Petition — Reliance Insurance v. F & D Electrical Contractors, Inc.

——U —— —ẽ

IN THE

Supreme Court, U. & *

FILE B

APR 21 1s

MICHAEL RODAK, JR.

Supreme Court of the United States

OctToBER TERM, 1977

No. 7 7 * 1 5 6 9

RELIANCE INSURANCE COMPANY, Petitioner

V.

F & D ELROTRICAL Contractors, Inc.; J. H. COPELAND

& Sons Construction, Inc.; and UNITED STATES

or AMERICA, for the Use and Benefit Of Gray-BaR

ELECTRIC Company, Inc., Respondents

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

—

WIIILIAM KNIGHT ZEWADSKI

WILIAM C. FRYE

MicRHAREL C. ADDISON

TRENAM, SIMMONS, KEMKER,

ScHarF, BARKIN, FRYE

& O’NEDLL,

PROFESSIONAL ASSOCIATION

Attorneys for Petitioner

Post Office Box 1102

Tampa, Florida 33601

(813) 223-7474

April 20, 1978

Press or Brno S. ADAMS PRINTING, INC., WASHINGTON, D. C.

6

, CLERK

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which prevents 43 @overnment caused delays from justifyin: the contractor's

lectrical Contractors,

—

*

—

Insurance Co. v. Fa D

abandonment or withdrawal? (Reliance

4/21/78)

Ins., Sup Ct. 77-1509, petition filed,

TABLE OF CONTENTS

Page

Oprsions BELOW .....---eeeeeeeeerereeseeretettet® 1

Juni roc „„ 2

Oursrioxs PRESENTED nnn 2

Srarutory Provisions INVOL IW... 3

3

STATEMENT OF THE Cas...

REASONS FOR GRANTING THE WRIT

I. The Decision Of The Court Of Ap Should

Have, But Did Not, Enforce A Uniform Federal

Rule Governing The Rights And Remedies Of

Subcontractors On Government Construction

Contracts To The Same Extent That The Fed-

eral Rule Governs The Rights And Remedies

Of A Prime Contractor With Res To

Changes In The Amount Of Work Delays

In The Time Of Completion. The Court Below

Erroneously Decided An Important tion Of

Federal Law Which Has Not Been, But Should

Be, Settled By This Court

Il. The Decision Of The Court Of Appeals, Which

Held That A Subcontractor On Government

Project Which Underwent Significant Govern-

ment-Imposed And Ti Extensions

Could Establish A Material Breach Of The Sub-

contract Which Excused Further Performance

Based On The Mere Existence Of 2 In

Completion Without Establishing IIow ose

Delays Prejudiced His Performance, Conflicts

With Decisions Of The United States Court Of

Claims And Other Courts Of Appeal, And De-

cides An Important Question Of Federal Law

Which Has Not Been, But Should Be, Settled

By This Court..

ii Table of Contents Continued

Page

III. The Decision Court Of Appeals, Which Held

That The Portion Of The ‘‘Disputes’’ Clause

Which gy The Contractor To ‘‘Proceed

Diligently With The Performance Of The Con-

tract’’ In The Event Of A Dispute Over A De-

lay In The Time Of Completion Was Not In-

corporated By Reference Into The Subcontract,

Conflicts With A Decision Of Another Court Of

Appeals And Presents An Important Federal

estion Which Has Not Been, But Should Be,

rer.. ee 13

GGG 16

rale eee be eee e ee 1a

r e 10a

BOE BD c 15a

rr. . 16a

1 Wek 0c 00 eh ewdisians 20a

r cagnebanessteensebosaenast 23a

CasEs :

Bruno Law And Richard Marlink, Trustees In Dis-

solution For Daniel J. Cronin, Inc. v. The United

States, 195 Ct. Cl. 370 (Ct. Cl. 1971) ....... 9, 10, 11

H. W. Caldwell & Son, Inc. v. U.S. For John H. Moon

& Sons, Inc., 407 F.2d 21 (Sth Cir. 1969) ...... 15

Commerce International Company v. United States,

338 F. ad 81 (Ct. Cl. 1964) .............. 9, 10, 11-12

Discount Co., Inc. v. United States, 554 F.2d 435 (Ct.

Cl.), cert denied, —— U.S. ——, 54 L.Ed.2d 298

1 chancbiee e 6

McDaniel v. Ashton-Mardian Company, 357 F. 2d 511

n RR ere Ry 6, 9, 14

F. 1 Co. v. Industrial Lumber Co., 417 U.S. 116

„c sadaieeiin 7

United States v. Citizens & Southern Nat. Bank of

Atlanta, Ga., 367 F.2d 473 (4th Cir. 1966) ...... 9

Table of Contents Continued iii

Page

United States, Etc. v. J. H. Copeland d Sons, 568

F.2d at 1159 (5th Cir. 1978) .......... ae 14

United States v. F Construction Corporation, 423

V EE, BE coc vcccccesccecccescce 15

United States v. Rice, 317 U.S. 61 (1942) ......... 6, 14

STaTUTEs:

r ...t eee 3

r ¶ r.. cisbvedsesaceeoes 1,2

r ᷑ .... 3

IN THE

Supreme Court of the United States

OctoBER TERM, 1977

No.

RELIANCE INSURANCE CoMPANY, Petitioner

V.

F & D ELREOCTYRNCAL Contractors, INC. J. H. CoPELAND

& Sons Construction, INC.; and Unrrep States

or AMERICA, for the Use and Benefit Of Gray-Bar

EvLectric Company, Inc., Respondents

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

Petitioner, Reliance Insurance Company, prays that

a Writ of Certiorari be issued under 28 U.S.C. § 1254

(1) to review the opinion and judgment of the United

States Court of Appeals for the Fifth Circuit entered

in this proceeding on March 27, 1978.

The opinion of the Court of Appeals for the Fifth

Circuit is reported at 568 F.2d 1159 and reprinted in

Appendix A. The opinion of the United States District

Court for the Southern District of Florida is not re-

ported and is reprinted in Appendix B.

2

JURISDICTION

The judgment of the Court of Appeals for the Fifth

Circuit was entered on March 27, 1978, and is re-

printed in Appendix C. This Petition for Certiorari

was filed within 90 days of that date.

This Court’s jurisdiction to review the judgment

below is based on 28 U.S.C. § 1254(1).

QUESTIONS PRESENTED

1. Should a uniform federal rule govern the rights

and remedies of subcontractors on government con-

struction contracts to the same extent that the federal

rule governs the rights and remedies of a prime con-

tractor with respect to changes in the amount of work

and delays in the time of completion?

2. Whether the Court below erred in holding that a

government contractor had committed a material

breach of a subcontract as a result of delays in the

completion of the construction project, where the de-

lays were substantially covered by time extensions

granted by the government as a result of government

change orders and where the subcontractor did not at-

tempt to prove which specific delays were caused by

the contractor or that the delays had impaired the

subcontractor’s performance of his portion of the

work?

3. Whether a subcontractor on a government con-

struction project is permitted to abandon his portion

of the construction because of non-specific delays in

the time of completion caused by the contractor when

the subcontract incorporates by reference, and thereby

binds the subcontractor to, a contractual clause which

3

prevents government caused delays from justifying

the contractor’s abandonment or withdrawal!

STATUTORY PROVISIONS INVOLVED

The pertinent portions of the Miller Act (40 U.S. C.

§§ 270a, et seg.) and the Small Business Act (15 US.

C. § 637) are set forth in Appendix D to this petition.

STATEMENT OF THE CASE

The Small Business Administration (SBA) was the

original prime contractor on a government construc-

tion project located in Miami, Florida. The contract

concerned Phase II of the expansion and moderniza-

tion of the Miami air route traffic control center. Pur-

suant to the provisions of Section 8(a) of the Small

Business Act (15 U.S.C. §637(a)), the SBA con-

tracted with a minority contractor, J. H. Copeland &

Sons Construction, Inc. (Copeland), to perform the

actual functions of the general contractor. The con-

struction commenced on January 15, 1973 and was to

be completed in 365 days (January 15, 1974). Cope-

land entered inte a subcontract with F & D Electrical

Contractors, Inc. (F & D), which required that com-

pany to perform the electrical work for that project.

That subcontract was for approximately 25 percent

of the prime contract amount.

The contract between Copeland and the SBA incor-

ported by reference the General Provisions applicable

to government construction projects (Standard Form

23-A). Paragraph 3 of the General Provisions (Ap-

pendix E, p. 20a) obligated the contractor to accept

as binding the change orders issued at any time by the

government Contracting Officer which made any

change in the work within the general scope of the

4

contract, including changes which caused an increase

in the cost of, or time required for, performance of

the work under the contract. Under that clause, if the

contractor did not agree to accept the amount of

money, if any, proffered by the Contracting Officer to

compensate him for the increased cost, the contractor

was entitled to seek an equitable adjustment of the

contract price and time of completion. The contractor

was not free to abandon the contract.

F & D executed a subcontract with Copeland which

incorporated by reference the General Provisions of

Copeland’s contract with the SBA and specifically

provided that F & D shall assume toward the Con-

tractor all of the obligations and responsibilities which

the Contractor, by [the Contract] Documents, assumes

toward the Owner... . (Appendix F, p. 23a).

The work required under the contract was not com-

pleted according to the proposed schedule. Various

change orders expanding the amount of work required

were issued by the Contracting Officer. As of August

8, 1974, the date F & D ceased work and abandoned

the project, various formal contract modifications had

been executed which increased the time allowed for

completion to June 12, 1974, and increased the con-

tract price as well. Although negotiations were still

proceeding with respect to additional time extensions

as of August 8, no decisions had yet been reached to

extend the time for performance beyond the 513 day

periods already allowed.

F & D announced that the failure of the contractor

to receive a formal commitment extending the contract

completion date beyond June 12, 1974, resulted in F

& D no longer having a binding subcontract and there-

a eee Pe

——ͤ— ee

Ce ed

9 ee see at ee 2

——

5

fore F & D abandoned the project on August 8, 1974.

In February of 1975 the government executed an ad-

ditional modification which extended the allowed time

for completion an additional 296 days, which exten-

sion moved the completion deadline well beyond Au-

gust 8, 1974, F & D’s withdrawal date.

Copeland brought in a substitute electrical subcon-

tractor in August of 1974 to complete that portion of

the project left undone by F & D. The completion cost

of the electrical work exceeded the balance of the sub-

contract price, including retainages. F & D, when sued

by one of its suppliers, cross-claimed against Copeland

and Reliance Insurance Company, the Miller Act

Surety, for delay damages allegedly incurred by it

prior to August 8, 1974. Copeland cross-claimed

against F & D for the completion cost on the electrical

work in excess of the remaining contract balance, in-

cluding retainages. The District Court had jurisdic-

tion of the claims pursuant to U.S.C. § 270b(b). The

trial court, after a non-jury trial, ruled that Copeland

had breached the terms of the subcontract by being

the party substantially responsible for some of the

delays in completion, and awarded F & D the delay

damages sought and refused to compensate Copeland

on its counterclaim for completion costs. The United

States Court of Appeals for the Fifth Circuit af-

firmed, holding that it was not necessary to point to

specifie delays, which in turn prevented or impeded

specific items of work, in order for F & D to prove

the existence of a breach of the subcontract and that

Copeland caused nonspecific delays which entitled F

& D to abandon the subcontract. The petition for cer-

tiorari was filed to review that ruling.

6

REASONS FOR GRANTING THE WRIT

I. The Decision of the Court of Appeals Should Have, But Did

Not, Enforce a Uniform Federal Rule Governing the Righis

and Remedies of Subcontractors on Government Construction

Contracts to the Same Extent That the Federal Rule Governs

the Rights and Remedies of a Prime Contractor With Respect

to Changes in the Amount of Work and Delays in the Time

of Completion. The Court Below Erroneously Decided an

Important Question of Federal Law Which Has Not Been. But

Should Be, Settled by This Court.

There is no question that, under the terms of the

contract with the government, the prime contractor

cannot legitimately abandon his performance of the

work if the Contracting Officer, pursuant to the

“Changes’’ provision, increases the amount of work

required of the contractor. This is true even if the

additional work increases the cost of performance or

adds to the time required for completion. See gener-

ally, United States v. Rice, 317 U.S. 61, 65 (1942);

Discount Co., Inc. v. United States, 554 F.2d 435, 440

(Ct. Cl.), cert. denied, —— US. „54 L.Ed.2d 298

(1977); and McDaniel v. Ashton-Mardian Company,

357 F. 2d 551, 514-15 (9th Cir. 1966). Continued per-

formance of the contract is in the publie interest, and

the end result is a uniform rule which in general holds

that government caused delays do not justify aban-

donment of further performance by the contractor.

The Court of Appeals for the Fifth Cireuit has re-

fused to make equally applicable to the subcontractor

this federal rule with respect to delays, and this re-

fusal has occurred despite the fact that the General

Provisions of the prime contract have been clearly

and unequivocally incorporated into the subcontract.

Under the decision of the Court of Appeals, delays

which are the natural and proximate result of govern-

7

ment-imposed change orders can never excuse further

performance by the prime contractor, but those same

delays may serve to excuse further performance by

subcontractors and justify their abandonment of the

project. This ruling clearly frustrates the public in-

terest in continued performance, especially when it is

noted that the bulk of the work required under the

contract in suit was to be performed by the subcon-

tractors on the project. The Contractor is put in an

impossible situation and the parties to the contract

and subcontract are denied the benefits of a uniform

rule which will serve to avoid the pitfalls which re-

sult from an attempt to apply an ad hoc rule. See F.

D. Rich Co. v. Industrial Lumber Co., 417 U.S. 116,

127 (1974). This case presents an important federal

question concerning the interpretation of federal law

as it applies to widely used standard form contracts

and subcontracts for government construction. Peti-

tioner submits that the United States Court of Ap-

peals was in error in refusing to adopt a uniform

rule which will bind both the prime contractor and

the subcontractor to remain on the job and complete

the project even if delays are experienced in the time

for completion.

8

Il. The Decision of the Court of Appeals, Which Held That a

Significant Government-Imposed Changes and Time Exten-

sions Could Establish a Material Breach of the Subcontract

Which Excused Further Performance Based on the Mere

Existence of Delays in Completion Without Establishing How

Courts of Appeal, and Decides an Important Question of

Federal Law Which Has Not Been, But Should Be, Settled

by This Court.

The United States Government, through its various

departments, bureaus and agencies, is involved in bil-

lions of dollars of construction on thousands of pro-

jects throughout the United States every year. In ac-

cordance with standard government contracting pro-

cedure, the general contractor is required to assent to

the General Provisions for Construction Contracts,

Standard Form 23-A, which requires the general con-

tractor to agree to perform changes in, or additions to,

the project at any time during the course of construc-

tion when crdered to do so by the Contracting Officer.

The Contractor is not free to abandon the project or

refuse to perform the required extra work because

his costs or time of performance will be increased.

Paragraph 3 of the General Provisions (App. E, p.

20a) sets forth the procedures by which the con-

tractor will be protected if he can establish that the

required changes have in fact increased his costs of

performance or caused him actual delay in the time of

completion.

The portions of the prime contract which prevent

potentially expected cost increases or completion de-

lays from serving as a predicate for a claimed breach

of contract applied with equal force to the subcontract

9

between Copeland and F & D. Article 11 of the sub-

contract (App. F, p. ——) provided that F & D would

assume toward Copeland all the obligations Copeland

had assumed toward the government. These responsi-

bilities and obligations towards the contractor should

have barred F & D’s argument that a material breach

of the subcontract had occurred which would excuse

further performance based merely on a delay in the

estimated completion date of the project.

Cases arising out of delays in government construc-

tion projects have consistently held that a contractor

which had experienced delays in performing govern-

ment contracts could not establish the existence of a

breach of contract by merely proving government

caused delays—a breach of contract is not proved un-

til the contractor establishes (1) a delay in perform-

ance (2) caused by the government’s failure to per-

form an obligation defined by the contract (3) which

failure was solely responsible for preventing the con-

tractor from performing a specific item, or specific

items, of work under the contract, and (4) thereby

damaged the contractor. See Bruno Law And Richard

Marlink, Trustees in Dissolution for Daniel J. Cronin,

Inc. v. The United States, 195 Ct. Cl. 370, 381-87 (Ct.

Cl. 1971); Commerce International Company v.

United States, 338 F.2d 81, 89-90 (Ct. Cl. 1964);

United States v. Citizens & Southern Nat. Bank of

Atlanta, Ga., 367 F.2d 473, 480-81 (4th Cir. 1966) ; and

McDaniel v. Ashton-Mardian Company, 357 F.2d 511,

514-15 (9th Cir. 1966). Delay in the abstract is mean-

ingless, and proof that the completion of a construc-

tion project was behind schedule proves nothing—it

does not support cancellation of a subcontract; it does

not prove that subcontractor’s obligation to complete

10

his portion of the work has expired; and it does not

prove that the subcontract has been breached in a

manner which would justify abandonment of the

project.

The Court of Appeals rejected this rule and the

cited cases in affirming the judgment awarded to the

subcontractor in this instance. In its opinion the Court

of Appeals acknowledged that the subcontractor had

not attempted to prove which part of the delay, if

any, was the responsibility of Copeland as opposed to

the responsibility of the government. The rationale for

ignoring the rule of Bruno Law, supra, and Com-

merce International, supra, was based on the inter-

pretation that the rule established in those cases was

applicable only to the amount and quality of proof

necessary to allow an award of money damages, and

held that it did not apply to the question of whether

a material breach had in fact occurred. As the Court

of Appeals concluded on this issue:

[Bruno Law and Commerce International] con-

cerned the proof necessary to establish not merely

the fact_of breach of contract but the amount of

damages assessable against the United States as a

result. The exacting rules conditioning the deter-

mination of damages against the sovereign for tts

delay do not prescribe what constitutes a breach

of contract by a private party for purposes of ex-

— further performance. [Emphasis sup-

pli

568 F. 2d at 1161.

The conclusion of the Court of Appeals ignores the

holdings of those cases and, therefore, results in a de-

cision which is in direct conflict with them. A brief

extract from each of those opinions will demonstrate

11

that the amount and specificity of proof required was

necessary to establish the ezistence of a material

breach of the contract, not to determine the amount

of damages which would be recovered if a breach was

otherwise proven. In Bruno Law, 195 Ct. Cl. at 382,

the failure of the plaintiff to establish a breach of con-

tract in the first instance was noted in the following

language:

The evidence, however, demonstrates that many

of the ineidents relied on by plaintiff were iso-

lated and nonsequential, and therefore could not

possibly have caused any significant delay in the

overall progress of the project. Furthermore, with

respect to the great bulk of such incidents, platn-

tiff has failed to prove, or indeed even to attempt

to prove, the crucial fact of the specific extent of

the alleged wrongful delay to the project opera-

tions caused thereby. For the most part, it has

not even attempted a reasonable approximation

based upon some rational theory. Instead, the

plaintiff typically relies on each instance as con-

stituting wrongful action which ‘contributed to

the delayed completion’ of the particular building

or installation ‘and of the project as a whole,

without indicating whether such ‘contribution’

was one day, thirty days, or any reasonably accu-

rate — of time. Plaintiff simply takes the

original and extended completion dates, computes

therefrom the intervening time or overrun, points

to a host of individual delay incidents for which

defendant was allegedly responsible and which

‘contributed’ to the overall extended time, and

then leaps to the conclusion that the entire over-

run time was attributable to defendant. [Empha-

sis supplied].

Similarly, the plaintiff did not prove a material

breach of the contract under consideration in Com-

12

merce International, 338 F.2d at 89, because the delays

which occurred were not shown to have substantially

interfered with the progress of the work required of

the plaintiff :

Causation. Similarly plaintiff has not persuaded

us that the Commissioner was wrong in his alter-

native conclusion that any undue delays on de-

fendant’s part (with respect to the parts) have

not been shown to have interfered with produc-

tion. Plaintiff must admit that, no matter un-

reasonable the Government’s delay, there can be

no recovery without proof that that delay caused

material damage. [Citations omitted]. In the

evidentiary record made in this case there is much

to support the Commissioner’s determination that

such proof has not been made.

The primary lack is plaintiff’s complete failure

to link its accountants’ general survey of the

amounts of time taken by the Government (in the

requisitioning process) with the course of the

plaintiff’s operations.

* * *

Without any specific proof, we are asked to

assume that plaintiff’s serious production diffi-

culties through part shortages were all due to un-

due Government delays—even though other sub-

stantial causes for these difficulties have been ad-

vanced, much of the defendant’s cannot on

any view be deemed unreasonable, there could

not have been any in jurious delay-effect with re-

spect to the large number of — requests

(for parts) which were u . Plaintiff has

contended itself with broad — when spe-

cificity is essential. [Emphasis supplied].

If F & D had been able to prove that specific omis-

sions of Copeland caused it specific, unreasonable de-

13

lays in the performance of the subcontract, compen-

satory damages for the delay would have been avail-

able under the subcontract. Instead of adopting this

recognized legal principle, the Court of Appeals ig-

nored the very real differences betweea delay, breach

of contract, and material breach of contract which

excuses further performance, and help that the sub-

contractor could legally abandon a partially completed

project when the project was, by no substantial fault

of the contractor, delayed beyond the original time

of completion.

Petitioner submits that the decision of the United

States Court of Appeals for the Fifth Circuit on the

standard of proof required to establish a material

breach of a government contract which would serve to

excuse further performance by the subcontractors

conflicts with decisions of the United States Court of

Claims and other Courts of Appeal, and that this

Court should resolve the issue presented.

Ill. The Decision Court of Appeals, Which Held That the Portion

of the “Disputes” Clause, Which Requires the Contractor to

“Proceed Diligenily With the Performance of the Contract

in the Event of a Dispute Over a Delay in the Time of Com-

pletion Was Not Incorporated by Reference Into the Subcon-

tract, Conflicts With a Decision of Another Court of Appeals

and Presents an Important Federal Question Which Has Not

Been. But Should Be, Decided by This Court.

The last sentence of paragraph (a) of the Dis-

putes“ Clause of the General Provisions for construc-

tion contracts (App. E, p. 20a) provides that “the

Contractor shall proceed diligently with the perform-

ance of the contract and in accordance with the Con-

tracting Officer’s decision’’ pending a final decision on

a dispute concerning a question of fact under the con-

14

tract. This clause, in conjunction with the Changes“

provision (App. E, p. 20a), requires a prime con-

tractor to remain and complete his performance under

a government construction project when the Contract-

ing Officer orders work which was not required under

the terms of the original plans and specifications. See

United States v. Rice, 317 U.S. at 65-66. Although the

subcontract between Copeland and F & D specifically

incorporates by reference, and binds the subcontractor

to, the ‘‘Contract Documents between the Owner and

Contractor,” the Court of Appeals ruled as a matter

of law that this portion of the Disputes Clause of the

General Provisions was not incorporated by refer-

ence. See United States, Etc. v. J. H. Copeland &

Sons, 568 F.2d at 1160. Had the Court of Appeals

ruled that F & D was bound by its subcontract to

“proceed diligently with the performance of the con-

tract,” the abandonment of the job by F & D on Au-

gust 8, 1974, would not have been excused and would

in fact amount to a material breach of its obligations

under the subcontract.

The decision of the United States Court of Appeals

for the Fifth Cireuit on this point is in conflict with

the decision in McDaniel v. Ashton-Mardian Com-

pany, 357 F.2d 511 (9th Cir. 1966), which adopted the

language of the District Court in holding that the sub-

contract had sufficiently incorporated the General

Provisions of the government contract to prevent the

subcontractor from relying on delays occasioned by

government-imposed change orders for the recovery

of “anything other than the direct costs of the addi-

tional work and equitable time extensions for any ad-

ditional time required for performance of the

changes.” 357 F.2d at 516.

= >:

fay

The Court of Appeals e cases below relied on

its previous holdings in United States v. Fryd Con-

struction Corporation, 423 F.2d 980 (5th Cir. 1970),

and H. W. Caldwell & Son, Inc. v. U.S. For John H.

Moon & Sons, Inc., 407 F.2d 21 (5th Cir. 1969), to

justify its conclusion that the subcontractor could

justifiably abandon the project if a time delay was ex-

perienced as a result of government change orders is-

sued to the contractor. A review of those cases clearly

establishes that they involve issues completely differ-

ent from those presented in this action and provide

no basis for the conclusion of law reached by the

Court of Appeals. There was no challenge in the case

below to the right of the subcontractor to institute

suit under the Miller Act—what was challenged was

F & D’s right to abandon the project before it was

completed.

Petitioner submits that the decision of the Court of

Appeals, if allowed to stand, will substantially dis-

turb relationships between the contractor and his sub-

contractors on government construction projects, and

the lack of a uniform rule among the circuits on this

issue will raise serious questions about the rights and

liabilities of a contractor who is required to accept

and perform government change orders. This serious

question of federal law should be resolved by this

Court.

16

CONCLUSION

For the reasons set forth above, this Court should

grant this petition for a writ of certiorari.

Respectfully submitted,

WILIA KNIGHT ZEWADSKI

WuLIAM C. Frye

MicHAEL C. ADDISON

TRENAM, SIMMONS, KEMKER,

ScuarF, BaRKIN, FRYE

& O’NEILL,

PROFESSIONAL ASSOCIATION

Post Office Box 1102

Tampa, Florida 33601

(813) 223-7474

Attorneys for Petitioner : A P P E N D 1 X

la

APPENDIX A

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF FLORIDA

No. 75-253-Civ-PF

Unirep States or America for the use and benefit of Gray-

BAR Exectric Company, Inc., a New York Corporation,

Plaintiff,

vs.

J. H. Copetanp & Sons Construction, Ivc., a corporation;

RRLIAN CR Insurance Company, a corporation; and F &

D ELxOTRICAL Contractors, IN., a corporation,

Defendants.

Findings of Fact and Conclusions of Law

(Filed February 23, 1976)

The use-plaintiff, Graysar Exectric Company, Inc.,

(hereinafter referred to as Grayspar) brought this action

under the Miller Act, 40 U.S.C. S 270a-270d, as a supplier

of materials to the subcontractor, F & D Execrricat Con-

Tractors, Inc. (hereinafter referred to as F & D). The

prime contractor on the government construction was the

defendant, J. H. Copetanp & Sons Construction, Inc.

(hereinafter referred to as CopeLanp), and the Miller Act

bond was written by the defendant, Reviance Insurance

Company (hereinafter referred to as Retiance). F & D filed

a crossclaim against CopeLanp and Rewiance for sums al-

legedly due as a result of labor and materials furnished by

F & D to the government project in question. CopELanp, in

turn, filed a crossclaim against F & D for damages occa-

sioned by F & D’s alleged breach of the subcontract between

these parties.

Prior to the non-jury trial of this matter, the claim of

GrayBar against Reviance and CopeLanp was settled and

Graybar recovered the sum of $13,000.00; on the stipulation

2a

of the parties, the claim of GrayBar against F & D was dis-

missed without prejudice. This case, therefore, proceeded

to trial on the crossclaims of the defendants alone.

CopeLanp was the prime contractor on the government

project known as Modernization and Expansion of ARTCC

(Phase II) (hereinafter referred to as the project). F & D

entered into a subcontract with CopeLanp dated January

29, 1973, wherein F & D agreed to furnish electrical work,

including labor and materials, for the project in the initial

base amount of $525,000.00. Article 3 of the subcontract

provided that the work would commence on January 15,

1973 and would be completed on or before January 15, 1974,

with a penalty for delays at $500.00 per day.

Although the subcontract was scheduled for completion

on or before January 15, 1974, the project itself was behind

schedule on that date and, consequently, the subcontract

was not completed. By letter dated January 22, 1974, Copr-

LAND advised F & D that the prime contract had been ex-

tended by and through Modification No. 3 and that the re-

vised completion date for the project was June 8, 1974. F

& D, by its own admission, acceded to Modification No. 3

and remained on the project through June 8 and thereafter

until August 8, 1974.

During those months encompassed by Modification No. 3,

F & D asked Corglaxp to process certain claims through

the government for cost overruns and expenses for delays

which F & D had incurred on account of the extension of

the prime contract. CopeLanp complied with F & D’s re-

quest, and, by letter dated July 18, 1974, informed F & D

that the government had approved funds for the 144 ex-

tension authorized by Modification No. 3.

On July 23, 1974, F & D, Corxrlaxp and representatives

of the SBA held a meeting. At that gathering, F & D an-

nounced that time for performance of its subcontract had

expired; that no new time for completion of that subcon-

tract had been agreed upon; and that F & D had received

3a

no compensation for its extra time on the job. F & D tur-

ther stated that it could not be expected to continue to fur-

nish labor and materials to the project without some con-

tractural arrangement between it and CorRLAxp as to a new

completion date of the subcontract, together with adequate

compensation for labor and materials previously furnished

and to be furnished, should the job continue.

The only concrete result of the July 23 meeting was the

agreement between F & D and Corlaxp that F & D would

supply three men on the job to continue electrical work for

a reasonable time pending negotiations of F & D’s demands.

Two weeks passed, however, without any affirmative action

on the requests of F & D. On August 7, 1974, CopeLanp de-

manded that F & D supply six electricians to the project;

F & D refused. Finally, on August 8, F & D withdrew from

the job.

There is no disagreement among the parties to this law-

suit that the project in question was crippled by lengthy

and costly delays. The parties have differing opinions, how-

ever, as to the responsibility for those delays and the legal

duties of F & D relative to those delays. F & D contends

1) that, on August 8, 1974, the time for completion of the

subcontract, as extended by Modification No. 3, had expired ;

2) that CorxLAxD had materially breached the subcon-

tract by creating lengthy and costly delays; and

3) that F & D was justified, therefore, in abandoning the

subcontract.

CoreLanp counters the arguments of F & D and asserts

1) that the subcontract incorporated by reference the

provisions of the general contract;

2) that, under the incorporated terms of the prime con-

tract, F & D was obligated to perform its electrical work

regardless of any delay which the government might occa-

sion in regard to changes in the“project ;

bone —

4a

3) that the delay of the compietion of the subcontract

beyond January 24, 1974, was caused in substantial part by

the actions of the government and by other forces beyond

CopELanp’s control; and

4) that, therefore, F & D breached its subcontract by

abandoning the project on August 8, 1974.

In order to resolve the legal issues in the case at bar,

this Court must consider two questions. The first question is

whether the subcontract between Cormaxp and F & D in-

corporated, by reference, the provisions of the prime con-

tract between the United States and Copge.anp, specifically

General Provision Three of Standard Form 23-A which

provides:

The Contracting Officer may, at any time, by written

order, and without notice to the sureties, make

changes in the drawings and/or specifications of this

contract if within its general 14 If such changes

cause an increase or decrease in the Contractor’s cost

of, or time required for, performance of the contract,

an equitable adjustment shall be made and the con-

tract modified in writing accordingly.

Having reviewed the various documents and considered

the evidence adduced at trial, this Court is constrained to

answer this first question in the affirmative. Article One of

the subcontract provides that the agreement between the

owner and the contractor, including the general and special

conditions applicable thereto, is incorporated by reference

into the subcontract and, therefore, those provisions become

applicable to the subcontract. As a result of this incorpora-

tion by reference, F & D became obligated to abide by the

terms and conditions of the general contract with respect

to all applicable provisions, except the ‘‘disputes’’ clause

contained in General Provision Six. See H. F. Caldwell &

Son, Inc. v. U.S. for the use of John H. Moon d Son, Inc.,

407 F. 2d 21 (5th Cir. 1969); McDaniel v. Ashton-Merdian

5a

Co., 357 F.2d 511 (9th Cir. 1966). This Court also notes

that, prior to the date that F & D left the project, F & D

asked Cor Lax to process through the government certain

claims for cost overruns and expenses for delay which F &

D had incurred in connection with its performance under

the subcontract. The actions of F & D in this regard con-

stituted an express recognition of the fact that the sub-

contract incorporated, by reference, the provisions of the

prime contract between the United States and CopeLanp.

Having concluded that the general provisions of the

prime contract, with the exception of the ‘‘disputes’’ clause,

were incorporated by reference into the subcontract, this

Court is of the opinion that, on August 8, 1974, it would

have been a breach of the subcontract for F & D to abandon

work if the delays, which F & D now asserts to justify its

actions, were occasioned in substantial part by government-

ordered changes or other factors reasonably beyond Corx-

Laxp's control. If, on the other hand, those delays were

caused in substantial part by CopeLanp and were of a na-

ture that they constituted a material and fundamental

breach of the subcontract, then F & D had a right to aban-

don the subcontract and refuse to complete its electrical

work on the project. The second question which this Court

must resolve, therefore, is who, or what, was substantially

responsible for those delays which prompted F & D on Au-

gust 8, 1974, to completely abandon its contractural obliga-

tions to CopELAND.

If there are two facts which surface from the extensive

evidence and lengthy testimony in the case sub judice, they

are, first, that the project in question was subject to serious

delays before the ink was even dry on the prime contract

and, second, that CoprLanp was, in substantial part, the

cause of those delays. The evidence is clear that CoprLanp

did not get subcontractors signed up for the project until

many weeks after the execution of the prime contract. The

evidence is also clear that CorxlaxD was continuously be-

6a

hind in the general construction areas of the project and,

therefore, that F & D was literally unable to install con-

duits, pull wires, and other work because the buildings and

areas involved were not structurally ready for same. Al-

though some of the delays on the project were beyond the

control of CopeLanp and were recognized as such by the

government, the evidence reveals that most of the delays

were a direct result of CopeLanp’s inability to move con-

struction forward as scheduled, to properly coordinate the

subcontractors, and to provide the type of supervision ne-

cessary for such a project.

Furthermore, the testimony and the evidence show that,

even in the face of CopeLanp’s dehabilitating delays, F & D

‘‘walked the last mile“ in an attempt to reach an agreement

for the completion of electrical work at the project. With

no government extensions in existence, F & D stayed on the

job after the July meeting and maintained three men in the

hope that some decisions would be made as to a final com-

pletion date and as to additional compensation for ‘‘delay

overhead’’. The record reveals that, instead of affirmative

action on its demands, F & D received a telegram on August

7 in which CopeLanp demanded that F & D supply six men

to the project. At that point, this Court is of the opinion

that F & D was justified in abandoning the job; after all,

enough is enough.

In summary, this Court concludes that, even though the

terms of the prime contract were incorporated by reference

into the subcontract, CopeLanp, and not the government,

was substantially responsible for the delays which caused

F & D to abandon its work under the subcontract. This

Court further concludes that the delays occasioned by

CopeLanD were such as to go to the very heart of the sub-

contract and, therefore, were such as to amount to a ma-

terial breach of that subcontract. It is the holding of this

Court, therefore, that CopgLanp materially breached its

subcontract with F & D and that F & D was thereby justified

7a

in abandoning the project on August 8, 1974. Accordingly,

this Court now enters judgment in favor of F & D on both

its crossclaims against CopeLanp and RIAN and on

CopeLann’s crossclaim against F & D.

Turning now to the question of damages, this Court

makes the following awards to F & D on its crossclaim

against CorkLAN D and RELIANCE:

1) The sum of $90.00 a day for the 144 days from the

original date for the completion of the subcontract until

June 8, 1974, or damages in the amount of $12,960.00;

2) The sum of $90.00 a day for the forty-four (44) days

from June 8, 1974, until August 8, 1974, or damages in the

amount of $3,960.00;

3) Retainages in the amount of $47,418.67.

The total award to F & D, therefore, is $64,338.67. F & D

coneedes that this award should be diminished by $13,000.00,

the sum paid by Re.iance to Graysak in settlement of Gray-

BAR’s claim. This court, therefore, computes the total dam-

ages awardable in favor of F & D and against CoPELanp

and Rewiance as $51,338.67.

This Court notes that F & D makes no claim for the un-

paid portion of the base price of the subcontract, or $33,-

512.72. F & D admits that this sum is properly applied

toward CopeLaNp’s expenses in completing the electrical

work on the project. This Court also notes that F & D, in

its post-trial brief, concedes that, under the Miller Act, it

cannot recover its surety bond premium in the amount of

$10,500.00 against Retiance. As to Corax, this Court

holds that, under the provisions of the subcontract, the

surety bond premium was the sole obligation of F & D and,

therefore, F & D cannot recover the cost of that premium

against CopELanp.

Finally, this Court concludes that Corax shall recover

nothing under its crossclaim against F & D. This Court

8a

holds that CopeLanp breached the terms of the subcontract

with F & D and, therefore, is not entitled to set-off the

costs of completing the electrical work on the project

against F & D’s recovery here.

This Court will enter final judgments on the crossclaims

of the respective parties in accordance with the findings of

fact and conclusions of law stated herein.

Done anp Orperep at Miami, Florida, this 19th day of

February, 1976.

/s/ Illegible

UNITED States District Jupon

9a

(Carrion OmitTEepD ix PeintIne)

(Fitep FEBRUAR 23, 1976)

Final Judgment

In accordance with the Findings of Fact and Conclusions

of Law which this Court has entered in this case, this Court

hereby enters a Final Judgment in favor of F & D ELRO-

TRICAL ConTRacToRs on its crossclaim against J. H. Copr-

LAND & Sons Construction, Inc. and Reviance INSURANCE

Company, in the amount of Firry-One THovsanp THREE

Hunprep AND Turrty-E1cnt DoLLARS AND Srxty- Seven

Cents (51,338.67). Further it is—

ORDERED AND Ap upon that J. H. Copetanp & Sons Con-

struction, Inc. shall recover nothing on its crossclaim

against F& D Execrricat Contractors, Inc. Further, it is—

OrpERED that costs in this action shall be taxed at a later

date upon filing of appropriate Bill of Costs.

Done AND Orperep at Miami, Florida this 23rd day of

February, 1976.

/s/ Illegible

UNITED States District Jupon

10a

APPENDIX B

UNITED STATES COURT OF APPEALS, FIFTH CIRCUIT

March 3, 1978

Unrrep Srares of America, for the Use and Benefit of

Gray-Bar Exectric Company, IN., a New York Cor-

poration, Plaintiff,

v.

J. H. CorRLAND & Sons Construction, Inc., a corporation,

et al., Defendants-Cross Defendants-Appellants,

V.

F & D ELxOTRICAL. Contractors, Inc., Defendant-Cross

Plaintiff Appellee.

No. 76-2053.

Appeals from the United States District Court for the

Southern District of Florida.

Before Coteman, HL and Rvusin, Circuit Judges.

Auvin B. Rustin, Circuit Judge.

This appeal challenges the trial court’s conclusion that

J. H. Copeland & Sons Construction, Inc. (‘‘Copeland’’),

a Small Business Act, 15 U.S.C. § 637(a), ‘‘minority’’ con-

tractor, was substantially responsible for delays in the con-

struction of a United States Aviation facility adjacent to

the Miami International Airport and thereby breached its

contract with F & D Electrical Contractors, Inc. (F &

D’’), the electrical subcontractor on the project.’ Finding

that there was substantial evidence to support the factual

conclusions of the trial court, and that the opinion was con-

sonant with the applicable rules of law, we affirm.

The case was tried on the basis of cross-claims between F & D,

Copeland, and Reliance Insurance Company, Copeland’s surety

under the Miller Act, 40 U.S.C. §§ 270a-270d.

lla

I.

Appellant contends that the trial court was clearly er-

roneous in concluding that Copeland materially breached

its contract by reason of the delay. It is contended that the

delay, even if material, does not go to the heart of the con-

tract so as to constitute a breach. See, U.S. for Use and

Benefit of Pickard v. Southern Const. Co., 6 Cir. 1961, 293

F. 2d 493, rev’d in part and remanded on other grounds,

1962, 371 U.S. 57, 83 S.Ct. 108, 9 L.Ed.2d 31.

In an action between private parties, even though the

contract is governed by the Miller Act, it suffices to show

that the contractor caused a substantial delay in perform-

ance, that the contract terms forbade such a delay, and that

the plaintiff was injured as 1 result. See, Steenberg Con-

struction Co. v. Prepakt Concrete Co., 10 Cir. 1967, 381

F. 2d 768; Bruno Law and Richard Marlink v. United States,

Ot. Cl. 1971, 195 Ct. Cl. 370.

The trial court found that the subcontract between Cope-

land and F & D incorporated by reference the terms of the

general contract between Copeland and the government.“

Both the subcontract and the general contract provided

that the work to be completed on or before January 15,

1974. F & D ceased work on August 8, 1974, 188 days after

construction was originally due to be completed, but when

it was still not finished. The trial court concluded that, if

the delay had been occasioned in substantial part by gov-

ernment-ordered changes or other factors reasonably be-

yond Copeland’s control, then F & D had breached the sub-

contract by stopping work. However, the court found that

the delays were caused in substantial part by Copeland, and

that these delays constituted a material breach of the sub-

Only the ‘‘disputes’’ clause, which is not relevant here, was

not incorporated. See, H. W. Caldwell & Son, Inc. v. U. 8. for the

use of John H. Moon & Sons, Inc., 5 Cir. 1969, 407 F.2d 21.

12a

contract, thereby justifying F & D in abandoning the project

on August 8, 1974.

Article 12.10 of the subcontract provides The Contractor

shall cooperate with the Subcontractor in scheduling and

performing his Work to avoid conflicts or interference in

the Subcontractor’s Work.’’ Additionally, it is an implied

condition of every government construction contract that

neither party will hinder the performance of the other.

Bruno Law, supra.

The contract between Copeland and the government was

subject to the vicissitudes endemic to government contracts.

F & D’s subcontract with Copeland explicitly provided and

necessarily implied that F & D would bear with any delays

caused by the government. But neither the contract nor the

nature of the work obliged F & D to suffer the additional

cost that resulted from delay due to Copeland’s inexpert-

ness in performing its work and in discharging its own con-

tractual duties to subcontractors.

There is an abundance of evidence to support the con-

clusion reached by the trial court that Copeland’s delay

was sufficiently material and prejudicial to constitute a

breach of its contractual obligations, and that F & D was

injured as a result. Despite the various time extensions

resulting from the government change orders, which appel-

* The appellant challenges the finding that ‘‘F & D was literally

unable to install conduits, pull wires and other work because the

building and areas involved were not structurally ready for the

same.’’ It is apparent that this conclusion was based upon the testi-

money of Mr. Diaz, F & Dis President. Appellant contends that

this testimony referred only to the UPS building, where delay was

attributable to government change orders. However, although Mr.

Diaz testified about change order problems and cited the UPS area

as an example, he concluded that the problem that areas were not

structurally ready for F & D’s work ‘‘was occurring primarily

throughout the whole job.’’ Trial transcript, February 6, 1976, at

179.

13a

lant contends account for the vast proportion of the delay,

there were no extensions in existence when F & D finally

left the job on August 8, 1974. Moreover, as the trial court

found, ‘‘F & D walked the last mile’’ by continuing work

without any assurance of compensation. See, U.S. for Use

of F. E. Robinson Co. of N. C. Inc. v. Alpha Continental,

D. N. C. 1967, 273 F.Supp. 758, aff’d 4 Cir. 1969, 406 F.2d

561, cert. denied, 1969, 395 U.S. 922, 89 S.Ct. 1774, 23 L.Ed.

2d 239.

Appellant also contends that F & D was required to prove

the specific extent of the alleged wrongful delay caused by

Copeland itself, distinguished from delays occasioned by

the government. However, the cases relied upon, Bruno

Law, supra; Boyajian v. U. S., 1970 191 Ct. Cl. 233, 423 F. 2d

1231; Wunderlich Contracting Co. v. U. S., 1965, 173 Ct. Cl

180, 351 F.2d 956; Commerce International Co. v. U. S.,

1964, 167 Ct. Cl. 529, 338 F.2d 81; and, Great Lakes Con-

struction Co. v. U. S., Ct.Cl. 1942, 95 Ct. CI. 479, all involved

claims by contractors against the United States for dam-

ages sustained as a result of delay caused by the govern-

ment. They concerned the proof necessary to establish not

merely the fact of breach of contract but the amount of

damages assessable against the United States as a result.

The exacting rules conditioning the determination of dam-

ages against the sovereign for its delay do not prescribe

what constitutes a breach of contract by a private party

for purposes of excusing further performance.

Hence, we are unable to find the trial court erred in con-

cluding that Copeland breached its subcontract with F & D,

and that this excused F & D’s failure to continue work

after August 8, 1974.

II.

With respect to the amount of damages suffered, in a suit

between private parties for breach of a construction con-

tract by delay, the party who seeks to collect damages has

the burden of proving the extra costs it incurred as a result

14a

of the breach. United States v. Citizens q Southerns Nat.

Bank of Atlanta, Ga., 4 Cir. 1966, 367 F.2d 473, 480; Lichter

v. Mellon-Stuart Co., 3 Cir. 1962, 305 F.2d 216. If there are

factors for which the defendant is responsible and factors

for which it is not, the plaintiff must provide a reasonable

basis for apportioning the damages. United States v. Citi-

zens & Southerns, supra; Lichter v. Mellon-Stuart Co.,

supra; see also, Wunderlich Contracting Co. v. United

States, supra. However, where the defendant is responsible

for all of the several sources of delay, it would serve no

purpose to require the plaintiff to apportion the amount of

damages caused by each.“

Here, there were only two causes of the delay: the gov-

ernment change-orders and Copeland’s lack of diligence.

Copeland is liable under the subcontract for all additional

costs sustained as a result of government change-orders.'

Copeland is liable in breach of contract for all damage suf-

fered as a result of its own lack of diligence. Hence, regard-

less of the amount of damage attributed to each cause,

Copeland is liable for the whole. The damages were prop-

erly assessed to cover both. Accordingly, the judgment of

the district court is Arrirmep.

*In Wunderlich, supra, there was an equitable adjustment clause,

but a cause for which the government was not legally responsible,

the Korean War, was a major source of delay. Hence, apportion-

ment of damages was required.

* Provision three of the general contract, as incorporated by ref-

erence in the subcontract, provides in relevant part:

The Contracting Officer may, at any time . make any change

in the work within the general scope of the contract .. .

@ e e 8 ® 8

If any change under this clause causes an increase or decrease

in the Contractor’s cost of, or the time required for, the per-

formance of any part of the work . an equitable adjustment

shall be made and the contract modified accordingly. . ..

15a

APPENDIX C

(Caption OmitTTep tn PRintING)

Filed March 29, 1978

Appeals from the United States District Court for the

Southern District of Florida

Before Coteman, Hu and Rusin, Circuit Judges.

Judgment

This cause came on to be heard on the transcript of the

record from the United States District Court for the

Southern District of Florida, and was argued by counsel;

On ConsmperaTiIon Wuereor, It is now here ordered and

adjudged by this Court that the judgment of the said Dis-

trict Court in this cause be, and the same is hereby,

affirmed ;

It is further ordered that appellants pay to appellee, the

costs on appeal to be taxed by the Clerk of this Court.

March 3, 1978.

16a

APPENDIX D

15 U.S.C. § 687

Operation and regulation of companies

Cooperation WTrR Banks AND OTHER FINANCIAL

INSTITUTIONS

(a) Wherever practicable the operations of a small

business investment company, including the generation of

business, may be undertaken in cooperation with banks or

other investors or lenders, incorporated or unincorporated,

and any servicing or initial investigation required for loans

or acquisitions of securities by the company under the pro-

visions of this Act may be handled through such banks or

other investors or lenders on a fee basis. Any small busi-

ness investment company may receive fees for services

rendered to such banks and other investors and lenders.

40 U.S.C. §2270a

Bonds of contractors for public buildings or works; waiver of

bonds covering contract performed in foreign country

(a) Before any contract, exceeding $2,000 in amount,

for the construction, alteration, or repair, of any public

building or public work of the United States is awarded to

any person, such person shall furnish to the United States

the following bonds, which shall become binding upon the

award of the contract to such person, who is hereinafter

designated as ‘‘contractor’’:

(1) A performance bond with a surety or sureties

satisfactory to the officer awarding such contract, and

in such amount as he shall deem adequate, for the pro-

tection of the United States.

(2) A payment bond with a surety or sureties satis-

factory to such officer for the protection of all persons

supplying labor and material in the prosecution of the

17a

work provided for in said contract for the use of each

such person. Whenever the total amount payable by

the terms of the contract shall be not more than $1,000,-

000 the said payment bond shall be in a sum of one-ha!f

the total amount payable by the terms of the contract.

Whenever the total amount payable by the terms of the

contract shall be more than $1,000,000 and not more

than $5,000,000, the said payment bond shall be in a

sum of 40 per centum of the total amount payable by

the terms of the contract. Whenever the total amount

payable by the terms of the contract shall be more than

$5,000,000 the said payment bond shall be in the sum

of $2,500,000.

(b) The contracting officer in respect of any contract

is authorized to waive the requirement of a performance

bond and payment bond for so much of the work under such

contract as is to be performed in a foreign country if he

finds that it is impracticable for the contractor to furnish

such bonds.

(e) Nothing in this section shall be construed to limit

the authority of any contracting officer to require a per-

formance bond or other security in addition to those, or in

cases other than the cases specified in subsection (a) of

this section.

(d) Every performance bond required under this sec-

tion shall specifically provide coverage for taxes imposed

by the United States which are collected, deducted, or with-

held from wages paid by the contractor in carrying out the

contract with respect to which such bond is furnished. How-

ever, the United States shall give the surety or sureties on

such bond written notice, with respect to any such unpaid

taxes attributable to any period, within ninety days after

the date when such contractor files a return for such period,

except that no such notice suall be given more than one

hundred and eighty days from the date when a return for

the period was required to be filed under the Internal Reve-

18a

nue Code of 1954. No suit on such bond for such taxes shall

be commenced by the United States unless notice is given

as provided in the preceding sentence, and no such suit shall

be commenced after the expiration of one year after the day

on which such notice is given.

40 U.S.C. § 270b

Same: rights of persons furnishing labor or material

(a) Every person who has furnished labor or material

in the prosecution of the work provided for in such con-

tract, in respect of which a payment bond is furnished un-

der section 270a of this title and who has not been paid in

full therefor before the expiration of a period of ninety

days after the day on which the last of the labor was done

or performed by him or material was furnished or supplied

by him for which such claim is made, shall have the right

to sue on such payment bond for the amount, or the balance

thereof, unpaid at the time of institution of such suit and

to prosecute said action to final execution and judgment for

the sum or sums justly due him: Provided, however, That

any person having direct contractual relationship with a

subcontractor but no contractual relationship express or

implied with the contractor furnishing said payment bond

shall have a right of action upon the said payment bond

upon giving written notice to said contractor within ninety

days from the date on which such person did or performed

the last of the labor or furnished or supplied the last of the

material for which such claim is made, stating with sub-

stantial accuracy the amount claimed and the name of the

party to whom the material was furnished or supplied or

for whom the labor was done or performed. Such notice

shall be served by mailing the same by registered mail,

postage prepaid, in an envelope addressed to the contractor

at any place he maintains an office or conducts his business,

or his residence, or in any manner in which the United

States marshal of the district in which the public improve-

ment is situated is authorized by law to serve summons.

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(b) Every suit instituted under this section shall be

brought in the name of the United States for the use of the

person suing, in the United States District Court for any

district in which the contract was to be performed and exe-

cuted and not elsewhere, irrespective of the amount in con-

troversy in such suit, but no such suit shall be commenced

after the expiration of one year after the day on which the

last of the labor was performed or material was supplied

by him. The United States shall not be liable for the pay-

ment of any costs or expenses of any such suit.

APPENDIX E

General Provisions

(Construction Contract)

3. CHaNcEs

(a) The Contracting Officer may, at any time, without

notice to the sureties, by written order designated or indi-

cated to be a change order, make any change in the work

within the general scope of the contract, including but not

limited to changes:

(i) In the specifications (including drawings and de-

signs) ;

(ii) In the method or manner of performance of the

work;

(ili) In the Government-furnished facilities, equip-

ment, materials, services, or site; or

( * Directing acceleration in the performance of the

wo

(b) Any other written order or an oral order (which

terms as used in this paragraph (b) shall include direction,

instruction, interpretation, or determination) from the Con-

tracting Officer, which causes any such change, shall be

treated as a change order under this clause, provided that

the Contractor gives the Contracting Officer written notice

stating the date, circumstances, and source of the order

22258 —-„HT. cole as 6 Gun

er.

(c) Except as herein provided, no order, statement, or

conduct of the Contracting Officer shall be treated as a

change under this clause or entitle the Contractor to an

equitable adjustment hereunder.

(d) If any change under this clause causes an increase

or decrease in the Contractor’s cost of, or the time required

21a

for, the performance of any part of the work, under this

contract, whether or not changed by any order, an equit-

able adjustment shall be made and the contract modified in

writing accordingly: Provided, however, That except for

claims based on defective specifications, no claim for any

change under (b) above shall be allowed for any costs in-

curred more than 20 days before the Contractor gives writ-

ten notice as therein required: And provided further, That

in the case of defective specifications for which the Govern-

ment is responsible, the equitable adjustment shall include

any increased cost reasonably incurred by the Contractor

in attempting to comply with such defective specifications.

(e) If the Contractor intends to assert a claim for an

equitable adjustment under this clause, he must, within 30

days after receipt of a written change order under (a)

above or the furnishing of a written notice under (b) above,

submit to the Contracting Officer a written statement set-

ting forth the general nature and monetary extent of such

claim, unless this period is extended by the Government.

The statement of claim hereunder may be included in the

notice under (b) above.

(f) No claim by the Contractor for an equitable adjust-

ment hereunder shall be allowed if asserted after final pay-

ment under this contract.

6. Disputes

(a) Except as otherwise provided in this contract, any

dispute concerning a question of fact arising under this

contract which is not disposed of by agreement shall be

decided by the Contracting Officer, who shall reduce his

decision to writing and mail or otherwise furnish a copy

thereof to the Contractor. The decision of the Contracting

Officer shall be final and conclusive unless, within 30 days

from the date of receipt of such copy, the Contractor mails

or otherwise furnishes to the Contracting Officer a written

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appeal addressed to the head of the agency involved. The

decision of the head of the agency or his duly authorized

representative for the determination of such appeals shall

be final and conclusive. This provision shall not be pleaded

in any suit involving a question of fact arising under this

contract as limiting judicial review of any such decision to

cases where fraud by such official or his representative or

board is alleged: Provided, however, That any such decision

shall be final and conclusive unless the same is fraudulent

or capricious or arbitrary or so grossly erroneous as neces-

sarily to imply bad faith or is not supported by substantial

evidence. In connection with any appeal proceeding under

this clause, the Contractor shall be afforded an opportunity

to be heard and to offer evidence in support of his appeal.

Pending final decision of a dispute hereunder, the Contrac-

tor shall proceed diligently with the performance of the

contract and in accordance with the Contracting Officer’s

decision.

(b) This Dispute clause does not preclude considera-

tion of questions of law in connection with decisions pro-

vided for in paragraph (a) above. Nothing in this contract,

however, shall be construed as making final the decision of

any administrative official, representative, or board on a

question of law.

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APPENDIX F

Article 11

Subeontractor a Reaponsibijities

11.1 The Subcontractor shall be bound to the Contractor

by the terms of this Agreement and of the Contract Docu-

ments between the Owner and Contractor, and shall assume

toward the Contractor all the obligations and responsibili-

ties which the Contractor, by those Documents, assumes to-

ward the Owner, and shall have the benefit of all rights,

remedies and redress against the Contracter whieh the Con-

tractor, by those Documents, has against the Owner, insofar

as applicable to this Subcontract, provided that where any

provision of the Contract Documents between the Owner

and Contractor is inconsistent with any provision of this

Agreement, this Agreement shall govern.