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FARRISH GRAVEL COMPANY, INC. AND PHILLIPS CONTRACTING COMPANY, INC. v. MISSISSIPPI STATE HIGHWAY COMMISSION

NOVEMBER 07, 1984

FARRISH GRAVEL COMPANY, INC. AND PHILLIPS CONTRACTING COMPANY, INC.
v.
MISSISSIPPI STATE HIGHWAY COMMISSION



BEFORE ROY NOBLE LEE, DAN LEE and ROBERTSON

ROY NOBLE LEE, PRESIDING JUSTICE, FOR THE COURT:

Farrish Gravel Company, Inc. (Farrish) and Phillips Contracting Company, Inc. (Phillips) filed suit in the First Judicial District of Hinds County, against the Mississippi State Highway Commission [Commission] seeking money judgments for adjustments in highway contracts and seeking to enjoin the Commission from restricting the price adjustment program under highway contracts to the time period prior to the beginning of overtime on the respective projects. The cases were consolidated for trial, the chancellor found against both Farrish and Phillips and dismissed the complaints. Farrish and Phillips appeal here and assign three (3) errors in the trial below.

The central issue in this case involves the interpretation and applicability of Laws of 1975, Chapter 470 [an amendment to Mississippi Code Annotated 31-7-39 (1972)] to contracts between the Commission and road contractors. The relevant part of the amendment follows:

 Provided further, any public authority authorized to enter into contracts for the construction, maintenance, surfacing or repair of highways, roads or streets, including any department or agency of the State of Mississippi and its political subdivisions, may include in its bid proposal and contract documents a price adjustment clause with relation to the cost to the contractor, including taxes, based upon an industry wide cost index, of petroleum products including asphalt used in the performance or execution of the contract or in the production or manufacture of materials for

 use in such performance; such industry wide cost index to be established and published monthly by the State Highway Department with a copy thereof to be mailed to the clerks of the governing authority of each municipality and the clerks of each board of supervisors throughout the state. The price adjustment clause shall be based on such cost of said petroleum products only and shall not include any additional profit or overhead as part of the adjustment. The bid proposals or document contract shall contain the basis and methods of adjusting unit prices for the change in such cost of said petroleum products.

 After enactment of the amendment, the Commission adopted a price adjustment program and contracts stated in detail the basis and method of adjusting unit prices for changes in the cost of petroleum products necessarily consumed in the road building. The bid proposals and contracts prepared by personnel of the Mississippi State Highway Department provided for a price adjustment clause" based upon an industry-wide cost index, of petroleum products including asphalt used in the performance or execution of the contract. "The personnel of the Mississippi State Highway Department inserted a restrictive paragraph in the special contract provision which follows:

 Adjustments herein provided shall not apply to fuels consumed or materials incorporated into the work during any monthly estimate period falling wholly after the expiration of contract time as determined by checked final quantities.

 The appellants contend that use of the quoted restrictive paragraph is not within the authority conferred by the Legislature, and its use violates the intent of the Legislature as well as the letter of the law, and creates a second penalty on top of liquidated damages. Further, that the Commission never intended to restrict the price adjustment allowance to eliminate periods of performance in overtime and, when the attention of the Commission was called to the restrictive paragraph in the contract documents, the same was eliminated and stricken from the contract documents in May, 1980. In the alternative, appellants argue, if they are mistaken, then the restriction should be construed to exclude only increases in the price of petroleum products above the price prevailing on the date that the contract time allowance for completion expired, free of liquidated damages.

 The Commission vigorously defends its position that

 the chancellor correctly decided the questions in dismissing appellant's bills of complaint and strongly argue that the decree entered in the lower court should be affirmed.

 On May 5, 1980, the restrictive provision was removed from contract by order of the Commission and was intended by the Commissioners to apply both in the future and to those contracts which already contained the provision. On April 28, 1981, the Commission adopted a new provision, viz," After the expiration of contract time, including all authorized extensions, adjustments will be computed using fuel and material prices that are in effect at the expiration of contract time. "On that date, Farrish and Phillips filed their suits for $648,659.39, and $120,249.96, respectively.

 I.

 THE RESTRICTIVE PARAGRAPH WAS UNAUTHORIZED BY THE ENABLING STATUTE AND IS INVALID AND UNENFORCEABLE.

 Appellants contend that the Mississippi State Highway Commission was not required by statute to include the petroleum adjustment in its contracts and, since the Commission made the decision to do so, the petroleum adjustment could not be limited just to the work done during the contract period. The Commission contends that the determination of how to implement the petroleum adjustment clause was a function within the policy-making powers of the Commission. We recognize that government agencies have only such powers that are expressly granted to them, or necessarily implied in their grant of ...


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