Ling-Temco-Vought, Inc. v. United States

• Decision Date: 16 March 1973
• Docket Number: No. 417-69.,417-69.
• Citation: 475 F.2d 630,201 Ct. Cl. 135
• Parties: LING-TEMCO-VOUGHT, INC. v. The UNITED STATES.
• Court: U.S. Claims Court

201 Ct. Cl. 135, 475 F.2d 630 (1973)

LING-TEMCO-VOUGHT, INC. v. The UNITED STATES.

No. 417-69.

United States Court of Claims.

March 16, 1973.

Harold Hoffman, Dallas, Tex., of record, for plaintiff; Wynne Jaffe & Tinsley, Washington, D. C., of counsel.

Thomas W. Petersen, Washington, D. C., with whom was Asst. Atty. Gen. Harlington Wood, Jr., for defendant.

Before COWEN, Chief Judge, and DAVIS, SKELTON, NICHOLS, KASHIWA, KUNZIG and BENNETT, Judges.

OPINION

DAVIS, Judge.^*

Plaintiff Ling-Temco-Vought, Inc. ("LTV"), sues the defendant in this action for $1,022,973.27,¹ representing the amount which the plaintiff expended out of its own funds in completing a project that was originally undertaken by a corporation known as Frederick Fenski & Miller Electronics, Inc. ("FF & M"), under a 1961 contract between that corporation and the defendant, acting though the Bureau of Ships ("BuShips"), Department of the Navy. The suit is for breach not "under the contract."

In the early 1960's, the Navy had a need for a large-screen display system on which could be displayed, for the benefit of the personnel in the Combat Information Center ("CIC") of a warship, data revealed by the ship's radar concerning changes in the location of moving targets (such as aircraft, missiles, and vessels on the surface of the sea). FF & M's business included the manufacture and sale of large-screen display systems for commercial applications. One of FF & M's large-screen display systems employed an electro-mechanical technique and was sold under the trade name of Iconorama. Of all the workable large-screen display systems that were in existence during the early 1960's, FF & M's Iconorama was the only one that was available for shipboard use. However, the Navy regarded the commercial-type Iconorama as incapable of keeping track adequately of the movement of the large number of high-speed targets (jet aircraft and missiles) involved in an anti-air warfare environment.

In order to study FF & M's Iconorama in a shipboard environment, and, if possible, to develop it into a satisfactory large-screen display system for CIC use aboard warships, the Navy Department (acting through BuShips): (1) purchased a commercial-type Iconorama "off the shelf" and installed it aboard the U.S.S. Randolph for experimentation and observation; and (2) entered into a 1961 contract with FF & M, which basically required FF & M to adapt its Iconorama to military standards and requirements, and to produce two prototypes of the system thus revised. The device which FF & M contracted to produce was to be called a Tactical/Navigational Display System ("Tac/Nav"). At the time when the contract was entered into, both contracting parties knew that the two Tac/Nav's were being purchased by the Navy for evaluation purposes.

After the contract was entered into, FF & M was acquired by and merged into LTV; and LTV, the plaintiff in the present case, was substituted for FF & M as the contractor under the contract. The effective date of this substitution was December 31, 1961.

The contract required the plaintiff to design, fabricate, test, and furnish two Tac/Nav's to the Navy, together with preliminary drawings, working drawings, preliminary technical manuals, final technical manuals, various reports, and 60 man-days of engineering services to assist in the installation and checkout of the devices. The work was to be done on a cost-plus-a-fixed-fee basis; and all work (except the furnishing of the reports and the engineering services) was to be completed by June 30, 1962.

The contract contained an estimated cost schedule in the amount of $464,753, and the fixed fee was to be $27,097. Thus, the estimated cost and the fixed fee totaled $491,850.

With respect to the estimated cost schedule, the contract contained a provision under the heading of "Limitation of Cost" which stated in part as follows:

(b) The Government shall not be obligated to reimburse the Contractor for costs incurred in excess of the estimated cost set forth in the Schedule, and the Contractor shall not be obligated to continue performance under the contract or to incur costs in excess of the estimated cost set forth in the Schedule, unless and until the Contracting Officer shall have notified the Contractor in writing that such estimated cost has been increased and shall have specified in such notice a revised estimated cost which shall thereupon constitute the estimated cost of performance of this contract. * * *

At a conference between the plaintiff and BuShips that was held on March 28, 1962, the plaintiff asked that the estimated cost figure in the contract be increased by $590,000. BuShips told the plaintiff that it had not budgeted for or anticipated any cost overrun of such magnitude, and that it was not prepared to fund such an overrun. BuShips also stated that it would like to continue the contract, but not at the cost indicated, and asked what changes could be made to reduce the projected expenses. Possible areas of cost reduction were discussed. The conference was then recessed until the next day, so that the plaintiff could recompute the estimated overrun.

On March 29, 1962, the parties conferred again. At this conference, the plaintiff made a written submission listing certain changes that could be made to reduce the proposed increase in the estimated cost of the contract from $590,000 (the figure proposed by the plaintiff on March 28, 1962) to $358,028.

By means of a telegram dated March 30, 1962, BuShips notified the plaintiff that "the contract is hereby modified to increase the total estimated cost * * * by $358,028 * * *." Modification No. 3 was signed by the contracting officer on April 18, 1962, and by the plaintiff on April 24, 1962. It increased the estimated cost of the contract by $358,028 to a new total of $822,781, and it extended the completion date (except for the furnishing of the reports and the engineering services) to August 15, 1962.

During April of 1962, the plaintiff concluded that the cost of completing the contract would exceed by some $250,000 the then-current estimated cost of $822,781. At about the end of April 1962, the plaintiff asked for a conference with BuShips; and it was held on May 3, 1962. The plaintiff's purpose in asking for a conference was to request a further increase of $250,000 in the estimated cost of the contract. At the conference, however, the conferees did not discuss the dollar amount of any additional increase in the estimated cost of the contract. Instead, the plaintiff was given what it characterized as a "stern lecture" by BuShips on overruns, and was told that BuShips would terminate the contract rather than fund or accept an overrun. On the other hand, BuShips pointed out to the plaintiff various factors which indicated that it would be a good business risk on the part of the plaintiff if the plaintiff would complete the performance of the contract at its own expense.

The principal spokesman for BuShips at the conference on May 3, 1962, was Captain Francis H. Cunnare, the head of Code 665 in BuShips. Code 665 had entered into and was administering the contract for BuShips and the Navy Department. It was Captain Cunnare who pointed out the factors which indicated that it would be a good business risk on the part of the plaintiff if the plaintiff would complete the performance of the contract at its own expense. Captain Cunnare's representations in this respect are detailed in the findings. From the standpoint of the present litigation, the most significant of these representations will be outlined in the next two paragraphs.

Captain Cunnare told the plaintiff at the conference on May 3, 1962, that the Navy was not then considering any technique or concept other than Tac/Nav for accomplishing the large-screen display of information for CIC purposes.

Captain Cunnare also told the plaintiff that there was a "fantastic" market potential for the large-screen display system, which would justify the plaintiff in investing its own funds for the completion of the performance of the contract. In this connection, Captain Cunnare stated that the Navy had firm requirements for production quantities of a large-screen display system similar to the Tac/Nav system that was being developed by the plaintiff under the contract, that these requirements were already programmed by the Navy, and that the Navy planned to put large-screen display systems on a large number of ships. Captain Cunnare's presentation showed a requirement for the installation of large-screen display systems aboard 14 aircraft carriers over a period of approximately 5 or 6 years, an immediate requirement for 74 large-screen display systems aboard destroyers, and a total requirement for 350 large-screen display systems aboard destroyers over a period of from 5 to 8 years.

Promptly after the conference on May 3, 1962, the plaintiff's personnel who had participated in the conference outlined Captain Cunnare's presentation to the plaintiff's top management. One of the persons who participated in the conference with BuShips and also in the conference with the plaintiff's top management was the assistant comptroller of the plaintiff. He estimated for the benefit of the plaintiff's top management, on the basis of an anticipated selling price of $150,000 per Tac/Nav per destroyer and $250,000 per Tac/Nav per aircraft carrier, that the Navy's requirements indicated sales in the amount of approximately $56,000,000 and, before taxes, a profit of approximately $5,600,000.

Another conference between the plaintiff and BuShips was held on May 8, 1962. The plaintiff's vice-president in charge of the military electronics division was in the plaintiff's group on that occasion. BuShips again told the plaintiff that it would not fund or accept an overrun; and that if overrun funds were requested, it would terminate the contract. However, BuShips also pointed out again the factors which indicated...