B-152570, DEC. 4, 1968

B-152570, DEC. 4, 1968

TO COHEN, SHAPIRO, BERGER, POLISHER AND COHEN:

REFERENCE IS MADE TO YOUR LETTER OF AUGUST 16, 1968, WITH ENCLOSURE, REQUESTING RECONSIDERATION OF OUR DECISION B-152570, JULY 15, 1968, WHEREIN WE DENIED THE CLAIM OF THE TRUSTEE IN BANKRUPTCY FOR CONSTRUCTION COMPONENTS, INC., A SUBCONTRACTOR UNDER UNITED STATES ARMY CORPS OF ENGINEERS CONTRACT DA-36-109-ENG-7520.

YOUR CLAIM, WHICH WAS THE SUBJECT OF OUR DECISION OF JULY 15, IS FOR CONTRACT RETAINAGES IN THE AMOUNT OF $167,864.89 BEING WITHHELD TO COVER GOVERNMENT COUNTERCLAIMS FOR DEFICIENCIES IN THE ITEMS SUPPLIED BY THE CONTRACTOR WHICH WERE DISCOVERED AFTER FINAL INSPECTION AND ACCEPTANCE. OUR DECISION RECOGNIZED THAT ACCEPTANCE UNDER THE TERMS OF THE CONTRACT WAS FINAL IN THE ABSENCE OF LATENT DEFECTS, FRAUD, OR SUCH GROSS MISTAKES AS TO AMOUNT TO FRAUD. WE CONCLUDED THAT, EVEN THOUGH NO EVIDENCE OR ALLEGATION OF LATENT DEFECTS HAD BEEN INCLUDED IN THE CONTRACTING OFFICER'S FINDINGS OF FACT AND DECISIONS, ANY ACTION BY OUR OFFICE WITH REFERENCE TO THE RELEASE OF THE RETAINAGES PRIOR TO CONSIDERATION OF THE GOVERNMENT'S COUNTERCLAIMS BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS WOULD BE "PREMATURE AND UNWARRANTED.'

YOU CONTEND, HOWEVER, THAT IN LIGHT OF THE CONTRACTING OFFICER'S SILENCE ON THE ISSUE OF THE NATURE OF THE ALLEGED DEFECTS, I.E., LATENT OR PATENT, OUR REFUSAL TO CONSIDER THE CLAIM UNTIL SUCH TIME AS THAT ISSUE IS FINALLY DETERMINED BY THE BOARD IS AN IMPROPER ABDICATION OF THE JURISDICTION OF OUR OFFICE. IN ADDITION, YOU STATE THAT OUR CONCLUSION THAT EVIDENCE INDICATIVE OF THE NATURE OF THE DEFECTS MAY BE INITIALLY INTRODUCED AT THE BOARD LEVEL IS "SHEER SPECULATION TO THE VERY GREAT AND PREJUDICIAL DETRIMENT OF THE CONTRACTOR BY ATTEMPTING TO IMAGINE CIRCUMSTANCES WHICH MIGHT RAISE IN PROCEEDINGS BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS A FACTUAL DISPUTE * * * WHICH IS NOT NOW ALLEGED BY THE GOVERNMENT.' ALSO, IN YOUR OPINION, THE GOVERNMENT SHOULD BE LEGALLY PRECLUDED FROM INTERJECTING SUCH A FACTUAL DISPUTE BECAUSE THE ISSUE OF THE ALLEGED DEFECTS AND RETAINAGES THEREFOR WAS NOT TIMELY RAISED.

THE DISPUTES CLAUSE OF THE CONTRACT PROVIDES THAT A FINDING OF FACT BY THE CONTRACTING OFFICER, DETERMINATIVE OF A DISPUTE ARISING UNDER PERFORMANCE OF THE CONTRACT, IS FINAL AND CONCLUSIVE ONLY INSOFAR AS THAT DETERMINATION IS NOT TIMELY APPEALED AS PROVIDED THEREIN. UPON APPEAL, FINAL DISPOSITION OF THE DISPUTE IS MADE DEPENDENT UPON THE FINDINGS OF THE BOARD, SUBJECT TO LEGAL REVIEW BY A COURT OF COMPETENT JURISDICTION OR OUR OFFICE.

THEREFORE, THE CONTRACTING OFFICER'S DETERMINATION THAT CERTAIN ITEMS SUPPLIED UNDER THE CONTRACT DEVIATED SUBSTANTIALLY FROM THE TERMS AND CONDITIONS THEREOF, FOR WHICH THE CONTRACTOR IS LEGALLY LIABLE UNDER THE INSPECTION AND WARRANTY CLAUSES OF THE CONTRACT, CONSTITUTED A FINDING OF FACT UNDER THE DISPUTES CLAUSE. ANY DECISION BY OUR OFFICE AT THIS TIME RELATIVE TO THE LEGALITY OF THE RETAINAGES WOULD OBVIOUSLY BE "PREMATURE AND UNWARRANTED" SINCE SUCH DECISION WOULD NECESSARILY INVOLVE THE CONSIDERATION OF MANY FACTS WHICH, AT THIS DATE, ARE NOT FINAL AND CONCLUSIVE, AND ANY ACTION BY THE BOARD WITH RESPECT THERETO WHICH WOULD ALLOW THE COUNTERCLAIMS TO SOME EXTENT WOULD IN ALL PROBABILITY RENDER A DECISION BY OUR OFFICE QUITE MEANINGLESS.

MOREOVER, THE FACT THAT THE ALLEGED DEFECTS HAVE NOT YET BEEN CHARACTERIZED AS LATENT OR PATENT IS NOT, AS YOU CONTEND, FATAL TO THE GOVERNMENT'S COUNTERCLAIMS. SEE DONALD GLOVE COMPANY, ASBCA NO. 3247.

WE HAVE CAREFULLY CONSIDERED THE AUTHORITIES CITED BY YOU, BUT WE ARE NOT PERSUADED THAT THEY LEND ANY SUPPORT TO YOUR REQUEST FOR RECONSIDERATION. WE THEREFORE ARE REQUIRED TO AFFIRM OUR DECISION OF JULY 15, 1968.