Sylvania Electric Products, Inc. v. United States, 378-70.

• Citation: 479 F.2d 1342
• Decision Date: 20 June 1973
• Docket Number: No. 378-70.,378-70.
• Parties: SYLVANIA ELECTRIC PRODUCTS, INC. v. The UNITED STATES.
• Court: Court of Federal Claims

479 F.2d 1342 (1973)

SYLVANIA ELECTRIC PRODUCTS, INC. v. The UNITED STATES.

No. 378-70.

United States Court of Claims.

June 20, 1973.

Allan J. Joseph, San Francisco, Cal., for plaintiff. Walter F. Pettit, San Francisco, Cal., attorney of record for plaintiff. Sidney J. Cohen, San Francisco, Cal., Haig J. Shalvarjian, Mountain View, Cal., and Miller, Groezinger, Pettit, & Evers, San Francisco, Cal., of counsel.

Leslie H. Wiesenfelder, 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.

ON PLAINTIFF'S MOTION AND DEFENDANT'S CROSS MOTION FOR SUMMARY JUDGMENT

KUNZIG, Judge:

This is a contract action wherein this court, by cross motions for summary judgment, has been asked to review a decision of the Armed Services Board of Contract Appeals (the Board)¹ in accordance with the standards of the Wunderlich Act, 41 U.S.C. §§ 321, 322 (1970).

In issue is whether the Board's decision that the Government is entitled to a price reduction of $239,913.75 pursuant to the Defective Pricing Clause of the contract² is supported by substantial evidence and is correct as a matter of law.

We affirm the Board's excellent decision in favor of the Government. We hold the conclusions of the Board withstand a Wunderlich Review:

I. The plaintiff-contractor failed to disclose accurate, complete and current cost and pricing data.

II. The data not disclosed involved significant sums.

III. The Government relied upon the inaccurate data thus establishing a causal relationship between the incorrect data and the final negotiated contract price.

These conclusions of the Board involved mixed questions of law and fact. We do not deem it necessary to attempt to distinguish the two, since final disposition of this case does not require such delineation.

On April 30, 1964, plaintiff-contractor responded to a previously issued Request for Proposal (RFP) for the production of the electronic's portion of two special receiving sets. Plaintiff quoted a firm fixed price of $6,385,325. On October 2, 1964, the last day of the negotiations, plaintiff executed the required Certificate of Cost and Pricing Data. It provided:

(i) complete cost and pricing data, current as of 30 April 1964, has been considered in preparing Sylvania Proposal 300-PR-03 and submitted to the Contracting Officer or his representative;

(ii) all significant changes in the above data which occurred since the aforementioned date through 2 October 1964 have been similarly submitted; and no more recent significant change in such data was known to the undersigned at the time of executing this certificate; etc.

(iii) all data submitted are accurate.

Final price negotiations were held between September 28, 1964 and October 2, 1964, based upon plaintiff's submissions. At the outset, the parties were approximately $3,000,000 apart. After many changes in their respective positions, they differed by only about $600,000. It was mutually agreed to split the difference, which resulted in a final contract price of $4,614,000.

In 1966, as a result of events not relevant to this case, the General Accounting Office (GAO) opened an inquiry into plaintiff's compliance with the Truth in Negotiations Act. The GAO found that the contract price of $4,614,000 had been increased by significant sums because plaintiff had failed to disclose to the Government accurate, complete and current cost and pricing data. The GAO report further found that proper disclosure before final price negotiations would have revealed plaintiff's use of incorrect quantities in computing the cost of some parts and components, and the use of noncurrent price quotations in computing the cost of others. On the basis of these findings, the GAO recommended that the Government seek a downward adjustment of $254,000 in the contract price. Accordingly, on August 28, 1968, the Air Force contracting officer ordered the contract price reduced by $254,304. This figure represented defective pricing under the Truth in Negotiations Act as follows:

                  a. GPI Receivers (duplication) __________________________________ $104,752
                  b. Cable (939) (lower quotations) _______________________________   12,165
                  c. Cable (216) (307) (lower quotations) _________________________   10,173
                  d. Adapters and Connectors (duplication) ________________________   35,927
                  e. Goniometers (lower quotations) _______________________________   17,500
                  f. Power Supply Units (lower quotations) ________________________   18,820
                  g. Rack Hardware (lower quotations) _____________________________   15,636
                                                                                    ________
                       Total ______________________________________________________  214,973
                

To this amount, 6% for general and administrative expense and 11.6% for profit, were added, giving a total of $254,304.

On appeal to the Board, the contracting officer's decision was upheld to the extent of $239,913.75.³ Plaintiff subsequently sued for this figure, filing a petition in this court on November 3, 1970 and seeking a review of the Board's decision pursuant to the standards of the Wunderlich Act, 41 U.S.C. §§ 321, 322 (1970).

The instant contract contained a Defective Pricing Clause identical in content to ASPR § 7.104-29 in effect at the time of the contract and promulgated pursuant to the Truth in Negotiations Act. The clause reads in pertinent part:

(a) If The Contracting Officer determines that any price, including profit or fee, negotiated in connection with this contract was increased by any significant sums because the Contractor, or any subcontractor in connection with a subcontract covered by (c) below, furnished incomplete or inaccurate cost or pricing data or data not current as certified in the Contractor\'s Certificate of Current Cost or Pricing Data then such price shall be reduced accordingly and the contract shall be modified in writing to reflect such adjustment.

(b) Failure to agree on a reduction shall be a dispute concerning a question of fact within the meaning of the "Disputes" clause of this contract.

(c) The Contractor agrees to insert the substance of paragraphs (a) and (c) of this clause in each of his cost-reimbursement type, price redeterminable, or incentive subcontracts hereunder, and in any other subcontract hereunder in excess of $100,000 unless the price is based on adequate price competition, established catelog or market prices of commercial items sold in substantial quantities to the general public, or prices set by law of regulation. * * * (Emphasis added.)

Compliance or lack thereof with this provision raises three distinct issues:

I. Whether the plaintiff-contractor disclosed accurate, complete and current cost and pricing data?

II. Whether the disputed data qualified under the "significant sums" criteria?

III. Whether the Government sustained its burden of proof in showing that it relied upon the disputed data and that there was a subsequent causal relationship between the data and the increased negotiated contract price?

I Disclosure

The purpose of the Truth in Negotiations Act is to avoid situations in which inaccurate, incomplete, or noncurrent information is known by the contractor, but withheld from the Government to its detriment. Cutler-Hammer, Inc. v. United States, 189 Ct.Cl. 76, 84, 416 F.2d 1306, 1311 (1969). Judge Durfee clearly held in Cutler-Hammer that current and accurate information, if known, must be furnished. He reiterated this point in Lockheed Aircraft Corp. v. United States, 193 Ct.Cl. 86, 432 F.2d 801 (1971), when he stated that the only way to further the purpose of the statute is to require complete disclosure of actual costs known to the contractor.

In the instant action, there is substantial evidence to warrant the Board's conclusion that, as to all but one of the items listed in the GAO report⁴, the contractor was aware of the accurate figures prior to or during price negotiations, yet failed to inform the Government. This we consider to be nondisclosure in violation of the Defective Pricing Clause of the contract and the Truth in Negotiations Act.

As to the following items, the evidence is clear that plaintiff had knowledge prior to the price negotiations of October 2, 1964 of lower quotations, yet failed to fully disclose them:

Rack Hardware — Plaintiff's supplier lowered prices to plaintiff on September 15, 1964. This was acknowledged by plaintiff by issuing a purchase order on September 18, 1964. The information was not transmitted to the contractor's negotiating team that was meeting with the government representatives.

Power Supply Units — Plaintiff received a lower quotation from supplier's successor on September 10, 1964. Although a new subcontract was not awarded until November, plaintiff knew before the negotiating sessions with the Government that it had no choice but to award the subcontract to this supplier.

Cables RG 216 and 307/u — There was no question that early in May 1964, plaintiff received lower price quotations for the quantities needed and did not incorporate them in its proposal.

Goniometers — On or about August 13, 1964, plaintiff gained a price reduction because it negotiated the purchase of an increased quantity to satisfy other contracts, and failed to notify the Government.

Plaintiff specifically argues as to the Rack Hardware data and the Power Supplirs data that the information was not "reasonably available". Plaintiff admits that the new information regarding the Rack Hardware was known to a branch of plaintiff-corporation approximately one week before the negotiating sessions, but that it takes "approximately thirty to thirty-seven days" for this information to make its way to the firm's negotiators. This position we find untenable, even ludicrous. A simple telephone call could have obviated the situation. Plaintiff attempts, equally unsuccessfully,...