B-175215, APR 20, 1972

B-175215, APR 20, 1972

GENERAL GOVERNMENT - CONSTRUCTION CONTRACT - MONETARY CEILING - PROJECT APPROVAL - STATUTORY INTERPRETATION CONCERNING WHETHER THE DEPUTY ASSISTANT SECRETARY OF DEFENSE MAY RELY ON THE INCREASED MONETARY CEILING OF 10 U.S.C. 2674(B) TO AUTHORIZE PAYMENT IN SETTLEMENT OF A PROJECT TO PROVIDE AN ADDITION TO THE AIRCRAFT LANDING APRON AT KADENA AIR BASE, OKINAWA, FOR THE PURPOSE OF ACCOMMODATING C-5 AIRCRAFT. THE COMP. GEN. QUESTIONS THE PROPRIETY OF REAPPROVING THE PROJECT WHEN IT WAS APPARENT THAT ITS COST MIGHT WELL BE IN EXCESS OF THE THEN CURRENT STATUTORY CEILING OF $200,000. CONTRARY TO THE OPINION OF THE ASSISTANT GENERAL COUNSEL, THERE IS NO AUTHORITY TO APPROVE A PROJECT COSTING MORE THAN THE MONETARY LIMITATION IN 10 U.S.C. 2674 ON THE DATE THE PROJECT IS APPROVED. HOWEVER, SINCE THE COSTS INVOLVED ARE FOR DAMAGES SUFFERED AS A RESULT OF THE GOVERNMENT'S UNREASONABLE DELAY AND SINCE THE SUBJECT AMOUNT WOULD NOT EXCEED THE PRESENT STATUTORY LIMITATION, THE COMP. GEN. WOULD NOT QUESTION PAYMENT ON THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE.

TO MR. SECRETARY:

REFERENCE IS MADE TO LETTER DATED FEBRUARY 10, 1972, FROM MR. SAMUEL HANENBERG, ASSISTANT GENERAL COUNSEL, DEPARTMENT OF THE AIR FORCE, CONCERNING A MINOR CONSTRUCTION PROJECT UNDERTAKEN BY THE AIR FORCE PURSUANT TO 10 U.S.C. 2674. THIS CODE SECTION PROVIDES IN PART:

"SEC 2674. ESTABLISHMENT AND DEVELOPMENT OF MILITARY FACILITIES AND INSTALLATIONS COSTING LESS THAN $300,000.

"(A) UNDER SUCH REGULATIONS AS THE SECRETARY OF DEFENSE MAY PRESCRIBE, THE SECRETARY OF A MILITARY DEPARTMENT MAY ACQUIRE, CONSTRUCT, CONVERT, EXTEND, AND INSTALL, AT MILITARY INSTALLATIONS AND FACILITIES, URGENTLY NEEDED PERMANENT OR TEMPORARY PUBLIC WORKS NOT OTHERWISE AUTHORIZED BY LAW, INCLUDING THE PREPARATION OF SITES AND THE FURNISHING OF APPURTENANCES, UTILITIES, AND EQUIPMENT, BUT EXCLUDING THE CONSTRUCTION OF FAMILY QUARTERS. ***

"(B) THIS SECTION DOES NOT AUTHORIZE A PROJECT COSTING MORE THAN $300,000. A PROJECT COSTING MORE THAN $100,000 MUST BE APPROVED IN ADVANCE BY THE SECRETARY OF DEFENSE, AND A PROJECT COSTING MORE THAN $50,000 MUST BE APPROVED IN ADVANCE BY THE SECRETARY CONCERNED."

THE PRESENT $300,000 MONETARY CEILING SET FORTH IN SUBSECTION (B) OF THIS SECTION WAS ESTABLISHED BY THE MILITARY CONSTRUCTION AUTHORIZATION ACT, 1971, APPROVED OCTOBER 26, 1970, PUB. L. 91-511, TITLE VI, SEC 607, 84 STAT. 1223. PRIOR TO THIS AMENDMENT, 10 U.S.C. 2674 DID NOT AUTHORIZE A PROJECT COSTING MORE THAN $200,000.

THE RECORD BEFORE US DISCLOSES THE FOLLOWING PERTINENT FACTS AND CIRCUMSTANCES CONCERNING THE PROJECT IN QUESTION. ON AUGUST 27, 1969, THE DEPUTY ASSISTANT SECRETARY OF DEFENSE (INSTALLATIONS AND HOUSING) AUTHORIZED AT A COST OF $163,700, A PROJECT TO PROVIDE AN ADDITION TO THE AIRCRAFT LANDING APRON AT KADENA AIR BASE, OKINAWA, FOR THE PURPOSE OF ACCOMMODATING C-5 AIRCRAFT. SUBSEQUENTLY A CONTRACT WAS ENTERED INTO FOR CONSTRUCTION OF THE PROJECT AND THERE WAS ISSUED TO THE CONTRACTOR A NOTICE TO PROCEED (UNDER THE CONTRACT) DATED FEBRUARY 24, 1970. SUBSEQUENTLY IT BECAME NECESSARY TO INCREASE THE SCOPE OF THE PROJECT DUE TO THE ISSUANCE OF REVISED CRITERIA FOR C-5 AIRCRAFT AND TO REDESIGN THE PROJECT. CONSEQUENTLY, A VERBAL PARTIAL STOP WORK ORDER TO THE CONTRACTOR WAS CONFIRMED IN WRITING BY LETTER DATED MARCH 13, 1970. A COMPLETE STOP WORK ORDER WAS ISSUED TO THE CONTRACTOR ON APRIL 6, 1970. ON MAY 11, 1970, THE CONTRACTOR AT THE GOVERNMENT'S REQUEST SUBMITTED A TENTATIVE PROPOSAL ON THE ADDITIONAL WORK, THE CONTRACTOR STATING THAT HIS PROPOSAL DID "NOT INCLUDE ADDITIONAL COSTS AS A RESULT OF THE IMPACT CAUSED BY THE STOP ORDER." ON JULY 16, 1970, THE DEPUTY ASSISTANT SECRETARY REAPPROVED THE PROJECT AT A REVISED ESTIMATED COST OF $183,000.

ON AUGUST 6, 1970, THE CONTRACTOR WAS GIVEN WRITTEN NOTICE OF THE GOVERNMENT'S INTENT TO LIFT THE STOP WORK ORDER AND WAS REQUESTED TO CONFIRM HIS PROPOSAL OF MAY 11, 1970. ON AUGUST 27, 1970, MODIFICATION NUMBER 1 TO THE CONTRACT WAS FINALIZED FOR ALL ITEMS "OTHER THAN THOSE DIRECTLY ATTRIBUTABLE TO THE DELAY ITSELF." THE RECORD FURTHER DISCLOSES THAT THE STOP WORK ORDER WAS IN EFFECT UNTIL AUGUST 31, 1970, A PERIOD OF APPROXIMATELY 5 MONTHS.

SUBSEQUENT TO RESUMPTION OF WORK, THE CONTRACTOR SUBMITTED A CLAIM AGAINST THE GOVERNMENT CHARGING UNREASONABLE DELAY. THE CONTRACTING OFFICER CONSIDERED THE CLAIM VALID AND NEGOTIATED AN INCREASE IN COST OF $53,769.88, PAYMENT OF WHICH, AFTER CERTAIN MINOR ADJUSTMENT, WOULD BRING THE TOTAL COST OF THE PROJECT TO $236,000.

WE ARE REQUESTED TO DETERMINE WHETHER THE DEPUTY ASSISTANT SECRETARY MAY NOW RELY UPON THE INCREASED MONETARY CEILING OF 10 U.S.C. 2674(B) AND AUTHORIZE PAYMENT OF THE SETTLEMENT, THUS INCREASING THE TOTAL COST OF THE PROJECT TO AN AMOUNT IN EXCESS OF $200,000. THE ASSISTANT GENERAL COUNSEL STATES THAT THE STATUTE REQUIRES THAT THE PROJECT, NOT THE COST THEREOF, BE APPROVED IN ADVANCE; THAT ADVANCE APPROVAL WAS GRANTED IN THIS CASE; AND THAT SINCE THE STATUTE NOW PERMITS A PROJECT IN EXCESS OF $200,000 THERE WOULD SEEM TO BE NO REASON TO HOLD THAT THE COST OF THE PROJECT CANNOT NOW BE READJUSTED WITHIN THE CURRENT LIMIT. WE ARE ALSO REFERRED TO THE DECISION IN ROSS CONSTRUCTION CORP. V UNITED STATES, 183 CT. CL. 694, 392 F. 2D 984 (1968), HOLDING THAT ABSENT THE MOST EXPLICIT STATUTORY LANGUAGE TO THE CONTRARY, A CONGRESSIONAL LIMITATION UPON EXPENDITURES SHOULD NOT BE READ TO EXCLUDE RECOVERY FOR ADDITIONAL COSTS RESULTING FROM CHANGED CONDITIONS, ERRORS IN GOVERNMENT DRAWINGS AND INCORRECT INTERPRETATION OF SPECIFICATIONS BY THE CONTRACTING OFFICER, SUCH MATTERS BEING BEYOND THE CONTROL AND RESPONSIBILITY OF THE CONTRACTOR. ON THE BASIS OF THE ROSS DECISION, IT IS SUGGESTED THAT TO DENY PAYMENT HERE WOULD LEAD TO LITIGATION IN WHICH THE CONTRACTOR WOULD PROBABLY BE SUCCESSFUL.

IN LIGHT OF THE FACTS AND CIRCUMSTANCES RECITED ABOVE WE ARE NOT AWARE OF THE BASIS FOR REAPPROVING THE PROJECT ON JULY 16, 1970 (IN ADVANCE OF THE ADDITIONAL WORK), AT A REVISED ESTIMATED COST OF $183,000, SINCE IT WAS APPARENT FROM THE EVIDENCE OF RECORD AS OF THAT DATE, THAT THE COST OF THE PROJECT MIGHT WELL BE IN EXCESS OF $200,000. THIS IS SO BECAUSE THE CONTRACTOR HAD MADE IT CLEAR THAT HIS PROPOSAL FOR THE EXTRA WORK DID NOT INCLUDE ADDITIONAL COSTS (DAMAGES) INCURRED BY HIM AS A RESULT OF THE DELAY OCCASIONED BY THE STOP ORDER. WE QUESTION THE WISDOM OF REAPPROVING THE PROJECT UNDER SUCH CIRCUMSTANCES WITHOUT INCLUDING A LIMITATION OF $200,000 ON TOTAL CONTRACT COSTS, PARTICULARLY SINCE THE PARTIAL STOP ORDER HAD BEEN ISSUED ON MARCH 13, 1970, AND THE TOTAL STOP ORDER ON APRIL 6, 1972. MOREOVER WE MIGHT POINT OUT HERE THAT THE MOST OF THE COSTS (DAMAGES) WHICH RESULTED IN THE PROJECT COSTS EXCEEDING $200,000 WERE APPARENTLY INCURRED PRIOR TO THE DATE OF ENACTMENT OF THE STATUTE INCREASING THE MINOR CONSTRUCTION PROJECT LIMITATION CEILING.

CONCERNING THE ASSISTANT GENERAL COUNSEL'S STATEMENT THAT 10 U.S.C. 2674 REQUIRES THAT THE PROJECT, NOT THE COST THEREOF, BE APPROVED IN ADVANCE, THAT SECTION MUST BE READ IN ITS ENTIRETY, KEEPING IN MIND THE CONGRESSIONAL INTENT. IN OUR OPINION THERE IS NO AUTHORITY UNDER 10 U.S.C. 2674 TO APPROVE A PROJECT COSTING MORE THAN THE MONETARY LIMITATION SET FORTH THEREIN ON THE DATE THE PROJECT IS APPROVED, THAT IS TO SAY, A PROJECT THE COST OF WHICH WILL EXCEED $200,000 MAY NOT BE APPROVED UNDER 10 U.S.C. 2674, IF ON THE DATE OF APPROVAL OF SUCH PROJECT THE LIMITATION IN THE CITED SECTION IS $200,000. THEREFORE, THE SECRETARY OF DEFENSE (OR HIS DESIGNEE) MAY NOT RELY ON THE INCREASED STATUTORY MONETARY CEILING (IN 10 U.S.C. 2674) FOR PAYMENT PURPOSES INSOFAR AS PROJECTS APPROVED UNDER THE OLD CEILING ARE CONCERNED, AT LEAST WHERE THE EXCESS COSTS (FOR ADDITIONAL WORK) ARE INCURRED WHILE THE OLD CEILING WAS STILL IN EFFECT. OF COURSE IF UNDER CIRCUMSTANCES SUCH AS INVOLVED HERE (ADDITIONAL WORK NECESSARY), AN UNCOMPLETED PROJECT IS REAPPROVED UNDER THE NEW CEILING PRIOR TO THE INCURRING OF COSTS IN EXCESS OF THE OLD CEILING, THE NEW LIMITATION (CEILING) WOULD BE CONTROLLING.

FURTHER, IT IS OUR VIEW THAT THE INSTANT CASE IS DISTINGUISHABLE FROM THE ROSS CASE, AND, HENCE, WE DO NOT AGREE THAT THE CONTRACTOR INVOLVED HERE WOULD NECESSARILY PREVAIL IN LITIGATION ON THE BASIS OF THE ROSS DECISION. HOWEVER, SINCE THE COSTS INVOLVED ARE NOT FOR ADDITIONAL WORK PERFORMED BY THE CONTRACTOR BUT RATHER FOR DAMAGES SUFFERED BY HIM AS A RESULT OF THE UNREASONABLE DELAY ARISING INCIDENT TO THE ISSUANCE OF THE STOP WORK ORDER BY THE GOVERNMENT, IT DOES APPEAR THAT THE CONTRACTOR MIGHT PREVAIL IN LITIGATION. IN LIGHT OF ALL THE FACTS AND CIRCUMSTANCES, AND SINCE THE PAYMENT INVOLVED WOULD NOT EXCEED THE PRESENT STATUTORY LIMITATION WE WOULD NOT QUESTION PAYING THE CONTRACTOR IN THE INSTANT CASE.