B-154803, AUG. 6, 1964

B-154803: Aug 6, 1964

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DEPARTMENT OF JUSTICE: REFERENCE IS MADE TO YOUR LETTER DATED JULY 23. THE BOILERS WERE AMONG FOUR THAT WERE INSTALLED BY THE COMPANY AT THE UNITED STATES PENITENTIARY. WHICH IS WITHHELD UNDER THE CONTRACT TERMS PENDING COMPLETION OF EFFICIENCY TESTS. EXPLODED WHILE THE OPERATOR WAS TAKING THE BOILER OFF "BANK". THE CONTRACTING OFFICER ADVISED THE CONTRACTOR "THAT THE PRIMARY CAUSE OF THE EXPLOSION WAS AN ACCUMULATION OF EXPLOSIVE MIXTURE WHICH COULD NOT GAIN ACCESS TO THE FREE ATMOSPHERE BECAUSE OF A MALFUNCTION OF EQUIPMENT DUE TO THE FAULTY INSTALLATION OF THE UPTAKE DAMPER CONTROL.'. THE CONTRACTOR WAS ORDERED TO MAKE THE REPAIRS PURSUANT TO THE CONTRACT SPECIFICATIONS AND REQUIREMENTS.

B-154803, AUG. 6, 1964

TO THE HONORABLE JAMES V. BENNETT, DIRECTOR, BUREAU OF PRISONS, DEPARTMENT OF JUSTICE:

REFERENCE IS MADE TO YOUR LETTER DATED JULY 23, 1964, REQUESTING OUR DECISION CONCERNING A PROPOSED SETTLEMENT OF THE CLAIM OF E. KEELER COMPANY FOR THE COST OF REPAIRS TO TWO ANTHRACITE COAL BOILERS.

THE BOILERS WERE AMONG FOUR THAT WERE INSTALLED BY THE COMPANY AT THE UNITED STATES PENITENTIARY, LEWISBURG, PENNSYLVANIA, UNDER CONTRACT NO. J- 14C-3764, DATED JULY 30, 1959, IN THE AMOUNT OF $399,450. EXCEPT FOR THE AMOUNT OF $31,620, WHICH IS WITHHELD UNDER THE CONTRACT TERMS PENDING COMPLETION OF EFFICIENCY TESTS, ALL PAYMENTS DUE THE CONTRACTOR HAD BEEN APPROVED BY SEPTEMBER 5, 1961.

ON NOVEMBER 2, 1961, ONE OF THE BOILERS, REFERRED TO AS BOILER NO. 1, EXPLODED WHILE THE OPERATOR WAS TAKING THE BOILER OFF "BANK"--- A CONDITION IN WHICH COMBUSTIBLE GASES ACCUMULATE--- AND RAISING THE PRESSURE. ON DECEMBER 1, 1961, THE CONTRACTOR OFFERED TO REPAIR THE BOILER FOR $46,453. HOWEVER, ON JANUARY 18, 1962, THE CONTRACTING OFFICER ADVISED THE CONTRACTOR "THAT THE PRIMARY CAUSE OF THE EXPLOSION WAS AN ACCUMULATION OF EXPLOSIVE MIXTURE WHICH COULD NOT GAIN ACCESS TO THE FREE ATMOSPHERE BECAUSE OF A MALFUNCTION OF EQUIPMENT DUE TO THE FAULTY INSTALLATION OF THE UPTAKE DAMPER CONTROL.' ACCORDINGLY, THE CONTRACTOR WAS ORDERED TO MAKE THE REPAIRS PURSUANT TO THE CONTRACT SPECIFICATIONS AND REQUIREMENTS.

THE CONTRACTOR REPAIRED THE BOILER BUT DENIED RESPONSIBILITY FOR THE EXPLOSION. AN APPEAL WAS FILED WITH THE ATTORNEY GENERAL,AND ULTIMATELY A HEARING WAS SCHEDULED FOR JULY 13, 14, AND 15, 1964. FOR THE REASONS DISCUSSED BELOW, THE HEARING HAS NOT BEEN HELD.

SUBSEQUENT TO THE FILING OF THE CONTRACTOR'S APPEAL, A SECOND BOILER, REFERRED TO AS BOILER NO. 2, EXPLODED. THE DAMAGE FROM THIS EXPLOSION WAS LESS SEVERE THAN IN THE EARLIER EXPLOSION. ALSO, THERE WAS NO ALLEGATION OF DAMPER MALFUNCTION BECAUSE THE IMPROPER INSTALLATION HAD BEEN CORRECTED BEFORE THE EXPLOSION OCCURRED. THE COST OF REPAIRS WAS $10,082.23.

REGARDING THE APPEAL ON THE BOILER NO. 1 EXPLOSION, YOU ADVISE THAT THE POSITION WHICH THE CONTRACTOR WOULD HAVE TAKEN AT THE HEARING REPORTEDLY WOULD HAVE BEEN ESSENTIALLY AS FOLLOWS:

"1. THERE WAS NOT A MALFUNCTION OF EQUIPMENT DUE TO FAULTY INSTALLATION ON THE PART OF THE COMPANY;

2. THAT IF THERE WAS A MALFUNCTION, THIS WAS NOT THE PRIMARY CAUSE OF THE EXPLOSION;

3. THAT THE OPERATOR WHO WAS TAKING THE BOILER FROM "A BANKED" CONDITION DID NOT PROCEED ACCORDING TO COMPANY INSTRUCTIONS, SINCE HIS OPERATION DISTURBED THE FIRE BED;

4. IN ANY CASE, IT IS IMPOSSIBLE TO DETERMINE THE CAUSE OF THE EXPLOSION, THE BUREAU OF PRISONS IS RESPONSIBLE BECAUSE IT HAD BEEN IN SOLE CHARGE OF THE OPERATIONS, AND THAT THERE WAS FINAL ACCEPTANCE SINCE THE MONEYS WITHHELD RELATED ONLY TO CHECKING OUT EFFICIENCY TESTS.'

THE GOVERNMENT'S INITIAL POSITION WAS THAT THE DAMPERS WERE INSTALLED IMPROPERLY, THAT THEY MALFUNCTIONED, THAT THIS CAUSED THE EXPLOSION, AND THAT THE OPERATOR COMPLIED WITH COMPANY INSTRUCTIONS.

FURTHER, YOU ADVISE THAT, ALTHOUGH NO DECISION HAS YET BEEN REACHED REGARDING THE CAUSE OF THE BOILER NO. 2 EXPLOSION, THE CONTRACTOR WOULD HAVE CITED THAT EXPLOSION IN HIS APPEAL TO REFUTE THE CONTRACTING OFFICER'S DECISION ON THE BOILER NO. 1 EXPLOSION. ALSO, THE GOVERNMENT COULD NOT STRONGLY ADVANCE ITS CONTENTION THAT THE MALFUNCTIONING DAMPER WAS THE SOLE CAUSE OF THE BOILER NO. 1 EXPLOSION.

IN ADDITION TO THE FOREGOING, THE GOVERNMENT WOULD HAVE TO RELY ON AN INDEPENDENT ENGINEER AS ITS EXPERT WITNESS. IN THIS CONNECTION, YOU MAKE THE FOLLOWING STATEMENTS:

"THAT WITNESS WOULD HAVE TESTIFIED THAT BOTH EXPLOSIONS WERE CAUSED BY IMPROPER PURGING PROCEDURES, IN THAT NOT ENOUGH AIR WAS INTRODUCED INTO THE FURNACE TO PROPERLY PURGE BEFORE THE FIRE WAS BROUGHT UP FROM "BANKED" CONDITION. HE WOULD EXPLAIN THAT THE DIFFERENCE OF INTENSITY BETWEEN THE EXPLOSIONS IN BOILER NO. 1 AND BOILER NO. 2 WAS BECAUSE THE CLOSED DAMPERS PRECLUDED VIRTUALLY ANY PURGING, WHEREAS THERE WASA CERTAIN AMOUNT OF PURGING IN THE SECOND BOILER ALTHOUGH IT WAS NOT ENOUGH. HE COULD NOT SAY THAT IF THE DAMPERS HAD WORKED IN BOILER NO. 1, THERE WOULD HAVE BEEN NO EXPLOSION AT ALL. THE OPERATOR PROCEDURE WOULD HAVE TO BE DEFENDED BY THE GOVERNMENT ON THE GROUND THE CONTRACT REQUIRED THE COMPANY TO PROPERLY INSTRUCT OUR PEOPLE ON THE OPERATION OF THE BOILER AND IT DID NOT INSTRUCT ON HOW TO PURGE PROPERLY. THE COMPANY HAD SOME EXPERT WITNESSES AND IT IS QUITE POSSIBLE THAT THEY WOULD HAVE TAKEN ISSUE WITH THE GOVERNMENT WITNESS ON THE PROPER METHOD OF PURGING. THE COMPANY WOULD HAVE POINTED OUT THAT THE OPERATOR OF BOILER NO. 1 WAS NEVER MADE AVAILABLE TO THE COMPANY FOR INSTRUCTION, BUT THE GOVERNMENT COULD HAVE COUNTERED BY POINTING OUT THAT THIS OPERATOR RECEIVED HIS INSTRUCTION FROM ANOTHER OPERATOR WHO OBSERVED THE COMPANY PEOPLE FOR A PERIOD OF SEVERAL DAYS. THE PROCEDURE USED AT THE TIME OF BOILER NO. 1 EXPLOSION WAS QUITE SIMILAR TO THE PROCEDURE EXPLAINED BY THE COMPANY EXCEPT IN ONE SIGNIFICANT RESPECT. THE COMPANY PEOPLE DID INDICATE THAT THE FIRE SHOULD BE CHECKED BEFORE THE FORCED DRAFT FAN, WHICH BLOWS FROM BELOW THE FIRE AND AGITATES THE FIRE BED, IS STARTED. THIS WAS NOT DONE ON THE NIGHT OF THE EXPLOSION. IF THE OPERATOR HAD MADE SUCH A CHECK HE WOULD HAVE DISCOVERED THE FIRE WAS NOT IN THE CONDITION DESCRIBED BY THE COMPANY AS PROPER FOR THE ACTIVATION OF THE FORCED DRAFT FAN AND IF THAT WAS DONE, THE FAN WOULD NOT HAVE BEEN STARTED AND THE FIRE BED DISTURBED. THIS WAS A WEAKNESS IN THE GOVERNMENT'S CASE WHICH THE COMPANY COULD HAVE EMPHASIZED.

IT IS REPORTED THAT AT A PREHEARING CONFERENCE ON THE APPEAL, THE BUREAU ENGINEER CONCEDED THAT THE CONTRACTOR'S REPAIR BILL FOR $43,745.86 ON BOILER NO. 1 WAS REASONABLE FOR THE WORK PERFORMED. THEREAFTER, THE CONTRACTOR OFFERED TO ACCEPT $21,872, OR 50 PERCENT OF ITS BILL, FOR SUCH REPAIRS, BUT THE GOVERNMENT COUNTERED WITH A PROPOSAL TO PAY $10,082.23 (THE SAME AMOUNT AS THE COST OF THE BOILER NO. 2 REPAIRS) ON THE THEORY THAT ANY DAMAGES IN EXCESS OF SUCH SUM WERE CAUSED BY THE ACCUMULATION OF COMBUSTIBLE GASES DUE TO THE MALFUNCTIONING DAMPERS. BOTH OFFERS WERE REJECTED. HOWEVER, AFTER FURTHER NEGOTIATIONS, THE CONTRACTOR AND THE BUREAU AGREED ON JULY 10, 1964, THAT IT WOULD BE MUTUALLY ADVANTAGEOUS TO SETTLE THE REPAIR CLAIMS ON BOTH BOILERS FOR $17,582.23. THIS IS THE SETTLEMENT ON WHICH OUR OPINION IS REQUESTED.

IT IS YOUR CONTENTION THAT EXECUTION OF THE SETTLEMENT AGREEMENT WOULD BE TO THE ADVANTAGE OF THE GOVERNMENT. YOU INDICATE A BELIEF THAT THE GOVERNMENT'S POSITION ON THE BOILER NO. 2 EXPLOSION IS NOT STRONG AND THAT A REFUSAL TO PAY THE $10,082.23 REPAIR BILL ON THAT BOILER WOULD RESULT IN A SECOND PROLONGED PROCEEDING OF DUBIOUS OUTCOME WITH CONSIDERABLE LOSS OF TIME AND MONEY. YOU POINT OUT ALSO THAT THE GOVERNMENT'S POSITION ON THE BOILER NO. 1 EXPLOSION, ALTHOUGH STRONGER THAN IN THE SECOND CASE, IS NOT AIRTIGHT AND THAT AN ADVERSE DECISION WOULD REQUIRE PAYMENT BY THE GOVERNMENT OF $43,745 ON BOILER NO. 1 ALONE. ALSO, SUCH DECISION MIGHT ADVERSELY AFFECT THE SECOND CASE INVOLVING AN ADDITIONAL $10,082. THUS AN ADVERSE DECISION COULD COST THE GOVERNMENT $53,827, WHEREAS THE PROPOSED SETTLEMENT WOULD AMOUNT TO PAYMENT OF ONLY $7,000 ON THE CLAIM OF CLOSE TO $44,000 ON BOILER NO. 1 AFTER DEDUCTION OF THE $10,082 FOR THE BOILER NO. 2 REPAIRS. THE TOTAL SETTLEMENT WOULD THEREFORE AMOUNT TO LESS THAN 33 PERCENT OF THE TOTAL CLAIMS.

IN THE CIRCUMSTANCES, HAVING IN MIND PARTICULARLY THAT THE COST OF THE PROLONGED PROCEEDINGS ON THE TWO CLAIMS MAY FAR OUTWEIGH ANY ADVANTAGES TO BE GAINED THEREFROM BY THE GOVERNMENT AS WELL AS THE POSSIBILITY THAT THE CONTRACTOR MAY PREVAIL, THE PROPOSED SETTLEMENT, WHICH WOULD ELIMINATE THE NEED FOR ANY FURTHER PROCEEDINGS, IS REGARDED AS BEING IN THE BEST INTEREST OF THE GOVERNMENT. ACCORDINGLY, OUR OFFICE WILL INTERPOSE NO OBJECTION TO ITS ACCEPTANCE.