Schlesinger v. United States

• Citation: 390 F.2d 702,182 Ct. Cl. 571
• Decision Date: 16 February 1968
• Docket Number: No. 155-56.,155-56.
• Parties: Sol O. SCHLESINGER, doing business as Ideal Uniform Cap Company v. The UNITED STATES.
• Court: Court of Federal Claims

182 Ct. Cl. 571, 390 F.2d 702 (1968)

Sol O. SCHLESINGER, doing business as Ideal Uniform Cap Company v. The UNITED STATES.

No. 155-56.

United States Court of Claims.

February 16, 1968.

Harold F. Blasky, Washington, D. C., for plaintiff; Max E. Greenberg, New York City, attorney of record. Jerome Reiss, New York City, of counsel.

Lawrence S. Smith, Washington, D. C., with whom was Asst. Atty. Gen. Edwin L. Weisl, Jr., for defendant.

Before COWEN, Chief Judge, and LARAMORE, DURFEE, DAVIS, COLLINS, SKELTON, and NICHOLS, Judges.

OPINION

DAVIS, Judge:^*

The question here is how to treat the Government's termination of plaintiff's contract for default. The defendant and the Armed Services Board of Contract Appeals take the position that the default-termination was proper. Our trial commissioner and the plaintiff insist that it was a breach of the contract and should be dealt with as such. We hold that the termination should be considered as one for the convenience of the Government.

We place this conclusion on the facts found by the ASBCA (or proved conclusively by the record before it): On February 24, 1955, plaintiff submitted his bid to the Navy for furnishing 50,000 blue service caps for enlisted men in response to an invitation for bids requiring delivery by July 31, 1955, on a schedule to be supplied by the bidder. Plaintiff was equipped to perform this work, having completed a contract for 240,000 identical caps for the Navy in 1954. At bid opening on February 25, he was the second lowest bidder. His bid required acceptance within 20 days, or by March 17, and offered delivery of 15,000 caps in each of the months of April, May, and June, and 2,696 caps in July for a destination in Pennsylvania, plus 2,304 caps in June for a destination in Utah.

Plaintiff needed the work and had expected acceptance of his bid by early March. On March 16 the contracting officer requested an extension of time beyond March 17 for acceptance, and the plaintiff consented to seven days, an intentionally brief period in order not to jeopardize his arrangements with suppliers. Thereafter, four additional requests by the Navy, granted by plaintiff, extended the period for acceptance of the bid to April 23, 1955. These extensions were necessitated by the fact that the low bidder was not declared to be nonresponsible until April 4, 1955.

On April 14, 1955, a Government employee notified plaintiff by telephone that he had been awarded the contract to be dated April 14, gave him the contract number, and instructed him to provide the required performance bond. Plaintiff procured the bond on April 15 (received by defendant April 19), and proceeded to take the risk of ordering some of the 13 component materials which the contract required him to furnish. Technically the Government would not be bound until the written award was made (Ship Constr. & Trading Co. v. United States, 91 Ct.Cl. 419, 456 (1940), cert. denied, 312 U.S. 699, 61 S.Ct. 737, 85 L.Ed. 1133 (1941)), and that is why we say plaintiff took a risk in obligating himself to suppliers before having a contract enforceable against the Government. Except for thread, which was ordered on April 28, the record does not reflect the plaintiff's purchase orders for the components, but it is probable that they were ordered both before and after May 3, the date plaintiff received the formal contract award backdated to April 14.

Upon receiving the written award on May 3 the plaintiff learned for the first time that the delivery schedule which he had specified in his original bid had been unilaterally revised by the Government by postponing the deliveries for each month to Pennsylvania by one month, and the small delivery to Utah by two months. This general one-month postponement of the original delivery schedule was designed to offset the Government's 28-day delay in issuing the award (from March 17 to April 14), but the plaintiff was not consulted. He now says that he considered it doubtful that he could perform under the revised schedule but he made no mention of this until June 28, because, he contends, he felt at the time, on the basis of his experience in previous contracts, that he could secure reasonable adjustments from the contracting officer if need be.

The cutting operations for the caps were commenced toward the end of May. Plaintiff received the first two shipments of half of the Government-furnished cloth on April 29 and May 5, and the remaining half by May 26. In the garment trade it is desirable to have all of the cloth for cutting on hand at an early date, since the mass cutting of component parts is the first major step in production. We do not have the plaintiff's cutting schedule for he did not furnish weekly cutting reports as the contract required, perhaps because the Government failed to furnish him the forms (as the contract required) and he did not ask for them.

The contract also required plaintiff to submit to the Government for approval, prior to commencement of production, pre-production samples of 12 component materials which the contractor was to provide, plus two samples of the completed cap. From May 27 to June 17 the plaintiff submitted his 12 pre-production material samples to the contracting officer as fast as he obtained them from suppliers, and they were promptly inspected and approved by the Government well within the 10-day maximum period allowed by the contract. Plaintiff never submitted samples of completed caps because his contract was terminated for default before he delivered any of the items, and he had intended to obtain his sample caps from the earliest production run to satisfy the contract requirement. This may not have been strictly in accordance with the contract, but the plaintiff says that he reasoned that he had already demonstrated his ability to produce the identical cap in a completed contract for 240,000 of them the previous year, and felt that samples of actual production would be preferable to handmade specimens.

In any event, plaintiff failed to make the first delivery of 15,000 caps indicated by the revised delivery schedule to be due May 31. On June 14, 1955, the contracting officer advised him in writing that deliveries were delinquent, and observed that "satisfactory pre-production samples and components have not yet been approved although the contract award date was 14 April 1955". Actually by June 14 the plaintiff had submitted to the contracting officer for approval pre-production samples of all materials except the thread, which was not submitted until June 17 because plaintiff did not receive it from his supplier until June 9 and 14; nor had he submitted the two pre-production sample caps. The contracting officer's letter of June 14 concluded with this paragraph:

This letter notice is your first warning concerning delinquency in deliveries of Caps, service, under the subject contract. You are requested to immediately advise the Contracting Officer the specific dates on which deliveries can be expected. Upon receipt of the information further determination will be made regarding the status of your contract.

The Board properly held that this letter did not constitute an effective notice under Article 11(a) (ii) of the contract, relating to termination for such failure to make progress as to endanger performance of the contract. This provision required a 10-day notice of the condition, as well as a failure by the contractor to cure it, before a termination for default on that ground could be had. The Board also found, and we accept its determination, that, by this letter of June 14 and its failure to end performance at that time, the defendant waived plaintiff's default in not shipping 15,000 caps by May 31st.¹

Plaintiff did not respond until June 28 to the contracting officer's warning notice of June 14. In the interim Mr. Schlesinger was to testify before the Permanent Subcommittee on Investigations of the Senate Committee on Government Operations on June 21 in executive session and June 23 in public session. The Senate Subcommittee was investigating textile procurement in the military services, and plaintiff was a prime suspect in connection with certain alleged irregularities. Plaintiff says that he was busy preparing numerous records which Subcommittee investigators had demanded he produce. He testified that, en route to Washington on June 23 to attend public hearings that day as a witness, he ran into the contracting officer on the airplane, and told him that he had been busy in connection with the activities of the Subcommittee but that he would reply to the contracting officer's June 14th letter within the next few days. To which the contracting officer is said to have responded (although he could not recall it in testifying before the Board, agreeing only that they had met on the plane and had had some conversation) that "that was perfectly all right". The Board did not decide whether or not this exchange actually took place and, in view of the contracting officer's testimony, the evidence cannot be said to be conclusive in plaintiff's favor.

There is no doubt that Mr. Schlesinger did appear before the Subcommittee late in June, and the Board found that on June 27 a naval officer in Washington told the contracting officer that the Chairman of the Subcommittee had sent a letter to the Navy Department "asking as to the status of the contract and implying that the contract should be cancelled". This naval officer was the Assistant to the Assistant Chief of the Navy's Bureau of Supplies and Accounts for Purchasing, and he inquired from the contracting officer as to the status of plaintiff's contract and told him that, if investigation established that there was no urgent need for the caps, it was intended that the contracting officer should terminate for default. After the contracting officer had ascertained that there was no urgent need for the caps and that all pre-production components (but no...