B-138645, MARCH 10, 1960, 39 COMP. GEN. 629

B-138645: Mar 10, 1960

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CONTRACTS - DAMAGES - SPECIFICATION CHANGES - PRICE ADJUSTMENT - FIXED PRICE CONTRACT UNDER A DEVELOPMENTAL DESIGN AND MODIFICATION CONTRACT WHICH WAS NOT BASED SOLELY ON THE ORIGINAL INVITATION BUT INCLUDED THE CONTRACTOR'S ENGINEERING REPORT SPECIFYING A PARTICULAR METHOD OF PERFORMANCE. WHICH METHOD WAS SUBSEQUENTLY DETERMINED TO REQUIRE ADDITIONAL ITEMS OF EQUIPMENT AND SERVICES. IS OF SUCH DOUBTFUL VALIDITY AS TO REQUIRE DISALLOWANCE. A DEFINITE TIME FOR PERFORMANCE WAS UNDERSTOOD AND CONTEMPLATED. 1960: REFERENCE IS MADE TO YOUR LETTER OF MARCH 27. WHOSE FUNCTIONS WERE TRANSFERRED TO THE FEDERAL AVIATION AGENCY. WE ALSO HAVE FOR CONSIDERATION THE MATTER OF A REPORTED INDEBTEDNESS OF YOUR COMPANY IN THE AMOUNT OF $30.

B-138645, MARCH 10, 1960, 39 COMP. GEN. 629

CONTRACTS - DAMAGES - SPECIFICATION CHANGES - PRICE ADJUSTMENT - FIXED PRICE CONTRACT UNDER A DEVELOPMENTAL DESIGN AND MODIFICATION CONTRACT WHICH WAS NOT BASED SOLELY ON THE ORIGINAL INVITATION BUT INCLUDED THE CONTRACTOR'S ENGINEERING REPORT SPECIFYING A PARTICULAR METHOD OF PERFORMANCE, WHICH METHOD WAS SUBSEQUENTLY DETERMINED TO REQUIRE ADDITIONAL ITEMS OF EQUIPMENT AND SERVICES, THE CONTRACTOR MAY NOT BE HELD TO BE OBLIGATED TO MAKE THE MODIFICATIONS AT THE FIXED PRICE IN VIEW OF A CONTRACT CLAUSE WHICH PROVIDED A PROCEDURE FOR MODIFICATION OF THE SPECIFICATIONS WITH CORRESPONDING PRICE ADJUSTMENTS; THEREFORE, THE GOVERNMENT'S CLAIM FOR ITEMS OF COST INCIDENT TO THE MODIFICATION AFTER THE CONTRACT HAD BEEN TERMINATED CANNOT BE SUSTAINED AND THE CONTRACTOR'S CLAIM FOR AN ADDITIONAL AMOUNT FOR IMPROVEMENTS, NOTWITHSTANDING THE FAILURE TO FULLY PERFORM, IS OF SUCH DOUBTFUL VALIDITY AS TO REQUIRE DISALLOWANCE. UNDER A DEVELOPMENTAL DESIGN AND MODIFICATION CONTRACT WHICH DID NOT SPECIFY ANY DATE FOR COMMENCEMENT AND COMPLETION OF THE WORK BUT DID PROVIDE THAT ANY INTERRUPTION TO THE OPERATION OF THE PROJECT FOR MORE THAN 90 DAYS WOULD CONSTITUTE A BASIS FOR THE ASSESSMENT OF LIQUIDATED DAMAGES, A DEFINITE TIME FOR PERFORMANCE WAS UNDERSTOOD AND CONTEMPLATED.

TO U.S. PROPELLERS, INC., MARCH 10, 1960:

REFERENCE IS MADE TO YOUR LETTER OF MARCH 27, 1959, PRESENTING A CLAIM IN THE AMOUNT OF $22,174.29 FOR WORK PERFORMED UNDER YOUR CONTRACT NO. C13A- 467, DATED JUNE 18, 1952, WITH THE CIVIL AERONAUTICS ADMINISTRATION, WHOSE FUNCTIONS WERE TRANSFERRED TO THE FEDERAL AVIATION AGENCY, ESTABLISHED BY SECTION 301 (A) OF THE FEDERAL AVIATION ACT OF 1958, 72 STAT. 744, 49 U.S.C. 1341 (A). WE ALSO HAVE FOR CONSIDERATION THE MATTER OF A REPORTED INDEBTEDNESS OF YOUR COMPANY IN THE AMOUNT OF $30,935.33 WHICH THE FEDERAL AVIATION AGENCY BELIEVES WOULD CONSTITUTE REASONABLE COMPENSATION TO THE GOVERNMENT ON ACCOUNT OF DAMAGES SUSTAINED AS THE RESULT OF YOUR ALLEGED FAILURE TO PERFORM IN ACCORDANCE WITH THE CONTRACT TERMS.

THE CONTRACT PROVIDED FOR THE MODIFICATION OF THE WIND TUNNEL LOCATED AT THE TECHNICAL DEVELOPMENT AND EVALUATION CENTER, WEIR COOK AIRPORT, INDIANAPOLIS, INDIANA, TO RAISE THE MAXIMUM AIR SPEED OF THE TUNNEL FROM 110 TO 200 MILES PER HOUR. THE CONTRACT CONSIDERATION WAS ORIGINALLY $148,000 AND THIS PRICE WAS REDUCED TO $147,616 BY CONTRACT SUPPLEMENT NO. 2, DATED APRIL 7, 1954, ON ACCOUNT OF CERTAIN WORK WHICH HAD BEEN PERFORMED BY THE GOVERNMENT BEFORE OPERATION OF THE TUNNEL WAS INTERRUPTED TO PERMIT YOU TO PROCEED WITH THE MODIFICATION THEREOF. THE FORMAL CONTRACT DOES NOT PROVIDE FOR COMMENCEMENT AND COMPLETION DATES BUT IT WAS ESTIMATED IN YOUR PROPOSAL THAT THE REQUIRED WORK WOULD BE COMPLETED WITHIN 12 TO 15 MONTHS, AND THE GOVERNMENT'S NOTICE TO PROCEED INDICATED THAT IT WAS EXPECTED THAT THE PROJECT WOULD REQUIRE APPROXIMATELY ONE YEAR FOR COMPLETION. IT WAS AGREED THAT YOU WOULD NOT INTERRUPT OPERATION OF THE WIND TUNNEL FOR MORE THAN 90 WORKING DAYS AND THAT LIQUIDATED DAMAGES WOULD BE ASSESSED AT THE RATE OF $300 PER WORKING DAY IN EXCESS OF 90 WORKING DAYS THAT THE WIND TUNNEL WAS OUT OF OPERATION.

THE GOVERNMENT HAD ADVERTISED FOR BIDS ON THE PROJECT ON SPECIFICATIONS ESSENTIALLY OF PERFORMANCE TYPE. THE BID SPECIFICATIONS, SCHEDULE A OF THE CONTRACT, ALSO CONTAINED A DESCRIPTION OF THE EXISTING STRUCTURES AND EQUIPMENT, AND PROVIDED THAT THE CONTRACTOR SHOULD MAKE USE OF AS MUCH OF THE EXISTING EQUIPMENT AS POSSIBLE. INCLUDED AMONG THE LISTED EQUIPMENT WERE A WESTINGHOUSE ELECTRIC MOTOR, WHICH WAS STATED TO BE CAPABLE OF SHORT TIME OPERATION AT 4,200 HORSEPOWER, AND A REDUCTION GEAR CONSIDERED AS HAVING A MAXIMUM POWER LIMIT OF 2,250 HORSEPOWER. IT WAS PROVIDED IN PARAGRAPH 7 OF THE SPECIFICATIONS THAT, IF THE REVISED TUNNEL WERE TO USE A DRIVE ARRANGEMENT SIMILAR TO THE ONE THEN IN USE, THE REDUCTION GEAR SHOULD BE REPLACED BY A SIMILAR GEAR TRANSMITTING 4,200 HORSEPOWER PROVIDING THE NECESSARY SPEED REDUCTION FROM THE ELECTRIC MOTOR SPEED (1,800 REVOLUTIONS PER MINUTE). IT WAS PROPOSED THAT THE REDUCTION GEAR, IF AN AIRCRAFT ENGINE PART, WOULD BE GOVERNMENT-FURNISHED EQUIPMENT.

IN PARAGRAPHS 1 AND 2 OF THE SPECIFICATIONS IT WAS STATED THAT THE CONTRACTOR SHALL BE COMPLETELY RESPONSIBLE FOR ALL WORK ACCOMPLISHED IN CONNECTION WITH THE MODIFICATION OF THE WIND TUNNEL TO PROVIDE AN OUTLET AIR SPEED OF 200 MILES PER HOUR, AND THAT THE CONTRACTOR SHALL GUARANTEE THAT THE MODIFIED WIND TUNNEL WILL PRODUCE A MAXIMUM AIR SPEED OF NOT LESS THAN 200 MILES PER HOUR AT THE EIGHT (8) FOOT DIAMETER OUTLET END.

PARAGRAPH 14 OF THE SPECIFICATIONS PROVIDED, HOWEVER, THAT:

SINCE IT IS KNOWN THAT IT IS NOT HUMANLY POSSIBLE TO FORESEE ALL OF THE POSSIBLE CONFLICTS OR INADEQUACIES IN SPECIFICATION REQUIREMENTS, THE SPECIFICATIONS MAY BE MODIFIED AS THE RESULT OF MUTUAL AGREEMENT IN WRITING BETWEEN THE CONTRACTING OFFICER AND THE CONTRACTOR AFTER AWARD OF THE CONTRACT. SUCH WRITTEN AGREEMENT SHALL SPECIFICALLY STATE THE SPECIFICATION CHANGES AND PRICE ADJUSTMENTS MUTUALLY AGREED UPON.

YOUR PROPOSAL, WHICH WAS THE ONLY ONE RECEIVED, OFFERED TO PERFORM THE MODIFICATION WORK AT A PRICE OF $172,000. AN ENGINEERING REPORT, NO. 52- 4, WHICH WAS SPECIFICALLY MADE A PART OF YOUR PROPOSAL, STATED THAT YOU WERE WILLING TO GUARANTEE A SPEED OF 200 MILES PER HOUR AT THE TUNNEL OUTLET, PROVIDED THE MOTOR OUTPUT PROVED TO BE 4,200 HORSEPOWER. THE REPORT REFERRED TO PARAGRAPH 14 OF THE BID SPECIFICATIONS ONLY IN CONNECTION WITH THE POSSIBILITY THAT A REDUCTION GEAR OTHER THAN AN AIRCRAFT PART MIGHT BE USED, AND THAT SUPPLEMENTAL FAIRINGS TO DIMINISH PRESSURE LOSSES MIGHT BE REQUIRED. IN FURTHER NEGOTIATIONS YOU AGREED TO REDUCE YOUR PROPOSAL PRICE TO $148,000 IN CONSIDERATION OF THE GOVERNMENT'S AGREEMENT TO RELEASE YOU FROM ANY OBLIGATION REGARDING THE FURNISHING OF ONE PROPELLER HUB, INCLUDING PITCH CONTROL AND BLADES, ONE REDUCTION GEAR, AND THREE OTHER SPECIFIED ITEMS OF EQUIPMENT.

IT WAS STATED IN YOUR ENGINEERING REPORT THAT "THE GUARANTEE OF AN OUTLET SPEED OF 200 MPH IS HEREBY UNCONDITIONALLY COUPLED WITH THE GOVERNMENT'S GUARANTEE THAT THE ELECTRIC MOTOR WILL DELIVER THE ABOVE MENTIONED 4200 HP.' ALSO, LISTED THEREIN WAS ONE OF YOUR BASIC ASSUMPTIONS THAT "THE WESTINGHOUSE MOTOR PRESENTLY INSTALLED IN THE WIND TUNNEL HAS BEEN INVESTIGATED BY CAA PERSONNEL AND HAS BEEN DETERMINED TO BE CAPABLE OF SUPPLYING 4,200 HP FOR 15 MINUTE PERIODS.'

A CONTRACT WAS ENTERED INTO ON THE BASIS OF YOUR PROPOSAL, AND THE CONVERSION WORK ON THE WIND TUNNEL BEGAN ON APRIL 13, 1954. YOU PERFORMED A CONSIDERABLE AMOUNT OF WORK FROM THAT DATE UNTIL JUNE 16, 1954, WHEN A TEST OF THE TUNNEL WAS MADE. WITHIN A SHORT TIME AFTER THE MOTOR WAS TURNED ON FOR THE TEST THE REDUCTION GEAR AND PROPELLER DISINTEGRATED. THE GOVERNMENT FURNISHED A REPLACEMENT PROPELLER HUB AND REDUCTION GEAR IN JULY 1954 AND YOU EVENTUALLY RESUMED OPERATIONS, WITH ACCEPTANCE TESTS HAVING BEEN STARTED ON JANUARY 6, 1955. IN TESTING ON JANUARY 13 THE MOTOR AUTOMATICALLY STOPPED ON ACCOUNT OF AN OVERLOAD ON THE SWITCH GEAR. ADDITIONAL WORK WAS PERFORMED UNTIL ABOUT APRIL 15 WHEN TESTS WERE AGAIN MADE. THESE TESTS WERE COMPLETED ON APRIL 19 AND IT WAS THEN INDICATED THAT THE WORK WHICH YOU PERFORMED HAD NOT RESULTED IN INCREASING THE AIR SPEED OF THE TUNNEL TO MORE THAN 170 OR 175 MILES PER HOUR. YOU PERFORMED CERTAIN TESTS UP UNTIL JUNE 9, 1955, WHEN THE GOVERNMENT ISSUED A STOP ORDER DIRECTING YOU TO FURNISH AS SOON AS POSSIBLE A WRITTEN STATEMENT OF YOUR VIEWS AND PLANS AS TO THE POSSIBILITY OF COMPLETING THE PROJECT IN ACCORDANCE WITH THE CONTRACT REQUIREMENTS. THE STOP ORDER CONCLUDED WITH THE STATEMENT THAT:"IF AND WHEN YOUR RIGHT TO PROCEED UNDER THE TERMS OF THE CONTRACT HAS BEEN DEFINITELY TERMINATED BY A FORMAL WRITTEN NOTICE FROM THIS OFFICE YOU WILL BE GIVEN AN OPPORTUNITY TO NEGOTIATE FOR A FINAL SETTLEMENT.'

YOU ACKNOWLEDGED RECEIPT OF THE STOP ORDER BY LETTER DATED JUNE 23, 1955, AND FORWARDED WITH A LETTER DATED JULY 15, 1955, YOUR TECHNICAL REPORT NO. 55-23, DESCRIBING THE WORK THEN ACCOMPLISHED ON THE PROJECT AND SETTING FORTH YOUR VIEWS AS TO THE PROSPECTS FOR BRINGING THE PROGRAMS TO SOME REASONABLE CONCLUSION. THE CHIEF MODIFICATION PROPOSED TO THE ORIGINAL PLAN WAS THE SUBSTITUTION OF A 12-BLADE PROPELLER FOR THE 4-BLADE PROPELLER OUTLINED IN THE PREVIOUS REPORT, NO. 52-4, INCLUDED IN THE CONTRACT. IN A LETTER DATED OCTOBER 3, 1955, FROM THE CIVIL AERONAUTICS ADMINISTRATION, YOU WERE REQUESTED TO FURNISH A COST ESTIMATE CONCERNING THE OPTIMUM SOLUTION OUTLINED IN YOUR REPORT. YOU REPLIED BY LETTER OF NOVEMBER 4, 1955, STATING IN PART THAT "TO COMPLETE THE WIND TUNNEL MODIFICATION IN ACCORDANCE WITH THE OPTIMUM SOLUTION OUTLINED IN OUR REPORT NO. 55-23 WOULD REQUIRE AN ESTIMATED ADDITIONAL $47,000 OVER THE CURRENT AMOUNT SPECIFIED IN THE CONTRACT (OR A TOTAL CONTRACT AMOUNT OF $194,616.)"

THE GOVERNMENT DECIDED NOT TO INCUR ADDITIONAL EXPENSE IN ATTEMPTS TO RAISE THE MAXIMUM AIR SPEED OF THE WIND TUNNEL TO 200 MILES PER HOUR AND ON MAY 10, 1956, THE CONTRACTING OFFICER ADVISED YOU THAT BECAUSE OF YOUR FAILURE TO PERFORM THE TERMS OF THE CONTRACT THE GOVERNMENT HAD ELECTED TO TERMINATE YOUR RIGHT TO PROCEED FURTHER. THE TERMINATION NOTICE ALSO EXPRESSED THE OPINION THAT THE GOVERNMENT HAD BEEN DAMAGED IN AN UNDETERMINED AMOUNT BY YOUR DEFAULT UNDER THE CONTRACT.

CERTAIN WORK ON THE WIND TUNNEL WAS PERFORMED BY THE GOVERNMENT AFTER APRIL 19, 1955. THERE WAS INSTALLED A LARGE DIAMETER DUCT FROM THE ADJACENT BLOWER SYSTEM TO PROVIDE AN ALTERNATE AIR SUPPLY AT A REPORTED COST OF $4,991. THE GUIDE VANES WERE REPAIRED AND REINSTALLED AT A REPORTED COST OF $700, AND A STEEL PROPELLER WAS INSTALLED AS A REPLACEMENT FOR THE 4-BLADED WOODEN FAN WHICH YOU HAD INSTALLED. WITH THE USE OF THE STEEL PROPELLER, WHICH WAS INSTALLED FOR SAFETY IN OPERATION, THE INDICATED MAXIMUM AIR SPEED OF THE WIND TUNNEL IS FROM 150 TO 160 MILES PER HOUR. THE COST OF THE STEEL PROPELLER WAS NOT INCLUDED IN THE COMPUTATION OF THE SUM OF $30,935.33, REPORTED AS THE PROBABLE AMOUNT OF DAMAGES WHICH THE GOVERNMENT SUSTAINED AS THE RESULT OF YOUR ALLEGED DEFAULT. HOWEVER, THERE WAS INCLUDED THE SUM OF $4,500, REPRESENTING THE STATED VALUE OF THE ADDITIONAL HUB AND GEAR FURNISHED AS REPLACEMENTS FOR EQUIPMENT DAMAGED IN THE ACCIDENT WHICH OCCURRED ON JUNE 16, 1954.

IT WAS ESTIMATED BY THE FEDERAL AVIATION AGENCY THAT AN ADDITIONAL EXPENDITURE OF $87,981 WOULD BE REQUIRED IN ORDER TO PRODUCE A MAXIMUM AIR SPEED OF 200 MILES PER HOUR IN THE WIND TUNNEL. WHILE CONCEDING THAT THE GOVERNMENT COULD NOT, IN VIEW OF THE DEFAULT TERMINATION, ASSESS LIQUIDATED DAMAGES, THE AGENCY CONSIDERED THAT YOU WERE, NEVERTHELESS, CHARGEABLE FOR A TOTAL SUM OF $3,990.40, BASED UPON A DETERMINED REASONABLE RENTAL RATE OF $34.40 PER DAY FOR 116 WORKING DAYS OF EXCESS INTERRUPTIONS IN THE OPERATION OF THE TUNNEL, TOGETHER WITH THE AMOUNT OF $788.93 ON ACCOUNT OF TRAVEL EXPENSE INCURRED IN FLIGHT TESTS BECAUSE THE TEST CELL WAS NOT AVAILABLE. ALSO, IT WAS ESTIMATED THAT THE VALUE OF THE IMPROVEMENTS TO THE WIND TUNNEL FACILITIES RESULTING FROM YOUR WORK WAS $28,000.

ON THE BASIS OF THE FOREGOING FIGURES, AND CONSIDERATION OF THE PROGRESS PAYMENTS OF $103,600 WHICH YOU RECEIVED, THE TOTAL ESTIMATED COST OF THE PROJECT WOULD BE $206,551.33, OR $58,935.33 MORE THAN YOUR CONTRACT PRICE OF $147,616. THE $30,935.33 CLAIM REPORTED BY THE FEDERAL AVIATION AGENCY WAS FOR THIS EXCESS, LESS THE ALLOWANCE OF $28,000 AS THE VALUE REALIZED BY THE GOVERNMENT FROM YOUR WORK PRIOR TO THE TERMINATION.

UPON CONSIDERATION OF YOUR APPEAL FROM THE ACTION TAKEN BY THE CONTRACTING OFFICER, THE ACTING ADMINISTRATOR OF CIVIL AERONAUTICS, IN A DECISION RENDERED ON DECEMBER 5, 1958, SPECIFICALLY DETERMINED THAT YOUR WORK DID NOT PRODUCE THE REQUIRED RESULT; THAT YOU INTERRUPTED OPERATION OF THE WIND TUNNEL FOR A TOTAL OF AT LEAST 206 WORKING DAYS, OR 116 WORKING DAYS IN EXCESS OF THE ALLOWABLE 90 WORKING DAYS; THAT THE CONTRACT WAS NOT COMPLETED EITHER WITHIN THE TIME CONTEMPLATED OR WITHIN A REASONABLE TIME; AND THAT THE GOVERNMENT HAD FORFEITED ITS RIGHT TO ASSESS LIQUIDATED DAMAGES WHEN IT TERMINATED THE CONTRACT FOR DEFAULT.

IN A BRIEF SUBMITTED TO OUR OFFICE YOUR ATTORNEYS ARGUED THAT YOU WERE NOT IN DEFAULT AND THAT YOU WERE ENTITLED TO THE SUM OF $19,924.29 IN ADDITION TO THE PROGRESS PAYMENTS OF $103,600. WITH RESPECT TO THE CLAIM FOR $22,174.29, PRESENTED IN YOUR LETTER OF MARCH 27, 1959, AND WHICH INCLUDES $1,000 FOR ATTORNEY FEES AND $1,250 FOR PREPARATION OF REPORT NO. 55-23, WE WERE ADVISED INFORMALLY BY YOUR ATTORNEYS THAT YOU WOULD ACCEPT $16,174.29 AS A COMPLETE SETTLEMENT OF ALL CLAIMS ARISING OUT OF THE CONTRACT.

IT IS STATED IN YOUR ATTORNEYS' BRIEF THAT THE CONTRACT WAS A DEVELOPMENTAL PROJECT CONTEMPLATING THE DESIGN AND ULTIMATE MODIFICATION OF THE WIND TUNNEL WITHOUT ANY DEFINITE TIME LIMIT FOR PERFORMANCE; THAT NO DATE OF DELIVERY OR TIME FOR PERFORMANCE WAS FIXED BY THE TERMS OF THE CONTRACT; THAT YOUR GUARANTEE OF AN OUTLET SPEED OF 200 MILES PER HOUR WAS CONDITIONAL; THAT THE ELECTRIC MOTOR FURNISHED BY THE GOVERNMENT DID NOT PRODUCE 4,200 HORSEPOWER OUTPUT FOR 15-MINUTE PERIODS; THAT THE REDUCTION GEAR FAILED TO TRANSMIT 4,200 HORSEPOWER; THAT ALL SUBSTANTIAL DELAYS WERE CAUSED BY THE GOVERNMENT; AND THAT THE GOVERNMENT WAIVED THE TIME FOR PERFORMANCE AND AGREED TO NEGOTIATE A SETTLEMENT UPON TERMINATION.

WITHOUT ELABORATION, WHICH WE FEEL IS UNNECESSARY IN VIEW OF THE FOREGOING DESCRIPTION OF THE ADVERTISED SPECIFICATIONS AND OTHER CONTRACT DOCUMENTS, THERE APPEARS TO HAVE BEEN A DEFINITE UNDERSTANDING THAT YOU WOULD SUBSTANTIALLY COMPLETE THE PROJECT WITHIN NOT MORE THAN 90 WORKING DAYS AFTER YOUR OPERATIONS NECESSITATED A CLOSING DOWN OF THE WIND TUNNEL. WE AGREE THAT YOUR GUARANTEE WAS CONDITIONAL IN CERTAIN PARTICULARS, BUT DO NOT AGREE THAT ANY FAILURE OF THE REDUCTION GEAR TO TRANSMIT 4,200 HORSEPOWER CONSTITUTED A BREACH BY THE GOVERNMENT OF ITS SO -CALLED BASIC GUARANTEES. THE GEAR WAS SELECTED BY YOU AND IT WAS YOUR RESPONSIBILITY TO MODIFY SAME IN ORDER TO TRANSMIT 4,200 HORSEPOWER.

WITH RESPECT TO THE ELECTRIC MOTOR, IT IS APPARENT, AS YOUR ATTORNEYS STATE, THAT THE MOTOR DID NOT PRODUCE 4,200 HORSEPOWER. HOWEVER, THIS DOES NOT APPEAR TO BE AN ADEQUATE BASIS FOR QUESTIONING ITS CAPACITY, SINCE THE MOTOR WAS STOPPED IN TESTS OF YOUR WORK WHEN PRODUCING UP TO A MAXIMUM OF 3,750 HORSEPOWER, NOT BECAUSE ITS LIMIT HAD BEEN REACHED, BUT BECAUSE IT APPEARED THAT THE DESIGN SPEED OF 200 MILES PER HOUR WAS NOT OBTAINABLE FOR REASONS OTHER THAN ANY DEFICIENCY IN THE RATED CAPACITY OF THE ELECTRIC MOTOR, WHICH HAD BEEN REBUILT BY THE WESTINGHOUSE ELECTRIC CORPORATION IN 1954. THE RECORD SHOWS THAT THE MOTOR, AS REBUILT, WAS BELIEVED TO BE CAPABLE OF PROVIDING 5,100 HORSEPOWER AS COMPARED WITH ITS ORIGINALLY RATED CAPABILITY OF PROVIDING 4,200 HORSEPOWER FOR SHORT PERIODS OF TIME. YOUR ATTORNEYS HAVE REFERRED TO A LETTER DATED APRIL 23, 1954, FROM THE WESTINGHOUSE ELECTRIC CORPORATION, IN WHICH THE REBUILT MOTOR WAS STATED AS BEING CAPABLE OF OPERATING SAFELY FOR CERTAIN VALUES, INCLUDING 4,200 HORSEPOWER FOR 3 1/2 MINUTES. SINCE THE MAXIMUM HORSEPOWER OF THE MOTOR HAD BEEN INCREASED FROM 4,200 HORSEPOWER TO 5,100 HORSEPOWER, IT IS REASONABLE TO ASSUME THAT SUCH ESTIMATED SAFE TIME FOR OPERATION AT 4,200 HORSEPOWER WAS VERY CONSERVATIVE AND THAT, IN ALL PROBABILITY, IT COULD HAVE BEEN OPERATED SAFELY FOR PERIODS OF 15 MINUTES WHILE PROVIDING 4,200 HORSEPOWER. IN ANY EVENT, THE AVAILABLE EVIDENCE CONCERNING THE MOTOR'S CAPACITY IS SUCH THAT WE WOULD NOT BE WARRANTED IN REFUSING TO ACCEPT THE FINDING OF THE ACTING ADMINISTRATOR OF CIVIL AERONAUTICS THAT THE MOTOR MET THE CONTRACT REQUIREMENTS.

THE GOVERNMENT MAY HAVE BEEN RESPONSIBLE FOR SOME OF THE DELAY IN BEGINNING OPERATIONS AT THE CONTRACT SITE, ALSO FOR A PART OF THE TIME THAT THE WIND TUNNEL WAS INOPERATIVE DURING THE COURSE OF THE MODIFICATION WORK WHICH YOU PERFORMED. WE BELIEVE THAT SUCH DELAYS WOULD BE MATERIAL ONLY WITH RESPECT TO THE MATTER OF COMPUTING LIQUIDATED DAMAGES FOR EXCESS INTERRUPTIONS IN THE TUNNEL OPERATIONS, AND IT HAS BEEN NOTED THAT CERTAIN TESTING PERIODS WERE ELIMINATED FROM THE COMPUTATION OF THE 116 WORKING DAYS IN EXCESS OF THE ALLOWABLE 90 WORKING DAYS THAT THE TUNNEL WAS TO BE PLACED OUT OF OPERATION TO PERMIT YOU TO PROCEED WITH PERFORMANCE OF THE PROPOSED MODIFICATION OF THE TUNNEL.

YOUR ATTORNEYS ARGUE THAT THE GOVERNMENT'S ACTIONS IN DIRECTING YOU TO SUBMIT A REPORT AND THE REQUEST THAT YOU SUBMIT A COST ESTIMATE BASED UPON THE OPTIMUM SOLUTION IN THAT REPORT, AS WELL AS THE STATEMENT IN THE STOP ORDER THAT YOU WOULD BE GIVEN AN OPPORTUNITY TO NEGOTIATE A SETTLEMENT IF AND WHEN YOUR RIGHT TO PROCEED WAS TERMINATED, BOUND THE GOVERNMENT TO NEGOTIATE A SETTLEMENT UPON TERMINATION OF THE CONTRACT. IT IS ALSO STATED IN THEIR BRIEF THAT THE CASES RELATING TO WAIVER OF THE DUE DATE IN GOVERNMENT CONTRACTS HAVE UNIFORMLY HELD THAT AN ELECTION ON THE PART OF THE GOVERNMENT TO ACCEPT PERFORMANCE AFTER THE SPECIFIED PERFORMANCE PERIOD CONSTITUTES A WAIVER OF THE PERFORMANCE TIME. WHILE IN THE VIEW WE TAKE OF THE CASE WE FIND IT UNNECESSARY TO PASS ON THIS POINT, ATTENTION IS DIRECTED TO THE DECISION OF THE COURT OF CLAIMS IN ZODA V. UNITED STATES, CT.1CLS. NO. 353-55, JANUARY 20, 1960, WHICH RAISES SOME DOUBT AS TO THE PROPOSITION.

ASSUMING THAT THE TERMINATION OF YOUR RIGHT TO PROCEED DID AMOUNT TO A BREACH OF CONTRACT BY THE GOVERNMENT, YOUR CLAIM STILL APPEARS TO BE SUBJECT TO THE RULE THAT COMPENSATION FOR BREACH OF CONTRACT SHOULD PLACE THE INJURED PARTY IN THE POSITION THAT SUCH PARTY WOULD HAVE BEEN IN HAD THE CONTRACT BEEN FULLY PERFORMED, AND SUCH PARTY IS NOT ENTITLED TO BE PLACED IN A BETTER POSITION BECAUSE OF THE BREACH THAN HE WOULD HAVE BEEN IN HAD THE CONTRACT BEEN FULLY PERFORMED. SEE UNITED PROTECTIVE WORKERS OF AMERICAN LOCAL NO. 2 V. FORD MOTOR CO., 223 F.2D 49; AND BLAIR V. UNITED STATES, 150 F.2D 676.

THUS, EVEN IF YOUR PERFORMANCE HAD RESULTED IN INCREASING THE AIR SPEED OF THE WIND TUNNEL TO A MAXIMUM OF 200 MILES PER HOUR, THERE WOULD NORMALLY HAVE BEEN FOR DEDUCTION FROM THE CONTRACT PRICE THE SUM OF $4,500 TO COVER THE COST OF THE REPLACEMENT HUB AND GEAR, THE SUM OF $4,991 TO COVER THE COST TO THE GOVERNMENT IN PROVIDING AN ALTERNATE AIR SUPPLY, THE SUM OF $700 TO COVER THE COST TO THE GOVERNMENT FOR REPAIRING AND REINSTALLING THE GUIDE VANES, AND THE AMOUNT OF $34,800 AS LIQUIDATED DAMAGES FOR 116 WORKING DAYS OF EXCESS INTERRUPTIONS IN THE OPERATION OF THE WIND TUNNEL. ON SUCH BASIS THE AMOUNT PAYABLE UNDER THE CONTRACT, PLUS AN ALLOWANCE OF $1,250 TO COVER THE CLAIMED AMOUNT DUE FOR THE PREPARATION OF YOUR TECHNICAL REPORT NO. 55-23, WOULD BE $103,875, OR ONLY $275 IN EXCESS OF THE PROGRESS PAYMENTS OF $103,600.

IN PRESENTING A CLAIM BY THE GOVERNMENT AGAINST YOU, THE FEDERAL AVIATION AGENCY HAS CONSIDERED THE FACT THAT THE AIR SPEED OF THE WIND TUNNEL WAS INCREASED THROUGH YOUR WORK, IN WHAT IS DESCRIBED AS A DIFFERENCE IN VALUE METHOD OF COMPUTING THE CLAIM OF THE GOVERNMENT. THAT IS THE RULE GENERALLY APPLIED IN CASES WHERE A BUILDING IS NOT COMPLETED ACCORDING TO CONTRACT AND THE OWNER OR PURCHASER HAS ELECTED TO ACCEPT THE COMPLETED BUILDING WITHOUT RELEASING THE BUILDER FROM ANY CLAIM FOR DAMAGES ON ACCOUNT OF A FAILURE TO RENDER SATISFACTORY PERFORMANCE. THUS, IN THE CASE OF GEORGETOWN DEVELOPMENT CORP. V. GRANAT, 201 F.2D 714, IT WAS HELD THAT THE MEASURE OF DAMAGES IS THE DIFFERENCE BETWEEN WHAT THE BUILDING WAS WORTH WHEN COMPLETED AND WHAT IT WOULD HAVE BEEN WORTH HAD IT BEEN COMPLETED ACCORDING TO THE CONTRACT.

IN STILLWELL AND BIERCE MFG. CO. V. PHELPS, 130 U.S. 520, THE SUPREME COURT OF THE UNITED STATES CONSIDERED THE MEASURE OF DAMAGES, FOR A FAILURE TO COMPLETE SATISFACTORILY A CONTRACT FOR THE FURNISHING AND INSTALLATION OF MACHINERY, TO BE THE REASONABLE COST OF ALTERING THE CONSTRUCTION AND SETTING UP THE MACHINERY SO AS TO MAKE IT CONFORM TO THE CONTRACT. HOWEVER, SEE BEACON TOOL AND MACHINE CO. V. NATIONAL PRODUCTS MFG. CO., 252 MASS. 88, 175 N.E. 572, IN WHICH IT WAS HELD THAT A CONTRACTOR WHO UNDERTOOK TO ACHIEVE A STIPULATED RESULT BUT FAILED TO DO SO WAS NOT ENTITLED TO RECOVER EITHER UNDER THE CONTRACT OR ON A QUANTUM MERUIT EVEN IF PERFORMANCE WERE IMPOSSIBLE.

WHILE THE AMOUNT OF THE GOVERNMENT'S CLAIM AGAINST YOU COULD READILY BE COMPUTED IN AN AMOUNT HIGHER THAN THAT PRESENTED BY THE ADMINISTRATIVE AGENCY, IT HAS BEEN NOTED THAT THE ADMINISTRATIVE STATEMENT OF ACCOUNT INCLUDES ITEMS OF COST WHICH, IN OUR OPINION, WOULD NORMALLY HAVE BEEN FOR CONSIDERATION UNDER THE PROVISIONS OF PARAGRAPH 14 OF THE ADVERTISED SPECIFICATIONS.

AS COMPARED WITH THE COST OF APPROXIMATELY $2,000 TO $3,000 FOR A REDUCTION GEAR OF A TYPE BELIEVED TO BE SUITABLE UNDER THE ORIGINAL PLANS, THE FEDERAL AVIATION AGENCY ESTIMATE IS $16,638 FOR A SPECIAL TYPE REDUCTION GEAR WHICH WOULD BE REQUIRED IN A SYSTEM WHICH WOULD RESULT IN INCREASING THE AIR SPEED OF THE WIND TUNNEL TO A MAXIMUM OF 200 MILES PER HOUR. THE ESTIMATE FOR A 12-BLADED FAN IS $10,000, WHEREAS THE ORIGINAL PLANS CALLED FOR A FAN OF FOUR OR SIX BLADES, AND IT IS APPARENT THAT THE COST OF SAME WOULD NOT HAVE BEEN AS HIGH AS $10,000. ALSO, THE FEDERAL AVIATION AGENCY'S COST ESTIMATES INCLUDE OTHER COSTS OF $36,343 TO PROVIDE FOR THE USE OF A CLUTCH WITH THE WESTINGHOUSE MOTOR, DETERMINED NECESSARY TO PROPEL A 12-BLADED FAN HAVING BLADES WITH A FIXED PITCH, WHEREAS WORK IN ACCORDANCE WITH THE ORIGINAL PLANS APPARENTLY WOULD NOT HAVE REQUIRED INSTALLATIONS OF A CLUTCH FOR THE MOTOR, CLUTCH CONTROL, COOLING SYSTEM, ETC. EVIDENTLY, IF YOU WERE REQUIRED UNDER AN APPROPRIATE CONTRACT AMENDMENT, EXECUTED UNDER PARAGRAPH 14 OF THE SPECIFICATIONS, TO PURCHASE THE INDICATED ADDITIONAL ITEMS OF EQUIPMENT AND GIVEN A REASONABLE ALLOWANCE FOR YOUR SERVICES IN CONNECTION WITH THE ADDITIONAL WORK INVOLVED, THE CONTRACT PRICE WOULD HAVE BEEN INCREASED BY AS MUCH AS, IF NOT MORE THAN, YOUR ESTIMATE OF $47,000, BASED UPON COMPLETION OF THE WORK IN ACCORDANCE WITH THE OPTIMUM SOLUTION OUTLINED IN YOUR TECHNICAL REPORT NO. 55-23.

THE BASIC THEORY OF THE FEDERAL AVIATION AGENCY CLAIM IS THAT UNDER THE CONTRACT YOU WERE OBLIGATED TO PRODUCE THE DESIRED MODIFICATION AT THE FIXED PRICE STATED, REGARDLESS OF ANY CHANGES OF PLAN OR DESIGN. SINCE THE CONTRACT ENTERED INTO WAS NOT BASED SOLELY ON THE GOVERNMENT'S ORIGINAL INVITATION, BUT INCLUDED YOUR ENGINEERING REPORT NO. 52-4 WHICH SPECIFIED A PARTICULAR METHOD OF OBTAINING THE DESIRED RESULT, WE BELIEVE, IN VIEW OF THE PROVISIONS OF PARAGRAPH 14, THAT THE FEDERAL AVIATION AGENCY THEORY CANNOT BE MAINTAINED. IN THE CIRCUMSTANCES, WE ARE OF THE OPINION THAT YOU ARE NOT LIABLE TO THE GOVERNMENT IN ANY SUBSTANTIAL AMOUNT AND THAT WE ARE NOT, THEREFORE, REQUIRED TO REFER THE CASE TO THE DEPARTMENT OF JUSTICE FOR THE INSTITUTION OF A SUIT AGAINST YOU, OR OTHER APPROPRIATE ACTION. ON THE OTHER HAND, FOR THE REASONS STATED ABOVE, IT IS OUR OPINION THAT YOUR CLAIM FOR ANY MATERIAL AMOUNTS IS OF SUCH DOUBTFUL VALIDITY AS TO REQUIRE ITS REJECTION BY OUR OFFICE. SEE LONGWILL V. UNITED STATES, 17 C.1CLS. 288, 291; AND CHARLES V. UNITED STATES, 19 ID. 316, 319.