B-115157, JUL. 29, 1958

B-115157, JUL. 29, 1958

TO GOUGH INDUSTRIES, INCORPORATED:

REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 1, 1957, AND TO LETTER OF JULY 2, 1957, FROM YOUR ATTORNEY, MR. CARYL WARNER, REQUESTING RECONSIDERATION OF THE ACTION TAKEN BY THE CLAIMS DIVISION OF OUR OFFICE IN SETTLEMENT OF CLAIM, CERTIFICATE NO. 2113831, DATED FEBRUARY 25, 1953, WHEREIN THE SUM OF $32,859.52, WAS WITHHELD AND APPLIED IN PARTIAL LIQUIDATION OF YOUR INDEBTEDNESS OF $33,244.60, AND THE BALANCE, $385.08, SIMILARLY COLLECTED IN SETTLEMENT OF CLAIM, CERTIFICATE NO. 2113832, ALSO DATED FEBRUARY 25, 1953. LIKEWISE YOU REQUEST REFUND OF THE SUM OF $10,625, OTHERWISE APPARENTLY DUE YOU UNDER CONTRACT NO. I2R-18948, DATED MARCH 22, 1950 (SPECIFICATIONS NO. 2865), WHICH WAS DEDUCTED BY THE ADMINISTRATIVE OFFICE.

IT IS, IN SUBSTANCE, THE CONTENTION OF BOTH YOU AND YOUR ATTORNEY THAT THE ASSESSMENT BY OUR CLAIMS DIVISION OF EXCESS COSTS AMOUNTING TO $33,244.60, INCURRED BY THE GOVERNMENT BECAUSE OF YOUR DEFAULT UNDER CONTRACT NO. I2R-18890, AND THE ASSESSMENT BY THE ADMINISTRATIVE OFFICE OF $10,625 AS LIQUIDATED DAMAGES FOR DELAY IN PERFORMANCE OF CONTRACT NO. I2R -18948, WERE UNWARRANTED FOR THE FOLLOWING REASONS. IT IS STATED THAT BOTH THE DEFAULT UNDER CONTRACT NO. I2R-18890, AND THE DELAY UNDER CONTRACT NO. I2R-18948 WERE EXCUSABLE UNDER THE TERMS OF THE CONTRACTS SINCE THE FAILURE OF YOUR ORIGINAL SUBCONTRACTOR TO OBTAIN THE NECESSARY RAW MATERIALS AND SUPPLIES REQUIRED IN THE MANUFACTURE OF THE TRANSFORMERS AND RELATED EQUIPMENT WERE UNAVAILABLE BECAUSE OF THE RESTRICTIONS IMPOSED IN CONNECTION WITH THE OPERATIONS OF THE NATIONAL PRIORITIES SYSTEM. ALSO, IT IS ALLEGED THAT THE CONTRACTING OFFICER FAILED TO MAKE A FINDING THAT THE MATERIALS TO BE FURNISHED UNDER THE SUBCONTRACT WITH YOUR SUPPLIER WERE PROCURABLE IN THE OPEN MARKET, AS REQUIRED UNDER ARTICLE 5 OF THE CONTRACT, AND THEREFORE NO LEGAL BASIS EXISTS FOR CHARGING YOU WITH THE ACTUAL AND LIQUIDATED DAMAGES INVOLVED UNDER THE TWO CONTRACTS.

WITH RESPECT TO YOUR CLAIM FOR REMISSION OF THE LIQUIDATED DAMAGES DEDUCTED BY THE BUREAU OF RECLAMATION THE RECORD DISCLOSES THAT NOTICE OF AWARD OF CONTRACT NO. I2R-18948 WAS RECEIVED BY YOU ON MARCH 22, 1950, WHICH STIPULATED DELIVERY OF THE TRANSFORMER WITHIN 420 CALENDAR DAYS OR ON OR BEFORE MAY 16, 1951. PERFORMANCE WAS NOT COMPLETED UNTIL OCTOBER 2, 1952, WITH THE RESULT THAT LIQUIDATED DAMAGES AT THE RATE OF $25 PER DAY WERE ASSESSED AND COLLECTED BY SETOFF FOR THE DELAY, EXCLUSIVE OF 80 DAYS THEREOF FOUND EXCUSABLE BY THE CONTRACTING OFFICER.

CONTRARY TO YOUR ALLEGATION IT APPEARS THAT FORMAL FINDINGS OF FACT WERE MADE ON SEPTEMBER 8, 1953, BY THE CONTRACTING OFFICER, AS CONTEMPLATED BY THE PROVISIONS OF PARAGRAPH 18 OF THE SPECIFICATIONS SUBSTITUTED FOR ARTICLE 5 OF STANDARD FORM NO. 32. A COPY THEREOF WAS FURNISHED YOU WITH COVERING LETTER OF SEPTEMBER 29, 1953, WHICH SET FORTH IN DETAIL THE FACTS AND CIRCUMSTANCES RELATING TO THE DELAY IN PERFORMANCE OF CONTRACT NO. I2R -18948, AND HIS CONCLUSIONS AS TO THE RESPONSIBILITY THEREFOR. PARAGRAPH 18 FURTHER PROVIDES THAT SUCH FINDINGS SHALL BE FINAL AND CONCLUSIVE ON THE PARTIES, SUBJECT ONLY TO APPEAL WITHIN 30 DAYS TO THE HEAD OF THE DEPARTMENT. YOU WERE NOTIFIED IN BOTH THE FINDINGS OF FACT (PARAGRAPH 12) AND THE REGISTERED LETTER OF SEPTEMBER 29, 1953, AS TO YOUR RIGHTS IN THE EVENT YOU DISAGREED WITH THOSE FINDINGS. NO APPEAL BY YOU WAS FILED.

THE COURTS HAVE CONSIDERED SEVERAL CASES INVOLVING SIMILAR SITUATIONS WHERE THE PLAINTIFFS FAILED TO PURSUE THEIR ADMINISTRATIVE REMEDIES, AND IT HAS BEEN HELD UNIFORMLY THAT SUCH FAILURE CONSTITUTES A BAR TO ANY JUDICIAL DETERMINATION. IN THE CASE OF UNITED STATES V. HOLPUCH CO., 328 U.S. 234, THE SUPREME COURT OF THE UNITED STATES, CONCLUDED ITS DECISION AS FOLLOWS:

"IT FOLLOWS THAT WHEN A CONTRACTOR CHOOSES WITHOUT DUE COURSE TO IGNORE THE PROVISIONS OF ARTICLE 15 (HERE ARTICLE 18) HE DESTROYS HIS RIGHT TO SUE FOR DAMAGES IN THE COURT OF CLAIMS. THAT COURT IS THEN OBLIGATED TO OUTLAW HIS CLAIM, WHATEVER MAY BE THEIR EQUITY. TO DO OTHERWISE IS TO REWRITE THE CONTRACT.'

ALSO, SEE UNITED STATES V. BLAIR, 321 U.S. 730; UNITED STATES V. CALLAHAN WALKER CONSTR. CO., 317 U.S. 56.

THOSE DECISIONS CLEARLY ARE BINDING UPON THE ACCOUNTING OFFICERS OF THE GOVERNMENT, AND THEREFORE WE ARE WITHOUT AUTHORITY TO CONSIDER ON ITS MERITS YOUR CLAIM FOR REFUND OF THE LIQUIDATED DAMAGES DEDUCTED UNDER CONTRACT NO. I2R-18948.

THE REMAINING ITEM OF YOUR CLAIM IS, IN EFFECT, A REQUEST FOR RECONSIDERATION OF THE ACTION TAKEN BY THE CLAIMS DIVISION OF OUR OFFICE IN COLLECTION BY SETOFF THE SUM OF $33,244.60, REPRESENTING EXCESS COSTS INCURRED BY THE GOVERNMENT IN THE PURCHASE ELSEWHERE OF THE REQUIRED TRANSFORMER BECAUSE OF YOUR DEFAULT UNDER CONTRACT NO. I2R 18890. THAT AGREEMENT, EXECUTED FEBRUARY 3, 1950, PROVIDED FOR DELIVERY OF THE TRANSFORMER CALLED FOR UNDER ITEM NO. 1 WITHIN 300 CALENDAR DAYS AFTER RECEIPT OF NOTICE OF AWARD, OR NOVEMBER 30, 1950. YOUR FAILURE TO PERFORM IS ALLEGED TO HAVE BEEN ATTRIBUTABLE TO THE INABILITY OF YOUR SUBCONTRACTOR, GREGORY ELECTRIC COMPANY, TO PURCHASE THE NECESSARY RAW MATERIALS AND SUPPLIES BECAUSE OF THE NATIONAL PRIORITY SYSTEM. IT IS FURTHER ALLEGED THAT YOU SO NOTIFIED THE BUREAU OF RECLAMATION; THAT THE BUREAU REJECTED YOUR REQUEST FOR ASSISTANCE IN OBTAINING THE MATERIALS OR PRIORITY ALLOTMENTS THEREFOR; AND, THAT NO DETERMINATION WAS EVER MADE THAT THE SUPPLIES WERE OBTAINABLE FROM OTHER SOURCES.

UNDER DATE OF FEBRUARY 19, 1958, YOUR ENTIRE CLAIMS FILE WAS TRANSMITTED TO THE SECRETARY OF THE INTERIOR FOR A COMPLETE REPORT THEREON, AND IN RESPONSE TO SAID REQUEST THERE HAS BEEN RECEIVED A DETAILED, CHRONOLOGICAL SUMMARY WITH SUPPORTING DOCUMENTS, OF THE FACTS AND CIRCUMSTANCES WHICH TRANSPIRED DURING THE PERFORMANCE PERIOD OF THE CONTRACT. THE RECORD SHOWS THAT THROUGH AN ARRANGEMENT BETWEEN YOU AND GREGORY ELECTRIC COMPANY, THAT CONCERN AGREED TO UNDERTAKE TO FABRICATE THE TRANSFER YOU CONTRACTED TO FURNISH. BRIEFLY, IT APPEARS THAT THE COMPANY DID NOT POSSESS THE PHYSICAL CAPACITY TO PRODUCE THE TRANSFORMER; THAT THE FACILITIES NECESSARY FOR ITS PRODUCTION NEVER WERE ACQUIRED; THAT AFTER MORE THAN ONE-HALF OF THE PERFORMANCE PERIOD HAD EXPIRED LITTLE OR NO EFFORT HAD BEEN EXERTED BY THE SUBCONTRACTOR TO OBTAIN THE RAW MATERIALS AND SUPPLIES REQUIRED TO PRODUCE THE END PRODUCT; THAT ON SEPTEMBER 26, 1950, GREGORY ELECTRIC COMPANY NOTIFIED YOU THAT PRODUCTION OF THE SUBJECT TRANSFORMER, AS WELL AS OTHER SIMILAR UNITS WHICH YOU HAD ON ORDER WITH THE CONCERN, WAS BEING ABANDONED; AND, THAT THEREAFTER THE PLANT, TOGETHER WITH ALL OF ITS EQUIPMENT, WAS OFFERED FOR SALE BY PUBLIC AUCTION.

BY LETTER DATED OCTOBER 13, 1950, TO THE BUREAU OF RECLAMATION, YOU STATED--- "THAT THE MATERIALS APPEARED NOT TO HAVE BEEN ORDERED BY OUR SUBCONTRACTOR AND THAT OUR SUBCONTRACTOR HAS PLACED IT OUT OF ITS POWER TO FURNISH THE EQUIPMENT AND FACILITIES FOR FABRICATION AND TEST (WHICH APPEARS TO BE TRUE) HAS COME TO US AS A GREAT SURPRISE AND APPEARS TO BE CONTRARY TO DEFINITE WRITTEN ASSURANCES THAT WE HAD AS LONG AGO AS JULY 10, 1950.' ALTHOUGH PRIMARY RESPONSIBILITY FOR PERFORMING THE CONTRACT RESTED WITH YOU, IT IS TACITLY ADMITTED IN YOUR ABOVE LETTER THAT YOU WERE INCOGNIZANT OF YOUR SUPPLIER'S LACK OF DILIGENCE. UNDER DATE OF NOVEMBER 3, 1950, THE BUREAU OF RECLAMATION NOTIFIED YOU THAT AS A RESULT OF THE FOREGOING A BREACH OF CONTRACT WAS ANTICIPATED, UNLESS YOU HAD TAKEN AFFIRMATIVE ACTION SINCE YOUR LETTER OF OCTOBER 13, 1950, WITH A VIEW TO PERFORMANCE. NO REPLY WAS MADE TO THAT LETTER, AND ON DECEMBER 1, 1950, AFTER THE DELIVERY DATE HAD EXPIRED, YOUR RIGHT TO PROCEED WAS TERMINATED.

PURCHASE WAS MADE AGAINST YOUR ACCOUNT IMMEDIATELY FROM ANOTHER SOURCE, AND PERFORMANCE WAS ACCOMPLISHED BY THE COMPLETING CONTRACTOR IN CONSIDERABLY LESS TIME THAN THAT OFFERED BY YOU. SUCH FACT CONTRIBUTES ADDITIONAL DOUBT THAT A CRITICAL SHORTAGE OF MATERIALS EXISTED DURING THE PERFORMANCE TIME OF YOUR CONTRACT. IN VIEW THEREOF, AND SINCE THE EVIDENCE OF RECORD SHOWS THAT YOUR SUBCONTRACTOR DID NOT SERIOUSLY ATTEMPT TIMELY PROCUREMENT OF THE NECESSARY RAW MATERIALS; THAT IT ULTIMATELY ABANDONED COMPLETELY THE PRELIMINARY REQUIREMENTS TO FABRICATE THE RANSFORMER; THAT IT DISPOSED OF ITS PLANT AND FACILITIES; THAT YOU MADE NO EFFORT TO OBTAIN THE EQUIPMENT ELSEWHERE; AND THAT NO SPECIFIC REQUEST WAS MADE FOR A FINDING BY THE CONTRACTING OFFICER THAT THE NECESSARY RAW MATERIALS WERE UNAVAILABLE FOR ANY REASON, INCLUDING THE FUNCTIONS OF THE NATIONAL PRIORITY SYSTEM, THE CONTRACTING OFFICER MERELY NOTIFIED YOU OF THE CANCELLATION OF THE CONTRACT. MOREOVER, IF IT HAD BEEN SERIOUSLY CONTENDED AT THE TIME THAT DEFAULT WAS INEVITABLE SOLELY BECAUSE OF A SHORTAGE OF SUPPLIES, SPECIFIC REQUEST THAT YOU BE RELIEVED OF YOUR OBLIGATIONS COULD HAVE BEEN MADE IN THE FORM OF A REQUEST FOR A FINDING BY THE CONTRACTING OFFICER.

IT IS ABUNDANTLY CLEAR FROM THE RECORD THAT THE DEFAULT WAS PRIMARILY DUE TO THE INABILITY OF YOUR SUPPLIER, GREGORY ELECTRIC COMPANY, TO PERFORM ITS UNDERTAKING WITH YOU, AND THEREAFTER YOUR FAILURE TO COMPLY WITH THE CONTRACT TERMS BY ATTEMPTING TO SEEK ANOTHER SOURCE OF SUPPLY. IN VIEW THEREOF, THE EXCESS COSTS INCURRED BY THE GOVERNMENT IN THE PURCHASE ELSEWHERE OF THE TRANSFORMER PROPERLY WERE DEDUCTED FROM FUNDS OTHERWISE DUE YOU AND THERE IS NO LEGAL BASIS UPON WHICH REFUND OF ANY PART THEREOF MAY BE MADE.

ACCORDINGLY, THE REFERRED-TO SETTLEMENTS OF FEBRUARY 25, 1953, ARE SUSTAINED.