A-66244, DECEMBER 14, 1935, 15 COMP. GEN. 510

A-66244: Dec 14, 1935

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WITH LIQUIDATED DAMAGES OF $10.00 PER DAY FOR DELAYS BEYOND THE DELIVERY DATE SPECIFIED" IS OBJECTIONABLE BECAUSE OF UNCERTAINTY. 1935: THERE IS BEFORE ME FOR CONSIDERATION REQUEST DATED AUGUST 21. IT APPEARS FROM THE VOUCHER THAT THE ORDER WAS DATED JULY 12. THAT DELIVERY WAS MADE AUGUST 8. IT IS STATED BY THE PURCHASING AGENT THAT THE INTENT OF THE PROVISION WAS TO RESERVE TO THE FOREST SERVICE "THE OPTION OF REQUIRING OR WAIVING BOND AND PENALTIES. IT IS STATED FURTHER: * * * IT WAS ALSO THE INTENT THAT PENALTY SHOULD BE A CONCOMITANT OF THE BOND. THE LOW BIDDER WAS WELL KNOWN. THE BOND AND ATTENDANT PENALTY WERE WAIVED AND BIDDER SO INFORMED. IF THE OPTIONAL BOND AND PENALTY CLAUSE ARE OBJECTIONABLE I SHALL.

A-66244, DECEMBER 14, 1935, 15 COMP. GEN. 510

CONTRACTS - INDEFINITE PROVISIONS REGARDING PERFORMANCE BOND AND LIQUIDATED DAMAGES A PROVISION IN A CONTRACT THAT "PERFORMANCE BOND IN THE FORM OF A CERTIFIED CHECK FOR 25 PERCENT OF THE AMOUNT OF BID MAY BE REQUIRED, WITH LIQUIDATED DAMAGES OF $10.00 PER DAY FOR DELAYS BEYOND THE DELIVERY DATE SPECIFIED" IS OBJECTIONABLE BECAUSE OF UNCERTAINTY, INDEFINITENESS, AND UNFAIRNESS TO BIDDERS, PARTICULARLY WHERE IT HAS BEEN ADMINISTRATIVELY INTERPRETED TO PERMIT THE CONTRACTING OFFICER TO REQUIRE OR DISPENSE WITH THE FURNISHING OF THE BOND AND TO PERMIT THE CHARGING OR REMISSION OF LIQUIDATED DAMAGES AT HIS DISCRETION, AND ADMINISTRATIVE ACTION TOWARD CORRECTION THEREOF SHOULD BE TAKEN.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF AGRICULTURE, DECEMBER 14, 1935:

THERE IS BEFORE ME FOR CONSIDERATION REQUEST DATED AUGUST 21, 1935, OF A. H. COUSINS, REGIONAL FISCAL AGENT, FOREST SERVICE, PORTLAND, OREG., FOR REVIEW OF THE DISALLOWANCE OF CREDIT ON VOUCHER 10469 OF HIS ACCOUNT FOR SEPTEMBER 1934, FOR AN ITEM OF $60 WHICH THE DISBURSING OFFICER FAILED TO DEDUCT AS LIQUIDATED DAMAGES AT THE RATE OF $10 PER DAY BY REASON OF A DELAY OF 6 DAYS IN THE DELIVERY OF EIGHT LOOKOUT HOUSES PURCHASED UNDER CONTRACT A-6-FS-5535 WITH AMERICAN BUILDERS, INC.

IT APPEARS FROM THE VOUCHER THAT THE ORDER WAS DATED JULY 12, 1934, AND THAT DELIVERY WAS MADE AUGUST 8, 1934. BY ITS TERMS THE CONTRACT REQUIRED DELIVERY WITHIN 21 DAYS AFTER RECEIPT OF ORDER, AND IT FURTHER PROVIDED:

PERFORMANCE BOND IN THE FORM OF A CERTIFIED CHECK FOR 25 PERCENT OF THE AMOUNT OF BID MAY BE REQUIRED, WITH LIQUIDATED DAMAGES OF $10.00 PER DAY FOR DELAYS BEYOND THE DELIVERY DATE SPECIFIED.

IT IS STATED BY THE PURCHASING AGENT THAT THE INTENT OF THE PROVISION WAS TO RESERVE TO THE FOREST SERVICE "THE OPTION OF REQUIRING OR WAIVING BOND AND PENALTIES, AS IN ITS JUDGMENT SEEMED DESIRABLE.' IT IS STATED FURTHER:

* * * IT WAS ALSO THE INTENT THAT PENALTY SHOULD BE A CONCOMITANT OF THE BOND, HENCE NO BOND NO PENALTY.

IN THIS TRANSACTION AND IN EACH OF A NUMBER OF OTHERS SIMILARLY WORDED, THE LOW BIDDER WAS WELL KNOWN, REPUTABLE, AND HAD SATISFACTORILY EXECUTED OTHER CONTRACTS, AND AS A CONSEQUENCE OF THIS GOOD STANDING, THE BOND AND ATTENDANT PENALTY WERE WAIVED AND BIDDER SO INFORMED. IF THE OPTIONAL BOND AND PENALTY CLAUSE ARE OBJECTIONABLE I SHALL, OF COURSE, BE VERY GLAD TO DISCONTINUE THEIR USE. AS TO CONTRACTS ALREADY FILLED UNDER BIDS HAVING THIS CLAUSE, IT IS HOPED THE WAIVER WILL BE ACCEPTED AS THE OBJECTION, AFTER THIS FULLER EXPLANATION, MAY NOT BE CONSIDERED A SERIOUS ONE.

ONE OF THE FIRST AND MOST IMPORTANT REQUISITES OF A VALID CONTRACT IS THAT THE TERMS THEREOF SHALL BE CERTAIN AND DEFINITE. SEE CLARK V. UNITED STATES, 95 U.S. 539. IN THE CONSIDERATION OF CONTRACTS CONTAINING A STIPULATION THAT PERFORMANCE BONDS "MAY" BE REQUIRED THE WORD "MAY" HAS BEEN INTERPRETED AS "MUST" OR "SHALL.' SEE 3 COMP. GEN. 696; 15 COMP. DEC. 359; 20 ID. 670. IF THE ADMINISTRATIVE OFFICERS OF THE GOVERNMENT ARE PERMITTED AN OPTION TO REQUIRE OR DISPENSE WITH THE FURNISHING OF A PERFORMANCE BOND, THE OPTION SHOULD BE EXERCISED BEFORE THE BIDS ARE REQUESTED, AND THE SPECIFICATIONS SHOULD INFORM BIDDERS EITHER THAT PERFORMANCE BOND WILL NOT BE REQUIRED OR THAT IT WILL BE REQUIRED, AND, IF REQUIRED IN THE SPECIFICATIONS THE CONTRACTOR SHOULD FURNISH SUCH A BOND. THERE IS NO AUTHORITY IN ANY ADMINISTRATIVE OFFICER TO WAIVE SUCH REQUIREMENT AS TO A PARTICULAR BIDDER WHERE THE BIDS WERE REQUESTED ON SPECIFICATIONS CONTAINING SUCH A REQUIREMENT. IT IS SUCH A MANNER THAT BIDDERS MAY INCLUDE IN THEIR BID PRICE AN AMOUNT OBVIOUSLY UNFAIR TO OTHER BIDDERS AND TO THE GOVERNMENT TO ADVERTISE IN EQUAL TO THE PREMIUM ON THE PERFORMANCE BOND AND THEN TO WAIVE THE FURNISHING OF SUCH A BOND.

FURTHERMORE, THERE IS NOTHING IN THIS CONTRACT WHICH WOULD WARRANT THE CONCLUSION THAT SINCE THE CONTRACTING OFFICER ATTEMPTED TO RESERVE AN OPTION AS TO WHETHER A PERFORMANCE BOND WOULD OR WOULD NOT BE REQUIRED, HE HAD AN OPTION, ALSO, WITH RESPECT TO CHARGING OR REMITTING LIQUIDATED DAMAGES IN EVENT THE CONTRACTOR FAILED TO PERFORM THE CONTRACT WITHIN THE PERIOD STIPULATED THEREIN. THE CONTRACTOR EXPRESSLY STATED IN ITS ACCEPTED BID THAT IT WOULD MAKE DELIVERY WITHIN 21 DAYS AFTER RECEIPT OF ORDER, AND, PRESUMABLY, THE CONTRACTOR INCLUDED IN ITS BID PRICE ANY ADDITIONAL COST WHICH MIGHT BE REQUIRED TO ENABLE IT TO PERFORM WITHIN SUCH STATED PERIOD. THE CONTRACT EXPRESSLY STATED THAT THERE WOULD BE "LIQUIDATED DAMAGES OF $10 A DAY FOR DELAYS BEYOND THE DELIVERY DATE SPECIFIED," AND A CONTRACTING OFFICER MAY NOT GIVE AWAY OR REMIT A CLAIM OF THE UNITED STATES. SEE PACIFIC HARDWARE CO. V. UNITED STATES, 49 CT.CLS. 327, 335.

DUE TO THE APPARENT ADMINISTRATIVE MISUNDERSTANDING IN THIS MATTER AND THE AMBIGUOUS WORDING OF THE CONTRACT, NO FURTHER QUESTION WILL BE RAISED WITH RESPECT TO THE FAILURE TO EXACT A PERFORMANCE BOND AND TO CHARGE LIQUIDATED DAMAGES IN THIS CASE, BUT PROMPT AND EFFECTIVE ADMINISTRATIVE ACTION SHOULD BE TAKEN TO PREVENT THE RECURRENCE OF A SIMILAR SITUATION IN THE ADMINISTRATION OF THE AFFAIRS OF THE DEPARTMENT OF AGRICULTURE.