B-139280, OCT. 16, 1959

B-139280, OCT. 16, 1959

TO ENGLISH ELECTRIC EXPORT AND TRADING COMPANY LIMITED:

REFERENCE IS MADE TO YOUR LETTER OF JULY 21, 1959, TO THE DISTRICT ENGINEER, U.S. ARMY ENGINEER DISTRICT, LITTLE ROCK, ARKANSAS, YOUR FILE DESIGNATION C/140/DGH, RELATIVE TO OUR DECISION B-139280, DATED JUNE 8, 1959, TO W. E. PILCHER, DISBURSING OFFICER, U.S. ARMY ENGINEER DISTRICT, LITTLE ROCK, ARKANSAS.

IN THE DECISION, MR. PILCHER WAS ADVISED, IN PART, THAT THE ESCALATION PROVISIONS OF CONTRACT NO. DA-03-050-ENG-2690, DATED NOVEMBER 9, 1954, ENTERED INTO BETWEEN YOU AND THE UNITED STATES, COULD NOT BE CONSIDERED AS APPLYING TO AMOUNTS PAID FOR SERVICES OF ERECTING ENGINEERS FURNISHED PURSUANT TO SECTION 3 OF THE CONTRACT SPECIFICATIONS. THE BASIS FOR SUCH CONCLUSION, AS SET FORTH IN THE DECISION, WERE THAT THE SERVICES INVOLVED WERE ESSENTIALLY SEPARATE AND DISTINCT FROM THE DESIGN, MANUFACTURE AND DELIVERY OF THE TURBINES REQUIRED TO BE FURNISHED UNDER THE CONTRACT; WERE ENTIRELY OPTIONAL WITH THE GOVERNMENT; WERE NOT LIMITED AS TO TIME BUT PROBABLY WERE TO BE RENDERED IN LARGE PART AFTER THE DELIVERY DATE OF THE TURBINES; WERE NOT OF A KIND WHICH WOULD BE DIRECTLY AFFECTED BY FLUCTUATIONS IN PRODUCTION LABOR COSTS OR MATERIAL PRICES; AND THAT SECTION 3 MADE NO PROVISION FOR ANY ADJUSTMENT IN THE DAILY RATES OF COMPENSATION QUOTED.

PURSUANT TO THE DECISION, THE AMOUNT OF $547.13 (TOGETHER WITH THE AMOUNT OF $2,358.40, REPRESENTING RETAINED PERCENTAGE ON ESTIMATE NO. 32) WAS DEDUCTED FROM THE TOTAL SUM OF $47,715.12 IN MAKING PAYMENT TO YOU UNDER THE CONTRACT ON D.O. VOUCHER NO. 760, JUNE 30, 1959, ACCOUNTS OF W. E. PILCHER, SYMBOL 5536, TO COVER THE AMOUNT WHICH HAD BEEN INCLUDED THEREIN FOR LABOR-COST-PRICE ADJUSTMENT APPLICABLE TO THE AMOUNT SHOWN IN THE ESTIMATE TO BE OTHERWISE DUE FOR SERVICES OF ERECTING ENGINEERS.

IN YOUR LETTER, YOU PROTEST THE CONCLUSIONS REACHED IN THE DECISION AND THE ACTION TAKEN IN DEDUCTING THE AMOUNT INVOLVED ON THE VOUCHER. YOU CONTEND (1) THAT THE ERECTING ENGINEER SERVICES CANNOT BE CONSIDERED TO HAVE BEEN SEPARATE AND DISTINCT FROM THE DESIGN, MANUFACTURE AND DELIVERY OF THE TURBINES ANY MORE THAN CAN THE OTHER ITEMS ON THE CONTRACT SCHEDULE, PARTICULARLY THE ANCILLARY EQUIPMENT AND SPARE PARTS, THE PRICES OF WHICH WERE CONSIDERED SUBJECT TO ESCALATION; (2) THAT THE FACT THAT THE SERVICES WERE OPTIONAL AND THE GREATER PART THEREOF WERE TO BE FURNISHED AFTER THE TURBINES HAD BEEN DELIVERED HAS NO BEARING ON THE QUESTION AT ISSUE; (3) THAT IT MAY NOT BE SAID THE SERVICES WERE NOT LIMITED AS TO TIME "AS ITEM 11 OF THE SCHEDULE PROVIDES FOR AN ESTIMATED PERIOD "OF ABOUT 300 DAYS; " " (4) THAT YOU FAIL TO SEE THE SIGNIFICANCE OF THE OBSERVATION IN THE DECISION THAT THE SERVICES WERE NOT OF A KIND WHICH WOULD BE DIRECTLY AFFECTED BY FLUCTUATIONS IN PRODUCTION LABOR COSTS, INASMUCH AS CLAUSE SC-9, TITLED "ADJUSTMENT OF PRICES FOR LABOR AND MATERIAL," IS NEITHER LIMITED NOR CONFINED TO "PRODUCTION LABOR COSTS; " AND (5) THAT, WHILE SECTION 3 OF THE CONTRACT SPECIFICATIONS IS SILENT AS TO ADJUSTMENT OF THE DAILY RATES OF COMPENSATION QUOTED FOR THE ERECTING ENGINEER SERVICES, YOU WISH TO POINT OUT THAT IN SETTING OUT THE PRICES TO BE PAID FOR THE REMAINING ITEMS UNDER THE CONTRACT, NO MENTION IS MADE OF PRICE ADJUSTMENT IN CONNECTION THEREWITH, THE MATTER OF PRICE ADJUSTMENT BEING MENTIONED ONLY IN THE PRICE ADJUSTMENT CLAUSE.

WE BELIEVE THERE IS AMPLE JUSTIFICATION FOR CONSIDERING THE ERECTING ENGINEER SERVICES AS SEPARATE AND DISTINCT FROM THE OTHER ITEMS ON THE CONTRACT SCHEDULE. THE FORMER REPRESENTED AN ITEM OF PROFESSIONAL SERVICES WHICH WAS TO BE FURNISHED ON A FEE BASIS, AT THE OPTION OF THE GOVERNMENT. THE OTHER ITEMS, WITH THE EXCEPTION OF ITEM NO. 12,"SERVICES OF ONE SUPERVISING MECHANIC FOR ABOUT 300 DAYS" (WITH RESPECT TO WHICH NO CLAIM FOR ESCALATION APPEARS TO HAVE BEEN MADE), REPRESENTED THE TURBINES, RELATED EQUIPMENT, SPARE PARTS AND SPECIFIC ITEMS OF WORK, OPTIONAL, OR OTHERWISE, REQUIRED TO BE FURNISHED UNDER THE CONTRACT FOR A LUMP SUM, OR ON A UNIT PRICE BASIS. BROADLY SPEAKING, THEY WERE PRODUCTS INVOLVING THE USE OF PRODUCTIVE LABOR. HOWEVER, IN THE CASE OF THE ITEM UNDER CONSIDERATION, THE GOVERNMENT WAS PROCURING PARTICULAR SERVICES AT A STIPULATED DAILY RATE, UNDER AN OPTION CONTAINED IN THE CONTRACT.

ITEM 11 WAS DESCRIBED IN THE CONTRACT AS COVERING "SERVICES OF ONE OR MORE ERECTING ENGINEERS FOR A TOTAL OF ABOUT 300 MAN DAYS.' IT THUS SEEMS CLEAR THAT "300 MAN DAYS" REFERRED TO A QUANTITATIVE ESTIMATE OF THE AMOUNT OF SERVICES TO BE PERFORMED, RATHER THAN THE TIME WHEN THEY WERE TO BE FURNISHED. THE FACT THAT THE PARTIES STIPULATED IN ADVANCE THE UNIT PRICE WHICH WAS TO BE PAID FOR THE SERVICES WITH THE KNOWLEDGE THAT, IF REQUISITIONED, THE GREATER PART THEREOF WOULD NOT BE FURNISHED UNTIL AFTER THE DELIVERY OF THE TURBINES HAD BEEN COMPLETED IS ADDITIONAL EVIDENCE TO US THAT SUCH UNIT PRICE WAS INTENDED TO BE FIRM, AND NOT SUBJECT TO ADJUSTMENT UNDER THE PRICE ESCALATION PROVISIONS OF THE CONTRACT.

RELATIVE TO YOUR FOURTH CONTENTION, THE FACT THAT THE INDEX STIPULATED IN THE CONTRACT TO BE USED FOR MAKING ADJUSTMENTS IN THE CONTRACT PRICES ON ACCOUNT OF THE LABOR COST FACTOR WAS THE BASIC HOURLY EARNINGS INDEX, PUBLISHED BY THE BUREAU OF LABOR STATISTICS, WHICH INDEX IS CONCERNED ONLY WITH HOURLY RATES PAID TO WHAT MAY BE DESCRIBED AS "PRODUCTIVE LABOR," APPEARS TO US TO BE ANOTHER INDICATION THAT THE PARTIES DID NOT CONTEMPLATE THAT THE UNIT PRICE STIPULATED TO BE PAID FOR THE SERVICES HERE INVOLVED--- WHICH WOULD NOT BE DIRECTLY AFFECTED BY CHANGES IN HOURLY RATES PAID TO PRODUCTIVE LABOR--- WOULD BE SUBJECT TO ESCALATION.

THE POINT RAISED BY YOUR FIFTH CONTENTION IS WELL TAKEN, BUT WE DO NOT BELIEVE IT CONTROLLING AS TO THE EVIDENT INTENTION OF THE PARTIES, IN VIEW OF WHAT HAS ALREADY BEEN STATED.

ACCORDINGLY, YOU ARE ADVISED THAT WE FIND NO LEGAL BASIS FOR PAYMENT TO YOU OF THE AMOUNT INVOLVED.