B-144013, OCT. 26, 1960

B-144013, OCT. 26, 1960

TO THE TABULATING CARD COMPANY:

REFERENCE IS MADE TO YOUR LETTER DATED SEPTEMBER 13, 1960, REQUESTING REVIEW OF OUR SETTLEMENT DATED SEPTEMBER 8, 1960, DISALLOWING YOUR CLAIM FOR $1,430.87, UNDER GOVERNMENT PRINTING OFFICE CONTRACT NO. GP-2635-0A, DATED JULY 1, 1959, AND SOCIAL SECURITY ADMINISTRATION PURCHASE ORDERS NOS. 6359.60, 6720.60 AND 7630.60 ISSUED THEREUNDER.

THE GOVERNMENT PRINTING OFFICE ENTERED INTO TERM CONTRACT NO. GP 2635-0A WITH YOU FOR FURNISHING, IN EXACT ACCORDANCE WITH THE SPECIFICATIONS, ETC., AND IN SUCH QUANTITIES AS WERE INTENDED TO MEET THE NEEDS OF THE GOVERNMENT, CERTAIN TYPES OF TABULATING CARDS FOR THE PERIOD JULY 1, 1959, THROUGH DECEMBER 31, 1959, AT THE PRICES STATED. THE SOCIAL SECURITY ADMINISTRATION ISSUED PURCHASE ORDERS NOS. 6359.60, 6720.60 AND 7630.60 WHICH WERE ACCEPTED BY YOU, CALLING FOR SPECIFIED QUANTITIES OF THE CARDS UNDER THE CONTRACT. IT APPEARS THAT THE ADMINISTRATION SUBSEQUENTLY EXPERIENCED CONSIDERABLE DIFFICULTY WITH VARIOUS DELIVERIES OF CARDS RECEIVED FROM YOU DUE TO THE DEFECTIVE CONDITION OF SOME OF THE CARDS AND TO UNTIMELY DELIVERIES MADE ON OTHERS. AFTER SEVERAL REQUESTS MADE TO YOU TO REMEDY THESE CONDITIONS FAILED TO OBTAIN SATISFACTORY RESULTS, YOUR RIGHT TO PROCEED FURTHER UNDER THE THREE PURCHASE ORDERS WAS TERMINATED BY A LETTER ADDRESSED TO YOU UNDER DATE OF DECEMBER 9, 1959, IN ACCORDANCE WITH THE DEFAULT PROVISIONS CONTAINED IN PARAGRAPH 13 OF CONTRACT NO. GP 2635-0A. THE SUBSEQUENT REPLACEMENT PURCHASES RESULTED IN EXCESS COSTS TO THE ADMINISTRATION OF $1,430.87 WHICH WERE CHARGED TO YOUR ACCOUNT AND DEDUCTED FROM AMOUNTS OTHERWISE PROPERLY DUE YOU. THIS ACTION RESULTED IN YOUR CLAIM FOR REIMBURSEMENT OF THE AMOUNT DEDUCTED.

YOUR REQUEST FOR REVIEW OF OUR SETTLEMENT IS BASED PRIMARILY ON YOUR CONTENTION THAT SINCE PURCHASE ORDERS NOS. 6359.60, 6720.60 AND 7630.60 WERE CANCELED BEFORE YOU MADE ANY DELIVERIES UNDER THEM, PARAGRAPH 13 OF THE CONTRACT WAS NOT PROPERLY FOR APPLICATION SINCE THAT PARAGRAPH CONTEMPLATES TERMINATION FOR DEFAULT ONLY IN THOSE CASES WHERE THE CONTRACTOR REFUSES OR FAILS TO MAKE DELIVERY. YOU STATE THAT THE GOVERNMENT'S RECOURSE FOR THE DEFECTIVE CARDS WAS SET FORTH IN PARAGRAPH 10.2 OF THE CONTRACT WHICH PROVIDED THAT THE GOVERNMENT HAD THE RIGHT TO REJECT DEFECTIVE CARDS, REQUIRE THEIR CORRECTION OR REPLACEMENT, OR TO ACCEPT THEM AT A PROPER REDUCTION IN PRICE.

THE SOCIAL SECURITY ADMINISTRATION REPORTS THAT DEFECTIVE CARDS PRODUCED BY YOU BEGAN TO APPEAR IN ITS OPERATIONS IN EARLY OCTOBER 1959. VARIOUS TYPES OF DEFECTS EXISTED, BUT THE MOST TROUBLESOME CONDITION WAS CAUSED BY CARDS WHICH WERE A SMALL FRACTION OF AN INCH SHORT IN LENGTH OR WIDTH WHICH, WHEN PROCESSED THROUGH THE DIFFERENT MACHINES, RESULTED IN ERRONEOUS INFORMATION GETTING INTO THE ADMINISTRATION'S RECORDS. IN ONE INSTANCE, SOME 500,000 CARDS HAD TO BE SORTED AND RE-SORTED TO ISOLATE DEFECTIVE CARDS. THUS, THERE CAN BE NO DOUBT THAT DEFECTIVE CARDS WERE BEING FURNISHED BY YOU TO THE SOCIAL SECURITY ADMINISTRATION; NEITHER CAN THERE BE ANY DOUBT THAT THIS PLACED A CONTINUING HEAVY BURDEN ON THE ADMINISTRATION BY THE ADDITIONAL WORK HOURS REQUIRED TO CORRECT THE CONDITION. WHAT PERHAPSIS EVEN MORE SIGNIFICANT IS THAT IT APPEARS THAT DEFECTIVE CARDS WERE SCATTERED THROUGHOUT VARIOUS SHIPMENTS. IT IS SHOWN THAT THE CARDS REQUIRED UNDER PURCHASE ORDERS NOS. 6359.60, 6720.60 AND 7630.60 WERE IDENTICAL TO THOSE APPARENTLY FURNISHED UNDER PREVIOUS ORDERS. IT ALSO IS SHOWN THAT YOU CONTINUED TO FURNISH DEFECTIVE CARDS UNDER THE SET PRIOR ORDERS THEREBY CAUSING ADDITIONAL EXPENSE AND LOSS OF TIME TO THE SOCIAL SECURITY ADMINISTRATION. THUS, IT IS OBVIOUS THAT THE ADMINISTRATION COULD NOT REASONABLY ANTICIPATE A CORRECTION OF THE DEFECTIVE CONDITION OF THE CARDS. IN THESE CIRCUMSTANCES, WE MAY NOT CONCLUDE THAT AN ACTUAL DELIVERY UNDER PURCHASE ORDERS NOS. 6359.60, 6720.60 AND 7630.60 WAS A PREREQUISITE TO INSTITUTING DEFAULT PROCEEDINGS AGAINST YOU UNDER PARAGRAPH 13 OF THE CONTRACT. PARAGRAPH 13 MUST BE CONSTRUED AS COVERING SITUATIONS NOT ONLY WHERE THE CONTRACTOR COMPLETELY REFUSES OR FAILS TO MAKE ANY DELIVERIES BUT ALSO WHERE IT FAILS TO FURNISH ITEMS THAN CONFORM TO SPECIFICATION REQUIREMENTS.

MOREOVER, NO MERIT MAY BE GIVEN TO YOUR CONTENTION THAT THE GOVERNMENT'S RECOURSE IN THE INSTANT CASE WAS UNDER PARAGRAPH 10.2 OF THE CONTRACT. THIS REGARD, THERE APPEARS TO BE LITTLE, IF ANY, DOUBT THAT PARAGRAPH 10.2 WAS INTENDED SOLELY TO FACILITATE, WHERE PRACTICABLE, SUCH ADJUSTMENTS AS MIGHT BE NECESSARY BECAUSE OF MINOR OR NONRECURRING DEFECTS. PARAGRAPH 10.2 MAY NOT BE INTERPRETED AS BEING FOR APPLICATION TO THE EXCLUSION OF PARAGRAPH 13 OF THE CONTRACT IN CASES CONTAINING FACTS SUCH AS WE HAVE HERE. SUCH AN INTERPRETATION WOULD, OF COURSE, BE TANTAMOUNT TO PLACING THE GOVERNMENT IN A POSITION WHERE IT WOULD BE WITHOUT AN EFFECTIVE REMEDY SHOULD A CONTRACTOR PERSIST IN FURNISHING ITEMS WHICH DID NOT CONFORM TO THE REQUIREMENTS OF THE SPECIFICATIONS. OBVIOUSLY, THIS WOULD BE EXCEEDINGLY DETRIMENTAL TO THE INTERESTS OF THE GOVERNMENT, PARTICULARLY IN LONG TERM CONTRACTS.