Perry and Wallis, Inc. v. United States, 365-68.

• Decision Date: 12 June 1970
• Docket Number: No. 365-68.,365-68.
• Citation: 427 F.2d 722,192 Ct. Cl. 310
• Parties: PERRY AND WALLIS, INC. v. The UNITED STATES.
• Court: U.S. Claims Court

192 Ct. Cl. 310, 427 F.2d 722 (1970)

PERRY AND WALLIS, INC. v. The UNITED STATES.

No. 365-68.

United States Court of Claims.

June 12, 1970.

Paul T. O'Grady, Washington, D. C., for plaintiff. Samuel J. L'Hommedieu, Jr., Washington, D. C., attorney of record.

Steven L. Cohen, Washington, D. C., with whom was Asst. Atty. Gen. William D. Ruckelshaus, for defendant.

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

ON PLAINTIFF'S MOTION AND DEFENDANT'S CROSS-MOTION FOR SUMMARY JUDGMENT

SKELTON, Judge.

In March 1965, plaintiff, Perry and Wallis, Inc., entered into a contract as contractor with the National Park Service, a division of the Department of the Interior, for the construction of guard houses, fences, and sidewalks at the White House in Washington, D. C. In August 1966, Change Order No. 2 was issued, calling for design changes in the fence and guard booths in front of the White House. Plaintiff commissioned a subcontractor to perform the changes. The contracting officer determined that plaintiff's equitable adjustment, under the changes provisions of the contract, was limited to the actual cost to the subcontractor of labor, material and supplies expended on the project, plus 15 percent of this base cost as plaintiff's fixed fee.

Plaintiff appealed the contracting officer's determination to the Interior Board of Contract Appeals (IBCA), claiming that the base cost formula should have included 10 percent for the subcontractor's overhead plus 10 percent for the subcontractor's profits. Plaintiff then sought 15 percent of this increased base cost as his fixed fee. The IBCA denied plaintiff's claim in Appeal No. IBCA 617-1-67, 68-2 BCA ¶ 7116. The case is now before us on cross-motions for summary judgment. Plaintiff is asking this court to reverse the IBCA decision; in the alternative it alleges a breach of contract. We have concluded that the decision of the Board is entitled to finality, and that plaintiff's breach of contract argument is without merit.

The relevant contract provision is found in clause 6(a) (2) of the General Provisions:

6. CHANGES:

(a) Additional Costs. In conformance with Clause 3, 4 and 10 of the General provisions the cost of any change ordered in writing by the Contracting Officer which results in an increase in the contract price will be determined by one or the other of the following methods, at the election of the Contracting Officer:

(1) * * * Not applicable.

(2) On the basis of the actual necessary cost as determined by the Contracting Officer, plus a fixed fee to cover general supervisory and office expense and profit. The fixed fee shall not exceed 15 percent of the actual necessary costs. The actual necessary cost will include all reasonable expenditures for material, labor, and supplies furnished by the Contractor * * * but will in no case include any allowance for general superintendent, office expense, or other general expense not directly attributable to the extra work. * * * Emphasis supplied.

Plaintiff says a plain reading of this cited provision leads to the conclusion that "actual necessary cost" means the actual and necessary cost to the contractor. This interpretation would include the subcontractor's overhead and profits as a part of the base cost. We disagree. This contract specifically defines "actual necessary cost" as including "all reasonable expenditures for material, labor, and supplies," and then goes on to say that in no case will actual and necessary costs include an allowance for any "general expense not directly attributable to the extra work." We read this provision as plainly and directly refuting plaintiff's proffered interpretation. The term "actual necessary cost" is narrowed down to exclude any and all expenses not directly attributable to the extra work. This is a clear expression of the government's intention to limit the base cost formula so as to exclude what plaintiff is now seeking.

We take note of three prior cases decided by the IBCA which reach this same conclusion. These are Samkal Mines, Inc., IBCA No. 582-8-66, 66-2 BCA ¶ 6010; Seal & Co., IBCA No. 181, 61-1 BCA ¶ 2887; and Irvin Prickett & Sons, IBCA No. 203, 60-2 BCA ¶ 2747. Although these decisions are not those of a court, we refer to them to show the interpretation of the IBCA of contract terms identical to and similar to those in the instant case. Samkal involved the same phrase as is now before us, and the Board read it as we do. Prickett and Seal involved similar clauses, and the Board held in each case that the subcontractor's profit and overhead could not be included in the base cost formula.

We are especially cognizant and take note of the fact that in Seal the Department of Interior was, as here, the agency of the government involved and our present plaintiff was the subcontractor of the complaining contractor in the case. The clause in the Seal contract provided that the base cost formula be computed "on the basis of the actual cost of the extra work (* * * excluding overhead), plus fifteen (15) percent of that cost to cover profit and all indirect charges against such extra work." There is no meaningful distinction between this cited clause and the clause in the Perry & Wallis contract. And in Seal, the complaining contractor was trying to do the exact same thing that our present plaintiff is attempting to do, i.e., include the subcontractor's overhead and profit in the base cost formula. The Board ruled that this could not be done, and plaintiff, as subcontractor, was aware of the ruling and of defendant's interpretation of the clause involved. Therefore, when he signed the instant contract, he did so with knowledge of the defendant's past interpretation of this phase of the contract. A party who willingly and without protest enters into a contract with knowledge of the other party's interpretation of it is bound by such interpretation and cannot later claim that it thought something else was meant. See Franklin Company v. United States, 381 F.2d 416, 180 Ct.Cl. 666 (1967); City of Memphis, etc. v. Ford Motor Co., 304 F.2d 845, 849 (6th Cir. 1962); and Cresswell v. United States, 173 F.Supp. 805, 811, 146 Ct.Cl. 119, 127 (1959). In Cresswell we held:

If one party to a contract knows the meaning that the other intended to convey by his words, then he is bound by that meaning. The same is true if he had reason to know what the other party intended. * * *

It is clear that the plaintiff, by reason of its experience in the Seal case, knew or had reason to know the meaning intended by the identical agency of the government in the contract clause involved here. In any event, it was put on inquiry by such experience to investigate such intended meaning. Notwithstanding its duty in this regard, it did not make any inquiry nor assert any protest nor claim any different meaning before it made its bid and signed the contract. Under these circumstances, we conclude that plaintiff acquiesced in and is bound by the meaning of the clause as intended by the government. See Sun Shipbuilding & Dry Dock Co. v. United States, 393 F.2d 807, 818, 83 Ct.Cl. 358, 377 (1968); and Lykes-Youngstown Corp. v. United States, 420 F.2d 735, 744, 190 Ct.Cl....