B-182744, APR 30, 1975, 54 COMP GEN 928

B-182744: Apr 30, 1975

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THE COURT CASE NOT INDICATING THAT IT WOULD HAVE RETROACTIVE EFFECT ON OTHER CASES. AS A RESULT OF THE NAVY'S ACCEPTANCE OF POLORON'S VALUE ENGINEERING CHANGES THE NAVY WAS ABLE TO SATISFY ITS REQUIREMENTS WITH REVISED AND LESS COSTLY ITEMS. THAT IS. THIS CLAIM WAS DENIED FOR THE FOLLOWING REASONS: IT IS A RULE OF LONG STANDING THAT THERE IS NO DUTY ON THE PART OF ACCOUNTING OFFICERS OF THE GOVERNMENT TO REOPEN SETTLEMENTS AND EXAMINE THEM ON THE BASIS OF SUBSEQUENT COURT DECISIONS THAT MAY REQUIRE DIFFERENT ACTION THAN THAT ON WHICH THE PRIOR SETTLEMENTS WERE MADE. THE TRANSACTIONS ARE CONSIDERED CLOSED. CLAIMS WHICH AFFECT THE AMOUNT DUE A CONTRACTOR SHOULD BE ASSERTED AT OR BEFORE THE TIME A SETTLEMENT IS MADE.

B-182744, APR 30, 1975, 54 COMP GEN 928

COURTS - COURT OF CLAIMS - DECISIONS - ACCEPTANCE - APPLICATION IN SIMILAR CASES - NOT RETROACTIVE SETTLEMENT AGREEMENTS REGARDING PAYMENTS FOR VALUE ENGINEERING MAY NOT BE REFORMED TO CONFORM WITH A JUDICIAL INTERPRETATION OF CONTRACT PROVISIONS IN A SUBSEQUENT COURT CASE NOT INVOLVING THIS CONTRACTOR, THE COURT CASE NOT INDICATING THAT IT WOULD HAVE RETROACTIVE EFFECT ON OTHER CASES.

IN THE MATTER OF POLORON PRODUCTS, INC., APRIL 30, 1975:

THIS MATTER CONCERNS A REQUEST FOR RECONSIDERATION OF A SETTLEMENT DATED OCTOBER 8, 1974, OF OUR TRANSPORTATION AND CLAIMS DIVISION WHICH DISALLOWED POLORON'S CLAIMS FOR ADDITIONAL PAYMENTS FOR VALUE ENGINEERING INCENTIVE PROPOSALS ON CERTAIN GOVERNMENT CONTRACTS EXTENDING OVER THE PERIOD FROM 1966 THROUGH 1972.

AS A RESULT OF THE NAVY'S ACCEPTANCE OF POLORON'S VALUE ENGINEERING CHANGES THE NAVY WAS ABLE TO SATISFY ITS REQUIREMENTS WITH REVISED AND LESS COSTLY ITEMS. THE ISSUE PRESENTED BY POLORON'S CLAIM ESSENTIALLY CONCERNS THE EXTENT OF THE FIRM'S SHARE IN THE SAVINGS GAINED BY THE NAVY'S ACCEPTANCE OF THE VALUE ENGINEERING CHANGES. CONSISTENT WITH THE THEN PRACTICE OF THE NAVY, POLORON'S COMPENSATION FOR ENGINEERING CHANGES DID NOT INCLUDE PAYMENT FOR THE ELEMENT OF PROFIT ALLOCATED TO THE CONTRACT WORK DELETED BY THE CHANGE.

ON JULY 13, 1973, THE UNITED STATES COURT OF CLAIMS DECIDED THE CASE OF DRAVO CORPORATION V. THE UNITED STATES, 480 F.2D 1331, 202 CT. CL. 500 (1973), WHEREIN THE COURT DETERMINED THAT THE CONTRACT PRICE SHOULD NOT BE DECREASED FOR PROFIT ON DELETED WORK, THAT IS, THE CONTRACTOR SHOULD RETAIN PROFIT ON THE DELETED WORK. IN RESPONSE TO A REQUEST, DATED SEPTEMBER 26, 1973, FOR RECONSIDERATION AND RECOMPUTATION OF THE VECP ADJUSTMENTS UNDER POLORON'S CONTRACTS, THE NAVY ADVISED BY LETTER DATED NOVEMBER 26, 1973, THAT IT DID NOT CONSIDER THE COURT OF CLAIMS DECISION A MANDATE TO RECONSIDER ALL PREVIOUSLY ACCEPTED PROPOSALS. POLORON CONTENDED THAT THE COURT'S DECISION SHOULD BE RETROACTIVELY APPLIED TO THE CONTRACTS TO REOPEN THE ACCEPTED VALUE ENGINEERING PROPOSALS AND REFUND THE PROFIT WHICH HAD NOT BEEN PAID UNDER THE ORIGINAL COMPUTATION.

IN THE SETTLEMENT OF OCTOBER 8, 1974, THIS CLAIM WAS DENIED FOR THE FOLLOWING REASONS:

IT IS A RULE OF LONG STANDING THAT THERE IS NO DUTY ON THE PART OF ACCOUNTING OFFICERS OF THE GOVERNMENT TO REOPEN SETTLEMENTS AND EXAMINE THEM ON THE BASIS OF SUBSEQUENT COURT DECISIONS THAT MAY REQUIRE DIFFERENT ACTION THAN THAT ON WHICH THE PRIOR SETTLEMENTS WERE MADE. BLAZEK V. UNITED STATES, 44 CT. CL. 188, 192 (1909). FURTHERMORE, INSOFAR AS (POLORON) APPARENTLY ACQUIESCED IN THE ADJUSTMENTS AS COMPUTED AND ACCEPTED FINAL PAYMENT THEREFOR, THE TRANSACTIONS ARE CONSIDERED CLOSED. CLAIMS WHICH AFFECT THE AMOUNT DUE A CONTRACTOR SHOULD BE ASSERTED AT OR BEFORE THE TIME A SETTLEMENT IS MADE, AND WHEN APPROPRIATE, APPEAL MADE TO A CONTRACT APPEALS BOARD. THE GOVERNMENT IS ENTITLED TO KNOW, WHEN IT MAKES WHAT IT BELIEVES TO BE A FINAL PAYMENT ON ITS CONTRACT, WHAT CLAIMS A CONTRACTOR INTENDS TO ASSERT AGAINST IT ON ACCOUNT OF THE CONTRACT. IS THE GOVERNMENT'S RIGHT TO KNOW WHETHER THE SUPPOSED FINAL PAYMENT IS IN FACT FINAL AND CONCLUSIVE. SEE POOLE ENGINEERING & MACHINE COMPANY V. UNITED STATES, 57 CT. CL. 232 (1922); DUBOIS CONSTRUCTION CORP. V. UNITED STATES, 98 F. SUPP. 590 (1951); MCQUAGGE V. UNITED STATES, 197 F. SUPP. 460 (1961).

IN SUPPORT OF ITS REQUEST FOR RECONSIDERATION OF THE ACTION TAKEN ON ITS CLAIM, POLORON HAS REFERRED TO TWO DECISIONS OF THE ARMED SERVICES BOARD OF CONTRACT APPEALS (ASBCA). POLORON ARGUES THAT IN THE APPEAL OF KURZ & ROOT COMPANY, ASBCA NO. 17146, MARCH 18, 1974, A CONTRACT MODIFICATION WHICH PROVIDED THAT "THE ABOVE CHANGE RESULTS IN NO CHANGE IN CONTRACT PRICE" WAS NOT FOUND TO HAVE THE LEGAL EFFECT OF ACCORD AND SATISFACTION WITH REGARD TO MATTERS EXCLUDED FROM NEGOTIATIONS. IN ADDITION POLORON CITES THE APPEAL OF VIEWLEX, INC., ASBCA NO. 12584, JANUARY 21 AND AUGUST 4, 1971, WHEREIN A CONTRACT MODIFICATION COVERING THE "DELAY" AND "FAILURE TO DELIVER" GOVERNMENT-FURNISHED PROPERTY DID NOT BAR RECOVERY FOR A DEFECT IN THE GOVERNMENT-FURNISHED PROPERTY, INCLUDING DELAY COSTS RESULTING FROM THE DEFECT.

IT DOES NOT APPEAR THAT THE CITED CASES ARE APPLICABLE HERE. THE BASIS GIVEN IN THE SETTLEMENT OF OCTOBER 8 IS THAT THE COMPENSATION PAID TO POLORON FOR VALUE ENGINEERING CHANGES IS A CLOSED MATTER. GENERALLY, A SUBSEQUENT JUDICIAL INTERPRETATION OF CONTRACT LANGUAGE WHICH DIFFERS FROM THE INTERPRETATION MUTUALLY AGREED UPON BY PARTIES TO ANOTHER CONTRACT IN THE COURSE OF SETTLEMENT MAY NOT BE GIVEN THE EFFECT OF REFORMING THE SETTLEMENT PREVIOUSLY AGREED UPON BY SUCH PARTIES. BLAZEK V. UNITED STATES, SUPRA. THE HOLDING IN THE APPEAL OF KURZ & ROOT COMPANY, SUPRA, THAT ACCORD AND SATISFACTION IS NOT EFFECTIVE AS TO MATTERS EXCLUDED FROM NEGOTIATION AND THE HOLDING IN VIEWLEX, INC., SUPRA, THAT A CONTRACTOR'S LIMITED RELEASE DOES NOT PRECLUDE A CONTRACTOR'S SUBSEQUENT CLAIM BASED UPON OTHER FACTORS OUTSIDE THE SCOPE OF SUCH LIMITED RELEASE ARE INAPPOSITE SINCE POLORON IS ATTEMPTING TO REOPEN THE SAME MATTER CONSIDERED IN THE PRIOR SETTLEMENT.

WE MUST POINT OUT THAT POLORON COULD HAVE TAKEN EXCEPTION TO THE METHOD OF COMPUTATION BY THE CONTRACTING OFFICER UNDER THE "DISPUTES" CLAUSE OF THE CONTRACTS AND AT THAT TIME NOTED AN APPEAL TO THE APPROPRIATE BOARD OF CONTRACT APPEALS, AS IN THE DRAVO CASE. BUT OBVIOUSLY POLORON TOOK NO ACTION WHATEVER AT THE APPROPRIATE TIME AND RAISED NO OBJECTION UNTIL THE DRAVO DECISION WAS CALLED TO ITS ATTENTION, LONG AFTER SETTLEMENT OF POLORON'S CONTRACTS.

IN VIEW THEREOF, THE CLAIMS MAY NOT BE ALLOWED. ACCORDINGLY, THE SETTLEMENT DISALLOWING THE CLAIMS IS SUSTAINED.