A-80361, SEPTEMBER 10, 1937, 17 COMP. GEN. 231

A-80361: Sep 10, 1937

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1937: THERE IS FOR CONSIDERATION YOUR CLAIM FOR REMISSION OF LIQUIDATED DAMAGES ACCRUED TO THE GOVERNMENT AND FOR PAYMENT OF AMOUNTS OTHERWISE DUE YOU AS FINAL PAYMENTS UNDER CONTRACT NO. UNDER THE TERMS OF THE CONTRACTS YOU WERE OBLIGATED TO CONSTRUCT. LIQUIDATED DAMAGES THE AMOUNT OF FIFTY DOLLARS ($50.00) FOR EACH CALENDAR DAY OF DELAY UNTIL THE WORK IS COMPLETED OR ACCEPTED. ARTICLE 9 OF THE STANDARD FORM OF GOVERNMENT CONTRACT IS AS FOLLOWS: DELAYS. WITH SUCH DILIGENCE AS WILL INSURE ITS COMPLETION WITHIN THE TIME SPECIFIED IN ARTICLE 1. IF THE CONTRACTOR'S RIGHT TO PROCEED IS SO TERMINATED. IN WHICH EVENT THE ACTUAL DAMAGES FOR THE DELAY WILL BE IMPOSSIBLE TO DETERMINE AND IN LIEU THEREOF THE CONTRACTOR SHALL PAY TO THE GOVERNMENT AS FIXED.

A-80361, SEPTEMBER 10, 1937, 17 COMP. GEN. 231

CONTRACTS--- DAMAGES--- LIQUIDATED--- EFFECT OF ACCEPTANCE AT PRICE REDUCTION BECAUSE OF PRODUCT INFERIORITY WHERE HEATING PLANTS INSTALLED UNDER GOVERNMENT CONTRACT FAILED TO MEET SPECIFICATIONS AND AFTER REPEATED ATTEMPTS TO REMEDY AND CORRECT THE DEFECTS THE CONTRACTOR CONCLUDED THAT IT WOULD BE IMPOSSIBLE TO ATTAIN THE EFFICIENCY REQUIRED BY THE CONTRACT, THE ACCEPTANCE BY THE GOVERNMENT OF SAID PLANTS AT PRICES SUFFICIENTLY REDUCED TO COMPENSATE THE GOVERNMENT FOR THE EXCESS COST OF THEIR OPERATION DOES NOT JUSTIFY THE REMISSION OF LIQUIDATED DAMAGES FOR COLLECTION BECAUSE OF THE DELAYS INVOLVED.

ACTING COMPTROLLER GENERAL ELLIOTT TO E.J. YOUNG AND CO., INC., SEPTEMBER 10, 1937:

THERE IS FOR CONSIDERATION YOUR CLAIM FOR REMISSION OF LIQUIDATED DAMAGES ACCRUED TO THE GOVERNMENT AND FOR PAYMENT OF AMOUNTS OTHERWISE DUE YOU AS FINAL PAYMENTS UNDER CONTRACT NO. W6252-QM-9, MARCH 6, 1934, FOR THE CONSTRUCTION AND COMPLETION OF A HEATING PLANT AT MIDDLETOWN AIRPORT, MIDDLETOWN, PA., AND CONTRACT NO. W6681-QM-91, FEBRUARY 9, 1934, FOR THE CONSTRUCTION AND COMPLETION OF A HEATING PLANT AT PATTERSON FIELD, FAIRFIELD, OHIO.

UNDER THE TERMS OF THE CONTRACTS YOU WERE OBLIGATED TO CONSTRUCT, COMPLETE, AND DELIVER HEATING PLANTS IN STRICT ACCORDANCE WITH THE SPECIFICATIONS, SCHEDULES, AND DRAWINGS ATTACHED TO AND MADE PART OF SAID CONTRACTS, WITHIN THE TIME SPECIFIED THEREIN. THE CONTRACT SPECIFICATIONS PROVIDED IN EACH INSTANCE AS FOLLOWS:

LIQUIDATED DAMAGES.--- IF THE CONTRACTOR DELAYS THE COMPLETION OF THE WORK UNDER THIS CONTRACT BEYOND THE TIME FOR COMPLETION STATED IN THE CONTRACT, THEN THE CONTRACTOR SHALL PAY THE U.S. AS FIXED, AGREED, AND LIQUIDATED DAMAGES THE AMOUNT OF FIFTY DOLLARS ($50.00) FOR EACH CALENDAR DAY OF DELAY UNTIL THE WORK IS COMPLETED OR ACCEPTED, SUBJECT TO THE PROVISIONS OF ARTICLE 9 OF THE STANDARD FORM OF GOVERNMENT CONTRACT. ARTICLE 9 OF THE STANDARD FORM OF GOVERNMENT CONTRACT IS AS FOLLOWS:

DELAYS--- DAMAGES.--- IF THE CONTRACTOR REFUSES OR FAILS TO PROSECUTE THE WORK, OR ANY SEPARABLE PART THEREOF, WITH SUCH DILIGENCE AS WILL INSURE ITS COMPLETION WITHIN THE TIME SPECIFIED IN ARTICLE 1, OR ANY EXTENSION THEREOF, OR FAILS TO COMPLETE SAID WORK WITHIN SUCH TIME, THE GOVERNMENT MAY, BY WRITTEN NOTICE TO THE CONTRACTOR, TERMINATE HIS RIGHT TO PROCEED WITH THE WORK OR SUCH PART OF THE WORK AS TO WHICH THERE HAS BEEN DELAY. IN SUCH EVENT THE GOVERNMENT MAY TAKE OVER THE WORK AND PROSECUTE THE SAME TO COMPLETION, BY CONTRACT OR OTHERWISE, AND THE CONTRACTOR AND HIS SURETIES SHALL BE LIABLE TO THE GOVERNMENT FOR ANY EXCESS COST OCCASIONED THE GOVERNMENT THEREBY. IF THE CONTRACTOR'S RIGHT TO PROCEED IS SO TERMINATED, THE GOVERNMENT MAY TAKE POSSESSION OF AND UTILIZE IN COMPLETING THE WORK SUCH MATERIALS, APPLIANCES, AND PLANT AS MAY BE ON THE SITE OF THE WORK AND NECESSARY THEREFOR. IF THE GOVERNMENT DOES NOT TERMINATE THE RIGHT OF THE CONTRACTOR TO PROCEED, THE CONTRACTOR SHALL CONTINUE THE WORK, IN WHICH EVENT THE ACTUAL DAMAGES FOR THE DELAY WILL BE IMPOSSIBLE TO DETERMINE AND IN LIEU THEREOF THE CONTRACTOR SHALL PAY TO THE GOVERNMENT AS FIXED, AGREED, AND LIQUIDATED DAMAGES FOR EACH CALENDAR DAY OF DELAY UNTIL THE WORK IS COMPLETED OR ACCEPTED THE AMOUNT AS SET FORTH IN THE SPECIFICATIONS OR ACCOMPANYING PAPERS AND THE CONTRACTOR AND HIS SURETIES SHALL BE LIABLE FOR THE AMOUNT THEREOF: PROVIDED, THAT THE RIGHT OF THE CONTRACTOR TO PROCEED SHALL NOT BE TERMINATED OR THE CONTRACTOR CHARGED WITH LIQUIDATED DAMAGES BECAUSE OF ANY DELAYS IN THE COMPLETION OF THE WORK DUE TO UNFORESEEABLE CAUSES BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE CONTRACTOR, INCLUDING, BUT NOT RESTRICTED TO, ACTS OF GOD, OR OF THE PUBLIC ENEMY, ACTS OF THE GOVERNMENT, FIRES, FLOODS, EPIDEMICS, QUARANTINE RESTRICTIONS, STRIKES, FREIGHT EMBARGOES, AND UNUSUALLY SEVERE WEATHER OR DELAYS OF SUBCONTRACTORS DUE TO SUCH CAUSES: PROVIDED FURTHER, THAT THE CONTRACTOR SHALL WITHIN 10 DAYS FROM THE BEGINNING OF ANY SUCH DELAY NOTIFY THE CONTRACTING OFFICER IN WRITING OF THE CAUSES OF DELAY, WHO SHALL ASCERTAIN THE FACTS AND THE EXTENT OF THE DELAY AND EXTEND THE TIME FOR COMPLETING THE WORK WHEN IN HIS JUDGMENT THE FINDINGS OF FACT JUSTIFY SUCH AN EXTENSION, AND HIS FINDINGS OF FACTS THEREON SHALL BE FINAL AND CONCLUSIVE ON THE PARTIES HERETO, SUBJECT ONLY TO APPEAL, WITHIN 30 DAYS, BY THE CONTRACTOR TO THE HEAD OF THE DEPARTMENT CONCERNED, WHOSE DECISION ON SUCH APPEAL AS TO THE FACTS OF DELAY AND THE EXTENSION OF TIME FOR COMPLETING THE WORK SHALL BE FINAL AND CONCLUSIVE ON THE PARTIES HERETO.

COMPLETION DATE ON CONTRACT W6252-QM-9 AS EXTENDED BY CHANGE ORDERS WAS OCTOBER 11, 1934, AND THE CONTRACT PRICE AS MODIFIED BY CHANGE ORDERS WAS $208,941.55.

COMPLETION DATE UNDER CONTRACT W6681-QM-91 AS EXTENDED BY CHANGE ORDERS WAS OCTOBER 1, 1934, AND CONTRACT PRICE AS MODIFIED BY CHANGE ORDERS WAS $197,055.29.

THE RECORD SHOWS THAT THE HEATING PLANTS INSTALLED BY YOU DID NOT COMPLY WITH THE SPECIFICATIONS IN SEVERAL RESPECTS AND THAT THEY DID NOT ATTAIN THE EFFICIENCY RATINGS REQUIRED BY THE CONTRACTS AND GUARANTEED BY YOU. THE ADMINISTRATIVE REPORT TO THIS OFFICE IS TO THE EFFECT THAT AFTER REPEATED TESTS HAD ESTABLISHED THE FACT THAT THE PLANTS FAILED TO MEET THE SPECIFICATION REQUIREMENTS, AND AFTER REPEATED EFFORTS ON YOUR PART TO REMEDY AND CORRECT THE DEFECTS AND BRING THE PLANTS INTO COMPLIANCE WITH THE SPECIFICATIONS, YOU REACHED THE CONCLUSION THAT IT WOULD BE IMPOSSIBLE FOR YOU TO ATTAIN THE REQUIRED RATINGS WITH THE EQUIPMENT YOU HAD INSTALLED. THEREUPON, APPARENTLY PURSUANT TO PREVIOUS CONFERENCES, CONSULTATIONS, AND CORRESPONDENCE BETWEEN REPRESENTATIVES OF YOUR COMPANY AND REPRESENTATIVES OF THE QUARTERMASTER GENERAL OF THE ARMY, THE OFFICE OF THE QUARTERMASTER GENERAL WROTE YOU IN JULY 1936, STATING THAT THE PLANTS DID NOT AT THAT TIME COMPLY WITH THE SPECIFICATIONS IN A NUMBER OF RESPECTS AND WERE UNSATISFACTORY AS WELL AS UNACCEPTABLE. IT WAS SUGGESTED THAT IF YOU WOULD MAKE CERTAIN CHANGES AND CORRECTIONS AS PROPOSED BY YOU AND LISTED IN THE COMMUNICATION, WHICH WOULD BRING THE PLANTS MORE NEARLY IN LINE WITH EFFICIENCIES GUARANTEED AND THE DEGREE OF OPERATING PERFECTION REQUIRED BY THE SPECIFICATIONS, THE WAR DEPARTMENT WOULD ACCEPT THE TWO PLANTS AT PRICES SUFFICIENTLY REDUCED TO COMPENSATE THE GOVERNMENT FOR THE EXCESS COST OF OPERATING THE PLANTS OVER A PERIOD OF 20 YEARS,WHICH WAS ESTIMATED AS THE LIFE OF THE SAID PLANTS. YOU AGREED TO THAT PROPOSAL.

THE CONTRACTING OFFICER DECIDED THAT THE PLANT AT MIDDLETOWN AIRPORT WAS INSPECTED AND ACCEPTED ON JANUARY 12, 1937, WITH AN AGREED REDUCTION IN PRICE AS ABOVE OUTLINED OF $26,350.60, AND THAT THE PLANT AT PATTERSON FIELD WAS INSPECTED AND ACCEPTED APRIL 14, 1937, WITH AN AGREED REDUCTION IN PRICE OF $27,509.20.

THE DECISIONS OF THE CONTRACTING OFFICER AS TO DATES OF COMPLETION OR ACCEPTANCE ARE CONCLUSIVE UNDER THE CIRCUMSTANCES HERE APPEARING. IT THUS IS SHOWN THAT THERE WAS A DELAY OF 824 CALENDAR DAYS IN COMPLETION AND ACCEPTANCE OF THE MIDDLETOWN PLANT, WHICH, AT THE CONTRACT RATE OF $50 PER DAY, RESULTED IN ACCRUED LIQUIDATED DAMAGES OF $41,200, AND THAT THERE WAS A DELAY IN COMPLETION AND ACCEPTANCE OF THE PATTERSON FIELD PLANT OF 926 CALENDAR DAYS WITH ACCRUED LIQUIDATED DAMAGES OF $46,300 AT THE CONTRACT RATE OF $50 PER DAY. THERE IS NO EVIDENCE THAT ANY OF THE DELAY WAS CAUSED BY THE GOVERNMENT OR WAS ATTRIBUTABLE TO ANY OF THE CAUSES EXCUSING DELAY UNDER ARTICLE 9 OF THE CONTRACTS. ON THE OTHER HAND, THE ADMINISTRATIVE REPORT IS TO THE EFFECT THAT YOUR DIFFICULTY AND DELAY WAS OCCASIONED BY YOUR FAILURE TO ACHIEVE THE REQUIREMENTS OF THE SPECIFICATIONS WITH THE EQUIPMENT INSTALLED IN THE FIRST INSTANCE, AND YOUR CONSEQUENT REPEATED EFFORTS TO CORRECT SUCH INSTALLATIONS TO CONFORM TO THE SPECIFICATIONS, WITHOUT SUCCESS.

IT WAS YOUR OBLIGATION TO DELIVER HEATING PLANTS IN STRICT COMPLIANCE WITH THE SPECIFICATIONS AND WITHIN THE RESPECTIVE CONTRACT PERIODS--- INCLUDING ANY AUTHORIZED EXTENSIONS--- OR TO PAY TO THE GOVERNMENT LIQUIDATED DAMAGES UNTIL SUCH TIME AS SUCH PLANTS WERE COMPLETED OR ACCEPTED.

THE RIGHT TO COLLECT LIQUIDATED DAMAGES HAVING ACCRUED TO THE GOVERNMENT, THERE IS NO LEGAL BASIS APPARENT AT THIS TIME FOR THE REMISSION OF ANY PART THEREOF. IT WAS SAID BY THE COURT OF CLAIMS IN PACIFIC HARDWARE AND STEEL COMPANY V UNITED STATES, 49 CT. CLS. 327 335: "IT IS UNQUESTIONABLY TRUE THAT AN OFFICIAL OF THE GOVERNMENT IS NOT AUTHORIZED TO GIVE AWAY OR REMIT A CLAIM DUE THE GOVERNMENT. THIS RULE IS GROUNDED IN A SOUND PUBLIC POLICY AND IS NOT TO BE WEAKENED.' THE RULE IS APPLICABLE TO THE ACCOUNTING AS WELL AS TO THE ADMINISTRATIVE OFFICERS OF THE GOVERNMENT, AND NO CONSIDERATION OF SYMPATHY FOR THE POSSIBLE MISFORTUNE OF A CONTRACTOR MAY BE INVOKED OR INDULGED FOR ITS EVASION.

THE RECORD SHOWS PREVIOUS PAYMENTS MADE TO YOU ON THE MIDDLETOWN PLANT CONTRACT, TOGETHER WITH THE AGREED REDUCTION IN PRICE, AGGREGATE $155,653.75, AND THAT THERE IS A BALANCE OF $12,087.80 DUE YOUR COMPANY FROM THE GOVERNMENT ON THAT CONTRACT AFTER DEDUCTION OF $41,200 ACCRUED LIQUIDATED DAMAGES. THE RECORD SHOWS THAT PAYMENTS HERETOFORE MADE YOU ON ACCOUNT OF THE PATTERSON FIELD CONTRACT, TOGETHER WITH THE AGREED REDUCTION IN PRICE, AGGREGATE $192,234.08, AND THAT YOU ARE INDEBTED TO THE GOVERNMENT IN THE AMOUNT OF $41,478.79 AS BALANCE OF LIQUIDATED DAMAGES ACCRUED UNDER THAT CONTRACT.

THE FOLLOWING TABULATION REFLECTS BOTH TRANSACTIONS IN DETAIL:

CONTRACT W-6252-QM-9--- MIDDLETOWN AIR DEPOT CONTRACT PRICE AS MODIFIED - --------------------------------- $208,941.55 LESS --

PREVIOUS PAYMENTS ---------------------------- $129,303.15

DEDUCTION FOR FAILURE TO PROVIDE GUARANTEED

EFFICIENCY --------------------------------- 26,350.60

LIQ. DAMAGES ACCRUING UNTIL FINAL ACCEPTANCE

BY GOV-T, JANUARY 12, 1937, 824 DAYS $50

PER DAY ------------------------------------ 41,200.00

196,853.75

BALANCE DUE THE CONTRACTOR ---------------------------- 12,087.80

CONTRACT W-6681-QM-91--- PATTERSON FIELD CONTRACT PRICE AS MODIFIED ----- ----------------------------- $197,055.29 LESS --

PREVIOUS PAYMENTS ---------------------------- $164,724.88

DEDUCTION FOR FAILURE TO PROVIDE GUARANTEED

EFFICIENCY --------------------------------- 27,509.20

LIQ. DAMAGES ACCRUING UNTIL FINAL ACCEPTANCE

BY GOV-T, APRIL 14, 1937, 926 DAYS $50

PER DAY ------------------------------------ 46,300.00

238,534.08

BALANCE DUE THE GOVERNMENT ---------------------------- 41,478.79

----------- RECAPITULATION OF THE TWO CONTRACTS SHOWN ABOVE:

DUE THE GOVERNMENT ---------------------------------------- 41,478.79

DUE THE CONTRACTOR ---------------------------------------- 12,087.80

BALANCE STILL DUE THE GOVERNMENT ------------------------ 29,390.99

THE FOREGOING TABULATION SHOWS AN INDEBTEDNESS FROM YOU TO THE GOVERNMENT OF $41,478.79 AND FROM THE GOVERNMENT TO YOU OF $12,087.80. ACCORDINGLY, SETTLEMENT WILL ISSUE IN YOUR FAVOR FOR THE BALANCE OF $12,087.80 DUE YOU FROM THE GOVERNMENT UNDER CONTRACT W-6252-QM-9, AND THAT AMOUNT WILL BE APPLIED TO REDUCE YOUR INDEBTEDNESS TO THE GOVERNMENT OF $41,478.79 UNDER CONTRACT NO. W-6681-QM-91, LEAVING A NET INDEBTEDNESS FROM YOU TO THE GOVERNMENT OF $29,390.99. SECTION 236, REVISED STATUTES AS AMENDED BY SECTION 305, ACT JUNE 10, 1921, 42 STAT. 24, 31 U.S.C. 71; BARRY V UNITED STATES, 229 U.S. 47.

THAT AMOUNT SHOULD BE FORWARDED TO THIS OFFICE IMMEDIATELY FOR DEPOSIT IN THE TREASURY.