B-158696, MAY 23, 1966, 45 COMP. GEN. 716

B-158696, MAY 23, 1966, 45 COMP. GEN. 716

CONTRACTS - INCREASED COSTS - COST GREATER THAN CONTEMPLATED - NO BASIS FOR ADDITIONAL COMPENSATION A CLAIM FOR LOSSES ALLEGED TO HAVE BEEN BROUGHT ABOUT BY CHANGES, VARIANCES, AND EXCESSIVE RESEARCH AND DEVELOPMENT PROCESSES UNDER A SMALL BUSINESS SET-ASIDE FOR THE MANUFACTURE OF A VACUUM CLEANER ATTACHMENT AND THE SUBMISSION OF A PILOT MODEL, TOOLS AND MOLDS USED IN THE MANUFACTURE OF THE ITEM TO BE CONVEYED FREE OF CHARGE TO THE GOVERNMENT, MAY NOT BE ALLOWED, THE CONTRACT A FIXED PRICE RATHER THAN A RESEARCH AND DEVELOPMENT CONTRACT, THE CONTRACTOR HAD THE RESPONSIBILITY FOR MEETING SPECIFICATIONS AND TEST REQUIREMENTS, AND ABSENT A PRICE ADJUSTMENT PROVISION, THERE IS NO ENTITLEMENT TO ADDITIONAL COMPENSATION FOR UNFORESEEN DIFFICULTIES NOT OCCASIONED BY SPECIFICATION CHANGES WITHIN PURVIEW OF THE CHANGES CLAUSE OF THE CONTRACT, AND THE ACCEPTANCE BY THE GOVERNMENT OF THE FREE OF CHARGE VOLUNTARY OFFER OF TOOLS AND MOLDS, PROPER UNDER THE INVITATION AND SECTION 1-2.305 OF THE FEDERAL PROCUREMENT REGULATIONS, CONSTITUTES NO EQUITABLE BASIS FOR RELIEF OF THE CONTRACTOR.

TO COMO PLASTICS, INC., MAY 23, 1966:

REFERENCE IS MADE TO YOUR LETTER OF MARCH 9, 1966, REQUESTING REIMBURSEMENT, ON THE BASIS OF EQUITY, IN THE AMOUNT OF $11,657.49, REPRESENTING AN ALLEGED LOSS SUSTAINED BY YOU IN THE PERFORMANCE OF A FIXED-PRICE SUPPLY CONTRACT FOR THE POST OFFICE DEPARTMENT.

INVITATION FOR BIDS NO. 27, ISSUED OCTOBER 26, 1962, BY THE POST OFFICE DEPARTMENT, SOLICITED BIDS, ON A TOTAL SMALL BUSINESS SET-ASIDE BASIS, TO SUPPLY 8,000 VACUUM CLEANER ATTACHMENT SETS FOR CLEANING CITY CARRIERS' LETTER SORTING CASES, EACH SET TO CONSIST OF ONE ATTACHMENT, THREE TYPES OF ADAPTORS, ONE SPRING CLIP, AND AN INSTRUCTION SHEET. THE ITEM WAS TO BE MANUFACTURED IN ACCORDANCE WITH POST OFFICE DEPARTMENT SPECIFICATION POD-V-142A, DATED APRIL 30, 1962, AND POST OFFICE DEPARTMENT DRAWINGS (ORE) RD-3, DATED FEBRUARY 23, 1962, AND RD-4, REVISED APRIL 3, 1962. DELIVERY OF 2,000 UNITS TO EACH OF FOUR DESTINATIONS WAS TO BE COMPLETED WITHIN 180 DAYS AFTER AWARD.

THE SPECIFICATION REQUIRED SUBMISSION OF A PILOT MODEL FOR TESTING AND INSPECTION WITHIN 90 DAYS AFTER NOTIFICATION OF AWARD WITH AN ALLOWANCE OF AN ADDITIONAL 30 DAYS FOR CORRECTION OF ANY DEFICIENCIES CAUSING REJECTION OF SUCH PILOT MODEL. FURTHER, THE INSTRUCTION SHEET, WHICH WAS REQUIRED TO SHOW IN COMPLETE DETAIL HOW THE PROPER ADAPTOR WAS TO BE SELECTED AND ASSEMBLED TO THE ATTACHMENT AND HOW THE COMPLETE ATTACHMENT WAS TO BE ASSEMBLED TO THE VACUUM CLEANERS, WAS ALSO REQUIRED TO INCLUDE PICTURES OR SKETCHES SHOWING THE STEP-BY-STEP PROCEDURE.

CONSISTENT WITH FEDERAL PROCUREMENT REGULATION (FPR) 1-2.305, ARTICLE 4 (A) OF THE ADDITIONAL TERMS AND CONDITIONS OF THE IFB, AS CHANGED BY POD NOTICE 70, DECEMBER 1964, RELATING TO LATE BIDS AND MODIFICATIONS OR WITHDRAWALS, INCLUDED THE FOLLOWING PERTINENT LANGUAGE:

* * * A MODIFICATION WHICH MAKES THE TERMS OF THE OTHERWISE SUCCESSFUL BID MORE FAVORABLE TO THE GOVERNMENT WILL BE CONSIDERED AT ANY TIME IT IS RECEIVED AND MAY THEREAFTER BE ACCEPTED.

STANDARD FORM 32, GENERAL PROVISIONS (SUPPLY CONTRACT), INCORPORATED IN THE IFB BY REFERENCE, INCLUDED A CHANGES CLAUSE REQUIRING WRITTEN AUTHORIZATION FOR CHANGES AND A DISPUTE CLAUSE VESTING IN THE CONTRACTING OFFICER AUTHORITY TO DECIDE DISPUTED QUESTIONS OF FACT SUBJECT TO TIMELY APPEAL TO THE HEAD OF THE CONTRACTING AGENCY OR HIS REPRESENTATIVE.

IN A BID DATED NOVEMBER 13, 1962, YOU QUOTED A UNIT PRICE OF $3.48 FOR EACH ATTACHMENT SET. IN A LETTER BEARING THE SAME DATE, ADDRESSED TO THE PROCUREMENT OFFICE, YOU STATED THAT YOU HAD INCLUDED IN YOUR UNIT PRICE OF $3.48 THE MODE COSTS REQUIRED FOR THE "JOB," THE AMOUNT OF $1.85 REPRESENTING THE COST PER SET AND THE BALANCE OF $1.63 REPRESENTING THE COST OF THE TOOLING DIVIDED BY THE TOTAL QUANTITY OF SETS ON THE CONTRACT. ON DECEMBER 14, 1962, PRIOR TO THE ACCEPTANCE OF YOUR BID, THE PROCUREMENT OFFICE ADDRESSED A TELEGRAM TO YOU INQUIRING WHETHER YOU WOULD AGREE TO GIVE TO THE GOVERNMENT AT NO ADDITIONAL COST, UPON COMPLETION OF THE CONTRACT, TITLE TO THE TOOLS AND MOLDS USED IN THE MANUFACTURE OF THE PROCUREMENT ITEM. BY TELEGRAM OF THE SAME DATE, YOU REPLIED IN THE AFFIRMATIVE. ACCORDINGLY, THERE WAS INCLUDED IN THE CONTRACT, PURCHASE ORDER NO. 3 1-03302, AWARDED TO YOU ON JANUARY 10, 1963, AFTER YOU HAD VERIFIED YOUR TOTAL BID PRICE OF $27,840 AT THE REQUEST OF THE CONTRACTING OFFICER, THE FOLLOWING PERTINENT LANGUAGE:

NOTE: TOOLS AND MOLDS USED IN THE MANUFACTURE OF THIS CONTRACT ARE TO BE FORWARDED TO DEPARTMENT, ROOM 4113, UPON COMPLETION OF CONTRACT AT NO COST TO THE GOVERNMENT PER TELEGRAM SENT BY YOU.

DELIVERY OF 8,400 UNITS (BASIC QUANTITY OF 8,000 PLUS 5 PERCENT (400 UNITS) PERMISSIBLE OVERRUN) WAS COMPLETED IN MARCH 1965. BY LETTER DATED APRIL 6, 1965, ADDRESSED TO THE PROCUREMENT OFFICER, YOU STATED A CLAIM FOR YOUR ALLEGED LOSS OF $11,657.49 ON THE CONTRACT, CONTENDING THAT THE LOSS WAS BROUGHT ABOUT BY CHANGES, VARIANCES AND EXCESSIVE RESEARCH AND DEVELOPMENT PROCESSES NOT CONTEMPLATED OR FIGURED IN THE ORIGINAL ESTIMATE ON WHICH YOUR BID WAS BASED. SUCH CHANGES, YOU CLAIMED, AFFECTED THE ORIGINAL DESIGN AND REQUIREMENTS AND WERE SO EXTENSIVE AS TO JUSTIFY THE VIEW THAT THE PROCUREMENT WAS A RESEARCH AND DEVELOPMENT PROJECT RATHER THAN A CONTRACT FOR A DEFINITE DELIVERY OF AN ITEM PROVEN AND ADAPTABLE FOR USE. ADDITIONALLY, YOU STATE THAT WHILE YOUR INSTRUCTION SHEET CONTAINED ALL DETAILS REQUIRED FOR COMMERCIALLY SOLD PRODUCTS OF A LIKE NATURE, YOU WERE NEVERTHELESS REQUIRED TO MAKE SEVERAL CHANGES WHICH COST CONSIDERABLE IN ENGINEERING, DESIGN AND PRINTING TIME ALONE. ON JULY 30, 1965, THE CONTRACTING OFFICER DENIED YOUR CLAIM IN A LETTER READING, IN PART, AS FOLLOWS:

THIS CONTRACT WAS A PERFORMANCE TYPE CONTRACT IN WHICH YOU, AS THE CONTRACTOR, HAD THE RESPONSIBILITY FOR CONSTRUCTING THE ATTACHMENTS TO MEET POST OFFICE DEPARTMENT SPECIFICATIONS AS WELL AS TO MEET SPECIFIC TEST REQUIREMENTS. YOUR CLAIM THAT RESEARCH AND DEVELOPMENT WERE INVOLVED IN THIS CONTRACT IS NOT CORRECT, AS THE SPECIFICATION DID NOT LIMIT THE MANNER OF PRODUCTION. YOU ELECTED TO "INJECTION MOLD" THESE PARTS AT YOUR OWN OPTION; THE DESIGN WAS CONCEIVED FOR BLOW MOLDING OR ANY OTHER "FORMING TECHNIQUE.'

REVIEWING THE CORRESPONDENCE ON THIS CONTRACT THERE WAS ONE SUGGESTION FROM YOUR COMPANY, IN A LETTER DATED MARCH 11, 1963, ACCOMPANIED BY A DRAWING, THAT THE FLARED SECTION BE REMOVED ON EACH OF THE 8 NOZZLE FINGERS, MAKING IT EASIER TO ASSEMBLE. THIS WAS APPROVED BY THE DEPARTMENT AS BEING IN CONFORMITY WITH CONTRACT REQUIREMENTS. YOU IN FACT, NOTED THERE WOULD BE NO CHARGE FOR THIS ALTHOUGH IT HAD NOT BEEN CONSIDERED BY EITHER PARTY AS A CHANGE, BUT ONLY AN APPROVED METHOD OF ACCOMPLISHING A SPECIFIC REQUIREMENT. ON ONE OTHER OCCASION YOUR COMPANY ASKED FOR A TOLERANCE DEVIATION AND THE DEPARTMENT GRANTED THAT REQUEST. A DEVIATION IS NOT A CHANGE REQUIRING ADDITIONAL COMPENSATION.

THE LOSS SUSTAINED BY YOUR COMPANY HAS NO FOUNDATION FOR CONTRACTUAL RELIEF. ALL OF THE REJECTIONS FROM MARCH 1963 THROUGH SEPTEMBER 1964 WERE DUE TO YOUR MISINTERPRETATION OF THE SPECIFICATION AND THE FAILURE OF THE ATTACHMENTS TO PASS INSPECTION BECAUSE OF POOR BONDING AND SEALING OF THE SEAMS. THE DEPARTMENT CANNOT ASSUME RESPONSIBILITY FOR LOSSES DUE TO THESE FACTORS.

IN REFERENCE MADE TO THE INSTRUCTION SHEET, YOU CLAIM THE DEPARTMENT REQUIRED YOU TO MAKE CHANGES IN IT TO SHOW IN EXACT DETAIL THE REQUIREMENTS OF THE SPECIFICATION BEFORE BEING ACCEPTED. THE FIRST ONE SUBMITTED BY YOU DID NOT PROVIDE ADEQUATE INFORMATION TO FULFILL REQUIREMENTS OF THE SPECIFICATION. THE SECOND INSTRUCTION SHEET DID FINALLY MEET THE REQUIREMENTS. THE INSTRUCTION SHEET WAS A REQUIREMENT OF THE CONTRACT, AND IT WAS RETURNED TO YOU FOR CORRECTION UNTIL IT MET THE REQUIREMENT. YOU WERE NOT REQUIRED TO DO ANYTHING ADDITIONAL.

INASMUCH AS THE CONTRACT IS FIXED PRICE AND SINCE NO CHANGES HAVE BEEN FORMALLY ISSUED OR RATIFIED BY THE UNDERSIGNED CONTRACTING OFFICER UNDER THE CONTRACT CHANGES ARTICLE, YOUR CLAIM FOR ADDITIONAL FUNDS CANNOT BE HONORED.

ON OCTOBER 5, 1965, AFTER YOU HAD APPARENTLY DISCUSSED YOUR CLAIM FURTHER WITH THE PROCUREMENT OFFICE, YOU ADDRESSED A LETTER TO THE "U.S. POST OFFICE, BOARD OF REVIEW, WASHINGTON 25, D.C., " REQUESTING REVIEW OF YOUR CLAIM. THE POST OFFICE DEPARTMENT BOARD OF CONTRACT APPEALS ACCEPTED YOUR LETTER AS AN APPEAL FROM THE CONTRACTING OFFICER'S DECISION. THEREAFTER, HOWEVER, YOU REQUESTED THAT YOUR APPEAL BE DISMISSED WITHOUT PREJUDICE TO YOUR RIGHT TO REINSTATE IT AT A LATER DATE, AND THE BOARD GRANTED YOUR REQUEST IN AN ORDER ISSUED DECEMBER 28, 1965. ON THIS RECORD, WE MUST AT THIS TIME ACCEPT THE FACTUAL CONCLUSIONS OF THE CONTRACTING OFFICER AS BINDING UPON OUR OFFICE.

IN YOUR LETTER OF MARCH 9, 1966, TO OUR OFFICE, YOU POINT TO THE FACT THAT MORE THAN 2 YEARS WERE REQUIRED TO COMPLETE THE CONTRACT. YOU ASSERT THAT THE COST OF THE MOLDS DEVELOPED AND GIVEN TO THE POST OFFICE DEPARTMENT RAN IN EXCESS OF $16,000 OVER THE ORIGINAL ESTIMATED COST, AND YOU SUBMIT A QUOTATION FROM A SUPPLIER INDICATING THAT THE PRESENT COST OF THE MOLDS AND/OR TOOLS WOULD EXCEED $36,000. YOUR LETTER READS, IN PART, AS FOLLOWS:

THESE MOLDS AND/OR TOOLS ARE AT PRESENT BEING UTILIZED BY THE POST OFFICE DEPARTMENT IN PRODUCING A SECOND LOT OF THIS SAME ITEM, AND NO DOUBT WILL BE CONTINUOUSLY USED IN THE FUTURE, SINCE WE ARE INFORMED BY AN ENGINEERING OFFICIAL OF THE POST OFFICE THAT THIS IS AN EXPENDABLE ITEM REQUIRING REPLACEMENT AT INTERVALS, AND HAS MET WITH GREAT ACCEPTANCE IN THEIR SYSTEM, AND HAS EFFECTED CONSIDERABLE SAVINGS TO THE GOVERNMENT.

* * * THE LOSS SUSTAINED WAS IN DEVELOPMENT OF AN ITEM AND CONSTRUCTION OF MOLDS AND/OR TOOLS FOR THE CONTINUED PRODUCTION OF THIS ITEM THAT ACCRUED TO THE BENEFIT OF THE GOVERNMENT WITHOUT COMPENSATION THEREFOR.

IT IS INCONCEIVABLE THAT ANYONE WOULD BE EXPECTED TO VOLUNTARILY GIVE AWAY MOLDS AND/OR TOOLS COSTING IN EXCESS OF $16,000.00 WITH A REPLACEMENT COST IN EXCESS OF $36,000.00 ON A CONTRACT TOTALING NET $27,562.60.

IT IS, HOWEVER, CONCEIVABLE THAT IN ESTIMATING THE COST OF THE MOLDS AND/OR TOOLS ORIGINALLY AT $4,000.00 TO $5,000.00, SUCH A CONCESSION ON A $27,562.00 ORDER COULD HAVE BEEN MADE AS WAS DONE * * *.

THE POST OFFICE DEPARTMENT HAS OBTAINED THE OWNERSHIP AND FUTURE USE OF THESE MOLDS AND/OR TOOLS ON A TECHNICALITY THAT ALLOWS THEM TO PROFIT AT THE EXPENSE AND LOSS TO A SMALL BUSINESS CONCERN THAT HAS WORKED DILIGENTLY AND HONESTLY TO EFFECT AND COMPLETE A CONTRACT OF A MOST DIFFICULT PART. IN ADDITION, THE DETAILS OF MANUFACTURING PROCESSES HAVE BEEN DETAILED TO THE POST OFFICE OFFICIALS, AND THE EXPERIENCE GAINED WILL ALSO PROVE INVALUABLE IN FUTURE PRODUCTION OF THE PART BY THE POST OFFICE DEPARTMENT.

THE RECORD ESTABLISHES THAT WHILE THE POST OFFICE DEPARTMENT SOLICITED YOUR OFFER TO GIVE THE MOLDS AND/OR TOOLS USED IN THE PERFORMANCE OF THE CONTRACT TO THE DEPARTMENT FREE OF CHARGE, YOU WERE NOT REQUIRED TO MAKE SUCH OFFER, NOR DO YOU ALLEGE THAT ANY COERCION WAS USED. INASMUCH AS YOU HAD VOLUNTARILY STATED IN YOUR BID THAT IT INCLUDED YOUR ESTIMATED COST OF TOOLING, THE DEPARTMENT'S REQUEST WAS ENTIRELY REASONABLE, AND THE ACCEPTANCE OF YOUR OFFER WAS PROPER UNDER THE IFB TERMS AND UNDER FPR 1- 2.305, PERMITTING ACCEPTANCE OF LATE MODIFICATIONS FAVORABLE TO THE UNITED STATES TENDERED AT ANY TIME BY THE OTHERWISE SUCCESSFUL BIDDER.

THE RECORD ALSO ESTABLISHES THAT WHILE DELIVERY WAS NOT EFFECTED WITHIN THE PERIOD ORIGINALLY CONTEMPLATED BY THE CONTRACT TERMS, NEVERTHELESS YOU ULTIMATELY FURNISHED TO THE CONTRACTING AGENCY THE QUANTITY OF ATTACHMENT SETS INDICATED IN THE IFB, PLUS AN AUTHORIZED 5 PERCENT OVERRUN, WHICH SETS COMPLIED WITH SPECIFICATIONS IN WHICH NO CHANGES WERE MADE AS AUTHORIZED BY THE CHANGES CLAUSE IN THE CONTRACT. THE ISSUE INVOLVED, THEREFORE, IS NOT ONE OF SPECIFICATIONS WHICH COULD NOT BE MET WITHOUT CHANGE BUT RATHER A MATTER OF WHETHER THE CIRCUMSTANCES INVOLVING YOUR PERFORMANCE OF THE CONTRACT ARE SUCH AS TO JUSTIFY AN INCREASE IN THE CONTRACT PRICE TO COVER COSTS WHICH WERE APPARENTLY HIGHER THAN YOU ANTICIPATED AT THE TIME YOU SUBMITTED YOUR BID.

IT IS A WELL-SETTLED RULE THAT WHERE ONE AGREES TO DO, FOR A FIXED SUM, A THING POSSIBLE TO BE PERFORMED, HE WILL NOT BE EXCUSED OR BECOME ENTITLED TO ADDITIONAL COMPENSATION, BECAUSE UNFORESEEN DIFFICULTIES ARE ENCOUNTERED. COLUMBUS RAILWAY AND POWER COMPANY V. COLUMBUS, 249 U.S. 399, 412; DAY V. UNITED STATES, 245 U.S. 159, 161. ALSO WHERE A CONTRACT CONTAINS AN EXPRESS STIPULATION AS TO THE AMOUNT TO BE PAID, SUCH STIPULATION IS CONCLUSIVE ON THE PARTIES AND MEASURES THE AMOUNT OF RECOVERY FOR PERFORMANCE. BRAWLEY V. UNITED STATES, 96 U.S. 168; SIMPSON V. UNITED STATES, 172 ID. 372. FURTHER, THE RESPONSIBILITY FOR FURNISHING AN ARTICLE WHICH COMPLIES WITH THE ADVERTISED SPECIFICATIONS IS SOLELY THAT OF THE BIDDER WHO, BY THE MERE ACT OF SUBMITTING A BID, UNDERTAKES TO FURNISH THE ITEM DESCRIBED IN THE ADVERTISED SPECIFICATIONS OR ITS EQUIVALENT. 36 COMP. GEN. 143, 145, AND COURT CASES THEREIN CITED.

UNDER SUCH PRINCIPLES, THE FACT THAT THE PERFORMANCE OF YOUR FIXED PRICE CONTRACT WAS MORE EXPENSIVE THAN YOU HAD EXPECTED DOES NOT ENTITLE YOU TO ADDITIONAL COMPENSATION OTHER THAN AS PROVIDED BY THE CONTRACT. ACCORDINGLY, THE EXPENSES CLAIMED NOT BEING OCCASIONED BY ANY CHANGES IN THE SPECIFICATIONS WITHIN THE PURVIEW OF THE CHANGES CLAUSE OF THE CONTRACT, AND THERE BEING NO OTHER PROVISION IN THE CONTRACT AUTHORIZING ADJUSTMENT OF THE CONTRACT PRICE, WE ARE UNABLE TO FIND ANY LEGAL BASIS FOR THE PAYMENT OF YOUR CLAIM.

REGARDING YOUR CONTENTION THAT THE CURRENT HIGH VALUE ($36,000 AS OPPOSED TO YOUR ORIGINAL ESTIMATE OF $4,000 TO $5,000) OF THE MOLDS AN EQUITABLE BASIS FOR RELIEF, YOU ARE ADVISED THAT OUR OFFICE IS WITHOUT AUTHORITY TO DETERMINE CLAIMS BY OR AGAINST THE UNITED STATES SOLELY ON THE BASIS OF EQUITABLE CONSIDERATIONS. RATHER, OUR JURISDICTION IS RESTRICTED TO THE CONSIDERATION AND DETERMINATION OF SUCH MATTERS IN ACCORDANCE WITH THE APPLICABLE LAW OR UNDER THE TERMS OF A VALID AGREEMENT EXECUTED PURSUANT TO LAW.