B-140040, JANUARY 8, 1962, 41 COMP. GEN. 436

B-140040, JANUARY 8, 1962, 41 COMP. GEN. 436

CONTRACTS - PRICE ADJUSTMENT - DELAYS, ETC., BY GOVERNMENT - MODIFICATION - CONSIDERATION - DAMAGES - GOVERNMENT LIABILITY UNDER A SUPPLY CONTRACT FOR FURNISHING AND INSTALLING A MAIL-FLOW SYSTEM IN A POST OFFICE BUILDING WHICH CONTAINED A STANDARD CHANGES PROVISION AND REQUIRED THAT THE WORK FIRST ON ONE FLOOR AND THEN ON ANOTHER BE PERFORMED WITHOUT UNREASONABLE INTERFERENCE WITH THE POSTAL OPERATIONS, A SUSPENSION OF WORK ORDERED BY THE GOVERNMENT WHILE THE CONTRACTOR WAS SIMULTANEOUSLY WORKING ON BOTH FLOORS IN ACCORDANCE WITH A MUTUALLY AGREED ALTERNATE DELIVERY SCHEDULE TO PERMIT THE CONTRACTOR TO MAKE UP TIME LOST FOR AN EXCUSABLE DELAY MAY NOT BE REGARDED AS UNREASONABLE NOR UNAUTHORIZED UNDER THE CONTRACT WHEN THE ACTUAL WORK SCHEDULE WAS NO LONGER THAN THAT CONTEMPLATED WITHOUT THE MODIFYING AGREEMENT, AND THE WAIVER OF THE ORIGINAL DELIVERY SCHEDULE FOR THE BENEFIT OF THE CONTRACTOR MAY NOT BE CONSTRUED AS A WAIVER OF THE REQUIREMENT THAT THE WORK BE PERFORMED WITHOUT INTERFERENCE WITH THE POSTAL OPERATIONS OR OF THE RIGHT TO STOP WORK TO INSURE PROPER PERFORMANCE; THEREFORE, THE DELAY IS NOT ONE ENTITLING THE CONTRACTOR TO AN ADJUSTMENT OF THE CONTRACT PRICE UNDER THE CHANGES ARTICLE. TO AMEND A SUPPLY CONTRACT TO INCLUDE THE SUSPENSION OF WORK CLAUSE SET OUT IN SECTION 1-7.602-1 OF THE FEDERAL PROCUREMENT REGULATIONS FOR USE IN CONSTRUCTION CONTRACTS TO ENTITLE THE CONTRACTOR TO INCREASED COSTS RESULTING FROM A WORK STOPPAGE WOULD NOT BE PROPER IN THE ABSENCE OF SOME CONSIDERATION, NOR COULD THE CONTRACT BE REFORMED IN THE ABSENCE OF PROOF THAT THE INCLUSION OF THE WORK SUSPENSION CLAUSE WAS IN FACT INTENDED AT THE TIME THE CONTRACT WAS EXECUTED. UNDER A SUPPLY CONTRACT FOR FURNISHING AND INSTALLING A MAIL-FLOW SYSTEM IN A POST OFFICE BUILDING WHICH REQUIRED THE WORK TO BE PERFORMED WITH A MINIMUM OF INTERFERENCE WITH THE POSTAL OPERATIONS, A STOP ORDER ISSUED WHEN IT WAS FOUND UNFEASIBLE TO PERMIT THE CONTRACTOR TO CONTINUE WORK ON AN ACCELERATED DELIVERY SCHEDULE WAS NOT AN UNREASONABLE ORDER UNDER THE CONTRACT, AND, THEREFORE, THE GOVERNMENT IS NOT LIABLE UNDER A BREACH OF CONTRACT THEORY.

TO THE POSTMASTER GENERAL, JANUARY 8, 1962:

YOUR LETTER OF JUNE 29, 1961, WITH ENCLOSURES, REQUESTS OUR DECISION CONCERNING THE ACTION TO BE TAKEN ON A CLAIM ASSERTED BY INDUSTRIAL NUCLEONICS CORPORATION, COLUMBUS, OHIO, ARISING OUT OF CONTRACT NO. 9-1 9726, DATED JUNE 30, 1959, FOR THE FURNISHING AND INSTALLATION OF A MAIL- FLO SYSTEM ON THE 8TH AND 9TH FLOORS OF THE CHICAGO, ILLINOIS, POST OFFICE, IN ACCORDANCE WITH THE PROVISIONS OF POST OFFICE DEPARTMENT SPECIFICATION POD-M-1016/RE), APRIL 24, 1959, AS AMENDED.

THE CONTRACT WAS AWARDED UNDER COMPETITIVE BIDDING ON JUNE 30, 1959, IN THE AMOUNT OF $2,257,400, AND IT INCORPORATED STANDARD FORM 32, GENERAL PROVISIONS ( SUPPLY CONTRACT), OCTOBER 1957 EDITION, WHICH PROVIDES, IN PERTINENT PART, AS FOLLOWS: 2. CHANGES

THE CONTRACTING OFFICE, MAY AT ANY TIME, BY A WRITTEN ORDER, AND WITHOUT NOTICE TO THE SURETIES, MAKE CHANGES, WITHIN THE GENERAL SCOPE OF THIS CONTRACT, IN ANY ONE OR MORE OF THE FOLLOWING: (I) DRAWINGS, DESIGNS, OR SPECIFICATIONS, WHERE THE SUPPLIES TO BE FURNISHED ARE TO BE SPECIALLY MANUFACTURED FOR THE GOVERNMENT IN ACCORDANCE THEREWITH; (II) METHOD OF SHIPMENT OR PACKING; AND (III) PLACE OF DELIVERY. IF ANY SUCH CHANGE CAUSES AN INCREASE OR DECREASE IN THE COST OF, OR THE TIME REQUIRED FOR, THE PERFORMANCE OF ANY PART OF THE WORK UNDER THIS CONTRACT, WHETHER CHANGED OR NOT CHANGED BY ANY SUCH ORDER, AN EQUITABLE ADJUSTMENT SHALL BE MADE IN THE CONTRACT PRICE OR DELIVERY SCHEDULE, OR BOTH, AND THE CONTRACT SHALL BE MODIFIED IN WRITING ACCORDINGLY. * * * ( ITALICS SUPPLIED.) 11. DEFAULT

(A) THE GOVERNMENT MAY, SUBJECT TO THE PROVISIONS OF PARAGRAPH (C) BELOW, BY WRITTEN NOTICE OF DEFAULT TO THE CONTRACTOR, TERMINATE THE WHOLE OR ANY PART OF THIS CONTRACT IN ANY ONE OF THE FOLLOWING CIRCUMSTANCES:

(I) IF THE CONTRACTOR FAILS TO MAKE DELIVERY OF THE SUPPLIES OR TO PERFORM THE SERVICES WITHIN THE TIME SPECIFIED HEREIN OR ANY EXTENSION THEREOF; * * *

(B) IN THE EVENT THE GOVERNMENT TERMINATES THIS CONTRACT IN WHOLE OR IN PART AS PROVIDED IN PARAGRAPH (A) OF THIS CLAUSE, THE GOVERNMENT MAY PROCURE, UPON SUCH TERMS AND IN SUCH MANNER AS THE CONTRACTING OFFICER MAY DEEM APPROPRIATE, SUPPLIES OR SERVICES SIMILAR TO THOSE SO TERMINATED, AND THE CONTRACTOR SHALL BE LIABLE TO THE GOVERNMENT FOR ANY EXCESS COSTS FOR SUCH SIMILAR SUPPLIES OR SERVICES * * *.

(C) EXCEPT WITH RESPECT TO DEFAULTS OF SUBCONTRACTORS, THE CONTRACTOR SHALL NOT BE LIABLE FOR ANY EXCESS COSTS IF THE FAILURE TO PERFORM THE CONTRACT ARISES OUT OF CAUSES BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE CONTRACTOR. SUCH CAUSES MAY INCLUDE, BUT ARE NOT RESTRICTED TO * * * ACTS OF THE GOVERNMENT IN EITHER ITS SOVEREIGNOR CONTRACTUAL CAPACITY, * * * STRIKES, * * * AND UNUSUALLY SEVERE WEATHER; BUT IN EVERY CASE THE FAILURE TO PERFORM MUST BE BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE CONTRACTOR. IF THE FAILURE TO PERFORM IS CAUSED BY THE DEFAULT OF A SUBCONTRACTOR, AND IF SUCH DEFAULT ARISES OUT OF CAUSES BEYOND THE CONTROL OF BOTH THE CONTRACTOR AND SUBCONTRACTOR, AND WITHOUT THE FAULT OR NEGLIGENCE OF EITHER OF THEM, THE CONTRACTOR SHALL NOT BE LIABLE FOR ANY EXCESS COSTS FOR FAILURE TO PERFORM, UNLESS THE SUPPLIES OR SERVICES TO BE FURNISHED BY THE SUBCONTRACTOR WERE OBTAINABLE FROM OTHER SOURCES IN SUFFICIENT TIME TO PERMIT THE CONTRACTOR TO MEET THE REQUIRED DELIVERY SCHEDULE. ( ITALICS SUPPLIED.)

(R) THE RIGHTS AND REMEDIES OF THE GOVERNMENT PROVIDED IN THIS CLAUSE SHALL NOT BE EXCLUSIVE AND ARE IN ADDITION TO ANY OTHER RIGHTS AND REMEDIES PROVIDED BY LAW OR UNDER THIS CONTRACT.

SECTION 5 OF THE SPECIFICATIONS PROVIDED THAT WORK ON THE 9TH FLOOR WAS TO COMMENCE BETWEEN JANUARY 4 AND JANUARY 11, 1960, AND TO BE COMPLETED, TESTED AND READY FOR FULL OPERATION ON OR BEFORE JUNE 1960. WORK ON THE 8TH FLOOR WAS TO BEGIN ON OR ABOUT MAY 2, 1960, WHEN THE INSTALLATION OF THE 9TH FLOOR SYSTEM HAD BEEN COMPLETED, AND IT WAS TO BE COMPLETELY INSTALLED, TESTED AND READY FOR FULL OPERATION ON OR BEFORE OCTOBER 1, 1960. SECTION 3.8 OF THE SPECIFICATIONS PROVIDED:

* * * THE RESIDENT ENGINEER SHALL HAVE GENERAL SUPERVISION AND DIRECTION OF THE WORK. HE HAS AUTHORITY TO STOP THE WORK WHENEVER SUCH STOPPAGE MAY BE NECESSARY TO INSURE THE PROPER EXECUTION OF THE CONTRACT AND HE IS JUDGE OF ITS PERFORMANCE.

YOU REPORT THAT THE INSTALLATION SEQUENCE AND PERFORMANCE DATES WERE ESTABLISHED PRIMARILY BECAUSE THE DEPARTMENT'S OPERATIONAL REQUIREMENTS WOULD NOT PERMIT POSTAL OPERATIONS ON THE 8TH FLOOR TO BE TOTALLY INTERRUPTED AT ANY ONE TIME. ALSO THAT DURING THE CHRISTMAS MAILING SEASON OF NOVEMBER 1 THROUGH DECEMBER 31 NO INSTALLATION WORK ON THE MAIL- FLO SYSTEM ON EITHER THE 8TH OR 9TH FLOOR COULD BE PERMITTED, AND THAT THE CONTRACTOR WAS AWARE OF THESE FACTORS.

BY LETTER OF JULY 21, 1959, INDUSTRIAL NUCLEONICS CORPORATION SUBCONTRACTED THE CONVEYER PORTION OF THE CONTRACT TO THE OLIVER CORPORATION OF YORK, PENNSYLVANIA (THE SUBCONTRACT WAS FORMALIZED ON NOVEMBER 30, 1959), IT BEING PROVIDED IN THE SUBCONTRACT THAT THE SUBCONTRACTOR--- FOR THE FIXED PRICE OF $1,369,103--- AGREED TO DESIGN, FURNISH AND INSTALL THE MATERIALS AND EQUIPMENT WHICH CONSTITUTED THE CONVEYOR PORTION IN ACCORDANCE WITH SPECIFICATION POD-M-1016/RE), AND THAT THE SUBCONTRACTOR'S OBLIGATIONS WERE TO BE THE SAME AS THOSE UNDERTAKEN BY INDUSTRIAL NUCLEONICS UNDER THE PRIME CONTRACT WITH RESPECT TO THE TIME SCHEDULE FOR THE PERFORMANCE OF THE WORK. THE SUBCONTRACT INCORPORATED STANDARD FORM 32, GENERAL PROVISIONS ( SUPPLY CONTRACT), OCTOBER 1957 EDITION.

IN TURN, OLIVER SUBCONTRACTED THE INSTALLATION PORTION OF ITS SUBCONTRACT TO C. F. BUTZ ENGINEERING, AZUSA, CALIFORNIA, BY LETTER CONTRACT DATED MARCH 24, 1960.

THE EVENTS RELATING TO THE PERFORMANCE OF THE CONTRACT, AS SET FORTH IN YOUR LETTER AND MORE FULLY DISCLOSED BY CORRESPONDENCE REFERRED TO IN A MEMORANDUM DATED MAY 1, 1961, PREPARED BY MR. STURGIS WARNER, ATTORNEY FOR THE CONTRACTOR, WHICH WE UNDERSTAND WAS FURNISHED TO YOUR DEPARTMENT IN SUPPORT OF THE CLAIM, WERE AS FOLLOWS:

ON JULY 7, 1959, A STEEL STRIKE COMMENCED, AND CONTINUED FOR 114 DAYS. YOU STATE THAT THE CONTRACTING OFFICER DETERMINED THAT THE CONTRACTOR WAS ENTITLED TO A 132-DAY EXTENSION OF TIME BY REASON THEREOF, THE ADDITIONAL 18 DAYS HAVING BEEN ALLOWED TO TAKE CARE OF THE SHUTTING DOWN AND STARTING UP OF THE STEEL FURNACES. IN COMMENTING UPON THE CONTRACTING OFFICER'S DETERMINATION, YOU STATE THAT THE STRIKE "WAS AN EXCUSABLE DELAY FOR WHICH AN EXTENSION OF TIME COULD BE GRANTED UNDER ARTICLE 11 (C) (THE ABOVE- QUOTED CLAUSE 11 (C) OF STANDARD FORM 32) OF THE CONTRACT," CITING 35 COMP. GEN. 460 AND 39 COMP. GEN. 478.

35 COMP. GEN. 460 INVOLVED THE QUESTION WHETHER WESTINGHOUSE ELECTRIC CORPORATION WAS CHARGEABLE WITH EXCESS COSTS UPON TERMINATION OF THE CONTRACT THERE INVOLVED FOR DELAY--- ATTRIBUTABLE TO A STRIKE AGAINST THE CONCERN WHICH WAS IN PROGRESS AT THE TIME THE CONTRACT WAS AWARDED--- IN VIEW OF THE PROVISIONS OF CLAUSE 11 (B) OF STANDARD FORM 32, GENERAL PROVISIONS ( SUPPLY CONTRACT), NOVEMBER 1959 EDITION, INCORPORATED IN THE CONTRACT, WHICH WAS SIMILAR, INSOFAR AS MATERIAL HERE, TO CLAUSE 11 (C) OF THE OCTOBER 1959 EDITION OF THE FORM. PRECISELY, THE QUESTION WAS WHETHER THE GOVERNING CLAUSE ENTITLED A CONTRACTOR TO BE RELIEVED OF LIABILITY FOR EXCESS COSTS WHERE THE FAILURE TO PERFORM WAS DUE TO A CAUSE WHICH, TO THE KNOWLEDGE OF BOTH PARTIES, EXISTED WHEN THE CONTRACT WAS EXECUTED. THE ADMINISTRATOR OF THE GENERAL SERVICES ADMINISTRATION WAS ADVISED IN THE DECISION THAT SINCE THE CLAUSE MADE NO DISTINCTION BETWEEN EXISTING AND SUPERVENING CAUSES OF DELAY THAT AROSE OUT OF CAUSES BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE CONTRACTOR, AND WAS NOT LIMITED TO "UNFORESEEABLE" CAUSES, THE CONTRACTOR MUST BE CONSIDERED TO BE WITHOUT ANY LIABILITY FOR EXCESS COSTS. IT IS TO BE NOTED THAT IN THAT CASE THE CAUSE OF THE DELAY WAS A STRIKE OF THE CONTRACTOR'S OWN EMPLOYEES, RATHER THAN ONE AFFECTING ONLY ITS PROSPECTIVE SUPPLIERS OF MATERIALS; ALSO, THAT THE CONTRACT HAD BEEN TERMINATED FOR DEFAULT, WITHOUT EXTENSION OF TIME.

IN 39 COMP. GEN. 478 WE ADVISED THE ADMINISTRATOR OF THE FEDERAL AVIATION AGENCY THAT WE SAW NO OBJECTION TO HIS PRACTICE OF ADMINISTERING CONTRACTS WHICH INCLUDED CLAUSE 11 (C) OF STANDARD FORM 32, GENERAL PROVISIONS ( SUPPLY CONTRACT), OCTOBER 1957 EDITION, SUPRA, AND WHICH WERE AWARDED AFTER THE DATE OF COMMENCEMENT OF THE STEEL STRIKE HERE INVOLVED, IN THE SAME MANNER AS THOSE AWARDED PRIOR TO SUCH DATE, AND THAT WHERE HIS AGENCY WAS ABLE TO DETERMINE, IN ACCORDANCE WITH CLAUSE 11 (C), THAT THE CONTRACTOR'S INABILITY TO PERFORM WAS ATTRIBUTABLE TO THE STEEL STRIKE, EXTENSIONS OF THE TIME FOR PERFORMANCE, COMMENSURATE WITH THE DELAY OCCASIONED THEREBY, WOULD BE PERMISSIBLE. NO REFERENCE WAS MADE IN THAT DECISION TO THE FACT THAT ARTICLE 11 OF STANDARD FORM 32 CONTAINS NO SPECIFIC AUTHORIZATION FOR EXTENSION OF TIME SUCH AS APPEARS IN ARTICLE 5 OF STANDARD FORM 23A FOR CONSTRUCTION CONTRACTS.

AS A CONSEQUENCE OF THE DELAY, FOUND TO HAVE BEEN DUE TO THE STRIKE, THE CONTRACTING OFFICER OFFERED TWO ALTERNATIVE PERFORMANCE SCHEDULES TO THE CONTRACTOR, AS SET FORTH IN A LETTER DATED APRIL 13, 1960. ONE ALTERNATIVE CALLED FOR COMPLETION OF THE 9TH FLOOR BY NOVEMBER 1, 1960, AND WORK TO START ON THE 8TH FLOOR IN JANUARY 1961. THE OTHER ALTERNATIVE CALLED FOR SIMULTANEOUS WORK ON BOTH FLOORS, FOR COMPLETION AND OPERATION BY NOVEMBER 1, 1960. THIS ALTERNATIVE WAS MADE SUBJECT TO DEPARTMENTAL APPROVAL OF THE CONTRACTOR'S PLAN, SHOWING HOW IT WOULD PROVIDE SPACE ON THE 9TH FLOOR FOR 8TH FLOOR OPERATIONS, AND WITH THE UNDERSTANDING THAT THE ENTIRE 8TH FLOOR WOULD NOT BE VACATED FOR THE CONTRACTOR'S BENEFIT. THE CONTRACTOR REPLIED BY LETTER OF APRIL 25, 1960, SETTING FORTH A PROPOSAL FOR INSTALLING THE MAIL-FLO SYSTEM ON BOTH FLOORS BY NOVEMBER 1, 1960.

A MEMORANDUM OF MAY 2, 1960, FROM THE POSTMASTER OF THE CHICAGO, ILLINOIS, POST OFFICE TO THE REGIONAL OPERATIONS DIRECTOR, CHICAGO, RECORDS A MEETING OF THAT DATE ATTENDED BY THE POSTMASTER, THE ASSISTANT POSTMASTER, THE POSTAL INSTALLATIONS MANAGER, THE CHIEF REGIONAL ENGINEER, THE RESIDENT ENGINEER AND THE SENIOR FIELD SERVICE OFFICER AT WHICH THE SCHEDULING OF THE INSTALLATION OF THE MAIL-FLO SYSTEM ON THE 8TH AND 9TH FLOORS, TO THE END OF COMPLETING THE INSTALLATION ON BOTH FLOORS BY NOVEMBER 1, 1960, WAS AGREED UPON. THE MEMORANDUM REFERS TO THE FACT THAT THE RESIDENT ENGINEER, A REPRESENTATIVE OF INDUSTRIAL NUCLEONICS AND A REPRESENTATIVE FROM THE OFFICE OF THE CONTRACTING OFFICER HAD MET AT THE OLIVER CORPORATION'S PLANT ON APRIL 28, 1960, TO ASCERTAIN, AFTER DISCUSSIONS WITH OFFICIALS OF THE COMPANY, ITS ABILITY TO: (1) FABRICATE ON TIME, BY SEQUENCE NEEDED IN THE SYSTEM, THE NECESSARY COMPONENTS, AND (2) MAKE MAXIMUM PREASSEMBLY AT ITS PLANT TO MINIMIZE FIELD WORK. THE MEMORANDUM STATES THAT OLIVER GAVE ASSURANCE THAT IT COULD DO THESE THINGS, AND THAN AN INSPECTION OF THE PLANT AND A REVIEW OF THE COMPANY'S PRODUCTION AND SHIPPING SCHEDULES INDICATED THAT DEADLINES GIVEN IT COULD BE MET. THE MEMORANDUM ALSO SET FORTH THE PROCEDURES WHICH WERE TO BE FOLLOWED IN CHECKING ON THE PROGRESS OF THE WORK TO MAKE CERTAIN THAT THE NOVEMBER 1 DEADLINE FOR COMPLETION THEREOF WOULD BE MET. IN THE EVENT THE CONTRACTOR SHOULD GET BEHIND IN THE TIME SCHEDULE AGREED UPON FOR THE PERFORMANCE OF CERTAIN PHASES OF THE WORK--- WHICH WOULD INDICATE THAT THE WORK ON BOTH FLOORS COULD NOT BE COMPLETED BY NOVEMBER 1, 1960--- APPROPRIATE ACTION WAS TO BE TAKEN.

IN A LETTER DATED MAY 3, 1960, WHICH REFERRED TO THE MEETING OF APRIL 28, 1960, MENTIONED IN THE ABOVE MEMORANDUM, THE CONTRACTING OFFICER ADVISED INDUSTRIAL NUCLEONICS THAT OLIVER WOULD FURNISH IT WITH A SCHEDULE OF PRODUCTION AND INSTALLATION OF THE CONVEYORS ON THE 8TH AND 9TH FLOORS BASED ON THE SEQUENCE WHICH HAD BEEN DESCRIBED TO INDUSTRIAL NUCLEONICS' MR. STUART IN CHICAGO ON APRIL 25, AND THAT THE CONTRACTOR SHOULD "ADD YOUR CONTROLS INSTALLATION TIME TO THIS SCHEDULE AND FURNISH US A FIRM DATE FOR COMPLETION OF THE 9TH FLOOR PRIMARY, ETC.' THE CONTRACTOR WAS REQUESTED TO FURNISH THIS SCHEDULE BY THE END OF THE FOLLOWING WEEK, AND THE LETTER CONCLUDED:

THIS TYPE OF PLANNING SHOULD BE CONTINUED TO COVER THE COMPLETION OF BOTH FLOORS BY NOVEMBER 1, 1960. THESE REMAINING SCHEDULES SHOULD BE FURNISHED TO US IN ABOUT THREE (3) WEEKS.

IT APPEARS THAT ON OR ABOUT MAY 13, 1960, THE CONTRACTOR WAS AUTHORIZED TO PROCEED WITH THE WORK ON THE 8TH FLOOR CONCURRENTLY WITH THE WORK ON THE 9TH FLOOR. WITH RESPECT TO THE EVENTS WHICH TOOK PLACE THEREAFTER IN REGARD TO THE PERFORMANCE AND ADMINISTRATION OF THE CONTRACT, YOUR LETTER STATES:

THE CONTRACTOR PROCEEDED WITH THE WORK UNDER THE REVISED SCHEDULE FOR APPROXIMATELY ONE MONTH. IT WAS THEN DETERMINED BY THE DEPARTMENT THAT THE SAFETY OF THE POSTAL EMPLOYEES LOCATED ON THE 8TH FLOOR WOULD BE ENDANGERED IF THE CONTRACTOR CONTINUED WITH THE WORK ON THE FLOOR. THEREFORE, DELIVERY OF MATERIALS AND EQUIPMENT FOR THE 8TH FLOOR WAS STOPPED ON JUNE 2, AND ALL WORK THEREON WAS STOPPED ON JUNE 16, 1960, BY THE DEPARTMENT'S RESIDENT ENGINEER WHO WAS THE AUTHORIZED REPRESENTATIVE OF THE CONTRACTING OFFICER. SUBSEQUENTLY, IT WAS DETERMINED THAT THE CONTRACTOR WOULD NOT BE PERMITTED TO RESUME WORK ON THE 8TH FLOOR UNTIL SOME TIME AFTER THE CHRISTMAS MAILING SEASON. ON JANUARY 9, 1961, THE DEPARTMENT AGAIN MADE THE 8TH FLOOR AVAILABLE TO THE CONTRACTOR AND THE TIME FOR COMPLETION OF THE WORK THEREON WAS EXTENDED BY MUTUAL AGREEMENT TO JUNE 2, 1961. YOUR LETTER THUS IMPLIES THAT THE PARTIAL SUSPENSION OF WORK UNDER THE CONTRACT WAS FOR THE CONVENIENCE OF THE GOVERNMENT. HOWEVER, BY LETTER OF JULY 5, 1960, THE CONTRACTING OFFICER ADVISED THE CONTRACTOR AS FOLLOWS:

THIS IS TO CONFIRM THAT ON JUNE 16, 1960, AT OUR CONFERENCE IN WASHINGTON, YOU WERE DIRECTED TO SUSPEND INSTALLATION OF THE 8TH FLOOR SYSTEM UNTIL FURTHER NOTICE. THIS ACTION WAS NECESSARY IN ORDER TO CONCENTRATE ALL YOUR EFFORTS TOWARD COMPLETION OF THE 9TH FLOOR SYSTEM BY NOVEMBER 1, 1960.

UPON COMPLETION OF THE 9TH FLOOR PRIMARY, CONSIDERATION MAY BE GIVEN TO RE-STARTING THE 8TH FLOOR SYSTEM; HOWEVER, SUCH CONSIDERATION WILL DEPEND ALMOST ENTIRELY ON THE DATE OF COMPLETION OF THE PRIMARY.

OUR EARLIER ATTEMPTS TO ARRANGE FOR SIMULTANEOUS INSTALLATION WERE BASED ON THE DEPARTMENT'S NEEDS FOR THE SYSTEM AS WELL AS BEING AN ACCOMMODATION TO ASSIST YOU IN COMPLETING THE CONTRACT CLOSER TO SCHEDULE. WE WILL MAKE EVERY EFFORT TO CO-OPERATE WITH YOU IN THE FUTURE; HOWEVER, FOR THE PRESENT, WE WILL FOLLOW THE SPECIFICATION REQUIREMENTS FOR CONSECUTIVE INSTALLATION OF THE 9TH AND 8TH FLOORS, RESPECTIVELY. ( ITALICS SUPPLIED.)

THE CONTRACTING OFFICER'S ABOVE-QUOTED LETTER, WHEN CONSIDERED IN RELATION TO THE INFORMATION CONTAINED IN THE POSTMASTER'S MEMORANDUM OF MAY 2, 1960, AND THE CONTRACTING OFFICER'S LETTER OF MAY 3, 1960, REFERRED TO HEREINABOVE, IMPLIES THAT THE CONTRACTOR WAS ORDERED TO SUSPEND WORK ON THE 8TH FLOOR BECAUSE IT HAD GOTTEN BEHIND IN THE TIME SCHEDULE FIXED FOR THE PERFORMANCE OF THE WORK ON THE 9TH FLOOR, AND IN ORDER TO ENABLE THE CONTRACTOR TO COMPLETE INSTALLATION OF THE MAIL-FLO SYSTEM ON THE 9TH FLOOR BY NOVEMBER 1, 1960. HOWEVER, WE RECOGNIZE THAT THE CONTRACTING OFFICER MAY HAVE CONCLUDED AS A RESULT OF SUBSEQUENT INVESTIGATION, AS INDICATED BY HIS LETTER OF JANUARY 13, 1961, QUOTED IN PART BELOW, THAT THE WORK ON THE 8TH FLOOR WAS SUSPENDED BECAUSE IT WAS NOT FEASIBLE--- FROM THE STANDPOINT OF THE SAFETY OF POSTAL EMPLOYEES LOCATED ON THE 8TH FLOOR--- FOR WORK ON THE 8TH AND 9TH FLOORS TO PROCEED CONCURRENTLY, AS CONTEMPLATED BY THE REVISED SCHEDULE FOR THE PERFORMANCE OF THE CONTRACT WHICH HAD BEEN AGREED TO BY THE PARTIES AT THE TIME (ON OR ABOUT MAY 13, 1960) THE CONTRACTOR WAS AUTHORIZED TO PROCEED WITH THE WORK ON BOTH FLOORS, AND NOT BECAUSE OF ANY FAILURE OF THE CONTRACTOR TO PERFORM IN ACCORDANCE WITH THE REVISED SCHEDULE.

ATTACHED TO MR. STURGIS WARNER'S MEMORANDUM OF MAY 1, 1961 (ATTACHMENT "L"), REFERRED TO HEREINABOVE, ARE EXCERPTS FROM A LETTER DATED AUGUST 16, 1961, WRITTEN BY THE RESIDENT ENGINEER TO THE FIELD SUPERINTENDENT OF INDUSTRIAL NUCLEONICS. THE LETTER, AFTER REFERRING TO THE CONTRACTING OFFICER'S ABOVE-QUOTED LETTER OF JULY 5, 1960, TO THE CONTRACTOR, STATED:

YOU ARE FURTHER ADVISED THAT IN NO CASE WILL MAJOR CONSTRUCTION OR ERECTION WORK BE PERMITTED TO CONTINUE BEYOND NOVEMBER 1, 1960 ON EITHER THE 8TH OR 9TH FLOORS EXCEPT FOR MECHANICAL ADJUSTMENT OR ELECTRICAL TROUBLE SHOOTING WORK THAT MAY BE REQUIRED DURING THE CHRISTMAS PERIOD TO KEEP THAT PORTION OF THE SYSTEM IN OPERATION. MAJOR CONSTRUCTION OR ERECTION WORK MAY THEN RESUME AFTER CHRISTMAS ON OR ABOUT JANUARY 1, 1961.

THE INSTALLATION CRITERIA ESTABLISHED BY MR. KALLIO'S (THE CONTRACTING OFFICER-S) LETTER OF JULY 5, 1960 AND OPERATIONAL INTERPRETATION OUTLINED ABOVE IS TO BE ADHERED TO RIGIDLY UNLESS MODIFIED IN WRITING BY THE CONTRACTING OFFICER.

A LETTER DATED JANUARY 20, 1961, ADDRESSED BY INDUSTRIAL NUCLEONICS TO THE DIVISION OF SUPPLIES, BUREAU OF FACILITIES, POST OFFICE DEPARTMENT, AND TO THE ATTENTION OF THE CONTRACTING OFFICER (ATTACHMENT "B" TO THE MEMORANDUM OF MAY 1, 1961), REFERS TO A TELEGRAM DATED DECEMBER 22, 1960, RECEIVED FROM THE CONTRACTING OFFICER, REQUESTING THE CONTRACTOR TO SUBMIT A PROPOSED SCHEDULE FOR RESUMPTION OF INSTALLATION WORK ON THE 8TH FLOOR, AND TO A LETTER DATED JANUARY 13, 1961, RECEIVED FROM THE CONTRACTING OFFICER (ATTACHMENT "D" TO THE MEMORANDUM OF MAY 1, 1961) WHICH HAD CONFIRMED A CONFERENCE HELD ON THAT DATE WITH THE CONTRACTOR REGARDING A CLAIM OF THE LATTER FOR ADDITIONAL COSTS UNDER THE CONTRACT AND IN WHICH IT WAS STATED:

THIS WILL CONFIRM THAT THE POST OFFICE DEPARTMENT WILL ACCEPT RESPONSIBILITY FOR ADDITIONAL OVERHEAD, TOOL, SUPERVISORY (ABOVE THE FOREMAN LEVEL), AND ENGINEERING COSTS INCURRED AS A RESULT OF AN EXTENSION TO THE BASIC CONTRACT OF THREE MONTHS WHICH WAS NECESSARY TO MEET POST OFFICE REQUIREMENTS.

THE CONTRACTOR'S LETTER OF JANUARY 20, 1961, REFERS TO A PROPOSED SCHEDULE FOR RESUMPTION OF WORK ON THE 8TH FLOOR ENCLOSED THEREWITH, AND TO THE FACT THAT THE LETTER OF JANUARY 13, 1961, CONTEMPLATED FURTHER NEGOTIATIONS REGARDING THE SPECIFIC COSTS TO BE CLAIMED BY THE CONTRACTOR, AND THE LETTER CONCLUDES:

THESE ADDITIONAL NEGOTIATIONS WILL, OF COURSE, COVER ALL CLAIMS ARISING AS A RESULT OF EVENTS OCCURRING PRIOR TO THE RESUMPTION OF THE 8TH FLOOR WORK, AND THEREFORE WILL INCLUDE BUT NOT BE LIMITED TO THE CLAIMS ARISING AS A RESULT OF THE POST OFFICE DEPARTMENT'S EXTENSION OF THE CONTRACT TO WHICH MR. KALLIO'S LETTER REFERRED. THE RESUMPTION OF WORK ON THE 8TH FLOOR SHOULD NOT OF COURSE HAVE ANY EFFECT ON THE STATUS OF THESE PRIOR CLAIMS IN NEGOTIATIONS, BUT WE WOULD LIKE TO HAVE YOU CONFIRM THE POST OFFICE DEPARTMENT'S UNDERSTANDING ON THIS POINT AT THE TIME YOU ADVISE US OF YOUR APPROVAL OF THE ATTACHED SCHEDULE.

THE CONTRACTING OFFICER, IN REPLYING TO THE ABOVE LETTER BY LETTER OF JANUARY 30, 1961 (ATTACHMENT "C" TO THE MEMORANDUM OF MAY 1, 1961), DREW ATTENTION TO THE FACT THAT HIS TELEGRAM OF JANUARY 25 HAD INDICATED ACCEPTANCE OF THE CONTRACTOR'S PROPOSED SCHEDULE FOR COMPLETION OF THE INSTALLATION OF THE MAIL-FLO SYSTEM ON THE 8TH FLOOR, AND STATED:

AS INDICATED PREVIOUSLY WE WILL CONSIDER ALL CLAIMS TO MONEYS YOU FEEL THE DEPARTMENT OWES.

BY LETTER DATED FEBRUARY 23, 1961, INDUSTRIAL NUCLEONICS SUBMITTED A CLAIM IN THE AMOUNT OF $278,947 ON BEHALF OF ITSELF, ITS SUBCONTRACTOR AND THE SUB-SUBCONTRACTOR, BASED ON THE ALLEGED ADDITIONAL COSTS INCURRED OR ACCRUING FROM DELAY OCCASIONED BY THE DEPARTMENTAL ACTION IN STOPPING PERFORMANCE OF THE WORK ON THE 8TH FLOOR FROM JUNE 1960 UNTIL JANUARY 1961, AND YOU REQUEST OUR DECISION WHETHER THE CLAIM MAY BE CONSIDERED UNDER CLAUSE 2, CHANGES, OF THE GENERAL PROVISIONS OF THE CONTRACT, SUPRA. IF NOT, OUR ADVICE IS REQUESTED AS TO WHETHER--- ASSUMING THAT WE CONSIDER THE CONTRACTOR TO HAVE A VALID CLAIM AGAINST THE GOVERNMENT FOR BREACH OF CONTRACT--- THE CONTRACT MAY BE AMENDED "TO INCLUDE A " SUSPENSION" CLAUSE TO PROVIDE A CONTRACTUAL VEHICLE FOR AN ADMINISTRATIVE SETTLEMENT OF THE CLAIM.' IN THE EVENT OUR ANSWER TO THAT QUESTION SHOULD ALSO BE IN THE NEGATIVE, YOU REQUEST TO BE ADVISED WHETHER YOUR DEPARTMENT MAY CONSIDER THE CLAIM AND SETTLE IT ON PRINCIPLES APPLICABLE IN BREACH OF CONTRACT CASES.

IN UNITED STATES V. RICE, 317 U.S. 61, INVOLVING A CONTRACT FOR THE INSTALLATION OF PLUMBING, HEATING AND ELECTRICAL EQUIPMENT IN A VETERANS' HOME, THE SUPREME COURT WAS CALLED UPON TO DECIDE WHETHER THE RESPONDENT WAS ENTITLED TO RECOVER OVERHEAD EXPENSES AND CERTAIN OTHER EXPENSES INCURRED BY THE CONTRACTOR AS A RESULT OF THE GOVERNMENT'S SUSPENSION OF WORK UNDER THE CONTRACT, RESULTING FROM THE FACT THAT THE SITE OF THE VETERANS' HOME (THE CONSTRUCTION OF WHICH WAS PROVIDED FOR UNDER ANOTHER CONTRACT) HAD TO BE CHANGED--- NECESSITATING OTHER CHANGES IN THE SPECIFICATIONS--- BECAUSE OF THE UNEXPECTED DISCOVERY OF SOIL UNSUITABLE FOR FOUNDATION PURPOSES AT THE ORIGINAL SITE SELECTED FOR THE WORK. THE CONTRACT PROVIDED, INSOFAR AS MATERIAL, AS FOLLOWS:

ARTICLE 3. CHANGES.--- THE CONTRACTING OFFICER MAY AT ANY TIME, BY A WRITTEN ORDER, AND WITHOUT NOTICE TO THE SURETIES, MAKE CHANGES IN THE DRAWINGS AND (OR) SPECIFICATIONS OF THIS CONTRACT AND WITHIN THE GENERAL SCOPE THEREOF. IF SUCH CHANGES CAUSE AN INCREASE OR DECREASE IN THE AMOUNT DUE UNDER THIS CONTRACT, OR IN THE TIME REQUIRED FOR ITS PERFORMANCE, AN EQUITABLE ADJUSTMENT SHALL BE MADE AND THE CONTRACT SHALL BE MODIFIED IN WRITING ACCORDINGLY. * * *

IN CONCLUDING THAT THE RESPONDENT WAS NOT ENTITLED TO RECOVER THE INCREASED COSTS ACCRUING FROM THE DELAY, THE COURT STATED:

* * * THE COURT OF CLAIMS, RELYING ON PRINCIPLES ANNOUNCED IN THE CHOUTEAU, WELLS, AND CROOK CASES, SUPRA, HAS UNIFORMLY HELD THAT THE "INCREASE OR DECREASE OF COST" LANGUAGE IN ART. 3, AND IN SIMILAR CLAUSES, IS NOT BROAD ENOUGH TO INCLUDE DAMAGES FOR DELAY; AND " IT WAS NEVER CONTEMPLATED . . . THAT DELAYS INCIDENT TO CHANGES WOULD SUBJECT THE GOVERNMENT TO DAMAGE BEYOND THAT INVOLVED IN THE CHANGES THEMSELVES.' THE COURT HERE CITES PERTINENT DECISIONS OF THE COURT OF CLAIMS) * * *

WERE THIS A MATTER OF FIRST IMPRESSION, WE WOULD AGAIN COME TO THE SAME CONCLUSION REGARDING THIS CLAUSE. IT SEEMS WHOLLY REASONABLE THAT "AN INCREASE OR DECREASE IN THE AMOUNT DUE" SHOULD BE MET WITH AN ALTERATION OF PRICE, AND THAT "AN INCREASE OR DECREASE * * * IN THE TIME REQUIRED" SHOULD BE MET WITH ALTERATION OF THE TIME ALLOWED; FOR "INCREASE OR DECREASE OF COST" PLAINLY APPLIES TO THE CHANGES IN COST DUE TO THE STRUCTURAL CHANGES REQUIRED BY THE ALTERED SPECIFICATION AND NOT TO CONSEQUENTIAL DAMAGES WHICH MIGHT FLOW FROM DELAY TAKEN CARE OF IN THE "DIFFERENCE IN TIME" PROVISION. THE PROVISION AS TO TIME SERVES THE LARGE PURPOSE OF REMOVING FROM PERSONS IN THE POSITION OF RESPONDENT LIABILITY FOR "DELAY" BEYOND THE STIPULATED DATE FOR WHICH THEY MIGHT OTHERWISE HAVE THEIR CONTRACT TERMINATED OR MIGHT BE REQUIRED TO PAY LIQUIDATED DAMAGES WITHOUT FAULT. ( ITALICS SUPPLIED.)

PRIOR TO THE DECISION IN THE RICE CASE, THE COURT OF CLAIMS IN GENERAL CONTRACTING AND CONSTRUCTION COMPANY, INC. V. UNITED STATES (1937), 84 CT. CL. 570, 579, HAD HELD (REFERRING TO THE ABOVE-QUOTED ARTICLE 3), IN PERTINENT PART, AS FOLLOWS:

ARTICLE 3 OF THE CONTRACT IS A STANDARD FORM USED BY THE GOVERNMENT IN ALL CONSTRUCTION CONTRACTS. ITS PURPOSE IS TO ENABLE THE CONTRACTING OFFICER TO MAKE ANY CHANGE IN DRAWINGS AND SPECIFICATIONS HE MAY FIND NECESSARY OR DESIRABLE AS WORK UNDER THE CONTRACT PROGRESSES. IT HAS REFERENCE, WE THINK, ENTIRELY TO STRUCTURAL CHANGES LIKE THE SUBSTITUTION OF ONE KIND OF MATERIAL FOR ANOTHER, CHANGES IN ARCHITECTURAL DESIGN, THE ADDITION TO OR SUBTRACTION FROM WORK REQUIRED BY THE SPECIFICATIONS, ETC. * * * ( ITALICS SUPPLIED.)

IN MOUNT VERNON CONTRACTING CORPORATION, ET AL. V. UNITED STATES (DECIDED JULY 12, 1957), 139 CT. CL. 688, INVOLVING A CONTRACT WITH MOUNT VERNON TO PAVE AND DRAIN AN AIRCRAFT LANDING FIELD, THE LATTER HAD SUBCONTRACTED THE PAVING TO D AND F CONSTRUCTION COMPANY AT UNIT PRICES PER SQUARE YARD OF PAVEMENT AND PER BARREL OF CEMENT. OTHER SUBCONTRACTORS ENGAGED BY MOUNT VERNON FOR EXCAVATION AND FOR THE PLACING OF GRAVEL WERE TO PREPARE THE BASE TO RECEIVE THE PAVING. THE APPROVED PROGRESS SCHEDULE SHOWING THE PERIODS AND SEQUENCE OF THE WORK, AND A CONCRETE PAVING CHART WERE FURNISHED D AND F BY MOUNT VERNON. THE SCHEDULE PROVIDED FOR PAVING TO BE COMMENCED MAY 14, 1943, AND COMPLETED AUGUST 11, 1943. D AND F ERECTED ITS STORAGE BINS AND BATCHING PLANTS, PLACED ORDERS FOR CRUSHED STONE, SAND AND CEMENT, AND BROUGHT SOME EQUIPMENT TO THE JOB BY MAY 14. DELIVERY OF CEMENT WAS COMMENCED ON JUNE 3 AND PAVING WAS COMMENCED ON JUNE 8 WHEN, FOR THE FIRST TIME, AN AREA WAS READY FOR PAVING. BECAUSE OF ADDITIONAL EXCAVATION AND GRAVEL FILL WORK FOUND NECESSARY TO BE DONE BY REASON OF THE DISCOVERY OF UNSTABLE SOIL CONDITIONS AT THE SITE, NO PAVING AREA SUFFICIENT FOR NORMAL PAVING OPERATIONS WAS READY UNTIL ABOUT SEPTEMBER 1943. ALSO, BECAUSE ADEQUATE AREAS WERE NOT PREPARED IN ADVANCE, D AND F HAD TO MAKE FREQUENT MOVES OF ITS OPERATIONS. ON MANY OCCASIONS AFTER THE EXCAVATION HAD BEEN DONE AND GRAVEL FILL PLACED, ADDITIONAL SOFT SPOTS WOULD BE DISCOVERED AND FURTHER EXCAVATION MADE. FREQUENTLY D AND F WOULD HAVE PERFORMED ITS FINISHED GRADING, PLACED FORMS, AND COMMENCED PAVING WHEN ADDITIONAL SOFT SPOTS WOULD BE DISCOVERED AND EVERYTHING WOULD HAVE TO BE TORN OUT. ON OCTOBER 14, 1943, AFTER ONE OF THE TAXIWAYS WAS SUBSTANTIALLY READY FOR PAVING, THE GOVERNMENT DETERMINED TO SWING ONE END AROUND SEVERAL HUNDRED FEET FROM ITS ORIGINAL POSITION. AS REALIGNED, IT WAS NOT READY FOR PAVING UNTIL NOVEMBER 18. AND F COMPLETED ALL OF ITS PAVING ABOUT NOVEMBER 27, 1943, SOME 87 DAYS LATER THAN IT COULD HAVE COMPLETED IT IF IT HAD BEEN ABLE TO PROCEED CONTINUOUSLY. SOME 60 DAYS OF THIS DELAY WAS DETERMINED TO HAVE BEEN CAUSED BY STOP ORDERS AND CHANGES IN THE CONTRACT WORK, ORDERED BY THE GOVERNMENT, AND RESULTING DELAY IN THE PREPARATION OF AREAS FOR PAVING.

AFTER THE COMPLETION OF THE CONTRACT, THE EXCAVATION SUBCONTRACTOR SUED MOUNT VERNON BECAUSE IT HAD BEEN REQUIRED, BY A CHANGE IN THE SPECIFICATIONS AGREED TO BETWEEN THE GOVERNMENT AND MOUNT VERNON, TO WASTE THE CLASS B EXCAVATION IN THE SPOIL AREA RATHER THAN USE IT AS EMBANKMENT FILL. THE COURT AWARDED AN INCREASE UNIT PRICE PER YARD, WHICH AMOUNTED TO SOME $90,000, AND MOUNT VERNON PAID THIS AMOUNT. THEREUPON, IN APRIL 1955, MOUNT VERNON REQUESTED AN ADJUSTMENT IN THE CLASS B EXCAVATION PROVISIONS IN ITS PRIME CONTRACT. MODIFICATION NO. 17 TO THE CONTRACT WAS SUBSEQUENTLY ISSUED, RECLASSIFYING A LARGE PART OF THE CLASS B EXCAVATION AS CLASS C, AND INCREASING THE UNIT PRICE PER YARD, THE INCREASE AMOUNTING IN ALL TO $49,596.82. SUIT WAS BROUGHT BY MOUNT VERNON ON BEHALF OF D AND F CONSTRUCTION COMPANY TO RECOVER DAMAGES, AS FOR BREACH OF CONTRACT, FOR THE EXTRA COSTS INCURRED BY THE LATTER AS A RESULT OF THE DELAY. CONCLUDING THAT THE UNITED STATES WAS WITHOUT ANY LIABILITY IN THE MATTER, THE COURT OF CLAIMS STATED: * * * WE HAVE, THEN, A SITUATION IN WHICH THE PRIME CONTRACT, IN ARTICLE 3, RESERVES TO THE GOVERNMENT THE RIGHT TO MAKE CHANGES IN THE WORK, WITHIN THE GENERAL SCOPE OF THE CONTRACT, AND OBLIGATES THE GOVERNMENT, IF THE CHANGES CAUSE AN INCREASE OR DECREASE IN THE AMOUNT DUE UNDER THE CONTRACT, OR IN THE TIME REQUIRED FOR ITS PERFORMANCE, TO MAKE AN EQUITABLE ADJUSTMENT IN THE PRICE AND TIME. FURTHER RESERVES THE RIGHT, SPECIFICATIONS 1-05 (C) (1), TO STOP THE WORK WHEN CONDITIONS ARE DETERMINED TO BE UNFAVORABLE TO ITS PROSECUTION.

THE GOVERNMENT MAKES CHANGES IN THE AMOUNT AND METHOD OF WORK WITH REGARD TO EXCAVATION AND THE PLACING OF GRAVEL. THE CHANGES ARE NECESSARY TO MAKE A SAFE LANDING FIELD, BUT THEY DELAY THE COMPLETION OF THE EXCAVATION AND GRAVEL WORK, AND CONSEQUENTLY DELAY D AND F'S PAVING WORK. THE GOVERNMENT PAYS THE PRIME CONTRACTOR FOR THE INCREASED YARDAGE INVOLVED IN THE CHANGES, AND FOR THE INCREASED DIFFICULTY OF THE WORK DONE BY THE CHANGED METHOD. D AND F STILL HAS THE ORIGINAL NUMBER OF YARDS OF PAVEMENT TO PLACE AND IS PAID THE UNIT PRICE FOR DOING IT. ITS WORK HAS NOT BEEN INCREASED. IT HAS ONLY BEEN DELAYED, TO ITS DAMAGE. THE STOP ORDERS DID NOT CHANGE OR INCREASE ANYONE'S WORK. THEY ONLY DELAYED IT. WE DO NOT UNDERSTAND THAT EITHER THE CHANGE ORDERS OR THE STOP ORDERS WERE UNREASONABLE.

THE GOVERNMENT RELIES UPON UNITED STATES V. RICE, 317 U.S. 61, AND WE THINK ITS RELIANCE IS JUSTIFIED. * * *

IN AMERICAN PIPE AND STEEL CORPORATION V. FIRESTONE TIRE AND RUBBER COMPANY ( U.S.D.C., S.D. L., 1960), 186 F.1SUPP. 904, INVOLVING SUBCONTRACTS FOR FABRICATION OF SHIPPING CONTAINERS FOR MISSILES, ENTERED INTO BY FIRESTONE (WHICH HAD A PRIME CONTRACT WITH THE GOVERNMENT FOR THE FURNISHING THEREOF) WITH THE PLAINTIFF, THE ORIGINAL DRAWINGS WHICH WERE FURNISHED BY FIRESTONE TO PLAINTIFF FOR THE PERFORMANCE OF THE WORK CALLED FOR THE USE OF A TORSION BAR LEVER ARM OF 4 INCHES IN DIAMETER IN CONNECTION WITH THE FABRICATION OF THE CONTAINERS. UPON EXECUTION OF THE SUBCONTRACTS THE PLAINTIFF IMMEDIATELY COMMENCED WORK UPON THE CONTAINERS AND WAS PROGRESSING THEREON WHEN IT RECEIVED NOTICE FROM FIRESTONE TO CEASE INSTALLATION OF THE TORSION BAR LEVER ARM UNTIL A NEW BAR COULD BE DESIGNED, TESTED AND APPROVED BY THE GOVERNMENT. UPON RECEIPT OF THE NOTICE, PLAINTIFF AT ONCE STOPPED ALL WORK UPON THE CONTAINERS. SOME 30- ODD DAYS AFTER RECEIPT OF THE STOP ORDER, THE DEFENDANT GAVE PLAINTIFF NEW PLANS AND SPECIFICATIONS COVERING A REDESIGNED TORSION BAR LEVER ARM; WHEREUPON PLAINTIFF COMPLETED ITS SUBCONTRACTS, DELIVERED THE CONTAINERS AND WAS PAID BY FIRESTONE THE PRICE SET FORTH IN THE SUBCONTRACTS, PLUS THE AMOUNT OF $46,259.88, WHICH WAS DETERMINED BY THE PARTIES TO REPRESENT THE INCREASE IN THE ESTIMATED COST AND IN THE UNIT PRICE OF THE CONTAINERS CAUSED BY THE CHANGE IN THE TORSION BAR LEVER ARM. HOWEVER, THE PLAINTIFF CONTENDED IN THE SUIT THAT THE CHANGE IN DESIGN OF THE TORSION BAR LEVER ARM CAUSED A DELAY OF APPROXIMATELY 30 DAYS IN THE PERFORMANCE OF THE SUBCONTRACTS, DURING WHICH PERIOD ITS MANUFACTURING PLANT HAD REMAINED IDLE AND OVERHEAD HAD ACCUMULATED, AND THAT CONSEQUENTLY NOT ONLY WAS THE PLAINTIFF ENTITLED TO AN EQUITABLE ADJUSTMENT AS TO THE UNIT PRICE BUT ALSO TO AN EQUITABLE ADJUSTMENT FOR OVERHEAD RESULTING FROM THE TIME LOST BY REASON OF THE STOP ORDER.

THE PERTINENT PROVISIONS OF THE SUBCONTRACT ARE SET FORTH IN THE COURT'S OPINION AS FOLLOWS:

" THE FIRESTONE TIRE AND RUBBER COMPANY MAY AT ANY TIME BY WRITTEN ORDER, MAKE CHANGES IN ANY OF THE DRAWINGS, DESIGNS, SPECIFICATIONS, METHODS OF SHIPMENTS OR PACKING AND PLACE OF DELIVERY.

" IF ANY SUCH CHANGE CAUSES AN INCREASE OR DECREASE IN THE COST OF THE UNIT PRICE OF THE ARTICLES ORDERED, AN EQUITABLE ADJUSTMENT SHALL BE MADE IN THE CONTRACT PRICE BY AMENDMENT THERETO.

"/A) IF ANY CHANGE MATERIALLY AFFECTS THE ESTIMATED COST OF, OR TIME REQUIRED FOR THE PERFORMANCE OF THE WORK, AN EQUITABLE ADJUSTMENT SHALL BE MADE IN THE FIXED PRICE OR TIME OF PERFORMANCE OR BOTH.'

AFTER DETERMINING THAT THE SUBCONTRACTS PROPERLY WERE TO BE CONSIDERED AS " GOVERNMENT TRACTS," RATHER THAN "PRIVATE CONTRACTS," THE COURT RENDERED ITS DECISION AND SET FORTH THE BASIS THEREOF AS FOLLOWS:

THE NEXT QUESTION CONFRONTING THE COURT IS THE MEANING OF THE WORDS "EQUITABLE ADJUSTMENT" AS USED IN THE CONTRACTS. DEFENDANT CONTENDS THIS TERM HAS BEEN DEFINED BY THE UNITED STATES SUPREME COURT IN UNITED STATES V. RICE, 317 U.S. 61, 63 S. CT. 120, 87 L. USED. 53, AND THAT, ACCORDING TO THE DEFINITIONS AS PROMULGATED BY THE SUPREME COURT, PLAINTIFF CANNOT RECOVER INDIRECT COSTS. THE SUPREME COURT SAID, 317 U.S. AT PAGE 67, 63 S. CT. AT PAGE 124: (THE COURT HERE QUOTES THE UNDERSCORED LANGUAGE OF THE SUPREME COURT'S OPINION IN THE RICE CASE, QUOTED HEREINABOVE)

IF THE INTERPRETATION OF THE TERM "EQUITABLE ADJUSTMENT" AS MADE BY THE SUPREME COURT IN THE RICE CASE, SUPRA, EXCLUDES INDIRECT COSTS, THEN JUDGMENT HEREIN MUST BE RENDERED IN FAVOR OF THE DEFENDANT.

THE SUPREME COURT WENT ON TO SAY, 317 U.S. AT PAGE 68, 63 S. CT. AT PAGE 124:

"* * * FOR DELAYS INCIDENT TO SUCH UNANTICIPATED CHANGES, THE CONTRACTOR WAS UNDER EITHER SECTION (ARTICLE 3, CHANGES, AND ARTICLE 4, CHANGED CONDITIONS) TO BE GRANTED A COMPENSATING EXTENSION OF TIME.'

(1,2) THIS COURT IS OF THE OPINION THE CASE AT BAR IS CONTROLLED BY THE DECISION OF THE SUPREME COURT IN THE RICE CASE, SUPRA, AND THAT THE TERM "EQUITABLE ADJUSTMENT" DOES NOT INCLUDE INDIRECT COSTS, AS CLAIMED BY PLAINTIFF HEREIN.

IT WILL BE SEEN FROM THE ABOVE-QUOTED PROVISIONS OF THE SUBCONTRACTS ENTERED INTO BETWEEN FIRESTONE AND THE AMERICAN PIPE AND STEEL CORPORATION RELATING TO "CHANGES" THAT THEY ARE IDENTICAL, INSOFAR AS MATERIAL, WITH THOSE CONTAINED IN CLAUSE 2 OF STANDARD FORM 32, GENERAL PROVISIONS ( SUPPLY CONTRACT), OCTOBER 1957 EDITION, EXCEPT FOR THE INCLUSION OF THE PHRASE ,WHETHER CHANGED OR NOT CHANGED BY ANY SUCH ORDER" IN THE LATTER CLAUSE. IN OUR OPINION, THE " CHANGES" CLAUSE AS THUS MODIFIED PROVIDES IN EFFECT THAT, WHEN THE GOVERNMENT ORDERS A CHANGE IN THE WORK STIPULATED TO BE PERFORMED UNDER THE CONTRACT, THE CONTRACTOR MAY BE COMPENSATED NOT ONLY FOR THE INCREASED COSTS OF THE CHANGED WORK ITSELF, BUT ALSO FOR ANY INCREASED COST INCURRED, AS A RESULT OF THE CHANGE, IN UNCHANGED WORK. HOWEVER, THE INCLUSION OF THE REFERRED-TO PHRASE IN THE NEW CLAUSE IN NO WAY ELIMINATES THE CONDITION INHERENT IN THE FIRST PART THEREOF THAT A "CHANGE" OF A KIND PROVIDED FOR IN THE CLAUSE--- THAT IS, IN THE DRAWINGS, DESIGNS, OR SPECIFICATIONS, ETC.--- MUST HAVE TAKEN PLACE IN ORDER TO ENTITLE THE CONTRACTOR TO AN EQUITABLE ADJUSTMENT WITH RESPECT TO ANY TYPE OF COSTS INCURRED AS A RESULT THEREOF.

WHETHER THE CHANGES EFFECTED BY THE REQUIRED MODIFICATIONS OF THE INSTALLATION SCHEDULES IN THIS CASE MAY BE REGARDED AS CHANGES IN SPECIFICATIONS SO AS TO INVOKE THE EQUITABLE ADJUSTMENT PROVISIONS IS SUBJECT AT LEAST TO SERIOUS DOUBT. THE CLEAR HOLDING OF THE SUPREME COURT IN THE RICE CASE, SUPRA, AND OF THE COURT OF CLAIMS IN SEVERAL OF THE CASES REFERRED TO ABOVE, WAS THAT THE CHANGES IN SPECIFICATIONS COVERED BY THE CLAUSE WERE LIMITED TO STRUCTURAL CHANGES AND DID NOT EMBRACE CHANGES MERELY IN TIME OF PERFORMANCE. REFERENCE TO THE RECORDS OF THE SUBCOMMITTEE OF THE ARMED SERVICES PROCUREMENT REGULATION COMMITTEE WHICH DRAFTED THE REVISED FORM OF THE " CHANGES" ARTICLE INCORPORATED IN THE 1957 STANDARD FORM 32 SHOWS THAT CONSIDERATION WAS GIVEN TO A PROPOSAL THAT THE WORDS "SCHEDULE OR PLACE OF DELIVERY" BE INCLUDED INSTEAD OF "PLACE OF DELIVERY" IN THE LAST PHRASE OF THE FIRST SENTENCE OF THE ARTICLE BUT THAT THE PROPOSAL WAS REJECTED.

ON THE OTHER HAND, IT WAS STATED IN APPEAL OF GUTHERIE ELECTRICAL CONSTRUCTION, INTERIOR BOARD OF CONTRACT APPEALS, NO. 22, JULY 22, 1955, THAT "A STOP ORDER MAY ITSELF CONSTITUTE A CHANGE IN A CONTRACT RATHER THAN A BREACH THEREOF, AND SO ENTITLE A CONTRACTOR TO ADDITIONAL COMPENSATION AS AN EQUITABLE ADJUSTMENT PURSUANT TO THE " CHANGES" CLAUSE OF THE CONTRACT. FOR INSTANCE, IF THE PROGRESSION OF THE WORK UNDER A CONTRACT WERE FIXED BY THE SPECIFICATIONS, AND THE PURPOSE OF A STOP ORDER WAS TO VARY THE SCHEDULE OF PERFORMANCE, WITH THE RESULT THAT THE CONTRACTOR SUSTAINED ADDITIONAL COSTS, THE STOP ORDER, WHICH WOULD NOT BE EXTRANEOUS TO THE PERFORMANCE OF THE CONTRACT, WOULD CONSTITUTE A CHANGE, ENTITLING THE CONTRACTOR TO ADDITIONAL COMPENSATION.' IN SUPPORT OF THIS STATEMENT THERE WAS CITED CHARLES H. SCHAEFER, T/A SCHAEFER AND COMPANY, ASBCA NO. 917, JANUARY 31, 1952. A SIMILAR CONTENTION, ADVANCED AT A RECENT CONSTRUCTION CONTRACTS CONFERENCE SPONSORED BY THE GEORGE WASHINGTON UNIVERSITY AND FEDERAL PUBLICATIONS, INC., IS REPORTED IN THE GOVERNMENT CONTRACTOR, VOL. 3, PAR. 560; BUT THE SAME REPORT ALSO RECOUNTS REFERENCES BY OTHER AUTHORITIES TO THE RICE CASE AS SETTLING THE PROPOSITION THAT REASONABLE DELAYS ARE NOT SUBJECT TO MONEY COMPENSATION, AND TO HARWOOD NEBEL CONSTRUCTION CO. V. UNITED STATES, 105 CT. CL. 116 AND VOLENTINE AND LITTLETON V. UNITED STATES, 144 CT. CL. 723, AS AUTHORITY FOR RECOVERY OF DAMAGES BY COURT ACTION FOR UNREASONABLE DELAYS.

THE ARGUMENTS IN FAVOR OF REGARDING CHANGES IN TIME OF DELIVERY OR PERFORMANCE AS CHANGES CALLING FOR EQUITABLE ADJUSTMENT APPEAR TO BE MORE READILY APPLICABLE TO CONSTRUCTION CONTRACTS THAN TO CONTRACTS FOR SUPPLIES, BOTH BECAUSE OF THE DIFFERENCES BETWEEN THE CHANGES ARTICLES IN THE STANDARD FORMS USED FOR THE RESPECTIVE TYPES, AND BECAUSE TIME FACTORS ARE GENERALLY MORE FAR-REACHING IN EFFECT ON OTHER ELEMENTS OF A CONSTRUCTION PROJECT THAN IS THE CASE IN MERELY PRODUCING A MANUFACTURED END ITEM. WHILE THE INSTALLATION REQUIREMENTS OF THE SUBJECT CONTRACT APPEAR TO BE SIMILAR IN MANY WAYS TO CONSTRUCTION WORK, AND COULD READILY HAVE BEEN INCORPORATED IN A STANDARD FORM 23A CONSTRUCTION CONTRACT, THE TERMS AND CONDITIONS OF THE CONTRACT ACTUALLY MADE WERE THOSE OF STANDARD FORM 32, AND WE DO NOT FEEL THAT IT WOULD BE PROPER TO RESORT TO PROVISIONS OF ANOTHER FORM TO RESOLVE PROBLEMS UNDER THE CONTRACT, EVEN THOUGH THEY MIGHT HAVE BEEN MORE APPROPRIATE.

EVEN IF WE SHOULD CONCLUDE, DESPITE THE RICE CASE AND OTHERS TO THE SAME EFFECT, THAT A CHANGE OF DELIVERY TIME COULD FURNISH THE BASIS FOR AN EQUITABLE ADJUSTMENT UNDER THE CHANGES ARTICLE OF THE STANDARD FORM SUPPLY CONTRACT, WE NEVERTHELESS FEEL THAT THE CIRCUMSTANCES OF THIS CASE ARE NOT SUCH AS WOULD JUSTIFY ANY SUBSTANTIAL ADJUSTMENT IN THE CONTRACT PRICE. AS STATED ABOVE, THE CONTRACT ORIGINALLY PROVIDED FOR COMPLETION OF WORK ON THE 9TH FLOOR BEFORE COMMENCEMENT OF WORK ON THE 8TH FLOOR, THE ENTIRE WORK TO BE COMPLETED BY OCTOBER 1. SECTION 5.5 EXPRESSLY RECITED THAT THE BUILDING WAS TO BE OCCUPIED DURING THE WORK AND THAT THE CONTRACTOR SHOULD SO PERFORM THE CONTRACT THAT INTERRUPTIONS OR INTERFERENCES WITH GOVERNMENT BUSINESS SHOULD BE HELD TO A MINIMUM, AND YOU REPORT THAT THE CONTRACTOR WAS FULLY AWARE THAT NO WORK COULD BE PERMITTED DURING THE CHRISTMAS MAILING SEASON FROM NOVEMBER 1 THROUGH DECEMBER 31. THE RESIDENT ENGINEER, DESIGNATED AS THE CONTRACTING OFFICER'S REPRESENTATIVE ON THE SITE, WAS SPECIFICALLY AUTHORIZED ( SECTION 2.8) TO STOP THE WORK WHENEVER NECESSARY TO INSURE PROPER EXECUTION OF THE CONTRACT.

BECAUSE OF THE STEEL STRIKE COMMENCEMENT OF THE INSTALLATION WAS DELAYED UNTIL MAY, WITH THE ACQUIESCENCE OF THE GOVERNMENT; THE 9TH FLOOR WORK WAS COMPLETED BY NOVEMBER 1, WHICH WAS IN APPROXIMATELY THE SAME PERIOD OF TIME AS FIXED BY THE ORIGINAL SCHEDULE ( JANUARY TO JUNE). WORK ON THE 8TH FLOOR WAS DEFERRED (EXCEPT FOR A BRIEF PERIOD DURING WHICH WORK WAS PERMITTED ON BOTH FLOORS) UNTIL AFTER THE CHRISTMAS SEASON AND COMPLETED BY JUNE 1961. SO FAR AS WE CAN SEE, THIS SCHEDULE WAS VIRTUALLY WHAT SHOULD HAVE BEEN EXPECTED TO RESULT FROM THE STARTING DELAY OCCASIONED BY THE STRIKE. ACCEPTING THE FINDING OF THE CONTRACTING OFFICER THAT THE STRIKE WAS AN EXCUSABLE CAUSE OF DELAY WITHIN THE CONTEMPLATION OF ARTICLE II OF THE CONTRACT (ALTHOUGH IN THE CASE OF A VIRTUALLY IDENTICAL CONTRACT WITH THE SAME CONTRACTOR FOR A LIKE INSTALLATION AT THE PITTSBURGH, PENNSYLVANIA, POST OFFICE THE CONTRACTING OFFICER REACHED A CONTRARY CONCLUSION, WHICH WE APPROVED OVER THE CONTRACTOR'S COMPLAINT, SEE B- 140099, SEPTEMBER 17, 1959), IT NEVERTHELESS COULD NOT SERVE AS JUSTIFICATION FOR INCREASING THE CONTRACT PRICE. THE SOLE PURPOSE AND EFFECT OF THE "EXCUSABLE CAUSE" PROVISIONS OF ARTICLE 11 OF STANDARD FORM 32 IS TO PROTECT THE CONTRACTOR AGAINST LIABILITY FOR EXCESS COSTS IN THE EVENT OF TERMINATION FOR DEFAULT; IT DOES NOT AFFECT THE GOVERNMENT'S RIGHT TO TERMINATE, OR AUTOMATICALLY ENTITLE THE CONTRACTOR TO AN EXTENSION OF TIME; STILL LESS DOES IT IMPOSE ON THE GOVERNMENT THE RISK OF DELAYS FROM EXTRANEOUS CAUSES BY ENTITLING THE CONTRACTOR TO COMPENSATION FOR ANY INCREASED COSTS OCCASIONED THEREBY. THE CONTRACTOR, HOWEVER, APPEARS TO ARGUE THAT IT IS ENTITLED TO RELIEF BECAUSE THE ORIGINAL SCHEDULE WAS, IN VIEW OF THE DELAY, MODIFIED IN MAY 1960 BY MUTUAL CONSENT TO PERMIT WORK ON BOTH THE 8TH AND 9TH FLOORS SIMULTANEOUSLY, AND THAT THE WORK COULD HAVE BEEN COMPLETED BY NOVEMBER 1, 1960, BUT FOR THE ACTION OF THE GOVERNMENT IN STOPPING THE WORK ON THE 8TH FLOOR. CONSIDERING THE CONTRACT PROVISIONS MENTIONED ABOVE, AND THE CONDITIONS REQUIRING THE PROSECUTION OF THE WORK WITHOUT UNREASONABLE INTERFERENCE WITH THE POSTAL OPERATIONS, WE CAN FIND NO BASIS FOR CONSIDERING THE GOVERNMENT'S ACTION IN THIS RESPECT TO HAVE BEEN IN ANY WAY UNREASONABLE OR NOT CLEARLY AUTHORIZED BY THE CONTRACT. AS STATED ABOVE, THE SCHEDULE ON WHICH THE WORK WAS ACTUALLY DONE WAS JUST WHAT WOULD HAVE BEEN EXPECTED, WITHOUT ANY MODIFYING AGREEMENTS, AND WITHOUT LIABILITY ON THE PART OF THE GOVERNMENT FOR ANY INCREASED COSTS. THE FACT THAT THE CONTRACTING OFFICER, IN AN EFFORT TO FACILITATE THE CONTRACTOR'S ENDEAVOR TO MAKE UP THE LOST TIME, FOR THE MUTUAL ADVANTAGE OF THE PARTIES, WAIVED THE ORIGINAL SCHEDULE TO PERMIT WORK ON BOTH FLOORS SIMULTANEOUSLY CANNOT BE CONSTRUED AS A WAIVER OF THE REQUIREMENT THAT POSTAL WORK SHOULD NOT BE UNDULY INTERFERED WITH OR OF THE RIGHT OF THE RESIDENT ENGINEER TO STOP THE WORK WHEN NECESSARY TO INSURE PROPER PERFORMANCE.

FOR THESE REASONS, WE CONCLUDE THAT THE CLAIMANT IS NOT ENTITLED TO ANY PRICE INCREASE AS AN EQUITABLE ADJUSTMENT UNDER THE CHANGES ARTICLE OF THE CONTRACT.

SINCE THE SUSPENSION OF WORK CLAUSE SET OUT IN FPR 1-7.602-1 IS AUTHORIZED FOR USE ONLY IN CONSTRUCTION CONTRACTS, IT WOULD NOT APPEAR TO BE PERMISSIBLE TO ADD IT TO THE SUBJECT CONTRACT, WHICH WAS EXECUTED AS A SUPPLY CONTRACT. IN ANY EVENT, ITS INCORPORATION AS AN AMENDMENT WOULD NOT BE PROPER WITHOUT SOME CONSIDERATION AS AN AMENDMENT WOULD NOT BE PROPER WITHOUT SOME CONSIDERATION, AND IT COULD NOT BE ADDED BY WAY OF REFORMATION IN THE ABSENCE OF PROOF THAT ITS INCLUSION WAS IN FACT INTENDED AT THE TIME THE CONTRACT WAS EXECUTED.

IN RESPECT TO THE THIRD QUESTION RAISED IN YOUR LETTER, THE GOVERNMENT WOULD NOT BE LIABLE AS FOR BREACH OF CONTRACT FOR THE SUSPENSION OF WORK HERE INVOLVED UNLESS THE STOP ORDER WAS UNREASONABLE. MOUNT VERNON CONTRACTING CORPORATION, ET AL. V. UNITED STATES, SUPRA. IN OUR OPINION, THE FACTS SO FAR PRESENTED TO US IN THIS CASE FALL FAR SHORT OF ESTABLISHING THAT THE GOVERNMENT ACTED UNREASONABLY IN THE MATTER. ASSUMING THE EXISTENCE OF SUCH EVIDENCE, HOWEVER, WE KNOW OF NO AUTHORITY UNDER WHICH YOUR DEPARTMENT WOULD BE AUTHORIZED TO SETTLE THE CLAIM. COMP. GEN. 333, 336; 26 ID. 647, 649.