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  1. FAR 52.249-IO(a) provides: The government bears the burden of demonstrating that ICI did not perform in a timely manner and that it failed to gain approval of its submittals. DCX, Inc. v. Perry, 79 F.3d 132, 134 (Fed. Cir. 1996). Failure to proceed with the work during a dispute is a ground for termination for default. Preuss v. United States, 412 F.2d 1293, 1301-02 (Ct. Cl. 1969). In this appeal, it is undisputed that ICI failed to complete the work on time, failed to proceed with the work after the Corps rejected its proposed changes to the project, and failed to furnish some submittals and failed to gain approval of other submittals. The government has made a prima facie case for default termination; ICI must, therefore, prove that its nonperformance was excusable. DCX, 79 F.3d at 134. We have already rejected !Cl's contentions that the government delayed the project. Rather, the record makes it clear that ICI delayed the project because it disagreed with the government's design choices (see findings 7, 9-10, 12-14, 18, 22-23) and failed to provide timely or complete submittals (findings 8, 10-11, 15-17, 19-22, 25). The record strongly suggests that ICI has a basic misunderstanding as to its role as a contractor on a government project. Despite !Cl's views to the contrary, and as we now discuss, government contractors must perform the contracts they execute and cannot require the government to rewrite the contract so that they can build some other project they like better. It is well settled that the government is entitled to enforce its contracts so that it receives the work product provided for in the contract. JL. Malone & Assocs., Inc. v. United States, 879 F.2d 841, 845 (Fed. Cir. 1989). The government enjoys considerable leeway in determining what to specify. The Federal Circuit has held in the context of selecting the performance of air conditioning equipment that the "government may require performance both in excess of, or below, the standard normally accepted in a trade." Interwest Constr. v. Brown, 29 F.3d 611, 615 (Fed. Cir. 1994) (quoting Ralph Larsen & Son, Inc. v. United States, 17 Cl. Ct. 39, 46 (1989)). A number of cases from the Federal Circuit and the Court of Claims demonstrate that the contractor's role is to build the project for which it made a binding promise, not some contract that, in hindsight, it believes is more appropriate or makes more sense. For example, in JL. Malone & Assocs., 879 F.2d 841, an agency awarded a contract to replace an outdated fire alarm system and to upgrade an existing computer system. Instead, of upgrading the existing computer, the contractor offered to replace it with a new computer. When the contracting officer declined, the contractor proceeded with the work and submitted a claim. Id. at 844. The Federal Circuit affirmed a Veterans Administration Board of Contract Appeals decision denying the appeal. While the new computer would have been more advanced than the existing computer, the Federal Circuit held that the agency had no obligation to alter the basic design requirements. JL. Malone & Assocs., 879 F.2d. at 846. The court of appeals agreed with the board that it would have been unfair to other bidders to approve such a major change to the contract after the fact because they would not have anticipated when they prepared their bids that the agency would approve such a major change. Id. at 845. Similarly, in Farwell Co. v. United States, 148 F. Supp. 947 (Ct. Cl. 1957), the contract required either copper or brass pipe be supplied, but the contractor attempted to use cheaper copper tubing, which it contended would give equally satisfactory results. As the Court of Claims explained: Id. at 949. The Court of Claims also held that it would have been unfair to other bidders to allow the plaintiff to substitute the tubing. Id. at 950. If the other bidders had calculated their bids based on the use of pipe, the plaintiff would have had an advantage over them. The use of specifications insures uniformity of bidding. Id. During this project, ICI repeatedly informed the Corps of its opinion that the design of the existing system was defective and that it was a mistake to keep that design and add bigger equipment (findings 7, 9, 12, 14). The Corps considered ICI's point of view but elected to continue with its design (findings 9, 13, 19, 21-22, 24). At that point, ICI's only option was to build the project it had signed up to do. Instead, it kept dragging its feet and virtually forced the contracting officer to terminate the contract for default. While there is evidence in the record that ICI underbid the job and did not include all of the equipment in its bid (finding 34), during the hearing, ICI portrayed itself as animated by safety concerns. We need not address whether there is a safety exception to the rule that the contractor must build as designed. See Salisbury Special Tool Co., ASBCA No. 37530, 89-2 BCA i! 21,838 at 109,873. The undisputed evidence showed that the basic design had been in place for some time (findings 1, 13 ), and there was no evidence that the design caused any ill effects to the building occupants. During the hearing, ICI's expert disagreed with its contention that the design violated the building code (findings 32, 36), and there is no evidence that increasing the size of the HVAC equipment would create safety problems. While ICI continues to contend in its post-hearing brief that the specifications were defective, there is an absence of supporting evidence. In sum, any safety concerns that ICI had are unproven. With respect to the submittals, there is no evidence that the contracting officer or other Corps personnel acted unreasonably. As we have found, ICI furnished the submittals months late, or not at all (findings 15, 25). Any such delays are entirely the fault of ICI. The Corps rejected several of the product submittals but showed a willingness to work through the issues that came up (findings 13-14, 17, 19). In rejecting the submittals, the Corps made specific comments or asked specific questions that ICI should have been able to address (finding 15) if the equipment complied with the specifications. ICI failed to cooperate with the Corps and its attempts to work through the submittal process were half-hearted and sporadic. Finally, we also observe that ICI's failure to obtain approval of the accident prevention plan made it impossible to perform any work on the project (finding 16). The ACO provided a number of reasons for rejection of the plan, many of which ICI failed to challenge at the hearing and which we found had been abandoned (finding 48). We rejected ICI's other contentions concerning the accident prevention plan (findings 44-47). The failure to obtain approval of the accident prevention plan was a delay caused entirely by ICI that by itself prevented contract performance. We have examined I Cl's numerous contentions of government-caused delays and have found them to be lacking. ICI is not entitled to have the termination for default set aside, nor is it entitled to recover on its delay claim. See Industrial Consultants, Inc. DBA W. Fortune & Company.
  2. Attached is the March 9, 2017, indictment against 9 defendants in the Fat Leonard Case.
  3. This week, President Trump issued an Executive Order on a “Comprehensive Plan for Reorganizing the Executive Branch.” The order directs the “Director of the Office of Management and Budget (Director) to propose a plan to reorganize governmental functions and eliminate unnecessary agencies…, components of agencies, and agency programs.” This order is a timely, necessary step to improve procurement operations and service to the American people. See Coalition for Government Procurement.
  4. On February 7, 2017, the Board received and docketed an appeal filed by appellant, Foxy Construction, LLC (FCL), from a contracting officer’s decision dated December 8, 2016. In reviewing the materials attached to the notice of appeal, the Board became concerned about its jurisdiction to entertain this appeal and issued a show cause notice to which both FCL and the United States Forest Service (USFS) (an entity within the Department of Agriculture, the respondent in this appeal) have responded. Based upon our review of those responses and the materials attached to them, we must dismiss this appeal for lack of jurisdiction. (sections deleted) I. Requirements for a Claim The Board’s jurisdiction to entertain contract disputes derives from the Contract Disputes Act (CDA), 41 U.S.C. §§ 7101-7109 (2012). As a prerequisite to review by the Board of a contractor’s demand for money from the Federal Government, the contractor must have submitted a “claim” to an agency contracting officer. Id. §§ 7103, 7104(a). The CDA does not define the term “claim.” Todd Construction, L.P. v. United States, 656 F.3d 1306, 1311 (Fed. Cir. 2011). In the absence of a such a definition in the CDA itself, we rely upon the FAR’s definition of the term “claim” in applying the CDA’s requirements. Id. The FAR defines a “claim” as “a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain.” 48 CFR 2.101. There is no requirement in the CDA or the FAR “that a ‘claim’ . . . be submitted in any particular form or use any particular wording.” Contract Cleaning Maintenance, Inc. v. United States, 811 F.2d 586, 592 (Fed. Cir. 1987). Nevertheless, “[f]or the Board to possess jurisdiction to entertain an appeal for monetary relief, the contractor must first have submitted a claim to the contracting officer identifying the basis of the request, seeking payment of a sum certain, and requesting, either expressly or implicitly, a decision of the contracting officer.” Bon Secour Management, LLC v. Department of Veterans Affairs, CBCA 4703, slip op. at 2 (May 13, 2015). In addition, if the amount of a claim exceeds $100,000, the contractor must have certified the claim in the form required by 41 U.S.C. § 7103(b)(1), and any uncertified request for payment in excess of $100,000 “is not a claim under [the CDA] until certified as required by the statute.” FAR 2.101 (48 CFR 2.101). Once a proper claim is submitted, the contractor cannot appeal until either the contracting officer has issued a decision on the claim or the statutory time for the contracting officer to issue such a decision, as set forth in 41 U.S.C. § 7103(f), has expired. Primestar Construction v. Department of Homeland Security, CBCA 5510, 17-1 BCA ¶ 36,612, at 178,330. These requirements are jurisdictional prerequisites to any appeal under the CDA. M. Maropakis Carpentry, Inc. v. United States, 609 F.3d 1323, 1329 (Fed. Cir. 2010). FCL submitted three different letters to the USFS contracting officer requesting additional money under its contract. The USFS argues in its response to the show cause order that none of those letters constitutes a “claim” that would allow us to entertain FCL’s appeal. As an initial matter, the only contracting officer’s decision that FCL attached to its notice of appeal was the one dated December 8, 2016, which purported to decide the FCL “claim” dated October 18, 2016 (which also was attached to the appeal notice). Under our rules of procedure, it is the claim and/or decision referenced in and/or attached to the notice of appeal that identifies what is being appealed. 48 CFR 6101.2(a)(1). Typically, we would look to FCL’s October 18, 2016, submission, rather than its earlier letters, to evaluate whether we possess jurisdiction to entertain this appeal. Nevertheless, in the interest of completeness, and because FCL’s various submissions were apparently viewed as related (such that the contracting officer’s December 2016 decision refers back to the earlier July 2016 decision and the April 2016 “claim”), we will evaluate all three submissions to determine whether any one of them could provide a jurisdictional basis for appeal. II. The January 7, 2016, Letter FCL first requested money under the contract in its letter dated January 7, 2016. The USFS argues that this letter was not a “claim” because FCL did not certify it in accordance with section 7103(b) of the CDA, 41 U.S.C. § 7103(b). Such a certification is required for any claim of more than $100,000 and is “a jurisdictional prerequisite for review of a contracting officer’s decision before this Board.” B&M Cillessen Construction Co. v. Department of Health & Human Services, CBCA 931, 08-1 BCA ¶ 33,753, at 167,084 (2007). “The submission of an uncertified claim [in excess of $100,000], for purposes of the CDA, is, in effect, a legal nullity.” Fidelity Construction Co. v. United States, 700 F.2d 1379, 1384 (Fed. Cir. 1983). “Although a defective certification may be corrected, a failure to certify may not.” B&M Cillessen, 08-1 BCA at 167,084 (quoting K Satellite v. Department of Agriculture, CBCA 14, 07-1 BCA ¶ 33,547, at 166,154). There is no question that FCL did not attempt to certify its January 7 letter in accordance with the CDA. It is unclear, though, whether any certification was required. In its letter, the dollar figure that FCL identifies as the amount of the requested backcharge is $51,051.47, a figure below the statutory threshold for requiring certification.1 Yet the attachments to the January 7 letter, which FCL represented constituted its “claim,” include an unsigned “Application And Certificate For Payment” apparently seeking an additional payment of $95,207.71, which, coupled with the $51,051.47 backcharge request, exceeds the $100,000 certification threshold. The contracting officer expressed confusion over the amount of FCL’s “claim,” and it does not appear from the record that, in response to the contracting officer’s statements in a January 19 email message and at a meeting on April 14 that the total claimed amount exceeded $100,000, FCL made any attempt to clarify whether it was only seeking to recover the $51,051.47 figure through the January 7 submission. We need not resolve how much FCL was requesting in its January 7 letter because there is another reason – one that FCL candidly acknowledges – that precludes the January 7 submission from constituting a CDA “claim.” Nowhere in the January 7 letter does FCL request a contracting officer’s final decision, as required under the definition of a “claim” in FAR 2.101. Without such a request in the claim letter, we lack jurisdiction over an appeal based upon that “claim.” Bon Secour Management, slip op. at 2. It is true that “[t]he law does not require an explicit demand or request for a contracting officer’s decision; ‘as long as what the contractor desires by its submissions is a final decision, that prong of the CDA claim test is met.’” James M. Ellett Construction Co. v. United States, 93 F.3d 1537, 1546 (Fed. Cir. 1996) (quoting Transamerica Insurance Corp. v. United States, 973 F.2d 1572, 1576 (Fed. Cir. 1992), overruled in part on other grounds by Reflectone, Inc. v. Dalton, 60 F.3d 1572, 1579 & n.10 (Fed. Cir. 1995) (en banc)). Further, “[t]hat the contractor intended to make such a request [can] be ‘implied from the context of the submission.’” Rex Systems, Inc. v. Cohen, 224 F.3d 1367, 1372 (Fed. Cir. 2000) (quoting Heyl & Patterson, Inc. v. O’Keefe, 986 F.2d 480, 483 (Fed. Cir. 1993), overruled in part on other grounds by Reflectone, 60 F.3d at 1579 & n.10); see Red Gold, Inc. v. Department of Agriculture, CBCA 2259, 12-1 BCA ¶ 34,921, at 171,721 (2011) (“The request may be either explicit or implicit,” but it must be clear from the submission that “what the contractor desires . . . is a final decision.”). “To make this determination, the Board looks at the totality of the correspondence, including the submissions and the circumstances surrounding them,” using “a common sense analysis . . . to determine whether the contractor communicated his desire for a contracting officer’s decision.” Red Gold, 12-1 BCA at 171,721. There is no express request for a decision in the January 7 letter. Further, looking at the totality of FCL’s communications, we cannot imply a request for a final decision into the language of that letter. Although FCL uses the word “claim” in its January 7 letter, FCL asks the contracting officer to “review and comment” on, rather than decide, its request. Further, in its email message accompanying the January 7 letter, FCL indicated that the January 7 letter and its accompanying materials related to “the issues leading to a possible back charge” and that, if the contracting officer had any questions, she should call FCL’s owner. Exhibit C to Respondent’s Show Cause Response (emphasis added). We recognize that a “cordial closing” to a letter or other written communication that invites further discussions does not, in and of itself, “compromise the letter’s status as a claim.” James M. Ellett, 93 F.3d at 1546; see Contract Cleaning Maintenance, 811 F.2d at 592 (“The fact that in those letters the appellant frequently expressed the hope that the dispute could be settled and suggested meeting to accomplish that result does not mean that those letters did not constitute ‘claims.’”). Nevertheless, a “letter [that] expresses a willingness to reach an agreement as opposed to a demand that the contracting officer reach a final decision” is not a claim. Hoffman Construction Co. v. United States, 7 Cl. Ct. 518, 525 (1985). Here, considering as a whole the letter, its attachments, and the email message through which the letter and attachments were delivered, there was no implied request for a final decision. In its response to the Board’s show cause order, FCL represented that its intent in submitting the January 7 letter (as well as its subsequent April 26, 2016, letter) was to begin a negotiating process with the USFS. The United States Court of Appeals for the Federal Circuit has distinguished between, on the one hand, a request for equitable adjustment that seeks materially to further the negotiation process through exchanges of information aimed at achieving a mutually agreeable settlement and, on the other, a formal claim intended to commence the litigation or prosecution process. Bill Strong Enterprises, Inc. v. Shannon, 49 F.3d 1541, 1550 (Fed. Cir. 1995), overruled in part on other grounds by Reflectone, 60 F.3d at 1579 & n.10. Although a contractor (except in circumstances involving routine requests for payment and termination settlement proposals) may choose to initiate the claim prosecution process while or even before attempting to negotiate an amicable resolution, Systems Development Corp. v. McHugh, 658 F.3d 1341, 1347 (Fed. Cir. 2011) (impasse in negotiations is not necessary before claim can be submitted), the contractor is entitled to pursue negotiation before submitting a formal claim and to treat the costs that it incurs in that negotiation process as contract administration costs. Tip Top Construction, Inc. v. Donahoe, 695 F.3d 1276, 1284 (Fed. Cir. 2012). That is what FCL says it did through its January 7 submission, and the absence of a request for a contracting officer’s final decision in the letter is consistent with FCL’s representation that it did not intend for that submission to be a CDA claim. Until the contractor submits a formal claim meeting the requirements of the FAR, though, it cannot commence the appeal process. Todd Construction, 656 F.3d at 1311. The January 7, 2016, letter does not constitute a “claim” that could provide us a basis for exercising jurisdiction. III. The April 26, 2016, Letter In its letter dated April 26, 2016, FCL requested an equitable adjustment of $329,800.2 A claim in that amount requires certification. 41 U.S.C. § 7103(b). Because FCL did not certify its submission, it was not a claim, and we lack jurisdiction to entertain an appeal arising from it. B&M Cillessen, 08-1 BCA at 167,084. The fact that the contracting officer actually issued a decision in response to the April 26 submission, notifying the contractor of its right either to appeal to the Board or to file an action in the Court of Federal Claims (using the language set forth in FAR 33.211(a)(4)(v) (48 CFR 33.211(a)(4)(v)), does not somehow eliminate the jurisdictional defect because “[a] contracting officer’s decision rendered on an uncertified [claim] is a ‘nullity.’” Regency Construction, Inc. v. Department of Agriculture, CBCA 3246, et al., 16-1 BCA ¶ 36,468, at 177,705 (quoting EHR Doctors, Inc. v. Social Security Administration, CBCA 3426, 13 BCA ¶ 35,371, at 173,572). IV. The October 18, 2016, Letter The letter that FCL attached to its notice of appeal, dated October 18, 2016, requested payment of “approximately $225,000.” That letter cannot constitute a claim for two reasons. First, like the April 26 letter, the October 18 letter seeks payment of more than $100,000, but without any CDA certification. The Board lacks jurisdiction to entertain an appeal arising from it. B&M Cillessen, 08-1 BCA at 167,084. Second, the use of the word “approximately” in the October 18 letter is inconsistent with the FAR requirement that a claim be stated in a “sum certain.” 48 CFR 2.101, 52.233-1(c). In J.P. Donovan Construction, Inc. v. Mabus, 469 F. App’x 903 (Fed. Cir. 2012), the Federal Circuit held that the use of the word “approximately” in describing the claimed amount meant that the claimed amount was not a “sum certain” unless the contracting officer, from other information or material in or accompanying the claim, could determine the exact amount that the contractor was claiming: Id. at 908; see JEM Transport, Inc. v. United States, 120 Fed. Cl. 189, 198 (2015) (discussing the J.P. Donovan decision); G&R Service Co. v. General Services Administration, CBCA 1876, 10-2 BCA ¶ 34,506, at 170,166 (citing Van Elk, Ltd., ASBCA 45311, 93-3 BCA ¶ 25,995, for proposition that approximate amount does not constitute a sum certain). Here, as in J.P. Donovan, no clarifying supporting material accompanied FCL’s October 18 letter. Further, the dollar figure approximation in that letter differed from the dollar figures in earlier submissions. In such circumstances, the identification of “approximately $225,000” in cost overruns does not state a sum certain, as required for a claim under the FAR. In response to the Board’s show cause notice, FCL states that it is now seeking “exactly $153,430.12 as a Claim” from the USFS, a figure that differs from any of its prior submissions to the USFS. It is not too late for FCL to pursue this claim, see 48 CFR 33.206(a) (requiring contractor to submit claims to contracting officer within six years of accrual), but, before it files an appeal with the Board, FCL must first submit that claim to the contracting officer with the required information, identify the amount of its monetary request in a sum certain, certify the claim using the language required by the CDA (set forth at FAR 33.207(c) (48 CFR 33.207(c))), and allow the contracting officer to decide it. “If the contracting officer,” after receipt of a proper claim, “does not render a timely decision, or [the contractor] is unwilling to accept the decision, [the contractor] is free to exercise its right of appeal to this Board.” Red Gold, 12-1 BCA at 171,722. See Foxy Construction, LLC
  5. I'm posting this question for SKoslow: It was posted as a blog.
  6. There is another entry to the Fat Leonard story. Also, try the one below for disgust. Both are on the Home Page.
  7. Thank you for responding to this poll. I am surprised to see that this poll is not as lopsided as I thought it would be.
  8. seeks users of all ages and it must cater to all ages. I've placed your responses into 5 groups. Please click the age group in which you are included. The purpose of this poll is to attempt to provide you with a better experience. This is an anonymous poll so your display name is not shown with your vote.
  9. now has over 4,400 approved members. When we reached the approved member 4,000, I notified the member of the monetary reward for that registration. It took me a few PMs to convince that member that it wasn't a gag. I plan to notify member 4,500 of another monetary reward when I approve that registration. I'm hoping that if I announce that there will be such an award to member 4,500 beforehand, I won't have to send so many PMs to member 4,500. It should be about a 1 to 2 months from now for the 4,500th approved registration.
  10. I hope DHS hires Qin Shi Huangdi as a consultant.
  11. GSA maintains the CAAC Class Deviation Letters site. I've been checking it for over 2 years and there hasn't been a Class Deviation posted. Does anyone know if there have been any Letters issued by the CAAC since February 27, 2015?
  12. Your Registration Request for an account here may take a couple of days to get approved. The software for this forum may or may not backlog registration requests. If the software backlogs your request, I may not see it for hours. If it is not backlogged, I will see it when I check requests--which may be once a day. I approve all requests myself. is similar to the original Wizard of Oz movie where an aging wizard runs things from behind a screen. In this case, I am the aging wizard. So, it may take a bit of time to have your request approved. There are 2 Discussion Forums here: Contracting and Assistance. When your request is approved, you become a Member. Members and Guests can see the Contracting Forum. When Members login they can post to the discussion board. There is an Assistance forum designed for the U. S. Agency for International Development (USAID). Unfortunately, it is not shown to Members because of its inactivity. However, if you are with USAID, you receive a secondary membership which allows those members to see the Assistance Forum and the Contracting Forum when they log in. If you are someone that I think may be interested in an Assistance Forum, I automatically give you the secondary membership. If you want access to the Assistance Forum because you want to participate in it, send me a Private Message and I will give you the secondary membership. You can find the link for private messages at the top right of the screen. Just remember, as of now, no one has posted anything to the Assistance Forum since mid-2016. I only keep it in existence because I hope that it is eventually used.
  13. Vern: That is a solution to what I posted.
  14. I have a question. I hate to quote the FAR in a quote box but could someone explain the meaning of the phrases in 6.205 -- to allow only, 6.206 -- to allow only, 6.207 -- for only. If a regulation uses the word only as it does in the areas I quoted, how does an only allow for consideration of another?
  15. Yes it is out with Error 403. Error 403 is explained as It has been out for days and it probably does not have an active webmaster.
  16. Is this it, a COFC opinion, from 1999: Dubinsky.
  17. Regulatory Freeze Pending Review Things will be a bit unsettled until the new administration figures things out.
  18. There is a freeze on regulations pending review. Nothing extraordinary.
  19. Solicitation Number W15QKN-15-R-0002
  20. In the past, GAO has imposed sanctions on a protester's representative. See GAO Sanctions, COFC, Rule 11: Signing of Pleadings, Motions, and Other Papers; Representations to Court; Sanctions. You can also look at 4 CFR 21.4: Protective Orders where GAO's Bid Protest regulations authorize sanctions against a protester's representative. Under that rule, GAO can go as far as dismissing the protest. GAO, in its Latvian Connection decision, points to PWC Logistics. In that decision, it said: GAO also points to a Supreme Court decision to support its inherent right to impose sanctions. I haven't done any research but is it fair to place a firm and its principal in protest jail for 1 year or is it an abuse of discretion on GAO's part? I think it might make an interesting paper for someone.
  21. This material from The Nash & Cibinic Report has been reproduced with the permission of the publisher, Thomson Reuters. Further use without the permission of the publisher is prohibited. For additional information or to subscribe, call 1-800-344-5009 or visit The Nash & Cibinic Report is now available on Westlaw. Visit On January 11, 2017, the GAO published its decision in the matter of Sevatec, Inc.; InfoReliance Corporation; Enterprise Information Services, Inc.; Buchanan & Edwards, Inc., B-413559.3; B-413559.4; B-413559.6; B-413559.7, January 11, 2017. The attached article by Ralph Nash and Vern Edwards from the May 2016 issue of The Nash & Cibinic Report lays out the issues and the stakes. This is a decision of great potential significance, which offers ample opportunity for beneficial innovation in source selection. The article and the decision merit close attention by all professionals engaged in the conduct of source selections under the Competition in Contracting Act and FAR Part 15. Vern Edwards will soon post a blog entry to explain the decision's significance and potential.
  22. I posted it because GAO said: You can view the excerpt here and download the entire protest at the end pf the excerpt.
  23. According to the facts in my entry: After Rule signed the mod at 10 a. m. on October 8, 1976, was the following Before he signed the contract on October 8, 1976 Rule was a distinguished attorney and he knew that he was negotiating to satisfy a court order. He knew that meant his negotiation had to be approved by the U. S. Department of Justice. Why did he sign that modification is known only by him but he explains it in his sworn deposition, an excerpt of which explains his thinking, and which I have included above. Going back to the original signing of the contract on June 25, 1970 for the Virginia class DLGN's which became CGNs, I remember reading a memo from Secretary of Defense Melvin Laird to the Navy that they could only buy 3 ships--not 5. To get around that, the Navy had the first 3 ships as a base and options to buy two more ships, one of which was the CGN 41. I have always been suspicious about the pricing of the ships but I did not have the time nor the authorization to resolve my suspicions. I cannot let Rule off the hook for that contract awarded in 1970 because he was in NAVMAT's Procurement Control and Clearance Division at that time. I assume he was its Director and his office had to approve the original award which it must have done. On December 21, 1971, mod. 7 was added which authorized construction of the first 3 ships and set the FPIF pricing arrangement for the CGN 41 option. It had an 80/20 share ratio. On February 1, 1973, mod 18 was awarded to extend the date to exercise the option for the CGN-41 by 2 years. That mod. increased the pricing structure to the one that Rule agreed to in his 1976 negotiation. Additionally, the share ratio was now 95/5 and 90/10. That gives you an idea of expected final pricing for the CGN-41 even though it was stated that final pricing somewhere in the future was subject to downward revision. It was a bogus structure in 1973, if not 1970. Mod 18 also left the final resolution for escalation and several other things somewhere down the road. By the time Rule was handed the negotiation of mod 31 by Clements in 1976, the Navy and Rule were negotiating, not at target cost, but at ceiling price. Remember, that at the same time there were claims on the CGN-38, 39, and 40 which were eventually negotiated for roughly 20 cents on the claimed dollar. The escaIation provision left open by mod. 18 was finally agreed upon--3 years later. I would not have approved Rule's negotiation myself because of the bogus pricing structure but that was the state of Navy shipbuilding back then. You can get a flavor of the times by carefully reading the original entry. Rickover was forced to retire in January 1982. Rule lived a building or two away from NAVMAT in the Crystal Plaza complex and died in August 1982. Proxmire had hair plants placed in his head (was still bald) and continued to run down Mass. Ave to work. Once in a while, I acknowledged him. Shipbuilding claims continued.
  24. In early 1977, Gordon Wade Rule (Rule) sat in a chair in a corner of a conference room at the Naval Material Command reading a document that I had prepared about his negotiations on the CGN-41, a nuclear-powered guided missile cruiser. Days earlier, I was among a group that was briefed by a staff member of Admiral Hyman Rickover (Rickover), the Director of the Naval Nuclear Propulsion Program. Although, the briefing was supposed to be about the CGN-41 negotiation, we were treated to a 3-hour lecture on how the Navy's shipbuilders were trying to "pin the rose" on Rickover. In this case, pinning the rose had nothing to do with the shipbuilders asking the Admiral to a prom. When I began writing this blog entry, I had planned to include only the work I had done decades ago for the Chairman, House Committee on Armed Services. That work involved Rule's negotiation of Modification 31 to the contract that included the CGN-41, the eventual USS Arkansas. I wanted you to figure out if the modification that Rule signed was done in a manner that would allow it to survive a court test. It took 2 courts to decide that question so it wasn't as easy as it sounded. Unfortunately I read too much surrounding material and I realized that I was taking Rule's actions out of the context in which they happened back in the 1970s. So, I added a bit more information. You will see Rule as the contracting officer, Rickover as a program officer interfering with the contracting officer, Senator William Proxmire apparently acting for Rickover and himself, and Deputy Secretary of Defense William P. Clements, Jr. (Clements) trying to resolve the shipbuilding claims problem in any manner he could. You cannot choose sides on this one. All characters, including government agencies and shipbuilders, were trying to manipulate and influence anyone that became involved with the CGN-41. It seemed as if sides were drawn by identifying the enemy of an individual's enemy. A Brief Introduction to the Shipbuilding Claims Era In the early 1970s, cost overruns and shipbuilders' claims had become a major problem. By 1976, it had reached epidemic proportions with $1.9 billion in shipbuilder claims. The shipbuilders, the Navy, the Department of Justice, and Rickover were in a war. In the case of the CGN-41, Newport News Shipbuilding and Drydock Company was the industry player. Clements wanted to settle the ship claims problem with the use of P. L. 85-804. A June 21, 1976, Business Week article explains his early effort. The excerpt below is a quote from the article entitled: The Shipbuilders Balk at 40 Cents on the Dollar. The article explained that Clements had planned to settle $1.9 billion of shipbuilding claims against the Navy for "between $500 million and $700 million" but that plan fell fiat with the Navy's shipbuilders. He explained that "the shipyards are giving me trouble." The article further described: After failing to reach a settlement himself, Clements called Navy management to his office for a meeting of the status of shipbuilding claims. Nothing had been accomplished by them either. He then focused on the CGN-41. The work on this ship had been stopped by Newport News because of issues it was having with the Navy. The contract was in court and work had started again under the condition that the Navy negotiated in good faith with Newport News to resolve the issues. The court's time limit for good faith negotiations was running out and something had to be done. Since the CGN-41 contract was in court, the Department of Justice was required to play a part in the review of any settlement proposed to the court. This is where our story begins. I have added the dates on which the actions occurred so that you can follow. All facts are based on documents that I had reviewed in the 1970s or documents that I recently reviewed. I needed to limit the length of this entry so I added enough information to give you a flavor of the times. Sometime in the future, I may write a larger article. Rule was appointed as a special contracting officer on the CGN-41 to resolve the issues that the Navy and the Secretary of Defense could not accomplish. Undoubtedly he knew he was heading into a mighty storm that might harm him. Contract Modification P00031 To CGN-41: Chronology of Events July 13, 1976: Clements held a meeting to discuss Navy shipbuilding claims. Among those in attendance were: Deputy Secretary of Defense (Clements) Consultant to the Deputy Secretary of Defense Assistant Secretary of the Navy (Installations and Logistics) (ASN (I & L)) Chief of the Naval Material Command (NAVMAT) Vice-Chief of the Naval Material Command (NAVSEA) General Counsel of the Navy, and Gordon Rule, Director, Procurement Control and Clearance Division, Naval Material Command. (Rule) In regard to the Newport News claims, a member of the meeting quoted Clements as saying that he was "irrevocably committed to solving this problem; unlike Admiral Rickover." Clements then asked the Navy officials why they had not reformed the contract, indicating that if they would not, he would. He then stated that he wanted to see four changes incorporated in the CGN-41 contract: (1) a new escalation clause; (2) a new "changes" clause; (3) a new ceiling price; and (4) a new delivery date. (emphasis added) During the meeting it was agreed that Rule would become negotiator for the CGN-41. He was to report directly to the Chief, NAVMAT and the Vice Chief, NAVMAT was to meet with Clements each day at 9:15 a.m to report on the progress of the negotiation. July 14, 1976: Rule telephoned Newport News to explain that he had been assigned principal negotiator on the CGN-41 and requested a meeting. July 15, 1976: Newport News was contacted by a consultant to Clements who explained Rule's authority. Rule and Newport News held their first meeting. July 16, 1976: The Assistant Secretary of the Navy (Installations and Logistics) wrote to the Chief, NAVMAT informing him that the Chief would be responsible for the direct discussions between Rule and Newport News. Rule would be the principal negotiator and Rule would be assisted by NAVSEA and the Navy General Counsel, as required. July 16, 1976: Rule sent a memo to Clements describing his first meeting with Newport News. As a note, he mentioned that he intentionally did not contact the Navy's Supervisor of Shipbuiliding, Conversion and Repair (SUPSHIPS), Newport News. July 19, 1976: Rule sent a memo to the Deputy Commander for Contracts, NAVSEA asking for brief descriptions of what the Navy considered as key issues for negotiation and the Navy's negotiating position so he could develop his own negotiation position. July 28, 1976: The Vice Chief, NAVMAT and a consultant to Clements held discussions with Newport News. Areas discussed were: when the CGN 41 problems would be solved, ceiling price, and escalation provisions. August 10, 1976: Rule telephoned Newport News and requested a meeting in Washington on August 12,1976. August 12, 1976: During a meeting in Washington between Rule and Newport News, Newport News left a general outline for negotiations. August 12 and 13, 1976: The Vice Chief, NAVMAT asked Rule about the August 12 meeting so he could inform Clements. Rule explained that Newport News had delivered a proposal and he did not approve of it. August 17, 1976: Rule telephoned Newport News and requested a negotiating session to be held on August 20, 1976. August 19, 1976: The Deputy Chief of Naval Material (Procurement and Production) issued Rule an appointment as Contracting Officer with "unlimited authority with respect to negotiations with Newport News." August 20, 1976: Negotiations were held between Rule and Newport News. August 23, 1976: The Vice Chief, NAVMAT and Rule met with Clements to brief him on the August 20th negotiations. According to Rule, Clements' comment on the negotiations was "fine." After the meeting with Clements, Rule received a note from the Chief, NAVMAT to meet him in the Office of the Assistant Secretary of the Navy (Installations and Logistics). Among those attending were: Assistant Secretary of the Navy (Installations and Logistics), Chief, NAVMAT, Vice Chief, NAVMAT, Rule, Director, Procurement Control and Clearance Division, Naval Material Command, Commander, NAVSEA, Deputy Commander for Contracts, NAVSEA, At this meeting, the Chief, NAVMAT ordered Rule to describe the results of the August 20 negotiations. August 24, 1976: Rickover wrote to the Chief, NAVMAT that he had heard a rumor of a settlement on the CGN-41 between Rule and Newport News. Rickover commented point-by-point about the rumored settlement and said such a settlement "would show that the Government will not require Newport News to honor its contracts." Rickover recommended that any August 24, 1976: Senator William Proxmire wrote to the Attorney General, Department of Justice expressing concerns about Gordon Rule's views on the CGN-41 negotiations and telling the Attorney General: August 25, 1976: Newport News telephoned Clements and read a prepared press release. The consultant to Clements said he and Clements approved of the press release, an excerpt of which stated: "The parties have agreed to sign a definitive contractual document embodying the negotiated agreement for the construction of the CGN-41." Later that day, the Assistant Secretary of the Navy (Installation and Logistics) telephoned Newport News, informed them that he was perturbed by the Newport News press release and stated that the Navy would issue its own press release stating that agreement had been reached in principle but that the matter was to be reviewed by higher authority. On this same date the Navy issued a press release explaining an "agreement in principle" was being drafted for review and approval. (Emphasis added) August 26, 1976: The Chief, NAVMAT sent Rickover a response to his August 24, 2016 letter stating: The Chief, NAVMAT further wrote: For reasons such as this, you must stand apart from these negotiations unless the technical areas regarding naval nuclear reactors become involved. August 27, 1976: Rickover responded to the Chief's, August 26, 1976 letter to him. In response to the wide distribution he used for his letter of August 24, 1976, Rickover explained that: He used the same distribution list for this 6-page letter as he did in his August 24, 1976 letter. August 30, 1976: Newport News met with Rule in Washington and delivered the first draft of Modification P00031. The Chief, NAVMAT sent a letter to Rule explaining that, prior to a binding agreement on the CGN-41, the elements of the agreement must be submitted to the Chief, NAVMAT for review and approval. The review was to be conducted by the Vice Chief, NAVMAT, the Deputy Chief, NAVMAT (Procurement and Production), the NAVSEA Deputy Commander for Contracts; and the General Counsel for the Navy. Mr. Rule was to provide the proposed contract modification, the business clearance justifications, and other supporting papers for review prior to signature by the contracting officer. Gordon Rule forwarded a draft memorandum to the Chief, Naval Material that summarized his negotiations with Newport News. August 31, 1976: The General Counsel of the Navy noted the Rule draft memorandum and told Rule of the General Counsel's responsibility to review the summary of negotiations. Additionally, the General Counsel requested more information to support Rules' summary. September 1, 1976: Rule sent a summary of his negotiations to the Chief, NAVMAT. September 3 1976: In response to the August 31, 1976 memo from the Navy General Counsel, Rule sent him additional information supporting his summary of negotiations. He also provided a copy of the first draft of Modification P00031. September 14, 1976: Members of Rule's and Newport News negotiating teams and DCAA auditors met in Washington to discuss provisions in the first draft of Modification P00031. DCAA was asked to review certain provisions of the proposed modification. September 16, 1976: The Attorney General, Department of Justice, responded to Senator Proxmire's August 24th letter by writing: September 20, 1976: NAVSEA's Deputy Commander for Contracts and a member of the "review team" submitted his analysis of the first draft to the Vice Chief, NAVMAT. This analysis was not made available to Rule. September 24, 1976: DCAA submitted its analysis of certain provisions of the first draft to a member of Rule's negotiating team. September 27, 1976: Newport News delivered a second draft of the modification to Rule and Rule requested DCAA to review the draft. [September 28, 1976: Clements wrote a letter to the Attorney General, Department of Justice, commenting on the August 24 letter of Senator Proxmire. In regard to Rule, he wrote: In regard to the Department of Justice's review of the CGN-41 negotiation, he said: "Let me assure you that we in DoD have no intention to by-pass or withhold from your department any information which you determine that your department needs in connection with legal proceedings under the court order." September 28, 1976: DCAA submitted its analysis of the second draft to Rule. October 4, 1976: NAVSEA submitted its estimate of the cost of the draft modification. Rule rejected the NAVSEA estimate. October 5, 1976: Rule submitted a memorandum to the Chief, NAVMAT for his approval. It included the estimated dollar impact of his negotiated settlement. For those in contracting, it would be similar to a negotiator's memorandum. The Navy General Counsel sent its analysis of the information supplied by Rule to the Attorney General. In the memorandum, Rule noted that a member of his negotiating team could not complete an analysis he requested because of interference from Rickover and his staff. However, he was able to devise a workaround to complete his cost estimate of the modification for the Chief's review and approval. October 7, 1976: Newport News carried a third draft of the proposed modification to Rule. The cover letter from Newport News attached to the modification said "I have executed the enclosed modification on behalf of the company and request you immediately return a fully executed copy." Rule took a copy of the cover letter to the Chief and Vice Chief, NAVMAT in the afternoon. He returned to his office and received a letter from the Chief, NAVMAT telling him that neither he nor his review group had a copy of the proposed modification that accurately reflected the results of Rule's efforts. Final review had not been completed and the proposed modification could not be consummated before the review was done. According to Rule, he thought about the CGN-41 negotiation effort all afternoon after he met with the Chief and Vice-Chief, NAVMAT. He explained in a deposition that he: October 8, 1976: The Vice Chief, NAVMAT called Rule into his office at 8:22 a. m. He gave Rule a letter dated October 7, 1976 that explained that he did not have authority to sign the modification. Rule explained he had signed it and the Vice Chief requested Rule to give him all signed copies. Rule refused but said he would give them to Clements. The Vice Chief then left for his 9:15 am meeting with Clements. Rule returned to his office dictated a transmittal letter imposing two conditions upon the modification and gave Newport News a copy. The Vice Chief, NAVMAT called Rule into his office and told him that the Undersecretary of the Navy would keep all executed copies of the modification but Rule told him that he already had signed it. He returned to his office, signed the transmittal sheet, and handed it to Newport News at 10 A. M. Shortly afterward at 11:50 a. m., Rule was notified that his appointment as contracting officer was rescinded. March 8, 1977: The District Court for the Eastern District of Virginia ruled that: February 27, 1978: The United States Court of Appeals, Fourth Circuit ruled that