Adams v. United States

• Citation: 175 Ct. Cl. 288,358 F.2d 986
• Decision Date: 15 April 1966
• Docket Number: Cong. No. 5-59.
• Parties: Herman ADAMS, doing business as Adams Manufacturing Company v. The UNITED STATES.
• Court: Court of Federal Claims

175 Ct. Cl. 288, 358 F.2d 986 (1966)

Herman ADAMS, doing business as Adams Manufacturing Company v. The UNITED STATES.

Cong. No. 5-59.

United States Court of Claims.

April 15, 1966.

COPYRIGHT MATERIAL OMITTED

Dale L. Bumpers, Charleston, Ark., attorney of record, for plaintiff.

Charles A. Simmons and Sheldon J. Wolfe, 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.

PER CURIAM:^*

This is a suit for direct or primary loss in the amount of $172,081.92 caused by delays which occurred in the performance of a contract to produce a large number of wood tent pins for defendant. A claim for so-called "indirect loss" or secondary loss in the amount of $43,061.91 is not deemed to be supported by substantial evidence (and is no longer pressed by plaintiff). Extensive delay is attributed by plaintiff to the arbitrary and unreasonable action of an employee of defendant, Inspector Joseph C. Burkhart, in rejecting as many as 50 per cent of the tent pins produced by plaintiff under his inspection. There is also involved the withholding of information by defendant or failure of Inspector Burkhart to furnish plaintiff with the inspection plan which was used and the Acceptable Quality Level (AQL) required by defendant in performance of the contract. When Inspector Burkhart was replaced by another inspector (Kallen) the percentage of discarded or rejected pins was decreased from over 50 per cent under Inspector Burkhart to about 20 per cent or lower under Inspector Kallen. Although plaintiff did not exhaust his administrative remedies or file a formal complaint concerning the inspection of pins by Inspector Burkhart, he did make complaint and discuss his problems with Burkhart and Burkhart's supervisor.

By H.Res. 296, 86th Congress, 1st Sess., the House of Representatives has asked the court, pursuant to 28 U.S.C. §§ 1492 and 2509, for a report as to whether plaintiff is legally or equitably entitled to any damages in connection with a contract which he had with the defendant to manufacture tent pins.¹

In response to a request for proposals issued by the Chicago, Illinois, Quartermaster Corps on November 14, 1953, plaintiff submitted a proposal to furnish quantities of 16-inch and 24-inch tent pins for a consideration of $103,177.26, f. o. b. certain destination points. Plaintiff initially computed his net direct material costs at $24,320.46, later increased to $50,140.

Upon opening the bids, defendant's contracting officer noted that plaintiff's material cost allocation was substantially lower than the second lowest bidder. A few weeks later a representative of the Chicago Quartermaster advised plaintiff's plant manager that his bid figures were too low and asked him to recheck them. Subsequently, when a representative of the Quartermaster visited the plant to conduct a pre-award survey, he reminded plaintiff that in his bid he neglected to allow for the cost of manufacturing and shipping crates, and for a rejection factor.

After the pre-award survey was conducted, plaintiff was invited to Chicago to attend a conference to discuss the proposal of November 16, 1953. Prior to the meeting, plaintiff submitted to defendant an informal proposal which amended the initial proposal by allowing a 20 per cent rejection factor. This increased the bid price on f. o. b.-plant to $103,117.26.

Subsequently, in a conference held on December 18, 1953, defendant's spokesman advised plaintiff's representative that their second informal proposal was too high, and as a consequence, the informal proposal was revised downward to a figure of $90,000 f. o. b.-plant. The difference between the second proposal and the one arrived at during the meeting was determined by reducing the rejection factor from 20 per cent to 10 per cent, and making other minor adjustments.

Various other matters pertaining to the contract were discussed. Plaintiff's representative advised defendant that he anticipated buying mill run lumber and screening from it the No. 1 and No. 2 red oak for use in producing the pins. Plaintiff's representative attempted to ascertain what inspection procedure would be used. He was told that he would subsequently receive an inspection guide. The guide which was eventually furnished plaintiff covered inspections with respect to quartermaster contracts in general, but did not specifically refer to the procedure to be used in inspecting tent pins.

On the day following the conference, plaintiff submitted a formal bid in the amount of $123,391.51 f. o. b. certain destinations. In the revised formal bid plaintiff increased his materials cost from $24,320.46 to $50,140 while reducing his labor costs from $35,165.63 to $25,200. After making other minor adjustments and adding a 10 per cent profit factor plaintiff's f. o. b.-plant price amounted to $90,791.17. Plaintiff also increased his delivery costs from $30,215.86 to $52,600.34.

On December 10, 1953, Contract QM-23755 was awarded to plaintiff. For a consideration of $123,391.51 plaintiff agreed to manufacture and deliver 606,525 type I 16-inch wood tent pins and 763,000 type II 24-inch wood tent pins. The contract also contained the usual provisions entitled "Changes", "Inspections" and "Disputes." Pins were to be produced in accordance with Military Specifications Mil-P-2383A. In addition to delineating the contract specifications, Mil-P-2383A provided that sampling and inspection would be conducted in accordance with Standard MIL-STD-105A. In determining whether pins were to be accepted by the defendant, MIL-STD-105 A provided for inspection of a certain number of samples based upon the lot size submitted. If the sample contained more than the minimum number of major and minor defective pins, the entire lot was to be rejected. The maximum number of defects which were to be allowed was determined by the Acceptable Quality Level (hereafter called AQL), established by defendant and thus would vary with changes in the AQL. The AQL for contract No. QM-23755 was specified by the defendant, but defendant never revealed to plaintiff the particular AQL established for this contract. Plaintiff insists that the failure of defendant to furnish plaintiff with the AQL it was using constituted a breach of contract. Plaintiff accordingly claims that he is entitled to relief because defendant omitted a specification of the contract. Plaintiff's contractual obligation was to produce pins according to certain specifications. All details specifying the kind of pins that were to be manufactured were set out in Mil-P-2383A referred to in the contract. AQL is used to determine whether a sufficient number of defects (as defined in Mil-P-2383A) are found in the sample group of pins to warrant rejection of the entire lot. Since plaintiff was not advised of the AQL applicable, plaintiff could not anticipate in advance the number of defective pins he could produce without having an entire lot rejected. Inspector Burkhart never told plaintiff the number of major and minor defects which would be allowed in a sample size lot. Although plaintiff was prejudiced by lack of certain information known to defendant, he still had the basic duty under the contract to produce pins free from those defects prohibited by the specifications (Mil-P-2383A).

Plaintiff set up an assembly line whereby raw lumber which had been stored in a yard was put through a rip saw which cut it into rough strips. From there it went through the molder which planed it to the proper width and thickness. Once the pins were cut in the proper lengths they were processed through the ropenotching and pointing machines. At the end of the processing line the pins were dipped into a wood preservative.

On February 1, 1954, defendant's inspection supervisor and plaintiff executed an inspection plan which provided for only two inspection points (prior to the ultimate end-item stage). Once pins were molded they were to be tested for moisture and specific gravity. A stationary lot inspection for dimensional and visual defects was to be conducted before the pins were treated with a wood preservative.

Defendant's Inspector Burkhart arrived at plaintiff's plant on February 15, 1954. Upon his arrival he arbitrarily disregarded the prior inspection plan and established four inspection points all on a stationary lot basis. When production began in March, 1954, that change inconvenienced plaintiff to a great extent in that under stationary lot inspection the entire lot must be removed from the assembly line until testing of those samples chosen from the lot has been completed. Thus, production was delayed until the inspection was completed and the lot returned to the assembly line. The delay involved cannot properly be charged to plaintiff. In addition, on several occasions Inspector Burkhart aggravated the situation and increased the period of delay by refusing to inspect pins as they piled up at the second inspection station.

Approximately one month after production had commenced, the Quartermaster Inspection Service notified Inspector Burkhart that the sampling plan procedure should be changed to moving lot inspection. This change accelerated plaintiff's production. At about the same time Inspector Burkhart eliminated two of the additional inspection stations he had established. Testing for moisture content and density was now conducted on raw lumber. Dimensional and visual inspection was conducted only on finished pins after they had been dipped in the preservative.

In making his inspections Inspector Burkhart was most zealous. On a number of occasions he spoke to plaintiff's employees working on the assembly line and told them what defects they should look for in rejecting pins. He denied talking to anyone except Herman Adams, Ed Adams, plaintiff's brother and general superintendent, and Milus Bullington, plaintiff's tent pin production foreman,...