Sperry Corporation v. The United States

845 F.2d 965, 34 Cont. Cas. Fed. 75,475, 1988 U.S. App. LEXIS 5181, 1988 WL 34866
CourtCourt of Appeals for the Federal Circuit
DecidedApril 21, 1988
Docket87-1475
StatusPublished
Cited by14 cases

This text of 845 F.2d 965 (Sperry Corporation v. The United States) 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
Sperry Corporation v. The United States, 845 F.2d 965, 34 Cont. Cas. Fed. 75,475, 1988 U.S. App. LEXIS 5181, 1988 WL 34866 (Fed. Cir. 1988).

Opinions

FRIEDMAN, Circuit Judge.

The sole question in this case, here on the government’s appeal from the United States Claims Court, is whether the government’s exercise of an option to purchase additional items under a procurement contract was timely. The contract required the government to exercise the option within 120 days of the government’s acceptance of the product that was the subject of the contract, and the issue is the date of acceptance. The Claims Court, reversing the decision of the Armed Services Board of Contract Appeals, held that the government’s exercise of the option was untimely. Sperry Corp. v. United States, 9 Cl.Ct. 488 (1986). We reverse, concluding that the exercise was timely.

I

A. In January 1974, the government executed a contract with the appellee, Sperry Corporation, that required Sperry to design, fabricate, test and deliver one LOR-AN-D ground chain (Item 0001). This item was an advanced transportable, computer controlled, solid state long-range navigation (LORAN) system. The equipment transmits signals that can be received aboard aircraft, ships, or manpacks. The receiver determines locations by interpreting the time differences between precisely controlled pulses from the transmitters.

The contract called for a significant amount of testing by Sperry, lasting throughout the contract period. The tests were designed by Sperry and approved by the government, which participated in, or observed most, if not all, of the tests. Participation in the tests by Air Force personnel was intended to enable them to learn to operate the system and to verify that the equipment met the contractual requirements.

Development, Test and Evaluation (DT & E) is a process by which each item, including the whole system assembled from previously proven items, is tested to assure that the items and the system meet the [967]*967requirements of the contract. The Physical Configuration Audit is designed to compare the equipment tests with the prescribed technical data and to correct any deficiencies. The Formal Qualification Review (Qualification Review) is intended to gather data from the different tests and review them as a whole. The Functional Configuration Audit examines the test results to determine whether the testing was conducted properly.

The final delivery date under the contract (as modified) was May 15, 1978. DT & E field tests were completed February 3, 1978. The field portion of the Physical Configuration Audit was completed February 9, 1978. The Functional Configuration Audit was completed February 28, 1978, and the Formal Qualification Review was completed by March 1, 1978. Between February 3 and March 18, 1978, Sperry refurbished the site on which the tests were completed and the equipment. The government made its final inspection from February 27 to March 18, 1978, and on March 20,1978, it executed a DD Form 250 accepting the chain.

B. The contract “granted to the government the option to purchase up to three additional LORAN-D Ground Chains (Chains 2, 3, and 4) at prices specified in the contract. The option had to be exercised ‘within 120 days after final acceptance by the Government of Item 0001 [chain one]_’” Sperry Rand Corp., 83-2 B.C.A. (CCH) ¶ 16,841 at 83,787 (ASBCA Sept. 27, 1983). Contending that it had finally accepted the LORAN-D on March 20, 1978, when it executed the DD Form 250, the government exercised the option for two additional chains on July 6, 1978, within 120 days of the date of that acceptance.

Sperry responded that the government finally had accepted the LORAN-D upon completion of the DT & E field tests on February 3, 1978, so that the government had failed to exercise the option within 120 days. Sperry interpreted the government’s exercise of the option as a constructive change in the contract entitling it to an equitable adjustment in the contract price. Sperry supplied chains 2 and 3 under protest.

Sperry filed a claim with the contracting officer for an equitable adjustment. The contracting officer denied the claim. In a lengthy opinion the Armed Services Board of Contract Appeals (Board) (with one of the five members dissenting) denied the appeal.

Sperry sought review in the Claims Court pursuant to the Wunderlich Act, 41 U.S.C. § 321 et seq. (1982). The Claims Court reversed the decision of the Board and remanded for a determination of damages. The Claims Court subsequently entered final judgment against the United States in the amount stipulated by the parties.

Because the numerous contractual provisions involved are complicated and best understood in the context of the facts of the case, we describe those provisions in connection with our discussion of the legal issues in part II.

II

The linchpin of the Claims Court decision that the government did not timely exercise its option and Sperry’s defense of that ruling is the following provision contained in a section of the contract called the Schedule:

0001 Inspection at origin. Final inspection and acceptance upon successful completion of DT & E Field Test at destination.

Sperry contends that under this provision “[fjinal ... acceptance” of the contract by the government occurred automatically upon the successful completion of the DT & E field testing on February 3, and that this date was the beginning of the government’s 120-day period for exercising the option. Sperry then refers to Special Provision 5 of Section J of the contract, ORDER OF PRECEDENCE, which states:

In the event of an inconsistency in this contract, unless otherwise provided herein, the inconsistency shall be resolved by giving precedence in the following descending order: 1) Schedule (excluding Statement of Work, the Specifications, [968]*968and Contract Data Requirements List); 2) Genera] Provisions; 3) the other provisions of the contract whether incorporated by reference or otherwise; 4) Statement of Work; 5) Contract Data Requirements List; 6) the Specifications ...; 7) The Contractor’s Technical Proposal as described in Section F.

According to Sperry, the “Order of Precedence” clause makes the “Inspection at Origin” clause, as Sperry interprets that clause, controlling in resolving any inconsistencies between the “Inspection at Origin” clause and the other provisions of the contract upon which the Board relied in its decision.

We conclude, however, that the “Inspection at Origin” clause does not have the effect that Sperry ascribes to it. Instead, it merely specifies the time when and the place where the government affirmatively finally will inspect and accept the LORAN 1 chain. Moreover, under our view of that clause, there is no “inconsistency in this contract” that requires resort to the “Order of Precedence” clause. The Board correctly concluded that

it is possible to harmonize all contract provisions relating to inspection, testing, delivery and acceptance without creating conflicts between them or rendering some of the provisions meaningless. In the absence of conflict, the “Order of Precedence” clause need not be called upon to establish the alleged primacy of the schedule “Inspection and Acceptance” provision [Section I] over general provisions and specifications as suggested by appellant [Sperry] and in the dissenting opinion.

Sperry Rand Corp., 83-2 B.C.A.

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Sperry Corporation v. The United States
845 F.2d 965 (Federal Circuit, 1988)

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845 F.2d 965, 34 Cont. Cas. Fed. 75,475, 1988 U.S. App. LEXIS 5181, 1988 WL 34866, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sperry-corporation-v-the-united-states-cafc-1988.