B-142040, APR. 2, 1962

B-142040, APR. 2, 1962

TO THE AUTHORIZED CERTIFYING OFFICER, BUREAU OF RECLAMATION:

WE HAVE YOUR LETTER OF JANUARY 3, 1962, YOUR REFERENCE 4-390, REQUESTING AN ADVANCE DECISION AS TO THE PROPRIETY OF CERTIFYING AN ACCOMPANYING VOUCHER IN THE AMOUNT OF $1,825,291.17 CLAIMED BY THE MERRITT-CHAPMAN AND SCOTT CORPORATION UNDER CONTRACT NO. 14-06-D-2403.

THE CONTRACT, DATED APRIL 29, 1957, PROVIDES FOR CONSTRUCTION OF THE GLEN CANYON DAM AND POWERPLANT AT A PRICE OF $107,995,522. WORK UNDER THE CONTRACT IS TO EXTEND WELL INTO 1964.

PARAGRAPH 19 OF THE CONTRACT SPECIFICATIONS PROVIDES FOR ESCALATION OF THE CONTRACT PRICE BY AN AMOUNT EQUAL TO 85 PERCENT OF THE DIFFERENCE BETWEEN TOTAL WAGES ACTUALLY PAID TO LABORERS AND MECHANICS, AND WAGES WHICH WOULD HAVE BEEN PAID AT HOURLY RATES STIPULATED IN THE CONTRACT. THE PARAGRAPH FURTHER PROVIDES:

"IN COMPUTING THE ADJUSTMENT IN COMPENSATION TO BE MADE UNDER THIS PARAGRAPH, ILLEGAL WORKING TIME OF LABORERS AND MECHANICS; PAYMENTS IN THE FORM OF BONUSES, INCENTIVE PAYMENTS, OR GRATUITIES, SUBSISTENCE PAYMENTS, AND TRAVEL ALLOWANCES; AND ALL COSTS OF COMPENSATION INSURANCE AND OTHER DIRECT OR INDIRECT CHARGES, CONTRIBUTIONS, OR TAXES, EITHER STATE OR FEDERAL, APPLYING TO PAYROLLS WILL NOT BE CONSIDERED.'

AT THE TIME THE CONTRACT WAS ENTERED INTO, UNIONS REPRESENTING CARPENTERS, TEAMSTERS, OPERATING ENGINEERS, CEMENT MASONS AND LABORERS, KNOWN AS THE "FIVE BASIC CRAFTS," HAD IN EFFECT A STATE-WIDE MASTER LABOR AGREEMENT WITH THE ARIZONA CHAPTER OF THE ASSOCIATED GENERAL CONTRACTORS TO RUN FROM JUNE 1, 1955, TO MAY 31, 1959, WHICH PROVIDED THAT THE EMPLOYEES COVERED THEREUNDER WERE ENTITLED TO FREE ROOM AND BOARD OR $6 PER DAY FOR SUBSISTENCE FOR WORK ON "REMOTE PROJECTS.' THE CONTRACTOR, WHILE NOT A MEMBER OF THE ARIZONA CHAPTER OF THE ASSOCIATED GENERAL CONTRACTORS AND NOT SIGNATORY TO THE AGREEMENT, ADOPTED THE PROVISIONS THEREOF.

THERE APPEARS NO QUESTION THAT WHEN THE CONTRACT WAS UNDERTAKEN THE CONSTRUCTION SITE CAME WITHIN THE DEFINITION OF A REMOTE PROJECT. HOWEVER, THE CONTRACTOR SOON BEGAN, PURSUANT TO THE TERMS OF THE CONTRACT, TO CONSTRUCT HOUSING AND RELATED FACILITIES FOR ITS EMPLOYEES. ON JANUARY 15, 1959, BECAUSE OF THIS CONSTRUCTION, THE SITE WAS DETERMINED BY AN ARBITRATOR NO LONGER TO BE REMOTE, AND REMOTE PAY WAS HALTED AFTER JANUARY 25, 1959.

IN MAY 1959 THE ARIZONA CHAPTER OF THE ASSOCIATED GENERAL CONTRACTORS AND THE FIVE BASIC CRAFTS, EXCEPT FOR THE OPERATING ENGINEERS, EXECUTED A NEW MASTER LABOR AGREEMENT WHICH REPLACED THE REMOTE PROJECTS PROVISION BY A SYSTEM UNDER WHICH 12 ARIZONA CITIES WERE DESIGNATED AS FREE POINTS AND EXPENSE ALLOWANCES WERE CALLED FOR BASED ON THE DISTANCE OF THE WORK LOCATION FROM THE NEAREST FREE POINT. FOUR CONCENTRIC CIRCLES WERE DRAWN AROUND EACH FREE POINT. THE AREA WITHIN THE FIRST CIRCLE WAS REGARDED AS A FREE ZONE. FOR A WORK LOCATION WITHIN THE SECOND CIRCLE A WORK WAS ENTITLED TO AN EXPENSE ALLOWANCE OF $2 PER DAY IN ADDITION TO THE OTHER WAGE PAYMENTS. WITHIN THE THIRD CIRCLE THE EXPENSE ALLOWANCE WAS $4 PER DAY, AND WITHIN THE FOURTH CIRCLE $6 PER DAY. BECAUSE OF THE DISTANCE FROM THE NEAREST FREE POINT THE SITE OF THE CONTRACT WORK CAME WITHIN THE FOURTH ZONE.

THE CONTRACTOR AGAIN WAS NOT A PARTY TO THE STATEWIDE LABOR AGREEMENT, AND APPEARS TO HAVE TAKEN LITTLE, IF ANY, PART IN NEGOTIATIONS LEADING UP TO ITS ADOPTION. HOWEVER, THE CONTRACTOR OFFERED TO ACCEPT ALL OF THE PROVISIONS OF THE NEW CONTRACT EXCEPT THE EXPENSE ALLOWANCE PROVISIONS. AFTER LONG NEGOTIATIONS AND A STRIKE OF APPROXIMATELY SIX MONTHS, THE CONTRACTOR AND THE FIVE BASIC CRAFTS ENTERED INTO A LABOR AGREEMENT, TO ENDURE FOR THE LIFE OF THE PROJECT, IN WHICH THE EMPLOYEES COVERED WERE GRANTED A WAGE INCREASE OF 50 CENTS PER HOUR MORE THAN PROVIDED IN THE STATE-WIDE AGREEMENT, BUT WHICH ELIMINATED THE EXPENSE ALLOWANCE PROVISION.

SUBSEQUENTLY THE CONTRACTOR SUBMITTED A CLAIM PURSUANT TO THE ESCALATION PROVISION. THE CONTRACTING AGENCY QUESTIONED WHETHER ANY PART OF THE 50 CENTS PER HOUR WAS SUBJECT TO ESCALATION OR WHETHER, IN FACT, THE INCREASE PROPERLY CAME WITHIN THE TYPES OF COMPENSATION EXCEPTED BY PARAGRAPH 19 FROM ESCALATION. THE LEGALITY OF THE CLAIM WAS SUBMITTED TO OUR OFFICE AND BY DECISION B-142040, APRIL 1, 1960, 39 COMP. GEN. 668, WE HELD IN PART:

"ON THE BASIS OF THE PROVISIONS OF PARAGRAPH 19 OF THE SPECIFICATIONS, WE CONCUR IN THE VIEW OF THE ACTING ASSISTANT COMMISSIONER AND CHIEF ENGINEER THAT THE GOVERNMENT IS NOT LIABLE AS A MATTER OF LAW FOR ESCALATION ON THE FULL AMOUNTS OF THE INCREASES IN THE NOMINAL WAGE RATES, IF IN FACT THE INCREASED RATES INCLUDE ELEMENTS OF SUBSISTENCE OR TRAVEL PAY OR OTHER ITEMS EXCLUDED FROM CONSIDERATION BY THE THIRD SUB-PARAGRAPH OF THAT ARTICLE.

"WE BELIEVE, HOWEVER, THAT THE AMOUNT OF SUCH EXCLUDED COMPONENTS INCLUDED IN THE INCREASED RATE IS A QUESTION PRIMARILY OF FACT, TO BE DETERMINED IN THE FIRST INSTANCE BY THE CONTRACTING OFFICER, AND SUBJECT TO APPEAL AND FINAL RESOLUTION UNDER THE PROVISIONS OF THE DISPUTES CLAUSE OF THE CONTRACT. IN VIEW OF THE FULL CONSIDERATION ALREADY GIVEN TO QUESTION, AS INDICATED BY THE REPORT OF THE ACTING ASSISTANT COMMISSIONER, IT WOULD APPEAR NECESSARY ONLY TO STATE HIS DETERMINATIONS AS FINDINGS OF FACT AND FURNISH A COPY THEREOF TO THE CONTRACTOR.'

ON APRIL 21, 1960, THE CONTRACTING OFFICER ISSUED FINDINGS OF FACT AND CONCLUDED THAT NO PART OF THE 50 CENTS PER HOUR INCREASE SHOULD BE SUBJECT TO ESCALATION UNDER PARAGRAPH 19. THE CONTRACTING OFFICER'S DECISION WAS APPEALED PURSUANT TO THE DISPUTES CLAUSE OF THE CONTRACT WHICH STATES:

"DISPUTE--- EXCEPT AS OTHERWISE PROVIDED IN THIS CONTRACT, ANY DISPUTE CONCERNING A QUESTION OF FACT ARISING UNDER THIS CONTRACT WHICH IS NOT DISPOSED OF BY AGREEMENT SHALL BE DECIDED BY THE CONTRACTING OFFICER, WHO SHALL FURNISH TO THE CONTRACTOR A WRITTEN COPY OF HIS DECISION. SUCH DECISION SHALL BE FINAL AND CONCLUSIVE UNLESS WITHIN 30 DAYS FROM THE DATE OF RECEIPT THEREOF, THE CONTRACTOR APPEALS THEREFROM BY MAILING OR OTHERWISE FURNISHING TO THE CONTRACTING OFFICER A WRITTEN APPEAL ADDRESSED TO THE SECRETARY. THE DECISION OF THE SECRETARY OR HIS DULY AUTHORIZED REPRESENTATIVES UPON SUCH APPEAL SHALL BE FINAL AND CONCLUSIVE UNLESS THE DECISION IS FRAUDULENT OR CAPRICIOUS OR ARBITRARY OR SO GROSSLY ERRONEOUS AS NECESSARILY TO IMPLY BAD FAITH, OR IS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE. IN CONNECTION WITH ANY APPEAL PROCEEDING UNDER THE "DISPUTES" CLAUSE, THE CONTRACTOR SHALL BE AFFORDED AN OPPORTUNITY TO BE HEARD AND TO OFFER EVIDENCE IN SUPPORT OF ITS APPEAL. PENDING FINAL DECISION OF A DISPUTE HEREUNDER, THE CONTRACTOR SHALL PROCEED DILIGENTLY WITH THE PERFORMANCE OF THE CONTRACT AND IN ACCORDANCE WITH THE CONTRACTING OFFICER'S DECISION.'

THE INTERIOR BOARD OF CONTRACT APPEALS IN AN OPINION OF JANUARY 4, 1961, HELD THAT THE FULL 50 CENTS INCREASE WAS SUBJECT TO THE ESCALATION PROVISION. THE BOARD WAS REQUESTED TO RECONSIDER AND ON NOVEMBER 9, 1961, AFFIRMED ITS EARLIER POSITION WITH RESPECT TO THE ITEM HERE UNDER CONSIDERATION.

THE VOUCHER SUBMITTED BY YOU IS UNDERSTOOD TO COVER THE ADJUSTMENT DUE UNDER THE ESCALATION CLAUSE OF THE CONTRACT, IN ACCORDANCE WITH THE DECISION OF THE BOARD, FOR WAGES PAID TO WORKERS OF THE FIVE BASIC CRAFTS BY THE CONTRACTOR AND CERTAIN SUBCONTRACTORS DURING THE PERIOD JUNE 1, 1959-NOVEMBER 19, 1961. YOU STATE THAT YOUR SUBMISSION IS PROMPTED BY DOUBT AS TO THE PROPRIETY OF CERTIFYING THE VOUCHER BECAUSE OF APPARENT CONFLICT BETWEEN THE DECISION OF THE BOARD AND OUR PRIOR DECISION OF APRIL 1, 1960.

AS INDICATED ABOVE, THAT DECISION WAS RENDERED IN RESPONSE TO YOUR REQUEST, AUTHORIZED BY SECTION 8 OF THE ACT OF JULY 31, 1894, 28 STAT. 207, AS AMENDED (31 U.S.C. 74), FOR AN ADVANCE DECISION CONCERNING THE PROPRIETY OF PAYMENT OF THE ESCALATION CLAIM OF THE CONTRACTOR. THE CLAIM, AS SUBMITTED, WAS FOR ESCALATION BASED UPON THE FULL AMOUNT OF THE DIFFERENCE BETWEEN THE WAGE RATES SET OUT IN THE CONTRACT SPECIFICATIONS AND THE NEW WAGE RATES ESTABLISHED BY THE 1959 LABOR AGREEMENTS. IN OUR VIEW, THERE WAS BEFORE US ON THAT SUBMISSION THE SINGLE LEGAL QUESTION, WHETHER THE FACT THAT THE NEW RATES INCLUDED NO AMOUNTS SPECIFICALLY DENOMINATED AS BONUSES OR SUBSISTENCE PAYMENTS, OR OTHER TYPES OF PAYMENTS EXCLUDED FROM CONSIDERATION BY THE LANGUAGE OF PARAGRAPH 19, ENTITLED THE CONTRACTOR, AS A MATTER OF LAW, TO ESCALATION ON THE ENTIRE DIFFERENCE. IN ANSWERING THAT QUESTION IN THE NEGATIVE WE INTERPRETED THE ESCALATION CLAUSE AS REQUIRING THE EXCLUSION OF ANY PORTIONS OF THE NOMINAL WAGE INCREASES WHICH IN FACT, ALTHOUGH NOT IN FORM, REPRESENTED PAYMENTS FOR SUBSISTENCE OR OTHER TYPES OF EXCLUDED ITEMS. WE DID NOT, HOWEVER, UNDERTAKE TO DECIDE OR TO TAKE ANY POSITION WITH RESPECT TO THE CHARACTER OF ANY PART OF THE INCREASES INVOLVED IN THE SUBJECT CLAIM, POINTING OUT THAT THE FACTUAL QUESTION WAS PROPERLY FOR DECISION BY THE CONTRACTING OFFICER SUBJECT TO THE DISPUTES CLAUSE OF THE CONTRACT.

THE TWO DECISIONS OF THE BOARD, READ TOGETHER, DO NOT INDICATE ANY DISAGREEMENT BY THE BOARD WITH THE LEGAL PROPOSITION STATED IN OUR DECISION. WHILE THERE IS SOME LANGUAGE IN THE FIRST DECISION WHICH MIGHT BE INTERPRETED AS EVIDENCING ACCEPTANCE BY THE BOARD OF THE VIEW THAT THE FORM OF THE WAGE RATE SCHEDULES ADOPTED IN 1959 MIGHT BE CONTROLLING, THE DECISION OF NOVEMBER 9, 1961, MAKES IT CLEAR THAT THE BOARD FULLY RECOGNIZED THE POSSIBILITY THAT THE WAGE RATES MIGHT INCLUDE ELEMENTS WHICH SHOULD BE EXCLUDED FROM THE ESCALATION BASE, AND THAT ITS DECISION OF NOVEMBER 9, 1961, MAKES IT CLEAR THAT THE BOARD FULLY RECOGNIZED THE POSSIBILITY THAT THE WAGE RATES MIGHT INCLUDE ELEMENTS WHICH SHOULD BE EXCLUDED FROM THE ESCALATION BASE, AND THAT ITS CRAFTS DID NOT INCLUDE SUCH ELEMENTS WAS A CONCLUSION OF FACT FROM THE DECISION THAT THE RATES FIXED BY THE CONTRACT WITH THE FIVE BASIC EVIDENCE BEFORE THE BOARD.

AS A FACTUAL DETERMINATION, THE BOARD'S DECISION MUST BE ACCEPTED AS FINAL UNDER THE DISPUTES CLAUSE QUOTED ABOVE AND THE PROVISIONS OF THE ACT OF MAY 11, 1954, 68 STAT. 81, 41 U.S.C. 321, UNLESS IT IS FRAUDULENT OR CAPRICIOUS OR ARBITRARY OR SO GROSSLY ERRONEOUS AS NECESSARILY TO IMPLY BAD FAITH, OR IS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE.

UNDER THOSE PROVISIONS, WE BELIEVE IT TO BE THE DUTY OF OUR OFFICE TO CONSIDER WHETHER THE RECORD LEAVES ROOM FOR SUBSTANTIAL DOUBT AS TO WHETHER A COURT WOULD ACCEPT THE BOARD'S DECISION AS FINAL BY THE STANDARDS SO ESTABLISHED, AND TO WITHHOLD OR DENY CREDIT FOR PAYMENT THEREUNDER IF WE FIND SUCH DOUBT. NO OTHER PRACTICAL METHOD EXISTS TO OBTAIN JUDICIAL REVIEW OF QUESTIONABLE ADMINISTRATIVE DECISIONS WHICH MIGHT BE CONTRARY TO THE INTEREST OF THE GOVERNMENT.

THE BOARD'S CONCLUSION THAT THE 50-CENT PER HOUR EXCESS OF THE NEW WAGE RATES OVER THOSE ESTABLISHED BY THE STATE-WIDE AGREEMENT IS SUBJECT TO THE ESCALATION PROVISION IS BASED LARGELY UPON EVIDENCE PRESENTED AT HEARINGS THAT THE INCREASE CAN BE JUSTIFIED ON THE BASIS OF THE SUPERIOR BARGAINING POSITION OF THE UNIONS AND OF OTHER DIFFERENCES BETWEEN THE STATE-WIDE AGREEMENTS AND THE AGREEMENT BETWEEN THE CONTRACTOR AND THE FIVE BASIC CRAFTS APPLICABLE TO THE PROJECT.

THE TERM "SUBSISTENCE" IS OFTEN APPLIED TO PAYMENTS MADE TO COMPENSATE AN EMPLOYEE FOR THE COST OF ROOM AND BOARD WHEN THE WORK SITE IS SO FAR AWAY AS TO PRECLUDE THE USE OF HIS USUAL FACILITIES. HOWEVER, AS WAS POINTED OUT IN THE HEARINGS, PAYMENTS FOR "SUBSISTENCE" HAVE BEEN OBTAINED IN THE CASE OF SOME TYPES OF EMPLOYEES EVEN WHERE THEY ARE ABLE TO LIVE AT HOME. WE ARE SATISFIED AFTER A CAREFUL REVIEW OF THE RECORD THAT THE BOARD WOULD HAVE BEEN JUSTIFIED IN AGREEING WITH THE CONTRACTING OFFICER THAT THE 50 CENTS PER HOUR INCREASE IN FACT CONSTITUTED SUBSISTENCE OR ANOTHER FORM OF COMPENSATION TO WHICH ESCALATION WAS NOT APPLICABLE NOTWITHSTANDING THE DESIGNATION GIVEN THE INCREASE. SEE GEORGE LEARY CONSTRUCTION CO. V. UNITED STATES, 63 CT.CL. 206. HOWEVER, THE BOARD HAS, AFTER LENGTHY HEARINGS, TWICE CONCLUDED THAT THE INCREASE REPRESENTS TRUE WAGES AND THEREFORE IS SUBJECT TO ESCALATION. EVIDENCE WAS ADDUCED IN THE COURSE OF THE HEARINGS TO SUPPORT THAT POSITION. UPON CAREFUL CONSIDERATION OF THAT EVIDENCE, IN THE LIGHT OF THE BOARD'S BROAD AUTHORITY UNDER THE CONTRACT AND 31 U.S.C. 321, WE HAVE CONCLUDED THAT THERE IS NO ADEQUATE BASIS TO QUESTION THE DECISION.

CF. LANGOMA LUMBER CORP. V. UNITED STATES, 140 F.SUPP. 460, AFFIRMED 232 F.2D 886.

ACCORDINGLY, THE VOUCHER, WHICH IS ENCLOSED, MAY BE CERTIFIED FOR PAYMENT IF OTHERWISE CORRECT.