B-148266, DEC. 6, 1962

B-148266, DEC. 6, 1962

TO MILTON C. GRACE, ESQUIRE:

FURTHER REFERENCE IS MADE TO YOUR COMMUNICATION DATED FEBRUARY 23, 1962, SUBMITTING ON BEHALF OF THE TRIPLE "A" MACHINE SHOP, INC., A CLAIM FOR SUMS AGGREGATING $9,565.23, CONSISTING OF THE SUM OF $7,486, CLAIMED TO BE DUE FOR EXTRA WORK PERFORMED UNDER CONTRACT NO. MST-235, WITH THE MILITARY SEA TRANSPORTATION SERVICE, FOR CERTAIN REPAIR WORK ON THREE LIFEBOATS, PLUS THE SUM OF $2,079.23, REPRESENTING LIQUIDATED DAMAGES ASSESSED UNDER THE INDICATED CONTRACT. IN A BRIEF FILED IN OUR OFFICE ON OR ABOUT JULY 12, 1962, THE CLAIM FOR REMISSION OF LIQUIDATED DAMAGES WAS INCREASED TO THE SUM OF $2,100, THAT BEING THE AMOUNT OF LIQUIDATED DAMAGES WITHHELD FROM PAYMENT IN SETTLEMENT DATED FEBRUARY 4, 1954, IN WHICH OUR CLAIMS DIVISION CERTIFIED FOR PAYMENT TO THE BANK OF AMERICA, NATIONAL TRUST AND SAVINGS ASSOCIATION, COLUMBUS BR. NO. 268, ASSIGNEE OF TRIPLE "A" MACHINE SHOP, INC., THE NET AMOUNT OF $10,476, COVERING THE BALANCE OF THE CONTRACT PRICE AFTER THE DEDUCTION FOR LIQUIDATED DAMAGES.

IN SUPPORT OF THE CLAIM IT WAS STATED THAT BY INVITATION FOR BIDS NO. P51 -162, THE COMMANDER, MILITARY SEA TRANSPORTATION SERVICE, INVITED BIDS FOR THE PERFORMANCE OF CERTAIN REPAIR WORK ON THREE LIFEBOATS; THAT TRIPLE "A" MACHINE SHOP, INC., WAS THE LOW BIDDER AT THE PRICE OF $7,800, AND THAT ACCORDINGLY, JOB ORDER NO. 25 WAS ISSUED TO THAT CONCERN PURSUANT TO CONTRACT NO. MST-235, THE LATTER BEING ONE OF A MEMBER OF STANDARD MASTER- TYPE CONTRACTS FOR THE ALTERATION AND REPAIR OF NAVY VESSELS WHICH THE MILITARY SEA TRANSPORTATION SERVICE ENTERED INTO WITH VARIOUS SHIP REPAIR CONCERNS THROUGHOUT THE COUNTRY.

IT WAS FURTHER SET FORTH THAT THE INDICATED JOB ORDER CONTAINED FIVE "INDEFINITE" ITEMS--- TO BE PERFORMED ONLY IF REQUIRED BY MSTS--- ON WHICH THE CONTRACTOR SUBMITTED UNIT PRICE BIDS, AND DEFINITE SPECIFICATIONS FOR REQUIRED REPAIRS, INCLUDING ITEMS FOR THE REPLACEMENT OF A SPECIFIED NUMBER OF SHELL PLATES WHICH WERE PRECISELY DESCRIBED IN THE SPECIFICATIONS. YOU ALLEGED FURTHER, HOWEVER, THAT AFTER THE CONTRACTOR COMMENCED PERFORMANCE OF THE CONTRACT WORK AND HAD STRIPPED THE LIFEBOATS OF ALL TANKS, ETC., IT WAS DISCOVERED THAT A LARGE NUMBER OF SHELL PLATES WHICH HAD BEEN UNDER THE REMOVED TANKS NEEDED REPLACEMENT IN ORDER TO MAKE THE BOATS SEAWORTHY. YOU THEN STATED THAT---

"* * * IT IS AGREED THAT THOSE SHELL PLATES UNDER THE TANKS WERE NOT DESCRIBED IN THE SPECIFICATIONS AS REQUIRING REPLACING. LIKEWISE, IT IS NOT DISPUTED THAT AT THE THE TIME OF THE AWARD OF THE CONTRACT NEITHER THE CONTRACTING OFFICER NOR THE CONTRACTOR KNEW THAT THE PLATES UNDER THE TANKS WOULD HAVE TO BE REPLACED TO PUT THE BOATS IN FIRST CLASS CONDITION, AND MSTS ADMITS THAT A PRESENT INSPECTION OF THE LIFEBOATS PRIOR TO SUBMISSION OF THE BIDS WOULD NOT HAVE REVEALED THAT SUCH PLATES WOULD HAVE TO BE REPLACED. ACTUALLY, THE NUMBER OF ADDITIONAL PLATES WHICH WERE DISCOVERED TO BE IN NEED OF REPLACING AFTER REMOVAL OF THE TANKS, FAR EXCEEDED THE NUMBER OF PLATES WHICH THE SPECIFICATIONS PROVIDED WERE TO BE REPLACED. * * *"

IT WAS CLAIMED IN YOUR COMMUNICATION OF FEBRUARY 23, 1962, THAT THE TOTAL COST TO THE CONTRACTOR OF REPLACING THE ADDITIONAL SHELL PLATES NOT DESCRIBED IN THE SPECIFICATIONS AS REQUIRING REMOVAL WAS THE SUM OF $7,486 --- AN AMOUNT, IT IS NOTED, NEARLY EQUAL TO THE CONTRACTOR'S BID ON ALL DEFINITE ITEMS. UPON THE BASIS OF CERTAIN PROVISIONS OF THE JOB ORDER THE CONTRACTING OFFICER ORDERED THE CONTRACTOR TO REPLACE THE DEFECTIVE PLATES BUT REFUSED TO ALLOW ANY ADDITIONAL COMPENSATION THEREFOR, OR TO EXTEND THE CONTRACT COMPLETION PERIOD, AND ASSESSED LIQUIDATED DAMAGES IN THE AMOUNT OF $2,079.23 FOR FAILURE TO COMPLETE THE TOTAL WORK WITHIN THE STATED CONTRACT PERIOD.

UNDER THE PECULIAR PROVISIONS OF THE MASTER CONTRACT, ANY QUESTIONS REGARDING OR ARISING OUT OF THE INTERPRETATION OF PLANS OR SPECIFICATIONS WERE TO BE DETERMINED BY THE CONTRACTING OFFICER SUBJECTTO APPEAL TO THE COMMANDER, MSTS, OR HIS DULY AUTHORIZED REPRESENTATIVE (ARTICLE 5 (J) ). SINCE THE DECISION OF THE CONTRACTING OFFICER WAS BASED UPON HIS INTERPRETATION OF THE SPECIFICATIONS, THE CONTRACTOR APPEALED TO THE COMMANDER, WHO REFERRED THE APPEAL TO THE CONTRACT ADVISORY BOARD CREATED BY HIM AS HIS AUTHORIZED REPRESENTATIVE TO HEAR APPEALS UNDER THE CITED ARTICLE OF THE MASTER SHIP REPAIR CONTRACT. BY DECISION OF JANUARY 18, 1954, THE BOARD HELD THAT ALL OF THE WORK CLAIMED FOR AS EXTRA WORK WAS REQUIRED BY THE SPECIFICATIONS, AND THE CLAIM WAS THEREFORE DENIED. WITH RESPECT TO THE LIQUIDATED DAMAGES CLAIM, THE BOARD STATED:

"SINCE THE AUTHORITY OF THIS BOARD IS LIMITED TO RENDERING DECISIONS OR APPEALS UNDER ARTICLE 5 (J), THE CONTRACTOR'S CLAIM FOR RELIEF FROM LIQUIDATED DAMAGES HAS NOT BEEN DECIDED BUT INSTEAD HAS BEEN REFERRED WITH APPROPRIATE RECOMMENDATIONS TO THE COMMANDER MILITARY SEA TRANSPORTATION SERVICE FOR DECISION UNDER ARTICLE 14 OF THE MASTER SHIP REPAIR CONTRACT.'

ARTICLE 14 PROVIDED FOR SETTLEMENT OF ANY DISPUTES CONCERNING A QUESTION OF FACT OR PRICE (OTHER THAN MATTERS TO BE DETERMINED BY THE CONTRACTING OFFICER UNDER ARTICLE 5 (J) BY THE COMMANDER, MSTS, SUBJECT TO APPEAL TO THE SECRETARY OF THE NAVY OR HIS DULY AUTHORIZED REPRESENTATIVE.

UNDER DATE OF MARCH 5, 1957, THE COMMANDER MSTS ADVISED THE CONTRACTOR OF HIS FINDINGS, PURSUANT TO ARTICLE 14, THAT THE CONTRACTOR INEXCUSABLY DELAYED COMPLETION OF THE JOB ORDER FOR 20 DAYS AND 19 HOURS AND WAS THEREFORE SUBJECT TO LIQUIDATED DAMAGES IN THE AMOUNT OF $2,079.23. NOTICE OF APPEAL FROM THAT DECISION WAS FORWARDED TO THE SECRETARY OF THE NAVY BY LETTER OF APRIL 3, 1957, AND ACKNOWLEDGED BY THE RECORDER, ARMED SERVICES BOARD OF CONTRACT APPEALS, UNDER DATE OF APRIL 16, 1957. UPON YOUR REQUEST DATED FEBRUARY 29, 1960, THAT THE APPEAL BE HELD IN SUSPENSE PENDING PRESENTATION OF THE CLAIM TO THIS OFFICE, THE BOARD ON MARCH 18, 1960, ENTERED AN ORDER DISMISSING THE APPEAL WITH LEAVE TO APPELLANT TO REINSTATE IT IF AFTER OUR ACTION THERE SHOULD REMAIN A DISPUTE COGNIZABLE BY THE BOARD.

THE DEPARTMENT OF THE NAVY HAS FURNISHED AN ADMINISTRATIVE REPORT ON YOUR CLAIM, IN WHICH IT CONTENDED THAT THE INSTANT CLAIM LACKS INTRINSIC MERIT AND THAT BY REASON OF THE TEN-YEAR STATUTE OF LIMITATIONS CONTAINED IN SECTION 1 OF THE ACT OF OCTOBER 9, 1940, 54 STAT. 1061, 31 U.S.C. 71A, OUR OFFICE IS WITHOUT JURISDICTION TO CONSIDER THE CLAIM AT THE PRESENT TIME. IN YOUR BRIEFS DATED JULY 12 AND JULY 26, 1962, YOU STRENUOUSLY OPPOSE THE ADMINISTRATIVE POSITION ON BOTH POINTS.

IN YOUR BRIEF DATED JULY 12, 1962, AFTER REFERRING TO THE PROVISIONS OF THE CITED ACT OF OCTOBER 9, 1940, YOU EXPRESSED THE VIEW THAT THE CLAIM SHOULD BE CONSIDERED AS HAVING BEEN RECEIVED IN THE GENERAL ACCOUNTING OFFICE, WITHIN THE MEANING OF THE ACT, IN SEPTEMBER 1953. THAT STATEMENT APPEARS TO HAVE BEEN BASED UPON THE FACT THAT UNDER DATE OF SEPTEMBER 24, 1953, THE U.S. NAVY REGIONAL ACCOUNTS OFFICE FORWARDED TO OUR CLAIMS DIVISION FOR DIRECT SETTLEMENT A VOUCHER STATED IN FAVOR OF THE ASSIGNEE BANK IN THE NET AMOUNT OF $10,496.77, CONSISTING OF THE SUM OF $12,576, REPRESENTING THE AMOUNT PAYABLE UNDER THE JOB ORDER, LESS LIQUIDATED DAMAGES ASSESSED FOR THE PERIOD JUNE 18 TO JULY 9, 1951, IN THE AMOUNT OF $2,079.23.

FROM THE RECORD IT APPEARS THAT THE REASON FOR TRANSMITTAL OF THE VOUCHER TO OUR OFFICE WAS THAT THE APPROPRIATION CHARGEABLE FOR THE JOB ORDER HAD LAPSED AND THAT PAYMENT COULD THEREFORE BE MADE ONLY THROUGH THIS OFFICE. THE VOUCHER SUBMITTED DID NOT PURPORT TO COVER OTHER THAN THE CONTRACT PRICE ADMITTEDLY DUE, LESS THE INDICATED LIQUIDATED DAMAGES, AND MADE NO REFERENCE TO THE DISPUTED CLAIM FOR ADDITIONAL COMPENSATION. ON THE FACE OF THE INVOICE THERE WAS A REFERENCE TO A LETTER DATED MARCH 12, 1953--- SEE PAGES FOUR AND FIVE OF YOUR BRIEF DATED JULY 12, 1962--- BUT NO COPY OF THE LETTER WAS ATTACHED. INSOFAR AS COULD BE DETERMINED FROM THE INVOICE, THE LETTER WOULD APPEAR TO HAVE RELATED SOLELY TO THE ASSESSMENT OF LIQUIDATED DAMAGES, AND WE CONCLUDE THAT YOUR CLAIM WAS BEFORE THIS OFFICE IN SEPTEMBER, 1953, ONLY WITH RESPECT TO THE LIQUIDATED DAMAGE ASSESSMENT. AS TO THE BALANCE OF THE CLAIM, YOUR CONTENTION THAT THE CLAIM DID NOT "FIRST ACCRUE" UNTIL AFTER JANUARY 18, 1954, IS OBVIOUSLY INCONSISTENT WITH THE THEORY THAT IT SHOULD BE CONSIDERED AS HAVING BEEN RECEIVED IN OUR OFFICE IN SEPTEMBER, 1953.

ON PAGE EIGHT OF YOUR BRIEF YOU MADE REFERENCE TO ARTICLE 8 (D) OF THE CONTRACT WHICH, YOU STATED, PRESCRIBES THE EVENTS AND ACTIONS WHICH MUST TAKE PLACE BEFORE THE CONTRACTOR WAS ENTITLED TO PAYMENT, THAT IS TO SAY, THE CONTRACTOR WAS NOT ENTITLED TO PAYMENT UNTIL AFTER FINAL INSPECTION AND ACCEPTANCE AND UPON THE SUBMISSION OF AN INVOICE FOR PAYMENT IN SUCH FORM AND WITH SUCH COPIES AS THE CONTRACTING OFFICER MIGHT PRESCRIBE. THE RECORD ESTABLISHED THAT THE WORK WAS COMPLETED ON JULY 9, 1951, AND WAS APPARENTLY INSPECTED AND ACCEPTED ON THAT DATE. IT SEEMS PERFECTLY CLEAR THAT YOUR CLIENT MIGHT PROPERLY HAVE SUBMITTED ITS INVOICE IMMEDIATELY UPON RECEIPT OF NOTICE OF ACCEPTANCE, AND THAT THE DELAY IN SUBMITTING THE INVOICE TO APRIL 20, 1953--- ALMOST TWO YEARS AFTER COMPLETION OF THE CONTRACT WORK--- WAS WHOLLY THE RESPONSIBILITY OF THE CONTRACTOR.

THE ACT OF OCTOBER 9, 1940, PROVIDES IN PERTINENT PART AS FOLLOWS:

"EVERY CLAIM OR DEMAND * * * AGAINST THE UNITED STATES COGNIZABLE BY THE GENERAL ACCOUNTING OFFICE UNDER SECTION 305 OF THE BUDGET AND ACCOUNTING ACT OF JUNE 10, 1921 (41 STAT. 24), AND THE ACT OF APRIL 10, 1928 (45 STAT. 413), SHALL BE FOREVER BARRED UNLESS SUCH CLAIM, BEARING THE SIGNATURE AND ADDRESS OF THE CLAIMANT OR OF AN AUTHORIZED AGENT OR ATTORNEY, SHALL BE RECEIVED IN SAID OFFICE WITHIN TEN FULL YEARS AFTER THE DATE SUCH CLAIM FIRST ACCRUED: * * *"

IT IS TO BE NOTED THAT THE STATUTE RELATES SOLELY TO CLAIMS COGNIZABLE BY THE GENERAL ACCOUNTING OFFICE. IN YOUR BRIEF REFERENCE WAS MADE TO A NUMBER OF DECISIONS BY THE COURTS APPEARING TO GIVE SUPPORT TO THE PROPOSITION THAT THE STATUTE OF LIMITATIONS IS TOLLED WHILE A CLAIMANT IS PURSUING ADMINISTRATIVE REMEDIES MADE MANDATORY BY STATUTORY OR CONTRACTUAL PROVISIONS. WE ARE NOT AWARE, HOWEVER, OF ANY SPECIFIC HOLDING THAT AN ACTION MAY BE BROUGHT AT ANY TIME WITHIN THE STATUTORY PERIOD AFTER DECISION BY AN ADMINISTRATIVE OFFICIAL OR BOARD UNDER THE USUAL FORM OF DISPUTES CLAUSE INCORPORATED IN GOVERNMENT CONTRACTS. 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, 342 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 THAT 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.

THERE REMAINS FOR CONSIDERATION THE CONTRACTOR'S CLAIM FOR REFUND OF LIQUIDATED DAMAGES AMOUNTING TO $2,100, WHICH SUM WAS DEDUCTED BY OUR CLAIMS DIVISION FROM THE CONTRACT PRICE IN THE SETTLEMENT DATED FEBRUARY 4, 1954. IT APPEARS FROM THE ADMINISTRATIVE REPORT THAT YOUR CLIENT HAS BEEN GRANTED LEAVE TO REINSTATE ITS APPEAL BEFORE THE ARMED SERVICES BOARD OF CONTRACT APPEALS ON THE ISSUE OF LIQUIDATED DAMAGES AFTER DISPOSITION BY OUR OFFICE OF YOUR CLIENT'S CLAIM FOR ADDITIONAL COMPENSATION. SINCE IT APPEARS THAT THERE MAY BE FACTUAL ISSUES TO BE RESOLVED IN THAT CONNECTION, WE ASSUME THAT IT IS THE DESIRE OF YOUR CLIENT TO PURSUE THE MATTER TO A DECISION BEFORE THAT BOARD.