B-159998, SEP. 22, 1966

B-159998, SEP. 22, 1966

TO L AND P FOOD SERVICE EQUIPMENT CO.:

IN YOUR LETTER OF AUGUST 27, 1966, YOU ASK THAT WE REVIEW ARMED SERVICES BOARD OF CONTRACT APPEALS CASE NO. 11007, DATED JUNE 29, 1966, WHICH DENIED YOUR APPEAL FROM A CONTRACTING OFFICER'S DEFAULT TERMINATION OF YOUR CONTRACT NO. DA 45-016-AVI-2499 WITH THE DEPARTMENT OF THE ARMY, AND FROM HIS SUBSEQUENT ASSESSMENT OF EXCESS REPROCUREMENT COSTS IN THE AMOUNT OF $2,667.87. BY A LETTER DATED SEPTEMBER 1, 1966, THE DEPARTMENT OF THE ARMY NOTIFIED OUR OFFICE THAT YOU ARE INDEBTED TO THE UNITED STATES IN THE AMOUNT OF $1,664.19 (AN AMOUNT OF $1,080.43 PREVIOUSLY HAVING BEEN SET OFF AGAINST THE FULL INDEBTEDNESS), AND FORWARDED ITS ADMINISTRATIVE FILE TO OUR OFFICE FOR APPROPRIATE ACTION.

THERE APPEARS TO BE NO SERIOUS DISAGREEMENT IN THE FACTS AS SET FORTH IN YOUR LETTER OF AUGUST 27 AND IN THE BOARD'S "STATEMENT OF FACTS," ALTHOUGH THE LATTER DOES EXPLAIN THAT VICTORY, YOUR PROPOSED SUBCONTRACTOR, WAS UNWILLING TO CONTRACT WITH YOU UNLESS YOU WOULD ADVANCE CREDIT TO FINANCE THE ORDER. FOR OUR PURPOSES, THE FACTS ARE SUFFICIENTLY SET OUT IN THE FOLLOWING PORTION OF THE BOARD'S OPINION:

"DECISION

"THERE IS NO QUESTION BUT THAT APPELLANT FAILED TO PERFORM UNDER HIS CONTRACT. HE ALLEGES AS AN EXCUSE THE FAILURE OF HIS SUBCONTRACTOR TO SUPPLY IT WITH THE COFFEE URNS TO BE DELIVERED TO THE GOVERNMENT UNDER THE CONTRACT. THE SUBCONTRACTOR'S DEFAULT EXCUSES APPELLANT'S ONLY, HOWEVER, IF THE DEFAULT IS DUE TO CAUSES BEYOND THE CONTROL OF BOTH AND WITHOUT THEIR RESPECTIVE FAULT AND NEGLIGENCE. ASSUMING THAT VICTORY HAD ENTERED INTO A BINDING AGREEMENT TO FURNISH THE COFFEE URNS TO APPELLANT, ITS DEFAULT WAS, FROM ALL THAT APPEARS, DUE TO ITS LACK OF FUNDS TO PAY FOR THE COST OF MANUFACTURE PENDING RECEIPT OF PAYMENT FROM APPELLANT. SUCH FINANCIAL INABILITY IS IN THE ORDINARY CASE, AS HERE, ITS OWN RESPONSIBILITY AND DOES NOT EXCUSE ITS OWN OR APPELLANT'S DEFAULT UNDER THE LATTER'S CONTRACT WITH RESPONDENT. SCHUTTER MICROWAVE CORPORATION, ASBCA NO. 9786, 66-1 BCA PARA. 5473.

"ON THE OTHER HAND, APPELLANT AS A DEALER IN FOOD SERVICE EQUIPMENT WAS RESPONSIBLE UNDER ITS CONTRACT FOR FINDING A SUPPLIER FOR THE COFFEE URNS WHICH IT HAD UNDERTAKEN TO DELIVER. CANFIELD MACHINE AND TOOL CO., INC., ASBCA NO. 10390, 65-2 BCA PARA. 5018. THE EXCEPTIONAL CIRCUMSTANCES WHICH HAVE AT TIMES LED THE BOARD TO RELIEVE AN APPELLANT CONTRACTOR OF THIS RESPONSIBILITY (JOHN ANDRESEN AND CO., INC., ASBCA NO. 633 (1950) ( ARE NOT PRESENT HERE. IN PARTICULAR, THERE EXISTED NO LONG-STANDING BUSINESS RELATIONSHIP BETWEEN APPELLANT AND VICTORY OR ITS PARENT STANLEY NOR DID VICTORY RENEGE ON THE PRICES QUOTED BY ITS REPRESENTATIVE TO APPELLANT. ALL IT SOUGHT WAS A MEANS OF FINANCING THE TRANSACTION, WHICH APPELLANT DID NOT ARRANGE FOR WHATEVER MAY HAVE BEEN THE REASON.

"IN THESE CIRCUMSTANCES APPELLANT'S DEFAULT, HOWEVER ANTICIPATED BY HIM, CANNOT BE EXCUSED UNDER THE DEFAULT CLAUSE OF ITS CONTRACT AND THE DEFAULT TERMINATION THEREOF MUST STAND.

"THE REPROCUREMENT IS ATTACKED, APART FROM THE ATTACK ON THE DEFAULT TERMINATION, ON THE GROUND THAT THE CONTRACT WAS AWARDED TO THE FIRM WHICH HAD CAUSED APPELLANT'S DEFAULT BY FAILURE TO DELIVER THE COFFEE URNS TO HIM, WHATEVER COMMENT SUCH A COURSE OF EVENTS AND THE CAUSES THEREOF MAY OTHERWISE OCCASION, IT IS CLEAR THAT DISQUALIFICATION OF VICTORY AS A BIDDER AND AWARD TO THE NEXT HIGHER BIDDER WOULD HAVE INCREASED APPELLANT'S OBLIGATION FOR EXCESS COSTS BY ABOUT $13,000 AND WOULD HAVE GROSSLY VIOLATED RESPONDENT'S DUTY TO MITIGATE DAMAGES ON REPROCUREMENT AFTER DEFAULT TERMINATION. THE REPROCUREMENT COMPLIED IN ALL RESPECTS WITH PROPER PRACTICE AND THE ASSESSMENT OF EXCESS COSTS IS UPHELD.

"ACCORDINGLY, THE APPEAL MUST BE DENIED.'

THE QUOTED DECISION OF THE BOARD WAS RENDERED PURSUANT TO YOUR APPEAL UNDER THE DISPUTE CLAUSE OF THE CONTRACT. IN VIEW OF THE FINALITY WHICH IS ACCORDED TO FACTUAL FINDINGS BY THE CONTRACTING AGENCY UNDER THE DISPUTES CLAUSE, OUR REVIEW OF THE FACTS IS NECESSARILY LIMITED TO A DETERMINATION OF WHETHER SUCH FINDINGS ARE FRAUDULENT, CAPRICIOUS, ARBITRARY, GROSSLY ERRONEOUS OR NOT SUPPORTED BY SUBSTANTIAL EVIDENCE, AS SET OUT IN THE "WUNDERLICH" ACT OF MAY 11, 1954, 68 STAT. 81 (41 U.S.C. 321-322).

SINCE THERE DOES NOT APPEAR TO BE ANY SERIOUS DISAGREEMENT ON THE FACTS, WE MUST THEREFORE ACCEPT THEM AS FINAL. BASED UPON SUCH FACTS WE FIND NO VALID BASIS FOR DISAGREEING WITH THE BOARD'S LEGAL CONCLUSIONS, AND WE MUST THEREFORE CONCLUDE THAT YOUR INDEBTEDNESS TO THE GOVERNMENT IN THE AMOUNT OF $1,664.19 HAS BEEN LEGALLY ESTABLISHED. ACCORDINGLY, PAYMENT SHOULD BE MADE PROMPTLY BY CHECK OR MONEY ORDER TO THE "U.S. GENERAL ACCOUNTING OFFICE," AND FORWARDED TO UNITED STATES GENERAL ACCOUNTING OFFICE, CLAIMS DIVISION, P.O. BOX 2610, WASHINGTON, D.C. 20013.