A-99709, JANUARY 15, 1941, 20 COMP. GEN. 374

A-99709, JANUARY 15, 1941, 20 COMP. GEN. 374

CONTRACTS - INCREASED COSTS - DEFAULTING CONTRACTOR IN COMPUTING EXCESS COST OF PURCHASES AGAINST THE ACCOUNT OF A DEFAULTING CONTRACTOR HE IS NOT ENTITLED TO CREDIT FOR ANY AMOUNT WHICH MAY ACCRUE TO THE GOVERNMENT AS LIQUIDATED DAMAGES BECAUSE OF DELAYS IN DELIVERIES UNDER THE COMPLETION CONTRACT.

COMPTROLLER GENERAL WARREN TO NATHAN BOONE WILLIAMS, JANUARY 15, 1941:

YOUR LETTER OF DECEMBER 19, 1940, ON BEHALF OF DOEHLER METAL FURNITURE CO., INC., PROTESTS AGAINST THE COMPUTATION OF THE INDEBTEDNESS TO THE UNITED STATES OF THAT COMPANY AS REFLECTED IN SETTLEMENT NO. US-7668-W, DATED DECEMBER 11, 1940, WHICH CERTIFIED THE CONTRACTOR TO BE INDEBTED TO THE UNITED STATES IN THE GROSS AMOUNT OF $21,682.42, LESS $8,970.57 OTHERWISE DUE THE CONTRACTOR, LEAVING A NET DEBT OF $12,711.85, AS A RESULT OF ITS DEFAULT UNDER CONTRACT W-950-QM 1561, DATED DECEMBER 22, 1938.

THIS MATTER WAS THE SUBJECT OF DECISION OF OCTOBER 31, 1940, WHICH CONSIDERED THE COMPUTATION OF EXCESS COSTS AS INDICATED ABOVE; AND THE FACTS ARE STATED THEREIN.

IT IS YOUR CONTENTION THAT IN COMPUTING THE EXCESS COST TO THE GOVERNMENT UNDER THE CONTRACT WITH THE EQUIPMENT AND FURNITURE CORPORATION, THERE SHOULD BE ALLOWED TO DOEHLER METAL FURNITURE ., INC., THE AMOUNT OF LIQUIDATED DAMAGES COLLECTED FROM THE COMPLETING CONTRACTOR BECAUSE OF ITS FAILURE TO PERFORM WITHIN THE TIME SPECIFIED IN THE COMPLETION CONTRACT, WHICH AMOUNT IS STATED BY YOU TO BE APPROXIMATELY $9,408.62.

THE PURPOSE OF THE PROVISION WITH RESPECT TO LIQUIDATED DAMAGES INCORPORATED IN THE COMPLETION CONTRACT, WAS TO ENABLE THE PARTIES THERETO TO FIX IN ADVANCE THE MEASURE OF DAMAGES WHICH WOULD BE INCURRED BY THE UNITED STATES IN THE EVENT OF A FAILURE TO DELIVER ON TIME. THE AMOUNT STIPULATED THEREIN DOES NOT REPRESENT A REDUCTION OF THE CONTRACT PRICE, BUT RATHER AN APPROXIMATION OF THE DAMAGES TO THE GOVERNMENT BY REASON OF DELAYED PERFORMANCE THEREUNDER. THE COLLECTION OF SUCH DAMAGES FROM THE AMOUNT OF THE CONTRACT PRICE, RATHER THAN BY SOME OTHER MEANS, DOES NOT CHANGE ITS NATURE IN ANY RESPECT. IT IS OBVIOUS, THEREFORE, THAT IF CREDIT WERE GIVEN THE DOEHLER METAL FURNITURE CO., INC., FOR ANY AMOUNT OF LIQUIDATED DAMAGES ACCRUING TO THE GOVERNMENT UNDER THE COMPLETION CONTRACT, THE GOVERNMENT WOULD BE DEPRIVED OF ITS COMPENSATION FOR DAMAGES FOR THE DELAY. THE LIQUIDATED DAMAGE PROVISION IN THE COMPLETION CONTRACT HAS ONLY TO DO WITH THE GOVERNMENT'S REMEDY FOR A BREACH THEREUNDER, AND IS NOT A MATTER FOR CONSIDERATION IN COMPUTING EXCESS COSTS CHARGEABLE TO THE DOEHLER METAL FURNITURE CO., INC.

UNDER THE CIRCUMSTANCES APPEARING IN THIS CASE IT IS EVIDENT THAT THE MEASURE OF EXCESS COST RESULTING FROM THE DEFAULTING UNDER CONTRACT W-950- QM-1561, DATED DECEMBER 22, 1938, IS ESTABLISHED BY THE CONTRACT PRICE OF THE COMPLETION CONTRACT WITH THE EQUIPMENT AND FURNITURE CORPORATION; AND THAT ANY LIQUIDATED DAMAGES COLLECTED UNDER THE LATTER CONTRACT PERTAIN TO A SEPARATE AND DISTINCT BREACH OF THAT CONTRACT WITH WHICH THE DOEHLER METAL FURNITURE CO., INC., IS NOT CONCERNED. CONSEQUENTLY, IT MUST BE HELD THAT THE COMPUTATION OF EXCESS COSTS IN THE GROSS AMOUNT OF $21,682.42, AS STATED IN SETTLEMENT NO. US-7668-W, DATED DECEMBER 11, 1940, BY REASON OF THE DEFAULT OF THE DOEHLER METAL FURNITURE CO., INC., UNDER CONTRACT NO. W-950-QM-1561 DATED DECEMBER 22, 1938, IS CORRECT; AND SAID SETTLEMENT IS SUSTAINED.