B-149932, JUL. 15, 1963

B-149932, JUL. 15, 1963

TO MR. JEREMIAH C. WATERMAN:

YOUR LETTER OF MAY 1, 1963, ACKNOWLEDGED MAY 13, REQUESTS REVIEW OF THE DISALLOWANCE OF THE CLAIM OF THE SOUTHERN PACIFIC COMPANY FOR REFUND OF $116,119.61 DEDUCTED FROM MONEYS OTHERWISE PAYABLE TO SUCH COMPANY ON ACCOUNT OF DAMAGES TO A SHIPMENT FOR THE DEPARTMENT OF THE ARMY WHILE ENROUTE FROM EATONTOWN, NEW JERSEY, TO THE U.S. ARMY ELECTRONIC PROVING GROUND, FORT HUACHUCA, ARIZONA, ON BILL OF LADING WX-9654324 IN JULY 1959. YOU REFER TO A LETTER OF SEPTEMBER 11, 1962, FROM THE GENERAL FREIGHT CLAIM AGENT OF THE RAILROAD AND ASSERT THAT INFORMATION RELATIVE TO A DETAILED BREAKDOWN OF THE CHARGES AND THEIR NECESSITY NEVER HAS BEEN FURNISHED YOU.

WITH OUR DECISION OF MARCH 4, 1963, B-149932, ADDRESSED TO THE SOUTHERN PACIFIC COMPANY, WE FURNISHED A COPY OF A REPORT DATED SEPTEMBER 27, 1962, FROM THE TRANSPORTATION DIVISION, FINANCE CENTER, U.S. ARMY, INDIANAPOLIS 49, INDIANA, WHICH CONTAINS CONSIDERABLE INFORMATION AS TO MANY OF THE POINTS YOU RAISE. ANOTHER COPY OF SUCH REPORT IS ATTACHED FOR YOUR CONVENIENCE. HOWEVER, IT SEEMS CLEAR THAT THE AMOUNT COLLECTED IS COMPRISED OF THE AMOUNTS ACTUALLY EXPENDED BY THE UNITED STATES FOR REPAIR TO THE DAMAGED FLIGHT CONTROL SYSTEM PLUS UNEARNED FREIGHT AS FOLLOWS:

TABLE

COST OF REPLACEMENT ANTENNA $ 60,109.00

COST OF REPAIRS (INCLUDING MATERIALS

OTHER THAN ANTENNA) 55,983.00

$116,092.00

LESS SALVAGE ON SALE OF DAMAGED ANTENNA -15.00

$116,077.00

PLUS UNEARNED FREIGHT ON THE UNREPAIRABLE

ANTENNA 42.61

$116.119.61

THE NECESSITY FOR PROCURING A REPLACEMENT ANTENNA WHICH WAS PURCHASED BY SPERRY RAND CORPORATION, FORD INSTRUMENT DIVISION, WHICH HAD CONTRACTED TO DISASSEMBLE, EXAMINE AND EVALUATE THE DAMAGES TO THE FLIGHT CONTROL SYSTEM AND REPAIR THE SAME TO SERVICEABLE AND OPERABLE CONDITION UNDER CONTRACT DA-36-039 SC-84918 DATED JANUARY 5, 1960, IS EXPLAINED IN PARAGRAPH 2 (D) OF PAGE 2 OF THE REPORT OF SEPTEMBER 27, 1962. SUCH REPLACEMENT IS REPORTED TO HAVE BEEN PURCHASED FROM GENERAL BRONZE CORPORATION AT A COST OF $60,109. ALSO, A BREAKDOWN OF THE COSTS OF REPAIR INCLUDING MATERIALS OTHER THAN THE ANTENNA IS SET OUT IN THE ATTACHED COPY OF A CHART WHICH WAS INCLUDED IN THE FILE MADE AVAILABLE TO US BY THE DEPARTMENT OF THE ARMY.

AS TO THE 12 POINTS MENTIONED IN YOUR LETTER, OUR COMMENTS ARE AS FOLLOWS:

1 AND 2. PARAGRAPH 5 (B), PAGE 5 OF THE REPORT OF SEPTEMBER 27, 1962, DEALS AT LENGTH WITH YOUR ALLEGATION THAT YOU WERE NOT PERMITTED TO INSPECT THE DAMAGED EQUIPMENT AND OBTAIN INFORMATION AS TO THE COST OF REPAIRS. IF ADDITIONAL AUDIT OF COSTS IS CONSIDERED NECESSARY IT IS POSSIBLE THAT ARRANGEMENTS FOR SUCH AN AUDIT MIGHT BE ARRANGED WITH THE DEPARTMENT OF THE ARMY.

3. THE NECESSITY FOR REPLACEMENT OF THE ANTENNA IS, AS POINTED OUT ABOVE, EXPLAINED IN PARAGRAPH 2 (D), PAGE 2, OF THE REPORT OF SEPTEMBER 27, 1962. ALSO, THE STATEMENT THAT THE DAMAGE THERETO WAS SLIGHT APPEARS ERRONEOUS AS SHOWN BY YOUR AGENT'S (R. L. YOCHEM-S) INSPECTION REPORT DATED AUGUST 4, 1959, MADE AT THE TIME THE FLIGHT CONTROL SYSTEM ARRIVED AT DESTINATION AT BISBEE, ARIZONA, WHERE HE STATES

"EVIDENCE OF HEAVY IMPACT ENROUTE, SNAPPED ANTENNA SUPPORT ALLOWING SAME TO BECOME DISENGAGED FROM PEDESTAL MOUNT, SHEARING ALL CABLE CONNECTIONS, ANTENNA FELL AND LODGED BETWEEN WALL OF CAR AND TRAILER CHASSIS RESULTING IN FURTHER DAMAGE TO ANTENNA AND COMPONENT PARTS.'

4. AN EXPLANATION OF THE SALVAGE ($15) OBTAINED BY SALE OF THE DAMAGED ANTENNA IS CONTAINED IN PARAGRAPH 4 (A) AND 4 (A/1 OF THE ARMY REPORT OF SEPTEMBER 27, 1962, FROM WHICH IT APPEARS THAT SUCH AMOUNT RESULTED FROM COMPETITIVE BIDDING AND SALE TO THE HIGHEST BIDDER.

5. AS EXPLAINED ABOVE, THE CHARGE OF $60,109 FOR THE DAMAGED ANTENNA AND $55,983 WERE THE ACTUAL COSTS TO THE UNITED STATES.

6. THE COSTS WERE INCURRED UNDER CONTRACT DA-36-039 SC-84918 DATED JANUARY 5, 1960, WITH THE SPERRY RAND CORPORATION, FORD INSTRUMENT COMPANY DIVISION, UNDER WHICH THE REPAIRS WERE MADE.

7, 8 AND 9. THE CONTRACT AMONG OTHER THINGS PROVIDED FOR SPERRY RAND DISASSEMBLING, EXAMINING AND EVALUATING THE DAMAGES AND PERFORM REPAIRS AND MODIFICATIONS NECESSARY TO ITS RETURN TO A SERVICEABLE AND OPERABLE CONDITION. THE RECORDS HERE INDICATE THE ENGINEERING COSTS AND ENGINEERING TIME WAS REQUIRED INCIDENT THERETO AS WAS THE REPLACEMENT OF THE FOAM FLEX CABLE.

10. A CARRIER'S LIABILITY FOR THE SHIPPER'S LOSS TO THE DAMAGED PROPERTY INCLUDES NOT ONLY THE DIRECT COSTS OF LABOR AND MATERIALS BUT ALSO A FAIR ALLOWANCE FOR OVERHEAD INCURRED IN REPLACING THE DAMAGED ARTICLE. CONDITIONED AIR CORP. V. ROCK ISLAND MOTOR TRANSIT CO., 114 N.W. 2D 304. THUS, IF OVERHEAD IS INCLUDED IN THE LABOR COSTS IN REPRESENTS A PART OF THE DAMAGES FOR WHICH YOUR COMPANY APPEARS LIABLE.

11. AS SET OUT ABOVE, THE SUM OF $60,109 WAS THE COST OF THE REPLACEMENT ANTENNA PURCHASED BY SPERRY RAND CORPORATION FROM GENERAL BRONZE CORPORATION.

AS TO 12, SEE PARAGRAPH 5 OF THE REPORT OF SEPTEMBER 27, 1962.

ON THE BASIS OF THE RECORD HERE WE SEE NO PROPER BASIS FOR ALLOWING ANY PART OF YOUR CLAIM FOR $116,119.61 AND OUR DISALLOWANCE OF THAT CLAIM IS ACCORDINGLY SUSTAINED.