author: COWEN, Chief Judge.

text:
    GREAT AMERICAN INSURANCE COMPANY v. The UNITED STATES and T. G. Williamson d/b/a Williamson Construction Company and Boulevard State Bank, Third-Party Defendant.
    No. 151-72.
    United States Court of Claims.
    Feb. 20, 1974.

      Charles A. Sevier, Memphis, Tenn., atty. of record, for plaintiff.
    Leslie H. Wiesenfelder, Washington, D.C., with whom was Acting Asst. Atty. Gen. Irving Jaffe, for defendant.
    Ronald H. Rogg, Wichita, Kan., for third-party defendant Boulevard State Bank.
    John W. Brimer, Wichita, Kan., for third-party defendant T. G. Williamson d/b/a Williamson Construction Co.
    Before COWEN, Chief Judge, and DAVIS, SKELTON, NICHOLS, KASHIWA, KUNZIG and BENNETT, Judges.
   COWEN, Chief Judge.

In this case, we are once again asked to determine the rights of several parties to priority in the balance due under a Government contract. On June 24, 1970, the United States, through the Department of the Navy, contracted with T. G. Williamson, doing business as Williamson Construction Company, for the replacement of exterior siding on Johnson Housing (MEMQ), Naval Air Station Memphis, Millington, Tennessee. Plaintiff, Great American Insurance Company, executed both performance and payment bonds for the contract pursuant to the Miller Act, 49 Stat. 793 (1935), as amended, 40 U.S.C. §§ 270a-270 (1970). On October 19, 1970, the contractor assigned to Boulevard State Bank all moneys due or to become due under the contract, and on the same day, the assignee bank gave notice of the assignment to plaintiff and defendant.

In this action, plaintiff seeks reimbursement from the Government for payments made to laborers and material-men under the terms of the surety’s payment bond. The defendant asserts a right to $10,200 of the contract balance on the basis of a change order dated August 16, 1971, which assessed that amount against the contractor as liquidated damages for delay in completing the contract. Defendant further contends that in the event this court determines that any amount paid by defendant to the assignee bank was in fact erroneously paid, then defendant is entitled to a judgment against both the as-signee and the contractor to the extent the surety is awarded a recovery herein. The Government has impleaded the contractor and the assignee bank as third-party defendants in this suit, and they contest their liability to the defendant.

The case is before the court on the parties’ cross-motions for summary judgment, and there are no factual issues except those relating to the Government’s right to judgment against the contractor.

The total contract price for the construction project was $102,564. During the performance of the contract, the defendant made two progress payments to the Boulevard State Bank. The first payment was made on December 3, 1970, in the amount of $42,660 (excluding re-tainages), and the second progress payment was on January 6, 1971, in the amount of $31,160 (excluding retain-ages).

On March 26, 1971, the final housing units in the project were accepted by defendant as complete. Following completion of the contract, on May 10, 1971, Great American advised the defendant in writing that it had notice of unpaid claims of subcontractors in excess of $31,000, which amount exceeded the unpaid contract balance then being held by the Government ($28,718). Great American then requested that the surety’s name be added as joint payee in any future payments to the contractor or that all future payments be withheld. Also, on May 10, 1971, the contractor requested that a “final payment” be made on the contract in the amount of $28,718.

The Government officer responsible for administering the contract took the position that payment could be withheld at the request of the surety only if the surety presented evidence of actual payment of the contractor’s obligations, together with a court order or a written agreement signed by all parties. On May 19, 1971, the Government made a payment designated on the voucher as “Third Partial Payment” in the amount of $7,108 (excluding retainages) to the assignee bank.

On June 29, 1971, the contractor filed a petition in bankruptcy, and on July 1, 1971, he was adjudicated a bankrupt. The contractor alleges that notice of the bankruptcy was given to the United States by mailing notice on or about July 1, 1971, to the District Director of Internal Revenue, at Wichita, Kansas, and to the United States Attorney in Topeka, Kansas.

During the pendency of the bankruptcy, Williamson applied to the District Court for the District of Kansas for an order restraining the plaintiff from pursuing the prosecution of pending suits against the bankrupt. Williamson’s application referred to two suits brought in the Western District of Tennessee by the subcontractors, Willey Painting Corporation and Crump Lime & Cement Company, against the surety under the payment bond. In these actions, the surety asserted a claim for a judgment over and against Williamson for the amount of any judgment entered against the surety in favor of the subcontractors. ' •

By order of September 14, 1971, the referee in bankruptcy refused to enjoin the prosecution of the suits in the Western District of Tennessee, because he found that the surety’s suit was necessary to enable the surety to pursue the contract retainages under the contract between the bankrupt and the United States. The referee further found that the subject matter of the litigation in Tennessee did not constitute an asset of the bankrupt’s estate, and the referee also ordered the trustee to abandon any claim to any retainage funds held by the United States under the contract in question. On March 3, 1972, T. G. Williamson received a discharge in bankruptcy by order of the District Court for the District of Kansas.

It is established that during September 1971, the plaintiff surety discharged all claims made against it by reason of its payment bond. In so doing, the surety paid out $32,772.49, which exceeds the surety’s total claims in this action.

There are three distinct contract funds in issue: (1) the $7,108 payment made to the assignee bank on May 19, 1971; (2) $10,200 claimed and retained by the Government as liquidated damages pursuant to the change order of August 16, 1971; and (3) a contract re-tainage in the amount of $11,400, which the Government admittedly holds as a stakeholder.

I

The principal issues raised by this case concern the $7,108 payment made to the assignee bank, and the liability of the contractor or the assignee bank to the defendant for its erroneous payment of that amount. We have repeatedly held that the surety who satisfies the contractor’s obligations to pay laborers and materialmen under the payment bond has an equitable interest, superior to the interest of the contractor’s assignee or the contractor’s trustee in bankruptcy, in the unpaid contract balance held by the Government as a stakeholder. See, e. g., Argonaut Insurance Co. v. United States, 434 F.2d 1362, 1369, 193 Ct.Cl. 483, 496 (1970); National Surety Corp. v. United States, 133 F.Supp. 381, 384, 132 Ct.Cl. 724, 728-729, cert. denied, 350 U.S. 902, 76 S.Ct. 181, 100 L.Ed. 793 (1955); Continental Casualty Co. v. United States, 169 F.Supp. 945, 145 Ct.Cl. 99 (1959). On May 10, 1071, when plaintiff notified defendant of the unpaid claims of laborers and materialmen and asserted a claim to the unpaid contract balance, the defendant still held a total of $28,718, including the $7,108 in question. At that time, the Government asserted no claim to the $7,108 so that the Government held that amount as a stakeholder with full knowledge that both the surety and the assignee claimed a right to the money. Relying primarily on our decisions in Fireman’s Fund Insurance Co. v. United States, 421 F.2d 706, 190 Ct.Cl. 804 (1970); Home Indemnity Co. v. United States, 376 F.2d 890, 180 Ct.Cl. 173 (1967); Newark Insurance Co. v. United States, 144 Ct.Cl. 655, 169 F.Supp. 955 (1959), the plaintiff argues that, upon notification of the claims of laborers and materialmen, the Government had a duty to withhold payment of the $7,108 to protect the interests of the surety, and that the Government should be held liable to the plaintiff in the amount of the erroneous payment to the assignee bank.

The third party defendant Boulevard State Bank, on the other hand, contends that the defendant is not liable to the plaintiff for the $7,108 for two reasons: (1) the $7,108 payment was a progress payment and not a final payment so that the surety may not recover from the defendant under the rationale of our decisions in Argonaut Insurance Co. v. United States, supra; Fireman’s Fund Insurance Co. v. United States, supra; Home Indemnity Co. v. United States, supra, and Newark Insurance Co. v. United States, supra; and (2) that the rights of a payment bond surety are limited to the 10 percent retainage held by the Government.

Although the Government does not concede its liability, it acknowledges with admirable candor that there are no significant distinctions between this case and our prior decisions holding that the Government will be liable to the surety if, after due notification of the claims of laborers and materialmen, it wrongfully pays the final contract payment to the contractor or his assignee. Although the payment voucher designated the $7,108 payment as the “Third Partial Payment” and there were additional funds to be paid on the contract, the $7,108 was a contract payment made after the contract had been completed and accepted. Moreover, it was a payment made after the surety had given the defendant due notice that the contractor had failed to pay the claims of the subcontractors, which claims (approximately $31,000) then exceeded the balance due on the contract and held by the Government as a stakeholder ($28,-718). As in our previous decisions on this point, we hold that the Government improperly abandoned its role as a stakeholder and elected to decide the merits of the conflicting claims by paying the amount in dispute to the assignee without a valid reason for doing so. Therefore, the Government is liable for the $7,108 improperly paid to the assignee.

Secondly, it has often been recognized that a surety’s claim to the unpaid contract balance is not limited to the 10 percent retainage as the third-party defendant Boulevard State Bank contends. See, e. g., Argonaut Insurance Co. v. United States, 434 F.2d at 1369-1370, 193 Ct.Cl. at 496-497; Framingham Trust Co. v. Gould-National Batteries, Inc., 427 F.2d 856, 857 (1st Cir. 1970); National Shawmut Bank of Boston v. New Amsterdam Casualty Co., 411 F.2d 843, 848-849 (1st Cir. 1969); In re Dutcher Construction Corp., 378 F.2d 866, 869-871 (2d Cir. 1967); Reliance Insurance Co. v. Alaska State Housing Authority, 323 F.Supp. 1370, 1373 (D.Alaska 1971); National Surety Corp. v. United States, 319 F.Supp. 45, 49-50 (N.D.Ala.1970). Here, the surety’s monetary obligation to the laborers and materialmen exceeded the total unpaid balance on the contract (including the retainage) and the plaintiff has priority over the assignee for the entire contract balance.

The contractor, G. T. Williamson, argues that the surety is estopped to pursue its claim against the defendant for any amount in excess of the retainage existing on September 14, 1971, because of the referee’s order entered September 14, 1971, on Williamson’s “Motion to Restrain and Enjoin further Pending Suits against Bankrupts.” The contention is rejected, because it is clear that the order did not in any way attempt to limit the surety’s action against the defendant to the 10 percent retainage.

II

In view of its liability to the surety for the $7,108 paid to the assignee bank, the defendant seeks recovery of this amount from the bank. The defendant says, quite correctly, that in Newark Insurance Co. v. United States, 181 F.Supp. 246, 149 Ct.Cl. 170 (1960), hereinafter referred to as Newark II, this court held that the Government is entitled to recover such an erroneous payment even though the recipient is an assignee who received the payment under the Assignment of Claims Act.

Newark II was decided by a divided court. The present active judges believe that Judge Madden’s dissent is more consistent with the language of the statute, as amended, the legislative history, and the other ease authority, all as cited below. Reluctant as we are to overrule a decision of this court, we are constrained to do so here.

The 1951 amendment to the Assignment of Claims Act provides in part:

In any case in which moneys due or to become due under any contract are or have been assigned pursuant to this section, no liability of any nature of the assignor to the United States or any department or agency thereof, whether arising from or independently of such contract, shall create or impose any liability on the part of the assignee to make restitution, refund, or repayment to the United States of any amount heretofore since July 1, 1950, or hereafter received under the assignment. 65 Stat. 41 (1951), currently codified in 41 U.S.C. § 15 (1970).

The broad language of the amendment was intended to encourage private financing of public contracts and to counteract certain rulings by the Comptroller General which operated to deter banks and other financing institutions from making loans to Government contractors.

As a general rule, the Government has a right to recover funds which its agents have erroneously paid to another. See United States v. Wurts, 303 U.S. 414, 58 S.Ct. 637, 82 L.Ed. 932 (1938). However, this general rule does not apply when an Act of Congress expressly bars recovery. In the Wurts case, the Supreme Court stated:

* * * The Government’s right to recover funds, from a person who received them by mistake and without right, is not barred unless Congress has “clearly manifested its intention” to raise a statutory barrier. Id. at 416, 58 S.Ct. at 638.

The Government’s claim against the as-signee bank falls within the class of cases where Congress has expressly debarred the Government’s right to recover.

Within the terms of the amendment, the $7,108 payment was an amount “received under the assignment.” It makes no difference, as far as the Boulevard State Bank is concerned, that the Government’s agent failed to recognize the surety’s superior equitable interest in such payment. The Government paid the money in question to the bank as the contractor’s assignee, and the assignee is entitled to retain the funds in the absence of a showing of fraud on its part. See American Fidelity Co. v. National City Bank of Evansville, 105 U.S.App.D.C. 312, 266 F.2d 910, 916 (1959). Cf. Industrial Bank of Washington v. United States, 138 U.S. App.D.C. 19, 424 F.2d 932, 935 (1970).

Ill

As we have noted above, the bank is not required to refund the erroneous payment of $7,108 because of the Assignment of Claims Act. However, this does not leave the Government without a remedy, since in paying the bank, the Government was satisfying a debt of the contractor to the assignee bank.

Under the facts before us, the contractor thus received a double benefit which he would not have obtained were it not for the operation of the Assignment of Claims Act. His debt to the bank and his liability for restitution to his surety are both relieved by the Government’s double payment of the $7,108. We do not believe that Congress intended, by enacting the Assignment of Claims Act, to strip the sovereign of all its historical rights to recover ex aequo et bono the erroneous payments made by its public officers. Cf. Wisconsin Central R. R. v. United States, 164 U.S. 190, 212, 17 S.Ct. 45, 41 L.Ed. 399 (1896). Otherwise, there would be an unjust enrichment of the contractor. See Restatement of Restitution § 1 (1937). We therefore hold that the Government is subrogated to the bank’s claim on the debt that was satisfied by the payment of the $7,108.

Third-party defendant Williamson has countered the Government’s claim by a general denial of liability and with an additional defense that he was discharged from this particular debt by the referee’s order dated March 3,1972, which is a discharge in bankruptcy. The Government asserts the discharge to be ineffective against its subrogated debt for several reasons. While recognizing that Congress specifically made contingent claims capable of proof (11 U.S.C. § 103(a)(8)), the Government asserts that its claim was not discharged because it was “too” contingent. The thrust of the Government’s argument is that until the surety filed its claim against the Government, the contingency mentioned in section 103(a)(8) was not created and hence could not have been discharged, because the surety filed its claim after the adjudication in bankruptcy. This is a persuasive argument, and with supporting affidavits or documentary evidence, could be sufficient to render judgment for the Government against the contractor. However, there are gaps in the record which need to be illuminated by trial or by stipulation. We do not know what debts due the Government, established or contingent, were included in the schedule of obligations filed by the contractor in his application to the bankruptcy court.

The Government al'so argues that the head of the contracting agency (the Secretary of the Navy) was not duly notified of the first meeting of creditors as prescribed by 11 U.S.C. § 94(e). However, Williamson, the bankrupt, shows by documentary evidence that a notice of the first meeting of creditors was mailed to the United States attorney in Topeka, Kansas. It is possible that the United States Attorney forwarded this, notice to the Secretary of the Navy so that he had actual notice. The documents before us raise a doubt as to whether the notice requirement was fulfilled. Conceivably, the Secretary of the Navy was listed on the general schedule of creditors of the contractor. In sum, there are factual issues which preclude the rendition of judgment for the Government against the contractor for the $7,108 paid to the assignee bank.

IV

Included in the unpaid balance on the contract is the sum of $10,200, which the Government asserts the right to retain under a change order executed August 16, 1971. It is well settled that the right of the United States to collect debts due it by a contractor, by offsetting these obligations against the funds retained under a Government contract, is superior to claims of a surety based upon the discharge of its obligations on its payment bond. United States v. Munsey Trust Co., 332 U.S. 234, 67 S.Ct. 1599, 91 L.Ed. 2022 (1947); United States Fidelity and Guaranty Co. v. United States, 475 F.2d 1377, 1383, 201 Ct.Cl. 1, 12 (1973).

Plaintiff concedes the Government’s right of setoff as stated in the cited cases, but argues that it is entitled to a court trial to determine whether the Government’s assessment of liquidated damages against the contractor was proper. This plea comes far too late and is rejected on that ground. Neither the contractor nor the surety, for itself or in behalf of the contractor, appealed from the assessment of liquidated damages. Consequently, the change order of August 16, 1971, is final and binding on the contractor and the surety as well.

V

There remain for disposition only the contending claims of the assignee bank and the surety to $11,400 of the contract balance, which the Government acknowledges it holds purely as a stakeholder. As we recognized in part I of this opinion, the plaintiff as surety has a claim to the unpaid contract balance at the time of notification ($28,718) which is superior to that of the bank. Consequently, the plaintiff is entitled to recover the $11,400 still held by the Government.

VI

In view of the foregoing opinion, it is ordered:

(1) the cross-motion of plaintiff, Great American Insurance Company, for summary judgment is granted to the extent that plaintiff is entitled to recover the $7,108 which defendant erroneously paid to the assignee bank on May 19, 1971, plus the contract retainage of $11,410 which defendant holds as a stakeholder. Judgment is hereby entered for plaintiff against defendant for the sum of $18,518;

(2) plaintiff’s cross-motion against defendant for the recovery of $10,200, deducted by defendant as liquidated damages, is denied and defendant’s motion for summary judgment as to such liquidated damages is granted;

(3) defendant’s motion for summary judgment against the Boulevard State Bank for recovery of the $7,108 paid to the bank on May 19,1971, is denied;

(4) defendant’s claim against the contractor, T. G. Williamson, for recovery of the $7,108 paid to the assignee bank is hereby remanded to the trial division of this court for determination of the factual and legal issues pertinent to the claim, and

(5) the cross-motion for summary judgment of the Boulevard State Bank is, except as stated in paragraph (3) of this part VI, denied.

      . The assignment -was made in accordance with the Assignment of Claims Act, 41 U.S.C. § 15 (1970).

      . Although the Supreme Court in Henningsen v. United States Fidelity & Guar. Co., 208 U.S. 404, 28 S.Ct. 389, 52 L.Ed. 547 (1908), and Pearlman v. Reliance Ins. Co., 371 U.S. 132, 83 S.Ct. 232, 9 L.Ed.2d 190 (1962), dealt only with contract retainages, the logic of those opinions is directly in line with the position of this court on the surety’s right to assert priority in the total unpaid contract balance against the contractor, the contractor’s assignee, or the contractor’s trustee in bankruptcy.

      . H.R.Rep.No.376, 82d Cong., 1st Sess. 3 (1951); S.Rep.No.217, 82d Cong., 1st Sess. 2 (1951), U.S.Code Cong. & Admin.Serv. 1951, p. 1414.

      . To the extent that the position of the Fifth Circuit in Coconut drove Exchange Bank v. New Amsterdam Casualty Co., 149 F.2d 73 (5th Cir. 1945), is in conflict with the views expressed herein, we respectfully decline to follow it.


source: Caselaw Access Project

author: BENNETT, Judge.

license: Public Domain

text:
    BROOME CONSTRUCTION, INC. v. The UNITED STATES.
    No. 375-72.
    United States Court of Claims.
    Feb. 20, 1974.

      Paul H. Holmes, Hattiesburg, Miss., atty. of record, for plaintiff; Holmes & Dukes, Hattiesburg, Miss., of counsel.
    Raymond B. Benzinger, Washington, D. C., with whom was Acting Asst. Atty. Gen., Irving Jaffe, for defendant.
    Before DURFEE, Senior Judge, and KASHIWA and BENNETT, Judges.
    ON PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT AND DEFENDANT’S CROSS-MOTION FOR SUMMARY JUDGMENT
   BENNETT, Judge.

This contract dispute was submitted to the court on cross-motions for summary judgment. The case has been well briefed and all material facts essential to determination of the issues of liability are stipulated. Two claims are made. Plaintiff seeks a Wunderlich Act review of a decision of the Department of Agriculture Board of Contract Appeals on its remission of liquidated damages claim and seeks breach of contract damages in the sum of $18,331.34 for delay alleged to have been the fault of defendant. The board denied the latter claim for lack of jurisdiction and rejected the claim for an extension of contract time which would have brought remission of liquidated damages ($950) assessed for a 10-day delay in contract completion at the rate of $95 per day. We find neither claim sustainable in law. To the extent material to this decision, the facts may be summarized as follows:

Soil Conservation Service Contract No. 12-10-220-1448 was awarded to Broome Construction Company, of Mississippi, on June 24, 1966. The contract was in the amount of $153,398.57 and allowed a performance time of 158 calendar days for improvement in 8.5 miles of the Toposhaw Creek Channel in the Yalobusha River Watershed. Toposhaw Creek Channel empties into the Yalobu-sha Channel. A separate contract had been awarded on May 17, 1966, to Atlas Construction Company for the improvement of that section of the Yalobusha Channel where the Toposhaw Channel enters.

At the bid opening on May- 31, 1966, and at a preconstruction conference on July 11, 1966, plaintiff was advised by Government representatives that it would be necessary that Atlas complete its work prior to plaintiff’s starting excavation work. Plaintiff’s representative agreed to this condition but stated that plaintif would like to be authorized to proceed with clearing the Toposhaw Channel. Plaintiff also stated that it was in the process of buying or renting a new dragline that would be ready by the time it was to commence actual excavation. A contemporaneous memorandum of the conference understandings, which is a part of the record in the case, states that “all left with a thorough understanding of what would be expected.”

Plaintiff was notified on July 6, 1966, to start work within 20 days and to complete all work within 158 calendar days. However, by letter dated July 7, 1966, the contracting officer notified plaintiff that, pursuant to mutual agreement, Suspend Order No. 1 was issued. This was so that the second contractor, Atlas, could complete work and get out of plaintiff’s way. The order suspended all of plaintiff’s operations under the contract with the exception of the clearing of the channel right-of-way. Plaintiff agreed to the order and to Modification No. 1 which changed the contract to allow plaintiff to do the clearing while under the suspend order. The contracting officer’s letter transmitting the same concluded with the following sentences: “We would also like for you to submit ^your schedule of operations covering all items of work. In preparing your schedule, please keep in mind that it will be approximately October 1, 1966 before channel excavation can commence.” [Emphasis supplied.]

A second order to suspend work was issued August 23, 1966, because of plaintiff’s failure to sign and return Modification No. 1, and for other reasons not now material. A third order issued August 30, 1966, directed plaintiff to resume all work. This was in error, since it was actually intended that only the work permitted by Modification No. 1 should proceed. Plaintiff was not misled and did not rely on the order, and the board properly so found. A correction was issued on September 15, 1966.

On September 14, 1966, plaintiff leased a dragline from Tri-State Equipment Company, Inc., at an aggregate rental of $234,518.64 for a 48-month period. Under terms of the lease, the first 12 installments were $8,610.17 each and the next 36 at a rate of $3,644.33 per month. The dragline was delivered to the site on September 19, 1966.

Work on the Yalobusha Channel by Atlas progressed more slowly than expected and plaintiff did not receive Work Order No. 4 authorizing excavation work on all items of the contract until December 5, 1966, effective on that date.

Plaintiff’s claim for breach of contract is based on rental costs actually paid for the period from October 1 to December 5, 1966. Defendant, while not admitting liability, says that a proper computation of damages would be computed by using the total 48-month period of the lease and allocating to the average monthly rental over that period the sum of $10,423.06 to the claimed period of 2 months and 4 days of delay instead of plaintiff’s calculation which provides a figure of $18,331.34 at the higher base rate for the first 12 months under the lease. For reasons which will later appear, we do not have to resolve the quantum issue.

The Breach Claim

In declining to make findings or to adjudicate the merits of the breach claim, the AGBCA decision pointed out that plaintiff sought relief under the disputes article of the contract, Article 6 of the General Provisions, which limits jurisdiction of the board to any dispute concerning a question of fact arising under the contract, excluding breach claims whether for purposes of granting relief or making binding findings of fact. United States v. Utah Constr. & Mining Co., 384 U.S. 394, 86 S.Ct. 1545, 16 L.Ed.2d 642 (1966). In this the board was clearly correct. It also ruled that in the absence of a suspension-of-work or other similar provision designed to compensate a contractor for increased costs resulting from Government-caused delays, the board did not have jurisdiction under the disputes article to compensate a contractor for such delays. This, too, is a proposition of law so firmly established as to require no discussion or citation here.

Plaintiff now comes to court alleging breach and pointing out that it is undisputed that the contractor here was delayed until December 5, 1966, in channel excavation. This is unquestionably so and the circumstances which occasioned it have been related. While the delay period alleged by plaintiff approximates 5 months, claim is made, as indicated above, only for the shorter period from October 1, 1966 to December 5, 1966, on the assertion that defendant promised availability of the worksite by October 1. The contracting officer admitted that plaintiff was caused a delay in the use of his dragline, but said, as did the board, that there was no authority under the contract for payment of delay. The question to be resolved here is whether there was a breach or whether the delay was excusable under the contract terms. In resolving this question it is necessary to examine Article 11 of the Special Conditions section of the contract agreed to by the parties. It states in pertinent part:

11. SUSPENSION OF WORK
(a) The Contracting Officer may order suspension of the work in whole or in part for such time as he deems necessary due to weather or such other conditions are he considers unfavorable for the satisfactory prosecution of the work.
(b) When the Contracting Officer
orders suspension of the work * * * , the contract completion date shall be extended a full calendar day for each calendar day during suspension of the work * * * .
■ * * * * * *
(d) When the Contracting Officer orders any suspension of the work under the provisions of this clause, the Contractor shall not be entitled to any costs or damages resulting from delays due to such suspension of the work. [Emphasis supplied.]

Pursuant to the foregoing article, defendant formally suspended plaintiff’s right to proceed and made formal modifications of the contract which, by mutual agreement, permitted plaintiff to proceed with clearing operations while allowing the other contractor to finish his work so that plaintiff could later proceed without his interference. The suspension clause anticipated and provided for delays, granting the contractor extensions of time therefor but specifically prohibiting recovery of delay costs such as plaintiff claims now and not providing for any equitable adjustment. Atlas’ work created a condition “unfavorable for the satisfactory prosecution of the work” by plaintiff. The delay occasioned here is squarely within the four corners of the contract and is of the type anticipated by it. Plaintiff’s loss is not compensable by defendant without more.

Plaintiff, however, says that the defendant is liable because the delay was wrongfully occasioned by defendant. In support of this proposition plaintiff points to a file memorandum dated September 14, 1967, by a Government procurement agent who in that memorandum discussed the character of the lease between plaintiff and Tri-State Equipment Company for the dragline. The memorandum recounts a conversation with the Tri-State vice president about the lease and the way charges thereunder were arrived at and whether plaintiff was actually bound thereunder for the full term of the lease, even if the equipment was idle part of that time. Upon assurances of the lessor that plaintiff was so bound and that the costs were reasonable for such expensive equipment, the memorandum concluded with this sentence:

* * * Therefore, it is the foregone conclusion that Mr. Broome did in fact suffer the amount of the lease from date of agreement even though the piece of equipment was idle due to delay in his operation as caused by the Soil Conservation Service and the contractor on the Yalobusha portion of the channel.

Plaintiff says that the foregoing is an admission of fault by defendant. Aside from the fact that this is not shown to be an authorized statement or a finding under the disputes clause, even if it was it does not demonstrate that the delay was wrongful. The most it does demonstrate is that the delay was perhaps concurrently caused by defendant and by the other contractor. Where there is no proof that the delay was wrongful or “where the defendant’s delay is concurrent or intertwined with other delays,” there can be no recovery. Commerce Int’l Co. v. United States, 167 Ct.Cl. 529, 543, 338 F.2d 81, 90 (1964). John McShain, Inc. v. United States, 412 F.2d 1281, 1285, 188 Ct.Cl. 830, 835 (1969); Roberts v. United States, 357 F.2d 938, 849, 174 Ct.Cl. 940, 957 (1966).

Absent an unqualified warranty or express covenant, the Government is not liable for delays in making a worksite available where it seeks to do so in good faith and the delay is not unnecessary, unreasonable, or is not defendant’s fault. United States v. Howard P. Foley Co., 329 U.S. 64, 67 S.Ct. 154, 91 L.Ed. 44 (1946); L. L. Hall Constr. Co. v. United States, 379 F.2d 559, 177 Ct.Cl. 870 (1966); Commerce Int’l Co. v. United States, supra, 338 F.2d at 85, 167 Ct.Cl. at 535-536. Plaintiff says that in this case, however, defendant did promise to make the work-site available by October 1, 1966, and failed to do so. Plaintiff says it was at the bid opening on May 31, 1966, that this date was first promised but there is no corroboration of this and defendant denies it. If there was any binding promise by the Government, it must be found in the only evidence before us, the letter of July 7, 1966, transmitting Suspend Order No. 1 and Modification No. 1. As heretofore quoted, that letter only said “it will be approximately October 1, 1966 before channel excavation can commence.” [Emphasis supplied.] Excavation was actually delayed until December 5, 1966, as noted. The Government did not covenant to have the site available on a definite date. Plaintiff and defendant did agree at the bid opening that plaintiff’s excavation performance would have to await completion of work by the other contractor. Plaintiff was afforded extensions of time to accommodate this circumstance, but there is no evidence that defendant at any time obligated itself to compensate plaintiff for standby time or idled equipment. The parties here did what they agreed to do. The understanding was clear from the beginning and it was at the beginning that plaintiff indicated it had decided to get the dragline which, in fact, was ordered on July 1, 1966, as shown by the order therefor in the record before the court. How then can plaintiff say that it relied on the July 7 letter as the basis for securing the equipment? We do not believe that it did so. It is more reasonable to conclude from the record that since delivery of such equipment usually took from 6 weeks to several months after ordered, plaintiff moved early to get it out of reasonable caution, so as to be ready whenever defendant gave a proceed order for excavation. Plaintiff knew from the very start that there would be delay about going ahead with excavation and should have allowed in its bid for that delay as regards rental time on the dragline. Further, the July 7 language was stated only in terms of an approximation and is inconclusive on its face. It is “too soft to call for a judicially enforceable warranty-without-fault,” absent clear proof of Government fault or unacceptable conduct. Koppers/Clough v. United States, 201 Ct.Cl. 344, 361-62 (1973). There is no such fault or conduct here on defendant’s part.

We come then, for all the foregoing reasons, to the conclusion on the breach claim that plaintiff has shown no fault leading to breach by defendant of an express warranty not to delay or to permit plaintiff to proceed on a definite date. Defendant is fully entitled to enforce its rights as set forth in the contract. The contract reserved the right to suspend work without defendant’s being liable for costs arising from attendant delay. Plaintiff agreed to such terms. The court must enforce a mutually agreed-upon contract according to its terms. Aragona Constr. Co. v. United States, 165 Ct.Cl. 382, 390 (1964). We reject the breach of contract claim and plaintiff’s motion for summary judgment thereon. Plaintiff has demanded, in the alternative, a plenary evidentiary hearing on ' its breach claim, but poses no unresolved issues of fact to justify it and the same is denied.

Liquidated Damages

Extension of time under this contract determined that the revised completion date would be September 26, 1967. Plaintiff completed work on October 6, 1967, ten days late. Liquidated damages at the contract rate of $95 per day were assessed against plaintiff. On August 12, 1967, plaintiff had requested an extension of time of 11 days, which if granted would have forestalled assessment of liquidated damages and bring about their return now. In this request plaintiff complained about the lost rental time on equipment but also said “we lost several months of our best working time” on account of the delays. On October 5, 1967, plaintiff was asked to furnish a detailed breakdown of the 11 days for which an extension of time was requested, showing dates and reasons for the request. The stipulation in this case states:

No reply was received from the contractor, and he was requested by telephone on October 16 and October 23, 1967, to furnish the reasons for the requested additional extension of time. No reasons being furnished, the request for an extension of 11 days was disallowed.

Article 5(d), General Provisions, provides that the contractor shall not be charged with the costs of delay if:

(1) The delay in the completion of the work arises from unforeseeable causes beyond the contol and without the fault or negligence of the Contractor, including but not restricted to * * * acts of another contractor in the performance of a contract with the Government * * * unusually severe weather * * * and
(2) The Contractor, within 10 days from the beginning of any such delay * * * notifies the Contracting Officer in writing of the causes of delay.

If the 11-day delay of which plaintiff now complains was due to unusually severe weather conditions, plaintiff failed to substantiate it. The contract was extended considerably beyond the original completion date. Plaintiff was afforded an administrative hearing but at that time failed to clarify its claim for the additional 11-day extension due to unusually severe weather. The Government itself offered some evidence that rainfall in certain months of 1967 was greater than in some corresponding months of 1966. But, the record is absolutely devoid of any evidence that this was an “unusually severe” condition, or one that could not reasonably have been anticipated for inclusion in the bid price. Unusually severe weather must be construed to mean adverse weather which at the time of year in which it occurred is unusual for the place in which it occurred. This condition is not established simply because weather charts may indicate that on a certain day the precipitation is greater than on some other days in some other year, since variance in weather patterns is to be expected. Plaintiff was given a number of suspension orders when work could not be performed due to weather. There is no evidence that any extension was refused on this account or for any other excusable delay provided for in the contract. No other basis for remission of the liquidated damages was ever asserted. Plaintiff’s brief to the court, however, argues that liquidated damages must be waived where the contractor is not responsible for the failure to complete on time and the other party is responsible. Of course, this is the rule. United States v. United Eng’r & Contracting Co., 234 U.S. 236, 242, 34 S.Ct. 843, 58 L.Ed. 1294 (1914). But, that is not what happened here. The delay was anticipated and agreed to by the parties, as we have seen. Moreover, the Government is not obligated to anticipate acts of God and abnormal conditions that might interfere with contract performance. It is supposed that bidders allow for this in their bids. MacArthur Bros. Co. v. United States, 258 U.S. 6, 42 S.Ct. 225, 66 L.Ed. 433 (1922); Christie v. United States, 237 U.S. 234, 245, 35 S.Ct. 565, 59 L.Ed. 933 (1915); Hardeman-Monier-Hutcherson v. United States, 458 F.2d 1364, 198 Ct.Cl. 472 (1972); Banks Constr. Co. v. United States, 364 F.2d 357, 176 Ct.Cl. 1302 (1966). Here, there is no evidence of such conditions beyond extensions allowed. Of course, where defendant has information about such conditions not reasonably available to the contractor, it is under a duty to divulge such information or pay damages for it has an implied duty not to do anything to delay contract performance. L. L. Hall Constr. Co. v. United States, supra; Metropolitan Paving Co. v. United States, 325 F.2d 241, 163 Ct.Cl. 420, (1963); Peter Kiewit Sons’ Co. v. United States, 151 F.Supp. 726, 138 Ct.Cl. 668 (1957).

Plaintiff’s claim for remission of liquidated damages failed for want of proof before the AGBCA. We hold that board’s decision to be binding on the court and on the parties under the disputes clause of the contract and the Wunderlich Act, 41 U.S.C. §§ 321, 322, since it was in no way arbitrary or capricious, is supported by substantial evidence, and is not erroneous as a matter of law.

Plaintiff’s motion for summary judgment is denied. Defendant’s cross-motion for summary judgment is granted. The petition is dismissed.

      . 41 U.S.C. §§ 321, 322.

      . AGBCA No. 232 (Oct. 6, 1971), 71-2 BCA ¶ 9100.

      . A footnote to the quoted passage collects many corroborating precedents.


author: SKELTON, Judge.

text:
    M-R-S MANUFACTURING COMPANY v. The UNITED STATES.
    No. 95-72.
    United States Court of Claims.
    Feb. 20, 1974.

      Albert H. Greene, Washington, D. C., atty. of record for plaintiff. Richard J. Ney, Washington, D. C., of counsel.
    Raymond B. Benzinger, Washington, D. C., with whom was Acting Asst. Atty. Gen., Irving Jaffe, for defendant.
    Before COWEN, Chief Judge, and SKELTON and KUNZIG, Judges.
    ON PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT AND DEFENDANT’S CROSS MOTION FOR SUMMARY JUDGMENT
   SKELTON, Judge.

This contract action involves an appeal by the plaintiff, M-R-S Manufacturing Company, from a decision of the Armed Services Board of Contract Appeals (hereinafter referred to as the Board) in M-R-S Manufacturing Company, ASBCA No. 14825, 71-1 BCA, f[ 8821, at 40,998 (decided March 31, 1971). The Board found that the plaintiff’s submission of defective cost or pricing data to the Government resulted in overstatements in the prices of two contracts between the parties. The data found to be defective involved labor costs for four manufactured parts and a duplication in a bill of materials. On cross motions for summary judgment, the parties ask this court to review the Board’s decision in accordance with the standards of the Wunderlich Act, 41 U.S.C. §§ 321, 322 (1970). Such a review presents the issues of whether or not the Board’s decision is supported by substantial evidence and is correct as a matter of law. Resolving these issues requires further interpretation of the Truth in Negotiations Act, 10 U.S.C. § 2306(f) (1970) and the now standard Price Reduction for Defective Cost of Pricing Data clause (Defective Pricing Clause), added to Government contracts pursuant to that statute.

Factual Background

On January 23, 1967, the Government issued to the plaintiff sole source request for proposal (RPP) No. DSA-700-67-R-5960 calling for certain heavy duty earth moving equipment. The return date of the RPP was February 2, 1967. Since the RFP allowed only a short period of time for response, the plaintiff’s proposal utili2;ed cost figures which had been used in a previous procurement for identical equipment. The proposal included the applicable DD Forms 633 (Contract Pricing Proposals) which listed the proposed prices for the equipment. The first two columns of the forms showed a breakdown of the prices into individual cost elements. The third column, which allowed a reference to the source data used to form the proposal in the first two columns, contained no entries. The proposal included no supporting documentation.

On February 13, 1967, the Government requested the Defense Contract Audit Agency (DCAA) to perform an audit to provide the information necessary for the development of a realistic negotiation objective. A DCAA auditor conducted ah audit, or price proposal evaluation, between February 20, 1967, and March 1, 1967, at the plaintiff’s plant, and then submitted an audit report. The report contained nothing concerning the allegedly defective data involved in this action. After negotiations between the parties and plaintiff’s execution of a Certificate of Current Cost or Pricing Data, the Government awarded Contract DSA 700-67-C-C976 (Contract C976) on March 30, 1967.

On July 13, 1967, the Government issued sole source RFP No. DSA 700-68-R-0145 to M-R-S calling for more heavy duty equipment. This equipment was identical to the machinery involved in Contract C976. The plaintiff responded with a proposal which included the applicable DD Forms 633. The first two columns of the forms contained appropriate price information, but the third column contained nothing. A letter which accompanied the proposal read, in part, as follows:

Reference: Solicitation No. DSA-700-68-R-0145
We consider this proposal and Contract DSA-700-67-C-C-976 inter-related, as in effect, this Proposal is essentially the option we expected to be exercised when we secured Contract No. DSA-700-67-C-C-976.
Therefore, if your auditor’s figures on Contract DSA-700-67-C-C-976 are acceptable for this new procurement of identical items, you will find the attached DD Form 633 utilizes the EXACT Purchased and Sub-Contract Parts costs, the EXACT Direct Material cost and the EXACT Direct Labor cost as AUDITED and NEGOTIATED on Contract No. DSA-700-67C-C-976.

The proposal was later followed by additional DD Forms 633. No support data accompanied the forms, but a third set forwarded on August 16, 1967, listed in the third column a reference to “cost records” in explanation of the prices quoted in the first two columns.

The Government officials decided not to request audit assistance with respect to the plaintiff’s proposal because direct costs had been verified by the audit in connection with Contract C976, and indirect costs had been examined in another audit performed in connection with a May 22, 1967, proposal by M-R-S for production of similar, but larger, equipment. During final negotiations on August 16, 1967, the direct costs accepted by the Government were the same figures submitted in support of the proposal which resulted in Contract C976. Negotiated indirect costs were based on the audit performed in connection with the May 22, 1967, proposal for larger equipment. The plaintiff neither offered nor submitted any other cost data, and the Government requested no such data. The plaintiff executed a Certificate of Current Cost or Pricing Data on August 17, 1967, and received an award of Contract DSA 700-68-C-8006 (Contract 8006) on August 25, 1967.

Understanding the issues in this case requires a rather detailed explanation of the plaintiff’s accounting system and the nature of the February audit by the Government. ‘The plaintiff maintained a Kardex-file accounting system for manufactured parts. After fabricating a part, the plaintiff recorded manufacturing costs for the production run on a production card with a production order number as its means of identification. The production.card contained the name of the part, the part number, the date the production run commenced, the completion date, the number of units manufactured, and a breakdown of costs. The cost breakdown included entries for the unit and total costs of materials, labor, and burden for the particular run. After each production run was completed, the sum of the costs for materials, labor, and burden was posted on a unit and total basis to an inventory card. The inventory card contained the part name, the part number, and a list of every production run on that part. For each production run, the card listed the production order number, the date of completion, and the costs on a total and unit basis.

As can be seen, plaintiff’s Kardex file contained two relevant types of cards for manufactured parts. Although the inventory cards showed cost variations among production runs, they did not show precise labor and material costs for manufactured parts on particular production runs. These precise costs could be obtained by consulting the individual production card pertaining to a particular production run. This was done by determining the production order number from the inventory card and then going to the individual production card bearing that production order number.

When the auditor who conducted the first price evaluation in February 1967, went to the plaintiff’s plant, he carried the plaintiff’s proposal and DD Forms 633. After submitting the proposal, plaintiff had prepared additional cost data consisting of a priced bill of materials. This bill of materials, which listed manufactured parts by part name and number, was given to the auditor. The bill contained a breakdown of costs into categories for raw materials, purchased parts, direct labor and burden, and referenced the particular production run from which the stated costs were derived. The plaintiff also gave the auditor copies of the production cards for each production run referenced in the bill.

The auditor commenced his price evaluation in a room which contained the Kardex file of the inventory cards. The auditor was familiar with the plaintiff’s facility and accounting system, and, as he testified before the Board, he could backtrack to any accounting source from the information furnished to him. Before the Board, there was a substantial question concerning whether or not the auditor requested, or was given, production cards other than those cited in the bill of materials. The Board found that the auditor did not sample or test production costs for the parts in issue beyond the costs listed in the bill of materials. The plaintiff does not contest that finding before this court. Following his price evaluation, the auditor submitted a report as stated above.

In November 1967, another auditor performed an additional price evaluation of the plaintiff’s May 22, 1967, proposal for the larger equipment. The cost data which the plaintiff gave to the auditor were the same data that had been given to the previous auditor and which had been used in the negotiation of Contract C976. During the course of the second price evaluation, the auditor discovered two types of allegedly defective data. The first which plaintiff concedes, was a duplication of parts in the priced bill of materials. The second was allegedly defective data concerning the cost of direct labor attributable to four manufactured parts. The auditor discovered production cards evidencing lower direct labor costs than the direct labor costs incurred in the production run cited in the plaintiff’s bill of materials. For the- four parts, the production run referenced in the bill had the highest direct labor cost of all runs and none of the referenced runs were the most current runs experienced by the plaintiff.

Based on the report of the second auditor, the contracting officer decided that the two types of allegedly defective data showed a failure to disclose accurate, complete, and current cost data as required by the Truth in Negotiations Act. The duplication and the defective labor cost data were found to have resulted in a total cost overstatement of $176,845 on Contracts C976 and 8006. For overstatement due to the duplication, $23,028 was allocated to Contract C976, and $27,907.50 was allocated to Contract 8006. The overstatement from defective labor cost data was allocated $57,300 to Contract C976 and $68,610 to Contract 8006. On appeal to the Board, the parties stipulated that the plaintiff understated its costs on the two contracts by a total of $32,215. The Board upheld the contracting officer’s decision and offset the overstatement by the amount of the stipulated understatement. The net overstatement was found to be $144,630.50.

Before this court, the plaintiff contends that with respect to Contract 8006, it should be liable for neither overstatement from duplication, nor overstatement due to defective labor cost data. With respect to Contract C976, the plaintiff argues that it should not be liable for overstatement due to alleged defectiveness in labor cost data, and that liability for overstatement due to duplication should be offset by its cost understatements on that contract. Plaintiff’s contentions are fully explained below.

Contract 8006

The plaintiff bases its primary argument concerning Contract 8006 on the assertion that no data were submitted “in support” of its proposal for that contract. The plaintiff contends that the Government’s right to a price adjustment because of defective cost and pricing data is a contract right, and, therefore, limited to the terms of the contract. The Defective Pricing Clause, the argument continues, allows price reductions only when data referenced in the Certificate of Current Cost or Pricing Data are not accurate, complete, and current. The only data so referenced are data submitted “in support” of the proposal. Since no data were submitted “in support” of the proposal for Contract 8006, no data were certified as accurate, complete, and current, and therefore, the Defective Pricing Clause does not allow a price adjustment. This argument applies to the bill of materials duplication and the allegedly defective labor cost data.

The plaintiff’s argument contains several flaws, any one of which would be fatal, even if it stood alone. First, the Board found that the DD Forms 633 submitted with plaintiff’s proposal constituted cost and pricing data. The Board also found that the reference to “cost records” in the third set of DD Forms 633 meant the records from which the data furnished to the first auditor were compiled. The plaintiff does not argue that any of the Board’s findings are not supported by substantial evidence, but merely asserts that as a matter of law no data were submitted “in support” of the proposal for Contract 8006. As a matter of law, we can find nothing wrong with the findings by the Board. The nature of the DD Forms 633, with columns for total cost, unit cost, and source data, refutes any contention that such forms are not cost and pricing data.

Even if the Board’s finding concerning the reference to “cost records” is attacked as not supported by substantial evidence, the finding can still stand. Certainly the letter which accompanied the plaintiff’s proposal for Contract 8006, and stated that the attached DD Form 633 utilized the exact costs audited and negotiated for Contract C976, constitutes substantial evidence in support of the finding. This is especially true since the plaintiff offers no other explanation of the reference to “cost records.” The cost data submitted in support of the proposal for Contract 8006 were the same data submitted in support of the proposal for Contract C976. Therefore, the Government is entitled to a price adjustment on Contract 8006 for the overstatement caused by the duplication in the bill of materials. The propriety of an adjustment on Contract 8006 for the cost of direct labor on the four manufactured parts turns on whether or not the data submitted in support of Contract C976 were defective.

The second flaw in the plaintiff’s argument concerns its assertion that data must be submitted in support of a proposal before the Defective Pricing Clause allows a price reduction. The plaintiff interprets the Defective Pricing Clause and the Certificate of Current Cost or Pricing Data so as to sanction his argument. Such an interpretation might have merit if only contractual provisions, and not a statutory directive, were involved. However, since the clause and certificate exist pursuant to the directions of the Truth in Negotiations Act, 10 U.S.C. § 2306(f) (1970), the scope of these items turns on the scope of the Act.

As this court has said on several occasions, the Truth in Negotiations Act imposes a duty on Government contractors to completely disclose cost and pricing information. Sylvania Elec. Prods., Inc. v. United States, 479 F.2d 1342, 202 Ct.Cl. 16 (1973); Lockheed Aircraft Corp. v. United States, 432 F.2d 801, 193 Ct.Cl. 86 (1970); Cutler-Hammer, Inc. v. United States, 416 F.2d 1306, 189 Ct.Cl. 76 (1969). The information so disclosed must be, in the words of the Act, accurate, complete, and current. The Act grants to the Government the fight to adjust the contract price when the price is increased because the contractor did not meet his duty to furnish accurate, complete, and current data. Therefore, even if, as the plaintiff asserts, no data were submitted “in support” of the proposal for Contract 8006, the plaintiff still did not meet the requirements imposed by the Act. But regardless of what the situation would have been if the plaintiff had submitted no data, we must still deal with the plaintiff’s assertions concerning the Contract C976 data since we approve the Board’s finding that the same data were submitted for Contract 8006.

The plaintiff makes "one other argument concerning Contract 8006. It asserts that even if it was obligated to furnish accurate, complete, and current data, the Government waived the obligation. Waiver is said to be shown by the fact that the Government used only data available on March 23, 1967, as a basis for price reduction, even though the certificate for Contract 8006 was not executed until August 17, 1967. Since the Government chose to ignore any data developed between March 23 and August 17, the plaintiff says the obligation to furnish accurate, complete, and current data was waived. The most basic flaw in this argument is the assumption that the obligation to furnish proper data can be waived by a Government agent. The duty to furnish accurate, complete, and current data is a duty imposed on Government contractors by a statute, and, therefore, that duty cannot be waived by a Government agent. United States v. Stewart, 311 U.S. 60, 61 S.Ct. 102, 85 L.Ed. 40 (1940); Utah Power & Light Co. v. United States, 243 U.S. 389, 37 S.Ct. 387, 61 L.Ed. 791 (1917); see Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 68 S.Ct. 1, 92 L.Ed. 10 (1947); Montilla v. United States, 457 F.2d 978, 198 Ct.Cl. 48 (1972).

Contract C976

With respect to Contract C976, the plaintiff argues that the particular facts of this case demonstrate as a matter of law that it met its duty to submit accurate, complete, and current cost or pricing data concerning the four manufactured parts in issue. This argument is relevant to both contracts involved in this case since we hold that the data submitted in support of Contract C976 were also submitted in support of Contract 8006. The facts upon which the plaintiff relies are that the DCAA auditor who performed the February 1967, price evaluation received a bill of materials including all parts and part numbers, Knew previous production runs had been completed, and knew how to obtain all the information in the Kardex file. These facts, the argument goes, show that the plaintiff submitted all the information in the Kardex file to the auditor. Since the file included all the data available to the plaintiff, the obligation to submit accurate, complete, and current data was fulfilled.

The data in the Kardex file was certainly accurate, complete, and current since it comprised all existing information concerning the four parts. On the other hand, the data physically delivered to the auditor, i. e., the bill of materials, the inventory cards and the production cards for only one run per part, were not accurate, complete, and current. Production cards not physically delivered reflected the costs of other production runs, all of which were lower, and some of which were more current, than the costs shown in the delivered cost or pricing data. So, the issue becomes whether or not the plaintiff submitted all of the Kardex file data to the Government, or stated another way, what must a Government contractor do to submit data to the Government within the meaning of the Truth in Negotiations Act.

In Lockheed Aircraft Corp. v. United States, supra, this court held that making a Kardex file available to a Government auditor did not fulfill the duty to submit accurate, complete, and current information to the Government. The plaintiff contends that the case at bar is decisively different because an accurate audit through the Kardex file involved in Lockheed was not possible. The contractor involved in Lockheed submitted no bill of materials, and, therefore, the auditor could not determine which parts were purchased for the equipment in issue. Since the auditor could not determine what information in the file was relevant to the contract, the file certainly had not been submitted to the Government.

Unlike the situation in Lockheed, the plaintiff in this case did submit a. bill of materials to the auditor and an accurate audit of the plaintiff’s Kardex file was possible. There is dicta in the Lockheed opinion which indicates that making a Kardex file available and submitting a bill of materials satisfies the requirement to furnish accurate, complete, and current data. That language went further than was necessary to decide the ease, and although we give such dicta considerable weight, we conclude that it does not control the decision in the instant case. The facts hypothesized in Lockheed by such dicta are now actually before us in our case and we must decide the case on the basis of those facts.

A proper determination of what acts are sufficient to satisfy a Government contractor’s duty to submit information requires an examination of the reason Congress required such submission. This court has stated that the purpose of the Truth in Negotiations Act was to avoid excessive contract costs that result from a contractor having in his possession accurate, complete, and current information when the Government does not possess the same data. Sylvania Elec. Prods., Inc. v. United States, supra-, Lockheed Aircraft Corp. v. United States, supra; Cutler-Hammer, Inc. v. United States, supra. In Lockheed, we stated that the only way to further the purpose of the statute was to require a complete disclosure of costs known to the contractor. The statutory requirement was further explained in Sylvania as follows:

* * * In order that there be effective disclosure of cost and pricing data by the prospective contractor the Government must be clearly advised of the relevant cost and pricing data. * * *
If the Truth in Negotiations Act is to have any force and effect then the Government must be clearly and fully informed. This can only be achieved by complete disclosure * * *. [479 F.2d at 1348, 202 Ct.Cl. at 26.]

We fully recognize that words such as “clearly advised” and “complete disclosure” do not automatically resolve difficult questions. We do believe, however, that such language adequately shows the intent and purpose of the Truth in Negotiations Act and how it should be interpreted. A proper consideration of the Act’s purpose, as stated above, is of great help in applying its provisions to cases such as the one before us.

Situations wherein accurate, complete, and current information is known to the contractor and not known to the Government can certainly be avoided if such information is physically delivered to the Government and the information’s significance to the negotiation process is made known to the Government by the contractor. We do not hold that both of these conditions must always be met before a contractor can be said to have submitted the required information to the Government. We conclude, however, that if a contractor possesses accurate, complete, and current information that is relevant to negotiations with the Government, and he neither physically delivers the data to the Government, nor makes the Government aware of the information’s significance to the negotiation process, then he has not fulfilled his duty under the Act to furnish such information to the Government.

The plaintiff in the instant case did not physically deliver to the Government many of the production cards which showed production runs that were more current and less expensive, at least for direct labor, than the runs for which production cards were delivered. The plaintiff also failed to make any Government agent aware that the Kardex file contained production cards evidencing runs that were more current and less expensive than those runs on which the Government was given information. For these reasons, and because this information was very relevant to the negotiations, the plaintiff did not fulfill its duty to submit required information to the Government. The fact that the Government chose to utilize an auditor who knew other production runs had been completed and knew how to use the Kardex file did not alter the nature of the plaintiff’s duty, except to add another Government agent to whom information could have been submitted.' If the presence of an auditor lessened the extent of a contractor’s duty to submit correct and current information, then a danger would exist that a contractor could submit excessively high proposals, make voluminous incorrect data available to the auditor and then hope the auditor would be unable to extract the significant and correct information. The possibility of such a practice should be eliminated as it would be contrary to the purpose of the Truth in Negotiations Act.

Conclusion

The plaintiff does not attack the decision of the Board on grounds other than those mentioned above. No attack is made on the reasonableness nor the manner in which overstatements were calculated. As indicated above, we hold that the plaintiff cannot prevail on any of its contentions and that the Board’s decision withstands the standards of a Wunderlich Act review and is affirmed. Accordingly, the defendant’s motion for summary judgment affirming the Board’s decision is allowed and judgment is entered in favor of defendant on its counterclaim against plaintiff for the sum of $144,630.50, plus interest at the rate of six percent per annum from October 22, 1969, less all payments heretofore made by plaintiff on said amount and interest thereon. The plaintiff’s motion for summary judgment is denied, and the petition is dismissed.

      . The Truth in Negotiations Act, 10 U.S.C. § 2306(f) (1970), reads in pertinent part as follows:
      “(f) A prime contractor or any subcontractor shall be required to submit cost or pricing data under the circumstances listed below, and shall be required to certify that, to the best of his knowledge and belief, the cost or pricing data he submitted was accurate, complete and current—
      “(1) Prior to the award of any negotiated prime contract under this title where the price is expected to exceed $100,000;
      $ $ $ * $
      “Any prime contract or change or modification thereto under which such certificate is required shall contain a provision that the price to the Government, including profit or fee, shall be adjusted to exclude any significant sums by which it may be determined by the head of the agency that such price was increased because the contractor or any subcontractor required to furnish such a certificate, furnished cost or pricing data which, as of a date agreed upon between the parties (which date shall be as close to the date of agreement on the negotiated price as is practicable), was inaccurate, incomplete or noncurrent: * *

      . The Price Reduction for Defective Cost or Pricing Data clause reads in pertinent part as follows:
      “Price Reduction for Defective Cost or Pricing Data (Sept. 1964).
      “(a) If the Contracting Officer determines that any price, including profit or fee, negotiated in connection with this contract was increased by any significant sums because the Contractor, or any subcontractor in connection with a subcontract covered by (c) below furnished incomplete or inaccurate cost or pricing data or data not current as certified in the Contractor’s Certificate of Current Cost or Pricing Data, then such price shall be reduced accordingly and the contract shall be modified in writing to reflect such adjustment.
      “(b) Failure to agree on a reduction shall be a dispute concerning a question of fact within the meaning of the disputes clause of this contract.”

      . The Certificate of Current Cost or Pricing Data read as follows:
      “This is to certify that, to the best of my knowledge and belief, cost or pricing data submitted to the Contracting Officer or his representative in support of RFP No. DSA-700-67-R-5960 are accurate, complete and current as of the date of execution of this certificate.”


author: MARKEY, Chief Judge.

text:
    Application of John G. MENG and Gerald J. Driessen.
    Patent Appeal No. 9169.
    United States Court of Customs and Patent Appeals.
    March 7, 1974.

      Herman J. Gordon, William S. Feiler, Chicago, Ill. (Dressier, Goldsmith, Clement & Gordon, Chicago, Ill.), attorneys of record, for appellants.

      Joseph F. Nakamura, Washington, D. C., for the Commissioner of Patents. Fred Sherling, Washington, D. C., of counsel.
    Before MARKEY, Chief Judge, and RICH, BALDWIN, LANE and MILLER, Judges.
   MARKEY, Chief Judge.

This is an appeal from the decision of the Board of Appeals, affirming the rejection under 35 U.S.C. § 103 of claims 1 to 9 of appellants’ application serial No. 81,687, filed October 19, 1970, for “Package with Staggered Product Slices and Process and Apparatus for Producing the Same.” We reverse.

The Invention

The invention relates to a package containing a stack of individual product slices formed of a flexible material, such as processed cheese, wherein the lateral edges of adjacent slices are offset relative to one another to provide “gripping portions having a dimension that is sufficient to facilitate manual separation of the slices but insufficient to allow the gripping portions to sag out of the plane of the major portion of the slice.” The lateral edges of alternating slices remain aligned with one another to provide parallel surfaces at the sides of the stack. Figure 5 of the specification illustrates the package:

Independent claim 1 is directed to the package in general with claims 2 to 4 specifying the amount of offset at “less than %e inch,” “greater than i/g inch” and “between i/g inch and B/ie inch,” respectively.

Claims 5 to 8 are drawn to the process of producing the claimed package from product ribbons interleaved to create the offset relationship and then severed into individual stacks. Claim 9 claims the package as a product of the process of claim 6.

The Decision Below

Beck et al. (Beck) is directed to a novel method of packaging food products, such as cheese slices, which results in a package containing several food-filled pouches. No description is given of any relationship of the individual product slices. The following illustration of the pouches is found in Figure 10 of the patent:

Palmer discloses the acknowledged prior art method of producing processed cheese which entails the formation of ribbons of the cheese, stacking the ribbons, and severing the same into individual blocks of cheese slices with all of their edges completely aligned.

The examiner rejected claim 1 under 35 U.S.C. § 102 as anticipated by the upper portion of the package shown in Figure 10 of Beck. Claims 2 to 4 were deemed unpatentable under 35 U.S.C. § 103 as obvious choices for the amount of offset for the slices in the Beck pouch. Claim 1 was also rejected under 35 U.S.C. § 103, as were claims 5 to 9, as unpatentable over Beck in view of Palmer.

The board refused to sustain the § 102 rejection because Beck does not state and the Beck drawings “do not make it clear” that all the slices in his pouches were of the same external dimensions, whereas claim 1 specifically requires that the slices have “substantially the same external dimensions.”

The § 103 rejections covering the package claims were sustained however, on the following reasoning:

The package illustrated in Figure 10 of Beck et al., in our opinion, renders, at least, obvious the package defined by claims 1 through 4 and 9. One being aware of the problem of separation of individual slices of a material from a stack of such slices, viewing the Beck et al. package would readily recognize that the offset illustrated would provide a means for separating the individual slices. However, whether one would recognize the solution to the aforementioned problem is not here controlling since the package defined by the claims is illustrated by Figure 10.
******
Nor do the claims patentably distinguish on the basis of the amount of offset. The offset illustrated in Figure 10, appears to be of a dimension in which the edges do not sag, since no sag is illustrated. Moreover, the determination of an appropriate amount of offset for the particular material being packaged in order to prevent sag and to facilitate gripping, in our opinion, would not be unobvious to the packager.

The total absence from the Beck text of any reference to any offset of the slices was dismissed in these words:

The drawings clearly disclose the offset relationship of the individual slices, and are, therefore, available as a reference for that purpose. * * *

Appellants had submitted two affidavits. The Bush affidavit was not mentioned by the board. The affidavit of Beck, co-inventor of the Beck reference, to the effect that the concept of offset slices was entirely novel to him and had not been contemplated in his patent, was found unpersuasive, the board saying, “What a patentee may have intended or may have seen cannot negate what is conveyed by his patent disclosure.”

The rejection of process claims 5 to 8 was similarly sustained, “[t]he modification of Palmer to produce the Beck et al. package” being considered “obvious to a worker of merely ordinary skill in this art.”

OPINION

The problem solved by appellants may be stated, “How can packaged slices be more rapidly and easily separated, without damaging the slices, in fast food restaurants and like institutions ?” Prior to the first office action, appellants called attention to sixteen prior patents, among them the Beck and Palmer patents relied upon in the rejections before us. The issue to be decided is, “would one of ordinary skill in the art, presented with that problem and those sixteen prior patents — and totally unaware of appellants’ solution — be led to do what appellants did ?” We think not.

We arrive at our conclusion against the background of the scope and content of the prior art, the differences between the claims and that art, and the level of ordinary skill in that art. Graham v. John Deere Co., 383 U.S. 1, 86 S.Ct. 684, 15 L.Ed.2d 545 (1966).

The fundamental error below lay in an over-evaluation of the scope and content of the prior art. That made the claimed differences appear inconsequential and caused the level-of-skill evidence to be given insufficient weight.

We read, as we must, the primary reference to Beck without the benefit of appellants’ teachings. Beck is devoted solely to packaging by the use of envelopes and associated dividers. It has nothing whatever to do with separating food slices. In one part of one figure, Figure 10, it shows slices with alternately offset edges. Only that portion of one figure is alleged by the examiner and the board to render appellants’ invention obvious. In the other half of the same figure, the edges of the slices are shown as randomly offset, some extending beyond both edges of the adjacent slice. Appellants say that was a positive showing of slices having nonidentical external dimensions. We agree. Figure 7, a partial longitudinal view, and Figure 10, a lateral cross-section, show offsets at both the lateral and longitudinal edges of the slices. Figure 6 shows the cheese to be Swiss, which, appellants and affiant Beck say, is cut from a block or wheel in slices of varying external dimensions and thereafter individually stacked.

The erroneous evaluation of the prior art herein is illustrated by the statement of the examiner’s opinion (after saying that the Beck affidavit could not overcome the Beck reference):

* * * Most individuals, upon observing carefully the cheese stack shown in the upper portion of Fig. 10 of Beck et al, would conclude that the slices were offset in order to facilitate manual separation of slices, as the Examiner believes the honorable Board will appreciate. * * * (Emphasis the examiner’s)

The board stated the same view, as set forth in the quotation from the board’s opinion, supra.

But “whether one would recognize the solution to the aforementioned problem” is controlling. It begs the question to say that the claimed package is “illustrated by Fig. 10.” A claimed invention is “illustrated,” in the sense of 35 U.S.C. § 103, by a drawing which, independently of an applicant’s disclosure, would lead those skilled in the art to recognize the claimed invention as the solution to the problem it solved, i.e., by a drawing which renders the invention “obvious.”

In our view, the claimed package is not illustrated in Figure 10. We find no warrant for the assumption that one lacking knowledge of appellants’ teachings would be sure to disregard the lower half of Figure 10, the relationship of Figures 7 and 10, the illustration of Swiss cheese in Figure 6 and the entire text of the Beck reference, to focus inexorably on just the top half of Figure 10. If, somehow, that focusing did occur, we cannot believe that the extremely limited offset shown would teach or suggest the “gripping portion” of the product claims, or the problem of separating slices, or the solution thereof contributed by appellants. We note, in passing, that the upper half of Figure 10 did not make the claimed invention obvious to the reference inventor Beck, or to his food-packing assignee, Armour & Co., or, apparently, to anyone else during the seven years that the reference was extant before appellants’ filing date. If a viewer of Beck were to “zero in” on just the upper half of Figure 10, it required appellants, not Beck, to direct the viewer’s sight.

We are aware, of course, that a claimed invention may be anticipated or rendered obvious by a drawing in a reference, whether the drawing disclosure be accidental or intentional. In re Seid, 161 F.2d 229, 34 CCPA 1039, (1947). But, as the solicitor correctly states, a drawing is available as a reference for all that it teaches a person of ordinary skill in the art. The drawing here, Figure 10 of Beck, simply would not, in our view, teach or suggest the claimed invention to those who had never seen appellants’ disclosure. Although our view would remain unchanged if Figure 10 were comprised of only its upper half, the fact that its lower half admittedly does not suggest the invention strengthens that view. We are further stayed from a holding of obviousness when, as here, the drawing occurs in a reference in no way directed toward the problem involved, and the drawing must be viewed in a teaching vacuum so far as the invention before us is concerned.

As we said in In re Shuman, 361 F.2d 1008, 1012, 53 CCPA 1251, 1255 (1966), references must be evaluated by ascertaining the facts fairly disclosed therein as a whole. So evaluated, the Beck reference does not render the product claims before us obvious.

Because so much was read into the upper half of Beck’s Figure 10, it was an easy step to find the identical slice dimensions and the “gripping portions,” as well as the specific offset dimensions, i.e., the “differences between the prior art and the claims,” to be obvious. In view of our evaluation of Beck, we consider these differences as specific limitations which render the claims unobvious. Of course the invention seems simple, after the fact. But simplicity, particularly in an old and crowded art, may argue for rather than against patentability. In re Sporck, 301 F.2d 686, 49 CCPA 1039 (1962). Progress in the crowded arts, usually made in small increments, is as important as it is in arts at the pioneer stage. In re Hummer, 241 F.2d 742, 44 CCPA 814 (1957). The Constitution envisages and seeks progress in the “useful arts,” not just in those more esoteric or scientific.

Similarly, having decided that the scope of the art represented by the upper half of Beck’s Figure 10 rendered the product claims obvious, the examiner and the board disposed quickly of the evidence touching on the level of skill in the art.

The affidavit of Bush, who was clearly skilled in the art and experienced in cheese packaging for over twenty-one years, went unmentioned by the examiner and the board. Yet it establishes that Bush’s employer, appellants’ as-signee, had openly packaged cheese in a “shingle” package, with each slice offset from the next, for at least four years prior to appellants’ filing date without suggesting the claimed invention to Bush, or to anyone he knew of; that he knew the edges of the “shingle” packages sagged and believed in retrospect that such knowledge deterred those skilled in the art from the claimed invention; that he believed the Beck reference did not suggest the invention and that the cheese slices therein were clearly of different sizes, as shown in an exhibit attached to his affidavit; that none of the packages of Beck’s assignee, Armour & Co., contained staggered slices.

The affidavit of Beck evidences that his experience in the dairy industry, mostly in cheese packaging, encompassed over thirty years; that he had supervised all packaging plants for a large dairy cooperative; that he was familiar with many different approaches proposed and used to package cheese slices; that he was fully familiar with the Beck reference and supervised the manufacturing of the reference package wherein slices were cut from blocks of natural cheese and individually stacked; that he was familiar with the claimed invention and the commercial package embodying the invention; that in all his years in the industry he had never seen a package with the slices arranged in the manner of the invention; that the concept of the invention was excellent; that after studying it he was surprised that it had not been thought of in the past, because the package was so useful, commercially appealing and unique.

The board dispensed with the Beck affidavit in the single sentence concerning what the patentee saw or intended, which is quoted above. That sentence rests on the presumption that the Beck disclosure “conveyed” the claimed invention. If that presumption were accurate, the board’s statement would be correct. But the Beck affidavit was more than merely “[w]hat a patentee may have intended or may have seen.” It was, like the apparently ignored affidavit of Bush, a statement under oath by one skilled in the art over many years. Both affidavits constituted evidence of the level of skill in the art. Both were evidence that those skilled in the art when the invention was made, and for many years before, did not find the invention obvious, even though one affiant had been thoroughly and totally familiar with Figure 10 of the Beck reference for eleven years prior to appellants’ filing date, during all of which years he was busily packaging cheese slices.

The summary treatment of the Bush and Beck affidavits was error. See In re Bulina, 362 F.2d 555, 53 CCPA 1275 (1966); In re McKenna, 203 F.2d 717, 40 CCPA 937 (1953). Reference to the subjective reaction of a person who was familiar with and practiced the art at the time the invention was made is the usual way of determining the level of ordinary skill in the art. Malsbary Mfg. Co. v. Aid, Inc., 447 F.2d 809 (7th Cir. 1971).

For the reasons indicated it was error to reject the product claims 1-4 and 9 as obvious in view of Beck.

Regarding process claims 5-8, the board affirmed the rejection under 103 on Beck and Palmer, saying “Except for the claimed offset, the process is the conventional packaging process illustrated by Palmer.” We do not understand appellants as disputing that statement. Nor do we. It is, however, precisely the claimed offsetting step that is not disclosed or suggested by either Beck or Palmer. It is precisely this “difference” over the prior art which makes the invention as a whole nonobvious and the claims patentable. What we have said above respecting the basis for the rejection of the product claims applies in good part to the rejection of the process claims.

The scope and content of the prior art did not disclose or suggest the inventions claimed herein; the differences in the claims over what was conveyed by the prior art were such as to support patentability; the level of skill in the art was such as not to have led to the claimed inventions as obvious advances to be expected in the growth of the art. Accordingly, the decision of the board must be reversed.

Reversed.

      . U.S. 3,092,501, filed May 4, 1959, issued June 4, 1963.

      . U.S. 2,907,109 filed February 13, 1956, issued October 6, 1959.

      . Appellants’ brief is replete with references to commercial success, filling of a long felt but unresolved need, failures of others and copying by two named competitors. Under § 103, evidence of what occurred after the invention may have a probative value equal to or greater than evidence of what went before. Though indicated as “secondary” "considerations in Graham, such factors are second only in time. We are not, however, favored in this case with any evidence of commercial success, long felt need or failures of others. Appellants’ evidence of “copying” appears in their petition to make special filed two months after their application was filed. The petition states that a cheese package marketed by one competitor (not two) two months prior to appellants’ application date, but after their reduction to practice, would infringe the claims of their application. The petition, and the record (except for equivocal inferences in the affidavits) are silent as to when, if ever, appellants’ invention was placed on the market. In reaching our decision, therefore, we ignore, as did the board, all of the foregoing post-invention considerations.