Case: T. F. SCHOLES, INC. AND BERKS COUNTY TRUST COMPANY v. THE UNITED STATES
Abbreviation: T. F. Scholes, Inc. v. United States
Decision Date: 1966-03-18
Docket Number: No. 34-63
Citation: 174 Ct. Cl. 1215
Volume: 174
Reporter: United States Court of Claims Reports
Court: United States Court of Claims
Jurisdiction: United States
Parties: T. F. SCHOLES, INC. AND BERKS COUNTY TRUST COMPANY v. THE UNITED STATES
Judges: Before Cower, Chief Judge, Laramore, Dureee, Davis, and Collin's, Judges.
Pages: 1215–1252

Head Matter:
(357 F. 2d 963)
T. F. SCHOLES, INC. AND BERKS COUNTY TRUST COMPANY v. THE UNITED STATES
[No. 34-63.
Decided March 18, 1966]
O. P. Easterwood, Jr., attorney of record, for plaintiffs. McNutt, Dudley <S¡ Easterwood, of counsel.
Thomas J. Lydon, with whom was Assistant Attorney General J ohm, W. Douglas, for defendant. Sheldon P. Migdal, of counsel.
Before Cower, Chief Judge, Laramore, Dureee, Davis, and Collin's, Judges.

Opinion:
Per Curiam :
This case was referred to Trial Commissioner Mastin G. White with directions to make findings of fact and recommendation for conclusions of law. The commissioner has done so in an opinion and report filed on November 24, 1965. On December 20, 1965, plaintiffs filed an election to submit the case on the commissioner's report without exceptions and brief, and on January 3,1966-, defendant filed a statement under Buie 62 (b) and motion that the court adopt the commissioner's report, including conclusions of fact and law. Since the court agrees with the trial commissioner's findings, his opinion, and his recommended conclusion of law, as hereinafter set forth, it hereby adopts the same as the basis for its judgment in this case without oral argument. The court therefore concludes that plaintiffs are not entitled to recover and the petition is dismissed. It is further concluded that the defendant is entitled to recover of and from the plaintiff, T. F. Scholes, Inc., on the counterclaims, and judgment is entered for defendant and against the said plaintiff thereon in the sum of $168,059.22, together with penalties and interest as provided by law on the $146,-620.06 involved in the second counterclaim.
OPINION op Commissioner
Changed Conditions
White, Commissioner:
One of the problems before the court in this case is to decide whether the plaintiff T. F. Scholes, Inc., was entitled to an equitable adjustment under the "changed conditions" provision of a contract numbered AF 05(613)-8Y. This question has previously been considered by the Armed Services Board of Contract Appeals, which gave a negative answer to the question in a decision dated December 21,1957 (ASBCA No. 4616).
Contract AF 05 (613)-87 was entered into on March 23, 1956, between T. F. Scholes, Inc., and the defendant, represented by a contracting officer of the United States Air Force. It covered 52 items of work that related, in general, to the improvement of the site for the new United States Air Force Academy, located approximately 10 miles north of Colorado Springs, Colorado. The total contract price was $2,373,-586.30. (For the sake of convenience, T. F. Scholes, Inc., will usually be referred to hereafter in the opinion as "Scholes," and contract AF 05 (613)-87 will usually be referred to as "the contract.")
The contract contained the standard "changed conditions" provision that is customarily found in Government construction contracts, under which the contractor was authorized to submit to the contracting officer a claim for an equitable adjustment in the contract price if an increase in the cost of performance was caused by " (1) subsurface or latent physical conditions at the site differing materially from those indi cated in this contract, or (2) unknown physical conditions at the site, of an unusual nature, differing materially, from those ordinarily encountered and generally .recognized as inhering in work of the character provided for in this contract." If the contractor was dissatisfied with the contracting, officer's action on such a claim, the contractor was authorized to take an appeal under the "disputes" provision of the contract to the Armed Services Board of Contract Appeals, acting for the Secretary of the Air Force.. The "disputes" provision declared that the decision of the Board should, "unless determined by a court of competent jurisdiction to have been fraudulent or capricious or arbitrary or so grossly erroneous as necessarily to imply bad faith, or not supported by substantial evidence, be final and conclusive."
In soliciting bids for the performance of the proposed contract, the Air Force had listed the numerous items of work that were to be performed, and had set out an estimated quantity of material in connection with each item. Of special significance in connection with this case were Items 6 and 7, as follows:
Prospective bidders were informed that rock excavation would cover the removal and disposition of all boulders measuring i/2 cubic yard or more in volume, as well as rock in ledges and other rock deposits which could not be removed without drilling and blasting, and that common excavation would cover the removal and disposition of "all material not classified as rock, ditch, structural and exclusive of stripping of topsoil." Hence, boulders and other rocks measuring less than 1/2 cubic yard in volume were to be removed and disposed of as part of the common excavation.
Scholes' bid was 20 cents per cubic yard on the common excavation, and $8 per cubic yard on the rock excavation, and these unit prices were incorporated in the contract for Items 0 and 7, respectively.
Upon receiving the award of the contract, Scholes entered into a subcontract with Paul Hooper, Inc., whereby the latter was to perform the work called for under Items 6 and 7 of the contract.
Paul Hooper, Inc., commenced the excavating operations about the middle of April 1956. In approximately two weeks, the subcontractor began to encounter considerable quantities of rocks in the subsurface at depths that ranged from 5 to 25 feet in different parts of the excavation area. Thereafter, and throughout the remainder of the excavation work, rocks comprised a very substantial percentage of the material excavated at the work site. They were of all sizes, from small rocks up to one boulder that measured approximately 44 cubic yards in volume.
During the course of the performance of the excavation work, the subcontractor encountered, and was required to remove and dispose of, a total of approximately 60,000 cubic yards of so-called "classified rock." All of this classified rock consisted of large boulders measuring y2 cubic yard or more in volume. This total quantity of big boulders was, of course, vastly disproportionate to the Government's estimate of 200 cubic yards of classified rock under Item 7 of the contract. However, no claim was ever submitted to the contracting officer — and no claim is asserted in the present litigation — on the ground that, instead of encountering and having to deal with the estimated quantity of 200 cubic yards of classified rock, Scholes (through the subcontractor) encountered and was compelled to deal with approximately 60,000 cubic yards of big boulders measuring y2 cubic yard or more in volume. Scholes and the excavation subcontractor were evidently satisfied with the unit price of $8 per cubic yard for the excavation of such boulders, irrespective of the quantity involved.
In addition to the big boulders mentioned in the preceding paragraph, the excavation subcontractor also encountered, and was required to remove and dispose of, a large quantity of boulders and other rocks measuring less than y2 cubic yard in volume. Such of these rocks as were 6 inches or less in diameter could be handled effectively by the subcontractor's equipment, and they could be used, and were used, without difficulty as part of the fill on the construction job. However, the rocks that were more than 6 inches in diameter caused the excavation subcontractor great difficulty.
The record does not show, and apparently there is no means of determining, the total quantity of rocks more than 6 inches in diameter, but less than cubic yard in volume, that were encountered, removed, and disposed of during the course of the excavation work. Estimates varying from approximately 133,000 cubic yards to approximately 600,000 cubic yards have been made with respect to this quantity. It was necessary for these rocks to be handled at the common excavation unit price of 20 cents per cubic yard under Item 6 of the contract, rather than at the unit price of $8 per cubic yard for rock excavation under Item 7.
While the excavation work was in progress, Scholes and the excavation subcontractor orally expressed to the responsible Air Force personnel on many occasions dissatisfaction over the fact that the common excavation contained an unexpectedly large quantity of rocks which were too small to qualify as rock excavation and which were more difficult and expensive to handle than dirt. In this connection, there was no reasonable basis for Scholes or the excavation subcontractor to anticipate from a visual inspection of the surface of the excavation area prior to the beginning of the excavating operations that the subsurface would contain such large quantities of rocks.
Finally, on April 25, 1957, Scholes submitted to the contracting officer a formal claim for an equitable adjustment under the "changed conditions" provision of the contract, on the ground that "subsurface or latent physical conditions differing materially from those indicated in the contract, have caused an increase in the cost of the performance of the contract." Scholes requested that the unit price for common excavation (Item 6) be increased from 20 cents per cubic yard to 48.5 cents per cubic yard.
The contracting officer, in a letter dated August 23, 1957, denied Scholes' claim based upon the "changed conditions" provision of the contract. Scholes thereupon took an appeal to the Armed Services Board of Contract Appeals.
A 4-day hearing on Seholes' appeal was held in Washington, D.C., 'before a member of the Air Force panel of the Armed Services Board of Contract Appeals. The gist of the evidence presented by the claimant was that the Air Force, by estimating in the contract that 200 cubic yards of big rocks measuring y2 cubic yard or more in volume would be encountered in the course of the excavation work, had misled Seholes (and the excavation subcontractor) into, assuming that the common excavation would involve a .correspondingly insignificant quantity of rocks measuring less than y2 cubic yard in volume; that the plans for the performance of the excavation work, including the type of equipment purchased, were based upon this assumption that the common excavation would include few rocks and would consist almost wholly of dirt; and that when large quantities of rocks more than 6 inches in diameter, but less than y2 cubic yard in volume, were encountered in the subsurface, this substantially increased the difficulty and cost of performing the common excavation beyond that anticipated when the contract was made.
On December 27,1957, the Armed Services Board of Contract Appeals rendered its decision (ASBCA No. 4616) on Seholes' appeal. In its decision, the Board included an extensive statement of the happenings that led up to the filing of the claim, and the writer has found that these factual determinations by the Board were not fraudulent, or capricious,-or arbitrary, or so grossly erroneous as necessarily to imply bad faith,'and that they were supported by substantial evidence in the record before the Board. Consequently, such factual determinations by the Armed Services Board of Contract Appeals are final and conclusive under Section 1 of the so-called Wunderlich Act (41 U.S.C. § 321 (1964)). T. C. Bateson Construction Co. v. United States, 149 Ct. Cl. 514, 518 (1960); Ivy H. Smith Co. v. United States, 154 Ct. Cl. 74, 83 (1961).
On its analysis of the facts, the Armed Services Board of Contract Appeals concluded that "there was no reasonable reliance on the erroneous estimate" and, accordingly, that Seholes was not entitled to an equitable adjustment under the "changed conditions" provision of the contract.
On© of the problems in tli© present ease is to delineate tbe scope of judicial review with, respect to the administrative determination referred to in the preceding paragraph. In this connection, it should be noted at the outset that the Air Force did not make any estimate, or set out in the invitation for bids or the contract any other form of express representation, concerning the quantity of rocks more than 6 inches in diameter, but less than % cubic yard in volume, that would be involved in the common excavation. Hence, the question arises as to whether the Air Force, when it set out in the contract an estimate to the effect that 200 cubic yards of big rocks measuring y2 cubic yard or more in volume would be encountered in the performance of the excavation job, thereby impliedly represented that a correspondingly small quantity of rocks more than 6 inches in diameter, but less than y2 cubic yard in volume, would be encountered.
When an administrative decision concerning the allow-ability of an equitable adjustment under the "changed conditions" provision of a contract turns on the proper interpretation of the contract, in order to determine whether the subsurface or latent physical conditions at the site of the work differed materially from those indicated in the contract, the administrative agency is deciding a question of law, and its decision on such a question is not necessarily final and conclusive, even though it may meet all the criteria specified in the first section of the Wunderlich Act. Kaiser Industries Corp. v. United States, 169 Ct. Cl. 310, 330-331, 340 F. 2d 322, 333-334 (1965); Morrison-Knudsen Co. v. United States, 170 Ct. Cl. 757, 764, 345 F. 2d 833, 837 (1965).
However, the record which was before the Armed Services Board of Contract Appeals, and which is now before this court, contains the testimony of a professional geologist indicating that in a given excavation area there is not necessarily, or even ordinarily, any corresponding relationship between the quantity of rocks measuring y2 cubic yard or more in volume and the quantity of rocks more than 6 inches in diameter but less than y2 cubic yard in volume. The record does not contain any conflicting testimony of a persuasive nature. Consequently, although it actually happened in the present case that a large quantity of big rocks measuring y2 cubic yard or more in volume was accompanied by a large quantity of rocks more than 6 inches in diameter but less than % cubic yard in volume, it must be concluded that this was coincidental rather than something to be expected normally in the performance of excavation work. On that basis, the Air Force's erroneous estimate that 200 cubic yards of classified rock would be encountered in the course of the excavation work did not constitute an implied representation that the quantity of rocks more than 6 inches in diameter, but less than y2 cubic yard in volume, involved in the common excavation would be correspondingly small.
Hence, I agree with the Armed Services Board of Contract Appeals that the erroneous estimate by the Air Force concerning the quantity of classified rock that would be encountered during the course of the excavation work was not something that Scholes could reasonably rely on as an implied representation that a correspondingly small quantity of rocks more than 6 inches in diameter, but less than y2 cubic yard in volume, would be encountered in the subsurface.
In connection with the claim based upon the alleged "changed conditions," it perhaps should be mentioned that the record does not contain any evidence tending to prove that the extent of the subsurface rocks at the site of the excavation work constituted a condition "of an unusual nature, differing materially from those ordinarily encountered and generally recognized as inhering" in excavation work in the general geographical area where this contract was performed. On the contrary, persons who were familiar with the area, which lies immediately adjacent to the Rampart Range of the Rocky Mountains, anticipated that large quantities of rocks would be encountered in the subsurface, although such persons did not differentiate in their estimates as between rocks measuring y2 cubic yard or more in volume and rocks measuring less than y2 cubic yard in volume. Scholes and the excavation subcontractor were not previously familiar with the area or experienced in the performance of excavation work there.
There is another aspect of this claim that requires discussion. Prior to the issuance of the invitation for bids on the proposed contract, the Air Force had retained an architect- engineering firm to prepare the plans and specifications, and this firm had caused 122 borings to be made in the area of the prospective excavation for the purpose of ascertaining subsurface conditions. These borings were more or less evenly spaced throughout the area. The information obtained in these operations was recorded in graphic boring logs, which became part of the invitation for bids and, ultimately, of the contract. These graphic representations indicated that boulders (of -unspecified size) had been encountered in 41 of the holes, and that no boulders had been encountered in 81 of the holes, down to the depth of the ultimate excavation. The borings logs were correct, except that the drilling of 7 of the 81 holes mentioned in the preceding sentence had actually been stopped because boulders were encountered. Thus, the invitation for bids and the contract gave erroneous information as to 7 borings by indicating that no boulders had been encountered in such borings, when in fact boulders had been encountered in them.
A contractor, in submitting a bid and in entering into a contract' with a Government agency, has a right to rely on positive representations made by the agency regarding subsurface conditions at the site of the work. Levering & Garrigues Co. v. United States, 73 Ct. Cl. 566, 574 (1932). Such representations amount to a warranty and establish a predicate for a possible action for breach of contract if it is later discovered that the representations are untrue. Morrison-Knudsen Co. v. United States, 170 Ct. Cl. 712, 718, 345 F. 2d 535, 539 (1965). However, an essential prerequisite for a recovery on such a cause of action is proof that the contractor was misled by the agency's misrepresentations. Ragonese v. United States, 128 Ct. Cl. 156, 162, 120 F. Supp. 768, 770-771 (1954).
In the present case, the record fails to show that Scholes was misled by the Air Force's misrepresentations concerning the results of the seven borings previously mentioned. On the contrary, the evidence in the record indicates that Scholes' belief that the common excavation would consist almost wholly of dirt was not based upon a study of the boring logs but, rather, upon the Air Force's estimate of classified rock, previously discussed.
Also, it should be mentioned that the Air Force's architect-engineering firm, on the basis of the borings data previously mentioned, calculated that approximately 150,000 cubic yards of rocks would be encountered in connection with the performance of the excavation work. No differentiation was made in this calculation as between rocks measuring % cubic yard or more in volume and rocks measuring less than y2 cubic yard in volume. This estimate of 150,000 cubic yards of rocks was not disclosed to Scholes (or to the other bidders) in connection with the invitation for bids or the making of the contract.
With respect to the failure of the Air Force to disclose to Scholes and other bidders the estimate mentioned in the preceding paragraph, it is readily apparent that this was not a situation where a Government agency withheld or concealed vital information which it alone had, and which it knew that bidders did not have and would need in order to make an intelligent appraisal of the problems and costs that would be involved in the performance of a proposed contract. If those particular factors had been involved here, the failure to disclose the vital information would have provided a predicate for the assertion of a claim based upon the breach of an implied contractual obligation. Cf. Helene Curtis Industries, Inc. v. United States, 160 Ct. Cl. 437, 443-444, 312 F. 2d 774, 777-778 (1963). Whatthe Air Force failed to disclose to bidders in this case was merely a calculation which its architect-engineering firm had made upon the basis of borings data. The borings data themselves were made available to bidders, and the latter were free to make their own calculations upon the basis of such data as to the presence of rocks in the subsurface of the excavation area. As previously mentioned, the information which the Air Force furnished to bidders along this line contained certain errors which would have affected bidders' calculations to some extent. . However, Scholes did not make a calculation as to subsurface conditions on the basis of the borings data and, hence, wTas not misled by the eri'ors.
For the reasons previously indicated, it is my opinion that Scholes is not entitled to recover on the claim discussed in this part of the opinion.
Breaches of Contract
The petition alleges that the defendant breached the contract in certain respects, to Scholes' injury, by issuing work orders that required additional work but without making proper adjustments in the contract price, by delaying unduly the designation of a disposal area for the rocks previously mentioned that were more than 6 inches in diameter, and by issuing orders concerning the sequence of work that caused work disruptions and other inefficiencies.
Scholes has not offered any new evidence, or called attention to any evidence in the administrative record, supporting the allegations in the petition that Scholes was adversely affected by such alleged breaches of contract.
As anyone seeking to recover in this court has the burden of proving the asserted right to recover, it is necessary in the present case to find against Scholes with respect to the breach-of-contract allegations in the petition.
Measurement
The defendant has asserted a first counterclaim against Scholes in the amount of $21,439.16. This counterclaim is based upon an "equitable adjustment" downward in the total price for common excavation (Item 6) that was made by the contracting officer on May 28, 1962, upon the basis of a decision (ASBCANo. 5606) previously rendered by the Armed Services Board of Contract Appeals on August 22, 1961.
The Board's decision involved an interpretation of sub-paragraph (1) of paragraph "a" of technical provision 4-21 of the contract, which covered the subject of the measurement of common excavation (Item 6) for pay purposes. That subparagraph provided in part as follows:
(1) Measurement: The quantity to be paid for will be the number of cubic yards of material in its original position, and tenths thereof, excavated, placed in fill or stockpiles, completed and accepted and/or wasted. Measurement will be determined by original cross-sections established from aerial topographic maps included in the contract drawings and final sections taken after excavating operations and computed by the average end area method.
The problem which was dealt with in ASBCA No. 5606 and which is involved in the defendant's first counterclaim arose 'because time was important in preparing the plans for the proposed contract, and in order to save time the Air Force made use of aerial photographs in preparing contour maps of the surface of the work site. These contour maps purported to show the original ground surface at contour intervals of 2 feet. Scholes' bid on the common excavation was based on the assumption that the contour maps reflected with reasonable accuracy the actual surface of the ground.
Scholes was initially paid for common excavation under Item 6 of the contract on the basis of measurements determined by the original cross-sections established from the aerial topographic maps previously mentioned and subsequent final cross-sections prepared on the basis of a conventional survey made after the excavation operations were completed. This resulted in the making of payment to Scholes for a total of 4,289,928.6 cubic yards of common excavation at the unit price of 20 cents per cubic yard prescribed under Item 6 of the contract.
After Scholes had 'been paid for the common excavation, as indicated in the preceding paragraph, it was noted that the original ground elevations, as shown on the contour maps prepared from aerial photographs, did not coincide with the actual undisturbed ground elevations along the points where the excavation ended. This was apparently due in large part to the unusually high percentage of errors that developed in preparing the original contour maps from aerial photographs made of mountainous terrain. In this connection, the elevation of the original ground at the work site fell from approximately 7,800 feet in the southwest to approximately 6,975 feet in the northeast. Because of such errors, the proposed excavation work, as shown on the original cross-sections, extended horizontally beyond the outer limits of the actual excavation work that was performed in relation to the real surface of the ground.
On the basis of the discrepancies mentioned in the preceding paragraph (and other matters that are not involved in the present litigation), the contracting officer, by means of a letter dated February 23, 1959, proposed an equitable adjustment downward in the total contract price. 'Scholes took an appeal from this action to the Armed Services Board of Contract Appeals.
After a 6-day hearing was held in Colorado Springs, Colorado, and in Washington, D.C., the Board rendered a decision dated August 22, 1961 (ASBCA No. 5606) on Scholes' appeal. One of the points involved in the decision was whether Scholes was entitled to be paid, under Item 6 of the contract, for the space which extended outward laterally from the area actually excavated to the outer limits of the proposed excavation area shown on the original cross-sections, and which Scholes did not in fact excavate. The Board decided this question in the negative.
After the Board's decision was rendered, the contracting officer computed that Scholes had been overpaid $21,439.16 for 107,195.8 cubic yards of space that had not actually been excavated. Demand was made on Scholes for this sum as an "equitable adjustment" downward of the contract price for Item 6. Scholes did not pay such amount, and the defendant is demanding it as the first counterclaim in the present action.
Scholes does not question the accuracy of the contracting officer's computation, as mentioned in the preceding paragraph. Scholes does question, however, the correctness of the decision by the Armed Services Board of Contract Appeals in ASBCA No. 5606 with respect to this isue.
The administrative decision discussed in this part of the opinion was based upon a construction of the contract. Consequently, the Armed Services Board of Contract Appeals was deciding a question of law, and its decision on this question is not necessarily final and conclusive under the Wun-derlich Act, even though it may meet all the criteria specified in the first section of that statute. Kaiser Industries Corp. v. United States, supra, 169 Ct. Cl. at pages 330-331; Morrison- Knudsen Co. v. United States, supra, 170 Ct. Cl. at page 764.
It is my opinion, however, that the Armed Services Board of Contract Appeals was correct. The first sentence of the provision of the contract governing the measurement of common excavation for payment purposes states plainly that "The quantity to be paid for will be the number of cubic yards of material excavated, placed in fill or stockpiles, completed and accepted and/or wasted." (Emphasis supplied.) This sentence is not 'ambiguous, and it indicates that material must be "excavated" in order to qualify for payment. The 107,195.8 cubic yards of space involved in this portion of the opinion was not excavated and, therefore, Scholes was not entitled to receive payment for it.
It is true that the measurement provision involved here contained a second sentence to the effect that "Measurement will be determined by original cross-sections established from aerial topographic maps included in the contract drawings and final sections taken after excavating operations and computed by the average end area method." This sentence was subsidiary to the first sentence, discussed in the preceding-paragraph, and indicated how the material that was excavated should be measured for the purpose of calculating the amount due Scholes. It does not negative the previous conclusion that it was necessary for material to be excavated in order to qualify for payment.
On the basis of the discussion in this part of the opinion, the defendant is entitled to recover $21,439.16 from Scholes on the first counterclaim.
Taxes
The defendant, acting through the Secretary of the Treasury, assessed against Scholes on May 3, 1963, the sum of $146,741.58 as taxes and interest due for Scholes' fiscal year that ended on March 31,1954. The defendant gave to Scholes on May 3,1963, notice and demand for payment with respect to this assessment.
A credit of $121.52 was allowed Scholes with respect to the tax assessment mentioned in the preceding paragraph, leaving the sum of $146,620.06 due from Scholes to the defendant.
No part of the $146,620.06 has been paid by Scholes, and the defendant has asserted a second counterclaim in the present action for the recovery of this amount.
It appears that the defendant is entitled to recover on the second counterclaim the sum of $146,620.06, plus penalties and interest as provided by law.
Conclusion
For the reasons set out in the preceding portions of this opinion, Scholes is not entitled to recover on the claims set out in the petition, the defendant is entitled to recover the sum of $21,439.16 on its first counterclaim, and the defendant is entitled to recover the sum of $146,620.06, plus penalties and interest as provided by law, on its second counterclaim. Accordingly, the petition should be dismissed, and judgment should be entered for the defendant on its counterclaims in the total sum of $168,059.22, together with penalties and interest as provided by law on the $146,620.06 involved in the second counterclaim.
FINDINGS op Fact
Changed Conditions
1. (a) On February 17, 1956, the Air Force Academy Construction Agency, Department of the Air Force, Colorado Springs, Colorado, issued an invitation for bids on a proposed contract that was to involve the following work at the site of the new United States Air Force Academy, located approximately 10 miles north of Colorado Springs, Colorado:
Grading of Cadet-Academic Area, Parade and Drill Fields; Grading and Drainage of Athletic Fields including construction of certain drainage facilities; construction of Retaining Walls in Cadet-Academic Area.
(b) The invitation for bids listed 52 pay items of work, and set out an estimated quantity of material in connection with each item. Of special significance in connection with this case were Items 6 and 7, as follows:
(c) The plans and specifications in connection with the proposed contract were prepared for the Air Force Academy Construction Agency by Skidmore, Owings and Merrill, a nationally known architect-engineering firm with a good reputation.
2. Eighteen bidders responded to the invitation for bids referred to in finding 1. The average of the prices bid on Item 6 was 26.9 cents per cubic yard, and the average of the prices bid on Item 7 was $5.73 per cubic yard.
3. (a) The plaintiff T. F. Scholes, Inc., a corporation with offices in Eeading, Pennsylvania, was among the persons submitting, bids in response to the invitation referred to in finding 1. (For the sake of convenience, T. F. Scholes, Inc., will usually be referred to hereafter in the findings as "Scholes.")
(b) Scholes' bid on Item 6 was 20 cents per cubic yard, its bid on Item 7 was $8 per cubic yard, and its total bid on all items amounted to $2,373,586.30.
(c) Scholes' total bid was the lowest bid submitted in response to the invitation for bids.
4. (a) Scholes' bid was accepted by the Air Force Academy Construction Agency. On March 23, 1956, a contract numbered AF 05 (613)-87 was entered into between Scholes and the defendant, represented by a contracting officer of the United States Air Force.
('b) After generally describing the work to be performed in the language previously quoted in finding 1(a), and indicating that the contract price was $2,373,586.30, contract AF 05(613)-87 stated that:
The Contractor shall furnish all labor, equipment, and materials and perform the work above described for the amount stated above in strict accordance with the General Provisions (Standard Form 23a), specifications, schedules, drawings, and conditions all of which are made a part hereof .
(c) Contract AF 05' (613) -87 (which, for the sake of convenience, will usually be referred to hereafter in the findings as "the contract") contained the following general provisions (among others) :
2. SPECIFICATIONS AND DEA WINGS,
The Contractor shall keep on the work a copy of the drawings and specifications and shall at all times give the Contracting Officer access thereto. Anything mentioned in the specifications and not shown on the drawings, or shown on the drawings and not mentioned in the specifications, shall be of like effect as if shown or mentioned in both. In case of difference between drawings and specifications, the specifications shall govern. In any case of discrepancy either in the figures, in the drawings, or in the specifications, the matter shall be promptly submitted to the Contracting Officer, who shall promptly make a determination in writing. Any adjustment by the Contractor without this determination shall be at his own risk and expense. The Contracting Officer shall furnish from time to time such detail drawings and other information as he may consider necessary, unless otherwise provided.
*
4. CHANGED CONDITIONS
The Contractor shall promptly, and before such conditions are disturbed, notify the Contracting - Officer in writing of: (1) subsurface or latent physical conditions at the site differing materially from those indicated in this contract, or (2) unknown physical conditions at the site, of an unusual nature, differing materially from those ordinarily encountered and generally recognized as inhering in work of the character provided for in this contract. The Contracting Officer shall promptly investigate the conditions, and if he finds that such conditions do so materially differ and cause an increase or decrease in the cost of, or the time required for, performance of this contract, an equitable adjustment shall be made and the contract modified in writing accordingly. Any claim of the Contractor for adjustment hereunder shall not be allowed unless he has given notice as above required; provided that the Contracting Officer may, if he determines the facts so justify, consider and adjust any such, claim asserted before the date of final settlement of the contract. If the parties fail to agree upon the adjustment to be made, the dispute shall be determined as provided in Clause 6 hereof.
6. DISPUTES
Except as otherwise provided in this contract, any dispute concerning a question of fact arising under this contract which is not disposed of by agreement shall be decided by the Contracting Officer, who shall reduce his decision to writing and mail or otherwise furnish a copy thereof to the Contractor. Within 30 days from the date of receipt of such copy, the Contractor may appeal by mailing or otherwise furnishing to the Contracting Officer a written appeal addressed to the head of the Department, and the decision of the head of the Department or his duly authorized representative for the hearing of such appeals shall, unless determined by a court of competent jurisdiction to have been fraudulent or capricious or arbitrary or so grossly erroneous as necessarily to imply bad faith, or not supported by substantial evidence, be final and conclusive; provided that, if no such appeal is taken, the decision of the Contracting Officer shall be final and conclusive. In connection with any appeal proceeding under this clause, the Contractor shall be afforded an opportunity to be heard and to offer evidence in support of its appeal. Pending final decision of a dispute hereunder, the Contractor shall proceed diligently with the performance of the contract and in accordance with the Contracting Officer's decision.
(d) The contract contained the following special provisions (among others) :
SP 1-02 SCOPE OF WORK
Omissions from the drawings or specifications, or the misdescription of details of work which are manifestly necessary to carry out the intent of the drawings or specifications, or which are customarily performed, shall not relieve the contractor from performing such omitted or misdescribed details of work, but they shall be performed as if fully and clearly set forth and described in the drawings and specifications. Such obvious omissions supplied by the Contractor shall be without cost to the Government, but any change in drawings or specifications directed by the Government shall be made in accordance with the clause hereof entitled "changes".
SP 1-03 SITE INVESTIGATION AND REPRESENTATIONS
The Contractor acknowledges that he has satisfied himself as to the nature and location of the work, the general and local conditions, particularly those bearing upon transportation, disposal, handling and storage of materials, availability of labor, water, electric power, roads, uncertainties of weather, the conformation and conditions of the ground, the character, quality, and quantity of surface and subsurface materials to be encountered, the character of equipment and facilities needed preliminary to and during the prosecution of the work and all other matters which can in any way affect the work or the cost thereof under this contract. Any failure by the Contractor to acquaint himself with all the available information concerning these conditions will not relieve him from responsibility for estimating properly the difficulty or cost of successfully performing the work. The Government assumes no responsibility for any understanding or representations made by any of its officers or agents during or prior to the execution of this contract, unless such understanding or representations by the Government are expressly stated in the contract. Representations made but not so expressly stated and for which liability is not expressly assumed by the Government in the Contract shall be deemed only for the information of the Contractor and the Government will not be liable or responsible therefor.

SP 1-32 RECORD OF SUBSURFACE INVESTIGATIONS
Certain borings, soundings, test pits and related subsurface investigations have been carried out by the Government. The record of these investigations is given on the drawings. Samples of the materials which were obtained by these investigations are available near the site of the work. The Government does not guarantee that these available records show completely the existing conditions. Bidders may examine these records at their discretion or may make such other additional investigations that they consider necessary. Bidders shall make their own interpretation as to the type of the materials expected to be encountered on the site, as to the difficulties of making the excavations included in the contract, and the effect of subsurface conditions on all phases of the work.
(0) The contract contained the following technical provisions (among others) :
3-02 MATERIALS:
a. General: Stone for rip-rap shall be clean, free from structural defects, as approved. Suitable materials for rip-rap may be taken from the excavation in-so-far-as they are available. Bedding material is not available at the site.
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4-02 DEFINITIONS:
a. Excavation:
(1) Excavation consists of excavating for roadways, dams and graded areas, including gutters and ditches: excavating all material, regardless of character, as directed, and disposing of all excavated materials, as specified, and in conformity with the lines, grades, cross sections, and dimensions shown on drawings. Excavation shall include any authorized excavation required to produce in place, complete, the materials necessary for embankments and fills, and to replace unsatisfactory materials from other excavation or grading operations. The removal and disposal of existing structures below existing grade, such as old road surfaces, curbs, sidewalks, masonry, drainage structures and building foundations shall be performed in conjunction with excavation operations and will be considered a subsidiary obligation of the contractor covered under the applicable contract unit price for excavation.
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i. Limits of Work: The limits of work are indicated on the drawings. All movements of excavated materials shall be made within the limits of work and will be considered to be on a free haul basis.

4-03 GLASSIFICATION OF EXCAVATION: AH excavation shall be executed on a classified basis, as provided for under the item designations of the contract. Separate consideration will be given to the nature of the materials excavated, in accordance with the following designations and classifications:
a. Rock Excmation: This item shall include the satisfactory removal and disposition of all boulders measuring 1/2 cubic yard or more in volume; all rock material which is in ledges and bedded deposits, which cannot be removed without drilling and blasting; and conglomerate deposits which are so firmly cemented that they possess the characteristics of solid rock, and which cannot be removed without drilling and blasting. When, during the progress of excavation, material is encountered for which the contractor may claim classification as rock excavation, such material shall be uncovered, and the Contracting Officer notified before proceeding further. The Contracting Officer will then take cross sections of the material uncovered. The contractor shall not proceed with the excavation of the material claimed to be rock until this material has been cross-sectioned and classified. The classification of rock, ditch or common excavation will be determined by the Contracting Officer. Failure on the part of the contractor to uncover such material, notify the Contracting Officer, and allow ample time for cross-sectioning the undisturbed surface of such material, will forfeit the contractor's right-of-claim to any classification other than that allowed by the Contracting Officer for the areas of the work in which such deposits occur.
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c. Common Excavation: This item comprises the satisfactory removal and disposition of all material not classified as rock, ditch, structural and exclusive of stripping of topsoil.
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4-06 UTILIZATION OF EXCAVATED MATERIALS:
a. All Suitable Material removed from the excavations shall be used, insofar as practicable, in the formation of embankments, for roads, dams and graded areas, sub-grades, shoulders, slopes, bedding, backfill for culverts and other structures, and for such other purposes as may be directed by the Contracting Officer. Excavated material shall not be wasted without the authorization of the Contracting Officer. Material authorized to be wasted shall be disposed of near the areas of excavation as directed, and in such maimer as not to obstruct the flow characteristics of any stream or to impair the efficiency or appearance of any structure. Excavated material sba.ll not be deposited in a manner that may endanger a partly finished structure by direct pressure, by overloading banks contiguous to the operations, or that
may in any other way be detrimental to the completed work.
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4-07 BOCK FOR RIPRAP: Nock from excavations shall be conserved to be used as Niprap as specified in Section 8, ENOSION CONTNOL.
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4-11 , EMBANKMENT MATERIAL: Embankment fill shall be constructed of earth or other friable materials, free from roots or other organic material, trash or frozen materials. Nocks having a maximum dimension greater than 6 inches shall not be used in the embankment. Nocks having a maximum dimension greater than 3 inches shall not be used in the upper 6 inches of embankments.
4-12 FORMATION OF EMBANKMENTS:
a. General:
(1) Embanlements shall be formed to line, grade and cross section indicated, placed in horizontal layers, full width of embankments, or, in the case of large areas, workable widths as approved not more than 8 inches in depth after compaction. Each layer shall be spread uniformly by the use of a road machine or other approved device and rolled with an approved tamping, pneumatic or three-wheeled power roller or other approved compacter until compacted to 90 or 95 percent density, as indicated on the drawings and as specified in paragraph 4-02f.
$ $ $ $ ‡
4-21 MEASUREMENT AND PAYMENT:
a. Excavation, Common:
(1) Measurement: The quantity to be paid for will be the number of cubic yards of material in its original position, and tenths thereof, excavated, placed in fill or stockpiles, completed and accepted and/or wasted. Measurement will be determined by original cross-sections established from aerial topographic maps included in the contract drawings and final sections taken after excavating operations and computed by the average end area method. Plotted original sections will be furnished to the Contractor for checking and acceptance or revision by the Contractor and acceptance by the Contracting Officer prior to initiation of excavation. The measurement will not include the yardage excavated without authorization beyond indicated excavation lines, or the yardage of any material which, is used for purposes other than those directed. The cross sectional area as finally measured will not include water, but will include mud, muck, or similar semi-solid material which cannot be drained away, and which has not been disturbed by the contractor prior to the time that cross sections of the ^original ground are taken. The measurements will include authorized excavation of unsuitable material.
(2) Payment will be made at the contract unit price, for Item No. 6, "Excavation, Common". Payment will constitute full compensation for all labor, materials and equipment, and for performing all operations necessary for excavation, hauling to embankment areas or approved stockpiles, construction of roadway ditches, and disposal of surplus and unsuitable materials all as specified herein, or directed.
b. Excavation, Bock:
(1) Measurement: The quantity of ledge rock to be paid for will be the number of cubic yards of rock in its original position, and tenths thereof, excavated, and satisfactorily disposed of, complete. The quantity of boulders will be measured to the nearest y2 cubic yard. Measurement will be determined by cross sections taken before and after excavating operations and computed by the average end area method. The measurement will not include material excavated without authorization beyond indicated excavation lines, except unavoidable over breakage to an amount not exceeding 10 percent of the actual quantity contained within the lines shown on the drawings for any 50-foot interval between a station and a half-station, and the volume of loose, scattered rocks and boulders collected within the work areas, as directed.
(2) Payment will be made at the contract unit price for Item No. 7, "Excavation, Rock". Payment will constitute full compensation for all labor, materials and equipment, and for performing all operations necessary for the excavation of rock, including drilling, blasting and disposal of materials as directed.
5. (a) Upon receiving the award of the contract, Scholes entered into a subcontract with Paul Hooper, Inc., under which the latter was to perform the work called for under Items 6 and 7 of the contract.
(b) Paul Hooper, Inc., commenced operations under the subcontract about the middle of April 1956.
(c) In about two weeks after tbe excavating operations were begun, the subcontractor began to encounter considerable quantities of rocks in the subsurface at depths that ranged from 5 to 25 feet in different parts of the excavation area. Thereafter, and throughout the remainder of the excavation work, rocks comprised a very substantial percentage of the material excavated at the work site. They were all sizes, from small rocks up to one boulder that measured approximately 44 cubic yards in volume.
6. (a) During the course of the performance of the excavation work, the subcontractor encountered, and was required to remove and dispose of, a total of approximately 60,000 cubic yards of so-called "classified rock." All of this classified rock consisted of a large boulders measuring y2 cubic yard or more in volume. Scholes was paid for all of this classified rock at the unit price of $8 per cubic yard under Item 7 of the contract.
(b) No claim has ever been asserted by Scholes or the excavation subcontractor on the ground that the quantity of classified rock handled under Item 7 of the contract was vastly disproportionate to the estimated quantity of 200 cubic yards.
7. (a) In addition to the large boulders measuring % cubic yard or more in volume referred to in finding 6, the excavation subcontractor encountered, and was required to remove and dispose of, large quantities of boulders and other rocks measuring less than y2 cubic yard in volume. Such of these rocks as were 6 inches or less in diameter could be handled effectively by the excavation subcontractor's equipment, and they could be used, and were used, without difficulty as part of the fill on the construction job. However, the rocks that exceeded 6 inches in diameter caused great difficulty to the excavation subcontractor.
(b) Scholes was paid for rocks which exceeded 6 inches in diameter, but which were less than y2 cubic yard in volume, at the contract unit price of 20 cents per cubic yard for common excavation.
8. (a) While the excavation work was in progress, Scholes and the excavation subcontractor orally expressed to the re sponsible Air Force personnel on many occasions dissatisfaction over tlie fact that the common excavation contained unexpectedly large quantities of rocks which, exceeded 6 inches in diameter but which were too small to qualify as rock excavation under Item 7 of the contract.
(b) The record does not show, and apparently there is no means of determining, the total amount of rocks which exceeded 6 inches in diameter, but which were less than % cubic yard in volume, that were encountered, removed, and disposed of during the course of the excavation work. Estimates varying from approximately 138,000 cubic yards to approximately 600,000 cubic yards have been made with respect to this amount.
9. Prior to the beginning of the excavation work, there was no reasonable basis for Scholes or the excavation subcontractor to anticipate, from a visual inspection of the surface of the excavation area, that the subsurface would contain such large quantities of boulders measuring % cubic yard or more in volume and such large quantities of rocks which exceeded 6 inches in diameter but measured less than % cubic yard in volume.
.10. (a) Persons familiar with the geographical area where the contract was to be performed anticipated that the subsurface to be excavated would contain large quantities of rocks, although this was not indicated by surface conditions. Such persons did not differentiate in their estimates as between rocks measuring y2 cubic yard or more in volume and rocks measuring less than cubic yard in volume.
(b) Scholes and the excavation subcontractor were not previously familiar with, or experienced in the performance of excavation work in, the pertinent geographical area.
11. (a) On April 25, 1957, Scholes submitted to the contracting officer a formal request for an equitable adjustment under the contract, on the ground of "changed conditions." The claim stated in part 'as follows:
The nature of the materials encountered in the common excavation, which included an abnormal and indeterminable quantity of unclassified rock, was not known and is not believed to have been subject to a prior quantitative determination. An undue hardship was placed upon the Contractor and increased costs were incurred by reason of changed conditions attributable to the nature of the materials in the common excavation, both in excavating and placement of embankment, and also the abnormal amount of classified rock encountered in the common excavation. Since the increase in classified rock is all out of proportion to the overrun in common excavation, it unquestionably cost more money to accomplish the common excavation than would have been the case had rock excavation increased only proportionately to the overrun in common excavation. Due to the changed conditions and plan changes, the Contractor was unable to maintain the scheduled progress of excavation. This resulted in the contractor falling behind schedule, which made it necessary to hire additional equipment and to extend the work day schedule into overtime operations as directed by the Contracting Officer. In order to accomplish the required performance, which extended these operations into adverse winter conditions, many increased costs were incurred, including extensive equipment repairs. Increased costs were also incurred by the Contractor by reason of the requirement of added equipment necessary to process unusual quantities of rock encountered in the 'backfill compaction, Items Nos. 12(a), 12(b), 40(a) and 40(b).
The aforestated subsurface or latent physical conditions differing materially from those indicated in the contract, have caused an increase in the cost of the performance of the contract which necessitates this request of the Contractor for an equitable adjustment of the unit prices for the following items:
The Contractor respectfully petitions for an increase of the contract prices as above stated, to provide an equitable adjustment of the contract price, thereby affording just and proper recovery of increased costs occasioned by the changed conditions as related herein.
(b) The contracting officer, in a letter dated August 23, 1957, denied Scholes' claim based upon the alleged encountering of changed conditions.
(c) Scholes thereupon took an appeal to the Armed Services Board of Contract Appeals.
12. (a) After a 4-day hearing, which resulted in a 630-page transcript and numerous exhibits, was held in Washington, D.C., the Armed Services Board of Contract Appeals on December 27,1957, rendered a decision (ASBCA No. 4616) on Scholes' appeal.
(b) In its decision, the Board determined that the pertinent facts were as follows:
(1) The Academy site comprises about 26 square miles that lie immediately adjacent to the Rampart Range of the Rocky Mountains. At the west end there are high steep slopes of the range, to the east of which there are eastward trending ridges and valleys ending abruptly at the valley of southward flowing Monument Creek. The area east of the creek is a rolling plain cut by ravines and shallow valleys. The intended building area in its natural state was a gentle slope. Its design contemplated that the slope would be converted into four plateaus separated by retaining walls so that instead of a single ramp there would be a series of steps. It was the grading of these plateaus and the construction of these retaining walls that was the appellant's undertaking.
(2). Between February 1955 and January 1956 but principally in December 1955, and for purposes of determining these plateaus and walls the Government's Architect-Engineers caused 187 borings to be made. Of this number 122 were 24 inches in diameter and were made by an auger head which removed the earth in three foot segments. There were 49 of the more conventional 4 inch size. Lesser numbers were 18 and 30 inches. Of the smaller sizes 33 were made by use of a Flight Auger and for the rest the engineers used 10 other types of bits. The borings were planned on an approximate 1500 foot spacing.. This was changed as circumstances dictated, so that in the areas of greater interest the spacing was reduced. Material removed in these processes was classified according to a Unified System.
(3) .One hundred twenty-two of these borings were made in the area of excavation. Of this number 41 showed the presence of boulders at depths above finished grade. Fifteen showed them at depths below that grade. In some instances where they were encountered the boring continued through them and into other materials. In other Instances the bits were unable to penetrate, dislodge or remove them. For the 24 inch bit such impenetrability meant to the engineer the presence of a boulder about 18 inches in diameter or larger. It was capable of removing smaller ones. The Flight Auger would not penetrate rock.
(4) At the time the borings were made the finished grade had not been established. The drillers tried to reach its approximate location and did so unless they were stopped by boulders or encountered Dawson Arkose, a uniform formation of known quantity.
(5) The information obtained in these operations was recorded on graphic boring logs that became sheets 78 through 82 of a drawing that is a part of this contract and was part of the invitation to bid. It was accurate except that 7 of the graphic representations failed to show that the drilling terminated in boulders. The logs did not show the size of the holes or the type of equipment used.
(6) In February 1956 the Air Force Academy Construction Agency issued its invitations to bid on this procurement, listing 52 pay items of work with an estimated quantity set against each.
(7) The stated estimate of the quantity of rock excavation was 200 cubic yards. This was an erroneous and arbitrary figure said by the contracting officer to have been used for the purpose of obtaining aggregate bids and for funding purposes, a term not otherwise explained. The Government's engineers had actually estimated that there would be 150,000 cubic feet of rock of all sizes, that quantity being 5 percent of the estimated 3,000,000 cubic yards of rock bearing material. They did not know, however, nor was it ascertainable what portion of this or of any quantity would be pay size. But the 200 cubic yard estimate was clearly erroneous. A greater quantity was visible on the surface. It is to be noted that the quantity of sub-surface rock cannot be known from the amount of surface rock in an area.
(8) It was not shown on the invitation to bid that the 200 cubic yard "estimate" was arbitrary.
(9) The bidding documents were examined at Camden, Arkansas by the appellant's District Superintendent (Glass, who died shortly before the hearing of this appeal), an engineer in its employ (Bird) and an earth moving contractor (Hooper) whose company became the subcontractor for the operations with which we are here concerned. _ They came to the conclusion that this was a "good dirt Job". Neither the appellant nor Hooper was otherwise interested in it. Bird expressed the opinion that there would be ten times as much unclassified rock as classified but he picked this number out of the air. Glass then communicated with the area representative of a large automotive equipment manufacturer and told him "they were going to try to get some dirt work and that if they did they would be interested in purchasing some equipment".
(10) Within the week prior to the opening of bids Glass and Hooper went to the Academy site and were there joined by the automotive salesman and the appellant's General Superintendent of its Western Begion. The specific qualifications of Mr. Glass are not revealed in this record. Neither of the others is an engineer. Apparently without consulting with officials of the Construction Agency or the Architect-Engineers they examined the site and within a few days made their bid. The twenty cent bid for common excavation approximated the twenty-three cent estimate of its cost that had been made by the Architect-Engineers.
(11) In their site investigation they saw- certain of the borings and test pits and cut-areas in the vicinity of the proposed excavation. They observed an indeterminate quantity of surface rock most of which was in the relatively small Dam area where there was to be excavated only about 35,000 cubic yards. The quantity of this rock that was pay size was estimated by one of these observers to have been perhaps as much as 1,000 cubic yards and by another possibly as much as 400. They remained unpersuaded that the undertaking was other than a "good dirt job". The General Superintendent professes to have seen "nothing that would indicate that the representation of the Government in their estimate of quantities was anything but a fact or nearly so with reasonable variations which we can expect in this type of work." Hooper knew there was no way of ascertaining the size of the boulders indicated on the boring logs but when he observed the quantity of surface pay rock he concluded that they were no larger than six inches, the maximum size usable in the embankments, because the contract did not specify a place where waste rock was to be taken. It is observed that engineer Bird assumed that these same indicated boulders meant rock over six inches in size.
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(12) The appellant's subcontractor purchased $650,-000 worth of dirt moving equipment, unsuited to rock, and commenced its operations about the middle of April. In about t'wo weeks it started to encounter rock in some quantity. It appeared in most of the area and at depths of from 5 to 25 feet. It is not claimed that it was found in such places as to indicate inaccuracies in the boring logs.
(13) This subcontractor was unable satisfactorily to cope with the rock. Its equipment was extensively damaged. It acquired other and rock equipment, hired additional personnel and worked longer hours and itself subcontracted some of the work.
(14) No current record was kept of the quantity of non-pay rock. The appellant's witnesses, its Project Manager and the subcontractor made estimates of indefinite quantities ranging up to 600,000 cubic yards, a figure on which substantial reliance is now placed, but the latter acknowledged that he really did not know and the former said there was no way of determining it. An employee of the Architect-Engineer shortly before this hearing made a computation of the quantity of excavated rock of all sizes over 6 inches. These computations are said to have been based on almost daily observation. The witness (whose findings were stipulated into the record) made separate calculations of rock used as fill in several portions of the parade ground; that removed from the Academic area by a lower tier subcontractor for use as riprap by other contractors (figures taken from pay estimates); other quantities for riprap (partial figures from pay estimates) ; excavation from Diversion Dam disposed of on toe of slope; fill, separately estimated, for retaining wall in Academic area, the Turf parking area, the East face of the [Retention Dam, four athletic fields and the so-called Deadman's Diversion. The total volume so computed is 132,945.6 cubic yards.
(15) By virtue of changes in the contract revisions were made in the estimated quantities of rock and common excavation. The final estimate of common excavation was 4,996,250 cubic yards. In March 1957 the estimated quantity of rock excavation was increased from 200 to 43,200 cubic yards and again in May 1957 from 43,200 to 60,000.
(16) On 19 December 1956 the Chief of the Operations Division of the Air Force Academy Construction Agency wrote to the appellant that the quantities of work performed under two items, one of which was 7, Eock Excavation, had changed significantly. He said of that item that it had increased from 200 to 2'4,800 cubic yards. "An increase in quantity for work to be performed of the magnitude indicated above requires a review of the unit price to be paid for that part of the work which exceeds a reasonable variation." The appellant was requested to prepare an estimate of its proposal for a new unit price for "this additional work". The appellant replied that if it was proper to review these two items "we feel that it is also equitable that all other items which have exceeded a reasonable variation from the original quantities be reviewed at the same time". Thereafter and on 27 February 1957 the first complaint was made to the contracting officer that there had been encountered a changed condition within the meaning of the contract.
(17) Neither party to the controversy has commented on the Government's letter of 19 December which is not, in our opinion, without significance. It is doubtless true that the Government had actual knowledge of the subsurface rock that the appellant encountered, of all sizes. It might be, as the latter contends, that this knowledge made unnecessary the giving of the notice required by the Changed Conditions Article. We do not reach that point. But it seems to us that in the proof of a claim founded in misrepresentation, it is a material circumstance that that claim was not asserted for eight months and then only after, and in answer to the Government's request that the contract price be reduced.
(18). That letter puts the Government in an ungraceful attitude. The writer did not disclose the contractual basis for. his request and it is idle to speculate about it but he did invoke for the Government's advantage an estimate of quantity that is now repudiated as arbitrary.
(19) Such inference as might otherwise be drawn from this letter and other circumstances to which our attention is invited (to the claimed effect that the Government expected no more than 200 cubic yards of pay rock) cannot prevail against the unequivocal testimony that the Government did expect, as its boring survey indicated, an indefinite quantity of sub-surface rock of all sizes which was estimated would approximate 150,000 cubic yards and had no way of telling what part of this would be pay size. And we think this estimate is much closer to the truth than 600,000.
(c) The Board's decision then, stated in part as follows:
The Changed Condition here claimed has a quantitative basis and is not to be found in the kind or character of sub-surface materials. Without deciding if such a condition even if unknown could come within the purview of (2) of the Article, there is no evidence whatsoever in this record that the quantity of sub-surface rock whatever it may have been, was unusual or differed materially from that ordinarily encountered or was not generally recognized as an inherent characteristic of work of this kind.
It is a singular feature of this case that the appellant relies on no direct misrepresentation. It claims that the erroneous estimate of 200 cubic yards of rock each larger than % cubic yards led it to believe that it would find beneath the surface a relatively minor quantity of smaller rock. These conclusions were based on the assumptions that the Architect-Engineers had a knowledge of the subsurface conditions superior to its own and not disclosed on the plans or in the specifications, and that there was a known and fixed relationship between the quantities of rock of these two (size) classifications.
On this aspect of the case (1) of the Article) we think there was no reasonable reliance on the erroneous estimate and that the appellant was misled by the falsity of its own unjustified assumptions.
(d) The Board denied Scholes' appeal.
13. The factual determinations made by the Armed Services Board of Contract Appeals in its decision of December 27, 1957, as set out in the numbered subparagraphs of paragraph (b) of finding 12, were not fraudulent, or capricious, or arbitrary, or so grossly erroneous as necessarily to imply bad faith, and they were supported by substantial evidence in the record before the Board.
14. The record before the court does not show what interest, if any, the plaintiff Berks County Trust Company has in the subject matter of the pending litigation.
Measurement
15. By a letter dated February 23, 1959, the contracting officer made an equitable adjustment in the price applicable to certain of the pay items of the contract, including Item 6. In this action, the contracting officer proposed a net decrease of $331,614.13 in the contract price. Scholes took an appeal from this action to the Armed Services Board of Contract Appeals.
16. (a) After a 6-day hearing was held in Colorado Springs, Colorado, and in Washington, D.C., the Armed Services Board of Contract Appeals rendered a decision dated August 22, 1961 (ASBCA No. 5606) on Scholes' appeal.
(b) The Board made the following introductory finding:
Time was important in preparing the plans upon which bids were to be made. To save time the Government made use of an aerial survey of substantially the entire reservation. From information thus obtained, contour maps of the area work site were prepared. These contour maps, which are the final product of survey by this particular method of aerial photography, showed the original ground at contour intervals of two feet. All bids were on the basis that measurements of final quantities would be determined from original cross sections established from the aerial contour maps and accepted by the contractor, and final sections taken after excavating operations.
In other words, measurements of quantities of excavation were to be based upon the elevation of the earth's surface (original ground) derived from an aerial survey, whereas the final grade line was to be established by conventional survey methods, i.e., computations made from rod readings through a level instrument and tied in to bench marks for vertical control. Any necessary horizontal control was through base lines and a grid system related to triangulation stations. Federal survey agencies had previously established in the area the control points referred to.
(c) The Board set out the dispute, and its conclusion, in the following language:
The only seriously disputed issue, that of the method of measuring the quantities of common excavation [Item 6] for payment at the contract price of $.20 for each cubic yard, is really two issues:
(1) The Government instead of using the cross sections of the original ground that had been accepted by the contractor as the basis of measurement, actually re plotted those drawings. Appellant contends that the replotting was unauthorized. On a spot check basis in one area, this departure from the contract terms, according to appellant's testimony, reduced by perhaps 100,000 cubic yards the quantity of common excavation for which appellant would otherwise have been entitled to payment.
(2) The original ground elevations as shown on contour maps prepared from and as a part of the aerial survey did not coincide with the actual undisturbed ground elevations along the points where _ excavation ended. These places are known as "catch points". Discrepancies at the catch points are normal. They are usually adjusted in the field. The difference here is that the vertical discrepanices are greater than would have been the case if the cross sections accepted by the contractor under the contract terms had been taken from data produced by a conventional survey. The contractor contends that he is entitled under the contract provisions to:
"Kelation of the final grade lines of the entire area included within the limits of work to the original ground line established by agreement between the Agency and the contractor. The final grade line shall be the location of the ground surface after completion of the contract, regardless of whether such ground line was disturbed by the work required by the contract. Whenever the final grade line is below the original ground line, the intervening area shall be measured and paid for as Item 6 using vertical closure lines at the contract boundaries [footnote omitted] where needed."
The Government concedes that measurement for payment for excavation should be carried vertically upward from the final grade line to the ground line shown by the aerial survey. However, the Government denies that the measurement should, under the contract, be made in a horizontal direction any farther than the end of actual excavation, i.e., the catch point.
[W]e agree with the appellant on the first issue respecting excavation. On the second issue we are constrained to agree with the Government.
17. (a) Pursuant to the direction of the Armed Services Board of Contract Appeals in ASBCA No. 5606, the con tracting officer proceeded to make measurements for payment of tbe excavation in accordance with the Board's decision.
(b) By a letter dated May 28,1962, the contracting officer submitted the following finding and determination to Scholes:
4. It is the finding and determination of the contracting officer:
a. That the results of these measurements indicate that the final quantities of excavation, common, amount to 4,182,727.8 cubic yards.
b. That inasmuch as your company was previously paid for 4,289,923.6 cubic yards of excavation, common, the contract records now reflect that your company has been paid an excess of 107,195.8 cubic yards over the actual amount excavated.
c. That since payment was made at the contract unit price of 20 cents per cubic yard, your company has been overpaid under the contract in the amount of $21,439.16.
5. Based upon the foregoing finding and determination, it is the decision of the undersigned contracting officer that you submit a check to the contracting officer, Air Force Academy Construction Agency, P.O. Box 1670, Colorado Springs, Colorado, in the amount of $21,439.16, made payable to the "Treasurer of the United States." That this is to be considered a formal demand for the foregoing amount.
(c) Scholes took an appeal from the action of May 28, 1962, to the Armed Services Board of Contract Appeals, but subsequently withdrew this appeal.
18. In the present action, Scholes does not question the accuracy of the contracting officer's computations, as set out in finding 17, but does question the correctness of the decision by the Armed Services Board of Contract Appeals in ASBCA No. 5606 with respect to the second issue referred to in finding 16.
19. The defendant is entitled to recover on its first counterclaim the sum of $21,439.16, which sum has not been paid by Scholes and is presently due and owing the defendant by Scholes.
Taxes
20. (a) The defendant, acting through the Secretary of the Treasury, assessed against Scholes the following taxes and interest on the date and in the amount shown below, and has given to Scholes notice and demand for payment on the date shown below:
(:b) Toward the taxes so assessed, there was allowed a credit of $121.52.
(c) No: part of the said $146,620.06 has been paid by Scho'les, and there is therefore now due and owing the United States the stun of $146,620.06, plus penalties and interest as provided by law.
21. The defendant is entitled to recover on its second counterclaim the sum of $146,620.06, plus penalties and interest as provided by law. The term "penalities and interest as provided by law" means penalties and interest as provided by the Internal Revenue Code.
Conclusion of Law
Upon the foregoing findings' of fact and opinion, which are adopted by the court and made a part of the judgment herein, the court concludes as a matter of law that the plaintiffs are not entitled to recover, and the petition is therefore dismissed. The court further concludes as a matter of law that the defendant is entitled to recover of and from the plaintiff T. F. Scholes, Inc., on the counterclaims, and judgment is therefore entered for the defendant against the plaintiff T. F. Scholes, Inc., in the sum of one hundred sixty-eight thousand fifty-nine dollars and twenty-two cents ($168,-059.22), together with penalties and interest as provided by law on the $146,620.06 involved in the second counterclaim.
The opinion, findings of fact, and recommended conclusion of law are submitted under the order of reference and Rule 57(a).
The record before the court does not disclose what interest, if any, the plaintiff Berks County Trust Company has in the subject matter of the lawsuit. The initial submission of the claims set out in the petition is on the issue of liability only, and it is inferred that the Berks County Trust Company's interest will arise only in the event of a recovery by T. P. Scholes, Inc.
The administrative record does contain a decision by the Armed Services Board of Contract Appeals dated February 29, 19.60 (ASBCA No. 5010). that was favorable to a subcontractor on certain claims similar to some of those mentioned in this part of the opinion. However, that decision does not show any entitlement on the part of Scholes, the prime contractor, to recover.
No reply to this counterclaim was filed in accordance with Rules 8(a) and 18(a) of the Rules then in effect (now Rules 10(a) and 20(a)).
No reply to this counterclaim was filed. The second counterclaim originally covered other tax assessments in addition to the assessment mentioned! in this portion of the opinion. However, the defendant later withdrew its demand with respect to the other assessments.
The numbering of the Board's factual determinations has been supplied.
A footnote quoted special provision 1-32 of the contract.