B-151010, MAY 21, 1963

B-151010, MAY 21, 1963

TO STASSEN, KEPHART, SARKIS AND SCULLIN:

BY LETTER OF MARCH 7, 1963, WITH ENCLOSURES, YOU HAVE ON BEHALF OF THE BERT M. MORRIS COMPANY OF LOS ANGELES, CALIFORNIA, SUBMITTED A CLAIM FOR REIMBURSEMENT OF COSTS INCURRED IN THE MANUFACTURE OF APPROXIMATELY 15,000 DESK PEN SETS COMPLETED FOR DELIVERY TO THE GOVERNMENT UNDER THE CIRCUMSTANCES DESCRIBED BELOW.

INVITATION FOR BIDS NO. FSC GROUP 75, PART I, SECTION B WAS ISSUED APRIL 4, 1962, FOR OFFICE SUPPLIES TO MEET THE GOVERNMENT'S INDEFINITE QUANTITY REQUIREMENTS FOR THE CONTRACT PERIOD SEPTEMBER 1, 1962, THROUGH AUGUST 31, 1963. ITEM 21 COVERED DESK PEN SETS. THE INVITATION SOLICITED BID PRICES FOR THAT ITEM FOR FOUR DIFFERENT GEOGRAPHIC ZONES. THE MORRIS COMPANY WAS LOW FOR ZONES 2, 3 AND 4. ANOTHER FIRM, M.S. GINN AND COMPANY, WAS LOW FOR ZONE 1 WHICH ENCOMPASSES THE DOMESTIC UNITED STATES AND APPARENTLY REPRESENTS BY FAR THE LARGEST REQUIREMENT FOR THE ITEM. ON JULY 2, 1962, CONTRACT NO. GS-00S-27402 WAS AWARDED TO THE MORRIS COMPANY. BY AN INADVERTENCE ZONE 1 WAS ALSO INCLUDED IN THE AWARD. AT THE SAME TIME A CONTRACT WAS MAILED TO THE LOW BIDDER FOR ZONE 1, PROPERLY INDICATING THE AWARD TO THAT FIRM. THE ERROR WAS NOTED SOME TIME LATER AND BY LETTER OF OCTOBER 25, 1962, THE MORRIS COMPANY WAS ADVISED BY THE GENERAL SERVICES ADMINISTRATION THAT THE FIRM WAS NOT THE LOW BIDDER WITH RESPECT TO ZONE 1 AND THE AWARD THEREON THEREFORE WAS ERRONEOUS. THE AWARD TO MORRIS ON THAT ITEM AND ZONE WAS CANCELED.

IN YOUR LETTER OF MARCH 7, 1963, YOU STATE THAT PRIOR TO OCTOBER 25, 1962, THE DATE OF THE LETTER NOTIFYING THE FIRM OF THE ERRONEOUS AWARD, MORRIS HAD COMPLETED APPROXIMATELY 15,000 UNITS OF THE ITEM. THIS IS FAR IN EXCESS OF THE REQUIREMENT EXPECTED TO BE GENERATED FOR THE PERIOD FOR ZONES 2, 3 AND 4 FOR WHICH MORRIS RETAINS THE AWARD. IT IS ALSO INDICATED THAT THE COMPLETED UNITS HAVE NO COMMERCIAL VALUE, AND WHILE THEY WOULD FULLY COMPLY WITH THE GOVERNMENT'S SPECIFICATIONS THEY WOULD, UNLESS ACCEPTED BY THE GOVERNMENT, REPRESENT A TOTAL LOSS. IT IS SUGGESTED, THEREFORE, UNDER THE PRECEDENT AT 40 COMP. GEN. 160, THAT THE CONTRACTOR BE PERMITTED TO DELIVER AND THAT THE GOVERNMENT ACCEPT THE UNITS COMPLETED PRIOR TO OCTOBER 25, 1952, AND REIMBURSE MORRIS THEREFOR ON A QUANTUM VALEBAT BASIS.

THE PROCUREMENT IS GOVERNED BY SECTION 303 (B) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, 63 STAT. 395, 41 U.S.C. 253 (B), WHICH PROVIDES IN PART THAT "AWARD SHALL BE MADE * * * TO THAT RESPONSIBLE BIDDER WHOSE BID, CONFORMING TO THE INVITATION FOR BIDS, WILL BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED * * *.' THE QUOTED LANGUAGE HAS BEEN HELD TO LIMIT AWARD WITH CERTAIN EXCEPTIONS NOT APPLICABLE HERE TO THE LOW RESPONSIVE AND RESPONSIBLE BIDDER. FURTHER, AWARD CONTRARY TO THAT RULE IS A NULLITY AND CONFERS NO RIGHTS ON THE CONTRACTOR AGAINST THE UNITED STATES. SEE 37 COMP. GEN. 330, 331, AND CASES THEREIN CITED. ACCORDINGLY, NO VALID CONTRACT WAS EVER AWARDED TO MORRIS FOR THE ITEM AND ZONE IN QUESTION.

THE RULE WITH RESPECT TO THE PAYMENT ON A QUANTUM VALEBAT BASIS WHERE NO VALID CONTRACT HAS COME INTO BEING IS IN OUR VIEW CORRECTLY STATED BY THE SUPREME COURT IN UNITED STATES V. MISSISSIPPI VALLEY GENERATING COMPANY (1961), 364 U.S. 520, 566 (FOOTNOTE NO. 22) AS FOLLOWS:

"THE RESPONDENT ALSO CONTENDS THAT EVEN IF THE CONTRACT IS NOT ENFORCEABLE, A RECOVERY QUANTUM VALEBAT SHOULD BE DECREED. HOWEVER, SUCH A REMEDY IS APPROPRIATE ONLY WHERE ONE PARTY TO A TRANSACTION HAS RECEIVED AND RETAINED TANGIBLE BENEFITS FROM THE OTHER PARTY. SEE CROCKER V. UNITED STATES, 240 U.S. 74, 81-82. SINCE THE GOVERNMENT HAS RECEIVED NOTHING FROM THE RESPONDENT, NO RECOVERY QUANTUM VALEBAT IS IN ORDER.'

IT WILL BE NOTED THAT THE REMEDY IS DEEMED APPROPRIATE BY THE SUPREME COURT ONLY WHERE TANGIBLE BENEFITS HAVE BEEN RECEIVED AND RETAINED. HAVE TAKEN A CONSISTENT POSITION AT 40 COMP. GEN. 447, 450, WHERE WE STATED THAT THE RULE AUTHORIZES PAYMENT FOR BENEFITS RECEIVED "PRIOR TO THE DETERMINATION OF CONTRACT INVALIDITY.' SEE ALSO 40 COMP. GEN. 679. THEREFORE, IN OUR JUDGMENT, SINCE THE SETS IN QUESTION WERE NOT DELIVERED TO AND ACCEPTED BY THE GOVERNMENT PRIOR TO CANCELLATION, PAYMENT ON A QUANTUM VALEBAT BASIS WOULD NOT BE APPROPRIATE IN THIS CASE.

AS YOU PROPERLY POINT OUT, NOTWITHSTANDING THE FOREGOING DISCUSSION WE TOOK THE POSITION IN 40 COMP. GEN. 160 THAT IT WOULD BE EQUITABLE TO THE CONTRACTOR AND IN THE INTERESTS OF THE GOVERNMENT TO ACCEPT UNITS COMPLETED BUT NOT DELIVERED AND ACCEPTED AT THE TIME THE CONTRACT WAS CANCELED. IN THAT INSTANCE, HOWEVER, WE DID NOT ATTEMPT TO ENUNCIATE A RULE OF LAW BUT WERE SIMPLY STATING AN OPINION AS TO THE EQUITIES APPLICABLE TO A PARTICULAR FACTUAL SITUATION. WE DO NOT THINK THAT THE SAME EQUITIES EXIST IN THE INSTANT CASE SINCE A CONTRACT FOR THE ITEM AND ZONE WAS ALSO, AND PROPERLY, AWARDED TO THE LOW BIDDER WHO MIGHT WELL HAVE A RIGHT OF ACTION AGAINST THE GOVERNMENT IF A SUBSTANTIAL PART OF THE REQUIREMENT TO BE SATISFIED UNDER THE CONTRACT AWARDED TO HIM SHOULD INSTEAD BE OBTAINED FROM ANOTHER SOURCE. WE DO NOT THINK THAT THE EQUITIES EXISTING IN FAVOR OF MORRIS ARE SUFFICIENT IN VIEW OF THE LIABILITY THE GOVERNMENT MIGHT INCUR TO ACCEPT DELIVERY OF THE GOODS IN QUESTION.