A-18657, JULY 27, 1927, 7 COMP. GEN. 73

A-18657: Jul 27, 1927

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THE CONTRACTOR SHOULD HAVE THE RIGHT TO EMPLOY LABOR ON THE WORK IN EXCESS OF EIGHT HOURS PER DAY. WHEREIN CREDIT WAS DISALLOWED IN THE ACCOUNTS OF LIEUT. WAS OBLIGATED TO SUPPLY. THE CONTRACT PROVIDED THAT THE WORK WAS TO BE COMPLETED WITHIN THE NUMBER OF DAYS SPECIFIED. THAT IN CASE THE WORK WAS NOT COMPLETED WITHIN THE TIME FIXED. LIQUIDATED DAMAGES WERE TO BE CHARGED AGAINST CONTRACTOR AT THE PER DIEM RATES THEREIN FIXED FOR EACH DAY OF SUCH DELAY. IT WAS PROVIDED IN THE SPECIFICATIONS OF THE CONTRACT THAT: 281. THE CONTRACTOR SHALL HAVE THE RIGHT UNDER THIS CONTRACT TO EMPLOY LABOR IN EXCESS OF EIGHT HOURS PER DAY. IF THE COST OF SAID CHANGES IS $500 OR MORE. - SPECIAL ATTENTION IS CALLED TO THE PROVISIONS OF THE LAWS RELATING TO HOURS OF LABOR UPON PUBLIC WORKS.

A-18657, JULY 27, 1927, 7 COMP. GEN. 73

CONTRACTS - INCREASED COSTS - SUSPENSION AND RESTORATION OF 8-HOUR LAW WHERE A CONTRACT FOR GOVERNMENT WORK PROVIDED THAT UNDER AUTHORITY OF THE EXECUTIVE ORDER OF MARCH 22, 1917, THE CONTRACTOR SHOULD HAVE THE RIGHT TO EMPLOY LABOR ON THE WORK IN EXCESS OF EIGHT HOURS PER DAY, AT SPECIFIED INCREASED RATES PER HOUR FOR SUCH OVERTIME WORK, THE RESTORATION OF THE PROHIBITIONS OF THE SO-CALLED 8-HOUR LAW, AFTER THE EMERGENCY WHICH CAUSED ITS SUSPENSION BY THE EXECUTIVE ORDER HAD PASSED, DID NOT OBLIGATE THE GOVERNMENT TO PAY ANY EXPENSES INCURRED, OR DAMAGES SUSTAINED, BY THE CONTRACTOR RESULTING THEREFROM.

DECISION BY COMPTROLLER GENERAL MCCARL, JULY 27, 1927:

THE SECRETARY OF THE NAVY APPLIED MAY 24, 1927, FOR REVIEW OF SETTLEMENT NO. 1167-N, DATED SEPTEMBER 8, 1923, WHEREIN CREDIT WAS DISALLOWED IN THE ACCOUNTS OF LIEUT. THOS. C. EDRINGTON, SUPPLY CORPS, UNITED STATES NAVY, FOR $7,388.78 PAID TO THE F. W. MARK CONSTRUCTION CO. (INC.), ON VOUCHER NO. 130, BY CHECK NO. 4665, DATED OCTOBER 2, 1922, UNDER ITS CONTRACT NO. 3269, DATED SEPTEMBER 20, 1918, AND SUPPLEMENTAL CONTRACT NO. 3269X, DATED JUNE 19, 1919, FOR CONSTRUCTION OF A FUEL OIL STORAGE PLANT EQUIPMENT AT THE NAVY FUEL OIL STATION AT YORKTOWN, VA.

UNDER THE PROVISIONS OF THE CONTRACT NO. 3269, DATED SEPTEMBER 20, 1918, AND SUPPLEMENT THERETO DATED JUNE 19, 1919, THE F. W. MARK CONSTRUCTION CO. (INC.) WAS OBLIGATED TO SUPPLY, WITHIN THE TIME STIPULATED, THE LABOR AND SUCH MATERIALS NECESSARY--- IN ADDITION TO MATERIALS SPECIFIED TO BE FURNISHED BY THE GOVERNMENT--- FOR THE CONSTRUCTION AND INSTALLATION OF A FUEL OIL STORAGE PLANT EQUIPMENT AT THE NAVY FUEL OIL STATION AT YORKTOWN, VA., CONSISTING OF A HEATER AND PUMP HOUSE ON THE WHARF, A BOILER HOUSE, A HEATER HOUSE OVER PUMP PITS, A RESIDUE RESERVOIR, VALVE EXTENSION CHAMBERS, SLUDGE PITS AND APPURTENANCES, TOGETHER WITH AN ELECTRIC LIGHTING SYSTEM AND STEAM EXHAUST, BLOW-OFF, OIL, DRIP, FOAM SOLUTION, DRAIN AND WATER PIPING SYSTEMS, AND CERTAIN MECHANICAL AND ELECTRICAL EQUIPMENT, AND NECESSARY ACCESSORIES, IN ACCORDANCE WITH CERTAIN SPECIFICATIONS AND DRAWINGS ATTACHED TO AND MADE A PART OF THE CONTRACT, FOR AN AGREED SUM OF $462,204.53, TOGETHER WITH ADDITIONAL SUMS OF $4.40 AND $2.40 PER CUBIC YARD FOR EXCAVATIONS FOR THE PIPE LINE AND THE BOILER HOUSE.

THE CONTRACT PROVIDED THAT THE WORK WAS TO BE COMPLETED WITHIN THE NUMBER OF DAYS SPECIFIED; THAT EXTENSIONS OF THE TIME FOR COMPLETION THEREOF WOULD BE ALLOWED FOR DELAYS RESULTING FROM STIPULATED CAUSES; AND THAT IN CASE THE WORK WAS NOT COMPLETED WITHIN THE TIME FIXED, OR WITHIN SUCH EXTENSION OF THE CONTRACT AS SHOULD BE ALLOWED BY THE BUREAU OF YARDS AND DOCKS, LIQUIDATED DAMAGES WERE TO BE CHARGED AGAINST CONTRACTOR AT THE PER DIEM RATES THEREIN FIXED FOR EACH DAY OF SUCH DELAY.

IT WAS PROVIDED IN THE SPECIFICATIONS OF THE CONTRACT THAT:

281. SUSPENSION OF EIGHT-HOUR LAW.--- UNDER AUTHORITY OF THE EXECUTIVE ORDER OF MARCH 22, 1917, THE CONTRACTOR SHALL HAVE THE RIGHT UNDER THIS CONTRACT TO EMPLOY LABOR IN EXCESS OF EIGHT HOURS PER DAY, PROVIDED THAT THE WAGES OF PERSONS EMPLOYED UNDER SUCH CONTRACT SHALL BE COMPUTED ON A BASIC DAY RATE OF EIGHT HOURS' WORK, WITH OVERTIME RATES TO BE PAID FOR NOT LESS THAN TIME AND ONE-HALF FOR ALL HOURS' WORK IN EXCESS OF EIGHT HOURS.

THE GENERAL PROVISIONS FORMING PART OF THE SPECIFICATIONS OF THE CONTRACT PROVIDED THAT:

17. CHANGES.--- 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: * * *

23. EIGHT-HOUR LAW.--- SPECIAL ATTENTION IS CALLED TO THE PROVISIONS OF THE LAWS RELATING TO HOURS OF LABOR UPON PUBLIC WORKS. ANY VIOLATION OF SAID LAWS COMING TO THE NOTICE OF THE GOVERNMENT OFFICERS OR EMPLOYEES WILL BE REPORTED TO THE NAVY DEPARTMENT FOR SUCH LEGAL ACTION AS MAY APPEAR WARRANTED.

SUBJECT TO THE PROVISIONS OF SECTION 2 OF THE EIGHT HOUR LAW OF JUNE 19, 1912, NO LABORER OR MECHANIC DOING ANY PART OF THE WORK CONTEMPLATED BY THE CONTRACT IN THE EMPLOY OF THE CONTRACTOR OR ANY SUBCONTRACTOR CONTRACTING FOR ANY PART OF SAID WORK CONTEMPLATED SHALL BE REQUIRED OR PERMITTED TO WORK MORE THAN EIGHT HOURS IN ANY CALENDAR DAY UPON SUCH WORK. FOR EACH VIOLATION OF THIS PROVISION A PENALTY OF $5 SHALL BE IMPOSED FOR EACH LABORER OR MECHANIC FOR EVERY CALENDAR DAY IN WHICH HE SHALL BE REQUIRED OR PERMITTED TO LABOR MORE THAN EIGHT HOURS UPON SAID WORK AND THE AMOUNT OF ANY SUCH PENALTIES SHALL BE WITHHELD FOR THE USE AND BENEFIT OF THE GOVERNMENT FROM ANY MONEYS BECOMING DUE UNDER THIS CONTRACT, WHETHER THE VIOLATION OF THIS PROVISION IS BY THE CONTRACTOR OR ANY SUBCONTRACTOR.

IN THE PROGRESS OF THE WORK THERE APPEARS TO HAVE BEEN MANY CHANGES ORDERED BY THE GOVERNMENT, NECESSITATING CERTAIN INCREASES AND DECREASES FROM THE FIXED CONTRACT PRICE THEREFOR, AND ON ACCOUNT OF WHICH EXTENSIONS OF THE FINAL DATE OF COMPLETION OF THE CONTRACT WAS MADE BY THE BUREAU OF YARDS AND DOCKS FROM TIME TO TIME. THE CONTRACT APPEARS TO HAVE BEEN COMPLETED WITHIN THE PERIOD OF TIME REQUIRED, AS EXTENDED, AND NO LIQUIDATED DAMAGES ACCRUED TO THE GOVERNMENT THEREUNDER. THE CONTRACTOR WAS PAID $524,391.92 IN SETTLEMENT FOR SERVICES AND MATERIALS FURNISHED THE GOVERNMENT UNDER THE CONTRACT.

THE PAYMENT HERE IN QUESTION WAS IN ADDITION TO THE CONTRACT PRICE OF THE WORK WITH THE AUTHORIZED CHANGES ABOVE REFERRED TO, AND APPEARS TO HAVE BEEN APPROVED BY THE BUREAU OF YARDS AND DOCKS FOR THE PURPOSE OF REIMBURSING THE CONTRACTOR FOR OVERHEAD EXPENSES CLAIMED TO HAVE BEEN INCURRED AND DAMAGES SUSTAINED ON ACCOUNT OF THE RESTORATION OF THE EIGHT- HOUR WORKING DAY FOR ALL LABOR AFTER THE SIGNING OF THE ARMISTICE ON NOVEMBER 11, 1918. THE BASIS FOR THE PAYMENT OF THE $7,388.78 WAS THE FINDING OF A BOARD ON CHANGES APPOINTED AS UNDER SECTION 17 OF THE GENERAL PROVISIONS OF THE CONTRACT, HEREINABOVE QUOTED, THAT THE CONTRACTOR SUSTAINED DAMAGES IN THE SUM OF $7,388.78 ON ACCOUNT OF INCREASED OVERHEAD EXPENSES AND PLANT RENTALS CAUSED BY THE RESTORATION OF THE EIGHT-HOUR WORKING DAY FOR LABOR AFTER THE SIGNING OF THE ARMISTICE ON NOVEMBER 11, 1918. THE FINDINGS OF SAID BOARD, DATED NOVEMBER 21, 1921, RELATIVE TO THIS ITEM OF EXPENSE, WERE AS FOLLOWS:

11. * * * THE BOARD HAS CAREFULLY CONSIDERED THE EFFECT OF THE REDUCTION IN WORKING HOURS ON THE DIRECT LABOR COST. THE REPRESENTATIVE OF THE CONTRACTION IN WORKING HOURS ACTUALLY INCREASED THE UNIT COST, ON ACCOUNT OF DISSATISFACTION OF THE MEN IN THEIR REDUCED EARNINGS, AGGRAVATED BY THE LACK OF AMUSEMENT, AND THE PRIMITIVE LIVING CONDITIONS AT THE SITE OF THE WORK. THE BOARD BELIEVES THAT A CONSIDERABLE REDUCTION IN EFFICIENCY ACTUALLY DID OCCUR FROM THIS CAUSE AND THAT THIS REDUCED EFFICIENCY WAS SUFFICIENT TO OFFSET THE SAVING ON ACCOUNT OF THE DISCONTINUANCE OF PAYMENT FOR OVERTIME.

12. THE BOARD, THEREFORE, ESTIMATES AND DETERMINES THAT ADDITIONAL PAYMENT IS DUE THE CONTRACTOR, ON ACCOUNT OF INCREASED OVERHEAD EXPENSE AND PLANT RENTAL, ON ACCOUNT OF REDUCTION IN WORKING HOURS PER DAY AT THE TIME OF THE SIGNING OF THE ARMISTICE, IN THE AMOUNT OF $7,388.78.

THE RECORD DISCLOSES THAT ON ACCOUNT OF THE REDUCTION OF THE WORKING HOURS TO EIGHT HOURS PER DAY AFTER THE SIGNING OF THE ARMISTICE, CONTRACTOR WAS ALLOWED AN EXTENSION OF 60 DAYS' TIME WITHIN WHICH TO COMPLETE THE CONTRACT.

AS HEREINBEFORE INDICATED, THE THEORY UPON WHICH THE PAYMENT IN QUESTION WAS MADE, IS THAT THE RESTORATION OF THE RESTRICTIONS RELATIVE TO HOURS OF LABOR CONSTITUTED A "CHANGE" IN THE CONTRACT WITHIN THE MEANING OF THE PROVISIONS OF PARAGRAPH 17, SUPRA.

THE ACT OF AUGUST 1, 1892, 27 STAT. 340, AS AMENDED BY THE ACT OF JUNE 19, 1912, 37 STAT. 137, AND THE ACT OF MARCH 3, 1913, 37 STAT. 726, REQUIRED ALL CONTRACTS TO HAVE INCORPORATED THEREIN A PROHIBITION, UNDER A PENALTY, AGAINST WORKING EMPLOYEES IN THE TRADES MORE THAN EIGHT HOURS A DAY WHILE ENGAGED UPON ANY WORK FOR THE GOVERNMENT. THE PROHIBITIONS OF THE ACT WERE REMOVED OR SUSPENDED CONDITIONALLY BY THE SECRETARY OF THE NAVY IN CONFORMITY WITH EXECUTIVE ORDER NO. 2554, DATED MARCH 22, 1917, ISSUED UNDER AUTHORITY OF THE ACT OF MARCH 4, 1917, 39 STAT. 1192, MAKING APPROPRIATIONS FOR THE NAVAL ESTABLISHMENT, WHICH PROVIDED:

THAT IN CASE OF NATIONAL EMERGENCY THE PRESIDENT IS AUTHORIZED TO SUSPEND PROVISIONS OF LAW PROHIBITING MORE THAN EIGHT HOURS LABOR IN ANY ONE DAY OF PERSONS ENGAGED UPON WORK COVERED BY CONTRACTS WITH THE UNITED STATES: PROVIDED FURTHER, THAT THE WAGES OF PERSONS EMPLOYED UPON SUCH CONTRACTS SHALL BE COMPUTED ON A BASIS DAY RATE OF EIGHT HOURS WORK, WITH OVERTIME RATES TO BE PAID FOR AT NOT LESS THAN TIME AND ONE-HALF FOR ALL HOURS WORKED IN EXCESS OF EIGHT HOURS.

IT APPEARS THAT THE EXECUTIVE ORDER NO. 2554, DATED MARCH 22, 1917, HEREINABOVE MENTIONED, AUTHORIZED THE WAIVER OR SUSPENSION OF THE REQUIREMENT OF THE EIGHT-HOUR LAW ONLY UNDER CONDITIONS WHERE SUCH SUSPENSION OF THE PROVISIONS OF THE LAW WOULD RESULT IN HASTENING PREPARATION TO MEET EXISTING EMERGENCY CONDITIONS, THE ORDER PROVIDING:

IN ORDER TO ENABLE THE NAVY DEPARTMENT TO MEET THE REQUIREMENTS OF LAW TO SECURE THE MORE EXPEDITIOUS CONSTRUCTION OF SHIPS AND PROCUREMENT OF MUNITIONS AUTHORIZED, AND BY VIRTUE OF THE AUTHORITY VESTED IN ME BY THE PROVISIONS OF THE ACT OF CONGRESS APPROVED MARCH 4, 1917, * * * WHEREBY IT IS PROVIDED "THAT IN CASE OF NATIONAL EMERGENCY THE PRESIDENT IS AUTHORIZED TO SUSPEND PROVISIONS OF LAW PROHIBITING MORE THAN EIGHT HOURS LABOR IN ANY ONE DAY OF PERSONS ENGAGED UPON WORK COVERED BY CONTRACTS WITH THE UNITED STATES: PROVIDED FURTHER, THAT THE WAGES OF PERSONS EMPLOYED UPON SUCH CONTRACTS SHALL BE COMPUTED ON A BASIC DAY RATE OF EIGHT HOURS' WORK, WITH OVERTIME RATES OF EIGHT HOURS.' I DO HEREBY AUTHORIZE THE SUSPENSION OF THE PROVISIONS OF LAW PROHIBITING MORE THAN EIGHT HOURS OF LABOR IN ANY ONE DAY OF PERSONS ENGAGED IN SUCH WORK UNDER CONTRACT WITH THE NAVY DEPARTMENT IN ALL NAVY YARDS AND PRIVATE ESTABLISHMENTS WHERE SUCH SUSPENSION OF THE PROVISIONS OF THE LAW WILL RESULT IN HASTENING PREPARATION TO MEET PRESENT EMERGENCY CONDITIONS. AND RESULT IN HASTENING PREPARATION TO MEET PRESENT EMERGENCY CONDITIONS.

THIS ORDER SHALL TAKE EFFECT FROM AND AFTER THIS DATE.

IT IS OBVIOUS THAT THE PURPOSE OF THE ACT OF MARCH 4, 1917, SUPRA, WAS MERELY TO RELEASE CONTRACTORS FROM THE RESTRICTIONS OF THE STATUTE PROHIBITING THEM FROM WORKING EMPLOYEES MORE THAN EIGHT HOURS A DAY, AND TO PERMIT THEM TO WORK THEIR EMPLOYEES OVERTIME ON CONDITION THAT THEIR WAGES SHOULD BE AT NOT LESS THAN TIME AND ONE-HALF FOR ALL HOURS WORKED IN EXCESS OF EIGHT HOURS. THE SUSPENSION OF THE EIGHT-HOUR LAW WAS AUTHORIZED UNDER THE STATUTE AND THE EXECUTIVE ORDER ONLY FOR THE PURPOSE OF HASTENING PREPARATION TO MEET THE EMERGENCY CONDITIONS EXISTING IN MARCH, 1917. WHEN THE NEED FOR HASTENING SUCH PREPARATIONS CEASED TO EXIST THE AUTHORITY FOR THE SUSPENSION OF THE REQUIREMENTS OF THE LAW CEASED TO EXIST. THE PROVISION IN THE CONTRACT HERE IN QUESTION PURPORTING TO GIVE THE THE CONTRACTOR THE RIGHT TO EMPLOY LABOR IN EXCESS OF EIGHT HOURS A DAY, IMPOSED NO OBLIGATION UPON THE GOVERNMENT TO ASSUME THE ADDITIONAL COST THEREOF, OR THE RESULTING DAMAGES AND EXPENSES AFTER THE EMERGENCY PASSED AND THE RESTORATION OF THE EIGHT-HOUR DAY. SEE DECISION OF THIS OFFICE DATED FEBRUARY 25, 1926, A-6129.

THE "CHANGES" CONTEMPLATED UNDER PARAGRAPH 17, SUPRA, ARE CHANGES AFFECTING THE MATERIAL TO BE FURNISHED, THE QUANTITY OR CHARACTER OF WORK TO BE PERFORMED, OR THE TIME, MEANS, OR PLACE OF DELIVERY. THE RESTORATION OF THE PROHIBITIONS OF THE SO-CALLED 8-HOUR LAW (WHEREBY LABORERS ON GOVERNMENT WORK WERE NOT PERMITTED TO WORK LONGER THAN EIGHT HOURS PER DAY), AFTER THE EMERGENCY THAT CAUSED THEIR SUSPENSION BY EXECUTIVE ORDER HAD PASSED, WAS NOT SUCH A CHANGE BUT WAS RATHER A REQUIREMENT IMPOSED BY OPERATION OF LAW AS A RESULT OF THE PASSING OF THE EMERGENCY CONDITION. BY SECTION 23 OF THE GENERAL PROVISIONS, ABOVE QUOTED, THE SPECIAL ATTENTION OF CONTRACTOR WAS CALLED TO THE PROVISIONS OF THE LAWS RELATING TO THE 8-HOUR DAY FOR LABOR UPON GOVERNMENT WORK. THE CONTRACTOR MUST BE PRESUMED TO HAVE KNOWN, AT THE TIME OF THE EXECUTION OF THE CONTRACT INVOLVED, THAT THE SUSPENSION OF THE 8-HOUR LAW, PROVIDED FOR BY SECTION 281 OF THE SPECIFICATIONS, ABOVE QUOTED, WAS CONDITIONED UPON THE CONTINUANCE OF THE NATIONAL EMERGENCY WHICH PROMPTED THE PRESIDENT TO AUTHORIZE SUCH SUSPENSION BY EXECUTIVE SUSPENSION BY EXECUTIVE ORDER, AND THAT RESTORATION THEREOF WOULD BE EFFECTED WHEN THE EMERGENCY HAD PASSED.

SINCE THE CONTRACT MADE NO PROVISION FOR PAYMENT OF INCREASE IN THE CONTRACT PRICE OR REIMBURSEMENT OF ANY EXPENSES INCURRED OR DAMAGES SUSTAINED ON ACCOUNT OF THE DISCONTINUANCE OF THE OVERTIME EMPLOYMENT OF THE LABOR ENGAGED ON THE WORK THEREUNDER, IT MUST BE HELD THAT THE PAYMENT OF $7,388.78 TO THE CONTRACTOR BY CHECK NO. 4665, DATED OCTOBER 2, 1922, BY THE DISBURSING OFFICER, LIEUT. THOMAS C. EDRINGTON, SUPPLY CORPS, UNITED STATES NAVY, WAS ILLEGAL AND UNAUTHORIZED. ACCORDINGLY, UPON REVIEW, THE DISALLOWANCE OF CREDIT FOR SAID PAYMENT MUST BE AND IS SUSTAINED.