A-4379, JANUARY 16, 1925, 4 COMP. GEN. 609

A-4379, JANUARY 16, 1925, 4 COMP. GEN. 609

ACCOUNTING - SET-OFF WHERE LIQUIDATED DAMAGES DEDUCTED UNDER A CONTRACT WERE ERRONEOUSLY REFUNDED IN SETTLEMENT OF THE CONTRACT UNDER THE PROVISIONS OF THE DENT ACT OF MARCH 2, 1919, 40 STAT. 1272, ANY SUMS DUE THE CONTRACTOR BY THE UNITED STATES ON ACCOUNT OF OTHER CONTRACTS MAY BE SET OFF AGAINST SUCH ERRONEOUS REFUND.

DECISION BY COMPTROLLER GENERAL MCCARL, JANUARY 16, 1925:

THE EAGLE-OTTAWA LEATHER CO. REQUESTED REVIEW OF SETTLEMENT NO. 037916, DATED JULY 18, 1924, WHEREIN THE SUM OF $534.74 DUE IT FOR UPHOLSTERING LEATHER FURNISHED THE NAVY DEPARTMENT UNDER CONTRACT NO. 110, DATED JANUARY 24, 1924, WAS APPLIED AS A PARTIAL OFFSET AGAINST A PAYMENT OF $31,902.75 MADE TO IT IN JULY, 1920, AS REFUND OF LIQUIDATED DAMAGES DEDUCTED BY REASON OF DELAYS IN DELIVERY UNDER CONTRACTS EL-20-21, 28 AND 48, DATED NOVEMBER 7, 1917, AND CONTRACT EL 84, DATED MARCH 5, 1918. CLAIMANT CONTENDS THAT THE REFUND OF LIQUIDATED DAMAGES WAS PROPER AND THAT THE SET-OFF SHOULD NOT HAVE BEEN MADE.

PURSUANT TO THE TERMS OF THE CONTRACTS THE COMPANY AGREED TO FURNISH AND DELIVER TO THE UNITED STATES ON OR BEFORE CERTAIN SPECIFIED DATES QUANTITIES OF LEATHER MANUFACTURED IN ACCORDANCE WITH SPECIFICATIONS ATTACHED TO AND FORMING A PART OF THE CONTRACTS. EACH OF THE CONTRACTS WAS FOR WAR MATERIAL AND STIPULATED THAT TIME WAS OF THE ESSENCE. EVENT OF DELAY IN DELIVERY, EACH CONTRACT SIMILARLY PROVIDED THAT THE UNITED STATES SHOULD DEDUCT ONE-THIRTIETH OF 1 PERCENT OF THE CONTRACT PRICE FOR EACH AND EVERY DAY OF DELAY IN DELIVERY OF THE MATERIAL WITH THE FURTHER STIPULATION THAT:

IN MAKING SETTLEMENTS IN WHICH SUCH CHARGES ARE INVOLVED, THE CONTRACTOR SHALL RECEIVE CREDIT FOR ALL DELAYS WHICH THE CONTRACTING OFFICER, OR HIS SUCCESSOR, MAY DETERMINE TO HAVE BEEN DUE TO ACTION OF THE UNITED STATES, AND FOR SUCH OTHER DELAYS AS THE SAME AUTHORITY MAY DECIDE TO HAVE BEEN DUE TO SUCH UNAVOIDABLE CAUSES, INCLUDING FIRES, UNSEASONABLY SEVERE STORMS, AND LABOR STRIKES IN THE WORKS OF THE CONTRACTOR, AS OCCURRED BEFORE THE DATE UPON WHICH FINAL DELIVERY IS DUE * * *.

THERE WERE DELAYS IN DELIVERY AND ARMY DISBURSING OFFICERS DEDUCTED AN AGGREGATE OF $31,902.75 AS LIQUIDATED DAMAGES FOR THE DELAYS IN DELIVERY UNDER THE CONTRACTS. ON MARCH 27, 1919, CLAIMANT FILED A CLAIM WITH THE WAR DEPARTMENT FOR REFUND OF LIQUIDATED DAMAGES ON THE GROUND THAT THE DELAYS RESULTED FROM DIFFICULTIES IN COMPLYING WITH INSPECTION REQUIREMENTS, BECAUSE OF SHORTAGE OF COAL, AND BECAUSE OF A SHORTAGE OF HIDES. THE CONTRACTING OFFICER ON OR ABOUT JULY 2, 1919, FOUND THAT DELAY OF 225 DAYS, FROM AUGUST 11, 1917, TO FEBRUARY 15, 1918, HAD RESULTED FROM: SHORTAGE OF COAL; SHORTAGE OF HIDES OF PROPER WEIGHT, AND TIME USED IN EXPERIMENTING TO MEET VIEWS OF ORDNANCE DEPARTMENT.

HOWEVER, NO FURTHER ACTION WAS TAKEN IN THE MATTER AT THAT TIME AND ON MARCH 25, 1920, CLAIMANT FILED A CLAIM UNDER THE DENT ACT OF MARCH 2, 1919, 40 STAT. 1272, FOR $67,209.33 AS EXTRA COST OF MANUFACTURING ALLEGED TO HAVE BEEN CAUSED BY INSPECTION REQUIREMENTS DIFFERENT FROM THE CONTRACT REQUIREMENTS AND FOR DAMAGES DUE TO THE REFUSAL OF THE UNITED STATES TO ACCEPT DELIVERY OF BLACK STRAP LEATHER MANUFACTURED UNDER THE CONTRACTS HEREINBEFORE REFERRED TO. THE WAR DEPARTMENT CLAIMS BOARD ACTING FOR AND IN BEHALF OF THE SECRETARY OF WAR DENIED LIABILITY ON THE UNITED STATES FOR THE ALLEGED EXTRA COST OF $67,209.33 OR ANY PART THEREOF, BUT AGREED TO ALLOW CLAIMANT $31,902.75 AS THE AMOUNT OF LIQUIDATED DAMAGES DEDUCTED AND FORMULATED AND AWARD UNDER THE DENT ACT FOR SAID ACCOUNT WHICH CLAIMANT AGREED TO ACCEPT IN FULL SETTLEMENT, ETC., OF THE CONTRACTS.

THE CONTRACTS HAVING BEEN COMPLETED THERE WAS NO AUTHORITY CONFERRED BY THE DENT ACT OF MARCH 2, 1919, TO SETTLE EITHER THE CLAIM FOR ALLEGED EXTRA COST OR THE CLAIM FOR REFUND OF LIQUIDATED DAMAGES AND THE ACTION TAKEN POSSESSES NO VIRTUE BECAUSE JURISDICTION WAS ASSERTED UNDER SAID ACT. THE QUESTIONS REMAIN WHETHER THE DELAYS FOR WHICH LIQUIDATED DAMAGES WERE DEDUCTED RESULTED FROM ANY OF THE CAUSES SPECIFIED IN THE CONTRACTS AS ENTITLING CLAIMANT TO REMISSION OF LIQUIDATED DAMAGES AND WHETHER THERE WAS ANY SUM PAYABLE BY REASON OF THE ALLEGED EXTRA COST.

THE CONTRACTING OFFICER FOUND THAT DELAYS OF 225 DAYS RESULTED FROM SHORTAGE OF COAL, SHORTAGE OF PROPER HIDES, AND EXPERIMENTATIONS TO MEET THE REQUIREMENTS OF THE ORDNANCE DEPARTMENT. THE PERIOD OF DELAY RESULTING FROM EACH OF THE CAUSES WAS NOT ITEMIZED; HOWEVER, THEY ARE NOT OF THE CAUSES OF DELAY SPECIFIED IN THE CONTRACTS AS ENTITLING CLAIMANT TO REMISSION OF LIQUIDATED DAMAGES; THE UNITED STATES HAD THE LEGAL RIGHT TO INSIST THAT THE LEATHER BE MANUFACTURED IN ACCORDANCE WITH SPECIFICATIONS WITHOUT THEREBY BECOMING RESPONSIBLE FOR ANY DELAYS RESULTING FROM CLAIMANT'S EXPERIMENTS TO MAKE THE LEATHER CONFORM TO SPECIFICATIONS. THERE APPEARS NO AUTHORITY FOR REMISSION OF LIQUIDATED DAMAGES FOR DELAYS IN DELIVERY OF THE LEATHER.

THE CLAIM FOR EXTRA COST APPEARS TO BE WHOLLY UNFOUNDED AND WAS DENIED BY THE WAR DEPARTMENT ON THE GROUND THAT THE ALLEGED COST WAS INCURRED IN MAKING THE LEATHER CONFORM TO SPECIFICATIONS, THE REJECTED BLACK STRAP HARNESS LEATHER NOT CONFORMING TO SPECIFICATIONS.

UPON REVIEW THE SETTLEMENT APPLYING $534.74 AGAINST THE ERRONEOUS PAYMENT OF $31,902.75 IS SUSTAINED AND THE BALANCE OF $31,368.01 IS CERTIFIED DUE THE UNITED STATES.