United States v. Ulvedal

• Decision Date: 08 February 1967
• Docket Number: No. 18495.,18495.
• Citation: 372 F.2d 31
• Parties: UNITED STATES of America, Appellant, v. A. L. ULVEDAL, d/b/a Ulvedal Construction Company, and United Pacific Insurance Company, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

372 F.2d 31 (1967)

UNITED STATES of America, Appellant, v. A. L. ULVEDAL, d/b/a Ulvedal Construction Company, and United Pacific Insurance Company, Appellees.

No. 18495.

United States Court of Appeals Eighth Circuit.

February 8, 1967.

Robert C. McDiarmid, Atty., Dept. of Justice, Washington, D. C., for appellant, John W. Douglas, Asst. Atty. Gen., Civil Division, Dept. of Justice and David L. Rose, Atty., Dept. of Justice, Washington, D. C., and John O. Garaas, U. S. Atty., Fargo, N. D., were on the brief with him.

Gordon Caldis, Grand Forks, N. D., for appellees.

Before VAN OOSTERHOUT, BLACKMUN, and MEHAFFY, Circuit Judges.

BLACKMUN, Circuit Judge.

The United States instituted this action seeking net damages of $7,963.34 under a construction contract between the government, acting through the National Aeronautics and Space Administration, and the defendant Ulvedal, doing business as Ulvedal Construction Company. The second defendant is Ulvedal's performance bond surety. Jurisdiction is conferred by 28 U.S.C. § 1345.

After the defendants filed their answer, the United States moved for summary judgment. The district court denied that motion by order reciting that it was "unable to say on the present state of the record that there exists no genuine issue as to any material fact". The court, however, made the written statement required by 28 U.S.C. § 1292(b) and we permitted an appeal. We must reverse.

The facts are established by the pleadings and by the undenied material supportive of the motion. On July 22, 1960, the defendant Ulvedal entered into a contract with NASA for the construction of a radio tracking facility near East Grand Forks, Minnesota, at a cost of $167,280. The contract provided that the work was to start "Immediately"; that it was to be completed by September 13, 1960; that "The Contractor shall pay to the Government as compensation for delayed possession * * * the sum herein specified as ascertained and liquidated damages for each calendar day required for completion beyond" the date specified; and that "The deductions required * * * for failure to complete the work * * * in the time stated, will be at the rate of $100.00 per calendar day * * *"

The contract also contained a standard "changes" paragraph authorizing the contracting officer by written order to make changes in the drawings or specifications and, when appropriate, "an equitable adjustment"; a standard "changed conditions" paragraph directed to subsequently discovered physical conditions at the site and providing for "an equitable adjustment"; a provision authorizing the contracting officer to extend the time for completion of the work; a standard "disputes" paragraph;¹ and a provision supplemental to the "changes" and "changed conditions" paragraphs specifying how adjustments in the contract price were to be computed.

The United States, through its contracting officer, did extend the time of the contract's completion from September 13 to October 31, 1960. The work, however, was not completed for final acceptance until February 20, 1961, 112 days after the preceding October 31. The stated contract price nevertheless was paid to the defendant Ulvedal.

On November 23, 1962, the contracting officer wrote Ulvedal. In this letter he reviewed submitted modification proposals and allowed five change orders which effected a net increase of $804.91 in the price. He mentioned another change order which he did not allow; the negotiations which had taken place; the 112 day delay; lack of justification for that delay and the absence of word from the defendant during the two months since the last negotiation meeting. The officer then stated that he must "issue a written decision in accordance with the provisions of" the contract's disputes clause. He proceeded to fix the liquidated damages for the delay at $11,200 and the amounts due from and to the government. This resulted in a net figure of $7,963.34 due from the contractor. He also outlined the available appeal procedure.²

Ulvedal took no administrative appeal and did not comply with the request for payment. The government made demand upon the surety in August 1965. Payment was not forthcoming. The present suit against Ulvedal and his surety was then instituted in February 1966.

In their answer the defendants, in addition to admissions, pleaded "substantial compliance with the requirements" of the contract by October 24, 1960; that all delays arose from causes for which the contract provided that the contractor not be charged; that over $8,000 was due from the government to the contractor; that under the contract any liquidated damages were to have been satisfied by deductions; that the United States asserted no deduction when payment was effected; that the government was now estopped from claiming liquidated damages; and that the government was also guilty of laches. The defendant Ulvedal counterclaimed for the amount alleged to be due him.

The first section of the Wunderlich Act, 41 U.S.C. § 321, which became law in 1954, states that no contract provision relating to the finality of a decision of a government representative shall be pleaded as limiting judicial review where fraud is alleged, "Provided, however, That any such decision shall be final and conclusive unless the same is fraudulent or capricious or arbitrary or so grossly erroneous as necessarily to imply bad faith, or is not supported by substantial evidence". The Act's second section, 41 U.S.C. § 322, states that no government contract shall contain a provision making the decision of any administrative official final on a question of law. The identity of the language of these sections with the present contract's disputes clause is apparent. The Wunderlich Act thus does not serve to impeach the contract here in any way. Instead, the words of finality and conclusiveness in § 321 are in complete accord with the contract.

We know of no rule of law preventing the government and a contractor, such as Ulvedal, from entering into an agreement which, by its terms, makes final a contracting officer's decision in a dispute involving a question of fact arising under their contract. The Supreme Court has consistently upheld this very kind of provision. United States v. Moorman, 338 U.S. 457, 460-462, 70 S.Ct. 288, 94 L.Ed. 256 (1950); United States v. Wunderlich, 342 U.S. 98, 72 S.Ct. 154, 96 L.Ed. 113 (1951); United States v. Utah Constr. & Mining Co., 384 U.S. 394, 418-419, 86 S.Ct. 1545, 16 L.Ed.2d 642 (1966). The purpose of a disputes clause "is to provide for a quick efficient determination of disputes on an administrative level * * *" United States v. Taylor, 333 F.2d 633, 637 (5 Cir. 1964).

We would readily conclude, therefore, that the defenses asserted in the answer were matters which had already been presented to the contracting officer; that that officer had made a decision with respect thereto; that the contractor had received the prescribed notice thereof and had been advised as to appellate procedure; that the decision, by the clear terms of both the Wunderlich Act and the disputes clause, became final and conclusive upon the parties; that the defendant contractor abandoned his opportunity to make his record before the agency head and there to establish, if he could, that the decision was one which qualified for judicial review; and that, consequently, the defendants are now foreclosed from so doing in this litigation. United States v. Joseph A. Holpuch Co., 328 U.S. 234, 239-240, 66 S.Ct. 1000, 90 L.Ed. 1192 (1946); United States v. Blair, 321 U.S. 730, 735, 64 S.Ct. 820, 88 L.Ed. 1039 (1944); United States v. Peter Kiewit Sons' Co., 345 F.2d 879, 883-884 (8 Cir. 1965); Happel v. United States, 279 F.2d 88, 91-92 (8 Cir. 1960).

The defendants, however, would avoid the effect of these cited and apparently controlling authorities by suggesting that they concern only situations of affirmative relief and do not deprive a contractor of his "right to offer defense in an enforcement suit" by the government.

We fail to perceive any validity in the distinction. The rationale of the cases cited seems equally applicable when the contractor is sued as when he is the one who sues.

The Second Circuit has expressly so held. United States v. Hammer Contracting Corp., 331 F.2d 173 (2 Cir. 1964), affirming 216 F.Supp. 948. (E.D.N.Y. 1963), where the district court had said, p. 950, "Such a final decision may be asserted by the United States affirmatively as well as defensively". See United States v. Smith, 152 F.Supp. 322 (E.D. Pa.1957). We agree with the holding and implications of the Hammer case.

The only authorities cited by the defense in support of its position are three opinions under the rent control statutes. The courts there drew a distinction between affirmative relief and a defense in an enforcement proceeding. United States v. Fritz Properties, Inc., 89 F. Supp. 772, 777-780 (N.D.Cal.1950); Woods v....