B-14445, JAN. 5, 1962

B-14445, JAN. 5, 1962

TO SERVO RECORDING INSTRUMENTS, INC.:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 7, 1960, RELATIVE TO YOUR CLAIM IN THE AMOUNT OF $22,500 FOR SERVICES RENDERED IN CONNECTION WITH RESEARCH AND DEVELOPMENT UNDER CONTRACT NO. AF 41/608/-9326 DATED MAY 22, 1958.

UNDER THE TERMS OF THE CONTRACT, YOU AGREED TO FURNISH TO KELLY AIR FORCE BASE, TEXAS, 376 RADIAC SETS AT A UNIT PRICE OF $642 (TOTAL PRICE $246,807). DELIVERY OF 3 FIRST ARTICLES FOR APPROVAL WAS REQUIRED 105 DAYS AFTER RECEIPT OF WRITTEN NOTICE OF AWARD. COMPLETE DELIVERY WAS TO BE MADE WITHIN 120 DAYS AFTER RECEIPT BY THE CONTRACTOR OF WRITTEN NOTIFICATION OF FIRST ARTICLE APPROVAL. IT IS REPORTED THAT YOUR FIRST 2 SUBMISSIONS FOR FIRST ARTICLE APPROVAL WERE REJECTED, WHEREUPON YOUR CORPORATION UNDERTOOK A RESEARCH AND DEVELOPMENT PROGRAM TO DETERMINE WHEREIN THE GOVERNMENT DRAWINGS AND BLUEPRINTS WERE DEFICIENT. VARIOUS CHANGES WERE RECOMMENDED BY YOU, SOME OF WHICH WERE ACCEPTED BY THE AIR FORCE AND INCLUDED IN CONTRACT CHANGE NOTIFICATION NO. 1 DATED JULY 15, 1959. FIRST ARTICLE APPROVAL WAS GIVEN ON OCTOBER 28, 1959.

BY SUPPLEMENTAL AGREEMENT NO. 1 DATED FEBRUARY 8, 1960, THE UNIT PRICE WAS INCREASED BY $113, INCREASING THE CONTRACT PRICE BY $42,375 TO A TOTAL OF $289,182, AND THE CONTRACT PERIOD WAS EXTENDED BY A PROVISION FOR DELIVERY OF 30 UNITS WITHIN 90 DAYS AFTER RECEIPT BY THE CONTRACTOR OF THE SUPPLEMENTAL AGREEMENT, 60 UNITS WITHIN 120 DAYS AND 60 UNITS EVERY 30 DAYS THEREAFTER UNTIL COMPLETION. BY THE SUPPLEMENTAL AGREEMENT IT APPARENTLY WAS RECOGNIZED THAT YOU HAD INCURRED INCREASED COSTS AND PROVIDED THAT YOU SHOULD RECOVER THE INCREASED COSTS DURING THE CONTRACT PERIOD. HOWEVER, ON JANUARY 11, 1960, THE CONTRACTING OFFICER, LOS ANGELES AIR PROCUREMENT DISTRICT, SENT YOU A NOTICE OF INTENTION TO TERMINATE THE CONTRACT FOR DEFAULT AND YOU REPLIED BY LETTER DATED JANUARY 22, 1960, THAT YOU WERE FINANCIALLY UNABLE TO CONTINUE ANY TYPE OF OPERATION. THE CONTRACT WAS TERMINATED FOR DEFAULT ON MAY 18, 1960, NO RADIAC SETS HAVING BEEN DELIVERED. YOU APPEALED THE DECISION OF DEFAULT TERMINATION TO THE ARMED SERVICES BOARD OF CONTRACT APPEALS, WHICH DENIED YOUR APPEAL BY ITS DECISION NO. 6586 DATED FEBRUARY 27, 1961, FOR THE STATED REASON THAT THE BOARD HAD NO AUTHORITY TO GRANT RELIEF BEYOND THE PROVISIONS OF THE CONTRACT.

AFTER TERMINATION OF YOUR CONTRACT FOR DEFAULT, THE 376 RADIA SETS COVERED BY THE CONTRACT, AS AMENDED, WERE PROCURED FROM REPUBLIC ELECTRONIC INDUSTRIES CORPORATION UNDER CONTRACT NO. 41/608/-12717 AT AN EXCESS COST OF $57,267.84, AS YOU WERE ADVISED BY THE CONTRACTING OFFICER UNDER DATE OF APRIL 20, 1961. THIS AMOUNT IS STILL DUE AND UNPAID TO THE GOVERNMENT.

IT APPEARS THAT YOUR PARENT COMPANY, CHARLES MARTIN ELECTRONICS CORPORATION, FURNISHED TO THE AIR FORCE ITS FINANCIAL STATEMENT AND A GUARANTY AGREEMENT UNDER YOUR CONTRACT. THE FILE SHOWS THAT THE PHYSICAL ASSETS OF YOUR CORPORATION AND ITS PARENT COMPANY WERE SEIZED AND SOLD AT PUBLIC AUCTION ON JANUARY 8, 1960, TO APPLY ON FEDERAL TAX LIENS BUT THAT A TAX LIABILITY IN THE AMOUNT OF $14,594.89 REMAINS UNSATISFIED.

IT IS CLEAR FROM THE RECORD THAT YOU PERFORMED RESEARCH AND DEVELOPMENT WORK WHICH RESULTED IN VALUABLE CHANGES IN THE GOVERNMENT'S DRAWINGS AND SPECIFICATIONS. SINCE THOSE CHANGES WERE ACCEPTED BY THE AIR FORCE AND USED IN REPROCURING THE RADIAC SETS FROM ANOTHER FIRM IT APPEARS THAT YOU ARE ENTITLED TO THE REASONABLE VALUE OF THE SERVICES FURNISHED. ON THE BASIS OF THE PRESENT RECORD, HOWEVER, WE CANNOT DETERMINE THAT THE AMOUNT OF $22,500 CLAIMED BY YOU REPRESENTS THE REASONABLE VALUE OF THOSE SERVICES.

IN ANY EVENT, SINCE THE DECISION OF THE ARMED SERVICES BOARD OF CONTRACT APPEALS HOLDING THAT THE DEFAULT TERMINATION WAS PROPER IS FINAL AND CONCLUSIVE, THERE IS NO LEGAL BASIS FOR RELIEVING YOU OF EXCESS COSTS INCURRED BY THE GOVERNMENT IN PROCURING THE RADIAC SETS ELSEWHERE. CONSEQUENTLY, EVEN IF THE ENTIRE AMOUNT CLAIMED BY YOU WAS ALLOWED THE NET RESULT WOULD BE TO REDUCE YOUR INDEBTEDNESS TO THE GOVERNMENT.

THEREFORE, THERE IS NO PROPER BASIS FOR MAKING PAYMENT OF ANY AMOUNT TO YOU AND YOUR CLAIM MUST BE DISALLOWED.