B-148266, JULY 14, 1964, 44 COMP. GEN. 1

B-148266, JULY 14, 1964, 44 COMP. GEN. 1

STATUTES OF LIMITATION - CLAIMS - DATE OF ACCRUAL - CONTRACT MATTERS - DISPUTES. CONTRACTS - DISPUTES - FINALITY OF ADMINISTRATIVE FINDINGS - WUNDERLICH ACT RELIEF A CLAIM FOR EXTRA WORK UNDER A CONTRACT WHICH PROVIDED FOR AN EQUITABLE ADJUSTMENT FOR THE UNLISTED WORK AND REQUIRED THE CONTRACTOR TO SUBMIT THE MATTER TO A DISPUTES PROCEDURE WHICH SPECIFIED THAT THE DECISION OF THE CONTRACT ADVISORY BOARD WOULD BE FINAL IS NOT A CLAIM WHICH MATURED IN 1951 WHEN THE WORK WAS COMPLETED BECAUSE THE CONTRACTOR'S ENTITLEMENT TO THE EQUITABLE ADJUSTMENT COULD NOT MATURE UNTIL THE BOARD ACTED ADVERSELY TO THE CONTRACTOR AND NOT UNTIL THAT TIME WOULD THE GENERAL ACCOUNTING OFFICE BE ABLE TO ACT ON THE CLAIM UNDER THE CONTRACT FINALITY PROVISION; THEREFORE, PRESENTATION OF THE CLAIM MORE THAN 10 YEARS AFTER THE WORK WAS COMPLETED BUT WITHIN 10 YEARS FROM THE BOARD'S ADVERSE DECISION IS NOT BARRED BY THE 10-YEAR LIMITATION IN THE ACT OF OCTOBER 9, 1940, 31 U.S.C. 71A. A DETERMINATION BY A CONTRACT ADVISORY BOARD THAT A CONTRACTOR WAS NOT ENTITLED TO ADDITIONAL COMPENSATION FOR EXTRA WORK UNDER A CONTRACT EXECUTED PRIOR TO THE ACT OF MAY 11, 1954, 41 U.S.C. 321 (POPULARLY REFERRED TO AS THE WUNDERLICH ACT), EVEN THOUGH THE CONTRACT SPECIFIED CERTAIN INDEFINITE WORK AND PROVIDED FOR AN EQUITABLE ADJUSTMENT UNDER A DISPUTES PROCEDURE THAT MADE THE DECISION OF THE BOARD FINAL, IS CONSIDERED AN ARBITRARY DETERMINATION UNDER THE STANDARDS OF SECTION 1 OF THE WUNDERLICH ACT WHICH PROVIDES THAT SUCH ADMINISTRATIVE DECISIONS ARE FINAL UNLESS FRAUDULENT, CAPRICIOUS, ARBITRARY OR SO GROSSLY ERRONEOUS AS NECESSARILY TO IMPLY BAD FAITH OR IS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE, AND, THEREFORE, ON REVIEW OF THE MATTER THE COMPTROLLER GENERAL IS NOT BOUND BY THE DETERMINATION OF THE BOARD AND MAY PROPERLY FIND THAT, UNDER THE TERMS OF THE CONTRACT, THE CONTRACTOR IS ENTITLED TO AN EQUITABLE ADJUSTMENT. (B-148266, DECEMBER 31, 1963, MODIFIED DECISION OF DECEMBER 6, 1962 (UNPUBLISHED) ).

TO THE SECRETARY OF THE NAVY, JULY 14, 1964:

BY LETTER OF MARCH 27, 1964, WITH ENCLOSURE, YOU REQUEST RECONSIDERATION OF OUR DECISION B-148266, DATED DECEMBER 31, 1963, RELATING TO THE CLAIM OF TRIPLE "A" MACHINE SHOP, INCORPORATED.

BRIEFLY, THE MATTER AROSE FROM THE PERFORMANCE OF A JOB ORDER ISSUED BY THE MILITARY SEA TRANSPORTATION SERVICE TO TRIPLE "A" MACHINE SHOP, INC., IN MAY 1951, FOR REPAIR WORK ON THREE LIFEBOATS. THE WORK WAS SCHEDULED TO BE COMPLETED BY JUNE 18, 1951, BUT WAS NOT COMPLETED UNTIL JULY 9, 1951. IN SEPTEMBER OF 1951, THE CONTRACTOR CLAIMED EXTRA MONEY ($7,950) FOR EXTRA WORK. ON NOVEMBER 9, 1951, THE CONTRACTING OFFICER WROTE THE CONTRACTOR'S ATTORNEY DENYING THAT THE GOVERNMENT WAS OBLIGATED TO PAY THE CLAIM UNDER THE JOB ORDER SPECIFICATIONS. HE FURTHER STATED THAT: "* * * IF YOU WISH TO PURSUE THE MATTER FURTHER, YOU SHOULD SO ADVISE US AND STATE SPECIFICALLY THE BASIS OF YOUR CLIENT'S CLAIM.' ON MARCH 4, 1953, THE CONTRACTOR REQUESTED THAT THE CLAIM BE REOPENED AND BE SUBMITTED TO THE CONTRACT ADVISORY BOARD (PURSUANT TO ARTICLE 5 (J) OF THE MASTER CONTRACT). THE CONTRACTOR STATES THAT IT HELD-OFF UNTIL MARCH 1953 IN THE BELIEF THAT ITS CLAIM WAS BEING PROCESSED UNDER THE "DISPUTE" PROCEDURE. ON MAY 6, 1953, THE CONTRACTING OFFICER FURNISHED FINDINGS OF FACT, STATING THAT THE "EXCESS WORK" CLAIMED BY THE CONTRACTOR WAS REQUIRED UNDER THE SPECIFICATIONS AT THE CONTRACT PRICE, AND THAT THE CONTRACTOR WAS SUBJECT TO LIQUIDATED DAMAGES IN THE AMOUNT OF $2,079.23 FOR DELAY BEYOND JUNE 18, 1951. ON MAY 15, 1953, THE CLAIM (LATER REDUCED TO $7,486) WAS APPEALED TO THE MSTS CONTRACT ADVISORY BOARD. ON JANUARY 18, 1954, THE BOARD SUSTAINED THE CONTRACTING OFFICER'S FINDINGS. (APPEAL OF TRIPLE "A" MACHINE SHOP, INC., CAB NO. 7). MEANWHILE, UNDER DATE OF SEPTEMBER 24, 1953, THE UNITED STATES NAVY REGIONAL ACCOUNTS OFFICE HAD FORWARDED TO OUR CLAIMS DIVISION FOR DIRECT SETTLEMENT A VOUCHER STATED IN FAVOR OF THE ASSIGNEE BANK FOR $10,496.77, CONSISTING OF $12,576, REPRESENTING THE AMOUNT PAYABLE UNDER THE JOB ORDER, LESS LIQUIDATED DAMAGES ASSESSED IN THE AMOUNT OF $2,079.77. ON FEBRUARY 4, 1954, PAYMENT WAS AUTHORIZED FOR WORK UNDER THE JOB ORDER IN THE AMOUNT OF $10,476. WAS NOT UNTIL FEBRUARY 1962 THAT THE CONTRACTOR FILED ITS CLAIM WITH THIS OFFICE. (THE CONTRACTOR'S CLAIM FOR REFUND OF LIQUIDATED DAMAGES HAD BEEN ADMINISTRATIVELY DENIED IN MARCH 1957.)

IN OUR FIRST DECISION ON THE MATTER, DATED DECEMBER 6, 1962 (B 148266), WE DENIED THE CONTRACTOR'S CLAIM ON THE BASIS THAT:

* * * IF PURSUIT OF THE ADMINISTRATIVE REMEDY PROVIDED BY ARTICLE 5 (J) DID NOT TOLL THE STATUTE, THERE CAN BE NO QUESTION THAT THE CLAIM IN THIS CASE ACCRUED WITHIN THE MEANING OF THE 1940 STATUTE UPON COMPLETION AND ACCEPTANCE OF THE WORK--- ON OR ABOUT JULY 9, 1951, AND IS THEREFORE WITHDRAWN FROM OUR CONSIDERATION BY THE STATUTE CITED.

IF, ON THE OTHER HAND, WE CONSIDER THE CLAIM FOR EXTRA COMPENSATION AS HAVING ACCRUED WHEN IT WAS FINALLY DENIED BY THE CONTRACT ADVISORY BOARD AS REPRESENTATIVE OF THE COMMANDER, MSTS, ON JANUARY 18, 1954, WE ARE FACED WITH THE FACT THAT AS OF THAT DATE THE COURTS HAD HELD THAT SUCH ADMINISTRATIVE DECISIONS WERE NOT SUBJECT TO REVIEW. UNITED STATES V. MOORMAN, 338 U.S. 457; UNITED STATES V. WUNDERLICH, 324 U.S. 96.

WHILE THE RULES OF THOSE CASES HAVE BEEN SUPERSEDED BY THE PROVISIONS OF THE ACT OF MAY 11, 1954, 68 STAT. 81 (41 U.S.C. 321, 322), THE PROHIBITION AGAINST PROVIDING FOR FINALITY OF ANY ADMINISTRATIVE DECISION ON A QUESTION OF LAW, CONTAINED IN SECTION 2 OF THE ACT, DOES NOT APPEAR TO BE APPLICABLE RETROACTIVELY. WE THEREFORE MUST CONSIDER THAT WE WOULD BE RESTRICTED IN ANY REVIEW OF THE DECISION IN QUESTION TO THE CRITERIA ESTABLISHED BY SECTION 1 OF THE ACT, AND WOULD BE BOUND TO RECOGNIZE THE DECISION AS BINDING UNLESS "FRAUDULENT OR CAPRICIOUS OR ARBITRARY OR SO GROSSLY ERRONEOUS AS NECESSARILY TO IMPLY BAD FAITH.'

WHETHER OR NOT WE WOULD INDEPENDENTLY ARRIVE AT THE SAME CONCLUSION AS THE MSTS ON THE INTERPRETATION OF THE CONTRACT HERE INVOLVED, WE DO NOT FEEL THAT ITS INTERPRETATION, WHICH WE REGARD AS PRIMARILY A QUESTION OF LAW, COULD PROPERLY BE HELD TO FALL WITHIN THE ABOVE QUOTED PROVISIONS OF THE STATUTE.

THE CONTRACTOR REQUESTED RECONSIDERATION. IN OUR DECISION OF DECEMBER 31, 1963, B-148266, WE HELD THAT THE CONTRACTOR WAS ENTITLED UNDER CLAUSE 5 (J) OF THE CONTRACT TO AN EQUITABLE ADJUSTMENT OF $6,350 FOR PERFORMING EXTRA WORK UNDER THE CONTRACT. IN SO HOLDING, WE CONCLUDED THAT WE WERE NEITHER BARRED FROM CONSIDERING THE CLAIM UNDER THE PROVISIONS OF 31 U.S.C. 71A, NOR BOUND TO ACCEPT THE BOARD'S DECISION ON THE MATTER AS FINAL.

YOU BELIEVE THAT IN REVERSING THE BOARD'S DECISION, WE STEPPED BEYOND THE PERMISSIBLE SCOPE OF REVIEW SPECIFIED UNDER 41 U.S.C. 321 (THE WUNDERLICH ACT) AND SUBSTITUTED OUR JUDGMENT FOR THAT OF THE BOARD-S. (IT IS ALSO YOUR VIEW THAT WE DISREGARDED THE OPINION OF THE COURT IN TRIPLE "A" MACHINE SHOP, INC. V. UNITED STATES, 235 F.2D 626 (9TH CIR. 1956), WHICH REACHED THE SAME CONCLUSION ON THE MERITS AS THE BOARD, UNDER SUBSTANTIALLY THE SAME SPECIFICATIONS.) PARTICULARLY, YOU REFER TO THE LANGUAGE USED IN OUR DECISION OF DECEMBER 31, 1963, SEEMING TO INDICATE THAT WE REVERSED YOUR BOARD BY CONCLUDING THAT ITS DECISION WAS "PALPABLY WRONG.' YOU POINT OUT THAT THE PHRASE "PALPABLY WRONG" DOES NOT APPEAR IN 41 U.S.C. 321 AS A GROUND FOR REVERSING A FINAL DECISION OF A BOARD UNDER A CONTRACT.

UNDER SECTION 1 OF THE WUNDERLICH ACT (41 U.S.C. 321) A FINAL ADMINISTRATIVE DECISION ON A DISPUTED QUESTION OF FACT IS BINDING UNLESS FRAUDULENT, CAPRICIOUS, ARBITRARY, SO GROSSLY ERRONEOUS AS TO CONSTITUTE BAD FAITH, OR NOT SUPPORTED BY SUBSTANTIAL EVIDENCE. SECTION 2 OF THE ACT (41 U.S.C. 322) PRECLUDES ADMINISTRATIVE FINALITY ON ANY QUESTION OF LAW ARISING UNDER A GOVERNMENT CONTRACT. IN REVIEWING YOUR BOARD'S DECISION WE AGREED WITH YOUR DEPARTMENT THAT CLAUSE 5 (J) EXPRESSED FINALITY TO BOARD DECISIONS ON DISPUTED QUESTIONS OF SPECIFICATION INTERPRETATION. TRADITIONALLY IT HAS BEEN HELD THAT THE INTERPRETATION OF A CONTRACT SPECIFICATION IS A MATTER OF LAW. SEE GUYLER V. UNITED STATES (CT.CL.), 314 F.2D 506 (1963); ALSO CASES CITED IN WUNDERLICH, ET AL. V. UNITED STATES, 117, CT.CL. 92, 212-214 (1950). THE SUBJECT CONTRACT WAS EXECUTED PRIOR TO THE WUNDERLICH ACT (MAY 11, 1954), AND IT IS CLEAR FROM THE LEGISLATIVE HISTORY OF THE ACT THAT SECTION 2 THEREOF (41 U.S.C. 322) WAS MADE TO APPLY IN FUTURE CONTRACTS. SEE 1954 U.S.C. CONG. AND ADM. NEWS P. 2191 (PP. 2195-2196). BUT SECTION 1 OF THE ACT (41 U.S.C. 321) WAS MADE APPLICABLE TO QUESTIONS ARISING UNDER EXISTING CONTRACTS, AND WE CONCLUDED THAT THE SECTION 1 STANDARDS OF REVIEW APPLIED TO ALL EXISTING CONTRACT QUESTIONS, BOTH OF FACT AND OF LAW.

WE REVIEWED THE BOARD'S DECISION UNDER THE STANDARDS SET FORTH IN 41 U.S.C. 321, AND FOUND THAT THE DECISION SHOULD BE REVERSED. IN USING THE TERM "PALPABLY WRONG" TO SUPPORT OUR HOLDING, WE DID NOT INTEND TO DEPART FROM THE STATUTORY STANDARDS OF REVIEW. YOU BELIEVE THAT WHAT IS ,PALPABLY WRONG" IS NOT NECESSARILY FRAUDULENT OR ARBITRARY OR CAPRICIOUS OR SO GROSSLY ERRONEOUS AS TO IMPLY BAD FAITH. (HOWEVER, SEE DELL PUBLISHING CO. V. SUMMERFIELD, 198 F.SUPP. 843 (1961), AFFIRMED 303 F.2D 766 (1962), WHERE THE COURT RECOGNIZED THAT "ARBITRARY AND CAPRICIOUS" MEANS WITHOUT RATIONAL BASIS; CLEARLY WRONG.) TO REMOVE ANY AMBIGUITIES IN THE MATTER, IT SHOULD BE UNDERSTOOD THAT OUR DECISION OF DECEMBER 31, 1963, WAS REACHED ON THE BASIS THAT YOUR BOARD'S DECISION WAS FOUND BY US TO BE ARBITRARY WITHIN THE MEANING OF 41 U.S.C. 321. SEE GRACE LINE, INC. V. FEDERAL MARITIME BOARD, 263 F.2D 709, 711 (1959). OF COURSE, WE WERE NOT UNMINDFUL OF THE COURT'S OPINION IN TRIPLE "A" MACHINE SHOP, SUPRA, WHICH RESTED ON THE BASIS THAT THIS CONTRACTOR, UNDER A PRIOR JOB ORDER, WAS BOUND TO PERFORM THE UNLISTED WORK (RENEWAL OF PLATES) AT THE BID PRICE. THE LOWER COURT (1954 AMC 698, DECIDED IN MARCH OF 1954, PRIOR TO THE WUNDERLICH ACT) HAD RULED THAT THE CONTRACTOR WAS BOUND BY BY THE BOARD'S DECISION WHICH WAS FINAL, BUT THE COURT HAD ALSO FOUND THAT THE BOARD'S INTERPRETATION OF THE SPECIFICATIONS WAS CORRECT. THE APPEALS COURT (AFTER WUNDERLICH) PASSED THE ISSUE OF FINALITY AND RESTED ON THE LOWER COURT'S ,ALTERNATE" FINDING. BUT THE APPEALS COURT WENT ON TO NOTE THAT THE CONTRACTOR MIGHT HAVE BEEN ABLE TO SHOW MUTUAL MISTAKE UPON PROPER PLEADING AND EVIDENCE BELOW. WE FOUND THAT THE CONTRACT TERMS BEFORE US CLEARLY CALLED FOR THE PAYMENT OF AN EQUITABLE ADJUSTMENT FOR THE UNLISTED WORK (RENEWAL OF PLATES). WE NOTED THAT THE SUBJECT JOB ORDER, UNLIKE THE PRIOR JOB ORDER, SPECIFIED CERTAIN INDEFINITE WORK, AND WE CONCLUDED THAT THE COURT'S HOLDING IN TRIPLE "A" DID NOT REQUIRE US TO ABANDON OUR VIEWS ON THE VALIDITY OF YOUR BOARD'S DECISION. WE COULD NOT ACCEPT THE CONCLUSION THAT THE SPECIFICATIONS REQUIRED THE CONTRACTOR TO PERFORM UNLISTED WORK AT ITS BID PRICE, WHEN THE CONTRACT CONTAINED PROVISIONS CONTEMPLATING ADDITIONS AND ADJUSTMENTS TO THE SPECIFICATIONS ALONG WITH EQUITABLE ADJUSTMENTS.

YOU ALSO REQUEST THAT WE RECONSIDER OUR HOLDING THAT THE CONTRACTOR'S CLAIM WAS NOT TIME BARRED UNDER 31 U.S.C. 71A WHEN PRESENTED TO THIS OFFICE IN 1962. IT IS YOUR CONTENTION THAT THE CLAIM FIRST ACCRUED IN 1951, WHEN THE CONTRACTOR COMPLETED THE WORK, FIRST PRESENTED THE CLAIM TO MSTS, AND HAD THE FIRST INDICATION THAT THE CLAIM WAS REJECTED BY MSTS. YOU DISAGREE WITH OUR CONCLUSION THAT THE CLAIM HAD NOT ACCRUED WITHIN THE MEANING OF 31 U.S.C. 71A WHILE THE CONTRACTOR WAS "EXHAUSTING" ITS ADMINISTRATIVE DISPUTES PROCEDURE. YOU CAUTION THAT OUR HOLDING WOULD EXTEND THE LIFE OF CLAIMS BY AN INDEFINITE AMOUNT OF TIME--- MORE THAN 10 YEARS AFTER THE EVENT OUT OF WHICH THE CLAIM AROSE TOOK PLACE--- AND WOULD IMPOSE UPON YOUR DEPARTMENT NEW AND COSTLY PROBLEMS OF MAINTAINING AND STORING FILES FOR AN EXTENDED PERIOD.

IN B-152255, JANUARY 21, 1964, WE CONSIDERED A CLAIM ORIGINATING WITHIN YOUR DEPARTMENT UNDER A CONTRACT DISPUTES PROCEDURE WHERE THE FACTS GIVING TO RISE TO THE CLAIM OCCURRED NO LATER THAN 1946, BUT WHERE FINAL ADMINISTRATIVE ACTION UNDER THE DISPUTES PROCEDURE WAS REACHED IN 1963. THE CONTRACTOR WAS SEEKING A RETURN OF INVENTORY REFUNDS MADE TO THE GOVERNMENT FROM 1944 TO 1946, UNDER SEVERAL CONTRACTS. NEGOTIATIONS WERE CARRIED ON UNTIL MARCH OF 1961, WHEN THE CONTRACTING OFFICER MADE FINDINGS OF FACT DENYING THE CLAIM. THEREAFTER, WHILE THE CONTRACTOR WAS APPEALING THIS DETERMINATION (ASBCA NO. 7315) THE PARTIES AGREED TO A FINAL SETTLEMENT. YOUR DISBURSING OFFICER ASKED US WHETHER 31 U.S.C. 71A BARRED SUCH AN AGREEMENT. CITING B-148266, DECEMBER 31, 1963, WE ADVISED THAT THE "CLAIM" WAS NOT TIME BARRED. UNLIKE THE TRIPLE "A" CASE, THE CONTRACTOR WAS IN THE DISPUTES PROCEDURE MORE THAN 10 YEARS. IN THIS CONNECTION, THE ARMED SERVICES BOARD OF CONTRACT APPEALS HAS HELD IN APPEAL OF AMERICAN BRIDGE COMPANY, ASBCA NO. 126 (1958) THAT IT DOES NOT CONSTRUE 31 U.S.C. 71A AS BARRING A CONTRACTOR'S RIGHT TO A DETERMINATION PURSUANT TO THE DISPUTES CLAUSE, REGARDLESS OF WHAT EFFECT THE STATUTE WOULD HAVE UPON THE GENERAL ACCOUNTING OFFICE'S CONSIDERATION OF THE CONTRACTOR'S CLAIM FOR PAYMENT OF AND WHEN THE SAME IS MADE. OUR HOLDING IN B-152255, SUPRA, AT LEAST WOULD PRESERVE THE CONTRACTOR'S RIGHT OF APPEAL TO THIS OFFICE UNDER 41 U.S.C. 321.

YOU POINT TO VARIOUS COURT DECISIONS ARISING IN ADMIRALTY WHICH HOLD THAT A STATUTE OF LIMITATIONS APPLICABLE IN SUITS AGAINST THE UNITED STATES MAY NOT BE PUT OFF OR TOLLED WHILE A CLAIM IS UNDERGOING ADMINISTRATIVE CONSIDERATION. THE RATIONALE OF THESE HOLDINGS IS THAT THE STATUTORY PERIOD OF LIMITATIONS FIXES THE COURT'S JURISDICTION TO ENTERTAIN SUIT AGAINST THE SOVEREIGN AND CANNOT BE WAIVED BY THE PARTIES. (SEE SORIANO V. UNITED STATES, 352 U.S. 270, 273-75 (1954). IN MCMAHON V. UNITED STATES, 342 U.S. 25 (1951), THE SUPREME COURT HELD THAT AN ACT WHICH EXTENDED TO A CLASS OF SEAMEN (FEDERAL EMPLOYEES) THE RIGHT TO SUE THE UNITED STATES FOR INJURIES, MAINTENANCE AND CURE ONLY AFTER ADMINISTRATIVE REVIEW, DID NOT AFFECT THE ESTABLISHED CONSTRUCTION THAT SUCH SUITS RUN FROM THE DATE OF THE INJURY. IN STATES MARINE CORP. OF DELAWARE V. UNITED STATES, 283 F.2D 776 (1960), THE PLAINTIFF SUED FOR BREACH OF CONTRACT ARISING FROM DAMAGE TO PROPERTY ALLEGEDLY CAUSED BY THE ACT OR NEGLECT OF THE GOVERNMENT DURING THE UNLOADING OR DISCHARGING OF CARGO IF TIMELY NOTICE OF DAMAGE WAS PRESENTED TO THE GOVERNMENT. THE CONTRACT ALSO CONTAINED THE STANDARD DISPUTES CLAUSE. THE PLAINTIFF SOUGHT RELIEF BEFORE THE BOARD BUT WAS REFUSED ON THE BASIS THAT HIS NOTICE OF DAMAGE WAS NOT TIMELY. THEREAFTER, MORE THAN 2 YEARS AFTER THE DAMAGE OCCURRED, BUT ONLY A FEW MONTHS AFTER THE BOARD HAD RULED ON THE MATTER, PLAINTIFF FILED ITS LIBEL IN COURT ALLEGING THE GOVERNMENT'S BREACH OF CONTRACT AS HAVING OCCURRED WHEN THE GOVERNMENT FAILED TO PAY THE DAMAGE AFTER THE BOARD'S DECISION. REASONING FROM MCMAHON, SUPRA, THE COURT CONCLUDED THAT THE CONTRACTUAL CREATION OF A MANDATORY ADMINISTRATIVE PROCEDURE FOR REDRESS OF INJURY TO PROPERTY DID NOT AFFECT THE RUNNING OF THE TIME PERIOD FROM THE DATE OF THE PROPERTY DAMAGE. IT REJECTED AS SPECIOUS PLAINTIFF'S ASSERTION THAT THE ADMINISTRATIVE REFUSAL TO PAY THE CLAIM UNDER THE DISPUTES PROCEDURE CONSTITUTED THE CAUSE OF ACTION UPON WHICH SUIT WAS BROUGHT. IN HELLENIC LINES, LIMITED V. UNITED STATES, 201 F.SUPP. 10 (1961), THE PLAINTIFF SOUGHT DAMAGES FOR (1) TIME LOST DUE TO DETENTION OF THE VESSEL AND (2) CABLE CHARGES INCURRED DURING SUCH PERIOD. PLAINTIFF CLAIMED THAT ITS CAUSE OF ACTION FOR BREACH OF CONTRACT DID NOT ARISE UNTIL AFTER IT HAD SOUGHT THE ADMINISTRATIVE REDRESS REQUIRED UNDER THE CONTRACT. THE COURT STATED AS FOLLOWS:

THE RULE OF STATES MARINE DOES NOT APPEAR TO HAVE BEEN MODIFIED BY AMERICAN-FOREIGN STEAMSHIP CORP. V. UNITED STATES, 2 CIR., 291 F.2D 598, 607 IN WHICH CAUSES OF ACTION CONCERNING "DISPUTED INTERPRETATION OF THE TERMS OF THE CHARTERS THEMSELVES" WE HELD TO HAVE ACCRUED SOME TIME AFTER THE TERMINATION OF THE CHARTER. THE DISPUTED TERMS INVOLVED ACCOUNTING PROCEDURES WHICH NECESSARILY WERE POSTPONED. * * *

THE PLAINTIFF SEEKS TO BRING THIS CASE WITHIN THE AMERICAN-FOREIGN STEAMSHIP EXCEPTION BY CONTENDING THAT THE INTERPRETATION OF THE RELEVANT CHARTER TERMS IS IN DISPUTE. BUT THERE IS NO DISPUTE AS TO THE PROCEDURES CALLED FOR BY THE TERMS. THE PARTIES DISAGREE ONLY AS TO THE EFFECT OF THE TERMS UPON THE ACCRUAL OF THE CAUSE OF ACTION--- THAT IS, A DISPUTE NOT AS TO FACT BUT AS TO LAW. THAT DISAGREEMENT, TO REPEAT, WAS SETTLED BY STATES MARINE.

THE AMERICAN-FOREIGN STEAMSHIP CASE (291 F.2D 598 (1961) ( CITED IN THE HELLENIC OPINION, HELD THAT ACTIONS FOR REFUNDS OF CHARTER HIRE BASED UPON THE ALLEGED BASIC ILLEGALITY OF THE GOVERNMENT'S ADDITIONAL CHARTER HIRE SCHEME WERE BARRED WHEN SUIT WAS BROUGHT, BUT THOSE BASED UPON DISPUTED INTERPRETATIONS OF CERTAIN TERMS OF THE CHARTERS WERE NOT TIME-BARRED. THE COURT STATED (P. 607) IN PART AS FOLLOWS:

THIS DOES NOT MEAN THAT GOVERNMENTAL CONTRACTING AGENCIES ARE COMPLETELY PRECLUDED FROM AGREEING TO "FINAL AUDIT" CLAUSES LIKE CLAUSE 13 OF THESE BAREBOAT CHARTERS. BUT THE TYPE OF CONTROVERSIES "PUT OFF, MUST INVOLVE POSSIBLE FUTURE DISPUTES--- THOSE WHICH, BECAUSE OF THE ACCOUNTING GIVE- AND-TAKE ACCOMPANYING THIS KIND OF CHARTER ARRANGEMENT, WOULD PRESENT A MEASURE OF DOUBT CONCERNING THE EXACT TIME WHEN A "CAUSE OF ACTION" AROSE. THAT SORT OF ARRANGEMENT WOULD NOT DO VIOLENCE TO THE CONGRESSIONALLY IMPOSED BUILT-IN LIMITATION; THE DELIBERATE POSTPONING FOR TEN YEARS THE TRIAL OF A CLEAR AND PRESENTLY EXISTING CONTROVERSY MOST CERTAINLY WOULD SUBVERT THE LEGISLATIVE SCHEME OF A LIMITED WAIVER OF IMMUNITY. THIS IS EQUALLY TRUE WHETHER THE EXTENSION OF TIME IS INTERPRETED SO AS OPENLY TO POSTPONE THE RUNNING OF THE LIMITATIONS PERIOD --- OR WHETHER THE EXECUTIVE AGENCY "CONTRACTS" TO REFUND OVERPAYMENTS AT A TIME IN THE DISTANT FUTURE, DEPENDENT UPON THE OUT COME OF LAW SUIT BROUGHT AT THAT LATER DATE ON A CLAIMED BREACH OF THE AGREEMENT TO REFUND.

THE DISSENTING OPINION TOOK THE VIEW THAT NONE OF THE CLAIMS ACCRUED BEFORE THE FINAL AUDIT. IN AMERICAN MAIL LINE, LTD. V. UNITED STATES, 213 F.SUPP. 152 (1962), THE DISTRICT COURT CONCLUDED THAT THE DISSENTING VIEW IN AMERICAN-FOREIGN STEAMSHIP CONSTITUTED THE MAJORITY VIEW AS TO THE TIME -BAR ISSUE. THE COURT STATED AS FOLLOWS (P. 161):

WITHOUT CONDONING THE EXTENSIVE DELAY, THIS COURT BELIEVES THAT THE AGREEMENT TO POSTPONE DISPUTES UNTIL AFTER FINAL AUDIT WAS A WISE EXERCISE BY MARITIME OF ITS AUTHORITY AND SHOULD BE ENCOURAGED. THE AVOIDANCE OF MULTIPLICITY OF LITIGATION IS BOTH SOCIALLY AND ECONOMICALLY DESIRABLE.

SEE AMERICAN PRESIDENT LINE V. UNITED STATES, 61 AMC 176 (1961).

YOU CALL OUR ATTENTION TO THE RECENT CASE OF HAHN V. UNITED STATES, 218 F.SUPP. 562 (1963). THERE THE COURT HELD THAT ACTIONS IN ADMIRALTY AGAINST THE UNITED STATES FOR DAMAGE TO LIBELLANT'S OYSTER BEDS COULD NOT BE MAINTAINED WHERE ONE ACTION WAS FILED WITHIN THE 2 YEAR PERIOD OF LIMITATION (46 U.S.C. 745) BUT NOT FILED BEFORE EXPIRATION OF THE STATUTORY 6-MONTH WAITING PERIOD AFTER ADMINISTRATIVE PRESENTATION (46 U.S.C. 740); NOR WHERE A SECOND ACTION WAS FILED AFTER THE 6-MONTH WAITING PERIOD BUT AFTER EXPIRATION OF THE 2-YEAR LIMITATION PERIOD. REGARDING THE ACTION FILED AFTER THE 2-YEAR PERIOD, THE COURT CITED MCMAHON, SUPRA, FOR THE RULE THAT THE 2-YEAR PERIOD WAS TO BE COMPUTED FROM DATE OF INJURY, AND BOTH STATES MARINE, SUPRA, AND MCMAHON, FOR THE RULE THAT THE LIMITATION PERIOD IS NOT TOLLED PENDING ADMINISTRATIVE CONSIDERATION. TO THE ACTION FILED WITHIN THE 2-YEAR LIMITATION PERIOD BUT BEFORE THE 6- MONTH WAITING PERIOD, THE COURT REJECTED THE IDEA OF A "PROTECTIVE LIBEL" PENDING ADMINISTRATIVE DETERMINATION, SUGGESTED IN SUCH CASES AS STATES MARINE, SUPRA, AND WESSEL, DUVAL AND CO. V. UNITED STATES, 126 F.SUPP. (1954), FOR THE REASON THAT THOSE CASES PERTAINED TO AN ADMINISTRATIVE DISPUTES PROCEDURE WHICH CONSTITUTED A BAR TO SUIT, BUT NOT A CONDITION TO SUIT AS CONTAINED IN 46 U.S.C. 740. (THE COURT IN WESSEL, DUVAL, SUPRA, INDICATED THAT IT WOULD TAKE JURISDICTION OF AN ALLEGED BREACH WHERE THE ADMINISTRATIVE BODY HAD NOT TIMELY RESOLVED THE MATTER WITHIN THE PERIOD OF LIMITATIONS.) HOWEVER, IN ATLANTIC CARRIERS V. UNITED STATES, 131 F.SUPP. 1 (1955), THE PLAINTIFF ATTEMPTED TO FILE A PROTECTIVE LIBEL (FOR BREACH OF A CHARTER PARTY) WHILE IT WAS PURSUING ITS CONTRACT DISPUTES REMEDY. THE COURT DISMISSED THE SUIT PENDING THE ADMINISTRATIVE REVIEW, AND ON A "MOTION FOR REHEARING," STATED AS FOLLOWS:

LIBELANTS FAIL TO APPRECIATE THE THRUST OF THE COURT'S ORIGINAL OPINION. THE EFFECT OF A DISPUTES CLAUSE IS TO DEPRIVE THE COURTS OF JURISDICTION OF ANY CLAIM COVERED BY IT, UNTIL THE ADMINISTRATIVE PROCESS HAS BEEN COMPLETED. AT THAT TIME THE COURTS HAVE JURISDICTION OF THE CLAIM ONLY IF THERE IS AN ALLEGATION IN THE COMPLAINT THAT THE ADMINISTRATIVE DECISION IS ,FRAUDULENT OR CAPRICIOUS OR ARBITRARY OR SO GROSSLY ERRONEOUS AS NECESSARILY TO IMPLY BAD FAITH, OR IS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE.'

41 U.S.C.A. SEC. 321

(10) THE ONLY GLOSS UPON THE RULE DENYING JURISDICTION TO THE COURTS BEFORE COMPLETION OF THE ADMINISTRATIVE FACT-FINDING PROCESS IS THAT OF CLEAR INADEQUACY OF THE ADMINISTRATIVE REMEDY. SEE WESSEL, DUVAL AND CO. V. UNITED STATES, D.C.S.D.N.Y. 1954, 126 F.SUPP. 79; MANDERSCHEID V. UNITED STATES, D.C.N.D.CAL. 1950, 88 F.SUPP. 323 (LIBEL FILED TWO DAYS BEFORE STATUTE OF LIMITATIONS AN): CF. MORAN TOWING AND TRANSPORTATION CO. V. UNITED STATES, D.C.S.D.N.Y. 1944, 56 F.SUPP. 104, 106 ("POSSIBILITY * * * THAT THE STATUTE OF LIMITATION MAY RUN"--- NOT A DISPUTES CLAUSE CASE). AS INDICATED IN THE MAIN OPINION, SUCH INADEQUACY HAS NOT BEEN SHOWN TO EXIST IN THE INSTANT CASES.

WITH REGARD TO ITS 6-YEAR STATUTE OF LIMITATION (28 U.S.C. 2501), THE COURT OF CLAIMS HAS TAKEN THE POSITION THAT A CLAIM AGAINST THE UNITED STATES FIRST ACCRUES ON THE DATE WHEN ALL THE EVENTS HAVE OCCURRED WHICH FIX THE LIABILITY OF THE GOVERNMENT AND ENTITLE THE CLAIMANT TO INSTITUTE AN ACTION (EMPIRE INSTITUTE OF TAILORING, INC. V. UNITED STATES, 142 CT.CL. 165, 167 (1958) ); AND THAT WHERE A CLAIM IS BASED UPON A CONTRACTUAL OBLIGATION OF THE GOVERNMENT TO PAY MONEY, THE CLAIM FIRST ACCRUES ON THE DATE WHEN THE PAYMENT BECOMES DUE IS WRONGFULLY WITHHELD IN BREACH OF THE CONTRACT. CANNON V. UNITED STATES, 137 CT.CL. 104, 107 (1956); SEE OCEANIC STEAMSHIP COMPANY V. UNITED STATES, CT.CL. NO. 332-62, DECIDED MARCH 13, 1964. THAT COURT HAS REPEATEDLY INDICATED THAT A CLAIM DOES NOT ACCRUE FOR PURPOSE OF 28 U.S.C. 2501 WHILE THE CLAIMANT IS PURSUING A MANDATORY ADMINISTRATIVE REMEDY. SEE FRIEDMAN V. UNITED STATES (CT.CL.), 310 F.2D 381 (1962).

IN COSMOPOLITAN MANUFACTURING COMPANY V. UNITED STATES (CT.CL.),297 F.2D 546 (1962), THE COURT HELD THAT THE CONTRACTOR WAS TIME BARRED WHEN IT BROUGHT SUIT 12 YEARS AFTER THE BOARD ACTED. BUT THE COURT STATED AS FOLLOWS:

PLAINTIFF GROUNDS ITS CLAIM ON THE ALLEGED ARBITRARY AND CAPRICIOUS ACTION OF THE ARMY BOARD OF CONTRACT APPEALS, AND ITS APPROVAL BY THE SECRETARY OF THE ARMY. IT FOLLOWS THAT PLAINTIFF'S CAUSE OF ACTION, IF ANY, ACCRUED AT THE TIME THE APPEALS BOARD ACTED, ALL EVENTS HAVING OCCURRED WHICH WERE NECESSARY TO FIX THE LIABILITY OF DEFENDANT AND ENTITLE PLAINTIFF TO BRING SUIT. (CITATION FOLLOWS.)

SEE PENN BRIDGE CO. V. UNITED STATES, 71 CT.CL. 273 (1930); HOLTON, SEELYE AND CO. V. UNITED STATES, 106 CT.CL. 477, 500 (1946); INTERNATIONAL POTATO CORPORATION V. UNITED STATES, 142 CT.CL. 604, 606 607 (1958); FATTORE V. UNITED STATES (CT.CL.), 312 F.2D 797 (1963).

THE DISPUTES PROCEDURE OF THE GOVERNMENT CONTRACT PROVIDES A MECHANISM WHEREBY ADJUSTMENTS AND CORRECTIONS ARE MADE TO THE CONTRACT. THE PROCEDURE IS DESIGNED TO AVOID THE DELAYS, COSTS, AND INCONVENIENCES WHICH ORDINARILY ARISE WHEN THE PARTIES HAVE RECOURSE ONLY TO THE COURTS. THE ABSENCE OF CLEAR EVIDENCE THAT THE DISPUTES PROCEDURE IS INADEQUATE OR UNAVAILABLE, THE CONTRACTOR MUST EXHAUST THAT PROCEDURE BEFORE IT CAN BE HEARD TO COMPLAIN IN COURT. UNITED STATES V. HOLPUCH CO., 328 U.S. 234, 239-240 (1946); UNITED STATES V. CALLAHAN WALKER CO., 317 U.S. 56, 61 (1942).

RECENTLY, THE COURT OF CLAIMS STATED THAT THE DISPUTES PROCEDURE, UNLIKE THE STATUTE OF LIMITATIONS, IS WAIVABLE BY THE GOVERNMENT. SEE STEIN BROS.MFG.CO. V. UNITED STATES, CT.CL.NO. 389-59, DECIDED JULY 12, 1963. NEVERTHELESS, WE ASSUME THAT THE COURT OF CLAIMS WOULD CONSIDER A CAUSE OF ACTION AS FIRST ACCRUING WHEN THE MANDATORY DISPUTES PROCEDURE HAS BEEN EXHAUSTED. IN UNITED STATES V. BIANCHI AND CO., 373 U.S. 707 (1963), THE CONTRACTOR CLAIMED EXTRA WORK REQUIRED IN THE CONSTRUCTION OF A TUNNEL FOR A FLOOD CONTROL DAM. THE "EXTRA" WORK WAS PERFORMED IN LATE 1947, AND THE TUNNEL WAS COMPLETED BY MAY 8, 1948. THE CONTRACTING OFFICER HAD REFUSED TO AUTHORIZE THE WORK, AND IN DECEMBER 1948 THE BOARD DENIED THE CONTRACTOR'S APPEAL. ALL OF THE WORK UNDER THE CONTRACT WAS COMPLETED (ON TIME) ON JUNE 30, 1949. THE CONTRACTOR BROUGHT HIS ACTION IN THE COURT OF CLAIMS IN DECEMBER 1954, MORE THAN 6 YEARS AFTER MAY 1948, WHEN THE CLAIMED EXTRA WORK WAS COMPLETED, BUT NOT QUITE 6 YEARS AFTER COMPLETION OF THE DEPARTMENTAL PROCEEDINGS. NEITHER THE COURT OF CLAIMS (144 CT.CL. 500 (1959) ( NOR THE SUPREME COURT DISCUSSED WHEN THE CLAIM FIRST ACCRUED. BUT THE SUPREME COURT OPINION STATED THAT UNDER THE "WUNDERLICH ACT" THE COURT PERFORMS A REVIEWING FUNCTION, AND THAT "THE REVIEWING FUNCTION IS ONE ORDINARILY LIMITED TO CONSIDERATION OF THE DECISION OF THE AGENCY OR COURT BELOW AND OF THE EVIDENCE ON WHICH IT WAS BASED" (PAGES 714-715, SUPRA). IT WOULD APPEAR FROM BIANCHI THAT THE CAUSE OF ACTION UNDER WUNDERLICH SPRINGS FROM THE ACTION OF THE BOARD.

THE EXPRESS LEGISLATIVE PURPOSE IN SETTING A LIMITATION PERIOD DURING WHICH CLAIMS MAY BE PRESENTED TO THIS OFFICE, AS CONTAINED IN 31 U.S.C. 71A, WAS TO ENABLE THE DISMISSAL OF STALE CLAIMS WITHOUT THE EXPENSE OF DEVELOPMENT AND SETTLEMENT. SEE S.REPT.NO. 1338, 76TH CONGRESS, 3D SESSION (1940). PRESUMABLY A GENEROUS 10-YEAR PERIOD WAS PROVIDED BECAUSE THIS OFFICE ONLY PERMITS PAYMENTS ON CLAIMS WHICH ARE CLEARLY ALLOWABLE ON THE BASIS OF THE WRITTEN RECORD PRESENTED. SEE CHARLES V. UNITED STATES, 19 C.CL. 316, 319 (1884). THUS THE GENERAL ACCOUNTING OFFICE USUALLY DOES NOT FACE THE EVIDENTIARY PROBLEMS WHICH OFTEN ARISE WHEN THE FACTS ARE NOT READILY AT HAND.

BE THAT AS IT MAY, WE DO NOT BELIEVE THAT OUR HOLDING IN B-148266, DECEMBER 31, 1963, EXTENDS THE LIFE OF CLAIMS BEYOND THE TIME SPECIFIED IN 31 U.S.C. 71A. REASONING FROM STATES MARINE, SUPRA, WE WOULD DETERMINE WHEN THE CONTRACTOR'S CLAIM FIRST AROSE AND THEN APPLY THE STATUTORY PERIOD OF LIMITATIONS WITHOUT REGARD TO TIME SPENT IN MANDATORY ADMINISTRATIVE REVIEW. CERTAIN CASES OF THE COURT OF CLAIMS SUGGEST, HOWEVER, THAT A CONTRACTOR'S CLAIM DOES NOT ACCRUE WHILE THE PARTIES TO THE CONTRACT ARE FOLLOWING A DISPUTES PROCEDURE BECAUSE THAT PROCEDURE ESSENTIALLY FIXES THE RIGHTS AND LIABILITIES OF THE PARTIES. IN THE SITUATION AT HAND, THE CONTRACTOR SEEKS MONEY FOR LABOR AND MATERIAL FURNISHED UNDER A CONTRACT. THE ISSUES DISPUTED WERE WHETHER THE CONTRACTOR WAS ENTITLED TO AN EQUITABLE ADJUSTMENT, AND WHETHER THE GOVERNMENT WAS ENTITLED TO DEDUCT FROM THE CONTRACT PRICE LIQUIDATED DAMAGES FOR DELAY. THE DISPUTES TURNED ON WHETHER THE WORK IN QUESTION WAS REQUIRED WORK OR EXTRA WORK. UNDER THE CONTRACT, THE CONTRACTOR WAS REQUIRED TO SUBMIT THE MATTER TO THE DISPUTES PROCEDURE, AND THE BOARD'S DECISION WAS TO BE FINAL. YOU CONCLUDE THAT THE CLAIM FIRST AROSE WHEN THE WORK WAS COMPLETED. YET THE CONTRACTOR'S ENTITLEMENT TO AN EQUITABLE ADJUSTMENT WAS LIMITED BY THE FINALITY PROVISION OF THE CONTRACT. OTHER WORDS, THE CONTRACTOR'S ENTITLEMENT, IF ANY, TO AN EQUITABLE ADJUSTMENT COULD NOT MATURE INTO THE CLAIM WHICH WAS PRESENTED TO THIS OFFICE UNTIL THE BOARD ACTED ADVERSELY TO THE CONTRACTOR. AT THAT POINT, NOT ONLY WAS THE CONTRACTOR CONTRACTUALLY FREE TO PURSUE ITS CLAIM BEFORE THIS OFFICE, BUT THIS OFFICE COULD ACT ON THE CLAIM IN ACCORDANCE WITH THE CONTRACTUAL REQUIREMENT OF FINALITY. HENCE THE DISPUTES PROCEDURE WAS MORE THAN A BAR TO SUIT HERE. IT APPEARS TO US THAT THE AUTHORITIES LEAVE THIS MATTER UNSETTLED. WE CONCLUDE THAT THE CONTRACTOR'S CLAIM TO THIS OFFICE FIRST ACCRUED WHEN THE BOARD MADE ITS DECISION. ACCORDINGLY, WE SUSTAIN OUR DECISION OF DECEMBER 31, 1963, B-148266, WHICH MODIFIED DECISION OF DECEMBER 6, 1962.