B-153672, APR. 1, 1964

B-153672: Apr 1, 1964

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THIS AGREEMENT WAS DRAWN ON U.S. MCSHAIN WAS ASKED TO SUBMIT A REVISED PROPOSAL WHICH AGAIN WAS REJECTED ON THE BASIS THAT IT WAS BELIEVED TO BE EXCESSIVE. THE CONTRACTING OFFICER NOTIFIED MCSHAIN THAT THE COST BREAKDOWN WAS SATISFACTORY EXCEPT FOR THE INCLUSION OF $37.83 WHICH APPARENTLY COVERED ADDITIONAL BUILDERS' RISK INSURANCE AND WHICH WAS DETERMINED NOT TO BE AN ALLOWABLE ITEM. IT IS NOT DISPUTED THAT MCSHAIN DID NOT PROTEST THE TERMS OF THE CHANGE ORDER UNTIL JULY 25. 1963: "WE HAVE HAD UNDER CONSIDERATION YOUR LETTER OF JULY 25. "IN REVIEWING OUR RECORDS WE FIND THAT THE WORK COVERED BY YOUR SUPPLEMENTAL PROPOSAL IS IDENTICAL WITH THAT INCLUDED IN OUR CHANGE ORDER "M.'. 067.27 AND GRANTING FIVE DAYS ADDITIONAL TIME WAS ISSUED ON APRIL 16.

B-153672, APR. 1, 1964

TO ADMINISTRATOR OF VETERANS AFFAIRS:

WE REFER TO YOUR LETTER WITH ENCLOSURES, DATED MARCH 3, 1964, REQUESTING OUR VIEWS AS TO THE LEGAL EFFECT OF A CERTAIN CHANGE ORDER DATED APRIL 16, 1963.

THE RECORD FURNISHED THIS OFFICE SHOWS THAT ON JUNE 28, 1961, THE GOVERNMENT ENTERED INTO A CONTRACT WITH JOHN MCSHAIN, INC., FOR THE CONSTRUCTION OF A 700-BED GENERAL MEDICAL AND SURGICAL HOSPITAL, AND REGIONAL MEDICAL CLINIC, TO BE LOCATED IN WASHINGTON, D.C. THIS AGREEMENT WAS DRAWN ON U.S. STANDARD FORM 23 WHICH EXPRESSLY INCORPORATED THE GENERAL PROVISIONS OF STANDARD FORM 23A AS WELL AS VARIOUS DETAILED SPECIFICATIONS AND DRAWINGS COVERING THE INTENDED WORK. THE RECORD FURTHER SHOWS THAT BY LETTER DATED MAY 18, 1962, THE BUILDING ARCHITECTS INFORMED THE RESIDENT ENGINEER THAT THE VETERANS ADMINISTRATION DESIGN SECTION HAD RECOMMENDED A CHANGE IN PLANS INVOLVING THE ADDITION OF A CANOPY OVER AN ANIMAL RUN LOADING PLATFORM. ON JUNE 1, 1962, THE RESIDENT ENGINEER NOTIFIED MCSHAIN OF THE DESIRED CHANGE AND REQUESTED THAT THE CONTRACTOR FURNISH A COST PROPOSAL. BY LETTER DATED SEPTEMBER 13, 1962, MCSHAIN OFFERED TO PERFORM THE SUGGESTED CHANGE FOR $4,430.45. SINCE THIS AMOUNT EXCEEDED THE GOVERNMENT'S OWN ESTIMATE, MCSHAIN WAS ASKED TO SUBMIT A REVISED PROPOSAL WHICH AGAIN WAS REJECTED ON THE BASIS THAT IT WAS BELIEVED TO BE EXCESSIVE. FINALLY ON MARCH 15, 1963, MCSHAIN SUBMITTED A NEW COST PROPOSAL PROVIDING FOR AN INCREASE OF $4,105.10. SINCE THIS FIGURE APPROXIMATED THE GOVERNMENT'S OWN ESTIMATE, THE CONTRACTING OFFICER NOTIFIED MCSHAIN THAT THE COST BREAKDOWN WAS SATISFACTORY EXCEPT FOR THE INCLUSION OF $37.83 WHICH APPARENTLY COVERED ADDITIONAL BUILDERS' RISK INSURANCE AND WHICH WAS DETERMINED NOT TO BE AN ALLOWABLE ITEM. SUBSEQUENTLY, BY LETTER DATED APRIL 16, 1963, THE CONTRACTING OFFICER ORDERED MCSHAIN TO PROCEED WITH COMPLETION OF THE ADDITIONAL WORK STATING THE CONSIDERATION TO BE $4,067.27 (I.E. $4,105.10 LESS $37.83).

IT IS NOT DISPUTED THAT MCSHAIN DID NOT PROTEST THE TERMS OF THE CHANGE ORDER UNTIL JULY 25, 1963, AT WHICH TIME HE FILED A REVISED PROPOSAL AND BREAKDOWN OF COSTS CLAIMING THAT HE HAD UNDERCHARGED THE GOVERNMENT IN THE AMOUNT OF $764.62. THE CONTRACTING OFFICER DENIED THIS REQUEST IN THE FOLLOWING LETTER DATED AUGUST 27, 1963:

"WE HAVE HAD UNDER CONSIDERATION YOUR LETTER OF JULY 25, 1963, SUBMITTING AS A SUPPLEMENT TO YOUR CHANGE ORDER NO. 69 A PROPOSAL IN THE AMOUNT OF $4,831.89.

"IN REVIEWING OUR RECORDS WE FIND THAT THE WORK COVERED BY YOUR SUPPLEMENTAL PROPOSAL IS IDENTICAL WITH THAT INCLUDED IN OUR CHANGE ORDER "M.'

"CHANGE ORDER "M" IN AMOUNT OF $4,067.27 AND GRANTING FIVE DAYS ADDITIONAL TIME WAS ISSUED ON APRIL 16, 1963 FOR CANOPY OVER ANIMAL RUN LOADING PLATFORM. UNTIL YOUR LETTER OF JULY 25, 1963 NO QUESTION HAD BEEN RAISED AS TO THE ACCURACY OF CHANGE ORDER "M.' YOUR SUPPLEMENTAL PROPOSAL REQUESTS, IN EFFECT, ADDITIONAL COMPENSATION FOR WORK ALREADY COVERED BY CHANGE ORDER "M.'

"SINCE YOUR SUPPLEMENTAL PROPOSAL DOES NOT RELATE TO WORK IN ADDITION TO THAT REQUIRED BY CHANGE ORDER "M," AND SINCE THE DIFFERENTIAL IN AMOUNT CLAIMED APPEARS TO BE ATTRIBUTABLE TO AN ERROR IN ESTIMATING, FOR WHICH THE GOVERNMENT WAS IN NO WAY RESPONSIBLE, IT IS MY OPINION THAT ADDITIONAL COMPENSATION CANNOT BE FAVORABLY CONSIDERED.

"ACCORDINGLY, IT IS MY FINAL DECISION, PURSUANT TO CLAUSE 6 OF THE GENERAL PROVISIONS OF THE CONTRACT (SF23-A) THAT YOUR CLAIM FOR ADDITIONAL COMPENSATION ON THE BASIS OF YOUR SUPPLEMENTAL PROPOSAL DATED JULY 25, 1963 CANNOT BE APPROVED. IT IS THEREFORE DENIED.'

ON AUGUST 30, 1963, MCSHAIN REQUESTED THAT HIS CASE BE REFERRED TO THE VETERANS ADMINISTRATION BOARD OF CONTRACT APPEALS CLAIMING THAT HE WAS EQUITABLY ENTITLED TO EXTRA COMPENSATION SINCE THE ACTUAL WORK PERFORMED WAS IN ADDITION TO THAT REQUIRED BY THE CONTRACT. MCSHAIN FURTHER CLAIMS THAT ANY ERRORS IN ITS PROPOSAL OF MARCH 15 WERE HONEST PRICING MISTAKES WHICH RESULTED FROM NORMAL CHANGE ORDER NEGOTIATIONS.

ARTICLE 3 OF STANDARD FORM 23A PROVIDES THAT THE CONTRACTING OFFICER MAY AT ANY TIME, BY WRITTEN ORDER, MAKE SUCH CHANGES IN THE DRAWINGS AND/OR SPECIFICATIONS AS ARE WITHIN THE GENERAL SCOPE OF THE ORIGINAL CONTRACT. THEREAFTER, SHOULD A CONTRACTOR BELIEVE THAT AN ADJUSTMENT IN CONTRACT PRICE IS IN ORDER, HE IS SPECIFICALLY REQUIRED TO ASSERT HIS CLAIM IN WRITING WITHIN 30 DAYS AFTER RECEIPT OF SUCH CHANGE ORDER. IN THE PRESENT CASE, THE RECORD IS CLEAR THAT THE CONTRACTOR FAILED TO ASSERT ANY CLAIM WITHIN THE SPECIFIED PERIOD, BUT RATHER CHOSE TO WAIT APPROXIMATELY THREE MONTHS. IT IS OUR VIEW THAT THIS FAILURE TO COMPLY WITH THE ABOVE TIME LIMITATION MUST BE REGARDED AS FATAL AND PRECLUDE ANY CONSIDERATION OF THE CLAIM. SEE UNITED STATES V. CALLAHAN WALKER CONSTRUCTION CO., 317 U.S. 56 (1942); ANTHONY P. MILLER, INCORPORATED V. UNITED STATES, 111 CT.CL. 252 (1948).

WE ARE NOT UNMINDFUL OF THE FACT THAT THE CHANGE ORDER IN QUESTION DID NOT EXPRESSLY STATE THAT NEGOTIATIONS WERE AT AN END, OR EVEN THAT IT WAS A FINAL DECISION. WHILE ITS INCLUSION WOULD HAVE INDEED BEEN HELPFUL, WE DO NOT BELIEVE THAT SUCH LANGUAGE IS REQUIRED BY LAW, REGULATION OR CONTRACT PROVISION. NOR DO WE BELIEVE IT IS PLAUSIBLE TO ASSUME THAT THE CONTRACTOR WOULD HAVE ACTED ANY DIFFERENTLY OR THAT HE WAS MISLED BY THE CHANGE ORDER AS WRITTEN. THE TERMS OF THE CHANGE ORDER LEFT NOTHING FURTHER TO BE NEGOTIATED OR DECIDED. TO THE CONTRARY, THE CONTRACTOR WAS EXPRESSLY ORDERED TO PERFORM THE ADDITIONAL WORK AT A GIVEN PRICE. IF HE OBJECTED TO THE PRICE ADJUSTMENT CONTAINED IN THE CHANGE ORDER, IT WAS CLEARLY INCUMBENT UPON HIM TO REGISTER SUCH OBJECTION WITHIN THE PRESCRIBED TIME PERIOD. SEE UNITED STATES V. CALLAHAN WALKER CONSTRUCTION CO. SUPRA AND UNITED STATES V. CUNNINGHAM, 125 F.2D 28 (1941). IN THE CUNNINGHAM CASE, THE COURT HAVING A SIMILAR PROBLEM AS TO THE FAILURE OF A CONTRACTOR TO GIVE TIMELY NOTICE, ENUNCIATED THE GENERAL PROPOSITION THAT A PROVISION IN A CONSTRUCTION CONTRACT WHICH REQUIRES THAT A CONTRACTOR GIVE A SPECIFIED NUMBER OF DAYS NOTICE ESSENTIALLY AMOUNTS TO A "CONDITION PRECEDENT" AND AS SUCH MUST BE COMPLIED WITH BEFORE RECOVERY WILL BE ALLOWED.

YOUR LETTER FURTHER QUESTIONS WHETHER THE CONTRACTING OFFICER MAY NOT HAVE BEEN DEEMED TO HAVE WAIVED THE DEFENSE OF PROPER NOTICE SINCE HE ALSO DENIED MCSHAIN'S CLAIM ON THE MERITS. IN ARUNDEL CORPORATION V. UNITED STATES, 96 CT.CL. 77, 111 (1942) THE COURT STATED:

"IN THE CASE AT BAR THE CONTRACTING OFFICER CONSIDERED THE CLAIM ON ITS MERITS WITHOUT ANY MENTION OF THE FACT THAT THE PROTEST HAD NOT BEEN FILED AS REQUIRED BY THE CONTRACT. THERE WAS NO INDICATION THAT HE WAS RELYING ON THIS PROVISION OF THE CONTRACT. HIS ACTION IN CONSIDERING THE CLAIM ON THE MERITS WITHOUT ANY MENTION OF THIS PROVISION OF THE CONTRACT IS A CLEAR INDICATION THAT HE DID NOT INTEND TO RELY ON IT, BUT WAIVED IT.'

IT IS OUR VIEW HOWEVER, THAT THE ARUNDEL CASE IS DISTINGUISHABLE FROM THE PRESENT CASE ON THE ISSUE OF WAIVER, FOR HERE THE CONTRACTING OFFICER SPECIFICALLY INVITED MCSHAIN'S ATTENTION TO THE FACT THAT NO QUESTION HAD BEEN RAISED AS TO ACCURACY OF THE CHANGE ORDER UNTIL JULY 25, 1963. WHILE WE AGREE THAT THE CONTRACTING OFFICER DID IN FACT DECIDE THE CASE ON ITS MERITS, IT APPEARS EQUALLY APPARENT THAT THE CONTRACTING OFFICER RECOGNIZED THAT THE CLAIM WAS UNTIMELY IN PARAGRAPH 3 OF THE LETTER IN QUESTION. IN THE ARUNDEL CASE THE COURT FOUND AN IMPLIED WAIVER WHERE A CONTRACTING OFFICER CONSIDERED A CLAIM ON ITS MERITS WITHOUT MAKING ANY MENTION OF THE FACT THAT THE CLAIM HAD BEEN FILED TOO LATE; THE COURT SPECIFICALLY NOTED, HOWEVER, AT PAGE 111,THAT NO WAIVER MAY BE IMPLIED WHERE FACTS EXIST TO REBUT THE IMPLICATION OF A WAIVER ARISING FROM CONSIDERATION OF THE CLAIM ON ITS MERITS. HERE, AS WE PREVIOUSLY INDICATED, WHILE THE CONTRACTING OFFICER DID IN FACT ATTEMPT TO DECIDE THE CASE ON ITS MERITS, HE ALSO RECOGNIZED AND CLEARLY INDICATED THAT THE CLAIM WAS UNTIMELY. THE COURTS HAVE GENERALLY TAKEN THE POSITION THAT WHILE A WAIVER NEED NOT BE EXPRESSED, IT MUST BE EVIDENCED BY CONDUCT OF AN UNEQUIVOCAL CHARACTER. UNITED STATES V. CHICHESTER, 312 F.2D 275 (1963). SEE ALSO B-152346, NOVEMBER 22, 1963. IN 56 AM.JUR., WAIVER, SEC. 322, THE WRITER STATED:

"WHERE AN IMPLIED WAIVER IS CLAIMED, CAUTION MUST BE EXERCISED BOTH IN PROOF AND APPLICATION, AND THE FACT AND CIRCUMSTANCES MUST BE UNEQUIVOCAL IN CHARACTER.'

IN THIS CASE IT SEEMS APPARENT THAT THE CIRCUMSTANCES ARE NOT SUCH AS TO UNEQUIVOCALLY CONCLUDE THAT THE CONTRACTING OFFICER ACTUALLY INTENDED A WAIVER OF THE DEFENSE. IN VIEW THEREOF, WE MUST CONCLUDE THAT MCSHAIN IS NOW PRECLUDED FROM ASSERTING THIS CLAIM.