
    467 F. 2d 1293
    AEROJET-GENERAL CORPORATION AND AEROJET-GENERAL SHIPYARDS, INC. v. THE UNITED STATES
    [No. 332-67.
    Decided October 13, 1972]
    
      J. Franklin Fort, attorney of record, for plaintiffs. William K. Bachelder, Bichard 8. Salmian, Stephen F. Eilperin and Kominers, Fort, Schlefer <& Boyer, of counsel.
    
      Sheldon J. Wolfe, with whom was Assistant Attorney General L. Patrick Gray, III, for defendant.
    Before Cowbn, Chief Judge, Duress, Senior Judge, Davis, Skelton, Nichols, Kashiwa and Kunzig, Judges.
    
   Davis, Judge,

delivered the opinion of the court :

In July 1962 Gibbs Shipyards, Inc. contracted with the Maritime Administration to construct two oceanographic survey ships of an advanced type — the Oceanographer and the Discoverer — to be used by the Coast & Geodetic Survey. The second of the two vessels was optional, the option being exercised by Maritime in November 1962, along with an amendment providing for the installation in each vessel of “central engine room control”, 'an advanced form of machinery plant automation. The contract was further amended in March 1963 to include the installation in each vessel of a computer (instead of a less sophisticated data logger added to the contract by the November 1962 amendment) to monitor the central engine room control, and to report scientific data assembled by the oceanographic research equipment on each vessel. The contract price with these additions was $14,390,928.

In May 1964 plaintiff, with no prior shipbuilding experience but with ample experience in complex engineering fields, bought Gibbs and, with Maritime’s approval, assumed Gibbs’ obligation under the contract to complete the two vessels. Tn August 1965 plaintiff sold the yard to Jacksonville Shipyards and subcontracted the completion of the vessels to the latter, but remained responsible to Maritime for completion. The Oceanographer was delivered in April 1966 and the Discoverer in December 1966, instead of the original contract delivery dates of May and August 1964.

The final contract price, including extra items totaling $246,962 authorized by Maritime during construction (over and above the automation and computerization), was $14,-637,890. The final shipyard cost at completion was $21,823,-056.51, or $7,185,166.41 in excess of the adjusted contract price. Plaintiff’s gross loss on the portion of the contract completed after taking over from Gibbs was $7,908,619.40, its present claim. The theory of this case is that Aerojet is entitled to recover that sum from the Government because plaintiff was induced, it says, to assume the contract because of and in reliance on Maritime’s affirmative misrepresentation as to the status of contract completion and performance at that time, as well as Maritime’s failure to disclose significant information bearing on how Gibbs would make out on the contract, and should therefore recover full compensatory damages for its directly resulting loss.

Prior to purchasing Gibbs, plaintiff dispatched teams of its representatives there for several weeks to inspect the facilities and work in progress, examine Gibbs’ records, and confer with its management personnel. It also hired two firms of marine architects to survey the yard and its work in process. In particular, plaintiff investigated the completion status of the contract and its agreement to purchase was conditioned on assurance that the work was not in a loss condition. Plaintiff also confered with Maritime. Both Gibbs and Maritime told plaintiff that the contract for the vessels was about half-complete as of April 30,1964, and Maritime advised that the yard would probably break even upon completion. Plaintiff now contends that the contract was only 29.74 percent completed as of April 30,1964, instead of the 51.93 percent figure given in a report signed by Gibbs and Maritime, and that a loss was highly probable. The plaintiff’s lower figure represents the ratio between the actual costs to April 30,1964, and the completed costs, a ratio whose validity would necessarily rest on the assumption (Challenged by defendant) that plaintiff’s excessive costs after that date were wholly attributable to the Government and that none was the contractor’s fault.

Within a matter of months plaintiff discovered its costly mistake in acquiring Gibbs. Aerojet’s Director of Contracts surveyed all aspects of the acquisition intensively from September 8,1964 to February 1,1965, and estimated in January 1965 that plaintiff would lose $2,276,046 upon completion, subject to contingent reduction depending on the outcome of prospective claims against Maritime and Westinghouse, later abandoned. The Evaluation Beport prepared by the Director of Contracts for plaintiff’s private information painted a dismal portrait of the facilities, performance, and personnel of the yard. The report corroborates many findings based on facts elsewhere in the record as to the basic unreadiness of the yard to undertake such an ambitious project.

At the time it awarded the contract to Gibbs, Maritime had expected that Gibbs would probably lose money, although not nearly in the quantity ultimately suffered by plaintiff upon actual completion. These premonitions of loss were based on Maritime’s awareness of Gibbs’ deficiencies in facilities, personnel and experience, and from its knowledge that Gibbs’ bid was far lower than Maritime’s prebid cost estimates (due in large part to an underestimate of man-hours) , or than the Congressional appropriations requested by Maritime and the Coast & Geodetic Survey for the two vessels, or than the average of eleven competing bids received, including one from National Steel & Shipbuilding Company whose recent experience in completing a somewhat comparable ship — the Surveyor — at a substantial loss had given it unique insight as to the prospective costs for the two ships in suit. Maritime had notified Christy (whose low bid was rejected for being technically nonresponsive) that its bid had obviously underestimated engineering hours and material costs. Actuated by like misgivings as to Gibbs’ bid, Maritime demanded and received from Gibbs’ parent corporation the latter’s guarantee of a $600,000 subsidy to Gibbs if needed.

I.

Since plaintiff is suing the Federal Government for misrepresentation and failure to disclose, we are faced at once with the problem of whether Maritime’s statements to, and other conduct toward, plaintiff at the time the latter was considering the take-over of the Gibbs yard and contract were actionable (within the jurisdiction of this court)— regardless of whether defendant’s activity, if otherwise actionable, caused the loss for which plaintiff asks relief.

The governmental actions plaintiff cites to us cover both affirmative statements and items of non-disclosure. The first category includes: (1) a progress payment report, certified by government inspectors (as well as by Gibbs), that the contract was almost 52% complete; this report was found by plaintiff’s representatives in Gibbs’ files when they were advising plaintiff on the possible take-over; (2) an oral statement by the contracting officer to plaintiff’s agent that Maritime would not object to Aerojet’s acquisition of Gibbs and that “while it did not appear that Gibbs would make a profit [on the contract], that it also did not appear that there would be a loss”; and (3) a written memorandum given by the Under Secretary for Transportation of the Commerce Department to a high official of plaintiff, which stated (in part) : “Maritime advises that approximately one-half of the total construction [under the contract] is completed and, likewise, approximately one-half of the construction funds have been expended. On this basis, it now appears that the yard [Gibbs] will probably break even, financially, as far as these two vessels are concerned. * * *”; the memorandum also concluded that, in Maritime’s view, construction of the vessels “should continue in a satisfactory manner.”

The items the Government did not disclose, but should have (according to plaintiff), included (as plaintiff puts them): (a) the contract price for the two vessels, 'as awarded to Gibbs, was some $3,000,000 less than Maritime’s own in-temal “reasonable” cost estimate, and, also, the agency’s estimates for labor and engineering considerably exceeded those of Gibbs; (b) the 'agency’s survey group 'had forecast, before the award, that Gibbs would probably suffer a substantial loss on the contract; (c) Maritime had told another bidder (Christy) seeking the original contract that the latter’s engineering estimate was too low, although it was substantially higher than Gibbs’; (d) the comparable Surveyor, previously built for Maritime by National Steel & Shipbuilding Company, required more actual man hours to build than Gibbs had estimated for both of its vessels, and National Steel had lost some $2,700,000 on its contract; (e) Gibbs had told Maritime, before the take-over, that it would lose money on the contract; and (f) Maritime suspected, just before the takeover, that over a million dollars in excessive progress payments had probably been made to Gibbs.

II.

Four preliminary points Should be quickly made with respect to this charge of positive misrepresentation combined with culpable failure to disclose. The first is that the Government did not act fraudulently or in bad faith toward plaintiff; the trial commissioner found no such active misconduct, plaintiff does not seek such a finding, and we see no basis for one; the maximum charge which can be levied against the defendant is one of negligence.

Second, this case was presented to the trial commissioner and to the judges, and must be determined, on the basis of plaintiff’s claim of defendant’s culpability toward it at the time of the take-over; plaintiff is not seeking to vindicate any separate claim by Gibbs that defendant acted improperly toward Gibbs in initially awarding the contract to it, and the evidence and findings bearing on that award 'are pertinent bere only so far as they have a connection with. Aerojet’s own independent demand.

Third, though there is a question whether plaintiff has not overstated the error in the information supplied it by the Government, there is no doubt that that information turned out .to be substantially inaccurate. Defendant does not deny this premise, and we accept it as a datum for the case. Under the position we take, the precise extent of the error need not be determined.

■Fourth, the Government urges that we hold the entire claim tort-based and accordingly outside our jurisdiction. We do not reject that position, but neither do we accept it. Eather, we assume with plaintiff, for the purposes of the case and without deciding the issue, that the claim is contractually grounded in the novation by which plaintiff was substituted for Gibbs and undertook to finish the ship-construction agreement — 'and proceed on that postulate.

III.

Did the Government breach any contractual obligation to Aerojet when it affirmatively gave misinformation, in good faith, to the latter ? Assimilating its status to that of a successful bidder, solicited by the Government, who relies 'to 'his detriment on representations in the contract documents, plaintiff invokes the scores of cases stemming from Hollerbach v. United States, 238 U.S. 165, 172 (1914). Those lines of decision hold the Government liable either as an absolute war-rantor of its specifications and representations or, sometimes, for lack of appropriate due care toward the other contracting party.

Aerojet did not have, however, the same stance as those contractors. It was not solicited by the Government nor did the Government instigate the negotiations with it. Contrast Snyder-Lynch Motors, Inc. v. United States, 154 Ct. Cl. 476, 510 (fdg. 16), 292 F. 2d 907 (1961). Maritime may 'have been happy at the substitution of Aerojet for Gibbs, but it is a critical fact that the Government did not seek out plaintiff or let it be known in advance that it wanted a substitution for Gibbs.

Moreover, the mistaken information did not concern the scope of the contract work or the specifications or any obligation of the defendant under the contract with Gibbs. Plaintiff came to the Government for advice because, for its own reasons, it was considering acquisition of the Gibbs yard and a take-over of the Gibbs contract. The information plaintiff wanted did not involve any contractual obligation or activity of defendant (e.g., whether the Government would continue to make progress payments on the same basis as before) but solely the financial status of Gibbs vis á vis the contract, and the extent to which Gibbs had already performed its obligations. This was data the defendant m'ay have had, and would likely want, for its own purposes, but not information which concerned the specifications or conditions for the construction of the two ships under contract, or the Government’s responsibility toward the yard which was then building the vessels.

In this situation, we think that defendant did not warrant or guarantee the information sought by and supplied to Aerojet; at the most, the Government would have to exercise reasonable due care, in the circumstances, toward plaintiff. To impose the higher requirement is to equate plaintiff with successful bidders who can in normal course rightfully and reasonably expect that the Government’s authorized and positive representations as to work, conditions, or specifications should be accepted at face value and without further inquiry. Cf. Dale Constr. Co. v. United States, 168 Ct. Cl. 692, 699 (1964). Ordinarily both the procuring agency and the contractor (or about-to-be contractor) are intimately interested in the accuracy of warranted information which directly concerns the performance of the work. That is not true here. The requested information bore solely on the financial providence of Aerojet’s assumption of Gibbs’ place. Plaintiff could not reasonably expect tire Government to guarantee the accuracy of this information as to Gibbs’ status, passed on to Aerojet by courtesy of the defendant at the plaintiff’s behest and in its dominant interest.

We assume, therefore, that defendant’s conduct in supplying mistaken data and opinions should be measured, at most, by the less rigorous standard of due care. But we find that plaintiff has failed to prove negligence toward plaintiff with respect to these affirmative statements made to Aerojet by the Government.

The first item relied upon in this category — the latest in the series of progress payment reports, which said that the contract was almost 52% complete — was not given by defendant to plaintiff, but was found by plaintiff’s representatives in the Gibbs files. The report was a routine one, not prepared for plaintiff’s use or with plaintiff in mind, but solely for the Government and for Gibbs. Although we are positing that ■this is not a tort claim (see Part II, Fourth, supra), there is obviously a close relationship with the standards of conduct established for comparable tort actions. In that area of the law, defendant would not be liable to Aerojet because the information was not prepared for the latter’s benefit, with intent to influence it, or with knowledge or expectation that Gibbs would hand it over to Aerojet. See A.L.I., Restatement of the Law Second, Torts, Tent. Draft No. 12 (1966), § 552, and also the Reporter’s note, and comments h and i. It is entirely appropriate to use the same rule of non-liability for a presumed contract claim which entails the same factors and considerations on which the tort standard is based.

In addition to this absence of obligation toward plaintiff there is inadequate proof that defendant failed to exercise reasonable care or competence in certifying the report. The parties have stipulated that these progress reports represented the best evidence available as to the percentage of completion of the contract at any given time, and though this particular report was probably in error we cannot see that plaintiff has succeeded in demonstrating that it was carelessly drawn up. Maritime followed its established procedure with respect to this report, and no short-cuts were taken. In the making of the reports, the calculations were somewhat complex and the result was always subject to some margin of error (note 8, infra). (See, also, the discussion infra as to the direct representation to Aerojet that the work was half-done.)

The other affirmative statements which plaintiff invokes are an oral remark to plaintiff that “while it did not appear that Gibbs would make a profit [on the contract], that it also did not appear there would be a loss”, and a written memorandum for plaintiff’s benefit, saying that “approximately one-half of the total construction is completed”, “it now appears that [Gibbs] will probably break even, financially, as far as these two vessels are concerned”, and that construction of the ships should continue satisfactorily. These were not, on the whole, very positive, definite, or detailed observations; their use of “appear” or “appears”, “approximately”, and “probably” indicates their somewhat equivocal character. They were more in the nature of general opinions, proffered as such, than flat representations of fact.

With respect to the statement that one-half of the contract was completed, plaintiff has not proved that this observation, any more than the progress payment report discussed above, was negligently made. The Government used this figure for its own purposes and believed it to be correct; it was not a figure “cooked up” to influence plaintiff. It is now known to have been wrong, but the trial commissioner thought 42%, “in retrospect”, probably “a more realistic level of completion than any other figure supplied by the record” — and 42% is not so far away from 50%. We are not prepared to say that Maritime and Commerce failed to exercise reasonable care or competence in giving this judgment to plaintiff.

The suggestion that “it did not appear” that Gibbs would suffer a loss, that “it now appears” that Gibbs “will probably break even”, and that further construction should prove “satisfactory” also provide a tenuous hold for a finding of negligence. These were, by their very nature, expressions of opinion — genuinely held, the trier-of-fact has found — and clearly opinions rather than representations of hard or definite fact. Even these expressions of opinion were in the form of estimates, approximations, and judgments. Cf. Tree Preservation Co. v. United States, 172 Ct. Cl. 577, 581 (1965). They were not firm statements, but were subject to the play and latitude common to broad opinions of this type. Plaintiff’s strenuous effort to show that it was not negligent in taking over the Gibbs contract (see Part V, infra) seems to us to demonstrate, if accepted, that the defendant was equally free of blame in what it told Aerojet; the relevant factors were so intangible and fluctuating that mistaken optimism could take the lead without being accused of turning into outright negligence.

'Specifically, Aerojet sees proof of lack of due care in the Government’s expectation, at the time of the award to Gibbs, that the latter would probably lose money on the job, as well as in later intimations of trouble which cropped up during Gibbs’ performance. As we have indicated, these do not, in our view, require the brand of carelessness to be placed on the later evaluations. Though the initial thinking was that Gibbs woidd probably suffer a loss, plaintiff has not demonstrated to our satisfaction that the subsequent reappraisal, though in the end it was wrong, was carelessly made at the time. These are matters of wide judgment, and negligence is not mechanically proved by showing that the appraiser held different opinions at different moments.

IV.

The other aspect of plaintiff’s claim is that defendant failed to disclose some significant information (see Part I, supra), known to the Government but not to Aerojet, which had a direct bearing on plaintiff’s consideration of whether to take over Gibbs and the two-ship contract. Again, plaintiff puts itself in the same posture as a successful bidder misled by the Government’s failure to reveal information vital to that contractor’s performance of the work but which he does not know and cannot obtain elsewhere (or does not realize that he needs to know) . On this phase of the case, too, we see Aerojet in the quite different light of a would-be voluntary intervenor coming to the United States for information, not as to the scope or conditions of the work or the specifications, but as to the chances of the work’s being done within the sum which had already been bid. In a fixed-price agreement, the latter is not normally a matter as to which the Government has any direct responsibility.

Another important differentiating factor is that Aerojet was already keenly alert to the problem of Gibbs’ then status and was not disabled from obtaining, on its own, more complete information on that subject (if it wished to spend the time and effort) from Gibbs and its records. Cf. H. N. Bailey & Associates v. United States, 196 Ct. Cl. 166, 177-78, 449 F. 2d 376, 382-83 (1971); Ambrose-Augusterfer Cory. v. United States, 184 Ct. Cl. 18, 37, 394 F. 2d 536, 547 (1968); Donald M. Drake Co. v. United States, 194 Ct. Cl. 549, 555, 439 F. 2d 169, 172 (1971) ; Jefferson Constr. Co. v. United States, 176 Ct. Cl. 1363, 1370, 364 F. 2d 420, 424, cert. denied, 386 U.S. 914 (1967). Perhaps plaintiff could not get all of the precise items which it now cites (see Part I, supra), but it already knew a great deal and was free to instruct itself much more than it did on Gibbs’ capacities and performance (see Part V, infra) , The few pieces of information which defendant failed to disclose, and at the same time which plaintiff could not discover for itself, formed but a minor part of the total picture.

If this were indisputably a tort case alone — if, for instance, plaintiff had acquired Gibbs but not taken over the contract, or if plaintiff were a banker considering whether to lend money to Gibbs (and in either instance had had the same sort of dealings with the Government) — there could be no recovery for the nondisclosure in the circumstances shown by the record. See A.L.I. Restatement of the Law Second, Tort, Tent. Draft No. 12 (1966), § 551. Wholly apart from the signal fact that the Government did not actually “know” that these matters were important to Aerojet or that the latter would be misled, none of the pre-conditions for the existence of a duty to disclose (in tort law) exists here. There was no such relationship as called upon defendant to volunteer the particular items plaintiff mentions, and in turn these items were all peripheral, though relevant, to the matters about which plaintiff expressed concern.

■In the light of this tort rule and the quite different elements supporting our contract decisions finding liability for a failure to disclose by the Government, we determine that defendant is not liable for breach of contract for its failure to reveal to plaintiff the various items which Aerojet now insists should have been disclosed. The situation at that time did not require Maritime to volunteer the information.

V.

We have held (in Parts III and IV, supra) that, either because there was no obligation to plaintiff or because negligence has not been shown, defendant is not liable for the affirmative misinformation given to plaintiff or for the failure to disclose certain facts. If nevertheless it be thought that there were such legal obligations which were breached by negligence on the part of the Government, then we would have to hold that Aerojet was so contributorily negligent as to bar it from recovery. If the defendant was careless, then the following circumstances should likewise have alerted plaintiff to the probability of error in the optimistic statements made to it by the Government:

1. During its preacquisition investigation of Gibbs, plaintiff engaged the services of two marine engineer firms. One of them, M. Rosenblatt & Son, Inc., examined the two vessels and all records pertaining to the contract and advised plaintiff that the contract was 47 percent complete as of May 15, 1964. By extrapolation based on the estimate of the official progress report for that date that the contract was 56.76 percent complete, the plaintiff could have computed that the completion percentage as of April 30, 1964, was 42 percent, not 51.93 percent (as shown on the progress report for that date).

2. Prior to acquiring Gibbs, plaintiff had full access to its records and thus is charged with knowledge of the sharp disparity between Gibbs’ original bid and the spread of bids by other bidders. The average of all eleven bids was $15,-240,654, or $2,649,726 more than Gibbs’ bid of $12,590,726. The bid of National Steel and Shipbuilding Company, which had in 1960 suffered a substantial loss in constructing the Surveyor, a somewhat comparable ship, and was thus a more knowledgeable estimate because of that experience, was $15,211,000, or $2,620,072 more than Gibbs’ bid. Plaintiff could also have discovered the gaps between Gibbs’ bid and the appropriations for the vessels.

3. Plaintiff knew that Gibbs had been through a bankruptcy proceeding in 1962, that it was in financial difficulties in 1964, and that before awarding the contract to Gibbs, Maritime had required that America Corporation, Gibbs’ parent company, pledge $600,000 toward the contract. This was to compensate for what Maritime considered to be a substantial underestimate of manhours in Gibbs’ bid; Maritime felt that Gibbs would probably incur a loss of about $300,000 on the one ship, the Oceanographer, because of this underestimate of manhours, and it would be reasonable to approximately double that dollar estimate for two ships. There is no positive evidence that plaintiff actually knew of these latter facts, but they were available to be known through investigation of Gibbs’ records and inquiry from Gibbs personnel. The $600,000 pledge was certainly known to Aerojet.

4. Gibbs’ records, which were available for examination by plaintiff in the course of its preacquisition investigation of Gibbs, reflected delays in Gibbs’ performance of the contract by a railroad strike which delayed steel deliveries, abnormal weather, and substantial delays by Westinghouse in its deliveries under several subcontracts, including the critical automation subcontract. On January 26,1964, Gibbs had requested a price increase from Maritime because of delays due to the failure of Westinghouse to furnish subcontract drawings or deliver subcontracted equipment for the 'automation and computer systems. Plaintiff’s awareness of the Westinghouse delay situation is shown by its letter to Westinghouse of May 29,1964, a day after the formal transfer of the Gibbs facilities to plaintiff, expressing its dissatisfaction with the Westinghouse performance which it said had resulted in serious costs and disruption of the construction schedule. Later a suit against Westinghouse was considered, but not pursued.

5. The monthly force reports submitted to Maritime by Gibbs, which were available for examination by plaintiff prior to its acquisition of Gibbs, contained data from which it could be calculated that, as of April 30,1964, 87.5 percent of the manhours which Gibbs had originally scheduled for the Oceanographer (420,000), and 40.7 percent of manhours scheduled for the Discoverer (307,225), had been expended. These originally scheduled manhours did not, however, include the manhours required for the automation and computer additions to the contract, so the percentage figures of manhour consumption as of April 30, 1964, are subject to reduction in an unknown amount. The automation and computer additions were conditioned on contract extensions being given as justified.

6. Plaintiff could have discovered that Gibbs’ booked costs as of May 15, 1964, were $933,048 less than its contract receipts, a profit which, considering the sharp disparity of Gibbs’ bid and the costs of the various delays which had affected performance, would be difficult to reconcile with a contract reputed to be 51.93 percent complete as of April 30, 1964, and 56.76 percent complete as of May 15,1964.

This was all helpful information which Aerojet could have obtained and evaluated, but did not. If the Government was negligent in what it told plaintiff or did not say, then plaintiff also failed to exercise due care in not following up these leads. As we have already suggested, we are not able to escape the conclusion that, if the Government is thought to have been careless, so was plaintiff, and in significant degree. We cannot hold the defendant culpable and simultaneously absolve Aerojet.

On the assumption that Maritime and Commerce were careless, it makes no real difference whether we say that plaintiff is barred from recovery by its contributory fault or that it cannot prevail because the Government’s misrepresentations did not effectively cause the loss which could and should have been prevented by greater care on the part of plaintiff. In either formulation, the important notion is that Aerojet’s responsibility was at least commensurate with that of the Government; it could and should have helped itself. Cf. Ragonese v. United States, 128 Ct. Cl. 156, 162, 120 F. Supp. 768, 770-71 (1954); Anthony M. Meyerstein, Inc. v. United States, 133 Ct. Cl. 694, 700, 137 F. Supp. 427, 431 (1956) ; Leal v. United States, 149 Ct. Cl. 451, 460, 276 F. 2d 378, 383 (1960); Helene Curtis Industries, Inc. v. United States, 160 Ct. Cl. 437, 445, 312 F. 2d 774, 779 (1963); J. A. Jones Constr. Co. v. United States, 182 Ct. Cl. 615, 623 n. 10, 390 F. 2d 886, 890 n. 10 (1968).

VI.

These are the reasons why we hold defendant not liable to plaintiff. The trial commissioner touched on these grounds but placed his decision mainly on his conclusion that plaintiff’s losses were “attributable neither to Maritime nor its alleged misrepresentation of interim completed status, but rather were [independently] chargeable either to plaintiff, its predecessor contractor Gibbs, subcontractor Westinghouse, or to other events not attributable to the Government by any legal legerdemain.” In view of our holding on liability, we need not consider this separate position that, in any event, the Government did not cause the losses which had wholly other roots.

For the reasons we have given, plaintiff is not entitled to recover and its petition is dismissed.

Nichols, Judge,

dissenting:

This case is troublesome to me, and I have changed my views about it more than once. There follow my 20 worth, now tested as much as I know how.

The court asked the right question, I think, which is what duties did defendant owe plaintiff during the discussions that led to the making of the novation ? But it assumes rather than demonstrates the answer and comes to the wrong one. Plaintiff claims the benefit of decisions respecting mistaken Government statements of essential conditions (Hollerbach v. United States, 223 U.S. 165 (1914) ; Chris Berg, Inc. v. United States, 186 Ct. Cl. 389, 404 F. 2d 364 (1968); Womack v. United States, 182 Ct. Cl. 399, 389 F. 2d 793 (1968)), or withholding of superior Government information on matters essential to successful performance (Hardeman-Monier-Hutcherson v. United States, 198 Ct. Cl. 472, 458 F. 2d 1364 (1972); J. A. Jones Constr. Co. v. United States, 182 Ct. Cl. 615, 390 F. 2d 886 (1968); Snyder-Lynch Motors, Inc. v. United States, 154 Ct. Cl. 476, 292 F. 2d 907 (1961)). Compare, also, two recent cases in which the court has held the defendant responsible for the correctness of oral statements by its officials at bidders’ conferences. Sylvania Elec. Products Co. v. United States, 198 Ct. Cl. 106, 458 F. 2d 994 (1972); Manloading & Management Associates v. United States, 198 Ct. Cl. 628, 461 F. 2d 1299 (1972). The court says, no, these successful complaints were by contractors misled or denied information between invitation to bid and award; plaintiff here came into contract privity later on, by novation, long after award, and therefore none of these cases apply. Whatever duties the Government owes remain unstated, but whatever they are, they are held not necessarily breached by Government errors which would be breaches, if committed before the initial award with respect to the original contractor.

It is true the Government, by invitation to bid or request for proposals, with representations and specifications, is normally inviting adhesion to a contract of its drafting, and thereby it assumes various implied obligations to those who adhere. When the contractor comes in with superior knowledge, and the specifications are essentially its own, for the Government to adhere to, the case will be fundamentally different. See, e.g., Bethlehem Corp. v. United States, ante, at 247, 462 F. 2d 1400. Here, however, it seems to me Aerojet- General was in effect adhering to a deal it never made, and as to which it had inferior knowledge. True, defendant was passive and did not solicit Aerojet-General's adhesion. This is the distinction in the court’s mind. The novation, the court must think, was solicited for Aerojet-General's and Gibbs’ convenience, not defendant’s, and therefore it generates fewer rights.

I answer that the defendant was in no way obliged to make a novation unless it saw advantage to itself. If it had held Aerojet-General at arm’s length and insisted on dealing with Gibbs alone, it would have been within its rights, so far as we are told. In that event, its present attitude towards its own misrepresentations might be justified and Aerojet-General might well have no valid complaint, whatever capital it might have ventured and lost in building the ships, by way of loan to Gibbs, perhaps, or purchase of an equity interest. It seems to me, however, when Aerojet-General is admitted to privity of contract, it is not a second-class citizen, anymore, but there inure to it the benefits and privileges that inure to other Government contractors.

The situation of a contractor failing in performance of a major Government contract is a messy one fraught with possibilities of financial loss to the Government, as well as its inability to get whait it contracted for, free of defects and on time. To bring in a stronger entity to complete the job, before actual failure or default, is a common remedy, advantageous to all concerned. To treat the newcomer as a kind of inferior interloper is not the way to cement the foundations of a shaky procurement, no matter whose idea initially the novation was. Whether defendant solicited the deal, or the failing contractor, or the newcomer, should be irrelevant once the novation is signed by all three. Yet I gather that the court here would reach a different result if it appeared that Maritime had solicited Aerojet-General to become a party to this contract.

In Government contract litigation, for obvious reasons based on the structure of Government agencies, we rarely distinguish between what a Government official 'knew and what he ought to have known. Examples are the Chris Berg, Womack and J. A. Jones Construction Co., cases already cited, wherein knowledge that should have been available to the official preparing invitations to bid, or specifications, because he should have asked or somebody should have told him, is imputed to him whether he actually had it or not. In Womack, we said, 182 Ct. Cl. at 412-13, 389 F. 2d at 801:

* * * In short, in promulgating an estimate for bidding-invitation purposes, the Government is not required to be clairvoyant but it is obliged to base that estimate on all relevant information that is reasonably 'available to it.

Our commissioner finds as a fact — 'and the court agrees — ■ that by May 1964, i.e., before the memo of May 15, 1964, assuring plaintiff that the construction was half completed and approximately half the construction funds expended, Maritime had cause to suspect the contractor would incur a substantial loss on the contract because of its disproportionate bid coupled with the delays being experienced in the delivery of automation equipment 'from Westinghouse, as well as other delay-producing difficulties. Finding 29. I think he should have found, and we should find, that Maritime knew or ought to have known, that construction was not half completed, not by a wide margin. This information was there for the asking. The percentage of completion, as officially reported, and concurred in by the Maritime inspectors, was 51.93% on April 30 and 56.1 % on May 15, both 1964. By some strange coincidence, the facts as to the error of these figures began to come to the attention of Maritime just upon or just after plaintiff’s takeover of the contract. It was noticed that Gibbs had acquired nothing like the quantity of components and material the figures reflected. Engineering was not 95% complete, as reported on April 30. Only 40% of eventual engineering hours had been expended. Finding 28. Maritime’s auditor is quoted as saying such errors could have been detected much earlier if he had made more frequent inspection visits. Detected by him, or by anyone else with a normal supply of skepticism or mistrust, I would add. Aware as he was of the disproportionate bid and its potential for causing disaster all round, and of the apparent conflict between Maritime’s forecast of the contract experience and what the percentage of completion figures seemed to show, it would seem he should have conducted such inspections, or else should have imputed to him what he would have learned from them, as things he should have known. While the “point system” is represented as giving only the most inaccurate indications of the percentage of completion, Maritime relied on it to make progress payments, holding back only 5%. This would have been improper if the system was really known to be nearly useless. It appears to me to be inescapable that the system would have worked much better than it did if anyone had tried before the takeover to make it accurate, as they did with belated zeal after the takeover. If the system had worked as it should have, Maritime would have had actual “superior knowledge” with respect to the percentage of completion. As things were, I think it had imputed “superior knowledge.”

Plaintiff went to the Under Secretary to learn the status of the contract before the novation. The purpose of its inquiries was known and Maritime’s consent to the novation was only six days in the future. If Maritime’s officials really believed that the percentage of completion figures they had were “essentially arbitrary”, “an educated guess” (Finding 26) they needed only to say so. Instead, they advised the Under Secretary, for him to advise the plaintiffs, in writing, that approximately one-half the total construction was completed and half the construction funds were expended. The Under Secretary gave this memo to plaintiffs. This was an implied representation that Maritime knew what the percentage of completion was.

Plaintiff also tried to find out through its experts, M. Rosen-blatt & Son, Inc., what the percentage of completion was. They came up with 47% as of May 15, almost 10% under the official figure, for that date, though they placed “considerable reliance” (Finding 21) on the April 30 official figure. Undoubtedly this conclusion was optimistic, but should have been a forewarning of disaster. I infer from the findings that it would have been almost impossible to make a determination truly independent of the official figure. This is as clear-cut an instance of “superior knowledge” in the Government as you could wish to find, the only other source 'being the self-serving assertions of the vendor, the president of Gibbs. The plaintiff, it appears, unhappily chose to attach credence to what the Government told it, rather than depend on Rosen-blatt for this item of information, and this was reasonable if the findings are right in indicating that Rosenblatt’s knowledge was necessarily “inferior,” despite their best efforts.

Since defendant chose to give out the information, had the means to have had it accurate, and was under a duty to have it so, the duty of plaintiff to ascertain the full horror of the situation for itself was modified accordingly. Womack, supra. If plaintiff had a right to rely on the official figures I question whether the other warning flags, which clearly did exist, were sufficient to establish that plaintiff could have avoided its loss by due care. In this respect, the parallel of our recent Hardeman-Monier-Hutcherson decision, supra, is instructive. The contract there called for building a pier on a remote sound in northwestern Australia. Defendant had information developed through recent surveys by Australian government vessels, which tended to show that wind, wave, current and bottom conditions would make the work more dangerous, difficult, slower and costlier than could be ascertained from previous weather and hydrographic information accessible to bidders. Plaintiff, before bidding, asked for these surveys and was refused them. We held this refusal was a breach of contract making defendant liable, for how much remains to be ascertained at this writing. Defendant with its cross-motion submitted documents tending to show that another bidder made observations at the site which put it in possession of substantially the information obtained in the surveys. We refused to speculate whether plaintiff, too, might have informed itself in that manner.

If the defendant has a duty to supply meaningful information Which it has, and refuses, you are not obliged to show you could not possibly have obtained it elsewhere. It is enough if defendant’s knowledge is superior or represented by it to be. If information is not refused, but is supplied incorrectly, the same rule should be a fortiori, since the contractor is thereby lulled into security, whereas Hardeman-Monier- Hutcherson, df more intuitive, would have been greatly perturbed by the refusal of the surveys. Cf. discussion in Flippin Materials Co. v. United States, 160 Ct. Cl. 357, 365, 312 F. 2d 408, 413 (1963).

Here the key to everything else should have been the percentage of completion. With a correct figure, plaintiff would have been forewarned; without it, the most one can say is that a number of available facts, pieced together, might have told plaintiff the story. But it would have had to disbelieve the official figuré, which it did not choose to do. Thus part V of the court’s opinion really assumes the correctness of its previous holding as to defendant’s duty in the premises, and is not a separate ground of decision.

Nothing here said should be construed to support plaintiff’s claim for all its losses. My mind is open as to what a proper formula would be, if indeed the findings before us even permit one to be stated. It would probably be necessary to break down the claim into items and go through them one by one, as in the recent breach case of Mid-West Constr. Co., Ltd. v. United States, 198 Ct. Cl. 572, 461 F. 2d 794 (1972). Since a majority does not agree with me on entitlement, I deem it unnecessary to go into quantum, except for the above caveat. I believe a proper outcome would show plaintiff still bearing much of its loss.

DtjReee, Senior Judge, joins in the foregoing dissenting opinion.

EINDINGS OE PACT

The court, having considered the evidence, the report of Trial Commissioner C. Murray Bernhardt, and the briefs and arguments of counsel, makes findings of fact as follows:

1. Plaintiff Aerojet-General Corporation, 85 percent of whose voting stock is owned by General Tire and Rubber Company, is an Ohio corporation having offices at 9100 East Flair Drive, El Monte, California, 91734, and at 1120 Connecticut Avenue, N.W., Washington, D.C. 20036.

2. Aerojet-General Shipyards, Inc. (hereinafter “AGSI”) is a wholly owned subsidiary of plaintiff, organized and existing under the laws of the State of Florida.

3. The Department of Commerce, Maritime Administration (hereinafter “Maritime”) is, and was at times relevant hereto, an agency of the United States of America and acted for defendant as contracting party under the contract in suit concerning the construction of two oceanographic survey ships, as hereinafter more fully described.

4. Gibbs Shipyards, Inc. (“Gibbs”) was, at relevant times, a corporation organized and existing under the laws of the State of Florida with offices in Jacksonville, Florida.

5. No hydrographic survey ships were built in the United States between 1944 and 1957. In October 1957 Maritime awarded to National Steel and Shipbuilding Company (NASSCO) a bid contract for construction of the Surveyor for a scheduled delivery date of May 11, 1959. It was completed April 29, 1960. The Surveyor, a Class I hydrographic survey ship constructed for the use of the Coast and Geodetic Survey (C&GS), was 'acknowledged by the Government to be “a complicated ship of a nature never undei'taken by the shipyard [i.e., NASSCO].” Previously NASSCO had built tugboats, minesweepers, barges, tuna vessels, and a beach discharge lighter (which was larger than the Surveyor). The adjusted contract price for the Surveyor was $5,584,960. NASSCO’s cost of completion was $8,094,538, according to an incomplete, hasty audit of NASSCO’s records in late 1960 by Maritime representatives, which 'audit reported an overrun of 15 percent for material and 96 percent for labor (865,180 actual manhours vs. 441,479 scheduled manhours). Somewhat later, in connection with settlement negotiations on NASSCO’s claim, the contracting officer advised the Maritime Administrator that “the Contractor’s books of record show that the Contractor’s contract loss (not considering alleged lost profit) will be a sum slightly in excess of $2,700,000”. NASSCO claimed reimbursement for its losses in the amount of $2,802,592 (later increased to $3,128,-542, including profit of $528,477), on the principal grounds of delays and overinspection. In a 53-page decision under the Disputes clause of the contract the contracting officer found that of the time overrun of 354 days, 86 days were due to causes bsyond the contractor’s control, and the remaining 268 days were chargeable to the contractor. The contract provided for liquidated damages of $1,000 per day for delay in delivery. Mr. Bobert Lowry, then Assistant Chief of Maritime’s Division of Estimates in the Office of Ship Construction, investigated the claim for the contracting officer and advised the latter that “a major portion of the losses were due primarily to NASSCO (a) inexperience and (b) underbidding of the job due to underestimating the complexity of the particular ship”. Also that NASSCO’s substantial overrun in labor manhours was due to excessive rate of turnover of yard labor and engineering labor, plus inefficiencies flowing from a high proportion of alien labor unfamiliar with American shipbuilding techniques. In 1963 Maritime settled the claim with NASSCO’s successor in interest for $254,762, plus a time extension to date of completion which in effect waived liquidated damages of $268,000 ($1,000 per day for 268 days). NASSCO was thus benefited by a total of $522,782 in recovery and remission combined. In recommending the settlement the contracting officer advised the Maritime Administrator that, While NASSCO’s failures greatly contributed to the delay in delivery of the ship, in the event of litigation the contractor might be able to provide proof of Government-caused delays, and admitted Government delay in approving certain plans, delivering Government-furnished material, and in the actions of certain Government personnel interfering with performance (i.e., apparently overinspeetion). In the settlement negotiations NASSCO made no concession that it had been inefficient.

6. In March 1961 Maritime and C&GS prepared for budget and appropriation purposes their separate preliminary estimates for the cost of construction of the Oceanographer, a proposed Class I oceanographic survey ship for use of C&GS. These estimates by the two agencies were in the respective total amounts of $9,410,000 and $9,425,000, of which $8,000,000 and $8,015,000, respectively, were for the construction contract plus an allowance for changes ($300,000 allocated to changes in Maritime’s estimate), while $1,410,000 in each estimate was for non-contract costs to be borne by the Government, including design and administration, equip-meat furnished by C&GS, and special oceanographic equipment to be provided by the Government.

7. (a) At hearings on April 28, 1961, before a subcommittee of the House Appropriations Committee on the 1962 appropriation bill C&GS requested an appropriation of $9,425,000 for the Oceanographer, including $8,015,000 for the construction contract, $300,000 for Government cost of design and supervision, and $1,110,000 for equipment and outfitting (to be provided by the Government). Congress appropriated the requested $9,425,000 for the Oceanographer. At the same hearing C&GS anticipated requesting an appropriation of $10,490,000 in the 1963 appropriation act for a pending sister ship, the Discoverer, which was to be identical to the Oceanographer. In response to a question as to the basis for the appropriation request of $9,425,000 for the Oceanographer, the C&GS spokesman stated to the committee that “We took the cost of the Surveyor and escalated -I* 5?

(b) At hearings on February 13,1962 before a subcommittee of the House Appropriations Committee on the 1963 appropriation bill, C&GS requested an appropriation of $9,825,-000 for the Discoverer, as compared to $10,490,000 which C&GS had requested from the Department, and to $10,455,000 which the Department had requested from the Bureau of the Budget, which latter agency reduced the request to $9,825,000. The same request was presented to the Senate Appropriations Committee at hearings on July 25,1962. At this time C&GS was aware that Gibbs’ bid for the Discoverer was $5,993,000, which did not include those costs to be borne by the Government as stated above. Congress appropriated $9,725,000.

(c) At a hearing on June 26,1964 on the 1965 appropriation act before a subcommittee of the Senate Appropriations Committee, the spokesman for C&GS, in response to a request for an explanation as to the cost and delay problems then affecting the Oceanographer, placed the blame on inadequacies of the shipyard’s engineering staff, and delays occasioned by the tardy delivery of automation components by tbe vendor.

8. (a) In May 1962 Maritime prepared three alternative estimates for construction of the Oceanographer (in contrast to the estimate for appropriation purposes), a “reasonable” estimate, a “low” estimate, and a “low-low” estimate. At the same time Maritime prepared a cost estimate for the construction of the Discoverer, an identical sister ship of the Oceanographer, by means of discounting the estimates for the latter by 15 percent representing “learning curve” savings, i.e., savings involved in construction of an identical second ship through use of common drawings and through experience gained in building the first ship. Other evidence in the record sets the learning curve discount for the second of two identical ships at varying figures from three to ten percent. Because of their greater complexity and hence more intensive labor consumption, the learning curve discount for the second of two oceanographic ships should be greater than for simpler ships such as cargo vessels, etc. The Oceanographer and Discoverer (hereafter sometimes referred to as the OSS-1 and OSS-2, respectively, or collectively as the OSSes) are the two ships involved in the present suit. A hydrographic survey ship, such as the Surveyor referred to in finding 5, supra, differs from an oceanographic survey ship in that the former is a deep water charting ship without oceanographic capability, while the latter is a ship of unique and unusual design which is primarily for world-wide oceanographic research and survey purposes. An oceanographic survey ship was a new class of ship for a new job, and was more complex and sophisticated than the hydro-graphic survey ship, although resembling it in certain respects. An experienced ship designer employed by Maritime who participated in the plans for the Surveyor and the two vessels in suit, stated in December 1961 with reference to the pending procurement of the Oceanographer, that “Due to the specialized nature of the vessel, requiring unique engineering talents, it is requested that engineering capability be considered of prime importance.” He considered many shipyards incompetent from an engineering standpoint to bid on such, a ship, even without the additions of CEEC (central engine room control) and computers.

(b) The responsibility for preparing Maritime’s construction cost estimates for the OS'Ses for the evaluation of eventual bids thereon was imposed on Mr. Eobert Lowry, a career engineer and naval architect with Maritime for all but nine months of the period from June 1942 to date, including at least 17 years of experience in cost estimating and analysis. From June 1958 to December 15, 1965, as Assistant Chief of Maritime’s Division of Estimates for Domestic Cost, Division of Estimates, Office of Ship Construction, Mr. Lowry supervised the preparation of all official cost estimates for Maritime’s ship construction contracts under certain titles of the Merchant Marine Act. His credentials as a ship cost estimator, and his demonstrated knowledge of the subject as a witness for the Government in the trial of this case, were impressive. That is not to say that he was necessarily infallible in what is intrinsically a highly fallible undertaking.

(c) Preparation of Maritime’s cost estimates for the OSS-1 consumed from 300 to 400 manhours. Mr. Lowry first considered such features of the ship as its weight, arrangement, plan, equipment and machinery allocated to three major segments, i.e., steel envelope and superstructure, machinery, and outfitting, which were then broken down into 42 “systems”. He ascertained the cost of major items of equipment and machinery by consulting vendors. As to propulsion machinery, he considered as a basis the cost per shaft horsepower for the particular type of equipment. Costs of steel were estimated on a known tonnage basis against prevailing prices. In computing all other contract costs for material, labor (both direct and indirect, and engineering labor in preparation of working drawings), overhead, and profit Mr. Lowry relied primarily on extrapolations from Maritime’s “library of bid backups”, consisting of breakdowns of past bids by shipyards on ship construction contracts. These bid breakdowns by submitting shipyards were in turn based on their “return cost” experience (i.e., ultimate completion costs) in constructing ships previously. The “library” is not available to the shipbuilding industry, for the bid backup data of a submitting shipyard is treated as confidential information. In addition to using the “library” as a prime source of relevant cost data, Mr. Lowry also considered to an indeterminate but apparently minimal extent the contract prices of approximately six ships which had some comparable features, including some Government icebreaker tankers and cargo vessels, and the Surveyor referred to in finding 5. Mr. Lowry’s estimate escalated costs to an assumed contract award date of September 1961 at a rate of six percent per year based on the Department of Labor Wholesale Price Index, and added an estimated figure of two percent of total costs to cover possible cost increases in labor and material during construction. To these totals were added estimated amounts for non-contract costs for which the Government would be responsible, such as for possible change orders (computed at four percent), cost of government design and supervision, and C&GS-supplied figures for special oceanographic equipment. The estimate involved a considerable amount of judgment. The reason for Mr. Lowry attaching minimal weight to the contract prices of ships containing comparable features was the difficulty in comparing so many variables. No weight was attached to the return costs of other ships, since in fixed-price contracts Maritime is seldom familiar with the cost breakdown and allocation of such return costs. In the case of the Surveyor, where Maritime had performed an incomplete audit of NASSCO’s return costs as referred to in finding 5, supra, Mr. Lowry considered them to be irrelevant to the estimating of costs for the OSS-1 because he attributed the great majority of NASSCO’s excessive costs and consequent losses to its inexperience, under-bidding, and other causes for which the Government was not at fault.

(d) The “reasonable” estimate for the Oceanographer prepared by Mr. Lowry for Maritime represented a ceiling price which should not be exceeded by a low bid or, if so, then Maritime would reexamine its reasonable estimate and the shipyard’s low bid breakdown to ascertain possible errors. Maritime’s reasonable estimate was purposely on the high side. In the buyer’s market which prevailed in the shipbuilding industry in the 1960’s, the low bid would usually be substantially under Maritime’s reasonable estimate. The “low” estimate prepared by Mr. Lowry reflected Maritime’s expectation of the range of low bids. His “low-low” estimate, also expressed in a high-low range, was from $51,000 to $66,000 less than the high-low range of Mr. Lowry’s low estimate. The three alternative estimates were as follows:

Range Rounded off to
Reasonable estimate..-...$8,013,264-$8,621,020 $8,600,000
Low estimate.. 7,373,489- 7,666,083 $7,300,000-$7,600,000
Low-low estimate. 7,322,443- 7,499,811

With a learning curve reduction of 15 percent for the Discoverer as a second identical ship, Maritime’s reasonable and low estimates for the two ships combined would be, respectively, $15,725,000 and $14,060,000.

In each case the estimate was exclusive of additional costs to be borne by the Government (for design and administration, equipment furnished by C&GS, special oceanographic equipment to be furnished by the Government) and included no allowance for change orders. Thus the estimates were designed to provide a basis for evaluation of bids. The disparity between the high-low range of figures for the reasonable estimate is attributable to applying alternate overhead rates of 70 and 60 percent on direct labor. The disparity within the high-low range of figures for the low estimate is attributable to applying alternate overhead rates of 60 and 50 percent on direct labor. The principal reason for the difference between the low estimate and the low-low estimate lies in a lower labor rate for the latter. The principal reasons for the variations between the reasonable, low, and low-low estimates by Maritime for OSS-1 were (1) non-engineering labor rates computed at $3.10, $2.80 and $2.50 per hour in the respective estimates, (2) variations of from 50 to 70 percent of direct labor as tlie measure of overhead, and (3) a variation of about 21,000 labor hours between the reasonable estimate and the other two. Maritime’s material costs in its reasonable estimate were $68,846 more than in its other two prebid estimates, almost entirely as to outfitting costs. Of course, any differences between the estimates as to material and labor costs were enlarged by the percentage additions for overhead, profit, and percentage allowance for possible cost increases during performance.

9. On February 19, 1962, Maritime issued invitations to bid on the Oceanographer, and on the Discoverer as an optional second identical ship. At bid opening on May 15, 1962 bids were submitted by 11 shipyards ranging in price from $6,246,923 to $9,929,543 for the Oceanographer, from $5,848,894 to $8,335,893 for the Discoverer, and from $12,095,-817 to $18,265,436 for the combination. The bid averages for the Oceanographer, the Discoverer, and the combination were, respectively, $8,140,933, $7,099,721, and $15,240,654. The average “learning curve” discount disclosed by the competing bids for the Discoverer was 12.7 percent. National Steel and Shipbuilding Company (NASSCO), which had lost money in constructing the Surveyor as described in finding 5, supra, bid $8,235,000 for the Oceanographer, $6,976,000 for the Discoverer (hence a learning curve of 15 percent), and $15,-211,000 for the combination. Low bidder was the Christy Corporation, whose bids were $6,246,923 for the Oceanographer, $5,848,894 for the Discoverer, and $12,095,817 for the combination. Gibbs was the second low bidder with bids of $6,597,440 for the Oceanographer, $5,993,488 for the Discoverer (hence a learning curve of 9.2 percent), and $12,-590,928 for the combination. Christy Corporation, the low bidder, failed to furnish a bid bond, although in subsequent discussions it stated it was in a position to furnish a bond. Nevertheless its bid was ultimately determined to be non-responsive. In the course of the discussions Maritime advised Christy that its estimate for engineering hours of 91,000 hours was too low, and that its estimate for material was possibly $200,000 low. In contrast, Gibbs’ estimate of engineering manhours for the Oceanographer was 70,000 hours, and Maritime’s “reasonable” estimate was 138,881 hours.

10. The following comparison between the bid estimate by Gibbs and the reasonable and low prebid estimates by Maritime for the OSSes is hypothetical as to the latter in that adjustments have been made to the Maritime estimates in order to provide a more authentic comparison. The adjustments are to make Maritime’s unit cost of labor, and percentages for overhead and profit correspond to the figures used by Gibbs. Thus formulated, Maritime’s prebid reasonable estimate for the Oceanographer was 17 percent more than Gibbs’ and Maritime’s prebid low estimate for the Oceanographer was 13 percent more than Gibbs’. Correspondingly, Maritime’s reasonable and low estimates for the Oceanographer and Discoverer combined were 18 percent and 13 percent, respectively, more than Gibbs’. The greatest differences occurred with respect to labor as to which Maritime’s reasonable and low estimates for the Oceanographer were, respectively, 49 percent and 39 percent greater than Gibbs’ in dollars ($1,155,000 vs. $1,716,310 and $1,607,635) and 47 percent and 42 percent greater than Gibbs’ in hours (420,000 hours vs. 620,239 hours and 598,939 hours). The parenthetical insertions against certain figures in the following schedule represent percentage or unit variations in Maritime’s reasonable and low estimates compared to Gibbs’.

Oceanographer
Cost categories Gibbs’ estimate Maritime’s reasonable estimate Maritime’s low estimate
Engineering (man-bours).. Labor (man-bours)_ 70,000 300,000 138,881 481,308 (49%) (37%) 120,000 473,939 (44%) (36%)
Totals (man-hours). 420,000 620,239 (47%) 598,939 (42%) Material (dollars). $4,260,600 $4,256,772 (-$3,728) $4,187,258 (-$73,242) Labor (dollars). $1,165,000 $1,716,310 (49%) $1,607,635 (39%) Overhead at 75%. $866,000 $1,281,232 $1,165,626 Profit at 6%. $315,690 $360,316 $348,026 Adjustment for fixed price (2%). $161,333 $146,171
Totals. $6,597,440 $7,717,963 (17%) $7,454,716 (13%)
Oceanographer And Discoverer Combined
Totals.. 2,690,928 $14,743,209 (18%) $14,238,608 (13%)

11. Gibbs expected to break even on its bid for the OSSes. It had built an Agor-3 (a small and much simpler survey vessel) for the Navy just before, and submitted a break-even bid on the OSSes in order to retain its skilled labor force and with the ambition of building ships of this larger class. It believed that lower labor rates and benign weather in the Jacksonville area would keep its costs down. It was not aware of NASSCO’s cost or manhour experience in building the Surveyor (finding 5, supra), nor did it know of Maritime’s prebid estimates. It was generally aware of the public facts relative to Congressional appropriations for the two ships, but to what extent the record is silent.

12. A survey team was sent by Maritime to Gibbs on May 28-29, 1962, before the contract was awarded, for the purpose of determining the shipyard’s capability to construct the oceanographic vessels. This survey team reported that Gibbs had the physical capability to construct one or two of the vessels. It also reported that Gibbs had adequate sheet metal, piping, electrical, blacksmith, and steel fabrication shops, warehouse and storage areas, and satisfactory drydock and crane lift facilities; that Gibbs’ building way, platen area, and mold loft were inadequate; that Gibbs’ engineering staff was not large enough nor technically competent to build the ships (as to this Gibbs assured Maritime and C&GS prior to contract award that it had hired several competent engineers and anticipated hiring additional engineers following the award as necessary to handle design details); and that personnel in all categories except engineering were adequate. (Cf. finding 8(a), supra). It reported to the contracting officer that in its opinion Gibbs had understated the required engineering manhours by at least 50,000, and underestimated its required manhours for ship construction labor by 100,000.

Maritime’s Division of Estimates felt that at least 570,000 engineering and direct labor manhours would be spent as against Gibbs’ estimate of 420,000 manhours. The team advised the contracting officer that Gibbs would experience a probable loss of at least $300,000 on the one ship, which included a credit of $100,000 for “possible material saving”. On June 12,1962, the contracting officer reported this potential loss to the Comptroller of the Maritime Administration, and pointed out that there would also be “a possibility that in the event of late delivery, liquidated damages may be assessed at the rate of $2,000 per day”. The contracting officer advised in this communication that “It is in the Government’s interest that the financial capability of the Gibbs Shipyards, Inc., be such that, in the event of a loss, progress and vessel delivery will not be affected for financial reasons”. By letter dated June 25, 1962, America Corporation, the parent company of Gibbs, advised Maritime that it would make available from time to time sums up to a total of $600,000 to Gibbs to aid them in any financial need they might have in connection with the two OSSes. While there is no express proof in the record that America Corporation had been notified of Maritime’s belief that Gibbs would probably lose at least $300,000 on the one ship, the sequence of events and the mathematical coincidence of America Corporation’s $600,000* pledge for the two ships being exactly twice the figure provided by Maritime as the probable loss for the one ship, make it reasonable to conclude that America Corporation was aware of Maritime’s loss prediction. It is also reasonable to infer circumstantially that Gibbs knew that Maritime’s loss prediction was based on Gibbs’ underestimate of manhours. The testimony of Mr. Fletcher, the president of Gibbs at the time, that Maritime’s survey team did not tell him of a potential loss, may be merely a lapse of memory on his part.

13. Under date of July 16,1962, Gibbs and Maritime contracted for the construction of the Oceanographer at a price-of $6,597,440 for delivery in May 1964. It was designed by Maritime for use by C&GS. Under the contract Maritime had the option (later exercised, cf. finding 17) of amending within four months to provide for the construction of another identical ship, the Discoverer, for an additional $5,993,488.

14. As applied to vessels, centralized engine room control (hereafter CEBC) refers to an automated system and related subsystems which extend the operator’s supervision and control of a ship into all parts of its machinery plant, giving him immediate “pushbutton” control of the main and auxiliary machinery from a centralized location. It also permits centralized observation and monitoring of the operating condition of the machinery. The performance of all major pieces of machinery is automatically recorded on a teletype printer. Switches permit the reading of individual cylinder temperatures and exhaust temperatures. Performance of equipment in the machinery spaces, the propulsion motor room, and the steering engine room is monitored by closed circuit television cameras, and 'by microphones which pick up machinery sounds. Beadings from sensors installed at multiple points in the machinery plant are automatically transmitted to the CEBC system for recordation on a printer.

15. Prior to the award of the contract for construction of the Ocecmogrwpher in July 1962, various CEBC features had been incorporated on vessels here and abroad, such as pilothouse control, and pushbutton starting and stopping on towboats, tugboats, ferry boats, and cargo vessels. A Japanese cargo ship, the Kinkasan Maru, had the most highly developed CEBC system of any theretofore. Belated interest in automating American ships arose in late 1961 and early 1962, with Westinghouse Electric Company approaching Maritime on a program for automating cargo ships then being planned for Lykes Brothers. Maritime formed a team to study the engineering feasibility of CEBC. A mock-up of a CEBC console was displayed to Maritime in February 1962. Specifications for the contract in suit contained under date of June 30, 1962, an “Alternate Price Item ‘A’ (Machinery Plant Automation) ” specification, which was later modified and eventually incorporated as a part of Addendum No. 1 to the contract in suit on November 15, 1962. The CEBC system thus prescribed for the OSSes was the most advanced form of marine vessel automation as of then, the first to include a full scope of automation, and Avas regarded by tbe shipbuilding industry as a major developmental step in the automation of vessels. The CERC specification for the OSSes was a performance type and gave only overall guidance to Gibbs in developing CERC. The CERC addition to the contract was developmental in applying the state of the art to the particular ships, rather than being a research and development program. In its subcontract bid to provide a computer as a substitute for a data logger, Westinghouse Electric Corporation described the CERC system proposed for the OSSes as being “essentially the first of its kind, it is highly developmental and the integration of any computer and its associated equipment must necessarily contain the developmental aspect also.”

16. In its proposal to Gibbs on August 14,1962, Westinghouse stated that it was well qualified to develop the CERC system contemplated for the OSSes in suit, that its CERC System Group would be responsible for the design and development of the complete CERC systems subcontract then in prospect, that the systems would be furnished in sufficient time for Gibbs to meet its construction and delivery schedules, and that it had lengthy experience in providing centralized control systems in the electric utility, steel mill, and marine industries. On August 31,1962, Westinghouse offered to furnish Gibbs by subcontract the CERC systems for the two OSSes for $1,110,000. On October 22, 1962, Gibbs accepted the offer subject to Maritime’s approval of Addendum No. 1 authorizing the CERC addition.

17. (a) On November 14, 1962, Maritime exercised its option for the construction of the second vessel (the Discoverer), and Maritime and Gibbs thereupon, as of November 15, 1962, entered into Addendum No. 1, providing for the construction of the second vessel at the agreed price of $5,993,488. Addendum No. 1 also amended the specifications to provide for the installation of machinery plant automation (i.e., CERC), including a data logger on each vessel, at the additional price of $700,000 per vessel, or $1,400,000 for the two. The contract price as so adjusted by Addendum No. 1 was thus increased to $13,990,928. Addendum No. 1 also provided that, as to the liquidated damages of $2,000 per day per ship for the contractor’s delay in delivery, “the Contractor shall be granted an extension of time for any delay resulting from the late delivery to the Contractor of any automation equipment, material, data or approvals, whether furnished by a subcontractor or any other party.” Otherwise Addendum No. 1 did not extend the contract completion date to a day certain, nor does the record reflect the number of additional days or the additional manhours the parties estimated for the CEEC addition.

(!b) In issuing change orders and/or addenda to contracts for the construction of some cargo vessels awarded during the construction of the ships in suit, Maritime added automation to the contracts and agreed to pay costs plus 10 percent, rather than a fixed price basis.

18. By exchange of telegrams between Gibbs and Maritime dated March 26 and 29, 1963, Gibbs agreed to install upon each vessel a computer in lieu of a data logger at an increase in price of $200,000 per vessel, or $400,000 for the two vessels. Maritime virtually dictated Westinghouse to be the subcontractor by specifying a Westinghouse product “or equal” and by directing that “Westinghouse will accomplish substitution as systems vendor.” Because of the integrated nature of the overall automation of the OSSes, and the series of prior subcontracts to Westinghouse for mechanical and electrical components, the selection of Westinghouse to supply the computer was practically inevitable, and Gibbs was ordered to proceed. This informal agreement was later embodied in Addendum No. 3 to the contract dated June 29, 1965 (signed July 31, 1965), and the contract price was thereby increased to $14,390,928. The reason for the delay in execution of Addendum No. 3 is explained in finding 29, infra. During the course of construction, extra items of work (in addition to the automation and computer) were authorized by Maritime at a cost of $246,962 and the final contract price was, accordingly $14,637,890. Pursuant to subcontract with Gibbs, Westinghouse was to furnish the computer equipment and the basic engineering information showing the connections for both the CERC and computer systems, while Gibbs was to install the systems. The computer was a standard general purpose type, but was “ruggedized” in manufacturing for military use. Westinghouse had previously furnished and installed functionally similar computers elsewhere, but required supporting equipment of a special design for the particular installation on the OSSes. In its offer to supply the computer, Westinghouse regarded such subcontract to have “certain developmental aspects.” No computers had previously been installed in Navy or Maritime ships to monitor the performance of machinery, ballast and other systems, or to gather and report out scientific data on oceanographic research ships. The computer was more sophisticated and complex than the data logger which it replaced, particularly as to its programmed “memory” function.

19. Prior to its acquisition of Gibbs on May 28,1964, plaintiff had had no experience in ship construction. Its primary business had been production of rockets, various electronic instruments, and underwater vehicles such as torpedoes and small submarines for use by scuba divers. Plaintiff became interested in purchasing the Gibbs shipyard as 'a means of utilizing its (plaintiff’s) defense and aerospace technology in underseas warfare items, to develop oceanographic technologies, to secure ship construction contracts primarily from the Government, and to perform ship repair work for the Navy.

20. Representatives sent by plaintiff to Gibbs had only about two months to investigate the yard prior to plaintiff’s purchase. It was necessary to consummate the purchase prior to June 1,1964, because Gibbs had an outstanding note for $1 million due then which it would be unable to meet. Plaintiff was aware that Gibbs had been in financial difficulty, and had previously undergone bankruptcy proceedings. Maritime was pleased at the prospect of plaintiff’s acquiring Gibbs because of the relative financial condition of Gibbs and plaintiff. Gibbs’ records examined by plaintiff reflected delays in Gibbs’ performance of the contract in suit by such things as a railroad strike which, delayed steel deliveries, weather, and delays by Westinghouse in its deliveries under several subcontracts, including the automation subcontract. Westinghouse assured plaintiff that there would be no further slippages in delivery schedules.

21. (a) In the course of investigating its prospective purchase of Gibbs, the plaintiff engaged two prominent firms of naval architects and marine engineers, Gibbs & Cox (not to be confused with Gibbs Shipyard, Inc.), and M. Rosenblatt & Son, Inc. Gibbs & Cox made a one-day inspection of Gibbs on April 29,1964, to report on the condition and capabilities of available facilities. The report concluded that “the work being accomplished at the yard in comiection with new construction * * * appeared to be acceptable. It would appear that, provided additional equipment, machinery, etc., is installed, the capability of the shipyard with respect to new construction might be assured.” No appraisal was made by Gibbs & Cox of the progress of any specific construction contracts then pending in the yard.

(b) From May 15 through 17,1964, four technically qualified representatives of Rosenblatt visited Gibbs to estimate the percentage completion of the OSSes. They examined the incomplete vessels, consulted with Gibbs’ officials, and examined a variety of documentary material and records, including construction progress reports, progress billings, contract documents, Gibbs’ bid breakdown of labor, material and overhead, cost analyses, equipment procurement records, inventory, etc. While Rosenblatt did not accept responsibility for the accuracy of its report because it had not made a formal audit and had very limited time, it deemed its conclusions to be reliable, namely, that as of May 15,1964, the contract was 47 percent complete (57 percent for the Oceanographer and 36 percent for the Discoverer), and that the cost projected to completion would be $14,000,000, with $1,000,000 profit. Rosenblatt’s 47 percent completion estimate was based on a projection of all costs through completion, “including all Changes presently contemplated and others as yet unanticipated,” and assumed that “the work will be progressed -with the same degree of efficiency in the future as it has been in the past.”

The Rosenblatt estimate of 47 percent completion placed considerable reliance on Construction Progress Report No. 31 (characterized by the witness from Rosenblatt to be the “best evidence” of physical progress) which reported that as of April 30,1964, the contract was 51.93 percent complete. The Rosenblatt report made one or two adjustments to the construction progress report distribution of points between material and labor, but agreed pretty well with the points allocated to labor. Gibbs’ president, Mr. Fletcher, informed the Rosenblatt representatives that he considered the 51.93 percent completion figure as of April 30 in the progress report to be fairly 'accurate and, if anything, the ships were more than 51.93 percent complete as of the indicated date. Mr. Royce, who was at the time Gibbs’ project manager and remained on as such for Aerojet, testified that he believed the contract to be between 30 and 40 percent complete instead of 51.93 percent, but that he was “out-voted.” Apparently Royce’s views were not known beyond the circle of Gibbs’ officials. Since the Rosenblatt report estimated the contract to be 47 percent complete as of May 15, 1964, as compared to the 56.76 percent completion figure in the progress report of the same date, it would have been reasonable for plaintiff to have suspected that the 51.93 percent completion figure in the progress report for April 30, 1964, may have been overstated in a comparable amount, and by simple reconstruction to have computed that Rosenblatt would necessarily 'have estimated the contract to have been 42 percent complete as of the earlier date. Rosenblatt’s estimate of 47 percent completion as of May 15, 1964, is not easily reconcilable with its estimate that final costs upon completion would be less than the [adjusted] contract price, assuming a constant level of production efficiency. There is a reasonable margin of error of five percent in estimating percentage of completion under the point system. Thus as of April 30, 1964, the 51.93 percent completive estimate in the progress report of that date could be anywhere from 46.93 percent to 56.93 percent, according to plaintiff’s principal witness. A highly experienced expert witness for defendant who had spent many years as president of a major American shipyard testified that you cannot determine the percentage of completion of a partially completed ship by “eye-balling” it or by study of the builder’s cost record, but rather such a determination required a detailed breakdown and painstaking measurement of the ship’s many components.

22. (a) The form of construction progress and payment report (hereafter progress report) referred to in the preceding finding, and the point system integral to it, were developed and used by Maritime over a period of many years as a basis for making regular periodic cash advances to the contractor during contract performance and as a means for determining the percentage of completion of the contract at any time during its life. Under the point system, each vessel under construction is assigned at the outset a certain number of points (usually 10,000, as in the instant case) which are allocated to particular component items of work or equipment on the vessels, separately by labor and material. Each point is worth an aliquot portion of the contract price. The percentage of completion of a vessel 'at any interim time may then be determined theoretically by adding the points of completion credited against the individual components. Maritime requires the contractor to prepare the initial progress report allocating the 10,000 points to particular component items of work or equipment. The initial and subsequent reports prepared by the contractor, for periodic submission to Maritime, must have the joint approval of the contractor, the contracting officer, and Maritime’s comptroller. In the present instance the progress reports were prepared every two weeks by the contractor, based upon its estimate of the progress accomplished. They were submitted to Maritime representatives at the shipyard for review and. approval, which entailed consultation with Maritime’s resident inspectors. Maritime’s disagreements with the contractor’s reports of completion percentages would he discussed with the contractor until mutual agreement was reached, and the reports were then signed 'by each. Upon discovery of a substantial imbalance of points at any time, whether by reason of prior error or additions to or deletions from the contract, a redistribution of points would be effected. The Government’s partial payments to the contractor were protected by a five percent hold-back provision and by a performance bond. Contract progress would not be determined by comparing the actual expenditures of the contractor on the contract with the total contract price. The amount paid to the contractor would be based upon physical accomplishment as disclosed by the point system, i.e., work performed and material received in the yard up to the date of each report, plus work performed outside the yard at subcontractors’ plants but not yet delivered to the contractor. The parties stipulated that the progress reports represented the best evidence available 'as to the percentage of completion of the contract at any given time. However, if time were to permit, a more accurate determination could have been made by a meticulous examination of records and inspection of materials installed, on hand, or ordered.

(b) After the award of the contract for the first ship (the Oceanographer), Gibbs submitted to Maritime its proposed progress report form. On October 30, 1962, Maritime advised Gibbs that it was not necessary to take action on the proposed form since the award of the second vessel was pending, as well as the automation of both vessels. However, Maritime suggested that Gibbs’ proposed form, revised to include the second vessel and automation, should increase its labor point values in enumerated categories, which would effect a reduction in the material point values. On December 15, 1962, Gibbs complied by submitting to Maritime a progress report revised as suggested, and stating that the material-labor point ratios as revised “are very near those that can be expected in actual performance and are generally the same as those submitted with our initial estimate breakdown.” Thereafter, Gibbs submitted bi-weekly reports for the two vessels with points being distributed to encompass the automation and computer additions.

23. (a) During April and May 1964, many representatives of plaintiff company visited Gibbs’ shipyard to make a general inspection and interview management prior to acquisition. These visits included two visits by plaintiff’s assistant comptroller, who examined Gibbs’ accounting and cost records, as well as the progress report dated April 30,1964, which showed 51.93 percent completion. He was told by Gibbs’ personnel that the progress recorded in Gi'bbs’ internal financial records reflected approximately 50 percent completion and that the system used by Gibbs in appraising completion percentage was based generally on Maritime’s point system. Plaintiff’s financial vice-president testified that an examination of Gibbs’ books and records could not have revealed the physical percentage of completion of the two vessels. The president of Gibbs informed plaintiff’s board chairman that Gibbs was performing the contract at a pretty good profit. During this period the contracting officer informed a responsible official of plaintiff that Maritime would not object to plaintiff’s acquisition of Gibbs, and that “while it did not appear that Gibbs would make a profit [on the contract in suit], that it also did not appear that there would be a loss.” On May 15, 1964, the chairman of plaintiff’s board of directors consulted the Under Secretary for Transportation of the Department of Commerce who gave him a memorandum based on information obtained from the Maritime Office of Ship Construction which read in critical part as follows:

Maritime advises that approximately one-half of the total construction [under the contract in suit] is completed. and, likewise, approximately one-half of the construction funds have been expended. On this basis, it now appears that the yard [Gibbs] will probably break even, financially, as far as these two vessels are •concerned. * * *

The memorandum also stated that Gibbs was considerably behind schedule, with delivery scheduled a year behind the original contract dates, although, it was believed that construction should continue in a satisfactory manner. Plaintiff was known at the time to be a prospective purchaser of Gibbs.

(b) The monthly force reports submitted to Maritime by the contractor, which were available for examination by plaintiff prior to its acquisition of Gibbs, contained data from which it could be readily calculated that, as of April 30, 1964, 87.5 percent of the manhours which Gibbs had originally scheduled for the Oceanographer (420,000), and 40.7 percent of manhours originally scheduled for the Discoverer (307,225), had been expended. It should be noted, however, that these originally scheduled manhours did not include the manhours required for the CEBC and computer additions to the contract, so the percentage figures of manhour consumption as of April 30,1964, are subject to reduction in an unknown amount, since the manhour estimate for the CEBC and computer additions is not known. As of the date plaintiff assumed the contract (May 1964), the contract delivery date for the Oceanographer was May 31, 1964, and for the Discoverer, August 19, 1964, but the delivery dates had been rescheduled for June 28, 1965, and September 20, 1965, respectively. The CEBC and computer additions were conditioned on contract extensions being given as justified. The conditions of acceptance of the changes did not, however, include any increases in contract price beyond the fixed prices in Addenda 1 and 3.

24. On May 12, 1964, plaintiff’s president notified Gibbs’ parent corporation that plaintiff would purchase Gibbs’ assets no later than May 27,1964, “conditioned, among other things, that Aerojet is satisfied that work in process is not in loss condition.”

25. On May 21, 1964, plaintiff’s representatives were advised in conference with high Maritime officials that plaintiff could assume Gibbs’ contract. Maritime welcomed the prospect because of the relative financial condition of Gibbs compared to plaintiff’s. Plaintiff knew at the time that Gibbs’ records reflected an overall net operating loss on all of its work in process (including the contract in suit) of over $300,000 during the 18 weeks ending May 3, 1964, and that Gibbs’ book costs for the contract in suit as of May 15,1964, were about $938,048, less than receipts thereunder. Maritime suspected in May 1964 that there was an overprogressing of materials on the contract in the amount of $1,073,690, but there is no evidence that Maritime advised plaintiff of this suspicion (see finding 28 (a), infra).

26. In a letter dated August 19, 1966, commenting long after the fact on plaintiff’s claim for renegotiation of the contract in suit to reimburse losses, the Maritime Administrator advised the Deputy Under Secretary for Transportation of the Department of Commerce as follows:

* * * After the fact, it is now readily apparent that the reported completion of the vessel in the early stages of construction was much overstated, but it could not be known at the time that it occurred.
*****
* * * Since any progress payment formula under a ship construction contract is essentially arbitrary, that is, an approximation of actual physical progress, any person who proposes to use such determination for any purpose must make inquiry of its basis and its relation to physical progress. Neither Aerojet-General Shipyards, Inc. or its parent, Aerojet-General Corporation, requested advice.

During subsequent administrative processing of plaintiff’s renegotiation claim a memorandum dated November 28,1966, from a Mr. Craig of the office of the Under Secretary of Commerce for Transportation, addressed to the Under Secretary, stated as follows with reference to conversations in the spring of 1964 between the contracting officer (Hoff-mann) and plaintiff’s representatives then investigating the prospective purchase of Gibbs, with regard to the percentage of completion disclosed by the April 30, 1964, progress report:

* * * I was also advised that in 1964 when these conversations took place it was too early to make a projection of profit and loss on the contract which would be much more than an educated guess. This is somewhat in conflict with the information we received from Lud Hoffmann’s office in 1964 and passed on to Mr. Martin [then Under Secretary of Commerce for Transportation], i.e., “that the yard will probably break even.” In reflection it appears that we were dealing with guesses, and that there was no firm authoritative guarantee that Gibbs would not take a loss on the contract. * * *

Later in the same memorandum of November 28, 1966:

There may be justification for some degree of renegotiation of the contract, but hardly anywhere near the figure sought by Aerojet. I believe the Government should be fair and give due consideration to the loss anticipated by MarAd, but it should also consider the bids of the other shipyards.
The Office of General Counsel is studying this matter and will make a legal determination regarding Aerojet’s claim for “extraordinary relief” under P.L. 85-804.

27. On or about May 21, 1964, Aerojet-General Shipyards, Inc. (AGSI) was formed as a wholly owned subsidiary of plaintiff. Gibbs’ properties were transferred to AGSI on May 28,1964. The sales agreement provided for the sale and purchase of certain described assets, including inter alia the contract in suit. Paragraph 6(b) thereof read as follows:

Buyer agrees with Seller that it will, upon assignment of the outstanding contracts, bids and leases which Seller has at the Closing Date, as set forth in Exhibit B, assume and perform the same so as to hold Seller harmless and to relieve Seller of any liability thereunder except for liabilities not specifically assumed by Buyer hereunder which shall exist at the Closing Date or arise thereafter out of any action or omission by Seller prior to the Closing Date; and Buyer agrees to execute such instruments as the Seller may reasonably request evidencing such assumption of liability at Closing or within a reasonable time thereafter.

Other than as described, the sales agreement did not specify the rights and liabilities of the parties with respect to claims by or against third parties. Maritime was advised of the acquisition. As of July 31, 1964, AGSI and defendant entered into Addendum No. 2, which provided:

Artigue 1. Aerojet-General Shipyards, Inc. agrees to be bound by the terms of the Contract in all respects as Contractor thereunder as if Aerojet-General Shipyards, Inc. was the original party to the Contract in lieu of Gibbs.
Article 2. Gibbs agrees that except as to claims and demands under Contract No. MA. 3099 sold and transferred to Aerojet-General Shipyards, Inc. by reason of its sale and transfer to Aerojet-General Shipyards, Inc. of all of its interest in Contract No. MA-3099, it releases and discharges the Administration from all claims and demands in connection with said Contract.
Article 3. The Administration releases and discharges Gibbs Shipyards, Inc. from all claims and demands in respect to the Contract, accepts the obligation and liability of Aerojet-General Shipyards, Inc. under the Contract in lieu of the obligation and liability of Gibbs and agrees to be obligated by the terms of the Contract to Aerojet-General Shipyards, Inc. as Contractor thereunder ; provided, however, that any payments made or actions therefore [sic] taken under the Contract as to Gibbs shall be deemed to be payment made or actions taken as to Aerojet-General Shipyards, Inc.

Addendum No. 2 was signed by Gibbs, Maritime, and Aerojet.

28. (a) A few days prior to June 15, 1964, Maritime’s on-site construction representative advised plaintiff (which term includes AGSI as well as its corporate parent, the present plaintiff) that he would refuse to sign any further progress reports unless he was furnished a detailed breakdown — demanded of the contractor several weeks earlier— of materials making up each item on the progress report. The construction representative was concerned over the fact that Maritime had credited the contractor with a total weighted value of $3,434,901 in points for materials up to May 31,1964, while the contractor’s records showed material costs of $2,361,211 (exclusive of subcontractors), a difference of $1,073,690. Maritime’s auditor, upon spot-checking the contractor’s purchase orders, found that “overall the weighted point value for material is overstated”, meaning that in net too many points had been allocated to material in the point system basis of the progress report, or in other words, progress payments had been made by Maritime that were substantially in excess of the contractor’s costs. As a gross illustration, by May 31, 1964, plaintiff had expended or obligated $133,186 for material for Item 0501, Machinery, Main Propulsion, yet had been paid 95 percent of the $910,779 allotted to that item under the point system. Further, as to eleven selected groups of items, by May 31, 1964, the contractor had been paid or credited point values which were $778,271 more than the contractor had expended for materials. Maritime’s auditor advised that such errors could have been detected much earlier if he had made more frequent inspection visits, his previous such visit having been in September 1962. Finally, on April 30, 1964, engineering was credited as 95 percent complete, whereas only 40 percent (83,221) of total engineering hours eventually expended (209,590) had been expended. By the same date 75 percent of the engineering drawings for the vessels had been initially submitted to Maritime for review, not counting the plans then in varying stages of gestation but not actually submitted. Engineering work precedes physical construction, and the actual progress of the vessels would, therefore, lag behind engineering progress.

(b) As a result of these discoveries of point system imbalances, adjustments were made in the progress billing for May 31, 1964, which reduced approved shipyard costs by $756,564, thus adversely affecting future progress payments to plaintiff. Also, effective in the progress report dated August 15, 1964, without objection by plaintiff, the point system was revised by reducing the point values allocated to material from 71 to 65 percent, and correspondingly increasing the point values allocated to labor from 29 to 35 percent (to total 100 percent for the combination). Application of these point revisions to the progress report dated April 30, 1964, would cause a reduction in the percentage of contract completion as of that date from 51.93 to 49.85 percent, which would in turn reflect that the contractor through that date had been cumulatively overpaid $276,364.99 ($290,910.52 less 5 percent withholding). By the same arithmetic, the contractor had been cumulatively overpaid $192,696 by May 31, 1964. The revision of point distribution between material and labor in the progress report of August 15, 1964, while recognizing an over-progressing of material points, at the same time made no reappraisal of actual labor progress.

29. Although Addendum 3 covering the computer installation as a substitution for the data logger, as referred' to in finding 18, supra,, was forwarded to Gibbs on August 14,1963, it was not formally accepted (by plaintiff as successor to Gibbs) until July 31, 1965. As finally accepted, it contained the same proviso as did Addendum No. 1 (see finding 16, supra) promising the contractor a time extension for any delays in delivery of automation equipment. In the intervening two years the parties dickered over terms because of the contractor’s demand, first expressed in Gibbs’ letter to Maritime on January 6, 1964, for the Government’s agreement to increase the contract price for delay costs caused by Westinghouse’s failure either to furnish drawings or to timely deliver the subcontracted equipment for both the automation and computer systems. Maritime refused, insisting on its rights under the contract for computer installation described in finding 18, supra. In its letter of May 1, 1964, to Maritime, Gibbs warned of probable delay in delivery of the OSSes, citing as reasons a railroad strike, defendant’s refusal to issue plaintiff a priority rating for material shipments, and Westinghouse’s failure to timely deliver automation equipment. The May 1 letter also claimed the right to monetary consideration for excessive costs due to the research and development and nature of the automation additions to the contract. The timing of the correspondence exchange in May 1964 on this dispute is significant, for it parallels the period of the plaintiff’s negotiations with Maritime and Gibbs to take over the shipyard and the contract, in the course of which Maritime told plaintiff that Gibbs would probably break even on the contract, as related in previous findings. However, in the course of its preacquisition investigation of Gibbs’ records the plaintiff became aware of the delay problems Gibbs had been experiencing with Westinghouse subcontract performance and Westinghouse had promised there would be no further “slippages.” It is reasonable to conclude that by May 1964, if not before, Maritime had cause to suspect that the contractor would incur a substantial loss on the contract because of its disproportionate bid coupled with the delays being experienced in the delivery of automation equipment from Westinghouse, as well as other delay-producing difficulties which Gibbs had experienced. These various delays were the subject-matter of plaintiff’s formal claim for a 677-day time extension and monetary relief filed November 4, 1964, which claim was rejected by the contracting officer and then withdrawn by plaintiff on July 28, 1965, after the filing of an appeal to the Maritime Administrator who had assigned an examiner to hear the claim.

30. (a) The plaintiff’s November 4, 1964, claim to Maritime referred to in the preceding finding includes a chart which summarizes the delays which occurred to the contract through June 1965 (there is an unexplained conflict between the date of the claim — November 1964 — and the terminal date of the delay chart — June 1965). Through May 1964 (when plaintiff acquired Gibbs and is imputed with knowledge of delays to that time because of its preacquisition investigation), the chart depicts various specific delays, as follows:

a. Steel deliveries, due apparently to a railroad strike, 120 calendar days (80 working days).
b. Air conditioning, 153 calendar days (109 working days).
c. Structural changes in C deck, 241 calendar days (171 working days).
d. Stabilized transducer and window, 279 calendar days (201 working days).
e. Engineering of salt water service system, 231 calendar days (165 working days).
f. Automation equipment delay, approximately 300 calendar days to June 1,1964, plus 145 days beyond that.
g. Machinery and uptake delay, approximately 200 calendar days up to June 1, 1964, plus 185 beyond that.

As charted, the foregoing delays overlap extensively and there is no way of determining their cost impact on contract performance. The November 1964 claim to Maritime does not evaluate the cost impact, but promised to provide such data when available. Even discounting the natural tendency for a claimant to maximize his claim, there is some significance in the fact that the delays up to June 1,1964, total 1,524 calendar days and from then through June 1965 total 447 days, indicating that the great bulk of the delay causes and the cost consequences thereof occurred prior to plaintiff’s acquisition of the yard and presumably were available for its information before purchase. The plaintiff’s November 1964 claim to Maritime alleges an effective delay of 485 days to that date due to the causes enumerated, most of which occurred prior to plaintiff’s acquisition of the yard.

(b) Apparently developing misgivings early in its accession to the contract as to the soundness of its bargain, the plaintiff had its Director of Contracts prepare for its private use an Evaluation Eeport based upon a most meticulous survey of the human and physical facilities of the shipyard and its financial situation. The survey was conducted from September 8,1964 to February 1,1965, and disclosed, under date of January 171965, that the contract was then 55 percent complete and a loss was estimated upon completion of $2,276,046, possibly to be reduced by a “realistic” $650,000 in the event (here unmaterialized) that certain claims against Maritime and Westinghouse could be settled advantageously. The Evaluation Eeport attributed $500,000 of the expected loss to a hurricane, railroad strike, equipment delays, approved delays by Maritime, and changes numbered 1 through 20, while it attributed another $150,000 of the loss to Westinghouse “covering delays and rework of ship to handle late delivery of equipment.” The following excerpts are from the Evaluation Eeport:

One cannot walk through the Yard or through the Engineering Department, peek into manufacturing, planning and scheduling operation, review the contract administration procedures, or be privy to some of the management councils without seeing opportunities for improvement within almost every single operation.
The flagrant policy of presenting claims for work accomplished which are either exorbitant or of limited validity should be discontinued.
The number of [engineering] personnel is far below what is required to do the job. * * * Productivity in this department is below acceptable standards.
Since there is no inspection force per se, the control of quality is left almost entirely to the individual mechanic or to the customers’ inspectors.
There is a fundamental need for more emphasis on quality control of all work in the yard.
Top management’s techniques of doing business had degenerated because of a bankrupt situation and the lack of financial assistance and sound guidance prior to Aerojet-General acquisition.

The Evaluation Report also commented on the inadequacy of the shipbuilding facilities at the yard, duplication and redundancy in Gibbs organizational structure which required functional reorganization, lack of management level personnel competent in organizational and administrative requirements, particularly in engineering, estimating, and finance. The report further commented on understaffing and marginal quality of personnel at lower levels, “shabby method of handling customers and shabby workmanship,” and spoke of the need of reorganization for Quality Control to improve the quality of work. It was critical of Gibbs’ method of relating labor hours to actual physical progress of the ships, resulting in the eventual discovery that, although progress reflected by labor hours expended vs. total labor hours was on target, a survey at the % mark indicated that the job was not really that far completed physically “and the sweat begins.” Finally, the report stated that Gibbs did not adopt the best planning and control techniques in the periodic diversion of construction workmen to repair and conversion jobs.

31. In June 1965 plaintiff assigned key corporate officials from its El Monte, California, headquarters to take over the responsibility for the contract. These included two vice-presidents of the company, a manager of contracts, and a vice-president for finance. These officials had had no prior experience in ship construction, but were versed in business operations. Plaintiff also employed, as a full-time shipyard consultant permanently stationed in the yard, Admiral J. M. Farrin, USN-Ret., who had extensive experience in the Navy in ship construction.

32. On or about June 30, 1965, the assets of AGSI were transferred to its parent, the plaintiff corporation, subject to the former’s liabilities and obligations under the contract, and the shipyard became a division of its corporate parent, under the name of Aerojet-General Shipyards. Plaintiff and Maritime thereupon entered into Addendum No. 4, dated as of August 11,1965, providing for the assumption by plaintiff of the obligations of AGSI under the contract.

33. On August 2, 1965, plaintiff conveyed its shipyard assets to Jacksonville Shipyards (which was incorporated as Rawls Brothers Contractors, Inc., and maintained a large shipyard in Jacksonville), and entered into an agreement with the latter for it to complete the vessels as subcontractor in the same yard and with the same facilities and labor force, at the cost and expense of plaintiff. The agreement provided that: (a) the subcontractor would complete the OSSes on a direct cost reimbursable basis, plus overhead not exceeding 60 percent of direct labor costs; (b) purchase orders and subcontracts in excess of $10,000 must be approved by representatives of plaintiff; (c) plaintiff would have the right to supervise the work being done on the vessels; (d) the subcontractor would give priority in assigning shipyard labor to the performance of work on the vessels; (e) the subcontractor would supply office space, communications facilities, etc., to plaintiff’s officials stationed in the yard; and (f) both parties would preserve their books and records for purposes of audit. Thereafter key corporate officials of plaintiff company remained on in the yard to inspect and supervise the completion of the OSSes, and to review and audit the costs incurred.

34. Deliveries of the Oceanographer and Discoverer were accepted by Maritime and C&GS on, respectively, April 20 and December 15,1966. Acceptances were subject to completion and/or correction of enumerated punch list items, as well as correction of deficiencies subsequently disclosed by guarantee surveys conducted six months after delivery of each vessel. All contract requirements were fully completed in 1968. Extensions of time for delay in 'delivery beyond the dates specified in the original contract and until the dates of actual delivery were granted by Maritime on tbe stated ground of machinery automation difficulties “beyond the contractor’s control”, and no liquidated damages were assessed. Liquidated damages were not assessed because delays attributable to plaintiff were concurrent with the delay caused by the automation difficulties, the latter of which were excused by the language in Addenda 1 and 3.

35. As of April 30,1964, the contract price was $13,990,928 (exclusive of a round $646,000 in subsequent change orders), Gibbs’ “booked costs” were $6,301,407, and Maritime had approved $7,265,792 in progress payments, leaving a balance of $6,725,136 for future payments. By assuming the contract was 51.93 percent completed on April 30,1964, as estimated— and accordingly represented — by the progress report through that date, the projected total cost through completion (assuming an unchanged rate of progression and efficiency) would be a theoretical $12,134,425, thereby providing a theoretical profit of $1,856,503 (of which $964,385 was already credited to Gibbs by Maritime as the excess of approved billings over Gibbs’ ¡booked costs). The total cost of performing the contract (again eliminating the $646,000 in change orders in order to validate the comparison) was $21,176,516 (according to plaintiff), or $20,622^684 (according to defendant) . According to plaintiff’s theory (but not its figures) the true percentage of completion of the contract as of April 30, 1964, was 29.74 percent rather than the represented 51.93 percent, the lower percentage representing the proportion of costs to April 30,1964, to total costs upon completion. Using the defendant’s lower figure of total costs produces a completion percentage of 30.55 percent as of April 30, 1964, as contrasted with the plaintiff’s figure of 29.74 percent.

36. According to the progress report for the period ending April 30, 1964, the contractor had expended 491,195 labor hours to that date and 48.40 percent of the total labor requirements of the contract had been performed. By projection on that basis, full contract performance would require 1,014,865 labor hours in all, of which 528,670 hours remained to be performed after April 30, 1964. The contractor (s) actually expended a total of 2,519,012 manhours in full contract performance, of which 2,027,817 were expended after April 30, 1964, or 1,504,147 hours more than projected on the basis of the 48.40 percent estimate referred to above. The validity of the manhour projection rests upon the assumption that work efficiency and performance-delaying events would be at a constant level both before and after April 30,1964. The point system revision as of August 15, 1964, referred to in finding 28 (b), supra, which increased the point values allocated to labor from 29 to 35 percent, did not fully compensate for the understatement of labor hours which then existed and which continued to increase. The statistics in this finding are not of significant value however, since it is not known how many manhours were estimated or consumed, before and after April 30,1964, for the CERC and computerization addenda which caused great disruption to contract performance.

37. The overprogressing of the contract by mid-1964, the reasons therefor, and the consequences thereof have been described in previous findings, particularly findings 28 and 35. Gibbs and Maritime were mutually responsible for the overprogressing, the former for plotting and adhering to the point maldistribution 'and the latter for endorsing it initially and thereafter. While the basic contract and specifications were for building a standard diesel-electric research vessel to be operated in a conventional manner, the automation of the vessels by Addendum 1 increased their complexity substantially, involving techniques and principles theretofore untried in marine applications even though comparable principles of automation had been used by land based installations. The addition of computers by Addendum 3 further changed the situation by increasing the complexity and sophistication of the vessels, as well as their versatility, so that they were finally the most highly automated vessels afloat to that time. (Cf. finding 15, supra).

38. (a) On a total cost basis plaintiff claims entitlement to $7,932,390.76, representing the excess of its claimed costs in completing the contract after its assumption on May 31, 1964 ($14,419,890.20), over amounts left to be paid beyond that date from the adjusted contract price ($6,487,499.41). This figure is properly reduced by $23,771.36 to $7,908,619.40, representing elimination of the following items:

(1)i $57M: Precontract expenses conceded by plaintiff to be excludable.

(2) $7,072.65: Errors in addition conceded by plaintiff to be excludable.

(3) $16,64-1.6,9: This is a net figure whose elements appeared in plaintiff’s books but could not be verified against supporting documents on audit.

(¡b) In addition to the preceding exclusions (1) through (3), the defendant sought to exclude the following items:

(1) $723,452.99: This is the amount by which the total of Gibbs’ invoice billings to Maritime through May 31,1964, exceeded its booked costs, and thus represents a profit which Gibbs retained. On plaintiff’s theory of recovery, confining it to receipts and disbursements subsequent to May 31, 1964, this profit to Gibbs would not be deducted, even though it was not a cost of contract performance, since it accrued prior to May 31,1964.

(2) $9,906.41 and $544,4-66.08: Respectively, launching expenses, and an allocation of overhead to the contract in suit, spread amongst Gibbs, plaintiff, and Jacksonville Shipyards. These items were eliminated on Government audit on the basis that 41 C.F.R. 1-15.401 excludes from allocable overhead in construction contracts such items of expense as sales, salaries, entertainment, dues, subscriptions, contributions, advertising, and bad debts. The regulation, since superseded, applies specifically to contracts for construction of bridges, buildings, and roads, and expressly excludes contracts for the construction of, inter alia, vessels. No justification was advanced by the defendant for application of the regulation to the contract in suit, and its application would reduce plaintiff’s overhead to an unrealistically low percentage of direct labor costs. The charging of such expenses to an overhead pool for allocation to separate contracts is in accord with generally accepted accounting principles and, absent a specific regulation to the contrary, is justified in the present instance.

(c) Using the same deductions from allowable costs as in paragraph (a) of this finding, on a total cost basis throughout contract performance by the successive managements (Gibbs, plaintiff, and Jacksonville Shipyards), total costs ($21,823,056.51) exceeded total contract receipts ($14,637,-890.10) lay $7,185,166.41, representing the gross loss under the contract.

39. Various delays beset the contract throughout the period of its performance, both before and after the plaintiff’s assumption thereof. In its claim filed with Maritime on November 4, 1964, (cf. finding 29, supra,), the plaintiff enumerated the following causes of delay and extra costs:

Acts of God, including the Florida East Coast (FEC) railroad strike, extraordinary weather, and two hurricanes continually interrupted the Contractor.
Miscellaneous costs and delays, e.g., a direct labor rate increase, administrative difficulties with propeller acceptance, procurement problems with the stabilized transducer window, and the unavailability of a material priority to provide relief from the railroad strike further aggravated the execution of the contract.
The impact delinquencies in delivery of automation equipment has caused excessive delays, the total effect of which is yet to be evaluated and assessed.

In its claim to Maritime of November 4,1964, plaintiff proposed four alternative plans for overcoming the delays in whole or in part and accelerating delivery of the vessels, three of which plans involved a proposed increase in man-loading and overtime at cost increases per vessel ranging from $50,400 to $207,900, depending on the degree of acceleration. Certain of the delays and causes of extra costs listed by plaintiff in its claim to Maritime are contained in defendant’s requested finding 26, and will be the subject of ensuing findings 40 through 48. The extra costs occasioned by these individual causes of loss cannot be determined (except to the extent to be indicated), and plaintiff made no effort to isolate and define such, costs. These causes of loss were directly the fault of Gibbs, plaintiff, subcontractor Westinghouse, or third parties, including acts of God, etc.

40. (a) In addition to subcontracts for other major machinery and electrical systems for the vessels in suit, Westinghouse was subcontractor for the CERC and computer systems under Addenda 1 and 3 to the contract (findings 17 and 18, supra). There were extensive delays by Westinghouse in delivering the CERC and computer systems, and in furnishing the contractor with technical information necessary to install them. These delays by Westinghouse in turn delayed and disrupted construction and increased performance costs more than any other single performance factor. This is clear not only from the contents of plaintiff’s claim of November 4, 1964, filed with Maritime, but also from a number of communications in the record.

(b) Westinghouse received notification from Gibbs to proceed with CERC by telegram on October 26, 1962 (confirmed by purchase order December 24, 1962), with delivery due August 1,1963, for the Oceanograpli&r and December 1, 1963, for the Discoverer. Westinghouse was ordered to install a computer in each vessel in March 1963 (Cf. finding 18, supra) as a substitute for data loggers contemplated under the contract, for delivery in August 1963 for the Oceanographer and December 1963 for the Discoverer, which times coincided with the delivery due dates for the CERO equipment. These dates compare with the original due dates of the vessels themselves in May and August 1964, respectively, although as to them future time extensions were contemplated because of the automation additions. The CERC and computer systems were actually delivered by Westinghouse in October and November 1964, after successive intervening “slippages” in promised delivery dates. There was no correspondence from Westinghouse which would indicate any change in the original delivery dates for the automation components until Westinghouse’s Status Report No. 4 on July 8, 1963, although as stated in plaintiff’s November 4, 1964 claim to Maritime, “In May 1963 the Contractor [Gibbs] realized Westinghouse did not have control of the automation wort * * * and that they were lagging in their design and engineering development of all automation components.”

(c) Because of its preacquisition investigation of Gibbs in April and May 1964, it is conclusively presumed that plaintiff was as aware as Gibbs of the “slippage” status of the Westinghouse automation subcontracts. Plaintiff’s early awareness is shown, inter alia, by its letter to Westinghouse on May 29, 1964 (one day after the formal transfer of the yard to plaintiff), registering its vehement dissatisfaction with the Westinghouse performance which it said had resulted in serious costs to the prime contractor by reason of its effect on related work and disruption of the construction schedule. Plaintiff’s November 4, 1964, claim to Maritime described the disruption in these terms:

This schedule deterioration and changing of deliver dates [for Westinghouse components] resulted in the Contractor having to attempt to build the vessels around the Control Spaces necessary for automated equipment. This was a very impractical and expensive method, of operation pursued by the Contractor to further the job which finally had to be abandoned. Installed structural steel and equipment will now have to be removed to install automated equipment and then to be replaced in their original position. * * * The late delivery of this [automation control] equipment precluded orderly construction and the Contractor has been forced to work under extreme handicaps in starting work in these sections of the ships.
* *. * Late deliveries have not only disrupted construction schedules but will make installation and completion costs excessive.

The plaintiff’s November 4, 1964, claim to Maritime continues by advising that the vessels could be delivered in October and December 1965, respectively, “by working in a most economical manner”, or from SO to 90 days earlier by performance acceleration at additions to the contract price.

(d) Basic engineering information from Westinghouse relative to installation of the automation systems began to trickle in at about the time of delivery of the automation and computer equipment in October 1964. The need to convert this engineering information into working plans delayed the start of installation until the spring of 1965. Thereafter until about September 1965, the installation of leads for the automation and computer systems was constantly disrupted because of interferences with previously installed wireways, piping, ventilation ducts, etc., requiring many relocations and adjustments of existing installations. Between September 1965 and April 1966, when the Oceanographer was delivered, numerous problems involving the computer arose which required reworking to correct errors. The computer for the Discoverer had to be returned to the factory for repairs for two months. Whether these delays were due to the plaintiff or to Westinghouse is immaterial to this litigation. Defendant’s exhibits 169 and 170 are bar charts which purport to show the scheduled vs. actual commencement and completion dates for various categories of outfitting work which were affected little or not at all by automation difficulties (see details in finding 30(a), supra). No satisfactory explanation is given by plaintiff for its delay in performing those items of work which could have proceeded irrespective of automation delays, although it is impossible to assess quantitatively the extent of such items of work.

(e) Prior to Mr. Fletcher’s separation as president of plaintiff’s operating shipyard subsidiary, he unsuccessfully advocated the filing of a suit against Westinghouse for costs insulting from the latter’s delays in performing the CERC and computer system subcontracts. The gist of plaintiff’s November 4, 1964, claim to Maritime (subsequently withdrawn) was that Maritime foisted on a reluctant contractor the Addenda for CERC and computer systems aft fixed prices although Maritime knew that they were of a highly developmental character (cf. finding 37, supra), and that Maritime itself delayed the performance of the CERC subcontract by four months by diverting Westinghouse — without the contractor’s knowledge — to making a feasibility study for the substitution of the data logger in each vessel by a computer, a change order which the contractor accepted but tried to avoid and did not formally ratify until much later (findings 18 and 29, supra). Plaintiff’s claim sought equitable reconsideration by Maritime of the disastrous losses experienced and anticipated resulting from the CERC and computer additions, although beyond the extent noted above Maritime was not shown to have contributed to the losses suffered by the contractor as direct or indirect consequences of Westinghouse’s delinquent subcontract performance.

(f) On December 22, 1964, plaintiff wrote to Maritime demanding $496,293, which it described as its total costs “as determined by accepted accounting procedures” for the failure of Westinghouse with reference to the automative and computer subcontract. This letter, which described in detail the cost and delay consequences of Westinghouse’s failure, and related other delay factors which had affected performance, made no reference to any misstatement as to percentage of completion of the contract as of the earlier date of contract assumption from Gibbs.

41. (a) The shipyard where the contract in suit was being performed was a “composite” shipyard, i.e., it performed repair, conversion, and new construction work. It is not feasible for the average composite type shipyard to maintain separate 'labor forces for repair and new construction work. Rather, as was true in the present case, when repair work arrived in the yard the labor was obtained largely by recruiting men from the local labor pool, augmented by brief diversions of men from the new construction work. Accoi’ding to an Evaluation Report prepared in January 1965 by plaintiff’s Director of Contracts for plaintiff’s private information on the basis of his intensive five-month survey of the yard commencing September 8, 1964 (details in finding 30(b), supra), “The repair jobs have priority over the conversion jobs, the conversion jobs have priority over the new construction jobs.” The reason for the priority of repair work was to minimize demurrage charges for vessels laid up for repairs. Tlie diversions were usually for periods of several days at a time and the number of men diverted at any one time was not large. However, the Evaluation Report referred to above commented that the yard did not adopt the best planning and control techniques in connection with the diversion of construction workmen to repair and conversion jobs. It stated: “Because of repeated fluctuations in the repair work load and the progressively changing demand for trades and skills in New Construction as erection proceeds, 'a well-balanced work force has been difficult to maintain. As a consequence, progress schedules are in almost constant jeopardy.” There was apparently less diversion of labor under plaintiff’s management than under the preceding Gibbs management, and still less diversion under the management of Jacksonville Shipyard than under plaintiff’s direct management. Plaintiff’s subcontract to Jacksonville Shipyard prohibited the practice and, while it then occurred occasionally, it is not believed that the net effect was substantial. The log maintained by plaintiff’s principal witness, who was plaintiff’s representative at the yard throughout the completion of the vessels under Jacksonville, has entries such as those of September 28 and October 1, 1965, complaining of a large percentage of the labor force which was not productively engaged, plus a criticism of lack of supervision. In awarding the contract to a composite yard such as Gibbs, Maritime could expect a normal amount of such practice. There was no specific prohibition of the practice in the prime contract.

(!b) There is a substantial difference between a repair yard and a new construction yard with respect to the training, skills, and experience of the personnel employed. The labor force and supervision at the yard in suit, throughout the period of contract performance, was experienced in repair work primarily and not in new construction work, and consequently production efficiency was subnormal.

42. Rework costs of approximately $55,000, due to poor workmanship, inefficiencies, or mistakes of the contractor, caused an unascertainable amount of delay and disruption. The total of rework costs was not proven to be more than normal, or more than shipyards usually anticipate by including as a factor in their bids for ship construction. The construction of a ship, particularly of the excessively high density nature as the ones in suit, involves the work of various trades operating in extremely close quarters, which impairs their efficiency, is conducive to mistakes, interferences, and rework, and produces poor housekeeping. There was a certain amount of storage of equipment and materials under improper conditions which required either their replacement or restoration, but the evidence does not establish the incidents to be more than normal.

43. A strike of the Florida East Coast Eailroad suspended steel deliveries from February 14, 1963 to May 1, 1963, thus postponing steel fabrication and delaying the laying of the keel of the first of the two vessels from April 1, 1963 to July 22, 1963. In its November 4, 1964, claim to Maritime the plaintiff alleged a delay of 112 days (80 working days) from this cause. This delay caused a rescheduling of key construction events of both ships. The cost consequences of the strike cannot be estimated.

44. In its November 4,1964, claim to Maritime, the plaintiff alleged that two hurricanes in 1964 cost the contractor 21 working days delay due to work shutdowns, restoration, correction of damaged equipment, etc. It also alleged work stoppages due to concentrated periods of rain since the start of construction which, together with the effect of the hurricanes, “caused interruptions considerably in excess of that usually expected.” A majority of ship construction work is performed in the open.

45. The Discoverer was extensively damaged by fire on February 16, 1965. Although the damage was covered by insurance and is not included in the claim, repairs to the damaged areas were not completed until August 27, 1965. The repair work necessarily delayed and disrupted production, although other work on the ship was being performed concurrently.

46. Undermanning by plaintiff and certain of its subcontractors, particularly undermanning of the engineering staff and consequent delay in production of working drawings, affected production while plaintiff owned and operated the shipyard. Overmanning which increased costs without a commensurate increase in production occurred frequently during completion of the vessels by Jacksonville Shipyards under its cost reimbursable subcontract with plaintiff. During the latter period plaintiff expressed to Jacksonville Shipyards its dissatisfaction with the latter’s inadequate quality and quantity of first level and intermediate supervision, and with its lack of material control. Plaintiff’s principal witness, Admiral Farrin, testified that plaintiff’s engineering staff at the yard was a “pretty marginal kind of an engineering staff for a job of this sophistication,” and that even after the staff became adequate in size its talent “was marginal for the difficulty of the job * * * and there was some turnover associated with it.” In retrospect he felt it was a mistake for a yard of that size to do such a sophisticated engineering job with its own design staff. “A small yard like this will typically * * * hire a design agent to do the work for them.” According to Mr. Royce, project manager at the job throughout contract performance, the engineering department was the chief deficiency of the yard.

47. At the time of delivery of the vessels iteras were not completed and/or had to be corrected. Further, at the time of guarantee surveys conducted six months after delivery, items required corrective work. (Cf. finding 34, supra). “Punch list” items which require attention after formal coii-tract acceptance are common, and there is no evidence -that the list of such items here was abnormal or beyond that which would be normally contemplated. All such items were completed by June 30,1968.

48. From a comparison of the average manhour cost of labor between that experienced in performance and that anticipated by the contractor in its original bid estimate, it does not appear that any part of plaintiff’s loss attributable to total cost of labor is represented by increases in hourly labor rates during the period of performance. Thus the excess in labor cost is directly attributable to the manhour overrun described in finding 36, supra.

CONCLUSION OK LAW

Upon itb.6 foregoing findings of fact, which are made a part of the judgment herein, the court concludes as a matter of law that plaintiff is not entitled to recover and the petition is dismissed. 
      
      We reach the same result through a partially different road than, and borrow from the opinion of, Trial Commissioner C. Murray Bernhardt.
     
      
       “Plaintiff" will refer to both of the named plaintiffs, one being the parent corporation and the other a wholly owned subsidiary which was created expressly to purchase and operate the Gibbs shipyard.
     
      
       Commissioner Bernhardt said In this opinion: “We know of no reason to suspect a deliberate misrepresentation, and to say that Gibbs and Maritime dissembled because the one feared eventual loss and the other welcomed a more financially secure contractor would be sheer speculation. Simple mistake Is more In keeping with the facts.”
     
      
       Gibbs appears to have released any such claim In the novation agreement. The trial commissioner considered a claim of that type to be “dubious”, In any event, under the circumstances presented In the findings.
     
      
       See, e.g., Flippin Materials Co. v. United States, 160 Ct. Cl. 357, 365, 312 F. 2d 408, 413 (1963), and cases cited; Ragonese v. United States, 128 Ct. Cl. 156, 120 F. Supp. 768 (1954) ; Snyder-Lynch Motors, Inc. v. United States, 154 Ct. Cl. 476, 292 F. 2d 907 (1961) ; Morrison-Knudsen Co. v. United States, 170 Ct. Cl. 712, 345 F. 2d 535 (1965) ; Womack v. United States, 182 Ct. Cl. 399, 389 F. 2d 793 (1968).
     
      
       The trial commissioner's opinion refers to Maritime's “pleased” approval and its “alacrity” in approving the transfer.
     
      
       We leave open the possibility that, for a contract claim in circumstances like these, the general standard may be the still lower one of recklessness or gross negligence or, perhaps, even of absence of any obligation at all.
     
      
       Section 552 is as follows:
      “§ 552. Information negligently Supplied for the Guidance of Others.
      
      
        “(1) One who, in the course of his business, profession or employment, or in a transaction in which he has a pecuniary Interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.
      “(2) Except as stated in subsection (3), the liability stated in subsection (1) is limited to loss suffered
      (a) By the person or one of the persons for whose benefit and guidance he intends to supply the information, or knows that the recipient intends to supply it; and
      Footnote continued on following page.
      
        (b) Through reliance upon It In a transaction which he Intends the Information to Influence, or knows that the recipient so intends, or In a substantially similar transaction.
      “(3) The liability of one who is under a public duty to give the Information extends to loss suffered by any of the class of persons for whose benefit the duty is created, in any of the tranaetions in which it is intended to protect them.”
     
      
       The commissioner pointed out that “an estimate of the percentage of comjpletion of a vessel under construction is accurate only within plus or minus five points” and “the lower limit of Maritime’s 51.93 percent completion figure of which plaintiff complains would be 46.93 percent, a scant five percent above the 42 percent figure * *
     
      
       The trial commissioner has found and we agree (fdg. 29) that “it is reasonable to conclude that by May 1964, if not before, Maritime had cause to suspect that the contractor [Gibbs] would incur a substantial loss on the contract because of its disproportionate bid coupled with the delays being experienced in the delivery of automation equipment from Westinghouse, as well as other delay-producing difficulties which Gibbs had experienced.” But this is not the same as saying that defendant was negligent in giving a contrary opinion to plaintiff. Having “cause to suspect” is not the equivalent of “should necessarily have come to the conclusion.”
     
      
       Plaintiff cites Helene Curtis Industries, Inc. v. United States, 160 Ct. Cl. 437, 312 F. 2d 774 (1963) ; J. A. Jones Constr. Co. V. United States, 182 Ct. Cl. 615, 390 F. 2d 886 (1968) ; Aerodex, Inc. v. United States, 189 Ct. Cl. 344, 417 F. 2d 1361 (1969) ; Snyder-Lynch Motors, Inc. v. United States, 154 Ct. Cl. 476, 292 F. 2d 907 (1961) ; Bateson-Stolte, Inc. v. United States, 145 Ct. Cl. 387, 172 F. Supp. 454 (1959) ; Ragonese v. United States, 128 Ct. Cl. 156, 120 F. Supp. 768 (1954) ; and Potashnick v. United States, 123 Ct. Cl. 197, 105 F. Supp. 837 (1952).
     
      
       The trial commissioner properly said in his opinion that “in 1964 when plaintiff acquired Gibbs it was well aware of the 1962 bid results” “and of the appropriation disparities” “or at least had access to such knowledge and is charged with it.”
     
      
       Section 551 reads:
      
        “Liability for Nondisclosure.
      
      '“(I) One who fails to disclose to another a thing which he knows may justifiably induce the other to act or refrain fromi acting in a business transaction is subject to the same liability to the other as though he had represented the nonexistence of the matter which he has failed to disclose, if, but only if, he is under a duty to the other to exercise reasonable care to disclose the matter in question.
      “(2) One party to a business transaction is under a duty to disclose to the other before the transaction is consummated
      •(a) -Such matters known to him as the other is entitled to know because of a fiduciary or other similar relation of trust and confidence between them; and
      (b) Such additional mutters known to him as he knows to be necessary to prevent his partial statement of the facts from, being misleading; and
      (c) Subsequently acquired information which he knows will make untrue or misleading a previous representation which when made was true or believed to be so; and
      (d) The falsity of a representation not made with the expectation that it would be acted upon, if he subsequently learns that the other is about to act in reliance upon it in a transaction with him; and
      (e) ¡Facts basic to the transaction, if he knows that the other is about to enter into the transaction under a mistake as to such facts, and that the other, because of the relationship between them, the customs in the trade, or other objective circumstances, would reasonably expect a disclosure of such facts.”
     
      
       Comment l to § 551 states that there Is no duty to disclose where “the plaintiff has equal opportunity for obtaining information, which he may be expected to utilize if he cares to do so, or where the defendant has no reason to think that the plaintiff is acting under a misapprehension.” See also, Restatement of the Law, Contracts (1932) § 472(1) (b), and comment 6.
     
      
       This would include an unsegregated sum (probably about $300,000) for change orders.
     
      
       In contrast, the C&GS, In estimating the cost of the Oceanographer for budget and appropriation purposes, as described in finding 7 (a), supra, arrived at its estimate by escalating the cost of the newly completed Surveyor, but came up with a figure surprisingly close to Maritime’s budget estimate, as stated in finding 6.
     
      
      In contrast, NASSCO'expended 865,180 man-hours of labor in completing the Surveyor (see finding 5), as compared to NASSCO’s bid estimate of 441,479 man-hours.
     
      
       Actually, Maritime’s “reasonable” and “low” estimates of total manhours for the Oceanographer were, respectively, 620,239 and 598,939.
     
      
       Maritime’s “reasonable” and “low” prebid estimates on the Oceanographer estimated material cost at $3,728 and $73,242, respectively, less than Gibbs’ bid estimate,
     
      
       Considering that Rosenblatt knew that Gibbs’ total costs reported to Maritime through May 15, 1964, ■were $7,519,232, and that 47 percent of the $14,000,000 estimated total cost to completion -would be $6,580,000, It would appear on the surface that as of the May 15, 1964, date Gibbs had already expended 54 percent of the total estimated cost to completion, or $939,232, more than the Rosenblatt 47 percent estimate. The extent to which the excess may have been represented by Inventory Is not ascertainable In the available record.
     
      
       There are distortions In plaintiff's asserted and slightly greater completion percentage of 31.96 percent which come from use of costs “Reported to Maritime” figures Instead of Gibbs’ boohed costs, failure to trim the total completed cost figure by the same $646,000 which was properly omitted from the contract price, and from Inclusion of certain costs not properly chargeable to performance.
     
      
       The warranty clause In the Westinghouse offer for Installation of computers offered merely to repair or replace defective parts developing within a prescribed time, “and such correction shall constitute a fulfillment of all Westinghouse’s liabilities in respect to said apparatus, unless otherwise stated hereunder. Westinghouse shall not be liable for consequential damages.” No comparable warranty has been found in the record with respect to the Westinghouse subcontract for CERC installation.
     