Opinion ID: 268421
Heading Depth: 2
Heading Rank: 2

Heading: government-furnished machinery

Text: 54 Plaintiff urges that a determination of the reasonable value of its contract performance must take into account costs incurred as a result of defective government-furnished machinery. By supplying deficient equipment, it is alleged, the defendant forced Acme to render additional services, which had market value and are compensable under the theory of restitutive recovery. The purportedly defective machinery was, however, furnished under a separate facilities contract, not the main contract. That agreement explicitly disclaimed liability for damages or loss of profit by reason of any delay in delivery or failure to deliver any or all of the items set forth   , or for delivery of such items not in satisfactory operating condition or not of a suitable type. (Emphasis added.) The contract also stipulated, In the event [government-furnished] items are not in fit operating condition, the Contractor shall repair, restore, or rehabilitate such equipment so as to make it serviceable or fit for use (cost connected with such repairs, restoration, or rehabilitation shall not be reimbursed to the Contractor). If the provisions concerning government property had been included in the main contract, such a disclaimer or limitation of liability for breach of warranty would possibly have to be disregarded under plaintiff's theory, which fixes the measure of recovery by the value of the services performed, rather than by the terms of the breached contract providing or restricting compensation. But the facilities contract was separate and was not materially breached; its clauses limiting liability remain in effect. 32 We must therefore determine whether the plaintiff is correct that the disclaimer clause is less-than-absolute and does not bar recovery for increased costs resulting from defective government machinery. 55 Plaintiff would have us read this disavowal of liability as applicable only to ordinary repairs made following delivery of the equipment. Because the disclaimer refers to Acme's obligation to repair the machinery in case of delivery of such items not in operating condition, Acme infers that the cost of extraordinary repairs incurred in the course of performance was to be borne by the defendant. Aside from the practical difficulty of separating normal and extraordinary expenses, there is a more basic objection. The terms of the disclaimer are broad, and refer to Acme's duty to repair items not in operating condition, without imposing any limitation as to the time when the equipment becomes inoperable or the amount of work required to fix it. There is no reason to qualify or limit the general sweep of the contract words. 56 On the other hand, along with the disclaimer, the facilities agreement also specified that, if the equipment supplied by the Government required repair as a result of defects present at the time of delivery, the Contracting Officer, upon written request of the Contractor, may equitably adjust the price, the time of performance, and other terms and conditions of the affected supply contract(s).    Any failure by the parties hereto to agree upon such equitable adjustment shall be determined in accordance with the article of the related supply contract(s) entitled `Disputes'. See finding 35. We do not interpret these provisions as inconsistent with the explicit disavowal of liability. Instead, they specify the only form in which relief can be obtained for injuries resulting from substandard machinery furnished by the defendant; unless the contractor makes timely written request for an equitable adjustment, he must, according to the disclaimer, bear all costs of resulting delays and repairs. See, generally, Goodwin, Government-Furnished Property, Government Contracts Monograph No. 6, p. 17 (1963); Paul, United States Government Contracts and Subcontracts 267 et seq. (1964). 33 57 During the course of contract performance, Acme made at least two written requests for reimbursement of costs incurred as a result of defects in equipment supplied by the defendant. See finding 39(b) (2), (6). About one week after cancellation, on August 26, 1954, the plaintiff filed a claim with the Philadelphia Ordnance District, asking to be repaid for all parts which it purchased to make the defendant's machinery workable. Finding 44(a). This August 1954 request is challenged by the defendant as untimely. Considering all the circumstances, we cannot agree. The machinery was supplied to plaintiff throughout 1953; although some performed reasonably well, other pieces required constant tinkering and broke down repeatedly, disrupting the smooth flow of production. See findings 39(b), 43(c). At least as late as May 1954, flaws in the government machinery were still being encountered (see finding 39 (b) (11)), and, if past experience is the guide, such difficulties were probably prevalent until the suspension of contract performance a little over a month later. Had plaintiff been required to ask for an equitable adjustment each time a minor defect was discovered, the result would have been a continuous flow of such requests to the contracting officer. The time and effort expended by both parties in effecting numerous equitable adjustments would have been excessive. Instead, Acme apprised the defendant of the various difficulties at approximately the time they were encountered, but, with several minor exceptions, it in effect waited until after the abrupt termination of the contract to make a single request for compensation. This was undoubtedly the most efficient manner of obtaining relief. Plaintiff's cumulative demand for reimbursement in August 1954, as well as the two requests made prior to annulment of the contract, were timely. 58 Plaintiff's letters sought reimbursement for repair costs, without specifically invoking the equitable adjustment provision of the facilities contract or the Disputes article of the supply contract. But the letters were easily understandable, and the failure to delineate the precise clauses permitting recovery should not stand as a bar. Cf. Specialty Assembling & Packing Co. v. United States, 298 F.2d 794, 796, 156 Ct.Cl. 252, 254-255 (1962). To the extent that the trial commissioner finds that these timely claims for reimbursement reflect actual costs incurred by the contractor because of defective government equipment — rather than its own inexperience or inefficiency — the plaintiff is entitled to an equitable adjustment as provided in the facilities contract. This equitable adjustment should be added to the determination of the value of the rest of plaintiff's performance. 34