KECO Industries, Inc. v. United States

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KECO Industries, Inc. v. United States, 176 Ct. Cl. 983, 998 (Ct. Cl. 1966), was a case before the United States Court of Claims dealing with the procedure for handling contract adjustments when a contractor provides a substitution.

Contents

Background

Defendant United States contracted with plaintiff to produce electric and gas refrigerators. The parties sought the intervention of the Court of Claims on two disputes:

Court of claims

The court granted judgment on the government's counterclaim, less the amount due plaintiff for spare parts and tools. The contract obligated plaintiff to furnish the parts and tools; however, by eliminating a profit factor, the chargeback for deleted parts and tools was reduced.

Despite defendant's design changes, damages for transportation fees were denied because the evidence did not establish that plaintiff could not have complied with the weight specifications. The change from gas to electric drives was not a breach because it was not a cardinal change. The resulting adjustment to the contract price urged by defendant in its counterclaim was correct because the changes did not increase plaintiff's losses or costs.

Determinations

The reported decisions do not establish clear lines of demarcation between [these categories]. Certain guide lines in the decided cases are, however, helpful in determining how a given change should be regarded. In Saddler v. United States, 152 Ct. Cl. 557, 561, 287 F. 2d 411 (1961), the court stated: "We think that a determination of the permissive degree of change can only be reached by considering the totality of the change and this requires recourse to its magnitude as well as its quality."
In the instant case, if there had been no change order plaintiff would have lost $148.80 per unit in manufacturing the gasoline driven units . . . . the same unit loss which plaintiff would have had if there had been no change order. In other words, in the formula which defendant advocates under its counterclaim, the change would not, in the Nielsen language, increase plaintiff's losses . . . .
It is accordingly concluded that the adjusted unit contract price of the 100 changed units should be $1,454.78 which represents the contract price of the gasoline driven units ($1,720) less $265.22 which is the difference between the production cost of the two type units . . . .
176 Ct. Cl. at 1002, 364 F.2d at 850.

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