Fruhauf Southwest Garment Co. v. United States

• Decision Date: 05 May 1953
• Docket Number: No. 49239.,49239.
• Parties: FRUHAUF SOUTHWEST GARMENT CO. v. UNITED STATES.
• Court: U.S. Claims Court

111 F. Supp. 945

126 Ct. Cl. 51

FRUHAUF SOUTHWEST GARMENT CO. v. UNITED STATES.

No. 49239.

United States Court of Claims.

May 5, 1953.

Max H. Walls, Philadelphia, Pa., for plaintiff.

Thomas H. McGrail, Washington, D. C., with whom was Holmes Baldridge, Asst. Atty. Gen., for defendant.

Before JONES, Chief Judge, and LITTLETON, WHITAKER, MADDEN and HOWELL, Judges.

LITTLETON, Judge.

The plaintiff, a Kansas corporation with its place of business at Wichita, Kansas, seeks to recover the sum of $48,560 alleged to be the difference between the amount paid by the defendant to the plaintiff and the amount due plaintiff under a contract whereby the plaintiff manufactured overcoats for the United States Army.

On June 28, 1946, the plaintiff and the defendant, acting through its Quartermaster Corps, War Department, entered into this contract by which the plaintiff agreed to manufacture and deliver to the defendant 30,000 overcoats, with removable liners, at a unit price of $19.25 for a total sum of $577,500 with monthly deliveries scheduled from February through December 1947.

In so far as applicable here, the contract provided in part as follows:

"14. Revision of Price: Supplementary Contract Provisions.

"(a) The prices fixed herein may be increased or decreased in accordance with this Article.

"(b) Times for negotiation.— (1) Upon completion of delivery of thirty percent (30%) of the items to be furnished under this contract, the parties shall negotiate to revise the prices of all items theretofore and thereafter to be delivered. Within 5 days after the completion of delivery of said thirty percent (30%) the Contractor shall furnish to the Contracting Officer the statements and data referred to in paragraph (c) of this Article. At any time and from time to time after the completion of delivery of said thirty percent (30%), subject to the limitations specified in this Article, either the Government or the Contractor may deliver to the other a written demand that the parties negotiate to adjust the prices under this contract. No demand shall be made prior to 90 days after the completion of delivery of said thirty percent (30%) and thereafter neither party shall make a demand having an effective date within 90 days of the effective date of any prior demand, provided, however, that this limitation shall not be applicable in the event that during any 90-day period the War Labor Board or any similar Government agency shall authorize or order a change in wages, salaries or conditions of employment in the plants of the Contractor used in the performance of this contract. Each demand shall specify a date (identical with or subsequent to the date of the delivery of the demand) as of which the revised prices shall be effective as to the deliveries made thereon and thereafter. This date is hereinafter referred to as `the effective date of the price revision.' For the purposes of the first negotiation contemplated by this paragraph, the date of execution of this contract shall be deemed to be the effective date of the price revision. Any demand under this Article, if made by the Contractor, shall state briefly the ground or grounds therefor and shall be accompanied by the statements and data referred to in paragraph (c) of this Article. If the demand is made by the Government, such statements and data will be furnished by the Contractor within 30 days of the delivery of the demand.

(c) Submission of data.—At the time or each of the times specified or provided for in paragraph (b) of this Article the Contractor shall submit (i) a new estimate and breakdown of the unit cost and the proposed prices of the items remaining under this contract after the effective date of the price revision, itemized so far as is practicable in the manner prescribed by War Department Standard Procurement Form No. 3; (ii) an explanation of the differences between the original (or last preceding) estimate and the new estimate; (iii) such relevant shop and engineering data, cost records, overhead absorption reports and accounting statements as may be of assistance in determining the accuracy and reliability of the new estimate; (iv) a statement of experienced costs of production hereunder to the extent that they are available at the time or times of the negotiation of the revision of prices hereunder; and (v) any other relevant data usually furnished in the case of negotiation of prices under a new contract. The Government may make such examination of the Contractor's accounts, records and books as the Contracting Officer may require and may make such audit thereof as the Contracting Officer may deem necessary.

"(d) Negotiations.—(1) Upon the filing of the statements and data required by paragraph (c) of this Article, the Contractor and the Contracting Officer will negotiate promptly in good faith to agree upon prices for items to be delivered on and after the effective date of the price revision. Negotiations for price revisions under this Article shall be conducted on the same basis, employing the same types of data (including, without limitation, comparative prices, comparative costs, and trends thereof) as in the negotiation of prices under a new War Department contract.

"(2) After each negotiation the agreement reached will be evidenced by a supplemental agreement stating the revised prices to be effective with respect to deliveries on and after the effective date of the price revision (or such other later date as the parties may fix in such supplemental agreement).

"(e) Disagreements.—If within 30 days after the date on which the statements and data are required pursuant to paragraph (b) of this Article to be filed (or such further period as may be fixed by written agreement) the Contracting Officer and the Contractor fail to agree to revised prices, the failure to agree shall be deemed to be a disagreement as to a question of fact which shall be disposed of in accordance with Article entitled `Disputes,' and the prices so fixed shall remain in effect for the balance of the contract notwithstanding any other provision of this Article.

"(f) Payments.—Until new prices shall become effective in accordance with this Article, the prices in force at the effective date of the price revision shall be paid upon all deliveries, subject to appropriate later revision made pursuant to paragraph (d) or (e) or (h)(2)(B) of this Article.

"Article 16. Disputes.—Except as otherwise specifically provided in this contract, all disputes concerning questions of fact which may arise under this contract, and which are not disposed of by mutual agreement, shall be decided by the Contracting Officer, who shall mail to the Contractor a written notification of his determination. Within 30 days from said mailing the Contractor may appeal to the Secretary of War, whose decision shall be final and conclusive upon the parties. Pending decision of a dispute hereunder the Contractor shall diligently proceed with the performance of this contract."

On November 27, 1946, at the request of defendant's contracting officer, the parties executed a supplementary agreement wherein the unit price was reduced to $18.50. This price revision was accomplished before any labor was commenced or work performed under the contract.

The plaintiff's entire operation under the contract was financed by the Union National Bank of Wichita, Kansas. As of late November and early December 1946, the plaintiff had loans from this bank which established a revolving line of credit in the total sum of $200,000 at 4 percent interest. Two separate loans were involved, each in the amount of $100,000 both of which were payable one year after date. To secure payment, the plaintiff gave its promissory notes and a chattel mortgage covering all of its machinery, equipment, furniture and fixtures, and assigned its accounts receivable and all money due and to become due the plaintiff under its contract with the defendant, and further secured the bank by assignment of warehouse receipts on all of its raw materials and finished goods.

On June 4, 1947, the plaintiff was instructed by the defendant to submit to the contracting officer the cost data required to be furnished under paragraph (c) of the Revision of Price article, supra. On June 18, 1947, after the plaintiff had delivered 30 percent of the overcoats, it submitted to the defendant its schedules of experienced costs to May 31, 1947, a profit and loss statement and other pertinent data required as a preliminary to a demand under paragraph (b), to negotiate a price revision. The plaintiff accompanied this information with a proposal that the unit price of $18.50 remain unchanged for the balance of the contract quantity. Requests for further information in relation to its costs were made on the plaintiff by the defendant on July 7, August 4, and September 9, in 1947. The plaintiff supplied the information requested on those dates.

By letter of September 18, 1947, the contracting officer wrote to the plaintiff, in part, as follows:

"In connection with the revision of price clause in your contract, either the Government or the contractor may deliver to the other a written demand that the parties negotiate to adjust price under this contract, 90 days after the submission of the first demand.

"It is requested that you furnish this office with a new cost breakdown. The effective date of this new demand shall be 13 September 1947."

The plaintiff supplied the information desired by this request on October 20, 1947, which included a schedule of its experienced costs through September 30, 1947. These figures continued to support the original contract price, as modified, of $18.50 per overcoat. On October 23, 1947, the plaintiff's secretary-treasurer went to New York to negotiate for a revision of the unit price. The plaintiff's agent failed to see the contracting officer but met with three of his representatives. His efforts to discuss the plaintiff's cost figures...