B-157970, AUG. 1, 1966

B-157970: Aug 1, 1966

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WALLACE AND FEEHAN: REFERENCE IS MADE TO YOUR LETTER DATED MARCH 18. OF WHICH 250 UNITS (ITEM 1) WERE TO BE TYPED AQ-3/4) AND 310 UNITS OF (ITEMS 2 AND 2B) WERE TO BE TYPE AQ-2/3). THE REQUIRED 560 PROJECTORS WERE TO BE IN ACCORDANCE WITH MILITARY SPECIFICATION MIL-P-49C. THE PRELIMINARY WORKING PLANS FOR ITEM 1 AND THE CORRECTED WORKING PLANS FOR ITEM 1 WERE TO BE "AS DEFINED IN SPECIFICATION MIL-I- 983B AND AMENDMENT NO. 2.'. WAS NOT REQUIRED TO SUBMIT A PREPRODUCTION SAMPLE FOR APPROVAL. THE CONTRACT PRICE WAS $344. 560 AND IT APPEARS THAT THE 560 PROJECTORS WERE REQUIRED TO BE DELIVERED AT THE RATE OF 30 UNITS PER MONTH BEGINNING IN OCTOBER 1961. WHEREAS JOB NO. 1965 WAS COMPLETED IN JUNE 1962.

B-157970, AUG. 1, 1966

TO GRAY, THOMAS, WALLACE AND FEEHAN:

REFERENCE IS MADE TO YOUR LETTER DATED MARCH 18, 1966, RESTATING THE CLAIM OF LUMEN, INCORPORATED, CHICAGO, ILLINOIS, FOR AN AMOUNT OF $128,982.81 IN ADDITION TO THE SUMS FOUND BY THE ARMED SERVICE BOARD OF CONTRACT APPEALS TO BE DUE ON CLAIMS OF THAT COMPANY FOR EQUITABLE ADJUSTMENTS UNDER THE "CHANGES" AND THE "GOVERNMENT FURNISHED PROPERTY" ARTICLES OF AIR FORCE CONTRACT NO. AF 33/600/-43389, DATED MAY 19, 1961, AS AMENDED.

THE CONTRACT PROVIDED FOR THE MANUFACTURE AND DELIVERY OF 560 MOTION PICTURE PROJECTORS, 16 MILLIMETER, OF WHICH 250 UNITS (ITEM 1) WERE TO BE TYPED AQ-3/4) AND 310 UNITS OF (ITEMS 2 AND 2B) WERE TO BE TYPE AQ-2/3). OTHER ITEMS AND SUBITEMS OF THE CONTRACT CALLED FOR THE FURNISHING OF INSTRUCTION BOOKS, PROGRESS REPORTS, PRELIMINARY WORKING PLANS FOR ITEM 1 AND CORRECTED WORKING PLANS FOR ITEM 1. THE REQUIRED 560 PROJECTORS WERE TO BE IN ACCORDANCE WITH MILITARY SPECIFICATION MIL-P-49C, DATED MARCH 8, 1960, AND AMENDMENT NO. 2, DATED JUNE 1, 1960, AS MODIFIED BY EXHIBIT "A" MADE A PART OF THE CONTRACT. AS PROVIDED IN ITEMS 3 AND 4 OF THE CONTRACT, THE PRELIMINARY WORKING PLANS FOR ITEM 1 AND THE CORRECTED WORKING PLANS FOR ITEM 1 WERE TO BE "AS DEFINED IN SPECIFICATION MIL-I- 983B AND AMENDMENT NO. 2.' THE CONTRACT ALSO PROVIDED FOR THE BAILMENT OF A GOVERNMENT-OWNED MODEL OF TYPE AQ-3) ( PROJECTOR AND, AS A "B" BIDDER, LUMEN, INCORPORATED, WAS NOT REQUIRED TO SUBMIT A PREPRODUCTION SAMPLE FOR APPROVAL. THE CONTRACT PRICE WAS $344,560 AND IT APPEARS THAT THE 560 PROJECTORS WERE REQUIRED TO BE DELIVERED AT THE RATE OF 30 UNITS PER MONTH BEGINNING IN OCTOBER 1961, WITH THE LAST DELIVERY OF 20 UNITS BEING DUE IN APRIL 1963.

LUMEN, INCORPORATED, QUALIFIED AS A "B" BIDDER BY REASON OF HAVING PRODUCED AN ACCEPTABLE PREPRODUCTION MODEL OF PROJECTOR UNDER AIR FORCE CONTRACT NO. AF 33/600/-39874. THE COMPANY ASSIGNED JOB NO. 1965 TO PERFORMANCE UNDER THAT CONTRACT AND JOB NO. 4012 TO PERFORMANCE UNDER CONTRACT NO. AF 33/600/-43389. JOB NO. 1965 ORIGINALLY COVERED THE PRODUCTION OF 1,470 PROJECTORS BUT, BEFORE AWARD OF THE SECOND CONTRACT, THE GOVERNMENT EXERCISED AN OPTION TO PURCHASE 505 ADDITIONAL UNITS, MAKING THE TOTAL PROCUREMENT UNDER THE FIRST CONTRACT AMOUNT TO 1,975 UNITS. THE COMPANY ALLEGEDLY EXPECTED TO PRODUCE THE EXTRA 505 UNITS CONCURRENTLY WITH PRODUCTION OF THE 560 UNITS UNDER JOB NO. 4012. HOWEVER, WHEREAS JOB NO. 1965 WAS COMPLETED IN JUNE 1962, THE FIRST DELIVERY OF PROJECTORS RELATED TO JOB NO. 4012 WAS MADE IN JULY 1962 AND THE LAST DELIVERY WAS MADE IN MAY 1963. THIS WAS ONLY ONE MONTH AFTER THE TIME ORIGINALLY SCHEDULED FOR COMPLETION OF CONTRACT NO. AF 33/600/-43389, BUT IT WAS ALSO EIGHT MONTHS PRIOR TO THE TIME ALLOWED FOR FINAL DELIVERY UNDER CONTRACT CHANGE MODIFICATION, CCN NO. 2, DATED APRIL 3, 1962.

IT HAS BEEN THE POSITION OF LUMEN, INCORPORATED, THAT ITS COSTS OF PERFORMING CONTRACT NO. AF 33/600/-43389 WERE INCREASED CONSIDERABLY AS THE RESULT OF UNAUTHORIZED CONDITIONS IMPOSED BY THE GOVERNMENT IN THE MATTER OF APPROVING THE PRELIMINARY WORKING PLANS AND THE SUBMISSION OF CORRECTED WORKING PLANS FOR PRODUCTION OF THE 250 PROJECTORS CALLED FOR UNDER ITEM 1 OF THE CONTRACT. THE COMPANY ALSO CONSIDERED THAT THE GOVERNMENT DID NOT TIMELY FURNISH THE MODEL AQ-3) ( PROJECTOR WHICH WAS TO BE MADE AVAILABLE UNDER THE CONTRACT TERMS. IT WAS ALLEGED THAT EXTRA WORK WAS PERFORMED IN THE PREPARATION OF DRAWINGS, THAT ADDITIONAL COSTS WERE INCURRED IN THE PROCUREMENT AND HANDLING OF MATERIALS AND THAT THE COMPANY WAS PREVENTED FROM COMPLETING DELIVERIES WITHIN THE TIME ANTICIPATED WHEN THE CONTRACT WAS ENTERED INTO.

DURING PERFORMANCE OF THE CONTRACT, THE CONTRACT PRICE WAS REDUCED BY $100 ON ACCOUNT OF CHANGES MADE IN THE F.O.B. POINT OF DELIVERY AND PLACES FOR INSPECTION AND ACCEPTANCE OF CERTAIN QUANTITIES OF PROJECTORS. THE GOVERNMENT ALSO ISSUED TWO CONTRACT CHANGE MODIFICATIONS, CCN NO. 1 AND CCN NO. 2, WHICH CONCERNED PRIMARILY THE APPROVAL OR DISAPPROVAL OF NONSTANDARD PARTS PROPOSED BY LUMEN FOR THE PROJECTORS. CCN NO. 1 ALSO PROVIDED FOR A RESISTOR CHANGE AS TO WHICH THE GOVERNMENT PROPOSED TO ALLOW A CONTRACT PRICE INCREASE OF $568. LUMEN, INCORPORATED, CLAIMED $1,643 FOR THE RESISTOR CHANGE AND, APPARENTLY WITH RESPECT TO CCN NO. 2, THE COMPANY CLAIMED THE AMOUNT OF $11,701.59 BECAUSE OF BEING REQUIRED TO FURNISH TUBE PARTS MORE EXPENSIVE THAN THOSE WHICH THE COMPANY ORIGINALLY INTENDED TO USE IN THE PRODUCTION OF THE PROJECTORS.

BY LETTER DATED MARCH 28, 1963, LUMEN INCORPORATED, MADE A REQUEST FOR PAYMENT OF THE SUM OF $337,500 IN ADDITION TO THE ORIGINAL CONTRACT PRICE AS AN EQUITABLE ADJUSTMENT UNDER THE "CHANGES" AND THE "GOVERNMENT FURNISHED PROPERTY" ARTICLES OF THE CONTRACT. WITH EXCEPTION OF THE PREVIOUSLY OFFERED AMOUNT OF $568 FOR THE RESISTOR CHANGE, THE CONTRACTING OFFICER DENIED THE CLAIM FOR $337,500 IN ITS ENTIRETY. AN APPEAL WAS TIMELY PRESENTED UNDER THE "DISPUTES" ARTICLE OF THE CONTRACT AND THE CASE WAS CONSIDERED BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS. IN THE PROSECUTION OF THE MATTER BEFORE THE BOARD, AN AMENDED CLAIM FOR $223,931.14 WAS SUBMITTED. THE AMENDED CLAIM INCLUDED THE ABOVE AMOUNTS OF $1,643 AND $11,701.59, PLUS THE SUM OF $210,586.55 WHICH WAS REFERRED TO AS COSTS APPLICABLE TO CONTRACT CHANGES EXCLUSIVE OF THOSE DEALT WITH UNDER THE FIRST TWO ITEMS OF THE AMENDED CLAIM.

THE ITEM OF CLAIM FOR $11,701.59 WAS ALLOWED IN THE SUM OF $3,735.17 UNDER A DECISION RENDERED BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS ON NOVEMBER 14, 1964, ASBCA NO. 8779. WITH RESPECT TO THE REMAINING ITEMS OF CLAIM FOR $1,643 AND $210,586.55, THE AMOUNT OF $80,568 WAS FOUND DUE AS AN EQUITABLE ADJUSTMENT IN THE CONTRACT PRICE BY DECISION OF JULY 22, 1965, AFFIRMED ON SEPTEMBER 17, 1965, ASBCA NO. 9217. THE PARTIES HAD STIPULATED THAT THE PROPOSED ALLOWANCE OF $568 FOR THE RESISTOR CHANGE WOULD CONSTITUTE A SATISFACTORY SETTLEMENT AND, IN REGARD TO THE ITEM OF CLAIM FOR $210,586.55, IT WAS THE BOARD'S DETERMINATION THAT AN ALLOWANCE OF $80,000 WOULD BE SUFFICIENT TO COVER THE COMPANY'S COSTS ATTRIBUTABLE TO WHAT THE BOARD FOUND TO BE GOVERNMENT CHANGES IN CONNECTION WITH THE CONTRACT REQUIREMENTS FOR THE SUBMISSION OF PRELIMINARY WORKING PLANS AND CORRECTED WORKING PLANS FOR CONTRACT ITEM NO. 1.

THE BASIC CONTENTION IN THIS CASE IS THAT THE ARMED SERVICES BOARD OF CONTRACT APPEALS SHOULD NOT HAVE REJECTED THE TOTAL COST APPROACH IN DETERMINING THE AMOUNT DUE LUMEN, INCORPORATED, ON ITS CLAIM FOR $210,586.55. THE DIFFERENCE BETWEEN THAT AMOUNT AND $80,000 IS $130,586.55, WHEREAS THE RESTATED CLAIM IS IN THE AMOUNT OF $128,982.81. THE RECOMPUTATION OF CLAIM TREATS THE CONTRACT AS A WHOLE IN ARRIVING AT PERFORMANCE COSTS OF $539,426.18. THE SUM OF $11,701.59 WAS DEDUCTED FROM THAT AMOUNT AND THERE WAS ADDED TO THE NET SUM OF $527,724.59 THE AMOUNT OF $26,386.22 FOR "PROFIT AT 5 PERCENT.' CONSIDERATION WAS THEN GIVEN TO THE SUM OF $344,560, REFERRED TO AS THE CONTRACT PRICE, AND TO THE SUM OF $80,568, REFERRED TO AS COVERED BY THE BOARD'S DECISION.

AN AUDIT OF CONTRACT COSTS WAS BEING PERFORMED BY THE GOVERNMENT WHEN THE CONTRACTING OFFICER RENDERED HIS DECISION ON THE CLAIM FOR $337,500. THE REPORT OF AUDIT, MARKED AS THE GOVERNMENT'S EXHIBIT "E" IN THE CASE OF ASBCA NO. 9217, SHOWS A TENTATIVELY DETERMINED COST OVERRUN OF $151,411.74, REPRESENTING THE DIFFERENCE BETWEEN TOTAL ACCEPTED COSTS AND ESTIMATES OF COST, AGGREGATING THE SUM OF $495,971.74, AND THE ORIGINAL CONTRACT PRICE OF $344,560. A COST FIGURE OF $516,810.13 WAS USED IN THE SCHEDULE SUBMITTED TO THE BOARD IN SUPPORT OF THE AMENDED CLAIM OF LUMEN, INCORPORATED, IN THE AMOUNT OF $223,931.14. THE DIFFERENCE BETWEEN SUCH COST FIGURE AND THE ORIGINAL CONTRACT PRICE IS $172,250.13.

AT THE HEARINGS BEFORE THE BOARD THERE WAS A CONSIDERABLE DISCUSSION OF COST ACCOUNTING METHODS AND IN ITS DECISION THE BOARD RECOGNIZED THAT THERE COULD BE REASONABLE DIFFERENCES OF OPINION REGARDING THE HANDLING OF OVERHEAD EXPENSES IN DETERMINING COSTS APPLICABLE TO PERFORMANCE OF A PARTICULAR CONTRACT. IN THAT CONNECTION, IT APPEARS THAT THE BOARD ACTUALLY ACCEPTED THE COMPANY'S TOTAL COST FIGURE OF $516,810.13 WHEN IT MADE AN APPROXIMATION OF THE CONTRACT COST OVERRUN AS AMOUNTING TO $170,000. THERE IS A DIFFERENCE OF $2,250.13, BUT THERE WAS APPARENTLY CONSIDERED THE FACT THAT THE SUMS OF $568 AND $3,735.17 HAD BEEN DETERMINED TO BE DUE AS EQUITABLE CONTRACT PRICE ADJUSTMENTS FOR THE RESISTOR CHANGE AND THE CHANGE INVOLVED IN THE "TUBE CASE" WHICH WAS CONSIDERED IN ASBCA NO. 8779.

IT IS APPARENT THAT LUMEN, INCORPORATED, IS NOT NOW IN A POSITION TO CLAIM THAT ITS COSTS OF PERFORMING THE CONTRACT AMOUNTED TO $539,426.18, INSTEAD OF $516,810.13, SINCE IT HAS BEEN HELD THAT THE SCOPE OF REVIEW OF A FINAL ADMINISTRATIVE DECISION UNDER THE "DISPUTES" ARTICLE OF A GOVERNMENT CONTRACT IS LIMITED TO REVIEW OF THE ADMINISTRATIVE RECORD UNDER STANDARDS PRESCRIBED IN THE ACT OF MAY 11, 1954, 41 U.S.C. 321, 322. SEE UNITED STATES V. CARLO BIANCHI AND CO., 373 U.S. 709. THEREFORE SEE NO BASIS FOR CONSIDERING THE APPLICABLE COST OVERRUN TO BE IN EXCESS OF $170,000 AS APPROXIMATED IN THE DECISION OF THE ARMED SERVICES BOARD OF CONTRACT APPEALS.

IN THE SECOND PARAGRAPH OF THE BOARD'S DECISION OF JULY 22, 1965, THE NATURE OF THE CASE WAS DESCRIBED AS A SUBSTANTIAL OVERRUN IN THE COST OF PERFORMANCE, TO WHICH EACH OF THE PARTIES CONTRIBUTED. THE OPINIONS WERE EXPRESSED THAT THE COMPANY WAS IN A LOSS POSITION BY VIRTUE OF ITS LOW BID; THAT THE MANNER IN WHICH THE COMPANY PROCEEDED WITH PERFORMANCE WHEN IT SUBMITTED ITS PRELIMINARY WORKING PLANS WAS NOT IN ACCORDANCE WITH THE CONTRACT; THAT THE GOVERNMENT MISINTERPRETED THE CONTRACT REQUIREMENTS AND, IN FACT, CHANGED THE CONTRACT BY REQUIRING MANUFACTURING DRAWINGS WHICH THE CONTRACT DID NOT CALL FOR; AND THAT "EACH IS THEREFORE RESPONSIBLE IN SUBSTANTIAL DEGREE FOR THE COST OVERRUN.'

WITH RESPECT TO THE MATTER OF FURNISHING PRELIMINARY WORKING PLANS AND CORRECTED WORKING PLANS, THE BOARD FIRST OBSERVED THAT THE INVITATION FOR BIDS IS TO THE EFFECT THAT ANY INCONSISTENCY BETWEEN THE PROVISIONS OF THE INVITATION WOULD BE RESOLVED IN THE FOLLOWING ORDER: (1) THE BIDDING SCHEDULE; (2) THE TERMS AND CONDITIONS OF THE INVITATION; (3) THE GENERAL PROVISIONS; (4) OTHER PROVISIONS OF THE CONTRACT, WHETHER INCORPORATED BY REFERENCE OR OTHERWISE; AND (5) THE SPECIFICATIONS. THE BOARD THEN INDICATED THAT ALL OF THE ITEMS INVOLVED IN THE BAILMENT REQUIREMENT WERE IDENTICAL TO THOSE ALREADY IN THE COMPANY'S POSSESSION BY VIRTUE OF THE PERFORMANCE UNDER WAY OF CONTRACT NO. AF 33/600/-39874 (JOB NO. 1965).

EXHIBIT "A" OF THE INVITATION FOR BIDS WAS QUOTED IN THE DECISION. THAT EXHIBIT SHOWS THAT THE TYPES AQ-2 AND AQ-3 MOTION PICTURE PROJECTORS ARE IDENTICAL EXCEPT THAT AQ-3 PROJECTOR IS MODIFIED FOR DUAL OPERATION WITH A COMPLETE PUSHBUTTON CHANGE-OVER SYSTEM, AND THAT FOR THE PARTICULAR PROCUREMENT THERE WAS REQUIRED THE FURNISHING OF SYNCHRONOUS DRIVE MOTORS WITH ALL PROJECTORS TO AID IN REDUCING RADIO INTERFERENCE. THE BOARD EMPHASIZED THESE PARTS OF THE EXHIBIT WHICH PROVIDED THAT THE PROJECTORS BE PHYSICALLY INTERCHANGEABLE ON A PART FOR PART BASIS WITH THE PROJECTOR TO BE BAILED, EXCEPT FOR THE MODIFICATIONS TO PROVIDE DUAL OPERATION AND OTHER CHANGES LISTED IN THE EXHIBIT; AND THAT, WITH RESPECT TO ANY CONFLICT BETWEEN THE BAILED MODEL AND THE GOVERNMENT'S DRAWINGS AND SPECIFICATIONS, THE BAILED MODEL SHALL GOVERN, EXCEPT THAT THE FINISHES OF PARTS AND GOVERNMENT STANDARD APPROVED PARTS "SHALL BE IN ACCORDANCE WITH SPECIFICATION MIL I-983B WITH AMENDMENT NO. 3.'

THE DECISION STATES THAT, AS TO ENGINEERING DESIGNS UNDER THE CONTRACT INVOLVED, THERE WAS A SPECIFIC RESERVATION OF SUCH AREA BY THE NAVY DEPARTMENT, BUREAU OF SHIPS; AND THAT IN THIS CASE A BILL OF MATERIALS FROM THE PREVIOUS CONTRACT WAS SUBMITTED BUT REJECTED ON THE GROUND THAT THE PREVIOUS CONTRACT AND THE ONE INVOLVED IN THE APPEAL HAD DIFFERENT SPECIFICATIONS. THE INSPECTOR INSISTED ON A COMPLETE NEW BILL OF MATERIALS WHICH WOULD REFERENCE THE NEW SPECIFICATION, MIL P-49C. THE PARTIES DISCUSSED THE MATTER ON JULY 18, 1961, AND THE DECISION QUOTES A NAVY LETTER DATED JULY 31, 1961, WHICH STATES, IN PART, THAT ALL MATERIAL AND PARTS FOR AQ-2 PROJECTORS ARE TO BE IN ACCORDANCE WITH SPECIFICATION MIL-I-983B AS REQUIRED BY PARAGRAPH 3.3 OF SPECIFICATION MIL-P-49C; ALSO, THAT "IF PARTS ARE TO BE USED WHICH DO NOT MEET THESE REQUIREMENTS (NON- STANDARD PARTS), IT WILL BE NECESSARY TO SUBMIT A LISTING OF THESE PARTS FOR APPROVAL OF THEIR USE.'

THE BOARD QUESTIONED THE LETTER FROM THE STANDPOINT THAT EXHIBIT "A" DOES NOT INTERDICT USE OF NONSTANDARD PARTS IF SUCH WERE INSTALLED IN THE BAILED MODEL AND WERE NOT PHYSICALLY INTERCHANGEABLE WITH GOVERNMENT STANDARD PARTS. THE BOARD CONCLUDED THAT THE BAILED MODEL WAS OF SENIOR IMPORTANCE IN ASCERTAINING THE COMPANY'S COMMITMENTS; AND THAT IT WAS ONLY IN THE EVENT THAT THE BAILED MODEL CONTAINED NONSTANDARD PARTS WHICH DID NOT HAVE A PHYSICALLY INTERCHANGEABLE STANDARD VERSION THAT ANY QUESTION WAS NECESSARY, AND THEN ONLY IF THE COMPANY WANTED TO CONTINUE TO USE THE NONSTANDARD PART ON ITS JOB NO. 4012 AS IT WAS THEN DOING ON ITS JOB NO. 1965. THE BOARD'S DECISION THEN STATES THAT THE UNITS BEING BUILT UNDER JOB NO. 1965 HAD A NUMBER OF NONSTANDARD COMPONENTS WHICH HAD BEEN SPECIFICALLY APPROVED BY THE GOVERNMENT FOR USE ON JOB NO. 1965. THE DECISION SETS FORTH THAT BY LETTER DATED AUGUST 23, 1961, THE COMPANY ADVISED THE NAVY THAT IT WAS SHIPPING ITS PRELIMINARY WORKING PLANS WHICH HAD BEEN PREPARED IN ACCORDANCE WITH SPECIFICATION MIL-I-983B. THE LETTER INDICATED THAT PARA. 3.2.2.1 OF THE SPECIFICATION STATES THAT THE APPROVAL OF DESIGN AND MATERIALS PROPOSED FOR USE IN GIVEN EQUIPMENT IS OBTAINED BY SUBMISSION OF WORKING DRAWINGS. NOTICE WAS GIVEN THAT NUMEROUS ITEMS OF THE WORKING DRAWINGS DID NOT CARRY A MATERIAL SPECIFICATION AND, IN ORDER TO PREVENT THE POSSIBILITY OF ANY FUTURE QUESTIONS ARISING AS TO THE USE OF THOSE ITEMS, THE COMPANY REQUESTED SPECIFIC APPROVAL FOR USE OF SUCH ITEMS WHICH IN SOME CASES ARE TERMED NONSTANDARD PARTS. IT WAS NEVERTHELESS STATED THAT "ALL OF THESE ITEMS ARE IDENTICAL TO PARTS PREVIOUSLY INSTALLED IN THIS SAME EQUIPMENT FOR WHICH PERMISSION TO USE WAS PREVIOUSLY GRANTED.'

THE BOARD, IN COMMENTING ON THE LETTER AT THIS POINT, INDICATED THAT THE COMPANY MUST HAVE INTENDED TO REFER TO PARA. 3.2.3.1 OF MIL-I 983B, WHICH IS THE FIRST OF FOUR PARAGRAPHS IN SECTION 3.2.3 ENTITLED "BUREAU OF SHIPS APPROVAL.' THE BOARD EXPRESSED A DOUBT AS TO WHETHER THE COMPANY WAS UNDER THE IMPRESSION THAT SECTION 3.2.3 WAS PART OF THE CONTRACTUAL REQUIREMENTS BUT STATED THAT "THERE APPEARS NO DOUBT THAT THE GOVERNMENT WAS INSISTING ON COMPLETE COMPLIANCE WITH MIL-I 983B.' THE BOARD ALSO STATED THAT MIL-P-49C DID NOT INCORPORATE ALL OF MIL-I-983B BUT ONLY IDENTIFIED PARAGRAPHS THEREOF, AND THE "BUREAU OF SHIPS APPROVAL," SECTION 3.2.3, IS NOT LISTED AS ONE OF THE INCORPORATED PROVISIONS.

THE BOARD'S DECISION ALSO SETS FORTH THAT BY LETTER DATED SEPTEMBER 12, 1961, THE COMPANY'S PRELIMINARY WORKING PLANS WERE REJECTED BECAUSE OF DRAWING DEFICIENCIES AS NOTED BY CODE NUMBERS INDICATING THE TYPES OF DEFICIENCY. THE NAVY REQUESTED THAT THE COMPANY REWORK THE ,MANUFACTURING DRAWINGS" AND RESUBMIT THE "PRELIMINARY WORKING DRAWINGS" FOR APPROVAL. THE COMPANY WAS ADVISED THAT REQUESTED DEVIATIONS FROM SPECIFICATIONS MIL- I-983B AND MIL-P-49C MUST BE SUBMITTED TO THE BUREAU OF SHIPS WITH DETAILED JUSTIFICATION FOR EACH SPECIFIC DEVIATION. FOLLOWING THE CODE PAGES ATTACHED TO THE LETTER OF SEPTEMBER 12, 1961, WERE 24 MORE PAGES LISTING SEVERAL HUNDRED SPECIFIC DEVIATIONS AND THE COMPANY ALLEGED THAT, AS THE RESULT OF THE GOVERNMENT'S REJECTION, THE COMPANY'S PERSONNEL HAD TO MAKE "1,504 CHANGES IN 1181 DRAWINGS.' THE REJECTION WAS THE SUBJECT OF DISCUSSION BETWEEN THE PARTIES ON OCTOBER 11, 1961, AND OF A LETTER DATED OCTOBER 10, 1961, FROM THE CONTRACTING OFFICER TO THE COMPANY, WHEREIN THE COMPANY WAS ADVISED THAT THE EQUIPMENT BEING FURNISHED UNDER THE PREVIOUS CONTRACT, ALTHOUGH ACCEPTED, DID NOT COMPLY WITH THE SPECIFICATIONS AS INTENDED BY THE GOVERNMENT; AND THAT IN THIS CASE THE GOVERNMENT INTENDED TO OBTAIN FULL COMPLIANCE WITH THE TERMS OF THE CONTRACT. THE LETTER DISCUSSES VARIOUS MATTERS INVOLVED AND STATES IN PARAGRAPH 4 AS FOLLOWS:

"EXHIBIT "A" TO THE CONTRACT (AND REFERENCED UNDER ITEM 1 OF THE SCHEDULE) IS VERY CLEARLY WORDED INDICATING THAT EQUIPMENT FURNISHED MUST COMPLY WITH SPECIFICATION MIL-P-49C (AS AMENDED), BE INTERCHANGEABLE WITH A BAILED MODEL EXCEPT WHERE A CONFLICT EXISTS WITH RESPECT TO INTERCHANGEABILITY BETWEEN THE SPECIFICATION AND THE BAILED MODEL, THE BAILED MODEL SHALL GOVERN, EXCEPT THAT NOTWITHSTANDING THE PARTS INTERCHANGEABILITY REQUIREMENT, ALL FINISHES AND PARTS SHALL CONFORM TO SPECIFICATION MIL-I-983.'

THE DECISION OF THE BOARD REFERS TO THAT PARAGRAPH AS EVIDENCING THAT THE GOVERNMENT WAS INSISTING THAT ALL PARTS CONFORM TO SPECIFICATION MIL-I- 983, NOTWITHSTANDING THE PARTS INTERCHANGEABILITY REQUIREMENT.

THE BOARD AGREED WITH THE COMPANY'S CONTENTION THAT THE GOVERNMENT CHANGED THE CONTRACT BY REQUIRING MANUFACTURING DRAWINGS. ITS DECISION CITES PARAGRAPHS 3.9.2, 3.9.2.1, 3.9.2.2 AND 3.9.3 OF MIL-I 983B AS THE ONLY PROVISIONS IN THAT SPECIFICATION WHICH SPECIFICALLY RELATE TO ,PRELIMINARY" AND "WORKING" DRAWINGS, AND THE BOARD CONCLUDED THAT THOSE PARAGRAPHS, TOGETHER WITH PROVISIONS REFERENCED IN PARAGRAPH 3.9.3, PROVIDED DEFINITIONS OF WHAT THE PRELIMINARY WORKING PLANS REQUIRED UNDER ITEM 3 OF CONTRACT NO. AF 33/600/-43389 WERE TO CONSIST. THE COMPANY WAS STATED AS HAVING RESUBMITTED PRELIMINARY WORKING PLANS SUCCESSIVELY ON NOVEMBER 10 AND 24, 1961, AND IT WAS DETERMINED THAT SUBSTANTIAL APPROVAL OF THE PRELIMINARY PLANS WAS OBTAINED IN JANUARY 1962.

THE BOARD DID NOT FIND IN ITS DECISION OF JULY 22, 1965, THAT ANY ADDITIONAL EXPENSE WAS CAUSED BY A DELAY OF THE GOVERNMENT IN EFFECTING FORMAL BAILMENT OF THE GOVERNMENT-FURNISHED MODEL OF EQUIPMENT. THE BOARD FOUND THAT THE COMPANY BID ON THE BASIS THAT IT CONSIDERED THE CONTRACT AS A DE FACTO FOLLOW-ON PROCUREMENT TO ITS EXISTING JOB NO. 1965 AND EXPRESSED THE OPINION THAT THIS RESULTED IN A VERY SUBSTANTIAL UNDERESTIMATE ON THE PART OF THE COMPANY. THE BOARD ALSO DETERMINED THAT, WHEN THE COMPANY REQUESTED BLANKET APPROVAL IN AUGUST 1961 FOR ALL NONSTANDARD PARTS BEING INSTALLED IN JOB NO. 1965 UNITS, IT MADE SUCH REQUEST AT THE RISK OF GETTING A NEGATIVE ANSWER; AND THAT IT SHOULD HAVE CHECKED ALL THE RESPECTIVE PARTS IN THE BAILED MODEL, DETERMINED THE AVAILABILITY OF THE PHYSICALLY INTERCHANGEABLE STANDARD PARTS FOR NONSTANDARD PARTS, AND THEN ASKED FOR WAIVERS NECESSARY WHERE IT WANTED TO CONTINUE TO USE NONSTANDARD PARTS. IN ADDITION, THE BOARD FOUND THAT THE COMPANY'S INITIAL SUBMISSION OF ITS PLAN OF PERFORMANCE DID NOT SUFFICIENTLY HIGHLIGHT ITS SPECIFIC AREAS OF REQUESTED PERMISSION TO DEVIATE FROM THE CONTRACTUAL REQUIREMENTS, AND ITS SUBMISSION AS MADE CONTRIBUTED IN SUBSTANTIAL DEGREE TO THE CONFUSED SITUATION. HOWEVER, THE BOARD CONCLUDED THAT, ON THE BASIS OF AN INCORRECT INTERPRETATION OF THE CONTRACT, THE GOVERNMENT HAD INSISTED ON FULL COMPLIANCE WITH MIL-I 983B, AND IN FACT ADDED, IN A VERY REAL FASHION, A BURDENSOME REQUIREMENT OF MANUFACTURING DRAWINGS. IT IS STATED IN THE BOARD'S DECISION THAT, ON THE BASIS OF THE BEST EVIDENCE AVAILABLE, APPROXIMATELY $80,000 OF THE COMPANY'S COSTS CAN BE ATTRIBUTED TO THE GOVERNMENT CHANGES, AND THAT THE REMAINDER RESULTS FROM AN IMPROVIDENT BID. IT IS FURTHER STATED THAT "ON THE ISSUE OF WHETHER THE CONTRACT PRICE OF $344,560 IS A RELIABLE STARTING POINT, WE THINK THAT THE BID DID NOT ADEQUATELY TAKE INTO CONSIDERATION THE VICISSITUDES INCIDENT TO GETTING GOVERNMENT APPROVAL OF THE USE OF NONSTANDARD PARTS, AND THIS FACTOR IS WEIGHED IN OUR DECISION ON THE QUANTUM ISSUE.'

RELATIVE TO THE QUESTION OF WHETHER THE BOARD SHOULD HAVE ADDED A PROFIT ALLOWANCE TO THE SUM OF $80,000, ITS DECISION ON THE COMPANY'S MOTION FOR RECONSIDERATION OF THE DECISION DATED JULY 22, 1965, STATES THAT AN EQUITABLE ADJUSTMENT IS NOT NECESSARILY ACCOMPLISHED BY A DETERMINATION OF ADDITIONAL COST AND ADDING AN ARBITRARY PERCENTAGE TO COVER THE PROFIT FACTOR; THAT TO BE EQUITABLE THE SPECIAL CIRCUMSTANCES OF THE CASE ARE TAKEN INTO CONSIDERATION; AND THAT "IN OUR DETERMINATION OF THE QUANTUM ALL ASPECTS, INCLUDING THE PROFIT FACTOR, OF THE MATTER WERE RECOGNIZED AND GIVEN DUE WEIGHT.'

THE RESTATEMENT OF CLAIM ON BEHALF OF LUMEN, INCORPORATED, CONTAINS A GENERAL DISCUSSION OF THE SPECIFICATIONS MADE A PART OF THE CONTRACTS FOR WHICH THE COMPANY ASSIGNED JOB NOS. 1965 AND 4012. IT IS STATED THAT BOTH CONTRACTS HAD A REQUIREMENT FOR INTERCHANGEABILITY OF PARTS WITH A BELL AND HOWELL MODEL TO BE SUPPLIED AS GOVERNMENT FURNISHED PROPERTY FOR PERFORMANCE OF EACH CONTRACT. IT IS EXPLAINED THAT THE SPECIFICATION FOR THE BELL AND HOWELL MODEL IS DIFFERENT FROM THE SPECIFICATION MADE APPLICABLE TO THE SECOND CONTRACT BUT THAT THE ONLY DIFFERENCES WERE TO BE THOSE BROUGHT ABOUT THROUGH APPLICATION OF THE NEW SPECIFICATION MIL-P- 49C, AMENDMENT NO. 1 THERETO AND THE MODIFICATION CONTAINED IN EXHIBIT "A" OF THE INVITATION FOR BIDS ISSUED IN CONNECTION WITH THE AWARD OF THE SECOND CONTRACT.

IT IS ALLEGED THAT THE BUREAU OF SHIPS, DEPARTMENT OF THE NAVY, ACTING IN BEHALF OF THE AIR FORCE, ASSUMED CERTAIN RESPONSIBILITIES IN CONNECTION WITH THE NAVY LETTER DATED SEPTEMBER 12, 1961, AND THAT ITS APPROVAL OF ITEM 4, CORRECTED WORKING PLANS, EMBODIED A REQUIREMENT FOR PREPARATION OF A TOTALLY NEW SET OF DRAWINGS WITH NUMBERS DIFFERENT FROM THOSE OF THE PREVIOUS CONTRACT *) LUMEN JOB NO. 1965). IT IS FURTHER ALLEGED THAT THERE WAS NO CONTRACT REQUIREMENT COUPLING APPROVAL OF ITEMS 3 AND 4 WITH PRODUCTION AND SHIPMENT OF PRODUCTION UNITS, YET THE COMPANY WAS NOT PERMITTED TO MAKE SHIPMENT UNTIL APPROVAL BY THE BUREAU OF SHIPS HAD BEEN RECEIVED OF THE NEW MANUFACTURING DRAWINGS WHICH, OF NECESSITY, HAD TO BE COUPLED WITH THE OPERATION MANUAL REQUIRED TO BE SHIPPED WITH EACH UNIT.

IT IS ARGUED THAT THE ARMED SERVICES BOARD OF CONTRACT APPEALS ERRED IN STATING THAT BUREAU OF SHIPS' APPROVAL (MIL-I-983B, PARA. 3.2.3) WAS NOT ONE OF THE PARAGRAPHS REQUIRED AND THAT THE BOARD ERRED IN SIX WAYS. FIRST, IT IS STATED THAT THE AWARDED CONTRACT REQUIRED DELIVERY OF ITEM 3 WITHIN 90 DAYS AFTER RECEIPT OF WRITTEN NOTICE OF AWARD TO THE CHIEF, BUREAU OF SHIPS, NAVY DEPARTMENT, WASHINGTON, D.C. SECOND, YOU STATE THAT THERE WAS NO CONTRACTUAL RELATIONSHIP BETWEEN SHIPMENT AND/OR APPROVAL OF ITEM 3 AND THE PRODUCTION AND SHIPMENT OF THE END ITEM PROJECTORS. THIRD, YOU STATE THAT THERE WAS NO REQUIREMENT FOR THE COMPANY TO FURNISH OR OTHERWISE OBTAIN APPROVAL OF ITS MANUFACTURING DRAWINGS, AND AS A MATTER OF FACT THE CONTRACT HAD BEEN AWARDED ON THE BASIS THAT THE COMPANY HAD PREVIOUSLY PRODUCED THE ITEM AS DEFINED IN PARA. 3.9.6 OF MIL-I-983B. FOURTH, YOU STATE THAT, AFTER TIMELY DELIVERY OF ITEM 3, ABOUT WHICH NO FAULT WAS FOUND IN THE BUREAU LETTER OF SEPTEMBER 12, 1961, ALL SUBSEQUENT ENGINEERING ACTIONS WERE INITIATED BY THE NAVY DEPARTMENT THROUGH THE CONTRACTING OFFICER WITH RESPECT TO THE COMPANY'S MANUFACTURING DRAWINGS, MAKING A TOTAL OF 1,504 CHANGES TO 932 MANUFACTURING DRAWINGS, AFTER TOTALLY APPROVING SAME WITH REFERENCE TO LUMEN JOB NO. 1965 IN MARCH 1961, REQUIRING THAT ALL MANUFACTURING DRAWINGS TO BE REDRAWN AND RENUMBERED, FURTHER NECESSITATING SUBSTANTIAL AND UNNECESSARY REVISION TO THE OPERATING MANUALS REQUIRED TO BE SHIPPED WITH EACH PRODUCTION UNIT. FIFTH, YOU STATE OR RESTATE YOUR OBJECTION TO THE BOARD'S DETERMINATION THAT PARA. 3.2.3 OF MIL-I-983B IS NOT LISTED AS ONE OF THE INCORPORATED CONTRACT PROVISIONS. ON THAT POINT, YOU REFER TO THE FACT THAT PARA. 3.2 OF MIL-I-983B IS ENTITLED "GENERAL INFORMATION," IS A SUBPARAGRAPH OF PARAGRAPH 3, ENTITLED "REQUIREMENTS," AND YOU SUGGEST THAT PARAGRAPH 3 HAS NO MEANING UNLESS TAKEN TOGETHER WITH THE SUBPARAGRAPHS THEREUNDER. ALSO, IT IS STATED THAT THE GOVERNMENT REQUIRED COMPLIANCE WITH A SPECIFICATION OF THESE SUBPARAGRAPHS, UNLESS SPECIFICALLY EXCLUDED AND NONE WAS EXCLUDED. SIXTH, YOU STATE THAT THERE WAS NO REQUIREMENT FOR APPLICATION OF PARA. 3.9.4 OF MIL-I 983B, ENTITLED "DRAWINGS-MANUFACTURING.'

YOU CONTEND THAT NO EVIDENCE WAS PRESENTED BY THE GOVERNMENT TO SHOW THAT YOUR CLIENT SUBMITTED AN IMPROVIDENT BID. HOWEVER WE HAVE EXAMINED THE TRANSCRIPT OF HEARINGS BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS IN THE CASE OF ASBCA NO. 9217 AND HAVE NOTED THAT THE WITNESSES FOR LUMEN, INCORPORATED, CLOSELY ASSOCIATED THEIR STATEMENTS CONCERNING THE PREPARATION AND SUBMISSION OF A BID ON THE SECOND CONTRACT WITH THE PREVIOUS CONTRACT, LUMEN JOB NO. 1965. IN ANSWER TO A QUESTION DURING DIRECT EXAMINATION OF MR. JAMES T. MCGRATH, THE COMPANY'S VICE PRESIDENT AND GENERAL MANAGER, AS TO WHETHER HE HAD PREPARED A BILL OF MATERIAL FOR JOB NO. 4012, HE MADE THE FOLLOWING STATEMENTS:

"YES, SIR. WE HAD ON HAND FROM THE PREVIOUS CONTRACT A BILL OF MATERIALS, AND SINCE JOB 4012 WAS A FOLLOW-ON CONTRACT, AND TO BE IDENTICAL TO THE PREVIOUS CONTRACT MECHANICALLY, AND ELECTRICALLY, WE HAD BROKEN DOWN OUR PREVIOUS BILL INTO MAIN ASSEMBLIES AND THEN TO SUBASSEMBLIES, AND THEN DOWN TO INDIVIDUAL PIECE PARTS.'

ONE OF THE COMPANY'S REPRESENTATIVES PREVIOUSLY TESTIFIED THAT THE NEW SPECIFICATION CONTAINED ONE SIGNIFICANT CHANGE FROM AN INDUCTION MOTOR TO A SYNCHRONOUS MOTOR, WHICH MEANT THAT DETAILED DESIGN WORK IN THAT PARTICULAR AREA HAD TO BE DONE. THIS STATEMENT IS, IN ITSELF, AN INDICATION THAT THE UNIT COST OF PRODUCTION ON JOB NO. 4012 PROBABLY WOULD SUBSTANTIALLY EXCEED THE UNIT COST OF PRODUCTION ON JOB NO. 1965.

THE QUESTION AS TO WHETHER AN IMPROVIDENT BID WAS SUBMITTED WAS NOT RAISED SPECIFICALLY AT THE HEARINGS BEFORE THE BOARD BUT THE LUMEN REPRESENTATIVES WERE CALLED UPON TO SHOW WHO PREPARED THE BID AND THE MANNER IN WHICH THE BID PRICES WERE DETERMINED. IT WAS INDICATED ONLY THAT MR. MCGRATH PREPARED AND SIGNED THE BID AND THAT HE RELIED UPON ESTIMATES OF OTHER COMPANY PERSONNEL REGARDING PURCHASING AND ENGINEERING COSTS.

MR. MCGRATH'S STATEMENTS TEND TO SHOW THAT, WHEN THE COMPANY'S BID WAS SUBMITTED, IT CONSIDERED THE PROPOSED PROCUREMENT TO BE A FOLLOW ON OF THE PREVIOUS CONTRACT IN ALL MATERIAL RESPECTS. ALSO, THE COMPANY'S ALLEGED TOTAL CONTRACT PERFORMANCE COSTS INCLUDED OVER $280,000 FOR DIRECT MATERIALS AND OVER $50,000 FOR DIRECT LABOR AND IT APPEARS THAT SUCH FIGURES COULD BE TAKEN IN THEMSELVES AS AN INDICATION THAT, IN OFFERING TO SUPPLY THE 560 PROJECTORS AT A CONTRACT PRICE OF $344,560, THE COMPANY HAD FAILED TO GIVE PROPER CONSIDERATION TO REQUIRED ENGINEERING EXPENSES AND OVERHEAD COSTS WHICH WOULD BE INVOLVED IN CONTRACT PERFORMANCE. BELIEVE THAT THE ARMED SERVICES BOARD OF CONTRACT APPEALS WAS JUSTIFIED IN THE PARTICULAR CIRCUMSTANCES TO CONCLUDE THAT AN IMPROVIDENT BID WAS SUBMITTED AND THAT THE CONTRACTOR WAS PERFORMING UNDER A "LOSS CONTRACT.' FURTHERMORE, IN REQUESTING RECONSIDERATION OF THE BOARD'S DECISION OF JULY 22, 1965, NO ATTEMPT WAS MADE TO SHOW THAT THE COMPANY HAD NOT, IN FACT, SUBMITTED AN IMPROVIDENT BID, AND IT APPEARS THAT THIS WAS THE TIME TO DO SO IF THERE WAS ANY AVAILABLE EVIDENCE TO DEMONSTRATE THAT THE DIFFERENCE BETWEEN THE SPECIFICATIONS APPLICABLE TO JOB NOS. 1965 AND 4012 HAD BEEN CAREFULLY CONSIDERED IN THE BIDDING ESTIMATES ON CONTRACT NO. AF 33/600/- 43389, AND THAT SUCH ESTIMATES WERE REASONABLY ACCURATE.

THE SIGNIFICANCE OF CERTAIN OF THE ALLEGED ERRORS IN THE BOARD'S DECISION OF JULY 22, 1965, IS NOT READILY APPARENT, CONSIDERING THAT THE BOARD STATED THAT ITEM 3 WAS TO BE DELIVERED WITHIN 90 DAYS AFTER RECEIPT OF CONTRACT AWARD AND THERE WAS NO INTENTION TO MAKE THE PRODUCTION UNITS AWAIT APPROVAL OF THE "CORRECTED" WORKING PLANS; ALSO, THAT "THERE IS NO CONTRACTUAL REQUIREMENT FOR THE SUPPLYING OF MANUFACTURING DRAWINGS.' WITH RESPECT TO THE FOURTH REFERRED-TO STATEMENT (PAGE 5 OF YOUR LETTER), IT IS DIFFICULT TO FIND THAT NO FAULT WAS FOUND IN THE BUREAU OF SHIPS' LETTER OF SEPTEMBER 12, 1961, REGARDING THE ORIGINAL SUBMISSION OF ITEM 3, SINCE VARIOUS DEFICIENCIES WERE LISTED WITH REFERENCE TO SO-CALLED MANUFACTURING DRAWINGS WHICH WERE, HOWEVER, IN FACT, THE DRAWINGS SUBMITTED AS A PART OF THE REQUIRED PRELIMINARY WORKING PLANS FOR ITEM 1. ALSO, THE TESTIMONY OF GOVERNMENT WITNESSES AT THE BOARD HEARINGS CLEARLY SHOW THE BASIS UPON WHICH THE NAVY CONSIDERED THAT ADDITIONAL DATA WAS REQUIRED BEFORE APPROVAL OF THE PRELIMINARY PLANS. IN REGARD TO THE QUESTION RAISED IN THE FIFTH REFERRED-TO STATEMENT, THE PERTINENT PORTIONS OF THE APPLICABLE SPECIFICATIONS APPEAR TO BE AS FOLLOWS:

"MILITARY SPECIFICATION MIL-P-49C

"3.3 GENERAL FEATURES. THE EQUIPMENT SHALL BE IN ACCORDANCE WITH THE FOLLOWING PARAGRAPHS OF SPECIFICATION MIL-I-983 IN ADDITION TO THE REQUIREMENTS SPECIFIED HEREIN. WHENEVER A REQUIREMENT OF SPECIFICATION MIL-I-983 CONFLICTS WITH A REQUIREMENT OF THIS SPECIFICATION, THE REQUIREMENT OF THIS SPECIFICATION SHALL GOVERN:

"GENERAL INFORMATION

"MILITARY SPECIFICATION MIL-I-983B (SHIPS)

"3. REQUIREMENTS

"3.1 QUALIFICATION.--- THE INTERIOR COMMUNICATION EQUIPMENT FURNISHED UNDER THE INDIVIDUAL EQUIPMENT SPECIFICATIONS SHALL BE A PRODUCT WHICH HAS BEEN TESTED AND PASSED THE QUALIFICATION TESTS SPECIFIED THEREIN.

3.2 GENERAL INFORMATION.--- THIS SPECIFICATION HAS BEEN PREPARED BY THE BUREAU OF SHIPS, NAVY DEPARTMENT FOR MANUFACTURERS INTERESTED IN THE SUPPLY OF INTERIOR COMMUNICATION EQUIPMENT FOR SHIPS OF THE UNITED STATES NAVY. IT FORMS PART OF ALL INDIVIDUAL EQUIPMENT SPECIFICATIONS AND THE PRACTICES SET FORTH HEREIN SHALL GOVERN IN ALL CASES, UNLESS MODIFIED OR EXCEPTED BY THE INDIVIDUAL EQUIPMENT SPECIFICATION.

"3.2.3 BUREAU OF SHIPS APPROVAL.---

"3.2.3.1 NORMALLY, SPECIFIC BUREAU OF SHIPS APPROVAL OF DESIGN AND MATERIALS PROPOSED FOR USE IN A GIVEN EQUIPMENT IS OBTAINED BY THE SUBMISSION OF WORKING PLANS VIA THE GOVERNMENT INSPECTOR, THIS ACTION BEING REQUIRED PRIOR TO COMMENCING WORK (SEE 3.9.3), SUCH APPROVAL IS GIVEN IN WRITING BY THE BUREAU OF SHIPS OR THE BUREAU OF SHIPS' AUTHORIZED AGENT BY ENDORSEMENT OF DRAWINGS OR PURCHASE ORDERS.'

SO FAR AS CONCERNS MILITARY SPECIFICATION MIL-P-49C, IT IS APPARENT THAT THE SPECIFICATION WAS INTENDED TO INCORPORATE BUREAU OF SHIPS' APPROVAL IN ANY CASE WHERE IT WAS PROPOSED TO REQUIRE THE SUBMISSION OF PRELIMINARY WORKING PLANS OR DRAWINGS, AND CORRECTED WORKING PLANS OR DRAWINGS IN ACCORDANCE WITH OR AS DEFINED IN SPECIFICATION MIL-I 983B.

WITH RESPECT TO THE QUESTION OF WHETHER APPROVAL OF THE PRELIMINARY WORKING PLANS AND CORRECTED WORKING PLANS WAS COUPLED WITH PRODUCTION AND DELIVERY, THE PRELIMINARY WORKING PLANS OF A "B" BIDDER WERE REQUIRED FOR SUBMISSION WITHIN 90 DAYS AFTER RECEIPT OF WRITTEN NOTICE OF CONTRACT AWARD, AND CORRECTED WORKING PLANS WERE REQUIRED TO BE SUBMITTED WITHIN 30 DAYS AFTER RECEIPT OF WRITTEN GOVERNMENT APPROVAL OF THE PRELIMINARY PLANS. SINCE DELIVERIES UNDER THE CONTRACT WERE NOT REQUIRED TO START UNTIL 150 DAYS AFTER RECEIPT OF WRITTEN NOTICE OF CONTRACT AWARD, IT APPEARS REASONABLE TO ASSUME THAT THE PARTIES AT LEAST CONTEMPLATED THAT THE SUBMISSION AND APPROVAL OF PRELIMINARY WORKING PLANS WOULD BE COUPLED WITH PRODUCTION OF THE UNITS TO BE DELIVERED UNDER THE CONTRACT. EVIDENTLY SUCH APPROVAL WOULD INDICATE WHEREIN ANY CHANGES IN THE PRELIMINARY PLANS WERE NECESSARY AND APPROVAL OF ITEM 4 COULD AWAIT THE COMMENCEMENT OF PRODUCTION IF THE COMPANY CONSIDERED THAT THERE WOULD BE NO PROBLEM IN THE PREPARATION OF CORRECTED PLANS TO BE SUBMITTED DURING THE PERIOD OF CONTRACT PERFORMANCE. WE THEREFORE AGREE, IN GENERAL, WITH THE DETERMINATION OF THE ARMED SERVICES BOARD OF CONTRACT APPEALS THAT THERE WAS NO INTENTION TO MAKE THE PRODUCTION UNITS AWAIT APPROVAL OF THE "CORRECTED" WORKING PLANS. HOWEVER, WE DO NOT AGREE WITH YOUR CONTENTION THAT NEITHER THE APPROVAL OF THE PRELIMINARY WORKING PLANS NOR THE APPROVAL OF THE CORRECTED WORKING PLANS WAS COUPLED WITH PRODUCTION AND SHIPMENT OF THE CONTRACT UNITS. SO FAR AS INSPECTION OF COMPLETED UNITS IS CONCERNED, IT IS OUR OPINION THAT THE PARTIES TO THE CONTRACT DID NOT CONTEMPLATE THAT THE BUREAU OF SHIPS WOULD NOT HAVE AVAILABLE THE CORRECTED WORKING PLANS SHOWING IN SUFFICIENT DETAIL THE DATE NECESSARY TO DETERMINE THE ACCEPTABILITY OF THE EQUIPMENT DELIVERED.

THE RECORD OF THIS CASE DOES NOT APPEAR TO ESTABLISH THAT NO FAULT WAS FOUND WITH THE INITIAL SUBMISSION OF WORKING PLANS FOR ITEM 1 AND, AS STATED IN PARA. 3.9.3 OF SPECIFICATION MIL-I-983B, ANY WORK DONE BY A CONTRACTOR, SUCH AS THE PROCUREMENT OF MATERIAL OR FABRICATION OF UNITS, BEFORE APPROVAL OF WORKING DRAWINGS, WOULD BE "AT THE CONTRACTOR'S OWN RISK.' APPARENTLY IT WAS CONTEMPLATED THAT A "B" BIDDER COULD PROCEED WITH THE PROCUREMENT OF SOME MATERIALS WHEN AWARDED THE CONTRACT. HOWEVER, ON THE BASIS OF A REASONABLE BELIEF THAT THE COMPANY'S BILL OF MATERIALS WAS BASED PRIMARILY UPON THE SPECIFICATIONS OF A PREVIOUS CONTRACT, WE BELIEVE THAT THE NAVY REPRESENTATIVES WELL MIGHT HAVE SUGGESTED THAT PROCUREMENT ACTIONS BE SUSPENDED UNTIL THE COMPANY HAD SUBMITTED A LIST OF NONSTANDARD PARTS AND RECEIVED APPROVAL FOR THEIR USE. THE COMPANY COULD HAVE FOLLOWED SUCH SUGGESTION OR TAKEN THE CHANCE THAT THE PROCUREMENTS INVOLVED WOULD BE SATISFACTORY IN ALL RESPECTS. NOTWITHSTANDING THE PARTS INTERCHANGEABILITY PROVISIONS OF EXHIBIT "A" OF THE INVITATION FOR BIDS, THERE WOULD APPEAR TO HAVE BEEN SOME QUESTION AS TO COMPLIANCE WITH ITS EXCEPTION THAT THE FINISHES OF PARTS AND GOVERNMENT STANDARD APPROVED PARTS TO BE IN ACCORDANCE WITH SPECIFICATION MIL-I- 983B. HOWEVER, WE AGREE WITH THE ARMED SERVICES BOARD OF CONTRACT APPEALS THAT EXHIBIT "A" DOES NOT REQUIRE "ALL PARTS" TO BE IN ACCORDANCE WITH THAT SPECIFICATION, AND NONSTANDARD PARTS WITH THE REQUIRED TYPES OF FINISHES APPARENTLY COULD HAVE BEEN USED IF INTERCHANGEABLE WITH THE NONSTANDARD PARTS USED IN THE BAILED MODEL OF EQUIPMENT.

ADMITTEDLY THERE WAS NO REQUIREMENT IN THIS CASE THAT MANUFACTURING DRAWINGS BE SUBMITTED. HOWEVER, THE FINAL WORKING DRAWINGS OF THE TYPE REFERRED TO IN PARA. 3.9.3 OF SPECIFICATION MIL-I-983B ARE REQUIRED TO BE IN CONSIDERABLE DETAIL AND IT SEEMS QUESTIONABLE WHETHER THERE WAS PROVIDED ANYTHING MORE SUBSTANTIAL THAN WHAT WAS REQUIRED IN THE PREPARATION OF CORRECTED WORKING DRAWINGS AND ACCOMPANYING LISTS OF REPAIR PARTS, MATERIALS, ELECTRICAL RATINGS, ETC. ACCORDING TO THE TESTIMONY OF GOVERNMENT WITNESSES AT THE BOARD HEARINGS, THE COMPANY'S ORIGINALLY SUBMITTED WORKING DRAWINGS DID NOT CONTAIN SUFFICIENT INFORMATION AND IT WAS ASSUMED THAT THE COMPANY INTENDED THAT THE GOVERNMENT WOULD REFER TO DRAWINGS FURNISHED UNDER THE PREVIOUS CONTRACT FOR THE PURPOSE OF ASCERTAINING WHETHER THE WORKING PLANS FULFILLED THE REQUIREMENTS OF SPECIFICATION MIL-I-983B IN REGARD TO DATA SUCH AS TREATMENTS, MATERIALS AND SPECIFICATIONS WHICH WOULD NORMALLY BE SUPPLIED ON WORKING DRAWINGS. SEE PARA. 3.9.3.6.3 OF SPECIFICATION MIL-I-983B. IT WAS ESTABLISHED THAT IN A NUMBER OF INSTANCES THE REQUIREMENTS OF THE CONTRACT AND ITS SPECIFICATIONS WERE NOT BEING COMPLIED WITH. EVEN AS LATE AS NOVEMBER 14, 1961, THE COMPANY HAD NOT SUBMITTED SATISFACTORY WORKING PLANS AND AT SUCH TIME THE COMPANY INDICATED THAT CERTAIN OF THE WORKING DRAWINGS COULD BE MARKED TO SHOW COMPLIANCE WITH THE CONTRACT. THIS WAS AGREED TO BUT THE DRAWINGS SUBMITTED ON NOVEMBER 19, 1961, DID NOT CONTAIN DATA AS TO FINISHES OR DESCRIPTIONS OF FINISHES.

THE ARMED SERVICES BOARD OF CONTRACT APPEALS HELD THE "FINAL" DRAWINGS SUBMITTED BY THE COMPANY TO BE "MANUFACTURING" DRAWINGS, AND ITS DETERMINATION SEEMS TO BE FINAL AND CONCLUSIVE ON THE PARTIES. HOWEVER, IT IS APPARENT THAT MOST OF THE COMPANY'S ADDITIONAL COSTS OF CONTRACT PERFORMANCE ARE ATTRIBUTABLE TO ITS FAILURE TO SUBMIT REASONABLY SATISFACTORY WORKING PLANS IN THE FIRST INSTANCE. THE RECORD OF THIS CASE SEEMS TO JUSTIFY A CONCLUSION THAT THE COMPANY RELIED TO GREATER EXTENT THAN WARRANTED UPON THE FACT THAT IT HAD PRODUCED AN ACCEPTABLE PREPRODUCTION MODEL UNDER A PREVIOUS CONTRACT WHICH CONTAINED DIFFERENT SPECIFICATIONS. REGARDLESS OF THE PARTS INTERCHANGEABILITY FEATURE OF EXHIBIT "A" OF THE SECOND CONTRACT, THE GOVERNMENT WAS ENTITLED TO RECEIVE PRELIMINARY WORKING PLANS FOR ITEM 1 OF THE SECOND CONTRACT WHICH CLEARLY EVIDENCED AN INTENTION TO PROVIDE EQUIPMENT WHICH WOULD MEET SPECIFICATION REQUIREMENTS IN CERTAIN PARTICULARS, INCLUDING THE REQUIRED TYPES OF FINISHES FOR ALL PARTS OF THE PROJECTORS TO BE PRODUCED AND DELIVERED UNDER THE CONTRACT.

YOU CONTEND THAT THE ACTIONS OF THE GOVERNMENT IN THIS CASE REQUIRED A TOTALLY DIFFERENT PERFORMANCE FROM THAT REQUIRED UNDER THE TERMS OF THE CONTRACT, AND CITE CERTAIN COURT CASES AS HAVING ADOPTED THE TOTAL COST APPROACH IN DETERMINING THE AMOUNT OF DAMAGES FOR BREACH OF CONTRACT WHERE IT IS IMPRACTICABLE OR IMPOSSIBLE TO SEGREGATE COSTS. WE DO NOT CONSIDER THE CIRCUMSTANCES INVOLVED AS JUSTIFYING A CONCLUSION THAT THE PARTIES ABANDONED THE ORIGINAL CONTRACT OR THAT THE ESTIMATED COST OVERRUN IS ENTIRELY THE RESPONSIBILITY OF THE GOVERNMENT. SO FAR AS CONCERNS THE TOTAL COST APPROACH, THE ARMED SERVICES BOARD HAS REJECTED SUCH APPROACH AS A METHOD OF DETERMINING THE AMOUNTS TO BE ALLOWED CONTRACTORS AS EQUITABLE ADJUSTMENTS IN THIS AND SIMILAR CASES WHERE IT APPEARS THAT BOTH PARTIES ARE AT FAULT, AND SUCH REJECTIONS ARE CONSISTENT WITH THE DECISION RENDERED BY THE COURT OF CLAIMS IN F. H. MCGRAW AND COMPANY V. UNITED STATES, 132 CT.CL. 501, WHEREIN IT IS STATED THAT THIS METHOD OF PROVING DAMAGES IS BY NO MEANS SATISFACTORY BECAUSE, AMONG OTHER THINGS, IT ASSUMES THAT THE CONTRACTOR'S COSTS WERE REASONABLE AND THAT THE CONTRACTOR WAS NOT RESPONSIBLE FOR ANY INCREASE IN COST; AND BECAUSE IT ASSUMES THAT THE CONTRACTOR'S BID WAS ACCURATELY COMPUTED, WHICH IS NOT ALWAYS THE CASE, BY ANY MEANS.

IN OUR OPINION, THE ARMED SERVICES BOARD OF CONTRACT APPEALS WAS JUSTIFIED IN DETERMINING THE ESTIMATED COST OVERRUN TO BE APPORTIONABLE ON AN $80,000-$90,000 BASIS, AND WE WOULD NOT BE WARRANTED IN TAKING EXCEPTION TO THE BOARD'S DECISION ON THE GROUND THAT IT IS EITHER ARBITRARY, CAPRICIOUS OR NOT SUPPORTED BY SUBSTANTIAL EVIDENCE. IT IS ALSO OUR OPINION THAT THE BOARD CORRECTLY STATED THAT AN EQUITABLE ADJUSTMENT IS NOT NECESSARILY ACCOMPLISHED BY A DETERMINATION OF ADDITIONAL COST AND ADDING AN ARBITRARY PERCENTAGE TO COVER PROFIT.

ACCORDINGLY, WE FIND THAT THE DECISION OF THE BOARD SHOULD BE ACCORDED FINALITY UNDER THE STANDARDS OF REVIEW AS PROVIDED IN THE ACT OF MAY 11, 1954, AND THE RESTATED CLAIM FOR $128,982.81 ..END :