B-130284, FEB. 25, 1958

B-130284, FEB. 25, 1958

TO THE SECRETARY OF THE INTERIOR:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 31, 1958, REQUESTING AMPLIFICATION OF OUR DECISION OF DECEMBER 30, 1957, RELATING TO THE COMPUTATION OF DAMAGES CHARGEABLE TO R. O. NIERSTHEIMER AND K. C. STINGEL, JOINT VENTURERS UNDER CONTRACT NO. 14-04-001-259, DATED AUGUST 4, 1955, BECAUSE OF THE FAILURE OF A PORTION OF THE SEWER EXTENSIONS CONSTRUCTED UNDER THE CONTRACT TO MEET THE REQUIREMENTS OF THE SPECIFICATIONS AS TO TIGHTNESS.

OUR DECISION OF DECEMBER 30, 1957, IS TO THE EFFECT THAT--- SINCE IT WAS ADMINISTRATIVELY DETERMINED THAT IT WOULD NOT BE FEASIBLE TO REQUIRE A REBUILDING OF THE DEFECTIVE SEWER LINES, AND SINCE DIFFERENCE IN VALUE IS SOMETIMES USED AS A MEASURE OF DAMAGES FOR DEFECTS OR OMISSIONS IN THE PERFORMANCE OF CONSTRUCTION CONTRACTS--- THE DAMAGES CHARGEABLE TO THE CONTRACTORS MIGHT PROPERLY BE CONSIDERED TO BE SUBSTANTIALLY LESS THAN THE REPORTED COST OF REBUILDING THE DEFECTIVE SEWERS AT THE CONTRACT RATES.

HOWEVER, IT WAS FELT THAT THE GOVERNMENT SHOULD NOT ENTER INTO ANY SEPARATE AGREEMENT WITH THE CONTRACTORS CONCERNING THE AMOUNT OF SUCH DAMAGES IN VIEW OF THE PENDENCY OF A CLAIM OF THE CONTRACTORS FOR $61,003.69 ON ACCOUNT OF DELAYS IN PERFORMANCE OCCASIONED BY TESTING PROCEDURES, WHICH CLAIM WAS REPORTED AS BEING THE SUBJECT MATTER OF AN APPEAL FILED WITH THE INTERIOR BOARD OF CONTRACT APPEALS. IT WAS SUGGESTED IN THIS CONNECTION THAT, IF THIS APPEAL WERE DISMISSED AND SUIT WERE FILED AGAINST THE UNITED STATES, THE GOVERNMENT WOULD BE ENTITLED TO ASSERT A COUNTERCLAIM FOR AS MUCH AS $120,258.31, REPRESENTING THE REPORTED COST OF REBUILDING THE DEFECTIVE SEWERS, BASED UPON THE CONTRACT PRICES FOR PIPE, EXCAVATION AND BACKFILL.

ALTHOUGH IT WAS UNDERSTOOD THAT THE RETAINED PORTION OF THE TOTAL CONTRACT PRICE WAS IN EXCESS OF THE AMOUNT NECESSARY TO PROVIDE AN ANNUITY OF THE TYPE REFERRED TO IN YOUR LETTER OF NOVEMBER 6, 1957, WE ASSUMED THAT THE RETAINED AMOUNT WAS LESS THAN THE REPORTED COST OF REBUILDING THE DEFECTIVE SEWER LINES. WE ARE NOW ADVISED THAT THE SUM OF $171,438.15 HAS BEEN WITHHELD FROM PAYMENT UNDER THE CONTRACT AND THE QUESTION PRESENTED IS WHETHER WE WOULD OBJECT TO PAYMENT OF THE DIFFERENCE BETWEEN THAT AMOUNT AND $120,258.31, OR $51,179.84, AS THE BALANCE DUE FOR THE ACCEPTABLE WORK PERFORMED UNDER THE CONTRACT.

YOU ARE ADVISED THAT WE HAVE NO OBJECTION TO THE PAYMENT OF THE SUM OF $51,179.84 TO THE CONTRACTORS, SINCE IT CLEARLY APPEARS THAT THE RETENTION OF THE AMOUNT OF $120,258.31 WILL BE SUFFICIENT TO PROTECT THE INTERESTS OF THE GOVERNMENT IN THE MATTER, PENDING SETTLEMENT OR ADJUSTMENT OF THE CONTRACTORS' CLAIM ON ACCOUNT OF DELAYS IN PERFORMANCE OCCASIONED BY TESTING PROCEDURES, AND FINAL DETERMINATION OF THE VALUE OF THE UNACCEPTABLE SEWER INSTALLATION.

A COPY OF OUR LETTER OF TODAY TO THE CONTRACTOR'S ATTORNEY IS ENCLOSED FOR YOUR INFORMATION.