Victory Construction Co., Inc. v. United States, 8-73.

• Decision Date: 19 February 1975
• Docket Number: No. 8-73.,8-73.
• Citation: 510 F.2d 1379
• Parties: VICTORY CONSTRUCTION CO., INC., and Paul Krummel (a joint venture) v. The UNITED STATES.
• Court: U.S. Claims Court

510 F.2d 1379

VICTORY CONSTRUCTION CO., INC., and Paul Krummel (a joint venture) v. The UNITED STATES.

No. 8-73.

United States Court of Claims.

February 19, 1975.

Richard W. Miller, Kansas City, Mo., for plaintiff. George T. O'Laughlin, Kansas City, Mo., attorney of record. William E. Simmons, Windsor, Mo., of counsel.

Ray Goddard, Washington, D. C., with whom was Asst. Atty. Gen. Carla A. Hills, for defendant.

Before DURFEE, Senior Judge, and SKELTON and KASHIWA, Judges.

PER CURIAM:

This case comes before the court on defendant's request, filed June 12, 1974, for review by the court of the recommended decision filed April 12, 1974, by Trial Judge George Willi pursuant to Rule 166(c) on plaintiff's motion and defendant's cross-motion for summary judgment. Upon consideration thereof, together with the opposition thereto, and the briefs and oral argument of counsel, since the court agrees with the trial judge's recommended decision, as hereinafter set forth, it hereby affirms and adopts the same as the basis for its judgment in this case. Therefore, defendant's request for review and motion for summary judgment are denied, plaintiff's motion for summary judgment is granted and judgment is entered for plaintiff in the sum of $81,784.23.

OPINION OF TRIAL JUDGE

WILLI, Trial Judge:

On August 6, 1965 the Army Corps of Engineers awarded plaintiff, two general contractors associated in a joint venture, a $465,395.80 contract for modification of certain existing flood control structures along the west bank of the Mississippi River at St. Louis, Missouri. The job included the refurbishing and alteration of storm sewers comprising a part of the control complex. That work, for which the contract provided by reference to estimated quantities of individual items, each with its own unit price, was performed by a subcontractor, Western Waterproofing Co., Inc. In the course of performance the Government ordered increases in the estimated quantities of five categories of the subcontract work. Western did its job so diligently and efficiently that in thirty days it not only completed the work for which the contract allotted 270 days' performance time, but finished all of the Government-ordered increases as well.

The present suit is brought on behalf of Western Waterproofing to reverse a decision of the Corps of Engineers Board of Contract Appeals (the Board) upholding the contracting officer's determination as to the amount of compensation due Western for the additional work that it performed at the Government's behest. 69-2 BCA ¶ 7920.

The issue presented by the parties' cross-motions for summary judgment is the extent to which that decision merits the finality accorded by the interaction of the standard Disputes clause of the contract and the applicable criteria of the Wunderlich Act, 68 Stat. 81, 41 U.S.C. §§ 321-322 (1970).

In addition to a conventional Changes article, the subject contract included among its Special Provisions a clause required by the Armed Services Procurement Regulations¹ in all "* * * contracts containing estimated quantity items when the Contracting Officer has reserved the right to vary the estimated quantity during the performance of the work to accommodate actual conditions encountered" as follows:

SP-6. VARIATIONS IN ESTIMATED QUANTITIES (JAN. 1965).— Where the quantity of a pay item in this contract is an estimated quantity and where the actual quantity of such pay item varies more than fifteen (15%) percent above or below the estimated quantity stated in this contract, as it may hereafter be modified, an equitable adjustment in the contract unit price shall be made upon demand of either party. If the quantity variation is such as to cause an increase in the time necessary for completion, the Contracting Officer shall, upon receipt of a written request for an extension of time within ten (10) days from the beginning of such delay, or within such further period of time which may be granted by the Contracting Officer prior to the date of final settlement of the contract, ascertain the facts and make such adjustment for extending the completion date as in his judgment the findings justify. If the parties fail to agree upon an equitable adjustment in the contract price or time the dispute shall be determined as provided in the clause of this contract entitled "Disputes."

The quantity overrun that invoked the procedure defined by paragraph 6 of the Special Provisions occurred with respect to the five items of sewer alteration work identified below by contract Item Number, Estimated Quantity, Actual Quantity, Excess (in units) of Actual Quantity over 115 percent of Estimated Quantity, Unit Price Estimated by the Government Prior to Bidding, Unit Price per Award, and Unit Price Allowed by the Contracting Officer for Equitable Adjustment purposes.

                Quantity Unit Price on
                Item Est. Actual Above 115% Govt.Est. Unit Price Excess Per
                No. Quan. Unit Quan. of Estimate Unit Price Per Award Equit. Adj
                17     9   ea.       11       .65 ea.      $101.45   $1,085.70    $324.30
                18   300   lin. ft. 394.71  49.71 lin. ft.  $66.30      $92.40     $27.62
                19    15   sack      94.70  77.44 sacks    $269.30     $856.90    $256.15
                20    90   sack     116.83  13.33 sacks    $327.35     $561.85    $167.94
                21    15   sack      62.37  45.12 sacks    $579.50     $856.90    $256.07
                

On April 15, 1966, after Western's sewer work had been completed and the precise extent of additional work became known, the contracting officer wrote the plaintiff a letter detailing the overrun items and quantities and making the following statements with respect to them:

Examination of your unit prices for the above-listed items reveals these prices are in excess of amounts considered equitable for the work. Therefore, in accordance with the provisions of paragraph SP-6 of the contract specifications, you are hereby notified that equitable downward adjustments in unit prices for the excess quantity of these items are deemed warranted.

It is requested that you furnish a proposal reflecting such reductions. Said reductions shall apply only to the quantity in excess of 115 percent of the estimated contract quantity of each respective item. Your proposal shall be broken down into labor, plant and material costs and should be in sufficient detail to permit prompt evaluation.

* * * * * *

In determining the adjusted unit price for each of the items involved in the overrun, the contracting officer adhered to the approach indicated by his opening observations and directives. He evidently conceived the quantity variance clause, in an overrun situation, as not only entitling the Government to insist on an equitable adjustment of contract price for units in excess of 115 percent of those specified in the contract but also as limiting the price payable on such excess units to that which the contractor could affirmatively justify on the basis of his actual cost experience in performing the basic contract requirements for the same items. In short, he placed on the contractor the burden of proving the price to which it was entitled for the overrun units. In net effect, he treated the excess portion of the work as though it had been performed under a retroactive type of fixed-price redeterminable contract. 32 C.F.R. §§ 3.404-1, 3.404-6 (1969).

Although Western Waterproofing insisted to the contracting officer that a proper interpretation of the applicable ASPR provision expressly prohibited a reduction of contract unit price in the circumstances presented and further contended that the contract unit prices, as applied to the overrun quantities, were equitable in any event,² it nonetheless complied punctually with his demand for its cost records. By a letter of August 7, 1967 the contracting officer informed the plaintiff that he rejected Western's arguments in support of its request for payment at contract unit prices on the overrun quantities. He added:

I will now proceed to prepare a reasonable cost estimate based on actual Corps of Engineers field records and other information available covering the entire operation, including overhead, but exclusive of mobilization and demobilization. This total cost will be prorated among the overrun items to determine an estimated actual cost per unit of each item. This estimated actual cost per unit plus an equitable profit factor will thus become the new unit price for the quantities in excess of 115 percent of the estimated contract quantities.

* * * * * *

It was the above method that the contracting officer employed to arrive at the equitable adjustment that is the subject of the present suit.

Since separate records had not been maintained on the work in excess of 115 percent of contract quantities, it was impossible to determine the actual cost of performing that excess, either in the aggregate or for any of the individual categories of work involved. The records were adequate, however, to enable the parties to agree on the total direct cost of performing the entire portion of the contract work represented by the five items on which overruns were experienced. To that base figure the contracting officer added allowances for overhead and profit, for both Western and its prime, the plaintiff, and thereby arrived at a total aggregate price for the five items in their entirety. He then, and still over objection, apportioned the total price figure among the five types of work in accordance with the proportion that the Government's prebid estimate of unit price for each bore to their sum. Finally, he developed a unit price within each category by simply dividing the total number of units involved into the aggregate price apportioned to the category. Without conceding the overall propriety of this procedure, Western protested that the apportionment of lump-sum price among the five categories of work should at least be based on actual contract unit prices rather than on a prebid estimate that had proved...