B-153929, APR. 21, 1964

B-153929, APR. 21, 1964

TO THE SECRETARY OF THE AIR FORCE:

REFERENCE IS MADE TO A LETTER DATED APRIL 8, 1964, WITH ENCLOSURES, FROM THE DEPUTY FOR PROCUREMENT MANAGEMENT, REQUESTING OUR ADVICE AND COMMENTS WITH RESPECT TO A CLAIM OF THE INTERNATIONAL BUSINESS MACHINES CORPORATION (IBM), FOR $926,305.15, COVERING RENTAL CHARGES FOR COMPUTERS USED BY THE AIR FORCE DURING THE PERIOD SEPTEMBER 22, 1962, TO MAY 17, 1963.

THE RECORD SHOWS THAT AIR FORCE COST-PLUS-A-FIXED-FEE CONTRACT NO. AF 19/628/-525, WITH IBM, COVERING THE RENTAL OF ELECTRONIC DATA PROCESSING EQUIPMENT IN PLACE AT SAC INSTALLATIONS, EXPIRED ON SEPTEMBER 22, 1962, AND THAT, DUE TO REPEATED ADMINISTRATIVE DIFFICULTIES, INCLUDING DISAGREEMENTS AS TO THE PROPER FORM OF A RENEWAL CONTRACT, THE AIR FORCE PROCURING ACTIVITY FAILED TO EXECUTE A FOLLOW-ON RENTAL AGREEMENT WITH IBM UNTIL MAY 17, 1963. IN THE INTERIM, THE AIR FORCE CONTINUED TO MAKE USE OF THE EQUIPMENT IN PLACE AT SAC WITH THE ACQUIESCENCE OF IBM. THE CONTRACT EXECUTED ON MAY 17, 1963, WAS IN THE FORM OF A DELIVERY ORDER AGAINST GSA CONTRACT NO. GS 005-37449, AND IT CALLED FOR, RETROACTIVELY, THE AIR FORCE'S ACTUAL UTILIZATION OF THE IBM EQUIPMENT SINCE THE EXPIRATION OF THE PREVIOUS RENTAL AGREEMENT. EXCEPT FOR THREE MINOR ITEMS, THE RENTAL CHARGES RETROACTIVELY SPECIFIED IN THE DELIVERY ORDER ARE THOSE ESTABLISHED IN THE BASIC GSA CONTRACT. THERE IS NO DISAGREEMENT BETWEEN AIR FORCE PERSONNEL AND IBM AS TO THE ACCURACY OR PROPRIETY OF THE RENTAL CHARGES SPECIFIED IN THE DELIVERY ORDER BUT PAYMENT HAS NOT BEEN MADE AS RENTALS FOR THE PERIOD SEPTEMBER 22, 1962, THROUGH MAY 17, 1963, BECAUSE OF AN EXCEPTION TAKEN TO THE RETROACTIVE PROVISIONS OF THE DELIVERY ORDER BY AIR FORCE AUDITORS. HOWEVER, THE FORMER SYSTEMS PROGRAM DIRECTOR OF SYSTEM 438L FOUND THAT IBM IS ENTITLED TO THE SUM OF $926,305.15 FOR COMPUTER RENTALS COVERING THAT PERIOD.

REFERENCE HAS BEEN MADE TO OUR LETTER DATED JULY 9, 1963, B-151632, TO THE CONTROL DATA CORPORATION, PROPOSING TO ALLOW AN AMOUNT RECOMMENDED BY THE DEPARTMENT OF THE NAVY IN SETTLEMENT OF THAT COMPANY'S CLAIM FOR SERVICES RENDERED AT THE REQUEST OF NAVY TECHNICAL PERSONNEL BUT WITHOUT THE PRIOR AUTHORIZATION OF THE CONTRACTING OFFICER. IN THAT CASE WE DETERMINED THAT THE CONTROL DATA CORPORATION WAS ENTITLED TO PAYMENT OF THE REASONABLE VALUE OF THE SERVICES RENDERED, SINCE THE GOVERNMENT RECEIVED THE BENEFIT OF THE SERVICES AND IT APPEARED THAT THE NECESSARY CONTRACTUAL ARRANGEMENTS FOR PERFORMANCE OF SUCH SERVICES WOULD HAVE BEEN MADE IF THE CONTRACTING OFFICER HAD BEEN REQUESTED BY THE NAVY TECHNICAL PERSONNEL TO DO SO WHEN THE NEED FOR THE SERVICES DEVELOPED.

THE DEPUTY FOR PROCUREMENT MANAGEMENT EXPRESSES THE OPINION THAT IBM IS ALSO ENTITLED TO THE REASONABLE VALUE OF THE SERVICES RENDERED IN THIS CASE WITHOUT A PRIOR FORMAL AGREEMENT IN THE MATTER. HE RECOMMENDS THAT SETTLEMENT WITH IBM BE EFFECTED BY AN APPROPRIATE AMENDMENT TO CONTRACT NO. AF 19/628/-525 IF WE SHOULD CONCUR IN THIS PROCEDURE. THE SUGGESTED COURSE OF ACTION WOULD SAVE IBM THE INCONVENIENCE INVOLVED IN MAKING A CLAIM FOR PAYMENT BEFORE THIS OFFICE, AND THE DEPUTY FOR PROCUREMENT MANAGEMENT CONSIDERS THAT AN ADMINISTRATIVE SETTLEMENT IN THE MANNER PROPOSED WOULD BE ONLY FAIR TO IBM SINCE IT WAS IN NO WAY RESPONSIBLE FOR THE AIR FORCE'S FAILURE TO ISSUE A TIMELY CONTRACTUAL DOCUMENT FOR THESE SERVICES. IT IS REPORTED IN THAT CONNECTION THAT ADVICE HAS BEEN RECEIVED FROM HEADQUARTERS, AIR FORCE SYSTEMS COMMAND, THAT THE NECESSARY CORRECTIVE ACTION HAS BEEN TAKEN TO PREVENT A RECURRENCE OF THIS TYPE OF SITUATION IN THE FUTURE.

TECHNICALLY, AMENDING CONTRACT NO. AF 19/628/-525 TO PROVIDE FOR RENTAL OF THE COMPUTERS INVOLVED FROM SEPTEMBER 22, 1962, TO MAY 17, 1963, WOULD BE CONTRARY TO THE RULE THAT A CONTRACT MAY NOT BE AMENDED AFTER IT HAS CEASED TO EXIST. HENCE, THE PROPOSED CONTRACT AMENDMENT IN THIS CASE WOULD BE IN LEGAL EFFECT A NEW CONTRACT. SEE 31 COMP. GEN. 682. HOWEVER, SINCE NO APPROPRIATION PROBLEM WOULD BE INVOLVED, AND THE GOVERNMENT HAS RECEIVED THE BENEFIT OF USING THE COMPUTERS UNDER CIRCUMSTANCES CLEARLY INDICATING THAT THE GOVERNMENT EXPECTED TO PAY AND THE CONTRACTED EXPECTED TO RECEIVE A REASONABLE RENTAL, WE WOULD NOT BE REQUIRED TO OBJECT TO THE MANNER IN WHICH IT IS ADMINISTRATIVELY PROPOSED TO SETTLE IBM'S CLAIM.

WE ARE RETURNING THE ADMINISTRATIVE FILE OF THE CASE WHICH WAS ENCLOSED WITH THE LETTER DATED APRIL 8, 1964.