United States v. Mason & Hanger Co.
Headline: Dispute over contractor’s bond premium resolved: Court affirms reimbursement after contracting officer and War Department approved the cost, binding the Government to pay under the cost-plus contract.
Holding: The Court affirmed that a contractor can recover the $2,500 bond premium as a reimbursable expense because the contracting officer and War Department approved payment and their decision is conclusive.
- Allows contractors to recover approved bond premiums as contract costs.
- Makes contracting officer approvals binding on both contractor and Government.
- Limits later Treasury challenges to approved contract payments.
Summary
Background
A contractor sued the United States for unpaid amounts under cost-plus contracts to build buildings at Camp Zachary Taylor. The Court of Claims awarded the contractor $12,064.52; only a $2,500 item — the premium on a $250,000 bond fixed by the War Department — was contested. The War Department and the contracting officer had approved and paid the premium as part of contract costs, negotiated a reduction with sureties, and did not question the payment for over two years before the contractor sought recovery.
Reasoning
The core question was whether the bond premium counted as an expenditure “in the performance of the work” that the Government must reimburse. The Court relied on contract terms that make the contracting officer’s approval and the monthly cost statements binding, and on a clause reserving final decision to the Secretary of War. The opinion explains that the parties can make the officer’s decision conclusive, and that the officer’s unambiguous approvals and prior payments have legal effect. Prior decisions and the practical approval by the War Department supported treating the premium as a reimbursable cost.
Real world impact
The ruling means contractors who obtain contracting-officer approval for costs, including bond premiums and similar insurance or settlements, may recover those amounts under such contracts. It also emphasizes that contracting officers’ approvals and the War Department’s conduct can bind the Government, limiting later Treasury challenges to those approved payments.
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