ON PLAINTIFFS' MOTION AND DEFENDANT'S CROSS-MOTION FOR SUMMARY JUDGMENT
This case was referred to Trial Commissioner Saul Richard Gamer with directions to prepare and file his opinion on the issues of plaintiffs' motion and defendant's cross-motion for summary judgment under the order of reference and Rule 166(c). The commissioner has done so in an opinion and report filed on May 20, 1971, wherein such facts as are necessary to the opinion are set forth. Defendant filed a request for review by the court of the commissioner's opinion as it relates to plaintiffs' sixth and seventh causes of action and the case has been submitted to the court on the briefs of the parties and oral argument of counsel. Since the court agrees with the commissioner's opinion and recommended conclusion, as hereinafter set forth, it hereby adopts the same as the basis for its judgment in this case. Accordingly, further proceedings on plaintiffs'
OPINION OF COMMISSIONER
Plaintiff entered into a $32,512,000 contract with defendant, acting through the Public Buildings Service, General Services Administration, for the construction of the United States Courthouse and Federal Office Building in San Francisco, California.
The petition herein sets forth seven causes of action in which plaintiff seeks the total amount of $5,480,547, with respect to disputes growing out of its performance of the contract. The first five of these causes are based upon alleged breaches of the contract and are to be tried. However, the sixth and seventh causes are of a nature that would permit administrative adjustment under the contract. These claims were presented to, and denied by, the contracting officer and the General Services Board of Contract Appeals. The Board decisions are here contested by plaintiff's motion for summary judgment, which seeks review under the Wunderlich Act.
The pertinent facts here set forth are as found by the Board.
Sixth Cause of Action
Under the contract plaintiff was required, by the installation of a dewatering system, to keep all excavated areas free of water.
Prior to the letting of the contract, defendant had made site borings and had prepared logs therefrom. Section 7 of the specifications contained the provisions concerning "Excavation, Filling and Grading," and Paragraph 7-3 thereof, headed "Subsoil Information," stated that "[t]he existing subsurface soil data logs are shown on the [contract] drawings."
Plaintiff commenced its dewatering program by sinking a deepwell. However, since it began pumping sand instead of water (indicating soil of low water filtration) it was abandoned. Plaintiff then sank a second deepwell but the same trouble developed and it too was abandoned.
Thereupon, plaintiff employed Dames & Moore, the same firm that had prepared the boring data for defendant, to advise it concerning its dewatering problem. This firm stated that, in its opinion, it would take ten to twenty deepwells, depending on depth, to dewater
Plaintiff then changed its dewatering system from deepwells to well-points. Plaintiff commenced the installation of the well-points by jetting but found soil penetration by this process difficult and time-consuming. Accordingly, plaintiff obtained (from Houston, Texas) a special drill. Thereafter, plaintiff was able to proceed with the installation of the well-points in a normal manner.
The contract contained the usual Changed Conditions clause providing for an equitable adjustment if the contractor encountered (a) subsurface conditions differing materially from those indicated in the contract, or (b) physical conditions at the site differing materially from those ordinarily encountered in work of the kind covered by the contract.
While plaintiff was in the process of installing the well-points, it notified the contracting officer it had encountered clay deposits at a certain elevation during its deepwell drilling operations, and that this constituted a soil condition that differed materially from those indicated in the contract. The letter further advised that such deposits had also been encountered during the installation of the well-points. Plaintiff claimed that these changed conditions had increased its dewatering costs.
Upon denial of its claim by the contracting officer, plaintiff, pursuant to the Disputes clause of the contract, appealed to the Board, which conducted a hearing lasting four days, and during which 14 witnesses testified, including experts.
At the commencement of the hearing, the presiding Board member inquired as to whether plaintiff had calculated its increased costs and presented them to defendant, but plaintiff's counsel responded that it had not. He stated that the presentation "would have come at the second phase, if they found the changed condition. But they immediately denied that there was a changed condition, so that we never got to the question of additional cost." Counsel further stated that plaintiff's costs due to the alleged changed condition were "still accumulating" (since excavation operations were still taking place) so that it was not then in a position to submit its final costs.
By decision of December 27, 1963, the Board denied the claim which is the subject
The Board concluded that, on the basis of the consultant's opinion, as well as that of another expert called by plaintiff,
On the basis of the above considerations, the Board held that it was not necessary for it to decide whether a changed condition had in fact been encountered since plaintiff had failed to show that the cost of using the well-point system was materially greater than what the cost of using the proper number of deepwells would have been.
The Board clearly erred in dismissing this claim on the described basis and without even deciding whether plaintiff had actually encountered a changed condition. The failure to prove, at the stage of the appeal proceedings at which the hearing was held, the proper number of deepwells that would have been sufficient to dewater the site efficiently
Therefore, while the contractor's miscalculation (if there was one) may cause it to absorb some of the costs over its original estimate, it does not automatically result in its recovering nothing, as the Board here held. Certainly, in view of the express arrangement between the Board and the parties to the effect that the issues would be severed, with only the question of whether there was a changed condition to be tried initially, and with an extensive portion of the hearing thereafter being addressed to that question, the Board should not have terminated the case at such stage without even deciding such issue.
The contractor's miscalculation in Leal v. United States, 276 F.2d 378, 149 Ct. Cl. 451 (1960), upon which the Board relied, was of an entirely different nature. There the Corps of Engineers Claims and Appeals Board, unlike the instant Board, did address itself to the question of whether there was a changed condition and held there was not, a holding which this court sustained. The principal basis for rejecting the contractor's claim was the conclusion that the letters "WT" appearing on the contract drawings would indicate a "water table" to an experienced contractor (the contractor admitted it did not know what the symbol meant), and that the contractor should therefore have expected to find the wet materials condition he did actually encounter. It was in that context that the court held "if the contractor
The Board's error here is similar to that which occurred in the recent case of Merritt-Chapman & Scott Corp. v. United States, 439 F.2d 185, 194 Ct.Cl. 461 (1971). The issue there involved was whether the Government's failure to make a highway (an important portion of the construction site) available to the contractor by a promised date constituted a work suspension entitling the contractor to an equitable adjustment under the contract's "Suspension of Work" article. The court held that the denial of the claim by the contract appeals board there involved was error since it "wrongly assum[ed] that a suspension did not occur unless additional expense was possible and was proved," that the board had "fail[ed] to disentangle the question of the existence of a suspension from the independent issue of what damage the suspension caused or could have caused," and that the board had erroneously "rolled all these questions into one." 439 F.2d at 192, 194 Ct.Cl. at 474.
Plaintiff asks the court to review the administrative record and find that there was a changed condition. However, this determination must in the first instance be made by the Board. United States v. Anthony Grace & Sons, Inc., 384 U.S. 424, 428-429, 86 S.Ct. 1539, 16 L.Ed.2d 662 (1966). Accordingly, it is necessary that the proceedings with respect to this cause of action be here suspended so that the Board may determine whether plaintiff in fact encountered a changed condition within the meaning of the contract provision.
Seventh Cause of Action
On this dispute the Board again did not reach the merits. In this instance it held, on the basis of the facts hereinafter set forth, that the appeal to it was untimely.
The basic dispute is whether, under a proper interpretation of the specifications, certain glass was to be set with a glazing putty or with caulking. Plaintiff's subcontractor concluded that putty was to be used and, by letter of January 11, 1962, plaintiff submitted to the contracting officer a shop drawing indicating such method, together with a supporting letter of January 8, 1962, from its subcontractor.
By letter of January 16, 1962, the contracting officer advised plaintiff that he had reviewed the subcontractor's letter but that he disagreed with the conclusions reached therein. He therefore rejected the shop drawing and "directed" plaintiff "to proceed with the installation of the * * * glass" in accordance with his interpretation of the specifications.
The subcontractor in turn disagreed with the contracting officer's decision and so advised plaintiff by letter. Plaintiff thereupon forwarded a copy of such letter to the contracting officer and, by its transmittal letter, requested that a meeting be held at which the parties could discuss and consider the problem further.
By letter of February 15, 1962, the contracting officer advised that "[i]n accordance with your requests to hold a meeting to discuss the glazing of the * * * glass * * * I will be happy to meet with you * * *."
The following day, February 16, 1962, the General Services Administration promulgated a regulation which provided, among other things, that a contracting officer making a decision under a contract disputes clause was required to notify the contractor of such decision in writing, the notice to contain a paragraph substantially in conformance with one that was set forth in the regulation. Such paragraph was designed (a) to leave no doubt concerning the fact that the notice constituted the contracting officer's final decision, and (b) to alert the contractor to its appeal rights. The required paragraph stated in part that the notice "is the final decision of the contracting officer"; that "[d]ecisions on disputed questions of fact and on other questions that are subject to the Disputes clause may be appealed in accordance with the provisions of the Disputes
Thereafter meetings were held at which the parties discussed the disputed matter and, in addition, conducted a test. Further, on April 26, 1962, plaintiff wrote another letter to the contracting officer pertaining to the matter. However, by letter of May 7, 1962, the contracting officer responded:
By letter of June 19, 1962, to the Administrator of the General Services Administration, plaintiff appealed "from the final decision of the Contracting Officer dated January 16, 1962 and May 7, 1962."
The contracting officer thereupon challenged the timeliness of the appeal since it was not made within thirty days as required by the Disputes clause. In response, plaintiff contended that the contracting officer's letter of May 7, 1962, was the one which finally decided the dispute but that that letter did not constitute a decision from which it was required to appeal within thirty days because of its failure to comply with the provisions of the aforementioned GSA regulation. It therefore urged either that its appeal be deemed timely or that the contracting officer be required to decide the dispute and serve notice thereof in accordance with the requirements of the regulation.
The Board rejected the contention. It held instead that the letter of January 16, 1962, was the "decision of the Contracting Officer on the matter in dispute and was binding on the Appellant within the meaning of the Disputes clause." With respect to plaintiff's reliance on the proceedings subsequent to that letter whereby further consideration was given to the contentions of plaintiff (and its subcontractor) which, plaintiff contended, served to make the dispute "a continuing one * * * so recognized by the Contracting Officer up to May 7, 1962," the Board held that the contracting officer's letter of February 15, 1962 (whereby he agreed to meet for further discussions), "tolled the running of the 30-day appeal period" until May 7, 1962, since the "matter in dispute was under reconsideration by the Contracting Officer" until that date. The Board then held that "the Contracting Officer's letter of May 7, 1962, had the effect of ending his reconsideration and reinstating his decision of January 16, 1962." On this analysis, the Board concluded that plaintiff's appeal of June 19, 1962, was "clearly untimely."
The Board clearly erred. The contracting officer's decision of January 16, 1962, was not, as the Board held, "the final decision," for, obviously, the contracting officer's agreement shortly thereafter to meet with plaintiff and its subcontractor, and to reconsider the question, served to keep the matter open and necessarily destroyed any finality the decision theretofore had. As shown, further meetings were in fact held and a test conducted. As the Board itself held:
Accordingly, the Board was mistaken in holding the 30-day period within which plaintiff was required to appeal commenced to run from such January 16, 1962 letter, and that such running was "tolled" by the February 15, 1962 letter, whereby the contracting officer agreed to reconsider the matter, until May 7, 1962, when he ended his reconsideration. The Board cites no authority in support of its unusual "tolling" method of handling such a situation.
Under the circumstances described, and as everyone seems to agree, the contracting officer did not purport to decide the issue finally until his letter of May 7, 1962. As an effective notice of final decision, however, there is also no dispute that the letter did not advise the
Under the circumstances, plaintiff's appeal should be regarded as timely,
Further proceedings on plaintiffs' motion and defendant's cross-motion for summary judgment on the sixth and seventh causes of action are, under Rule 167(a) and (e), stayed for a period of six months to enable plaintiffs to obtain from the General Services Board of Contract Appeals determinations of (a) whether, in connection with the sixth cause of action, plaintiffs encountered such a changed condition as would entitle them to an equitable adjustment under Article 4 of the contract, and (b) whether, in connection with the seventh cause of action, plaintiffs are, on the basis of the proper interpretation of the specifications, entitled to an equitable adjustment under Article 3 of the contract with respect to the installation of the glass involved in this claim.
"Notice to Contractor