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In the light of the lack of legislative specificity, the continued interest in a special termination statute (akin to the Contract Settlement Act of 1944) can be readily seen as primarily rooted in a desire for (i) firmer and more specific Congressional guidance and sanction, (ii) greater uniformity in policies and procedures, and (iii) certain changes in existing administrative policies. This is the clear motivation of the Chamber of Commerce statement ("Why a Contract Settlement Law?'') cited by plaintiff in its motion for rehearing - not the absence of any legislative authority for the current administrative regulations,
EFFECT AS LAW
2. The Supreme Court's ruling in Paul, Public Utilities Comm'n of California, and Leslie Miller, Inc., cited Supra, require that, once Section 8.703 of the ASPR is recognized as validly authorized, it must be accorded the full effect of federal law. We have already pointed out the statutory authority for this section (and the standard article it requires) in the Procurement Act of 1947 and supplementing legislation. The history of contract-termination over the past decades (sketched in our original opinion) proves the propriety and reasonableness of the the normal articles for a convenience-termination Regulations reasonably adapted to the administration of a Congressional act, and not inconsistent with any statute, have "the force and effect of law." See, e.g., Maryland Casualty Co. v. United States, 251 U.S. 342, 349 (1920); United States v. Barnard, 255 F. 2d 583, 589 (C.A. 10, 1958), Cert. Denied, 358 U.S. 919. It follows that, if Section 8.703 applied it demanded the inclusion of the standard article in plaintiff's contract and that contract must be interpreted to comply (at least if it is to be held a valid agreement on which plaintiff can sue).
Plaintiff admits that, if a statute requires the inclusion of a termination clause, such a provision would be read into the agreement, whether the negotiators put it there or not. But great objection is laid against the incorporation of an article into a new contract by means of a valid pre-existing regulation. It is difficult to see why this should be so when, as the Supreme Court cases demonstrate, "mere" regulations can supersede state laws which should otherwise control; giving the regulations the status of law equates them fully to federal legislation. The concept of such incorporation is not novel. A well-known example is Executive Order No. 9001 (implementing the First War Powers Act), Supra, which expressly required, without specific statutory foundation, that World War II contracts should contain a covenant-against-contingent-fees, as well as an anti-discrimination clause. If the contracts were to be deemed valid, these articles had to be read as part of all war procurement agreements, whether or not they were physically incorporated. Conversely, the President forbade the cost-plus-a-percentage-of-cost system of contracting or the payment of fixed fee of more than 7% of estimated cost. No contract would transgress these requirements. also, Speck, Enforcement of Nondiscrimination Requirements for Government Contract work, 63 Col. L, Rev. 243, esp. 248-49 (1963); Van Cleve,
The Use of Federal Procurement to Achieve National Goals, 1961 Wis. L. Rev. 566. It was important then, and it is important now, that procurement policies set by higher authority not be avoided or evaded (deliberately or negligently) by lesser officials, or by a concert of contractor and contracting officer. To accept plaintiff's plea that a regulation is powerless to incorporate a provision into a new contract would be to hobble the very policies which the appointed rule-makers consider significant enough to call for a mandatory regulation. Obligatory Congressional enactments are held to govern federal contracts because there is a need to guard the dominant legislative policy against ad hoc encroachment or dispensation by the executive (see, e.g., United States v. Mississippi Valley Co., 364 U.S. 520 (1961)). There is a comparable need to protect the significant policies of superior administrators from sapping by subordinates.
Like other individuals who deal with the Federal Government (see e.g., Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380 (1947)) potential contractors can validly be bound to discover the published directives telling them the limits and the scope of the agreements the Government can make. Our concern is not at all whether the policy of embodying mandatory contractual provisions in regulations is the best one.
Our special interest is only the legality of such a practice, and we hold that, in the procurement field as in others, an authorized regulation can impose such peremptory requirements on federal officials and those who seek to enter into transactions with the Government.
APPLICATION OF ASPR
3. Plaintiff also contends that, in any event, the termination provisions of the ASPR do not, under their own terms, control the contract at bar because none of the termination regulations apply except where (a) the agreement already contains a termination article, and (b) the contract is made under the Procurement Act (and not under the Capehart Act). We find neither contention to be sound.
(a) Plaintiff founds its argument, that Section 8.703 (requiring the standard termination-for-convenience article for construction contracts of the size of plaintiff's) concerns only contracts already containing such an article, on Section 8.101 of the ASPR which declares that the termination part of the Procurement Regulations, (Section VIII) "applies to contracts entered into under the (Procurement) Act which by their terms provide for termination thereof for the convenience of the Government," and also that contracts not containing such a clause (or a clause differing from the standard clauses) "may be amended to include or substitute a standard clause." But these porțions of Section 8.101 do not have the meaning plaintiff attributes to them. By its very wording, the impact of Section 8.703, expressly directing that a certain standard clause "shall be inserted" (italics added) in construction contracts, could not and does not depend upon the preexistence of such a clause in the contract. Rather, the clue to Section 8.101 is that Section VIII, the termination portion of the Procurement Regulations, contains an elaborate set of procedures and practices to be followed upon the termination of a contract. The purpose of Section
8.101, referring as it does to "this part" (i.e., the whole termination regulation), is to make these procedures and practices (which are not embodied directly in any contract, or required to be so embodied directly in any contract, or required to be so embodied) applicable to contracts which contain, either expressly or by incorporation, a termination-forconvenience clause - and only to such contracts. Not all contracts were (or are) required to have such a clause; and if the clauses were not required to be included in an agreement the procedures and practices of Section VIII of the Procurement Regulations would not control, even if the Government should thereafter elect to terminate the contract for its own convenience.
The sentence in Section 8.101 saying that contracts without any of the new standard termination clauses can be amended to include one - on which plaintiff also relies - was obviously placed in the regulations to cover contracts already in existence before the issuance of the new termination regulation. Section VIII, the termination part of the ASPR, was promulgated in February 1952. Section 8.102, as well as Section 8.703, ordered the new standard-form termination clauses to be used in the appropriate future contracts. One of the purposes of Section 8.101 was to afford the Government and a contractor the right to conform already-existing contracts to the new standards, by agreement, if they wished to do so. The section did not controvert the mandatory requirement of Section 8.703 (and its kin) that future contracts were to include the new article.
(b) Another of plaintiff's arguments is that the temination regulation applied, by its own terms, only to contracts under the Procurement Act of 1947, and plaintiff's contract was not made under that statute but under the Capehart Act. It is true that the housing contract referred specifically only to the Capehart Act, which was the explicit authority for the Government to undertake the elaborate tri-partite arrangement under which Capehart Act housing was erected and maintained including the leasing of land to the private party, the insuring of the loan, the payment of the mortgage indebtedness by the Government, and the operation of the housing project. But the housing contract itself was primarily a construction contract, and the general provisions of the Procurement Act authorized the armed services to make construction contracts of various types; since its enactment that Act has been the main basis upon which military construction contracts have been founded, Special legislation may provide additional authority or limitation for certain projects or kinds of agreements, but the supplemental authority does not eliminate the general grant given to the military departments by the 1947 statute. Plaintiff's housing contract was grounded in part upon the special implementing provisions of the Capehart Act but, as a construction contract, it also drew basic authority from the Procurement Act. The former statute expressly requires that construction contracts for the housing projects shall be made by competitive bidding as provided in the Procurement Act (42 U.S.C. & 1594 (a)). The failure of the contract to mention the latter is no more significant than if some other construction contract had referred only to the appropriate legislation granting the money for the buildings or the act authorizing a new military base on which the buildings were to be erected; the general authority of the Procurement Act would nevertheless be involved.
AUTHORITY TO OMIT CLAUSE
4. Plaintiff's next point is that, even if Section 8.703 would otherwise apply, there was sufficient administrative authorization to omit the standard termination article from Capehart Act housing contracts. The essence of this contention is that a special form of contract was drawn up by the Defense Department and the Federal Housing Administration for Capehart Act projects, differing in many of its articles from the standard forms and leaving out a termination-for-convenience clause. Undoubtedly, the Secretary of Defense - who had general supervisory authority over the Procurement Regulations, as well as a specific grant of power under the Capehart Act to include in the housing contract such terms and conditions as he considered necessary - could have decided that Capehart Act construction contracts, unlike other military construction agreements, should not be terminated for the Government's convenience without rendering the United States liable for anticipated but unearned profits. The question is whether it has been shown that he (or a proper delegate) did make that choice. We think not.
(a) The Armed Services Procurement Regulations contemplated a specific mechanism for receiving permission to deviate from required forms or articles. See 32 C.F.R. 400.108 (1954 rev.) and 32 C.F.R. 1.109 (1955 rev.). There is no proof, or offer to prove, that this mechanism was used. It is said, however, that the general agreement of the Assistant Secretary of Defense (Properties and Installations) with the Federal Housing Commissioner upon a number of forms, including a form of housing contract, constituted sufficient permission to eliminate the termination-for-convenience clause. Here, too, there is lacking any proof that this particular Assistant Secretary was empowered to approve alterations in articles mandatorily required by the ASPR. More importantly, we are not persuaded that a conscuous decision was made, at the appropriate level in the Defense Department, to eliminate the required termination article and this to subject the Government to the full common-law measures of damages (including unearned profits). We are informed by plaintiff (as well as by the plaintiff in J.W. Bateson Company, Inc. v. United States, Ct. Ci. No. 365-60) that there was no discussion - either between the contractors and the Government, or while the form of housing contract was being drawn up by the Government officials - as to the inclusion or omission of the standard-form article. There is therefore no direct showing of such a conscious election to omit the termination provision.
(b) Plaintiff insists that such an affirmative decision as to termination must nevertheless be implied from (i) the use in the housing contract of other standard articles, coupled with the omission of the termination-for-convenience clause, and (ii) an understanding with Congress, reflected in the Capehart Act, that the projects would not be cancelled. The fact that the housing contract employed variations of the standard clause for "disputes", "changes", etc. - to accommodate the role of the F.H.A. in the administration of the contract, and to cover other special circumstances of Capehart Act projects - does not mean that the uniform termination clause was deliberately rejected by officials in the Defense Department empowered to make that choice. The matter may never have been brought to their attention, or, if it were, they may have thought that the four explicit references in the contract (and its accompanying agreements) to "termination for convenience" of the Government adequately incorporated the standard article on that subject.
Plaintiff also errs in thinking that projects under the Capehart Act were never to be cancelled. The Act required (70 Stat. 1018-19) the Secretary of Defense to submit to Congress a report "stating the intent to construct or acquire such (housing) units," and "certifying that the number of units to be constructed or acquired is consistent with the long-range troop strength to be stationed at the location of such unit." This is a certification of present understanding and present intent. It is a far cry from a guaranty that the project would not be cancelled, no matter what unforeseen changes in military requirements might occur. The predecessor Wherry Act contained a comparable certification requirement, but this court held that nothing equivalent to a guaranty was intended and that "Congress must have been aware that the requirement for a fluid military establishment made it impossible to represent that a military installation would not be deactivated or curtailed for the indefinite future." Henry Barracks Housing Corp. v. United States, 150 Ct. cl. 689, 695, 281 F. 2d 196, 200 (1960). As under the Wherry Act, a Capehart Act contractor must have been aware "of the inability of the Government, or any government, to guarantee that defense needs are immutable" (150 Ct. cl. at 699, 281 F. 2d at 202).
(c) In addition to the absence of a persuasive showing that a proper Defense Department officer chose to waive the requirement for a convenience-termination clause, there is affirmative evidence that no such election was made. We pointed out in our original opinion (slip op. p. 14, 312 F. 2d at 427), and mention above, that there are four express references to termination-for-convenience in the contractual papers. The housing contract itself twice mentions "termination of the Housing Contract for the convenience of the Department prior to completion of the project"'; the accompanying building loan agreement provides for certain action "if the Housing Contract shall be completely terminated for the conveience of the Department prior to completion of the project"; and the companion guaranty-with-respect-to-mortgage-payments refers to "the complete termination of the Housing Contract for the convenience of the Department prior to completion of the F.H.A. project."
Plaintiff minimizes these explicit references as included solely to satisfy private lenders who were afraid that the Government might cancel the housing contract even though there was no authority to do so. It is difficult to accept this as the correct explanation for the reiterated inclusion of these phrases. One of the citations in the housing contract deals not only with the lender but with the plaintiff itself. The other three references directly concern only the lender, but they limit the Government's liability to that party to the monies advanced up to the date of termination and waive other claims. If plaintiff were right, such termination by the Government would constitute an outright breach and the lender might be entitled to wearned interest, just as the plaintiffbuilder would be entitled to unearned profits; the lenders would have been better off not to press for the "protection" plaintiff says they sought. Moreover, if plaintiff were right, there would be no need for these special references to termination since the normal law of contracts would give the lenders all necessary protection against the injurious consequences of a breach by the Government.
Above all, we cannot believe the familiar and established phrase "termination for the convenience of the Department" meant, in this contract, a cancellation which would be a breach of contract. At least since the