A-59280, MAY 5, 1937, 16 COMP. GEN. 975

A-59280: May 5, 1937

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CONTRACTS - FLOOD DAMAGE TO UNCOMPLETED BUILDING - CONTRACTOR'S LIABILITY FOR RESTORATION WHERE BY CONTRACT PROVISION A CONTRACTOR IS MADE RESPONSIBLE FOR THE PROPER PROTECTION OF THE WORK UNTIL COMPLETION AND FINAL ACCEPTANCE. CONTRACT T1PW-2273 WAS AWARDED BY THIS DEPARTMENT TO ROCHE. THIS CONTRACT WAS EXECUTED IN THE STANDARD FORM. QUESTION HAS ARISEN AS TO WHETHER THE CONTRACTOR IS OBLIGATED. IN VIEW OF THE FOLLOWING FACTS AND CIRCUMSTANCES: THE BUILDING WAS COMPLETED TO AN EXTENT PERMITTING OCCUPANCY BY THE POST OFFICE DEPARTMENT SEPTEMBER 5. THE CONTRACTOR WAS SHORTLY THEREAFTER FURNISHED LISTS CONTAINING 20 DEFECTIVE CONSTRUCTION ITEMS AND 70 DEFECTIVE OR INCOMPLETE MECHANICAL ITEMS REQUIRING CORRECTION.

A-59280, MAY 5, 1937, 16 COMP. GEN. 975

CONTRACTS - FLOOD DAMAGE TO UNCOMPLETED BUILDING - CONTRACTOR'S LIABILITY FOR RESTORATION WHERE BY CONTRACT PROVISION A CONTRACTOR IS MADE RESPONSIBLE FOR THE PROPER PROTECTION OF THE WORK UNTIL COMPLETION AND FINAL ACCEPTANCE, AND THE DELIVERY OF THE BUILDING AT THAT TIME "COMPLETE AND UNDAMAGED," THE FACT THAT DAMAGE TO THE BUILDING RESULTED FROM AN "UNPRECEDENTED" FLOOD DOES NOT ABSOLVE THE CONTRACTOR FROM THE RESPONSIBILITY FOR RESTORATION AND DELIVERY OF THE BUILDING AS CONTEMPLATED BY THE CONTRACT, THE BUILDING, ALTHOUGH SUBSTANTIALLY COMPLETED AND OCCUPIED, PROPERLY NOT HAVING BEEN ACCEPTED BY THE UNITED STATES AT THE TIME OF THE FLOOD.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF THE TREASURY, MAY 5, 1937:

THERE HAS BEEN RECEIVED YOUR LETTER OF APRIL 23, 1937, AS FOLLOWS:

JUNE 18, 1935, CONTRACT T1PW-2273 WAS AWARDED BY THIS DEPARTMENT TO ROCHE, CONNELL AND LAUB CONSTRUCTION CO., IN THE AMOUNT OF $190,000, FOR THE FURNISHING OF ALL LABOR AND MATERIALS AND THE PERFORMANCE OF ALL WORK REQUIRED FOR THE COMPLETION OF THE CONSTRUCTION OF THE POST OFFICE AT PORTSMOUTH, OHIO, IN ACCORDANCE WITH SPECIFICATIONS THEREFOR DATED OCTOBER 31, 1934, AND CERTAIN ADDENDA THERETO. THIS CONTRACT WAS EXECUTED IN THE STANDARD FORM, CONTAINING THE USUAL PROVISIONS IN ARTICLES 2, 10, AND 16 (C) RELATIVE TO THE RESPONSIBILITY OF THE CONTRACTOR FOR THE PROPER PROTECTION OF THE WORK UNTIL COMPLETION AND FINAL ACCEPTANCE AND THE DELIVERY OF THE BUILDING AT THAT TIME "COMPLETE AND UNDAMAGED.' QUESTION HAS ARISEN AS TO WHETHER THE CONTRACTOR IS OBLIGATED, UNDER THESE PROVISIONS, TO RESTORE DAMAGE CAUSED BY THE UNPRECEDENTED FLOOD OF THE OHIO RIVER WHICH INUNDATED THE LOWER PORTION OF THE BUILDING IN THE LATTER PART OF JANUARY 1937, IN VIEW OF THE FOLLOWING FACTS AND CIRCUMSTANCES:

THE BUILDING WAS COMPLETED TO AN EXTENT PERMITTING OCCUPANCY BY THE POST OFFICE DEPARTMENT SEPTEMBER 5, 1936, AND OCCUPANCY BEGAN ON THAT DATE. FINAL INSPECTION OF THE GENERAL CONSTRUCTION WORK AND OF MECHANICAL EQUIPMENT HAD BEEN MADE SEPTEMBER 2, 1936, AND AUGUST 28, 1936, RESPECTIVELY, AND THE CONTRACTOR WAS SHORTLY THEREAFTER FURNISHED LISTS CONTAINING 20 DEFECTIVE CONSTRUCTION ITEMS AND 70 DEFECTIVE OR INCOMPLETE MECHANICAL ITEMS REQUIRING CORRECTION. THE CONSTRUCTION ENGINEER WAS TRANSFERRED FROM THE PROJECT TO ANOTHER AT JACKSON, GEORGIA, AS OF OCTOBER 1, 1936, AND ON THAT DATE HE REPORTED TO THE DISTRICT ENGINEER THAT MANY OF THE DEFECTS AND OMISSIONS HAD BEEN CORRECTED OR SUPPLIED, LEAVING A SMALL BALANCE WHICH COULD EASILY BE CHECKED BY THE CUSTODIAN. THE CUSTODIAN FROM TIME TO TIME ADVISED THE DISTRICT ENGINEER OF THE CORRECTION OF VARIOUS DEFECTS, BUT A MECHANICAL INSPECTOR FOUND ON A VISIT TO THE BUILDING, JANUARY 18, 1937, THAT THERE WERE SEVERAL MECHANICAL DEFECTS AND OMISSIONS STILL TO BE CORRECTED. THESE ITEMS, WHICH REMAINED INCOMPLETE AT THE TIME WHEN THE FLOOD WATERS ENTERED THE BUILDING, WERE NOS. 10, 12, 32, 45, AND 63 OF THE ORIGINAL LIST OF MECHANICAL DEFECTS AND OMISSIONS. THEY WERE OF SLIGHT IMPORTANCE AND COULD HAVE BEEN CORRECTED IN A FEW DAYS. THE DISTRICT ENGINEER, IN REPORTING THESE ITEMS FEBRUARY 2, 1937, ALSO CALLED ATTENTION TO FOUR ADDITIONAL ITEMS OF A MINOR NATURE FOUND TO EXIST JANUARY 18, 1937, AND REQUIRING CORRECTION BY THE CONTRACTOR PRIOR TO FINAL SETTLEMENT. IN ADDITION, THE NECESSITY OF AGREEING UPON MINOR ADJUSTMENTS DELAYED FINAL SETTLEMENT DURING THIS TIME, AS, FOR EXAMPLE, THE CONTRACTOR'S PROPOSAL FOR OMITTING THE DEMOLITION OF A GARAGE AND THE GRADING OF THE GARAGE AREA, WHICH WAS ACCEPTED FEBRUARY 10, 1937.

THE CONTRACTOR APPEARS TO HAVE UNDERSTOOD THAT ALL DEFECTS AND OMISSIONS HAD IN FACT BEEN CORRECTED, AND DECEMBER 21, 1936, IT ADDRESSED A LETTER TO THE PROCUREMENT DIVISION POINTING OUT THAT THE WORK HAD BEEN "PRACTICALLY COMPLETED" SINCE SEPTEMBER AND THAT AT THE DATE OF THE LETTER CERTAIN STACK LOUVERS, APPARENTLY REGARDED AS THE LAST ITEM, WERE IN PLACE. FINAL SETTLEMENT OF THE CONTRACT WAS REQUESTED. JANUARY 21, 1937, THE CONTRACTOR REQUESTED PAYMENT OF $20,000 OF THE BALANCE OF APPROXIMATELY $21,500 THEN REMAINING DUE UNDER THE CONTRACT. THE CONTRACTOR WAS ADVISED FEBRUARY 25, 1937, THAT IT WOULD BE NECESSARY TO SUBMIT TO YOU FOR DECISION THE QUESTION WHETHER THE CONTRACTOR WAS RESPONSIBLE FOR THE RESTORATION OF DAMAGE CAUSED BY THE FLOOD, THEN ESTIMATED TO COST $7,000, BUT THAT CONSIDERATION WAS BEING GIVEN THE PROPRIETY OF A PARTIAL PAYMENT IN THE AMOUNT OF $10,000. SUCH PARTIAL PAYMENT WAS MADE PURSUANT TO A FURTHER LETTER ADDRESSED TO THE CONTRACTOR FEBRUARY 26, 1937, AND THE PRESENT BALANCE REMAINING DUE UNDER THE CONTRACT IS $12,244.28.

IN RESPONSE TO THE LETTER OF FEBRUARY 25, 1937, THE CONTRACTOR REFERRED TO ITS UNDERSTANDING THAT THE CONTRACT HAD BEEN COMPLETED NOVEMBER 2, 1936 (EXCEPT FOR THE STACK LOUVERS, WHICH WERE INSTALLED IN DECEMBER), AND STATED IT WAS SURPRISED THAT THERE WAS A QUESTION AS TO ITS RESPONSIBILITY IN CONNECTION WITH THE FLOOD DAMAGE. THIS LETTER STATED:

"YOUR LETTER STATES THAT IT IS CONSTRUED THAT WE ARE RESPONSIBLE FOR THE BUILDING UNTIL IT IS COMPLETED AND ACCEPTED. THE BUILDING WAS COMPLETED NOVEMBER 2, 1936, BUT WAS NOT ACCEPTED. IT IS OUR EXPERIENCE THAT YOU DO NOT ISSUE ACCEPTANCES. IF YOU INFER THAT FINAL PAYMENT IS AN ACCEPTANCE, IT IS NOT OUR UNDERSTANDING, AS IT REQUIRES SEVERAL MONTHS TO MAKE FINAL PAYMENT AND WE CONTEND THE WORK IS ACCEPTED WHEN WE INFORM YOU IT IS COMPLETE AND YOU MAKE NO OBJECTIONS.' THE CIRCUMSTANCES ABOVE OUTLINED DO NOT BRING THE CASE STRICTLY WITHIN THE RULE APPLIED IN 15 COMP. GEN. 876, TO THE EFFECT THAT OCCUPANCY OF A BUILDING, COUPLED WITH APPROVAL OF THE WORK AFTER FINAL INSPECTION, MAY CONSTITUTE AN ACCEPTANCE AT THE TIME WHEN THE WORK IS ENTIRELY COMPLETED, EVEN THOUGH THERE HAS BEEN NO FINAL SETTLEMENT OF THE CONTRACT. THE DEFECTS AND OMISSIONS HERE REMAINING TO BE CORRECTED, HOWEVER MINOR IN CHARACTER, PREVENTED THE ACCEPTANCE OF THE BUILDING, AND IT CANNOT BE STATED, AS THE DEPARTMENT CONCEDED IN THE ABOVE MENTIONED CASE, THAT THE BUILDING HAD IN FACT BEEN ACCEPTED SO FAR AS THERE IS EVER AN ACCEPTANCE PRIOR TO FINAL SETTLEMENT OF THE CONTRACT, UNDER THE USUAL PRACTICE OF THE DEPARTMENT. NEVERTHELESS, THE CONTRACTOR HAD RECEIVED NO WORD FROM THE CONTRACTING OFFICER IN REPLY TO ITS LETTERS ADVISING AS TO THE COMPLETION OF THE WORK AND REQUESTING FINAL SETTLEMENT; AND IT MAY HAVE BEEN BELIEVED, AS STATED, THAT THE DEPARTMENT CONSIDERED THE WORK SATISFACTORILY COMPLETED IN THE ABSENCE OF SUCH REPLY. THE CONTRACTOR'S CONTENTION, IN EFFECT, IS THAT IT WAS JUSTIFIED IN CONSIDERING THE BUILDING AS COMPLETED AND ACCEPTED IN VIEW OF THE DEPARTMENT'S FAILURE TO ADVISE TO THE CONTRARY WITHIN A REASONABLE TIME AFTER THESE LETTERS WERE RECEIVED; AND THE QUESTION RAISED BY THIS CONTENTION WOULD APPEAR OF A SPECIAL NATURE AND NOT NECESSARILY CONCLUDED BY 15 COMP. GEN. 876.

COPIES OF ALL PERTINENT PAPERS ARE ATTACHED, TOGETHER WITH A LIST THEREOF FOR YOUR CONVENIENCE, AND YOU ARE REQUESTED TO ADVISE WHETHER IN YOUR OPINION THE CONTRACT REQUIRES THE RESTORATION OF DAMAGED WORK UNDER THE FOREGOING CIRCUMSTANCES. A SPECIFICATION FOR THE RESTORATION WORK, ESTIMATED TO COST $10,000, HAS BEEN PREPARED; BUT NO ACTION WILL BE TAKEN IN THE MATTER PENDING RECEIPT OF YOUR DECISION.

THE QUESTION STATED IN THE CONCLUDING PARAGRAPH OF THE ABOVE-QUOTED LETTER IS ANSWERED IN THE AFFIRMATIVE. SEE NORTH PACIFIC CONSTRUCTION CO. V. UNITED STATES, 73 CT.CLS. 341-362. THE FACT THAT THE DAMAGE TO THE BUILDING REQUIRING RESTORATION RESULTED FROM THE RECENT FLOOD IN THE OHIO VALLEY DOES NOT ABSOLVE THE CONTRACTOR FROM THE RESPONSIBILITY OF COMPLETING THE CONTRACT IN ACCORDANCE WITH ITS TERMS AND DELIVERING IT AS SO COMPLETED TO THE UNITED STATES. SEE DECISION OF JULY 3, 1935, A-61838, TO YOU. ALSO, DAY V. UNITED STATES, 245 U.S. 159.

WHILE THE DEFECTS AND THE OMISSIONS IN THIS CASE MAY HAVE BEEN SLIGHT, NEVERTHELESS THEY EXISTED AT THE TIME OF THE FLOOD AND THE BUILDING COULD NOT HAVE BEEN ACCEPTED BY THE UNITED STATES AS HAVING BEEN COMPLETED IN ACCORDANCE WITH THE TERMS OF THE CONTRACT.