ARMED SERVICES BOARD OF CONTRACTAPPEALS Appeal of

-- ) ) Military Aircraft Parts ) ) Under ContractNo. SPM4A7-ll-M-Dl 11 )

APPEARANCE FORTHE APPELLANT:

APPEARANCES FORTHE GOVERNMENT: ASBCA No. 60009

Mr. Robert E. Marin

President

Daniel K. Poling, Esq.

DLA ChiefTrial Attorney Edward R. Murray, Esq. Jason D. Morgan, Esq.

Trial Attorneys DLAAviation Richmond, VA

OPINION BYADMINISTRATIVE JUDGE O'SULLIVAN Military AircraftParts (MAP) appeals from a contracting officer's final decision denying its claim for breach ofcontract. The parties have submitted the appeal for decision on the written record pursuant to BoardRule 11. 1 Both entitlement and quantum
are at issue. We havejurisdictionpursuantto the Contract Disputes Act of 1978 (CDA), 41 U.S.C. §§ 7101-7109. We sustain the appeal in part.
FINDINGS OF FACT

1. Purchase OrderNo. SPM4A7-ll-M-Dl 11 (the contract) was issuedbythe Defense Logistics Agency Aviation (DLAAviation) field office, Richmond, Virginia, to MAP on 18 November2010 (R4 tab 1). The government soughtto acquire one first article and six production units ofa steel flap track liner for the A-10 aircraft (id. at 3, 8-10). The contract identifies this part as a Critical Application Item (id. at 4). The total price ofthe contract, for first article manufacture andtesting and six production parts, was $7,550.00 (id. at 1). Section B ofthe contract contains first article testing instructions, which provide in pertinent part:
5. MATERIAL PROCESSING, INCLUDING FINISH REQUIREMENTS (PLATING, CASTING, FORGING,

1MAP originally electedto proceed under BoardRule 12.2, small claims expedited procedure. MAP subsequently elected to remove the appeal from the Board's Rule 12 docket in orderto extend the time available for discovery. 

# lHEATTREATMENT, WELDING, INSPECTION, ANODIZE, PAINTING, ETC.) UTILIZED IN THE MANUFACTURE OF FIRSTARTICLE ITEMS SHALL BE IDENTIFIED AND CERTIFIED ALONG WITH A COPY OF MATERIAL PURCHASE REQUESTS AS CONFIRMING TO APPLICABLE DAT A REQUIREMENTS. A COPY OF THE PURCHASE ORDER CERTIFYING THE PROCESS ACCOMPLISHED AT OTHERTHAN CONTRACTOR FACILITY SHALL BE INCLUDED.
(Id. at 3) The applicable drawings specify the application ofcadmium plating and epoxy-polyamide primer as part ofthe manufacturing process (R4, tab 19 at 7).

2. The contract containedthe Federal Acquisition Regulation (FAR) 52.209-4, FIRST ARTICLE APPROVAL-GOVERNMENTTESTING (SEP 1989) clause, with its ALTERNATE I (JAN 1997). The clause provides in pertinentpart: (b) Within 120 calendar days after the Government receives the first article, the Contracting Officer shall notify the Contractor, in writing, ofthe conditional approval, approval, or disapproval ofthe first article. The notice ofconditional approval or approval shall not relieve the Contractor from complying with all requirements ofthe specifications and all otherterms and conditions ofthis contract. A notice ofconditional approval shall state any further action required ofthe Contractor. A notice of disapproval shall cite reasons for the disapproval.
(c) Ifthe first article is disapproved, the Contractor, upon Government request, shall submit an additional first article for testing. After each request, the Contractor shall make any necessary changes, modifications, orrepairs to the first article or select another first article for testing. All costs related tothese tests are to be borne by the Contractor, including any and all costs for additional tests following a disapproval. The Contractor shall furnish any additional first article to the Government under the terms and conditions and within the time specifiedby the Government.

... (d) Ifthe Contractor fails to deliver any first article
on time, orthe Contracting Officer disapproves any first article, the Contractor shall be deemed to have failed to
2make delivery within the meaning ofthe Default clause of this contract.

(h) Before first article approval, the acquisition of materials or components for, or the commencement of production of, the balance ofthe contract quantity is at the sole risk ofthe Contractor. Before first article approval, the costs thereofshall not be allocable to this contract for (1) progress payments, or (2) termination settlements ifthe contract is terminated for the convenience ofthe Government. (R4, tab 1at 14)2 The contract also contains a DLA clause with additional requirements, 52.209-9018, FIRSTARTICLE

- GOVERNMENT TEST-ADDITIONAL REQUIREMENTS (SEP 2008) DLAD (id.).

3. The contract required delivery ofthe first article to the government for testing by 17 May 2011, 180 days after award (R4, tab 1at 2). It is undisputed that MAP did not deliverthe first article by this date; the first article was delivered to the government for testing on 30 January 2012 (R4, tab 37).3 Governmenttesting of MAP's first article resulted in a discrepancy report thatwas attached to a notice providedby the contracting officerto MAP on 15 May 2012 that its first article was disapproved (R4, tabs 4, 5). The only discrepancy noted after testing and inspection
was with respect to the holes drilled in the part to facilitate its attachmentto the flap track-the contract called for the holes to be .190" to .194" in diameter, butthe report stated that the actual diameter was ".195

- .196 [in] twelve places" (id.). 4

4. The government's structures engineer who replaced the engineer responsible for reviewing the first article submitted by MAP is familiar with the A-10 wing flap system and provided the following general information about the holes in the flap liner. Aircraft mechanics use the 12 holes to mount the liner, with fasteners, to an underlying aluminum section which is traversed by the roller that extends and retracts the wing flaps ofthe aircraft. Ifthe liner were not securely fastened and were to detach from the mating section below, the roller would be likely to damage that section and potentially cause the wing flap not to operate correctly. In addition, ifthe

2 FAR 52.209-4 is not set forth in full text in the contract document. 3 The record before us does not indicate that the governmenttook any action with respect to the missed delivery date. There is no indication that a new delivery date was ever established. 4 A second discrepancy with respect to the certificationpackage was corrected on 14 May 2012 (id.). 3linerholes are too large, the mechanic attaching the liner may not be able to use it as a template for drilling holes in the matingpart and may notbe able to use the specified fasteners. (Gov'tbr., ex. A, Casey Thurber decl. (Thurber decl.) 

### iii! 1-4) However, the government has presented no evidence that the nonconforming holes in MAP's first article were large enoughto actually presentthe potential problems described.

5. At MAP'srequest, quality assurance representatives (QARs) Randall Fritz and Greg Keeler from the Defense Contract Management Agency (DCMA) visited MAP's facility on 20 June 2012 to witness an inspection ofthe returned part (gov'tbr.,
ex. C, Randall Fritz decl. (Fritz decl.) 

### iii! 2, 3). Contrary to the discrepancy report, only 3 (out of 12 total) holes were found to be out oftolerance-i.e., measuring .195" to .196" in diameter (R4, tab 6). Theremainder measured .190" to .194" in diameter (R4, tab 40). Atthe time, Mr. Marin ofMAP pointed outthat the out-of-tolerance holes were missing paint, and stated that this condition could have been caused by forcing gauge pins5 through the holes, thereby removing the paint and enlarging the holes (Fritz decl. 

### ii 5). Mr. Fritz responded that Mr. Marin's theory was plausible but unlikely, and offered him an opportunity to demonstrate on anotherpart. Mr. Marin declined because he did not wantto destroy a part. (Id.; R4, tab 9 at 1)

6. The same day, 20 June 2012, Mr. Marin emailed DLA contract administrator Lisa Hardy, noting that paintwas missing from the holes that were measured to be out of tolerance, and further statingthat MAP suspectedthatthe part "was in tolerance and acceptableper drawing when submitted and forceful inspection at the ESA caused by forcing a gagepin thru the hole occurred."6 Mr. Marin asserted that over a hundred holes in parts made at the same time were in tolerance and did nothave paintremoved from the holes. He requested permission to do a resubmittal at no cost. (R4, tab 6 at 1) QARFritz replied to this email, confirmingto Ms. Hardy that three ofthe holes were out oftolerance, and stating "Iwould concur with you, ifyou should decide to allow a no costresubmittal" (id.).

7. The ESA engineering technician who performed the measurement ofthe holes in the first article provided a declaration in which she confirmed that she "found the holes to be in the .195" to .196" range." She denied enlarging the holes or forcing gauge pins through the holes, but did state that it is possible that heruse ofthe gauge pin couldhave removedpaint from the holes. In her opinion, such a result would be "typical, but irrelevant to the inspection. The inspection is for the diameter ofthe metal, not the paint." (Gov'tbr., ex. B, Julie Morse decl. (Morse decl.) 

### iii! 1-4) EngineerThurberbacks up Ms. Morse's opinion in this regard, declaring that:

5 The Board will refer to these measuring instruments·as "gaugepins," following the dictionary preferred spelling ofthe word "gauge," but in the record the spelling used is most often "gage." 6 ESArefers to the Engineering Support Activity at Hill AirForce Base, Utah. The ESA conducted the first article inspection at issue in this appeal.
4

### It is

...irrelevantthatthe paintwas removed from any ofthe holes in the part. The inspection should be measuring the diameters ofthe metal, not paint. Paint is not a structural component and obviously does not have the structural integrity ofsteel. Paint will not hold a fastener in place. Likewise, a part with oversized holes cannot be repaired by adding paintto the holes. This will not repair the structural integrity ofthe part. (Thurber decl. 

### ii 5)

8. Although Ms. Morse does not in her declaration provide any details about how she conducted her inspection, there is evidence in the record that she used gauge pins during the inspectionprocess (R4, tab 38 at 5).

9. On 22 June 2012, Mr. Fritz issued a Corrective Action Request (CAR) to MAP, requesting that MAP respond on orbefore 5 July 2012 with its analysis ofthe cause of the dimensional nonconformance andthe action proposedto be takento prevent a re-occurrence (R4, tab 7).

10. On 25 June 2012, MAP quality inspector Alberto Valenzuela conductedhis
own inspection ofthe holes in the rejectedpart. He recorded measurements from .190 to .196". (R4, tab 40)

11. The previous year, on 9 November 2011, Mr. Valenzuelahad inspected the
same partpriorto sendingthe partto the government for inspection, and recorded a hole diameter of.194" at Step 4 ofthe manufacturing process (R4, tab 33). That same day, 9 November 2011, another MAP inspectorperformed an inspection ofthe same part at Step 5 ofthe manufacturing process and recorded the hole diameter as .191" (R4, tab 34).7 Subsequently, on 21 November 2011, a third MAP inspector conducted
an inspection on a sample offour parts out ofa production run of 13 parts at Step 5 of the manufacturingprocess.8 This inspector recorded a hole diameter of.191" for the four inspectedparts. (R4, tab 35) Finally, on 30 January 2012, government QARGordon Gregory signed offon the First Article Test Report conducted by MAP prior to shipping the first article for governmenttesting, commenting:

7 From the information available in the record, it appears that Step 4 involves the drilling ofthe holes and Step 5 involves "MACHINE DE-BURRPER G-FlOl." Both ofthese steps precede the application ofthe required coating and primer. (R4, tab 36) 8MAP electedto manufacture the first article, the six production parts, and additional parts, for a total ofone first article and twelve production parts, in one production run priorto first article approval (R4, tab 48 at 14). 

### 5VERIFIED CALIBRATION, VERIFIED PPP&M, REVIEWED CERTPACKAGE, REVIEWED INSPECTION RECORDS, REVIEWED CONTRACT FOREXCEPTIONS, WITTINESS [sic] DIMENSIONAL INSPECTION & METHODS, RECOMMEND FAT APPROVAL[.]
(R4, tab 37 at 2) The dimension recorded for hole diameter in the FAT Report was .191" for a sample of4 out of 13, as inspected on 21 November 2011 (id. at 37).

12. On 19 July 2012, MAP responded to the DCMA CAR. MAP asserted that the root cause ofthe nonconformance was damage caused by the government while inspecting the part, pointing outthat "144 holes in parts we have in stock made at the
same time were in tolerance and did not have paintremoved from the holes." MAP requested the opportunity to submit one ofthe production parts as a new first article and requested that the government use "reasonable care" in inspecting it. (R4, tab 8) Mr. Fritzresponded on 23 July 2012 that MAP's response was unacceptable. He stated: "I offered youthe chance to prove yourtheory ifyou were willing to destroy
one ofyour stockparts at no expense to the government, to demonstrate. You declined." (R4, tab 9 at 11) Mr. Fritz apparently agreed with Mr. Marin that forcing a gauge pin through the hole, thereby removing the paint, would destroy the part.
13. On 19 July 2012, Ms. LisaHardy ofDLAAviation responded to Mr. Marin's 20 June 2012 email (finding 6), requestingthat he confirm MAP's willingness to pay the first article re-testing fee of$651.07 as well as consideration of $1,325.55 to re-establish the first article test date to 31August2012. She further informed him that a no-cost cancellation ofthe orderwas an available option. He responded the same day, stating that "[w]e certainly feel strongly this was a Government caused disapproval and hope you will considerDCMA's recommendation to resubmit at no additional cost. Ifnot, then this is reluctantly acceptable." (R4, tab 13 at 2-3)

14. Bothparties agree that on 20 June 2012 in the presence ofMessrs. Fritz and Keeler, and again on 24 July 2012 in the presence ofMr. Robert Presley, DCMA supervisory quality assurance specialist, MAP employees pulled production parts from stock, used "go/no-go" gaugepins on them, and represented to the government representatives thatthe parts were compliant (Fritz decl. 

### ii 4; gov't hr., ex. D, Robert Presley decl. (Presley decl.) 

### ii 3). Itdoes not appear from the record that the results ofthese inspections oftheproductionparts were recorded, and both Mr. Fritz and Mr. Presley stated they do not knowthe sizes ofthe gauge pins that were used (Fritz decl. 

### ii 4; Presley decl. 

### ii 3). None ofthese governmentrepresentatives either questioned any ofthe reported results, orperformed any inspection themselves, despite having the opportunity to do so (id.).


### 615. From the record, there appear to be at least two different ways ofinspecting the dimensional compliance ofholes: (1) using go/no-go gauge pins; and (2) actually measuring the holes. The go/no-go process was described by Mr. Valenzuela, a MAP inspector with over 30 years ofexperience, as follows:

In my inspection I prefer to perform what I call a "hard gage" inspection ofthe parts. This involves the use oftwo gage pins, a go and a no-go pin. Forthe .190/.l94" diameter I would use a .190" and make sure it goes into all the holes. Finally I would use a .194" and checkto see it does not go into any ofthe holes (no-go condition). This shows passing results. (App. supp. R4, tab 110, Valenzuela decl.**~~** 4, 6) Actually measuring the specific dimension ofa hole appears to be more time-intensive and was described by Mr. Valenzuela
as more likely to enlarge the holes than go/no-go inspection. Mr. Valenzuela stated: Measuring each and every hole in a part like this [referring to the flap track liner] can be done, but ittakes a lot oftime and can progressively make the hole larger, so I prefer not to do this. (Id.**~** 7) MAP also submitted for the record independent industry materials indicating that the use ofgo/no-go pin orplug gauges is an accepted method for inspecting the dimensional compliance ofdrilled holes on a pass/fail basis. For instance, the Meyer Gage Catalog states that:

A GO gage is used to checkthe lower limit ofa hole. A NOGO gage is used to checkthe upper limit ofa hole. Ifthe GO gage enters the hole and the NOGO gage is unable to enter, the design specifications ofthe hole have been met. (R4, tab 108 at 3) The same source cautions that such gauges are used to inspect the holes for pass/fail compliance only, and will not measure the exact size ofthe hole (id. at 4).

16. On 25 March 2013 (there is no explanation in the record ofwhat occurred, if anything, during the intervening eight months), DLA contracting officer (CO) Janice Hicks issued a show cause letterto MAP, inviting MAP to submit information bearing on whetherthe contract should be terminated for default, or a new delivery schedule should be established, within 10 days (R4, tab 11). MAP responded on 1April 2013 that it had requested a no-costresubmission and that it had enough parts in stockto immediately ship
a first article and all production parts. Itreiterated its position that the rejected first article
was damaged during government inspection. (R4, tab 12 at 2) On 2 April 2013, CO Hicks

7responded thatthe government could not approve a no-cost first article resubmittal unless MAP provided evidence ofthe rejectedpartbeing damaged by the government (id.). CO Hicks' request for evidence ofgovernment damage drew the following response from QARFritz:
QAR Keeler and myselfinspected the rejected part with Military Aircraft Parts personnel when the part was returned. We did not see any "clear and convincing evidence" that the government caused damage to the part during their test.
We did observe the part was nonconforming. Justto be clear, DCMA at no time has recommended a no costFAresubmittal. (R4, tab 12 at 1)

17. On 5 April 2013, Mr. Marin responded to CO Hicks's invitationto submit evidence that the rejectedpartwas damaged by the governmentby offering to return the damagedpartto DLA "along withthe 12 production parts that are in tolerance and undamaged. This will provide proofand assure that production parts are in tolerance at the same time." (R4, tab 14 at 2) CO Hicks responded the following Monday, 8 April:

Rob

You have one of2 choices1. You can resubmit the FAT samples and pay the cost for FATresubmittal. 2. DLA can proceed with Termination for Default.l91

I need a decision no later than 16 April 2013. Ifno response is received, then I will surmise that your decision
was for DLA to proceed with Termination for Default.

On 17 April 2013, Mr. Marinresponded that MAP agreed to the resubmittal and to pay the cost ofre-testing. (R4, tab 14 at 1) That same day, Mr. Keeler emailed Mr. Marin and statedthatMAP needed to make a new first article testpart and could not use one

9 In accordance with FAR49.504(a)(l), the contract did not contain FAR 52.249-8. Default (Fixed-Price Supply and Service) (or any other Default clause). The inclusion ofthis clause was notrequired pursuantto FAR49.504(a)(l) since the contract amount did not exceedthe simplified acquisition threshold. See FAR2.101. 8ofthe parts from the priorproduction run, because "yourFAT failed government inspection so all parts you made on the same run as the FAT are considered bad also" (R4, tab 15 at 1-2).

18. On 19 April 2013, DLA contract administratorLee Skimin sent MAP contract Modification No. POOOO1 (Mod. POOOO 1) containing a new CLIN and delivery date for the first article resubmittal (R4, tab 16 at 2, tab 2). Mr. Marin responded the following Monday, 22 April, that he was unsure how to proceedbecause:

2. On 6/20/12 we worked with our QARto inspect all the holes in the 12 remaining parts, which we would like to use as our FA exhibit. All items were acceptable. 3. On 7/24/12 Randy's DCMA supervisor, Robert Presley, also came in and the same inspection was conducted. All holes were acceptable. 4. DCMA now wants to reject the parts with holes they observed to be acceptable, perthe email below [the referenced email appears to have been deleted in the copy provided by the government for the Rule 4 file].

The attached contract page seems to give the Government the option to reject the parts, though this appears counterproductive and costprohibitive. Making newparts obviously would require additional time and cost.

Is this something to address with your agency orDCMA? I would certainly like to resolve this without further conflict with DCMA. (R4, tab 17 at 2) The "attached contractpage" refers to Section B ofOrder No. SPM4A7-11-M-Dl 11, which contains an unnamed, unnumbered, undated clause providing as follows:

SAMPLING:

1. SAMPLING FORINSPECTION AND TESTING SHALL BE IAW ANSI/ ASQ Z.4-2008, DATED JAN 1, 2008. ANYALTERNATE PLAN MUST BE APPROVED BYTHE PCO. A SAMPLING PLAN THATACCEPTS ON ZERO DEFECTS IS REQUIRED.

2. ANYDEFECTIVE ITEM DISCOVERED DURING INSPECTION MAYBE CAUSE FORREJECTION
9OF THE ENTIRE CONTRACT QUANTITY. CRITICAL APPLICATION ITEM.
(R4, tab 17 at 7, tab I at 4)

19. In response, CO Hicks emailed Mr. Marin on 23 April 2013, stating:

We cannot accept a new FAT sample from production quantities where the FAT failed previously. Thereason being is your FAT failed government inspection so all parts you made on the same productionrun as the FAT are considered badparts. That is a riskthat you assumedwhen you manufactured the entire production quantity at the
same time thatyou produce[d] the FAT sample. You will need to produce a new FAT sample and ifit passes, then you will need to produce new quantities.
(R4, tab 17 at 1) Neither CO Hicks nor Mr. Keeler specified any contract term underlying theirrefusal to accept a new first article made from the same production
run as the disapproved first article.

20. On 2 May 2013, MAP and the government executed bilateral Mod. POOOOl establishing a first article resubmittal date of24 October 2013 (R4, tab 2). Mod. POOOOl states in pertinent part:
3. Tore-submit a First Article, reference DLAAviation, FAW A Disapproval Letter, dated 19 JUN 2012. First Article re-submission is as follows: a. Revise the delivery date on CLIN 0002, formerly CLIN 9906 to 24 OCT 2013, for FirstArticle re-submission. b. Contractor shall provide DLAAviation withproofofdelivery (DD250) and shipping documents that the First Article re-submission
was shipped by the date above.

4. Revise the delivery date on CLIN 0001, Production Units, as indicated- 22 APR2014- due to the time extension for the First Article re-submission.

5. Pursuant to FAR 52.209-4, the related costs are: Re-Testing Charges: $651.07 Administrative Costs and Time Extension: Waived Total: $651.07

10Consideration in the amount of$651.07 is accepted for this modification. For invoicing purposes, the contractvalue will not be changed. Therefore, when invoicingthe contractor's invoice should NOT be adjusted to reflect this modification. To effectuate this modification, the payment office will offsetthe amount ofthis modification against any outstanding payments due, potentially including other contracts.

6. Pursuant to FAR 52.209-4 and the General Provision Clauses, ifthe FirstArticle re-submission is not delivered by the date above, or ifthe First Article is disapproved (second disapproval), this contract may be terminated in its entirety at no cost to the Government. Purpose ofthis modification is to authorize the Contractor to re-submit the FirstArticle, acceptthe Contractor's consideration and to revise the delivery dates for the First Article and for Production, due to the Contractor's decision to re-submit apreviously disapprovedFirstArticle.
(R4, tab 2 at 2) Mod. POOOOl does not contain any requirement that the re-submitted first article be newly manufactured.

21. On 25 July 2013 MAP submitted a Request for Deviation/Waiver10 requesting permission to submit a new first article using one ofthe parts previously made. MAP reiterated that the remaining parts had been inspected with pin gauges in DCMA'spresence and found to be 100% compliantwith the .190-.194" hole requirement. (R4, tab 19 at 1, tab 20 at 2)

22. On 29 July 2013, Mr. Raymond Thomas, who had replaced Mr. Fritz as the QARassigned to MAP, responded requesting an "inspectionrecord showingthe exact dimensions ofall the holes for the twelve parts that were made with this first article" (R4, tab 20 at 2). Mr. Marin sent an email to Mr. Valenzuela, asking "Canyou supply this?" (R4, tab 41 at 1). Mr. Valenzuelathen sentMr. Marin a copy ofthe inspection he hadperformed ofthe first article back in November 2011 (id. at 1, 10). Mr. Marin responded, "We need a QD form for the 12 extraparts

...notthe 1partwe sent...can

10 MAP asserts that it was directed by DCMA to file a waiverrequest as an alternative to manufacturing more parts (app. reply br. at 6). However, there is no evidence in the record supporting this assertion. 11you help?" Mr. Valenzuelaresponded, "I can modify or create a new one because the rest ofthe parts was finished, same machine and sameprogram." (R4, tab 42 at 1) 11

23. Subsequently Mr. Marin sent Mr. Thomas an email with the message "See attached" (R4, tab 45). It is unclear from the Rule 4 file what was actually attached to his email. In any event, Mr. Thomas replied:
Rob,

Thank you for providing the inspection record from your sampling. However I will need an inspection record for each individual part that was made with the failed first article showing the actual measurements for each hole that is coveredby .190-.194 DIAtolerance. Failure to provide the documentation by 1Aug. will cause the waiverto be processed without this information.
(R4, tab 20 at 1)

24. Mr. Marin then emailed Mr. Valenzuela, commenting "This seems unreasonable

..

### .! think measurements of 144 holes is excessive and unnecessary. Any thoughts?" (R4, tab 111 at 8)

25. Mr. Thomas and Mr. Keeler visited MAP on 1August2013. Mr. Valenzuela declares that:

I am sure I presented one new goodpart from inventory, sometime afterthe first article rejection, to DCMA QAR Greg Keeler. He said somethingto the effect of, "I'm goodwith that. All you need is a mod now." I believe this
was onAugust Pt, 2013 to the best ofmy memory. (R4, tab 110,, 8) Mr. Marin states:

I am unsure aboutthe events that occurred when DCMA
was at MAP's facility on 1August2013 for ourregular weekly QARwitness ofparts, which is the deadline QARThomas gave MAPto show inspection records ofr [sic] all the holes for parts in inventory. However, the

11 While the dates on these emails are consideredreliable, the times are not. Most of the emails are printed from government counsel's computer and it appears the computer may have convertedthe original times ofthe mostrecent email in each series from Pacific Time to Eastern StandardTime. 12attached email from me [referring to his 29 July 2013 email quoted above] shows we knew inspection ofall 144 holes in the good parts we had in stock could damage the .190/.194 holes and may bethe reason we failed to perform the inspection. I believe this wouldbe an issue we would likely address with DCMA on that date, but wehave no otherrecord ofwhat transpired.
(R4, tab 111,**~** 10)

26. Mr. Thomas's recollection ofthe I August meeting is as follows:

OnAugust 1, 2013, I was at the MAP facility for a weekly meeting. I asked Mr. Marin ifMAPhad an inspection record showing dimensional measurements ofall the holes in all ofthe parts and he said he did not. (Gov'tbr., ex. E, Thomas decl.**~** 4) The record does not include a declaration from Mr. Keeler.

27. On 5 August 2013, DCMA's Mr. Presley forwarded MAP's waiverrequest package to DLA's Mr. Skimin for final approval/disapproval action by DLAAviation. In the forwarding email, Mr. Presley stated: "Please note our functional specialists have reviewedthis waiverrequest and do not recommend approval." (R4, tab 21 at I) By email dated 20 December2013 (the delay is unexplained in the record), DLA notified MAPthat its waiverrequest hadbeen denied (R4, tab 22). Attachedto the email were DCMA's comments onForm DD 1998. Mr. Thomas had commented, "I
am not aware ofany DCMA 100% inspection ofthe remainingtwelve remaining [sic] parts. Requestedthe contractorprovide inspectionrecords for [sic] show the I00% · compliance withthe .194/.190 requirement. The contractorneverprovidedthe records." (R4, tab 22 at 5) There is no explanation in the record ofwhy Mr. Thomas insisted on an exact measurement ofeach hole in all theparts, vs. a pass/fail inspection.

28. In a 20 December 2013 email, Mr. Skimin ofDLA's contracting office informed MAPthat:

Your RFW/RFD, dated 7/24/2013, has been denied. The First article exhibit did not conform to Technical Data Package requirements. Initial FirstArticle disposition was "Disapproved". Pursuantto FAR 52.209-4(h), before first article approval, the acquisition ofmaterials orcomponents for, orthe commencement ofproduction of, the balance of the contract quantity is at the sole risk ofthe Contractor. Your firm has 2 remaining options: I-resubmit a
13conforming first article for government evaluation, as prescribed in Modification POOO[O]l dated 2 MAY 2013;
or 2-take no action."

A response was requestedby 27 December 2013. (R4, tab 22 at 1)

29. On 27 December 2013, MAP (Mr. Marin) responded in part:

We respectfully reiterate our original position that the first article for this contract was erroneously rejected by the Government and the production parts we currently have in
ourpossession, sufficient in quantity to satisfy the requirements ofthe entire contract, should be inspected and accepted. Delivery ofproduction parts would occur when the final inspection paperwork is completed by MAP, within two weeks ofGovernmentnotification of acceptance ofthis proposal.

We also respectfully decline to manufacture a new lot of first article parts. (R4, tab 23 at 1) Mr. Marin further articulatedthe viewthat since the nonconforming holes and the holes from whichpaint had been removed were the same holes, the observed discrepancy was easily correctable in production and the government should have conditionally approved the part. He stated that the government had failed to explain its basis for refusing to allow otherparts manufactured at the same time to be used for a new first article submission and, while he assumed thatthe government was relying on the contract clause statingthat "any defective item discovered during inspection may be cause for rejection ofthe entire contract quantity," he did notbelieve that clause applied to the current situation butto instances where latent defects may be present in production parts or fraud ormisrepresentation had occurred. (Id. at 1-2)

30. The record does not indicate whetherthe CO responded to Mr. Marin's email, other than to withdraw the purchase order for failure to meetthe first article delivery date by unilateral Mod. P00002, effective 13 January 2014 (R4, tab 3). On 21April2015, MAP submitted its claim for breach ofcontract, alleging breach ofthe implied duty of good faith and fair dealing and seeking as damages restitution ofthe cost incurred to manufacture the parts ($10,591.42) plus the $651.07 paidto DLA as consideration for Mod. POOOO1 (R4, tab 25). The claimwas denied by CO Hicks on 13 May 2015 (R4, tab 26), and this appeal followed.

31. MAP's inspection ofthe first article as well as otherparts in the same production run beforethe first article was shippedto the government for first article testing consistently recorded conforming hole diameters ranging from .191 to .194
14inches (finding 11). Government QARGordon Gregory signed offonMAP's first article testreport on 30 January 2012 expressly noting that he hadwitnessed the dimensional inspection and methods and recommending FAT approval (id.). The contract required that cadmium plating and epoxy-polyamideprimerbe applied to the part as part ofthe manufacturing process prior to shipment and testing ofthe first article (finding 1). The first article and all the otherparts manufactured in the same production run therefore hadboth cadmiumplating and primer appliedpriorto shipment ofthe first article to the government for testing.

32. After inspection, the government's dimensional technician reported that instead ofthe required dimension of.190 to .194 inches, the diameter ofthe holes was .195 to .196 inches "[in] twelve places." This was the only respect in whichthe first article did not meet contractrequirements. (Finding 3) When the disapproved first article partwas returned to MAP for inspection in the presence ofthe DCMA QARs
on 20 June 2012, only three holes out ofthe total oftwelve holes were found to be .195 to .196 inches in diameter, while the remaining nine were the required .190 to .194 inches in diameter (finding 5). The three nonconforming holes all had paint missing (id.). The nine holes that did not have paint missing were measured as conforming (id.).

33. The government does not dispute eitherthatthe nine holes withoutpaint removed were conforming, orthat all three nonconformingholes hadpaint missing. When Mr. Marin ofMAP observed following the 20 June 2012 inspection ofthe returned part thatthe nonconforming condition could have been caused during the government inspection by forcing a gauge pin through the holes, thereby removing the paint, government QARFritz found this theory plausible, butunlikely (finding 5). The government's dimensional technician, on the other hand, while denying that she forced
a gauge pin through the holes, statedthat it is possible paint was removed during the inspection process and that the removal ofpaint would be a "typical" result ofthe inspection process (finding 7).

34. Based onthe ESAtechnician's use ofpin gauges during the inspection process (finding 8), her admission thatpaint couldhave been removed during her inspection and that such a result would be "typical,"the evidence ofrecord that pin gauges are not suitable for exact hole measurement because they tend to enlarge the hole (finding 15), the fact that a dimensional discrepancy ofonly two thousandths of
an inch (.196 vs
..194) separated the failing holes from the passing holes, and the fact thatpaintwas missing from the failing holes and only from the failing holes, we find that it mostprobablethatthe technician attempted an exact measurement ofthree holes with gauge pins, removing paint in the process, and then extrapolatedthe results to the other holes. Based onthe evidence thatthe holes metthe required dimensions prior to being shippedto the government for testing (finding 11) and no other discrepancies
were noted in the inspectionprocess (finding 3), we further find that MAP's first article met all contract requirements and that the dimensional discrepancy that resulted
15in the disapproval ofMAP's first article was causedby the government's own inspectionprocess. 12

35. The contract in this case was a unilateral purchase order which by its terms lapses ifcompleteperformance in accordance with the offer's terms and conditions is not tendered. We find thatMAP first tendered performance that met the offer'sterms and conditions on 30 January 2012, when it shipped its first article for government inspection (finding 3). Thus, the unilateral purchase order was converted to a contract as ofthat date.

36. In finding that the first article met the contract requirements, we necessarily reject the government's argument thatthe 12 holes in MAP's first article part were required to meet the specified dimensions after paint was removed. The government has not directed us to any contract provision supporting this argument, and we have found none. To the contrary, the contract required that a cadmium coating and primer both be applied to the partbefore shipping it for inspection (finding 1), and thus we find that the contract required the dimensional requirement to be met with paint, not without.

37. Because MAP's first article met all contractrequirements when shipped to the government (finding 34), we find thatthe CO's disapproval ofthat first article was improper. We also find that the CO's subsequent failure to acknowledge (1) that the government's own inspection process removed paint from three holes in MAP's part, causingthem to be out oftolerance, and (2) that the remaining parts in MAP's inventory were in tolerance and acceptable, was unreasonable based in part on information known to her and in part on information known to the DCMA QARs whose knowledge is imputed to her. The QARs knew or had reason to know, either from the initial inspection ofthe first article part (findings 11, 31), or from the subsequent inspections ofthe disapproved first article comparedto otherparts manufactured at the same time (findings 5, 32), that the first article was damaged while in the government'spossession and thatthe parts from the same run that MAP had in stock were fully acceptable under the contract. 13 The CO herselfwas personally

12 With respect to our finding that MAP's first article met the contract requirements,
we note that the government has introduced evidence ofdifficulties MAP encountered at the outset in manufacturing this part. MAP has explained in a supplemental declaration from Mr. Marin that its first attempt at production employed two inexperienced machinists due to a labor shortage (app. reply br.,
ex. F 

### ,-i 8). The second production run from whichthe first article was submitted employedtwo experienced machinists and no notable problems were encountered (id.). The government has not introduced any evidence that MAP experienced any difficulties in manufacturingthe first article that was actually submitted. 13 The record does not reveal whether or not this information was actually shared with her. 16aware from MAP's contract correspondence that MAP contended its first article had been damagedby the government and that its remainingparts were acceptable, yet rejected MAP's offerto deliver the parts and let the government see for itself (findings 16-17).

38. Once MAP executed Mod. POOOOl establishing a new first article delivery date, it submitted a request for waiver/deviation again seeking the government's
concurrence that it could submit an existingpart as its first article. Raymond Thomas, the then-QAR, responded requesting an inspection record "showingthe exact dimensions ofall the holes for the twelve parts that were made with this first article." (Findings 21, 22) QARThomas provided no explanation to MAP ofwhy exact measurement ofthe diameter ofeach hole in eachpart was needed to determine the dimensional compliance ofthe holes, and none otherwise appears in the record (finding 27). From the evidence ofrecord (findings 7, 17), the Board concludes that pass/fail inspection using go/no-go gauges would have provided the government with adequate assurance that the holes were compliant, and, moreover, that exact measurementposed a risk ofenlarging the holes and destroying what otherwise would have been a goodpart, as happened in the initial government inspection. Thus, we find the QAR's insistence on exact measurement ofeach of 144 holes to have been unreasonable, and the CO's denial ofMAP's waiver request based on its failure to conduct an exact measurement of 144 holes to also have been unreasonable.

39. The CO's failure to acknowledge that government-caused damage to MAP's first article was the sole cause ofits disapproval led directly and inevitably to her subsequent actions we find to have been unreasonable: the CO's failure to allow MAP a no-costresubmittal (findings 16-17); the CO's imposition ofa requirementthat MAP manufacture a newpart for the re-submittal (findings 18-19); the CO's denial of MAP'swaiverrequest based on MAP's failure to comply with DCMA'sunreasonable requirement to measure all 144 holes (findings 22, 27); and, ultimately, the CO's unilateral cancellation ofthe contract in January 2014 (finding 30).

DISCUSSION

MAP asserts that the government was notjustified in disapproving its first article partbecause the government's unduly forceful inspection damaged the three holes found to be nonconforming. MAP also asserts that by insisting that the hole dimensions withoutpaint meet the specified dimensions, the government imposed a more stringent or different inspection standard in its inspection ofMAP's first article than provided for in the contract. In theirtotality, MAP asserts, the government's actions in this case violated the implied duty ofgood faith and fair dealing and constituted a breach ofcontract. MAP asserts entitlement to restitution, to restore it to the status quo ante (as ifthere never had been a contractthat was breached), in the amount of$11,242.49. (R4, tab 25; app. br. at 9-16)

17The government asserts at the outsetthatthe unilateral purchase order at issue in this appeal, as modified by bilateral Mod. POOOO 1, required delivery ofa first article by 24 October 2013, and since MAP failed to do so, the CO wasjustified in cancellingthe order (gov'tbr. at 24-25). The government acknowledges that MAP'sposition is that the CO abused her discretion in not allowing MAP to resubmit a first article using one ofthe production parts it had already manufactured (id. at 25). The government's response to this is in two parts: first, the government argues that MAP agreed to submit a newly manufactured first article by entering into Mod. POOOO 1after being informed by governmentrepresentatives that only a newly manufactured first article would be acceptable (id. at 25-26). Secondly, the government argues that, aside from Mod. POOOOl, the contract clause specifically statingthat any defective item discovered during inspection may be
cause for rejection ofthe entire contract quantity gave the CO the right to decide not to accept any parts made in the same production run as the disapproved first article (id. at 26).

As to the issue whetherthe government wasjustified in disapproving the initial first article, the government first argues that MAP is foreclosed from contestingthis issue by having entered into Mod. POOOO 1, citing

### James Electronics, Inc., ASBCA No. 43505, 93-2 BCA**~** 25,677 at 127,728 (by agreeing to a new delivery schedule after two failed first article submissions, appellant surrendered its right to argue any then existing causes as a defense to its failure to deliver an acceptable first article on the third submittal) (id. at 30-31). Secondly, the government states thatthe disapproval, ifreviewable, was correctbecause the holes in the part were oversized and MAP has not met its burden ofproving thatthis defect was easily correctable in production (id. at 32-33).

To recover on its breach ofcontracttheory, MAP must show (1) a valid contract between the parties; (2) an obligation or duty ofthe government arising out ofthe contract, (3) a breach ofthat duty, and (4) damages caused by the breach. 

### San Carlos Irrigation & 

### DrainageDist. v. 

### UnitedStates, 877 F.2d 957, 959 (Fed. Cir. 1989); 

### Northrop Grumman Systems Corporation Space Systems Division, ASBCANo. 54774, 10-2 BCA**~** 34,517 at 170,237. We consider each ofthese elements in tum.


### 1. A validcontract between theparties. The contract in this case was a unilateral purchase order. As such, as a matter oflaw, it constitutes an offerto buy certain supplies on specified terms and conditions ifthe offer is accepted by delivering those supplies on orbeforethe date specified. Ifcomplete performance in accordance with the offer's terms and conditions is not tendered, the offer lapses by its terms. 

### Comptech Corp., ASBCANo. 55526, 08-2 BCA**~** 33,982 at 168,082. We have found that MAP did tender acceptable performance (finding 35). Therefore, Order No. SPM4A7-ll-M-Dl 11 was a valid contract between the parties.



### 2. An obligation orduty of the government arising outof the contract. The government was obligated to evaluate MAP's first article in a reasonable manner in accordance with the terms ofthe contract. First articles are typically not production items
18and, unlike production items, which are either accepted orrejected, first articles are either approved, conditionally approved, or disapproved. MilitaryAircraftParts, ASBCA No. 59978,**15-1BCA~36,101at176,258;** see also FAR 52.209-4, FIRSTARTICLE APPROVAL

- GOVERNMENTTESTING (SEP 1989) clause, which was included in the contract (finding 2): "Within 120 calendar days after the Government receives the first article, the Contracting Officer shall notify the Contractor, in writing, ofthe conditional approval, approval, or disapproval ofthe first article" (id.**~** (b)). This clause is prescribed for use in contracts by FARPart 9, Contractor Qualifications, which in Subpart 9.3, First Article Testing and Approval, sets forth the purpose offirst article testing, which is to ensure that a contractor "can furnish a product that conforms to all contract requirements for acceptance." FAR 9.302.

The first article clause does not give the governmentthe right to disapprove a first article for any noncompliance with specifications that would be a validreason for rejection ofsupplies tendered for delivery under the contract. Marvin Engineering Co., ASBCANo. 27016, 84-2 BCA**~** 17,401 at 86,674. Ordinarily, the primary purpose for requiring first article submission is to prove the capability ofthe contractor to produce endproducts thatwill meet contractrequirements. Id. (citingAstra Science Corp. v. UnitedStates, 471F.2d624 (Ct. Cl. 1973); Farris andCompany, ASBCA No. 31275, 73-1 BCA**~** 9963)). Deficiencies in a first article that are correctable in production are not a validbasis for an outright disapproval and, in recognition ofthis, the first article approval clause expressly provides for conditional approval. Id.

First article testing and inspection ofsupplies have distinctly different purposes. As noted above, the purpose offirst article testing is to determine whetherthe contractor can produce the supplies to the contract specifications. FAR9.302. FAR Part 9 governs contractorqualifications and prescribes the use ofthe first article testing clause, FAR 52.209-4, underwhich deficiencies in a first article that are correctible in production are not grounds for disapproval. The purpose ofinspection ofsupplies, on the otherhand, is to determine whetherproduction parts that have been delivered should be accepted. FARPart 46, Quality Assurance, governs the inspection ofdelivered supplies and services.

In addition, bothparties to the contract owe each otherthe implied duty ofgood faith and fair dealing. InMetcalfConstruction Co. v. UnitedStates, 742 F.3d 984, 990 (Fed. Cir. 2014), the United States Court ofAppeals for the Federal Circuit affirmed the basic principle thatthe parties to a government contract are under a duty ofgood faith and fair dealing in the performance and enforcement ofthe contract, and that failure to fulfill that duty constitutes a breach. "The covenantofgood faith and fair dealing

...imposes obligations on both contracting parties that include the duty not to interfere with the other party'sperformance and not to act so as to destroy the reasonable expectations ofthe otherparty regarding thefruits of the contract." Id. at 991 (citing Centex Corp. v. UnitedStates, 395 F.3d 1283, 1304 (Fed. Cir. 2005)).

19

### In order to prove a violation ofthe duty, a contractor need not necessarily prove that the government specifically targeted action to obtain the benefit ofthe contract or that the government's actions were undertaken for the purpose ofdelaying or hampering performance ofthe contract. Metcalf, 

### 742 F.3d at 993. Rather, the implied duty ofgood faith and fair dealing is "limitedby the original bargain: itprevents a party's acts or omissions that, though not proscribed by the contract expressly, are inconsistent with the contract's purpose and deprive the otherparty ofthe contemplated value." Id. 

### at 991.

3. A breach of the duty. 

### Based on the record before us, we have found that MAP's first article met all contract requirements, including hole diameter, when shipped to the government. Were it not for the damage causedto the first article while in the government's possession, there would not have existed any reason not to approve the first article. Thus, the CO's disapproval ofthe first article submitted by MAP on 30 January 2012 was unreasonable. In addition, the CO'srefusal to allow MAP to submit another part from the same production run for re-testing, the after-the-fact imposition ofa requirement that the holes in the part meet the dimensionalrequirement withoutpaint, and the insistence that MAP conduct exact measurements ofall 144 holes before a waiver would be considered, had no basis in the contract and were unreasonable. (Findings 37-39)
These acts were in violation both ofthe government's duty to evaluate MAP's first article in accordance with the express terms ofthe contract, and its implied duty to cooperate and not willfully or negligently hinder the contractor'sperformance. American Ordnance LLC, 

### ASBCA No. 54718,**10-1BCA~34,386** 

### at 169,795 (citing Malone v. UnitedStates, 

### 849 F.2d 1441, 1445 (Fed. Cir. 1988)). We impute to the CO the knowledge ofherrepresentatives, the DCMA QARs, in finding the government's conductto have been a breach ofthe duty ofgood faith and fair dealing. Walter Straga, 

### ASBCA No. 26134, 83-2 BCA**~** 

### 16,611at82,617-18.

We find inapposite the government's argument that our holding in James Electronics 

### forecloses MAP from contestingthe CO's disapproval ofthe first article. In that case, we held thatthe governmenthad met its burden to show that the submitted first article, on athird submission, failed to meet contractrequirements, and that the contractorhad not met its burden to show that the defects were easily correctable in production. 93-2 BCA**~** 

### 25,677 at 127,728. In connection with the latterholding, we observed:

To the extentthat appellant's briefconcentrates upon initial problems in appellant's obtaining copies of pertinent specifications and differences in test configuration when the secondFA submittal was rejected,
as excusable causes for default, it is unavailing. The law is clearthatby agreeing to a new delivery schedule, which
20 

# Iappellant did in the fall of 1990, long after the first two FA rejections

...it surrendered its right to argue any then existing causes as a defense to its failure to deliver an acceptable FA on its third submittal.

Id. In stark contrast, in this case MAP contends, and the preponderance ofthe evidence shows, thatMAP's first article did meet contract requirements when first submitted. MAP is not presenting "defenses"to a failure to deliver an acceptable first article because there was no such failure.

We also rejectthe government's contention that CO Hicks wasjustified in requiring a newly manufactured first article because the contract included a clause stating that any defective item discovered during inspection may be cause for rejection ofthe entire contract quantity (gov'tbr. at 26). This clause, reproduced in full at finding 18, refers to "SAMPLING FORINSPECTION AND TESTING," and states that "ANY DEFECTIVE ITEM DISCOVERED DURING INSPECTION MAY BE CAUSE FORREJECTION OF THE ENTIRE CONTRACT QUANTITY." This language contemplates that a production lot will be delivered and items (the sample) will be selected from that lot for testing that will result in acceptance orpossibly rejection ofthe entire lot. In contrast, the contract's first article testing clause, which applies in this case, calls for the delivery ofan item or items that are not expectedto be partofa production lot and which are inspected for the purpose ofdetermining whetherthe contractorhas the capability ofproducing items that meetthe contract requirements. Ifthe first article is approved or conditionally approved, then the contractor is giventhe opportunity to deliver the production quantity.

In orderto shed light on the applicability ofthis clause to first article testing, the government was directed to supplement the record in this appeal with more information about theprovenance ofthe clause. Inresponse, the government informed the Boardthatthe language ofthe clause is notpart ofany standard contract clause, and that it is included in Section B ofthe contract as part ofthe "standalone narrative terms ofthe contract" (Bd. corr. file, ltr. dated 9 February 2016). The government also providedthe Board with an electronic link to the archived version ofthe DLAD in effect at the time the contract was issued (representingthat the full DLAD comprised approximately 750 pages). The government stated further:

With respect to the Board's question about whether the clause applies to first article testing orproduction lot testing, Respondent's position is thatthe plain terms ofthe clause state that it applies to inspection ("Any defective item discovered during inspection

...") and there are two inspection points identified in the contract

- the first article inspection and the production quantity inspection. Se[e] R4 Tab 1 at 2 ("FAT:Inspection=Origin, Acceptance=
21Destination; Remaining Production: Inspection/ Acceptance=Origin). Respondent further notes that the contract does not contemplate production lot testing as there is no Production LotTest clause in the contract. See DLAD 52.209-9026, Production lot test (PLT) (http://farsite.hill.af.mil/archive/Dlad/Rev5_PROCLTRI0- 40/Part52.htm). (Bd. corr. ltr. dtd. 22 February 2016)

The Board agrees thatthe contract does not contain the citedproduction lot testing clause. This makes sense, since the contract calls for first article testing, not production lottesting. The contract's first article testing clause, FAR 52.209-4, provides that following first article disapproval, ifthe government requests it, the contractor shall submit an additional first article for approval (finding 2). Nothing in the first article clause gives the governmentthe right to dictate that only a newly manufacturedpartmay be submitted as the additional first article. Nor does the non-standard contract language
on which the governmentrelies, as explained below.

The Board's review ofthe archived DLADrevealedthat, subsequentto the issuance ofthe subject contract, pursuantto PROCL TR 11-45, PRODUCTION LOT TEST (PLT) (JAN 2009) clause, DLAD 52.209-9026, was removed and replaced with new clauses: DLAD 52.246-9085, PRODUCTION LOT TESTING (PLT)

- GOVERNMENT (JUL 2011); and DLAD 52.246-9086, PRODUCTION LOT TESTING (PLT)

- CONTRACTOR (JUL 2011), Furthermore, the production lot testing clause (JUL 2011) contains language very similarto that onwhich the government relies:
(e) Upon completion ofthe PLT sample testing, the Governmenttest facility will provide the results to the FAT/TestingMonitor (or ACO) and to the Contracting Officer. 

### Ifthe PLT sample is disapproved, the Government shall advise the Contractor ofthe nonconformance, and whetherthe Contractorwill be allowed to produce a new lot to tender for testing. Disapprovalof the PLTsample is groundsfor rejection of the entireproduction lotproduced. The Contractor shall discard any failed production lotproduced andproduce a newproduction lot underthe contractterms and conditions. [Emphasis added]



### 22http://farsite.hill.af.mil/archive/Dlad/Rev5_PROCLTRl 1-45/PART52.htm. The quoted language is essentially unchanged in the currentversion ofthe production lot testing clause. 14

As discussed above, the non-standard contract clause relied on by the government, on its face, appears inapplicable to the first article testing process contemplated in the contract's first article clause. This, combined with the fact that substantially the same provision was incorporated in the 2011 production lot testing clause, leads the Boardto conclude that the non-standard clause incorporated in the contract does not apply to first article testing and may notbe invokedby the government tojustify its imposition on MAP ofrequirements not authorized in the contract's first article testing clause. Moreover, even ifwe found that the clause properly applied to first article testing, it speaks in permissive, not mandatory terms. Under the facts and circumstances present in this case-wherethe part was damaged while in the government's possession and there was, therefore, no rational basis for concluding that the remaining parts manufactured by MAP were defective-itwould still be unreasonable and an abuse ofdiscretion for the governmentto require MAP to manufacture a new run ofparts for a first article re-submission. In conclusion, the CO's insistence that MAP incurthe expense ofa whole new production run in order for the government to conduct another first article test was an unreasonable imposition ofyet another obstacle to contract performance and a breach ofthe government's implied duty to cooperate and not hinderperformance ofthe contract. 15
Ultimately, CO Hicks cancelledthe purchase order after MAP insisted on its right under the contractto submit an existingpart for the first article re-testing (finding 30). This action was also a breach ofthe contract, since MAP had effected delivery according to the terms ofthe contract by tendering a conforming first article.

14 The Board also finds it significant that both the production lot testing regulatory provisions and the related contract clauses were moved from Part 9 ofthe DLAD, which addresses Contractor Qualifications, to Part 46, which addresses Quality Assurance. This underscores the distinction in process and purpose between first article testingto qualify a contractorto produce a part, and inspection ofdelivered supplies to determine their acceptability. 15 We also reject the government's argumentthatMAP nevertheless agreed to provide
a newly manufactured first article by entering into Mod. POOOO 1afterbeing informedby a government representative that a newly manufactured first article would be required (gov'tbr. at 25-26). Mod. POOOO 1on its face did not require MAP to submit a newly manufactured first article, and MAP did not otherwise acquiesce to the government's demand. The government has not met its burden ofproofon this issue. 

### DTCEngineers & 

### Constructors, LLC, ASBCA No. 57614, 12-1 BCA**~** 34,967 at 171,899. 23

# I While we find numerous breaches, both ofexpress contract duties and the implied duty ofgood faith and fair dealing, we do not find that any ofthe government officials involved acted with malice or specific intent to injure 

### MAP.

4. Damages causedby the breach. The contract's First Article Testing clause provides that the contractor assumes the risk ofany production parts manufactured priorto first article approval; the costthereofshall notbe allocable to the contract for purposes ofprogress payments ortermination settlements (finding 2). In this case, neither progress payments nor a constructive termination for convenience are presented. Becausethe contract did not contain the standard Default clause, FAR 5 2.249-8, even ifwewere to conclude that the CO's cancellation ofthe contract equated to an impropertermination for default, the governmentcannot avail itselfof the conversion ofan improper default termination to a termination for convenience provided for by paragraph (g) ofthat clause. 16 This being so, paragraph (h) ofthe First Article Testing clause is not applicable and MAP is entitledto breach damages.

The contractprice of$7550.00 included 1first article and 6 production parts. 

### MAP electedto make 13 parts altogether in one production run, and claims its costs of manufacturing all 13 parts ($10,591.42) plus $651.07 paid to DLA as consideration for Mod. 

### POOOO1 (R4, tab 25). We have found that the governmentbreachedthe contract and its actions prevented

### MAP from successfully delivering conforming parts. Thus,. the appropriate measure offoreseeable damages flowing from the government's breach is the contract price, $7,550.00.

We do not grant

### MAP the full amount ofits requested damages. The contract only called for six productionparts and it would be sheer speculationthat it would have ordered six more. As tothe amount of$651.07 MAP agreed to as consideration for the government's agreement to a first article resubmission, 

### MAP has not met its burdento showthis amountwas everpaidto or collectedby the govemment. 17 Accordingly, this appeal is sustained in part.

16 Because the Default clause was notrequiredto be included (see fn. 9 above), it is not incorporated into the contractby operation oflaw. American Water Cooling Equipment Corp., GSBCANo. 9083-TD,**89-1BCA~21,364** at 107,689; compare Turnco Machine Co., ASBCA No. 33559, 88-2 BCA**~** 20,551(FAR52.249-8 required and incorporated by operation oflaw). 17 The government contends this amount was never chargedto MAP (gov'tbr. at 34). MAP counters that this amountwas deducted from other amounts due and owingto 

### MAP perthe terms ofMod. 

### POOOO 1. Mod. 

### POOOO 1 states that "the payment office will offset the amount ofthis modification against any outstandingpayments due, potentially including other contracts" (R4, tab 2 at 2). We cannot find any evidence in the record that the amount was actually collected from MAP. 24

# 1 I CONCLUSION

Forthe foregoing reasons, we sustainthe appeal in the amount of$7,550.00, plus interest pursuant to 41U.S.C.§7109 calculated from 21April2015 until paid.

Dated: 31 May 2016

I concur LYNDiO'SULLIVAN Administrative Judge Armed Services Board ofContractAppeals 

# -

# ~**~~~~** _Rl_C_H_ARD

__ S_H_A_C_K-LE_F_O_RD

___ _ Administrative Judge Administrative Judge Acting Chairman Vice Chairman Armed Services Board Armed Services Board ofContractAppeals ofContractAppeals

I certify thatthe foregoing is a true copy ofthe Opinion and Decision ofthe Armed Services Board ofContract Appeals in ASBCANo. 60009, Appeal ofMilitary AircraftParts, rendered in conformance with the Board's Charter.

Dated:

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