Cannon Construction Company v. United States

• Decision Date: 07 June 1963
• Docket Number: No. 89-57.,89-57.
• Citation: 319 F.2d 173,162 Ct. Cl. 94
• Parties: CANNON CONSTRUCTION COMPANY, Inc., Ed. J. Kearns, Company, Incorporated v. The UNITED STATES.
• Court: U.S. Claims Court

162 Ct. Cl. 94, 319 F.2d 173 (1963)

CANNON CONSTRUCTION COMPANY, Inc., Ed. J. Kearns, Company, Incorporated v. The UNITED STATES.

No. 89-57.

United States Court of Claims.

June 7, 1963.

Charles S. White, Indianapolis, Ind., for plaintiffs. J. D. Wright and Davis, Hartsock & Wright, Indianapolis, Ind., were on the brief.

Gerson B. Kramer, Silver Springs, Md., with whom was Asst. Atty. Gen. John W. Douglas, for defendant. Daniel M. Redmond, Washington, D. C., was on the brief.

Before JONES, Chief Judge, and WHITAKER, LARAMORE, DURFEE and DAVIS, Judges.

JONES, Chief Judge.

This is a suit to recover damages in the amount of $81,000 for breach of a government contract to rehabilitate an Army hospital. The amount claimed is alleged to have been the loss of profit sustained as the result of Government delays in performance of work under the contract and is in addition to a sum (designated as out-of-pocket losses) previously awarded as an equitable adjustment under the contract's "Suspension of Work" clause. Defendant contends that the equitable adjustment was an accord and satisfaction of plaintiffs' losses from delays and precludes further recovery in this court.

Plaintiffs, the Cannon Construction Company, Inc., and the Ed. J. Kearns Company, Incorporated, acting as joint venturers, entered into a fixed price construction contract with the Department of the Army on March 5, 1951, undertaking therein to furnish all plans, labor, material, and equipment, except for equipment specified to be furnished by the Government, for the rehabilitation and repair of numerous hospital buildings at the U.S. Army Hospital, Camp Atterbury, Indiana.

Performance was to have been completed within 90 days after receiving instructions to commence work, but the contract as modified actually required approximately 2 years to complete.

The original contract price was $696,485, but because of numerous change orders, in the net amount of $195,676.08, not in issue, and an equitable adjustment in the amount of $87,270.92 for losses due to delays, designated as Modification No. 10, the final contract price amounted to $979,432.

The contract included the usual standard clauses pertaining to "Changes," "Changed Conditions," "Extras," "Delays-Damages," and "Termination."

Article 15, the "Disputes" clause, provided that all disputes concerning questions of fact which might arise under the specifications, not disposed of by mutual agreement, should be decided by the contracting officer, with the usual provisions for appeal to the Secretary of the Army, whose decision would be final and conclusive upon the parties.

In addition, Part II of the Specifications contained a "Suspension of Work" clause, which authorized the contracting officer to "order the contractor to suspend all or any part of the work for such period of time as may be determined by him to be necessary or desirable for the convenience of the Government." It further provided that in the event a suspension of work for an unreasonable time caused additional expense or loss to the contractor, the contracting officer should make an equitable adjustment in the contract price.

The contract called for the installation of many pieces of equipment to be furnished by the Government through Medical Supply and Quartermaster channels. In many instances, neither the equipment nor necessary details describing it were made available to the contractor until many months after the original completion date of June 5, 1951. During the first 15 months of work, and prior to June 14, 1952, when the contracting officer ordered the contract suspended, plaintiffs sustained substantial losses as a result of the Government delays in performing its express and implied obligations under the contract. Delays during this period included the defendant's failure to provide plaintiffs with continuous access to certain job worksites, its failure to make orderly and timely delivery of Government-furnished equipment for installation, and its failure to supply accurate advance rough-in specifications of the equipment to be installed, all of which made it impossible for plaintiffs to proceed in an orderly fashion from building to building in accordance with their work schedules.

As a result of these conditions, plaintiffs, on March 3, 1952, a year after commencing work, requested permission to suspend all work on the contract, complaining that they had been subject to

"* * * considerable expense due to the fact that in every building where government equipment was involved in our contract, we were never able to start a job and carry it through * * *.

* * * * * *

"* * * This delay has resulted in a loss to our Company of approximately $150,000.00. We feel that we would not have sustained this loss had we been able to carry out our work as set out in the plans and specifications.

"* * * unless the job is suspended we will be penalized further. We also submit this letter as a claim to recover our losses as stated above.¹

The contracting officer granted the requested suspension on June 16, 1952, effective June 14, 1952, and at about the same time, on June 12, 1952, extended the contract 180 calendar days, which extension plaintiffs agreed would not result in any change in the contract price as previously modified.

In a letter with enclosures, dated August 11, 1952,² plaintiffs submitted a detailed description of their losses, with an itemized list of the various elements which amounted to a total claim of $101,381.56, as follows:

                    "I. Loss of efficiency of labor due to delays ....... $ 54,643.13
                    II. Extra overhead due to the delays ................   25,238.25
                   III. Extra equipment cost due to the delays ..........    8,987.00
                    IV. Wage increases incurred due to the delays .......    6,890.76
                     V. Extra payroll insurance and taxes on No. I ......    4,173.30
                    VI. Job insurance ...................................      834.37
                   VII. Extra storage space .............................      453.00
                  VIII. Loss of material ................................      161.75
                                                                          ____________
                                                                          $101,381.56"
                

In submitting this claim, plaintiffs made the following statement in their letter:

"Our claim for $101,381.56 does not include any claim for the amount of profit which we should have made on this project, it is merely a statement of the amount which we were damaged by the delay in the delivery of the Government equipment. This is not a claim for profit or additional profit; we merely wish to recover the amount of our loss on the project." Emphasis supplied.

A 3-day conference was held at Camp Atterbury, January 12 to 14, 1953, to negotiate a settlement of plaintiffs' claim as presented in their letter of August 11, 1952. Present at the conference, in addition to plaintiffs' representatives, were the Purchasing and Contracting Officer, the Chief Engineer, and the Architectural Engineer. As a result of this conference, the parties entered into Modification No. 10 on March 10, 1953, which provided that the contract was declared to be modified under the "Suspension of Work" clause to increase the contract price in the amount of $87,270.92. After reciting the losses resulting from the extensive delays occasioned by the Government in furnishing equipment, the agreement declared "the contract price shall be increased in the lump sum of $87,270.92 which amount shall constitute full compensation for said delays."³ Emphasis supplied.

Plaintiffs assented to Modification No. 10 without reservation or qualification.

The suspension was lifted in January 1953, and all work required under the contract as modified was completed in March 1953. Subsequently, on July 15, 1953, the plaintiffs certified that the correct and just total completed contract price (which included Modification No. 10) was $979,432.00, of which amount they had already received on account the sum of $954,316.09, leaving a balance due them of $25,115.91. Plaintiffs received payment for this amount on November 11, 1953.

On February 24, 1956, plaintiffs demanded that defendant pay them an additional $90,893.44. The Comptroller General denied this claim on June 13, 1956. Thereafter, on February 25, 1957, plaintiffs filed a petition in this court demanding an identical amount and alleging it to be damages resulting from defendant's delays and administrative coercion.

At pretrial conference they eliminated that portion of their claim described as out-of-pocket loss, thereby reducing their claim to $81,000, which is alleged to be the reasonable profit contemplated under the original contract and lost because of defendant's unreasonable delays. In their response to defendant's motion for summary judgment, plaintiffs appear to have abandoned their allegation that they were coerced into accepting Modification No. 10, and we will so treat their petition for purposes of the motions before us at this time.⁴

Defendant moves for summary judgment on the ground that the settlement under Modification No. 10 was an accord and satisfaction completely discharging plaintiffs' claim for damages due to excessive delays in obtaining Government-supplied equipment. We think defendant is correct.

Modification No. 10, which was mutually agreed to by the parties, stipulated that, because of the extensive delays occasioned by the Government, plaintiffs were entitled to an equitable adjustment in the contract price in the sum of $87,270.92, which amount (in the express words of the agreement) "shall constitute full compensation for said delays." Emphasis supplied. And in July 1953, plaintiffs, in applying for the final payment under the contract which amounted to $25,115.91, certified that the total contract price, which included the increase granted in Modification No. 10, was correct and just.⁵ In November they received and accepted that amount as final...