UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 97-20281
CENTURY MARINE INCORPORATED,
Plaintiff-Appellant;
VERSUS
UNITED STATES OF AMERICA,
Defendant-Appellee.
Appeal from the United States District Court
For the Southern District of Texas
August 27, 1998
Before BARKSDALE, BENAVIDES and DENNIS, Circuit Judges.
DENNIS, Circuit Judge:
Appellant Century Marine, Inc. (“Century”), appeals the
district court’s dismissal of its claims for additional
compensation under a fixed-price vessel repair contract with the
Maritime Administration of the United States Department of
Transportation (“MARAD”). MARAD terminated the contract because of
Century’s default in failing to complete the work within the time
specified by the contract. Century filed suit against the United
States seeking to have the termination for default converted to a
termination for the Government’s convenience; and for payments in
addition to the amount MARAD had paid Century under the terminated
contract. After a bench trial, the district court rejected
Century’s demands and dismissed its suit with prejudice. We
affirm. On appeal Century does not contest the trial court’s
determination that its contract was properly terminated for
default. Despite its default, Century argues that it is entitled
to recover an amount equal to the unpaid balance of the full fixed
price of the contract less the cost of completion of the unfinished
work under the contract. Century’s argument is contrary to well
established law and federal regulations. Under the Government’s
termination of a fixed-price contract because of the contractor’s
default, the Government is not liable to the contractor for
unperformed or undelivered work. Anticipated but unearned profits
are not recoverable by the contractor when the Government
terminates the contract for the contractor’s default or for the
convenience of the Government. Century’s additional contention
that it should be compensated for extra work is also without merit.
There is warrant in the record and an applicable basis in law for
the district court’s rejection of this claim after a trial on the
merits.
I. FACTUAL AND PROCEDURAL BACKGROUND
In September 1992, Century and MARAD entered into a fixed-
price contract for the repair and renovation of cargo and ballast
tanks of the S.S. MOUNT WASHINGTON, a public vessel of the United
States. Thereafter, MARAD issued three contract modifications
(“Mods”) that increased the contract value by $1,050,000.000, for
a total contract amount of $8,521,910.000. When Century fell
2
behind schedule on the original completion date of May 3, 1993,
MARAD issued three additional Mods that extended the completion
date until September 15, 1993. Despite these extensions, Century
continued to fall behind its work schedule. When it became evident
that Century could not complete the contract timely, by letter
dated September 8, 1993, MARAD terminated Century for default.1 At
the time of termination, MARAD had made progress payments to
Century of $5,903,135.50. On September 22, 1993, the Government
issued Modification No. 0009 (“Mod 9") to the contract that
adjusted the contract price for the value of the unfinished work,
and calculated the final progress payment to Century based on its
completed work. MARAD eventually retained another contractor to
finish Century’s work.2
Mod 9, admitted as a Government exhibit at trial, sets forth
the percentage of completion of each work item, and adjusts the
total contract price by deducting the contract value of Century’s
1
Pursuant to the Federal Acquisition Regulations, the
Government may, by written notice of default to the contractor,
terminate the contract in whole or in part if the contractor fails
to perform the services within the time specified in the contract
or any extension. 48 C.F.R. § 52.249.8(a)(1)(i). “Federal
regulations which are based upon a grant of authority ‘have the
force and effect of law, and, if they are applicable, they must be
deemed terms of the contract even if not specifically set out
therein, knowledge of which is charged to the contractor.’”
General Eng’g & Mach. Works v. O’Keefe, 991 F.2d 775, 780 (Fed.
Cir. 1993).
2
Under the Federal Acquisition Regulations, when the services
to be provided by the terminated contractor are still required
after default, the contracting officer shall repurchase the same
services against the contractor’s account as soon as practicable,
48 C.F.R. § 49.402-6(a), and the contractor is liable to the
Government for any excess costs incurred in acquiring services
similar to those terminated for default. 48 C.F.R. § 49.402-2(e).
3
uncompleted work, estimated at $1,260,861.00. In Mod 9, MARAD
based the percentage of completion in part on Century’s own percent
completion figure provided in its last progress payment request
submitted to MARAD one week prior to termination, with this figure
adjusted for work accomplished by Century during the final week of
the terminated contract. The Government’s estimate in Mod 9 of the
contract value of Century’s uncompleted work also was based on a
thorough inspection and videotaping of each item of unfinished work
by Richard Volkmann, the contracting officer’s technical
representative, who testified at trial.
Based on the Government’s calculations in Mod 9, MARAD made a
final payment to Century of $409,023.56, representing compensation
for all work performed after the latest progress payment but before
Century was terminated for default. According to the contracting
officer’s decision denying Century’s administrative claims for
additional compensation, this final payment to Century represented:
(1) payment for the progress made by Century between the time of
its last progress payment and termination of the contract
($51,532.00); (2) payment of the balance of retainage owed to
Century after deducting the excess cost of procurement
($285,539.06)3; and (3) payment of funds withheld at the direction
of the Government‘s legal department until a separate claim on
another contract was settled ($71,952.50).
3
Under the Federal Acquisition Regulations, “the contracting
officer shall use all retained percentages of progress payments
previously made to the contractor and any progress payments due for
work completed before the termination to liquidate the contractor’s
liability to the Government.” 48 C.F.R. § 49.406.
4
In July 1994, Century submitted a “Request For Equitable
Adjustment and For Conversion of a Termination For Default to a
Termination For Convenience.” Century’s Request For Equitable
Adjustment presented an administrative claim for additional
payments of almost $1.3 million under the contract, based on
Century’s allegations that MARAD had underestimated the percentage
of completion of finished work items in Mod 9, and that MARAD was
not entitled to retain excess costs of reprocurement from the
retainage withheld from the final payment to Century because
Century was wrongfully terminated. Century also asserted a claim
for $21,254 in extra work performed pursuant to Century’s Request
For Delivery Orders (RDOs). Finally, Century requested that its
termination for default be converted to a termination for
convenience.
In December 1994, the Government’s contracting officer issued
a final administrative decision on Century’s claims, denying any
further payments to Century. This 48-page decision, with attached
supporting exhibits, rebuts in detail each allegation in Century’s
Request For Equitable Adjustment, concluding that Century’s
“termination for default is valid,” and that Century “is not
entitled to a further equitable adjustment.”
In September 1994, pursuant to the Contract Disputes Act, 41
U.S.C. § 603, and the Suits in Admiralty Act, 46 U.S.C. § 741 et
seq., Century sued the United States in the Court of Federal
Claims, which transferred the case to the Southern District of
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Texas.4 The United States elected not to file a counterclaim
against Century for liquidated damages, which are recoverable
against a contractor terminated for default. See 48 C.F.R. §§
49.402-6(c), 49.402-7, 49.402-2(e). Century’s claims were tried to
a judge in December 1996.
In the district court, Century presented no evidence
supporting the claim in its administrative level Request For
Equitable Adjustment that it was entitled to recover the excess
costs of reprocurement that the Government had deducted from
Century’s retainage. Exhibit K of the Contracting Officer’s
decision, which was the only evidence of the Government’s excess
reprocurement costs and the amount of retainage withheld at
termination, was withdrawn at trial after Century objected to its
admissibility.
On January 3, 1997, the district court issued findings of fact
and conclusions of law rejecting Century’s claims, finding that the
United States’ termination of Century for default was justified by
Century’s breach of the contract, and that Century had no valid
claim for an equitable adjustment to the contract. Also on January
3, 1997, the district court rendered a final judgment dismissing
Century’s claims against the United States with prejudice.
4
Under § 603 of the Contract Disputes Act, subject matter
jurisdiction in appeals of administrative decisions involving
federal maritime contracts vests in the federal district courts,
rather than in the Court of Claims (now the Court of Federal
Claims) or the Court of Appeals for the Federal Circuit. Bethlehem
Steel Corp. v. Avondale Shipyards, Inc., 951 F.2d 92, 93, 94 (5th
Cir. 1992). Government maritime contracts are otherwise governed
by the Contract Disputes Act. Id. at 94.
6
On January 10, 1997 Century filed a Motion to Amend or Make
Additional Findings of Fact, asserting that Century had made a
prima facie case on two claims that had not been rebutted by the
United States: (1) a claim for extra work performed on seven RDOs
in the amount of $20,583; and (2) a claim for the “contract
balance” due of $1,293,218.54 resulting from the following
computation:
Modified Contract Amount $8,521,910.00
Less-Payments and Deducts $6,492,159.46
Less-Work not performed $ 714,187.00
Less-Tow credit and Item 058 $ 22,345.00
Contract Balance Due $1,293,218.54
On March 4, 1997 the district court entered an order denying
Century’s Motion to Amend or Make Additional Findings of Fact.
Century appealed.
II. STANDARD OF REVIEW
The district court’s findings of fact must be reviewed under
the “clearly erroneous” standard of Fed R. Civ. P. 52(a). A
finding of fact is said to be “clearly erroneous” when,
notwithstanding there is evidence to support it, the reviewing
court upon examination of the entire evidence is left with the
definite and firm conviction that a mistake has been committed.
Justiss Oil Co. v. Kerr-McGee Refining Corp., 75 F.3d 1057, 1062
(5th Cir. 1996) (citing United States v. United States Gypsum Co.,
333 U.S. 364, 395 (1948)). With respect to the legal conclusions
reached by the trial court on the basis of the facts so found, this
court will conduct a de novo review. Reich v. Lancaster, 55 F.3d
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1034, 1045 (5th Cir. 1995).
III. DISCUSSION
On appeal, Century does not contest the district court’s
determination that MARAD properly terminated the contract for
Century’s default. Nor does Century reurge its administrative
level claim that MARAD had withheld an excessive amount of
retainage from the final payment to Century. Century argues only
that the district court’s judgment denying its claims for the
“contract balance” and extra work was clearly erroneous and must be
reversed because: (1) Century made a prima facie case at trial for
its contract balance and extra work claims; (2) MARAD failed to
rebut Century’s proof on these claims; (3) the district court made
no express findings on each of these claims; and (4) no such
findings can be implied because an implied finding is not supported
by the evidence.
A. Century’s “Contract Balance” Claim
Century contends that it made out a prima facie case for
recovery of a “contract balance” of either $1,293,218.54 or
$768,889.54. It is undisputed that the total amount of the fixed-
price contract, including all modifications, was $8,521,910.00, and
that MARAD had paid Century $6,492,159.46 for work completed prior
to Century’s termination for default, leaving an unpaid balance of
$2,029,750.54 under the contract at that time. MARAD and Century
presented conflicting technical expert evidence as to the estimated
cost of completing the contract: Century’s estimate was $736,532.00
and MARAD’s was $1,260,861.00. Consequently, Century asserts,
8
after subtracting the estimated cost of completing the work under
the contract from the unpaid balance, Century is entitled to the
difference, viz., either $1,293,218.54 or $768,889.54, depending on
whether the Century or the MARAD estimate is used.
Century’s argument lacks a sound basis in law. Termination
for default is generally the exercise of the Government’s
contractual right to completely or partially terminate a contract
because of the contractor’s actual or anticipated failure to
perform its contractual obligations. 48 C.F.R. § 49.401(a). The
Government has the right to terminate a fixed-price contract for
default if the contractor fails to deliver the supplies or to
perform the services within the time specified in the contract. 48
C.F.R. § 49.402-1. Under a termination for default, the Government
is not liable for the contractor’s costs on undelivered work. 48
C.F.R. § 49.402-2(a). In contrast, under a fixed-price contract
terminated for the convenience of the Government, a settlement
should compensate the contractor fairly for the work actually done
and for the preparations made for the terminated portions of the
contract, including a reasonable allowance for profit applicable to
that work and preparations. 48 C.F.R. §§ 49.201, 49.202.
Anticipatory profits and consequential damages shall not be allowed
under either a termination for convenience or a termination for
default of a fixed-price contract. 48 C.F.R. §§ 49.201, 49.202,
49.402-2; See Mega Constr. Co. v. United States, 29 Fed. Cl. 396,
475 (1993); G.L. Christian & Assocs. v. United States, 312 F.2d
418, 426 (Ct. Cl.), cert. denied, 375 U.S. 954 (1963).
9
Consequently, as a contractor terminated for default, Century
cannot, as a matter of law, recover the “unpaid balance” of the
contract less the “cost of completion” of the work under the
contract. To allow such recovery would permit Century to do
indirectly what it could not do directly, viz., recover anticipated
but unearned profits after the contract has been terminated because
of its default. A contractor’s right to recover for anticipated
profits arises only if the termination of the contract by the
Government is wrongful and constitutes a breach. G.L. Christian,
312 F.2d at 423 (citing United States v. Behan, 110 U.S. 338, 346
(1884); United States v. Spearin, 248 U.S. 132, 138 (1918);
Broadbent Portable Laundry Corp. v. United States, 56 Ct. Cl. 128,
132 (1921)). Any recovery of profits by a contractor on a contract
terminated because of its own default is limited to earned profit
on work actually performed prior to the termination. Mega Constr.,
29 Fed. Cl. at 475.
B. Century’s Claim For Extra Work
Century argues that the district court’s findings and
conclusions are legally insufficient because the court made no
express finding addressing its extra work claim, and that any
implied finding by the court on the extra work issue is not
supported by the evidence.
Rule 52(a) of the Federal Rules of Civil Procedure provides
that “[i]n all actions tried upon the facts without a jury. . .,
the court shall find the facts specially and state separately its
conclusions of law thereon. . . .” The articulation of findings of
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fact and conclusions of law allows this court to ascertain the
factual and legal bases for the district court’s decision, thereby
providing a sufficiently definite predicate for appellate review.
Chandler v. City of Dallas, 958 F.2d 85, 90 (5th Cir. 1992). But
Rule 52(a) “exacts neither punctilious detail nor slavish tracing
of the claims issue by issue and witness by witness.” Burma
Navigation Corp. v. Reliant Seahorse M/V, 99 F.3d 652, 656 (5th
Cir. 1996) (quoting Schlesinger v. Herzog, 2 F.3d 135, 139 (5th
Cir. 1993)); see also United States v. Northside Realty Assocs.,
Inc., 474 F.2d 1164, 1170 n.5 (5th Cir. 1973) (“‘Courts need not
indulge in exegetics, or parse or declaim every fact and each
nuance and hypothesis.’”) (quoting Gulf King Shrimp Co. v. Wirtz,
407 F.2d 508, 516 (5th Cir. 1969)). The rule is satisfied if the
district court’s findings give the reviewing court a clear
understanding of the basis for the decision. Burma Navigation, 99
F.3d at 656.
If a trial judge fails to make a specific finding on a
particular fact, the reviewing court may assume that the court
impliedly made a finding consistent with its general holding so
long as the implied finding is supported by the evidence. In re
Texas Mortgage Servs. Corp., 761 F.2d 1068, 1075 n.12 (5th Cir.
1985); Gilbert v. Sterrett, 509 F.2d 1389, 1393 (5th Cir.), cert.
denied, 423 U.S. 951 (1975).
According to the district court’s factual findings and
conclusions of law, Century had been compensated for the ten valid
delivery orders under which it performed “extra work” to repair
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weld fractures. The court also reached the legal conclusion that
“there is no valid basis for an equitable adjustment to the
contract.” In rejecting Century’s general claim for equitable
adjustment, which encompassed the extra work claim, the district
court impliedly found that Century was not entitled to compensation
for any other extra work.
The district court’s 12-page findings of fact and conclusions
of law are sufficiently detailed to adequately state the factual
and legal bases for the district court’s denial of Century’s claim
for extra work, thereby providing a sufficiently definite predicate
for proper appellate review. The court’s implied denial of
Century’s extra work claim is fully supported by the evidence,
particularly Mod 9, which sets forth the percentage of completion
for unfinished delivery orders; the contracting officer’s decision,
which provides detailed reasons for MARAD’s denial of Century’s
claims for extra work; and the testimony of Volkmann, the
contracting officer’s technical representative, who testified that
he personally inspected and videotaped Century’s unfinished work
and that he researched and drafted 90% of the contracting officer’s
decision with the assistance of Billy Greer, another MARAD employee
who testified at trial.
In so doing, we reject Century’s argument that the contracting
officer’s decision is a “pleading” and therefore cannot be used as
evidentiary support for the trial court’s implied denial of
Century’s claim for extra work. Under the Contract Disputes Act,
contracting officers are not required to make specific findings of
12
fact, but, if made, they “shall not be binding in any subsequent
proceeding.” 41 U.S.C. § 605(a). However, there is nothing in the
Contract Disputes Act that prohibits the use of the contracting
officer’s findings and conclusions as evidence in a subsequent de
novo proceeding.5 Cupey Bajo Nursing Home, Inc. v. United States,
36 Fed. Cl. 122, 130 (1996) (“[T]his court reviews the facts and
law decided by a contracting officer similar to other evidence
before it[.]”). Accord Lathan Co. v. United States, 20 Cl. Ct.
122, 125 (1990) (“This court may weigh the [contracting officer’s]
findings and conclusions as it would any other evidence.”). See
Wilner v. United States, 24 F.3d 1397, 1403-04 (Fed. Cir. 1993) (en
banc) (expressly overruling pre-Contracts Dispute Act precedent
holding that a contracting officer’s decision “constitutes a strong
presumption or an evidentiary admission. . . albeit subject to
rebuttal,” but cautioning that its opinion does not “suggest[] that
a contracting officer’s final decision has no place in . . .
litigation in the Court of Federal Claims”). Therefore, in its
role as the finder-of-fact, a district court may give the
contracting officer’s administrative determinations weight, not
deference. Mega Constr., 29 Fed. Cl. at 414. Cf. Universal Camera
Corp. v. National Labor Relations Bd., 340 U.S. 474, 493-94 (1951)
(holding that the nonbinding findings of an NLRB “trial examiner”
5
The Contract Disputes Act provides that, after a contracting
officer renders a decision on a claim, a contractor may bring an
action directly on the claim in the United States Court of Federal
Claims (formerly the United States Claims Court), 41 U.S.C. §
609(a)(1), where the action “shall proceed de novo in accordance
with the rules of the appropriate court.” 41 U.S.C. § 609(a)(3).
13
may be considered in a subsequent appeal to establish whether an
employee’s removal was supported by substantial evidence); Chandler
v. Roudebush, 425 U.S. 840, 864 n.39 (1976) (holding that prior
administrative findings can be used as evidence of the ultimate
matters at issue in a subsequent de novo proceeding).
Accordingly, we conclude that the Contract Disputes Act does
not preclude the use of the contracting officer’s decision as
evidence of the ultimate matters at issue in a subsequent de novo
proceeding, provided that it is not given deference or a rebuttable
presumption of correctness.
IV. CONCLUSION
Having reviewed the record and considered all of Century’s
arguments, we conclude that the district court did not commit any
error of law or clear error of fact in finding Century in default
and in rejecting Century’s claims with prejudice. As for Century’s
“contract balance” argument, we conclude that there is no basis in
law for a defaulted contractor to recover the difference between
the unpaid balance of the contract and the cost of completing the
unfinished work under the contract. It is well settled that a
defaulted contractor cannot recover anticipated but unearned
profits. Accordingly, the judgment of the district court is
AFFIRMED.
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RHESA HAWKINS BARKSDALE, Circuit Judge, specially concurring:
I concur in the judgment being AFFIRMED, but would do so on
the basis that, pursuant to the district court’s findings of fact
and conclusions of law, and the underlying evidence upon which they
are based (especially, modification No. 009 and the Government
contacting officer’s written response to the request for equitable
adjustment), Century Marine’s claims presented in this court fail,
to include its primary claim that it was not paid for work which it
performed.
Concerning that primary claim, the references in the majority
opinion concerning anticipated but unearned profits seem wide of
the mark. Such a “lost-profit” claim is not raised by Century
Marine; and, contrary to the approach taken by the majority, I
would not assume that this is the indirect or implied thrust of the
position asserted here. To do as the majority has done results, in
my view, in this court reaching outside the record—something we
should not, indeed cannot, do.
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