B-172067, MAY 19, 1971

B-172067: May 19, 1971

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ON WHICH THE PRICE IS STATED SEPARATELY IN THE CONTRACT. IS AMBIGUOUS. BLACKWELL: REFERENCE IS MADE TO YOUR LETTER DATED DECEMBER 17. IT IS REPORTED THAT. SINCE THE PRICE WAS STATED SEPARATELY. ON WHICH THE PRICE IS STATED SEPARATELY IN THE CONTRACT. ON WHICH THE VINNELL CORPORATION WAS A MEMBER OF THE JOINT VENTURE FOR SIMILAR ITEMS OF WORK. WHICH IS. AS FOLLOWS: "IT IS AT LEAST QUESTIONABLE WHETHER OR NOT THE LAST SENTENCE OF CLAUSE NO. 7(C) COVERS AN ITEM SUCH AS MOBILIZATION AND PREPARATORY WORK. *** THIS SENTENCE WOULD APPEAR TO BE SPEAKING OF TANGIBLE AND SEPARABLE ITEMS OF THE CONTRACT WORK. SINCE THE EFFECTIVE VALUE OF SUCH AN ITEM IS SPREAD OVER THE ENTIRE LENGTH OF THE JOB.

B-172067, MAY 19, 1971

CONTRACTS - AMBIQUOUS LANGUAGE - PROGRESS PAYMENTS DECISION AUTHORIZING PAYMENT OF A VOUCHER FOR $600,000 IN FAVOR OF VINNELL-DRAVO-LOCKHEED-MANNIX, A JOINT VENTURE, REPRESENTING A PORTION OF THE AMOUNT PREVIOUSLY WITHHELD FROM PROGRESS PAYMENTS INCIDENT TO CONSTRUCTION WORK AT THE THIRD POWERPLANT, GRAND COULEE DAM, COLUMBIA BASIN PROJECT, WASHINGTON. A CONTRACT PROVISION THAT STATES, "ON COMPLETION AND ACCEPTANCE OF EACH SEPARATE BUILDING, PUBLIC WORK OR OTHER DIVISION OF THE CONTRACT, ON WHICH THE PRICE IS STATED SEPARATELY IN THE CONTRACT, PAYMENT MAY BE MADE THEREFOR WITHOUT RETENTION OF A PERCENTAGE", IS AMBIGUOUS, THE CONTRACTOR CLAIMING THAT NO PERCENTAGE SHOULD BE RETAINED ON PAYMENTS FOR MOBILIZATION AND PREPARATORY WORK WHICH HAS A LUMP SUM CONTRACT PRICE OF $6 MILLION. BECAUSE THERE EXISTS MORE THAN ONE REASONABLE INTERPRETATION OF THE CONTRACT LANGUAGE, IT SHOULD BE CONSTRUED AGAINST THE DRAFTER - THE GOVERNMENT - AND PAYMENT MAY BE MADE TO THE CONTRACTOR UPON RECEIPT OF THE SURETY'S CONSENT.

TO MRS. BLACKWELL:

REFERENCE IS MADE TO YOUR LETTER DATED DECEMBER 17, 1970, WITH ENCLOSURES, REQUESTING ADVICE AS TO THE LEGALITY OF CERTIFYING FOR PAYMENT A VOUCHER IN THE AMOUNT OF $600,000, STATED IN FAVOR OF VINNELL DRAVO- LOCKHEED-MANNIX, A JOINT VENTURE, AND REPRESENTING A PORTION OF THE AMOUNT PREVIOUSLY WITHHELD IN MAKING PROGRESS PAYMENTS UNDER DEPARTMENT OF THE INTERIOR CONTRACT NO. 14-06-D-6965, DATED FEBRUARY 26, 1970, ENTERED INTO WITH THE JOINT VENTURE FOR THE PERFORMANCE OF CONSTRUCTION WORK AT THE THIRD POWERPLANT, GRAND COULEE DAM, COLUMBIA BASIN PROJECT, WASHINGTON.

THE VOUCHER INDICATES THAT, IN MAKING 10 PREVIOUS PROGRESS PAYMENTS UNDER THE CONTRACT, THE GOVERNMENT WITHHELD $2,452,814.76, OR 10 PERCENT OF ESTIMATED NET EARNINGS, AND THAT THE RETAINED PERCENTAGE INCLUDES 10 PERCENT OF THE LUMP-SUM CONTRACT PRICE OF $6 MILLION FOR MOBILIZATION AND PREPARATORY WORK, AS SET FORTH IN CONTRACT SCHEDULE ITEM NO. 1.

IT IS REPORTED THAT, BY LETTER DATED OCTOBER 20, 1970, THE CONTRACTOR REQUESTED PAYMENT OF THE RETAINAGE ON THIS ITEM, CONTENDING THAT, SINCE THE PRICE WAS STATED SEPARATELY, PAYMENT IN FULL COULD BE MADE IN ACCORDANCE WITH SUBPARAGRAPH (C) OF PARAGRAPH 7 OF THE GENERAL PROVISIONS OF THE CONTRACT (STANDARD FORM 23A), ENTITLED "PAYMENTS TO CONTRACTOR." SUBPARAGRAPH 7(C) PROVIDES IN PART THAT, IN MAKING PROGRESS PAYMENTS, THERE SHALL BE RETAINED 10 PERCENT OF THE ESTIMATED AMOUNT UNTIL FINAL COMPLETION AND ACCEPTANCE OF THE CONTRACT WORK, BUT THE LAST SENTENCE OF THE SUBPARAGRAPH STATES THAT, ON COMPLETION AND ACCEPTANCE OF EACH SEPARATE BUILDING, PUBLIC WORK, OR OTHER DIVISION OF THE CONTRACT, ON WHICH THE PRICE IS STATED SEPARATELY IN THE CONTRACT, PAYMENT MAY BE MADE THEREFOR WITHOUT RETENTION OF A PERCENTAGE.

THE DIRECTOR OF DESIGN AND CONSTRUCTION, BUREAU OF RECLAMATION, ENGINEERING AND RESEARCH CENTER, DENVER FEDERAL CENTER, DENVER, COLORADO, INITIALLY DETERMINED THAT THE CONTRACTOR'S REQUEST SHOULD NOT BE APPROVED. HOWEVER, UPON RECEIPT OF ADDITIONAL INFORMATION FROM THE CONTRACTOR, INCLUDING REFERENCE TO TWO PROJECTS OF THE CORPS OF ENGINEERS, ON WHICH THE VINNELL CORPORATION WAS A MEMBER OF THE JOINT VENTURE FOR SIMILAR ITEMS OF WORK, THE DIRECTOR OF DESIGN AND CONSTRUCTION APPROVED THE CONTRACTOR'S REQUEST IN A LETTER DATED DECEMBER 4, 1970, WHICH IS, IN PERTINENT PART, AS FOLLOWS:

"IT IS AT LEAST QUESTIONABLE WHETHER OR NOT THE LAST SENTENCE OF CLAUSE NO. 7(C) COVERS AN ITEM SUCH AS MOBILIZATION AND PREPARATORY WORK. *** THIS SENTENCE WOULD APPEAR TO BE SPEAKING OF TANGIBLE AND SEPARABLE ITEMS OF THE CONTRACT WORK, SUCH AS A BUILDING OR OTHER PHYSICAL FEATURE, AND NOT TO AN ITEM SUCH AS MOBILIZATION, SINCE THE EFFECTIVE VALUE OF SUCH AN ITEM IS SPREAD OVER THE ENTIRE LENGTH OF THE JOB.

"CLAUSE NO. 7(C) STATES THAT SUCH PAYMENT WILL BE MADE UPON 'COMPLETION AND ACCEPTANCE' OF THE ITEM OF WORK. THERE IS NO 'ACCEPTANCE' BY THE GOVERNMENT, EITHER FORMALLY OR INFORMALLY, OF THE ITEM FOR MOBILIZATION AND PREPARATORY WORK AND THIS FACT COULD LEAD ONE TO CONCLUDE THAT THE PROVISIONS OF THE LAST SENTENCE OF CLAUSE NO. (7C) DO NOT APPLY TO THE ITEM FOR MOBILIZATION. IN THIS CONNECTION, THE LAST SENTENCE IN THE NEXT TO THE LAST PARAGRAPH OF PARAGRAPH 11 OF THE SPECIFICATIONS STATES THAT PAYMENTS MADE FOR PREPARATORY WORK *** 'SHALL NOT OPERATE TO VEST TITLE IN THE GOVERNMENT *** .' THIS PROVISION WOULD INDICATE THAT NO ACCEPTANCE BY THE GOVERNMENT WAS CONTEMPLATED.

"LASTLY, IT IS NOTED THAT PARAGRAPH 11 SPECIFICALLY PROVIDES THAT PAYMENTS UNDER THIS ITEM ARE SUBJECT TO THE RETENTION REQUIRED BY CLAUSE NO. 7.

"IN RESPONSE TO THIS ANALYSIS, THE CONTRACTOR CONTENDS SIMPLY THAT THE ITEM IN QUESTION IS COMPLETE AND THAT IT IS A ' *** DIVISION OF THE CONTRACT ON WHICH THE PRICE IS SEPARATELY STATED IN THE CONTRACT *** ' WITHIN THE MEANING OF THE LAST SENTENCE OF CLAUSE NO. 7(C). IN ADDITION, THE PAYMENT PROCEDURE CONTENDED FOR WAS APPARENTLY FOLLOWED ON TWO OTHER FEDERAL PROJECTS CONSTRUCTED BY THE CORPS OF ENGINEERS ON WHICH THE CONTRACTOR WAS VINNELL. I MUST CONCEDE THAT THE ISOLATED PLAIN MEANING OF THE LAST SENTENCE OF CLAUSE NO. 7(C) SEEMS TO INDICATE THAT PAYMENT OF THE RETAINED PERCENTAGE IS PROPER IN THIS INSTANCE.

"ON EVIDENCE SUPPLIED BY THE CONTRACTOR, I HAVE VERIFIED THAT THE CORPS OF ENGINEERS DID, IN FACT, CONSTRUE THE LAST SENTENCE OF CLAUSE NO. 7(C) IN THE FASHION ASSERTED BY THE CONTRACTOR. WE HAVE ALSO INVESTIGATED THE SPECIAL PROVISIONS COMPARABLE TO PARAGRAPH 11 IN THESE CORPS SPECIFICATIONS AND HAVE ASCERTAINED THAT THEY DO CONTAIN SIMILAR PROVISIONS FOR THE HANDLING OF RETENTION AND DO HAVE REFERENCES SIMILAR TO THOSE FOUND IN PARAGRAPH 11 TO THE EFFECT THAT RETENTION UNDER CLAUSE NO. 7 WILL BE MADE.

"BASED UPON THE FOREGOING ANALYSIS, IT IS MY OPINION THAT THE MOST REASONABLE CONSTRUCTION OF THE INVOLVED PROVISIONS DOES NOT SUPPORT THE RELEASE OF THE RETENTION. HOWEVER, I MUST ALSO CONCEDE THAT THE APPLICABLE LANGUAGE, IN TOTAL, IS AMBIGUOUS AS TO THE PRECISE POINT AT ISSUE. IT IS A WELL ACCEPTED PRINCIPLE OF INTERPRETATION THAT CONTRACT LANGUAGE WILL BE CONSTRUED AGAINST THE DRAFTER (HERE THE GOVERNMENT) WHERE MORE THAN ONE REASONABLE INTERPRETATION OF THE SAME IS POSSIBLE. IN OTHER WORDS, THE MOST REASONABLE INTERPRETATION WILL NOT NECESSARILY BE ADOPTED WHERE ANOTHER REASONABLE INTERPRETATION IS ALSO JUSTIFIED AND THE CONTRACTOR HAS RELIED ON THE LATTER INTERPRETATION IN BIDDING. IN VIEW OF THE CONTRACTOR'S PREVIOUS EXPERIENCE WITH THE CORPS OF ENGINEERS, I AM SATISFIED THAT THE CONTRACTOR HERE RELIED ON THIS ASSERTED INTERPRETATION IN BIDDING."

WE AGREE THAT THE LANGUAGE OF SUBPARAGRAPH 7(C) OF THE GENERAL PROVISIONS OF THE CONTRACT IS AMBIGUOUS AS TO THE PRECISE POINT AT ISSUE, AND THAT THERE EXISTS A REASONABLE BASIS FOR CONSIDERING THAT THE RETAINED PERCENTAGE ON CONTRACT SCHEDULE ITEM NO. 1, WHICH HAS BEEN COMPLETED AND MIGHT BE CONSIDERED TO BE A DIVISION OF THE CONTRACT, SHOULD BE PAID TO THE CONTRACTOR. IN THE CIRCUMSTANCES, WE BELIEVE THAT THE ATTITUDE OF THE SURETY ON THE PERFORMANCE AND PAYMENT BONDS SHOULD BE CONSIDERED BEFORE RELEASING THE CLAIMED AMOUNT. SEE 46 COMP. GEN. 730, 733 (1967).

IN THE CIRCUMSTANCES, YOU ARE ADVISED THAT THE VOUCHER FOR $600,000, WHICH IS RETURNED HEREWITH, PROPERLY MAY BE CERTIFIED FOR PAYMENT UPON RECEIPT OF THE SURETY'S CONSENT TO THE RELEASE OF THAT AMOUNT TO THE CONTRACTOR.