Murdock MacHine & Engineering Company of Utah v. The United States

873 F.2d 1410, 35 Cont. Cas. Fed. 75,653, 1989 U.S. App. LEXIS 5489, 1989 WL 39889

• Court: Court of Appeals for the Federal Circuit
• Decided: April 26, 1989
• Docket: 88-1287
• Status: Published

Opinions

BISSELL, Circuit Judge.

Murdock Machine & Engineering Company of Utah (Murdock) appeals from the decisions of the Armed Services Board of Contract Appeals (ASBCA), Murdock Mach. & Eng’g Co. of Utah, ASBCA Nos. 20409, 27860, 28031, 88-1 BCA 1120, 354 (1987), denying Murdock’s consolidated appeals. We reverse the ASBCA’s decisions in Appeal Nos. 27860 and 28031 and remand. The jurisdictional question raised in Appeal No. 20409 need not be reached because of our reversal in the other two appeals. Appeal No. 20409, accordingly, is dismissed.

BACKGROUND

A more detailed background appears in the ASBCA’s opinion. See id. In 1971, the government awarded Murdock a $10,659,-612 fixed-price contract for supplying the United States Navy (Navy) with anti-submarine rocket (ASROC) launchers and related spare parts. Early in the performance of the contract, Murdock experienced substantial production problems, fell behind in its delivery schedule, and informed the Navy that contract performance could not be continued due to lack of financial resources. Concerned with timely receipt of ASROC launchers for new ships, the Navy procuring command provided Mur-dock with a $2,500,000 government-guaranteed loan and encouraged Murdock to apply for extraordinary contractual relief pursuant to Public Law 85-804, 50 U.S.C. §§ 1431-35 (1982). After evaluating Mur-dock’s request, the Navy procuring command recommended that the Navy Contract Adjustment Board (NCAB) grant Public Law 85-804 relief and convert Mur-dock’s contract to a cost reimbursement/no-fee contract because continued production of the ASROC launchers was “essential to the national defense.”

On April 7, 1975, the NCAB granted Public Law 85-804 relief and converted the contract to a cost reimbursement/no-fee contract. The NCAB prepared and sent a draft decision to Murdock for comment, verbally notified Murdock and the Navy of its decision, and advised the parties to promptly initiate actions to comply with the requirements established by the decision.

Shortly thereafter, the Navy located another source of ASROC launchers, thus, obviating the need for production of new launchers by Murdock. The Navy procuring command notified Murdock and the NCAB that the command was withdrawing its recommendation for Public Law 85-804 relief because the ASROC contract was no longer “essential to the national defense.” On April 17, 1975, the contracting officer (CO) sent Murdock a 10 day right to cure notice, and on May 16,1975, terminated the contract for default because of Murdock’s financial inability to perform and its anticipatory breach. Murdock appealed the CO’s decision (No. 20409). Murdock filed for bankruptcy and its trustee submitted another claim alleging breach of contract by the Navy. When the CO failed to issue a decision, Murdock appealed (No. 27860). After the CO issued a decision, Murdock appealed a second time (No. 28031). The ASBCA denied Murdock’s consolidated appeals. Murdock, 88-1 BCA If 20,354 at 102,935.

OPINION

Murdock contends that the Navy’s termination for default of its contract to produce rocket launchers was improper in that the government materially breached the contract under terms established by the April 7, 1975 decision of the NCAB. We agree.

In Appeal Nos. 27860 and 28031, the ASBCA held that the April 7,1975, decision of the NCAB was not “self-executing.” Because the NCAB’s decision (1) had not been communicated to the appropriate officer for implementation, (2) was not implemented by a contractual document, and (3) was not signed by the NCAB chairman, all of which were required by regulation, the decision was not final. Id. (citing Armed Services Procurement Regulations (ASPR) §§ 17-202.2, 17-208.4(a), (b), and 17-208.-2(b)(ii) (1973), see 1973 Gov’t Cont.Rep. (CCH) ¶ 35,252-257.56, which have been superseded by the Federal Acquisition Regulations located in Title 48, Chapter 1, sub-part 50, of the Code of Federal Regulations).

As to the first point, ASPR 17-208.4 only requires that the NCAB’s decision be communicated to the appropriate official. Regulation 17-208.4 neither suggests nor supports that a decision does not become final until such communication occurs.

The ASBCA cited ASPR § 17 — 208.2(b)(ii) as necessitating implementation by contractual document before the decision could be considered final. This section only requires that the contractual documents implementing the decision be submitted to the Naval Sea Systems Command “within 30 days after the close of the month during which it is executed.” Id. None of the regulations cited by the ASBCA require implementation by a contractual document before the NCAB’s decision could be considered final.

We also disagree with the ASBCA that a decision of the NCAB could not be final without the chairman’s signature. See ASPR 17-208.4. There is nothing in the regulations that permits the chairman to act other than in accordance with the NCAB’s decision. The chairman possesses no independent authority to reconsider, modify, correct, or reverse the decisions of the NCAB. See ASPR 17-202.2.

The ASBCA erred. The NCAB’s April 7, 1975, decision was final and converted the fixed-price contract to a cost reimbursement/no-fee contract that obligated the government to pay Murdock its costs incurred in performing the contract.

* The government materially breached the contract by failing to reimburse Murdock. That breach relieved Murdock of the default termination and its consequences. Malone v. United States, 849 F.2d 1441, 1446 (Fed.Cir.1988). The termination for default clause in Murdock’s contract, see 32 C.F.R. §§ 7.103-11, 8.707 (1971), automatically converted Murdock’s wrongful default termination into a termination for convenience. Id. A remand to the ASBCA is proper for a determination of quantum under the contract’s termination for convenience clause. See 32 C.F.R. §§ 7.103.21(c), 8.701(a) (1971).

COSTS

The government shall pay Murdock’s costs.

REVERSED-IN-PART, DISMISSED-IN-PART, and REMANDED.

The government contends that any Public Law 85-804 relief request carries with it a sweeping exemption of all agency action from judicial review. Although Public Law 85-804 provides the agency unfettered discretion in considering requests for relief, see Coastal Corp. v. United States, 713 F.2d 728, 731 (Fed.Cir.1983); Paragon Energy Corp. v. United States, 645 F.2d 966, 975 (Ct.Cl.1981), neither Public Law 85-804 nor its implementing regulations give a contracting officer the right to repudiate the terms of an NCAB decision once final. The authority to reconsider, modify, correct, and reverse its decisions resides in the NCAB alone. See ASPR 17-202.2. Because the Board here did not reconsider, modify, correct or reverse its final decision, this court and the ASBCA have jurisdiction under the Contract Disputes Act, 41 U.S. C. §§ 605-10 (1982), to review the contracting officer’s default termination of Murdock’s modified contract.