B-147326, MAY 25, 1962

B-147326: May 25, 1962

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MONTEREY CAMPBELL: REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 22. THE REQUIRED TYPE OF RECTIFIER WAS CHANGED TO RA 91-C. WERE DELETED FROM THE REQUIREMENTS OF THE CONTRACT. THE UNIT PRICE ON ITEM NO. 1 WAS INCREASED TO $240.44. ADJUSTMENTS WERE MADE IN THE PRICES ON CERTAIN OF THE SPARE PARTS. ALLOWANCES WERE PROVIDED IN THE AMOUNTS OF $116.04 AND $203.10 TO COVER ADDITIONAL TRANSPORTATION COSTS AND DELIVERY TO THE GOVERNMENT OF 10 OBSOLETE SELENIUM RECTIFIERS. SELENIUM RECTIFIERS WERE LISTED IN THE CONTRACT AS COMPONENTS OR SPARE PARTS FOR . RECTIFIER RA-91-) UNDER THE SUPPLEMENTAL AGREEMENTS THE TOTAL AMOUNT OF THE CONTRACT WAS INCREASED FROM $30. THE TIME FOR COMPLETION OF THE CONTRACT WAS EXTENDED FROM JANUARY 3.

B-147326, MAY 25, 1962

TO MR. MONTEREY CAMPBELL:

REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 22, 1961, AND SUBSEQUENT CORRESPONDENCE, CONCERNING A CLAIM OF THE WINDER AIRCRAFT CORPORATION OF FLORIDA AND ITS ASSIGNEE, THE SEMINOLE BANK OF TAMPA, FOR $68,889.97, UNDER ARMY CONTRACT NO. DA 36-039-SC-64909, DATED JUNE 30, 1954, AS AMENDED.

THE CONTRACT ORIGINALLY PROVIDED UNDER ITEM NO. 1 FOR DELIVERY OF 146 RECTIFIERS, METALLIC, RA-91-B, WITH TWO SUPPLEMENTS FOR TECHNICAL MANUALS TO BE DELIVERED WITH EACH RECTIFIER, AT A UNIT PRICE OF $187.65 AND AT A TOTAL PRICE OF $27,396.90. THE AGREED PRICES ON OTHER ITEMS OF THE CONTRACT, SPECIFYING ADDITIONAL SUPPLEMENTS FOR TECHNICAL MANUALS (ITEM NO. 2), SPARE PARTS (ITEMS NOS. 3, 4 AND 5), AND LITERATURE (ITEM NO. 6), AGGREGATED THE SUM OF $2,716.75.

ON JULY 13, 1954, THE REQUIRED TYPE OF RECTIFIER WAS CHANGED TO RA 91-C. THEREAFTER, BY SUPPLEMENTAL AGREEMENTS, ITEMS NOS. 2 AND 6 AND TWO OF THE SUBITEMS OF ITEM NO. 1 (FUSES AND SUPPLEMENTS FOR TECHNICAL MANUALS), WERE DELETED FROM THE REQUIREMENTS OF THE CONTRACT; THE UNIT PRICE ON ITEM NO. 1 WAS INCREASED TO $240.44; ADJUSTMENTS WERE MADE IN THE PRICES ON CERTAIN OF THE SPARE PARTS; AND ALLOWANCES WERE PROVIDED IN THE AMOUNTS OF $116.04 AND $203.10 TO COVER ADDITIONAL TRANSPORTATION COSTS AND DELIVERY TO THE GOVERNMENT OF 10 OBSOLETE SELENIUM RECTIFIERS. SELENIUM RECTIFIERS WERE LISTED IN THE CONTRACT AS COMPONENTS OR SPARE PARTS FOR ,RECTIFIER RA-91-)

UNDER THE SUPPLEMENTAL AGREEMENTS THE TOTAL AMOUNT OF THE CONTRACT WAS INCREASED FROM $30,113.65 TO $38,343.69, AND THE TIME FOR COMPLETION OF THE CONTRACT WAS EXTENDED FROM JANUARY 3, 1955, TO MAY 31, 1957. THE CONTRACTOR COMPLETED DELIVERY OF THE 146 RECTIFIERS IN MARCH 1958 AND FINAL PAYMENT UNDER THE CONTRACT APPEARS TO HAVE BEEN MADE ON OR ABOUT MARCH 28, 1958. THE CONTRACT WAS TERMINATED FOR DEFAULT ON APRIL 1, 1958, BECAUSE OF THE CONTRACTOR'S FAILURE TO DELIVER THE BALANCE OF THE SPARE PARTS SPECIFIED IN THE CONTRACT.

THE RECORD INDICATES THAT THE TOTAL SUM OF $35,791.67 WAS PAID TO THE CONTRACTOR, INCLUDING PAYMENT OF $35,104.24 FOR THE 146 RA-91-C RECTIFIERS AT A PRICE OF $240.44 EACH, EXCLUSIVE OF ANY PROPORTIONATE ALLOWANCE FOR ADDITIONAL TRANSPORTATION EXPENSE.

IN PRESENTING CLAIM FOR THE ORIGINAL SUM OR $68,131.03 TO OUR OFFICE, YOU REFERRED TO A SIMILAR AMOUNT WHICH WAS CLAIMED IN AN APPLICATION FOR RELIEF PURSUANT TO THE PROVISIONS OF PUBLIC LAW 85-804, APPROVED AUGUST 28, 1958, AS IMPLEMENTED BY EXECUTIVE ORDER NO. 10789, DATED NOVEMBER 14, 1958, AND SECTION 17 OF THE ARMED SERVICES PROCUREMENT REGULATION. HOWEVER, THE AMOUNT OF THE RELIEF CLAIM HAD BEEN AMENDED TO $68,889.97, COMPUTED AS FOLLOWS:

TABLE

ALLEGED PERFORMANCE COSTS $ 95,165.13

PROFIT AT 10 PERCENT 9,516.51

TOTAL COST PLUS PROFIT $104,681.64

LESS: CONTRACT PAYMENTS 35,791.67

AMOUNT OF CLAIM $ 68,889.97

IT WAS EXPLAINED THAT THE RELIEF CLAIM WAS BASED UPON THE FOLLOWING FACTORS: (1) THAT THE CONTRACTOR SUFFERED A LOSS WHICH IMPAIRED ITS PRODUCTIVE ABILITY AND ITS CONTINUED PERFORMANCE OF DEFENSE CONTRACTS, ALSO ITS CONTINUED OPERATION AS A SOURCE OF SUPPLY, WAS ESSENTIAL TO THE NATIONAL DEFENSE; (2) THAT THE LOSS SUFFERED BY THE CONTRACTOR RESULTED FROM GOVERNMENT ACTION AND FAIRNESS DICTATED THAT THE CONTRACT BE ADJUSTED TO COMPENSATE THE CONTRACTOR FOR THE LOSS; (3) THAT AN INFORMAL COMMITMENT WAS GIVEN BY THE ADMINISTRATOR OF THE CONTRACT WHICH RESULTED IN THE EXPENDITURE OF ADDITIONAL SUMS AND THE ASSIGNEE BANK ADVANCED THOSE SUMS ON THE STRENGTH OF THE COMMITMENT GIVEN; AND (4) THAT CHANGES IN THE CONTRACT SPECIFICATIONS RESULTED IN A SUBSTANTIAL INCREASE IN THE CONTRACTOR'S COSTS AND OPERATED TO COMMIT THE GOVERNMENT TO INCREASE THE COST OF THE CONTRACT WHICH WAS NOT ACCOMPLISHED.

THE DEPARTMENT OF THE ARMY FURNISHED A REPORT IN THE MATTER, STATING THAT THE CLAIM WAS GIVEN VERY CAREFUL CONSIDERATION BY LEGAL, ACCOUNTING, CONTRACT, AND ENGINEERING SPECIALISTS AT THE FIELD LEVEL AND ALSO BY THE OFFICE OF THE CHIEF SIGNAL OFFICER, AND ALL CONCURRED THAT THE FACTS OF THE CASE DID NOT MERIT THE GRANTING OF RELIEF.

THE DEPARTMENTAL FILE OF THIS CASE SHOWS THAT THE CLAIM WAS DENIED BY THE ACTING DEPUTY CHIEF SIGNAL OFFICER THROUGH THE CONTRACTING OFFICER. LETTER DATED AUGUST 18, 1961, THE ACTING DEPUTY CHIEF SIGNAL OFFICER FURNISHED YOU A COPY OF HIS MEMORANDUM DECISION DATED JUNE 6, 1961, AND COMMENTED ON THE ALLEGATION BY MR. GORDON E. MARKS, PRESIDENT OF THE SEMINOLE BANK OF TAMPA, THAT MR. GILSON W. DAVIS OF THE ARMY SIGNAL CORPS HAD INFORMED HIM THAT A CLAIM UNDER TITLE II OF THE FIRST WAR POWERS ACT, 1941, AS AMENDED, WAS ENTIRELY JUSTIFIED. PUBLIC LAW 85-804 IS SUCCESSOR LEGISLATION, AUTHORIZING THE MAKING, AMENDMENT AND MODIFICATION OF CONTRACTS TO FACILITATE THE NATIONAL DEFENSE.

THE MEMORANDUM OF DECISION STATES THAT THE CONTRACTOR IS NOT CONSIDERED ESSENTIAL TO THE NATIONAL DEFENSE BY THE U.S. ARMY SIGNAL CORPS. THE MEMORANDUM CONTAINS VARIOUS FINDINGS, SOME OF WHICH ARE AS FOLLOWS:

THE CONTRACTOR DID NOT ENGINEER, DEVELOP OR DESIGN THE RA-91-C RECTIFIER. THERE WERE CHANGES IN THE EQUIPMENT AFTER AWARD BUT PRICE ADJUSTMENTS WERE NEGOTIATED TO COVER THE INCREASED COSTS CAUSED BY SUCH CHANGES. THE CONTRACTOR REQUESTED CLARIFICATION OF CERTAIN GOVERNMENT- FURNISHED DRAWINGS. MINOR DIMENSIONAL CHANGES IN THE DRAWINGS WERE APPROVED AND INCORPORATED IN TECHNICAL ACTION REQUESTS NOS. FEB 8 AND FEB 10. THE AUTHORIZED CHANGES IN THE DRAWINGS WERE MADE CONTINGENT UPON NO CHANGE IN THE CONTRACT PRICE OR DELAY IN DELIVERY. THE DRAWINGS WERE CORRECTED WHEN THE CONTRACTOR WAS BUILDING THE REPRODUCTION MODELS AND NOT DURING PRODUCTION. THE ARMY AUDIT AGENCY REPORT DOES NOT CLEARLY SUPPORT THE AMOUNT OF THE ALLEGED LOSS AND THE CONTRACTOR WAS UNABLE TO FULLY SUPPORT THE BASIS USED IN ITS CLAIM OR SUGGEST A MORE EQUITABLE BASIS FOR SETTLEMENT. THE GOVERNMENT DID NOT LEAD THE CONTRACTOR TO BELIEVE AT THE OUTSET OF THE CONTRACT THAT CERTAIN SUBCONTRACTORS WERE ON AN APPROVED LIST OF MANUFACTURERS. ONLY THE SUBCONTRACTORS WARRANTED THAT THEIR PRODUCTS CONFORMED TO CONTRACT SPECIFICATIONS.

YOU WERE ADVISED IN THE LETTER DATED AUGUST 18, 1961, THAT MR. GILSON W. DAVIS HAD DENIED ASSURING MR. MARKS THAT A "TITLE II" CLAIM WAS ENTIRELY JUSTIFIED. ACCORDINGLY TO AN AFFIDAVIT SUBMITTED BY MR. DAVIS, MR. MARKS WAS INFORMED ON OR ABOUT FEBRUARY 15, 1957, THAT THE CONTRACTOR WOULD BE PAID ONLY FOR ACCEPTABLE COSTS CAUSED BY ENGINEERING CHANGES AND THAT ANY COSTS CLAIMED BY THE CONTRACTOR WHICH WERE BEYOND THE CONTRACTING OFFICER'S AUTHORITY TO NEGOTIATE COULD BE INCLUDED IN A "TITLE II" CLAIM.

THE FACTS OF THE CASE WERE DISCUSSED BY ONE OF OUR REPRESENTATIVES WITH YOU AND MR. JOEL T. HENRY, PRESIDENT OF THE WINDER AIRCRAFT CORPORATION OF FLORIDA, ON JANUARY 24, 1962. IT WAS NOTED AT THIS CONFERENCE THAT NO INFORMATION HAD BEEN FURNISHED BY THE CONTRACTOR TO SHOW THE EXTENT TO WHICH INCREASED COSTS WERE INCURRED AS THE RESULT OF ERRORS IN THE CONTRACT DRAWINGS AND ALLEGED DELAYS IN APPROVAL OR REJECTION OF COMPONENTS BY THE FORT MONMOUTH, NEW JERSEY, SIGNAL CORPS LABORATORIES. IT WAS ALSO NOTED THAT NO CLAIM BASED UPON DRAWING ERRORS WAS EVER PRESENTED UNDER THE CONTRACT "CHANGES" ARTICLE, AND THAT YOU HAD NOT FURNISHED WRITTEN COMMENTS ON THE FINDINGS AS MADE IN THE MATTER OF THE CLAIM FOR RELIEF BY THE ACTING DEPUTY CHIEF SIGNAL OFFICER.

IN LETTERS DATED FEBRUARY 12 AND 13, 1962, FROM YOU AND MR. HENRY, IT IS ALLEGED THAT ABOUT 50 PERCENT OF THE CLAIM IS BASED UPON DRAWING ERRORS AND THE BALANCE OF THE CLAIM IS BASED UPON DIFFICULTIES EXPERIENCED IN OBTAINING TESTS AND APPROVAL OF COMPONENTS. IT IS ALLEGED THAT THE SIGNAL CORPS WAS WELL AWARE OF THE CONTRACTOR'S INTENTIONS TO FILE A CLAIM BASED UPON DRAWING ERRORS AND CHANGES OF VARIOUS COMPONENTS. REFERENCE IS MADE TO THE FACT THAT THE GOVERNMENT ADMITTED THE ERRORS IN THE DRAWINGS BUT CONSIDERED THAT, SINCE ONLY MINOR DIMENSIONAL CHANGES WERE INVOLVED, THE CHANGES COULD NOT HAVE RESULTED IN ANY APPRECIABLE PRICE INCREASE. IT IS CONTENDED THAT THE ARMY AUDIT AGENCY'S REPORT SHOWS THAT A MINIMUM OF $43,917.86, OVER AND ABOVE THE AMENDED CONTRACT PRICE OF $38,343.69, WAS EXPENDED IN PERFORMING THE CONTRACT, AND THAT THE CONTRACTING OFFICER INDICATED THAT IT TOOK FROM SIX MONTHS TO A YEAR TO PROCESS CERTAIN COMPONENT PARTS THROUGH THE FORT MONMOUTH LABORATORIES FOR APPROVAL FOR USE WITH THE END ITEMS. THERE IS REITERATED THE CONTENTION THAT, AT THE OUTSET OF THE CONTRACT, THE ARMY FURNISHED THE CONTRACTOR A LIST OF APPROVED MANUFACTURERS. YOU INDICATE THAT IT WAS NEVER EXPLAINED THAT THE FURNISHING OF SUCH LIST MEANT ONLY THAT THE PARTICULAR MANUFACTURERS HAD THEIR PRODUCTS APPROVED IN THE PAST BY THE SIGNAL CORPS.

IT IS ARGUED THAT THE ARMY HAS NOT REFUTED THE CLAIM THAT INCREASED COSTS WERE INCURRED AS THE RESULT OF THE DRAWING ERRORS, AND THAT THE SIGNAL CORPS WAIVED THE CONTRACT PROVISION THAT A CLAIM MUST BE PRESENTED BEFORE FINAL PAYMENT UNDER THE CONTRACT. FURTHER, IT IS ARGUED THAT IT IS UNLIKELY THAT THE ASSIGNEE BANK WOULD HAVE GONE AHEAD WITH THE ADVANCEMENT OF FUNDS IF MR. DAVIS HAD NOT ASSURED MR. MARKS THAT THE CLAIM AT THAT TIME WAS JUSTIFIED.

THE RECORD BEFORE US FAILS TO JUSTIFY ANY CONCLUSION THAT ALL OF THE ALLEGED INCREASED COSTS OF PERFORMING THE CONTRACT WERE DUE TO THE DRAWING ERRORS AND A FAILURE ON THE PART OF THE FORT MONMOUTH LABORATORIES TO APPROVE OR REJECT SAMPLES OF COMPONENTS WITHIN REASONABLE PERIODS OF TIME. THERE IS NO EVIDENCE TO SUBSTANTIATE THAT A LIST OF APPROVED MANUFACTURERS WAS FURNISHED TO THE CONTRACTOR AT THE INCEPTION OF THE CONTRACT OR, IF SO, THAT THE CONTRACTOR RELIED UPON THE LIST AS A GUARANTEE THAT THE PRODUCTS OF THOSE MANUFACTURERS WOULD MEET SPECIFICATIONS REQUIREMENTS. SOME SUPPLIERS WERE SUGGESTED AFTER SUBCONTRACTOR'S COMPONENTS FAILED TO MEET SPECIFICATIONS. AS EVIDENCED BY THE CONTRACTOR'S LETTER DATED MAY 9, 1955, THE ORIGINAL SUBCONTRACTORS, AND NOT THE GOVERNMENT, FURNISHED ASSURANCES THAT THEIR PRODUCTS WOULD CONFORM TO THE CONTRACT SPECIFICATIONS.

A TOTAL OF 11 MODIFICATIONS TO THE CONTRACT WERE NEGOTIATED, AND THEY APPEAR TO COVER ALL CLAIMS FOR CHANGES IN SPECIFICATIONS. THE NEGOTIATION OF THESE SEVERAL CONTRACT MODIFICATIONS APPEARS REASONABLE TO INDICATE THAT THE CONTRACTOR WAS WELL AWARE OF THE FACT THAT THE CONTRACT PROCEDURES MUST BE FOLLOWED TO OBTAIN ADJUSTMENTS IN THE CONTRACT PRICE BASED UPON INCREASED COSTS INCURRED AS THE RESULT OF AUTHORIZED CHANGES IN THE CONTRACT REQUIREMENTS. THE FACT THAT THE SIGNAL CORPS MAY HAVE BEEN ADVISED AS EARLY AS MAY 1955 THAT THE CONTRACTOR INTENDED TO FILE A ,TITLE II" CLAIM DOES NOT NECESSARILY JUSTIFY THE INFERENCE THAT THE SIGNAL CORPS HAD WAIVED THE REQUIREMENT FOR THE TIMELY PRESENTATION OF CLAIMS UNDER THE "CHANGES" ARTICLE OF THE CONTRACT.

THE ARMY AUDIT AGENCY'S REPORT ON EXAMINATION OF THE CONTRACTOR'S BOOKS AND RECORDS WAS INTENDED MERELY AS ESTABLISHING A BASIS FOR GRANTING RELIEF UNDER THE PROVISIONS OF PUBLIC LAW 85-804. THE REPORTED COST FIGURE WAS QUALIFIED IN CERTAIN RESPECTS AND DID NOT DISCLOSE PARTICULAR AMOUNTS OF ADDITIONAL COSTS AS HAVING BEEN ATTRIBUTABLE TO SUCH CAUSES AS ERRORS IN DRAWINGS OR DELAYS IN APPROVAL OR REJECTION OF COMPONENTS. FROM AN EXAMINATION OF THE ENTIRE RECORD, INCLUDING A COPY OF CONTRACTOR'S LETTER DATED JUNE 29, 1955, THE CONTRACTOR'S INCREASED COSTS APPEAR TO HAVE BEEN CAUSED PRIMARILY BY DIFFICULTIES EXPERIENCED IN OBTAINING ACCEPTABLE COMPONENTS.

THE ARMY HAS REFUTED THE CLAIM CONCERNING THE DRAWING ERRORS, INSOFAR AS IT IS REASONABLY POSSIBLE TO DO SO IN THE PARTICULAR CIRCUMSTANCES. IS, IF COURSE, THE RESPONSIBILITY OF CLAIMANTS TO PROVE THEIR CLAIMS, NOT ONLY FROM THE STANDPOINT OF SHOWING A GENERAL BASIS THEREFOR, BUT ALSO THE CORRECT AMOUNTS PAYABLE THEREON. IN THIS CASE, IT APPEARS THAT THE CONTRACTOR MAY HAVE CONSIDERED THE INCREASED COSTS INVOLVED IN THE CHANGES IN THE DRAWINGS WERE NEGLIGIBLE AND THAT IT MAY HAVE INTENDED TO WAIVE ANY CLAIM WITH RESPECT TO SUCH ERRORS WHICH IT ACCEPTED WITHOUT PROTEST THE TECHNICAL ACTION REQUESTS APPROVING THE CHANGES IN DIMENSIONS BUT INDICATING THAT NO PRICE ADJUSTMENT WAS CONTEMPLATED ON ACCOUNT OF THE CHANGES.

WE BELIEVE THAT IT IS IMMATERIAL WHETHER OR NOT MR. GILSON W. DAVIS ADVISED MR. MARKS AND MR. HENRY IN FEBRUARY 1957 THAT A CLAIM UNDER TITLE II OF THE FIRST WAR POWERS ACT, 1941, AS AMENDED, WAS ENTIRELY JUSTIFIED. IF HE MADE A STATEMENT TO THAT EFFECT, IT CAN BE VIEWED AS NO MORE THAN AN EXPRESSION OF OPINION. IT DID NOT CONSTITUTE A BINDING COMMITMENT ON THE PART OF THE GOVERNMENT TO ALLOW ANY PART OF THE RELIEF CLAIM. AN INFORMAL COMMITMENT CONCERNING THE POSSIBLE AMENDMENT OF A FORMAL CONTRACT IS NOT BINDING UPON THE GOVERNMENT EITHER UNDER ESTABLISHED LEGAL PRINCIPLES CONCERNING THE AUTHORITY OF GOVERNMENT AGENTS, OR UNDER SECTION 17 OF THE ARMED SERVICES PROCUREMENT REGULATION, WHICH GOVERNS THE CONSIDERATION BY THE MILITARY DEPARTMENTS OF RELIEF CLAIMS UNDER PUBLIC LAW 85-804. DURING A CONFERENCE HELD AT OUR OFFICE ON APRIL 10, 1962, YOU REFERRED TO A MEMORANDUM OF DECEMBER 10, 1956, IN WHICH THE CONTRACTING OFFICER STATED THAT THE CONTRACTOR HAD BEEN DELAYED WELL OVER A YEAR IN GETTING APPROVAL "ON ANOTHER COMPONENT.' THE CONTRACTING OFFICER PROPOSED AT SUCH TIME TO ISSUE AN ORDER GRANTING PRIORITY FOR DELIVERY OF AMMETERS FROM A SUBCONTRACTOR. SUBSEQUENTLY, YOU SUBMITTED A MEMORANDUM REQUESTING THAT WE GRANT RELIEF IN THIS MATTER AS WELL AS IN THE CASE OF A NAVY CONTRACT CLAIM FOR $50,531.53 WHICH WE DISALLOWED BY DECISION B-143250, NOVEMBER 21, 1961. IN A LETTER DATED APRIL 20, 1962, WITH WHICH THERE WERE ENCLOSED COPIES OF CERTAIN CORRESPONDENCE CONCERNING DELIVERIES OF SELENIUM RECTIFIERS BY THE INTERNATIONAL RECTIFIER CORPORATION TO THE CONTRACTOR, YOU REFERRED TO THE REJECTION ON MAY 3, 1955, OF A KOTRON SELENIUM RECTIFIER WHICH HAD BEEN SUBMITTED BY THE CONTRACTOR FOR TESTING ON FEBRUARY 24, 1955. ALSO, IN A LETTER DATED APRIL 25, 1962, YOU PROPOSED THAT THE ARMY AND NAVY CONTRACT CLAIMS "BE COMPROMISED AT A TOTAL SETTLEMENT OF $68,764.81.' THAT SETTLEMENT PROPOSAL IS BASED UPON A SUGGESTED ALLOWANCE OF $24,846.95 ON THE NAVY CONTRACT CLAIM TO COVER THE DIFFERENCE BETWEEN THE CONTRACT PRICE AND THE NAVY'S ESTIMATED COST OF PROCUREMENT, PLUS A SUGGESTED ALLOWANCE OF $43,417.86 OF THE ARMY CONTRACT CLAIM.

YOU ARGUE THAT OUR OFFICE HAS THE NECESSARY AUTHORITY TO SETTLE THE CLAIMS AND THAT THE ACTIONS TAKEN BY THE DEPARTMENTS OF THE ARMY AND THE NAVY ON THE CLAIMS FOR RELIEF UNDER PUBLIC LAW 85-804 WERE CAPRICIOUS, ARBITRARY, GROSSLY ERRONEOUS, NOT IN GOOD FAITH NOR SUPPORTED BY SUBSTANTIAL EVIDENCE. ALTHOUGH IT SEEMS TO BE YOUR BELIEF THAT THE ADMINISTRATIVE DECISIONS DENYING THE RELIEF CLAIMS ARE SUBJECT TO REVIEW UNDER THE MINIMAL STANDARD OF REVIEW AS SET FORTH IN THE WUNDERLICH ACT, 41 U.S.C. 321, 322, WHICH CONCERNS THE FINALITY ATTACHED TO ADMINISTRATIVE DECISIONS RENDERED UNDER PROVISIONS OF GOVERNMENT CONTRACTS, IT IS OUR OPINION THAT AN ADMINISTRATIVE DECISION DENYING A RELIEF CLAIM UNDER PUBLIC LAW 85-804 IS NOT SUBJECT TO REVIEW BY EITHER OUR OFFICE OR THE COURTS. ONLY THE CONTRACTING AGENCIES DESIGNATED BY EXECUTIVE ORDER ARE AUTHORIZED BY THE STATUTE TO AMEND OR MODIFY CONTRACTS WITHOUT CONSIDERATION ON THE BASIS THAT SUCH ACTION WOULD FACILITATE THE NATIONAL DEFENSE. WHEN ANY SUCH RELIEF CLAIM HAS BEEN DENIED ADMINISTRATIVELY AND THE CONTRACTOR THEREAFTER SUBMITS A CLAIM TO OUR OFFICE UNDER THE SAME CONTRACT, IT IS RATHER FOR US TO DETERMINE WHETHER THERE EXISTS A SUFFICIENT LEGAL BASIS FOR ALLOWANCE OF ANY PART OF SUCH CLAIM FROM APPROPRIATED FUNDS.

WE ARE NOT AUTHORIZED TO WAIVE RIGHTS VESTED IN THE GOVERNMENT BY THE TERMS OF A CONTRACT, NOR ARE WE AUTHORIZED TO COMPROMISE CLAIMS OF A CONTRACTOR ALTHOUGH WE HAVE ACCEPTED SETTLEMENT OFFERS WHERE IT IS CLEAR THAT THE GOVERNMENT HAS A LEGAL OBLIGATION TO PAY THE CONTRACTOR A SUM WHICH EQUALS OR APPROXIMATES THE AMOUNT OF THE SETTLEMENT OFFER. HOWEVER, AS INDICATED IN THE DECISION BEING RENDERED TODAY ON YOUR REQUEST FOR RECONSIDERATION OF THE DISALLOWANCE OF THE NAVY CONTRACT CLAIM, WE WILL NOT CONSIDER CLAIMS AGAINST THE UNITED STATES WHICH WE DETERMINE ARE ESSENTIALLY CLAIMS FOR UNLIQUIDATED DAMAGES, SINCE WE DO NOT HAVE THE FACILITIES FOR TAKING TESTIMONY, CROSS EXAMINATION OF WITNESSES AND WEIGHING CONFLICTING EVIDENCE, WHICH MAY BE NECESSARY IN DECIDING SUCH CLAIMS.

IN OUR CONSIDERATION OF THE NAVY CONTRACT CLAIM WE HAVE DETERMINED IN EFFECT THAT THE CIRCUMSTANCES OF THAT CASE CLEARLY DO NOT SHOW ANY POSSIBILITY OF LEGAL LIABILITY ON THE PART OF THE UNITED STATES. HENCE,WE FIND NO PROPER BASIS FOR CONSIDERING A PROPOSED RELINQUISHMENT OF THE MAJOR PART OF SUCH CLAIM AS JUSTIFYING AN ALLOWANCE OF PRACTICALLY ALL OF THE AMOUNT CLAIMED BY THE CONTRACTOR AND ITS ASSIGNEE UNDER THE ARMY CONTRACT, WHICH CLAIM ALSO APPEARS TO BE OF VERY DOUBTFUL VALIDITY.

REGARDING YOUR REFERENCE TO SETTLEMENTS SOMETIMES ARRIVED AT BY THE DEPARTMENT OF JUSTICE BASED IN PART UPON OUR RECOMMENDATIONS, WE HAVE ON VARIOUS OCCASIONS BEEN REQUESTED BY THE DEPARTMENT TO FURNISH RECOMMENDATIONS ON SETTLEMENT OFFERS INVOLVING CASES WHICH WE HAVE FORWARDED TO THE DEPARTMENT WITH THE REQUEST THAT APPROPRIATE COLLECTION PROCEEDINGS BE INSTITUTED AGAINST PARTIES WHOM WE HAVE CERTIFIED TO BE INDEBTED TO THE UNITED STATES. HOWEVER, OUR REPORTS AND RECOMMENDATIONS TO THE DEPARTMENT OF JUSTICE ON CLAIMS AGAINST THE UNITED STATES ARE FURNISHED ONLY IN RESPONSE TO REQUESTS THEREFOR AFTER THE CLAIMANTS HAVE FILED ACTIONS AGAINST THE UNITED STATES EITHER IN THE COURT OF CLAIMS OR THE UNITED STATES DISTRICT COURTS.

IN THIS CASE IT APPEARS THAT, WHILE THE CLAIM IS ESSENTIALLY ONE FOR UNLIQUIDATED DAMAGES, THERE IS, IN ANY EVENT, NO SUBSTANTIAL BASIS FOR CONSIDERING THE GOVERNMENT TO BE LEGALLY LIABLE TO THE CONTRACTOR IN ANY AMOUNT.

WE AGREE WITH YOUR CONTENTION THAT THE DEPARTMENTAL FILE RELATING TO THE CLAIM FOR RELIEF UNDER PUBLIC LAW 85-804 SHOWS IN A GENERAL MANNER THAT THE CONTRACTOR EXPERIENCED DIFFICULTY IN OBTAINING ACCEPTABLE SELENIUM RECTIFIERS, 292 OF WHICH WERE REQUIRED AS COMPONENTS FOR THE 146 RA-91-C METALLIC RECTIFIERS. HOWEVER, THERE IS NOTHING IN THE DEPARTMENTAL FILE NOR IN THE COPIES OF CORRESPONDENCE SUBMITTED WITH YOUR LETTER OF APRIL 20, 1962, TO INDICATE THAT THERE WAS ANY UNDUE DELAY ON THE PART OF THE GOVERNMENT IN APPROVING OR REJECTING SAMPLES OF SELENIUM RECTIFIERS MANUFACTURED BY THE KOTRON RECTIFIER COMPANY AND THE INTERNATIONAL RECTIFIER CORPORATION. NOR DOES THE RECORD OF DELIVERIES OF COMPLETE RA- 91-C UNITS TO THE GOVERNMENT, AS SET FORTH IN THE APPLICATION FOR RELIEF UNDER PUBLIC LAW 85-804, AGREE WITH YOUR ALLEGATION THAT IT WAS NOT UNTIL MARCH 22, 1957, THAT A SHIPMENT OF SELENIUM RECTIFIERS WAS MADE TO THE CONTRACTOR BY THE INTERNATIONAL RECTIFIER CORPORATION. IT APPEARS THAT 60 SELENIUM RECTIFIERS WERE SHIPPED ON THAT DATE FOLLOWING SOME DIFFICULTY WITH THE SUPPLIER REGARDING A RELUCTANCE ON ITS PART TO MAKE FURTHER SHIPMENTS EXCEPT UPON A CASH PAYMENT BASIS. THE RECORD OTHERWISE INDICATES THAT ABOUT 200 SELENIUM RECTIFIERS MANUFACTURED BY THE INTERNATIONAL RECTIFIER CORPORATION WERE SHIPPED TO THE CONTRACTOR IN MAY 1955, AND THAT A SECOND SUBMITTED A SAMPLE OF A SELENIUM RECTIFIER OF SUCH MANUFACTURE HAD BEEN APPROVED BY THE SIGNAL CORPS TESTING LABORATORIES.

WITH RESPECT TO THE REJECTION ON MAY 3, 1955, OF A KOTRON SELENIUM RECTIFIER WE NOTE THAT THIS WAS THE SECOND SAMPLE OF THAT FIRM'S MANUFACTURE WHICH WAS REJECTED AND WE WOULD NOT BE WARRANTED IN ASSUMING THAT A DELAY OF MORE THAN TWO MONTHS IN REPORTING ON THE SECOND SAMPLE WAS UNREASONABLE, CONSIDERING THAT FROM ABOUT FEBRUARY THROUGH MAY 1955 VARIOUS EXCEPTIONS WERE TAKEN TO THE QUALITY OF SAMPLES OF OTHER COMPONENTS SUBMITTED BY THE CONTRACTOR AND TO THE CONTRACTOR'S FIRST SUBMITTED PREPRODUCTION MODELS OF THE RA-91-C METALLIC RECTIFIER.

RELATIVE TO THE CONTRACTING OFFICER'S STATEMENT INDICATING THAT IT TOOK IN SOME CASES OVER A YEAR TO OBTAIN APPROVAL OF COMPONENTS, THE CORRESPONDENCE OF THE CASE SEEMS REASONABLY TO SUGGEST THAT THE DIFFICULTY DID NOT INVOLVE UNREASONABLE DELAY ON THE PART OF THE GOVERNMENT BUT, RATHER, AN APPARENT INABILITY ON THE CONTRACTOR'S PART PROMPTLY TO OBTAIN ACCEPTABLE COMPONENTS FROM ITS SUBCONTRACTORS. YOU CONTEND THAT IF THE GOVERNMENT DID NOT RECOGNIZE ITS FAULT IN THESE DELAYS, IT WOULD HAVE CANCELED THE CONTRACT FOR DEFAULT. WE DISAGREE WITH SUCH CONTENTION AND CONSIDER THAT THE GOVERNMENT WAS UNDER NO OBLIGATION TO TAKE DEFAULT TERMINATION ACTION AT ANY TIME PRIOR TO APRIL 1, 1958. THE GOVERNMENT WAS, OF COURSE, AWARE OF THE FACT THAT THE CONTRACTOR HAD NOT MET THE ORIGINAL DELIVERY SCHEDULE. HOWEVER, THE RECORD SHOWS THAT THE CONTRACTOR HAD IN A SERIES OF LETTERS EXPLAINED ITS DELAYS AND THEREBY EVIDENCED A DESIRE TO BE PERMITTED AN OPPORTUNITY TO CONTINUE PERFORMANCE OF THE CONTRACT WORK.

YOUR ATTENTION IS INVITED TO THE CASE OF WILLIAM A. SMITH CONTRACTING COMPANY, INC., ET AL. V. UNITED STATES, COURT OF CLAIMS NO. 264-57, DECIDED JULY 19, 1961, WHICH DISCUSSES SEVERAL PREVIOUS DECISIONS OF THE COURT OF CLAIMS INVOLVING THE QUESTION AS TO THE GOVERNMENT'S LIABILITY FOR DELAYS IN CONTRACT PERFORMANCE. IN THE ABSENCE OF A CLEAR SHOWING IN A PARTICULAR CASE THAT DELAYS CAUSED BY THE GOVERNMENT WERE DUE TO ITS NEGLIGENCE OR INCONSIDERATE CONDUCT, THE GOVERNMENT IS NOT LIABLE FOR BREACH OF THE CONTRACT AND CANNOT BE SAID TO BE UNDER ANY OTHER LEGAL OBLIGATION TO PAY AN AMOUNT IN ADDITION TO THE CONTRACT PRICE FOR DELAYS ATTRIBUTABLE TO THE GOVERNMENT UNLESS THE CONTRACT SO PROVIDES. CF. CROOK CO. V. UNITED STATES, 270 U.S. 4; UNITED STATES V. RICE, 317 U.S. 61; UNITED STATES V. FOLEY CO., 329 U.S. 64. IN THIS CASE WE FIND NO PROPER BASIS FOR CONSIDERING THE GOVERNMENT TO BE LEGALLY LIABLE TO THE CONTRACTOR ON ACCOUNT OF THE ALLEGEDLY UNREASONABLE DELAYS IN OBTAINING REPORTS ON SAMPLES OF COMPONENTS SUBMITTED BY THE CONTRACTOR.

INSOFAR AS THE MINOR DIMENSIONAL ERRORS IN THE DRAWINGS FOR THE CHASSIS OF THE RA-91-C METALLIC RECTIFIER ARE CONCERNED, THE GOVERNMENT ADMITS THAT THEY OCCURRED BUT THE CONTRACTOR HAS NOT ESTABLISHED THAT ANY CONSIDERABLE COSTS WERE INCURRED AS THE RESULT OF THE DRAWING ERRORS. OUR OPINION, THE CONTRACTOR SHOULD HAVE CLAIMED AN EQUITABLE ADJUSTMENT UNDER THE CHANGES CLAUSE OF THE CONTRACT WHEN THE ERRORS WERE DISCOVERED AND CORRECTED IF IT BELIEVED THAT IT WAS ENTITLED TO ADDITIONAL COMPENSATION. THE CONTRACTOR FAILED TO PRESENT ANY SUCH CLAIM WITHIN THE STIPULATED 30-DAY PERIOD OR AT ANY TIME BEFORE FINAL PAYMENT WAS MADE UNDER THE CONTRACT, THE LIMITING TIME FOR ANY WAIVER BY THE CONTRACTING OFFICER OF THE REQUIREMENT THAT A CLAIM BE PRESENTED WITHIN 30 DAYS FOR EQUITABLE PRICE ADJUSTMENT BASED UPON AUTHORIZED CHANGES IN DRAWINGS OR SPECIFICATIONS.

IN ORDER TO HAVE OBTAINED AN EQUITABLE ADJUSTMENT ON ACCOUNT OF THE DISCOVERY AND CORRECTION OF ERRORS IN THE DRAWINGS, IT WOULD HAVE BEEN NECESSARY FOR THE CONTRACTOR TO HAVE FILED A TIMELY CLAIM UNDER THE CONTRACT TERMS AND, IN THE EVENT OF AN ADVERSE DECISION BY THE CONTRACTING OFFICER, TO APPEAL TO THE HEAD OF THE DEPARTMENT AS PROVIDED UNDER THE DISPUTES CLAUSE OF THE CONTRACT. THE SUPREME COURT OF THE UNITED STATES HAS CONSISTENTLY MAINTAINED THAT THE CONTRACT PROVISIONS ESTABLISHING PROCEDURES FOR THE CONSIDERATION OF CLAIMS FOR EXTRA WORK OR PRICE ADJUSTMENTS BASED UPON AUTHORIZED CHANGES IN CONTRACT DRAWINGS OR SPECIFICATIONS MUST BE STRICTLY COMPLIED WITH AND CONSTITUTE THE CONTRACTOR'S "ONLY AVENUE FOR RELIEF.' SEE PLUMLEY V. UNITED STATES, 226 U.S. 545; UNITED STATES V. CALLAHAN WALKER CO., 317 U.S. 56, 61; UNITED STATES V. BLAIR, 321 U.S. 730, 735, 736; AND UNITED STATES V. HOLPUCH CO., 328 U.S. 234, 239, 240. WE DO NOT AGREE WITH YOUR APPARENT BELIEF THAT A GENERAL RELIEF CLAIM UNDER A SPECIAL STATUTE, FILED FOR THE PURPOSE OF RECOVERING ALL LOSSES INCURRED IN CONTRACT PERFORMANCE, MAY PROPERLY BE HELD AS REPRESENTING FULL COMPLIANCE WITH CONTRACT PROVISIONS FOR CLAIMING EQUITABLE PRICE ADJUSTMENTS BASED UPON AUTHORIZED CHANGES WITHIN THE GENERAL SCOPE OF THE CONTRACT WORK.

SINCE THE CONTRACTOR FAILED TO MAKE TIMELY CLAIM ON ACCOUNT OF THE DRAWING ERRORS AND APPARENTLY ACQUIESCED IN THE GOVERNMENT'SNOTIFICATION TO THE EFFECT THAT THE CONTRACT PRICE WOULD NOT BE CHANGED BECAUSE OF THE DISCOVERY AND CORRECTION OF THE MINOR DIMENSIONAL ERRORS IN THE DRAWINGS, THE CONCLUSION APPEARS TO BE REQUIRED THAT THE CONTRACTOR IS NOT LEGALLY ENTITLED TO ADDITIONAL COMPENSATION RESPECTING SUCH DRAWING ERRORS EITHER AS A BREACH OF CONTRACT MATTER OR AS AN EQUITABLE PRICE ADJUSTMENT UNDER THE CONTRACT TERMS.

IN VIEW OF THE FOREGOING, WE MUST DISALLOW THE ARMY CONTRACT CLAIM IN ITS ENTIRELY AND REFUSE TO ACCEPT ANY COMPROMISE OFFER OF SETTLEMENT INVOLVING THAT CLAIM AND THE NAVY CONTRACT CLAIM.