Court Opinion

ID: 8597030
Source: CourtListenerOpinion
Date Created: 2022-11-23 16:04:22.531474+00
Date Added: 2024-06-11T16:55:00.424509
License: Public Domain

BENNETT, Judge,
concurring in part and dissenting in part:
I concur in the court’s decision as to the Deductive Change claim and the National Radio claim. However, i must respectfully dissent on the First Articles claim. This matter has startling and far-reaching implications in government contract procurement law.
The First Articles claim arose as follows: plaintiff was the low bidder on a formally advertised fixed-price supply contract for radio transmitters. After the bids were opened, defendant’s contracting officer contacted plaintiff about possible mistakes in its bid with regard to price and quantity. The contracting officer’s position with regard to quantities was that first article samples had to be refurbished and supplied in addition to the total quantities called for in the invitation for bids (IFB). However, the IFB clearly indicated that first articles could be refurbished and supplied as a part of the total quantities. The contracting *343officer’s position, in effect, required eight more transmitters to be supplied than were called for in the IFB. Plaintiffs response was to confirm its bid price but dispute the contracting officer’s requirement of eight extra transmitters. Discussions followed and eventually plaintiff wrote a letter on November 30, 1966, to the contracting officer accepting the requirement of the eight extra transmitters, as specified in an earlier letter from the contracting officer. That earlier letter and plaintiffs letter accepting the requirement of eight extra transmitters were expressly made part of the contract. Thus, the contract clearly called for the eight extra transmitters to be manufactured and delivered. At the same time, the price was not increased. The court’s opinion fails to mention this. Plaintiff did manufacture and deliver the extra transmitters along with the others and then asked for a price increase for the extra work. The contracting officer refused the request and plaintiff appealed.
The Armed Services Board of Contract Appeals held that there was no reasonable basis for the contracting officer’s position that the IFB required refurbished first articles to be supplied in addition to the total quantities. However, the Board held that since plaintiff had acquiesced in that position it was not entitled to relief. The Board cited nine Court of Claims cases and 12 Board decisions as authority for this conclusion. The court reverses the Board. I would affirm the Board both as to its result and its reasoning and therefore I must dissent.
The court does not reverse any of the Board’s findings of fact on this issue, only its conclusion of law. The issue may be framed as follows: the parties entered into a contract which contained the IFB, plaintiffs bid, and the two letters referred to above. As such, the contract clearly specified plaintiffs bid price as the contract price, and the quantities as required by the contracting officer and agreed to by plaintiff, which included the eight extra transmitters. The issue is whether plaintiff can vary the price term.
There is no argument here that the contract as it now stands is in any way ambiguous as to the price term. Thus, this is not a contract interpretation case at all. There is no issue here as to whether parol evidence is admissible to *344vary the terms of the writing or anything of that sort. The court obscures the issue by claiming it is "construing” the contract. That is, it claims that the contracting officer’s pre-award discussions regarding quantities may be "construed” as a post-award exercise of the option clause for more transmitters. Such "construction” is a pure legal fiction to achieve the desired result and should be recognized as such.
Since the contract is perfectly clear, the only way to allow plaintiff to escape the price term is either to nullify the contract entirely or reform it. Since the court leaves the contract largely intact, and relies on Chris Berg, Inc. v. United States, 192 Ct. Cl. 176, 426 F.2d 314 (1970), a reformation case, it may be safely assumed that what has happened here behind the legal fiction is that the court has reformed the contract rather than nullify it.
It is my position that plaintiff must lose on this claim because the rule espoused by the court does not apply to this case and is not good law in any event. Before discussing my position, I will delineate just what the rule is that the court applies. To do that, it will be helpful to begin with what the rule is not.
First, the rule does not involve bad faith on the part of defendant’s agents. Kalvar Corp. v. United States, 211 Ct. Cl. 192, 199-200, 543 F.2d 1298, 1302 (1976), cert. denied, 434 U.S. 830 (1977). Neither the Board nor the court makes any findings of bad faith. The court emphasizes that the contracting officer’s misreading of the IFB was arbitrary and irrational, but its rule is not limited to, nor does it necessitate, a finding of intentional misreading or bad faith.
Secondly, there is no duress here. Johnson, Drake & Piper, Inc. v. United States, 209 Ct. Cl. 313, 531 F.2d 1037 (1976); Collins v. United States, 209 Ct. Cl. 413, 420, 532 F.2d 1344, 1348 (1976). Again, neither the Board nor the court makes any findings of duress. Plaintiff attempts to make much of what it claims were improper choices afforded it. Plaintiff claims that the contracting officer told plaintiff that its only choices were to accede to the Government’s view regarding quantities or pursue bid mistake procedures. Plaintiff says that since it had not made a mistake, its only choice was to accede to the Government’s demands. This is absurd. An experienced *345Government contractor like plaintiff cannot seriously come into this court and complain that it was put into a straitjacket because it took its legal advice from the opposing party and it turns out the advice was not very good. Airmotive Eng’r Corp. v. United States, 210 Ct. Cl. 7, 13 n.3, 535 F.2d 8, 11 n.3 (1976); Collins v. United States, supra, 209 Ct. Cl. at 422, 532 F.2d at 1350; Mills v. United States, 187 Ct. Cl. 696, 700, 410 F.2d 1255, 1257-58 (1969). The major option of the many available to plaintiff was simply to stand firm on its position. The only "force” here was not a stick but a carrot. Plaintiff was so anxious to get this $20 million contract that apparently it was willing to do almost anything to avoid jeopardizing the opportunity. The law of duress has not evolved so far as to protect those who change their position out of temptation rather than fear. 13 Williston §§ 1602-1604 (3d ed. 1970). In any event, to repeat, whatever atmosphere of duress plaintiff would seek to create, even the court does not accept it or at least does not rely on it, so it is no part of the rule announced.
The third point deals with a factual error the court makes. It says that plaintiff never expressly agreed to furnish the Government-required quantity of 370 transmitters for the same price that it had bid on the IFB-required 362 transmitters. Yet, in an earlier part of the opinion, the court notes that (1) plaintiff sent defendant a letter dated November 4,1966, expressly confirming its bid price and (2) at a conference, one of plaintiffs representatives, speaking for one-half the joint venture, remarked that plaintiff would be confirming its "prices and the quantities [Government-required] for all transmitter lots.” If those are not express enough agreements as to price and quantity, the court seems to forget that such agreement was expressly made when plaintiffs agents put plaintiffs name on the contract with an express and unambiguous requirement of 370 transmitters and plaintiffs express and unambiguous bid price as the price term. Furthermore, the court seems to imply that plaintiff had some secret reservation about the price term. That would be a question of fact and the court would be bound by the Board’s findings. Foster Wheeler Corp. v. United States, 206 Ct. Cl. 533, 544, 513 F.2d 588, 593-94 (1975). Yet there is no such finding in the Board’s *346opinion. The closest finding is that plaintiff acquiesced in the Government’s position which at best suggests the opposite. The court cannot accrue these facts by osmosis. It should also recognize that when a party signs an unambiguous contract, knowing full well the other party’s intent, secret reservations are entirely irrelevant anyway. ITT Arctic Services, Inc. v. United States, 207 Ct. Cl. 743, 752, 524 F.2d 680, 684 (1975); John C. Kohler Co. v. United States, 204 Ct. Cl. 777, 787, 498 F.2d 1360, 1365 (1974); Dana Corp. v. United States, 200 Ct. Cl. 200, 214, 470 F.2d 1032, 1041 (1972). The point is simply that there is no issue here as to whether plaintiff may have been a little remiss or very remiss about expressing its reservations (if any), and the existence of secret reservations on a plaintiffs part forms no part of the rule of this case.
Bearing the above three points in mind, the majority’s rule may be clearly understood. Simply stated, it is as follows: if there is a regulation which is in part for the benefit of plaintiff-contractor, its violation may be asserted at any time despite a previous failure to protest, estoppel, or acquiescence, and binds the Government to pay money damages.
The court emphasizes that a basis for its decision is that the contracting officer’s demand was plainly contrary to the terms of the IFB. The significance of that is that under the court’s view the regulations were plainly violated. However important that may be to the court, it places no bounds on its logic, and it is not a limitation on the rule enunciated. Even if the contracting officer’s demands were just wrong, instead of plainly wrong, such demands would still violate the regulations as the court interprets them. As such, the demands would be illegal and unauthorized under its view. As in this case, that would result in "officials of the Government mak[ing] a contract they are not authorized to make,” and so the contractor would not be "bound by estoppel or acquiescence or even failing to protest.” Note that such logic would also permit plaintiff to recover here even if it never noticed the contracting officer’s error until after contract performance was complete and the statute of limitations had not yet run.
*347The next issue is whether the rule applies to this case. I would hold that it does not because there is no violation of a regulation that is for the benefit of plaintiff. The only two regulations cited by the court are ASPR 2-301 (32 C.F.R. at 295 (1979)) and ASPR 2-407.1 (32 C.F.R. at 307 (1979)). Presumably, the court feels the violation that occurred here was that the modification of plaintiffs bid to include eight extra transmitters ran contrary to language in the regulations to the effect that bids must comply with the IFB in all material respects.
The problem with the court’s reasoning is that the provisions requiring substantial adherence to the IFB are totally inapplicable to the present situation. First, they do not protect plaintiff. These provisions are for the benefit of the public and for the bidders other than the one to which the contract is finally awarded. Toyo Menka Kaisha, Ltd. v. United States, 220 Ct. Cl. 210, 219, 597 F.2d 1371, 1377 (1979); Prestex Inc. v. United States, 162 Ct. Cl. 620, 627, 320 F.2d 367, 372 (1963). Second, they do not cover this injury. They are only designed to prevent variations which, if available to the other bidders, may have enabled them to improve their bids. Toyo Menka Kaisha, Ltd. v. United States, supra, 220 Ct. Cl. at 219, 597 F.2d at 1377. Needless to say, requiring other bidders to manufacture an extra eight transmitters would have enabled none of them to improve their bids. Lastly, the provisions do not protect against this type of action. As already mentioned, this case does not involve bad faith. Therefore, this is a situation where the contracting officer subjectively believes his interpretation conforms to the IFB, however arbitrary or irrational that belief is. From his point of view then, when he asks plaintiff to accede to his view, he is requiring conformance with these regulations. If he accedes to plaintiffs view, he will seem, to himself, to be violating the regulations. These regulations cannot be directed at such a situation because that would produce the absurd result that the contracting officer would violate the regulations by his efforts to enforce them. The Board made this same analysis. It held, "The agreement so reached is not abrogated by the regulations governing awards under formally-advertised procurements. Award to appellant, as low bidder, could not *348have affected the rights of other bidders and, there being at most only a violation of procedural regulations, the validity of the IFB-award was not compromised.” CRF, ASBCA No. 18748, 76-2 BCA ¶ 12,129, at p. 58,280.
In short, I would hold that these regulations are totally inapplicable to this case and so even under the rule stated by the court, plaintiff must lose. However, I would go even further and reject the rule entirely.
The rule may first be analyzed as a matter of precedent. To begin with there is the general rule that a party may lose its rights by estoppel or waiver. Opposed to this, plaintiff and the court cite a single case, Chris Berg, Inc. v. United States, 192 Ct. Cl. 176, 426 F.2d 314 (1970). That case involved a bid mistake. The contracting officer suspected the mistake but would not allow the plaintiff to correct it. Plaintiff signed the contract, simultaneously delivering an express, written protest, reserving its right to request a modification. The court held that the contracting officer’s actions violated the bid mistake regulation which would have permitted the contractor to correct its mistake. It also held that the violated regulation was for the benefit of the contractor and allowed a recovery in the amount of the mistake.
Chris Berg is distinguishable from the instant case on several grounds. First, Chris Berg involved a regulation which not only was held to be for the benefit of the contractor, 192 Ct. Cl. at 183, 426 F.2d at 318, but specifically contemplated the kind of correction made. 192 Ct. Cl. at 185, 426 F.2d at 318.1 have shown above that the regulations here are not for plaintiffs benefit. Even under the court’s view, the regulations are at best only partly for the contractor. Thus, this rule is at least an extension of Chris Berg. The problem created by this extension is that the rule may, as in this case, enforce one purpose of the regulations at the price of violating others. One purpose of the provisions requiring compliance with the IFB is to give everyone an equal right to compete for the Government’s business. Prestex Inc. v. United States, supra. Yet the decision of the court violates that purpose. Even from its point of view, plaintiff will, in effect, be awarded a contract for eight extra transmitters without ever having to compete *349with other bidders for them. This is a nice way to avoid the bid process. Contractors in the future will hope and pray for contracting officers to go awry. If a contracting officer demands "extra” work, contractors may immediately accede, cheerfully perform the extra work and then get the contract reformed to collect the extra price, all without having to compete for the extra work.
A second distinction is that in Chris Berg the statement that contractors are not bound by estoppel, acquiescence or even failing to protest is entirely irrelevant dicta. The contractor there submitted an express, written protest when it signed the contract. 192 Ct. Cl. at 179, 426 F.2d at 315. Here that statement is vital to the holding. Even Chris Berg got the idea from a very different context. The principle derives from a series of cases arising under the Merchant Ship Sales Act of March 8, 1946, 60 Stat. 41, as amended (current version at 50 U.S.C. App. § 1735 (1976)), where, as carefully analyzed by Judge Davis in Rough Diamond Co. v. United States, 173 Ct. Cl. 15, 21, 351 F.2d 636, 639-40 (1965), cert. denied, 383 U.S. 957 (1966), a very special statutory scheme was involved. In those cases, Government surplus ships were to be sold off at prices calculated on the basis of a statutory formula. The court held that the scheme "was intended to relieve the Maritime Commission of the responsibility of haggling over prices, and of the criticism, embarrassment, and possible scandal which might result if sales were individually negotiated.” Nautilus Shipping Corp. v. United States, 141 Ct. Cl. 391, 394, 158 F.Supp. 353, 354 (1958). The entire congressional purpose behind the scheme was to prevent any variation from the statutory formulas. Thus, the court would not permit such variation even in the face of estoppel, acquiescence, and the like. Rough Diamond Co. v. United States, supra, 173 Ct. Cl. at 21, 351 F.2d at 639; Nautilus Shipping Corp. v. United States, supra, 141 Ct. Cl. at 394-95, 158 F.Supp. at 354-55. The principle was harmless dicta in Chris Berg and should never be given force here, outside the peculiar scheme in the Ship Sales Act.
The last distinction between the cases is that in Chris Berg the plaintiff had given an express, written protest of the contracting officer’s actions, reserving its request for a *350modification. That is precisely what plaintiff failed to do here and why it should lose. This distinction is significant on several grounds. First, the reservation in Chris Berg gave the court a basis for acting within the traditional form of reformation, i.e., conforming to the parties’ mutual intent. Bromley Contr. Co. v. United States, 219 Ct. Cl. 517, 527, 596 F.2d 448, 454 (1979). The court could find a mutual intent to form a contract and yet to let the particular dispute be resolved by subsequent litigation. That cannot be done in the instant case. The only mutual intent to be found is to form a contract on the unambiguous price and quantity terms that existed. Second, plaintiff cannot come within the rule that failure of a contracting agency to abide by a provision of its own regulation is material only "if the provision is for the benefit of the contractor and there is a causal nexus between the failure and the asserted financial injury to the contractor.” De Matteo Constr. Co. v. United States, 220 Ct. Cl. 579, 593, 600 F.2d 1384, 1392 (1979). Here plaintiffs acquiescence breaks the chain of causation. The reservation also allows the Government to make a choice about its best course. Rather than risk further dispute it may acquiesce in the contractor’s position, attempt a settlement, or scratch the IFB and start over. Where the plaintiff acquiesces, from the Government’s view all dispute is over and done with. There is no indication that there is trouble ahead or that what is done may be undone. It is hardly an unfair imposition on contractors to require them to protest, which is really all this issue comes down to. A simple letter works just fine. But the attitude of "sign now and make it up later” should not be countenanced. Chris Berg then is distinguishable and this case falls within the general rule that a plaintiff may lose its rights by estoppel or waiver.
The rule may next be considered on policy grounds. On the one side there is the Government’s interest in being able to make binding contracts, to plan its affairs and make an informed decision. After the court’s decision however, no contract, no settlement is safe. If a contractor can find a regulation that is arguably in part for his benefit he may waive his rights to the regulation and then come into court years later and have his waiver set aside. A provision for 10 *351days’ notice to the contractor is more clearly for the contractor’s benefit than the regulations in this case. Now the Government may never ask a contractor to waive the full 10 days because it is impossible to waive a regulation for the contractor’s benefit. It will be extremely difficult for the Government to make an informed decision. Contracting officers will never know if they really have a contract, what its terms are, or whether a dispute has ever been settled.
On the other side, the court fears giving contracting officers carte blanche to force wholly arbitrary and illegal demands on low bidders on pain of cancellation. There are several problems with this. First, that fear involves bad faith action; yet, as indicated above, the court’s rule is not based on or in any way limited to bad faith actions. Second, the pain of cancellation does not withstand scrutiny. It has been indicated above that this is not a case of duress. It has also been indicated that contractors may quite simply preserve the Government’s interest in being able to make a choice as well as their own rights by simply maintaining their protest and reserving their rights to appeal the contracting officer’s determinations. Where, as here, the contracting officer is "plainly wrong,” that is all the more reason to sit tight, confident that any appeal will reverse the contracting officer. As for cancellation, the bidders may come to this court under Keco Indus., Inc. v. United States, 203 Ct. Cl. 566, 492 F.2d 1200 (1974), and recover their bid preparation costs not only if the contracting officer acts in bad faith, but also if he acts without rational basis, or otherwise arbitrarily and capriciously. Burroughs Corp. v. United States, 223 Ct. Cl. 53, 617 F.2d 590 (1980). Hence, the court does not state an adequate policy in favor of its rule and it should fall on that ground as well.
In sum, the court’s new rule is neither in line with precedent nor a good rule as a matter of policy. Originally, plaintiff had an unshakeable case. Then it waived its rights and its waiver was expressly incorporated into the written contract. A single letter reserving the right to appeal the contracting officer’s determination is all the difference between my result and the court’s, and would best have preserved the rights of both parties as it has in other cases. Given plaintiffs written acquiescence without such a *352reservation, however, I would affirm the Board’s holding that plaintiff may not now recover.
October 10, 1980