169 Ct. Cl. 465 | Ct. Cl. | 1965
delivered the opinion of the court:
In December 1958, plaintiff entered into a contract with the Federal Aviation Agency to do grading, drainage, and paving work at Dulles (then called Washington) International Airport. Part of its task raider the contract was the installation of approximately 26,000 feet of subsurface pipeline. The specifications outlined the requirements for normal trench excavation and backfill operations in connection with the pipeline installation and provided for compensation
In the course of trench excavation, the contractor did meet unstable soil and was authorized by the Aviation Agency to remove and replace it. After carrying out these directions, plaintiff filed a request for additional compensation of $6.00 per cubic yard for all this work. In August 1961, the contracting officer determined that plaintiff was entitled to the additional payment only for the removal and replacement of unstable soil below the excavation depths shown on the contract drawings; unstable materials found within the indicated depths were to be paid for at the normal rate of $3.93 per cubic yard. Following the procedures then in effect, the plaintiff appealed this decision to the Administrator of the Federal Aviation Agency; after a 'hearing before a member
The contracting officer took no action. The parties held a meeting in May 1963, at which the plaintiff was informed that its claim had not been determined for over nine months because the contracting officer was uncertain as to the proper interpretation of the Administrator’s decision. At that meeting, the General Counsel of the Federal Aviation Agency requested an attorney in his office to prepare a memorandum discussing the Administrator’s decision. The memorandum was subsequently filed, on June 28, 1963, “on behalf of the contracting officer”, with the Contract Appeals Panel of the Agency as a request for a “supplemental decision” by the Administrator. Despite its euphemistic characterization, the true gist of this application was that the Administrator’s original decision was wrong. Plaintiff squarely opposed consideration of this request for a reopening, but on September 30, 1963, the Administrator granted it, and referred the case back to the Contract Appeals Panel for a full rehearing.
A. Defendant's motion to dismiss. Disposition of the defendant’s motion to dismiss turns on the Federal Aviation Agency’s authority to reconsider its initial decision favoring the contractor. If the Agency had power to order a rehearing of this case as it did, plaintiff has failed to exhaust its administrative remedies. Under the rules at the time of the Administrator’s original decision,
What remains is a refusal by the contracting officer to take action on a claim filed by the plaintiff on the basis of a final determination by the Administrator in its favor. We have held that when the contracting officer unreasonably delays action on a contractor’s claim, or refuses entirely to take action, the exhaustion requirement will be excused and the contractor may bring suit directly in this court. Oliver-Finnie Co. v. United States, 150 Ct. Cl. 189, 196-97, 279 F. 2d 498, 503 (1960); Cape Ann Granite Co. v. United States, 100 Ct. Cl. 53, 71 (1943), cert. denied, 321 U.S. 790 (1944) ; James McHugh Sons, Inc. v. United States, 99 Ct. Cl. 414, 431 (1943). Although those decisions involved claims on which no contract appeals board (or the head of a department) had acted, their reasoning is fully applicable here. In any event, a petition by plaintiff to the Administrator expressly requesting that he direct the contracting officer to make a determination under the decision of June 1962 would surely have been futile, since the Administrator himself had ordered that the entire matter be reconsidered. This was tantamount to a ruling that the contracting officer need not follow the earlier decision. Obviously, no relief would come through a further effort to have the head of the Agency compel his subordinate to abide by that holding. The contractor had, in substance, already exhausted his appeal. If the case be viewed more formalistically, then it falls, we think, within the rule recognized by the Supreme Court that a failure to exhaust administrative remedies will be excused where such procedures are unavailable or inadequate. United States v. Joseph A. Holpuch Co., 328 U.S. 234, 239-40 (1946).
Plaintiff cannot be faulted for failing to exhaust any administrative remedies under the contract. The suit is properly in this court, and the defendant’s motion to dismiss must be denied.
B. Defendant's motion for suspension of proceedings. In the alternative, the Government requests the court to suspend
Although we do not have a full record of the proceedings on liability within the Federal Aviation Agency, the plaintiff has submitted (with the concurrence of the defendant, see Defendant’s Supplemental Memorandum, p. 5) a comprehensive set of exhibits containing the basic written materials considered by the Administrator in reaching his original decision, as well as the arguments which persuaded him to reopen that ruling.
C. Plaintiff's motion for summary judgment on liability. In support of its motion for summary judgment on liability, plaintiff contends that (1) the June 1962 decision of the Administrator (in favor of the contractor) is conclusive and cannot be reviewed at all by this court; (2) if that decision can be reviewed, the court will find no disputed issues of law which we may examine de novo, but only questions of fact (which are undisputed or must be answered in the plaintiff’s favor on the basis of the substantial evidence test); (3) in any event, the plaintiff’s position on the legal questions is correct and requires judgment when applied to the agreed facts. We reject the first two of these arguments, but we agree with the last.
1. Plaintiff first asserts broadly that a final decision by the head of a department for the contractor is conclusive and cannot be reexamined in any way by this court. The argument is that one who contracts with the Government has virtually no choice concerning the contract’s standard terms; not the least restrictive provision is the Disputes clause setting out a complete arbitral system to which the contractor must submit whenever a controversy arises under the con
Whatever may have been the rule or the practice before the Wunderlich Act, 68 Stat. 81, 41 U.S.C. §§ 321-22, that statute compels us to reject plaintiff’s suggestion. It is in effect asking that we read into all government contracts (with Disputes clauses) the provision that a claim otherwise properly before the court may not be decided on the merits if there was a prior administrative determination favorable to the contractor, i.e. a clause that administrative determinations for the contractor are automatically conclusive. The standard Disputes clause does not and cannot now contain such a limitation, because the Wunderlich Act specifically prohibits the inclusion in a government contract of any clause making the decisions of an administrative official on questions of law or fact completely final and free from judicial review. 68 Stat. 81, 41 U.S.C. §§ 321-22. The Act, phrased in universal terms, makes no qualification or exception for administrative orders sustaining the contractor.
The legislative history of the Wunderlich Act confirms the position, implicit in the statutory language, that administrative rulings against the Government are not wholly free from judicial review. The Comptroller General had long asserted authority to examine such determinations and to deny payment on the basis of illegality. When the Supreme Court held, in United States v. Wunderlich, 342 U.S. 98 (1951), that decisions under the Disputes clause were final unless fraud was alleged and proved, the Comptroller General conceded that, as a result, his powers of review had been eliminated. See Hearings on S. 2487 Before the Subcommittee on Finality Clauses in Government Contracts of the Senate Committee on the Judiciary, 82d Cong., 2d Sess. 4-13 (1952). One of the major reasons for the passage of the new Act was to assure to the General Accounting Office a limited right of scrutiny comparable to (though perhaps not precisely the same as) that given to the courts.
2. Plaintiff’s second position is that only factual issues are in controversy, and the Administrator’s determination of those questions must be upheld because not disputed or not shown to be unsupported by substantial evidence. The error in this formulation is its disregard of the legal issue over which the parties are really quarreling. Plaintiff, it is true, sought an “equitable adjustment” under the contract, but it is too simple to say that “equitable adjustments” involve nothing but facts. The ultimate question in this case is whether the contract specifications entitle the contractor to premium payments for all the unstable soil which it removed and replaced, or for only that amount which was
3. We are able to consider the issue of the defendant’s liability, without a fuller administrative record than the truncated one which is available, because the physical facts relevant to that point are all undisputed. The parties disagree about the meaning of the specifications, but they do not disagree that plaintiff encountered substantial unstable soil within the excavation depths marked by the drawing, as well as below that level. In its request to the Administrator for a reopening, the Government expressly agreed that the pertinent facts were not in dispute; before us, the defendant does not repeat that concession but it fails to suggest any relevant physical fact which is in contest or which does not appear in the Administrator’s original determination. We are justified in considering the physical facts, significant to liability, as known and unchallenged.
The legal controversy over the specifications can adequately be solved, as already indicated, with the help of the parts of the administrative record appended (with the defendant’s concurrence) to the plaintiff’s motion for summary judgment; so far as we can tell, the hearing before the Con
4. The Administrator’s decision in favor of the contractor was based on the language of the apposite contract specification, the established rule that contract ambiguities are to be resolved against the author, and the best estimate of the parties’ purpose in drafting the provisions concerning unstable soil.
The pertinent specification, 702-3.2 (see footnote 1, supra), begins by elaborating the procedure for normal trench excavation and backfill operations in connection with pipeline installation. It goes on to treat separately with the excavation of unstable soil. Much later in the text of the specifications, an over-all general provision (702-5.1) dealing with payment stipulates that pipeline excavation is to be compensated at the “contract unit price” ($3.93 per cubic yard). But the unit price for removal and replacement of unstable soil encountered in pipeline excavation is given in the same specification that deals with its treatment. This states,
Though the actual purpose of the parties is uncertain, there is another good ground, also accepted by the Administrator, for holding that the removal and replacement of all unstable soil was meant to be compensated for at the higher rate. Plaintiff asserts that there was no accurate means of determining the amount of unstable soil to be encountered in trench excavation for a project covering as much area as the
In attempting to counter plaintiff’s reading of the specifications, defendant points to what it considers the normal trade usage, to this plaintiff’s previous practice on other contracts, and to the prior dealings of the parties under this agreement. It is said that the customary practice in contracts involving trench excavation for pipelines is to submit a composite bid price which takes into account the cost of excavating unstable as well as suitable soil. Under all such contracts, defendant claims, no additional payment is made for the removal and replacement of unstable soil to the depths specified in the contract drawings. To prove the existence of the alleged trade usage and plaintiff’s awareness of it, the defendant submitted, in its application to the Administrator for a new hearing, a number of sample contract specifications, including specifications used by the plaintiff in prior dealings with the Government. But each of these contracts is quite different in significant wording from the one before us, and most of them are very markedly dissimilar. Furthermore, all of those agreements explicitly provide that no additional payment is to be made for the excavation of unstable soil or indicate affirmatively by their phrasing that
The last of the Government’s defenses, on the merits, is that plaintiff’s conduct at the time of the performance of this contract shows that it did not consider itself entitled to additional compensation for the excavation of unstable soil. During the trench excavation operations, plaintiff encountered both acceptable soil and unacceptable shale, which, like unstable soil, was unsuitable for use as backfill, and replacement for which was, in certain instances, to be compen
For these reasons, we uphold plaintiff’s interpretation of the specifications and reject the tenuous defenses based on the wholly inadequate proffers as to trade practice, prior dealings of the parties under other agreements, and contemporaneous construction of this contract.
The plaintiff’s motion for summary judgment of liability is granted and the defendant’s motion to dismiss or to suspend proceedings is denied. Judgment is entered to that effect, with the amount of recovery to be determined under Rule 47 (c).
From the Government’s application to the Administrator and his second decision it is clear that he wholly reopened the case so as to allow the Government to show that the contractor was entitled to nothing more than the award originally made by the contracting officer.
When plaintiff’s appeal was considere! in 1962, the Aviation Agency’s appellate procedure differed considerably from that of the Armed Services Board of Contract Appeals. See 41 C.E.R. § 2-60 (1960). At the hearing before the member of the Contract Appeals Panel, only the contractor’s case was to be presented. Evidence on behalf of the Government was not to be adduced (41 C.E.R. § 2-60.12), but prior to the hearing the chairman of the Contract Appeals Panel was to “supply to [the contractor] copies of such relevant factual material in the possession of the Government as the Chairman may deem to be desirable in order to assist the contractor to develop his case.” 41 C.E.K. § 2-60.8. The regulations did not prescribe the mode of presenting the Government’s case to the Contract Appeals Panel or to the Administrator (if there was any such presentation at all), nor did they indicate whether the contractor would have any access to the Government’s arguments or evidence, other than under the provision just quoted.
41 C.F.R. § 2-60.20 (1960), which became effective on June 9, 1960, provided : “Motions for rehearing. In most instances, the decision of the Administrator as to questions of fact, by the terms of the contract involved, are final and conclusive and binding on the parties thereto. Motions for rehearing or reconsideration will not be considered unless based upon evidence not previously available to the contractor or considered by the member to whom the appeal was assigned, in malting his recommendation to the Administrator. Such motions must be filed within a reasonable period of time from the date of receipt of the Administrator’s decision and shall set forth specifically the grounds relied upon.”
Since it was not superseded until June 20, 1963, this regulation covers the events in controversy. The superseding regulation revises and amplifies its predecessor. See 41 C.E.R. § 2-60.210-4 (1963).
Although an administrative agency may be permitted to reopen or modify a decision on its own motion in defined circumstances, e.g., Natural Gas Act, 72 Stat. 947, 15 U.S.C. § 717r(a), the Federal Aviation Agency regulation in effect at the time this case was heard and decided (see note 4, supra) did not authorize such action, and the Agency did not purport to grant the rehearing on that basis.
These exhibits include the contract between the parties, the relevant extracts from the specifications, the contractor’s original claim for additional compensation, the opinion of the contracting officer denying that claim in part, the notice of appeal from that decision and the supporting brief submitted by the contractor, the opinion of the Administrator overruling the contract officer, the contractor’s claim for payment in accordance with the Administrator’s decision, the request for a supplemental decision made by the Office of the General Counsel of the Federal Aviation Agency, the extensive memorandum and exhibits tendered in support of that request, and the decision of the Administrator granting a rehearing.
In an attempt to overcome the impact of the Wunderlich Act, plaintiff emphasizes the part of the Disputes clause specifying the procedure by which a contractor may appeal an adverse decision by the Contracting Officer, but omitting any corresponding right on the part of the Government. Plaintiff also points to Federal Aviation Agency regulations to the same effect. See 41 C.F.R. §§ 2—60.3, 2 — 60.6. By analogy or implication, plaintiff urges, the same policy should govern decisions by the head of the department. But the provisions relied upon by plaintiff do no more than outline the appellate procedure to be followed within the agency. Though they may be crucial when the court is called upon to dismiss a contractor’s petition for failure to exhaust administrative remedies, they are irrelevant in the present context. Rather, it is the Wunderlich Act which is determinative. The minimal bounds of judicial review must be drawn from the terms, history, and policy of that Act, not from policies speculatively drawn from the contract clauses which are themselves governed by the statute. We read the statements of commentators (cited by plaintiff), saying or Implying that only the contractor may “appeal” from an adverse decision, as either referring to appeals within the agency or as suggesting the practical unlikelihood that the Government will (or will be able to) obtain judicial review as a regular matter of course.
See 1954 U.S. Code Cong. & Adm’n News 2191, 2196-97 ; Note, 70 Harv. L. Rev. 850, 358-59 (1956) ; Shedd, Disputes and Appeals: The Armed Services Board of Contract Appeals, 29 Law and Contemp. Prob. 39, S1-S2 (1964) ; Spector, Is it “Bianchi's Ghost” — Or “Much Ado About Nothing”?, 29 Law and Contemp. Prob. 87, 108-11 (1964) ; Schultz, Wunderlich Revisited: New Limits on Judicial Review of Administrative Determination of Government 'Contract Disputes, 29 Law and Contemp. Prob. 115, 117, 182-33 (1964).
This and other courts have sometimes overturned Comptroller General’s reversals of administrative decisions sustaining contractors, but the cases have involved errors of law or the absence of circumstances sufficient to invalidate the administrative determination under the prevailing standards. In other word's, the Comptroller General has been held wrong in the particular circumstances, not devoid of all power over such favorable decisions. See, e.g., McShain Co. v. United States, 83 Ct. Cl. 405, 409-10 (1936) ; Albina Marine Iron Works, Inc. v. United States, 79 Ct. Cl. 714, 719-20 (1934).
We are dealing, it should be emphasized, with administrative decisions under the Disputes clause, not with compromises or settlements entered into by the parties (cf. Cannon Constr. Co. v. United States, 162 Ct. Cl. 94, 319 F. 2d 173 (1963)) or with amendments duly made in the contract on proper consideration.
At the oral argument, the parties were requested to file supplementary briefs supporting their respective interpretations of the specifications — the substantive issue on which this ease depends.
Plaintiff also refers to other parts of the specifications, concerned with other types of excavation, which make it clear that the normal unit price is to be paid for that excavation regardless of the material encountered. The point is that the same clarity was not infused into the provisions on pipeline excavation.
Defendant also contends that plaintiff’s original claim filed with the; contracting officer related only to one of its subcontractors, while the monetary claim which it made after the favorable decision of the Administrator was for itself as well as the subcontractor. We see nothing wrong with this broader claim. The Administrator’s decision in plaintiff's favor was not limited to the subcontractor’s claim; rather, it related to all quantities of unstable soil removed under the contract.
Since these proffers are insufficient and raise no issue worthy of trial, it is unnecessary to take any evidence, and consequently unnecessary to reach either of these questions : (1) Whethei-, in a trial before a Commissioner of this court, a party would be precluded from offering evidence of trade usage, prior dealings of the parties, and their contemporaneous construction of the contract, because it failed to do so, in timely fashion, in the proceedings at the administrative level; (2) whether, in a suit for relief under the contract, such factual questions, which directly relate to the legal issue of the meaning of the contract, may he tried de novo in this court (a) where they have already been tried and determined administratively or (b) where the administrators have not reached those questions.