S & E Contractors, Inc. v. United States

PETITIONER:S & E Contractors, Inc.
RESPONDENT:United States
LOCATION:University of Wisconsin-Oshkosh

DOCKET NO.: 70-88
DECIDED BY: Burger Court (1972-1975)
LOWER COURT:

CITATION: 406 US 1 (1972)
REARGUED: Mar 20, 1972
DECIDED: Apr 24, 1972
ARGUED: Oct 21, 1971

ADVOCATES:
Geoffrey Creyke, Jr. – for petitioner
Irving Jaffe – for respondent

Facts of the case

Question

Media for S & E Contractors, Inc. v. United States

Audio Transcription for Oral Argument – October 21, 1971 in S & E Contractors, Inc. v. United States

Audio Transcription for Oral Reargument – March 20, 1972 in S & E Contractors, Inc. v. United States

Warren E. Burger:

We’ll here arguments next in number 70-88, S & E Contractors against the United States.

Mr. Creyke, you may proceed whenever you’re ready.

Geoffrey Creyke, Jr.:

Mr. Chief Justice, may it please the Court.

This case is also here for re-argument, and it comes from the United States Court of Claims.

It involves the finality under a 1961 Federal Construction Contract of an administrative disputes decision favorable to the contractor, allowing payment for certain routine contract changes, which decision was accepted by the contractor and by the agency, the Atomic Energy Commission.

What was collaterally attacked by the Comptroller General on his own initiative precluding payment and forcing us to suit in the Court of Claims.

There is no issue as to the authority to enter the contract, obligate funds or indeed to conduct the disputes process.

Neither is there any allegation of any fraud, wrongdoing or impropriety whatsoever on the part of anyone connected with the contractor or the AEC.

The matter is simply one in which we say the Comptroller General in an overreaching of his powers has blocked payment of the resolution of this matter under the disputes process, forcing the contractor into litigation.

The Department of Justice here, takes the position that the action of the Comptroller General is immaterial and although it is not supported by the Atomic Energy Commission in it’s pursuit of this, nevertheless contends that this creates a right of judicial review of this procedure.

The case was decided by the Court of Claims in a 4 to 3 Opinion, the majority holding that regardless of what precipitated the litigation, there would be a judicial review conducted under the standards of the Wunderlich Act of 1954.

And the case was remanded to the Commissioner of the Court of Claims for hearing on the merits.

Therefore the case is not here on the merits as such, but on the question of the finality of this determination under the disputes process and the rights of the contract, to which he is asserting to hold that disputes process having been accepted by the agency was final.

And it is not subject to collateral attack.

The case therefore involves a contract between the agencies and an interpretation of this Wunderlich Act.

If I may briefly review the history of the case itself, it is laid out as a chronology on page one of the appendix.

It was a Lump sum competitively bid Federal construction contract to build a portion of the Atomic Reactive Test Station for the navy in Idaho.

The original sum was $1,272,000 and the contract performance period was 180 days or to run from August 1961 to February 1962.

The contract was entered into on a US Standard Form 23, 23A and so forth, well with the contact of the 1953 edition with the normal and usual act, with adjustment clauses for changes, change conditions and other factors in the contact.

It worked, however, due to extra work and extra time, actually consumed 325 days or in effect approximately double the time of performance and the expenditures involved.

Six claims arose out of this and amounting to $1,950,000 and claims for an additional 120 days in time extensions.

They are routine claims.

Nothing extraordinary other than the magnitude of them in relation to the basic contract and the type of thing that is encountered in almost all federal construction contacts.

Denied by the Contracting Officer, a timely appeal taken, they were referred by the Atomic Energy Commission under it’s then existing practice to an examiner, who heard in a 13-day hearing, the claims in an adversary proceeding found in December of 1962, for the appellant here on liability.

The matter was remanded by him to the contacting officer to negotiate quantum.

The Contacting Officer appealed to the commission itself.

This proceeding to this extent being a little different from your normal Board of Contract Appeals type of proceeding which is prevalent throughout most of the Federal departments today.

The full Commission —

William J. Brennan, Jr.:

Including this Commission, Mr. Creyke?

Geoffrey Creyke, Jr.:

Sir today, they have a Board of Contract Appeals, just as does the Department of Defense does, yes sir.

Geoffrey Creyke, Jr.:

On November 1963, the full Commission reaffirmed some of the claims and granted a review by the full Commission on several, mostly pertaining to time extensions.

In May 14, 1963, the Commission itself in a formal act affirmed the claims other than a slight modification on one regarding time of site access which it remanded for negotiation, and directed the contract —

William J. Brennan, Jr.:

Do I gather that today, that kind of action would be taken not by the Commission itself required by —

Geoffrey Creyke, Jr.:

By the Atomic Energy Commission Board of Contract appeals which is very much like the counter part of The Armed Services Board of Contract appeals, yes sir, Your Honor.

There was this remand to the contracting officer again in May of 1963 then by the full Commission, but in the meanwhile the dispersing officer had addressed an inquiry to the General Accounting Office regarding certain set offs involving about $32,000, items which were independent of the merits of the claims themselves, so found by the Commissioner of Court of Claims who reported on this.

But the request which went to the General Accounting Office expressly stated that it was not to be construed as a request for a review of or concurrence in the decision.

Nevertheless the General Accounting Office did contending that it had a right acting in an executive capacity and under the standard of the Wunderlich Act to review the entire decision, did so taking 33 months to do it and in a 260-page opinion, set aside the entire decision.

It allowed not one set, it allowed not one day’s time extension and in it’s own papers filed in these proceedings, it characterizes this action as an advanced notice of dis-allowance.

William J. Brennan, Jr.:

You said they set aside, is that what GAO did or —

Geoffrey Creyke, Jr.:

Perhaps I inadvertently used the word set aside, I should have said, they simply blocked the payment of this taking the position that the contractor was not entitled to any compensation and —

William J. Brennan, Jr.:

And suppose despite GAO’s expressing disapproval, AEC had gone forward nevertheless and paid it, now what would have been the risk in making the payment that the members of the commission would tell you?

Geoffrey Creyke, Jr.:

I would suppose they would be subjected to the possible charges personally or their bond being charged by the Comptroller General, with the amount so dispersed if his position had —

William J. Brennan, Jr.:

And the amount involved was about a million dollars, wasn’t it?

Geoffrey Creyke, Jr.:

Sir, the amount claimed was $1,950,000.

William J. Brennan, Jr.:

Well, I mean you agreed settlement was for how much?

Geoffrey Creyke, Jr.:

Well there was never an agreed settlement.

William J. Brennan, Jr.:

Oh!

I see.

Geoffrey Creyke, Jr.:

The examiner found liability, the commissioner affirmed liability —

William J. Brennan, Jr.:

So the amount had not been fixed?

Geoffrey Creyke, Jr.:

The amount had not been resolved.

William J. Brennan, Jr.:

Now whatever it was —

Geoffrey Creyke, Jr.:

It was in negotiation, the amount claimed was of $1,950,000.

William J. Brennan, Jr.:

Well, if the payment had been made, if a settlement that been agreed upon and the payment made, the million dollars whatever the amount was, then the members of the commission ran the risk by paying it of the personal liability?

Geoffrey Creyke, Jr.:

Correct sir, or a liability under bonds or the Dispersing Officer might have run that risk.

That is not altogether [Attempt to Laughter] clear to me to the full extent of that —

William J. Brennan, Jr.:

But I expect it —

Geoffrey Creyke, Jr.:

It would be as we view it, a total deterrent to making a dispersion.

William J. Brennan, Jr.:

But if you or I were members of the commission, we’d hesitate twice, were that sort of (Inaudible) making the payment.

Geoffrey Creyke, Jr.:

Agreed, quite agreed, Mr. Justice White.

John Paul Stevens:

What happened to the petitioner in the meantime, petitioner still in business?

Geoffrey Creyke, Jr.:

Sir the petitioner is not in business.

He has been unable to continue in business ever since this.

William O. Douglas:

Is there anything in the record about this?

I don’t want to pick up every time.

Geoffrey Creyke, Jr.:

I would say there is no — nothing in the record itself to this effect, bearing in mind sir, that the record as such can only be the record of the Atomic Energy Commission [Attempt to Laughter] proceeding as reviewed under the motion for summary judgment proceeding in the Court of Claims.

Warren E. Burger:

The claimant has and if they receive some money, will they receive interest from the time when it was due?

Geoffrey Creyke, Jr.:

Under the present State of the Law, no sir.

Warren E. Burger:

Court of Claims cannot make an allowance of interest as such, can it?

Geoffrey Creyke, Jr.:

No it cannot.

There have been some decisions in recent years which have enabled the Court of Claims to recognize that in an overhead expense certain interest occurring during a period of extended overhead while that work was being performed, but there is no basis for allowing interest for the period beyond the time when the contract was completed which was of course in 1962.

Warren E. Burger:

It would take special legislation to treat that aspect of the problem, I imagine?

Geoffrey Creyke, Jr.:

I’d think it would.

There is a remote possibility [Attempt to Laughter] that had been discussed that one might go for an amendment without consideration under Public Law 87653, but I — that these unprecedented of this, simply serving as run through I think.

William J. Brennan, Jr.:

Mr. Creyke in the — then you had to bring the lawsuit?

Geoffrey Creyke, Jr.:

Correct.

William J. Brennan, Jr.:

Now in that lawsuit, government defended of course, is this 260-page memorandum of any binding affect on anyone in the lawsuit?

Geoffrey Creyke, Jr.:

None whatsoever, sir.

William J. Brennan, Jr.:

It’s as if it were never written?

Geoffrey Creyke, Jr.:

It is a published opinion and therefore we feel free to refer to it because it’s in the opinions of the Comptroller General.

William J. Brennan, Jr.:

But the issue —

Geoffrey Creyke, Jr.:

But the issue in this suit, once we have brought it in the Court of Claims.

It came to an issue on cross motions for summary judgment.

William J. Brennan, Jr.:

Those cross motions have to be decided by the Court of Claims independently of this 260-page memorandum or anything said in it?

Geoffrey Creyke, Jr.:

Yes.

But it should be noted that in the Court of Claims not only the Department of Justice, but an attorney from the General Accounting Office appeared with the government.

At a later point they diverted it and we faced with more than one adversary, but initially, in the initial motion, it was a filed not only by the department, but by the — joined in by the Comptroller General.

If I may discuss the Court of Claims proceeding where the brief —

Lewis F. Powell, Jr.:

May I ask a question —

Geoffrey Creyke, Jr.:

Yes sir.

Lewis F. Powell, Jr.:

What is the scope of the review of GAO, was it de novo?

Geoffrey Creyke, Jr.:

They have reviewed it as I understand it on the basis of saying that it was a review as to whether the decision of the AEC affirming the examiner’s decision was supported by substantial evidence and whether it was correct as a matter of law and they found, it was not.

Lewis F. Powell, Jr.:

Did GAO accept findings of the fact by the AEC or its examiner?

Geoffrey Creyke, Jr.:

Negative.

Lewis F. Powell, Jr.:

He made his own findings of fact.

Geoffrey Creyke, Jr.:

Absolutely, yes sir, that’s correct.

Lewis F. Powell, Jr.:

No payment could be made in face of that decision by GAO?

Geoffrey Creyke, Jr.:

Practically speaking that is correct, yes sir.

(Inaudible)

William J. Brennan, Jr.:

The only practically speaking, the AEC could have gone ahead and told its Dispersing Officer to pay it anyway, couldn’t it?

Geoffrey Creyke, Jr.:

I think the Dispersing Officer would have been within his own rights to independently refuse to make that, at the direction — either of his Superior.

William J. Brennan, Jr.:

And neither was going to risk making that payment for fear of the personal liability, if they did in the face of the disapproval of the General Accounting Office, wasn’t that it?

Geoffrey Creyke, Jr.:

I quite agree.

William J. Brennan, Jr.:

And when you answered Mr. Justice Powell, this was a de novo review, I gathered it’s not a review of any kind, whatever that 260-page memorandum is, it has no legal affect except there is a statement of why GAO disapproved, wasn’t that it?

Geoffrey Creyke, Jr.:

Yes.

Warren E. Burger:

Historically I understand there have been occasions where payments were made not withstanding the opposition of the Comptroller General, but that was where the Attorney General took the opposite position?

Geoffrey Creyke, Jr.:

Historically and particularly in the period of the 19th Century, there were numerous cases and some in this century where the attorney general took entirely different view of the rights of the Comptroller General and specifically held that in matters vested in the discretion of the administrative official that he had no right to superimpose his judgment.

And one of the big issues in this case will be whether that was altered by the Wunderlich Act.

In other words, this Court in Mason & Hanger, very clearly held that Comptroller General had no right to adjudicate.

William J. Brennan, Jr.:

What I am telling Mr. Creyke, in this very case, the problem is that, the Attorney General had said, no I don’t agree with the Comptroller General and I am not going to send this to him, might he have done that?

Geoffrey Creyke, Jr.:

Yes.

William J. Brennan, Jr.:

And the General Accounting Office would be helpless to do anything about it?

Geoffrey Creyke, Jr.:

I think that —

William J. Brennan, Jr.:

And judgment would have gone as a course for your claim?

Geoffrey Creyke, Jr.:

I think that’s correct, But our point here is, that there would be no case on which to make such a determination were not for the improper, unwarranted and illegal act of the Comptroller General.

In fact you go back just a second to proceeding in the Court of Claims, I think it’s important to bring out, that having been referred to the commissioner first, he made a recommendation to the court, that the court find that this was a breach of contract and that it render summary judgment.

William J. Brennan, Jr.:

Tell me, Mr. Creyke, suppose the Comptroller General had not taken the action he did, but the dispersing officer for whatever reason, he just refused to pay, you’d then still have the suit wouldn’t you?

Geoffrey Creyke, Jr.:

If the Dispersing Officer had refused to pay in accordance with the —

William J. Brennan, Jr.:

No the GAO did nothing, but the dispersing officer just refused to pay, you’d still have to sue, wouldn’t you?

Geoffrey Creyke, Jr.:

I believe not, because I think it would have been taken away from him by the action of the Commission by which he would be bound since there is a formal act as the Commission and the hypothetical situation you are projecting as I understand it would entail a reversal of position on the part of the Commission itself or its representative —

William J. Brennan, Jr.:

You don’t get a check until a Dispersing Officer fills it out and send it to you, do you?

Geoffrey Creyke, Jr.:

That’s correct.

William J. Brennan, Jr.:

Now, so he doesn’t fill it it out and doesn’t send it to you.

Then what’s your position, what do you have to do?

Geoffrey Creyke, Jr.:

If such a situation were to occur then I would suppose in due course if we were unable to resolve it, we would have the possibilities of either seeking mandamus action which has been done in some cases, where it involved simply a ministerial action to carry out an obligation of the United States, or the possibility of bringing an action in the Court of Claims.

William J. Brennan, Jr.:

In either event, the Attorney General would defend your action, I take it?

Geoffrey Creyke, Jr.:

In either event, the Attorney General would have the responsibility defending a suit against the United States —

William J. Brennan, Jr.:

I suppose the Attorney General were then to say, well GAO might have thought this was alright, but I don’t and I am going to defend it on the ground on which the GAO said it should have been set aside?

Geoffrey Creyke, Jr.:

Well, this is a procedure which actually the attorney general suggested in that opinion of January, 1969, which we took such strong issue.

In other words, in effect he suggested that anyone within the Government, who was not satisfied had the right to short circuit it [Attempt to Laughter], if you will, the disputes process and throw the thing into litigation whereby the contractor who was playing by the Government’s rules accepted this onerous contract with all the incumbent responsibilities of caring forth changes, that is expensive, of carrying forward at his expense in accordance with the contracting officer’s determination, while the dispute is being resolved that he would still have the additional onus, having one of carrying on this litigation.

Now that is not the way the disputes process works.

Warren E. Burger:

Mr. Creyke, I am not sure I follow those hypothetical situations as they evolved in this colloquy, but if the Comptroller General had taken no position and if the Atomic Energy Commission had approved the payment, but it’s Dispersing Officer refused to pay the Atomic Energy Commission might solve that by just getting a new Dispersing Officer might they not?

Geoffrey Creyke, Jr.:

Quite —

Warren E. Burger:

In other words, he has no authority to interpose himself or a legal authority to interpose himself between the decision of the Commission and a contractor?

Geoffrey Creyke, Jr.:

Absolute case of insubordination because in this situation by statute the Atomic Energy Commission is the delegated representative of the government and in this situation the Commission itself has acted, has made a determination and that determination has never yet been altered.

William O. Douglas:

But I suppose that in light of that theory is Professor Petrowitz (ph) in his amicus brief filed suggests you would have been a suit against government for damages for breach of the disputes contract?

Geoffrey Creyke, Jr.:

I agree with that theory.

Now in fact the Commissioner White’s opinion in the Court of Claims held that this non payment in our case constituted a breach of contract because the remedies as suggested — as required were not carried out were unavailable.

William O. Douglas:

That sometimes takes a long time to assert factual —

Geoffrey Creyke, Jr.:

I could say it took [Attempt to Laughter] a long time in this case Mr. Justice Douglas.

One of our problems in this case of course is that S&E Contractors are taking on that one but three adversaries really in a sense, although we have no conflict with the Atomic Energy Commission at this point in time.

We do have problems on the one hand of the Comptroller General and on the other hand with the Attorney General.

As I started to say a little bit ago in the initial proceedings in the Court of Claims, they were together.

Later after the Commissioner found for S&E and after we filed — excuse me, the government jointly filed a brief seeking review and we responded, they split and took different positions and filed a amicus brief on behalf of the Comptroller General asserting different positions from those which the Department of Justice had asserted.

The Department of Justice seem to bottom its case on this nebulous right of making independent review notwithstanding the circumstances of how the matter came about.

It is our position that you simply cannot arrive at such a situation without giving recognition to and approval of what it is a breach of contract and an illegal act, the failure on the part of the agency of United States, the Atomic Energy Commission to carry out it’s agreement with this contractor.

And from time immemorial, this Court has recognized the rights of encouraged parties to provide methods whereby they could resolve their own disputes.

In the case of the government, this has been recognized particularly in Jone’s case 120 years ago as well as in the Mason & Hanger case to which I adverted to a little while ago which both specifically involved an attempt by the Comptroller General to overrule the head of an agency on a routine contract matter and there this Court held that there was no such power.

Now was this authored by the Wunderlich Act; remember that case, excuse me that Act came about as a result of two decisions of this Court in 1950 and 1951 whereby this Court in upholding the rights of parties to contract for their own remedies said that they have contracted the way the right to judicial review.

In the Moorman case involving questions of law and in the Wunderlich case involving questions of fact, the Court suggested that the Congress felt a different standard should be applied, it was a matter for Congress to undertake.

Geoffrey Creyke, Jr.:

Congress did enact this Wunderlich Act, we have it on page 3 and 21 of our own petition, it’s short —

William J. Brennan, Jr.:

Well, Mr. Creyke apart from the Wunderlich Act, I guess all the way back you said 100 years ago or so?

Geoffrey Creyke, Jr.:

We have cited the Jone’s case in 1850, yes.

William J. Brennan, Jr.:

Yeah, and Kihlberg and rest of them and certainly these were all done, this was a contractual matter, wasn’t it?

Geoffrey Creyke, Jr.:

Correct.

William J. Brennan, Jr.:

And they — how the parties would contract as I recall it that be the decision to an official or one of them, and that any matter in dispute would be resolved by him and that his decision would be final and conclusive, that’s as much as the closest said in history, isn’t that right?

The original form of clause was a very short thing, that wasn’t it —

Geoffrey Creyke, Jr.:

Yes.

William J. Brennan, Jr.:

I gather a fraud exception was engrafted by the courts, wasn’t it?

Geoffrey Creyke, Jr.:

Excuse me.

What exception?

William J. Brennan, Jr.:

The fraud exception, the exception for fraud?

Geoffrey Creyke, Jr.:

Yes, it actually came about more or less concurrently because in Wunderlich decision, you had said —

William J. Brennan, Jr.:

No, no, I am getting back to 1878 at the time of Kihlberg.

At that time, the form of the clause, the Disputes Clause was simply that decision of an official of one of the contracting parties would be conclusive and binding and Court said that that was enforceable in the absence of fraud, is that right?

Geoffrey Creyke, Jr.:

Yes, Your Honor.

William J. Brennan, Jr.:

And if there were a fraud, then even the party who is official had been agreed upon as the one who should make — should decide the dispute, even that party could attack the award, could he not, for frauds?

Geoffrey Creyke, Jr.:

I regard it it as analogous to a situation in the private contract where there is fraud —

William J. Brennan, Jr.:

Well, as a matter of fact this whole thing grew out of a private contract provision, didn’t it?

Geoffrey Creyke, Jr.:

Yes.

William J. Brennan, Jr.:

Railroad construction (Inaudible).

Geoffrey Creyke, Jr.:

It has been characterized as a tantamount to arbitration by some although we see it does not keep it all the time.

William J. Brennan, Jr.:

Well, now you have a contract in which you have a provision which expands, doesn’t it, on the initial form of the Disputes Clause, from the simple clause and includes these exceptions, that’s — it maybe set aside where fraudulent frauds expressly stated and then four of the exceptions.

Now just as a matter a contract law and to the old line of cases why isn’t got enforceable, just as the initial clause was always enforceable and the fraud exception of course.

Why you’d have to get to the Wunderlich Act here?

Geoffrey Creyke, Jr.:

It is not enforceable if you please Mr. Justice Brennan because there was no effort to enforce it on the part of the official and the government, the Atomic Energy Commission.

William J. Brennan, Jr.:

Well, how does the clause read?

Geoffrey Creyke, Jr.:

It is on page 3 or 21 of our brief.

William J. Brennan, Jr.:

Yes, page 5 I guess, isn’t it?

(Voice Overlap)

William O. Douglas:

Unless its fraudulent, no claim is fraudulent —

Geoffrey Creyke, Jr.:

None Your Honor.

William J. Brennan, Jr.:

No, but there is and it goes on unless it’s fraudulent or capricious or arbitrary or so grossly erroneous as necessary to imply bad faith or not supported by substantial evidence, and that’s the one that’s involved here, isn’t it, Page 6?

Geoffrey Creyke, Jr.:

Yes, yes it runs (Voice Overlap) I am sorry, I didn’t.

William J. Brennan, Jr.:

Well, I don’t quite understand why — and the only thing since Kihlberg these clauses have been enforceable with a suit of either, why that isn’t enforceable is to all those grounds from the —

Geoffrey Creyke, Jr.:

Sir, if you take the exact wording of the clause, it’s plainly intended only to provide for the contractor because it says the decision shall be final and conclusive unless the contractor may also or otherwise furnishes a contract —

William J. Brennan, Jr.:

Do you mean is this to say now that the government under this clause cannot attack as it always could ever since Kihlberg, the act of its own official for fraud?

Geoffrey Creyke, Jr.:

No, it is not sir.

I am just saying, the government cannot attack under this clause, the decision of the contracting officer and of the commissioner.

William J. Brennan, Jr.:

No, that isn’t what it says.

It’s the decision of the Commission or its duly authorized representative for the determination of such appeals which I take it would be the Contract Appeals Court today, shall be final and conclusive unless determined by a court of competent jurisdiction to have been fraudulent, does not mean the government could attack him for fraud?

William O. Douglas:

No fraud here I understand?

Geoffrey Creyke, Jr.:

No fraud.

William J. Brennan, Jr.:

Alight, or capricious or arbitrary or so grossly erroneous as necessarily to imply bad faith, or not supported by substantial evidence, which is the ground, isn’t it?

Geoffrey Creyke, Jr.:

Yes it is.

But this clause in its application has always been construed as only for writing — for a means for a contractor to go forward with these appeals.

It is —

William J. Brennan, Jr.:

I suggest not where fraud was involved.

It was always, even without the word fraud in the Disputes clause, the government could attack the word its own official for fraud, couldn’t it?

Geoffrey Creyke, Jr.:

It could for fraud.

William J. Brennan, Jr.:

Alright, well now they have put the word fraud in the provision itself and then added some other grounds of attack.

Geoffrey Creyke, Jr.:

Clause which is in question here of course was not the one (Inaudible) clause, which is a little different.

This is the clause for our contract and we are —

William J. Brennan, Jr.:

Yeah, this is a clause — what I am reading from —

Geoffrey Creyke, Jr.:

Yes it is the clause under our contract and —

William J. Brennan, Jr.:

Yeah, what you like I gather negotiate it with the government.

I say I take it when the contract was entered into —

Geoffrey Creyke, Jr.:

The word negotiated [Attempt to Laughter] has broad implications —

William J. Brennan, Jr.:

You would not have had the contract if you hadn’t agreed to a contract which included that provision I take it, isn’t that right?

Geoffrey Creyke, Jr.:

It’s correct, Your Honor.

Geoffrey Creyke, Jr.:

I would like to conclude by saying that I feel that this case is one in which the broad aspects of this entire problem, the application of the disputes process, its value to the government and contracting industry should be given very serious consideration.

That the power to control the incidence of contract including this should be limited to those of the using agency, that it determine it traditionally although the construction might indicate the power existed by the government to process this.

In fact, over years there is no background or no experience of it having been done, that the government has the power to write contracts and regulations to give itself powers of review which it did not do so here.

And that it would be a last time done to this contract as well as to the entire contracting industry, if this case is not overruled.

Thank you.

Warren E. Burger:

Mr. Creyke.

Harry A. Blackmun:

Mr. Creyke, let me follow through on —

Geoffrey Creyke, Jr.:

Yes sir, Mr. Justice Blackmun.

Harry A. Blackmun:

Justice Brennan’s questions because I am not sure that you proffered full import of it.

I think it is his position that at all times the government could appeal on the ground of fraud, at all times prior to one that it elected any time.

Geoffrey Creyke, Jr.:

Yes, Your Honor.

Harry A. Blackmun:

And the next step is that by putting in language of fraud into the contract that this didn’t disturb that rule and by putting in other grounds for appeal, the implication is that the government can appeal with respect to all those other grounds as well and what I would like to get is your answer to that suggestion?

Geoffrey Creyke, Jr.:

As I reach the background of that Mr. Justice Blackmun, the intention of putting that reference to throw in there and is brought out in the amicus brief of the American Bar was to expressly overcome, restrict standards established by this Court in limiting a contractor’s right over due.

In the Wunderlich decision, the cases where fraud was alleged, said that shall not be limited to that and that the same nevertheless shall be presumed final unless not supported by substantial evidence as well as not fulfilling the other four standards as set out in the later part of that article.

Warren E. Burger:

Mr. Creyke, since you’ve answered that last question after you revealed and we’ll give you the three minutes you were trying to save and we’ll enlarge you accordingly Mr. Jaffe.

Mr. Jaffe?

Irving Jaffe:

Mr. Chief Justice, may it please the Court.

The real issue in this case is whether or not the government may challenge in court a decision favorable to a contractor rendered by an agency under the Standard Disputes Clause, on the ground that it does not meet the standards of the Wunderlich Act.

Now it should be borne in mind that the only decision placed before the Court of Claim was not the GAO’s opinion, not anything that the department justice had done but the Atomic Energy Commission decision and that decision is challenged.

That is the finality of that decision is challenged in our answer on the ground that does not comport with the standards of the Wunderlich Act.

Warren E. Burger:

We are going to the practical matters that we have brought in the colloquially.

If the General Accounting Office had never got into this situation at all, what would the Atomic Energy Commission have done at the conclusion of its funds?

Irving Jaffe:

Well, let me answer that question —

Warren E. Burger:

Are we to assume that they would have paid the contractor?

Irving Jaffe:

In the normal course of events as happens with all of these contracts, the matter would have been continued and concluded before the contracting officer which was where the Atomic Energy Commission is centered, presumably an amount that was due, since they found the government liable on several of the claims, would have ultimately been determined and paid by the agency’s disbursing or certifying officer.

However, I would like to answer the question that was posed by Mr. Justice Brennan.

Suppose that the disbursing officer had not paid, this is not a hypothetical situation, except for this particular case because the disbursing officer of another agency, not so long ago refused to pay.

I say that mandamus would not lie, it’s not a ministerial act because that decision which the disbursing officer refused to pay could be subjected to challenge by the very device of refusing to pay.

It is not a decision which requires payment unless it is one which is not fraudulent, not arbitrary or capricious, not clearly so erroneous as to imply bad faith.

It must be supported by substantial evidence and one step more, it must be correct as a matter of law that Section 320, the second section of the Wunderlich Act.

Irving Jaffe:

So that on any of these grounds, there is no — if there is — any of those grounds are not met, there is no requirement to pay.

Now the disbursing officer assuming that he came to the conclusion that this decision was infirm under the standards of the Wunderlich Act, could not be compelled in mandamus in my opinion to pay, it is not a ministerial act required and the case that be subjected to judicial scrutiny.

In this case, there has not yet been a determination by a court of competent jurisdiction, namely the Court of Claims that this decision of the Atomic Energy Commission has any viability whatever or that any payment is required.

The reason it has not reached that decision is because the plaintiff has contended and this Court has granted certiorari that the standards of the Wunderlich Act are available only to the contractor, that there was nothing under the Wunderlich Act which enabled the government to challenge the decision of its own agency.

William O. Douglas:

That depends on who the government is?

Irving Jaffe:

Well, I think I can answer that Mr. Justice Douglas.

William O. Douglas:

Is the government the AEC in this case, or is it the Department of Justice?

Irving Jaffe:

Well, I think what you are really asking me is the mechanics of procedure as to how the matter gets into court and it can get into court in a variety of ways.

The government as Congress in Willis said, when the question was posed to it in the consideration of the Wunderlich Act, said that it might be the General Accounting Office, it might be the Department of Justice, it might be the agency involved.

Now let us assume, for example, another means by which this could have come to court and how the government would have asserted its rights.

Suppose, for example, the disbursing officer did pay as what have been true in a normal course of events, and then the General Accounting Office in auditing these accounts looks at this decision and comes to the conclusion that it’s erroneous as a matter of law on the basis of the decision on its face and therefore transmits it to the Department of Justice with the request that we look into for the purpose of recouping money erroneously or illegally paid because the decision of an agency, under a Disputes Clause was not entitled to finality under the Wunderlich Act.

Now that would be another way as the Attorney General said in his opinion of January 6, 1969 in which this could be tested.

William J. Brennan, Jr.:

Mr. Jaffe, what’s the risk that the Commission ran here after the GAO-260 page memorandum?

Had they paid, had they gone through with the payment, who would have taken what risk?

Irving Jaffe:

Well, the risk — there is a risk, Mr. Justice Brennan, because the statutes which govern the General Accounting Office also provide that if a payment is illegally or erroneously made, and I wouldn’t going to the bad faith or the other factors that exist, but just plainly the illegally or erroneously, that he may charge the accountable officer for that payment —

William J. Brennan, Jr.:

Personally?

Irving Jaffe:

— personally, or through his bondman.

I wish to mention in passing that this is so seldom use that I can find no case that’s upheld it absent corruption or venality, but nevertheless on its face that is a remedy which is available.

And it is —

William J. Brennan, Jr.:

Well, is the practice in government when GAO indicates disapproval of a payment about to be made, is it the general practice to make it or sometimes GAO defines or what happens?

Irving Jaffe:

The general practice is I must admit to use discretion as a better part of valor and not pay.

However, there are innumerable circumstances in which the agency had, having received an opinion of the General Accounting Office usually an advanced opinion, that a payment if made, would be disallowed by him in the subsequent audit of accounts and incidentally the General Accounting Office uses language which indicates that it’s — his opinion, that it is advisory, I advise, etcetera, as he did in this case.

However, I think will not pay, but I submit that that’s a matter of prudence, particularly in this kind of a situation and they should not pay because it never results in anything other then a resort to the courts where and no one has ever contended —

William J. Brennan, Jr.:

Well, I suppose there is as was here, when a suit is brought, what could the Attorney General do about the lawsuit?

Irving Jaffe:

One of two things.

He would examine as he did in this case.

The decision — the Attorney General did not get into this suit at all for any purpose or in any way interfered or intervened in the disputes process —

William J. Brennan, Jr.:

Till the lawsuit?

Irving Jaffe:

— until the lawsuit was filed.

When we received the petitions that were filed in the Court of Claims, we did with that petition exactly what we do with every other petitions, summons or complaints which we receive.

Irving Jaffe:

We obtain from the interested agency, all the background data, their advice and assistance which we got here and we examine into it.

We were aware at that point of the action of the Comptroller General.

We paid no attention to it because we knew that what they say was not binding in court and that we had a statutory responsibility to exercise a litigative judgment.

William J. Brennan, Jr.:

So you could have confessed judgments —

Irving Jaffe:

We certainly could have as we did in another case not so long ago where the GAO was not involved I must admit, but where the disbursing officer refuse to pay.

The decision of the Board of Contract Appeals of his agency because he thought it was an unsound decision.

We disagreed with that disbursing officer and confessed to the entry of judgment, and it was a substantial sum.

Now in this particular case, we did examine the record, that is the record before the agency, we examined it from the point of view of the evidence that was submitted.

We examined it from the point of view of the decisions of the hearing examiner which were not disturbed by the Atomic Energy Commission and we examined the decision of the Atomic Energy Commission to the extent that it passed on any other claims.

We came to the conclusion which only coincidental was almost the same as that of the Comptroller General, that this decision, in this case, did not satisfy the standards of the Wunderlich Act.

William J. Brennan, Jr.:

Well, tell me Mr. Jaffe, could you have defended simply on the basis of the provisions or the clause that which Creyke and I were discussing without reference to the Wunderlich Act?

Irving Jaffe:

Oh!

I think we could, if we had no Wunderlich Act because I do not think that there was anything in the Wunderlich Act or in the judicial precedence which would make that kind of a contract provision unenforceable.

However, I do want to add that the language in this contract tracks the language of the Wunderlich Act and is virtually the same, and I call to the Court’s attention that the Wunderlich Act is worded that in terms of no provision of any contract may limit finality only to fraud, provided however that finality will attach unless the decision of the head of an agency or the Board of Contract Appeals.

So the fact that the AEC in this case was the agency whose decision is itself does not make it any different at all from that of a Board of Contract Appeals, there is no immunization from the — any greater immunization from the head of the department between a Board of Contract Appeals and the head of the agency itself.

Now of course, the way the petitioner would have this Court construe this contract would be in direct contravention of the language of the Wunderlich Act.

The petitioner contends that the Disputes Clause in this contract must be read as he argues, as limiting the government to setting a decision of an agency aside only if it can show fraud or overreaching.

That the entire history says he, which we dispute of the Wunderlich Act shows that the recourse to the courts for judicial review was intended to be available only to the contract —

William J. Brennan, Jr.:

Who wrote the Wunderlich Act, actually wrote it?

Irving Jaffe:

Actually written by the General Accounting Office in my opinion.

William J. Brennan, Jr.:

And this is an argument that the General Accounting Office wrote on behalf of the government a statute which would limit attack down these contracts only to attach by the contract?

Irving Jaffe:

Well of course, the General Accounting Office never had that in mind as the legislative history clearly shows.

William J. Brennan, Jr.:

This seem rather peculiar I should think —

Well generally —

— the General Accounting Office would be acting as the agent of the contractor against such legislation.

Irving Jaffe:

The General Accounting Office repeatedly stated to the committee that it was acting for this legislation not only for the benefit of the contractor, but because the narrow limited test of fraud hampered the government and hampered the GAO in auditing accounts.

William J. Brennan, Jr.:

Now the General Accounting Office though in the initial draft that it offered as the substitute for the McCarran proposal?

Irving Jaffe:

Yes.

William J. Brennan, Jr.:

The McCarran proposal did have more than just an expanded basis of judicial review, it also would have if it had got that legislation as I remember, it also would have had the authority itself like to act as a Court of Claim.

Irving Jaffe:

Now yes – now let me comment on that Mr. Justice Brennan.

Irving Jaffe:

The original statute as drafted by GAO I believe included unless the General Accounting Office or a court found etcetera, etcetera.

Now the interpretation of that clause in my opinion would have equated the General Accounting Office precisely as if it were a court, it would have had authority to reverse an opinion —

William J. Brennan, Jr.:

Well the GAO itself would do that when it got to the house and then — in the succeeding (Voice Overlap)

Irving Jaffe:

Yes.

It itself suggested the substitute which eliminated the words General Accounting Office or a court.

Now of course the statute speaks in terms of judicial review and there was never any question of access to a court.

William J. Brennan, Jr.:

The expanded ground of the judicial review remained as GAO initially wrote it in the first substitute for the McCarran?

Irving Jaffe:

Yes and the GAO felt at that time and I submit to this Court that they were correct, that the GAO authority would not be hampered, that is the authority that they wanted to have and that they felt they always did have before this Court’s decision in the Wunderlich case.

The — that to in auditing accounts to use a broader standard of review and indeed they must.

For them to determine whether a payment is or will be illegal or unlawful, or within the contemplation of statute or law, they must apply the applicable principles of law.

In a contract dispute, those applicable principles and the standards to be applied are those set forth in the Wunderlich Act.

So whether or not they are mentioned when they audit accounts, when they render an advance opinion in order to determine whether it is or will be a lawful expenditure, they must apply the applicable law, the Wunderlich Act.

Now the –- there is no suggestion I’m sure and none have been made, that the Wunderlich Act in any way repealed those provisions of the law which give to the General Accounting Office the authority to render an advance opinion to a certifying officer as was the case here or to audit accounts and to disallow items which were illegally or erroneously paid.

Now in a contract matter that must be the standard of the Wunderlich Act.

Now I will not dwell on the legislative history because we believe that it supports the view that the government has equal access to the courts for the contract without question.

However, the legislative history —

Warren E. Burger:

Excuse me my interrupting you.

In this case let me pose the question Mr. Justice Douglas put.

Right at that stage at this problem when you say the government, you mean what entity, what part of the government?

Irving Jaffe:

I mean any of the agency, the General Accounting Office or the Department of Justice.

I think what we are really speaking about is not who is the only person who may speak, but who and under what circumstances can the matter be precipitated into a court review.

Now I think that that can occur in many ways.

I think the most usual way would be by failing to pay.

Now who is going to make that determination?

Perhaps the best answer is how that determination has been made and there are many instances which have occurred in the past prior to this case, prior to the (Inaudible) case, there are many cases that Mr. — that judge — that Judge Davis of the Court of Claims detailed in the line of case.

The usual way is not to pay and who determines that?

Normally it’s the general counsel of the agency, who — and how does that come about?

The angry trial attorney that we always have him, the angry trial attorney who has lost the case before his Board, who feels that the Board was wrong, that they have no legal sense that they are way off base, complains to the general counsel.

In 99 cases out of a 100, he addresses (Inaudible) perhaps even more, but occasionally the general counsel is persuaded and the general counsel will block the payment.

It doesn’t go to GAO at all and that precipitates payment.

Irving Jaffe:

Occasionally the matter will be submitted to the Department of Justice.

Somebody in the agency and it has to be someone high up because we do not accept communications from trial attorneys or lower stafficial ones, there is someone in the general counsel’s office or an assistant secretary will write to us and say they are disturbed about an opinion as did Mason, as did FAA, as did several agencies, and the question they asked us is not to intervene in the disputes process, as the petitioner would have you believe, the decision has already been rendered.

The disputes process is at a close.

The question is if we don’t pay will you defend us?

Will this withstand scrutiny?

Now so far unfortunately we found that it wouldn’t withstand scrutiny.

All we could find is that if we were the judges, we would have decided differently, but that’s no reason for challenging, as the courts have frequently said.

We haven’t found one yet, although several have been submitted to us, where we thought we would defend it, but that is a method in which it could be done.

Sometimes the GAO will come across it either by advance opinion as happened here or perhaps in a post audit.

I can’t imagine how else at the moment, although there maybe other ways, it would come — the government would have this right of appeal which I submit is a misnomer.

We’re not appealing, we are seeking judicial review.

We don’t change the opinion, neither Department of Justice did, the GAO did not.

The only opinion before the Court is the Atomic Energy Commission opinion.

It is not true to say that they still are restraining at the least to pay this man, want to go forward.

They’ve assisted us in our defense.

They are yielding, whether or not they still agree with their decision, they are yielding to the possibility that the GAO was reasonable or maybe right.

Warren E. Burger:

Well, isn’t that chiefly Mr. Mr. Jaffe, because once it wanted the litigation, the Atomic Energy Commission would have lost the control.

Irving Jaffe:

It lost complete control Your Honor, but I am speaking about —

Warren E. Burger:

The Attorney General has the sole control once the litigation has started.

Irving Jaffe:

That is correct.

Warren E. Burger:

But if the Atomic Energy Commission had just decided to ignore the Comptroller General and pay the money out that would in all probability had been the end of the matter, would it not?

Irving Jaffe:

That probably would have been the end of the matter but perhaps not.

I should remind the Court of the possibility that in this particular case, for example, the Comptroller General having written a 260-page opinion might not have ignored the matter had it been paid.

But he would be powerless to do anything except to send it to the Department of Justice for prosecution, either against the surety, against the disbursing officer, or perhaps, which is more likely, against the recipient of the money as in the contract we could recoup it if we agree.

Warren E. Burger:

It doesn’t happen very often, does it?

Irving Jaffe:

Very very seldom.

I should add here — in this particular case, the only real relief available was not to pay.

The reason I say that is because prior to the completion of this contract, the — all payments there under, at least six months before the contract was completed while it was being performed, that all payments here under were assigned to a bank.

I therefore wonder why we speak so much about the — how contractor went out of business, because of the delay in payment.

Contractor received, almost, that is we paid the full contract price after this contract.

Irving Jaffe:

These are the extras, the things that have not yet been determined that they are entitled to payment on.

And any payment we decide or is ultimately decided that S & E Contractors are entitled to, we’ll not go to S & E Contractors, but to the bank, because when they have assigned to —

Warren E. Burger:

(Voice Overlap) rule about having a businessman after the proceeds of the contract with the government is pledged as collateral for bank, is there?

Irving Jaffe:

No, there isn’t.

I merely say that, the failure hasn’t thrown him out of business.

Warren E. Burger:

But, we have no way of knowing that one way or the other really, have we?

Irving Jaffe:

Well, except from that fact alone, we don’t and therefore, I think it should not be urged upon the Court that it did, except from that fact alone that the payments were assigned to a bank, who alone is entitled to payment.

There are many factors we believe that put them out of business —

William J. Brennan, Jr.:

What’s the issue that would be decided in the Court of Claims on the merits?

Irving Jaffe:

What issue —

William J. Brennan, Jr.:

What issue will be decided on the merits in the Court of Claims?

Irving Jaffe:

Whether or not the decision of the Atomic Energy Commission is entitled to finality under the standards of the Wunderlich Act.

William J. Brennan, Jr.:

Well, what standard — what standards?

Irving Jaffe:

Oh!

We are challenging it on two standards only, that either is not supported by substantial evidence of the commission’s allowances and in many instances that it’s erroneous as a matter of law.

William J. Brennan, Jr.:

I see.

That’s under the Second Section?

Irving Jaffe:

Under the Second Section that it cannot be final on any part of law.

Now the — I had been about to speak briefly about the legislative history.

The legislative history of course, as some lawyer in the field once said has a little bit of everything for everybody and therefore it’s little confusing.

What we had originally was a proposal, a Wunderlich Act proposal, which would have included the GAO equally with the Courts.

That was deleted and the GAO was taken out and the word Court was taken out, but we still speak of the judicial review.

It was quite clear, we say, from the legislative history.

Two things were quite clear, that this access to the Courts for judicial review under the standard that they were setting forth was available to both parties.

The reason that I say that it was aware is because there were bills before the Congress, including one presented by the American Bar Association specifically to limit this judicial review to the contractors.

The Congress did not accept any of those.

There were debates on whether or not this wouldn’t be equally available to the government as well as the contractor and that the Congress had indicated that they thought it was.

There is no suggestion that it isn’t available to them and there is certainly nothing on the face of the Act which indicates that it is available only to the contractor.

The Act itself would seem to make that clear.

It says any decision of the head of the department and any such decision shall only have finality, if it is not fraudulent or capricious, etcetera.

Irving Jaffe:

Now it doesn’t say any decision adverse to a contractor and I don’t think that, that should be read in, particularly in the light of the legislative history.

It is also strange, it seems to me, that the argument should be made, that the Wunderlich Act actually provides with two standards; one standard for the contractor which covers this entire panoply of broadened standards and quite another for the government.

The government is limited to fraud and overreaching, that is precisely what it was the Wunderlich Act was seeking to overcome.

As a matter of fact, if that were true, then the language of the Wunderlich Act, which says that no provision of any contract shall limit any decision of a head of an agency or of a Board of Contract Appeals to fraud, would again have to be interpolated as meaning only as against the contractor’s complaint, but it could be so limited as far as the government was concerned.

I submit that there is nothing in the language, nothing in the history, nothing in logic which would call for that view.

I submit that the government should have and does have equal access to the courts to challenge the decisions of an agency head or of a Board of Contract Appeal on the basis set forth in the Wunderlich Act, that is that the standards there have not been met, that no finality should therefore attach to the decision and therefore, no payment, if one is ordered should legally or lawfully be made under such a decision.

Now the question that’s raised, who is the government?

I have answered in the only way that I can, the normal way in which the government gets a case into Court.

Now that could be done normally in one of the three ways I suggested.

I don’t think we need to look for any others, that’s ample protection for the government.

The payment can be made as the Attorney General said and we can seek to recoup it in a private suit of our own, if it in fact was erroneous.

Now we would have to test in that suit in the District Court.

William J. Brennan, Jr.:

How — will this procedure go on everyday in the week?

Irving Jaffe:

The disputes procedure goes on everyday in the week.

The involvement of not paying a decision of a Board of Contract Appeals rises very rarely.

The way that — frankly, the way in which the government’s access to the Courts has arisen in the past most frequently has been where a contractor submits several claims to a Board.

The Board rules in the contractor’s favor with respect to three or four of them and rules against him with respect to two or three of them and he is to satisfy with the two or three, which have been adverse to him and he institutes a suit in the Court of Claims seeking to set aside the Board’s decision with respect to those which were adverse and we in defending again, what is the entire record.

We come to the conclusion that the Board was correct in denying the two or three it did, but was incorrect in allowing two of the four that they had allowed because it wasn’t supported, let’s say by substantial evidence or was erroneous as a matter of law.

We have done that in many, many instances and we have been successful and in some.

Now that’s merely another manner in which the government has asserted its right to test a decision rendered under the Disputes Clause, under the standards of the Wunderlich Act.

Now in this particular case, payment was stopped, that’s happened before too and then the contractor goes into Court.

Had we paid this one, we would never have been able to recoup it because we can’t recoup it from a bank and (Inaudible).

31 U.S.C. 203 prohibits that procedure, so that we would have been out.

So in this case, even if it had wanted to pay and let it go the other way, the Atomic Energy Commission would have been ill-advised to do so.

Warren E. Burger:

We have knowing on this record, of course, whether the bank kept all of this or whether they kept half of it or some other part, do we?

Irving Jaffe:

Well, well we do.

I don’t think I am — to be speaking myself, paragraph 20 of the petition in this very case and then here, it says, petitioner assigned its rights to amounts to be received under this contract to the First Citizens Bank of Dallas, Texas, September 12, 1961, the contract was completed and accepted in June of 1962.

Warren E. Burger:

That doesn’t prevent your recovery, your recoupment against that principle.

Irving Jaffe:

Against the principle sir?

Warren E. Burger:

Yes.

Irving Jaffe:

Oh!

No, not against the principle, but he would not have received the money and I don’t know that we would have — I mean, it would have been, well that’s correct.

Warren E. Burger:

We don’t know anything about that, do we?

Irving Jaffe:

We don’t know anything about the situation there, although we did know in 1966, when the payment had to be made.

Warren E. Burger:

So when you say the government must have its day in Court, it certainly has a day in Court by the recoupment route, does it not?

Irving Jaffe:

It could, that could be one way, but I don’t think that, that should militate against seeking its day in Court in other way.

Bear in mind, if you please Mr. Chief Justice, if this decision is not entitled to finality, the payment should not be made.

So withholding the payment is not in any sense a penalty, it’s doing something we may not be required to do.

William J. Brennan, Jr.:

In that contract itself?

Irving Jaffe:

Under the contract itself.

We are only required to make certain payments under the contract.

It’s the same as any private dispute, where one of the parties of the contract says I don’t owe you this money and the other says you do.

Now this —

William J. Brennan, Jr.:

This via breach of contract, I guess?

Irving Jaffe:

Oh!

It definitely cannot be a breach of contract because if it were, then the holding that as a breach would be holding contrary to the terms of the Wunderlich Act.

William J. Brennan, Jr.:

And for these terms of the contract?

Irving Jaffe:

And for the terms of this contract, which tried here.

Harry A. Blackmun:

Mr. Jaffe, I am still bothered I think by your answer to Justice Douglas’ question as to who is the government.

What comes to me out of your explanation is that this contractor has three tiers to overcome, the agency, the Comptroller General and the Attorney General?

Irving Jaffe:

He really doesn’t have three tiers to overcome.

All he has, if it please you Mr. Justice Blackmun — first, the General Accounting Office is never a threat to the contractor.

He needn’t wait one moment for the General Accounting Office to have or to consider the advance opinion or any advance request from any disbursing or certifying officer.

He can go into Court immediately he hears that the General Accounting Office’s views has been solicited.

So the General Accounting Office provides no tier to him at all.

It is one mean for the government to be aware that there may be an illegal payment about to made or if it is made to recoup it.

That’s the manner in which the General Accounting Office entered the picture but it’s not a tier of review as such.

Now, the Department of Justice comes in only if an agency should decide to ask the department first, will you defend us or in this case for example, where the Comptroller General has issued an opinion in which he says that this would be an invalid payment, the agent — the head of the department could come in and say to us, do I have to listen to the Comptroller General?

And we could as we have as recently as 1969, told the agencies your accountable officers need not hear to the Comptroller General.

We think you can make the payment, and we so direct you.

Irving Jaffe:

So that — I don’t know to what extent these tiers are review, really are administrative hurdles.

All it is really is, do we have a basis for defending a suit or for prosecuting a suit, and neither of them do I think the Court should assume that the contractor is entitled to money, any money or any payment until the Court has had opportunity to scrutinize that decision under the standards of the Wunderlich Act.

Until then, it is not a order or a decision in types of the finality which requires any payment.

William J. Brennan, Jr.:

What I expect Mr. Jaffe, this maybe a very cumbersome and difficult and in terms of modern business quite inefficient way of doing things.

That’s the way Congress has ordered — that you suggest to the way Government should be carried on it.

Irving Jaffe:

I think that that’s the natural consequence of the Wunderlich Act and the terms of the contract would require I.

William J. Brennan, Jr.:

And of the very existence of the GAO.

If Comptroller General supposedly — the congressional (Inaudible).

Irving Jaffe:

Yes sir he is.

William J. Brennan, Jr.:

Unless you are going to abolish him I don’t see how —

Irving Jaffe:

We can’t avoid he is looking at, either before or after, and in either event there will be a suit —

William J. Brennan, Jr.:

May be he ought to be abolished when I was in that position, I used to think so.[Laughter]

Irving Jaffe:

I am not authorized to comment on that.

Warren E. Burger:

Mr. Jaffe.

Irving Jaffe:

Yes sir.

Warren E. Burger:

The Comptroller General’s function is essentially a post audit function, is it not?

Irving Jaffe:

It is.

Warren E. Burger:

He is not part of the discretionary decision say during the evolution of these.

Irving Jaffe:

No, sir he is not.

Warren E. Burger:

He is strictly an auditor.

Irving Jaffe:

Correct, except for one provision, 31 U.S.C. 74 and 31 U.S.C. 82d, give to the Comptroller General on request, the right to render advance opinions which was precisely what was done here.

So that he does come into it in a pre-audit system, if an Executive Branch Officer that is the disbursing officer or a certifying officer asked him for an advanced opinion and that was what was done here.

Warren E. Burger:

That’s advisory only.

Irving Jaffe:

And that’s advisory.

Warren E. Burger:

Now if dispute, disagreement, difference in position evolves between the contracting agency and the Comptroller General, the Attorney General really becomes the referee, does he not?

Irving Jaffe:

Well, he becomes a referee with punch because his decision is binding on the agency.

Warren E. Burger:

Thank you Mr. Jaffe.

Mr. Creyke, you have three minutes left.

Geoffrey Creyke, Jr.:

Thank you, Mr. Chief Justice.

A study of the intent history of the Wunderlich Act will disclose that the Comptroller General in the 82nd Congress having sought to and having been included expressly in a Bill as a tier of review —

William J. Brennan, Jr.:

He did write the bill, didn’t he, Mr. Creyke?

Initially Mr. McCarran introduced the bill.

Geoffrey Creyke, Jr.:

That is —

William J. Brennan, Jr.:

Then would substitute for that Bill, well, I am sure I have read the same history available to you and the Comptroller General — and it was substituted for McCarran bill, the bill of the Comptroller General.

Bill of the Comptroller General — I don’t know Your Honor who wrote the —

Of course, you find in the history so it says.

Well, I don’t know who wrote the first (Voice Overlap)

Geoffrey Creyke, Jr.:

In the 82nd Congress, when the Bill was under consideration that he would be included, he was. Strong objection —

William J. Brennan, Jr.:

But he wrote the very Bill that included him, the Comptroller General wrote the very bill that included him?

Geoffrey Creyke, Jr.:

Oh!

Yes.

(Voice Overlap) 82nd and that’s the one I don’t know who wrote.

William J. Brennan, Jr.:

And I don’t either, I think you (Inaudible).

But the bill, it became law is the one that the Comptroller General wrote with one minor exception and the deletion of the provision which gave him with the courts the power of independent review.

Geoffrey Creyke, Jr.:

provision for the Comptroller General represented a compromise proposed by him, correct Mr. Justice Brennan.

Due to objections raised by the Department of the Defense Contractors and others that they would create this additional tier of review which is proved so awkward in this situation.

William J. Brennan, Jr.:

Well didn’t they actually referred it, would make the GAO as second Court of Claims as a worthy —

Geoffrey Creyke, Jr.:

And his letter which I have in the House Report 1380, says and in effect, it is intended — it is not intended to be the change the jurisdiction or to grant any new jurisdiction or to recognize the jurisdiction which he has.

What we say is not intended.

Now with respect to the overall intent of the Act one, we don’t believe that it was ever intended any using agency would attack its own decisions by fraud.

With respect to fraud, otherwise there are always remedies available to the Government and otherwise but the procedure as it has been afforded here to just take away from the disputes process it’s efficacy is simply calamitous within the operation of the system as it now works.

When a contractor signs a government contract, and he agrees to the changes clause and do the work as its changed and he agrees to the Disputes Clause, he says he will keep right, I am going to his expects as the Government interprets the contract and which he did here, that I think the quid pro quo involved there of those unlimited powers being granted to the Government, and the Government given its right of decision itself.

Warren E. Burger:

Thank you Mr. Creyke, and thank you Mr. Jaffe.

The case is submitted.