United States v. Utah Construction & Mining Co.
384 U.S. 394 (1966)

Annotate this Case

U.S. Supreme Court

United States v. Utah Construction & Mining Co., 384 U.S. 394 (1966)

United States v. Utah Construction & Mining Co.

No. 440

Argued March 23-24, 1966

Decided June 6, 1966

384 U.S. 394

CERTIORARI TO THE UNITED STATES COURT OF CLAIMS

Syllabus

The contract whereby respondent agreed to construct a facility for the Atomic Energy Commission contained a disputes clause which provided that "all disputes concerning questions of fact arising under this contract" should be decided by the contracting officer subject to written appeal to the head of the department, "whose decision shall be final and conclusive upon the parties thereto." After completing the project, respondent filed claims seeking additional compensation and time extensions pursuant to the "changed conditions" clause of the contract. The Advisory Board of Contract Appeals, after hearings, (1) denied the request for time extension and damages for the "Pier Drilling" claim, finding that increased costs were incurred by a subcontractor, rather than respondent, and that the delay was caused by a dispute over the quality of government-supplied concrete aggregate, which was not before the Board for adjudication; (2) denied additional compensation, but authorized a time extension for the "Shield Window" claim; and (3) ruled that the appeal from the contracting officer's rejection of the claim for additional compensation for poor quality concrete aggregate was untimely, remarking however that, if the claim was one for unliquidated damages for breach of warranty or for delay, it had no jurisdiction to award monetary relief. Respondent brought this action in the Court of Claims for breach of contract, asserting government-caused unreasonable delay. That court held that the Pier Drilling and Shield Window claims were primarily for breach of contract, and ordered a trial de novo on the factual issues in those claims. On the concrete aggregate claim, the court ruled that, if the claim was one for breach of contract, rather than one "arising under" the contract, the factual issues should be resolved in a judicial trial.

Held:

1. The government contract "disputes clause" does not extend to breach of contract claims not redressable under other clauses of the contract. Pp. 384 U. S. 403-418.

(a) In decisions both before and after the execution of this contract, the Court of Claims had established that the jurisdiction

Page 384 U. S. 395

of Boards of Contract Appeals was limited to claims under specific contract provisions authorizing relief, and that contractors need not process pure breach of contract claims through the disputes machinery before filing suit. Pp. 384 U. S. 405-406.

(b) It was the settled practice of the Boards of Contract Appeals at the time of execution of this contract to refuse to consider pure breach of contract claims. P. 384 U. S. 406.

(c) While some Boards possess authority to make factual findings in cases where they have no jurisdiction to grant relief, such findings have no binding effect. Pp. 384 U. S. 407-411.

(d) Congress and the military procurement agencies recognize the jurisdictional limitations of the Boards by enacting alternative administrative remedies and by fashioning additional contract adjustment provisions to deal with claims for delay damages such as presented here. Pp. 384 U. S. 413-417.

(e) The development of these additional contractual provisions illustrates not only administrative acceptance of the narrow interpretation of the disputes clause, but also indicates the lack of any compelling reason to overturn that interpretation now. Pp. 384 U. S. 417-418.

2. Although the Board here lacked authority to consider delay damages under the Pier Drilling and Shield Window claims, it did have authority to consider requests for time extensions under specific contract provisions, and these requests called for findings of fact which, if they meet the Wunderlich Act standards, are conclusive on the parties not only under the contract provisions, but also in the court action for breach of contract and delay damages. Pp. 384 U. S. 418-423.

(a) Both the disputes clause and the Wunderlich Act provide that administrative findings on factual issues relevant to questions arising under the contract shall be final and conclusive on the parties. P. 384 U. S. 419.

(b) A party cannot compel relitigation of a matter once decided by merely couching a claim in breach of contract language. P. 384 U. S. 419.

(c) United States v. Carlo Bianchi & Co.,373 U. S. 709, held that administrative findings in the course of adjudicating claims within the disputes clause were not to be retried in the Court of Claims, but were only to be reviewed on the administrative record. P. 384 U. S. 420.

Page 384 U. S. 396

(d) This result is in accord with the principles of collateral estoppel. Pp. 384 U. S. 421-422.

(e) Since the Board was acting in a judicial capacity when it considered these claims, the factual disputes were relevant to the issues properly before it, and both parties had an opportunity to argue their version of the facts and to seek court review of adverse findings, there is no need or justification for a second evidentiary hearing on these matters. P. 384 U. S. 422.

168 Ct.Cl. 522, 339 F.2d 606, affirmed in part and reversed in part.

MR. JUSTICE WHITE delivered the opinion of the Court.

The typical construction contract between the Government and a private contractor provides for an equitable adjustment of the contract price or an appropriate extension of time, or both, if the government orders permitted changes in the work or if the contractor encounters changed conditions differing materially from those ordinarily anticipated. Likewise, it is provided that the contract shall not be terminated, nor the contractor charged with liquidated damages, if he is delayed in completing the work by unforeseeable conditions beyond his control, including acts of the Government. See Armed Services Procurement Regulations (hereinafter ASPR), 32 CFR §§ 7.602-3 to 7.602-5; Atomic Energy Commission Procurement Regulations (hereinafter AECPR), 41 CFR

Page 384 U. S. 397

§ 9-7.5005-2. [Footnote 1] Article 15 provides that "all disputes concerning questions of fact arising under this contract" shall be decided by the contracting officer subject to written

Page 384 U. S. 398

appeal to the head of the department, "whose decision shall be final and conclusive upon the parties thereto." ASPR, 32 CFR §7.602-6; AECPR, 41 CFR

Page 384 U. S. 399

§ 9-7.5004-3. [Footnote 2] Appeals from the decision of the contracting officer are characteristically heard by a board or committee designated by the head of the contracting department or agency. Should the contractor be dissatisfied with the administrative decision and bring a Tucker Act suit for breach of contract in the Court of Claims or the District Court, 28 U.S.C. § 1346(a)(2) (1964 ed.), the finality accorded administrative fact finding by the disputes clause is limited by the provisions of the Wunderlich Act of 1954 which directs that such a decision

"shall be final and conclusive unless the same is fra[u]dulent or capricious or arbitrary or so grossly erroneous as necessarily to imply bad faith, or is not supported by substantial evidence. [Footnote 3]"

With respect to this statutory provision

Page 384 U. S. 400

we held in United States v. Carlo Bianchi & Co.,373 U. S. 709, that where the evidentiary basis for the administrative decision is challenged in a breach of contract suit, Congress did not intend a de novo determination of the facts by the court, which must confine its review to the administrative record made at the time of the administrative appeal.

The issues in this case involve the coverage of the disputes clause and a recurring problem concerning the application of Bianchi to certain findings made during the administrative process. We granted certiorari because of the importance of these questions in the administration of government contracts. 382 U. S. 900.

I

.

The contractor, Utah Construction & Mining Company, executed a contract in March, 1953, to build a facility for the Atomic Energy Commission. After completing the project in January, 1955, it filed with the contracting officer a "Pier Drilling" claim, which asked for an adjustment in the contract price and an extension of time under Article 4, the "changed conditions" clause. The contractor asserted it had encountered float rock in the course of excavating and drilling which, among other things, had increased its costs and delayed the work. Contrary to the decision of the contracting officer, the Advisory Board of Contract Appeals found the float rock to be a changed condition within the meaning of Article 4. But the Board nevertheless denied the request for a time extension and for delay damages. It found that the increased costs had been incurred by a subcontractor, rather than the contractor, and that the delay experienced by the contractor was not caused by the float rock, but by a dispute over the quality of concrete aggregate furnished by the Government, a dispute not then before the Board for adjudication.

Page 384 U. S. 401

Another claim filed by the contractor, its "Shield Window" claim, asserted the existence of changed conditions calling for relief under Article 4 by reason of inadequate specifications and drawings furnished by the Government. Additional compensation and additional time were demanded. The Board found there was no changed condition within Article 4, and denied additional compensation. However, it found the delay involved to be the result of difficulties inherent in a new field of construction, rather than the fault of either party, and it therefore authorized a time extension under Article 9.

In the contractor's subsequent suit for breach of contract, the Court of Claims held both the Pier Drilling claim and the Shield Window claim to be claims for delay damages alleging a breach of contract by reason of the Government's unreasonable delay. In its view, such breach of contract claims were not within the disputes clause, and the administrative findings regarding the responsibility for the delays were subject to de novo determination in the Court of Claims. The disputes clause limited the authority of the Board to "disputes concerning questions of fact arising under this contract." That meant "a dispute over the rights of the parties given by the contract; it [did] not mean a dispute over a violation of the contract." Utah Constr. & Mining Co. v. United States, 339 F.2d 606, 609-610, 168 Ct.Cl. 522, 527 (1964). Because the Advisory Board of Contract Appeals was clearly authorized to determine the cause of the delay in granting or denying the request for an extension of time under Articles 4 and 9, the dissenting judge thought the findings were reviewable only on the administrative record, and therefore objected to the de novo trial ordered by the majority. 339 F.2d at 615, 168 Ct.Cl. at 537 (Davis, J.).

The meaning of the Court of Claims' distinction between disputes over rights given by the contract and

Page 384 U. S. 402

disputes over a violation of the contract has been clarified in a subsequent decision holding that, to the extent complete relief is available under a specific contract adjustment provision, such as the changes or changed conditions clauses, the controversy falls within the disputes clause, and cannot be tried de novo in a suit for breach of contract. Morrison-Knudsen Co. v. United States, 345 F.2d 833, 837, 170 Ct.Cl. 757, 762 (1965). With respect to relief available under the contract, therefore, the contractor must exhaust his administrative remedies, and the findings and determination of the Board would be subject to review under the Wunderlich Act standards, as applied in Bianchi. But the Court of Claims has also ruled that, when only partial relief is available under the contract -- e.g., an extension of time under Article 4 -- the remedies under the contract are not exclusive, and the contractor may secure damages in breach of contract if the Government's conduct has been unreasonable. See Fuller Co. v. United States, 69 F.Supp. 409, 108 Ct.Cl. 70, 90-102 (1947); Kehm Corp. v. United States, 93 F.Supp. 620, 119 Ct.Cl. 454, 465-473 (1950). The issue raised by the decision of the Court of Claims respecting the Pier Drilling and Shield Window claims is therefore whether factual issues that have once been properly determined administratively may be retried de novo in subsequent breach of contract actions for relief that is unavailable under the contract.

The other issue of significance in this case is raised by a third claim filed by the contractor, and involves the matter referred to by the Advisory Board of Contract Appeals in disposing of the contractor's Pier Drilling claim. The contractor, as it was permitted to do under the contract, elected to purchase concrete aggregate from the government stockpile, discovering very shortly that the aggregate was dirty, and its poor quality the cause of understrength concrete. The Government suspended the

Page 384 U. S. 403

work for a time, directed temporary corrective procedures, and itself undertook more permanent remedial measures. After completing the contract, the contractor claimed extra compensation based on the poor condition of the aggregate, which was alleged to be a changed condition under Article 4. The contracting officer rejected the claim, and the Board ruled the appeal was untimely. It remarked, however, that, if the claim was one for unliquidated damages for breach of warranty or for delay, it had no jurisdiction to award monetary relief. Rejecting the Government's position that even if a claim sought only a remedy that was not available under Articles 3, 4 or 9, it nevertheless was within the scope of the disputes clause and subject to "final" administrative determination, the Court of Claims held that, unless the claim sought relief for a "change" under Article 3 or "changed conditions" under Article 4 or "excusable delay" under Article 9 and was adjustable by the terms of those provisions, the claim was not within the disputes clause, was not subject to administrative determination, and was a matter for de novo trial and decision in the proper court. [Footnote 4]

II

We deal first with the issue of the scope of the disputes clause which is raised by the Court of Claims' treatment of the concrete aggregate claim. The Government reasserts here its position in the Court of Claims [Footnote 5] that the

Page 384 U. S. 404

disputes clause authorizes and compels administrative action in connection with all disputes arising between the parties in the course of completing the contract. In its view, the disputes clause is not limited to those disputes arising under other provisions of the contract -- Articles 3, 4 and 9 in this case -- that contemplate equitable adjustment in price and time upon the occurrence of the specified contingencies. If the Government is correct, the concrete aggregate claim was a proper subject for administrative handling even if the substandard aggregate was not a changed condition within Article 4, and even if the claim was for breach of warranty and delay damages. From this and from the Government's position in United States v. Anthony Grace & Sons, Inc., post, p. 384 U. S. 424, which we sustain, it would follow that the factual issues underlying this claim were not subject to a de novo trial in the Court of Claims.

We must reject the government position, as did all the judges in the Court of Claims. The power of the administrative tribunal to make final and conclusive findings on factual issues rests on the contract, more specifically on the disputes clause contained in Article 15. This basic proposition the United States does not challenge; and the short of the matter is that, when the parties signed this contract in 1953, neither could have understood that the disputes clause extended to breach of contract claims not redressable under other clauses of the contract. [Footnote 6] Our conclusion rests on an examination of

Page 384 U. S. 405

uniform, continuous, and longstanding judicial and administrative construction of the disputes clause, both before and after the contract here in question was executed. Reference to decisions subsequent to 1953 is justified in many cases as a practical construction of the clause by one of the contracting parties, the Government (for it has frequently been the Government that has urged a narrow construction of the disputes clause on the various Boards of Contract Appeals), [Footnote 7] and, in any event, as showing the construction on which innumerable other government contractors may have relied in not presenting breach of contract claims to the contracting officer, which claims would now be forever barred under the Government's interpretation by the contractual time limitations on the presentation of claims and appeals. [Footnote 8]

Beginning in 1937, a series of cases in the Court of Claims decided prior to the execution of this contract had established that the jurisdiction of the Boards of Contract Appeals under the disputes clause was limited to claims for equitable adjustments, time extensions, or other remedies under specific contract provisions authorizing such relief, and, accordingly, that the contractor need not process pure breach of contract claims through the disputes machinery before filing his court action. See, e.g., Phoenix Bridge Co. v. United States, 85 Ct.Cl. 603, 629-630 (1937); Plato v. United States, 86 Ct.Cl. 665, 677-678 (1938); John A. Johnson Contracting Corp. v.

Page 384 U. S. 406

United States, 98 F.Supp. 154, 156, 119 Ct.Cl. 707, 745 (1951); Continental Illinois Nat. Bank & Trust Co. of Chicago v. United States, 115 F.Supp. 892, 897, 126 Ct.Cl. 631, 640-641 (1953). That has continued to be the view of the Court of Claims. E.g., Railroad Waterproofing Corp. v. United States, 137 F.Supp. 713, 715-716, 133 Ct.Cl. 911, 915-916 (1956); Ekco Products Co. v. United States, 312 F.2d 768, 773, 160 Ct.Cl. 75, 84 (1963); see also Hunter v. United States, 9 C.C.F.

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