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TO RUSSELL ELECTRIC COMPANY: REFERENCE IS MADE TO LETTER OF JUNE 17. YOUR BID WAS ACCEPTED BY THE GOVERNMENT AND THE CONTRACT AWARDED TO YOU ON MAY 14. DURING A FURTHER EXCHANGE OF CORRESPONDENCE THE FIRM WAS ADVISED THAT ITS LEGAL STATUS IN THE MATTER. WAS THAT OF SUBCONTRACTOR UNDER ARRANGEMENTS WITH YOU. THE DELIVERY OF 182 UNITS WAS MADE BY YOUR SUBCONTRACTOR. WHOSE REQUEST FOR DIRECT PAYMENT WAS DENIED WITH THE ADVICE THAT CERTIFICATION OF CONTRACT PAYMENTS WOULD BE STATED ONLY IN YOUR FAVOR. IS CONTENDED THAT YOUR SUBCONTRACTOR THEREAFTER TERMINATED PRIOR ARRANGEMENTS WITH YOU AS A RESULT OF WHICH NO FURTHER CONTRACT DELIVERIES WERE MADE. YOU WERE OFFICIALLY ADVISED REGARDING YOUR DELINQUENT DELIVERIES AND GRANTED THE REQUIRED TIME TO PRESENT ACCEPTABLE EVIDENCE OF YOUR FUTURE INTENTIONS.

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B-124778, SEP. 15, 1955

TO RUSSELL ELECTRIC COMPANY:

REFERENCE IS MADE TO LETTER OF JUNE 17, 1955, FROM YOUR ATTORNEY, MR. MICHAEL LEO LOONEY, RELATIVE TO YOUR INDEBTEDNESS TO THE UNITED STATES IN THE AMOUNT OF $180,745.96, REPRESENTING EXCESS COSTS INCURRED AS A RESULT OF YOUR DEFAULT OF CONTRACT NO. N163S-947, DATED MAY 14, 1951, AS STATED IN OUR CLAIMS DIVISION LETTER DATED FEBRUARY 18, 1955, TO YOUR ATTORNEYS IN NEW YORK CITY.

IN RESPONSE TO INVITATION NO. 163/8657 ISSUED BY THE U.S. NAVAL ORDNANCE PLANT, INDIANAPOLIS, INDIANA, YOU SUBMITTED A BID DATED APRIL 25, 1951, OFFERING TO PRODUCE AND DELIVER WITHIN THE SCHEDULED PERIODS ITEMS 1 AND 2, CONSISTING OF 7,100 GYRO MOTORS AS DESCRIBED THEREIN FOR A UNIT PRICE OF $14.12, EQUAL TO $100,252, AND ALL NECESSARY TOOLS, ETC., IN ONE LOT FOR $13,665, RESPECTIVELY. YOUR BID WAS ACCEPTED BY THE GOVERNMENT AND THE CONTRACT AWARDED TO YOU ON MAY 14, 1951, WHICH, UNDER THE CIRCUMSTANCES, CONSUMMATED A VALID AND BINDING CONTRACT AND FIXED THE RIGHTS AND LIABILITIES OF THE PARTIES. SEE UNITED STATES V. PURCELL ENVELOPE COMPANY, 239 U.S. 313; AND AMERICAN SMELTING AND REFINING COMPANY V. UNITED STATES, 295 U.S. 75.

THE CONTRACT PROVIDED FOR AN INITIAL DELIVERY OF 500 MOTORS NOT LATER THAN AUGUST 15, 1951, WITH MONTHLY DELIVERIES OF THE REMAINING CONTRACT QUANTITY BEING SCHEDULED THROUGH JANUARY 1952. HOWEVER, PRIOR TO THE INITIAL DELIVERY YOU ADMITTEDLY SOLD CERTAIN OF YOUR FACILITIES AND ACCOUNTS, INCLUDING THE CONTRACT ORDER IN QUESTION TO ANOTHER FIRM. YOU STATE THAT THIS FIRM, REDMOND COMPANY, INC., IN CONFIRMING THE PURCHASE DURING AUGUST 1951, REQUESTED THE CONTRACTING OFFICER TO REISSUE THE CONTRACT AND STATE THE ORDER IN ITS NAME. DURING A FURTHER EXCHANGE OF CORRESPONDENCE THE FIRM WAS ADVISED THAT ITS LEGAL STATUS IN THE MATTER, AT BEST, WAS THAT OF SUBCONTRACTOR UNDER ARRANGEMENTS WITH YOU. THE DELIVERY OF 182 UNITS WAS MADE BY YOUR SUBCONTRACTOR, WHOSE REQUEST FOR DIRECT PAYMENT WAS DENIED WITH THE ADVICE THAT CERTIFICATION OF CONTRACT PAYMENTS WOULD BE STATED ONLY IN YOUR FAVOR, AS THE PRIME CONTRACTOR. IS CONTENDED THAT YOUR SUBCONTRACTOR THEREAFTER TERMINATED PRIOR ARRANGEMENTS WITH YOU AS A RESULT OF WHICH NO FURTHER CONTRACT DELIVERIES WERE MADE.

IN LETTER DATED AUGUST 22, 1952, YOU WERE OFFICIALLY ADVISED REGARDING YOUR DELINQUENT DELIVERIES AND GRANTED THE REQUIRED TIME TO PRESENT ACCEPTABLE EVIDENCE OF YOUR FUTURE INTENTIONS, YOUR ATTENTION BEING INVITED TO THE SECTION 11/A) (II) OF THE GENERAL PROVISIONS OF THE CONTRACT. THE CONTRACT WAS TERMINATED FOR DEFAULT BY LETTER DATED SEPTEMBER 11, 1952, TO YOU. THEREAFTER, YOU WERE APPRISED REGARDING THE EXCESS COSTS INCURRED IN THE PURCHASE OF 6,768 MOTORS AGAINST YOUR ACCOUNT AND YOUR REFUSAL TO COMPLY WITH ADMINISTRATIVE DEMANDS THEREFOR RESULTED IN THE MATTER BEING TRANSMITTED TO OUROFFICE FOR DISPOSITION UNDER APPLICABLE LAW.

IN THE LETTER OF JUNE 17, 1955, YOUR LIABILITY FOR THE AMOUNT STATED IN OUR CLAIMS DIVISION LETTER OF FEBRUARY 18, 1955, IS DENIED FOR THE REASONS (1) THAT THE GOVERNMENT REFUSED TO ENTER INTO A NOVATION AND SUBSTITUTE YOUR SUBCONTRACTOR FOR YOU; (2) THAT PAYMENT WAS REFUSED FOR THE PARTIAL DELIVERIES MADE UNDER THE CONTRACT; AND (3) THAT SUCH ACTION BY THE GOVERNMENT WAS A JUSTIFIABLE CAUSE FOR REMOVAL OF ALL LIABILITY ON YOUR PART UNDER THE DEFAULT PROVISIONS OF THE CONTRACT. THESE CONTENTIONS ALSO WERE THE SUBJECT OF YOUR FIRM'S LETTER DATED DECEMBER 10, 1952 (SIGNED BY CHARLES FROST), TO THE CONTRACTING OFFICER, WHOSE REPLY DATED DECEMBER 29, 1952, PROPERLY INFORMED YOU REGARDING YOUR OBLIGATIONS UNDER THE CONTRACT. WITH RESPECT TO THE STATEMENT CONTAINED IN THE LETTER OF DECEMBER 10, AS TO YOUR BEING PERSUADED TO ENTER INTO A MARKEDLY UNDERPRICED CONTRACT WHICH COULD NOT UNDER ANY CIRCUMSTANCES BE PERFORMED AT THE PRICES FIXED, THE CONTRACTING OFFICER POINTED OUT THAT THE SUBJECT CONTRACT WAS AWARDED AFTER ADVERTISING ON A COMPETITIVE BASIS AND THE PRICE OF THE CONTRACT WAS THE PRICE WHICH YOU BID ON YOUR OWN VOLITION. THE FACT THAT YOU MAY HAVE ENCOUNTERED DIFFICULTIES NOT ANTICIPATED AT THE TIME OF PREPARING YOUR BID PRICE IS NOT FOR CONSIDERATION HERE. THE RESPONSIBILITY FOR THE PREPARATION OF THE BID SUBMITTED BY YOU WAS SOLELY YOUR OWN. SEE FRAZIER-DAVIS CONSTRUCTION COMPANY V. UNITED STATES, 100 C.CLS. 120, 162. IN REGARD TO THE NOVATION THE CONTRACTING OFFICER SPECIFICALLY ADVISED YOU THAT THE REQUEST THEREFOR WAS WITHDRAWN BY YOUR SUBCONTRACTOR ON JANUARY 11, 1952. WITH RESPECT TO THE 182 UNITS DELIVERED AND ACCEPTED BY THE GOVERNMENT YOU WERE ALSO ADVISED IN THE LETTER OF DECEMBER 29, 1952, THAT PAYMENT WAS MADE TO YOU FOR 165 UNITS AGAINST THE SUBJECT CONTRACT, AND PAYMENT FOR THE REMAINING 17 UNITS WAS MADE TO THE SUBCONTRACTOR UNDER ANOTHER CONTRACT.

ACCORDINGLY, IN THE LIGHT OF THE FOREGOING, IT MUST BE CONCLUDED THAT THE CHARGES RAISED AGAINST YOU IN THE AMOUNT OF $180,745.96 AS COMPUTED IN OUR CLAIMS DIVISION LETTER OF FEBRUARY 18, 1955, ARE CORRECT. THEREFORE, UNLESS ARRANGEMENTS ARE MADE WITHIN 30 DAYS FOR COMPLETE LIQUIDATION OF THE INDEBTEDNESS, THE MATTER WILL BE REPORTED TO THE DEPARTMENT OF JUSTICE FOR THE ..END :

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