FISCHBACH AND MOORE, ETC. v. United States

• Decision Date: 19 March 1980
• Docket Number: No. 377-78,385-78.,377-78
• Parties: FISCHBACH AND MOORE INTERNATIONAL CORP. v. The UNITED STATES. PIERCE ASSOCIATES, INC. v. The UNITED STATES.
• Court: U.S. Claims Court

617 F.2d 223

FISCHBACH AND MOORE INTERNATIONAL CORP. v. The UNITED STATES.

PIERCE ASSOCIATES, INC. v. The UNITED STATES.

Nos. 377-78, 385-78.

United States Court of Claims.

March 19, 1980.

Geoffrey T. Keating, Washington, D. C., attorney of record, for plaintiff Fischbach and Moore. Roy S. Mitchell, Thomas M. Brownell and Lewis, Mitchell & Moore, Washington, D. C., of counsel.

George M. Beasley, III, Washington, D. C., with whom was Asst. Atty. Gen. Alice Daniel, Washington, D. C., for defendant in No. 377-78.

Jack Rephan, Washington, D. C., attorney of record, for plaintiff Pierce Associates. Braude, Margulies, Sacks & Rephan, Washington, D. C., of counsel.

Ray Goddard, Washington, D. C., with whom was Asst. Atty. Gen. Alice Daniel, Washington, D. C., for defendant in No. 385-78.

Before DAVIS, BENNETT and SMITH, Judges.

ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

ON PLAINTIFF'S MOTION FOR JUDGMENT ON THE PLEADINGS, OR, ALTERNATIVELY, FOR SUMMARY JUDGMENT

DAVIS, Judge:

These two cases, argued in tandem, present the question of whether, under S & E Contractors, Inc. v. United States, 406 U.S. 1, 92 S.Ct. 1411, 31 L.Ed.2d 658 (1972), the heads of two separate procuring agencies could properly refuse to accept a determination of the agency's board of contract appeals favorable to the contractor, and thus compel the latter to litigate the merits of its claim in this court.¹ We hold that the agency heads had no such authority and the contractors are entitled to recover on the basis of the favorable decisions of the boards of contract appeals.

I.

No. 377-78:² In May 1966 plaintiff Fischbach and Moore International Corporation entered into a fixed-price contract with the United States Information Agency (U.S.I.A.) to construct and install radio transmitting and receiving facilities in the Philippines. During performance plaintiff sought from the contracting officer equitable adjustments under the contract for various asserted changes, delays, suspensions and accelerations of work. On denial of the claims by the contracting officer, plaintiff appealed to the Armed Services Board of Contract Appeals (ASBCA) which had been designated by U.S.I.A. to hear and determine such disputes under the standard Disputes clause of the contract. After a hearing on entitlement the ASBCA held that certain actions by U.S.I.A. were a constructive change and remanded the matter for negotiation of the appropriate equitable adjustment. Fischbach & Moore Int'l Corp., ASBCA No. 14216, 71-1 BCA ¶ 8775, 71-2 BCA ¶ 9081. These negotiations failing, plaintiff again appealed to the board which, after a further hearing, allowed an equitable adjustment of $796,067, of which $190,000 was increased profit for use of equity or borrowed capital in the performance of the changed work; this increased profit was measured at the rate of 6 percent per annum on $367,693, from August 1, 1967 (the date the construction problem involved in the case became apparent) to the date of the ASBCA decision on quantum (Dec. 13, 1976). Fischbach & Moore Int'l Corp., ASBCA No. 18146, 77-1 BCA ¶ 12,300.

In February 1977, the Acting Director of U.S.I.A. informed plaintiff in writing that it would pay all of the award except the $190,000 allowed for increased profit. That segment of the ASBCA award was considered by the agency head to be erroneous as a matter of law and therefore not binding on U.S.I.A. under the Wunderlich Act. Plaintiff subsequently received payment of the balance of the award ($606,067) and now sues for the $190,000 withheld by the agency. Plaintiff's position is that it is entitled to that sum because it was awarded by the board and neither the agency head nor this court has authority to consider whether the board's determination on that point was or was not erroneous. Defendant urges that we can and should hold that the award of the $190,000 was erroneous as a matter of law, and therefore unrecoverable by plaintiff.

No. 385-78:³ In November 1974 plaintiff Pierce Associates, Inc. contracted with the General Services Administration (G.S.A.), for a fixed price, for the mechanical work on the first phase of the Washington Technical Institute in the District of Columbia. Plaintiff claimed government-caused delays in the course of performance and, when the contracting officer refused to acknowledge these delays to the extent claimed, plaintiff appealed to the General Services Administration Board of Contract Appeals (GSBCA). That tribunal granted part of the relief sought by Pierce Associates and remanded the case to the contracting officer for initial determination of the proper equitable adjustment. Pierce Associates, Inc., GSBCA No. 4163, 77-2 BCA ¶ 12,746. The Government's motion for reconsideration was denied by the board in an opinion. Pierce Associates, Inc., GSBCA No. 4163, 78-1 BCA ¶ 13,078.

Plaintiff then submitted a claim for $700,819 as the equitable adjustment to which it was entitled, but the Administrator of G.S.A. wrote in response that he considered the board's decision as lacking finality under the Wunderlich Act and the Disputes clause and therefore as not binding on G.S.A. A copy of this letter was furnished to the contracting officer. It is undisputed that the Administrator's letter constituted a refusal to pay plaintiff or to allow any amount to be determined by the contracting officer as the equitable adjustment under the board's decision.

By its motion for judgment on the pleadings, or alternatively, for summary judgment,⁴ plaintiff asks us to hold, without review under the standards of the Wunderlich Act, that the GSBCA's favorable decision is automatically final and binding on the G.S.A. and the Government. Defendant seeks, on the other hand, to have us review the Board's decision for correctness under the standards of the Wunderlich Act.

II.

The seminal decision on the power vel non of the Government to compel Wunderlich Act review by this court of a determination, favorable to the contractor, by the procurement agency of a Disputes-clause controversy is S & E Contractors, Inc. v. United States, 406 U.S. 1, 92 S.Ct. 1411, 31 L.Ed.2d 658 (1972). There, the dispute was determined, on the contractor's appeal from the contracting officer's decision, by the procuring agency itself, the Atomic Energy Commission (AEC), since it did not then have a contract appeals board. The AEC upheld the contractor's claim (in the aspect later challenged by the Government in this court) but the Comptroller General ruled that the claim could not be paid as contrary to the criteria of the Wunderlich Act. The AEC abided by this ruling and the contractor brought suit in this court. By a divided vote we held that the defendant had the right to a Wunderlich Act review in this court of the AEC determination. S & E Contractors, Inc. v. United States, 193 Ct.Cl. 335, 433 F.2d 1373 (1970). The Supreme Court reversed, holding that, under the Wunderlich Act and the Disputes clause, the AEC decision was final and conclusive. 406 U.S. 1, 92 S.Ct. 1411, 31 L.Ed.2d 658 (1972).⁵

In the current cases the defendant would read the Supreme Court's S & E decision as restricted solely to the situation in which the procuring agency (there, the AEC) is satisfied with its determination favorable to the contractor but in which outside agencies (there, the General Accounting Office and the Department of Justice) are attempting to upset the procuring agency's determination. The present cases are significantly different, defendant insists, because the heads of the procuring agencies (U.S.I.A. and G.S.A.) have made it clear that they reject and repudiate the determinations favorable to the contractors rendered by the boards of contract appeals.

Even if we accept defendant's general approach that S & E was concerned only with a "settlement" made by the procuring agency and the contractor which is later challenged by an outside body, we think that rationale squarely covers the cases now before us. In arguing to the contrary, defendant passes over the critical fact here that in each instance the head of the procuring agency had expressly delegated his full Disputes clause authority to the board of contract appeals without reserving power to review, reconsider, or reject the rulings of the board.⁶ Those delegations meant that, for Disputes clause and Wunderlich Act purposes, the boards, not the agency heads, represented the procuring agencies — and the boards' determinations were therefore the full equivalent of the AEC determinations in S & E. To rephrase it, for our purposes the boards were the agencies and were also the Federal Government. See S & E, 406 U.S. at 4, 10, 92 S.Ct. at 1414, 1417. Accordingly, the procuring agencies had each reached the same kind of settlement with the contractor about which the Supreme Court spoke in the S & E opinion. Just as the contractor in S & E, the plaintiffs in the present litigations had the right and expectation that a favorable board decision would be "final and conclusive," completely ending the dispute with the procuring agency. The later repudiations by the heads of the agency were without effect because those heads had not reserved or retained such power in themselves.⁷ Their unauthorized actions did not undo the authorized settlement of the contractual dispute which had already been obtained by the agreement of the boards with plaintiffs' claims.⁸

Nothing in the prevailing Supreme Court opinions in S & E runs counter to this analysis, and much supports it. Mr. Justice Douglas's opinion for the Court stated the question and decision in terms which are precisely applicable here, mutatis mutandis:

In plain lay language the question then is whether, absent fraud or bad faith, the contractor can rely on the ruling of the federal agency with which it made the contract or can be forced to go through still another tier of federal review. We hold that absent fraud or bad faith the federal agency's settlement under the disputes

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