Air-A-Plane Corporation v. United States

• Decision Date: 13 June 1969
• Docket Number: No. 61-62.,61-62.
• Citation: 408 F.2d 1030
• Parties: AIR-A-PLANE CORPORATION v. The UNITED STATES.
• Court: U.S. Claims Court

408 F.2d 1030 (1969)

AIR-A-PLANE CORPORATION v. The UNITED STATES.

No. 61-62.

United States Court of Claims.

March 14, 1969.

As Amended June 13, 1969.

David V. Anthony, Washington, D. C., for plaintiff, Gilbert A. Cuneo, Washington, D. C., attorney of record, Sellers, Conner & Cuneo and James R. Stoner, Washington, D. C., of counsel.

Douglas M. Smith, Civil Div., Dept. of Justice, Washington, D. C., with whom was Asst. Atty. Gen., William D. Ruckelshaus, for defendant.

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

OPINION

DAVIS, Judge.^*

After formal advertising, plaintiff Air-A-Plane Corporation entered into a fixed-price contract with the Army Chemical Corps to make over 1100 smoke generators (designated as M3A1). The total price at the outset was $607,101.04. The current dispute is the outcome of a large number of changes made by the Government after the award. In its decision the Armed Forces Board of Contract Appeals said that "while aware of the `Changes' provision in the contract and of the Government's right to order changes, plaintiff in bidding on the contract, had not anticipated that any substantial number of changes would be ordered. This belief was based principally on the fact that the contract, by way of detailed and comprehensive specifications and drawings, described the contract items minutely. This belief was apparently also based in part upon the fact that the contract was a fixed price contract."

Nevertheless, the Board found, "after the contract was awarded a large number of changes were made. The first change changed the designation of the item from the M3A1 to the M3A2. The Board here emphasizes that it was a large number of changes that were made. Since the parties count the changes differently they do not agree on the precise number (plaintiff uses a figure of approximately 1000) but using either party's version the number is large. So numerous were the changes that the contract took on the aspects of a design or development contract. Certain components of the generator were the subject of more than one change; and other components, although not themselves changed, would be affected (as to time of assembly for example) by changes made on other components. The frequency and nature of the changes were disruptive of plaintiff's production. By way of illustration as to the number of changes the first change deleted some 41 drawings in their entirety, making substitutions for most of them; and directed plaintiff to hold in abeyance the procurement of the materials and components covered by some 126 other drawings."

As compensation for these modifications, the contractor sought equitable adjustments under the Changes article. Certain supplemental agreements were made, one of which (No. 17) added some $25,000 to the total price. The parties could not agree on the recovery for other changes, and the contracting officer unilaterally allowed an additional $60,000, which was much less than plaintiff had asked. It appealed to the Board of Contract Appeals, arguing that Supplemental Agreement No. 17 should be set aside as induced by economic duress, and that the total equitable adjustment should be considerably enlarged over the $85,000 (or so) extra which had been granted.

The Board agreed that "There is no dispute as to the fact that changes were ordered. There is no dispute as to the fact that the over-all effect of these changes was to increase the cost of performing the contract. There is no dispute as to the fact that plaintiff is entitled to an upward adjustment of the contract price." The Board decided, however, that Supplemental Agreement No. 17 was not vitiated by duress and that Air-A-Plane had failed to prove that it was entitled to anything more, by way of equitable adjustments under the Changes article, than it had already been allowed by the contracting officer. Air-A-Plane Corp., ASBCA No. 3842, 60-1 BCA ¶ 2547, at 12,203.

The original petition in this court (filed in 1962) contented itself with attacking the Board's decision, on the amount of recovery, as vulnerable under the standards of the Wunderlich Act, 41 U.S.C. § 321 (1964). After United States v. Carlo Bianchi & Company, 373 U.S. 709, 83 S.Ct. 1409, 10 L.Ed.2d 652 (1963), plaintiff was allowed to amend the petition to assert, in addition, (a) that defendant breached the contract because the changes imposed amounted in toto to a cardinal change, beyond the scope of the Changes article, and (b) a plea for reformation of the contract because the parties intended, but never executed, a novation of the original contract, transforming it into a research, development, and production agreement.¹ Plaintiff continues to press these additional claims, and we consider them first because their disposition may make it unnecessary to review the Board's decision at all.

Cardinal change: The normal Changes article (which was the clause in this agreement) permits the Government to make changes "within the general scope of this contract." Because of this phrase in particular, and the structure of the article in general, the court has consistently ruled that such a "changes" provision does not authorize a "cardinal" change — a drastic modification beyond the scope of the contract.² Rather, a fundamental alteration of this type is a contract breach, entitling the contractor to breach damages.

The basic standard, as the court has put it, is whether the modified job "was essentially the same work as the parties bargained for when the contract was awarded. Plaintiff has no right to complain if the project it ultimately constructed was essentially the same as the one it contracted to construct." Conversely, there is a cardinal change if the ordered deviations "altered the nature of the thing to be constructed". Aragona Constr. Co. v. United States, supra note 2, 165 Ct.Cl. at 391; Keco Indus., Inc. v. United States, supra note 2, 364 F.2d at 847-848, 176 Ct.Cl. at 998; see Wunderlich Contracting Co. v. United States, supra note 2, 351 F.2d at 966, 173 Ct.Cl. at 194. Our opinions have cautioned that the problem "is a matter of degree varying from one contract to another" and can be resolved only "by considering the totality of the change and this requires recourse to its magnitude as well as its quality". Saddler v. United States, supra note 2, 287 F.2d at 413, 152 Ct.Cl. at 561, see J. D. Hedin Constr. Co. v. United States, supra note 2, 347 F.2d at 257, 171 Ct.Cl. at 105, 106. "There is no exact formula * * *. Each case must be analyzed on its own facts and in light of its own circumstances, giving just consideration to the magnitude and quality of the changes ordered and their cumulative effect upon the project as a whole." Wunderlich Contracting Co. v. United States, supra, 351 F.2d at 966, 173 Ct.Cl. at 194. In emphasizing that there is no mechanical or arithmetical answer, we have repeated that "the number of changes is not, in and of itself, the test * * *." Saddler v. United States, supra, 287 F.2d at 413, 152 Ct.Cl. at 561; see Aragona Constr. Co. v. United States, supra, 165 Ct.Cl. at 390; J. D. Hedin Constr. Co. v. United States, supra, 347 F.2d at 257-258, 171 Ct.Cl. at 106.

Under these general standards, there is surely adequate warrant for inquiring whether the modifications made by the defendant in the M3A1 generator resulted in a cardinal change. We have already quoted the ASBCA's major description of these changes in its findings of fact. At the end of its opinion, the Board said in the same vein: "In view of the large number of changes that were made it may well be that another form of contract might have proved to be more appropriate; for example, a price redetermination contract or a cost-plus-a-fixed-fee contract." These statements by the only tribunal which has thus far considered the extent of the changes reveal, by themselves, that the claim of a cardinal change is very substantial and far from frivolous — whether or not it turns out to be vindicated in the end. Plaintiff is not embarked on a mere fishing expedition.

It is said, nevertheless, that there can be no trial or consideration of that issue in view of the administrative process made available by the contract and used by this contractor. One theory is that there cannot be a cardinal change if the agency is willing, as here, to consider an equitable adjustment under the Changes clause. That position has no historical support in our treatment of the problem, and United States v. Carlo Bianchi & Company, supra, 373 U.S. 709, 83 S.Ct. 1409, 10 L.Ed.2d 652, as well as its descendants, do not suggest that agency tribunals should now have jurisdiction beyond the specific contract provisions giving them authority; on the contrary, United States v. Utah Construction & Mining Co., 384 U.S. 394, 86 S.Ct. 1545, 16 L.Ed.2d 642 (1966), expressly recognizes the large areas in which the Boards have no power.

This theory suffers, moreover, from the logical difficulty that it allows the Board or other agency tribunal to create jurisdiction for itself where none exists under the traditional exception for a "cardinal" change. Administrative power flows (in this instance) from the Changes clause; that provision expressly limits modifications to those "within the general scope of this contract", and impliedly excepts alterations which transform the nature of the work to be done or the item to be furnished. The agency's willingness to go into the excluded area cannot enlarge its authority and should not be permitted to force a contractor to seek administrative relief for an injury which is outside the contract and for which he has a right to a judicial decision.³

A related but separate hypothesis — stressed by the defendant — is that this particular plaintiff estopped itself by seeking an equitable adjustment. This is an instance of an imposed election of remedies which seems to us unfair to contractors. One who was...