A-37483, AUGUST 21, 1931, 11 COMP. GEN. 81

A-37483: Aug 21, 1931

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CONTRACTS - DEFAULT - LIQUIDATED DAMAGES - SUBROGATION OF SURETY WHERE GOVERNMENT CONSTRUCTION WORK IS ABANDONED BY A CONTRACTOR AND THE SAME IS COMPLETED BY THE UNITED STATES AND THE AMOUNTS WITHHELD FROM THE DEFAULTING CONTRACTOR UNDER THE RETAINED PERCENTAGE CLAUSE OF THE CONTRACT ARE MORE THAN SUFFICIENT TO REIMBURSE THE GOVERNMENT FOR ITS EXPENDITURES IN FINISHING THE UNCOMPLETED WORK AND FOR THE ACCRUED LIQUIDATED DAMAGES ON ACCOUNT OF THE CONTRACTOR'S DELAY IN PERFORMANCE. UPON A SHOWING THAT IT WAS REQUIRED TO AND DID MAKE PAYMENTS TO MATERIALMEN AND LABORERS TO AN AMOUNT IN EXCESS OF SUCH BALANCE. WHICH CONTRACT WAS ABANDONED BY SAID CONTRACTOR BEFORE COMPLETION. THE CONTRACTOR WAS OBLIGATED.

A-37483, AUGUST 21, 1931, 11 COMP. GEN. 81

CONTRACTS - DEFAULT - LIQUIDATED DAMAGES - SUBROGATION OF SURETY WHERE GOVERNMENT CONSTRUCTION WORK IS ABANDONED BY A CONTRACTOR AND THE SAME IS COMPLETED BY THE UNITED STATES AND THE AMOUNTS WITHHELD FROM THE DEFAULTING CONTRACTOR UNDER THE RETAINED PERCENTAGE CLAUSE OF THE CONTRACT ARE MORE THAN SUFFICIENT TO REIMBURSE THE GOVERNMENT FOR ITS EXPENDITURES IN FINISHING THE UNCOMPLETED WORK AND FOR THE ACCRUED LIQUIDATED DAMAGES ON ACCOUNT OF THE CONTRACTOR'S DELAY IN PERFORMANCE, THE BALANCE OF THE CONTRACT PRICE FOR THE WORK, INCLUDING RETAINED PERCENTAGES, MAY BE PAID TO THE SURETY ON THE PERFORMANCE BOND, UPON A SHOWING THAT IT WAS REQUIRED TO AND DID MAKE PAYMENTS TO MATERIALMEN AND LABORERS TO AN AMOUNT IN EXCESS OF SUCH BALANCE. WHERE A CONTRACTOR ABANDONS HIS CONTRACT, NECESSITATING THE TERMINATION THEREOF BY THE GOVERNMENT AND THE SUBSEQUENT COMPLETION OF THE WORK EITHER BY THE GOVERNMENT OR ANOTHER CONTRACTOR, LIQUIDATED DAMAGES FOR DELAYS IN PERFORMANCE, WHEN PROVIDED FOR IN THE CONTRACT, ACCURE ONLY TO THE DATE OF SUCH TERMINATION.

DECISION BY COMPTROLLER GENERAL MCCARL, AUGUST 21, 1931:

THERE HAS BEEN PRESENTED TO THIS OFFICE FOR CONSIDERATION AND SETTLEMENT THE CLAIM OF THE NEW AMSTERDAM CASUALTY CO. (NEW YORK) FOR THE BALANCE OF THE MONEYS DUE UNDER THE CONTRACT OF HARRY E. TOSTONWITH THE NAVY DEPARTMENT, NUMBERED NOY-299, DATED APRIL 25, 1928, FOR MAKING CERTAIN REPAIRS TO THE HEATING TUNNEL AT THE NAVAL OBSERVATORY, WASHINGTON, D.C., WHICH CONTRACT WAS ABANDONED BY SAID CONTRACTOR BEFORE COMPLETION, NECESSITATING COMPLETION OF THE UNFINISHED WORK BY THE GOVERNMENT.

UNDER THE TERMS AND CONDITIONS OF SAID CONTRACT, THE CONTRACTOR WAS OBLIGATED, FOR AND IN CONSIDERATION OF THE PAYMENT OF $1,897, TO FURNISH ALL LABOR AND MATERIALS AND TO PERFORM ALL WORK REQUIRED FOR REPAIRING THE HEATING TUNNEL AT SAID NAVAL OBSERVATORY IN ACCORDANCE WITH THE SPECIFICATIONS AND DRAWINGS THEREFOR--- MADE A PART OF THE CONTRACT--- AND TO COMMENCE THE WORK WITHIN 10 CALENDAR DAYS AFTER DATE OF RECEIPT OF THE GOVERNMENT'S NOTICE TO PROCEED, AND TO COMPLETE SAME WITHIN 60 CALENDAR DAYS FROM SAID DATE OF RECEIVING NOTICE. THE CONTRACT PROVIDED THAT IN THE EVENT OF DELAY IN COMPLETION OF THE WORK THE CONTRACTOR SHOULD PAY TO THE GOVERNMENT THE SUM OF $5 FOR EACH CALENDAR DAY OF DELAY, EXCEPT FOR SUCH DELAYS AS WERE DUE TO UNFORESEEABLE CAUSES BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE CONTRACTOR, PROVIDED THAT WRITTEN NOTICE THEREOF BE GIVEN BY CONTRACTOR TO THE CONTRACTING OFFICER WITHIN 10 DAYS FROM THE BEGINNING OF THE DELAYS.

TO GUARANTEE THE PERFORMANCE OF SAID CONTRACT IN ACCORDANCE WITH THE TERMS AND CONDITIONS THEREOF, THE CONTRACTOR, HARRY E. TOSTON, AS PRINCIPAL, AND THE NEW AMSTERDAM CASUALTY CO. (NEW YORK), AS SURETY, EXECUTED A PERFORMANCE BOND IN THE SUM OF $569, DATED APRIL 26, 1928, PAYABLE TO THE UNITED STATES OF AMERICA.

THERE WAS A CHANGE IN THE WORK AS IT PROGRESSED BY WHICH THE COMPENSATION TO BE PAID THE CONTRACTOR WAS INCREASED $25 UNDER THE PROVISIONS OF ARTICLE 3 OF THE CONTRACT, THUS INCREASING THE CONTRACT PRICE FOR THE WORK TO $1,922.

THE FACTS RELATIVE TO THE MATTERS INVOLVED IN THE SURETY'S CLAIM ARE STATED BY THE CHIEF OF THE BUREAU OF YARDS AND DOCKS, NAVY DEPARTMENT, IN HIS LETTER OF MAY 15, 1929, TO THIS OFFICE, TO BE AS FOLLOWS:

CONTRACT NOY-299 CALLED FOR THE PERFORMANCE OF THE WORK THEREUNDER WITHIN THE 60-DAY PERIOD FROM AMY 14 TO JULY 13, 1928, FOR THE SUM OF $1,897.00. TO COVER THE EXTRA WORK OF DEPOSITING EXCAVATED MATERIAL NOT REQUIRED FOR BACKFILL AT A GREATER DISTANCE FROM THE SITE THAN PRESCRIBED IN PARAGRAPH 2-07 OF THE SPECIFICATION, ADDITIONAL COMPENSATION AMOUNTING TO $25.00 WAS APPROVED (CHANGE "A"), MAKING THE TOTAL PRICE $1,922.00.

ON JULY 13, 1928, THE WORK BEING THEN INCOMPLETE, THE CONTRACTOR WAS REQUESTED TO DEFER THE SPECIFIED RESTORATION OF THE ROADWAY AND SIDEWALKS FOR A PERIOD OF TEN DAYS IN ORDER TO GIVE THE BACKFILL TIME TO SETTLE. FAILED TO RETURN TO THE WORK AND ON AUGUST 2, ON ACCOUNT OF HIS DEFAULT, HIS RIGHT TO PROCEED THEREWITH WAS, PURSUANT TO ARTICLE 9 OF THE CONTRACT, TERMINATED; AND HIS BONDSMAN, THE NEW AMSTERDAM CASUALTY COMPANY, HAVING ELECTED NOT TO TAKE OVER THE CONTRACT, THE UNFINISHED WORK WAS COMPLETED BY THE GOVERNMENT AT AN EXPENDITURE OF $488.21. FOR THE DELAY OF TEN DAYS FROM JULY 24 TO AUGUST 2, INCLUSIVE, LIQUIDATED DAMAGES AMOUNTING TO $5.00 A DAY TO $50.00 WERE ASSESSED. THE CONTRACTOR RECEIVED ONE PAYMENT ON ACCOUNT OF THE CONTRACT, IN AMOUNT $1,191.60.

THE BOARD APPOINTED IN ACCORDANCE WITH PARAGRAPH 29 OF THE GENERAL PROVISIONS OF THE CONTRACT, FOLLOWING MR. TOSTON'S DEFAULT, ESTIMATED THE VALUE OF THE MATERIAL DELIVERED AND WORK DONE BY HIM, INCLUDING A FAIR PROFIT, TO BE $2,464.55, WHICH ESTIMATE THE BUREAU APPROVED.

SETTLEMENT OF THE CONTRACT ON THE BASIS INDICATED BELOW WAS APPROVED BY THE BUREAU APRIL 12, 1929, VIZ:

TABLE

ORIGINAL PRICE----------------------------------------------- $1,897.00

CHANGE "A," ADDITIONAL WORK------------------------------- 25.00

TOTAL PRICE-------------------------------------------------- 1,922.00

NET AMOUNT PAID CONTRACTOR------------------------ $1,191.60

LIQUIDATED DAMAGES-------------------------------- 50.00

COST TO GOVERNMENT TO COMPLETE-------------------- 488.21

1,729.81

EARNED BALANCE PAYABLE TO CONTRACTOR------------------------- 192.19

THUS, IT APPEARS THAT CONTRACTOR FAILED TO COMPLETE THE WORK BY JULY 13, 1928, THE DATE FIXED BY THE CONTRACT FOR COMPLETION, AND THAT HE ABANDONED HIS CONTRACT ON OR BEFORE JULY 23, 1928, AND FAILED TO PERFORM THE WORK CONTRACTED FOR THEREUNDER, AND THAT HIS SURETY ELECTED NOT TO COMPLETE THE UNFINISHED WORK, NECESSITATING THE SUBSEQUENT COMPLETION THEREOF BY THE GOVERNMENT. CONTRACTOR'S RIGHT TO COMPLETE THE WORK WAS TERMINATED BY THE GOVERNMENT ON AUGUST 2, 1928, PURSUANT TO THE PROVISIONS OF ARTICLE 9 OF THE CONTRACT, AND THE UNFINISHED WORK THEREUNDER SUBSEQUENTLY WAS COMPLETED BY THE GOVERNMENT.

WHERE A CONTRACTOR ABANDONS HIS CONTRACT, NECESSITATING TERMINATION THEREOF BY THE GOVERNMENT AND THE SUBSEQUENT COMPLETION OF THE WORK CONTRACTED FOR EITHER BY ANOTHER CONTRACTOR OR BY THE GOVERNMENT, LIQUIDATED DAMAGES FOR DELAYS IN PERFORMANCE, WHEN PROVIDED FOR IN THE CONTRACT, ACCRUE ONLY TO THE DATE OF SUCH TERMINATION. 7 COMP. GEN. 409; 10 ID. 437.

IN THE INSTANT MATTER THE CONTRACTOR APPEARS TO HAVE RECEIVED THE GOVERNMENT'S NOTICE TO PROCEED WITH THE WORK ON MAY 14, 1928. UNDER THE TERMS OF THE CONTRACT, THEREFORE, THE WORK SHOULD HAVE BEEN COMPLETED WITHIN 60 DAYS FROM THAT DATE, OR ON JULY 13, 1928. CONTRACTOR DID NOT COMPLETE THE WORK, BUT ABANDONED SAME, AND HIS CONTRACT WAS TERMINATED BY THE GOVERNMENT ON AUGUST 2, 1928. IT APPEARS, HOWEVER, THAT THE DELAY IN THE WORK FROM JULY 13, 1928, TO AND INCLUDING JULY 23, 1928, WAS DUE TO THE GOVERNMENT'S ORDER TO SUSPEND THE SPECIFIED RESTORATION OF THE ROADWAY AND SIDEWALKS FOR 10 DAYS IN ORDER TO GIVE THE BACKFILL TIME TO SETTLE, AND UNDER THE TERMS OF THE CONTRACT LIQUIDATED DAMAGES ARE NOT CHARGEABLE AGAINST CONTRACTOR FOR SUCH DELAY. THEREFORE, LIQUIDATED DAMAGES ACCRUED TO THE GOVERNMENT ON ACCOUNT OF UNEXCUSED DELAYS FOR THE PERIOD OF TEN DAYS, BEGINNING JULY 24 AND ENDING AUGUST 2, 1928, AT THE RATE OF $5 FOR EACH CALENDAR DAY, AMOUNTING TO $50. THE CONTRACT PROVIDED:

ARTICLE 9. DELAYS--- DAMAGES.--- IF THE CONTRACTOR REFUSES OR FAILS TO PROSECUTE THE WORK, OR ANY SEPARABLE PART THEREOF, WITH SUCH DILIGENCE AS WILL INSURE ITS COMPLETION WITHIN THE TIME SPECIFIED IN ARTICLE 1, OR ANY EXTENSION THEREOF, OR FAILS TO COMPLETE SAID WORK WITHIN SUCH TIME, THE GOVERNMENT MAY, BY WRITTEN NOTICE TO THE CONTRACTOR, TERMINATE HIS RIGHT TO PROCEED WITH THE WORK OR SUCH PART OF THE WORK AS TO WHICH THERE HAS BEEN DELAY. IN SUCH EVENT, THE GOVERNMENT MAY TAKE OVER THE WORK AND PROSECUTE THE SAME TO COMPLETION BY CONTRACT OR OTHERWISE, AND THE CONTRACTOR AND HIS SURETIES SHALL BE LIABLE TO THE GOVERNMENT FOR ANY EXCESS COST OCCASIONED THE GOVERNMENT THEREBY. IF THE CONTRACTOR'S RIGHT TO PROCEED IS SO TERMINATED, THE GOVERNMENT MAY TAKE POSSESSION OF AND UTILIZE IN COMPLETING THE WORK SUCH MATERIALS, APPLIANCES, AND PLANT AS MAY BE ON THE SITE OF THE WORK AND NECESSARY THEREFOR. IF THE GOVERNMENT DOES NOT TERMINATE THE RIGHT OF THE CONTRACTOR TO PROCEED, THE CONTRACTOR SHALL CONTINUE THE WORK, IN WHICH EVENT THE ACTUAL DAMAGES FOR THE DELAY WILL BE IMPOSSIBLE TO DETERMINE AND IN LIEU THEREOF THE CONTRACTOR SHALL PAY TO THE GOVERNMENT AS FIXED, AGREED, AND LIQUIDATED DAMAGES FOR EACH CALENDAR DAY OF DELAY UNTIL THE WORK IS COMPLETED OR ACCEPTED THE AMOUNT AS SET FORTH IN THE SPECIFICATIONS OR ACCOMPANYING PAPERS AND THE CONTRACTOR AND HIS SURETIES SHALL BE LIABLE FOR THE AMOUNT THEREOF: PROVIDED, THAT THE RIGHT OF THE CONTRACTOR TO PROCEED SHALL NOT BE TERMINATED OR THE CONTRACTOR CHARGED WITH LIQUIDATED DAMAGES BECAUSE OF ANY DELAYS IN THE COMPLETION OF WORK DUE TO UNFORESEEABLE CAUSES BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE CONTRACTOR, INCLUDING, BUT NOT RESTRICTED TO, ACTS OF GOD, OR OF THE PUBLIC ENEMY, ACTS OF THE GOVERNMENT, FIRES, FLOODS, EPIDEMICS, QUARANTINE RESTRICTIONS, STRIKES, FREIGHT EMBARGOES, AND UNUSUALLY SEVERE WEATHER OR DELAYS OF SUBCONTRACTORS DUE TO SUCH CAUSES: PROVIDED FURTHER, THAT THE CONTRACTOR SHALL WITHIN TEN DAYS FROM THE BEGINNING OF ANY SUCH DELAY NOTIFY THE CONTRACTING OFFICER IN WRITING OF THE CAUSES OF DELAY, WHO SHALL ASCERTAIN THE FACTS AND THE EXTENT OF THE DELAY, AND HIS FINDINGS OF FACTS THEREON SHALL BE FINAL AND CONCLUSIVE ON THE PARTIES HERETO, SUBJECT ONLY TO APPEAL, WITHIN THIRTY DAYS, BY THE CONTRACTOR TO THE HEAD OF THE DEPARTMENT CONCERNED, WHOSE DECISION ON SUCH APPEAL AS TO THE FACTS OF DELAY SHALL BE FINAL AND CONCLUSIVE ON THE PARTIES HERETO.

ARTICLE 16. PAYMENTS TO CONTRACTORS.--- (A) UNLESS OTHERWISE PROVIDED IN THE SPECIFICATIONS, PARTIAL PAYMENTS WILL BE MADE AS THE WORK PROGRESSES AT THE END OF EACH CALENDAR MONTH, OR AS SOON THEREAFTER AS PRACTICABLE, ON ESTIMATES MADE AND APPROVED BY THE CONTRACTING OFFICER. IN PREPARING ESTIMATES THE MATERIAL DELIVERED ON THE SITE AND PREPARATORY WORK DONE MAY BE TAKEN INTO CONSIDERATION.

(B) IN MAKING SUCH PARTIAL PAYMENTS THERE SHALL BE RETAINED 10 PERCENT ON THE ESTIMATED AMOUNT UNTIL FINAL COMPLETION AND ACCEPTANCE OF ALL WORK COVERED BY THE CONTRACT: PROVIDED, HOWEVER, THAT THE CONTRACTING OFFICER, AT ANY TIME AFTER 50 PERCENT OF THE WORK HAS BEEN COMPLETED, IF HE FINDS THAT SATISFACTORY PROGRESS IS BEING MADE, MAY MAKE ANY OF THE REMAINING PARTIAL PAYMENTS IN FULL: AND PROVIDED FURTHER, THAT ON COMPLETION AND ACCEPTANCE OF EACH SEPARATE BUILDING, VESSEL, PUBLIC WORK, OR OTHER DIVISION OF THE CONTRACT, ON WHICH THE PRICE IS STATED SEPARATELY IN THE CONTRACT, PAYMENT MAY BE MADE IN FULL, INCLUDING RETAINED PERCENTAGES THEREON, LESS AUTHORIZED DEDUCTIONS.

(C) ALL MATERIAL AND WORK COVERED BY PARTIAL PAYMENTS MADE SHALL THEREUPON BECOME THE SOLE PROPERTY OF THE GOVERNMENT, BUT THIS PROVISION SHALL NOT BE CONSTRUED AS RELIEVING THE CONTRACTOR FROM THE SOLE RESPONSIBILITY FOR THE CARE AND PROTECTION OF MATERIALS AND WORK UPON WHICH PAYMENTS HAVE BEEN MADE OR THE RESTORATION OF ANY DAMAGED WORK, OR AS A WAIVER OF THE RIGHT OF THE GOVERNMENT TO REQUIRE THE FULFILLMENT OF ALL OF THE TERMS OF THE CONTRACT.

(D) UPON COMPLETION AND ACCEPTANCE OF ALL WORK REQUIRED HEREUNDER, THE AMOUNT DUE THE CONTRACTOR UNDER THIS CONTRACT WILL BE PAID UPON THE PRESENTATION OF A PROPERLY EXECUTED AND DULY CERTIFIED VOUCHER THEREFOR, AFTER THE CONTRACTOR SHALL HAVE FURNISHED THE GOVERNMENT WITH A RELEASE, IF REQUIRED, OF ALL CLAIMS AGAINST THE GOVERNMENT ARISING UNDER AND BY VIRTUE OF THIS CONTRACT, OTHER THAN SUCH CLAIMS, IF ANY, AS MAY BE SPECIFICALLY EXCEPTED BY THE CONTRACTOR FROM THE OPERATION OF THE RELEASE IN STATED AMOUNTS TO BE SET FORTH THEREIN.

DAMAGES FOR DELAY IN ACCORDANCE WITH ARTICLE 9 OF THE STANDARD GOVERNMENT FORM OF CONTRACT (CONSTRUCTION) SHALL BE AT THE RATE OF $5 PER CALENDAR DAY.

THE RECORD DISCLOSES THAT PROGRESS OR PARTIAL PAYMENTS, ON THE BASIS OF 90 PERCENT OF THE ESTIMATED VALUE OF THE COMPLETED WORK, WERE MADE TO THE CONTRACTOR BY A NAVY DEPARTMENT DISBURSING OFFICER, AS FOLLOWS: JUNE, 1928, ON VOUCHER NO. 1 -------------------------------- $89.10 JULY, 1928, ON VOUCHER NO. 2 -------------------------------- 1,102.50

TOTAL PAYMENTS TO CONTRACTOR -------------------------- 1,191.60

THE CHIEF OF BUREAU OF YARDS AND DOCKS, NAVY DEPARTMENT, ON MAY 15, 1929, REPORTED TO THIS OFFICE THAT THE TOTAL AMOUNT EXPENDED BY THE UNITED STATES TO COMPLETE THE WORK AFTER ITS ABANDONMENT BY THE CONTRACTOR AGGREGATED $488.21.

AFTER DEDUCTING FROM THE CONTRACT PRICE OF $1,922 FOR THE REQUIRED WORK, (1) THE $1,191.60 PAID TO THE CONTRACTOR, (2) THE $488.21 EXPENDITURES MADE BY THE UNITED STATES IN COMPLETING THE CONTRACT, AND (3) THE $50 ACCRUED LIQUIDATED DAMAGES, THERE REMAINS OF THE CONTRACT PRICE THE SUM OF $192.19.

THE NEW AMSTERDAM CASUALTY CO. (NEW YORK) SURETY ON THE CONTRACTOR'S PERFORMANCE BOND, CLAIMS THE $192.19 BALANCE DUE UNDER THE CONTRACT IN ORDER PARTIALLY TO REIMBURSE IT FOR EXPENDITURES ON BEHALF OF THE CONTRACTOR FOR WHICH IT WAS LIABLE UNDER THE PERFORMANCE BOND.

THE PERFORMANCE BOND PROVIDED:

NOW, THEREFORE, IF THE PRINCIPAL SHALL WELL AND TRULY PERFORM AND FULFILL ALL THE UNDERTAKINGS,COVENANTS, TERMS, CONDITIONS, AND AGREEMENTS OF SAID CONTRACT DURING THE ORIGINAL TERM OF SAID CONTRACT AND ANY EXTENSIONS THEREOF THAT MAY BE GRANTED BY THE GOVERNMENT, WITH OR WITHOUT NOTICE TO THE SURETY, AND DURING THE LIFE OF ANY GUARANTY REQUIRED UNDER THE CONTRACT, AND SHALL ALSO WELL AND TRULY PERFORM AND FULFILL ALL THE UNDERTAKINGS, COVENANTS, TERMS, CONDITIONS, AND AGREEMENTS OF ANY AND ALL DULY AUTHORIZED MODIFICATIONS OF SAID CONTRACT THAT MAY HEREAFTER BE MADE, NOTICE OF WHICH MODIFICATIONS TO THE SURETY BEING HEREBY WAIVED, AND IF SAID CONTRACT IS FOR THE CONSTRUCTION OR REPAIR OF A PUBLIC BUILDING OR A PUBLIC WORK WITHIN THE MEANING OF THE ACT OF AUGUST 13, 1894, AS AMENDED BY ACT OF FEBRUARY 25, 1905, SHALL PROMPTLY MAKE PAYMENT TO ALL PERSONS SUPPLYING THE PRINCIPAL WITH LABOR AND MATERIALS IN THE PROSECUTION OF THE WORK PROVIDED FOR IN SAID CONTRACT, AND ANY SUCH AUTHORIZED EXTENSION OR MODIFICATION THEREOF, THEN, THIS OBLIGATION TO BE VOID; OTHERWISE TO REMAIN IN FULL FORCE AND VIRTUE.

THIS CONTRACT FOR THE REPAIRING OF THE HEATING TUNNEL AT THE UNITED STATES NAVAL OBSERVATORY, WASHINGTON, D.C., IS FOR A PUBLIC WORK WITHIN THE MEANING OF THE ACT OF AUGUST 13, 1894, 28 STAT. 278, AS AMENDED BY THE ACT OF FEBRUARY 24, 1905, 33 STAT. 811, WHICH PROVIDES FOR THE PROTECTION OF PERSONS FURNISHING MATERIALS AND LABOR FOR THE CONSTRUCTION OF PUBLIC BUILDINGS AND WORKS. THE COURTS HAVE HELD THAT UNDER A PERFORMANCE BOND FOR PUBLIC BUILDINGS AND WORK UNDER SAID STATUTE THE OBLIGATION HAS A DUAL ASPECT, TO WIT, (1) TO SECURE TO THE GOVERNMENTS THE FAITHFUL PERFORMANCE OF THE CONTRACT, AND (2) TO PROTECT THIRD PERSONS FROM WHOM THE CONTRACTOR MAY OBTAIN MATERIALS OR LABOR; AND THAT THE ACT WAS INTENDED TO PROVIDE A SECURITY FOR LABORERS AND MATERIALMEN ON WHICH THEY COULD RELY CONFIDENTLY FOR PROTECTION, UNLESS THEY RELINQUISHED THE BENEFIT OF SUCH SECURITY BY THEIR OWN DEALINGS WITH THE CONTRACTOR. UNITED STATES V. NATIONAL SURETY COMPANY, 92 FED.REP. 549; EQUITABLE SURETY COMPANY V. UNITED STATES, 234 U.S. 448.

IN VIEW OF SAID STATUTE, AND UNDER THE CONDITIONS OF THE BOND, THE SURETY BECAME BOUND FOR THE PERFORMANCE OF THE WORK BY THE CONTRACTOR IN ACCORDANCE WITH THE STIPULATIONS OF THE CONTRACT AND FOR THE PROMPT PAYMENT OF MONEYS DUE TO ALL PERSONS SUPPLYING LABOR AND MATERIALS TO THE CONTRACTOR FOR THE WORK UNDER SAID CONTRACT.

IN THE INSTANT CASE THE CONTRACTOR DEFAULTED IN PERFORMANCE OF HIS CONTRACT AND THE SURETY ELECTED NOT TO COMPLETE THE CONTRACT, AND THE UNITED STATES WAS COMPELLED TO COMPLETE THE WORK. HOWEVER, AT THE TIME OF SAID DEFAULT THERE WERE FUNDS DUE THE CONTRACTOR FOR WORK PERFORMED WHICH HAD BEEN WITHHELD UNTIL COMPLETION OF THE WORK, UNDER THE RETAINED PERCENTAGE CLAUSE OF THE CONTRACT. AFTER PAYMENTS OF THE AMOUNTS DUE THE GOVERNMENT, BOTH FOR NECESSARY EXPENDITURES IN COMPLETING THE WORK AND FOR ACCRUED LIQUIDATED DAMAGES FOR DELAY IN PERFORMANCE, THERE REMAINS OF THE CONTRACT PRICE FOR THE WORK THE SUM OF $192.19 (WHICH INCLUDES THE RETAINED PERCENTAGES), AS BALANCE WITHHELD FROM THE DEFAULTING CONTRACTOR.

IT IS A WELL-SETTLED PRINCIPLE OF LAW THAT WHERE A SURETY UPON A CONTRACTOR'S BOND HAS PAID CLAIMS IT WAS OBLIGED TO PAY, IF ITS PRINCIPAL DID NOT, IT IS ENTITLED BY RIGHT OF SUBROGATION, TO BE REIMBURSED FOR SUCH PAYMENTS FROM AND NOT TO EXCEED THE AMOUNT OF ANY FUNDS IN THE HANDS OF THE GOVERNMENT OTHERWISE DUE THE CONTRACTOR FOR WORK PERFORMED UNDER THE INVOLVED CONTRACT. IN THIS CONNECTION SEE PRAIRIE STATE BANK V. UNITED STATES, 164 U.S. 227. SEE, ALSO, 8 COMP. GEN. 266; AND ID. 318.

THE LAW IS WELL ESTABLISHED THAT THE RETAINED PERCENTAGES AUTHORIZED BY A CONTRACT TO BE WITHHELD UNTIL COMPLETION OF THE WORK TO BE DONE ARE AS MUCH FOR THE INDEMNITY OF HIM WHO MAY BE A GUARANTOR OF THE PERFORMANCE OF THE CONTRACT AS FOR HIM FOR WHOM IT IS TO BE PERFORMED. SEE PRAIRIE STATE BANK V. UNITED STATES, SUPRA; COX V. NEW ENGLAND EQUITABLE INSURANCE COMPANY, 247 FED.REP. 955; AND IN RE SCOFIELD COMPANY, 215 FED.REP. 45.

THE EVIDENCE HEREIN SHOWS THAT CLAIMS AGGREGATION $1,963.87 HAVE BEEN PRESENTED TO THE SURETY BY MATERIALMEN AND LABORERS FOR PAYMENT UNDER THE PERFORMANCE BOND OF THE DEFAULTING CONTRACTOR; THAT THE SURETY LIQUIDATED SUCH OF SAID CLAIMS AS IT DEEMED THE BOND LIABLE FOR, AMOUNTING TO $1,676.80, BY THE PAYMENT OF EACH OF SAID CLAIMANTS A PRO RATA SHARE OF THE AMOUNT OF THE BOND ($569), AMOUNTING IN THE AGGREGATE TO THE SUM OF $485.77; THAT THERE ARE YET PENDING FOR ADJUSTMENT BY THE SURETY DISPUTED CLAIMS IN THE AMOUNT OF $287.07, FOR THE PAYMENTS OF WHICH IT MAY BE LIABLE ON THE BOND.

IN VIEW OF THE FACTS AND CIRCUMSTANCES IN THIS MATTER, AS HEREINABOVE SET FORTH, AND IT APPEARING THAT THE SURETY ON THE DEFAULTING CONTRACTOR'S PERFORMANCE BOND HAS PAID OBLIGATIONS AND LIABILITIES TO MATERIALMEN AND LABORERS UNDER INVOLVED CONTRACT AGGREGATING AN AMOUNT IN EXCESS OF THE BALANCE DUE FROM THE GOVERNMENT UNDER THE CONTRACT, THE SAID $192.19 BALANCE DUE UNDER THE CONTRACT MAY BE PAID TO THE SURETY.