Navcom Defense Electronics, Inc. v. England

53 F. App'x 897
CourtCourt of Appeals for the Federal Circuit
DecidedDecember 4, 2002
DocketNo. 02-1063
StatusPublished
Cited by15 cases

This text of 53 F. App'x 897 (Navcom Defense Electronics, Inc. v. England) is published on Counsel Stack Legal Research, covering Court of Appeals for the Federal Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Navcom Defense Electronics, Inc. v. England, 53 F. App'x 897 (Fed. Cir. 2002).

Opinion

CLEVENGER, Circuit Judge.

In this appeal, NavCom Defense Electronics, Inc. (“NavCom”) challenges the denial by the Armed Services Board of Contract Appeals (“Board”) of its claims for equitable adjustment arising from a contract with the Navy. We affirm the Board’s decision on claims 1, 2, 3, 4, 6, 7, 8, 10, 11 and 13. On claim 9 regarding the Level of Repair Analysis, the Board’s findings are not supported by substantial evidence, so we reverse the denial of entitlement on that claim and remand for a determination of quantum.

I

This appeal concerns a contract between the government and NavCom for the production of IFF Radar Test Sets (“RTS”). “IFF,” an acronym for “Identification of Friend or Foe,” involves a radar system mainly used today in civil aviation traffic control. In IFF systems, a ground or airborne interrogator sends out a signal which is recognized by a transponder at the receiving end and followed by an identification signal response by the transponder.

By the early 1980’s, the nation’s RTS systems had become outdated. Thus, in 1982, the Navy contracted with NavCom’s predecessor in interest to design, develop, and test a functional engineering model for a new generation of IFF RTS. Due to their substantial experience in designing and producing military electronics hardware equipment, NavCom- and its predecessor in interest knew about the requirements of military research and development (“R&D”) environments and the needs of mass production for actual use.

As part of the R&D contract specifications, the Navy required NavCom to pre[899]*899pare and submit extensive test procedures for the development model. Although the Navy had reviewed and approved NavCom’s testing procedures, NavCom did not perform its tests as required by the specifications. When the Navy informed NavCom of the model’s failures to meet the specifications, the contractor asserted that the Navy had to accept the RTS models because the prototypes still met the test procedures. Since NavCom was a year late in delivering the models and the government’s budget for the project was depleted, the Navy decided to terminate the project. In closing the project, the Navy deleted certain tests and deemed that the models proved the feasibility of the RTS.

Although the R&D contract was terminated, the Navy decided to re-test those prototypes to learn from the models and refine the existing specifications before undertaking the procurement of production units. NavCom understood that its tests were not comprehensive and that the Navy would conduct further operational tests after the delivery of the prototypes. Based on those tests, the Navy concluded that NavCom’s prototypes were unacceptable as production units.

The Navy then prepared a new set of specifications for the production contract. NavCom was aware that the specifications for the R&D and production contracts would be different. Indeed, the Navy was constantly updating the specifications for the RTS, even during the course of the R&D contract. The government also shared those revisions with NavCom personnel both during the course of the R&D contract and after the Navy terminated the contract. In 1987, Navy personnel visited NavCom to acquaint it with the new production specifications because the government planned an ambitious schedule for the upcoming production contract.

The government approved the procurement of production RTS units in March 1987, and issued a request for proposal the following December. The request for proposal included the new production specifications and required that each bidder address in its proposal the specific changes to the R&D units. In particular, the new production specifications required that the contractor perform a battery of tests on the first RTS and the first six accompanying Analog Controller Multiplexers (“ACM”) that were manufactured.

NavCom viewed the new specifications simply as revisions to the R&D specifications and based its proposal on that assumption. Hence, NavCom believed that it could use essentially the same test procedures used for the R&D contract and underestimated the technical risks in the production contract.

Problems and delays occurred during the performance of the production contract, and NavCom submitted a request for equitable adjustment in 1995. NavCom asked for $11,338,676 under thirteen claims. After negotiation broke down, NavCom submitted a certified claim for $13,435,058 in 1997, but the contracting officer declined to respond. On appeal, the Board denied all disputed claims. In re NavCom Defense Elecs. Inc., 01-2BCA ¶ 31,546, 2001 WL 865388 (ASCBA July 25, 2001). In its appeal to this court, NavCom only challenges ten of the entitlement decisions and one quantum issue. We have jurisdiction under 28 U.S.C. § 1295(a)(10).

We review the Board’s legal determinations de novo, Ingalls Shipbuilding, Inc. v. Dalton, 119 F.3d 972, 975 (Fed.Cir.1997), but will not disturb the Board’s factual findings unless the appellant can show that the findings are arbitrary, capricious, so erroneous as to necessarily imply bad faith, or unsupported by substantial evi[900]*900dence. Cessna Aircraft Co. v. Dalton, 126 F.3d 1442, 1446 (Fed.Cir.1997).

II

A. The Constructive Change Doctrine

NavCom bases all of its claims for equitable adjustment on the doctrine of constructive change. A constructive change occurs where a contractor performs work beyond the contract requirements, without a formal order under the Changes Clause, either due to an informal order from, or through the fault of, the government. See Ets-Hokin Corp. v. United States, 190 Ct.Cl. 668, 420 F.2d 716, 720 (1970); Len Co. & Assocs. v. United States, 181 Ct.Cl. 29, 385 F.2d 438, 443 (1967). As the Court of Claims explained:

where a contract contains the standard “changes” provision and the contracting officer, without issuing a formal change order, requires the contractor to perform work or to utilize materials which the contractor regards as being beyond the requirements of the pertinent specifications or drawings, the contractor may elect to treat the contracting officer’s directive as a constructive change order and prosecute a claim for an equitable adjustment under the “changes” provision of the contract.

Ets-Hokin, 420 F.2d at 720.

“Where it requires a constructive change in a contract, the Government must fairly compensate the contractor for the costs of the change.” Aydin Corp. (West) v. Widnall, 61 F.3d 1571, 1577 (Fed.Cir. 1995) (citing J.B. Williams Co. v. United States, 196 Ct.Cl. 491, 450 F.2d 1379, 1394 (1971)). Like our predecessor court, we have permitted equitable adjustment recovery based on the doctrine of constructive change. E.g., Aydin, 61 F.3d at 1577-78; John C. Grimberg Co., Inc. v. United States,

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