Court Opinion

ID: 8594324
Source: CourtListenerOpinion
Date Created: 2022-11-23 16:01:04.364871+00
Date Added: 2024-06-11T16:54:48.240733
License: Public Domain

Nichols, Judge,
dissenting:
This case presents a difficult problem of contract interpretation. The solution proposed in the majority opinion will appear correct to some lawyers and may have beneficial results in persuading the procurement authorities to state their *31intentions more clearly in future contracts. Nevertheless, with all respect, I think it is wrong. Consideration must be given and has not been, to the circumstances under which the contract was awarded, and the intentions of the parties, as they can be deduced from the contract language and the ASPE. [Regulations which are part of the contract.
The multi-year type contract used here is to be made use of, according to ASPE 1-322, when military requirements for an item are known and will be stable for a planned period, of up to five (5) years, and economy can be achieved by contracting for the entire requirements, but the total funds to be obligated by the contract are not available. This condition doubtless has existed from time to time since the days of Alexander Hamilton and results from statutes, 41 U.S.C. § 11, and 31 U.S.C. § 665, which make it a criminal offense for an officer or employee to obligate the United States to pay money in advance of a Congressional appropriation therefor. A willful violation is punishable by a fine of not more that $5,000, or imprisonment for not over 2 years, or both. This means, that absent such a device as is made use of here, appropriated funds often must be obligated years in advance of the time when they are actually spent. Congress may have to be asked to appropriate for fiscal 1965 money that is not to be spent until fiscal 1970. This compels the procurement authorities to request appropriations in excess of what they are going to spend in the immediate future, and from the point of view of Congress, lessens its financial control by the vast sums of money obligated and in the pipeline, but not spent.
The scheme set up in the above cited ASPE for multi-year procurement, is one of those that have been devised to get around this problem. Essentially, obligations for years after the first come into being only when the money is appropriated and funds are available for obligation. It seems to me that the plaintiff and the majority opinion herein treat the notice that funds are or are not available simply as a euphonious way of saying that the Government does or does not choose to continue procurement. This is not so at all. If, for example, the contracting officer learns that the Govern*32ment requirements are diminishing and wishes to cancel for that reason, but funds are available, he would be violating the contractor’s legal rights in a most serious way if he attempted to make use of the cancellation clauses herein. The contract says if funds are available he “shall * * * so notify the contractor.” (Emphasis supplied.) Under those circumstances, as the Regulation says, the contractor would be entitled to a settlement in accordance with the “Termination for Convenience” clause and could obtain a termination settlement on terms much more favorable to him than the “cancellation charge” he can recover in case of unavailability of funds. Despite the contract clauses cited by Judge Skelton, I have no doubt that a contracting officer who had learned that funds were available for a subsequent year, but failed to advise the contractor of the fact within the prescribed period, hoping to effectuate a cancellation, would be brought up very short indeed by the contractor if the contract was valuable to him. Yet I read Judge Skelton’s opinion as holding that in such a case the mere failure to give notice would remit the contractor to the unremunerative cancellation charge, and this I deem to be in conflict with the entire scheme.
I think it is unfortunate that the parties failed to inform the court as to the methods by which funds are made available, thus allowing the impression to prevail that saying funds are unavailable is the same as saying the Government exercises an option to withdraw from the contract, or that the difference is, as Judge Skelton calls it, “a matter of semantics.” As a matter of judicial notice, I know that in order to be available, appropriations have to be requested by the President and appropriated by Congress. Congress exercises, at times, its prerogative of refusing to appropriate. Even after the President has signed the appropriation bill he can exercise his prerogative of impounding the funds so that the Secretary of Defense cannot obligate them. Once funds are available to his Department, however, the Secretary can determine and direct their destination except insofar as they are “line items” appropriated for only a single purpose. *33Finally, a procurement activity learns that an allotment has been made to it and funds are available to effectuate its program. Of course, the procurement activity could then make the funds unavailable by spending them for something other than to service its outstanding multi-year contracts.
I think, however, that the framers of the language and contract clauses involved had most clearly in mind that funds would be unavailable because of a stoppage somewhere prior to their reaching the procurement activity and therefore not within its control. If the latter itself made the funds unavailable, I have considerable doubt what the rights of the contractor would be and it would produce a most interesting question. However, funds were available here and that problem does not arise. The question 'here is, as I see it, whether a contracting officer can cut off and destroy what I see as valuable contract rights, simply by not performing the ministerial act of notifying the contractor that funds are available, when they are available in fact.
The contract language difficulty arises out of the “Cancellation of Items” clause, paragraph (b), including the following, which is included for clarity:
* * *. Such cancellation shall occur only if, within the time period specified in the Schedule, or such further time as may be agreed to, the Contracting Officer (i) notifies the contractor that funds will not be available for contract performance for any subsequent Program Year; or (ii) fails to notify the contractor that funds have been made available for performance of the Program Year requirement for the succeeding Program Year.
I believe the Government officials who drafted the language used the words “only if” in the loose way that people sometimes do these days and that they really meant to say “Such cancellation shall occur, if at all, only when * * *.” The idea that the contracting official by his mere whim or inadvertence can fail to give notice and thus destroy what would normally be a valuable contract right — to whichever side valuable — is contrary to the whole scheme set out in the ASPE. Eegulation.
*34Contractors are to be induced to 'bid, the Regulation tells us, in the expectation that they will have a large multiple year contract to perform in convenient annual installments, lowering their costs, enhancing standardization, reducing administrative burden, obtaining production continuity and stabilizing the work force. Persons it is hoped will bid for multiple years who would not bid for a single year, thus broadening competition. These hopes are defeasible only in the relatively unlikely contingency of funds not being available. When contractors learn from Judge Skelton’s opinion, that their rights are so easily destroyed, for other reasons, they will not offer the low prices they would for a firm multi-year procurement but only a higher price for a single year, or not bid at all. Thus, in helping ITT, which probably does not need our help, to escape from what it came to regard as a bad bargain, the court frustrates the ASPR Regulation, and makes it useless for its intended purpose.
It might be urged, I suppose, though Judge Skelton does not, that the written notice provision is for the protection of the contractor and could be waived by it. In my view, however, its primary purpose is to protect the officials concerned with awarding and administering the contract. It makes sure they will not by inadvertence or clerical errors obligate unappropriated funds and thus be exposed to fine or imprisonment or both, under 31 U.S.C. § 665. Plaintiff’s use of it is as unintended as it is unwelcome to defendant.
I would add that the people of the United States also had valuable rights, in this contract, which did not belong to defendant’s procurement officers for them to preserve or destroy as their whim might dictate. I am sure this was the intention. If the contract says otherwise, which I deny, I would reform it to state the true intent of the parties.
Therefore, I would award plaintiff not the cost of performing, plus profit, but only the actual injury to it, if any, resulting from a single day’s delay in giving it its legal notice that funds were available. On the theory which actually animates plaintiff’s petition, the proper disposition of the case can only be to allow defendant’s motion for summary judgment, and this I would do.