Court Opinion

ID: 8591401
Source: CourtListenerOpinion
Date Created: 2022-11-23 15:49:30.180886+00
Date Added: 2024-06-11T16:54:30.078544
License: Public Domain

Jones, Chief Judge,
concurring:
I concur in the result. The only basis of a recoverable claim on the part of plaintiff would be on the ground that it was not reimbursed for its initial expenses. Such expenses are recoverable in termination proceedings. However, the Appeal Board, Office of Contract Settlement, after a hearing, decided this issue against plaintiff. Plaintiff had 90 days after the decision of the board within which to bring suit in this court to review the decision of the board. According to the Contract Settlement Act of 1944, 58 Stat. 649, 41 U. S. C. 101 et seq. (1946 Ed.), if it does not sue in this period, the decision of the board becomes final and con-*771elusive. Plaintiff did not sue within the prescribed period and its action is therefore barred.
BINDINGS ON PACT
The court, having considered the evidence, the report of Commissioner Roald A. Iiogenson, and the briefs and argument of counsel, makes findings of fact as follows:
1. Plaintiff was and is a New York corporation with principal office at Brooklyn, New York, and plant located at Long Island City, Long Island.
2. By letter dated December 2, 1944, defendant’s Army Service Forces, New York Ordnance District, War Department, requested plaintiff to submit a proposal on the reconditioning of 1,200 vehicles, % ton, 4' x 4', reconnaissance, commonly known as jeeps. This written request provided in part as follows:
Payment is to be made on the basis of a predetermined hourly rate for each labor hour of the classes of direct labor involved. Your proposal should be based on such hourly rates broken down by categories of the classes of direct labor involved. The hourly rates quoted for each class should include all elements of your costs including wages, overheadj profit, etc. No direct payments will be made for the time of nonproductive labor and same should be figured in the hourly rates quoted for the direct labor.
»•» H*
* * * Price breakdown of the basis used in calculating the hourly labor rate should also be included.
3. Prior to submission of its bid proposal, plaintiff had conferences with defendant’s chief negotiator and also its supervisory accountant assigned to the New York City offices of the Army Service Forces, who informed plaintiff that the average time experienced on other contracts for repair of jeeps was 50 hours per vehicle, which for 1,200 jeeps would amount to 60,000 hours. Defendant’s representatives stated that the 1,200 jeeps could be delivered to plaintiff’s plant in three months at the rate of 400 per month. Plaintiff prepared on the basis of a minimum period of three months a statement of charges, covering “overhead” and “setting up” expenses, to be used in negotiating for a contract *772price based on an hourly rate for each hour of the classes of direct labor involved in the contract performance. Plaintiff's schedule proposed a lump sum of about $135,000 for “overhead and proprietary” charges, which on the basis of the contemplated 60,000 hours of direct labor, would have constituted a rate of $2.26 for such charges for each hour of direct labor. The defendant’s supervisory accountant objected to this proposed rate because it was a higher hourly overhead charge than was being paid to any other contractor. Both the project manager and the supervisory accountant requested plaintiff to reduce the overhead to a rate just under two dollars per hour. The figure of $118,000 in overhead expenses was discussed, which amount would result in a rate of about $1.97 per hour for 60,000 hours of work. The defendant’s representatives asserted that plaintiff could not be paid a lump sum of $118,000, but that reimbursement would be on the hourly rate basis. They stated that there was enough work so that instead of stopping at the end of three months, the contract performance would probably continue for two years.
4. By letter dated December 11, 1944, plaintiff submitted its proposal on the reconditioning of the 1,200 jeeps, 400 in January, 400 in February, and 400 in March 1945, and submitted a proposed hourly charge for each class of labor, which included itemized rates for straight time labor, excess for overtime, overhead, and for profit. The hourly overhead rate was stated as $1.97 on each and every class of labor. This proposal provided in part as follows:
We understand that if the Government fails to furnish vehicles, parts or supplies in sufficient quantities to keep our shop employees fully occupied, the Government agrees to pay an equitable adjustment in the contract price to cover our losses occasioned thereby; and in making such adjustment it is understood that our prices are based on the productive use of 20,000 man hours per month.
5. By letter dated December 16,1944, defendant’s contracting officer accepted plaintiff’s offer, and directed plaintiff to proceed immediately with the commencement of work in order that plaintiff’s proposed delivery schedule might be *773strictly maintained. This letter otherwise provided in pertinent part, as follows:
The United States of America, acting through the undersigned Contracting Officer, hereby accepts your company’s offer as stated in your proposal, dated 11 December 1944, to furnish the labor and services necessary to perform the following:
The remanufacture and reconditioning of 1,200 trucks, 14 ton, 4' x 4', reconnaissance at the rates per labor hour as set forth in the schedule contained in your proposal, and which shall be delivered to the Government at the rate of 400 per month during the months of January, February and March 1945.
$ $ * $ #
Your offer is accepted with the understanding that the agreement between your company and the United States of America shall be embodied, within a reasonable time after the date of this letter, in a single instrument following generally the form of War Department Supply Contract Form No. 1, as amended to date of mailing hereof adapted to cover services rendered on a time and material basis. The Contract shall contain all articles required by Federal Law, War Department Procurement Kegulations or Executive Order, for inclusion in a contract of such type, together with the optional articles contemplated by the terms of your proposal.
6. Shortly thereafter in December 1944, defendant provided plaintiff with contract forms for execution, which were recalled by defendant because of mistake in the numbering of the document. This form provided for performance within the three months of January, February, and March 1945.
By letter dated January 13, 1945, defendant again transmitted the contract forms to plaintiff.
By letter dated January 18,1945, plaintiff proposed various amendments to the proposed contract, one of which was the insertion of the following language at the end of an appropriately designated paragraph:
In the event that the Government fails to provide cars or materials resulting in work stoppage, the contractor’s employees remaining on the job shall be paid for at the rates provided in Schedule A. In the event that the contracting officer directs the release of employees during such work stoppage, the contractor shall be reim*774bursed in accordance with the following provisions. If during January the actual hours work shall be less than 5,000, the contractor shall be reimbursed for the difference between the actual hours work and 5,000, at the overhead rate of $1.97. For the successive months of February, March and April, the contractor shall be reimbursed on the basis of the difference between the actual hours work and 15,000 hours for February and 20,000 hours each for March and April.
7. Plaintiff, by its attorney and also its secretary, conferred on January 20,1945, at the New York City offices of the Army Service Forces with defendant’s representatives, who were the chief, contract section of the legal branch of the New York Ordnance District, the attorney for the division concerned with the particular contract, the chief negotiator and also the price analyst of that office.
The conferees discussed plaintiff’s requested amendment, quoted in finding 6, above, and in settlement of plaintiff’s request, agreed upon the language incorporated in the contract as Article 1 B 1 (d), hereinafter quoted in finding 9.
There were no statements made in terms of a “guarantee” of the payment in any event of 60,000 hours of overhead at a rate of $1.97 an hour. Plaintiff’s representatives asserted that there would be a certain amount of overhead which would be reimbursed at the agreed rate of $1.97 per hour for 60,000 hours of direct labor, and the conferees understood that plaintiff would not be reimbursed its overhead on the reconditioning of 1,200 jeeps until paid for 60,000 hours. There was no discussion about payment of overhead in the event of termination of the contract at the convenience of the defendant, but only concerning the possibility of stoppage of work because defendant failed to provide sufficient jeeps and materials.
8. At the request of plaintiff’s representatives made at the conference, the defendant’s chief, contract section of the legal branch, prepared a written explanation in the form of a letter to plaintiff, dated January 22,1945, as to how an equitable adjustment would be made if necessary under the agreed provisions of Article 1 B 1 (d) of the proposed contract. This letter was signed by the defendant’s contracting officer *775and transmitted to plaintiff, and provided in pertinent parts as follows:
Yon are advised that the following principles will be observed in negotiating an equitable adjustment under the contract article cited:
a. If the Government’s failure to furnish cars or materials results in a stoppage of work and you are directed by the Contracting Officer under the article to maintain your work crews, then the negotiation will be based on reimbursing you for the crews maintained at the same rates as are provided in Schedule A of the contract for hours consumed in productive work. This basis, in such event, shall be continued until such time as you may become entitled to reimbursement for a total of 5,000 (productive and nonproductive) hours for the month of January, 15,000 for February, and 20,000 for March and April. Thereafter if the condition persists, the basis shall be revised to eliminate the overhead factor of $1.97 since overhead will have been completely recovered when the stated limits of houxe have been reached.
b. If the Government’s failure to furnish cars or materials results in a stoppage of work, and you are directed by the Contracting Officer under the article to release crews, then the negotiation will be conducted on the basis of your recovering your overhead factor only. That is to say, if during January the actual hours worked shall be less than 5,000 the negotiations will be on the basis of reimbursing you the difference between the actual hours worked and 5,000 at the overhead rate of $1.97. For the successive months of February, March and April, the basis shall be the difference between the actual hours worked, and 15,000 hours for February and 20,000 each for March and April. It is understood that in the situation contemplated under this subparagraph, you will make no claim for profit.
By letter dated January 25, 1945, plaintiff acknowledged receipt of defendant’s letter of explanation, and transmitted to defendant executed copies of the contract. This transmittal letter stated in part as follows:
We also have a letter from Lt. Col. Myron E. Douchette, stating the principles to be followed in negotiating an equitable adjustment in the event of work stoppages, which has been accepted and relied upon by us in executing and delivering the contracts herewith.
*7769. The contract, numbered W-30-069-OBD-2793, and predated December 16,1944, required plaintiff to provide plant facilities, equipment, personnel and labor sufficient to repair, recondition, overhaul, paint, rustproof, lubricate, and otherwise service, in accordance with the contract specifications, 1,200 jeeps, with the defendant to provide replacement parts, lubricants, expendable tools, and other materials.
Subject to delivery by defendant to plaintiff of the vehicles and necessary replacement parts within a reasonable time in advance, plaintiff promised to make delivery of 100 jeeps in January, 300 in February, and 400 each in March and April 1945.
The contract further contained as Article 1 B 1 (d), the following:
(d) It is understood that if the Government fails to deliver to the Contractor all or a part of the material required to be furnished by the Government in sufficient time to allow the Contractor to maintain a continuous flow of productive work at its plant, the Contractor may incur additional costs by reason of increased overhead and other expenses resulting from said failure. Accordingly it is agreed that if there is any delay in delivering the material called for by this article to the Contractor which results in a stoppage of productive work under this contract in the Contractor’s plant, then the Contracting Officer shall in writing either authorize the maintenance of work crews during such stoppage, or in the alternative the release of such crews; and in the case of the occurrence of either alternative, the amount to be paid the Contractor under this contract shall be adjusted equitably by negotiation to compensate the Contractor for any increased costs resulting from such delay. In this connection it is understood and agreed that the labor hourly rates hereinafter set forth and provided in this contract have been negotiated and agreed on the basis of the Contractor furnishing an .estimated 5,000 man-hours for the month of January, 15,000 man-hours for the month of February, and 20,000 man-hours for the months of March and April of the labor of the categories listed in Schedule “A” attached hereto and made a part hereof.
The contract further provided for payment to the plaintiff on the basis of direct labor hours expended on the work at rates provided in Schedule A of the contract. The schedule *777set forth the agreed hourly charge for each class of labor, which charge was itemized as to each of the four factors of straight-time labor, excess for overtime, overhead, and profit. As to each hourly charge on each class of labor, the item of overhead was agreed to be $1.97 per hour.
10. The contract further provided in Article 12 thereof that performance of the work could be terminated in whole or in part whenever the contracting officer determined any such termination was for the best interests of the Government.
11. By supplemental agreement executed March 5, 1945, the parties agreed to increase the number of jeeps to he repaired and reconditioned to the total number of 1,600, and provided for the delivery of the additional 400 during the month of May 1945.
Further provisions of this supplemental agreement were as follows:
5. It is understood and agreed that the payments to be made to the Contractor for productive labor in accordance with Article 1C of the contract are set forth under the column entitled “Hourly Charge” in Schedule “A” annexed to the contract; and that the figures set forth under the column entitled “Labor” in Schedule “A” are merely to assist in identifying the various categories of labor designated as Class A, Class B and Class C; and that the breakdown, in Schedule “A,” of the “Hourly Charge” into its component elements is for the purpose of furnishing a general basis for the equitable adjustment provided for in paragraph 1 (d) of Article IB in the event of a stoppage of productive work. It is recognized that the Contractor may pay Class A, Class B or Class C labor at different rates from those set forth under the column entitled “Labor”; but such fact shall not affect the payments to be made by the Government to the Contractor for productive labor in accordance with Article 1C of the contract and as specified in the column of Schedule “A” entitled “Hourly Charge.”
6. By reason of the increase herein effected in the quantity of jeeps to be repaired and remanufactured by the Contractor, the estimated contract price is increased in the sum of $200,000 making the revised estimated contract price the sum of $500,756.25; and the time for performance is extended through May 1945.
*7787. All other terms and conditions of this contract shall remain in full force and effect as heretofore, except as herein modified.
12. By telegram transmitted March 10, 1945, General Reimel, New York Ordnance District, advised plaintiff as follows:
YOUR CONTRACT NO. W-30-069-ORD-2 7 9 3 IS HEREBY TERMINATED EFFECTIVE AT 5:30 P. M. MARCH 13, 1945, AS TO 1,55 5 TRUCKS 1/4 TON 4X4 RECONNAISSANCE LEAVING UNTERMINATED A BALANCE OP 45 TRUCKS INCLUDING ANY HERETOPORE ACCEPTED OR DELIVERED. IMMEDIATELY UPON THE EPPECTIVE DATE AND TIME SPECIFIED STOP ALL WORK, TERMINATE SUBCONTRACTS AND PLACE NO FURTHER ORDERS EXCEPT TO EXTENT NECESSARY TO PERFORM ANY PORTION OP CONTRACT UNTERMINATED HEREBY. TELEGRAPH SIMILAR INSTRUCTIONS TO ALL SUBCONTRACTORS AND SUPPLIERS. LETTER AND INSTRUCTIONS FOLLOW.
13. By letter dated March 12, 1945, received by plaintiff the next day, defendant’s contracting officer notified plaintiff that the contract was terminated for the convenience of the Government, effective March 13, 1945, at 5:30 p. m., solely with respect to 1,555 jeeps, leaving unaffected the remaining 45 j eeps of the 1,600 covered by the contract. Later in March, by agreement of the parties, the 45 remaining jeeps were increased by one to 46.
Transmitted with the termination notice were written instructions and forms for settlement of termination claims. All completed jeeps accepted and delivered after the effective time of termination were to be invoiced in the usual way under the contract and not included in a termination claim. It was stated that the Government desired to settle promptly by negotiation any termination claim.
14. Plaintiff performed 33,885.25 hours of direct labor under the contract, for which it was paid at the agreed rates for hourly charges, and claims in this case to be entitled to compensation for the remaining balance of 60,000 hours, or for 26,114.75 hours, at the overhead rate of $1.97 per hour, which amounts to $51,446.06.
15. At no time prior to the termination of the contract was there any work stoppage by the plaintiff due either to the failure of the defendant to supply jeeps on which to *779work, or with replacement parts or materials for such jeeps. The defendant’s contracting officer at no time authorized the maintenance of any of plaintiff’s work crews without work, nor did he authorize the release of any crews.
16. Under date of October 7, 1946, plaintiff submitted its termination claim on a standard form entitled “Settlement Proposal For Use by Prime Contractor or Subcontractor Under Terminated Fixed-Price War Supply Contract.” On January 17,1947, the parties executed a supplemental agreement by which plaintiff’s tennination claim and all claims imder the contract were settled and released with the express exception and reservation of the plaintiff’s claim for “un-liquidated overhead charges,” on which plaintiff sues in this case.
Under date of February 7, 1947, defendant’s contracting officer made and thereafter transmitted to plaintiff written findings of fact, in which it was recited that such findings were made pursuant to Section 13 of the Contract Settlement Act of 1944, and it was further stated concerning the claim now before the Court, in part, as follows:
15. That, from information furnished by the Contractor and from information available in this office, the undersigned Contracting Officer, pursuant to Part 5, Section YII of the Joint Termination Eegulation, makes the determination that there is nothing due to the Contractor with respect to that part of Item 8 of the Settlement Proposal, more particularly set forth in Schedule “B” as Item B3, “Unliquidated Overhead Charges” in the stated sum of $52,015.00 and alleged by the Contractor to arise out of the termination of subject contract, for the reason that it is not a proper charge within the contemplation and purview of the Contract Settlement Act of 1944 and the Joint Termination Eegulation promulgated thereunder, in that the formal contract, as entered into by the parties does not guarantee payment or reimbursement to the Contractor, either expressly or by implication, of 60,000 hours of overhead at $1.97 per hour upon the failure of the Contractor to recover same as a result of any contingency.
Plaintiff having appealed on May 8,1947, from the denial of its claim by the contracting officer, and a hearing having been held before the Appeal Board, Office of Contract Settle*780ment, on June 10, 1949, this Board by written opinion and decision made and entered on its records on October 28,1949, affirmed the findings of fact of the contracting officer in denying plaintiff's claim. This opinion provided in pertinent part as follows:
Appellant contends that by virtue of Article I B 1 (d), as interpreted by the letter of January 22, it was guaranteed the overhead item of $1.97 an hour for 60,000 hours, whether it worked or not, to cover initial costs which arose because of its unfamiliarity with the product and the necessity for training employees and setting up assembly lines. When the contract was terminated appellant had completed only 31,404.5 hours of work. It was paid for these hours according to the schedule of hourly rates, and it now claims $1.97 an hour for the 28,515.5 hours necessary to round out the allegedly guaranteed minimum of 60,000.*
We find no such guarantee as appellant contends existed. The contract provision and letter related to stoppages resulting from respondent’s delay in delivering materials in time to allow appellant to maintain a continuous flow of productive work. Any guarantee found therein protected appellant only from the costs of such stoppages. Here there was no stoppage resulting from a delay in the delivery of materials. The contract and letter were not operative in the event of a stoppage, if it can be called a stoppage, resulting from termination.
The contract contained the Uniform Termination Article (JTR. 931). Initial costs allocable to the terminated part of a contract may be recovered under the Statement of Cost Principles (OCS Beg 5) which is incorporated by reference into that article, even though not provided for elsewhere in the contract.
Initial costs are defined as follows:
“Costs of a nonrecurring nature which arise from unfamiliarity with the product in the initial stages of production should be appropriately apportioned between the completed and the terminated portions of the contract. In this category would be included high direct labor and overhead costs, including training, costs of excessive rejections and similar items” (OCS Reg. 14, TCM 7).
*781There is no evidence in the record to indicate that the costs intended to be covered by the overhead item were of a nonrecurring nature. At the hearing appellant offered á document entitled “Recapitulation of Overhead and Overhead Rate Per Hour.” Respondent objected to the document on the ground that it might be inconsistent with the contract. The question of the admissibility was passed for the moment, and thereafter the offer was neither renewed nor withdrawn. Without some evidence of the nature of the costs here involved, appellant cannot meet the burden of showing that such costs are initial costs. Even if we give it the benefit of its offer and consider the document as though it were admitted, appellant still does not meet the burden, for the document simply shows that the total amount of monthly overhead was arrived at by considering the following items: Indirect Labor, Social Security, Unemployment Taxes and Compensation Insurance on Indirect Labor, Administrative Salaries, Administrative Expenses, Use of Shop Facilities (Rent, Power, etc.), Facilities for Resident Inspectors, and Equipment Operating Costs. These items are explained in detail on work sheets accompanying the recapitulation, but there is nothing in either the recapitulation or the work sheets to show that the items were of a nonrecurring nature.
Appellant contends that respondent’s letter of January 22, 1945, recognized that the so-called overhead would be fully recovered at the end of the 60,000 hours, and therefore that the parties by their agreement gave the item the character of a nonrecurring initial cost. The letter, however, did not place a ceiling on the total number of overhead hours for which payment could be made. It did not indicate that total overhead would be fully recovered after a definite number of hours of work. It simply recognized that appellant would have a certain minimum overhead each month whether it worked or not, and provided for the payment thereof in case a delay in delivering materials caused a stoppage which prevented appellant from working sufficient hours to recover that minimum amount.
17. No evidence has been offered before this Court as to the nature of the overhead costs on which the overhead rate of . $1.97 per hour was based.
*782CONCLUSION OE LAW
Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes that as a matter of law plaintiff is not entitled to recover, and its petition is therefore dismissed.

So computed, the claim amounts to $56,333.44, which Is the amount stated In appellant’s brief. The claim as presented to and denied by the contracting agency and as stated in the notice of appeal filed with this Board, however, is $52,015, as set forth in the first paragraph of this decision.