A-66667, JANUARY 17, 1936, 15 COMP. GEN. 627

A-66667: Jan 17, 1936

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CONTRACTS - SPECIFICATIONS - PERFORMANCE BOND AND LIQUIDATED DAMAGE PROVISIONS THE REQUIRING OF PERFORMANCE BONDS AND CHARGING OF LIQUIDATED DAMAGES FOR DELAYS IN PERFORMANCE ARE MATTERS FOR ADMINISTRATIVE DISCRETION IN CERTAIN TYPES OF CONTRACTS. THAT DISCRETION SHOULD BE EXERCISED BEFORE BIDS ARE REQUESTED AND SPECIFICATIONS SHOULD STATE DEFINITELY THE REQUIREMENTS IN THIS REGARD. 1936: THERE ARE BEFORE THIS OFFICE THE FOLLOWING CONTRACTS: A 6 FS-6145. TIME TO BEGIN THE DAY AFTER ORDER IS RECEIVED. THE ABOVE-QUOTED STIPULATION IN THE ADVERTISED SPECIFICATIONS IS NOT DEFINITE AND CERTAIN. AS THE BIDDERS MAY NOT BE DEFINITELY INFORMED WHETHER A PERFORMANCE BOND WOULD BE REQUIRED UNTIL AFTER THE BID IS ACCEPTED.

A-66667, JANUARY 17, 1936, 15 COMP. GEN. 627

CONTRACTS - SPECIFICATIONS - PERFORMANCE BOND AND LIQUIDATED DAMAGE PROVISIONS THE REQUIRING OF PERFORMANCE BONDS AND CHARGING OF LIQUIDATED DAMAGES FOR DELAYS IN PERFORMANCE ARE MATTERS FOR ADMINISTRATIVE DISCRETION IN CERTAIN TYPES OF CONTRACTS, BUT THAT DISCRETION SHOULD BE EXERCISED BEFORE BIDS ARE REQUESTED AND SPECIFICATIONS SHOULD STATE DEFINITELY THE REQUIREMENTS IN THIS REGARD.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF AGRICULTURE, JANUARY 17, 1936:

THERE ARE BEFORE THIS OFFICE THE FOLLOWING CONTRACTS:

A 6 FS-6145, RADIO SPECIALTY COMPANY.

A 6 FS-6175, GARCO MANUFACTURING COMPANY.

A 6 FS-6177, RADIO SPECIALTY COMPANY.

A 6 FS-6191, SPOKANE RADIO COMPANY, INC.

A 6 FS-6197, RADIO SPECIALTY COMPANY.

A 6 FS-6200, RADIO SPECIALTY COMPANY.

A 6 FS-6201, SPOKANE RADIO COMPANY, INC.

A 6 FS-6203, RADIO SPECIALTY COMPANY.

THE ADVERTISED SPECIFICATIONS IN THESE CONTRACTS PROVIDED, AMONG OTHER THINGS, THAT:

AT THE OPTION OF THE FOREST SERVICE A PERFORMANCE BOND UP TO 50 PERCENT OF THE AMOUNT OF THE BID MAY BE REQUIRED OF THE SUCCESSFUL BIDDER AND LIQUIDATED DAMAGES MAY BE CHARGED IN THE AMOUNT OF $1.00 PER DAY PER SET STRAIGHT TIME FOR EACH CALENDAR DAY'S DELAY IN THE DELIVERY BEYOND THE DATE OF DELIVERY SPECIFIED. TIME TO BEGIN THE DAY AFTER ORDER IS RECEIVED.

THIS OFFICE HAS SEVERAL TIMES INVITED THE ATTENTION OF THE ADMINISTRATIVE DEPARTMENTS AND ESTABLISHMENTS OF THE GOVERNMENT TO THE FACT THAT SPECIFICATIONS SHOULD BE DEFINITE AND CERTAIN SO AS TO PROVIDE A COMMON BASIS FOR COMPETITION FOR SUPPLYING THE NEEDS OF THE UNITED STATES. THE ABOVE-QUOTED STIPULATION IN THE ADVERTISED SPECIFICATIONS IS NOT DEFINITE AND CERTAIN, AS THE BIDDERS MAY NOT BE DEFINITELY INFORMED WHETHER A PERFORMANCE BOND WOULD BE REQUIRED UNTIL AFTER THE BID IS ACCEPTED. OBVIOUSLY, A REASONABLY PRUDENT BIDDER WOULD INCLUDE IN HIS BID PRICE AN AMOUNT EQUAL TO THE PREMIUM ON THE PERFORMANCE BOND WHICH HE MIGHT BE REQUIRED TO FURNISH WITH THE CONTRACT, AND IF HE ANTICIPATED ANY DELAY IN MAKING DELIVERY IN ACCORDANCE WITH THE TERMS OF THE CONTRACT HE WOULD DOUBTLESS INCLUDE AS A PART OF THE CONTRACT PRICE THE LIQUIDATED DAMAGES TO BE DEDUCTED BY REASON OF THE DELAY. IT IS OBVIOUSLY IMPROPER TO CAUSE CHARGES AGAINST APPROPRIATED MONEYS FOR PREMIUMS ON PERFORMANCE BONDS, AND IN THE NATURE OF INSURANCE AGAINST THE CHARGING OF LIQUIDATED DAMAGES WHERE NO PERFORMANCE BOND IS REQUIRED AND WHERE THERE MAY BE A SERIOUS DISPUTE AS TO WHETHER LIQUIDATED DAMAGES MUST IN ANY EVENT BE CHARGED FOR DELAYS IN DELIVERY.

IT IS A MATTER OF ADMINISTRATIVE DISCRETION, IN CONTRACTS SIMILAR TO THE ONES UNDER CONSIDERATION, WHETHER TO EXACT A PERFORMANCE BOND OR MAKE PROVISION FOR LIQUIDATED DAMAGES, BUT THE DISCRETION IS FOR EXERCISING BEFORE THE BIDS ARE REQUESTED AND THE SPECIFICATIONS SHOULD STATE CLEARLY WHETHER THE BOND IS TO BE REQUIRED AND WHETHER LIQUIDATED DAMAGES WILL BE CHARGED FOR DELAY.

IT IS REQUESTED THAT THE APPROPRIATE ADMINISTRATIVE ACTION BE TAKEN TO CORRECT THE ERRONEOUS PROCEDURE IN THIS CASE.