B-168619, MAY 11, 1970

B-168619, MAY 11, 1970

CONTRACTS--REQUIREMENTS--ESTIMATED AMOUNTS NOT WARRANTY PAYMENT OF CONTRACTOR'S CLAIM FOR $25,305.43 FOR FAILURE OF GOVERNMENT TO PROVIDE ESTIMATED PRINTING WORK UNDER REQUIREMENTS CONTRACT WITH GOVERNMENT PRINTING OFFICE FOR HEALTH EDUCATION AND WELFARE FOR PERIOD DEC. 1, 1968 TO NOV. 30, 1969, MAY NOT BE AUTHORIZED SINCE WORK TO BE PERFORMED UNDER REQUIREMENTS CONTRACT IS CAPABLE ONLY OF ESTIMATION. FAILURE OF ANTICIPATED NEEDS OF GOVERNMENT TO MATERIALIZE IN QUANTITIES ESTIMATED DOES NOT JUSTIFY PRICE ADJUSTMENT ABSENT EVIDENCE ESTIMATES WERE BASED ON OTHER THAN BEST INFORMATION AVAILABLE. GOVERNMENT PRINTING OFFICE DID NOT IMPLIEDLY WARRANT CONTRACTOR WOULD RECEIVE PARTICULAR AMOUNT OF WORK; IN FACT, THERE IS EXPRESS DISCLAIMER. SEE COMP. GEN. DECS. AND CT. CASES CITED.

TO JARRETT PRESS, INC.:

WE REFER AGAIN TO YOUR LETTER (WITH ENCLOSURES) DATED MARCH 13, 1970, CLAIMING $25,305.43 AS COMPENSATION FOR THE FAILURE OF THE GOVERNMENT TO PROVIDE YOU WITH THE ESTIMATED QUANTITY OF PRINTING WORK UNDER YOUR CONTRACT NO. 902'S WITH THE GOVERNMENT PRINTING OFFICE (GPO). YOU ALSO CLAIM $10,500 WITHHELD FROM YOU ON ACCOUNT OF OVERCHARGES MADE BY YOU UNDER THE SAME CONTRACT AND PAID BY THE GPO. THE LATTER QUESTION WAS THE SUBJECT OF OUR DECISION TO YOU DATED JANUARY 14, 1970. WE HAVE REVIEWED THAT DECISION AND DO NOT FIND IT ERRONEOUS.

THE SUBJECT CONTRACT WAS ENTERED INTO ON NOVEMBER 29, 1968, COVERING MISCELLANEOUS PUBLICATIONS FOR THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE (HEW) IN THE NEW YORK CITY AREA FOR THE PERIOD COMMENCING DECEMBER 1, 1968, AND ENDING ON NOVEMBER 30, 1969. THE INVITATION AND THE RESULTING CONTRACT BOTH CONTAINED THE FOLLOWING ADVICE:

"FREQUENCY OF ORDERS: IT IS ANTICIPATED THAT THERE WILL BE 12 ORDERS FOR THE 5 7/8 X 9 1/8" SIZE, AND 18 ORDERS FOR THE 10 1/4 X 13" SIZE DURING THE TERM OF THE CONTRACT. THERE WILL BE TWO PUBLICATIONS IN THE 10 1/4 X 13" SIZE; ONE MONTHLY, THE OTHER EVERY OTHER MONTH. ORDERS FOR THE 5 7/8 X 9 1/8" SIZE MAY BE AT IRREGULAR INTERVALS.

"QUANTITY AND NUMBER OF PAGES: THE FOLLOWING ARE THE ANTICIPATED REQUIREMENTS:

"5 7/8 X 9 1/8" SIZE: FROM 5,000 TO 10,000

COPIES PER ORDER, WITH AN

AVERAGE (PER ORDER) OF

APPROXIMATELY 7,000 COPIES,

AND FROM 16 TO 120 PAGES

PER COPY WITH AN AVERAGE OF

76 PAGES; SELF- OR SEPARATE

COVER.

"10 1/4 X 13" SIZE: FROM 6,000 TO 20,000

COPIES PER ORDER WITH AN

AVERAGE OF 14,000 COPIES,

AND FROM EIGHT TO 40 PAGES

PER COPY WITH AN AVERAGE OF

24 PAGES; SELF- OR SEPARATE

COVER."

THERE WAS, IN ADDITION, THIS STATEMENT CONCERNING EVALUATION AND AWARD UNDER THE INVITATION:

"BASIS OF AWARD: AWARD WILL BE MADE TO THE BIDDER WHOSE TOTAL AGGREGATE COST RESULTS IN THE LOWEST BID. THE GOVERNMENT WILL DETERMINE THE TOTAL AGGREGATE COST BY APPLYING THE PRICES QUOTED IN THE 'SCHEDULE OF PRICES' TO THE FOLLOWING LISTED UNITS OF PRODUCTION WHICH ARE THE ESTIMATED REQUIREMENTS FOR THE PRODUCTION OF 6 MONTHS' WORK. THESE UNITS DO NOT CONSTITUTE, NOR ARE THEY TO BE CONSTRUED AS, A GUARANTEE OF THE VOLUME OF WORK WHICH MAY BE REQUIRED UNDER THIS CONTRACT FOR ANY SIMILAR PERIOD OF 6 MONTHS."

YOU POINT OUT THAT ALTHOUGH 30 ORDERS WERE SPECIFIED UNDER THE "FREQUENCY OF ORDERS" PROVISION, YOU RECEIVED ONLY 12 ORDERS "WITHIN THE CONTRACT SPECIFICATIONS" DURING THE YEAR OF PERFORMANCE. YOU ALSO ASSERT THAT CERTAIN PRINTING WORK WAS PERFORMED BY YOU THAT WAS NOT WITHIN THE SPECIFICATIONS. YOU BILLED GPO FOR WORK SUBSEQUENT TO THE FIRST PRINT ORDER AT A RATE NOT AUTHORIZED BY THE CONTRACT. WHEN THIS WAS DISCOVERED, GPO BEGAN WITHHOLDING PAYMENTS FOR OTHER WORK DONE BY YOU.

THE FAILURE ON THE PART OF THE GOVERNMENT TO ORDER THE VOLUME OF PRINTING WORK ORIGINALLY CONTEMPLATED BY BOTH PARTIES TO THE CONTRACT RAISES THE QUESTION WHETHER THE STATEMENT OF THE GOVERNMENT'S "ANTICIPATED" REQUIREMENTS CONSTITUTED A WARRANTY OF THE QUANTITY OF WORK TO BE PROVIDED TO YOU. IN PACCON, INC. V. UNITED STATES, 185 CT. CL. 24 (1968), THE COURT QUOTED, AT PAGES 31 AND 32, FROM DALE CONSTRUCTION CO. V. UNITED STATES, 168 CT. CL. 692 (1964), THE FOLLOWING DEFINITION OF A WARRANTY:

"'IN ESSENCE A WARRANTY IS AN ASSURANCE BY ONE PARTY TO AN AGREEMENT OF THE EXISTENCE OF A FACT UPON WHICH THE OTHER PARTY MAY RELY; IT IS INTENDED PRECISELY TO RELIEVE THE PROMISEE OF ANY DUTY TO ASCERTAIN THE FACTS FOR HIMSELF. THUS, A WARRANTY AMOUNTS TO A PROMISE TO INDEMNIFY THE PROMISEE FOR ANY LOSS IF THE FACT WARRANTED PROVES UNTRUE.' * * *"

IN OUR DECISION REPORTED AT 48 COMP. GEN. 576 (1969), WE QUOTED WITH APPROVAL THE FOLLOWING LANGUAGE FROM THE OPINION OF JUDGE LEARNED HAND IN STRIKA V. NETHERLANDS MINISTRY OF TRAFFIC, 185 F. 2D 555 (2D CIR. 1950) AT 558:

"* * * IT IS TRUE THAT A WARRANTY, WHETHER EXPRESS OR IMPLIED, IS TREATED AS IF IT WERE AN ASSURANCE BY THE WARRANTOR TO THE WARRANTEE THAT HE MAY RELY UPON THE TRUTH OF THE FACT WARRANTED, AND IN THE CASE OF EXPRESS WARRANTIES IT WOULD BE DIFFICULT IN PRINCIPLE TO TREAT THAT ASSURANCE AS OTHER THAN ITSELF A PROMISE. HOWEVER, IMPLIED WARRANTIES, ALTHOUGH THEY ARE CONSENSUAL IN THE SENSE THAT THEY PRESUPPOSE THAT THE PARTIES HAVE ENTERED INTO SOME SORT OF CONTRACT, ARE NOT PROMISES BY THE WARRANTOR THAT THE FACT WARRANTED IS TRUE; THEY ARE 'OBLIGATIONS' IMPOSED IN INVITUM AS A CONSEQUENCE OF MAKING THE CONTRACT REGARDLESS OF THE WARRANTOR'S INTENT. HENCE IT IS ONLY BY A FICTION THAT WE CALL THEM PROMISES AT ALL IN THE SENSE THAT EXPRESS WARRANTIES ARE PROMISES."

IN TRAVIS T. WOMACK, JR. V. UNITED STATES, 182 CT. CL. 399 (1968), WHERE THE GOVERNMENT'S ESTIMATE OF WORK TO BE PERFORMED UNDER A CONTRACT WAS FOUND TO BE SUBSTANTIALLY LESS THAN THE ACTUAL QUANTITY, THE COURT AT PAGES 412-413 MADE THIS REMARK CONCERNING THE OBLIGATION OF THE GOVERNMENT WITH REGARD TO THE FORMULATION OF AN ESTIMATE:

"* * * IN PROMULGATING AN ESTIMATE FOR BIDDING-INVITATION PURPOSES, THE GOVERNMENT IS NOT REQUIRED TO BE CLAIRVOYANT BUT IT IS OBLIGED TO BASE THAT ESTIMATE ON ALL RELEVANT INFORMATION THAT IS REASONABLY AVAILABLE TO IT."

IT IS IN THE NATURE OF A REQUIREMENTS CONTRACT THAT THE AMOUNT OF WORK TO BE PERFORMED OR GOODS TO BE SUPPLIED IS, AT THE OUTSET, CAPABLE ONLY OF ESTIMATION BASED ON THE PERTINENT INFORMATION THEN BEFORE THE GOVERNMENT PROCUREMENT OFFICE. THERE IS ALWAYS THE ATTENDANT RISK THAT LATER EVENTS WILL PROVE THAT THE ESTIMATE WAS INACCURATE. ASSUMING A BONA FIDE, REASONABLY WELL-INFORMED ESTIMATE, THE CHANCES OF THE ACTUAL QUANTITY FALLING SHORT OF THE ESTIMATE EQUALS THE POSSIBILITY THAT THE ESTIMATE WILL BE EXCEEDED. REASONABLY PRUDENT BUSINESSMEN MUST BE HELD TO CONTEMPLATE SUCH RISKS WHEN ENTERING INTO A REQUIREMENTS CONTRACT. HAVE, THEREFORE, CONCLUDED ON SEVERAL PRIOR OCCASIONS THAT THE FACT THAT A REQUIREMENTS CONTRACT HAS BECOME UNPROFITABLE DUE TO A FAILURE OF THE ANTICIPATED NEEDS OF THE GOVERNMENT TO MATERIALIZE IN THE QUANTITIES ESTIMATED DOES NOT JUSTIFY A PRICE ADJUSTMENT IN THE ABSENCE OF EVIDENCE THAT THE ESTIMATES WERE BASED ON OTHER THAN THE BEST INFORMATION AVAILABLE. SEE, E.G; B-165642, FEBRUARY 19, 1969; B 158239, MARCH 11, 1966; 37 COMP. GEN. 688 (1958). WE DO NOT FIND EVIDENCE OF RECORD THAT GPO MISSTATED THE ESTIMATE DUE TO A FAILURE TO BE FULLY INFORMED OF HEW'S EXPECTED NEEDS FOR THE CONTRACT PERIOD HERE INVOLVED.

FURTHERMORE, THERE IS IN THIS INSTANCE AN EXPRESS DISCLAIMER BY THE GOVERNMENT IN THE "BASIS OF AWARD" PROVISION IN THE INVITATION AND RESULTING CONTRACT. SEE B-160276, FEBRUARY 7, 1967, FOR A CASE INVOLVING ANOTHER EXPRESS DISCLAIMER CONCERNING ESTIMATED VOLUME OF WORK. SUCH LANGUAGE, IN OUR VIEW, MAKES IT EVEN MORE IMPROBABLE THAT THE PARTIES AGREED TO (OR SHOULD BE TREATED AS IF THEY HAD AGREED TO) A SPECIFIC QUANTUM OF PERFORMANCE UNDER THIS CONTRACT. IN THIS CONNECTION, THE COURT OF CLAIMS IN ALLOYS AND CHEMICALS CORPORATION V. UNITED STATES, 163 CT. CL. 229 (1964), IN DEALING WITH A CLAUSE THAT STATED "THE QUANTITY OF THE ABOVE MATERIAL IS ESTIMATED ONLY AND DU PONT COMPANY DOES NOT GUARANTEE TO FURNISH ANY MAXIMUM OR MINIMUM QUANTITIES OF ANY OF THE ABOVE CLASSES OF MATERIALS," HELD THAT ANY WARRANTY OF QUANTITY WAS "WHOLLY NEGATED." ACCORDANCE WITH THE ABOVE, WE ARE NOT PERSUADED THAT THE GPO IMPLIEDLY WARRANTED THAT YOU WOULD RECEIVE ANY PARTICULAR AMOUNT OF WORK UNDER THE CONTRACT.

IN ADDITION TO THE FOREGOING, YOU ASSERT THAT CERTAIN ACTIONS BY THE GPO, PRIMARILY THOSE OF THE FIELD MANAGER IN NEW YORK, CONSTITUTED CONSENT TO YOUR DEVIATIONS FROM THE PROPER BILLING METHOD, WHICH WAS EXPLICITLY SPECIFIED IN THE CONTRACT. YOU ADOPTED A METHOD OF BILLING WHICH YOU CANDIDLY ADMIT WAS INTENDED TO RELIEVE YOU FROM A CONTRACT WHICH WAS TURNING OUT TO BE UNPROFITABLE BECAUSE THERE WERE FEWER PRINT ORDERS THAN EXPECTED.

EVEN ASSUMING THAT OTHERWISE AUTHORIZED OFFICIALS OF GPO CONSENTED TO YOUR HIGHER BILLING RATE, SUCH A MODIFICATION OF THE CONTRACT IS NOT PERMISSIBLE. IN B-169273, APRIL 14, 1970, WE QUOTED THE FOLLOWING FROM B- 166606, MAY 15, 1969:

"* * * WITHOUT A COMPENSATING BENEFIT TO THE UNITED STATES, AGENTS AND OFFICERS OF THE GOVERNMENT HAVE NO AUTHORITY TO DISPOSE OF THE MONEY OR PROPERTY OF THE UNITED STATES, TO MODIFY EXISTING CONTRACTS, OR TO SURRENDER OR WAIVE CONTRACT RIGHTS THAT HAVE VESTED IN THE GOVERNMENT. SEE UNITED STATES V. AMERICAN SALES CORPORATION, 27 F. 2D 389, AFFIRMED 32 F. 2D 141, CERTIORARI DENIED 280 U.S. 574; THE PACIFIC HARDWARE & STEEL CO. V. UNITED STATES, 49 CT. CL. 327, 335; AND BAUSCH & LOMB OPTICAL COMPANY V. UNITED STATES, 78 CT. CL. 584, 607."

THE ABOVE VIEWS REQUIRE US TO ADVISE YOU THAT PAYMENT OF YOUR CLAIM CANNOT BE AUTHORIZED.