A-88513, AUGUST 29, 1938, 18 COMP. GEN. 201

A-88513: Aug 29, 1938

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

CONTRACTS - CONSTRUCTION - INSPECTION COSTS ON DELAYED DELIVERIES - EXTENT OF CONTRACTOR'S LIABILITY UNDER SUPPLY CONTRACT PROVIDING "THAT ALL INSPECTION COSTS INVOLVED BY REASON OF DELAY IN COMPLETION ARE TO BE CHARGED TO AND ASSUMED BY THE CONTRACTOR. " CONTRACTOR IS NOT CHARGEABLE WITH ALL INSPECTION COSTS ON LATE DELIVERIES BUT ONLY SUCH ADDITIONAL INSPECTION COSTS AS WERE CAUSED BY ITS DELAY IN COMPLETION. 1938: THERE IS BEFORE THIS OFFICE FOR CONSIDERATION A CLAIM OF THE NEW ENGLAND BUNTING COMPANY. WHICH ORDER WAS RECEIVED AUGUST 24. THE CONTRACT CONTAINED THE FOLLOWING PROVISION: IN THE EVENT DELIVERIES ARE NOT COMPLETED BY EXPIRATION DATE OF THE CONTRACT. DELIVERIES AFTER SUCH EXPIRATION DATE MAY BE PERMITTED WHERE THE INTERESTS OF THE GOVERNMENT ARE SERVED THEREBY WITH THE EXPRESS CONDITION THAT ALL INSPECTION COSTS INVOLVED BY REASON OF DELAY IN COMPLETION ARE TO BE CHARGED TO AND ASSUMED BY THE CONTRACTOR.

A-88513, AUGUST 29, 1938, 18 COMP. GEN. 201

CONTRACTS - CONSTRUCTION - INSPECTION COSTS ON DELAYED DELIVERIES - EXTENT OF CONTRACTOR'S LIABILITY UNDER SUPPLY CONTRACT PROVIDING "THAT ALL INSPECTION COSTS INVOLVED BY REASON OF DELAY IN COMPLETION ARE TO BE CHARGED TO AND ASSUMED BY THE CONTRACTOR," CONTRACTOR IS NOT CHARGEABLE WITH ALL INSPECTION COSTS ON LATE DELIVERIES BUT ONLY SUCH ADDITIONAL INSPECTION COSTS AS WERE CAUSED BY ITS DELAY IN COMPLETION.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF WAR, AUGUST 29, 1938:

THERE IS BEFORE THIS OFFICE FOR CONSIDERATION A CLAIM OF THE NEW ENGLAND BUNTING COMPANY, 65 WORTH STREET, NEW YORK CITY, NEW YORK, FOR $18.74, INSPECTION COSTS ASSESSED AGAINST IT IN CONNECTION WITH DELIVERY OF A QUANTITY OF WOOL BUNTING TO YOUR DEPARTMENT UNDER CONTRACT NO. W-669-QM- ECW-50, DATED AUGUST 21, 1936.

THE CONTRACT REQUIRED DELIVERY OF THE BUNTING WITHIN 21 DAYS FROM RECEIPT OF ORDER, WHICH ORDER WAS RECEIVED AUGUST 24, 1936, THEREBY ESTABLISHING THE DELIVERY DUE DATE AS SEPTEMBER 14, 1936. THE CONTRACT CONTAINED THE FOLLOWING PROVISION:

IN THE EVENT DELIVERIES ARE NOT COMPLETED BY EXPIRATION DATE OF THE CONTRACT, DELIVERIES AFTER SUCH EXPIRATION DATE MAY BE PERMITTED WHERE THE INTERESTS OF THE GOVERNMENT ARE SERVED THEREBY WITH THE EXPRESS CONDITION THAT ALL INSPECTION COSTS INVOLVED BY REASON OF DELAY IN COMPLETION ARE TO BE CHARGED TO AND ASSUMED BY THE CONTRACTOR.

THE RECORD INDICATES THAT NONE OF THE DELIVERIES WAS MADE ON TIME AND AS A RESULT A DEDUCTION OF $18.74 WAS MADE, WHICH AMOUNT COVERED THE ENTIRE INSPECTION COSTS ON ALL OF THE BUNTING. THE CONTRACTOR PROTESTS THIS DEDUCTION ON THE GROUND THAT THE CONTRACT DOES NOT PROVIDE FOR ASSESSMENT AGAINST THE CONTRACTOR OF ALL INSPECTION COSTS ON LATE DELIVERIES BUT ONLY SUCH ADDITIONAL INSPECTION COSTS AS WERE CAUSED BY THE DELAY.

THE LANGUAGE OF THE CONTRACT SUPPORTS THE CONTRACTOR'S CONTENTION. PROVISION IS CONTAINED IN THE AGREEMENT THAT ALL INSPECTION COSTS ON LATE DELIVERIES SHALL BE PAID BY THE CONTRACTOR, BUT ONLY SUCH AS ARE INVOLVED "BY REASON OF DELAY IN COMPLETION.' THESE QUOTED WORDS LIMIT THE EXTENT OF THE INSPECTION COST ASSESSMENT WHICH CAN BE MADE AGAINST THE CONTRACTOR IF HE FAILS TO MAKE TIMELY DELIVERIES. FURTHERMORE, IT IS A FAMILIAR RULE IN THE CONSTRUCTION OF WRITTEN CONTRACT PROVISIONS THAT GENERAL WORDS CANNOT BE DETACHED FROM EXPLANATORY WORDS IMMEDIATELY FOLLOWING IN THE SAME SENTENCE IN DETERMINING THE MEANING, AND THAT THE EXPLANATORY OR SPECIAL WORDS IN SUCH A CASE SHALL CONTROL. SMITH V. MCCULLOUGH, 104 U.S. 25, 28; BECK V. PERKINS, 139 U.S. 628, 634. IN THE CONTRACT PROVISION HERE UNDER CONSIDERATION THE GENERAL TERM "ALL INSPECTION COSTS" IS FOLLOWED BY THE EXPLANATORY WORDS "INVOLVED BY REASON OF DELAY IN OMPLETION" AND, ACCORDINGLY, THESE LATTER WORDS PRESCRIBE THE EXTENT OF THE LIABILITY AND PRECLUDE AN INTERPRETATION THAT ALL INSPECTION COSTS ON DELAYED DELIVERIES MAY BE ASSESSED AGAINST THE CONTRACTOR, IRRESPECTIVE OF WHETHER SUCH COSTS AROSE "BY REASON OF DELAY IN COMPLETION.'

IT IS STATED IN THE LETTER OF NOVEMBER 25, 1936, SIGNED BY W. A. MCCAIN, COLONEL, Q.M.C., THAT SO MANY DELINQUENT DELIVERIES ARE RECEIVED AT THE PHILADELPHIA QUARTERMASTER DEPOT THAT PROPER COORDINATION OF INSPECTION WORK IS IMPOSSIBLE WITH THE RESULT THAT A NUMBER OF ADDITIONAL INSPECTORS ARE REQUIRED TO BE MAINTAINED. IT IS FURTHER STATED THAT IT WOULD BE PRACTICALLY IMPOSSIBLE TO DETERMINE THE PERCENTAGE OF ADDITIONAL INSPECTION COSTS ALLOCABLE TO A PARTICULAR CONTRACT AND THAT "FOR THIS REASON, IT HAS BEEN THE POLICY TO REGARD THE ABOVE QUOTED CONTRACT PROVISION AS INTENDING THE ASSESSMENT UPON THE CONTRACTOR OF THE TOTAL EXPENDITURE FOR INSPECTION COSTS WHERE THE DELIVERIES ARE INSPECTED BY TEMPORARY PERSONNEL AFTER COMPLETION DATE OF TRACT.' A CONDITION AS DESCRIBED MIGHT WELL BE ADMINISTRATIVELY DETERMINED TO JUSTIFY INCORPORATING IN CONTRACTS A PROVISION THAT CONTRACTORS SHALL PAY ALL INSPECTION COSTS ON LATE DELIVERIES, BUT IT DOES NOT JUSTIFY DELETION THROUGH INTERPRETATION OF THE PHRASE "INVOLVED BY REASON OF DELAY IN COMPLETION" FROM THE CLEAR AND UNAMBIGUOUS TERMS OF THE ABOVE QUOTED CONTRACT PROVISION.

IT IS STATED IN THE ABOVE MENTIONED LETTER OF NOVEMBER 25, 1936, THAT:

WHILE THIS IS A SMALL CLAIM, THE TOTAL CHARGE BEING ONLY $18.74, THE ISSUE INVOLVED IS CONSIDERED IMPORTANT IN HANDLING EXCESS INSPECTION COSTS AT THIS DEPOT UNDER EXISTING CONDITIONS. * * *

YOU ARE INFORMED, THEREFORE, THAT IF IT IS DEEMED ADMINISTRATIVELY DESIRABLE TO ASSESS ALL INSPECTION COSTS ON LATE DELIVERIES AGAINST DELINQUENT CONTRACTORS IT IS SUGGESTED THAT PROPER PROVISION BE MADE IN THE CONTRACTS TO MEET THE CONDITION; THE PROVISION HERE UNDER CONSIDERATION CANNOT BE INTERPRETED AS JUSTIFYING THE ASSESSMENT OF ANY EXCEPT ADDITIONAL INSPECTION COSTS ASCERTAINED AS CAUSED BY DELAYED DELIVERIES UNDER THE PARTICULAR CONTRACT.