A-25880, OCTOBER 30, 1929, 9 COMP. GEN. 175

A-25880: Oct 30, 1929

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HIGHWAY CONSTRUCTION - FEDERAL AID TO STATES THERE IS NEITHER LEGAL NOR EQUITABLE OBLIGATION UNDER THE ACT OF JULY 11. 230.65 AS AMOUNT ALLEGED TO HAVE BEEN EARNED BY CLIFTON-APPLEGATE AND TOOLE UNDER A CONTRACT DATED SEPTEMBER 16. WHICH IS KNOWN LOCALLY AS THE SKALKAHO ROAD. THE STATE HIGHWAY DEPARTMENT WAS REQUIRED TO FURNISH HIM WITH SUCH SURVEYS. SHALL HAVE BEEN SUBMITTED TO AND APPROVED BY THE SECRETARY OF AGRICULTURE. SHALL NOT BE MORE THAN THE UNITED STATES PRO RATA PART OF THE VALUE OF THE LABOR AND MATERIALS WHICH HAVE BEEN ACTUALLY PUT INTO SAID CONSTRUCTION IN CONFORMITY TO SAID PLANS AND SPECIFICATIONS. THE PROJECT WAS APPROVED. THE ADVERTISEMENT NOTIFIED PROSPECTIVE CONTRACTORS THAT FEDERAL AID WAS BEING EXTENDED TO PAY A PORTION OF THE COST OF IMPROVEMENT AND THAT THE ACT OF JULY 11.

A-25880, OCTOBER 30, 1929, 9 COMP. GEN. 175

HIGHWAY CONSTRUCTION - FEDERAL AID TO STATES THERE IS NEITHER LEGAL NOR EQUITABLE OBLIGATION UNDER THE ACT OF JULY 11, 1916, 39 STAT. 355, AS AMENDED, ON THE PART OF THE UNITED STATES TO PAY TO A STATE ANY SUM IN ADDITION TO THE APPROVED ESTIMATE, FOR THE CONSTRUCTION OF A FEDERAL-AIDED HIGHWAY.

DECISION BY COMPTROLLER GENERAL MCCARL, OCTOBER 30, 1929:

THE STATE OF MONTANA ON THE RELATION OF CLIFTON-APPLEGATE AND TOOLE HAS SUBMITTED CLAIM--- IN ADDITION TO THE PAYMENT OF $93,186.59 MADE BY THE UNITED STATES TO THE STATE OF MONTANA UNDER THE FEDERAL AID ROAD ACT OF JULY 11, 1916, 39 STAT. 355, AS AMENDED BY THE ACT OF FEBRUARY 28, 1919, 40 STAT. 1200--- FOR THE SUM OF $38,230.65 AS AMOUNT ALLEGED TO HAVE BEEN EARNED BY CLIFTON-APPLEGATE AND TOOLE UNDER A CONTRACT DATED SEPTEMBER 16, 1921, WITH THE STATE OF MONTANA FOR THE CONSTRUCTION OF A HIGHWAY DESIGNATED AS MONTANA PROJECT NO. 161-A, WHICH IS KNOWN LOCALLY AS THE SKALKAHO ROAD. IT HAS BEEN FURTHER SUBMITTED THAT, IF THE CLAIM BE FOUND AS NOT PROPERLY PAYABLE UNDER EXISTING LAW, IT BE REPORTED TO THE CONGRESS PURSUANT TO THE ACT OF APRIL 10, 1928, 45 STAT. 413, WITH RECOMMENDATION THAT AN APPROPRIATION BE MADE FOR PAYMENT OF THE CLAIM.

BY THE ACT OF JULY 11, 1916, 39 STAT. 355, THE UNITED STATES EMBARKED ON A SYSTEM OF FEDERAL AID TO THE VARIOUS STATES IN THE CONSTRUCTION OF APPROVED HIGHWAYS, AND SECTION 6 OF THE SAID ACT PROVIDED THAT ANY STATE DESIRING TO AVAIL ITSELF OF SUCH FEDERAL AID SHOULD SUBMIT TO THE SECRETARY OF AGRICULTURE PROJECT STATEMENTS SETTING FORTH THE PROPOSED CONSTRUCTION OF ANY RURAL POST ROAD OR ROADS THEREIN. IN EVENT THE SECRETARY OF AGRICULTURE SHOULD APPROVE SUCH A PROJECT, THE STATE HIGHWAY DEPARTMENT WAS REQUIRED TO FURNISH HIM WITH SUCH SURVEYS, PLANS, SPECIFICATIONS, AND ESTIMATES THEREFOR AS HE MIGHT REQUIRE AND THAT:

* * * IF THE SECRETARY OF AGRICULTURE APPROVE THE PLANS, SPECIFICATIONS, AND ESTIMATES, HE SHALL NOTIFY THE STATE HIGHWAY DEPARTMENT AND IMMEDIATELY CERTIFY THE FACT TO THE SECRETARY OF THE TREASURY. THE SECRETARY OF THE TREASURY SHALL THEREUPON SET ASIDE THE SHARE OF THE UNITED STATES PAYABLE UNDER THIS ACT ON ACCOUNT OF SUCH PROJECT, WHICH SHALL NOT EXCEED FIFTY PERCENTUM OF THE TOTAL ESTIMATED COST THEREOF. PAYMENT OF ANY MONEY APPORTIONED UNDER THIS ACT SHALL BE MADE ON ANY PROJECT UNTIL SUCH STATEMENT OF THE PROJECT, AND THE PLANS, SPECIFICATIONS, AND ESTIMATES THEREFOR, SHALL HAVE BEEN SUBMITTED TO AND APPROVED BY THE SECRETARY OF AGRICULTURE.

WHEN THE SECRETARY OF AGRICULTURE SHALL FIND THAT ANY PROJECT SO APPROVED BY HIM HAS BEEN CONSTRUCTED IN COMPLIANCE WITH SAID PLANS AND SPECIFICATIONS HE SHALL CAUSE TO BE PAID TO THE PROPER AUTHORITY OF SAID STATE THE AMOUNT SET ASIDE FOR SAID PROJECT: PROVIDED, THAT THE SECRETARY OF AGRICULTURE MAY, IN HIS DISCRETION, FROM TIME TO TIME MAKE PAYMENTS ON SAID CONSTRUCTION AS THE SAME PROGRESSES, BUT THESE PAYMENTS INCLUDING PREVIOUS PAYMENTS, IF ANY, SHALL NOT BE MORE THAN THE UNITED STATES PRO RATA PART OF THE VALUE OF THE LABOR AND MATERIALS WHICH HAVE BEEN ACTUALLY PUT INTO SAID CONSTRUCTION IN CONFORMITY TO SAID PLANS AND SPECIFICATIONS; NOR SHALL ANY SUCH PAYMENT BE IN EXCESS OF $10,000 PER MILE, EXCLUSIVE OF THE COST OF BRIDGES OF MORE THAN TWENTY FEET CLEAR SPAN. THE CONSTRUCTION WORK AND LABOR IN EACH STATE SHALL BE DONE IN ACCORDANCE WITH ITS LAWS, AND UNDER THE DIRECT SUPERVISION OF THE STATE HIGHWAY DEPARTMENT, SUBJECT TO THE INSPECTION AND APPROVAL OF THE SECRETARY OF AGRICULTURE AND IN ACCORDANCE WITH THE RULES AND REGULATIONS MADE PURSUANT TO THIS ACT.

THE SECRETARY OF AGRICULTURE AND THE STATE HIGHWAY DEPARTMENT OF EACH STATE MAY JOINTLY DETERMINE AT WHAT TIMES, AND IN WHAT AMOUNTS, PAYMENTS, AS WORK PROGRESSES, SHALL BE MADE UNDER THIS ACT. SUCH PAYMENTS SHALL BE MADE BY THE SECRETARY OF THE TREASURY, ON WARRANTS DRAWN BY THE SECRETARY OF AGRICULTURE, TO SUCH OFFICIAL, OR OFFICIALS, OR DEPOSITORY, AS MAY BE DESIGNATED BY THE STATE HIGHWAY DEPARTMENT AND AUTHORIZED UNDER THE LAWS OF THE STATE TO RECEIVE PUBLIC FUNDS OF THE STATE OR COUNTY.

THE AMENDATORY ACT OF NOVEMBER 9, 1921, 42 STAT. 212, 214, AUTHORIZED AN ADDITION TO THE 50 PERCENT SPECIFIED OF A SUM EQUAL TO "A PERCENTAGE OF SUCH ESTIMATED COST EQUAL TO ONE-HALF OF THE PERCENTAGE OF WHICH THE AREA OF THE UNAPPROPRIATED PUBLIC LANDS IN SUCH STATE BEARS TO THE TOTAL AREA OF SUCH STATE," AND INCREASED THE MAXIMUM EXPENDITURES WHICH COULD BE MADE NOT TO EXCEED $20,000 PER MILE. SEE ALSO ACT OF FEBRUARY 28, 1919, 40 STAT. 1200, 1201.

THE STATE OF MONTANA SUBMITTED TO THE SECRETARY OF AGRICULTURE A PROJECT TO CONSTRUCT THE ROAD HERE IN QUESTION. THE PROJECT WAS APPROVED, AND THE STATE ADVERTISED FOR PROPOSALS FOR BUILDING THE ROAD. THE ADVERTISEMENT NOTIFIED PROSPECTIVE CONTRACTORS THAT FEDERAL AID WAS BEING EXTENDED TO PAY A PORTION OF THE COST OF IMPROVEMENT AND THAT THE ACT OF JULY 11, 1916, PROVIDED:

* * * THAT THE CONSTRUCTION WORK AND LABOR IN EACH STATE SHALL BE DONE IN ACCORDANCE WITH ITS LAWS, AND UNDER THE DIRECT SUPERVISION OF THE STATE HIGHWAY DEPARTMENT, SUBJECT TO THE INSPECTION AND APPROVAL OF THE SECRETARY OF AGRICULTURE, AND IN ACCORDANCE WITH THE RULES AND REGULATIONS MADE PURSUANT THERETO. THE CONSTRUCTION WORK, THEREFORE, WILL BE SUBJECT TO SUCH INSPECTION BY THE UNITED STATES SECRETARY OF AGRICULTURE, OR HIS AGENTS, AS MAY BE NECESSARY TO MEET THE ABOVE REQUIREMENTS, BUT SUCH INSPECTION WILL IN NO SENSE MAKE THE FEDERAL GOVERNMENT A PARTY TO THIS CONTRACT AND WILL IN NO WAY INTERFERE WITH THE RIGHTS OF EITHER PARTY HEREUNDER, NOR WILL IT SUBJECT THE CONTRACTOR TO COMPLIANCE WITH THE FEDERAL LAWS RELATIVE TO LABOR, ETC., ON GOVERNMENT CONTRACTS.

PROSPECTIVE CONTRACTORS WERE FURTHER ADVISED THAT---

THESE SPECIFICATIONS HAVE BEEN APPROVED BY THE PROPER REPRESENTATIVE OF THE U.S. BUREAU OF PUBLIC ROADS, ACTING FOR THE SECRETARY OF AGRICULTURE; AND COMPLIANCE THEREWITH WILL IN EVERY RESPECT MEET THE INSPECTION REQUIREMENTS OF THE FEDERAL GOVERNMENT.

THE STATE HIGHWAY ENGINEERS ESTIMATED VARIOUS QUANTITIES OF WORK TO BE PERFORMED SUCH AS COMMON EXCAVATIONS, INTERMEDIATE EXCAVATIONS, ROCK EXCAVATIONS, OVERHAULING, ETC., AND THE BIDDERS WERE REQUESTED TO SUBMIT THEIR PROPOSALS--- NOT ON A LUMP SUM BASIS BUT ON A UNIT PRICE BASIS. CLIFTON-APPLEGATE AND TOOLE SUBMITTED THEIR PROPOSAL DATED AUGUST 31, 1921, ON THE UNIT PRICE BASIS, AGGREGATING $139,140 FOR THE WORK BASED ON THE APPROXIMATED QUANTITIES NAMED IN THE ADVERTISEMENT. IT IS REPORTED BY THE STATE HIGHWAY DEPARTMENT THAT THE ATTENTION OF CLIFTON-APPLEGATE AND TOOLE WAS INVITED TO THE FACT THAT THEIR PROPOSAL OF $319,140 WAS SOMETHING LIKE $58,000 LESS THAN THE ESTIMATED COST OF THE WORK AND THIS STATEMENT IS INSERTED IN AN OPINION, HEREINAFTER REFERRED TO MORE AT LENGTH, OF THE SUPREME COURT OF MONTANA IN STATE EX REL. CLIFTON-APPLEGATE AND TOOLE V. STATE HIGHWAY COMMISSION. THE CONTRACTORS APPARENTLY DENIED THAT ANY OFFER WAS MADE BY THE STATE HIGHWAY DEPARTMENT TO RETURN THEIR DEPOSIT OF $10,000 MADE WITH THEIR BID BUT, BE THAT AS IT MAY, THE CONTRACT OF SEPTEMBER 16, 1921, WAS ENTERED INTO AGREEING TO DO THE WORK FOR THE UNIT PRICES STATED IN THE PROPOSAL. THE WORK WAS COMPLETED, AND ON THE BASIS OF THE APPROVED ESTIMATE, WHICH, AS MODIFIED BY CERTAIN ADDITIONS, AMOUNTED TO $93,186.59 TO THE STATE TO AID THE CONSTRUCTION OF THE ROAD.

APPARENTLY DURING THE PROGRESS OF THE WORK CERTAIN DISPUTES AROSE BETWEEN THE CONTRACTORS AND THE ENGINEERS OF THE STATE HIGHWAY DEPARTMENT AS TO THE MEASUREMENTS, CLASSIFICATIONS, ETC., OF THE WORK BEING DONE,AND AT THE CONCLUSION OF THE WORK THE CONTRACTORS ALLEGED THAT THEY WERE ENTITLED TO THE SUM OF $126,054.59 IN EXCESS OF THE AMOUNT PAID BY THE STATE WITH THE AID OF THE FEDERAL GOVERNMENT. THE STATE HIGHWAY DEPARTMENT APPEARS TO HAVE DENIED LIABILITY AND TO HAVE INSISTED THAT THE DIFFERENCE BETWEEN THE AMOUNT THE ROAD COST THE CONTRACTORS AND THE AMOUNT OBTAINED BY THEM BASED ON UNIT PRICES FOR THE WORK WAS DUE TO THE FACT THAT, IN THE SUBMISSION OF THEIR PROPOSAL, THE CONTRACTORS HAD MADE AN ERROR IN PROPOSING TO DO THE UNIT QUANTITIES OF WORK AT THE STATED PRICES. THIS DISPUTE APPEARS TO HAVE CULMINATED IN THE PRESENTATION OF A PRIVATE BILL TO THE STATE LEGISLATURE, AND THE 1925 SESSION OF THE MONTANA LEGISLATURE PASSED HOUSE BILL NO. 353 (19TH SESS., LAWS OF MONTANA LEGISLATURE, 1925, P.406) APPROPRIATING $33,902.65 TO BE PAID TO CLIFTON-APPLEGATE AND TOOLE AS "47 PERCENT, THE STATE'S PROPORTION OF THE BALANCE UNPAID FOR THE CONSTRUCTION OF A STATE HIGHWAY KNOWN AS THE SKALKAHO ROAD AND DESIGNATED AS FEDERAL AID PROJECT NO. 161-A.' THIS ADDITIONAL SUM OF $33,902.65 WAS PAID TO THE CONTRACTORS BY THE STATE OF MONTANA AND THEN THE CONTRACTORS INSISTED THAT THE STATE HIGHWAY DEPARTMENT SUBMIT A CLAIM AGAINST THE UNITED STATES FOR A BALANCE OF 53 PERCENT OR $38,230.65, MAKING A TOTAL OF $72,133.30 TO WHICH THE CLAIM FOR ADDITIONAL AMOUNT HAD BEEN REDUCED. THE STATE HIGHWAY DEPARTMENT REFUSED TO SUBMIT SUCH A CLAIM AND THEREUPON THE CONTRACTORS SOUGHT AND OBTAINED A WRIT OF MANDAMUS AGAINST THE STATE HIGHWAY DEPARTMENT REQUIRING IT TO PREPARE AND SUBMIT TO THE SECRETARY OF AGRICULTURE A CLAIM FOR $38,230.65, OR 53 PERCENT OF THE ALLEGED EXCESS COST OF THE ROAD. THE ACTION OF THE TRIAL COURT IN ISSUING THE MANDAMUS WAS SUSTAINED BY THE SUPREME COURT OF MONTANA IN THE DECISION HEREINBEFORE REFERRED TO, REPORTED IN 267 PAC. 499. THE SUPREME COURT OF MONTANA APPEARS TO HAVE PROCEEDED ON THE THEORY THAT THE ACTION OF THE STATE LEGISLATURE IN APPROPRIATING $33,902.65 FOR PAYMENT TO THE CONTRACTORS RECOGNIZED THAT THE STATE HAD FAILED TO COMPLY WITH THE TERMS OF ITS CONTRACT AND THAT SUCH ACTION CREATED AN OBLIGATION ON THE STATE HIGHWAY DEPARTMENT TO SUBMIT CLAIM TO THE UNITED STATES FOR THE BALANCE OF 53 PERCENT, OR $38,230.65.

IT IS CONCEDED BY THE CLAIMANTS THAT THERE WAS NO PRIVITY OF CONTRACT BETWEEN THE UNITED STATES AND THE CONTRACTORS FOR THE CONSTRUCTION OF THIS ROAD. THE CONTRACT WAS WITH THE STATE AND THE OBLIGATION WAS THAT OF THE STATE, EVEN THOUGH THE STATE WAS TO RECEIVE THE AID PROVIDED IN THE ACT OF JULY 11, 1916, AS AMENDED BY THE ACT OF NOVEMBER 9, 1921, CITED. THESE STATUTES DID NOT AUTHORIZE THE UNITED STATES TO PAY ANY PARTICULAR SUM TO THE STATE FOR AID IN THE CONSTRUCTION OF ANY PARTICULAR ROAD. THEY DID PROHIBIT THE PAYMENT OF ANY SUM IN EXCESS OF THE NAMED MAXIMUM AMOUNTS, AND THE PAYMENT TO THE STATE WAS TO BE MADE ON THE BASIS OF "THE TOTAL ESTIMATED COST" OF THE PROJECT. IT IS TRUE, AS CONTENDED BY THE CONTRACTORS, THAT WHERE WORK IS DONE ON A UNIT PRICE BASIS A DIFFERENT SITUATION IS PRESENTED THAN WHERE IT IS DONE ON A LUMP SUM BASIS, AND THAT IN MANY INSTANCES IT WILL BE FOUND THAT THE ESTIMATES ARE INCORRECT AND THE WORK COSTS EITHER MORE OR LESS THAN THE ESTIMATED COST, BUT THIS FACT DOES NOT IMPOSE ON THE UNITED STATES ANY OBLIGATION TO PAY THE STATE OF MONTANA A PERCENTAGE OF THE COST AS FINALLY DETERMINED. ON THE CONTRARY, THE STATUTE CLEARLY PROVIDES THAT THE OBLIGATION OF THE UNITED STATES WAS TO PAY THE FIXED PERCENTAGE OF THE ESTIMATED COST OF THE APPROVED PROJECT. THE ESTIMATED COST IN THIS CASE WAS SUBMITTED AND THE PROJECT APPROVED, AND THE FIXED PERCENTAGE OF THE ESTIMATED COST HAS LONG SINCE BEEN PAID TO THE STATE.

IT MUST BE HELD THAT THERE IS NO CONTRACTUAL OBLIGATION ON THE UNITED STATES TO PAY THE STATE OF MONTANA FOR THE BENEFIT OF THE CONTRACTORS A FIXED PERCENTAGE OF THE TOTAL COST OF THE WORK.

ASIDE FROM THE FACT THAT THERE HAS BEEN NO EVIDENCE PRESENTED TO ESTABLISH THAT THE EXCESS COST OF THIS WORK WAS $126,054.59, AS ORIGINALLY CLAIMED, OR $72,133.30, AS APPARENTLY AGREED UPON WITH THE STATE LEGISLATURE, OR WHETHER SAID SUMS REPRESENT THE DIFFERENCE BETWEEN THE AMOUNTS RECEIVED BY THE CONTRACTORS ON THE BASIS OF THE UNIT PRICES FIXED IN THEIR CONTRACT FOR THE WORK ACTUALLY DONE AND THE AMOUNT EXPENDED BY THEM IN DOING THE WORK, IT CAN NOT BE CONCLUDED THAT THERE IS ANY AUTHORITY IN THE ACT OF APRIL 10, 1928, 45 STAT. 413, TO TRANSMIT THE CLAIM TO THE CONGRESS WITH REPORT AND RECOMMENDATION THAT IT BE PAID. IS NOTED IN THIS CONNECTION THAT THERE WAS INTRODUCED IN THE CONGRESS SENATE BILL NO. 5561 TO APPROPRIATE THE SUM OF $38,230.65 FOR PAYMENT TO THE CONTRACTORS; THAT THE BILL WAS REFERRED TO THE COMMITTEE ON POST OFFICES AND POST ROADS; THAT ON FEBRUARY 12, 1929, THE DEPARTMENT OF AGRICULTURE MADE AN ADVERSE REPORT THEREON; AND THAT, APPARENTLY, NO FURTHER ACTION HAS BEEN TAKEN ON THE BILL. THE MATTER HAS BEEN BEFORE THE CONGRESS, AND, FURTHERMORE, THE BENEFIT CONFERRED BY THE CONSTRUCTION OF THE ROAD WAS PRIMARILY ON THE STATE AND ITS INHABITANTS, FOR, AS REPORTED BY THE SECRETARY OF AGRICULTURE, THE ROAD IN QUESTION DOES NOT CONSTITUTE A PART OF THE APPROVED PERCENT OF THE STATE HIGHWAYS. NO ACTION OR FAILURE TO ACT ON THE PART OF ANY OFFICIAL OF THE UNITED STATES CAUSED THE CONTRACTORS TO SUBMIT THE UNIT PRICES STATED IN THEIR PROPOSAL NOR TO EXPEND ANY SUM IN CONNECTION WITH THE WORK. THE SECRETARY OF AGRICULTURE HAS REPORTED THAT NONE OF HIS SUBORDINATES WERE PRESENT AT THE TIME OF THE NEGOTIATIONS BETWEEN THE CONTRACTORS AND THE STATE AND THAT HE HAS NO INFORMATION AS TO HOW SAID SUM WAS DETERMINED TO BE DUE FROM THE STATE TO THE CONTRACTORS.