United States v. Callahan Walker Construction Co.

Background

A private contractor agreed in 1931 to build a long levee for the War Department at a set price per cubic yard of earth. During construction the Government ordered an extra, enlarged false berm to prevent subsidence, adding about 64,000 cubic yards. The contracting officer ordered the work, gave credit for some earth, and said the extra yardage would be paid at the original contract price; the contractor protested, kept records, accepted final payment under protest, and later sued for additional costs. The contractor did not pursue the contract’s internal appeal to the head of the department.

Reasoning

The Court considered whether deciding an ‘‘equitable adjustment’’ for extra work is a factual matter or a legal question. The contract’s Article 3 said changes might require an equitable adjustment; Article 15 required disputes of fact to be decided by the contracting officer and allowed appeal to the department head. The Court held that figuring an equitable adjustment mainly requires factual inquiries—measuring extra costs and adding a reasonable profit—which fall within Article 15’s factual-dispute process. The Court also relied on the trial record showing the contracting officer did consider and decide the matter. Because the questions were factual and the contractor did not use the contract’s appeal process, the lower court’s award was reversed.

Real world impact

The ruling means contractors must make factual-showing appeals under their contracts when facing change-orders and cannot bypass those steps to sue immediately. Government change orders may be enforced while contractors preserve protest rights and later use the contract’s appeal route.

Dissents or concurrances

Judges below had disagreed: some thought the contracting officer ignored the contract and made no adjustment. The Supreme Court found the record did not support that view and therefore reversed.