A-81601, MARCH 21, 1938, 17 COMP. GEN. 753

A-81601, MARCH 21, 1938, 17 COMP. GEN. 753

CONTRACTS - INCREASED COSTS - GUN FORGING DEFECTS - CONTRACTOR'S LIABILITY WHERE CONTRACT TO FURNISH GUN FORGINGS PROVIDED THEY MIGHT BE REJECTED AT ANY PERIOD OF MACHINING OR ASSEMBLING FOR DEFECTS DISCOVERED OR DEVELOPED AND THAT, IN CASE OF REJECTION, CONTRACTOR WOULD PAY THE GOVERNMENT'S ACTUAL EXPENSES FOR WORK DONE ON THE DEFECTIVE MATERIAL AND THE INSPECTION WAS ADEQUATE, REASONABLE, AND THAT THERETOFORE EMPLOYED IN SUCH CASES, AND THERE IS NO SHOWING OF NEGLIGENCE ON THE PART OF THE GOVERNMENT, THE CONTRACTOR MAY NOT BE RELIEVED OF LIABILITY ARISING FROM THE DELIVERY OF DEFECTIVE MATERIAL ON THE BASIS THAT THE GOVERNMENT COULD HAVE MINIMIZED OR REDUCED THE DAMAGE BY A DIFFERENT METHOD OF INSPECTION.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE NATIONAL FORGE AND ORDNANCE CO., MARCH 21, 1938:

YOUR LETTER OF JANUARY 25, 1938, REQUESTS REVIEW OF SETTLEMENT NO. 0440645, APRIL 6, 1937, WHEREIN, FROM THE AMOUNT OF $52,067.98 OTHERWISE PROPERLY DUE YOUR COMPANY AS PARTIAL PAYMENTS FOR CERTAIN GUN FORGINGS FURNISHED THE NAVY DEPARTMENT UNDER CONTRACT NOD-634, JANUARY 14, 1935, THERE WAS DEDUCTED THE SUM OF $46,942.22, REPRESENTING YOUR INDEBTEDNESS TO THE GOVERNMENT COVERING WORK DONE BY THE NAVY DEPARTMENT ON DEFECTIVE FORGINGS FURNISHED BY YOU UNDER CONTRACT NOD-420, MARCH 11, 1933.

THE RECORD SHOWS THAT UNDER CONTRACT NOD-420, THE NATIONAL FORGE AND ORDNANCE CO. WAS REQUIRED TO DELIVER TO THE NAVY DEPARTMENT, INTER ALIA, 13 TUBE FORGINGS, 8 INCH/55, COMPLYING WITH SPECIFICATIONS MADE A PART OF THE CONTRACT. THESE TUBE FORGINGS WERE TO BE MACHINED BY THE NAVY DEPARTMENT FOR USE AS BARRELS, INCLUDING FIRING CHAMBERS, OF 8 INCH GUNS, WHEN ASSEMBLED WITH OTHER PARTS OF COMPLETE UNITS. IT IS STATED THAT THE MACHINING PROCESS COMPRISED ABOUT A DOZEN DISTINCT STAGES UP TO AND INCLUDING ASSEMBLY WITH OTHER PARTS OF COMPLETED GUNS.

THE CONTRACT SPECIFICATIONS PROVIDED THAT:

THE INSPECTOR SHOULD PROMPTLY NOTIFY THE CONTRACTOR OF THE EXISTENCE OF ANY DEFECT WHICH, IN HIS OPINION, WILL MAKE FINAL ACCEPTANCE OF A PIECE DOUBTFUL, AND SHOULD IMMEDIATELY CONDEMN ANY PIECE HAVING DEFECTS WHICH ARE OF SUCH GRAVITY AS TO CERTAINLY PREVENT FINAL ACCEPTANCE; BUT THE FINAL ACCEPTANCE OF A PIECE CANNOT BE CLAIMED BECAUSE OF ANY FAILURE TO DISCOVER DEFECTS AT A PARTICULAR TIME.

PIECES MAY BE REJECTED AT ANY PERIOD OF MACHINING OR ASSEMBLING FOR DEFECTS DISCOVERED OR DEVELOPED.

THE CONTRACTOR SHALL REPLACE WITHOUT CHARGE ANY PIECE WHICH MAY BE CONDEMNED AT ANY TIME PRIOR TO OR DURING PROOF FIRING OF THE GUN.

IF DEFECTS ARE DEVELOPED IN ANY OF THE GUN FORGINGS CONSTITUTING A GUN OF SUCH A CHARACTER AS TO CAUSE ITS REJECTION THE ACTUAL EXPENSE INCURRED BY THE DEPARTMENT FOR WORK DONE UPON THE DEFECTIVE MATERIAL, AND UPON ANY OTHER MATERIAL WHOSE REJECTION IS NECESSITATED BY BEING ASSEMBLED WITH THE DEFECTIVE MATERIAL, SHALL BE BORNE BY THE MANUFACTURER OF THE DEFECTIVE MATERIAL. (NAVY ORDNANCE PAMPHLET NO. 9, PART IV, ARTICLE 20.)

OF THE 13 TUBE FORGINGS DELIVERED UNDER THE CONTRACT, 8 WERE FOUND TO BE DEFECTIVE AND WERE REJECTED. SIX OF THESE, WHICH WERE EARLIER DELIVERIES, WERE SUBJECTED TO THE "RADIAL EXPANSION" TEST, OR FOURTH STAGE IN THE MACHINING PROCESS, BUT WERE NOT INSPECTED OR "BORE SEARCHED" IMMEDIATELY THEREAFTER, AND WERE NOT REJECTED THEN, BUT WERE REJECTED FOR DEFECTS DISCLOSED UPON INSPECTION AT VARIOUS SUBSEQUENT STAGES OF THE MACHINING PROCESS. THE OTHER 2 OF THE 8 DEFECTIVE FORGINGS WERE REJECTED UPON INSPECTION AND BORE SEARCH IMMEDIATELY AFTER THE RADIAL EXPANSION TEST. THE CONTRACTOR ACQUIESCED WITHOUT PROTEST IN BEING CHARGED WITH THE COST OF THE WORK DONE THEREON TO THAT POINT AND REPLACED THE DEFECTIVE FORGINGS, AND THESE 2 ARE NOT INVOLVED IN THE PRESENT CLAIM.

IN ACCORDANCE WITH THE PROVISIONS OF THE CONTRACT, THE NAVY DEPARTMENT CHARGED THE CONTRACTOR WITH THE COST OF ALL WORK DONE ON THE OTHER 6 DEFECTIVE FORGINGS UP TO AND INCLUDING THE VARIOUS STAGES AT WHICH THE DEFECTS WERE DISCOVERED AND THE FORGINGS REJECTED, WHICH COSTS AMOUNTED TO $46,942.22 HERE CLAIMED.

YOUR LETTER OF JANUARY 25, 1938, ADDUCES NO FACT AND PRESENTS LITTLE IF ANY ARGUMENT NOT HERETOFORE PRESENTED BUT IN SUBSTANCE URGES THAT IT WAS THE DUTY OF THE NAVY DEPARTMENT UNDER THE PROVISIONS OF THE CONTRACT TO INSPECT AND BORE SEARCH THE FORGINGS IMMEDIATELY AFTER RADIAL EXPANSION, AND THAT ITS FAILURE TO DO SO, AND TO DISCOVER THE DEFECTS AT THAT POINT AND REJECT THE FORGINGS THERE AND THEN RELIEVED THE CONTRACTOR OF LIABILITY TO THE GOVERNMENT FOR THE COST OF ALL WORK SUBSEQUENTLY DONE UPON THE FORGINGS DURING THE MACHINING PROCESS, SINCE "IN ALL PROBABILITY" BORE SEARCH AFTER RADIAL EXPANSION WOULD HAVE DISCLOSED THE DEFECTS WHICH LED TO THEIR ULTIMATE REJECTION.

ALSO, YOU STATE THAT PRIOR TO THE DATE OF THE COMPANY'S FIRST CONTRACT FOR FURNISHING GUN FORGINGS TO THE NAVY DEPARTMENT, WHICH CONTRACT WAS ENTERED INTO JULY 17, 1931, THE VICE PRESIDENT OF THE COMPANY MADE SEVERAL VISITS TO THE NAVAL GUN FACTORY FOR THE PURPOSE OF ASCERTAINING THE PROCEDURE IN CONNECTION WITH APPLYING RADIAL EXPANSION TO GUN FORGINGS; THAT AMONG THE PROCESSES WITNESSED WAS BORE SEARCHING OF A FORGING IMMEDIATELY AFTER RADIAL EXPANSION, WHICH FACT WAS COMMUNICATED BY HIM TO THE COMPANY, AND THAT "THE NATURAL UNDERSTANDING FROM SUCH OBSERVATION WAS THAT BORE SEARCHING WAS EMPLOYED REGULARLY AS A NORMAL PART OF THE RADIAL EXPANSION TEST.' THERE ACCOMPANIES YOUR LETTER PHOTOSTAT COPY OF A "CONFIDENTIAL" COMMUNICATION DATED MARCH 14, 1931, ADDRESSED TO "DEAR WILDER" AND SIGNED "SCRIM"--- WHO, APPARENTLY, WAS MR. SCRIMGEOUR, VICE PRESIDENT OF THE NATIONAL FORGE AND ORDNANCE CO.--- WHICH PURPORTS TO REPORT ON THE RESULT OF SEVERAL VISITS TO THE WASHINGTON NAVY YARD FOR THE PURPOSE OF OBSERVING THE METHOD OF INSPECTION OF GUN FORGINGS. THE "REPORT" WAS, IN PART, AS FOLLOWS:

AFTER EXPANDING THIS SECTION OF THE GUN WHICH WAS A 5 INCH GUN, IT WAS PLACED ON TRESTLES ALONG THE SIDE OF THE MACHINE AND A VERY CAREFUL MEASUREMENT WAS MADE OF THE OUTSIDE AS WELL AS THE STAR GAUGING OF THE BORE. THEY ALSO HAD A GADGET WHICH WAS MERELY A LONG POLE WITH A LIGHT AND REFLECTOR GLASS ON IT WITH WHICH THEY EXAMINED THE BORE TO SEE THE EFFECTS OF THE EXPANSION. THE MAN IN CHARGE TOLD ME THAT BY THIS INSPECTION ALL DEFECTS CAUSED BY THE EXPANDING OF THE FORGING COULD BE READILY OBSERVED. I ASKED HIM WHETHER THEY HAD MANY FORGINGS TESTED THIS WAY THAT BURSTED. HE TOLD ME THEY DIDN-T BECAUSE THE METAL WAS PUT TO ONE OF THE HIGHEST PRESSURES THAT THE GUN WOULD EVER RECEIVE WHEN BEING FIRED. HE SAID SOMETIMES THEY HAVE A FORGING THAT WOULD WARP OR BEND OUT OF SHAPE SO BADLY THAT IT WAS HARD TO GET THE MANDREL OUT. THIS HE SAID WAS CAUSED BY A SOFT OR POROUS SECTION IN THE GUN, AND OF COURSE, WHEN THE PRESSURE WAS ON IT IT WOULD EXPAND MORE IN THAT PLACE THAN IN ANY OTHER BUT WOULD CAUSE THE PLACE TO WARP OR BEND. I WAS VERY MUCH AMUSED AT THIS LONG POLE OR WHATEVER THEY CALLED IT FOR INSPECTION AS IT MERELY GAVE THE INSPECTOR AN OPPORTUNITY TO SEE ONLY ONE QUARTER OF THE BORE WHICH NECESSITATED THEM TO GO THROUGH THE GUN FOUR TIMES, THAT IS A QUARTER SECTION OF THE BORE EACH TIME.

ALSO A PECULIAR THING I NOTICED ABOUT THE MANDREL WAS THAT IT STRETCHED CONSIDERABLY DUE TO THE PRESSURE, POSSIBLY 3/16 INCH. ALSO WITH THIS LONG POLE WITH THE LIGHT AND GLASS ON IT THE INSPECTOR TOLD ME THAT THEY COULD LOCATE A DEFECT VERY READILY AND CLEARLY. THIS I DOUBT. THIS IS MY PERSONAL OPINION BECAUSE AFTER YOU GET THAT POLE WAY IN THE BARREL THERE IS A CHANCE FOR PASSING OVER A DEFECT IF THEY ARE NOT VERY CAREFUL.

IT IS TO BE PRESUMED THAT THE ABOVE DESCRIBED OPERATION PERFORMED WITH A GADGET WHICH AMUSED MR. SCRIMGEOUR, AND THE EFFICIENCY OF WHICH HE DOUBTED IS THE BORE SEARCH INSPECTION AFTER RADIAL EXPANSION NOW CLAIMED BY YOUR COMPANY TO BE AN INSPECTION ESSENTIAL TO PROPER COMPLIANCE WITH CONTRACT OBLIGATIONS BY THE NAVY DEPARTMENT. IT APPEARS FROM THE LETTER THAT THE ONLY INFORMATION GATHERED BY MR. SCRIMGEOUR AT THAT TIME RELATIVE TO THE "BORE SEARCH" TEST, WAS OBTAINED FROM THE MAN IN CHARGE OF THE OPERATION, WHOSE IDENTITY WAS NOT DISCLOSED AND WHOSE JUDGMENT IN THE MATTER AS TO THE EFFICACY OF THE BORE SEARCH WAS DOUBTED BY MR. SCRIMGEOUR. MOREOVER, IT DOES NOT APPEAR THAT ANY REPRESENTATION WAS MADE OR ANY ASSURANCE GIVEN TO MR. SCRIMGEOUR AT ANY TIME THAT THE BORE SEARCH INSPECTION THEN WITNESSED WAS A REGULAR OR REQUIRED FEATURE OF INSPECTION IMMEDIATELY AFTER RADIAL EXPANSION. AND IT IS OBVIOUS THAT THE CONFIDENTIAL REPRESENTATIONS MADE BY MR. SCRIMGEOUR TO ANOTHER OFFICER OF HIS OWN COMPANY, AND ANY "UNDERSTANDING" GATHERED BY THE COMPANY FROM SUCH REPRESENTATIONS WERE INTER ALIOS SO FAR AS THE NAVY DEPARTMENT WAS CONCERNED AND COULD NOT CONFER UPON THE CONTRACTOR ANY RIGHTS, OR IMPOSE UPON THE NAVY DEPARTMENT ANY RESPONSIBILITIES, UNDER AN ENSUING OR ANY SUBSEQUENT CONTRACT, WHICH WERE NOT INHERENT IN SUCH CONTRACT.

THE CONTRACT SPECIFICATIONS DID NOT REPRESENT OR REQUIRE THAT THE NAVY DEPARTMENT WOULD MAKE ANY INSPECTION AT ANY SPECIFIED STAGE OF THE WORK, BUT LEFT THE DEPARTMENT FREE TO MAKE INSPECTION AT ANY TIME DURING THE PROGRESS OF THE WORK WITHOUT NOTICE TO THE CONTRACTOR. THIS IS ADMITTED, FOR YOU STATE ON PAGE 6 OF YOUR LETTER THAT "* * * IN PREPARING ITS HAND- MADE SPECIFICATIONS IN THE PRESENT CASE THE DEPARTMENT OMITTED A DEFINITE STATEMENT THAT IT WOULD MAKE INSPECTION OF THE FORGINGS AT THE EXPANSION STAGE. * * *" BUT YOU ARGUE THAT, NOTWITHSTANDING THE FACT THAT THE CONTRACT SPECIFICATIONS INCLUDED NO SUCH REQUIREMENT OR REPRESENTATION THAT THE NAVY DEPARTMENT SHOULD OR WOULD MAKE A PARTICULAR INSPECTION OR A PARTICULAR KIND OF INSPECTION AT ANY SPECIFIED POINT OF THE MACHINING PROCESS, THE SPECIFICATIONS MUST BE INTERPRETED IN FAVOR OF THE COMPANY; THAT "THE NAVY DEPARTMENT WAS OBLIGATED TO CONSERVE THE COMPANY'S INTERESTS; " THAT "THE STANDARD INSPECTION PROCEDURE WAS ANTIQUATED," AND THAT:

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

NO AUTHORITY HAS BEEN CITED AND NONE HAS BEEN FOUND TO LEND SUPPORT TO THE SOMEWHAT NOVEL PROPOSITION THAT THE GOVERNMENT IS CONCLUSIVELY OR OTHERWISE PRESUMED TO HAVE HAD KNOWLEDGE, AB INITIO, OF ANY SUPERIOR METHODS OF INSPECTION OR ANY ADVANTAGES OF A PARTICULAR METHOD OF INSPECTION WHICH MAY BE DEVELOPED OR DISCOVERED DURING THE PERFORMANCE OF A CONTRACT, OR THAT A CONTRACTOR WHO FURNISHES DEFECTIVE MATERIAL AND NEVERTHELESS REAPS THE BENEFIT OF SUCH IMPROVED METHOD OF INSPECTION SUBSEQUENT TO ITS DISCOVERY AND ADOPTION IS ENTITLED TO HAVE SUCH BENEFIT APPLIED EX POST FACTO TO THAT PORTION OF HIS CONTRACT PERFORMED PREVIOUS TO SUCH DISCOVERY AND ADOPTION.

THE NAVY DEPARTMENT HAS REPORTED, IN PART, AS FOLLOWS:

RADIAL EXPANSION IS A METHOD OF GUN CONSTRUCTION, THE PRINCIPAL ADVANTAGES OF WHICH, AS COMPARED WITH THE OLDER METHOD OF CONSTRUCTION BY SHRINKING HOOPS TOGETHER, ARE ECONOMY IN MANUFACTURING TIME AND REDUCTION IN WEIGHT OF THE FINISHED GUN. ANY ADVANTAGES WHICH MAY ACCRUE TO THE RADIAL EXPANSION METHOD IN THE NATURE OF TESTS OF FORGING QUALITY ARE INCIDENTAL. THE STANDARD PRACTICE AT THE TIME OF AWARDING THE CONTRACT AT ISSUE EMPLOYED BORE SEARCHING OF THE FORGING AFTER EACH OPERATION DURING WHICH METAL WAS REMOVED FROM THE BORE, BUT DID NOT EMPLOY BORE SEARCHING IMMEDIATELY AFTER RADIAL EXPANSION BEFORE FURTHER MACHINING. BUT IN THE FORGINGS SUPPLIED UNDER SUBJECT CONTRACT A SITUATION AROSE WHICH HAD NOT BEEN EXPERIENCED PREVIOUSLY WITH RADIALLY EXPANDED FORGINGS; THAT IS, UNUSUALLY DEFECTIVE STEEL WAS SUPPLIED RESULTING IN LARGE PERCENTAGES OF REJECTIONS. THESE REJECTIONS SERIOUSLY INTERFERED WITH THE GOVERNMENT'S PRODUCTION SCHEDULE. AFTER CONSIDERATION OF THIS PROBLEM, AND IN AN EFFORT TO AVOID THE DIFFICULTIES CAUSED BY THE HIGH PERCENTAGE OF REJECTIONS, THE PROCEDURE OF BORE SEARCHING IMMEDIATELY AFTER RADIAL EXPANSION--- WHICH PAST EXPERIENCE HAD NOT INDICATED NECESSARY--- WAS TRIED AND ADOPTED.

THE NAVY DEPARTMENT ALSO HAS REPORTED THAT THE METHOD OF INSPECTION IN EFFECT AT THE TIME CONTRACT NOD-420 WAS ENTERED INTO HAD BEEN FOLLOWED IN CONNECTION WITH FORGINGS FURNISHED UNDER PREVIOUS CONTRACTS WITH YOUR COMPANY, AND THAT THE FORGINGS ORIGINALLY FURNISHED UNDER CONTRACT NOD-420 WERE INSPECTED STRICTLY IN ACCORDANCE WITH THE STANDARD PRACTICE IN EFFECT AT THAT TIME.

IT THUS IS PLAIN THAT THE "ANTIQUATED" METHOD OF INSPECTION NOW OBJECTED TO BY YOU HAD PROVEN ADEQUATE FOR THE PURPOSES OF BOTH THE NAVY AND CONTRACTORS WITH THE NAVY PRIOR TO DELIVERY BY YOU OF SUCH POOR AND DEFECTIVE MATERIAL UNDER CONTRACT NOD-420 AS TO NECESSITATE INAUGURATION BY THE NAVY OF A NEW AND MORE EXPENSIVE INSPECTION SYSTEM IN ORDER TO PROTECT THE GOVERNMENT AS WELL AS THE CONTRACTOR AGAINST THE RESULTS OF DELIVERIES OF DEFECTIVE MATERIAL.

WHILE THE RULE MAY BE STATED GENERALLY THAT THE AGGRIEVED PARTY IS REQUIRED TO MINIMIZE THE DAMAGES TO THE OFFENDING PARTY RESULTING FROM HIS BREACH OF HIS CONTRACT, THERE HAS BEEN FOUND NO AUTHORITY IN SUPPORT OF THE PROPOSITION THAT SAID AGGRIEVED PARTY IS REQUIRED TO ADOPT UNUSUAL OR EXTRAORDINARY METHODS OR DEPART FROM HIS USUAL PRACTICE IN ORDER, AT HIS OWN EXPENSE AND TO HIS OWN DETRIMENT, TO PROTECT THE INTERESTS OF THE DELINQUENT PARTY. SOME STRESS HAS BEEN LAID UPON THE PROVISION OF THE SPECIFICATIONS THAT:

THE INSPECTOR SHALL PROMPTLY NOTIFY THE CONTRACTOR OF THE EXISTENCE OF ANY DEFECT WHICH, IN HIS OPINION, WILL MAKE FINAL ACCEPTANCE OF A PIECE DOUBTFUL, AND SHOULD IMMEDIATELY CONDEMN ANY PIECE HAVING DEFECTS WHICH ARE OF SUCH GRAVITY AS TO CERTAINLY PREVENT FINAL ACCEPTANCE; BUT THE FINAL ACCEPTANCE OF A PICE CANNOT BE CLAIMED BECAUSE OF ANY FAILURE TO DISCOVER DEFECTS AT A PARTICULAR TIME.

AND IT HAS BEEN CONTENDED THAT THAT PROVISION IMPORTED A CONTRACTUAL OBLIGATION UPON THE NAVY DEPARTMENT TO MAKE REASONABLE INSPECTION TO DISCOVER SUCH DEFECTS. YOUR ARGUMENT ASSUMES, WHICH HAS NOT BEEN ESTABLISHED, THAT THE METHODS OF INSPECTION APPLIED BY THE NAVY WERE NOT REASONABLE. THE MEANING OF THE PARAGRAPH IS PLAIN. THE CONTRACT PROVIDED THAT INSPECTION COULD BE MADE AT ANY TIME, THAT PIECES MIGHT BE REJECTED AT ANY PERIOD OF MACHINING OR ASSEMBLING FOR DEFECTS DISCOVERED OR DEVELOPED, AND THAT IF DEFECTS WERE DEVELOPED IN ANY FORGING OF SUCH A CHARACTER AS TO CAUSE ITS REJECTION THE CONTRACTOR SHOULD BEAR THE ACTUAL EXPENSE INCURRED BY THE DEPARTMENT FOR WORK DONE NOT ONLY UPON THE DEFECTIVE MATERIAL ITSELF, BUT ALSO UPON OTHER MATERIAL REJECTION OF WHICH WAS NECESSITATED BY BEING ASSEMBLED THEREWITH. THE QUOTED PROVISION MEANT, IN PLAIN AND SIMPLE LANGUAGE, THAT IF, UPON INSPECTION AT ANY PERIOD OF MACHINING OR ASSEMBLING, DEFECTS WERE DISCOVERED WHICH THE INSPECTOR BELIEVED WOULD MAKE FINAL ACCEPTANCE DOUBTFUL HE SHOULD NOTIFY THE CONTRACTOR PROMPTLY TO THAT EFFECT, BUT HE WAS NOT REQUIRED TO REJECT THE PIECE FORTHWITH; THAT IN CASE A DEFECT WAS DISCOVERED SUFFICIENTLY GRAVE TO RENDER FINAL REJECTION CERTAIN, THE INSPECTOR WAS AUTHORIZED, DIRECTED, AND INSTRUCTED TO REJECT THE PIECE IMMEDIATELY IF OR WHEN SUCH DEFECT WAS DISCOVERED, BUT THAT THE FAILURE OF AN INSPECTOR TO DISCOVER DEFECT AT A PARTICULAR TIME SHOULD NOT PREJUDICE THE RIGHT OF THE GOVERNMENT TO REJECT THE FORGING AT ANY LATER PERIOD OF MACHINING OR ASSEMBLING AT WHICH SUCH DEFECT WAS DISCOVERED OR DEVELOPED, NOTWITHSTANDING SAID DEFECT MIGHT HAVE EXISTED AND HAVE BEEN DISCOVERABLE UPON INSPECTION AT AN EARLIER STAGE. SUCH IS THE OBVIOUS MEANING OF THE PROVISION, AND IT IS TOO CLEAR TO REQUIRE OR TO PERMIT OF ,INTERPRETATION" IN BEHALF OF EITHER THE GOVERNMENT OR THE CONTRACTOR. THE LAST SENTENCE OF THE PROVISION NECESSARILY IMPLIED AND RESERVED TO THE GOVERNMENT THE RIGHT TO CONTINUE THE MACHINING PROCESSES UNTIL A DEFECT ACTUALLY WAS DISCOVERED OR DEVELOPED.

A CAREFUL EXAMINATION OF THE CONTRACT, THE SPECIFICATIONS AND THE ADMINISTRATIVE REPORT LEADS INEVITABLY TO THE CONCLUSION THAT CONTRACT NOD -420 WAS ENTERED INTO UPON THE BASIS OF THE INSPECTION METHODS EMPLOYED BY THE NAVY DEPARTMENT AT THE DATE THEREOF; THAT NEITHER EXPRESSLY NOR BY REASONABLE IMPLICATION FROM ANY PROVISION OF THE CONTRACT WAS THE NAVY DEPARTMENT REQUIRED TO RESORT TO BORE SEARCH INSPECTION IMMEDIATELY AFTER RADIAL EXPANSION; THAT THERE IS DISCLOSED NO NEGLIGENCE ON THE PART OF THE NAVY AS TO INSPECTION AT ANY TIME, AND NO FAILURE TO PROTECT THE INTERESTS OF THE CONTRACTOR TO THE FULLEST EXTENT REQUIRED BY THE CONTRACT; THAT THE FACT THAT THE CONTRACTOR SUPPLIED UNUSUALLY DEFECTIVE STEEL, RESULTING IN LARGE PERCENTAGES OF REJECTIONS, AND NECESSITATING ADOPTION BY THE NAVY OF A NEW AND MORE EXPENSIVE INSPECTION PROCEDURE IN AN ATTEMPT TO REDUCE THE RESULTANT PROCEDURE ACTUALLY RESULTED IN A SUBSEQUENT SAVING TO THE CONTRACTOR AND THE GOVERNMENT DURING THE LATER STAGES OF THE CONTRACT CONFERS UPON THE CONTRACTOR NO RIGHT TO WHICH IT WAS NOT OTHERWISE ENTITLED UNDER THE CONTRACT, AND AFFORDS NO LEGAL BASIS FOR RELIEVING THE CONTRACTOR OF LIABILITY FOR THE ACTUAL COST OF ALL WORK DONE BY THE NAVY DEPARTMENT ON DEFECTIVE MATERIAL DELIVERED DURING THE EARLIER STAGES OF THE CONTRACT, WHEN ITS USUAL AND THERETOFORE ESTABLISHED INSPECTION PROCEDURE WAS IN OPERATION.

UPON THE FACTS PRESENTED AND UNDER APPLICABLE LEGAL PRINCIPLES THERE IS NO LEGAL BASIS FOR THE ALLOWANCE OF ANY PART OF YOUR CLAIM, AND THE SETTLEMENT OF APRIL 6, 1937, MUST BE AND IS SUSTAINED.