In the United States Court of Federal Claims
Total Page：16
File Type：pdf, Size：1020Kb
In the United States Court of Federal Claims No. 98-894C (Filed June 10, 2005) * * * * * * * * * * * * * * * * * * * * * SHORT BROTHERS, PLC, * Contracts; breach of contract; illegal * contract; commercial impracticability; Plaintiff, * impossibility; superior knowledge; * mutual mistake; defective government- v. * furnished property; duties of good faith * and fair dealing; unjust enrichment. THE UNITED STATES, * * Defendant. * * * * * * * * * * * * * * * * * * * * * * Ronald S. Perlman, Washington, DC, for plaintiff. John H. Korns, Susan Warshaw Ebner, and Brian J. McCormick, Jr., Buchanan Ingersoll, PC, of counsel. James W. Poirier, Washington, DC, with whom was Assistant Attorney General Peter D. Keisler, for defendant. OPINION MILLER, Judge. This case involves the acquisition for the U.S. Army National Guard of a commercial aircraft converted to a military aircraft, the C-23B+, under a sole-source fixed-price contract. The finished product is quite the success; the C-23B+ is in service today, and some of the military aircraft are with our nation’s servicemembers in Iraq. The success did not come without cost. Defendant agreed to pay approximately $150 million for twenty-eight aircraft. Plaintiff sued in the United States Court of Federal Claims to recover cost overruns that, as of trial, plaintiff calculated at $58.9 million. Trial demonstrated that plaintiff, a sophisticated original manufacturer and maintenance provider of aircraft, undertook a major modification effort that it had never performed before, underestimated the effort that the scope of work required, grossly underestimated hours and costs, and was hobbled by its production subcontractor. For its part, the military underestimated the effort that the scope of work required and exhibited questionable candor concerning the risks and costs that plaintiff faced. Plaintiff produced and delivered twenty-eight aircraft based on what turned out to be a wholly inadequate government-approved proposal. Although the proposal period represented a singularly bilateral coordination effort on the part of the contractor and the military, plaintiff recorded, for the conversion alone, direct labor hours of 1,124,603 against the 253,531 estimated hours that formed the basis of its proposal. Where the fault for this discrepancy lay is the issue before the court. PROCEDURAL HISTORY Short Brothers, PLC (“plaintiff”), filed this lawsuit against the United States in the United States Court of Federal Claims on November 25, 1998. Short Brothers, PLC v. United States, No. 98-894C. The complaint sought relief on the following nine counts: two counts for illegal fixed-price contract; impossibility; commercial impracticability; failure to disclose superior knowledge; mutual mistake; defective government-furnished property; breach of implied duties of good faith, cooperation, and fairness; and unjust enrichment. The United States answered, and after completion of two years’ discovery, defendant moved for summary judgment on March 13, 2001. Briefing on defendant’s motion was completed in September 2001, and, after a ruling had not issued by October 2002, the parties filed motions for leave to file supplemental authority. The supplemental briefing was added to the record as of February 26, 2003, and the case was reassigned to the undersigned on March 10, 2004. As of that date, the summary judgment motion still was pending. On March 18, 2004, an order entered that granted in part and denied in part defendant’s motion for summary judgment and scheduled trial. Short Brothers, PLC v. United States, No. 98-894C (Fed. Cl. Mar. 18, 2004) (unpubl.) (the “Summary Judgment Order”). Surviving the Summary Judgment Order were plaintiff’s claims for commercial impracticability, failure to disclose superior knowledge, mutual mistake, and defective government-furnished property. Plaintiff’s claims for illegal contract and impossibility were adjudicated in defendant’s favor. The parties proceeded to trial beginning in January 2005. 1/ 1/ The court considered the testimony of every witness, although discussion of each one is not necessary to render this opinion. Plaintiff presented the following fact witnesses: (1) John W. Ballard, a methods engineer, currently Senior Industrial Engineer at Bombardier Aerospace (“Bombardier”) in Belfast, employed by plaintiff during the relevant time period as Work Study Engineer from 1978 to 1994, and Methods Engineer from 1994 to 1998, with 2 1/ (Cont’d from page 2.) prior experience in the Royal Navy; (2) Kenneth S. Brundle, a member of plaintiff’s Board of Directors, currently semi-retired with the position of Vice Chairman, formerly plaintiff’s Vice President of Manufacturing from 1990 to 1995; Vice President of Aircraft, Aerospace Operations from 1995 to 1996; Vice President and General Manager for Aerospace Operations from 1996 to 2000; and Executive Vice President and General Manager for Aerospace Operations, Bombardier Aerospace Operations Group, from 2000 to 2003; (3) C.W. Stephen Bowyer, currently a self-employed business owner, a licensed FAA DER (Federal Aviation Administration delegated Designated Engineering Representative), employed at West Virginia Air Center (“WVAC”) as Chief Engineer from 1992 to 1995, with prior employment at de Havilland Inc. in Toronto; (4) Patrick N. Cowan, currently Engineering Project Manager in Montreal for Bombardier, former Engineering Manager for the C-23B+ project and, prior thereto, Head of Design Engineering Support Group – Aircraft Division; (5) Thomas P. Dillon, a finance manager for plaintiff in Belfast, who served as a senior financial analyst for the C-23B+ project; (6) Cathryn Crone Gilmore, Contract Manager for the C-23B+ in 1995 and the Contract Director beginning in 1996; (7) J.D. Luchuck, CPA, currently the Finance Lead at WVAC, former Short Brothers (USA), Inc. (“Shorts Inc.”) employee in 1995 and later Staff Accountant for WVAC from 1996 to 1998; (8) Diarmuid B. Maguire, plaintiff’s Designated Commercial Manager for the C-23B+ proposal; (9) Stephen G.D. McCoy, currently WVAC General Manager, formerly plaintiff’s C-23B+ Program Manager from January 1993 to October 1994, when he became Operations Manager at WVAC and then C-23B+ Program Manager at WVAC from July 1996 to July 1997; (10) Russell W. McFadden, currently General Manager Composites for Bombardier, formerly Director of Manufacturing Engineering in 1993; (11) John C. Nesbitt, currently Program and Contracts Manager on two Bombardier programs, formerly Program Manager for the C-23B+ project from time of award to October 1994, when he became WVAC General Manager until December 1995; and (12) Danielle Thibaudeau, Chartered Accountant (the equivalent of a CPA), and former Bombardier employee from 1997 to 2004, initially an internal auditor and finally Manager of General Accounting within a division called BTNA. Plaintiff’s expert witness in aircraft manufacturing, new aircraft manufacturing, engineering remanufacturing processes and aerospace estimating methodology was Allen C. Haggerty, currently President of the Embry-Riddle Aeronautical University Engineering Advisory Board, a trained aeronautical engineer and former aerospace executive at Boeing and McDonnell Douglas. 3 OVERVIEW OF THE PROCUREMENT In 1993 the United States Government, through the U.S. Army Aviation and Troop Command (“ATCOM”), entered into Contract No. DAAJ09-93-C-0656 with plaintiff for the procurement of twenty military aircraft with an option for an additional ten; U.S. Army National Guard (the “Guard”) was the customer. The aircraft was to be known as the C- 1/ (Cont’d from page 3.) Defendant called two fact witnesses: (1) Paul E. Lutz, currently employed by the Army Aviation Systems Command (“AVSCOM”), the predecessor to the agency that commandeered the C-23B+ Division, as Aerospace Engineer in the Fixed Wing Engineering branch in the Systems Engineering Division; and (2) Steven S. Mead, Contracting Officer in charge of the acquisition of the C-23B+. Defendant’s expert in scheduling and delay analysis was Thomas C. Caruso, an attorney currently employed at Navigant Consulting in Denver, Colorado, as a director performing claims analysis, with employment history in the construction business, including serving as Project Engineer with Western Fuels-Utah, Inc., and Chief Capital Construction Officer for Long Island Railroad. Seven witnesses testified by deposition: (1) Sam Coey, deposed August 11, 2000, retired Belfast employee, stress engineer; (2) Kevin Crawley, deposed on July 26, 2000, employed in plaintiff’s Sales Department during the pertinent time period; (3) Ian Heaton, deposed on August 1, 2, 3, and 9, 2000 (consecutively paginated under two systems, the first referred to herein as “Heaton I” and “Heaton II”), former Director of New Programmes for plaintiff; (4) Tom Mansfield, deposed on August 3, 2000, Engineering Project Manager for the C-23B+ project; (5) Harry Stripe, deposed on August 11, 2000, former Design Engineer and Structural Engineering Manager for plaintiff and former member of the Royal Air Force; (6) William H. Pentz, deposed on July 6, 2000, consultant to WVAC during 1992 who subsequently served as Program Manager at WVAC, and a former member of the United States Army, including work as Production Director for Defense Contract Audit Systems and Director of Contracts at Raytheon; and (7) Larry R. Wright, deposed on October 2, 2000, Avionics Manager for plaintiff and later Production Manager on the C-23B+ project during approximately December 1996. The parties