A-57342, NOVEMBER 15, 1935, 15 COMP. GEN. 409

A-57342: Nov 15, 1935

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IS CHARGEABLE WITH LIQUIDATED DAMAGES WHICH HAD ACCRUED TO THE UNITED STATES PRIOR TO THE TERMINATION. OF THE TOTAL AMOUNT CLAIMED THERE WAS ALLOWED THE CONTRACTOR BY SETTLEMENT OF FEBRUARY 12. THAT AMOUNT WAS WITHHELD FROM PAYMENT FOR THE REASON THAT DAVID TEITZ AND SON WERE INDEBTED TO THE UNITED STATES UNDER CONTRACT AND THERE WAS CHARGED AGAINST THE CONTRACTOR AND THE SURETY THE SUM OF $1. WITH SUCH DILIGENCE AS WILL INSURE ITS COMPLETION WITHIN THE TIME SPECIFIED IN ARTICLE 1. LIQUIDATED DAMAGES ARE CHARGEABLE AT THE RATE OF $10 AS NAMED IN THE SPECIFICATIONS FOR EACH CALENDAR DAY OF DELAY IN COMPLETING THE ADDITION TO THE GARAGE. THE WORK WAS TO BE COMMENCED FEBRUARY 6. THE TIME FOR COMPLETION WAS EXTENDED 6 DAYS.

A-57342, NOVEMBER 15, 1935, 15 COMP. GEN. 409

CONTRACTS - DEFAULT OF CONTRACTOR - COMPLETION BY SURETY UNDER THE TERMS OF ARTICLE 9 OF THE GOVERNMENT STANDARD FORM OF CONSTRUCTION CONTRACT A SURETY WHICH COMPLETED THE CONTRACT OF ITS PRINCIPAL WHOSE RIGHT TO PROCEED HAD BEEN TERMINATED BY THE GOVERNMENT, IS CHARGEABLE WITH LIQUIDATED DAMAGES WHICH HAD ACCRUED TO THE UNITED STATES PRIOR TO THE TERMINATION, AND WITH THE EXCESS COST OCCASIONED THE GOVERNMENT IN HAVING THE WORK PROSECUTED TO COMPLETION. CONTRACT PROGRESS PAYMENT PERCENTAGES NOT PAID THE CONTRACTOR MAY BE RETAINED BY THE UNITED STATES IN CONNECTION WITH THE CONTRACTOR'S INDEBTEDNESS ON ANOTHER ACCOUNT.

DECISION BY COMPTROLLER GENERAL MCCARL, NOVEMBER 15, 1935:

THE FIREMAN'S FUND INDEMNITY CO., BY ITS ATTORNEYS, LETTERS DATED MAY 27 AND JULY 17, 1935, REQUESTED REVIEW OF SETTLEMENT NO. 0349845, DATED FEBRUARY 12, 1935, OF ITS CLAIM FOR $3,354.80 AS DUE THE SURETY UNDER CONTRACT NO. W-6174-QM-115, DATED JANUARY 17, 1933, WITH DAVID TEITZ AND SON, FOR THE CONSTRUCTION OF AN ADDITION TO THE QUARTERMASTER GARAGE AND CONSTRUCTION OF A QUARTERMASTER MAINTENANCE BUILDING AT LANGLEY FIELD, VA. OF THE TOTAL AMOUNT CLAIMED THERE WAS ALLOWED THE CONTRACTOR BY SETTLEMENT OF FEBRUARY 12, 1935, $1,669.80 PART OF PERCENTAGES RETAINED PRIOR TO THE CONTRACTOR'S DEFAULT, BUT THAT AMOUNT WAS WITHHELD FROM PAYMENT FOR THE REASON THAT DAVID TEITZ AND SON WERE INDEBTED TO THE UNITED STATES UNDER CONTRACT AND THERE WAS CHARGED AGAINST THE CONTRACTOR AND THE SURETY THE SUM OF $1,685 AS LIQUIDATED DAMAGES DUE THE UNITED STATES BY REASON OF DELAY IN THE COMPLETION OF THE WORK UNDER THAT CONTRACT. BY LETTER OF MAY 27, 1935, THE ATTORNEYS FOR THE SURETY INVITED ATTENTION TO AN OPINION RENDERED MAY 6, 1935, BY THE COURT OF CLAIMS IN THE CASE OF THE FIDELITY AND CASUALTY COMPANY OF NEW YORK V. THE UNITED STATES, COURT OF CLAIMS NO. 42526, AND REQUESTED THAT LIQUIDATED DAMAGES CHARGED IN THE INSTANT CASE BE REMITTED AND THAT PAYMENT BE MADE TO THE FIREMAN'S FUND INDEMNITY CO. OF THE BALANCE DUE UNDER THE CONTRACT INVOLVED.

UNDER THE CONTRACT OF JANUARY 17, 1933, JACOB TEICH, TRADING AS DAVID TEITZ AND SON, AGREED FOR A TOTAL CONSIDERATION OF $32,252 TO FURNISH ALL LABOR AND MATERIALS AND TO PERFORM ALL WORK REQUIRED FOR CONSTRUCTING COMPLETE A FOUR-BAY ADDITION TO THE QUARTERMASTER GARAGE, AND ONE QUARTERMASTER MAINTENANCE BUILDING, INCLUDING UTILITIES THERETO, AT LANGLEY FIELD, VA., IN ACCORDANCE WITH CERTAIN SPECIFICATIONS. THE CONTRACTOR FURNISHED A PERFORMANCE BOND DATED JANUARY 17, 1933, WITH THE FIREMAN'S FUND INDEMNITY CO. AS SURETY IN THE PENAL AMOUNT OF $16,126, AS PROVIDED BY THE ACT OF AUGUST 13, 1894 (28 STAT. 278), AS AMENDED BY THE ACT OF FEBRUARY 24, 1905 (33 STAT. 811).

ARTICLE 9 OF THE CONTRACT PROVIDED, IN PERTINENT PART, THAT:

ARTICLE 9.--- 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 * * *.

UNDER THE PROVISIONS OF SAID ARTICLE 9 OF THE CONTRACT, LIQUIDATED DAMAGES ARE CHARGEABLE AT THE RATE OF $10 AS NAMED IN THE SPECIFICATIONS FOR EACH CALENDAR DAY OF DELAY IN COMPLETING THE ADDITION TO THE GARAGE, AND AT THE RATE OF $15 FOR EACH CALENDAR DAY OF DELAY IN COMPLETING THE MAINTENANCE BUILDING. THE WORK WAS TO BE COMMENCED FEBRUARY 6, 1933, AND COMPLETED SEPTEMBER 4, 1933, BUT BECAUSE OF STORMS AND FLOOD CONDITIONS SET FORTH IN STOP ORDER OF AUGUST 23, 1933, AND NOTICE TO PROCEED DATED AUGUST 29, 1933, THE TIME FOR COMPLETION WAS EXTENDED 6 DAYS. BY CHANGE ORDER A, DATED SEPTEMBER 25, 1933, THE TIME FOR COMPLETION WAS FURTHER EXTENDED FOR 21 DAYS AS TO THE GARAGE ADDITION AND 28 DAYS AS TO THE MAINTENANCE BUILDING, MAKING OCTOBER 21, 1933, THE COMPLETION DATE FOR THE GARAGE ADDITION AND OCTOBER 28, 1933, FOR THE MAINTENANCE BUILDING. UNDER DATE OF NOVEMBER 16, 1933, A STOP ORDER WAS ISSUED DIRECTING THE CONTRACTOR TO STOP FURTHER WORK ON THE FOUR-BAY ADDITION TO THE QUARTERMASTER GARAGE, IT BEING STATED IN THE STOP ORDER THAT THE GOVERNMENT HAD NO FACILITY FOR TESTING HEATING LINES FOR THE GARAGE ADDITION, AND IN VIEW OF THE FACT THAT THE WORK WAS OTHERWISE COMPLETE. THE STOP ORDER OF NOVEMBER 16, 1933, WHICH RELATED ONLY TO THE GARAGE ADDITION, WAS IN EFFECT ON DECEMBER 16, 1933, WHEN THE CONTRACTOR'S RIGHT TO PROCEED WAS TERMINATED, EFFECTIVE DECEMBER 15, 1933, BECAUSE OF ABANDONMENT BY THE CONTRACTOR OF THE WORK. THE CONTRACTOR'S SURETY, THE FIREMAN'S FUND INDEMNITY CO., AS OF DECEMBER 18, 1933, ELECTED TO AND COMPLETED THE CONTRACT WORK--- BEING PAID THEREFOR THE SUMS OF $2,110.46 AND $1,088.14, AS THE FOURTEENTH AND FIFTEENTH ESTIMATES UNDER THE CONTRACT LESS RETAINED PERCENTAGES. SINCE THE SURETY ELECTED TO COMPLETE THE CONTRACT WORK, THERE IS NO DIFFERENCE IN CONTRACT PRICE TO BE CHARGED THE CONTRACTOR AND ITS SURETY. HOWEVER, UNDER ARTICLE 9 OF THE CONTRACT THE CONTRACTOR AND ITS SURETY ARE CHARGEABLE WITH ALL EXCESS COSTS, AND THE SECRETARY OF WAR REPORTED SEPTEMBER 30, 1935, THAT THE UNITED STATES INCURRED COSTS--- WHICH OTHERWISE WOULD NOT HAVE BEEN INCURRED--- OF $234.81 FOR INSPECTION, CLERK HIRE, AND SALARY OF THE CONSTRUCTING QUARTERMASTER DURING THE PERIOD OF DEFAULT AFTER THE RIGHT OF THE CONTRACTOR TO PROCEED HAD BEEN TERMINATED. THESE ITEMS AGGREGATING $234.81 SHOULD HAVE BEEN DEDUCTED FROM THE PROGRESS PAYMENTS MADE TO THE SURETY AND IT HAS BEEN OVERPAID TO THAT EXTENT. (SEE BARRY V. UNITED STATES, 229 U.S. 47.)

THE GARAGE ADDITION WAS COMPLETED ON DECEMBER 28, 1933, AND THE MAINTENANCE BUILDING ON FEBRUARY 6, 1934, BY THE SURETY, RESULTING IN DELAYS OF 27 DAYS AND 101 DAYS, RESPECTIVELY. AS COMPUTED IN THE SETTLEMENT OF FEBRUARY 12, 1935, IN CONNECTION WITH THE FINAL PAYMENT VOUCHER OF $3,354.80, REPRESENTING THE DIFFERENCE BETWEEN THE CONTRACT PRICE AND THE AMOUNT THERETOFORE PAID, 4 DAYS' ADDITIONAL TIME WAS ALLOWED BY REASON OF UNUSUALLY SEVERE STORMY WEATHER IN THE SUMMER OF 1933 FOLLOWING THE SUSPENSION OF WORK FROM AUGUST 23 TO AUGUST 29, 1933, AND LIQUIDATED DAMAGES WERE CHARGED AT THE CONTRACT RATE OF $10 PER CALENDAR DAY FOR 23 DAYS' DELAY IN COMPLETING THE GARAGE ADDITION AND AT THE CONTRACT RATE OF $15 PER CALENDAR DAY FOR 97 DAYS' DELAY IN COMPLETING THE MAINTENANCE BUILDING OR IN AN AGGREGATE AMOUNT OF $1,685, AND THAT AMOUNT WAS DEDUCTED IN THE SETTLEMENT OF FEBRUARY 12, 1935. ADMINISTRATIVE FINDINGS OF FACT MADE IN ACCORDANCE WITH ARTICLE 9 OF THE CONTRACT, WHICH ARE FINAL AND CONCLUSIVE ON THE CONTRACTOR (AS TO WHICH SEE PENN BRIDGE CO. V. UNITED STATES, 59 CT.CLS. 892), SHOW THAT THERE RESULTED DELAYS NOT WITHIN THE EXCEPTED CAUSES NAMED IN ARTICLE 9 OF THE CONTRACT AS ENTITLING THE CONTRACTOR TO REMISSION OF LIQUIDATED DAMAGES FOR A PERIOD OF 21 DAYS FROM OCTOBER 25 TO NOVEMBER 16, 1933, AS TO THE GARAGE ADDITION AND 44 DAYS IN CONNECTION WITH THE MAINTENANCE BUILDING, OR FROM NOVEMBER 1 TO DECEMBER 15, 1933, THE LATTER DATE BEING THE EFFECTIVE DATE OF THE ORDER TERMINATING THE RIGHT OF THE CONTRACTOR TO PROCEED. THE LIQUIDATED DAMAGE WHICH ACCRUED PRIOR TO THE ORDER AGGREGATED $870. IN OTHER WORDS, AT THE TIME THE RIGHT OF THE CONTRACTOR TO PROCEED WAS TERMINATED THERE HAD ACCRUED TO THE UNITED STATES THE RIGHT TO CHARGE $870 AS LIQUIDATED DAMAGES BY REASON OF THE DELAY PRIOR TO THE DATE OF SUCH TERMINATION, AND THE ORDER ISSUED IN ACCORDANCE WITH ARTICLE 9 TERMINATING THE RIGHT OF THE CONTRACTOR TO PROCEED DID NOT OPERATE TO DIVEST THE UNITED STATES OF ITS ACCRUED RIGHT TO $870 LIQUIDATED DAMAGES AS STIPULATED IN THE CONTRACT. WHILE THE CITED CASE OF FIDELITY AND CASUALTY CO. OF NEW YORK HELD THAT UNDER ARTICLE 9 OF THE STANDARD FORM OF CONSTRUCTION CONTRACT, WHICH WAS USED IN THIS CASE, A COMPLETING SURETY MAY NOT BE CHARGED WITH LIQUIDATED DAMAGES FOR DELAYS ACCRUING AFTER THE CONTRACTOR'S RIGHT TO PROCEED THEREUNDER HAS BEEN TERMINATED, SUCH CASE DID NOT HOLD THAT THE CONTRACTOR AND THE COMPLETING SURETY WERE NOT CHARGEABLE WITH LIQUIDATED DAMAGES WHICH HAD ACCRUED TO THE UNITED STATES PRIOR TO THE TIME WHEN THE RIGHT OF THE CONTRACTOR TO PROCEED WAS TERMINATED.

THAT IS TO SAY, THERE ARE CHARGEABLE TO ANY BALANCE ACCRUING UNDER THIS CONTRACT THE AFORESAID ITEM OF $870, REPRESENTING LIQUIDATED DAMAGES WHICH HAD ACCRUED TO THE UNITED STATES FROM THE DATE THE RIGHT OF THE CONTRACTOR TO PROCEED HAD TERMINATED, AND THE SUM OF $234.81 AS EXCESS COSTS TO THE UNITED STATES IN SUPERVISING THE WORK, ETC., AFTER THE DATE THERE WAS TERMINATED THE RIGHT OF THE CONTRACTOR TO PROCEED. FURTHERMORE, INCLUDED IN THE UNPAID AMOUNT UNDER THIS CONTRACT IS THE SUM OF $2,030.94, WHICH REPRESENTS PERCENTAGES RETAINED IN ACCORDANCE WITH THE TERMS OF THE CONTRACT FROM PROGRESS PAYMENTS TO THE CONTRACTOR. SUCH AMOUNT WAS NOT EARNED BY THE SURETY, AND THE RIGHT OF SUBROGATION THERETO ON THE PART OF THE SURETY IS SUBJECT TO THE SUPERIOR RIGHT OF THE UNITED STATES TO RETAIN SAID AMOUNT BECAUSE OF INDEBTEDNESS OF THE CONTRACTOR TO THE UNITED STATES ON ANOTHER ACCOUNT. (SEE BARRY V. UNITED STATES, 229 U.S. 47, ABOVE CITED.)

THE SURETY WILL BE ALLOWED THE UNPAID BALANCE OF THE CONTRACT PRICE OF $3,354.80 LESS THE ITEM OF $870 LIQUIDATED DAMAGES ACCRUING PRIOR TO THE DATE OF TERMINATION OF CONTRACT AND $234.81 EXCESS COSTS OF THE UNITED STATES IN PERFORMANCE OF THE CONTRACT AFTER THERE HAD BEEN TERMINATED THE RIGHT OF THE CONTRACTOR TO PROCEED AND LESS $2,030.94 AS AMOUNT EARNED BY THE CONTRACTOR PRIOR TO THE DATE OF TERMINATION OF THE RIGHT OF THE CONTRACTOR TO PROCEED, OR A BALANCE OF $219.05.