A-11977, FEBRUARY 18, 1926, 5 COMP. GEN. 642

A-11977: Feb 18, 1926

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THERE IS FOR CONSIDERATION IN CONNECTION WITH THE AUDIT OF HIS ACCOUNT THE QUESTION WHETHER THE PAYMENT WAS LEGAL AND PROPER. THE DECLARED INTENTION WAS WRITTEN INTO THE CONTRACT AS FOLLOWS: * * * FURNISH. WILL FURTHER REMOVE THE RECEIVER AND CONDENSATE PUMPS IN BUILDING NO. 16 AND RELOCATE THEM IN BUILDING NO. 121. THE WORK TO BE PERFORMED WITHIN 120 DAYS FROM THE DATE A COPY OF THE CONTRACT WAS DELIVERED TO THE CONTRACTOR. THE WORK WAS COMPLETED ON NOVEMBER 3. AN AGREEMENT WAS EXECUTED. THERE WAS NO ADVERTISING OF THE ADDITIONAL WORK IN ACCORDANCE WITH THE PROVISIONS OF SECTION 3709. OR PERFORMANCE OF THE SERVICE. * * * THERE WAS BEFORE THE COURT OF CLAIMS IN SCHNEIDER V. THERE WAS A PURPORTED CHANGE IN THE CONTRACT WITHOUT ADVERTISING TO REQUIRE MARBLE IN LIEU OF SANDSTONE.

A-11977, FEBRUARY 18, 1926, 5 COMP. GEN. 642

CONTRACTS - ADDITIONAL WORK SECTION 3709, REVISED STATUTES, REQUIRES ADVERTISING, FOR ALL SERVICES AND SUPPLIES SECURED ON BEHALF OF THE GOVERNMENT AND AN ORIGINAL CONTRACT MAY NOT BE EXPANDED BY A SUPPLEMENTAL AGREEMENT ENTERED INTO WITHOUT ADVERTISING, PROVIDING FOR SUBSTANTIAL ADDITIONS TO AND NOT A PART OF THE WORK COVERED BY THE ORIGINAL CONTRACT.

DECISION BY COMPTROLLER GENERAL MCCARL, FEBRUARY 18, 1926:

ROBERT B. HUFF, LIEUTENANT, SUPPLY CORPS, UNITED STATES NAVY, MADE A PAYMENT ON VOUCHER NO. 2341, JANUARY, 1923, ACCOUNTS OF $1,243.70 TO N. CONNOLLY UNDER AN AGREEMENT DATED OCTOBER 4, 1922, PURPORTING TO BE SUPPLEMENTAL TO CONTRACT NO. 4668 OF JUNE 24, 1922, AND THERE IS FOR CONSIDERATION IN CONNECTION WITH THE AUDIT OF HIS ACCOUNT THE QUESTION WHETHER THE PAYMENT WAS LEGAL AND PROPER.

PARAGRAPH 1 OF THE SPECIFICATIONS, INCORPORATED IN AND MADE A PART OF THE CONTRACT, DECLARED THE INTENTION OF THE PROJECT TO BE THE PROVIDING AND SECURING OF A HIGH-PRESSURE 12-INCH STEAM MAIN AND A LOW PRESSURE CONDENSATE MAIN FOR THE POWER HOUSE, BUILDING 23, TO MAIN TUNNEL AT THE CORNER OF SECOND STREET WEST AND PORTER AVENUE, PHILADELPHIA; THE RELOCATION OF THE RECEIVER AND CONDENSATE PUMPS THEN IN BUILDING 16 TO BUILDING 121, NAVY YARD; AND THE CONSTRUCTION OF A NEW CONCRETE TRENCH FROM SECOND STREET WEST AND PORTER AVENUE TO THE TUNNEL AT THE SOUTHWEST CORNER OF BUILDING 121. THE DECLARED INTENTION WAS WRITTEN INTO THE CONTRACT AS FOLLOWS:

* * * FURNISH, DELIVER AND INSTALL A HIGH-PRESSURE 12-INCH STEAM MAIN, AND A LOW-PRESSURE 5-INCH CONDENSATE RETURN MAIN FROM THE POWER HOUSE, BUILDING NO. 23, AT THE NAVY YARD, PHILADELPHIA, PENNSYLVANIA, TO THE MAIN TUNNEL AT THE CORNER OF SECOND STREET WEST AND PORTER AVENUE, AND WILL FURTHER REMOVE THE RECEIVER AND CONDENSATE PUMPS IN BUILDING NO. 16 AND RELOCATE THEM IN BUILDING NO. 121, AND CONSTRUCT AND COMPLETE A CONCRETE TRENCH FROM SECOND STREET WEST AND PORTER AVENUE TO THE TUNNEL AT THE SOUTHWEST CORNER OF BUILDING NO. 121, ALL IN ACCORDANCE WITH THE PROVISIONS OF SPECIFICATION NO. 4668, AND AS CONTEMPLATED BY ITEMS 1 AND 3, PARAGRAPH 48 THEREOF.

AND THE UNITED STATES AGREED TO PAY THE SUM OF $39,030 THEREFOR, THE WORK TO BE PERFORMED WITHIN 120 DAYS FROM THE DATE A COPY OF THE CONTRACT WAS DELIVERED TO THE CONTRACTOR.

THE WORK WAS COMPLETED ON NOVEMBER 3, 1922, AND PAYMENT OF THE CONTRACT PRICE MADE THEREFOR. HOWEVER, ON OCTOBER 4, 1922, OR APPROXIMATELY ONE MONTH BEFORE COMPLETION OF THE WORK, AN AGREEMENT WAS EXECUTED, WITHOUT ADVERTISING, PURPORTING TO BE SUPPLEMENTAL TO THE CONTRACT OF JUNE 24, 1922, WHEREIN THE CONTRACTOR AGREED TO FURNISH, DELIVER, AND INSTALL AT THE PHILADELPHIA NAVY YARD A 4-INCH STEAM LINE FROM THE FOUNDRY TO DRY DOCK NO. 2, INCLUDING A CONCRETE TRENCH FOR THE SAME; AND AN 8-INCH COMPRESSED-AIR LINE FROM PORTER AVENUE TO CONNECTION AT PIER D, AND A 5- INCH COMPRESSED-AIR LINE ALONG PHILIP AVENUE, FOR WHICH THE UNITED STATES AGREED TO PAY $10,970. THE PAYMENT OF $1,243.70 UNDER CONSIDERATION REPRESENTS A PART OF SAID SUM.

THERE WAS NO ADVERTISING OF THE ADDITIONAL WORK IN ACCORDANCE WITH THE PROVISIONS OF SECTION 3709, REVISED STATUTES, AS FOLLOWS:

ALL PURCHASES AND CONTRACTS FOR SUPPLIES OR SERVICES, IN ANY OF THE DEPARTMENTS OF THE GOVERNMENT, EXCEPT FOR PERSONAL SERVICES, SHALL BE MADE BY ADVERTISING A SUFFICIENT TIME PREVIOUSLY FOR PROPOSALS RESPECTING THE SAME, WHEN THE PUBLIC EXIGENCIES DO NOT REQUIRE THE IMMEDIATE DELIVERY OF THE ARTICLES, OR PERFORMANCE OF THE SERVICE. * * *

THERE WAS BEFORE THE COURT OF CLAIMS IN SCHNEIDER V. UNITED STATES, 19 CT.CLS. 547, A CONTRACT WHICH HAD BEEN EXECUTED AFTER ADVERTISING FOR DELIVERY OF A QUANTITY OF SANDSTONE. THERE WAS A PURPORTED CHANGE IN THE CONTRACT WITHOUT ADVERTISING TO REQUIRE MARBLE IN LIEU OF SANDSTONE. THE COURT SAID WITH RESPECT TO THE FAILURE TO COMPLY WITH SECTION 3709, REVISED STATUTES, THAT:

IN THE ABSENCE OF ANY EXIGENCY, IN FACT, OR ANY DECLARED BY THE SECRETARY, OR ANY THAT CAN BE JUDICIALLY INFERRED, WE THINK THE PORTION OF THE SECTION WHICH REQUIRES ADVERTISEMENT IS MANDATORY, AND A CONTRACT MADE IN VIOLATION OF IT IS VOID. CLARK V. UNITED STATES, 95 U.S. 539; UNITED STATES V. SPEED, 8 WALL., 77; HENDERSON'S CASE, 4 CT.CLS., 75; WENTWORTH'S CASE, (5) ID., 302.

BUT IT IS ARGUED THAT THIS WAS ONLY A MODIFICATION OF THE SANDSTONE CONTRACT WHICH HAD BEEN MADE AFTER DUE ADVERTISEMENT. THE CASES OF SOLOMON V. THE UNITED STATES, 17 WALL., 17, AND OF PIATT'S ADMINISTRATORS V. THE UNITED STATES, 22 WALL., 469, WITH OTHER AUTHORITIES, ARE CITED IN SUPPORT OF THIS VIEW. BUT THE COURT IS OF THE OPINION THAT THE MODIFICATION MAKES ESSENTIALLY A NEW AND DIFFERENT CONTRACT. THE ONE IS AN AGREEMENT TO FURNISH SANDSTONE FROM THE STATE OF ILLINOIS, THE OTHER TO FURNISH MARBLE FROM THE STATE OF TENNESSEE. THE PRICE IN THE ONE CASE IS $58,125; IN THE OTHER, $143,125. IT IS ONLY A CHANGE OF ONE ARTICLE FOR ANOTHER, TO BE SURE, BUT THAT ONE ARTICLE IS ALL THERE IS OF THE CONTRACT. THE SECRETARY OF THE TREASURY AT FIRST REGARDED IT AS A MODIFICATION, ALLOWABLE UNDER THE STATUTES WITHOUT ADVERTISEMENT, AND AS SUCH APPROVED IT, BUT UPON REFLECTION HE WITHDREW HIS APPROVAL. WE THINK THE SECRETARY'S FINAL DECISION WAS RIGHT.

THE CONTRACT BEING INVALID, THE CLAIMANT ACQUIRED NO RIGHTS UNDER IT. HE WAS BOUND, AS WELL AS THE OFFICERS OF THE GOVERNMENT, TO KNOW THE LAW, AND IF BOTH MISTOOK IT EACH MUST BEAR HIS OWN LOSS. PIERCE V. UNITED STATES, 7 WALL., 666; MCCOLLUM'S CASE, 17 C.CLS.R., 103.

THIS PRINCIPLE HAS ALSO BEEN REPEATEDLY DECLARED IN DECISIONS OF THE ACCOUNTING OFFICERS OF THE UNITED STATES AND EXPRESSED IN OPINIONS OF ATTORNEYS GENERAL. 3 COMP. DEC. 470; 27 ID. 640; 1 COMP. GEN. 232; 3 ID. 304; 15 OP.ATTY.GEN. 539; 21 ID. 207. SEE ALSO UNITED STATES V. NEWPORT NEWS SHIPBUILDING CO., 178 FED.REP. 194., DRISCOLL V. UNITED STATES, 13 CT.CLS. 15; 6 OP.ATTY.GEN. 99.

IT IS SOUGHT TO ESCAPE THE APPLICATION OF SECTION 3709, REVISED STATUTES, IN THIS CASE BY THE CONTENTION THAT THE AGREEMENT OF OCTOBER 4, 1922, WAS SUPPLEMENTAL TO THE CONTRACT OF JUNE 24, 1922, AND AUTHORIZED WITHOUT ADVERTISING BY PARAGRAPH 17 OF THE GENERAL PROVISIONS OF THE CONTRACT AS FOLLOWS:

THE GOVERNMENT RESERVES THE RIGHT TO MAKE SUCH CHANGES IN THE CONTRACT, PLANS, AND SPECIFICATIONS AS MAY BE DEEMED NECESSARY OR ADVISABLE, AND THE CONTRACTOR AGREES TO PROCEED WITH SUCH CHANGES AS DIRECTED IN WRITING BY THE CHIEF OF THE BUREAU OF YARDS AND DOCKS. THE COST OF SAID CHANGES SHALL BE ESTIMATED BY THE OFFICER IN CHARGE, AND, IF LESS THAN $500, SHALL BE ASCERTAINED BY HIM. IF THE COST OF SAID CHANGES IS $500 OR MORE, AS ESTIMATED BY THE OFFICER IN CHARGE, THE SAME SHALL BE ASCERTAINED BY A BOARD OF NOT LESS THAN THREE OFFICERS OR OTHER REPRESENTATIVES OF THE GOVERNMENT. THE COST OF THE CHANGES AS ASCERTAINED ABOVE, WHEN APPROVED BY THE CHIEF OF THE BUREAU OF YARDS AND DOCKS, SHALL BE ADDED TO OR DEDUCTED FROM THE CONTRACT PRICE, AND THE CONTRACTOR AGREES AND CONSENTS THAT THE CONTRACT PRICE THUS INCREASED OR DECREASED SHALL BE ACCEPTED IN FULL SATISFACTION FOR ALL WORK DONE UNDER THE CONTRACT:PROVIDED, THAT THE INCREASED COST SHALL BE THE ESTIMATED ACTUAL COST TO THE CONTRACTOR AT THE TIME OF SUCH ESTIMATE AND THAT THE DECREASED COST SHALL BE THE ACTUAL OR MARKET VALUE AT THE TIME THE CONTRACT WAS MADE, BOTH PLUS A PROFIT OF 10 PERCENT.

SAID PARAGRAPH AUTHORIZED NOTHING MORE THAN CHANGES IN THE WORK OF THE ORIGINAL CONTRACT AND SO CLOSELY CONNECTED THEREWITH AND SO INSEPARABLY A PART THEREOF THAT THE ADDITIONAL WORK INCIDENT THERETO COULD NOT BE PERFORMED OTHERWISE THAN BY THE CONTRACTOR PERFORMING THE WORK COVERED BY THE ORIGINAL CONTRACT. SAID PARAGRAPH HAS NOTHING WHATEVER TO DO WITH ENTIRELY DIFFERENT WORK, AS HERE, OR WITH AN ENTIRELY DIFFERENT CHARACTER OF WORK AS IN THE SCHNEIDER CASE, SUPRA.

THERE MAY BE INSTANCES AFTER A CONTRACT HAS BEEN DULY AND LAWFULLY ENTERED INTO ON BEHALF OF THE UNITED STATES FOR THE DOING OR ACQUIRING OF THINGS AUTHORIZED BY LAW TO BE DONE OR ACQUIRED, WHERE A CHANGE OR MODIFICATION IN THE CONTRACT SPECIFICATIONS IS ESSENTIAL AND IN THE INTEREST OF THE UNITED STATES. IN SUCH INSTANCES, IF THE CHANGES MATERIALLY ALTER THE CHARACTER OR SCOPE OF THE REQUIREMENTS UNDER THE ORIGINAL CONTRACT, SAID CONTRACT SHOULD BE TERMINATED IN THE INTEREST OF THE GOVERNMENT AND BIDS SHOULD BE SOLICITED ON THE WORK AS CHANGED. THE CHANGES DO NOT MATERIALLY AFFECT THE REQUIREMENTS UNDER THE ORIGINAL CONTRACT BUT INVOLVE RATHER AN ADDITION THERETO, THE RULE WITH REFERENCE TO THE PROCEDURE TO BE FOLLOWED IS AS STATED IN DECISION OF JANUARY 21, 1926, 5 COMP. GEN. 508, AS FOLLOWS:

* * * IN GENERAL, AN EXISTING CONTRACT MAY NOT BE EXPANDED SO AS TO INCLUDE ADDITIONAL WORK OF ANY CONSIDERABLE MAGNITUDE, WITHOUT COMPLIANCE WITH SECTION 3709, REVISED STATUTES, UNLESS IT CLEARLY APPEARS THAT THE ADDITIONAL WORK WAS NOT IN CONTEMPLATION AT THE TIME OF THE ORIGINAL CONTRACTING AND IS SUCH AN INSEPARABLE PART OF THE WORK ORIGINALLY CONTRACTED FOR AS TO RENDER IT REASONABLY IMPOSSIBLE OF PERFORMANCE BY OTHER THAN THE ORIGINAL CONTRACTOR. THE APPARENT PROBABILITY THAT THE ADDITIONAL WORK MAY BE DONE MORE CONVENIENTLY OR EVEN AT LESS EXPENSE BY THE ORIGINAL CONTRACTOR, BECAUSE OF BEING ENGAGED UPON THE ORIGINAL WORK, OR OTHERWISE, IS NOT CONTROLLING OF THE MATTER AS TO WHETHER THE PROVISIONS OF SECTION 3709 ARE FOR APPLICATION. WHETHER THE ORIGINAL CONTRACTOR CAN DO THE WORK AT LESS EXPENSE TO THE GOVERNMENT THAN CAN ANY OTHER CONTRACTOR IS POSSIBLE OF DEFINITE DETERMINATION ONLY BY SOLICITING COMPETITIVE BIDS AS CONTEMPLATED UNDER SAID SECTION. * * *

HERE THE WORK REQUIRED BY THE SUPPLEMENTAL AGREEMENT HAD LITTLE IF ANY CONNECTION WITH THE ORIGINAL CONTRACT AND IT IS CLEAR THAT THE LAYING OF THE ADDITIONAL MAINS COULD HAVE BEEN DONE BY SOME OTHER CONTRACTOR. SHORT, THERE WAS A CLEAR VIOLATION OF THE STATUTE WITH RESPECT TO ADVERTISING AND INSTEAD OF THE ADDITIONAL WORK BEING PERFORMED AS A "CHANGE" IN THE CONTRACT--- WHICH IT WAS NOT--- THE MATTER SHOULD HAVE BEEN SUBMITTED FOR BIDS. HOWEVER, THE REQUIREMENT AS TO ADVERTISING, WITH RESPECT TO CHANGES IN CONTRACTS, APPEARS NOT TO HAVE BEEN FULLY UNDERSTOOD IN THE VARIOUS ADMINISTRATIVE DEPARTMENTS AND OTHER GOVERNMENT ESTABLISHMENTS, AND IN VIEW OF THE PRACTICE ESTABLISHED AS A RESULT OF THE MISUNDERSTANDING, CREDIT WILL BE ALLOWED FOR THE INSTANT PAYMENT AND, IF OTHERWISE PROPER, FOR ALL OTHER SIMILAR PAYMENTS UNDER CHANGES HERETOFORE MADE. BUT HEREAFTER, UNLESS THE LAW REQUIRING FULL COMPETITION BE SHOWN TO HAVE BEEN OBSERVED IN MAKING CHANGES TO CONTRACTS, APPROPRIATED FUNDS MUST BE HELD UNAVAILABLE FOR PAYMENT THEREFOR.