Case ID: us-ct-cl_163/html/0381-01.html
Source: Caselaw Access Project
Author: {"author": "Davis, Judge, Laramore, Judge,\n     \n      Whitaker, Judge,", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

JOHN REINER & COMPANY, INDIVIDUALLY AND TO THE USE OF KURZ & ROOT COMPANY (INCORPORATED) v. THE UNITED STATES
    [No. 431-57.
    Decided December 13, 1963] 
    
    
      
      George Zolotar for the plaintiff. Charles Rembar of counsel.
    
      Edwin J. Reis, with, whom was Assistant Attorney General John W. Douglas, for the defendant. A. H. O. Boudreau, Jr. was on the brief.
    Before Jones, Chief Judge, Whitaker, Laramore, Durfee and Davis, Judges.
    
    
      
       Plaintiff’s petition for writ of certiorari denied by the Supreme Court, 377 U.S. 931.
    
   Davis, Judge,

delivered the opinion of the court:

In May 1956 the Corps of Engineers advertised for bids on 3,567 generator sets to be purchased by the Army. The invitation stated that “the Government desires delivery” of the items in accordance with a definite schedule (ranging from September 30, 1956, to August 31, 1957), but it was also provided that “in the event bidder is unable to make deliveries in accordance with the foregoing schedule, he shall set forth in the space below his proposed delivery schedule.” Immediately beneath this blank space for the bidder’s own delivery schedule, the form declared:

Bids offering a proposed delivery schedule which will extend the time for the delivery of the quantities as called for in any delivery period of the foregoing delivery schedule by more than 60 days, may be cause for rejection of bid [emphasis added].

Plaintiff John Reiner & Company submitted a bid with its own delivery schedule specifying dates more than 60 days after those listed by the Government in the invitation. When the bids were opened on June 21,1956, Reiner was the lowest in price of the thirteen bidders. Seven others proposed their own delivery schedules, some (like Reiner) offering delivery dates more than 60 days beyond the invitation times. The Corps of Engineers then inquired of the requisitioning agency (the Signal Corps) whether plaintiff’s schedule was satisfactory and met its requirements. Upon receiving an affirmative reply, the Engineers notified plaintiff by telephone, on June 29,1956, that its bid had been accepted; this was followed by a written notice of award received on July 2, 1956. The formal contract came shortly thereafter.

Plaintiff proceeded to negotiate with suppliers of the main components of the generator sets and to incur certain other limited costs under the contract. Before it was well launched, however, it received word from the defendant (on August 3, 1956) to suspend all operations under the contract until further notice and to inform its suppliers and subcontractors accordingly. This came about because, unknown to plaintiff, an unsuccessful bidder had prevailed upon the General Accounting Office to rule that the award was improper and the contract should be cancelled. That Office felt that the invitation did not adequately inform bidders as to how they should bid with respect to delivery dates.

Plaintiff’s efforts to have the Comptroller General’s decision reversed were fruitless, and on September 21, 1956, the contracting officer informed plaintiff that in compliance with the ruling its contract was cancelled. On September 24th, Reiner replied that the Comptroller General’s decision was not binding on the Army and that the contractor considered the cancellation a breach for which it would seek recovery of full damages. This suit was then brought for breach of the contract.

I

The initial question is whether the award was illegal and void so that the plaintiff cannot found a court action upon it. This inquiry, we believe, is not precisely the same as that with which the Comptroller General dealt. Because of his general concern with the proper operation of competitive bidding in government procurement, he can make recommendations and render decisions that, as a matter of procurement policy, awards on contracts should be cancelled or withdrawn even though they would not be held invalid in court. He is not confined to the minimal measure of legality but can sponsor and encourage the observance of higher standards by the procuring agencies. Courts, on the other hand, are restricted, when an invitation or award is challenged, to deciding the rock-bottom issue of whether the contract purported to be made by the Government was invalid and therefore no contract at all — not whether another procedure would have been preferable or better attuned to the aims of the competitive bidding legislation.

In testing the enforceability of an award made by the Government, where a problem of the validity of the invitation or the responsiveness of the accepted bid arises after the award, the court should ordinarily impose the binding stamp of nullity only when the illegality is plain. If the contracting officer has viewed the award as lawful, and it is reasonable to take that position under the legislation and regulations, the court should normally follow suit. Any other course could place the contractor in an unfortunate dilemma. If he questions the award and refuses to accept it because of his own doubts as to possible illegality, the contracting officer could forfeit his bid bond for refusing to enter into the contract. The full risk of an adverse decision on validity would then rest on the bidder. If he accedes to the contracting officer and commences performance of the contract, a subsequent holding of non-enforceability would lead to denial of all recovery under the agreement even though the issue of legality is very close; and under the doctrine of quantum meruit there would be no reimbursement for expenses incurred in good faith but only for any tangible benefits actually received by the defendant. United States v. Mississippi Valley Generating Co., 364 U.S. 520, 566 n. 22 (1961); Clark v. United States, 95 U.S. 539, 542 (1877). It is therefore just to the contractor, as well as to the Government, to give him the benefit of reasonable doubts and to uphold the award unless its invalidity is clear. Cf. 17 Comp. Gen. 53, 54-55 (1937).

Applying that norm, we cannot deem this award to have been a nullity. Reiner’s bid was responsive to the invitation which allowed the bidders to set their own delivery schedules and went no further than to caution that schedules extending the time over 60 days beyond that designated in the defendant’s preferred (“desired”) schedule might be cause for rejection. There was no statement or indication that time was of the essence. On other occasions plaintiff, answering the same type of invitation, had proposed schedules extending the procurement agency’s desired schedule by more than 60 days and had been granted the contracts. This was an accepted form for procurement by the Corps of Engineers. There was no reason to think that in this particular invitation “may be cause for rejection” (emphasis added) meant “will” or “shall” be cause for rejection.

But, defendant urges, this very provision, with its implicit permission to propose longer schedules, vitiated the invitation. The “full and free competition” envisaged by the Armed Services Procurement Act of 1947, § 3, 62 Stat. 21, 22-23, as amended, 69 Stat. 551-52 (1955), 41 U.S.C. §152 (1952 ed.), was stifled, it is said, by allowing bidders to present their own delivery program, no matter how protracted. One charge levied against this phase of the invitation is that it was so worded tliat bidders would not understand that they could depart from the listed schedule by more than 60 days. This does not seem probable. The form used the permissive word “may” instead of the mandatory “will” or “shall’; its ordinary meaning would be that bidders took their chances in offering a too-extended schedule but were not barred from shouldering that risk. In previous uses of this standard form bidders had apparently not felt themselves limited to a deviation of 60 days; in this very case others than Reiner extended their suggested dates for more than that period. There is no showing that any bidder was actually misled. Like much procurement prose, the delivery section of the invitation was not a stylist’s model, but we think it conveyed its meaning sufficiently to ward off the charge of undue ambiguity.

The second vice defendant marks in the invitation is that it left both bidders and the contracting officer too much at large. The latter might or might not accept a lower bid with an extended delivery schedule, rather than a “timely” one at a higher price. From the viewpoint of improving procurement procedures, the Comptroller General could well believe that some method of evaluating the bids according to both, price and delivery dates should have been explicitly stated. That defect, however, was not so deep or so clear that it nullified the invitation as a matter of law. The bidders were not helpless. They were free to submit more than one bid if the delivery schedule affected their price proposals ; they could file, if they wished, one price based on the Government’s schedule, another on an extension of less than 60 days, and a third on an extension of over 60 days. The contracting officer, for his part, would be guided by the directives in the Procurement Act of 1947 to consider “the requirements of the agency concerned” and the bid which was “most advantageous to the Government, price and other factors considered.” 62 Stat. 23, 41 U.S.C. § 152(a), (b) (1952 ed.). To the extent that quicker delivery was called for by the procuring agency, the contracting officer would evaluate on the basis of price those bids meeting the earlier delivery requirement; if a delayed schedule turned out to be acceptable, the other bidders would enter the widened circle of competition. That would be the natural and proper way to proceed and that is the way the contracting officer did proceed. The Procurement Act was designed to leave to him business discretion of this type and measure. See S. Rep. No. 571, 80th Cong., 2d Sess., pp. 2-3. In the circumstances present here, the contracting officer did not assume for himself so great an area of judgment as to destroy the free competition (on a common basis) the statute demands. We hold, accordingly, that the award to plaintiff must be deemed lawful, not void.

II

The next inquiry concerns the nature of the cancellation resulting from the Comptroller General’s ruling and the damages to which the contractor is entitled. Plaintiff characterizes the cancellation as a clear breach, entailing the full common-law measure of recovery; it points out that the contracting officer did not purport to terminate the contract for the Government’s convenience or to follow the procedures established for that kind of termination. Those were in fact the circumstances of the cancellation but the plaintiff’s conclusion does not necessarily follow.

If the contracting officer had deliberately employed the termination-for-convenience article of the contract, his action would have been entirely valid. Such termination is authorized “whenever the contracting officer shall determine” that it is “in the best interests of the Government.” The broad reach of that phrase comprehends termination in a host of variable and unspecified situations calling (in the contracting officer’s view) for the ending of the agreement; the article is not restricted, as plaintiff contends, to a decrease in the need for the item purchased. Under such an all-inclusive clause, the Government has the right to terminate “at will” (Davis Sewing Mach. Co. v. United States, 60 Ct. Cl. 201, 217 (1925), aff'd, 273 U.S. 324 (1927); Librach v. United States, 147 Ct. Cl. 605, 611 (1959)), and in the absence of bad faith or clear abuse of discretion the contracting officer’s election to terminate is conclusive. See Line Constr. Co. v. United States, 109 Ct. Cl. 154, 187 (1947).

Here, termination would have been invoked in deference to the Comptroller General’s declaration that the contract should be cancelled. The contracting officer did not agree with that opinion, but it is the usual policy, if not the obligation, of the procuring departments to accommodate themselves to positions formally taken by the General Accounting Office with respect to competitive bidding. That Office, as we have pointed out, has special concern with, and supervision over, that aspect of procurement. It would be entirely justifiable for the contracting officer to follow the general policy of acceding to the views of the Accounting Office in this area even though he had another position on the particular issue of legality or propriety. He would not be allowing the Comptroller General to dictate the termination of the contract but, rather, would be using termination as a means of minimizing a conflict with another arm of Government properly concerned with the contractual problem. It cannot be contrary to “the best interests of the Government” — the controlling standard of the termination clause— to end a contract which the Comptroller General has branded as incorrectly advertised.

Plaintiff refers to decisions holding that a contracting officer should not abdicate his functions to another official (e.g., Sun Shipbuilding & Dry Dock Co. v. United States, 76 Ct. Cl. 154, 187 (1932)), but those were cases in which someone else made specific determinations of fact under the contract, for example, that the contractor was in default or had no excusable delays. In this case the contracting officer would not be shifting a problem to the General Accounting Office; he would simply be deciding that the Government’s “best interests” required that as a matter of general policy he bow to an opinion of the Comptroller General on competitive bidding, even though he thought it wrong.

Plaintiff emphasizes, of course, that the contracting officer did not invoke the termination clause as we hold that he could well have done. But this phase of the contractual history does not compel us to hold that in cancelling the contract the contracting officer committed a common-law breach. Almost forty years ago, in College Point Boat Corp. v. United States, 267 U.S. 12, 15-16 (1925), the Supreme Court gave us the lead (speaking through Mr. Justice Brandéis) in a closely comparable case. The defendant purported to cancel a Navy contract in midstream, without benefit of any power of termination reserved in the agreement and without knowledge that the Navy had such authority under a World War I statute. “[S]o far as appears, neither party knew that the United States had such a right. The Navy Department failed to give the notice requisite to terminate the contract” (id. at 15). It appeared on the surface that the defendant was anticipatorily breaching the contract. The Court held, nevertheless, that the contractor could only recover the measure of relief allowed by the termination statute. “A party to a contract who is sued for its breach may ordinarily defend on the ground that there existed, at the time, a legal excuse for nonperformance by him, although he was then ignorant of the fact. He may, likewise, justify an asserted termination, rescission, or repudiation, of a contract by proving that there was, at the time, an adequate cause, although it did not become known to him until later.” Id. at 15-16 (footnotes omitted). The Government’s right to terminate was held effective when asserted later in court, and recovery of prospective profits was barred.

The Supreme Court’s ruling embraces this case. The broad termination clause in plaintiff’s contract stands in the place of the statutory termination power involved in College Point Boat Corp. (the Act of June 15, 1917, 40 Stat. 182). Under that clause, we have shown above, the defendant had a valid ground to terminate. As the Supreme Court held, such “adequate cause” for termination may be asserted as a defense to a breach action even though it may not have been known at the time of cancellation. The contracting officer on plaintiff’s contract probably thought that he was cancel-ling the agreement for illegality. That excuse was not a valid justification as we now know, but just as in College Point Boat Corp. a good ground did exist in the far-reaching right to terminate under the termination article. That justifiable cause controls the case and “operate [s] to curtail the damages recoverable” (267 U.S. at 16).

Some of the foregoing may seem incompatible with certain observations in Klein v. United States, 152 Ct. Cl. 8, 16-20, 285 F. 2d 778, 782-85 (1961). That case dealt with an erroneous termination for default which the defendant later sought to turn into a convenience termination. The only holding of the court (on this point) is that, once the Government wrongfully terminates for default where there has been no default, it cannot thereafter seek to avoid liability by invoking a convenience termination. That holding the court accepts and reaffirms today in Goldwasser v. United States, post, p. 450. Although some portions of the Klein opinion may seem to go beyond that holding if taken out of context, we now read the case as confined to the issue of default presented by its facts. Indeed, the Klein decision appears to have put aside situations like the present when it said that that case “has no resemblance to that of one who has terminated a contract for a stated reason, which turns out to be insupportable, but later discovers and relies on a valid reason for cancellation” (152 Ct. Cl. at 19, 285 F. 2d at 784). See also Newark Fireproofing Sash & Door Co., Inc. v. United States, 107 Ct. Cl. 606, 627, 69 F. Supp. 121, 124 (1947).

Just as the failure to invoke the termination article leaves untouched the defendant’s right to rely on the damage limitation of that clause, so the failure to follow the termination procedures of the Armed Services Procurement Regulations (ASPR) is ineffective to broaden plaintiff’s rights of recovery. Those regulatory provisions have the force of law (G. L. Christian and Associates v. United States, 160 Ct. Cl. 58, 320 F. 2d 345 (1963)), but a departure from their requirements does not convert a termination into a common-law breach subjecting the United States to liability for unearned anticipated profits any more than would a deviation from the procedures set forth in a statutory provision for termination. Unless the contractor can show that he has been injured by the failure to pursue the ASPR procedures, such a lapse is immaterial to his recovery. Cf. J. W. Bateson Co., Inc. v. United States, 308 F. 2d 510, 514 (C.A. 5, 1962). Plaintiff does not claim, and there is no reason to believe, that it was hurt by the informal procedures followed here. As soon as the Comptroller General had ruled, Reiner was told to suspend all operations, to defer incurring any further expenses, and to inform its subcontractors and suppliers. It did so immediately. The amount of plaintiff’s termination expenses is known because it has stipulated the exact sum recoverable on the basis of a convenience termination, i.e., $17,000.

This stipulation facilitates our disposition of the case. Since we hold that Reiner is entitled to recover only the amount collectible on a termination for convenience, and that sum is agreed to be $17,000, we shall enter judgment in that figure.

We add that, in the present circumstances, there is another ground, related but separate, why plaintiff is restricted to this stipulated amount. Even if we assume that the reasoning of College Point Boat Corp. is inapplicable, the plaintiff could not recover anticipated but unearned profits without clear and direct proof that it would have made such gains. United States v. Penn Foundry & Mfg. Co., Inc., 337 U.S. 198 (1949); United States v. Behan, 110 U.S. 338, 344 (1884). That type of proof is unavailable here because the plaintiff cannot show that its contract would have been allowed to continue to completion. A standard termination clause was ever-ready for use and it is more than likely that this contracting officer (who thought the award to plaintiff valid) would have acted explicitly under that provision to end performance legally as soon as someone he deemed authoritative had whispered in his ear that he was breaching the agreement by cancelling it in the way he did. Since plaintiff cannot show that that would not have happened, it must fail in its quest for prospective profits. See the opinion of Mr. Justice Douglas for the four concurring Justices in Penn Foundry & Mfg. Co., supra at 216.

III

Plaintiff Reiner sues also on behalf of Kurz & Root Company, an actual or potential subcontractor. After Reiner had received the award for the generator sets at the end of June 1956 it negotiated with Kurz & Root to supply the generators, one of the major components. An oral agreement was reached on July 10,1956, and Kurz & Root then began preliminary work, but no written purchase order was executed prior to suspension of the prime contract on August 3, 1956. At that time Reiner advised Kurz & Root to stop all work. Defendant insists that no valid subcontract was ever made and that, in any event, nothing is recoverable on behalf of Kurz & Root.

We need not decide (i) whether Reiner had an enforceable agreement with Kurz & Root, (ii) if so, whether Reiner can sue on its subcontractor’s behalf, or (iii) whether the claim is barred because not included in Reiner’s own termination claim. The record fails to show that the subcontractor suffered any damages from the defendant’s cancellation of the main contract. Almost nine months after this cancellation, the Government re-let the very same contract to another company (John R. Hollingsworth Corp.) and Kurz & Root obtained the subcontract to produce the 3,567 generators which it would have supplied to Reiner. It made a good profit on that subcontract, more than would necessarily have been expected and more than it claims it would have made on the subcontract with Reiner. Kurz & Root cannot obtain these profits twice. The Hollingsworth contract and subcontract would never have existed had there been no cancellation of the Reiner contract; nor is there substantial ground for belief that Kurz & Root lost other business because it undertook to supply Reiner. In these circumstances the gains made under the second contract must be deducted from the damages claimed for the alleged breach of the Reiner agreement. Restatement, Contracts, § 336, Comment c; Canton-Hughes Pump Co. v. Llera, 205 Fed. 209, 215 (C.A. 6, 1913); Ed. 8. Michelson, Inc. v. Nebraska Tire & Rubber Co., 63 F. 2d 597, 601 (C.A. 8, 1933).

Kurz & Root did incur some preliminary expenses on the Reiner generator but there is no evidence whether or not this work was useful in the performance of the Hollingsworth subcontract; moreover, the evidence of these out-of-pocket expenses was not well supported. On the whole record, we are justified in finding, as we do, that Kurz & Root has failed to prove that it was damaged to any appreciable extent by the suspension and cancellation of the Reiner contract. No right to recover has been shown.

Our conclusion is that plaintiff is entitled to recover $17,000 on its own claim and judgment will be entered to that effect. It is not entitled to recover on behalf of Kurz & Root Company and its petition will be dismissed to that extent.

Laramore, Judge,

concurring:

I agree with the majority opinion. I write this because of my concurrence in the case of Goldwasser v. United States, this day decided, post, p. 450.

In my opinion, the Goldwasser case is clearly distinguishable from the present case. The contract in the case of Gold-wasser was, in my opinion, terminated for default. In that situation my belief is that plaintiff Goldwasser should have an opportunity to prove a breach thereof and resulting damages, if any.

The contract in the instant case was not terminated for default, and I believe under the circumstances of this case the correct measure of damages should be based on the cost resulting from the termination provision of the contract.

Whitaker, Judge,

dissenting in part:

Having written the opinion of the court in Goldwasser v. United States, this day decided, post, p. 4-50, it follows that I disagree with the opinion in this case. It reiterates, I think, the positions taken in the dissenting opinions in the Goldwasser case.

In Goldwasser, the defendant became dissatisfied with plaintiff’s performance but it did not refuse further to honor the contract because plaintiff had defaulted in performance, but, instead, took refuge in the “indefinite-quantities” clause of the contract, contending that under that clause it was no longer obligated to avail itself of plaintiff’s services. Because we thought this clause was inapplicable and that defendant had wrongfully refused to further honor the contract unless plaintiff was actually in default, and because it did not take advantage of the termination-for-convenience-of-the-Govemment clause, we held this clause did not prescribe the measure of defendant’s liability, if any.

Nor in the case at bar did defendant take advantage of the termination-for-convenience-of-the-Govemment clause; it cancelled the contract because, acting upon the opinion of the Comptroller General, it held that it had been awarded without compliance with the statute and was, therefore, a nullity. It is a contradiction to say that it terminated a contract that in law it asserted had never existed. Whether it had a right to do so or not is immaterial, because it did not in fact do so. The possession of a right means nothing unless that right is exercised.

As in the Goldwasser case, a cancellation of the contract because it had been illegally entered into involved no liability on the part of the Government; a termination for convenience did render the Government liable. The Contracting Officer chose the former course. The Government is bound by the action he took.

What I have said is in harmony with our holding in Klein v. United States, 152 Ct. Cl. 8, 285 F. 2d 778 (1961).

The majority relies upon College Point Boat Corp. v. United States, 267 U.S. 12 (1925), affirming 58 Ct. Cl 380 (1923), but in that case there was no election by the Government between two alternative courses of action, one of which subjected the Government to liability and the other did not.

FINDINGS OE PACT

The court, having considered the evidence, the report of Trial Commissioner Paul H. McMurray, and the briefs and arguments of counsel, making findings of fact as follows:

1. Plaintiff John Reiner & Company (sometimes hereinafter referred to as Reiner) was a limited partnership at times material herein which formerly had its principal place of business at Long Island City, New York. In 1956 Reiner was a manufacturer of special-purpose generator sets and pump units. The firm was also an exclusive distributor in New York, New Jersey, Pennsylvania, and the New England states of machinery and equipment manufactured by others, maintaining distributor branches in Syracuse, New York, Springfield, Massachusetts, and Flemington, New Jersey.

2. Reiner received from defendant, acting through the United States Army Corps of Engineers, Chicago Procurement Office, Invitation No. DA-ENG-41-184-56-F-707, requesting bids for the furnishing of 3,567 5KW generator sets. The invitation, originally issued under date of May 18, 1956, and amended by four addenda, contained the following special terms and conditions as to delivery of the generator sets (Iteml) and a tabular list of parts (Item 3):

11. Delmery Scheckile: The Government desires delivery of the articles or supplies awarded under this invitation in accordance with the following schedule:
Item 1 Item 3
172 units 30 Sept. 1956 6 each — 31 Oct. 1956
300 units 31 Oct. 1956
300 units 30 Nov. 1956
300 units 31 Dec. 1956
350 units 31 Jan. 1957
350 units 28 Feb. 1957
350 units 30 Mar. 1957
350 units 30 Apr. 1957
350 units 31 May 1957
350 units 29 June 1957
350 units 31 July 1957
45 units 31 Aug. 1957
In the event bidder is unable to make deliveries in accordance with the foregoing schedule, he shall set forth in the below his proposed delivery schedule:
Bidder's Proposed Delivery Schedule:
[Blank space of several lines provided in form.]
Bids offering a proposed delivery schedule which will extend the time for the delivery of the quantities as called for in any delivery period of the foregoing delivery schedule by more than 60 days, may be cause for rejection of bid.
In the event a bidder does not set forth a proposed delivery schedule the Government’s delivery schedule as hereabove set forth shall be bidder’s proposed delivery schedule.

The General Provisions provided:

12. Disputes
Except as otherwise provided in this contract, any dispute concerning a question of fact arising under this contract which is not disposed of by agreement shall be decided by the Contracting Officer, who shall reduce his decision to writing and mail or otherwise furnish a copy thereof to the Contractor. Within 30 days from the date of receipt of such copy, the Contractor may appeal by mailing or otherwise furnishing to the Contracting Officer a written appeal addressed to the Secretary, and the decision of the Secretary or his duly authorized representative for the hearing of such appeals shall, unless determined by a court of competent jurisdiction to have been fraudulent or capricious or arbitrary or so grossly erroneous as necessarily to imply bad faith, or not supported by substantial evidence, be final and conclusive; urovided that, if no such appeal is taken, the decision of the Contracting Officer shall be final and conclusive. In connection with any appeal proceeding under this clause, the Contractor shall be afforded an opportunity to be heard and to offer evidence in support of its appeal. Pending final decision of a dispute hereunder, the Contractor shall proceed diligently with the performance of the contract and in accordance with the Contracting Officer’s decision.
% # ifc % #
21. Termination eor Convenience of the Government (a) The performance of work under this contract may be terminated by the Government in accordance with this clause in whole, or from time to time in part, whenever the Contracting Officer shall determine that such termination is in the best interests of the Government. Any such termination shall be effected by delivery to the Contractor of a Notice of Termination specifying the extent to which performance of work under the contract is terminated, and the date upon which such termination becomes effective.
(b) After receipt of a Notice of Termination, and except as otherwise directed by the Contracting Officer, the Contractor shall (1) stop work under the contract on the date and to the extent specified in the Notice of Termination; (2) place no further orders or subcontracts for materials, services, or facilities except as may be necessary for completion of such portion of the work under the contract as is not terminated; (3) terminate all orders and subcontracts to the extent that they relate to the performance of work terminated by that Notice of Termination; (4) assign to the Government, in the manner, at the times, and to the extent directed by the Contracting Officer, all of the right, title, and interest of the Contractor under the orders and subcontracts so terminated, in which case the Government shall have the right, in its discretion, to settle or pay any or all claims arising out of the termination of such orders and subcontracts; (5) settle all outstanding liabilities and all claims arising out of such termination of orders and subcontracts, with the approval or ratification of the Contracting Officer, to the extent he may require, which approval or ratification shall be final for all the purposes of this clause; (6) transfer title and deliver to the Government, in the manner, at the times, and to the extent, if any, directed by the Contracting Officer, (i) the fabricated or unfabri-cated parts, work in process, completed work, supplies, and other material produced as a part of, or acquired in connection with the performance of, the work terminated by the Notice of Termination, and (ii) the completed or partially completed plans, drawings, information, and other property which, if the contract had been completed, would have been required to be furnished to the Government; (7) use its best efforts to sell, in the manner, at the times, to the extent, and at the price or prices directed or authorized by the Contracting Officer, any property of the types referred to in provision (6) of this paragraph, provided, however, that the Contractor (i) shall not be required to extend credit to any purchaser, and (ii) may acquire any such property under the conditions prescribed by and at a price or prices approved by the Contracting Officer; 'and provided further that the proceeds of any such transfer or disposition shall be applied in reduction of any payments to be made by the Government to the Contractor under this Contract or shall otherwise be credited to the price or cost of the work covered by this contract or paid in such other manner as the Contracting Officer may direct; (8) complete performance of such part of the work as shall not have been terminated by the Notice of Termination; and (9) take such action as may be necessary, or as the Contracting Officer may direct, for the protection and preservation of the property related to this contract which is in the possession of the Contractor and in which the Government has or may acquire an interest. At any time after expiration of the plant clearance period, as defined in Section VIII, Armed Services Procurement Regulation, as it may be amended from time to time, the Contractor may submit to the Contracting Officer a list, certified as to quantity and quality, of any or all items of termination inventory not previously disposed of, exclusive of items the disposition of which has been directed or authorized by the Contracting Officer, and may request the Government to remove such items or enter into a storage agreement covering them. Not later than fifteen (15) days thereafter, the Government will accept title to such items and remove them or enter into a storage agreement covering the same, provided that the list submitted shall be subject to verification by the Contracting Officer upon the removal of the items, or if the items are stored, within forty-five (45) days from the date of submission of the list, and any necessary adjustment to correct the list as submitted shall be made prior to final settlement.
(c) After receipt of a Notice of Termination, the Contractor shall submit to the Contracting Officer its termination claim, in the form and with the certification prescribed by the Contracting Officer. Such claim shall be submitted promptly but in no event later than two years from the effective date of termination, unless one or more extensions in writing are granted by the Contracting Officer, upon request of the Contractor made in writing within such two-year period or authorized extension thereof. However, if the Contracting Officer determines that the facts justify such action, he may receive and act upon any such termination claim at any time after such two-year period or any extension thereof. Upon failure of the Contractor to submit its termination claim within the time allowed, the Contracting Officer may determine, on the basis of information available to him, the amount, if any, due to the Contractor by reason of the termination and shall thereupon pay to the Contractor the amount so determined.
(d) Subject to the provisions of paragraph (c), the Contractor and the Contracting Officer may agree upon the whole or any part of the amount or amounts to be paid to the Contractor by reason of the total or partial termination of work pursuant to this clause, which amount, or amounts may include a reasonable allowance for profit on work done. The contract shall be amended accordingly, and the Contractor shall be paid the agreed amount. Nothing in paragraph (e) of this clause, prescribing the amount to be paid to the Contractor in the event of failure of the Contractor and the Contracting Officer to agree upon the whole amount to be paid to the Contractor by reason of the termination of work pursuant to this clause, shall be deemed to limit, restrict or otherwise determine or affect the amount or amounts which may be agreed upon to be paid to the Contractor pursuant to this paragraph (d).
(e) In the event of the failure of the Contractor and the Contracting Officer to agree as provided in paragraph (d) upon the whole amount to be paid to the Contractor by reason of the termination of work pursuant to this clause, the Contracting Officer shall determine, on the basis of information available to him, the amount, if any, due to the Contractor by reason of the termination and shall pay to the Contractor the amounts determined as follows:
(1) For completed supplies accepted by the Government (or sold or acquired as provided in paragraph (b) (7) above) and not theretofore paid for, a sum equivalent to the aggregate price for such supplies computed in accordance with the price or prices specified in the contract, appropriately adjusted for any saving of freight or other charges:
(2) The total of—
(i) The costs incurred in the performance of the work terminated, including initial costs and preparatory expense allocable thereto, but exclusive of any costs attributable to supplies paid or to be paid for under paragraph (e)(1) hereof:
(ii) The cost of settling and paying claims arising out of the termination of work under subcontracts or orders, as provided in paragraph (b) (5) above, which are properly chargeable to the terminated portion of the contract (exclusive of amounts paid or payable on account of supplies or materials delivered or services furnished by subcontractors or vendors prior to the effective date of the Notice of Termination, which amounts shall be included in the cost payable under (i) above).
(iii) A sum equal to 2% of that part of the amount determined under (i) which represents the cost of articles and materials not processed by the Contractor, plus a sum equal to 8% of the remainder of such amount, but the aggregate of such sums shall not exceed 6% of the whole of the amount determined under subdivision (i) above, which amount for the purpose of this subdivision (iii) shall exclude any charges for interest on borrowings; Provided, however, that if it appears that the Contractor would have sustained a loss on the entire contract had it been completed, no profit shall be included or allowed under this subdivision (iii) and an appropriate adjustment shall be made reducing the amount of the settlement to reflect the indicated rate of loss.
(3)_ The reasonable costs of settlement, including accounting, legal, clerical, and other expenses reasonably necessary for the preparation of settlement claims and supporting data with respect to the terminated portion of the contract and for the termination and settlement of subcontracts thereunder, together with reasonable storage, transportation, and other costs incurred in connection with the protection or disposition of property al-locable to this contract. The total sum to be paid to the Contractor under (1) and (2) of this paragraph (e) shall not exceed the total contract price as reduced by the amount of payments otherwise made and as further reduced by the contract price of work not terminated. Except for normal spoilage, and except to the extent that the Government shall have otherwise expressly assumed the risk of loss, there shall be excluded from the amounts payable to the Contractor as provided in paragraph (e) (1) and paragraph (e) (2) (i), the fair value, as determined by the Contracting Officer, of property which is destroyed, lost, stolen, or damaged so as to become un-del'iverable to the Government, or to a buyer pursuant to paragraph (b) (7).
(f) Any determination of costs under paragraph (c) or (e) hereof shall be governed by the Statement of Principles for Consideration of Costs set forth in Part 4 of Section VIII of the Armed Services Procurement Regulation, as in effect on the date of this contract.
(g) The Contractor shall have the right of appeal, under the clause of this contract entitled “Disputes,” from any determination made by the Contracting Officer under paragraphs (c) or (e) above, except that if the Contractor has failed to submit its claim within the time provided in paragraph (c) above and has failed to request extension of such time, he shall have no such right of appeal. In any case where the Contracting Officer has made a determination of the amount due under paragraph (c) or (e) above, the Government shall pay to the Contractor the following: (i) if there is no right of appeal hereunder or if no timely appeal has been taken, the amount so determined by the Contracting Officer, or (ii) if an appeal has been taken, the amount finally determined on such appeal.
(h) In arriving at the amount due the Contractor under this clause there shall be deducted (1) all un-liquidated advance or other unliquidated payments on account theretofore made to the Contractor, (2) any claim which the Government may have against the Contractor in connection with this contract, and (3) the agreed price for, or the proceeds of sale of, any materials, supplies, or other things acquired by the Contractor or sold, pursuant to the provisions of this clause, and not otherwise recovered by or credited to the Government.
(i) If the termination hereunder be partial, prior to the settlement of the terminated portion of this contract, the Contractor may file with the Contracting Officer a request in writing for an equitable adjustment of the price or prices specified in the contract relating to the continued portion of the contract (the portion not terminated by the Notice of Termination), and such equitable adjustment 'as may be agreed upon shall be made in such price or prices.
(j) The Government may from time to time, under such terms and conditions as it may prescribe, make partial payments and payments on account against costs incurred by the Contractor in connection with the terminated portion of this contract whenever in the opinion of the Contracting Officer the aggregate of such payments shall be within the amount to which the Contractor will be entitled hereunder. If the total of such payments is in excess of the amount finally agreed or determined to be due under this clause, such excess shall be payable by the Contractor to the Government upon demand, together with interest computed at the rate of 6% per annum, for the period from the date such excess payment is received by the Contractor to the date on which such excess is repaid to the Government; provided, however, that no interest shall be charged with respect to any such excess payment attributable to a reduction in the Contractor’s claim by reason of retention or other disposition of termination inventory until ten days after the date of such retention or disposition.
(k) Unless otherwise provided for in this contract, or by applicable statute, the Contractor, from the effective date of termination and for a period of six years after final settlement under this contract, shall preserve and make available to the Government at all reasonable times at the office of the Contractor but without direct charge to the Government, all its books, records, documents, and other evidence bearing on the costs and expenses of the Contractor under this contract and relating to the work terminated hereunder, or, to the extent approved by the Contracting Officer, photographs, micro-photographs, or other authentic reproductions thereof.

3. Reiner submitted a bid of $1,092 per unit for the generator sets, or a total price of $3,895,164 for the contract. As a delivery schedule it proposed that the units be delivered as follows:

Item 1 Item 3
172 Units Jan. 31,1957 6 each — Nov. 30, 1956
300 Units Feb. 28, 1957
300 Units Mar. 30,1957
300 Units Apr. 30,1957
350 Units May 31,1957
350 Units June 29,1957
350 Units July 31,1957
350 Units Aug. 31,1957
350 Units Sept. 30,1957
350 Units Oct. 31,1957
350 Units ISTov. 30,1957
45 Units Dec. 31, 1957

Subsequently, by telegram dated June 20, 1956, plaintiff reduced its offer to $1,042 per unit, or $3,716,814 on the total contract.

4. The bids were publicly opened by defendant on June 21, 1956. As to price, Reiner was the lowest of thirteen bidders. In addition to Reiner, seven other bidders proposed their own delivery schedules.

The Corps of Engineers thereafter inquired of the requisitioning agency, the United States Army Signal Corps, Philadelphia, whether Reiner’s proposed delivery schedule met its requirements. On June 26, 1956, the requisitioning agency replied that the proposed delivery schedule was satisfactory and met its requirements.

5. On June 29, 1956, defendant notified Reiner by telephone that its bid in response to the invitation had been accepted, and Reiner was authorized to proceed with the performance of contract DA-11-184-ENG-14933 (hereinafter referred to as the prime contract). Written notice of award was received by Reiner on July 2,1956.

6. On August 3, 1956, following a telephone conversation between Maj. Stanley Boriss, Chief of Production Branch, Corps of Engineers, and David I. Cohen, Reiner’s assistant general manager, the contracting officer sent to Reiner a telegram containing the following text:

REP PURCHASE ORDER 88-V-41390-27, CONTRACT NO. DA-ENG-11-184-56-F-707 FOR 5 KW GENERATORS. SUSPEND ALL OPERATIONS IN PERFORMANCE OF THIS CONTRACT UNTIL FURTHER NOTICE; INFORM YOUR SUPPLIERS AND SUBCONTRACTORS ACCORDINGLY TO AVOID INCURRING ANY COSTS. THIS INSTRUCTION BASED ON DECISION OF GENERAL ACCOUNTING OFFICE AND CONFIRMS TELEPHONE CONVERSATION BETWEEN YOUR MR. COHEN AND MAJOR BORISS.

7. In a telephone conversation, Major Boriss advised Reiner’s assistant general manager that the General Accounting Office, based on a protest by an unsuccessful bidder, had recommended that the prime contract be cancelled. Major Boriss stated that the requisition had not been withdrawn by the requisitioning agency; that the generator sets were needed; and that the Chicago Procurement Office was not satisfied with, the recommendation of the General Accounting Office.

8. Beiner had not been notified previously by the United States Army or the General Accounting Office of the protest by an unsuccessful bidder and had no prior knowledge of its existence.

9. Beiner notified Hercules Motors' Corporation and Kurz & Boot Company, the subcontractors with whom it had made agreements for the manufacture of the engine and the generator, of the contents of the contracting officer’s telegram of August 3,1956.

10. The decision of the Comptroller General (No. B-128405 dated August 3, 1956) referred to in the telegram of August 3,1956 (finding 6), stated:

Beference is made to letter dated July 20,1956, from Mr. F. H. Higgins, Assistant Secretary or the Army (Logistics), forwarding an administrative report on the protest of United States Motors Corporation against the award of a contract to another bidder pursuant to invitation No. DA-ENG-11-184-56-F-707 issued May 18, 1956, by the Chicago Procurement Office, Corps of Engineers.
The invitation as amended by Addenda dated May 29 and June 1,7, and 8,1956, requested bids for furnishing generator sets under item No. 1, with tabular list of parts, provisioning list and drawings, the cost of which was to be included in the price quoted for item No. 1. The invitation expressly provided that all items would be awarded as a lot and that the Government desired delivery of the equipment awarded under the invitation in accordance with the following schedule:
Item 1 Item 3
172 units 30 Sept. 1956 6 each — 31 Oct. 1956
300 units 31 Oct. 1956
300 units 30 Nov. 1956
300 units 31 Dec. 1956
350 units 31 J an. 1957
350 units 28 Feb. 1957
350 units 30 Mar. 1957
350 units 30 Apr. 1957
350 units 31 May 1957
350 units 29 J une 1957
350 units 31 July 1957
45 units 31 Aug. 1957
Bidders were advised that in the event they were unable to make deliveries in accordance with the foregoing schedule they should set forth in the space provided therefor the delivery schedule they proposed. Bidders were advised also that “bids offering a proposed delivery schedule which will extend the time for the delivery of the quantities as called for in any delivery period of the foregoing delivery schedule by more than 60 days, may be cause for rejection of bid,” and that should a bidder not set forth a proposed delivery schedule of its own the Government’s delivery schedule set forth in the invitation would be regarded as the bidder’s proposed delivery schedule.
The record shows that 13 bids were received in response to the invitation and that the bid of the John Reiner and Company was the lowest received as to price. This bidder, however, offered the following delivery schedule:
Item 1 Item, 3
172 units Jan. 31, 1957 6 each — Nov. 30,1956
300 units Feb. 28, 1957
300 units Mar. 30, 1957
300 units Apr. 30, 1957
350 units May 31, 1957
350 units June 29, 1957
350 units July 31, 1957
350 units Aug. 31, 1957
350 units Sept. 30, 1957
350 units Oct. 31, 1957
350 units Nov. 30, 1957
45 units Dec. 31, 1957
The next low bid was that submitted by the United States Motors Corporation. This bidder, and four other bidders, offered delivery in strict accordance with the delivery schedule set forth in the invitation. It is stated by the contracting officer that his request of the requisitioning agency for information as to whether the delivery offered by the John Reiner and Company met its requirements elicited the reply that the delivery schedule offered by that bidder was satisfactory and met the requirements. The contract was then awarded to that bidder.
The protest of the United States Motors Corporation as presented to our Office is predicated upon the following contentions:
“1. We were low bidder complying in all respects to the terms and conditions of the referenced invitation.
“2. No exceptions or alternate bids were acceptable under the provisions of the invitation.
“3. If delivery is of importance to the requisitioning agencies as indicated by the delivery requirements, no exception should be considered unless a like exception is extended to all bidders.
“4. If delivery is not of consequence to the requisitioning agencies, then a restrictive or suggestive clause that refers to the possible rejection of a bid exceeding by more than sixty days the desired delivery, should not have been included in the invitation.”
Section 3 (b) of the Armed Services Procurement Act of 1947, 62 Stat. 21, 23, provides that all bids shall be publicly opened at the time and place stated in the advertisement and that “Award shall be made with reasonable promptness by written notice to that responsible bidder whose bid, conforming to the invitation for bids, will be most advantageous to the Government, price and other factors considered.” The purpose of this statute is, of course, to afford all bidders an opportunity to bid on an equal basis.
We have held that time of delivery may be considered in making an award, price alone not being controlling, when early delivery is required in the Government’s interest, and when the invitation to bid so provides, all bidders thus being placed on notice and given an equal opportunity to compete for the Government’s business. In the present case the advertised specifications expressly advised bidders that the Government desired delivery of the equipment on the dates and in the quantities set forth in the bid schedule. The reasonable interpretation of this delivery provision is that the Government required the equipment on the dates and in the quantities stated. While the invitation for bids purported to afford an opportunity^ to bidders to propose a different delivery schedule if they could not meet the Government’s delivery requirements, the force and effect thereof was virtually eliminated by the further provision to the effect that any proposed delivery schedule which would extend the time for delivery as called for in the Government’s “delivery schedule by more than 60 days, may .be cause for rejection of bid.” It would seem only logical to assume that, in the face of this clear admonition, those bidders who promised delivery in compliance with the Government’s delivery requirements did not propose any longer schedule since no useful purpose apparently would be served thereby.
If the requisitioning agency did not actually require delivery on the dates specified then the dates should have been extended in line with the Government’s requirement, or some alternative should have been left to the bidders to offer longer delivery schedules at lower prices, in which event, of course, some method of evaluating the bids according to price and delivery dates should have been stated. Had all bidders been given an opportunity to bid on the basis of the delivery schedule offered by the low bidder as being the time required by the Government, it is reasonable to assume that additional bids would have been received quoting more favorable prices and that those bidders quoting prices for delivery within the time stated as desired by the Government might have quoted prices even lower than that quoted by the successful bidder.
Under the circumstances we have no alternative but to conclude that the award as made does violence to the spirit and purpose of the law due to the fact that the bidders were not properly advised as to the basis upon which bids should have been submitted. Hence, the contract should be cancelled.

11. Reiner had observed the same delivery clauses in other prior invitations as was contained in the invitation involved herein and had on other occasions proposed delivery schedules extending the procurement agency’s desired schedule by more than 60 days, and had been awarded contracts on such invitations when the bid was lowest in price. The same form of “delivery schedule” provisions had previously been used by the Corps of Engineers in many invitations.

12. Reiner’s attempt to have the Comptroller General’s decision reversed was unsuccessful, and on September 21, 1956, the contracting officer sent Reiner a telegram as follows:

IN REPLY REFER TO ENGPB-3-1785 SGD COL MURRAY CONTRACTING OFFICER. IN REGARDS CONTRACT DA-11-184 — ENG-14933 PO 88-F-41390-27. THE COMPTROLLER GENERAL OF THE UNITED STATES IN HIS DECISION B-1280458 [sic] 3 AUGUST 1956 RULED THAT THE INVITATION FOR BID FORMING THE BASIS FOR THE AWARD OF THIS CONTRACT WAS AMBIGUOUS AS TO DELIVERY REQUIREMENT AND THAT THIS CONTRACT SHOULD BE CANCELLED. BY LETTER DATED 17 SEPTEMBER 1956 THE COMPTROLLER GENERAL REAFFIRMED HIS DECISION B-128045 [sic]. IN COMPLIANCE WITH THIS DECISION YOU ARE HEREBY NOTIFIED THAT YOUR CONTRACT DA-11-184-ENG-14933 PO 88-F-41390-27 AWARDED YOUR CONCERN BY THIS OFFICE ON 29 JUNE 1956 IS HEREBY CANCELLED.

13. At the time the telegram was sent, the Armed Services Procurement Regulation contained, in part, the following provisions as to termination of contracts (Federal Register of February 29, 1952, p. 1791) :

§407.302 Authority of Contracting Officers. The authority of the Contracting Officer to terminate a contract for the convenience of the Government and to enter into settlement agreement under this subchapter is set forth in the termination clause. Contracting Officers may terminate contracts for the convenience of the Government to the extent authorized by procedures prescribed by each respective department.
% * * * ❖
§ 407.304 Notice of Termination. Contracts subject to termination for convenience shall be terminated only by written notice to the Contractor conforming substantially to the form of Notice of Termination set forth in Subpart G of this part. Modification of such form is authorized, but in any event each such Notice shall state: (a) That the contract is being terminated for the convenience of the Government under the provisions of the termination for convenience clause thereof, (b) the effective date of termination, (c) the extent of termination and if a partial termination, the portion of the contract to be continued, and (d) any special instructions. A copy of the Notice of Termination shall be sent to any known assignee, guarantor or surety of the Contractor.
*****
§ 407.707 Notice of Termination.
§ 407.707-1 Telegraphic Notice of Termination. (a) The following form of telegraphic notice is approved for use where a contract is being completely terminated:
TELEGRAPHIC NOTICE — COMPLETE TERMINATION
Date.
XYZ Corporation,
New YorJc, New YorJc.
Your Contract No.----is hereby terminated in its entirety pursuant to clause - _ of the contract effective [here insert “immediately” or “on----------------19 — (Inserting the date) or “as soon as you have delivered thereunder including previous deliveries the following items” (listing items)]. Immediately stop all work, terminate subcontracts and place no further orders except to extent (insert if applicable — necessary to perform any portion thereof not terminated hereby or) that you or a subcontractor wish to retain and continue for own account any work in process or other materials. Telegraph similar instructions to all subcontractors and suppliers. Letter and instruction follow.
(Name and Rank) Contracting Officer
* * * # *
§407.707-2 Letter Notice of Termination, (a) In accordance with § 407.304, the following form of Notice of Termination of prime contract is approved for use. With appropriate modifications it is suitable for use in terminating subcontracts.
LETTER NOTICE OF TERMINATION TO PRIME CONTRACTORS
[At the top of the Notices set out all special details relating to the particular termination: e.g., name and address of company, number of prime contract terminated, service involved, appropriation or allotment, etc.
Two alternative forms of paragraph No. 1 are set out below. If this written termination notice confirms a telegraphic notice previously sent, use the first of the alternative paragraphs No. 1 below. If no previous telegraphic notice has been sent, use the second.]
1. Effective date of termination. This letter will confirm the Government’s telegram to you dated-------________, 19__, terminating [in part] your Contract No. __________ (hereinafter referred to as “the contract”) for the convenience of the Government, in accordance with the clause thereof entitled “Termination for the Convenience of the Government” [or, in the case of a cost-type contract, “Termination”]. Such termination is effective on the date and in the manner stated in such telegram, reference to which is hereby made [or copy of which is attached hereto].
(or)
.1. Effective date of termination. You are notified that your Contract No___________(hereinafter referred to as “the contract”) is hereby terminated [in part] for the convenience of the Government, in accordance with the clause thereof entitled “Termination for the Convenience of the Government” [or, in the case of cost-type contract, “Termination”]. Such termination will be effective:
[Here insert either “immediately upon your receipt of this Notice” or “on----------------19 — ,” (inserting the date), or “as soon as you have delivered under the contract the following number of each of the items listed below, including those heretofore delivered, to wit: --------------------” or, “on________________, 19__, on which date you are hereby directed to reduce the total number of items to be delivered under the contract as follows”: (here insert instructions as to reduced deliveries) .]
2. Cessation of work and notification to your immediate subcontractors, (a) You shall stop all work, make no further shipments, and place no further orders in connection with the contract, except (1) to the extent necessary to perform any portion thereof not terminated by this Notice, or (2) to the extent that you may wish to retain and continue any work in process or other materials for your own account, or (3) to the extent the Contracting Officer authorizes you to continue work-in-process for reasons of safety, or to clear [or avoid damage to] equipment or to avoid immediate complete spoilage of work-in-process having a definite commercial value, or otherwise to prevent undue loss to the Government. [If you believe the authorization referred to in subparagraph (3) above is necessary or advisable you shall immediately notify the Contracting Officer by telephone or personal conference and obtain instructions.] You shall keep adequate records of your compliance with this paragraph 2(a) showing (i) the date you received your Notice of Termination, (ii) the effective date of such termination, and (iii) the extent of completion of performance on such effective date.
(b) You shall give notice of termination to each of your immediate subcontractors (including suppliers) who will be affected by the termination of your Contract. In such notice you shall (1) give him the number of your Contract with the Government, (2) state that it has been terminated (or terminated in part, if that is the case) for the convenience of the Government, (3) give him the name and address of the Contracting Officer, (4) instruct him to stop all work, to make no further shipments, to place no more orders, and to terminate all subcontracts under this contract with you (subject to the same exceptions stated in paragraph 2(a)), (5) direct him to submit his settlement proposal promptly in order to expedite settlement, and (6) request him to give similar notice and instructions to his immediate subcontractors.
(c) You shall notify the Contracting Officer of the number of articles completed under the Contract and still on hand, and arrange with him for their delivery or other disposal.
(d) You shall forthwith transfer title to and deliver to the Government, in accordance with any instructions of the Contracting Officer, all items of termination inventory (including subcontractor termination inventory which under the terms of the subcontract or purchase order concerned you have the right to take over) of the following types or classes: [Insert proper identification or “none.”]
(e) You shall notify the Contracting Officer of any pending legal proceedings which relate to any subcontracts or purchase orders under the terminated contract or which have resulted in or which are intended to result in a lien or encumbrance on any termination inventory other than termination inventory you propose and are authorized to purchase, retain, or dispose of. (The Contracting Officer shall also be promptly notified of any such proceedings brought after receipt of this Notice.)
(f) You shall take such other action as may be required by the Contracting Officer or under the termination clause contained in your contract.
3. Termination inventory. In connection with settlement of your claim, it will be necessary to establish that all your termination inventory and that of your subcontractors has been properly accounted for. For detailed information, see Part 6 of Section VIII of ASPE.
4. Completed articles. Subject to paragraph 8-502 of ASPE, you will invoice acceptable completed articles under the contract in the usual way and not include them in your settlement proposal.
5. Submission of settlement proposed. To assist you in prompt submission of your settlement proposal, there is inclosed one set of the standard forms.
6. Patents. Your attention is called to any provisions of the contract which may require you to make a disclosure of, and to deliver to the Government instruments of license or assignment respecting all inventions, discoveries, and patent applications made by you in the performance of the contract. You aré urged to forward such disclosures and instruments of license or assignment to the Contracting Officer promptly, inasmuch as these contractual obligations must be complied with before execution of the final settlement agreement. This paragraph may be disregarded if the contract contains no such patent provisions.
Y. Settlements with subcontractors. You remain liable to your subcontractors and suppliers for claims arising by reason of the termination of their subcontracts or orders. You are requested to settle such termination claims as promptly as possible. For purposes of reimbursement by the Government, such settlements will be governed by the provisions of Parts 4 and 5 of Section VIII of ASPR.
8. The Office named below will be in charge of the settlement of your claim. As to any matters not covered by this Notice, you should consult the Office named below.
9. Please acknowledge receipt of this Notice as shown below. Enclosures:
(Contracting Officer)
(Name of Office)
(Address)
ACKNOWLEDGMENT OP NOTICE
The undersigned hereby acknowledges receipt of a signed copy of the foregoing Notice on---------------, 19__. Two copies of this Notice, both signed, are herewith returned.
(Name of Contractor)
By------------------------
(Title)

14. Reiner did not receive a telegram or letter from the contracting officer specifically stating that the prime contract was terminated for the convenience of the Government pursuant to clause 21 of the General Provisions of the prime contract. The contracting officer did not send to Reiner a set of standard forms for the submission of a settlement proposal of its termination claims, nor did the contracting officer request Reiner to settle the termination claims of its subcontractors and suppliers.

15. On September 24,1956, Reiner replied to the telegram of September 21, 1956, from the contracting officer with a telegram as follows:

REFER TO ENG PB-3-1Y85 SGD COL. MURRAY CONTRACTING OFFICER. IN REGARD TO CONTRACT DA-11-184-ENG-14933 PO 88-F-41390-27, WE CALL YOUR ATTENTION TO COURT DECISIONS HOLDING THAT THE RULING OF THE COMPTROLLER GENERAL IN SUCH MATTERS IS NOT CONTROLLING UPON THE DEPARTMENT OF THE ARMY. YOU ARE HEREBY ADVISED THAT YOUR NOTICE OF CANCELLATION IS DEEMED A FORMAL ADMISSION OF BREACH OF CONTRACT ON THE PART OF YOUR DEPARTMENT AND THAT WE INTEND TO SEEK RECOVERY OF FULL DAMAGES FOR SAID BREACH AND TO PURSUE SUCH OTHER REMEDIES AS MAY BE ADVISABLE.

16. At the time -when the contract was cancelled, Reiner desired to continue performance and had the physical facilities, the personnel, the financing and the knowledge to complete the contract.

17. The parties have stipulated that if it should be determined that Reiner’s individual claim is to be restricted to the costs recoverable on the basis of a termination for the convenience of the Government, Reiner would be entitled to recover $17,000.

18. Reiner claims individual damages for breach of the prime contract by defendant of $457,713, consisting of estimated loss of profits of $440,713 plus unrecovered costs of $17,000. Plaintiff determined its claim by adding estimated costs of material, direct labor, and overhead, and deducting this sum from the contract price.

19. Kurz & Root Company (Incorporated) (hereinafter referred to as Kurz & Root) is a Wisconsin corporation, organized in 1898, which has its principal plant and place of business in Appleton, Wisconsin. In 1956 it was a manufacturer of rotary electrical equipment, primarily generators. Approximately 90 percent of its manufacturing was for the United States Department of Defense, as both a prime contractor and subcontractor. It had approximately 200 employees in its plants at Appleton and Seymour, Wisconsin, and Los Angeles, California. Kurz & Root has manufactured more than 50,000 generators. Eugene B. Brownell, its president, was the sole owner of Kurz & Root at times material herein. In May 1961 he owned approximately 86 percent of the stock which would have been reduced to 80 percent if certain key employees had elected to take up stock options held by them.

20. After Eeiner had been awarded the prime contract involved in this action, Brownell, as president of Kurz & Eoot, entered into negotiations with John Merk, Eeiner’s general manager, in an effort to obtain a subcontract for the generators. On July 10, 1956, at Eeiner’s offices, they reached an oral agreement that Kurz & Eoot would furnish the generators to Eeiner at a price of $200 per unit, delivery to be made 60 days prior to the dates proposed by Eeiner in the prime contract and in the quantities therein specified.

21. Eeiner assigned Purchase Order No. EM 16200 for contemplated use in submitting an order to Kurz & Eoot, but had not written up such purchase order nor placed any information regarding the verbal agreement with Kurz & Eoot on the purchase order prior to suspension and cancellation of the prime contract.

22. Kurz & Eoot began certain necessary preliminary work on the 5KW generator which it planned to supply Eeiner, after the oral agreement of July 10,1956.

23. After the suspension of August 3, 1956, Eeiner advised Kurz & Eoot by telephone to stop work under the subcontract. On August 6,1956, Kurz & Eoot was notified that the contracting officer had ordered suspension of all operations in performance of the prime contract and had required Eeiner to notify subcontractors to avoid incurring any further costs.

24. The New York Statute of Frauds provides:

§ 31. Agreements required to be in writing.
Every agreement, promise or undertaking is void, unless it or some note or memorandum thereof be in writing, and subscribed by the party to be charged therewith, or by his lawful agent, if such agreement, promise or undertaking;
1. By its terms is not to be performed within one year from the making thereof or the performance of which is not to be completed before the end of a lifetime. (As amended L. 1911, c. 571, § 2; L. 1933, c. 616; L. 1943, c. 104; L. 1949, c. 203, eff. Sept. 1,1949; Personal Property Law, § 31.)

The evidence does not show that Kurz & Eoot would have delivered all the generators needed for Eeiner’s contract within a year’s time, although the same number of similar generators was subsequently produced in approximately one year for another contractor (finding 29).

25. On August 7, 1956, Kurz & Root wrote Reiner, in pertinent part, as follows:

In accordance with your advice, we have ceased all further activity here and have placed a hold on our suppliers in reference to this order.
$ $ $ $
We are further quite disturbed because we have based our 1957 operations upon this contract as the backlog contract. Knowing that we had this order, we have refrained from bidding on certain other business that we otherwise would have gone after. It is now too late to seek that business. Further, in one case we bid higher than we would have except for having this backlog contract and we missed an award for that reason. We have also arranged to sub-contract certain business which we now cannot bring back into our plant. I cite these examples to show you the difficulties we run into when we have a hold up of this character.
If there is a substantial delay before we are able to proceed, it will be necessary for us to adjust our price upward.

26. Kurz & Root was subsequently notified by Reiner that the prime contract had been cancelled.

At the time of the cancellation Kurz & Root had the facilities, the knowledge, and the financial capacity to perform this subcontract.

27. Kurz & Root has insisted that Reiner is liable for breach of a subcontract, and requested Reiner to include its claim in Reiner’s action against defendant. However, in view of the circumstances of cancellation, Kurz & Root advised Reiner they would not press for payment of their claim if plaintiff does not prevail in this suit.

28. Plaintiff claims damages to the use of Kurz & Root of $167,383, consisting of (1) estimated loss of profits of $157,744 plus (2) unrecovered out-of-pocket costs of $9,639. The latter item is based primarily on a computation which is arrived at by using estimated costs.

29. After cancellation of the prime contract here involved, the same contract was re-let as DA-ENG-H-184-57-F-616 JD, the date of invitation being March 26, 1957. Plaintiff Reiner bid on this contract also, but was unsuccessful, and the contract was awarded to the John R. Hollingsworth Corp. Although this re-let contract was not put in evidence, two of Reiner’s witnesses, Nicholas and Brownell, admitted that the contract involved in this suit was re-let. Kurz & Root obtained the subcontract from Hollingsworth to produce the 3,567 generators involved. These units were produced by Kurz & Root for Hollingsworth. They were priced at $180 each and were basically the same as the unit which was to have been produced previously for Reiner, except that they lacked certain accessories, including a fan, etc., which was to have been included in the Reiner unit (see finding 46). Kurz & Root made more profit on the Hollings-worth contract than would necessarily have been expected and more than it claims it would have made on the Reiner subcontract ($21.69 per unit). Production under the subcontract proceeded in a satisfactory manner. Brownell testified that Kurz & Root’s profit amounted to $23.87 per unit on the Hollingsworth contract. Kurz & Root produced this generator for Hollingsworth almost entirely in its fiscal year 1958, while the Reiner subcontract would have been produced primarily in fiscal 1957. No evidence was offered to show whether any portion of the prior preliminary work on the Reiner generator was useful in the performance of the re-let contract to Hollingsworth.

30. Kurz & Root’s claim for out-of-pocket expenses was based on estimates which primarily consisted of wages estimated in hours, for various employees and for Brownell, on work performed for Reiner. The claimed expenses were estimated as follows:

Prototype, material, labor, and overhead---------------- $676
Engineering costs------------------------------------- 1,423
Estimating costs______________________________________ 283
Purchasing Department_______________________________ 348
Executive costs_______________________________________ 1,200
Administration______________________________________ 388
Additional overhead at 50% of special costs____________ 1,821
iSettlement fees and costs_____________________________ 3,500
Total----------------------------------------- 9,639

31. For the most part, claimed out-of-pocket expenses of Kurz & Root lack supporting evidence. The evidence reveals that the drawings submitted to Reiner, consisting of about 10 or 12 drawings, actually were prepared fear previous contracts except for a top layout drawing which included the various components included in the other drawings submitted. These various component drawings were selected by Kurz & Root from its files based on their suitability for the Reiner contract. The evidence supports a finding that Kurz & Root improperly or erroneously included in this claim (1) settlement costs of $3,500, (2) the time spent with defendant’s auditors in connection with this claim, and (3) executive salary at $15 per hour.

32. Assuming that Kurz & Root could not use any of the preliminary work performed for Reiner on the Hollings-worth or any other contract, the proof does not warrant a finding that out-of-pocket expenses of Kurz & Root were more than $5,000. Defendant’s computation resulted in an amount of $3,209. There is no adequate proof that Kurz & Root could not or did not make use of this preliminary work for the Hollingsworth or some other contract.

33. Kurz & Root made its verbal agreement with Reiner on July 10, 1956. The suspension was made on August 3, 1956. The assumption that defendant was responsible for maintaining a volume of business for Kurz & Root of $713,-400 in addition to what could be obtained elsewhere for portions of the following 2 fiscal years (December 1956 through November 1957), and the further assumption that no fixed overhead or general and administrative expenses would be applicable to this contract, are improper and unwarranted. Kurz & Root was responsible for acquiring such other work as it could obtain to maintain its proper volume of business. If Reiner had an agreement with Kurz & Root, it existed only for about 3% weeks prior to suspension.. Had Kurz & Root not obtained the re-let contract from Hollingsworth the following year, it admittedly would have obtained other work to replace what was lost under the subcontract. Whatever volume of business was lost during fiscal 1957 was gained in fiscal 1958 when Kurz & Root successfully obtained the subcontract for the 3,567 generators from Hol-lingsworth. Kurz & Root’s volume of business in fiscal 1957, the year in which most of this contract was to have been performed, was greater than in any of the previous 5 years, and also more than fiscal year 1958, when the re-let Hollings-worth contract was actually performed.

34. Kurz & Eoot obtained a subcontract under the re-let contract for the same generator sets as are involved in the suit here, and produced these units primarily in fiscal 1958 rather than in fiscal 1957 as was originally contemplated under the agreement with Eeiner. The proof does not show that Kurz & Eoot was damaged to an appreciable extent by the suspension and cancellation of the Eeiner contract.

conclusion op 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 plaintiff is entitled to recover only $17,000 on its own claim, and it is therefore adjudged and ordered that plaintiff recover from the United States the sum of seventeen thousand dollars ($17,000), on its own claim. Otherwise the petition is dismissed, including the claim for the use of Kurz & Eoot Company (Incorporated). 
      
       For reflections of the Comptroller General’s particular Interest in the competitive bidding system, see 37 Comp. Gen. 251, 255 (1957) ; 28 Comp. Gen. 401 (1949) ; 17 Comp. Gen. 554, 557 (1938) ; 16 Comp. Gen. 565, 567 (1936).
     
      
       The rules as to illegality for fraud, conflict of interest, or some lite defect may well be different.
     
      
       As we hold below, tbe views of tbe Comptroller General can be largely effectuated and tbe interests of tbe Government protected tbrougb use of tbe termination-for-convenienee clause to stop performance under tbe challenged contract.
     
      
       The Armed Service Procurement Act of 1947, as amended, provided in pertinent part (41 U.S.C. § 152(a), (b) and (e) (1952 ed.)) :
      Whenever advertising is required—
      (a) The advertisement for bids shall be a sufficient time previous to the purchase or contract, and specifications and invitations for bids shall permit such full and free competition as is consistent with the procurement of types of supplies and services necessary to meet the requirements of the agency concerned.
      (b) All bids shall be publicly opened at the time and place stated in the advertisement. Award shall be made with reasonable promptness by written notice to that responsible bidder whose bid, conforming to the invitation for bids, will be most advantageous to the Government, price and other factors considered: Provided, That all bids may be rejected when the agency head determines that it is in the public interest so to do.
      (c) All bids or invitations for bids shall contain in their specifications all the necessary language and material required and shall be so descriptive both in its language and attachments thereto in order to permit full and free competition. Any bid or invitation to bid which shall not carry the necessary descriptive language and attachments thereto, or if such attachments are not available or accessible to all competent, reliable bidders, such bid or invitation to bid shall be invalid and any award or awards made to any bidder in such case shall be invalidated and rejected.
     
      
       If the Comptroller General’s view was that the contract was void, termination would Itself be inappropriate since the whole contract would be a nullity. Termination, however, would cushion a possible dash with the General Accounting Office.