B-140040, MAY 28, 1964

B-140040, MAY 28, 1964

TO THE POSTMASTER GENERAL:

REFERENCE IS MADE TO A LETTER DATED APRIL 14, 1964, FROM YOUR GENERAL COUNSEL, AS SUPPLEMENTED BY A LETTER RECEIVED FROM HIM ON APRIL 21, 1964, REQUESTING ADVICE AS TO WHETHER OUR OFFICE WOULD ENTERTAIN ANY OBJECTION TO PAYMENT BY THE POST OFFICE DEPARTMENT OF THE AMOUNT OF $147,491.58 IN FULL SETTLEMENT OF A CLAIM IN THE REVISED TOTAL AMOUNT OF $545,420.55 ASSERTED BY INDUSTRIAL NUCLEONICS CORPORATION ON BEHALF OF ITSELF, ITS SUBCONTRACTOR AND THE SUB SUBCONTRACTOR UNDER CONTRACT NO. 9-1-9726, DATED JUNE 30, 1959, FOR THE FURNISHING AND INSTALLATION OF A MAIL-FLO SYSTEM ON THE 8TH AND 9TH FLOORS OF THE CHICAGO, ILLINOIS, POST OFFICE.

THE CLAIM, WHICH WAS THE SUBJECT OF OUR DECISION TO YOU OF JANUARY 8, 1962, 41 COMP. GEN. 436, IS BASED ON THE ALLEGED ADDITIONAL COSTS INCURRED OR ACCRUING FROM DELAY OCCASIONED BY THE ACTION OF YOUR DEPARTMENT IN STOPPING PERFORMANCE OF THE WORK ON THE 8TH FLOOR OF THE BUILDING FROM JUNE 1960 UNTIL JANUARY 1961. IN YOUR LETTER OF JUNE 29, 1961, YOU HAD REQUESTED OUR DECISION WHETHER THE CLAIM MIGHT BE CONSIDERED UNDER CLAUSE 2, CHANGES, OF STANDARD FORM 32, GENERAL PROVISIONS (SUPPLY CONTRACT), OCTOBER 1957 EDITION, INCORPORATED IN THE CONTRACT. IF NOT, OUR ADVICE WAS REQUESTED AS TO WHETHER--- ASSUMING THAT WE CONSIDERED THE CONTRACTOR TO HAVE A VALID CLAIM AGAINST THE GOVERNMENT FOR BREACH OF CONTRACT--- THE CONTRACT MIGHT BE AMENDED "TO INCLUDE A ,SUSPENSION" CLAUSE TO PROVIDE A CONTRACTUAL VEHICLE FOR AN ADMINISTRATIVE SETTLEMENT OF THE IM.' IN THE EVENT OUR ANSWER TO THAT QUESTION ALSO SHOULD BE IN THE NEGATIVE, YOU REQUESTED TO BE ADVISED WHETHER YOUR DEPARTMENT MIGHT CONSIDER THE CLAIM AND SETTLE IT ON PRINCIPLES APPLICABLE IN BREACH OF CONTRACT CASES.

IN OUR DECISION OF JANUARY 8, 1962, WE STATED THAT THE QUESTION WHETHER THE CHANGE IN THE SCHEDULE FIXED FOR THE PERFORMANCE OF THE WORK COULD BE REGARDED AS A CHANGE IN SPECIFICATIONS SO AS TO INVOKE THE EQUITABLE ADJUSTMENT PROVISIONS IN THE CHANGES CLAUSE OF THE CONTRACT WAS SUBJECT AT LEAST TO SERIOUS DOUBT. IN ANSWER TO YOUR SECOND AND THIRD QUESTIONS, WE STATED THAT THE RECORD IN THE CASE, AS THEN PRESENTED TO US, FURNISHED NO BASIS FOR CONCLUDING THAT THE GOVERNMENT HAD EXCEEDED ITS CONTRACTUAL RIGHTS IN STOPPING THE WORK ON THE 8TH FLOOR SO THAT ANY CONSIDERATION MIGHT BE SAID TO EXIST FOR EXECUTION OF AN AMENDMENT TO THE CONTRACT OF THE NATURE PROPOSED, AND THAT WE KNEW OF NO AUTHORITY UNDER WHICH YOUR DEPARTMENT WOULD BE AUTHORIZED TO SETTLE THE CLAIM, WHICH WOULD BE ALLOWABLE, IF AT ALL, ON THE BASIS THAT THE GOVERNMENT HAD ACTED UNREASONABLY IN THE MATTER.

IN REGARD TO THE INITIAL EXTENSION OF TIME UNDER THE CONTRACT, WE OBSERVED THAT IN THE CASE OF A VIRTUALLY IDENTICAL CONTRACT WITH THE SAME CONTRACTOR FOR A LIKE INSTALLATION AT THE PITTSBURGH, PENNSYLVANIA, POST OFFICE THE CONTRACTING OFFICER HAD REACHED THE CONCLUSION (WITH WHICH WE EXPRESSED AGREEMENT IN B-140099, SEPTEMBER 17, 1959), THAT THE CONTRACTOR WAS NOT ENTITLED TO AN EXTENSION OF TIME, A POSITION WHICH APPEARED INCONSISTENT WITH THE VIEW THAT THE CONTRACTOR WAS ENTITLED TO THE INITIAL EXTENSION IN THE PRESENT INSTANCE. IN OUR PREVIOUS DECISION OF JANUARY 8, 1962, IN THIS CASE WE EXPRESSED THE VIEW THAT THE CHAIN OF CORRESPONDENCE THERE REFERRED TO IMPLIED THAT THE CONTRACTOR HAD BEEN ORDERED TO SUSPEND WORK ON THE 8TH FLOOR BECAUSE IT HAD GOTTEN BEHIND IN THE TIME SCHEDULE FIXED FOR THE PERFORMANCE OF THE WORK ON THE 9TH FLOOR, AND THAT SUCH SUSPENSION WAS TO ENABLE THE CONTRACTOR TO COMPLETE INSTALLATION OF THE MAIL-FLO SYSTEM ON THE 9TH FLOOR BY NOVEMBER 1, 1960. THAT VIEW WAS QUALIFIED BY THE FOLLOWING:

"HOWEVER, WE RECOGNIZE THAT THE CONTRACTING OFFICER MAY HAVE CONCLUDED AS A RESULT OF SUBSEQUENT INVESTIGATION, AS INDICATED BY HIS LETTER OF JANUARY 13, 1961, QUOTED IN PART BELOW, THAT THE WORK ON THE 8TH FLOOR WAS SUSPENDED BECAUSE IT WAS NOT FEASIBLE--- FROM THE STANDPOINT OF THE SAFETY OF POSTAL EMPLOYEES LOCATED ON THE 8TH FLOOR-- FOR WORK ON THE 8TH AND 9TH FLOORS TO PROCEED CONCURRENTLY, AS CONTEMPLATED BY THE REVISED SCHEDULE FOR THE PERFORMANCE OF THE CONTRACT WHICH HAD BEEN AGREED TO BY THE PARTIES AT THE TIME (ON OR ABOUT MAY 13, 1960) THE CONTRACTOR WAS AUTHORIZED TO PROCEED WITH THE WORK ON BOTH FLOORS, AND NOT BECAUSE OF ANY FAILURE OF THE CONTRACTOR TO PERFORM IN ACCORDANCE WITH THE REVISED SCHEDULE.'

THE JANUARY 13, 1961, LETTER MENTIONED ABOVE IS REFERRED TO AND STATED IN PART IN THE DECISION AT 41 COMP. GEN. 442.

THAT PART OF THE RECORD OF PROCEEDINGS BEFORE THE POST OFFICE DEPARTMENT BOARD OF CONTRACT APPEALS IN THIS MATTER, P.O.D. BCA NO. 22, WHICH WAS FURNISHED TO US BY YOUR GENERAL COUNSEL BY LETTER OF APRIL 17, 1963, INDICATES THAT THE CONTRACTING OFFICER NOTIFIED INDUSTRIAL NUCLEONICS CORPORATION BY LETTER OF JANUARY 22, 1962, THAT THE CLAIM HERE INVOLVED WAS DENIED; THAT THE CONTRACTOR APPEALED TO THE BOARD FROM THIS DECISION; AND THAT UNDER DATE OF AUGUST 2, 1962, MR. I. F. KARDOS, IN THE CAPACITY OF "DEPARTMENTAL COUNSEL," FILED A MOTION TO DISMISS THE APPEAL ON BEHALF OF THE GOVERNMENT ON THE GROUNDS THAT THE CONTRACT DOES NOT CONTAIN A "SUSPENSION OF WORK" CLAUSE, AND THAT THE "CHANGES" CLAUSE OF THE CONTRACT DOES NOT AUTHORIZE PRICE ADJUSTMENTS FOR ,CHANGES IN THE SCHEDULE AND GOVERNMENT CAUSED DELAY," CITING, AMONG OTHER AUTHORITIES IN SUPPORT OF THIS INTERPRETATION, OUR DECISION OF JANUARY 8, 1962. IN ITS "RESPONSE TO MOTION TO DISMISS," ETC., FILED UNDER DATE OF OCTOBER 5, 1962, INDUSTRIAL NUCLEONICS CONTENDED, AMONG OTHER THINGS, THAT OUR DECISION OF JANUARY 8, 1962, MAY NOT BE CONSIDERED AS A "DEFINITIVE DETERMINATION" OF THE LEGAL QUESTION AT ISSUE SINCE ONLY " "SERIOUS DOUBT" IS EXPRESSED (THEREIN) AS TO WHETHER THE MODIFICATION OF THE INSTALLATION SCHEDULES THAT TOOK PLACE IN THIS CASE COULD BE REGARDED AS CHANGES IN THE SPECIFICATIONS SO AS TO INVOKE THE EQUITABLE ADJUSTMENT CLAUSE.'

IN A CONFERENCE HELD HERE ON OCTOBER 15, 1963, BETWEEN REPRESENTATIVES OF OUR OFFICE AND OF YOUR DEPARTMENT, THE BELIEF WAS EXPRESSED THAT, INSOFAR AS THIS OFFICE WAS CONCERNED, OUR DECISION TO YOU IN THE JERVIS B. WEBB COMPANY CASE, B-149895, DATED OCTOBER 1, 1963, HAD DEFINITELY RESOLVED IN THE NEGATIVE THE QUESTION WHETHER A DELAY ORDERED BY THE GOVERNMENT IN THE PERFORMANCE OF THE WORK ALONE CONSTITUTES A CHANGE SO AS TO AUTHORIZE AN ADJUSTMENT IN PRICE UNDER THE CHANGES CLAUSE OF STANDARD FORM 32 (SUPPLY CONTRACT), OCT. 1957 EDITION. THE REPRESENTATIVES OF YOUR DEPARTMENT THEN STATED THAT THEY FELT INDUSTRIAL NUCLEONICS MIGHT WELL HAVE A VALID CLAIM AGAINST THE GOVERNMENT, AS FOR BREACH OF CONTRACT, WHICH IT MIGHT BE IN THE INTEREST OF THE GOVERNMENT TO SETTLE THROUGH THE EXECUTION OF A SUPPLEMENTAL AGREEMENT SUCH AS WAS AUTHORIZED IN THE JERVIS B. WEBB COMPANY CASE, PROVIDED A SATISFACTORY AMOUNT COULD BE AGREED UPON. THEY EXPLAINED THAT FINAL PAYMENT HAD NOT BEEN MADE UNDER THE INDUSTRIAL NUCLEONICS CONTRACT, AND STATED THAT THEY FELT THE OBJECTIONS WHICH WE HAD RAISED IN OUR DECISION OF JANUARY 8, 1962, TO PAYMENT OF ANY AMOUNT TO THE CONCERN MIGHT BE SATISFACTORILY ANSWERED. AMONG OTHER THINGS, IT WAS STATED THAT EVIDENCE HAD BEEN PRESENTED BY THE CONTRACTOR OR DEVELOPED BY YOUR DEPARTMENT DURING THE COURSE OF THE PROCEEDINGS ON APPEAL WHICH INDICATED THAT THE CONTRACTOR, OR SUBCONTRACTOR, ACTUALLY WAS UNABLE TO OBTAIN THE NECESSARY STEEL FOR THE MANUFACTURE OF THE EQUIPMENT DURING THE PERIOD OF THE STEEL STRIKE, AND THAT THE ORIGINAL TIME EXTENSION HAD BEEN GRANTED FOR THAT REASON AND NOT SIMPLY BECAUSE THE CONTRACTOR, OR SUBCONTRACTOR, WOULD HAVE BEEN REQUIRED TO PAY MORE FOR THE STEEL. THE CONFERENCE CONCLUDED WITH THE ADVICE FROM OUR REPRESENTATIVES THAT THEY SAW NO REASON WHY YOUR DEPARTMENT COULD NOT ENTER INTO SUCH A SUPPLEMENTAL AGREEMENT WITH THE UNDERSTANDING THAT IT WOULD BE SUBMITTED TO OUR OFFICE FOR APPROVAL WITH SUPPORTING COST DATA AND EXPLANATION CONCERNING THE MERITS OF THE CLAIM, ETC.

IN THE LETTER OF APRIL 14, 1964, AS SUPPLEMENTED BY HIS LETTER RECEIVED HERE ON APRIL 21, YOUR GENERAL COUNSEL STATES THAT THE POST OFFICE DEPARTMENT'S BOARD OF CONTRACT APPEALS HAS NOT YET RENDERED A DECISION ON THE APPEAL FILED BY INDUSTRIAL NUCLEONICS IN THIS MATTER, AND THAT THE TESTIMONY ADDUCED AT THE HEARING OF THE APPEAL REVEALED THAT STEEL WHICH HAD BEEN DESTINED FOR THE CONTRACT WORK IN CHICAGO, ILLINOIS, WAS AT THE DIRECTION OF THE POST OFFICE DEPARTMENT, DIVERTED TO THE POSTAL FACILITY AT PITTSBURGH, PENNSYLVANIA, WHICH ACCOUNTED FOR THE FACT THAT AN EXTENSION OF TIME HAD BEEN DENIED BY THE CONTRACTING OFFICER IN THE PITTSBURGH CASE (B-140099). HOWEVER, THE GENERAL COUNSEL STATES THAT, AS A RESULT OF THE DIVERSION OF THE STEEL, THE WORK UNDER THE CONTRACT HERE INVOLVED WAS IMPEDED BY THE CONTRACTOR'S AND SUBCONTRACTOR'S INABILITY TO OBTAIN THE NECESSARY STEEL, AND YOUR DEPARTMENT THEREFORE BELIEVES THE CONTRACTING OFFICER WAS JUSTIFIED IN EXTENDING THE TIME FOR START OF THE INSTALLATION WORK THEREUNDER FOR A PERIOD OF 132 DAYS (THE APPROXIMATE LENGTH OF TIME THAT THE STEEL STRIKE WHICH COMMENCED ON JULY 7, 1959, HAD LASTED), OR UNTIL ABOUT MAY 13, 1960, WHEN THE CONTRACTOR WAS AUTHORIZED TO PROCEED WITH THE WORK ON THE 8TH AND 9TH FLOORS OF THE BUILDING CONCURRENTLY IN ACCORDANCE WITH A REVISED WORK SCHEDULE WHICH HAD BEEN AGREED TO BY THE PARTIES.

RELATIVE TO THE QUESTION WHETHER THE ORDER TO SUSPEND WORK ON THE 8TH FLOOR WAS ISSUED FOR THE CONVENIENCE OF THE GOVERNMENT (SAFETY OF THE POSTAL EMPLOYEES), OR FOR THE CONVENIENCE OF THE CONTRACTOR (TO ENABLE IT TO CATCH UP ON THE WORK SCHEDULE WHICH IT HAD AGREED TO), THE GENERAL COUNSEL STATES IN SUBPARAGRAPH (B) OF THE SECOND PARAGRAPH OF HIS LETTER RECEIVED HERE ON APRIL 21, 1964:

"/B) THERE IS SHARP CONFLICT IN THE TESTIMONY CONCERNING THE ISSUE OF WHETHER THE DEPARTMENT PROPERLY AND JUSTIFIABLY SUSPENDED THE WORK ON THE EIGHTH FLOOR. ANALYSIS OF THIS TESTIMONY LEADS US TO BELIEVE THAT A BOARD OR COURT COULD CONCLUDE THAT THE DEPARTMENT BREACHED THE CONTRACT BY SUSPENDING THE EIGHTH FLOOR WORK ON JUNE 16, 1960. IF THAT BE THE CASE, WE BELIEVE THAT ANY AWARD FOR DAMAGES WOULD EXCEED THE PROPOSED SETTLEMENT AMOUNT. HENCE, IT IS IN THE GOVERNMENT'S INTEREST TO ADMINISTRATIVELY SETTLE THIS CLAIM.'

IN A TELEPHONE CONVERSATION HELD BETWEEN MR. I. F. KARDOS OF YOUR DEPARTMENT AND MR. E. A. HUMPHREY OF OUR OFFICE ON APRIL 19, 1964, CONCERNING THE ISSUES PRESENTED IN THIS CASE, MR. KARDOS, IN AMPLIFICATION OF THE ABOVE-QUOTED SUBPARAGRAPH OF THE GENERAL COUNSEL'S LETTER, STATED THAT THE TESTIMONY BEFORE THE BOARD WAS CONFLICTING ON THE FOLLOWING POINTS:

1. WHETHER THE CONTRACTOR COULD BE SAID TO HAVE BEEN BEHIND SCHEDULE IN THE WORK ON THE 9TH FLOOR AT THE TIME HE WAS DIRECTED TO SUSPEND WORK ON THE 8TH FLOOR;

2.WHETHER THE GOVERNMENT ALLOWED THE CONTRACTOR SUFFICIENT TIME TO "BUILD UP" ON THE 8TH FLOOR "BEFORE STOPPING HIM; "

3. WHETHER THERE "WAS SUFFICIENT LACK OF COOPERATION BY GOVERNMENT PEOPLE WHICH CAUSED THE CONTRACTOR TO BE DELAYED IN BEING ABLE TO KEEP UP WITH THE SCHEDULE; " AND

4. WHETHER, DESPITE ALL OF THE FOREGOING, THE GOVERNMENT DID "FOR ITS OWN CONVENIENCE," TELL THE CONTRACTOR TO CONCENTRATE ON THE 9TH FLOOR.

IT THUS APPEARS FROM THE FACTS PRESENTED IN THE GENERAL COUNSEL'S LETTERS, AS AMPLIFIED BY MR. KARDOS IN THE TELEPHONE CONVERSATION REFERRED TO , THAT CONSIDERABLE EVIDENCE IN THE FORM OF TESTIMONY HAS BEEN PRESENTED TO THE BOARD INDICATING THAT THE STOPPAGE OF WORK HERE INVOLVED WAS FOR THE CONVENIENCE OF THE GOVERNMENT, OR AT LEAST MADE NECESSARY BY THE FAILURE OF THE GOVERNMENT TO RENDER TO THE CONTRACTOR THE ASSISTANCE IT HAD A RIGHT TO EXPECT IN MAKING THE 8TH FLOOR AVAILABLE TO THE CONTRACTOR DURING THE EARLY STAGES OF THE INSTALLATION WORK. WHILE TESTIMONY TENDING TO REFUTE THIS IS ALSO IN THE RECORD OF THE PROCEEDINGS BEFORE THE BOARD, THE FACT THAT THE CONTRACTING OFFICER ADVISED THE CONTRACTOR IN THE LETTER OF JANUARY 13, 1961, REFERRED TO ABOVE, THAT THE LETTER WAS TO CONFIRM THAT THE POST OFFICE DEPARTMENT WOULD ACCEPT RESPONSIBILITY FOR ADDITIONAL COSTS WHICH THE CONTRACTOR HAD INCURRED IN THE CATEGORIES MENTIONED AS A RESULT OF THE STOPPAGE IN WORK ON THE 8TH FLOOR, STATING THAT SUCH ACTION "WAS NECESSARY TO MEET POST OFFICE REQUIREMENTS," COULD BE EXPECTED TO BE ACCORDED GREAT WEIGHT BY THE BOARD, OR A COURT, IN DECIDING THE ISSUE. IF IT SHOULD BE DETERMINED THAT THE STOPPAGE IN WORK ON THE 8TH FLOOR WAS FOR THE CONVENIENCE OF THE GOVERNMENT, THERE WOULD BE AMPLE BASIS FOR CONCLUDING THAT SUCH ACTION, INVOLVING A DELAY FROM JUNE 1960 TO JANUARY 1961, WAS SO UNREASONABLE AS TO CONSTITUTE A BREACH OF CONTRACT.

UNDER THE CIRCUMSTANCES, AND SINCE YOUR GENERAL COUNSEL'S LETTER RECEIVED BY US ON APRIL 21, 1964, ADVISES THAT AUDITS PERFORMED BY YOUR DEPARTMENT, TOGETHER WITH TECHNICAL ADVICE FURNISHED BY THE THEN RESIDENT ENGINEER FOR THIS JOB, INDICATE THAT THE CONTRACTOR, EITHER DIRECTLY OR THROUGH LIABILITY TO THE SUBCONTRACTORS AND SUB SUBCONTRACTORS INVOLVED, INCURRED ADDITIONAL COSTS DUE TO THE SUSPENSION OF WORK HERE IN QUESTION AT LEAST IN THE AMOUNT OF THE PROPOSED SETTLEMENT, WE WILL ENTERTAIN NO OBJECTION TO PAYMENT BY YOUR DEPARTMENT OF THE SUM OF $147,491.58 TO THE CONTRACTOR IN FULL SETTLEMENT OF THE CLAIM.