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559

Opinion of the Commissioner

WILBUR K. MILLER, Circuit Judge, sitting by designation; LARAMORE, Judge; MADDEN, Judge, and WHITAKER, Judge,

concur.

OPINION BY THE TRIAL COMMISSIONER (AS MODIFIED)

Plaintiff is claiming additional compensation of $69,961.69 on the basis of the actual costs and expenditures made during the period covered by the claim, rather than on the basis of cost data submitted to the Veterans Administration covering a period prior to the beginning of the period covered by the contract in suit. Thus we have here, apparently for the first time in this court, a situation wherein plaintiff's school is able to show the actual costs during the period of operation under the contract. If schools, authorized to furnish education and training to veterans, should be permitted to proceed on that basis, and be paid the profit normally allowed, they would, in effect, have costplus contracts. It appears unlikely that such schools would be interested in contracts negotiated for prospective application to a school's operation if such procedure was adopted. No provision is found in any legislative enactment of the Congress relating to operation of schools for education and training of veterans which provides for the review or renegotiation of contracts of the type involved here after the services have been performed.

Defendant insists that (1) the plaintiff's financial statement for the contract period may not be considered by the court in determining a fair and reasonable rate of tuition, (2) plaintiff has failed to prove that the rate determination of the Veterans' Education Appeals Board was erroneous, arbitrary, or not supported by substantial evidence, and (3) plaintiff has failed to exhaust its administrative remedies.

Earlier the defendant filed a motion to dismiss this claim on the basis that the Court of Claims is not vested with jurisdiction to review the determinations of fair and reasonable rates of tuition made by the Administrator of Veterans Affairs pursuant to the provisions of Public Law 266, enacted by the Congress August 24, 1949, 63 Stat. 631, and Public Law 610, enacted July 13, 1950, 64 Stat. 336. The 146 C. Cls. Opinion of the Commissioner motion was denied by the court in a written opinion (133 C. Cls. 462). In overruling defendant's motion to dismiss, the court stated (at p. 470):

*** There are many issues, both factual and legal, disclosed in the pleadings, briefs, and oral arguments, especially as to the action of the Board and as to the interpretation of the contracts and statutes involved. The case will be referred to a commissioner of the court so that the facts may be fully developed before

final disposition. Pursuant to this remand, the parties were given full opportunity to offer any evidence, documentary or oral testimony, which they desired to have considered in the court's review of the claim. Additional evidence was placed in the record by each party.

The attorney for the defendant has devoted much of his brief to argument in support of the statement that plaintiff's cost data for the contract period may not be considered by the court in determining a fair and reasonable tuition rate, taking the position that plaintiff's contention is sufficiently answered by the court's opinion in Field School of Upholstery v. United States, 141 C. Cls. 807.

Plaintiff is willing and has agreed to accept the cost items concerning which there was no disagreement between the parties at the time the appeal was considered by the Board. Plaintiff also agrees to have allocations of various items made to the day course on the same basis used by the Board in its decision, if such allocations are applied to the exact costs for the contract period involved."

As a practical and workable procedure, the Veterans Administration has prescribed by regulation that cost data covering a period preceding the effective date of proposed contracts would be utilized as a basis for arriving at the tuition rate under proposed contracts. This has been a standard practice over a period of years. The Veterans Administration had the authority to issue such a regulation (Change 4 of the applicable Veterans Administration Manual M-5, effective July 1, 1948) and it has been used and accepted by both plaintiffs and defendants in many cases.

1 The suit is limited to the day course, since a “frozen rate" has been established for the night course.

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Opinion of the Commissioner It has also been followed in the disposition of many suits filed in this court. If plaintiff's view should prevail, it could mean that, as to future operations, no contract would be negotiated between the parties until some date subsequent to the completion of the entire period of instruction involved. Obviously such a procedure was never contemplated by the Congress when legislation was enacted authorizing the Administrator of Veterans Affairs to determine fair and reasonable rates of tuition.

It appears from argument on behalf of the defendant that the opinion, previously held, namely, that this court has no jurisdiction to review the Administrator's finding of a fair and reasonable rate of tuition, remains unchanged. The specific directive from the court in its prior opinion would be a useless gesture if the court, in the final decision, should decline to review the complete record, and disregard new and material evidence which has been added to that record since the motion to dismiss was overruled. There have been hundreds of claims decided by the Veterans Administration which never reached the Veterans' Education Appeals Board, and likewise a large number of appeals handled by that Board which have never been contested in this court. The number of suits filed in this court have been relatively few. The court has stated that it has jurisdiction to review the agency's findings with respect to a fair and reasonable tuition rate. The court has also ruled in other cases that additional material evidence can be admitted and considered along with the administrative record. Volentine and Littleton v. United States, 136 C. Cls. 638; Art Center School v. United States, 136 C. Cls. 218; and Hemphill Schools, Inc. v. United States, supra; Carlo Bianchi and Company, Inc. v. United States, 144 C. Cls. 500. When an act of Congress or a contract made pursuant thereto makes final the action of an administrative agency official the court will not substitute its judgment for that of such administrative agency unless the decision is arbitrary or capricious or not supported by substantial evidence, or unless the board or agency misinterprets or misapplies the applicable law.

The principal disagreement between the Veterans Administration and the plaintiff, at the time the appeal was 146 C. Cls. Opinion of the Commissioner before the Board, was concerned with the manner of handling two items of cost: (1) teaching and related costs, and (2) the administrative expense, with particular reference to establishment of a fair and reasonable tuition rate.

The plaintiff, a New York corporation, operated for profit an educational institution in Long Island City, New York, for instruction and training in diesel engine mechanics from 1935 until November 30, 1950. It operated a day course six hours a day, five days a week, covering a period of 34 weeks and 1,020 hours of training. It also operated an evening course three hours a night, four nights a week, for 300 hours of training, requiring attendance of any two evenings a week for a period of 50 weeks.

The plaintiff's school was duly approved by the proper authorities of the State of New York as qualified and adequately equipped and operated to furnish vocational rehabilitation to eligible veterans under Public Law 16, March 24, 1943, as amended, 57 Stat. 43, and education and training to eligible veterans under Public Law 346, June 22, 1944, as amended, known as the Servicemen's Readjustment Act of 1944, 58 Stat. 284.

The plaintiff claims additional compensation as tuition for veterans enrolled and trained in the day course under contract V3006V-687, which covered the final year of veteran training from December 1, 1949, to November 30, 1950. The rate of tuition under this contract was $.466 per student hour for the day course and $.7033 per student hour for the evening course, and payments have been made to plaintiff at the rates specified under the contract. The tuition rate for the evening course is not in dispute and no claim is made for any veteran training in the evening course.

During the same period covered by various contracts with the Veterans Administration, the plaintiff enrolled and trained nonveteran students in the day course, at a tuition rate of $500. This rate continued in effect for nonveterans until February 1, 1950, when a 10 percent increase was made, with the approval of State authority, increasing the tuition for nonveterans to $550 for the day course and $275 for the evening course.

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Opinion of the Commissioner Prior to the expiration of contract V3006V–324, the plaintiff was notified that the rate of tuition for the evening course under this contract became frozen by Public Law 266, enacted August 24, 1949, as the Independent Offices Appropriation Act, 1950, 63 Stat. 631, 652, and the tuition rate of $211 for the evening course was specified in the final contract without further consideration being accorded the cost of this new course.

On November 9, 1949, the plaintiff submitted to the Veterans Administration cost data covering its operations for the last fiscal year, audited from April 1, 1948, to March 31, 1949, together with the paid student hours of attendance for this period. The total student hours of paid attendance in the day course was 420,047 hours, representing 94.5 percent of normal capacity, and the paid attendance in the evening course was 75,630 hours, representing 42.5 percent of normal capacity.

The cost data submitted by plaintiff for the year ended March 31, 1949, sometimes referred to as the cost period, reflected total operating costs of approximately $226,780.44, of which plaintiff allocated $184,296.05 as the cost of the day course of instruction and training. By adding $20,477.34 for a profit allowance, the total of $204,773.39 was applied to 420,047 hours of student training, and plaintiff proposed a tuition rate of $.4875 per hour for the day course in the contract period to follow.

During the cost period reported, all regular instructors were paid on the basis of a 40-hour work week, with overtime at one and one-half of the regular hourly rate. On December 22, 1949, a supplemental report was submitted to the Veterans Administration providing for an increase in the salary of instructors by approximately 15 percent, effective December 1, 1949, and a basic work week of 38 hours.

During the period that the plaintiff's cost data was under study by the Veterans Administration, the basic work week for all regular instructors was reduced to 36 hours, effective January 3, 1950, and finally to 32 hours a week, effective March 16, 1950, under schedules of agreement with the teachers' union. Under the final agreement with the union, the work schedule consisted of 30 hours of teaching, 50 min

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