B-125852, DEC. 13, 1955

B-125852: Dec 13, 1955

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LOUISVILLE ELECTRIC MANUFACTURING COMPANY: REFERENCE IS MADE TO LETTER OF OCTOBER 20. WHICH WAS DISALLOWED IN OUR SETTLEMENT DATED SEPTEMBER 29. AS A RESULT OF CONTRACT AMENDMENTS YOU WERE PAID A TOTAL CONSIDERATION OF $294. YOU ALSO WERE COMPELLED TO SUBLET THE MAJOR PORTION OF THE CONTRACT WORK WHICH RESULTED IN THE INCREASED COSTS NOW CLAIMED. YOU STATE THAT WHILE THE MISREPRESENTATION OF THE TOLERANCE WAS UNINTENTIONAL. THE CONTRACTING PARTIES NEVERTHELESS COMPLETED THE NEGOTIATIONS UNDER THE MISTAKEN BELIEF THAT THE TOLERANCES REQUIRED WERE OTHER THAN THOSE DEMANDED AND USED IN THE DELIVERED ITEMS AND THAT BY REASON OF SAID MUTUAL MISTAKE YOU ARE LEGALLY ENTITLED TO RELIEF. YOU WERE AFFORDED OPPORTUNITIES TO SUBMIT PROPOSALS FOR MANUFACTURING CERTAIN DEFENSE EQUIPMENT.

B-125852, DEC. 13, 1955

TO CASTLEMAN COMPANY, FORMERLY, LOUISVILLE ELECTRIC MANUFACTURING COMPANY:

REFERENCE IS MADE TO LETTER OF OCTOBER 20, 1955, FROM YOUR ATTORNEY, RELATIVE TO YOUR CLAIM FOR ADDITIONAL COMPENSATION IN THE AMOUNT OF $170,593 UNDER CONTRACT NO. DA-33-008-ORD-47, DATED MARCH 19, 1951, WHICH WAS DISALLOWED IN OUR SETTLEMENT DATED SEPTEMBER 29, 1955. IN ADDITION TO A REVIEW, YOUR ATTORNEY HAS REQUESTED A HEARING WITH THE OPPORTUNITY TO PRESENT AT THAT TIME SUCH ADDITIONAL WRITTEN EVIDENCE NECESSARY TO SUPPORT THE MATTER DISCUSSED.

SUBSEQUENT TO THE RECEIPT OF YOUR LETTER, A REPRESENTATIVE OF OUR OFFICE CONTACTED YOUR ATTORNEY WITH REGARD TO THE REQUESTED HEARING. UPON BEING ADVISED THAT MATTERS PRESENTED ORALLY HAD TO BE REDUCED TO WRITING IN ORDER TO RECEIVE CONSIDERATION AND THAT OUR OFFICE APPARENTLY HAD ALL THE INFORMATION PRESENTED IN SUPPORT OF THE CLAIM, YOUR ATTORNEY INFORMED OUR REPRESENTATIVE THAT HE HAD NOTHING FURTHER TO PRESENT AT THIS TIME.

UNDER THE TERMS OF THE NEGOTIATED CONTRACT YOU AGREED TO MANUFACTURE AND DELIVER CERTAIN SPARE PARTS FOR FIRE CONTROL INSTRUMENTS FOR A TOTAL PRICE OF $219,727.27, WITH A REDETERMINATION CEILING PRICE OF $263,672.72. HOWEVER, AS A RESULT OF CONTRACT AMENDMENTS YOU WERE PAID A TOTAL CONSIDERATION OF $294,136.07. YOU CONTEND THAT THE DELAY BY THE GOVERNMENT IN FURNISHING YOU WITH ALL THE DETAILED DRAWINGS DURING THE PERIOD OF NEGOTIATION, PARTICULARLY THOSE DEALING WITH THE MANUFACTURING TOLERANCES REQUIRED, AND YOUR RELIANCE UPON AN ADMINISTRATIVE EMPLOYEE'S STATEMENT TO THE EFFECT THAT THE THEN MISSING DRAWINGS PERMITTED THE USE OF COMMERCIAL TOLERANCES NOT ONLY PREVENTED YOU FROM MAKING AN ACCURATE ESTIMATE OF YOUR COSTS OF PERFORMANCE BUT BECAUSE OF THE ACTUAL PRECISION MANUFACTURING REQUIRED, AS TO WHICH YOUR FACILITIES PROVED NOT ADAPTABLE, YOU ALSO WERE COMPELLED TO SUBLET THE MAJOR PORTION OF THE CONTRACT WORK WHICH RESULTED IN THE INCREASED COSTS NOW CLAIMED. ALSO, YOU STATE THAT WHILE THE MISREPRESENTATION OF THE TOLERANCE WAS UNINTENTIONAL, THE CONTRACTING PARTIES NEVERTHELESS COMPLETED THE NEGOTIATIONS UNDER THE MISTAKEN BELIEF THAT THE TOLERANCES REQUIRED WERE OTHER THAN THOSE DEMANDED AND USED IN THE DELIVERED ITEMS AND THAT BY REASON OF SAID MUTUAL MISTAKE YOU ARE LEGALLY ENTITLED TO RELIEF.

THE RECORD SHOWS THAT FOLLOWING SEVERAL SURVEYS OF YOUR PLANT FACILITIES BY VARIOUS DEFENSE PROCUREMENT AGENCIES, YOU WERE AFFORDED OPPORTUNITIES TO SUBMIT PROPOSALS FOR MANUFACTURING CERTAIN DEFENSE EQUIPMENT, INCLUDING THE PROPOSAL COVERING THE ITEMS IN QUESTION WHICH WERE MANUFACTURED FOR THE CINCINNATI ORDNANCE DISTRICT, DEPARTMENT OF THE ARMY, UNDER THE SUBJECT CONTRACT. AN EXAMINATION OF SAID REPORTS SHOWS THAT AT THE OUTSET OF THE PRICE NEGOTIATIONS YOUR FIRM REPRESENTATIVES WERE PLACED ON NOTICE THAT CERTAIN COPIES OF THE DETAILED PRINTS NECESSARY TO "CLOSE PRICING" WERE NOT THEN AVAILABLE; BUT THAT THERE WAS AVAILABLE A FINAL ASSEMBLY PRINT UPON WHICH AN ESTIMATION OF COSTS COULD BE MADE. THE RECORD FURTHER SHOWS THIS TO BE AN ADMITTED FACT AND THAT IN RECOGNITION OF THIS CONDITION THE GOVERNMENT MADE THE CONTRACT FLEXIBLE PRICE-WISE BY THE INCLUSION OF AN ESCALATION CLAUSE PERMITTING A PRICE REDETERMINATION REVISION UNDER WHICH A 20 PERCENT UPWARD ADJUSTMENT OF THE CONTRACT PRICE WAS AUTHORIZED.

IT MAY BE THAT YOUR PREPARATION OF THE QUOTATIONS ON THE BASIS OF ALL THE DETAILED DRAWINGS WOULD HAVE SUGGESTED INCREASED AMOUNTS. NEVERTHELESS, YOUR ELECTION TO PRESENT YOUR PRICES ON THE INFORMATION AVAILABLE WAS YOUR OWN AND THE FACT THAT YOU MAY HAVE RELIED UPON THE JUDGMENT OF SOME OTHER PERSON AS TO CERTAIN TOLERANCE ALLOWANCES REQUIRED IN THE COMPLETED WORK DOES NOT AFFECT YOUR LEGAL RIGHTS AND OBLIGATIONS UNDER THE CONTRACT. THE RESPONSIBILITY FOR THE ACTUAL PREPARATION OF THE PROPOSAL IN THE CIRCUMSTANCES REPORTED HERE WAS UPON THE BIDDER AND FOR THAT REASON THE CASE OF FRAZIER-DAVIS CONSTRUCTION COMPANY V. UNITED STATES, 100 C.CLS. 120, 163, APPEARS FOR DIRECT APPLICATION.

THE ADMINISTRATIVE OFFICE HAS REPORTED THAT BECAUSE OF THE LAPSE OF TIME IT IS UNABLE TO STATE WHETHER AN ADMINISTRATIVE EMPLOYEE MADE A STATEMENT TO THE EFFECT THAT COMMERCIAL TOLERANCES WERE PERMITTED; HOWEVER, THE ADMINISTRATIVE OFFICIAL WHO IS ALLEGED TO HAVE MADE SUCH A STATEMENT BELIEVES THAT HE NEVER DID SO. IN ADDITION, HE REPORTS AS A DEFINITE FACT THAT IT WAS POINTED OUT TO YOUR REPRESENTATIVES AT THE TIME OF THEIR INVESTIGATION OF THE CONTRACT REQUIREMENTS THAT BECAUSE OF THE ABSENCE OF THE DETAILED PRINTS CONSIDERABLE CARE SHOULD BE EXERCISED IN THE FINAL PREPARATION OF YOUR PROPOSAL. ALSO, HE REPORTED THAT YOUR REPRESENTATIVES FULLY UNDERSTOOD THE CONDITIONS AND INDICATED THE MATTER PRESENTED NO PARTICULAR PROBLEM TO THEM FROM A PRODUCTION STANDPOINT. IT WAS AT THIS TIME THAT THEY SELECTED THE GROUP OF ITEMS THEY BELIEVED RELATED TO THE TYPE OF PRODUCTION FAMILIAR TO THEM AND AFTER DUE STUDY SUBMITTED THE PROPOSAL UPON WHICH THE CONTRACT IS BASED TO THE PROCUREMENT NEGOTIATOR FOR THE GOVERNMENT. THERE IS NO EVIDENCE OF RECORD THAT ESTABLISHES ANY MISBELIEF BY THE GOVERNMENT REPRESENTATIVES AS TO THE MANUFACTURING REQUIREMENTS HERE IN QUESTION. FURTHERMORE, THE FACT THAT THE PROGRAM WAS WITHOUT ANY INSURMOUNTABLE PRODUCTION PROBLEMS IS EVIDENCED BY THE PROPOSALS SUBMITTED BY OTHER FIRMS FOR PRODUCING THE REMAINING PROGRAM ITEMS AND THE COMPLETION OF SUCH ITEMS UNDER SIMILAR AGREEMENTS WITHOUT LOSS. CONSEQUENTLY, IF YOU SUBMITTED YOUR PROPOSAL ON THE BASIS OF COMMERCIAL TOLERANCES ON CERTAIN ITEMS, AFTER IT WAS POINTED OUT TO YOU THAT OTHER TOLERANCES MIGHT BE REQUIRED, THE MATTER CANNOT BE REGARDED AS A MUTUAL MISTAKE BUT MUST BE REGARDED AS DUE TO LACK OF PROPER CARE OR NEGLIGENCE ON THE PART OF YOUR REPRESENTATIVES AND NOT TO ANY LACK OF FURNISHING SUFFICIENT INFORMATION ON THE PART OF THE GOVERNMENT. IN PAGE ON THE LAW OF CONTRACTS, VOLUME I, SECTION 275, IT IS STATED:

"SOME COURTS LAY IT DOWN AS A BROAD PRINCIPLE THAT ONE WHO ENTERS INTO A CONTRACT UNDER A MISTAKE OF FACT DUE TO HIS OWN NEGLIGENCE, CONCERNING WHICH HE COULD WITH REASONABLE DILIGENCE HAVE LEARNED THE TRUTH, CAN NOT HAVE RELIEF.' (CITING GRYMES V. SANDERS, 93 U.S. 55; BARKER V. NORTHERN PACIFIC RAILWAY CO., 65 F. 460; POPE, ET AL. V. HOOPES, ET AL. 90 F. 451.)

IN VIEW OF THE FOREGOING IT IS CLEAR THAT SUCH ERROR AS MAY HAVE BEEN MADE IN YOUR PROPOSAL WAS DUE TO YOUR FAILURE TO TAKE INTO ACCOUNT THE FACT THAT FINE PRECISION WORK MIGHT BE REQUIRED. THERE WAS NO MISUNDERSTANDING OR ERROR BY THE GOVERNMENT. THE ERROR, IF ANY, WAS UNILATERAL, NOT MUTUAL AS ALLEGED, AND, THEREFORE, DOES NOT ENTITLE YOU TO RELIEF. SEE OGDEN AND DOUGHERTY V. UNITED STATES, 102 C.CLS. 249; SALIGMAN, ET AL. V. UNITED STATES, 56 F.SUPP. 505, 507.

FURTHERMORE, WHILE THE DEPARTMENTAL DENIAL OF YOUR REQUESTED RELIEF UNDER THE FIRST WAR POWERS ACT HAS NO BEARING UPON THE CONCLUSIONS REACHED HEREIN ON THE QUESTION OF MUTUAL MISTAKE, IT IS NOTED THAT THE SAID QUESTION FIRST WAS PRESENTED TO THE DEPARTMENT AFTER ITS RETURN OF YOUR ORIGINAL CLAIM AND THE FINAL DETERMINATION AND PAYMENT TO YOU OF THE INCREASED CONTRACT PRICE UNDER THE ESCALATION CLAUSE OF THE CONTRACT. THE FINAL DETERMINATION, CONSIDERATION WAS GIVEN TO YOUR STATEMENT OF COSTS INCURRED IN THE SUBCONTRACTING OF THE ITEMS IN QUESTION AND IN ADDITION THE CONTRACTING OFFICER HAS REPORTED THAT EVEN ASSUMING YOUR ALLEGED COSTS ARE CORRECT, YOU HAVE OFFERED NO EVIDENCE TO JUSTIFY A CONCLUSION THAT THE INCREASED COSTS ARE THE DIRECT RESULT OF THE ALLEGED MISTAKES OF THE GOVERNMENT. THE CONTRACT HERE VESTED IN THE UNITED STATES THE RIGHT TO HAVE IT PERFORMED STRICTLY IN ACCORDANCE WITH ITS TERMS; AND NO OFFICER OF THE GOVERNMENT HAS ANY AUTHORITY TO DIVEST THE GOVERNMENT OF SUCH VESTED RIGHT OR TO ALLOW COMPENSATION FOR PERFORMANCE IN AN AMOUNT GREATER THAN THAT AGREED UNDER THE CONTRACT. BRAWLEY V. UNITED STATES, 96 U.S. 68; SIMPSON V. UNITED STATES, 172 U.S. 372, 379; UNITED STATES V. AMERICAN SALES COMPANY, 27 F.2D 389, AFFIRMED IN 32 F.2D 141, AND CERTIORARI DENIED, 280 U.S. 574.

ACCORDINGLY, THE ACTION IN THE SETTLEMENT OF SEPTEMBER 29, 1955, IS SUSTAINED.