B-144847, FEB. 14, 1961

B-144847, FEB. 14, 1961

TO AUTHORIZED CERTIFYING OFFICER, BUREAU OF PUBLIC ROADS:

BY LETTERS DATED JANUARY 17 AND 31, 1961, WITH ENCLOSURES, YOU REQUESTED AN ADVANCE DECISION AS TO WHETHER A VOUCHER IN THE AMOUNT OF $171,367.74, DRAWN IN FAVOR OF THE PUGET SOUND NATIONAL BANK, ASSIGNEE OF THE HENLY CONSTRUCTION COMPANY UNDER CONTRACT NO. CPR8-9231 DATED OCTOBER 12, 1955, MAY BE CERTIFIED FOR PAYMENT.

THE VOUCHER REPRESENTS AN AWARD MADE TO HENLY BY THE DEPARTMENTAL BOARD OF APPEALS, DOCKET NO. PR-24, AS AN EQUITABLE ADJUSTMENT FOR CHANGES AND WORK SUSPENSIONS ORDERED BY THE GOVERNMENT IN CONNECTION WITH THE CONSTRUCTION OF THE WASHINGTON FOREST DEVELOPMENT ROAD PROJECT, SNOQUALMIE NATIONAL FOREST, YAKIMA, WASHINGTON.

THE CLAIM REPRESENTED BY THE VOUCHER AROSE UNDER THE "DISPUTES" CLAUSE OF THE CONTRACT AND RELATES PRIMARILY TO THE ADDITIONAL WORK PERFORMED BY HENLY UNDER CHANGE ORDER NO. 2 TO THE CONTRACT AND TO UNCOMPENSATED DELAYS CAUSED BY THE GOVERNMENT IN REACHING A DECISION AS TO THE APPROPRIATE ACTION TO BE TAKEN AFTER ENCOUNTERING A MAJOR SLIDE AREA AT THE CONTRACT SITE WHICH RESULTED IN CHANGE ORDER NO. 2. THE BOARD BY DECISION DATED APRIL 29, 1960, FOUND THAT AN EQUITABLE ADJUSTMENT REQUIRED BY THE CONTRACT HAD NOT BEEN ACCOMPLISHED BY THE GOVERNMENT AND DIRECTED THAT THE PARTIES DETERMINE THE AMOUNT DUE BY MUTUAL AGREEMENT. THE BOARD, ALSO, RESERVED TO ITSELF THE RIGHT TO DECIDE THE AMOUNT IN ISSUE IF HENLY AND THE BUREAU WERE UNABLE TO REACH AN AGREEMENT. SINCE SEVEN MONTHS HAD ELAPSED WITHOUT ANY AGREEMENT AS TO THE AMOUNT OF THE EQUITABLE ADJUSTMENT, THE BOARD DETERMINED IN DECEMBER 1960 THAT THE AMOUNT OF $171,367.74 REPRESENTED AN EQUITABLE ADJUSTMENT.

IN THAT CONNECTION, IT WAS POINTED OUT BY THE BOARD THAT THE CHANGE IN PLANS INVOLVED 28 PERCENT OF THE LENGTH OF THE PROJECT AND NEARLY 50 PERCENT OF THE COST OF THE ENTIRE PROJECT.

UPON REVIEW OF THE RECORD BEFORE US, THERE APPEARS TO BE ONLY ONE QUESTION FOR OUR OFFICE TO CONSIDER, THAT IS, WHETHER THE DECISION OF THE BOARD TO AWARD $171,367.74 TO HENLY AS EQUITABLE PRICE ADJUSTMENT UNDER THE CONTRACT IS "SUPPORTED BY SUBSTANTIAL EVIDENCE" AS CONTEMPLATED BY 41 U.S.C. 321. IT IS RECOGNIZED THAT THE BOARD'S AWARD WAS NOT BASED ON AUDIT DATA DEMONSTRATING THE ACTUAL LOSSES SUSTAINED BY HENLY DUE TO ACTS OF THE GOVERNMENT. IN FACT, THE BOARD'S DECISION OF APRIL 29, 1960, WAS CONFINED TO A FACTUAL DETERMINATION THAT EQUITABLE ADJUSTMENT AS REQUIRED BY THE CONTRACT HAD NOT BEEN FULLY COMPLIED WITH. THE DETERMINATION AS TO THE AMOUNT OF EQUITABLE ADJUSTMENT WAS HELD IN ABEYANCE PENDING NEGOTIATION BETWEEN THE PARTIES AS TO THE AMOUNT THEREOF. HOWEVER, CONSIDERING THE CHARACTER OF HENLY'S COST DATA APPLICABLE TO THE CONTRACT, IT WAS NOT POSSIBLE TO ARRIVE AT A FIGURE WHICH COULD BE SAID TO BEAR A REASONABLE RELATION TO THE CLAIM. THEREUPON,THE BOARD ASSUMED JURISDICTION AND MADE AN AWARD BASED ON AN ENGINEERING ANALYSIS OF THE ENTIRE PROJECT COMPLETED BY HENLY UNDER THE CONTRACT. THE ENGINEERING ANALYSIS PROCEEDED ON THE ASSUMPTION THAT HAD THE ORIGINAL UNCHANGED PORTION OF THE CONTRACT BEEN READVERTISED AND THE CHANGED PORTION HAD ALSO READVERTISED, AND THE ENTIRE PROJECT REAWARDED TO HENLY, THE ESTIMATED COST TO THE GOVERNMENT WOULD HAVE BEEN $620,668.78, LESS THE AMOUNT OF THE TOTAL AMOUNT EARNED UNDER THE ORIGINAL CONTRACT, OR $171,367.74. MAKING SUCH ENGINEERING ANALYSIS, THE BOARD UTILIZED THE SAME FACTORS THAT WOULD HAVE BEEN USED BY GOVERNMENT ENGINEERS IN ESTIMATING THE COST OF THE ENTIRE PROJECT BEFORE BIDS THEREON WOULD BE REQUESTED. WE ALSO HAVE BEEN INFORMED THAT CUSTOMARY ENGINEERING STANDARDS WERE USED IN DETERMINING THE ESTIMATED CONSTRUCTION COSTS, AND THAT SUCH ANALYSIS WAS MADE BY A BUREAU ENGINEER WHO WAS A MEMBER OF THE BOARD WHEN IT CONSIDERED THE HENLY CLAIM WITH THE ASSISTANCE OF OTHER BUREAU ENGINEERS FAMILIAR WITH THE CLAIM.

IN VIEW OF THE LACK OF ACCOUNTING DATA TO SUPPORT THE CLAIM FOR EQUITABLE ADJUSTMENT DETERMINED BY THE BOARD TO BE REQUIRED UNDER THE FACTS OF THE MATTER, WE ARE OF THE OPINION THAT THE ENGINEERING ESTIMATE OF THE ENTIRE COST OF THE PROJECT MUST BE RECOGNIZED AS CONSTITUTING ,SUBSTANTIAL EVIDENCE" IN SUPPORT OF THE BOARD'S DECISION. WE MUST NECESSARILY RELY ON THE EXPERTISE EXERCISED IN ARRIVING AT THE AMOUNT OF EQUITABLE ADJUSTMENT AND, WHILE WE MAY NOT BE IN COMPLETE AGREEMENT THAT THE RECORD CONVINCINGLY SUPPORTS SUCH AWARD, WE MAY NOT SUBSTITUTE OUR JUDGMENT FOR THAT OF THE BOARD. IT IS RECOGNIZED THAT THE AWARD IS NOT SUBJECT TO DEFINITE PROOF BUT, ON THE OTHER HAND, WE ARE NOT IN A POSITION TO HOLD THAT THE BOARD ERRED IN REASONABLY ESTIMATING THE AMOUNT OF DAMAGES SUFFERED BY HENLY.

ACCORDINGLY, AND IN VIEW OF THE FINALITY OF THE BOARD'S DECISION AS TO QUESTIONS OF FACT, WE BELIEVE THAT PAYMENT OF THE AWARD SHOULD BE MADE IF PROPER IN OTHER RESPECTS. HOWEVER, SINCE THE CLAIMS DIVISION OF OUR OFFICE ADVISED THE BUREAU ON JANUARY 3, 1961, THAT HENLY IS INDEBTED TO THE SMALL BUSINESS ADMINISTRATION IN THE AMOUNT OF $86,936.90, AS OF DECEMBER 21, 1960, PLUS THE DAILY ACCRUAL OF INTEREST IN THE AMOUNT OF $12.25111 AND COURT COSTS IN THE AMOUNT OF $27.60, IT IS REQUESTED THAT A VOUCHER COVERING THE AMOUNT OF SUCH INDEBTEDNESS BE PROMPTLY PREPARED AND TRANSMITTED TO OUR OFFICE FOR DIRECT SETTLEMENT AND SETOFF. ON THE BASIS OF THE LETTER DATED DECEMBER 23, 1960, FROM THE PUGET SOUND NATIONAL BANK, ASSIGNEE UNDER THE CONTRACT, PAYMENT OF THE AMOUNT OF $50,858.53 MAY BE MADE DIRECTLY TO SUCH BANK FROM THE PROCEEDS OF THE BOARD'S AWARD WITH THE UNDERSTANDING THAT A RELEASE BE PROMPTLY FURNISHED TO THE BUREAU UPON PAYMENT OF SUCH AMOUNT. THE REMAINDER OF THE AWARD MAY BE PAID TO THE HENLY CONSTRUCTION COMPANY AND THE CHECK IN PAYMENT THEREOF MAY BE FORWARDED CARE OF LINTON M. COLLINS, ESQUIRE, THE ATTORNEY OF RECORD OF THE COMPANY.