C. H. Leavell & Co. v. United States
208 Ct. Cl. 776, 530 F.2d 878, 21 Cont. Cas. Fed. 83,906 (1976)
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Rule of Law:
A contractor is entitled to an equitable adjustment for unreasonable work suspensions under a standard "Suspension of Work" clause, even when the suspension is caused by a lack of appropriated funds contemplated by a "Funds Available" clause. The "Funds Available" clause only bars claims for breach of contract damages, not intra-contractual equitable adjustments for costs incurred during the suspension.
Facts:
- On May 5, 1967, the Army Corps of Engineers awarded C. H. Leavell and Company a multi-year, continuing contract to construct the Jonesville Lock and Dam in Louisiana.
- Leavell's work progress schedule, which planned for completion earlier than the contract deadline, was approved by the Corps of Engineers "subject to the availability of funds."
- Throughout 1968, the Corps repeatedly notified Leavell that allocated funds were nearly exhausted, but on each occasion prior to the final one, the Corps secured additional funding, allowing work to continue.
- In response to funding uncertainty, Leavell notified the Corps that it was unable to practically design a decelerated work schedule and decided to proceed at its planned rate.
- On November 29, 1968, the Corps gave final notice that funds would be exhausted by the end of the year.
- On January 10, 1969, after the allocated funds were depleted, Leavell suspended all work on the project.
- Work remained suspended for approximately five months until Leavell was notified of new funding and resumed work on June 16, 1969.
Procedural Posture:
- C. H. Leavell and Company submitted a claim for an equitable adjustment to the Corps of Engineers Board of Contract Appeals (BCA).
- The BCA denied Leavell's claim, reasoning that the work suspension was due to Leavell's own fault or negligence in maintaining an 'accelerated schedule' despite knowing funds were limited.
- Leavell sought review of the BCA's decision in the U.S. Court of Claims.
- A trial judge of the Court of Claims reviewed the case and filed a recommended decision to reverse the BCA's decision.
- Both parties requested a review of the trial judge's recommendation by the full U.S. Court of Claims.
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Issue:
Does a standard "Funds Available for Payments" clause (SP-19), which disclaims government liability for damages from delays due to lack of funds, preclude a contractor from receiving an equitable adjustment under the "Suspension of Work" clause (GP-42) when work is suspended for an unreasonable period due to an appropriation shortfall?
Opinions:
Majority - Per Curiam (adopting Trial Judge Fletcher's opinion)
No. The "Funds Available for Payments" clause (SP-19) does not preclude a contractor from receiving an equitable adjustment under the "Suspension of Work" clause (GP-42). The two clauses must be harmonized, with the former barring claims for breach of contract damages and the latter providing an administrative remedy for unreasonable government-caused delays. A suspension due to lack of funds is a suspension for the convenience of the Government, which triggers the equitable adjustment provision of the Suspension of Work clause. The court reasoned that SP-19 was historically intended to shield the government from liability for breach of contract damages (such as lost profits) when Congress fails to appropriate funds, not to bar contractually provided remedies like an equitable adjustment for actual costs incurred. A suspension for lack of funds benefits the government by keeping the contractor on standby, ready to resume work when funds become available, thus saving the government the expense and delay of re-letting the contract. Furthermore, the court rejected the Board's finding that Leavell was at fault for its 'accelerated schedule,' deeming it 'wholly arbitrary and capricious' to penalize a contractor for its efficiency or for not decelerating work without a government order.
Analysis:
This decision clarifies the relationship between two standard, and seemingly contradictory, clauses in government construction contracts. It establishes that a lack-of-funds suspension constitutes a suspension for the 'convenience of the Government,' triggering the contractor's right to cost reimbursement under the Suspension of Work clause. The ruling significantly shifts the risk of standby costs during funding gaps from the contractor to the government, even when the contract explicitly disclaims liability for funding-related delays. By reinforcing the crucial distinction between remedies within the contract (equitable adjustments) and remedies for breach of contract (damages), the case provides contractors with greater financial protection against the uncertainties of the federal appropriations process.
