Court Opinion

ID: 8595317
Source: CourtListenerOpinion
Date Created: 2022-11-23 16:02:26.417266+00
Date Added: 2024-06-11T16:54:52.845290
License: Public Domain

Nichols, Judge,
with whom Kashiwa, Judge, joins, dissenting:
I am grateful for the court’s candid admission that the plaintiff made a prima facie case. This means that our holding in Lykes Bros. S. S. Co. v. United States, 198 Ct. Cl. 312, 459 F. 2d 1393 (1972) comes into play. The Government bears the burden of proof. It “shifts to the Government to prove that the plaintiff’s profits were excessive and the extent thereof. This encompasses not only the burden of going forward with evidence after plaintiff’s case in chief is closed, but also the burden of persuasion.” [Fn. omitted] 198 Ct. Cl. at 327, 459 F. 2d at 1402.
We thus intended to effect a sweeping change in the previous Tax Court procedure in redetermining excessive profits under the Renegotiation Act of 1951,50 U.S.C. App., §§ 1211-1224. That tribunal started with a presumption the Board *148was correct. The contractor had to show wherein it was wrong and all the Government had to do was to bolster the determination up when it appeared to be crumbling under the attack. Despite the de novo nature of the proceeding which the Congress had attempted to enact, the structure of fact and reason that emerged after trial was mostly the Board’s. Much, other than evidence, came into the Board determination by perfectly legitimate routes, for an open, adversary, due process proceeding was not required there. It stayed with the Tax Court determination, and the result depended for its foundation in part on the knowledge and experience of Board members, and on what they learned apart from any due process record. We were going to change all that. If the Government wanted us to uphold the Board it must prove to us the Board was right with no help from any presumption.
To the extent the Government does not supply reasons and techniques, it calls on us to fabricate our own. Yet, in Bethlehem Steel Corp. v. United States, 206 Ct. Cl. 122, 128, 511 F. 2d 529, 582 (1975), we pointed out in a different but related context, that persons “ ‘learned in the law’ can hardly be also expected to be so expert as not to need guidance as to the techniques of reasonable profit determination.” We there decried “do it yourself guidelines” and “seat of the pants navigation.”
It would seem to follow that in the absence of a satisfactory structure of facts and reasons, erected on the record in accordance with the factors prescribed in the statute, 50 TJ.S.C. §.1218 (e), that supports a refund determination, it is our duty to issue the contractor a clearance, or no excessive profits determination, and this even though we may find the task distasteful because we personally feel the contractor made too much money. This is the transformation we have effected. It is our duty to swallow the medicine we ourselves brewed in the LyTces case like little men, whether we relish it or not.
I find it impossible to conceive how any tribunal, composed as this court is, can determine excessive profits in a case such as we have made these cases to be, without the help of expert *149testimony. The following colloquy at the oral argument is, I think, revealing:
Judge Nichols : “How can we get along without them [experts] here?”
Mr. BaNNEy : “Well, your Honor, this was one of the early cases tried. We did have one expert in the conference. I do feel that the records that will be coming forth in the other cases — with the one case that is cited — in all cases there were experts on both sides— I know in that case particularly on the Government side. There were other cases in the process of being tried at this time — are going to ”
Judge Nichols: “The best expert is * * * (inaudible) ”
Mr. BaNNEy : “We are in the same boat as the court. When the law was changed in 1970 and the cases initially-assigned to the Court of Claims section of the Civil Division, we hadn’t ever tried one of these before. In the Tax Court they were handled by a separate group. As a result, we had to learn how to walk before we could run. So we were sort of feeling our way along on these earlier cases.”
Judge KuNzig: “[Is this a] creeping or running or walking case?”
(Laughter.)
No one would suggest that the members of this court appraise a tract of land by just looking at it. Somehow, a renegotiation is different.
It seems apparent to me that the Government could qualify as experts many of those who participated in making the Board decision, either in a member or staff capacity. To do this would in no way compromise the de novo character of the trial in this court. As for the contractor, its own officers could give competent testimony, or others could be retained. If we receive some self-serving testimony, we should know how to discount that feature of it. There are many persons formerly engaged in renegotiation on the Government side, now resigned or retired, who no doubt could give informed and knowledgeable testimony on behalf of a contractor who retained them. There are related occupations such as securities analysis. In fact, the ablest re-negotiator I ever knew, Chairman Ed. Barker, Navy Price Adjustment (Benegotiation) Board, circa 1946-48, came into *150renegotiation direct from the securities business. By ablest, I mean the best able to articulate an analysis of the reasonableness or excessiveness of a contractor’s profit in light of direct application of the factors, one by one.
This case is an example of the lawyer’s delusion that we can do everything without appropriate help. We tend to under value the other word-smithing and idea-mongering disciplines, such as economist, or accountant, and to assume that whatever they can do we can do better. However, I do not rate economists high among the disciplines that can be most helpful in renegotiation. We had a well-qualified economist on the Eenegotiation Board staff in 1951-54, but he was, rightly I think, never asked to recommend an individual excessive profits determination. He advised us on profits, costs and trends in whole industries. I valued his services much more than the Board did.
The court says it had expert testimony here. This consisted, on the Government side, of one economist. The court’s endorsement of him in the opinion is lukewarm indeed. The value assigned his testimony by the Government is shown by the above-quoted colloquy at oral argument. The value assigned by our trier of fact is shown by his findings which, before amendment by the court, nowhere mentioned this testimony. The court added findings 47 (a) and (b). The trial judge allowed to plaintiff less as a reasonable profit than this Government witness would have allowed.
The contracting officer testified and might be considered a kind of expert, though his operating capacity in the case would conflict with the status of a true expert. He thought reasonable the 3% profit on receipts he expected and intended all GOCO contractors to make.
The seat-of-the-pants character of the decision now proposed is best illustrated by the fact that both the trial judge and the court regard “normal earnings”, i.e., earnings in a normal year, as the best yardstick to justify a refund determination. However, they differ as to what “normal” year to use. The trial judge picked 1966 and the court 1965. Yet the lower “normal” profits in 1965 are referred to by the court to justify a relatively higher retained profit for 1967, the year under review, and the higher “normal” profits of 1966 *151were invoked by the trial judge to support his recommended lower retained profit for 1967. If the trial judge and the court really used these so-called “normal” figures, the court should have come up with a bigger refund than the trial judge did.
Obviously, 1966 was not a normal year, with respect to the Army business where the alleged excessive profits were. The contractor was moving out of standby status, activating one entire dormant plant and new lines in another, and in so doing incurred costs that had not been incurred before and would not be incurred in full production, “starting up” and “learning curve” costs, and what the Board called “support activities”. As the fee per unit of production was fixed, while the cost per unit was high, the profit stated as a percentage of cost was low. As to 1965, that was the final year of little or no consumption of the product, virtually a stand-by year. In a type of business where full production is attained only in time of emergency, is a stand-by year to be deemed a normal year ? Maybe so, but before accepting the notion, I would like to see some informed and reasoned support for it. In face of both opinions, I would hold that for a contract manager of GOCO ammunition plants, the statutory factor of “normal earnings” is wholly unhelpful and should be discarded as a measure to determine the reasonableness of profit earned. The “normal earnings” factor is of value in dealing with companies that convert to defense production, as the auto companies did in World War II, or with companies producing articles, such as trucks, having both war and peacetime uses. The effect of its use here is simply to penalize a company that stayed in existence through lean years in stand-by as against a hypothetical one that might have been newly formed to manage GOCO plants.
As the contractor reached full production at the start of 1967 its efficiency improved and as a result the unit costs declined. The Government got benefit from this efficiency in having to reimburse only for lower unit costs. The court thinks that lower unit fees should also have been negotiated. The statute says that favorable recognition must be given for efficiency. The court is changing the trial judge’s proposed opinion by underlining the word “must” as quoted by him. I *152would like to see a demonstration, then, that the court is not penalizing efficiency instead of rewarding it. Should the cut in production cost be large enough, it might be arguable the unit fee should be increased, not decreased. This is the essence of the familiar “incentive” contracting, which is not in contention here, of course. The proper concept still is that the Government and the contractor should share the benefits from increased volume and efficiency. The court here fails to demonstrate that if the contractor had remained inefficient, ¿.<3., had failed to reduce the 1966 unit costs, the court would not have allowed a larger profit simply because, stated as a percentage of cost it looked smaller. The court has also failed to demonstrate that the share each side enjoyed in the benefits from volume and efficiency was not a fair share before renegotiation.
To take the 177 mm. projectile produced at the Corn-husker plant as typical, the figures in the court’s fn. 20 show a unit cost reduction of $.61.4 (61.4 cents) from 1966 to 1967. In this instance, there was a reduction, not an increase, in volume, so the saving must be due wholly to efficiency. The fixed unit fee was $.27 (27 cents) both years. I take it, applying the proposed refund proportionately to this unit fee, the court is reducing it to about $.22 (22 cents). Thus the saving to the Government is increased from $.61.4 (61.4 cents) to $.66.4 (66.4 cents) and the reward to the contractor is cut by five cents. If the court is doing anything but penalizing the contractor for its efficiency, I would like to have its explanation how. If there is any sharing of the reward for efficiency between Government and contractor, how and where? There were further savings per unit of $.82.0 (82 cents) in 1968 and $1.22 (one dollar and twenty-two cents) in 1969, by the end of which year, extrapolating the court’s decision according to logic, it would seem the fee should be eliminated entirely.
The quotes the court uses from Laird Bell and John T. Koehler, are misleading in that both were speaking about fixed price sales, where the contractor would monopolize all the cost savings due to increased volume unless the price were reduced by negotiation or renegotiation. Here, with fixed unit fees plus cost reimbursement, the Government automatically *153gets a large benefit from efficiency and volume saving, and the sole question is, how much more would be fair to exact.
The court mates a to-do about the absence of risk and low commitment of contractor capital. Yet it surely knows that contractors who incur risks and use their own capital are not obtainable at under 3%. Here the unit fees are, virtually, commissions.
I am not disputing that possibly some fee reduction should have been made. Or possibly not. My complaint is that in our very first renegotiation case to come to us on the merits, we are not adhering to the standards we set for ourselves in the LyTces case. We are not requiring the Government to prove its case. As I see it, we are not even analyzing the issues to the point where we can tell for sure whether we are rewarding or penalizing efficiency. Insistence on standards of proof would benefit the public more than the small amount— as such cases go — to be recovered here as a refund. I would issue a judgment clearing the contractor of liability for excessive profits for its fiscal year 1967.
KINDINGS 03? 3TACT
1. Plaintiff, a West Virginia corporation, with a home office in Lexington, Kentucky, has since 1958 been engaged almost entirely in the management, operation and maintenance of four “GOCO” plants (GOCO for Government-owned, contractor-operated), two owned by the Atomic Energy Commission and two owned by the Department of the Army.
The AEC plants, one near Amarillo, Texas, and the other in Burlington, Iowa, are nuclear ordnance plants in which the primary work is the assembly of nuclear weapons from high explosives manufactured by plaintiff and nuclear and other components supplied by other GOCO contractors. The two Army plants, “Cornhusker” in Grand Island, Nebraska, and “Iowa” in Burlington, Iowa, are conventional ammunition plants, administered by the Ammunition Procurement and Supply Agency (APSA) for the Army Munitions Command. The primary work in these plants is the loading, assembly and packing of conventional large caliber ammunition from high explosives manufactured by plaintiff and *154other components supplied to plaintiff. The plants and all facilities and equipment are Government-owned.
2. GOCO plants originated in the preparations for possible involvement in World War II, when the Government, firiding its arsenals inadequate, sought to promote private investment in a munitions production capability. Private industry was, however, found to be unwilling to commit the substantial capital required for the construction of munitions plants. The Government thereupon decided to assume the capital costs, and embarked on a program of building munitions plants at public expense and arranging for their private operation at Government cost, on a basis of minimal risk-minimal investment for the private contractor-operator. By the end of World War II, 84 plants were under the program either built or in process of construction.
The AEC’s design laboratories have no production facilities, and the AEC depends on such contractors as the plaintiff to operate the facilities owned by the AEC and to meet the designers’ specifications.
During 1967, private contractors operated 26 GOCO plants for APSA, and additional GOCO plants were operated for other defense agencies. Generally speaking GOCO ammunition plants of the kind operated for APSA produce the chemicals and explosives that go into metal components (supplied from private-sector, non-GOCO sources) and also load, assemble and pack the ammunition. GOCO-made items are obtainable from private sources only to a very limited extent.
In 1967, 40 prime contractors operated AEC-owned facilities employing 106,623 persons. Of these facilities, 26 among them the two plants presently under consideration, represented AEC investments in excess of $25 million each. Annual Report to Congress of the Atomic Energy Commission for 1967 281,317 (1968).
Plaintiff came to the work of operating the four GOCO plants involved in this case by virtue of experience in heavy construction, including the building of ammunition plants, and the design of such plants, including portions of the four plants presently involved. The plaintiff left the construction field because of the acute competitive conditions which diminished the profit prospects.
*1553. The issue herein is the amount of the excessive profits, if any, of the plaintiff in 1967, to be determined de novo under the Renegotiation Act of 1951, as amended, 65 Stat. 7, ch. 15, as amended, 50 U.S.C. App. § 1211 et seq. (1970), as amended (Supp. II, 1972).
Over 99 percent of plaintiff’s renegotiable business is represented by its four GOCO contracts. It is agreed that the nature of the remainder of the plaintiff’s renegotiable business need not be considered.
Plaintiff’s fiscal year is the calendar year. The year under review is thus calendar 1967.
4. The contracts for the operation of the two AEC plants are cost-plus-fixed-fee contracts. They were treated as one, and a fixed fee of $864,000 was paid to plaintiff as its compensation under the contracts. The fee was negotiated annually on the basis of estimated costs, but was the same in 1966 and 1967. In addition, in 1967, plaintiff was paid $16,640 for construction work at one of the plants, making its total fees in 1967 $88,640.
Reimbursed costs in 1967 at the AEC plants were $27,526,427. Total receipts, consisting of reimbursed costs plus fees, were $28,407,067.
5. The contract for the operation of the Iowa Army plant is a cost-plus-fixed-fee per unit of ammunition produced. Unit production fees — so much for an item produced — vary with the items; for instance, the fee for the production of a 175-mm. shell was $0.27. Under this contract plaintiff was in 1967 paid $49,465,841, consisting of $47,978,275 in reimbursed costs and $1,487,567 in unit production fees. Total receipts under the contract were thus $49,465,841.
6. The contract for the operation of the Cornhusker Army plant is also a cost-plus-fixed-unit-fee contract, but it provides in addition for an award fee in the discretion of APSA, based upon superior performance. Under this contract plaintiff was in 1967 paid $84,148,094, consisting of $33,167,488 in reimbursed costs and $980,606 in unit production fees. Plaintiff received $53,449 in award fees, which was 30.3 percent of the maximum of such fee; the record is unclear as to whether this award fee is included in the above $980,606 sum.
*1567. (a) The plaintiff’s total receipts in the calendar year 1967 were $113,428,408.01, of which over 99 percent or $112,931,469.39 represents renegotiable receipts. Its total net profits (including income from investments), before federal and state income taxes, amounted to $3,116,560.32, of which $2,681,800.53 was profit derived from renegotiable business. Since almost all of plaintiff’s business is the operation of GOCO plants under cost-plus-fixed-fee contracts, renegotiable profits consist of fees less nonreimbursed costs, which latter are almost exclusively the costs of plaintiff’s home office; and renegotiable receipts consist of reimbursed costs plus fees.
(b) Renegotiable receipts and profits in 1967, here under review, are thus receipts of $112,931,469.39 and profits of $2,681,806.53. The profits are 2.37 percent of the receipts.
8. (a) An unclassified description of the plaintiff’s work in 1967 under the two AEC contracts, approved by the AEC and stipulated by the parties, is set out in the following subparagraph (b).
(b) Mason & Hanger-Silas Mason Co., Inc. (M&H) (the plaintiff) operates Atomic Energy Commission (AEC) facilities under two contracts with AEC: Contract W-49-010-AMC-68 (A) for the operation of the AEC facilities located at Burlington, Iowa, and Contract DA-11-173AMC-487 (a) for the operation of the ABC Pantex facilities located at Amarillo, Texas. These two plants are the only two AEC plants for the final assembly of nuclear weapons, and all nuclear weapons of stockpile quality are processed in these plants. The following statements are as applicable to 1967 as to other years.
About 10 percent of M&H’s work for the AEC is research and development work relating to the field of nuclear weapons. This work includes the formulation, pilot manufacture, and testing of new explosives and the establishment of compatibility of these explosives with other weapons materials. Development is also directed toward explosive gadgetry for weapons use. About 20 percent of M&H’s work consists of maintenance and test of nuclear weapons in the AEC’s stockpile. The remainder of M&H’s work for the AEC involves the formulation, fabrication and testing of explosives *157and explosive components for assembly into nnclear weapons and the final assembly of the nuclear weapons.
M&H’s work includes the receiving and qualitative testing of raw explosive materials through establishing chemical content, purity, and parameters of detonation characteristics. The explosives in some cases must be recrystalized and formulated with other chemicals to establish weapon quality materials. These also must be tested to establish detonation characteristics.
The accepted explosives must then he fabricated through extrusion, casting or pressing into configurations desired for further processing. The rough configurations are then machined to tolerances of 0.001 inches using computer controlled milling and turning equipment into shapes required to further assemble. The explosives, after being bonded with metal shells or with each other, are ready for weapon assembly.
Testing of these explosive configurations is accomplished using equipment which is “state of the art” in measurement of fast events. Timing of these events is in terms of one-hundred millionth of a second with oscilloscopes and photographic equipment. The performance of the explosive configurations is exacting and must be as near perfection as possible.
The assembly of a nuclear weapon requires precision found in few, if any, industrial or laboratory operations. Parts, including nuclear components, fusing and firing units, and case parts are received from other integrated GOCO contractors. These are individually tested, serial number controlled and precision assembled by M&H.
Explosive actuators and other components in modern nuclear weapons are developed and manufactured by M&H. All modern nuclear weapons in the stockpile were assembled by Mason & Hanger-Silas Mason Co. The high explosives used for these weapons were fabricated by M&H in these two plants.
Nuclear weapons units in the field are returned for tear-down and testing to assure that degradation of the stockpile has not occurred. This requires testing with precision anal*158ysis equipment and interpretation by competent technical personnel.
Weapons which have been damaged through accident or use are returned to M&H for repair or for disposal. M&H has participated in the clean-up on the site of damaged weapons, such as that in Thule, Greenland. The contaminated materials were returned to M&H for safe processing and disposition.
Trained teams are maintained by M&H to respond to any nuclear or radiation accident throughout the world.
(c) None of the plaintiff’s work for the AEC was subcontracted.
9. (a) On October 15,1968, the renegotiation affairs officer of the AEC, in response to a request from the Eenegotiation Board for a performance report on the plaintiff’s AEC contracts for 1967, wrote to the Eenegotiation Board stating, among other things, that the contractor’s performance was considered satisfactory and the overall objective, including economical performance, had been achieved; and that although there had been a continued improvement in services and performance of work, the contractor did not make an outstanding contribution to the defense effort in 1967. The letter is set out in the following subparagraph (b). On April 8, 1970, the general manager of the AEC wrote to a Board member of the Eenegotiation Board a lengthy letter praising plaintiff’s 1967 performance in the area of production engineering and related activities. The letter is set out in the following subparagraph (c).
(b) The October 15,1968 letter reads as follows:
The following information on Mason & Hanger-Silas Mason Co., Inc., contracts as listed in the subject above, is provided as requested in your letter dated September 26, 1968. It should be noted that scope of work for both contracts under your review is basically the same, i.e., “the fabrication of high explosive components of atomic weapons and other elements and the assembly of components with other materials”. The contractor also performs many supplementary tasks of importance such as development support, stockpile sampling, new materials systems testing, and other quality evaluation programs ; salvage, reclamation, and/or destruction of *159weapons materials and parts. Since both contracts are basically the same our comments to your questions are applicable to each contract. They are furnished below in same sequence as the questions asked in your aforementioned letter.
1. No significant differences.
a. Same difference in the scope of operations in that disposal activities were included in 1967 which were not included in 1961.
b. Basically the fees were not measured differently. The budget assumptions and directive schedule workload documents represent the basis for the base fee estimates.
c. Advance Account Reimbursement or Letter of Credit. The contractor does not receive reimbursement since his operation at both locations is covered by pre-financing except for his fixed fee.
2. The contractor’s performance record in 1967 was considered satisfactory and the overall objective (including that of economics performance) had been achieved.
3. There was no appreciable degree of financial risk placed upon the contractor during 1967 performance.
4. Although there has been a continued improvement in services and performance of work, the contractor did not make an outstanding contribution to the defense effort in 1967.
5. Yes, there are audit reports available for possible ERRB review if deemed necessary. If required, please advise the particular audit function or area concerned so that the proper audit report can be forwarded.
6. There were no known claims pending, either between the Government and contractor, or between contractor and subcontractors, at the end of Contract Year 1967.
Should you require additional information please advise.
(c) The April 8,1970 letter reads as follows:
Pursuant to an inquiry by Mr. Ross Pancoast, Deputy Director, Office of Review, and in the hope that it will assist you in the execution of your responsibilities in determining the competency of Mason & Hanger-Silas Mason Co., Inc., in performing the terms of its contract during CY 1967 with the Atomic Energy Commission, we are submitting the following information setting forth areas in which credit should be given to this contractor for production engineering and related activities. *160Mason & Hanger-Silas Mason Co., Inc., organizations at both the Pantex and Burlington AEC plants possess scientific and engineering knowledge and know-how in the various technologies associated with fabrication of high explosive parts and assembly of nuclear weapons which we believe would be extremely difficult or impossible to obtain from private industry in the development and production time scales with which we work. Some of this expertise pushes the state-of-the-art and to the best of our knowledge is not available anywhere else in the United States except in our design laboratories. It should be noted that our design laboratories, in general, do not have a manufacturing capability and must depend upon our production agencies to develop equipment and production techniques to assure meeting laboratory design specifications.
It is our opinion that the Mason & Hanger-Silas Mason Co., Inc., has performed an outstanding management service and has significantly reduced costs to the AEC by its activity in the areas of development and production engineering. Through its ideas, suggested changes, and development of processing techniques the organization has been exceptionally important in the manufacturing of a better quality product. We have enclosed a list of examples of the type of development and production engineering conducted by Mason & Hanger-Silas Mason Co., Inc., during CY 1967, the period under review.
During this period, Mason & Hanger-Burlington effected cost reductions in the amount of $570,400 of which $55,600 was applicable to the first half and $514,800 was applicable to the second half of the year. During the same year, the Pantex plant effected cost reductions in the amount of $1,158,000 of which $881,000 was applicable to the first half and $327,000 was applicable to the second half of the year. These cost savings have been verified by the AEC as actual cost savings for the period.
We trust the comments and information presented above will assist you in your determination. If we can be of any further assistance, please advise us.
Enclosed with the letter were examples of contract performance by Mason & Hanger-Silas Mason Co., Inc., during CY 1967, as follows:
*161EXAMPLES OF CONTRACT PERFORMANCE BY MASON & HANGER-SILAS MASON CO., INC. DURING CY 1967

Wme Generator.

Mason & Hanger designed a line wave generator based upon parameters furnished to them by Lawrence Radiation Laboratory (LRL). No previous development of a device to produce a straight line shock wave meeting the desired configuration had ever been designed. The device was fabricated and furnished to LRL for research activities of the laboratory.

High Explosive Pellet Location.

Mason & Hanger performed an engineering evaluation of test firing which indicated mislocated HE pellet locations in a weapon part. As a result of this study and recommendation, the pellet positions were relocated to improve the quality of the end product.

Loadmg Techniques.

Mason & Hanger made major improvements in the techniques of extruding HE which permitted a process loading change. This change also resulted in improved quality of the finished product.

Improved Product Yield.

Mason & Hanger developed, through quality control engineering, a radiographic technique for minimizing rejection of parts containing extruded HE. Also, production engineering developed a process to reclaim and reload rejected parts with extruded HE. Although these actions resulted in important dollar savings, the reclamation of the parts when they were in short supply was more important to our production mission than the dollar savings.

Hydrodynamic Testing.

1. In connection with the design and building of instrumentation and equipment for hydrotesting, Mason & Hanger designed the firing bunker.
2. The raster scope was produced to an LRL design; however, the image recorder was designed by Mason & Hanger.
3. All interconnecting circuitry between the scope and the main control console and the test shot console were designed and installed by Mason & Hanger. All of the synchronous circuitry for the sixty raster scopes, which automatically sequence the tests, were designed and fabricated by Mason & Hanger.
*1624. The environmental control of the device being fired was designed and installed by Mason & Hanger. The test shot configuration, the pin dome geometry, the test plate, and other hardware were developed by Mason & Hanger in conjunction with LEL. The equipment for manufacturing pin domes and inspecting them by an electronic digital readout was developed by Mason & Hanger. The equipment used to reduce the photographic test data to numerical data was developed by Mason & Hanger. It automatically punches IBM cards for each test pin so that this can be fed into a central computer program to determine the quality levels of the components being tested. Mason & Hanger engineers also installed identical equipment for the reduction of data at LEL for the laboratory’s use.

Precision Pressing.

The original design of LEL explosive assemblies had a small HE part which required five separate machining operations. Mason & Hanger engineers had previously developed precision pressing techniques to press to a finished shape which they applied to this HE part production. This has been incorporated into the weapon design at substantial savings to the AEC.

Special Test Firing Facility.

The contractor has also been involved in the development of a special test firing facility. This system makes measurements based upon the speed of light versus the speed of electricity.

Jigs and Fixtures.

The subassembly fixtures developed by Mason & Hanger engineering for use in locating and holding HE components and metal hardware items during actual gluing-operations and cure time periods are considered outstanding. They have resulted in a minimum of rejects due to out-of-tolerance conditions.
The following are items which, although performed at both plants, are primarily conducted at the Pantex plant:
1. Test Firing and Diagnostic TecJmigues.
a. Application of hydrodynamic test firing to quality control of two-dimensional systems.
b. Besearch in techniques for the measurement of detonation pressure.
*163c. Improvements in the precision of a less expensive measuring technique (the aquarian method) and research in the attenuation of explosively driven shocks in water.
d. Research into lighting techniques for very high speed HE diagnostic photography.
e. Development of a method of intensifying and prolonging the light from exploding wires.
2. IIE Safety Testing.
Two new tests of detonation threshold of explosives have been developed at Pantex:
a. The “Skid Test” measures the reaction when an HE sample is impacted in a skidding mode on a prepared surface. It was first developed to test protective flooring, and proved so effective that it is used to compare explosives.
b. The “Friction Sensitivity Test” in which a small sample is forced against a standard surface and then dragged rapidly across it at a fixed energy level.
3. Characterization of HE.
R&D resulting in many contributions in the field of particle characterization such as sizing by sieves, semiautomatic microscopy, and calibration of a variety of surface area measurements.
4. Fabrication Processes.
a. Development of very strong structures by filament winding, both with glass fibers and with metal wires. Research into the time-dependent response (creep, etc.) of such systems.
b. Advances in the precision fabrication of explosives, particularly in the field of numerical control such as 5 axis milling, turning, and isostatically pressing to shape of large, complex precision HE parts, etc.
5. Process Development and Facility Design for HE/ Nuclear Safety in Assembly.
Developing the concept for an HE assembly structure to limit the effects of accidents to the narrowest possible region and designing the facility. These structures consist of a buried cylindrical wall with a deep gravel overburden, supported by a novel steel cable structural system. This work was done several years ago. The structures are known as “Gravel Gerties”. They were built at both HE plants.
*1646. Research, for Reimbursable Worlc m Support of Department of Defense.
a. Contributions of conventional military weapons by research in the shock-sensitivity of military explosives, particularly by application of ÁEC-developed techniques to the problem.
b. Eesearch into the output of military weapon fuses measured quantitatively and applied to the problem of weapon reliability by advanced diagnostic methods. We understand such services are indicative of scientific expertise at the frontiers of present knowledge and were not available to the DOD any where else.
c. Development of new techniques by which military conventional weapons explosive systems can be characterized.
d. Contributions to the development of a very large chemical HE bomb, particularly in the initiation characteristics of a gelled slurry explosive in the development of an appropriate fuze.
10. Plaintiff’s performance in 1967 of the contract for the operation of the Cornhusker Army plant was the subject of a Renegotiation Performance Report by APSA, as follows (slightly condensed) :
(a) Contract Information. Contract DA-11-173-AMC-19(A), dated 7 April, 1950, performed 1 January, 1967 through 31 December, 1967. This contract is a cost-plus-award-fee type of contract. The basis for the use of a cost reimbursable type contract was a Finding and Determination dated 13 February, 1950. The method of procurement was Sole Source Negotiation pursuant to 10 U.S.C. § 2304(a)(16).
(b) Principal Product. Production of 500-, 750-, 1,000- and 2,000-pound bombs, and loading, assembling and packing (D/A/P) of XM45 and XM41E1 mines.
(c) Brief Description of Work Normally Performed. E/A/P high explosive bombs, artillery projectiles and mines. Manufacturing technique involves mixing, melting and pouring explosives; and finished products with density, cavitation and other stringent standards required to be met to pass Government inspection. Components and operation supplies are either Government-furnished or purchased by the contractor.
*165(d) Subcontracting. No 'ammunition production has been subcontracted. Subcontracting has been limited to a minor portion of reactivation and production equipment fabrication and is not in excess of 5 percent of the total such work.
(e) The Facilities Involved. Comhusker Army Ammunition Plant, a Government-owned facility at Grand Island, Nebraska. The facilities consist of real estate, buildings, fixtures and production equipment, with an estimated replacement value of $31,453,620. The contractor has made effective use of these facilities.
(f) Level of Production. In 1961, as a result of the war in Southeast Asia, Cornhusker AAP was operating at full capacity.
(g) Total Billings (contract payments, that is, costs and fees) During Period, $32,845,658.67 [but cf. finding 6].
(h) Total Production Fees Paid to Oontractor Dwring Period. Production fees of $882,369.61, which is 2.69 percent of reimbursed costs, plus award fees determined by APSA of $53,449.67. The contractor has received fees varying between 2 and 3 percent of the estimated cost of the contract during calendar year 1967. This fee ratio is commensurate with similar GOCO contracts. No important contracts have been negotiated with this contractor without fees [but cf. finding 6].
The award fee of $53,449.67 represents 30.3 percent of the potential maximum of such fee.
(i) Contractor Performance.
(1) The contractor has met the contract requirements.
(2) Delivery schedules were met although frequent changes were made by the Government with little advance notification.
(3) Kejection and spoilage rates are considered low.
(4) The contractor is considered average in controlling the use of materials, facilities, manpower, and production costs.
(5) There have been no strikes, stoppages, or other significant developments in labor management affecting contractor performance.
(j) Information Concerning Reasonableness of Cost and Profits.
(1) The adequacy and reliability of the contractor-provided cost information has been average to above average compared to other GOCO contractors.
*166(2) Since the subject contract is a cost reimbursable type contract, the contractor has assumed little if any risk.
(3) There have been no significant refunds or price reductions.
(4) The contractor is an average cost producer. Contract costs are based on product unit cost estimates submitted by the contractor and reviewed by the Government. Revised estimates are prepared whenever a fund deficiency or excess funding is indicated and the contract amount is adjusted accordingly. Upward revisions have generally been due to schedule changes and/or slippages in Government-furnished components.
(5) The contractor operates with $20,000 of company funds as plant working capital. The Government locally reimburses the contractor concurrent with release of payment checks that the contractor has issued.
(k) Contractor's Contribution to Defense Efforts.
(l) This plant is the major supplier of high explosive bombs to the Air Force. In addition, major caliber artillery projectiles and mines are produced. Through Value Engineering, a new and improved method of coating the interior of bomb casings was developed and put into use as well as other developments to improve melt loading techniques.
(2) Contractor’s performance from a production viewpoint has been very good. The award fees determined by APSA represents 30.3 percent of the potential maximum of such fees.
11. Plaintiff’s performance in 1967 of the contract for the operation of the Iowa Army plant was the subject of a Renegotiation Performance Report by APSA, as follows (slightly condensed) :
(a) Contract Information. Contract No. DA-11-173AMC-85(A), dated February 24, 1951, being performed January 1, 1967 through December 31, 1967. This contract is a cost-plus-fixed-fee type of contract. The basis for the use of a cost reimbursable type contract was a Findings and Determination dated February 12, 1951. The method of procurement was Sole Source Negotiation pursuant to 10 U.S.C. § 2304(a) (16).
*167(b) Principal Product. Production and loading of 76 mm, 90 mm, 105 mm, 106 mm, 120 mm, 155 mm, 165 mm, and 175 mm, ammunition, warheads, igniters, boosters, detonators, fuses, grenades, primers and mines.
(c) Brief Description of Type of Worh Normally Performed. The contractor operates the Iowa AAP, a Government-owned facility for loading and assembly of ammunition and ammunition components in accordance with furnished schedules incorporating delivery and performance rates and provides all support functions applicable thereto. Some of the items manufactured by the contractor have been standardized for over 25 years, but the bulk of them are relatively new and still subject to design changes requiring the utmost flexibility and responsiveness. Performance under the contract requires a comparable amount of technical expertness required by any manufacturing operation of comparable magnitude involving explosives and materials dangerous and hazardous in nature. Operation of a large ammunition loading plant such as this involves not only the staffing of existing facilities, but the establishment of criteria for the design of new structures, and the complete design, fabrication and procurement of loading and assembly equipment for new end items. Also involved is the replacement or modernization of existing equipment in order that work may be accomplished more efficiently with greater safety, economy and quality. Engineering studies and services are performed as may be requested or approved by the Government with a primary view towards a development of more efficient mass production equipment, techniques, procedures and methods. Operation of the plant also includes procurement, receipt, storage and issue of necessary supplies, equipment, components, and essential materials. Maintenance and/or repair of active facilities are in support of current operations. In addition, maintenance of layaway and standby facilities including any machinery and package lines received from industry is performed as directed. Also involved are receipt, surveillance, maintenance, renovation, demilitarization, salvage, and storage of assigned field service stocks and V&W group items of industrial stock as required or directed. Mobilization *168planning, including review and revision of plans, is performed as required.
(d) Subcontracting. None of tbe loading, assembly and packing operations of this plant has been subcontracted. Subcontracting in other areas has been minimal and is estimated as less than 5 percent.
(e) The Facilities Involved, are Iowa Army Ammunition Plant (AAP), a Government-owned facility at Burlington, Iowa. The facilities consist of real estate, buildings, fixtures and production equipment, with an estimated replacement value of $66,127,638. The contractor has made effective use of these facilities.
(f) Level of Production. Loading, assembly, packing (L/ A/P) operations in the calendar year involved the production of 40 to 45 different items, many of them new items. Nine of the 11 lines were in operation for 2 months of the year and 10 of the 11 lines were operated for the other 10 months. Most of the lines were operating on a two to three shift basis. In addition to the support activities, routine maintenance work, facilities expansion and reactivation of production lines performed by the contractor, the design, fabrication and procurement of loading and assembly equipment for new items were at a very high level.
(g) Total Billings (contract payments, that is costs and fees) During Period. $49,465,842.25.
(h) Total Production Fees Paid to Contractor Durmg Period. $1,487,566.91, which is 3.1 percent of the reimbursed costs. This fee ratio is commensurate with similar GOCO contracts. No important contracts have been negotiated with this contractor without fees.
(i) Contractor Performa/nce.
1. Production of accepted items has met the contract requirements.
2. Delivery schedules were generally met, and those instances of failure were a result of nonavailability of Government-furnished metal parts.
3. Rejection and spoilage rates were kept to a reasonable and acceptable level. The introduction of new items and extremely rapid expansion of production schedules with the inherent increase in training of personnel, defective metal *169parts and numerous changes in specifications, caused an increase in spoilage rates.
4. The contractor has utilized materials, facilities and manpower in a satisfactory and economical manner and has been reasonably effective in controlling production costs.
5. Contracts were negotiated with all unions during 1966 for a period of 3 years. There were no strikes or work stoppages during the period of this report. Joint labor-management meetings were held monthly to discuss problems that had arisen thus providing a continuous channel of communication. Difficulties have been experienced in the recruitment of personnel due to the rapid buildup of production and production schedules and tight labor market. However, contract performance has not been affected to any substantial degree in this area.
(j) Information Ooncerni/ng Reasonableness of Costs amd Profits.
1. The adequacy and reliability of the contractor-provided cost information has been average to above average compared to other GOCO contractors.
2. Since the subject contract is a cost reimbursable type contract, the contractor assumed little if any risk.
3. There have been no significant refunds or price reductions.
4. The contractor is an average cost producer. Cost overruns were caused in most instances by unforeseen problem areas, primarily new items and additional work and changes in specifications after the original estimates and funding were provided. Cost underruns were caused primarily by rapid increase in the volume of production and the resulting decrease of overhead applied. This factor is involved in both underruns and overruns since the overhead fluctuates with the volume of production. Another cause for overruns and underruns is inaccurate estimates for the new items for which no prior experience or historical data is available.
5. The contractor operates with approximately $20,000 of company funds as plant working capital. The Government locally reimburses the contractor concurrent with release of payments checks that the contractor has issued.
(k) Contractor’s Contribution to Defense Efforts.
*1701. The contractor has made a contribution to the defense effort by virtue of his operation of this plant by producing acceptable ammunition and ammunition components for the Armed Forces. He has made effective use of Value Engineering validated cost reduction savings in the amount $275,700 for calendar year 1967.
2. The contractor’s overall performance for the period under consideration has been most satisfactory.
8. Many new items have been introduced during this period and the contractor has been flexible and most responsive to the numerous changes in specifications and design which have occurred as well as the rapid build-up in production schedules. The contractor excels in the area of design and operation of equipment for the manufacture of extremely high quality explosive castings. The contractor has pioneered in the design of vacuum melting and pouring equipment for loading ammunition items where density and soundness of cast is of the utmost importance. Total production fees paid to the contractor for calendar year 1967 were $1,487,566.91 which is 3.1 percent of the reimbursed costs.
12. Plaintiff was not only the “major supplier of high explosive bombs to the Air Force” (finding 10 (k)), but also the only producer of the 750-pound bomb and an antipersonnel aerial mine, involving a particularly sensitive explosive, under a program which was new in 1967 and had the highest priority. Production of the aerial mine was undertaken after other contractors had declined to take the project on, and, in terms of costs and fees, the aerial mine project accounted for approximately 20 percent of work in 1967 at the Iowa plant. Nine million of these mines were produced by plaintiff in 1967 and plaintiff was congratulated by the Army Munitions Command for its performance.
13. Plaintiff, in the year under review, cooperated with the Government in respect to additional work under the contract and assistance to other Government contractors and to foreign governments. When the Government failed timely to supply wooden pallets on which bombs are shipped, plaintiff manufactured large numbers of pallets at the Cornhusker plant so that deliveries could be made on schedule. At the Army’s request, plaintiff gave technical assistance to other *171GOCO contractors in matters with which plaintiff was familiar. Similarly, plaintiff gave assistance to the governments of the Netherlands, Australia, Canada and Great Britain.
14. The Burlington AEC plant is contained within the perimeter of the Iowa Army plant; together they occupy a tract of 19,136 acres, on which there are 1,042 buildings, with 4,000,000 sq. ft. of floor space. The tract contains 150 miles of roads and 102 miles of railroad.
The other AEC plant, the Pantex plant, covers 10,200 acres on which there are 80 buildings with 700,000 sq. ft. of floor space and 26 miles of roads.
The Cornhusker Army plant covers 11,983 acres, on which there are 649 buildings, with 2,300,000 sq. ft. of floor space, 88 miles of roads and 28 miles of railroad.
15. In 1967 the work force at the four plants averaged over 11,000. The following were the categories of employees.

Employees

Officials and managers_ 385
Professional_ 363
Technicians_ 667
Office and clerical_ 866
Craftsmen (skilled)_ 2, 055
Operatives (semi-skilled)_ 5, 635
Laborers (unskilled)_ 604
Service workers_ 618
Total____ 11,193
The 363 professionals included 151 engineers, 33 chemists and biologists and 32 physicists and mathematicians. The engineering fields represented were civil, architectural and structural, 16; mechanical, 53; electrical, 16; chemical, 27; and industrial and quality control, 39.
16.(a) Plaintiff’s surplus, total assets and net worth at the beginning of 1967 were, respectively, $5,679,369.27, $6,311,-624.71 and $6,012,369.27. Most of the surplus was invested in stock, Treasury bills and certificates of deposit.
(b) Because of the nature of plaintiff’s business as a GOCO contractor, the prompt reimbursement of costs, and the payment of fees at short intervals, performance of plaintiff’s contracts did not require it to use substantial amounts of its own funds for extended periods of time. Plaintiff op*172erates with a small amount of cash at both, the Army and the AEC plants as plant working capital.
17. (a) The Government reimbursed plaintiff for costs at the Army plants weekly, though the contract required only monthly reimbursement. Costs at the AEC plant were pre-financed by a letter of credit on which plaintiff drew as it issued checks.
(b) Reimbursement takes place so often, in the case of the Army contracts more often than the contract requires, in furtherance of the concept of GOCO contracting, under which capital investment by the contractor is intended to be reduced to the minimum.
18. (a) The possibility, in 1967, by reason of Government studies and proposals since 1952, that the Government would reimburse GOCO contractors less often than weekly, did not mature into actuality until 1972, when the Army changed its reimbursement frequency from weekly to biweekly, and paid compensation for the additional contractor capital required, according to a formula paying an additional fee for the financing of the operation.
(b) Plaintiff had no need in 1967 for the maintenance of any substantial capital as a reserve for the possibility that the Army might reimburse GOCO contractors less often than it did. Amy problem which might be presented by a less frequent reimbursement schedule would be solvable by borrowing, with the reasonable expectation that compensation would be paid for the additional working capital required.
19. Plaintiff’s home office in Lexington, Kentucky, almost entirely devoted to its renegotiable business, is headed by a chairman, president and executive vice-president who together own 88 percent of plaintiff’s stock and are paid total salaries of $225,000.
The plant managers at the GOCO plants report to the chief engineer and vice-president in charge of operations (a lesser officer than the officers mentioned above) at the home office. The home office establishes high-level corporate policy in such areas as personnel and labor relations, negotiates Government contracts and amendments thereto, participates in labor relations and the negotiation of union contracts, and assists the individual plants with engineering services, engi*173neering designs, and advice on safety and in areas sucbi as equal opportunity and small business participation programs.
20. The Government’s policy is not to reimburse GOCO contractors for home office general and administrative costs (unless specific work is assigned to the home office, in which case its cost is reimbursed) because GOCO plants are generally structured and staffed so as to operate with little or no dependence on the home office, and in the case of those who (unlike plaintiff) have substantial non-GOCO business, the home office might neglect GOCO for other business, making the GOCO business share of the expense disproportionately large.
Accordingly, plaintiff’s contracts do not provide for reimbursement of such expenses. Instead the Army accepts billing for home office costs directly incurred at a GOCO plant, and also, in fixing fees, considers the fact that home office is not being reimbursed.
The costs of plaintiff’s home office (including other non-reimbursed costs of approximately $30,000) were $822,000 in 1967 (and $755,000 in 1966). These costs were deducted from the fixed fees in determining profits subject to renegotiation. The renegotiable profits presently under review are thus net after deduction of home office costs and other non-reimbursed costs.
21. An allocation of plaintiff’s home office expenses to its GOCO business as a cost (which plaintiff contends would bring down its profit ratio) is not permissible under the contracts and has not been an issue in the pretrial of this case. The amount of renegotiable sales and profits has, moreover, been agreed; and thus their percentage relationship or ratio is fixed.
22. The risk of explosion, despite plaintiff’s technical expertise, long experience and training programs, is ever present in plaintiff’s work of dealing with high explosives and packing of ammunition.
A bomb manufactured by plaintiff exploded in 1967 in the Port of Chicago, and injured a fork-lift operator. There have been two major explosions in the aerial mine program (one occurring in 1967) in which nine employees were killed.
*17423. The Army contracts provide that because of the hazardous nature of the work and the risks involved, the Government will indemnify plaintiff for all losses arising out of the performance of the work, including personal injuries and deaths, unless caused by bad faith or willful misconduct of a corporate officer or a representative in charge of the whole business or a whole plant acting within the scope of his authority.
24. Under the AEC contracts, plaintiff was indemnified by the AEC for losses resulting from nuclear incidents in the United States to the extent of $500 million, and outside the United States to the extent of $100 million.
When in 1967 the exposure from nonnuclear incidents was estimated to be $100 million in one plant and $125 million in the other, and the premium for insurance to be $550,000, the AEC decided to provide an indemnification for nonnuclear incidents, and it did so in 1968.
In 1967, plaintiff could, however, reasonably rely, for indemnification for nonnuclear incidents, upon the AEC contract provision authorizing reimbursement for “just and reasonable” expenses and losses in the performance of the contract.
25. During the entire time plaintiff has had GOCO contracts, since 1958, it has never failed to be reimbursed for the claims paid or losses incurred by reason of explosions or for claims resulting from accidents causing injury or death. Plaintiff has borne, from such causes, only some non-reimbursed home office expenses. There are some claims now pending, but there is no reason to believe that losses and settlements will not continue to be reimbursed.
26. Plaintiff does not incure any appreciable financial risk from the possibility of explosions. It does not employ or need its capital as a reserve for such risks, and it was not required to maintain substantial capital, in 1967, on account of such risks.
27. (a) Financial risks to plaintiff from causes other than explosion were also minimal.
(b) While the value of Government-owned property entrusted to plaintiff was high, the financial risk to plaintiff from loss or destruction of Government-furnished property *175was negligible. The indemnification for plaintiff’s losses, except for misconduct by bigli-level management, includes losses of Government-furnished property. Plaintiff’s witnesses could remember, hazily, only one item of property, lost “years ago,” for which plaintiff was ultimately held responsible.
Plaintiff was not required to maintain any substantial capital on account of any risk of loss of Government-furnished property.
(c) In 1967 there were no strikes or stoppages, or other significant developments in labor-management relations affecting contractor’s performance at the Army plants.
Data on this subject for the AEC plants does not appear in the record.
The risk of financial loss in 1967 in connection with strikes or other expressions of bad labor relations was negligible. The “risk” that should there be a strike, the work done at plaintiff’s plant would be done elsewhere is not a risk in any way unusual in a business.
(d) The “risk” that a contract such as plaintiff’s GOCO contracts may be terminated for convenience is no more a risk than that it may come to an end by expiration. The work of an ammunition plant ends, naturally, when ammunition is no longer needed. Plaintiff is reimbursed for all costs, on either a termination for convenience or on expiration.
(e) Nor is it a “risk” that upon termination, for whatever reason, plaintiff may find it difficult to return to, or enter other business than its GOCO business. Plaintiff could enter such other business at any time, employing for it the capital it does not use in the instant business.
(f) Fees paid to plaintiff by APSA in 1967 were based on the assumption that plaintiff’s risks were minimal.
28. Plaintiff possessed, in 1967, very substantial technical and scientific expertise and know-how, enabling it to perform the technical, complex, highly responsible operations and for its personnel hazardous work involved in the operation of the four plants to produce satisfactorily the nuclear and nonnuclear ammunition of the type and quality and in the quantity required by the Government. While the expertise and know-how was during 1967 doubtlessly valuable, in non-*176balance-sheet terms, there is no evidence in the record upon which to base a valuation of it, for inclusion in the capital devoted to the business or otherwise.
29. (a) Plaintiff’s gross income from sales, renegotiable and negotiable, in 1962-1966 was as follows:

Gross income

1962__— $41, 282, 276. 45
1963__ — ... 39, 445, 883. 91
1964___ 40, 748, 260. 31
1965... 39,503,465.09
1966._____ 63,202,837.91
(b) Kenegotiable receipts, profits and profits expressed as a percentage of receipts (profit ratios) in the 3 years 1965, 1966 and 1967 were:
Projas r jv ^
$647, OOO H co 60-
1, 122, OOO o
2, 681, OOO H H to
Profits in 1965 and 1966 were found by the Benegotiation Board to be nonexcessive. On the $50.1 million excess of receipts in 1967 over the $62.8 million of receipts in 1966, plaintiff made profits of $1.5 million more than the $1.1 million in profits on the first $62.8 million in receipts.
(c) Plaintiff’s nonreimbursable costs, comprised of its home office expenses and certain corporate costs, were $755,000 in 1966 and in 1967 increased by $67,000 to $822,000.
(d) Percentage increases of receipts, profits and profit ratios were as follows:

1966 Percentage Increase Over 1966 (egual to average of 1969-66) 1967 Percentage Increase Over 1986 Over 1966

389. 26 Renegotiable receipts_ 60. 79 CO 05 I>
314. 37 Renegotiable profits_ 73. 42 cn OO
42. ratios_
(e)The percentage increase in nonreimbursable costs from 1966 to 1967 — $755,000 to $822,000 — was 8.87 percent.
30. From the beginning in 1965 of the intensified American participation in the war in Vietnam and 'as the “heating-up” of the war continued in 1966 and 1967, the Army procurement authorities had sought to encourage increased capability and production of the type of ammunition produced in plaintiff’s Army plants, and, having achieved high-level production, *177to keep and encourage the high, level. They were interested in “getting the goods” and bought all that could be produced.
31. In 1965, 1966, and 1967, plaintiff’s employees totaled 5,300, 6,900 and 11,200 , respectively. In 1965 there were seven production lines in operation at the Iowa plant, in 1966 nine production lines, and through most of 1967 ten (of a total of 11) production lines. In 1967 Iowa was producing 40 to 45 different items, 11 of which were in the developmental stage. Many of the 40 to 45 items were new items. The Corn-husker plant had been “mothballed” until late 1965 when it was reactivated. Production at Cornhusker began in January 1966 and increased throughout the year. In 1967 the Corn-husker plant was operated near capacity.
32. The customary method by which an order was placed with an Army GOCO plant, in effect in 1967 and previously, was that the Government, when it had need for an item of ammunition produced by or capable of being produced by a GOCO contractor, solicited from the contractor as estimate of cost, to be based on a gross production amount and an idea as to a production rate.
In keeping with the objective stated above in finding 30, and since all of the GOCO contractors in plaintiff’s field were being used to their limit, competitive estimates of cost were not solicited in 1967.
The estimate was reviewed and refined by APSA’s staff at the plant and ultimately reviewed and approved at APSA.
33. Following approval of the cost estimate, a fee per unit to be produced was negotiated, and upon approval of the cost estimate and agreement on the unit fee, the order was embodied in an amendment to the contract. Then, monthly, APSA put out a schedule of how many units or rounds it would require for an extended period of a year, or more or less.
34. APSA’s guidelines for establishing the fee per unit of ammunition to be produced by a GOCO producer included the estimated cost of the item, the scope of the work required to produce the item, in terms of complexity of work rather than its cost; the profit objectives “weighted guidelines” of the Armed Service Procurement Regulations, used by the Army in dealing with private plants and modified by APSA *178for purposes of GO CO plants; the unit fee paid on a prior order of the same item, or the fee paid to other contractors producing the same item, if it was or had been in production or, if not, the unit fee paid for items similar in character to the item for which the fee was being established; the total volume of work being performed by the contractor; the contractor’s total fee return; and the character and extent of the contractor’s nonproduction, nonfee bearing activities.
35. In practice, fees were actually freshly discussed and negotiated only in cases of experimental, new or pilot lots, in cases where the first production run was being ordered following a small pilot lot order, and in cases where changes in technology had lowered costs to a point where the fee was no longer relevant. There were about 12 such negotiations in 1967.
Except in the foregoing cases — described in the record as unusual — repeat orders were placed at previously established fees. Most orders were repeat orders. There were about 100 repeat orders to plaintiff in 1967.
The reasons for placing repeat orders at previously fixed fees are indicated in finding 31, above, and 40, below.
36. For the same reasons that repeat orders were placed at previously set fees (finding 35), the same unit fee was with rare exceptions paid to all the contractors who were producing an item.
37. The largest part of the fees paid for production in 1967 were, moreover, originally set on a basis of requirements given to the contracting officer by others in the Army, at a time when there was no anticipation of a long war or of a long production run of the items required. The assumptions were a short war and a limited volume.
The assumptions turned out to be wrong. The war continued longer than anticipated, and volume of orders rose beyond expectations.
38. There was no reduction, or consideration of reduction, in fees on the ground of the expanded and increasing volume of orders, on any other related ground or on any ground except to the extent indicated in finding 35. APSA never requested plaintiff to reduce fees on repeat orders on the ground that increased quantities were being ordered.
*17939.Once a fee on an item was set by APSA it would remain in force indefinitely, though reimbursable costs of production went up or down. For example, the unit fee per 175-mm. projectile remained steady at the Iowa plant for 6 years beginning in 1966 at $0.27 per unit, though reimbursable costs varied substantially, up and down, as shown in the following table:
Iowa Army Ammunition Plant
L/A/P Projectile, 175 mm, HE, M437A2

Fiscal Year Date Quantity Bate Unit Fixed Percent-Cost Fee age

*

1966. 16 Sep 65 505,000 40,000 8,338 0.27 3.35 (3.24)
1967. 19 Oct 66 111,000 27,000 7,724 0.27 3.62 (3.50)
1968. 21 Aug 67 485,000 60,000 6,904 0.27 4.07 (3.91)
1969.. 13 Aug 68 833,000 90,000 5,683 0.27 4.99 (4.75)
1970. 21 Nov 69 173,000 60,000 7,694 0.27 3.64 (3.51)
40. APSA, far more interested in increasing production than in reducing fees or in promoting competition hi fees, did not wish to undertake negotiations for fees on repeat orders. Indeed, one of the reasons for the adoption of the unit fee system was that it would obviate the need for such negotiations.
Fees earned by plaintiff in 1967, whether on repeat orders placed in that year or placed in the previous year and filled in 1967, were the previously established fees, agreed to as a routine matter, without bargaining or competition.
41. The contracting officer on plaintiff’s APSA contracts was a man of many years’ experience in negotiating fees which he and APSA considered proper. He was aware, throughout, of plaintiff’s production level and overall fees and profit rate, and aware, too, that in 1967, 1968 and 1969, when production was building up, the rate of profits of GOCO contractors was rising. He and his colleagues, knowing this, would try to cut down overall fees of GOCO contractors by negotiating fees downwards on repeat orders when they had risen above the proper “historical” margin of profit, which he and his colleagues felt was about 3 percent. (Compare the data for 1966 and 1967 in findings 43-44.) He could not remember doing this with plaintiff, from which, he agreed, it could be inferred that he (and thus, presumably, *180bis agency) did not feel plaintiff was getting up above the proper margin of profit.
42. Plaintiff did not request increases in unit production fees in 1967, either on the ground of an increase in hazards from larger-scale work with high explosives, a rise in training costs as production costs rose, or other ground.
43. (a) Profit data for DOD, AEC and NASA GOCO plants and service contractors whose source is Defense Industry Profit Study, Eeport No. B-159896, to Congress by the Comptroller General, March 17,1971 (pp. 29, 73), is set out in following subparagraphs (b) and (c).
(b)

Profit data for GOOO plants amd service contracts of 80 large DOD contractors

We obtained separate data pertaining to the operation of GOCO plants, contracts for operation and/or maintenance of Government facilities, and service contracts for DOD and the other defense agencies (NASA and AEC). The characteristic common to these contracts is that they require little or no investment of contractor capital. If we included data on these contracts, our overall profit data would be distorted.
Of the 80 large DOD contractors, six reported all, or practically all, their defense business in GOCO-type sales, and 38 others reported some sales of this type to DOD or other defense agencies. The volume of GOCO business reported was about 2% times greater for DOD than for the other defense agencies ($2.1 billion and $0.8 billion, respectively). The profit on sales for the other defense agency business was about 32 percent higher than for DOD business (4.1 percent and 3.1 percent, respectively).
The difference in profit between DOD and the other defense agencies on GOCO sales may be explained, in part, by the nature of the work performed. The bulk of GOCO sales to DOD were for the operation of Government-owned ammunition plants and to NASA were largely for technical services. GOCO sales to AEC were divided between support services and GOCO plant operations. Cost-type contracts were the contracts most widely used by both DOD and other defense agencies for this work.
(For further details see sch. 15 [set out in the following subparagraph (c)].)
*181(O)

Schedule 15

Summary of Sales and Profits Before Federal Income Taxes for GOCO Plants and Service Contracts of Large DOD Contractors

me 1867 1968 1969 Weighted

GOCO Sales billions)
DOD_ $1.7 $1.9 $2.3 $2.5 $2.1
Other defense agencies_ 0.7 0.8 0.8 0.8 0.8

Profit as Percent of Sales

DOD. 2.5% 3.1% 3.3% 3.3% 3.1%
Other defense agencies_ 4.3 4.6 42 3.3 4.1
44. (a) Profit data for DOD GOCO ammunition plants for 1967-71, obtained from the Department of Defense, OASD (Comptroller), Directorate for Information Operations, is set out in following subparagraph (b).
(b)
Summary of Average Profits on Department of Defense Government-Owned-Contraetor Operated (GOCO) Ammunition Plants
(Fiscal Years 1067 through 1971)
Number Average Profit Fiscal Year of Con- Cost Profit Profit Range tracts (? Thousands) (3 Thousands) Pci. on - Cost High Low
1967. 34 $530,917 $16,537 3.1% 6.7% 1.7%
1068. 24 1,493,240 47,492 3.2 5.6 0.9
1969. 37 2,044,665 68,484 3.3 8.0 1.5
1970. 40 1,045,990 35,341 3.4 8.2 1.2
1971. 38 880,563 29,511 3.3 9.1 0.4
Totals. 173 $5,995,375 $197,365 3.3%
(c) It may be inferred from the similarity of the DOD groups reported on by the Comptroller General (mainly ammunition plants) (finding 43 (b)) and in the present finding (exclusively ammunition plants) and from the identity of their average profit ratios in 1967-69, that the average profit ratio in 1966 of the group reported on in the present finding was the same 2.5 percent as is reported by the Comptroller General in finding 43 (c).
45. (a) It may be inferred that each of the contracts noted in the second column of the table in the foregoing finding covered one plant, and thus that the figures for 1967 represent 34 plants.
(b) The total reimbursed costs of $530 million for the 34 plants, divided by 34, gives an average per plant of less than $16 million reimbursed costs, far less than either the reimbursed costs of $34 million and $49 million at Cornhusker *182and Iowa, respectively. Many of tlie 34 plants, if not most, were thus much smaller than the Army plants operated by plaintiff. The DOD average is, therefore, based on data for plants much smaller than the plants operated by plaintiff.
(c) The record does not contain details on the nature of the business, efficiency, or contribution to the war effort of the 32 plants other than plaintiff’s.
46. During 1967, Federal Cartridge Corp., under a GOCO contract with the Army, operated the Twin Cities Army Ammunition Plant, at which it produced two small-arms ammunition items. The Twin Cities plant was Federal Cartridge’s sole GOCO operation; the negotiable sales from the plant in 1967 were $74.6 million. Federal Cartridge’s renegotiable profit for 1967, expressed as a percentage of sales, was 3.1 percent. After renegotiation, its profits were 2.7 percent of sales.
There is no evidence in the record of the company’s efficiency or contribution to the defense effort.
47. (a) Dr. William Long testified as an expert witness for the Government. Dr. Long is an associate dean at George Washington University and teaches economics. He received his Doctorate in economics from that institution. He is a member of several societies, including the American Economic Association. He was at one time chief economist for the Electronic Industries Association, in which capacity he represented some 540 companies before various congressional committees. His function was to examine the economic-production-marketing aspects of those companies and to prepare data and testimony on their behalf.
(b) Dr. Long testified that in his opinion plaintiff incurred no risk to its capital. He also testified that in his opinion plaintiff’s profits were disproportionately high in 1967, because, while plaintiff’s sales from 1966 to 1967 did not quite double, its profits more than doubled. He stated that a reasonable profit for plaintiff in 1967 would have been $2,130,-000, or at most $2,244,000.
CONCLUSION OK LAW
Upon the foregoing findings of fact and for the reasons given in the opinion, the court concludes and determines as a matter of law that plaintiff realized excessive profits in the *183gross amount of $423,000 from contracts or subcontracts subject to renegotiation under the Renegotiation Act of 1951, as amended. Plaintiff’s petition is hereby dismissed and judgment is entered on defendant’s counterclaim in the sum of four hundred twenty-three thousand dollars ($423,000) less appropriate state and federal tax credits, plus interest thereon as provided by law.
523 F. 2d 1384
ORDER ON PLAINTIKir’s MOTION EOR RECONSIDERATION
October 3,1975
“This renegotiation case comes once again before the court, presently on plaintiff’s motion for reconsideration and additional trial on certain issues which figured in our decision announced June 25, 1975. Briefly, plaintiff would have us vacate the judgment and remand the case to the Trial Division for further evidentiary hearing on two points: (1) whether 1965 presents an appropriate historical base for purposes of evaluating ‘normal earnings,’ 50 U.S.C. APP. § 1213(e) (1) (1970); and (2) whether in principle renegotiable profit rate should be thought to decline as sales increase in this line of business. On August 14,1975, the court allowed the motion of John T. Koehler and Judith A. Yannello for leave to file a brief amicus curiae directed to the matters raised by the instant motion. Upon a thorough review of the record and briefs, we conclude that the plaintiff has not demonstrated adequate grounds for the extraordinary relief sought and that the motion must be denied.
“In General Elec. Co. v. United States, 189 Ct. Cl. 116, 416 F. 2d 1320 (1969), we considered the standard by reference to which a motion for reconsideration will be evaluated. We recognized that a request for such relief must be received hospitably where the decision has turned upon a point neither briefed nor raised by the parties. A contrary rule applies in the normal case, however:
* * * where a party adversely affected by the court’s decision on the issue has had fair notice that the question may well be in the case, has had a fair chance to present its position, has failed to do so, and gives no *184sufficient excuse for its failure, a demand for post-decision relief will normally be rejected. * * *. [189 Ct. Cl. at 117-18, 416 F. 2d at 1321-322.]
We think this rule fully applicable here.
“Plaintiff tells us that since the Government bears the ultimate burden of proof in this case under Lykes Bros. S.S. Co. v. United States, 198 Ct. Cl. 312, 459 F. 2d 1393 (1972), and since the Government at trial did not specifically rely on 1965 profits or on the familiar volume principle, plantiff was not properly put to its proof on either point. We do not agree.
“With respect to 1965 profits as normal earnings, our examination of the transcript indicates that defense counsel’s prepared questions for its expert witness, a copy of which was provided for opposing counsel before trial, included an inquiry specifically directed to 1965. Without objection defendant introduced in evidence a summary of plaintiff’s profit position for the years 1962 through 1966, inclusive. On cross-examination defendant’s expert testified that in his opinion profits as a percentage of sales remained fairly constant during this period, and that any of the years referenced could usefully be considered as a benchmark for evaluating earnings in 1967. In these circumstances, and particularly in view of the explicit wording of 50 TJ.S.C. APP. § 1213 (e) (1) (1970), we find that at the trial level plaintiff had notice that 1965 earnings could be taken into account. Plaintiff could have adduced rebuttal evidence on this point at the trial, yet for reasons of its own it did not.
“The ‘volume principle,’ codified in 32 C.F.R. § 1460.10 (b) (3) (1971), also found its way into this litigation at the trial level. Plaintiff’s counsel elicited testimony to the effect that under “unusual circumstances” unit fees would be reduced; for example, as in the case of full production runs of ordnance previously fabricated only in much smaller pilot lots. Counsel inquired of his witness whether or not the Government had ever asked plaintiff to reduce fees because of larger quantities. Defendant’s expert testified at some length respecting the profit-to-sales ratio. This line of questioning indicates notice that the volume concept was in the case, whether technically brought up by defendant in its eviden-*185tiary presentation or in the trial briefs. Moreover, tbe trial judge was required by law to take judicial notice of the content of 82 C.F.E. § 1460(b)(3) (1971). 44 U.S.C. §1507 (1970). We think that plaintiff was clearly on notice of the presence of this issue at trial. We are not inclined to provide an opportunity for post-decision bolstering of contentions which we have already rejected. See Carchia v. United States, 202 Ct. Cl. 723, 731-32, 485 F. 2d 622, 626-27 (1973).
“The amicus brief raises two matters which merit further comment. First, Mr. Koehler suggests that we delete our citation of his remarks since they were made only with reference to firm fixed-price contracts. We note that he made no distinction between contracts of that species and those of the cost-plus-fixed-free variety at the time of his speech. Moreover, 32 C.F.E. § 1460.10(b) (3) (1971) makes no such distinction. Second, our opinion specifically disclaims reliance on any single fact or factor as a rigid formula or fixed limitation on allowable profit. Normal earnings were but one of several factors entering our judgment, and we reiterate that view here. With due respect, plaintiff and amici misapprehend the thrust of the opinion.
“it is therefore ordered that, upon reconsideration of the entire record, without oral argument, plaintiff’s motion for reconsideration and additional trial is denied.”

The percentages above, not in parentheses, are erroneous, but are given as they appear in an exhibit in evidence. The percentages in parentheses are correct.