Court Opinion

ID: 9481333
Source: CourtListenerOpinion
Date Created: 2023-08-05 08:15:43.961929+00
Date Added: 2024-06-11T17:48:14.656217
License: Public Domain

PAULINE NEWMAN, Circuit Judge,
dissenting.
I respectfully dissent, for this change in the Davis-Bacon wage classification terms of Emerald’s two contracts, made by the government after the contracts were entered into and performed, is not at the risk and liability of the contractor.
The Board erred in holding that Emerald must bear the cost of the government’s post-contract determination that all of the “laborers”, in the six laborer classifications set in the contracts, must be reclassified and paid as “roofers”.1 It was a stipulated fact that neither the government nor the contractor knew of such an “area practice”. During the procurement process the Army Engineers and Emerald each prepared labor cost estimates wherein demolition of the existing roofs and cleanup, for example, were done by laborers at the Davis-Bacon laborers’ wage rates specified for demolition and cleanup work, not by roofers at the Davis-Bacon roofers’ rates. The contracts were bid, accepted, entered into, and performed on this basis.
While Emerald does not and can not contest in this action the correctness of the Department of Labor’s determination of area practice, requiring that the laborers’ *1431work in the Davis-Bacon schedule be paid at the roofers’ rate, neither the contracts between Emerald and the agency, nor operation of law, absolves the agency of liability for the increased wages it retroactively required the contractor to pay. On the contractor’s legal theories of mutual mistake, defective specification, or misrepresentation, the contractor is entitled to relief.
I
By dismissing Counts I and II, the Board deprived the contractor of the opportunity to support two legal theories of recovery: the theories of defective specification and misrepresentation. While the first decision of the Board, dated August 3, 1988, responding to the government’s motion to dismiss, appears to have limited the dismissal to those aspects of Counts I and II that could be interpreted as challenging the correctness of the Department of Labor’s Davis-Bacon reclassification, the Board in its second decision, dated September 26, 1989, treated the dismissal as removing from consideration the merits of Emerald’s arguments of defective specification and misrepresentation. This was error, procedural and substantive.
Emerald does not challenge the correctness of the Department of Labor’s determination in September 1986 that all workers on these two contracts who had been classified and paid as laborers must be retroactively2 reclassified and paid as roofers. However, whether or not there was a “Dispute Concerning Labor Standards” between Emerald and the Department of Labor, see 29 C.F.R. Parts 5, 6, and 7 (applying the Davis-Bacon Act, 40 U.S.C. §§ 276a et seq.), that issue is unrelated to the dispute between Emerald and the contracting agency concerning liability for increased costs of performance due to the change by the government in the contracts’ wage and classification terms. This dispute is subject to the contracts’ “Disputes Clause”, and is decided under the Contract Disputes Act, 41 U.S.C. §§ 601 et seq. The Board's own precedent is clear. E.g., Ralph Construction, Inc., ASBCA No. 35633, 88-2 BCA II 20,731, reaffirmed 88-3 BCA 1121,136:
The dispute here is not whether the Department of Labor has properly classified a class of employees employed in the performance of the contract or the prevailing minimum wage rates.
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Rather, the dispute concerns who is to bear the burden of increased wages and fringe benefits. This is a matter properly before this Board for resolution.
Id. at 104,756 (holding the government responsible for the contractor’s increased costs when the government issued a wage determination that was defective because it omitted one class of employee).
In Count I Emerald raised the legal theory that the wage classification specification in the solicitation and in the contracts was defective, for it was prejudicially different from the specification that was determined and imposed after the contracts were performed.3 In Count II Emerald raised the legal theory that the erroneous wage classification specification in the contracts should be viewed as a misrepresentation, for there is authority that whether or not such a misrepresentation was innocent, it is the responsibility of the agency that made it. E.g., Womack v. United States, 389 *1432F.2d 793, 800, 182 Ct.Cl. 399 (1968). In Poirier & McLane Corp. v. United States, 120 F.Supp. 209, 128 Ct.Cl. 117 (1954), wherein an error in the wage rate specified in the contract was discovered while the contract was being performed, the Court of Claims described this as a “misrepresentation” of labor costs:
There consequently was a misrepresentation by defendant, perhaps an innocent one, as to the prevailing wage rate for unskilled laborers, but one upon which plaintiff relied.
Id. at 214,128 Ct.Cl. at 126. In Poirier the court granted relief on a theory of mutual mistake of fact.
These legal theories do not turn on the correctness of the Department of Labor’s classifications, but on the placement of the burden of errors or changes in such classifications.4 While a post-contract change in the Department of Labor’s classification gave rise to this dispute, Emerald is not foreclosed from challenging the placement of liability for that change, in the forum established for such challenge. The panel majority is incorrect in holding that the issues raised in Counts I and II, defective specification and misrepresentation, are not subject to resolution under the Contract Disputes Act, for that is where the law places them. Thus I must dissent from the affirmance by this court of the dismissal of these counts.
II
The Board did consider Emerald’s legal theory of mutual mistake. In view of the stipulation of the Army Engineers and the contractor that they did not know of the “area practice” at the time the contracts were bid, and the Board’s explicit finding that “the Department of Labor was unaware of the area practice”, there is scant dispute that all concerned were mistaken in their knowledge or understanding. Like Emerald’s estimator, the Army Engineers’ estimator (a civil engineer in the Cost Engineering Branch located in Hawaii) contemplated that workers would do demolition and cleanup at the stated laborers’ rates, not at the roofers’ rate. As previously noted, “laborers, Group 2” included “demolition laborer” and “cleanup”. Such specific designations in roofing contracts can only mean demolition and cleanup related to the roof, for this was work that the contracts required. Emerald had paid these laborers at the Group 2 wage, as the contracts required. Both parties to the contracts expected, it is undisputed, that application of the schedule in the contracts would meet the requirements of the Davis-Bacon Act. Both parties were later found by the Department of Labor to have been in error. Mutual mistake was established.
The contracting agency, in this case the Army Engineers, is responsible for including the correct wage determinations and work descriptions in its bid solicitations and contracts. 29 C.F.R. § 1.6(a)(2)(b) and (f) (1989):
§ 1.6 Use and effectiveness of wage determinations.
sH * :f sH * *
(b) Contracting agencies are responsible for insuring that only the appropriate wage determination(s) are incorporated in bid solicitations and contract specifications and for designating specifically the work to which such wage determinations will apply. Any question regarding application of wage rate schedules shall be referred to the Administrator, who shall give foremost consideration to area practice in resolving the question.
* * * * * *
(f) The Administrator may issue a wage determination after contract award *1433or after the beginning of construction if the agency has failed to incorporate a wage determination in a contract required to contain prevailing wage rates determined in accordance with the Davis-Bacon Act, or has used a wage determination which by its terms or the provisions of this part clearly does not apply to the contract. Further, the Administrator may issue a wage determination which shall be applicable to a contract after contract award or after the beginning of construction when it is found that the wrong wage determination has been incorporated in the contract because of an inaccurate description of the project or its location in the agency’s request for the wage determination. Under any of the above circumstances, the agency shall either terminate and resoli-cit the contract with the valid wage determination, or incorporate the valid wage determination retroactive to the beginning of construction through supplemental agreement or through change order, Provided That the contractor is compensated for any increases in wages resulting from such change. The method of incorporation of the valid wage determination, and adjustment in contract price, where appropriate, should be in accordance with applicable procurement law.
This assigned responsibility is a determining factor in Emerald’s claim, for it is specific to the issue in dispute.
Although the government argues that Emerald must be held to bear the risk of the agency’s error in wage rates and classification, none of the criteria for assumption of such risk was here shown. See Restatement (Second) of Contracts § 154 (1981). This issue was removed by the parties’ stipulation that both sides were unaware of the “area practice” later found by the Department of Labor; both parties believed they knew the facts, and there was no basis for a finding of either conscious ignorance or a recognition that a vital fact was unknown and required further investigation.
The panel majority relies on the contract clause entitled “Site Investigation and Conditions Affecting the Work” in holding Emerald solely responsible for the consequences of the error in determining the “area practices”. This clause states:
45. SITE INVESTIGATION AND CONDITIONS AFFECTING THE WORK
(a) The Contractor acknowledges that it has taken steps reasonably necessary to ascertain the nature and location of the work, and that it has investigated and satisfied itself as to the general and local conditions which can affect the work or its cost, including but not limited to (1) conditions bearing upon transportation, disposal, handling, and storage of materials; (2) the availability of labor, water, electric power, and roads; (3) uncertainties of weather, river stages, tides, or similar physical conditions at the site; (4) the conformation and conditions of the ground; and (5) the character of equipment and facilities needed preliminary to and during work performance. The Contractor also acknowledges that it has satisfied itself as to the character, quality, and quantity of surface and subsurface materials or obstacles to be encountered insofar as this information is reasonably ascertainable from an inspection of the site, including all exploratory work done by the Government, as well as from the drawings and specifications made a part of this contract. Any failure of the Contractor to take the actions described and acknowledged in this paragraph will not relieve the Contractor from responsibility for estimating properly the difficulty and cost of successfully performing the work, or for proceeding to successfully perform the work without additional expense to the Government.
This clause is specific as to certain site conditions, and states the consequences of failure to reasonably investigate the site. There is no mention of wage classifications. The stipulated fact that both the contractor and the agency did not know of and did not adopt the “area practice” weighs against a holding that the contractor did not act reasonably, even were the Site Investigation clause to apply. However, it is the agency *1434that is “responsible for insuring” the correctness of the wage determinations. 29 C.F.R. § 1.6(a)(2)(b).
To cure its failure in this responsibility, the government unilaterally changed the contract terms. This change was totally outside the control of the contractor. The law that applies in this situation is settled. E.g., Black, Raber-Kief & Assoc. v. United States, 357 F.2d 355, 174 Ct.Cl. 302 (1966);
It is settled that, where the Government requires a contractor to pay higher wages than he was obligated to do under his contract, the United States is liable for the additional costs.
Id. at 361, 174 Ct.Cl. at 312.
To hold otherwise is to bestow on the government a benefit unintended by the parties to the contract. See, e.g., Southwest Welding & Mfg. Co. v. United States, 373 F.2d 982, 179 Ct.Cl. 39 (1967) (reforming contract for mutual mistake, despite error on both sides, thus avoiding unintended enrichment of the government at the expense of the contractor); Walsh v. United States, 102 F.Supp. 589, 591, 121 Ct.Cl. 546, 554 (1952) (because of mutual ignorance of a rate change that had been made shortly before the contract was signed, the contractor could recover the increased wage costs although it was a fixed price contract); Poirier & McLane, 120 F.Supp. at 214, 128 Ct.Cl. at 127 (government responsible for increased cost where both parties were unaware of the correct wage rate, and intended that the correct rate be paid); Sunswick Corp. v. United States, 75 F.Supp. 221, 109 Ct.Cl. 772, cert. denied, 334 U.S. 827, 68 S.Ct. 1337, 92 L.Ed. 1755 (1948) (where Wage Adjustment Board defined substantially all carpentry work as waterfront work, United States must reimburse contractor for increased labor costs).
The cases cited by the government are less apt on their facts. In Anthony Grace & Sons v. United States, 433 F.2d 766, 768-69, 193 Ct.Cl. 248, 252-56 (1970) the court held that the contractor had inadequately investigated a glaring ambiguity in the wage rate determination and had a duty to investigate and inquire, and thus must bear the cost of the correct rate. In Collins Int’l Serv. Co. v. United States, 744 F.2d 812 (Fed.Cir.1984) the contractor recognized discrepancies in the worker classifications during the bid phase, and when the government refused to clarify the discrepancies the contractor made a “best guess” that turned out to be wrong; the court held that the contractor took that risk. Unlike Anthony Grace or Collins, here there were no ambiguities in the wage classification, no failure of Emerald to conduct a reasonable inquiry, no difference in understanding or knowledge between the contractor and the contracting agency.
The Board suggested that Emerald's failure to consider that this union’s rates established the area practice was “more a mistake of law than of fact”. However, the record shows no requirement, as a matter of law, that a contractor must adopt union wage and classification practices that were not uniformly followed in the area,5 in order to do business with the government. If that were indeed a legal requirement for roofing contracts in Hawaii, the withholding of this information from both the government agency and the contractor is itself grounds for relief.
It is undisputed that until the agency’s letter to Emerald of September 10, 1986, the wage classifications in the contracts were not changed to place all labor in the “roofer” classification, instead of among the six “laborer” classifications which were directed to the specific jobs to be performed. This later-imposed “area practice” made meaningless the contracts’ Davis-Bacon definitions and categories. The Board’s placing on Emerald of the burden of this retroactive change by the government is unsupported in fact and law. Thus, respectfully, I dissent.

. The contracts between Emerald and the Army Engineers provide that the contractor will follow the Davis-Bacon general wage determination for Hawaii that is dated July 20, 1984 with specified modifications. This schedule, which is included in the contracts, shows wage rates for laborers in six defined categories of work, at pay ranging from $9.75 to $18.25 per hour (including fringe benefits); the schedule shows the roofers’ rate of $22.00 per hour.

. The -0131 contract was awarded to Emerald on September 16, 1985. Notice to Proceed was received on October 2, 1985; construction started on November 26, 1985, and was substantially complete on May 6, 1986. Work on the -0143 contract was substantially complete on September 19, 1986. An investigation (of an unrelated contract) was begun in the spring of 1986; and on September 10, 1986 the agency wrote to Emerald that there was an "area practice" that all persons working for a roofing contractor must be classified and paid as roofers.

. For example, the contracts’ job description in the Wage Determination for "laborers, Group 1” included operators of forklifts and trucks; the job description for "laborers, Group 2” included "clean-up ... demolition laborer ... kettlemen ...” Demolition and clean-up and truck driving were among the activities required in performance of the roofing contracts here at issue. The agency did not inform Emerald that these laborers should have been classified and paid as roofers, until after contract performance.

. Following is Count II in its entirety:
COUNT II — MISREPRESENTATION
37. The specification provided job descriptions of laborers attached to the Wage Determination.
38. Emerald relied upon these descriptions when it prepared its bid for the contract.
39. The Corps withheld monies from Emerald because it maintained that local area practice required payment of the workers, employed as laborers, at the rate for roofers.
40. Emerald is entitled to compensation based upon the misrepresentation by the Government of the job descriptions of laborers contained within the contract.

. The Board found that six other contractors with contracts with this same agency did not follow this "area practice”.