B-151113, MAY 21, 1963

B-151113, MAY 21, 1963

TO ADMINISTRATOR, AGENCY FOR INTERNATIONAL DEVELOPMENT:

REFERENCE IS MADE TO LETTER OF MARCH 18, 1963, FROM THE ASSISTANT ADMINISTRATOR FOR THE FAR EAST REQUESTING A DECISION AS TO WHETHER OUR OFFICE WOULD BE REQUIRED TO OBJECT TO PAYMENT OF THE AMOUNT OF $442,089 TO THE E. V. LANE CORPORATION AS AN EQUITABLE ADJUSTMENT UNDER CONTRACT NO. ICAC-1729 (TAN SON NHUT AIRPORT PROJECT, SAIGON, VIETNAM) WHICH AMOUNT WAS DETERMINED TO BE DUE BY A FINAL DECISION OF THE CONTRACTING OFFICER. DOUBT AS TO THE PROPRIETY OF SUCH PAYMENT HAS ARISEN BECAUSE THE CONTRACTOR RECENTLY FILED A TIMELY APPEAL UNDER THE STANDARD DISPUTES CLAUSE OF THE CONTRACT WHICH IS NOW PENDING BEFORE THE AGENCY'S BOARD OF CONTRACT APPEALS.

CONTRACT NO. ICAC-1729, DATED DECEMBER 29, 1960, PROVIDED FOR THE CONSTRUCTION OF A CONCRETE RUNWAY AND CERTAIN APPURTENANT FACILITIES AT THE TAN SON NHUT AIRPORT FOR THE SUM OF $4,105,592, AND NOTICE TO PROCEED WAS ISSUED TO THE CONTRACTOR THE SAME DAY THE CONTRACT WAS EXECUTED. THE WORK WAS TO BE COMPLETED ON OR BEFORE OCTOBER 31, 1962, SUBJECT TO THE ASSESSMENT OF LIQUIDATED DAMAGES AS PROVIDED IN PARAGRAPH 59. THE CONTRACT PRICE WAS INCREASED TO $4,157,984 AS THE RESULT OF CHANGES IN THE WORK COVERED BY ADDENDA NOS. 1 TO 5 INCLUSIVE, WITHOUT ANY CHANGE IN THE OVERALL COMPLETION DATE.

IT IS REPORTED THAT DURING THE COURSE OF CONSTRUCTION, THE CONTRACTOR SUBMITTED TEN SEPARATE CLAIMS FOR EQUITABLE ADJUSTMENTS TOTALING $2,496,780 TOGETHER WITH TIME EXTENSIONS TOTALING 520.7 DAYS PURSUANT TO THE FOLLOWING PARAGRAPHS OF THE GENERAL AND SPECIAL PROVISIONS OF THE CONTRACT.

CHART

PARAGRAPH 6 CHANGES

PARAGRAPH 7 CHANGED CONDITIONS

PARAGRAPH 8 TIME EXTENSIONS--- TERMINATION FOR

DEFAULT--- DAMAGES FOR DELAY

PARAGRAPH 28 GOVERNMENT FURNISHED PROPERTY

PARAGRAPH 34 POSSESSION PRIOR TO COMPLETION

PARAGRAPH 54 PRICE ADJUSTMENT FOR SUSPENSION,

DELAY, OR INTERUPTION OF THE WORK

PARAGRAPH 60 WAR RISKS EACH OF THE CITED PARAGRAPHS PROVIDES FOR EQUITABLE ADJUSTMENTS UNDER THE CIRCUMSTANCES STATED THEREIN.

PARAGRAPH 61 PROVIDES THAT THE CONTRACT WILL BE INTERPRETED AND GOVERNED BY THE LAW APPLICABLE TO CONTRACTS OF THE GOVERNMENT OF THE UNITED STATES.

IT IS REPORTED FURTHER THAT EXTENSIVE NEGOTIATIONS WITH THE CONTRACTOR FAILED TO RESULT IN AGREEMENT ON THE CONTRACTOR'S CLAIMS AND THAT ON JANUARY 3, 1963, THE CONTRACTING OFFICER, PURSUANT TO THE DISPUTES CLAUSE, RENDERED A FINAL DECISION ON THE CONTRACTOR'S CLAIMS.

FOUR OF THE CLAIMS (NOS. 1, 2, 4 AND 10) AGGREGATING $114,000 WERE DENIED IN TOTO. TWO OTHER CLAIMS FOR $30,474 AND $193,623 (NOS. 3 AND 6) AGGREGATING $224,097 WERE ALLOWED IN THE AMOUNTS OF $7,000 AND $31,961, RESPECTIVELY. THE REMAINING FOUR CLAIMS (NOS. 5, 7, 8 AND 9 AGGREGATING $2,158,683.21, WERE FOUND TO CONSTITUTE, IN ESSENCE, A SINGLE DAMAGE DUE TO MULTIPLE CAUSES AND, THEREFORE, WERE CONSOLIDATED INTO A SINGLE CLAIM AND ALLOWED IN THE AMOUNT OF $403,128.

IT IS STATED THAT THE WORK IS STILL IN PROGRESS; THAT THE CONTRACTOR EXPECTED TO COMPLETE SAME BY APPROXIMATELY APRIL 30, 1963; AND THAT ON FEBRUARY 5, 1963, ADDITIONAL CLAIMS COVERING THE PERIOD BETWEEN OCTOBER 31, 1962, AND JANUARY 3, 1963, WERE FILED WITH THE CONTRACTING OFFICER BUT THAT NO DETERMINATION HAS BEEN MADE AS TO SUCH CLAIMS.

IT IS STATED FURTHER THAT BEFORE RECEIPT OF THE CONTRACTING OFFICER'S DECISION, THE CONTRACTOR HAD BEEN ADVISED OF ITS CONTENTS AND, HAD IN TURN, ADVISED THE CONTRACTING OFFICER THAT AN APPEAL WOULD BE TAKEN; THAT AT THE SAME TIME THE CONTRACTOR REQUESTED THAT THE AMOUNT OF $442,089 BE PAID PENDING APPEAL, WITHOUT PREJUDICE TO THE RIGHTS OF ANY PARTY, IN ORDER TO ENABLE IT TO MAKE BANKING ARRANGEMENTS WHICH WOULD HELP ITS VIETNAMESE SUBCONTRACTOR, NECIDECO, TO COMPLETE WORK ON THE PROJECT; AND THAT ON JANUARY 3, 1963, AS A RESULT OF THOSE DISCUSSIONS, AND RELYING TO SOME EXTENT UPON ADVICE GIVEN HIM FROM AID/WASHINGTON, THE CONTRACTING OFFICER WROTE A SECOND LETTER TO THE CONTRACTOR STATING IN PART THAT---

"YOU PREVIOUSLY INFORMED ME THAT YOU INTEND TO APPEAL THESE DECISIONS TO THE AGENCY FOR INTERNATIONAL DEVELOPMENT IN WASHINGTON, D.C., AS YOU ARE ENTITLED TO DO PURSUANT TO THE DISPUTES CLAUSE OF THE SUBJECT CONTRACT. YOU HAVE REQUESTED, HOWEVER, THAT AS CONTRACTING OFFICER, I MAKE AN IMMEDIATE AWARD OF THE STATE INCREASE IN CONTRACT PRICE AND EXTENSION OF THE CONTRACT COMPLETION DATE WITHOUT ANY PREJUDICE OF YOUR RIGHT TO APPEAL.

"WHILE SUCH A PROCEDURE IS NOT EXPRESSLY PROVIDED FOR IN THE RULES OF THE A.I.D. BOARD OF CONTRACT APPEALS OR IN THE TERMS OF THE CONTRACT ITSELF, I AM WILLING TO CONSIDER SUCH IMMEDIATE PAYMENT PENDING YOUR FURTHER APPEAL. . . .

"YOU INDICATED TO ME IN OUR FINAL CONFERENCE BEFORE YOUR RECENT DEPARTURE FROM SAIGON THAT ADVANCE PAYMENT WOULD FACILITATE THE NECESSARY BANKING ARRANGEMENTS TO ENABLE YOU TO ARRIVE AT SOME ACCOMMODATION WITH NECIDECO IN SETTLEMENT OF PRESENT ACCOUNTS BETWEEN E. V. LANE CORPORATION AND NECIDECO AND THUS BE IN A BETTER POSITION TO COMPLETE WORK UNDER THE CONTRACT. FOR THIS REASON, I SHALL ORDER SUCH ADVANCE PAYMENT TO BE MADE AS SOON AS I RECEIVE A WRITTEN UNDERSTANDING, THROUGH AN EXCHANGE OF LETTERS OR OTHERWISE, BETWEEN E. V. LANE CORPORATION AND NECIDECO WHICH WOULD ENSURE THAT THE SUB CONTRACTOR IS ABLE TO CONTINUE TO PERFORM ITS WORK ON THIS PROJECT. AS SOON AS I RECEIVE SUCH WRITTEN ASSURANCES, I SHALL MAKE THIS MONEY AVAILABLE.'

WITH RESPECT TO THE FOREGOING STATEMENT IT IS STATED THAT THE CONTRACTOR ADVISED THE AGENCY THAT IN RELIANCE THEREON AND SIMILAR ORAL ASSURANCES OF THE CONTRACTING OFFICER, IT ENTERED INTO A SERIES OF NEGOTIATIONS WITH THE SUBCONTRACTOR AND ON FEBRUARY 1, 1963, AN AGREEMENT WAS REACHED ACCEPTABLE TO THE CONTRACTING OFFICER; AND THAT THEREAFTER, ON FEBRUARY 5, 1963, THE CONTRACTING OFFICER NOTIFIED THE CONTRACTOR THAT THE AGREEMENT WAS ACCEPTABLE AND INFORMED HIM THAT AID/WASHINGTON, HAD BEEN REQUESTED TO MAKE IMMEDIATE PAYMENT OF THE AMOUNT OF $442,089.

IT IS RELATED THAT ON JANUARY 21, 1963, TIMELY NOTICE OF APPEAL WAS RECEIVED BY THE CONTRACTING OFFICER; THAT ON FEBRUARY 13, 1963, THE FORMAL APPEAL FOR AN EQUITABLE ADJUSTMENT RELATING TO ALL TEN CLAIMS WAS DOCKETED BY THE A.I.D. BOARD OF CONTRACT APPEALS; THAT THE DISBURSEMENT AS PROPOSED IN THE CONTRACTING OFFICER'S LETTER OF JANUARY 3, 1963, HAS BEEN WITHHELD BY AID/WASHINGTON BECAUSE OF THE DOUBT AS TO LEGAL AUTHORITY THEREFOR PENDING DISPOSITION OF THE PENDING APPEAL; THAT WHILE AID/WASHINGTON HAS NOT HAD AN OPPORTUNITY TO REVIEW THE CLAIMS FULLY OR THE ACTION TAKEN BY THE CONTRACTING OFFICER IT APPEARS THAT A SUBSTANTIAL AMOUNT OF TIME WILL BE REQUIRED TO RESOLVE THE APPEALS; AND THAT IN THE CIRCUMSTANCES OF THE CASE, THERE APPEAR TO BE STRONG EQUITABLE ARGUMENTS IN FAVOR OF MAKING PAYMENT ON ACCOUNT OF THE CLAIMS APPROVED BY THE CONTRACTING OFFICER.

IT SEEMS APPARENT THAT THE AGENCY'S PRIMARY DOUBT IN THE MATTER HAS ARISEN FROM THE FACT THAT UNDER THE DISPUTES CLAUSE THE CONTRACTING OFFICER'S DECISION IS SUBJECT TO APPEAL TO THE DIRECTOR, ICA THEREBY PREVENTING ANY PART OF THE CONTRACTING OFFICER'S FINDINGS FROM BECOMING FINAL AND CONCLUSIVE AND OPENING UP FOR CONSIDERATION ALL FACTORS UPON WHICH THE CONTRACTING OFFICER'S FINDINGS WERE BASED. IN THAT REGARD, WE HAVE HELD THAT SUCH AN APPEAL TO THE HEAD OF A DEPARTMENT OR AGENCY OF THE GOVERNMENT UNDER THE DISPUTES CLAUSE OF THE CONTRACT PREVENTS ANY PART OF THE FINDINGS OF THE CONTRACTING OFFICER FROM BECOMING FINAL AND OPENS UP FOR CONSIDERATION BY THE HEAD OF THE DEPARTMENT, OR AN APPEAL BOARD AS HIS REPRESENTATIVE, ALL FACTORS UPON WHICH THE CONTRACTING OFFICER'S FINDING WAS BASED. 35 COMP. GEN. 512, 516.

THE PROCEDURES OF THE CORPS OF ENGINEERS, BUREAU OF YARDS AND DOCKS AND THE BUREAU OF RECLAMATION, REFERRED TO BY THE CONTRACTOR, PROVIDING FOR 2- PART CHANGE ORDERS UNDER WHICH PAYMENTS ARE MADE TO CONTRACTORS ON ACCOUNT OF WORK PERFORMED UNDER CHANGE ORDERS BEFORE AN EQUITABLE ADJUSTMENT, HAS BEEN AGREED UPON OR UNILATERALLY DETERMINED ARE BASED UPON THE EXPRESS PROVISIONS OF THE INSTRUCTIONS QUOTED IN THE LETTER OF MARCH 18, 1963, AND OF COURSE, WOULD FURNISH NO PRECEDENT FOR THE PAYMENT HERE PROPOSED UNDER A CONTRACT WHICH DOES NOT CONTAIN SUCH PROVISIONS. OUR DECISIONS OF AUGUST 27, 1952, AND FEBRUARY 18, 1953, B-111399, ALSO REFERRED TO BY THE CONTRACTOR, INVOLVED A SITUATION FACTUALLY DISTINGUISHABLE FROM THE PRESENT CASE AND THEREFORE, WOULD FURNISH NO JUSTIFICATION FOR THE PROPOSED PAYMENT IN THIS INSTANCE.

IN THE PRESENT INSTANCE IT IS CONCEIVABLE, OF COURSE, THAT THE DECISION OF THE BOARD OF CONTRACT APPEALS MAY BE UNFAVORABLE TO ANY OR ALL OF THE ITEMS COMPRISING THE CONTRACTOR'S CLAIMS FOR EQUITABLE ADJUSTMENTS, THEREBY REQUIRING AN ADJUSTMENT IN THE AGGREGATE AMOUNT APPROVED FOR ALLOWANCE BY THE CONTRACTING OFFICER. HOWEVER, IN VIEW OF THE DIFFICULT SITUATION IN WHICH THE CONTRACTOR NOW FINDS ITSELF, WE WOULD NOT OBJECT TO PAYMENT TO IT OF A PORTION OF THE AMOUNT APPROVED FOR ALLOWANCE BY THE CONTRACTING OFFICER, PROVIDED IT IS ADMINISTRATIVELY DETERMINED THERE IS A REASONABLE PROBABILITY THAT REDUCE THE AMOUNT ALLOWABLE BELOW THAT FIGURE. IF THIS BE DONE, AN ANY ADJUSTMENT BY THE BOARD UNDER THE CONTRACT AS A WHOLE WILL NOT UNDERTAKING SHOULD BE EXECUTED BY THE CONTRACTOR BY WHICH IT AGREES TO MAKE IMMEDIATE REFUND TO THE GOVERNMENT OF ANY DIFFERENCE BETWEEN THE AMOUNT NOW PAID AND ANY LESSER AMOUNT FOUND ALLOWABLE BY THE BOARD.

IT HAS BEEN INFORMALLY REPORTED THAT THERE PRESENTLY IS A BALANCE OF $61,997.11 RETAINED FROM PARTIAL PAYMENTS. WE WOULD, OF COURSE, HAVE NO OBJECTION TO THE RELEASE OF THIS AMOUNT TO THE CONTRACTOR ON THE ASSUMPTION THAT THE CONTRACT IN QUESTION WILL BE COMPLETED IN ACCORDANCE WITH ITS TERMS.