Case: TOPKIS BROTHERS COMPANY v. THE UNITED STATES
Abbreviation: Topkis Bros. v. United States
Decision Date: 1961-12-06
Docket Number: No. 391-57
Citation: 155 Ct. Cl. 648
Volume: 155
Reporter: United States Court of Claims Reports
Court: United States Court of Claims
Jurisdiction: United States
Parties: TOPKIS BROTHERS COMPANY v. THE UNITED STATES
Judges: Darr, Senior District Judge, sitting by designation; DurKEE, Judge; Laramorb, Judge; and Whitaker, Judge, concur.
Pages: 648–681

Head Matter:
TOPKIS BROTHERS COMPANY v. THE UNITED STATES
[No. 391-57.
Decided December 6, 1961]
Samuel F. Schwag for the plaintiff.
Edna P. Goldberg, with whom was Assistant Attorney General William Id. Orrich, Jr., for the defendant.
Opinion denying defendant’s motion for reconsideration and clarification was rendered by the court on March 7, 1962, post, p. 680.

Opinion:
.JoNES, Chief Judge,
delivered the opinion of the court:
Plaintiff Topkis Brothers Company, a clothing manufacturer, seeks reimbursement by way of an equitable adjustment in the contract price for increased costs of production and loss of profit because of defendant's alleged failure to supply suitable Government-furnished property. Defendant counterclaims for savings allegedly realized by plaintiff in the performance of its agreement.
On November 9, 1951, defendant's New York Quartermaster Procurement Agency issued an invitation for bids pursuant to which the Government sought to procure 8,802,980 field jackets, sateen, od-7. On the basis of its responsive bid to defendant's invitation, plaintiff was awarded two contracts on December 21, 1951, numbered DA-30-280-QM-22839 and DA-30-280-QM-22848. The former contract called for delivery of 700,000 jackets at unit prices ranging from $0.545 to $0.599, for a total contract price of $398,900, while the latter called for delivery of 300,000 jackets at unit prices of from $0.519 to $0.535, for a total contract price of $157,300. Deliveries under both contracts were to be made in designated monthly quantities, with performance under both to be completed by August of 1952.
Except for the unit prices and quantities involved, the terms and conditions of each contract were identical in all material respects. The jackets were to be manufactured by plaintiff in strict compliance with defendant's specification MIL-J-3001A, which is fully set forth in finding 10. Defendant undertook to furnish plaintiff with the requisite cloth for the manufacture of the jackets, the government-furnished cloth being described in defendant's invitation for bids as "Cloth, Cotton, Sateen, 8.5 oz., od-7."
Although no specification concerning the manufacture of the sateen cloth was mentioned in the contracts, there was in existence at the time of the issuance of defendant's invitation for bids a Government military specification controlling the manufacture of cotton, sateen cloth. This specification, which by its terms superseded MIL-C-10296, dated May 9, 1950, was MIL-C-10296A, dated May 10, 1951, covering "Cloth, Cotton, Sateen, Carded." The pertinent provisions of each of the above specifications are fully set forth in finding 8.
In connection with defendant's undertaking to supply plaintiff with the necessary "Cloth, Cotton, Sateen, 8.5 oz., od-7" for the manufacture of the field jackets, each of the contracts provided in pertinent part as follows:
29. Government-Furnished Property. — (a) The Gov-erment shall deliver to the Contractor, for use in connection with and under the terms of this contract, the property which the schedule or the specifications state the Government will furnish {hereinafter referred to as "Government-Furnished property"). The delivery or performance dates for the supplies or services to be furnished by the Contractor under this contract are based upon the expectation that Government-Furnished property of a type suitable for use will be delivered to the Contractor at the times stated in the schedule or if not so stated in sufficient time to enable the Contractor to meet such delivery or performance dates. The Government shall not be liable to the Contractor for damages or loss of profit by reason of any delay in delivery of or failure to deliver any or all of the Government-Furnished property, except that in case of such delay or failure upon the written request of the Contractor, an equitable adjustment shall be made in the delivery or performance dates, or price, or both, and in any other contractual provision affected thereby, in accordance with the procedures provided for in the clause of this contract entitled "Changes."
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2. Changes. — The Contracting Officer may at any time, by a written order, and without notice to the sureties, make changes, within the general scope of this contract, in any one or more of the following: (i) drawings, designs, or specifications, where the supplies to be furnished are to be specially manufactured for the Government in accordance therewith; (ii) method of shipment or packing; and (iii) place of delivery. If any such change causes an increase or decrease in the cost of, or the time required for, performance of this contract, an equitable adjustment shall be made in the contract price or delivery schedule, or both, and the contract snail be modified in writing accordingly. Any claim by the Contractor for adjustment under this clause must be asserted within 30 days from the date of receipt by the Contractor of the notification of change: Provided, however, That the Contracting Officer, if he decides that the facts justify such action, may receive and act upon any such claim asserted at any time prior to final payment under this contract. Failure to agree to any adjustment shall be a dispute concerning a question of fact within the meaning of the clause of this contract entitled "Disputes." However, nothing in this clause shall excuse the Contractor from proceeding with the contract as changed.
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12. Disputes. — Except as otherwise provided in this contract, any dispute concerning a question of fact arising under this contract which is not disposed of by agreement shall be decided by the Contracting Officer, who shall reduce his decision to writing and mail or otherwise furnish a copy thereof to the Contractor. Within 30 days from the date of receipt of such copy, the Contractor may appeal by mailing or otherwise furnishing to the Contracting Officer a written appeal addressed to the Secretary, and the decision of the Secretary or his duly authorized representative for the hearing of such appeals shall be final and conclusive: Provided, That if no such appeal is taken, the decision of the Contracting Officer shall be final and conclusive. In connection with any appeal proceeding under this clause, the Contractor shall be afforded an opportunity to be heard and to offer evidence in support of its appeal. Pending final decision of a dispute hereunder, the Contractor shall proceed diligently with the performance of the contract and in accordance with the Contracting Officer's decision.
Plaintiff received its first shipment of the Government-furnished sateen cloth under these contracts on February 9, 1952. Upon commencing production in accord with the method specified in the invitation for bids, i.e., specification MIL-J-3001A, plaintiff immediately experienced sewing difficulties. Although there is no doubt that the cloth con formed to the applicable specifications controlling its manufacture, nonetheless its finish was so "hard" and lacking in flexibility that it resisted adjusting to the shape to be provided by the %6-ineh folders with which plaintiff's machines were equipped. As a result, the cloth was not adequately folded together on the requisite double stitching operations, thereby causing raw edges of the cloth to remain exposed after such operations. Similarly, on both single and double stitching operations, the stiffness of the cloth resulted in cloth fracture, needle burning, thread breakage, and malformed stitching.
Plaintiff's machinists endeavored to solve the problems thus encountered but without success, and plaintiff finally found it necessary to call upon the Singer Sewing Machine Company for advice. Singer machinists recommended, and plaintiff accomplished, the installation of 14-inch folders on all of its double stitching machines. (It is to be noted that, in order to enlarge the basis of bidding on the invitation for bids, defendant's specifications controlling the manufacture of the jackets provided for a range of %6-to %6-inch gage on double stitching operations.) Thereafter, the "hard" cloth passed effectively through the folders, thus eliminating the problem of raw edges resulting from the double stitching operations. However, plaintiff still experienced the same difficulties of cloth fracture, needle burning, thread breakage and malformed stitching in its operations.
Because of these problems, plaintiff was required to do extensive repair work on the jackets, and increased its repair department from two operators to as many as thirty or forty. The "hard" cloth also caused a decrease in the speed of production since plaintiff was required to slow down the operation of its machines to avoid needle burning and breakage.
Throughout the performance of the contracts, plaintiff repeatedly advised defendant's officials of its difficulties in making the jackets. Defendant's representatives acknowledged that they were aware of the problem concerning "hard" cloth and agreed to furnish "softer" material in future shipments. Nevertheless, except for one shipment of "soft" sateen and one shipment of herringbone twill which defendant had substituted for the sateen (as to which no sewing difficulties were encountered), deliveries of the "hard" sateen continued throughout plaintiff's performance.
Plaintiff was substantially delayed in its deliveries of manufactured jackets because of these problems encountered in the manufacturing process. Consequently, defendant's contracting officer advised plaintiff that the contracts would have to be cancelled unless plaintiff entered into subcontracts with other manufacturers so as to expedite deliveries. Plaintiff did subcontract a total of 630,000 units to three other manufacturers, although one of these agreements was actually executed a short time prior to plaintiff's discussion with the contracting officer concerning delayed deliveries. Interestingly enough, the record indicates that the manufacturer to whom plaintiff shipped a supply of Government-furnished sateen cloth from its own stock experienced the same sewing difficulties as did plaintiff.
Plaintiff completed performance on both contracts in the early part of 1953. On April 21, 1953, plaintiff filed a claim with defendant's contracting officer for $83,362.88, representing increased costs allegedly caused by the "hard" Government-furnished sateen. The claim was denied, however, as was plaintiff's subsequent appeal to the Armed Services Board of Contract Appeals. The Board found (ASBCA No. 2382 (1955)), among other things, that there had been no satisfactory showing by plaintiff that the Government-furnished cloth was not satisfactory for use. Plaintiff thereupon brought this suit for a review of the administrative determination.
The trial commissioner has found, and plaintiff does not deny, that the sateen cloth furnished by defendant conformed to the applicable specifications relating to its manufacture. It is plaintiff's contention that, despite compliance with such specifications, the Government-furnished cloth was nevertheless not of a type "suitable for use" within the intendment of Article 29(a) of the contracts existing between the parties. Defendant, on the other hand, takes the position that the "suitable for use" clause means nothing more than that defendant undertook to furnish specification cloth from which, specification jackets could be manufactured. Defendant therefore denies liability from this claim on the ground that specification cloth was furnished to plaintiff and plaintiff did, in fact, manufacture specification jackets from that fabric.
This case is evidently the first in which a court of law has been called upon to determine whether or not Government-furnished property manufactured in accord with applicable specifications, and which could be used to make the final end product contracted for, is, ipso facto, property "suitable for use" within the meaning of that clause of Article 29(a). The contracts here involved do not themselves purport to define the meaning of that term. Nevertheless, the Armed Services Board of Contract Appeals has, on occasion, interpreted such provisions, and we may properly consider these interpretations for guidance in resolving the issues raised in this case. Art Center School v. United States, 136 Ct. Cl. 218 (1956).
Thus, in Gillsam Mfg. Co., ASBCA No. 4461 (1958), a case involving a "suitable for use" provision identical to that in Article 29(a) herein, although not an express determination that the property in question did not conform to the applicable specifications, the Government-furnished fabric created delays in performance by reducing the output of the machines, thereby increasing the costs of production. The Board said:
Trimmed of all extra questions, the issue here is simply one of "suitability" of the cloth for the use for which it was intended. Now it cannot be gainsaid that appellant did accomplish performance but, as we may well say, by the use of a slow-sewing machine needle speed. The Government points to this completion of the contract as proof that appellant's claim lacks merit.
We cannot agree that the fact that the goal teas accomplished is proof against appellant's claim. The claim is not that of a non-arrival at the goal. It is one of wnnecessary roadblocks getting there. It seems reasonable to say, under the issues of this case, that "suitability" for use is not measured by conformance with, or non-conformance with specifications but goes deeper than that, and deals with the makeup of the individual fiber — was it brittle or not? — and this, whether or not the fiber acquired the alleged brittle condition in its manufacture or subsequent thereto. [Emphasis added.]
# & There is apparently no contention that such [specification] cloth was not furnished; but, as stated above, the real question is that of its suitability. If, then, we find that it was not suitable for use in the customary way and its use caused appellant the losses claimed, the question then becomes one of considering whether or not the Government's insistence that appellant go ahead and use it, is not, in effect changing the above-quoted provision for reimbursement. In effect it would be to include reimbursement for extra expense incident to devising a method for using unsuitable material, provided that material is specification material.
Similarly, in Globe Crayon Co., ASBCA No. 1486 (1954), a case again involving an identical Government-furnished property clause as is here involved, the Government furnished an ingredient which admittedly met the applicable specifications for the manufacture of that ingredient. Nevertheless, the use of the ingredient in the item to be manufactured by Globe under the contract decreased the rate of production with a consequent increase in costs. Said the Board:
Other findings appear in the report but it is sufficient for the purposes of this decision to say, that, though the Bureau found it possible to make the crayons with this ingredient, the results were such as to show a grave doubt of accomplishing the crayons in commercial quantities with any practical speed.
* # * % Here the crayons can be made, and apparently are being made, or have been made by this time, but under circumstances indicative of a radical change in performance or, at least a greatly extended performance, not within the contemplation of the parties at the tiine they entered into the contract. We believe that, under such circumstances, it is reasonable to say that the ingredient was not suitable.
We find the Board's thinking in these cases to be persuasive. Defendant's interpretation of the "suitable for use" clause as meaning only that it undertook to furnish specifi cation fabric from which the jackets contracted for could be manufactured is too narrow. The clause must ,be more than a mere concatenation of word symbols. Yet, the net effect of defendant's interpretation would be to render the phrase "suitable for use" in the second sentence of Article 29(a) totally devoid of meaning, for the first sentence of that Article makes clear that the property furnished by the Government was to be specification cloth which was to be used, and could be used, to fabricate the jackets contracted for. Eather than reach such a result, we will strive for an interpretation which gives a reasonable meaning to all provisions, thus giving effect to all parts of the instruments. Restate-ment5, Contracts, §236(a) (1932).
In our opinion, defendant has undertaken to do two things under Article 29(a) in connection with the property it agreed to furnish plaintiff. Defendant promised to furnish cloth which met the specifications established for that cloth and promised to furnish cloth which is "of a type suitable for use." Suitability, taken in context, does not mean merely that the end product can be manufactured from the cloth, but rather refers to the cloth as it is cut and sewn upon in the 'process of manufacturing the end product. The cloth itself must be suitable from a mass production manufacturing standpoint, taking into consideration the background of price and delivery schedules.
The fallacy in defendant's interpretation of "suitable for use" may be illustrated by carrying it to its logical conclusion. Thus, in this case plaintiff agreed to manufacture 1,000,000 jackets from specification cloth to be furnished by defendant. There is no doubt that the cloth so furnished met the technical wording of the specifications and that it could be, and was, used to fabricate specification jackets. However, if the condition of the cloth was nevertheless such that the jackets could not be made on a mass production basis at all, but had to be hand-sewn individually, plaintiff would not be entitled to increased costs of production under the theory defendant urges upon us. This is so because the cloth would obviously be specification cloth from which specification jackets could be manufactured, albeit at an unreasonable expenditure of time and money. It can hardly be said that the parties contemplated such, a result would follow from the "suitable for use" clause at the time they entered into the contracts. Of course, the facts in the case at bar are not as drastic as those we have hypothesized, but the principle involved is the same. It would seem that it was just this type of hazard that the parties sought to guard against by the use of the term "suitable for use" in Article 29(a). Therefore, it is our conclusion that suitability under Article 29(a) has reference to the appropriateness of the Government-furnished property for use in the 'process of manufacturing the items contracted for. It would follow from this that cloth conforming to the applicable specifications and which could be used to make specification jackets is not necessarily "suitable for use" within the meaning of Article 29(a).
Whether or not any given property is actually "suitable for use" as we have defined that term is a question of fact to be determined on the basis of the unique circumstances of each case. As we have indicated, the Armed Services Board of Contract Appeals has found in this case that there was no satisfactory showing that the Government-furnished sateen was not suitable for use. Under the "Disputes" clauses of these contracts and the so-called Wunderlich Act, 68 Stat. 81 (1954), the Board's decision is "final and conclusive unless the same is fraudulent or capricious or arbitrary or so grossly erroneous as necessarily to imply bad faith, or is not supported by substantial evidence." Facts must be proven by plaintiff which show that, under the language quoted above, the Board's decision cannot stand.
Upon consideration of the record in this case, we have concluded that plaintiff has discharged this burden. Suitability of cloth for the purpose of manufacturing garments on a mass production basis is not necessarily established by the tests incorporated in defendant's specifications for these tests do not purport to control all factors which may have a definite bearing on this matter. It is apparent from the record that plaintiff encountered substantial difficulties in performing under these contracts, despite the fact that plaintiff used the sateen furnished by the Government and fol lowed defendant's specifications controlling the actual process of manufacturing to the letter. In addition, there are other facts which we feel are particularly significant. For example, prior to the award of the contracts, defendant's representatives conducted an inspection to determine the adequacy of plaintiff's plants, equipment and personnel. When the difficulties in issue arose, plaintiff took what remedial measures it could, but with only limited success. Defendant was aware of these difficulties from the outset and its representatives were at plaintiff's plants constantly, yet they could do little more than promise shipments of "softer" cloth in the future; evidently they could suggest no other appropriate remedies. There is no indication that plaintiff was lax in performing any phase of the manufacturing process or could have avoided the increased costs within the limitations of defendant's specifications. Nor is there any indication that the "hardness" or stiffness of the cloth was not the cause of plaintiff's increased costs.
In view of these considerations, we must conclude that the overwhelming weight of the evidence establishes that the Government-furnished sateen was not reasonably suitable for use on a mass production basis within the meaning of Article 29(a). Plaintiff is thus entitled to an equitable adjustment in the contract price in order to recover its increased costs under these contracts, in an amount the parties agree to be $66,846.63. Insofar as plaintiff seeks to recover its loss of profit, however, such relief must be denied under the express provisions of Article 29(a).
At the trial of this case on February 10, 1959, defendant was permitted, without objection on the part of plaintiff, to amend its answer by stating an offset and counterclaim. It was alleged that plaintiff had realized certain savings in performing the contracts by virtue of a deviation from specifications allowed by the contracting officer on May 13, 1952. Although this claim was thus made nearly 7 years after the jackets involved had been fabricated, defendant has nonetheless proven that plaintiff did actually realize savings in the amount of $674.70, and we are therefore constrained to hold that defendant is entitled to recover on its counterclaim.
Plaintiff is entitled to recover in tbe amount of $66,846.63, less defendant's offset and counterclaim in the amount of $674.70, for a net recovery to plaintiff in the amount of $66,171.93. Judgment will be entered for plaintiff in that amount.
It is so ordered.
Darr, Senior District Judge, sitting by designation; DurKEE, Judge; Laramorb, Judge; and Whitaker, Judge, concur.
FINDINGS OF FACT
The court, having considered the evidence, the briefs and argument of counsel, and the report of Trial Commissioner Roald A. Hogenson, makes the following findings of fact:
1. Plaintiff, at the time of the submission of its bid and performance under the contracts involved in this case, was a Delaware corporation with its principal office at Wilmington, Delaware.
On December 4, 1956, plaintiff filed a certificate of dissolution with the Delaware Secretary of State who on that date certified that plaintiff's dissolution was in accordance with the provisions of Section 275 of the General Corporation Law of Delaware.
By a written instrument dated November 25, 1957, plaintiff made the following general assignment:
For Value Received, and as a liquidating dividend, it, Topkis Brothers Company, a corporation of the State of Delaware, in liquidation, does hereby sell, assign, transfer, set over and deliver unto Abraham Topkis, David L. Topkis, Paul Goldblatt, Abraham Topkis, Trustee for Lewis S. Topkis, Hannah Tress, Zipporah T. Wolson and Lewis S. Topkis, being all of the holders of the common stock of Topkis Brothers Company, all its right, title and interest in and to all causes of actions, claims, suits and demands which it may now have against all persons, firms, corporations, or United States Government or its agencies.
2. On November 9, 1951, defendant's New York Quartermaster Procurement Agency issued Invitation for Bid No. qm-30-280-52-581 pursuant to which the Government sought to procure 3,802,980 jackets, sateen, od-7, the bids to be opened on November 29,1951.
It was stated in the invitation that the manufacture of the jackets was to be in strict accordance with Military Specification miu-j-3001a, dated August 3, 1951, except that "Jacket, Sateen, od-7" was substituted for "Jacket, hbt, od-7," and "Cloth, Cotton, Sateen, 8.5 oz., od-7" was substituted for "Cloth, Cotton, Herringbone twill, 8.5 oz., od-7." The abbreviation "hbt" means herringbone twill, and "od-7" is a particular color shade.
3. On December 21, 1951, plaintiff on the basis of its responsive bid to the defendant's invitation was awarded two contracts, numbered da-30-280-qm-22839 and da-30-280-qm-22848. The former contract called for delivery of 700,000 jackets at unit prices ranging from $0.545 to $0.599 for a total contract price of $398,900. The latter called for delivery of 300,000 jackets at unit prices of $0.519 and $0.535 for a total contract price of $157,300. Deliveries under the former contract were to be in designated monthly quantities during the months of February through August 1952, with monthly deliveries under the latter contract in the period April through August 1952.
For the convenience of the defendant in shipment and distribution, the nomenclature for the jackets was changed by defendant's notices of award to "Jacket, Utility, Cotton, od-7."
Except for the unit prices and quantities involved, the terms and conditions of each contract were identical in all material respects.
4. By the terms of the contract documents, defendant undertook to furnish plaintiff with the necessary cloth for the manufacture of the jacket, this Government-furnished material being described in defendant's invitation for bids as "Cloth, Cotton, Sateen, 8.5'oz., od-7." Defendant undertook, as stated in its invitation for bids, to make an initial delivery of the cloth at least 45 days prior to the first scheduled delivery date in each contract, and it was stated that each delivery period for the contractor would be extended by the number of calendar days that the initial delivery of cloth by the defendant was delayed.
No specification concerning the manufacture of this sateen cloth was anywhere mentioned in the contract documents, but defendant's invitation for bids set forth the Government military specification (Army, Navy, Air Force) number for herringbone twill, the fabric as to which there was the indicated substitution, as set forth in finding 2. This specification was referred to as "mil-c-154a — Cloth; Cotton, Herringbone Twill, 12/20/50."
In existence at the time of the issuance of defendant's invitation for bids and the award of the contracts to plaintiff was a Government military specification concerning the manufacture of cotton, sateen cloth, being mil-c-10296a, dated May 10, 1951, covering "Cloth, Cotton, Sateen, Carded." This latter specification by its terms superseded mil-c-10296, dated May 9, 1950, covering the same type of cloth.
5. In connection with the supplying to plaintiff by the defendant of the necessary "Cloth, Cotton, Sateen, 8.5 oz., od-7" for the manufacture of the jackets, each of the contracts provided in pertinent parts as follows:
29. Government-Furnished Property. — (a) The Government shall deliver to the Contractor, for use in connection with and under the terms of this contract, the property which the schedule or the specifications state the Government will furnish {hereinafter referred to as "Government-Furnished froferty''1'). The delivery or performance dates for the supplies or services to be furnished by the Contractor under this contract are based upon the expectation that Government-Furnished property of a type suitable for use will be delivered to the Contractor at the times stated in the schedule or if not so stated in sufficient time to enable the Contractor to meet such delivery or performance dates. In the event that Government-Furnished property is not delivered to the Contractor by such time or times, the Contracting Officer shall, if requested by the Contractor, make a determination of the delay occasioned the Contractor thereby, and shall grant to the Contractor a reasonable extension of time in respect of such delivery or performance dates. The Government shall not be liable to the Contractor for damages or loss of profit by reason of any delay in delivery of or failure to deliver any or all of the Government-Furnished property, except that in case of such delay or failure, upon the written request of the Contractor, an equitable adjustment shall be made in the delivery or performance dates, or price, or both, and in any other contractual provision affected thereby, in accordance with the procedures provided for in the clause of this contract entitled "Changes."
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(e) The Contractor shall maintain and administer, in accordance with sound industrial practice, a program for the maintenance, repair, protection and preservation of Government-Furnished property, until disposed of by the Contractor in accordance with this clause. In the event that damaged or defective Government-Furnished property is delivered to the Contractor, or any other damage occurs to Government-Furnished property the risk of which has been assumed by the Government under this contract, the Government shall replace such items or the Contractor shall make such repair of the property as the Government directs; provided however, that if the Contractor cannot effect such repair within the time required, the Contractor may reject such property. The contract price includes no compensation to the Contractor for the performance of any repair or replacement for which the Government is responsible, and an equitable adjustment will be made in the contract price for any such repair or replacement of Government-Furnished property made at the direction of the Government. Any repair or replacement for which the Contractor is responsible under the provisions of this contract shall be accomplished by the Contractor at its own expense.
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32. Government-Furnished Property, (a) Property to ~be Furnished. The Government shall furnish to the contractor for use in connection with and under the terms of this contract the property or equipment (hereinafter referred to as "Property") which the attached Schedule and/or the specifications state the Government will furnish, at the time or times, if any, and at the place specified therein. Title to the Property shall remain in the Government. The dates fixed for the contractor's performance of this contract are based upon the expectation that the Property will be furnished to the contractor at the times stated, or if no times are stated, in sufficient time to enable the contractor to meet such dates. In the event that any Property is not furnished to the contractor at such time the contracting officer shall, if duly requested by the contractor, make a determination of the delay occasioned the contractor thereby and an equitable adjustment on account of such delay under the section of this contract entitled "Changes," provided, however, that the Government shall not be liable to the contractor for, and no such adjustment shall include, consequential damages or loss of profit.
(b) Allowances. — The Government may furnish not more than 5% of the Material in short pieces. The Government may substitute material for that listed and may vary the allowances set forth and substitution or variation shall be deemed a change and appropriate adjustment of the terms of this contract shall be made under the section of this contract entitled "Changes."
6. Each of the contracts contained provisions regarding "changes" and "disputes," as follows:
2. Changes. — -The Contracting Officer may at any time, by a written order, and without notice to the sureties, make changes, within the general scope of this contract, in any one or more of the following: (i) drawings, designs, or specifications, where the supplies to be furnished are to be specially manufactured for the Government in accordance therewith; (ii) method of shipment or packing; and (fiii) place of delivery. If any such change causes an increase or decrease in the cost of, or the time required for, performance of this contract, an equitable adjustment shall be made in the contract price or delivery schedule, or both, and the contract shall be modified in writing accordingly. Any claim by the Contractor for adjustment under this clause must be asserted within 30 days from the date of receipt by the Contractor of the notification of change: Provided, however, That the Contracting Officer, if he decides that the facts justify such action, may receive and act upon any such claim asserted at any time prior to final payment under this contract. Failure to agree to any adjustment shall be a dispute concerning a question of fact within the meaning of the clause of this contract entitled "Disputes." However, nothing in this clause shall excuse the Contractor from proceeding with the contract as changed.
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12. Disputes. — Except as otherwise provided in this contract, any dispute concerning a question of fact arising under this contract which is not disposed of by agreement shall be decided by the Contracting Officer, who shall reduce his decision to writing and mail or otherwise furnish a copy thereof to the Contractor. Within 30 days from the date of receipt of such copy, the Contractor may appeal by mailing or otherwise furnishing to the Contracting Officer a written appeal addressed to the Secretary, and the decision of the Secretary or his duly authorized representative for the hearing of such appeals shall be final and conclusive: Provided, That if no such appeal is taken, the decision of the Contracting Officer shall be final and conclusive. In connection with any appeal proceeding under this clause, the Contractor shall be afforded an opportunity to be heard and to offer evidence in support of its appeal. Pending final decision of a dispute hereunder, the Contractor shall proceed diligently with the performance of the contract and in accordance with the Contracting Officer's decision.
7. Defendant's invitation for bids made reference to "Federal Specifications: ccc-t-191a — Testóles; General Specifications, Test Methods (and Supplement thereto dated 10/8/45) dated 4/23/37, Amendment No. 2 11/29/45."
8. MIL-O-10296A, the defendant's military specification concerning manufacture of "Cloth, Cotton, Sateen, Carded," and its predecessor specification mih-c-10296, both previously mentioned in finding 4, each contained the following pertinent provisions:
2.1 Specifications. — The following specifications, of the issue in effect on date of invitation for bids, form a part of this specification: Federal Specifications ccc-t-191 — Textiles; General Specifications, Test Methods and Supplement thereto.
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3.6 Finish. — The cloth shall be closely singed, de-sized, and mercerized. Eesidual size finishing or other nonfibrous material shall not exceed 3 percent when tested as specified in 4.3.4. The use of finishing or loading materials to increase the weight or strength is prohibited. The filling flush side shall be the face.
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3.8 Seam efficiency. — The cloth shall have a seam efficiency of not less than 80 percent when tested as specified in 4.3.3.
$ * $ * $
4.3.4. Size content. — Size content shall be determined in accordance with section V, paragraph 2 of Specification CCC-t-191.
By Amendment 1, dated June 26, 1952, mil-c-10296a was amended by deleting "ccc-r-191 — Textiles; General Specifications, Test Methods and Supplement thereto" and substituting "cco-t-191 — Textile Test Methods."
iynr, — o—1 54a, being the defendant's military specification concerning manufacture of "Cloth, Cotton, Herringbone Twill," previously mentioned in finding 4, contains the same above-quoted provisions as are contained in Min-c-10296A.
All three of these military specifications contained the same test provisions regarding seam efficiency, referred to in the above-quoted paragraph 3.8. Each of them contained a statement that the pertinent cloth was intended for use in manufacture of clothing and equipage supplies.
9. Defendant's invitation for bids stated with respect to availability of patterns for and sample of the pertinent jackets, as follows:
Samples and Patterns. — A sample of this item may be inspected at this office but is not available for loan. Patterns will be available at time of award.
The office of issuance of the invitation was located at 111 East 16th Street, New York City.
Each contract otherwise provided with respect to a sample j acket, as follows:
Samples for Loan. — When available, a sample similar to the article described in the specifications, but not NECESSARILY IN EXACT CONFORMANCE THEREWITH, WÍ11 be loaned to any responsible bidder upon request to be returned in 10 days
10. Military specification mil-j--3001a, previously mentioned in finding 2, included by reference, among others, the above-mentioned Federal Specification "cco-t-191 — Textiles ; General Specifications, Test Methods and Supplement thereto" and military specification "mil-c-154 — Cloth; Cotton, Herringbone Twill."
After the cutting of the cloth into the various pieces comprising the jacket, mil-j-3001a required that the sewing be conducted in twenty successive operations. A single row or line of stitches was to be applied by a single-needle machine in sixteen of these sewing operations, but double stitching was required on the following:
With respect to the %6- and %6-inch gages mentioned in the above-quoted operations, each gage represents the distance between the two lines of stitching, resulting from the fixed positions of the two needles in a double-needle machine. Depending on the parts installed, such a machine can be equipped to sew with its two needles %6, %, or %6 of an inch apart, the double stitches being sewed simultaneously, but the particular gage provided does not vary and cannot be adjusted except by replacement of parts.
In sewing together two pieces of the jacket in the double stitching operations, the sewing edge of each piece had to be folded into the folded edge of the other piece in such a manner that the raw edge of neither piece would be left exposed, and the double stitching was thus through at least four layers of the cloth, with more layers involved at places where double stitched seams were joined with others. To accomplish the folding, the double-needle machine is equipped with a device, called a folder, which has the same gage as that provided between the needles of the machine.
The defendant's Quartermaster Corps had manufactured similar garments in its factory with the use of %-inch gage double-needles and %-inch folders, but provided a range of s/ie to %6 gage on double stitching in mid-j-3(X)1a to enlarge the basis of bidding on the invitation for bids.
Sewing operation No. 18 in mil-j'-3001a required that the collar of the jacket be made of two pieces of the cloth.
11. Prior to submission of plaintiff's bid, plaintiff's production manager went to the office of defendant's New York Quartermaster Procurement Agency and contacted defendant's purchasing officer assigned under defendant's contracting officer to the procurement involved in this case. Plaintiff's agent requested that he be permitted to inspect a jacket made of the cloth to be furnished by the Government, but no such jacket was available at that office. Defendant's purchasing agent then took plaintiff's agent to the sample room of the New York office, and plaintiff requested, but that office could not supply, a sample of the cloth to be furnished by defendant under the pertinent invitation for bids. Defendant's purchasing agent then suggested that plaintiff might obtain a piece of the pertinent cloth from the Philadelphia Quartermaster Depot.
Upon his return to plaintiff's office at Wilmington, Delaware, plaintiff's production manager requested plaintiff's assistant secretary to procure a piece of the cloth from the Philadelphia Quartermaster Depot. This officer then telephoned the "stock room" of the depot and talked to an otherwise unidentified person, stating that plaintiff wanted to obtain as large a sample as possible of "cotton, sateen, 8.5 oz., od-7" as plaintiff expected to submit a bid on the pending invitation for " jackets, sateen, od-7."
This telephone call was made on November 26, 1951, and on that date defendant's Philadelphia Depot mailed to plaintiff two pieces of cloth described on the transmittal form as "Cloth, Cotton, Sateen, Carded, 8.5 oz., od-7." These samples each measured approximately twelve inches square. On or about December 29, 1951, which date was subsequent to the defendant's award of plaintiff's contracts, the Philadelphia Quartermaster Depot, pursuant to a telephone request supplied plaintiff by mail with a two-yard sample of "Cloth, Cotton, Sateen, Carded, 8.5 ounce, Olive Drab 7."
12. At the time of plaintiff's submission of its bid and the award of the two pertinent contracts, plaintiff's double-needle machines were equipped with %6-inch gage needles and %6-inch folders. Immediately prior to the submission of its bid, plaintiff's business had been primarily the manufacture of dress and sport shirts, pajamas, and some jackets for the civilian trade. It had been using primarily cotton, flannel, corduroy, and rayon gabardine in its operations. The heaviest of these materials was the corduroy which had a unit weight of about 8 ounces. Plaintiff had had previous experience in the manufacture of water repellant jackets of different types and had used 8.5-ounce herringbone twill and poplin and other goods weighing between T.5 and 9.5 ounces.
13. Plaintiff's bid was prepared by its production manager. His work papers concerning bid preparation indicate that he considered the possibility that %-inch accessories might have to be used in some of the sewing operations.
Upon receipt of the two twelve-inch samples, previously mentioned in finding 11, plaintiff's production manager examined the cloth, manipulated it in his hand, and also tested its passage through s/16-inch folders with which plaintiff's double-needle machines were equipped. He also performed stitching operations on the samples insofar as he could on these small pieces of material by using both a single-needle and a double-needle machine. He found these samples to be soft and pliable, and no sewing difficulties were indicated.
14. On the basis of his examination and testing of the two twelve-inch samples, plaintiff's production manager reasonably concluded that plaintiff could expect a minimum of difficulty in making the jackets and accordingly reduced somewhat his cost figures which he had tentatively intended to use in computing plaintiff's bid.
Plaintiff's production manager based his cost computations for materials to be supplied by the contractor on quotations furnished plaintiff by suppliers. He obtained from plaintiff's controller cost data concerning plaintiff's overhead, general administrative, tax and other expenses, all based on plaintiff's actual experience.
With respect to labor costs, plaintiff's production manager took into consideration each of the required sewing operations, and established a piece rate for each operation or combination of operations which would yield earnings to the operator in line with previous average earnings. He took into consideration minimum pay requirements and also rates at which his operators would be willing to work as shown by previous experience and also by conferences with their Wilmington union representatives.
Plaintiff intended to use both its shop at Wilmington, Delaware, and also the one at Corbin, Kentucky, the latter shop being nonunion. Labor costs were less at Corbin, and plaintiff's production manager accordingly computed different piece rates for each location, although the same standard of production was used for each shop. In addition to the piece rates, plaintiff allowed three cents per jacket as the estimated cost of cutting the cloth and a 5-percent increase on the labor cost estimates to cover the possibility that some new operators might not earn the minimum wage required by law on a piece-rate basis. This 5-percent addition was substantially greater than the additional labor costs previously experienced by plaintiff on account of minimum wage requirements.
Plaintiff's bid reflected the lower labor costs at Corbin. It bid on the manufacture of 1,400,000 jackets, with 800,000 to be made at Corbin, and 600,000 at Wilmington. The following schedule, set forth in plaintiff's bid, shows plaintiff's unit bid price on various quantities of jackets, with the letters "A" and "B" indicating respectively that Corbin and Wilmington were to be the places of manufacture of the various lots:
15. The standards of production and the piece rates set by plaintiff for the manufacture of the pertinent jackets at the Wilmington and Corbin plants were reasonable on a mass production basis.
16. Plaintiff's bid was submitted on November 28, 1951, and the next day bids were opened. Thereafter representatives of the Quartermaster Corps surveyed plaintiff's shops at Wilmington and Corbin, and observed the available space, machine facilities, and operators at work. Such inspectors were required by Quartermaster Corps standards of inspection to determine the number and types of machines of a bidder, to estimate the output capacities of the machines, to determine whether plaintiff had sufficient qualified operators, and to recommend in accordance with official standards how many, if any, units of the jackets the bidder could produce within the delivery requirements. The record in this case does not show what recommendations were made by the inspectors, but on December 21, 1951, plaintiff was awarded the contracts for 1,000,000 jackets, as stated in finding 3.
17. Other awards of contracts to other bidders on the pertinent invitation for bids were made by the defendant at unit prices of $0.465 for 100,000 jackets; $0.51 for 100,000; $0.53 for 133,000; $0.549 for 1,000,000; $0.5556 for 140,000; $0.57 for 100,000; $0.58 for 50,000; $0.59 for 180,000; $0.59 for 75,923; $0.59 for 75,000; $0.595 for 600,000; $0.597 for 200,000; and $0.60 for 49,057 j ackets.
Plaintiff's average bid price per unit on the manufacture of 1,000,000 of the jackets, the total quantity provided in plaintiff's contracts as awarded by defendant, amounted to $0.5562.
In estimating its costs on 1,400,000 jackets, the total quantity on which plaintiff bid, plaintiff computed an estimated average cost per jacket of $0.55617. This estimate per unit was comprised of the following items:
Direct Labor:
Cutting_ $0. 0300
Piece rates_ . 2313
Minimum wage risk — 5% of piece rates . 0116
•- $0. 27290
Manufacturing Overhead — 40% of direct labor_ . 10916
Social Security taxes on direct labor_ . 00818
Contractor furnished materials_ . 08500
General Administrative — 2% of total bid price_ . 01113
Anticipated profit per unit at approximately 12%_ . 06980
Total estimated cost per jacket_ . 55617
The estimated piece rate cost per jacket of $0.2313 was an adjusted average of the estimated piece rates per jacket of $0.25805 at Wilmington and $0.2135 at Corbin.
18. Plaintiff received its first shipment of Government-furnished cloth on February 9, 1952. Upon commencing production, plaintiff immediately experienced sewing difficulties. The cloth was so hard and stiff that it resisted conforming to the shape to be provided by the folders on the double-needle machines, which machines were equipped with %6-inch folders. As a result, the cloth was not adequately folded together on the double stitching operations, and raw edges of the cloth remained exposed after such operations. The resistance of the folder likewise caused the feed of the machine to fracture the cloth in places. The cloth also resisted passing under the presser foot, a piece of metal which rests on top of the cloth and presses it against the feed of the machine. The cloth resisted needle penetration to the extent that the needles became hot, turned black, and developed burrs which fractured the cloth and caused thread breakage. The operators were required to pull the cloth through the folders, and this resulted in skipped or malformed stitches. On the single-needle machines the hemming folders resisted the cloth, and the same difficulties occurred with respect to cloth fracture, needle heating, and thread breakage, and malformed stitching. On some operations, the machines were required to sew through as many as 8 and 16 layers of cloth.
For about two weeks plaintiff's two machinists tried to solve the problems encountered, and then plaintiff called upon Singer Sewing Machine Company which provided two machinists who spent two additional weeks on plaintiff's difficulties, primarily on the double-needle machines, but also on the other operations. The Singer machinists finally recommended and plaintiff accomplished the installation of 14-inch folders on all of its double-needle machines, both at the Wilmington and Corbin shops. Thereafter, the hard cloth passed effectively through the folders, but plaintiff still experienced the same difficulties concerning passage of the cloth under the presser foot, needle 'burning, needle breakage, and malformed stitching.
Because . of the defects in manufacture resulting from such problems, plaintiff was required to do extensive repair work on the jackets, and increased its repair department from two operators to as many as thirty to forty. The hard cloth also decreased production because the operators were required to slow down the operation of the machines to avoid needle burning and breakage.
19. Throughout the performance of the contracts, plaintiff repeatedly advised defendant's officials at the New York Quartermaster Agency, both orally and in writing, that the Government-furnished cloth was hard and lacking in flexibility and pliability, and that plaintiff was experiencing difficulties in making the jackets. Plaintiff showed its problems to defendant's inspectors present during operations in its shops, and requested them to make a report to the contracting officer. Defendant's representatives acknowledged that they were aware of the problem concerning hard cloth and promised softer material on subsequent shipments. Plaintiff did receive some Government-furnished sateen cloth from one certain manufacturer, which cloth was soft and pliable, and plaintiff experienced no difficulties in the use thereof. At one time defendant substituted for the sateen cloth some herringbone twill which was also soft and pliable and caused no sewing problems. Deliveries of the hard cloth continued however, throughout plaintiff's performance. On one occasion plaintiff submitted samples of the hard and soft sateen cloth to defendant's purchasing agent at the New York Quartermaster Agency.
20. Plaintiff completed performance of both contracts in early 1953, the final shipment on qm-22839 being made on January 23, 1953, and on qm-22848 on March. 31, 1953. Thereafter plaintiff submitted two samples of the Government-furnished sateen cloth, one soft and one hard to the U.S. Testing Company to determine the cause for difference in hardness. Under date of August 4, 1953, this company submitted its written report of the test conducted. The pounds of pressure required to penetrate a single layer of each sample of cloth with a standard needle was measured, ten times on each sample, and the results showed that an average of 1.25 pounds was required on the soft sample, with an average of 2.15 pounds on the hard sample. In an effort to determine the reason for the difference in hardness, this company subjected the two cloth samples to ether and alcohol extract tests. The materials (soluble in ether or alcohol) contained in each sample of cloth were not qualitatively ascertained, but on the soft sample they amounted by weight to 0.61% on the ether extract and 0.71% on the alcohol extract, and respectively 0.18% and 0.59% on the hard sample. The conclusion of the testing company was that the soft sample contained more oils, or materials having lubricating characteristics, which gave the soft fabric greater lubricity, and less pressure for needle penetration was required because of the resulting mobility of the yarn. A later series of tests were conducted by this company on a number of samples of Government-furnished sateen cloth supplied by plaintiff. The needle penetration tests were applied to double layers of each sample, and the results showed a variation from one sample to another of 1.9 to 10 pounds to cause the needle to penetrate.
The evidence in this case does not establish any standard of pounds pressure required for needle penetration in relation to the matter of suitability of cloth for sewing on a mass production basis. No attempt was made by the U.S. Testing Company to determine whether the nonfibrous materials in the samples submitted by plaintiff exceeded the maximum permitted by the Government specifications relating to manufacturing of the cloth.
21. Except for the limited substitution of some herringbone twill, the Government-furnished material received by plaintiff was Cloth, Cotton, Sateen, Carded, 8.5 oz., od-7, manufactured either pursuant to mil-c-10296a or its predecessor mil-c-10296. During the course of the manufacture of such cloth on a number of different contracts, tests were to be conducted by the respective manufacturers and by the defendant with respect to seam efficiency of the finished cloth and also concerning the extent of the nonfibrous materials remaining therein as a result of the manufacturing processes. These tests were purportedly conducted in accordance with the manufacturing specifications and in the manner required by the applicable Government test methods outlined in cco-t-191a. There is no evidence to the contrary.
From all of the circumstances in evidence in this case it is reasonably to be concluded that the sateen cloth furnished by 'the defendant to plaintiff complied with the applicable specifications concerning seam efficiency and also the limitation with respect to nonfibrous materials remaining in the finished cloth, as well as other specifications relating to the manufacture of the cloth.
22. Suitability of cloth for use in the manufacturing of garments on a mass production basis is not necessarily established by the fact of compliance of the cloth with the defendant's seam efficiency test and with the restrictions on the amount of non-fibrous materials left in the finished cloth.
The seam efficiency test in paragraph 3.8 of mil-c-10296 and mil-c-10296a was conducted in accordance with paragraphs 4.3 through 4.3.3.4 thereof. Two strips of fabric, both about 48 inches long and one about 13 inches wide and the other 8 inches wide are sewed together longitudinally by using %-inch gage double-needles, and a %-inch folder, the sewing being done at full speed of the machine. Appropriate threat, needle size and stitches per inch are specified as intended in the manufacturing of garments from the cloth. The seam is then inspected to determine that there was proper folding and stitching. Strips of this joined cloth are then cut about four inches wide across the width through the seam, each strip being about 20 inches by 4 inches, with the seam across the strip about 8 inches from one end. These strips are not cut from the cloth within 6 inches of either the start or end of the seam. Each of at least 5 of such strips is then tested by a machine which breaks the cloth at a point where it is unseamed and in another operation breaks the fabric at the seam. The pressure in pounds required to break the fabric at the seam must be at least 80 percent of the pounds pressure required to break the unseamed fabric on the average of 5 determinations. The seam efficiency test indicates in terms of relative breaking points the extent of yam severance or damage resulting from the penetration of the double-needles through the cloth.
23. The seam efficiency test likewise may indicate to some extent the resistance of the tested fabric to needle penetration. The hard finish of a cloth may be due to the lack of sufficient lubricating substances therein, and in such a circumstance the yarns do not readily move apart to accommodate the entry of the needle, resulting in more damage to the yarns. However, poor seam efficiency can result from excessive lubricants in the cloth.
The hardness of cloth, however, may be due to several factors other than lack of lubricity, including the presence in the cloth of excessive amounts of other non-fibrous materials, including such substances as sizing, waxes, chemicals, dyes, and soaps and detergents used in the manufacturing process. Even if such non-fibrous materials do not exceed the maximum permitted by defendant's specifications, the sew-ability of the cloth from the standpoint of hardness of the fabric could be adversely affected by the methods used in the finishing process, such as in the calendering or pressing of the fabric, or in the exposing of the cloth to the dyeing procedures, none of which methods was controlled by defendant's specifications.
24. As a result of the problems encountered by plaintiff on account of the hardness of most of the Government-furnished cloth, plaintiff was substantially delayed in its deliveries of manufactured jackets, and defendant's contracting officer advised plaintiff that cancellation would have to be made of the contracts unless plaintiff entered into subcontracts to expedite deliveries. With the approval of the contracting officer, plaintiff did subcontract 180,000 units of contract qm-22839 to Nose Manufacturing Company at $0.555 per jacket; 300,000 units of contract qm-22848 to Martin Manufacturing Company, Inc., at $0.53 per jacket; and 150,000 units of contract qm-22839 to Bethlehem Sportswear Mfg. Co. at $0.47 per jacket. The Bethlehem subcontract was actually executed sometime prior to plaintiff's discussion with the contracting officer concerning the delayed deliveries. On the Bethlehem subcontract, plaintiff was to supply the contractor-furnished materials which cost seven cents per jacket.
25. In order to permit the subcontractors to commence production promptly, plaintiff sent them Government-furnished sateen cloth from its own stocks. Plaintiff supplied soft cloth to Bose Manufacturing Company. The evidence does not establish what type was shipped to Martin, but hard cloth was provided to Bethlehem which experienced the same difficulties plaintiff did in the sewing operations. Additional shipments of the doth were thereafter made directly to the subcontractors by the defendant.
26. On April 21, 1953, plaintiff filed a claim with the defendant's contracting officer for $83,362.88, representing additional costs to plaintiff resulting from the alleged furnishing by defendant of stiff and boardy sateen fabric claimed to be substantially heavier and of a harder finish than plaintiff was to have received to perform its two contracts. By his findings of fact and decision, dated October 28, 1953, the contracting officer denied the claim. A timely appeal was taken to the Armed Services Board of Contract Appeals which heard testimony of witnesses and received documentary proof in the case. By its opinion and decision, dated August 23, 1955, the appeal was denied by the Board with the statement, among others, that there had been no satisfactory showing that the Government-furnished cloth was not suitable for use.
27. Both from the standpoint of the testimony and evidence before the appeal board as well as before this Court, it is found that the administrative findings of fact are contrary to the overwhelming weight of the evidence, which clearly establishes that most of the Government-furnished sateen cloth in this case was so hard and stiff that it was not reasonably suitable for use in the manufacturing of the pertinent jackets on a mass production basis, and the administrative decisions are not supported by substantial evidence.
28.As a direct result of the supplying by defendant to plaintiff of sateen cloth which was not reasonably suitable for use in plaintiff's contracts, plaintiff incurred increased costs of performance in the sum of $66,846.68, as follows:
Direct labor_$42, 390.47
Social Security Taxes_ 1,907. 57
General Administrative_ 1,371. 85
Cost of converting machines_ 4,220. 55
Manufacturing overhead_ 16, 956.19
Total_$66,846.63
29. By letter dated May 9, 1952, plaintiff requested defendant's contracting officer for permission to construct a one-piece collar on the jackets being manufactured under both of its contracts, in lieu of the specified collar to be made of two pieces of cloth. This request was made at the instance of one of plaintiff's subcontractors, Bethlehem Sportswear Mfg. Co., although defendant was not so advised.
By letter dated May 13, 1952, defendant's contracting officer advised plaintiff concerning both contracts that
it is permissible to construct a one piece collar, that is, the top and under collar cut in one piece with the ends of collar points seamed, turned and stitched in accordance with applicable specification. This alternate method of construction can be considered as equal to specification requirements.
It is to be noted that this permission is granted providing that there is no additional cost to the Government.
30. By letter to plaintiff dated October 30,1957, more than 5 years after allowance of the collar deviation, defendant by its successor contracting officer first asserted that plaintiff was indebted to the defendant on account of any savings realized by construction of a one-piece collar in lieu of the one previously specified. This letter pertained only to contract qm-22848. Plaintiff was supplied alternative computations that (a) the savings amounted to $0.00551 per jacket on the 300,000 manufactured under this contract, or a total sum of $1,752.18, and (b) that the savings amounted to $0.00756 per jacket, or a total of $2,404.08, the alternative amounts being dependent respectively on whether a $0.75 or $1.00 hourly wage rate was applied. Plaintiff was requested to remit the appropriate sum to the defendant, along with documentation establishing the applicable wage rate.
The contract which was the subject of the demand for payment had been fully contracted to Martin Manufacturing Company under an agreement dated August 11, 1952, about three months after the collar deviation allowance.
31. At the trial of this case on February 10, 1959, defendant moved to amend its answer in this case by stating an offset and counterclaim. Plaintiff stated it had no objection to this proposed amendment. Accordingly, the amendment was allowed. The counterclaim asserted plaintiff's request for and defendant's allowance of the collar deviation on both contracts and stated further as follows:
f. Upon information and belief, plaintiff realized savings on account of the aforesaid deviation in the amount of $0.00801 per jacket, or a total savings for all 1,008,168 Jackets manufactured under both contracts of $8,075.43, no part of which has been paid to defendant, although demand has been made.
No payments have ever been made by plaintiff or any of its subcontractors on this claim.
32. Defendant in its requested findings of fact limits its counterclaim to the 630,000 jackets manufactured under plaintiff's three subcontracts, previously described in finding 24. The date of the Martin subcontract in relation to allowance of the collar deviation is stated in finding 30. Plaintiff's subcontract with Pose Manufacturing Company was dated July 25, 1952, about 2.5 months after such allowance, whereas the Bethlehem subcontract was executed on or about April 5, 1952, about a month prior thereto.
Plaintiff made no effort to renegotiate its subcontract price with Bethlehem on account of any savings that might be realized on the collar deviation. Plaintiff had no discussion or dealings with the other two subcontractors concerning the collar deviation, and there is no evidence that either subcontractor was aware of or took into consideration such deviation in reaching an agreement concerning the subcontract price.
33. It is reasonable to infer from the evidence that Bethlehem Sportswear Mfg. Co. did manufacture the 150,000 jackets raider its subcontract with a one-piece collar. However, the evidence is insufficient to establish how many, if any substantial number, of such jackets were so manufactured by the other two subcontractors.
34. The reasonable savings per jacket on the change from a two-piece to a one-piece collar amounted to $0.004498, computed as follows:
Direct labor_§0. 003
Stitching make-up_ .00015
.00315
Overhead at 40%_ . 00126
.00441
General and Administrative at 2%_ . 000088
Total unit savings_ . 004498
The total unit savings of $0.004498 applied to the 150,000 jackets manufactured by Bethlehem under its subcontract amounts to $674.70.
CONCLUSION OP LAW
Upon the foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that plaintiff is entitled to recover under its claim in the amount of $66,846.63 and that defendant is entitled to recover under its offset and counterclaim in the amount of $674.70. It is therefore adjudged and ordered that plaintiff recover of and from defendant the net sum of sixty-six thousand, one hundred seventy-one dollars and ninety-three cents ($66,171.93).
On defendant's motion for reconsideration and clarification, Jones, Chief Judge, on March 7, 1962, delivered the following opinion of the court:
The defendant in its motion for reconsideration and clarification expresses the fear that the wording of our opinion, cmte, p. 648, is such that it tends to create, at least by implication, a new cause of action.
We can see no plausible basis for this fear.
By the plain terms of the contracts the defendant undertook an obligation. Shining through the entire record, including the evidence, the findings of fact, and the recitals in the opinion, is overwhelming evidence that it failed to discharge that obligation. By no reason, logic, or wording of specifications should it be permitted to avoid carrying out an affirmative obligation clearly expressed in the contract.
Defendant agreed by the express terms of Article 29(a) to furnish property of a type "suitable for use" within the context of the contracts. Nonetheless, defendant in fact furnished property of a type which substantially delayed plaintiff's performance and increased its costs of production. Because of this, we held that the property was not of a type "suitable for use" within the intendment of Article 29(a). In our view, suitability is an additional obligation assumed by defendant, a primary obligation, and is determined by reference to the contract as a whole, and not by mere reference to the technical wording of the specifications only. If this were not true, the "suitable for use" clause would be without meaning.
We do not share defendant's conviction that we have thereby created a new cause of action. What we have done is make meaningful, and given effect to, a specific clause of the contracts, a clause that was agreed upon by both parties when the contracts were entered into. The interpretation we have adopted is not "new," as defendant urges, but rather is in harmony with the interpretation adopted by the Armed Services Board of Contract Appeals in previous cases. We have indicated as much in our opinion.
Defendant's motion for reconsideration and clarification is overruled.
Darr, Senior District Judge, sitting by designation; Dureee, Judge; Laramore, Judge; and Whitaker, Judge, concur.
See findings 22 and 23.