may have access to the Court of Claims or a U.S. district court. And if it does exhaust its administrative remedies and then, on losing at the board level, seeks judicial review, the board's findings of fact are essentially conclusive. If it is a dispute in breach of contract, the contractor must, of course, now go directly to either the Court of Claims or a district court.

Thus, under the present disputes procedure, the contractor has only limited access to the courts. The Bianchi 2 Supreme Court decision and its progeny in Grace 43 and Utah 4 have made the administrative forum the principal locus within which the contractor may present its claim. The boards, in effect, have become the final arbiters of fact, while the courts may only inspect the board record to determine if the findings of fact were "fraudulent, arbitrary, capricious or unsupported by substantial evidence."

In recent years it has been contended that contractors ought to have greater access to the courts, although admittedly a dispute processed through the courts may take longer and be more expensive to litigate than in an administrative forum. Those opposed to direct access, and in favor of mandatory exhaustion of administrative remedies through a board of contract appeals, believe that a primary goal of an administrative procedure is to produce sound, expeditious decisions that result in final disposition of the great majority of cases. They consider that the well-established trend in the law recognizes the benefits of mandatory exhaustion of administrative remedies. They contend that making the disputes-resolving procedures currently available in the boards of contract appeals optional would result in increased delays and formality that would affect the expeditious completion of the contract. Although it is true that some cases will eventually reach the courts and suffer even greater delay by reason of the administrative process, these cases presently amount to only about five percent of all cases decided by the boards. Those opposed to direct access also believe that permitting optional forums invites "forum shopping," by encouraging litigants to choose a

42 Bianchi, supra note 27.

43 Grace, supra note 30.

Utah, supra note 14.

45 Study Group 4, Final Report, vol. II, p. A-72.

tribunal on the basis of its past treatment of the same type of party, and would thus tend to undermine the basic tenet of our jurisprudence that the quality of justice in one tribunal is no different from that of another.

We conclude, however, that direct access to the courts should be restored to the contractor to assure it of a day in court, a fully judicialized, totally independent forum that historically has been the forum within which contract rights and duties have been adjudicated. The rationale of the Tucker Act, which ended to a great degree the doctrine of sovereign immunity, is that the Government acting as a buyer subjects itself to this judicial scrutiny when it enters the marketplace, and should not in all cases be administratively the judge of its own mistakes, nor adjust with finality disputes to which it is a party. This recommendation does no more than reaffirm the intent of this statute. While most disputes will undoubtedly best be resolved in an administrative proceeding, the contractor should not be denied a full judicial hearing on a dispute it deems important enough to warrant the maximum due process available under our system. Direct access to courts guarantees that, at the option of the contractor, the remedial process may extend from the contracting officer to the courthouse on all aspects of a dispute.

"Forum shopping" under a remedies system featuring alternative forums is not an undesirable result, because it will promote efficiency and fair results among the forums. Each of the recommended forums is designed for a different purpose and should ultimately handle different types of claims. Moreover, under the present system there exists considerable disharmony between the administrative and judicial forums that oversee the resolution of disputes. There is an ongoing competition for jurisdiction of contract claims. Tension is generated by the fact-law dichotomy under Wunderlich Act standards, judicial suspension for further administrative factfinding, and remand to the boards for a quantum determination.

Taking a claim directly to court instead of to a board of contract appeals may cause additional delay and expense over and above that required for resolution at the board level. However, the claimant desiring the court proceed

ing presumably will consider the additional time and expense a reasonable cost for the increased due process available in the court. In addition, time and expense will actually be saved in many cases because direct access will permit questions that ultimately must go to court, because of their size or importance, to go there directly without delay.

Judicial Review

Recommendation 7. Grant both the Government and contractors judicial review of adverse agency boards of contract appeals decisions.*

46

Until recently, it has been assumed by most that the Government could force judicial review of adverse board decisions only by withholding payment of a board award. The present state of the law, including the interpretation of the Wunderlich Act and its legislative history, was recently examined by the Supreme Court in the S&E Contractors, Inc. decision. The Court held that the General Accounting Office (GAO) had no authority to make an administrative review of a final agency decision in favor of the contractor. The Court also took the position that the role of the Department of Justice was to represent the Government agencies, not to challenge their actions. While deciding that no other Government agency could administratively review final agency decisions under the standard disputes clause, the Court's opinion does not expressly state if a contracting agency may seek judicial review of an adverse decision by a board of contract appeals. However, the tone and thrust of the Court's opinion is that a decision by a board of contract appeals acting on behalf of the agency head would be final and conclusive on the entire Government, at least under the regulations and charter governing the typical agency board of contract appeals.1

*See dissenting position, infra.

* S&E Contractors, Inc., v. United States, 14 G.C. ¶ 182 (U.S. Sup. Ct., Apr. 24, 1972).

47 In a recent case, Dynalectron Corp. v. United States (Ct Cl. order, Sept. 28, 1972), the Court of Claims has apparently taken this view by barring the Government from obtaining a Wunderlich Act review of a board decision on reprocurement costs. The action was brought originally by the contractor to overturn a default termination, and the Government action was in the form of a counterclaim.

We recommend that the Government be granted a clear right to seek judicial review of adverse agency board decisions. The agency boards of contract appeals as they exist today, and as they would be strengthened by our other recommendations, function as quasi-judicial bodies. Their members serve as administrative judges in an adversary-type proceeding, make findings of fact, and interpret the law. Their decisions set the bulk of legal precedents in Government contract law, and often involve substantial sums of money. In performing this function, they do not act as a representative of the agency, since the agency is contesting the contractor's entitlement to relief. In this context, the Government should have an equal right of judicial review, since it would be an anomaly in the American judicial system for such formalized trial tribunals to have the final authority on decisions that set important precedents in procurement law.

Moreover, our recommendations give the contractor an option to go directly from a contracting officer decision to the Court of Claims or U.S. district court. If the contractor chooses direct access to court, the Government can appeal to a higher court as a matter of right. If the Government has no right to seek judicial review of a board decision, we create a situation where contractors may be prone to take controversial issues involving statutes or case law to the boards in order to obtain a tactical advantage over the Government. If the Government has no appeal rights, but the contractor does, the contractor has an unfair advantage since if it loses before the board, it can seek judicial review of the decision.

To minimize the possibility of personal bias by trial attorneys or program level officials, we believe that requests to appeal should be to the agency head, who would then determine whether the Department of Justice should be asked to appeal the decision. The final decision whether the Government should appeal or not should rest with the Attorney General, as decisions to initiate suits in court or appeal from lower court rulings now do.

The primary arguments made for denying the Government the right of judicial review are, first, that the procuring agency has prescribed the use of boards, appoints them, and therefore should be willing to abide by their

decisions and, second, that the Government could put contractors to additional expense and delay by the use of appeals. Our recommendations answer these arguments by: (1) assuring the independence of the boards; (2) allowing the contractor interest on its claim when it recovers; (3) providing the contractor the optional use of small claims forums or direct access to court to reduce time and expense; and (4) requiring that the final decision by the Government to seek judicial review be made by the Attorney General.

DISSENTING POSITION

Some Commissioners* dissent from the recommendation to grant the Government the right to judicial review.

They believe there are three primary reasons why the Government should not have the right of judicial review:

• To maintain the integrity of the disputes process

To protect contractors from unwarranted prolonged reviews of disputes

• To avoid creating an unneeded right.

First, most Government contracts include a disputes clause that subjects contractors to administrative reviews and determinations of contract disputes in accordance with the intent of the Wunderlich Act. Throughout this administrative process, designated representatives of the Government are decisionmakers. And, pending final decision on the dispute, a contractor is obligated-under the terms of Government contracts-to proceed with performance in accordance with the Government's decision, no matter how strongly it may dispute the issue at hand.

In return for these substantial rights that contractors surrender under the disputes procedure, the Government has traditionally recognized that its ultimate administrative determination, by a board of contract appeals, should be final as far as the Government is concerned. Otherwise, it would cast aspersions on the validity of the entire administrative process and, in effect, result in impeaching all

*Commissioners Beamer, Horner, Joers, McGuire, and Sanders.

of the designated officials who have represented the Government throughout that process.

Although the Government's representatives exercise objective and independent judgments in making their determinations, it must nevertheless be recognized that these officials are appointed solely by the Government, which is as it should be, since a board of contract appeals constitutes the duly authorized representative of its Secretary for determining appeals. Thus, an attempt, within an agency, to overturn a board decision must be equated with an attempt to overturn the decision of the Secretary himself, whose word should be final as far as his agency is concerned.

Second, the finality provision of the disputes clause is one of the salient features of the disputes process. It culminates the administrative process in the manner contemplated by the Wunderlich Act, and it overcomes the problems that constituted the reasons for enacting the Wunderlich Act in the first place.

The intent of Wunderlich was to establish a quick and efficient procedure for resolving disputes under Government contracts. Prior to Wunderlich, contractors could be unduly subjected to prolonged and unwarranted delays in order to obtain a final determination of contract disputes. To avoid this, Wunderlich was enacted and, thus, board decisions became final and conclusive and, as clearly enunciated in the S&E Contractors case, unappealable by the Government. The many years of delay involved in the S&E case itself illustrates how gross the inequity and wrong can be vis-a-vis certain contractors when the Government takes a board decision to the courts.

Moreover, if the Government could appeal an adverse board decision, the power of the board would be severely diminished, thereby weakening the entire administrative process. The board decision would be no more than another subordinate Government official's decision that could only influence somewhat the outcome of the dispute but not represent an end to the chain of decisions the Government required before it recognized that it had treated a contractor wrongfully.

Third, a final reason for not creating a Government right to appeal from an adverse board decision is fundamental-this right is not needed. In the past 20 years, there have been

extremely few cases in which the Government has even seriously contemplated an appeal, much less taken action to appeal. The reason is because the administrative process for reviewing disputes has been successful as far as the Government is concerned. Changing this situation, for the one or two cases which might arise in the next 20 years, seems completely unjustified, without perspective, and could only result in adversely affecting the disputes process as a whole.

Judicial Review Time Limits

Recommendation 8. Establish uniform and relatively short time periods within which parties may seek judicial review of adverse decisions of administrative forums.

Whether or not the Government is granted a right to judicial review of adverse agency board decisions, we recommend that uniform and relatively short time periods be established within which parties may seek judicial review of the decisions of the agency boards, the SCBCA system, or the contracting officer.

At present, a contractor has six years following an adverse board decision to initiate legal action on its dispute in the courts.48

Since the boards as now constituted, and further strengthened by our recommendations, are essentially trial courts, there is no reason to treat the time period for "appeal" of their decisions any differently than an appeal from a U.S. district court or U.S. court of appeals. Moreover, the existing situation can result in the filing of lawsuits many years after the knowledgeable personnel are gone and important records destroyed.

Accordingly, we favor a fairly short time period, perhaps ninety days, to initiate judicial review by either a contractor or the Government. If no appeal is taken within the prescribed time period, the decision of the board should be final and binding on both the contractor and the Government. For the sake of uniformity and simplification, we further recommend that the same time limit apply to the contractor seeking judicial review of adverse

48 28 U.S.C. § 2401 (1970).

SCBCA decisions and for the contractor seeking to appeal an adverse contracting officer decision in an agency board, the courts, or in the SCBCA system.

Remand Practice

Recommendation 9. Modify the present court remand practice to allow the reviewing court to take additional evidence and make a final disposition of the case.

The standards of review established by the Wunderlich Act as interpreted by the Supreme Court in the Grace 9 decision foreclose the courts from making any findings of fact consequent to a board of contract appeals decision. The court must remand a case to the board for any further findings of fact the court deems necessary before it can render a decision, and when the court makes a finding on the question of entitlement, it must refer the case back to the board for findings as to "quantum" or damages. The latter is the most common cause of remands. For the three-year period, 1968 through 1970, only 51 cases were remanded. This is a small number when compared to the total number of board cases, although it is approximately 30 percent of the total number of contract cases filed in the court during those years.50

The rationale of the Supreme Court in Grace is based not only on the contractual provisions that establish the boards as the forum for trial of the facts but also on the belief that administrative proceedings are more efficient for settlement. The Court also remarked that "reliance upon a few expert agencies to make the records and initially to pass on the merits of the claims properly presented to them will lead to greater uniformity in the important business of fairly interpreting Government contracts." 51

However, some observers presently believe that, in the time-consuming process of judicial review, the interests of economy and speed become overriding and are better served by allowing the court to retain control over the

49 Grace, supra note 30.

50 Study Group 4, Final Report, vol. II, pp. A-69 to A-77. 1 Grace, supra note 30 at 429.

litigation once it has reached the review level and to make whatever findings are required. They believe that the delay resulting from the requirement that the case be remanded to a busy board is too great a price to pay for maintaining the distinction between factfinding and reviewing findings of law and is, furthermore, a waste of the readily accessible factfinding mechanism available in the court.

Others believe that the present remand practice, since it involves primarily a referral for determination of quantum, is appropriate, since the boards are a forum where the agency officials can deal directly with the contractor and frequently negotiate a reasonable settlement without requiring a full hearing. The responsibility and authority for settlement is primarily in the agency, and a consideration of what is a reasonable contract adjustment requires the first-hand knowledge of those Government officials responsible for administering the contract, especially the contracting officer. Finally, there is concern that to permit the courts to open the board record and admit new evidence on a particular factual question is to risk de novo review of other questions as well, since the bounds of such a hearing will be difficult or impossible to define.

The present judicial review process does not contribute to speedy and economical resolution of disputes. The limitations and uncertainties appear to have increased emphasis on procedures that can have a resultant ping-pong effect between the boards and the courts, while the substance of the case is largely ignored. This, along with the lengthy time period needed to initiate court action in the first place, can make a case stale since a board of contract appeals may not be directed to reopen a case until several years after its initial decision. During such an interval, witnesses and records for both sides may be lost or become difficult to find.

Although the boards of contract appeals should be strengthened in ways that will contribute to making better records and decisions, we see no advantage in continuing the rigid Wunderlich Act review standards and remand practice. The system would be more responsive to the interests of economy and fair treatment if the courts were allowed discretion to supplement the board record with additional

evidence where appropriate and to take appropriate action to resolve the dispute. This should not foreclose the discretion to remand a case to an agency board of contract appeals. However, the delay and added expense resulting from a mandatory remand procedure is too great a price to pay. Considering the factfinding mechanism available in the judicial forums-particularly the Court of Claims-and the limited number of contract disputes that are litigated in the courts, revisions in the standards for scope of review and remand should benefit both contractors and the Government.52

District Court Jurisdiction

Recommendation 10. Increase the monetary jurisdictional limit of the district courts to $100,000.*

The Tucker Act was intended to create an integrated jurisdictional plan so that the Court of Claims and the U.S. district courts could offer an equal opportunity for a fair trial of like claims within the stated jurisdictional amount of the district courts. The act was intended in part to release the pressure put on Congress by individuals for private bills to terminate disputes. It also was intended to allow those with small claims to bring suit in the district in which they and their witnesses resided without incurring the expense and inconvenience of litigation in Washington.

These remain valid reasons for giving the district courts a role in the disputes-resolving process, although in recent years that role has greatly diminished, largely because inflation has made the present jurisdictional limit of $10,000 far too low. It is clear that this limit must be raised if the district courts are to play an effective role in the process.

Expanding the district court jurisdiction to $100,000 would broaden the base of Government contract law by involving a greater

52 Pub. L. No. 92-415, signed by the President in Sept. 1972, grants the court the power to remand with such "directions" as it may deem proper and just. Our recommendation would give the court the additional power to take additional evidence itself instead of remanding. In addition, Rep. Celler in May 1972 introduced a bill (H.R. 14726) that would amend the Wunderlich Act to grant the contractor a de novo review of an adverse board decision with, however, the board decision bearing a presumption of correctness. See dissenting position, infra.