North American Philips Company v. United States

• Decision Date: 15 April 1966
• Citation: 358 F.2d 980
• Parties: NORTH AMERICAN PHILIPS COMPANY, Inc., and Philips Electronics, Inc., Third-Party Plaintiff v. The UNITED STATES.
• Court: U.S. Claims Court

358 F.2d 980 (1966)

NORTH AMERICAN PHILIPS COMPANY, Inc., and Philips Electronics, Inc., Third-Party Plaintiff v. The UNITED STATES.

Cong. 1-60.

United States Court of Claims.

April 15, 1966.

Joseph H. Elcock, Jr., Boston, Mass., attorney of record, for plaintiff.

Frances L. Nunn, Washington, D. C., with whom was Asst. Atty. Gen. John W. Douglas, for defendant.

Before COWEN, Chief Judge, and LARAMORE, DURFEE, DAVIS and COLLINS, Judges.

DURFEE, Judge.

This is an action for delay damages and added engineering costs not compensable under the changes clause or any modification to the contract in issue. North American Philips Company, Inc., the nominal plaintiff, and Philips Electronics, Inc., a sister corporation, are both referred to interchangeably as plaintiff. North American Philips Company has no present interest in the outcome of the present suit, the real party in interest being the transferee of North American's interest in the contract — Philips Electronics.

This case is before the court on a Congressional reference. It is also one within the general jurisdiction of the court. It is therefore one on which, under 28 U.S.C. § 1492 (1964 ed.) the court may render judgment.

In 1952 defendant entered into a contract with A.R.F. Products, Inc. (hereinafter ARF) for development and production of signal generators.¹ Under this contract ARF was additionally required to furnish a complete set of finished production drawings from which copies could be made for future procurements. By November, 1954, defendant determined the need for procurement of additional signal generators; however, ARF had not yet completed work on the development and production contract, and therefore, the production drawings for the generators had not yet been completed. Despite the absence of production drawings for the signal generators, the authorized engineer representative of defendant decided to proceed with the procurement and instituted bid procedures. Bid invitations were then issued on January 18, 1955. These invitations contained a statement that drawings were not available.

Between issuance of bid invitations and submission of plaintiff's bid on February 18, 1955, defendant had on display at Fort Monmouth a model of the signal generator, and had representatives there to give advice and information to bidders. The model was assembled and it was not possible to make a detailed examination of its components without disassembly, which was not permitted. Also available for examination by bidders were specifications and a copy of the Army Technical Manual containing descriptive data, pictures, diagrams, and a probably inaccurate and incomplete parts list of the signal generator. Representatives of plaintiff spent a day at Fort Monmouth obtaining the information relevant to the procurement. On that occasion they were also told that, although it was not then known when ARF would deliver its production drawings to the Government, the drawings, when available, would be furnished the successful bidder for the pending new procurement.

Hindsight shows that the information which was available to plaintiff and the other bidders at Fort Monmouth was sufficient to make only an inexact estimate of costs for bid purposes. Examination of production drawings and disassembly of the display model would have been necessary for a more accurate estimate of costs. It is customary and desirable in comparable procurements to furnish production drawings to bidders, but it is also not uncommon in procurement of equipment of complexity comparable to a signal generator that production drawings are not furnished bidders because they are not available as in this instance. Hindsight again shows a substantial risk involved in plaintiff submitting the bid under these circumstances, however at least 26 other firms besides plaintiff submitted bids in this particular procurement, thus alleviating to a large extent the question as to plaintiff's wisdom in taking a chance on misjudgment.

Plaintiff's bid of $644 per unit was the lowest responsive bid. In addition to the signal generators, plaintiff was to supply a set of reproducible vandykes of manufacturer's own drawings² and about 44 production drawings for the case and dummy load, accessories to the signal generator. The bid estimate provided $15,000 in engineering costs and $5,000 for the drawings, of which $185 was for the vandykes. The contract was awarded plaintiff on May 20, 1955 to deliver 652 signal generators plus accessories and drawings. In June 1955 the quantity was increased by 355 units at a reduced price of $619 each. The units were to be delivered in installments from March through October, 1956, with the schedule later revised to commence in August 1956 and to be completed March, 1957. The contract specifications stated that unless otherwise specified, all components of the signal generator "shall conform to the model," and further that "where drawings or a model are supplied to the contractor for his guidance, * * * this specification and any specification to which it is subsidiary shall govern over the drawings or model."

A brief summary of what has transpired is now in order so that the events that followed may be seen perspectively. In summarizing these events, we shall also look at the parties' intent as it must be remembered that "in the case of contracts the avowed purpose and primary function of the court is the ascertainment of the intention of the parties." Williston on Contracts, Third Edition, section 601; Union Pacific Railroad Co. v. United States, 10 Ct.Cl. 548 (1874), aff'd United States v. Union Pacific Railroad Co., 11 Ct.Cl. 1, 91 U.S. 72, 23 L.Ed. 224 (1875); Chase and Rice, Inc. v. United States, 354 F.2d 318, 173 Ct.Cl. ___ (December 1965).

Plaintiff had compiled its bid based on a copy of the specifications, the descriptive data in the Army Technical Manual, an inspection of an assembled model, and an incomplete parts list. Plaintiff knew that the ARF drawings were not available for bid purposes, but had been assured that when they were available, they would be furnished as an aid in the manufacture of the signal generators. Plaintiff also knew that the ARF drawings were being made from a prior procurement of the signal generator and undoubtedly expected the drawings when delivered to be capable of use in production. Plaintiff, therefore, took a risk in underestimating the cost of materials (materials not called for in information available) for completion of the signal generator by bidding without seeing production drawings and the disassembled model; however, plaintiff believed that any production drawings received would be complete and workable, supplying any omissions, and also helpful in assembly. Plaintiff could not have relied on any more help from the drawings than that stated above since the specifications in the invitation and the resulting contract both stated that the completed item "shall conform to the model," and that the specifications governed over the drawings or model.

Defendant also must have expected the completed drawings from ARF to be suitable for procurement purposes, and helpful to the successful bidder in supplying omissions and in assembling the item. This conclusion is based on two facts — first, research and development, and development and production contracts had been given to ARF to originally procure the signal generators, and the procurement had been successfully accomplished and, second, the production drawings required from plaintiff under the contract related only to generator accessories, not to the actual item itself, thus implying confidence that ARF would supply complete drawings for the generator.

Keeping the above analysis in mind, we return to the subsequent events of this controversy. The ARF production drawings were delivered to defendant on April 27, 1955. Defendant reviewed and approved them on May 16, 1955, four days prior to the award of the contract in suit to plaintiff. However, they were not checked by the Government to determine whether they accurately reflected the ARF signal generator, and defendant advised plaintiff that it was uncertain of the accuracy of the drawings. The availability of these ARF drawings obviated the need for the drawings plaintiff was to supply with its contract, and created a new need for revision and correction of the ARF drawings (since they had not been checked for accuracy by defendant). Therefore on June 15, 1955, the requirement that plaintiff supply vandykes and the 44 accessory drawings was deleted from the contract, along with the $5,000 cost of the drawings ($185 of which covered the vandykes), and in lieu thereof was added to the contract a requirement for plaintiff to...