Original jurisdiction in cases of The Pennsylvania Turnpike Commission v. Litton RCS, Inc. now as legal successor Litton Business Systems, Inc., successor by merger; and Litton RCS, Inc., now as legal successor Litton Business Systems, Inc., successor by merger v. Pennsylvania Turnpike Commission.
Kenneth M. Cushman, with him Peter Marvin, Bruce W. Ficken, and, of counsel, Pepper, Hamilton & Scheetz and John R. Rezzolla, for Pennsylvania Turnpike Commission.
Bruce W. Kauffman, with him Robert W. Maris, and Dilworth, Paxson, Kalish & Levy, for Litton RCS, Inc.
President Judge Bowman and Judges Crumlish, Jr., Kramer, Wilkinson, Jr., Mencer, Rogers and Blatt. Opinion by Judge Rogers.
[ 20 Pa. Commw. Page 578]
We have consolidated for argument and disposition the petition of Litton RCS, Inc. (Litton)*fn1 to confirm an arbitrator's award*fn2 in its favor in a contract dispute with The Pennsylvania Turnpike Commission (Commission) and the petition of the Commission to vacate, or in the alternative to modify or correct, said award.*fn3
The Commission desiring to improve and modernize its toll collection facilities, consulted Taller & Cooper, Inc. (T&C), a leader in the field of developing and
[ 20 Pa. Commw. Page 579]
producing such equipment. On August 10, 1967, the Commission and T&C entered into a research and development contract. T&C agreed to devote its best efforts to the production of a prototype weight classification system of toll collection and the Commission agreed to pay for these services by reimbursing T&C's costs and by paying a fixed fee of $20,000. T&C estimated that the total cost of the project, including its fee, would be $148,000 and promised to use its best efforts to do the work for this amount. The contract further provided: (1) that the prototype would be the property of the Commission; (2) that the Commission would have available to it all parts or components and all rights necessary for the complete manufacture and production of the toll collection equipment to be developed; (3) that T&C would report its progress to the Commission at intervals to be agreed upon by the parties; and (4) that any disputes arising out of the contract would be submitted to arbitration by the American Arbitration Association. T&C additionally agreed that it would perform some of the work under the contract within six months and complete the balance within 18 months.
Finally, the agreement reserved in the Commission the right to terminate the contract:
"at any time upon thirty days prior written notice, in which event the fixed fee shall be paid in the same proportion as the total cost paid or to be paid to [T&C] bears to the estimated cost of performance as herein provided [; i]n the event of such termination, [T&C] shall be paid all costs of the work incurred to the date of termination."
T&C began work on August 11, 1967. During the whole period of T&C's work, a consulting engineer, R. L. Budnik, specially engaged by and acting for the Commission, monitored, collaborated in and assisted with the work, and reported to the Commission.
In April 1968, T&C billed the Commission for costs incurred through March 31, 1968 in an amount in excess
[ 20 Pa. Commw. Page 580]
of $74,500, and estimated that the cost of completion would be in the amount of about $53,500. The Commission met this billing.
On February 21, 1969, Litton, which had with the knowledge and acquiescence of the Commission succeeded T&C, advised the Commission that costs would exceed the original estimate and requested a formal extension of time for completion. By a letter dated March 6, 1969, the Commission terminated the contract effective April 6, 1969. No reason was given for the termination. Litton then billed the Commission for its costs incurred to the termination date and its fixed fee. Despite the formal notice of termination Litton continued to work on the project after April 6, 1969, and ...