B-164013, NOV. 7, 1968

B-164013: Nov 7, 1968

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

TO AARON FERER AND SONS COMPANY: REFERENCE IS MADE TO YOUR LETTER OF JULY 15. IN WHICH YOU HAVE OFFERED YOUR COMMENTS ON THE SALES CONTRACTING OFFICER'S REPORT WHICH WAS FORWARDED TO YOU WITH OUR LETTER OF MAY 27. THE SALES CONTRACTING OFFICER'S REPORT WAS THE BASIS UPON WHICH OUR OFFICE PREDICATED THE OFFER OF $2. THE CONTRACT WAS AWARDED ON JANUARY 11. 1966) AND THE 30-TON HC-78 LINKBELT CRANE WERE BASED ON THE EXPECTATION THAT THE CONTRACTOR WOULD WORK 26 EIGHT-HOUR DAYS OR 208 HOURS. MAKES THE FOLLOWING CONTENTIONS WITH RESPECT TO THE COMPUTATION OF THE RENTAL COSTS FOR THE TWO ABOVE CRANES: "WHILE THE LORAIN CRANE WAS RENTED AT A RATE OF $6000.00 PER MONTH. THIS WAS FOB SHIPPING POINT.

B-164013, NOV. 7, 1968

TO AARON FERER AND SONS COMPANY:

REFERENCE IS MADE TO YOUR LETTER OF JULY 15, 1968, IN WHICH YOU HAVE OFFERED YOUR COMMENTS ON THE SALES CONTRACTING OFFICER'S REPORT WHICH WAS FORWARDED TO YOU WITH OUR LETTER OF MAY 27, 1968. THE SALES CONTRACTING OFFICER'S REPORT WAS THE BASIS UPON WHICH OUR OFFICE PREDICATED THE OFFER OF $2,996.63 IN OUR LETTER OF MAY 1, 1968, AS FULL AND FINAL PAYMENT OF YOUR THREE CLAIMS UNDER CONTRACT NO. 01 6004-006, FOR 11 ITEMS OF EX-ATLAS "F" MISSILE SITE PERSONAL PROPERTY AND EQUIPMENT LOCATED AT VARIOUS SITES NEAR LINCOLN, NEBRASKA. THE CONTRACT WAS AWARDED ON JANUARY 11, 1966, BY THE DEFENSE LOGISTICS SERVICES CENTER, BATTLE CREEK FEDERAL CENTER, BATTLE CREEK, MICHIGAN.

THE SALES CONTRACTING OFFICER'S COMPUTATIONS OF THE ACTUAL RENTAL COSTS FOR THE LORAIN TRUCK CRANE (REFERRED TO AS THE 75-TON CRANE IN THE CLAIM OF MAY 10, 1966) AND THE 30-TON HC-78 LINKBELT CRANE WERE BASED ON THE EXPECTATION THAT THE CONTRACTOR WOULD WORK 26 EIGHT-HOUR DAYS OR 208 HOURS. THESE COSTS REPRESENT THE BULK OF THE ADDITIONAL COSTS INCURRED UNDER CLAIM NO. 1. THE SALES CONTRACTING OFFICER'S REPORT HAS DISALLOWED OVERTIME PREMIUM COSTS UNDER CLAIM NO. 1 AND PAYROLL SERVICING COSTS UNDER CLAIMS NO. 1, 2 AND 3.

YOUR LETTER OF JULY 15, 1968, MAKES THE FOLLOWING CONTENTIONS WITH RESPECT TO THE COMPUTATION OF THE RENTAL COSTS FOR THE TWO ABOVE CRANES: "WHILE THE LORAIN CRANE WAS RENTED AT A RATE OF $6000.00 PER MONTH, THIS WAS FOB SHIPPING POINT, LORAIN, OHIO, WITH RENTAL TO START ON DATE OF DELIVERY TO YORK, NEBRASKA AND END ON THE DATE ACCEPTED BY THE CARRIER ON TERMINATION. AS LESSEE, WE WERE FULLY RESPONSIBLE FOR ASSEMBLY AND ERECTION, MOVEMENT, USE AND OPERATION OF THE EQUIPMENT, AND THE EQUIPMENT WAS TO BE RETURNED IN THE SAME CONDITION AS WHEN RECEIVED. WE WERE REQUIRED TO CARRY INSURANCE IN THE AMOUNT OF $185,000.00 COVERING LOSS, DESTRUCTION, OR DAMAGE, WITH OR WITHOUT FAULT ON OUR PART, AND EVEN IF CAUSED BY ACT OF GOD. WE PAID RENTAL FOR 6-1/5 MONTHS IN THE TOTAL AMOUNT OF $37,200.00, INBOUND FREIGHT OF $3,790.51 AND INSURANCE PREMIUM OF $637.00, OR A TOTAL OF $41,627.51, THUS OUR COST PER MONTH WAS $6,404.23. TO REDUCE THIS TO AN HOURLY RATE, CONSIDERATION MUST THEN BE GIVEN TO IDLE TIME FOR UNLOADING, ERECTION, OBTAINING MOVEMENT PERMITS AND ESCORTS, MOVING, RIGGING, REPAIRS, DISMANTLING, LOADING AND NON-WORK DAYS. THE COMPLEXITIES OF THIS OPERATION WERE ENORMOUS. FROM INFORMATION WE HAVE PIECED TOGETHER FROM VOLUMINOUS FIELD FILES, LETTERS AND REPORTS, WE HAVE ARRIVED AT AN AVERAGE OF 110 HOURS PER MONTH FOR THE TIME THE CRANE WOULD BE ACTUALLY IN USE. ON THIS BASIS, WE ARRIVE AT AN AVERAGE RATE (EXCLUSIVE OF REPAIRS, CABLES, OPERATING COSTS, ETC.) OF $58.22 PER HOUR; HOWEVER, IT WAS AND IS OUR CONTENTION THAT THE MOST PRACTICAL AND EQUITABLE MEASURE OF CRANE RENTAL COST FOR ANY SPECIFIC HOURS OF DELAY SHOULD BE BASED ON THE ESTABLISHED STRAIGHT TIME RENTAL CHARGE IN THIS AREA OF $1.00 PER TON PER HOUR. "REGARDING THE 30 TON LINK BELT CRANE, WE PAID RENTAL FOR 6 MONTHS IN THE TOTAL AMOUNT OF $14,400.00, INBOUND FREIGHT OF $145.00, OR A TOTAL OF $14,545.00, THUS OUR COST PER MONTH WAS $2424.17. ON THE BASIS OF THE ABOVE 110 HOURS, THIS PRODUCES A RATE OF $22.04 PER HOUR; HOWEVER, FOR REASONS ALREADY STATED THERE ARE TOO MANY FACTORS INVOLVED IN APPORTIONING A MONTHLY RENTAL OF THIS NATURE ON THIS TYPE OF OPERATION AND WE BELIEVE THE ESTABLISHED STRAIGHT TIME RENTAL CHARGE FOR THIS AREA OF $1.00 PER TON PER HOUR REPRESENTS THE MOST PRACTICAL AND EQUITABLE MEASURE OF OUR LOSS FOR THE DELAY.'

WITH RESPECT TO THE SALES CONTRACTING OFFICER'S DISALLOWANCE OF OVERTIME PAYROLL COSTS AND PAYROLL SERVICING COSTS UNDER CLAIM NO. 1, THE LETTER OF JULY 15 URGES AS FOLLOWS: "WITH REFERENCE TO PAGE 6 (19) OF THE SALES CONTRACTING OFFICER'S STATEMENT REGARDING THE PAYROLL CLAIM, IT IS OUR PRACTICE IN JOB OR OPERATION CONTROL AND COSTING TO ASSIGN OVERTIME PREMIUM DIRECTLY TO THE JOB OR OPERATION CAUSING THE OVERTIME, WHERE PRACTICAL. AS TO WHY OUR SUPERINTENDENT RETAINED HIS WORK FORCE FOR MORE THAN 8 HOURS PER DAY DURING THE PERIOD, THERE MUST HAVE BEEN GOOD REASON, AND SURELY THIS IS MERELY A CRITICISM, FOR THE FACT REMAINS THAT HE DID RETAIN THEM AND THEY WERE ACCORDINGLY PAID. ALSO, WE SEE NO JUSTIFICATION FOR DISALLOWANCE OF OUR MODEST PAYROLL SERVICING COSTS, AS THESE ARE CERTAINLY NOT CONSTANT COSTS AND INCLUDE NO CHARGE FOR FIXED OR ADMINISTRATIVE OVERHEAD.'

CLAIM NO. 2 FOR THE MOST PART IS FOR ADDITIONAL COSTS INCURRED IN CONNECTION WITH THE 45-TON LINKBELT CRANE. THE SALES CONTRACTING OFFICER'S COMPUTATION OF THE ACTUAL RENTAL COSTS FOR THIS CRANE WAS BASED ON THE EXPECTATION THAT THE CONTRACTOR WOULD WORK 26 EIGHT-HOUR DAYS OR 208 HOURS.

THE LETTER OF JULY 15 TAKES EXCEPTION TO THE ABOVE COMPUTATION BY THE SALES CONTRACTING OFFICER AND URGES THAT THE RENTAL COSTS BE COMPUTED ON THE FOLLOWING BASIS: "REGARDING THE 45 TON LINK BELT CRANE, WE PAID RENTAL FOR 5.3485 MONTHS IN THE TOTAL AMOUNT OF $17,917.67, INBOUND FREIGHT OF $145.00, OR A TOTAL OF $18,062.67, THUS OUR COST PER MONTH WAS $3377.15. ON THE BASIS OF 110 HOURS THIS PRODUCES A RATE OF 30.70 PER HOUR; HOWEVER,FOR REASONS ALREADY STATED WE BELIEVE THE ESTABLISHED STRAIGHT TIME RENTAL CHARGE FOR THIS AREA OF $1.00 PER TON PER HOUR REPRESENTS THE MOST PRACTICAL AND EQUITABLE MEASURE OF OUR LOSS FOR THE DELAY.'

IT IS ALSO URGED IN THE LETTER OF JULY 15 THAT PAYROLL COSTS UNDER CLAIM NO. 2 SHOULD BE ALLOWED.

UNDER CLAIM NO. 3, IT HAS BEEN DETERMINED THAT THE RENTAL COSTS FOR THE 30-TON CRANE SHOULD BE DISALLOWED. YOUR CONCERN HAS TAKEN ISSUE WITH THIS DETERMINATION. THE SALES CONTRACTING OFFICER HAS REPORTED THE FOLLOWING FACTS WITH RESPECT TO THIS CLAIM:

"/6) IT HAS BEEN DETERMINED THAT THE FOLLOWING SEQUENCE OF EVENTS OCCURRED BETWEEN 29 JUNE AND 5 JULY 1966:

"/A) 29 JUNE 1966: THE RAILROAD SPOTTED TWO CARS AT THE DUNBARRAILHEAD -- ONE FOR THE GOVERNMENT AND ONE FOR THE CONTRACTOR.

"/C) THE CONTRACTING OFFICER'S REPRESENTATIVE, AFTER BEING ADVISED BY BASE TRANSPORTATION THAT THE RAILROAD WOULD GET TWO MORE CARS OUT TO DUNBAR AS QUICKLY AS POSSIBLE, ASSURED THE CONTRACTOR THAT THE OTHER TWO CARS WOULD ARRIVE THE NEXT MORNING, 1 JULY 1966.

"/D) APPARENTLY, IN AN EFFORT TO SAVE TIME AND EXPENSES, THE CONTRACTING OFFICER'S REPRESENTATIVE ADVISED THE CONTRACTOR THAT HE SHOULD PROCEED TO LOAD THE GOVERNMENT TANKS ON THE TWO RAIL CARS THEN AT THE RAILHEAD.

"/E) 1 JULY 1966: CONTRACTOR TRANSFERRED THE TWO A-6 TANKS FROM THE MOVER'S RIG TO THE TWO AVAILABLE RAIL CARS BY USING THE SMALL 30 TON CRANE.

"/F) SGT. STRICKLAND OF BASE TRANSPORTATION ADVISED THE CONTRACTING OFFICER'S REPRESENTATIVE THAT THERE WAS NO CHANCE OF GETTING RAIL CARS SPOTTED BEFORE WEDNESDAY, 6 JULY 1966.

"/G) IN ORDER TO RELEASE THE MOVING RIG AND GET ALL THE TANKS TO THE RAILHEAD, IT WAS AGREED BETWEEN THE CONTRACTING OFFICER'S REPRESENTATIVE AND THE CONTRACTOR THAT THE A-6 TANKS WOULD BE OFFLOADED AND THE OTHER TWO TANKS MOVED TO THE RAILHEAD. THE METHOD USED TO ACCOMPLISH THIS WAS AS FOLLOWS:

"1. THE CONTRACTOR MOVED HIS 115 TON CRANE AND LOX TANK FROM SITE 4 TO THE RAILHEAD, OFFLOADED THE A-6 TANKS, PLACED THEM ON THE GROUND, TRANSFERRED THE LOX TANK TO ONE OF THE RAIL CARS AND THEN RETURNED TO SITE 4 WITH THE 115 TON CRANE AND MOVING RIG.

"2. USING THE 115 TON CRANE, THE A-7 TANK WAS LOADED ON THE MOVING RIG AT THE SITE AND TRANSPORTED TO THE RAILHEAD, LEAVING THE 115 TON CRANE AT THE MISSILE SITE.

"3. UPON ARRIVAL AT THE RAILHEAD, THE A-7 TANK WAS TRANSFERRED FROM THE MOVER'S RIG TO THE RAILROAD CAR BY USING THE SMALL 30 TON CRANE. APPARENTLY THE 30 TON CRANE THEN PROCEEDED ON TO ANOTHER WORK SITE.

"4. THE NEXT DAY, SATURDAY, 2 JULY 1966, THE RAILROAD SPOTTED FIVE ADDITIONAL RAIL CARS. THE 115 TON CRANE WAS AT THE MISSILE SITE AND COULD NOT BE MOVED OVER THE HIGHWAY UNTIL AFTER THE 4TH OF JULY DUE TO RESTRICTIONS IMPOSED BY THE STATE OF NEBRASKA.

"5. 5 JULY 1966. CONTRACTOR MOVED THE 115 TON CRANE BACK TO THE RAILHEAD AND RELOADED THE A-6 TANKS. CONCLUSION: ----------

"/7) A REVIEW OF THE RECORD OF EVENTS REVEALS THAT THE 30 TON LINKBELT CRANE WAS NOT REQUIRED OR UTILIZED AFTER THE A-7 TANK WAS LOADED ON 1 JULY 1966. ACCORDING TO THE CONTRACTING OFFICER'S REPRESENTATIVE, THE CRANE WOULD HAVE BEEN REQUIRED FOR THIS PERIOD OF TIME EVEN IF THE CARS HAD BEEN SPOTTED AS SCHEDULED (EXHIBIT 20). WHEN CONSIDERING THE METHOD OF CRANE UTILIZATION DURING THIS INCIDENT, THE 30 TON CRANE COULD HAVE BEEN RELEASED ON THE MORNING OF 1 JULY 1966 IF THE 115 TON CRANE HAD ACCOMPANIED THE A-7 TANK BACK TO THE RAILHEAD ON 1 JULY RATHER THAN REMAINING AT THE MISSILE SITE UNTIL 5 JULY. IN VIEW OF THE ABOVE, IT IS THE CONCLUSION OF THE SALES CONTRACTING OFFICER THAT THE CONTRACTOR SUSTAINED NO NECESSARY ADDITIONAL EXPENSES IN REGARD TO THE 30 TON LINKBELT CRANE AND CREW AND THAT THIS PART OF THE CLAIM AMOUNTING TO $546.00 SHOULD BE DISALLOWED.

"/9) THE HOURLY RATE FOR THE 115 TON LORAIN CRANE SHOULD BE $28.85 PER HOUR RATHER THAN $75.00 PER HOUR AS CLAIMED. (SEE PARAGRAPHS (14) AND (15), CLAIM NO. 1).'

THE LETTER OF JULY 15 MAKES THE FOLLOWING CONTENTIONS WITH REGARD TO THIS CLAIM: "IT WOULD APPEAR THAT THE SALES CONTRACTING OFFICER HAS OVERLOOKED THE FACT THAT THE A6 AND A7 TANK WEIGHED 43 TONS EACH AND THE LOX TANK WAS IN EXCESS OF 50 TONS. THE ONLY MOVEMENT WHEN IT WAS POSSIBLE TO HANDLE ANY OF THESE TANKS WITH THE 30 TON MACHINE WAS FROM THE MOVER'S RIG TO A RAILROAD CAR. THE MOVER'S RIG WAS SPECIALLY BUILT UP WITH BEAMS SO THAT IT WAS POSSIBLE TO ROLL ONE END OF THE TANK AT A TIME DIRECTLY ONTO THE CAR. IN NO CASE COULD THE 30 TON MACHINE BE USED TO LIFT THESE TANKS FROM THE GROUND TO THE MOVER'S RIG OR FROM THE RAILROAD CAR TO THE GROUND OR VICE-VERSA. THIS EXPLAINS THE REASON FOR MOVING THE 115 TON CRANE TO THE RAILHEAD (P10-G1) AND THE RETURN TO SITE 4 FOR THE A7 TANK (P11-G 2). HAD BEEN ADVISED THAT THE MOVEMENT OF THE 115 TON CRANE ON 1 JULY WAS IMPOSSIBLE SINCE IT WAS THE END OF THE DAY AND MOVEMENT WAS RESTRICTED AS INDICATED. MOVING A CRANE OF THIS SIZE NORMALLY REQUIRES SOME DISMANTLING, SHERIFF'S ESCORTS, ETC. IF THE 30 TON CRANE HAD BEEN RELEASED AS WAS SUGGESTED, THEN ONE MORE DAY WOULD HAVE BEEN LOST AT SUBSTANTIAL ADDITIONAL MANPOWER, EXPENSE, ETC. THUS WE FEEL THAT OUR CLAIM FOR THE 30 TON CRANE IS JUSTIFIED. HOWEVER, IT WOULD APPEAR THAT OUR CLAIM FOR REIMBURSEMENT FOR EXPENSES PRIOR TO 1 JULY 1967 WAS NOT JUSTIFIED. "AS TO OUR POSITION ON RATES FOR THE CRANES AND ON PAYROLL COSTS WE REFER YOU TO OUR STATEMENTS UNDER CLAIMS NOS. 1 AND 2.'

IN A SUPPLEMENTAL REPORT, THE SALES CONTRACTING OFFICER HAS TAKEN THE FOLLOWING POSITIONS WITH RESPECT TO THE CONTENTIONS IN THE LETTER OF JULY 15, 1968: "1. * * * AS INDICATED IN THE INITIAL SCO'S REPORT, THE HOURLY RATE FOR EACH SIZE CRANE WAS DETERMINED BY DIVIDING THE MONTHLY RENTAL FEE OF THE CRANE ($2,400 FOR 30 TON CRANE; $6,000 FOR 115 TON CRANE) BY 208 HOURS AVAILABLE PRODUCTIVE WORK HOURS PER MONTH. THE RATES WERE STATED AS $11.54 FOR THE 30 TON CRANE AND $28.85 FOR THE 115 TON CRANE. THE CONTRACTOR CONTENDS THAT THE RATES SHOULD BE HIGHER SINCE INBOUND FREIGHT AND INSURANCE PREMIUM COSTS INCURRED INCIDENT TO THE CRANE RENTALS WERE NOT REFLECTED IN THE SCO'S HOURLY RATES. HE ALSO CLAIMS THAT THE CRANES WERE USED ONLY AN AVERAGE OF 110 HOURS PER MONTH. ACCORDING TO HIS CALCULATIONS, THE HOURLY RATES SHOULD BE $22.04 FOR THE 30 TON CRANE AND $58.22 FOR THE 115 TON CRANE, EXCLUSIVE OF MAINTENANCE AND OPERATING COSTS. HE CONSIDERS A MORE EQUITABLE BASE FOR COMPENSATION TO BE A STRAIGHT TIME RENTAL CHARGE OF $1 PER TON PER HOUR. THE CONTRACTOR IS ONLY ENTITLED TO ACTUAL DAMAGES INCURRED AS A RESULT OF CITED DELAYS CAUSED BY THE GOVERNMENT. IN THIS RESPECT, THE GOVERNMENT'S POSITION IS THAT THE INBOUND FREIGHT AND INSURANCE PREMIUMS PAID INCIDENT TO THE LEASE OF THE CRANES ARE NOT PROPER ELEMENTS OF COST TO INCLUDE IN AVERAGING THE HOURLY CRANE RATES INASMUCH AS THESE COSTS HAD TO BE PAID REGARDLESS OF ANY DELAY CAUSED BY THE GOVERNMENT. THE PROPER ELEMENT OF DAMAGES THEREFORE APPEARS TO BE ONLY THE ADDITIONAL RENTAL PAID BY THE CONTRACTOR RESULTING FROM THE DELAY BY THE GOVERNMENT. THE CONTRACTOR DID NOT ALLEGE NOR PRODUCE ANY EVIDENCE THAT THESE COSTS WERE INCREASED AS A RESULT OF THE DELAY. AT MOST, THE CONTRACTOR WOULD BE ENTITLED TO A PRO RATA ALLOWANCE FOR THE INSURANCE PREMIUM COMPUTED ON THE BASIS OF THE NUMBER OF DAYS DELAY CAUSED BY THE GOVERNMENT, VIS-A VIS THE TOTAL NUMBER OF DAYS THE CRANES WERE COVERED BY INSURANCE.

"THE CONTRACTOR REQUESTED THAT 110 HOURS MONTHLY BE USED TO COMPUTE THE HOURLY RATE FOR THE CRANES. THAT THIS WOULD BE ENTIRELY INEQUITABLE TO THE GOVERNMENT IS CLEARLY SHOWN BY CONSIDERING THAT THE TOTAL DELAYS CAUSED BY THE GOVERNMENT FOR THE 115 TON CRANE WAS 56-1/2 HOURS AND FOR THE 30 TON CRANE 24 HOURS. IN OTHER WORDS, UNDER THE CONTRACTOR'S THEORY FOR SLIGHTLY OVER 7 DAYS DELAY ON THE 115 TON CRANE, HE WOULD RECOUP APPROXIMATELY 56 PERCENT OF ONE MONTH'S RENT, WHILE BEING ABLE TO USE THE CRANE ON HIS OTHER WORK FOR THE REMAINDER OF THE WORK MONTH (19 WORK DAYS OR 73 PERCENT OF THE WORK MONTH) AT A COST TO HIM OF APPROXIMATELY 44 PERCENT OF ONE MONTH'S RENTAL. LIKEWISE, ON THE 30 TON CRANE HE WOULD RECOUP APPROXIMATELY 22 PERCENT OF ONE MONTH'S RENTAL FOR ONLY THREE DAYS DELAY, WHILE BEING ABLE TO USE THE CRANE THE REMAINDER OF THE MONTH (APPROXIMATELY 23 WORK DAYS OR 89 PERCENT OF THE WORK MONTH) FOR APPROXIMATELY 78 PERCENT OF ONE MONTH'S RENTAL. TO CARRY THE CONTRACTOR'S REQUEST TO ITS EXTREME, IF THE GOVERNMENT HAD DELAYED HIM FOR 14 DAYS (OR 112 HOURS), HE WOULD BE REIMBURSED THE FULL MONTH'S RENTAL AND HAVE FREE USE OF THE CRANES FOR THE REMAINDER OF THE MONTH. THE ORIGINAL REPORT OF THE CONTRACTING OFFICER COMPUTED THE DAMAGES BASED UPON THE HOURLY RENTAL COST TO THE CONTRACTOR BY DIVIDING THE MONTHLY RENTAL BY THE AVERAGE NUMBER OF WORK HOURS IN A MONTH. THE SAME RESULT WOULD BE REACHED BY DIVIDING THE MONTHLY RENTAL BY THE NUMBER OF WORK DAYS IN THE MONTH TO ARRIVE AT THE COST PER DAY. REIMBURSEMENT FOR THE ACTUAL NUMBER OF DAYS OF DELAY IS THEREFORE THE MOST EQUITABLE METHOD TO COMPUTE SUCH DAMAGES. "2.OVERTIME PREMIUM (CLAIM 1). THE CONTRACTOR HAS NOT GIVEN A PLAUSIBLE EXPLANATION TO SUPPORT THIS ITEM OF HIS CLAIM. AS INDICATED IN THE SCO'S INITIAL REPORT, THERE APPEARS TO BE NO JUSTIFIABLE REASON FOR THE CONTRACTOR TO HAVE RETAINED HIS WORK FORCE FOR MORE THAN 8 HOURS PER DAY DURING THE PERIOD INDICATED. "3. PAYROLL SERVICING COSTS (CLAIMS 1, 2 AND 3). THE SCO'S POSITION ON THE CLAIM FOR THESE COSTS REMAINS THE SAME. (THE SALES CONTRACTING OFFICER'S POSITION IS THAT THESE COSTS SHOULD BE DISALLOWED SINCE THEY ARE CONSTANT COSTS WHICH WOULD HAVE BEEN INCURRED REGARDLESS OF THE DELAY.) "4. USE OF 30 TON CRANE (CLAIM 3). SINCE THE CONTRACTOR REQUESTED THAT RAIL CARS BE SPOTTED ON 30 JUNE 1966, THE 30 TON CRANE WOULD HAVE BEEN USED ON 1 JULY AT THE RAIL SIDING IN ANY EVENT. (SEE EXHIBIT 20, PARAGRAPH 5, OF CONTRACTING OFFICER'S INITIAL REPORT.) THEREFORE, THE CONTRACTOR EXPERIENCED NO DAMAGE IN CONNECTION WITH THE 30 TON CRANE FOR THAT DAY. * * *"

THE ABOVE INDICATES THAT THERE ARE BASIC DISAGREEMENTS BETWEEN YOUR CONCERN AND THE SALES CONTRACTING OFFICER IN REGARD TO ALL THREE CLAIMS.

UNDER CLAIMS NO. 1 AND 2 THERE IS A DISAGREEMENT WHETHER 208 HOURS AS DETERMINED BY THE SALES CONTRACTING OFFICER MAY BE USED AS THE FACTOR FOR COMPUTING THE HOURLY RENTAL CHARGE FOR THE CRANES. THERE IS ALSO A DISAGREEMENT WITH RESPECT TO WHETHER INBOUND FREIGHT AND INSURANCE PREMIUMS SHOULD BE INCLUDED AS ACTUAL ADDITIONAL COSTS UNDER CLAIM NO. 1 AND WHETHER PAYROLL SERVICE COSTS AND OVERTIME PREMIUM COSTS SHOULD BE INCLUDED AS ALLOWABLE COSTS.

WE AGREE WITH THE POSITION OF THE CONTRACTING OFFICER THAT THE GOVERNMENT SHOULD BE LIABLE ONLY FOR THOSE ADDITIONAL COSTS WHICH WERE NECESSARILY INCURRED AS A RESULT OF THE DELAY IN MAKING RAILROAD CARS AVAILABLE. ACCORDINGLY, WE THINK IT APPROPRIATE TO ELIMINATE FROM CONSIDERATION THOSE ELEMENTS OF THE CLAIM WHICH DO NOT MEET THE FOREGOING STANDARD, NAMELY, OVERTIME PREMIUM, PAYROLL SERVICING COSTS AND INSURANCE AND SHIPPING COSTS ON THE HEAVY EQUIPMENT. WE ALSO CONCUR IN THE CONCLUSION OF THE CONTRACTING OFFICER AS TO THE PROPER HOURLY RATE TO APPLY TO THE DELAY TIME ON THE RENTED HEAVY EQUIPMENT. IN THIS CONNECTION IT SHOULD BE NOTED THAT IF YOUR HOURLY CHARGE IS TO BE BASED ON PRODUCTIVE USE TIME, THEN THE NUMBER OF HOURS CHARGED SHOULD BE BASED ON PRODUCTIVE USE TIME. IF THE FULL WORKING DAY IS TO BE USED AS THE MEASURE OF DELAY, THEN, LOGICALLY, THE HOURLY RATE SHOULD BE COMPUTED ON THAT STANDARD, AND THIS IS WHAT THE CONTRACTING OFFICER DID.

WITH REGARD TO CLAIM NO. 3, THERE IS A DISAGREEMENT WHETHER THE RENTAL COSTS FOR THE 30-TON CRANE SHOULD BE ALLOWED. IT SEEMS UNDISPUTED THAT THE TWO A-6 TANKS WERE PLACED ON THE GROUND ON JULY 1, 1966, BY THE 115- TON CRANE, AND THAT THE 30-TON CRANE COULD NOT LOAD THESE TANKS FROM THE GROUND TO THE RAILROAD CAR. THEREFORE, THE SALES CONTRACTING OFFICER SEEMS CORRECT IN HIS ASSERTION THAT THE 30-TON CRANE WAS NOT REQUIRED AFTER THE A-7 TANK HAD BEEN LOADED ON THE RAILROAD CAR FROM THE MOVING RIG ON JULY 1, 1966. THE RENTAL COSTS FOR THE 115-TON CRANE FOR JULY 2, 4 AND 5, HAVE BEEN ALLOWED AND ARE INCLUDED IN THE SETTLEMENT OFFER. PURSUANT TO OUR REVIEW OF CLAIM NO. 3 WE CANNOT SAY THAT THE SALES CONTRACTING OFFICER HAS TAKEN AN UNREASONABLE POSITION HERE.

IN THE CIRCUMSTANCES WE ACCEPT THE DETERMINATIONS MADE BY THE SALES CONTRACTING OFFICER REGARDING THE COMPUTATION OF YOUR ACTUAL COSTS UNDER CLAIMS NO. 1, 2 AND 3.

PLEASE ADVISE IF YOU WILL ACCEPT $2,996.63, IN FULL AND FINAL SETTLEMENT OF YOUR CLAIMS.