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YOU POINT OUT THAT AN ALTOGETHER DIFFERENT APPROACH WAS TAKEN BY OUR OFFICE IN DISALLOWING THE CLAIM BY DECISION DATED JUNE 28. THAT YOU AND YOUR CLIENT WERE LED TO BELIEVE THAT THE CLAIM WOULD BE ALLOWED IF SUPPORTED BY AN AUDIT OF YOUR CLIENT'S BOOKS AND RECORDS. AN AUDIT REVIEW WAS MADE OF THE CLAIM AND. THE CLAIM WAS DISALLOWED BY DECISION DATED SEPTEMBER 29. ON THE BASIS THAT THE CLAIM WAS NOT SUPPORTED FROM AN AUDIT STANDPOINT. WAS NOT UNTIL AFTER YOU HAD REQUESTED RECONSIDERATION OF THAT DECISION THAT THE CLAIM WAS THOROUGHLY REVIEWED TO DETERMINE WHETHER A LEGAL BASIS DID EXIST FOR ALLOWANCE SO AS TO WARRANT A RE AUDIT OF YOUR CLIENT'S BOOKS AND RECORDS TO DETERMINE THE DOLLAR VALUE OF THE CLAIM.

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B-137991, JUL. 29, 1960

TO MURRAY STEINBERG, ATTORNEY AT LAW:

BY LETTER DATED JULY 6, 1960, YOU REQUEST THAT WE RECONSIDER OUR DECISION OF JUNE 28, 1960, WHICH DISALLOWED THE CLAIM OF SEYMOUR WALLAS AND COMPANY FOR LOSS OF OVERHEAD ALLEGEDLY SUSTAINED IN THE PERFORMANCE OF CONTRACTS NOS. AF 33/602/-6572 AND 6766.

YOU POINT OUT THAT AN ALTOGETHER DIFFERENT APPROACH WAS TAKEN BY OUR OFFICE IN DISALLOWING THE CLAIM BY DECISION DATED JUNE 28, 1960, AND THAT YOU AND YOUR CLIENT WERE LED TO BELIEVE THAT THE CLAIM WOULD BE ALLOWED IF SUPPORTED BY AN AUDIT OF YOUR CLIENT'S BOOKS AND RECORDS.

AS YOU KNOW, AN AUDIT REVIEW WAS MADE OF THE CLAIM AND, AS A RESULT THEREOF, THE CLAIM WAS DISALLOWED BY DECISION DATED SEPTEMBER 29, 1959, ON THE BASIS THAT THE CLAIM WAS NOT SUPPORTED FROM AN AUDIT STANDPOINT. WAS NOT UNTIL AFTER YOU HAD REQUESTED RECONSIDERATION OF THAT DECISION THAT THE CLAIM WAS THOROUGHLY REVIEWED TO DETERMINE WHETHER A LEGAL BASIS DID EXIST FOR ALLOWANCE SO AS TO WARRANT A RE AUDIT OF YOUR CLIENT'S BOOKS AND RECORDS TO DETERMINE THE DOLLAR VALUE OF THE CLAIM. IT WAS CONCLUDED THAT A RE-AUDIT OF THE CLAIM WAS NEITHER NECESSARY NOR REQUIRED SINCE NO LEGAL BASES EXISTED FOR ITS FAVORABLE CONSIDERATION. WE ACCORDINGLY DENIED THE CLAIM FOR THE REASONS SET FORTH IN OUR DECISION OF JUNE 28, 1960.

WHILE IT WAS UNFORTUNATE THAT YOU OR YOUR CLIENT MAY HAVE GAINED THE IMPRESSION THAT THE CLAIM WAS OTHERWISE PAYABLE, THE REPRESENTATIVES OF OUR OFFICE INVOLVED HAD NO INTENTION OF IMPLYING THAT THE GOVERNMENT WAS LEGALLY LIABLE. IN FACT IN OUR LETTER OF MAY 18, 1960, WE ADVISED YOU THAT THE CLAIM WAS BEING CONSIDERED WITHIN OUR OFFICE TO DETERMINE WHETHER A RE-AUDIT WAS "LEGALLY REQUIRED.'

OUR JUNE 28, 1960, DECISION WAS BASED ON THE ESTABLISHED LAW APPLICABLE TO CONTRACT CLAIMS SUCH AS HERE INVOLVED. IN DECISION OF OUR OFFICE REPORTED AT 38 COMP. GEN. 749, IT WAS HELD, QUOTING FROM THE SYLLABUS:

"A CONTRACTOR WHO REQUESTS A PRICE ADJUSTMENT FOR AN ALLEGEDLY UNREASONABLE DELAY BY THE GOVERNMENT IN FURNISHING GOVERNMENT-OWNED PROPERTY UNDER A CONTRACT WHICH CONTAINS A DISPUTES CLAUSE MAKING DETERMINATIONS OF THE CONTRACTING OFFICER FINAL AND CONCLUSIVE, IN THE ABSENCE OF A TIMELY APPEAL, MUST EXHAUST THE ADMINISTRATIVE REMEDIES PROVIDED IN THE CONTRACT AND, IN THE ABSENCE OF EVIDENCE THAT THE CONTRACT PROCEDURES WERE FOLLOWED, NO LEGAL BASIS EXISTS FOR ANY CONSIDERATION OF PRICE ADJUSTMENT.'

IN 37 COMP. GEN. 568, 570-571, WE HELD THAT:

"* * * FAILURE TO COMPLY WITH THE DISPUTES CLAUSE,"THE ONLY AVENUE FOR RELIEF" AVAILABLE FOR THE SETTLEMENT OF DISPUTES CONCERNING QUESTIONS ARISING UNDER THE CONTRACT, IS SUFFICIENT WITHOUT ANYTHING ELSE TO PREVENT RECOVERY. UNITED STATES V. CALLAHAN WALKER CO., 317 U.S. 56, 61. THE GOVERNMENT CANNOT BE DEPRIVED OF THE BENEFITS OF THE ADMINISTRATIVE MACHINERY IT HAS PROVIDED TO ADJUDICATE DISPUTES AND TO AVOID LARGE DAMAGE CLAIMS. UNITED STATES V. BLAIR, 321 U.S. 730, 735; UNITED STATES V. HOLPUCH CO., 328 U.S. 234, 239-240; YUHASZ V. UNITED STATES, 109 F.2D 467, 468; AND J. AND J. W. STOLTZ ASSOCIATION V. UNITED STATES, 66 C.CLS. 1, 8 -9.

"A CASE VERY MUCH IN POINT WITH THIS PART OF YOUR CLAIM IS UNITED STATES V. BLAIR, SUPRA. IN THAT CASE, THE CONTRACTOR FILED A CLAIM FOR EXTRA LABOR, MATERIALS AND MISCELLANEOUS COSTS ALLEGED TO HAVE BEEN IMPOSED ON HIM BY THE "ARBITRARY, CAPRICIOUS AND UNFAIR CONDUCT OF GOVERNMENT NTS.' THE CONTRACTOR HAD NEVER REFERRED THE DISPUTE TO THE CONTRACTING OFFICER AS WAS REQUIRED BY THE DISPUTES CLAUSE SIMILAR TO PARAGRAPH 12 CONTAINED IN THE IMMEDIATE CONTRACT. THE SUPREME COURT HELD THAT THE CONTRACTOR SHOULD BE PRECLUDED FROM RECOVERING ON ITS CLAIM. THE COURT SAID THAT EVEN IF THE CONDUCT OF THE GOVERNMENT SUPERINTENDENT OR CONTRACTING OFFICER, OR THEIR ASSISTANTS, WAS SO FLAGRANTLY UNREASONABLE OR SO GROSSLY ERRONEOUS AS TO IMPLY BAD FAITH, THE APPEAL PROVISIONS OF THE CONTRACT MUST BE EXHAUSTED. BLAIR CASE, SUPRA, AT 736.'

IN VIEW OF THE FACTS OF RECORD AND THE LAW APPLICABLE TO THOSE FACTS WE HAD NO ALTERNATIVE BUT TO DISALLOW THE SUBJECT CLAIM.

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