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3 Pub. Cont. Newsl. 1 (1967-1968)

handle is hein.journals/procurlw3 and id is 1 raw text is: SECTION OF PUBLIC CONTRACT LAW AMERICAN BAR ASSOCIATION Vol. 3, No. 1, Dec. 1967 FEDERAL STATE & LOCAL GOVERNMENT CONTRACTS Charlotte P. Murphy, Editor, P.O. Box 7783, Washington, D.C. 20014 NEW CHANGES, DIFFERING SITE CONDITIONS, AND SUSPENSION OF WORK CLAUSES, ISSUED BY G.S.A. FOR CONSTRUCTION CONTRACTS Culminating three years of effort, G.S.A., on November 28, 1967, published in the Federal Register the new mandatory Changes, Differing Site Conditions, and Suspension Of Work clauses for use in Standard Form 23-A for fixed-price construction contracts (FPR § § 1-7.601-2, 1-7.601-3, and 1-7.601-4). Although many changes have been made in the language of the new clauses since the initial drafts were written, the basic provisions contained in the first draft have been retained (See Public Contract Newsletter, Vol. 1, No. 3, July 1966). The Section actively participated in discussions with G.S.A. and the Government Interagency Working Group in an effort to improve and clarify the clauses. The major revisions effected by the new clauses include the elimination of the Rice Doctrine with respect to the effects of changes on portions of the work not specifically changed; a similar provision with respect to Differing Site Conditions (the new title of the old Changed Conditions clause); and a mandatory requirement that the Suspension Of Work clause be used in all contracts. At the suggestion of the Section, the new clauses were revised to delete all references to the Disputes clause to avoid any change in the existing jurisdiction of the boards of contract appeals and the Court of Claims. The new clauses retain the standard of unreasonable delay in the Suspension clause, but in accordance with the comments of the Section, this standard was eliminated from the new Changes, and Differing Site Conditions clauses. Despite unanimous objection by industry and the Section, the new clauses include onerous notice requirements, with inadequate provision for waiver. In an appendix published with the new clauses, ambiguities and a possible conflict with the language of the new clauses are introduced with regard to whether delay costs incurred prior to the issuance of changes are to be paid under the Changes clause or the Suspension of Work clause. Despite these defects, the Section, on September 18, 1967, recommended that the revised clauses be adopted, since the clauses represent a significant advance in construc- tion contract arrangements, but urged that efforts continue in the task of improving and refining the clauses. The new clauses become mandatory on February 1, 1968, but may be used before that date. Nothing in the new clauses, or the regulations adopting them, would preclude the parties to an existing contract from executing a supple- mental agreement to substitute the revised clauses. 5TH CIRCUIT REFUSES GOVT. RIGHT TO SET OFF CONTRACTOR'S TAXES AGAINST SURETY'S CLAIM In Trinity Universal ins. Co. & 1st National Bank (Dallas) v. U.S., decided Sept. 12, 1967 by the Court of Appeals for the 5th Circuit, the issue was whether, when a Miller Act surety completes a defaulted contract pursuant to its performance bond, (and expends more than the full contract price), the Government may set off taxes owed by the contractor against the surety's claim to the fund retained by the Government to insure performance. The surety's claim was rejected by the district court on authority of U.S. v.Munsey Trust Co., 332 U.S. 234 (1947). The rights of the surety in that case were those of a subrogee of the contractor, with the person paying the laborers and materialmen becoming a creditor of the Government insofar as the retained funds are concerned. See, Pearlman v. Reliance Ins. Co., 371 U.S. 132, 141. In reversing the lower court, the Court of Appeals specifically rejected the opposite view expressed in Standard Accident Ins. Co. v. U.S., 97 F. Supp. 829 (Ct. Cls. 1951). The Court held that: the surety should not be worse off because it undertook to finish the job. The performance bond is to assure that the Government has a completed project for the agreed contract price. The obligation may be performed either in kind or in money. Performance results equally when the surety completes the contract or when the surety pays the Government any damage which the Government incurs in completing the job. In either event, the surety is entitled to have the full contract price applied to the performance of the contract. At presstime, the Government had not yet announced whether it would file a petition for certiorari. FUTURE EVENTS PREVIEW April 5, 6, 1968 - Two day National Institute to be sponsored by our Section at the Mayflower Hotel in Washington, D.C. August 4- 6, 1968 - PCS/ABA Annual Meeting in Philadelphia. The Section will sponsor three half day sessions, its traditional luncheon, and two Council meetings-all meet- ings are to be held at the new Convention Center.

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