B-144374, NOV. 25, 1960

B-144374: Nov 25, 1960

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THEREAFTER THE CLAIM WAS REFERRED TO THE DEPARTMENT OF THE ARMY FOR AN ADMINISTRATIVE REPORT. THE CLAIM WAS RETURNED WITH THE RECOMMENDATION THAT THE SAME BE DISALLOWED. THE CLAIM WAS CONSIDERED BY OUR CLAIMS DIVISION AND WAS DISALLOWED BY SETTLEMENT DATED APRIL 2. ON THE GROUND PRIMARILY THAT THE REIMBURSABLE COSTS WERE FIXED BY THE TERMS OF ARTICLE 2 (C) OF THE CONTRACT. THE PENDING MATTER WILL BE CONSIDERED AS A REQUEST FOR REVIEW OF THE SETTLEMENT DATED APRIL 2. ALTHOUGH WE HAVE RECEIVED NO DIRECT COMMUNICATION FROM YOU SINCE THAT DATE. THERE WERE ALSO ENCLOSED YOUR LETTERS DATED JUNE 25. IN FURTHER SUPPORT OF YOUR CONTENTION THAT NO CEILING WAS INTENDED TO BE PLACED ON OTHERWISE REIMBURSABLE COSTS INCURRED IN THE PERFORMANCE OF THE SUBJECT CONTRACT.

B-144374, NOV. 25, 1960

TO AMERICAN MACHINE AND FOUNDRY COMPANY:

WITH LETTER DATED OCTOBER 18, 1960, THE OFFICE OF THE CHIEF OF FINANCE, DEPARTMENT OF THE ARMY, INDIANAPOLIS, INDIANA, TRANSMITTED TO OUR CLAIMS DIVISION FOR DIRECT SETTLEMENT YOUR CLAIM FOR AMOUNTS AGGREGATING $90,254.47, REPRESENTING ALLEGED OVERRUN OF COSTS IN THE AMOUNT OF $80,239.96 IN THE PERFORMANCE OF COST-PLUS-A-FIXED-FEE CONTRACT NO. DA-30- 069-ORD-1033, DATED MARCH 23, 1953, COVERING CERTAIN RESEARCH AND DEVELOPMENT WORK, PLUS THE SUM OF $10,014.51 FOR TERMINATION SETTLEMENT COSTS.

THE RECORD SHOWS THAT BY LETTER OF MARCH 28, 1956, YOUR COMPANY SUBMITTED TO OUR CLAIMS DIVISION FOR SETTLEMENT A CLAIM IN THE INDICATED AMOUNT OF $80,239.96, AND THEREAFTER THE CLAIM WAS REFERRED TO THE DEPARTMENT OF THE ARMY FOR AN ADMINISTRATIVE REPORT. BY THIRD ENDORSEMENT DATED MARCH 4, 1957, THE CLAIM WAS RETURNED WITH THE RECOMMENDATION THAT THE SAME BE DISALLOWED. THE CLAIM WAS CONSIDERED BY OUR CLAIMS DIVISION AND WAS DISALLOWED BY SETTLEMENT DATED APRIL 2, 1957, ON THE GROUND PRIMARILY THAT THE REIMBURSABLE COSTS WERE FIXED BY THE TERMS OF ARTICLE 2 (C) OF THE CONTRACT. THE PENDING MATTER WILL BE CONSIDERED AS A REQUEST FOR REVIEW OF THE SETTLEMENT DATED APRIL 2, 1957, ALTHOUGH WE HAVE RECEIVED NO DIRECT COMMUNICATION FROM YOU SINCE THAT DATE.

WITH THE LETTER OF OCTOBER 18, 1960, THE DEPARTMENT OF THE ARMY TRANSMITTED HERE YOUR LETTER OF DECEMBER 19, 1958, ADDRESSED TO OUR CLAIMS DIVISION VIA THE NEW YORK ORDNANCE DISTRICT, WHEREIN YOU CLAIMED THE SUM OF $90,254.47 TO BE DUE YOUR COMPANY ON THE BASIS SET FORTH THEREIN. THERE WERE ALSO ENCLOSED YOUR LETTERS DATED JUNE 25, 1959, MARCH 14, 1960, AND APRIL 19, 1960, ADDRESSED TO THE CONTRACTING OFFICER, NEW YORK ORDNANCE DISTRICT, RELATING FURTHER TO THE MATTER OF YOUR CLAIM.

IN YOUR LETTER OF DECEMBER 19, 1958, YOU INVITED ATTENTION TO ARTICLE 2 (A) OF THE INVOLVED CONTRACT PROVIDING THAT "NEITHER THE GOVERNMENT NOR THE CONTRACTOR GUARANTEES THE ACCURACY OF THESE ESTIMATES.' SEE ALSO ARTICLE 1 (A) OF THE CONTRACT PROVIDING, IN PART, AS FOLLOWS:

"* * * THE CONTRACTOR AGREES TO USE ITS BEST EFFORTS TO COMPLETE PERFORMANCE OF THIS CONTRACT WITHIN THE ESTIMATED COST AND WITHIN THE TIME SPECIFIED, BUT THE GOVERNMENT AND THE CONTRACTOR AGREE THAT PERFORMANCE WITHIN SUCH ESTIMATED COST AND WITHIN SUCH TIME CANNOT BE GUARANTEED.'

YOU ALSO INSISTED THAT THE LANGUAGE OF ARTICLE 2 (C), CITED IN THE SETTLEMENT OF APRIL 2, 1957, DOES NOT CHANGE THE ABOVE-QUOTED LANGUAGE OR ITS MEANING, IT MERELY BEING PROVIDED IN THE LATTER THAT NO ADJUSTMENT OF THE FIXED FEE UPWARD OR DOWNWARD WOULD BE MADE BY REASON OF AN INCREASE OR DECREASE IN THE ESTIMATED COST. IN FURTHER SUPPORT OF YOUR CONTENTION THAT NO CEILING WAS INTENDED TO BE PLACED ON OTHERWISE REIMBURSABLE COSTS INCURRED IN THE PERFORMANCE OF THE SUBJECT CONTRACT, YOU CALLED ATTENTION TO THE LANGUAGE OF ARTICLE 3 (C) (4) OF THE CONTRACT TO THE EFFECT THAT THE CONTRACTOR WOULD BE REIMBURSED FOR LOSSES OR EXPENSES ACTUALLY SUSTAINED IN CONNECTION WITH THE WORK AND FOUND AND CERTIFIED BY THE CONTRACTING OFFICER TO BE JUST AND REASONABLE, UNLESS EXPRESSLY PROHIBITED. IT WAS ALSO SUGGESTED THAT ARTICLE 2 (E) OF THE CONTRACT MILITATES AGAINST THE VIEW THAT THERE WAS ANY INTENTION TO PLACE A CEILING ON THE REIMBURSABLE COSTS IN THIS CASE.

THE RECORD SHOWS THAT THE NEW YORK ORDNANCE DISTRICT GAVE CONSIDERATION TO YOUR CLAIM IN THE LIGHT OF THE SEVERAL MATTERS REFERRED TO IN YOUR LETTERS AND NOW AGREES THAT CONSIDERATION OF THE CONTRACT AS A WHOLE COMPELS THE CONCLUSION THAT THE CONTRACT DOES NOT PLACE A CEILING ON THE AMOUNT OF THE COSTS FOR WHICH THE CONTRACTOR MAY BE REIMBURSED. OUR OFFICE IS IN AGREEMENT WITH THAT VIEW. WITH THE LETTER OF OCTOBER 18, 1960, THE DEPARTMENT OF THE ARMY TRANSMITTED A COPY OF A LETTER DATED AUGUST 8, 1956, FROM THE NAVY AUDITOR-IN CHARGE TO THE NEW YORK ORDNANCE DISTRICT, STATING THAT AN AUDIT HAD BEEN MADE OF YOUR REPORTED COSTS OF $80,239.96 FOR OVERRUN AND THAT ONLY THE SUMS OF $79,577 HAD BEEN ALLOWED. ALSO, THE ARMY ORDNANCE MISSILE COMMAND RECOMMENDED A DISALLOWANCE OF THE SUM OF $4,931.12, BASED UPON A TECHNICAL EVALUATION OF CERTAIN WORK PERFORMED UNDER THE CONTRACT. IT WAS THE RECOMMENDATION OF THE NEW YORK ORDNANCE DISTRICT THAT YOUR CLAIM FOR TERMINATION SETTLEMENT COSTS IN THE AMOUNT OF $10,014.51 BE ALLOWED, THAT SUM HAVING BEEN DETERMINED TO BE FAIR AND REASONABLE. THE FOREGOING RECOMMENDATIONS WERE CONCURRED IN BY THE OFFICE OF THE CHIEF OF ORDNANCE, DEPARTMENT OF THE ARMY.

UPON THE BASIS OF THE FACTS SET FORTH IN THE ADMINISTRATIVE REPORT IN THIS CASE AND IN VIEW OF THE CITED PROVISIONS OF THE CONTRACT INVOLVED, INSTRUCTIONS ARE BEING ISSUED TODAY TO OUR CLAIMS DIVISION TO CERTIFY FOR PAYMENT TO YOUR COMPANY THE INDICATED AMOUNT OF $84,660.39.