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City of Oxnard v. United States

Decided: July 6, 1988.

CITY OF OXNARD, APPELLANT,
v.
THE UNITED STATES, APPELLEE



Appealed from: Armed Services Board of Contract Appeals.

Friedman, Circuit Judge, Bennett, Senior Circuit Judge, and Newman, Circuit Judge.

Newman

NEWMAN, Circuit Judge.

We affirm the decision of the Armed Services Board of Contract Appeals*fn1 denying the claims of the City of Oxnard for payment, on behalf of the Department of the Navy, of a share of the cost overruns incurred by Oxnard in performance of Contract Nos. N62474-76-C-6511 and N62474-76-C-6512.

Discussion

In accordance with the contracts, Navy installations at Port Hueneme, California and Point Mugu, California would be connected to Oxnard's sewer service lines and waste water treatment facilities, requiring inter alia the construction of adequate connections and the upgrading of Oxnard's regional waste water treatment plant. The two contracts provided that the Navy would pay a designated "Connection Charge", which was a share of the total construction costs. The Connection Charge was described in the contracts as "not to exceed" a stated amount.*fn2

Oxnard asserts that the mutual intent and understanding was that the Navy would pay a proportionate share of the total actual costs, and that Navy representatives orally so assured Oxnard as it became apparent, during the course of construction, that the costs would exceed the estimates on which the Navy's share was calculated. The Navy's position is that it never gave such assurances, that such assurances if given were unauthorized and therefore of no effect, that the written contract must prevail, and that Navy representatives told and wrote Oxnard that the "not to exceed" price was the government's maximum liability. Oxnard replies that persons representing the Navy told them that "not to exceed" clauses were always included in Navy contracts, but that the Navy would pay its fair share and when the project was finished the Navy would request any necessary additional funds. The Navy ultimately refused to pay a share of the increased costs.

Witnesses on both sides testified in support of their respective positions. The Board found credible the denial of the Navy's representative that she had given the assurances attributed to her, and placed weight on various letters from Navy contracting officials, written in connection with change orders and progress payments and expressly stating that the "not to exceed" price was the maximum commitment. Such correspondence spans several years, and is illustrated as follows:

Letter dated May 10, 1978 from Sukeo Oji, Head, Commercial Utilities Branch, Western Division, Naval Facilities Engineering Command: to the Director of Public Works of the City of Oxnard:

Your attention is called to the requirement that total construction costs, including all change orders previously effected and the instant change order in the sum of $421,101, shall not exceed $1,649,796.

Letter dated March 13, 1979 from C.C. Hoffner, Jr., Director, Utilities Division (Navy) to the Oxnard Director of Public Works:

Your attention is called to the requirement that total costs, including all change orders (amendments) shall not exceed $1,649,796 under Contract N62474-76-C-6512 and $538,319 under Contract N62474-76-C-6511.

Letter dated July 25, 1980 from Commander J.D. Kunz, Head, Facilities Management Department, to the Oxnard Director of Public Works:

In any event, the Government's total liability for all construction costs under Contracts N62474-76-C-6511 and N62474-76-C-6512, including contract contingencies, shall not ...


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