# Petition for Writ of Certiorari — Federal Electric Corp. v. United States > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385608_0230%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1974 - **Citation:** 419 U.S. 874 ## Text Fepmnat Exeoraro Compoeinion, Petitioner . sy. v. Tue Unrrer States ad ee eae INDEX Page COUN TN ogc in oo havo REA SANSA OR SEROREEAARO 1 POMIIIIIE gh vo kcinka cede a vateaeereenadkasksteans 2 QURSTIONS PRESENTED .... 22s cssscccssesccnnccesense 2 eg: | ne rr. eee 3 SRR ERY OP CE CAE oacc ccc scncanens ccccuanaies 3 REASONS FOR GRANTING THE WRIT ..........00.00ce00. 8 I. The Decision of the Court of Claims Is in Con- fliet With Decisions of the United States Court of Appeals for the Second Circuit and Other Federal Courts as Well as With Its Own Earlier PRE ery re Fer rT Tee Pr T eT Pee ere 11 II. The Court of Claims Erroneously Considered Itself Bound by a Decision of This Court Which Is Inapplicable to This Case on Its Facts ...... 20 Il. The Court of Claims Erred in Holding That the Government May Issue Reprocurement Orders Under an Indefinite Quantity Contract for the Sole Benefit and Account of a Defaulted Govern- PTT ee ree errr 22 Me rE ey TTT TET CETTE eT CTET 25 PE BE. own c eee kak rak (kk se we Reka habe en la SE Oe 5b 565s RRs CEES eee l5a pt rey Cee a rere rer Tarr pry re 16a pT Peer Peer Teer ye Tere Tr ere Tere 39a POT Oa FFT i eee ee nn Gere eo , EE, BIR ILENE SSE a ra ii Index Continued CITATIONS CASES: Page Armstrong Metals & Plasties Co. v. United States, Ct. Cl. No. 239-70, Trial Judge Opinion (Sept. 17, | Pn repre Tyrer ec Tree rer Tere te 15 Carpenter Steel Co., AECBCA No. 5-65, 65-1 BCA BOED Ni cikksisncctveussdsekeaenetweneassaeees 18 G. L. Christian & Associates v. United States, 160 Ct. Cl. 1, 312 F.2d 418, rehearing denied, 160 Ct. Cl. 58, 320 F.2d 345, cert. denied, 375 U.S 954 (1968) 12 Cudahy Packing Co. v. United States, 109 Ct. Cl. 833, 75 F. Supp. 239 (1948) ........cccccccccsccccees 18 Everett Plywood & Door Corp. v. United States, 190 Ct. Cl. 80, 419 F.2d 425 (1969) ............000. 10, 15 Federal Pac. Elec. Co., IBCA No. 334, 1964 BCA TOE vcs nab ndwasds ss 5kbee¥essesabxthostuneaen 1s Garrity Co., ASBCA No. 12174, 67-2 BCA 7 6586 .... 10 General Elec. Co., IBCA No. 442-6-64, 65-2 BCA [4974 18 Grain Merchants Inc. v. Union Bank, 408 F.2d 209 (7th ONE: DD aacdecancacdechuscnssasaevesiesenaes 15 Mazur Bros. & Jaffe Fish Co., VACAB No. 512, 65-2 Be EE x ecg Ra ki ek Od bab ue Ueda eeceseeaaues 18 Meeks Transfer Co., ASBCA No. 11419, 68-1 BCA Serer a rn ener ee 11 Northern Helex Co. v. United States, 197 Ct. Cl. 118, ef 8 8. er er er 10, 15, 16, 17 Paul v. United States, 371 U.S. 245 (1963) ........... 12 Priebe & Sons, Ine. v. United States, 322 U.S. 407 SEES Rccncencdiccbavnapaned) tapharecauetnaee 13, 19 Reeves Sounderaft Corp., ASBCA Nos. 9030, 9130, oR OE Se rere re Serer re 18 John Reiner & Co. v. United States, 163 Ct. Cl. 381, 325 F.2d 438 (1963), cert. denied, 377 U.S. 931 (|: Sey eon ree eer errr ree 4 J. %. Simplot Co., ASBCA No. 3952, 59-1 BCA § 2112, modified on mot. for recon., 59-2 BCA § 2306 .... 18 Harry Thuresson Inc. v. United States, 197 Ct. Cl. 88, Se Te CORD nn 6 cancun sees esanenkus ses 10, 15 United States v. Carlo Bianchi & Co., 373 U.S. 709 PRE Cdk ccendkupehare PeneeSkvecaceeee vbeweeee 4 © ES Is tee ae RES Index Continued iil Page United States v. First National Bank of Boston, 203 P. Sapp. 298 (D. Muss. 1967) ...... 2.0.60... 15 United States v. Hamden Co-operative Creamery Co., 185 F. Supp. 541 (E.D. N.Y. 1960) ........¢..... 1S United States v. Hext, 444 F.2d 804 (Sth Cir. 1971) ..13,15 United States v. National Optical Stores Co., 407 F.2d 759 (7th Cir. 1969) RM SSUNT ER EL Sao oe ee 15 United States v. Wegematie Corp., 360 F.2d 674 (2d EE a laa woe orc sae Se tee 10, 14, 15 Whitin Mach. Works v. United States, 175 F.2d 504 Pe SNE ral Men Coun se tA Re 18 Willard, Sutherland & Co. v. United States, 262 U.S. Se MOE ca ene veek tic wuvwect 9, 11, 12, 13, 20, 21, 22 STATUTES: Armed Services Proeurement Act of 1947, as amended, 10 U.S.C. § 2304 et seq. (1970) ............. .3, 12, 19 Armed Services Procurement Regulation, §§ 7-103.12, S-701(a), 8-G02.6, 1-300 ... os. cccus.. .3, 4, 12, 19, 23 Constitution of the United States, Fifth Amendment. .3, 19 Defense Production Act of 1950, as amended and ex- tended, 50 U.S.C. $$ 2071-73 (1970) ............ 3, 19 Uniform Commercial Code, §¢ 1-207 ........ 3, 9, 10, 11, 13, 14, 15, 18, 19, 22 Wunderlich Act, 4 U.S.C. $$ 321, 322 oe 7 OTHER: Gusman, Article 2 of the UCC and Government Pro- curcment;: Selected Areas of Discussion, 9 B.C.And. CAomn.LaRev. 1 (1967) ccc cece ccnscunncese 14 Traynor, Statutes Revolving in Common-Law Orbits, 17 Cath.U.L.Rev. 401 (1967) .................... 19 | SOE H TEAS RE ANY NESTE NG ees . peel eran, Mad cabana tn iin See tea ¥ Le aiid Lat aE Ne Na Nh eae I ENE RN AR PN BN BETTI RS ME SEO IRS ME OM wir Rm reget TAS ROC LN PIRES, BO i 9 eae foi tN go yee Spare ade atin! Neen | IN THE Supreme Court of the United States OcTroBER TERM, 1973 b] No. ¥ . . E FeperaL HLECTRIC Corporation, Petitioner e & V. THE UNITED STATES SOONG PIO STS ETS PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF CLAIMS EYL OE PERS LANE A ROH HT ME RIT Petitioner, Federal Electrie Corporation, respect- fully prays that a Writ of Certiorari issue to review the opinion and judgment of the United States Court of Claims in this proceeding. OPINIONS BELOW The opinion of the Court of Claims, as yet unre- ported, appears in Appendix A, infra, pages la-14a. The order of the Court of Claims denying petitioner’s motion for rehearing, also unreported, appears in Appendix B, infra, page 15a. The opinion of the Armed CPR Ls ae? Pied abs r ‘ - Aa rt a Ee Co a le 4 & . & j 4 r) i a 2 Services Board of Contract Appeals (‘ASBCA") is reported at 68-1 BCA © 6854, and appears in Appendix C, infra, pages 16a-38a. JURISDICTION The judgment of the Court of Claims was entered on January 23, 1974. The Chief Justice extended the time within which to file a petition for a writ of certiorari to and ineluding May 23, 1974. This Court’s jurisdic- tion is invoked under 28 U.S.C. § 1255(1) (1970). QUESTIONS PRESENTED 1. Whether, contrary to the decision of the Court of Claims in this case, the Uniform Commercial Code (“*UCC”’) is the controlling federal law applicable to disputes under Government contracts in the absence of otherwise applicable federal statutes or regulations, as has been held by the Court of Appeals for the Seeoud Cireuit and other federal courts. 9. Whether the UCC has now superseded previous judicial decisions as controlling authority in disputes under Government contracts, when there are no other- wise applicable federal statutes or regulations. 3. Whether the acquisition by the United States of goods at unreasonably low prices under a Government contract which is unenforceable and has been validly rescinded is a taking of private property without just compensation, in violation of the Fifth Amendment to the Constitution. 4. Whether the Court of Claims properly dis- regarded well-established standards, set forth in appli- eable statutes and in the decisions of this Court, with respect to the construction of Government contracts. 3 ®. Whether the Government may place reprocure- ment orders under an indefinite quantity contrect for the sole benefit and account of a defaulted Government contractor, in violation of the Armed Services Procure- ment Regulation (ASPR) and contrary to the previ- ous interpretations and agreements of the parties. STATUTES INVOLVED The relevant provisions of the Armed Services Pre- curement Act of 1947, as amended, 10 U.S.C. § 2304 et seq. (1970), as implemented by the Armed Services Procurement Regulation (ASPR), §§ 7-103.12 (Dis- putes), 8-701(a) (Termination for Convenience of the Government), 8-602.6 (Repurchase Against Contrac- tor’s Account) and 1-309 (Solicitations for Informa- tional or Planning Purposes) (1965); the Uniform Commercial Code, § 1-207; the Defense Production Act of 1950, 50 U.S.C. §§ 2071-73 (1970), as amended and extended; and the Fifth Amendment to the Constitu- tion of the United States are set forth in Appendix D, infra, pages 39a-52a. STATEMENT OF THE CASE This case arises out of a contract between petitioner and the United States Government, acting through the Department of the Air Force, entered into on Deecem- ber 17, 1965. The contract called for the production and purchase of an indefinite quantity of five types of mobile generator sets of various sizes and e>pacities. The contract provided that the Government would order a minimum quantity of 453 generators and reserved the Government's right to place additional orders for generators up to a maximum quantity of 3,600 within a period of 12 months beginning one day after the effee- tive date of the contract. ORTON PEP REE Peer pemaessi ey gemimmmremeyenctan cs 4 The contract specifically prohibited the Government from issuing orders for the minimum quantity simul- taneously with the effective date of the contract. At the same time, by means of the standard Termination clause, the Government reserved the right to terminate the entire contract before issuing orders for the mini- mum quantity.' In accordance with these provisions, the order for the ninimum quantity was not placed by the Air Force contemporaneously with the effective date of the contract. To the contrary, the order for the minimu a quantity was net issued by the Air Force until three days after the effective late of the contract. The contract also contained a Disputes clause of the type normally found in Government supply contracts.° This clause required petitioner to continue perform- ance and pursue its administrative remedies under the contract in the event that a dispute with the Govern- ment arose during performance. Some time after petitioner’s acceptance of the first two delivery orders under the contract, petitioner be- came aware of certain errors in its proposal for the contract which resulted in petitioner’s incurring sub- stantial unanticipated losses on each generator ordered by the Air Force, Petitioner advised the Air Force of the errors, and informed the Air Foree that it was withdrawing its offer to supply any additional genera- tors, other than those which had already been ordered. Petitioner contended that the contract was void 1The standard Termination clause is considered in John Reiner & Co. vy. United States, 163 Ct. Cl. 381, 390, 325 F.2d 4388, 442 (1963), cert. denicd, 377 U.S. 931 (1964). 2 The standard Disputes clause is set forth and considered in United States v. Carlo Bianchi & Co., 373 U.S. 709, 710 (1963). 5 “b initio because it did not contain any binding con- sideration running from the Government to petitioner. At the time of award, all that the Government prom- ised was to place orders at some future date; but the Government also retained the right under the Termina- tion clause of the contract to rescind or revoke its promise or to terminate the contract for its convenience and at its discretion? The Government's promise was thus illusory, and the contract was one-sided and unen- forceable. In accordance with the Disputes clause ot the eon- tract, petitioner also informed the Air Force on March 29, 1966, that it would continue to manufacture, under protest, any additional generators ordered by the Air Force, without prejudice to its right to reeover, in an appropriate administrative or judicial proceeding, the reasonable price for the delivery of such generators. Thereafter, the Air Force placed orders for 2.174 addi- ticnal generators and made payment to petitioner only at the erroneously low prices set forth in the contract. Petitioner thus seeks in this litigation to recover the difference between the erroneous contract prices and the reasonable prices for these generators. Prior to the time that petitioner and the Govern- ment entered into the contract, the Government, acting through the same Air Force procuring activity, entered into a similar contract with another company, Bogue Electric Company (‘*Bogue’’), for substantially simi- lar generators, The Bogue contract was terminated for default on November 19, 1965, approximately one mouth prior to the exeeution of the contract between petitioner and the Government. On January 31, 1966, % Supra, note 1, ——— }é 6 after the execution of the contract with petitioner, the Air Force issued a ‘*Request for Proposal’? to repro- cure a quantity of generators ‘tfor the acconut’? of Bogue. This reprocurement was in accordance with the provisions of the Default clause in the contract be- tween Bogue and the Air Force. Pursuant to that clause, Bogue was liable for the difference between the unit price set forth in its contract and the unit price at which the Air Force reprocured the defaulted generators. Four proposals were received by the Air Force in response to the Bogue reprocurement request, including one from petitioner. Petitioner's proposed prices were the lowest among the four offerors. Tlowever, peti- tioner’s proposed prices were substantially higher than the erroneous prices set forth in the contract between petitioner and the Government. At the invitation of the Air Foree, negotiations were entered into by petitioner and the Air Force under the Bogue reprocurement request. During the negotia- tions, the Air Force offered petitioner additional con- sideration to permit the Government to reprocure the defaulted Bogue units under petitioner’s contract, and so stipulated before the Armed Services Board of Con- tract Appeals (ASBCA). However, petitioner refused this offer. An agreement was subsequently reached on prices and other terms under the Bogue reprocurement request, subject to availabliity of funds and approval of higher authority. The prices agreed upon were com- parable to those which petitioner had quoted in its original response to the reprocurement request and, significantly, were as much as $2,700 per unit higher than the erroneous prices set forth in the basie contract with petitioner. The Government stipulated before the 7 ASBCA that these higher prices were “fair and reason- able.” Some time after March 1966, the Air Force reversed its position, abandoned the Bogue reprocurement re- quest, and determined to reprocure the defaulted Bog: » units under petitioner's contract at the erroneous prices set forth in that contract. On April 15 and June 13, 1966, the Air Force issued delivery orders under the contract to reprocure 753 units for the aceount of Bogue. Alternatively, petitioner thus seeks in this litigation to recover the difference between the ervone- ous prices set forth in the contract and the reasonable prices for the generator reprocured by the Air Force for Bogue’s account. Petitioner sought to recover the difference between the erroneous prices and its actual costs through admin- istrative procedures provided for in the Disputes clause of its contract with the Government. In an opinion rendered on January 26, 1968, the Armed Serviecs Board of Contract Appeals denied petitioner's claims under the contract. The Board held that the contract was legally enforceable as to all orders issued there- under and at the prices set forth therein. The Board further held that the requirement in ASPR § 8-602.6(2) that the contracting officer reprocure defaulted units at “as reasonable a price as practicable’? means at the “lowest practicable price,” and that the Air Force was only ‘testing the market’ when it issued the Bogue reprocurement request. (68-1 BCA at 31, 598; Appen- dix C, page 36a). On January 21, 1973, petitioner appealed the ASBCA decision to the United States Court of Claims. The appeal sought review of the ASBCA decision pursuant to the Wunderlich Act, 41 U.S.C, §§ 321, 322 (1970). MEINE Bree one ye 8 Petitioner contended that the Government breached the contract by its insistence upon petitioner’s continued performance at the erroneous prices set forth in the con- tract and by its demand that petitioner fill orders for the account of another contractor. Finally, petitioner con- tended that the Government's actions under the con- tract constituted a taking of petitioner’s property with- out just compensation within the meaning of the Fifth Amendment to the Constitution. On October 25, 1973, the Court of Claims granted the Government’s cross-motion for summary judgment and dismissed petitioner’s appeal. With respect to the enforceability of the contract, the court adopted the result reached by the ASBCA, but declined to follow its reasoning. Although the court recognized that recent federal court decisions have applied the provi- sions of the UCC to disputes arising under Govern- ment contracts, it refused in this case to apply those provisions. The court substantially followed the rea- soning of the Board with respect to the Bogue repro- envement issue. It did not reach petitioner’s conten- tions under the Fifth Amendment. REASONS FOR GRANTING THE WRIT This case raises issues of substaigial and compelling national importance to the law applicable to disputes under Government contracts. It presents to this Court for the first time the basie question of whether the Uni- form Commercial Code, which has been adopted by 49 states and by Congress for the District of Columbia, is the prevailing ‘* federal common law’ applicable to dis- putes under Government contracts in the absence of otherwise applicable federal statutes and regulations. As we show below, the decisions of the lower federal 9 courts are directly in conflict with respect to this mat- ter. In addition, this case presents the question of whether the Court of Claims may properly disregard well-settled principles, set forth in applicable statutes and in the decisions of this Court, with respect to the construction of Government contracts. The prompt resolution of these Guestions by this Court is a matter of genuine importance for the fair and orderly adminis- tration of Government contracts. The uncertainty and confusion regarding the proper status of the UCC in disputes arising under Govern- ment contracts are the result of a decision rendered by this Court more than 50 years ago. The Court of Claims stated in this case that, although it “might find per- suasive the contemporary view of performance under protest as restated in Section 1-207 of the Uniform Commercial Code... , we hesitate to extend this view in the face of a clear, contrary rule established and affirmed, albeit a half century ago, by the Supreme Court."" (Appendix A, page 9a) The ‘contrary rule” to which the court referred as governing authority is the decision of this Court in Willard, Sutherland & Cov. United States, 262 U.S, 489 (1923). On the basis of Willard Sutherland, the Court of Claims held that petitioner's contract was valid to the extent that petitioner performed thereunder, although the contract contained a Disputes clause and peti- tioner’s performance was under protest. In electing to follow what Judge Nichols, concurring, described as “elderly”? decisions of this Court, and dis- * UCC $ 1-207 provides: ‘A party who with explicit reservation of rights performs or promises performance or assents to perform- ance in a manner demanded or offered by the other party does not thereby prejudice the rights reserved ... .”’ AC yee ces om Oo ead neat) MME AEROS SNORE UBL DENI wy ro 4 ih # » 10 regarding the currently prevailing view of perform- ance under protest as set forth in the UCC, the Court of Claims ignored the recent trend of its own decisions. Those decisions have consistently recognized the UCC as a principal source of the federal common law for purposes of Government contracts. See Northern IHeler Co. vy. United States, 197 Ct. Cl. 118, 455 F.2d 546 (1972); Harry Thuresson, Ine. vy. United States, 197 Ct. Cl. 88, 453 F.2d 1278 (1972); Everett Plywood & Door Corp. v. United States, 190 Ct. Cl. 80, 419 F.2d 425 (1969). Additionally, the decision of the Court of Claims in this case is directly in confliet with the landmark deci- sion of the Court of Appeals for the Second Circuit in United States v. Wegematie Corp., 360 F.2d 674 (2d Cir. 1966). In an opinion by Chief Judge Friendly, the Second Cirenit held in Wegematic that the UCC is an important source of the federal common law regarding Government contracts. The court emphasized that it would be a ‘distinct disservice’”’ to disregard the UCC, as did the Court of Claims here. Jd. at 676. The conflict between the Court of Claims and the Second Cireuit regarding the applieability of the UCC to disputes under Government contracts has already resulted in substantial uncertainty in the administra- tion of Government contracts. The confused state of the law in this area is reflected in decisions of the administrative boards of contract appeals. Consistent with Wegematic, some of those decisions recognize the UCC as the most reliable source for determining the federal common law applicable to Government con- tracts. See, e.g., Garrity Co., ASBCA No, 12174, 67-2 BCA 6586. Others, however, like the Court of Claims in this proceeding, have refused to apply the require- 11 ments of the UCC. See, eg. Mecks Transfer Co., ASBCA No. 11819, 68-1 BCA © 7063. It is important that this Court act promptly to dispel the confusion and uncertainty regarding the applicability of the UCC in disputes arising under Government contracts. A separate question in this proceeding involves the Government's reprocuren.. it rights in the event of default by a Government contractor. The resolution of this question is also of substantial importance to the Jaw of Government contracts. The issue in this ease is whether the Government may ignore the guidelines set forth by applicable statutes, as implemented by the Armed Services Procurement Regulation, and by the decisions of this Court with respect to the constuction of Government contracts. I. The Decision of the Court of Claims Is in Conflict with Deci- sions of the United States Court of Appeals for the Second Circuit and Other Federal Courts as Well as With Its Own Earlier Decisions. The Court of Claims in this ease held that it was unnecessary ‘for it to resolve the central issue of the unenforceability ab initio of petitioner’s contract with the Government, sinee the ‘present ease is governed hy” the decision of this Court in Willard, Sutherland d Co. v. United States, supra. ( Appendix A, page 7a). The court held that under the Willard, Sutherland rule, petitioner was bound to the erroneous contract price for all of the generators which it delivered, re- gardless of whether its performance was under protest. The Court of Claims stated: Though we might find persuasive the eontem- porary view of performance under protest as re- stated in Section 1-207 of the Uniform Commercial “oh Petar oh FRM MALCR RAAT IUR UG oe a Bivse 12 Code and accepted by the court under the special circumstances of the Northern Hele case, we hesi- tate to extend this view in the face of a clear, eon- trary rule established and affirmed, albeit a half century ago, by the Supreme Court. We are re- minded in this connection of the Court’s recent expression of ‘‘difficulty in comprehending how decisions by lower courts can ever undermine the authority of a decision of [the Supreme] Court.”’ United States vy. Mason, 412 U.S. 391 (1973). What the Court of Claims referred to as the ‘con- temporary view”? of performance under protest is embodied in Section 1-207 of the Uniform Commercial Code. The Section provides that a party, such as peti- tioner, which performs ‘*with explicit reservation of rights . . . does not thereby prejudice the rights re- served ....°’ Although there is no specifically appli- ‘able provision in the Armed Services Procurement Regulation,’ the contractual requiremeit of continued performance, contained in the standard Disputes clause, obviously indicates that such performance will not take place at the expense of the eontractor’s specifi- cally reserved legal rights. As shown in Section II of this petition, Willard, Sutherland is inapplicable to this case on its facts be- >The Armed Services Procurement Act of 1947, as amended, 10 U.S.C. § 2304 ef seq. (1970), is the organie statute autho izing the Department of Defense to issue procurement regulations. These regulations are known collectively as the Armed Services Procurement Regulation (ASPR) and are codified in Title 32 of the Code of Federal Regulations. This Court has held that the pro- visions of ASPR have the full force and effect of law. Paul vy. United States, 371 U.S. 245, 255 (1963). See G. L. Christian and Associates v. United States, 160 Ct. Cl. 1, 312 F.2d 418, rehearing denicd, 160 Ct. Cl. 58, 320 F.2d 345, cert. denied, 375 U.S. 954 (1963). ee a ee 13 ‘ause of the presence of a modern Disputes clause in petitioner’s contract and because of the valid rescis- sion of petitioner’s contract. However, it is important to note at this point that, regardless of Willard, Suther- land, the refusal of the Court of Claims to apply the UCC in this case directly confliets with prior decisions of that court and with decisions of the United States Court of Appeals for the Second Circuit and other federal courts. It also conflicts with the reasoning of this Court in Priche & Sons, Inc. vy. United States, 322 U.S. 407, 411 (1947).° Tn 1947, this Court stated in Priebe that: It is customary, where Congress has not adopted a different standard, to apply to the construction of Government coutracts the princi ples of general contract law, United States vy. Standard Rice Co., 323 U.S. 106, 111 and cases cited. [ Emphasis added] : There can be no question of the dramatie impact of the Uniform Commercial Code on the “principles of general contract law.’’ The Code has been adopted by 49 states and by Congress for the District of Columbia. Sce United States vy. Hext, 444 F.2d 804, 811 (5th Cir. 1971). A review of the Court of Claims and other fed- eral court decisions rendered since the publication of * Judge Nichols, concurring in the Court of Claims decision in this proceeding, suggested that the court should not have departed from the reasoning of the ASBCA. One beauty (among many) of the Board’s opinion is that it avoids the Scylla and Charybdis between which this court, on its chosen course, must pass: that is, either we must ignore what we call ‘‘the contemporary view of performance under protest’’ or we must presumptuously overrule some elderly Supreme Court decisions. (Appendix A, page 13a). LRP LORI A SL oY Ne yy bi Eo ey ees ree wey PORN PROS IIAeo PANN as os Ad sees e's Denereateasccx 14 the UCC, as well as the decisions of the Government boards of contract appea!s, indicates that application of the Code to disputes under Government contracts in the absence of otherwise applicable statutes or regula tions is the ru/e and not the exception. Accordingly, the decision of the Court of Claims in this proceeding is contrary to che prevailing law. It is a matter of genuine importance that the proper funetion of the UCC in Government contracts disputes be expeditious!y resolved. As one commentator has emphasized, the **wniform application of an inde- pendent federal common law’ is essential to protect federal contracts from the multiplicity of litigation which inevitably results from confusion with respect to the applicable law. Gusman, Article 2 of the UCC and Government Procurement: Selected Areas of Discus- sion, 9 B.C.Ind. & Com.L.Rev. 1,3 (1967). The landmark case in this field is United States v. Wegematie Cor p., 269 F.2d 674 (2d Cir. 1966), an action by the United States seeking damages for delay under a Government computer contract. Chief Judge Friendly stated for the Second Circuit : We find persuasive the defendant’s suggestion of looking to the Uniform Commercial Code as a souree for the ‘‘federal’’ law of sales. The Code has been adopted by Congress for the District of Columbia, 77 Stat. 630 (1963), has been enacted in over forty states and is thus well on its way to be- coming a truly national law of commerce, which, as Judge L. Hand said of the Negotiable Instruments Law, is ‘‘more complete and more certain, than any other which ean coneeivably be drawn from those sources of ‘general law’ to which we were accustomed to resort in the days of Swift v. Tyson.”’ New York, N.H. & H.R. Co. v. Recon- struction Finance Corp., 180 F.2d 241, 244 (2 Cir. SY EL LES NIMS B OIL a ln 15 1950). When the states have gone so far in achiev- ing the desirable goal of a uniform law yoverning commercial transactions, it would be a distinct dis- service lo insist ona differcut one for the segment of commerce, important but still small in relation to the total, consisting of transactions with the United States. [360 F.2d at 676; emphasis added. ] Contrary to its position before the Court of Claims, the Government has frequently acknowledged the appli- cability of the U.C.C, to federal contracts. Wegematic has substential progency; and no contrary authority among the circuit courts of appeals exists. See United States vy. Heat, supra, 444 F.2d at 809-811 (5th Cir.): Grain Merchanis, Liev. Union Bak, 408 F.2d 209, 218 (7th Cir. 1969), United States v. National Optical Stores Co., 407 F.2d 759, 761 n. 3 (7th Cir. 1969) ; (United States vy. First National Bank of Boston, 203 F.Supp. 298, 300 (D. Mass. 1967) (per Judge Wyzanski). Similarly, the Court of Claims accepted and relied upon the U.C.C. in Everett Plywood &: Door Corp. V. United States, supra, 190 Ct. Cl. at 89-90, 419 F.2d at 450, where the court quoted with approval the language of Chief Judge Friendly in Wegematie. In Harry Phuresson, Tuc. ¥. United States, supra, the court also found support for its decision in the U.C.C., which, as it acknowledged, “we have applicd in the past.”” (197 Ct. Cl. at 97, 453 F.2d at 1282; emphasis added), See also Armstrong Metals & Plastics Co. y. United States, No, 239-70, Trial Judge Opinion (Sept. 17, 1973). In Northern Helex Co., supra, to which the Court of Claims referred in its opinion, the eourt adhered to the “more modern position’? of the UCC and lauded the “fairness of following the modern UCC rule.” which SFO RLS SS Bear Risic tect iteass 16 permits continued performance under protest after a breach of contract by the Government. The very sane UCC provision which was at issue in Northern IHeler is also at issue, here, and was distinguished, erroneously, by the Court of Claims. In Northern Heler, the court stated as follows: We reject the contractor’s point that in fact defendant consented to continued performance, but adhere to the more modern position of the Uni- form Commercial Code, in its Section 1-207, that the opponent’s assent is not au prerequisite. ‘As always, the federal contract law we apply should take account of the best in modern decision and diseussion.’’ Pabloe Co, v. United States, 161 Ct. Cl. 369, 377 (1963). This court has explicitly recog- nized the authority and relevance of the Uniform Commercial Code in the field of public contracts. Everett Plywood & Door Corp. v. United States, [supra] ..., as has the Second Cireuit, United States v. Wegematic Corp., [supra] .... See, also, Harry Thuresson, Inc. v. United States, [supra] .... We are convinced of the fairness of following the modern UCC rule in this case because of the harshness of a contrary result on our special facts, where cessation of production was commercially impossible and avoidanee of waste most desirable. As Wiliston explains the rationale behind the strict doctrine of election of remedies (Williston, Contracts, supra, sec, 684), that theory has little impact here. He says: ‘*The law simply does not, under the circumstances, permit a party to exercise two alternative or inconsistent rights or remedies.”’ In this instance, continued delivery was not an in- consistent, voluntarily chosen, course of action, but an indispensable route which was the only practi- eable one. [197 Ct. Cl. at 130, 455 F.2d at 553-554 ; emphasis added.] FOES VD iOS EA dene C sn Eh OO ONL Ae a : rs EE EN AOE sre eee AWE eceoness 17 The course of action followed by petitioner in this cease—namely, performance under protest—was also an “indispensable route.” Petitioner was required here to continue performance by virtue of the Disputes clause In its coutrace and by virtue of directives issued by the Business and Defense Services Administration (BDSA) of the Department of Commerce.” There are civil and criminal penalties in the Defense Pro- duction Act for the willful violation of such BDSA directives,” * The BDSA, now renamed the Bureau of Domestic Commeree (BDC), under the authority of the Defense Production Act of 1990, 50 U.S.C. $$ 2071-73 (1970). as amended and extended, op- erates the Defense Materials System (DMS). That system con- sists of a body of regulations, orders and procedures desizied to channel the flow of materials and products to the nation’s vital military defense, atomic energy, Space, construction and research and development programs, by seiting priorities for the purchase and supply of materials by and to Government prime contractors and subcontractors at every tier, *The Court of Claims also erred in attempting to distingnish this ease from Northern Heler on the grounds of the alleged “special circumstances’? in Northern Heler. “Special” cireum- stances are also present here, Additionally, the court failed to point out that Northern Melos vested, “equally.” on the significant facts that the contractor in that ease had made an express reserva- tion of its rights (197 Ct. Cl. at 128-29, 455 F.2d at 552-53); and that the ‘Government was not hurt and it did not change its position.”’ (197 Ct. CL at 130, 455 F.2d at 554). Petitioner meets both of the two co-equal eriteria set forth by the Court of Claims in Northern Telvr. Petitioner can point both to the ‘particular circumstances’ of this case, ¢.9., the pres- ence of a modern disputes clanse, the applicability of BDSA diree- tives carrying civil and criminal penalties, and the Government requirements for the ordered generators for the Vietoam War; and to “special facts," eg., petitioner made an express protest and reservation of its rights, and the Government was not hurt (but rather, benefitted) by petitioner's continued performance and did not change its position in reliance thereon, Se 5 é 4 ' t 18 The boards of contract appeals have also recognized the applicability of the UCC to the resolution of dis- putes under Government contracts in the absence of otherwise applicable statutes and regulations. See Gen- eral Elec. Co., IBCA No, 442-6-64, 65-2 BCA ‘ 4974 (§ 2-317 cited in support of cumulation of warranties) ; Mazur Bros. & Jaffe Fish Co., VACAB No, 512, 65-2 BCA £4982 (§§ 2-602(1), 2-606, and 2-607 cited to show acceptance of supplies); Carpenter Steel Co., AECBCA No, 5-65, 65-1 BCA { 4848 (§ 2-202 used to support admission of prior negotiations) ; Federal Pac. Elec. Co., IBCA No. 334, 1964 BCA { 4494 (§ 2-317 cited for cumulation of remedies) ; Reeves Soundcraft Corp., ASBCA Nos. 9030, 9130, 1964 BCA { 4817 (§ 2-315 cited for implied warranty of fitness for particular purpose and § 2-316(3) to negate warranty ).” Finally, the commentators have also recognized that the Uniform Commercial Code applies to the resolu- tion of disputes under Government contracts in the absence of otherwise applicable statutes and regula- tions. For example, retired Chief Justice Traynor of the California Supreme Court has stated in a ecompre- hensive article that: The Uniform Commercial Code has become a major influence in the development of common law “In the past, the Uniform Sales Act, which was modified and supplanted by Article IT of the UCC, was regarded as a source of principles for use in deciding Government contract cases. See Whitin Mach. Works vy. United States, 175 F.2d 504 (1st Cir. 1949) ; Cudahy Packing Co. v. United States, 109 Ct. Cl. 883, 75 F. Supp. 239 (1948); United States v. Hamden Co-operative Cream- ery Co., 185 F. Supp. 541 (E.D. N.Y. 1960); J. R. Simplot Co., ASBCA No, 3952, 59-1 BCA ©2112, modified on mot. for recon., 59-2 BCA § 2306. 19 in the federal courts to govern cases involving gov- ernment contracts and other commereial transac- tions. Judge Friendly, speaking for the Court of Appeals for the Second Circuit, has reinforced with appellate approval the established practice of lower courts and federal agencies to make use of the Code as a source of federal! law. He notes that its widespread enactment put it ‘well on its way to be- coming a truly national law of commerce” and that this promise of uniformity would be disserved if transactions with the government were not subject to kindred rules. [17 Cath.U.L.Rey. 401, 422-23 (1967) ; footnotes omitted] In summary, the Court of Claims decision in this case is in direct conflict with: (1) the deeision of this Court in Priche vy. United States, supra; (2) prior deci- sions of the Court of Claims which recognize the “authority and relevance’ of the Uniform Commercial Code in the field of public contracts; (3) decisions of the Second Circuit and other federal courts which have held the Code applicable to disputes arising under Governnient contracts; (4) applicable statutes, such as the Armed Services Procurement Act of 1947, as imple- mented by the Armed Services Procurement Regula- tion, which has the full force and effect of statutory law, and the Defense Production Act of 1950, as imple- mented by the Department of Conmeree BDSA regula- tions; and (4) the Fifth Amendment to the Constitu- tion. The inconsistencies in the Court of Claims decision, the conflict between that decision and the decisions of ether federal courts, and the court’s failure to adhere fully to this Court’s decision in Pricbe have created sub- stantial uncertainty and confusion with respect to the law applicable to Government contract disputes. The WAR ILO My eer one ate RS MIO GU ny = Bhekaiceuas Bi Mae 20 resolution of that uncertainty by this Court is a matter of urgent national importanee. Ii. The Court of Claims Erroneously Considered Itself Bound by a Decision of This Court Which Is Inapplicable to This Case on Its Facts. As stated above, the Court of Claims held with apparent reluctance that it could not reach the question of the unenforceability ab initio of petitioner’s contract with the Government because ‘tthe present case is gov- erned by”? this Court’s decision in Willard, Suther- land & Co. v. United States, supra. In the absence of Willard, Sutherland, the court stated that it might have found persuasive the contemporary view of perform- ance under protest as set forth in Section 1-207 of the UCC. (Appendix A, page 9a) The Court of Claims obviously erred in concluding that it could not reach the question of the unenforee- ability of petitioner's contract. Willard, Sutherland is clearly inapplicable because, unlike the contract here, the contract in Willard, Sutherland was not impacted by BDSA directives and did not contain a modern Dis- putes clause which required performance during the pendency of a dispute and because in this case peti- tioner not only registered a ** prior protest’? but, more- over, effectively terminated and rescinded the contract. In this case, unlike Willard, Sutherland, no coutract existed under which the Government could issue any additional orders. Willard, Sutherland eoneerned a contract for the purchase by the Government of an indefinite quantity of coal, This Court held that there was nething in the 2 contract which required the Government to take or limited its demand to any ascertainable quantity, and accordingly held that ** ... for lack of consideration and mutuality, the contract was not euforceable.”’ (262 U.S. at 493). ILowever, the Court held that the contractor in Willard, Sutherland was bound to the contract price to the extent that it had performed. It held “to no avail”’ an early protest by the contractor which the Govern- ment had refused to accept, and concluded that the con- tractor’s deliveries were *tvoluntary.’’ (262 U.S. at 494). In contrast, petitioner’s deliveries in this ease were not *voluntary.”’ Petitioner here acted under the com- pulsion of BDSA directives and a Disputes clause which obligated it to comply with any order issued by the contracting officer, albeit unoer protest. Thus, the Disputes clause, and the BDSA. directives, which have the force and effect of statutory law,’ effectively re- versed Willard, Sutherland with respect to perform- ance under protest, making the UCC applicable. In light of the Disputes clause and of the BDSA diree- tives, petitioner’s performance under protest obviously was not voluntary, and the claim of aequieseence asserted successfully by the Government in Willard, Sutherland is simply irrelevant here. There is yet another reason why the Willard, Suther- land decision is inapplicable here. There is no dis- agreement between the parties with respect to the fact that the basic contract was unenforceable. The Gov- ernment has admitted that petitioner could have de- 19 See note 5, supra. 7 oy clared the contract cancelled and would not have been liable for breach.’ Petitioner did, in fact, caneel the contract by letter to the contracting officer dated March 29, 1966. The Government has thus essentially admitted that no contract existed between the parties after March 29, 1966. Since the rule stated in Willard, Sutherland applies only to an existing contract, that rule is clearly inapplicable here. In these circumstances, the Court of Claims plainly erred in applying Willard, Sutherland and in holding that the UCC is inapplicable to this case. Unless the Court of Claims decision is reviewed by this Court, and guidance provided with respect to the proper applica- tion of the UCC to Government contracts, the law appli- cable to such contracts will become inereasingly con- fused and uncertain. The standard Disputes clause, which appears in virtualy all Government contracts and which is the foundation of the system for administrative resolution of Government contract disputes, will be undermined. For this reason alone, petitioner urges that review of this case by this Court is required in the public interest. III. The Court of Claims Errec in Holding that the Govern- ment May Issue Reprocurement Orders Under an In- definite Quantity Contract for the Sole Benefit and Account of a Defaulted Government Contractor. Petitioner contended before the Court of Claims that the Government’s issuance of reprocurement orders under petitioner’s contract for the sole benefit and account of a defaulted Government contractor was in " Defendant’s Reply to Plaintiff's Response to Defendant’s Cross-Motion for Summary Judgment, pp. 7-8: Defendant’s Memo- randum In Response to Plaintiff's Supplemental Statement, p. 2. 23 | violation of the applicable provisions of the Armed Services Procurement Regulation, § 8-602.6(a), and contrary to the previous interpretations and agree- ments Gf the partics, The court held that it was unnecessary to even consider whether the Government Violated the applicable regulations, since the orders placed by the Government under petitioner’s contract for Bogue’s account were “subject neither to repro- curement nor new-contract guidelines.”? (Appendix A, page 22a) This ruling by the Court of Claims is erroneous as a matter of fact and law. Additionally, it places in substantial doubt the integrity of all Govern- ment indefinite quantity contracts and ignores the guidelines set forth by this Court with respect to the standards applicable to the coustruetion of Govern- ment contracts. Contrary to the decision of the Court ef Claims, the actual facts are that the orders in question were reprocurement orders and so stated on their face. Orders 4 and G stated as follows: Note 1: This is a reproenrement of supplies which were terminated for default under Contract AF 04(606)-12917 [the Bogue contract}.” Moreover, the applicable law prohibited the place- ment ef such orders under petitioner’s contract. ASPR § 8-602.6(a) requires that contracting officers award reprecurement contracts at ‘tas reasonable a price as practicable.” Petitioner argued to the Board that a fortiori’ the prices set forth in the subject contract were not “tas reasonable as practicable’? within the meaning of ASPR, since the prices were based on errors and "Orders 4 and 6 appeared in the administrative record as Tabs Cand F in the Rule 4 file (ASBCA No. 11918, Vol. 2). ; £ é g $ z. yee ima Sree > PRIORY RI OER TN & CORP eh Phere pero se cece pre aeer erneet or: 24 mistakes in petitioner’s bid, and since the Government stipulated before the ASBCA that higher prices than those set forth in petitioner’s contract were ‘*fair and reasonable.”’ However, as shown above, the Board held that ‘tas reasonable a price as practicable’? means ‘the lowest practicable price.’’ [68-1 BCA at 31,598; Appen- dix C, page 36a (Emphasis added)]. Petitioner urges that the Board’s interpretation of ASPR was erroneous as a matter of law, and that the result reached by the Court of Claims is patently unfair. The deficiencies of the result reached by the Court of Claims are concisely stated in the separate opinion of Judge Davis: To sanction what was done here is to permit the defendant te elect to bail out Bogue at the expense of FEC—which had, of course, nothing to do with Bogue’s transgression. The defendant was not obligated to Bogue to use FEC as the reprocure- ment vehicle. The ASPR regulation, 32 C.F.R. § 8.602-6(a) (1965), calling for reprocurement at ‘fas reasonable a price as practiceal,’’ does not direct that the reprocurement order must be given to a low offeror who fiiids out he has bid teo low because of a mistake. Octagon Process, Inc., ASBCA No. 10371, 65-2 BCA £5168. Similarly, this standard of Sas reasonable a price as practical’? would not require reprocurement under plaintiff’s contact which likewise had set the price too low because of mistake. On this basis that the Government was legally free to reprocure elsewhere, J would hold it overreaching, and not within the parties’ reasou- able contemplation, to insist on reprocuring under the FEC contract although it was by then known to be a loss arrangement. Bogue, not the innocent plaintiff, should bear that portion of the loss. [ Emphasis added. 25 CONCLUSION For the foregoing reasous, a Writ of Certiorari should be issued to review the decision of the Court of Claims. Respectfully submitted, GILBERT A. CUNEO 1625 K Street, N.W. Washington, D. C. 20006 Attorney for Plaintiff Of Counsel: (, STANLEY DEES ILanvey G. SHERZER SELLERS, CONNER & CUNEO 1625 KK Street, N.W. Washington, D.C. 20006 “N. J. VIntarosa Frank X. Prevost International Telephone & Telegraph Corporation 320 Park Avenue New York, New York 10022 PEIN TPM eee Ree ERR TST a tee see ae RNS Prayers, APPENDIX _———— nr ore tite venient la APPENDIX A IN THE UNITED STATES COURT OF CLAIMS No. 166-72 (Decided October 25, 1973) Feperat Exectric Corporation v. THE Unitep States C. Stanley Dees for plaintiff, Gilbert A. Cuneo, attorney of record for plaintiff. Harvey G. Sherzer, N. J. Villarosa and Frank X. Prevost, of counsel. Sheldon J. Wolfe, with whom was Acting Assistant At- torney General Irving Jaffe, for defendant. Before Cowen, Chief Judge, Davis, SKELTON, NICHOLS, Kasurwa, Kuxzic and Bennett, J udges. ON PLAINTIFF’S MOTION AND DEFENDANT’S CROSS MOTION FOR SUMMARY JUDGMENT Keunzic, Judge, delivered the opinion of the court: Plaintiff Federal Electrie Corporation (FEC) presents a five-count elaim for relief in this case involving an indefi- nite quantity contract between FEC and the Government: Count I requests a Wunderlich Act (41 U.S.C. $§ 321, 322 (1970)) review of an adverse decision by the Armed Serv- ices Board of Contract Appeals (the Board). Count I] asserts the Government breached the contract by insisting plaintiff perform following plaintiff’s purported revocation. Count III asserts the Government breached the contract hy improperly reprocuring under the contract for another supplier’s account. ——— 1 Federal Electrie Corporation, 68-1 BCA { 6834. tee Ate ~_e Sieg ako SRR St eh Re RL Bette LA Ba Rie 2a Count IV alleges a &fth amendment taking of property as a result of the Government’s action described in count I. Count V alleges a fifth amendment taking of property as a result of the Government’s action deseribed in count IIT. Plaintiff moves for summary judgment on counts | through III, while the Government cross-moves for sum- mary judgment on these three counts and moves for sum- mary judgment on counts IV and V. We hold that the Board’s conclusion in favor of the Gov- ernment withstands Wunderlich review (count I). We fur- ther hold that plaintiff’s arguments gain no greater credence by casting the dispute in terms of a breach of an implied-in- fact contract (counts I] and II1). Thus, our legal conelu- sions in favor of the Government under Wunderlich review equally dispose of plaintiff’s breach claims. Accordingly, the Government’s motion for summary judgment on counts I, If and III should be granted, and the plaintiff’s motion should be denied. Having so concluded, it is unnecessary for the court to discuss plaintiff’s fifth amendment argument (counts 1V and V). Only if the contract had been held unenforceable or the reprocurement erroneous would plaintiff possibly have had an argument that its performance under such condi- tions constituted a taking without just compensation. Ac- cordingly, the Government’s motion for summary judgment on counts IV and V should be granted. I Background FEC responded to an Air Force Request for Proposal (RFP) for the production and delivery of five types of mobile generator sets of varying sizes and capacities. The. RFP called for an indefinite quantity contract with a mini- mum of 453 and a maximum of 3600 generators to be or- 3a dered within a 12-month period.2) On December 17, 1965, the contract (AF 04(606)-15369) was approved by an authorized representative of the Secretary of the Air Force. Thereafter, on December 20, 1965, the Air Foree mailed an official acceptance of plaintiff’s proposal and at the same time issued the first delivery order for the minimum quan- tity. On January 11, 1966, the Air Force issued a second delivery order for an additional six generators. Subsequent to receipt of the first two orders, plaintiff realized that it had made some substantial errors in its re- sponse to the RFP which were resulting in unanticipated losses. Plaintiff had anticipated a small loss on the con- tract, but not to the extent that became apparent once pro- duction began. After meeting with the appropriate Air Force ofticials, plaintiff notified the Government by letter dated March 29, 1966 that it considered the contract unen- foreesable with respect to all future unordered goods. The contractor further asserted that its offer to supply the Government up to 3600 generators constituted a revocable offer by plaintiff for those units not yet ordered by the Government. In accordance with this position the contrac- tor advised the Government as follows: 1. Federal Electrie Corporation hereby withdraws its offer to supply the unordered generators under Con- tract AIF 04(606)-15369 at the prices quoted in the contract. 2. Notwithstanding the above, should the Govern- ment deem that the offer of Federal Electric Corpora- “Part XI of the contract reads: **This contract shall be effective and binding as of the date of ap- proval thereof by the Secretary or his duly authorized representa- tive as set forth in General Provision 37. The Government reserves the right to issue orders against this contract for a period not to exceed 12 months from the date of approval. For the purposes of computing the aforementioned 12 month time period on this contract, the first day of the contract period shall be excluded and the last day of the contract shall be included.’’ SRR EATEN 8 REAL TET Le IS Erte eee ee ae 4a tion, as contained in Contract AF 04(606)—15369, is irrevocable and, as a result thereof determines to place additional orders for generators, then Federal Electric Corporation will promptly proceed to manufacture the unit so ordered under protest and without prejudice to its rights. 3. Should, as a result of subsequent actions by FEC and/or the Government, it be determined that FEC’s position is correct, as defined above, an equitable ad- justment shall be made in aceordance with the ‘*Changes’’ and/or ‘‘ Extras’’ clauses of the aforemen- tioned contract. 4. Production under future orders for additional generators will not be deemed as a waiver of FEC’s rights to recover the losses it experiences in supplying the generators because of mistakes made by FEC in bidding contract AF 04(606)-15369. 5. FEC further asserts that its actions herein are taken solely for the purpose of protectiag FEC’s legal rights and that nothing herein should be deemed in any manner whatsoever as a refusal to perform pending resolution of the dispute or disputes between the parties hereto or in any way serve as grounds for terminating the contractor’s right to proceed. Subsequent to FEC’s letter of March 29, 1966, the Air Force issued the following orders: Order number Date Quantity 3 SE DRO FG sae e cheats wae keene een 292 + DG DE AEE oh esa h hi haek eae eee ees 662 5 SE Ge Cc akuds sdeas tanec eusenwene 8 6 Sw SR ring ae easier ar 101 : UE BBO 56 80s via we che beeen 199 8 pe EEE T ETC re ere re 43 9 GEE Ty TOE oo i vcce inch en eexkaens 443 10 EO Bi Be us aac caelakeeece es 426 5a Plaintiff objected to receipt of each of these and, with the exception of orders number 9 and 10, individual appeals were taken from adverse decisions of the contracting officer regarding plaintiff’s obligation to deliver the items.2 Addi- tionally, plaintiff objected to orders four and six on the separate basis that they had been expressly made to cover generators ordered but never delivered under a different contract with the Bogue Electric Company (Bogue) and, therefere, intended to mitigate that defaulting contractor’s damages. Throughout this period, plaintiff adhered to its position, as outlined in the March 29, 1966 letter, that it would continue to perform, but under protest. Plaintiff’s appeals from the decisions of the contracting officer were consolidated before the Board. The Board de- cided for the Government, concluding: (1) That the FEC contract came into effect on De- cember 20, 1965, simultaneously with defendant’s plac- ing of the minimum order and, henee, was enforceable ab initio. Plaintiff was thus bound to supply all orders placed under the contract at the prices set forth therein. (2) The contracting officer was entitled to issue or- ders under the subject contract to accomplish the re- procurement for the account of Bogue. *The following stipulation was submitted by the parties to the Board: ‘*5. That appellant timely appealed from final decisions uphold- ing the right of the Government to issue Orders 3 through 8 under the subject contract. Should the Board determine that appellant was n't obligated to accept orders under the contract subsequent to its le.ter of 29 March 1966 (Tab S, Rule 4 Documents for ASBCA No. 11726, and Tab M for ASBCA No. 11918), a de- cision by the ASBCA will affect Orders 3 through 10. * * *’’ : f \ i 4 i 4 j 4 $ | 6a We will deal with these two issues separately in the sections which follow. II Enforceability of the Indefinite Quantity Contract In deciding for the Government with regard to the en- forceability of the FEC contract, we depart from the Board’s reasoning. An indefinite quantity contract provides for the furnish- ing of an undetermined quantity of supplies or services during a specified period. The advantages to the Govern- ment of this type of contract are clearly set forth in the applicable Armed Services Procurement Regulations (ASPR): (i) Flexibility with respect to both quantities and delivery scheduling; (ii) Supplies or services need be ordered only after actual needs have materialized; (iii) The obligation of the Government is limited; and (iv) It permits stocks to be maintained at minimum levels and allows direct shipment to the user. 32 C.F.R. § 3.409(e)(2) (1965). In order to avoid an attack upon this type of contract for lack of mutuality of obliga- tion (7.c., one party to the contract being obligated to per- form while the other is not‘), the contract must obligate the Government to order a stated minimum quantity. 32 C.F.R. § 3.409-3(a) (1972). See Willard, Sutherland d& Co. v. United States, 262 U.S. 489, 493 (1923). Although the instant contract did provide for a minimum order of 453 generators, the contractor contends that, since ‘See 1A A. Corpin, Contracts 152 (1950), 1 S. Wituiston, Contracts 105A (3d ed. 1957) ). GIRLIE LAC OLO LCE DE? CORE LP BREA. OT we BIBI a VR AEE NO SE i Pater neRe. 7a the Government did not place the minimum order until three days after the effective date of the contract, the entire con- tract is unenforceable ab initio due to lack of mutuality of obligation. The Government counters that the contract was enforce- able because the minimum order was incorporated in or issued contemporaneously with the execution of the contract, and that plaintiff was entitled only to compensation pro- vided for in the contract. In the alternative, the Govern- ment contends that, if the contract was unenforceabie, plaintiff is barred from seeking additional relief because plaintiff performed and an unenforceable contract is en- forceable to the extent that it is performed. We deem it unnecessary to resolve the issue of enforee- ability ab initio since we accept the Government’s alterna- tive contention. The present case is governed by the Supreme Court decision of Willard, Sutherland & Co. v. United States, supra, where the Court held that an indefi- nite quantity government contract, unenforceable at its inception due to a lack of mutuality of obligation, became valid and would be enforced to the extent it was performed. Td. at 493-94, This court applied the Willard, Sutherland ruie to hold enforceable an indefinite quantity contract to the extent that orders had been placed by the Government under it, without determining whether or not the contract was valid ab initio. Tennessee Soap Co. v. United States, 130 Ct. Cl. 154, 158, 126 F. Supp. 439, 441 (1954). This precedent squarely governs the situation at hand. The required minimum or- der having been satisfied, FEC’s entitlement to compensa- tion fur supplying 2633 generator units, including the 2174 supplied following plaintiff’s purported revocation, is gov- erned by the terms of the subject contract. Nor is this result affected by the fact FEC continued to perform after March 29, 1966 under protest. The contrac- tor in Willard, Sutherland clearly stated that it was ‘‘doing BPA trie Oe ' Pa 2 4 * * ¢ § i 8a this [7.e., performing despite the unenforceability of the contract] under protest which can be straightened out later.’’ The protest issue was also raised in Larly & Daniel Co. vy. United States, 271 U.S. 140 (1926), which involved an indefinite quantity contract to deliver hay. When a dispute arose over an alleged breach by the Government, the con- tractor stated: [W]e want it distinctly understood that we are doing this under protest and are going to put the matter up to proper authorities in Washington; and if they rule in our favor, [we] want settlement at fair market price for amount we overfill. 271 U.S. at 141. This language is strikingly similar to that used in FEC’s letter of March 29, 1966. Nevertheless, the Supreme Court held in Farly & Daniel that the contractor had the option of delivering or no* delivering. Having chosen to deliver, even under protest, the Willard. Suther- land rule applied and the contractor was bound to the con- tract price to the extent that the contractor performed. Id. at 142. In an attempt to avoid the effect of the Willard, Suther- land rule, plaintiff raises two arguments which we feel are without merit. First, plaintiff contends that ‘‘under the contract’’ the Government’s actions constituted a ‘‘change”’ and that the disputes clause compelled continued perform- ance under protest by plaintiff while pursuing an adminis- trative adjustment. See Dynamics Corp. of America v. United States, 182 Ct. Cl. 62, 389 F.2d 424 (1968). In Dynamics Corp. we held that plaintiff’s performance under protest in order to comply with its contract’s stand- ard disputes clause distinguished its situation from the Willard, Sutherland and Early & Daniel precedents, in which disputes clauses were not present. No challenge was made, however, to the enforceability of the indefinite quan- tity contract in Dynamics Corp.; the dispute involved only Be MER Pe Pe SACL AAA ot 2 MB BSS PSP AE IE 9a performance by the contractor subsequent to the termina- tion of the admittedly valid agreement. In the present case, on the other hand, FEC seeks first to disavow the existence of the subject contract and then, by citing the Dynamics Corp. precedent, to take advantage of the disputes clause which is a part of that very agreement. We cannot abide this effort by the plaintiff to ‘‘come up under”’ the same contract it seeks to have nullified. Plaintiff ‘‘ecan’t have it both ways.”’ Secondly, under its breach-of-contract theory, plaintiff contends that the Willard, Sutherland rule has been modi- fied by recent cases which allow continued performance despite a pre-existing breach. See, e.g., Northern IHelex Co. v. United States, 197 Ct. Cl. 118, 455 F. 2d 546 (1972). Plaintiff’s reliance on Northern Helex is misplaced. Al- though the court there allowed continued performance with- out prejudice after a breach had occurred, the court empha- sized that it takes ‘‘particular cireumstances”’ in ‘‘ specific cases’? to warrant such action. The special circumstances of Northern Helex (i.e., the processing and storing of helium, a valuable national resource, as a by-product of another chemical process) clearly distinguishes that case from the instant one. Though we might find persuasive the contemporary view of performance under protest as restated in section 1-207 of the Uniform Commercial Code * and accepted by the court under the special circumstances of the Northern Helezx case, we hesitate to extend this view in the face of a clear, con- trary rule established and affirmed, albeit a half century ago, by the Supreme Court. We are reminded in this con- nection of the Court’s recent expression of ‘difficulty in comprehending how decisions by lower courts can ever °**A Party who with explicit reservation of rights performs or promises performance or assents to perform in a manner demanded or offered by the other party does not thereby prejudice the rights reserved. * ¢ ©’? a | kos a tala F ARLES FIR ee ee ve ee CUA eae MU TEER Rt Bittistetierasiouniancdair Kee SSL 10a undermine the authority of a decision of [the Supreme] Court.’’? United States v. Mason, 412 U.S. 391 (1973). In summary, we hold that the subject contract was en- forceable to the extent that it was actually performed. Ill The Bogue Reprocurement Having concluded that the instant contract was enforce- able to the extent that it was performed irrespective of the contractor’s protests, it is necessary to discuss plaintiff’s secondary contention—that the Air Foree was not entitled to place orders under the contract for the account and benefit of a defaulted contractor. We find that the Board’s decision for the Government was correct as a matter of law. Prior to the execution of the instant contract, the Air Force was having difficulties with Bogue, another supplier of the same generators. A contract with Bogue was termi- nated for default on November 19, 1965, thus necessitating a reprocurement to satisfy the requirements of that agree- ment. Accordingly, the Government on January 31, 1966 issued a reprocurement RFP. FEC responded to this new RFP. The bid price was substantially higher than the one which resulted in the FEC December 1965 contract, yet was still the lowest bid submitted in response to the reprocure- ment RFP. Rather than issue a new contract, the Govern- ment on or about February 21, 1966 offered FEC additional consideration to permit the Government to reprocure the Bogue units under the original FEC contract. FEC re- jected this proposal. The Government then decided to utilize the existing contract to satisfy its reprecurement needs. Accordingly, the Air Force issued the fourth and sixth delivery orders under the original contract on April 15, 1966 and June 13, 1966 for 763 units which had been LET A POE, ARMA TIPE A ww lla ordered but not delivered under the Bogue contract. Plaintiff delivered these units, as all others in question, under protest. FEC contends that the Government was not entitled to reprocure the Bogue requirements under the instant con- tract, since it was clear that a substantial loss to FEC would result from said reprocurement. The grounds for this posi- tion are first that the Beard erred in interpreting 32 C.F.R. § 8.602-6(a) (1965), requiring that the contracting officer reprocure at ‘‘as reasonable a price as practical,’’ to mean the ‘‘lowest practical price.’’ Secondly, plaintiff cites the ‘*mistake in bid’’ cases for the proposition that its original contract was a mistake and thus could not be utilized as the basis for the reprocurement. See Royal Pioneer Paper Box Mfg. Co., 69-1 BCA ©7631; Octagon Process, Inc., 65-2 BCA 4 5168. We deem it unnecessary to reach these difficult questions in this case because we hold that, as far as FEC was con- cerned, orders four and six were subject neither to repro- curement nor new-contract guidelines because they were merely additional orders under a pre-existing contract. Admittedly, it appears harsh to place the financial burden of Bogue’s default upon plaintiff. Nevertheless, by the terms of the FEC contract the Government was free to order up to 3600 generators within one year, regardless of the reason why said generators were needed. As long as orders four and six did not result in the quantity limita- tions of the original contract being exceeded and were con- sistent in all other respects with the specifications of the contract, there was nothing to prohibit the Government from placing the orders under the original contract. The fact that these were reproeurement orders is relevant only to the Government’s duty to mitigate damages to the defaulted contractor. In an effort to accomplish this goal, eA eat Oe REEL OE ND FEI OR ee ay ie wer ee we ids S P . Sod PR ndine itbad Bcrahstancoenis Se iS inter he 12a the contracting officer is not limited to specific methods of reprocurement, but rather is given broad discretion. Astro- Space Laboratorics, luc. v. United States, 200 Ct. Cl. 282, 508, 470 F. 2d 1008, 1017 (1972). Plaintiff finally contends that the parties’ negotiation for reprocurement under the FEC contract (but at a higher consideration) represented a contemporaneous interpreta- tion by the parties that defendant was not entitled to accomplish the Bogue reprocurement under the subject contract according to its original terms, an interpretation that should be given great weight by the court. See, e.g., Dynamics Corp. of America v. United States, supra 182 Ct. Cl. at 73, 389 F. 2d at 430. We reject this assertion because of its speculative nature. The fact that defendant initially considered increasing plaintiff’s compensation does not necessarily mean defendant felt it could not procure under the original terms of the FEC contract, especially since defendant ultimately did exactly that. Henee, we do not feel the alleged contemporaneous interpretation merits sufficient weight to rebut our decision that the procurement of 763 generators under the FEC contract was proper. In light of the foregoing, we conclude that the Board’s decision withstands Wunderlich review, though we reject some of the Board’s reasoning in reaching this result. Be- cause the subject contract is found enforceable to the extent performed and the Bogue reprocurzment was proper, plain- tiff’s breach-of-contract arguments are without merit. For the same reasons, we find it unnecessary to reach plaintiff’s fifth amendment allegations, Accordingly, plaintiff’s motion for summary judgment on counts I, JI and III is denied; defendant’s cross motion for summary judgment on counts I, II and IIT and its motion for summary judgment on counts IV and V are granted; and the petition is dismissed. 13a Nicuots, Judge, concurring: I join in the judgment of the court, but I would not reject the reasoning of the Board, 68-1 BCA § 6834, or any sub- stantial part thereof. Its handling of the contentions also made here I find simple, sound, and convincing. One beauty (among many) of the Board’s opinion is that it avoids the Seylla and Charybdis between which this court, on its chosen course, must pass: that is, either we must ignore what we call ‘‘the contemporary view of performance under protest’’ or we must presumptuously overrule some elderly Supreme Court decisions. Sinee we can’t ‘‘undermine”’ their authority, I hope it is true we can’t add to it either. Davis, Judge, dissenting in part: I join Parts I and II of the court’s opinion, but on the Bogue reprocurement (Part ITI) I differ. In my view the parties did not contemplate, \when they made this contract, that the Government would ke able to use the agreement as a vehicle for reprocuring itéms under someone else’s de- faulted contract, where FEQ would suffer a loss through such an order (and therefore\objected to it). It seems to me most unlikely that, if the question had been raised during the negotiations, FEC would have agreed that it was obli- gated to fill the order. To do justice, I would construe the contract, despite its all-embracing language, as not cover- ing this particular situation. To sanction what was done here is to permit the defendant to elect to bail out Bogue at the expense of FEC—which had, of course, nothing to do with Bogue’s transgression. The defendant was not obligated to Bogue to use FEC as the reprocurement vehicle. The ASPR regulation, 32 C.F.R. § 8.602-6(a) (1965), calling for reprocurement at ‘‘as rea- sonable a price as practical,’’? does not direct that the re- procurement order must be given to a low offeror who finds out he has bid too low because of a mistake. Octagon ES See Ne ee ee CN ee ee l4a Process, Inc., ASBCA No. 10371, 65-2 BCA 75168. Simi- larly, this standard of ‘‘as reasonable a price as practical’’ would not require reprocurement under plaintiff’s contract which likewise had set the price too low because of mistake. On this basis that the Government was legally free to repro- cure elsewhere, I would hold it overreaching, and not within the parties’ reasonable contemplation, to insist on reprocur- ing under the FEC contract although it was by then known to be a loss arrangement. Bogue, not the innocent plaintiff, should bear that portion of the loss. The rationale of Willard, Sutherland & Co., supra, does not, in my view, control this aspect of the case because the two Bogue reprocurement orders were an authorized con- structive cuange in the original coverage of the contract, entitling plaintiff to an equitable adjustment. With respect to a changes claim ‘‘under the contract,’’ the contractor is required to continue performance, and by doing so does not forfeit his claim for additional payment. There is no prob- lem of invalidity on this portion of the case. The de- fendant affirmatively asserts the full validity of the con- tract, and the plaintiff assumes it, and must assume it, for this facet of its claim. APPENDIX B IN THE UNITED STATES COURT OF CLAIMS 166-72 Ferperau Evectric Corporation v. Tue Unitep Srares Before Cowen, Chief Judge, Durrex, Senior Judge, Davis, SKELTON, Nicos, Kasuiwa, Kunzic and Bennett, Judges, except that Durree, Senior Judge, participated only in No. 250-67 in which Kasuiwa, Judge, took no part. Order These cases come before the court on motions for rehear- ing, to alter judgment, for reconsideration, for oral argu- ment and for further relief under Rules 151 and 152 of the Rules of this court and, on consideration thereof, It Is Orpverep this 23rd day of January, 1974, that said motions be and the same are denied as follows: * * * * * * ~ : ~ * * 166-72 Federal Electric Corporation. Plaintiff’s motion for rehearing pursuant to Rule 151. By tne Court Wilson Cowen Chief Judge tt De es = ip PCE COM LIEBE LEA DELDIO VEN IAD AL EAE VLBI AIOE aah tow 21 Oe sie aed SAS i Oe aed GAL Boat cen Re SRT — ] 4 l6a APPENDIX C ARMED SERVICES BOARD OF CONTRACT APPEALS ASBCA Nos. 11726, 11918 and 12161 Appeals of Federal Electrie Corporation Under Contract No. AF 04(606)-15369 APPEARANCES FOR THE GOVERNMENT: Colonel David C. Yeo- man, USAF—Chief Trial Attorney; Leonard F. Rob- erts, Esq.—Trial Attorney APPEARANCES FOR THE APPELLANT: Sellers, Conner & Cuneo by: Gilbert A. Cuneo, Esq.; C. Stanley Dees, Esq. ; Frank X. Prevost, Esq. Opinion by Mr. Sobernhesm This is an appeal from the contracting officer’s denial of appeliant’s claim for an equitable adjustment in the con- tract price of generators which appellant delivered to re- spondent in response to delivery orders (sometimes re- ferred to herein as ‘‘D. 0.’’) issued ander Contract No. AF 04(606)-15369. Appellant has claimed that the delivery orders were contract changes or extras unilaterally imposed on appellant by the contracting officer while the latter took the view that compliance with these orders was the essenee _ of appellant’s contractual obligation. Subsidiarily, appellant has also argued that two of the delivery orders, issued to procure generators which a de- faulted contractor under another contract had failed to de- liver, were invalid. It is urged that delivery orders under the instant contract could not legally be used to reprocure such supplies from appellant, when respondent knew that compliance with the two orders would cause appellant heavy losses due to the excessively low price mistakenly quoted by appellant to the Government under the contract. was deemed unascer- tainable either by reference to a minimum quantity (see Feuchtwanger, supra) or to the buyer’s requirements (see U.S. vy. Purcell Envelope Co., supra). Sinee the purchaser need only buy what he may wish or want, the seller did not become obligated to furnish anything. But once he had ac- cepted the buyer’s order, he became obligated to furnish at the contract price the specifie quantity of goods which by his acceptance of the order he had agreed to deliver. Wil- lard, Sutherland & Co. vy. United States and Atwater & Co. v. United States, supra. In between these two poles is the range of contracts in which the total quantity of goods to be furnished by the seller is left indefinite but where the buyer undertakes an obligation to purchase at the minimum a fixed quantity of goods. Where this minimum quantity is purely nominal, the legal obligation of the seller to deliver goods at the contract * For the sequel see 160 Ct. Cl. 450 (1963). 6 ISOS TM an 27a price is no greater than if such nominal obligation to pur- chase goods were omitted from the contract terms. The Tennessee Soap Company v. United States, 130 Ct. Cl. 154, 158 (1954) ; see Neil A. Goldwasser, supra. Thus Tennessee Soap involved a contract for the purchase by the Navy of 120,000 pounds, more or less, of soap at about 8 cents per pound, for the purpose of replenishing the supply of vessels docking in United States ports. The minimum purchase to which the Navy had obligated itself was $10 worth of soap, or about 125 pounds. The plaintiff argued that it was not bound, because of the $10 minimum order, to deliver such indefinite amounts from time to time as the defendant might see fit to order and the court im- plicitly accepted this argument. In Goldwasser this Board held that under a contract for the printing of a monthly newspaper the bargain was for the printing of the paper, as long as required, and not for a #100 minimum payment upon which the Government would he discharged of all further obligations to the contractor under its contract. In both of the cited cases it was clear to the Court of Claims and to this Board that the minimum order was without business justification or value—a sort of lagniappe to give the appearance of consideration. The instant appeal differs sharply on the facts from these instances. For the minimum quantity, the purchase of which was ‘‘not optional’? with but obligatory upon respondent (see International Fermont, Inc., ASBCA No. 9097, 1964 BCA par. 4290) constituted a substantial order in itself which any manufacturer of generator sets might well desire to fill, even if standing alone.* ) Respondent’s minimum pur- *) Appellant argues also that to be valid consideration for any promise of appellant, the contract itself must embody the order. However, the regulations cited by appellant by implication leave the choice of the form of the minimum quantity erder, whether in the contract or by separate instrument, to the eontracting officer. International Fermont, supra, upholds the latter form as sufficient. AREA RS ROAD OR Lao DARIEN ga saconiaeaeancf SD eniecetiea og tebe te IL AK ine Pee y 6 ie Rica nea > IV Appellant has argued that, even if the Board were to de- termine that appellant had entered into a binding contract for the delivery of up to 3600 generator sets, when ordered, the contract could not be used to reprocure 763 generator sets under D.O.’s Nos. 35775 and 41205, when respondent knew that this order would inflict a substantial loss upon appellant. The contract, construed by the Board as binding upon appellant up to the maximum quantity for each class of generators, did not contain any limitation in its terms as to the causes or motives which might lead respondent to order generator sets from appellant within the maximum pre- scribed. As the events showed, the maximum was a generous 35a figure, for respondent ordered only 2,633 generator sets out of a possible grand total of 3,600. There was nothing in the contract, in particular, which restricted respondent to order only quantities which had not yet been ordered from other contractors. On the contrary, one would assume that the contract, with its flexibility as to the number of generator sets to be delivered thereunder, provided a suitable and ready means for reordering those quantities of generator sets which other contractors had failed to deliver. This Board has held that a contractor is not discharged from its obligation to furnish supplies in response to orders of the Government which were issued after the contractor had decided to discontinue the manufacture thereof as unprofit- able and after the Government had become aware of this fact. Standard Steel & Tube Corporation, ASBCA No. 12076, 67-1 BCA par. 6199; Lucas Aircraft Supply Co., ASBCA No. 11167, 66-1 BCA par. 5671. The same rule ap- plies where the contractor continues in the business of manufacturing the supplies contracted for, as appellant here did. Hence, there was nothing in the direct contractual relationship of the parties which required respondent to forego its contractual right to order generator sets at the contract price, although at a loss to appellant. Aceerding to appellant, the situation here is different be- cause the Government is reprocuring supplies on the deliv- ery of which the original contractor is said to have inexecus- ably defaulted, and for the excess costs of which in the event of reprocurement he is said to be liable. Octagon Process, Inc., ASBCA No, 10371, 65-2 BCA par. 5168, is cited by ap- pellant in support of the proposition that on reprocurement the Government may pass up the lowest price bid by a pro- spective reprocurement contractor, if such pric? is known to infliet a loss upon him, and reprocure at a higher price, charging the defaulied contractor with the difference. But that is not the proposition for which Octagon stands. All that this deeision held was that, where the Government be- fore award became aware of a low bidder’s mistake and 36a hence was not entitled to hold him to his bid (see Framlau Corp., IBCA No. 228, 61-2 BCA par. 3116), it fulfills its duty toward the defaulted contractor to mitigate damages by awarding the reprocurement to the next lowest bidder (who has thus become the lowest acceptable bidder). Nor is the appellant served by the statement that repro- curement is not for the Government’s account. The regula- tions which govern the contracting officer’s conduct in letting reprocurement contracts require him to reprocure not, as appellant asserts (Br. p. 48), at a ‘‘reasonable’’ price but ‘‘at as reasonable a price as practicable’’ (ASPR 8-602.6 (a)), that is, at the lowest practicable price. If he fails to do so, for instance by not securing savings reasonably avail- able, the amount of excess costs resulting from his failure is ‘‘unnecessary’’ and, hence, uncollectible. National Robe Company, ASBCA Nos. 11227, 11333, 67-1 BCA par. 6365. Nor is there anything in the laws of the United States, applicable regulations, or the decisions of courts or contract appeals boards which requires a contracting officer to incur greater excess costs and thereby to create potential litiga- tion and collection problems for the Government, when he can by permissible contractual action avoid or minimize the dangers presented by litigation as to the excusability or ex- istence of a default, or the collectibility of the excess costs. Since respondent was entitled to procure the 763 Bogue units by ordering the same from appellant, the contracting officer was under no obligation to enter into an additional contract for their reprocurement unless he could do so at prices lower than appellant’s. It was perhaps this hope, tenuous as it might have been, which induced SAMA to issue RFP’s for the reprocurement of the Bogue units. If so, such hopes were disappointed. In the ensuing negotiations SAMA adopted the idea of order- ing the Bogue units under Contract No. AF 04(606)-15369. A memorandum making certain concessions to appellant (ASBCA No. 11918, R4 doc. V) was drafted by the SAMA 37a negotiators but was not accepted by appellant. Further price negotiations in March 1966 led to a tentative agree- ment on terms and prices, substantially higher than those listed in appellant’s then-existing contract. This tentative agreement was, however, by its terms previously quoted, conditional upon availability of funds and approval by higher authority. Either or both must have been lacking for the agreement was not consummated, and in April 1966 the first of the disputed D.O.’s was issued to reprocure units which Bogue had failed to deliver. In the light of this record it cannot be said that SAMA’s issuance of a RFP for the reprocurement of the Bogue units under a separate contract committed respondent to this course and, therefore, barred it from obtaining these units by D.O.’s issued under «ppel- lant’s existing contract. Consequently the issuance of D.O. Nos. 35775 and 41205 must be upheld as valid against the attack that they could not be used to procure or reprocure the units on which Bogue had defaulted. V Accordingly, the three appeals challenging the validity of the several delivery orders issued by respondent under Contract No. AF 04(606)-15369 must be, and they hereby are, in all respects denied. Dated 26 January 1968. /s/ Rvuvoir Sopernuem Rudolf Sobernheim Member of Division No. 7 Armed Services Board of Contract Appeals T eoneur /s/ Josern P. Ramsay Joseph P. Ramsay, Colonel, JAGC Member of Division No. 7 Armed Services Board of Contract Appeals Se I concur /s/ Louis Spector Louis Spector Chairman, Armed Services Board of Contract Appeals and Member of Division No. 7 I concur /s/ Davin Antuony Borre David Anthony Botte, Colonel, USAF Member of Division No.7 Armed Services Board of Contract Appeals I certify that the foregoing is a true copy of the decision and opinion of the Armed Services Board of Contract Ap- peals in ASBCA Nos. 11726, 11918 and 12161, Appeals of Federal Electric Corporation, rendered in conformance with the Board’s Charter. Dated: 1 February 1968 /s/ Greorce L. Hawkes George L. Hawkes, Recorder Armed Services Board of Contract Appeals Sastiitanieded Patric. .ts nat aes le as sorrel semicon ———— 9 eee APPENDIX D STATUTES INVOLVED Armed Services Procurement Regulation Disputes § 7-103.12 ‘(a) Except as otherwise provided in this contract, any dispute concerning a question of fact arising under this con- tract which is not disposed of by agreement shall be de- cided by the Contracting Officer, who shall reduce his deci- sion to writing and maii or otherwise furnish a copy thereof to the Contractor. The decision of the Contracting Officer shall be final and conclusive unless, within 30 days from the date of receipt of such copy, the Contractor mails or other- wise furnishes to the Contracting Officer a written appeal addressed to the Secretary. The decision of the Secretary or his duly authorized representative for the determination - of such appeals shall be final and conclusive unless deter- mined by a court of competent jurisdiction to have been fraudulent, or capricious, or arbitrary, or so grossly errone- ous asx necessarily to imply bad faith, or not supported by substantial evidence. In connection with any appeal pro- ceeding under this clause, the Contractor shall be afforded an opportunity to be heard and to offer evidence in support of its appeal. Pending final decision of a dispute hereunder, the Contraetor shall proceed diligently with the perform- ance of the contract and in accordance with the Contracting Officer ’s decision. (b) This e Disputes’’ clause does not preclude considera- tion of law questions in connection with decisions provided for in paragraph (a) above: Provided, That nothing in this contract shall be construed as making final the decision of any administrative official, representative, or board on a question of law. Oe OB TS" aes eb LEG AM te oe § 8-701(a) TERMINATION FOR CONVENIENCE OF THE GoveRNMENT (Jan. 1961) (a) The performance of work under this contract may be terminated by the Government in accordance with this clause in whole, or from time to time in part, whenever the Contracting Officer shall determine that such termination is in the best interest of the Government. Any such termina- tion shall be effected by delivery to the Contractor of a Notice of Termination specifying the extent to which per- formance of work under the contract is terminated, and the date upon which such termination becomes effective. (b) After receipt of a Notice of Termination, and except as otherwise directed by the Contracting Officer, the Con- tractor shall: (i) stop work under the contract on the date and to the extent specified in the Notice of Termination; (ii) place no further orders or subcontracts for ma- terials, services or facilities, except as may be necessary for completion of such portion of the work under the contract as is not terminated; (iii) terminate all orders and subcontracts to the ex- tent that they relate to the performance of work terminated by the Notice of Termination; (iv) assign to the Government, in the manner, at the times, and to the extent directed by the Contract- ing Officer, all of the right, title, and interest of the Contractor under the orders and subcontracts so terminated, in which case the Government shall have the right, in its discretion, to settle or pay any or all claims arising out of the termina- tion of such orders and subcontracts; (v) (vi) (vii) 4la settle all outstanding liabilities and all claims arising out of such termination of orders and subcontracts, with the approval or ratification of the Contracting Officer, to the extent he may require, which approval or ratification shall be final for all the purposes of this clause ; transfer title and deliver to the Government, in the manner, at the times, and to the extent, if any, directed by the Contracting Offieer, (A) the fabricated or unfabricated parts, work in proc- ess, completed work, supplies, and other material produced as a part of, or acquired in connection with the performance of, the work terminated by the Notice of Termination, and (B) the com- pleted or partially completed plans, drawings, information, and other property which, if the contract had been completed, would have been required to be furnished to the Government; use his best efforts to sell, in the manner, at the times, to the extent, and at the price or prices directed or authorized by the Contracting Officer, any property of the types referred to in (vi) above; provided, however, that the Contractor (A) shall not be required to extend credit to any purchaser, and (B) may require any such prop- erty under the conditions prescribed by and at a price or prices approved by the Contracting Officer; and provided further that the proceeds of any such transfer or disposition shall be ap- plied in reduction of any payments to be made by the Government to the Contractor under this contract or shall otherwise be credited to the price or cost of the work covered by this contract or paid in such other manner as the Contracting Officer may direct ; - —_ PE ie PR DORE BET RT 6. EI A Te PLE LAA ALLEL SO OB AAS oh a ee 42a (viii) complete performance of such part of the work as shall not have been terminated by the Notice of Termination; and (ix) take such action as may be necessary, or as the Contracting Officer may direct, for the protection and preservation of the property related to this contract which is in the possession of the Con- tractor and in which the Government has or may acquire an interest. At any time after expiration of the plant clearance period, as defined in Section VIII, Armed Services Procure- ment Regulatior, as it may be amended from time to time, the Contractor may submit to the Contract- ing Officer a list, certified as to quantity and quality, of any or all items of termination inventory not pre- viously disposed of, exclusive of items the disposition of which has been directed or authorized by the Con- tracting Officer, and may request the Government to remove such items or enter into a storage agreement cover- ing them. Not later than fifteen (15) days thereafter, the Government will accept title to such items and remove them or enter into a storage agreement covering the same; pro- vided, that the list submitted shall be subject to verification by the Contracting Officer upon removal of the items, or if the items are stored, within forty-five (45) days from the date of submission of the list, and any necessary adjustment to correct the list as submitted shall be made prior to final settlement. Jagat bi of ttn eS adn ie ATE aban dew ALO NNR ua (c) After receipt of a Notice of Termination, the Con- tractor shall submit to the Contracting Officer his termina- tion claim, in the form and with certification preseribed by the Contracting Officer. Such claim shall be submitted promptly but in no event later than one year from the effec- tive date of termination, unless one or more extensions in writing or granted by the Contracting Officer, upon request of the Contractor made in writing within such 2ne year e777 noe oe IRL at PAR Os LET ely Li gt BS 43a period or authorized extension thereof. However, if the Con- tracting Officer determines that the facts justify such action, he may receive and act upon any such termination claim at any time after such one year period or any extension thereof. Upon failure of the Contractor to submit his ter- mination claim within the time allowed, the Contracting Officer may, subject to any Settlement Review Board ap- provals required by Section VIII of the Armed Services Procurement Regulation in effect as of the date of execu- tion of this contract, determine, on the basis of information available to him, the amount, if any, due to the Contractor by reason of the termination and shall thereupon pay to the Contractor the amount so determined. (d) Subject to the provisions of paragraph (c), and sub- ject to any Settlement Review Board approvals required by Section VIII of the Armed Services Procurement Regula- tion in effect as of the date of execution of this contract, the Contractor and the Contracting Officer may agree upon the whole or any part of the amount or amounts to be paid to the Contractor by reason of the total or partial termination of work pursuant to this clause, which amount or amounts may include a reasonable allowance for profit on work done; provided, that such agreed amount or amounts, exclusive of settlement costs, shall not exceed the total contract price as reduced by the amount of payments otherwise made and as further reduced by the contract price of work not termi- nated. The contract shall be amended accordingly, and the Contractor shall be paid the agreed amount. Nothing in paragraph (e) of this clause, prescribing the amount to be paid to the Contractor in the event of failure of the Con- tractor and the Contracting Officer to agree upon the whole amount to be paid to the Contractor by reason of the termi- nation of work pursuant to this clause, shall be deemed to | limit, restrict, or otherwise determine or affect the amount or amounts which may be agreed upon to be paid to the Contractor pursuant to this paragraph (d). b 4 : ul 3 : 44a (e) In the event of the failure of the Contractor and the Contracting Officer to agree as provided in paragraph (d) upon the whole amount to be paid to the Contractor by rea- son of the termination of work pursuant to this clause, the Contracting Officer shall, subject to any Settlement Review Board approvals required by Section VIII of the Armed Services Procurement Regulation in effect as of the date of execution of this contract, determine, on the basis of infor- mation available to him, the amount, if any, due to the Con- tractor by réason of the termination and shall pay to the Contractor the amounts determined as follows: (i) for completed supplies accepted by the Govern- ment (or sold or acquired as provided in para- graph (b)(vii) above) and not theretofore paid for, a sum equivalent to the aggregate price for such supplies computed in accordance with the price or prices specified in the contract, appro- priately adjusted for any saving of freight or other charges; (ii) the total of— (A) the costs incurred in the performance of the work terminated, including initial costs and preparatory expense allocable thereto, but exclusive of any costs attributable to sup- plies paid or to be paid for under paragraph (e)(i) hereof; (B) the cost of settling and paying claims arising out of the termination of work under sub- contracts or orders, as provided in para- graph (b)(v) above, which are properly chargeable to the terminated portion of the contract (exclusive of amounts paid or pay- able on acevunt of supplies or materials de- livered or services furnished by subcon- tractors or vendors prior to the effective date of the Notice of Termination, which amounts 45a shall ke included in the costs payable under (A) above); and (C) a sum, as a profit, equa] to 2 percent of that part of the amount determined under (A) above which represents the cost of articles and materials not processed by the Con- ' tractor, plus a sum equa! to 8 percent of the remainder of such amount, but the aggregate { of such sums shall not exceed 6 percent of the whole of the amount determined under (A) above; provided, however, that if it ap- pears that the Contractor would have sus- tained a loss on the entire contract had it been complet:«, no profit shall be included or allowed under this subdivision (C) and an appropriate adjustment shall be made redue- ing the amount of the settlement to reflect the indicated rate of loss; and (iii) the reasonable costs of settlement, including ac- counting, legal, clerical, and other expenses rea- sonably necessary for the preparation of secttle- ment claims and supporting data with respect to the terminated portion of the contract and for the termination and settlement of subcontracts there- under, together with reasonable storage, trans- portation, and other costs incurred in connection with the protection or disposition of property allocable to this contract. The total sum to be paid to the Contractor under (i) and (ii) of this paragraph (e) shall not exceed the total contract price as reduced by the amount of payments otherwise made and as further reduced by the contract price of work not terminated. Except for normal spoilage, and except to the extent that the Government shall have otherwise ex- pressly assumed the risk of loss, there shall be excluded from the amounts payable to the Contractor as provided in AAEM BOS BOT i A BIE ELGAR Ba OI STEEDS PA LOLITA PARIS al mh ae 46a (e)(i) and (ii)(A) above, the fair value, as determined by the Contractor Officer, of property which is destroyed, :ost, stolen, or damaged so as to become undeliverable to the Government, or to a buyer pursuant to paragraph (b) (vii). (f) Any determination of costs under paragraph (c) or (ec) hereof shall be governed by the principles for considera- tion of costs set forth in Section XV, Part 2, of the Armed Services Procurement Regulation, as in effect on the date of this contract. (g) The Contractor shall have the right of appeal, under the clause of this contract entitled ‘‘Disputes,’’ from any determination made by the Contracting Officer under para- graph (c) (e) above, except that if the Contractor has failed te submit his claim within the time provided in paragraph (c) above and has failed to request extension of such time, he shall have no such right of appeal. In any case where the Contracting Officer has made a determination of the amount due under paragraph (c) or (e) above, the Government shall pay to the Contractor the following: (:) if there is no right of appeal hereunder or if no timely appeal has been taken, the amount so determined by the Contracting Officer, or (ii) if an appeal has been taken, the amount finally de- termined on such appeal. (h) In arriving at the amount due the Contractor under this clause there shall be deducted (i) all unliquidated ad- vance or other payments on account theretofore made to the Contractor, applicabie to the terminated portion of this contract, (ii) any claim which the Government may have against the Contractor in connection with this contract, and (iii) the agreed price for, or the proceeds of sale of, any materials, supplies, or other things acquired by the Con- tractor or sold, pursuant to the provisions of this clause, and not otherwise recovered by or credited to the Govern- ment. (i) If the termination hereunder be partial, prior to the settlement of the terminated portion of this contract, the Eo AS DETR Pe ORATOR RR A O65 EL Sy 47a Contractor may file with the Contracting Officer a request in writing for an equitable adjustment of the price or prices specified in the contract relating to the continued portion of the contract (the portion not terminated by the Notice of Termination), and such equitable adjustment as may be agreed upon shall be made in such price or prices. (j) The Government may from time to time, under such terms and conditions as it may prescribe, make partial pay- ments and payments on account against costs incurred by the Contractor in connection with the terminated portion of this contract whenever in the opinion of the Contracting Officer the aggregate of such payments shall be within the amount to which the Contractor will be entitled hereunder. If the total of such payments is in excess of the amount fi- nally agreed or determined to be due under this clause, such excess shall be payable by the Contractor to the Govern- ment upon demand, together with interest computed at the rate of 6 percent per annum, for the period from the date such excess payment is received by the Contractor to the date on which such exeess is repaid to the Government; provided, however, that no interest shall be charged with respect to any such excess payment attributable to a reduc- tion in the Contractor’s claim by reason of retention or other disposition of termination inventory until ten days after the date of such retention or disposition, or such later date as determined by the Contracting Officer by reason of the circumstances. (k) Unless otherwise provided for in this contract, or by applicable statute, the Contractor, from the effective date of termination and for a period of three years after final settlement under this contract, shall preserve and make available to the Government at all reasonable times at the office of the Contractor but without direct charge to the Government, all his books, records, documents, and other evidence bearing on the costs and expenses of the Con- tractor under this contract and relating to the work termi- nated hereunder, or, to the extent approved by the Con- tracting Officer, photographs, micro-photographs, or other authentic reproduction thereof. § 8-602.6 Repurchase Against Contractor’s Account. (a) Where the supplies or services are still required after termination, repurchase of supplies or services which are the same as or similar to those called for in the contract, shall be made against the contractor’s account as soon as practicable after termination. Such repurchase shall be at as reasonable a price as practicable considering the quality required by the Government and the time within which the supplies or services are required. The contract of repurchase may be made for a quantity in cxeess of the undelivered quantity terminated for default, when such excess quantity is needed, but excess cost may be charged against the defaulting contractor for no more than the undelivered quantity terminated for default (including vari- ations in quantity permitted by the terminated contract). (b) If the repurchase is for a quantity not in excess of the undelivered quantity terminated for default, the require- ments of 10 U.S.C. 2304(a), with respect to formal adver- tising, are inapplicable. However, the contracting officer may use formal advertising procedures. If the contracting officer devides to negotiate the repurchase contract, he may either (1) use any authority listed in 3-201 through 3-217 (10 U.S.C. 2304(a) (1)-(17)), as appropriate, or (2) if none of those authorities to negotiate are used, the contract shall identify the procurement as a repurchase in accordance with the provisions of the Default clause in the defaulted contract. If the repurchase is for a quantity in excess of the undelivered quantity terminated for default, the entire quantity shall be treated as new procurement. (c) If repurchase is effected at a price in excess of the price of the supplies terminated, the contracting officer AO La OME ALLS ER LEC ODL NN AE BELT AAO A Se 40D» ae 49a shall make a written demand on the contractor for the total amount of such excess giving due consideration to any in- creases or decreases in other ascertainable costs such as transportation discounts, ete., and shall take such other action as is required by Appendix E, Part 6, for collecting claims in favor of the Government. § 1-309 Solicitations for Informational or Planning Purposes. It is the general policy of the Department of Defense to solicit bids, proposals or quotations only where there is a definite intention to award a contract or purchase order. However, in some cases solicitation for informational or planning pur- poses may be justified. Invitations for bids and requests for proposals will not be used for this purpose. Requests for quotations may be issued for informational or planning purposes only with prior approval of an individual at a level higher than the contracting officer. In such cases, the request for quotation shall clearly state its purpose and, in addition, the following statement in capital letters shall be placed on the face of the request: ‘THE GOVERNMENT DOES NOT INTEND TO AWARD A CONTRACT ON THE BASIS OF THIS REQUEST FOR QUOTATION, OR OTHERWISE PAY FOR THE INFORMATION SOLICITED.’ The foregoing does not prohibit the allow- ance, in accordance with 15-205.3, of the cost - preparing such quotations. + * * id * * * * * o _ Uniform Commercial Code, § 1-207 Performance or Acceptance Under Reservation of Rights. A party who with explicit reservation of rights per- forms or promises performance or assents to performance in a manner demanded or offered by the other party does not thereby prejudice the rights reserved. Such words as 50a ‘‘without prejudice’’, ‘‘under protest’’ or the like are suf- ficient. * * * * * * * * * * Defense Production Act of 1950, 50 U.S.C. §§ 2071-73 (1970) TITLE I—PRIORITIES AND ALLOCATIONS § 2071. Priority in contre: ts and orders. (a) Allocation of materials and faciltiies. The President is authorized (1) to require that perform- ance under contracts or orders (other than contracts of employment) which he deems necessary or appropriate to promote the national defense shall take priority over per- formance under any other contract or order, and, for the purpose of assnring such priority, to require acceptance and performance of such contracts or orders in preference to other contracts or orders by any person he finds to be eap- able of their performance, and (2) to allocate materials and facilities in such manner, upon such conditions, and to such extent as he shall deem necessary or appropriate to pro- mote the national defense. * * * ¥* * * * * * * (b) Critical and strategic materials. The powers granted in this section shall not be used to control the general distribution of any material in the civilian market unless the President finds (1) that such material is a scarce and critical material essential to the national defense, and (2) that the requirements of the national defense for such material cannot otherwise be met without creating a significant dislocation of the normal dis- tribution of such material in the civilian market to such a degree as to create appreciable hardship. (Sept. 8, 1950, ch. 932, title I, § 101, 64 Stat. 799; July 31, 1951, ch. 275, title I, § 101(a), 65 Stat. 132; June 30, 1952, ch. 530, title I $§ 101, 102, 66 Stat. 296; June 30, 1953, ch. 171, § 3, 67 Stat. 129.) 5la § 2072. Hoarding of designated scarce materials. In order to prevent hoarding, no person shall accumulate (i) in exeess of the reasonable demands of business, per- sonal, or home consumption, or (2) for the purpose of resale at prices in excess of prevailing market prices, materials which have been designated by the President as searce materials or materials the supply of which would be threatened by such accumulation. The President shall order published in the Federal Register, and in such other manner as he may deem appropriate, every designation of materials the accumulation of which is unlawful and any withdrawai of such designation. In making such designations the President may prescribe such conditions with respect to the accumulation of materials in excess of the reasonable demands of business, personal, or home consumption as he deems necessary to carry out the objectives of this Act [sections 2061, 2062, 2071 to 2073, 2091 to 2094, 2151 to 2163 and 2164 to 2168 of this Appendix]. This section shall not be construed to limit the authority contained in sections 101 and 704 of this Act [sections 2071 and 2154 of this Append:«]. (Sept. 8, 1950, ch. 932, title I, § 102, 64 Stat. 799; July 31, 1951, ch. 275, title I, § 101(b), 65 Stat. 132.) § 2072. Penaities. Any person who willfully performs any act prohibited, or willfully fails to perform any act required, by the pro- visions of this title [sections 2071 to 2073 of this Appendix] or any rule, regulation, or order thereunder, shall, upon conviction, be fined not more than $10,000 or imprisoned for not more than one year, or both. (Sept. 8, 1950, ch. 932, title I, § 103, 64 Stat. 799.) 52a United States Constitution, Amendment V * * * * * * * * * 7 Ne person shall be held to answer for a capital, or other- wise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the lend or naval forces, or in the Militia, when in actual service in time of War or publie danger; nor shall any person be subject for the same offence 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 prop- erty, without due process of law; nor shall private property be taken for public use, without just compensation. ?@ + ay eer --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385608_0230%3A1. Public record. Not legal advice.