Petition for Writ of Certiorari — Evans Reamer & Machine Co. v. United States

LIBRARY | sass

SUPREME COURT. U. & of. FEB 9° 196g

In the Supreme Court of the. United States

OCTOBER TERM, 1967.

No 1.09 '7 fe

EVANS REAMER. & MACHINE COMPANT,

Petitioner,

THE UNITED STATES, 0

Respondent. |

| PETITION FOR A WRIT OF CERTIORARI

20 THE UNITED STATES ,COURT OF: ‘CLAIMS.

i

”

Ricwagrp F. Stevens,

a | 1950 Union Commerce Building,

‘Cleveland; Ohio, ©

Attorney for Petitioner. 2

Of Counsel: ‘3 a 3

Hersert A. SPRING, ns

VicToR STRIMBU, JR.,

Davin J. Srrauss.

THE GATES LEGAL PUBLISHING CO., CLEVELAND, OHIO—TEL. (216) 621-5647

Ky 2 ‘ 6 wis ware lt SP hil Ay esi snapahia caplet a a staat. inte esiers iebcnstivitie

, TABLE OF CONTENTS.

Opinion Below _-.---.____ alenaninaiai cesuate eens 1

Jurisdiction ates saat en PrN RBE OR: 1

Statute and Regulations edieel .. ots, ae

Questions Presented er cued 2

Statement of the Case _2..-----_. a

- Reasons for Granting the Writ se padicalbceedaleeheiiaaa aan

Conclusion SPC Gro = oe

Appendix, (Attached): | 2 - :

' Opinion of the United States Court of Claims -_- 1a

Statutes _ | ateesandocerem are arayin enue ieciouasloiaaeasm meeres 6la_

. Procurement Regulations _....__-_________-< “6la_

Court of Claims ie oe 64a

‘TABLE OF AUTHORITIES.

Cases.

Albert & Harrison, Inc. v. vane States, 68 F.Supp.

732 «(Ct. Cl. 1946) ewes Lee beer Bae Cll re : 12

Bateson-Stolte, Inc. v. United States, 172 F. Supp. :

454 (Ct. Cl. Re RE: RE Wye Cee eT iz -:

Chernick v. United States, 372 F.2d 492 (Ct. Go...

DY) sivnvcocedisssabseianiennesiotiesame a cima name Sta 12

Helene Curtis Industries, Ine. v. United States, 312

| Fad 774 (Ct. CL BE ocacieeaaetes 12

Maxwell Dynamometer Company v. United States,

| No. 120-62 ____ Ct. Cl. .-__ (decided Nov. 9,

BOGE) 6 anny Screen nse Np corset late inet aseticne +12

National Presto Industries, Inc. v. United States, 338

| F.2d 99 (Ct. Cl. 1964). _____ Redlands saan 12

Oe ee

%

ERE ¥ ~

*s ‘

‘

oN . *

4

Ba hk ha

Pe ae ee 4

na = we

ee wv. United States, 120 F. F.Supp. 1 (Ct G%.

ee See” ee os” 1

SiadenLainite Motors, Inc. v. . United States, 292 F.2d

| OO oon 2

Staten Island Hygeia Ice & Cold Storage Co. v. United

| States, 85 F.2d 68 (2d Cir. 1936) Soiecumees’ Te

| ‘Texts. *,

3 Corbin, Contracts § 618 (1960) _-_-___-_-___-_- 15

rey Statutes

6.4 6 I tee:

Rules and Regulations.

Court of Claims Rules; | 4”

EES a RN eee

ID evn eeisrwtcienieecnengeenstlinnnnimemnanineniseimnintd 9, 64a

I cin ites Sipincctncncbecsiei metic cabaaniaiolonl 9, 65a

I BO ni i cis gin ci ercemnengetios 2, 64a

ASPR. 1-302.4, 32 CFR 1.302-4 (1954) taser éla- j

ASPR 1-802, 32 CFR 1.802 (1967) ---------- 2, 13, 62a

‘ASPR 1-803 (a) (i), 32 CFR 1.803(a)(1) (1967) |

sshaipahcacnsmeiieeepitotaiithancimeaiehaiaamanaiis 2, 13, 63a.

ASPR 3-219. 4(c), 32 CFR 3. 219-4(c) (1954) dineeen 2, 62a

ASPR 3-219. 5(a), 32 CFR 3.219.5 (a) (1954) _2, 13, 62a

Title II of the First War Powers Act (50-U.S.C., App.

611) ne 1, 6la’

Ay Ra ete etait is hi

" In the Suprenie Court of the United States —

~ OCTOBER TERM, 1967.

nt ee

_ EVANS REAMER & MACHINE COMPANY,

' Petitioner,

ae

THE UNITED STATES,

- Respondent.

_ PETITION FOR A WRIT.OF CERTIORARI

TO THE UNITED STATES COURT OF CLAIMS. .

To the Honorable, the Chief Justice and the Associate

7 Justices of the Supreme Court of the United States: :

Your Petitioner, Evans Reamer & Machine Company, |

plaintiff below, respectfully prays that a writ of certiorari

issue to review the judgment of the United States Court of

Claims entered in this case on November 9, 1967." A copy

of the opinion of the Court of Claims, _.__ F. 2d ____ (not

published yet) is printed in the Appendix hereto.

OPINION BELOW.

The opinion of the Court of Claims (Appendix to the

Petition, PP. — is reported at ____ F. 2d ____ ( re

SJ URISDICTION.

The judgment of, the United States Court of Claims

was entered into November 9, 1967. |

The jurisdiction of the Paden Court i is invoked

under 28 U. S. C. § 1255(1).

tan tite BA Oe Pie ath Cah ge eae Siem v8 thn aa

4 Y sal v 7, 4 » <e

SSRI MA RDM NR aE oa iia St tae eo wait

- y

STATUTE AN D REGULATIONS INV OLVED.

_ The statutory provision involved is “Title II of the’

First War Powers Act (50 U.S. C., APP. 611). The regu-

lations involved are ASPR 3-219.5(a), 32 CFR 3.219.5(a)

1954); ASPR 1-802, 32 CFR 1.802 (1967); ASPR

1-803(a)(1), 32 CFR 1.803(a) (1) (1967); ASPR 3-219.4

.. (c), 32 CFR 3.219-4(c) (1954); ASPR 1-302.4, 32 CFR :

1.302.4 (E98); APP 30-404.

QUESTIONS PRESENTED. : crar

A. Is a contracting officer obligated to disclose during

the course of contract negotiations information solely in

his possession regarding changes in circumstances affect- Me

_ ing the represented price paid to another contractor where

under set-aside regulations the price under both procure-

ments was inter-related; or are contractors required to

| ‘negotiate set-aside contracts at: their peril?

- 2. Whether a contractor is entitled to reformation of

its contract where a contractor’s mistake as to his legal

rights was induced hy the misrepresentations, ‘innocent

- or otherwise, of a Government contracting officer on whose |

knowledge Petitioner had a right to rely.

3. Whether ‘pertinent Armed Services Procurement

. Regulations dealing with set-aside contracts for econom-

‘ically depressed areas prohibit the granting of a unit price

- in the basic set-aside contract that exceeds the award price

of the non-set-aside contract despite the fact that- the

_ material provisions of the. set-aside contract differ sub-

: stantially from those of the non-set-aside contract. ~

_ 3

STATEMENT OF THE CASE.

Sometime in 1953, responsibility for designing ‘and

developing a fire bomb to meet specifications of, and for. ~

use by the Air Corps and for procuring and delivering a

substantial quantity of such fire bombs, was assigned to

the Chemical Corps. The Chemical Corps i in turn assigned

procurement responsibility for. the fire homb :to its’: New

York Chemical Procurement District. On or.about May —

_ 14, 1954, that Procurement District issued an Invitation

for Bids (IFB) for the manufacture and supply of 73,944

fire bombs on the basis of both F.O.B. — and F. 0. 4%

destination. oer Ohad

‘The invitation contained a note vain that a “set.

| aside” procurement might be negotiated: with firms located

in labor surplus areas in accordance with pertinent pro-

visions of the Armed Services Procurement Regulations.

(ASPR.) Any bidder desiring to participate in such nego-

tiations was invited to attach to its bid on the non-set-aside

‘i portion of the procurement a-supplemental letter furnish-

ing data as to its eligibility to: negotiate for the potential

'. set-aside portion. (App. 2a-3a, Opinion.)

The Petitioner was one of more than 50 bidders who

__ responded to the IFB. Its manufacturing plant, was located

_ in Perry Court, Ohio, a coal mining area. where chronic |

‘unemployment had existed for many years. Petitioner

attached .to its. competitive bid a statement indicating its

interest in, and eligibility for, negotiations on any sét-aside

portion of the fire bomb procurement. (App. 3a, Opinion.)

The contract for the non-set-aside portion of the pro-_

_curement was awarded to The Aircraftsmen Company

(Aircraftsmen ) in late June, 1994. It called for the manu-

factute and delivery of 73, 944 fire bombs at a delivery ‘

~ rate (after the first two months of production) of 8,000

bombs per month. ( App. 4a,' Opinion. ) The original award’

:

Cee eee ee

Sux

4 AE at ae cet os Si Alston, «

‘ . 4

prices per bomb wére $73.98 and $77.98 F.O.B. origin and

destination . respectively. However, a pre-award survey.

team had discovered a $2.056 error in Aircraftsmen’s bid

and, after the contract had been awarded, Aircraftsmen

filed a mistake-in-bid claim with the General Accounting -

Office ( GAO). requesting a price increase of $2.056 per

bomb. In October, 1954, GAO approved Aircraftsmen’s .

mistakesin-bid claim and the prices per bomb were in-

creased to $76.036 and $79. 836 F. FO. B. origin and destina-

tion respectively.

Petitioner was the only bidder who was ; eligible to

negotiate for a set-aside procurement of the fire bombs. -

The contracting officer responsible for the fire bomb pro-

- curement sent a letter to Petitioner under date of J uly 20,

1954 inviting Petitioner to bid on a set-aside quantity of

71,661 bombs with monthly deliveries commencing in

April, 1955. In the letter, the contracting officer- stated

that set-aside procurements could be negotiated at prices

no higher than those paid on’ the non-set-aside -portion

‘and advised Petitioner that the award to Aircraftsmen had

been made at $73.98 per bomb F.O.B.° origin. Petitioner

rejected the invitation. (App. 4a-5a, Opinion. )

Shortly thereafter, the contracting officer, at the direc-

_ tion of his commanding officer, asked representatives of

- Petitioner whether the Company would be interested in

‘negotiations if the maximum price were set at $76.036.

~The Court found thét Petitioner’s representatives told the

contracting officer that Petitioner could not meet the

$76.036 price either but then reconsidered their decision

and informed the contracting officer that Petitioner was

interested in negotiating for the set-aside portion of the

fire bomb procurement. (App. 5d-6a, Opinion. ) In the

_ belief that negotiations with Petitioner had been ter-

minated when Petitioner’s representatives stated Petition-

—

‘%

ree Fe Ai 0 er SA Rae eat nae an dae

eZ we ee

er could not meet the $76.036 price per bomb, the contract- |

ing officer refused. to negotiate with Petitioner. The de-

“cision of the contracting officer was . appealed to the

commanding General, Army Chemical "Corps, Materiel

_Command. (MATCOM.)

_ After Petitiorier had sent letters to the contracting

officer offering to perform the contract at the $76.036 price -

per bomb; MATCOM. directed’ the eéntracting: officer to

inquire as.to whether the terms and conditions set forth in

_ Petitioner’s letters would apply to a production Fate of

3,000 bombs per month. Petitioner answered in the. -

affirmative. MATCOM then directed the contracting

officer to continue negotiations with Petitioner and the |

contracting officer informed Petitioner” by letter ‘dated

October 15, 1954° that he had been authorized to re-enter °

into negotiations for a contract at the optimum production

rate of 3,000 bombs per month. (App. 6a, ‘Opinion. ) The

production rate for the non-set-aside contract: remained -

_ at 8,000 bombs per month. (App. 6a, Opinion, )

A series»of negotiation conferences followed’ during

ich Petitioner’s representatives vigorously pressed for

increase in the $76.036 price or consent:to the inclusion

‘in the contract of an escalation-clause on material prices!

The contracting officer consistently maintained that exist-

ing ASPR governing set-aside procurements | did not permit

him to consider any unit price in the basic contract in

excess of Aircraftsmen’s coatract. price. Petitioner’s rep-

resentatives contended that Aircraftsmen’s contract price

was pn longer controlling because of the fact that the

Government had reduced the production rate of 8,000 per

- month in Aircraftsmen’ s contract to 3,000 per month for

the set-aside. procurement. (App. 7a-8a, Opinion.)

In the interest of providing work for the persons in

_its erttionhy distressed area, Petitioner stated’ it would

ib ctmsncstsenians

wt

6°

- accept the Government’s conditions if they were manda-

tory and not susceptible to revision. Petitioner continued

to urge the Government to allow it an increase over the

$76.036 price. Negotiations continued on the contract into

- February, 1955. (App. Ta-8a, Opinion. )

Meanwhile, Aircraftsmen was experiencing sub-

stantial difficulties in manufacturing and delivering fire

bombs. In late January, 1955, representatives of Aircrafts-

men called the contracting officer and informed him that

increases in the price of aluminum could affect Aircrafts-

men disastrously if an aluminum price escalation clause

was not included in its contract. On January 31, 1955,

Aircraftsmen wrote the contracting officer and requested

the inclusion of an aluminum price escalation clause in its

contract. . aie eee .

In early February, 1955, the contracting officer visited

Aircraftsmen’s plant in Los Angeles to. discuss the prob-

lems confronting Aircraftsmen.. This .visit-was undertaken

after the New York Procurement District personnel had

reviewed the Aircraftsmen situation at a staff meeting

with representatives of the Company. On February 11,

1955, Aircraftsmen wrote the contracting officer and for-

mally requested a’ progress payments program. Aircrafts-

men included in said letter ‘a financial statement showing

it had been unable to pay approximately two-thirds of

the expenses which it had incurred in the performance of

its contract. (App. 46a-47a, Opinion.) - :

On February 15, 1955, the contracting officer re-

sponded to Aircraftsmen’s letter of January 31, 1955 re-

questing an aluminum escalation clause. He inquired

- whether Aircraftsmen desired its request to be considered

as a claim under Section 30, Part IV of the Army Procure-

ment Regulations (APP) and, if so, he suggested that Air-

craftsmen should elaborate its claim on appropriate forms,

e

-

7

copies of which he offered to furnish. By a letter marked

“Air Mail” and dated February 23, 1955, Aircraftsmen

advised the contracting officer that it did desire its request

for an aluminum escalation clause to be treated asa claim °

under Section 30, Part IV of APP and attached thereto

its application for relief with supporting documentation.

The letter was date stamped as having been received by

the contracting officer on March a 1955. The Court be-.

low found there .was no satisfactory evidence in the

record to'explain the reason for the lengthy time lapse ex-

cept. the possibility that the documents may have been

hand carried. (App. Opinion, 48a.) -

Petitioner executed its contract with the Chodubeeiaie

on February 28, 1955. The contracting officer had never

disclosed to Petitioner that Aircraftsmen was encounter-

ing production difficulties nor that Aircraftsmen was

encountering severe financial problems in the pérformance

of the non-set-aside contract and had requested financial

“relief. . Petitioner entered into the performance of its con-

tract and despite financial losses suffered in producing

the fire bombs, delivered the last of the fire bombs to the

Government in March 1958. .

» Aireraftsmen suffered losses also and submitted

claims for relief under Title II of the First War Powers

Act (50 U.S. C. App. Sec. 611). On October 3, 1955, the

contracting officer submitted a favorable preliminary

recommendation certifying that Aircraftsmen’s financial

distress was caused by a number of factors, namely: (a)

an original underestimation of costs; (b) lack of extensive -

working capital to carry a contract of such magnitude

during shutdown periods necessitated by change orders;

and’(c) failure to anticipate a rising market in a basic _

commodity. (App. 50a, Opinion.) -On October 17,

_ 1955, Aircraftsmen was granted an increase in the price —

TTR

a i

: ¥

RI reek eon

>

8

per bomb to $87.9391 retroactive to the first bomb pro-

duced. Despite the relief it obtained, Aircraftsmen was

unable to meet its delivery schedule and the Government

terminated Aircraftsmen’s contract in March, 1956. (App.

50a-51a, Opinion.)

Petitioner soni relief under Title II, First War

Powers Act, in October, 1956. The Army Contract Ad-

-justment Board denied Petitioner’s application in June,

1957 stating that it was unable to find that the current

productive capacity of Petitioner and its parent company,,

Lempco Products, Inc., would be substantially impaired as

a result of the losses suffered. Petitioner requested the

Board to reconsider its decision on December 11, 1957.

The Board denied the request for reconsideration on March

25, 1958. (App. 53a-54a, Opinion.)

Petitioner initiated the present case against the a ao

| States in the Court of Claims, contending: (1) that the

contracting officer’s intentional concealment of informa-

tion material to the negotiations which was solely in his

possession constituted actual fraud which misled Petitioner

to its detriment and, thus, Petitioner was entitled to refor-

mation of its-contract; (2) that assuming the contracting

officer’s failure to disclose information material to the

negotiations was not intentional, then such failure consti-

tuted constructive fraud, and thus, Petitioner Was entitled

to the rélief sought in its Petition; (3) that the parties

entered into the basic contract under a mutual mistake

of fact; (4) that the contracting officer violated the stand-

ards of fair play and good faith and knowingly took an

unconscionable advantage of the inferior bargaining posi-'

tion of Petitioner, and, therefore, Petitioner was entitled

to the relief sought in its Petition; and (5) that the con-

tracting officer, by insisting that applicable regulations

prohibited his granting Petitioner a price per bomb in ex-

9

cess of the ‘award price in the cieneatatie: contract, erred

in his interpretation of the applicable regulations, induced

Petitioner mistakenly to believe it could not receive an

increase in its unit price because of the reduced produc-

tion rate in the set-aside contract and, thus, Petitioner was

entitled to reformation of its contract.

Pursuant to Court of Claims Rule 53 (a), Petitioner’: Ss

_case was referred to a Commissioner for action pursuant —

to Rule 52() of said Rules. On October 21, 1966, in com-

pliance with Rule 57, the Commissioner filed his opinion

which dismissed Petitioner’s Petition.

The Commissioner rejected the first and second con-—

‘tentions stating that the most the record in this case could

be said to support was that the contracting officer had be-

--—eome aware in a general way that Aircraftsmen was ex-

periencing both production and financial difficulties in the

performance of its contract and that the contracting officer

had only surmises, not verified facts, as to the nature of -

Aircraftsmen’s problems. The Commissioner said the con-

tracting officer could not be charged with fraud, either

actual or constructive, in failing to disclosé facts which

he did not actually know to be ‘facts. (App. 17a-18a,

Opinion.) The Commissionef rejected the third contention

on the ground that the written contract precisely expressed

the terms and. conditions upon which both parties’ had F-

agreed in their antecedent negotiations. .(App. 15a, Opin-

ion.) ©

ear . ee >

SEB IANA LEE IA ARENT EH NS

‘The Commissioner did not expressly reject the fourth

contention. Apparently, the fourth contention was not

discussed because of the Commissioner’s ‘ruling oh the

first and second contentions. The Commissioner did not

rule on Petitioner’s fifth contention. (App. 13a-15a,

Opinion. ) 7 Commissioner merely noted that both par-

du ere

10

ties had persuasive arguments regarding the proper inter-

pretation of the applicable regulations. |

‘Petitioner filed Exceptions to the Commissioner’s Re-

port tothe Court of Claims. In a per curiam opinion,

Judge Nichols dissenting, the Court of Claims adopted the :

-Commissioner’s findings of fact, opinion and recommended

conclusion of law.

J udge Nichols dissented on the basis that a ground

rule ‘had been established in the negotiations that the

Government would: not pay more than the Aircraftsmen

price and Petitioner would not take less and that, under

the circumstances of this case, the contracting officer was

under a duty to warn Petitioner before its contract was

executed by both parties if he entertained’any expectation

that the Aircraftsmen price might not hold firm. (App.

20a-21a, Opinion.) Judge Nichols further stated that:,

““* * * The commissioner says (in the opinion, not the

findings) that before the award to plaintiff the con- °

tracting officer had ‘only surmises, not verified facts,

as to the nature, of Aircraftsmen’s problems * * *.’

To sustain the result reached, it is vital that this

characterization be correct. The commissioner had.

‘the officer before him as a witness, and no doubt was

as well situated to Jook into the man’s mind as triers

of fact ever are. But I question whether any well ad-.

vised contracting officer would throw out such a broad

_ hint to a contractor to apply for the extraordinary

relief, available only to contractors in grave enough

difficulty, under Title II, as this one did on February

15, (Finding 30), because of troubles he merely sur-

mised. Their letter to him of February 11, (Finding

29); I would hold of itself afforded more than surmise,

disclosing as it did that they had been unable to pay

approximately two-thirds of their expenses. I do not

think ‘surmise’ is the mot juste, and if the commis-

sioner had selected one more in accord with his detail

=)

11

findings, the result ‘might wal have been different. _

‘I miss here the equitable approach of National Presto

Industries, Inc. v. United States, 167 Ct. Cl. 749, 338

F.2d 99 (1964). If this case is not to go down in his- -

tory as an instance of atavism in the evolution of law,

it must be explained in the peculiar, and to me inex-

' plicable, view the court and the commissioner take as

to the ultimate facts.” (App. 21a-22a, Opinion.)

REASONS FOR GRANTING THE WRIT.

The decision of the Court of Claims.enunciates a novel

but nevertheless fundamental principle that during nego- .

tiations a contracting officer need not divulge to a con+

tractor information.jn his possession which is relevant and

‘ material to the contract but which he has not verified as

being accurate or true. “The Court of Claims has said, in

effect, that a contracting officer may be in sole Possession .

of certain facts material to the negotiations for a contract

which, if true, would most certainly affect the decision of

the contractor to enter into a contract but need not make

the contractor aware of said information until he has veri-

fied the accuracy of the information eventhough the con-

_ tractor may, , in the meantime, execute the contract and

thus ufiwittingly plunge into an abyss from which there

is no escape.

The Court of Claims did not even limit the above rule

by requiring the contracting officer ‘to suspend negotiations

with the contractor until he investigated and ascertained

. whether the information was accurate or not. Thus, a con-

tracting officer may, under the rule enunciated by the

Court of Claims, wait until after , contractor with whom

he is dealing executes his contract before ascertaining

whether the information material to negotiations which

came into his possession during negotiations is accurate.

If the contract subsequently proves to be a ruinous one for |

"2

the contractor, the Government is absolved of all respon-

sibility for failing to either divulge the information or

suspend the negotiations until the information could be’

* verified. The new rule actually encourages a contracting

officer not to investigate and verify information in his pos-

session which the contractor needs but would not have any 25

way of obtaining.

The Court of Claims has for many years adhered to

- the rule that where the Government possesses vital infor-

mation which it is aware a contractor needs but would

_ not have, it cannot properly remain silent and betray a

contractor into a ruinous course of action. Albert & Har-

rison, Inc. v. United States, 68 F.Supp. 732 (Ct. Cl. 1946);

Potashnick .v. United States, 105 F’‘Supp. 837 (Ct. Cl.

1952); Ragonese v. United States, 120 F.Supp. 768 (Ct.

Cl. 1954); Bateson-Stolte, Inc. v. United States; 172 F.

Supp. 454 -(Ct. Cl. 1959); Snyder-Lynch Motors, Ine. v.

United States, 292 F.2d 907 (Ct. Cl. 1961); Helene Curtis

Industries, Inc. v. United States, 312 F.2d 774 (Ct. Cl.

_ 1963); Natienal Presto Industries, Inc. Ww. x United States, |

338 F.2d 99 (Ct. Cl. 1964) ; Chernick v. United States, 372°

F.2d 492 (Ct. Cl. 1967); Maxisell Dynamometer Company |

v. United States, No. 120- 62 codices RE I ccantataties (decided

Nov. 9, 1967). Adherence to said rule is particularly im-

portant in cases such as the one at bar where the Govern-

ment has asserted ‘that the price per bomb to be paid to

Petitioner could not exceed the price paid per bomb to Air-

craftsmen. .

The Court of Claims has now made a basic change in

the long-established rule and has stated that during con-

tract negotiations, the Government need not divulge vital

information which it is aware a contractor needs but

would not have, until after it has verified the information.

Such a basic change in the law applicable to approximately

~ , gations of one party to the other in government contract

13,

180 billion Sellers in Government contracts per year ought

not be made without any appellate review.

A rule of contract law followed for many decades and

uniformly endorsed by the courts forms an unusually solid

- foundation for reliance by parties on the duties and obli-

negotiations. The rule requiring the divulgence of vital

information which the Government knows a contractor

needs but would not have is such a rule. Petitioner be-

_ lieves that the new rule stated by the Court of Claims, in

this case is as wrong in principle as it will be upsetting .

in- practice, for it clearly places contractors at the complete

mercy: of the Government procurement officials. At the.

very least, the new rule merits full consideration by the

Court.

; 2. In 1954-55, the ASPR dealing with set-aside con-

tracts prohibited the payment of a price differential to the

contractor producing the set-aside portion of a procure-

ment. (ASPR 3.219. D(a), 32 CFR 3. 219.5(a) (1954).)

While the ASPR just cited was deleted on October 9, 1959

by Amendment 47, 24 FR 8219, the pertinent language’

of that regulation has been incorporated: into ASRR 1-802,

32 CFR 1.802 (1967 ) ASPR 1-803(a)(i), 32 CFR .

1.803(a) (1) (1967)..The aforesaid procurement regula- °

tions are set forth in full in the Appendix. :

During the negotiations for a contract, the Govern-

ment reduced the production rate, in Petitioner’s contract,

from 8,000 bombs per: month to 3,000 bombs per month.

The contract of the non-set-aside contractor, Aircraftsmen,

was not changed. Petitioner requested an increase in the

price to be paid per bomb or the inclusion of-an escalation

clause in its contract for the reduction in, production rate

greatly increased the time period within which the con-

tract was to be performed and thus exposed Petitioner to

é.. d

fa

* P4 » ?

Re nan aR AR He een DleE LEI aiiiakie sy dbUtEE Ss

? . *.

assent diss CLLR ON ah SpiSiets CSTE ia eho

°

se

ota 8 14

probable increases in cost 6f material and other increases

in cost that Aircraftsmen would not have to contend with.

The contracting officer refused to grant Petitioner’s'

requests stating in a forceful and unequivocal manner that

the ASPR’s dealing with “set-aside” contracts prohibited

the granting of a unit price in the bagic set-aside contract

that would exeeed the award price of the non-set-aside

contract. Petitioner entered into’a contract with the Gov- -

ernment in reliance on the. contracting officer’s intetpreta-

tion of the pertinent ASPR.

' In‘ the Court below, Petitioner contended that it was -

entitled to reformation of its contract because the con-

tracting officer erred in his interpretation of the pertinent |

“regulations and that Petitioner reasonably relied upon the ~ '

representations of the contracting officer to its detriment...

Petitioner contended that the prohibition in the regula-

tions against. a price differential was intended to apply

only ‘where all material provisions in the two contracts,

the non-set-aside. and the set-aside contracts, were the

same. oe

The f'rial Commissioner stated in his opinion, which

was adopted by the Court below, that:

“Whether the contracting officer was. right or

wrong in this interpretation of the set-aside regula, —,

tions seems beside the point. - Typically, the remedy

of reformation is intended to give relief from a con-'

tract which does not conform to antecedent expres-

sions on which the parties have agreed. It is not a

proper remedy for the enforcement of terms to which

the defendant never assented.” (App. 13a-14a, Opin-

ion. )

te SO stating, the Trial Conmmiasidisée and the Court:

of Claims: ‘rejected Petitioner's argument that the proper

rule of contract law in cases such as this is as follows:

ty

&e

®.

15

“If the mistake of law that induced the making or

the performance of a contract by one party was

~ caused by a fraudulent misrepresentation of the law

" * by: the other, or by-his innocent misrepresentation if

the relations of the parties are such as to make it

reasonable for the one. to rely upon the representa-

tions of the other, the appropriate relief by rescission, .

restitution, or reformation -will be given the injured

party. * * *” 3 Corbin, Contracts § 618 (1960). See

_also: Staten Island Hygeia Ice & Cold Storage Co. v.

United States, 85 F.2d 68, 71-72 (2d Cir. 1936)...

The Court of Claims refused to decide whether the _

contracting officer’s interpretation of the set-aside regula-

tions was right or wrong on the ground that reformation

was not the proper remedy even if he was wrong in his

interpretation. One flaw if the Court of Claims’ analysis

is that theré is a rule of contract law which does permit

reformation of a contract in cases such as this. Petitioner

submits that itis entitled to continued recognition of said

rule of contract law. Pa Cs a

* Moreover, the decision of the Court of Claims has left

unclear the proper interpretation. of the set-aside regula-

tions. The Government has asserted: that the price to be

paid per unit in a set-aside contract can never exceed the

award price per unit in the non-set-aside contract regard-

_less of the differences that may exist in the terms and con- °

ditions of the two contracts. Petitioner has stated this

interpretation is erroneous. The Court of Claims found |

both positions. persuasive. ae Re i

In’ view of the.-Government’s expressed policy of |

alleviating the plight of workers in economically depressed

areas by placing set-aside contracts in said areas and the

large number. of Government contracts involved, it is

vitally important that this issue be resolved. The unset-.

<>

| 16 |

tling consequences of the decision of the Court of Claims

can only be forestalled by a: decision of this Court finally

repolving the’ question left unanswered below.

CONCLUSION.

For the foregoing reasons, it is respectfully submitted

that this Petition for a Writ of ete aeae should be

granted.

$

Ricuarp F. ravens,

Attorney for Petitioner.

Of Counsel: | - bn. :

HERBERT A. SPRING, ;

. Victor StRIMBU, JR.,

‘Davip J. STRAUSS.

February 1968.

~~ ’ , : . ‘

, f 4 6 e.

; 3

Pe

° ° %

; F .

“2

id

.

.

+

APPENDIX

os

’

e

4

, F

° . :

.

*

a .

> ‘

4

‘

b i | :

. x -

» .

‘

’ : :

‘

| : eo, See

“2 ‘

° 7 + - ~—b

= ‘

. if

; -

s

~ : Poe

Y Pa

: 7

5 °

; ‘ a

s °

.

. @ :

. . - :

c :

.

. °

e

se

. é

oe

.