Section 8. Debarment

P. E. C. CORPORATION

ASBCA No. 14241 (1969)

This is an appeal from the summary cancellation of a Purchase Order upon discovery that through administrative oversight it had been issued to a suspended contractor, Type D indefinite, contrary to Armed Services Procurement Regulation (ASPR) Section 1, Part 6.1

DECISION

This Board has jurisdiction to determine the validity of a contract under which an appeal is brought to it to the extent necessary to determine if the Board has jurisdiction to proceed. Ordnance Parts & Engineering Co., ASBCA No. 12820, 68-1 BCA ¶ 6870; ITT Defense Communications Division, Defense-Space Group ASBCA No. 13420, 69-1 BCA ¶ 7548; Mission Valve & Pump Company, a Division of Mission Manufacturing Company, ASBCA Nos. 13552 & 13821, 69-2 BCA ¶ and cases cited.

Quotations for small purchases may be solicited by the use of SF 18 or DD Form 1155, which expressly state that quotations submitted on those forms are not to be construed as offers that can be accepted to form a binding contract. Thus, as ASPR 16-102.1(b) (2) states, a Purchase Order issued pursuant to a quotation submitted on one of those forms is only an offer to buy goods and services specified in that order on the terms indicated therein. The result is the same where, as in this case, quotations are solicited by teletype. A quotation of prices is not an offer since all of the terms essential to the formation of a contract are not expressed. Although the mere use of the word "quotation" does not negate the possibility that all other essential terms were previously agreed upon, tacitly or otherwise, the party asserting that a contract has been formed must show that such was the case. Corbin, Contracts, § 26 (1950).

It is clear in this case that the subject Purchase Order, when issued on 11 March 1969, was only an offer, and, accordingly, could have been cancelled by the Government without liability at any time before appellant undertook a substantial part of the requested performance. Ordnance Parts and ITT cases, supra. But by the time the Government cancelled the Purchase Order, on 25 April 1969, appellant had commenced a substantial part of the requested performance, through its supplier, and, accordingly, but for appellant's suspended status, the Purchase Order by that date would have ripened into an irrevocable contract.

So far as respondent's motion to dismiss is based upon the lack of a Termination for Convenience clause in the Purchase Order, it is without merit. In the ITT case, supra, there was also involved a Purchase Order

1Legal notice concerning the content of ASPR, and changes thereto, is provided by publication in the Federal Register. See 32 CFR § 1.100, et seq.

without such provisions, cancelled after the recipient had undertaken a substantial part of the requested performance, where the supplier would not accept a no-cost termination. In that case we noted that contracting officers have authority, and are expected by established policy, to enter into settlement agreements, before or after termination of a contract without termination provisions, thereby providing a contractual remedy for what would otherwise be a breach of contract. Therein we concluded that ASPR 3-608.5, read together with ASPR 8-201, compelled the conclusion that, in any case where a valid contract without termination provisions was to be terminated under circumstances not amounting to default, the the contracting officer was required to follow the provisions of Section VIII of ASPR as a basis for settlement of such termination. Since in this case the Purchase Order amounted to less than $1,000.00, if it were to be found to be a valid and binding contract the contracting officer would be required, in lieu of termination, to permit the Purchase Order to run to completion.

Accordingly, since there is no dispute between the parties over any material fact herein, the proper disposition of this appeal depends upon the effect upon the contractual relationships between the parties to be given appellant's suspended status. Debarment as a remedy to insure compliance with various statutes has been enacted by Congress as a part of the so-called Buy American Act (41 U.S.C. § 10b), Walsh-Healey Public Contracts Act (41 U.S.C. § 37), Davis-Bacon Act (40 U.S.C. § 276a-2), and a number of other statutes, which procedures are reflected in the provisions of ASPR 1-603. Administrative debarment as a means of insuring responsible bidding, having no immediate statutory basis, but for various types of conduct tending to reflect upon the business integrity and responsibility of the firms and individuals concerned, has been authorized by regulations contained in ASPR 1-604. In the case of both statutory and administrative debarment, it has been held that such debarment is not a penalty but, if the procedures leading thereto are reasonable, a proper regulatory measure for protecting the interest of the Government in such matters. See ASPR 1-604, 1-605; Copper Plumbing & Heating Co. v. Campbell, 290 F. 2d 368 (D.C. Cir. 1961). ASPR 1-605 concerns temporary suspension for the same reasons that might lead to administrative debarment and is authorized only pending further investigation and the pendency of any legal proceedings that might ensue. The validity of both suspension and administrative debarment has been upheld. See Schlesinger v. Gates, 249 F. 2d 111 (D.C. Cir. 1957), cert. denied, 355 U.S. 939 (1958).

The effect of an award made during a period of statutory or administrative debarment or suspension contrary thereto, whether because of the deceptivensss of the contractor or administrative oversight on the part of the contracting officer, has not preveusly been considered by this Board.

The Comptroller General, in 33 Comp. Gen. 63 (1953), considered the claim of a copartnership, consisting of Harry and Samuel Paisner, doing business as Quality Manufacturing Company, who, while debarred for violation of the Walsh-Healey Act, had been awarded a contract for the manufactur of sleeping bags from Government-furnished material, cancelled after partial performance within 3 months, upon discovery that the partners, doing business under a different name, were currently debarred and so listed under their own names and previous firm name. When the deception was discovered, the partners were directed by an inspector to complete those bags for which material had already been cut. Some 12,000 bags

were thus completed and delivered but the Government refused to pay for them. It was also shown that during the period of debarment the partners, doing business under their new firm name, had been awarded two additional contracts, satisfactorily performed them, and had been paid in full. The record was clear that the partners were fully aware of their debarred status. On this record, The Comptroller General refused all payment to the partners even for sleeping bags delivered. He held that debarment under the Walsh-Healey Act made the contract illegal and totally void. On these facts, however, the United States Court of Claims, in Paisner v. United States, 138 Ct. Cl. 420, 150 F. Supp. 835 (1957), cert. denied, 355 U.S. 941 (1958), in a split decision, apparently based on quantum meruit, determined that the partners should receive the contract price for sleeping bags delivered, less any profit thereon and the cost to the Government of removing the remainder of the Government-furnished material from the partner's plant. In addition, the Court of Claims allowed the Government's counterclaim for all profit the partners had received from the two other contracts performed during debarment for which they had previously been paid in full.

In a case involving circumstances similar to this appeal, The Comptroller General, in 36 Comp. Gen. 532 (1957) considered the claim of Manhattan Lighting Equipment Co., Inc. There the contractor, after notice of administrative debarment by the Department of the Air Force containing notice that such debarment was effective throughout the Department of Defense, nevertheless submitted the low bid in response to an IFB issued by the Department of the Army for the supply of lighting equipment. In ignorance of the contractor's debarred status, through administrative oversight, the Army contracting officer awarded that debarred firm the contract. Within two months the error was discovered, but only after the contractor had incurred expense toward fulfillment of the contract. Nevertheless, the contracting officer notified the contractor that its contract was rescinded and declared void and that no deliveries would be accepted. The Comptroller General found that the contractor had been duly notified concerning its debarred status and of the relevant provisions of ASPR by reason of their publications in the Federal Register. Accordingly, since the contractor knew, or should have known, that the Army contracting officer lacked authority to award a contract to it unless an exception to its debarred status for the purposes of such award had in fact been made by designated authority, The Comptroller General held that under such circumstances it was incumbent upon the debarred contractor to ascertain whether such a determination had in fact been made before it could rely upon such award as valid. In reaching the conclusion that such a duty was properly imposed upon the debarred contractor, The Comptroller General cited Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380 (1947). In that latter case, the United States Supreme Court, at page 384, has said:

11* * * anyone entering into an arrangement
with the Government takes the risk of having
accurately ascertained that he who purports to
act for the Government stays within the bounds
of his authority. The scope of this authority
may be explicitly defined by Congress or be
limited by delegated legislation *** even
though, as here, the agent himself may have been
unaware of the limitations upon his authority."

After finding that the contractor, in Manhattan Lighting, had made no inquiry, and that no exception had in fact been requested or granted, The Comptroller General held that, under such circumstances, award to an administratively debarred contractor was voidable at the option of the Government. Cancellation of the contract upon discovery of the contractor's debarred status was therefore deemed proper, and after such cancellation The Comptroller General concluded there was no longer any basis for payment by the Government of any expenses incurred by the debarred contractor in connection with that transaction.

In a related, unpublished opinion, B-129021, 25 January 1957, The Comptroller General advised the Secretary of the Army that administrative debarment becomes effective as a basis for rejection of a bid as soon as a determination to debar is made by designated authority, and notice to the debarred bidder for that purpose is not material. However, the award of a contract to an administratively debarred firm or individual would be voidable at the option of the Government if the debarred firm or individual had not in fact received such notice, irrespective in either case of notice to the contracting officer who made the award. Although no metion was made therein of suspension, it is clear that the same rules ought to apply to such status as well.

The foregoing cases indicate that a clear distinction is to be made between statutory debarment and administrative debarment and suspension. It is clear, from a consideration of Federal Crop Insurance Corp., supra, and in any event is a familiar and well-established rule, that concepts of estoppel and apparent authority, applicable against other contractors, are not applicable against the Government as a contractor. See, United States v. Hoffart, 256 F. 2d 186, 192 (8th Cir. 1958); Reese v. Government of The Virgin Islands, 277 F. 2d 329, 333 (3d Cir. 1960); Stone v. United States, 286 F. 2d 56, 59 (8th Cir. 1961), and cases cited. However, the doctrine of ratification is applicable in Government contracting, so that the superior of a Government contracting officer, if he has such authority, may ratify and thus confirm what the inferior was unauthorized to do. See, Ford v. United States, 17 Ct. C1. 60, 76 (1881); Byrne Organization, Inc., et al. v. United States, 152 Ct. Cl. 578, 586, et seq. (1961), and cases cited.

Thus, in Paisner, supra, where award was made to a partnership debarred for violation of a labor statute by action of the Secretary of Labor, no contracting officer of the Government had authority to award a contract to that partnership so long as it was carried on the debarred list. The purported award, therefore, was void ab initio. On the other hand, in the Manhattan Lighting claim, supra, where award was made to an administratively debarred firm due to administrative oversight or ignorance of that firm's debarred status, the erroneous action of the contracting officer, upon its discovery, was susceptible of ratification by superior authority. That award, therefore, was not void ab initio but voidable at the option of the Government. If, upon discovery of his error, the contracting officer does not consider that the making of an exception in such a case would be in the best interest of the Government, and hence makes no request for ratification of the erroneous award, but instead notifies the debarred firm that the award is cancelled or rescinded, the purported award thereupon becomes void and thereafter no payment need be made by the Government of any expenses incurred by the debarred contractor in connection with

that transaction, except for goods delivered and accepted by the Government. For such goods, the Government need pay only the contract price, less profit, and may counterclaim for any profit made by a debarred contractor on other contracts performed during a period of debarment provided no exception was in fact made by designated authority to permit the award of any such prior contracts. These latter actions, of course, do not arise under a valid contract, and, accordingly, may not be brought before this Board for settlement.

Based upon the record before us in this case, we have found, or consider it reasonable to infer, that the OCAMA contracting officer who issued the subject Purchase Order to appellant on 11 March 1969 did so through administrative oversight or ignorance at that time of appellant's suspended status; but that on or shortly before 25 April 1969 he discovered or had it brought to his attention that appellant was currently listed as a suspended contractor, Type D indefinite. Upon such discovery and after reaching the conclusion that there were no circumstances in this case sufficient to justify his seeking ratification of the erroneous award from superior authority, the OCAMA contracting officer promptly notified appellant that the subject Purchase Order was cancelled. Thereupon the purported award became void. We do not consider that any inequity is imposed upon an administratively debarred or suspended firm or individual by the requirement that such a firm or individual ascertain accurately whether in fact an exception to such status has been made for the purposes of a particular award during such a period of debarment or suspension.

Accordingly, on and after 25 April 1969, there being no valid and binding contract between the parties, the Board is without jurisdiction to consider this appeal. For that reason, respondent's motion must be granted. This appeal is, therefore, DISMISSED.

Section 9. Contractor Negligence

UNITED STATES v. M. O. SECKINGER, JR., etc.
397 U.S. 203

In the Supreme Court of The United States. No. 395. Dated March 9, 1970.
On Writ of Certiorari to the United States Court of Appeals for the Fifth
Circuit.

This case concerns the construction of a provision common to fixedprice government construction contracts which provides that the private contractor "shall be responsible for all damages to persons or property that occur as a result of his fault or negligence "The Court of Appeals for the Fifth Circuit held that the provision could not be construed to allow the Government to recover from the contractor damages suffered by the Government on account of its own negligence. 408 F. 2d 146 (1969). We granted certiorari because of the large amount of litigation which this contract clause has produced and because of the divergent results which the lower courts have reached in construing the same or similar provisions. 396 U.S. 815 (1969). We reverse.