The opinion of the court was delivered by: MINER
MEMORANDUM-DECISION and ORDER
This is an action to recover for monies allegedly due the Government under the terms of a performance bond issued by defendant as surety for a defaulting contractor. Jurisdiction is founded upon the provisions of 28 U.S.C. § 1345. Before this Court is the Government's motion for (1) an order pursuant to Rule 56 of the Fed.R.Civ.P. granting summary judgment on the grounds that the defendant, through the contractor, Rhein Contracting Corporation, has failed to exhaust mandatory administrative remedies, and (2) for an order pursuant to Rules 12(b)(1) and (6) and 56, Fed.R.Civ.P., dismissing defendant's counterclaims or granting summary judgment on the grounds that the defendant, through the contractor Rhein Contracting Corporation, has failed to exhaust mandatory administrative remedies.
On June 28, 1973, the United States Air Force awarded a contract to the Rhein Contracting Corporation of Albany, New York. The contract was for the repair of roofs of base facilities at Plattsburgh Air Force Base, New York. The defendant, Glens Falls Insurance Company (hereinafter "Surety"), as surety for the contractor Rhein Contracting Corporation (hereinafter "Rhein"), executed a performance bond on July 11, 1973 for the penal sum of $ 158,000 to secure performance of the contract. The terms of this performance bond provide that the obligations of the Surety would be void and of no effect only if the principal, Rhein, performed all the terms and conditions of the contract. Rhein completed approximately 17 percent of the required work and abandoned performance on September 17, 1974.
The contract was terminated for default on October 31, 1974. On April 24, 1975, bids were opened for reprocurement of the contract. Trataros Painting and Construction Corporation (hereinafter "Trataros") submitted the lowest bid in the amount of $ 193,335.00. The second lowest bid was received from NIK General Contractor (hereinafter "NIK") in the amount of $ 242,076.00. On May 2, 1975, the Surety was advised by the Government that the low bidder claimed a mistake in its bid. On May 14, 1975, Contracting Officer Paul R. Pierson conducted an inquiry into the claimed mistake in bid by Trataros and issued a statement pursuant to Armed Services Procurement Regulations (ASPR), § 2-406.3(e)(3)(v), in which he recommended that, although the information submitted by Trataros was not adequate to determine a bona fide mistake in bid, it is in the best interest of the Government to reject the bid as unreasonable.
On June 20, 1975, a contract was entered into between the Government and NIK, the second lowest bidder, in the amount of $ 242,076.00. Subsequently, the Government demanded $ 114,223.52, plus interest at 87/8 percent from September 8, 1975, from the Surety. This sum represented the NIK bid of $ 242,076.00, plus the agreed extra cost of $ 1,696.00, less the admitted contract balance of $ 129,548.48. On September 2, 1977, the Surety tendered a check in the amount of $ 65,482.52 to the Government. This sum represented the difference between the Trataros low bid of $ 193,335 and the agreed contract balance of $ 129,548.48 plus the agreed extra cost.
On September 8, 1975, a Notice of Assessment was issued to Rhein for the excess reprocurement costs. The Surety, at this time, unsuccessfully attempted to contact Rhein regarding the Government's demand for the excess costs.
The default termination and the excess cost assessment were not appealed by either the contractor or the Surety.
On October 28, 1980, the Government filed suit against the defendant for the remaining $ 69,126.76 plus interest. The defendant alleges as defenses and counterclaims that (1) the Government failed to follow its own regulations respecting mistakes in bids; (2) that the decision of the contracting officer that there was no mistake in the Trataros bid should have been "final and conclusive"
; (3) that the interest computations of the Government are incorrect, and (4) that the amount of defendant's debt is $ 65,482.52 and has already been paid or, alternatively, that defendant has overpaid the Government by $ 12,955.00 and that the Government must remit said $ 12,955.00 to the defendant.
The Government argues that summary judgment must be granted as a matter of law because the defendant, and the insured contractor, failed to exhaust mandatory administrative remedies and, thus, are now estopped from contesting the amount of reprocurement costs and from asserting the above defenses and counterclaims. It is uncontroverted that the Surety and Rhein did not appeal from the Termination Contracting Officer's final decision. However, the Government has the burden of demonstrating that it is entitled to judgment as a matter of law. Adickes v. S. H. Kress & Co., 398 U.S. 144, 90 S. Ct. 1598, 26 L. Ed. 2d 142 (1970); United States v. Bosurgi, 530 F.2d 1105 (2d Cir. 1976).
Under the Wunderlich Act, 41 U.S.C. § 321, a contractor must seek relief provided under the contract or be barred from any relief in the courts. See, e.g., Crown Coat Front Co. v. United States, 386 U.S. 503, 87 S. Ct. 1177, 18 L. Ed. 2d 256 (1967); R.E.D.M. Corp. v. Lo Secco, 412 F.2d 303 (2d Cir. 1969).
The availability of an administrative remedy makes it necessary to use such remedies before a claim may be taken to the courts. United States v. Hammer Contracting Co., 216 F. Supp. 948, 950 (E.D.N.Y.1963), aff'd, 331 F.2d 173 (2d Cir. 1964). Therefore, Rhein, as contractor, by not seeking an administrative remedy, relinquished its rights of action in this Court.
The Government contends that the Surety also had the obligation to appeal, in the name of the contractor, to the Armed Services Board of Contract Appeals. It argues that failure to do so deprived the Surety of the right to assert any defenses or counterclaims in this action. While the right of a surety to assert defenses or claims of the defaulting contractor has been judicially recognized, American Surety Co. of New York v. United States, 317 F.2d 652 (8th Cir. 1963); United States v. Duby, 201 F.2d 800 (9th Cir. 1952), the exercise of that right has been contingent upon the consent of the defaulting contractor, id.
The Government's position that there is a "mandatory" administrative remedy cannot be sustained. For this Court to uphold the Government's position would subject a surety's right to appeal entirely to the whims of its defaulted contractor. Such a "mandatory" administrative remedy would be highly arbitrary and inequitable, particularly under circumstances in which the contractor had an adverse relationship with a surety, or as here, was insolvent or could not be reached for its required consent. One who has no fair opportunity to exhaust an administrative remedy cannot be barred from a court for a failure to do so. See Craycroft v. Ferrall, 408 F.2d 587 (9th Cir. 1969), vacated and remanded, 397 U.S. 335, 90 S. Ct. 1152, 25 L. Ed. 2d ...