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THE FACTS IN THIS CASE ARE SET FORTH IN OUR DECISION OF OCTOBER 21. YOU HAVE CONTENDED THAT THE EMPLOYEES OF THE STRATOS DIVISION. YOU DISPUTE THE CONCLUSIONS REACHED IN OUR PRIOR DECISION THAT THE CONTRACTING OFFICER WAS NOT ON CONSTRUCTIVE NOTICE OF ANY ERROR IN PRICE WHEN HE ACCEPTED THE STRATOS PROPOSAL. THAT THE MISTAKE STRATOS MADE WAS A MISTAKE IN JUDGMENT FOR WHICH RELIEF WAS PROPERLY DENIED. WE CONCLUDED THAT SINCE THE PROCUREMENT COVERED A NEW TYPE OF ITEM (A CLOSED CYCLE COMPRESSION TURBINE SET) WHICH WAS TO BE DEVELOPED PRIMARILY BY THE CONTRACTOR. THE CONTRACTING OFFICER HAD NO VALID BASIS BY WHICH TO JUDGE THAT THE STRATOS PROPOSAL WAS OFFERED AT AN UNREASONABLY LOW PRICE.

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B-153279, DEC. 2, 1964

TO FAIRCHILD HILLER:

BY LETTER OF NOVEMBER 12, 1964, YOU ASK FOR RECONSIDERATION OF OUR DECISION B-153279, DATED OCTOBER 21, 1964, WHICH AFFIRMED THE DENIAL OF YOUR CLAIM FOR AN ADDITIONAL PAYMENT OF $230,700 UNDER CONTRACT NO. DA-44- 009-ENG-2799, DATED FEBRUARY 3, 1956, BETWEEN THE DEPARTMENT OF THE ARMY AND STRATOS DIVISION, FAIRCHILD ENGINE AND AIRPLANE CORPORATION (SUBSEQUENTLY KNOWN AS FAIRCHILD STRATOS CORPORATION).

THE FACTS IN THIS CASE ARE SET FORTH IN OUR DECISION OF OCTOBER 21, 1964, AND NEED NOT BE REPEATED. YOU HAVE CONTENDED THAT THE EMPLOYEES OF THE STRATOS DIVISION, IN COMPUTING THE PRICE OFFERED TO THE GOVERNMENT, MADE "A GROSS MISTAKE IN THEIR EVALUATION OF THE COST OF ACCOMPLISHING * * * (THE REQUIRED WORK).' YOU DISPUTE THE CONCLUSIONS REACHED IN OUR PRIOR DECISION THAT THE CONTRACTING OFFICER WAS NOT ON CONSTRUCTIVE NOTICE OF ANY ERROR IN PRICE WHEN HE ACCEPTED THE STRATOS PROPOSAL, AND THAT THE MISTAKE STRATOS MADE WAS A MISTAKE IN JUDGMENT FOR WHICH RELIEF WAS PROPERLY DENIED. SPECIFICALLY, WE CONCLUDED THAT SINCE THE PROCUREMENT COVERED A NEW TYPE OF ITEM (A CLOSED CYCLE COMPRESSION TURBINE SET) WHICH WAS TO BE DEVELOPED PRIMARILY BY THE CONTRACTOR, THE CONTRACTING OFFICER HAD NO VALID BASIS BY WHICH TO JUDGE THAT THE STRATOS PROPOSAL WAS OFFERED AT AN UNREASONABLY LOW PRICE. YOU CONCLUDE FROM THE RECORD, HOWEVER, THAT THE CONTRACTING OFFICER RECOGNIZED THAT STRATOS' PRICE WAS EXTREMELY LOW, BUT HE ASSUMED THAT THE BIDDER WAS DELIBERATELY UNDERBIDDING THE PROCUREMENT RATHER THAN THAT THE BIDDER HAD MADE AN ERROR. YOU CONTEND THAT THE CONTRACTING OFFICER WAS NOT JUSTIFIED IN MAKING SUCH AN ASSUMPTION.

THE RECORD BEFORE US INDICATES THAT THE REASON FOR THE DIFFERENCE BETWEEN THE GOVERNMENT ESTIMATE AND YOUR PROPOSED PRICE WAS A DIFFERENCE IN TECHNICAL APPROACHES. IT IS REPORTED BY ONE OF THE SEVERAL CONTRACTING OFFICERS INVOLVED THAT IF THE TECHNICAL APPROACH WHICH YOU PROPOSED AND PURSUED INITIALLY, BUT LATER APPEAR TO HAVE ABANDONED, HAD BEEN SUCCESSFUL, YOUR COST ESTIMATE AND CONTRACT PRICE WOULD HAVE BEEN ADEQUATE. IN OTHER WORDS, THE MISTAKE WHICH YOU MADE WAS ONE OF ENGINEERING JUDGMENT AS TO HOW TO ACCOMPLISH THE WORK TO BE DONE, RATHER THAN AS TO THE COST OF THE APPROACH YOU PROPOSED. IN SUCH CIRCUMSTANCES, THE ONLY CONSTRUCTIVE NOTICE OF ERROR WHICH MIGHT BE IMPUTED TO THE CONTRACTING OFFICER WOULD BE RECOGNITION OF THE NONFEASIBILITY OF THE TECHNICAL APPROACH YOU PROPOSED. AS TO THIS, PARTICULAR ATTENTION WAS PAID AND IT WAS CONCLUDED THAT YOUR APPROACH, WHILE NOT PROVEN, WAS FEASIBLE. FURTHERMORE, IT APPEARS THAT NEITHER YOU NOR THE GOVERNMENT BECAME AWARE THAT SUCH AN APPROACH WAS NOT FEASIBLE UNTIL MORE THAN A YEAR AFTER AWARD WAS MADE. IT THEREFORE SEEMS TO US THAT THE CONTRACTING OFFICER CANNOT FAIRLY BE SAID TO HAVE ACCEPTED AN OFFER WHICH WAS OBVIOUSLY IN ERROR.

AS WE VIEW THE MATTER, YOU UNDERTOOK TO PERFORM THE CONTRACT FOR THE GOVERNMENT AT AN AGREED-FIXED PRICE. THE GOVERNMENT WAS IN NO BETTER POSITION TO JUDGE WHAT THE TOTAL COSTS OF PERFORMANCE WOULD BE THAN YOU WERE, BUT YOUR FIRM ACCEPTED THE RISK OF PERFORMING AT THE AGREED UPON PRICE. TO REQUIRE THE GOVERNMENT TO PAY AN ADDITIONAL AMOUNT BECAUSE YOUR FIRM INCURRED GREATER EXPENSE THAN ANTICIPATED, WHICH WAS IN TURN CAUSED BY A CHANGE IN APPROACH, WOULD PLACE THE GOVERNMENT IN THE POSITION OF PAYING MORE FOR THE CONTRACT THAN IT AGREED TO PAY.

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