B-149895, OCT. 1, 1963

B-149895, OCT. 1, 1963

TO THE POSTMASTER GENERAL:

REFERENCE IS MADE TO LETTER OF JANUARY 10, 1963, FROM THE ASSISTANT POSTMASTER GENERAL, SUBMITTING FOR OUR CONSIDERATION A COPY OF A SUPPLEMENTAL AGREEMENT DATED DECEMBER 7, 1962, EXECUTED BY THE JERVIS B. WEBB COMPANY AND THE CONTRACTING OFFICER FOR THE POST OFFICE DEPARTMENT, BUREAU OF FACILITIES, DIVISION OF SUPPLIES PROCUREMENT, REQUIREMENTS AND INVENTORY CONTROL BRANCH, IN CONNECTION WITH FIXED PRICE CONTRACT 6-1- 9881, AWARDED JUNE 22, 1960, WHICH CALLS FOR THE FURNISHING AND INSTALLATION BY WEBB OF A "FLAT BELT PARCEL POST CONVEYOR SYSTEM," ,PARCEL SORTING MACHINES" AND A "SACK SORTING MACHINE," TOGETHER WITH RELATED EQUIPMENT, IN THE GENERAL POST OFFICE AND TERMINAL ANNEX, PHILADELPHIA, PENNSYLVANIA, IN ACCORDANCE WITH POST OFFICE DEPARTMENT SPECIFICATION DATED APRIL 15, 1960, FOR THE LUMP-SUM PRICE OF $3,863,464.

THE CONTRACT INCORPORATED STANDARD FORM 32, GENERAL PROVISIONS (SUPPLY CONTRACT), OCTOBER 1957 EDITION, THE "CHANGES" CLAUSE OF WHICH PROVIDES, IN PERTINENT PART, THAT THE CONTRACTING OFFICER MAY, BY A WRITTEN ORDER, MAKE CHANGES, WITHIN THE GENERAL SCOPE OF THE CONTRACT, IN ANY ONE OR MORE OF THE FOLLOWING: (I) DRAWINGS, DESIGNS, OR SPECIFICATIONS, WHERE THE SUPPLIES TO BE FURNISHED ARE TO BE SPECIALLY MANUFACTURED FOR THE GOVERNMENT IN ACCORDANCE THEREWITH; (II) METHOD OF SHIPMENT OR PACKING; AND (III) PLACE OF DELIVERY; AND THAT IF ANY SUCH CHANGE CAUSES AN INCREASE OR DECREASE IN THE COST OF, OR THE TIME REQUIRED FOR, THE PERFORMANCE OF ANY PART OF THE WORK UNDER THE CONTRACT, WHETHER CHANGED OR NOT CHANGED BY ANY SUCH ORDER, AN EQUITABLE ADJUSTMENT SHALL BE MADE IN THE CONTRACT PRICE OR DELIVERY SCHEDULE, OR BOTH, AND THE CONTRACT SHALL BE MODIFIED IN WRITING ACCORDINGLY. THE "CHANGES" CLAUSE FURTHER PROVIDES THAT ANY CLAIM BY THE CONTRACTOR FOR ADJUSTMENT MUST BE ASSERTED WITHIN 30 DAYS FROM DATE OF RECEIPT BY THE CONTRACTOR OF THE NOTIFICATION OF CHANGE, BUT THAT THE CONTRACTING OFFICER MAY, IF HE DECIDES THAT THE FACTS JUSTIFY SUCH ACTION, RECEIVE AND ACT UPON ANY SUCH CLAIM ASSERTED AT ANY TIME PRIOR TO FINAL PAYMENT UNDER THE CONTRACT; AND THAT FAILURE TO AGREE TO ANY ADJUSTMENT SHALL BE A DISPUTE CONCERNING A QUESTION OF FACT WITHIN THE MEANING OF THE "DISPUTES" CLAUSE OF THE CONTRACT. THAT CLAUSE, WHICH APPEARS IN THE REFERRED-TO STANDARD FORM 32, PROVIDES THAT ANY DISPUTE CONCERNING A QUESTION OF FACT ARISING UNDER THE CONTRACT SHALL BE DECIDED BY THE CONTRACTING OFFICER, WHOSE DECISION SHALL BE FINAL AND CONCLUSIVE, UNLESS THE CONTRACTOR, WITHIN 30 DAYS FROM THE DATE OF RECEIPT OF A COPY OF THE DECISION, SHALL FURNISH THE CONTRACTING OFFICER A WRITTEN APPEAL ADDRESSED TO THE "SECRETARY" OF THE GOVERNMENT DEPARTMENT CONCERNED, WHOSE DECISION IN TURN IS MADE FINAL AND CONCLUSIVE UNLESS DETERMINED BY A COURT OF COMPETENT JURISDICTION TO HAVE BEEN FRAUDULENT, OR CAPRICIOUS, OR ARBITRARY, OR SO GROSSLY ERRONEOUS AS NECESSARILY TO IMPLY BAD FAITH, OR NOT SUPPORTED BY SUBSTANTIAL EVIDENCE. THE "DISPUTES" CLAUSE FURTHER PROVIDES THAT THE CLAUSE DOES NOT PRECLUDE CONSIDERATION OF "LAW QUESTIONS" IN CONNECTION WITH DECISIONS PROVIDED FOR THEREIN, BUT THAT NOTHING IN THE CONTRACT SHALL BE CONSTRUED AS MAKING FINAL THE DECISION OF ANY ADMINISTRATIVE OFFICIAL, REPRESENTATIVE, OR BOARD ON A QUESTION OF LAW.

PARAGRAPH 2-2 OF THE POD SPECIFICATION INVOLVED PROVIDED THAT PAYMENTS MADE UNDER THE CONTRACT ,SHALL BE MADE IN ACCORDANCE WITH POST OFFICE DEPARTMENT PROCEDURES ON PROGRESS PAYMENTS, A COPY OF WHICH IS ATTACHED TO THE BID INVITATION.' WHILE A COPY OF THE POST OFFICE DEPARTMENT PROCEDURES ON PROGRESS PAYMENTS MENTIONED AS BEING ATTACHED TO THE BID INVITATION WAS NOT INCLUDED AMONG THE CONTRACTUAL DOCUMENTS FURNISHED TO US BY YOUR DEPARTMENT FOR CONSIDERATION OF THE MATTER, THE DOCUMENT REFERRED TO IS PRESUMABLY THE ONE ENTITLED "RULES OF PROCEDURE FOR PROGRESS PAYMENTS ON POST OFFICE DEPARTMENT PROCUREMENT CONTRACTS," AS PUBLISHED IN THE FEDERAL REGISTER OF MAY 27, 1959, AT PAGE 4251, AS FEDERAL REGISTER DOCUMENT 59-4450 (24 F.R. 4251), WHICH PROVIDES IN PERTINENT PART THAT, UNLESS A SMALLER AMOUNT IS REQUESTED, EACH PROGRESS PAYMENT SHALL BE 90 PERCENT OF THE CONTRACTOR'S CUMULATIVE COSTS OF DIRECT LABOR PERFORMED AND MATERIAL INCLUDING EQUIPMENT ACQUIRED FOR PERFORMANCE OF THE CONTRACT, LESS THE SUM OF PREVIOUS PROGRESS PAYMENTS, BUT THAT IN NO EVENT MAY THE AMOUNT OF UNLIQUIDATED PROGRESS PAYMENTS EXCEED 60 PERCENT OF THE TOTAL CONTRACT PRICE OF ITEMS AND SERVICES NOT YET DELIVERED, INVOICED TO AND ACCEPTED BY THE GOVERNMENT; ALSO, THAT THE AGGREGATE AMOUNT OF PROGRESS PAYMENTS MADE MAY NOT EXCEED 60 PERCENT OF THE TOTAL CONTRACT PRICE.

PARAGRAPHS 3-11 THROUGH 3-15 OF THE SPECIFICATION ESTABLISHED A CHRONOLOGICAL SEQUENCE FOR INSTALLATION OF THE MAIL HANDLING EQUIPMENT. THE FIRST PHASE OF THIS PART OF THE WORK, NAMELY, WORK IN THE WEST PORTION OF THE SECOND FLOOR OF THE MAIN POST OFFICE BUILDING, WAS TO BE COMPLETED BY MAY 1, 1961. UPON COMPLETION OF THE WEST PORTION, WORK WAS TO CONTINUE IN THE EAST PORTION OF THE SECOND FLOOR. WHILE THE WEST AREA WAS BEING COMPLETED, POST OFFICE OPERATIONS WERE TO CONTINUE IN THE EAST AREA, AND, UPON COMPLETION OF THE WEST AREA, THE POST OFFICE OPERATIONS BEING PERFORMED IN THE EAST AREA WERE TO BE MOVED INTO THE COMPLETED WEST AREA. AFTER COMPLETION OF THE INSTALLATION WORK ON THE SECOND FLOOR, WORK WAS TO BE CONTINUED IN A SIMILAR SEQUENCE ON THE FIRST FLOOR. THE CONTRACT PROVIDED THAT MAIL HANDLING EQUIPMENT REQUIRED TO BE FURNISHED THEREUNDER WAS TO BE COMPLETELY INSTALLED AND OPERATING BY FEBRUARY 1, 1962.

SECTION 3, GENERAL CONDITIONS, OF THE SPECIFICATION PROVIDED, IN PERTINENT PART, AS FOLLOWS:

"3-1 THE BUILDING WILL BE OCCUPIED DURING CONSTRUCTION. THE CONTRACTOR SHALL COMPLY WITH THE REGULATIONS GOVERNING THE OPERATION OF THE PREMISES WHICH ARE OCCUPIED AND SHALL EXECUTE THE PERFORMANCE OF HIS CONTRACT IN A MANNER WHICH WILL NOT INTERRUPT OR INTERFERE WITH GOVERNMENT BUSINESS.

"3-3 INSTALLATION OF NEW EQUIPMENT AND MODIFICATION OF EXISTING EQUIPMENT SPECIFIED SHALL BE ACCOMPLISHED WITHOUT INTERFERENCE TO THE POST OFFICE MAIL-HANDLING OPERATIONS AND WITH A MINIMUM OF TEMPORARY ADDITIONAL HANDLING OF MAIL.

"3-16 LIQUIDATED DAMAGES--- THE CONTRACTOR SHALL PAY TO THE POST OFFICE DEPARTMENT, IN ADDITION TO ANY OTHER DAMAGES WHICH MAY BE DUE THE GOVERNMENT, LIQUIDATED DAMAGES IN THE AMOUNT OF $300 PER DAY, THE AMOUNT OF SAVINGS IN PERSONAL (PERSONNEL) COSTS TO RESULT FROM THE INSTALLATION OF THE EQUIPMENT, FOR EACH CALENDAR DAY THE CONTRACT IS NOT COMPLETED IN ACCORDANCE WITH THE SCHEDULE AS OUTLINED HEREIN.

"3-69 THE RESIDENT ENGINEER'S STATUS--- THE RESIDENT ENGINEER SHALL HAVE GENERAL SUPERVISION AND DIRECTION OF THE WORK. HE HAS AUTHORITY TO STOP THE WORK WHENEVER SUCH STOPPAGE MAY BE NECESSARY TO INSURE THE PROPER EXECUTION OF THE CONTRACT, AND HE IS THE JUDGE OF ITS RFORMANCE.'

AS INDICATED IN THE ASSISTANT POSTMASTER GENERAL'S LETTER, BY LETTER OF SEPTEMBER 10, 1962, MCNUTT, DUDLEY AND EASTERWOOD, AS ATTORNEYS FOR THE JERVIS B. WEBB COMPANY, SUBMITTED A BRIEF TO OUR OFFICE IN SUPPORT OF THE PROPOSITION THAT A SUSPENSION OF WORK UNDER THE CONTRACT--- WHICH HAD BEEN ORDERED BY THE CONTRACTING OFFICER PREVIOUS TO THE ONE HERE INVOLVED--- CONSTITUTED A CHANGE ENTITLING THE CONTRACTOR TO AN EQUITABLE ADJUSTMENT UNDER THE "CHANGES" CLAUSE OF THE CONTRACT, SUPRA, AND REQUESTED OUR OPINION ON THE POSITION TAKEN IN THE BRIEF. IT APPEARS FROM THE FACTS SET FORTH IN MCNUTT, DUDLEY AND EASTERWOOD'S LETTER, WHICH APPARENTLY ARE NOT DISPUTED BY YOUR DEPARTMENT, THAT, FOLLOWING AWARD OF THE CONTRACT, WEBB PROCEEDED WITH THE MANUFACTURE AND ASSEMBLY OF THE VARIOUS COMPONENT PARTS OF THE MAIL-HANDLING EQUIPMENT INVOLVED PREPARATORY TO THE INSTALLATION PHASE OF THE WORK, WHICH WAS TO BEGIN ABOUT MARCH 1, 1961, THIS BEING THE LATEST DATE SUCH WORK COULD COMMENCE IF THE SPECIFIED COMPLETION DATE OF MAY 1, 1961, FOR THE FIRST PHASE OF THE WORK WAS TO BE MET. HOWEVER, AT A PROJECT MEETING HELD AT THE PHILADELPHIA POST OFFICE ON JANUARY 24, 1961, POD REPRESENTATIVES ADVISED THE CONTRACTOR THAT IT HAD BEEN DETERMINED THAT INSTALLATION OF THE MAIL-HANDLING SYSTEM IN THE MAIN POST OFFICE BUILDING WOULD CONFLICT WITH POST OFFICE OPERATIONS, AND THAT ALTERNATE PLANS WERE UNDER CONSIDERATION TO LEASE OUTSIDE SPACE FOR SUCH OPERATIONS OR DEFER INSTALLATION WORK IN THE MAIN POST OFFICE BUILDING UNTIL COMPLETION OF THE TERMINAL ANNEX BUILDING ON OR ABOUT FEBRUARY 1, 1962. IT WAS INDICATED THAT THE CONTRACTOR WOULD BE NOTIFIED OF A REVISED PERFORMANCE SCHEDULE.

BY LETTER OF FEBRUARY 15, 1961, THE CONTRACTING OFFICER INFORMED WEBB THAT YOUR DEPARTMENT HAD UNDER CONSIDERATION A REQUEST FROM THE POSTMASTER AT PHILADELPHIA TO DEFER INSTALLATION OF THE BALANCE OF THE "MECHANIZATION" UNTIL COMPLETION OF THE NEW TRUCK TERMINAL, WHICH WOULD ENABLE THE POSTMASTER TO USE THIS SPACE FOR MAIL HANDLING AND "PERMIT VACATING SEVERAL FLOORS OF THE BUILDING YET PERMIT A FAIRLY ECONOMICAL HANDLING OF MAIL.' THE CONTRACTING OFFICER REQUESTED THE CONTRACTOR TO ADVISE HIM WHAT THE EFFECT OF DEFERRING THE "START OF YOUR INSTALLATION" FOR APPROXIMATELY ONE YEAR WOULD BE, INCLUDING ADDITIONAL COSTS, IF ANY. THE CONTRACTOR REPLIED BY LETTER OF MARCH 2, 1961, QUOTING A FIGURE OF $549,000 AS THE ESTIMATED INCREASE IN COSTS WHICH WOULD RESULT FROM THE CHANGE IN WORK SCHEDULE BEING CONSIDERED.

BY LETTER OF MAY 8, 1961, THE CONTRACTING OFFICER FURNISHED WEBB WITH A "SCHEDULE FOR CONSTRUCTION AND MECHANIZATION" OF THE GENERAL POST OFFICE AND TERMINAL ANNEX AT PHILADELPHIA, IN THE FORM OF A BAR CHART, SHOWING, AMONG OTHER THINGS, THE EXPECTED COMPLETION DATE OF THE TERMINAL ANNEX BUILDING TO BE JANUARY 31, 1962; THAT INSTALLATION BY WEBB OF THE "FIXED BELTS FOR PARCEL, POUCHES AND SACK SORTING MACHINES ON 1ST AND 2ND FLOOR TERMINAL ANNEX" AND THE "FIXED BELTS AND SACK SORTING MACHINE ON GROUND FLOOR AND REMAINDER OF TERMINAL ANNEX" WAS TO START ON NOVEMBER 15, 1961, AND TO BE COMPLETED ON JANUARY 31, 1962; THAT INSTALLATION BY WEBB OF THE ,FIXED BELTS FOR SACK, POUCHES, PARCEL AND SACK SORTING MACHINE ON 1ST AND 2ND FLOOR OF GPO" WAS TO START ON JANUARY 15, 1962, AND TO BE COMPLETED ON SEPTEMBER 30, 1962; AND THAT INSTALLATION BY WEBB OF THE "FIXED BELTS AND SACK SORTING MACHINE ON GROUND FLOOR AND REMAINDER OF TERMINAL NNEX" WAS TO TAKE PLACE DURING THE PERIODS NOVEMBER 15, 1961, TO JANUARY 31, 1962, AND NOVEMBER 1, 1962, TO MARCH 23, 1963, RESPECTIVELY. THE CONTRACTING OFFICER STATED THAT THE REVISED SCHEDULE FOR PERFORMANCE OF THE WORK HAD BEEN ESTABLISHED AT A MEETING HELD ON APRIL 27, 1961.

IN A LETTER DATED NOVEMBER 6, 1961, WEBB ADVISED THE CONTRACTING OFFICER THAT IT HAD REDUCED ITS ESTIMATE OF THE INCREASED COSTS WHICH IT WOULD INCUR AS A RESULT OF THE DELAY ORDERED BY THE GOVERNMENT IN CONNECTION WITH THE INSTALLATION OF THE EQUIPMENT TO THE AMOUNT OF $224,831 BECAUSE OF THE FACTORS MENTIONED IN ITS LETTER. PROMPT REVIEW OF "THIS QUOTATION," WHICH WAS ACCOMPANIED BY A BREAKDOWN OF COSTS, AND ISSUANCE OF A "PURCHASE ORDER" TO COVER THE ADDITIONAL COSTS UNDER THE CONTRACT WAS REQUESTED.

IT APPEARS THAT THE CONTRACTING OFFICER DENIED THE CLAIM ON THE GROUND THAT THE "CHANGES" CLAUSE OF THE CONTRACT DOES NOT AUTHORIZE A PRICE ADJUSTMENT BASED UPON A CHANGE IN THE PERFORMANCE SCHEDULE,CITING OUR DECISION TO YOU IN THE INDUSTRIAL NUCLEONICS CASE DATED JANUARY 8, 1962, B -140040, 41 COMP. GEN. 436; THAT THE CONTRACTOR APPEALED FROM THE CONTRACTING OFFICER'S DECISION TO YOUR DEPARTMENT'S BOARD OF CONTRACT APPEALS; BUT THAT ACTION ON THE APPEAL HAS, AT THE CONTRACTOR'S REQUEST, BEEN WITHHELD PENDING A RULING BY OUR OFFICE ON THE QUESTION PRESENTED IN MCNUTT, DUDLEY AND EASTERWOOD'S LETTER OF SEPTEMBER 10, 1962.

IN EXPLAINING THE REASON FOR THE EXECUTION OF THE SUPPLEMENTAL AGREEMENT WHICH HAS BEEN REFERRED TO US FOR CONSIDERATION, THE ASSISTANT POSTMASTER GENERAL STATES THAT IN NOVEMBER OF 1962, IT BECAME NECESSARY, IN VIEW OF THE IMMINENT INCREASE IN THE VOLUME OF MAIL DURING THE CHRISTMAS SEASON, TO ISSUE A "NEW STOP WORK ORDER" UNDER THE CONTRACT INVOLVED, AND THE CONTRACTOR, THROUGH ITS ATTORNEYS, IMMEDIATELY ASSERTED A CLAIM FOR INCREASED COSTS DUE TO THE STOPPAGE OF WORK; THAT YOUR DEPARTMENT, UPON INQUIRY, RECEIVED INFORMAL ADVICE FROM OUR GENERAL COUNSEL'S OFFICE THAT A "RULING" ON THE QUESTION PRESENTED IN MCNUTT, DUDLEY AND EASTERWOOD'S LETTER OF SEPTEMBER 10, 1962, WAS NOT FORTHCOMING; AND THAT SINCE OUR DECISION OF JANUARY 8, 2,"EXPRESSES SOME DOUBTS, AND SINCE IT DID NOT PROMPT, AS A PRECEDENT, AN IMMEDIATE ANSWER TO THE SUBMISSION OF SEPTEMBER 10, 1962," IT WAS FELT THAT THE CONTRACTOR MIGHT HAVE A CLAIM THE WAIVER OF WHICH COULD BE CONSIDERED SUFFICIENT CONSIDERATION FOR AN INCREASE IN PROGRESS PAYMENTS. HENCE, YOUR DEPARTMENT NEGOTIATED AND ENTERED INTO THE SUPPLEMENTAL AGREEMENT, WHICH, THE CONTRACTING OFFICER STATES, IS CONSIDERED TO BE IN THE BEST INTERESTS OF THE GOVERNMENT. THE SUPPLEMENTAL AGREEMENT (DATED DECEMBER 7, 1962) PROVIDES THAT ALL WORK WILL STOP ON THE CONTRACT "WHEN THE POINT IS REACHED WHERE FURTHER PROGRESS WOULD ENTAIL THE REMOVAL OF THE TEMPORARY CONVEYOR RUNNING BETWEEN THE TRUCK TERMINAL AND THE PENNSYLVANIA RAILROAD; " THAT WORK MAY RESUME ON JANUARY 2, 1963; THAT ANY WORK PERFORMED BY THE CONTRACTOR DURING THE PERIOD OF WORK STOPPAGE MUST BE AUTHORIZED IN WRITING BY THE CONTRACTING OFFICER; AND THAT ANY DELAY CAUSED BY THE WORK STOPPAGE IN THE COMPLETION OF THE WORK WILL ENTITLE THE CONTRACTOR TO A COMMENSURATE EXTENSION OF TIME. IT IS FURTHER PROVIDED THEREIN AS FOLLOWS:

"3. IN CONSIDERATION OF THE CONTRACTOR'S WAVING ANY AND ALL CLAIMS HE MAY HAVE DUE TO THE SUSPENSION OF WORK, THE PROGRESS PAYMENTS TOTAL COST CLAUSE POD NOTICE 64 DATED APRIL, 1962, WITH 90 PERCENT SUBSTITUTED FOR 75 PERCENT WHEREVER THIS PERCENTAGE APPEARS IN PARAGRAPH A. COMPUTATION OF AMOUNTS, SHALL BE SUBSTITUTED FOR THE PROGRESS PAYMENT CLAUSE INCLUDED IN THE CURRENT CONTRACT. PROVIDED, HOWEVER, THAT IF THE COMPTROLLER GENERAL OF THE UNITED STATES DETERMINES THAT BECAUSE THE CONTRACTOR DOES NOT HAVE A CLAIM AGAINST THE GOVERNMENT FOR THE WORK STOPPAGE THERE IS NO VALUABLE CONSIDERATION FOR THE CHANGE IN THE PROGRESS PAYMENT CLAUSE, THE SUBSTITUTION OF THE NEW PROGRESS PAYMENT CLAUSE AND THE WAIVER SHALL BE NULL AND VOID AND ALL MONIES PAID UNDER POD NOTICE 64 IN EXCESS OF MONIES TO WHICH THE CONTRACTOR IS ENTITLED UNDER THE CURRENT CLAUSE SHALL BE REFUNDED IMMEDIATELY.'

BY LETTER OF APRIL 9, 1963, THE CONTRACTING OFFICER FURNISHED US WITH A COPY OF THE POD NOTICE 64 (APRIL 1962) FORM ENTITLED "PROGRESS PAYMENTS--- "TOTAL COSTS" CLAUSE," REFERRED TO IN THE ABOVE QUOTE. THE CLAUSE, WHICH IS THE SAME AS THAT SET FORTH AS EXHIBIT A IN THE FEDERAL REGISTER OF APRIL 24, 1962, AT PAGE 3885 (27 F.R. 3885), PROVIDES IN PERTINENT PART THAT, UNLESS A SMALLER AMOUNT IS REQUESTED, EACH PROGRESS PAYMENT SHALL BE 75 PERCENT OF THE AMOUNT OF THE CONTRACTOR'S TOTAL COSTS INCURRED UNDER THE CONTRACT PLUS THE AMOUNT OF THE PROGRESS PAYMENTS MADE BY THE CONTRACTOR TO ITS SUBCONTRACTORS AS PROVIDED IN PARAGRAPH J OF THE CLAUSE, BUT THAT (PARAGRAPH A. (3) OF THE CLAUSE) THE AMOUNT OF UNLIQUIDATED PROGRESS PAYMENTS SHALL NOT EXCEED THE LESSER OF (A) 75 PERCENT OF THE COSTS MENTIONED IN PARAGRAPH A. (1) (A) OF THE CLAUSE, PLUS ANY UNLIQUIDATED PROGRESS PAYMENTS MENTIONED IN PARAGRAPH A. (1) (B) THEREOF, BOTH OF WHICH ARE APPLICABLE ONLY TO THE SUPPLIES AND SERVICES NOT YET DELIVERED AND INVOICED TO AND ACCEPTED BY THE GOVERNMENT, OR (B) 75 PERCENT OF THE TOTAL CONTRACT PRICE OF SUPPLIES AND SERVICES NOT YET DELIVERED AND INVOICED TO AND ACCEPTED BY THE GOVERNMENT; ALSO (PARAGRAPH A (4) (, THAT THE AGGREGATE AMOUNT OF PROGRESS PAYMENTS SHALL NOT EXCEED 75 PERCENT OF THE TOTAL CONTRACT PRICE. WITH HIS LETTER, THE CONTRACTING OFFICER ALSO FURNISHED US WITH TWO LETTERS ADDRESSED TO HIM BY WEBB UNDER DATES OF NOVEMBER 14 AND NOVEMBER 17, 1962, CONCERNING THE INCREASE IN COSTS WHICH THE CONTRACTOR WOULD INCUR AS A RESULT OF THE DELAY. THE NOVEMBER 17 LETTER, WHICH CONTAINS A RE-ESTIMATE OF COSTS IN THE LIGHT OF THE FACT THAT THE CONTRACTOR WOULD BE ALLOWED TO GO FORWARD WITH CERTAIN WORK UNDER THE CONTRACT DURING THE PERIOD OF WORK STOPPAGE, PURPORTS TO SHOW THAT THE DELAY COSTS WOULD FALL SOMEWHERE BETWEEN $16,000 AND $22,000, DEPENDING UPON THE METHOD OF COMPUTATION USED. IN HIS LETTER, THE CONTRACTING OFFICER OBSERVES THAT THE LETTERS IN QUESTION "SHOW THE MAGNITUDE OF THE ADDITIONAL COSTS EXPECTED TO RESULT FROM THE SUSPENSION," AND, IN COMMENTING UPON THE CONSIDERATION MOVING BETWEEN THE PARTIES FOR THE EXECUTION OF THE SUPPLEMENTAL AGREEMENT, STATES:

"* * * AT THE TIME OF THIS AGREEMENT FOR ADDITIONAL PROGRESS PAYMENTS, THE CONTRACTING OFFICER COMPUTED THE VALUE TO WEBB OF THE EARLIER PAYMENT BASED ON THE ASSUMPTION THAT THEY WOULD RECEIVE IMMEDIATELY $640,000 AND THAT THEY WOULD HAVE THE ADDITIONAL MONEY FOUR MONTHS EARLIER THAN WOULD OTHERWISE BE THE CASE. PRIOR TO THIS SUSPENSION COMPLETION OF THE CONTRACT WAS PLANNED IN MARCH OF 1963. THE INTEREST VALUE OF THIS AMOUNT OF MONEY FOR A 4-MONTH PERIOD AT 5 PERCENT PER ANNUM IS $10,554 (WEBB REPORTED A CURRENT INTEREST RATE OF 4 3/4 PERCENT). THE COST TO THE GOVERNMENT FOR BORROWING THIS AMOUNT COMPUTED AT 3 PERCENT PER ANNUM IS $6,400. THE AMOUNT PAID TO WEBB SUBSEQUENT TO AND AS A RESULT OF THIS AGREEMENT FOR GREATER PROGRESS PAYMENTS WAS $611,000.'

AS HEREINABOVE INDICATED, SECTION 3 OF THE SPECIFICATIONS PROVIDED THAT THE CONTRACT WAS TO BE PERFORMED IN A MANNER WHICH WOULD NOT INTERRUPT OR INTERFERE WITH GOVERNMENT BUSINESS; THAT INSTALLATION OF NEW EQUIPMENT AND MODIFICATION OF EXISTING EQUIPMENT WAS TO BE ACCOMPLISHED WITHOUT INTERFERENCE TO THE POST OFFICE MAIL HANDLING OPERATIONS; AND THAT THE RESIDENT ENGINEER HAD AUTHORITY TO STOP THE WORK WHENEVER SUCH STOPPAGE MIGHT BE NECESSARY TO INSURE THE PROPER EXECUTION OF THE CONTRACT. VIEW OF THESE CONTRACT PROVISIONS, THERE WOULD APPEAR TO BE SOME DOUBT AS TO WHETHER SUSPENSION OF THE WORK FOR A PERIOD BEGINNING ON, OR AFTER, DECEMBER 7, 1962, AND EXTENDING TO JANUARY 2, 1963, DUE TO THE IMMINENT INCREASE IN THE VOLUME OF MAIL DURING THE CHRISTMAS SEASON, WITHOUT WEBB'S CONSENT, WOULD HAVE CONSTITUTED A BREACH OF CONTRACT, AND, HENCE, THAT THE CONTRACTOR'S CONSENT TO THE SUSPENSION REPRESENTED VALID CONSIDERATION FOR THE EXECUTION OF THE SUPPLEMENTAL AGREEMENT FROM THE GOVERNMENT'S STANDPOINT. DOUBT CONCERNING THE VALIDITY OF THE CONSIDERATION MOVING TO THE GOVERNMENT FOR THE EXECUTION OF THE SUPPLEMENTAL AGREEMENT WOULD, IN OUR OPINION, BE REMOVED PROVIDED THE GOVERNMENT'S ACTION IN SUSPENDING THE WORK FOR THE PERIOD IN QUESTION WAS MADE NECESSARY BY THE STOPPAGE IN WORK WHICH FORMS THE BASIS FOR WEBB'S CLAIM AGAINST THE GOVERNMENT SET FORTH IN MCNUTT, DUDLEY AND EASTERWOOD'S LETTER OF SEPTEMBER 10, 1962, AND THE GOVERNMENT'S ACTION IN ORDERING THE INITIAL SUSPENSION PROPERLY MAY BE SAID TO HAVE BEEN UNREASONABLE AND NOT AUTHORIZED UNDER THE TERMS OF THE CONTRACT.

CONSIDERING THE REASONS FOR, AND THE DURATION OF, THE INITIAL STOPPAGE IN WORK ORDERED BY THE GOVERNMENT, AS HEREINABOVE SET FORTH, THE DELAY INVOLVED WOULD APPEAR TO HAVE BEEN CLEARLY UNREASONABLE, IF IMPOSED UPON THE CONTRACTOR WITHOUT ITS CONSENT. HOWEVER, THE CONTRACTING OFFICER RECOGNIZED WEBB'S RIGHT TO BE COMPENSATED FOR ANY EXTRA COSTS WHICH IT WOULD INCUR AS A RESULT OF THE DELAY IN HIS LETTER OF FEBRUARY 15, 1961, WHEREIN THE CONTRACTOR WAS REQUESTED TO ADVISE HIM WHAT THE EFFECT OF DEFERRING THE START OF THE INSTALLATION WORK UNDER THE CONTRACT FOR APPROXIMATELY ONE YEAR WOULD BE, INCLUDING ADDITIONAL COSTS, IF ANY. WEBB REPLIED BY LETTER OF MARCH 2, 1961, QUOTING A FIGURE OF $549,000 AS THE ESTIMATED INCREASE IN COSTS WHICH WOULD RESULT FROM THE CHANGE IN WORK SCHEDULE BEING CONSIDERED, AND BY LETTER OF MAY 8, 1961, THE CONTRACTING OFFICER FURNISHED THE CONTRACTOR WITH THE REVISED WORK SCHEDULE REFERRED TO HEREINABOVE. AS PREVIOUSLY INDICATED, WEBB ADVISED THE CONTRACTING OFFICER BY LETTER OF NOVEMBER 6, 1961, THAT IT HAD REDUCED ITS ESTIMATE OF THE INCREASED COSTS WHICH IT WOULD INCUR AS A RESULT OF THE DELAY ORDERED BY THE GOVERNMENT TO THE AMOUNT OF $224,831 AND REQUESTED THAT A "PURCHASE ORDER" BE ISSUED TO COVER THE ADDITIONAL COSTS.

FOR THE REASONS INDICATED IN OUR DECISION TO YOU IN THE INDUSTRIAL NUCLEONICS CASE, REFERRED TO HEREINABOVE, WE DO NOT BELIEVE THAT A SUSPENSION OF WORK AND MODIFICATION OF THE PERFORMANCE SCHEDULE OF A CONTRACT SUCH AS HERE INVOLVED PROPERLY MAY BE HELD TO CONSTITUTE A CHANGE WITHIN THE MEANING OF THE "CHANGES" CLAUSE CONTAINED IN STANDARD FORM 32, GENERAL PROVISIONS (SUPPLY CONTRACT), OCTOBER 1957 EDITION.

IN THEIR BRIEF, MCNUTT, DUDLEY AND EASTERWOOD ARGUE, WITH SOME DEGREE OF LOGIC, THAT SINCE THE PERFORMANCE SCHEDULE IN THE PRESENT INSTANCE WAS A PART OF THE CONTRACT SPECIFICATIONS, A MODIFICATION CONSTITUTED A CHANGE BY THE CLEAR WORDING OF THE CHANGES CLAUSE. HOWEVER, IN PROVIDING THAT THE CONTRACTING OFFICER MAY MAKE CHANGES IN ANY ONE OR MORE OF THE FOLLOWING: (I) DRAWINGS, DESIGNS, OR SPECIFICATIONS; (II) METHOD OF SHIPMENT OR PACKING; AND (III) PLACE OF DELIVERY, THE LANGUAGE OF THE CLAUSE HERE INVOLVED APPEARS TO US TO DEMONSTRATE THAT THE TERM ,SPECIFICATIONS," AS USED THEREIN, WAS INTENDED TO BE GIVEN THE MORE LIMITED MEANING REFERRED TO IN OUR DECISION IN THE INDUSTRIAL NUCLEONICS CASE. IN THE FIRST PLACE, IN (I) THE TERM ,SPECIFICATIONS" FOLLOWS THE WORDS "DRAWINGS, DESIGNS," WHICH RELATE TO THE TECHNICAL ASPECTS OF THE SUPPLIES OR PRODUCT "TO BE SPECIALLY MANUFACTURED FOR THE GOVERNMENT IN ACCORDANCE THEREWITH.' SINCE THE TERM "SPECIFICATIONS" EMBRACES THE DRAWINGS AND DESIGNS OF THE PRODUCT, THERE IS FOR APPLICATION THE RULE OF CONSTRUCTION THAT WHERE NO INTENTION TO THE CONTRARY APPEARS, GENERAL WORDS USED AFTER SPECIFIC TERMS ARE TO BE CONFINED TO THINGS EJUSDEM GENERIS WITH THE THINGS PREVIOUSLY SPECIFIED. IN OTHER WORDS, WHERE GENERAL WORDS FOLLOW THE ENUMERATION OF PARTICULAR CLASSES OF THINGS, THE GENERAL WORDS WILL BE INTERPRETED AS APPLICABLE ONLY TO THINGS OF THE SAME GENERAL NATURE OR CLASS AS THOSE ENUMERATED. SEE STANDARD ACC.INS.CO. V. SIMPSON (C.C.A., FOURTH CIRCUIT; 1933), 64 F.2D. 583, 590; HODGES V. UNITED STATES FIDELITY AND GUARANTY CO. ET AL. (MUN.C.A.DIST.COL.; 1952), 91 A.2D 473, 476, 34 ALR2D 1101; 12 AM.JUR., CONTRACTS, SEC. 244. IN THE SECOND PLACE, IT WOULD HAVE BEEN SUPERFLUOUS TO PROVIDE FOR THE CHANGES "/II)" AND "/III)" UNLESS THE TERM "SPECIFICATIONS," AS USED IN "/I)," WERE INTENDED TO APPLY TO ENGINEERING CHANGES, OR CHANGES HAVING TO DO WITH THE MANNER OF PERFORMING THE WORK, ETC. THESE ITEMS NECESSARILY WOULD BE EMBRACED WITHIN THE SPECIFICATIONS OF THE CONTRACT IN A GENERAL SENSE.

IN THE DECISION INVOLVING INDUSTRIAL NUCLEONICS, 41 COMP. GEN. 436, WE HAD STATED (PAGE 447) THAT THE RECORDS OF THE SUBCOMMITTEE OF THE ARMED SERVICES PROCUREMENT REGULATION COMMITTEE WHICH DRAFTED THE REVISED FORM OF THE "CHANGES" CLAUSE INCORPORATED IN THE 1957 STANDARD FORM 32 SHOWED THAT CONSIDERATION WAS GIVEN TO A PROPOSAL THAT THE WORDS "SCHEDULE OR PLACE OF DELIVERY" BE INCLUDED INSTEAD OF "PLACE OF DELIVERY" IN THE "III" PHRASE OF THE CLAUSE, REFERRED TO ABOVE, BUT THE PROPOSAL WAS REJECTED. IN REFERRING TO THIS PART OF THE DECISION, THE BRIEF SUBMITTED BY MCNUTT, DUDLEY AND EASTERWOOD STATES:

"WE RESPECTFULLY SUBMIT THAT SUCH CONCLUSION (I.E., IT HAD BEEN STATED IN THE PRECEDING SENTENCE OF THE BRIEF THAT WE HAD APPARENTLY CONCLUDED THAT THE FAILURE TO INCLUDE THE WORD ,SCHEDULE" WAS EVIDENCE OF THE COMMITTEE'S INTENT TO "EXCLUDE MODIFICATIONS IN PERFORMANCE TIME FROM THE CHANGES CLAUSE") IS NOT BORNE OUT BY THE ENTIRE RECORD OF THE SUBCOMMITTEE DELIBERATIONS. A REFERENCE TO THE MEMORANDUM OF DECEMBER 12, 1955 BY WHICH THE SUBCOMMITTEE SUBMITTED THE PROPOSED CHANGES CLAUSE TO THE FULL COMMITTEE, AND THE MEMORANDUM OF JULY 11, 1956 RECOMMENDING ADOPTION OF THE CLAUSE AS PROPOSED, WILL SHOW THAT THE CLEAR PURPOSE OF THE REVISED LANGUAGE WAS TO AUTHORIZE EQUITABLE ADJUSTMENTS TO COMPENSATE FOR COSTS RESULTING FROM CHANGES IN PERFORMANCE TIME. * * * (ARMED SERVICES PROCUREMENT REGULATION COMMITTEE FILE NO. 55-118).'

WHILE THE LEGAL CONCLUSION EXPRESSED HEREIN, THAT A SUSPENSION OF WORK AND MODIFICATION OF THE PERFORMANCE SCHEDULE MAY NOT BE CONSIDERED A CHANGE UNDER THE CHANGES CLAUSE INVOLVED, IS BASED PRIMARILY UPON THE COURT DECISIONS DISCUSSED IN 41 COMP. GEN. 436, AND THE REASONING SET FORTH ABOVE, WE REQUESTED THE OFFICE OF THE ASSISTANT SECRETARY OF DEFENSE TO FURNISH US PHOTOSTATS OF ANY MEMORANDA, OR CORRESPONDENCE, CONTAINED IN THE FILES OF THE ARMED SERVICES PROCUREMENT REGULATION COMMITTEE PERTAINING TO THE DRAFTING OF THE CHANGES CLAUSE INCLUDED IN STANDARD FORM 32, GENERAL PROVISIONS (SUPPLY CONTRACT), OCTOBER 1957 EDITION, WHICH MIGHT INDICATE WHAT THE INTENTION OF THE COMMITTEE WAS WITH RESPECT TO THE QUESTION AT ISSUE.

UNDER DATES OF JUNE 24 AND JUNE 26, 1963, THE OFFICE OF THE ASSISTANT SECRETARY OF DEFENSE FURNISHED US WITH PHOTOSTATS OF THE FOLLOWING MEMORANDA CONTAINED IN THE ASPR FILES WHICH WERE CONSIDERED TO HAVE A BEARING ON THE MATTER:

EXHIBIT 1. MEMORANDUM PREPARED BY DEPUTY GENERAL COUNSEL,

DEPARTMENT OF THE NAVY

"12 DECEMBER 1955

"MEMORANDUM

TO: THE CHAIRMAN OF THE ASPR COMMITTEE

SUBJ: PRICING OF CONTRACT CHANGES

1. IN CONNECTION WITH THE PRICING OF CONTRACT CHANGES, COURTS HAVE RENDERED INTERPRETATIONS OF THE CHANGES CLAUSES AND RELATED PROVISIONS WHICH INTERPRETATIONS EXCLUDE CERTAIN TYPES OF COSTS ACTUALLY AND UNAVOIDABLY INCURRED BY CONTRACTORS BY REASON OF THE CHANGES. THIS RESULTS IN CONTRACTORS BEING DEPRIVED OF THE FULL "EQUITABLE ADJUSTMENT" STIPULATED IN THE CHANGES CLAUSE. THE COSTS EXCLUDED BY THE CASES GENERALLY RELATE TO (A) COSTS OF WORK ONLY INDIRECTLY AFFECTED BY CHANGES AND (B) STANDBY AND OTHER DELAY COSTS INCURRED BY CONTRACTORS DURING A REASONABLE PERIOD WHERE WORK HAS BEEN HELD UP PENDING THE ISSUANCE OF CHANGE ORDERS.

"2. FOR EXAMPLE, IN U.S. VS. RICE, 317 U.S. 61, THE GOVERNMENT MADE CHANGES IN THE SITE OF A BUILDING. BECAUSE OF THE NEED FOR PREPARING A NEW FOUNDATION, THE PLUMBING, HEATING, AND ELECTRICAL WORK ON THE SUPERSTRUCTURE WAS DELAYED UNTIL LATER. THE CONTRACTOR INCURRED STANDBY OR OVERHEAD COSTS DURING THE PERIOD OF DELAY AND INCREASED COSTS OF PERFORMING THE MECHANICAL SPECIALTY WORK IN COLD WEATHER. THE COURT DISALLOWED THE CLAIM FOR SUCH COSTS, CONCURRING EXPRESSLY IN THE DOCTRINE OF CHOUTEAU VS. U.S., 95 U.S., 61 THAT "FOR THE REASONABLE COST AND EXPENSES OF THE CHANGES MADE IN THE CONSTRUCTION, PAYMENT WAS TO BE MADE; BUT FOR ANY INCREASE IN THE COST OF THE WORK NOT CHANGED, NO PROVISION WAS MADE.' "3. IN THE RECENT CASE OF F. H. MCGRAW AND COMPANY VS. U.S., DECIDED 5 APRIL 1955, THE COURT OF CLAIMS AGAIN HAD OCCASION TO APPLY THE WELL-SETTLED DISTINCTION BETWEEN A REASONABLE AND AN UNREASONABLE TIME FOR THE CONSIDERATION OF CHANGES BY THE GOVERNMENT. THERE THE GOVERNMENT HELD UP THE WORK FOR 159 DAYS BEFORE ISSUING CHANGES. THE COURT RULED THAT ONLY THIRTY DAYS WAS REASONABLE AND "FOR ALL DELAY OVER A MONTH, WE THINK DEFENDANT IS LIABLE IN DAMAGES.'

"4. THESE COST EXCLUSIONS ARE NOT BASED UPON STATUTORY, APPROPRIATION OR OTHER GOVERNMENTAL LIMITATIONS ON THE AUTHORITY OF THE CONTRACTING AGENCIES. THEY STEM WHOLLY FROM INTERPRETATIONS OF CONTRACT PROVISIONS AND, IN OUR OPINION, CAN BE OVERCOME BY APPROPRIATE CHANGES IN THE GOVERNMENT CONTRACT CLAUSES. WE FEEL SUCH CHANGES SHOULD BE MADE IN THE STANDARD SUPPLY AND CONSTRUCTION CONTRACTS, AFTER COORDINATION WITH GSA. IT IS RECOMMENDED THAT THIS PROBLEM BE ASSIGNED TO A SUBCOMMITTEE FOR CONSIDERATION AND RECOMMENDATION.

"5. IT SHOULD BE NOTED THAT THIS PROBLEM IS SUBSTANTIVELY INDEPENDENT OF ASPR CASE 54-81 INVOLVING A PRICE ADJUSTMENT CLAUSE FOR DELAY IN GOVERNMENT CONSTRUCTION CONTRACTS. HERE THE PROBLEM IS TO MAKE ALLOWABLE CERTAIN COSTS WHICH ARE NOT NOW SUBSTANTIVELY ALLOWABLE, EITHER ADMINISTRATIVELY OR IN THE COURT OF CLAIMS. IN CASE 54-81 THE PROBLEM INVOLVES COSTS WHICH ARE NOW ALLOWABLE BY WAY OF DAMAGES IN THE COURT OF CLAIMS AND THE PROPOSAL IS SIMPLY TO MAKE THEM ADMINISTRATIVELY ALLOWABLE BY WAY OF AN EQUITABLE ADJUSTMENT UNDER THE CONTRACT. PARTICULAR CARE WAS TAKEN TO AVOID ANY CHANGE IN THE SUBSTANTIVE RULES LAID DOWN BY THE COURTS. THE TWO PROBLEMS ARE RELATED IN THE SENSE THAT THE COSTS ARE FREQUENTLY CONCURRENT, OVERLAPPING AND DIFFICULT TO DIFFERENTIATE AND ALLOCATE.'

EXHIBIT 2. MEMORANDUM PREPARED BY G. C. BANNERMAN, CHAIRMAN OF THE

SUBCOMMITTEE.

"11 JULY 1956

"MEMORANDUM FOR THE CHAIRMAN OF THE ASPR COMMITTEE

SUBJ: ASPR CASE 55-118--- PRICING OF CONTRACT CHANGES

ENCL: (1) PROPOSED REVISION OF "CHANGES" CLAUSE, ASPR 7-103.2

(2) PROPOSED REVISION OF CONSTRUCTION CONTRACT "CHANGES"

AND "CHANGED CONDITIONS" CLAUSES

(3) MEMORANDUM FROM BUDOCKS DTD 6 JUN 56

1. THE ASPR SUBCOMMITTEE CONSIDERING THIS CASE HAS REVIEWED THE TECHNICAL SERVICE, BUREAU AND COMMAND COMMENTS ON THE PROPOSALS CONTAINED IN ENCLOSURES (1) AND (2).

"2. THE COMMENTS FROM THE AIR FORCE AND THE NAVY GENERALLY FAVOR THE USE OF THE NEW CLAUSES IN OTHER THAN CONSTRUCTION CONTRACTS. THE COMMENTS FROM THE ARMY WERE MIXED. SOME OF THE ARMY COMMENTS WHICH OPPOSED THE NEW CLAUSES DID SO BECAUSE OF RELATIVELY MINOR QUESTIONS OF WORDING AND OTHERS BECAUSE OF THE BELIEF THAT THE PROPOSED CLAUSES WOULD LEAD TO EXCESSIVE CLAIMS AND ABUSE OF NEGOTIATION DISCRETION. BOTH THE ARMY ENGINEERS AND THE BUREAU OF YARDS AND DOCKS OPPOSE THE USE OF THE PROPOSED CLAUSES FOR CONSTRUCTION CONTRACTS (ENCLOSURE (2) ).

"3. AFTER CONSIDERATION OF ALL OF THE COMMENTS, THE SUBCOMMITTEE AGREES THAT THE WORDING PREVIOUSLY PROPOSED IS PREFERABLE TO ANY MODIFICATIONS SUGGESTED. THE SUBCOMMITTEE AGREES THAT ASPR 7-103.2 SHOULD BE REVISED AS SHOWN IN ENCLOSURE (1), AND RECOMMENDS ADOPTION OF THIS REVISION. THE MAJORITY OF THE SUBCOMMITTEE FURTHER RECOMMENDS THAT THE CLAUSES CONTAINED IN ENCLOSURE (2) BE ADOPTED FOR CONSTRUCTION CONTRACTS. THE MAJORITY BELIEVES THAT THE PRINCIPLES INVOLVED ARE THE SAME IN CONSTRUCTION CONTRACTS, AND THAT THE EVALUATION OF CLAIMS AND NEGOTIATION IS NO MORE DIFFICULT ALTHOUGH THE NUMBER OF CLAIMS MIGHT BE GREATER. THE MINORITY BELIEVES THAT THE CLAUSES CONTAINED IN ENCLOSURE (2) SHOULD NOT BE ADOPTED FOR CONSTRUCTION CONTRACTS AND THAT NO CHANGE IN THIS RESPECT IS NEEDED. ENCLOSURE (3) IS FURNISHED IN SUPPORT OF THIS MINORITY VIEW.

"4.IT IS ANTICIPATED THAT THIS IS THE FINAL REPORT FROM THIS SUBCOMMITTEE.'

EXHIBIT 3. EXCERPT FROM MINUTES OF MEETING HELD ON SEPTEMBER 25,

1956 BY ASPR COMMITTEE

"9. CASE 55-118--- PRICING OF CONTRACT CHANGES. A REPORT FROM THE SUBCOMMITTEE, DATED 11 JULY 1956, WHICH PRESENTED A PROPOSED REVISION OF THE SUPPLY CONTRACT "CHANGES" CLAUSE, ASPR 7-103.2, TOGETHER WITH A PROPOSED REVISION OF THE CONSTRUCTION CONTRACT "CHANGES" AND "CHANGED CONDITIONS" CLAUSES, WAS DISCUSSED. REPRESENTATIVES FROM THE OFFICE OF OSD (PROPERTIES AND INSTALLATIONS), THE CORPS OF ENGINEERS, BUREAU OF YARDS AND DOCKS, AND THE SUBCOMMITTEE ATTENDED THE MEETING FOR THE FOLLOWING DISCUSSION.

"THE PROPONENTS OF THE CHANGE ADVISED THAT THE PRESENT "CHANGES" ARTICLE, AS INTERPRETED BY THE COURTS IN U.S. VS. RICE (317 U.S. 61), DOES NOT PERMIT THE RECOGNITION OF ADDITIONAL COSTS OF WORK NOT CHANGED BY CHANGE ORDERS; THAT NO UNIFORM APPROACH TO THIS PROBLEM HAS BEEN UTILIZED BY THE THREE DEPARTMENTS; THAT APPARENTLY THE BASIS FOR ALLOWANCE OR DISALLOWANCE IN A PARTICULAR CASE DEPENDS UPON THE CIRCUMSTANCES INVOLVED; AND THAT IF NO ACTION IS TAKEN THE CONTINUED PRACTICES OF SOME OF THE PURCHASING ACTIVITIES ADMINISTERING CONTRACTS AND THE INTERPRETATION OF THE LAW WILL BE IN CONFLICT. IT WAS FURTHER STATED THAT THE ADOPTION OF THE CHANGES RECOMMENDED BY THE SUBCOMMITTEE WOULD RESULT IN THE EQUITABLE PRICING OF CHANGES TO ALL IN A UNIFORM MANNER.

"IT WAS STATED THAT THE PROBLEM AT HAND WAS LIMITED TO REASONABLE DELAYS AND NOT TO DELAYS CONSIDERED UNREASONABLE, IN THAT UNREASONABLE DELAYS WERE COVERED BY THE USE OF A "SUSPENSION" CLAUSE IN ARMY CONTRACTS AND BY PARTIAL TERMINATION IN NAVY CONTRACTS; THAT IN ACCEPTING THE ,CHANGES" AND "CHANGED CONDITIONS" CLAUSES IN CONSTRUCTION CONTRACTS THE CONTRACTORS UNDERSTAND THAT THERE WILL BE CERTAIN REASONABLE DELAYS AND THAT THE CONSTRUCTION INDUSTRY INCLUDES A CONTINGENCY IN THE ORIGINAL PRICE TO TAKE CARE OF SUCH "REASONABLE DELAYS.' IT WAS FURTHER POINTED OUT THAT THE INCLUSION OF THE PROPOSED LANGUAGE IN THE CONSTRUCTION CONTRACTS WOULD NOT REMOVE THIS CONTINGENCY FACTOR AND CONSEQUENTLY, PROBABLY WOULD RESULT IN THE GOVERNMENT PAYING DUPLICATE COSTS. IT WAS FURTHER STATED THAT CONSTRUCTION CONTRACTS DIFFER IN MANY RESPECTS, SUCH AS GREATER NUMBER OF CHANGE ORDERS, LESS PRECISENESS AS TO WORK TO BE ACCOMPLISHED, GREATER AMOUNT OF WORK PERFORMED OUTDOORS WHICH INCREASES THE CONTRACTOR'S RISK AND, HENCE, HIS CONTINGENCIES, ETC., TO THE EXTENT THAT THE PROPOSED CHANGE IN SUPPLY CONTRACTS IS SEPARABLE FROM THE PROPOSED CHANGES IN CONSTRUCTION CONTRACTS.

"IN VIEW OF THIS INFORMATION THE COMMITTEE DECIDED:

A. TO APPROVE THE REVISED LANGUAGE FOR INCLUSION IN THE SUPPLY CONTRACTS "CHANGES" CLAUSE, AND TO RECOMMEND THAT THE REVISED LANGUAGE BE INCORPORATED BY GSA IN THE PENDING REVISION OF STANDARD FORM 32.

B. THE REVISED LANGUAGE FOR INCLUSION IN THE "CHANGES" AND "CHANGED CONDITIONS" CLAUSES FOR CONSTRUCTION CONTRACTS WAS DISAPPROVED ON THE BASIS OF THE DIFFERENCE IN SUPPLY AND CONSTRUCTION CONTRACTS, AND

C. THE DEPARTMENTS WOULD ISSUE APPROPRIATE INSTRUCTIONS TO CONTRACTING OFFICERS OF THE NEED FOR STRICT ENFORCEMENT OF THE DOCTRINE SET FORTH BY THE SUPREME COURT IN THE U.S. VS. RICE, 317 U.S. 61.

"THE STAFF WILL TAKE THE NECESSARY ACTION TO PRESENT THE REVISED LANGUAGE TO GSA FOR INCORPORATION IN STANDARD FORM 32. THIS ACTION WILL BE MERGED WITH CASE 53-6.

"THIS ACTION CLOSES THE CASE SEP. 25, 1956"

EXHIBIT 4. LETTER FROM G. J. VECCHIETTI, AIR FORCE MEMBER, ASPR

COMMITTEE, ON BEHALF OF HEADQUARTERS, DEPARTMENT OF THE

AIR FORCE

"8 OCT. 1959

ASPR CASE NO. 59-165

"SUBJECT: PROPOSED "STOP WORK ORDERS" CLAUSE

TO: CHAIRMAN, ASPR COMMITTEE

1. IT IS RECOMMENDED THAT A CONTRACT CLAUSE BE APPROVED AND AUTHORIZED IN ASPR WHEREBY THE GOVERNMENT WILL HAVE A RIGHT TO ORDER A CONTRACTOR TO STOP WORK ON A CONTRACT FOR A LIMITED PERIOD OF TIME. NEED FOR THIS RIGHT HAS FREQUENTLY OCCURRED IN THE PAST AND SUCH ORDERS HAVE BEEN ISSUED NOTWITHSTANDING THAT NEITHER A CONTRACTUAL RIGHT EXISTED NOR ANY GUIDANCE FOR THE SETTLEMENT OF CLAIMS THEREUNDER. CONTRACTORS HAVE NORMALLY COOPERATED AND RECOGNIZED THE STOP WORK ORDER; HOWEVER, THE PRACTICE HAS BEEN QUESTIONED FROM TIME TO TIME.

"2. THE FOLLOWING PROPOSED CLAUSE, FOR USE IN FIXED PRICE AND COST REIMBURSEMENT CONTRACTS, IS SUBMITTED FOR APPROVAL.

A. CLAUSE FOR USE IN FIXED PRICE CONTRACTS.

THE FOLLOWING CLAUSE MAY BE INSERTED IN ANY NEGOTIATED FIXED PRICE CONTRACT CONTAINING A CHANGES CLAUSE WHENEVER THE RIGHT TO STOP WORK IS CONSIDERED TO BE IN THE BEST INTEREST OF THE GOVERNMENT:

"STOP WORK NOTICES"

"THE CONTRACTING OFFICER MAY, BY WRITTEN NOTICE TO THE CONTRACTOR, REQUIRE THE CONTRACTOR TO STOP ALL, OR ANY PORTION, OF THE WORK CALLED FOR UNDER THIS CONTRACT. THE CONTRACTOR, UPON RECEIPT OF SUCH NOTICE, SHALL FORTHWITH COMPLY WITH THE TERMS OF THE ORDER AND TAKE ALL REASONABLE STEPS TO MINIMIZE THE ACCRUAL OF ADDITIONAL COSTS IN CONNECTION WITH THE CONTRACT DURING THE PERIOD OF WORK STOPPAGE. IF SUCH ORDER IS NOT CANCELLED BY THE GOVERNMENT WITHIN 90 DAYS AFTER RECEIPT BY THE CONTRACTOR, OR EXTENDED BY AGREEMENT OF THE PARTIES, THIS CONTRACT SHALL BE TERMINATED FOR THE CONVENIENCE OF THE GOVERNMENT UPON REQUEST BY THE CONTRACTOR.

"IT IS AGREED THAT THE CONTRACT PRICE CONTAINS NO ALLOWANCE FOR ANY INCREASED COST THAT MAY RESULT FROM THE ISSUANCE OF ANY STOP WORK ORDER, AND, THEREFORE, IN THE EVENT AN ORDER IS ISSUED HEREUNDER AND THE CONTRACT IS NOT TERMINATED AS PROVIDED ABOVE, AN EQUITABLE ADJUSTMENT IN THE PRICE, DELIVERY SCHEDULE, OR BOTH SHALL BE NEGOTIATED WITH THE PROVISIONS OF THE CHANGES CLAUSE HEREOF.'" (NOTE: SUBPARAGRAPH "B" OF PARAGRAPH 2 OF THE LETTER PROPOSED A CHANGES CLAUSE FOR INSERTION IN COST-REIMBURSEMENT TYPE CONTRACTS IDENTICAL IN ALL MATERIAL RESPECTS TO THAT DESCRIBED IN SUBPARAGRAPH "A").

THE "CHANGES" CLAUSE REFERRED TO IN ENCLOSURE (1) TO EXHIBIT 2 WAS THE CHANGES CLAUSE SET FORTH IN PARAGRAPH 7-103.2 OF THE ARMED SERVICES PROCUREMENT REGULATION, 1955 EDITION, FOR USE IN FIXED PRICE SUPPLY CONTRACTS. THAT CLAUSE, WHICH WAS CONTAINED IN STANDARD FORM 32, GENERAL PROVISIONS (SUPPLY CONTRACT), NOVEMBER 1949 EDITION, PROVIDED, IN PERTINENT PART, AS FOLLOWS:

"THE CONTRACTING OFFICER MAY AT ANY TIME, BY A WRITTEN ORDER, AND WITHOUT NOTICE TO THE SURETIES, MAKE CHANGES, WITHIN THE GENERAL SCOPE OF THIS CONTRACT, IN ANY ONE OR MORE OF THE FOLLOWING: (I) DRAWINGS, DESIGNS, OR SPECIFICATIONS, WHERE THE SUPPLIES TO BE FURNISHED ARE TO BE SPECIALLY MANUFACTURED FOR THE GOVERNMENT IN ACCORDANCE THEREWITH; (II) METHOD OF SHIPMENT OR PACKING; AND (III) PLACE OF DELIVERY. IF ANY SUCH CHANGE CAUSES AN INCREASE OR DECREASE IN THE COST OF, OR THE TIME REQUIRED FOR, PERFORMANCE OF THIS CONTRACT, AN EQUITABLE ADJUSTMENT SHALL BE MADE IN THE CONTRACT PRICE OR DELIVERY SCHEDULE, OR BOTH, AND THE CONTRACT SHALL BE MODIFIED IN WRITING ACCORDINGLY. * * * "

AS INDICATED IN EXHIBIT 3, THE REVISION OF THE ABOVE CLAUSE WHICH HAD BEEN PROPOSED BY THE SUBCOMMITTEE WAS APPROVED BY THE COMMITTEE FOR INCLUSION IN THE ARMED SERVICES PROCUREMENT REGULATION. IT FIRST APPEARED AS SECTION 7-103.2 OF THE 1960 EDITION OF THE REGULATION, WHICH SHOWS THAT THE REVISION BECAME EFFECTIVE AS OF JANUARY 1958. IT ALSO APPEARS AS SECTION 7.103-2 OF TITLE 32 OF THE CODE OF FEDERAL REGULATIONS, REVISED JANUARY 1, 1961, WHEREIN THE ARMED SERVICES PROCUREMENT REGULATIONS ARE CODIFIED. THE REVISED CLAUSE WAS SUBSEQUENTLY APPROVED BY THE GENERAL SERVICES ADMINISTRATION FOR INCLUSION IN STANDARD FORM 32, GENERAL PROVISIONS (SUPPLY CONTRACT), OCTOBER 1957 EDITION, AND IT APPEARS AS SECTION 1-16.901-32 OF TITLE 41 OF THE CODE OF FEDERAL REGULATIONS, REVISED JANUARY 1, 1960, WHEREIN THE FEDERAL PROCUREMENT REGULATIONS ARE CODIFIED.

IT WILL BE SEEN THAT PARAGRAPH 1 OF EXHIBIT 1 REFERS TO THE FACT THAT THE COURTS HAD INTERPRETED THE CHANGES CLAUSES IN GOVERNMENT CONTRACTS IN SUCH A WAY AS TO EXCLUDE CERTAIN TYPES OF COSTS ACTUALLY AND UNAVOIDABLY INCURRED BY CONTRACTORS "BY REASON OF THE CHANGES," AND THAT THE COSTS THUS EXCLUDED GENERALLY RELATED TO "/A) COSTS OF WORK ONLY INDIRECTLY AFFECTED BY CHANGES," AND "/B) STANDBY AND OTHER DELAY COSTS INCURRED BY CONTRACTORS DURING A REASONABLE PERIOD WHERE WORK HAS BEEN HELD UP PENDING THE ISSUANCE OF CHANGE ORDERS.' IT SEEMS APPARENT FROM THE QUOTED AND UNDERLINED LANGUAGE CONTAINED IN THIS EXHIBIT THAT THE SUBCOMMITTEE, IN DRAFTING THE REVISED CHANGES CLAUSE, HAD NO INTENTION OF PROVIDING THAT A SUSPENSION OF WORK, OR MODIFICATION OF THE PERFORMANCE OR DELIVERY SCHEDULE OF A CONTRACT, WOULD BE SUFFICIENT TO AUTHORIZE AN EQUITABLE ADJUSTMENT UNDER THE CLAUSE. RATHER, THE INTENTION OF THE SUBCOMMITTEE AND THE COMMITTEE, AS GATHERED FROM EXHIBITS 2 AND 3, WAS TO PROVIDE THAT, WHEN THE GOVERNMENT ORDERED A CHANGE IN THE WORK STIPULATED TO BE PERFORMED UNDER THE CONTRACT, THE CONTRACTOR COULD BE COMPENSATED NOT ONLY FOR THE INCREASED COSTS OF THE CHANGED WORK ITSELF, BUT ALSO FOR ANY INCREASED COST INCURRED, AS A RESULT OF THE CHANGE, IN UNCHANGED WORK. STOP-WORK CLAUSE IDENTICAL IN ALL MATERIAL RESPECTS TO THAT SET FORTH IN EXHIBIT 4 WAS APPROVED BY THE ARMED SERVICES PROCUREMENT REGULATION COMMITTEE FOR INCLUSION IN THE REGULATION AS A CLAUSE AUTHORIZED FOR USE IN ANY NEGOTIATED FIXED-PRICE SUPPLY TYPE CONTRACT UNDER WHICH WORK STOPPAGE MIGHT BE REQUIRED FOR REASONS SUCH AS "ADVANCEMENTS IN THE STATE OF THE ART, PRODUCTION OR ENGINEERING BREAK THROUGHS, OR REALIGNMENT OF PROGRAMS.' SUCH A CLAUSE FIRST APPEARED AS SECTION 7-105.8 (C) OF THE 1960 EDITION OF THE ARMED SERVICES PROCUREMENT REGULATION (32 CFR 7.105- 8), WHICH GIVES ITS EFFECTIVE DATE AS JULY 1960. RELATIVE TO INVOKING THE PROVISIONS OF THE CLAUSE, SUBPARAGRAPH (B) OF SECTION 7-105.8 STATES:

"/B) USE OF ORDERS. (1) INASMUCH AS STOP WORK ORDERS MAY RESULT IN INCREASED COSTS TO THE GOVERNMENT BY REASON OF STANDBY COSTS, SUCH ORDERS WILL BE ISSUED ONLY WITH PRIOR APPROVAL AT A LEVEL ABOVE THE CONTRACTING OFFICER. GENERALLY, USE OF A STOP WORK ORDER WILL BE LIMITED TO THOSE SITUATIONS WHERE IT IS ADVISABLE TO SUSPEND WORK PENDING A DECISION BY THE GOVERNMENT AND A SUPPLEMENTAL AGREEMENT PROVIDING FOR SUCH SUSPENSION IS NOT FEASIBLE * * *.'

THE VERY FACT THAT THE ARMED SERVICES PROCUREMENT REGULATION COMMITTEE FELT IT NECESSARY TO PROVIDE FOR THE INCLUSION OF THE ABOVE SUSPENSION OF WORK CLAUSE IN CONTRACTS REQUIRED TO CONTAIN THE CHANGES CLAUSE SET FORTH IN ASPR 7-103.2 IS CONFIRMATORY OF THE VIEWS EXPRESSED HEREIN AS TO THE COMMITTEE'S ORIGINAL INTENTION IN DRAFTING THE CLAUSE.

ALTHOUGH, FOR THE REASONS INDICATED HEREINABOVE, WE ARE OF THE FIRM OPINION THAT WEBB'S CLAIM FOR EXTRA COMPENSATION DUE TO THE INITIAL SUSPENSION OF WORK ORDERED BY THE GOVERNMENT WAS NOT COGNIZABLE UNDER THE CHANGES CLAUSE HERE INVOLVED, IT SEEMS APPARENT THAT THE CONTRACTOR IS ENTITLED TO BE COMPENSATED FOR THE INCREASED COSTS INCURRED AS A RESULT THEREOF UNDER WELL-ESTABLISHED PRINCIPLES OF LAW. MOREOVER, IN VIEW OF THE CORRESPONDENCE EXCHANGED BETWEEN THE PARTIES AT THE TIME OF THE SUSPENSION AND MODIFICATION OF THE PERFORMANCE SCHEDULE, AS SET FORTH ABOVE, WE BELIEVE THE GOVERNMENT MAY BE SAID TO HAVE IMPLIEDLY AGREED TO PAY THE REASONABLE COSTS WHICH WOULD BE INCURRED BY THE CONTRACTOR DUE TO THE DELAY.

ACCORDINGLY, SINCE WE UNDERSTAND THAT THE CONTRACT HAS NOT BEEN COMPLETED, IT WOULD APPEAR ADVISABLE FOR YOUR DEPARTMENT TO NEGOTIATE WITH WEBB IN AN EFFORT TO AGREE ON THE AMOUNT WHICH THE CONTRACTOR IS ENTITLED TO BE PAID ON ACCOUNT OF THE INITIAL DELAY, AND, IF WHAT IS DETERMINED BY YOUR DEPARTMENT TO BE A REASONABLE AMOUNT CAN BE AGREED UPON, TO EXECUTE A SUPPLEMENTAL AGREEMENT TO THE CONTRACT PROVIDING FOR PAYMENT OF THE AMOUNT INVOLVED. ALSO, SINCE IT IS APPARENT FROM THE RECORD THAT THE WORK UNDER THE CONTRACT WOULD HAVE BEEN COMPLETED PRIOR TO DECEMBER 7, 1962, HAD IT NOT BEEN FOR THE INITIAL SUSPENSION, AND THAT THE SUSPENSION OF WORK REFERRED TO IN THE SUPPLEMENTAL AGREEMENT OF DECEMBER 7, 1962, WAS, THEREFORE, MADE NECESSARY BY THE INITIAL SUSPENSION, WE PERCEIVE NO LEGAL OBJECTION TO THAT SUPPLEMENTAL AGREEMENT, WHICH APPEARS TO BE SUPPORTED BY ADEQUATE CONSIDERATION INSOFAR AS THE GOVERNMENT IS CONCERNED.

ORDINARILY, WE WOULD REFRAIN FROM RENDERING A DECISION OF THE NATURE HERE INVOLVED WHILE THE MATTER IS BEFORE THE APPEAL BOARD OF THE GOVERNMENT DEPARTMENT CONCERNED, AND WE HAVE UNDERTAKEN TO DO SO IN THIS INSTANCE ONLY BECAUSE BOTH OF THE INTERESTED PARTIES HAVE REQUESTED US TO DO SO AND FURTHER PROCEEDINGS ON THE APPEAL HAVE BEEN SUSPENDED PENDING RECEIPT OF OUR DECISION, WHICH IS CONCERNED PRIMARILY WITH QUESTIONS OF LAW IN ANY EVENT.

THE CONTRACT SPECIFICATIONS (PROJECT NO. CEP-3620-8062) ARE RETURNED HEREWITH, AS REQUESTED IN THE CONTRACTING OFFICER'S LETTER OF APRIL 9, 1963.