OMEN CONST. CO. v. Tennessee Valley Authority

• Decision Date: 13 December 1979
• Docket Number: No. 79-3098-NA-CV.,79-3098-NA-CV.
• Citation: 486 F. Supp. 375
• Parties: OMAN CONSTRUCTION COMPANY v. TENNESSEE VALLEY AUTHORITY.
• Court: U.S. District Court — Middle District of Tennessee

486 F. Supp. 375

OMAN CONSTRUCTION COMPANY v. TENNESSEE VALLEY AUTHORITY.

No. 79-3098-NA-CV.

United States District Court, M. D. Tennessee, Nashville Division.

December 13, 1979.

COPYRIGHT MATERIAL OMITTED

George E. Copple, Jr., Nashville, Tenn., for plaintiff.

Herbert S. Sanger, Jr., Gen. Counsel, James E. Fox, Asst. Gen. Counsel, Thomas C. Doolan, Tennessee Valley Authority, Knoxville, Tenn., for defendant.

MEMORANDUM

MORTON, Chief Judge.

This suit was brought in the Chancery Court of Davidson County, Tennessee, by Oman Construction Company ("Oman" or "Contractor") against the Tennessee Valley Authority ("TVA") seeking to set aside a Hearing Officer's final administrative decision rendered pursuant to the Disputes provision of a contract between the parties denying Oman's claim for increased compensation for taxes and insurance costs in the amount of $2,952.82.¹

The facts are not in dispute and are summarized as follows:

On April 22, 1974, following competitive bidding, TVA awarded a contract (TVA Contract No. 74C53-94171-1) to Oman for the construction of new approaches for a railroad bridge across the Little Tennessee River.² The work, which has now been completed, was to be performed for a fixed price of $838,491.40, with Oman furnishing all labor and materials. The contract required Oman to pay for labor used in performing the contract at rates not less than those specified in the minimum wage and fringe benefits schedule of the contract (form TVA 1851, app. 96).³ The minimum wage and fringe benefit schedules are generally revised annually by TVA. The contract provided, under the Field Labor Cost Adjustment provision, for cost adjustments based on changes made in the "wage rate or related benefits listed in the minimum wage schedule" (app. 113).⁴ The revised schedules are incorporated in the contract.

On December 10, 1975, Oman submitted an invoice to TVA seeking a price adjustment under the Field Labor Cost Adjustment provision for the years 1974 and 1975 because of increases in the minimum wage rates and related benefits listed in the minimum wage schedules for those years. The invoice also included a claim for $2,952.82 for increased FICA taxes, state and federal unemployment taxes, public liability and property damage insurance, and workmen's compensation insurance costs which Oman claimed it incurred as a result of the revised TVA wage schedules. The amounts billed for increases in the minimum wage rates and for related benefits listed in the minimum wage schedule were paid by TVA in accordance with the Field Labor Cost Adjustment provision of the contract. However, on March 31, 1976, the contract purchasing agent denied Oman's claim for increased taxes and insurance costs as not reimbursable under the contract. Oman, by letter of June 14, 1977, requested a contracting officer's decision under the Disputes clause of the contract (General Conditions, § 16, Disputes, app. 94) to resolve the matter.

On August 8, 1977, the Contracting Officer rendered a decision denying Oman's claim on the ground that the taxes and insurance costs were not "related benefits listed in the minimum wage schedule" and were, therefore, not reimbursable under the Field Labor Cost Adjustment provision. By letter dated September 1, 1977, in accordance with the Disputes clause of the contract, Oman appealed the Contracting Officer's decision to TVA's General Manager (app. 36) who appointed a Hearing Officer, Kenneth D. McCasland, Sr., to hear and decide the dispute (app. 32-33).

In the appeal, the parties agreed that no material facts were in dispute in regard to liability, and that the issue of liability was suitable for disposition by summary judgment without a factual hearing (app. 1, 6, 16, 26-28, 31). The dispute was accordingly submitted for resolution by the Hearing Officer on the basis of the briefs of the parties and pertinent documents which had been submitted to the Hearing Officer.⁵ On March 2, 1978, the Hearing Officer denied Oman's claim and granted summary judgment in TVA's favor, holding that the contract provisions "do not specifically require payment of taxes and insurance cost burdens and . . . do not require or permit payment of the Oman claim for such items in the amount of $2,952.82" (app. 4).

Oman brings this suit to recover the amounts claimed for increased taxes and insurance costs, contending that the decision of the Hearing Officer is contrary to law. This action is before the court on TVA's motion for judgment on the pleadings or, alternatively, for summary judgment. As in the administrative disputes proceeding, there are no material facts in dispute.

The contract involved in this case provides for administrative resolution of all disputes arising out of or connected in any way with the performance of the parties under the contract (General Conditions, § 16, Disputes, app. 94). The Disputes provision states in pertinent part:

The decision of the General Manager or his representative or representatives shall be final and conclusive upon the parties except on questions of law or unless determined by a court of competent jurisdiction to have been fraudulent or capricious or arbitrary or so grossly erroneous as necessarily to imply bad faith, or not supported by substantial evidence . . . .⁶

The court's role in a contract dispute proceeding like this one is not de novo; rather, as the Supreme Court has stated, "the court performs principally a reviewing function." Crown Coat Front Co. v. United States, 386 U.S. 503, 513, 87 S.Ct. 1177, 1183, 18 L.Ed.2d 256 (1967). Moreover, in reviewing a final administrative decision, the court is restricted to the administrative record. Crown Coat Front Co. v. United States, supra. Thus, "apart from questions of fraud, determination of the finality to be attached to a departmental decision on a question arising under a `disputes' clause must rest solely on a consideration of the record before the department." United States v. Carlo Bianchi & Co., supra, 373 U.S. at 714, 83 S.Ct. at 1413. Although the hearing officer's interpretation of the contract, as a question of law, is not binding on the court under the disputes provision, that administrative interpretation is to "be given careful consideration and accorded great respect." George Hyman Constr. Co. v. United States, 564 F.2d 939, 944 (Ct.Cl. 1977); accord, Dale Ingram, Inc. v. United States, 475 F.2d 1177, 1185, 201 Ct.Cl. 56 (1973); Winston Bros. Co. v. United States, 458 F.2d 49, 54, 198 Ct.Cl. 37 (1972).

TVA's motion here, as in the proceeding before the Hearing Officer, presents for determination the single issue of the proper interpretation of the Field Labor Cost Adjustment provision of the contract. That provision provides in pertinent part:

The TVA minimum wage schedule (form TVA 1851) usually is revised around the first of each calendar year to reflect changes in the prevailing rates of wages and related benefits. If any revisions are made by TVA which are applicable to the minimum wage schedule attached to this contract between the date of contractor's bid and the date stipulated for completion of the contract, or any extension thereof authorized by TVA in accordance with the "Delays and Remedies" provision, the contract price shall be increased or decreased to reflect such revisions as follows:

(a) For each classification actually used in work on the contract and with respect to which a revision is made in the wage rate or related benefits listed in the minimum wage schedule, the number of man-hours worked during the period in which such revision is effective shall be determined from the certified payrolls submitted by the contractor or its subcontractor; and the increase or decrease in the respective wage rate or benefit shall be applied to this number of man-hours. The contract price shall be increased or decreased by the total net amount resulting from all such changes under the various classifications in the schedule. This labor cost adjustment shall be made regardless of the level of wage rates and other benefits actually paid by the contractor or subcontractor, either before or during the period of work under this contract.

. . . . .

(c) This provision is applicable only to work which is subject to the TVA minimum wage schedule (form TVA 1851) and this provision is in lieu of all other adjustments for changes in labor costs app. 113.

The question presented is whether the above provision allows Oman a price adjustment for increased FICA taxes, federal and state unemployment taxes, public liability and property damage insurance, and workmen's compensation insurance which may have resulted from increases in the minimum wage and related fringe benefits schedule. The Hearing Officer correctly and unequivocally answered this question in the negative, stating:

The field labor cost provision as included in the contract (quoted previously) and as applied to the TVA minimum wage schedule as revised (form TVA 1851) deals with increases or decreases in compensation payable to the contractor with respect to revisions made in the wage rate or related benefits listed in the minimum wage schedule. The wage rates are specifically shown as hourly rates applicable to the various classifications of employees by craft. The "related benefits listed in the minimum wage schedule" are transportation allowances, contributions to health and welfare funds or programs, and pension benefit funds (Schedule A Construction Work . . . Part 2. Minimum Fringe Benefits). These are the type of benefits commonly contained in wage negotiation agreements between contractors and crafts in the construction industry. Nowhere in the field labor cost provision, the minimum wage schedule or the wage rates and classifications provision is any reference express or implied to be found relating to payment by TVA under these provisions of taxes or insurance costs app. 4.

The Hearing Officer's decision denying Oman's claim for...