U.S. Government Printing Office
Office of the General Counsel
Contract Appeals Board

Appeal of Schlosser / Stromberg, Joint Venture
CA-76-6
April 14, 1977

Vincent T. McCarthy. Chairman
Jay E. Eisen, Member
Drew Spalding, Member

This is an appeal filed on May 24, 1976, by Schlosser/Stromberg,
Joint Venture, 2400 51st Place, Hyattsville, Maryland  20781
(herein referred to as the contractor), under the disputes clause
of the contract GPO, Phase II-Contract No. 5750, Clause 5,
Standard Form 23-A.  The Office of General Counsel is the Public
Printer's representative for the determination of appeals under
the disputes clause.

1.  Findings of Fact

a.  This contract called for the construction in the improvement
of air-conditioning and related services at the United States
Government Printing Office, Washington, D.C.

b.  The parties to the Joint Venture arrangement are designated
as W. M. Schlosser Company, Inc. (hereinafter referred to as
Schlosser), and Stromberg Sheet Metal Works, Inc. (hereinafter
referred to as Stromberg).  Certain portions of the work were
contracted by the joint venture to third parties other than
Schlosser and Stromberg.

c.  The appeal arises from the issuance of several change orders
pertaining to the contract.  The amount in dispute is based on a
claim by the contractor for a 10% commission of the total cost of
work allegedly performed by Schlosser and Stromberg, as
subcontractors, with other than the joint venture's own forces.

d.  The contract contains the General Provisions for construction
contracts, Standard Form 23A (March 1953), which includes Clause
3, "Changes", which authorized an equitable adjustment in the
contract price in the event of the issuance of change orders.  It
also contains Clause 23, "Equitable Adjustments", in the GSA Form
1139, April 1968, Section 0010, General Conditions as follows:

"23.  EQUITABLE ADJUSTMENTS

23.1  The provisions of the Changes Clause of Standard Form 23-A,
General Provisions, are supplemented as follows:

. . .

23.1.2  The maximum allowable overhead, profit and commission
percentages, given at the end of this paragraph, shall be
considered to include, but not be limited to, insurance other
than that mentioned in this 'Equitable Adjustments' clause, bond
or bonds, use of small tools, incidental job burdens, and general
office expense.  No percentages for overhead, profit or
commission will be allowed on employment taxes under FICA and
FUTA.  The percentages for overhead, profit and commission shall
be negotiated and may vary according to the nature, extent, and
complexity of the work involved, but in no case shall exceed the
following:

   Overhead   Profit    Commission
"To contractor on work
performed by other
than his own forces   --   --   10%

To contractor and/or
the subcontractors for
that portion of the
work performed with
their respective forces   10%   10%   --

Not more than three percentages, not to exceed the maximum
percentages shown above, will be allowed regardless of the number
of their subcontractors, i.e., the markup on work subcontracted
by a subcontractor will be limited to one overhead percentage and
one profit percentage in addition to the prime contractor's
commission percentage.  On proposals covering both increases and
decreases in the amount of the contract, the overhead, profit,
and commission will be allowed on the net increase only."
(Emphasis added.)

Performance by the contractor is covered in part as follows:

"32.  PERFORMANCE OF WORK BY CONTRACTOR

32.1  The Contractor shall perform on the site, and with his own
organization, work equivalent to at least twelve percent (12%) of
work to be performed under the contract.  If, during the progress
of the work here under, the Contractor requests a reduction in
such percentage, and the Contracting Officer determines that it
would be to the advantage of the Government, the percentage of
the work required to be performed by the :Contractor may be
reduced with the written approval of the Contracting Officer."
(Emphasis added.)

e.  The contracting officer denied the appellant's request for
10% commission on change order work performed allegedly by
Schlosser and Stromberg as subcontractors.

The contracting officer asserted that the joint venture entity
itself, had no employees on-the-job, and that if the joint
venture was to be treated as an entity distinct from its member
firms, it would not meet the contractual requirement that the
prime contractor perform 12 percent of the work on-the-job with
its own forces.

The contractor was willing to adjust his claim to a 5 percent
commission ($10,199.33) which was rejected by the contracting
officer.

f.  The appellant avers that it is entitled to its markup
commission as an indirect cost based on the fact that valid
subcontracts existed between the joint venture and Schlosser and
Stromberg, and that these contracts amounted to arms length
transactions between separate entities.  Appellant stressed that
the joint venture is an entity separate and apart from its
constituent elements; that it did have unique overhead, separate
and distinct from the overhead of its constituent elements and
is, therefore, entitled to the commission on all change orders
involving work subcontracted to its constituent elements in the
same manner as if the subcontractor were a third party. Appellant
further contends its unique expenses included costs associated
with coordination of subcontractors, office expenses and the
salaries of the project supervisor and the field superintendent.

II.  Opinion

In order to resolve this dispute it is necessary to decide
whether appellant's concept of an equitable adjustment and the
proffered evidence established to the Board's satisfaction that
the additional allowance in.the form of commission constitutes a
cost item payable as an equitable adjustment pursuant to a change
order for work performed for.the contractor "by other than his
own forces."

Equitable adjustments are corrective measures utilized to keep a
contractor whole when the Government modifies a contract.  The
purpose underlying such adjustments is to safeguard the
contractor against increased costs due to the change or
modification of the contract.

The agreement between the Schlosser and Stromberg Corporations as
indicated by the express language adopted by the parties was a
joint venture.  It was established as a single business adventure
for joint profit, for which purpose they combined their efforts,
property, money, skill and knowledge, for the limited purpose of
performing the requirements set forth with regard to GPO Contract
5750.  The joint venture, under the terms of the contract is
authorized to enter into contracts with subcontractors, for work
to be rendered towards the completion of the contract.

The Schlosser and Stromberg Corporations are not entities
separate and distinct from the joint venture.  They are
intertwined as part of the joint venture.

Under the terms of General Conditions 23.1.2. a contractor is
only entitled to a commission on change order work when the work
is performed "by other than [its] own forces." Therefore, it is
concluded that because the change order work in question was done
by the joint venture's own forces, the venture is not entitled to
a commission.  (Emphasis added.)

Generally, the law applicable to partnership applies with respect
to relation between members of a joint venture and third persons.
Bushman Construction Co.  v. Connor, 307 F.2d 888 (1962), 10th
Circuit; Southland Corporation v. Shulman, 331 Fed.Supp. 1024
(1971), D.C. Md. 1971.  It has been held that the Uniform
Partnership Act (UPA) is applicable to joint ventures.  Wood v.
Western Beef Factory, Inc., 378 F. 2d 96 (1967), 10th Circuit.
The Uniform Partnership Act, has been adopted by Congress for the
District of Columbia by Section 1 of the Act, September 27, 1962,
Title 41, D.C. Code, Section 308, and provides that:

"Every partner is an agent of the partnership for the purpose of
its business, and the act of every partner including the
execution in the partnership name of any instrument, for
apparently carrying on in the usual way the business of the
partnership of which he is a member binds the partnership. . . ."

Thus, when Schlosser and Stromberg executed the subcontracts to
do the change order work, they were apparently carrying on the
business of.the joint venture and were agents of the joint
venture.  Each being members of the joint venture, they act as
agents for the  other members in pursuit of the general scope of
the enterprise. Taylor v. Brindley, 164 F. 2d 235 (1947), 10th
Circuit.  It appears, therefore, that the joint venture was
attempting to do the impossible in attempting to subcontract the
work to it's own constituent parts.  Actually it was performing
the work itself.  No commission can be allowed because the joint
venture performed the work in question with its own forces.

We find, therefore, that the contractor's contention that the
change order work was performed by other than its forces to be
untenable and unreasonable.

Even assuming the two corporations could be acting as separate
entities, aside from the joint venture, the appellant would have
breached its contract since it would not have complied with that
portion of the contract which required the contractor to perform
on the site with its own organization work equivalent to at least
12 percent of the total amount of work to be performed under the
contract.

We hold that the contractor is not legally entitled to any
commission claimed as additional compensation.  This appeal is
denied.