Firestone Tire & Rubber Company v. United States

• Decision Date: 11 June 1971
• Docket Number: No. 246-69.,246-69.
• Parties: The FIRESTONE TIRE & RUBBER COMPANY v. The UNITED STATES.
• Court: U.S. Claims Court

195 Ct. Cl. 21, 444 F.2d 547 (1971)

The FIRESTONE TIRE & RUBBER COMPANY v. The UNITED STATES.

No. 246-69.

United States Court of Claims.

June 11, 1971.

Loren K. Olson, Washington, D. C., attorney of record, for plaintiff.

R. W. Koskinen, Washington, D. C., with whom was Asst. Atty. Gen. L. Patrick Gray, III, for defendant.

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

ON PLAINTIFF'S MOTION AND DEFENDANT'S CROSS MOTION FOR SUMMARY JUDGMENT

DURFEE, Judge.

This is a Government contracts case wherein plaintiff, a body corporate of the State of Ohio, seeks review of an adverse decision rendered by the Armed Services Board of Contract Appeals (hereinafter the Board or ASBCA), under the provisions of the Wunderlich Act, 41 U.S.C. §§ 321, 322 (1964). In the proceedings before the Board, the parties filed a Stipulation of Facts which has been incorporated in major part below. The controversy focuses upon the proper and reasonable interpretation of the Price Escalation clause which became an integral part of the contract in suit.

On May 14, 1965, defendant, acting through the United States Army Tank-Automotive Center, issued an Invitation for Bids for the production and delivery of Shoe Assemblies, Rubber, Track, for tanks. At the time the invitation for bids was issued, as stated therein, defendant had a present two-year requirement for track shoe assemblies. The invitation further stated that the contract would be awarded to fulfill this requirement either in whole on a multi-year basis identified as Alternate A in the bid schedule, or in part on a single-year basis identified as Alternate B. Alternate A of the bid schedule was divided into two Program Year increments; the first year increment consisting of 224,886 track shoe assemblies and the second year increment consisting of an additional 243,000 assemblies. Defendant reserved the right to increase the quantity of each program year by not more than 50 percent.

The invitation for bids further provided that in the event an award was made under Alternate A, the contract would be subject to the Limitation of Price and Contractor Obligations clause which stated:

(a) This clause applies only in the event this contract is awarded on the alternative basis for award described in the Schedule as "Multi-Year Procurement."

(b) Funds are available for performance of this contract in the amount specifically described in the Schedule, as available for contract performance. The amount of funds so described at the time of award is not considered sufficient for the contract performance required by and described in the schedule for any Program Year other than the First Program Year. Upon availability to the Contracting Officer of additional funds sufficient for performance of the full requirements for the next succeeding Program Year, the Contracting Officer shall, not later than the date specified in the schedule, unless a later date is agreed to by the parties, so notify the Contractor in writing and the amount of funds described in the schedule as available for contract performance shall be modified accordingly. This procedure shall apply for each successive Program Year.

(c) The Government is not obligated to the Contractor for contract performance in any monetary amount in excess of that described in the schedule or modifications thereto, as available for contract performance.

(d) The Contractor is not obligated to incur costs for the performance required for any Program Year after the first unless and until he has been notified in writing by the Contracting Officer of an increase in availability of funds in accordance with paragraph (b) of this clause. If so notified, the Contractor\'s obligation shall be increased only to the extent contract performance is required for the additional Program Year for which funds have been made available.

* * * * * *

The invitation required that bids be submitted for the entire quantity of each item under both Alternates A and B, or for Alternate B only. In addition, bidders were instructed to submit identical unit price bids for each of the two Program Year increments covered by Alternate A, i. e., the second year increment was to be bid at the same unit price as that submitted for the first year increment. However, the invitation for bids provided that in the event award was made under Alternate A, the contract would be written on a firm fixed price basis, subject to the contract provision entitled "Price Escalation" for the second program year.

Plaintiff submitted identical unit price bids of $23.33 for each of the two Program Year increments. In view of the provision for price escalation, plaintiff's bid included no contingency allowance in the unit prices to cover possible fluctuations in cost which might occur during the second year of performance. As low bidder, plaintiff was awarded the contract on July 1, 1965.

Pursuant to the conditions outlined in the invitation for bids, plaintiff was notified, by Change Order dated July 5, 1965, that the second year increment had been funded and production of the same was accordingly authorized. By Change Order dated May 31, 1966, defendant exercised its option to increase the quantity of the second year increment by 50 percent.

The Price Escalation clause set forth in the invitation for bids and in the contract is as follows:

(a) At such times as, pursuant to the clause entitled Limitation of Price and Contractor Obligations, notification is given the contractor as to the availability of funds for second increment, the unit prices for said items shall be the original prices therefor as shown in the schedule hereof subject to an adjustment, upward or downward, on the following terms and conditions:

(1) The first published final "Wholesale Prices and Price Indexes" published monthly by the U. S. Department of Labor for the month in which the bid opening date falls shall be the base for the purpose of price adjustment under this clause. The basis upon which the price escalation shall be made is as follows:

(i) Rubber, Synthetic will have a weight of 10% of the unit selling price of the track assembly, and the price will be adjusted based on the Index cited above under reference 0712.¹

(ii) Steel Products will have a weight of 90% of the unit selling price of the track assembly, and the price will be adjusted based on the Index cited above under reference 1014.

(2) The unit prices to be applicable to the items under the second increment shall be the original contract unit prices set forth in the schedule increased or decreased to reflect the percentage difference between the base index price referred to above and the first published Final Price Index for the month of last contract scheduled delivery date for preceding increment. This amount will be inserted by modification pursuant to the provisions of the "Limitation of Price and Contractor Obligation" clause.

(3) The upward adjustment under this provision shall not exceed five percent (5%), i. e., the revised unit prices which may result from the application of this Price Escalation provision shall, in no event, be more than 5% higher than the original unit prices for said items as set forth in the schedule hereof. The downward adjustment shall be unlimited.

All of the contract documents, including the language of the Price Escalation clause, were prepared by defendant without the advice or consultation of plaintiff. Plaintiff did not question any clause or seek clarification or amendment of any language prior to award of the contract.

The "Wholesale Prices and Price Indexes" (hereinafter Index) referred to in the Price Escalation clause is designed to measure average changes in prices of all commodities sold in primary markets of the United States. Specifically, it compiles and publishes wholesale price indexes for "commodity groups", e. g., reference 10, Metals and Metal Products; "subgroups", e. g., reference 101, Iron and Steel; "product classes", e. g., reference 1014, Finished Steel Products; and "individual commodities", e. g., reference 1014-37.03, Bars, H.R., Alloy (described below as Steel, Forging). Each individual commodity in the index is representative of a class of prices and is assigned its own statistical weight plus the statistical weights of other commodities not directly priced but whose prices are known or assumed to move similarly. The statistical weight for the product class is the total of the statistical weights of the individual commodities included in the product class. The price index for the product class "Finished Steel Products" (reference 1014), is the statistically weighted average of the individually weighted price indexes of approximately 50 individual commodities, at least three, but no more than five of which are used in the manufacture of track shoe assemblies.²

Approximately 63 pounds of steel were required in the manufacture of each track shoe assembly. The component breakdown by weight, including the applicable individual commodity reference in the Index, is set forth in the following table:

                ___________________________________________________________________________________________
                Component                    Approximate             Specified                  Applicable
                                              weight                   steel                    price index
                ___________________________________________________________________________________________
                Tube ______________________ 10½ pounds __________ Carbon Steel Tubing _____   1014-63.04
                Pins ______________________ 16½ pounds __________ Steel, Forging __________   1014-37.03
                                                                             or
                                                                    Tubing, Steel, Alloy,        Not indexed
                                                                    Seamless
                End Plate, Center Guide,    28 pounds _____________ Steel, Forging __________    1014-37.03

...