#### THE STEWART-McGEHEE CONSTRUCTION COMPANY v. THE UNITED STATES.

[No. 80-A.

Decided December 3, 1922.]

*On the Proofs.*

*Bent Act; cost-plus contract; extra work.*— Where a contract provides that certain wort shall be completed within a specified time and that the contractor shall be reimbursed for all cost of the same, and be paid a fee on such cost according to a graduated scale of percentages, not to exceed a specified amount, and he is reimbursed by the Government for all cost of wort completed within the contract time, and paid the maximum fee thereon, he is entitled to recover under the Dent Act a fee on the cost of wort performed by him thereafter under orders given him after the expiration of the time limit of the contract by the proper officer of the Government, although the authorization for the performance of the wort may have been issued under said contract prior to its termination, and such right of recovery is not affected by a new contract entered into after such wort has been performed which provides for additional wort, with a different scale of fees and a larger maximum fee, although part of the wort performed was authorized under the old contract and ordered under the new contract.

*The Reporter's*statement of the case:

*Messrs. Harvey D. Jacob*and *Richard P. Whiteley*for the plaintiff.

*Mr. George H.*Foster, with whom was *Mr. Assistant Attorney General Robert H.*Lovett, for the defendant.

The following are the facts of the case as found by the court:

I. The plaintiff is a corporation duly incorporated under the laws of the State of Arkansas, with its principal office *2in the city of Little Rock, Ark., and is now, and was during the different transactions described in these findings, engaged in the general contracting business.

II. On November 1, 1917, the plaintiff and the United States entered into a formal written contract whereby plaintiff was to furnish labor, materials, tools, machinery, equipment, facilities, and supplies, and to do all things necessary for the construction and completion of alterations, additions, and repairs at Camp Pike, Little Rock, Ark., as might from time to time be ordered in writing within six months from said November 1, 1917; and the Government agreed to pay for said supplies and work, and also a fee to be determined as px-ovided in the contract, a copy of which is attached to the petition in this case, marked “ Exhibit A thereto, and is made a part of these findings by reference. As will appear from Exhibit A, it was agreed that the total fee to the contractor should in no event exceed the sum of' $15,000, anything in the contract to the contrary notwithstanding.

III. At the time the contract of November 1, 1917, was executed it was estimated that the cost of the work contracted for would not exceed $200,000; but afterwards additional work was authorized which greatly exceeded the-estimated sum of $200,000 and amounted to approximately $730,000. Accordingly, on February 21, 1918, a supplemental agreement was entered into between the same parties extending the time limit to eight months instead of six months and providing for a maximum fee to the contractor-of $65,000. The expiration of the supplemental agreement was June 30, 1918. A copy of the supplemental agreement fonns part of Exhibit A to the petition and is made a part of these findings by refei'ence.

IV. The plaintiff began promptly and completed a large-amount of woi’k ordered under the terms of the contract of November 1,1917, as amended by the supplemental agreement. The cost of work at the contract price up to and including June 30, 1918 (the date of the expiration of the amended coixtract), amounted to $1,224,784.95, for which-the plaintiff 'was duly reimbursed by the Government. This *3sum did not include tlie stipulated fee or any part of it, but tlie sum of $40,000 was paid upon the fee prior to June 30 and the sum of $25,000 was paid in August, these sums aggregating the sum of $65,000 specified in the contract.

V. The War Department issued letters authorizing construction, called by .the contractors and parties concerned “ L. A. C.” These went to the constructing quartermaster, who issued orders to the contractor based on the “ L. A. C.,” and frequently the constructing quartermaster’s orders to proceed were withheld or withdrawn owing to other instructions. It was his practice frequently to order work to be performed a considerable time after the letters authorizing construction (“ L. A. C.”) had been received, and sometimes the work which had been authorized was not ordered to be performed at all.

After the expiration of the time limit of the amended contract — June 30, 1918 — orders for work by the plaintiff were continued and plaintiff expressed an unwillingness to proceed with the repair and construction work without some further and definite arrangement as to compensation. Whereupon the constructing quartermaster in charge of the work, and afterwards the officer in charge at Washington,, assured plaintiff that a further extension of the time and fee would be recommended and made and urged plaintiff to continue the work. The plaintiff thereupon, relying upon chis assurance as to compensation, proceeded with the work and the cost of it was paid for by the Government, the payments being made as they had been made for work done under the provisions of the contract and supplement thereto, which had expired as stated. The cost of the work performed under orders to proceed given by the constructing quartermaster between June 30, 1918, and August 22, 1918, amounted to $145,954.82, except the small amount hereafter mentioned. For these expenditures the plaintiff was reimbursed in due course. These orders to proceed were based upon authorizations (“ L. A. C.”), issued in some instances before June 30 and in some instances after June 30. Of this amount $125,618.35 was for work done after June 30, under letters from the War Department authorizing construction, which had been issued before July 1, 1918, but where the *4orders to the contractor to proceed had been delayed until after June 30, and $20,337.47 was for work done after July 1, 1918, under authorizations and orders, both issued after July 1,1918.

VI. While the plaintiff was proceeding with the work after June 30, the constructing quartermaster duly x-ecom-mended to the proper officer an extension of the contract, as he had assured the plaintiff he would do, stating, among other things, that the work authorized since the previous extension of contract had been greater than was anticipated, and that he believed it to be for the best interest of all concerned that this new extension of contract fee should be made. This recommendation was not carried out as proposed. A new and different contract was executed as stated hereafter.

VII. On August 22, 1918, the plaintiff and the United States entered into another formal contract by which plaintiff agreed to furnish the labor, material, tools, machinery, equipment, facilities, and supplies, and to do all things necessary for the construction and completion of the following work: “ Officers’ training school and additions, including alterations and repairs to Camp Pike, Little Pock, Arkansas, in accordance with the drawings and specifications to be furnished by the contracting officer and subject in every detail to his supervision, direction, and instruction.” A copy of this contract is made an appendix to these findings. It involved work similar to that plaintiff had been doing under the earlier contract, but it also involved the construction of an entirely new building and structures. This contract also contained a schedule of fees by a sliding scale materially less than the schedule in the former contract. It provided in express terms for a maximum fee of $160,000.

VIII. After August 22, 1918, work was performed which had been authorized by “L. A. C.,” issued prior to July 1, 1918, and upon orders to proceed issued after August 22, amoimting to $61,413.59, which, together with the fees thereon, was paid under the terms of the contract of August 22, 1918, and the balance of the work done after August 22, and amounting to $1,840,910.93, was also paid for. Upon *5the sum of these two amounts, aggregating $1,902,324.54, fees were computed and allowed and paid under the terms of the contract of August 22 to the amount of $95,145.53.

IX. The total amount paid to the plaintiff as the cost of all work performed by plaintiff at Camp Pike amounted to $3,273,064.29, exclusive of fees. The total amount paid to the plaintiff as the cost of the work up to August 22, 1918, was $1,370,739.77, and the total amount as cost of work paid plaintiff after August 22 was $1,902,324.52. The total amount of fees paid to the plaintiff before August 22 was $65,000, and the total amount of fees paid on the cost of the work performed after August 22, 1918, under the contract of that date, was $95,145.53. None of the cost of the work performed between June 30, 1918, and August 22, 1918, was considered when paying the fee of $95,145.53, which was limited to the cost of work performed after August 22, 1918; nor was it considered when paying the fee of $65,000 under the first contract. The estimated cost of work that might be called for under the contract of August 22 was approximately $4,500,000. The armistice came in November, and the work was suspended. The fee above mentioned was paid.on the work actually performed.

X. This claim was originally filed with the Board of Contract Adjustment under the Dent Act for additional compensation claimed to have been earned by the plaintiff for work ordered and performed, and for the cost of which work plaintiff was reimbursed, as is stated above, at Camp Pike between June 30,1918, and August 22,1918, during a period when there was not a written agreement. Findings of fact were made by the board and the claim disallowed. The decision of the board was approved by the Secretary of War, who failed or refused to allow any further compensation to plaintiff. The conclusion of the Secretary was as follows: “ Upon consideration of the record in this matter and pursuant to the policy established in prior decisions and outlined in the accompanying recommendation, the decision of the Board of Contract Adjustment in this matter is hereby approved.”

*6In the memorandum or recommendation accompanying the Secretary’s decision it is said:

“ Except as to work ordered after June 30,1918, the claim should therefore be denied for the reasons stated in the cases above referred to. With regard to work ordered after June 30, 1918, and especially with regard to work ordered after that date and performed before the claimant’s agreement of August 22, 1918, was entered into, an interesting question would be presented if there were proof of the amount of such work and if it were shown that payment for the same had been accepted under either of the written contracts. The board finds that there is no evidence of the cost of the work ordered between June 30 and August 22, 1918, and the claimant’s brief appears not to dispute this statement.”

XT. If plaintiff is entitled to recover, the reasonable amount plaintiff should receive as compensation or fees for work ordered and done between June 30 and August 22, 1918. is the sum of $7,725.

If the plaintiff is entitled to recover fees based upon the amount of work done after July 1, 1918, where the letters authorizing construction and also the constructing quartet»master’s orders were issued after July 1,1918 (which amount is $20,337.47, as shown in Finding Y), the reasonable amount of such fees should be $1,075.

CaMpbell, *Chief*Justice,

delivered the opinion of the court:

The plaintiff claims to be entitled to compensation under an implied contract. Its claim was presented to the Secretary of War under the provisions of the act of March 2,1919, 40 Stat. 1272, known as the Dent Act, and was disallowed. It comes to this court under section 2 of the Dent Act.

A written contract was made between the plaintiff and the United States whereby the former agreed to furnish labor and materials and do work of construction and repair at Camp Pike, Ark., such as would be ordered from time to time, in writing, within six months from the date of the contract in accordance' with drawings and specifications to be furnished by the contracting officer, “ and subject in every detail to his supervision, direction, and instruction.” The contracting officer was authorized to make changes in the *7■specifications, to issue additional instructions, require additional work, and direct omissions of work previously ordered. Provision was made for reimbursing the contractor for his actual net expenditures in the performance of the work. In addition to this reimbursement and as full compensation for his services he was to be paid a fee to be determined from a graduated schedule, set forth in the contract. There was, however, a provision that the total fee ■.should in no event exceed the sum of $15,000, “ anything in ■ this agreement to the contrary notwithstanding.” A short time after this contract was made it was ascertained that the '•estimated expenditures upon the work would be greatly exceeded and owing to this fact a supplemental contract was made extending the time from six to eight months and the •maximum fee to the contractor from $15,000 to $65,000. This supplemental contract brought the date of expiration of the •contract period to June 80, 1918.

The method of authorizing and ordering the work was as follows: The War Department, or the division in charge, would prepare and forward to the constructing quartermaster (the officer in charge at the site of the work) letters authorizing the construction or repair of designated work (these authorizations being known to the parties as “ L. A. •C.”). Upon their receipt, or when in his judgment it was suitable, the constructing quartermaster would notify the -contractor of the authorization, and then, or afterwards, would give an order for the authorized work to proceed or ■be done. When the contract time expired, and, in fact, before it had expired, it was apparent that a large amount of •the work that was estimated for remained to be done. Authorizations had issued for construction in some instances that had not been followed by orders to proceed, and some orders to proceed had been issued which could not be complied with by June 30. In this state of affairs the contractor naturally objected to going forward with the work and the ■outlay incident thereto without some definite arrangement ■regarding his reimbursement and compensation. He made protest to the proper authorities in Washington. He was ••assured that a supplemental contract to take care of the *8situation would be madd, and he was urged in the meantime to proceed with the work. He did proceed, and his actual net expenditures were repaid as formerly. On August 22 another contract was executed by the parties. It did not in terms refer to work done or fees earned between June 30 and the date of the new contract, but it provided for new and additional work not contemplated by the first contract and made changes in the schedule of fees. The estimated sums to be expended under this new contract were larger than had been expended under the other and aggregated several millions of dollars. It also provided for compensation based upon a specified schedule but limited the amount not to exceed $160,000. Work was suspended under the new contract because of the armistice, but the plaintiff was reimbursed for his expenditures under it and was paid as compensation approximately $95,000. He had been paid as compensation under the first contract the maximum sum provided for therein, $65,000.

It thus appears that the plaintiff was reimbursed for all expenditures whether made before June 30 or between June 30 and August 22 or after August 22, the date of the new contract. He received the maximum compensation fixed under the first and supplemental contracts and the amount due under the terms of the new contract, but he claims he has not been compensated on account of work done between June 30 and August 22. Whether he is entitled to compensation for work or expenditures during that period is the principal question in the case. We are clearly of the opinion that the contractor is entitled to compensation, based upon the amount of expenditures that were duly ordered after June 30, the date the written contract expired, and before August 22, the date the new contract was made. During this period a large amount of work was done. No question was made at any time about the authority under which the plaintiff proceeded with the work during this period. It had been duly authorized; it was authoritatively ordered to be done; it was performed by plaintiff, and he was reimbursed for his expenditures. Neither the expenditures between June 30 and August 22 nor plaintiff’s com*9pensation during such period was considered in making payments or reimbursements after August 22 under the contract of that date. No good reason has been assigned for not compensating him for his labor. It would seem from the decision of the Secretary of War, referred to in the findings of fact, that this official could not find from the record before him the amount of expenditures between the dates mentioned, and that if the fact had appeared the decision upon the point in question may have been different. But the fact does appear in the record here, and we have based compensation on the amount ascertained to have been expended between the dates and upon the orders stated.

We think there is no merit in the plaintiff’s contention that work authorized and ordered prior to July 1 may, in some instances, have been carried over until after that date. The contract fixed a maximum fee to be paid for work or expenditures ordered within the period covered by it, and plaintiff is, of course, bound by his contract. The work done after August 22, regardless of when it was authorized or ordered, was paid for under the contract of that date.

The plaintiff should have judgment for the amount ($7,725.00), ascertained as stated, to be due. And it is so ordered.

Graham, *Judge;*Hat, *Judge;*Downet, *Judge;*and Booth, Judge, concur.