Copco Steel & Engineering Co. v. United States

• Decision Date: 19 February 1965
• Docket Number: No. 196-62.,196-62.
• Citation: 169 Ct. Cl. 601,341 F.2d 590
• Parties: COPCO STEEL & ENGINEERING CO. v. The UNITED STATES.
• Court: U.S. Claims Court

169 Ct. Cl. 601, 341 F.2d 590 (1965)

COPCO STEEL & ENGINEERING CO. v. The UNITED STATES.

No. 196-62.

United States Court of Claims.

February 19, 1965.

Robert J. Bird, Washington, D. C., for plaintiff. John L. Carey, So. Bend, Ind., Bird & Thompson, Washington, D. C., and Oare, Thornburg, McGill & Deahl, So. Bend, Ind., of counsel.

Edgar H. Twine, Washington, D. C., with whom was Asst. Atty. Gen., John W. Douglas, Washington, D. C., for defendant.

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

PER CURIAM.

This case was referred pursuant to Rule 54(b) to Trial Commissioner Saul Richard Gamer with directions to make his recommendation for conclusion of law on plaintiff's motion and defendant's cross-motion for summary judgment. The commissioner has done so in an opinion filed October 5, 1964. No exceptions or request for review of the commissioner's opinion and recommendation have been filed and the time for so filing pursuant to the rules of the court having expired, the case is submitted to the court without oral argument according to Rule 55(b) (3) (iii). Since the court is in agreement with the opinion and recommendation of Trial Commissioner Gamer, as hereinafter set forth, it hereby adopts the same as the basis for its judgment in this case. Plaintiff is therefore not entitled to recover. Defendant's cross-motion for summary judgment is granted, plaintiff's motion is denied, and plaintiff's petition is dismissed.

The Chief Judge concurs in the granting of defendant's cross-motion for summary judgment on the first ground stated in Trial Commissioner Gamer's opinion.

OPINION OF COMMISSIONER

Plaintiff's contract¹ with the Ordnance Corps, Department of the Army (Picatinny Arsenal, Dover, New Jersey), for the manufacture of 38 "Containers T 315",² incorporated a price redetermination article. The original contract price, as amended, was $67,820.79. The contracting officer subsequently determined that $41,925.32 constituted a fair and reasonable price (which allowed a 15 percent profit) and, following plaintiff's refusal to make a voluntary refund, withheld from payments otherwise due under the contract and from a series of others that plaintiff had with defendant the difference of $25,895.47.³ The Armed Services Board of Contract Appeals, in an 11-5 decision, upheld the contracting officer's action and plaintiff, contending it is entitled to the full contract price, sues to recover the withholdings.

At a pretrial conference, the parties agreed that there was no material dispute concerning the facts and that the legal issues involved could be determined on the basis of the facts as found by the Appeals Board. These issues are now presented for resolution on plaintiff's motion and defendant's cross-motion for summary judgment.

Plaintiff's case rests on the contention that the price redetermination article is, under the circumstances, not applicable to it at all. It says that if the Government desired to invoke the article, it was required by the specific terms thereof to give plaintiff a timely written demand, which it failed to do.

The pertinent provisions of the article read as follows:

"Article 35 — Price Redetermination (a) Within sixty days after the completion or termination of this contract, the Contractor will submit to the Contracting Officer a detailed statement of the costs of performing this contract. Upon the written demand of the Contracting Officer, made at any time within thirty days after the submission of such statement, the Contractor will negotiate to reduce the contract price to an amount representing fair and reasonable compensation for the performance of the contract. * * *

* * * * * *

"(c) If within thirty (30) days after the making of such demand (or such further period as may be fixed by written agreement) the Contracting Officer and the Contractor fail to agree to a redetermined price (which term, for the purpose of this clause, shall include direct costs, indirect costs and profits, the failure to agree shall be a dispute concerning a question of fact within the meaning of the clause of this contract entitled `Disputes.\'

"(d) The Government shall retain from amounts otherwise due the Contractor, or the Contractor shall repay to the Government if paid to him, any amount by which the contract price is found as a result of the application of this clause to exceed a fair and reasonable price, as the Contracting Officer may direct."

The final shipment, consisting of 14 containers, was received by defendant on March 4, 1955. On March 10, 1955, auditors of the Army Audit Agency arrived at plaintiff's place of business to audit plaintiff's books and records on this contract and to determine plaintiff's costs and profit. The audit took approximately 2 weeks. During this period plaintiff, by letter of March 18, 1955, forwarded a detailed cost statement to defendant which it stated it was submitting "in accordance with article No. 35 of this contract." By letter of March 22, 1955, defendant's price analyst (evidently the letters having crossed) requested plaintiff to submit cost data "in accordance with the provisions of Article 35 of the subject contract." By letter of the same date, March 22, 1955, plaintiff supplemented its March 18 statement by a corrected figure, showing, according to plaintiff's calculations, its costs to be $37,356.77, and leaving it with a profit of $30,464.02. Since this indicated an abnormally large profit of over 80 percent, plaintiff, on March 24, 1955, sent a long letter attempting to justify its position that it be permitted to retain the full contract price. However, the only written demand under the article requiring the contractor to negotiate to reduce the contract price was not made by defendant until June 14, 1955. Manifestly, this was not made "within thirty days after the submission of such statement" (it was almost 3 months later), and would, on this basis, be untimely.

Defendant, however, supports the timeliness of the June 14 demand by contending that the contract can not be considered to have been completed until May 18, 1955, and that plaintiff's submission of the cost statement (and defendant's request therefor) in March was therefore actually premature, Article 35 (a) requiring that the statement be submitted "after the completion of" the contract (emphasis supplied). The May 18 date should, defendant contends, therefore be considered as the effective date of the submission of the cost statement. On that basis, its June 14 demand, made within 30 days after May 18, would be timely.

The grounds for defendant's contention that the contract should not be regarded as having been completed prior to May 18, 1955, despite the final delivery made on March 4, 1955, are as follows:

By letter of April 4, 1955, defendant notified plaintiff that one container in a lot of 10 which defendant had received on February 23, and one in the last lot received on March 4, were defective (by reason of air test failure) and therefore rejected. The letter requested plaintiff to furnish shipping instructions for the return of the two containers. By letter of April 29 (plaintiff's delay in replying is unexplained), plaintiff gave the necessary shipping instructions for their return, stating that it would put them in proper condition. By letter of May 10, plaintiff, not having heard further from defendant and not having received the containers, made inquiry about the matter. Subsequently, by letter of May 24, defendant advised that, because of urgent need, it had decided to make the necessary repairs itself and to accept both containers. Defendant had in fact formally accepted the two containers on May 18. Although defendant had, as a result of the rejection, withheld payment for the two containers, deducting amounts with respect thereto from plaintiff's invoices, plaintiff was advised, by letter of May 26, 1955, to resubmit invoices covering them and payment was ultimately made for them in full, without plaintiff's being charged for the cost of any repairs.

After a price redetermination conference on June 7, 1955, during which plaintiff raised for the first time the question of whether defendant was precluded from redetermining the contract price because it had made no written demand to negotiate within 30 days after plaintiff had submitted its cost statement in March, defendant, by letter of June 14, 1955, then made such a formal demand. This letter took the position that "the contract was not physically completed until final acceptance by this Arsenal of the containers on 18 May 1955" and that, therefore, "less than 30 days have elapsed since the completion of the contract."

On this issue, it seems plain that defendant is correct. Certainly in a supply contract such as the instant one which contains specific provisions with respect to inspection, acceptance of the articles, and payment only upon acceptance, a contract can not be considered to be "completed" immediately upon the contractor's unilateral act of shipping out the final articles. Obviously some reasonable amount of time must be allowed the Government to inspect and test the articles and to make a determination concerning their technical compliance with the specifications.

Article 5 of this contract, headed "Inspection", in terms provides that: "All supplies * * * shall be subject to inspection and test by the Government * * * prior to final acceptance"; that "In case any supplies * * * are defective * * * the Government shall have the right either to reject them * * or to require their correction"; and that "Final acceptance or rejection of the supplies shall be made as promptly as practicable after delivery * * *." And Article 7, "Payments", provides that the contractor shall, upon the submission of proper invoices or vouchers, be paid the contract price for the "supplies delivered and accepted." Certainly under such provisions, mere delivery alone does not...