Prestex Inc. v. United States

• Decision Date: 12 July 1963
• Docket Number: No. 415-61.,415-61.
• Citation: 320 F.2d 367
• Parties: PRESTEX INC. v. The UNITED STATES.
• Court: U.S. Claims Court

320 F.2d 367 (1963)

PRESTEX INC. v. The UNITED STATES.

No. 415-61.

United States Court of Claims.

July 12, 1963.

Edwin J. McDermott, Philadelphia, Pa., for plaintiff.

William L. Davis, with whom was Asst. Atty. Gen. John W. Douglas, for defendant.

Before JONES, Chief Judge, and LARAMORE, DURFEE and DAVIS, Judges.

JONES, Chief Judge.

Plaintiff was awarded a contract on January 29, 1960, to supply the United States Military Academy with 25,000 yards of white duck cloth to be used in making summer uniforms for the cadets, for a total contract price of $16,447.50.

After testing a sample of the finished cloth, the defendant refused to accept delivery because the cloth failed to conform to the advertised specification.

Plaintiff now sues for damages for breach of contract, asking that it be reimbursed in an amount equal to the difference between the contract price and the resale price (approximately $10,000), or, in the alternative, that it be placed in the position it occupied before the transaction took place, with the amount of recovery to be determined pursuant to Rule 38(c).

The defendant moves for summary judgment, contending that it is not liable under an express contract because the agreement, being predicated upon a bid which was not responsive to the advertised specification, was invalid ab initio and that, alternatively, it is not liable under an implied contract because it received no benefits from plaintiff's attempted performance.

The contract at issue involved the Academy's 1959 supply of the white duck cloth for summer uniforms, the technical description of which is stated in military specification MIL-D-1645.¹ This same material conforming to the same specification had been in use at the Academy at least since 1952, and plaintiff or its president had been identified with the source of supply since that date. In 1958, the plaintiff had fulfilled a contract for the Academy in compliance with specification MIL-D-1645.

The bid which resulted in plaintiff's contract was in response to a second invitation for bids, all bids (there were only two in both instances) having been rejected as too high in comparison with plaintiff's 1958 price. As customary, both invitations required that the material conform to military specification MIL-D-1645, and both of plaintiff's bids offered to furnish material conforming to that specification. However, in plaintiff's response to the second invitation it inserted with pen and ink an exception to the specification, the legal effect of which is the primary issue in this case. Plaintiff stated this exception to military specification MIL-D-1645 in the following words: "Bidding on enclosed sample 35/36"."²

These cryptic words together with the sample constituted the exception in its entirety. Since the specification expressly provided for a width of 29½-30 inches,³ and since the sample enclosed was similar in appearance to white duck conforming to the specification, it was difficult to determine, without a laboratory test, that plaintiff's bid sample differed substantially from the advertised specification except as to its width which was not considered by the contracting officer a material deviation. However, it was lighter in weight, had a lesser thread count, and was only two-ply instead of four-ply as called for in the written specification.

It was on the basis of this second bid incorporating this sample that the contracting officer awarded the contract now sued upon. The contract was for 25,000 yards of white duck at a price of $.6579 per linear yard for a total contract price of $16,447.50. It provided that the cloth was to conform to specification MIL-D-1645 per sample submitted 35/36 inches. The specification required the contractor to submit, before commencing production, a sample of the finished cloth to the contracting officer for approval.⁴

On April 11, 1960, plaintiff submitted the required "preproduction" sample, although it was hardly preproduction, since the initial and only production run in the manufacturing process had been for the entire contract quantity or 25,000 yards. There were no facilities at West Point for testing textiles, and hence plaintiff's "preproduction" sample was forwarded to a laboratory to determine whether the finished cloth proposed to be supplied would conform to specification MIL-D-1645.

The tests disclosed that the "preproduction" sample (and hence the bid sample⁵) failed to conform to the required specification with respect to weight, thread count, yarn for filling, and sizing content. When plaintiff was informed of these deviations from the specification, it replied that its intention always had been to comply with the sample, not with the specification. Plaintiff was then advised that the material submitted by it had been found inferior and unuseable for the purpose of manufacturing white uniforms for cadets' summer wear and that consequently the preproduction sample was rejected. Plaintiff was requested "to locate material meeting the specification requirements." This the plaintiff failed to do. It is defendant's position, therefore, that no valid contract ever came into existence. Plaintiff appealed this decision of the contracting officer to the Armed Services Board of Contract Appeals. This appeal was dismissed for lack of jurisdiction. On June 12, 1961, the Comptroller General decided that since the bid did not conform to the invitation there was no valid contract,⁶ and, since the Government had not accepted delivery of the nonconforming cloth, nor retained any tangible benefits from the other party, no recovery could be had on a quantum meruit basis. Plaintiff then solicited bids for the sale of the rejected material and, on July 24, 1961, sold it to the highest bidder at a price of $0.265 per yard for a total price of $6,832.56.

In moving for summary judgment, defendant argues that the effect of the various statutes and regulations pertaining to formal advertising in the letting of public contracts is that the contract awarded must be the contract advertised and that, if it is not, the Government is not bound, since defendant's contracting agent could not bind the Government beyond his actual authority.

On the question of validity of the contract, we are of the opinion that the defendant is essentially correct. It is a well recognized principle of procurement law that the contracting officer, as agent of the executive department, has only that authority actually conferred upon him by statute or regulation.⁷ If, by ignoring statutory and regulatory requirements, he exceeds his actual authority, the Government is not estopped to deny the limitations on his authority, even though the private contractor may have relied on the contracting officer's apparent authority to his detriment,⁸ for the contractor is charged with notice of all statutory and regulatory limitations.⁹

Reviewing the facts of this case briefly, we find that the defendant advertised for certain material expressly required to conform to military specification MIL-D-1645. Upon the basis of this advertisement, the contracting officer awarded plaintiff the contract incorporating not only the named specification, but also whatever exceptions were implied in the like-appearing sample which plaintiff tied to its bid, the full import of which was not to be discovered until later. It is contended that in doing so the contracting officer violated specific statutory and regulatory requirements pertaining to the bid and award of public contracts and that, since plaintiff is charged with knowledge of these limitations on the contracting authority, the Government is free to disavow the contract, even though the plaintiff may have relied on it to its detriment.

The law applicable to the issue of validity is clear. The Armed Services Procurement Act of 1947, continuing previous policy, provides that Government contracts for the procurement of supplies shall be made by formal advertising¹⁰ and that the contract shall be awarded to the responsible bidder whose bid conforms to the invitation.¹¹ Implementing the general rule, the Armed Services Procurement Regulations require the contracting officer to reject any bid which fails to conform to the essential requirements of the invitation. This applies unless the invitation for bids authorized the submission of alternate bids, and the supplies offered as alternates meet the required specifications. Such an alternative is not present in the invitation involved in this case.¹² Rejection of irresponsive bids is necessary if the purposes of formal advertising are to be attained, that is, to give everyone an equal right to compete for Government business, to secure fair prices, and to prevent fraud.¹³ Indeed, where the specifications in the invitation to bid are at variance with the contract awarded the successful bidder, the resulting contract may be "so irresponsive to and destructive of the advertised proposals as to nullify them."¹⁴ Such a contract in effect would be one issued without competitive bidding and therefore invalid.¹⁵

We must conclude, then, that the contract which concerns us here is invalid and without binding effect on the Government if the plaintiff's exception to the specification was at such variance with the advertised proposals as to nullify them.

The Comptroller General has many times considered the legal effect of deviations from advertised specifications.¹⁶ The rule generally applied in these situations is that deviations may be waived by the contracting officer provided they do not go to the substance of the bid or work an injustice to other bidders.¹⁷ A substantial deviation is defined as one which affects either the price, quantity, or quality of the article offered.¹⁸ The pertinent question for us is whether plaintiff's sample represented a substantial deviation. Without question it did, certainly as to price and — almost as certainly — as to quality.

Plaintiff is of the...