Amicus Curiae Brief — S&E Contractors, Inc. v. United States

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eee SUPREME, COURT. oF THE UNITED STATES ~~

fae - OCTOBER TERM 1970

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Ss & E CONTRACT ORS, INC., 9 Petitioner -

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THE we OF AMERICA, se

- ON WRIT OF CEpTIORARNG ‘THis on

_ UNITED STATES COURT OF "CLAIMS © ~

Aces BRIEF AMICUS CURIAE OF

PROFESSOR HAROLD C, PETROWITZ:

_ IN SUPPORT OF F PETITIONER

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wh es Harold’C. Petrowitz

er) eee ee ' American University.

i Washington - ‘College .

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Page

Preliminary statement

Certification —

‘Interest of Prof. Harold C. Petrowitz

Issues 7

Argument,

- Summary.

Intr ction.

1, Can a contracting agency with im-

|! ‘.punity refuse to implement its own

eS decision favorable to the contractor

’ rendered pursuant to the Disputes

clause of one of its contracts?

2. Did the General Accounting Office in 7

reviewing and denying the entire claim

a on thé basis of Wunderlich Act criteria —

«rather than ruling only on those points ~

raised by the certifying officer act |

_ ~ , beyond the scope of its ——s author -

“toe 7

[Om Rw ee

é e

: ——_

3. Can the Government obtain court: me

a3 review of an administrative decision

rendered under the Disputes clause in

. accordance with the criteria established ~

by the Wunderlich Act? si

: Conclusion ae : | sie a

, | CITATIONS ~ . i

Court Decisions !

_ United States v. Mason & Hanger Co, — ,

: 260 U.S. 323 (1922) Rit i eee.

‘ Jos. Graham Mfg. Co. v. United - oe ee

_ States, 91 F.Supp 715 (N.D. ere

ca 1950) . en

mec agy SS RT A NRE ET r

' Zweig v. United States,

- . McShain v. United States,

| ‘United States v. Moorman —

United States v. Wunderlich .—

_ United States vy. Wurtz;

Budget & Accounting Act of 1921, 31 U.S.C.

es | Weeks

John H. Mathis Co, v. United States, ;

79 F.Supp. 703 (D.N.J.1948).

Livingston v. United States, . So

\101 Ct. Cl.. 625(1944) * 7 ,

92 Ct.Gl. 472 0941)

83 Gt. Cl.’ 405 (1936)

338 U.S. 4571950) itis

OR NE a to.

‘342 U.$. 98 (1951)

| MOVE MEG oy gg

United States vy, Bateson . ? 3

308 F. 2d. 510 (Sth Cir.1962) 14

Statutes

_ Wunderlich Act, 41 U!S.C. §8321-22 (964) 3, 8,

a." ar 9, 10,

Act of Dec. 29,1941, 31 U.S.C. §824

1964)" a ie ;

‘§71 (1964). 8, ll

| Decisions of the Comptroller General —

27 Comp. Gen. 222 (1947) ; BO

Dee RE ae Re yp a >

7, te

| a a INTHE

SUPREME. COURT OF THE UNITED STATES.

_ OCTOBER’ TERM 1970.

NO, 1298»

—

S & E CONTRACTORS, INC., Petitioner

‘MV.

_ THE UNITED STATES OF ‘AMERICA, Respondent _

(

_ON WRIT OF CERTIORARI. TO THE —

: ined STATES COURT OF CLAIMS

BR RIEF-AMICUS-CURIAE OF

-—" PROFESSOR HAROLD C. PETROWITZ

_IN SUPPORT .OF PETITIONER

’ PRELIMINARY STATEMENT ©

Af This brief is filed by Professor Harold C. ©

Petrowitz, who is admitted to practice before this

Court, as amicus curiae, pursuant to the written

consent of the Petitioner. and. Respondent which is

on file with the Clerk of this Court.

- CERTIFICATION

I Thereby certify that I have this ey mailed

three fou ore of this brief to issenied peyke, rs

oe ST APR Ee hea DOS BRR POE OI

‘

_ .

‘THE INTERESTO

__tion Of petitioner.

attorney of record for the Petitioner, .and to the

_. Honorable Erwin Griswold,; Solicitor General of _

the United States, attorney of record for Respondent. ..

July 1, +1971. ee —.» AWC,

of |

OF PROF. HAROLD C, PETROWITZ

—

.. ~ Professor Pétrowitz strongly supports the posi-'

’ Cal

__ The decision’of thé Court of Claims: bel

Will have’ a disruptive effect on the orderly dévelop- —

ment of an important’ segment of administrative law

by introducing great uncertainty into the degree of

_ finality attaching to decisions rendered by federal —

agencies in contract disputes. This will have an ad-.

verse long-run effect because tthe climate presently

; favorable to the orderly settlement of government

_ contract disputes wilt be adversly affected; ° With the

_ present and projected high level of Government con-

tracting, this is ‘a matter for grave public concern

and for particular concern of the industrial commu- |

nity, members of the bar and the courts. It is also”

a matter of grave concern for'menibers of the oe

academic community who are interested in improving —

the administration of justice and in elevating the S

efficiency of the judicial system. -

Also of concern to members of the academic.

community and members of the bar is the threat

_ posed to sanctity of contract by the implications of | ~

the decision below,

ey Se ee ee A et NBR lB Lt rae ttn Be

_—~—~———

. .

- Of one of its contracts?

ISSUES ***

; The. facts of this case have been well Stated

in. the brief of the petitioner. The essen ial ref-

erences are contained in the Appendix and in

r .

petitioner's brief,

This is one of those cases in which the”

agency; the

and the Court of Claims. |

The original issue in

‘Stated: cana contracting a

issues - relatively simple at.the start - have in-~w»

on creased in complexity at each level of controversy:

‘the contracting

Comptroller General; y

this. case can be concisely

gency with impunity re-

fuse to implement its own decision favorable to the

contractor rendered pursuant to the Disputes clause

¢.

a“

An additional issue was injected almost immedi- -

ately because the refusal by the agency to implement .

officer acted beyond the Scope of its statutory author -

ity ee *

$ ON TREE OT ER Sing EN aa

" FETS SRS

RF A RE RN Re re NS ET ATR

Trey

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68 Stat. 81 (1954), 41 U.S. C. §§321-322 (1964)? ee

Gy answering: this question in the affirmative, the. .

ourt

-. entire administrative structure established for~the

pur

versies, °

‘Government contracts a procedure for the résolu- .

tion of controversies arising under the contract _

known as "disputes procedure"-that brings into :

Operation well -known principles of administratwe ,_

law,

_ relatively expeditious and inexpensive method of |

securing a remédy to the contractor in exchange

_. for a giving up of the right on the part of the con- -

tractor to abandon contract performance and sue

-in co

for the-system-to work, ,the contractor must have

confidence that the administrative process will

‘accord fair and expeditious. consideration of valid

* claims. with the reasonable assurance of a prompt

- and’m

| Process has a predictable cut-off point free from. _

_ -Second-guessing and collateral attack will it be - °: -

attrac

law remedies in exchange for it.

contracting agericy can with impunity refuse to. .

implement.its administrative decision favorable to a

sthe co

procedure on the basis of a collateral adverse ruling

of Claims cast doubt on the efficacy of the

se of resolving government contract cont O= .

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“

ARGUMENT

Summary .

There has developed in connection with’

This procedyre depends for its success on a °*"

t for breach of contract -damages. In ordeh

eaningful remedy. Only if this administrative

tive to the contractor who gives up his common-

fon

) 3 >. a. . 5

The argument discusses in detail whether.a ~ |

ntractor rendef¢ under established disputes.

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agency (the Atomic Energy Commission), | ae

' decision was never changed or revoked. The

_. Atomic Energy Commission sim refused’ to imple-

ment its decision which’ was largely favorable to the

Contractor. This point is of interest because the.

_ Majority decision of the Court of Claims speaks ex- .

tensively of administrative boards instead of agency.

, ‘Actually the legal framework of this casé

. Would not have been altered if the final nm,

decision had been rendered by an administrative .. - b

board because most of these béards are delegated, - °

ployed, therefor, this grant of authority constitutes

_ + It becomes official. When the board procedure is ‘em -

a the board as the alter €go or agent of the agency head

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"ORO UIE RIT oe . ' sy

- b —_ eee ge me ’ ¥

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: jurisdiction to decide appeals under the Disputes:

‘ authorized representative fhereof ".

' as necessarily to imply bad

. the agency

- to implement a ‘valid administrative decision r

work:as

(Officer. |

om ” a

for the purpose of deciding controversies under

the Disputes clause of contracts.

It is equally clear that administrative

Clause is contractual. It is a procedure that a

" party who contracts with ‘the Government accepts

as a trad¢-off for agreeing to continue with contract

unilaterally directed by the contracting

NU) oe

hoa?

Can a contracting agency with im unity refuse to

_ implement its own decision favorable to the con- -

tractor rendered pursuant to the Disputes clause

_ Of one of its contracts a .

’ ot oe

"The language of the Disputes. clause states

that the decision by the agency head or the duly

. shall be

final and conclusive unless determined by a court

of competent jurisdiction to have been fraudulent,

or capricious, or arbitrary,

faith, or not supported

Used in this context the

means that the decision is binding on.

by substantial evidence."

“conclusive”

and there is a clear implication that the decision

' will be Carried out. with reasonable promptnes$ as

part of the Government's obligation under the con-

tract. Viewed in this light, a refusal by the agency

pursuant to the contract Disputes clause would be a

clear breach of contract.

decision in this case without justification found

either in the contract or in statute, the contract was

or so grossly erroneous ~

(unless determined to be arbitrary\ etc.),

ered |

There can-be no doubt,then,

that if the Government refused to implement its fina]

met EEN

ee ET ORT

. :

breached and the:Government must answer in

damages. It is obvious that a contractor would,

be foolish:in agreeing to a disputes procedure

that is incapable of securing for him an expeditious

and meaningful remedy. The collateral attack on

agency decisions under the Disputes Clause and the.

_ refusal to. implement them invited by the decision

‘of the Court of Claims in this case is certain to

work a serious hardship by increasing the degree

of risk the contractor must assume, . This will, in

the long run, discourage- industry participation in -

the Government market place. ~ mie

em: | - IL: : : . AS

Did the General Accountin Office in reviéwing and

denying the entire claim on the basis of Wunderlich

Act criteria rather than rulin only on those points

- Since the refusal by the agency to implement . -.

its decision was thie direct result of a ruling by the

General Accounting Office, it must now be determined _

whether that office acted appropriately under the.

circumstances and whether its. decisi6n was valid and

binding. > Se |

° This case came béfore General: Accounting

Office (GAO) when the certifying officer in the

Atomic Energy Commission (AEC) sought its advice

on two relatively minor points of law related to the »

decision on the dispute rendered by the Commission.

Instead of ruling-on the two questions thus raised;

the General Accounting Office spent 33 months re-

viewing the entire AEC decision and then issued a

rae T,

. . | & -

8 aoe -

ruling to the effect that no part of the contractor's

Claim. should be paid, thus reversing the adminis-

trative decision.. ; =F a “

. In referring the two. points to GAO for ac |

. ruling, the certifying officer was acting pursuant to ©

4 1941 statute, the’purpose of which was to clarify

the role of certifying officers, 95 Stat. 876, (1941), |

31U.S. C. §82d (964), Petitioner's Brief p.p. 4-5.

Its legislative history makes clear that this statute.

was not enacted to enlarge the authority of GAO, .-

but rather to minimize the risks ‘assumed by agency

officers charged with the duty of certifying payment

* vouchers. The Comptroller. General himselfhas |. |

* " stated that this legislation did not confer jurisdiction

_ on GAO-to render a decision to. a certifying officer

on general questions, 27 Comp. Gen. 222, 223.1947).

There can be'no doubt that the General Accounting

Office had authority.to rule on the questions of law .

presented to it by the certifying officer. :

pe But GAO did not limit ss review of the matter

_ to the questions referred to t by the certifying ~ .

officer. Purporting to act under authority’ conferred

eby the Budget and Accounting Act of 1921, 42 Stat. 24,

31 U.S.C. §71 (1964), and the “Wunderlich Act," 68

Stat. 81 (1954), 41U. S.C. §§321-22(1964), (Petitioner's

. brief p. p. 3-4), the General Accounting Office re-

viewed the entire AEC decision and reversed it.

. The only’ pronouncement that has been made :

_ _ by. this Court relating to the power of the Comp-.

‘ -troller.General "to settle and adjust". all-Govern-

ment accounts occurred in United States v. Mason:

and Hanger Co. , 260 U.S..323€922), a case that

actually involved the Comptroller of the Treasury,

the immediate predecessor of the Comptroller General.

In that Case this Court held that the parties could by a

_ opinion did not mention any spécific statute but

authority of the Government officials involved.

' . ‘decisions handed down between 1922 and 1965 departed

_ Mfg. Co. v. United States, 91-F.Supp. Z15(N-D. Cal,”

" 101 Ct. Cl. 625, 6380944); Zweig v. United States Go

_ mination by a contracting agency. rendered pursuant .

_ though the Comptroller General has the power to rule -

’ fying officers and to determine whether appropriated

- 98 (1951) and established a generally recognized. .

contract reserve to the contracting officer the -

‘right ‘to make a final decision regarding the. allowa -

bility of costs chargeable to the contract. The |.

_ Seemed to refléct an overall assessment of the

. The interesting thing is that no federal court

substantially from the rule laid down in United States —

v. Mason and Hangér, supra. ‘See e. g.. Jos. Graham

1950); John H. Mathis Co. v. United States, 79 F.Supp.

703, 7 °: ; Livingston v. United States

Ct. Cl. 472, 482 (1941); McShain Co. v. United States, .

83 Ct. Cl. 405, 409 (1936). These. decisions all have in.

common a reiteration-of the rule that the Comptroller

General cannot overrule ‘an essentially factual deter - |

to contractual agreement. This line of court decisions.

appears to stand solidly for the proposition that, al-

on’ specific matters of law referred to him by certi- ~

funds have been expended in accordance with law, he

‘does not have authority to review, as might acourt, ~

. administrative decisions having.a high degree of

factual content réndered pursuant to contractual agree-

ment unless there has been fraud or overreaching.

; a

| nde rlich Act

was passed; 41 U.S. C: §§321-22(1964) pellant's

brief p.3): This.statute overruled the desisions of

‘this court in United States v. Moorman, 338 U.S, -

457 (1950) and United States v. Wunderlich,

‘Then in 1954 the so-called Wu

‘ c:

-. standard of "appellate" review to administrative

_ decisions rendered pursuant‘to the Disputes ==>

clauses of government contracts. ‘ The Comptroller’. »

General, both in his decision overruling the AEC in .

the instant case and in his amicus curiae brief to os

' the Court of Claims has taken the position thagthe -

Wunderlich Act conferred on GAO the same authority

to review administrative decisions as that Actcon- _..

‘fers on.a court. - This contention.has no: sound basis

either in fact or in law. = one oe

In the first place, the primary thrust of the

Wunderlich Act was to instill in contractors’

minds confidence that they would receive fair —

tréatment with adequate procedural safeguards as.

.part of the disputes machinery they had to agree to

in accepting a Government contract.: The whole _—

context of Section 321 relates solely to court appeal.

_ The words "suit", “pleaded”. and "judicial" are used

explicitly and there is no reference to the Comptroller

_ General or to the General Accounting Office... Nor.

_- was.GAO mentioned in the original draft of the legis -

lation. GAO was mentioned expressly inaninter- — -

.. mediate draft of that part of the legislation that now,

corresponds to Section 321, but, in the final version

of this section, the reference to ‘GAO was deleted.

What is now Section 322 of the Wunderlich Act ° -

was not in the original draft of the: legislation but: ~ -

was add€d'to early-revisions at the urging of GAO |

and. others, (Hearings Before a Subcommittee of the

Senate Committee on the Judiciary, 82nd Cong..2d

_, Sess, 1952). This section states simply and enig-

matically that no Government contract ‘shall contain

-- a provision making final on a question of law any ad-

°o |.

ministrative decision. There is ‘no indication that .: ~

this section applies to-GAO, ‘nor is any other

qualification ppaced on it. The two sections of - "%

- tatute taken together define almost perfectly

theordinary criteria fer appellate court. review of:

the decision of an administrative tribunal or a

trial court sitting without a jury.

The legfslative history of the Wunderlich

Act (discussed exhaustively in Petitioner's brief

p. p. 24-49).is not voluminous, but has been cited

‘at various times and places to. buttress an astounding:

variety of interpretations of this statute. By being

sufficiently selective in citing fram this legislative

history, it is easily possible to support di ametrically

opposed views of what this legislation was intended

to aecomplish.

- history of the Wunderlich Act, it is possible to

reach the following conclusions:

l. . Section 321 was intended solely to free contrac-.

_ tors from the limitations on court review of admin-

2 y

istrative decisions imposed by the decision in

United States v. Wunderlich,’ supra. It was not in-

tended to establish the General Accounting Office as

a ''Court’of,Claims".

2. Section 322 of the Act was intended to restore,

to the courts the full scope of appellate review of

administrative action and to assure the General

’ Accounting Office of its right to determine that

appropriated funds are expended in accordance

with the law. This represents the recognizéd:

jurisdiction conferred on’GAO b udget and

Accounting Act of 1921. f -

i 12

_ 3. The Act is clearly not jurisdictional. There

_is no indication whatever that Congress intended

_to confer on the Government the right to initiate

review of administrative decisions to which the

Wunderlich Act applies, ‘Indeed, there is no re-

cord of the Government ever having initiated in

any Court an appeal of administrative action on the

basis of the Wunderlich Act, nor has the Govern-

ment contended so far in this proceeding that it

has this right. ’ A

Snes Therefore’ it must be concluded that the

General Accounting Office acted beyond its

authority in reversing on the basis of Wunderlich

Act Criteria the administrative decision rendered

by AEC and directing that agénc not to make pay-

ment on any of Petitioner's cine. it

III.

Can the Government obtain court review of an:

isputes Clause in accordance witht e€ Criteria -

€stablishe ees

The Government appears to concede thatit ‘| »

cannot initiate a court appeal under the Wunderlich

Act by the fact that it has never done so. This . |

position also appears to constitute recognition of

the well-established Principle that the Government

"Cannot sue itself,

; The only means remaining by which the ~ *

Government can obtain the appellate review spe-

Cified by the Wunderlich legislation is for the

contracting agency to refuse to implement its —

e @

own administrative decisions - either on its

Own initiative or as the result of collateral

attack by GAO as‘occurred in the instant.

Case - and force the contractor to go to court

to obtain. the remedy decreed at the agency

level. This is the approach sanctioned by the -

decision of the oat of Claims below,

. . “yg OG |

| This backhand method of securing re--

view of an administrative decision is basically

unfair. It forces the contractor to run the

tisk of delay’and expensive litigation in order

which it gave ‘up important common-law rights.

Such a rule also encourages the contracting

agency to renege on its agreements in the hope

of either obtaining the reversal of a decision - |

favorable to the contractor or of running the. -

contractor out of money because of delay in

Securing Payment.’ There is the Constant'threat -

that the Government will litigate the contractor .

to death as actually happened in this case.

by refusing implementation of the administra-

tive decision.. This is collateral interference

. 4

without any foundation in statute of the same _

sort as was represented by the intrusion of the

_ General Accounting Office in the instant case.

‘It is the function of the Department of Justice

to defend the Government against suits against

it and to initiate legal action where authdtized

to do sq by statute. . The Department of Justice. -

is not authorized by statute to interfere with

the contractual rights of contractors with the _

Government and to generate litigation thereby. -

_ Actually the Government has a common-

_ law right so declared by this Court to initiate

. legal action to recover public funds wrongfully,

€rroneously:or illegally paid, United States v. :

Wurts, 303 U.S. 414, 415 (1938). This rule was

recently. reaffirmed by a federal court.in United

States v. Bateson, 308 F:2d 510, 514 (Sth cir.

CONCLUSION -

7 _An orderly contracting process requires

this Court to overturn the interpretation that.

the court below has given to the Wunderlich Act

and the technique the Government may employ

_ to invoke its application. a

The administrative procedure now em-

ployed for resolving disputes arising under

Governmegs.contracts has évolved Over a sub-

‘stantial - r of years by trial and error. |

In'1954, it became necessary to make a-correc- |

tion by means of legislation - the Wunderlich Act.-

If the process has once again gotten out of .

_ action-and not by means of the strained in- a

terpretation given the law by the court below...

| As far as this case is Concerned, itis

‘urged that this Court find that the Government

has breached its contract with Petitioner and

_ remand the case to the Court of Claims,’ with

directions to grant Petitioner's motion for i

summary judgment. | ae ee,

__. Respectfully submitted, .

- Professor of Law,

American University ~_

aa Washington College of Law

Washington, D.C. .

June 29, 197i |

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