Essex Electro Engineers v. Danzig
| Decision Date | 18 August 2000 |
| Citation | 224 F.3d 1283 |
| Parties | (Fed. Cir. 2000) ESSEX ELECTRO ENGINEERS, INC.,Appellant, v. Richard J. Danzig, SECRETARY OF THE NAVY, Appellee. 99-1480 DECIDED: |
| Court | U.S. Court of Appeals — Federal Circuit |
Appealed from: Armed Services Board of Contract Appeals
[Copyrighted Material Omitted]
[Copyrighted Material Omitted] Charles E. Raley, Law Offices of Charles E. Raley, of Hilton Head Island, South Carolina, argued for appellant.
Mark L. Josephs, Trial Attorney, Commercial Litigation Branch, Civil Division, Department of Justice, of Washington, DC, argued for appellee. With him on the brief were David W. Ogden, Acting Assistant Attorney General; David M. Cohen, Director. Of counsel was Anthony H. Anikeeff, Assistant Director.
Before CLEVENGER, BRYSON, and LINN, Circuit Judges.
Essex Electro Engineers, Inc., appeals from a decision of the Armed Services Board of Contract Appeals. The Board held that Essex was entitled to compensation for certain government-caused delays to its contract performance. For other government-caused delays, however, the Board held that Essex was not entitled to compensation, because it found that Essex concurrently delayed the performance of the contract. We conclude that the parties' delays in this case may be apportionable; we therefore vacate the Board's decision and remand for further consideration of that issue.
On September 6, 1990, the Marine Corps Research, Development and Acquisition Command awarded Essex a contract to manufacture, test, and deliver a number of skid-mounted floodlights. The contract required Essex to produce and test two prototype floodlights, which the contract referred to as First Articles. The contract further provided that following the government's review of and comment on the First Article inspection report, Essex would commence production of the remaining floodlights and periodically deliver the finished items.
The contract required Essex to use government-provided drawings. Drawing revisions, including any that were necessary to correct the government's initial drawings, required approval by way of formal engineering change proposals (ECPs). A configuration-management program, which Essex was to implement in accordance with a contract-specified standard, governed the submission of the ECPs.
On April 15, 1991, Essex notified the government that the drawings for the floodlights contained errors and omissions that had to be corrected before Essex could assemble the First Articles. Essex stopped work on that date because of the errors. The government's technical project officer contacted Essex by telephone on May 10 and provided additional details and revised dimensions that addressed some of Essex's concerns. Then, on May 21, the contracting officer sent Essex a letter advising that changes to the drawings appeared to be indicated and directing that the proposed changes to the drawings be submitted as ECPs pursuant to the contract.
Essex submitted the ECPs on July 30 using the single-page form specified by MIL-STD-481, a military standard for configuration control and engineering changes. In the space on that form for specifying "Estimated Costs/Savings," Essex wrote "To be determined." The contracting officer replied by letter dated September 16 that the government rejected the ECPs "because they were not submitted in accordance" with the contract provision that specified MIL-STD-480 as the applicable standard. The five-page form designated by MIL-STD-480 requires extensive information in addition to the direct costs of implementing the change.
Essex did not consider MIL-STD-480 controlling. Counsel for Essex on September 20 requested a meeting with the government to discuss other issues, and on September 30 Essex asked that the discussion include the issue of the applicable standard for ECP submission. At the ensuing meeting between the parties on November 8, the government repeated its insistence that MIL-STD-480 applied to the ECPs and noted that Essex must provide the "costs associated with each one." On November 26, Essex submitted the ECPs on the correct form, providing the total proposed cost for each ECP, but no cost details.
The government on February 11, 1992, notified Essex that it had approved some of the ECPs but had rejected others. Two of the disapproved ECPs concerned the dimensional errors and detail omissions that were the subjects of the government's May 10, 1991, telephone call to Essex. The government informed Essex that it needed to submit additional cost details and a revised delivery schedule to complete the approved ECPs. Essex submitted the required cost details on May 5, 1992.
The contract required Essex to submit a draft First Article inspection procedure (FAIP). The government had 45 days to review and comment. Essex then had 30 days to submit the final FAIP.
Essex submitted its draft FAIP on March 6, 1991. The government responded with its comments on May 21. The response identified 12 alleged deficiencies and stated a contractual basis for each. In particular, the government faulted the draft for not listing the test equipment to be used, citing sections 10(d) and (e) of DI-T-4901, the standard for FAIPs that was incorporated by reference in the contract. Those sections required the FAIP to include such information as a "[d]escription of support equipment required from the Government" and a "[s]tep-by-step method to be followed for satisfying the particular requirements" of the contract. The government also faulted Essex's draft FAIP for using the word "may" in the criteria for rejection of the First Articles. The use of that term, the government contended, did not conform to the purchase description, which provided that test failures and defects "shall" be cause for rejection.
On June 24, Essex submitted a revised FAIP, which the government rejected on August 12 for failing adequately to address nine of the deficiencies previously identified. On August 22, Essex challenged the government's interpretation of the contract's FAIP requirements. Essex asserted that its revised FAIP fully listed all support equipment required from the government and that its revised FAIP stated that test failures and defects "will" cause rejection, as the government had directed.
At the parties' November 8 meeting, the government accepted some of Essex's comments, but continued to require a generic list of test equipment and insisted that Essex use the term "shall" instead of "will" in the rejection criteria. Essex submitted a further-revised FAIP on November 22, but without incorporating all agreed changes. The government rejected the FAIP again on December 27, and Essex complied with the government's comments on January 7, 1992. On January 16, the government approved the FAIP.
Certain mandatory First Article tests required the use of government-furnished equipment, such as electric generators. Essex commenced First Article testing on March 5, 1992, even though the ECPs had not been formally approved. The next day, Essex notified the government that the government-supplied equipment had malfunctioned and could not be used for testing. Instead, Essex proposed using commercial power for one of the tests, to which the government did not object. The government and Essex attempted to repair the equipment so that it could be used in another test, but they were unsuccessful and the government could not locate replacement equipment. On April 6, Essex asked permission to proceed with revised tests that did not require the use of the defective equipment, and on April 15 the government agreed.
Essex submitted its First Article inspection report on May 20, 1992. The government approved the report on August 17, and Essex began production of the floodlights. Following completion of the contract, Essex requested an equitable adjustment. Among other claims, Essex argued that it was entitled to delay and disruption costs associated with the ECP and FAIP approval processes and with the defective generating equipment. The contracting officer denied Essex's request for adjustment in toto. Essex then appealed to the Armed Services Board of Contract Appeals.
The Board found that the government had provided Essex with defective drawings and was liable for the resulting harm to Essex. For that reason, the Board awarded Essex recovery of the engineering and production costs it incurred to incorporate the disapproved ECPs in the floodlight design. In addition, the Board found the government liable for Essex's costs associated with the 25-day delay between Essex's April 15, 1991, notice to the government of the drawing defects and the government's May 10 telephone call providing additional detail and revised dimensional information, because that delay affected the production of the First Articles. For the period after May 10, however, the Board concluded that Essex had acted unreasonably in stopping work pending the government's acceptance of the ECPs. Therefore, the Board reasoned, any government-caused delays after that date were concurrent with Essex-caused delays and precluded Essex from further recovery based on delays associated with the erroneous drawings.
Essex attacks the Board's ruling on several fronts. The essence of Essex's argument, however, is that the government's demand for cost information did not excuse the delay caused by the defective specifications. In support of that argument, Essex cites numerous reasons that the Board should not have charged it for the delay in providing the cost estimates. According to Essex, because the contract allowed the government to reject nonconforming goods and required the contracting officer to authorize in writing all changes to the contract, Essex could not proceed with work on the First Articles until the government approved the ECPs. In addition, the contract required the contracting officer to use formal modifications to...
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