B-167566, DEC. 4, 1969

B-167566: Dec 4, 1969

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CLAIM IS DENIED. GOVERNMENT FULFILLED DUTY TO LESSEN DAMAGES AS ADEQUATE EFFORTS WERE MADE TO OBTAIN LOWEST REPROCUREMENT PRICE AND EVIDENCE DOES NOT JUSTIFY CONCLUSION THAT PRICE OF NEW CONTRACT WAS UNREASONABLE. THE ASBCA DECISION IS NOS. 11774 AND 11959. THE SUBSTANCE OF THE CLAIM IS THAT THE CONTRACT WAS IMPROPERLY TERMINATED FOR DEFAULT. THAT THE REPLACEMENT CONTRACT WAS NOT THE SAME AS THE CONTRACT WHICH WAS TERMINATED. THE CONTRACTOR IS ENTITLED TO THE CONTRACT PRICE OF $4. THE CONTRACT WAS AWARDED TO THE CLAIMANT ON JUNE 30. ON WHICH DELIVERY WAS REQUIRED TO BE MADE WITHIN 90 DAYS AFTER THE DATE OF THE CONTRACT (I.E. OF PERTINENCE TO THE CLAIM ARE THE FOLLOWING PROVISIONS OF THE CONTRACT: "2.0 - DESCRIPTION OR SPECIFICATIONS * * * * * * * CONSTRUCTION: 1.

B-167566, DEC. 4, 1969

DEFAULT--TERMINATION OF CONTRACT--PROPRIETY CONCERNING CLAIM FOR CONTRACT PRICE AND AMOUNT WITHHELD FOR EXCESS COST AFTER TERMINATION OF CONTRACT FOR DEFAULT AND ATTACK ON ADVERSE ARMED SERVICES BOARD OF CONTRACT APPEALS DECISION, ON BASIS THAT CONTRACTOR COMPLIED WITH SPECIFICATIONS AND GOVERNMENT WAIVED REVISED DELIVERY DATE AND FAILED TO MITIGATE DAMAGES INCIDENT TO READVERTISEMENT WHICH INCREASED COST, CLAIM IS DENIED, SINCE CONTRACTOR DID NOT PERFORM IN ACCORDANCE WITH CONTRACT PROVISIONS CONSTRUED TO GIVE REASONABLE MEANING TO ENTIRE CONTRACT AND NO BASIS EXISTS FOR CONCLUDING CONTRACTOR CONTINUED TO PERFORM AFTER DELIVERY DATE IN RELIANCE ON PURPORTED GOVERNMENT WAIVER; ALSO, GOVERNMENT FULFILLED DUTY TO LESSEN DAMAGES AS ADEQUATE EFFORTS WERE MADE TO OBTAIN LOWEST REPROCUREMENT PRICE AND EVIDENCE DOES NOT JUSTIFY CONCLUSION THAT PRICE OF NEW CONTRACT WAS UNREASONABLE.

TO FRIEDLANDER, MISLER AND FRIEDLANDER:

WE REFER TO YOUR LETTER OF JULY 23, 1969, AS SUPPLEMENTED BY YOUR LETTER OF SEPTEMBER 8, PRESENTING A CLAIM OF EMERSON-SACK-WARNER CORPORATION INVOLVING DEPARTMENT OF THE NAVY CONTRACT N174-14756, AND ATTACKING AN ADVERSE DECISION BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS (ASBCA) WHICH DENIED SUBSTANTIALLY THE SAME CLAIM. THE ASBCA DECISION IS NOS. 11774 AND 11959, DATED AUGUST 20, 1968. THE RECORD BEFORE THE BOARD HAS BEEN MADE AVAILABLE TO OUR OFFICE.

THE SUBSTANCE OF THE CLAIM IS THAT THE CONTRACT WAS IMPROPERLY TERMINATED FOR DEFAULT; THAT THE GOVERNMENT FAILED IN ITS DUTY TO MITIGATE THE DAMAGES INCIDENT TO READVERTISEMENT OF THE PROCUREMENT NEED; AND THAT THE REPLACEMENT CONTRACT WAS NOT THE SAME AS THE CONTRACT WHICH WAS TERMINATED. ACCORDINGLY, YOU ASSERT, THE CONTRACTOR IS ENTITLED TO THE CONTRACT PRICE OF $4,500 AND TO REFUND OF THE AMOUNT OF $3,997.99 WITHHELD BY THE GOVERNMENT FROM OTHER AMOUNTS DUE THE CLAIMANT IN LIQUIDATION OF EXCESS COSTS OF $3,481 AND INTEREST OF $516.99.

THE CONTRACT WAS AWARDED TO THE CLAIMANT ON JUNE 30, 1964, FOR THE FURNISHING OF THREE NITROGLYCERIN CATCH TANKS AT A UNIT PRICE OF $1,500, ON WHICH DELIVERY WAS REQUIRED TO BE MADE WITHIN 90 DAYS AFTER THE DATE OF THE CONTRACT (I.E., BY SEPTEMBER 28, 1964). AT THE DATE OF THE DEFAULT TERMINATION, JUNE 10, 1966, NO DELIVERIES HAD BEEN MADE UNDER THE CONTRACT.

OF PERTINENCE TO THE CLAIM ARE THE FOLLOWING PROVISIONS OF THE CONTRACT:

"2.0 - DESCRIPTION OR SPECIFICATIONS

* * * * * * * CONSTRUCTION: 1. SHELL AND BOTH END-HEADS SHALL BE OF ONE- PIECE BUTT WELDED CONSTRUCTION.

* * * * * * * 9. DEFECTS: ALL CRACKS, NONFUSION, SLAG AND POROSITY SHALL BE REMOVED BY GRINDING AND REWELDED.

* * * * * * * 11. TREATMENT OF BACKSIDE OF WELDING GROOVE: THE BACKSIDE OF THE WELDING GROOVE SHALL BE GROUND TO SOUND CLEAN METAL SUFFICIENTLY WIDE TO ALLOW FREE MANIPULATION OF THE ELECTRODE. ALL WELDED JOINTS OF THE TANK, AND FITTINGS, SHALL BE WELDED ON BOTH SIDES. ALL JOINTS REQUIRE 100 PERCENT PENETRATION AND FUSION. FILLET-WELD FUSION MUST EQUAL THE THICKNESS OF THE LIGHTER GAGE OF THE TWO PIECES OF METAL INVOLVED. BASE METAL UNDERCUTTING NOT TO EXCEED 5 PERCENT OF BASE METAL WELD THICKNESS. ALL WELDED JOINTS WHICH ARE IN CONTACT WITH THE CONTENTS OF THE TANK (INSIDE) SHALL BE GROUND TO NO. 4 NISH.'INSPECTION: 1. ALL WELDED JOINTS WHICH ARE IN CONTACT WITH CONTENTS OF THE TANK SHALL BE RADIOGRAPHED. FILMS MUST SHOW WELDS TO BE ABSOLUTELY FREE FROM SLAG INCLUSIONS, POROSITY OR PIN HOLES. VENDOR SHALL SUPPLY WITH EACH TANK A COMPLETE SET OF X- RAYS. X-RAY FILM SHALL BE PROPERLY IDENTIFIED FOR CONVENIENT LOCATION ON THE TANK. PREFERRED PROCEDURE FOR IDENTIFYING NEGATIVES IS TO MAKE LIGHT CENTER PUNCH DOT ON OUTSIDE OF TANK WITH IDENTIFYING NUMBERS TO CORRESPOND WITH THE NUMBERS ON THE FILM. 2. THE TANK SHALL BE SUBJECT TO FINAL INSPECTION AND ACCEPTANCE BY A REPRESENTATIVE OF THE NAVAL PROPELLANT PLANT. FINAL ACCEPTANCE TO BE BASED ON QUALITY OF WORKMANSHIP, QUALITY OF WELDING AS INDICATED BY X RAYS AND DETAILS AS SPECIFIED.'

* * * * * * * "5.0 - INSPECTION AND ACCEPTANCE (A) INSPECTION OF THE SUPPLIES OR SERVICES TO BE FURNISHED HEREUNDER SHALL BE MADE BY REPRESENTATIVES OF THE MATERIAL INSPECTION SERVICE, USN, AT THE CONTRACTOR'S OR SUBCONTRACTOR'S PLANT. FINAL INSPECTION AND ACCEPTANCE OF SUCH SUPPLIES OR SERVICES SHALL BE MADE BY PERSONNEL OF THE NAVAL PROPELLANT PLANT, INDIAN HEAD, MARYLAND.'

STANDARD FORM 32, GENERAL PROVISIONS (SUPPLY CONTRACT), WHICH WAS INCORPORATED IN THE CONTRACT BY REFERENCE, INCLUDED THE STANDARD INSPECTION CLAUSE WHEREBY THE GOVERNMENT HAD THE RIGHT TO REJECT DEFECTIVE SUPPLIES OR REQUIRE THEIR CORRECTION. THE STANDARD DEFAULT CLAUSE PROVIDED, AMONG OTHER THINGS, FOR TERMINATION FOR DEFAULT UPON FAILURE TO MAKE DELIVERY WITHIN THE TIME SPECIFIED IN THE CONTRACT OR ANY EXTENSION THEREOF, OR FAILURE TO CURE A DEFICIENCY IN PERFORMANCE WITHIN 10 DAYS AFTER RECEIPT OF WRITTEN CURE NOTICE, AND SPECIFICALLY STATED THAT IN THE EVENT OF TERMINATION FOR DEFAULT THE GOVERNMENT MIGHT PROCURE, UPON SUCH TERMS AND IN SUCH MANNER AS THE CONTRACTING OFFICER MIGHT DEEM APPROPRIATE, SUPPLIES OR SERVICES SIMILAR TO THOSE SO TERMINATED AND THE CONTRACTOR SHOULD BE LIABLE TO THE GOVERNMENT FOR ANY EXCESS COSTS FOR SUCH SIMILAR SUPPLIES OR SERVICES.

DURING PERFORMANCE THE CONTRACTOR ENCOUNTERED TECHNICAL DIFFICULTIES, WAS SUBJECTED TO AN EXTENDED STRIKE, AND SUFFERED A FIRE IN ITS PLANT. THE TECHNICAL DIFFICULTIES CONCERNED DEFECTS IN THE TANK WELDS SHOWING GAS, SLAG, TUNGSTEN INCLUSION, POROSITY AND INCOMPLETE FUSION AND PENETRATION AS EVIDENCED BY X-RAYS.

ON SEPTEMBER 10, 1965, A SHOW-CAUSE LETTER WAS ISSUED TO THE CONTRACTOR, PURSUANT TO THE TERMS OF THE DEFAULT CLAUSE, AFFORDING THE CONTRACTOR AN OPPORTUNITY EITHER TO ESTABLISH THAT THE DELAY IN DELIVERY WAS EXCUSABLE UNDER THE DEFAULT CLAUSE OR TO SHOW CAUSE WHY THE CONTRACT SHOULD NOT BE TERMINATED FOR DEFAULT AND TO REQUEST THE NAVY TO CONSENT TO A NEW FIRM DELIVERY DATE. THE CONTRACTOR RESPONDED TO THE SHOW CAUSE LETTER WITH A LETTER OF SEPTEMBER 22, WHICH LED TO A MEETING OF THE PARTIES ON OCTOBER 21, 1965. AT THE MEETING THE NAVY REPRESENTATIVES POINTED OUT TO THE CONTRACTOR METHODS FOR CORRECTING DEFECTS, AND THE CONTRACTOR, IN TURN, INDICATED THAT THE NECESSARY WORK COULD BE ACCOMPLISHED IN 90 DAYS. THE PARTIES THEREFORE AGREED ON A NEW DELIVERY DATE OF JANUARY 19, 1966, WHICH THE NAVY CONFIRMED BY LETTER OF OCTOBER 25, 1965, ADVISING THE CONTRACTOR THAT FAILURE TO MEET THE NEW DELIVERY DATE WOULD RESULT IN TERMINATION FOR DEFAULT, REPROCUREMENT FROM ANOTHER SOURCE, AND ASSESSMENT OF ANY EXCESS COSTS AGAINST THE CONTRACTOR.

IN A LETTER DATED JANUARY 12, 1966, OR ONLY SEVEN DAYS BEFORE THE EXTENDED DELIVERY DATE, THE CONTRACTOR INFORMED THE CONTRACTING OFFICER OF VARIOUS CIRCUMSTANCES WHICH HAD AFFECTED ITS PERFORMANCE, INCLUDING ILLNESS OF THE FIRM'S PRESIDENT, HOSPITALIZATION OF ONE OF THE TANK WORKERS, AND LOSS TO A COMPETITOR OF THE WELDER WHO HAD BEEN TRAINED SPECIFICALLY FOR WORK ON THE TANKS. IN ADDITION, THE CONTRACTOR STATED THAT THE TANKS WERE AT THAT TIME AT THE X-RAY LABORATORY; THAT THERE MIGHT BE SOME ADDITIONAL REWORKING; AND THAT DELIVERY MIGHT BE DELAYED ONE OR TWO WEEKS.

THE RECORD INDICATES THAT THE NEXT DEVELOPMENT WAS A TELEPHONE CONVERSATION OF APRIL 5, 1966, BETWEEN THE CONTRACT ADMINISTRATOR AND THE CONTRACTOR, AS EVIDENCED BY THE CONTRACTOR'S LETTER OF THE SAME DATE TO THE CONTRACTING OFFICER READING AS FOLLOWS:

"IN OUR TELEPHONE CONVERSATION WITH MR. LAIGN WE DISCUSSED THE FOLLOWING: "THE CATCH TANKS HAVE BEEN RE-WORKED ON THE QUESTIONED AREAS SEVERAL TIMES. YOU MAY ACCEPT THEM OR YOU MAY FIND ADDITIONAL QUESTIONABLE AREAS.'SINCE YOUR FACILITIES EXCEED ANYTHING AVAILABLE HERE AND YOU ARE THE FINAL AUTHORITY FOR ACCEPTANCE, WE RESPECTFULLY REQUEST THAT CONSIDERATION BE GIVEN TO THE ACCEPTANCE OF THE MATERIAL AND THAT WE WILL BEAR THE COST OF RE-WORKING IF IT IS REQUIRED.

"WE WOULD, SINCERELY APPRECIATE YOUR CONSIDERING THIS REQUEST.'

THE ASBCA COPY OF THE CONTRACTOR'S LETTER OF APRIL 5 CARRIES A HANDWRITTEN NOTATION DATED APRIL 11, 1966, SIGNED "DAVID" (THE FIRST NAME OF MR. LAIGN, THE CONTRACT ADMINISTRATOR, WITH WHOM THE CONTRACTOR HAD THE TELEPHONE CONVERSATION REFERENCED IN THE LETTER). THE NOTATION READS AS OLLOWS:

"HAVE ASKED MR. SILVERMAN FOR X-RAYS FOR TANKS ON 5 APRIL. ASKED AGAIN TODAY. THEY WILL SEND TO CONTRACTING OFFICER MORNING OF 4-12-66, AIRMAIL SPECIAL DELIVERY.'

BY LETTER DATED APRIL 13, 1966, THE CONTRACT ADMINISTRATOR ADVISED THE CONTRACTOR AS FOLLOWS:

"THIS LETTER ACKNOWLEDGES RECEIPT OF YOUR LETTER DATED 5 APRIL 1966 AND THE X-RAYS FORWARDED ON 11 APRIL 1966.

"BE ADVISED THAT APPROPRIATE ACTION IS BEING TAKEN AND YOU WILL BE NOTIFIED WITHIN TEN (10) S.'

THE RECORD FURTHER INDICATES THAT NAVY TECHNICAL PERSONNEL REVIEWED THE X -RAYS AND THE ACCOMPANYING LABORATORY REPORT DATED JANUARY 26, 1966, PERTAINING TO ONLY ONE OF THE TANKS, WHICH SHOWED THAT THE X-RAYS HAD BEEN MADE ON JANUARY 24. THE RESULTS OF THE REVIEW WERE MADE KNOWN TO THE CONTRACTING OFFICER BY AN INTERNAL NAVY MEMORANDUM DATED APRIL 21, 1966. THE MEMORANDUM STATED THAT THE TANKS WERE NOT IN ACCORDANCE WITH THE CONTRACT SPECIFICATIONS AND WERE NOT USABLE FOR THEIR INTENDED SERVICE; THAT THE QUALITY OF THE WORKMANSHIP, AS EVIDENCED BY THE X RAYS, WAS POOR; THAT THE TESTING LABORATORY REPORT HAD ACCEPTED ONLY THREE OF TWENTY-SIX FILMS OF THE PARTICULAR TANK COVERED BY THE LABORATORY REPORT; AND THAT THE REVIEW OF THE NAVY TECHNICAL EVALUATION TEAM WAS IN CLOSE AGREEMENT WITH THE LABORATORY REPORT.

UNDER DATE OF APRIL 29, 1966, THE CONTRACTING OFFICER ISSUED A SHOW CAUSE LETTER TO THE CONTRACTOR CITING THE CONTRACTOR'S DEFAULT BY REASON OF ITS FAILURE TO DELIVER BY JANUARY 19 AND, AS IN THE SHOW CAUSE LETTER OF SEPTEMBER 10, 1965, AFFORDING THE CONTRACTOR AN OPPORTUNITY EITHER TO ESTABLISH THAT THE DELAY IN DELIVERY WAS EXCUSABLE UNDER THE DEFAULT CLAUSE OR TO SHOW CAUSE WHY THE CONTRACT SHOULD NOT BE TERMINATED FOR DEFAULT AND TO REQUEST CONSENT OF THE GOVERNMENT TO A NEW FIRM DELIVERY DATE. THE LETTER STATED THAT A REPLY WAS REQUIRED WITHIN 10 DAYS OF ITS RECEIPT BY THE CONTRACTOR AND WARNED THAT FAILURE TO SO REPLY MIGHT RESULT IN IMMEDIATE TERMINATION OF THE CONTRACT FOR DEFAULT. THE LETTER ALSO MADE SEVERAL EXPRESS RESERVATIONS TO THE GOVERNMENT INCLUDING THE RIGHTS TO TERMINATE THE CONTRACT FOR DEFAULT, TO REPURCHASE THE ITEMS AND TO CHARGE THE EXCESS COSTS TO THE CONTRACTOR'S ACCOUNT.

THE CONTRACTOR'S REPLY TO THE SHOW CAUSE LETTER WAS MADE BY A LETTER DATED MAY 10, 1966, ADDRESSED TO THE CONTRACTING OFFICER, READING AS FOLLOWS: "IN REPLY TO YOUR OF 29 APRIL 66, WE SUBMITTED FOR CONSIDERATION ALL THE X-RAY'S FOR THE SUBJECT TANKS. WE RESPECTFULLY REQUEST CONSIDERATION OF OUR LETTER DATED APRIL 5, 1966.'WE SINCERELY TRUST THAT YOU WILL EXTEND YOUR EFFORTS FOR A FAVORABLE SOLUTION.'

THE NEXT DEVELOPMENT OF RECORD WAS A LETTER DATED MAY 26, 1966, IN WHICH THE CONTRACTING OFFICER ADVISED THE CONTRACTOR AS FOLLOWS:

"PLEASE REFERENCE YOUR LETTER OF 10 MAY 1966 AND OUR LETTER OF 29 APRIL 1966.

"CONSIDERATION HAS BEEN GIVEN TO YOUR LETTER DATED 5 APRIL 1966. THE X- RAY FILMS OF THE THREE CATCH TANKS HAVE BEEN REVIEWED. OUR FINDINGS ARE THAT NONE OF THE TANKS ARE IN ACCORDANCE WITH CONTRACT SPECIFICATIONS. THEREFORE, THEY ARE NOT USABLE FOR THEIR INTENDED SERVICE. OUR REVIEW REVEALED THAT ARNOLD GREENE LABORATORY ACCEPTED ONLY THREE OF THE TWENTY- SIX FILMS OF TANK -C- AND WE AGREE WITH THEIR FINDINGS.

"IT IS IMPOSSIBLE FOR THE NAVAL PROPELLANT PLANT TO ACCEPT THESE TANKS IN ACCORDANCE WITH YOUR LETTER OF 5 APRIL 1966.

"PLEASE ANSWER IMMEDIATELY OUR LETTER OF 29 APRIL 1966.'

IN A LETTER DATED JUNE 7, 1966, ADDRESSED TO THE CONTRACTING OFFICER, WHICH MADE REFERENCE TO THE LETTER OF MAY 26, THE CONTRACTOR STATED: "I ATTENDED THE BRIEFING FOR BUSINESSMEN AT RICHMOND, VIRGINIA ON JUNE 1ST, AND UPON COMPLETION OF THIS BRIEFING I HAD HOPED TO SEE YOU, BUT I TOOK ILL AND HAD TO RETURN TO BOSTON. WHEN I RETURNED I WAS INFORMED OF YOUR SUBJECT LETTER.'I DID HOPE THAT OUR LETTER DATED APRIL 5, 1966 WOULD BE ACCEPTED IN THE INTEREST OF CLEANING UP THIS CONTRACT. I SINCERELY TRUST THAT YOU WILL CONSIDER REVIEWING THE SAME.'IF YOU STILL FIND IT IMPOSSIBLE TO CONSIDER ACCEPTANCE, PLEASE SEE THAT THE X-RAY NEGATIVES ARE RETURNED SO THAT WE CAN PIN-POINT THE AREAS TO DETERMINE THE AMOUNT OF WORK INVOLVED.'

THE DATE ON WHICH THE JUNE 7 LETTER WAS RECEIVED BY THE PROCURING ACTIVITY IS NOT REFLECTED IN THE RECORD; HOWEVER, A HANDWRITTEN NOTATION ON THE COPY IN THE ASBCA FILE READS "SEE TERMINATION LETTER 6/8/66 RW.' ON JUNE 10, 1966, THE TERMINATION LETTER WAS ISSUED BY THE CONTRACTING OFFICER. THE X-RAYS WERE NOT RETURNED TO THE CONTRACTOR.

ON OCTOBER 10, 1966, A REPROCUREMENT CONTRACT FOR THE THREE TANKS WAS AWARDED AT A UNIT PRICE OF $2,687, TOTAL $8,061, AFTER ADVERTISING AND POSTING OF NOTICES IN PUBLIC PLACES. THE SPECIFICATIONS AND DRAWING INCORPORATED IN THE REPLACEMENT CONTRACT WERE THE SAME AS THE SPECIFICATIONS AND DRAWING IN THE ORIGINAL CONTRACT, AND NAVY REPRESENTATIVES TESTIFIED BEFORE ASBCA THAT REVIEW OF THE X-RAYS OF THE TANKS MANUFACTURED BY THE REPLACEMENT CONTRACTOR, AND DELIVERED ON MARCH 16, 1967, TO THE NAVY, SHOWED THAT THE WELDS WERE HOMOGENEOUS AS REQUIRED BY THE SPECIFICATIONS. (SEE PAGES 134, 135, 195, 225 AND 226 OF THE TRANSCRIPT OF THE ASBCA PROCEEDINGS.) IN ADDITION, ONE NAVY REPRESENTATIVE TESTIFIED THAT THE PRICES PAID BY THE NAVY FOR THE TANKS PRIOR TO THE PROCUREMENT WHICH WAS AWARDED TO THE DEFAULTING CONTRACTOR HAD RANGED FROM $2,500 TO $3,000 EACH. (SEE PAGE 230 OF THE TRANSCRIPT.) THE RECORD SHOWS THAT ON OCTOBER 10, 1966, THE DATE OF THE AWARD OF THE REPURCHASE CONTRACT, THE CONTRACTING OFFICER ADDRESSED A LETTER TO THE CONTRACTOR ADVISING OF THE AWARD AND REQUESTING REMITTANCE TO THE GOVERNMENT OF EXCESS COSTS IN THE AMOUNT OF $3,561, REPRESENTING THE DIFFERENCE BETWEEN THE REPROCUREMENT COST OF $8,061 AND THE PRICE OF $4,500 FOR WHICH THE CONTRACTOR HAD AGREED TO PROVIDE THE TANKS. SUBSEQUENTLY, THE BASIC DEBT WAS REDUCED BY $80 DUE TO ASSESSMENT OF LIQUIDATED DAMAGES AGAINST THE REPLACEMENT CONTRACTOR FOR DELAY IN DELIVERY WHICH WAS DETERMINED NOT TO BE EXCUSABLE UNDER THE CONTRACT. (SEE PAGE 133 OF THE TRANSCRIPT.) IN ITS APPEAL TO ASBCA THE DEFAULTING CONTRACTOR CONTENDED THAT THE SENTENCE IN THE SPECIFICATIONS RELATING TO INSPECTION READING,"ALL WELDED JOINTS WHICH ARE IN CONTACT WITH CONTENTS OF THE TANK SHALL BE RADIOGRAPHED," LIMITED THE REQUIREMENTS WITH RESPECT TO X-RAYS SHOWING FREEDOM OF WELDS FROM POROSITY, ETC., TO THE INNER SURFACE OF THE WELDS. UNDER THIS INTERPRETATION, THE CONTRACTOR URGED, THE X-RAYS SUBMITTED BY THE CONTRACTOR SHOWING NO POROSITY, ETC., ON THE INSIDE OF THE TANK WELDS INDICATED COMPLIANCE WITH THE SPECIFICATIONS.

THE BOARD NOTED THAT WHILE THE PARTIES WERE IN AGREEMENT THAT THE WELDS ON THE INNER SURFACES OF THE TANKS WERE SATISFACTORY, THERE WAS NO REAL DIFFERENCE OF OPINION WITH RESPECT TO THE EXISTENCE OF IMPERFECTIONS IN THE WELD JOINTS PROPER BELOW THE INSIDE SURFACES AND EXTENDING TO THE OUTER SURFACES OF THE TANKS, NUMEROUS FLAWS WITHIN THE JOINTS BEING REFLECTED IN THE X-RAYS. THE BOARD STATED, HOWEVER, THAT IT FOUND NOTHING IN THE INSPECTION CLAUSE WHICH WOULD RELIEVE THE CONTRACTOR FROM ITS RESPONSIBILITY THAT ALL WELDMENTS BE FREE OF DEFECTS. IN THIS REGARD, THE BOARD, CITING THE REQUIREMENT IN THE CLAUSE THAT ALL WELDED JOINTS BE RADIOGRAPHED, STATED THAT SUCH JOINTS PENETRATE THE ENTIRE THICKNESS OF THE METAL AND THEREFORE FILMS SHOWING WELDS ABSOLUTELY FREE OF DEFECTS MUST OF NECESSITY INCLUDE BOTH THE EXPOSED OUTSIDE SURFACES TOGETHER WITH THE UNEXPOSED DEPTHS WITHIN A PARTICULAR JOINT, THE EFFECT OF ANY OTHER FINDING BEING TO RENDER NUGATORY THE CONTRACTUAL REQUIREMENT FOR RADIOGRAPHS. FURTHER, THE BOARD STATED, ANY QUESTION THE CONTRACTOR MIGHT HAVE HAD IN THIS AREA IS DISPELLED BY THE REQUIREMENT IN PARAGRAPH 11 OF THE SPECIFICATION THAT ALL WELDED JOINTS BE WELDED ON BOTH SIDES WITH 100 PERCENT PENETRATION AND FUSION, AND NOTE WAS ALSO MADE BY THE BOARD OF THE ADDITIONAL REQUIREMENT IN PARAGRAPH 9 THAT ALL CRACKS, NONFUSION, SLAG AND POROSITY BE REMOVED.

IN LIGHT OF THE ABOVE, THE BOARD FOUND THE CONTRACTOR'S POSITION UNTENABLE AND RULED THAT THE TANKS WERE NOT FABRICATED IN ACCORDANCE WITH CONTRACT REQUIREMENTS AND WERE PROPERLY REJECTED BY THE GOVERNMENT. THIS CONNECTION, THE BOARD CITED THE WELL-ESTABLISHED RULE OF CONTRACT CONSTRUCTION THAT AN INTERPRETATION WHICH GIVES A REASONABLE MEANING TO ALL PARTS OF AN INSTRUMENT WILL BE GIVEN PREFERENCE OVER ONE WHICH LEAVES A PORTION OF IT USELESS, INOPERATIVE, VOID, MEANINGLESS OR SUPERFLUOUS (HOL-GAR MANUFACTURING CORPORATION V UNITED STATES, 351 F.2D 972, 979 (1965) (, AND THE BOARD OBSERVED THAT THE CONTRACTOR'S INTERPRETATION WOULD REQUIRE THE BOARD TO OVERLOOK PARAGRAPHS 9 AND 11 OF THE SPECIFICATIONS.

IN CHALLENGING THE BOARD'S CONCLUSION ON THIS ISSUE, YOU CONTEND THAT THE CONTRACT LANGUAGE WAS AMBIGUOUS AND THAT THE AMBIGUITY SHOULD HAVE BEEN CONSTRUED AGAINST THE NAVY AS THE AUTHOR OF THE CONTRACT. IN SUPPORT OF THIS PREMISE, YOU URGE THAT THERE ARE INSIDE WELDED JOINTS AS WELL AS OUTSIDE WELDED JOINTS AND THAT THE WORDS "WELDED JOINTS WHICH ARE IN CONTACT WITH CONTENTS OF THE TANK," APPEARING IN PARAGRAPH 11 OF THE SPECIFICATIONS AND IN THE INSPECTION PARAGRAPH, HAVE REFERENCE ONLY TO THE INSIDE WELDED JOINTS. ON THE BASIS, THEREFORE, THAT THE SPECIFICATIONS DID NOT CLEARLY INDICATE THAT BOTH THE INSIDE AND OUTSIDE WELDED JOINTS SHOULD MEET THE SAME STANDARDS AND THAT THE CONTRACTOR'S INTERPRETATION WAS REASONABLE, YOU ASSERT THAT THE AMBIGUITY SHOULD BE RESOLVED AGAINST THE GOVERNMENT AND THAT THE CONTRACTOR SHOULD BE CONSIDERED TO HAVE MET THE SPECIFICATIONS.

WE ARE UNABLE TO ACCEPT YOUR POSITION. EACH OF THE WELDED JOINTS INCLUDED BOTH INNER AND OUTER WELDS. FURTHER, EVEN IF THE FIRST TWO SENTENCES OF THE INSPECTION PROVISIONS MIGHT BE INTERPRETED AS REQUIRING THAT THE X-RAYS SHOW ONLY THE INNER SURFACE OF THE WELDED JOINTS TO BE FREE FROM THE DESIGNATED DEFECTS, PARAGRAPH 11 OF THE CONSTRUCTION SPECIFICATIONS MADE NO EXCEPTION TO THE REQUIREMENT THAT ALL WELDED JOINTS OF THE TANK AND FITTINGS SHOW 100 PERCENT PENETRATION AND FUSION. RADIOGRAPHS, OR X-RAYS, OF THE WELDED JOINTS IN CONTACT WITH THE CONTENTS OF THE TANK WERE THE ONLY MEANS OF INSPECTION PRESCRIBED FOR EVIDENCING COMPLIANCE WITH SUCH REQUIREMENT, BUT WE CANNOT CONSTRUE THIS PROVISION TO MEAN THAT ONLY THE INNER SURFACE OF THE WELD NEED BE FREE OF DEFECTS; THE PURPOSE OF X-RAY PHOTOGRAPHS IS TO DISCLOSE INTERNAL CONDITIONS BENEATH THE SURFACE, AND IT IS OUR UNDERSTANDING THAT THE RADIOGRAPHS IN THIS INSTANCE DID SHOW DEFECTS IN THE WELDED JOINTS. OF EQUAL IMPORTANCE IS THE REQUIREMENT IN PARAGRAPH 9 OF THE CONSTRUCTION SPECIFICATIONS, AGAIN WITH NO EXCEPTIONS, THAT ALL CRACKS, NONFUSION, SLAG AND POROSITY SHALL BE REMOVED BY GRINDING AND REWELDED. IN THE CIRCUMSTANCES, UNDER THE RULE OF CONTRACT CONSTRUCTION CITED BY ASBCA, WHICH STANDS FOR THE PRINCIPLE THAT THE INTENT AND MEANING OF A CONTRACT ARE NOT TO BE DETERMINED BY THE CONSIDERATION OF AN ISOLATED SECTION OR PROVISION THEREOF BY ITSELF, BUT FROM CONSIDERATION OF THE CONTRACT IN ITS ENTIRETY, WITH EACH PROVISION BEING CONSTRUED IN ITS RELATIONSHIP TO OTHER PROVISIONS AND IN THE LIGHT OF THE GENERAL PURPOSE INTENDED TO BE ACCOMPLISHED BY THE CONTRACTING PARTIES (SEE 17A C.J.S. 297), WE CONCUR WITH THE CONCLUSION OF ASBCA THAT THE CONTRACT, READ AS A WHOLE, LEAVES NO DOUBT THAT ALL OF THE WELDED JOINTS WERE TO BE FREE FROM DEFECTS THROUGHOUT THE DEPTH OR THICKNESS OF THE JOINT BETWEEN THE JOINED SURFACES. WE THEREFORE FIND NO AMBIGUITY IN THE CONTRACT PROVISIONS AND CONCUR WITH THE VIEW OF ASBCA THAT THE TANKS OFFERED BY THE CONTRACTOR, WHICH ADMITTEDLY INCLUDED DEFECTS IN THE INTERIOR OF THE WELDED JOINTS, ALTHOUGH NOT VISIBLE FROM THE INSIDE OF THE TANKS, DID NOT COMPLY WITH THE CONTRACT SPECIFICATIONS AND WERE PROPERLY REJECTED BY THE NAVY.

TURNING NOW TO THE EVENTS WHICH TRANSPIRED BETWEEN JANUARY 19, 1966, THE EXTENDED DELIVERY DATE, WHICH THE CONTRACTOR FAILED TO MEET, AND JUNE 10, 1966, THE DATE THE GOVERNMENT TERMINATED THE CONTRACT FOR DEFAULT, YOU CLAIM THAT THE GOVERNMENT, BY ITS CONDUCT, WAIVED THE JANUARY 19 DELIVERY DATE AND WAS THEREFORE REQUIRED, UNDER JUDICIAL PRECEDENTS, TO ESTABLISH A NEW REASONABLE DELIVERY DATE AND TO ADVISE THE CONTRACTOR THEREOF IN ORDER TO REVIVE THE GOVERNMENT'S RIGHT TO TERMINATE FOR DEFAULT.

THE BOARD FOUND THAT THERE WAS NO ENTITLEMENT ON THE PART OF THE CONTRACTOR TO ANOTHER EXTENSION OF THE DELIVERY SCHEDULE AFTER JANUARY 19, 1966, ABSENT ANY SHOWING THAT PERFORMANCE WAS PREVENTED BY EVENTS BEYOND ITS CONTROL AND WITHOUT ITS FAULT AND NEGLIGENCE. UNDER THE CIRCUMSTANCES SHOWN, THE BOARD HELD, THE CONTRACTING OFFICER HAD A CLEAR RIGHT TO TERMINATE THE CONTRACT AFTER THE CONTRACTOR FAILED TO MEET THE REVISED DELIVERY SCHEDULE, THE CONTRACTING OFFICER'S FORBEARANCE DID NOT CONSTITUTE A WAIVER OF THE REVISED DELIVERY DATE, AND THE GOVERNMENT'S RIGHT TO TERMINATE FOR DEFAULT WAS PROPERLY EXERCISED. THE BOARD ALSO STATED THAT NOTHING WAS SAID OR DONE BY THE CONTRACTING OFFICER OR HIS REPRESENTATIVES DURING THE PERIOD BETWEEN JANUARY 19 AND JUNE 10, 1966, WHICH WOULD WARRANT THE CONCLUSION THAT THE GOVERNMENT WAS DOING ANYTHING MORE THAN EXERCISING REASONABLE FORBEARANCE IN ACCORDANCE WITH ITS RIGHT TO DO SO AS THE NONDEFAULTING PARTY. ACCORDINGLY, THE BOARD CONCLUDED THAT THE DEFAULT TERMINATION WAS VALID.

CONTRARY TO THE BOARD'S STATEMENTS, YOU CHARGE THAT THE GOVERNMENT CONTINUED TO DO BUSINESS WITH THE CONTRACTOR AFTER JANUARY 19, 1966. THIS REGARD, YOU STATE THAT THE NAVY ACCEPTED FROM THE CONTRACTOR SETS OF X-RAYS OF THE TANKS ON JANUARY 24, APRIL 11 AND MAY 10, 1966, AND THAT THE NAVY EXAMINED AND EVALUATED THESE X-RAYS. FURTHER, YOU STATE THAT BY GIVING THE CONTRACTOR AN OPPORTUNITY IN THE SHOW CAUSE LETTER OF APRIL 29 TO REQUEST A NEW DELIVERY DATE AND BY REQUESTING AS LATE AS MAY 26 A REPLY TO THE LETTER OF APRIL 29, THE GOVERNMENT INDICATED THAT IT WAS NO LONGER INSISTING ON THE JANUARY 19 DELIVERY DATE. ACCORDINGLY, YOU CONTEND, THE NAVY WAIVED THE JANUARY 19 DELIVERY DATE, AND THE EXERCISE OF RESTRAINT DOES NOT EXEMPT OR CONFER UPON THE NAVY ANY SPECIAL DISPENSATION FROM ADHERING TO THE MANDATES OF THE COURTS. PROCEEDING ONE STEP FURTHER, YOU ASSERT THAT WHEN THE CONTRACTOR FAILED TO REQUEST A NEW DELIVERY DATE, IT WAS INCUMBENT UPON THE NAVY TO UNILATERALLY FIX A FINAL, FIRM DELIVERY DATE AND TO NOTIFY THE CONTRACTOR THAT FAILURE TO DELIVER BY SUCH DATE WOULD RESULT IN A DEFAULT TERMINATION. THEREFORE, YOU CLAIM, THE JUNE 10 TERMINATION NOTICE WAS OF NO FORCE AND EFFECT.

AS TO THE SUBMISSION OF X-RAYS TO THE NAVY IN 1966, THE TRANSCRIPT OF THE ASBCA PROCEEDINGS DOES NOT EVIDENCE ANY DISPUTE IN THIS MATTER BETWEEN THE PARTIES. NAVY WITNESSES GAVE TESTIMONY TO THE EFFECT THAT SUBSEQUENT TO THE REJECTION OF THE TANKS BY THE GOVERNMENT ON THE BASIS OF VARIOUS X- RAYS WHICH HAD BEEN SUBMITTED BY THE CONTRACTOR IN 1965, THE ONLY X-RAYS WHICH THE GOVERNMENT RECEIVED WERE THOSE WHICH WERE TRANSMITTED TO THE PROCURING ACTIVITY FOLLOWING THE TELEPHONIC REQUEST OF THE CONTRACT ADMINISTRATOR ON APRIL 11, 1966 (SEE PAGES 130, 191, 201, 204, 211 AND 221 OF THE TRANSCRIPT.). THE CONTRACTOR TOOK NO EXCEPTION TO SUCH TESTIMONY, NOR DID IT SEEK TO ESTABLISH THAY ANY OTHER X-RAYS HAD BEEN FURNISHED TO THE NAVY IN 1966. IN THE CIRCUMSTANCES, WE MUST CONCLUDE THAT THE RECORD DOES NOT SUPPORT YOUR STATEMENT THAT X-RAYS WERE ALSO TRANSMITTED BY THE CONTRACTOR TO THE GOVERNMENT ON JANUARY 24 AND MAY 10, 1966.

WITH RESPECT TO THE SIGNIFICANCE OF THE TENDER BY THE GOVERNMENT IN THE SHOW CAUSE LETTER OF APRIL 29, 1966, OF AN OPPORTUNITY TO THE CONTRACTOR TO REQUEST A NEW FIRM DELIVERY DATE, THE LANGUAGE IN QUESTION, WHICH ALSO APPEARED IN THE EARLIER SHOW CAUSE LETTER OF SEPTEMBER 10, 1965, WAS AS FOLLOWS:

"YOU ARE HEREBY AFFORDED OPPORTUNITY EITHER TO ESTABLISH THE FACT THAT THE DELAY IN DELIVERY IS EXCUSABLE WITHIN THE MEANING OF THE DEFAULT CLAUSE OR TO SHOW CAUSE, IN WRITING, AS TO WHY THE CONTRACT SHOULD NOT BE TERMINATED FOR DEFAULT AND TO REQUEST THIS OFFICE TO CONSENT TO A NEW FIRM DELIVERY DATE. YOUR FAILURE TO REPLY AS REQUIRED MAY RESULT IN IMMEDIATE TERMINATION OF THIS CONTRACT FOR DEFAULT.'

CLEARLY, THE SUGGESTED WILLINGNESS OF THE GOVERNMENT TO CONSIDER A NEW DELIVERY DATE WAS CONTINGENT UPON ESTABLISHMENT BY THE CONTRACTOR TO THE SATISFACTION OF THE GOVERNMENT THAT EITHER THE DELAY IN DELIVERY WAS EXCUSABLE OR THAT THERE WAS SOME OTHER REASON WHY A DEFAULT TERMINATION SHOULD NOT BE INVOKED BY THE GOVERNMENT. AS THE BOARD POINTED OUT ON PAGE 5 OF ITS DECISION, THE CONTRACTOR OFFERED NO EVIDENCE OF ENTITLEMENT TO ANOTHER EXTENSION OF THE DELIVERY SCHEDULE, AND THE RECORD DOES NOT SHOW THAT ANY FURTHER WORK WAS PERFORMED AFTER RECEIPT OF THE SHOW CAUSE LETTER OR THAT THERE WAS ANY STATEMENT INDICATING THAT MORE WORK WAS CONTEMPLATED PRIOR TO THE CONTRACTOR'S LETTER OF JUNE 7. FURTHER, AS IN THE 1965 SHOW CAUSE LETTER, THE GOVERNMENT HAD SPECIFICALLY RESERVED ITS RIGHT TO TERMINATE FOR DEFAULT. IN THE CIRCUMSTANCES, WE ARE UNABLE TO CONCUR WITH YOUR VIEW THAT THE APRIL 29 LETTER WAS NOT CONSISTENT WITH THE SUBSEQUENT DEFAULT TERMINATION BY THE GOVERNMENT.

AS TO YOUR ASSERTION THAT WHEN THE CONTRACTOR FAILED TO REQUEST A FURTHER EXTENSION OF THE DELIVERY SCHEDULE THE GOVERNMENT WAS OBLIGATED TO UNILATERALLY ESTABLISH A FINAL FIRM DELIVERY DATE AND TO NOTIFY THE CONTRACTOR THAT FAILURE TO DELIVER BY SUCH DATE WOULD RESULT IN A DEFAULT TERMINATION, IT IS OUR VIEW, FOR THE REASONS STATED BELOW, THAT THE RECORD SUPPORTS THE DECISION OF THE BOARD THAT THE GOVERNMENT'S ACTIONS IN THE CIRCUMSTANCES OF THIS CASE SHOWED ONLY REASONABLE FORBEARANCE AND DID NOT ESTABLISH A WAIVER OF THE EXTENDED DELIVERY DATE.

THE NECESSARY ELEMENTS OF AN ELECTION BY THE NONDEFAULTING PARTY TO WAIVE DEFAULT IN DELIVERY UNDER A CONTRACT ARE (1) FAILURE TO TERMINATE WITHIN A REASONABLE TIME AFTER THE DEFAULT UNDER CIRCUMSTANCES INDICATING FORBEARANCE, AND (2) RELIANCE BY THE CONTRACTOR ON THE FAILURE TO TERMINATE AND CONTINUED PERFORMANCE BY HIM UNDER THE CONTRACT, WITH THE GOVERNMENT'S KNOWLEDGE AND IMPLIED OR EXPRESS CONSENT. WHAT IS A REASONABLE TIME FOR THE GOVERNMENT TO TERMINATE AFTER DEFAULT DEPENDS ON THE CIRCUMSTANCES OF EACH CASE. THE PERIOD FOR TERMINATION AFTER DEFAULT WILL NATURALLY BE GREATER WHERE THE CONTRACTOR ABANDONS PERFORMANCE OR WHERE HIS SITUATION IS SUCH AS TO RENDER PERFORMANCE IMPOSSIBLE OR UNLIKELY, THAN WHERE HE CONTINUES PERFORMANCE IN RELIANCE ON THE LACK OF TERMINATION AND PROCEEDS TO INCUR OBLIGATIONS IN EFFORTS TO PERFORM. DEVITO V UNITED STATES, CT. CL. NO. 432-65, DECIDED JULY 16, 1969, AND CASES THEREIN CITED.

OTHER THAN THE X-RAYS WHICH THE CONTRACTOR TRANSMITTED TO THE NAVY IN APRIL 1966, AND WHICH WERE APPARENTLY TAKEN ON JANUARY 24, 1966, THE RECORD DOES NOT REFLECT THE INCURRENCE OF ANY EXPENSE BY THE CONTRACTOR IN PURSUIT OF PERFORMANCE OF THE CONTRACT BETWEEN JANUARY 19 AND APRIL 5, 1966. CONVERSELY, THE CONTRACTOR'S LETTER OF APRIL 5 REQUESTING THE GOVERNMENT TO CONSIDER COMPLETING THE CONTRACT WITH GOVERNMENT FACILITIES INDICATES THAT THE CONTRACTOR'S PERFORMANCE WAS ALREADY AT A STANDSTILL, AND THE CONTRACTOR'S LETTER OF JUNE 7, 1966, REQUESTING THE RETURN BY THE NAVY OF THE X-RAYS SO THAT THE CONTRACTOR COULD DETERMINE THE AMOUNT OF WORK STILL REQUIRED UNDER THE CONTRACT, DID NOT CLEARLY COMMIT HIM TO FURTHER PERFORMANCE OR FURNISH AN ADEQUATE BASIS FOR CONCLUDING THAT IT COULD MEET THE SPECIFICATIONS. IN SUCH CIRCUMSTANCES, IT IS OUR VIEW THAT THE CONTRACTOR HAS NOT ESTABLISHED THAT IT CONTINUED TO PERFORM THE CONTRACT AFTER JANUARY 19, 1966, IN RELIANCE ON THE GOVERNMENT'S FAILURE TO TERMINATE AND WITH THE GOVERNMENT'S KNOWLEDGE AND IMPLIED OR EXPRESS CONSENT. FURTHER, WE ARE NOT AWARE OF ANY JUDICIAL OR LEGAL PRECEDENT TO SUPPORT THE PROPOSITION THAT A DEFAULTING CONTRACTOR, SIMPLY BY CARRYING ON CORRESPONDENCE WITH THE GOVERNMENT WHILE AT THE SAME TIME FAILING TO RESPOND TO A SHOW CAUSE LETTER ISSUED IN ACCORDANCE WITH THE TERMS OF THE DEFAULT CLAUSE, CAN DEPRIVE THE GOVERNMENT OF ITS RIGHT TO INVOKE A DEFAULT TERMINATION. ACCORDINGLY, WE FIND NO LEGAL BASIS FOR DISAGREEMENT WITH THE CONCLUSION OF THE BOARD THAT THE TERMINATION FOR DEFAULT WAS VALID.

AS TO THE REPROCUREMENT, THE COURT OF CLAIMS HAS HELD THAT THE GOVERNMENT, AFTER TERMINATING A CONTRACT FOR DEFAULT, MAY REPROCURE THE ITEMS ELSEWHERE ON SUCH TERMS AND IN SUCH MANNER AS THE CONTRACTING OFFICER DEEMS APPROPRIATE AND NEED NOT RESORT TO COMPETITIVE BIDDING PROCEDURES, AND THE DEFAULTING CONTRACTOR MAY BE CHARGED FOR THE EXCESS COST OF SUCH PROCUREMENT UNLESS THE REPROCUREMENT WAS CARRIED OUT IMPROPERLY AND UNREASONABLY. H-AND-H MANUFACTURING CO., INC. V UNITED STATES, 168 CT. CL. 873 (1964). WHILE THE SAME COURT HAS UPHELD THE SOLICITATION OF ONLY THE ORIGINAL COMPETING BIDDERS ON THE REPROCUREMENT AS BEING NEITHER UNREASONABLE NOR ILLEGAL (AMERICAN MARINE UPHOLSTERY COMPANY V UNITED STATES, 345 F.2D 577 (1965), AND ZODA V UNITED STATES, 180 F.SUPP. 419 (1960) (, WE FIND NOTHING IN THE COURT'S DECISIONS OR IN THE PROCUREMENT STATUTES AND REGULATIONS WHICH STANDS FOR THE PROPOSITION THAT RESOLICITATION OF THE ORIGINAL BIDDERS IS REQUIRED UPON REPROCUREMENT AFTER A DEFAULT TERMINATION.

IN THIS CASE, AS THE BOARD NOTED ON PAGE 6 OF ITS DECISION, THE REPROCUREMENT WAS MADE AFTER SOLICITATION BY THE NAVY OF SEVERAL DEALERS AND THE POSTING OF NOTICES IN PUBLIC PLACES, AND EVEN THOUGH MORE THAN TWO YEARS HAD ELAPSED SINCE THE ORIGINAL CONTRACT HAD BEEN AWARDED, THE REPROCUREMENT PRICE, WHILE HIGHER THAN THE PRICE OF THE DEFAULTING CONTRACTOR, WAS CONSISTENT WITH PRICES WHICH THE NAVY HAD PREVIOUSLY PAID FOR IDENTICAL TANKS OVER A TEN-YEAR PERIOD. FURTHER, THE BOARD NOTED THAT THE CONTRACTOR DID NOT CONTROVERT THE TESTIMONY OF NAVY WITNESSES THAT THE CONTRACTOR'S PRICE WAS UNUSUALLY LOW. IN THE ABSENCE OF SOME EVIDENCE THAT THE NAVY DID NOT MAKE REASONABLE EFFORTS TO OBTAIN THE BEST PRICE AVAILABLE WE CANNOT DISAGREE WITH THE BOARD'S CONCLUSION, AND WE DO NOT FEEL THAT THE FAILURE TO SOLICIT A BIDDER WHO HAD OFFERED A LOWER PRICE TWO YEARS EARLIER IS SUFFICIENT TO ESTABLISH A LACK OF REASONABLE DILIGENCE.

AS TO YOUR ARGUMENT THAT THE REPLACEMENT CONTRACT PRICE UNDOUBTEDLY INCLUDED A COST ELEMENT RELATED TO THE POSSIBLE REJECTION OF THE TANKS AFTER DELIVERY TO THE GOVERNMENT, REQUIRING RETURN OF THE TANKS TO THE CONTRACTOR, AFTER INSPECTION AT DESTINATION RATHER THAN AT ORIGIN AS PROVIDED IN THE ORIGINAL CONTRACT, THE BOARD REJECTED THIS CONTENTION WITH THE STATEMENT THAT THE BOARD WAS NOT CONVINCED THAT THE RECORD PROVIDED A BASIS FOR ASSIGNING ANY PARTICULAR DOLLAR FIGURE TO SUCH FACTOR. WHILE YOU CITE THE TESTIMONY OF ONE NAVY WITNESS TO THE EFFECT THAT THE COST OF A ROUND TRIP SHIPMENT OF THE TANKS BETWEEN THE PLANT OF THE REPLACEMENT CONTRACTOR AND THE PROCURING ACTIVITY WOULD BE $135 IN ROUND FIGURES, WE BELIEVE THERE IS SUBSTANTIAL EVIDENCE IN THE RECORD TO JUSTIFY THE CONCLUSION THAT THE AMOUNT WHICH MIGHT HAVE BEEN INCLUDED FOR THIS CONTINGENCY BY A BIDDER IS ENTIRELY SPECULATIVE.

IN CONSTRUING LANGUAGE SUCH AS APPEARS IN PARAGRAPH (B) OF THE DEFAULT CLAUSE IN STANDARD FORM 32, WHEREBY THE CONTRACTOR AGREED THAT IN THE EVENT OF TERMINATION FOR DEFAULT THE GOVERNMENT COULD PROCURE THE ITEMS FROM ANOTHER SOURCE "UPON SUCH TERMS AND IN SUCH MANNER AS THE CONTRACTING OFFICER MAY DEEM APPROPRIATE," THE COURTS HAVE HELD THAT SUCH AGREEMENT NOT ONLY CONTEMPLATES SOME VARIATION FROM THE ORIGINAL CONTRACT BUT VESTS A BROAD DISCRETION IN THE CONTRACTING OFFICER. IN UNITED STATES V WARSAW ELEVATOR CO., ET AL., 213 F.2D 517 (1954), THE COURT SAID, AT PAGE 519:

"IN THE ORDINARY COURSE OF RELETTING A CONTRACT IT IS HARDLY STRANGE THAT SUCH DETAILS AS THE F.O.B. SHIPPING POINT AND THE SCHEDULE OF DELIVERIES WILL BE ALTERED. IF THERE IS INCREASED COST FROM SUCH NATURAL, IF NOT UNAVOIDABLE, VARIANCES, THAT IS SURELY WITHIN THE REASONABLE EXPECTATION OF THE CONTRACTING PARTIES.'

IN CONSOLIDATED AIRBORNE SYSTEMS, INC. V UNITED STATES, 348 F.2D 941, 948 (1965), THE COURT HELD THAT THE BURDEN WAS ON THE CONTRACTOR TO SHOW THAT THE REPROCUREMENT COST WAS UNJUSTIFIABLY INCREASED AND THE AMOUNT OF THE INCREASE. IN AMERICAN SURETY COMPANY OF NEW YORK V UNITED STATES, 317 F.2D 652, 657 (1963), THE COURT HELD THAT EVEN THOUGH THE SECOND CONTRACT CONTAINS SOME VARIATIONS FROM THE FIRST, THE STANDARD OF COST DIFFERENTIAL (I.E., THE SUM BY WHICH THE REASONABLE COST OF HAVING THE WORK DONE BY ANOTHER CONTRACTOR EXCEEDS THE DEFAULTING CONTRACTOR'S PRICE) REMAINS APPLICABLE IF THE VARIATIONS ARE IMMATERIAL AND DO NOT AFFECT THE CONTRACT PRICE.

ON THE RECORD BEFORE US, WE ARE UNABLE TO FIND THAT THE CONTRACTOR HAS ESTABLISHED ENTITLEMENT TO A REDUCTION OF THE EXCESS COSTS IN ANY AMOUNT ON THE BASIS CLAIMED. ACCORDINGLY, WE CONCUR WITH THE BOARD'S CONCLUSION ON THIS ISSUE.

IN LIGHT OF THE FOREGOING, WE SEE NO LEGAL BASIS TO QUESTION THE BOARD'S DECISION DENYING THE CONTRACTOR'S CLAIM, AND THEREFORE FOR THE SAME REASONS WE ALSO DENY IT. ..END :