A-72307, APRIL 7, 1936, 15 COMP. GEN. 876

A-72307: Apr 7, 1936

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CONTRACTS - PERFORMANCE - DAMAGE TO COMPLETED BUILDINGS A CONTRACTOR NEED NOT BE REQUIRED TO REPAIR A PUBLIC BUILDING CONSTRUCTED BY HIM AND DAMAGED BY AN EXPLOSION OF GAS WHICH ENTERED THE BUILDING FROM A BROKEN GAS MAIN WHERE THE BUILDING WAS COMPLETED. NOTWITHSTANDING FINAL SETTLEMENT UNDER THE CONTRACT WAS DELAYED BECAUSE OF MINOR FINANCIAL ADJUSTMENTS. IT IS ESTIMATED THAT THE COST OF RESTORATION WILL AMOUNT TO APPROXIMATELY $21. WAS OCCUPIED BY THE POST OFFICE DEPARTMENT. THERE IS FORWARDED HEREWITH PHOTOSTATIC COPY OF A REPORT MADE TO THE PROCUREMENT DIVISION BY INSPECTION ENGINEER ENGLAND AND MECHANICAL ENGINEER BRENNAN. SHORTLY AFTER THE DAMAGE OCCURRED IT WAS DISCOVERED THAT GAS WAS ISSUING FROM A LEAK IN A GAS MAIN UNDER THE STREET BORDERING ONE SIDE OF THE SITE.

A-72307, APRIL 7, 1936, 15 COMP. GEN. 876

CONTRACTS - PERFORMANCE - DAMAGE TO COMPLETED BUILDINGS A CONTRACTOR NEED NOT BE REQUIRED TO REPAIR A PUBLIC BUILDING CONSTRUCTED BY HIM AND DAMAGED BY AN EXPLOSION OF GAS WHICH ENTERED THE BUILDING FROM A BROKEN GAS MAIN WHERE THE BUILDING WAS COMPLETED, ACCEPTED, AND OCCUPIED AT THE TIME OF THE EXPLOSION, NOTWITHSTANDING FINAL SETTLEMENT UNDER THE CONTRACT WAS DELAYED BECAUSE OF MINOR FINANCIAL ADJUSTMENTS.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF THE TREASURY, APRIL 7, 1936:

CONSIDERATION HAS BEEN GIVEN YOUR LETTER OF MARCH 11, 1936, IN PERTINENT PART AS FOLLOWS:

AT 8:10 A.M. ON FEBRUARY 11, 1936, A GAS EXPLOSION OCCURRED IN THE NEW GLENDIVE, MONTANA, POST OFFICE, WHICH CAUSED EXTENSIVE DAMAGE TO THE BUILDING. IT IS ESTIMATED THAT THE COST OF RESTORATION WILL AMOUNT TO APPROXIMATELY $21,000.00, INCLUDING A CONSTRUCTION COST OF $12,500.00. THE BUILDING HAD BEEN COMPLETED UNDER CONTRACT T1PW-1636, DATED FEBRUARY 20, 1935, WITH JOHN STERHAN, GLENDIVE, MONTANA, AND WAS OCCUPIED BY THE POST OFFICE DEPARTMENT, BUT FINAL SETTLEMENT OF THE CONTRACT HAS NOT YET BEEN AUTHORIZED.

THERE IS FORWARDED HEREWITH PHOTOSTATIC COPY OF A REPORT MADE TO THE PROCUREMENT DIVISION BY INSPECTION ENGINEER ENGLAND AND MECHANICAL ENGINEER BRENNAN, DATED FEBRUARY 18, 1936, WHICH CONTAINS A FULL REVIEW OF THE FACTS BROUGHT TO LIGHT BY THEIR INVESTIGATION OF THE MATTER. APPEARS FROM THIS REPORT THAT THE FIRST OF A SERIES OF EXPLOSIONS OCCURRED IN THE POSTMASTER'S OFFICE ON THE FIRST FLOOR OF THE BUILDING, PROBABLY AS A RESULT OF THE STRIKING OF A MATCH BY ONE OF THE CUSTODIAL EMPLOYEES OR FROM AN ELECTRIC SPARK AT A WALL SWITCH. SHORTLY AFTER THE DAMAGE OCCURRED IT WAS DISCOVERED THAT GAS WAS ISSUING FROM A LEAK IN A GAS MAIN UNDER THE STREET BORDERING ONE SIDE OF THE SITE, NEAR THE NORTHEAST CORNER OF THE BUILDING. FROM THIS FACT AND FROM OTHER EVIDENCE IN THE CASE, THE CONCLUSION SEEMS FAIRLY CLEAR THAT THE GAS MAIN BROKE BECAUSE OF UNUSUALLY COLD WEATHER DURING THE MONTH PREVIOUS TO FEBRUARY 11TH; THAT THE GAS, WHICH WAS UNDER A THIRTY-POUND PRESSURE, PERCOLATED THROUGH THE SUBSOIL STRATA AND INTO A SUBDRAIN PIPE; THAT IT FOUND ITS WAY THENCE INTO THE BASEMENT OF THE BUILDING THROUGH OPENINGS AT THE TOP OF A SUMP; AND THAT IT THEN PASSED THROUGH SLEEVE OPENINGS IN THE FIRST FLOOR INTO THE POSTMASTER'S ROOM AND GENERALLY THROUGHOUT THE BUILDING. THE GAS WAS A NATURAL GAS WHICH IS SAID TO BE ODORLESS, AND THE EXTENT OF THE DAMAGE INDICATES THAT A LARGE AMOUNT OF THE GAS HAD FOUND ITS WAY INTO THE BUILDINGS. THE GAS MAIN WAS OWNED BY THE MONTANA-DAKOTA POWER COMPANY.

THE BUILDING, AS PREVIOUSLY STATED, WAS OCCUPIED AT THE TIME OF THE EXPLOSION, THE POST OFFICE FACILITIES HAVING BEEN MOVED IN ON NOVEMBER 30, 1935, WHEN THE BUILDING WAS PRACTICALLY COMPLETED. PRIOR THERETO,FINAL INSPECTION OF BOTH CONSTRUCTION WORK AND MECHANICAL EQUIPMENT HAD BEEN MADE, AND FINAL INSPECTION REPORTS LISTING DEFECTS AND OMISSIONS HAD BEEN MADE FOR BOTH BRANCHES OF WORK, UNDER DATES OF NOVEMBER 22, 1935, AND NOVEMBER 25, 1935, RESPECTIVELY. THE CONTRACTOR HAD BEEN FORWARDED LISTS OF THE DEFECTS AND OMISSIONS IN LETTERS FROM THE DISTRICT ENGINEER DATED NOVEMBER 25, 1935, AND DECEMBER 4, 1935, AND HAD BEEN DIRECTED TO COMPLETE THE WORK IN CONFORMITY WITH INSTRUCTIONS CONTAINED IN THE LISTS. THESE LETTERS LIKEWISE STATED THAT THE CONSTRUCTION ENGINEER HAD BEEN DIRECTED TO REPORT TO THE DISTRICT ENGINEER WHEN THE DEFECTS AND OMISSIONS HAD BEEN CORRECTED. THE CONSTRUCTION ENGINEER REPORTED UNDER DATE OF DECEMBER 16, 1935, THAT THE CONTRACT HAD BEEN COMPLETED IN A SATISFACTORY MANNER, INCLUDING ALL ITEMS IN THE ABOVE-MENTIONED LISTS, EXCEPT AS TO TWO MINOR ITEMS WHICH ARE NOT HERE MATERIAL. ONE RELATED TO THE REFINISHING OF CERTAIN STEEL SCREWS TO MATCH DOOR HOLDERS, AND IN THIS RESPECT THE CONTRACTOR FOLLOWED THE CONTRACT REQUIREMENTS FOR REFINISHED STEEL SCREWS, RATHER THAN THE REQUIREMENTS OF THE INSPECTION ENGINEER THAT BRASS, BRONZE, ETC., SCREWS BE SUBSTITUTED; AND THE OTHER INVOLVED DEFECTIVE MATERIALS IN CERTAIN PAINTING WORK, FOR WHICH AN ADEQUATE DEDUCTION WAS MADE UNDER DATE OF DECEMBER 27, 1935. THE CONSTRUCTION ENGINEER'S REPORT DID NOT TAKE INTO ACCOUNT THE RECOMMENDATIONS IN THE FINAL INSPECTION REPORT THAT CERTAIN DEDUCTIONS BE MADE IN CONNECTION WITH DEFECTIVE CONCRETE AND BRICKWORK WHICH IT WAS IMPRACTICABLE TO CORRECT; BUT THESE RECOMMENDATIONS WILL REQUIRE ONLY THAT MINOR FINANCIAL ADJUSTMENTS BE MADE.

IT THUS APPEARS THAT THE BUILDING WAS ENTIRELY COMPLETED ON DECEMBER 16, 1935. BESIDES THE FINANCIAL ADJUSTMENTS BEFORE MENTIONED AND A REQUEST OF THE CONTRACTOR FOR AN EXTENSION OF TIME BECAUSE OF CERTAIN DELAYS, ONLY TWO ITEMS PREVENTED FINAL SETTLEMENT OF THE CONTRACT PRIOR TO FEBRUARY 11, 1936, NAMELY, THAT THE CONTRACTOR HAD NOT FURNISHED A CERTIFICATE OF SEWER CONNECTION FROM THE BUILDING TO THE CITY SEWER AND A CERTIFICATE OF HYDROSTATIC TEST OF HOT WATER AND STORAGE TANKS, IN ACCORDANCE WITH FEDERAL SPECIFICATION WW-P-541. THESE CERTIFICATES WERE REQUESTED ON FEBRUARY 19, 1936. A BALANCE OF $6,371.43 REMAINS DUE UNDER THE CONTRACT.

THE FOREGOING FACTS GIVE RISE TO TWO MAIN ISSUES: (1) WHETHER THE MONTANA -DAKOTA POWER COMPANY IS LIABLE FOR THE DAMAGE, AND (2) WHETHER THE RISK OF LOSS WAS ON THE CONTRACTOR AND THE GOVERNMENT MAY REQUIRE HIM UNDER THE CONTRACT TO RESTORE THE BUILDING. WHILE ULTIMATELY THE FIRST ISSUE WILL PERHAPS BE OF GREATER IMPORTANCE, THE IMMEDIATE PROBLEM RELATES ONLY TO THE SECOND, IN VIEW OF THE FACT THAT PROMPT STEPS MUST BE TAKEN FOR THE RESTORATION OF THE BUILDING AND THAT A DECISION MUST BE MADE AS TO THE DUTIES OF THE CONTRACTOR IN CONNECTION THEREWITH.

CONSIDERATION HAS BEEN GIVEN YOUR DECISION OF JULY 3, 1935 (A 61838), IN REGARD TO DAMAGE TO AN OIL SWITCH IN THE POST OFFICE DEPARTMENT BUILDING, WASHINGTON, D.C., WHICH OCCURRED AT A TIME WHEN THAT BUILDING WAS "PRACTICALLY FINISHED" AND WAS OCCUPIED BY THE GOVERNMENT. IT WAS THERE HELD, UNDER ARTICLES 2, 10, AND 16 (C) OF THE CONTRACT, THAT THE RISK OF LOSS WAS ON THE CONTRACTOR AT THE TIME OF THE ACCIDENT, AND YOUR OPINION STATES THAT A CONTRACTOR IS SUBJECT TO SUCH RISK UNTIL ,FINAL ACCEPTANCE" OF THE WORK, AND THAT A "FORMAL ACCEPTANCE" IS CONTEMPLATED BY THE CITED PROVISIONS OF THE CONTRACT. THE QUESTION PRESENTED HERE IS WHETHER UNDER THE CIRCUMSTANCES OF THIS CASE THE BUILDING HAD BEEN ACCEPTED AT THE TIME OF THE EXPLOSION.

IT IS TO BE NOTED THAT THERE ARE SEVERAL IMPORTANT DIFFERENCES BETWEEN THE FACTS PRESENTED HERE AND THOSE INVOLVED IN YOUR DECISION OF JULY 3, 1935. IN THAT CASE THE BUILDING HAD NOT BEEN ENTIRELY COMPLETED BY THE CONTRACTOR, AND THERE HAD BEEN NO FINAL INSPECTION; WHEREAS, IN THE PENDING CASE THE BUILDING HAD BEEN ENTIRELY COMPLETED AND THE WORK HAD BEEN FORMALLY APPROVED BY THE GOVERNMENT INSPECTORS, IN ADDITION TO THE OCCUPANCY. HERE ONLY THE FURNISHING OF CERTAIN CERTIFICATES AND AGREEMENT UPON MINOR FINANCIAL ADJUSTMENTS REMAINED TO BE ACCOMPLISHED BEFORE FINAL SETTLEMENT OF THE CONTRACT COULD HAVE BEEN MADE. THE BUILDING HAD BEEN "FORMALLY ACCEPTED," BY OCCUPANCY AND BY APPROVAL OF THE WORK ON FINAL INSPECTION, AS FAR AS BUILDINGS ARE EVER FORMALLY ACCEPTED IN THE USUAL PRACTICE OF THE DEPARTMENT, SHORT OF FINAL SETTLEMENT OF THE CONTRACT. HAD NOT BEEN ACCEPTED IF SUCH ACCEPTANCE CAN BE ACCOMPLISHED ONLY BY FINAL SETTLEMENT OF THE CONTRACT; BUT IN THIS REGARD IT MUST BE BORNE IN MIND BOTH THAT THE ADJUSTMENTS WHICH OFTEN DELAY FINAL SETTLEMENT FOR MONTHS HAVE IN MANY CASES NO RELATION TO THE ACCEPTABILITY OF THE BUILDING CONSTRUCTED UNDER THE CONTRACT, AND THAT THE TERM "ACCEPTANCE" IS A WORD OF ACT WHICH IN BUILDING CONSTRUCTION CASES IS CONCERNED WITH ACTUAL APPROVAL OF THE WORK BY THE OWNER, AS EVIDENCED BY ACTS ON HIS PART RECOGNIZING THAT THE WORK HAS BEEN SATISFACTORILY COMPLETED AND APPROPRIATING THE BENEFITS THEREOF. THE AUTHORITIES ON THIS SUBJECT ARE FULLY REVIEWED IN DEPARTMENT LETTER OF APRIL 30, 1935, SUBMITTING THE POST OFFICE DEPARTMENT BUILDING CASE FOR YOUR DECISION.

THE DEPARTMENT FEELS THAT UNDER THE CIRCUMSTANCES OF THIS CASE THE BUILDING HAD BEEN ACCEPTED AND THAT THE RISK OF LOSS HAD IN CONSEQUENCE SHIFTED TO THE GOVERNMENT. STEPS HAVE BEEN TAKEN TO SECURE THE NECESSARY FUNDS FOR RESTORING THE BUILDING, WHICH IT MAY BE NECESSARY TO USE EVEN THOUGH AN ATTEMPT MUST BE MADE TO REQUIRE THE CONTRACTOR TO RESTORE THE BUILDING UNDER HIS CONTRACT. A PRELIMINARY DECISION IS NECESSARY, HOWEVER, WHETHER THE OBLIGATIONS OF THE CONTRACTOR HAVE BEEN SATISFIED AND THE RESTORATION OF THE BUILDING MAY BE UNDERTAKEN WITHOUT REGARD THERETO, OR WHETHER THE RESTORATION MUST BE PERFORMED BY THE CONTRACTOR OR AT HIS EXPENSE, LEAVING HIM RATHER THAN THE GOVERNMENT TO LOOK TO THE MONTANA- DAKOTA POWER COMPANY FOR ULTIMATE REIMBURSEMENT.

THE MATTER IS SUBMITTED FOR YOUR DECISION AS TO THIS QUESTION, AND, AS THE WORK OF RESTORING THE BUILDING IS URGENTLY NEEDED, IT WILL BE APPRECIATED IF YOU WILL ADVISE THE DEPARTMENT OF YOUR DECISION AT THE EARLIEST POSSIBLE DATE.

THE CONTRACT REFERRED TO WAS ON THE STANDARD GOVERNMENT FORM OF CONSTRUCTION CONTRACT AND CONTAINED THE FOLLOWING PROVISIONS:

ARTICLE 2. * * * UPON COMPLETION OF THE CONTRACT THE WORK SHALL BE DELIVERED COMPLETE AND UNDAMAGED.

ARTICLE 10. * * * THE CONTRACTOR * * * SHALL BE RESPONSIBLE FOR THE PROPER CARE AND PROTECTION OF ALL MATERIALS DELIVERED AND WORK PERFORMED UNTIL COMPLETION AND FINAL ACCEPTANCE.

ARTICLE 16. * * *

(C) ALL MATERIAL AND WORK COVERED BY PARTIAL PAYMENTS MADE SHALL THEREUPON BECOME THE SOLE PROPERTY OF THE GOVERNMENT, BUT THIS PROVISION SHALL NOT BE CONSTRUED AS RELIEVING THE CONTRACTOR FROM THE SOLE RESPONSIBILITY FOR THE CARE AND PROTECTION OF MATERIALS AND WORK UPON WHICH PAYMENTS HAVE BEEN MADE OR THE RESTORATION OF ANY DAMAGED WORK, OR AS A WAIVER OF THE RIGHT OF THE GOVERNMENT TO REQUIRE THE FULFILLMENT OF ALL OF THE TERMS OF THE CONTRACT.

ARTICLE 2 OF THE CONTRACT REQUIRED THE CONTRACTOR TO DELIVER THE BUILDING COMPLETE AND UNDAMAGED, AND ARTICLES 10 AND 16 (C) MADE THE CONTRACTOR RESPONSIBLE FOR THE CARE AND PROTECTION OF ALL WORK DONE AND MATERIAL DELIVERED UNTIL COMPLETION AND FINAL ACCEPTANCE.

THE OCCUPANCY OF THE BUILDING BEFORE FINAL ACCEPTANCE WAS ENTIRELY WITHIN THE CONTROL OF THE CONTRACTOR AND THE METHOD OF PROTECTION WITHIN HIS DISCRETION. SEE MURCH BROTHERS CONSTRUCTION ., INC. V. UNITED STATES, NO. M-92, DECIDED BY THE COURT OF CLAIMS OF THE UNITED STATES, JUNE 3, 1935. THE LAW IS WELL SETTLED THAT A CONTRACTOR WHO HAS UNDERTAKEN TO COMPLETE AN ENTIRE STRUCTURE IS REQUIRED TO REPLACE A BUILDING DESTROYED BY FIRE, EXPLOSION, OR OTHERWISE, EXCEPT THROUGH THE FAULT OF THE OWNER, AT ANY TIME PRIOR TO COMPLETION AND FINAL ACCEPTANCE. SEE 6 COMP. GEN. 261; UNITED STATES V. FIDELITY CO., 236 U.S. 512; AND UNITED STATES V. ANSONIA BRASS CO., 218 U.S. 452, 468. HENCE, DETERMINATION OF THE MATTER HERE PRESENTED IS DEPENDENT UPON THE QUESTION OF FACT AS TO WHETHER, AT THE TIME OF THE EXPLOSION ON FEBRUARY 12, 1936, THE CONSTRUCTION OF THE BUILDING, AS REQUIRED BY THE CONTRACT, HAD BEEN COMPLETED BY THE CONTRACTOR AND FINALLY ACCEPTED BY THE GOVERNMENT. IN YOUR LETTER, SUPRA, SAID QUESTION OF FACT IS ANSWERED IN THE AFFIRMATIVE. THE FACTS STATED IN SAID LETTER AND COPIES OF CERTAIN TELEGRAMS, LETTERS, AND REPORTS SUBMITTED THEREWITH APPEAR TO SUPPORT SUCH A CONCLUSION.

WHILE OCCUPANCY, ALONE, IS NOT CONCLUSIVE OF ACCEPTANCE--- IT BEING NECESSARY THAT ALL WORK REQUIRED BE COMPLETED IN FACT, AND APPROVED AFTER FINAL INSPECTION--- FINAL SETTLEMENT IS NOT ESSENTIAL. COMPLETION AND FINAL ACCEPTANCE ARE CONDITIONS PRECEDENT TO FINAL SETTLEMENT WHICH MAY BE MADE LONG THEREAFTER.

UNDER THE FACTS AND CIRCUMSTANCES STATED IN YOUR LETTER, THE CONTRACT HERE IN QUESTION DOES NOT REQUIRE THAT THE CONTRACTOR REPAIR THE DAMAGED BUILDING.