A-11909, MARCH 22, 1926, 5 COMP. GEN. 750

A-11909: Mar 22, 1926

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THERE IS NO JURISDICTION OR AUTHORITY IN ANY ADMINISTRATIVE OFFICER OF THE GOVERNMENT TO WAIVE SUCH RIGHT. THE FACT THAT THE UNITED STATES MAY HAVE SUSTAINED NO ACTUAL DAMAGE UNDER A LIQUIDATED DAMAGE CONTRACT AS THE RESULT OF A DELAY ON THE PART OF THE CONTRACTOR CAN AFFORD NO JUSTIFICATION FOR THE WAIVER OF LIQUIDATED DAMAGES THAT MAY HAVE ACCRUED. WHEREIN CREDIT WAS DISALLOWED FOR ITEMS AGGREGATING $13. THE BASIS OF THE DISALLOWANCE WAS THAT THE DISBURSING OFFICER. WHICH ARE HEREBY LIQUIDATED AT THAT SUM. IT SHALL HAVE THE RIGHT TO DO SO. " AND ARTICLE EIGHT OF THE CONTRACT PROVIDES THAT "ALL MATERIALS FURNISHED AND THE EXECUTION AND PERFORMANCE OF THE WORK HEREUNDER IN ALL PARTICULARS ARE TO BE TO THE FULL SATISFACTION AND ACCEPTANCE OF THE COMMISSIONER.

A-11909, MARCH 22, 1926, 5 COMP. GEN. 750

CONTRACTS, LIQUIDATED DAMAGES - WAIVER OF WHERE THE RIGHT TO DEDUCT OR COLLECT LIQUIDATED DAMAGES UNDER A CONTRACT ACCRUES TO THE GOVERNMENT, THERE IS NO JURISDICTION OR AUTHORITY IN ANY ADMINISTRATIVE OFFICER OF THE GOVERNMENT TO WAIVE SUCH RIGHT, EITHER PURSUANT TO A PROVISION IN THE CONTRACT OR OTHERWISE, UNLESS SUCH JURISDICTION OR AUTHORITY HAS BEEN SPECIFICALLY GRANTED BY STATUTE. THE FACT THAT THE UNITED STATES MAY HAVE SUSTAINED NO ACTUAL DAMAGE UNDER A LIQUIDATED DAMAGE CONTRACT AS THE RESULT OF A DELAY ON THE PART OF THE CONTRACTOR CAN AFFORD NO JUSTIFICATION FOR THE WAIVER OF LIQUIDATED DAMAGES THAT MAY HAVE ACCRUED.

DECISION BY COMPTROLLER GENERAL MCCARL, MARCH 22, 1926:

THE SECRETARY OF THE INTERIOR BY LETTER OF NOVEMBER 10, 1925, REQUESTED REVIEW OF SETTLEMENT NO. C-23666-I OF THE ACCOUNTS OF J. B. CALLAHAN, CHIEF DISBURSING CLERK, DEPARTMENT OF THE INTERIOR, COVERING THE PERIOD FROM JULY 1 TO SEPTEMBER 30, 1924, WHEREIN CREDIT WAS DISALLOWED FOR ITEMS AGGREGATING $13,890, BEING A PART OF THE AMOUNTS PAID TO SACKETT AND WILHELMS CORPORATION ON ACCOUNT OF PHOTOLITHOGRAPHIC COPIES FURNISHED UNDER CONTRACT OF JUNE 10, 1924, BETWEEN SAID CORPORATION AND THE COMMISSIONER OF PATENTS.

THE BASIS OF THE DISALLOWANCE WAS THAT THE DISBURSING OFFICER, IN MAKING PAYMENTS IN AUGUST AND SEPTEMBER, 1924, FOR COPIES FURNISHED UNDER THE CONTRACT, DID NOT MAKE ANY DEDUCTION AS LIQUIDATED DAMAGES ON ACCOUNT OF DELAYS IN DELIVERY AS PROVIDED FOR UNDER ARTICLE 7 OF THE CONTRACT, WHICH READS:

IN THE EVENT, HOWEVER, OF FAILURE ON THE PART OF THE CONTRACTOR TO COMPLETE AN ENTIRE ORDER AS APPEARS UPON ANY REQUISITION, AND WITHIN THE TIME OR TIMES HEREIN SPECIFIED, IT AGREES TO PAY TO THE GOVERNMENT FOR EACH AND EVERY REQUISITION DELAYED FOR EACH AND EVERY SECULAR DAY AFTER THE DATE FIXED FOR THE COMPLETION AND DELIVERY OF THE WORK THE SUM OFTEN DOLLARS ($10) IN GOOD AND LAWFUL MONEY OF THE UNITED STATES, NOT AS A PENALTY OR FORFEITURE, BUT AS AND FOR THE DAMAGES TO THE GOVERNMENT, WHICH ARE HEREBY LIQUIDATED AT THAT SUM; AND THE SURETY OR SURETIES ON THE CONTRACTOR'S BOND SHALL BE JOINTLY AND SEVERALLY LIABLE FOR SUCH DAMAGES, WHICH DAMAGES MAY BE DEDUCTED FROM ANY AMOUNTS IN THE HANDS OF THE GOVERNMENT PAYABLE TO THE CONTRACTOR, OR SUCH DAMAGES MAY BE SUED FOR IN THE NAME OF THE UNITED STATES OF AMERICA, AT THE OPTION OF THE GOVERNMENT; PROVIDED, HOWEVER, THAT THE COLLECTION OF SUCH SUMS MAY BE WAIVED IN WHOLE OR IN PART IN THE DISCRETION OF THE SECRETARY OF THE INTERIOR.

IN THE REQUEST FOR REVIEW THE SECRETARY OF THE INTERIOR SUBMITS THE FOLLOWING EXPLANATIONS AND REASONS AS A BASIS FOR ALLOWING THE ITEMS IN QUESTION:

THE ACT OF JULY (JANUARY) 12, 1895 (28 STAT. 620) AUTHORIZES THE COMMISSIONER OF PATENTS TO CONTRACT FOR THE PHOTOLITHOGRAPHIC WORK OF HIS OFFICE AND PROVIDES THAT IT SHALL BE PERFORMED UNDER THE DIRECTION OF THE COMMISSIONER OF PATENTS. ACTING UNDER THIS AUTHORITY AND PURSUANT TO APPROPRIATIONS BY CONGRESS THE COMMISSIONER OF PATENTS ON JUNE 10, 1924, ENTERED INTO A CONTRACT WITH THE SACKETT AND WILHELMS CORPORATION OF BROOKLYN, NEW YORK, FOR THE FURNISHING AND DELIVERING OF PHOTOLITHOGRAPHIC WORK FOR HIS OFFICE.

ARTICLE SIX OF THIS CONTRACT PROVIDES, AMONG OTHER THINGS, THAT "IF DURING THE CONTINUANCE OF THE CONTRACT THE GOVERNMENT SHALL DESIRE TO CHANGE THE SIZE OF THE COPIES, THE STYLE OF THE WORK, THE QUALITY OF THE PAPER, OR THE TIME OF DELIVERIES, IT SHALL HAVE THE RIGHT TO DO SO," AND ARTICLE EIGHT OF THE CONTRACT PROVIDES THAT "ALL MATERIALS FURNISHED AND THE EXECUTION AND PERFORMANCE OF THE WORK HEREUNDER IN ALL PARTICULARS ARE TO BE TO THE FULL SATISFACTION AND ACCEPTANCE OF THE COMMISSIONER, WHOSE JUDGMENT AND DETERMINATION AS TO THE STANDARD, QUALITY, AND CHARACTER OF THE SAME, AS WELL AS THE PROMPTNESS OF DELIVERY, SHALL BE FINAL AND CONCLUSIVE.'

IT APPEARS THAT ON JUNE 6, 1924, THE PATENT OFFICE CALLED THE ATTENTION OF THE CONTRACTOR TO THE FACT THAT CERTAIN DELAYS WERE OCCURRING IN THE DELIVERIES OF THE WORK, AND HE WAS REQUESTED TO REMEDY THE SAME.

ON JUNE 7, 1924, THE CONTRACTOR CALLED THE ATTENTION OF THE COMMISSIONER OF PATENTS TO THE FACT THAT HE COULD NOT COMPLETE THE WORK REQUIRED UNDER HIS CONTRACT FOR THE FISCAL YEAR ENDING JUNE 30, 1924, UNLESS HE WAS PERMITTED TO DEFER TAKING UP THE WORK UNDER HIS NEW CONTRACT FOR 1925, AND UNDER DATE OF JULY 9, 1924, THE COMMISSIONER OF PATENTS GRANTED HIS REQUEST.

FROM THE COPY OF A LETTER FROM THE COMMISSIONER OF PATENTS DATED JULY 10, 1925, AND A LETTER FROM THE CHIEF CLERK OF THAT OFFICE DATED AUGUST 4, 1925, WITH ACCOMPANYING INCLOSURES, WHICH WERE TRANSMITTED TO THE GENERAL ACCOUNTING OFFICE BY DEPARTMENT LETTER OF SEPTEMBER 26, 1925, IT WILL BE SEEN THAT THE DELAYS IN THE DELIVERIES OF THE WORK FOR WHICH IT IS PROPOSED TO PENALIZE THE CONTRACTOR WERE DULY AUTHORIZED BY THE COMMISSIONER OF PATENTS, AND THAT UNDER THE LAW AND THE TERMS OF THE CONTRACT THE COMMISSIONER WAS CLOTHED WITH FULL AUTHORITY TO GRANT THE EXTENSION OF TIME, AND THAT HIS JUDGMENT AS TO THE PROMPTNESS OF DELIVERIES AND OF THE DETAILS CONNECTED WITH THE WORK ARE FINAL AND CONCLUSIVE. FURTHERMORE, THE GOVERNMENT DOES NOT APPEAR TO HAVE BEEN DAMAGED IN ANY RESPECT BY THE FAILURE TO DELIVER THE WORK WITHIN THE CONTRACTUAL PERIODS.

IT IS NOTED THAT THE SECRETARY DOES NOT SEEK TO JUSTIFY THE DISBURSING OFFICER'S FAILURE TO DEDUCT LIQUIDATED DAMAGES ON ANY ATTEMPTED WAIVER UNDER THE PROVISO AT THE END OF ARTICLE 7, SUPRA, AND IT IS ASSUMED FROM THIS THAT HE RECOGNIZED THE FACT THAT SAID PROVISO IS OF NO FORCE OR EFFECT. HOWEVER, IT MAY BE PROPER TO STATE IN THIS CONNECTION, THAT WHERE THE RIGHT TO DEDUCT OR COLLECT LIQUIDATED DAMAGES ACCRUES TO THE GOVERNMENT UNDER A CONTRACT, THERE IS NO JURISDICTION OR AUTHORITY IN ANY ADMINISTRATIVE OFFICER OF THE GOVERNMENT TO WAIVE SUCH RIGHT, EITHER PURSUANT TO A PROVISION IN THE CONTRACT OR OTHERWISE, UNLESS SUCH JURISDICTION OR AUTHORITY IS SPECIFICALLY GRANTED BY STATUTE, AS IN THE CASE OF CERTAIN PUBLIC BUILDING CONTRACTS UNDER SECTION 21 OF THE ACT OF JUNE 6, 1902, 32 STAT. 326, AND EVEN IN SUCH CASES THE DISCRETION AUTHORIZED TO BE EXERCISED IS A LEGAL DISCRETION. 4 COMP. GEN. 306. THERE IS NO STATUTE AUTHORIZING THE INCLUSION OF SUCH PROVISIONS IN CONTRACTS MADE BY THE COMMISSIONER OF PATENTS OR ANY OTHER OFFICER UNDER THE DEPARTMENT OF THE INTERIOR, AND SUCH PROVISIONS SHOULD BE OMITTED FROM ALL SUCH CONTRACTS HEREAFTER. 3 COMP. GEN. 696; 4 ID. 578; 5 ID. 363.

THE PROVISION IN ARTICLE 8 OF THE CONTRACT, REFERRED TO BY THE

SECRETARY, TO THE EFFECT THAT THE JUDGMENT AND DETERMINATION OF THIS COMMISSIONER AS TO "THE PROMPTNESS OF DELIVERY" SHALL BE FINAL AND CONCLUSIVE, RELATES ONLY TO QUESTIONS OF FACT AS TO DATES OF REQUISITIONS, DELIVERIES, ETC., AND CAN NOT BE CONSTRUED TO CONFER ANY AUTHORITY TO WAIVE LIQUIDATED DAMAGES. IF SAID PROVISION WAS INTENDED TO AUTHORIZE ANY WAIVER OF THE GOVERNMENT'S RIGHTS IN THE MATTER OF LIQUIDATED DAMAGES, IT IS, TO THAT EXTENT, NULL AND VOID FOR REASONS SET FORTH IN THE PRECEDING PARAGRAPH HEREOF.

WITH REFERENCE TO THE SECRETARY'S STATEMENT, SUPRA, THAT "THE GOVERNMENT DOES NOT APPEAR TO HAVE BEEN DAMAGED IN ANY RESPECT BY THE FAILURE TO DELIVER THE WORK WITHIN THE CONTEMPLATED PERIODS," ATTENTION IS INVITED TO DECISION IN 23 COMP. DEC. 514, 515, IN WHICH IT WAS SAID:

THE FACT THAT THE UNITED STATES MAY HAVE SUSTAINED NO ACTUAL DAMAGE AS A RESULT OF THE DELAY, IF IT WERE POSSIBLE FOR ANYONE TO FIND SUCH TO BE A FACT, CAN AFFORD NO JUSTIFICATION FOR A WAIVER OF ANY LIQUIDATED DAMAGES THAT MAY HAVE ACCRUED. THIS PRINCIPLE IS SO WELL ESTABLISHED BY DECISIONS OF THE COURTS AND OF THIS OFFICE THAT IT IS NOT UNDERSTOOD WHY AN OFFICER OF THE GOVERNMENT SHOULD SUGGEST A WAIVER OF LIQUIDATED DAMAGES IN SUCH CASES.

IN VIEW OF WHAT HAS BEEN SAID HEREIN, IT MUST BE HELD THAT THE CONTRACTOR IS PROPERLY CHARGEABLE WITH LIQUIDATED DAMAGES AS PROVIDED FOR IN ARTICLE 7 OF THE CONTRACT ON ALL DELIVERIES NOT COMPLETED AS REQUIRED BY THE CONTRACT.

IT NOW APPEARS, HOWEVER, THAT BEFORE THERE WAS ANY DELIVERY UNDER THE CONTRACT--- IN FACT, BEFORE WORK HAD COMMENCED THEREUNDER--- IT WAS AGREED THAT DELIVERIES UNDER SAID CONTRACT SHOULD NOT BEGIN UNTIL JULY 19, 1924. IN VIEW OF THE TERMS OF THE CONTRACT, THE VALIDITY OF SUCH ARRANGEMENT IS DOUBTFUL. HOWEVER, THE CIRCUMSTANCES AND THE APPARENT INTERESTS OF THE UNITED STATES WERE SUCH AS WOULD SEEM TO JUSTIFY THIS OFFICE IN WITHHOLDING FURTHER OBJECTION THERETO. ACCORDINGLY, JULY 19 WILL BE REGARDED AS THE DUE DATE FOR THE REQUISITIONS OF JULY 1, JULY 20 FOR THE REQUISITIONS OF JULY 2, JULY 21 FOR JULY 3, AND SO ON THROUGHOUT THE LIFE OF THE CONTRACT, AND THE DISBURSING OFFICER'S ACCOUNTS WILL BE ADJUSTED ACCORDINGLY.