B-162551, OCT. 9, 1967

B-162551, OCT. 9, 1967

CONTRACTS - PAYMENTS - SURETY BOND INCREASE DECISION TO R-K CONSTRUCTION CO. CONCERNING CLAIM FOR ADDITIONAL BOND PREMIUM PAID TO CONTRACT SURETY BECAUSE OF INCREASE IN CONTRACT. A CONTRACTOR WHO AFTER COMPLETION AND PAYMENT WAS REQUIRED TO PAY ADDITIONAL AMOUNT TO SURETY BECAUSE PAYMENT AND PERFORMANCE BONDS WERE BASED ON $312,692 ORIGINAL CONTRACT PRICE AND AS RESULT OF CHANGES ORDERS AND SUPPLEMENTAL AGREEMENTS CONTRACT PRICE WAS INCREASED TO $405,583.86 MAY NOT HAVE CLAIM ALLOWED SINCE GOVT. DID NOT REQUIRE ADDITIONAL BOND COVERAGE AND UNDER CENTRAL EXCAVATORS, INC. V. U.S., 116 CT. CL. 744 FINAL PAYMENT MUST BE HELD TO HAVE BEEN ACCEPTED WITHOUT RESERVATION.

TO MR. RAY KLEINSCHMIDT, OWNER, R-K CONSTRUCTION:

REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 8, 1967, REQUESTING RECONSIDERATION OF OUR SETTLEMENT CERTIFICATE OF JUNE 23, 1967, WHICH DISALLOWED YOUR CLAIM FOR $604, PLUS INTEREST, AS A RESULT OF THE ADDITIONAL BOND PREMIUM PAID TO YOUR CONTRACT SURETY BECAUSE OF AN INCREASE IN THE PRICE ON CONTRACT T17CG-1328 WITH THE UNITED STATES COAST GUARD.

WE HAVE REVIEWED THE RECORD IN THIS CASE, INCLUDING THE COPIES OF CORRESPONDENCE FURNISHED BY YOU AND THE UNITED STATES COAST GUARD. THE RECORD SHOWS THAT CONTRACT T17CG-1328 IN THE AMOUNT OF $312,692 WAS AWARDED TO YOUR COMPANY ON MARCH 31, 1964, AND THAT A PAYMENT BOND AND PERFORMANCE BOND EACH IN THE PENAL SUM OF $156,346, OR 50 PERCENT OF THE CONTRACT PRICE, WERE FURNISHED BY YOU TO THE COAST GUARD. THE RECORD SHOWS FURTHER THAT, THROUGH THE ISSUANCE OF CHANGE ORDERS AND SUPPLEMENTAL AGREEMENTS DURING THE COURSE OF THE CONTRACT, THE CONTRACT PRICE WAS INCREASED TO $405,583.86. THE CORRESPONDENCE SHOWS THAT ON NOVEMBER 27, 1964, YOU WROTE THE COAST GUARD AND INQUIRED WHETHER IT WAS NECESSARY TO INCREASE THE AMOUNT OF THE PERFORMANCE BOND BECAUSE OF THE INCREASE IN THE CONTRACT PRICE. BY LETTER OF DECEMBER 2, 1964, THE CONTRACTING OFFICER ADVISED THAT NO NEED EXISTED FOR AN ADDITIONAL PERFORMANCE BOND COVERING THE INCREASED PRICE OF THE CONTRACT BECAUSE OF THE SATISFACTORY PERFORMANCE OF THE CONTRACT. IN THAT CONNECTION, AS YOU WERE ADVISED IN THE JUNE 23, 1967, DISALLOWANCE, SECTIONS 1 10.104-1 (F) AND 1-10.105-1 (F) OF THE FEDERAL PROCUREMENT REGULATIONS DO NOT REQUIRE ADDITIONAL BOND COVERAGE IN EVERY CASE WHERE THERE IS AN INCREASE IN THE CONTRACT PRICE, BUT ONLY WHERE IT IS NECESSARY, IN THE OPINION OF THE CONTRACTING OFFICER, TO PROTECT THE INTERESTS OF THE GOVERNMENT IN THE CASE OF PERFORMANCE BONDS AND WHERE IT IS FOUND NECESSARY TO PROTECT THE INTERESTS OF PERSONS SUPPLYING LABOR AND MATERIAL IN THE CASE OF PAYMENT BONDS.

APPARENTLY, THERE WAS NO FURTHER CORRESPONDENCE BETWEEN YOU AND THE CONTRACTING OFFICER ON THIS MATTER UNTIL AFTER THE FINAL PAYMENT WHICH WAS MADE IN APRIL 1965. THE FINAL STATUS REPORT FURNISHED THE SURETY BY THE COAST GUARD SHOWED THE INCREASE IN THE CONTRACT PRICE. AS A RESULT OF THIS INCREASE, THE SURETY DEMANDED, AND YOU PAID, AN ADDITIONAL PREMIUM OF $604. THE CORRESPONDENCE WITH RESPECT TO THE PREMIUM FOLLOWED THE APRIL 1965 FINAL PAYMENT UNDER THE CONTRACT. THE CORRESPONDENCE INCLUDED LETTERS FROM THE SURETY STATING THAT THE CONTRACT BOND PREMIUM WAS COMPUTED ON THE BASIS OF THE ORIGINAL CONTRACT AMOUNT AND THAT WHEN THE CONTRACT PRICE IS INCREASED AN ADDITIONAL PREMIUM IS REQUIRED. NOTWITHSTANDING THE SURETY'S POSITION, THE CONTRACTING OFFICER RESPONDED ON MAY 18, 1965, THAT ADDITIONAL BONDING WAS NOT REQUIRED BY THE GOVERNMENT AND HE TOOK NO FURTHER ACTION. SUBSEQUENTLY, ON DECEMBER 29, 1965, YOU SUBMITTED A CLAIM TO THE COAST GUARD FOR THE $604 EXTRA BOND PREMIUM. THE COAST GUARD THEN SUBMITTED THE MATTER TO OUR CLAIMS DIVISION FOR APPROPRIATE ACTION.

TO SUMMARIZE THE SITUATION, IT DOES NOT APPEAR THAT THE CONTRACTING OFFICER DELIBERATELY MISLED YOU. WHILE THE CONTRACT WAS IN PROGRESS, YOU INQUIRED WHETHER THE CONTRACTING OFFICER WOULD REQUIRE ADDITIONAL BOND COVERAGE AND HE RESPONDED THAT ADDITIONAL COVERAGE WAS NOT NECESSARY. THERE WAS NO INTIMATION THAT THE SURETY WOULD NOT CHARGE AN ADDITIONAL PREMIUM FOR THE INCREASED WORK. YOU DID NOT CLAIM THE ADDITIONAL BONDING COST UNTIL AFTER THE WORK WAS COMPLETED AND FINAL PAYMENT. AT THAT TIME THE ISSUE AROSE BETWEEN YOU AND THE SURETY AS TO WHETHER YOU WERE REQUIRED TO PAY AN ADDITIONAL PREMIUM BY VIRTUE OF THE INCREASE IN CONTRACT PRICE. IN A CASE SOMEWHAT SIMILAR TO THIS SITUATION, THE COURT OF CLAIMS HELD THAT A CLAIM BY THE CONTRACTOR FOR ADDITIONAL BOND PREMIUM WAS BARRED FROM CONSIDERATION WHERE, AS HERE, THE FINAL PAYMENT WAS ACCEPTED BY THE CONTRACTOR WITHOUT A RESERVATION OF THE CLAIM. CENTRAL EXCAVATORS, INC. V. UNITED STATES, 116 CT. CL. 744.

IN THE CIRCUMSTANCES, THERE IS NO LEGAL BASIS, WHICH IS THE ONLY BASIS, UPON WHICH OUR OFFICE COULD ALLOW YOUR CLAIM. ACCORDINGLY, THE DISALLOWANCE OF JUNE 23, 1967, IS SUSTAINED FOR THE REASONS STATED HEREIN.