Len Company and Associates v. United States

• Decision Date: 13 October 1967
• Docket Number: No. 257-63.,257-63.
• Citation: 181 Ct. Cl. 29,385 F.2d 438
• Parties: The LEN COMPANY AND ASSOCIATES v. The UNITED STATES.
• Court: U.S. Claims Court

181 Ct. Cl. 29, 385 F.2d 438 (1967)

The LEN COMPANY AND ASSOCIATES v. The UNITED STATES.

No. 257-63.

United States Court of Claims.

October 13, 1967.

Marvin P. Sadur, Washington, D. C., for plaintiff. Herman M. Braude, Washington, D. C., of counsel.

David Orlikoff, Washington, D. C., with whom was Acting Asst. Atty. Gen. Carl Eardley, for defendant.

Before COWEN, Chief judge, and LARAMORE, DURFEE, DAVIS, COLLINS, SKELTON and NICHOLS, Judges.

ON DEFENDANT'S REQUEST FOR REVIEW OF THE COMMISSIONER'S ORDER DENYING DEFENDANT'S MOTION TO SUSPEND PROCEEDINGS

DAVIS, Judge:

This is another Government contract case in which the key question is whether the trial of the contractor's claims shall be held administratively or in court. Cf. New York Shipbuilding Corp. v. United States, 385 F.2d 427, 180 Ct.Cl. — (June 1967); Universal Ecsco Corp. v. United States, Ct.Cl. 385 F.2d 421, decided this day. In August 1958 the Len Company entered into a Capehart Act housing contract with the Navy for 650 housing units at Pearl Harbor. As was customary for such projects, the work was divided into separate mortgage areas, the contract was made severable as to each area, and mortgagor-builders were appointed.¹ During the progress of construction on the seven units, periodic inspections were made and certificates of acceptable work and materials issued. When the work was well advanced, the Navy's contracting officer was replaced. The new official called for various reinspections and then found that several elements of the job did not conform, in his view, with the plans and specifications. The result was that plaintiff had to alter considerable portions of completed work.

Fifteen of the seventeen counts in the petition relate to the work done pursuant to these reinspection orders. Counts I-XIII and XVI (the reinspection claims) broadly urge that this work was not required by the contract but was extra. Count XVII, the most significant financially (amounting to almost one-half of the total relief requested), is a conventional "delay-damages" claim for detriment occurring because of this allegedly extra work. The remaining claims, Counts XIV and XV, are not directed to the reinspection but involve disputes as to the correct equitable adjustment on account of two separate formal changes in the contractual requirements.

The parties acknowledge that Counts XIV and XV are redressable under the "Changes and Changed Conditions" clause (Article 9 of the general provisions) and, taken alone, would ordinarily be subjected to the administrative procedure established by that provision. It is also agreed that Count XVII for delay damages is a breach-of-contract demand which, to the extent its facts differ from previously-litigated claims arising under the contract, should be tried in this court.² See United States v. Utah Constr. & Mining Co., 384 U.S. 394, 418-422, 86 S.Ct. 1545, 16 L.Ed.2d 642 (1966); Morrison-Knudsen Co. v. United States, 345 F.2d 833, 837-838, 170 Ct.Cl. 757, 764 (1965); J. D. Hedin Constr. Co. v. United States, 347 F.2d 235, 241, 171 Ct.Cl. 70, 77 (1965). The real controversy is over the disposition of the reinspection claims (Counts I-XIII and XVI), and whether the hair (Counts XIV, XV, and XVII) should follow the hide.

Each of the reinspection claims concerns work accomplished, but assertedly not paid for, during construction in the seven mortgage areas. As each of these units was completed, the contractor sought releases with permission to except its claims for additional work. The contracting officer (the Navy District Public Works Officer) refused to allow exceptions as to any one unit until all seven were finished. In August 1960, upon completion of the housing in the last mortgage area, plaintiff presented its claims for extra compensation. The contracting officer held that these claims could be processed only under the change-request procedure detailed in General Provision No. 9 of the contract, "Changes and Changed Conditions". The claims were thus submitted, processed, and denied by the Public Works Officer in November 1960.

Shortly thereafter, the contracting officer initiated eleven "change requests" for deductive change orders — work which varied from the contract terms and which, in the Government's view, called for a price reduction. Plaintiff submitted its countering estimates and argument. In December the contracting officer determined that the Government was entitled to a credit. Under the "Changes" clause procedure, the contracting officer forwarded both sets of requests with his "recommendations" (denying all of the company's requests and granting partial relief on the deductive requests he had initiated) to the Federal Housing Administration. That Administration's District Director acknowledged that his review of the change requests was limited by "outstanding instructions" — agreed to by his agency and the Defense Department — "whereby FHA accepts the amounts recommended and certified by the contracting officer."³ Accordingly, he accepted the contracting officer's recommendation with respect to each claim, thereby denying all but three of the change-requests. Of the three confirmed changes, two resulted in decreases in the contract price (i. e., credits to the Government) and the other in an increase, but not as substantial as sought by plaintiff. After the FHA's action, the last mortgage area was closed and the contractor received the remaining portion of the proceeds from the seven mortgages.

Prior to the FHA decision, the contractor, which had learned of the District Public Works Officer's unfavorable recommendation, filed an appeal with the Secretary of the Navy. The case was referred to the Armed Services Board of Contract Appeals, where the Government moved to dismiss for lack of jurisdiction. The motion was granted and the appeal dismissed in September 1962. Len Co. & Associates, 1962 B.C.A. ¶ 3498 (No. 7151). The Board concluded that it could not hear the merits of the dispute because the contractor had already received a decision from the FHA in accordance with the contract's terms.

In September 1963 plaintiff filed its petition in this court. The defendant, in March 1966, moved to suspend proceedings to allow the parties to return to the ASBCA or the FHA for complete administrative determination of disputed factual questions on the reinspection claims. The trial commissioner first denied the motion, without prejudice, on the authority of Anthony Grace & Sons, Inc. v. United States, 345 F.2d 808, 170 Ct.Cl. 688 (1965). After the Supreme Court's reversal of that decision (384 U.S. 424, 83 S.Ct. 1539, 16 L.Ed.2d 662 (1966)), the denial was rescinded and the motion restored to the docket. The parties sought to agree upon removal of the case to the Armed Services Board without a formal order. Attempts to amend the "Disputes" clause or to enter into a stipulation failed. The trial commissioner then denied the Government's motion, holding that in the circumstances a de novo trial in this court would be proper. The case is before us on the defendant's request to review that ruling.

I

The constitution governing the mode of resolving the parties' disputes is always the particular contract made by the contractor and the Government. Both the Supreme Court and this court have confirmed that it is within the parties' power to select their own remedies (subject to the overriding requirements of the Wunderlich Act). United States v. Carlo Bianchi & Co., 373 U.S. 709, 713, 715-718, 83 S.Ct. 1409, 10 L.Ed.2d 652 (1963); United States v. Anthony Grace & Sons, Inc., 384 U.S. 424, 428-429, 83 S.Ct. 1539, 16 L.Ed.2d 662 (1966); United States v. Utah Constr. & Mining Co., supra 384 U.S. at 402-407, 415-418, 86 S.Ct. 1545, 16 L.Ed.2d 642; New York Shipbuilding Co. v. United States, supra, 385 F.2d 427, 180 Ct.Cl. — (June 1967). That choice can, of course, point to administrative determination. If so, and "the contract makes provision for equitable adjustment of particular claims, such claims may be regarded as converted from breach of contract claims to claims for relief under the contract." United States v. Utah Constr. & Mining Co., supra, 384 U.S. at 404 n. 6, 86 S.Ct. at 1551; see Morrison-Knudsen Co. v. United States, supra, 345 F.2d at 837, 170 Ct.Cl. at 763-764. To the extent that complete relief is available under a specific provision — i. e., the claim is both cognizable under and adjustable by the terms of the contract — such as the currently standard "Changes", "Changed Conditions", or "Inspection" clauses, the controversy arises under the contract and is subject to initial administrative resolution as provided in the normal "Disputes" article. But if a fair reading of the particular contract shows that the specific dispute has not been committed to agency decision, the claims are then for a "pure" breach of contract and are considered de novo in this court.⁴

Accepting this settled formulation, the Government contends that plaintiff's requests for compensation for the modifications which the successor contracting officer required as a result of his reinspections are demands for equitable adjustments for "constructive changes" which are cognizable under, and adjustable by, either Article 9, "Changes and Changed Conditions", or Article 6, "Inspection". As constructive changes, according to this theory, the claims should be decided in the first instance by the contracting officer, with an appeal either to the Federal Housing Commissioner (designated in the "Changes" article) or to the Armed Services Board of Contract Appeals (referred to in the "Disputes" clause).

The flaw in this argument is that it overlooks the special provisions of the plaintiff's Capehart Act contract and divorces the "constructive change" doctrine from the type of contractual "Changes" clause to which it has always been wedded. This court has never indicated that the doctrine inheres in or is applicable to every "C...