A-77186, OCTOBER 23, 1936, 16 COMP. GEN. 410

A-77186: Oct 23, 1936

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CONTRACTS - EXCESS INSPECTION COSTS - DELAYS BY CONTRACTOR EXCESS COSTS OF INSPECTION RESULTING DIRECTLY FROM DELAYS IN COMPLETION OF A CONTRACT ARE CHARGEABLE TO THE CONTRACTOR NOTWITHSTANDING THE OMISSION FROM THE CONTRACT OF A STIPULATION TO THAT EFFECT. IS PERFORMED AT A POINT OTHER THAN THAT SPECIFIED IN THE CONTRACT IS NOT MATERIAL. YOU WERE ADVISED IN THE SETTLEMENT THAT BALANCES AGGREGATING $2. THE AMOUNT OF $945.45 WAS WITHHELD BY SETTLEMENT NO. 0386718. YOU HAVE RETURNED CHECK NO. 1. IN ACCORDANCE WITH THE CONTRACT PROVISIONS FINAL DELIVERIES OF THE SPECIFIED QUANTITIES WERE TO BE MADE UNDER CONTRACT W669-QM-4846 NOT LATER THAN MARCH 10. WERE STIPULATIONS THAT IF THE CONTRACTOR FAILED TO COMPLETE DELIVERIES UNDER THE SAID CONTRACTS WITHIN THE TIME SPECIFIED AND WAS PERMITTED TO COMPLETE SAME AFTER THE EXPIRATION DATE THERE WOULD BE CHARGED TO HIM THE INSPECTION COSTS ACCRUING AFTER SUCH DATE.

A-77186, OCTOBER 23, 1936, 16 COMP. GEN. 410

CONTRACTS - EXCESS INSPECTION COSTS - DELAYS BY CONTRACTOR EXCESS COSTS OF INSPECTION RESULTING DIRECTLY FROM DELAYS IN COMPLETION OF A CONTRACT ARE CHARGEABLE TO THE CONTRACTOR NOTWITHSTANDING THE OMISSION FROM THE CONTRACT OF A STIPULATION TO THAT EFFECT, SUCH COSTS CONSTITUTING ACTUAL DAMAGES WHICH MAY FAIRLY AND REASONABLY BE CONSIDERED AS FLOWING FROM THE CONTRACT BREACH, AND THE FACT THAT SUCH INSPECTION, AFTER THE COMPLETION DATE, IS PERFORMED AT A POINT OTHER THAN THAT SPECIFIED IN THE CONTRACT IS NOT MATERIAL.

ACTING COMPTROLLER GENERAL ELLIOTT TO SIGMUND EISNER CO., OCTOBER 23, 1936:

CONSIDERATION HAS BEEN GIVEN YOUR REQUEST FOR REVIEW OF SETTLEMENT NO. 014665 (3) DATED AUGUST 21, 1935, WHICH DISALLOWED YOUR CLAIM FOR $3,391.06, REPRESENTING AMOUNTS CHARGED AGAINST YOU BY REASON OF ADDITIONAL INSPECTION COSTS INCURRED BY THE WAR DEPARTMENT UNDER CONTRACTS W669-QM-4846, DATED AUGUST 21, 1933, W669-QM-4839, DATED AUGUST 24, 1933, W669-QM-5313, AND W669-QM-5315, BOTH DATED FEBRUARY 28, 1934, AND W669-QM- 5508, DATED APRIL 23, 1934, CALLING FOR DELIVERY OF RAINCOATS TO THE PHILADELPHIA QUARTERMASTER DEPOT, IN CONNECTION WITH DELIVERIES MADE AND ACCEPTED AFTER THE COMPLETION DATES FIXED UNDER THE TERMS OF THE RESPECTIVE CONTRACTS.

YOU WERE ADVISED IN THE SETTLEMENT THAT BALANCES AGGREGATING $2,445.61 WITHHELD FROM PAYMENT UNDER CONTRACTS W669-QM-4839 AND W669 QM-5508 WOULD BE APPLIED IN PARTIAL LIQUIDATION OF THE EXCESS INSPECTION COSTS OF $3,391.06 AND THAT THE BALANCE OF $945.45 WOULD BE COLLECTED FROM ANY AMOUNTS FOUND TO BE OTHERWISE DUE YOU. THE AMOUNT OF $945.45 WAS WITHHELD BY SETTLEMENT NO. 0386718, DATED JANUARY 27, 1936, AND YOU HAVE RETURNED CHECK NO. 1,000,158, DATED FEBRUARY 3, 1936, ISSUED, PURSUANT TO THE LATTER SETTLEMENT, BY E C. MORTON, FINANCE OFFICER, UNITED STATES ARMY, OVER SYMBOL NO. 20-249, FOR $433.98, WITH YOUR REQUEST FOR REVIEW OF THE SETTLEMENTS.

UNDER THE TERMS OF THE CONTRACTS YOU AGREED TO FURNISH CERTAIN SPECIFIED QUANTITIES OF RAINCOATS TO THE PHILADELPHIA QUARTERMASTER DEPOT, TWENTY- FIRST AND JOHNSTON STREETS, PHILADELPHIA, PA., FOR THE PRICES STIPULATED THEREIN. IN ACCORDANCE WITH THE CONTRACT PROVISIONS FINAL DELIVERIES OF THE SPECIFIED QUANTITIES WERE TO BE MADE UNDER CONTRACT W669-QM-4846 NOT LATER THAN MARCH 10, 1934; CONTRACT W669-QM 4839, NOT LATER THAN MARCH 26, 1934; CONTRACTS W669-QM-5313 AND W669 QM-5315, NOT LATER THAN MAY 29, 1934, AND CONTRACT W669-QM-5508, NOT LATER THAN AUGUST 1, 1934. ATTACHED TO AND MADE A PART OF CONTRACTS W669-QM-5313, W669-QM-5315 AND W669-QM- 5508, WERE STIPULATIONS THAT IF THE CONTRACTOR FAILED TO COMPLETE DELIVERIES UNDER THE SAID CONTRACTS WITHIN THE TIME SPECIFIED AND WAS PERMITTED TO COMPLETE SAME AFTER THE EXPIRATION DATE THERE WOULD BE CHARGED TO HIM THE INSPECTION COSTS ACCRUING AFTER SUCH DATE. THE OTHER TWO CONTRACTS, W669-QM-4839 AND W669-QM-4846, CONTAINED NO PROVISIONS FOR LIQUIDATED OR ACTUAL DAMAGES EXCEPT THE PROVISION IN ARTICLE 5, COMMON TO ALL OF THE CONTRACTS, AUTHORIZING THE GOVERNMENT TO TERMINATE THE RIGHT OF THE CONTRACTOR TO PROCEED WITH DELIVERIES UNDER THE CONTRACTS IN CASE OF DEFAULT AND TO PURCHASE SIMILAR MATERIALS OR SUPPLIES IN THE OPEN MARKET OR SECURE THE MANUFACTURE AND DELIVERY THEREOF BY CONTRACT OR OTHERWISE, THE CONTRACTOR AND HIS SURETY TO BE LIABLE FOR ANY EXCESS COST OCCASIONED THE GOVERNMENT THEREBY.

YOUR RIGHT TO PROCEED UNDER THE CONTRACTS WAS NOT TERMINATED BUT YOU WERE PERMITTED TO CONTINUE WITH DELIVERIES AFTER THE EXPIRATION DATES, AND THE WAR DEPARTMENT HAS REPORTED AS FOLLOWS WITH RESPECT TO THE ACTUAL COMPLETION DATES AND ADDITIONAL INSPECTION CHARGES WHICH WERE INCURRED AFTER THE DATES FIXED UNDER THE CONTRACTS FOR COMPLETION:

CHART

DATES DELIVERIES INSPECTION

CONTRACT NUMBERS COMPLETED CHARGES W669 QM-4846 --------------------- AUG. 20, 1934 $189.07 W669-QM 4839 --------------------- SEPT. 27, 1934 2,624.81 W669-QM 5313 --------------------- AUG. 28, 1934 286.46 W669-QM 5315 --------------------- AUG. 17, 1934 2.32 W669-QM 5508 --------------- ------ SEPT. 27, 1934 288.40

TOTAL --------------------------------------- 3,391.06

WITH RESPECT TO THE ALLEGED CAUSES OF THE DELAYS IN COMPLETING DELIVERIES THE CONTRACTING OFFICER HAS FOUND AS FOLLOWS:

I CERTIFY THAT I HAVE EXAMINED THE CLAIMS OF SIGMUND EISNER COMPANY FILED WITH THIS DEPOT FOR RELIEF FROM PAYMENT OF THE COST OF EXCESS INSPECTION IN THE AMOUNT OF $3,391.06, CHARGED TO THE CLAIMANT IN CONNECTION WITH PERFORMANCE UNDER THE FOLLOWING CONTRACTS:

CHART

CONTRACT W 669 QM-4839, DATED 8-24-33.

CONTRACT W 669 QM-4846, DATED 8-21-33.

CONTRACT W 669 QM-5313, DATED 2-28-34.

CONTRACT W 669 QM-5315, DATED 2-28-34.

CONTRACT W 669 QM-5508, DATED 4-23-34.

AS A RESULT OF THIS INVESTIGATION I CERTIFY THAT I HAVE FOUND THE FOLLOWING FACTS:

1. THAT NO DELAY IN PRODUCTION OF THE CONTRACTOR OCCURRED AS A RESULT OF A STRIKE IN THE CONTRACTOR'S PLANT IN SEPTEMBER 1933;

2. THAT NO MATERIAL DELAY IN PRODUCTION OF THE CONTRACTOR RESULTED FROM ANY ERROR IN PATTERNS FURNISHED BY THIS DEPOT;

3. THAT THE ALLEGATION RESPECTING SABOTAGE IN THE PLANT OF THE SUPPLIER OF THE BALLOON CLOTH APPEARS TO BE UNFOUNDED IN FACT INSOFAR AS THE REJECTIONS OF BALLOON CLOTH WHICH OCCURRED AT THE FACTORY OF THE STANDARD OILED CLOTHING COMPANY ARE CONCERNED;

4. THAT THE GOVERNMENT SUSTAINED A LOSS IN THE AMOUNT OF $3,391.06 BY REASON OF THE DELINQUENCIES OF THE CLAIMANT ON THE ABOVE NOTED CONTRACTS;

5. THAT THIS LOSS REPRESENTS THE ADDITIONAL COSTS OF INSPECTION INCURRED AFTER THE COMPLETION DATE OF THE ABOVE MENTIONED CONTRACTS;

6. THAT THE GOVERNMENT WAS FORCED TO ABANDON THE PRELIMINARY INSPECTION MAINTAINED AT THE PLANT OF THE STANDARD OILED CLOTHING COMPANY, NEW YORK CITY, A SUB-CONTRACTOR OF THE CLAIMANT, WHEN THE EXCESSIVE PERCENTAGE OF REJECTIONS OF RAINCOATS OFFERED FOR PRELIMINARY INSPECTION BEFORE SHIPMENT TO THIS DEPOT INDICATED THAT THIS PRELIMINARY INSPECTION WAS NOT EFFECTIVE IN SECURING THE MANUFACTURE OF THE RAINCOATS ACCORDING TO THE SPECIFICATION REQUIREMENTS, AND THAT THE CONTRACTOR EVIDENTLY WAS NOT PROPERLY INSPECTING THE RAINCOATS BEFORE OFFERING THE SAME FOR SUCH PRELIMINARY INSPECTION;

7. THAT THESE GOVERNMENT INSPECTORS WERE WITHDRAWN FROM THE PLANT OF THE STANDARD OILED CLOTHING COMPANY, FEBRUARY 23, 1934, AND THE INSPECTION OF THE REMAINING UNDELIVERED RAINCOATS WAS PERFORMED AT THIS DEPOT;

8. THAT THIS DEPOT INSPECTION FOR WHICH THE CONTRACTOR WAS CHARGED WAS PERFORMED AFTER THE COMPLETION DATE OF THE CONTRACTS BY TEMPORARILY EMPLOYED INSPECTION PERSONNEL;

9. THAT, WITH RESPECT TO THE CONTRACT PROVISION THAT THE COST OF ALL INSPECTION PERFORMED AT A POINT OTHER THAN THE PREMISES OF THE CONTRACTOR OR SUB-CONTRACTOR WOULD BE AT THE EXPENSE OF THE GOVERNMENT, IT WAS THE INTENTION OF BOTH PARTIES, THE GOVERNMENT AND THE CLAIMANT, THAT THIS PROVISION WOULD APPLY ONLY TO THE PERFORMANCE OF THE CONTRACTS AS SUCH PERFORMANCE WAS MUTUALLY PROMISED, AND THAT, IN THESE INSTANCES, THIS PROVISION OF THE GOVERNMENT WAS GIVEN IN CONSIDERATION OF THE PROMISE OF THE CLAIMANT TO PERFORM IN ACCORDANCE WITH THE PROVISIONS OF THE CONTRACTS; AND

10. THAT THE PROVISIONS CONCERNING THE RESPONSIBILITY FOR THESE INSPECTION COSTS IN CONTRACTS W669-QM-5313, W669-QM-5315, AND W669-QM 5508, AND IN THE PERTINENT INVITATIONS FOR BIDS THERETO (INVITATIONS FOR BIDS NOS. 669-34-164, 669-34-174, AND 669-34-264) DO NOT CONFLICT AS IS ALLEGED; BUT ARE, AND WERE, INTENDED TO BE COMPLEMENTARY, THE CONTRACT PROVISION APPLYING TO ALL COSTS OF INSPECTION FROM THE AWARD UNTIL THE COMPLETION DATE OF THE CONTRACTS, AND THE PROVISION IN THE RESPECTIVE INVITATION FOR BIDS PERTAINING TO THE COST OF ALL INSPECTION INCURRED AFTER THE COMPLETION DATE OF THE CONTRACTS.

PURSUANT TO THE EXPRESS TERMS OF CONTRACTS W669-QM-5313, W669-QM 5315, AND W669-QM-5508 YOU WERE CHARGEABLE WITH THE INSPECTION COSTS ACCRUING AFTER THE EXPIRATION OF THE PERIOD SPECIFIED FOR COMPLETION OF DELIVERIES THEREUNDER. WHILE CONTRACTS W669-QM-4839 AND W669-QM 4846 CONTAINED NO SPECIFIC PROVISIONS WITH RESPECT TO THE CHARGING OF DAMAGES IN THE EVENT YOU WERE PERMITTED TO CONTINUE WITH DELIVERY AFTER THE EXPIRATION DATES, YOU ARE CHARGEABLE WITH THE ACTUAL AND DIRECT LOSS CAUSED THE GOVERNMENT BY REASON OF THE DELAY IN COMPLETION FOR WHICH NO EXTENSION OF TIME WAS PROVIDED (8 COMP. GEN. 455).

THE WAR DEPARTMENT HAS DETERMINED THE EXCESS COST OF INSPECTION TO THE GOVERNMENT RESULTING DIRECTLY FROM THE DELAYS IN COMPLETING THE DELIVERIES UNDER THE FIVE CONTRACTS AND WITH RESPECT TO CONTRACTS W669 QM-4846, DATED AUGUST 21, 1933, AND W669-QM-4839, DATED AUGUST 24, 1933, AS SUCH EXCESS INSPECTION COSTS CONSTITUTE ACTUAL DAMAGES WHICH MAY FAIRLY AND REASONABLY BE CONSIDERED AS ARISING IN THE USUAL COURSE OF THINGS FROM THE BREACH OF THE CONTRACTS, YOU WERE CHARGEABLE THEREWITH WITHOUT ANY SPECIAL CONTRACTUAL PROVISIONS. THIS IS WITHIN THE RULE OF HADLEY V. BAXENDALE, 9 EXCH. 345, 354-355, WHICH HAS BEEN UNIVERSALLY ADOPTED AND APPROVED IN THE UNITED STATES. SEE PRIMROSE V. WESTERN UNION TEL. CO., 154 U.S. 1, 29 -30; GLOBE REFINING CO. V. LANDA COTTON OIL CO., 190 U.S. 540; A-62700, DECEMBER 24, 1935; A 65278, SEPTEMBER 21, 1936, 16 COMP. GEN. 277.

FURTHERMORE, ARTICLE 4 OF THE CONTRACTS PROVIDED THAT THE RAINCOATS WOULD BE SUBJECT TO INSPECTION AND THAT THE GOVERNMENT RESERVED THE RIGHT TO CHARGE THE CONTRACTOR ANY ADDITIONAL COST OF INSPECTION WHEN NOT READY AT THE TIME INSPECTION WAS REQUESTED BY THE CONTRACTOR. THE RECORDS SHOW THAT FOR SOME TIME BEFORE THE COMPLETION DATES OF THESE TWO CONTRACTS THE INSPECTION FORCE MAINTAINED BY THE WAR DEPARTMENT IN CONNECTION THEREWITH WAS SUFFICIENT TO TAKE CARE OF THE DELIVERIES WHICH WERE MADE. SINCE THE RAINCOATS WERE NOT READY FOR DELIVERY ON THE DUE DATES IT WAS NECESSARY TO KEEP INSPECTORS ON THE JOB UNTIL THEY WERE DELIVERED AND THE RESULTING EXPENSE WOULD APPEAR TO BE SUCH AS WOULD NOT HAVE BEEN INCURRED HAD YOU COMPLETED DELIVERIES ON TIME. THE FACT THAT SUCH INSPECTION, AFTER THE COMPLETION DATES, WAS PERFORMED AT A POINT OTHER THAN YOUR PREMISES IS NOT MATERIAL SINCE THE ADDITIONAL INSPECTION CHARGES INCURRED AFTER THE COMPLETION DATES REPRESENT ACTUAL DAMAGES RECOVERABLE BY THE GOVERNMENT BY REASON OF YOUR BREACH OF THE CONTRACTS.

IN ANY EVENT, UNDER THE TERMS OF ARTICLE 12 OF EACH OF THE FIVE CONTRACTS, DISPUTES CONCERNING QUESTIONS OF FACT ARISING UNDER THE CONTRACTS WERE TO BE DECIDED BY THE CONTRACTING OFFICER OR HIS DULY AUTHORIZED REPRESENTATIVE, SUBJECT TO WRITTEN APPEAL BY THE CONTRACTOR WITHIN 30 DAYS TO THE HEAD OF THE DEPARTMENT CONCERNED, WHOSE DECISION WAS TO BE FINAL AND CONCLUSIVE ON THE PARTIES THERETO, AS TO SUCH QUESTIONS OF FACT. THE CONTRACTING OFFICER HAS DETERMINED, AS A MATTER OF FACT, THAT THE DAMAGES SUSTAINED BY THE GOVERNMENT IN THE MATTER OF EXCESS INSPECTION COSTS AGGREGATED $3,391.06, AND THAT THE DELAYS WERE NOT DUE TO ANY OF THE CAUSES ALLEGED. SUCH DETERMINATION IS FINAL AND CONCLUSIVE ON YOU. SEE PENN BRIDGE COMPANY V. UNITED STATES, 59 CT.CLS. 892, AND THE CASES THEREIN CITED.

WHILE YOU HAVE DISPUTED SOME OF THE FACTS REPORTED BY THE CONTRACTING OFFICER, THE EVIDENCE DOES NOT SHOW THE FACTS AS ADMINISTRATIVELY REPORTED TO BE ERRONEOUS, AND IT IS THE ESTABLISHED RULE OF THIS OFFICE TO ACCEPT THE REPORT OF THE ADMINISTRATIVE OFFICERS ON DISPUTED QUESTIONS OF FACT, IN THE ABSENCE OF EVIDENCE SUFFICIENT TO OVERCOME THE PRESUMPTION OF THE CORRECTNESS THEREOF. 3 COMP. GEN. 51.

UPON REVIEW, THE SETTLEMENT DATED AUGUST 21, 1935, DISALLOWING YOUR CLAIM, AND THE SETTLEMENT DATED JANUARY 27, 1936, WHEREIN THE BALANCE OF $945.45 WAS DEDUCTED FROM AN AMOUNT OTHERWISE DUE YOU, MUST BE, AND ARE, SUSTAINED.