B-105694, MAY 4, 1955, 34 COMP. GEN. 565

B-105694: May 4, 1955

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FACT ACCEPTANCE OF LATE DELIVERY UNDER A CONTRACT CONTAINING AN ESCALATOR CLAUSE DOES NOT REQUIRE THE GOVERNMENT TO ASSUME ADDITIONAL COSTS AS A RESULT OF PRICE INCREASES WHICH OCCUR AFTER THE FINAL DATE DELIVERY WOULD HAVE BEEN MADE EXCEPT FOR CONTRACTOR'S FAULT OR NEGLIGENCE AND. THE PRICE INCREASE TO WHICH THE CONTRACTOR IS ENTITLED UNDER THE ESCALATOR CLAUSE IS BASED ON THE DATE DELIVERY SHOULD HAVE BEEN MADE. A DECISION BY THE DEPARTMENT HEAD THAT ESCALATOR CLAUSE WAS APPLICABLE TO INCREASED COSTS INCURRED DURING THE ENTIRE PERIOD OF DELAY IS A DETERMINATION OF A QUESTION OF LAW AND NOT OF FACT AND. PARAGRAPH 19 OF SPECIAL CONDITIONS MADE A PART OF THE CONTRACT PROVIDED FOR ADJUSTMENT OF THE CONTRACT PRICES TO COMPENSATE FOR CHANGES IN THE COST OF LABOR AND MATERIALS FROM THE TIME BIDS WERE OPENED UP TO AND INCLUDING THE MONTH DURING WHICH THE RIGHT TO PAYMENT ACCRUES.

B-105694, MAY 4, 1955, 34 COMP. GEN. 565

CONTRACTS - ESCALATOR CLAUSES - ACCEPTANCE OF LATE DELIVERIES; DISPUTES CLAUSES - CONCLUSION OF LAW V. FACT ACCEPTANCE OF LATE DELIVERY UNDER A CONTRACT CONTAINING AN ESCALATOR CLAUSE DOES NOT REQUIRE THE GOVERNMENT TO ASSUME ADDITIONAL COSTS AS A RESULT OF PRICE INCREASES WHICH OCCUR AFTER THE FINAL DATE DELIVERY WOULD HAVE BEEN MADE EXCEPT FOR CONTRACTOR'S FAULT OR NEGLIGENCE AND, THEREFORE, THE PRICE INCREASE TO WHICH THE CONTRACTOR IS ENTITLED UNDER THE ESCALATOR CLAUSE IS BASED ON THE DATE DELIVERY SHOULD HAVE BEEN MADE. UNDER A CONTRACT DISPUTES CLAUSE WHICH PROVIDES THAT QUESTIONS OF FACT SHOULD BE DECIDED BY THE CONTRACTING OFFICER SUBJECT TO APPEAL TO THE HEAD OF THE DEPARTMENT WHOSE DECISION SHALL BE FINAL AND CONCLUSIVE, A DECISION BY THE DEPARTMENT HEAD THAT ESCALATOR CLAUSE WAS APPLICABLE TO INCREASED COSTS INCURRED DURING THE ENTIRE PERIOD OF DELAY IS A DETERMINATION OF A QUESTION OF LAW AND NOT OF FACT AND, THEREFORE, MAY NOT BE ACCEPTED AS FINAL AND CONCLUSIVE.

COMPTROLLER GENERAL CAMPBELL TO THE DARBY CORPORATION, MAY 4, 1955:

YOUR LETTER OF JANUARY 29, 1953, PRESENTED A CLAIM FOR $9,251.95, REPRESENTING ADJUSTMENTS IN THE CONTRACT PRICE FOR CHANGES IN THE COST OF PENSTOCKS FURNISHED TO THE BUREAU OF RECLAMATION, DEPARTMENT OF THE INTERIOR, PURSUANT TO CONTRACT NO. I2R-7387, DATED OCTOBER 25, 1946.

THE CONTRACT PROVIDED FOR THE DELIVERY OF ONE 96-INCH PENSTOCK AND THREE 78-INCH PENSTOCKS WITHIN 360 AND 720 CALENDAR DAYS, RESPECTIVELY, AFTER DATE OF RECEIPT OF NOTICE OF AWARD OF THE CONTRACT, FOR THE RESPECTIVE SUMS OF $38,840 AND $638,490. PARAGRAPH 19 OF SPECIAL CONDITIONS MADE A PART OF THE CONTRACT PROVIDED FOR ADJUSTMENT OF THE CONTRACT PRICES TO COMPENSATE FOR CHANGES IN THE COST OF LABOR AND MATERIALS FROM THE TIME BIDS WERE OPENED UP TO AND INCLUDING THE MONTH DURING WHICH THE RIGHT TO PAYMENT ACCRUES. THERE WERE DELAYS OF 251 CALENDAR DAYS AND 300 CALENDAR DAYS IN DELIVERY OF THE 96-INCH AND 78 INCH PENSTOCKS, RESPECTIVELY. PAYMENT OF THE CONTRACT PRICES, AS ADJUSTED CHANGES IN THE COST OF PENSTOCKS COMPUTED UP TO THE DELIVERY DUE DATES, HAS BEEN MADE.

ALTHOUGH THE CONTRACTING OFFICE FOUND ON OCTOBER 19, 1950, THAT THE GOVERNMENT WAS RESPONSIBLE ONLY FOR A DELAY OF 205 CALENDAR DAYS AS TO DELIVERY OF THE THREE 78-INCH PENSTOCKS AND THAT ALL OTHER DELAYS WERE DUE TO CAUSES WITHIN YOUR CONTROL, IT IS YOUR CONTENTION, AS SET OUT IN YOUR LETTER OF JANUARY 29, 1953, AND IN YOUR APPEAL OF NOVEMBER 15, 1950, TO THE SECRETARY OF THE INTERIOR, REFERRED TO IN THAT LETTER, THAT SUCH FINDING WAS ERRONEOUS. IN FACT, YOU CONTEND THAT YOU ARE ENTITLED TO ADJUSTMENT OF THE CONTRACT PRICES BECAUSE YOUR DELAY IN DELIVERY WAS EXCUSABLE. YOU STATE THAT COAL STRIKES WERE RESPONSIBLE FOR STEEL SHORTAGES WHICH DELAYED YOU IN FURNISHING THE PENSTOCKS UNDER THE CONTRACT AND THAT THE OPERATION OF THE GOVERNMENT PRIORITY SYSTEM FURTHER DELAYED YOU IN THE PERFORMANCE OF THE CONTRACT. IN VIEW OF THIS, YOU ALLEGE THAT YOU ARE ENTITLED TO AN ADJUSTMENT FOR CHANGES IN COST UP TO THE DATES DELIVERIES WERE ACTUALLY MADE.

ARTICLE 12 OF THE CONTRACT PROVIDES THAT " EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN THIS CONTRACT, ALL DISPUTES CONCERNING QUESTIONS OF FACT ARISING UNDER THIS CONTRACT SHALL BE DECIDED BY THE CONTRACTING OFFICER, SUBJECT TO WRITTEN APPEAL BY THE CONTRACTOR WITHIN 30 DAYS TO THE HEAD OF THE DEPARTMENT CONCERNED OR HIS DULY AUTHORIZED REPRESENTATIVE, WHOSE DECISION SHALL BE FINAL AND CONCLUSIVE UPON THE PARTIES HERETO.' YOU APPEALED TO THE SECRETARY OF THE INTERIOR FROM THE FINDING OF FACT *BY THE CONTRACTING OFFICER AS TO CAUSES OF DELAY. THE SOLICITOR OF THE DEPARTMENT OF THE INTERIOR, AS AUTHORIZED REPRESENTATIVE OF THE SECRETARY, CONSIDERED YOUR APPEAL AND, BY DECISION OF JULY 27, 1951, HELD THAT AS A MATTER OF LAW THE ESCALATION CLAUSE OF THE CONTRACT WAS APPLICABLE TO THE INCREASED COSTS INCURRED BY YOU DURING THE ENTIRE PERIOD OF DELAY. THE CONTRACT, HOWEVER, CONTAINS NO PROVISION MAKING THE DECISION OF ANY ADMINISTRATIVE OFFICIAL FINAL ON A QUESTION OF LAW. IN THIS CONNECTION, SEE PUBLIC LAW 356, APPROVED MAY 11, 1954, WHICH PRECLUDES THE INSERTION OF SUCH A PROVISION IN A GOVERNMENT CONTRACT.

IN THE CASE OF DAVIS ER AL. TRUSTEES V. UNITED STATES, 82 C.1CLS. 334, 346, 347, THE COURT OF CLAIMS HAD UNDER CONSIDERATION A PROVISION IN A CONTRACT THAT ALL DISPUTES CONCERNING QUESTIONS OF FACT SHOULD BE DECIDED BY THE CONTRACTING OFFICER OR HIS DULY AUTHORIZED REPRESENTATIVE, SUBJECT TO WRITTEN APPEAL BY THE CONTRACTOR TO THE HEAD OF THE DEPARTMENT, WHOSE DECISION SHOULD BE FINAL AND CONCLUSIVE. THE COURT STATED THERE THAT THE QUESTION OF CAUSES OF DELAY IN PERFORMANCE OF THE WORK WAS A QUESTION OF FACT BUT THAT THE PROPER CONSTRUCTION OF THE CONTRACT WAS A QUESTION, THE DECISION OF WHICH WAS OUTSIDE THE JURISDICTION OF THE CONTRACTING OFFICER OR HEAD OF THE DEPARTMENT, IT BEING THE PROVINCE OF THE COURTS TO DECLARE THE LAW OF THE CONTRACT. IN ADDITION TO THE ABOVE, SEE PENKER CONSTRUCTION COMPANY V. UNITED STATES, 96 C. CLS. 1; S. J. GROVES AND SONS, CO. V. WARREN, 135 F.2D 264, CERTIORARI DENIED, 319 U.S. 766; BELL AIRCRAFT CORPORATION V. UNITED STATES, 120 C.1CLS. 398; AND CRAMP SHIPBUILDING COMPANY V. UNITED STATES, 122 C.1CLS. 72. IT FOLLOWS THAT THE DECISION OF THE SOLICITOR OF THE INTERIOR, HAVING BEEN MADE ON A QUESTION OF LAW--- THE PROPER CONSTRUCTION OF ARTICLE 19 OF THE CONTRACT-- - MAY NOT BE ACCEPTED AS FINAL AND CONCLUSIVE.

THE GENERAL ACCOUNTING OFFICE HAS CONSISTENTLY REFUSED TO ALLOW PRICE INCREASES IN CASES SUCH AS THIS EXCEPT WHERE THE DELAY WAS CAUSED BY THE GOVERNMENT OR OTHERWISE WAS EXCUSABLE UNDER THE TERMS OF THE CONTRACT. THE BASIS FOR OUR POSITION IN THIS REGARD IS THAT WE PERCEIVE NO VALID REASON, IN LAW OR EQUITY, FOR REQUIRING THE GOVERNMENT TO ASSUME THE BURDEN OF PRICE INCREASES OCCURRING AFTER THE FINAL DATE DELIVERY WOULD HAVE BEEN MADE BUT FOR THE CONTRACTOR'S OWN FAULT OR NEGLIGENCE. REQUIRE THE GOVERNMENT TO PAY SUCH PRICE INCREASES WOULD PERMIT THE CONTRACTOR TO BENEFIT FROM HIS OWN DELINQUENCY AND WOULD PENALIZE THE GOVERNMENT FOR MINIMIZING THE CONTRACTOR'S LOSS WHICH WOULD HAVE RESULTED HAD THE CONTRACT BEEN TERMINATED BECAUSE OF THE CONTRACTOR'S DEFAULT.

FURTHERMORE, IT IS WELL SETTLED THAT A WAIVER OF THE RIGHT TO RESCIND OR TERMINATE A CONTRACT BY ACCEPTANCE OF LATE DELIVERY DOES NOT INCLUDE A WAIVER OF THE RIGHT TO DAMAGES RESULTING FROM THE DELAY. SEE PURRINGTON PAVING AND BRICK CO. V. METROPOLITAN PAVING COMPANY, 4 F.2D 676; H. KOEHLER AND COMPANY V. YORK MANUFACTURING COMPANY, 193 FED. 981. IN OUR VIEW, IT WOULD BE ENTIRELY INCONSISTENT TO CHARGE THE GOVERNMENT WITH ADDITIONAL COSTS ARISING AS A RESULT OF THE SAME DELAY WHICH WOULD HAVE GIVEN THE GOVERNMENT THE RIGHT TO RECOVER DAMAGES.

AFTER MAKING SEVERAL REQUESTS TO THE DEPARTMENT OF THE INTERIOR FOR REVIEW OF THIS MATTER UNDER THE " DISPUTES CLAUSE" OF YOUR CONTRACT WITH THE VIEW TO MAKING A FINAL DETERMINATION OF WHETHER AND TO WHAT EXTENT THE CAUSES OF YOUR DELAY WERE EXCUSABLE, THE SOLICITOR OF THE DEPARTMENT HAS ADVISED, BY LETTER OF APRIL 25, 1955, THAT "WE HAVE NOT BEEN ABLE TO ARRIVE AT ANY NEW THEORY OF THE CASE THAT WOULD APPEAR TENABLE.' AS A RESULT, WE HAVE NO ALTERNATIVE BUT TO SETTLE YOUR CLAIM ON THE BASIS OF THE CONTRACTING OFFICER'S FINDINGS OF FACT REGARDING THE CAUSES OF YOUR DELAY.

SETTLEMENT FOR THE AMOUNT DUE YOU ON THAT BASIS WILL BE ISSUED IN DUE COURSE.