A-6138, APRIL 30, 1925, 4 COMP. GEN. 902

A-6138: Apr 30, 1925

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PAYMENT OF A VOUCHER AT THE FULL CONTRACT PRICE COVERING A DELAYED DELIVERY IS AUTHORIZED ONLY IF ACCOMPANIED BY A STATEMENT BY THE HEAD OF THE DEPARTMENT OF THE FACTS AS TO THE EXTENT AND CAUSE OF THE DELAY AND THAT IN HIS OPINION NO DAMAGES WERE SUSTAINED BY THE GOVERNMENT. THE PRESUMPTION IN CASES OF CONTRACTS LET BY COMPETITIVE BIDDING IS THAT THE GOVERNMENT IS GENERALLY DAMAGED BY DELAYS WHERE TIME IS OF THE ESSENCE OF THE CONTRACT. WITH REQUEST FOR DECISIONS AS TO WHETHER PAYMENT THEREON IS AUTHORIZED WITHOUT DEDUCTION OF LIQUIDATED DAMAGES FOR DELAY IN DELIVERY. THE CONTRACT UNDER WHICH DELIVERY WAS MADE CONTAINING A REVISED LIQUIDATED DAMAGE CLAUSE DIFFERING IN ITS TERMS FROM SIMILAR CONTRACTS.

A-6138, APRIL 30, 1925, 4 COMP. GEN. 902

CONTRACTS - ENVELOPES - LIQUIDATED DAMAGES UNDER THE PROVISION APPEARING IN CONTRACTS FOR ENVELOPES FOR THE EXECUTIVE DEPARTMENTS AND INDEPENDENT ESTABLISHMENTS AT WASHINGTON, D.C., FOR THE FISCAL YEAR 1925, THAT THE HEAD OF THE DEPARTMENT MAY DEDUCT LIQUIDATED DAMAGES IF IN HIS OPINION THE GOVERNMENT HAS SUSTAINED ANY DAMAGES BY REASON OF DELAY IN DELIVERY, PAYMENT OF A VOUCHER AT THE FULL CONTRACT PRICE COVERING A DELAYED DELIVERY IS AUTHORIZED ONLY IF ACCOMPANIED BY A STATEMENT BY THE HEAD OF THE DEPARTMENT OF THE FACTS AS TO THE EXTENT AND CAUSE OF THE DELAY AND THAT IN HIS OPINION NO DAMAGES WERE SUSTAINED BY THE GOVERNMENT. THE PRESUMPTION IN CASES OF CONTRACTS LET BY COMPETITIVE BIDDING IS THAT THE GOVERNMENT IS GENERALLY DAMAGED BY DELAYS WHERE TIME IS OF THE ESSENCE OF THE CONTRACT.

COMPTROLLER GENERAL MCCARL TO A. ZAPPONE, DISBURSING CLERK, DEPARTMENT OF AGRICULTURE, APRIL 30, 1925:

THERE HAS BEEN CONSIDERED YOUR LETTER OF NOVEMBER 5, 1924, SUBMITTING A VOUCHER IN THE AMOUNT OF $66.04, IN FAVOR OF THE COMMERCIAL ENVELOPE CO. (INC.), FOR ENVELOPES, WITH REQUEST FOR DECISIONS AS TO WHETHER PAYMENT THEREON IS AUTHORIZED WITHOUT DEDUCTION OF LIQUIDATED DAMAGES FOR DELAY IN DELIVERY, THE CONTRACT UNDER WHICH DELIVERY WAS MADE CONTAINING A REVISED LIQUIDATED DAMAGE CLAUSE DIFFERING IN ITS TERMS FROM SIMILAR CONTRACTS, VIZ:

* * * IF THE CONTRACTOR SHALL FAIL TO DELIVER AS ORDERED ANY OR ALL OF THE ENVELOPES AGREED BY HIM TO BE SUPPLIED UNDER HIS CONTRACT WITHIN THE TIME SPECIFIED HEREIN, UNLESS OTHERWISE SPECIFIED IN HIS CONTRACT, IN ACCORDANCE WITH THE CONDITIONS AND REQUIREMENTS OF HIS CONTRACT, THE HEAD OF THE DEPARTMENT OR OFFICE ORDERING SAID ENVELOPES IN MAKING PAYMENT THEREFORE MAY, IF IN HIS OPINION THE INTEREST OF THE GOVERNMENT HAS SUSTAINED ANY DAMAGE BY REASON OF SUCH DELAY, DEDUCT AS LIQUIDATED DAMAGES, IN LIEU OF ACTUAL DAMAGES, A SUM EQUAL TO TWO TENTHS OF 1 PERCENT OF THE TOTAL AMOUNT WHICH WOULD BE PAYABLE THEREFOR, AT THE PRICE OR PRICES STIPULATED IN THE CONTRACT, FOR EACH DAY'S DELAY IN THE FULFILLMENT OF THE ORDER.

WHENEVER THE GOVERNMENT ACTUALLY SUSTAINS DAMAGES BY REASON OF DELAYS IN DELIVERY UNDER CONTRACTS CONTAINING SUCH A PROVISION, THE HEAD OF THE DEPARTMENT OR OFFICE MAKING THE PURCHASE BECOMES OBLIGATED -- TO PROPERLY PROTECT THE RIGHTS TO LIQUIDATED DAMAGES THEREBY ACCRUING TO THE GOVERNMENT--- TO SEE THAT PROPER DEDUCTION IS MADE. THEREFORE THERE SHOULD ACCOMPANY EACH VOUCHER COVERING A PAYMENT FOR A DELAYED DELIVERY, WHERE IN THE OPINION OF THE HEAD OF THE DEPARTMENT NO DAMAGE TO THE INTEREST OF THE GOVERNMENT HAS RESULTED BY REASON OF DELAY IN DELIVERY, THE STATEMENT OF THE HEAD OF THE DEPARTMENT TO THAT EFFECT AND GIVING THE FACTS UPON WHICH HIS CONCLUSION IS REACHED.

ALTHOUGH YOU STATE LIQUIDATED DAMAGES ARE NOT DEDUCTED FROM THE VOUCHER BECAUSE NO DAMAGE WAS SUSTAINED, THERE IS NOTHING TO SUPPORT SUCH CONCLUSION. THE VOUCHER MUST BE ACCOMPANIED BY AN ADMINISTRATIVE FINDING IN THIS RESPECT AND NOT BY A FINDING OF THE DISBURSING CLERK. SEE THE ACT OF AUGUST 23, 1912, 37 STAT. 375. THE CONTRACT PROVISION IS NOT AN AUTHORITY TO CHARGE OR NOT CHARGE LIQUIDATED DAMAGES AT THE ADMINISTRATIVE WILL BUT ACTION MUST BE BASED UPON FACTS, SHOWING, FOR INSTANCE, WHAT WERE THE CAUSES OF DELAY AND THE RESPONSIBILITY THEREFOR. IF THE RESPONSIBILITY DOES NOT APPEAR OTHERWISE THAN WITH THE CONTRACTOR, AND THE ACTUAL DAMAGE TO THE UNITED STATES CAN NOT BE ASCERTAINED BECAUSE IT IS INDEFINITE AND UNCERTAIN, THEN IT IS A PROPER CASE FOR APPLICATION OF THE LIQUIDATED DAMAGE CLAUSE RATHER THAN A FINDING OF NO ACTUAL DAMAGES.

THE PRESUMPTION THAT DAMAGE IS SUSTAINED IS PARTICULARLY STRONG WHERE THE ELEMENT OF TIME IS PRESCRIBED IN A CONTRACT UPON WHICH THERE HAS BEEN PUBLIC COMPETITION. THIS IS BECAUSE THE ELEMENT OF TIME REQUIRES HIGHER BIDS AND PRICES TO BE PAID, THE INCREASE ON ACCOUNT OF WHICH IS GAINED BY THE CONTRACTOR WHEN THE STIPULATED DAMAGE IS NOT DEDUCTED, AND THE UNITED STATES RECEIVES NOTHING FOR THE AMOUNT PAID FOR THE EARLIER DELIVERY CONTRACTED.