Hewlett-Packard Company v. United States
| Decision Date | 15 November 1967 |
| Docket Number | No. 21323.,21323. |
| Citation | 385 F.2d 1013 |
| Parties | HEWLETT-PACKARD COMPANY, a corporation, David Packard, and Wilfred F. Cavier, Appellants, v. UNITED STATES of America, Appellee. |
| Court | U.S. Court of Appeals — Ninth Circuit |
McCutchen, Doyle, Brown, Trautman & Enersen, Robert Minge Brown (argued), San Francisco, Cal., for appellant.
Cecil F. Poole, U. S. Atty., San Francisco, Cal., Barefoot Sanders, Asst. Atty. Gen., Harland F. Leathers (argued), Atty. Civil Division, Dept. of Justice, Washington, D. C., for appellee.
Before CHAMBERS, HAMLEY and HAMLIN, Circuit Judges.
The United States brought this action against Hewlett-Packard Company, a corporation, to enforce the Government's asserted right under 10 U.S.C. § 2313(b) (1964) to examine certain books and records of the company.1 Plaintiff sought declaratory and injunctive relief. After defendants filed a responsive pleading the parties stipulated as to the relevant facts and filed cross motions for summary judgment. The district court granted the motion of the United States, denied that of Hewlett-Packard, and entered a judgment substantially as prayed for in the complaint. Hewlett-Packard appeals.
Hewlett-Packard is a manufacturer of electronic test and measurement equipment designed for general use where great precision in measurement is required. During the period from March, 1959 to January, 1961, the United States Department of the Air Force awarded to Hewlett-Packard four negotiated firm fixed-price contracts for equipment. The parties are agreed that, for the purposes of this case, the two contracts referred to below may be regarded as typical.
One of these, designated No. AF 33 (604) 22221, was executed on March 16, 1959. It provided for the sale, to the United States, of standard commercial items of equipment then sold by Hewlett-Packard in substantial quantities to the general public. With one exception, each such item had been included in Hewlett-Packard's regularly published catalog for the previous three years or more. The catalog listed items for sale to the public at indicated prices. Each item qualified as a standard commercial article as defined by the Renegotiation Act of 1951, 65 Stat. 7, added by 70 Stat. 790 (1956), 50 U.S.C.App. § 1216(e) (1964), and was therefore exempt from renegotiation.2
In the contract of March 16, 1959, the contract price was determined upon the basis of the listed catalog prices of the particular item of equipment, less a volume discount. The Government's Request for Proposal which was incorporated into the contract contained a form statement of additional terms and conditions, but only the clauses checked by the Government were to be applicable. One clause, entitled "Cost Data Information," called for the seller to provide the Government with detailed data concerning such cost items as material, labor and overhead. However, this clause was not checked and was therefore not applicable. Hewlett-Packard did not supply to the Government any information as to the costs of production or profit margins upon any of the items listed in this contract.
The other contract which the parties regarded as typical, designated No. AF 33(604)-31882, was executed on January 30, 1961. This contract related to only one item of equipment, namely Hewlett-Packard instrument Model No. 620A. This was a standard commercial item then sold by the company in substantial quantities to the general public. The item had been included in Hewlett-Packard's regularly published catalog since 1952, for sale to the public at a catalog list price. The price had remained unchanged since the original date of introduction of the item.
At the date of execution of this contract, this item of equipment qualified as a standard commercial article as defined by the Renegotiation Act of 1951, as amended, and was therefore exempt from negotiation. The contract price was determined upon the basis of the listed catalog price, less a volume discount. Hewlett-Packard did not supply to the Government any information as to any of the company's costs of production or profit margins upon this contract item.3
All four contracts were negotiated pursuant to chapter 137, Title 10, U.S.C. §§ 2301-2314, entitled "Procurement Generally." A subsection of that chapter, 10 U.S.C. § 2313(b), provides that each contract negotiated under chapter 137 shall provide that the Comptroller General and his representatives are entitled for a period of three years after final payment, to examine any books, documents, papers or records of the contractor, or any of his subcontractors:
"that directly pertain to, and involve transactions relating to, the contract or subcontract."
Consistent with this statutory provision each of the four contracts referred to above contained a clause 10, giving the Comptroller General and his representatives for a period of three years after final payment, access to and the right to examine:
"any directly pertinent books, documents, papers, and records of the Contractor involving transactions related to this contract."4
Purporting to exercise rights accorded by clause 10 of these contracts, representatives of the Comptroller General commenced an examination of the books and records of Hewlett-Packard in September, 1962. During this examination the company permitted access to books and records relating to sales prices of various instruments and parts sold under the four contracts. The representatives of the Comptroller General then requested all books, documents, papers or records of Hewlett-Packard:
"relating to the pricing and cost of performance, support for prices charged to the Government, and such other necessary information which would permit such Representatives to review the reasonableness of the contract prices provided for in the aforesaid contracts."
This request was refused by Hewlett-Packard upon the ground that cost of production information was not directly pertinent to these contracts. In this suit, which the United States then instituted, the trial court disagreed with Hewlett-Packard, and judicially declared that the company's costs of direct material, direct labor and overhead costs in producing the items furnished under the contracts, directly pertain to, and involve transactions relating to, those contracts. The court further declared that the Comptroller General and his representatives have the right to...
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...a congressional sub- committee in 1963 regarding the GAO's litigation of the scope of its access authority in Hewlett-Packard Co. v. United States, 385 F.2d 1013 (CA9 1967), cert. denied, 390 U.S. 988, 88 S.Ct. 1184, 19 L.Ed.2d 1292 (1968).14 In light of the GAO's litigation posture during ......
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