B-150173, JANUARY 11, 1963, 42 COMP. GEN. 357

B-150173: Jan 11, 1963

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WHICH CLAIM WAS DENIED ON THE MERITS BY THE CONTRACTING OFFICER. IS PRECLUDED UNDER A CONTRACT MODIFIED PURSUANT TO AN APPEAL FILED BY THE CONTRACTOR AFTER THE EXPIRATION OF THE 31-DAY PERIOD PROVIDED BY THE DISPUTES CLAUSE OF THE CONTRACT AND SUSTAINED BY THE HEARING EXAMINER WHO ERRONEOUSLY BELIEVING THE APPEAL PROPERLY TAKEN UNDER THE 60-DAY PERIOD PROVIDED BY THE COMMISSION'S RULES OF PROCEDURE IN CONTRACT APPEALS OVERRULED THE CONTRACTING OFFICER'S MOTION TO DISMISS FOR LACK OF JURISDICTION. THE HEARING EXAMINER WAS WITHOUT AUTHORITY TO CONSIDER THE APPEAL. THE GOVERNMENT'S LEGAL DEFENSE OF LACK OF JURISDICTION WAS NOT WAIVED. LACKING CONSIDERATION THE CONTRACT MODIFICATION IS VOID AND.

B-150173, JANUARY 11, 1963, 42 COMP. GEN. 357

CONTRACTS - DISPUTES - APPEALS - FAILURE TO APPEAL WITHIN TIME LIMITATION PAYMENT OF A CLAIM FOR ADDITIONAL COSTS UNDER A UNITED STATES ATOMIC ENERGY COMMISSION CONTRACT, WHICH CLAIM WAS DENIED ON THE MERITS BY THE CONTRACTING OFFICER, IS PRECLUDED UNDER A CONTRACT MODIFIED PURSUANT TO AN APPEAL FILED BY THE CONTRACTOR AFTER THE EXPIRATION OF THE 31-DAY PERIOD PROVIDED BY THE DISPUTES CLAUSE OF THE CONTRACT AND SUSTAINED BY THE HEARING EXAMINER WHO ERRONEOUSLY BELIEVING THE APPEAL PROPERLY TAKEN UNDER THE 60-DAY PERIOD PROVIDED BY THE COMMISSION'S RULES OF PROCEDURE IN CONTRACT APPEALS OVERRULED THE CONTRACTING OFFICER'S MOTION TO DISMISS FOR LACK OF JURISDICTION, THE DECISION OF THE CONTRACTING OFFICER ON THE QUESTION OF FACT HAVING BECOME FINAL AND CONCLUSIVE, THE HEARING EXAMINER WAS WITHOUT AUTHORITY TO CONSIDER THE APPEAL, AND AS HIS DETERMINATION TO OVERRULE THE MOTION TO DISMISS--- A QUESTION OF LAW--- DID NOT BECOME FINAL AND CONCLUSIVE UNDER THE PROVISIONS OF THE WUNDERLICH ACT, 41 U.S.C. 322, THE GOVERNMENT'S LEGAL DEFENSE OF LACK OF JURISDICTION WAS NOT WAIVED, AND LACKING CONSIDERATION THE CONTRACT MODIFICATION IS VOID AND, THEREFORE, THERE IS NO VALID CLAIM UPON WHICH PAYMENT CAN BE MADE.

TO THE CHAIRMAN, UNITED STATES ATOMIC ENERGY COMMISSION, JANUARY 11, 1963:

REFERENCE IS MADE TO A LETTER DATED OCTOBER 23, 1962, FROM MR. SIDNEY G. KINGSLEY, ASSISTANT GENERAL COUNSEL (SOLICITOR), SUBMITTING, AT OUR REQUEST, THE PAPERS AND DOCUMENTS INVOLVED IN A DECISION ISSUED AUGUST 2, 1962, BY MR. J. D. BOND, HEARING EXAMINER, ATOMIC ENERGY COMMISSION, IN THE APPEAL OF MORAN BROS., INC., CONTRACT NO. AT/29-2/ 908, DOCKET NO. CA- 152. THE PAPERS SUBMITTED INDICATE THAT THE DECISION OF THE HEARING EXAMINER WHICH SUSTAINED THE APPEAL OF THE CONTRACTOR WOULD OBLIGATE THE GOVERNMENT TO PAY A CLAIM WHICH IS, IN OUR VIEW, NOT VALID.

BEFORE DISCUSSING THE MERITS OF THE QUESTIONS PRESENTED BY THE HEARING EXAMINER'S DECISION, WE THINK IT APPROPRIATE TO NOTE SOME PRELIMINARY CONSIDERATIONS WITH RESPECT TO THE AUTHORITY OF OUR OFFICE OR OF A COURT TO REVIEW DECISIONS RENDERED BY CONTRACTING OFFICERS OR APPEAL BOARDS UNDER THE STANDARD GOVERNMENT DISPUTES CLAUSE.

FOR A NUMBER OF YEARS STANDARD FORMS OF GOVERNMENT CONTRACTS HAVE CONTAINED A DISPUTES CLAUSE WHICH USUALLY PROVIDES, IN SUBSTANCE, THAT ALL DISPUTES CONCERNING QUESTIONS OF FACT ARISING UNDER THE CONTRACT SHALL BE DECIDED BY THE CONTRACTING OFFICER SUBJECT TO APPEAL BY THE CONTRACTOR WITHIN 30 DAYS TO THE HEAD OF THE DEPARTMENT CONCERNED WHOSE DECISION SHALL BE FINAL AND CONCLUSIVE UPON THE PARTIES THERETO. IN UNITED STATES V. MOORMAN, 338 U.S. 457 (1950), THE UNITED STATES SUPREME COURT HELD IN EFFECT THAT SINCE AN ADMINISTRATIVE DECISION CAME WITHIN THE AMBIT OF THE ALL DISPUTES CLAUSE APPLICABLE IN THAT CASE IT WAS FINAL ON QUESTIONS OF LAW AS WELL AS FACT. ALSO, PRIOR TO THE DECISION OF THE UNITED STATES SUPREME COURT IN UNITED STATES V. WUNDERLICH, 342 U.S. 98 (1951), IT WAS HELD THAT ADMINISTRATIVE DECISIONS RENDERED UNDER THE STANDARD DISPUTES CLAUSE WERE FINAL AND WOULD NOT BE SUBJECT TO REVIEW UNLESS THE DECISION WAS EITHER FRAUDULENT, ARBITRARY, CAPRICIOUS OR SO GROSSLY ERRONEOUS AS NECESSARILY TO IMPLY BAD FAITH. THE DECISION IN THE WUNDERLICH CASE REJECTED ARBITRARINESS OR CAPRICIOUSNESS AS GROUNDS FOR REVIEW AND LIMITED JUDICIAL REVIEW TO THE SOLE GROUND OF FRAUD WHICH IT DEFINED AS "CONSCIOUS WRONGDOING, AND INTENTION TO CHEAT OR TO BE DISHONEST.'

AFTER EXTENSIVE HEARINGS THE CONGRESS CONCLUDED THAT IT WAS NEITHER IN THE GOVERNMENT'S INTEREST OR IN THE INTEREST OF CONTRACTORS TO REPOSE IN GOVERNMENT OFFICIALS THE POWER TO CONCLUSIVELY DETERMINE EITHER DISPUTED QUESTIONS OF LAW OR DISPUTED QUESTIONS OF FACT ARISING UNDER GOVERNMENT CONTRACTS. THE CONGRESS, THEREFORE, ENACTED WHAT IS COMMONLY REFERRED TO AS THE WUNDERLICH ACT, 41 U.S.C. 321, 322, WHICH READS AS FOLLOWS:

(321) 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 NOT 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.

(322) NO GOVERNMENT CONTRACT SHALL CONTAIN A PROVISION MAKING FINAL ON A QUESTION OF LAW THE DECISION OF ANY ADMINISTRATIVE OFFICIAL, REPRESENTATIVE, OR BOARD.

WHILE IT IS TRUE THAT THE WUNDERLICH ACT SPEAKS IN TERMS OF "JUDICIAL" REVIEW OF ADMINISTRATIVE DECISIONS, THE LEGISLATIVE HISTORY OF THE ACT CLEARLY INDICATES THAT THE CONGRESS DID NOT INTEND, BY USE OF THE TERM "JUDICIAL," TO LIMIT THE JURISDICTION OR AUTHORITY OF OUR OFFICE TO REVIEW SUCH DECISIONS. SEE PAGES 6 AND 7 OF H.REPT. NO. 1380, 83D CONGRESS, 2D SESSION, TO ACCOMPANY S.24 (THE BILL WHICH ULTIMATELY BECAME LAW) WHERE IT IS STATED, IN PERTINENT PART, THAT:

THE PROPOSED LEGISLATION, AS AMENDED, WILL NOT ADD TO, NARROW, RESTRICT, OR CHANGE IN ANY WAY THE PRESENT JURISDICTION OF THE GENERAL ACCOUNTING OFFICE EITHER IN THE COURSE OF A SETTLEMENT OR UPON AUDIT, AND THE LANGUAGE USED IS NOT INTENDED EITHER TO CHANGE THE JURISDICTION OF THE GENERAL ACCOUNTING OFFICE OR TO GRANT ANY NEW JURISDICTION, BUT SIMPLY TO RECOGNIZE THE JURISDICTION WHICH THE GENERAL ACCOUNTING OFFICE ALREADY HAS.

THE ELIMINATION OF THE SPECIFIC MENTION OF THE GENERAL ACCOUNTING OFFICE FROM THE PROVISIONS OF THE BILL AS AMENDED (WITH RESPECT TO REVIEW OF ADMINISTRATIVE DECISIONS) SHOULD NOT BE CONSTRUED AS TAKING AWAY ANY OF THE JURISDICTION OF THAT OFFICE. IT IS INTENDED THAT THE GENERAL ACCOUNTING OFFICE, AS WAS ITS PRACTICE, IN REVIEWING A CONTRACT AND CHANGE ORDERS FOR THE PURPOSE OF PAYMENT, SHALL APPLY THE STANDARDS OF REVIEW THAT ARE GRANTED TO THE COURTS UNDER THIS BILL. * * *

FOR AN EXAMPLE OF A CASE WHERE OUR OFFICE WAS SUSTAINED BY THE COURT OF CLAIMS WHEN WE TOOK EXCEPTION TO A DECISION BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS, SEE NORTHROP AIRCRAFT, INC. V. UNITED STATES, 130 CT.CL. 626. SINCE IT IS OUR VIEW, AS WILL BE OUTLINED BELOW, THAT THE HEARING EXAMINER'S DECISION ON A DECISIVE QUESTION OF LAW WAS CLEARLY ERRONEOUS, WE FEEL IT IS NECESSARY TO BRING THIS MATTER TO YOUR ATTENTION.

IN ORDER THAT THE LEGAL ISSUES INVOLVED IN THE CASE MAY BE BETTER UNDERSTOOD IT IS NECESSARY TO SET OUT THE FACTS AND CIRCUMSTANCES INVOLVED IN SOME DETAIL.

ON JULY 6, 1959, COPIES OF INVITATION FOR BIDS NO. 292-59-54 WERE MAILED BY THE ATOMIC ENERGY COMMISSION TO EIGHT PROSPECTIVE BIDDERS. UNDER THE INVITATION BIDS WERE SOLICITED FOR THE DRILLING, CASING AND CEMENTING OF ONE LARGE DIAMETER VERTICAL HOLE, 950 FEET DEEP, IN GRANITIC ROCK AT THE ATOMIC ENERGY COMMISSION'S NEVADA TEST SITE IN THE VICINITY OF MERCURY, NEVADA. THE LOW BID, IN THE AMOUNT OF $272,810 WAS SUBMITTED BY MORAN BROS., INC. (MORAN), OF WICHITA FALLS, TEXAS. THE GOVERNMENT ESTIMATE FOR THE WORK WAS $319,391.

BY LETTER DATED AUGUST 18, 1959, FROM THE CONTRACTING OFFICER, MORAN WAS AWARDED CONTRACT NO. AT/29-2/-908. THE CONTRACT, WHICH WAS DATED AUGUST 13, 1959, REQUIRED THE CONTRACTOR TO PERFORM THE CONTRACT WORK AS DESCRIBED IN, AND IN ACCORDANCE WITH, THE TERMS AND CONDITIONS SET FORTH IN THE CONTRACT'S GENERAL PROVISIONS, THE CONTRACT'S DRAWINGS, SCHEDULES AND SPECIFICATIONS, AND THE INVITATION FOR BIDS NO. 292-59-54, TOGETHER WITH ADDENDA 1, 2, 3, 4, 5 AND 6 THERETO, RECEIPT OF WHICH ADDENDA WAS ACKNOWLEDGED IN WRITING BY BY CONTRACTOR.

MORAN ACKNOWLEDGED RECEIPT OF NOTICE TO PROCEED ON AUGUST 27, 1959. THE NOTICE TO PROCEED AND THE CONTRACT REQUIRED THAT THE WORK BE STARTED WITHIN 10 CALENDAR DAYS FOLLOWING RECEIPT BY THE CONTRACTOR OF THE NOTICE TO PROCEED AND THAT THE WORK BE COMPLETED WITHIN 100 CALENDAR DAYS FOLLOWING RECEIPT OF SUCH NOTICE (E.G., BY DECEMBER 5, 1959). FINAL ACCEPTANCE OF THE COMPLETED WORK UNDER THE CONTRACT WAS MADE ON APRIL 5, 1960, AND WAS ACKNOWLEDGED BY THE CONTRACTING OFFICER IN A LETTER DATED APRIL 8, 1960, TO MORAN.

THE CONTRACT CONTAINED A CHANGED CONDITIONS AND A DISPUTES CLAUSE WHICH READ AS FOLLOWS:

4. CHANGED CONDITIONS

THE CONTRACTOR SHALL PROMPTLY, AND BEFORE SUCH CONDITIONS ARE DISTURBED, NOTIFY THE CONTRACTING OFFICER IN WRITING OF: (1) SUBSURFACE OR LATENT PHYSICAL CONDITIONS AT THE SITE DIFFERING MATERIALLY FROM THOSE INDICATED IN THIS CONTRACT, OR (2) UNKNOWN PHYSICAL CONDITIONS AT THE SITE, OF AN UNUSUAL NATURE, DIFFERING MATERIALLY FROM THOSE ORDINARILY ENCOUNTERED AND GENERALLY RECOGNIZED AS INHERING IN WORK OF THE CHARACTER PROVIDED FOR IN THIS CONTRACT. THE CONTRACTING OFFICER SHALL PROMPTLY INVESTIGATE THE CONDITIONS, AND IF HE FINDS THAT SUCH CONDITIONS DO SO MATERIALLY DIFFER AND CAUSE AN INCREASE OR DECREASE IN THE COST OF, OR THE TIME REQUIRED FOR, PERFORMANCE OF THIS CONTRACT, AN EQUITABLE ADJUSTMENT SHALL BE MADE AND THE CONTRACT MODIFIED IN WRITING ACCORDINGLY. ANY CLAIM OF THE CONTRACTOR FOR ADJUSTMENT HEREUNDER SHALL NOT BE ALLOWED UNLESS HE HAS GIVEN NOTICE AS ABOVE REQUIRED; PROVIDED THAT THE CONTRACTING OFFICER MAY, IF HE DETERMINES THE FACTS SO JUSTIFY, CONSIDER AND ADJUST ANY SUCH CLAIM ASSERTED BEFORE THE DATE OF FINAL SETTLEMENT OF THE CONTRACT. IF THE PARTIES FAIL TO AGREE UPON THE ADJUSTMENT TO BE MADE, THE DISPUTE SHALL BE DETERMINED AS PROVIDED IN CLAUSE 6 HEREOF. CLAUSE 6, STANDARD FORM 23A, ENTITLED "DISPUTES" WAS DELETED BY THE CONTRACT AND ARTICLE 28 SUBSTITUTED THEREFOR.

ARTICLE 28 DISPUTES.

EXCEPT AS OTHERWISE PROVIDED IN THIS CONTRACT, ANY DISPUTE CONCERNING A QUESTION OF FACT ARISING UNDER THIS CONTRACT WHICH IS NOT DISPOSED OF BY AGREEMENT SHALL BE DECIDED BY THE CONTRACTING OFFICER, WHO SHALL REDUCE HIS DECISION TO WRITING AND MAIL OR OTHERWISE FURNISH A COPY THEREOF TO THE CONTRACTOR. WITHIN 30 DAYS FROM THE DATE OF RECEIPT OF SUCH COPY, THE CONTRACTOR MAY APPEAL BY MAILING OR OTHERWISE FURNISH A COPY THEREOF TO THE CONTRACTOR. WITHIN 30 DAYS FROM THE DATE OF RECEIPT OF SUCH COPY, THE CONTRACTOR MAY APPEAL BY MAILING OR OTHERWISE FURNISHING TO THE CONTRACTING OFFICER A WRITTEN APPEAL ADDRESSED TO THE COMMISSION, AND THE DECISION OF THE COMMISSION SHALL, UNLESS DETERMINED BY A COURT OF COMPETENT JURISDICTION TO HAVE BEEN FRAUDULENT, ARBITRARY, CAPRICIOUS, OR SO GROSSLY ERRONEOUS AS NECESSARILY TO IMPLY BAD FAITH, OR NOT SUPPORTED BY SUBSTANTIAL EVIDENCE, BE FINAL AND CONCLUSIVE:PROVIDED, THAT IF NO SUCH APPEAL TO THE COMMISSION IS TAKEN, THE DECISION OF THE CONTRACTING OFFICER SHALL BE FINAL AND CONCLUSIVE. IN CONNECTION WITH ANY APPEAL PROCEEDING UNDER THIS CLAUSE, THE CONTRACTOR SHALL BE AFFORDED AN OPPORTUNITY TO BE HEARD AND TO OFFER EVIDENCE IN SUPPORT OF ITS APPEAL. PENDING FINAL DECISION OF A DISPUTE HEREUNDER, THE CONTRACTOR SHALL PROCEED DILIGENTLY WITH THE PERFORMANCE OF THE CONTRACT AND IN ACCORDANCE WITH THE CONTRACTING OFFICER'S DECISION.

BY A LETTER DATED OCTOBER 5, 1960, ADDRESSED TO THE ATOMIC ENERGY COMMISSION, MORAN SUBMITTED A CLAIM TO THE CONTRACTING OFFICER IN THE AMOUNT OF $181,253.27. THE CLAIM WAS DESIGNATED, IN THE CONTRACTOR'S WORDS, AS CONSISTING OF:

* * * ADDITIONAL COSTS INCURRED RESULTING FROM ADDITIONAL WORK PERFORMED IN DELIVERING THE ATOMIC ENERGY COMMISSION A USABLE FACILITY. THE NEED FOR THE ADDITIONAL TIME AND COSTS RESULTED EITHER FROM CHANGE OF CONDITIONS INVOLVING "SUBSURFACE OR LATENT PHYSICAL CONDITIONS AT THE SITE DIFFERING MATERIALLY FROM THOSE INDICATED" AND/OR "UNKNOWN PHYSICAL CONDITIONS ENCOUNTERED OR DELAYS AND DAMAGE TO THE WORK SITE DUE TO UNFORESEEABLE CAUSES BEYOND CONTROL AND WITHOUT FAULT OR NEGLIGENCE OF THE CONTRACTOR," OR A COMBINATION OF ONE OR MORE OF SUCH CAUSES.

THE CONTRACTING OFFICER IN A DECISION DATED MARCH 6, 1961, DENIED MORAN'S CLAIM ON THE MERITS, WHICH FOR OUR PURPOSES WE NEED NOT GO INTO, EXCEPT TO NOTE THAT IN HIS FINDINGS OF FACT AND DECISION THE CONTRACTING OFFICER CONCLUDED THAT THE CAUSES TO WHICH THE CONTRACTOR ATTRIBUTED HIS CLAIM WERE "NEITHER DIRECTLY NOR INDIRECTLY DUE TO "CHANGED CONDITIONS," " BUT WERE "DUE TO CIRCUMSTANCES WHICH WERE KNOWN OR FORESEEABLE AND TO CAUSES WHICH WERE WITHIN THE CONTROL OF THE CONTRACTOR AND/OR ITS SUBCONTRACTORS ENGAGED IN THE WORK UNDER THE CONTRACT.' A COVER LETTER DATED MARCH 6, 1961, BY THE CONTRACTING OFFICER TO MORAN (WHICH ENCLOSED HIS DECISION), CONTAINED THE FOLLOWING TWO CONCLUDING PARAGRAPHS:

YOUR ATTENTION IS FURTHER INVITED TO PARAGRAPH 28, DISPUTES, OF THE GENERAL PROVISIONS OF YOUR CONTRACT WHICH PROVIDES THAT YOU MAY WITHIN THIRTY (30) DAYS FROM THE DATE OF RECEIPT OF MY FINDINGS OF FACT AND DECISIONS APPEAL THEREFROM BY MAILING OR OTHERWISE FURNISHING TO THE CONTRACTING OFFICER A WRITTEN APPEAL ADDRESSED TO THE COMMISSION.

ENCLOSED AS EXHIBIT 2 FOR YOUR INFORMATION AND RETENTION ARE COPIES OF THE RULES OF PRACTICE AND RULES OF PROCEDURE IN CONTRACT APPEALS OF THE UNITED STATES ATOMIC ENERGY COMMISSION, OFFICE OF HEARING EXAMINER.

MORAN RECEIVED THE DECISION OF THE CONTRACTING OFFICER, TOGETHER WITH COPIES OF THE RULES OF PRACTICE AND RULES OF PROCEDURE IN CONTRACT APPEALS, ON MARCH 9, 1961. THEREAFTER, ON MAY 5, 1961, 57 DAYS AFTER RECEIPT BY MORAN OF THE CONTRACTING OFFICER'S DECISION, MORAN MAILED ITS NOTICE OF APPEAL FROM THIS DECISION. IN A LETTER TRANSMITTING THE NOTICE OF APPEAL, MORAN'S ATTORNEY STATED THAT THE DELAY IN FILING THE NOTICE OF APPEAL WAS THE RESULT OF A CLERICAL ERROR IN HIS OFFICE WHICH OCCURRED WITHOUT THE KNOWLEDGE OR CONTROL OF THE CONTRACTOR.

THE ATTORNEY FOR THE CONTRACTING OFFICER BY LETTER DATED MAY 12, 1961, TO THE OFFICE OF THE HEARING EXAMINER TRANSMITTED, PURSUANT TO SECTION 3.14 OF THE RULES OF PROCEDURE IN CONTRACT APPEALS (PART 3, CHAPTER 1, TITLE 10, CODE OF FEDERAL REGULATIONS), THREE APPEAL FILES EACH CONTAINING A COPY OF THE SUBJECT CONTRACT, THE CONTRACTING OFFICER'S DECISION AND THE CONTRACTOR'S APPEAL FROM SUCH DECISION. ALSO TRANSMITTED WITH THIS LETTER WAS A NOTICE OF APPEARANCE OF THE ATTORNEY FOR THE CONTRACTING OFFICER AND A MOTION ON BEHALF OF THE CONTRACTING OFFICER THAT THE APPEAL BE DISMISSED. THE MOTION TO DISMISS THE APPEAL SPECIFICALLY CALLED ATTENTION TO THE FACT THAT THE CONTRACTOR'S NOTICE OF APPEAL WAS RECEIVED BY THE CONTRACTING OFFICER 27 DAYS AFTER THE 30-DAY APPEAL PERIOD SPECIFIED IN THE DISPUTES CLAUSE HAD ELAPSED. THE MOTION TO DISMISS CONCLUDED AS FOLLOWS: THE CONTRACTING OFFICER, THEREFORE, MOVES THAT THE HEARING EXAMINER ENTER HIS ORDER DISMISSING THE CONTRACTOR'S APPEAL IN THIS MATTER ON THE GROUNDS THAT INASMUCH AS THE CONTRACTOR'S APPEAL WAS NOT TIMELY TAKEN, THE DECISION OF THE CONTRACTING OFFICER BECAME FINAL AND CONCLUSIVE ON THE CONTRACTOR AND OPERATED TO FORECLOSE THE CONTRACTOR AND CREATED A VESTED RIGHT IN FAVOR OF THE GOVERNMENT AND THAT THE CONTRACTOR HAS, THEREFORE, LOST ITS APPEAL RIGHTS WHICH CANNOT BE WAIVED BY THE GOVERNMENT.

BY AN ORDER ISSUED ON JUNE 6, 1961, THE HEARING EXAMINER DENIED THE CONTRACTING OFFICER'S MOTION TO DISMISS THE APPEAL. SUBSEQUENTLY A PREHEARING CONFERENCE AND HEARING SESSIONS WERE HELD ON AUGUST 7, 10, 11, 12, 14, 15, 16 AND 17, 1961, IN ALBUQUERQUE, NEW MEXICO. THE TRANSCRIPT OF THE AUGUST 10, 1961, HEARING SESSION CONTAINS (ON PAGES 27-28) THE FOLLOWING PERTINENT EXCHANGE BETWEEN THE HEARING EXAMINER AND THE ATTORNEY FOR THE CONTRACTING OFFICER (MR. RANDALL):

MR. RANDALL: IF IT PLEASE THE COURT, IF PROPER AT THIS TIME, WE WOULD LIKE TO ADVANCE, AS WE MENTIONED IN THE PRE-HEARING CONFERENCE, THAT WE PLAN TO ASSERT DURING THE COURSE OF THESE PROCEEDINGS OUR ORIGINAL POSITION OF LACK OF JURISDICTION OF THIS TRIBUNAL. WE ARE WILLING TO PROCEED IN THIS RESPECT AT THE DEFERENCE TO THE COURT, BUT WOULD LIKE TO JUST STATE ON THE RECORD AS HAVING AGAIN PUT IN THE RECORD, WE DO BELIEVE THIS TO BE IN JURISDICTION IN THE MATTER, AND WE WOULD LIKE TO HAVE THE OPPORTUNITY TO SUBMIT, AS DIRECTED ON OUR LEGAL MEMORANDUM, TO THIS EFFECT.

EXAMINER BOND: WELL, YOUR MOTION TO DISMISS FOR LACK OF JURISDICTION HAS BEEN SUBMITTED, HAS BEEN CONSIDERED, AND THAT HAS BEEN OVERRULED.

MR. RANDALL: THAT IS RIGHT.

EXAMINER BOND: THE RECORD NOW INDICATES THAT YOU MAINTAIN AND PRESERVE YOUR POSITION WITH RESPECT TO THE POINTS THERE PRESENTED, AND YOUR LEGAL EXCEPTION, THEREFORE IS FULLY PRESERVED. THE MATTER MAY BE PRESENTED, IF YOU SO DESIRE, IN SUPPLEMENTAL BRIEFS OR MEMORANDA IN CONNECTION WITH THE PLEADINGS UPON THE CASE AS A WHOLE. I UNDERSTOOD YOUR REQUEST TO CONTEMPLATE THAT; IS THAT CORRECT?

MR. RANDALL: THAT IS RIGHT, SIR.

BY LETTER OF JULY 7, 1961, TO THE HEARING EXAMINER THE ATTORNEY FOR THE CONTRACTING OFFICER TRANSMITTED THE CONTRACTING OFFICER'S ANSWER TO THE CONTRACTOR'S COMPLAINT. PARAGRAPH (4) OF THE ANSWER REASSERTED THE GOVERNMENT'S DEFENSE OF LACK OF JURISDICTION OF THE HEARING EXAMINER TO HEAR THE COMPLAINT BECAUSE OF THE FAILURE OF THE CONTRACTOR TO MAKE A TIMELY APPEAL. ON JANUARY 5, 1962, THE ATTORNEY FOR THE CONTRACTING OFFICER FILED A SUPPLEMENTAL MEMORANDUM OF LAW OUTLINING THE CONTRACTING OFFICER'S LEGAL POSITION AS TO HIS MOTION TO DISMISS THE APPEAL. THE ATTORNEY FOR THE CONTRACTOR FILED A REPLY BRIEF TO THE SUPPLEMENTAL MEMORANDUM ON FEBRUARY 6, 1962.

THE DECISION OF THE HEARING EXAMINER ISSUED ON AUGUST 2, 1962. THE DECISION SUSTAINED THE CONTRACTOR'S APPEAL AND REMANDED THE PROCEEDING TO THE CONTRACTING OFFICER WITH INSTRUCTIONS "TO EFFECT THE EQUITABLE ADJUSTMENT TO WHICH THE APPELLANT IS ENTITLED PURSUANT TO THE FINDINGS AND CONCLUSIONS HEREINABOVE SET OUT, PROVIDED THAT, IN THE EVENT OF DISAGREEMENT CONCERNING THE ADJUSTMENT THE CONTRACTING OFFICER WILL MAKE A DETERMINATION THEREON PURSUANT TO THE DISPUTES CLAUSE OF THE CONTRACT AND HIS DECISION WILL BE SUBJECT TO THE APPEAL PROVISIONS THEREIN SET OUT.' IT HAS BEEN INFORMALLY REPORTED THAT THE GOVERNMENT DID NOT PETITION FOR COMMISSION REVIEW OF THIS DECISION AS IT WAS ENTITLED TO DO UNDER SECTION 3.42 (C) OF THE RULES OF PROCEDURE IN CONTRACT APPEALS.

PERTINENT SECTIONS OF THE THEN APPLICABLE COMMISSION'S RULES OF PROCEDURE IN CONTRACT APPEALS (TITLE 10, CODE OF FEDERAL REGULATIONS) READ AS FOLLOWS:

SEC. 311 APPEAL.

AN APPEAL FROM THE DECISION OF THE CONTRACTING OFFICER SHALL BE TAKEN BY THE CONTRACTOR BY SERVING UPON THE CONTRACTING OFFICER, FROM WHOSE DECISION THE APPEAL IS TAKEN, A NOTICE OF APPEAL, TOGETHER WITH THREE COPIES THEREOF, WITHIN SIXTY DAYS AFTER SERVICE UPON THE CONTRACTOR OF SUCH DECISION OR WITHIN SUCH OTHER PERIOD AS MAY BE PROVIDED BY THE CONTRACT UNDER WHICH THE DISPUTE HAS ARISEN OR IS ALLEGED TO RISE. * * *

SEC. 3.14 TRANSMITTAL OF NOTICE OF APPEAL.

WHEN THE CONTRACTING OFFICER HAS BEEN SERVED WITH A NOTICE OF APPEAL, OR WITH A NOTICE OF APPEAL AND COMPLAINT, AS THE CASE MAY BE, HE SHALL FORTHWITH ENDORSE THE DATE OF SUCH RECEIPT ON THE ORIGINAL AND COPIES THEREOF AND WITHIN TEN DAYS THEREAFTER FORWARD TO THE HEARING EXAMINER (A) THE ORIGINAL AND TWO COPIES OF SUCH NOTICE OF APPEAL OR OF SUCH NOTICE OF APPEAL OR OF SUCH NOTICE OF APPEAL AND COMPLAINT, AS THE CASE MAY BE, AND (B) THREE COPIES OF THE CONTRACT, THE FINDINGS OF FACT AND DECISION OF THE CONTRACTING OFFICER, AND SUPPORTING DATA, CORRESPONDENCE, OR OTHER DOCUMENTS RELATIVE TO THE DISPUTE, TOGETHER WITH A LIST THEREOF. THE CONTRACTING OFFICER SHALL SIMULTANEOUSLY SERVE ONE COPY OF EACH DOCUMENT (EXCEPT THE CONTRACT), TOGETHER WITH A COPY OF THE LIST OF ALL SUCH DOCUMENTS, UPON THE APPELLANT.

SEC. 3.16 ANSWER.

(C) LACK OF JURISDICTION OF THE HEARING EXAMINER TO HEAR THE APPEAL AND FAILURE TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED MAY BE ASSERTED IN THE ANSWER OR MAY BE RAISED BY APPROPRIATE MOTION, AS PROVIDED IN SEC. 3.19.

SEC. 3.19 MOTIONS.

(A) UNLESS RAISED BY THE ANSWER, LACK OF JURISDICTION AND FAILURE TO STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED MUST BE RAISED BY MOTION BEFORE THE HEARING ON THE MERITS. SUCH MOTIONS SHALL BE HEARD AND DETERMINED BEFORE HEARING ON THE MERITS UNLESS THE HEARING EXAMINER ORDERS THAT DETERMINATION OF THE MOTION BE DEFERRED PENDING HEARING ON BOTH THE MERITS AND THE MOTION. THE HEARING EXAMINER HAS THE RIGHT AT ANY TIME TO RECOGNIZE HIS LACK OF JURISDICTION TO PROCEED IN A PARTICULAR CASE.

WITH RESPECT TO THE QUESTION OF THE HEARING EXAMINER'S JURISDICTION TO HEAR THE APPEAL, HIS DECISION OF AUGUST 2 READS, IN PERTINENT PART, AS FOLLOWS:

1. * * * THE GOVERNMENT'S INSISTENTLY RENEWED MOTION TO DISMISS THE APPEAL INVITES THE DISCUSSION SET OUT IN PARAGRAPH 3 BELOW.

3. THE CONTRACT DISPUTES ARTICLE INCLUDES THE USUAL PROVISION THAT THE CONTRACTOR MAY APPEAL ,WITHIN 30 DAYS FROM THE DATE OF RECEIPT" OF THE CONTRACTING OFFICER'S DECISION, AND PROVIDES T,"IF NO SUCH APPEAL TO THE COMMISSION IS TAKEN, THE DECISION OF THE CONTRACTING OFFICER SHALL BE FINAL AND CONCLUSIVE.' THE GOVERNMENT MOTION TO DISMISS WAS INITIALLY DENIED BY ORDER DATED JUNE 6, 1961 FOR THE REASON, AS THEREIN STATED, THAT THE THEN APPLICABLE COMMISSION'S RULES OF PROCEDURE IN CONTRACT APPEALS PROVIDED, IN THE PERTINENT PART OF SEC. 3.11, THAT:

"AN APPEAL * * * SHALL BE TAKEN * * * BY SERVING * * * A NOTICE OF APPEAL * * * WITHIN SIXTY DAYS * * * OR WITHIN SUCH OTHER PERIOD AS MAY BE PROVIDED BY THE CONTRACT * * *"

THE NOTICE OF APPEAL HEREIN WAS FILED WITHIN THE SIXTY-DAY PERIOD STATED IN THE QUOTED RULE. NO CITED PRECEDENT WARRANTS THE HOLDING, AS GOVERNMENT COUNSEL ADVOCATES, THAT PROVISIONS IN CONTRACTS WITH THE COMMISSION MUST BE DEEMED TO SUPERSEDE AND OVERRIDE SPECIFIC PROVISIONS OF THE COMMISSION'S RULES OF PROCEDURE WHEN AN INCONSISTENCY BETWEEN THE TWO EXISTS. THE GOVERNMENT'S ARGUMENT FOR A VESTED RIGHT OF FINALITY OF THE CONTRACTING OFFICER'S DECISION IGNORES THAT THE RIGHT DID NOT SO RIPEN UNTIL THE EXPIRATION OF THE SIXTY-DAY PERIOD SPECIFIED IN THE RULES. THE RIGHTS AND REMEDIES CONTEMPLATED IN THE CONTRACT ARE SUBJECT TO AND GOVERNED BY THE COMMISSION'S RULES WHICH APPLY TO BOTH JURISDICTIONAL AND PROCEDURAL MATTERS IN CONTRACT DISPUTES APPEALS. BECAUSE THE THEN APPLICABLE SEC. 3.11 OF THE RULES ANSWERS THE GOVERNMENT'S DISMISSAL MOTION, IT IS NOT NECESSARY TO CONSIDER THE APPELLANT'S ARGUMENT FOR EQUITABLE ESTOPPEL AGAINST THE CONTRACTING OFFICER, WHO DID NOT COMPLY WITH THE REQUIREMENTS OF THEN SEC. 3.14 OF THE COMMISSION'S RULES IN THAT HE DID NOT FILE THE COMPLETE APPEAL RECORD UNTIL MORE THAN TWO MONTHS AFTER SERVICE OF THE NOTICE OF APPEAL INSTEAD OF WITHIN THE TEN-DAY PERIOD PRESCRIBED. THE DENIAL OF THE MOTION TO DISMISS IS AFFIRMED.

AT THE OUTSET IT SHOULD BE NOTED THAT THE HEARING EXAMINER'S DECISION ON THE GOVERNMENT'S MOTION TO DISMISS THE APPEAL WAS ONE CONCERNING A QUESTION OF LAW AND, AS SUCH, IS NOT FINAL AND CONCLUSIVE. POLORON PRODUCTS, INC. V. UNITED STATES, 126 CT.CL. 816. IN THE POLORON CASE, THE COURT STATED THAT:

THE BOARD OF CONTRACT APPEALS GRANTED PLAINTIFF A FULL HEARING ON THE MERITS OF ITS CLAIMS BECAUSE IT DEEMED A CONSIDERATION ON THE MERITS NECESSARY TO A DECISION ON THE JURISDICTIONAL QUESTION PRESENTED, THAT IS, WHETHER A TIMELY APPEAL HAD BEEN MADE. THE BOARD THEN, IN ADDITION TO DISMISSING THE APPEAL FOR FAILURE TO PERFECT IT WITHIN THE REQUIRED TIME, MADE AND INCORPORATED AS PART OF ITS DECISION, DETAILED FINDINGS OF FACT WHICH WERE ADVERSE TO PLAINTIFF ON ALL ITS CLAIMS. WHILE THE DECISION OF THE HEAD OF THE DEPARTMENT AS TO THE FACTS IS BINDING ON THIS COURT UNDER UNITED STATES V. WUNDERLICH, 342 U.S. 98, ITS DECISION AS TO WHETHER A TIMELY APPEAL HAS BEEN PERFECTED WITHIN THE MEANING OF THE CONTRACT, BEING A QUESTION OF LAW, IS NOT ONE TO WHICH THE LIMITATION OF WUNDERLICH ATTACHES. W. C. SHEPHERD V. UNITED STATES, 125 C.CLS. 724, 729; SEE CALLAHAN CONSTRUCTION CO. V. UNITED STATES, 91 C.CLS. 538, 616.

THUS, WE HAVE IN EFFECT A TWO FOLD DECISION BY THE BOARD, PART OF WHICH IS BINDING HERE AND PART WHICH IS NOT. WE WILL FIRST CONSIDER THE ISSUE OF TIMELY APPEAL.

WE HOLD, THEREFORE, THAT THE "NOTICES OF TERMINATIONS" AND THE LETTERS OF AUGUST AND SEPTEMBER 1943 CONSTITUTED SUFFICIENT NOTICE TO THE PLAINTIFF OF THE CONTRACTING OFFICER'S DECISIONS, UNDER THE CONTRACT PROVISIONS APPLICABLE HERE, AND BECAUSE OF THE FAILURE TO APPEAL THOSE DECISIONS WITHIN THE THIRTY DAYS AS REQUIRED BY ARTICLE 11, PLAINTIFF IS BARRED FROM RECOVERY. UNITED STATES V. BLAIR, 321 U.S. 730, 735; UNITED STATES V. HOLPUCH CO; 328 U.S. 234, 240.

IN ADDITION TO THE AUTHORITIES CITED IN THE POLORON CASE ABOVE, SEE CLEVELAND WRECKING CO. OF CINCINNATI, INC. V. UNITED STATES, 123 CT.CL.327, 107 F.SUPP. 590, AND CLIMATIC RAINWEAR COMPANY, INC. V. UNITED STATES, 115 CT.CL. 520.

WITH RESPECT TO THE MERITS OF THE LEGAL QUESTION UPON WHICH THE HEARING EXAMINER RULED, IT IS NOTED THAT HIS DECISION TO DISMISS THE GOVERNMENT'S MOTION IS BASED UPON THE VIEW THAT THE PROVISIONS OF SECTION 3.11 OF THE COMMISSION'S RULES OF PROCEDURE IN CONTRACT APPEALS ARE INCONSISTENT WITH THE 30-DAY APPEAL PROVISIONS OF THE DISPUTES CLAUSE. WE BELIEVE THAT THE HEARING EXAMINER'S CONCLUSION THAT THERE IS AN INCONSISTENCY BETWEEN THE COMMISSION'S RULES AND THE DISPUTES CLAUSE IS CLEARLY ERRONEOUS. THE COMMISSION'S RULES PROVIDE THAT "AN APPEAL * * * SHALL BE TAKEN * * * WITHIN SIXTY DAYS * * * OR WITHIN SUCH OTHER PERIOD AS MAY BE PROVIDED BY THE CONTRACT.'

THE CONTRACT (DISPUTES CLAUSE) PROVIDED THAT "WITHIN 30 DAYS FROM THE DATE OF RECEIPT OF SUCH COPY (OF DECISION), THE CONTRACTOR MAY APPEAL.' WHILE IT MAY BE TRUE THAT AN INCONSISTENCY WOULD EXIST WERE IT NOT FOR THE PRESENCE OF THE ABOVE-UNDERSCORED LANGUAGE IN THE COMMISSION'S RULES, THE PRESENCE OF SUCH LANGUAGE HARMONIZES THE 60-DAY PERIOD IN THE RULES WITH THE 30-DAY PERIOD SPECIFIED IN THE DISPUTES CLAUSE. MOREOVER, WE BELIEVE THAT BEFORE ONE CAN ARRIVE AT A CONCLUSION THAT ANY INCONSISTENCY EXISTS, IT WOULD FIRST BE NECESSARY TO COMPLETELY IGNORE THE UNDERSCORED PORTION OF THE COMMISSION'S RULES. WE DO NOT THINK THAT SUCH A DISREGARD OF SPECIFIC LANGUAGE IS JUSTIFIED. ON THE CONTRARY, WE THINK THAT THE UNDERSCORED PORTION OF THE RULES INDICATES AN INTENT BY THE DRAFTERS OF THE RULES THAT THE PARTIES MAY AGREE IN THE CONTRACT AS TO THE TIME WITHIN WHICH AN APPEAL FROM A DECISION OF THE CONTRACTING OFFICER MAY BE TAKEN AND THAT ONLY IN THE EVENT THE CONTRACT DOES NOT SPECIFY THE PERIOD FOR APPEAL IS THE 60-DAY PERIOD PRESCRIBED IN THE RULES TO GOVERN.

IT IS A BASIC PRINCIPLE OF CONTRACT LAW THAT PARTIES MAY AGREE TO WHATEVER THEY WISH, SO LONG AS THEIR AGREEMENT DOES NOT VIOLATE SOME POSITION PROHIBITION OF LAW OR PUBLIC POLICY. THE HEARING EXAMINER'S DECISION STATES THAT "THE RIGHTS AND REMEDIES CONTEMPLATED IN THE CONTRACT ARE SUBJECT TO AND GOVERNED BY THE COMMISSION'S RULES WHICH APPLY TO BOTH JURISDICTIONAL AND PROCEDURAL MATTERS IN CONTRACT DISPUTES APPEALS. EVEN WERE WE TO ACCEPT THIS STATEMENT AS ACCURATELY REFLECTING THE LAW ON THIS SUBJECT, WHICH WE DO NOT, WE ARE AWARE OF NO LAW OR PRINCIPLE OF PUBLIC POLICY THAT WOULD PROHIBIT THE PARTIES FROM VARYING BY CONTRACT THE 60-DAY PERIOD PROVIDED IN THE COMMISSION'S RULES. WE THINK THAT THIS WOULD BE POSSIBLE EVEN IF THE RULES DID NOT PERMIT SUCH VARIATION SINCE THOSE RULES WERE NOT INCORPORATED INTO THE CONTRACT BY REFERENCE. HOWEVER, WE NEED NOT CARRY THE ANALYSIS THAT FAR BECAUSE THE RULES, IN FACT, RECOGNIZE THAT THE PERIOD CAN BE VARIED AND, WE THINK, SPECIFICALLY AUTHORIZE SUCH VARIATION, SINCE THEY STATE THAT AN APPEAL IS TO BE TAKEN "WITHIN SIXTY DAYS * * * OR WITHIN SUCH OTHER PERIOD AS MAY BE PROVIDED BY THE CONTRACT.' MOREOVER, THE PRACTICE OF SPECIFYING THE APPEAL PERIOD IN THE DISPUTES CLAUSE OF A CONTRACT BY AGREEMENT BETWEEN THE PARTIES IS NOT UNCOMMON BUT IS THE USUAL METHOD OF HANDLING THIS PROBLEM THROUGHOUT THE GOVERNMENT. THE COURTS HAVE CONSISTENTLY SANCTIONED THE PROCEDURES CONTAINED IN THE STANDARD DISPUTES CLAUSE (INCLUDING THE APPEAL PROVISIONS THEREIN) AND HAVE REFUSED TO RELIEVE CONTRACTORS WHO HAVE NOT PURSUED THEIR CLAIMS IN ACCORDANCE WITH THE TERMS OF SUCH CLAUSE. SEE UNITED STATES V. JOSEPH A. HOLPUCH CO., 328 U.S. 234, WHERE THE UNITED STATES SUPREME COURT SAID AT PAGES 239-240:

BUT ARTICLE 15 (DISPUTES) IS SOMETHING MORE THAN A DEAD LETTER TO BE REVIVED ONLY AT THE CONVENIENCE OR DISCRETION OF THE CONTRACTOR. IT IS A CLEAR, UNAMBIGUOUS PROVISION APPLICABLE AT ALL TIMES AND BINDING ON ALL PARTIES TO THE CONTRACT. NO COURT IS JUSTIFIED IN DISREGARDING ITS LETTER OR SPIRIT. ARTICLE 15 IS CONTROLLING AS TO ALL DISPUTES "CONCERNING QUESTIONS ARISING UNDER THIS CONTRACT" UNLESS OTHERWISE SPECIFIED IN THE CONTRACT. IT CREATES A MECHANISM WHEREBY ADJUSTMENTS MAY BE MADE AND ERRORS CORRECTED ON AN ADMINISTRATIVE LEVEL, THEREBY PERMITTING THE GOVERNMENT TO MITIGATE OR AVOID LARGE DAMAGE CLAIMS THAT MIGHT OTHERWISE BE CREATED. UNITED STATES V. BLAIR, 321 U.S. 730, 735. THIS MECHANISM, MOREOVER, IS EXCLUSIVE IN NATURE. SOLELY THROUGH ITS OPERATION MAY CLAIMS BE MADE AND ADJUDICATED AS TO MATTERS ARISING UNDER THE CONTRACT. * * * AND IN THE ABSENCE OF SOME CLEAR EVIDENCE THAT THE APPEAL PROCEDURE IS INADEQUATE OR UNAVAILABLE, THAT PROCEDURE MUST BE PURSUED AND EXHAUSTED BEFORE A CONTRACTOR CAN BE HEARD TO COMPLAIN IN A COURT.

THERE IS YET ANOTHER REASON WHY WE THINK THE HEARING EXAMINER'S CONCLUSION THAT THE COMMISSION'S RULES AND THE DISPUTES CLAUSE ARE INCONSISTENT IS UNSOUND. OBVIOUSLY, ONE OF THE PRIMARY REASONS WHY INCONSISTENCY WITH RESPECT TO CONTRACTUAL TERMS IS UNDESIRABLE IS THAT THE PARTIES THERETO MIGHT BE MISLED OR CONFUSED AS TO THEIR RIGHTS OR LIABILITIES THEREUNDER. WHILE THE ATTORNEY FOR MORAN ALLEGED IN A MEETING WITH US ON JANUARY 7, 1963, THAT HE WAS MISLED OR CONFUSED AS TO THE APPLICABLE TIME PERIOD WITHIN WHICH TO APPEAL THE CONTRACTING OFFICER'S DECISION, WE CANNOT OVERLOOK THE FACT THAT THE CONTRACTING OFFICER'S COVER LETTER OF MARCH 6, 1961, TO MORAN WHICH ENCLOSED HIS DECISION SPECIFICALLY CALLED MORAN'S ATTENTION TO THE DISPUTES CLAUSE AND THE 30-DAY APPEAL PERIOD SPECIFIED THEREIN. FURTHERMORE, AS NOTED ABOVE, MORAN'S ATTORNEY IN HIS LETTER OF MAY 5, 1961, STATED THAT THE DELAY IN FILING THE NOTICE OF APPEAL WAS THE RESULT OF A CLERICAL ERROR.

SINCE, AS ABOVE INDICATED, WE DO NOT THINK THAT THERE WAS AN INCONSISTENCY BETWEEN THE COMMISSION'S RULES AND THE DISPUTES CLAUSE, MORAN SHOULD HAVE APPEALED THE CONTRACTING OFFICER'S DECISION WITHIN 30 DAYS AFTER RECEIPT OF SUCH DECISION. BECAUSE IT FAILED TO DO SO, THE DECISION OF THE CONTRACTING OFFICER DENYING MORAN'S CLAIM ON THE QUESTIONS OF FACTS INVOLVED WAS FINAL AND CONCLUSIVE AND THE HEARING EXAMINER WAS WITHOUT AUTHORITY TO HEAR THE APPEAL AFTER THE EXPIRATION OF THE 30-DAY PERIOD SPECIFIED. SEE AUTOMATIC SCREW PRODUCTS COMPANY V. UNITED STATES, 145 CT.CL. 94, 169 F.SUPP. 951; WILLIAM S. HAPPEL V. UNITED STATES, 176 F.SUPP. 787, AFFIRMED 279 F.2D 88; P.L.S. COAT AND SUIT CORP. V. UNITED STATES, 148 CT.CL. 296, 180 F.SUPP. 400; UNITED STATES V. SMITH, 152 F.SUPP. 322; POLORON PRODUCTS, INC. V. UNITED STATES, SUPRA; UNITED STATES V. BLAIR, 321 U.S. 730; AND UNITED STATES V. JOSEPH A. HOLPUCH CO., SUPRA. IN THE AUTOMATIC SCREW PRODUCTS CASE THE CONTRACT (WITH THE DEPARTMENT OF THE ARMY) CONTAINED ESSENTIALLY THE SAME DISPUTES CLAUSE AS THAT BEFORE US. THE CONTRACTOR'S APPEAL FROM THE CONTRACTING OFFICER'S DECISION WAS LATE AND THE BOARD (APPARENTLY THE ARMED SERVICES BOARD OF CONTRACT APPEALS) DISMISSED THE APPEAL. WHEN THE CONTRACTOR BROUGHT SUIT IN THE COURT OF CLAIMS, THAT COURT GRANTED THE GOVERNMENT'S MOTION FOR SUMMARY JUDGMENT, DISMISSED THE PLAINTIFF'S PETITION AND QUOTED THE FOLLOWING LANGUAGE OF THE BOARD WITH APPROVAL:

THIS BOARD HAS UNIFORMLY AND CONSISTENTLY HELD THAT IT IS WITHOUT AUTHORITY TO EXTEND THE PERIOD OF TIME FIXED BY THE CONTRACT TERMS, WITHIN WHICH THE APPELLANT MAY APPEAL FROM DECISIONS OF CONTRACTING OFFICERS. THE EVIDENCE DISCLOSES THAT APPELLANT FAILED TO APPEAL FROM THE CONTRACTING OFFICER'S DECISION WHICH WAS RECEIVED BY IT ON 15 OCTOBER 1954 UNTIL MORE THAN 8 MONTHS THEREAFTER, ON 1 JULY 1955, WHEREAS THE CONTRACT TERMS UNEQUIVOCALLY PROVIDED THAT AN APPEAL BE TAKEN WITHIN 30 DAYS.

COMPARE THE HAPPEL CASE WHERE THE CONTRACTING OFFICER'S DECISION WAS RENDERED ON APRIL 7, 1958; THE CONTRACTOR APPEALED ON MAY 15, 1958; AND THE BOARD OF CONTRACT APPEALS DISMISSED THE APPEAL ON JULY 29, 1958, ON THE BASIS THAT THE APPEAL WAS NOT TIMELY MADE WITHIN THE 30 DAYS PROVIDED IN THE DISPUTES CLAUSE. THE UNITED STATES DISTRICT COURT STATED:

* * * IT HAS BEEN REPEATEDLY HELD THAT CONTRACT PROVISIONS SIMILAR TO THE ONE IN THE CONTRACT IN QUESTION AND REFERRED TO FOR THE SETTLEMENT OF DISPUTES CONCERNING FACTS, IS A VALID PROVISION FOR DECIDING THESE FACTUAL ISSUES, AND IT IS SOLELY THROUGH ITS OPERATION THAT CLAIMS MAY BE MADE AND ADJUDICATED AS TO MATTERS ARISING UNDER THE CONTRACT. UNITED STATES V. CALLAHAN WALKER CONST.CO., SUPRA (317 U.S. 56), AND UNITED STATES V. JOSEPH A. HOLPUCH CO., 328 U.S. 234 * * *.

(3) IN THE CASE BEFORE THE COURT THE PLAINTIFF HAS NOT EXHAUSTED HIS ADMINISTRATIVE REMEDY FOR THE REASON THAT HIS APPEAL WAS UNTIMELY AND IT WAS SO DETERMINED BY THE APPEAL BOARD. PLAINTIFF FAILED TO INITIATE HIS APPEAL WITHIN THE TIME REQUIRED BY THE CONTRACT. ACCORDINGLY, HE HAS FAILED TO EXHAUST HIS ADMINISTRATIVE REMEDY IN THIS RESPECT AND THE CONTRACTOR CANNOT MAINTAIN AN ACTION AGAINST THE GOVERNMENT FOR THE ALLEGED UNPAID BORROW PIT FILL WHEN AN APPEAL WAS NOT TAKEN WITHIN 30 DAYS OF THE DATE OF THE DECISION OF THE CONTRACTING OFFICER FINDING AGAINST HIM, UNLESS THE SAME IS FRAUDULENT, ARBITRARY, CAPRICIOUS OR SO GROSSLY ERRONEOUS AS NECESSARILY TO IMPLY BAD FAITH, WHICH ARE NOT APPLICABLE TO THIS CASE. AUTOMATIC SCREW PRODUCTS CO. V. UNITED STATES, C., 169 F.SUPP. 951.

THERE REMAIN TWO ISSUES IN THIS CASE WHICH REQUIRE SOME DISCUSSION. THE FIRST OF THESE IS MENTIONED IN THE HEARING EXAMINER'S DECISION WHEREIN HE STATES "IT IS NOT NECESSARY TO CONSIDER THE APPELLANT'S ARGUMENT FOR EQUITABLE ESTOPPEL AGAINST THE CONTRACTING OFFICER, WHO DID NOT COMPLY WITH THE REQUIREMENTS OF THEN SEC. 3.14 OF THE COMMISSION'S RULES IN THAT HE DID NOT FILE THE COMPLETE APPEAL RECORD UNTIL MORE THAN TWO MONTHS AFTER SERVICE OF THE NOTICE OF APPEAL INSTEAD OF WITHIN THE TEN-DAY PERIOD PRESCRIBED.' THE SECOND ISSUE CONCERNS THE EFFECT TO BE GIVEN TO THE GOVERNMENT'S FAILURE TO APPEAL THE ADVERSE DECISION OF THE HEARING EXAMINER TO THE COMMISSION AS PROVIDED IN SECTION 3.42 (C) OF THE COMMISSION'S RULES.

WITH RESPECT TO THE FIRST ISSUE, THE RECORD INDICATES, AS OUTLINED ABOVE, THAT ON MAY 12, 1961 (7 DAYS AFTER RECEIPT OF CONTRACTOR'S NOTICE OF APPEAL), THE CONTRACTING OFFICER TRANSMITTED THREE APPEAL FILES EACH CONTAINING A COPY OF THE CONTRACT, THE CONTRACTING OFFICER'S DECISION AND THE CONTRACTOR'S APPEAL. ALSO TRANSMITTED AT THIS TIME WAS A MOTION BY THE CONTRACTING OFFICER THAT THE APPEAL BE DISMISSED. THIS MOTION WAS DENIED BY THE HEARING EXAMINER ON JUNE 6, 1961. SUBSEQUENTLY, BY LETTER DATED JULY 14, 1961, THE ATTORNEY FOR THE CONTRACTING OFFICER SUBMITTED, FOR INCLUSION IN THE APPEAL FILE, THREE COPIES OF CERTAIN DOCUMENTS ENTITLED EXHIBITS E, F, G, H AND I, TOGETHER WITH THE APPROPRIATE NUMBER OF LISTS THEREOF. IN EXPLANATION OF WHY THESE EXHIBITS WERE NOT INCLUDED IN THE ORIGINAL APPEAL FILE FORWARDED ON MAY 12, 1961, THE CONTRACTING OFFICER'S ATTORNEY STATED IN HIS LETTER OF JULY 14, THAT BECAUSE OF HIS STRONG CONVICTION THAT HIS MOTION TO DISMISS THE APPEAL WOULD BE GRANTED HE PURPOSELY COMPILED A BRIEF APPEAL FILE, AND THAT SINCE IT NOW APPEARED THAT MORAN'S APPEAL WAS APPROACHING A HEARING ON THE MERITS HE WAS SUBMITTING THE ADDITIONAL DOCUMENTS AT THAT TIME.

ON THE BASIS OF THESE FACTS WE FAIL TO SEE ANY MERIT IN MORAN'S CONTENTION THAT THE GOVERNMENT SHOULD BE EQUITABLY ESTOPPED FROM ASSERTING LACK OF JURISDICTION IN THE HEARING EXAMINER TO HEAR THE APPEAL. THERE IS NOTHING IN THE RECORD TO INDICATE THAT MORAN MADE TIMELY OBJECTION TO THE LATE FILING OF THE EXHIBITS. IN THIS CONNECTION, THE TRANSCRIPT OF THE AUGUST 10, 1961, HEARING SESSION REVEALS (AT PAGE 29) THAT WHEN THE ATTORNEY FOR MORAN WAS ASKED BY THE HEARING EXAMINER WHETHER THERE WAS ANY OBJECTION TO THE RECEIPT OF THE LATE MATERIAL HE REPLIED: "THERE IS NO OBJECTION, YOUR HONOR.'

MOREOVER, IT DOES NOT APPEAR THAT THE SUBJECT EXHIBITS WERE GERMANE OR NECESSARY TO ENABLE THE HEARING EXAMINER TO REACH A DECISION ON THE GOVERNMENT'S MOTION TO DISMISS THE APPEAL. WHILE IT MAY BE TRUE THAT THESE EXHIBITS WERE NECESSARY FOR A HEARING OF MORAN'S APPEAL ON THE MERITS, THIS FACT, WE BELIEVE, IS IRRELEVANT FOR THE SIMPLE REASON, AS WE HAVE INDICATED ABOVE, THAT MORAN'S APPEAL SHOULD NOT HAVE BEEN HEARD ON THE MERITS IN THE FIRST PLACE. HAD THE CONTRACTING OFFICER FAILED TO TIMELY OR DILIGENTLY PRESS ITS MOTION FOR DISMISSAL OF THE APPEAL THERE MIGHT BE SOME MERIT TO MORAN'S CONTENTIONS AS TO EQUITABLE ESTOPPEL. BUT, AS THE EVENTS OUTLINED ABOVE INDICATE, THE ATTORNEY FOR THE CONTRACTING OFFICER RAISED THE ISSUE OF LACK OF JURISDICTION IMMEDIATELY AND PRESSED THIS ISSUE UPON THE HEARING EXAMINER WITH DUE DILIGENCE. IN ANY EVENT, IT IS DIFFICULT TO SEE HOW EVENTS WHICH OCCURRED AFTER THE DENIAL OF A MOTION TO DISMISS, WHICH SHOULD HAVE BEEN GRANTED AND WHICH WOULD HAVE FORECLOSED ANY FURTHER PROCEEDINGS, CAN OPERATE TO ESTOP THE GOVERNMENT FROM ASSERTING A PERFECTLY VALID DEFENSE OF LACK OF JURISDICTION PRIOR TO SUCH DENIAL

TURNING NOW TO THE SECOND ISSUE, IT HAS BEEN PREVIOUSLY NOTED THAT THE QUESTION WHETHER A TIMELY APPEAL HAS BEEN MADE IS ONE GOING TO THE JURISDICTION OF THE HEARING TRIBUNAL AND IS A QUESTION OF LAW. THE DISPUTES CLAUSE IN THE CONTRACT BEFORE US PROVIDED THAT ANY DISPUTE CONCERNING A QUESTION OF FACT SHALL BE DECIDED BY THE CONTRACTING OFFICER WHOSE DECISION SHALL BE FINAL IF NO APPEAL IS TAKEN WITHIN 30 DAYS FROM THE DATE OF RECEIPT BY THE CONTRACTOR OF THE DECISION. PROVISIONS IN GOVERNMENT CONTRACTS MAKING FINAL ON A QUESTION OF LAW THE DECISION OF ANY ADMINISTRATIVE OFFICIAL, REPRESENTATIVE OR BOARD ARE EXPRESSLY PROHIBITED BY THE TERMS OF 41 U.S.C. 322. SEE ABOVE WHERE THE WUNDERLICH ACT IS QUOTED IN FULL. THIS BEING THE CASE, THE HEARING EXAMINER'S DECISION ON THE QUESTION OF TIMELY APPEAL IS NOT FINAL AND CONCLUSIVE. IN THAT CONNECTION SEE PAGE 6 OF H.REPT. NO. 1380, CITED ABOVE, WHEREIN IT IS STATED WITH REFERENCE TO THE IMPACT OF THE WUNDERLICH LEGISLATION THAT:

THE COMMITTEE FORESEES NO POSSIBILITY OF THE PROPOSED LEGISLATION CREATING ANY NEW RIGHTS THAT A CONTRACTOR MAY NOT HAVE HAD PRIOR TO ITS ENACTMENT, WITH THE EXCEPTION OF THE STANDARDS OF REVIEW THEREIN PRESCRIBED. UNDER THE TERMS OF THE STANDARD DISPUTES CLAUSE THE DECISION OF A CONTRACTING OFFICER IS FINAL UNLESS THE CONTRACTOR APPEALS WITHIN 30 DAYS. THE SUPREME COURT IN UNITED STATES V. HOLPUCH CO. (328 U.S. 234), HAS HELD THAT UNLESS A CONTRACTOR PURSUES THE ADMINISTRATIVE REMEDY OF APPEAL TO THE HEAD OF THE DEPARTMENT WHICH HE IS GRANTED BY THE DISPUTES CLAUSE, HE LOSES HIS RIGHT TO SUE IN THE COURT OF CLAIMS. GOVERNMENT CONTRACTORS WHO HAVE NOT APPEALED THEIR DECISIONS TO THE HEAD OF THE DEPARTMENT WITHIN THE 30-DAY PERIOD WILL NOT BE PERMITTED TO DO SO.

IT HAS BEEN CONSISTENTLY HELD THAT THE FAILURE OF A CONTRACTOR TO APPEAL THE DECISION OF A CONTRACTING OFFICER OR OF AN APPEALS BOARD ON A QUESTION OF LAW LOSES NOTHING BY SUCH FAILURE AND MAY LATER BRING SUIT IN COURT TO RECOVER ON HIS CLAIM. CRAMP SHIPBUILDING COMPANY V. UNITED STATES, 122 CT.CL. 72; UNITED STATES V. SMITH, 152 F.SUPP. 322 (FOOTNOTE 9, PAGE 327); ALLIED CONTRACTORS, INC. V. UNITED STATES, 129 CT.CL. 400, 124 F.SUPP. 366; POTTSVILLE CASTING AND MACHINE SHOPS, INC. V. UNITED STATES, 101 F.SUPP. 370; RAILROAD WATERPROOFING CORPORATION V. UNITED STATES, 133 CT.CL. 911, 137 F.SUPP. 713; HALVORSON V. UNITED STATES, 126 F.SUPP. 898, AND UNITED STATES V. LUNDSTROM, 139 F.2D 792. THIS IS SO BECAUSE A DECISION ON A QUESTION OF LAW BY A CONTRACTING OFFICER OR APPEAL BOARD, AS THE CASE MAY BE IS NOT FINAL OR CONCLUSIVE SINCE UNDER THE STANDARD DISPUTES CLAUSE ONLY DECISIONS ON QUESTIONS OF FACT ARE ACCORDED FINALITY.

WHILE IT IS TRUE THAT ALL OF THE AUTHORITIES CITED ABOVE ARE CONCERNED WITH A CONTRACTOR'S FAILURE TO APPEAL A DECISION ON A QUESTION OF LAW, IN NONE OF THEM IS THERE ANY INDICATION THAT THE SAME RULE WOULD BE INAPPLICABLE TO A CASE WHERE IT IS THE GOVERNMENT THAT FAILS TO APPEAL SUCH DECISION. UNLESS IT CAN BE SAID THAT A CONTRACTOR HAS GREATER RIGHTS UNDER A CONTRACT WITH THE GOVERNMENT THAN THE GOVERNMENT ITSELF DOES, WE CAN PERCEIVE NO BASIS IN EITHER LAW OR REASON WHY THE SAME RULE WOULD NOT BE EQUALLY APPLICABLE TO A SITUATION WHERE IT IS THE GOVERNMENT WHICH FAILS TO APPEAL. IT FOLLOWS THAT THE GOVERNMENT HAS NOT WAIVED ITS RIGHT TO INSIST UPON ITS LEGAL DEFENSE OF LACK OF AUTHORITY IN THE HEARING EXAMINER TO HEAR THE APPEAL OF MORAN. SINCE MORAN DID NOT APPEAL THE DECISION OF THE CONTRACTING OFFICER WITHIN THE 30 DAYS SPECIFIED IN THE DISPUTES CLAUSE, THAT DECISION IS FINAL AND PRECLUDES ANY RECOVERY BY MORAN ON ITS CLAIM. IT HAS BEEN INFORMALLY REPORTED TO US THAT, PURSUANT TO THE DECISION OF THE HEARING EXAMINER, THE CONTRACTOR AND THE GOVERNMENT, BY A MODIFICATION TO THE CONTRACT, HAVE FIXED THE SUM TO BE PAID THE CONTRACTOR AT $180,230.96. WE HAVE ALSO BEEN INFORMED THAT THE AMOUNT SO DETERMINED HAS NOT YET BEEN PAID. IN VIEW OF THE FOREGOING ANALYSIS, IT IS CLEAR THAT THE CONTRACT MODIFICATION IS NULL AND VOID SINCE THERE IS NO CONSIDERATION TO SUPPORT IT. WE MUST ADVISE, THEREFORE, THAT MORAN BROS., INC., HAS NO VALID CLAIM AGAINST THE GOVERNMENT UPON WHICH PAYMENT CAN BE MADE.