A-46587, JANUARY 25, 1933, 12 COMP. GEN. 507

A-46587: Jan 25, 1933

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CONTRACTS - LIQUIDATED DAMAGES - COMPLETION OF WORK BY SURETY WHERE THE RIGHT OF THE CONTRACTOR TO PROCEED IS TERMINATED IN ACCORDANCE WITH ARTICLE 9 OF THE STANDARD GOVERNMENT CONSTRUCTION CONTRACT AND THE SURETY ELECTS TO COMPLETE THE CONTRACT. THE SURETY IS REQUIRED TO COMPLETE THE WORK IN ACCORDANCE WITH THE CONTRACT TERMS. IS CHARGEABLE WITH LIQUIDATED DAMAGES FOR FAILURE TO COMPLETE WITHIN THE TIME STIPULATED IN THE CONTRACT. WHEREIN YOU WERE ALLOWED A BALANCE OF $28. WHEREIN YOU HAVE URGED THAT YOU SHOULD NOT BE CHARGED WITH LIQUIDATED DAMAGES IN AN AGGREGATE AMOUNT OF $5. THE SUBSTANCE OF YOUR CONTENTION IS STATED IN YOUR LETTER OF JANUARY 14. AS IT WAS PERMITTED TO DO UNDER THE CONTRACT.

A-46587, JANUARY 25, 1933, 12 COMP. GEN. 507

CONTRACTS - LIQUIDATED DAMAGES - COMPLETION OF WORK BY SURETY WHERE THE RIGHT OF THE CONTRACTOR TO PROCEED IS TERMINATED IN ACCORDANCE WITH ARTICLE 9 OF THE STANDARD GOVERNMENT CONSTRUCTION CONTRACT AND THE SURETY ELECTS TO COMPLETE THE CONTRACT, THE SURETY IS REQUIRED TO COMPLETE THE WORK IN ACCORDANCE WITH THE CONTRACT TERMS, AND IS CHARGEABLE WITH LIQUIDATED DAMAGES FOR FAILURE TO COMPLETE WITHIN THE TIME STIPULATED IN THE CONTRACT.

COMPTROLLER GENERAL MCCARL TO THE FIDELITY AND CASUALTY COMPANY OF NEW YORK, JANUARY 25, 1933:

THERE HAS BEEN RECEIVED IN REFERENCE TO SETTLEMENT 0289459, DATED OCTOBER 31, 1932, WHEREIN YOU WERE ALLOWED A BALANCE OF $28,551.74 IN FINAL SETTLEMENT UNDER CONTRACT VAC-37, DATED SEPTEMBER 12, 1931, YOUR LETTER OF JANUARY 14, 1933, WHEREIN YOU HAVE URGED THAT YOU SHOULD NOT BE CHARGED WITH LIQUIDATED DAMAGES IN AN AGGREGATE AMOUNT OF $5,900 FOR 118 DAYS' DELAY IN COMPLETION OF WORK.

THE SUBSTANCE OF YOUR CONTENTION IS STATED IN YOUR LETTER OF JANUARY 14, 1933, AS FOLLOWS:

THE GOVERNMENT BY ITS DULY AUTHORIZED AGENTS TERMINATED R. O. STAKE'S RIGHT TO PROCEED WITH THIS CONTRACT ON FEBRUARY 10TH, 1932. AND BY SUCH TERMINATION THE GOVERNMENT COULD TAKE OVER THE WORK AND PROSECUTE THE SAME TO COMPLETION BY CONTRACT OR OTHERWISE, AND THE CONTRACTOR AND HIS SURETIES WOULD BE LIABLE TO THE GOVERNMENT FOR ANY EXCESS COSTS OCCASIONED THE GOVERNMENT THEREBY. THE GOVERNMENT DID NOT FINISH THE WORK ITSELF BUT RELET THE CONTRACT TO THE FIDELITY AND CASUALTY COMPANY, AS IT WAS PERMITTED TO DO UNDER THE CONTRACT. THE FIDELITY AND CASUALTY COMPANY DID NOT COMPLETE THIS WORK AS SURETY FOR R. O. STAKE BUT AS AN INDEPENDENT CONTRACTOR ON A SEPARATE CONTRACT WITH THE GOVERNMENT. THE GOVERNMENT'S RIGHT TO COLLECT LIQUIDATED DAMAGES ENDED WHEN IT TERMINATED R. O. STAKE'S RIGHTS TO PROCEED WITH THE WORK. THE FIDELITY AND CASUALTY COMPANY REFUSED TO PUT ANY MONEY INTO THE CONTRACT UNTIL THE GOVERNMENT HAD DEFAULTED R. O. STAKE. WE KNEW OUR RIGHTS AND LIABILITIES; IF WE HAD GONE AHEAD WITH THE WORK BY ASSISTING R. O. STAKE FINANCIALLY WE KNEW THAT WE WOULD WAIVE THE PENALTY OF THE BOND AND ALSO BE SUBJECT TO $50.00 PER DAY LIQUIDATED DAMAGES; IF THE GOVERNMENT COMPLETED, WE KNEW THAT THERE WOULD BE NO LIQUIDATED DAMAGES BUT WE COULD NOT BE SURE THAT THE GOVERNMENT WOULD COMPLETE AS CHEAPLY AS WE COULD ALTHOUGH WE WOULD BE SURE THAT THE LIMIT OF OUR LIABILITY WOULD NOT BE BEYOND THE PENALTY OF OUR BOND; AND, IF THE GOVERNMENT DEFAULTED R. O. STAKE AND PERMITTED US TO COMPLETE, WE KNEW THAT THE LIQUIDATED DAMAGES WOULD NOT BE CHARGED AGAINST US AND THAT WE WOULD BE SURE THAT THE WORK WOULD BE DONE FOR THE LEAST COST POSSIBLE ALTHOUGH BY CONSENTING TO COMPLETE WE WOULD BE WAIVING THE PENALTY OF THE BOND. IT WAS ONLY AFTER CONSIDERING THESE THREE POSSIBLE WAYS OF PROCEEDING THAT WE DECIDED TO FOLLOW THE LATTER COURSE, HAVING FULLY WEIGHTED THE ADVANTAGES AND DISADVANTAGES OF THE POSITION. YOU SURELY DO NOT SUPPOSE FOR ONE MINUTE THAT WE WOULD HAVE CHOSEN THE LATTER COURSE IF WE HAD CONTEMPLATED HAVING TO PAY LIQUIDATED DAMAGES. IT WOULD HAVE BEEN UNREASONABLE. WE WOULD HAVE PERMITTED THE GOVERNMENT TO COMPLETE AND BY DOING SO, WE WOULD NOT BE SADDLED WITH LIQUIDATED DAMAGES AND THE GOVERNMENT WOULD HAVE RELET THE CONTRACT FOR POSSIBLY NO MORE THAN IT COST US TO COMPLETE AND IT WAS ONLY BECAUSE WE FELT THAT WE COULD RELET THE CONTRACT FOR LESS THAN THE GOVERNMENT THAT WE CONSENTED TO TAKE IT OVER.

THE RIGHT OF THE CONTRACTOR TO PROCEED WAS TERMINATED UNDER ARTICLE 9 OF THE CONTRACT. AS YOU HAVE STATED, THE GOVERNMENT COULD HAVE COMPLETED THIS WORK BY CONTRACT OR OTHERWISE AND CHARGED THE CONTRACTOR AND HIS SURETY WITH THE EXCESS COST, BUT SINCE YOU AS SURETY HAD GUARANTEED THE CONTRACTOR'S PERFORMANCE IN ACCORDANCE WITH THE TERMS OF THE CONTRACT YOU WERE GIVEN THE OPPORTUNITY TO DO WHAT THE CONTRACTOR HAD FAILED TO DO AND YOU ELECTED TO COMPLETE THE CONTRACT WORK, AND, AS SURETY, YOU ARE ENTITLED TO NO GREATER RIGHTS THAN THE CONTRACTOR HAD AND YOU ARE SUBJECT TO THE SAME LIABILITIES. ONE OF THE LIABILITIES WHICH YOU ASSUMED WAS TO SEE THAT THE WORK WAS COMPLETED WITHIN THE SPECIFIED PERIOD OR PAY LIQUIDATED DAMAGES AT THE STIPULATED RATE THEREFOR.

THERE APPEARS NO BASIS FOR MODIFICATION OF THE SETTLEMENT CHARGING LIQUIDATED DAMAGES AT THE STIPULATED RATE OF $50 PER DAY FOR 118 CALENDAR DAYS IN COMPLETION OF THE WORK AND THE SETTLEMENT IS SUSTAINED.