A-72331, APRIL 15, 1936, 15 COMP. GEN. 913

A-72331: Apr 15, 1936

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CONTRACTS - DEFAULT OF CONTRACTOR - COMPLETION BY SURETY UNDER THE TERMS OF ARTICLE 9 OF THE GOVERNMENT STANDARD FORM OF CONSTRUCTION CONTRACT A SURETY COMPLETING THE CONTRACT OF ITS PRINCIPAL WHOSE RIGHT TO PROCEED WAS TERMINATED. IS CHARGEABLE WITH LIQUIDATED DAMAGES ACCRUED PRIOR TO THE TERMINATION PLUS THE EXCESS COST OCCASIONED THE GOVERNMENT IN HAVING THE WORK PROSECUTED TO COMPLETION. IF THE PRINCIPAL'S RIGHT TO PROCEED WAS NOT TERMINATED LIQUIDATED DAMAGES ARE CHARGEABLE TO THE SURETY TO DATE OF COMPLETION. WHEREIN YOU HAVE URGED THAT YOU WERE CHARGED AS COMPLETING SURETY WITH AN EXCESS AMOUNT OF $780 AS LIQUIDATED DAMAGES BY REASON OF DELAYS IN THE COMPLETION OF CONTRACT W-6101-QM-25.

A-72331, APRIL 15, 1936, 15 COMP. GEN. 913

CONTRACTS - DEFAULT OF CONTRACTOR - COMPLETION BY SURETY UNDER THE TERMS OF ARTICLE 9 OF THE GOVERNMENT STANDARD FORM OF CONSTRUCTION CONTRACT A SURETY COMPLETING THE CONTRACT OF ITS PRINCIPAL WHOSE RIGHT TO PROCEED WAS TERMINATED, IS CHARGEABLE WITH LIQUIDATED DAMAGES ACCRUED PRIOR TO THE TERMINATION PLUS THE EXCESS COST OCCASIONED THE GOVERNMENT IN HAVING THE WORK PROSECUTED TO COMPLETION, BUT IF THE PRINCIPAL'S RIGHT TO PROCEED WAS NOT TERMINATED LIQUIDATED DAMAGES ARE CHARGEABLE TO THE SURETY TO DATE OF COMPLETION.

COMPTROLLER GENERAL MCCARL TO THE STANDARD ACCIDENT INSURANCE CO., APRIL 15, 1936:

THERE HAS BEEN CONSIDERED YOUR LETTER OF OCTOBER 14, 1935, WHEREIN YOU HAVE URGED THAT YOU WERE CHARGED AS COMPLETING SURETY WITH AN EXCESS AMOUNT OF $780 AS LIQUIDATED DAMAGES BY REASON OF DELAYS IN THE COMPLETION OF CONTRACT W-6101-QM-25, DATED NOVEMBER 15, 1933. IT APPEARS YOU HAVE ADMITTED THERE WAS PROPERLY CHARGED $647.50 AS LIQUIDATED DAMAGES FOR DELAYS WHICH HAD ACCRUED PRIOR TO THE TIME WHEN YOU COMMENCED AS SURETY TO COMPLETE THE WORK, BUT YOU INSIST YOU SHOULD NOT BE CHARGED WITH $780 LIQUIDATED DAMAGES BY REASON OF THE DELAY AFTER THE DATE WHEN YOU PROCEEDED TO COMPLETE THE WORK.

AS YOU HAVE INDICATED, IT WAS HELD BY THE COURT OF CLAIMS IN A DECISION OF MAY 6, 1935, IN THE CASE OF FIDELITY AND CASUALTY CO. OF NEW YORK V. THE UNITED STATES THAT LIQUIDATED DAMAGES MAY BE CHARGED FOR DELAYS TO THE DATE OF THE TERMINATION OF THE RIGHT OF THE CONTRACTOR TO PROCEED; ALSO, THAT UNDER ARTICLE 9 OF THE STANDARD FORM OF CONSTRUCTION CONTRACT THE COMPLETING SURETY MAY NOT BE CHARGED WITH LIQUIDATED DAMAGES FOR DELAYS AFTER SAID DATE. SUCH RULE WAS APPLIED BY THIS OFFICE IN 15 COMP. GEN. 409.

THERE IS, AS YOU APPARENTLY ADMIT, SOME DOUBT WHETHER THE UNITED STATES DID, IN FACT, TERMINATE THE RIGHT OF THE CONTRACTOR TO PROCEED IN THIS CASE OR WHETHER THE GOVERNMENT PERMITTED YOU TO PROCEED AS COMPLETING SURETY WITHOUT TERMINATING THE RIGHT OF THE CONTRACTOR TO PROCEED. HOWEVER, IT DOES NOT APPEAR NECESSARY FOR THIS OFFICE TO DETERMINE AT THIS TIME WHETHER THE GOVERNMENT DID, IN FACT, TERMINATE THE RIGHT OF THE CONTRACTOR TO PROCEED AS WAS THE SITUATION IN THE CITED FIDELITY AND CASUALTY CO. OF NEW YORK CASE. IF SUCH RIGHT TO PROCEED WAS NOT TERMINATED, THEN YOU WERE PROPERLY CHARGEABLE WITH LIQUIDATED DAMAGES FOR ALL OF THE DELAY UNTIL COMPLETION OF THE WORK. IF THE RIGHT OF THE CONTRACTOR TO PROCEED WAS, IN FACT, TERMINATED THEN, AS COMPLETING SURETY, YOU ARE CHARGEABLE WITH ALL EXCESS COSTS TO THE UNITED STATES, AND THE WAR DEPARTMENT HAS REPORTED THAT THE ACTUAL DAMAGES SUSTAINED BY THE GOVERNMENT DURING THE PERIOD FROM JULY 27, 1934, TO SEPTEMBER 11, 1934, THROUGH FAILURE OF THE CONTRACTOR TO COMPLETE THE CONTRACT WITHIN THE STIPULATED PERIOD, AGGREGATED $864.50, CONSISTING OF $273.12 AS ADDITIONAL COST OF INSPECTION; $114.79 SALARY PAID TO THE SUPERINTENDENT OF CONSTRUCTION; $121.12 OFFICE OVERHEAD; $203.95 SALARY PAID TO THE CONSTRUCTION QUARTERMASTER; AND $151.50 AS COMMUTATION ALLOWANCES PAID DURING SAID PERIOD BECAUSE THE GOVERNMENT WAS UNABLE TO FURNISH QUARTERS IN KIND TO THE PERSONS ENTITLED THERETO AND WHO WOULD HAVE OTHERWISE OCCUPIED THE QUARTERS IN QUESTION.

THAT IS TO SAY, IF YOU HAD BEEN CHARGED IN THE SETTLEMENT OF SEPTEMBER 28, 1935, WITH THE ACTUAL DAMAGES SUSTAINED BY THE GOVERNMENT AS A PART OF THE EXCESS COSTS TO WHICH THE UNITED STATES IS ENTITLED UNDER ARTICLE 9 OF THE CONTRACT IN EVENT OF TERMINATION OF THE RIGHT OF THE CONTRACTOR TO PROCEED, YOU WOULD HAVE BEEN CHARGED WITH AN AMOUNT IN EXCESS OF $780 WHICH WAS, IN FACT, CHARGED AS LIQUIDATED DAMAGES DURING SAID PERIOD ON THE THEORY THAT THE RIGHT OF THE CONTRACTOR TO PROCEED WAS NOT TERMINATED.

IF AS YOU HAVE CONTENDED, THE RIGHT OF THE CONTRACTOR TO PROCEED WAS, IN FACT, TERMINATED, YOU SHOULD REMIT THE SUM OF $84.50 AS THE DIFFERENCE BETWEEN THE ACTUAL INCREASED COST OF $864.50 AND THE LIQUIDATED DAMAGES OF $780 CHARGED IN THE SETTLEMENT FOR THE PERIOD IN QUESTION.