Petition for Writ of Certiorari — McQuiston v. United States

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8 4 . 9 0 4 itive: Supreme Court, U.S.

FILED

DEC § 1984

ALEXANDER i. STEVAS,

CLERK

No.

In The Supreme Court

OF THE

United States

OcTOBER TERM 1984

J. H. McQUISTON,

Petitioner,

Vs.

THE UNITED STATES,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

B. ALAN DiCKSON

KAUFMAN, FRANKLIN & DICKSON

Century Park Center

9911 West Pico Blvd., Suite 650

Los Angeles, California 90035

Telephone: (213) 553-3351

Attorneys fer Petitioner

Bown. of Los Angeles, Inc., Law Printers. (213) 742-6600

QUESTIONS PRESENTED

I. Is it proper for a Court of the United States, to

which a dispute of a “private” (commercial, for-profit )

contract of the United States is first referred, to refuse to

adjudicate the facets and law de novo, thus contravening

the preseription of Article III of the Constitution, requir-

ing the Court to exercise the judicial power in such

disputes by a judge holding office according to the re-

quirement of Article III?

II. Is it proper for any party to a mandatory Defense

Production Act contract (50 U.S.C. App. $§ 2061 et

seq.) to revoke unilaterally the immunity from penalties

statutorily conferred upon every mandatory contractor by

that Act, and without referring the determination of

liability and imposition of penalty to the statutory en-

forecer prescribed by the Act?*

*The parties involved in the proceeding sought to be reviewed are

solely those appearing in the caption of the case in this Court.

TABLE OF CONTENTS

cuties: MIRO oo. kk cs a Ors a Se eens

Tee OF DI kk he ka a oe ee a kee

CN SN i Oe ee es Oe es

Jurisdiction —

Constitutional Provisions Involved

Statutes Involved

Miatomout.oF Te Cae oss va ee eee kao

BR. GR 4 0 a OR Ss eee ORES ee

2. Administrative BevieW ... . 0... ec es’

Se. Dee ek ee eee es

Reasons for Granting the Petition ............

It Is Constitutionally Impermissible for a Court of

the United States to Refuse to Adjudieate, at

First Impression, the Facts and Law for a Party

to a United States Contract in Dispute With

Another Party to the Contract ..............

It Is Improper for Any Party te a Mandatory DPA

Con vaet to Impose or Enforee Any Non-Per-

formance Penalty Except as Prescribed by DPA

ROUGE ccc x bw ea es eae eee

Come ook oe a a oe ee eee

Appendix A Final Decision, Court of Appeals for

the Focerel CONN ba a ee

Appendix B Initial Decision, ASBCA ..........

Appendix C Final Deeision, ASBCA ..........

Appendix D Uneertified Order, Court of Appeals

for the Federal Cireuit .........

Appendix E Initial Decision, Court of Appeals for

the Pedeval Clgeuie © 6 Oi ee

ili

TABLE OF AUTHORITIES

Page

Acorn Tron v Bethlehem Steel Co., 96 F Supp 481

4 ee Se) ) Se 27, 28, 29, 30, 31, 33, 34

Chisholm v Georgia, 2 U.S. 419 (1793) ........ 20

Eastern Air Lines v McDonnell Douglas, 532 F2d

eo LS highs eka ese an a8 8x8 31

Ford v Estelle, 740 F2d 374 (5 Cir 1984) ...... 24

Georgia v Brailsford, 3 U.S. 1 (1794) .....0..... 20

INS. v Chadha, U.S.——.,103 S Ct 2764, 51

ee os kg ug 0 a Bin 0 O84 0.8 15, 20

Lynch v U.S., 292 U.S. 559 (1934) .......... 22,23

New York Times v U.S., 403 U.S. 713 (1971) .... 23

Northern Pipeline v Marathon Pipe Line, 458 U.S.

a ee ng was eau eo passim

Pacemaker uv Instromedizx, 725 F2d 537 (9 Cir

ee ak dials keane 6 24

Npringer v Philippine Islands, 277 U.S. 189 (1928) 20

U.S. v Mitchell (Mitehell IT), —— U.S. —__, 108

S Ct 2961, 51 LW 4999 (1983) ........21, 22,23

U.S. ve Utah Construction Co., 384 U.S. 394 (1966) 24

Wharton-Thomas v U.S., 721 F2d 922 (38 Cir 1983) 24

Youngstown Co. v Sawyer, 343 U.S. 579 (1952) = 20, 23

Constitution:

Sy re hg dg alg 6 a6 84 86% RA 20

a CA ca 5 5 ai 4-028 a 0 38 passim

Tee eee Se

rere.

CC ee

ar Aree ra ete Ake ed Nl ge 4, 20

TABLE OF AUTHORITIES

Page

Statutes:

ek ae | eres ee ene a ere rem ey i

tS se ree ea 6, 14,19

eee ere rs Pe ee 14

EE Sia a A oe Rk Ae a ek aes 10, 14

ee Get ol eS ee eee. Gate 15

en ee ee SS oa sae ee ee ee 29

41 U.S.C. §§ 601 et seq (Contract Disputes Act) )

50 U.S.C. App §$§ 2061 et seq (Defense Produe-

Sete SI go ks a ec %o GSS ec eee passim

P.L. 94-583 (Foreign Sovereign Immunities

BR ak ae eae Oe ce ee 14, 16, 23

P.L. 95-598 (Bankruptey Reform Act) ...... 14, 22

P.L. 97-164 (Federal Courts Improvement

BE Co raie RR SRCRRRCNGRRR ES beeen 14,19

Code of Federal Regulations:

Se: Ss PO 9G 0 4s kn a oe oo ere 27

OE ek eat Beet ei ewes 10

Miscellaneous:

Cempernen Ciel Cote & 1670 6. ki ack cases 24

Hamilton: The Federalist No. 81............ 22, 23

H.R. Rep No. 94-1487, 94th Congress (1976) 23

26 Dept. State Bulletin 984 (1952) ........ 23

Senate Banking Committee, 89th Congress:

Hearings on Defense Production Act Amend-

EE SE ec < cba aes ce eee eee 26, 27

No.

In The Supreme Court

OF THE

United States

OCTOBER TERM 1984

J. H. MCQUISTON,

Petitioner,

Vs.

THE UNITED STATES,

Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

Petitioner, J. H. MeQuiston, respectfully prays that a

writ of certiorari issue to review the judgment and opin-

ion of the United States Court of Appeals for the Federal

Circuit entered in this proceeding on July 20, 1984 and

denied réhearing on September 5, 1984.

OPINIONS BELOW

The order of the Court of Appeals for the Federal

Cireuit (CAFC), unreported, denying rehearing/ rehear-

ing/en bane appears herein as Appendix “A’’. The opinion

of the Armed Services Board of Contract Appeals

(ASBCA), on which the Court of Appeals based its

opinion, appears herein as Appendix “B’’. The opinion of

ASBCA denying rehearing of its opinion appears herein

as Appendix “‘C’’. The order of CAFC denying motion for

joining parties and withholding certificate per 28 U.S.C.

§ 1254(3) appears herein as Appendix **D’’. The opinion

of CAFC denying original jurisdiction and affirming

ASBCA appears herein as Appendix “E”’.

JURISDICTION

The judgment of the Court of Appeals for the Federal

Cireuit (CAFC) was entered on July 20, 1984. The

timely request for rehearing and suggestion for rehearing

en bane was denied September 5, 1984. This petition for

certiorari was filed within ninety (90) days of that date.

This Court's jurisdiction is invoked per 28 U.S.C.

§ 1254(1).

CONSTITUTIONAL PROVISIONS INVOLVED

Article [II Sees. I & II

“See. 1. The judicial power of the United States

shall be vested in one supreme court, and in such

inferior courts as the Congress may from time to

time ordain and establish; the judges, both of the

supreme and inferior courts, shall hold their offices

during good behaviour, and shall, at stated times,

receive for their services, a compensation, which

shall not be diminished during their continuance in

office.

“See. Il. The judicial power shall extend to all

cases, in law and equity, arising under this Constitu-

tion, the taws of the United States, and treaties

made, or which shall be made, under their authority;

—to all cases affecting ambassadors, other public

ministers and consuls; — to all cases of admiralty

and maritime jurisdiction; —to controversies to

which the United States shall be a party; —to

controversies between two or more states: — be-

tween a state and citizen of another state; — be-

tween citizens of different states; — between citizens

of the same state claiming lands under grants of

different states, and between a state, or the citizens

thereof, and foreign states, citizens or subjects.”

Amendment V

“No person shall be held to answer for a capital, or

otherwise infamous crime, unless on a presentment

or indictment of a Grand Jury, except in’ cases

arising in the land or naval forces, or in the Militia,

when in actual service in time of war or public

danger; nor shall any person be subject for the same

offense to be twice put in jeopardy of life or limb; nor

shall be compelled in any Criminal Case to be a

Witness against himself; nor be deprived of life,

liberty, or property, without due process of law; nor

shal private property be taken for public use, with-

out just compensation.”

Amendment VII

“In suits at common law, where the value in contro-

versy shall exceed twenty dollars, the right of trial by

jury shall be preserved, and no facet tried by a jury

shall otherwise be re-examined in any court of the

United States, than according to the rules of the

common law.”

Amendment LX

“The enumeration in the constitution, of certain

rights, shall not be construed to deny or disparage

others retained by the people.”

Amendment X

“The powers not delegated to the United States by

the Constitution, nor prohibited by it to the States,

are reserved to the States respectively, or to the

people.”

STATUTES INVOLVED

Defense Production Act

40 U.S.C. App. § 2157

“No person shall be held lable for damages or

penalties for any act or failure to act resulting

directly or indireetly from compliance with a rule,

regulation, or order issued pursuant to this Aet,

notwithstanding that any such rule, regulation, or

order shall thereafter be declared by judicial or other

competent authority to be invalid. No person shall

discriminate against orders or contracts to which

priority is assigned or for which materials or facili-

ties are allocated under title I of this Act or under

any rule, regulation, or order issued thereunder, by

charging higher prices or by imposing different terms

and conditions for such orders or contracts than for

other generally comparable orders or contracts, or in

any other manner.”

50 U.S.C. App. § 2151 (b)

“(iv) In administering this Act, special provision

shall be made for the expeditious handling of all

requests, applications, or appeals from small-

business enterprises.”

50 U.S.C. App. § 2156

“(a) Whenever in the judgment of the President any

person has engaged or is about to engage in any acts

or practices which constitute or will constitute a

violation of any provision of this Act, he may make

application to the appropriate court for an order

enjoining such aets or practices, or for an order

enforcing compliance with such provision, and upon a

showing by the President that such person has en-

gaged or is about to engage in any such acts or

practices a permanent or temporary injunction, re-

straining order, or other order, with or without such

injunction or restraining order, shall be granted

Without bond.

“(b) The district courts of the United States and

the United States courts of any Territory or other

place subject to the jurisdiction of the United States

shall have jurisdiction of violations of this Act or any

rule, regulation, order, or subpena thereunder, and

of all civil aetions under this Act to enforce any

liability or duty created by, or to enjoin any violation

of, this Aet or any rule, regulation, order, or subpena

thereunder. Any criminal proceeding on account of

any such violation may be brought in any district in

which any act, failure to act, of transaction constitut-

ing the violation occurred. Any such civil action may

be brought in any such district or in the district in

which the defendant resides or transacts business,

Process in such cases, eriminal or eivil, may be

served in any district wherein the defendant resides

or transacts business or wherever the defendant may

be found; the subpena for witnesses who are required

to attend a court in any district in such case may run

into any other district. The termination of the an-

thority granted in any title or section of this Aet, or

of any rule, regulation, or order issued thereunder,

shall not operate to defeat any suit, action, or prose-

cution, whether theretofore or thereafter com-

menced, with respect to any right, liability, or offense

incurred or committed prior to the termination date

of such title or of such rule, regulation, or order. No

costs shall be assessed against the United States in

any proceeding under this Act. All litigation arising

under this Act or the regulations promulgated there-

under shall be under the supervision and control of

the Attorney General.”

Judicial Procedure

28 U.S.C. § 1295

“(a) The United States Court of Appeals for the

Federal Cireuit shail have exclusive jurisdiction —

(9) of an appeal from a final decision of an ageney

board of contract appeals pursuant to section

&(g) (1) of the Contract Disputes Act of 1978 (41

U.S.C. § 607(g) (1) ).

shall review the matter referred in accordance with

the standards specified in section 10(b) of the Con-

tract Disputes Aet of 1978. The court shall proceed

with judicial review on the administrative record

made before the board of contract appeals on matters

so referred as in other cases pending in such court,

sha!l determine the issue of finality of the appeal

decision, and shall, if appropriate, render judgment

thereon, or remand the matter to any administrative

or executive body or official with such direction as it

may seem proper and just.”

STATEMENT OF THE CASE

1. General

The U.S. Army Missile Command engaged in sales-for-

profit of various equipments to various “‘wholesale cus-

tomers’ (as the Command ealled them) other than the

United States. The Command habitually procured its

salable stock by invoking the Defense Production Act

(DPA), 50 U.S.C. App. §$§ 2061 et seq., which requires

those solicited to participate or suffer pain of fine, impris-

onment and withdrawal of the right to procure and sell

materials. The Act specifically segregates the Command

from the Sovereign or “public” power, and specifically

prohibits the Command from ordering in excess of its

immediate needs. Moreover, persons who discover that

the Command’s orders are in excess of its needs are

required not to deliver the orders.’

Petitioner MeQuiston was aggrieved in two discrete

ways by the operation of DPA as utilized improperly by

Command and as reviewed by the administrative and

judicial bodies. First, the MeQuiston proprietorship, a

very small jusiness, was unilaterally designated by the

Command as the industrial base for the product involved

herein, was sent unsolicited orders which by law it was

not at liberty to refuse, and then — despite many years of

faithful service producing such products — was penalized

for alleged default despite DPA’s express prohibition of

such penalties and in derogation ef DPA’s specific en-

forcement mechanisms. This is the genesis of the second

Question Presented.

Second, MeQuiston in trying to exhaust administrative

relief from the improper penalties was thrust involuntar-

ily into the “Disputes” procedure, inhibiting his right to

'It isa DPA crime for anyone to order or deliver in excess of need. 50

U.S.C. App § 2073.

Article III adjudication although the contract containing

the “Disputes” clause had been imposed unilaterally and

had not been freely entered into. This is the genesis of the

first Question Presented.

On December 17, 1979 the Command, after placing

mandatory-acceptance orders per DPA and receiving

from MeQuiston deliveries in excess of its needs, termi-

nated the open balance for “‘partial default”. The Com-

mand assessed a penalty neither consistent with (1) the

contractual protection guaranteeing MeQuiston’s just

compensation for parts delivered, nor (2) the statutory

protection guaranteeing MeQuiston’s immunity from pen-

altv and forfeiture.

The Command effected a “partial default” by (1)

encouraging the sole-source manufacturer of a Command-

specified proprietary component (materialman) not to

abide by MeQuiston’s DPA eontraect with that material-

man, and (2) prohibiting MeQuiston from deviating from

the Command’s arbitrary technical and contractual re-

quirements for the product, thereby barring MeQuiston

from any other source.

The Command’s motivation for its monopolistic maneu-

ver against MeQuiston, apparently violating regulations

& statutes upon whose conditional authority the United

States allowed the Command to make commercial DPA

contracts, ean probably be explained thusly:

The Command’s ‘‘wholesale customers” recoiled at the

Command's exorbitant markup of spare parts it was

reselling to them (tripling the acquisition price but ad-

ding no value) just like Congress objected recently when

it heard of paying $7,000 for coffeepots and $500 for claw

hammers. Reacting in 1978, the Command attempted to

raise the acquisition price of the components it bought for

resale, by deliberately trying to order on a sole-source

basis only from costly suppliers, thereby driving other

sources out of business. MeQuiston initially was merely

one low-cost suppher who would be eliminated, to mollifyv

the “customers” by lowering the Command’s paper profit.

But MeQuiston in 1979 was a “whistleblower”, exposing

unlawful practices of his contracting officer and forcing

corrections. Thereafter, the contracting officer decided to

punish MeQuiston, rigging the ‘default’ and intending

MeQuiston to pay for the Command's newly-revised “‘ac-

quisition” cost.

Consequently, the United States was induced to “take”

over $250,000 from MeQuiston without exchanging value

therefor. That amount was over 30 years of MceQuiston’s

income. Moreover, the modus of taking requires the State

of California to revoke MeQuiston’s license to practice his

profession, making it impossible for MeQuiston to recoup

the taking, neither by continuing in business nor by

working for another.

In attempting below to nullify the Command's default

determination, MeQuiston went unrepresented by coun-

sel, because counsel was unavailable to him.

2. Administrative Review

MeQuiston interpreted the Command's termination as

a breach of contract, which under this pre-Contraect Dis-

putes Act (CDA) (41 U.S.C. §§ 601 et seq) contract was

redressable only in a Court of the United States; never-

theless, those Courts generally required, as a precondi-

tion of filing, the exhaustion of administrative remedies.

On January 17, 1980, because the contracting officer

and his supervisor assured MeQuiston (1) that the con-

tracting officer would undertake a reconsideration of the

Command's termination, and (2) that it was feasibie for

the contracting officer to reinstate and complete the

terminated contract, MeQuiston formally requested the

contracting officer to undertake the reconsideration. Per

the “Disputes” clause (32 C.F.R. 7-103.12(a), 1958

Jan.), the contracting officer could decide by himself

such disputes before proceeding further. But instead of

reconsidering as agreed, the contracting officer merely

referred this breach-of-contract dispate to the Armed

Services Board of Contract Appeals (ASBCA). Thus the

contracting officer was the party actually requesting the ©

administrative review by the Secretary.

Because of the foregoing anomalies, MeQuiston, at his

first opportunity, insisted that ASBCA should take care

not to prejudice MeQuiston’s right to bring an original

action in a Court of the United States, under 28 U.S.C.

§ 1491 or other statutes. The examiner consented.

Whereupon, ASBCA asked the Command to file what

would function as a “complaint” and permitted MeQuis-

ton to pursue six defenses:

(1) MeQuiston’s statutory DPA immunity bars

the Command from imposing punitive termination of

the parties’ DPA contract for ‘“‘default’’, absent the

process prescribed by DPA itself.

(2) The Command was required to provide Me-

Quiston with expeditious handling and it failed to do

So.

(3) The Command unfairly interpreted its own

obvious typographical error in the DPA contract

papers to its advantage, refused to admit waiver, and

failed to correct the error when timely due.

(4) The Command unlawfully refused to correct

its own defective specification when such correction

became imperative.

(5) The Command unfairly biocked the perform-

ance of the only materialman permitted MeQuiston

by the Command, 2cessarily making completion

impossible.

(6) The Command refused to follow the con-

tracting and_ termination-of-contract regulations

which were its only souree of contracting and termi-

nation authority.

The examiner decided to conduct the prescribed hear-

ing in two parts. Part one was to elicit testimony on the

Command's behalf, from government employees and any

other witnesses the Command wished to present. Part two

was thereafter to hear evidence on MeQuiston’s behalf.

The examiner permitted the Command to withhold its

records and personnel from examination before Part one

of the hearing was coneluded, nor was MeQuiston permit-

ted to subpoena evidence from either the Command or

third parties. Several months after the Command's wit-

nesses were heard and Part one was concluded, the

examiner sua sponte canceled the Part-two hearing the

examiner had previously promised for MeQuiston’s 40

witnesses and evidence.

Inter alia, MeQuiston’s witnesses would have testified:

(1) the specifications (technical and procedural)

imposed by the Command upon MeQuiston by its

mandatory-aceeptanece contract were imposed on no

other contractor by the Command,

(2) the Command intended to treat MeQuiston

disparately,

(3) the Command diseussed internally how to

conceal its disparate treatment of MeQuiston,

(4) the production failures were squarely the

product of laws of nature,

(5) every rejection of material was the direct

result of MeQuiston’s detection of an out-of-toler-

ance condition arising from the Command's arbitrary

and unreasonable technical requirements,

(6) although the Command's arbitrary technical

requirements caused the production failures, — the

Command could have relaxed them and assured fac-

ile production,

(7) DPA would not permit the Command to re-

tain its arbitrary and unreasonable technical require-

ments in the face of production difficulties affecting

the National Defense,

(8) the Command had no actual need then or ever

for any parts which MeQuiston failed to deliver, and

(9) the order of MeQuiston’s deliveries to the

(Command's depots had been suggested and approved

by the Command and were accomplished only with

the Command's surveillance and acceptance.

After the examiner prevented MeQuiston from present-

ing witnesses on his behalf, MeQuiston submitted, ter

alia:

(1) documentary reports of 11,077 tests required

by the Command, which linked every failure of ac-

ceptability to Command’s arbitrary and unreasonable

requirements,

(2) textbook and other literature describing the

natural laws controlling the various modes of failure,

and

(3) affidavits and statements verifying that (A)

the component became commercially “impossible” in

1979 and (B) the Command had permitted anyone

but MeQuiston to substitute a non-conforming part

thereafter.

However, MeQuiston’s submissions went apparently un-

noticed because of a clerical error at ASBCA after they

were received.

ASBCA’s opinion upholding the contracting officer's

unqualified right to terminate for penalties is set forth in

Appendix “B’’. Instead of concentrating upon the stat-

utes and procedures which the contracting officer admit-

ted violating, the opinion cited the Board’s lack of

knowledge regarding facts necessary to verify the impos-

sibility to produce, and even a lack of knowledge about

the physical laws alleged to have dictated the alleged

production impossibility.

Inasmuch as ASBCA based its reasoning upon con-

tested facts, rather than upon the law and agreed facts in

the manner prescribed for summary judgments, MeQuis-

ton requested a rehearing and cited the contractual right

to present witnesses on his behalf. ASBCA’s denial of

rehearing is set forth in Appendix “C’’, affirming inter

alia over MeQuiston’s objections:

(1) Despite the record proving that only the Com-

mand was permitted to present witnesses, ASBCA

held that “appellant’s allegations that it did not have

an opportunity to present its ease is totally without

merit.”

(2) Ducking MeQuiston’s legal argument (that

beeause DPA prohibited processes & penalties ex-

cept as specified by DPA, the Command's *Default”

clause was invalid if the Command had invoked DPA

in solicitation & contract), ASBCA held “the con-

tractor must establish a causal connection between

the operation of the priority system and its delay or

failure to perform.”

(3) Referring to the failure of the Board to ad-

dress the Command’s violations of procedures and

the attendant “taking” of MeQuiston’s liberty and

property without just compensation nor due process,

the Board responded, ‘‘the issues in this ease are

those arising under appellant's (mandatory-accept-

anee) contract and the mutual contractual rights and

obligations of the parties. We do not reach the

constitutional issue of “‘liberty’, as appellant at-

tempts (sie) to define it, nor are we concerned with

the procedures of the Administrative Procedures Act

since we are proceeding under the Contract Disputes

Act and the Board’s Charter and Rules.”

3. Action in Court

During the pendeney of the administrative review,

Congress enacted in 1982 the Federal Courts Improve-

ment Act (FCIA), P.L. 97-164, severing the trial section

of the Court of Claims by amending 28 U.S.C. § 1491 and

suggesting that the judicial power of the United States

could be exercised by judges other than those prescribed

in Article III. FCIA essentially eneored the. adjudicatory

scheme Congress enacted in the Bankruptey Reform Act

of 1978, in which the judicial power was to be exercised

by judges other than per Article ITI.

Only injuries of less than $10,000 remained triable per

Article III, according to FCIA and 28 U.S.C. § 1346(a).

FCIA might have prevented MecQuiston from bringing

this transitional action to any Court of the United States,

but 28 U.S.C. § 1295 provided jurisdiction in the new

Court of Appeals for the Federal Cireuit because the

contracting officer in 1980 referred the administrative

review to the Board of Contract Appeals.

The complaint argued that the “restrictive” theory of

sovereign immunity, adopted formally by Congress in

1976 and approved by the President in P.L. 94-583,

prevented the United States from asserting sovereign

defenses and tacties denying the Constitutional access to

the judicial power, in disputes involving its ‘‘private”

commercial operations such as government contracts. It

also alleged that Congress designated the Court of Ap-

peals for the Federal Cireuit (CAFC) to hear the eon-

tract dispute, and that the Constitution required that the

ease should be heard de novo by a judge of the United

States, but that if it was more appropriate 28 U.S.C.

§ 1631 permitted the CAFC to assign the case to a

District Court for trial.

MeQuiston pleaded that in lieu of the CAFC’s deelar-

ing FCIA unconstitutional, because FCIA withdrew the

provision for trial of facet by an Article III judge, it was

possible for CAFC, to decide it possessed the inherent

ability to hear and decide factual issues as the court of

first impressien. If so, only a modicum of FCIA’s lan-

guage need be severed. This use of severability avoids

paralyzing contract disputes and applies with this Court's

severability doctrine as prescribed in J.N.S. v Chadha,

asian (1983).

Accordingly, MeQuiston’s “transitional” suit was

framed as a verified, ‘‘original” complaint referring to the

Board’s opinion as merely the required exhaustion of

administrative remedy that was not at all binding on the

court, rather than framed as an appeal. In Memorandum,

MecQuiston offered Northern Pipeline” and its progeny as

authority for the unusual procedure and the reason why

the ordinary standard of review was inappropriate to this

action.

The complaint alleged, inter alia, that MeQuiston suf-

fered actual contractual injury after exercising his first-

amendment right to notify the Government of unlawful

acts by government employees, and that the Command

“Northern Pipeline v Marathon Pipe Line, 458 U.S. 50 (1982).

had used DPA and procurement regulations unlawfully,

damaging MeQuiston as a direct consequence.

Per Appendix “D”, CAFC on January 24, 1984 denied

MeQuiston’s motion to join other parties than the United

States as defendants in the action. It also refused sub

silentio to certify the denial for immediate review by this

Court.

Per Appendix “E”’, CAFC on July 20, 1984 denied

McQuiston the trial he demanded, deciding that case law

of this Court (antedating P.L. 94-583 (adoption of ‘‘re-

strictive”’ theory) and Northern Pipeline (requirement for

de novo review) ) prevented MeQuiston from being heard

de novo by an Article IIIT Court.

The Court of Appeals implicitly decided that the

agency party to a government contract was authorized to

decide liability and penalize any contractual partner any

amount prescribed by the agency party.

The court further decided that MeQuisten willfully

violated DPA (and could not retain its protection) by

delivering to the Command’s depots in an order the Court

assumed was ‘‘wrong’’, but the court neglected to con-

sider whether the order of delivery might well have been

proposed or sanctioned by the Command and therefore

could have been executed by MeQuiston in good faith.

Citing only a DPA regulation pertaining to multi-

agency resolutions of “impossible” scheduling, CAFC

additionally failed to establish a factual basis for conelud-

ing that MeQuiston’s deliveries were impossible when

scheduled, a fact ASBCA rejected before, rather than

being subjected to disrupting events thereafter. But the

Court nevertheless concluded that MeQuiston’s deliver-

ing on more than one contract under the control of a

single contracting officer and in the order that actually

occurred ‘‘was sufficient to break any pattern established

by the Government (sic) in liberally granting extensions

of time for appellants’ performance because of supplier

difficulties.”

The Court decided that the Command's abuse of pro-

curement regulations, by which the termination for de-

fault was effected and the penalties were imposed, should

not be questioned netwithstanding that “abuse of ageney

diseretion (sic) ean be the subject of board review if it

pertains to a matter otherwise within the board's

authority.”

The Court also decided that ‘In view of the above, it is

unnecessary to reach appellant’s contentions of violations

of civil rights and constitutional torts.”

A timely request for rehearing and suggestion of re-

hearing en banc was denied September 5, 1984, per

Appendix “A”.

REASONS FOR GRANTING THE PETITION

Terminations for Default have had a disparate impact

on Small Business, notwithstanding Congress’ granting

them special protection per 50 U.S.C. App § 2151(b)

beeause they constitute the backbone of the Defense

Industrial Base. But when a military ageney is permitted

to coerce contracts from a small business by using (1) the

threat of sanetions per DPA and (2) the promise of

special assistance, then the ageney ought to adhere to

statutory restraints, rather than leaping to impose penal-

ties benefitting the agency without even a modicum of the

process prescribed by the coercive statute. The courts

should not permit an ageney to manipulate DPA offen-

sively without respecting the immunity DPA extends to

those caught in its web. Yet this 1s exactly how DPA was

used against MeQuiston by the Command.

The time is now ripe for this Court to issue a writ of

certiorari in a case involving abuse of DPA by an ageney,

because after some 34 vears of practice, under which the

case law in Cireuits hearing civil-rights cases has pro-

fected DPA contractors, CAFC has unequivoeally dis-

agreed with granting DPA protection. There is now a

major split between the Cireuits.

Small Businesses cannot afford to bring injustices to

the Supreme Court for redress, especially after the

ageney has used DPA (as is frequent) to put them out of

business. This petition provides this Court with an over-

due but rare opportunity to decide whether an agency

party toa DPA contract has a status more privileged than

any other person, which privilege permitting the agency

to overrule statutes and regulations protecting the other

parties to the contract.

IT IS CONSTITUTIONALLY IMPERMISSIBLE FOR

A COURT OF THE UNITED STATES TO REFUSE

TO ADJUDICATE, AT FIRST IMPRESSION, THE

FACTS AND LAW FOR A PARTY TO A UNITED

STATES CONTRACT IN DISPUTE WITH AN-

OTHER PARTY TO THE CONTRACT.

This Court in Northern Pipeline fully deseribed our

Founding Fathers’ abhorrence of adjudicators capable of

being controlled by one party to a dispute, and that the

abhorrence spawned the prolubition in Article II]. But

Northern Pipeline decided a jurisdictional dispute per-

taining to the Bankruptey Reform Act, so this Court's

commentary therein regarding adjudication of United

States contracts was merely dicta.

Nevertheless, the parallel is unavoidable between the

Bankruptey Reform Act and the Federa) Courts Improve-

ment Aet, P.L. 97-164, regarding Congress’ unconstitu-

tional delegation of the judicial power to an ineligible

adjudicator. The Court’s dicta in Northern Pipeline per-

taining to United States contract disputes becomes con-

trolling here.

But MeQuiston did not request adjudication by a con-

stitutionally-ineligible adjudicator. To the contrary, Me-

Quiston presented the controversy to a duly-constituted

Court of the United States, which Court Congress in 28

U.S.C. § 1295 specifically designated to hear contract

disputes, Thus the Constitutional issue narrows to how

that Court should form its decision.

Obviously an adjudicator cannot be said to have “de-

cided” something if the adjudicator is controllable by

someone else. That is why Article III insists on the

economic independence of the actual adjudicators. And

nothing in FCIA means Congress intended to withdraw

the Article II] judicial power from contract eases. And

neither Congress nor any other Branch may appropriate

the power of another Branch. I.N.S. v Chadha, US.

. 91 LW 4907, 4919 (1983); Springer v Philippine

Islands, 277 U.S. 189, 203 (1928); Youngstown Co. v

Sawyer, 343 U.S. 579 (1952).

It is not surprising in view of Amendments IX and X

that Justice Jay in Chisholm v Georgia, 2 U.S. 419 (1793)

and Georgia v Brailsford, 3 U.S. 1 (1794) clearly articu-

lated the proposition that the citizens, not the Executive,

of the United States were the United States; accordingly,

citizens should be able to invoke the judicial power of the

United States against sovereigns, and sovereigns after

being so summoned within the court’s jurisdiction should

be treated with no more deference than any other litigant.

But there emerged a more prudential version of standing

after the Siates swiftly responded with the 11th Amend-

ment, making some ‘“‘sovereigns’’ immune from summons.

President Jackson's famous refusal to enforce the Su-

preme court’s decision in Worcester v Georaia’® provided

further fuel. The stricture of Article II Section 3, that the

President shall “‘take care that the laws be faithfully

executed”, thereafter relied simply on entreaty, since the

President was in control of the Army.

Gradually, this Court refined its prudential theory,

. . , .

depending upon the Executive's consent to the action

before the court would entertain a suit, with adjudication

yermitted only according to the terms and processes that

were specifically consented to by the Executive.

The Court’s prudential deference to the “dictatorship

of the Exeeutive’’ was anchored on two observations:

* 310.5. 515(1832). “John Marshall has made his decision; now let

him enforce it.”

(1) The Magna Carta was obtained not by judicial

ruling but by foree of superior arms, and the United

States judiciary possessed no arms to enforce its

decisions. Thus the judiciary required the Execu-

tive’s cooperation, if opinions of the Court were to

have any practical force and effect.

(2) The Exeeutive and Legislative Branches act-

ing in eoneert could contravene the Constitution

unhindered by any judicial comment intended as a

restraint; nor would the Exeeutive be removable for

contempt of court in such circumstances.

But these prudential considerations should not deter

this Court in the case at bar, for reasons discussed below.

Congress has never indicated that it would support the

Exeeutive in an argument over Executive (Sovereign)

immunity regarding the Executive's commercial activi-

ties. By enacting the Tucker Act, Congress provided a

complete waiver of “sovereign immunity” regarding con-

tract disputes. See, e.g., U.S. v Mitchell (Mitchell IT),

U.S. , 91 LW 4999 (1983), where the Court

sald:

“In at least two recent decisions this Court explicity

stated that the Tucker Act effects a waiver of sover-

eign immunity. *** The existence of a waiver is

readily apparent in claims founded upon ‘any express

or implied contract with the United States.’ 28

U.S.C. § 1491. The Court of Claims’ jurisdiction over

contract claims against the government has long

been recognized, and government liability in contract

is viewed as perhaps ‘the widest and most unequivo-

cal waiver of federal immunity from suit.’ *** The

same is true for claims founded upon executive regu-

lations. Indeed, the Act makes absolutely no distine-

tion between claims founded upon contracts and

claims founded upon other specified sources of law.”

51 LW at 5002.

Thus for any contract consummated before FCIA was

enacted in 1982, Congress clearly provides no intent to

support the Executive in a plea of immunity. There is no

reason for prudence regarding this 1979 contract dispute.

Moreover, FCIA contains nothing to support a claim

that it was not accidental when Congress, in reorganizing

the Court of Claims, broke the express link providing

Article III Judges with oversight of United States con-

tract disputes; nor is there any other indication that

Congress meant to withdraw the constitutionaliy-pre-

scribed relief. For example, when it mended the unconsti-

tutional language in the Bankruptey Reform Aet,

Congress conformed the Act as prescribed by Article II]

and Northern Pipeline, rather than by withdrawing the

Article III relief. Undoubtedly Congress would respond

similarly for FCIA because of the parallel between the

two Aets. Moreover, most proceedings upon which FCIA

focused are constitutionally justiciable in the Legislative

Court provided by FCIA, because those proceedings will

not require the exereise of the judicial power of the

United States.

Nor should the foree of the Executive’s superior arms

suggest caution, as it did in the time of President Jack-

son. While in Lynch v U.S., 292 U.S. 571, 581 (1933),

this Court retained the rationale of Hamilton’s Federalist,

No. 81, saying “The contracts between a Nation and an

individual are only binding on the conscience of the

Sovereign and have no pretensions to compulsive force.

They confer no right of action independent of the sover-

eign will’, nowadays the Executive regularly accepts

adverse court decisions, even those affecting the exercise

of military foree. See, e.g, Youngstown Co. v Sawyer, 343

U.S. 579 (1952) (adjudication against Executive who

seized mills using military force); New York Times v U.S.,

403 U.S. 713 (1971) (adjudieation against Executive

who intended to suppress adverse military data); U.S. v.

Mitchell, supra (adjudication against Executive for

breach of duty).

Moreover, after Congress ratified in P.L. 94-583 the

“restrictive” theory of sovereign immunity in 1976, as it

was explained in H. Rep Report 94-1487 (1976 U.S.

Code Cong & Adm News at 6604), there is no basis for

this Court to reach for sovereign immunity in actions over

“private” or commercial contracts (jure gestionis) of

United States agencies. The Executive rejected such im-

munity as early as 1952, issuing the ‘‘Tate Letter” (26

Dept State Bull 984), by which “sovereigns” no longer

could retain the ability to repudiate their contracts as

described in Lynch and The Federalist.*

Furthermore, government contracting today is a giant

operation which produces some 12 million contracts every

vear. The sheer volume renders it impossible for the

Executive to monitor the aets of every contracting officer,

and mistakes will oceur. Some of these mistakes, perhaps

involving DPA, will entangle lines of authority; modern

Management Theory will render the Executive unwilling

to extricate itself without the help of the judicial power of

this Court. Therefore, the fact that the Executive formally

“opposed” the case below shouldn’t raise a separate

barrier to a writ of certiorari.

Despite the benign portents, CAFC plainly refused to

adopt MeQuiston’s constitutional argument releasing

that Court from the prejudicial constraints of the Board.

CAFC cited as authority only a decision of this Court”

antedating congress’ adopting the “restrictive” theory.

* Noticed in Verlinden v Bank of Nigeria, ——U.A. ——( 1983).

"U.S. v Utah Construction Co, 384 U.S. 394 (1966)

In certain factual settings, binding the Court to the

influence of a non-party would be appropriate. For exam-

ple, amendment VII prescribes fact-finding by a jury, at

the parties’ option in such eases, and prohibits a court

from re-examining a fact tried by such jury. Likewise, the

parties might refer their dispute to a mutually-acceptable

arbitrator, which need not be a Court of the United

States. But when a ease is “assigned from Article III

jurisdiction to another forum, both the rights of the

parties and the relations between the separate branches

of the government are implicated.” Pacemaker v In-

stromedix, 725 F2d 537, 541 (9 Cir 1984) (en bane). Ina

DPA mandatory-acceptance contract, elicited from one

party by threat of punishment, clearly no contract clause

of the mandating party can be ealled consensual for the

purpose of establishing waiver of Article III protection.

“Waiver of personai :ights must be freely and voluntarily

taken.” Pacemaker at 543; Accord, Wharton-Thomas v

US., 721 F2d 922 (3 Cir 1983); Ford v Estelle, 740 F2d

374 (5 Cir 1984).

MeQuisten is subject also to the laws of California.

California recognized the pernicious temptation of sover-

eigns to provide for “arbitration” by personnel controlled

by the sovereign. Accordingly, California Civil Code

§ 1670 specifically invalidates any contract clause by a

publie ageney which would permit the public ageney’s

employee or agent to arbitrate a dispute arising under

that contract, and prescribes mutual assent to remove any

dispute from a court of competent jurisdiction.

By its contrary decision in the case at bar, CAFC set

itself apart from all other Circuits which have considered

the issue of non-consensual removal, and raised a disa-

greement with this Court’s dicta in Northern Pipeline.

Unless this Court harmonizes the split in the Circuits,

some 12 million contracts per year will be saddled with a

LA Mae hm

ae RM aie 80 00 ot

withdrawal of their constitutional rights. The only remedy

left would be if the contract disputants are able to divide

their claims into separate actions of less than $10,000

each and to thereby avoid the anomalous CAFC.

Therefore, every prudential consideration in the ease at

bar urges this Court to issue the writ of certiorari and

settle the first question.

IT IS IMPROPER FOR ANY PARTY TO A

MANDATORY DPA CONTRACT TO IMPOSE OR

ENFORCE ANY NON-PERFORMANCE PENALTY

EXCEPT AS PRESCRIBED BY DPA ITSELF.

This issue was heretofore decided in the affirmative by

every court to whom the question was posed since World

War I, ineluding the Court of Claims. However, CAFC’s

opinion in the case at bar departed from those prior

decisions. Because agencies unilaterally demand penalty

clauses as a matter of course in over 12 million of their

DPA contracts every year, and DPA forces contractors to

accept those contracts under pain of imprisonment and

other penalties, the validity of an agency penalty clause in

a DPA eontract is a substantial question which has

created a significant split between the cireuits. It is only

resolvable by means of a writ of certiorari by this Court.

Hornbook law prefers the interpretation of Circuits

other than CAFC, and MecQuiston testified and offered

documents showing that he relied on his prior DPA

experience, which of course followed the hornbook law,

but the Command defended by advancing the proposition

that the hornbooks are legally mistaken. Thus the ques-

tion was suitable for summary judgment because it is not

fact-bound.

If this Court decides that a party is free to preseribe

penalties other than the law authorizes, in a contract

which the law authorizes it to foree upon another party,

then the Command was ecorreet in its position,

If this Court decides that a party may not prescribe

penalties in such contract except as per statute, then

MecQuiston was correct.

Congress intended that DPA will keep the United

States militarily prepared and defensible, by abrogating

the right to refuse to sell materials and services actually

required for National Defense. The Congressional intent

is clear not only in the statutory language but also in the

legislative history.°

It is unquestionable that the United States has the

irresistible right to take property per Amendment V of

the Constitution. Taking property for National Defense

"See, e.g, 50 U.S.C. App §§2071(a), 2156(a), and 2157. See alse

Hearing on DPA Extension, 89th Cong Senate Banking Committee,

June 23, 1966, testimony of Asst Adm for Industrial Mobilization:

“Mr. Bertsch: We set aside, Mr. Chairman, 13 percent of the

domestically refined copper, copper refined from domestic ores,

which is 36-cent copper, for defense use, so as to assure 36-cent

copper for the defense effort.

“Senator Douglas: Suppose the companies don’t want to sell?

“Mr. Bertsch: They have to sell.

“Senator Douglas: They have to sell?

“Mr. Bertsch: They have to sell to the military, under our priorities

system.

“Senator Douglas: Even though they can get 62 cents in the open

market?

“Mr. Bertsch: They must sell under our priorities system. They

must fulfill our defense needs under Title I of the DPA. Every

order that is issued by the Department of Defense carries a priority

rating, and it must be fulfilled.” Hearing, at 16

through the medium of a DPA ecentraet is merely an

exercise of that Fifth-Amendment right.

A restatement of the question MeQuiston presents to

this Court is therefore: May an ageney penalize a person

unilaterally because the person does not possess what the

ageney wanted to take in the name of the United States,

or must the ageney defer to the proeess and penalty

preseribed by the United States in such situations?

Less than mine months after DPA was enacted, the

definitive hornbook case decided this question, In Aeorn

Tron v Bethlehem Steel, 96 F Supp 481 CELD. Penn 1951)

Bethlehem Steel refused to supply material to oa

fabricator, damaging the fabricator whieh had invoked

DPA with its order. The fabricator sued for injunetive

and compensatory relief, alleging non-performanee of

contract. But the Court deeided that the contractural

relief specified by the ordering party in the DPA contract

would be inapplicable, because of the duties imposed upon

the supplier by the Act itself. Remedy would have to be

found within the statute.

MeQuiston argued below that Acorn controlled and

invalidated the Company's penalty elause in the contract

imposed upon MeQuiston (82.0 VEOR. 7-108.11, 1969

AUG), beeause the clause did not conform to the DPA,

While the Command was free to offer and enforee eon

tracts containing such a clause to non-DPA contractors,

it was prohibited from enforcement except in accordance

with DPA because the Command invoked DPA beginning

in the solicitation papers. MeQuiston argued that) the

solicitation, containing referenee to DPA authority, was

an actual and/or potential Sth-Amendment taking; events

flowing from the solicitation were colored thereby and

thus protected by statute.

Acorn clearly controls such a ease between ordinary

parties. It clearly and suecinetly decided that Bethlehem

had violated the duties imposed upon it by the Act and

regulations, but it pointed out that the Act specifically

prohibited the actual parties to a DPA contract from

imposing penalties upon each other for nonperformance,

notwithstanding any violation.

The Acorn decision remains hornbook Jaw 33 years

later. The Command argued, and the argument was up-

held by CAFC in the ease at bar, penalties impesed by an

agency that is party to a DPA contract have validity even

though penalties imposed by other parties to the contract

do not. Thus, opined CAFC, if MeQuiston delivered parts

on a United States contract for a Command project before

MeQuiston delivered parts on another United States con-

tract for the same Command project, then regardless of

the circumstances of the deliveries the Command is enti-

tled to assess such penalties as it determines are appro-

priate. But MeQuiston would be unable to penalize in

turn the non-performing supplier, because of Acorn; he

would be left with no redemy at all.

It should be obvious that CAFC’s new interpretation of

CAFC reads important language out of the statutes and

undermines an involuntary contraetor’s 5th-Amendment

rights to just compensation and due process of law. This

Court has never permitted these rights to be lightly taken

away.

The controversy in Acorn was between two parties,

neither of which was a United States agency. However,

Acorn as plaintiff insisted that it was representing the

interest of the United States by its action, and therefore

the Acorn court analyzed DPA and the legislative history

as if a contracting agency had filed the suit. The Court

nevertheless prohibited penalties to be imposed except as

prescribed by the statute.

United States agencies party to DPA contracts are

specifically defined as ‘‘persons”’, made subject all the

requirements in the Act per 50 U.S.C. App § 2152(a)

(except ‘no punishment provided by this Act shall apply

to the United States’), and are not entitled to deference

and extraordinary powers. If this Court on writ of certio-

rari applies the Acorn doctrine to the case at bar, it will

merely affirm a proposition which heretofore has been

accepted as law in every cireuit but CAFC, but whieh

heretofore has not been accepted as law by government

agencies party to DPA contracts.

In rendering its opinion, CAFC relied upon no case

law;’ it merely referred to a textbook dealing with DPA as

if it were a separable appendage in government contracts.

But if a party has been coerced by DPA’s threat of fine

and imprisonment into a contract to deliver something,

and a contract clause makes the party responsible for the

performances of whatever materialmen are specified and

controlled by the forcing party, then the extent of DPA’s

taking extends far beyond the property of the prime

contractor. Therefore, DPA cannot be treatable as an

appendage; it is an integral part of, and controls, the

party’s every act or failure-to-act at every stage of the

solicitation and contract. Even the party’s ability to

demand quotations from materialmen is predicated upon

DPA, just like the Command's ability to demand the

quotation from the prime contractor is predicated upon

DPA. And 50 U.S.C. App § 2157 speaks to the power to

elicit responses to solicitations when it prescribes:

‘‘No person shall discriminate against orders or con-

tracts to which priority is assigned *** by charging

higher prices or by imposing different terms and

conditions *** or in any other manner.”’

‘Because 41 U.S.C. § 322 denies legal finality for any Board decision,

CAFC was not “relying on case law” by quoting Board “‘authorities’’.

Moreover, DPA anticipates that certain contracts will

eventually prove impossbile to complete. In such eases, 50

U.S.C. App §2155(b) provides that the “immunity

granted herein from prosecution and punishment and

from any penalty and forfeiture shall not be construed to

vest in any individual any right to priorities assistance, to

the allocation of any materials, or to any other benefit

which is within the power of the President to grant under

any provision of this Aect.’’ In other words, whenever

MecQuiston found a barrier to production, the President

was not required to remove the barrier, but neither did

DPA permit the Command, nor MeQuiston, to cancel the

uncompleted balance for default and thereby impose pen-

alties and forefeitures because of that barrier. Within

those limits the parties were free to seek alternative

remedies, such as a termination for convenience, relaxa-

tion of technical and contractual barriers, or voluntary

priorities assistance.

The Acorn court properly refused to allow the interest

of the United States to be adjudicated or prosecuted any

party to the contract in dispute. There is a basie unfair-

ness in permitting one who covets another's property to

sit in judgment over the other and thereby to take the

coveted property. According to the Acorn court, after

contracting agencies pleaded for such DPA power Con-

gress specifically withheld it, entrusting that power to a

separate, central agency not under the control of the

Defense Department. In fact, DPA itself is controlled by

the Banking committees, not the Armed Services commit-

tees of Congress, an extra precaution against unfair

treatment of contractual partners by the procuring

agencies.

Moreover, DPA is designed to react quickly to chang-

ing events affecting the National Defense. Hidebound

procedure could result in our Country’s defenders being

overrun by an advancing enemy. Thus, courts always

recognized that informality of procedure and voluntary

cooperation are linchpins of DPA contracts. See, e.g,

Eastern Airlines v McDonnell Douglas, 532 F2d 957, 981-

998 (5 Cir 1976), and eases cited therein. Without

protective immunity an involuntary contractor could eas-

ily be bilked by agencies issuing informal instruciions

which later the agency might have forgotten while acecus-

ing the contractor of wrongdoing. Clearly, the Acorn rule

is necessary to safeguard the National Defense from

being sabotaged by the ordinary confusion connected with

large procurement agencies.

Reviewing the case at bar, it is easy to see why the

Acorn rule is appropriate here. The Command divided its

stock-in-trade between several depots. For the purposes

of replenishment, each depot’s reorders were processed as

separate purchase requisitions. Nevertheless, all require-

ments were coordinated by a single contracting officer

and combined for actual procurement from vendors. One

depot’s requisition was unfortunately excluded from Me-

Quiston’s 1978 contract, necessitating an advertisement

and contract in 1979 for the single depot just to correct

the mistake. That depot’s contract was necessarily re-

ceived later than the other. But thereafter, the depot

apparently needed an earlier delivery. Nothing in DPA

prevented the contracting officer from asking MeQuiston,

to deliver to the needy depot first, telephonically.

According to DPA, impossible orders must be sched-

uled in the order of receipt, but all other orders can be

scheduled in any order. Idiotically interpreted, this might

seem to provide a bar to revising depots’ order of delivery

onee the contracts have been issued, even though the

materials are for the same project. But obviously the

contracting officer will telephone the contractor, tell the

contractor to revise the order of shipment, and the con-

tractor will comply with the telephone request. Moreover,

at the time of shipment the government inspector will

check for the proper order of shipment. The inspector will

certify on DD Form 250 (required by the Command's

contract) that the shipment complies with the terms of

the contracts, including shipment in the desired order, or

else the government will not accept the material.”

In the case at bar there was evidence that there was

displeasure between contracting officer and MeQuiston.

MeQuiston had ‘“‘whistleblown” the contracting officer,

not once but several times and over a lengthy period in

1978-79. The contracting officer thereafter was required

to engage MeQuiston in the Command's further commer-

cial activities despite the office’s efforts to the contrary.

How easy it would be for that office to retaliate against

MeQuiston for penalties, by placing phone messages to

MeQuiston and his known sole materialman! The ensuing

default penalty if unilaterally assessable would relieve the

contracting office of the necessity for dealing thereafter

with this contractor, who was now a “troublemaker”. How

easy to move against this professional engineer, who was

known to have no employees liable to be witnesses, and

who was known to be subject to suspension of his profes-

sional license for such a ‘“default”’!"

But as Acorn decided, a person is not liable for any

“act or failure to act’, except after being duly found by

specified process to have wilfully violated the Aet. And 50

“The Board relied on evidence also proving that the inspector

approved the order of shipments, and accepted the material.

"The actual facts were never brought forth. For purpose of showing

why McQuiston needed the statutory protection, it matters little where

the truth lies.

U.S.C. App § 2156(b) preseribes that “all litigation aris-

ing under this Act or the regulations promulgated there-

under shall be under the supersivion and eontrol of the

Attorney General.”” It furthermore specifies that civil

actions in such eases shall be conducted in District

Courts, which shall have jurisdiction of “all civil actions

under this Act to enforee any liability or duty created by,

or to enjoin any violation of, this Act, or any rule, regula-

tion order, or subpena thereunder.” therefore, the Com-

mand should have had no standing to proscecute, enforce,

or cause to enforce the penalty that is ealled “termination

for default” against MeQuiston’s DPA contract, and cer-

tainly the Command was not authorized to enforce such

penalty by convening a proceeding in ASBCA.

Acorn said that no DPA party could assess penalties in

lieu of the Distriet Court:

“Had the Congress intended the result contended for

by plaintiff, it would have been an easy matter to so

provide and in very simple words. That this was not

the intent of the Congress is apparent from the Act

as a whole and from the legislative history as gleaned

from conference Reports and the Congressional Re-

cord. The plain meaning of the words used is wholly

consistent with the policy expressly declared by the

Congress in Section 2, 50 U.S.C. App § 2062." 96 F

Supp at 482.

It further deelared:

“Since the Act imposes duties on the defendant in

derogation of its common law right to sell or refuse

to sell to anyone for any or no reason, the Act must

be strictly construed. Where a statute imposes new

duties or creates new rights, the penalties and reme-

dies must be found within the statute. *** From the

statute and the legislative history it is apparent that

Congress sought to and did effectively limit the

enforcement of the Act and effectuation of its policy

to the President and those to whom he duly dele-

gated his powers. *** If the plaintiff is aggrieved by

defendant’s conduct his recourse is the National

Production Authority and, if cireumstanees warrant,

through it to the Courts.” 96 F Supp at 482.

Moreover, because under the “restrictive” theory of

sovereignty the Command is not sovereign when it en-

cages in commercial contracting for-profit, the Command

could not possibly lay claim to the ‘‘publie” enforcement

powers of the Attorney General specified in DPA.

Therefore, every prudential consideration in the case at

bar urges this Court to issue the writ of certiorari and

settle the second question.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted,

B. ALAN DICKSON

KAUFMAN, FRANKLIN & DICKSON

Attorneys for Petitioner

Date Deeember 3, 1984

A-1

Appendix A

United States Court of Appeals

for the Federal Circuit

No. 84-578

J. H. MeQUISTON,

Appellant,

VS.

THE UNITED STATES,

Appellee.

ORDER

A petition for rehearing and a suggestion for rehearing

in bane having been filed in this ease,

UPON CONSIDERATION THEREOF, it is Ordered

by the court that the petition for rehearing be, and the

same is hereby, Denied.

The suggestion for rehearing in bane is declined.

FOR THE COURT

GEORGE E. HurciiNnson,

CLERK

Date September 5, 1984

A-2

Appendix B

ARMED SERVICES BOARD OF CONTRACT

APPEALS

ASBCA No. 24676

Appeal of — MeQuiston Associates

Under Contraet No. DAAHO1-79-C-0179

APPEARANCES FOR THE APPELLANT:

Mr. J. H. MeQuiston, President

APPEARANCES FOR THE GOVERNMENT:

Colonel C. T. Lakes, JAGC |

Chief Trial Attorney

Major W. Erie Pedersen, JAGC

Trial Attorney

OPINION BY ADMINISTRATIVE JUDGE GOMEZ

This timely appeal is from the default termination of a

supply contract for pulse forming networks, radar compo-

nents of the Hereules Missile System. Appellant, having

elected to proceed under the Contract Disputes <Aet,

contends that its failure to deliver was excused because

respondent's specifications were defective. Appellant also

argues it is further exeused by respondent’s failure to

follow the eorreet regulatory procedure for contract ter-

mination and for priorities assistanee, and by respon-

dent’s interference with its subcontract relationships.

Finally, appellant contends that it was entitled to a

longer period for contract performance insofar as respon-

dent led appellant to believe that the contract delivery

date would be extended as was done on earlier contracts.

Respondent rejects all of these contentions arguing sim-

ply that appellant’s failure to deliver the supplies within

the contractually specified time was within its control and

not without its fault or negligence.

ae |

A-3

FINDINGS OF FACT

Background

1. Contract DAAHO1-79-C-0179, in the amount of

$168,588.00, was awarded to appellant on 20 December

1978. The contract required appellant to deliver 216

pulse forming networks within 300 days of award, i.e., by

16 October 1979 (R4, tab 1). By 17 August 1979,

appellant had delivered and the Government had ac-

cepted 112 networks (R4, tab 55), leaving a balance due

in the two remaining months of 104 units; these were not

delivered by the 16 October 1979 delivery date. On 7

November 1979 the Contracting Officer issued a show

cause letter (R4, tab 15), and the contract was termi-

nated for default on 17 December 1979 (R4, tabs 2, 24).

Appellant has timely appealed that decision. (R4, tab 27)

2. The history of the procurement of the pulse forming

network goes back to 1964. Prior to award of the instant

contract appellant had already participated in the earlier

phases of the procurement history of the network. Be-

tween 1964 and 1980, 15 contracts involving more than

2100 networks were awarded; at least one, and sometimes

two, contracts were awarded in a single year, except for a

hiatus in 1969 and in 1975-1977, for quantities ranging

from 20 to 300 units. During this period, the record

indicates that while Western Electric was the original

supplier of the networks, appellant received the major

share of awards (R4, tab 76; tr. 1618). Four contracts

were awarded to appellant between 1964 and 1966 and

six between 1971 to 1974; these were either advertised or

negotiated fixed price contracts. During the period be-

tween 1967 and 1970, Western Electric Company re-

ceived three contract awards of the cost-plus-fixed-fee

type. All subsequent contracts between 1971 and 1979

were awarded to appellant (R4, tabs 68-70). A summary

of the procurement history follows:

Year

1964

1965

1966

1967

1968

1969

1970

1971

1972

1973

1974

1975

1976

1977

197%

1979

1980

Contract

DA01-021-AMC-

11747(Z)

DA01-021-AMC-

13220(Z)

DA01-021-AMC-

15295(Z)

DAAII01-67-C-0808

DAAII01-67-A-0024

DAAH01-67-A-0024

DAAG25-71-C-0230

DSA900-72-C-2372

DSA900-72-C-7536

DSA900-73-C-5014

DSA900-74-C-1816

DSA900-74-C-3273

DAAIH01-75-C-0073

DAAH01-79-C-0179

DAAII01-79-C-0621

DAAII01-78-G-0018

AFP

CPFF

Qty Unit Price Contractor (sub)

47 $ 517.33 MeQuiston

(Jennings Radio)

154 411.30 MeQuiston

(ITT Jennings)

80 443.00 MeQuiston

295 417.00 MeQuiston

216 681.00 Western Electric

17) 682.00 Weatern Electric

39 1456.07 Western Electric

48 697.34 MeQuiston

(ITT Jennings)

20 897.66 MeQuiston

(ITT Jennings)

122 734.00 MeQuiston

74 682.00 MeQuiston

(ITT Jennings)

300 638.00 MeQuiston

(ITT Jennings)

109 739.70 MeQuiston

(Kilovac)

216 780.50 MeQuiston

b ( Kilovac)

65 946.20 MeQuiston

(Kilovae )

211 2200.00

. “Type of contract is abbreviated as follows:

AFP — advertised fixed price

NFP — negotiated fixed price

CPFF — cost-plus-fixed-fee

The Vacuum Relay

3. Each pulse network utilized two vacuum relays,

each of which are required to carry 8,000 volts of direct

current. The mechanical parts of the relay are enclosed in

a glass vacuum tube similar to a radio-type vacuum tube.

These relays, as noted below, presented considerable

difficulties to appellant over the range of its involvement

in the aforementioned procurements. (R4, tab 340) At

the hearing, appellant prepared a diagram of the relay

Western Electric

BEST AVAILABLE COPY

A-5

operating part substantially identical to what appears

below (exh. A-1):

(FIGURE DELETED)

4. Contract Drawing No. 9755026 depicts the specifi-

cation for the vacuum relay component originally de-

signed and manufactured by Jennings’ Radio

Manufacturing Corporation in 1964 (R4, tabs 63, 340).

In 1967, the drawing was revised after Jennings was

acquired by International Telephone and Telegraph Cor-

poration (ITT) and became a division known as ITT

Jennings. There have been no changes to the drawing

since that time. (Jbid.) Drawing No. 9755026 contained

the following notes:

1.1 SOURCE OF SUPPLY JENNINGS RADIO

MANUFACTURING CORP.

* * *

JENNINGS RADIO PART NO. RBID-26N202

* * *

1.1.1 SOURCE INFORMATION IS FOR THE

CONVENIENCE OF THE PROCURING ACTIV-

ITY. IT IS NOT TO BE CONSTRUED AS RE-

STRICTING QUALIFIED SOURCES OF

PROCUREMENT.

2. REQUIREMENTS:

2.1 THIS ITEM IS THE SAME AS MANU-

FACTURER’S PART NUMBER RBI1D-26N202

EXCEPT AS STATED IN REQUIREMENTS 4

AND 5.

A-6

2.2 THE RELAY SHALL BE IN ACCOR-

DANCE WITH THE APPLICABLE REQUIRE-

MENTS OF 9006876...

* * *

3. THE RELAY SHALL MEET THE FOL-

LOWING REQUIREMENTS:

* * *

3.1.3.1 OPERATE: 68 MA

3.1.3.2 HOLD: 30 MA

3.1.3.3 RELEASE: 6 MA

3.1.4 TESTING CURRENT (SEE 9006876.

PAR. 2.1): 110 MA

3.2. AMBIENT TEMPERATURE RANGE:

3.2.1 —40°C TO 85°

3.3. CONTACT DATA:

3.3.1 MATERIAL: TUNGSTEN AND MOLYB-

DENUM

3.3.2 RATING: 10 AMP RMS, 15 KV PEAK,

60 CPS

3.3.3, A 10,000 VOLT AC RMS 60 CPS

DIEELCTRIC STRENGTH TEST SHALL BE AP-

PLIED BETWEEN CONTACTS.

3.4 STABILITY

** *

3.4.2.1 OPERATE CURRENT: +10%

3.4.2.2 HOLD CURRENT: +20%

3.4.2.3 RELEASE CURRENT: -20%

* * *

onthe.

A-7

4. FINISH

* * *

5. MOUNTING HOLES SHALL BE OMITTED

FROM THE FLANGE.

(R4, tab 63)

5. Appellant first experienced difficulty obtaining re-

lays from its vendor under its initial contract in 1964,

Contraet No. DAQ1-021-AMC-11747(Z) (tr. 1618 et

seq.). Attempting to procure the relay from Jennings

Radio Manufacturing Corporation pursuant to Drawing

No. 9755026, appellant was informed by Jennings that

Western Electric, to whom Jennings was also supplying

relays, was not procuring to that drawing. Jennings had

advised appellant that it would not furnish the relay

listed on Drawing No. 9755026, 7.e., Jennings Radio Part

No. RB1D-26N202 (R4, tab 100; exh. A-2; tr. 1640). In

this regard, Jennings had earlier quoted the following to

Western Electric:

We can comply with this specification as shown on

vour drawing, however, in order for the Jennings

vacuum relay to be in complete compliance with vour

specification, the part number as referred in para-

graph 2.1 should read RB1K-26N368 and this para-

graph should read ‘this item is the same as

manufacturers part number RB1K-26N368 as stated

in requirements four and five.’’ Under electrical data

paragraph 3.1.3.2 should read “hold eurrent 38 MA”

instead of 30 MA, and paragraph 3.1.3.3 release

current should read ‘3.5 MA” instead of 6 MA.

These changes are requested in order to eliminate

any possible rejection.

Our quotation is based on your engineering depart-

ment accepting the changes requested. These

changes in no way alter the part as specified.

(R4, tab 98)

6. Aceordingly, with respeet to appellant, Jennings

not only was ineapable of meeting the requirements it

addressed in its aforequoted letter to Western Electric,

but in addition, was not able to guarantee appellant the

68 milliamp “operate” required by paragraph 3.1.3.1 of

Drawing No. 9755026 (tr. 1641; exh. A-2). Jennings

asked for a waiver to increase that rating to 73 milliamps

(tr. 1642).

7. While Jennings advised appellant that it had been

able to obtain deviations with respect to its Western

Electric contraet, appellant would not permit any devia-

tions without first obtaining Army approval (ibid.; tr.

1640-42). Respondent first advised appellant that it was

too costly to make drawing changes, especially since the

pulse forming network was an old system about to be

retired (tr. 1619); however, appellant eventually ob-

tained the waivers which Jennings required under Con-

tract No. -11747 (tr. 1648, 1658). We note that up until

the time of the waiver, appellant obtained relays from

Jennings which indeed complied with the specifications

(tr. 1647-48). This was possible because the characteris-

tics of the relays were such that in producing such large

quantities for both appellant and Western Electric, a

certain percentage of the relays in a production run would

fall within specification requirements. Since is was pro-

ducing to a waiver for Western Electric, Jennings could

accommodate appellant with specification compliant re-

lays as long as it continued to manufacture relays for both

Western Electric and appellant under these circum-

stances (tr. 1647-1648). Contraet No. -11747 was ex-

tended to cover the delays attributed to appellant’s and

respondent's attempts to resolve the waiver issue regard-

ing Drawing No. 9755026 (tr. 1619, 1646-47, 1658).

i a ef hla

A-9

8. Contract Nos. DAQO1-021-AMC-18220(Z) AND

DAAHO1-67-C-O808, subsequently awarded to appellant

during 1965-1966, do not appear from the reeord to have

been particularly troublesome to appellant, although Jen-

nings continued to furnish the relays for these contracts

(R4, tabs 68-70). In 1967, ITT acquired Jennings which

became known as ITT Jennings. (R4, tabs 68-70, 340; tr.

1236, 1419) In 1967 and 1970, Western Electric re-

ceived award of Contraet Nos. DAAHO1-67-A-0024 and

DAAG25-71-C-0230, respectively (ibid.). While the re-

cord is silent as to what occurred under these contracts, it

is reasonable to conelude that Jennings continued to

deliver relays to Western Electric pursuant to the

aforedeseribed waivers.

9. Following the ITT takeover of Jennings Radio in

1967, the relay underwent configuration changes and the

failure rate of the relays increased to a problem level (R4,

tab 340). Appellant encountered problems with the newly

configured relay during performance of Contract No. -

2372, in particular, broken relays, air entrapment under

sealed surfaces and voltage breakdown (R4, tabs 32, 6%,

115, 117, 340; tr. 1621). Appellant was granted a time

extension of Contract -2372 for consideration of one

dollar per unit; presumably, the reasons for the delay

were these problems (tr. 1621). Regarding such

problems, on 18 July 1972, appellant communicated the

following to respondent:

A sole-source item, 9755026 relay, procured from

ITT Jennings Radio, is delaying the contract comple-

tion. ITT is having difficulty, suddenly, making ac-

ceptable parts. These items are = metal-and-glass

vacuum units and their construction is an art and is

difficult, and they are very expensive. We have pro-

cured them for this item off and on for eight vears

A-10

from this vendor and we ean say in the main the units

are good and long-lived. Lately, trouble has been

encountered when the relays are assembled and

given over-voltage tests. Several units have broken

down, apparently due to a faulty sealing of the glass.

* * *

The manufacturer has required, and is requiring,

some time to adjust his quality checks to sereen

potential defectives. Since there is a long wait after

“clean up” until one can retest with accuracy, that

waiting time, inexorably, must be permitted. How-

ever, we are, of course, pressing him to repair his

processing so that the testing is not so critical to

good production. Prior units have not exhibited the

breakdown difficulty.

(R4, tab 118)

10. As already noted, appellant received three follow-

on contracts during the 1972-1973 period; the record is

silent as to whether appellant encountered any unusual!

problems with the relays during the performance of these

contracts. During the 1973-74 period, appellant received

award of Contraet Nos. DSA900-74-C-3273 and

DAAHO1-75-C-0073 for the supply, respectively, of 300

and 109 pulse forming networks. While a large number of

the relays for these networks were delivered without

serious difficulties, the final delivery of Contract -3273

had to be extended, placing appellant more than a vear

behind the original schedule (tr. 1623; R4, tabs 68-70).

Appellant's president testified to experiencing a “‘stupen-

dous erisis” which led to the grant of the extension. In

this regard, on 12 August 1974, appellant communicated

the following to its relay vendor, ITT Jennings:

* * *

A-1]

There seems to be a breakdown in your quality

assurance inasmuch as the observations in your letter

did nothing but point out that you are not performing

the proper testing or inspection to insure quality of

product.

It is not possible to separate good and bad units

merely by applying the hipot breakdown test as you

apparently did. You will note that 9755026, to wich

these units must be built, requires standards of

workmanship, shock, vibration, temperature, etc, to

be met as well.

A brief check of our inspection records, which were

enclosed with the returns, revealed about 40 units

which were rejected for causes other than hipotting.

The fact that vou could not find fault with those units

is unsettling to us inasmuch as the units were unmis-

takably identified with other reasons for rejection

and there could be no mistaking the fact that the

requirements of 9755026 were not met.

With respect to the units with glass damage, the

damage is the direct result of the mechanical defects

that were built into the units. If you delivered units

with these defeets then you must accept responsibil-

itv when they fail.

We are convinced by our research that if, of the units

in the 40 under the discussion that were rejected for

inherent seratches and ineomplete sealing, those

units had been mounted and potted, at least 15 more

would have had glass damage. This failure mode has

been proven here to our satisfaction. Defects of this

tvpe are caught by visually inspecting the unit for

glass seratches (none permitted), incomplete melt-

ing and joining at the seals and joints, and glass

depressions causing stress raisers (non-cylindrical

A-12

glass). Units with these defects are evonsidered to fail

2.2 or 3.4 of 9755026, including 1.1 of 9006876 ....

Inasmuch as your quality-assurance is deficient, it

will not be possible to aecept at your plant until

quality is back to its former excellence. Inspection

and aeceptance will continue to be at our plant.

We will endeavor to work with your engineering,

production, and quality assurance personnel in order

to help vou as mueh as possible. But we want you to

understand that your problem is not merely one of

testing alone, but that positive cures must attack the

manufacturing defects first. However, we believe it

would not take much concentrated effort to effect a

cure.

(R4, tab 131)

11. Appellant also advised respondent of the status of

Contract No. -3273 regarding the relays on 12 August

1974:

The delivery of the 88 balance of Reference contract

will be delayed due to a production and quality

problem coneerning the supplier of a critical

component.

The supplier, ITT Jennings, has submitted the en-

closed letter in response to our letter also enclosed.

You will note that their quality assurance group has

failed to inspeet properly their defective production.

If there were no manufacturing defects, then the

failure to inspect properly would not be as serious.

However, these units are blown glass, made by arti-

sans, and the manufacture is an art, not a science, at

ITT. The art is evidently elusive at this time.

(R4, tab 35)

waneangts ase

RU iat ea os eee

A-13

12. On 30 September 1974 appellant again advised

respondent of the status of its problems with its relay

vendor under Contract -3273 indicating that ITT Jen-

nings had not been able to deliver the balance of the

relays pursuant to Drawing No. 9755026 and therefore

would not be able to complete the contract (R4, tab 37).

Appellant further advised respondent that while it had

previously requested respondent’s assistance in procuring

the relays, to date it had been unsuccessful in obtaining

such assistance. In addition, appellant, for the first time

advised respondent of a defeet in Drawing 9755026:

There seems to be a defect in the drawing and that

defect has prohibited us or you from exerting enough

pressure on the subcontractor to obtain delivery as

scheduled. Because of the advertised procurement,

there were limits on the amount of premium we could

offer in our bid, contrasted with others ignorant of

the drawing defects, in order to shore up the defects

on an independent basis.

As you know, your engineer is aware of these defects

and their effect on the procurement of this part both

for this contraet and for independent Government

spares contracts direct to the subcontractor.

(R4, tab 36)

13. Asa result of appellant’s contentions, the Admin-

istrative contracting Officer (ACO) requested technical

assistance from the respondent’s Production Engineering

Branch. On 7 October 1974, the Production Engineering

Branch sent the following response to the ACO. We quote

from the memorandum in full sinee it evidences the

respondent's contemporaneous view of the relay problems

then facing appellant:

1. General. This is in response to your request

for technical assistance on the above contract. This

A-14

office has visited the econtractor’s facilities to review

the problem. Contact was made with James MeQuis-

ton, Owner.

2. Problem Areas. There were no problems en-

countered so far as the contractor was concerned. All

data and information requested was_ provided

willingly.

3. Discussion.

a. The item under contract is a network pulse

form device for use on a radar system. There are two

relays used in each system. These relays are required

to handle 8000 volts of direct current. The contacts

in the relay are enclosed in a glass vacuum tube

similar to radio type vacuum tubes. The contractor

has been fabricating this hardware since 1964 and no

serious manufacturing problems have been encoun-

tered untii now. The relay was originally designed

and manufactured by the Jennings Manufacturing

Company and Jennings was recently acquired by ITT

under the name of ITT Jennings. Sinee ITT took

over, the product has undergone configuration

changes and the failure rate has increased to a

problem level.

b. Ordnance Corp’s Drawing Number 9755026

delineates this relay. The drawing is strictly an

envelope type drawing with minimal performance

requirements specified. The relay is more specifi-

cally identified as Jennings Radio Part Number

RB1D-26N202. Under normal circumstances a

vendor part number is sufficient for procurement

with the expectation that repeatability will occur.

Unfortunately a vendor part number and its con-

figuration is proprietary with the vendor and he

has the prerogative to change it as he sees fit

without coordination with his customers. There are

— sae to cece

A-15

indications that changes have occurred in this

instance. The contractor claims that the reject rate

has gone from an acceptable 5% to 30% or more.

c. A review of the available vendor specification

discloses vagueness and looseness which tend to

support the contractor’s explanation of what he

thinks may be causing the relay failures. The most

common failure experienced by the contractor is

the observation of a glow (fluorescence) under

18,000 VDC test. The vendor specifications 857-2,

sheet 1 of 1, indicates in the unit screening and

acceptance criteria that no fluorescence is allowed.

If the vendor is meeting this requirement and the

reject criteria develops after installation and upon

system test, it appears that the vendor test is not

adequate to assure performance in the system

application.

d. The fluorescence appears to be caused by

impurities or stray material that are not removed

when the vacuum is drawn on the tube before

sealing. It is possibly [sie] to energize the con-

tacts in the assembled relay in such a manner as to

cause this stray material to vaporize and condense

on the side walls of the vacuum tube. Thus a

vendor test might not disclose the fluorescence.

During subsequent soldering operations, the glass

wall of the vacuum tube become [sic] heated and

can cause evaporation of the stray material with a

redeposit of the material on the sapphire rod of the

relay. The same test after soldering would show

fluorescence if the stray material did exist and was

deposited on the sapphire rod.

e. The prevention of this problem can be ap-

proached in several ways so far as production is

A-16

coneerned. Better control of cleaning and decon-

tamination before drawing the vacuum is one alter-

native. The use of a “getter” in the vacuum is

another alternative. These techniques have not

been specified nor should they be imposed. The

vendor's process should be left to his discretion.

There are however quality control tests that could

be imposed to foree a vendor to produce a relay

that would not display fluorescence after

installation.

f. The existing contract with the applicable

specifications cannot control this problem. It is

recommended that the government, contractor,

and vendor get together to resolve this problem on

the current contract and the anticipated follow-on

contract. Such a meeting would serve the best

interests of all parties. If, during this meeting,

additional quality assurance procedures are deter-

mined to be necessary, equitable adjustments

should be made. The only alternative, without

having such a meeting, will result in a continuation

of the problem (i.e., high vendor rejections and

schedule delays). The contractor will be obligated

to fight the problem with the vendor with subse-

quent delinquency. Modifieations will be required

to extend schedules and other administrative

problems will oceur.

g. In order to correct this problem permanently

an update or revision to the specification should be

considered. The contractor has already initiated

with his own funds a specification from which he

feels he can control the vendor product. The con-

tractor also has been investigating an alternate

vendor as a possible source of relay supply. This

souree is Kilovae Corporation of Santa Barbara.

A er ee Ret LBL Sembee 22 a

A-17

Kilovae uses a “getter” in their product. MeQuis-

ton indicated that he was reluctant to risk antago-

nizing his only souree of supply (ITT Jennings)

without first proving that the Kilovae product was

equal to or superior to the Jennings product.

MeQuiston indicates a long term solution is [to]

revise the specification and develop an alternate

source. This reviewer suggests that the PCO con-

sider MeQuiston’s long term solution and discuss

the possibilities of submitting a proposal to pro-

duce a refined specification for the vacuum relays,

and to supply a small quantity of the network pulse

form systems with the alternate source to be evalu-

ated by the government. This recommendation

should run coneurrently with the existing con-

tracts or follow-on contracts in order to avoid

schedule delays.

4. Conclusion. This office cannot resolve the

problems that have been induced by the acquisition

of Jennings by ITT and the subsequent manage-

ment, processing and/or hardware changes. ITT

Jennings is located in San Fancisco and has been

under surveillanee of DCASR-SF DCRC-POS/ D5.

DCRL-DUPE has not obtained direct vendor input

to this problem and has not reviewed and/or dis-

cussed the problem with ITT Jennings. Although

this is a small dollar value contract, it would

behoove all parties (MeQuiston, Jennings, and

Buying Agency) to jointly diseuss increased rejec-

tion rate at the vendor level and attempt to intro-

duce the needed control to resolve the problem. A

long term approach would require a knowledge of

the future needs for the item and possibly develop

an alternate source.

(R4, tab 340)

A-18

14. After considering the aforequoted views of respon-

dent's Production Engineering Branch, the contracting

officer sent the following telegram to appellant on 27

November 1974:

IT HAS BEEN DETERMINED THAT NO CON-

FIGURATION CHANGES HAVE BEEN MADE

IN APN9755026, ARMATURE RELAY AND NO

ERRORS EXIST ON THE DRAWING. THE

PROBLEM WOULD APPEAR TO BE ONE OF

WORKMANSHIP AND QUALITY CONTROL ON

THE PART OF THE VENDOR. YOU ARE CUR-

RENTLY DELINQUENT REGARDING DELIV-

ERY OF 62 EACH OF THIS RELAY ON

CONTRACT DSA900 74 C 3273. WITHOUT

PREJUDICE TO THE RIGHTS OF THE GOV-

ERNMENT WITH RESPECT TO SUCH DELIN-

QUENCY, PLEASE ADVISE THAT IF YOU

WILL ACCEPT A NO-COST CANCELLATION OF

THE ABOVE UNDELIVERED BALANCE OF 62

EACH. REQUEST REPLY WITHIN 48 HOURS.

(R4, tab 133)

15. On 2 December 1974, appellant responded to the

aforequoted telegram as follows:

At this time, 254 units have been completed, and the

balance of 46 is so nearly complete that a cutback to

the lowest possible quantity (254) would result in

total adjusted contract price larger than the price

now in foree.

Moreover, the substantial escalation of the compo-

nent costs would mean that for this attrition item the

replacement of the cutback units would be exces-

sively costly. It would not be economically feasible to

give up these low-cost units.

*x* * *

eh, i ENT An

A-19

With respect to your alleged determination that no

errors exist on drawing 9755026, we are somewhat

surprised by your seeming acceptance of implied

warranty for parts defective in design, and an oppo-

site stance from your local engineer on the determi-

nation. You should know after your investigation that

parts built to the acceptance level of this drawing

will not be operable in the end-item, due to inade-

quate design control. That fact is unassailable.

The extent and correction of errors on 9755026 are

proprietary data and you are not to disclose them to

others. We have incurred considerable expense engi-

neering a solution to the problem. That corrective

action now threatens to invalidate any future compet-

itive procurements for this item that the Government

may undertake.

(R4, tab 37)

16. On 2 January 1975, respondent notified appellant

that it was in agreement that no units should be cancelled

under Contraet No. -3273 and requested appellant to

furnish a new firm delivery date for the balance due so

that the contract could be modified to reflect the new

date. Respondent further advised appellant that with

respect to the drawings relating to the relay, the cogni-

zant service engineering activity had determined the

drawings to be correct and that respondent had no obliga-

tion or responsibility to assist appellant with its subeon-

tract problems (R4, tab 134).

17. On 10 March 1975 appellant advised respondent as

follows:

At this time, there remain 32 networks to be deliv-

ered. We will deliver 17 on March 14. These 17

required 34 relays from ITT, part of 41 relays prom-

ised (Feb 24) by Mar 1 from a lot promised to have

A-20

been delivered last December. Only 38 of the 41 were

shipped, and only by Mar 6; some of those were

defective and must be rejected. Thus only the 17

could be assembled. For ITT Jennings to replace

these rejects may take 60 days or more, given past

performance as a guide.

We will continue to exert all possible pressure on

ITT to deliver the balance quickly. Perhaps it will be

only a matter of weeks until they deliver enough good

parts to complete the contract. However, we propose

that vou revise the scheduled delivery to June 16,

1975 for the balanee. There is also the possibility

that the June 16 date will not be enough time, given

ITT Jennings’ recent record.

At this time we are developing a proprietary specifi-

cation in order to procure reliable relays from an-

other source. If the other source can be developed,

we intend to complete this procurement using relays

from whichever source delivers earliest. However, it

may be that another souree cannot be found.

(R4, tab 136)

18. On 13 May 1975 appellant received a no cost time

extension for the undelivered balance of the pulse form-

ing networks due under Contract No. -3273 (R4, tab

143). Appellant’s Contract -0073, while not vet delin-

quent, was suspected of ultimately being so. In this

regard, appellant informed respondent:

The presently unprocurable item, a relay, OPN

9755026, two of which are assembled in each end-

item, is a sole-source item with which the long-time

producer, Jennings Radio (now ITT Jennings), has

lately and suddenly experienced a considerable (and

inexplicable) rejection rate. It is a high-value item.

Jennings is now a year behind schedule on a prior

A-2]

contract with us for the same item (DESC DSA900-

74-C-3273) and, apparently, tentatively has decided

not to accept new requirements to this specification,

at least not until the prior contract is complete and

its results analyzed.

An alternate source was cultivated by our engineer-

ing staff and a specification submitted for quotation.

That souree answered **.... None of us could remem-

ber ever having seen such a comprehensive specifica-

tion to cover one of our relays.... We are not in a

position to make the required changes in design,

manufacturing and testing to be able to quote exactly

to your specification.” The differences between speci-

fication and any available substitute appear to be

substantial and may compromise reliability. We are

continuing to evaluate the reliability aspects.

(R4, tab 40)

19. In February 1979 appellant asked Kilovac, the

other souree appellant had been attempting to develop to

supply vacuum relays under Contract No. -0073, to fur-

nish a quote (R4, tab 135); ITT Jennings was continuing

to experience quality control and delivery problems (R4,

tab 136). In early Mareh 1979 Kilovae responded that it

was not in a position to quote exactly to appellant’s relay

specification. Kilovae excepted to certain requirements

thereof, relating to the spot heating of the glass envelope,

certain inspection testing, delivery definitions, limitation

of lability with respect to testing, materials to be fur-

nished thereunder, and excessive insulation test voltage.

As a second alternative, Kilovae suggested that appellant

simply purchase its own standard parts which could be

tested in accordance with standard MILSPEC require-

ments (R4, tab 137).

20. In late Mareh 1975, ITT Jennings informed appel-

lant that the relays it had been furnishing under Contract

A-22

No. -3273 had met the requirements of the technical

specifications therein defined and that during the course

of that contract appellant had rejected these relays. ITT

Jennings also indicated that the relavs had been replaced

and repaired at no charge (R4, tab 138). ITT Jennings

advised appellant that it would not be able to furnish

additional quotations for the relays pursuant to Contraet

No. -0073 until it received and approved a definitive

specification, Appellant responded as follows:

With respect to your comment about the belief vou

hold concerning the technical suitability of relays

delivered on contraet DSA900-74-C-3273, please be

advised that our technical requirements for this

product have not changed for over ten vears of

provurement from you. Only lately have there been

substantial problems with the level of excellence in

vour produets. At no time have any relays been

rejected by us that did meet the technical require-

ments. We submit that if you believe otherwise, then

perhaps the testing at Jennings has-not been ade-

quate to catch intermittent failures, and while we do

not like that, we should like to point out that inspee-

tors ean only discover defeets — they do not create

them. Nor do they discover all defects all the time.

(Mur rejeets can be classed into seven groupings:

1. Solder tabs not welded to the terminals, making

it impossible to conneet wiring to the unit.

2. Unit glowed or flashed over on hipot, or was

shorted internally.

3. Glass contained stresses according to polari-

scope testing, or contained seratehes, that might

cause failure when subjected to specification shocks.

‘

;

4. Seal was not properly wetted and might cause

vacuum failure.

A-2%

5. Mechanical action was physically impaired,

6. Coil was open-cireuited.

7. Coil mounting stud was danaged, with usual

cause over-torquing the mounting nut on assembly

(missing loekwashers were not a cause for

rejection).

(R4, tab 139)

21. On 9 May 1975 Kilovae acknowledged appellant's

purehase order for 225 vacuum relays (R4, tab 140).

Kilovae’s immediate acceptance of appellant's purchase

order was based upon appellant's so-called proprietary

specification drawing with several qualifications whieh did

not give appellant much coneern (exh. A-1; R4, tab 141).

A comparison of appellant's proprietary specification

drawing indicates that appellant was significantly con

cerned that the requirements for calibration of the mea.

surement and testing equipment be comprehensively

detailed and that the procedures of measurement take

into account the known errors of calibration for testing to

minimum and maximum ratings. Appellant further de

sired to more precisely specify to its vendor the inspee

tion requirements to be applied to the relay. Insofar as

the pertinent operating requirements of the relays were

concerned, some of the comparisions are tabulated below:

INSPECTION VALUES Appellant's

AFTER | SECOND Specification Drawing

SOAK AT 26 VOLTS: Control Drawing U7 52H

OPERATE 6h MA ih MA

HOLD SO MA 40 MA

RELEASE 6 MA fh MA

STABILITY

OPERATE CURRENT + 10 pereent + 10 percent

HOLD CURRENT + 20 pereent + 20 pereent

RELEASE CURRENT + 20 percent 20 pereent

A-24

CONTACT RESISTANCE

AND RATING

RATING — 10 amp RMS, 10 amp RMS,

10 KV RMS, 15 KV peak,

60 eps 60 eps

(Exh, A-2)

22. In addition, appellant’s specification required the

relay to be subjected to repeated testing at the high

voltage potential (hipot) of 18.0 KV DC minimum ap-

plied both between COM and NO terminals and between

COM and flange as two separate tests, the potential being

applied for a ‘“‘minimum 60 ... [seconds] for each test,

without any glow becoming visible . .. , and without flash-

over ...”’ In order to resolve the seal leakage problem,

appellant specified in more detail the construction re-

quirements of the relay («bid.)

23. On 13 May 1975, ITT Jennings confirmed its

decision not to quote on appellant’s request with regard

to relays (R4, tab 142) and appellant’s delivery date on

Contract No. -3273 was extended to 16 June 1975 at no

cost to appellant or the respondent (R4, tab 143). On 20

June 1975, regarding the Contract No. -3273 situation,

appellant advised respondent as follows:

This component is not now being marketed by the

producer listed on the drawing, ITT Jennings Radio,

due to quality-control problems. However, Jennings

has asked not to be removed from the drawing.

Another source [ Kilovac] has been persuaded, after

lengthy negotiating, to manufacture this item. How-

ever, it was decided that the drawing as it stands is

inadequate to control the product. Therefore, we are

now controlling it with a proprietary specification

based on our long experience with this unit, and

under our engineering control, which embodies the

| ,

Lab hate tai 0 APE AIS

A-25

requirements of 9755026 plus several more require-

ments that are considered essential to the assurance

of component quality.

This development has been accompanied by a sub-

stantial increase in the price of the component. We

are not at this time planning to ask the Government

to reimburse us for this extra cost on this contract.

Ilowever, for future procurement, it appears that the

end-item cost will be substantially higher for both of

us. That higher cost will be mitigated somewhat by

the companion inerease in reliability and

procurability.

(R4, tab 42)

24. On 19 August 1975, appellant received an exten-

sion in the delivery date under Contract No. -0073.

Modification No. POOOO] thereto, “[d]ue to delivery

problems beyond the Contractor's control ...,° revised

the delivery date under Contract No. -0073 to read 12

September 1975 (R4, tab 43). According to appellant's

president’s testimony, Kilovae’s initial deliveries were

not aeceptable (tr. 1624). It was appellant's president's

belief, however, that the delays Kilovae experienced

under Contract No. -0073 were essentially inconsequen

tial and accordingly appellant perceived their problems to

be behind them at the successful conclusion of Contract

No. -0073 (tr. 1626). The record does not indicate that

Kilovae experienced any difficulty with the high voltage

potential test of 18 KVDC minimum (tr. 1667-68).

25. Upon the completion of Contract No. -0073 in

September 1975, respondent made no further procure-

ments of the pulse forming network during the 1975-1977

period (R4, tabs 68-70).

A-26

The Instant Procurement

26. On 29 September 1978, respondent issued Solici-

tation No. DAAHO1-78-B-0883 for the supply of 216

pulse forming networks to be delivered within 300 days of

contract award. While a bidder who had to submit a first

article would have had 420 days for production, the

inclusion of the 300 day period for bidders for whom the

first article was waived was not a mistake but a deliber-

ately established period (R4, tabs 1, 44). At this time

respondent was considering whether or not to grant

appellant a waiver of the first article requirement because

it had already delivered approved first articles under

Contracts -0073 and -2372 (R4, tab 44). Contract

DAAHO1-79-C-0179 was awarded to appellant on 20

December 1978. The first article submission was waived

and appellant was required to deliver the 216 pulse

forming networks at a unit price of $780.50 within 300

days i.e., 16 October 1979 (R4, tab 1). Despite its prior

problems, in 3 November 1978 Kilovae quoted $88.75 per

relay for the vacuum relays under the instant contract, as

compared with its previous quote of $75.25 under Con-

tract No. -0073. Kilovae stated: ‘Relays to be the same as

supphed on your Order #DAA-H01-75-C-0073, dated 9

May 75” (R4, tabs 3-5). The reeord does not indicate

that either appellant or Kilovae anticipated unusual per-

formance difficulties prior to entering the instant con-

tract, since their respective problems had already been

worked out (tr. 1625-26). Thus, appellant did not antici-

pate respondent’s assistance insofar as it expected

Kilovae to meet the scheduled deliveries with “little or no

problem whatsoever” (tr. 1626). Indeed, Kilovae subse-

quently accepted appellant’s order for 442 relays expect-

ing to deliver them within slightly more than three

months, and no later than 17 June 1979 (R4, tab 4).

Sh seme Seam ty el A NRA Ail ch a

A-27

27. On 27 March 1979, appellant was awarded Con-

tract No. DAAHO1-79-C-0621 for 65 pulse forming net-

works at a unit price of $946.20 (R4, tab 65). In

response to this new requirement, appellant, in an effort

to avail itself of the prices for the 442 relays Kilovae had

agreed to under Contract -0179, attempted to increase its

order from Kilovac by 136 relays. The parties disagree as

to whether this was actually accomplished (R4, tabs 6-

10). Kilovae later, on 24 August 1979, denied having

received appellant’s order for these additional relays

(R4, tab 8). Delivery of the 65 networks was required by

21 April 1980, a delivery period of approximately 390

days. Appellant completed delivery under Contract -0621

on 15 June 1979, utilizing relays it had ordered for

Contract -0179 (R4, tab 66 tr. 1306-1309). No deliveries

had yet commenced under Contract -0179 (R4, tab 55).

28. Between 29 June 1979 and 17 August 1979, ap-

pellant delivered 112 networks under Contract -0179,

leaving a balance due of 104 units (R4, tab 55). The

scheduled and actual deliveries for Contracts -0621 and -

0179 are tabulated below:

DELIVERIES UNDER CONTRACT —

0621 for 65 Units

Actual Delivery No. of Units Required

25 May 1979 16

15 June 1979 49

65 21 April 1980

(R4, tabs 65, 66)

A-28

DELIVERIES UNDER CONTRACT —

0179 for 216 Units

Actual Delivery No. of Units _ Required

29 June 1979 24

6 July 1979 16

13 July 1979 24

3 August 1979 19 :

10 August 1979 17 |

17 August 1979 12 |

112 Units

Undelivered Balance 104 16 October 1979

(R4, tab 55)

Priority Assistance

29. Contract -0179 incorporated by reference the

clause entitled ‘Priorities, Allocations, and Allotments

(1975 OCT)”, ASPR 7-104.18 (R4, tab 1 at 21 of the

contract). We quote therefrom in pertinent part:

The Contractor shall follow the provisions of DMS

Reg. 1 or DPS Reg. 1 and all other applicable

regulations and orders of the Bureau of Domestic

Commerce in obtaining controlled materials and

other products and materials needed to fill this

order.

Contract -0179 was assigned a priority rating of DO-

A2* (R4, tab 1).

— UU -

*The DO rating is one of two types of authorized ratings, the other

being a DX rating. Ratings must contain the prefix DO or DX, as the

case may be, followed by the appropriate program identification, in this

case A2 for missiles program. All DO rated orders have equal preferen-

tial status, and take precedence over unrated orders previously or

subsequently received. All DX rated orders have equal preferential

status, and take precedence over DO rated orders and unrated orders

previously or subsequently received (32 C.F.R. §§ 651.4(a), (c), and

Schedule 1).

—

A-29

30. Under the applicable Defense Priorities System

Regulation 1 (DPS Reg. 1), as revised 15 Jun 1974

(32A. C.F.R. § 651), appellant was authorized to place

DO rated orders for his requirements for products and

materials under the contract (382A C.F.R. (§ 651.3(c)

and (d)). DPS Reg. 1 provided for requests for assis-

tance under the priority system as follows (32a C.F.R.

(§ 651.12):

: Sec. 12. Expediting assistance and assistance in

placing mandatory acceptance orders.

(a) If a person has placed a mandatory accept-

ance order and needs expediting assistance to

obtain timely delivery, he shall request expediting

assistance from the appropriate Defense Agency

specified in Schedule 1 of this regulation. Such

request shall be submitted on form DIB-999 (For-

merly BDSAF-138) which may be obtained from

U.S. Department of Commerce District Offices or

from the Bureau of Domestic Commerce, U.S.

Department of Commerce, Washington, D.C.

20230.

(b) If a person cannot find a supplier who will

accept a mandatory acceptance order he attempts

to place, he shall request assistance in placing such

order from the appropriate Defense Agency speci-

| fied in Schedule 1 of this regulation. Such request

shall be submitted on Form DIB-999 (Formerly

BDSAF-138) which may be obtained from U.S.

Department of Commerce District Offices or from

the Bureau of Domestic Commerce, U.S. Depart-

! ment of Commerce, Washington, D.C. 20230.

dae note

(ce) Requests for assistance made in accordance

with paragraph (a) or paragraph (b) of this sec-

tion must establish that:

A-30

(1) There is an urgent defense related need

for the products, materials or services, covered

by the associated mandatory acceptance order.

(2) Applicant has exercised reasonable effort

to resolve the problem through employment of

his own resources, and

(3) The request for assistance is timely.

Form DIB-999 was replaced by Form ITA-999 under the

instant contract (R4, tabs 20,255).

31. Appellant’s president employed the Defense Prior-

ity System in 1955, when in connection with a contract

associated with the Atlas Missile Program, he filed a

Form BDASF-138, Request for Special Priorities Assis-

tance, and obtained timely delivery of the needed parts.

Again, in 1958, appellant’s president filed a Form

BDASF-138 in order to expedite shipment under another

contract (tr. 1283-1285, 1434, 1435). He had also used

the system previously, with regard to the same relays and

networks involved in the instant contract, on contract -

O8O8 in 1967 (tr. 1286, 1287, 1436). In that instance,

however, after the Form BDASF-i38 was filed, the Gov-

ernment suspended action on the request since it was

determined that the subeontractor, ITT Jennings, had

taken action to assure that the delivery schedule would be

met (tr. 1287; R4, tabs 107-110).

32. During the pre-award survey on the instant con-

tract, Mr. Gary Higgs, who was responsible for priority

assistance for respondent, briefed appellant on the opera-

tion of the system. Appellant was told that a new Form

ITA-999 had replaced the Form BDSAF-138, but that

procedures remained essentially the same as when appel-

lant had experienced them before (tr. 1290, 1450). Thus,

we find that appellant’s president was familiar with the

A-31

operation of the Defense Priorites System as modified at

the time of the instant contract.

33. It first became apparent to appellant that deliv-

eries under the instant contract might reqire priority

assistance when it received a 24 August 1979 letter from

Kilovae declining appellant’s request to augment its sub-

contract to furnish 136 additional relays, and indicating

its intention to return 62 relays previously rejected by

appellant and needed for contract -0179 (R4, tabs 8, 205;

tr. 1298, 1452). Concerned that there might be a problem

meeting the contract’s delivery schedule, appellant, on 17

August 1979, sent a letter to ITT Jennings requesting

their re-entry into the relay market (tr. 1300, 1383, 1393;

R4, tab 209). In addition, appellant’s president notified

Kilovae’s marketing vice-president that the respondent

could require production of rated orders (tr. 1298, 1299,

1386). Troubled by Kilovae’s opinion that production

could not be required except in time of war, appellant

asked the Defense Contract Administration Services Re-

gion (DCSAR) office to send Kilovae a copy of the

Defense Priorities System Bulletin (tr. 1302, 1391; R4,

tabs 206, 208).

34. On 13 September 1979, appellant met with

DCASR representatives to review the Kilovae quality

problems. One of the DCASR representatives requested

that appellant obtain three other sources to bid on the

relays to facilitate the processing of a form 999 to initiate

priority assistance action. The three other sources were

required because DCASR no longer processed requests

involving sole sources; however, the DCASR representa-

: tive stated that he would talk to Kilovac, and see if just

‘jawboning”’’ would help the situation (tr. 1388-1391; R4,

tab 215). Appellant, in late September -early October

1979, continued attempts to re-establish Jennings as a

source. Indeed, Jennings had promised to deliver a first

Cee

A-32

article to appellant in mid-October 1979, and if it was

deemed acceptable, appellant intended to order the bal-

ance of the Kilovae relays from Jennings (tr. 1026-28;

R4, tab 227).

35. On 26 November 1979, Kilovae informed appellant

that it would not perform further work under its subcon-

tract (R4, tabs 18, 249). Approximately one week later,

appellant reinstated its efforts to obtain priority assis-

tance (tr. 1404). In this regard, appellant filed two

‘Request for Special Priorities Assistance” (Form ITA-

999) forms under contract -0179, one for 89 relays on 4

December 1979 (R4, tab 255), and the other for 136

relays on 5 December 1979 (R4, tab 20). A DCASR

representative had earlier requested that the two orders

be separated instead of having them both on the same

form to accommodate the dispute as to the extent of

Kilovae’s obligation under the instant contract (tr. 1030,

1031, 1404; R4, tab 23 at 2). At a meeting at DCASR,

respondent informed appellant that it did not have a

purchase order for the 136 relays, and that its request for

priorities assistance could not be processed without a firm

purchase acknowledgement from Kilovac. It was finally

agreed to process both forms, and appellant was given the

name and telephone number of an individual employed by

the Department of Commerce to contact for assistance

(tr. 1405, 1406).

Alleged Interference with the Subcontractor

Relationship

36. In late July 1979, Kilovae was concerned about the

return of €% relays appellant had rejected. An internal

memoranduin indicated:

A-33

The returns are divided into the following broad

classifications:

A. Flashover 19 Relays

B. Glass flaws 18 Relays

(. Variable, or out of

specification

operating voltages 32 Relays

: ***

All of these eriteria are purely subjective and allow

us to be entirely at MeQuisiton’s merey. With such a

contract we can only proceed on our own judgment as

to whether the purehaser is a reasonable man.

** *

In summary I find that much of my experience with

MeQuiston has been valuable. He is quick and intelli-

gent but also has the self-centered ego of his type. He

will defend the indefensible to the last ditch.

Unless he is prepared to make compromises with his

specification, I believe any of his orders will result

{sic} in economie loss. On the other hand I believe

we have derived as much intellectual gain as we are

likely to receive from his aequaintance. Therefore |

recommend we do no further business with him.

(R4, tab 195)

37. On 3 August 1979, Kilovae communicated its views

to appellant regarding the above-noted problems and

suggested that appellant should accept return of 57 of the

62 relays. At this time appellant had requested Kilovae to

submit a quote for 435 relays with delivery to begin in

October 1979. In response to this request, Kilovae stated

that it would be unable to quote on the relays until a

resolution of the matter concerning the 69 rejects was

A-34

achieved (R4, tabs 197, 198).

38. On 27 August 1979, appellant called the DCASR

office and requested that Kilovae be sent a copy of the

Defense Priorities System Bulletin. It was appellant's

view that Kilovae ‘“‘would shape up if they knew the

Government meant business” (R4, tabs 206, 208; tr.

1302, 1391). Regarding Kilovae’s proposal to return the

69 relays, appellant had advised Kilovae that it would not

buy these relays because they didn’t meet the relay

requirement on the drawing; however, appellant further

advised that if Kilovae insisted on its submission, it

would request the Government review the functional re-

quirements, as opposed to the drawing requirements, to

determine if there was a possibility of getting some kind

of a waiver on these relays (tr. 1385).

39. On 19 September 1979, appellant informed the

contracting officer concerning the question of a waiver:

We are not privy to the wiring schematic between the

coils of these relays and circuits off [sic] the case of

the 9016346 Network. So, we don’t know how much

in-service variation of relay parameters is actually

tolerable. However, we do know that sometimes

WECO did not spend much time putting down the

limits on paper and then later the limits became

major headaches in production. We have worked out

some of these already, and we think Ref (b) [OPN

9755026] needs work now.

With these relays, we have already ‘‘worn out” one

manufacturer with our tight-to-spee inspection and

numerous rejections, and we are in danger of losing

another, who is apparently the last responsible one.

Although we still inspect to Ref(a) [OPN 9016346 |

“unmercifully’, we have noted that perhaps the re-

quirements should change now: re-specification of

pet ta AS PLC PE mo —

A-35

pull-in, drop-out, hold, stability, ete would in our

opinion improve reliability and also make the unit

much more producible. We have accumulated our

knowledge after having processed thousands of these

relays in this very assembly.

** *

At this time we are working with DCASR-Los Ange-

les to foree our subeontraetor to continue making

this part to complete Ref (a), which he wants to

breach, and the outcome could go either way, he is so

despondent.

Progress on changing the requirements would give

him a symbolie lift and might get the parts without

exerting muscle. Otherwise, there would be an impact

vet unknown on final deliveries for Ref (a).

In our opinion, the ehanges we will propose will not

affect the cost nor degrade the operational reliability

of the relay. Any saving will doubtless be taken by

inflation. The extent of reliability increase depends

also on other non-related factors.

We would be pleased to get your approval to confer

as soon as possible.

(R4, tab 221)

40. On 2 October 1979, respondent advised appellant

that its proposal was being evaluated by technical person-

nel, but reminded appellant that delivery on Contract -

0179 was due on 16 October 1979 (tr. 1399; R4, tabs 12,

226). Appellant performed no production work during

the period from 16 Oetober 1979 until termination. Its

only activities consisted of contacts with Kilovae and

other potential suppliers. Appellant’s reply to respon-

dent’s 7 November 1979 show cause letter so indicates

and summarizes appellant’s difficulties in this regard

A-36

(R4, tab 15). On 17 December 1979, respondent termi-

nated appellant for untimely delivery of the units (R4,

tab 2).

41. In November 1979, Kilovae’s marketing vice-presi-

dent was about to write a letter to MeQuiston, stating

that Kilovae’s management had finally concluded they

could perform no further rework or replacement of re-

jected parts under the instant contract (R4, tab 18). He

had asked DCASR if stopping activities under Contract -

0179 would jeopardize Kilovae’s position as a supplier to

the Defense Electronics Supply Center, or to other Gov-

ernment agencies. The DCASR representative indicated

that the Government would not tell them how to run their

business. He refrained from encouraging Kilovae not to

deal with appellant telling Kilovae that their performance

under appellant’s subeontract was strictly between them

and appellant, and the Government was not a party to it

(tr. 1906, 1017).

DECISION

As we have found, appellant failed to deliver the 104

units due on 16 October 1979. Thus, appellant’s apparent

défault created in respondent the right of immediate

termination for default. The issue before us is whether or

not appellant was in a default status at the time of

termination of the instant contract, and if so, whether its

failure to deliver was due to causes beyond the control

and without the negligence of itself or its vendors. Appel-

lant first contends that respondent waived the delivery

date and that the 300 day period allowed in the instant

contract for production was mistakenly short by 120 days

due to a typograhical error. We disagree with both of

these contentions.

The 300 day delivery period was deliberately estab-

lished for bidders for whom the first article was waived.

- ee

FA Nr ea Ose

A-37

This was not a mistake, as we have found. Regarding

appellant's waiver argument, the case cited, DeVito rv.

United States, 188 Ct. Cl. 979, 418 F.2d 1147 (1969) is

inapposite. That ease stands for the proposition that a

contract must be terminated within a reasonable time

after appellant’s default, or a constructive eleetion not to

terminate is created, requiring a notice containing a new

schedule for performance before termination can be

effected.

Hlowever, in DeVito the contractor had continued to

perform following the defaulted delivery date with the

Government's knowledge, and the Government had given

the contractor no inkling of its intention to terminate

prior to the termination notice, some 48 days after the

due date. In the instant case, although 63 days elapsed

between the delivery date and termination, the 7 Nov-

ember show cause letter served to inform appellant of

respondent's intent in a timely fashion, and final termina-

tion occurred within a reasonable period. Thereafter, even

were we to conclude that this much elapsed time was

excessive, there is no evidence that appellant in fact

relied on any behavior or conduct of respondent, or made

any tangible progress on the contract during this period.

Prester, Inc., ASBCA No. 21284, motion for recon., 81-2

BCA © 15,397.

We now turn to appellant's other defenses. Among the

various excuses for nonperformance argued, appellant

points out that time extensions had been granted under

earlier contracts for defects in the relay specifications.

Appellant contends that because respondent's specifi-

cations for the relays were defective, t.¢., impossible to

procure, a time extension was justified. Appellant argues

that respondent breached its implied warranty that the

relay specifications would be suitable for use in the pulse

A-38

forming network; they were not, appellant contends, be-

cause the specifications failed to “list all the salient

characteristics required to assure proper operation in the

Network.” (App. Opening Brief 1-2)

In this appeal, we have been impressed by an unassaila-

ble faet. There is no issue, here, regarding appellant's

ability to make the pulse forming networks in question

due to impossibility to proeure the relays to respondent's

specifications. Certainly, the relay problems appellant

experienced were most complex and difficult. Yet, while

appellant diligently insisted upon quality and specifica-

tion compliance, it always succeeded in obtaining specifi-

cation compliance from its vendors. Continually

throughout its involvement with respondent’s network

procurements, appellant delivered to respondent accept-

able pulse forming networks incorporating satisfactory

relays.

Appellant's real coneern is that respondent’s default

termination radically departs from the reaction appellant

came to expect when it ran into trouble on the relays.

Appellant argues that it had an understanding with re-

spondent, relying upon prior mutual experiences under

similar contracts, that respondent would grant a time

extension to “appellant whenever trouble arose with the

|relav| specification’; such an understanding was the

condition, appellant argues, to its continued use of the

alleged defective relay specifications. (App. Opening

Brief 32, 36)

First, we cannot say that the evidence before us even

suggests that the expectations of the parties at contract

award manifested such an intent. The long history of

appellant's involvement in procuring the pulse forming

networks involved two experienced relay vendors who

encountered the full range of problems; and, of course,

appellant was privy to all of these difficulties. But, as we

a ee

ay ee ene

‘

A-39

have found, the time extensions over this period were not

always granted for the same kinds of delay-causing

problems. Moreover, respondent did not concede at any

time—aindeed, expressly disclaimed—any notion that its

relay specification was defective. On one occasion, respon-

dent exacted consideration from appellant in exchange

for a time extension. Thus, the record fails to show any

established pattern of conduet by the parties to support

appellant's contention that respondent promised appel-

lant a time extension anytime it ran into difficulties with

the relays.

The eases cited by appellant to support its argument

involve the application of the rule that the parties’ con-

duet under prior similar contracts may well refleet how

disputed language in the instant contract should be inter-

preted. L.W. Foster Sportswear, 186 Ct. Cl. 499, 405 F.2d

1285 (1969); Gresham & Co. v. United States, 200 Cr. Cl.

97; 470 F.2d 542 (1972).

In L.W. Foster Sportswear, which involved defective

specifications for flying jackets, the contractor deviated

from the specifications under prior similar contracts be-

cause it was “practically” or “virtually impossible” fer

the contractor to join certain seams in the flying jackets

without causing abrasions and cuts that would later be

subject to rejection. As we have noted, the relay specifica-

tions in the instant case were not impossible to meet.

Moreover, problems eneountered were not always the

same and were consistently resolved by appellant's un-

canny resourcefulness.

In Gresham & Co., the Court of Claims found « clear

specification requirement for an automatic detergent dis-

penser in dishwashing machines to have been suspended

during the administration of earlier similar contracts

giving rise to a reasonable belief on the part of the

contractor that it would continue to be suspended with

A-40

respect to the contract in question. We find nothing in the

evidence before us which vrould have given appellant any

reasonable belief that the delivery schedule in the con-

tract for which he competitively bid was waived or sus-

pended in any way.

Although appellant had been granted time extensions

under earlier contracts because of problems associated

with the relays, we are convineed, regarding the instant

contract, that it was appellant’s intention to meet the

original delivery dates, and that appellant could have met

these dates. That appellant’s president anticipated little

if any difficulty evidences his intention in this regard.

Appellant delivered 112 networks between 29 June

1979 and 17 August 1979, leaving a balance due of 104

units to be delivered by 17 October 1979. Thus, appel-

lant’s rate of delivery was such that in less than 2 months,

over half of the networks contracted for were completed.

We have no doubt that appellant, accordingly, was capa-

ble of delivering the balance within the remaining two

months. And when we consider appellant’s diversion of

136 relays in the May-early June 1979 period, whieh

relays its vendor was manufdcturing for the instant con-

tract (appellant made a business decision to utilize these

relays on another contract and delivered 65 networks

thereunder a year before they were due), our conclusion

that appellant possessed the ability to deliver the balance

of 104 units within the remaining two-month period is

corroborated.

We have vet to determine whether or not appellant’s

failure to deliver the remaining 104 units was excusable.

We are not persuaded by appellant’s argument that the

relay specifications were defective, 7.¢., unsuitable for the

pulse forming network, and that this therefore justified a

time extension.

A-41

Appellant places great emphasis on the fact that the

specified maximum test voltage of 15 KVDC for the relay

was less than the 17 KVDC required for the pulse

forming network (app. br. 39). Ostensibly, this inconsis-

teney would result in a failure of the relays when the

networks were tested. In order to correct this problem,

appellant increased maximum test voltage for the relay to

18 KVDC. The difficulty we have with the appellant's

argument in this regard is that we are unable to deter-

mine from the record that this inconsistency presented

any delay-causing problems to appellant under the in-

stant contract. Indeed Kilovae had little difficulty in

complying with this high potential 18 KVDC test require-

ment. Secondly, this was not a test imposed by respon-

dent, but one created by appellant because of its

perception that the mismatch of the 15 KVDC peak test

for the relays and the 17 KVDC test for the network was

untenable. Finally, there is no evidence in the record to

show that manufacturing relays to the lesser peak voltage

presented difficulties to appellant when testing the net-

work to the higher voltage. Thus, we are not persuaded by

this aspect of appellant’s contention that the alleged

defectiveness of the relay specification caused appellant

delay in performing the instant contract.

Nor are we convinced that appellant otherwise estab-

lishes an excuse for untimely delivery based upon defee-

tive relay specifications. Our consideration of appellant’s

intimate involvement in the early procurement of the

pulse forming networks leads us to this conclusion. Re-

spondent identified in the original Drawing 9755026 a

brand name souree, t.e., Jennings Radio Part No. RB1D-

26N202. This brand name identification was expressly

“invoked for the convenience of [respondent and] not to

be construed as restricting qualified sources of procure-

ment.”” Appellant, at the outset of its involvement in

A-42

1964, instead of obtaining this brand designation, pro-

cured Jennings’ Relay RB1K-26N368 which did not al-

ways comply with the specified operational requirements

when submitted. Notwithstanding, such continuing

problems, appellant adroitly managed to obtain relays

from Jennings which permitted appellant to deliver ac-

ceptable pulse forming networks pursuant to its contract

obligations for the next 10 years. Thus, in the developing

pulse forming network procurement history, appellant, as

a result of its experiences, had become extremely know]-

edgeable about the troublesome relays.

During the 1974-75 period, after experiencing many of

the aforementioned difficulties with the Jennings Radio

relays, appellant met with respondent’s engineer who

concluded from the discussion that the hipot 18000 VDC

test failures, manifested by a flourescent glow caused by a

seal leakage problem, presented the most eritical problem

to appellant. As appellant suggested that the specifica-

tions should be corrected to resolve this problem, it

announced its intention to initiate a proéject to develop

another source for the relays pursuant to its new “‘specifi-

cation control drawing’. Appellant wanted to control the

relay to this new specification and felt that based on its

long experience and under its engineering control, it

would implement this new specification embodying the

requirements of Drawing 9755026 as well as other re-

quirements essential to assuring component quality. This

would not cost respondent under its current contract, but

appellant gave notice to respondent that it would charge

respondent extra under future procurements.

Appellant, indeed, cultivated an alternate source,

Kilovae Corporation, who went on to furnish relays to

appellant during the 1974-75 contract period. Appellant

satisfactorily delivered 109 pulse forming networks tlivre-

under to respondent utilizing Kilovae relays purchased to

A-43

appellant’s new specification control drawing. Kilovae

would furnish the same relays under the instant contract.

Thus, upon entering the instant contract, appellant cer-

tainly knew about every problem that could be eneoun-

tered regarding the relays and appeared to have all of its

problems behind it. In performing the contract, the re-

cord does not indicate that appellant encountered any

problems with the relays which differed in kind from

those experienced earlier.

Thus, we are unable to determine from the record

precisely the nature of the defectiveness appellant alludes

to regarding the relay specifications. And, without con-

cluding that the specifications were in fact defective,

under these cireumstanees, appellant must be viewed as

having entered the contract with full and complete know!-

edge of the inherent problems of the relays and must be

viewed as having assumed the risk of any such problems

since it had the opportunity to avoid the contract at the

outset. In any event, as it had previously indicated,

appellant intended to charge the Government extra for its

resolution of the relay problems it had previously encoun-

tered. Moreover, appellant’s failure to deliver was caused

by its subeontractor’s failure and there is no showing that

this was excusable. Since the default clause requires that

the failure of both the prime and the sub must be excusa-

ble, this defense fails. ‘

Appellant also alleges that the respondent failed to

meet its obligations concerning priorities assistance. The

issue before us at the hearing was if true, whether such

failure excused appellant's inability to deliver the overdue

networks. While we are not convinced that appellant

specifically addressed this issue in its brief, we will do so

here and thereafter proceed to the other arguments appel-

lant sets forth regarding priorities assistamce. We first

note that delays in a “contractor's performance caused by

A-44

the operation of the Government’s priorities system may

be-excusable and éntitle the contract to an extension of

the delivery dates.” Prester, Inc., ASBCA Nos. 21284,

73,609. However, the contractor must establish a causal

connection between the operation of the priority system

and its delay or failure to perform. C.C.C. Construction

13,164.

In this case appellant, although familiar from past

experience with the particulars of the operation of the

priority system, made a calculated decision to postpone

utilizing that system in favor of pressing other options

that it considered more likely to obtain satisfactory per-

formance. It was not until several weeks after the con-

tract delivery date had passed that appellant filed the

request for priority assistance.

This Board has previously held that -such failure to

make a timely request for Government assistance “‘pre-

cludes whatever entitlement the contractor may otherwise

have had to assistance from the procuring activity in

obtaining needed materials.”” Texoma Construction, Inc.,

ASBCA No. 20924, 77-1 BCA € 12,449. A request subse-

quent to the contract’s completion dates obviously fails to

meet this requirement and «learly establishes the lack of a

causal connection between the operation of the priority

system and appellant’s inability to perform. Hogan

Mechanical, Inc., supra.

Appellant also makes the argument that respondent

failed to terminate for default in accordance with the

provision of the Default clause. Appellant points out that

the clause does not require termination in the event of a

default, “but... [respondent] ...‘may’... terminated

A-45

[sic] provided certain regulations are observed.” Appel-

lant argues that “|[nJo contractor notification was permit-

ted until after” the contracting officer had considered the

seven factors set out in DAR 8-602.3. These factors were

to be considered by the contracting officer in addition to

the default itself. For example, appellant claims that the

termination was defective because respondent failed to

notify the Small Business Administration (SAB) of its

action, as required by DAR 8-602.3(b) (4). However, the

language of that provision requires only that a copy of any

cure notice or show cause letter be provided to the SBA

“as a matter of information’; it requires no action by the

SBA in response. Appellant has failed to show how failure

to comply with this provision prejudiced its position. This

noncompliance does not provide appellant with any basis

for relief. Omni-Wave Electronics Corporation, ASBCA

No. 23465, 80-2 BCA 14,552. We have considered all of

the other arguments appellant has made concerning its

allegation that respondent's default termination was pro-

cedurally defective, and we find them unpersuasive.

Regarding appellant’s contentions that the Govern-

ment interfered with its attempts to obtain relays from

Kilovaec, its relay vendor, we have found nothing in the

record to support this contention. As appellant put it, it

had ‘‘worn-out” its vendor with its insistence for total

compliance with the relay specification. There is evidence

to indicate that Kilovae was arriving at a decision of its

own to discontinue its relationship with appellant. We

have found nothing in the record to even suggest any

action on the part of respondent to aid or abet Kilovae in

this regard.

Since appellant has failed to show that its failure to

make timely delivery was not due to excusable causes, we

must conclude that its contract was properly terminated

for default.

A-46

The appeal is denied.

Dated 22 November 1982.

/s/ RoBert J. GOMEZ

Administrative Judge

Member of Division No. 4

Armed Services Board of

Contract Appeals

mnie

A-47

Appendix C

ARMED SERVICES BOARD OF CONTRACT

APPEALS

ASBCA No. 24676

Appeal of — MeQuiston Associates

Under Contract No. DAAHO1-79-C-0179

Appearances for the Appellant:

Mr. J. H. MeQuiston, pro se

Appearances for the Government:

Colonel C. T. Lakes, JAGC

Chief Trial Attorney

Major W. Eric Pedersen, JAGC

Trial Attorney

OPINION BY ADMINISTRATIVE JUDGE GOMEZ

ON APPELLANT'S MOTION

FOR RECONSIDERATION

On 4+ January 1983, appellant filed its Motion for

16,187) indicating generally it had *‘...a serious objee-

tion with almost every single...” finding of fact, and

that we had ignored the issues in our decision. Respon-

dent replied arguing that appellant presented bare con-

clusions and that the Motion should be denied for lack of

support. Our review of appellant’s Motion led us to agree

with Respondent’s views; however, we gave appellant

additional time to furnish support for the grounds set

forth in its Motion. On 23 February 1983, the Board

received appellant's supplemental response. Respondent

has chosen not to reply to this latter submission.

A-48

Appellant complains that he was somehow deprived of a

hearing in the subject appeal. A seven day hearing was

held during which the Board received testimonial and

voluminous documentary evidence from appellant. There-

after, the record was left open for a period of 13 months

during which appellant was given an opportunity to file

additional evidence with the Board. Thereafter with

agreement by the parties and subsequent to the filing of

post-hearing and reply briefs, the record was closed and

considered ready for decision. Thus, appellant’s allega-

tions that it did not have an opportunity to present its

case 1s totally without merit.

We note that appellant’s most recent submission con-

tains voluminous objections to our faet findings; we cite

several examples. Appellant objects to “repair parts”

being called “radar ‘components’”’, to our failure to

mention that appellant was licensed, operated as an

individual proprietorship, and was competent to contract

with the Government. Appellant also objeets to our omit-

ting certain faets in our recitation of the history of the

network procurement, but fails to indicate where in the

record these omitted faets ean be found. In any event,

none of the aforementioned objections are pertinent to

our decision, thus we will make no further comment on

these and other similar objections cited by appellant in

his motion.

Appellant does complain that a “diagram” is improp-

erly referenced as “Exhibit A-1”. Appellant correctly

points out that Exhibit A-1 refers to an affidavit of the

Contracting Officer. The appropriate reference to the

diagram is “Exhibit A-6,” appellant’s sketch schemati-

cally showing the so-called “contact gap” in the context

of the operating parts of the relay. This diagram was

included in the Board’s decision for illustration only.

Appellant’s objections to its being “...inaceurate and

met ORLA wm Ne ne saat se

A-49

unfit for the purpose intended in the Opinion” therefore

is without merit.

Appellant also corrects our finding no. 35. Kilovae

informed appellant that it would not perform further

work under its subeontraect on 26 November 1979, not 28

November 1979 as we indicated (R4, tabs 18, 249).

We have reviewed appellant’s other exceptions to the

board's findings and are unable to find any significant or

persuasive matters which would otherwise alter our find-

ings or merit our attention here.

Regarding our decision, appellant takes issue with the

Board's delineation of the issues, in particular, the

Board's failure to address the issues as stated by appel-

lant in its brief. In this regard, after several pre-hearing

conferences with the parties, the Board with the assis-

tance of the parties delineated the specific issues to be

tried and decided in this appeal. And, indeed, we have

thoroughly discussed and decided these issues. Notwith-

standing, appellant believes that the Board failed to

consider a number of issues, in particular, its contention

that the Board “... cannot permit the ‘default’ clause to

operate here...”, since “*... Respondent incorporated

the | Defense Production Act of 1950 §$ 707 as amended

(50 U.S.C. App. § 2157)] in the IFB....” (Emphasis

appellant’s Motion at 25) To support this argument,

appellant cites Climatic Rainwear Co., Inc. v. United

States, 115 Ct. Cl. 520, 88 F. Supp. 4154 (1950). While

our decision has already considered this issue, we will

elaborate further.

Appellant’s citation of Climatic Rainwear, supra, is

inapplicable to the instant situation. In that case, the

Court found that there had been no consideration of

plaintiff's proof of the causes of delay which led to the

default termination there. In particular, the Court noted

that the Government's findings attributed the alleged

A-50

inexcusable delay to plaintiff's election to complete its

subcontract before performing its prime contract. The

Court rejected this because these findings ran afoul of the

Second War Powers Act and the regulations issued there-

under which prohibited imposition of liability for *...

and default under any contract which shall result directly

or indireetly from compliance...’ with such regulations.

See § 301 of the Second War Powers Act, 56 Stat. 177-

180, 50 U.S.C. War App. § 633, enaeted 27 Mareh 1942.

The Court stated that this Act had for its purpose to

establish priorities in connection with war contracts and

subcontracts. It noted out that both the “... subeontraect

and the subsequent prime [terminated] Contract... bore

identical priorities ratings...and in plaintiff's request

for an extension of time for delivery under the [termi-

nated] Contract it had pointed out its obligation to

complete deliveries on its subcontract before proceeding

... [with the terminated contract ].”’

Here appellant did not comply with the requirements of

the priorities system in place. As we stated in our deci-

sion (at 80,441):

|DJelays in a “eontraector’s performance caused

by the operation of the Government’s priorities sys-

tem may be excusable and entitle the contractor to an

extension of the delivery dates.” Prester, Inc.,

ASBCA Nos. 21284, 21372, 21453, 21467, 23184,

tor must establish a casual connection between the

operation of the priority system and its delay or

failure to perform. C.C.C. Construction Company,

Mechanical, Ince., ASBCA No, 21612, 78-1 BCA

€ 13,164.

In this case appellant, although familiar from past

experience with the particulars of the operation of

a a ee ae

ot AOE CO Re eB ae

A-51

the priority system, made a calculated decision to

postpone utilizing that system in favor of pressing

other options that it considered more likely to obtain

satisfactory performance. It was not until several

weeks after the contract delivery date had passed

that appellant filed the request for priority

assistance.

This Board has previously held that such failure to

make a timely request for Government assistance

“precludes whatever entitlement the contractor may

otherwise have had to assistance from the procuring

activity in obtaining needed materials.” Teroma Con-

struction, Inc., ASBCA No. 20924, 77-1 BCA

completion dates obviously fails to meet this require-

ment and clearly establishes the lack of a casual

connection between the operation of the priority

svstem and appellant’s inability to perform. Hogan

Mechanical, Inc., supra.

We note finally that appellant continues to complain of

this board’s noneomplianee with 5 USC 552 and 554 and

to refer to his individual “liberty”. We merely add that

‘the issues in this case are those arising under appellant's

contract and the mutual contractual rights and obliga-

tions of the parties. We do not reach the constitutional

issue of “liberty”, as appellant attempts to define it, nor

are we concerned with the procedures of the Administra-

tive Procedures Act since we are proceeding under the

Contract Disputes Act and the Board's Charter and

Rules.

We have considered appellant’s other argumeuts and

are unable to discern any basis for setting aside our

decision. As we decided, appellant has failed to show that

its failure to make timely delivery was due to excusable

causes. Accordingly, our prior decision that appellant's

contract was properly terminated for default, is reaf-

firmed. Appellant's Motion for Reeonsideration is denied.

Dated 24 May 1983.

]l concur

V. JOUN RIUSMANDEL

Administrative Judge

Member of Division No. 4

Armed Services Board

of Contract Appeals

] concur

Harkkis J. ANDREWS, JR.

Administrative Judge

Chairman, Armed Services

Board of Contract Appeals

RoBERT J. GOMEZ

Administrative Judge

Member of Division No. 4

Armed Services Board

of Contract Appeals

I concur

MAXWELL C.

FREUDENBERG

Administrative Judge

Member of Division No. 4

Armed Services Board

of Contract Appeals

I coneur

DANIEL M. ARONS

Administrative Judge

Vice Chairman, Armed

Services Board of

of Contract Appeals

A-53

Appendix D

IN THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

Appeal No. 84-578

J. H. MeQUISTON,

Appellant,

Vv.

THE UNITED STATES,

Appellee.

ORDER

Upon reading and consideration of appellant's motion

to join additional parties defendant and appellee's oppo-

sition thereto it is

ORDERED that appellant’s motion to join additional

parties defendant is denied.

Oscar H. DAvis

CIRCUIT JUDGE

DATED: JANUARY 24, 1984

WASHINGTON, D.C,

A-94

Appendix E

United States Court of Appeals for the Federal Circuit

Appeal No. 84-578.

J. H. MeQUISTON,

Appellant,

THE UNITED STATES,

Appellee.

DECIDED: July 20, 1984

Before Markey, Chief Judge, KASHIWA, and MILLER,

Circuit Judges.

MILLER, Cireuit Judge.

DECISION

The decision of the Armed Serviees Board of Contract

Appeals (‘board’), ASBCA No. 24676, sustaining the

contracting officer's termination for default on Contract

No. DAAiITI01-79-C-0179 (0179) due to appellant’s

failure to deliver on time, is affirmed.

OPINION

Appellant’s argument that this court should employ a

de novo standard of review lacks merit because the

contract in question incorporated by reference a standard

disputes clause (Armed Services Procurement Regula-

tion 7-103.12(a)) providing for the resolution of all

disputes by a board of contract appeals. The disputes

clause and its limited remedies have been approved by the

Supreme Court. United States v. Utah Construction &

Mining Co., 384 U.S. 394, 420 (1966).

The dispositive issue is whether, with respect to the

facts, the decision of the board is fraudulent, arbitrary,

capricious, so grossly erroneous as necessarily to imply

A-55

bad faith, or not supported by substantial evidence. 41

U.S.C. § 609(b).' We hold for the Government on this

issue,

An essential factor in appellant’s failure to complete

performance in a timely manner of 0179 was his own

business decision to use networks ordered for 0179 to

prematurely complete the more profitable Contract No.

DAAHO1-79-C-0621 (‘'0621") on June 15, 1979, al-

though delivery for 0621 was not required until April 21,

1980. This decision was sufficient to break any pattern

established by the Government in liberally granting ex-

tensions of time for appellant's performance because of

supplier difficulties.

With respeet to appellant’s arguments under the De-

fense Production Aet, 50 U.S.C. §§ 2061, et seq., the

0179 econtraet incorporated by reference a standard

clause entitled ‘Priorities, Allocations, and Allotments”

which obligated appellant to:

follow the provisions of DMS Reg. 1 or DPS Reg. 1

and all other applicable regulations and orders of the

Bureau of Domestic Commerce in obtaining con-

trolled materials and other products and materials

needed to fill this order.

Under the applicable Defense Priorities System Regula-

tion 1 (“DPS Reg. 1”), as revised July 1, 1974, (322

C.F.R. Part 651, See. 16(b) [presently appearing at 15

C.F.R. Part 350, See. 16(b) |), appellant was to use the

following sequence in filling “rated orders”;

A person who has accepted rated orders must

schedule his operations, if possible, to fill each rated

order by the required delivery or performance date,

'The board's conclusions of law are, of course, freely reviewable by

this court. Systems Technology Associates, Inc. v. United States, 699

F.2d 1383, 1386 (Fed. Cir. 1983).

A-56

regardless of the sequence in which the orders were

received. If this is not possible, he must give prece-

dence as follows:

(b) As between conflicting rated orders of

equal priority status, precedence stall be given to

the order whieh was received first.

If a contractor with a rated order is unable to obtain

materials, he is entitled to an exeusable delay only if he

has comphed with the requirements of the priorities

system. 2 R. Nash and J. Cibimie, Federal Procurement

Law 2303 (3rd ed. 1980). See Prestex, Inc., ASBUA Nos.

at 73,608-10. Similarly, although the Government may

otherwise be hable for damages for failure to give priori-

ties assistance within a reasonable time after a timely

request, a contractor must show that al! the requirements

of the priorities system have been complhed with in order

to prevail on such a claim. Nash and Cibime at 2305.

We are persuaded that the board committed no prejudi-

cial procedural errors; also, that the board’s finding that,

at the time of the award of 0179, appellant and his

current supplier expected no technical difficulties arising

from the agreed-upon specifications, is supported by sub-

stantial evidence; further, that appellant has not shown

that its failure to make timely delivery was due to excusa-

vle causes.

In view of the above, it is unnecessary to reach appel-

lant’s contentions of violations of civil rights and consti-

tutional torts. As to appellant’s allegations of antitrust

violations, jurisdiction over an antitrust claim belongs, in

the first instanee, in the federal district eourt. 15 U.S.C.

§ 4. A board of contract appeals can only give relief to the

extent permitted by the provisions of the contract. R.W.

A-57

at 95,189-90. We do not consider this issue, whieh was

not (and could not have been) addressed below and

which was raised for the first time on appeal. Inferna-

tional Seaway Trading Corp. v. United States, 488 F.2d

344, 547 (CCPA 1973).

Finally, we are satisfied that the board properly re-

fused to consider appellant’s claims under the Adminis-

trative Procedure Act (5 U.S.C. §§ 701, et seq.). An

abuse of agency discretion ean be the subject of board

review if it pertains to a matter otherwise within the

board’s authority. However, the law of contracts, not the

Administrative Procedure Act, is the source of the

board's authority to review and correct such an abuse.

Ray & Ray's Carpet & Linoleum, Inc., GSBCA No. 5666.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.