ARMED SERVICES BOARD OF CONTRACTAPPEALS Appeals of

-- ) ) Precision Standard, Inc. ) ) Under ContractNo. SPM4A7-08-M-9187 ) APPEARANCES FORTHEAPPELLANT:

APPEARANCES FORTHE GOVERNMENT: ASBCA Nos. 58135, 58205

NancyM. Camardo, Esq. Kevin M. Cox, Esq.

Camardo Law Firm, P.C. Auburn, NY Daniel K. Poling, Esq.

DLA ChiefTrial Attorney Edward R. Murray, Esq.

Trial Attorney DLAAviation Richmond, VA OPINION BYADMINISTRATIVE JUDGE O'SULLIVAN ON THE PARTIES' CROSS-MOTIONS FOR SUMMARYJUDGMENT These appeals arise from a contract awarded by the Defense Logistics Agency to Precision Standard, Inc. (PSI). Theparties have cross-moved for summaryjudgment. We havejurisdictionpursuantto the Contract Disputes Act of 1978 (CDA), 41 U.S.C. §§ 7101-7109. We grantthe government's motion in part and otherwise deny the motions. STATEMENT OF FACTS (SOF) FORPURPOSES OF THE MOTIONS 1. On 30 April 2008, the Defense Supply Center Richmond (DSCR), now DLA Aviation (DLA), awarded Contract No. SPM4A7-08-M-9187 (hereinafterthe contract) to PSI. The contractrequired the manufacture and delivery of 138 aircraft skins for the A-10 aircraft at a price of$395 per skin. The total price ofthe contract, includingthe separately-priced first article, was $57,010. Inspection/Acceptance was to take place at origin at PSI's plant in Ferndale, Michigan. The delivery pointwas the Defense Depot at San Joaquin, Tracy, California (DDJC). The contractwas administeredby the Defense Contract Management Agency (DCMA). (R4, tab 1at 1, 7-8, 13) 2. The skins are made oflayers ofmaterial held togetherby resistance spot welds. They are not stifforrigid, but are somewhatpliable. They are used to line the inside of the engine cowling and are mounted about 10 inches in front ofthe fan blades. Each skincovers 180 degrees ofthe circumference inside the cowling, and together apair ofskins will coverthe entire 360 degree arc inside the cowling. Giventheir location, the skins are subjectto significant levels ofvibration, force, and pressure. Ifthe skins, and particularly the welds holding the material layers in place, were to fail, pieces couldbe sucked into the aircraft engine with catastrophic results. (Gov't Statement ofUndisputed Material Facts (GSUMF)**~~** 2-3) 3. The contractrequired PSI to deliver a first article to the Engineering Support Activity (ESA) at Hill Air Force Base (Hill AFB) 200 days after award or by 16 November 2008. ESA had 120 days in which to evaluate the first article. The price of the first article was $2,500. (R4, tab 1at2-4,9, 13-14) 4. The production quantity consisted of 138 skins. Contract line item number (CLIN) 0001 consisted of 108 skins and CLIN 0002 consisted of30 skins. Both CLINs required delivery 200 days after approval ofthe first article. (R4, tab 1at 2, 7-9) 5. Drawing No. 160D411002 Rev M, dated 10 June 1997, was the main (basic) drawing for the skins and is also the part number for the skins. Note 3 ofthe drawing required spot welding to be done in accordance with specification A-F401. (R4, tab 1at 6, tab 46 at 1) 6. On 25 October 2010, the governmentreleased Engineering Order (EO) 10Al244, amending DrawingNo. 160D411002, as follows: 20. DESCRIPTION OF CHANGES/REMARKS This EO is to insure that the spot welds are radiographically inspected to find cracks resultant ofmanufacture before they are allowed to propagate in usage. A. CHANGE NOTE 3 INDRA WING NOTES AS FOLLOWS: WAS 3. SPOTWELD PERA-F401. LOCATION OF SPOTWELD TO BE+/- .12 IS SPOTWELD AND RADIOGRAPHICALLY INSPECT SPOTWELDS INACCORDANCE WITH A-F401 AND

2 

# l(R4, tab 47) AWS D17.2

.... LOCATION OF SPOTWELD TO BE +/- .12

7. Paragraph 4.7.1.1 ofAWS DI7.2, entitled "Visual Discontinuities in Test Specimens,"required the welds to be "free ofcracks" (R4, tab 7 at 13). Paragraph 4.7.2, entitled "Radiographic Acceptance Criteria," required atparagraph 4.7.2.1 that "[a ]II welds

....be free ofcracks" (id. at 15). Paragraph 5.2.2.6 ofAWS D17.2, entitled "Visual and Radiographic Requirements," statedthat "[r]adiographic examinations

...shall notbe required, unless otherwise specified in the applicable drawing orpart specification" (id. at 21). 8. The contract incorporatedthe following Federal Acquisition Regulation (FAR) clauses by reference, each providing in pertinentpart as follows: FAR 52.233-1, DISPUTES (JUL 2002)

(i) The Contractor shall proceed diligently with performance ofthis contract, pending final resolution ofany request for relief, claim, appeal, or action arising under or relating to the contract, and comply with any decision ofthe Contracting Officer. FAR 52.243-1, CHANGES-FIXED-PRICE (AUG 1987) (a) The Contracting Officer may, at any time, by written order

...make changes withinthe general scope ofthis contract.
...
(b) Ifany such change causes an increase or decrease in the cost of, orthe time required for, performance ofany part ofthe work underthis contract, whether or not changed by the order, the Contracting Officer shall make an equitable adjustment in the contractprice, the delivery schedule, or both, and shall modify the contract. FAR52.246-2, INSPECTION OF SUPPLIES-FIXED-PRICE (AUG 1996)

3 

# I(k) Inspections and tests by the Government do not relieve the Contractor ofresponsibility for defects or other failures to meet contract requirements discovered before acceptance. Acceptance shall be conclusive, except for latent defects, fraud, gross mistakes amounting to fraud, or as otherwise provided in the contract. FAR52.247-34, F.O.B. DESTINATION (Nov 1991) (b) The Contractor shall-

(4) Beresponsible for any loss ofand/or damage to the goods occurring before receipt ofthe shipment by the consignee at the delivery point specified in the contract. FAR 52.249-8, DEFAULT (FIXED-PRICE SUPPLY AND SERVICE) (APR 1984) (a)(l) The Government may...terminate this contract.
..ifthe Contractor fails to-- (i) Deliverthe supplies or to perform the services within the time specified in this contract or any extension; (ii) Make progress, so as to endangerperformance of this contract.
... or (iii) Perform any ofthe otherprovisions ofthis contract.
... The contract also included a DSCRlocal clause as follows: FAR 52.246-9G01, WARRANTY OF SUPPLIES OF A NON-COMPLEX NATURE DSCR (MAY 2001) (a) Definitions: "Acceptance," as used in this clause, means the act ofan authorized representative ofthe Government by which the Government assumes for itself, or as an agent ofanother, ownership ofexisting supplies

.... "Supplies," as used in this clause, means the end items

4

### furnished by the Contractor and related services required under the contract.
... (b) Contractor's Obligations. (1) Notwithstanding inspection and acceptance by the Government...the Contractor warrants that at time of delivery: (i) 

### All supplies furnished under this contract will be free from defects in design, material or workmanship and will conform with the requirements ofthis contract; and (ii) The preservation, packaging, packing, and marking, and the preparation for, and method of, shipment ofsuch supplies will conform with the requirements ofthis contract.

(c) Remedies Available to the Government: (1) The Contracting Officer shall give written notice to the Contractor ofany breach ofwarranties

...within one year from the last delivery under the contract. (2) Within a reasonable time after the notice, the Contracting Officermay either

-
(ii) Retain such supplies and reduce the contractprice by an amount equitable under the circumstances. (3)(i) If

### the contract provides for inspection of supplies by sampling procedures, conformance ofsupplies or components subject to warranty action shall be determined by the applicable sampling procedures in the contract. (R4, tab 1at 12-15, tabs 42-43)

59. The first article was to be delivered within 200 days after contract award, or by 16 November 2008 (SOF**~** 3). Forreasons that are not apparent from the record, PSI did not ship the first article and first article test report to DLAuntil 7 September 2010. The first article test report stated, among otherthings, that the first article was manufactured in accordance with the technical datapackage, Drawing No. 160D411002 and A-F401. (R4, tab 11 at 7) 10. Ms. Jerri C. Stuart, the designated DCMA quality assurance representative (QAR), recommended approval ofthe first article on 7 September 2010: 1. Material meets all requirements ofthe contract, drawings and specifications. 2. Material meets all the requirements ofthe applicable special process and Quality Assurance Requirements (QARs). 3. Material meets all the requirements ofthe contractor (or Government) testing provisions. 4. Recommend Approval ofthe FAT. (R4, tab 11) QAR Stuart gave the first article a "Pass" on workmanship (R4, tab 11). 11. The contract required PSI to submit a welding certificate with the first article (R4, tab 1at3). Since there was no mention ofspotwelding in any ofthe inspection reports,jobtravelers or other documents accompanyingthe first article, the government requested PSI toprovide a welding certificate on 13 October 2010 (R4, tab 13 at 1-2). On 14 October2010, PSI submitted a "Certificate ofresistance spot weld" dated 20 August 2010, which stated as follows: This is to certify that above mentionedpart has been spot welded in accordance with A-F401 and AMS-W-6858 Class A. (R4, tab 13 at 33, tab 14 at 2) 12. On 6December 2010, the government issued Modification No. POOOOl, conditionally approving the first article and extending the delivery date for the 138 production units from 3 October 2009 until 24 June 2011 (R4, tab 2). The conditional approval by First Article Program Manager Tammy Hamel, dated 29 November 2010, noted that no certification for spot welding was initially received and that there was no mention ofspot welding in any inspection report,jobtraveler, etc. These discrepancies were required to be corrected in production and the conditional approval specifically requested thatthe appropriate DCMA QARensure that the discrepancies were corrected


### 6

### on the production items. The conditional approval further stated that the approved first article was not to be used as a manufacturing standard and that production items must meet the contract requirements. (R4, tab 14) 13. On 19 May 2011, based on information received from PSI, DCMA issued a "DelayNotice," advising cognizantpersonnel that PSI would not deliverthe entire quantity of 138 skins on the 24 June 2011 due date (R4, tab 16). Rather, PSI estimated it would complete 40-50 skins by that date (id.). 

### 14. By 3 August 2011, PSI had shipped 70 skins: -Shipment PSI0002: 10 skins on 10 May 2011 -Shipment PSI0003: 10 skins on 25 May 2011 -Shipment PSI0004: 10 skins on 20 June 2011 -Shipment PSI0005: 15 skins on 12 July 2011 -Shipment PSI0006: 15 skins on 25 July 2011 -Shipment PSI0007: 10 skins on 3 August 2011 (R4, tab 58 at 7, tab 59 at 7, tab 61 at 7, tab 62 at 7, tab 63 at 7, tab 64 at 7) 15. DCMA QAR Stuart signed offon the production parts prior to shipment via Electronic Data Interchange (GSUMF 

### if 24). According to the government, DCMA QARs do not have to personally inspectparts before signing for their release and there is no evidence in the record thatMs. Stuartpersonally inspected these shipments (id.). 

### PSI contends that the government has not affirmatively established that QAR Stuart did not personally inspect the parts since there is no declaration from her in the record (app. stmt. ofgenuine issues ofmaterial fact 

### if 24). The record does contain an email from Ms. Stuart to counsel for PSI stating that "PSI['s] surveillance was in great shape which would mean that I would not have inspected at all their shipments going out" (R4, tab 69). 16. PSI was responsible for shipping the skins to the DDJC and for any loss or damage priorto their arrival at DDJC (GSUMF 

### if 9; SOF 

### if 1). Mr. 

### Shad Winter, a distribution facilities manager at DDJC, described DDJC's intake procedures as follows: 6

....When documenting inspection origin shipments received, DDJC

...compare[s] the documentation to the property received. They pay very close attention to any special markings.... They conduct a visual inspection ofone bare item [to] validate the part number and National Stock Number. A visual verification ofthe general physical appearance ofall packages and specific characteristics ofthe bare item is conducted

....

77

....DDJC [also] performs a visual damage inspection

.... There is no record ofany [damage to these shipments and there is no evidence] ofany special handling instructions

.... 8. [T]he items [are stored] in the same boxes in which [they are shipped[,] placed on a pallet, [and] stored in a storage rack location. Each

...rack will only hold one pallet. (GSUMF, ex. 5, decl. at 3) 17. DDJC receivedthe parts shipped by PSI onthe following dates:

• 10 on 18 May 2011 • 10 on 1June 2011 • 10on29June2011 • 15on20July2011 • 15 on 1August2011 • 10 on 8 August 2011 (GSUMF,28) 18. Upon request, DDJC shippedthe skins to its customers, one ofwhich was the DLADistribution Depot at Hill AFB (GSUMF, 31). Mr. Marlin Zachry, Jr., senior program manager for URS, a service contractorthat operates the depot (GSUMF, 32), described the depot's intake and handling procedures as follows: 4. Upon receipt...we performed a kind, count and condition (KCC) inspection ofthe material but wouldnot have gone to the bare item on each boxunless there was evidence of tampering or damaging. These boxes were not damaged or had any evidence oftampering

.... 5. IfURS employees had noticed any damage to any ofthe shipments orboxes

...we wouldhave generated a Transportation Discrepancy Report (TDR) or Supply Discrepancy Report (SDR) as appropriate. There is no record ofany TDRor SDRbeing submitted for any ofthese shipments. 6. These items were in the original manufacturepackwhen received and we stored the items in the same boxes in which

8

### the material was initially shipped

.... The items were transported [from DDJC] via a commercial carrier, and once receipted into our inventory, they were moved to one ofour buildings for storage via our internal fleet. Neither am I aware, nor is there any evidence, that these boxes were flattened during the receipt and storage process. (GSUMF, ex. 4, decl. at 2) 19. On 16 June 2011, the 309th Air Force Maintenance Wing at Hill AFB issued a Product Quality Deficiency Report (PQDR) finding "Bad Spot Welds" on an aircraft skin delivered by PSI. The PQDR stated that "SPOT WELDS ARE DAMAGED/PULLED THROUGH." (R4, tab 60 at 1-3; GSUMF**~** 

### 40) 20. On 22 June 2011, Mr. John A. Martinez, a mechanical engineer who acted as an aerospace engineer for the 416th Supply Chain Management Squadron at Hill AFB, was asked to investigate the PQDR (GSUMF**~** 

### 43, ex. 1,**~** 

### 1). His declaration stated, in part, as follows: 4. Afterreviewing the PQDRissued by the mechanics, I visited the maintenance line

.... A high number ofwelds in the part the mechanics showed me had visible defects. Ofthe many visible defects, the mostprominent defects were the spot welds. The spot welds were very deep and had star like patterns in the actual weld nuggets. This type ofpitting is generally a good indicatorthat there are problems with the spotwelds especially knowing that these spot welds are held to "Class A" welding requirements. 5. Since this PQDRparthad such a high number ofvisibly bad spotwelds, I then decided to inspect the skins [in stock at the depot]. There were 8parts in stock in the depot at that time. These skins showed signs ofvisible cracking in the spot welds similarto the part I reviewed on the maintenance line. The parts appeared to be in their original packaging, with eachpartbagged and packaged in an individual box. I did not notice any damage to any ofthe boxes. There was nothing about eitherthe parts or the boxes which indicated they had been damaged, crushed, or flattened. I do not recall seeing any special handlingprocedures, such as fragile, this side up, etc., printed anywhere on the boxes. (GSUMF, ex. 1at 2)

921. Mr. Martinez then requested thatMr. Anthoney Harrison, program manager for the Conformance and Verification Program (CVP), inspect and test all the skins in stock at the depot (GSMUF 

### ii 45, ex. 2). Mr. Harrison's declarationprovides, in part, as follows: 8. I requested

...thatthe depotprovide me with the parts in stock at the depot [from PSI]. I learnedthatthere were 16 suchparts. The 16 parts arrived atthe CVP office onJuly 28, 2011. They appearto have arrived in the same boxes in which they were shipped by the contractor. The boxes did not appearto be damaged in any way. There were no handling instructions on the boxes, such as this side up, fragile, orhandle with care. 9. OnAugust 2, 2011, John Martinez and I metto discuss howto inspect and test the parts. We discussed the AF-401 spot welding inspection criteria identified in the contract and the fact thatthis required compliance with the visual and radiographic inspection requirements in AWS D

### 17.2. We decided that I would conduct a visual inspection ofthe spot welds on the parts, and then forward them for radiographic inspection at the Non-Destructive Inspection (NDI) Laboratory atHill

.... 10. OnAugust 3, 2011, I removed the parts from the boxes andperformed a visual inspection ofthe 16 parts. I was careful to maintain the contour ofthe parts and avoid flexing them. Every singlepart I reviewed had multiple instances of cracking in thepaint at the spot welds.

. ..I decidedto allow them to be radiographically tested as we had planned. Not only would this provide further information about the defects, itwould allow us to determine whetherthe cracks were only in the surface paint or in the spot welds themselves. (GSUMF, ex. 2 at 2-3) 22. Radiographic testing was completed and Mr. Ward Fong, program lead for NDI Laboratory, metwith Mr. Harrison on 9 August 2011 to discuss the results ofthe tests. According to Mr. Fong: Every single one ofthe x-ray images showed a significant number ofcracked spot welds. Not only were cracks clearly visible in the spotwelds markedwiththe lead arrows [the
10welds identified by Mr. Harrison as showing cracks upon visual inspection], virtually all ofthe other spot welds also contained cracks

.... (GSUMF, ex. 3,**~** 5) 23. On 9 August 2011, the government issued unilateral Modification No. P00002 (Mod 2), stopping work due to defective welds (R4, tab 3). 24. On 5 October 2011, DLA contracting officer (CO) Heather Gomez sent a Notice ofRevocation ofAcceptance and Breach ofWarranty to PSI'spresident, Mr. Everett Casey. The notice stated, in part, as follows:

(R4, tab 26) [T]his letter serves as written Notice ofBreach ofWarranty pursuantto Clause 52.246-9GO1

.... Rather than terminating your contract for default, Ihave decided to allow you a chance to replace the 70 defective parts you shipped (at your cost) pursuantto the warranty clause. However, to ensure thatthese and remaining contract quantities are not defective, I am creating a special testing CLIN 9910 with a delivery date ofJanuary 04, 2012. You shall submit 2 each samples to Hill AFB

.... Once Hill AFB has tested the samples for compliance with the contract requirements, including using x-ray examinations as required, you may deliver the remainder ofthe quantities under the contract.

25. On 6 October 2011, the DLA contracting office issued Modification No. P00003 (Mod 3) to the contract, which added the special test CLIN referenced in CO Gomez's letter and extendedthe contract delivery dates: REVISED DELIVERY SCHEDULE IS AS FOLLOWS: SPECIAL TEST CLIN SUBMITTAL DATE: 90 DAYS, 01/04/2012 TESTING/EVALUATION DATE: 120 DAYS, 05/04/2012 Upon completion ofthese tasks, the delivery date for the production units was to be extended from 24 June 2010 until 20 November 2012. (R4, tab 4) 26. On 7 October 2011, the government issued Modification No. P00004 (Mod 4), lifting the stop work order and directing PSI to "[p]roceedwithproduction with the delivery schedule on modification P00003" (R4, tab 5).

11 

# I 

# I

### 27. PSI responded in a letter dated 12 October 2011, requesting "theprompt issuance ofa further mod in the identified contract to clarify

...the Contractor's duties and responsibilities" following CO Gomez's 5 October2011 letter and Mods 2, 3, and 4. PSI specifiedthat:The mod is properly to: 1. Report that the 3 5parts referred to in the noted October 5, 2011 letter (a) are not disapproved, that (b) there is no "Revocation ofAcceptance" thereof, that (c) there is no charge of"Breach ofWarranty" as to those parts, that (d) those parts will not be returned, and that (e) the contractorhas no duty to supply a Fed Ex number for such return. 2. Report that the additional Clin 9910 Special Test and the "Clin 3 for a 68 ea (warranty items) at no costto the government" set forth in P000[0]3 are now void and withdrawn. 3. Report that the delivery schedule for the remaining production parts is tobe "11/20/2012" as set forth in P000[0]3. (R4, tab 27) PSI provided no explanation orrationale in the letter for its position (id.). 

### 28. On 25 October 2011, CO Gomez responded, declining to rescind Mod 3 and observingthat "it appears that you are refusing to comply with ModificationP000[0]3. You are hereby notified that the Government considers this a condition which is endangeringperformance ofthe contract." She called for PSI to provide the government with adequate assurances ofperformance within 10 days, or "the Government may terminate this contract for default." (R4, tab 29) 29. On 18 November 2011, CO Gomez emailed a copy ofthe cure notice to PSI, reminding PSI that she had not yet received aresponse (R4, tab 30). There is no indication in the record that PSI everresponded to this second communication. 30. On 20 January 2012, after the due date for delivery ofthe two test items (4 January 2012) had passedwithout any delivery by PSI, and PSI still hadprovided no response to CO Gomez'srequests for adequate assurances, CO Gomez sent PSI yet another letter via email and U.S. mail, providing PSI yet another chance to provide adequate assurances ofperformance and requesting PSI to provide a date by which it would deliver the two delinquent test items to Hill AFB. CO Gomez further noted:

12 

# l(R4, tab 34) I am aware that you have recently informed DCMA thatyou believe that the defective items were damaged by flattening during shipment or storage. The AirForce organization which performed testing on the defective material finds that this explanation could not account for the extensive damage to the parts it reviewed. Italso notedthat the original countours [sic] ofthe parts were still intact when the x-rays were performed.... [I]n any event, the purpose ofthe special test CLIN was to allow you an opportunity to demonstrate that you can adequately produce the part. Yet you appear to be refusing to submit these test parts.

31. On 30 January 2012, Mr. Jeremy Lee Wilczewski, PSI's seniorproject manager, responded, in toto, as follows: Ms. Gomez, This contractordeems that P000[0]4 dated Oct 7, 2011 to override the previous P000[0]2 and P000[0]3. The remaining balance ofproduction items will be delivered by 11/20/2012 as stated in Mr. Casey's letter dated 10/12111. (R4, tab 35) 32. On 23 March 2012, DLATerminating CO Susan E. Perkins terminated the contract for default based on PSI's failure to perform in accordance with the terms and conditions ofthe contract (R4, tab 36 at 7). 33. On 19 June 2012, DLA CO Janice A. Hicks issued a final decision (COFD), debt determination, and demand for repayment offunds pursuantto the Warranty clause in the amount of$13,825.00 (35 units@ $395/unit) (R4, tab 37). The amount demanded was subsequently reduced to $6,320.16 (16 units@ $395/unit) (App. Rev. Statement of Undisputed Material Facts (ASUMF), ex. 17). 34. On 9 May 2012, PSI timely appealedthe termination for default to this Board. We docketed the appeal as ASBCANo. 58135 on 14 May 2012. PSI timely appealed DLA'sbreach ofwarranty claim COFD on 26 June 2012. We docketed that appeal as ASBCA No. 58205 on 2 July 2012.

13DECISION Summaryjudgmentis appropriate whenthere is no genuine issue ofmaterial fact and the movant is entitledtojudgment as a matter oflaw. FED. R. C1v. P. 56(c); Proveris Scientific Corp. v. Innovasystems, Inc., 739 F.3d 1367, 1371 (Fed. Cir. 2014); Mingus Constructors, Inc. v. UnitedStates, 812 F.2d 1387, 1391 (Fed. Cir. 1987). A material fact is one that may affect the outcome ofthe decision. Anderson v. LibertyLobby, Inc., 477 U.S. 242, 248-49 (1986). The moving party bears the burden ofestablishing the absence ofany genuine issue ofmaterial fact, and all significant doubt over factual issues mustbe resolved in favor ofthe party opposing summaryjudgment. Mingus, 812 F.2d at 1390-91. However, more than mere assertions ofcounsel are necessary to counter a motion for summaryjudgment. The non-movant may not rest on its conclusory pleadings, but must set out, in affidavit or otherwise, what specific evidence could be offered at trial. Pure Gold, Inc. v. Syntex (U.S.A.), Inc., 739 F.2d 624, 626-27 (Fed. Cir. 1984). The parties' cross-motions are evaluated on their own merits, and we are not obliged to grantjudgment as a matter oflaw for one side orthe other. Mingus, 812 F.2d at 1391. On cross-motions, "counsel are deemed to represent...that all the relevant facts are before the [Board] and a trial is unnecessary." Aydin Corp. v. UnitedStates, 669 F.2d 681, 689 (Ct. Cl. 1982). We address first the government's claim for breach ofwarranty due to the cracks in the welds. Visible cracks were discovered in the skins provided by PSI by government personnel working on the A-10 maintenance line (SOF 

### ,-r 19). The governmentthen further examined 16 PSI skins in stock using the visual andradiographic acceptance standards in AWS Dl7.2. Theradiographic testing revealed multiple cracks in most welds in all ofthe samples (SOF 

### ,-r 22). The government attributes the cracks to improper spot welding during PSI's manufacturing process. PSI argues both thatthe cracking was caused by government mishandling ofthe aircraft skins after delivery and that the government erred in radiographically inspecting the skins under AWS D17.2, when the standard incorporated into the contractwas AMS-W-6858 Class A. The government asserts that AWS D17.2 was applicable to PSI's contract. It explains that the specificationreferenced in the main drawing for the part (Drawing No. 160D411002), namely MIL-W-6858, was superseded by AMS-W-6858, which itself was supersededby AWS Dl7.2 in November 2007 (GSUMF 

### ,-r 4, ex. 1, 

### ,-r 8, ex. 2, 

### ,-i 5). Thus, AWS D17.2 was the applicable standard at the time PSI's contract was awarded in April of2008 (GSUMF 

### ,-i 5). However, the government further asserts that even if AMS-W-6858 had been the applicable standard, it contains similarvisual and radiographic inspection requirements as AWS DI7.2: (1) visually, AMS-W-6858 states "cracks open to the surface in Class A welds must be limited to 0%" while AWS D17.2 requires that welds "shall be smooth, free ofcracks, tip-pickup, pits, and other flaws; (2) radiographically, AMS-W-6858 calls for welds to be "free ofcracks and flash," while

14AWS Dl7.2 requires that "[a]ll welds shall be free ofcracks and expulsion" (GSUMF**~~** 5-6 nn.1-2). PSI counters that AWS D17.2 was not incorporated into the contract and that the applicable standard was AMS-W-6858. PSI relies for this assertion on the fact that the contract specifically calls out Specification A-F401 Amendment C dated 10 February 1988 (which version actually incorporates MIL-W-6858, not AMS-W-6858). (ASUMF**~~** 10-11; R4 tab 1at6,tab 21at3) PSI also takes issue with the government's assertion that the requirements ofthe two standards are essentially the same, insisting that AWS D17.2 is more stringent than AMS-W-6858 and that the government is quoting from the provisions in the latter standard thatpertain to test welds, ratherthan the ones pertaining to production items (app. mot. at 10). PSI cites to the visual and radiographic criteria of AMS-W-6858 (Jul 1999) and states that the government has failed to substantiate that its skins failed to comply with those requirements (ASUMF, ex. 16 at 27-28, 31). We find that there is a dispute ofmaterial fact with respect to the applicable welding standard, at the very least. Further development ofthe record is necessary, and we deny the parties' cross-motions for summaryjudgment as to ASBCANo. 58205, the warranty claim. As to ASBCANo. 58135 (PSI's appeal ofthe termination for default), TCO Perkins basedher final decision terminating the contract for default on PSI's failure to perform in accordance with the terms and conditions ofthe contract (SOF**~** 32). The 23 March 2012 memorandum for recordprepared by CO Gomez recounts the following:

• PSI's initial rejection ofMod 3 on 12 October 2011 (see SOF**~** 27) • PSI's failure to respond to the CO's cure notice dated 25 October 2011 1 • The CO's 18 November 2011 email to PSI again requesting a response to the 25 October2011 cure notice (SOF**~** 29) • PSI's failure to respondto the 18 November 2011 email (id.) • CO Gomez's inquiry to Mr. Harrison whetherthe defects found in the 16 skins could have been caused by flattening during handling or storage (R4, tab 33) • Mr. Harrison's response that storage and handling by the government did not cause the defects in the 16 skins (id.)

1 PSI contends that its 5 January 2012 letterto DCMA constituted a response to the CO's October cure notice (app. stmt. ofgenuine issues ofmaterial**fact~** 64). We reject this argument. Not only did PSI never sendthe CO a response, but its January letter concerned one skin sentto it for evaluation by DCMA and did not address the 16 skins inspected by governmentpersonnel that formed the basis for the issuance ofMod 3 and the CO's subsequent cure notice.
15• CO Gomez's 20 January 2012 cure notice to PSI noting that the 4 January 2012 ship date for the two test skins required by Mod 3 has passed and PSI is now delinquent (SOF 

### 'il 30) • PSI's 30 January 2012 letter which failed to provide a date by which the test skins would be shipped and stated that PSI "deems" Mod 4 to have overridden Mod 3 and Mod 2 and that PSI intended to deliver the balance ofthe production items by 20 November 2012 (SOF 

### 'il 31) (R4, tab 36 at 3-5) PSI does not dispute that it failed to deliver the two test samples required by Mod 3 or that it failed to offer adequate assurances ofperformance in response to the CO's repeated requests. Rather, it argues in opposition to the government's motion for summary judgmentthatthe government'spriorbreach ofthe contract (by using test procedures inconsistent with the contract specifications) removed any obligation on its part to perform in accordance with the contractterms and conditions, including Mod 3. (App. opp'nat 2-3) Additionally, PSI argues in its motion for summaryjudgmentthat its failure to perform was causedby the government's improper warranty claim and was therefore excusable because it was beyondthe control and without the fault or negligence ofPSI (app. mot. at 19-21). The undisputed facts demonstrate thatthe default termination was proper. See Third CoastFresh Distribution, L.L.C., ASBCANo. 59696, 16-1BCA'i!36,340. On 5 October 2011, CO Gomezwrote PSI enclosing the report from Hill AFB 8091h Maintenance Squadron onthe inspection of 16 PSI skins in stock at the depot at Hill AFB which found both visible defects in the spot welds and cracks in a significant number of the spot welds on each ofthe 16 skins underradiographic analysis. Rather than terminate the contract for default, she offered PSI the opportunity to replace the defective skins already shipped after first submitting two samples for testing. (R4, tab 26) Mod 3, issued thereafter on 6 October2011, called for delivery ofthe twotest skins by 4 January 2012 (SOF 

### 'il 25). Based on the information she received in the report, CO Gomez acted reasonably in affording PSI the opportunity to demonstrate that its skins conformedto contract requirements ratherthan terminating for default. The recordreflects thatthe government's imposition ofAWS 

### Dl7.2 was done in the good faith beliefthatit was the correct standard (SOF 

### 'il 21). We have not found any evidence in the record before us that PSI raised the issue ofbreach by the government at the time Mod 3 was issued or at any time thereafter, priorto appealing the default termination. Nor did PSI assert any intention, after Mod 3 issued, to cease performance of the contract due to the government's putative breach. We also cannot find any evidence in the record that PSI ever discussed with the government at any time priorto the termination a concern that the wrong welding standard was being applied by the government in its inspections. Therefore, the governmenthad no opportunity to address the issue with PSI. Rather, in response to Mod 3, PSI unilaterally announced that it intended to go forward
16with the production and delivery ofthe remaining quantity ofskins while ignoring the government's concerns with respect to the quality ofthe skins that had been delivered, the requirements ofMod 3 that were put in place to address those concerns, and the incipient, unresolved disagreement overthe applicable welding standard. Priorto issuing the second cure notice in January 2012, CO Gomez was made aware that DCMA had sent another skin (not one ofthe 16 the government inspected) to PSI for evaluation and that PSI had reported back to DCMAthat the skin it was sent showed signs ofhaving been flattened which it believed had caused the visible cracks. No radiographic analysis was performed on that one skin by PSI. (GSUMF 

### iiii 66-67) CO Gomez inquired ofMr. Harrison whetherthe cracks in the welds ofthe 16 skins couldhave been causedby improper storage or mishandling ofthe parts. Mr. Harrison responded that he had no knowledge as to the part sentto PSI, which he had never seen or inspected, butthat none ofthe 16 skins he inspected had been flattened. Moreover, he relayed to herthat the type ofdefects observed in the 16 skins were not the sort that would be caused by flattening, but rather by the welding process itself. (R4, tab 33; GSUMF 

### iiii 72-74)2 The contract's Disputes clause, FAR 52.233-1, requires the contractorto continue performance ofthe contractpending resolution ofa dispute arising under the contract (SOF 

### ii 8). Whetherthe properversion ofwelding standards was being applied, andthe likely cause ofthe cracks inthe welds, arejust such disputes. Underthe contract's Changes clause, for instance, PSI would have been entitledto compensation for any increased costs or delays occasionedby the government's insistence that it perform under a standard different from that contained in the contract, ifsuch were determined to be the case. Whether ornot such a dispute existed at the time PSI expressed its intention to ignore Mod 3 is questionable, since PSI had apparently notraised the issue. But, ifit had, it would still have been required to perform in accordance withthe contract's requirements and the reasonable direction ofthe CO. 

### EssexElectro Eng'rs, Inc., ASBCA No. 49115, 02-1 BCA

### ii 31,714 at 156,699 (citing

### Benju Corporation, ASBCA No. 43648 

### etal., 97-2 BCA

### ii 29,274 at 145,654-55 (even ifthe government's interpretation is wrong, the contractor is notjustifiedin refusing to do as directed, since the merits ofthe controversy have no**~ffect** on the requirement that a contractor continue performance)).

2Appellant objects to paragraphs 72-74, 

### interalia, ofthe government's SUMF on the basis thatthe declarations ofMessrs. Martinez, Fong, and Harrison constitute improper experttestimony, butdoes not otherwise dispute the facts or opinions therein. We note that Federal Rule ofEvidence 701 permits lay opinion testimony based on the witness's personal knowledge and experience, but in any event do not rely herein on the disputed opinions since we do not decide the warranty breach issue.
17Reliefwas available underthe contract should the government's beliefthat AWS D17.2 was the applicable standardturns outto have been mistaken. PSI's failure to perform was the result ofits own acts and omissions and was not excusable. CONCLUSION Forthe reasons stated, the government's motion for summaryjudgmentin ASBCA No. 58135 is granted, and the parties' cross-motions for summaryjudgment in ASBCA No. 58205 are denied. Dated: 8June 2016

I concur

# /~~~ MARKN. S MPLER Administrative Judge Acting Chairman Armed Services Board ofContractAppeals I concur

RICHARD SHACKLEFORD Administrative Judge Vice Chairman Armed Services Board ofContractAppeals

I certify that the foregoing is a true copy ofthe Opinion and Decision ofthe Armed Services Board ofContractAppeals in ASBCA Nos. 58135, 58205, Appeals of Precision Standard, Inc., rendered in conformance with the Board's Charter. Dated:

18 JEFFREY D. GARDIN Recorder, Armed Services Board ofContract Appeals