B-147295, DEC. 8, 1961

B-147295: Dec 8, 1961

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GENERAL SERVICES ADMINISTRATION: REFERENCE IS MADE TO A LETTER DATED SEPTEMBER 25. WITH YOUR LETTER THERE WAS ENCLOSED A LETTER DATED JULY 7. WAS AN ACT OF THE UNITED STATES IN ITS SOVEREIGN CAPACITY. THAT UNDER PARAGRAPH 26 (B) OF THE GENERAL CONDITIONS OF THE CONTRACT THE CLAIMANT IS ENTITLED TO COMPENSATION FOR ANY EXCESS COSTS. IT WAS STATED THAT THERE APPEARS TO BE NO CASE AUTHORITY EXACTLY IN POINT BUT THAT THE COURT OF CLAIMS IN SOMEWHAT SIMILAR CASES HAD LAID DOWN RULES WHICH. IT WAS POINTED OUT IN YOUR LETTER THAT THE CITED PARAGRAPH 26 OF THE GENERAL CONDITIONS RELATES SOLELY TO THE RIGHTS AND OBLIGATIONS OF THE CONTRACTING PARTIES IN THE EVENT OF DEFAULT AND TERMINATION. SUBPARAGRAPH (B) RELIEVES THE CONTRACTOR UNDER SUCH CIRCUMSTANCES FROM LIABILITY FOR ANY EXCESS COSTS IN THE EVENT DEFAULT IS CAUSED BY.

B-147295, DEC. 8, 1961

TO ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION:

REFERENCE IS MADE TO A LETTER DATED SEPTEMBER 25, 1961, WITH ENCLOSURES, FROM YOUR PREDECESSOR, REQUESTING OUR DECISION CONCERNING THE ACTION TO BE TAKEN ON A CLAIM FILED BY MR. WILLIAM L. WEITZEL, JR., FOR CERTAIN ADDITIONAL LABOR COSTS INCURRED AND TO BE INCURRED UNDER CONTRACT NO. GS- 08B-2891, DATED FEBRUARY 13, 1961, FOR CLEANING SERVICES FOR THE FEDERAL BUILDING, 517 GOLD AVENUE, S.W., ALBUQUERQUE, NEW MEXICO.

WITH YOUR LETTER THERE WAS ENCLOSED A LETTER DATED JULY 7, 1961, FROM KAHIN, CARMODY AND HORSWILL, ESQUIRES, SEATTLE 4, WASHINGTON, SUBMITTING ON BEHALF OF MR. WEITZEL A CLAIM FOR ADDITIONAL COSTS UNDER THE INDICATED CONTRACT ARISING OUT OF AN INCREASE IN MINIMUM WAGES PROVIDED BY THE AMENDMENTS TO THE FAIR LABOR STANDARDS ACT, EFFECTIVE SEPTEMBER 3, 1961. IN THE LETTER OF JULY 7, 1961, THE ATTORNEYS FOR THE CLAIMANT CONTENDED, AMONG OTHER THINGS, THAT THE ACT OF MAY 5, 1961, 75 STAT. 65, AMENDING THE FAIR LABOR STANDARDS ACT OF 1938, 52 STAT. 1060, AS AMENDED, WAS AN ACT OF THE UNITED STATES IN ITS SOVEREIGN CAPACITY; ALSO, THAT UNDER PARAGRAPH 26 (B) OF THE GENERAL CONDITIONS OF THE CONTRACT THE CLAIMANT IS ENTITLED TO COMPENSATION FOR ANY EXCESS COSTS. IT WAS STATED THAT THERE APPEARS TO BE NO CASE AUTHORITY EXACTLY IN POINT BUT THAT THE COURT OF CLAIMS IN SOMEWHAT SIMILAR CASES HAD LAID DOWN RULES WHICH, WHEN APPLIED TO THE INSTANT CASE, WOULD GIVE THE CONTRACTOR RELIEF, CITING THE CASE OF THE SUNSWICK CORPORATION V. UNITED STATES, 109 CT.CL. 772.

IT WAS POINTED OUT IN YOUR LETTER THAT THE CITED PARAGRAPH 26 OF THE GENERAL CONDITIONS RELATES SOLELY TO THE RIGHTS AND OBLIGATIONS OF THE CONTRACTING PARTIES IN THE EVENT OF DEFAULT AND TERMINATION, REFERENCE BEING MADE TO SUBPARAGRAPH (A) UNDER WHICH THE GOVERNMENT MAY TERMINATE THE WHOLE OR ANY PART OF THE CONTRACT FOR ANY OF THE REASONS SET FORTH THEREIN, AND TO SUBPARAGRAPH (C) UNDER WHICH THE GOVERNMENT MAY PROCURE THE SERVICES FROM OTHER SOURCES, THE CONTRACTOR TO BE LIABLE FOR ANY EXCESS COSTS. SUBPARAGRAPH (B) RELIEVES THE CONTRACTOR UNDER SUCH CIRCUMSTANCES FROM LIABILITY FOR ANY EXCESS COSTS IN THE EVENT DEFAULT IS CAUSED BY, AMONG OTHER THINGS,"ACTS OF THE GOVERNMENT, IN EITHER ITS SOVEREIGN OR CONTRACTUAL CAPACITY.'

THE VIEW WAS EXPRESSED IN YOUR LETTER THAT SUBPARAGRAPH (B) DOES NOT ENTITLE THE CONTRACTOR TO AN INCREASE IN THE AMOUNT PAYABLE UNDER THE CONTRACT IN ORDER TO COMPENSATE HIM FOR ADDITIONAL COST FOR PERFORMING THE CONTRACT BY VIRTUE OF THE AMENDMENTS OF THE FAIR LABOR STANDARDS ACT. ALSO, YOU CITED THE CASE OF HOROWITZ V. UNITED STATES, 267 U.S. 458, IN WHICH THE SUPREME COURT HELD THAT THE GOVERNMENT AS A CONTRACTING PARTY CANNOT BE HELD LIABLE FOR ITS ACTS IN ITS SOVEREIGN CAPACITY.

FOR THE REASONS SET FORTH HEREIN WE CONCLUDE THAT THE HOLDING IN THE SUNSWICK CASE IS NOT FOR APPLICATION IN THIS CASE. IN THAT CASE THE PLAINTIFF SUED TO RECOVER CERTAIN INCREASED LABOR COSTS INCURRED UNDER THE CONTRACT THERE INVOLVED WHICH RESULTED FROM THE PAYMENT BY THE PLAINTIFF OF A HIGHER WAGE RATE THAN THAT CONTAINED IN THE CONTRACT SPECIFICATIONS, THE PAYMENTS HAVING BEEN MADE IN ORDER TO COMPLY WITH A DIRECTIVE ORDER OF THE WAGE ADJUSTMENT BOARD. THE ATTORNEYS FOR THE CLAIMANT HEREIN STATED THAT IN THAT CASE THE GOVERNMENT MAINTAINED THAT THE CONTRACT WAS ENTERED INTO BY THE GOVERNMENT IN ITS CONTRACTUAL CAPACITY, WHEREAS THE INCREASE IN WAGES WAS BROUGHT ABOUT BY THE GOVERNMENT IN ITS SOVEREIGN CAPACITY. THE ATTORNEYS FOR THE CLAIMANT APPEAR TO FEEL THAT UNDER THE HOLDING IN THE CITED DECISION THEIR CLIENT IS ENTITLED TO BE PAID THE CLAIMED INCREASED COSTS.

IN HOLDING THAT THE PLAINTIFF IN THE CITED CASE WAS ENTITLED TO RECOVER THE CLAIMED INCREASED COSTS, THE COURT OF CLAIMS MADE THE FOLLOWING STATEMENT:

"* * * THE INCREASED WAGE COSTS FOR WHICH PLAINTIFF SEEKS TO BE REIMBURSED RESULTED NOT FROM THE GOVERNMENT'S PUBLIC AND GENERAL ACT IN SETTING UP ITS WARTIME SYSTEM FOR CONTROLLING AND ADJUSTING WAGES, NOR FROM ANY WIDESPREAD AND GENERAL APPLICATION OF A DEVICE CREATED FOR THIS PUBLIC PURPOSE AS A MATTER OF NATIONAL POLICY, BUT RATHER FROM A SPECIFIC ORDER ISSUED ON A PARTICULAR JOB BY ONE AGENCY OF THE GOVERNMENT, TO WIT, THE WAGE ADJUSTMENT BOARD, TO WHOM THE CONTRACTING AGENCY, THE WAR DEPARTMENT, HAD BY A SPECIFIC PROVISION OF ITS CONTRACT DELEGATED AUTHORITY TO MODIFY THE SPECIFICATIONS AS TO WAGE RATES. WE THINK THE DISTINCTION BETWEEN THE MANNER OF CONDUCT FOR WHICH THE GOVERNMENT WAS HELD NOT LIABLE IN THE CASES ABOVE CITED, AND THE ACT FOR WHICH PLAINTIFF SEEKS TO HOLD DEFENDANT RESPONSIBLE IN THE INSTANT CASE, IS OBVIOUS.'

REFERRING FURTHER TO THE ATTORNEYS' CONTENTION CONCERNING THE RIGHT OF THE CLAIMANT UNDER PARAGRAPH 26 (B) OF THE GENERAL CONDITIONS, IT SEEMS TO BE CLEAR THAT THAT PARAGRAPH HAS APPLICATION ONLY IN THOSE INSTANCES WHERE THE CONTRACT HAS BEEN TERMINATED BY WRITTEN NOTICE OF DEFAULT TO THE CONTRACTOR PURSUANT TO THE PROVISIONS OF SUBPARAGRAPH (A). PARAGRAPH 26 (B) PROTESTS THE CONTRACTOR FROM LIABILITY FOR ANY EXCESS COSTS OTHERWISE DUE UNDER SUBPARAGRAPH (C) IF THE FAILURE TO PERFORM THE CONTRACT ARISES OUT OF CAUSES BEYOND THE CONTROL AND WITHOUT FAULT OR NEGLIGENCE OF THE CONTRACTOR, INCLUDING ACTS OF THE GOVERNMENT IN EITHER ITS SOVEREIGN OR CONTRACTUAL CAPACITY. IN THIS INSTANCE THERE HAS BEEN NO TERMINATION; IF THE CONTRACTOR SHOULD REFUSE TO PERFORM AND THE CONTRACT WERE TERMINATED FOR DEFAULT WE BELIEVE THERE WOULD BE AT LEAST A SERIOUS DOUBT WHETHER THE CONTRACTOR COULD SUCCESSFULLY CONTEND THAT THE AMENDMENT OF THE FAIR LABOR STANDARDS ACT WAS THE "CAUSE" OF THE DEFAULT, WITHIN THE MEANING OF PARAGRAPH 26 (B).

PARAGRAPH 2 (B) OF THE FAIR LABOR STANDARDS ACT OF 1938 ESTABLISHED A GOVERNMENTAL POLICY THROUGH THE EXERCISE BY THE CONGRESS OF ITS POWERS TO REGULATE COMMERCE AMONG THE SEVERAL STATES, TO CORRECT AND AS RAPIDLY AS PRACTICABLE TO ELIMINATE THE CONDITIONS SET FORTH IN PARAGRAPH 2 (A) IN THE INDUSTRIES THERE INDICATED WITHOUT SUBSTANTIALLY CURTAILING EMPLOYMENT OR EARNING POWER. THERE IS NOTHING IN THE AMENDATORY ACT OF MAY 5, 1961, TO INDICATE ANY CHANGE IN THE POLICY ESTABLISHED BY THE ORIGINAL ACT. SEEMS CLEAR THAT THE PURPOSE OF THE FAIR LABOR STANDARDS ACT, AS AMENDED, WAS TO ESTABLISH A NATIONAL POLICY CONCERNING WAGES OR WAGE RATES GENERALLY, THAT ACTION BEING BASED UPON ECONOMIC REASONS AND APPLICABLE TO EVERYONE ALIKE. AT PAGE 799 OF THE OPINION IN THE SUNSWICK CASE THE COURT STATED THAT SUCH A POLICY MIGHT PROPERLY BE CLASSIFIED AS A SOVEREIGN ACT FOR WHICH NO RECOVERY COULD BE HAD BY A CONTRACTOR FOR INCREASED COSTS OCCASIONED THEREBY. IT IS OUR VIEW THAT THE CLAIM IN THIS CASE COMES WITHIN THE HOLDING OF THE COURT AS SET FORTH IN THIS PARAGRAPH, THAT IS TO SAY, THE INCREASED COSTS FOR WHICH MR. WEITZEL SEEKS REIMBURSEMENT WERE BROUGHT ABOUT BY AN ACT OF CONGRESS ESTABLISHING A NATIONAL POLICY AND THAT THEREFORE NO ALLOWANCE MAY BE MADE ON THE CLAIM FILED HEREIN.

THE CONTRACT INVOLVED IN THIS CASE WAS A FIXED-PRICE CONTRACT AND CONTAINED NO PROVISION FOR ANY INCREASE IN THE CONTRACT PRICE EXCEPT TO COMPENSATE FOR CHANGES ORDERED BY THE CONTRACTING OFFICER UNDER PARAGRAPH 6 OF THE GENERAL PROVISIONS. THE RISK OF HAVING TO PAY HIGHER WAGES, FOR WHATEVER REASON, IS IN OUR OPINION SOLELY THAT OF THE CONTRACTOR.

IT IS A WELL-ESTABLISHED PRINCIPLE OF CONTRACT LAW THAT CONTRACTS ARE TO BE ENFORCED AND PERFORMED AS WRITTEN, AND THE MERE FACT THAT PERFORMANCE IS RENDERED MORE BURDENSOME OR COSTLY BY AN INTERVENING OR UNFORESEEN CAUSE IS INSUFFICIENT TO ENTITLE A CONTRACTOR TO COMPENSATION BEYOND THAT PROVIDED FOR IN THE CONTRACT. COLUMBIA RY. POWER AND LIGHT COMPANY V. COLUMBUS, 249 U.S. 399, 412. WHEN A CONTRACT CONTAINS AN EXPRESS STIPULATION AS TO THE PRICE TO BE PAID, SUCH STIPULATION IS CONCLUSIVE ON THE PARTIES. SEE SIMPSON V. UNITED STATES, 172 U.S. 372, 379. FURTHERMORE, A CONTRACT WITH THE FEDERAL GOVERNMENT MAY NOT BE MODIFIED OR AMENDED EXCEPT IN THE INTERESTS OF THE UNITED STATES AND THE GOVERNMENT'S LIABILITY AS FIXED IN A CONTRACT MAY NOT BE INCREASED BY A SUPPLEMENTAL AGREEMENT WITHOUT A COMPENSATING BENEFIT TO THE GOVERNMENT.

FOR THE REASONS SET FORTH HEREIN WE CONCLUDE THAT THERE IS NO LEGAL BASIS FOR AUTHORIZING ANY INCREASE IN THE CONTRACT PRICE.

IN ACCORDANCE WITH THE REQUEST CONTAINED IN YOUR LETTER, THE ENCLOSURES THERETO ARE BEING RETURNED HEREWITH.