
    417 F. 2d 1356
    RUSSELL R. GANNON CO., INC. v. THE UNITED STATES
    [No. 206-63.
    Decided November 14, 1969]
    
      
      Robert D. Walliok, attorney of record, for plaintiff. Step-toe & Johnson, of counsel.
    
      Thomas W. Petersen, with whom was Assistant Attorney General William D. Ruc7eelshaus, for defendant.
    Before Cowen, Ohief Judge, Laramore, Dtjreee, Davis, ColliNS, Skelton and Nichols, Judges.
    
   PeR Curiam:

This case was referred to Trial Commissioner Mastin G. White with directions to make findings of fact and recommendation for conclusions of law under the order of reference and Rule 57 (a) [since September 1, 1969, Rule 134(h)]. The commissioner has done so in an opinion and report filed on September 11, 1968. Exceptions to the commissioner’s opinion, findings and recommended conclusion of law were filed by defendant. The case has been submitted to the court on oral argument of counsel and the briefs of the parties. Since the court agrees with the commissioner’s opinion, findings and recommended conclusion of law, as hereinafter set forth, it hereby adopts the same as the basis for its judgment in this case. Therefore, plaintiff is entitled to recover on the third count of the petition and judgment is entered for plaintiff in the sum of $5,000.

OPINION OF COMMISSIONER

White, Commissioner:

The petition, as originally filed, set out in separate counts six different claims allegedly arising in connection with the performance by the plaintiff during 1958 and 1959 of a contract (No. DA 11-184 — ENG-16458) under which the plaintiff produced 231 dehumidifiers for the defendant.

The work under the contract was performed by the plaintiff at a plant located in Cincinnati, Ohio.

On March 11, 1968 [183 Ct. Cl. 971], the court dismissed counts 1,2,4, 5, and 6 of the petition because of the plaintiff’s failure to prosecute those claims. Thus, only the third count of the petition remains in the case for disposition by the court.

In the third count of the petition, the plaintiff alleges that the defendant breached the contract by failing to provide adequate inspection services in connection with the performance of a 40-hour operational test which each dehumidifier was required to undergo after being completed and prior to shipment; and that this caused the plaintiff to sustain damages in the amount of $7,784.58 'because the plaintiff (a) “was seriously delayed in meeting its production schedule,” and (b) “was required to provide inspectors to record the test data * *

The contract specifications required that each dehumidifier, after the completion of the manufacturing process and prior to shipment, be operated continuously for a period of 40 hours, and that the various components operate satisfactorily during the test, without any undue heating of the bearings.

The 40-hour operational test on a completed dehumidifier was conducted by the plaintiff’s inspectors, who examined the machine at regular intervals during the test, checked the various components to see whether they were operating correctly and meeting the requirements of the test, and maintained a log in which the observations of the inspectors were recorded.

The shipment of dehumidifiers by the plaintiff under the contract was begun on November 21, 1958 and continued through March 26, 1959. During the greater part of this period, or until about February 9, 1959, the defendant directed the plaintiff not to begin the 40-hour operational test on a dehumidifier, or attach the unit to an electrical outlet for the beginning of such test, unless a Government inspector was present to inspect the unit, approve it for testing, and witness the beginning of the operational test. The inspection of a unit by the Government inspector at this stage required from an hour to an bour and a half. The requirement with respect to a pre-test inspection was waived by the defendant on and after about February 9, 1959.

Also, the defendant directed the plaintiff not to conclude the 40-hour operational test of a dehumidifier unless a Government inspector was present to witness the end of the test and to check the log maintained by the plaintiff’s inspectors during the course of the test.

The validity of the directives mentioned in the two immediately preceding paragraphs is not questioned by the plaintiff.

As the defendant believed that the extent of the inspection services to be performed by Government personnel during the course of the work under the contract was not sufficient to justify the assignment of a Government inspector to the plaintiff’s plant on a full-time basis, the defendant informed the plaintiff, at about the time when the contract was awarded to the plaintiff, that inspection services for the defendant under the contract would be performed by an itinerant inspector on an on-call basis. The defendant further instructed the plaintiff in this connection that it would be necessary for the plaintiff, whenever it was anticipated that the services of a Government inspector would be needed in connection with the performance of the work under the contract, to give 72 hours’ advance notice of such prospective need to an inspection office which the defendant maintained in Cincinnati.

The evidence indicates that, throughout the performance of the work under the contract, the defendant never failed to provide a Government inspector to the plaintiff within 72 hours after receiving a request from the plaintiff for such inspection services. Furthermore, the defendant at times sent an inspector to the plaintiff’s plant the next day after receiving a request from the plaintiff; and the defendant occasionally sent an inspector to the plaintiff’s plant in the afternoon after receiving a request from the plaintiff in the morning.

On the other hand, although the defendant did not always insist upon a 72-hour time interval between the receipt .of a request from the plaintiff for inspection services and the furnishing of a Government inspector, the defendant did insist that the plaintiff give advance notice regarding the anticipated need for inspection services. Because of this rule, there were a number of occasions during the period prior to February 9,1959 when completed dehumidifiers were ready for the beginning of the 40-hour operational test but the plaintiff was unable to begin the operational testing of such units because no Government inspector was present to make the pre-test inspection then required by the defendant; and there were some occasions when the plaintiff was required to extend the operational testing of dehumidifiers beyond the prescribed 40-hour period because no Government inspector was present at the end of the prescribed 40-hour period to witness the termination of the operational test and to check the log concerning such test.

The unavailability of a Government inspector at such times seriously delayed the plaintiff in meeting its production schedule, as alleged in the third count of the petition, and increased the plaintiff’s cost of performing the contract.

The defendant’s rule with respect to the giving of 72 hours’ advance notice by the plaintiff concerning the anticipated need for Government inspection services was not based upon any provision of the contract. On the contrary, it must be concluded that the rule was inconsistent with the provisions of the contract. When the defendant inserted in the contract express provisions whereby certain testing procedures were to be witnessed by a Government inspector, the defendant impliedly agreed to make the services of a Government inspector available for such purposes whenever the services of an inspector were reasonably required, so as not to impede the plaintiff in the performance of the work under the contract.

The defendant points out that during the 5-year period immediately preceding the award of the present contract to the plaintiff, the latter had performed several other contracts for the defendant; and that the inspection services by Government personnel in connection with such other contracts had been performed by an itinerant inspector on an on-call basis. Since the record does not reveal the nature of the inspection services performed by Government personnel in connection with, the previous contracts, this circumstance cannot be regarded as overcoming the implied commitment by the defendant in the present contract to make inspection services available to the plaintiff whenever they were reasonably needed in connection with the performance of the 40-hour operational test, where time was of the essence.

As indicated in the findings, it is my opinion that judgment should be entered for the plaintiff in the amount of $5,000 on the aspect of the case previously discussed.

The plaintiff, in addition to complaining about the unavailability of Government inspection services at the beginning and end of the 40-hour operational test, also asserts in the third count of the petition that it was the responsibility of the defendant to have a Government inspector present at all times during the performance of the 40-hour operational test; and that if the defendant had discharged this duty, it would not have been necessary for the plaintiff to provide personnel to witness and record the results of the test. The plaintiff bases this contention upon a statement in the contract specifications to the effect that “Tests shall be witnessed by the Government inspector * *

The plaintiff’s contention in this respect cannot be accepted, in view of the following express provision contained elsewhere in the specifications:

* * * [T]he Contractor shall provide the necessary personnel, adequate test facilities and supplies required for the performance of all required tests, both pre-pro-duction, production and final acceptance. Test records will be maintained by the Contractor and made available for use by the Government.

The provision relied on by the plaintiff, to the effect that “Tests shall be witnessed by the Government inspector,” was undoubtedly inserted for the benefit of the defendant, the purpose being to establish the right of the defendant to have a Government inspector present at any time, or at all times, while tests were in progress. If the defendant elected to have an inspector present only during portions of a test, this did not provide any sound basis for a complaint by the plaintiff.

Davis Judge,

concurring:

When this case was earlier before us on the question of whether plaintiff was entitled to a de novo trial on the merits of this claim, I dissented from the court’s order (in favor of de novo trial) on the ground that the failure to supply Government inspectors was a constructive change within the Changes Article and therefore within the Board’s jurisdiction. Now that the case has been tried here under the court’s directive, I bow to the prior decision and on the merits agree with and join in the court’s opinion and judgment.

FiNdings of Fact

1. At all times relevant to this claim, the plaintiff was a corporation duly organized and existing under and by virtue of the laws of the State of Ohio, with its principal office and place of business located at 5537 Vine Street, Cincinnati, Ohio. It was engaged in (among other activities) the general 'business of research, development, and manufacture of technical items and instruments for the defendant.

2. After competitive bidding, the plaintiff, on June 30, 1958, received from the United States Army Engineer Procurement Office located at Chicago, Illinois, a “Notice of Award” for contract No. DA 11-18 A-ENG-16458 (hereinafter “the contract”) in the sum of $774,726.55, to design, develop, manufacture, and supply 231 dehumidifiers, dry desiccant type, conforming to Military Specification MID-D-16886C (Docks), dated February 19, 1957.

3. The contract specifications provided in pertinent part as follows:

4.1 Pre-Produetion, Production and Acceptance Tests—
(a) Notwithstanding the following provision as contained in paragraph (c) of General Provision 5 entitled Inspection “If Government inspection and test is made at a point other than the premises of the Contractor or sub-contractor, it shall be at the expense of the Government”, and except for those tests which are specifically provided for in the specifications or otherwise herein set forth as the responsibility of and for performance by the Government, all examinations and tests required of the pre-production test model, pilot lot or pilot model and of the supplies to be furnished, to substantiate conformance to specification requirements, shall be made at the place of manufacture and/or at such, other place or places as may be selected by the Contractor and the cost of performing said tests shall be the responsibility of the Contractor. Except as to the tests which are explicitly identified as the responsibility of and to be performed by the Government, the Contractor shall provide the necessary personnel, adequate test facilities and supplies required for the performance of all required teste, both pre-production, production 'and final acceptance. Test records will be maintained by the Contractor and made available for use by the Government.
* * # # ❖
(c) The following examinations and tests are the responsibility of and will be performed by the Government:
None. All teste are the responsibility of and will be performed by the Contractor at his cost and expense.
jfj ifc # ❖ *
4.6 Testing. — Each machine shall be mounted in the normal operating position required for the intended service and tested mechanically and electrically at the glace of manufacture. Teste shall be witnessed by the rovernment inspector and shall include the following:
4.6.1Electrical. — Each electrical circuit shall be tested for proper installation and operation of all components.
4.6.2Operation. — Each machine shall be operated continuously for a period of 40 hours with all components in service except that it shall be with or without the heaters. If heaters are not installed during the 40 hour test, immediately following this test, the heaters shall be connected and the machine operated for two complete cycles on each desiccant bed. During the test, there shall be no undue heating of bearings and the satisfactory operation of control equipment, thermo-switches, thermostats, relays, safety devices and valves shall be demonstrated.
4.6.3Air leakage test. — Air leakage test shall follow immediately the operating test and before the cooling of the unit has taken place. A measured amount of air under a statis introduced through a gas flow meter to the reactivation inlet when the valves are in one of the two normal operating positions and the reactivation outlet blanked off. * * *
❖ ❖ * # *
4.8 Inspection and teste of preparation for delivery requirements. — The preservation, packaging, packing, and marking of tbe equipment shall be subject to inspection and teste by the Government inspector to determine compliance with the requirements of Section 5 of this specification. The contractor shall provide the necessary facilities and supplies for inspection and tests made prior to final acceptance.

4. Based in part upon the results of the 40-hour operational test referred to in paragraph 4.6.2 of the contract specifications, the defendant either accepted or rejected the dehumidifier unite produced by the plaintiff under the contract.

5. (a) .The formal contract required that shipments were to be made by the plaintiff as follows:

66 units within 120 days after the date of the award (or by October 26,1958) ;
66 additional unite within 150 days after the date of the award (or by November 25,1958); and
99 additional unite within 180 days after the date of the award (or by December 25,1958).

.(b) Thus, under the original production and shipment schedule set forth in the contract, shipments of all the dehumidifier units to be produced under the contract were to be completed by December 25,1958.

6. The plaintiff commenced its shipments of dehumidifiers under the contract on November 21,1958, and it made the last shipment on March 26, 1959. The plaintiff shipped 5 units in November 1958 and 14 in December 1958.

7. The plaintiff performed the contract under a joint venture arrangement with United States Electric Tool Co.

8. (a) It was the view of the defendant that the extent of the inspection services to be performed by Government personnel during the course of the work under the contract was not sufficient to justify the assignment of a Government inspector to the plaintiff’s plant on a full-time basis; and that the inspection services by Government personnel under the contract should be performed on an on-call basis by an itinerant inspector, who performed inspection services not only in connection with the contract involved here but also in connection with a number of other Government contracts that were in progress at the manufacturing plants of other companies in the Cincinnati area.

(b) At about the time when the defendant notified the plaintiff that the contract had been awarded to the plaintiff, the defendant sent to the plaintiff a letter which (among other things) informed the plaintiff that it would be necessary for the plaintiff, whenever it was anticipated that the services of a Government inspector would be needed in connection with the performance of the work under the contract, to give 72 hours’ advance notice of such prospective need to an inspection office which the defendant maintained in Cincinnati. This requirement concerning the giving of 72 hours’ advance notice was not withdrawn by the defendant at any time during the progress of the work under the contract, although the defendant at times sent an inspector to the plaintiff’s plant the next day after receiving a request from the plaintiff, and the defendant occasionally sent an inspector to the plaintiff’s plant in the afternoon after receiving a request from the plaintiff in the morning.

9. During the period of approximately 5 years immediately preceding June 1958, the plaintiff had performed several other contracts for the defendant. The inspection services by Government personnel in connection with such other contracts had been performed by an itinerant inspector on an on-call basis. The nature of such inspection services is not revealed by the record.

10. (a) In the early stages of performing the work under the contract, the plaintiff produced the dehumidifier units principally by hand-tooling methods, as opposed to assembly line production.

(b) In late November of 1958, the plaintiff employed the services of Gerald H. Brown and Edward Miller for the purpose of setting up an assembly line production of the dehumidifier units. Both Mr. Brown and Mr. Miller had previously had extensive experience in setting up assembly line production systems.

(c) Messrs. Brown and Miller proceeded to set up an assembly line for the production of the dehumidifier units under the contract, based upon a production schedule which called for the production of 4 units per day, or 20 units per week. This schedule and the assembly line production were geared to meet a revised final delivery date of March 31,1959.

11. The process of setting up an assembly line system of production for the work under the contract, as mentioned in finding 10, was completed by the end of December 1958. Thereafter, the plaintiff had the capability of producing 4 units per day, or 20 units per week, under normal conditions, assuming the availability of an adequate supply of the materials needed in connection with the manufacture of the dehumidifiers, the availability of an adequate labor supply for the performance of the necessary work, and the availability of the necessary Government inspection personnel to perform in a timely manner the inspection services that were to be performed by such personnel under paragraph 4.6 of the contract specifications (see finding 3).

12. (a) The assembly line that was established by the plaintiff for the production of dehumidifiers under the contract consisted of two tracks running parallel down the length of the plaintiff’s building in which the work under the contract was performed. The production process started out at one end of a track, with a wheeled dolly being placed on the track. As the dolly proceeded down the track, being pushed by hand, the various components of a dehumidifier were installed by employees of the plaintiff at the several stations that had been set up along the assembly line for this purpose. The dolly was held in place by the track as it was pushed by hand from station to station. At the end of the track, the dehumidifier was a complete unit and was ready for the 40-hour operational test to be performed in accordance with paragraph 4.6.2 of the contract specifications (see finding 3).

(b) Each of the two tracks referred to in paragraph (a) of this finding was capable of holding 8 dollies at the same time, the dollies being at different stations along the track and bearing units in different stages of completion.

13. (a) In order that the 40-hour operational test required by paragraph 4.6.2 of the contract specifications might be performed, the plaintiff obtained the installation of a total of 8 electrical outlets in the portion of the building beyond the end of the assembly line tracks referred to in finding 12. Thus, 8 different units could be in the process of being tested at the same time.

(b) It was contemplated by the plaintiff, in setting up the assembly line system of production, that the 40-hour operational test of a dehumidifier would be begun promptly after the process of manufacturing the unit was completed, the unit being wheeled on its dolly to a position where it could be attached to an electrical outlet for the beginning of the 40-hour operational test.

14. The 40-hour operational test on a completed dehumidifier was conducted by the plaintiff’s inspectors, who looked at the machine at regular intervals during the test, checked the various components to see whether they were operating correctly and were meeting the requirements of the test, and maintained a log in which the observations of the inspectors were recorded.

15. (a) Up until about February 0,1959, the defendant directed the plaintiff not to begin the 40-hour operational test of a dehumidifier under paragraph 4.6.2 of the contract specifications, or attach the unit to an electrical outlet for the beginning of such test, unless a Government inspector was present to inspect the unit subsequent to the completion of the manufacturing process, approve it for 'testing, and witness the beginning of the test. The inspection of a unit by the Government inspector at this stage required from 1 hour to 1% hours.

(b) If a Government inspector was not present when the process of manufacturing a dehumidifier was completed during the period mentioned in paragraph (a) of this finding, it was necessary for the plaintiff, when the unit reached the end of the assembly line, to find some vacant floor space where the unit could be stored, wheel the unit on its dolly to such place, and hold it there until the arrival of a Government inspector to perform the required inspection prior to the beginning of the 40-hour operational test.

(c) On or about February 9,1959, the defendant cancelled the directive referred to in paragraph (a) of this finding. Thereafter, it was permissible for the plaintiff, without any prior inspection of a completed dehumidifier by Government personnel, to begin the 40-hour operational test of the unit promptly after the process of manufacturing was completed.

16. (a) At all material times, the defendant directed the plaintiff not to conclude the 40-hour operational test of a dehumidifier unless a Government inspector was present to witness the end of the test, to check the log maintained by the plaintiff during the course of the test, and to witness the leakage test, which was required by paragraph 4.6.3 of the contract specifications to be made immediately after the termination of the 40-hour operational test and before the unit had an opportunity to cool.

(b) The witnessing by a Government inspector of the end of a 40-hour operational test, the checking by him of the log maintained by the plaintiff with respect to such test, and the witnessing by him of the leakage test required approximately an hour.

(c) If a Government inspector was not present at the end of the 40-hour period of an operational test on a dehumidifier, it was necessarj for the plaintiff to continue the test on the particular unit beyond the 40-hour period until a Government inspector arrived to witness the end of the test, to check the log of the test, and to witness the subsequent leakage test.

17. There was no occasion, during the progress of the work under the contract, when the defendant failed to have an inspector in the plaintiff’s plant within 72 hours after receiving a request from the plaintiff for inspection services.

18. There were a number of occasions during the period prior to February 9,1959 when completed dehumidifiers were ready for the beginning of the 40-hour operational test but the plaintiff was unable to begin the operational testing of such units because no Government inspector was present when the units were completed to make the pre-test inspection then required by the defendant.

19. There were some occasions during the period prior to February 9, 1959 when the plaintiff was required to extend the operational testing of dehumidifiers beyond the prescribed 40-hour period, and to postpone the leakage test on such units, because no Government inspector was present at the end of the prescribed 40-hour period to witness the termination of the operational test, to check the log concerning such test, and to witness the leakage test.

20. The plaintiff had not, in any of the instances referred to in findings 18 and 19, given tlie defendant 72 hours’ advance notice of the anticipated need for the services of a Government inspector.

21. During the period between December 16,1958 and February 9, 1959, the plaintiff’s personnel informed representatives of the defendant on many occasions that the plaintiff was being delayed in its production under the contract as a result of the unavailability of a Government inspector to approve the commencement of, and the completion of, the 40-hour operational test.

22. On or about February 9, 1959, the defendant waived the requirement that a Government inspector be present and approve the commencement of the 40-hour operational test as dehumidifiers were completed. As a result, production delays resulting from the unavailability of Government inspection services were substantially eliminated as of approximately February 9,1959.

23. (a) During the period between December 16 and 31, 1958, there were 8 work-days on which the plaintiff failed to ship any dehumidifiers under the contract; and on the following additional work-days during the same period, the plaintiff shipped less than four dehumidifiers: December 19, three; and December 30, three.

(b) The evidence in the record does not clearly show the plaintiff’s capability during the period December 16-31, 1958 with respect to the daily production and shipment of dehumidifiers. However, the evidence does show that the plaintiff’s production during that period was adversely affected on some days by the unavailability of a Government inspector to perform needed inspection services, as indicated in findings 18 and 19.

24. During the period between January 1 and February 9, 1959, there were 12 work-days when the plaintiff failed to ship any dehumidifiers under the contract, despite the plaintiff’s capability at the time of producing and shipping 4 units per day under normal conditions. This was partially due to the unavailability of a Government inspector to perform needed inspection services, as indicated in findings 18 and 19, and it was partially due to other causes (see findings 25-27).

25. Sometime between December 16,1958 and February 9, 1959, tbe plaintiff lost the equivalent of two days of production under the contract because of the improper painting of dehumidifiers by plaintiff’s personnel.

28.The plaintiff lost the equivalent of five days of production under the contract in January 1959 because of a flood that adversely affected the plaintiff’s plant.

27. The plaintiff’s production under the contract during the period between December 16, 1958 and February 9, 1959 was adversely affected to some extent by shortages of essential materials; and the plaintiff’s shipment schedule was adversely affected to some extent by the plaintiff’s occasional failure to give timely and proper notice to the trucking company that was utilized in shipping the dehumidifiers.

28. The total amount paid by the plaintiff for labor attributable to the contract during the month of December 1958 was $15,089.14. The total amount expended by the plaintiff on account of burden with respect to the contract during the month of December 1958 was $22,057.66.

29. The average daily amount paid by the plaintiff on account of labor and burden with respect to this contract for the months of January and February 1959 was $1,297.43. The average daily amount paid by the plaintiff for labor during that period was $564.14, and the average daily amount paid by the plaintiff on account of burden for that period was $733.29.

30. A finding in the nature of a jury verdict is made to the effect that the defendant’s failure to provide inspection services when they were reasonably needed, as indicated in findings 18 and 19, increased the plaintiff’s cost of performing the contract to the extent of $5,000.

CONCLUSION OK LAW

Upon the foregoing findings of fact and opinion, which are adopted by the court and made a part of the judgment herein, the court concludes as a matter of law that the plaintiff is entitled to recover on the third count of the petition, and it is therefore adjudged and ordered that the plaintiff recover of and from the United States the sum of five thousand dollars ($5,000). 
      
      Tke concurring opinion of Davis, Judge, follows the opinion of the trial commissioner which has been adopted by the court.
     