B-158651, AUG. 11, 1970

B-158651, AUG. 11, 1970

CONTRACTS -- PAYMENTS -- VALUE ENGINEERING INCENTIVE REAFFIRMING DECISION OF APRIL 1, 1970, DENYING CONTRACTOR'S CLAIM UNDER VALUE ENGINEERING CONTRACT BECAUSE OF SAVINGS IN PACKING TRAILERS. FINDING THAT CONTRACTOR'S VALUE ENGINEERING INCENTIVE CLAIM WAS NOT INITIATED OR DEVELOPED BY CONTRACTOR AND DOES NOT MEET CRITERIA OF REQUIREMENT MUST BE UPHELD.

TO TAR HEEL ENGINEERING AND MANUFACTURING COMPANY:

THIS IS IN REFERENCE TO YOUR LETTER OF APRIL 9, 1970, WITH ENCLOSURES, REQUESTING RECONSIDERATION OF OUR DECISION, B-158651, APRIL 1, 1970, IN WHICH WE CONCLUDED THAT THE RECORD BEFORE OUR OFFICE PROVIDED NO BASIS FOR OVERRULING THE CONTRACTING OFFICER'S DECISION DENYING YOUR CLAIM UNDER THE VALUE ENGINEERING INCENTIVE PROVISION IN CONTRACT NO. DA-20-113-AMC- 04491(T), DATED OCTOBER 30, 1964, AS AMENDED, WITH THE DEPARTMENT OF THE ARMY.

THE CONTRACTING OFFICER'S CONCLUSION THAT NO INCENTIVES COULD BE PAID TO TAR HEEL UNDER THE "VALUE ENGINEERING INCENTIVE" CLAUSE OF THE CONTRACT WAS BASED ON THE FINDING THAT THE VALUE ENGINEERING CHANGE PROPOSAL (VECP) SUBMITTED BY THE CONTRACTOR COULD NOT BE CHARACTERIZED AS ONE INITIATED AND DEVELOPED BY IT AS REQUIRED BY THE CLAUSE.

TAR HEEL'S VECP WHICH SUGGESTED THE POSSIBLE SAVINGS TO BE DERIVED BY PACKING THE TRAILERS IN THE MANNER ILLUSTRATED IN FIGURE 1 WHICH WAS ATTACHED TO THE VECP, WAS SUBMITTED BY TAR HEEL TO THE BIRMINGHAM PROCUREMENT DISTRICT, UNITED STATES ARMY, ON APRIL 6, 1965.

YOU SUBMITTED A CLAIM TO OUR OFFICE, WHICH WAS THE SUBJECT OF OUR DECISION OF APRIL 1, 1970, FOR THE SAVINGS UNDER YOUR VECP ON DECEMBER 16, 1969, AND OUR OFFICE REQUESTED A REPORT ON YOUR CLAIM. THE REPORT ON YOUR CLAIM INCLUDED THE "CONTRACTING OFFICER'S FINDINGS OF FACT AND FINAL DECISION" WHICH STATES THAT DURING THE PERIOD MARCH 30-31, 1965, GOVERNMENT QUALITY CONTROL SPECIALISTS INSTRUCTED TAR HEEL TO CHANGE ITS METHOD OF PACKING THE CONTRACT SUPPLY ITEM (M 100, AMPHIBIOUS, CARGO, 1/4 TON, 2 WHEEL TRAILERS). THE INSTRUCTIONS GIVEN BY THE GOVERNMENT QUALITY CONTROL SPECIALISTS TO TAR HEEL WERE TO POSITION ONE TRAILER INVERTED OVER THE TOP OF AN UPRIGHT ONE SO THAT THE RESPECTIVE TRAILER LUNETTE ATTACHMENTS FACED IN THE SAME RATHER THAN OPPOSITE DIRECTIONS. THE NEXT STEP OF THE INSTRUCTIONS WAS TO REMOVE THE WHEELS OF THE INVERTED PACKED TRAILER AND TO STRAP THEM TO THE BOTTOM OF THE TRAILER INSTEAD OF LEAVING THE WHEELS ATTACHED TO THE TRAILER AXLE.

THE FOLLOWING FINDINGS ARE ALSO SET FORTH IN THE CONTRACTING OFFICER'S DECISION:

"4. AT NO TIME PRIOR TO THE GOVERNMENT'S INSTRUCTIONS OF 30-31 MARCH 1965 AS INDICATED ABOVE DID THE CONTRACTOR SUGGEST OR OTHERWISE MENTION IN ANY MANNER OR DETAIL WHATEVER THE NATURE OF SAID PACKING CHANGES TO THE GOVERNMENT.

"5. THE CONTRACTOR AGREED WITHOUT EXCEPTION ON OR ABOUT 30-31 MARCH 1965 TO POSITION TRAILERS PACKED IN SHIPPING UNITS SO THAT THEIR RESPECTIVE LUNETTE ATTACHMENTS FACED IN THE SAME DIRECTION PURSUANT TO GOVERNMENT INSTRUCTIONS.

"6. NOTWITHSTANDING ITS OBJECTIONS, THE CONTRACTOR WAS ADVISED ON 30 31 MARCH 1965 BY GOVERNMENT INSPECTION PERSONNEL AND AGAIN ON 7 APRIL 1965 BY THE CONTRACTING OFFICER'S REPRESENTATIVE, THAT EXISTING CONTRACT SPECIFICATIONS REQUIRED IT TO REMOVE THE WHEELS FROM INVERTED PACKED TRAILERS AND STRAP THEM TO THE BOTTOM OF THE TRAILER.

"7. THE CONTRACTOR'S ENGINEERING CHANGE COST REDUCTION PROPOSAL DATED APRIL 6, 1965 INCORPORATED AS PROPOSED CONTRACT CHANGES NOTHING MORE THAN THE EXACT, DETAILED PACKING CHANGES THE CONTRACTOR HAD BEEN INSTRUCTED TO ACCOMPLISH BY GOVERNMENT QUALITY CONTROL SPECIALISTS ON 30-31 MARCH 1965 AS MENTIONED ABOVE.

"8. THE PROPOSED PACKING TECHNIQUE CHANGES REFLECTED IN THE CHANGE PROPOSAL SUBMITTED BY TAR HEEL ENGINEERING AND MANUFACTURING COMPANY UNDER DATE OF APRIL 6, 1965 WERE NOT INITIATED AND DEVELOPED BY SAID CONTRACTOR, BUT WERE INITIATED AND DEVELOPED TO COMPLETE DETAIL BY GOVERNMENT PERSONNEL WHO FIRST DIRECTED THE APPLICATION OF SUCH TECHNIQUES TO CONTRACT DA-20-113-AMC-04491(T) DURING THE LIFE OF SAID CONTRACT."

IN THE LETTER OF APRIL 9, 1970, YOU DISAGREE WITH ARMY'S POSITION THAT THE CHANGES INCLUDED IN YOUR VECP WERE NOT ORIGINATED AND DEVELOPED BY YOUR CONCERN. IN THIS REGARD THE LETTER OF APRIL 9, 1970, STATES AS FOLLOWS:

"1. SEE THE ATTACHED LETTER IN WHICH WE EXPLAINED THAT AT THE TIME OF MESSRS. LLOYD AND ATKINSONS' ARRIVAL AT TAR HEEL ENGINEERING & MFG. CO. WE HAD FOUR TRAILERS ALREADY PACKAGED AND READY FOR SHIPMENT. ONE PACKAGE OF THESE TRAILERS HAD ONE TRAILER INVERTED AND STACKED ON TOP OF THE OTHER TRAILER WITH LUNETTES IN OPPOSITE DIRECTION AND THE WHEELS WERE STILL MOUNTED ONTO THE AXLE. THE OTHER PACKAGE OF TRAILERS WAS IN ACCORDANCE WITH THE VALUE ENGINEERING PROPOSAL WE LATER SUBMITTED; THAT IS, ONE TRAILER WAS PACKAGED ON TOP OF ANOTHER TRAILER WITH THE TOP TRAILER IN THE INVERTED POSITION WITH LUNETTES IN THE SAME DIRECTION AND THE WHEELS OF THE TOP TRAILER REMOVED AND STRAPPED TO THE UNDERBED OF THE UPPER VEHICLE. IN THE NEXT TO THE LAST PARAGRAPH OF YOUR LETTER OF APRIL 1, 1970 YOUR CONCLUSION WAS THAT WE NEITHER INITIATED NOR DEVELOPED THIS PACKAGING ARRANGEMENT. THIS IS NOT TRUE. IT WOULD APPEAR SINCE BOTH AFFIDAVITS FROM MR. ATKINSON AND MR. LLOYD ARE SO NEARLY THE SAME THAT SOMEONE HAD PREPARED THIS STATEMENT TO HAVE THEM SIGN, AND IT IS DIFFICULT FOR US TO UNDERSTAND WHY THEY WOULD PERJURE THEMSELVES IN MAKING SUCH A STATEMENT.

"2. WE ARE ENCLOSING A COPY OF A LETTER DATED JUNE 8, 1965 FROM MR. WILLIAM B. ATKINSON THAT EXPLAINS THAT WE HAD GIVEN CONSIDERABLE THOUGHT AND INVESTIGATION TO VARIOUS MEANS OF PACKAGING THESE TRAILERS FOR OVERSEAS EXPORT SEVERAL WEEKS PRIOR TO MESSRS. LLOYD AND ATKINSONS' VISIT TO TAR HEEL."

WE REQUESTED A REPORT FROM THE DEPARTMENT OF THE ARMY ON THE CONTENTIONS IN THE LETTER OF APRIL 9, 1970. ENCLOSED WITH THE CONTRACTING OFFICER'S SUPPLEMENTAL ADMINISTRATIVE REPORT AND RECOMMENDATIONS ARE STATEMENTS FROM MR. ATKINSON AND MR. LLOYD BOTH OF WHICH REITERATE THAT THE AFFIDAVITS ORIGINALLY SUBMITTED BY THESE GENTLEMEN ARE CORRECT. THE AFFIDAVIT FROM MR. ATKINSON DATED MAY 9, 1970, SPECIFICALLY STATES THAT THE PERSONNEL OF TAR HEEL DID NOT MENTION, DEMONSTRATE OR OTHERWISE BRING TO HIS ATTENTION THE METHOD OF PACKING REFLECTED IN THE VECP. ANOTHER MEMORADNDUM PREPARED BY MR. ATKINSON DATED SEPTEMBER 24, 1965, INDICATES THAT THE VARIOUS PACKING CHANGES WHICH WERE INCLUDED IN YOUR VECP WERE INITIALLY SUGGESTED BY MR. ATKINSON DURING AN INSPECTION VISIT TO YOUR PLANT ON MARCH 30-31, 1965.

THE LETTER OF JUNE 8, 1965, SIGNED BY MR. WILLIAM B. ATKINSON ENCLOSED WITH YOUR LETTER OF APRIL 9, 1970, IS NOT FROM THE SAME MR. ATKINSON WHO VISITED YOUR PLANT ON MARCH 30-31, 1965. WE DO NOT CONSIDER THE LETTER OF JUNE 8, 1965, AS ESTABLISHING THAT THE STATEMENTS MADE BY MR. WALTER T. ATKINSON ARE CONTRADICTORY OR INCORRECT.

IN THE LETTER OF APRIL 9, 1970, YOU STATE THAT YOU COULD FIND NO REQUIREMENT IN THE VALUE ENGINEERING INCENTIVE PROVISION INCLUDED IN YOUR CONTRACT THAT THE VECP BE "NEW, UNIQUE, DIFFERENT OR ORIGINAL." IN THIS REGARD, YOU ARE ADVISED THAT THE "VALUE ENGINEERING INCENTIVE (OCTOBER 1964) (ASPR 1-1707.2)" PROVISION INCLUDED IN YOUR CONTRACT PROVIDES IN PARAGRAPH (A) THAT THE CLAUSE APPLIES TO COST REDUCTION PROPOSALS "INITIATED" AND "DEVELOPED" BY THE CONTRACTOR FOR CHANGING THE DRAWINGS, DESIGNS, SPECIFICATIONS, OR OTHER REQUIREMENTS OF THE CONTRACT. THE CONTRACTING OFFICER'S FINDING WAS THAT YOUR VECP DID NOT MEET THIS REQUIREMENT. PURSUANT TO OUR REVIEW OF YOUR LETTER OF APRIL 9 AND THE ENCLOSURES ATTACHED THERETO AND ARMY'S REPORT OF JUNE 8, 1970, WE FIND NO BASIS FOR DISAGREEING WITH THE CONTRACTING OFFICER'S DECISION THAT THE CHANGE IN YOUR VECP WAS NOT ORIGINATED OR DEVELOPED BY YOU.

IN THE CIRCUMSTANCES, OUR DECISION OF APRIL 1, 1970, DENYING YOUR CLAIM IS AFFIRMED.