B-152570, JUL. 15, 1968

B-152570, JUL. 15, 1968

TO GINSBURG AND FELDMAN:

REFERENCE IS MADE TO THE CLAIM FILED IN OUR OFFICE ON BEHALF OF THE TRUSTEE IN BANKRUPTCY FOR CONSTRUCTION COMPONENTS, INC., A SUBCONTRACTOR UNDER CONTRACT NO. DA-36-109-EHG-7520, AWARDED BY THE CORPS OF ENGINEERS, UNITED STATES ARMY.

THE CLAIM IS IN THE AMOUNT OF $167,864.89, REPRESENTING CONTRACT PAYMENTS PRESENTLY BEING RETAINED BY THE GOVERNMENT BECAUSE OF OUTSTANDING GOVERNMENT COUNTERCLAIMS IN EXCESS OF THAT AMOUNT FOR DEFICIENCIES IN THE ITEMS SUPPLIED UNDER THE CONTRACT. THE GOVERNMENT COUNTERCLAIMS AS WELL AS CLAIMS ON BEHALF OF HOME BUILDING CONTRACTORS, INC., THE PRIME CONTRACTOR, FOR EXTRA COSTS HAVE BEEN RESOLVED BY THE CONTRACTING OFFICER UNDER THE CONTRACT DISPUTES CLAUSE. WITH THE EXCEPTION OF A CLAIM FOR EXTRA COSTS FOR CERTAIN PRESERVATIVE TREATMENT DIRECTED BY THE GOVERNMENT WHICH WAS GRANTED BY THE CONTRACTING OFFICER IN THE AMOUNT OF $32,917.32, ALL OTHER CLAIMS AND COUNTERCLAIMS HAVE BEEN RESOLVED AGAINST THE CONTRACTOR UNDER FINDINGS OF FACT AND DECISIONS RENDERED BY THE CONTRACTING OFFICER. IN THIS REGARD, WE ARE ADVISED THAT APPROPRIATE APPEALS HAVE BEEN FILED WITH THE ARMED SERVICES BOARD OF CONTRACT APPEALS.

THE SUBJECT CONTRACT COVERED THE FURNISHING OF PREFABRICATED HOUSES FOR VARIOUS OVERSEAS DESTINATIONS. THE DEFICIENCIES WHICH ARE THE BASIS FOR THE GOVERNMENT COUNTERCLAIMS, WITH ONE EXCEPTION, WERE REPORTED AFTER THE HOUSING UNITS HAD BEEN DELIVERED TO THE OVERSEAS DESTINATIONS. THE CONTRACT, ON THE OTHER HAND, PROVIDED FOR INSPECTION AND ACCEPTANCE AT PORT ROYAL, SOUTH CAROLINA. IT IS YOUR CONTENTION THAT THE CLAIM FOR RETAINAGES IS PROPERLY FOR CONSIDERATION BY OUR OFFICE NOTWITHSTANDING THE PENDANCY OF THE GOVERNMENT COUNTERCLAIMS BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS BECAUSE THE RESOLUTION OF THE COUNTERCLAIMS INVOLVES A QUESTION OF LAW RATHER THAN ONE OF FACT. IN THIS REGARD, YOU POINT OUT THAT ACCEPTANCE UNDER THE TERMS OF THE CONTRACT IS FINAL, ABSENT EVIDENCE OF LATENT DEFECTS, FRAUD, OR SUCH GROSS MISTAKES AS WOULD AMOUNT TO FRAUD; THAT THE EXISTENCE OF SUCH EVIDENCE HAS NOT BEEN ALLEGED IN THE CONTRACTING OFFICER'S FINDINGS OF FACT AND DECISIONS; AND THAT THERE IS THEREFORE NO BASIS FOR A REFUSAL BY OUR OFFICE TO SETTLE THE RETAINAGES CLAIM.

AS A MATTER OF POLICY, OUR OFFICE GENERALLY DECLINES TO CONSIDER A MATTER WHICH IS PROPERLY PENDING APPEAL BEFORE AN ADMINISTRATIVE BOARD OF CONTRACT APPEALS. FURTHER, THE DETERMINATION OF THE NATURE OF DEFECTS DETECTED AFTER FINAL ACCEPTANCE IS ESSENTIALLY A FACTUAL ONE, AND WHILE THE CONTRACTING OFFICER'S FINDINGS AND DECISIONS ARE SILENT ON THIS QUESTION, SUCH SILENCE, IN OUR OPINION, DOES NOT PRECLUDE THE INTRODUCTION AT THE BOARD LEVEL OF EVIDENCE TENDING TO SHOW THAT THE DEFECTS DISCOVERED AFTER ACCEPTANCE WERE OR WERE NOT OF THE KIND WHICH WOULD SURVIVE FINAL ACCEPTANCE. NEITHER THE RULES UNDER WHICH THE BOARD OPERATES NOR THE TERMS OF THE DISPUTES CLAUSE LIMIT THE BOARD'S JURISDICTION TO ONLY THAT EVIDENCE CONSIDERED IN THE CONTRACTING OFFICER'S FINDING OF FACT AND DECISION.

SINCE DISPUTES OF FACT MUST BE RESOLVED IN ACCORDANCE WITH THE ADMINISTRATIVE APPEALS PROCEDURES AGREED TO BY THE PARTIES BEFORE THEY CAN BE CONSIDERED BY EITHER OUR OFFICE OR THE COURTS, THE DETERMINATION OF THE VALIDITY OR INVALIDITY OF THE GOVERNMENT COUNTERCLAIMS MUST BE MADE BY THE ARMED SRVICES BOARD OF CONTRACT APPEALS. WE THEREFORE CONCLUDE THAT RELEASE BY OUR OFFICE OF THE CONTRACT RETAINAGES BEFORE SUCH DETERMINATION IS MADE BY THE BOARD WOULD BE PREMATURE AND UNWARRANTED UNDER THE CIRCUMSTANCES.