT OF $186,065 FOR CERTAIN SUSPENSION OF WORK CLAIMS PLUS $1,000 OTHERWISE WITHHELD.

THE STUDY WHICH WAS MADE DID NOT INCLUDE THE WORK COVERED BY THE BASIC CONTRACT, AMOUNTING IN PRICE TO $8,402,862, ON THE STATED ASSUMPTION THAT THIS AMOUNT WAS ASSUMED TO REPRESENT THE FAIR VALUE OF THAT WORK BECAUSE IT WAS THE LOWEST OF NINE BIDS RECEIVED THEREFOR AFTER FORMAL ADVERTISING. THE FIRST KNOWLEDGE THAT WE HAD OF THIS APPROACH TO THE QUANTUM MERUIT EVALUATION WE HAD REQUESTED TO BE MADE WAS GIVEN US BY THE LETTER OF JULY 28, 1965. WE DO NOT UNDERSTAND ON WHAT BASIS THIS APPROACH TO THE PROBLEM CAN BE CONSIDERED TO RESULT IN A PROPER QUANTUM MERUIT EVALUATION OF THE TOTAL WORK PERFORMED, WHICH IN ACCORDANCE WITH THE CONTRACT AMOUNTED TO $12,223,873.73. OUR LETTER OF OCTOBER 12, 1964, SPECIFICALLY STATED THAT THE CONTRACT (REFERRING TO THE BASIC CONTRACT) WAS, IN OUR OPINION, INVALID FOR FAILURE TO COMPLY WITH THE PUBLIC PROCUREMENT STATUTES. WE ARE, THEREFORE, AT A LOSS TO UNDERSTAND HOW YOUR DEPARTMENT COULD ASSUME THAT THE AWARDED PRICE OF THE VERY CONTRACT WE CONSIDERED TO BE INVALID COULD BE CONSIDERED A PROPER QUANTUM MERUIT MEASURE OF THE WORK IT COVERED.

THE EVALUATION PERFORMED BY THE INDEPENDENT CONTRACTOR EMPLOYED BY YOU IN THE STATED INTEREST OF OBJECTIVITY WAS RESTRICTED BY THE TERMS OF ITS CONTRACT TO MODIFICATIONS TO THE BASIC CONTRACT. WE UNDERSTAND THAT CONTRACTOR SPENT ONLY ABOUT 30 DAYS IN ITS STUDY, AND EXAMINED INTO THE REASONABLE VALUE OF LESS THAN $1,000,000 OF THE MORE THAN $3,800,000 WORTH OF CONTRACT MODIFICATIONS. ANY STUDY OF THE REASONABLE VALUE OF THE WORK PERFORMED UNDER THE CONTRACT WHICH FAILS TO TAKE INTO CONSIDERATION THE EFFECT ON THE VALUE OF THE ORIGINAL WORK OF THE APPROXIMATELY 45 PERCENTUM INCREASE THEREIN BY THE MODIFICATIONS, AND THE GREATLY DIFFERENT PROPORTIONS OF LIGHTING WORK INCLUDED IN THE BASIC CONTRACT AND THE MODIFICATIONS IS NOT, IN OUR OPINION, A TRUE QUANTUM MERUIT STUDY OF THE VALUE OF THE TOTAL WORK PERFORMED. THIS IS PARTICULARLY TRUE SINCE AT THE TIME THE MODIFICATIONS WERE ENTERED INTO MOST OF THE BASIC CONTRACT WORK WAS STILL TO BE PERFORMED. WE ARE THEREFORE OF THE OPINION THAT YOU HAVE FAILED TO PERFORM THE QUANTUM MERUIT EVALUATION WE RECOMMEND IN OUR LETTER OF OCTOBER 12, 1964.

THE FACT REMAINS, HOWEVER, THAT PAYMENT OF THE CONTRACT BALANCE HAS BEEN WITHHELD FROM THE PRIME CONTRACTOR FOR OVER TWO YEARS. MOST OF THIS AMOUNT REPRESENTS A CLAIM BY A SUBCONTRACTOR, WHOM IT IS OUR UNDERSTANDING THE PRIME CONTRACTOR HAS NOT PAID PENDING SETTLEMENT OF THE QUANTUM MERUIT ISSUE. BECAUSE OF THIS, WE DO NOT BELIEVE IT WOULD BE FAIR TO EITHER THE PRIME CONTRACTOR OR THE SUBCONTRACTOR INVOLVED TO CONTINUE THE WITHHOLDING FOR THE CONSIDERABLY LONGER PERIOD OF TIME THAT WOULD BE NECESSARY PROPERLY TO RESOLVE THIS MATTER.

ACCORDINGLY, YOU ARE ADVISED THAT WE WILL NOT OBJECT TO PAYMENT TO THE PRIME CONTRACOTR OF THE AMOUNT DETERMINED TO BE DUE IN ACCORDANCE WITH THE TERMS OF THE CONTRACT AND ITS MODIFICATIONS.