B-176039, JUL 13, 1972

B-176039, JUL 13, 1972

PROCUREMENT LAW - VALIDITY OF CONTRACT - UNAUTHORIZED ACTS OF GOVERNMENT AGENTS DECISION SUSTAINING PRIOR DISALLOWANCE OF A CLAIM OF SEAWILL RESEARCH, LTD., BASED ON A CONTRACT ALLEGEDLY EXECUTED BY AN EMPLOYEE OF THE VETERANS ADMINISTRATION HOSPITAL, WACO, TEX., ON BEHALF OF THE HOSPITAL. GOVERNMENT AGENTS MUST POSSESS ACTUAL AUTHORITY IN ORDER TO CONTRACTUALLY BIND THE UNITED STATES. FEDERAL CROP INSURANCE CORPORATION V. MERRILL, 332 U.S. 380, 384 (1947). ALTHOUGH APPROPRIATE CIRCUMSTANCES MIGHT WARRANT RATIFICATION OF AN UNAUTHORIZED ACT, IN THE INSTANT CASE THE GOVERNMENT HAS NEITHER RATIFIED NOR ACCEPTED THE BENEFITS OF THE ALLEGED CONTRACT. ACCORDINGLY, THE PRIOR DISALLOWANCE IS SUSTAINED.

TO WEXLER, WEISMAN, MAURER & FORMAN:

WE REFER TO YOUR LETTER OF MAY 9, 1972, REQUESTING PAYMENT OF SEAWILL RESEARCH, LTD., CLAIM NO. Z-2473001, BASED ON A CONTRACT ALLEGEDLY EXECUTED BY AN EMPLOYEE OF THE VETERANS ADMINISTRATION HOSPITAL, WACO, TEXAS, ON BEHALF OF THE HOSPITAL.

THIS CLAIM ARISES OUT OF THE FOLLOWING SET OF FACTS AS REPORTED TO OUR OFFICE. DURING DISCUSSIONS WITH A SEAWILL SALES REPRESENTATIVE, THE CHIEF OF THE HOSPITAL'S ENGINEERING DIVISION SHOWED AN INTEREST IN OBTAINING A QUANTITY OF SEAWILL PACKING AND DIAPHRAGM MATERIAL SUFFICIENT TO DETERMINE IF THOSE MATERIALS WOULD MEET HOSPITAL NEEDS. THE REPRESENTATIVE WAS TOLD THAT THE ENGINEERING DIVISION WAS NOT AUTHORIZED TO MAKE PURCHASES, BUT THAT A REQUEST FOR THE PURCHASE OF THE MATERIALS WOULD BE SENT TO THE HOSPITAL'S SUPPLY (PROCUREMENT) DIVISION. THE APPROXIMATE PRICES AND DESCRIPTION INFORMATION FOR THESE MATERIALS SO AS TO BE ABLE TO INITIATE THE PURCHASE REQUEST, THE SALES REPRESENTATIVE INSERTED THIS DATA ON A SEAWILL ORDER FORM AND REQUESTED THAT HE SIGN THE ORDER FORM. THE CHIEF OF THE ENGINEERING DIVISION STATES THAT HE AGAIN TOLD THE SALES REPRESENTATIVE THAT ONLY THE SUPPLY DIVISION COULD AUTHORIZE ANY PURCHASE OF THE MATERIALS. THE CHIEF STATES THAT HE DID SIGN THE FORM, HOWEVER, AFTER BEING INFORMED BY THE REPRESENTATIVE THAT A SIGNATURE WAS NEEDED ONLY AS A VERIFICATION OF THE CONTACT HE HAD MADE WITH THE HOSPITAL. THE HOSPITAL RECEIVED THE MATERIALS IN EARLY MARCH 1971 FROM SEAWILL, BUT THE HOSPITAL DECLINED TO ASSUME ANY LIABILITY THEREFOR. IT IS WILLING TO SHIP THE MATERIALS BACK TO SEAWILL OR TO A SEAWILL CUSTOMER IN THE UNITED STATES SINCE IT HAS NO CONTRACTUAL OBLIGATION TO ACCEPT THE MATERIALS.

THE IMPORTANT FACTOR IN THIS CASE IS THAT THE CHIEF OF THE ENGINEERING DIVISION WAS WITHOUT AUTHORITY TO ENTER INTO CONTRACTS ON BEHALF OF THE HOSPITAL. AGENTS OF THE GOVERNMENT MUST HAVE ACTUAL AUTHORITY IN ORDER TO BIND THE UNITED STATES, AND INDIVIDUALS ENTERING INTO CONTRACTUAL ARRANGEMENTS WITH THE UNITED STATES ARE, AS A MATTER OF PUBLIC POLICY, CHARGED WITH THE RESPONSIBILITY OF ACCURATELY ASCERTAINING THE EXTENT OF THE AUTHORITY OF THE AGENT TO ACT FOR THE GOVERNMENT. FEDERAL CROP INSURANCE CORPORATION V. MERRILL, 332 U.S. 380, 384 (1947); NEWMAN V. UNITED STATES, 135 F. SUPP. 953, 957 (CT. CL. 1955).

IT IS, OF COURSE, RECOGNIZED THAT IN APPROPRIATE CIRCUMSTANCES AN UNAUTHORIZED ACT BY PERSONNEL OF THE GOVERNMENT MAY BE EXPRESSLY OR IMPLIEDLY RATIFIED. IN THIS REGARD, FEDERAL PROCUREMENT REGULATIONS (FPR) 1-1.405 - APPLICABLE TO PURCHASES MADE BY THE VA - PROVIDES AS FOLLOWS:

"SEC 1-1.405 RATIFICATION OF UNAUTHORIZED CONTRACT AWARDS.

"EXECUTION OF OTHERWISE PROPER CONTRACTS MADE BY INDIVIDUALS WITHOUT CONTRACTING AUTHORITY, OR BY CONTRACTING OFFICERS IN EXCESS OF THE LIMITS OF THEIR DELEGATED AUTHORITY, MAY BE LATER RATIFIED. TO BE EFFECTIVE, SUCH RATIFICATION MUST BE IN THE FORM OF A WRITTEN DOCUMENT CLEARLY STATING THAT RATIFICATION OF A PREVIOUSLY UNAUTHORIZED ACT IS INTENDED AND MUST BE SIGNED BY A PERSON AUTHORIZED TO RATIFY SUCH ACTS. GENERALLY SUCH RATIFICATION MAY BE MADE ONLY BY AN OFFICIAL ON WHOSE BEHALF THE CONTRACT WAS MADE AND THEN ONLY (1) IF HE COULD HAVE GIVEN AUTHORITY TO ENTER INTO THE CONTRACT BEFORE IT WAS AWARDED AND (2) IF HE STILL HAS POWER TO DO SO AT THE TIME OF RATIFICATION."

IT IS ALSO RECOGNIZED THAT THE ACCEPTANCE OF BENEFITS BY AUTHORIZED REPRESENTATIVES OF THE GOVERNMENT WITH KNOWLEDGE OF THE CIRCUMSTANCES MAY, IN THE PROPER CASE, RESULT IN THE RATIFICATION OF THE UNAUTHORIZED ACT BY IMPLICATION. SEE WILLIAMS V. UNITED STATES, 127 F. SUPP. 617 (CT. CL. 1955), CERTIORARI DENIED, 349 U.S. 938 (1955); NIAGARA FALLS BRIDGE COMMISSION V. UNITED STATES, 76 F. SUPP. 1018 (CT. CL. 1948); PACIFIC MARITIME ASSOCIATION V. UNITED STATES, 108 F. SUPP. 603 (CT. CL. 1952).

IN THE INSTANT CASE, HOWEVER, EVEN ASSUMING THAT THE CHIEF OF THE ENGINEERING DIVISION INTENDED TO ORDER THE MATERIALS FROM SEAWILL, THERE HAS BEEN NO RATIFICATION OF THIS UNAUTHORIZED ACT BY THE GOVERNMENT, NOR HAS THE GOVERNMENT ACCEPTED THE BENEFITS OF THE UNAUTHORIZED ACT. INSTEAD, THE HOSPITAL IS HOLDING THE MATERIALS FOR SEAWILL WHILE AT THE SAME ATTEMPTING TO DETERMINE WHETHER SEAWILL WOULD PREFER THAT THE HOSPITAL RETURN THEM TO THAT FIRM OR TO A SEAWILL CUSTOMER IN THE UNITED STATES.

CONSEQUENTLY, IN VIEW OF THE FACT THAT THE CHIEF OF THE ENGINEERING DIVISION HAD NO AUTHORITY TO ENTER INTO ANY CONTRACTUAL RELATIONSHIP WITH SEAWILL ON BEHALF OF THE GOVERNMENT, THE CLAIM ADVANCED BY SEAWILL MUST BE DENIED, AND PAYMENT THEREFOR MAY NOT BE AUTHORIZED.

ACCORDINGLY, THE MARCH 20, 1972, DISALLOWANCE OF THE SEAWILL CLAIM BY OUR CLAIMS DIVISION IS SUSTAINED.