GL Christian and Associates v. United States

• Citation: 320 F.2d 345
• Decision Date: 12 July 1963
• Docket Number: No. 56-59.,56-59.
• Parties: G. L. CHRISTIAN AND ASSOCIATES v. The UNITED STATES.
• Court: Court of Federal Claims

320 F.2d 345 (1963)

G. L. CHRISTIAN AND ASSOCIATES v. The UNITED STATES.

No. 56-59.

United States Court of Claims.

July 12, 1963.

COPYRIGHT MATERIAL OMITTED

Gilbert A. Cuneo, Washington, D. C., for plaintiff. Norman R. Crozier, Jr., Dallas, Tex., Chester H. Johnson and O. D. Hite, San Antonio, Tex., Richard C. Bexten, Dallas, Tex., Chester E. Finn, Dayton, Ohio, William L. Hillyer, San Diego, Cal., William W. Sweet, Jr., Wilson Johnston, Dallas, Tex., and Cummings & Sellers, Washington, D. C., of counsel.

Carl Eardley, Washington, D. C., with whom was John W. Douglas, Asst. Atty. Gen., for defendant. Irving Jaffe, Washington, D. C., and Gerson B. Kramer, Silver Spring, Md., of counsel.

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

DAVIS, Judge.

Plaintiff's motion for rehearing and reargument raises, for the most part, issues which were not previously presented and were therefore not discussed in the court's opinion handed down on January 11, 1963, 312 F.2d 418. The additional arguments all concern our refusal to award anticipated but unearned profits to the contractor and its subcontractors. We have considered these new contentions and have concluded that they require no change in our judgment or in the reasoning on which it is based.¹ This supplementary opinion treats mainly with the points which have not hitherto been explicitly considered.

1. We held in our original opinion that Section 8.703 of the Armed Services Procurement Regulations (ASPR) required, as a matter of law, the inclusion in plaintiff's housing contract of the standard-form military article providing for the termination of construction contracts for the convenience of the Government. The Supreme Court has made it plain that validly issued military procurement regulations have the full force and effect of federal law, even to the extent of overriding inconsistent state legislation. Paul v. United States, 371 U.S. 245, 255, 83 S.Ct. 426, 9 L.Ed.2d 292 (1963); Public Utilities Comm. of California v. United States, 355 U.S. 534, 542-543, 78 S.Ct. 446, 2 L.Ed.2d 470 (1958); Leslie Miller, Inc. v. Arkansas, 352 U.S. 187, 77 S.Ct. 257, 1 L.Ed.2d 231 (1956). But plaintiff now says, for the first time, that this particular section of the ASPR was promulgated without statutory authority and accordingly is bereft of the force of law.² The chief reason advanced is that the Armed Services Procurement Act of 1947, 62 Stat. 21 — the general military procurement statute — which was a principal legislative basis for Section 8.703, did not expressly refer to termination of military contracts. On this ground it is said that the Procurement Act wholly failed to cover the subject of contract-termination in any way, and that a new statute dealing specifically with such terminations would be necessary before the Defense Department (or its constituents) could issue binding regulations in that area. In support of this proposition, plaintiff cites the unsuccessful efforts which have been made to obtain such express legislation, as well as general statements by Defense Department officials and others which are interpreted as recognizing that the termination regulations set forth in ASPR are without statutory authority.

The basic defect in this argument is its failure to recognize that general legislation empowering, in broad terms, a government agency to procure and to make contracts normally covers all phases of that process — from the solicitation of bids or proposals, to the making of the contract, through its administration and performance, to its completion or termination. "The power to purchase on appropriate terms and conditions is, of course, inferred from every power to purchase." Priebe & Sons v. United States, 332 U.S. 407, 413, 68 S.Ct. 123, 127, 92 L.Ed. 32 (1947). Unless the Congress has prohibited the agency from entering some phase of the contractual process (or using some otherwise lawful method of contracting), a grant of wide and general authority to contract and procure will extend to all reasonable phases and methods. See Kern-Limerick, Inc. v. Scurlock, 347 U.S. 110, 114 ff., 74 S.Ct. 403, 98 L.Ed. 546 (1954); Public Utilities Comm. of California v. United States, 355 U.S. 534, 540-543, 78 S.Ct. 446, 2 L.Ed.2d 470 (1958); Paul v. United States, 371 U.S. 245, 251-255, 261-263, 83 S.Ct. 426, 9 L.Ed.2d 292 (1963); United States v. Penn Foundry & Mfg. Co., Inc., 337 U.S. 198, 214-216, 69 S.Ct. 1009, 93 L.Ed. 1308 (1949) (opinion of Mr. Justice Douglas). There is a cardinal illustration in the history of contract-termination-for-convenience itself. It was not until July 1, 1944, that Congress enacted the Contract Settlement Act of 1944, 58 Stat. 649, establishing legislative standards and procedures for the termination of World War II contracts for the Government's convenience.³ But for over two years before that time the War and Navy Departments had been using termination-for-convenience clauses in many of their contracts and had also been issuing regulations dealing with such provisions.⁴ This was done principally under the generous umbrella of Title II of the First War Powers Act of December 18, 1941, 55 Stat. 838-839, authorizing the President to empower war agencies "to enter into contracts and into amendments or modifications of contracts heretofore or hereafter made * * *, without regard to the provisions of law relating to the making, performance, amendment, or modification of contracts whenever he deems such action would facilitate the prosecution of the war * * *." (Executive Order No. 9001, 3 C.F.R., 1943 Cum.Supp., pp. 1054-1056, delegated this authority to the war agencies, cf. 40 Op.Atty.Gen. 225 (1942)). See also ch. 508, 54 Stat. 712; ch. 340, 56 Stat. 314, 316-317. Though the First War Powers Act did not refer specifically to contract-termination, its general terms authorized those departments procuring for war ends to employ such contract articles — as well as many other provisions and forms not mentioned in the statute. The Contract Settlement Act was passed in 1944, not because the war agencies were then powerless to issue termination regulations or to insist on termination-for-convenience clauses, but because it was considered appropriate to establish uniform Congressional standards enforced by a central civilian agency, and thus to confine and supervise the broad discretion hitherto exercised by the separate departments and agencies under the First War Powers Act (as well as the authority which the Comptroller General threatened to exercise). In short, the Settlement Act was felt to be wise and desirable, but it was not needed to confer power in the area of contract-termination.

With respect to this subject of contract-termination, the situation is the same under the Armed Services Procurement Act of 1947 (and its supplementing legislation) as it was under the First War Powers Act. The Procurement Act (now 10 U.S.C. §§ 2301 et seq.) is a broad charter conveying general authority to the service departments to enter into contracts by advertising, and in many circumstances into negotiated agreements. See H.Rep. No. 109, 80th Cong. 1st Sess., p. 6; S.Rep. No. 571, 80th Cong., 1st Sess., p. 2. It clearly covers contracts for buildings, facilities, and public works. Sec. 10 U.S.C. § 2303(b). Aside from specified requirements and prohibitions (not now pertinent), the Act leaves to the procuring agency the terms and conditions of both negotiated and advertised contracts. Many different types of agreements and contractual provisions can be, and have been, adopted under the sweeping authority accorded by the Act. In particular, the Act does not in any way prohibit or limit, expressly or by implication, the use of clauses providing for termination of a contract for the convenience of the Government. As in the period prior to the Contract Settlement Act of 1944, that subject is left to the discretion of the procuring agencies. Just as the comprehensive provisions of the First War Powers Act sanctioned the promulgation and use of termination clauses although termination was not mentioned in that statute, so the comprehensive terms of the Procurement Act authorized the promulgation of Section 8.703 of the ASPR. Buttressing the Procurement Act as the source of this provision are the general statutory sections authorizing the Defense and Service Secretaries to adopt directives and regulations in their fields of competence, including procurement. See Congress Construction Corp. v. United States, Ct. Cl. No. 535-59, decided March 6, 1963, 314 F.2d 527, 531 (Secretary of Defense); 10 U.S.C. § 3012 (Secretary of the Army); 10 U.S.C. § 8012 (Secretary of the Air Force); 5 U.S.C. § 22 (general authority to issue departmental regulations)⁵ The basic administrative authority of the military departments to adjust claims of the termination kind has, of course, long been established. Cannon Construction Company, Inc. v. United States, Ct.Cl., 319 F.2d 173.

When Section VIII of the ASPR (dealing with contract termination) was issued in 1952, the Defense Department declared that, while the Procurement Act does not specifically mention terminations, the new termination regulation was being issued "under the general authority of the Secretaries of the Military Departments, based on the Procurement Act and other statutes, to issue detailed regulations to carry out their authority and responsibilities." The authority thus invoked was adequate to sustain termination regulations of this type — though no doubt the legislative foundation could be strengthened and supplemented by more explicit Congressional action.

Plaintiff stresses the lack of detailed legislative policies on termination, but the absence of such Congressional spelling-out is very different from the absence of any authority in the administrators under their general procurement powers. The experience under the First War Powers Act, among others, shows...