Peterson Builders, Inc. v. United States

41 Cont. Cas. Fed. 77,074, 37 Fed. Cl. 407, 1997 U.S. Claims LEXIS 40, 1997 WL 88106
CourtUnited States Court of Federal Claims
DecidedFebruary 28, 1997
DocketNo. 91-1406C
StatusPublished

This text of 41 Cont. Cas. Fed. 77,074 (Peterson Builders, Inc. v. United States) is published on Counsel Stack Legal Research, covering United States Court of Federal Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Peterson Builders, Inc. v. United States, 41 Cont. Cas. Fed. 77,074, 37 Fed. Cl. 407, 1997 U.S. Claims LEXIS 40, 1997 WL 88106 (uscfc 1997).

Opinion

OPINION

BRUGGINK, Judge.

This action arises out of a contract between Peterson Builders, Inc. (PBI) and the United States Department of the Navy (“Navy”). It is brought pursuant to the Contract Disputes Act (CDA), 41 U.S.C. §§ 601-613 (1994). Presently pending are the parties’ cross-motions for summary judgment on the only remaining count, Count IV. Oral argument was held on January 28, 1997. For the reasons set forth herein, plaintiffs motion is denied and the Government’s motion for summary judgment is granted.

BACKGROUND1

In the 1980s, the Navy had a shortage of adequate minecraft and had not developed or made any new minecraft since the 1950s. With only a few of the mine warfare ships still operational, the Navy made it a priority to add a new class of minecraft to its fleet to replace the remnants of the thirty-year-old class of ships.

The Navy did not have a design in existence from which a modern minesweeper could be constructed. Instead, it developed the basic requirements for a new class of wooden-hulled minesweepers. The requirements, known as the contract design and ship specifications (contract design), described the desired end product in terms of its general dimensions and capabilities, but did not provide the particular details of how it would be built.

Because the Navy wanted to build a class of ships, its first priority was to have an initial contractor build a prototype vessel, using the contract design. This vessel would be known as MCM-1. The specific drawings generated by that contractor, showing how the prototype was successfully built, would then be passed on to builders of subsequent ships, the MCMs 2 through 8, not as an obligatory blueprint, but as an aid to construction.

The Navy selected PBI to design and build the prototype MCM-1. The contract, based on cost plus an incentive fee, was executed in June, 1982. The contract made PBI responsible for developing a detail design.2 In turn, as part of PBI’s obligation to provide “lead yard services,” it would furnish to the Navy “all lead ship design drawings and construction drawings and drawings supporting construction” along with “all planning and production data, weight data, provisioning data, CFE listing, engineering data, purchase specifications, and all information for the planning, construction, fitting out, test and delivery of follow-on ships.” MCM-1 Contract, Item 007.

The Navy had the right to make changes to the contract design during construction of the MCM-1, and did so extensively. There is no question that all the changes it ordered to the contract design, including the spillover effect onto PBI’s development of its detail design, have been paid for.

On May 2, 1983, the Navy awarded a contract for the production of the first follow-on ship, the MCM-2,.to Marinette Marine Corporation (“Marinette”). It was understood that PBI would not have completed the MCM-1 when follow ships were initiated. Instead, as portions of the detail design were completed, they would then be available to the Navy and to Marinette. The original delivery date of the MCM-1 was thirty-nine months from the date of contract award. Marinette established a production schedule for the first follow ship that was only a few months behind the milestone dates of PBI under the MCM-1 contract.

In June, 1983, the Navy entered into another contract with PBI for it to furnish “lead yard services” directly to Marinette and other subsequent follow-ship builders (the LYS contract). This contract obligated [409]*409PBI to pass on directly to those builders its detail design. The purpose of this arrangement was to accelerate and make more efficient the transmission of the presumably helpful detail design as it emerged, piece by piece, from the MCM-1 contract.

On December 23, 1983, the Navy awarded a fixed-price contract to PBI with cost escalation for the construction of two follow ships, the MCM-3 and the MCM-5. On August 20, 1986, the Navy awarded construction of the MCM-6 and the MCM-8 to PBI and of the MCM-7 to Marinette. It is the MCM-3/5 and MCM-6/8 contracts that form the basis for the present suit.

The MCM-3/5 contract obligated PBI to build in accordance with the contract design and ship specification, but stated that it could use the detail design drawings being developed by PBI for the MCM-1. Attached to all the follow contracts was a copy of the LYS contract.

PBI, in other words, played two roles in the building of the MCM class of ships. Its first role was that of the lead-ship builder under the MCM-1 and LYS contracts. This included the obligations of designing and building the MCM-1, and then passing on that design, piecemeal, to contractors responsible for building the follow ships. PBI’s second role was that of follow-ship builder. Because PBI was building MCM-3/5 at the same time it was still working on MCM-1, it was preparing detail designs that it and Mar-inette were waiting to use.

Ideally, PBI would have completed the detail design of portions of the lead ship before those same portions were started on the follow ships. This would have ensured, as long as the detail design was correct, that there would be no need to build any part of the follow ships more than once.

Things did not work out this way. There were many delays and changes on the MCM-1. Although it was launched on June 15, 1985, the Navy did not formally accept the MCM-1 until August 28, 1987, long after both the MCM-3/5 and the MCM-6/8 contracts had been awarded. Some of the initial difficulties encountered arose because of eight design features which the parties to the MCM-1 contract understood were unresolved at the time it was executed. These items, which came to be known as “the Big 8,” were deleted by the Navy from the original scope of the contract work in order to lower its projected cost. The parties anticipated that, following contract award, they would be able to conduct a more detailed analysis of the technical requirements of “the Big 8” items and negotiate an increase to the original contract price. It took nearly thirteen months, however, for the parties to reach agreement on these unresolved issues. No time was added to the contract when these items initially were added back. In September 1983, the parties to the MCM-1 contract executed a memorandum agreement to compensate PBI for disruption costs in connection with prior or future change orders, including changes in connection with the Big 8.

In August 1985, the parties signed Modification 11 to the MCM-1 contract, changing it from a cost-plus-incentive-fee contract to a cost-plus-incentive-fee-with-a-ceiling contract. As of that date, almost all of PBI’s detail design drawings on the prototype ship had been completed and validated by its design subcontractor, J.J. Henry Company. Nevertheless, even after this date, contract design changes continued, resulting in even more detail design changes. The Navy issued more than 300 contract design changes and PBI issued more than 8,000 “Engineering Change Notices” to the detail design to itself or Marinette as follow-on contractors.

The parties agree that the Navy has compensated PBI for every contract design change in MCM-1 and in MCM-3/5, including the impact of contract design changes on the detail design drawings.

One factual issue has to be clarified.

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Bluebook (online)
41 Cont. Cas. Fed. 77,074, 37 Fed. Cl. 407, 1997 U.S. Claims LEXIS 40, 1997 WL 88106, Counsel Stack Legal Research, https://law.counselstack.com/opinion/peterson-builders-inc-v-united-states-uscfc-1997.