B-123758, JUN. 1, 1955

B-123758, JUN. 1, 1955

TO MR. EDWARD MCCABE, JR., AUTHORIZED CERTIFYING OFFICER, SOUTHWESTERN POWER ADMINISTRATION:

REFERENCE IS MADE TO YOUR LETTER OF APRIL 20, 1955, REPRESENTING A DECISION AS TO WHETHER YOU ARE AUTHORIZED TO CERTIFY FOR PAYMENT INVOICE NO. TD-55043, DATED APRIL 6, 1955, IN THE AMOUNT OF $6,223.03, PRESENTED BY THE ALLIS-CHALMERS MANUFACTURING COMPANY, MILWAUKEE, WISCONSIN.

THE INVOICE COVERS A PRICE INCREASE OF 1.2 PERCENT CLAIMED BY THE COMPANY IN CONNECTION WITH CONTRACT NO. ISPA-391, DATED JUNE 7, 1951, UNDER WHICH THE COMPANY FURNISHED THREE POWER TRANSFORMERS AND SPARE PARTS TO THE SOUTHWESTERN POWER ADMINISTRATION FOR A TOTAL PRICE OF APPROXIMATELY $519,396. YOU STATE THAT THE CONTRACT HAS BEEN PERFORMED SATISFACTORILY AND PAYMENT MADE TO THE CONTRACTOR IN FULL EXCEPTING THE AMOUNT CLAIMED ON THE SUBJECT INVOICE.

THE CONTRACT WAS MADE SUBJECT TO ADJUSTMENT OF THE PRICE--- NOT TO EXCEED 10 PERCENT OF THE BID PRICE--- IN ACCORDANCE WITH PARAGRAPH GP 11 OF THE SPECIFICATIONS, WHICH PROVIDES, IN PART, AS FOLLOWS:

"IF TIME FOR COMPLETION OF THIS CONTRACT IS EXTENDED BY THE CONTRACTING OFFICER AND IF, ON THE DATE OF ACTUAL DELIVERY OR THE EXTENDED DATE OF DELIVERY, WHICHEVER IS EARLIER, THE CONTRACTOR'S APPLICABLE ESTABLISHED PRICE FOR SUCH EQUIPMENT OR UNIT THEREOF IS HIGHER OR LOWER THAN THE CONTRACTOR'S BID PRICE (DISREGARDING ANY ADJUSTMENT), THE CONTRACT PRICE WILL BE ADJUSTED UP OR DOWN BY SUCH AMOUNT OF INCREASE OR DECREASE, PROVIDED THAT THE CONTRACTING OFFICER HAS APPROVED IN WRITING ANY PROPOSED CHANGE IN THE PRICE OF ARTICLES TO BE DELIVERED UNDER THE CONTRACT IN ACCORDANCE WITH THE PROCEDURE SET FORTH HEREUNDER, AND PROVIDED FURTHER, THAT IN NO EVENT SHALL THE PRICE PAID FOR THE EQUIPMENT EXCEED ANY MAXIMUM CEILING PRICE ESTABLISHED BY THE ECONOMIC STABILIZATION AGENCY, OR OTHER AUTHORIZED GOVERNMENT AGENCY, IN EFFECT AT TIME OF SHIPMENT.

"THE CONTRACTOR SHALL NOTIFY THE CONTRACTING OFFICER IN WRITING CONCERNING ANY PROPOSED CHANGE IN THE PRICE OF ARTICLES TO BE DELIVERED UNDER THE CONTRACT NOT LATER THAN FIVE (5) DAYS SUBSEQUENT TO CHANGE IN PRICES, OR FIFTEEN (15) DAYS PRIOR TO THE DAY ON WHICH SHIPMENT IS TO BE MADE, WHICHEVER DATE IS EARLIER. IN THE EVENT THE PROPOSED ADJUSTMENT IN ANY CONTRACT UNIT PRICE IS ACCEPTABLE TO THE CONTRACTING OFFICER, HE SHALL IMMEDIATELY NOTIFY THE CONTRACTOR IN WRITING TO PROCEED WITH SHIPMENT. ANY PROPOSED ADJUSTMENT IN PRICE IS NOT ACCEPTABLE TO THE CONTRACTING OFFICER, THE GOVERNMENT MAY TERMINATE ANY PORTION OF THE CONTRACT WHICH HAS NOT BEEN PERFORMED BY GIVING WRITTEN NOTICE TO THE CONTRACTOR. WHERE THE CONTRACT IS TERMINATED BY THE GOVERNMENT IN ACCORDANCE WITH THE FOREGOING PROVISION, THE CONTRACTOR WILL BE PAID REASONABLE AND PROPER CANCELLATION CHARGES FOR ANY WORK DONE PRIOR TO TERMINATION OF THE CONTRACT.'

BY CHANGE ORDER NO. 391-2, DATED FEBRUARY 26, 1953, THE TIME FOR COMPLETION OF THE CONTRACT WAS EXTENDED FOR 90 DAYS FROM JUNE 27, 1953, THE ORIGINAL COMPLETION DATE. BY LETTER DATED NOVEMBER 13, 1952, THE CONTRACTOR NOTIFIED THE CONTRACTING OFFICER OF THE PRICE INCREASE OF APPROXIMATELY 1.2 PERCENT EFFECTIVE OCTOBER 6, 1952, UNDER THE PROVISIONS OF OPS REGULATION 60R-35. IN HIS REPLY DATED NOVEMBER 18, 1952, THE CONTRACTING OFFICER STATED IN PART:

"* * * THIS ADMINISTRATION OFFERS NO OBJECTION TO THE INCREASE IN PRICE AS STATED IN YOUR LETTER OF THE ABOVE DATE.'

IT IS STATED IN THE CONTRACTING OFFICER'S MEMORANDUM OF MARCH 24, 1955, THAT A REQUEST TO THE CONTRACTOR APPROXIMATELY IN MAY 1953 RESULTED IN A REPORT THAT CANCELLATION CHARGES FOR TWO OF THE THREE TRANSFORMERS WOULD COST THE GOVERNMENT $240,000.

ORDINARILY THIS OFFICE HAS REQUIRED STRICT COMPLIANCE WITH PROCEDURAL AND EVIDENTIARY REQUIREMENTS IN CONNECTION WITH ESCALATION CLAUSES OF CONTRACTS. ALTHOUGH IT IS NOT ENTIRELY CLEAR IN THE INSTANT MATTER AS TO WHEN THE CONTRACTOR'S PRICE INCREASE ACTUALLY WAS MADE, IT SEEMS PROBABLE THAT ITS NOTIFICATION TO THE CONTRACTING OFFICER WAS GIVEN TOO LATE TO COMPLY STRICTLY WITH THE FIVE-DAY REQUIREMENT OF THE CONTRACT. HOWEVER, IN VIEW OF THE COMPARATIVELY SMALL AMOUNT OF THE INCREASE IN PRICE AND THE FACTS THAT THE NOTICE WAS GIVEN LONG BEFORE THE CONTRACT COMPLETION DATE, THAT THE CONTRACT WAS SATISFACTORILY COMPLETED AFTER THE CONTRACTING OFFICER HAD APPROVED THE PRICE INCREASE, AND THAT THE COST TO THE GOVERNMENT OF TERMINATING THE CONTRACT APPARENTLY WOULD HAVE BEEN PROHIBITIVE, THE INVOICE SUBMITTED MAY BE CERTIFIED BY YOU WITHOUT OBJECTION BY THIS OFFICE.