Petition for Writ of Certiorari — United States v. Peotzer

INDEX

Page

ee nn Tenet eer reer 1

IE, oi, ass GA sop WAS waco abuacawky Oecd Jus Vpenhee hn 1

NE oo skh Cine Shea ste akideaantens eave e 2

Contract provisions involved .......... 2.2... 66. eee eee ees 3

NES El SEES Ne By UP BEM Se enn pane weg ee O 3

1. Claim for $3,217.80 for formed concrete beams....... 5

2. Claim for $2,018 for excavation and concrete floor slabs

IE 0 i a bis nda s SAK GOS Cay CLE RS 7

Specification of errors to be urged .......... 2.0... 0.0005. 10

Reasons for granting the writ........... 2.2.6.0... cece ll

hs oon ia Vu cd Oy AD 5A KEEN ah AMINO AR Kee 27

RA ree merce rerreee rag ae Crea ey are 28

a CITATIONS

. Cases :

3 American Smelting ¢ Refining Co. v. United States, 259

DN tact ak hunt ankles Bickas Guan Rik eek enh 15

: B-W Construction Co. v. United States, 97 C. Cls. 92..... 19

3 B-W Construction Co. v. United States, 101 C. Cls. 748,

F reversed sub nom. United States v. Beuttas, 324 U. S.

: RTGS Coe oie tn arco tee tea oe kes 16, 19

3 Callahan Construction Co. v. United States, 91 C. Cls.

: ERS SS IRE eR. aaa ea 18

; Davis v. United States, 82 C. Cis. 334.................. 18

3 English Const. Co., Inc. v. United States, 43 F. Supp.

3 ag BEER SSR Seep ee tA ale re ine 16,19

: Fleisher Eng. & Constr. Co. v. United States, 98 C.

: ES Wad int ten apn tad SEEKER oes Sea RAR TELA bas 19

Fred R. Comb Co. v. United States, 100 C. Cls. 259... ... 19

Langevin v. United States, 100 C. Cls.15...... .... 16, 19, 22, 25

E McCloskey & Co. v. United States, 103 C. Cis. 254. .16, 19, 22, 25

ES John McShain, Inc. v. United States, 88 C. Cls. 284,

: woveneed, 308 U. B. GIR GED... o.oo. ce cw canes 19

: King v. United States, 100 C. Cls. 475....... 2... ...... 19

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

16, 19, 25

‘ , ,

: Gerhardt F. Meyne v. United States, C. Cls. No. 45926,

EE UIE A EID 05 5 oad Sictn kau i Radha PRA be ees 19

; Norwegian Nitrogen Products Co. v. United States, 288

PR noha Rasa ckpi sin kk bila se Skis ee ee cae

4 Orino v. United States, C. Cls. No. 46063, decided June 1,

4 PA aes cathe Ghik tdin ik wad ag nia pana vik ak Paka 19

Perkins v. Lukens Steel Co.,310U.8.113........... 13, 14, 15

; Priebe & Sons, Inc. v. United States, 332 U. 8.407....... 13

(1)

Il

Schmoll v. United States, 91 C. Cls.1..................

Tobin Quarries, Inc. v. Central Nebraska Public Power

& Irr. Dist., 64 F. Supp. 200, affirmed, 157 F. 2d 482... 16,

25

Union Paving Co. v. United States, 107 C. Cls. 405 16, 19, 22, 25

United States v. Beuttas, 324 U.S. 768....... ....... 12, 16, 17

United States v. Blair, 321 U.S. 730......... ....... 12, 17, 26

United States v. Callahan-Walker Constr. Co., 317 U. S.

UP wera ck Wi eas as ick ls Ws ae I 12, 17,18

United States v. John McShain, Inc., 308 U. S. 512, 520,

11, 16, 17, 19, 22, 25

United States v. Joseph A. Holpuch Co., 328 U. 8S.

EE UG Rak Cc deel ais Sm ahaa s BaKS . 12, 17, 19, 22, 25

United States v. Madsen Const. Co., 139 F. 2d 613........ 16, 19

United States v. New York and Porto Rico Steamship

Sis Es WN Ae ee Lohan inn) eh Wenie ave cancun chs 15

United States v. Standard Rice Co., 323 U.S. 106........ 13

Statutes:

Act of June 17, 1910, 36 Stat. 531, 41 U.S.C. 7......... 23

Act of February 27, 1929, 45 Stat. 1341, 41 U. S. C.

Wie cc 20s Fev dk AeA ci ek nea chewed 23

First War Powers Act, Title II (Act of December 18,

1941, e. 593, 55 Stat. 838, 839, 50 U. S. C. App. 611).. 23

Legislative Appropriation Act, Title IV (Act of June 30,

1932, ec. 314, 47 Stat. 382, 413-415), as amended by

Sec. 16 of the Treasury and Post Office Department

Appropriation Act of March 3, 1933 (c. 212, 47 Stat.

1489, 1517-1519), and Title III of the Act of March

es Fey 5 8S goer oper sree we 15

Pee TUE SUES Sa; cas 8b oSee ba cadens ba dnc on ews 15

Miscellaneous:

Anderson, The Disputes Article in Government Contracts

(1945) 44 Mich. L. Rev. 211, 215, 238-239............ 19

BCA No. 122, July 20, 1943, 1 Contract Cases Federal

(Commerce Clearing House) 230.................... 8,13

BCA No. 292, December 15, 1943, 1 Contract Cases Fed-

eral (Commerce Clearing House) 931................ 7

Bureau of the Budget Circular No. 47 (November 22,

1921), reprinted in Harwood-Nebel Construction Co. v.

United States, 105 C. Cls.116....................... 15

SS 2 RES Ae amep es ERR a Fee 14

PIE eo a rBa oS iG aks ewes a den oad lew oh hen 14

ME eG SUE GS Saks oaks [SoA OK Wed Kok ie ntet 4, 14, 17, 21

Executive Order No. 6166, June 10, 1933............... 14, 20

Executive Order No. 9001 (3 C. F. R. 1941 Supp., pp.

330-332, December 27, 1941)

il

Fain and Watt, War Procurement—A New Pattern for

Contracts, (1944) 44 Col. L. Rev. 127

11 Fed. Reg. 13638

Hearings, Senate Committee on Expenditures in the Exec-

utive Departments, 80th Cong. 2d sess., on proposed

Federal Property Act of 1948, p. 129

40 Op. Atty. Gen. No. 53, August 29, 1942, pp. 4,6. .....

Reorganization Plan No. 1, effective July 1, 1939, 53

War Department Procureme Regulations, pars. 304,

1301-1325, 10 C. F. R. Cum. Supp. 81.304, 81.1301—

Bute Supreme Court of the Wnited States

OcToBER TERM, 1948

No. 332

THE UNITED STATES, PETITIONER

v.

EDMOND PFOoTZER AND E. JOHN PFOTZER,

CO-PARTNERS

PETITION FOR A WRIT OF CERTIORARI TO THE

COURT OF CLAIMS

The Solicitor General, on behalf of the United

States, prays that a writ of certiorari issue to re-

view the judgment of the Court of Claims, entered

in the above-entitled case on May 3, 1948.

OPINION BELOW

The opinion of the Court of Claims (R. 46-62)

has not yet been reported.

JURISDICTION

The judgment of the Court of Claims was

entered on May 3, 1948 (R. 62). A motion for a

new trial, seasonably filed, was denied on July 6,

(1)

2

1948 (R. 63). The jurisdiction of this Court is

invoked under 28 U.S.C. 1255.

QUESTIONS PRESENTED

In May 1942, the War Department and a con-

tractor entered into a standard-form construction

contract, Article 15 of which required recourse to

established administrative procedure for the final

determination of disputes concerning questions of

fact, and Article 1 of which incorporated a provi-

sion of the specifications requiring recourse to the

same procedure for final determination of the

‘“‘intent and meaning”’ of the ‘‘drawings and speci-

fications.’”’ Disputes arose concerning the inter-

pretation of the plans and specifications, which

were adjudicated adversely to the contractor by

the designated administrative officials, and the

contractor brought suit in the Court of Claims.

The questions presented are:

1. Whether the contractor has standing to chal-

lenge the validity of the specifications-interpreta-

tion provision or the authority of the contracting

officer to include it in the contract.

2. Whether the specifications - interpretation

provision is valid and authorized.

3. Whether the specifications - interpretation

provision covers issues of interpretation involved

in the determination of amounts due by the Gov-

ernment under the contract. .

3

CONTRACT PROVISIONS INVOLVED

The pertinent portions of the contract and speci-

fications are set forth in the Appendix, infra, pp.

28-29.

STATEMENT

In May, 1942, the United States (through the

War Department’s Corps of Engineers) entered

into a contract with the respondents for the con-

struction of housing and other facilities at Brook-

ley Field, Mobile, Alabama. In this action,

respondents asserted seven claims for additional

compensation, under the contract, which had been

rejected by the War Department. The Court of

Claims denied recovery on four of these items and

entered judgment against the United States on the

remaining three claims. This petition raises the

correctness of the lower court’s rulings on two of

the three claims decided against the Government.

The pertinent facts, as found by the lower court,

are as follows:

The bid submitted by respondents, after they had

consulted the plans and specifications of the project

(R. 24) in response to the War Department’s

invitation for bids, was accepted (R. 25, 26), and

on May 14, 1942, the parties entered into a ‘‘ Letter

Contract’? by which the United States placed an

order for the work which ‘“‘shall include all items

incidental to the proper execution and completion

of the work, ready for use, in strict accordance with

specifications, schedules and drawings, all of

which are made a part hereof * * *’ (R. 25).

4

The letter stated that ‘‘It is understood that this

contract will be supplemented by the execution of

a formal contract between you and the United

States of America, following, in General, U. 8.

Standard Form No. 23 ,Revised * * *’’ (R. 25).

The formal contract, which both parties later exe-

cuted, followed Standard Form No. 23 with cer-

tain additions and eliminations (R. 29-32). It con-

tained the normal form of ‘‘Disputes’’ clause,

Article 15, which entrusted to the contracting officer

the settlement of ‘‘all disputes concerning ques-

tions of fact’’ and with a right of appeal from the

contracting officer’s decision to the head of the

department (R. 14, 59-60, 63). Article 1 of the con-

tract also incorporated by reference the ‘‘specifica-

tions, schedules, and drawings,’’ which were desig-

" nated by title* (R. 10-11, 29-30). Paragraph 1-07

of the incorporated specifications (‘‘ Interpretation

of Contract’’) made the contracting officer the ‘‘in-

terpreter”’ of ‘‘the true intent and meaning of the

drawings and specifications’’ (R. 18, 60, 63-64) ; and

Paragraph 1-08 of the specifications (‘‘Claims,

Protests and Appeals’’) gave the contractor an

appeal to the Secretary of War, or his representa-

tive, from any action or ruling of the contracting

officer which was deemed un* ir, and made the

Secretary’s decision ‘‘final and binding upon the

parties to the contract’’ (R. 18-19, 64). The two

claims for additional compensation involved in this

1 The incorporation of “specifications, schedules, and draw-

ings” is an integral part of U.S. Standard Form No. 23. See

41 C.F.R. 12.23, p. 1326.

5

petition were submitted to the contracting officer,

who ruled against respondents (R. 24, 33, 35, 59),

and his rulings were affirmed by the War Depart-

ment Board of Contract Appeals, the Secretary’s

duly authorized representative, which held that

respondents were not entitled to any further pay-

ments (R. 24, 33, 35, 59).

1. Claim for $3,217.80 for formed concrete beams

(R. 33-34, 51-53): The Bid Form (which was in-

corporated into the specifications, as the court be-

low expressly held (R. 30-32, 34)) provided for

lump sum payments for each of several types

of buildings (‘e. g. administration, barracks, mess,

warehouse) to be erected by respondents (R. 28),?

and also contained a general unit price ($30.00

per cubic yard) for pouring ‘‘Formed Con-

crete Foundations * * * Concrete includ-

ing reinforcement for all piers, foundation walls,

bases under all piers and foundation walls and

for floor slabs’? (R. 27). In connection with

the construction of the mess buildings, respond-

ents poured a number of formed concrete beams,

reinforced with steel rods, extending around

Ba Head in the Bid Form provided, in this connection

. 27):

“Unit price for each of the buildings listed hereinafter

shall include all work, materials, labor and inciden :

construct them complete with utilities to a point five (5)

feet outside the building except for clearing and grubbing,

excavation, gravel fill under the floor concrete and

reinforcing steel in the piers, footings, f tion walls or

floor slabs on earth or gravel. Concrete floor slabs includ-

ing reinforcement not on earth or gravel shall be included

in the lump sum price bid for each building.”

the perimeter of the kitchen section of each of the

buildings (R. 33). These beams rested on the

concrete foundation piers, and were a minimum of

18 inches above the finished grade of the ground,

and were formed and poured as a monolith with

the floor slabs, which partly rested on the beams

and were poured on wood sub-floors; the beams

could as well, at the contractor’s election, have

been poured as a monolith with the concrete foun-

dation piers (R. 33).

The beams were shown and called for on the

foundation drawings but were apparently specifi-

cally referred to in the written specifications only

in an irrelevant connection (R. 33-34).° Respond-

ents interpreted the Bid Form and the drawings

as intending the beams to be paid for at the gen-

eral unit price for ‘‘Formed Concrete Founda-

tions,’’ and therefore did not include any amount

for their cost in the lump sum price bid for the

mess building (R. 33-34).

On presentation of respondents’ claim for pay-

ment for this concrete work at the unit price of $30

a cubic yard, the contracting officer held that the

beams were part of the superstructure, and not the

foundations, of the buildings, and that compensa-

* Article 2 of the contract (“Specifications and drawings”)

provided, in part: “Anything mentioned in the specifications

and not shown on the drawings, or shown on the drawings and

not mentioned in the specifications, shall be of like effect as if

shown or mentioned in both. In case of difference between

ne and specifications, the specifications shall govern”

7

tion therefor was included in the lump sunt paid for

each building. On appeal, the Board of Contract

Appeals affirmed this ruling (R. 33).* Interpret-

ing the Bid Form (which constituted a part of the

specifications) and the drawings for itself, the

Court of Claims held, with respondents, that the

‘‘contract intended that these formed reinforced

concrete beams should be paid for at the unit price

bid * * * for‘Formed Concrete Foundations’ ”’

(R. 34, 51-53), awarded judgment on this item for

$3,217.80.

2. Claim for $2,018 for excavation and concrete

floor slabs for wash racks (R. 34-35, 53-54): The

contract, through the Bid Form, called for two

‘“Wash Rack, Mod. (25’ x 60’) (5-Car) (Excluding

Booster Pump and connections)’’ at a total lump

sum price of $2,400 (R. 28). In performing this

portion of the contract, respondents did a con-

siderable amount of excavation and laid down a

reinforced concrete floor slab for each wash rack

(R. 3435). Payment for this work, in addi-

tion to the designated lump sum price, was de-

manded under the general item for ‘‘ Formed Con-

crete Foundations’? (R. 27, 35) (quoted supra,

p. 5) (for the floor slabs), and under the similar

general unit price item for ‘‘ Excavation for build-

ing foundations, footings and floor slabs (other

than space grading indicated above)’’ (R. 27, 34)

(for the excavation).

The Board of Contract Appeals’ decision on this claim

(BCA No. 292, December 15, 1943) is reported at 1 Contract

Cases Federal (Commerce Clearing House) 931, at 933.

8

In addition to the excavation and floor slabs, the

wash racks required, among other things, plumb-

ing, water pipes and connections, fixtures and

drains (R. 35). In making their bid, respondents

did not include the cost of excavation in calculating

their price of $1,200 for each of the racks (R. 35).

The above quoted provision in the Bid Form (which

was incorporated in the specifications) was the only —

reference in the written contract or specifications

specifically relating to the wash racks, but the

racks were shown on one of the drawings * (R. 53).

Respondents rested their claim for additional com-

pensation on the wording of the various items, as

quoted above; on the ‘‘Note’’ quoted in foot-

note 2, p. 5; and on ‘‘General Note’ 1 in the

Bid Form.* The claim was, however, denied by

the contracting officer, and, on appeal, by the Board

of Contract Appeals’ (R. 35). The court below

interpreted the specifications for itself, apparently

without considering the pertinent drawing (which

5 See fn. 3, supra, p. 6.

*“Whenever units of measure, i.e. linear foot, cubic yard,

square yards, and similar units of measure are mentioned in

the unit price bids, it shall be interpreted to mean the unit of

material installed in accordance with the plans and specifica-

pers and ready for use. Where items are paid for complete,

omplete in place, ready for use, or furnishe and installed, all

inci entals necessary to the proper operation or use of the item,

such as excavation, backfill, equipment, assemblies, piping and

connection to adjacent work shall be included in the unit

price bid” (R. 28-29).

™The Board of Contract Appeals’ decision (BCA No. 122,

July 20, 1943) is reported at 1 Contract Cases Federal (Com

merce Clearing House) 230, at 238-239 (“Claim for Payment

for Wash Racks and Booster Pumps”).

9

was not in evidence below, but which the Board of

Contract Appeals had considered of prime signifi-

cance), and held that the respondents were entitled

to recover on this claim (R. 34-35, 53-54).

In the general portion of its opinion dealing with

all of respondents’ claims (R. 59-62), the Court of

Claims held that Article 15 (‘‘Disputes’’) did not

apply to any of the contested items, including the

two involved in this petition, because the issues

were not of fact but of law (R. 59-60). It refused to

apply, or be bound by, Paragraphs 1-07 and 1-08 of

the specifications, regarding interpretation of the

intent and meaning of the drawings and specifica-

tions (infra, pp. 28-29), because, in its view (a) the

contracting agency had no authority to vary or add

to Standard Form No. 23 by inserting these pro-

visions in the specifications; (b) Standard Form

No. 23 required all changes or alterations to be noted

in a certain formal manner, and no such notation

was made here; and (c) in any case, Paragraphs

1-07 and 1-08 do not mean that the administrative

interpretation of the plans and specifications is to

be final with respect to questions of “‘amounts

due’’ under the contract (R. 60-62). Accordingly,

the court interpreted the plans, drawings, and

specifications for itself in adjudging that re-

spondents’ claims were valid.

Judgment was entered against the United States

for $6,085.80 on the three claims on which respond-

ents were successful (R. 62, 63). Of that sum, $5,-

10

235.80 represents the recovery on the two claims

involved here (R. 53, 54).

SPECIFICATION OF ERRORS TO BE URGED

The Court of Claims erred:

1. In rejecting, in connection with Item 2

(‘Claim for $3,217.80 for formed concrete beams’’)

and Item 3 (‘‘Claim for $2,018 for excavation and

concrete floor slabs for wash racks’’), the adminis-

trative interpretations by the contracting officer

and the Board of Contract Appeals of the draw-

ings, plans, and specifications pertinent to those

claims, and in independently interpreting those

drawings, plans, and specifications without regard

to those administrative interpretations.

2. In failing to give finality to the administra-

tive interpretations of the pertinent drawings,

plans, and specifications, as required by Para-

graphs 1-07 and 1-08 of the specifications.

3. In holding that it could properly review the

administrative interpretations and could substitute

its own interpretations of the pertinent plans,

drawings and specifications for those of the con-

tracting officer and the Board of Contract Ap-

peals.

4. In holding that Paragraphs 1-07 and 1-08

of the specifications were not intended to make the

‘decision of the contracting officer and the Secretary

of War (or his representative) final and conclusive

on all issues of the interpretation of the drawings,

ll

plans and specifications, including issues of inter-

pretations involved in questions of amounts due

by the Government under the contract.

5. In holding that a contrary construction of

Paragraphs 1-07 and 1-08 would make those pro-

visions illegal or unauthorized, and subject to be

disregarded by the Court of Claims.

6. In holding that it was beyond the competence

of the parties to confer authority upon the con-

tracting officer and the Secretary of War (or his

representative) to make final and conclusive

rulings on questions of interpretation of the speci-

fications, plans, and drawings.

7. In entering judgment for respondents on

“Claim 2”’ for ‘‘Formed Concrete Beams, $3,-

217.80”’ and on ‘‘Claim 3”’ for ‘‘Excavation Per-

formed and Concrete Floor Slabs Placed for Wash

Racks, $2,018.”’

REASONS FOR GRANTING THE WRIT

The Court of Claims has once again refused to

apply the established provisions of government

construction contracts, long accepted by contrac-

tors, which designate certain contractual disputes

for administrative settlement.’ In this latest of a

8 In less than a decade, the Government has felt it n

to bring to this Court five other decisions of the Court of Claims

inadequately ae the right of the United States to pro-

vide by contract for the administrative settlement of disputes

arising under its construction contracts. See petitions for

writs of certiorari in United States v. John McShain, Inc., No.

43, Oct. T., 1939, pp. 6, 8-9 (reversed per curiam, 308 U. 8.

12

series of restrictive holdings in this field, each

contrary to the principles announced in this Court’s

controlling decisions, the court below has ignored

the traditional clause providing for administra-

tive interpretation of the plans, drawings, and

specifications—used for years in thousands of con-

tracts and often applied by the courts—on the

novel ground that the contracting officer was not

authorized to insert such a provision in the contract.

As in the case of its predecessors in the series, this

palpably erroneous decision requires correction by

this Court.

1. In the first place, even if the contracting

officer were without authority under the regula-

tions to include the disputed provision in the

specifications, the contractor would have no stand-

ing to challenge that clause. Before bidding upon

the project, respondents were furnished with

copies of the specifications containing paragraphs

1-07 (‘‘Interpretation of Contract’’) and 1-08

(‘‘Claims, Protests and Appeals’’) (R. 24). The

‘Letter Contract’’ accepted by them on May 15,

1942 expressly incorporated the specifications (R.

25). The formal contract, later executed by both

512, 520; United States v. Callahan-Walker Constr. Co., No. 65,

Oct. T., 1942, pp. 8-12 (reversed 317 U.S. 56) ; United States v.

Blair, No. 75, Oct. T., 1943, pp. 18-19 (reversed 321 U.S. 730) ;

United States v. Beuttas, No. 431, Oct. T., 1944, pp. 7-8 (re-

versed 324 U. 8. 768) ; United States v. Joseph A. Holpuch Co.,

ae 696 and 697, Oct. T., 1945, pp. 17-18 (reversed 328

. 8. 234).

—

13

parties, likewise made the pertinent specifications

‘fa part’’ of the contract (R. 30). The very pro-

visions now attacked as invalid were thus made

known to respondents at the earliest possible time,

and were voluntarily accepted and agreed to by

them, without any protest so far as we are aware.

In addition, after the dispute arose, respondents

made full use of the review mechanism of para-

graph 1-08 (supra, pp. 7, 8) to procure appellate

decisions by the War Department’s Board of Con-

tract Appeals.® Basic contract law teaches that a

contractor freely agreeing to, and making use of,

a contract term cannot later repudiate it when it

works to his disadvantage; and there is nothing

in the nature of Government contracts which grants

such a special privilege to contractors who would

clearly have no similar right in their private deal-

ings. Cf. Perkins v. Lukens Steel Co., 310 U. S.

113, 127, 129-130; United States v. Standard Rice

Co., 323 U. 8. 106, 111; Priebe & Sons, Inc. v.

United States, 332 U.S. 407, 411.

The Court of Claims has, however, erroneously

found a reason for granting respondents a unique

status, in the asserted absence of authority to

‘“‘deviate’’ from the terms of the standard form

construction contract issued by the Treasury’s

* On some issues (not involved here) involving interpretation

of the plans and specifications, the Board of Contract Ap

upheld ndents rather than the contracting officer. 1

Contract Cases Federal (Commerce Clearing House) 230, at

235-7, 239, 241-2 (supra, fn. 7, p. 8).

14

Procurement Division (R. 60-62).° But established

doctrine flatly denies that a contractor receives any

private right from such a failure of the contracting

officer to stay within the bounds of his contractual

power. ‘‘Like private individuals and businesses,

the Government enjoys the unrestricted power

* * * to fix the terms and conditions upon which it

will make needed purchases’’; and ‘‘the Govern-

ment may for the purpose of keeping its own house

in order lay down guide posts by which its agents

are to proceed in the procurement of supplies, and

which create duties to the Government alone.”

Perkins v. Lukens Steel Co., 310 U.S. at 127 [italics

supplied]. The standardization of government

contract forms, and the centralization of federal

procurement policy in the Treasury Department

in 1933, was not undertaken to confer private rights

on government contractors, but to promote the uni-

formity and efficiency of government contracting,

as the terms of the authorizing Reorganization Act

make clear.” Ifthe Procurement Division’s direc-

tion of uniformity was violated in this instance,

1° By Section 1 of Executive Order No. 6166, June 10, 1933

(note following 5 U.S.C. 132), the Procurement Division of the

Treasury Department (now called the Bureau of Federal

Supply, 11 Fed. Reg. 13638) was authorized to supervise pro-

curement throughout the Federal Government and to require

use of approved contract forms. 41 C.F.R. 1.1—1.2, 11.1—11.3.

U. 8. Standard Form No. 23 (“Construction”) was promul-

gated under this authority, and was to be used “for every

formal contract for the construction or repair of public build-

ings or works.” 41 C.F.R. 12.23, p. 1332.

11 Executive Order No. 6166 was issued under Title IV (‘‘Re-

organization of Executive Departments”) of the Legislative

Appropriation Act for the fiscal year 1933 (Act of June 30,

1932, c. 314, 47 Stat. 382, 413-415), as amended by Section 16

15

the matter is one of internal housekeeping, appro-

priate for correction by superior executive or ad-

ministrative authorities. The provisions of the

contract, freely entered into by respondent, are not

thereby rendered unenforceable against the private

contractor.” In this respect, the Procurement Di-

vision’s requirements are in precisely the same

class of Government-oriented internal regulations

as the Public Contracts Act (Perkins v. Lukens

Steel Co., 310 U.S. at 127-9), the statute directing

Government contracts to be in writing (United

States v. New York and Porto Rico Steamship Co.,

239 U. 8. 88, 92), and the advertising-and-low-

bidder legislation (American Smelting & Refining

Co. v. United States, 259 U. 8. 75, 78; Perkins v.

Lukens Steel Co., 310 U. 8. at 126)—all of which

have been held by this Court not to confer any

of the Treasury and Post-Office Department Appropriation

Act of March 3, 1933 (c. 212, 47 Stat. 1489, 1517-1519), and

Title III of the Act of March 20, 1933, c. 3, 48 Stat. 8, 16.

These statutes empowered the President to reorganize executive

agencies and functions in order “to reduce expenditures * * *,”

“to increase the efficiency of the operations of the Govern-

ment * * *,” “to reduce the number of [executive] agencies,”

“to eliminate overlapping and duplication of effort,” and to

“group, coordinate, and consolidate executive and administra-

tive agencies of the Government * * * according to major pur-

poses.” 47 Stat. 1517. See also Bureau of the Budget Cir-

cular No. 47 (November 22, 1921), reprinted in Harwood-

Nebel Construction Co., Inc., v. United States, 105 C. Cls. 116,

129-130.

12 The question at issue concerns only the alleged deviation

by the contracting officer in inserting paragraph 1-07 of the

specifications into the contract, contrary, it is said, to the

applicable regulations. There is no doubt that the inclusion of

such @ provision could lawfully be authorized by the proper

agency of the Government, and it in nowise infringes on the

judicial power. This Court and the Court of Claims have fre-

quently upheld such clauses. See infra, p. 16.

16

justiciable rights on contractors or would-be con-

tractors.

2. The court below erred even more seriously in

holding that the contracting officer had no authority

to incorporate the disputed ciauses (paragraphs

1-07 and 1-08 of the specifications) in the contract.

Neither general law, nor the Procurement Divi-

sion’s regulations, nor the terms of Standard Form

No. 23, barred the use of these provisions, during

either time of peace or war.

a. Courts throughout the country—this Court,

the Court of Claims, and other tribunals—have long

upheld, as properly includible in construction con-

tracts, clauses giving the power of final interpreta-

tion of plans and specifications to designated of-

ficials.* As the multitude of cases shows, such

provisions have had wide usage for many years,

both in Government and in private agreements.”

The lower court neither suggests any change in the

18 B.g., Merrill-Ruckgaber Co. v. United States, 241 U. S.

387, 388, 393; United States v. John McShain, Inc., 308 U. S§.

512, 520; B-W Construction Co. v. United States, 101 C. Cls.

748, 768 (reversed on other points sub nom. United States v.

Beuttas, 324 U. S. 768) ; Langevin v. United States, 100 C. Cls.

15, 40-41; McCloskey & Co. v. United States, 103 C. Cls. 254;

Union Paving Co. v. United States, 107 C. Cls. 405, 417; United

States v. Madsen Const. Co., 139 F. 2d 613, 614, 616 (C.C.A. 6);

English Const. Co., Inc. v. United States, 43 F. Supp. 313

(D. Del.) ; Tobin rries, Inc. v. Central Nebraska Public

Power & Irr. Dist., 64 F. Supp. 200, 208-210 (D. Neb.), af-

firmed, 157 F. 2d 482 (C.C.A. 8), and state and federal de-

cisions there cited.

14 See cases cited and referred to in fn. 13, supra, and also

infra, p. 19.

17

settled judicial law on the point of ultimate power

to contract for this type of clause, nor that any

statute now requires a different decision, but it does

hold that, at least since the establishment of cen-

tralized procurement in 1933, authority has been

withdrawn by the Treasury’s Procurement Divi-

sion from government contracting agents to insert

these provisions in government construction con-

tracts. The court points to the ‘‘Disputes’’ clause

of the standard form (Article 15) (R. 60,63), which

deals with ‘‘questions of fact,’’** and founds its

invalidation of paragraph 1-07 upon the ‘‘Direc-

tions for Preparation of Contract,’’ attached to

Form No. 23 (R. 61, 64-65; 41 C.F.R. 12.23, p.

1332-2), which state: ‘‘There shall be no deviation

from this standard contract form, except as pro-

vided for in these directions, and except as author-

ized by the Director of Procurement”’ and ‘‘ Addi-

tional contract provisions and instructions, deemed

necessary for the particular work, not inconsistent

with the standard form nor involving questions of

policy, may be incorporated in the specifications or

15 Article 15 (“Disputes”) of U. 8S. Standard Form No. 23

which is limited to questions of fact, was involved in United

States v. Callahan-Walker Constr. Co., 317 U. 8. 56, 58. Article

15 (“Disputes”) of U. 8. Government Form P.W.A. 51, which

form was extensively utilized on government construction con-

tracts between 1933 and 1940, is not so limited and provides

for administrative settlement of “all” disputes concerning ques-

tions arising under the contract. This was the form considered

by this Court in United States v. John McShain, Inc., 308 U. 8.

512, 520; United States v. Blair, 321 U. 8. 730; United States v.

Beuttas, 324 U. 8. 768, and United States v. Joseph A. Holpuch

Co., 328 U. S. 234.

18

other accompanying papers.’’ The short answer to

this surprise charge of improper deviation is that

none exists, and that neither courts, Government

agencies, nor contractors have hitherto surmised

any inconsistency. Article 15 is limited to disputes

concerning issues of ‘“‘fact,’’ and does not imply

that other disputes cannot be handled similarly, if

the parties so agree; the opening phrase (‘‘ Except

as otherwise specifically provided in this con-

tract’’) itself indicates room for additional pro-

visions regarding contractual disputes to be in-

corporated in the agreement. The inclusion of a

provision extending administrative settlement to

issues of interpretation of the drawings and speci-

fications cannot, therefore, be a deviation from, or

inconsistent with, Article 15, which stands un-

changed and fully effective. To the contrary, the

close affinity, in construction matters, between the

expertise and judgment required to determine

strictly ‘‘factual’’ issues and that needed to solve

problems of the interpretation of plans and specifi-

cations has led some Government contracting agen-

cies to insist, perhaps correctly, that Article 15

itself covers the latter, without need for a supple-

mentary clause like paragraph 1-07. Cf. United

States v. Callahan-W alker Constr. Co., 317 U. 8S.

56 (‘‘equitable adjustment”’ required by change or-

der a ‘‘question of fact’’).**

%® The Court — Claims has, aeuees. mgd pow reed in

recent years, interpretation of plans specifications

feen teh enue water nude th of eh ee ee

Davis v. United States, 82 C. Cls. 334, 346-7; Callahan Con-

19

Nor, at the time this contract was made, did the

challenged clauses of the specifications involve

a new ‘‘question of policy,’’ upon which the specific

ruling of the Procurement Division was necessary.

By 1942, the policy had long been established.

Provisions substantially identical with paragraph

1-07 have been used in numerous government con-

struction contracts for at least thirty-five years, and

are now regarded as ‘‘common.’’** The widespread

use of the clause is proved most simply by a survey

of the Government contract cases in this Court

and the lower courts."* This conclusion is con-

struction Co. v. United States, 91 C. Cls. 538, 616-7; Schmoll

v. United States, 91 C. Cls. 1, 33; John McShain, Inc. v. United

States, 88 C. Cls. 284, 296-7 (reversed, 308 U.S. 512, 520) ; B-W

Construction Co. v. United States, 97 C. Cls. 92, 118; Ger-

hardt F. Meyne v. United States, C. Cls. No. 45926, decided

April 5, 1948; Orino v. United States, C. Cls. No. 46063, de-

cided June 1, 1948; instant opinion, R. 62.

17 Anderson, The Disputes Article in Government Contracts

(1945) 44 Mich. L. Rev. 211, 215, 238-239; B-W Constr. Co. v.

United States, 101 C. Cis. 748, 768 (“It is true that it is not un-

common in construction contracts for the parties to agree that

the decision of the architect or engineer shall be final on such

uestions as the proper interpretation of the plans and speci-

cations * ").

18 The cases in this Court in which it cl Sr svpates at Se

contract contained such a provision are:Merril-

Co. v. United States, 241 U. S. 387, 388, 393 (1916) ; United

in, Inc., 308 U. 8. 512, 520 (1939) ; United

States v. Joseph A. H. Co., 328 U. S. 234, 237 (1946).

Recent cases in the lower federal courts are: Fred R. C Co.

v. United States, 100 C. Cls. 259, 260; King v. United States,

’ . v

100 C. Cls. 475, 482; Fleisher Eng. & Constr. Co. v. United

States, 98 C. Cls. 139, 141; Langevin v. United States, 100 C.

Cls. 15, 26; McC & Co. v. United States, 103 C. Cls. 254;

Union rece ws nited States, 107 C. Cis. 405, 413, 41

422; United v. Madsen Constr. Co., 139 F. 2d

(C.C.A. 6); English Constr. Co. v. United States, 43

313 (D. Del.).

so:

20

firmed by a hasty search through the Government’s

construction-contract records back to 1920, which

reveal that the clause has been used by various gov-

ernment bureaus doing construction work, and con-

sistently by the main such agency, Public Buildings

Administration and its predecessors.” Specifically,

similar provisions were widely used in general

construction specifications, both before the adop-

tion of Standard Form No. 23 in 1926 and there-

after, including the fifteen-year period since the

Procurement Division was granted authority to

require the use of standard forms (see fn. 10, supra,

p. 14). The Procurement Division has been cog-

nizant of, and has always regarded, the inclusion of

such a clause together with Standard Form No.

1° The old Office of the Supervising Architect included in its

“General Conditions” a provision that “The decision of the

Supervising Architect as to the proper interpretation of the

drawings and specifications shall be final,” or, later (e.g. 1932),

that “The decision of the Contracting Officer or his duly author-

ized representative as to the proper interpretation of the draw-

ings and specifications shall be final.” By Executive Order

No. 6166, June 10, 1933 (supra, p. 14, fn. 10), the Office of

the Supervising Architect was transferred to the ‘newly-created

Procurement Division of the Treasury Department. The same

clause was used by the Public Buildin Branch of the Pro-

curement Division (successor to the Office of the Supervising

Architect). By Reorganization Plan No. 1, effective July 1,

1939, 53 Stat. 1423 (note following 5 U.S.C. 133t), the Public

Buildings Branch was transferred to the Federal Works Agency,

and became known as Public Buildings Administration. That

Administration has at all times retained the clause in the

“General Conditions” to its construction contracts, and em-

ploys it a:

In addition, eases cited above (fn. 18), indicate Set 0

similar clause has been used by many other sam caeeaggee

cies, including the War Department, ureau of ian

Affairs, the t of the Interior, Public Works Admin-

istration, oo e Civil Aeronautics Administration.

21

23 as wholly unexceptionable. This is shown most

vividly by the fact that the Procurement Division’s

own Public Buildings Branch made use of the com-

bination from 1933 to 1939, and that since its trans-

fer in that year, the Public Buildings Administra-

tion, the chief government construction agency, has

uniformly employed a ‘‘proper interpretation’’

clause in the General Conditions of its specifica-

tions. Long-established administrative practice of

this strength compels the conclusion that the dis-

puted paragraph cannot be viewed as a deviation

from, or inconsistent with, the standard form, or

as involving an unsettled matter of policy. Cf.

Norwegian Nitrogen Products Co. v. United States,

288 U.S. 294, 315.”

Not only is the instant decision in conflict with

the settled practice, and unsupported by the terms

of Standard Form No. 23, but it constitutes a com-

20 Even if paragraph 1-07 be regarded as a deviation from, or

inconsistent with, Article 15, the established practice of fifteen

years indicates tacit authorisation by the Director of Procure-

ment (as he then was).

The lower court's observation that no notation was made

under the “Alterations” article of the standard form (R. 60-61)

is obviously far wide of the mark. The “Alterations” article

refers only to “changes * * * made in this contract before

it was signed by the parties hereto” (R. 65), and no relevant

changes “in this contract” were made. Article 15 was not al-

tered in any way, and no reference had to be made to the addi-

tion of paragraphs 1-07 and 1-08 of the specifications since

Article 1 of the standard form specifically made the specifica-

tions “a part” of the contract (R. 30; 41 C.F.R. 12.23, p.

1326). It is clear from the Article 22 (“Alterations”) con-

tained in respondent's contract that that provision was used

only to note actual deletions from, or changes in, the standard

my and the specifications submitted with the invitation

22

plete volte face from recent decisions of the Court

of Claims on all fours with this one.” In Langevin

v. United States, 100 C. Cls. 15, 25-26, 40-41 (1943),

the standard form was used, with the normal

Article 15, and the specifications contained a clause

akin to paragraph 1-07; the court below did not

hesitate to recognize and apply the latter provision.

McCloskey & Co. v. United States, 103 C. Cls.

254, 255-256, 264-265 (1945), involving a similar

coupling of disputes provisions, expressly rested

on the ‘‘proper interpretation’’ clause in holding

that the plaintiff could not recover for certain back

counters in a government cafeteria which it claimed

were not called for by the plans and specifications,

but which the contracting officer required to be

built. And in Union Paving Co. v. United States,

107 C. Cls. 405, 408-409, 417 (1946); with similar

contract and specifications, the court relied on the

interpretation provision in the specifications in

holding that the contractor could not recover for

having to use more concrete than it believed was

called for by the specifications. Not only the

novelty but the error of the instant opinion are

underscored by these prior decisions of the Court of

Claims itself.

21 We do not stress a conflict with United States v. John

McShain, Inc., 308 U. S. 512, 520, and United States v. Joseph

A. Holpuch Co., 328 U. S. 234, because Standard Form No. 23

was not used in those cases, and Article 15 (“Disputes”) was

not limited to questions of fact. See fn. 15, supra, p. 17. The

present significance of those cases rests on the fact that they

demonstrate that there is no overall executive, legislative or

judicial policy opposed to provisions according finality to ad-

ministrative decisions of the character here involved.

23

b. In any event, during World War II, the War

Department (the contracting agency here) was

freed by Title II of the First War Powers Act (Act

of December 18, 1941, c. 593, 55 Stat. 838, 839, 50

U.S.C. App. 611) and by Executive Order No. 9001

(3 C.F.R., 1941 Supp., pp. 330-332, December 27,

1941) from the requirement of using the Procure-

ment Division’s standard forms. The statute

authorized the President to permit the war agencies

‘‘to enter into contracts and into amendments or

modifications of contracts * * * without regard to

the provisions of law relating to the making, per-

formance, amendment, or modification of contracts

* * *? and the Executive Order delegated this

power to the War Department, expressly authoriz-

ing ‘‘agreements of all kinds’. As the Attorney

General said in a classic opinion on the Act and

Order (40 Op. Atty. Gen. No. 53, August 29, 1942,

pp. 4, 6), ‘‘the grant is without any limitation what-

ever’’ (save certain specific exceptions not now

relevant), and surely permitted the disregard of

legislation and executive directions concerning the

distribution of procurement functions within the

Government.” During the active life of Title IT

of the First War Powers Act, the War Department

22 The Attorney General’s opinion specifically mentioned (pp.

4, 6), as among the statutes which could be superseded, the

Act of February 27, 1929, 45 Stat. 1341, 41 U.S.C. 7a-7d, cen-

tralizing government purchasing in the Treasury Department.

This is one of the two main acts under which the Procurement

Division (now the Bureau of Federal Supply) has operated.

See Note following 41 U.S.C. 7. The other statute is the Act

of June 17, 1910, 36 Stat. 531, 41 U.S.C. 7.

24

did not consider itself bound to use the peacetime

standard forms, and as a matter of practice fre-

quently departed from the terms of the Procure-

ment Division’s contracts, or instituted new forms,

without seeking or securing any authorization from

the peacetime promulgating agency.” Thousands

upon thousands of war contracts were made which

did not comply with the Treasury’s regulations.

The Procurement Division accepted the Attorney

General’s and the war agencies’ views as to the

scope of the First War Powers Act, and the Comp-

troller General did not object to the use of non-

standard forms.” It follows that the lower court’s

views as to the limits of a contracting officer’s au-

thority to use the Procurement Division’s standard

forms are wholly irrelevant and incorrect as to all

wartime agreements entered into by the many

agencies endowed with power under Title IT of the

First War Powers Act.

3. The Court of Claims’ secondary reason for

ignoring paragraph 1-07 is, apparently, that the

23 The War Department issued an entire series of its own

standard form contracts. See e.g., War Department Procure-

ment Regulations, pars. 304, 1301-1325, 10 C.F.R. Cum. Supp.

81.304, 81.1301-81.1325. Cf. Fain and Watt, War Procure-

ment—A New Pattern for Contracts (1944) 44 Col. L. Rev. 127.

*4A memorandum recently submitted by the Bureau of

Federal Supply to a Senate Committee states that after enact-

ment of the First War Powers Act “the Military Establish-

ment enjoyed for war purposes a complete exemption from all

authority of the Bureau of Federal Supply with respect to

procurement.” Hearings before the Senate Committee on

Expenditures in the Executive Departments, 80th Cong., 2d

sess. on the proposed Federal Property Act of 1948, p. 129.

25

clause was not designed to apply to matters of

‘‘amounts due,’’ but was an interim device requir-

ing the contractor to accept the administrative in-

terpretation during performance but leaving him

entirely free to contest it after completion (R.

61-62). Paragraph 1-07 (‘‘Interpretation of Con-

tract’’), however, flatly makes the contracting offi-

cer the ‘‘interpreter’’ of the ‘‘intent and meaning”’

of the ‘‘drawings and specifications’’, without

qualification as to time or purpose, and paragraph

1-08 provides for an appeal from an adverse inter-

pretation to a tribunal whose decision ‘‘shall be final

and binding upon the parties to the contract.’’ The

lower court’s peculiarly strained construction is

also denied by the long practice under clauses such

as these, both in government and in private con-

tracts, which appears never to have doubted that

the arbiter’s interpretation is final for all pur-

poses.” In addition, this Court and the Court of

Claims in its prior decisions have always accepted

clauses of this type as meaning precisely what they

say, in cases directly involving questions of contract

price or ‘amounts due.’’ Merrill-Ruckgaber Co. v.

United States, 241 U. S. 387, 392-393 ; United States

v. John McShain, Inc., 308 U.S. 512, 520; United

States v. Joseph A. Holpuch Co., 328 U. S. 234;

Langevin v. United States, 100 C. Cls. 15, 39-41;

McCloskey & Co. v. United States, 103 C. Cls. 254:

25 See supra, p. 16, especially the collection of cases in

Tobin Quarries, Inc. v. Central Nebraska Public Power &

Irr. Dist., 64 F. Supp. 200, 208-210 (D. Nebr.).

26

Union Paving Co. v. United States, 107 C. Cls. 405,

417.

4. This decision of the Court of Claims, substan-

tially destroying the effectiveness of the commonly-

used ‘‘proper interpretation’’ clause, will operate,

in a very large and significant class of cases, to

deprive the Government ‘‘of the benefits of the ad-

ministrative machinery it has created to adjudicate

disputes and to avoid large damage claims.”’

United States v. Blair, 321 U.S. 730, 735. As

we have indicated (supra, pp. 19-21), provisions

similar to paragraph 1-07 have for years been used

in government construction contracts by many agen-

cies, and are currently being included in numbers

of agreements. Unless the instant decision is re-

viewed and corrected, all vitality will be drawn

from hundreds of such clauses contained in con-

tracts still outstanding or subject to litigation. The

proper functioning of government procurement

will also be seriously impeded by two other impor-

tant aspects of the decision: (a) by permitting con-

tractors who consent to certain contractual provi-

sions later to attack the contracting officer’s author-

26 The Court of Claims implicitly admits that its decisions on

Claims 2 and 3 necessarily involved interpretations of the

drawings and specifications (R. 59-62). The court’s findings

and opinion make this indisputable (R. 33-35, 51-54). See

supra, pp. 5-9. There is some slight suggestion that the ad-

ministrative interpretations were arbitrary (R. 34), but the

court does not actually go on that ground (R. 33-35, 51-54,

59-62) ; and, in any case, a reading of the pertinent decisions

of the Board of Contract Appeals (supra, pp. 7, 8, fn. 4, 7),

together with the opinion below, demonstrates that the ad-

ministrative determinations were entirely reasonable.

ity, the lower court opens the door for contractors

to escape from distasteful clauses by first accepting

and then disavowing them, and (b) by making it

hazardous to forecast whether a particular added

clause, no matter how ancient or useful, will be

enforced in the Court of Claims, the decision be-

low severely limits the freedom of government

agencies to supplement the terms of standard form

contracts. We do not hesitate, therefore, once

again to petition this Court for relief from a deci-

sion by the Court of Claims nullifying an important

and established clause in government contracts on

the thinnest of grounds.

CONCLUSION

For the reasons stated, it is respectfully sub-

mitted that this petition should be granted.

Purr B. PERLMAN,

' Solicitor General.

OcTOBER 1948.

28

APPENDIX

Article 15 of the Contract provides:

Disputes.—Except as otherwise specifically

provided in this contract, all disputes concern-

ing questions of fact arising under this con-

tract shall be decided by the contracting officer

subject to written appeal by the contractor

within 30 days to the head of the department

concerned or his duly authorized representa-

tive, whose decision shall be final and conclu-

sive upon the parties thereto. In the mean-

time the contractor shall diligently proceed

with the work as directed.

Paragraphs 1-07 and 1-08 of the specifications

provide:

1-07. Interpretation of Contract—Unless

otherwise specifically set forth, the Contractor

shall furnish all materials, plant, supplies,

equipment, labor, etc., necessary to complete

the work according to the true intent and mean-

ing of the drawings and specifications, of which

intent and meaning the Contracting Officer

shall be the interpreter. Except when other-

wise indicated, no local terms or classifications

will be considered in the interpretation of the

contract or the specifications forming a part

thereof.

1-08. Claims, Protests and Appeals.—If the

Contractor considers any work demanded of

him to be outside the requirements of the con-

tract or if he considers any action or ruling

of the Contracting Officer or of the inspectors

29

to be unfair, the Contractor shall without un-

due delay, upon such demand, action, or ruling,

submit his protest thereto in writing to the

Contracting Officer, stating clearly and in de-

tail the basis of his objections. The Contract-

ing Officer shall thereupon promptly investi-

gate the complaint and furnish the Contractor

his decision, in writing, thereon. If the Con-

tractor is not satisfied with the decision of the

Contracting Officer, he may, within thirty days,

appeal in writing to the Secretary of War,

whose decision or that of his duly authorized

representative shall be final and binding upon

the parties to the contract. 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. All appeals from

decisions of the Contracting Officer authorized

under the contract shall be addressed to the

Secretary of War, Washington, D. C. The

appeal shall contain all the facts or cireum-

stances upon which the Contractor bases his

claim for relief and should be presented to the

Contracting Officer for transmittal within the

time provided therefor in the contract.

wu. s. GOVERNMENT PRINTING OFFICE: 1948 8073989 148