B-125483, FEB. 7, 1957

B-125483, FEB. 7, 1957

TO MR. JOHN B. KELLY:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 11, 1957, CONCERNING OUR DECISION OF NOVEMBER 6, 1956, IN REFERENCE TO GOVERNMENT CONTRACT NO. V1001C-152 FOR CONSTRUCTION OF VETERANS ADMINISTRATION FACILITIES AT SALISBURY, NORTH CAROLINA. THIS DECISION AFFIRMED OUR DECISION OF MARCH 14, 1956, 35 COMP. GEN. 512, WHICH SUSTAINED A DETERMINATION BY THE CONTRACTING AGENCY THAT A CREDIT IN THE SUM OF $52,278.87 WAS DUE THE GOVERNMENT UNDER THIS CONTRACT.

IN YOUR LETTER IT IS STATED THAT YOU "WISH TO TAKE VIGOROUS EXCEPTION TO A STATEMENT" QUOTED FROM PAGE 3 OF THE DECISION OF NOVEMBER 6, 1956, WHICH READS AS FOLLOWS:

"IN OTHER WORDS, THE EVIDENCE OF RECORD AMPLY ESTABLISHES THAT THE CONTRACTING OFFICER'S DETERMINATION TO INCREASE THE CONTRACT PRICE WAS SO GROSSLY ERRONEOUS AS TO IMPLY BAD FAITH AND, THEREFORE, CHANGE ORDER 15U PROPERLY MAY NOT BE REGARDED AS A VALID AND BINDING MODIFICATION OF THE CONTRACT IN THIS RESPECT.'

YOU EXPRESS THE VIEW THAT THIS STATEMENT, IN EFFECT, GIVES RISE TO AN INFERENCE THAT "IN ARRIVING AT THE PARTICULAR DECISION, THE CONTRACTING OFFICER MUST HAVE BEEN MOTIVATED BY SOME CORRUPT OR DISHONEST CONSIDERATIONS.' "TAKING THE INFERENCE A STEP FURTHER," YOU STATE,"IT ALSO SEEMS THAT THE STATEMENT MUST IMPLY THAT OUR COMPANY, WHICH REQUESTED THE PARTICULAR DECISION * * * PARTICIPATED IN THE DISHONESTY.' ON THE BASIS OF SUCH INFERENCES YOU EXPRESS THE BELIEF THAT IF THE STATEMENT "IS ACCURATE AND TRUE, THE PERSONS WHO ACTED IN BAD FAITH SHOULD BE PUNISHED" AND IF NOT,"THEN, IN ALL FAIRNESS, IT SHOULD BE WITHDRAWN.'

YOU ARE ASSURED THAT NO SUCH INFERENCES WERE INTENDED, AND WE DO NOT BELIEVE THAT THEY MAY REASONABLY BE DRAWN FROM THE LANGUAGE USED IN THE QUOTED STATEMENT. MOREOVER, A CAREFUL EXAMINATION AND CONSIDERATION OF ALL THE FACTS AND DATA OF RECORD FAILS TO DISCLOSE ANY PLAUSIBLE BASIS FOR SUCH INFERENCES.

THE UNDERSCORED LANGUAGE HAS BEEN USED FOR MANY YEARS BY THE COURTS AS A TEST OF THE CONCLUSIVENESS OF ADMINISTRATIVE DETERMINATIONS, ACT OF MAY 11, 1954, 68 STAT. 81.

AS POINTED OUT BY THE COMMITTEE ON THE JUDICIARY, HOUSE OF REPRESENTATIVES, IN ITS REPORT ON THAT LEGISLATION, ENTITLED "FINALITY CLAUSES IN GOVERNMENT CONTRACTS," (HOUSE REPORT NO. 1380, 83D CONGRESS, 2D SESSION) FOR MANY YEARS GOVERNMENT CONTRACTS HAVE CONTAINED A STANDARD "DISPUTES" CLAUSE SIMILAR TO THAT INCORPORATED IN THE INSTANT CONTRACT, AND PRIOR TO THE DECISION IN THE CASE OF UNITED STATES V. WUNDERLICH, 342 U.S. 98, IT WAS GENERALLY UNDERSTOOD THAT ADMINISTRATIVE DECISIONS RENDERED UNDER THIS CLAUSE WERE FINAL AND WOULD NOT BE SUBJECT TO REVIEW UNLESS THE DECISION WAS FRAUDULENT, OR CAPRICIOUS, OR ARBITRARY, OR SO GROSSLY ERRONEOUS AS NECESSARILY TO IMPLY BAD FAITH. THE COMMITTEE ALSO POINTED OUT THAT THE MAJORITY OPINION IN THE WUNDERLICH CASE LIMITED JUDICIAL REVIEW OF SUCH ADMINISTRATIVE DECISIONS TO THE SOLE GROUND OF FRAUD WHICH THE COURT DEFINED AS "CONSCIOUS WRONGDOING, AN INTENTION TO CHEAT OR TO BE DISHONEST.' AND IT WAS FOR THIS REASON, THAT IS, TO REESTABLISH FAIR AND UNIFORM STANDARDS FOR THE REVIEW OF SUCH ADMINISTRATIVE DECISIONS THAT THE COMMITTEE RECOMMENDED THE PASSAGE OF NEW LEGISLATION. THE RECOMMENDED LEGISLATION AS ENACTED BY THE CONGRESS PROVIDES IN PERTINENT PART, AS FOLLOWS:

"NO PROVISION OF ANY CONTRACT ENTERED INTO BY THE UNITED STATES, RELATING TO THE FINALITY OR CONCLUSIVENESS OF ANY DECISION OF THE HEAD OF ANY DEPARTMENT OR AGENCY OR HIS DULY AUTHORIZED REPRESENTATIVE OR BOARD IN A DISPUTE INVOLVING A QUESTION ARISING UNDER SUCH CONTRACT, SHALL BE PLEADED IN ANY SUIT NOW FILED OR TO BE FILED AS LIMITING JUDICIAL REVIEW OF ANY SUCH DECISION TO CASES WHERE FRAUD BY SUCH OFFICIAL OR HIS SAID REPRESENTATIVE OR BOARD IS ALLEGED: PROVIDED, HOWEVER, THAT ANY SUCH DECISION SHALL BE FINAL AND CONCLUSIVE UNLESS THE SAME IS FRAUDULENT OR CAPRICIOUS OR ARBITRARY OR SO GROSSLY ERRONEOUS AS NECESSARILY TO IMPLY BAD FAITH, OR IS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE.'

THUS, THE RULE FOR APPLICATION IN THIS CASE IS NOT THAT LAID DOWN BY THE WUNDERLICH DECISION, AS APPARENTLY INDICATED IN YOUR LETTER, BUT RATHER IS THAT EXPRESSLY PROVIDED BY THE 1954 ACT WHICH IS SUBSTANTIALLY THE SAME AS HAD BEEN LAID DOWN BY THE SUPREME COURT AND FOLLOWED BY THE COURT OF CLAIMS IN A NUMBER OF CASES PRIOR TO THIS ENACTMENT. SEE WAGNER WHIRLER AND DERRICK CORPORATION V. UNITED STATES, 128 C.CLS. 382, 385-386, AND THE AUTHORITIES THERE CITED. CF. MARTINSBURG AND POTOMAC RAILROAD COMPANY V. MARCH, 114 U.S. 549; RIPLEY V. UNITED STATES, 222 U.S. 144, AND UNITED STATES V. MOORMAN, 338 U.S. 457, 460. FROM THE LEGISLATIVE HISTORY OF THE 1954 ACT AND THE LONG LINE OF PRIOR JUDICIAL DECISIONS APPLYING THE STANDARDS ENUMERATED THEREIN IT SEEMS MANIFEST THAT FRAUD AND CORRUPTION ARE NOT CONSTITUENT ELEMENTS OF THE STANDARD OF BAD FAITH PRESCRIBED BY THIS STATUTE. UNDER THIS STANDARD A DECISION BY A CONTRACTING OFFICER OR DEPARTMENT HEAD MAY BE "SO GROSSLY ERRONEOUS AS NECESSARILY TO IMPLY BAD FAITH" WHERE IT IS SHOWN THAT THE DECISION WAS NOT MADE IMPARTIALLY AND IN GOOD FAITH CONSIDERING ALL THE PERTINENT FACTS AND CIRCUMSTANCES, WHETHER DUE TO OVERZEALOUSNESS FOR THE GOVERNMENT'S INTERESTS, NEGLIGENCE OR INCOMPETENCE OF THE DECIDING OFFICIAL, A FAILURE TO RECOGNIZE ESTABLISHED PRINCIPLES, MISREPRESENTATIONS--- HOWEVER INNOCENT--- ON BEHALF OF ONE OR BOTH OF THE PARTIES, PREJUDICE FOR OR AGAINST THE CONTRACTOR, OR OTHER CAUSES THAT FALL SHORT OF ACTUAL CORRUPTION OR CONSCIOUS WRONG-DOING. STATED BY MR. JUSTICE DOUGLAS IN THIS DISSENTING OPINION IN THE WUNDERLICH CASE, SUPRA,"WE SHOULD ALLOW THE COURT OF CLAIMS * * * TO REVERSE AN OFFICIAL WHOSE CONDUCT IS CLEARLY OUT OF BOUNDS, WHETHER HE IS FRAUDULENT, PERVERSE, CAPTIOUS, INCOMPETENT, OR JUST PALPABLY WRONG.' SEE THE CASES CITED ABOVE.

NO EVIDENCE HAS BEEN SUBMITTED HERE WHICH WOULD, IN OUR OPINION, JUSTIFY INFERENCES OF FRAUD AND CORRUPTION IN THE INSTANT CASE, AND YOU MAY BE ASSURED THAT IF THERE HAD BEEN ANY SUCH EVIDENCE OF RECORD THE MATTER WOULD HAVE BEEN TRANSMITTED PROMPTLY TO THE ATTORNEY GENERAL FOR CONSIDERATION AND APPROPRIATE ACTION.

WE REGRET THAT YOU HAVE READ OUR DECISION AS CONTAINING IMPLICATIONS WHICH WERE NOT INTENDED, AND TRUST THAT YOU WILL UNDERSTAND THAT IN USING THE LANGUAGE OF THE STATUTE WE INTENDED ONLY TO STATE THAT THE FINDINGS OF THE CONTRACTING OFFICER UNDER CONSIDERATION WERE NOT IN OUR OPINION ENTITLED TO BE REGARDED AS FINAL AND CONCLUSIVE UNDER THE RECOGNIZED STANDARDS LAID DOWN BY THE COURTS.