B-158651, APR. 1, 1970

B-158651, APR. 1, 1970

CONTRACTS--DELIVERIES--SAVINGS TO GOVERNMENT--CONTRACTOR'S CLAIM CONTRACTOR'S CLAIM FOR PERCENTAGE OF SAVINGS EFFECTED BY GOVT. THROUGH USE OF ITS VALUE ENGINEERING INCENTIVE PROPOSAL, SUBMITTED IN CONNECTION WITH PERFORMANCE OF ARMY CONTRACT, IS DENIED, SINCE PROPOSED CONTRACT PACKING CHANGES REFLECTED IN PROPOSAL WERE NOT INITIATED AND DEVELOPED BY CONTRACTOR AS REQUIRED BY CONTRACT'S VALUE ENGINEERING INCENTIVE CLAUSE; RATHER CONTRACTOR WAS DIRECTED BY GOVT. PRIOR TO SUBMITTING ITS PROPOSAL TO PACK TRAILERS IN PRECISE MANNER THAT PROPOSAL INDICATED, AND IT APPARENTLY BECAME AWARE OF PROCESS ONLY AFTER RECEIVING INSTRUCTIONS FROM GOVT. REPRESENTATIVES.

TO TAR HEEL ENGINEERING AND MANUFACTURING COMPANY:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 16, 1969, AND TO SUBSEQUENT CORRESPONDENCE, RELATIVE TO YOUR CLAIM TO A PERCENTAGE OF SAVINGS EFFECTED BY THE GOVERNMENT THROUGH THE USE OF YOUR VALUE ENGINEERING INCENTIVE PROPOSAL SUBMITTED ON APRIL 6, 1965, IN CONNECTION WITH THE PERFORMANCE OF ARMY CONTRACT NO. DA-20-113-AMC 04491 (T), DATED OCTOBER 30, 1964, AS AMENDED, WHICH WAS AWARDED TO YOUR COMPANY FOR THE PRODUCTION AND DELIVERY, F.O.B. ORIGIN, OF 712 1/4 TON, TWO WHEEL, AMPHIBIOUS CARGO TRAILERS (M100). YOUR PROPOSAL OF APRIL 6, 1965, RELATED TO A METHOD OF PACKING TRAILERS FOR SHIPMENT OVERSEAS.

WE ARE ENCLOSING FOR YOUR INFORMATION A COPY OF A LETTER DATED MARCH 16, 1970, FROM HEADQUARTERS, UNITED STATES ARMY MATERIEL COMMAND, FURNISHING THE BASIC ADMINISTRATIVE REPORT ON YOUR CLAIM; A COPY OF THE SEPARATE ADMINISTRATIVE REPORT AND RECOMMENDATION PREPARED BY THE CONTRACTING OFFICER ON BEHALF OF THE ARMY TANK-AUTOMOTIVE COMMAND; A COPY OF HIS DECISION WHICH WAS RENDERED IN THE FORM OF A LETTER DATED SEPTEMBER 29, 1965, TO YOUR COMPANY; AND A COPY OF HIS "FINDINGS OF FACT AND FINAL DECISION," DATED MARCH 3, 1970. WE ARE ALSO ENCLOSING COPIES OF AFFIDAVITS DATED FEBRUARY 21 AND 24, 1970, FROM MR. WALTER T. ATKINSON AND MR. ELMER V. LLOYD, JR; CONCERNING THEIR PARTICIPATION IN A PILOT PACK INSPECTION ON MARCH 30 AND 31, 1965, OF THE M100 TRAILERS BEING MANUFACTURED UNDER CONTRACT NO. DA-20-113-AMC-04491 (T) AT YOUR PLANT.

THE CONTRACT ORIGINALLY INCORPORATED THE CLAUSE, ENTITLED "VALUE ENGINEERING INCENTIVE (AUG. 1963)." HOWEVER, UNDER CONTRACT MODIFICATION NO. 4, FULLY EXECUTED BY THE PARTIES AS OF MARCH 10, 1965, IT WAS AGREED THAT A NEW CLAUSE, ENTITLED "VALUE ENGINEERING INCENTIVE (OCTOBER 1964)," WOULD BE APPLICABLE WITH RESPECT TO ANY SO-CALLED COST REDUCTION PROPOSALS. THE SUBSTITUTED CLAUSE APPLIES TO COST REDUCTION PROPOSALS "INITIATED AND DEVELOPED BY THE CONTRACTOR." IT APPEARS TO BE THE OPINION OF THE DEPARTMENT OF THE ARMY THAT A SAVING IN SHIPPING COSTS WHICH DID NOT AFFECT PERFORMANCE COSTS UNDER A SUPPLY CONTRACT, PROVIDING FOR DELIVERY ON AN F.O.B. ORIGIN BASIS, COULD ALSO BE CONSIDERED UNDER THE VALUE ENGINEERING INCENTIVE CLAUSE OF THE AMENDED CONTRACT.

IN PARAGRAPH (C) OF THE OCTOBER 1964 VALUE ENGINEERING INCENTIVE CLAUSE, IT IS PROVIDED THAT THE DECISION OF THE CONTRACTING OFFICER AS TO THE ACCEPTANCE OF ANY COST REDUCTION PROPOSAL "SHALL BE FINAL AND SHALL NOT BE SUBJECT TO THE 'DISPUTES' CLAUSE" OF THE CONTRACT. THE CONTRACTING OFFICER'S DECISION, THEREFORE, WOULD NOT BE SUBJECT TO APPEAL TO ANY OTHER OFFICIAL OF THE DEPARTMENT OF THE ARMY OR TO THE ARMED SERVICES BOARD OF CONTRACT APPEALS.

THE CONTRACTING OFFICER ORIGINALLY DECIDED AND HE HAS NOW DETERMINED THAT YOUR PROPOSAL OF APRIL 6, 1965, IS NOT ACCEPTABLE AS A VALUE ENGINEERING CHANGE PROPOSAL BECAUSE THE PROPOSED CONTRACT PACKING CHANGES REFLECTED THEREIN WERE NOT "INITIATED AND DEVELOPED" BY YOUR COMPANY AS REQUIRED UNDER SUBPARAGRAPH (A) OF THE OCTOBER 1964 VALUE ENGINEERING INCENTIVE CLAUSE OF THE AMENDED CONTRACT. IN REGARD TO THE FACTUAL ISSUE INVOLVED, THE BASIC REPORT OF THE DEPARTMENT OF THE ARMY ON YOUR CLAIM STATES THAT THE FACTS ESTABLISH THAT YOU WERE DIRECTED BY THE GOVERNMENT PERSONNEL, IN ADVANCE OF SUBMISSION OF YOUR PROPOSAL, TO PACK THE TRAILERS IN THE PRECISE MANNER THAT YOUR PROPOSAL INDICATED; THAT YOU NEITHER "INITIATED" NOR "DEVELOPED" THIS PACKING METHOD; AND THAT YOU APPARENTLY BECAME AWARE OF THIS PROCESS ONLY AFTER RECEIVING INSTRUCTIONS FROM GOVERNMENT REPRESENTATIVES.

THE RECORD BEFORE US PROVIDES NO BASIS FOR OVERRULING THE DECISION OF THE CONTRACTING OFFICER OR FOR AUTHORIZING ANY ADJUSTMENT IN CONNECTION WITH THE CLAIM HERE INVOLVED.