B-164169, MAR 31, 1971

B-164169, MAR 31, 1971

CLAIMS - DELAY DAMAGES DECISION DISALLOWING CLAIM FOR $259,327.93 FOR DELAY DAMAGES ALLEGED TO HAVE BEEN INCURRED DUE TO FAULTY SPECIFICATIONS AND UNREASONABLE DELAYS BY THE GOVERNMENT IN CONNECTION WITH A NEGOTIATED CONTRACT DATED JUNE 29, 1954. SINCE CERTAIN PROVISIONS OF THE ADMINISTRATIVE REPORT SEEMED TO WARRANT FURTHER CONSIDERATION THE DEPARTMENT OF THE ARMY WAS REQUESTED TO SUBMIT ITS VIEWS ON THE POSSIBILITY OF FURTHER ADMINISTRATIVE ACTION AND THE POSSIBILITY OF AN AGREEABLE SETTLEMENT OF ANY AMOUNT OF UNCOMPENSATED DELAY DAMAGES ATTRIBUTABLE TO THE FAULT OF THE GOVERNMENT. HOWEVER, AFTER AN EXAMINATION OF ALL THE EVIDENCE, THE COMP. GEN. MUST AGREE WITH THE ARMY THAT THE FACTS OF RECORD DO NOT ESTABLISH A CLEAR LIABILITY ON THE PART OF THE GOVERNMENT AND THEREFORE THE CLAIM MUST BE DISALLOWED.

TO HENRY PRODUCTS COMPANY:

REFERENCE IS MADE TO YOUR CLAIM IN THE AMOUNT OF $259,327.93 FOR DELAY DAMAGES ALLEGED TO HAVE BEEN INCURRED DUE TO FAULTY SPECIFICATIONS AND UNREASONABLE DELAYS BY THE GOVERNMENT IN CONNECTION WITH CONTRACT NO. DA- 36-039-SC-64235, DATED JUNE 29, 1954, ISSUED BY THE SIGNAL CORPS SUPPLY AGENCY, DEPARTMENT OF THE ARMY.

THE REFERENCED NEGOTIATED CONTRACT, AS ORIGINALLY EXECUTED, CALLED FOR THE DELIVERY OF 662 REEL UNITS AND AUXILIARY ITEMS DURING A PERIOD OF APPROXIMATELY 15 MONTHS, WITH COMPLETION SCHEDULED FOR SEPTEMBER 1955, AT A TOTAL PRICE OF $410,384.34. AFTER EXTENSIVE CHANGES IN THE SPECIFICATIONS AND 18 MODIFICATIONS TO THE CONTRACT, DELIVERY OF THE REQUIREMENTS WAS COMPLETED IN APRIL 1959 AT A TOTAL CONTRACT CONSIDERATION OF $808,500.90.

BASICALLY, YOUR CLAIM IS FOR DELAY DAMAGES AND IS PREMISED ON THE CONTENTIONS THAT (1) THE GOVERNMENT DID NOT ACKNOWLEDGE THAT THE CHANGES IN THE DRAWINGS AND SPECIFICATIONS WERE NECESSARY AND PERMIT THEIR CORRECTION IN A TIMELY MANNER; AND (2) WHILE THE GOVERNMENT PAID FOR THE HIGHER COST OF A DIFFERENT TYPE OF STEEL THAN THAT WHICH WAS ORIGINALLY SPECIFIED FOR CERTAIN PARTS, AND PAID THE COSTS INCURRED BY THE CONTRACTOR IN ATTEMPTING TO USE THE ORIGINAL STEEL, THE GOVERNMENT HAS REFUSED TO ACKNOWLEDGE ERROR IN SPECIFYING THAT STEEL AND HAS ALSO REFUSED TO PAY ANY OF THE DELAY EXPENSES INCURRED DURING THE TWO YEARS BEFORE THE STEEL SPECIFICATION WAS CHANGED TO PROVIDE FOR THE TYPE OF STEEL THAT WAS EVENTUALLY USED.

IN THE ORIGINAL ADMINISTRATIVE REPORT RECOMMENDING DISALLOWANCE OF YOUR CLAIM, IT IS STATED THAT (1) A MAJOR FACTOR IN EFFECTING THE NECESSARY CHANGES IN THE SPECIFICATIONS AND IN CAUSING THE LONG DELAY IN GETTING PRODUCTION STARTED WAS YOUR FAILURE TO EMPLOY FULL-TIME COMPETENT ENGINEERING PERSONNEL; AND (2) USE OF THE TYPE OF STEEL INITIALLY SPECIFIED WAS NOT BEYOND THE STATE OF THE ART, THE SUBSTITUTION OF A DIFFERENT STEEL WAS SOLELY AS A RELIEF TO YOU TO FACILITATE PRODUCTION AND, IN ANY EVENT, YOU WERE FULLY COMPENSATED FOR YOUR EXPENSES IN THIS AREA BY MODIFICATIONS NOS. 10 AND 12 TO THE CONTRACT.

REPORTS BY THE ARMY AUDIT AGENCY AND A CERTIFIED PUBLIC ACCOUNTING FIRM, SHOW THAT YOU SUFFERED A SUBSTANTIAL LOSS ON THE CONTRACT. HOWEVER, THE FINDINGS OF THE ARMY REPORT, AND FINDINGS OF THE ARMY AUDIT AGENCY IN A SPECIAL REPORT ANALYZING THE ACCOUNTING FIRM'S REPORT, ASSERT THAT NEITHER YOUR TOTAL CLAIM NOR YOUR CLAIM FOR ANY SUBSTANTIAL PORTION THEREOF, IS SUPPORTED BY SUBSTANTIVE FINANCIAL RECORDS OR DATA IDENTIFYING SUCH EXCESS OF INCURRED COSTS OVER THE AMENDED CONTRACT PRICE TO THE GOVERNMENT'S ACTIONS. THE ARMY AUDITORS ALSO STATE THAT THERE IS NO DATA OR OTHER INFORMATION AVAILABLE AT THE CONTRACTOR'S SITE SUSCEPTIBLE OF A COST ANALYSIS WITH RESPECT TO THE BASIS UPON WHICH THESE MODIFICATIONS WERE AWARDED. AS A RESULT, THE AGENCY AUDITORS FOUND THAT THEY WERE UNABLE TO ASCERTAIN ON AN ACCOUNTING BASIS THE EXTENT TO WHICH THE FACTORS INVOLVED IN YOUR CLAIM HAD BEEN PREVIOUSLY CONSIDERED IN THE MODIFICATIONS ISSUED UNDER THE CONTRACT.

IT WAS FURTHER REPORTED THAT THE DIFFICULTY OF SPECIFICALLY ASSIGNING THE EXCESS COSTS TO COST UNITS FOR ACCOUNTING PURPOSES, AS WELL AS THE DECLARATIONS BY COGNIZANT GOVERNMENT ENGINEERING AND CONTRACTING PERSONNEL THAT A SUBSTANTIAL PORTION OF THE LOSS UNDER THE CONTRACT WAS DUE TO A LACK OF COMPETENT EXPERIENCED TECHNICAL PERSONNEL IN YOUR COMPANY, CONSTITUTED THE BASIS FOR THE EARLIER RECOMMENDATIONS FOR DENIAL OF YOUR SIMILAR CLAIMS IN PROCEEDINGS BEFORE THE COURT OF CLAIMS AND FOR A CONTRACTUAL ADJUSTMENT ON AN EQUITABLE BASIS UNDER PUBLIC LAW 85-804, 72 STAT. 972. YOUR ACTION BEFORE THE COURT OF CLAIMS WAS DISMISSED FOR THE REASON THAT IT WAS NOT BROUGHT WITHIN THE TIME REQUIRED BY THE STATUTE OF LIMITATIONS, AND YOUR CLAIM FOR RELIEF UNDER PUBLIC LAW 85-804 WAS DENIED ON ITS MERITS.

AFTER PREVIOUSLY CONSIDERING ALL OF THE EVIDENCE INCLUDING THE AUDIT REPORTS, THE VARIOUS ARGUMENTS AND STATEMENTS SUBMITTED IN YOUR BEHALF, AND THE STATEMENTS AND CONTENTIONS OF THE AGENCY PERSONNEL, WE COULD NOT CONCLUDE THAT THE EVIDENCE, WHICH WAS DISPUTED IN MATERIAL AREAS, CLEARLY ESTABLISHED THE LEGAL LIABILITY OF THE GOVERNMENT AS TO ANY AMOUNTS WHICH COULD BE SPECIFICALLY IDENTIFIED UNDER STRICT ACCOUNTING PRINCIPLES. SINCE CERTAIN PORTIONS OF THE ADMINISTRATIVE REPORT SEEMED TO WARRANT FURTHER CONSIDERATION, BY LETTER OF MARCH 6, 1970, WE EXPLORED WITH THE DEPARTMENT OF THE ARMY THE POSSIBILITY OF FURTHER ADMINISTRATIVE ACTION WITH THE VIEW OF ARRIVING AT A MUTUALLY AGREEABLE SETTLEMENT OF ANY AMOUNTS OF UNCOMPENSATED DELAY DAMAGES WHICH MIGHT BE REASONABLY IDENTIFIED AND FAIRLY REGARDED AS BEING ATTRIBUTABLE TO FAULTY SPECIFICATIONS OR EXCESSIVE DELAYS BY THE GOVERNMENT IN EFFECTING THE CHANGES WHICH WERE MADE IN THE CONTRACT. AS YOU WERE ADVISED IN OUR LETTER OF SEPTEMBER 28, 1970, THIS INQUIRY WAS MADE IN CONSONANCE WITH THE GENERAL PRACTICE OF THIS OFFICE TO DECLINE SETTLEMENT OF DELAY DAMAGE CLAIMS UNDER SUCH CIRCUMSTANCES UNLESS BOTH THE GOVERNMENT'S LIABILITY AND THE AMOUNT OF DAMAGES RESULTING FROM THE GOVERNMENT'S WRONGFUL ACTS ARE ESTABLISHED WITH REASONABLE CERTAINTY AND THE AMOUNT IS MUTUALLY ACCEPTABLE IN FINAL SETTLEMENT BY THE CONTRACTING PARTIES.

IN A LETTER DATED SEPTEMBER 16, 1970, THE DEPARTMENT OF THE ARMY STATED ITS POSITION THAT FURTHER ADMINISTRATIVE CONSIDERATION OF THE MATTER IS NOT WARRANTED. IN SUPPORT OF SUCH CONCLUSION THE FOLLOWING POINTS WERE PRESENTED:

"2. THE MEMORANDUM OF DECISION ISSUED IN RESPONSE TO HENRY PRODUCTS' CLAIM FOR P.L. 85-804 RELIEF SHOULD BE DISPOSITIVE, AS WELL, OF HENRY PRODUCTS' CLAIMS NOW BEFORE THE GAO. THIS DECISION WENT DIRECTLY TO THE MERITS OF HENRY PRODUCTS' CLAIM, AND IT WAS DETERMINED THAT FOR THE FOLLOWING REASONS THE CLAIM WAS WITHOUT MERIT:

A. MUCH OF THE ALLEGED DELAY IN PERFORMANCE OF THE CONTRACT IS ATTRIBUTABLE TO CONTRACTOR AND NOT TO THE GOVERNMENT.

B. INSOFAR AS THE GOVERNMENT CONTRIBUTED TO THE DELAY, IT IS IMPOSSIBLE TO ASCERTAIN THE AMOUNT OF DELAY ATTRIBUTABLE TO EITHER PARTY. IT IS LIKEWISE IMPOSSIBLE TO DETERMINE WHAT FRACTIONAL SHARE OF DELAY DAMAGES, IF ANY, SHOULD BE BORNE BY EITHER PARTY.

C. IT IS IMPOSSIBLE TO ASCERTAIN WHETHER OR WHAT PORTION OF HENRY PRODUCTS' LOSS IS ATTRIBUTABLE TO DELAY AS OPPOSED TO THE CONTRACTOR'S INEFFICIENCY, FAILURE TO MITIGATE DAMAGES AND IMPROVIDENT BIDDING.

D. THE GOVERNMENT ALSO SUFFERED DAMAGES FROM DELAYS ATTRIBUTABLE TOTALLY OR IN PART TO HENRY PRODUCTS.

"3. THESE FINDINGS, INSOFAR AS CAN BE DETERMINED FROM A CURRENT REVIEW OF AVAILABLE DOCUMENTS, WERE BASED UPON SUBSTANTIAL EVIDENCE, AND WERE NEITHER ARBITRARY NOR CAPRICIOUS. ATTORNEYS FOR HENRY PRODUCTS HAVE ALLEGED NO IMPROPRIETY IN REACHING THESE FINDINGS; THE ATTORNEYS HAVE ALSO FAILED TO CITE ANY FACTS WHICH WERE NOT KNOWN OR TAKEN INTO ACCOUNT. THE FINDINGS OF THE MEMORANDUM OF DECISION SHOULD THEN PRECLUDE ANY RECOVERY BY HENRY PRODUCTS BEFORE THE GAO, JUST AS THEY PREVENTED THE ARMY FROM GRANTING P.L. 85-804 RELIEF.

"4. IN THEIR LETTER OF 14 JANUARY 1970, ATTORNEYS FOR HENRY PRODUCTS SOUGHT TO DISTINGUISH BETWEEN THE P.L. 85-804 AND GAO CLAIMS AS GROUNDED RESPECTIVELY ON EQUITABLE AND LEGAL BASES. THE ATTORNEYS MAINTAINED THAT THE GOVERNMENT'S REFUSAL TO GRANT RELIEF ON AN EQUITABLE BASIS HAS NO EFFECT ON THE LATER LEGAL CLAIM. IT IS SUGGESTED THAT THIS IS A DISTINCTION WITHOUT ANY SUBSTANCE. FINDINGS OF FACT DO NOT VARY ACCORDING TO THE NATURE OF THE PROCEEDINGS IN WHICH THEY ARE FOUND. IT MATTERS NOT WHETHER HENRY PRODUCTS' CLAIM IS BASED ON RIGHTS GENERATED BY LAW OR DESSERTS FLOWING FROM EQUITY. IF THE FINDINGS REACHED BY THE ARMY IN THE P.L. 85-804 PROCEEDINGS ARE APPLIED TO HENRY PRODUCTS' CLAIM BEFORE THE GAO, THIS CLAIM MUST ALSO BE DENIED.

"5. IT MUST BE REMEMBERED THAT THE P.L. 85-804 FINDINGS WERE MADE NINE YEARS AGO WHEN FAMILIARIZATION WITH THE FACTS OF THE CASE WAS FAR EASIER. ATTORNEYS FOR HENRY PRODUCTS HAVE NOT CHALLENGED ANY OF THE SPECIFIC FINDINGS AND THERE IS NO EVIDENCE THAT THE FINDINGS WERE INACCURATE. WOULD THEREFORE BE PRESUMPTUOUS FOR USAECOM TO NOW SEEK TO REVERSE THE REASONABLE FINDINGS OF MEN WHO WERE SO MUCH CLOSER TO THE ACTUAL EVENTS THAN ANY PERSON COULD BE TODAY."

WE HAVE AGAIN EXAMINED ALL OF THE EVIDENCE AVAILABLE IN THIS MATTER, AND WE AGREE WITH THE ABOVE CONCLUSION OF THE DEPARTMENT OF THE ARMY THAT THE FACTS OF RECORD DO NOT ESTABLISH A CLEAR LIABILITY ON THE PART OF THE GOVERNMENT FOR ANY SPECIFIC AMOUNT WHICH CAN BE ESTABLISHED IN ACCORDANCE WITH STRICT ACCOUNTING PROCEDURES. IN VIEW THEREOF, AND SINCE THE DEPARTMENT OF THE ARMY HAS DETERMINED THAT FURTHER ADMINISTRATIVE ACTION TO ARRIVE AT A MUTUALLY AGREEABLE SETTLEMENT BETWEEN THE CONTRACTING PARTIES IS NOT WARRANTED, WE FIND NO BASIS UPON WHICH YOUR CLAIM, OR ANY PORTION THEREOF, COULD PROPERLY BE ALLOWED BY THIS OFFICE.

ACCORDINGLY, YOUR CLAIM FOR DELAY DAMAGES ALLEGED TO HAVE BEEN INCURRED, AND NOT COMPENSATED FOR, IN CONNECTION WITH CONTRACT NO. DA 36-039-SC- 64235 IS DISALLOWED.