B-44825 October 17, 1944

B-44825 October 17, 1944

Henry B. Steeg & Associates, 129 East Market Building, Indianapolis, Indiana.

Gentlemen:

Reference si made to your letter of September 19, 1944, wherein you request review of settlement dated August 30, 1944, which disallowed your claims for $9,702.07 and $2,619.43, representing additional compensation alleged to be due for certain architectural-engineering services furnished in connection with the construction of 750 prefabricated demountable dwelling units and an administration building as part of Defense Housing Project No. IND-12042 at Charlestown, Indiana, under contract No. NA-1343, dated January 19, 1942, and supplemental agreements Nos. 1 and 2, dated June 12, 1942, and December 14, 1942, with the Federal Works Agency.

Under the terms of the contract it was agreed that for and in consideration of payment of the lump-sum amount of $39,935 you would "render such architectural-engineering services as may be required for the construction of the project" and would "perform all necessary field engineering, supervision and inspection during construction." Under the terms of supplements Nos. 1 and 2, considered collectively, it was agreed further that for and in consideration of payment of 5 percent of a specified portion of the "Estimated Improvement Cost," plus the sum of $1,200, you would render such services of a similar nature "as may be required for the construction of a one-story, frame-structure Administration Building." Articles 5 and 16 of the contract provided, respectively, as follows:

"Article 5. Additional Work. If during the performance of this contract other or additional architectural-engineering services are required in connection with the project, the Administrator may order the Architect- Engineer, in writing, to perform such services for a consideration to be mutually agreed on, such services to be subject in all other respects to the terms of this contract.

"Article 16. Disputes. All disputes arising under the contract shall be decided by the Administrator whose decision shall be final and conclusive upon the parties hereto. Pending the settlement of the dispute, the Architect-Engineer shall diligently proceed with the prosecution of the work except and to such extent as the Administrator or his duly authorized representative shall otherwise derect."

Your claim for $9,702.07 is based upon the allegation that at the time the contract was executed it was understood orally between you and the contracting officer of the Federal Works Agency that the total period for performance of the work would not exceed 180 days but in the event it should, an equitable adjustment would be made to cover any additional expenses attributable thereto. In a letter dated February 28, 1944, addressed to you, the contracting officer has substantiated, to some extent, your allegation in that respect. Also, it appears that the contracts for the construction work on the project, which were let approximately 6 months subsequent to the date of your contract by the Federal Public Housing Authority to whom the administratin of the project has been transferred by Executive Order No. 9070, dated February 24, 1942, specified completion periods of less than 180 days.

Your claim in the amount of $2,619.43 is based upon the allegation that, since you were required to render additional supervisory and superintendence services in connection with the reconstruction of the administration building as a result of its having been damaged severly by a tormado on July 29, 1943, at which time it was nearing completion, you are entitled to an equitable adjustment in that amount.

On June 26, 1944, the Commissioner, Federal Public Housing Authority, transmitted the claims to this office for direct settlement with the recommendation that they be disallowed. The Commissioner's recommendation as to the former claim was based upon the fact that there was nothing contained in the contract which limited the time for performance of the services thereunder and under the well-established principle of law that where the parties have reduced their agreement to writing in plain and unambiguous terms prior oral agreements are excluded from consideration in construing the written instrument. Teh Commissioner's recommendation as to the latter claim was based upon the fact that there was no provision contained in either the contract or its supplements which placed any time limit on performance of the services covered by the said supplements and that, under the law, construction contractors generally are held to ahve assumed the risk of delays arising by reason of unforeseen hazards encountered during construction. Also, in making his recommendation, the Commissioner gave considerable weight to the fact that apparently you had been obliged to maintain certain personnel at the project site until November 30, 1943, to supervise other Government work for which extra services were not performed pursuant to a written order as required by article 5 of the contract, supra.

In the settlement of August 30, 1944, the claims were dissallowed for substantially the same reasons. You now request review of the action thus taken, stating that if a favorable decision cannot be reached on the legal merits of the claims, you would appreciate having the matter considered from an equitable standpoint under the act of April 10, 1928, 45 Stat. 413, which provides:

"That when there is filed in the General Accounting Office a claim or demand against the United States that may not lawfully be adjusted by the use of an appropriation theretofore made, but which claim or demand in the judgment of the Comptroller general of the United States contains such elements of legal liability or equity as to be deserving of the consideration of the Congress, he shall submit the same to the Congress by a special report containing the material facts and his recommendation thereon."

With respect to your claim for $9,702.07, it must be reiterated that, if free from ambiguity, a formal written contract entered into after previous negotiations merges all such negotiations and is presumed in law to express the final understanding of the parties. Nash v. Towne, 72 U.S. 689; Brawley v. United states, 96 U.S. 168, 173; Simpson v. United States, 172 U.S. 373, 379. As hereinbefore pointed out, your contract expressly required you to render all necessary supervisory services "during construction" of the buildings provided for therein. Moreover, the Government was in no way bound to have the construction work on the buildings completed within any particular time. In its ordinary sense the word "during" means "in the time of," "in the course of," or "throughout the continuance of." See Ellis v. Fraternal Aid Union, 108 Kan. 819, 197 P. 189, 190. Consequently, the contract appears to have been clear and unambiguous in requiring you not only to supervise the construction of the buildings until completed but to adjust your work to that of the construction contractors. It follows that, even though you and the contracting officer may have been under the impression that the construction work would not extend over a period of 180 days, the risk of its extending a longer period was assumed by you when you failed to have any time limit inserted in the contract.

Furthermore, while the said claim may contain such elements of equity as might jsutify this office in making a report and recommendatio to the Congress under the act of April 10, 1928, supra, I would not feel warranted in recommending amy part of the amount of the alleged additional expenses for payment under that act or otherwise on the facts now of record. The claim is supported by a statement purporting to show that the additional expenses incurred from January 1, 1943, to September 16, 1943, the period covered by the claim, equaled the amount of the claim, or $9,702.07. Also, there has been furnished a tabulation, together with supporting statements, listing your alleged actual costs "including approximately 15 percent overhead," for supervision during the period of construction from June 15, 1942, to december 31, 1942, and showing such costs to have aggregated $14,500. However, the contract was executed January 19, 1942, and, apparently, you began work on the topographical survey and preliminary site plan for the project on April 13, 1942, yet it does not appear that any statement of your costs for the period from January 19, 1942, to June 14, 1942, ahs been furnished. Likewise, you apparently incurred various "clean-up" expenses during the period from December 8 t9 31, 1942, which have not been shown. Naturally, since any settlement recommended to the Congress under the act of April 10, 1928, supra, would have to be equitable to the Government as well as to you, it would be necessary to consider the claim in the light of the entire cost of performance of the original contract and the lump-sum price paid therefor in determining what would constitute a fair and equitable adjustment of the claim. Hence, in the absence of a certified statement setting forth all of the pertintnt facts relative to your entire cost, including overhead, of performing the original contract, togehter with an itemized breakdown of the said cost from the date of the contract until the date of completion and a statement aas to the periods between those dates during which no supervisory work was required or performed, the extent, if any, to which you might be entitled to equitable relief cannot be determined and no report or recommendation in connection therewith can be made.

Considering next your claim for $2,619.43, it appers that, while the construction contractor was required to complete the administration building within 120 days, there was no provision contained in the supplemental agreements to your contract which specified or limited the time in which the services covered by the said supplements were to be required. Rather, by the express terms of supplement No. 1, your agreed for the consideration stipulated therein to render such architectural- engineering services "as may be required" by the Government for the construction of the administration building and to "perfrom generally all architectural, engineering, and other similar professional services necessary for the design and supervision of the Improvement." In view thereof, and since the courts consistently have held that a contractor who has undertaken to complete an entire structure is obligated to replace it if it is destroyed without the fault or negligence of the owner at any time prior to completion and final acceptance, the fact that the damage to the building requiring its reconstruction resulted from a tornado did not absolve you from your obligation of completing the supplements in accordance with their terms. See United States v. United States Fidelity Co., 236 U.S. 512; Day v. Unite States, 245 U.S. 159; Mittry et al. v. United States, 73 C. Cls. 341, 358. Aside, then, from the additional fictors mentioned in the settlement of August 30, 1944, there also appears to exist no legal basis on which your claim for the increased costs attributable to the tornado can be allowed.

Mlreover, in my judgment, the latter-as distinguished from the former- claim properly may not be said to contain any elements of equity such as would justify reporting it to the Congress under the act of April 10, 1928, supra. The very essence of a contract is that the contractor assumes the risks within the limits of his undertaking, and, unless otherwise specifically provided, is presumed to have made a sufficient allowance in the contract price to compensate him for any increased costs of performance which might result from unforseen delays or difficulties, however great. In the case of the former claim this presumption is negatived considerably by the fact that you apparently negotiated the price of the original contract on the basis that perforance would be completed within 180 days and that, under the circumstances involved, you were not entirely unjustified in doing so. However, in the case of the later claim, since it clearly appears that you and the contracting officer dealt at "arms length" with full knowledge of all the facts in arriving at the price finally agreed upon for the work covered by the supplements, the presumption that the said amount was sufficient to protect you against such contingencies as might be expected to arise, is conclusive. Therefore, the fact that you may have failed to realize as much profit as you anticipated, or even occasioned a loss, in the performance of such work cannot be accepted as affording any basis whatever for equitable relief in connection therewith.

Accordingly, you are advised that the settlement of August 30, 1944, must be, and is, sustained, and that, on the basis of the present record, no further action in the matter may be taken by this office.

Respectfully,

(Signed) Lindsay C. Warren Comptroller General of the United States.