Military Aircraft Parts

ARMED SERVICES BOARD OF CONTRACT APPEALS
Appeal of -- )
)
Military Aircraft Parts ) ASBCA No. 60009)
Under Contract No. SPM4A7-l l-M-Dl 11 )
APPEARANCE FOR THE APPELLANT: Mr. Robert E. Marin
President
APPEARANCES FOR THE GOVERNMENT: Daniel K. Poling, Esq.
DLA Chief Trial Attorney
Edward R. Murray, Esq.
Jason D. Morgan, Esq.
Trial Attorneys
DLA Aviation
Richmond, VA
OPINION BY ADMINISTRATIVE JUDGE O'SULLIVAN
Military Aircraft Parts (MAP) appeals from a contracting officer's final decision
denying its claim for breach of contract. The parties have submitted the appeal for
decision on the written record pursuant to Board Rule 11. 1 Both entitlement and quantum
are at issue. We have jurisdiction pursuant to the Contract Disputes Act of 1978 (CDA),
41 U.S.C. §§ 7101-7109. We sustain the appeal in part.
FINDINGS OF FACT
1. Purchase Order No. SPM4A7-l l-M-Dl 11 (the contract) was issued by the
Defense Logistics Agency Aviation (DLA Aviation) field office, Richmond, Virginia,
to MAP on 18 November 2010 (R4 tab 1). The government sought to acquire one first
article and six production units of a steel flap track liner for the A-10 aircraft (id. at 3,
8-10). The contract identifies this part as a Critical Application Item (id. at 4 ). The
total price of the contract, for first article manufacture and testing and six production
parts, was $7,550.00 (id. at 1). Section B of the contract contains first article testing
instructions, which provide in pertinent part:
5. MATERIAL PROCESSING, INCLUDING FINISH
REQUIREMENTS (PLATING, CASTING, FORGING,
1
MAP originally elected to proceed under Board Rule 12.2, small claims expedited
procedure. MAP subsequently elected to remove the appeal from the Board's
Rule 12 docket in order to extend the time available for discovery.
HEAT TREATMENT, WELDING, INSPECTION,
ANODIZE, PAINTING, ETC.) UTILIZED IN THE
MANUFACTURE OF FIRST ARTICLE ITEMS SHALL
BE IDENTIFIED AND CERTIFIED ALONG WITH A
COPY OF MATERIAL PURCHASE REQUESTS AS
CONFIRMING TO APPLICABLE DATA
REQUIREMENTS. A COPY OF THE PURCHASE
ORDER CERTIFYING THE PROCESS
ACCOMPLISHED AT OTHER THAN CONTRACTOR
FACILITY SHALL BE INCLUDED.
(Id. at 3) The applicable drawings specify the application of cadmium plating and
epoxy-polyamide primer as part of the manufacturing process (R4, tab 19 at 7).
2. The contract contained the Federal Acquisition Regulation (FAR) 52.209-4,
FIRST ARTICLE APPROVAL-GOVERNMENT TESTING (SEP 1989) clause, with its
AL TERNA TE I (JAN 1997). The clause provides in pertinent part:
(b) Within 120 calendar days after the Government
receives the first article, the Contracting Officer shall
notify the Contractor, in writing, of the conditional
approval, approval, or disapproval of the first article. The
notice of conditional approval or approval shall not relieve
the Contractor from complying with all requirements of the
specifications and all other terms and conditions of this
contract. A notice of conditional approval shall state any
further action required of the Contractor. A notice of
disapproval shall cite reasons for the disapproval.
(c) If the first article is disapproved, the Contractor,
upon Government request, shall submit an additional first
article for testing. After each request, the Contractor shall
make any necessary changes, modifications, or repairs to
the first article or select another first article for testing. All
costs related to these tests are to be borne by the
Contractor, including any and all costs for additional tests
following a disapproval. The Contractor shall furnish any
additional first article to the Government under the terms
and conditions and within the time specified by the
Government. ...
(d) If the Contractor fails to deliver any first article
on time, or the Contracting Officer disapproves any first
article, the Contractor shall be deemed to have failed to
2
make delivery within the meaning of the Default clause of
this contract.
(h) Before first article approval, the acquisition of
materials or components for, or the commencement of
production of, the balance of the contract quantity is at the
sole risk of the Contractor. Before first article approval,
the costs thereof shall not be allocable to this contract for
(1) progress payments, or (2) termination settlements if the
contract is terminated for the convenience of the
Government.
(R4, tab 1 at 14)2 The contract also contains a DLA clause with additional requirements,
52.209-9018, FIRST ARTICLE - GOVERNMENT TEST-ADDITIONAL REQUIREMENTS (SEP
2008) DLAD (id.).
3. The contract required delivery of the first article to the government for
testing by 17 May 2011, 180 days after award (R4, tab 1 at 2). It is undisputed that
MAP did not deliver the first article by this date; the first article was delivered to the
government for testing on 30 January 2012 (R4, tab 37). 3 Government testing of
MAP's first article resulted in a discrepancy report that was attached to a notice
provided by the contracting officer to MAP on 15 May 2012 that its first article was
disapproved (R4, tabs 4, 5). The only discrepancy noted after testing and inspection
was with respect to the holes drilled in the part to facilitate its attachment to the flap
track-the contract called for the holes to be .190" to .194" in diameter, but the report
stated that the actual diameter was ".195 - .196 [in] twelve places" (id.). 4
4. The government's structures engineer who replaced the engineer responsible
for reviewing the first article submitted by MAP is familiar with the A-10 wing flap
system and provided the following general information about the holes in the flap
liner. Aircraft mechanics use the 12 holes to mount the liner, with fasteners, to an
underlying aluminum section which is traversed by the roller that extends and retracts
the wing flaps of the aircraft. If the liner were not securely fastened and were to
detach from the mating section below, the roller would be likely to damage that
section and potentially cause the wing flap not to operate correctly. In addition, if the
2
FAR 52.209-4 is not set forth in full text in the contract document.
3
The record before us does not indicate that the government took any action with
respect to the missed delivery date. There is no indication that a new delivery
date was ever established.
4
A second discrepancy with respect to the certification package was corrected on
14 May 2012 (id.).
3
liner holes are too large, the mechanic attaching the liner may not be able to use it as a
template for drilling holes in the mating part and may not be able to use the specified
fasteners. (Gov't br., ex. A, Casey Thurber decl. (Thurber decl.) iii! 1-4) However, the
government has presented no evidence that the nonconforming holes in MAP's first
article were large enough to actually present the potential problems described.
5. At MAP's request, quality assurance representatives (QARs) Randall Fritz
and Greg Keeler from the Defense Contract Management Agency (DCMA) visited
MAP's facility on 20 June 2012 to witness an inspection of the returned part (gov't br.,
ex. C, Randall Fritz decl. (Fritz decl.) iii! 2, 3). Contrary to the discrepancy report,
only 3 (out of 12 total) holes were found to be out oftolerance-i.e., measuring .195"
to .196" in diameter (R4, tab 6). The remainder measured .190" to .194" in diameter
(R4, tab 40). At the time, Mr. Marin of MAP pointed out that the out-of-tolerance
holes were missing paint, and stated that this condition could have been caused by
forcing gauge pins 5 through the holes, thereby removing the paint and enlarging the
holes (Fritz decl. ii 5). Mr. Fritz responded that Mr. Marin's theory was plausible but
unlikely, and offered him an opportunity to demonstrate on another part. Mr. Marin
declined because he did not want to destroy a part. (Id.; R4, tab 9 at 1)
6. The same day, 20 June 2012, Mr. Marin emailed DLA contract administrator
Lisa Hardy, noting that paint was missing from the holes that were measured to be out of
tolerance, and further stating that MAP suspected that the part "was in tolerance and
acceptable per drawing when submitted and forceful inspection at the ESA caused by
forcing a gage pin thru the hole occurred." 6 Mr. Marin asserted that over a hundred holes
in parts made at the same time were in tolerance and did not have paint removed from the
holes. He requested permission to do a resubmittal at no cost. (R4, tab 6 at 1)
QAR Fritz replied to this email, confirming to Ms. Hardy that three of the holes were out
of tolerance, and stating "I would concur with you, if you should decide to allow a no
cost resubmittal" (id.).
7. The ESA engineering technician who performed the measurement of the
holes in the first article provided a declaration in which she confirmed that she "found
the holes to be in the .195" to .196" range." She denied enlarging the holes or forcing
gauge pins through the holes, but did state that it is possible that her use of the gauge
pin could have removed paint from the holes. In her opinion, such a result would be
"typical, but irrelevant to the inspection. The inspection is for the diameter of the
metal, not the paint." (Gov't br., ex. B, Julie Morse decl. (Morse decl.) iii! 1-4)
Engineer Thurber backs up Ms. Morse's opinion in this regard, declaring that:
5
The Board will refer to these measuring instruments·as "gauge pins," following the
dictionary preferred spelling of the word "gauge," but in the record the spelling
used is most often "gage."
6
ESA refers to the Engineering Support Activity at Hill Air Force Base, Utah. The
ESA conducted the first article inspection at issue in this appeal.
4
It is .. .irrelevant that the paint was removed from any of the
holes in the part. The inspection should be measuring the
diameters of the metal, not paint. Paint is not a structural
component and obviously does not have the structural
integrity of steel. Paint will not hold a fastener in place.
Likewise, a part with oversized holes cannot be repaired by
adding paint to the holes. This will not repair the structural
integrity of the part.
(Thurber decl. ii 5)
8. Although Ms. Morse does not in her declaration provide any details about
how she conducted her inspection, there is evidence in the record that she used gauge
pins during the inspection process (R4, tab 38 at 5).
9. On 22 June 2012, Mr. Fritz issued a Corrective Action Request (CAR) to MAP,
requesting that MAP respond on or before 5 July 2012 with its analysis of the cause of
the dimensional nonconformance and the action proposed to be taken to prevent a
re-occurrence (R4, tab 7).
10. On 25 June 2012, MAP quality inspector Alberto Valenzuela conducted his
own inspection of the holes in the rejected part. He recorded measurements from .190
to .196". (R4, tab 40)
11. The previous year, on 9 November 2011, Mr. Valenzuela had inspected the
same part prior to sending the part to the government for inspection, and recorded a
hole diameter of .194" at Step 4 of the manufacturing process (R4, tab 33). That same
day, 9 November 2011, another MAP inspector performed an inspection of the same
part at Step 5 of the manufacturing process and recorded the hole diameter as .191"
(R4, tab 34). 7 Subsequently, on 21 November 2011, a third MAP inspector conducted
an inspection on a sample of four parts out of a production run of 13 parts at Step 5 of
the manufacturing process. 8 This inspector recorded a hole diameter of .191" for the
four inspected parts. (R4, tab 35) Finally, on 30 January 2012, government
QAR Gordon Gregory signed off on the First Article Test Report conducted by MAP
prior to shipping the first article for government testing, commenting:
7
From the information available in the record, it appears that Step 4 involves the
drilling of the holes and Step 5 involves "MACHINE DE-BURR PER G-FlOl."
Both of these steps precede the application of the required coating and primer.
(R4, tab 36)
8 MAP elected to manufacture the first article, the six production parts, and additional
parts, for a total of one first article and twelve production parts, in one
production run prior to first article approval (R4, tab 48 at 14).
5
VERIFIED CALIBRATION, VERIFIED PPP&M,
REVIEWED CERT PACKAGE, REVIEWED
INSPECTION RECORDS, REVIEWED CONTRACT
FOR EXCEPTIONS, WITTINESS [sic] DIMENSIONAL
INSPECTION & METHODS, RECOMMEND FAT
APPROVAL[.]
(R4, tab 37 at 2) The dimension recorded for hole diameter in the FAT Report was
.191" for a sample of 4 out of 13, as inspected on 21 November 2011 (id. at 3 7).
12. On 19 July 2012, MAP responded to the DCMA CAR. MAP asserted that
the root cause of the nonconformance was damage caused by the government while
inspecting the part, pointing out that "144 holes in parts we have in stock made at the
same time were in tolerance and did not have paint removed from the holes." MAP
requested the opportunity to submit one of the production parts as a new first article
and requested that the government use "reasonable care" in inspecting it. (R4, tab 8)
Mr. Fritz responded on 23 July 2012 that MAP's response was unacceptable. He
stated: "I offered you the chance to prove your theory if you were willing to destroy
one of your stock parts at no expense to the government, to demonstrate. You
declined." (R4, tab 9 at 11) Mr. Fritz apparently agreed with Mr. Marin that forcing a
gauge pin through the hole, thereby removing the paint, would destroy the part.
13. On 19 July 2012, Ms. Lisa Hardy of DLA Aviation responded to
Mr. Marin's 20 June 2012 email (finding 6), requesting that he confirm MAP's
willingness to pay the first article re-testing fee of $651.07 as well as consideration of
$1,325.55 to re-establish the first article test date to 31August2012. She further
informed him that a no-cost cancellation of the order was an available option. He
responded the same day, stating that "[w]e certainly feel strongly this was a
Government caused disapproval and hope you will consider DCMA' s
recommendation to resubmit at no additional cost. If not, then this is reluctantly
acceptable." (R4, tab 13 at 2-3)
14. Both parties agree that on 20 June 2012 in the presence of Messrs. Fritz and
Keeler, and again on 24 July 2012 in the presence of Mr. Robert Presley, DCMA
supervisory quality assurance specialist, MAP employees pulled production parts from
stock, used "go/no-go" gauge pins on them, and represented to the government
representatives that the parts were compliant (Fritz decl. ii 4; gov't hr., ex. D,
Robert Presley decl. (Presley decl.) ii 3). It does not appear from the record that the
results of these inspections of the production parts were recorded, and both Mr. Fritz and
Mr. Presley stated they do not know the sizes of the gauge pins that were used (Fritz decl.
ii 4; Presley decl. ii 3). None of these government representatives either questioned any
of the reported results, or performed any inspection themselves, despite having the
opportunity to do so (id.).
6
15. From the record, there appear to be at least two different ways of inspecting
the dimensional compliance of holes: (1) using go/no-go gauge pins; and (2) actually
measuring the holes. The go/no-go process was described by Mr. Valenzuela, a MAP
inspector with over 30 years of experience, as follows:
In my inspection I prefer to perform what I call a "hard
gage" inspection of the parts. This involves the use of two
gage pins, a go and a no-go pin. For the .190/. l 94"
diameter I would use a .190" and make sure it goes into all
the holes. Finally I would use a .194" and check to see it
does not go into any of the holes (no-go condition). This
shows passing results.
(App. supp. R4, tab 110, Valenzuela decl. `` 4, 6) Actually measuring the specific
dimension of a hole appears to be more time-intensive and was described by Mr. Valenzuela
as more likely to enlarge the holes than go/no-go inspection. Mr. Valenzuela stated:
Measuring each and every hole in a part like this [referring
to the flap track liner] can be done, but it takes a lot of time
and can progressively make the hole larger, so I prefer not
to do this.
(Id. ~ 7) MAP also submitted for the record independent industry materials indicating
that the use of go/no-go pin or plug gauges is an accepted method for inspecting the
dimensional compliance of drilled holes on a pass/fail basis. For instance, the Meyer
Gage Catalog states that:
A GO gage is used to check the lower limit of a hole. A
NOGO gage is used to check the upper limit of a hole. If the
GO gage enters the hole and the NOGO gage is unable to
enter, the design specifications of the hole have been met.
(R4, tab 108 at 3) The same source cautions that such gauges are used to inspect the holes
for pass/fail compliance only, and will not measure the exact size of the hole (id. at 4).
16. On 25 March 2013 (there is no explanation in the record of what occurred, if
anything, during the intervening eight months), DLA contracting officer (CO) Janice Hicks
issued a show cause letter to MAP, inviting MAP to submit information bearing on
whether the contract should be terminated for default, or a new delivery schedule should be
established, within 10 days (R4, tab 11 ). MAP responded on 1 April 2013 that it had
requested a no-cost resubmission and that it had enough parts in stock to immediately ship
a first article and all production parts. It reiterated its position that the rejected first article
was damaged during government inspection. (R4, tab 12 at 2) On 2 April 2013, CO Hicks
7
responded that the government could not approve a no-cost first article resubmittal unless
MAP provided evidence of the rejected part being damaged by the government (id.).
CO Hicks' request for evidence of government damage drew the following response from
QARFritz:
QAR Keeler and myself inspected the rejected part with
Military Aircraft Parts personnel when the part was
returned. We did not see any "clear and convincing
evidence" that the government caused damage to the part
during their test.
We did observe the part was nonconforming.
Just to be clear, DCMA at no time has recommended a no
cost FA resubmittal.
(R4, tab 12 at 1)
17. On 5 April 2013, Mr. Marin responded to CO Hicks's invitation to submit
evidence that the rejected part was damaged by the government by offering to return
the damaged part to DLA "along with the 12 production parts that are in tolerance and
undamaged. This will provide proof and assure that production parts are in tolerance
at the same time." (R4, tab 14 at 2) CO Hicks responded the following Monday,
8 April:
Rob
You have one of 2 choices-
1. You can resubmit the FAT samples and pay the cost for
FAT resubmittal.
2. DLA can proceed with Termination for Default.l91
I need a decision no later than 16 April 2013. If no
response is received, then I will surmise that your decision
was for DLA to proceed with Termination for Default.
On 17 April 2013, Mr. Marin responded that MAP agreed to the resubmittal and to pay
the cost of re-testing. (R4, tab 14 at 1) That same day, Mr. Keeler emailed Mr. Marin
and stated that MAP needed to make a new first article test part and could not use one
9
In accordance with FAR 49.504(a)(l), the contract did not contain FAR 52.249-8. Default
(Fixed-Price Supply and Service) (or any other Default clause). The inclusion of this
clause was not required pursuant to FAR 49.504(a)(l) since the contract amount did
not exceed the simplified acquisition threshold. See FAR 2.101.
8
of the parts from the prior production run, because "your FAT failed government
inspection so all parts you made on the same run as the FAT are considered bad also"
(R4, tab 15 at 1-2).
18. On 19 April 2013, DLA contract administrator Lee Skimin sent MAP contract
Modification No. POOOO 1 (Mod. POOOO 1) containing a new CLIN and delivery date for
the first article resubmittal (R4, tab 16 at 2, tab 2). Mr. Marin responded the following
Monday, 22 April, that he was unsure how to proceed because:
2. On 6/20/12 we worked with our QAR to inspect all the
holes in the 12 remaining parts, which we would like to
use as our FA exhibit. All items were acceptable.
3. On 7/24/12 Randy's DCMA supervisor, Robert Presley,
also came in and the same inspection was conducted. All
holes were acceptable.
4. DCMA now wants to reject the parts with holes they
observed to be acceptable, per the email below [the
referenced email appears to have been deleted in the copy
provided by the government for the Rule 4 file].
The attached contract page seems to give the Government
the option to reject the parts, though this appears
counterproductive and cost prohibitive. Making new parts
obviously would require additional time and cost.
Is this something to address with your agency or DCMA?
I would certainly like to resolve this without further
conflict with DCMA.
(R4, tab 17 at 2) The "attached contract page" refers to Section B of Order
No. SPM4A7-11-M-Dl 11, which contains an unnamed, unnumbered, undated clause
providing as follows:
SAMPLING:
1. SAMPLING FOR INSPECTION AND TESTING
SHALL BE IA W ANSI/ASQ Z.4-2008, DATED
JAN 1, 2008. ANY ALTERNATE PLAN MUST BE
APPROVED BY THE PCO. A SAMPLING PLAN
THAT ACCEPTS ON ZERO DEFECTS IS
REQUIRED.
2. ANY DEFECTIVE ITEM DISCOVERED DURING
INSPECTION MAY BE CAUSE FOR REJECTION
9
OF THE ENTIRE CONTRACT QUANTITY.
CRITICAL APPLICATION ITEM.
(R4, tab 17 at 7, tab I at 4)
19. In response, CO Hicks emailed Mr. Marin on 23 April 2013, stating:
We cannot accept a new FAT sample from production
quantities where the FAT failed previously. The reason
being is your FAT failed government inspection so all
parts you made on the same production run as the FAT are
considered bad parts. That is a risk that you assumed when
you manufactured the entire production quantity at the
same time that you produce[ d] the FAT sample. You will
need to produce a new FAT sample and if it passes, then
you will need to produce new quantities.
(R4, tab 17 at 1) Neither CO Hicks nor Mr. Keeler specified any contract term
underlying their refusal to accept a new first article made from the same production
run as the disapproved first article.
20. On 2 May 2013, MAP and the government executed bilateral Mod. POOOOl
establishing a first article resubmittal date of 24 October 2013 (R4, tab 2). Mod. POOOOl
states in pertinent part:
3. To re-submit a First Article, reference DLA Aviation,
FAWA Disapproval Letter, dated 19 JUN 2012. First
Article re-submission is as follows: a. Revise the delivery
date on CLIN 0002, formerly CLIN 9906 to 24 OCT 2013,
for First Article re-submission. b. Contractor shall provide
DLA Aviation with proof of delivery (DD250) and
shipping documents that the First Article re-submission
was shipped by the date above.
4. Revise the delivery date on CLIN 0001, Production
Units, as indicated- 22 APR 2014- due to the time
extension for the First Article re-submission.
5. Pursuant to FAR 52.209-4, the related costs are:
Re-Testing Charges: $651.07
Administrative Costs and Time Extension: Waived
Total: $651.07
10
Consideration in the amount of $651.07 is accepted for this
modification. For invoicing purposes, the contract value
will not be changed. Therefore, when invoicing the
contractor's invoice should NOT be adjusted to reflect this
modification. To effectuate this modification, the payment
office will offset the amount of this modification against
any outstanding payments due, potentially including other
contracts.
6. Pursuant to FAR 52.209-4 and the General Provision
Clauses, if the First Article re-submission is not delivered
by the date above, or if the First Article is disapproved
(second disapproval), this contract may be terminated in its
entirety at no cost to the Government.
Purpose of this modification is to authorize the Contractor
to re-submit the First Article, accept the Contractor's
consideration and to revise the delivery dates for the First
Article and for Production, due to the Contractor's decision
to re-submit a previously disapproved First Article.
(R4, tab 2 at 2) Mod. POOOOl does not contain any requirement that the re-submitted
first article be newly manufactured.
21. On 25 July 2013 MAP submitted a Request for Deviation/Waiver 10
requesting permission to submit a new first article using one of the parts previously
made. MAP reiterated that the remaining parts had been inspected with pin gauges in
DCMA's presence and found to be 100% compliant with the .190-.194" hole
requirement. (R4, tab 19 at 1, tab 20 at 2)
22. On 29 July 2013, Mr. Raymond Thomas, who had replaced Mr. Fritz as the
QAR assigned to MAP, responded requesting an "inspection record showing the exact
dimensions of all the holes for the twelve parts that were made with this first article"
(R4, tab 20 at 2). Mr. Marin sent an email to Mr. Valenzuela, asking "Can you supply
this?" (R4, tab 41 at 1). Mr. Valenzuela then sent Mr. Marin a copy of the inspection
he had performed of the first article back in November 2011 (id. at 1, 10). Mr. Marin
responded, "We need a QD form for the 12 extra parts ... not the 1 part we sent...can
10
MAP asserts that it was directed by DCMA to file a waiver request as an alternative
to manufacturing more parts (app. reply br. at 6). However, there is no
evidence in the record supporting this assertion.
11
you help?" Mr. Valenzuela responded, "I can modify or create a new one because the
rest of the parts was finished, same machine and same program." (R4, tab 42 at 1) 11
23. Subsequently Mr. Marin sent Mr. Thomas an email with the message "See
attached" (R4, tab 45). It is unclear from the Rule 4 file what was actually attached to his
email. In any event, Mr. Thomas replied:
Rob,
Thank you for providing the inspection record from your
sampling. However I will need an inspection record for
each individual part that was made with the failed first
article showing the actual measurements for each hole that
is covered by .190-.194 DIA tolerance. Failure to provide
the documentation by 1 Aug. will cause the waiver to be
processed without this information.
(R4, tab 20 at 1)
24. Mr. Marin then emailed Mr. Valenzuela, commenting "This seems
unreasonable .. .! think measurements of 144 holes is excessive and unnecessary. Any
thoughts?" (R4, tab 111 at 8)
25. Mr. Thomas and Mr. Keeler visited MAP on 1August2013. Mr. Valenzuela
declares that:
I am sure I presented one new good part from inventory,
sometime after the first article rejection, to DCMA QAR
Greg Keeler. He said something to the effect of, "I'm
good with that. All you need is a mod now." I believe this
was on August Pt, 2013 to the best of my memory.
(R4, tab 110,, 8) Mr. Marin states:
I am unsure about the events that occurred when DCMA
was at MAP's facility on 1August2013 for our regular
weekly QAR witness of parts, which is the deadline
QAR Thomas gave MAP to show inspection records
ofr [sic] all the holes for parts in inventory. However, the
11
While the dates on these emails are considered reliable, the times are not. Most of
the emails are printed from government counsel's computer and it appears the
computer may have converted the original times of the most recent email in
each series from Pacific Time to Eastern Standard Time.
12
attached email from me [referring to his 29 July 2013
email quoted above] shows we knew inspection of all 144
holes in the good parts we had in stock could damage the
.190/.194 holes and may be the reason we failed to perform
the inspection. I believe this would be an issue we would
likely address with DCMA on that date, but we have no
other record of what transpired.
(R4, tab 111, ~ 10)
26. Mr. Thomas's recollection of the I August meeting is as follows:
On August 1, 2013, I was at the MAP facility for a weekly
meeting. I asked Mr. Marin if MAP had an inspection
record showing dimensional measurements of all the holes
in all of the parts and he said he did not.
(Gov't br., ex. E, Thomas decl. ~ 4) The record does not include a declaration from
Mr. Keeler.
27. On 5 August 2013, DCMA's Mr. Presley forwarded MAP's waiver request
package to DLA's Mr. Skimin for final approval/disapproval action by DLA Aviation.
In the forwarding email, Mr. Presley stated: "Please note our functional specialists
have reviewed this waiver request and do not recommend approval." (R4, tab 21 at I)
By email dated 20 December 2013 (the delay is unexplained in the record), DLA
notified MAP that its waiver request had been denied (R4, tab 22). Attached to the
email were DCMA's comments on Form DD 1998. Mr. Thomas had commented, "I
am not aware of any DCMA 100% inspection of the remaining twelve remaining [sic]
parts. Requested the contractor provide inspection records for [sic] show the I 00% ·
compliance with the .194/.190 requirement. The contractor never provided the
records." (R4, tab 22 at 5) There is no explanation in the record of why Mr. Thomas
insisted on an exact measurement of each hole in all the parts, vs. a pass/fail inspection.
28. In a 20 December 2013 email, Mr. Skimin ofDLA's contracting office
informed MAP that:
Your RFW/RFD, dated 7/24/2013, has been denied. The
First article exhibit did not conform to Technical Data
Package requirements. Initial First Article disposition was
"Disapproved". Pursuant to FAR 52.209-4(h), before first
article approval, the acquisition of materials or components
for, or the commencement of production of, the balance of
the contract quantity is at the sole risk of the Contractor.
Your firm has 2 remaining options: I-resubmit a
13
conforming first article for government evaluation, as
prescribed in Modification POOO[O]l dated 2 MAY 2013;
or 2-take no action."
A response was requested by 27 December 2013. (R4, tab 22 at 1)
29. On 27 December 2013, MAP (Mr. Marin) responded in part:
We respectfully reiterate our original position that the first
article for this contract was erroneously rejected by the
Government and the production parts we currently have in
our possession, sufficient in quantity to satisfy the
requirements of the entire contract, should be inspected
and accepted. Delivery of production parts would occur
when the final inspection paperwork is completed by
MAP, within two weeks of Government notification of
acceptance of this proposal.
We also respectfully decline to manufacture a new lot of
first article parts.
(R4, tab 23 at 1) Mr. Marin further articulated the view that since the nonconforming holes
and the holes from which paint had been removed were the same holes, the observed
discrepancy was easily correctable in production and the government should have
conditionally approved the part. He stated that the government had failed to explain its
basis for refusing to allow other parts manufactured at the same time to be used for a new
first article submission and, while he assumed that the government was relying on the
contract clause stating that "any defective item discovered during inspection may be cause
for rejection of the entire contract quantity," he did not believe that clause applied to the
current situation but to instances where latent defects may be present in production parts or
fraud or misrepresentation had occurred. (Id. at 1-2)
30. The record does not indicate whether the CO responded to Mr. Marin's email,
other than to withdraw the purchase order for failure to meet the first article delivery date
by unilateral Mod. P00002, effective 13 January 2014 (R4, tab 3). On 21April2015,
MAP submitted its claim for breach of contract, alleging breach of the implied duty of
good faith and fair dealing and seeking as damages restitution of the cost incurred to
manufacture the parts ($10,591.42) plus the $651.07 paid to DLA as consideration for
Mod. POOOO 1 (R4, tab 25). The claim was denied by CO Hicks on 13 May 2015 (R4,
tab 26), and this appeal followed.
31. MAP' s inspection of the first article as well as other parts in the same
production run before the first article was shipped to the government for first article
testing consistently recorded conforming hole diameters ranging from .191 to .194
14
inches (finding 11). Government QAR Gordon Gregory signed off on MAP's first
article test report on 30 January 2012 expressly noting that he had witnessed the
dimensional inspection and methods and recommending FAT approval (id.). The
contract required that cadmium plating and epoxy-polyamide primer be applied to the
part as part of the manufacturing process prior to shipment and testing of the first
article (finding 1). The first article and all the other parts manufactured in the same
production run therefore had both cadmium plating and primer applied prior to
shipment of the first article to the government for testing.
32. After inspection, the government's dimensional technician reported that
instead of the required dimension of .190 to .194 inches, the diameter of the holes was
.195 to .196 inches "[in] twelve places." This was the only respect in which the first
article did not meet contract requirements. (Finding 3) When the disapproved first
article part was returned to MAP for inspection in the presence of the DCMA QARs
on 20 June 2012, only three holes out of the total of twelve holes were found to be
.195 to .196 inches in diameter, while the remaining nine were the required .190 to
.194 inches in diameter (finding 5). The three nonconforming holes all had paint
missing (id.). The nine holes that did not have paint missing were measured as
conforming (id.).
33. The government does not dispute either that the nine holes without paint
removed were conforming, or that all three nonconforming holes had paint missing.
When Mr. Marin of MAP observed following the 20 June 2012 inspection of the
returned part that the nonconforming condition could have been caused during the
government inspection by forcing a gauge pin through the holes, thereby removing the
paint, government QAR Fritz found this theory plausible, but unlikely (finding 5). The
government's dimensional technician, on the other hand, while denying that she forced
a gauge pin through the holes, stated that it is possible paint was removed during the
inspection process and that the removal of paint would be a "typical" result of the
inspection process (finding 7).
34. Based on the ESA technician's use of pin gauges during the inspection
process (finding 8), her admission that paint could have been removed during her
inspection and that such a result would be "typical," the evidence of record that pin
gauges are not suitable for exact hole measurement because they tend to enlarge the
hole (finding 15), the fact that a dimensional discrepancy of only two thousandths of
an inch ( .196 vs .. 194) separated the failing holes from the passing holes, and the fact
that paint was missing from the failing holes and only from the failing holes, we find
that it most probable that the technician attempted an exact measurement of three holes
with gauge pins, removing paint in the process, and then extrapolated the results to the
other holes. Based on the evidence that the holes met the required dimensions prior to
being shipped to the government for testing (finding 11) and no other discrepancies
were noted in the inspection process (finding 3), we further find that MAP's first
article met all contract requirements and that the dimensional discrepancy that resulted
15
in the disapproval ofMAP's first article was caused by the government's own
inspection process. 12
35. The contract in this case was a unilateral purchase order which by its terms
lapses if complete performance in accordance with the offer's terms and conditions is
not tendered. We find that MAP first tendered performance that met the offer's terms
and conditions on 30 January 2012, when it shipped its first article for government
inspection (finding 3). Thus, the unilateral purchase order was converted to a contract
as of that date.
36. In finding that the first article met the contract requirements, we necessarily
reject the government's argument that the 12 holes in MAP's first article part were
required to meet the specified dimensions after paint was removed. The government
has not directed us to any contract provision supporting this argument, and we have
found none. To the contrary, the contract required that a cadmium coating and primer
both be applied to the part before shipping it for inspection (finding 1), and thus we
find that the contract required the dimensional requirement to be met with paint, not
without.
37. Because MAP's first article met all contract requirements when shipped to
the government (finding 34), we find that the CO's disapproval of that first article was
improper. We also find that the CO's subsequent failure to acknowledge (1) that the
government's own inspection process removed paint from three holes in MAP's part,
causing them to be out of tolerance, and (2) that the remaining parts in MAP's
inventory were in tolerance and acceptable, was unreasonable based in part on
information known to her and in part on information known to the DCMA QARs
whose knowledge is imputed to her. The QARs knew or had reason to know, either
from the initial inspection of the first article part (findings 11, 31 ), or from the
subsequent inspections of the disapproved first article compared to other parts
manufactured at the same time (findings 5, 32), that the first article was damaged
while in the government's possession and that the parts from the same run that MAP
had in stock were fully acceptable under the contract. 13 The CO herself was personally
12
With respect to our finding that MAP's first article met the contract requirements,
we note that the government has introduced evidence of difficulties MAP
encountered at the outset in manufacturing this part. MAP has explained in a
supplemental declaration from Mr. Marin that its first attempt at production
employed two inexperienced machinists due to a labor shortage (app. reply br.,
ex. F ,-i 8). The second production run from which the first article was
submitted employed two experienced machinists and no notable problems were
encountered (id.). The government has not introduced any evidence that MAP
experienced any difficulties in manufacturing the first article that was actually
submitted.
13
The record does not reveal whether or not this information was actually shared with her.
16
aware from MAP's contract correspondence that MAP contended its first article had
been damaged by the government and that its remaining parts were acceptable, yet
rejected MAP's offer to deliver the parts and let the government see for itself
(findings 16-17).
38. Once MAP executed Mod. POOOOl establishing a new first article delivery
date, it submitted a request for waiver/deviation again seeking the government's
concurrence that it could submit an existing part as its first article. Raymond Thomas,
the then-QAR, responded requesting an inspection record "showing the exact
dimensions of all the holes for the twelve parts that were made with this first article."
(Findings 21, 22) QAR Thomas provided no explanation to MAP of why exact
measurement of the diameter of each hole in each part was needed to determine the
dimensional compliance of the holes, and none otherwise appears in the record
(finding 27). From the evidence of record (findings 7, 17), the Board concludes that
pass/fail inspection using go/no-go gauges would have provided the government with
adequate assurance that the holes were compliant, and, moreover, that exact
measurement posed a risk of enlarging the holes and destroying what otherwise would
have been a good part, as happened in the initial government inspection. Thus, we
find the QAR's insistence on exact measurement of each of 144 holes to have been
unreasonable, and the CO's denial of MAP's waiver request based on its failure to
conduct an exact measurement of 144 holes to also have been unreasonable.
39. The CO's failure to acknowledge that government-caused damage to
MAP's first article was the sole cause of its disapproval led directly and inevitably to
her subsequent actions we find to have been unreasonable: the CO's failure to allow
MAP a no-cost resubmittal (findings 16-17); the CO's imposition of a requirement that
MAP manufacture a new part for the re-submittal (findings 18-19); the CO's denial of
MAP's waiver request based on MAP's failure to comply with DCMA's unreasonable
requirement to measure all 144 holes (findings 22, 27); and, ultimately, the CO's
unilateral cancellation of the contract in January 2014 (finding 30).
DISCUSSION
MAP asserts that the government was not justified in disapproving its first
article part because the government's unduly forceful inspection damaged the three
holes found to be nonconforming. MAP also asserts that by insisting that the hole
dimensions without paint meet the specified dimensions, the government imposed a
more stringent or different inspection standard in its inspection of MAP's first article
than provided for in the contract. In their totality, MAP asserts, the government's
actions in this case violated the implied duty of good faith and fair dealing and
constituted a breach of contract. MAP asserts entitlement to restitution, to restore it to
the status quo ante (as if there never had been a contract that was breached), in the
amount of $11,242.49. (R4, tab 25; app. br. at 9-16)
17
The government asserts at the outset that the unilateral purchase order at issue in this
appeal, as modified by bilateral Mod. POOOO 1, required delivery of a first article by
24 October 2013, and since MAP failed to do so, the CO was justified in cancelling the
order (gov't br. at 24-25). The government acknowledges that MAP's position is that the
CO abused her discretion in not allowing MAP to resubmit a first article using one of the
production parts it had already manufactured (id. at 25). The government's response to this
is in two parts: first, the government argues that MAP agreed to submit a newly
manufactured first article by entering into Mod. POOOO 1 after being informed by
government representatives that only a newly manufactured first article would be acceptable
(id. at 25-26). Secondly, the government argues that, aside from Mod. POOOOl, the contract
clause specifically stating that any defective item discovered during inspection may be
cause for rejection of the entire contract quantity gave the CO the right to decide not to
accept any parts made in the same production run as the disapproved first article (id. at 26).
As to the issue whether the government was justified in disapproving the initial
first article, the government first argues that MAP is foreclosed from contesting this
issue by having entered into Mod. POOOO 1, citing James Electronics, Inc., ASBCA
No. 43505, 93-2 BCA ~ 25,677 at 127,728 (by agreeing to a new delivery schedule
after two failed first article submissions, appellant surrendered its right to argue any
then existing causes as a defense to its failure to deliver an acceptable first article on
the third submittal) (id. at 30-31). Secondly, the government states that the
disapproval, if reviewable, was correct because the holes in the part were oversized
and MAP has not met its burden of proving that this defect was easily correctable in
production (id. at 32-33).
To recover on its breach of contract theory, MAP must show ( 1) a valid contract
between the parties; (2) an obligation or duty of the government arising out of the
contract, (3) a breach of that duty, and (4) damages caused by the breach. San Carlos
Irrigation & Drainage Dist. v. United States, 877 F.2d 957, 959 (Fed. Cir. 1989);
Northrop Grumman Systems Corporation Space Systems Division, ASBCA No. 54774,
10-2 BCA ~ 34,517 at 170,23 7. We consider each of these elements in tum.
1. A valid contract between the parties. The contract in this case was a
unilateral purchase order. As such, as a matter of law, it constitutes an offer to buy
certain supplies on specified terms and conditions if the offer is accepted by delivering
those supplies on or before the date specified. If complete performance in accordance
with the offer's terms and conditions is not tendered, the offer lapses by its terms.
Comptech Corp., ASBCA No. 55526, 08-2 BCA ~ 33,982 at 168,082. We have found
that MAP did tender acceptable performance (finding 35). Therefore, Order
No. SPM4A7-l l-M-Dl 11 was a valid contract between the parties.
2. An obligation or duty of the government arising out of the contract. The
government was obligated to evaluate MAP's first article in a reasonable manner in
accordance with the terms of the contract. First articles are typically not production items
18
and, unlike production items, which are either accepted or rejected, first articles are either
approved, conditionally approved, or disapproved. Military Aircraft Parts, ASBCA
No. 59978, 15-1BCA~36,101at176,258; see also FAR 52.209-4, FIRST ARTICLE
APPROVAL - GOVERNMENT TESTING (SEP 1989) clause, which was included in the
contract (finding 2): "Within 120 calendar days after the Government receives the first
article, the Contracting Officer shall notify the Contractor, in writing, of the conditional
approval, approval, or disapproval of the first article" (id. ~ (b) ). This clause is
prescribed for use in contracts by FAR Part 9, Contractor Qualifications, which in
Subpart 9.3, First Article Testing and Approval, sets forth the purpose of first article
testing, which is to ensure that a contractor "can furnish a product that conforms to all
contract requirements for acceptance." FAR 9.302.
The first article clause does not give the government the right to disapprove a
first article for any noncompliance with specifications that would be a valid reason for
rejection of supplies tendered for delivery under the contract. Marvin Engineering
Co., ASBCA No. 27016, 84-2 BCA ~ 17,401 at 86,674. Ordinarily, the primary
purpose for requiring first article submission is to prove the capability of the contractor
to produce end products that will meet contract requirements. Id. (citing Astra Science
Corp. v. United States, 471F.2d624 (Ct. Cl. 1973); Farris and Company, ASBCA
No. 31275, 73-1 BCA ~ 9963)). Deficiencies in a first article that are correctable in
production are not a valid basis for an outright disapproval and, in recognition of this,
the first article approval clause expressly provides for conditional approval. Id.First article testing and inspection of supplies have distinctly different purposes.
As noted above, the purpose of first article testing is to determine whether the
contractor can produce the supplies to the contract specifications. FAR 9.302. FAR
Part 9 governs contractor qualifications and prescribes the use of the first article
testing clause, FAR 52.209-4, under which deficiencies in a first article that are
correctible in production are not grounds for disapproval. The purpose of inspection
of supplies, on the other hand, is to determine whether production parts that have been
delivered should be accepted. FAR Part 46, Quality Assurance, governs the inspection
of delivered supplies and services.
In addition, both parties to the contract owe each other the implied duty of good
faith and fair dealing. In Metcalf Construction Co. v. United States, 742 F.3d 984, 990
(Fed. Cir. 2014), the United States Court of Appeals for the Federal Circuit affirmed
the basic principle that the parties to a government contract are under a duty of good
faith and fair dealing in the performance and enforcement of the contract, and that
failure to fulfill that duty constitutes a breach. "The covenant of good faith and fair
dealing .. .imposes obligations on both contracting parties that include the duty not to
interfere with the other party's performance and not to act so as to destroy the
reasonable expectations of the other party regarding thefruits of the contract." Id. at
991 (citing Centex Corp. v. United States, 395 F.3d 1283, 1304 (Fed. Cir. 2005)).
19
In order to prove a violation of the duty, a contractor need not necessarily prove
that the government specifically targeted action to obtain the benefit of the contract or
that the government's actions were undertaken for the purpose of delaying or
hampering performance of the contract. Metcalf, 742 F.3d at 993. Rather, the implied
duty of good faith and fair dealing is "limited by the original bargain: it prevents a
party's acts or omissions that, though not proscribed by the contract expressly, are
inconsistent with the contract's purpose and deprive the other party of the
contemplated value." Id. at 991.
3. A breach of the duty. Based on the record before us, we have found that
MAP's first article met all contract requirements, including hole diameter, when shipped
to the government. Were it not for the damage caused to the first article while in the
government's possession, there would not have existed any reason not to approve the
first article. Thus, the CO's disapproval of the first article submitted by MAP on
30 January 2012 was unreasonable. In addition, the CO's refusal to allow MAP to
submit another part from the same production run for re-testing, the after-the-fact
imposition of a requirement that the holes in the part meet the dimensional requirement
without paint, and the insistence that MAP conduct exact measurements of all 144 holes
before a waiver would be considered, had no basis in the contract and were unreasonable.
(Findings 37-39)
These acts were in violation both of the government's duty to evaluate MAP's
first article in accordance with the express terms of the contract, and its implied duty to
cooperate and not willfully or negligently hinder the contractor's performance.
American Ordnance LLC, ASBCA No. 54718, 10-1BCA~34,386 at 169,795 (citing
Malone v. United States, 849 F.2d 1441, 1445 (Fed. Cir. 1988)). We impute to the CO
the knowledge of her representatives, the DCMA QARs, in finding the government's
conduct to have been a breach of the duty of good faith and fair dealing. Walter Straga,
ASBCA No. 26134, 83-2 BCA ~ 16,611at82,617-18.
We find inapposite the government's argument that our holding in James
Electronics forecloses MAP from contesting the CO's disapproval of the first article.
In that case, we held that the government had met its burden to show that the
submitted first article, on a third submission, failed to meet contract requirements, and
that the contractor had not met its burden to show that the defects were easily
correctable in production. 93-2 BCA ~ 25,677 at 127,728. In connection with the
latter holding, we observed:
To the extent that appellant's brief concentrates
upon initial problems in appellant's obtaining copies of
pertinent specifications and differences in test
configuration when the second FA submittal was rejected,
as excusable causes for default, it is unavailing. The law is
clear that by agreeing to a new delivery schedule, which
20
appellant did in the fall of 1990, long after the first two FA
rejections .. .it surrendered its right to argue any then
existing causes as a defense to its failure to deliver an
acceptable FA on its third submittal.
Id. In stark contrast, in this case MAP contends, and the preponderance of the
evidence shows, that MAP's first article did meet contract requirements when first
submitted. MAP is not presenting "defenses" to a failure to deliver an acceptable first
article because there was no such failure.
We also reject the government's contention that CO Hicks was justified in
requiring a newly manufactured first article because the contract included a clause
stating that any defective item discovered during inspection may be cause for rejection
of the entire contract quantity (gov't br. at 26). This clause, reproduced in full at
finding 18, refers to "SAMPLING FOR INSPECTION AND TESTING," and states
that "ANY DEFECTIVE ITEM DISCOVERED DURING INSPECTION MAY BE
CAUSE FOR REJECTION OF THE ENTIRE CONTRACT QUANTITY." This
language contemplates that a production lot will be delivered and items (the sample)
will be selected from that lot for testing that will result in acceptance or possibly
rejection of the entire lot. In contrast, the contract's first article testing clause, which
applies in this case, calls for the delivery of an item or items that are not expected to be
part of a production lot and which are inspected for the purpose of determining
whether the contractor has the capability of producing items that meet the contract
requirements. If the first article is approved or conditionally approved, then the
contractor is given the opportunity to deliver the production quantity.
In order to shed light on the applicability of this clause to first article testing,
the government was directed to supplement the record in this appeal with more
information about the provenance of the clause. In response, the government informed
the Board that the language of the clause is not part of any standard contract clause,
and that it is included in Section B of the contract as part of the "standalone narrative
terms of the contract" (Bd. corr. file, ltr. dated 9 February 2016). The government also
provided the Board with an electronic link to the archived version of the DLAD in
effect at the time the contract was issued (representing that the full DLAD comprised
approximately 750 pages). The government stated further:
With respect to the Board's question about whether
the clause applies to first article testing or production lot
testing, Respondent's position is that the plain terms of the
clause state that it applies to inspection ("Any defective
item discovered during inspection ... ") and there are two
inspection points identified in the contract - the first article
inspection and the production quantity inspection. Se[ e]
R4 Tab 1 at 2 ("F AT:Inspection=Origin, Acceptance=
21
Destination; Remaining Production:
Inspection/Acceptance=Origin). Respondent further notes
that the contract does not contemplate production lot
testing as there is no Production Lot Test clause in the
contract. See DLAD 52.209-9026, Production lot test
(PLT)
(http://farsite.hill.af.mil/archive/Dlad/Rev5_PROCL TRI 0-
40/Part52.htm).
(Bd. corr. ltr. dtd. 22 February 2016)
The Board agrees that the contract does not contain the cited production lot
testing clause. This makes sense, since the contract calls for first article testing, not
production lot testing. The contract's first article testing clause, FAR 52.209-4, provides
that following first article disapproval, if the government requests it, the contractor shall
submit an additional first article for approval (finding 2). Nothing in the first article
clause gives the government the right to dictate that only a newly manufactured part may
be submitted as the additional first article. Nor does the non-standard contract language
on which the government relies, as explained below.
The Board's review of the archived DLAD revealed that, subsequent to the issuance
of the subject contract, pursuant to PROCLTR 11-45, PRODUCTION LOT TEST (PL T) (JAN
2009) clause, DLAD 52.209-9026, was removed and replaced with new clauses:
DLAD 52.246-9085, PRODUCTION LOT TESTING (PL T) - GOVERNMENT (JUL 2011 ); and
DLAD 52.246-9086, PRODUCTION LOT TESTING (PL T) - CONTRACTOR (JUL 2011 ),
Furthermore, the production lot testing clause (JUL 2011) contains language very similar to
that on which the government relies:
(e) Upon completion of the PL T sample testing, the
Government test facility will provide the results to the
FAT/Testing Monitor (or ACO) and to the Contracting
Officer. If the PLT sample is disapproved, the
Government shall advise the Contractor of the
nonconformance, and whether the Contractor will be
allowed to produce a new lot to tender for testing.
Disapproval of the PLT sample is grounds for rejection of
the entire production lot produced. The Contractor shall
discard any failed production lot produced and produce a
new production lot under the contract terms and
conditions. [Emphasis added]
22
http://farsite.hill.af.mil/archive/Dlad/Rev5 _PROCL TRl 1-45/PART52.htm. The
quoted language is essentially unchanged in the current version of the production lot
testing clause. 14
As discussed above, the non-standard contract clause relied on by the
government, on its face, appears inapplicable to the first article testing process
contemplated in the contract's first article clause. This, combined with the fact that
substantially the same provision was incorporated in the 2011 production lot testing
clause, leads the Board to conclude that the non-standard clause incorporated in the
contract does not apply to first article testing and may not be invoked by the government
to justify its imposition on MAP of requirements not authorized in the contract's first
article testing clause. Moreover, even if we found that the clause properly applied to
first article testing, it speaks in permissive, not mandatory terms. Under the facts and
circumstances present in this case-where the part was damaged while in the
government's possession and there was, therefore, no rational basis for concluding that
the remaining parts manufactured by MAP were defective-it would still be
unreasonable and an abuse of discretion for the government to require MAP to
manufacture a new run of parts for a first article re-submission. In conclusion, the CO's
insistence that MAP incur the expense of a whole new production run in order for the
government to conduct another first article test was an unreasonable imposition of yet
another obstacle to contract performance and a breach of the government's implied duty
to cooperate and not hinder performance of the contract. 15
Ultimately, CO Hicks cancelled the purchase order after MAP insisted on its
right under the contract to submit an existing part for the first article re-testing
(finding 30). This action was also a breach of the contract, since MAP had effected
delivery according to the terms of the contract by tendering a conforming first article.
14
The Board also finds it significant that both the production lot testing regulatory
provisions and the related contract clauses were moved from Part 9 of the
DLAD, which addresses Contractor Qualifications, to Part 46, which addresses
Quality Assurance. This underscores the distinction in process and purpose
between first article testing to qualify a contractor to produce a part, and
inspection of delivered supplies to determine their acceptability.
15
We also reject the government's argument that MAP nevertheless agreed to provide
a newly manufactured first article by entering into Mod. POOOO 1 after being
informed by a government representative that a newly manufactured first article
would be required (gov't br. at 25-26). Mod. POOOO 1 on its face did not require
MAP to submit a newly manufactured first article, and MAP did not otherwise
acquiesce to the government's demand. The government has not met its burden
of proof on this issue. DTC Engineers & Constructors, LLC, ASBCA
No. 57614, 12-1 BCA ~ 34,967 at 171,899.
23
While we find numerous breaches, both of express contract duties and the
implied duty of good faith and fair dealing, we do not find that any of the government
officials involved acted with malice or specific intent to injure MAP.
4. Damages caused by the breach. The contract's First Article Testing clause
provides that the contractor assumes the risk of any production parts manufactured
prior to first article approval; the cost thereof shall not be allocable to the contract for
purposes of progress payments or termination settlements (finding 2). In this case,
neither progress payments nor a constructive termination for convenience are
presented. Because the contract did not contain the standard Default clause,
FAR 52 .249-8, even if we were to conclude that the CO' s cancellation of the contract
equated to an improper termination for default, the government cannot avail itself of
the conversion of an improper default termination to a termination for convenience
provided for by paragraph (g) of that clause. 16 This being so, paragraph (h) of the First
Article Testing clause is not applicable and MAP is entitled to breach damages.
The contract price of $7550.00 included 1 first article and 6 production parts.
MAP elected to make 13 parts altogether in one production run, and claims its costs of
manufacturing all 13 parts ($10,591.42) plus $651.07 paid to DLA as consideration for
Mod. POOOO 1 (R4, tab 25). We have found that the government breached the contract
and its actions prevented MAP from successfully delivering conforming parts. Thus,.
the appropriate measure of foreseeable damages flowing from the government's
breach is the contract price, $7,550.00.
We do not grant MAP the full amount of its requested damages. The contract
only called for six production parts and it would be sheer speculation that it would
have ordered six more. As to the amount of $651.07 MAP agreed to as consideration
for the government's agreement to a first article resubmission, MAP has not met its
burden to show this amount was ever paid to or collected by the govemment. 17
Accordingly, this appeal is sustained in part.
16
Because the Default clause was not required to be included (see fn. 9 above), it is not
incorporated into the contract by operation of law. American Water Cooling
Equipment Corp., GSBCA No. 9083-TD, 89-1BCA~21,364 at 107,689; compare
Turnco Machine Co., ASBCA No. 33559, 88-2 BCA ~ 20,551(FAR52.249-8
required and incorporated by operation of law).
17
The government contends this amount was never charged to MAP (gov't br. at 34).
MAP counters that this amount was deducted from other amounts due and
owing to MAP per the terms of Mod. POOOO 1. Mod. POOOO 1 states that "the
payment office will offset the amount of this modification against any
outstanding payments due, potentially including other contracts" (R4, tab 2
at 2). We cannot find any evidence in the record that the amount was actually
collected from MAP.
24
I
CONCLUSION
For the foregoing reasons, we sustain the appeal in the amount of $7,550.00,
plus interest pursuant to 41U.S.C.§7109 calculated from 21April2015 until paid.
Dated: 31 May 2016
LYNDiO'SULLIVAN
-
Administrative Judge
Armed Services Board
of Contract Appeals
I concur
~
```` _Rl_C_H_ARD
_ _S_H_A_C_K-LE_F_O_RD
_ _ __
Administrative Judge Administrative Judge
Acting Chairman Vice Chairman
Armed Services Board Armed Services Board
of Contract Appeals of Contract Appeals
I certify that the foregoing is a true copy of the Opinion and Decision of the
Armed Services Board of Contract Appeals in ASBCA No. 60009, Appeal of Military
Aircraft Parts, rendered in conformance with the Board's Charter.
Dated:
JEFFREY D. GARDIN
Recorder, Armed Services
Board of Contract Appeals
25
1
I