Petition for Writ of Certiorari — Silas Mason Co. v. United States

FILE COPY

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1945

No. Mi 100

SILAS MASON COMPANY, INC., WALSH CONSTRUC-

TION COMPANY, ATKINSON-KIER COMPANY,

Petitioners,

vs.

THE UNITED STATES

PETITION FOR A WRIT OF CERTIORARI TO THE

COURT OF CLAIMS AND BRIEF IN SUPPORT

THEREOF.

SamvueEt T. ANSELL,

Counsel for Petitioners.

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So CT A LILLE IDE DEI LED LOT

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INDEX

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Page

Petition for writ of certiorari..................... 1

GR NE ee ea cake badin c CA Ae 1

SSRIS ALE a0 Saha adn Sapir a age br 1

ana Sarre renee ae ar 2

a ae ee a errr 5

Specification of errors to be urged............ 12

Reasons for granting the writ................ 15

GRE ko cc cok ks sch eh ana e ace Ved Ka cwns 18

Brief in support of petition........................ 19

Opinion of the Court below, Jurisdiction of the

Court, Statement of the case, and Specification

OF arses Ub OO WOES o 5 5o cc Sik 19

NE 55, Sas Sei EON butane 8s 8 20

Appendix ‘‘A’’—Article 15 of contract involved. ... 25

Appendix ‘‘B’’—Specifications No. 570............ 25

Appendix ‘‘C’’—Order for changes No. 1.......... 26

Appendix ‘‘D’’—Findings of fact and decision of

er eee ee ee 27

Appendix ‘‘E’’—Correspondence between Depart-

ment of Interior and Mason-Walsh-Atkinson-Kier

SE S's ods « Cae EE nie a Oke d A ee 31

TaBLe oF Cases CrTEp

Merrill-Ruckgaber Co. v. United States, 241 U.S8.387 15

Ripley v. United States, 223 U. S. 695............. 17

S.J. Groves & Sons Co. v. Warren, 135 F. (2d) 264. . 15

United States v. Beuttas, 324 U.S. 768............ 15, 16

United States v. Blair, 321 U. S. 730.............. 15, 17

United States v. Callahan Walker Constr. Co., 317

ih or Pee ae eS ee at ei 15

United States v. McShain, 308 U. 8. 512............ 15, 16

United States v. Smith, 256 U.S. 11................ 17

Statute Crrep

Act of February 13, 1925, Section 3(b), as amended

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SUPREME COURT OF THE UNITED STATES

OOTOBER TERM, 1945

No. 1200

SILAS MASON COMPANY, INC., WALSH CONSTRUC-

TION COMPANY, ATKINSON-KIER COMPANY,

io Petitioners,

THE UNITED STATES

PETITION FOR A WRIT OF CERTIORARI TO THE

COURT OF CLAIMS

The petitioners pray that a writ of certiorari issue to

review the judgment of the Court of Claims entered in this

case October 1, 1945.

Opinion Below

The opinion of the Court of Claims (R. 86-98) is re-

ported in 62 F. Supp. 432.

Jurisdiction

The judgment of the Court of Claims sought to be re-

viewed was entered October 1, 1945 (R. 98). A motion

by the petitioners for a new trial was denied February 4,

1946 (R. 99). The jurisdiction of this Court is invoked

2

under Section 3 (b) of the Act of February 13, 1925, as

amended by the Act of May 22, 1939.

Questions Presented

1. Petitioners and the United States entered into an agree-

ment upon a government standard form contract covering

the construction by petitioners of the first development of

the Grand Coulee Dam (R. 72, Fdg. 2; Exhibit ‘‘A”’ an-

nexed to Petition). Article 15 of such contract contains an

agreement between petitioners and the United States for

final and conclusive decision by the head of the department

of all disputed contract questions, both of fact and law

(Appendix ‘‘A,”’ infra, p. 25; R. 79, Fdg. 14; R. 96-97). Peti-

tioners sued in the Court of Claims on disputed contract

questions without prior decision by the head of the de-

partment (R. 95-97). On these facts arise two closely

related questions:

a. Whether the head of the department can make final

and conclusive decisions on questions of law arising under

government contracts; and if not then—

b. Whether a contractor, who has bargained for final and

conclusive decisions by the head of the department on all

questions, both fact and law, is required, before bringing

suit in the Court of Claims, to obtain a decision by the

head of the department which settles only questions of fact—

a procedure not agreed upon between the parties.

2. Petitioners, without admitting the validity or applica-

bility of Article 15 of the contract, appealed to the head

of the department from a decision by the contracting officer

on 28 claims for breach of the contract (R. 87-89, 135-140,

141-143). While the claims were pending for decision by

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the head of the department, petitioners brought suit in the

Court of Claims (R. 1, 84). Throughout the consideration

, of the claims by the contracting officer petitioners com-

plained repeatedly to the head of the department that the

contracting officer was arbitrary and unfair in his handling

of the claims and that it was his avowed purpose to build

a defense to the claims rather than to decide them on their

? merits (R. 147-149, 150-153, 153-159, 160-163). These

protests went unheeded by the head of the department; his

only reply as characterized by the court below being ‘‘in

bad temper’’ and indulging ‘‘in a wholly irrelevant and

improper reflection upon counsel’’ for petitioners (R. 90,

7 147-160, 164, 204-205, 208-209). The department head’s atti-

tude toward, and conception of fair dealing with, the peti-

tioners, their counsel, and their claims is further shown by

his own testimony: it was the duty of a contracting officer

considering claims under Article 15 to require a claimant to

make out his case by a preponderance of tha evidence

(R. 203); he (the department head) would accept more

readily the statement of a government official than the

statement of a witness for the contractor (R. 204); he

believed that the immediate interests of a contracting

officer engaged in considering claims under Article 15

lay in spending new money rather than in correcting past

mistakes (R. 207); the statement of petitioners’ counsel

made formally to him that the contracting officer’s repre-

sentative had advised counsel that the time being consumed

f in the consideration of the claims was necessary to prepare

the best defense possible was just a ‘‘further building-up”’

of what counsel was apparently preparing to urge in the

Court of Claims (R. 208) ; it was a fair inference from a tele-

gram sent by him to petitioners’ counsel that he thought

4

counsel was disloyal to the government in pressing these

claims (R. 209-210) ; in imputing disloyalty to petitioners’

counsel in this telegram, he was ‘‘hitting back’’ for so many

offensive letters he had received from counsel (R. 210);

whereas at that time he had received three letters from

petitioners’ counsel making the same charge against the

contracting officer of constructing the best defense possible,

to none of which did he ever reply except through subor-

dinates and then only to state that action on the claims was

being expedited (R. 147-157, 164). The question thus pre-

sented is whether, assuming the validity and applicability

of Article 15 of the contract, these facts standing uncontro-

verted in the record made a sufficient showing of prejudice

and bad faith in the head of the department to justify

petitioners in suing in the Court of Claims without a deci-

sion by the head of the department.

3. Whether the Court of Claims may properly refuse

to consider claims for damages sustained by contractors

under a standard form government construction contract

upon the ground that the contractors had unjustifiably aban-

doned their appeal to the head of the department required

under the terms of Article 15 of the contract without making

findings in respect of the bad faith of the department head

and the other inadequacy of the appeal procedure estab-

lished by Article 15 as to which allegations are made by

the contractors (R. 15-17) and substantial evidence is con-

tained in the record (R. 101-217).

If a writ of certiorari is granted, petitioners intend to sub-

mit argument on the following additional questions:

4. Whether Article 15 of the contract, assuming it to be

valid, applies to petitioners’ claims for breach of the

contract.

5

5. Whether, upon the facts presented on this record, the

appeal to the head of the department has been abandoned.

6. Whether an order for changes issued to petitioners

by the government after the work was well under way,

changing the construction undertaken by petitioners from

a low dam to the low development of a high dam (Appendix

“‘C,”’ infra, pp. 26-27, R. 76, Fdg. 11), dropped Article 15 as

a provision of petitioners’ contract.

Statement of the Case

1. On July 16, 1934, the petitioners entered into a con-

tract with the government, signed by R. F. Walter, Chief

Engineer, Bureau of Reclamation, representing the Govern-

ment (R. 72, Fdg. 2) and approved by Harold L. Ickes,

Public Works Administrator (Exhibit ‘‘A’’ annexed to

Petition). The contract was for the construction of the

‘*first development’’ of the Grand Coulee Dam on the

Columbia River (R. 72, Fdg. 2). The contract consisted

of Government Form PWA No. 51, Specifications No.

570, and numerous drawings (Exhibit ‘‘A’’ annexed to

Petition). With a few exceptions, it was a unit price con-

tract (R. 72, Fdg. 3). Petitioners were to do the work

and furnish the labor, plant and equipment; the government

was to supply the material (R. 72, Fdg. 2). The stated

consideration was $29,399,301.50 (R. 72, Fdg. 2).

2. The structure called for by petitioners’ contract was

for a low dam—a core of the contemplated high dam which

by the ‘‘second development’’ was to be constructed by

building over the low dam a high concrete cowl extending

the low dam to the height and width of the high dam (R.

74, Fdg. 9; R. 76, Fdg. 11). The high dam was to be a

2a

—

6

power dam. Petitioners began work October 4, 1934 (R.

73, Fdg. 5). On June 5, 1935, petitioners received Order

for Changes No. 1, signed by the contracting officer (R. 76-

77, Fdg. 11) and approved by Secretary Ickes (Exhibit ‘‘B”’

annexed to Petition), which effected a complete change

(Appendix ‘‘C,”’ infra, pp. 26-27) : the entire dam was to be

built as a single structure; the dam was to be not only a

power dam but an irrigation dam as well, with pumphouses,

pumps and equipment for lifting the water from the pool

into the Grand Coulee of the Ice Age for supplying water to

the arid lands beyond (Exhibits ‘‘A’’ and ‘‘B’’ annexed to

Petition). Of this high dam petitioners were directed

to build the lower part and the foundations of the power

and pumphouses (Exhibit ‘‘B’’ annexed to Petition). This

order stated that, ‘‘In lieu of constructing the Grand Cou-

lee Dam and the appurtenant works in accordance with the

drawings and Specifications No. 570 you are directed to

construct the dam and appurtenant works in accordance

with the revised designs as shown on the attached general

drawings * * *’’ (Appendix ‘‘C,”’ infra, pp. 26-27; R. 76-

77, Fdg. 11). The Order further provided that all work shall

be done under the detailed instructions contained in Specifi-

cations No. 570 where these were applicable as determined

by the contracting officer and otherwise in accordance with

new instructions and drawings which were to be furnished

(Appendix ‘‘C,”’ infra, pp. 26-27; R. 77, Fdg. 11). The

Order also fixed the time for the adjustment of compensa-

tion (Appendix ‘‘C,”’ infra, pp. 26-27; R. 77, Fdg. 11).

This dam is the largest man-made structure on earth

(R. 78, Fdg. 13). The water of the Columbia river im-

pounded by the dam extends 151 miles to the Canadian

border (R. 73, Fdg. 4). It is 4300 feet long at the

=

7

crest, 550 feet high, and 500 feet wide at the base (R. 78,

Fdg. 13). Petitioners’ organization consisted of over 5000

workmen, working in three shifts daily (R. 73, Fdg. 7).

The government’s organization consisted of from 500 to

1000 officers and men (R. 73, Fdg. 7).

3. Work upon the new structure described by Change

Order No. 1 proceeded immediately (R. 76, Fdg. 11). In

December, 1935, an ‘‘Adjustment of Compensation’’ was

entered into by the parties and approved by the Secretary

(R. 77, Fdg. 12). This document carried many new de-

sign drawings and some twenty pages of new specifica-

tions (Exhibit ‘‘B’’ annexed to Petition). This new and

larger work required by Order for Changes No, 1 and the

Adjustment of Compensation resulted in increasing the

consideration stated in the original contract from approxi-

mately $29,000,000 to almost $40,000,000 (R. 76, Fdg. 11).

The government accepted petitioners’ work March 21, 1938

(R. 73, Fdg. 5).

4. Differences as to the work required to be performed

under the contract and as to other matters relating thereto

arose from time to time (R. 79-80, Fdg. 16). Many of these

differences were adjusted by informal communication be-

tween the contracting officer’s representative on the job

and the petitioners’ representatives (R. 79-80, Fdg. 16).

Others were not adjusted in such fashion, and protests were

made to the contracting officer or to the contracting offi-

cer’s representative (R. 80, Fdg. 16). When adjustment

could not then be reached and adverse decision was made

by the contracting officer, the petitioners upon occasion

appealed in writing to the Secretary of the Interior (R.

80, Fdg. 16; R. 106-108; Plaintiffs’ Exhibit ‘‘J,’’ pp. 17-21,

296, 581-582; Appendix ‘‘E,’’ infra, pp. 38-40), submitting

ST eee ee, ore wm DS

8

their appeal to the contracting officer for transmittal to the

Secretary as required by the contracting officer (R. 106-107).

The contracting officer had no fixed rule for handling appeals

but, as in the case of one claim which is the subject of this

suit, might receive an appeal to the Secretary of the Inter-

ior and fail to transmit it to the Secretary because, ‘‘We did

not feel this matter would ripen into a claim that was neces-

sary to submit to the Secretary at that time, in view of the

fact that there were numerous other claims, which, in the or-

derly process, would be transmitted to the Secretary, even-

tually’’ (R. 107-108; Appendix ‘‘E,’’ infra, pp. 31-40). In

this instance, petitioners had no further word from the

Bureau of Reclamation or the Department after submitting

their appeal (R. 106-107).

5. Order for Changes No. 1 did not expressly bring for-

ward the provisions of the original contract and specifica-

tions for protest and appeal (Appendix ‘‘C,’’ infra, pp.

26-27 ; R. 76-77; Exhibit ‘‘B’’ annexed to Petition).

6. The petitioners, on November 22, 1937, formally filed

claims which constitute causes of action in suit with the

head of the department (R. 80, Fdg. 17). .The petitioners

accompanied the claims with a letter in which they charged

the contracting officer and other government representa-

tives with wrongful, unfair, and arbitrary conduct (R. 87-

88). No action was taken by the head of the department in

respect of the petitioners’ charges (R. 185, 194). The act-

ing head of the department referred the claims and letter

back to the contracting officer (R. 80, Fdg. 17), although

such claims had previously been decided by the contracting

officer (R. 93; Plaintiffs’ Exhibit ‘‘J’’, pp. 3, 82, 91, 154,

155, 158, 202, 250, 253, 262, 265, 285, 296, 309, 312, 327, 368,

370, 373, 388, 419, 481, 487, 488, 490, 492, 576). Between

November 22, 1937, and February 14, 1938, ten additional

claims of the same character were sent to the head of the

department, who also referred them to the contracting

officer (R. 88). By letter of April 13, 1938, three additional

claims were filed with the contracting officer (R. 88-89).

The amount represented by the claims thus submitted to

the Secretary and the contracting officer was in excess of

$5,000,000 (R. 89). The petitioners pressed for early

administrative consideration of the claims (R. 97). The

policy of the head of the department and the contracting

officer was to give priority to new projects and contracts

and to postpone the consideration of claims growing out

of work already done (R. 207). The petitioners also in-

sisted that the contracting officer grant them and their of-

ficers and witnesses a hearing upon the merits of the claims

(R. 89).

7. In July, 1938, the contracting officer informed the

petitioners’ representatives that a hearing was superfluous

(R. 89, 90-91). On July 14, 1938, the petitioners in writ-

ing complained of such attitude to the head of the depart-

ment and reported that the contracting officer had clearly

indicated to them that he intended to construct such de-

fense against the claims as the evidence available to him

might seem to him to justify (R. 91). The letter of July

14, 1938, and later letters dated August 11 and October

12, 1938, requesting the head of the department to take

remedial action respecting the contracting officer were

acknowledged by subordinates without making reference to

this matter (R. 147-157, 164). Counsel for petitioners

renewed this request by telegram of October 23, 1938, to

the Secretary who responded in terms of resentment,

anger, and insult (R. 90, 157-160). The head of the de-

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10

partment refused to exercise remedial supervision over the

contracting officer and testified that he regarded the re-

quests for such action and the complaints against the con-

tracting officer as a personal and official affront to him in

‘thitting at me’’ over the contracting officer’s shoulder

(R. 210).

8. Under date of December 5, 1938, the contracting offi-

cer made his ‘‘Findings of Fact and Decision’’ and trans-

mitted a copy to the petitioners’ counsel (R. 80, Fdg. 18).

On January 4, 1939, petitioners appealed from these find-

ings to the head of the department without recognizing

any requirement therefor and with full reservation of their

rights to have all issues adjudicated by the proper courts

(R. 82, Fdg. 21; R. 93). The Secretary was so rushed that

he could not see counsel on the subject of procedure (R. 172).

He turned the claims over to Mr. Margold, the department

solicitor, for consideration and report (R. 82-83, Fdg. 23).

The department solicitor saw counsel February 6, 1939 (R.

83, Fdg. 23). On this occasion, counsel requested a full

hearing with the right to offer the oral testimony of wit-

nesses and to examine the contracting officer on the facts

and any of his subordinates from whom he had obtained

the facts used by him in support of his findings (R. 83,

Fdg. 23). Petitioners’ counsel understood that Mr. Mar-

gold rejected such procedure (R. 94, 111-112). Accordingly,

counsel wrote the Secretary February 7, 1939, advising

him in detail of the nature of the hearing counsel had re-

quested Mr. Margold to conduct and of counsel’s under-

standing that Mr. Margold had denied this request (R. 94,

171, 174). By letter of February 11, 1939, to petitioners’

counsel, Mr. Margold informed counsel that he had ‘‘de-

cided to grant, without any qualification, the request which

you made during your personal conference with me last

ei |

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Monday for a full and complete hearing of the merits of

the controversy’? (R. 94), This letter also informed

counsel that Mr. Margold contemplated an arrangement

whereby an attorney of the Department of Justice would

represent the government’s interests (R. 94, 174-175).

In this letter, the solicitor stated that circumstances had

arisen which required him immediately to leave for Cali-

fornia and which ‘‘may delay my return for a few weeks’’

(tbid.). On February 16, petitioners’ counsel replied that

the solicitor’s decision in respect of the hearing was entirely

agreeable (R. 94). On February 24, the solicitor in re-

sponse to counsel’s request agreed that counsel and Mr.

Miller, the attorney of the Department of Justice named

by the solicitor to represent the government, might have

pre-trial conferences for the purpose of stipulating such

facts as they might agree upon (R. 117, 177-178).

Counsel for petitioners then visited the Department of

Justice for the purpose of thus conferring with Mr. Miller

and was there informed that the solicitor had not made, and

could not make, arrangement in which the Department of

Justice would represent the government’s interest at the

hearing (R. 94, 126, 179-180).

9. On February 27, 1939, counsel wrote the acting head

of the department, Mr. Slattery, relating the abortive re-

sults of the solicitor’s arrangement as counsel learned them

upon his visit to the Department of Justice (R. 94). On

March 9, 1939, the acting head of the department, Mr.

Burlew, wrote counsel saying that the falling-through of

that arrangement in no way affected the hearing, except

in so far as it concerned the fixing of a date, and concluded

by writing that ‘‘It appears that there now exists no reason

why a date may not be set for the inauguration of the hear-

ing. Accordingly, in the near future you will be notified

LNG RNG RT ITEP

12

by the solicitor as to a date which is agreeable to him

and advised as to the procedure which is deemed appro-

priate.”” (Emphasis supplied) (R. 95). Nothing more

was heard from the department or from the solicitor until,

on May 1, 1939, petitioners filed their original petition in

the Court of Claims, over 17 months after the submission

of the original 16 claims to the Secretary and 78 days after

Mr. Margold left Washington to be gone a few weeks

(R. 95).

10. The amended petition was filed in the Court of Claims

February 14, 1940 (R. 10). The court referred the case

to a commissioner, who took over 8,000 pages of testimony

(R. 71). The court in its opinion rested its decision on the

ground that Article 15 of the contract obligated petitioners

to appeal the contracting officer’s decision to the head of the

department and to exhaust that appeal and that, having

abandoned the appeal without justification, they could not

resort to the Court of Claims (R. 96-97).

Specification of Errors to Be Urged

First Group

The court erred—

1. In failing to hold that Article 15 of the contract is

invalid as an unlawful impairment of the jurisdiction of

the Court of Claims; and

2. In failing to hold that Article 15 is invalid as ultra

vires the authority of the Secretary of the Interior because

thereby he presumes the power (a) to limit and control

the jurisdiction of the Court of Claims and (b) to make deci-

sions final and conclusive upon the United States.

a EB

13

Second Group

The court erred—

3. In failing to hold that Article 15 was rescinded by

Change Order No. 1.

4. In failing to hold that petitioners’ compliance with

Article 15 was waived by the government; and

5. In failing to find that petitioners’ compliance with

Article 15 was prevented by the government.

Third Group

The court erred—

6. In failing to hold that Article 15, construed in the light

of paragraph 14 of Specifications 570, does not contemplate

or require appeal of the decisions of the contracting officer

to the head of the department.

7. In holding that Article 15, even if it is not valid to

authorize final decisions upon questions of law, is neverthe-

less valid to authorize final decisions upon questions of

fact; and

8. In failing to hold that, if Article 15 is invalid to au-

thorize final decisions upon questions of law, it is invalid to

require the submission of any questions to the head of the

department for any purpose.

Fourth Group

The court erred—

9. In failing to consider and determine the distinct causes

of action upon their substantive merits.

3a

7

10. In failing to consider the testimony of Secretary Ickes

as to his unfairness, bias, and prejudice.

14

11. In failing to hold that Secretary Ickes was so biased,

prejudiced, and arbitrary that the appeal to him was futile.

12. In finding that it had not been proved that the con-

tracting officer was arbitrary or capricious or lacking in

good faith.

13. In failing to find that the head of the department

failed to exercise effective control over his subordinates

to relieve petitioners of the effect of the arbitrary conduct of

such subordinates.

14. In finding that petitioners abandoned their appeal to

the head of the department.

15. In failing to find that the procedure of Article 15 was

inadequate to accomplish its purposes.

16. In failing to find that petitioners were excused from

persisting in their appeal to the head of the department,

assuming that compliance therewith was not waived or pre-

vented by the government.

17. In finding that the head of the department did not fail

or refuse to entertain petitioners’ appeal.

18. In failing to find that the failure of the solicitor of the

department to set a day for the commencement of hearing

on appeal was unreasonable; and

19. In failing to enter judgment for the petitioners

as to each cause of action.

15

Reasons for Granting the Writ

The questions here involved are of far-reaching impor-

tance. They affect not only the field of construction con-

tracts but also the even broader field of government con-

tracts in general. This Court has consistently recognized

the substantial nature of questions arising out of the appli-

cation of Article 15 and similar contractual provisions and

the desirability of settlement of such questions by the high-

est judicial authority. It has clarified the attitude of the

courts upon most of the questions arising under Article 15

when the application of the provision is limited to fact

through the frequent exercise of its jurisdiction to review

judgments of the Court of Claims. Merrill-Ruckgaber Co.

. v. United States, 241 U. 8. 387; United States v. Callahan

Walker Constr. Co., 317 U. S. 56; and numerous other cases.

It is now being increasingly confronted, however, with the

desirability of settling questions under Article 15 when it

is employed without limitation upon the authority of execu-

tive officers and employees finally to determine all ques-

tions. United States v. McShain, 308 U. 8S. 512; United

States v. Blair, 321 U. S. 730; United States v. Beuttas, 324

U. S. 768. The case herein, as disposed of by the Court of

Claims, raises fundamental questions affecting the inherent

availability of Article 15 as a proper and effective provision

for the just determination of disputes in respect of law,

economy, and public administration. It is, at least, salu-

tary that these questions be finally settled as to the standing

and scope of the Article in law. This is so for the guidance

of the government. S.J. Groves & Sons Co. v. Warren, 135

F, (2) 264. It is so for the direction of the contracting in-

dustry, basic to the welfare of the Nation, which finds its

most considerable opportunities in these times in the field

of government contract. It is especially so for the assur-

ance of final justice to these petitioners who are now de-

ieee net

16

prived of all recourse to any tribunal which may determine

the merits of their claims totalling over $5,000,000, claims

which have never been considered by any public office or

officer other than the contracting officer out of whose con-

duct all of them arose.

In the premises and with specific reference to the par-

ticular questions presented in this case, the petitioners

assign the following reasons for granting the writ:

1. At the outset it must be determined whether the head

of the department can make final determinations on all

questions. If he cannot, the question is squarely presented

as to whether Article 15 would then still impose the neces-

sity of appealing to him before suing in the Court of

Claims. The latter question, although of the utmost

importance to those contracting with the government, has

never been presented to this Court for decision; and the

question whether the head of a department can make final

decisions on questions of law has not been, but should be,

settled by this Court. This latter question was expressly

left open in the recent case of United States v. Beuttas, 324

U. 8. 768, although the Court noted in its opinion that there-

tofore the decisions of this Court had not explicitly drawn

any distinction between questions of fact and law. This

leaves uncertainty as to the state of the law, especially in

view of this Court’s per curiam decision in United States v.

McShain, 308 U. 8. 512. The confusion on this point is

acutely reflected in the recent wide contrariety among

the decisions of the Court of Claims.

These two related questions present the pressing need

for exploration and determination by this Court of the

extent, if any, that the doctrine of the exhaustion of admin-

istrative remedies is applicable to consensual agreements.

2. The decisions of the court below that petitioners were

not justified in suing in the Court of Claims without a

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17

decision by the head of the department is probably in con-

flict with the decisions of this Court. United States v.

Smith, 256 U. 8. 11, 16; Ripley v. United States, 223 U. 8.

695, 702; cf. United States v. Blair, $21 U. 8. 730.

It is submitted that the degree of prejudice and bad faith

in the head of the department here was as great as was

found by this Court to have existed in the Smith and other

cases decided by this Court. It would have been as useless

here, as 'it was found by this Court to have been in the Smith

case, for petitioners to have tried to get a fair decision from

the head of the department. The court below overlooked

the view admittedly taken by the head of the department

with respect to the contract and his functions in making

decisions thereunder. Although the contracting parties

stood on an equal footing, the department head would have

required petitioners to make out their case by a preponder-

ance of the evidence, and in making his decision on the

claims he says that he would accept more readily the state-

ment of a government official than the statement of a witness

for the contractor. These views, it is submitted, go to the

very roots of our judicial system’s conception of fair deal-

ing, and this Court has held that the presupposition of fair

dealing underlies government contracts. Ripley v. United

States, 223 U. 8. 695, 702; United States v. Smith, 256 U. 8.

11, 16; United States v. Blair (dissenting opinion), 321

U. 8. 730, 738-739.

It is submitted that in substance the basis for the decision

in the Smith and other applicable cases decided by this

Court is that forfeitures are to be abhorred, and for that

reason the doctrine in the Smith case must be strictly and

vigorously adhered to by the courts that apply it. Should

the decision of the court below be allowed to stand petition-

ers would be denied all right to have their claims adjudi-

cated on the merits. This, in fact and result, would con-

stitute that forfeiture which the law abhors.

3. The Court of Claims avoided making any finding as to

the bad faith on the part of Secretary Ickes. Government

contracts are phrased so as by their terms to condition

access to the courts for determination of the merits of all

controversy which may arise thereunder upon complete

exhaustion of an administrative procedure except when the

bad faith of the head of the governmental department con-

cerned may be shown. Under these circumstances it is

manifest that, where the prescribed procedure is admittedly

not followed by a contractor who assigns, for excuse there-

from, that compliance with the procedure would be futile

because of the bad faith of the departmental head and

adduces substantial evidence in the record tending to show

the existence of that bad faith, the essential question in the

case is whether the requisite bad faith has been proved.

Thus, it is equally manifest that an answer to this question

which may be and frequently is determinative of every issue

is of greatest consequence to the contractor. It follows,

therefore, that it is an important question of the law of

government contracts whether, when pertinent allegations

“are made and substantial evidence is of record, the Court of

Claims may properly omit to make its finding as to the

existence or non-existence of bad faith in declining to con-

sider the merits of disputes arising under contracts which

are presented to it for determination.

Conclusion

For the foregoing reasons it is respectfully submitted

that this petition for a writ of certiorari should be granted.

Samvuet T. ANSELL,

Counsel for Petitioners.

May 3, 1946.

mene

wren <S Prey —_

a Tn AE OT

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1945

No. 1200

SILAS MASON COMPANY, INC., WALSH CONSTRUC-

TION COMPANY, ATKINSON-KIER COMPANY,

Petitioners,

vs.

THE UNITED STATES

BRIEF IN SUPPORT OF PETITION FOR WRIT OF

CERTIORARI

Opinion of the Court Below, Jurisdiction of the Court,

Statement of the Case, and Specification of Errors to Be

Urged.

Reference to the opinion of the Court of Claims is made

in the Petition, ante, page 1. A statement of the grounds on

which the jurisdiction of this Court is invoked is also con-

tained in the Petition, amte, pages 1-2. A statement of the

case is contained in the Petition, ante, pages 5-12. A speci-

fication of errors intended to be urged is contained in the

Petition, ante, pages 12-14. Accordingly, these subject-

matters are not set forth in this brief.

Argument

The petitioners believe that a supporting brief in addi-

tion to the statements embodied in Reasons for Granting

the Writ, Petition, ante, pages 15-18, will be helpful only

in respect of the third reason which is, in substance, that

this Court should determine whether the Court of Claims

may decline to adjudicate disputes arising out of a govern-

ment contract where appeal to the head of the department

was provided but was not completed without making find-

ings in respect of the bad faith of the head and of the other

inadequacy of the appeal procedure as to which allegations

are made and substantial evidence is contained in the

record. They believe that the presentations of the first

and second reasons in the Petition, ante, pages 16-17, are

full and concise statements of these particulars and need no

enlargement here. Accordingly, this brief is directed to a

further development of the third reason alone and is

intended only to supplement the statement of that reason in

the Petition, ante, page 18.

I

The petitioners alleged in the Court of Claims not only

that the Secretary of the Interior manifested that he was

incapable of giving just and fair consideration to the peti-

tioners’ appeals but also that they complied with the proce-

dure established in the contract for the administrative

settlement of disputes where such compliance was not im-

possible (R. 15-16). The Court of Claims made no finding

upon this allegation in refusing to consider the petitioners’

claims upon their merits although much evidence upon the

subject was adduced. The impossibility of the petitioners’

compliance with the settlement procedure was shown by the

evidence to have been the result of the conduct of the con-

tracting officer and the Secretary of the Interior in dealing

——————————

a

21

with the petitioners’ protests and appeals made during the

course of the work. This evidence shows:

Numerous disputes as to the work required to be per-

formed and as to other related matters arose. Some of

these differences were adjusted to the satisfaction of the

parties by informal communication between the contracting

officer’s representative on the job and the petitioners’ repre-

sentatives. The disputes remaining unadjusted through

this informal means are those embodied in the causes of

action which are the substance of the petition in the court

below. Those disputes which were not adjusted through

informal communication were treated in a variety of ways:

one (part of the seventh cause of action) was appealed by

the petitioners from an adverse decision of the contracting

officer to the Secretary of the Interior ‘‘in accordance with

Article 15’’ but the contracting officer, without the knowl-

edge of the petitioners, failed ever to transmit it to the

Secretary ;* two (the first and twenty-ninth causes of action

for which a total judgment of $1,188,349.17 was asked)

were appealed in the fall of 1937 from adverse decisions

of the contracting officer or of his representative to the

Secretary of the Interior but were never acted upon by him

(Plaintiffs’ Exhibit ‘‘J,”’ pp. 17, 582); three (the fifth,

eleventh, and seventeenth causes of action for which a total

of $525,608.16 was asked) were protested to the contracting

officer under paragraph 14 of the specifications ( Appendix

‘*B,”’ infra, pp. 25-26) in each case over eight months prior

1 The treatment accorded this appeal taken entirely within the literal re-

quirements of Article 15 as interpreted to the petitioners by the contracting

officer is such conclusive evidence of abandonment of Article 15 by the gov-

ernment during the course of the work as to require the entire history of

it to be emphasized to this Court. Accordingly, this history is presented

in Appendices “D” and “E”, infra, pp. 27-40, where the contracting officer's

findings and decision including the protests and original appeal are set

forth and in the testimony of the respondent’s witness Harper which is

printed in the record (R. 104-108).

7

to completion of the work, but the contracting officer failed

to render any decision thereon (Plaintiffs’ Exhibit ‘‘J,’’ pp.

191-203, 330-331, 404-405); and four (the fourth, tenth,

thirteenth, and eighteenth causes of action for which a total

of $947,788.31 was asked), arising near the completion of

work, were submitted to the Secretary of the Interior for

determination after adverse decision by the contracting

officer in the general submissions hereinafter described but

were then sent by him to the contracting officer for another

decision (Plaintiffs’ Exhibit ‘‘J,’’ pp. 137-157, 306-312,

364-374, 444-492).

By letters of November 22, 1937, and January 17, 1938,

all the disputes then remaining unsettled were submitted

by the petitioners to the Secretary of the Interior as ‘‘un-

authorized requirements”’ of the contracting officer (Plain-

tiffs’ Exhibit ‘‘J,’’ pp. 22-41, 42-54; R. 135-140, 143”

The Acting Secretary of the Interior turned the submission

of November 22, 1937, over to the contracting officer ‘‘ with

instructions that he proceed in accordance with Article 15

of the contract.’’? The petitioners were then informed by

the Acting Secretary of his disposition of the claims (R. 140-

141). Thereupon the petitioners wrote the Secretary in effect

that they were not invoking Article 15 in their presentations

as they believed it to be without binding force and effect in

those respects and that they had submitted the matters to

him as the administrative departmental head authorized

by law to contract for the construction of the dam and from

whom the requirements of officials of the Department upon

2A further submission of three claims and a modification of one claim

previously submitted was made) by the petitioners April 13, 1938, and state- |

ments of damage on each of the claims were submitted at various dates

from March 4, 1938, to May 8, 1988. These submissions were made to the

contracting officer rather than to the head of the department upon the

suggestion of the’ Secretary of the Interior (R. 141).

the dam are presumed to emanate (R. 141-142). They added,

however, that this difference in view as to the capacity in

which the Secretary might act in these respects seemed to

raise no issue at the time as the petitioners wished to reach

an administrative settlement and the methods and pro-

cedure to be adopted and the officials to bring the matters

under departmental consideration were for the Secretary’s

determination (R. 142). Subsequently, the petitioners were

informed by the Secretary that their letter of January 17,

1938, had likewise been sent to the contracting officer for

consideration in connection with the ‘‘Findings of Fact’’

to be prepared by him under Article 15 (R. 144).

Under these circumstances, where many of the disputes

had already been the subject of formal decision by the con-

tracting officer, where some of these disputes had been

formally appealed to the Secretary of the Interior without

result, where other disputes had been protested to the con-

tracting officer months and years before without decision,

and where the petitioners informed the Secretary that they

did not regard their submissions of November 22, 1937 and

January 17, 1938, to him as invoking Article 15, the con-

tracting officer proceeded to a consideration of all the dis-

putes. On December 5, 1938, he rendered his written deci-

sion affirming all his prior decisions and requirements

except in one lesser respect.

The petitioners appealed the decision of the contracting

officer to the Secretary January 4, 1939, ‘‘without recogni-

tion of any supposed requirement therefor and with full

reservation of the contractor’s rights to have all issues ad-

judicated by the proper courts’? (Emphasis supplied.) (R.

170). No communication was had by the petitioners from

which they might have been advised that the Secretary

would consider their appeal upon any different conditions

from those stated by them to him in transmitting their

appeal. It was this appeal that the petitioners abandone-,

as he court below found, by entering suit in the Court of

Claims May 1, 1939, when neither the Secretary nor his

representative, the solicitor of the Department, had yet

made any determination of the time when their considera-

tion of the appeal would commence.

It is manifest upon this state of established facts that

the petitioners had set up and prc ved in the Court of Claims

justification for not completing the procedure of Article 15

for administrative settlement of disputes arising under

their contract. If the effect of Article 15 be that of a trans-

fer of jurisdiction from the Court of Claims to the Adminis-

trative authorities, or if it be that of a condition upon the

court’s jurisdiction that the contractor merely exhaust his

contractual remedies before turning to the Court of Claims

for relief, it is plain that prevention of performance of the

contractors’ obligation by the government removes any

bar to a condition upon adjudication of the claims upon

their merits by the Court of Claims.

It follows, then, that this Court should decide whether

the Court of Claims was correct in denying adjudication

of petitioners’ claims upon their merits without findings

as to the inadéquacy of the appeal procedure established

by Article 15 of the contract.

Conclusion

Wuenerorg, it is respectfully submitted that the petition

for a writ of certiorari should be granted.

SamvuEt T. ANSELL,

Counsel for Petitioners.

May 3, 1946.

aa

25

APPENDICES

The contract, the specifications, the drawings, Change

Order No. 1, the Adjustment of Compensation, and the

Findings of Fact and Decision of Contracting Officer, have

been certified as a part of the record by the Court of

Claims and are filed with the Clerk of the Court. The

parties have stipulated that they need not be printed in

this Court. The pertinent portions of these documents are

reproduced as follows:

APPENDIX “A”

Contract [2r-4359

Art. 15. Disputes.—All labor issues arising under this

contract which cannot be satisfactorily adjusted by the con-

tracting officer shall be submitted to the Board of Labor

Review. Except as otherwise specifically provided in this

contract, all other disputes concerning questions arising

under this contract shall be decided by the contracting

officer or his duly authorized representative, subject to

written appeal by the contractor within 30 days to the head

of the department concerned or his duly authorized repre-

sentative, whose decision shall be final and conclusive

upon the parties thereto as to such questions. In the

meantime the contractor shall diligently proceed with the

work as directed.

APPENDIX “B”

Spectrications No. 570

14. Protests. If the contractor considers any work de-

manded of him to be outside the requirements of the con-

tract, or considers any record or ruling of the contracting

officer or of the inspectors to be unfair, he shall immedi-

ately upon such work being demanded or such record or

ruling being made, ask for written instructions or decision,

whereupon he shall proceed without delay to perform the

work or to conform to the record or ruling, and, within ten

(10) days after the date of receipt of the written instruc-

tions or decision, he shall file a written protest with the

26

contracting officer, stating clearly and in detail the basis

of his objections. Except for such protests or objections

as are made of record in the manner herein specified and

within the time limit stated, the records, rulings, instruc-

tions, or decisions of the contracting officer shall be final and

conclusive. Instructions and/or decisions of the contract-

ing officer contained in letters transmitting drawings to the

contracter shall be considered as written instructions or

decisions subject to protest or objection as herein provided.

APPENDIX “O”

Cuance Orper No. 1

(Exhibit ‘‘B’’ Annexed to Petition)

Washington, D. C., June 5, 1935.

Orper ror CHances No. 1

Silas Mason Company, Inc.,

Walsh Construction Company, and

Atkinson-Kier Company,

Mason City, Washington.

GENTLEMEN :

Additional information having become available it is

found desirable, in pursuance of the provisions of Article

4 of the contract with you dated July 16, 1934 (Symbol No.

I-2r-4359), and in pursuance of the provisions of paragraph

24 of specifications No. 570 forming a part thereof, to

change the dimensions and design of the Grand Coulee Dam

and power plant to meet such conditions. In the opinion of

the contracting officer those changes are necessary and

desirable.

In lieu of constructing the Grand Coulee Dam and the

appurtenant works in accordance with the drawings and

specifications No. 570 you are directed to construct the

dam and appurtenant works in accordance with the revised

designs as shown on the attached general drawings Nos.

27

222-D-751, 752, and 753. Other drawings showing addi-

tional details will be furnished for construction purposes.

The principal changes involved are as follows:

All work shall be done under the detailed instructions

contained in specifications No. 570 where these are appli-

cable as determined by the contracting officer and otherwise

in accordance with the detailed instructions and drawings

which will be furnished by the contracting officer.

Compensation for the work involved as a result of this

order shall be made in pursuance of the provisions of para-

graph 24 of specifications No. 570 and (or) the provisions

of Article 4 of the contract. The time within which to

submit claims for adjustment of compensation shall be 60

days from the date of receipt of this order, unless the con-

tracting officer for proper cause shall extend such time.

Very truly yours,

(S.) R. F. Waurer,

Chief Engineer, Bureau of Reclamation.

Approved, May 24, 1935.

(S.) Exwoop Mezap,

Commissioner of the Bureau of Reclamation.

Approved, June 5, 1935.

(S.) Harotp L. Ickgs,

Secretary of the Interior.

APPENDIX “D”

FINDINGS OF FACT AND DECISION OF CONTRACT-

ING OFFICER (Plaintiffs’ Exhibit ‘‘J’’, pp. 234-236,

243, 244, 245, 246, 247, 250-251, 256-258).

Finpines oF Fact anp Decision or Contractine OFFICER

on Cram No. 6

Damages to the Contractor resulting from Grout Pipe

becoming clogged because of a defective design provided

by the Government, and Damage because of a requirement

i 5 ied

LUGE LEAL: PTS

28

by the Government that the Contractor perform work not

required by the Specifications to prevent grout pipe from

becoming clogged.’’

Amount

Claimed In Date

$34,401.73 Original Claim Feb. 14, 1988

$34,401.73 Final Release Mar. 21, 1938

$29,298.43 Statement of Damages Mar. 4, 1938

1. The contractor’s claim is for remission of penalties

assessed on account of clogged grout pipe, and for addi-

tional compensation for work done to keep the pipes from

becoming clogged. The contractor’s contention is that

the pipes became clogged through no fault of its own, but

chiefly because of failure of the grout stops, which were

designed by the Government, and that the work necessary

to keep the pipes open, consisting of circulation of water

through the grout pipe system, was extra contractual.

2. Paragraph 73 of specifications no. 570, entitled ‘‘Con-

traction joints’’, reads in part as follows:

‘«* * * contraction joint sealing strips consisting

of non-corrosive metal sheets equivalent to No. 20 U. S.

Standard gage in thickness shall be placed in each

contraction joint as shown on the drawings or as di-

rected by the contracting officer. The sealing strips

shall be carefully joined together by brazing or welding

so as to form a continuous water-tight diaphragm in

each contraction joint. Adequate provisions shall be

made to support and protect the sealing strips during

the progress of the work. The contractor shall replace

or repair at the contractor’s expense any sealing strip

punctured or damaged before final acceptance of the

work * @ #9)

Paragraph 74 of specifications no. 570, entitled ‘‘ Pipe for

grouting Contraction Joints,’’ reads in part as follows:

««* * * Great care shall also be taken to insure that

all parts of the system are maintained free from dirt

and other foreign substances. All pipe and fittings

shall be thoroughly cleaned immediately before con-

— ae ee Oe

crete is placed about them. After each lift of the

grouting system is placed and before any concrete is

placed around it, and at such other times as the con-

tracting officer may direct, the pipe shall be tested by

forcing a current of air under pressure through it to the

satisfaction of the contracting officer, after which it

shall be immediately temporarily capped or otherwise

closed to avoid the possibility of any foreign substance

entering it until it is pressure grouted. Any pipe that

becomes clogged before final acceptance of the work,

due to any cause, shall, if practicable, be cleaned or

opened up to the satisfaction of the contracting officer.

For any pipe which the contractor fails to open up

or to replace to meet this test the contractor shall pay

to the Government as fixed, agreed, and liquidated

damages the sum of two dollars ($2.00) per linear foot

of the total length of pipe which is thereby made in-

effective as determined by the contracting officer.’’

3. When the contractor installed the metal grout stops

prescribed by paragraph 73 of specifications no. 570, they

were often improperly embedded and holes were some-

times punctured in the seals after being placed ; imperfect

tamping was done, causing porous concrete in contact with

the seals, and in many cases the grout pipes were improperly

hooked up by inexperienced laborers. Because of this faulty

installation, and also because of natural seepage through

shrinkage cracks in the concrete, grout from the ‘‘C’’ hole

grouting operations sometimes got into the grout pipes of

the dam. When grout entered the grout pipes in this

manner it was ordinarily washed away by the water cir-

culation method, but on numerous occasions the contractor

failed to have facilities immediately available for wash-

ing ovt pipe before the grout solidified and, even when’

such facilities were available, there was often a failure

to do any such washing, or to do it in a careful and work-

manlike manner. When this occurred, clogging of the grout

pipes usually resulted and in such cases the contractor was

advised, in accordance with paragraph 74 of specifications

no. 570 quoted above, of the assessment of liquidated

damages at $2.00 per foot for the lengths of piping clogged.

—----e

30

4. A resume of the assessments made for clogged grout

pipes of the contraction joint grouting system (not in-

cluding the wash pipe serving the grout grooves) is as

follows:

Contractor’s

Date of Length Amount Claim for

Pipe of Remission of

Letter Protest Clogged Assessment Assessment

Oct. 22,1936 Nov. 7, 1936 231.8 ft. $463.60 $463.60

Oct. 27,1936 May 1, 1937 340.0 ft. 680.00 680.00

Nov. 7, 1936 May 1, 1937 85.0 ft. 170.00 170.00

Nov. 27,1937 Dec. 8, 1937 271.8 ft. 543.60 543.60

Jan. 27,1938 Feb. 10, 1938 54.4 ft. Se. eeeeeanias

Note: It will be noted from the next to the last paragraph

of the contractor’s letter of February 10, 1938, that it

accepts responsibility for the clogging of the 22 feet of

pipe in block 31C. The contractor now advises verbally

that it omitted including in its claim the remission of the

penalty assessed for the 32.4 feet of clogged pipe in block

41A. This accounts for the difference of $108.80 in the

total of the contractor’s claim and the total of penalties

assessed.

5. Early in the concrete placing program the con-

tractor’s field forces requested permission to circulate

water through the contraction joint grouting system, in-

stead of first testing it with air and then washing it out if

it was found to be clogged. This proved to be the cheapest

and most practicable way of protecting the grout pipes

during the ‘‘C’’ hole grouting, and was therefore con-

tinued during those operations. Because of the success

of this method, the change was satisfactory to the Govern-

ment. The cost of this operation was not substantially

greater than the method of air testing and washing, and

its 100 percent efficiency in preventing clogging of grout

pipes meant a saving in both money and time to the con-

tractor.

6. The contractor is entitled to no additional compensa-

tion by reason of this claim and the contractor’s claim is

denied.

rere

—

31

APPENDIX “E”

UNITED STATES DEPARTMENT OF THE INTERIOR

BUREAU OF RECLAMATION

Coulee Dam, Washington

October 22, 1936

Mason-Walsh-Atkinson-Kier Company,

Mason City, Washington.

GENTLEMEN:

During grouting operations of the ‘‘C’’ hole at Station

A5/93 completed September 8, 1936, grout entered the

transverse joint at Station A6/24 between blocks 9 and 10,

clogging the lines and making ineffective a portion of the

grouting system for the above joint.

A print of drawing R2-1094-1 is enclosed, showing a por-

tion of the grouting system at transverse joint A6/24 men-

tioned above. From a field report of observations made

during the grouting operations and of subsequent water

tests made from the auxiliary header upstream from the

gallery at elevation 950, it is evident that the grouting sys-

tem is ineffective below elevation 940 at block 10A, and that

the 144” header from rock to elevation 950 adjacent to the

longitudinal joint at Station 19/77 is also clogged.

Under the provisions of paragraph 74 of Specifications

No. 570 and of paragraph 15 of specifications accompany-

ing Order for Change No. 1 of your contract ( symbol I2r-

4359), liquidated damages at the rate of two dollars ($2.00)

per lineal foot for 231.8 feet of clogged grout pipe, or a total

of $463.00, were deducted from payments under your Sep-

tember, 1936, estimate. Items of this deduction are as

follows:

Elev. top of pour Length of pipe in pour

920 14.2 ft.

925 57.2 ””

930 68.4 ”’

933 30.0 ”’

940 30.0 ”

1% header in 10B 32.0 ”

231.8 ”’

32

If this pipe is opened up and made effective prior to final

acceptance of the work under your contract, the above

charge will be cancelled.

Very truly yours,

F. A. Banks,

Construction Engineer.

Unirep States DepaRTMENT OF THE INTERIOR

Bureau or RECLAMATION

Coulee Dam, Washington

October 27, 1936.

Mason-Walsh-Atkinson-Kier Company, Mason City, Wash-

ington.

Clogged grouting system—Sta. A12/14

GENTLEMEN :

The 114” return header for the transverse joint between

blocks 25 and 26, axis station A12-14, serving from rock to

elevation 900, is found to be clogged. Neither the exact

date of clogging nor the cause of the clogging is definitely

known, but it was discovered when a water test was applied

to the header just prior to placing of concrete to elevation

880 in Block P7A on June 16, 1936. A recent test with

water pressure was unsuccessful in opening up the return

header.

Three hundred and forty (340) lineal feet of the grout

pipe is rendered ineffective by this plugging, from the down-

stream end of the return header to the grouting and drain-

age gallery in block 26A as shown on the attached drawing

R2-1094-3.

Under the provisions of paragraph 74 of specifications

No. 570, and of paragraph 16 of specifications accompany-

ing Order for Change No. 1 of your contract (symbol I2r-

4359), liquidated damages at the rate of two dollars ($2.00)

per lineal foot for 340 lineal feet of clogged grout pipe as

33.

outlined above, or a total of Six Hundred Eighty Dollars

($680.00), will be deducted irdiyour October, 1936, esti-

mate

If ‘this pipe is opened up and made effective prior to

final acceptance of the work under your contract, the above

charge will be cancelled.

Very truly yours,

F. A. Banks,

Construction Engineer.

Encl.

Mason City, Washington

November 7, 1936.

Mr. F. A. Banks, Construction Engineer, Bureau of Rec-

lamation, Coulee Dam, Washington.

Dear Sir:

We note that a deduction of $463.60 was made from our

September estimate as liquidated damages at the rate of

$2.00 per foot applied to 231.8 feet of grout pipe found to

be ineffective. Your letter of October 22nd explains that

the stoppage of this pipe occurred during the grouting of

the ‘‘C’’ holes.

It has been our understanding that the liquidated damage

penalty was intended to apply to the installation of the

piping for the grouting system, and we have been very care-

ful to test all installed piping, both before and after being

covered with concrete. As a matter of routine, all risers

and headers have been blown out under the supervision of

your inspection force. The pipes now found to be clogged

were tested in this manner and found to be clear up until

the grouting of the ‘‘C’’ holes was begun. There seems to

us a reasonable doubt whether we should be held respon-

sible for the stoppage of the piping system caused by entry

of grout from the ‘‘C’’ hole foundation grouting. The

fact is that we spent a great deal of money maintaining the

water flow through the joints to wash out any grout which

might enter from the foundation.

a Teka RRO ae ee Te . TERRE APRS, ESAS TNL SR git TO BOOTIES

a

Under these circumstances, we request that you recon-

sider your decision to apply liquidated damages in this case.

The same reasoning applies to the stoppage of the headers

between blocks 25 and 26 referred to in your letter of Octo-

ber 27th. Presumably, this is another case of stoppage from

the foundation grouting, inasmuch as this header was found

to be open when tested a short time before the grouting

was started. The stoppage was discovered at the first test

made after the grouting had commenced.

34

Yours very truly,

Mason, Watsu, Atkinson, Kier Company,

Geo. H. Atkinson, Job Manager.

Unrrep States DepaRTMENT OF THE INTERIOR

Bureau or RECLAMATION

Coulee Dam, Washington

December 1, 1936.

Mason-Walsh-Atkinson-Kier Company, Mason City, Wash-

ington.

GENTLEMEN :

A portion of the 114” supply header is clogged that serves

the longitudinal joint at station B19/34 in blocks 18 to 26

inclusive from bedrock to elevation 900. The 14” supply

header connection to the gallery at elevation 900 in block

22 is also clogged.

A print is inclosed of drawing R2-1094-3, showing the

grout pipe layout for this joint. A study of this layout indi-

cates that 40 linear feet of pipe in the supply header is in-

effective between axis stations A10/95 and A11/27 in addi-

tion to 45 linear feet in the riser to the gallery, a total of

85 linear feet.

Under the provisions of paragraph 74 of specifications

No. 570 and of paragraph 16 of specifications accompanying

Order for Change No. 1 of your contract (symbol I2r-4359),

35

liquidated damages at the rate of Two Dollars ($2.00) per

linear foot for 85 linear feet of clogged grout pipe as out-

lined above, or a total of One Hundred and Seventy Dollars

($170.00), will be deducted from your estimate for Decem-

ber, 1936.

If this pipe is opened up and made effective prior to final

acceptance of the work under your contract, the above

charge will be cancelled.

Very truly yours,

F. A. Banks,

Construction Engineer.

Incl.

2 ee—Denver

Mason City, Washington

May 1, 1937.

Mr. F. A. Banks, Construction Engineer, Bureau of Rec-

lamation, Coulee Dam, Washington.

Dear Sir:

In reviewing our files, we find the following references

advising us of the assessment of liquidated damages on

account of the stoppage of grout piping :

Liquidated Damages .................._.. $463.60

Your letter of October 27,1936............__ 680.00

Your letter of December ERA 170.00

RR oe ane bey alec Ved case $1313.60

Our position with respect to these deductions was ex-

pressed in our letter of November 7, 1936. We consider

that our responsibility is discharged when the piping has

been installed and tested and capped after embedment and

found by your inspectors to be in accordance with the plans

and specifications. We cannot accept the responsibility for

stoppage of the piping due to the ‘‘C”’ hole grouting, espe-

36

cially in view of the fact that we have installed the grout

stops and tested them in the specified manner. In a sepa-

rate letter of this date we are asking you to assume the

cost of such measures as you consider necessary to prevent

further stoppage.

We hereby file claim for refund of liquidated damages

in the amount of $1313.60, which has been deducted from

our estimates.

Yours very truly,

Mason-WatsH-ATKinson-Kigr Company.

(S.) Gro. H. ArKtnson,

Job Manager.

Unrrep States DEPARTMENT OF THE INTERIOR

Bureau or RECLAMATION

Denver, Colorado

June 1, 1937.

Silas Mason Company, Inc.,

Walsh Construction Company, and

Atkinson-Kier Company,

Mason City, Washington.

GENTLEMEN :

Reference is made to your letter of May 1, 1937, addressed

to the construction engineer, Coulee Dam, Washington,

protesting the deduction of liquidated damages on account

of the stoppage of grout piping which is being installed

under contract No. 12r-4359, dated July 16, 1934, for con-

struction of Grand Coulee Dam, Columbia Basin Project.

You have presented a claim for the remission of liquidated

damages assessed under the provisions of paragraph 74 of

specifications No. 570 and paragraph 16 of the specifications

attached to the Adjustment of Compensation under Order

for Changes No. 1 on account of your failure to open up

or replace grout pipe which has become clogged before

final acceptance of the work.

37

The provisions of paragraph 74 of specifications No. 570

covering the application of liquidated damages for failure

of the contractor to open up or replace grout pipe which

has become clogged are identical in wording with the corre-

sponding provisions of paragraph 16 of the specifications

attached to the Adjustment for Compensation under Order

for Changes No. 1 and are stated as follows:

‘*Any pipe that becomes clogged before final accept-

ance of the work, due to any cause, shall if practicable

be cleaned and opened up to the satisfaction of the

contracting officer. For any pipe which the contractor

fails to open up or to replace to meet this test the con-

tractor shall pay to the Government as fixed, agreed

and liquidated damages the sum of two dollars ($2.00)

per linear foot of the total length of pipe which is

thereby made ineffective as determined by the con-

tracting officer.’’

The action of the construction engineer in deducting

liquidated damages under the above quoted provisions

of the contract as stated in letters addressed to you by

the construction engineer under dates of October 22,

1936, October 27, 1936, and December 1, 1936, in the total

amount of $1313.60, has been reviewed, and it is found that

these deductions have been made in accordance with the

provisions of the specifications and are mandatory under

the provisions of the contract. The contracting officer is

without authority to remit such deductions for liquidated

damages. Your claim for remission of liquidated damages

is therefore denied.

Attention is invited to the right to appeal, as provided

in article 15 of the contract, which appeal if made, should

be filed in the office of the Bureau of Reclamation, Denver,

Colorado, within 30 days from the receipt thereof, for

transmittal to the Secretary.

Very truly yours,

(S.) R. F. Warren,

Chief Engineer.

38

Mason City, Washington

June 28, 1937

Mr. R. F. Walter, Chief Engineer,

Bureau of Reclamation,

Customhouse,

Denver, Colorado,

Dear Sir:

We acknowledge receipt of your letter of June 1, 1937,

in which you deny our claim for the remission of liquidated

damages which have been deducted from our payments on

account of stoppage of grout piping installed under con-

tract I2r-4359. In accordance with article 15 of the con-

tract we hereby enter our appeal from this decision to the

Head of the Department.

Briefly, the facts are as follows: In letters dated October

22, October 27, and December 1, 1936, the Construction

Engineer advised us that certain grout pipes had been

found to be stopped and that liquidated damages at the

rate of $2 per linear foot, aggregating $1313.60, would be

deducted from payments due us under the contract. In

each instance it is found without dispute that the pipes in

question were installed in accordance with the specifica-

tions. Immediately before and immediately after embed-

ment in the concrete and on several occasions thereafter the

pipes were tested in the presence of the Government in-

spector and found to be clear of any obstruction. In each in-

stance the obstruction was first discovered upon testing the

system soon after the pressure grouting in the ‘‘C’’ holes in

the nearby foundation areas was completed. It is therefore

obvious that the stoppage was caused by the entry of grout

under pressure from the foundation area into the contrac-

tion joints.

For the purpose of preventing the entry of grout into

the contraction joints from the foundation area the design

requires the installation of a grout stop on each joint near

the foundation rock level. It is not in dispute that these

grout stops were installed, inspected, and tested in accord-

ance with the specifications. However, on more than one

39

occasion during the progress of the ‘‘C”’ hole grouting, we

have observed positive evidence that grout was in some

manner escaping past the grout stops into the contraction

joints, thus proving that the design which had been executed

in accordance with the plans of the specifications was not

adequate to prevent this occurrence.

The assessment of liquidated damages is predicated on

paragraph 74 of Specifications No. 570 which is quoted as

follows:

‘“‘Any pipe that becomes clogged before final accept-

ance of the work, due to any cause, shall if practicable

be cleaned and opened up to the satisfaction of the con-

tracting officer. For any pipe which the contractor

fails to open up or to replace to meet this test the con-

tractor shall pay to the Government as fixed, agreed

and liquidated damages the sum of two dollars ($2.00)

per linear foot of the total length of pipe which is

thereby made ineffective as determined by the contract-

ing officer.’’

In denying our claim for remission of damages you state

that

““e * * these deductions have been made in accord-

ance with the provisions of the specifications and are

mandatory under the provisions of the contract. The

contracting officer is without authority to remit such

deductions for liquidated damages.’’

A literal interpretation of the phrase ‘‘due to any cause’’

places us in the position of a guarantor of the design. This

we believe to be improper, since we assumed no such obliga-

tion under the contract. An equitable interpretation would

limit our responsibility to those causes which are within our

control. We contend in this instance that we have executed

the design in accordance with the specifications and under

rigid inspection ; that the quality of our workmanship is not

in dispute; that the stoppage occurred by reason of the

failure of the design to function as intended; and that we

were powerless to prevent such failure.

40

It is our understanding that it is within the discretion

of the Head of the Department to consider the equities of

disputed questions presented to him. The denial of our

claim has been predicated on the mandatory provisions of

the specifications; the equity of our contention has not been

challenged. We submit that in executing the design in

accordance with the plans and specifications given us we

have discharged our responsibility under the contract and

that we cannot be equitably held responsible for the failure |

of the design to function as intended. |

We, therefore, appeal for the remission of damages which

have been assessed against us in the instances cited.

Yours very truly,

Mason-WatsH-Atkinson-Kier Company,

Gero. H. Arxrnson,

Job Manager.

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