B-161179, AUGUST 7, 1967, 47 COMP. GEN. 95

B-161179: Aug 7, 1967

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

ETC. - DELAYS - REIMBURSEMENT THE RECOVERY OF THE STAND-BY COSTS AND RELATED EXPENSES INCURRED BY A CONTRACTOR IN CONNECTION WITH THE DELAYED PERFORMANCE OF A CONTRACT FOR GRADING A TIMBER ACCESS ROAD AND CONSTRUCTING A FOOTBRIDGE IS LIMITED IN THE ABSENCE OF A CONTRACTUAL PROVISION FOR PAYMENT OF RELAYED COSTS TO THE ADDITIONAL EXPENSES DIRECTLY ATTRIBUTABLE TO THE CHANGED WORK AUTHORIZED UNDER THE CHANGES CLAUSE OF THE CONTRACT WHICH DISRUPTED THE CONTRACT. REQUESTS A LEGAL DECISION ON WHETHER THE BUREAU OF PUBLIC ROADS HAS AUTHORITY TO PAY FOR STAND-BY (DELAY) COSTS RESULTING FROM A CONSTRUCTIVE CHANGE WHEN THERE IS NO SPECIFIC CONTRACT PROVISION UNDER WHICH INCREASED COSTS FOR DELAY MAY BE PAID.

B-161179, AUGUST 7, 1967, 47 COMP. GEN. 95

CONTRACTS - SPECIFICATIONS - CHANGES, REVISIONS, ETC. - DELAYS - REIMBURSEMENT THE RECOVERY OF THE STAND-BY COSTS AND RELATED EXPENSES INCURRED BY A CONTRACTOR IN CONNECTION WITH THE DELAYED PERFORMANCE OF A CONTRACT FOR GRADING A TIMBER ACCESS ROAD AND CONSTRUCTING A FOOTBRIDGE IS LIMITED IN THE ABSENCE OF A CONTRACTUAL PROVISION FOR PAYMENT OF RELAYED COSTS TO THE ADDITIONAL EXPENSES DIRECTLY ATTRIBUTABLE TO THE CHANGED WORK AUTHORIZED UNDER THE CHANGES CLAUSE OF THE CONTRACT WHICH DISRUPTED THE CONTRACT, AND IN ACCORDANCE WITH THE SO-CALLED RICE DOCTRINE, UNITED STATES V RICE, 317 U.S. 61, PAYMENT MAY NOT BE MADE FOR THE CONSEQUENTIAL EXPENSES INCURRED INCIDENT TO THE UNCHANGED WORK.

TO THE GENERAL COUNSEL, DEPARTMENT OF COMMERCE, AUGUST 7, 1967:

YOUR LETTER OF MARCH 29, 1967, REQUESTS A LEGAL DECISION ON WHETHER THE BUREAU OF PUBLIC ROADS HAS AUTHORITY TO PAY FOR STAND-BY (DELAY) COSTS RESULTING FROM A CONSTRUCTIVE CHANGE WHEN THERE IS NO SPECIFIC CONTRACT PROVISION UNDER WHICH INCREASED COSTS FOR DELAY MAY BE PAID.

YOUR REQUEST STEMS FROM A DECISION RENDERED ON DECEMBER 6, 1965, BY THE DEPARTMENT OF COMMERCE APPEALS BOARD IN THE APPEAL OF A. L. HARDING, INC., DOCKET NO. PR-44. THE APPEAL WAS TAKEN FROM A DENIAL BY THE BUREAU OF PUBLIC ROADS CONTRACTING OFFICER OF A NUMBER OF CLAIMS FOR ADDITIONAL COMPENSATION TOTALLING APPROXIMATELY $92,000.

THE CONTRACT INVOLVED (NO. CPR 8-9443 DATED NOVEMBER 2, 1959) WAS IN THE AMOUNT OF $425,376 AND CALLED FOR GRADING OF 9.382 MILES OF A TIMBER ACCESS ROAD AND THE CONSTRUCTION OF A 125 FOOT BRIDGE OVER PASS CREEK IN DOUGLAS COUNTY, OREGON. PERFORMANCE HISTORY UNDER THE CONTRACT IS DESCRIBED IN THE CONTRACTING OFFICER'S DECISION OF SEPTEMBER 9, 1963, AS FOLLOWS:

"* * * CONTRACT TIME BEGAN DECEMBER 3, 1959 AND 250 CALENDAR DAYS WERE ESTABLISHED AS THE TOTAL CONTRACT TIME TO BE ALLOWED. ACTUAL CONSTRUCTION OPERATIONS BEGAN JANUARY 11, 1960, WITH THE MAJORITY OF THE WORK BEING PERFORMED DURING THE SUMMER CONSTRUCTION SEASONS OF 1960 AND 1961. THE PROJECT WAS SATISFACTORILY COMPLETED AND ACCEPTED ON AUGUST 1, 1962. THE 250 CALENDAR DAYS ALLOWED UNDER THE CONTRACT WERE FURTHER INCREASED BY FOUR DAYS FROM WORK UNDER CHANGE ORDERS, AND 20 DAYS BY FINDINGS AND DETERMINATION OF CLAIM FOR TIME EXTENSION DUE TO DELAYS RELATED TO STRIKE BY OPERATING ENGINEER'S UNION. ALSO TIME WAS INCREASED 51 DAYS UNDER THE CONTRACT PROVISIONS ON ACCOUNT OF A 20.246 PERCENT OVERRUN OF THE TOTAL CONTRACT BID AMOUNT. THESE CONTRACT TIME EXTENSIONS AMOUNTED TO A TOTAL OF 75 DAYS, OR A TOTAL CONTRACT TIME OF 325 DAYS. CONTRACT TIME USED TO COMPLETE THE WORK WAS 341 DAYS, THUS RESULTING IN A 16 DAY OVERRUN OF CONTRACT TIME FOR WHICH PENALTY WAS ASSESSED AT THE RATE OF $100.00 PER DAY * * *.'

IN RESPONSE TO CLAIMS SUBMITTED BY THE CONTRACTOR THE CONTRACTING OFFICER ISSUED TWO SEPARATE DECISIONS UNDER THE DISPUTES CLAUSE OF THE CONTRACT. IN HIS FIRST DECISION DATED SEPTEMBER 9, 1963, THE CONTRACTING OFFICER ALLOWED THE CONTRACTOR A TIME EXTENSION OF 16 DAYS AND THE SUM OF $20,163.25 WHICH INCLUDED $1,600 REPRESENTING LIQUIDATED DAMAGES WHICH WERE RELEASED AS THE RESULT OF THE 16-DAY TIME EXTENSION. IN HIS SECOND DECISION DATED JUNE 17, 1964, THE CONTRACTING OFFICER ALLOWED THE CONTRACTOR THE ADDITIONAL SUM OF $14,231.36.

THE CONTRACTOR APPEALED THOSE CLAIMS DISALLOWED BY THE CONTRACTING OFFICER AND ALSO CLAIMED ADDITIONAL AMOUNTS ON THOSE CLAIMS WHICH WERE PARTIALLY ALLOWED. THE TOTAL AMOUNT CLAIMED BEFORE THE APPEALS BOARD WAS $57,964.26 WHICH WAS BROKEN DOWN INTO THE FOLLOWING CLAIMS: (1) DITCH CLAIM, (2) STAKING, (3) SLIDE REMOVAL, (4) WINTER WORK, (5) BACK TRACKING, DANGER TREE REMOVAL, (6) FAILURE TO ACCEPT JOB ON COMPLETION, AND (7) ALLOWANCE FOR EXCESS EXCAVATION OVER 125 PERCENT OF ORIGINAL BID SCHEDULE QUANTITIES. OUR DISCUSSION HEREAFTER WILL BE LIMITED TO THE DITCH AND STAKING CLAIMS SINCE THE STAND-BY (DELAY) COSTS UPON WHICH YOU REQUEST A DECISION RELATE TO THOSE TWO CLAIMS.

UNDER THE DITCH CLAIM THE CONTRACTOR CONTENDED THAT HE WAS DIRECTED TO CONSTRUCT A DITCH ADJACENT TO THE ROADWAY IN ALL CUTS THROUGHOUT THE LENGTH OF THE PROJECT EXCEPT FOR 2,000 FEET; THAT THE PLANS DID NOT PROVIDE FOR DITCHES IN ROCK SECTIONS; AND THAT HIS BID PRICE FOR UNCLASSIFIED EXCAVATION WAS ON THE ASSUMPTION THAT A DITCH WOULD NOT BE REQUIRED IN THE ROCK CUTS. THE CLAIM WAS BASED ON THE THEORY THAT THE GOVERNMENT'S DIRECTION TO CONSTRUCT THE DITCH CONSTITUTED A "CHANGE" OR "CONSTRUCTIVE CHANGE.' WHILE THE CONTRACTING OFFICER ALLOWED THIS CLAIM IN SUBSTANCE AND GRANTED AN EQUITABLE ADJUSTMENT BASED ON THE ESTIMATED COST ACTUALLY INCURRED FOR THE EXTRA DITCH WORK, THE CONTRACTOR, ON APPEAL, DISPUTED THE CONTRACTING OFFICER'S DETERMINATION ON THE AMOUNT AND SIGNIFICANCE OF ROCK EXCAVATION RESULTING FROM THE CONTINUOUS DITCH. THE APPEALS BOARD UPHELD THE CONTRACTING OFFICER'S DECISION AND CONCLUDED THAT HIS ALLOWANCE FOR THE EXTRA WORK INVOLVED WAS A REASONABLE AND PROPER EQUITABLE ADJUSTMENT.

ON THE STAKING CLAIM THE CONTRACTOR ASSERTED THAT HIS OPERATIONS WERE DELAYED, SUSPENDED AND/OR INTERRUPTED BECAUSE OF THE ABSENCE OF GRADE STAKES AND THAT THIS WAS A DIRECT CONSEQUENCE OF THE ADDITION OF THE DITCH AS DESCRIBED UNDER THE DITCH CLAIM. THE CONTRACTOR CLAIMED THAT THE NEW DITCH ADDITION NECESSITATED NUMEROUS GRADE AND ALIGNMENT CHANGES WHICH IN TURN NECESSITATED RE-STAKING BY THE GOVERNMENT. THIS RESULTED, ACCORDING TO THE CONTRACTOR, IN 22 DAYS DELAY, AT AN ESTIMATED COST FOR STANDBY AND RELATED EXPENDITURES OF $450 PER DAY OR A TOTAL OF $9,900. THE CONTRACTING OFFICER DENIED THE MONETARY CLAIM RELYING UPON CLAUSE 5/C) OF THE GENERAL PROVISIONS (STANDARD FORM 23A, MARCH 1953 EDITION) WHICH LIMITS ANY ADJUSTMENT FOR DELAYS DUE TO AN ACT OF THE GOVERNMENT TO AN APPROPRIATE ADJUSTMENT IN CONTRACT TIME. HOWEVER, THE CONTRACTING OFFICER DID FIND THAT FIVE DAYS DELAY ON THE CLAIM WERE ATTRIBUTABLE TO THE GOVERNMENT AND HE INCLUDED THESE FIVE DAYS IN THE AFOREMENTIONED 16 DAYS TIME EXTENSION WHICH HAD THE EFFECT OF RELEASING THE LIQUIDATED DAMAGES PREVIOUSLY WITHHELD. ON APPEAL, THE BOARD HELD AS FOLLOWS:

"STAKING CLAIM

"THIS IS A CLAIM FOR STANDBY COSTS AND RELATED EXPENDITURES WHICH ALLEGEDLY RESULTED DIRECTLY FROM THE CIRCUMSTANCES UNDERLYING THE ABOVE- DESCRIBED DITCH CLAIM. THE CONTRACTING OFFICER FOUND THAT THEY DID SO RESULT, AT LEAST TO THE EXTENT OF FIVE (5) DAYS FOR WHICH, HOWEVER, HE CONCLUDED HE WAS LEGALLY AUTHORIZED UNDER THE CONTRACT ONLY TO EXTEND THE CONTRACTOR'S PERFORMANCE TIME ON THIS ACCOUNT. THE GOVERNMENT TOOK SUBSTANTIALLY THE SAME POSITION ON APPEAL, ALSO REFERRING TO THE SO-CALLED RICE DOCTRINE AND MAKING THE ADDITIONAL ARGUMENT THAT THE CLAIM WAS OF A BREACH OF CONTRACT NATURE AND, ACCORDINGLY, BEYOND THIS BOARD'S JURISDICTION TO DECIDE.

"-RICE- DOCTRINE: IMPACT COSTS

"WE THINK THE GOVERNMENT'S ANALYSIS AND CONCLUSION IN RESPECT TO THIS CLAIM WAS WRONG. IT REFLECTS A MUCH TOO LITERAL READING OF THE CONTRACT PROVISION RELATING TO -DELAYS' AS WELL AS THE RICE RULE, NOT AT ALL IN KEEPING WITH THE RECENT TREND IN THE HANDLING OF CLAIMS OF THIS NATURE. (SEE, SHEDD, RICE DOCTRINE AND RIPPLE EFFECTS OF CHANGES, VOL. 32, G. W. LAW REVIEW, PP. 62-81 (1963), AND REDA, IMPACT COSTS OF ACCELERATION, SPRING 1965 ISSUE, FED. B. J., AND CASES CITED THEREIN.) SIMPLY STATED, U.S. V. RICE, 317 U.S. 61 (1942), THE CASE FROM WHICH THE DOCTRINE DERIVES ITS NAME, DECIDED THAT THE -CHANGES' CLAUSE PERMITS PAYMENT ONLY FOR ADDITIONAL EXPENSES DIRECTLY ATTRIBUTABLE TO THE CHANGED WORK, BUT CONSEQUENTIAL DAMAGES TO UNCHANGED WORK ARE NOT COMPENSABLE. HOWEVER, THE IMPORTANT QUESTION REMAINS UNDER THE RULE AS TO THE NATURE OF THE DIRECT COSTS OF A CHANGE WHICH ARE COMPENSABLE; AND IN THIS CONNECTION IT IS NOW WELL ESTABLISHED THAT SUCH COSTS MAY INCLUDE, INTER ALIA, THE INCREASED COST OF PERFORMANCE CAUSED BY DISRUPTION OF THE CONTRACT WORK IF AND INSOFAR AS SUCH DISRUPTION WAS A DIRECT RESULT OF THE CHANGE.

"AS ALREADY INDICATED, THE CONTRACTOR ALLEGED TWENTY-TWO (22) DAYS' DELAY ATTRIBUTABLE TO LACK OF STAKING WHEN THE BUREAU'S ENGINEER WAS RE- ESTABLISHING BALANCES ON ACCOUNT OF THE DITCH REQUIREMENT. THE CONTRACTING OFFICER, UPON THE BASIS OF OFFICIAL RECORDS, DETERMINED THAT FIFTEEN (15) OF THE CLAIMED TWENTY-TWO (22) ALLEGED DELAYS (SIC) OCCURRED DURING PERIODS WHEN THE PROJECT WORK WAS EITHER TOTALLY OR PARTIALLY SUSPENDED AND, THEREFORE, NOT BEING CHARGED AGAINST REQUIRED CONTRACT PERFORMANCE TIME. AND, HE QUESTIONED TWO (2) OF THE REMAINING SEVEN (7) CLAIMED DAYS OF DELAY AS NOT OTHERWISE BEING ATTRIBUTABLE TO STAKING OPERATIONS, BUT HE DID APPROVE AN EXTENSION OF PERFORMANCE TIME, AND CONSEQUENT RELEASE OF LIQUIDATED DAMAGES, FOR FIVE (5) DAYS ON THIS ACCOUNT.

"IN OUR VIEW, THE CONTRACTOR WAS ALSO ENTITLED TO HIS ACTUAL REASONABLE COSTS ATTRIBUTABLE TO THE DISRUPTION OF HIS WORK CAUSED BY THE GOVERNMENT'S RESTAKING OPERATIONS DURING THE PERIOD COVERED BY THIS CLAIM. THIS CLAIM IS, THEREFORE, REMANDED TO THE CONTRACTING OFFICER FOR DETERMINATION, IN CONSULTATION WITH THE CONTRACTOR, AS TO THE AMOUNT THEREOF. THE RECORD BEFORE US IS INSUFFICIENT TO ENABLE US TO MAKE THAT DETERMINATION AND WE CANNOT PROPERLY ACCEPT WITHOUT MORE DOCUMENTATION THE CONTRACTOR'S CLAIMED ESTIMATE OF SUCH COSTS. HOWEVER, THE PARTIES MAY CONSULT US FURTHER IN THIS REGARD IF THEY CANNOT RESOLVE THIS MATTER.'

ON JANUARY 5, 1966, THE GOVERNMENT FILED A MOTION FOR RECONSIDERATION OF THE BOARD'S DECISION ON SEVERAL POINTS, INCLUDING THE DECISION ON DELAY COSTS UNDER THE STAKING CLAIM. ON MARCH 24, 1966, THE APPEALS BOARD RENDERED ITS DECISION ON THE GOVERNMENT'S MOTION FOR RECONSIDERATION. THE BOARD, IN EFFECT, AFFIRMED ITS PREVIOUS DECISION STATING IN PERTINENT PART:

"THE CONTRACTOR'S PRESENTATION IN RESPECT TO THIS CLAIM WAS * * * PROLIFERATED AND SOMEWHAT UNCLEAR IN THAT * * * HE TREATED TWO PARTS OF WHAT WAS ESSENTIALLY ONE CLAIM AS TWO SEPARATE CLAIMS. AND, IN HIS DESCRIPTION OF THE CIRCUMSTANCES AS WELL AS HIS CALCULATIONS OF THE AMOUNT OF THE CLAIM, THE CONTRACTOR APPEARS TO HAVE INCLUDED CERTAIN ELEMENTS OF COST BEYOND THOSE DIRECTLY ATTRIBUTABLE AND CONFINED TO THE CHANGED WORK *

"AS WE UNDERSTOOD IT, THIS IS WHAT HAPPENED HERE: SHORTLY AFTER THE JOB WAS BEGUN, THE CONTRACTOR WAS REQUIRED TO CONSTRUCT A DITCH SUBSTANTIALLY ALONG THE ENTIRE ROAD, WHICH BOTH THE CONTRACTING OFFICER AND WE FOUND AND DETERMINED TO BE A CHANGE WITHIN THE MEANING OF THE -CHANGES' PROVISION OF THE CONTRACT CALLING FOR AN EQUITABLE ADJUSTMENT OF PRICE COMMENSURATE WITH DIRECTLY RELATED INCREASED COSTS. THIS CHANGE, IN ADDITION TO INVOLVING DIFFERENT AND MORE COSTLY KINDS OF CONSTRUCTION WORK FROM THAT ORIGINALLY CONTEMPLATED, ALSO REQUIRED CERTAIN RESTAKING OPERATIONS BY THE GOVERNMENT ON ACCOUNT OF WHICH THE CONTRACTOR'S COSTS OF DOING THE CHANGED WORK WERE ALLEGEDLY FURTHER INCREASED.

"THE RESTAKING OPERATIONS FORMED AN ESSENTIAL PART OF THE CHANGED WORK, AND THE DELAY AND DISRUPTION OF THE CONTRACTOR'S METHOD OF OPERATION CAUSED THEREBY WERE APPARENTLY PART AND PARCEL, SO TO SPEAK, OF THE CHANGE ITSELF. WHERE BOTH THE CAUSE AND CONSEQUENCES OF DELAY, CHANGE IN PERFORMANCE METHOD, OR WORK DISRUPTION RELATE DIRECTLY TO AN ITEM OF CHANGED WORK, THE DEMONSTRABLE COSTS THEREOF WOULD SEEM CLEARLY TO COME WITHIN THE AUTHORITY PROVIDED FOR IN THE -CHANGES' CLAUSE TO MAKE AN EQUITABLE ADJUSTMENT COMMENSURATE WITH THE DIRECT INCREASED COSTS OF THE CHANGE. AND, WE BELIEVE THAT RESULT IS NOT INCONSISTENT WITH THE RICE RULE UNDER WHICH CONSEQUENTIAL DAMAGES TO UNCHANGED WORK ARE NOT ADMINISTRATIVELY COMPENSABLE IN THE ABSENCE OF A SPECIFIC CONTRACT PROVISION THEREFOR. BY WAY OF ILLUSTRATION AND CONTRAST, WE WOULD OBSERVE THAT THE SITUATION IN THIS CASE IS TO BE DISTINGUISHED FROM THAT WHERE THE GOVERNMENT ORDERS OR IS OTHERWISE RESPONSIBLE FOR A SUSPENSION OF OPERATIONS, BUT ABSENT A CHANGE IN THE WORK, IN WHICH CASE THERE WOULD BE NO BASIS UNDER THE -CHANGES' CLAUSE TO PAY FOR SUCH DELAY COSTS.

"THE INTERIOR BOARD OF CONTRACT APPEALS, IN THE KIEWIT CASE, CITED ABOVE (PETER KIEWIT SONS' COMPANY, IBCA NO. 405, 65-2 BCA 5157) AND CALLED TO OUR ATTENTION BY GOVERNMENT COUNSEL, AND ALSO IN AN EARLIER DECISION, WELDFAB, INC., IBCA NO. 268, 61-2 BCA 3121, 3 GOVT. CONTR. 500, SPECIFICALLY MADE NOTE OF THE DISTINCTION UNDER RICE BETWEEN CASES WHICH INVOLVED COSTS OF DELAYS IN THE PERFORMANCE OF WORK NOT CHANGED AND THOSE INVOLVING SUCH COSTS INCURRED IN THE PERFORMANCE OF THE PORTION OF WORK THAT IS CHANGED. AND, AS FAR AS RESULTS ARE CONCERNED, IT IS NOTEWORTHY THAT THE CONTRACTOR'S CLAIM IN THE KIEWIT CASE WAS EVIDENTLY RELATED TO THE ALLEGED PROLONGING OF THE ENTIRE JOB AND NOT JUST THE CHANGED PORTION. THE FACTS IN THAT CASE WERE ALSO SIGNIFICANTLY DIFFERENT FROM OUR CASE IN THAT WHILE THE CONTRACTOR WAS DELAYED BY THE STAKING OPERATIONS THE BOARD REMARKED THAT OTHER WORK WAS EVIDENTLY BEING PERFORMED DURING THE SAME PERIOD SO THAT NO ADDITIONAL COSTS WERE INCURRED AS A RESULT OF SUCH OPERATIONS. FURTHERMORE, THE INTERIOR BOARD HAS BY NO MEANS ALWAYS REFUSED COMPENSATION FOR CLAIMS OF THIS NATURE, AS SHOWN IN ANOTHER RECENT CASE, LINCOLN CONSTRUCTION COMPANY, IBCA NO. 438-5-64, 65-2 BCA 5234, ALLOWING MONETARY COMPENSATION IN ADDITION TO A TIME EXTENSION IN A SITUATION WHERE A CONSTRUCTIVE CHANGE BY THE GOVERNMENT DIRECTLY DELAYED AND OTHERWISE ADVERSELY AFFECTED THE CONTRACTOR'S METHOD OF PERFORMANCE. "FOR THE FOREGOING REASONS, AND NOW ALSO HAVING IN MIND GOVERNMENT COUNSEL'S LATEST CONTENTION (INDICATED ABOVE) IN REGARD TO THE CONTRACTING OFFICER NOT HAVING PREVIOUSLY CONSIDERED THE WORK DISRUPTING ASPECT OF THIS CLAIM ITEM, WE BELIEVE WE WERE CORRECT IN REFERRING IT BACK TO THE CONTRACTING OFFICER TO DETERMINE WHETHER IN FACT THE ALLOWANCE ALREADY MADE FOR WORK ON THE DITCH TOOK ACCOUNT OF THE CONTRACTOR'S INCREASED COSTS, IF ANY, ATTRIBUTABLE TO THE GOVERNMENT'S RESTAKING OPERATIONS AND TO WHAT EXTENT A FURTHER ALLOWANCE IS WARRANTED. THE CONTRACTO'S CLAIMED AMOUNTS IN THIS RESPECT SHOULD NOT BE CONSIDERED AS CONTROLLING EXCEPT TO THE EXTENT THEY REFLECT ADDITIONAL DIRECT COSTS INCURRED IN CONNECTION WITH PERFORMING THE CHANGED WORK.' YOUR LETTER OF MARCH 29 PHRASES THE ISSUE AS FOLLOWS:

"OUR QUESTION IS THIS: GRANTED, ARGUENDO, THAT THE RESTAKING WAS A CONSTRUCTIVE CHANGE, CAN THE CONTRACTOR RECOVER IN AN ADMINISTRATIVE PROCEEDING BEFORE THE DEPARTMENT OF COMMERCE APPEALS BOARD THE STAND-BY COSTS (THE DELAY OR DISRUPTIVE COSTS) WHICH RESULTED FROM THE CONSTRUCTIVE CHANGE IN THE ABSENCE OF ANY CONTRACTUAL PROVISION FOR MONEY COMPENSATION FOR DELAY?

"TO STATE THE QUESTION ANOTHER WAY: IN THE ABSENCE OF ANY CONTRACTUAL PROVISION FOR PAYMENT FOR DELAY, ARE NOT STAND-BY COSTS IN THE CATEGORY OF THE COSTS WHICH ARE BEYOND THE DIRECT COSTS APPROVED IN UNITED STATES V. RICE, 317 U.S. 61 (1942).'

IN THE RICE CASE, AS IN THE INSTANT CASE, THE CONTRACTS CONTAINED A CHANGES CLAUSE READING AS FOLLOWS:

"3.CHANGES.--THE CONTRACTING OFFICER MAY AT ANY TIME, BY A WRITTEN ORDER, AND WITHOUT NOTICE TO THE SURETIES, MAKE CHANGES IN THE DRAWINGS AND (OR) SPECIFICATIONS OF THIS CONTRACT AND WITHIN THE GENERAL SCOPE THEREOF. SUCH CHANGES CAUSE AN INCREASE OR DECREASE IN THE AMOUNT DUE UNDER THIS CONTRACT, OR IN THE TIME REQUIRED FOR ITS PERFORMANCE, AN EQUITABLE ADJUSTMENT SHALL BE MADE AND THE CONTRACT SHALL BE MODIFIED IN WRITING ACCORDINGLY * * *.'

IN THE RICE CASE, A MECHANICAL CONTRACTOR WAS TO INSTALL PLUMBING, HEATING AND ELECTRICAL EQUIPMENT IN A VETERANS HOME WHILE A GENERAL CONTRACTOR PREPARED THE SITE AND CONSTRUCTED THE BUILDING. HOWEVER, AFTER NOTICE TO PROCEED HAD BEEN GIVEN TO BOTH THE GENERAL AND MECHANICAL CONTRACTORS, THE WORK WAS STOPPED BY THE GOVERNMENT BECAUSE OF THE UNEXPECTED DISCOVERY OF AN UNSUITABLE SOIL CONDITION. IT BECAME NECESSARY TO CHANGE THE SITE OF THE BUILDING AND TO ALTER THE SPECIFICATIONS. AS A RESULT, THE MECHANICAL CONTRACTOR WAS UNABLE TO BEGIN WORK UNTIL OCTOBER RATHER THAN IN EARLY JUNE WHEN IT ARRIVED AT THE WORK SITE. AS A CONSEQUENCE, OVERHEAD EXPENSES ACCUMULATED DURING THE PERIOD OF DELAY AND MUCH OF THE WORK WHICH OTHERWISE WOULD HAVE BEEN DONE IN WARM WEATHER, OR AFTER THE BUILDING WAS ENCLOSED, WAS DONE OUTSIDE IN COLD WEATHER.

PURSUANT TO THE ADJUSTMENT CLAUSES OF THE CONTRACT (WHICH SUBSTANTIVELY WERE NOT DIFFERENT THAN THOSE FOUND IN THE STANDARD FORM 23A IN THE HARDING CONTRACT), THE GOVERNMENT EXTENDED THE TIME OF PERFORMANCE BY THE MECHANICAL CONTRACTOR, AND DUE TO STRUCTURAL CHANGES, IT READJUSTED THE AMOUNT DUE BY INCREASING PAYMENTS TO THE GENERAL CONTRACTOR AND DECREASING THE AMOUNT DUE THE MECHANICAL CONTRACTOR BECAUSE OF CONSTRUCTION ECONOMIES UNDER THE REVISED SPECIFICATIONS. THE GOVERNMENT ALSO WAIVED ANY CLAIM TO LIQUIDATED DAMAGES FOR THE PERIOD OF THE EXTENSION. IN REVERSING THE COURT OF CLAIMS, WHICH HAD EARLIER HELD THAT THE CONTRACTOR WAS ENTITLED TO RECOVER CERTAIN OF ITS EXCESS COSTS, THE SUPREME COURT STATED (P. 64 ET. SEQ.):

"1. THE GOVERNMENT CONTENDS, AS IT DID IN THE CROOK CASE, SUPRA(CROOK CO. V. UNITED STATES, 270 U.S. 4) THAT THE CHANGE IN SPECIFICATIONS RESULTING IN DELAY WAS NOT A BREACH OF THE CONTRACT, BUT IN ACCORDANCE WITH ITS TERMS; THAT THE EXTENT OF ITS OBLIGATION FOR PERMITTED CHANGES WAS FIXED BY THE CONTRACT; THAT FOR DELAY THE GOVERNMENT WAS REQUIRED TO DO NO MORE THAN GRANT AN EXTENSION OF TIME. PUT ANOTHER WAY, THE GOVERNMENT CONCEDES THAT, IF AN ALTERATION OF PLAN REQUIRED RESPONDENT TO USE AN EXTRA 50 TONS OF STEEL, THE GOVERNMENT WOULD BE LIABLE FOR THE VALUE OF THE STEEL AND THE COST OF INSTALLATION; BUT IT ARGUES THAT UNDER THE TERMS OF THIS CONTRACT AN EXTENSION OF TIME SHOULD BE ACCEPTED AS FULL EQUITABLE ADJUSTMENT FOR ALL DAMAGES CAUSED BY THE FACT THAT THE WORK WAS DONE AT THE LATER PERIOD MADE NECESSARY BY THE PERMITTED CHANGE. ESSENTIALLY IT REPEATS THE DOCTRINE OF CHOUTEAU V. UNITED STATES, 95 U.S. 61, 68: -FOR THE REASONABLE COST AND EXPENSES OF THE CHANGES MADE IN THE CONSTRUCTION PAYMENT WAS TO BE MADE; BUT FOR ANY INCREASE IN THE COST OF THE WORK NOT CHANGED, NO PROVISION WAS MADE.-

"WE AGREE WITH THIS VIEW. * * *

"AS POINTED OUT, THE DELAY HERE RESULTED FROM A CHANGE IN SPECIFICATIONS MADE NECESSARY BY DISCOVERY OF SOIL UNSUITABLE FOR FOUNDATION PURPOSES. THE GOVERNMENT HAVING RESERVED THE RIGHT TO MAKE SUCH CHANGES UPON DISCOVERY OF -SUBSURFACE AND (OR) LATENT CONDITIONS AT THE SITE MATERIALLY DIFFERING FROM THOSE SHOWN ON THE DRAWINGS OR INDICATED IN THE SPECIFICATIONS,- DELAYS INCIDENT TO THE PERMITTED CHANGES CANNOT AMOUNT TO A BREACH OF CONTRACT. IF THERE ARE RIGHTS TO RECOVER DAMAGES WHERE THE GOVERNMENT EXERCISES ITS RESERVED POWER TO DELAY, THEY MUST BE FOUND IN THE PARTICULAR PROVISIONS FIXING THE RIGHTS OF THE PARTIES.

"WERE THIS A MATTER OF FIRST IMPRESSION, WE WOULD AGAIN COME TO THE SAME CONCLUSION REGARDING * * * (THE CHANGES) CLAUSE. IT SEEMS WHOLLY REASONABLE THAT -AN INCREASE OR DECREASE IN THE AMOUNT DUE- SHOULD BE MET WITH AN ALTERATION OF PRICE, AND THAT -AN INCREASE OR DECREASE ... IN THE TIME REQUIRED- SHOULD BE MET WITH ALTERATION OF THE TIME ALLOWED; FOR - INCREASE OR DECREASE OF COST- PLAINLY APPLIES TO THE CHANGES IN COST DUE TO THE STRUCTURAL CHANGES REQUIRED BY THE ALTERED SPECIFICATION AND NOT TO CONSEQUENTIAL DAMAGES WHICH MIGHT FLOW FROM DELAY TAKEN CARE OF IN THE - DIFFERENCE IN TIME- PROVISION. THE PROVISION AS TO TIME SERVES THE LARGE PURPOSE OF REMOVING FROM PERSONS IN THE POSITION OF RESPONDENT LIABILITY FOR -DELAY- BEYOND THE STIPULATED DATE FOR WHICH THEY MIGHT OTHERWISE HAVE THEIR CONTRACT TERMINATED OR MIGHT BE REQUIRED TO PAY LIQUIDATED DAMAGES WITHOUT FAULT.

"IN THIS CASE THERE WERE TWO CONSEQUENCES OF THE DISCOVERY THAT THE HOME COULD NOT BE BUILT AS ORIGINALLY PLANNED. ONE WAS AN ALTERATION OF SPECIFICATIONS, WHICH RESULTED IN A SLIGHT CUT IN RESPONDENT'S OUTLAY AND IN ITS COMPENSATION. THE OTHER WAS THE DELAY ITSELF, AND FOR THIS THE TIME NECESSARY TO PERFORM THE CONTRACT WAS EQUITABLY ADJUSTED BY EXTENSION, THEREBY RELIEVING RESPONDENT OF LIQUIDATED DAMAGES WHICH COULD OTHERWISE HAVE BEEN IMPOSED. UNDER THE TERMS OF THE CONTRACT IT IS ENTITLED TO NO MORE.'

THE RICE CASE AND THE SO-CALLED RICE DOCTRINE HAVE GENERATED A GREAT DEAL OF COMMENT AND CONTROVERSY. THEY HAVE BEEN THE SUBJECT OF NUMEROUS LAW REVIEW ARTICLES SOME OF WHICH, SUCH AS THE SHEDD AND REDA ARTICLES CITED BY THE BOARD IN ITS DECISION, ARE HIGHLY CRITICAL AND ADVANCE INTERPRETATIONS OF THE DOCTRINE WHICH WOULD RESTRICT ITS APPLICATION. THE RICE CASE HAS BEEN INTERPRETED, AND OFTEN DISTINGUISHED, IN DECISIONS OF THE COURTS AND BOARDS OF CONTRACT APPEALS. THERE APPEARS TO BE A SUBSTANTIAL FEELING IN THE GOVERNMENT CONTRACTING COMMUNITY THAT THE RICE DOCTRINE OFTEN BRINGS ABOUT INEQUITABLE RESULTS. IN THAT CONNECTION, WE NOTE THAT AN INTERAGENCY WORKING GROUP UNDER THE AUSPICES OF THE GENERAL SERVICES ADMINISTRATION IS PRESENTLY CONDUCTING A STUDY FOR THE PURPOSE, IN PART, OF DETERMINING WHETHER THE CHANGES CLAUSE OF STANDARD FORM 23A SHOULD BE REVISED IN ORDER TO OVERCOME THE RICE DOCTRINE IN CONSTRUCTION CONTRACTS. SEE PAGE 18 OF THE MARCH 1, 1966,"REPORT OF THE WORKING GROUP STUDYING THE CHANGES CLAUSE OF SF-23A" WHICH STATES THAT "A MAJOR PART OF THE WORKING GROUP'S DELIBERATIONS PERTAINED TO THE SO-CALLED RICE DOCTRINE PURSUANT TO WHICH RELIEF FOR INCREASED COSTS OF A CHANGE HAS BEEN LIMITED TO A TIME EXTENSION WHERE SO-CALLED -UNCHANGED WORK- WAS INVOLVED.' ANY EVENT, WHILE THERE MAY NOT BE AGREEMENT ON THE APPLICABILITY OF THE RICE DOCTRINE TO VARIOUS COSTS IN ALL CHANGE SITUATIONS THERE APPEARS TO BE LITTLE, IF ANY, DOUBT THAT THE DOCTRINE AT THE VERY LEAST, FORBIDS THE PAYMENT ADMINISTRATIVELY OF DELAY OR STAND-BY COSTS ON UNCHANGED WORK UNDER THE CHANGES ARTICLE OF STANDARD FORM 23A. SEE IVCY BROTHERS CONSTRUCTION CO., INC., ENG. BCA 1764 (1960):

"* * * THERE IS NO MORE WELL ESTABLISHED OR OFTEN REPEATED PRINCIPLE OF GOVERNMENT CONTRACT LAW THAN THAT ADJUSTMENTS UNDER THE CHANGES ARTICLE ARE LIMITED TO THE COSTS INVOLVED IN THE CHANGED WORK, AND TO ADDITIONAL TIME IF MADE NECESSARY BY THE CHANGED WORK. IT DOES NOT INCLUDE DAMAGES FOR DELAYS TO THE REMAINDER OF THE WORK NOT CHANGED. THIS PRINCIPLE WAS ESTABLISHED BY THE SUPREME COURT. RICE V. UNITED STATES, 317 U.S. 61; CHOTEAU V. UNITED STATES, (SIC) 95 U.S. 61; CROOK COMPANY V. UNITED STATES, 270 U.S. 4. IT HAS BEEN FOLLOWED BY THE COURT OF CLAIMS. MOUNT VERNON CONTRACTING CORPORATION V. UNITED STATES, 153 F. SUPP. 469; MAGOBA CONSTRUCTION CO. V. UNITED STATES, 99 CT. CL. 662, AND IS FOLLOWED REPEATEDLY AND CONSISTENTLY BY THE APPEALS BOARDS. NORAIR ENGINEERING CORPORATION, ASBCA NO. 3527, 57-1 BCA PAR. 1283; CHARLES H. TOMPKINS, C AND A NOS. 685 AND 768; SANDERS BCA NO. 1468, 4 C.C.F. PAR. 60,526; GERWICK, ET. AL., ASBCA NO. 158, 5 C.C.F. PAR. 61,461; H. R. HENDERSON COMPANY, INC., C AND A NO. 1170; LEWIS CONSTRUCTION COMPANY, C AND A NO. 1271; MCGOUGH BROTHERS, ENG. BCA NO. 1524. THE CLAIM FOR SUPERVISORY AND OVERHEAD COSTS IS PREDICATED DIRECTLY UPON DELAYS TO THE UNCHANGED WORK AND IS NOT COMPENSABLE.'

IN ADDITION TO THE AUTHORITIES CITED IN THE IVEY BROTHERS' DECISION, ABOVE, SEE MCDANIEL V. ASHTON-MARDIAN COMPANY, 357 F. 2D 511 (1966, 9TH CIRCUIT); 44 COMP. GEN. 353; 41 ID. 436; AND AN ANALYSIS OF THE STANDARD - CHANGES' CLAUSE BY LOUIS SPECTOR, 25 FEDERAL BAR JOURNAL 177 (1965). THIS ARTICLE THE CHAIRMAN OF THE ARMED SERVICES BOARD OF CONTRACT APPEALS STATES (P. 185):

"* * * SUFFICE IT TO SAY THAT BY REASON OF FOUR DECISIONS OF THE U.S. SUPREME COURT DATING BACK TO 1877, THAT COURT HAS CONSTRUED THE CHANGES' CLAUSE, AND RELATED LANGUAGE IN THE -CHANGED CONDITIONS' AND DELAYS' CLAUSES TO MEAN THAT THE CONTRACTOR IS ENTITLED TO AN EQUITABLE ADJUSTMENT IN CONTRACT PRICE FOCUSED UPON THE WORK WHICH CONSTITUTES THE SUBJECT MATTER OF THE CHANGE ORDER; THAT IF THE CHANGE ORDER HAS AN ADDITIONAL IMPACT UPON THE REMAINDER OF THE WORK, NOT CHANGED, (AND THIS IS USUALLY IN THE FORM OF A DELAY TO THAT REMAINING WORK), THE AGREED UPON ADJUSTMENT FOR THIS IS AN EXTENSION OF TIME, AND NOT AN ADJUSTMENT OF CONTRACT PRICE. THIS HAS COME TO BE KNOWN AS THE RICE DOCTRINE, THAT BEING THE PLAINTIFFS NAME IN ONE OF THESE SUPREME COURT DECISIONS.'

FROM THE FOREGOING IT WOULD APPEAR THAT THE BASIC QUESTION UNDER THE RICE DOCTRINE IS WHETHER THE COSTS SOUGHT TO BE RECOVERED ARE ATTRIBUTABLE TO DELAY IN WORK WHICH WAS, OR WHICH WAS NOT CHANGED. IF SUCH COSTS ARE ATTRIBUTABLE TO DELAY IN WORK WHICH WAS NOT CHANGED, RICE WOULD PROHIBIT THEIR PAYMENT. WHILE THE BOARD'S INITIAL DECISION OF DECEMBER 6, 1965, WHICH DIRECTED PAYMENT OF "THE INCREASED COST OF PERFORMANCE CAUSED BY DISRUPTION OF THE CONTRACT WORK IF AND INSOFAR AS SUCH DISRUPTION WAS A DIRECT RESULT OF THE CHANGE," WOULD APPEAR TO COUNTENANCE THE PAYMENT OF INCREASED COSTS ATTRIBUTABLE TO DELAY IN THE WORK NOT CHANGED, WE ARE SATISFIED THAT THE BOARD'S SUBSEQUENT DECISION ON THE MOTION FOR RECONSIDERATION HAS APPROPRIATELY LIMITED THE RECOVERY OF SUCH COSTS TO THOSE WHICH WERE DIRECTLY INCURRED IN CONNECTION WITH PERFORMING THE CHANGED WORK. TO THE EXTENT, THEREFORE, THAT THE REMAND TO THE CONTRACTING OFFICER RESULTS IN THE MAKING OF AN EQUITABLE ADJUSTMENT WHICH WOULD ENCOMPASS ONLY THOSE COSTS DIRECTLY ATTRIBUTABLE TO PERFORMING THE CHANGED WORK WE SEE NO VALID BASIS ON WHICH TO OBJECT THERETO. IN THAT CONNECTION WE NOTE THAT THE CONTRACTING OFFICER'S PROPOSED DRAFT OF "SECOND SUPPLEMENTAL FINDINGS AND DETERMINATION OF CLAIM III STAKING PROCEDURES" DATED FEBRUARY 10, 1967, WOULD ALLOW THE CONTRACTOR THE SUM OF $1,098.70 IN COMPLETE AND FINAL SETTLEMENT OF THE CLAIM. FROM OUR REVIEW OF THE RECORD SUBMITTED WITH YOUR REQUEST FOR DECISION WE MUST CONCLUDE THAT THIS SUM REPRESENTS ONLY THOSE INCREASED COSTS WHICH WERE CAUSED BY THE CHANGE ORDER AND WHICH ARE DIRECTLY ATTRIBUTABLE TO PERFORMING THE CHANGED WORK. THE PROPOSED SETTLEMENT EXPRESSLY DISALLOWS THOSE DELAY COSTS WHICH THE CONTRACTING OFFICER HAS DETERMINED RELATE TO SECTIONS OF THE PROJECT WHERE NO DITCH WAS INCLUDED OR WHERE THERE WAS NO RESTAKING IN CONNECTION WITH THE DITCH. IN OUR OPINION THE RICE CASE DOES NOT PROHIBIT PAYMENT UNDER THE CHANGES CLAUSE OF THOSE DIRECT COSTS IN THE SUM OF $1,098.70 SET OUT IN THE CONTRACTING OFFICER'S PROPOSED FINDING.

THE PAPERS SUBMITTED WITH YOUR LETTER OF MARCH 29 ARE RETURNED AS REQUESTED.