Reddick & Sons of Gouverneur, Inc. v. United States

39 Cont. Cas. Fed. 76,674, 31 Fed. Cl. 558, 2 Wage & Hour Cas.2d (BNA) 379, 1994 U.S. Claims LEXIS 128, 1994 WL 363133
CourtUnited States Court of Federal Claims
DecidedJuly 13, 1994
DocketNo. 37-87C
StatusPublished

This text of 39 Cont. Cas. Fed. 76,674 (Reddick & Sons of Gouverneur, Inc. v. United States) is published on Counsel Stack Legal Research, covering United States Court of Federal Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Reddick & Sons of Gouverneur, Inc. v. United States, 39 Cont. Cas. Fed. 76,674, 31 Fed. Cl. 558, 2 Wage & Hour Cas.2d (BNA) 379, 1994 U.S. Claims LEXIS 128, 1994 WL 363133 (uscfc 1994).

Opinion

OPINION

ANDEWELT, Judge.

In this government contract action brought pursuant to the Contract Disputes Act, 41 U.S.C. §§ 601-613, plaintiff, Reddick & Sons of Gouverneur, Inc., seeks to recover payments pursuant to a contract it entered with the United States Army Corps of Engineers for the construction of a recreation center at Fort Drum, Watertown, New York. Plaintiff claims (1) it is entitled to receive interest on certain payments defendant allegedly failed to make in a timely manner, (2) defendant improperly required plaintiff to pay plaintiffs employees at rates higher than those set forth in the contract, (3) it is entitled to recover liquidated damages assessed against it, and (4) defendant caused plaintiff to perform certain work outside of the contract. This action is presently before the court on cross-motions for summary judgment. For the reasons set forth below, defendant’s motion for summary judgment is granted in part and plaintiffs cross-motion is granted in part.

I.

Pursuant to Section 3902 of the Prompt Payment Act, 31 U.S.C. §§ 3901-3906, “an agency acquiring property or service from a business concern, who does not pay the concern for each complete delivered item of property or service by the required payment date, shall pay an interest penalty to the concern on the amount of the payment due.” Pursuant to Section 3903, where a contract does not specify a payment date, the government is obliged to make payments “30 days after a proper invoice for the amount due is received.” Herein, the contract did not specify payment dates and defendant delayed certain payments beyond 30 days after receiving the invoices from plaintiff. Plaintiff claims it is entitled to receive interest payments for these periods of delay.

Defendant responds that at the time of the contract, the regulations implementing the Prompt Payment Act did not provide for interest on such payments. Specifically, defendant relies upon OMB Circular A-125, 118(e), which states that “[ijnterests penalties are not required ... when payments are made solely for financing purposes.” General Provision 7 of the instant contract obliged defendant to make periodic progress payments. Defendant argues that because it made these progress payments prior to completion of the contract, and because it based the amount of these payments on a distribution of the contract price over the term of the contract, these payments should be deemed to have been made solely for financing purposes.

The Prompt Payment Act was enacted in 1982 (the 1982 Act) and amended in 1988 (the 1988 Amendment). The 1988 Amendment expressly provides that the obligation in the 1982 Act to pay interest on delayed payments includes progress payments made in government construction contracts. 31 U.S.C. § 3903(a)(6). The 1988 Amendment, however, is prospective in effect and does not apply retroactively. Hence, plaintiff is entitled to interest herein under the Prompt Payment Act only if the 1988 Amendment’s specific [560]*560reference to progress payments on construction contracts served to clarify rather than modify the 1982 Act.

The pertinent legislative history indicates that Congress intended the 1982 Act to include progress payments and the 1988 Amendment merely to clarify that point. The pertinent 1982 House Committee Report provides, in pertinent part:

To the extent that contracts involving a series of partial payments or executions provide for separate payments, OMB’s regulations shall specify separate dates when payment is due. This provision is intended to cover situations where the government and a business concern contract for separate payment for partial deliveries or executions; for example, progress payments.

H.R.Rep. No. 461, 97th Cong., 2nd Sess. (1982), reprinted in 1982 U.S.C.C.A.N. 111, 124. The 1988 House Committee Report, complaining that OMB Circular A-125 had improperly failed to follow the terms of the 1982 Act and the intent of Congress, reiterates this point as follows:

Progress payments. — Progress payments under construction contracts are payments for partial executions authorized by the contract (31 U.S.C. 3903(4)). They, therefore, fall squarely within the act’s protections [as enacted in 1982], The initial version of OMB’s implementing circular (OMB Circular A-125), however, defined progress payments generally as financing payments, which the circular specifically excluded from coverage (paragraph 8(c)). Since the circular failed to distinguish progress payments for construction from other forms of progress payments, most agencies specified in their implementing regulations that construction progress payments were “payments ... made solely for financing purposes” and refused to pay late payment interest penalties on untimely construction progress payments.
OMB recently issued a revised circular which states explicitly that progress payments under construction contracts are subject to the act. Despite this revision, construction industry witnesses testifying during the subcommittee hearing strongly support inclusion of construction contracts by specific reference in statute.

H.R.Rep. No. 784, 100th Cong., 2d Sess. (1988), reprinted in 1988 U.S.C.C.A.N. 3036, 3050 (footnotes omitted).

The provisions of the instant contract and the wording of the Prompt Payment Act similarly support the conclusion that the instant progress payments come within the scope of the 1982 Act. General Provision 7 of the contract is entitled “PAYMENTS TO CONTRACTORS” and its focus is not on providing payments to the contractor solely for financing purposes but rather on providing payments for work actually being performed and completed. General Provision 7(b) explains the tie between receipt of the progress payments and the performance of the contract work, as follows:

The Government will make progress payments monthly as the work proceeds, or at more frequent intervals as determined by the Contracting Officer, on estimates approved by the Contracting Officer. If requested by the Contracting Officer, the Contractor shall furnish a breakdown of the total contract price showing the amount included therein for each principal category of the work, in such detail as requested, to provide a basis for determining progress payments.

(Emphasis added.) Thus, General Provision 7(b) envisions making progress payments “as the work proceeds” and corresponding the amounts of these payments generally to the amount of work performed.

General Provision 7(c), demonstrating a similar intent, provides, in pertinent part:

In making such progress payments, there shall be retained 10 percent of the estimated amount until final completion and acceptance of the contract work. However, if the Contracting Officer finds that satisfactory progress was achieved during any period for which a progress payment is to be made, he may authorize such payment to be made in full without retention of a percentage.

[561]

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39 Cont. Cas. Fed. 76,674, 31 Fed. Cl. 558, 2 Wage & Hour Cas.2d (BNA) 379, 1994 U.S. Claims LEXIS 128, 1994 WL 363133, Counsel Stack Legal Research, https://law.counselstack.com/opinion/reddick-sons-of-gouverneur-inc-v-united-states-uscfc-1994.