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Universal Canvas Inc. v. Stone

Decided: September 14, 1992.

UNIVERSAL CANVAS, INC., APPELLANT,
v.
MICHAEL P. W. STONE, SECRETARY OF THE ARMY, APPELLEE.



Appealed from: Board of Contract Appeals Armed Services

Before Mayer, Circuit Judge, Cowen, Senior Circuit Judge, and Rader, Circuit Judge.

Mayer

MAYER, Circuit Judge.

Universal Canvas, Inc. appeals the Armed Services Board of Contract Appeals denial of an equitable adjustment and of a motion to vacate its decision for lack of jurisdiction. Universal Canvas, Inc., ASBCA No. 36141 (April 29, 1991; July 3, 1991). We reverse.

Background

On August 31, 1984, the Natick Army Research, Development and Engineering Center (Natick) awarded to Universal Canvas, Inc. contract number DAAK60-84-C-0062 (contract 0062), for the manufacture of TEMPER tents (Tent, Expandable, Modular, Personnel) along with related components. The contract provided that the government would supply cotton oxford cloth to be used as the liner for the tents. But during manufacture, Universal had difficulties with the government furnished material (GFM). As a result, Universal alleges that its performance of the contract was delayed and it incurred expenses beyond what it had anticipated.

Universal started as a small awning shop in Corpus Christi, Texas, and was purchased in 1977 by Edward Cantu. After it received its first government contract in 1983, immediately preceding contract 0062, Universal acquired a 100,000 square foot facility in Brownsville, Texas, about 150 miles away from Corpus Christi. This new facility is where contract 0062 was performed. During performance of the contract, Cantu was mainly at the Corpus Christi facility. Joe Flores, Universal's Vice President of Accounting, one of three vice presidents reporting directly to Cantu, was also based at the Corpus Christi facility, which served as the corporate headquarters. Initially, the Brownsville plant was managed by Ruben Solano, Cantu's brother-in-law and Universal's Vice President for Operations. In 1985, Cecil Hinojosa took over the management of the Brownsville plant from Solano.

On February 6, 1987, Universal filed a claim for an equitable adjustment for $3.3 million, later reduced to $3 million, certified by Flores. The claim was based on alleged problems with the GFM, such as tearing, width variations, and government delay in delivery. The contracting officer denied the claim, and Universal appealed to the Armed Services Board of Contract Appeals. The board held that Universal was not entitled to an equitable adjustment because its inefficiencies, and not any defects in the GFM, were to blame for the cost overrun. Specifically, the board found that Universal's new, inexperienced management and production personnel, in addition to its start-up costs, poor material handling, and poor planning caused the cost overruns.

After the board's decision was handed down, Universal filed a motion to vacate the judgment and dismiss the appeal for lack of subject-matter jurisdiction, based on the then-recent United States v. Grumman Aerospace Corp., 927 F.2d 575 (Fed. Cir. 1991), because its claim was not properly certified. In its motion, Universal argued that its certification did not meet the requirements of the Federal Acquisition Regulations (FAR), 48 C.F.R. § 33.207 (1991), as interpreted by Grumman, 927 F.2d 575, and Ball, Ball & Brosamer, Inc. v. United States, 878 F.2d 1426 (Fed. Cir. 1989). Relying on United States v. Newport News Shipbuilding and Dry Dock Co., 933 F.2d 996 (Fed. Cir. 1991), however, the board thought this was a case in which "the certification by a corporate officer, without explanation, [implies] that the officer has overall responsibility and may properly sign the certification." It reasoned that since Universal is a small business and since Flores served as Vice President of Accounting, reporting directly to the President and providing information to the government to support the equitable adjustment claim, Flores could properly certify the claim. It also said that "the remedy which appellant seeks flies in the face of the Contract Disputes Act and the intent of its drafters. Claim certification was intended by Congress to be a Government shield, and appellant is attempting to wield it as its own sword." In response to Universal's motion to reconsider the denial of its motion to vacate, the board said there was no reason to dismiss the case because at the time of certification there was "no defect on the face of appellant's certification." This appeal followed.

Discussion

The Contract Disputes Act provides, "All claims by a contractor against the government relating to a contract shall be in writing and shall be submitted to the contracting officer for a decision." 41 U.S.C. § 605(a) (1988). Further,

For claims of more than $50,000, the contractor shall certify that the claim is made in good faith, that the supporting data are accurate and complete to the best of his knowledge and belief, and that the amount requested accurately reflects the contract adjustment for which the contractor believes the government is liable.

Id. § 605(c)(1). FAR § 33.207(c)(2) provides for two categories of individuals to certify claims:

(i) A senior company official in charge at the contractor's plant or location involved; or

(ii) An officer or general partner of the contractor having overall responsibility for the conduct of the contractor's affairs.

48 C.F.R. ยง 33.207(c)(2). Grumman affirmed the validity and literal applicability of this ...


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