Cutler-Hammer, Inc. v. The United States

DAVIS, Judge

(dissenting in part and concurring in part):

For the “duplication” issue (Part I of the court’s opinion), none of the keys fits at all well, and the lock must be forced, one way or the other. Both sides urge that the language of the Truth-in-Negotiations Act is clear on its face, but the only thing plain to me is that equally respectable textual arguments can be made for both the contractor’s and the Government’s positions. The legislative history 1 is also inconclusive; the only part bearing directly on offsets seems to favor the Government but that dialogue can also be read as dealing with the different problem of whether upward price revisions should be allowed for errors the contractor makes against himself. The purpose of the statute is likewise unclear — is it simply to prevent windfall profits to the contractor or is it also to encourage or push contractors into being more careful in making their cost estimates? And where, as in this ease, the result of either interpretation affects no more than the size of the contractor’s profit — a loss is not involved —I see no objective principle of fairness strongly favoring one side or the other. These and the other aids to interpretation, 2 singly or in combination, do not *1317 readily turn the bolt. Still, it remains our judicial duty to open the door, no matter how resistant.

Driven by this compulsion to decide, I would force the lock, in this instance, in the Government’s favor. My basis for this choice is twofold. First, the only parts of the legislative history dealing specifically with offsets tend to support the Government’s interpretation, and I would, in the absence of anything else, accept that flickering light as the best we have. At the Senate hearings, a representative of the electronics industry criticized the bill as a “one-way street”, suggested that “there ought to be some offset”, and offered to submit language embodying that proposal. Senators Symington and Cannon seemed to reject this approach outright. Hearings before the Senate Committee on Armed Services on H.R. 5532, 87th Cong., 2d Sess. (1962), pp. 100-102; Roback, supra, p. 23. Thereafter, the Electronics Industry Association did submit a substitute which explicitly authorized offset (Hearings, supra, p. 103), but this suggestion was not adopted. Plaintiff’s brief concedes that “Viewed cold, it may be argued that the testimony [to which I have just referred] lends superficial support to this [the Government’s] view”, but then makes a strenuous argument that the Senators misunderstood the proposal and did not realize that only offset was involved, not an attempt to increase the contract price in the contractor’s favor. This may or may not be so — the Senators’ remarks are not explicit or pointed — but the fact remains that, although contractors expressly put forward offset, both orally and in writing, the Senate Committee (which really framed the bill in its final form, see Roback, supra, at pp. 20-24) gave no hint of accepting it, and rejected a written proposal incorporating offset. 3 Admittedly, the legislative record is unsatisfactory on the point, but, in the absence of any other meaningful sign, I would accept what appears on the surface — rejecting offset — as manifesting the Congressional intention.

My secondary reason is that, although even the sharp-eyed can see all of this Act’s purposes only through a glass darkly, I do discern an aim to spur contractors into more careful and correct pricing. Certainly, the chief goal of the statute was to prevent windfall profits occurring through mistaken estimates, but there are also indications that Congress was interested in pushing bidders and contractors into more carefully prepared, more accurate, proposals all along the line. Senator Symington stressed “efficiency and intelligence,” rather than “integrity”, as the basis of the bill; he also spoke at the hearing against “buying in” practices. Roback, supra, pp. 22-23. *1318 The Senate Committee report said that “those costs that can be shown should be furnished currently, accurately, and completely”, and then added so far “as is practicable”. S.Rep.No.1884, 87th Cong., 2d Sess., p. 4 (emphasis added). To reject offsets, it seems plain to me, would work to stimulate more care and accuracy on the part of contractors than would the allowance of offset. To that extent, the Government's construction would further the legislative purpose of encouraging care and accuracy.

As for “buying in”, the court thinks that permission to offset would not affect that practice. I believe that the contractor’s position here would somewhat tend to encourage “buying in” more than the Government’s. Under the former, a bidder attempting to “buy in” could feel that, if the Truth-in-Negotiations Act happened to come into operation — at the end of the contract, after generous modifications had upped the total contract price — he would probably get substantial advantage from some of his deliberate understatements at the beginning; this prospect would tend to abet his taking a chance o,n “buying in” on his initial proposal, in the hope of ending up with a good profit, not a loss. On the other hand, if offsets are disallowed, the bidder knows that, if the Act is ultimately applied, he will not get any succor from these intentional errors against himself; his hoped-for profit could be reduced substantially, if and when the Act is applied, or there might even be a loss. The risk of “buying in” is thus somewhat greater if there are no offsets.

These reasons, I have emphasized, are by no means compelling, but for me they are enough when all the other indicators seem to add up to zero. I add that the offsets here do not involve the same specific items and therefore I do not have to consider, and would reserve, the question of whether a limited offset, or netting, is allowable in that circumstance. See ASPR 3-807.5(3), as amended by Defense Procurement Circular No. 57. Similarly, the plaintiff conceded in oral argument that it would make a profit on the contract even if offsets were disallowed. Accordingly, I do not reach, and would defer, the issue of whether the Act should be construed to reject offsets where that would impose an actual loss on the contractor (a loss which would not exist if offset were permitted). Since the Act is primarily concerned with regulating the contractor’s profit, the loss case seems even more difficult to me than the instance, as here, in which some profit remains under either theory.

I join in the court’s opinion on the Luneberg Lens (Part II).

. See Roback, Truth in Negotiating: The Legislative Background of P.L. 87-653, 1 Public Contract Law J., No. 2, p. 3 (1908).

. The canon contra proferentam is of no help because the contract clause parrots the statute, and I know of no accepted rule that Congress’ procurement legisla *1317 tion should be read in favor of the contractor and against the Government (or vice versa). The administrative construction of the Act is so recent, and so enmeshed in controversy from the start, that no real deference can be given to the views of the Comptroller General and the Defense Department. The unsuccessful attempt to amend the Act is, as the court points out, quite equivocal. Nor do I get significant assistance from invoking the burden of persuasion. That principle is not normally applied to issues of statutory interpretation, and in any event. I would not know whether the burden should he on the contractor as plaintiff seeking to overturn the ASBCA decision, or on the defendant seeking to prevent payment by use of the defense that the Act has been triggered into operation.

. It is possible, of course, that this written proposal, which purported to cover the entire subject of the bill, was rejected as a whole for other reasons (see Roback, supra, p. 23), but it is at least certain that the proposed offset language was not put into the final Committee bill.

I do not at all agree with plaintiff’s contention that to reject offset would be inconsistent with the position advanced by other legislators during the course of the consideration of the bill. The difficulty with the legislative history, as I see it, is that most of it is consistent with both the plaintiff’s and the defendant’s position, but I find nothing in favor of the concept of offset while there are the indications I have mentioned opposed.