B-1494, B-6834, DECEMBER 12, 1939, 19 COMP. GEN. 568

B-1494,B-6834: Dec 12, 1939

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THE SECRETARY OF LABOR IS AUTHORIZED TO DETERMINE THE PREVAILING WAGE RATES FOR THE VARIOUS CLASSES OF LABORERS AND MECHANICS WHICH IT IS CONTEMPLATED WILL BE EMPLOYED IN THE PERFORMANCE OF A CONTRACT SUBJECT TO THE ACT. THE ACT DOES NOT AUTHORIZE THE SECRETARY TO DETERMINE THE PREVAILING RATES OF WAGES FOR A CLASS OF EMPLOYEES WHICH WERE NOT SPECIFICALLY INCLUDED IN THE ADVERTISED SPECIFICATIONS. PARTIES TO A CONTRACT MAY PROPERLY DESIGNATE A PARTICULAR PERSON TO DECIDE DISPUTED QUESTIONS AND DECISIONS ON SUCH QUESTIONS BY THE PERSON SO DESIGNATED ARE FINAL AND CONCLUSIVE ON THE PARTIES TO THE CONTRACT IN THE ABSENCE OF FRAUD OR OF MISTAKE SO GROSS AS NECESSARILY TO IMPLY BAD FAITH. AN INCREASE IN WAGES IS DETERMINED UPON BY HER UNDER A CONTRACT PROVISION SPECIFICALLY AUTHORIZING HER TO MAKE SUCH DETERMINATIONS.

B-1494, B-6834, DECEMBER 12, 1939, 19 COMP. GEN. 568

CONTRACTS - WAGE STIPULATIONS - SECRETARY OF LABOR'S AUTHORITY UNDER DAVIS-BACON ACT AND CONTRACT WAGE ADJUSTMENT PROVISIONS UNDER THE TERMS OF THE DAVIS-BACON ACT OF AUGUST 30, 1935, 49 STAT. 1011, THE SECRETARY OF LABOR IS AUTHORIZED TO DETERMINE THE PREVAILING WAGE RATES FOR THE VARIOUS CLASSES OF LABORERS AND MECHANICS WHICH IT IS CONTEMPLATED WILL BE EMPLOYED IN THE PERFORMANCE OF A CONTRACT SUBJECT TO THE ACT, FOR THE PURPOSE OF HAVING SUCH WAGE RATES SPECIFICALLY SET FORTH IN THE "ADVERTISED SPECIFICATIONS," BUT, AFTER THE AWARD OF THE CONTRACT, THE ACT DOES NOT AUTHORIZE THE SECRETARY TO DETERMINE THE PREVAILING RATES OF WAGES FOR A CLASS OF EMPLOYEES WHICH WERE NOT SPECIFICALLY INCLUDED IN THE ADVERTISED SPECIFICATIONS. PARTIES TO A CONTRACT MAY PROPERLY DESIGNATE A PARTICULAR PERSON TO DECIDE DISPUTED QUESTIONS AND DECISIONS ON SUCH QUESTIONS BY THE PERSON SO DESIGNATED ARE FINAL AND CONCLUSIVE ON THE PARTIES TO THE CONTRACT IN THE ABSENCE OF FRAUD OR OF MISTAKE SO GROSS AS NECESSARILY TO IMPLY BAD FAITH. WHERE, NOTWITHSTANDING THE SECRETARY OF LABOR'S LACK OF AUTHORITY UNDER THE DAVIS-BACON ACT OF AUGUST 30, 1935, 49 STAT. 1011, TO ADJUST, UNDER AN EXECUTED CONTRACT, THE WAGES OF A PARTICULAR GROUP OF EMPLOYEES, AN INCREASE IN WAGES IS DETERMINED UPON BY HER UNDER A CONTRACT PROVISION SPECIFICALLY AUTHORIZING HER TO MAKE SUCH DETERMINATIONS, THE GENERAL ACCOUNTING OFFICE IS NOT JUSTIFIED, IN THE ABSENCE OF FRAUD OR GROSS MISTAKE AND IN THE PRESENT STATE OF THE RECORD, IN DISREGARDING THE DECISION OF THE SECRETARY, NOTWITHSTANDING THE ALLEGATION OF THE CONTRACTOR THAT THE COMPLAINT AS TO THE WAGES PAID WAS BY OTHER THAN THE "INTERESTED PARTIES," AND, IF THE INCREASE IN WAGES IS NOT PAID BY THE CONTRACTOR, THE CONTRACT PAYMENTS SHOULD BE REDUCED ACCORDINGLY PENDING A JUDICIAL DETERMINATION OF THE RIGHTS OF THE PARTIES INVOLVED, AND THERE IS NO AUTHORITY UNDER THE CONTRACT FOR GRANTING AN INCREASE IN THE CONTRACT PRICE COMMENSURATE WITH THE SAID INCREASE IN WAGES.

COMPTROLLER GENERAL BROWN TO THE SECRETARY OF THE INTERIOR, DECEMBER 12, 1939:

THERE HAS BEEN RECEIVED YOUR LETTER OF NOVEMBER 16, 1939, AS FOLLOWS:

THE ROHL-CONNOLLY COMPANY OF LOS ANGELES, CALIFORNIA, IS NOW ENGAGED IN THE CONSTRUCTION OF A DIVERSION DAM ACROSS THE COLORADO RIVER AT PARKER, ARIZONA, UNDER A CONTRACT BETWEEN THIS COMPANY AND THE UNITED STATES NUMBERED I-156-IND-14 DATED JUNE 15, 1938, AND A MODIFICATION THEREOF DATED DECEMBER 10, 1938. THE CONTRACTING OFFICER IS MR. R. H. RUPKEY, ENGINEER FOR THE U.S. INDIAN IRRIGATION SERVICE, WHO IS IN CHARGE OF THE CONSTRUCTION OF THE COLORADO RIVER INDIAN IRRIGATION PROJECT OF WHICH THE DIVERSION DAM IS A PART.

THERE ARE ENCLOSED HEREWITH REPORTS FROM THE CONTRACTING OFFICER AND THE CONTRACTOR WITH RESPECT TO A PROBLEM WHICH HAS ARISEN INVOLVING THE RATE OF PAY FOR DRIVERS OF TRUCKS OF CAPACITIES IN EXCESS OF 8 CUBIC YARDS.

BEFORE ADVERTISEMENTS FOR BIDS WERE ISSUED A REQUEST FOR A PREDETERMINATION OF WAGE RATES WAS ADDRESSED TO THE SECRETARY OF LABOR IN ACCORDANCE WITH THE PROVISIONS OF THE DAVIS-BACON ACT, AS AMENDED ( ACT OF AUGUST 30, 1935, PUBLIC, NO. 403, 74TH CONGRESS, 49 STAT. 1011, U.S.C. TITLE 40, SECTION 276 (A) ).

AMONG OTHER POSITIONS LISTED IN THE REQUEST THE FOLLOWING WERE INCLUDED:

TRUCK DRIVER, 4-TON AND UNDER.

TRUCK DRIVER, OVER 4-TON. THE RATES SUGGESTED AS THE MINIMUM TO BE PAID WERE 75 CENTS AND $1.00 PER HOUR, RESPECTIVELY.

IN A DECISION DATED APRIL 12, 1938, THE SECRETARY OF LABOR ESTABLISHED THE SCALE OF RATES TO BE INCLUDED IN THE SPECIFICATIONS, AMONG WHICH THE FOLLOWING WERE INCLUDED:

TRUCK DRIVER, 1 1/2 TONS OR LESS --------------------$0.65 PER HOUR

TRUCK DRIVER, OVER 1 1/2 TONS BUT LESS THAN 7 CU. YDS. .75 PER HOUR

TRUCK DRIVER, 7 TO 8 CU. YD. BODY ------------------- .85 PER HOUR

IT WILL BE NOTED THAT NO RATE WAS ESTABLISHED FOR DRIVERS OF TRUCKS OF A CAPACITY IN EXCESS OF 8 CUBIC YARDS. WHILE THIS DIFFERENCE BETWEEN THE RATES REQUESTED AND THOSE ESTABLISHED BY THE SECRETARY OF LABOR WAS NOTICED, IT WAS DECIDED THAT A PROVISION CONTAINED IN THE DECISION REFERRED TO ABOVE WOULD GOVERN IN THE EVENT IT BECAME NECESSARY TO REVISE THE SCHEDULE. THE PROVISION IS QUOTED AS FOLLOWS:

"IN ACCORDANCE WITH THE PROVISIONS OF THE SAID DAVIS-BACON ACT, AS AMENDED, THESE ARE THE MINIMUM WAGES TO BE INSERTED IN THE ADVERTISED SPECIFICATIONS FOR SAID CONTRACT, AND ANY CLASS OF LABORERS AND MECHANICS NOT LISTED IN THE PRECEDING PARAGRAPH, WHICH WILL BE EMPLOYED ON THIS CONTRACT, SHALL BE CLASSIFIED OR RECLASSIFIED CONFORMABLY TO THE FOREGOING SCHEDULE. IN THE EVENT THE INTERESTED PARTIES CANNOT AGREE ON THE PROPER CLASSIFICATION OR RECLASSIFICATION OF A PARTICULAR CLASS OF LABORERS AND MECHANICS TO BE USED, THE QUESTION ACCOMPANIED BY THE RECOMMENDATION OF THE CONTRACTING OFFICER, SHALL BE REFERRED TO THE SECRETARY OF LABOR FOR FINAL DETERMINATION.'

SINCE WORK BEGAN, THE CONTRACTOR HAS BEEN USING TRUCKS HAVING A BODY CAPACITY OF 17 1/2 CUBIC YARDS. DRIVERS OF THESE TRUCKS ARE BEING PAID 90 CENTS PER HOUR, WHICH IS 5 CENTS IN EXCESS OF THE MINIMUM RATE ESTABLISHED IN THE SCHEDULE FOR DRIVERS OPERATING TRUCKS HAVING A CAPACITY OF FROM 7 TO 8 CUBIC YARDS. ACCORDING TO STATEMENTS MADE BY THE CONTRACTING OFFICER AND THE CONTRACTOR THIS RATE IS CONSIDERED EQUITABLE, AND APPARENTLY NO COMPLAINTS HAVE BEEN REGISTERED BY THE EMPLOYEES OF THE CONTRACTOR. NUMEROUS COMPLAINTS, HOWEVER, HAVE BEEN RECEIVED FROM MR. COTTON MURRAY, SECRETARY OF THE PHOENIX BUILDING TRADES COUNCIL, AN ARIZONA LABOR ORGANIZATION, THAT THE WAGES BEING PAID THESE DRIVERS DO NOT CONFORM TO THE SCALE AS PROVIDED IN THE ARIZONA WAGE LAW. FOLLOWING CONSIDERABLE EFFORT TO RECONCILE THESE DIFFERENCES, THE SECRETARY OF LABOR WAS REQUESTED UNDER DATE OF SEPTEMBER 17, 1938, TO MAKE A DETERMINATION WITH RESPECT TO THE RATE TO BE PAID DRIVERS OF TRUCKS HAVING A CAPACITY OF 17 1/2 CUBIC YARDS.

ON OCTOBER 11, 1938, THE SECRETARY OF LABOR RENDERED A DECISION FROM WHICH THE FOLLOWING IS QUOTED:

"THE PROCEDURE INCLUDED IN THE CONTRACT SPECIFICATIONS FOR DETERMINING THE MINIMUM WAGE APPLICABLE TO ANY CRAFT EMPLOYED UNDER THE CONTRACT BUT FOR WHICH NO WAGE WAS SPECIFIED IN THE SCHEDULE, IS BASED UPON THE FINAL PARAGRAPH OF THE DECISION OF THE SECRETARY OF APRIL 12, 1938, PREDETERMINING THE WAGES APPLICABLE TO THIS CONTRACT. IN ACCORDANCE WITH THIS PROVISION THE RATES TO BE PAID ANY SUCH LABORERS AND MECHANICS MUST BE DETERMINED BY RECLASSIFYING THEIR WORK WITH ONE OF THE OCCUPATIONS LISTED IN THE WAGE SCHEDULE. THE ROHL CONNOLLY COMPANY APPARENTLY DID NOT MAKE SUCH A RECLASSIFICATION BUT CHOSE TO PAY DRIVERS OF TRUCKS OF 17 1/2 CU. YDS. CAPACITY A RATE OF 90 CENTS PER HOUR, OR 5 CENTS OVER THE TOP RATE SPECIFIED IN THE CONTRACT FOR TRUCK DRIVERS. THERE IS NO OCCUPATION IN THE WAGE SCHEDULE BEING PAID A RATE OF 90 CENTS PER HOUR, AND THEREFORE THE CONTRACTOR WAS IN ERROR IN ARRIVING AT THIS RATE AS THE MINIMUM APPLICABLE TO THIS CRAFT.

"THE PREPONDERANCE OF THE EVIDENCE COLLECTED BY THE DEPARTMENT OF LABOR CLEARLY INDICATES THAT OF ALL THE CLASSIFICATIONS FOR WHICH WAGE RATES PREDETERMINED BY THE SECRETARY OF LABOR ARE LISTED IN THE CONTRACT SPECIFICATIONS, THE WORK OF GRADER OPERATOR MOST NEARLY CORRESPONDS TO THE WORK TO BE PERFORMED BY THE OPERATORS OF TRUCKS IN EXCESS OF 8 CU. YDS. CAPACITY. THIS HAS SUPPORT IN THE FACT THAT AT THE TIME OF THE PREDETERMINATION OF THE SECRETARY OF LABOR FOR THIS CONTRACT THE RATE ESTABLISHED BY THE ARIZONA INDUSTRIAL COMMISSION FOR DRIVERS OF THE LARGEST TYPE OF TRUCKS WAS A RATE OF $1.00 PER HOUR FOR TRUCKS OF 8 TO 12 CU. YDS. BODY, WHICH WAS ALSO THEIR RATE FOR GRADER OPERATOR. ADDITION, ON MAY 9, 1938, AT THE REQUEST OF THE INDIAN OFFICE, THE SECRETARY OF LABOR DETERMINED $1.00 PER HOUR TO PREVAIL FOR DRIVERS OF TRUCKS OF 8 TO 12 CU. YDS. BODY, FOR A PROPOSED CONTRACT FOR CONSTRUCTION WORK AT PARKER, ARIZONA, THE SAME LOCATION AS THE INSTANT PROJECT.

"ACCORDINGLY, AS EVIDENCE OF WAGES ESTABLISHED SUBSEQUENT TO THE DATE THE BIDS FOR THE CONTRACT WERE OPENED CANNOT NOW BE CONSIDERED IN RECLASSIFYING THE CRAFT HEREIN IN DISPUTE, THE SECRETARY OF LABOR FINDS THAT THE MINIMUM WAGE RATE APPLICABLE TO DRIVERS OF TRUCKS IN EXCESS OF 8 CU. YDS. BODY IS THE RATE SPECIFIED IN THE CONTRACT FOR GRADER OPERATOR OF $1.00 PER HOUR. THE CONTRACTING AGENCY SHOULD SO INFORM THE ROHL- CONNOLLY COMPANY.'

THE CONTRACTOR WAS DULY NOTIFIED OF THE FOREGOING FINDING, BUT PROTESTED TO THE CONTRACTING OFFICER THE PAYMENT OF MORE THAN 90 CENTS PER HOUR SINCE HE FELT THAT THE SECRETARY OF LABOR WAS WITHOUT AUTHORITY IN MAKING THIS FINAL DETERMINATION. IT HAS BEEN HELD BY OFFICIALS OF THE OFFICE OF INDIAN AFFAIRS THAT IN VIEW OF THE PROVISIONS OF THE DECISION OF OCTOBER 11, 1938, THE CONTRACTOR WOULD BE REQUIRED TO ASSUME THE ADDITIONAL COST INVOLVED WHICH IT IS NOW ESTIMATED WILL AMOUNT TO APPROXIMATELY $8,000 DURING THE LIFE OF THE CONTRACT AND FOR THAT REASON THE CONTRACTING OFFICER HAS DEDUCTED FROM MONTHLY ESTIMATES DUE THE CONTRACTOR THE AMOUNTS REPRESENTING THE DIFFERENCE BETWEEN THE TOTAL WAGES DUE THE DRIVERS AT $1.00 PER HOUR AND THAT PAID AT THE RATE OF 90 CENTS PER HOUR.

THE CONTROVERSY IS REFERRED TO YOU FOR CONSIDERATION WITH THE REQUEST THAT YOU INFORM ME AS TO WHETHER THE CONTRACTOR SHOULD BE REQUIRED TO PAY $1.00 PER HOUR TO DRIVERS OF TRUCKS HAVING A CAPACITY OF 17 1/2 CUBIC YARDS AND, IF SO, WHETHER HE WILL BE OBLIGED TO ASSUME THE ADDITIONAL COST INVOLVED OR WHETHER IT SHOULD BE BORNE BY THE UNITED STATES BY REIMBURSING THE CONTRACTOR UNDER THE PROVISIONS OF ARTICLE 3 OF THE MODIFICATION OF CONTRACT I-156-IND-14 DATED DECEMBER 10, 1938.

AS POINTED OUT IN YOUR LETTER, THE SPECIFICATIONS WHICH ACCOMPANIED THE INVITATION TO BID, AND WHICH FORM A PART OF THE CONTRACT, PROVIDED UNDER PARAGRAPH 24 OF THE GENERAL CONDITIONS THAT ANY CLASS OF LABORERS OR MECHANICS EMPLOYED ON THE CONTRACT, BUT NOT SPECIFICALLY LISTED IN THE SPECIFICATIONS, SHOULD BE CLASSIFIED OR RECLASSIFIED CONFORMABLY TO THE SCHEDULE SET FORTH THEREIN. ALSO, IT WAS PROVIDED THAT IN THE EVENT OF DISAGREEMENT AS TO CLASSIFICATION OR RECLASSIFICATION OF SUCH EMPLOYEES, THE MATTER SHOULD BE REFERRED TO THE SECRETARY OF LABOR FOR FINAL DETERMINATION. OBVIOUSLY IT MUST HAVE BEEN CONSIDERED, AT THE TIME THE WORK WAS ADVERTISED AND THE CONTRACT WAS AWARDED, THAT THE CONTRACTOR MIGHT EMPLOY A CLASS OF LABORERS AND MECHANICS AS TO WHICH THE SECRETARY OF LABOR HAD NOT PREDETERMINED THE PREVAILING WAGE RATES AS REQUIRED BY THE DAVIS-BACON ACT, 49 STAT. 1011, SINCE PARAGRAPH 24 OF THE GENERAL CONDITIONS OF THE SPECIFICATIONS MADE PROVISION FOR SUCH AN EVENTUALITY.

IT APPEARS THAT IN THE PERFORMANCE OF THE WORK THE CONTRACTOR ENGAGED NUMEROUS EMPLOYEES IN THE DRIVING OF TRUCKS HAVING A CAPACITY OF 17 1/2 CUBIC YARDS; THAT THE CONTRACT DID NOT SPECIFICALLY PROVIDE A WAGE RATE FOR EMPLOYEES DRIVING TRUCKS HAVING A CAPACITY IN EXCESS OF 8 CUBIC YARDS; AND THAT THE MATTER WAS REFERRED TO THE SECRETARY OF LABOR WHO DETERMINED THE WORK PERFORMED BY DRIVERS OF TRUCKS OF 17 1/2 CUBIC YARDS CAPACITY MOST NEARLY CORRESPONDED TO THE WORK PERFORMED BY GRADER OPERATORS, WHO WERE REQUIRED TO BE PAID $1 PER HOUR, AND, ACCORDINGLY, A RATE OF $1 PER HOUR WAS ESTABLISHED FOR SUCH TRUCK DRIVERS. IT APPEARS THE CONTRACTOR HAD CONTEMPLATED PAYING SUCH TRUCK DRIVERS $0.90 PER HOUR, AND THAT IT HAS REFUSED TO PAY THE RATE OF $1 PER HOUR. AMONG OTHER QUESTIONS, YOU HAVE ASKED WHETHER THE CONTRACTOR SHOULD BE REQUIRED TO PAY THE RATE OF $1 PER HOUR AS ESTABLISHED BY THE SECRETARY OF LABOR.

UNDER THE TERMS OF THE DAVIS-BACON ACT THE SECRETARY OF LABOR WAS AUTHORIZED TO DETERMINE THE PREVAILING WAGE RATES FOR THE VARIOUS CLASSES OF LABORERS AND MECHANICS WHICH IT WAS CONTEMPLATED WOULD BE EMPLOYED IN THE PERFORMANCE OF THE SUBJECT CONTRACT FOR THE PURPOSE OF HAVING SUCH WAGE RATES SPECIFICALLY SET FORTH IN THE ADVERTISED SPECIFICATIONS. THAT WAS DONE. HOWEVER, AFTER THE AWARD OF A CONTRACT THE DAVIS-BACON ACT DOES NOT AUTHORIZE THE SECRETARY OF LABOR TO DETERMINE THE PREVAILING RATES OF WAGES FOR A CLASS OF EMPLOYEES WHICH WERE NOT SPECIFICALLY INCLUDED IN THE ADVERTISED SPECIFICATIONS. CONSEQUENTLY, THE SUBJECT DETERMINATION OF THE SECRETARY OF LABOR WAS NOT PURSUANT TO THE DAVIS-BACON ACT, IT WAS NOT MADE AS A STATUTORY RIGHT, AND THE EFFECT OF HER DECISION IS NOT TO BE GOVERNED BY THE DAVIS-BACON ACT.

UNDER PARAGRAPH 24 OF THE GENERAL CONDITIONS OF THE SPECIFICATIONS THE CONTRACT SPECIFICALLY SET FORTH THE PREDETERMINED WAGE RATES TO BE PAID VARIOUS CLASSES OF LABORERS AND MECHANICS TO BE EMPLOYED ON THE WORK, AND IT WAS FURTHER AGREED BY THE PARTIES THAT---

IN ACCORDANCE WITH THE PROVISIONS OF THE SAID DAVIS-BACON ACT, AS AMENDED, THESE ARE THE MINIMUM WAGES TO BE INSERTED IN THE ADVERTISED SPECIFICATIONS FOR SAID CONTRACT, AND ANY CLASS OF LABORERS AND MECHANICS NOT LISTED IN THE PRECEDING PARAGRAPH, WHICH WILL BE EMPLOYED ON THIS CONTRACT, SHALL BE CLASSIFIED OR RECLASSIFIED CONFORMABLY TO THE FOREGOING SCHEDULE. IN THE EVENT THE INTERESTED PARTIES CANNOT AGREE ON THE PROPER CLASSIFICATION OR RECLASSIFICATION OF A PARTICULAR CLASS OF LABORERS AND MECHANICS TO BE USED, THE QUESTION ACCOMPANIED BY THE RECOMMENDATION OF THE CONTRACTING OFFICER SHALL BE REFERRED TO THE SECRETARY OF LABOR FOR FINAL DETERMINATION. IT WAS AS A RESULT OF THIS CONTRACTUAL AGREEMENT, AND NOT AS A MATTER OF STATUTORY RIGHT, THAT THE SECRETARY OF LABOR PURPORTED TO ACT IN THE MATTER INVOLVED AND THE EFFECT OF HER DECISION IS TO BE GOVERNED BY THE PROVISIONS OF THE CONTRACT.

AS WILL BE SEEN FROM THE FOREGOING THE AUTHORITY OF THE SECRETARY OF LABOR TO ACT UNDER PARAGRAPH 24 OF THE SPECIFICATIONS, SO AS TO BIND THE PARTIES TO THE CONTRACT, IS LIMITED TO A CASE OF DISAGREEMENT BETWEEN THE "INTERESTED PARTIES.' ACCORDING TO YOUR LETTER, AND THE ENCLOSURES WHICH ACCOMPANIED IT, THE CONTRACTING OFFICER, THE CONTRACTOR, AND THE EMPLOYEES WERE SUBSTANTIALLY IN AGREEMENT THAT THE RATE OF $0.90 PER HOUR BEING PAID BY THE CONTRACTOR WAS PROPER. WHILE THE PHOENIX BUILDING TRADES COUNCIL MAY HAVE OBJECTED TO THE RATE BEING PAID BY THE CONTRACTOR THE SAID COUNCIL WAS NOT A PARTY TO THE AGREEMENT AND IT IS NOT UNDERSTOOD THE COUNCIL WAS AN "INTERESTED PARTY" WITHIN THE MEANING OF THE CONTRACT, PARTICULARLY SINCE THE CONTRACTOR'S EMPLOYEES APPARENTLY DID NOT OBJECT TO THE WAGE RATE BEING PAID. FURTHERMORE, THE CONTRACTOR STATES THAT "THE MEN ARE VIRTUALLY ALL FROM CALIFORNIA" WHICH APPARENTLY WOULD LEAVE THEM WITHOUT THE JURISDICTION OF THE LOCAL LABOR ORGANIZATIONS. IT IS TO BE NOTED THAT THE CONTRACTOR HAS DENIED ANY DISAGREEMENT EXISTED BETWEEN THE "INTERESTED PARTIES," WITHIN THE MEANING OF THE CONTRACT, AND IT INSISTS THAT THE SECRETARY OF LABOR WAS WITHOUT JURISDICTION TO MAKE A BINDING DETERMINATION IN THE MATTER. NEVERTHELESS, THE MATTER WAS REFERRED TO THE SECRETARY OF LABOR AND SHE DETERMINED, FROM A ,PREPONDERANCE OF THE EVIDENCE COLLECTED BY THE DEPARTMENT OF LABOR," THAT THE EMPLOYEES IN QUESTION SHOULD RECEIVE $1 PER HOUR. ALSO, AND IRRESPECTIVE OF THE APPARENT AGREEMENT BETWEEN THE CONTRACTING PARTIES, IT APPEARS THE CONTRACTING OFFICER RECOMMENDED, AT THE TIME THE SECRETARY OF LABOR WAS REQUESTED TO DECIDE THE MATTER, THAT A RATE OF $1 PER HOUR BE ESTABLISHED FOR SUCH EMPLOYEES. THE COURTS HAVE CONSISTENTLY HELD THAT IT IS PROPER FOR PARTIES TO A CONTRACT TO DESIGNATE A PARTICULAR PERSON TO DECIDE DISPUTED QUESTIONS AND THAT DECISIONS ON SUCH DISPUTED QUESTIONS BY THE PERSON SO DESIGNATED ARE FINAL AND CONCLUSIVE ON THE PARTIES TO THE CONTRACT IN THE ABSENCE OF FRAUD OR OF MISTAKE SO GROSS AS NECESSARILY TO IMPLY BAD FAITH. SEE UNITED STATES V. GLEASON, 175 U.S. 588; KIHLBERG V. UNITED STATES, 97 U.S. 398; AND MCCULLOUGH V. CLINCH-MITCHELL CONST. CO., 71 F./2D) 17, AND AUTHORITIES THEREIN CITED. FRAUD OR GROSS MISTAKE HAS NOT BEEN ESTABLISHED IN THE PRESENT CASE. WHILE THE CONTRACTOR'S CONTENTION THAT THE SECRETARY OF LABOR HAD NO JURISDICTION TO CONSIDER THE MATTER IS NOT WITHOUT MERIT, THE FACT THAT THE MATTER WAS REFERRED TO THE SECRETARY OF LABOR, ACCOMPANIED BY THE CONTRACTING OFFICER'S RECOMMENDATION THAT A RATE OF $1 BE ESTABLISHED FOR THE EMPLOYEES INVOLVED INDICATES THAT THE MATTER COULD NOT BE ADJUSTED BETWEEN THE PARTIES, THAT IT MAY HAVE BEEN IN DISPUTE, AND THAT THE SECRETARY OF LABOR WAS AUTHORIZED TO DETERMINE THE QUESTION. IN ANY EVENT, THE MATTER HAVING BEEN REFERRED TO THE SECRETARY OF LABOR, SHE HAVING ESTABLISHED A WAGE RATE OF $1, WHICH WAS CONSISTENT WITH THE CONTRACTING OFFICER'S RECOMMENDATION, AND THE CONTRACTING OFFICER HAVING REQUESTED THE CONTRACTOR TO PAY THAT RATE, THE MATTER IS SUFFICIENTLY DOUBTFUL THAT THIS OFFICE, NOT NAMED IN THE CONTRACT TO DETERMINE SUCH MATTERS, WOULD NOT BE JUSTIFIED IN AUTHORIZING A DISREGARD OF THE DECISION OF THE SECRETARY OF LABOR. ACCORDINGLY, IF THE CONTRACTOR REFUSES TO PAY THE RATE OF $1 AS ESTABLISHED BY THE SECRETARY OF LABOR THERE SHOULD BE A CONTINUED WITHHOLDING OF THE DIFFERENCE IN AMOUNT BETWEEN SUCH RATE AND THE RATE ACTUALLY PAID BY THE CONTRACTOR TO THE EMPLOYEES INVOLVED, PENDING A JUDICIAL DETERMINATION OF THE RIGHTS OF THE PARTIES INVOLVED.

IT IS TO BE UNDERSTOOD, OF COURSE, IF THE CONTRACTOR ABIDES BY THE DECISION OF THE SECRETARY OF LABOR AND PAYS THE RATE OF $1 PER HOUR, THAT IT MAY NOT BE REIMBURSED BY THE UNITED STATES FOR THE INCREASED COST INVOLVED. THE CONTRACT CONTAINS NO PROVISION REQUIRING THE GOVERNMENT TO ASSUME, OR EVEN INDICATING THAT IT WOULD ASSUME, ANY INCREASED COST TO THE CONTRACTOR BASED ON THE DIFFERENCE BETWEEN THE WAGE RATES THE CONTRACTOR CONTEMPLATED PAYING AND THOSE ESTABLISHED BY THE SECRETARY OF LABOR UNDER PARAGRAPH 24 OF THE SPECIFICATIONS.

THE CONTRACTOR CONTENDS IT SHOULD BE REIMBURSED SUCH INCREASED COST UNDER ARTICLE 3 OF THE MODIFICATION OF THE CONTRACT DATED DECEMBER 10, 1938, WHICH PROVIDES, IN PART, AS FOLLOWS:

(A) IF ANY OF THE MINIMUM WAGE RATES AS ESTABLISHED FOR THE ORIGINAL CONTRACT I-156-IND-14 ARE RAISED BY ORDERS OF THE UNITED STATES GOVERNMENT, THE CONTRACT PRICE WILL BE ADJUSTED ACCORDINGLY ON THE BASIS OF ALL INCREASED LABOR AND COMPENSATION INSURANCE COSTS RESULTING THEREFROM. NO ADJUSTMENT WILL BE MADE FOR INCREASED COSTS DUE TO CHANGE IN RATES MADE BY THE CONTRACTOR NOT COVERED BY GOVERNMENTAL ORDER. THIS PROVISION IN NO WAY OBLIGATES THE GOVERNMENT TO ASSUME THE INCREASED COST WHICH WOULD RESULT FROM THE CONTRACTOR PAYING THE RATE OF $1 PER HOUR AS ESTABLISHED BY THE SECRETARY OF LABOR. THE PROVISION WAS AGREED TO ON DECEMBER 10, 1938, AND IS PROSPECTIVE IN EFFECT, WHEREAS THE RATE OF $1 WAS ESTABLISHED BY THE SECRETARY OF LABOR ON OCTOBER 11, 1938, AND COMMUNICATED TO THE CONTRACTOR ON OCTOBER 26, 1938, AND IT APPEARS THE DEPARTMENT OF THE INTERIOR HAS CONSIDERED IT AS EFFECTIVE BEGINNING OCTOBER 27, 1938. IN OTHER WORDS, THAT RATE HAD BEEN ESTABLISHED AND WAS APPLIED PRIOR TO THE DECEMBER 10, 1938, MODIFICATION OF THE CONTRACT. FURTHERMORE, THE ABOVE-QUOTED PROVISION RELATES ONLY TO AN INCREASE IN THE "MINIMUM WAGE RATES AS ESTABLISHED FOR THE ORIGINAL CONTRACT" AND THE RATE OF $1 PER HOUR WAS ESTABLISHED AS A MINIMUM RATE FOR THE ORIGINAL CONTRACT AND HAS NOT BEEN INCREASED.