A-63579, OCTOBER 28, 1935, 15 COMP. GEN. 345

A-63579: Oct 28, 1935

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DOES NOT PROVIDE FOR A SETTLEMENT OF A CLAIM FOR DAMAGES BUT CONTEMPLATES RELIEF TO THE CONTRACTOR ONLY UPON CONDITION THAT THE WORK IS TO BE COMPLETED IN ACCORDANCE WITH THE PROVISIONS OF THE ORIGINAL CONTRACT. AS FOLLOWS: REFERENCE IS MADE TO THE PUBLIC ACT NO. 273. THERE IS INCLOSED HEREWITH A MEMORANDUM ADDRESSED TO THE DIRECTOR OF PROCUREMENT BY THE BOARD OF AWARD OF THE PUBLIC WORKS BRANCH OF THE PROCUREMENT DIVISION UNDER DATE OF SEPTEMBER 10. THE MEMORANDUM EXPRESSES THE VIEWS OF THE TREASURY DEPARTMENT EXCEPT THAT IT IS DEEMED UNDESIRABLE. THE RECOMMENDATIONS CONTAINED IN PARAGRAPHS 2 AND 3 ON PAGE 13 OF THE REPORT OF THE BOARD OF AWARD ARE NOT TO BE GIVEN CONSIDERATION. HAS AGREED THAT THIS CONCLUSION IS SOUND.

A-63579, OCTOBER 28, 1935, 15 COMP. GEN. 345

CONTRACTS - GOVERNMENT DELAY - INCREASED COSTS - MODIFICATION AUTHORIZED BY THE CONGRESS THE ACT OF AUGUST 14, 1935, 49 STAT. 649, AUTHORIZING THE SECRETARY OF THE TREASURY, SUBJECT TO PRIOR REVIEW BY THE COMPTROLLER GENERAL OF THE UNITED STATES, TO MODIFY THE CONTRACT FOR THE CONSTRUCTION OF THE DEPARTMENT OF AGRICULTURE EXTENSIBLE BUILDING TO REIMBURSE THE CONTRACTOR FOR INCREASED COSTS DUE TO GOVERNMENT DELAY, DOES NOT PROVIDE FOR A SETTLEMENT OF A CLAIM FOR DAMAGES BUT CONTEMPLATES RELIEF TO THE CONTRACTOR ONLY UPON CONDITION THAT THE WORK IS TO BE COMPLETED IN ACCORDANCE WITH THE PROVISIONS OF THE ORIGINAL CONTRACT; THEREFORE, THERE SHOULD BE WITHHELD RETAINED PERCENTAGES SUFFICIENT TO PROTECT THE INTERESTS OF THE GOVERNMENT IN THE EVENT OF FAILURE OF THE CONTRACTOR TO RESUME OPERATIONS AND DILIGENTLY TO PROSECUTE THE WORK TO COMPLETION.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF THE TREASURY, OCTOBER 28, 1935:

THERE HAS BEEN RECEIVED YOUR LETTER OF OCTOBER 9, 1935, AS FOLLOWS:

REFERENCE IS MADE TO THE PUBLIC ACT NO. 273, 74TH CONGRESS, INCREASING THE LIMIT OF COST FOR THE DEPARTMENT OF AGRICULTURE EXTENSIBLE BUILDING AND AUTHORIZING A MODIFICATION OF THE CONSTRUCTION CONTRACT TO REIMBURSE THE CONTRACTOR.

THERE IS INCLOSED HEREWITH A MEMORANDUM ADDRESSED TO THE DIRECTOR OF PROCUREMENT BY THE BOARD OF AWARD OF THE PUBLIC WORKS BRANCH OF THE PROCUREMENT DIVISION UNDER DATE OF SEPTEMBER 10, 1935, WHICH DISCUSSES THE ITEMS OF INCREASED COST RESULTING FROM THE LENGTHY DELAY IN MAKING AVAILABLE THE SITE FOR THE COMPLETION OF THE BUILDING AND MAKES DEFINITE RECOMMENDATIONS WITH RESPECT TO THE PROPOSALS OF THE CONTRACTOR FOR AN ADJUSTMENT OF ITS CONTRACT.

THE MEMORANDUM EXPRESSES THE VIEWS OF THE TREASURY DEPARTMENT EXCEPT THAT IT IS DEEMED UNDESIRABLE, AT THIS TIME, TO MAKE ANY PAYMENT ON ACCOUNT OF RETAINED PERCENTAGES OR TO RELIEVE THE CONTRACTOR OF RESPONSIBILITY FOR THE COMPLETED PORTIONS OF THE WORK. ACCORDINGLY, THE RECOMMENDATIONS CONTAINED IN PARAGRAPHS 2 AND 3 ON PAGE 13 OF THE REPORT OF THE BOARD OF AWARD ARE NOT TO BE GIVEN CONSIDERATION. THE BOARD OF AWARD, AFTER FURTHER CONSIDERATION, HAS AGREED THAT THIS CONCLUSION IS SOUND.

THE ACT PROVIDES THAT THE AMOUNT OF THE ADJUSTMENT IN THE CONTRACT PRICE SHALL BE SUBJECT TO PRIOR REVIEW BY YOU. ACCORDINGLY, YOU ARE REQUESTED TO ADVISE THIS DEPARTMENT WHETHER THE PROPOSED ADJUSTMENT MEETS WITH YOUR APPROVAL.

THERE ARE INCLOSED HEREWITH THE VARIOUS PROPOSALS OF THE CONTRACTOR, WHICH ARE REFERRED TO IN THE ABOVE-MENTIONED MEMORANDUM. THERE IS ALSO INCLOSED A DRAFT OF AGREEMENT TO GIVE EFFECT TO THE RECOMMENDED ADJUSTMENT OF THE CONTRACT.

THE CONTRACTOR IS EITHER NOT IN A POSITION OR IS UNWILLING TO RECOMMENCE WORK ON THE PROJECT UNTIL AN ADJUSTMENT OF THE CONTRACT HAS BEEN MADE. ACCORDINGLY, IT WILL BE APPRECIATED IF THIS MATTER MAY RECEIVE YOUR EARLY CONSIDERATION.

BRIEFLY, IT APPEARS THAT CONTRACT NO. T1 SA-3167, DATED MAY 16, 1932, WAS ENTERED INTO BETWEEN THE UNITED STATES, REPRESENTED BY THE SECRETARY OF THE TREASURY, AND THE ARONBERG-FRIED CO., INC., FOR REMOVING CERTAIN OLD STRUCTURES, REMODELING OTHERS, AND CONSTRUCTING A NEW BUILDING FOR THE DEPARTMENT OF AGRICULTURE FOR THE SUM OF $5,380,000; THAT CERTAIN PORTIONS, REPRESENTING, IT APPEARS, 80 PERCENT OF THE WORK, WERE SATISFACTORILY COMPLETED BY SEPTEMBER 18, 1933, AND THE REMAINING PORTION HAS BEEN DELAYED APPROXIMATELY 2 YEARS BY REASON OF THE FAILURE OF THE GOVERNMENT TO DELIVER THE SITE. IT FURTHER APPEARS THAT THE DELAY CAUSED THE CONTRACTOR TO FACE A CONDITION OF INCREASED COSTS TO SUCH AN EXTENT THAT IT AVOWED AN INABILITY TO PROCEED WITH THE COMPLETION OF THAT PART OF THE WORK WHICH WAS SUSPENDED DUE TO THE FAILURE OF THE GOVERNMENT TO DELIVER THE SITE, WITHOUT BEING ASSURED OF SOME FINANCIAL RELIEF FROM THE GOVERNMENT. BY REASON OF THE SITUATION THUS ARISING, THERE WAS ENACTED AN ACT APPROVED AUGUST 14, 1935, 49 STAT. 649, WHICH PROVIDED:

THAT THE SECRETARY OF THE TREASURY IS HEREBY AUTHORIZED TO MODIFY THE CONTRACT NUMBERED T1SA-3167 FOR THE CONSTRUCTION OF THE DEPARTMENT OF AGRICULTURE EXTENSIBLE BUILDING IN THE DISTRICT OF COLUMBIA, TO REIMBURSE THE CONTRACTOR FOR INCREASED COSTS INCURRED AS A RESULT OF THE FAILURE OF THE GOVERNMENT TO DELIVER THE SITE TO THE CONTRACTOR IN ITS ENTIRETY WITHIN THE TIME SPECIFIED, THE AMOUNT OF THE ADJUSTMENT DETERMINED UPON TO BE SUBJECT TO PRIOR REVIEW BY THE COMPTROLLER GENERAL OF THE UNITED STATES.

SEC. 2. THE LIMIT OF COST FOR THE SITE AND CONSTRUCTION OF SUCH BUILDING AS AUTHORIZED IN THE SECOND DEFICIENCY ACT, FISCAL YEAR 1931 (46 STAT. 1604), IS INCREASED TO $13,150,000 IN LIEU OF $12,800,000, AND THERE IS HEREBY AUTHORIZED TO BE APPROPRIATED SUCH SUMS AS MAY BE NECESSARY TO CARRY OUT THE PROVISIONS OF THIS ACT.

IT APPEARS THAT THE CONTRACTOR SUBMITTED 4 SUPPLEMENTAL PROPOSALS RELATIVE TO THE INCREASED COSTS, 2 SUBMITTED UNDER DATES OF APRIL 19, 1935, AND JUNE 18, 1935, RESPECTIVELY, BASED ON A DELAY OF 21 MONTHS, AND 2 SUBMITTED UNDER DATES OF SEPTEMBER 9 AND SEPTEMBER 17, 1935, RESPECTIVELY, AND BASED ON A DELAY OF 2 YEARS, THE PROPOSAL OF SEPTEMBER 9, 1935, BEING IN THE SUM OF $326,437.62 AND THAT OF SEPTEMBER 17, 1935, IN THE SUM OF $332,842.95, AND AN ADDITIONAL PROPOSAL OF SEPTEMBER 9, 1935, IN THE SUM OF $10,384.40. THEREAFTER, THE BOARD OF AWARD, PUBLIC WORKS BRANCH, PROCUREMENT DIVISION, TREASURY DEPARTMENT, CONSIDERED THE MATTER OF THE INCREASED COSTS DUE TO THE DELAY IN DELIVERING THE SITE, SUBMITTING A MEMORANDUM OF SEPTEMBER 10, 1935, WITH RESPECT THERETO TO THE DIRECTOR OF PROCUREMENT, AND A FURTHER MEMORANDUM OF SEPTEMBER 24, 1935, TO THE ASSISTANT DIRECTOR OF PROCUREMENT, AND RECOMMENDING THEREIN THAT CONSIDERATION BE GIVEN TO A SETTLEMENT IN THE SUM OF $296,311.45 AND THAT THERE BE NO FURTHER CONSIDERATION OF COSTS ACCRUING AFTER SEPTEMBER 18, 1935, ON WHICH DATE THE CONTRACTOR HAD ORDERS TO PROCEED WITH THE WORK, THE SITE HAVING THEN BEEN DELIVERED. IT APPEARS FROM YOUR LETTER THAT THE TREASURY DEPARTMENT CONCURS IN THE VIEWS EXPRESSED IN SAID MEMORANDA EXCEPT AS TO PARAGRAPHS 2 AND 3 ON PAGE 13 OF THE MEMORANDUM OF SEPTEMBER 10, 1935, OF THE BOARD OF AWARD, AND THAT THE BOARD OF AWARD NOW CONCURS IN OMITTING ITS RECOMMENDATION AS CONTAINED IN SAID PARAGRAPHS 2 AND 3. THE DRAFT OF THE PROPOSED AGREEMENT RELATIVE TO THE INCREASED COSTS SUBMITTED WITH YOUR LETTER OF OCTOBER 9, 1935, AND WHICH IT IS UNDERSTOOD YOU RECOMMEND FOR APPROVAL, PROVIDES THAT THE ORIGINAL CONTRACT BE ADJUSTED SO AS TO PROVIDE FOR THE PAYMENT TO THE CONTRACTOR, IN ADDITION TO THE SUMS OTHERWISE PAYABLE UNDER THE ORIGINAL CONTRACT, OF THE SUM OF $296,311.45 AND LEAVES OPEN FOR FURTHER CONSIDERATION CERTAIN ITEMS LISTED THEREIN AGGREGATING $10,384.40. THE PROPOSED AGREEMENT APPEARS TO BE BASED ON THE RECOMMENDATIONS OF THE BOARD OF AWARD, AS MODIFIED, AS SET FORTH IN THE THIRD PARAGRAPH OF YOUR LETTER, EXCEPT AS TO SAID ITEMS AGGREGATING $10,384.40, WHICH, IT APPEARS FROM THE MEMORANDA OF SEPTEMBER 10, 1935, WERE NOT CONSIDERED BY THE BOARD OF AWARD OWING TO THE LACK OF TIME AND FAILURE OF THE CONTRACTOR TO SUBMIT ANY SUPPORTING EVIDENCE.

THE PROPOSED AGREEMENT, AFTER CERTAIN RECITALS, PROVIDES THAT:

FIRST. THE ORIGINAL CONTRACT IS HEREBY ADJUSTED TO PROVIDE FOR THE PAYMENT TO THE CONTRACTOR, IN ADDITION TO THE SUMS OTHERWISE PAYABLE THEREUNDER, THE SUM OF TWO HUNDRED NINETY-SIX THOUSAND THREE HUNDRED ELEVEN DOLLARS AND FORTY-FIVE CENTS ($296,311.45), PAYABLE AS TO ONE HUNDRED SEVENTY-SEVEN THOUSAND TWO HUNDRED TWENTY-FOUR DOLLARS AND SIXTEEN CENTS ($177,224.16) THEREOF, AS IT ACCRUES FROM TIME TO TIME AS INDICATED ON SCHEDULE A ATTACHED HERETO AND MADE A PART HEREOF, AND AS TO ONE HUNDRED NINETEEN THOUSAND EIGHTY-SEVEN DOLLARS AND TWENTY NINE CENTS ($119,087.29) THEREOF, FROM TIME TO TIME AS PROGRESS PAYMENTS ARE MADE UNDER THE ORIGINAL CONTRACT AND IN AMOUNTS PROPORTIONATE TO THE AMOUNT OF COMPLETED WORK OF THE CHARACTER INDICATED IN SCHEDULE A.

SECOND. THE CONTRACTOR AGREES, FROM TIME TO TIME AS PAYMENTS ARE MADE TO IT IN ACCORDANCE WITH ARTICLE FIRST HEREOF, THAT IT WILL APPLY TO THE PAYMENT OF ITS SUBCONTRACTORS THE PORTIONS THEREOF DUE SUCH SUBCONTRACTORS AS INDICATED IN SCHEDULE A. IN THE EVENT THAT ANY SUBCONTRACTOR DECLINES TO PROCEED WITH THE WORK, THE AMOUNTS ALLOCATED IN SCHEDULE A FOR SUCH SUBCONTRACTOR SHALL NEVERTHELESS BE PAYABLE TO THE CONTRACTOR WHO MAY APPLY SUCH SUMS AT IT DEEMS ADVISABLE FOR THE COMPLETION OF THE WORK.

THIRD. THERE IS INCLUDED IN THE SUM SPECIFIED IN ARTICLE FIRST HEREOF, INTEREST AT THE RATE OF 6 PERCENT PER ANNUM FOR A PERIOD OF TWO YEARS ON THE FOLLOWING RETAINED PERCENTAGES:

FOLLOWING AN ITEMIZED LIST OF THE REFERRED TO RETAINED PERCENTAGES, AGGREGATING $276,460, THE PROPOSED AGREEMENT FURTHER PROVIDES:

THE SECRETARY RESERVES THE RIGHT TO MAKE PAYMENT TO THE CONTRACTOR OF SUCH PORTION OF SUCH RETAINED PERCENTAGES (NOW AMOUNTING TO $276,460) FROM TIME TO TIME DURING THE PROGRESS OF THE WORK AS HE MAY DEEM IN THE INTERESTS OF THE UNITED STATES. IN THE EVENT SUCH RETAINED PERCENTAGES, OR ANY PART THEREOF, ARE PAID PRIOR TO THE DATE OF FINAL SETTLEMENT OF THE CONTRACT, THERE SHALL BE DEDUCTED FROM THE AMOUNT PAYABLE TO THE CONTRACTOR, FROM THE NEXT PAYMENT OR PAYMENTS OTHERWISE DUE PURSUANT TO THE PROVISIONS HEREOF, AN AMOUNT EQUAL TO INTEREST COMPUTED AT THE RATE OF SIX PERCENT PER ANNUM ON THE AMOUNT OF EACH SUCH PAYMENT FROM THE DATE OF SUCH PAYMENT TO OCTOBER 1, 1936. THE PAYMENTS DUE FROM THE CONTRACTOR TO ITS SUBCONTRACTORS TO WHOM SUCH PAYMENTS ARE MADE BY THE CONTRACTOR SHALL BE SIMILARLY REDUCED.

FOURTH. THE AMOUNT HEREINBEFORE STIPULATED IS IN FINAL SETTLEMENT OF ALL OF THE CLAIMS FOR INCREASED COSTS UNDER THE ORIGINAL CONTRACT INCURRED AS A RESULT OF THE ABOVE-MENTIONED DELAY, EXCEPT WITH RESPECT TO THE FOLLOWING ITEMS:

CHART INCREASED COST REINFORCING STEEL MATERIAL SWEETS STEEL COMPANY $5,489.11 INCREASED COST PLUMBING AND HEATING MATERIAL W. G. CORNELL

COMPANY -------------------------------------------- 2,000.00 INCREASED LABOR COST ERECTION STRUCTURAL STEEL OSCAR DANIELS

COMPANY -------------------------------------------- 1,000.00 INCREASED LABOR COST PLACING REINFORCING STEEL METROPOLITAN

STEEL ERECTION CORP. ------------------------------- 1,057.50 INCREASED COST SETTING MISCELLANEOUS AND ORNAMENTAL IRON

CROWN IRON WORKS ----------------------------------- 250.00

TOTAL ---------------------------------------------- 9,796.61 ADD 6 PERCENT SUBCONTRACTORS' OVERHEAD ----------------------- 587.79

TOTAL ---------------------------------------------- 10,384.40

AS TO THE ABOVE ITEMS, THE RIGHT IS RESERVED TO THE CONTRACTOR TO FURNISH PROOF IN SUBSTANTIATION THEREOF. TO THE EXTENT THAT THE SECRETARY CONSIDERS THAT SUCH ITEMS REPRESENT PROPER CLAIMS, AND SUBJECT TO PRIOR REVIEW BY THE COMPTROLLER GENERAL OF THE UNITED STATES AS TO THE AMOUNT THEREOF, PROVISION SHALL HEREAFTER BE MADE FOR FURTHER ADJUSTMENT OF THE ORIGINAL CONTRACT.

FIFTH. EXCEPT AS HEREBY MODIFIED, THE ORIGINAL CONTRACT SHALL BE AND REMAIN IN FULL FORCE AND EFFECT.

THERE IS APPENDED TO THE PROPOSED AGREEMENT A FORM OF CONSENT, TO BE SIGNED BY THE SURETY ON THE PERFORMANCE BOND UNDER THE ORIGINAL CONTRACT, TO THE PROPOSED MODIFICATION OF THE ORIGINAL CONTRACT AND, ALSO, A SCHEDULE A SHOWING THE PROPOSED DISTRIBUTION OF PAYMENT OF THE INCREASED COSTS AND THE DATES OF ACCRUAL THEREOF.

IN VIEW OF THE REPORTED FACTS AND YOUR RECOMMENDATION, THIS OFFICE WILL NOT INTERPOSE OBJECTION TO THE AMOUNT OF THE INCREASED COSTS AS PROVIDED IN THE PROPOSED AGREEMENT, NOR, IN VIEW OF THE FACTS AND CIRCUMSTANCES, TO LEAVING OPEN FOR FURTHER CONSIDERATION, SUBJECT TO PRIOR REVIEW BY THIS OFFICE, OF THE REFERRED TO ITEMS AGGREGATING $10,384.40.

HOWEVER, THE ACT OF AUGUST 14, 1935, HEREINBEFORE QUOTED, PROVIDES FOR A MODIFICATION OF THE CONTRACT, NOT THE SETTLEMENT OF A CLAIM FOR DAMAGES AND CONTEMPLATES RELIEF TO THE CONTRACTOR ONLY UPON CONDITION THAT THE WORK IS TO BE COMPLETED IN ACCORDANCE WITH THE PROVISIONS OF THE ORIGINAL CONTRACT. THEREFORE, WITH REFERENCE TO PARAGRAPH "FIRST" OF THE PROPOSED MODIFICATION AGREEMENT AND THE SCHEDULE A MENTIONED THEREIN, THE ACT DOES NOT AUTHORIZE A PAYMENT BEFORE RESUMPTION OF WORK UNDER THE CONTRACT, AS APPARENTLY IS INTENDED BY SAID PARAGRAPH, OF AN AMOUNT SUFFICIENT TO COVER SUBSTANTIALLY ALL DAMAGES OR COSTS INCURRED BY THE CONTRACTOR UP TO THE TIME OF SUCH PAYMENT. CONSEQUENTLY, UNLESS THERE IS BEING WITHHELD--- AND WILL CONTINUE TO BE WITHHELD--- RETAINED PERCENTAGES SUFFICIENT TO PROTECT THE INTERESTS OF THE GOVERNMENT IN THE EVENT OF FAILURE OF THE CONTRACTOR PROMPTLY TO RESUME OPERATIONS AND DILIGENTLY TO PROSECUTE THE WORK TO COMPLETION, THE AMOUNT (APPROXIMATELY $122,000) SCHEDULED AS FOR IMMEDIATE PAYMENT SHOULD BE REDUCED OR PRORATED SO THAT AT ALL TIMES THERE WILL BE WITHHELD FROM PAYMENT EARNED MONEYS IN AN AMOUNT SUFFICIENT TO PROTECT THE INTERESTS OF THE GOVERNMENT.

ALSO, IT IS SUGGESTED THAT THERE BE SUBSTITUTED FOR THE FIRST THREE LINES OF PARAGRAPH OURTH," THE FOLLOWING:

THE AMOUNT HEREINBEFORE STIPULATED IS IN FULL AND FINAL SETTLEMENT OF ANY AND ALL CLAIMS ARISING OUT OF THE ABOVE-MENTIONED DELAY, EXCEPT WITH RESPECT TO THE FOLLOWING ITEMS: ..END :