B-171979, JUL 14, 1971

B-171979, JUL 14, 1971

CONTRACTS - DEFICIENT PERFORMANCE - SETTLEMENT DECISION CONCERNING THE AMOUNT DUE CORPORATE DIESEL, INCORPORATED FOR REPAIRS TO 60 FUEL INJECTOR PUMPS AND FOUR GOVERNORS USED IN THE ENGINE OF THE U.S.S. CUTLASS WITH A CONTRACT PRICE OF $3,500, WHICH WHEN RETURNED AND TESTED WERE SHOWED TO PRODUCE EXCESSIVE NOISE AND SMOKE DUE TO IMPROPER PUMP CALEBRATION. CORRECTIONS WERE MADE BY DIESEL INJECTOR SALES & SERVICE, INC. BECAUSE OF OPERATIONAL COMMITMENTS ON AN URGENT BASIS AT A COST OF $2,302.80. IN THESE CIRCUMSTANCES FULL PAYMENT IS NOT JUSTIFIED AND SETTLEMENT AT $1,197.20 IS REASONABLE DESPITE THE ARGUMENT OF CONTRACTOR THAT PERIOD ALLOWED - FROM 17 FEBRUARY 1970 TO 25 FEBRUARY 1970 - FOR CORRECTIVE ACTION WAS NOT REASONABLE.

TO LIEUTENANT BANO:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 7, 1971, WITH ENCLOSURES, REQUESTING A DECISION AS TO THE AMOUNT DUE CORPORATE DIESEL, INCORPORATED, PORTSMOUTH, VIRGINIA, UNDER NAVY CONTRACT NO. N00189-70-C 0067, FOR THE REPAIR OF 60 FUEL INJECTOR PUMPS AND FOUR GOVERNORS USED IN ENGINES OF THE USS CUTLASS. YOUR LETTER AND ITS ENCLOSURES WERE FORWARDED TO OUR OFFICE BY LETTER DATED FEBRUARY 19, 1971, FROM THE CHIEF, ACCOUNTING & FINANCE DIVISION, OFFICE OF THE COMPTROLLER, DEFENSE SUPPLY AGENCY (DSA). SUBSEQUENT REPORT DATED JUNE 15, 1971, WAS RECEIVED FROM THE DSA ASSISTANT COUNSEL, MR. GEORGE W. SHELLHORSE.

THE PUMPS AND GOVERNORS WERE RETURNED TO THE USS CUTLASS ON SEPTEMBER 26, 1969, WITHOUT COMPLIANCE WITH A CONTRACTUAL REQUIREMENT FOR INSPECTION AND ACCEPTANCE AT THE CONTRACTOR'S PLANT. IT APPEARS THE CONTRACTOR HAD ATTEMPTED TO OBTAIN THE REQUIRED INSPECTION BUT WAS UNSUCCESSFUL, AND THEREFORE MADE DELIVERY WITHOUT INSPECTION. THE EQUIPMENT WAS INSTALLED AND THE PARTIES NEGOTIATED A CONTRACT MODIFICATION, CHANGING THE PLACE FOR INSPECTION AND ACCEPTANCE FROM SOURCE TO DESTINATION AND REDUCING THE CONTRACT PRICE BY $100, FROM $3,600 TO $3,500. THE EQUIPMENT WAS FINALLY TESTED ON JANUARY 11, 1970, ABOARD THE USS CUTLASS.

WHEN THE ENGINES OF THE SHIP WERE TEST RUN, IT WAS FOUND THAT THERE WAS EXCESSIVE CLATTER AND NOISE FROM EACH CYLINDER AND THE ENGINES SMOKED EXCESSIVELY. IT WAS DETERMINED THAT THE ENGINE MALFUNCTION WAS DUE TO IMPROPER PUMP CALIBRATION. BY LETTER DATED FEBRUARY 17, 1970, THE CONTRACTOR WAS ADVISED WITH RESPECT TO THE TEST RESULTS, AND REQUESTED TO TAKE CORRECTIVE ACTION. A REPLY WAS REQUESTED BY FEBRUARY 25, 1970, BUT THE CONTRACTOR'S REPLY WAS BY LETTER DATED FEBRUARY 27, 1970; IN THE MEANWHILE AN ORDER HAD BEEN ISSUED ON FEBRUARY 23, 1970, TO DIESEL INJECTOR SALES AND SERVICE, INCORPORATED, NORFOLK, VIRGINIA, FOR RECALIBRATION OF THE PUMPS. THE COST OF RECALIBRATION AND REPLACEMENT OF PLUNGERS IN 10 OF THE 60 PUMPS WAS $2,302.80. THE CONTRACTING OFFICER INDICATED THAT THE PUMPS WERE REINSTALLED IN THE SHIP'S MAIN ENGINES AND HAVE BEEN GIVING GOOD SERVICE. THE GOVERNORS REPAIRED BY CORPORATE DIESEL, INCORPORATED, REQUIRED READJUSTMENT. HOWEVER, IT IS REPORTED THAT THE GOVERNORS WERE ADJUSTED BY THE SHIP'S FORCE AND TENDER PERSONNEL SO THAT THEY WOULD ADEQUATELY CONTROL ENGINE SPEED.

A RECOMMENDATION WAS MADE THAT THE ADMINISTRATIVE CONTRACTING OFFICER NEGOTIATE A REDUCTION IN THE CONTRACT PRICE FROM $3,500 TO $1,197.20, SO THAT THE COST OF RECALIBRATING THE PUMPS AND REPLACEMENT OF 10 PLUNGERS WOULD BE RECOVERED BY THE GOVERNMENT. AN OFFER TO SETTLE THE CASE ON THAT BASIS WAS MADE BY LETTER DATED JULY 8, 1970. THE OFFER WAS REJECTED BY LETTER DATED JULY 31, 1970, WHEREIN THE CONTRACTOR CONTENDED THAT THE GOVERNMENT WAS NOT JUSTIFIED IN SENDING THE PUMPS TO ANOTHER REPAIR FACILITY WHILE UNDER CORPORATE DIESEL'S SERVICE WARRANTY. WITH RESPECT TO THAT CONTENTION, THE CONTRACTING OFFICER REPORTED THAT, DUE TO OPERATIONAL COMMITMENTS OF THE USS CUTLASS, THE GOVERNMENT HAD THE DEFICIENCIES CORRECTED ON AN URGENT BASIS BY SEPARATE CONTRACT. HE ALSO REFERRED TO THE FACT THAT THE CONTRACTOR HAD NOT RESPONDED IN A TIMELY MANNER TO THE GOVERNMENT'S LETTER OF FEBRUARY 17, 1970, REQUESTING THAT CORRECTIVE ACTION BE TAKEN. THE RECORD OTHERWISE INDICATES THAT THE MATTER WAS DISCUSSED IN ONE OR MORE TELEPHONE CONVERSATIONS BETWEEN THE ENGINEERING OFFICER OF THE SHIP AND THE PRESIDENT OF CORPORATE DIESEL, INCORPORATED, BEFORE FEBRUARY 25, 1970, AND THAT THERE EXISTED A QUESTION WHETHER THE CONTRACTOR HAD, COULD OBTAIN, OR WOULD USE A .625 CAM TO PERFORM THE RECALIBRATION WORK.

IN VIEW OF THE DETERMINATION OF THE ENGINEERING OFFICER OF THE USS CUTLASS THAT THE PUMPS WERE NOT CALIBRATED BY THE CONTRACTOR IN ACCORDANCE WITH THE MANUFACTURER'S LATEST TEST SPECIFICATIONS, AND THAT THE CONTRACTOR DID NOT TAKE TIMELY CORRECTIVE ACTION, WE MUST CONCLUDE THAT THE CONTRACTOR IS NOT ENTITLED TO FULL PAYMENT OF THE AMENDED CONTRACT PRICE OF $3,500. ALTHOUGH IT MAY BE ARGUED THAT THE GOVERNMENT DID NOT AFFORD THE CONTRACTOR A REASONABLE OPPORTUNITY TO MAKE THE NECESSARY REPAIRS, ON THE BASIS OF THE PRESENT RECORD WE CANNOT REACH THIS CONCLUSION THEREFORE, IT IS OUR OPINION THAT THE SUGGESTED BASIS OF SETTLEMENT IS REASONABLE. HOWEVER, AS POINTED OUT BY COUNSEL FOR YOUR AGENCY, THE CONTRACTOR MAY STILL EXERCISE HIS RIGHT OF APPEAL UNDER THE DISPUTES PROCEDURE, SINCE NO FINDING OF FACT HAS BEEN MADE OR REQUESTED.