Petitioners Reply Brief — S&E Contractors, Inc. v. United States

Reply

Summary wadeows es ee ee aie

I. The Wunderlich Act By Its a Confers No

Right Upon The Government To Obtain Judi-

cial Review Of An Agency Disputes Decision. '

- The History Of The Act Reflects An Exclusion

Of The GAO From The,Provisions Of The Law | -

Because Of Opposition To The Principle Of —

Deeeeeive- OOM oni vec faensssaesc ks

Il. The AEC Did Not Make A Decision Not. To Pay

Petitioner’s Claims. It Was Forced Into Its.

Position Because Of The Unauthorized Inter-

_ vention Of The GAO And The Power Ynhering

In. That Office To Compel Adherence To Its

Own Views On .The Merits Of A Claim By Dis-

allowing Credit In The Account Of A Certifying

CE ss vk db ca vido vd chee eecevk ee

Ill. By Agreeing: To The Neston Clause, The Gan

, tractor Gives Up His Common Law Rights To

Stop Work And Sue In Breach Of. Ceatrast In

Exchange For Obtaining A Prompt Decision

Binding. On The Agency .......ccccccccsccces

IV. Petitioner’s Reply To The Views°Of The Gen-

eral Accounting Office As Stated In The Appen-

dix To The Government’s Brief ..............

CS oe oa Pree rae cd wespetedeeces

CITATIONS

Court DEcISIONS:. -

Acme Process Bquipment Co. v. United States, 171

Ct. Cl, 251, 347 F. 9d 588. (1965) °.. 0.6... csc ee

Albina Marine Iron. Works, Inc, Vv. United States, 79

A Oe FOOD oso oe cn wc

C. J. Langenfelder & Son, Inc: v. United States, 169

ee 341 F. 2d-600 (1965) bapwae@ocued Sees

. 8

14

13

22

13.

: Ee ee, Index Continued

: | Page

Climatic Rainwear Co., Ino. Vv: United States, 115 Ct.

: Cl. 520, 88 F. Supp. WAP CUNT Ve hncisadecases ee ee “e

_ MecShain' Co.; Ine._v. United States, 83° Ct. Cl. 405 : :

et Cone RN Sg ba oid sk Gy Gace o's cha ev as. 03 eee ' 22

Miguel v. McCarl, 291 U. g, 442 (1934) is ce pas babes 22. —t

Morgan v. United States, 298 U.S: 468 (1936) ........ 19

Northrop Aircraft, Inc. v. United States, 130 Ct. Cl.

626, 127. F. Supp. 597°:(1065) 50... vesscccss.. 18°

Ripley v. United States, 223 U.S. 695 (1912) ........ 19

Penner. Installation Corp. v. United States, 116 Ct. CL.

BOG, OF WF. om, BOG CRUG O) os cic cs ceeeectcee ae

United States.v. Anthony Grace od Sons, Inc., 384 U. Ss. :

ME CS ya he 0k oho then ds oeb ove cedaese ur. 2

United States v. Jones, 59 U.S. (18: How: ). 92 (1856)... 22

United States v. Mason & Hanger Co., 260 US. 323 s

SS Nc uA coda rk Fao hi asc ¥en boa vies 6 22

‘United States v. Moorman, 338 U.S. 457 (195Q) ...... .21, 22

United States v, Utah Constr. & Mining Co., 384 US. .

ct EOS PR ee | ere 13

United States v. Wunderlich, 342 U.S. 98 (1951) . 9, 21, 22

Wright v. Ynchausti € Co., 272 U.S. 640 (1922) ..,... 22.

S

ADMINISTRATIVE Drcistgns:

42 Ops..Attty Gen. — (Op. No. 33, January 16,1969) .. 19

. 87 Ops. Att’y Gen. 534 (1934) ..,...... ualkenwaa de aed ‘22

Be Se, BE Gem, GOT CAOGA) 4 oe ve cic ccccccss Sere 22

_- 87 Ops. Att’y Gen. 95 (1933) ........ ed bee las cee Se ae.

- 086 Ope. sAtt*y Gem. 980 (1000) .5. occu cece cece cece 22,

OE Ue, Bie Gem, BET TIME)... . 0. esc cccecess ‘ie S|

34 Ops. Att’y Gen. 162 (1924) ....... Sespeeegesesces Met

_ 46 Dees. Comp. ‘ten. 441 (1966) ...... error rry or 11,12 ©

2 AEC Rep. 850) (1964) . Ce kian tones crown evnepend es , 16

Srarures:

Act of May 11, 1954 (Wunderlich Act) 68 Stat. 81, 41

USC 48h, SALT? 1, 2, 3, 4, 10, 11, 12,

“us “14, 15,17, 18, 20"

>

Index Continued | ; : iii

Concressionat, HEARINGS AxD Reports:

Hearings Before a Subcommittee of the Senate Com- |

-- mittee on the Judiciary on §. ‘2487, 82d Cong., 2d —

“Bees, (1968) 2.05... 6 dees PV bc Vawheesvenlhsccccs 6, 7

Hearings Before Subcommittté No. 1 of the House .

Committee on the Judiciary Batt R. 1839 and 8.

24, H.R. 3634, H.R. 6946,83d @8ng., Ist & 2d Sess

(1953, 1954)... * 00... Pie eiak fakok 5, 6, 8, 9, 10

‘LR. Rep. No. 1380, 83d:Cong., 2d Sess. (1954) ...:..10,11

S. Rep. No. 1670, 82d Cong., 2d Sess. (1952) .-..+.... 10

Concresston an Recorp: |

_ 99 Cong. Ree. 4598 ( May 6, 1953) Defense Dep’t objec-

‘tions to S. 24, Statement of Position of Associated

General Contractors of America ..... Weeden ekena 7

Briers: oe oe |

Defendant’s Request for Review of the Commigsionér’s

Recommended Opinion (in the Court of Claims) .. 16.

MisceLLaNxous:. | a

Mansfield, The Comptroller Géneral, (Yale University © — 7

' , Press, 1989) ..............0 feu e ee Wkkesenyes -' 16

. INT

Spee Court of the Auited State

OCTOBER ‘TERM, 197 1

No. 70-88

S&E Coneractors, Inc., Petitioner,

uO ; - Vv. : “ .

THE Waraics Srares OF acne nian

ON WRIT OF cieceenedslee TO THE UNITED STATES.

COURT OF CLAIMS

PETITIONER'S ae BRIEF

& SUMMARY

The Governments argument i is that it has a right to

\\

a judicial review of an agency disputes decision urdér .

the Wunderlich Act since that Act itself makes no __ .

reference to either party. There is an appealing at-

"traction to the idea that plain words suggest a plain

- Meaning, but the history of the Wunderlich Act con-

. Vineingly rejects the Government’s interpretation.

That history shows an unsuccessful effort to obtain

for the Government a right—to be assertable by the

' GAO—to question the merits of an agency's final de-

cision on contract matters. The bills that: contem- |

plated such’a role for ‘the. GAO were rejected and,

er at no point during the hearings was it ever

.

. advocated that, apart. from the GAO, the. contracting :

agencies themselves, or some other governmental arm,

should be vested with authority to oo review —

in behalf of the Government. —

~The only reason this case isin court today is because

. of the GAO. The very authority that had been denied

that office under the Wunderlich Act was improperly —

used’ by it in this case to usurp the responsibility,

- authority. and- powers of the Atomic Energy Commis-

sion and interfere with that agency’s contractual rela-

tionship with Petitioner, at a point im time when both

parties * the AEC and Petitiener) had coneluded their —

/ a -upon disputes procedure in Petitioner’s favor.

This was accomplished ‘by an advance notice of dis-

- allowance, preventing the AEC from implementing 7

- its final disputes decision. ad

We say it is a specious and illogical argument to

defend the non-payment of Petitioner’s claims under

the broad, géneral theory of a “‘right.to judicial re-

_ view.’’ But for the GAO there would never have been

any litigation. The whole line of reasoning for the alle-

gation that the Government has a.‘‘right to judicial |

_ review!” fails because. of the failure of the major

_ premise. The case therefore has no standing in court

ona ‘“Wunderlich Act’’ review. +

_ For the same reason we submit that the question of

"the powers and dutiés of the Department: of Justice

“to conduct litigation in behalf of the United States, as

advanced by the Government,-are not material. |

‘The Government also argues here that hy acquiescing

. in the GAO advance notice of disallowance and direc-

tive not to pay Petitioner’s claims, the AEC has re-.

pudiated its _— decision and that this is. the precipi-

ap

: . : .

3 |

tating cause of the sonkourerer: This ‘i is ineorrect in:

fact. It is negated not only by the AEC’s own lan-

guage that it would ‘‘’. . take no act ion ... inconsistent

with the views expreased by the Comptroller ‘Gen-

eral....’’ (App. 10), but by the position of the Comp-

La troller General as well. (Govt. Br. 44). |

| Finally, viewing this case from the standpoint of the.

orderly functioning of the Government, in terms of

_ its relationship with contractors, and in terms of the. .

- audit functions that are carried out by the GAO, there _

is neither need nor justification for judicial review of: .

agency disputes decisions. The Government is ade-

quately protected by the management and legal staffs «

of the contracting agencies who are fully qualified to

act up6h the issues of fact and law which may develop

-. in a controversy betwedn a contractor and the Govern-

' vention by the GAO should be restricted of

ment. This i is true both at the contracting officer level

as well as in the contract appeal. board levels.. Tnter-

fraud or overreaching.

RIGHT UPON THE GOVERNMENT TO OBTAIN JUDI-

- CIAL REVIEW OF AN AGENCY DISPUTES DECISION.

THE HISTORY OF THE ACT REFLECTS AN EXCLU-

- _ SION OF THE GAO FROM THE PROVISIONS OF THE

LAW BECAUSE OF OPPOSITION TO THE PRINCIPLE

OF COEXTENSIVE REVIEW. |

The Government’s brief ‘alse the position that even |

__ . though Congress did not adopt a proposed Wunderlich

‘bill which would have specifically granted the GAO

authority to intervene in the agency disputes process,

| nevertheless, the Wunderlich Act—as enacted—was

intended to, and did give to the Government, a right

I. THE WUNDERLICH ACT, ‘BYITS TERMS, CONFERS NO- ©

b |

' to.a judicial review of agency x dale decisions COCX-.

4 ake

‘tensive with, that: permitted a , contractor umder ie

4 terms of that law. ann.

_ The language of the statute is the stafting aie for

this argument. A ‘According to the Government, since °

there is nothing’ ‘in the wording of the Act to suggest .

that its provisions should be applicable only to deci-_.

sions adverse to a contractor, it. follows ‘therefore that

‘no one may assert the finality provision: -of a Govern-

ment contract to bar judicial ‘review. The argument

begs the question. The root issue is whether the Gov-

ernment has a right, in the first instance, to refuse pay-

‘ment on an agency decision favorable to a cqntractor

in order to force judicial review. On this issue—which _

is the determinative issue in this case—the statute pro-

vides no answer whatsoevek.

: ‘Historically, the right of access to the courts ‘to pecle .

_ judicial review. of an adverse disputes decision was a

right that belonged to the contractor alone. The resto-

ration of that right was the purpose of the Wunderlich .

Act. The argument is now made tliat the Act also

_ subsumed a congressional intent to. provide for judicial: |

:, review when initiated by the Government. We ee

‘5 One ee the most pervasive ‘ thames 3 in the legislative

\ history of the Wunderlich Act was the opposition |

expressed, by Government and industry alike, to the . _

proposed bill that would have recognized arightinthe ~- |

- General Accounting Office to intervene in the adminis- —

trative disputes process. Because of that opposition—

_. which was directed mainly to the impairment of finality

+: that would result—the GAO was taken. ont’ of ‘the bill

(Pet. Br. 28-33, 42). This notwithstanding, the Gov-

ernment now urges this Court to disregard the role

= played by the —* in om case because the legislative

Pre mecca conta Bp NOMEN

controversy over the GAO “did not overshadow. the

substantial support for a judicial review that would |

_ * work both ways.’’ (Govt. Br. 9) This argument re-

_ ,duces the controversy over the,GAO toa nullity. |

. +. To*begin with, the statements and comments that ©

comprisethe Government ’s argurhent on the legislative -

-. . _ history-deal, in the main, with those legislative pro- |

| posalg in the 82d Congress and in‘ the early. 83d Con-.

oo * gress that expressly. provided a role for the GAO in

the disputes process. . The Government, in other words,

supports its_case, not in terms of the law that‘was.en-

‘acted, bit in terms‘of the law that might have been. ©

Even assuming the validity of such-an ‘approach to «

_ statutory interpretation, the more important point is

that ‘there is a convincing lack of proof that Congress

was ever asked to consider, or did in fact consider, a

Government right to obtain court review of. an agency

decision through any means other than by the inter-

vention of the General Accounting Office in the disputes

Repeatedly during the hearings, when support was

voiced for athe. idea of protecting the Gov ent’s _

interest against erreneous contraet decisions, he GAO -

. _ Was seen as the way to’ secure that end, not the con-

0 tracting agencies or the Justice Department as the Gov- .

ernment now claims. This thought was expressed not.

only .by representatives: of private industry—for ex-

ample, George Leonard speaking for. the Wunderlich

Gortten statis Gecteraar? had stated during the first day of

the House hearings that, under then_ existing law, the _

.. |: right to appeal a con acting officer’s decision was open

_ neither to the contfactor through the courts nor to e

“the Government, through the GAO . < . .”’ Hearings

. Before Subcommittee No. 1 of the House Committee

of

je

‘ 2 =

. 6 est, - ~

Pu \ ° . @

on the Judiciary, 83d Cong., Ist & 2d Sess. 7 (1953,

* 1954)—but was stated with equal clarity by Govern- _

_ ment representatives. See, for éxample, thé statement

of E. L. Fisher, Counsel for the General Accounting :

“Office (id. at 42), the testimony of U. Bonnell Phillips,

Assistant to the Assistant Attorney General, Civil Divi-

/ sion, Department of Justice (id. at 52) and the testi-

‘mony of J. H. Macomber, Jr., Associate General |

Counsel, General Services Administration: (id. at 59).

: Indeed, the very witnesses whose.statements the Gov-

__ ernment now relies upon to support its argument, were ©

_-yeferrinig not'to agency-initiated review, or review in

the: abstract, but’ court review to be realized through |

the “mechanics of GAO intervention For example,

-. Frank L. Yates, the Assistant Comptroller General, in

stating his dissatisfaction with-S. 2487 said: ‘no ye

vision is made therein for a review of decisions of

‘administrative officers by. the Government, through the

+ General Accounting Office.’’ ‘Hearings Beforé a Sub-

committee of the Senate Comiittee on the Judiciary,

: 82d Cong., 2d Sess. 10 (1952). Mr. Yates did not ex-

press the need for protection of the Government’s

. interests in any terms other than the GAO. Nor did

John ©. Hayes, Counsel for the Associated General

Contractors ‘of America. When this association

‘ initially went on record in support of. coextensive re-

_. view (a position which they later changed *), Mr. Hayes

o>. hia legi lation as finally adopted should interpose

‘no bar to further administrative review: by an ,

1 Phroughout its brief the Government relies upon testimony that

was directed to legislative proposals that either contemplated or

did specifically include the GAO. The fallacy of proving this case

“by relying upon such testimony is well illustrated ‘in the position

taken by the ted General Contractors of America. Orig- .

* 4

t , °

—~ oO ie ae nate OT RPO TIO ENG: ™ ptesinn FT ne Mckee (one A A he,

’ ’

- .

QB. 2 +8

" *

"

agency of government ‘wholly independent of the

' department, agency, or bureau involved in the dis-

08 Hence, there should be little or no additional

urden placed on the courts. (Jd. at 30)

That Mr. Hayes did not have in mind’ a_right of

. judicial review to be implemented by: the contracting

agencies. themselves could hardly have been made

clearer. The same is true of the other witnesses upon .

which the Government relies.* :

Given this constant identification between a Govern-

ment right of review and the GAQ'as the means of

obtaining that end, there is no basis upon which to find

that Congress could have intended to rve for the

Government a right of review over agency decisions

when the bill that it enacted specifically deleted all

reference to the GAO. And especially is this so when

» inally, as the Government's brief points out, the Association did

support Government review (Govt. Br. 15, 20) but what is over-

looked. is that, at a later point in the House hearings, when opposi-

tion to the GAO had crystallized, the Association joined the De-

partment of Defense in opposing S: 24. The’ Air Force opposed

the bill because it saw the finality of its decisions being impaired

(Pet. Br. 42) and the Association, in joining that opposition, went

on record for the proposition that it Was ‘‘primarily interested in

the early enactment, of legislation which will assure members of —

our industry the right of judicial review.’’ “99-Cong. Rec. 4598,

* Gardiner Johnson (Govt. Br. 15) stated: ‘‘I understood that

they [the GAO] simply wanted ‘practically the same right that

the contractors are requestitf{, to take an appeal from. what they

consider to be an unfair and unreasdnable decigion.’’ (Senate

Hearings at 84) .Elwyn.L. Simmons, president of a contracting

company (Govt. Br. 18) urged-legislation to protect the contractor

and said that, at the same time, he had no objection to the inclusion .

of the GAO in the bill. (House Hearings at 5) Alan Johnstone,

& private attorney, (Govt. Br. ¥8) identified the GAO as that -

office ‘‘which objectively watches ‘over the enormous expenditures

of the Government, especially in-its defenses . . . .’’ and, on that

ground, defended its inclusion in the then-pending ill (House,

Hearings at 20). 8

. —

ee ee ee Pt greet —

.

—_———————

8

one considers the fact that the opposition which had °

‘been voiced against the GAO was directed, not against

~ that office per se, but against the threat to the principle

of finality thatit represented. . .

The-fact is that Congress did not see its amended

bil as granting any right of judicial review to, the

Go nent. Late in the House hearings, when the |

itil bill came under consideration, the point was

. raised during the testimony of Franklin Schultz that

coextensive review remained a danger even under. the

amended bill. Congressman Edwin E. Willis, a mem-

ber of the House Committee, questioned this: * ~ .

Mr. Wiis. Ido not know that I follow your.

last point. What danger do you anticipate?

_ + Mr. Scuvurrz. The danger I anticipate is -that

the GAO may rely on the wording of this bill and

the legislative history, to permit it to reverse for

lack of substantial evidence, a contracting officer

who has made a decision favorable to the con-

eee ug Sy

Mr. Wiis. This judicial review referred to in

that passage there referring to a review by GAO,

when GAO has been left out deliberately as com-

pared to S: 24? — \ . 3

Mr. Scuunrz. Well, that is persuasive, si... .

(House Hearings at 110,111) *

pp, arte

The Government is quite correct when it says that Mr.

Schultz’ testimony ‘‘did not refer to the fact that the

agency itself or the Department, of Justice might be.

involved in the government’s decision to force judicial

review.” (Govt. Br. 22). It only begs the obvious to

state the reason for this ‘‘omission’’: The idea of an’

agency appealing from its own disputes decision was

totally alien to the history of Government-Contractor

~ dealings under the disputes clause. a ae

a

Further, if it ever were the case that the contracting

agencies saw themselves as occupying a status suffi- .

ciently alien to their own decisions So as to warrant the ~

desirability of obtaining judicial review, the problem

could have been solved simply through change in con- |

: tract language. No statufe bound the agencies to ad-. °

. here to the disputes clause and revision_of that clause

was at all times an-administrative optjon. ;

The fact of the matter is that the contracting agen- .

~ cies, in particular’ the Department of Defense, were -

opposed to any impairment of the finality of their deci- :

sions beyond that -which was necessary to secure the _

_contractor’s right of access to the courts. From the

Defense Department’s point ‘of view, coextensive re-

-view was neither. necessary nor desirable. Thus, in

' Opposing the inclusion of the GAO -in the ‘proposed

legislation, Roger Kent,.General Counsel for the De-

: clause ; ie., the achievement of _ and expedi- _

tious performance of contracts. ( :

at 132) - os '

At the same time, however, the Department of De-

_ fense was.distinetly aware that, having retained, by ©

before the decision in United States v. Wunderlich,

342 US. 98 (1951). To achieve that. end, Leonard

N iederlehner, Deputy General Counsel for the Defense

Department, testified before the Committee that his

department had modified its disputes élause to. limit

finality by providing for réview of the decision of the

“40°:

head of the department by a court of competent juris-

diction under such criteria as fraud, arbitrariness,

capriciousness or gross error implying ‘pad faith.. By

' these arrangements,-he said, ‘“‘we .. . have stipulated

finality in our contracts to a degree which represents.

the interpretation of the courts as to finality before

- Wunderlich.”’? ‘‘The arrangements which -we have

made are now adequate to protect the eontractor.”’

(House Hearings at 53) The Government’ s reference

to this witness’ ‘statement about review in courts of

competent jurisdiction (Govt. Br. 20, 21) should be

read in the ful) context in which that. statement was .

made, The Department of Defense never advocated

the position ‘of coextensive review which the Govern-

ment now seeks to attribute to it.

The House Judiciary Committee Report that accom-

panied the final bill (H. R. Rep. No. 1380, 83d Cong.,

2d Sess. (1954) ), makes no mention of the novel eon-

struction of the Wunderlich Act that the Government —

- now urges this Court to adopt. - Certainly a right of the

Government to obtain review-of its own disputes deci-

sions through a withholding of _payment—represent-

ing as it does so drastic a departure from the: practice

and thinking that had obtained before the Wunderlich.

decisién—would have demarided, explicit comment by

the House Committee. But such thoughts do not ap- .

. pear ;* the single statement from that report which the

* It is significant to note that while the House Report borrowed.

from the language that had appeared in the eatlier Senate report.

that accompanied 8. 2487 (the amended version of that, bill which

specifically included the GAO) it did not. repeat that language

from the Senate report. which acknowledged that a decision of a

contracting officer might operate, not only to the disadvantagé of .

a contractor, but ‘talso operate to the disadvantage-of the Govern-

ment in those cases, sometimes happens, when tlie- contracting

officer makes a decision detrimental tothe Government interest in

the claim.”’ (8S. Rep. No. 1670, 82d" Coiig., 2d Sess: 2 (1983)

¢

1h

7s

| Government has chosen to'include in its brief (Govt. see

Br. 22)-most certainly does not bear out the Govern-

ment’s argument. That statement only ‘reiteratéd

_ thoyghts:that had been expressed several times during

the hearings, namely, that, unless Government con-

tracts were made mutually enforceable: (meaning that

the contractor should be provided with a forum in

which his disputes would be given objective evaluation)

_the Government would become the loser in the ‘long

run. Further, the House report specifically points out

that objection to the GAO had. been predicated on

Defense Department and industry fear that “ inclusion

of the Controller (sic) General in the wording of the

bill would destroy the finality which existed under the

Defense Department procedures.””. (H.R. Rep: ~~

1380, 83d Cong., 2d Sess. at 2) . 7 ik

Not only does the committee report fail to support

the Government’s interpretation of the Wunderlich .

Act, but actual practice under that Act is vontrary to ©.

the Government’s point. Suits ynder that Act have

- been contractor suits seeking reversal of an adverse:

administrative decision, not suits, like this one, which

was brought to enforce a payment that the.contracting

~agency had earlier determined was due. The Govern-

ment claims that this absence of agency-instituted

‘Government ‘‘appeals’’ (i.e., forcing a contractor’s suit

by withholding payment) ‘cannot be attributed -to a

' lack of knowledge on the part of the government that it

_ too can obtain judicial review under thé Act.”? (Govt.

_ Br. 38) We think it can be attributed to nothing else

but that. Why, for example, if the’ point is as certain

‘and clear as the Government now claims.it to be, should ~

the GAO have sought to justify its unauthorized inter-

vention in this case by claiming that: 3 :

_ Where, as here, the disputes procedure has been

exhausted in the contracting agency, there would -

ore 5 ena

. f .

-

‘ . a RO RE Sw wen

» ne 3

: ‘ . .

——12

be no pnrie date open to remedy an erroneous

Disputes clause decision against the Government’s .

interest unless our Office exercised its traditional

jurisdiction to question such a decision. 46 Decs. .

Comp. Gen, 441, 458 (1966) : moe

Why should the Department of Transportation haye

_seen it necessary to propose a change in its procurement

-_ regulations specifically to permit review of its own dis-

putes decisions (Pet. Br. 72, n. 16) if, as the Govern-

' ment now claims, the agencies always had that, right

under the Wunderlich Act? And why should this Court

liave described the standard disputes clause procedure’

in United States v. Utah Constr. & Mining Co., 384

U:S. 394; 399 (1966) as one involving Tuckex Act suits

brought into the Court of Claims by ‘‘the contractor’’.* ~

The answer to these questions is obvious: Congress

never Intended to vest the contracting agencies (or for

that matter, any other governmental arm) with author- -

ity to withhold payment on a favorable contractor

disputes decision in order to force judicial review by

- compelling the contractor to, seek relief in court. The

_ consensus of thought only confirms the point.

In summary, we submit that the Government’s argu-

ment does not meet the issues in this case. It builds —

almost entirely upon that language in the legislative

history that was specifically directed to the GAO and .

* The language referred to reads as follows:

Appeals from the decision of the contracting officer are char-

acteristically heard by a board or committee designated by .

the head of the contracting department or agency. Should the

contractor be dissatisfied with the administrative decision and

_ bring a Tucker Act suit... in the Court of Claims... the |

‘finality accortled administrative fact finding i limited by the —

provisions of the Wunderlich Act.... United States v. Utah — .

‘Constr. & Mining Co., 384 U.S. at 399. - J fe

= .

MSE RE Nae ee ee PA OTA PRL NT NY EIR BERL TRIO E c > *

: . *

Piet

. resolved by the -Board

‘+ tion where the contr.

. DP LARS POEL eS Dare aes *

PIM 2 BOY SOR A TENEMENT! PEM YIM » , a . : 7

13

the protéction io the Government that would be secured

through that.office, and, it asks this Court to assume

the legislation. The argument ignores the very reason

ie for the opposition that was voiced against the AO, it

ignores the telling silence of the committee’s. report,

and it ignores the fact that’the only judicial. decision

that offers any comfort to the Government’s argument

is the Court of Claiths’ opinion in.C. J. Langenfelder

&. Son, Ine. v. United States, 169 Ct. Cl. 465, 341 F. 2d

600 (1965), the dictum of which was- later expanded

.that a congressional intent to provide for coextensive _

review remained even after the GAO was taken out of

into a holding for the decision below.’ “The problem of

2 ot ; :

_ 5 The Government also cites the Court of Claims’ decisions. in

- Narthrop - Aircraft, Inc. v. United States, 130 Ct.Cl. 626, 127

F.Supp. 597 (1955) and Acme Process Equipment ‘Co. v. United

States, 171 Ct.Cl. 251, 347 F.2d 538 (1965) us support. for its

contention that’ payment upon final agency disputes determinations -

may be refused in order to force the matter into litigation. (Govt.

Br. 25) The eases.do not support the argument for which they

are offered. The Northrop case did not ‘itivolve a dispute arising

under the contract nor a. wrongful refusal on the part of. the

Government to pay over mone? that was due. At issue in that

case was simply the Government’s right to recover its ‘proportion-:

ate share -of the interest earned on a tax refund, the principal

- amount of which had earlier been permitted as an element of

‘Teimbursable cost under the plaintiff's CPFF contract. No con-

tract provision was cited as bearing upon plaintiff’s duty to refund.

case involved a situation where a contractor brought a Wunderlich

. Act suit in the Court of Claims seeking to reverse a partially

adverse Board determination while claiming, at the same time,

The duty to refund, said -the court, ‘arises in equity and good °

~ conscience by natural implication from the principles of a CPFF

— eontract.’’ (130° Ct.Cl. at 629, 127 F.Supp. at 598) -The Acme °

that that aspect of his contract claim which, had been favorably .

fas. immune frem re-examination -by the

ntended that the Wunderlich Act estops

pening up’’ a Board decision in a situa-

r is the one who freely bring’ suit because

a Board decision. Eete

court. We have never

the Government from ‘‘

of aliéged erra:

“a

“ 14

statutory interpretation raised in this case involves’

only one issue—the significance of taking the GAO out

of the Wunderlich legislation. For the many reasons

earlier stated, (Pet. Br. 37-49), it is Petitioner’s posi-

tion that the GAO’s intervention in this case effected a

breach of contract.

I. THE AEC DID NOT MAKE A DECISION NOT TO PAY

: PETITIONER'S CLAIMS. IT WAS.FORCED INTO ITS -

- POSITION BECAUSE OF THE UNAUTHORIZED IN-

TERVENTION: OF THE GAO AND THE POWER INHER-

- ING IN THAT OFFICE TO COMPEL ADHERENCE TO

ITS OWN VIEWS ON THE‘MERITS OF A CLAIM BY ©

DISALLOWING CREDIT IN THE ACCOUNS OF A CER-

‘TIFYING OFFICER.

The Government’s second principal argument i is that

” the actions taken by the GAO in this case are irrelevant |

because—according to the Government—‘‘it was not.

the intervention of GAO hat directly triggered peti-.

tioner’ s suit. ... rather, it was the decision of the Com+

mission not to: pay petitioner’s claims®’ (Govt. Br. 26)

It should be made clear to the Court that the issue

of who precipitated Petitioner’s suit is a consideration

chiefly relevant to the Government’s argument; not our

-own.. It has never been our contention that the

Wunderlich Act was meant to deny only to the GAO

- the right to compel judicial review of agency decisions

favorable to a contractor. Rather, throughout these

proceedings, it has always been Petitioner’ $ position

that under the Wunderlich Act no arm of the Govern-

ment—whether that be the GAO or a contracting

agency—should have a right to refuse payment upon a

?

disputes decision in ‘favor of a contractor.°

/

_ © Our brief acknowledged the fact, that imnlteats the Wundér-

lich Act was intended for the benefit of contractors alone, a con-

tractirig agency could avail itself of the review standards of that

| 16,

‘The Government sliseite to have this Géeré avoid

_ the question posed by. the GAO’s intervention for one

reason only: That intervention exceeded not only the

a

authority that the GAO was meant to exercise under ©

the Wunderlich Act (see Pet. Br. 47, 48). but, at the .

same time, it exceeded the historically recognized limits

of its inherent ‘authority (Pet. Br. 38-41; infra, p. 22,

Petitioner’s Reply to the Views of the GAO). It is to

" escape this dilemma, and, at-the same time to support |

- the legitimacy of its own role in this case, that the

Justice Department now makes the-claim that Peti- .

_ tioner’s suit was.‘‘directly triggered”’ by the contract-

ing agency itself. The facts are otherwise. a

Extensive administrative proceedings were held in

connection with Petitioner’s claims. These are. ‘fully

stated in our brief (Pet. Br. 9, 10). We stress here. -

that, at the conclusion of those proceedings, the head

. of the contracting agency (the Commissioners of. the 2

| Fak ordered” the contracting officer :

. to proceed to final settlement or . dedinion [on

the payment of Petitioner’s claims] in accordance .

with the decision of the hearing examiner dated

- June 26, 1963, as modified by our order of Novem-

ber: 14, 1963, ‘and by this decision. 2 AEC Rey

~ 850, 856 ( 1964) - . e

Act if it were ‘to reserve ‘such. a ight by appropriate contract lan- °

uage and, at the same time, undértake to make the correspondingly

necessary changes in its applicable procurement regulations. (Pet.

Br. 58,n.10) This position in no way undercuts what ‘we contend

to have been the purpoga underlying the Act because it.was (and

still is) open for the agencies to rewrite their disputes clauses :

so as to provide for complete and coextensive review.. "The Wundér-

lich Act does not. Mantis that option in a Oe slightest. |

DEE POT SIP RE EEN EA TU

“*

16

The Cominission’ Ss. ‘decision: was never implemented

and the reason, of course, was the fact that the GAO

intérvened, re-decided the case and reached a different .

~.concluston. Before this Court, the Government 1s \con- -

tention is that non-payment reflects a ‘‘decision of the

Commission not to pay petitioner’s ims”’ (Govt. Br. -

26), whered# before- the Court of Claims, the. Govern-

ment made the point that “‘the Commission has not °

‘Defendant’ 8 Request For Review of..the Commis-

_ *gioner’s Recommended ‘Opinion at 14, n. 4) However

_ the Government may wish to characterize the Commis- .

sion’s actions, the truth of the matter is that those ac-

tions were taken not by choice, but. by. forced necessity

-~_what the court below aptly described as ‘‘the Comp-

troller General’s ie threat to charge the. eertis yng

< officer’s account: “gs (App. 49) ae

It is this authority i in the GAO——the power to charge 7

a certifying officer’s account, to disallow credit—that -

goes to: the heart of the matter. Unless these conse-.

- quences can be ignored. or avoided by. the paying

agency, the GAO can use this authority to make its

_ interpretation prevail and thereby extend its jurisdic.

™

tion. As one eminent authority. has put it, the Comp-

- troller General ‘‘can decide what he cannot prove.

297

Thus, for the Government to’now claim that the agency .

- made a ‘“‘decision” not to pay and tg. suggest, as the

- Government also does, that-the ‘“Commission could’.

_ have ignored the GAO ‘opinidn apd proceeded to final -

3 settlement. . . yp? (Govt, ‘Br. 26) i and to1 nihil the

=" ; . ’

7 The reference is. te Mansfield, The Comptroller General, 96 .

1089). :

° . .

, en = . . ° . : . : ;

° . 7 e : K

7 8 oe 7 ‘ ° :

. -

»

“17

: . . @ “ . - li, ’

Teality. of the situation? It is an argument that-ele-

vates form over substance. ema a3 XY a

It was precisely in. this light that Judge Skelton saw

« the situation. He‘said: ‘The AEC never at any time -

|." reversed, modified; canceled, set aside, or changed its — ‘

final decision between the time it was issued on May —

13, 1964, and the date this suit was filed on April 11,

1967, or thereafter.” (App. 63) At the same time;

. Judgé Skelton also saw the actions of the GAO in this

‘case.as going beyond the authority of that office. (App: .

».,69) "It was the combination of these two factors—the: .

_.° contracting agency’s unabated: adherence to its. own .

- .. ‘final decision and the undermining of that decision ‘by _

|. an exercise of ‘unauthorized authority by. the GAO— —_

that led J udge Skelton to attack the J ustice Depart-.-

ments assertion of the Wunderlich Act defense in this ’

. case. The Government's response to that attack. (Govt. ° .

Br. 32-36). is a discussion that is irrelevant to the is-

» sues. Neither Judge Skelton—nor Petitioner in sup-

porting his views—ever challenged the right of the De-.

partment of Justice to conduct litigation inyolving the

United States in $>case otherwise prope before a

court. The whole point of Judge Skelton’s position,

and our own as well,’ is that the Justice Department

® The Court need not speculate as to whether payment by the

Commission would have resulted in disallowance. The Govern-

‘ment’s own brief tells us it would have. The ‘‘ Vievgg of the General “

. + Accounting’ Office’’, included in an appendix to Government’s -

Brief (at 41-50) state: - . a. SS

. -». The GAO decision advising the Commi on not to pay

petitioner’s claims was not, strictly speaking, the actual settle- =

ment of an account. The ruling consituted (sie) merely an

advance notice to the Commission that credit would not be

__ allowed in its disbursing officer’s accounts if petitioner’s claims -

- Were paid‘ administratively in accordance with*the Commis-

', §i0n’s disputes decision.... (Govt. Br. 44). oo

-- ; . . ieee : :

; .

. .

ace ° ‘

-

«

. ~ . — a eemnerure We dee PRR Dereon ae

a a

eae

:

wh

el cn Me

4:

2 Elbe hee

- rationalized its role of defense attorney in this casé by

postulating .a unique (and erroneous) construction -of

the Wunderlich:Act:and, within that framework (since

*it could not-defend the GAO intervention) hypothesiz- - =

ree rejection of a disputes. decision ‘that.

never™

ened. - In. short, a bootstr ap approach.

Im. BY AGREEING TO THE DISPUTES CLAUSE, THECON- |

TRACTOR GIVES.UP HIS COMMON. LAW RIGHTS TO |

“STOP WORK AND SUE IN BREACH OF CONTRACT, IN

BINDING ON THE AGENCY. | - _ +

EXCHANGE FOR OBTAINING,A PROMPT. DECISION |

_ The Governntent contends, that affrination of the Se. -*

cision-beléw,will not impair the viability of the disputes

‘clause.'. The argument which is now urged. upon the:

Court in support of that decision offers —

reasons to the contrary. : . ; -

By the terms of. the disputes clause, a contractor is

. obligated ‘to’ proceed diligently ‘with performance of

the disputed work pending the resolution of a contract —

. dispute—an obligation that carriers.with it the sub-

stantial - ‘burden, for the contractor, of financing ‘the

work that is*the subject . of.controversy.. The quid pro °

quo for this, relinquishment of the right to stop werk

and the burden of financing continued performance is.’

the Government’ s promise ‘to provide procedur es that

offer a fair, just and. inexpensive means of promptly l.,

séttling disputes arising under the éorifract. . Within .

this framework, the long-accepted interpretation ¢f the :

, disputes’ clause has been’ that the quasi-judicial de-

. cikions rendered on contractor.claims by a’ representa-

Br of the agency head were treated as final ‘unless ap-

“pealed to the courts by the contractor.

° Geldeary to the Government’s description, the ‘*usual dispute’

proceeding” has never involved a before-payment review of board

’

“,

© ‘

decisions i in favor of a contractor by either an agency head acting

&

-. where finality for the.contra

- e

“The Government ° now ar

‘tor can never be secured

except in the-courts.”:€ontract appeal board decisions,

though held out as an agency’s final decision by: contract

; - language and supporting regulations. (Pet. Br. 68-71),

are to.be made’ subject..to review and disavowal by ain:

ageney head, acting ‘‘either on his own or after consul-.

tation with GAO or the Department of Justice . . ros

~ € Govt. Br. 27) and decisions of agency: heads may. be |

alone or in consultation. with the GAO or the Department of

‘ Justice (Govt. Br. 27-28).- Board decisions have always been re-

garded as final. decisions. -What, in fact, the Government is .de-

* seribing is the Attorney General’s own conceptualization. of the -

disputes process,'as it was envisioned in 42 Ops. Att’y Gen. No.

. 33 (January 16, 1969).- It was then that the-idea of agency head

review of-board decisions was first articulated and ‘the idea has no.

support: in longiifttanding practices of the agencies in disputes

proceedings. foe

Fufther, ‘the. Government makes-a grave and serious error . when-~

‘it describes the contracting. officer’s role in the disputes process as .

‘

one who ‘primarily represents the interests of the government’”’

(Govt: ‘Br. 29, n. 15) and whose decisions ‘‘are expected to repre-

sent the zovernment’s interests, ” ” (Govt. Br. 49) “It.is, elementary

that a contracting officer, in making a decision under the disputes

clause, acts in ‘a quasi-judicial capacity and must use his inde-.

pendent judgment ‘“with due regard to the rights 6f-both the con-.

tracting parties. ’? Ripley v. United States, 223 U.S. 695. (1912) ;

- See also Morgay v. United States, 298 U,S. 468, 480, 481 (1936) ;

>

Y ¥#

4

—

Penner Instaltation Corp. v. United States, 116 Ct.Cl. 550,.563, 89

F.Supp. 545, 547 (1950) ; CTimatie Rainwear Co., Inc. v.. United:

States, 115 Ct.Cl. 520, 559, 88 F.Supp. 415, 421. (1950). This

attempt to. stigmatize a contracting officer’s disputes determination:

‘with an. inherently. pro-Government., bias is made in an effort to

explain away the fact that the Wunderlich Act, by its terms, does —

‘not apply to decisions. of eontracting Officers ; hence it offers no, -

-basis upon which ‘the Government could ever obtain judicial review .

_ of a contracting officer’s decision favorable toa contractor. Thus,

_in terms of the. argument which’ the* Government now makes, it |

- means'that agency decisions rendered at.a subordinate level are

_ immune from attack while decisions of the’ egehey head become

Subject to: a an sapeuiad _

es in fayor of a system |

°

2

eal

eT en ae

aie peed ee ee eee " = z

= Sais bo nS A POL ARE RAPALA alles St GEE DOES Bnei) He

eet ak . : E34 x ‘

low hes 7 7

: : % “as ae io. ri ‘

>.

:

Cres .

ae

7 .

disavowed, either esitias the GAO may, 7: tak a0 me ’ | : ne

_ doubt on’ the soundness ee a

agency °% ‘decision”’

(Govt. Br; 28) or “merely . [because] the impor-

_- tanhee of the factual or legal issue raised warrant pre-

~ sentation to a court?” (Govt. B

eould survive: this’ maze of ‘eggsond guessing’’. The

Few contractors

Petitioner wé&s. among those who: could het. The Gov-

ernmeént?s argument -is directly ‘contrary to the pro-..

visions of the disputes clause and contrary to this

Court’s admonition that the disputes procedure is

founded. on the belief ‘‘that resort’ to administrative.

- procedures is an‘expeditious way to settle disputes, con-.

ducive df speed. and economy.” ‘(Footnote omitted) ©

_ United States v. Anthony Grace & Sons, Ane, 384. v: 8.

424, 429 (1966). _ MU. z,

“clause. _ Section 322, we said, was intended as a statu-~

‘tory restriction to bar the contracting agencies from _

- extending their usé.of the disputes clause prineiple

There is a final point that requires écintnant: Wie n

. Government’s ‘brief .says that ‘‘ Petitioner concedes

_that, under. 41 U.S.C.°322 [the second section of the .

Wunderlich Act]. no finality can attach. to questions -

of law underlying agency disputes decisions.”’ (Govt.

Br. 40, n: 24) Our brief contains no such concession.

We defined finality against the Government in terms -

coextensive with the coverage of the standard disputes

(and the historical concept of finality against the Gov-

ernment associated therewith) to matters, other than

disputed facts and the legal-questions posed upon the

resolution of'such facts. (Pet. Br. 47,48). We said:

. where a legal queStion arises out of facts ini-

iaaity ‘resolved under the disputes clause—the so-

called mixed questions of fact and law that are

posed by facts arising under the contract—this. |

type of law question would fall beyond the reach

' of the GAO. Coomute omitted) (Ret, Br. $5).

a ee

a

“ee

a

| oS :

| We think the. point should have ae ohvices to a

7 Government that, when we defined finalj y on questions © -

«of law underlying agency disputes decisions’in terms —

' . of the GAO-we were, at the same time, defining finality ~

* on such questions against the Government as a whole.

It goes to the point repeatedly stated if this reply:.

; throughout the» legislative. hearings the Government’s — :

_ interest in adverse disputes decisions ‘was. identified as

gperating through the GAO. ‘When the GAOwas

taken out of tlie bill, it-left the ‘executive agencies free’

to decide their own contract. disputes without the hind-

. rance of. second-guessing ‘by the GAO and: it left the

contractors free to peste — agency determina-

tions‘ ‘in’ 1 court.

ef.

IV. PETITIONER'S REPLY TO THE VIEWS OF THE GEN. oe)

-ERAL ACCOUNTING OFFICE AS STATED IN THE AP.

PENDIX TO THE GOVERNMENT'S BRIEF. :

In the committee report that accompanied the final

bill that beeame the Wunderlich Act, it is concluded that |

- the effect of: ‘the Ac€ would be to leave the “GAO in. >

precisely the same position it was in before the decision

in the Wunderlich and Moorman cases.”” H. R. Rep.

No#1380, 83d Cong., 2d Sess. 6 (1984). - It would thus

seem to tis that-any-analysis-attempting to-justify the .

lawfulness of the GAO’s actions in. this case would

have, as its premise, a full explanation. of the position .

held by: the GAO with respect ‘to agency contract dis- -,°

putes and payments -prior to the Wunderlich and

Moorman. decisions. . But neither: the Government’s -

brief nor the GAO’s own views (Govt. Br. 41-50) pro-

vide this Court with such an explanation. In fact;

those views offer an analysis that ends where it should

_ -begin and throughout they assume the existence of an’ ie

Se Pe, authority i in the panne which i is never proven. 5

f -

~

- opinions that his functions ‘as an accounting officer did

Pitas ik ale

_ Marine I ron W ortes, Ene. v. United States, 79 Ct. Gl. 714 | :

~~” Gen. 437 (1934) ; 37 Ops

. Att’y Gen. 289 (1930) ; 34 Ops. Att’y Gen. 311 (1924); .

- : | . 22 os e

Not only has the GAO not met the was point jn

“issue, but, we submit, it chnnot meet that point. .The

* truth of the. matter is that: prior to the ‘Wunderlich a

~ and, Moorman decisions, the GAO never had authority )

.. to assert control. over contrattmatters of the sort that -

was exercised againgt Petitioner ahd. the contracting

agency in this case. Repeatedly, the Comptroller had

been told through, eourt decisions and administrative _ -

not vest -his office with authority to second-guess de- +

etsions of other executive officers in connection with aN es

atter's“ specially. entrusted:to their. judgmen See, me |

*.- Miguel ¥. MeCarl, 291 U.S. 442-(1934); United- States —

v. Mason & Hanger Co., 260 U.S. 323 (1922) ; Wright

--y. Fnchausti &Co., 272 U.S. 640 (1922) ; United Stites

v. Jones, 59 U.S. (18 How.) 92 (1856); MeShain @o, = s

Inc. v. United States, 83 Ct. Cl. 405: (1936) ; Albina .

(1934) ; 37 Ops. Att’y Gen.-534, (1934) ; 37 Ops. Att’y

Att’y Gen. 95 (1933) ; 36: Ops.

34 Ops. Att’y Gen. 162 (1924). Nothing in the ,

Wunderlich Act -has altered: this limitation on the 4

GAO’s authority, and, not until this case, has the GAO" — -

ever serjously contended to the « to the contrary.

‘The only other point that requires comment i is the

GAQ’s-attempt to. draw. a distinction between the ab-

solute finality accorded a eontracting .officer’s decision

_'—as was the éase, for example, in ‘Unrited’ States Vv.

Mason & Hanger Co. supra—and decisions rendered: ,

. “by contract appeal boards. _Accordingsto the GAQ, the —~ are

_- difference. between these respective decisions is’ that

‘contracting officers ... are expected to represent the -

government’s interests” whereas ‘‘Boards function as

independent tribunals: . . .”’ (Govt. Br. 49), -The dis-

b.

“2¢

ogo Pe ;

tineti mm iqnon-existent. _ Contract boards, like contract-

ing officers; are representative agents who derive their ae)

~ authority from, and are beholden to, the same source :

the head of the agency. As stated. herein, both have -

the duty to use obj ective, independent judgment.’ (su-

oN pra, at 18, 19, n. 19) But even if one were to speak with

less partiality, than the other in deciding a contractor’ ~

claim, that would: have absolutely no bearing on the

finality that attaches to the decision insofat as the GAO |

is concerned. Absent fraud or overreaching, the GAO.

is without authority to question’ either decision. because

the matter in dispute is within the exclusive province

of the agency to decide. And this is so because it is

the agency alone that has been delegated the authority -

- to enter into edntracts, hence it alone has the right ‘to

‘decide how, and i in what manner, it shall resolve dis-

putes arising under its. contracts.” :

nee? | s ‘CONCLUSION

iii aes ee this case, we ask that the Court give

. thought to the calamity th; that" befell S&E Contractors.

‘ Operating. within the framework of the contract forms, «_

- regtilations and procedures mandated by the Govern-

ment, S&H Contractors undertook a construction

project i in 1961 during the course of which-it'was com-

pelled to furnish extra labor, materials and effort equal

-to twice the original-contraet price. It séught recom-

pense for those outlays in accordance with the Govern- ©

___. _ment’s_own rules and it prevailed, but. it‘has, yet to .

receive one penny on its claims, and is out of business. .

due to this extraordinary assertion, of power by the |

General Accounting Office—a power which the Depart-.

ment, of J ustice now claims to be irrelevant to the is issues

in this case. | | 7

| a

-in which it participates. -

\___ reaching.

%

4

2

i a eontractors:

be

: ge P. WIrsk

ROWN & TACKE

and

a)

~ LANEY & NEEEY

Of Cotinsel’

‘Neither the histor? of the Wunderlich Rot. nor

siderations ‘of public policy could support ‘either the

: unauthorized actions taken by the GAO inthis cage or

* ... the arguments advanced by the Department of J Ustice: a. . '

The Government is fully protected by the-technical, ,.

management and legal skills within the using ageticy . ,

and by. the adversary proceeding whith it conducts and

KDSON, CREYKE, KOEHLER,

‘Locke, PURNELL, BorEN,

24 i

*:

bon-

There.is, therefore, neither e

- reason nor need to vest the GAO with power to rev iew

agency disputes * “ decisions, absent fraud or over-

: ee

—_—

——_

We urge the Court to reestablish schab-inks s heretofore e

been &n or derly . process for the resolution of con-|

tractual di lisputes “he yetween the Governmesit” and its’:

‘The Court is asked to reverse the judg- |

ment of the Court of Claims and direct that Petition-

er ’s s Motion for Summary J udgment be granted. .

Respeetfully submitted,

GEOEFREY ae KE, if R.

Attorney for Petitioner

1744 R Street, N.W. .

_ Washington, ‘D. €. 20009

—

. at 7G