B-93924, JULY 21, 1954, 34 COMP. GEN. 31

B-93924, JULY 21, 1954, 34 COMP. GEN. 31

LUMP-SUM CONTRACTS - BUILDING, ETC., PERMIT FEES - GOVERNMENT HOSPITAL CONSTRUCTION - FEE RECOVERED BY CONTRACTOR FROM MUNICIPALITY UNDER A LUMP-SUM CONTRACT FOR CONSTRUCTION OF A GOVERNMENT HOSPITAL WHICH PROVIDES IN THE SPECIFICATIONS THAT THE CONTRACTOR SHALL PROCURE ALL NECESSARY PERMITS AND LICENSES AT HIS OWN EXPENSE, BUT WHICH CONTAINS NO PROVISION FOR AN ADJUSTMENT IN THE CONTRACT PRICE IN THE EVENT OF A SUBSEQUENT DETERMINATION THAT PERMIT FEES ARE NOT PAYABLE, THE GOVERNMENT MAY NOT DEDUCT FROM THE CONTRACT PRICE THE BUILDING PERMIT FEE WHICH THE CONTRACTOR LAWFULLY AVOIDED PAYING TO THE MUNICIPALITY WHERE THE HOSPITAL WAS CONSTRUCTED.

ACTING COMPTROLLER GENERAL WEITZEL TO THE SECRETARY OF THE ARMY, JULY 21, 1954:

REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 30, 1953, REQUESTING ADVICE AS TO WHETHER A DEDUCTION SHOULD BE MADE FROM MONEYS OTHERWISE DUE THE FIRM OF THOMPSON AND STREET COMPANY, UNDER LUMP-SUM CONTRACT NO. DA-01-076 -ENG-136, DATED OCTOBER 4, 1949, IN AN AMOUNT EQUAL TO THE COST OF A BUILDING PERMIT PAID BY THE CONTRACTOR TO THE CITY OF BIRMINGHAM, ALABAMA, BUT WHICH SUBSEQUENTLY WAS RECOVERED BY IT FROM THE CITY THROUGH LITIGATION.

IN THE DECISION DATED JULY 26, 1950, 30 COMP. GEN. 28, THIS OFFICE CONCLUDED THAT THE CONTRACTOR IN MAKING THE PAYMENT WAS ACTING AS AN AGENT OF THE GOVERNMENT, THAT THE CITY WAS WITHOUT AUTHORITY TO COLLECT IT AND THAT THEREFORE THE GOVERNMENT WAS THE REAL PARTY IN INTEREST TO RECOVER THE FEE. HOWEVER, IN THE SUIT OF THE CONTRACTOR AGAINST THE CITY, THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT, IN SUSTAINING THE DECISION OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ALABAMA, AGREED WITH THE CHIEF, LEGAL DIVISION, CORPS OF ENGINEERS," THAT THE UNITED STATES HAS NO DIRECT INTEREST IN THE MATTER WHICH WOULD SUPPORT A SUIT IN ITS OWN NAME, NOR HAS IT ANY CONTRACTUAL RIGHT TO SUE IN THE NAME OF THE CONTRACTOR; " AND ON THIS POINT THE COURT HELD THAT " APPELLEES PAID THE PERMIT FEES TO APPELLANT, AND THEY ARE THE REAL PARTIES IN INTEREST TO RECOVER SUCH FEES IF THEY WERE ILLEGALLY REQUIRED, OR NOT LEGALLY NECESSARY.' CITY OF BIRMINGHAM V. F. N. THOMPSON, ET AL., 200 F.2D 505. THUS, THE PREMISE FOR THE CONCLUSION REACHED IN OFFICE DECISION OF JULY 26, 1950, HAS BEEN REJECTED BY THE COURTS. THE RULING OF THE COURT, NEVERTHELESS, IS NOT RES JUDICATA WITH RESPECT TO WHATEVER INDEPENDENT RIGHT OR RIGHTS THE GOVERNMENT MAY HAVE AGAINST THE CONTRACTOR.

PARAGRAPH SC-44 OF THE SPECIFICATIONS PROVIDES THAT THE CONTRACTOR, OR CONTRACTORS, SHALL PROCURE ALL NECESSARY PERMITS AND LICENSES AT HIS, OR THEIR, OWN EXPENSE. ALSO, ARTICLE 10 OF THE CONTRACT PROVIDES THAT: " THE CONTRACTOR SHALL OBTAIN ALL REQUIRED LICENSES AND PERMITS.' IS INDICATED THAT, IN VIEW OF THIS REQUIREMENT, AN AMOUNT SUFFICIENT TO COVER THE COST OF THE PERMIT WAS INCLUDED IN THE LUMP-SUM BID, WHICH, BEING THE LOWEST SUBMITTED, WAS ACCEPTED BY THE GOVERNMENT. BY THE TERMS OF THE CONTRACT THE GOVERNMENT WAS TO PAY A DEFINITE AND FIXED PRICE IN RETURN FOR WHICH IT WAS TO RECEIVE A HOSPITAL BUILDING. IT DID NOT UNDERTAKE OR AGREE TO FURNISH THE MONEYS OR PUT THE CONTRACTOR "IN FUNDS" FOR THE PAYMENT OF THE PERMIT FEE (CF. WAYNE COUNTY PRODUCTS V. DUFFY-MOTT CO., 155 N.E. 669); AS ABOVE INDICATED, THAT WAS THE OBLIGATION OF THE CONTRACTOR. IN THESE CIRCUMSTANCES, IT MUST BE CONSIDERED THAT THE PERMIT FEE--- AS WELL AS THE OTHER ITEMS OF COST UNDER THE CONTRACT--- WAS ABSORBED IN THE FIXED PRICE TO BE PAID. THE CONTRACTOR LAWFULLY AVOIDED THE COST OF THE FEE, AND THE GOVERNMENT IS NOT ENTITLED TO A REFUND OF AN EQUIVALENT AMOUNT UNLESS SUCH A RESULT WAS CONTEMPLATED BY THE PARTIES.

IN THAT CONNECTION, THE CONTRACT CONTAINS NO PROVISION FOR AN ADJUSTMENT IN THE CONTRACT PRICE IN THE EVENT OF A SUBSEQUENT DETERMINATION THAT THE FEES ARE NOT PAYABLE. MOREOVER, THE RECORD INDICATES THAT THE GOVERNMENT QUESTIONED THE RIGHT OF THE CITY TO EXACT THE FEE BUT FAILED TO OBTAIN A WAIVER OF THE CITY'S BUILDING PERMIT REQUIREMENTS. THE GOVERNMENT OFFICIALS THEREUPON ADVISED PROSPECTIVE BIDDERS, INCLUDING THE CONTRACTOR, OF THE CITY'S POSITION PRESUMABLY FOR THE PURPOSE OF HAVING THEM CONSIDER THE INVOLVED COST IN PREPARING ITS CONTEST OF THE FEE AND TO MAKE APPROPRIATE PROVISION IN THE CONTRACT WITH RESPECT TO A REFUND. THIS IT DID NOT DO, BUT RATHER AGREED TO PAY A LUMP SUM FOR THE CONTRACT WORK. THE COURTS CANNOT BE EXPECTED TO REWRITE A CONTRACT TO SAVE A PARTY FROM THE CONSEQUENCES OF ITS OWN LACK OF FORESIGHT IN NEGOTIATING THE ORIGINAL TERMS. HERE, THE GOVERNMENT COULD HAVE PRESERVED ITS RIGHTS BY AN EXPRESS PROVISION BUT GAVE THEM AWAY.

ACCORDINGLY, THE AMOUNTS PROPERLY DUE MAY BE RELEASED TO THE CONTRACTOR WITHOUT DEDUCTION.