
    NATIONAL WOOD PRODUCTS, INC. v. THE UNITED STATES
    [No. 493-53.
    Decided December 5, 1956]
    
      
      Mr. Ryan deGraffenreid for the plaintiff. Mr. William Edward deGraffenreid was on the briefs.
    
      Miss Kathryn H. Baldwin, with whom was Mr. Assistant Attorney General George Cochran Doub, for the defendant. Mr. Benton C. Tolley, Jr., was on the brief.
   Madden, Judge,

delivered the opinion of the court:

The plaintiff had a contract with the Department of the Army to manufacture 250,000 folding canvas cots. It was late in its deliveries, and the Government terminated the contract as to 98,000 of the cots, and obtained them from another manufacturer. The Government charged the plaintiff with the excess costs of obtaining the 98,000 cots from the other manufacturer, as it had the right to do under the contract, and deducted $33,133.80 from the money otherwise due the plaintiff for the cots that the plaintiff did manufacture and deliver.

The plaintiff claims that, in the circumstances, the Government had no right to charge it with any excess costs of obtaining tbe 98,000 cots, and claims, in the alternative, that in any event the Government charged it more than the excess costs actually amounted to.

When the Government invited bids for the contract which the plaintiff got, it advised bidders that, although the Government would take delivery at the factory of the contractor, it intended to cause the cots to be transported to certain designated Army stations, and would take into consideration the cost of that transportation in determining which bid would be most advantageous to the Government. The designated stations were in Georgia, Ohio, Virginia and New York. The plaintiff’s factory was in Mississippi. The plaintiff’s bid price at its factory was $3.62 per cot, and the Government, considering that price, and the costs of transportation, awarded the contract to the plaintiff.

When the Government terminated the plaintiff’s contract as to the 98,000 cots, it concluded that it wanted the 98,000 cots manufactured by the new contractor transported only to the Ohio and Georgia stations. In its invitation for bids for the new contract, it again advised the bidders that transportation costs would be considered in determining which bid was most advantageous to the Government. On that basis, it awarded the new contract to a factory in Granville, New York, whose bid was $3.94 per cot.

The plaintiff says that the new contract should have been awarded to a California factory whose bid was $3.25 per cot, and that since that figure was less than the $3.62 figure of the plaintiff’s contract, there would have been no excess costs to charge against the plaintiff.

There is no merit in this contention of the plaintiff. If the contract had been given to the California factory at its low unit price, the additional cost of the transportation from California to Georgia and Ohio would have made the cots cost more, delivered to the Army stations where they were wanted, than they would have cost if bought, as they were, from the New York factory. The Government, under the express terms of the invitations for bids for both the original and the substituted contract, made plain the basis on which it would award the contracts.

After the new contract was awarded to the New York factory, the Government decided that it would have the 98,000 cots transported, not to the Ohio and Georgia stations, where it intended to have them taken when it invited bids, but to Schenectady, New York and New Cumberland, Pennsylvania. Since these stations were much nearer to the Granville, New York, factory which had the new contract, the transportation costs and the total expense to the Government of acquiring the cots was considerably less than it would have been if they had been transported to the Ohio and Georgia Stations.

In charging the plaintiff with the excess costs resulting to the Government from the plaintiff’s default, and the consequent necessity of acquiring the cots from another manufacturer, the Government at first set the figure at $44,635.90, which represented $33,133.80 of additional factory costs, plus $11,502.10 which represented the amount by which the cost of the transportation from Granville, New York, to the then intended destinations in Ohio and Georgia exceeded the cost of transportation from the plaintiff’s factory in Columbus, Mississippi, to those stations. When the Government decided to have the cots transported, not to the Ohio and Georgia stations, but to the nearby stations in New York and Pennsylvania, it removed the $11,502.10 from its charge, leaving only the $33,133.80 excess factory cost. It collected this amount from plaintiff.

In fact the transportation to the nearby points in New York and Pennsylvania cost the Government much less than it would have cost to have them transported from the Columbus, Mississippi, plant of the plaintiff to their actual destinations in New York and Pennsylvania. The plaintiff says that this saving should be offset against the excess factory cost with which it has been charged.

We think the plaintiff is right. The contract provisions and the notice given in the invitations for bids show that the Government was concerned, not merely with the factory costs, but the total costs of getting the cots to the Army stations where they were needed. When those costs bade fair to include some excess transportation costs, the Government charged the plaintiff with that excess. When it turned out that there was a saving in transportation costs, the plaintiff, by the same token, should have been credited with that saving. It should have been charged only with $8,878.15, which was the Government’s actual excess cost. Giving the Government credit for the amount of its counterclaim, $1,868.40, it owes the plaintiff $22,388.23. A judgment for the plaintiff for that amount will be entered.

It is so ordered.

Littleton, Judge, and Jones, Chief Judge, concur.

Laramore, Judge,

dissenting:

I respectfully dissent.

As stated by plaintiff in its original brief, “the sole question presented by this case is whether or not the Government made a proper repurchase as to the 98,000 cots in default.”

Plaintiff then argues that the relet contract should have been awarded to a California factory as the lowest responsible bidder.

This court, in the majority opinion, rejected this contention, but says the Government saved freight costs and the savings should inure to the benefit of the plaintiff.

The stipulation entered into after argument shows that the difference in freight costs was a comparison between costs of cots manufactured in Granville, New York, shipped to Schenectady, New York, and New Cumberland, Pennsylvania, and cots manufactured in Columbus, Mississippi, and shipped to Schenectady and New Cumberland.

I believe it cannot be said with certainty that the Government saved in costs because the goods were shipped to a closer destination point (Schenectady, New York, and New Cumberland, Pennsylvania). To prove a savings on transportation costs, plaintiff must show that the Government’s freight costs on the full 250,000 cots were less than they would have been had there been no default. In other words, deliveries undoubtedly were shifted due to the default, and there is no showing what the Government would have done with the cots had they been manufactured and delivered under the original contract. It is entirely possible that by reason of shipping to New York and Pennsylvania, greater freight costs were incurred on the balance of the cots manufactured under the reinstated contract. At least the evidence does not disclose otherwise. Since the burden is on the plaintiff to prove a savings, I believe it must fail.

At the time the contracts were entered into there was no assurance that the cots would go to any particular place. Nor is there any assurance now that the Government would have shipped these cots from Columbus, Mississippi to New York and Pennsylvania, had plaintiff performed as required. Inasmuch as there were no preestablished destinations for these cots, it must be assumed they were shipped to places where storage space ivas available or where the cots were needed. It must also be assumed that the changes in destination were also caused by plaintiff’s default. Therefore, I can see no basis upon which plaintiff can claim a “saving” by the Government in transportation costs.

Item I of each invitation provided:

The contract shall be awarded to that responsible bidder whose bid, conforming to the invitation for bids, will be most advantageous to the Government, price and other factors considered.

This created an obligation to select a responsible bidder whose bid was most advantageous to the Government. This was the Telescope Folding Furniture Company, Inc., as conceded by plaintiff.

The repurchase of the 98,000 cots was made under the default clause of plaintiff’s contract which provides that “In the event the Government terminates this contract * * *, the Government may procure, upon such termination and in such manner as the contracting officer may deem appropriate * * *, and the contractor shall be liable to the Government for any excess costs for such similar supplies or services: * *

“Excess costs” mentioned above means the excess costs occasioned by the Government in obtaining the defaulted cots by a contract, which like the original contract was most advantageous to the Government.

The above provision vested in the contracting officer a discretion. Transportation costs were the sole responsibility of the defendant and consideration by the Government of those costs in evaluating bids, and the use of tentative destinations for this purpose, in the absence of determined ultimate destinations, was not an abuse of that discretion. The provisions of the reletting invitation expressly fixed the bidder’s location as the point of origin for the repurchased supplies, and requires that bids be evaluated on the basis of transportation costs from such bidder’s origin point to the named tentative destination point. These provisions govern the assessment of excess costs in this case, and Columbus, Mississippi, as a location, did not and could not enter into the evaluation of the reletting bids.

To say that the Govermnent should have waited until the ultimate destinations for the cots and the actual transportation costs were known is without merit. The Government could procure the defaulted cots in such manner and upon such terms and conditions as it deemed appropriate and charge plaintiff the excess costs. At the time these contracts were entered into, there was no assurance that the cots would go to any particular place. The Government had no way of knowing where the need for a particular shipment might be, nor is there any way of knowing where the cots would have been shipped had plaintiff not defaulted. Therefore the ultimate destinations to which defendant shipped the cots have no bearing upon the amount of excess costs assessed, and this court cannot say that the Government saved costs for which the plaintiff is entitled to benefit.

This case falls squarely within the language of the United States Court of Appeals in the case of United States v. Warsaw Elevator Co., 213 F. 2d 517, 518-519, wherein the court said:

The situation here presented is unlike the usual case of proving damages for breach of contract by showing the cost of substituted performance, where the burden is naturally on the claimant to show that the work is the same. * * * here Warsaw has expressly consented to “such terms” and “such manner” of completion as the Contracting Officer may deem appropriate. In the ordinary course of reletting a contract it is hardly strange that such details as the F. O. B. shipping point and the schedule of deliveries will be altered. If there is increased cost from such natural, if not unavoidable, variances, that is surely within the reasonable expectation of the contracting parties. Under such a contract, liability for the loss the promisor has caused should not be avoided except upon its showing of an abuse of the discretion it has granted and some new obligations in the relet contract going beyond the reasonable latitude accorded the promisee.

In the case at bar the reletting contract was substantially the same as the original contract. The f. o. b. origin basis was the same in the reletting as in the original contract. The increased cost was natural and unavoidable and there is no showing of an abuse of discretion.

Therefore, since this Court has found that the award of the repurchase contract was proper, I believe the Government could properly assess against plaintiff as “excess costs” the difference between the two contracts. Goldberg v. United States, 103 C. Cls. 237; Doehler Metal Furniture Co., Inc., v. United States, 149 F. 2d 130.

Whitaker, Judge,

dissenting:

I agree with Judge Laramore, that the defendant' purchased the cots f. o. b. factory, and that it was no concern of the maker or of the plaintiff what it did with them.

Transportation costs have nothing to do with the “excess costs” incurred by the defendant as the result of plaintiff’s default. The defendant never represented that it intended to ship the cots to any particular place. Transportation costs were considered only for the purpose of evaluating bids.

I agree with Judge Laramore that plaintiff is not entitled to the deduction allowed it by the majority.

FINDINGS OF FACT

The court, having considered the evidence, the briefs and argument of counsel, and the report of Commissioner Paul H. McMurray, and a stipulation of the parties, makes findings of fact as follows:

1. The plaintiff, National Wood Products, Inc., is the successor to Southern Supply Company, a partnership composed of Oscar F. W. Bloom, E. Russell Sanford, Carol Ann Sanford, Ward W. McFarland, Travis J. Kester and Travis J. Hester, Jr.

2. On the 7th day of November 1951, defendant issued an Invitation for Bids No. QM-11-009-52-579 and Amendment No. 1 for a quantity of 250,000 canvas folding cots, which invitation was mailed to 468 firms. Thirty-seven firms bid on said invitation. Plaintiff’s predecessor Southern Supply Company was determined by the defendant to be the lowest responsible bidder with a bid of $8.62 per unit; and the Southern Supply Company was awarded a Supply Contract No. DA-11-009-QM-15582 on January 11,1952, for the full amount of 250,000' cots. With respect to default by the contractor, the contract provided in Section 11 of the General Provisions thereof:

DEFAULT
(a) The Government may, subject to the provisions of paragraph (b) below, by written Notice of Default to the Contractor terminate the whole or any part of this contract in any one of the following circumstances:
(i) if the Contractor fails to make delivery of the supplies or to perform the services within the time specified herein or any extension thereof; or
(ii) if the Contractor fails to perform any of the other provisions of this contract, or so fails to make progress as to endanger performance of this contract in accordance with its terms, and in either of these two circumstances does not cure such failure within a period of 10 days (or such longer period as the Contracting Officer may authorize in writing) after receipt of notice from the Contracting Officer specifying such failure.
* * * * *
(c) In the event the Government terminates this contract in whole or in part as provided in paragraph (a) of this clause, the Government may procure, upon such terms and in such manner as the Contracting Officer may deem appropriate, supplies or services similar to those so terminated, and the Contractor shall be liable to the Government for any excess costs for such similar supplies or services: Provided, That the Contractor shall continue the performance of this contract to the extent not terminated under the provisions of this clause.

This contract was fully transferred and assigned by Southern Supply Company to plaintiff by written agreement properly executed by a duly authorized agent of the defendant, and Southern Supply Company, on June 30, 1952.

3.Under the terms of the Invitation to Bid, the bids were to be submitted on an F. O. B. origin basis; in evaluating bids, transportation costs were to be considered from bidders’ shipping points to certain specified tentative destinations; for the purpose of evaluating bids, and for no other purpose, the final destinations for the supplies were to be considered to be the following:

Army Depot, Georgia_ 50,000 units
Columbus, Obio_ 90,000 units
BellblufE, Virginia_ 50, 000 units
South Schenectady, N. Y_ 60,000 units

Item 1 of the Terms and Conditions of the Invitation for Bids provided in pertinent part:

The contract shall be awarded to that responsible bidder whose bid, conforming to the Invitation for Bids, will be most advantageous to the Government, price and other factors considered.

4. Prior to the assignment of the contract to the plaintiff, the defendant, under date of May 23, 1952, terminated the contract for default on the part of the Southern Supply Company in failing to deliver 98,000 cots in accordance with the terms of the delivery schedule set out in the contract. The default was not excusable under the terms of the contract. The termination was accomplished in accordance with the terms of the contract. No appeal from the decision of the contracting officer was taken by the Southern Supply Company prior to assignment of the contract to the plaintiff.

5. Subsequent to the termination of the contract, the defendant rescinded its order of termination as to 152,000 cots, and reinstated said contract, which contract was then assigned to plaintiff, as stated in finding No. 2 with the approval of the defendant.

6. At the time said contract was reinstated it was understood that the defendant was to make a repurchase of the 98,000 cots in which the Southern Supply Company was in default, and that upon a proper and legal repurchase being made, the excess costs, if any, would be assessed against Southern Supply Company or its successor, the plaintiff herein.

7. On or about June 13,1952, defendant issued its Invitation for Bids on No. QM-11-[ XXX-XX-XXXX ] and amendment No. 1 for the quantity of 98,000 folding canvas cots, which invitation contained the same specifications and same pertinent terms and conditions as were found in the prior invitation of November 7, 1951, relating to the original contract, except that two of the original four tentative destinations points for shipment were eliminated. The Invitation to Bid was mailed to 255 firms and 15 firms bid on the invitation. Included among the 15 firms were 12 firms which had bid on the invitation of November 7,1951. The Telescope Folding Furniture Company, Inc., of Granville, New York, which was one of the firms that had bid on both invitations, was considered by the defendant to be the lowest responsible bidder on the invitation of June 13,1952, with a bid of $3.94 per unit. The Telescope Folding Furniture Company, Inc., was awarded Supply Contract No. DA-11-009-QM-20119 on July 31, 1952, for the full amount of 98,000 cots.

8. Under the terms of the Invitation for Bids, it was provided that bids would be submitted on an F. O. B. origin basis. In evaluating bids, the defendant’s transportation costs were to be considered from bidders shipping points to certain specified tentative destinations. For the purpose of evaluating bids, and for no other purpose, the final destinations for these supplies were to be considered to be the following:

Army Depot, Georgia-60,000 units
Columbus, Ohio_ 48, 000 upits

In evaluating the bids, defendant’s contracting officer used proper transportation charges in effect at the time involved.

9.The Telescope Folding Furniture Company, Inc., was not the lowest responsible bidder from the standpoint of bid price alone, but that firm was the lowest responsible bidder taking into account bid price at point of origin, and defendant’s transportation costs to the tentative destination points, in accordance with the terms of the Invitation to Bid. The lowest net bid received was that of Pan Pacific Manufacturing Company of Glendale, California, in the amount of $3.25 per unit. The net bid of said Pan Pacific Manufacturing Company, plus transportation costs from its shipping point at Burbank, California, and the net bid of Telescope Folding Furniture Company, Inc., plus transportation costs from its shipping point in Granville, N. Y. to said tentative destination were as follows:

PAN PACIFIC MANUFACTURING COMPANY
Net bid_$3.25 Net bid-$3.25
Freight to Georgia 1.14 Freight to Columbus, - Ohio_ 1.16
Total_$4.39 --
Total_$4.41
TELESCOPE FOLDING FURNITURE COMPANY
Net bid_$3.94 Net bid_$3.94
Freight to Georgia_ . 43 Freight to Columbus, - Ohio_ . 35
Total_$4.37 -
Total_$4.29

10. On September 3, 1952, defendant’s Chicago Quartermaster Depot received from the Department of the Army, Office of the Quartermaster General, Washington 25, D. C., shipping instructions applicable to supplies under both the unterminated portion of contract No. DA-11-009-QM-15582 with plaintiff, and replacement contract No. DA-11-009QM-20119 with Telescope Folding Furniture Company, Inc.; that thereafter shipping instructions and bills of lading were transmitted to both contractors, and as a result thereof, shipments were made by plaintiff as follows:

20, 000 to Sharpe General Depot, Lyoth, California.
20, 000 to Mira Loma Quartermaster Depot, Mira Loma, Calif.
10,082 to Memphis General Depot, Memphis, Tennessee.
9,996 to Charlotte Quartermaster Depot, Charlotte, N. O.
19, 968 to Atlanta General Depot, Army Depot, Georgia.
19,916 to Columbus General Depot, Columbus, Ohio.
16, 000 to Auburn General Depot, Auburn, Washington.
16, 000 to Richmond Quartermaster Depot, Bellbluff, Va.
10, 000 to Fort Worth Quartermaster Depot, Fort Worth, Texas.
9, 994 to Utah General Depot, Ogden, Utah.
151,956

and that as a result of such instructions shipments were made by Telescope Folding Furniture Company, Inc., as follows:

48,946 to Schenectady, New York
49, 000 to New Cumberland, Pennsylvania
97,946

11. Nothing in said contract between the plaintiff, as successor in interest to Southern Supply Company, and defendant, or in said contract between Telescope Folding Furniture Company, Inc., and defendant, obligated defendant to ship supplies covered thereby to the tentative destination points listed therein. At the time of the letting of the contract to Telescope Folding Furniture Company, Inc., on July 31, 1952, there were no shipping instructions covering the actual destinations of the supplies to be furnished under either contract; the shipments as actually made were ordered by defendant in good faith, in accordance with the needs of the Government, and for its convenience and advantage.

12. On the first day of August 1952, defendant charged against Southern Supply Company, and made demand for, excess costs incurred in replacement of the terminated supplies, pursuant to General Provision 11 (c) of the contract No. DA-11-009-QM-15582, the sum of $44,635.90, representing $33,133.80 in excess costs on bid price, plus $11,502.10 in éxcess transportation costs to defendant. On the 27th day of August 1952, pursuant to plaintiff’s request therefor, defendant forwarded to plaintiff a detailed computation covering said assessment. Thereafter, on the 11th day of December 1952, defendant revised said excess costs of replacement by eliminating the excess transportation costs included therein. Defendant then made an assessment charging the plaintiff with the difference between the net bid of Telescope Folding Furniture Company, Inc., and the net bid of Southern Supply Company, which difference amounted to $33,133.80. The defendant is making no claim for said excess transportation charges.

13. On or about the 19th day of August 1952, Southern Supply Company appealed the assessment of said excess costs to the Secretary of the Army, contending “that in awarding said contract for repurchase of said 98,000 cots to the Telescope Folding Furniture Company, Inc., Granville, New York, the Govermnent did not award said contract to the 'lowest responsible bidder.” Plaintiff’s appeal was denied.

14. Plaintiff, under the contract as reinstated, delivered to the defendant 151,956 cots, for which plaintiff was entitled to payment of $3.62 per unit, less a discount of one-half of one percent, and less any excess costs due the defendant on account of the repurchase of 98,000 cots.

15.Plaintiff has been paid the sum of $514,195.53, computed as follows:

161,956 cots delivered @ $3.62 each_$650,080.72
Less discount % of 1% per contract-$2,750.41
Withheld as excess costs on replacement- 33,133.80
- 35,884.21
Payment due plaintiff_$514,196.51
Payment made to plaintiff- 514,195. 53
Credit to plaintiff as accounting adjustment- $0.98

16.The cost to defendant of 97,946 cots on the repurchase contract, plus transportation costs paid by the Government on shipments thereof from the contractor’s shipping point at Granville, New York, was as follows:

97,946 cots at $3.94 each-$385,907.24
Freight costs to Schenectady, New York_ 6,484. 97
Freight costs to New Cumberland, Pennsylvania_ 12,124.27
$404, 516.48

The cost to defendant of 97,946 cots on which plaintiff defaulted, plus estimated transportation costs which would have been incurred by defendant, had the cots been manufactured by plaintiff and had they been shipped by the Government from plaintiff’s shipping point at Columbus, Mississippi, to the above mentioned destinations is computed as follows:

97,946 cots at $3.62 each_$354,564. 52
Less Va of 1% discount_ 1,772.82
Net cost of cots_$352,791. 70
Freight costs to Schenectady, New York_ 22,291. 83
Freight costs to New Cumberland, Pennsylvania_ 20, 554. 80
$395,638. 33

The excess of the former figure over the latter is $8,878.15. This was the actual excess cost to the defendant of securing the cots from the Telescope Folding Furniture Co. Inc. and having them transported to the desired destinations.

17.The proper account of the debts and credits of the parties is as follows:

151,956 cots delivered at $3.62 each_$550,080.72
Less Ys of 1% discount_$2,750.41
Excess costs on reletting_ 8,878.15
- 11,628. 56
Amount due plaintiff under contract_$538,452.16
Less payment made to plaintiff_ 514,195. 53
Amount due plaintiff_ $24,256. 63
Less amount due defendant on its counterclaim_ 1, 868.40
Net amount due plaintiff_ $22,388.23

The $33,133.80 which the defendant deducted from the amount otherwise due the plaintiff was $24,255.65 more than the defendant’s actual excess costs. The figure $24,256.63 includes the $0.98 due plaintiff as reflected by finding 15.

CONCLUSION OK LAW

Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that the plaintiff is entitled to recover on its petition the sum of $24,256.63, and defendant is entitled to recover on its counterclaim the sum of $1,868.40. It is therefore adjudged and ordered that the plaintiff recover the sum of twenty-two thousand three hundred eighty-eight dollars and twenty-three cents ($22,388.23).  