American Ship Building Co. v. United States

654 F.2d 75, 29 Cont. Cas. Fed. 81,612, 228 Ct. Cl. 220, 1981 U.S. Ct. Cl. LEXIS 396
CourtUnited States Court of Claims
DecidedJuly 1, 1981
DocketNo. 225-74
StatusPublished
Cited by58 cases

This text of 654 F.2d 75 (American Ship Building Co. v. United States) is published on Counsel Stack Legal Research, covering United States Court of Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
American Ship Building Co. v. United States, 654 F.2d 75, 29 Cont. Cas. Fed. 81,612, 228 Ct. Cl. 220, 1981 U.S. Ct. Cl. LEXIS 396 (cc 1981).

Opinion

NICHOLS, Judge,

delivered the opinion of the court:

The issues presented in this breach of contract case are (1) whether a contract requirement that performance be completed within 900 days is an affirmative representation or warranty by the government that the contract could, in fact, be completed within the stated time, and (2) whether the government’s failure to disclose superior knowledge of delays and cost overruns that occurred in previous contracts prior to the award of this contract amounted to a breach. For the reasons discussed herein, we hold that the government neither made an affirmative representation nor failed to disclose any information which it had a duty to disclose, and therefore plaintiff is entitled to no relief.

Defendant United States Government prosecutes various exceptions to the report of Trial Judge Spector, wherein the trial judge recommended that the government did breach a contract with plaintiff American Ship Building Company. The trial judge reasoned that the government had failed to disclose facts of which it was aware about cost overruns and delays in previous similar contracts, and therefore breached this contract and is liable for similar overruns in the instant case. Additionally, the trial judge found that a 900 day requirement for performance in the contract was effectively a representation by the government that work could be completed within that time. The government attacks that recommendation and contends that it had no obligation on the facts of this case to disclose the history of previous contracts without any request from the contractor. The government further argues that it made no representation that the contract could be completed within 900 days, it merely set a due date. Lastly, the government criticizes the trial judge as biased and prejudiced. It excepts to several of the trial judge’s findings, but we have not reviewed the exceptions because the trial judge’s conclusions cannot be [222]*222sustained even on the findings he made. The court’s findings of fact are embodied in the opinion.

Facts

In 1964, the Department of Commerce decided to add a fourth oceanographic research vessel to its fleet. This new vessel, the Researcher, was to be smaller and lower powered but with great automation and advanced instrumentation. Problems, however, had occurred in performance of previous contracts. In 1960, the first vessel was delivered 354 days late at a cost in excess of 127 percent of the original estimate. In 1962 contracts were awarded on the second and third vessels, which were to be the first to employ fully Centralized Engineer Room Control (CERC). CERC is an automated system which extends the operator’s supervision and control of a ship into all parts of its machinery plant and permits centralized observation and monitoring of the machinery through the use of sensors, microphones, and cameras. The trial judge found that delays and cost overruns in the construction of these two vessels were attributable to problems in the CERC system and the performance of Westinghouse, the subcontractor for the system. The government, however, had consistency attributed these costs to contractor inexperience and inefficiency. It is clear that someone failed to take into account the fact that the CERC represented an advance in the state of the art with all the engineering problems that usually accompany such advances and are eliminated only as production models succeed prototypes. Because of delays, the second vessel was delivered 689 days late for a total construction time of 1,374 days, and the third vessel was delivered 848 days late for a total construction time of 1,492 days.

In developing its cost estimate for the Researcher, the Commerce Department used cost data derived from construction of the previous vessels. Overrun costs incurred by the earlier vessels were not included, however, allegedly because these costs were not thought to be legitimate costs of an efficient business operation. An invitation for bids on the Researcher was issued on January 7, 1966. Notwithstanding the time overruns of the earlier contracts, the [223]*223invitation provided that no bid that fixed completion of the vessel in excess of 900 days would be considered.

When plaintiff submitted its bid, it allegedly was unaware of the monetary losses and time overruns suffered by the other shipbuilders. Although testimony illustrated that the CERC system was complex and plaintiff testified that at the time it prepared the bid, it knew it would have to subcontract the CERC system, it introduced no evidence showing it even bothered to consult with Westinghouse or any other specialized electrical firm prior to preparing the bid, as to what the problems might be. Three bids were received, and the contract was awarded to plaintiff on June 6,1966, at a contract price of $8,382,431. Westinghouse was the CERC subcontractor. Delivery was due 900 days from the date of award, November 24, 1966. However, the Researcher was delivered 511 days late on June 18, 1970. When delivered, the vessel met all of the contract specifications, but at a total asserted cost of $13,155,955.37. Plaintiff claims a total loss of $4,546,383.87, excluding lost profits.

Before the trial judge, plaintiff argued that the government made an affirmative representation that the contract could be performed within 900 days and that it withheld material facts that past contracts had suffered from delays and overruns. Defendant pointed to the entire absence of a nexus in the evidence between the losses of prior contractors, as defendant knew of them, and the losses of plaintiff. The ships were different, the power plants were different, and the CERC system had been specified for enough previous ships, that the problems to be encountered in the Researcher might be hoped to have been already solved. At least no evidence was offered to demonstrate otherwise. In fact, the plaintiff introduced no evidence whatsoever as to what the actual problems with the Researcher were. In short, defendant’s case is that the losses may have been post hoc but were in no way shown to be propter hoc. Alternatively, plaintiff contended that under the doctrines of either mutual or unilateral mistake, it was entitled to reformation of the contract. For the following reasons we hold the government did not make a representation or warranty that the ship could be completed within 900 days and that it .did not withhold material information from plaintiff. [224]*224Lastly, we hold plaintiff is not entitled to contract reformation.

900 Days Requirement

Our interpretation of whether the 900 days requirement is a due date, agreed to by the contractor or a warranty by the government, in effect, will determine which party guaranteed completion within 900 days. A due date can be characterized as a contract requirement establishing when performance by the contractor must be completed. By entering into the contract, the contractor warrants it can perform by the due date. One expects a contractor would examine the specifications provided to determine the complexity of the contract and make inquiries where necessary in light of its own capabilities. The contractor would then make a business judgment in deciding whether it could complete the contract by the due date. How long it takes to perform a contract is a function of the specification requirements and the contractor’s capabilities.

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Cite This Page — Counsel Stack

Bluebook (online)
654 F.2d 75, 29 Cont. Cas. Fed. 81,612, 228 Ct. Cl. 220, 1981 U.S. Ct. Cl. LEXIS 396, Counsel Stack Legal Research, https://law.counselstack.com/opinion/american-ship-building-co-v-united-states-cc-1981.