UNITED STATES SUPREME COURT DECISIONS ON-LINE

Petitioner, in May, 1956, agreed to furnish canteen covers to the United States under a contract containing a standard "disputes" clause requiring the contracting officer to decide "any dispute concerning a question of fact arising under [the] contract," and providing for appeal to the department head or his representative, whose decision was to be final unless judicially determined to have been fraudulent, arbitrary, capricious, or so grossly erroneous as necessarily to imply bad faith. The Government later tested material samples and rejected them as not meeting contract specifications. Petitioner agreed to a price reduction, and completed the contract in December, 1956. In March, 1959, petitioner allegedly first learned the nature of the Government's tests, and, in October, 1961, demanded an equitable adjustment in the contract price, asserting in the claim filed with the contracting officer that the tests constituted a change in contract specifications. In February, 1963, the board of contract appeals affirmed the contracting officer's rejection of the claim. About five months later, petitioner sued in the District Court on its claim, alleging that the board's decision was capricious, arbitrary, and not supported by substantial evidence. The District Court, without deciding whether the claim arose under the contract within the meaning of the disputes clause, upheld the Government's contention that the cause of action accrued when performance of the contract was completed, and was thus foreclosed by 28 U.S.C. § 2401(a), which bars a civil action against the United States unless the complaint is filed within six years "after the right of action first accrues." The Court of Appeals affirmed.

Held:

1. When administrative proceedings with respect to a contractor's claim subject to the disputes clause in a government contract extend beyond the completion of the contract, his right of action "first accrues" within the meaning of 28 U.S.C. § 2401(a) when the administrative action is final, and not before. Nager Electric Co., Inc. v. United States, 177 Ct.Cl. 234, 368 F.2d 847, followed. Pp. 386 U. S. 510-522. clubjuris

Page 386 U. S. 504

(a) The "civil action" referred to in § 2401(a) is a civil action in a court of competent jurisdiction. P. 386 U. S. 510.

(b) With respect to claims arising under the disputes clause of a government contract, the contractor has, in effect, agreed to convert what might otherwise be claims for breach of contract into claims for equitable adjustment. P. 386 U. S. 511.

(c) Adjustment of such claims, as provided in the contract, must be made by the contracting officer subject to appeal to the department head or his representative, here, the board of contract appeals, and not until that board has acted is the contractor's claim subject to court adjudication. P. 386 U. S. 511.

(d) The contractor must seek the relief provided for under the contract or be barred from any relief in the courts. P. 386 U. S. 512.

(e) The court review, which is not de novo, is focused upon the validity of the administrative decision, pending the making of which the contractor cannot know what his justiciable claim is. Pp. 386 U. S. 512-514.

(f) To hold that the six-year limitation period runs from the contract completion date, as the Government urges, would deprive the contractor of judicial review where administrative proceedings extend more than six years beyond that date, a result which would conflict with the policy underlying the Wunderlich Act. P. 386 U. S. 514.

(g) Determination of when a "cause of action" first "accrues" must be made with regard to the practical ends to be served by statutes of limitations. McMahon v. United States, 342 U. S. 25, and other cases not involving the Tucker Act, distinguished. Pp. 386 U. S. 516-519.

(h) In enacting a general statute limiting suits by the Government to those which are brought within

"six years after the right of action accrues or within one year after final decisions . . . in applicable administrative proceedings required by contract or by law"

(28 U.S.C. § 2415), Congress manifested no intention to construe § 2401, which governs a private litigant's right to sue the Government. Pp. 386 U. S. 519-522.

2. The determination of whether petitioner's claim arose under the contract or involved a breach of contract claim, which accrued no later than the contract completion date, will be open on remand to the District Court. P. 386 U. S. 522.

363 F.2d 407, reversed and remanded. clubjuris

Page 386 U. S. 505