“If a contractor could knowingly understate certain costs in order to lower his price and obtain the contract, and thereafter show the true costs of the items and get an upward adjustment, this would work an injustice against the Government and the other bidders”
How later courts described this case
- “If a contractor could knowingly understate certain costs in order to lower his price and obtain the contract, and thereafter show the true costs of the items and get an upward adjustment, this would work an injustice against the Government and the other bidders”
- a contractor must disclose a lower subcontractor quote to the government if the contractor considers using it
Written by the judges who cited it.
The opinion
NICHOLS, Judge
(concurring in part, dissenting in part):
I rejoin in Part I of the court’s opinion, but with all respect I think it is mistaken in Part II, dealing with the Luneberg Lens. It appears that plaintiff had before it, shortly in advance of the final award, a quotation to supply this component at a price considerably lower than the figure used in plaintiff’s statutory cost or pricing data which it had furnised to defendant. The latter was based on the quotation of AGA, an established supplier of the component. The former had come from Transco, which desired to supply the item, but had no previous experience with it. Plaintiff’s officials concluded that the statute and the implementing contract clause did not require them to notify the defendant of Transco’s quotation because there was, as they tentatively thought, no real possibility that Transco would be able to lower the procurement cost of the item to them. What loses the case for them here is that they were following through with Transco to be absolutely sure of their tentative conclusion. Had they tossed its proposal in the waste basket, they would now be in free. The proposal turned out to be more serious than they had thought. Eventually they did obtain components from Transco, not at the original quotation, but still perhaps at some saving. How much saving is not yet known.
*1319 The evidence, the findings of the Board, and the prevailing opinion here, all speculate that the Government negotiators would have used the Transco quotation, if they had known of it, either to reduce the target cost or to reserve the price for this component for future determination, though the Board rejected the first alternative. I think this technique obscures the real point of the case, anyway.
The statute and contract clause involved were comparatively new when the instant award was made. Experience with them, and decisions under them, were lacking. It can hardly be doubted that the terms “cost or pricing data” may include or exclude many things. They are, therefore, ambiguous. There can be no speculation whether the plaintiff participated in drafting the language. Obviously it had no part. It seems to me that the usual consequence should follow. That is, the defendant, not having notified contractors what it construed the language to mean, was bound by whatever meaning contractors might reasonably attach to it.
It is obvious from a reading of our cases, and common knowledge, that many persons “buy into” Government contracts and subcontracts, to use the phrase used in the majority opinion. That is, they bid below cost, or without adequate cost information, confidently relying on their beneficent Government to bail them out somehow if necessary. In many instances, the unlucky Government has no alternative but to do so, the item to be supplied being urgently needed and other possible sources having ceased to be available. The result is, a surprisingly low quotation from a party not established as a responsible supplier must always be regarded at first with some suspicion. The initial attitude of plaintiff’s officials toward the Transco quotation is understandable in view of this, and its good faith is not challenged. There may often be, and there apparently was here, a wide margin between the nominal cost of a component, measured by the lowest quotation, and what good judgment tells one it is probably going to cost. If defendant wanted to learn of the lowest quotation, however apparently undependable, as its “cost or pricing data,” it had only to say so. Such a pronouncement would have precluded any litigation as to the Luneberg Lens item. Instead, defendant left our plaintiff to figure out for itself what defendant’s words meant. Plaintiff (as I read the record) concluded that defendant wanted to have plaintiff’s honest estimate as to what the lens was going to cost. I cannot for the life of me perceive why this conclusion was unreasonable. If it was reasonable, we ought to sustain it.
Defendant, in properly implementing the statute, also should have specified as of what date the cost and pricing data should speak. Was it to be continually revised as fresh information came in, even after the contract negotiation was substantially complete ?
It appears to me the Congressional purpose was to prevent contractors from abusing the otherwise approved incentive type contract, by supplying cost data including costs they know or should know before award they will not incur. They were not, however, to be denied the bonus offered them, in case of savings effected by managerial efforts and efficiency, after award, even though they anticipate before award they will seek such savings. Incomplete as are the facts before us at this stage of the litigation, it appears to me that whatever the savings were from the subcontracting with Transco instead of AGA, it is probable that little of them could have been predicted just from Transco’s low quotation. It may turn out there were none after allowing for the technical assistance plaintiff rendered Transco and for what the Board calls the “contingency factor.” If there were savings they were due, it appears, to plaintiff’s voluntary assumption of risk in dealing with an unknown supplier and to the help plaintiff extended to that supplier. Plaintiff, by dealing with Transco, could well (antecedently con *1320 sidered) have raised its real costs instead of lowering them. Thus it appears to me, if plaintiff had looked beyond the literal language of the statute to its apparent purpose, it would have felt justified in supplying only the data it did.
I am not suggesting, however, that plaintiff could properly or safely have ignored an express statement by defendant as to what it wanted. It is obvious that defendant’s agents and servants must always be the best judges of what cost and price data are relevant to their needs. I am saying they cannot reasonably expect contractors to intuit what they want. If they maintain silence in the premises, they are bound by whatever reasonable interpretation contractors apply to the involved statute and contract clause. The decision today is, I think, inimical to the effective use of the incentive type contract to encourage efficiency and cost savings in Government procurement.