B-107063, FEBRUARY 27, 1952, 31 COMP. GEN. 428

B-107063: Feb 27, 1952

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THE GOVERNMENT IS ENTITLED. TO LIQUIDATED DAMAGES FROM THE TIME THE WORK WAS REQUIRED TO BE COMPLETED UNTIL IT WAS COMPLETED BY THE REPLACING CONTRACTOR. 1952: REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 14. SAID CONTRACT WAS AWARDED TO DAVID A. IT IS STATED THAT THE CONTRACTOR'S RIGHT TO PROCEED WAS TERMINATED JANUARY 15. I2R 15673 WAS NEGOTIATED WITH THE MCLAUGHLIN CONSTRUCTION COMPANY AT PRICES HIGHER THAN THOSE IN THE DEFAULTED CONTRACT. THE WORK WAS COMPLETED ON JULY 5. TO HAVE THE WORK COMPLETED BY OTHERS. IT WAS HELD IN THE CASE OF UNITED STATES V. THAT THE RIGHTS GRANTED THE GOVERNMENT BY THE CLAUSE WERE MUTUALLY EXCLUSIVE AND THAT THE TERMINATION OF THE CONTRACTOR'S RIGHT TO PROCEED OPERATED AS A WAIVER OF LIQUIDATED DAMAGES.

B-107063, FEBRUARY 27, 1952, 31 COMP. GEN. 428

CONTRACTS - DAMAGES - LIABILITY FOR BOTH LIQUIDATED AND ACTUAL DAMAGES WHERE CONSTRUCTION CONTRACTOR DEFAULTED UNDER A CONTRACT CONTAINING THE STANDARD DALAYS-DAMAGES CLAUSE PROVIDING LIQUIDATED DAMAGES FOR DELAYS IN COMPLETION OF CONTRACT IN EVENT THE GOVERNMENT DID NOT TERMINATE CONTRACTOR'S RIGHT TO PROCEED, BUT THE SPECIFICATIONS PROVIDED FOR LIQUIDATED DAMAGES UNTIL COMPLETION BY THE CONTRACTOR OR REPLACING CONTRACTOR AND THAT SUCH PROVISION WOULD NOT PREVENT GOVERNMENT FROM TERMINATING RIGHT OF CONTRACTOR TO PROCEED, THE GOVERNMENT IS ENTITLED, UPON TERMINATION OF THE CONTRACT AND AWARD TO A REPLACING CONTRACTOR, TO LIQUIDATED DAMAGES FROM THE TIME THE WORK WAS REQUIRED TO BE COMPLETED UNTIL IT WAS COMPLETED BY THE REPLACING CONTRACTOR, PLUS EXCESS COST OF COMPLETION UNDER THE REPLACING CONTRACT.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF THE INTERIOR, FEBRUARY 27, 1952:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 14, 1951, REQUESTING A DECISION AS TO THE PROPER MEASURE OF DAMAGES TO BE CHARGED FOR DEFAULT UNDER CONTRACT NO. I2R-15060. SAID CONTRACT WAS AWARDED TO DAVID A. RICHARDSON ON JUNE 20, 1944, AND COVERED THE CONSTRUCTION OF A REINFORCED CONCRETE FLUME SPANNING THE CROOKED RIVER, DESCHUTES PROJECT, OREGON, TO BE COMPLETED BY APRIL 7, 1945.

IT IS STATED THAT THE CONTRACTOR'S RIGHT TO PROCEED WAS TERMINATED JANUARY 15, 1946, SOME 282 DAYS AFTER EXPIRATION OF THE ORIGINAL CONTRACT TIME, AND ON JANUARY 26, 1946, REPLACEMENT CONTRACT NO. I2R 15673 WAS NEGOTIATED WITH THE MCLAUGHLIN CONSTRUCTION COMPANY AT PRICES HIGHER THAN THOSE IN THE DEFAULTED CONTRACT. THE WORK WAS COMPLETED ON JULY 5, 1946, OR 453 CALENDAR DAYS AFTER THE ORIGINAL COMPLETION DATE.

THE RICHARDSON CONTRACT CONTAINED, AS ARTICLE 9 THEREOF, THE THEN STANDARD DALAYS-DAMAGES CLAUSE GIVING THE GOVERNMENT THE RIGHT TO TERMINATE THE CONTRACTOR'S RIGHT TO PROCEED FOR FAILURE TO COMPLETE THE WORK ON TIME, TO HAVE THE WORK COMPLETED BY OTHERS, AND TO CHARGE THE CONTRACTOR AND HIS SURETY FOR ANY EXCESS COST THEREBY OCCASIONED THE GOVERNMENT. SAID CLAUSE ALSO PROVIDED FOR THE ASSESSMENT OF LIQUIDATED DAMAGES FOR DELAY IN THE EVENT THE GOVERNMENT DID NOT SO TERMINATE THE CONTRACTOR'S RIGHT TO PROCEED. AS STATED IN YOUR LETTER OF DECEMBER 14, 1951, IT WAS HELD IN THE CASE OF UNITED STATES V. AMERICAN SURETY CO., 322 U.S. 96, INVOLVING A SIMILAR CONTRACT CLAUSE, THAT THE RIGHTS GRANTED THE GOVERNMENT BY THE CLAUSE WERE MUTUALLY EXCLUSIVE AND THAT THE TERMINATION OF THE CONTRACTOR'S RIGHT TO PROCEED OPERATED AS A WAIVER OF LIQUIDATED DAMAGES. THE CONTRACT SPECIFICATIONS IN THAT CASE CONTAINED A PARAGRAPH WHICH MERELY SPECIFIED THE DAILY RATE OF LIQUIDATED DAMAGES, AND WHICH, AS THE COURT STATED, WAS "OBVIOUSLY NOT INTENDED TO SPELL OUT THE SITUATIONS WHERE LIQUIDATED DAMAGES ARE TO BE PAID," AND COULD NOT, THEREFORE, BE CONSIDERED AS MODIFYING OR CONTROLLING THE LANGUAGE OF THE DALAYS-DAMAGES ARTICLE OF THE CONTRACT. IN THE INSTANT CASE, HOWEVER, PARAGRAPH 22 OF THE CONTRACT SPECIFICATIONS PROVIDES IN PLAIN AND UNAMBIGUOUS TERMS FOR THE ASSESSMENT OF LIQUIDATED DAMAGES AT THE RATE OF $50 PER DAY.

* * * FOR EACH CALENDAR DAY'S DELAY UNTIL THE WORK IS SATISFACTORILY COMPLETED OR UNTIL SUCH TIME AS THE GOVERNMENT MAY REASONABLY PROCURE THE COMPLETION OF THE WORK BY ANOTHER CONTRACTOR OR COMPLETE THE WORK ITSELF. * * * THE PROVISION FOR LIQUIDATED DAMAGES SHALL NOT PREVENT THE GOVERNMENT FROM TERMINATING THE RIGHT OF THE CONTRACTOR TO PROCEED IN CASE OF DEFAULT, AS PROVIDED IN ARTICLE 9 OF THE CONTRACT. IT IS CLEAR THAT THE ABOVE-QUOTED LANGUAGE OF THE SPECIFICATIONS WAS INTENDED TO OVERCOME THE EFFECT OF THE INTERPRETATION GIVEN THE LANGUAGE OF ARTICLE 9 OF THE CONTRACT IN THE AMERICAN SURETY COMPANY CASE, SUPRA. NOR CAN IT BE DOUBTED THAT THE LANGUAGE USED IS ADEQUATE FOR THE ACCOMPLISHMENT OF THAT PURPOSE. TO THE EXTENT THAT THE TWO PROVISIONS MAY BE DEEMED INCONSISTENT, THE MORE SPECIFIC PROVISIONS OF PARAGRAPH 22 OF THE SPECIFICATIONS FOR THE WORK MUST PREVAIL OVER THE GENERAL PRINTED CONTRACT CONDITIONS. SEE 15 COMP. GEN. 533; 19 ID. 440, AND CASES CITED THEREIN.

QUESTION IS RAISED, HOWEVER, AS TO THE ENFORCEABILITY OF PARAGRAPH 22 OF THE RICHARDSON CONTRACT SPECIFICATIONS BECAUSE OF THE FACT THAT IT MAY BE CONSIDERED A DEVIATION FROM THE STANDARD FORM OF GOVERNMENT CONSTRUCTION CONTRACT WHICH HAD NOT BEEN AUTHORIZED BY THE TREASURY DEPARTMENT. THE AUTHORITY OF THE SECRETARY OF THE TREASURY, AS OF THE TIME THE RICHARDSON CONTRACT WAS EXECUTED, TO PRESCRIBE CERTAIN STANDARD CONTRACT TERMS AND CONDITIONS AND TO PROHIBIT DEVIATION THEREFROM APPEARS TO HAVE BEEN DERIVED FROM EXECUTIVE ORDER 6166, ISSUED JUNE 10, 1933, AND FROM REGULATIONS ISSUED PURSUANT THERETO BY THE DIRECTOR OF PROCUREMENT ON FEBRUARY 12, 1934. SEE, IN THIS CONNECTION, 17 COMP. GEN. 700.

ASIDE FROM THE QUESTION WHETHER THE PROVISIONS OF ARTICLE 9 LEGALLY COULD BE DEVIATED FROM, IT APPEARS QUESTIONABLE WHETHER PARAGRAPH 22 OF THE CONTRACT SPECIFICATIONS ACTUALLY CONSTITUTED SUCH A DEVIATION. SOME TWO YEARS PRIOR TO THE DECISION IN THE AMERICAN SURETY COMPANY CASE THIS OFFICE SUGGESTED TO THE SECRETARY OF THE TREASURY THE ADVISABILITY OF REVISION OF THE STANDARD DALAYS-DAMAGES CLAUSE BECAUSE OF CERTAIN LOWER COURT DECISIONS WHICH HAD INTERPRETED THAT CLAUSE IN THE SAME WAY AS DID THE LATER DECISION OF THE SUPREME COURT, AND POINTING OUT THE PATENTLY ANOMALOUS RESULTS UNDER SUCH AN INTERPRETATION OF THE CLAUSE. IN REPLY, THE TREASURY DEPARTMENT STATED ITS OPINION THAT A REVISION OF THE CLAUSE PROBABLY WOULD BECOME NECESSARY UNLESS THE SUPREME COURT SHOULD RESOLVE THE THEN EXISTING CONFLICT BETWEEN LOWER COURT DECISIONS IN FAVOR OF THE GOVERNMENT'S POSITION. IT IS CLEAR, THEREFORE, THAT THE CLAUSE WAS INTENDED BY ITS DRAFTERS TO PERMIT THE COLLECTION OF BOTH EXCESS COSTS AND LIQUIDATED DAMAGES, AND PARAGRAPH 22 OF THE CONTRACT SPECIFICATIONS IN THE INSTANT CASE DID NO MORE THAN TO MAKE CERTAIN THAT INTENT AND PURPOSE.

HOWEVER, EVEN IF IT BE ASSUMED THAT PARAGRAPH 22 OF THE PRESENT CONTRACT SPECIFICATIONS WAS AN UNAUTHORIZED DEVIATION FROM THE STANDARD CONTRACT FORM, IT IS THE VIEW OF THIS OFFICE THAT THE CONTRACTOR CANNOT ESCAPE LIABILITY ON THAT ACCOUNT. THE STANDARDIZATION OF GOVERNMENT CONTRACT FORMS PURSUANT TO EXECUTIVE ORDER 6166 WAS BEYOND QUESTION INTENDED SOLELY FOR THE BENEFIT OF THE GOVERNMENT, AND DID NOT PURPORT TO CONFER ANY RIGHTS UPON CONTRACTORS IN THE EVENT OF AN UNAUTHORIZED DEVIATION FROM THE STANDARD FORMS SO PRESCRIBED. THE FACTS IN THE PRESENT CASE ARE COMPARABLE TO THOSE IN THE CASE OF UNITED STATES V. N.Y. AND PORTO RICO S.S. CO., 239 U.S. 88. THERE THE GOVERNMENT SOUGHT TO HOLD A CONTRACTOR TO AN AGREEMENT WHICH DID NOT CONFORM TO A STATUTORY REQUIREMENT THAT IT BE REDUCED TO WRITING AND SIGNED AT THE END BY THE CONTRACTING PARTIES. MR. JUSTICE HOLMES, SPEAKING FOR THE COURT, STATED IN PART AS FOLLOWS:

THE STATUTE DOES NOT ADDRESS ITSELF IN TERMS TO THE EFFECT OF THE FORM UPON THE LIABILITY OF THE PARTIES, LIKE THE STATUTE OF FRAUDS.

* * * THE PREVAILING OPINION CANNOT BE TAKEN TO SIGNIFY THAT THE INFORMAL CONTRACT IS ILLEGAL * * *. OF COURSE THE STATUTE DOES NOT MEAN THAT ITS MAKER, THE GOVERNMENT, ONE OF THE OSTENSIBLE PARTIES, IS GUILTY OF UNLAWFUL CONDUCT, OR THAT THE OTHER PARTY IS COMMITTING A WRONG IN MAKING PRELIMINARY ARRANGEMENTS, IF LATER THE SECRETARY OF THE NAVY DOES NOT DO WHAT THE ACT MAKES IT HIS DUTY TO DO.

THERE IS NO PRINCIPLE OF MUTUALITY APPLICABLE TO A CASE LIKE THIS * * *. THE UNITED STATES NEEDS THE PROTECTION OF PUBLICITY, FORM, REGULARITY OF RETURNS AND AFFIDAVIT * * *. A PRIVATE PERSON NEEDS NO SUCH PROTECTION AGAINST A WRITTEN UNDERTAKING SIGNED BY HIMSELF. THE DUTY IS IMPOSED UPON THE OFFICERS OF THE GOVERNMENT NOT UPON HIM. * * * EVEN WHEN A STATUTE IN SO MANY WORDS DECLARES A TRANSACTION VOID FOR WANT OF CERTAIN FORMS, THE PARTY FOR WHOSE PROTECTION THE REQUIREMENT IS MADE OFTEN MAY WAIVE IT, VOID BEING HELD TO MEAN ONLY VOIDABLE AT THE PARTY'S CHOICE. THERE IS THE FURTHER POSSIBILITY THAT THE CONTRACTOR, HAVING SIGNED THE CONTRACT INCORPORATING PARAGRAPH 22 OF THE SPECIFICATIONS AND HAVING COMMENCED PERFORMANCE OF WORK THEREUNDER WITHOUT PROTEST, MAY BE ESTOPPED TO DENY THE VALIDITY OF THAT PART OF THE CONTRACT.

ACCORDINGLY, IT IS THE VIEW OF THIS OFFICE THAT THE CONTRACTOR AND HIS SURETY SHOULD BE HELD LIABLE FOR LIQUIDATED DAMAGES OF $50 FOR EACH CALENDAR DAY OF INEXCUSABLE DELAY FROM THE TIME THE WORK WAS REQUIRED TO BE COMPLETED UNTIL IT WAS ACTUALLY COMPLETED BY THE REPLACING CONTRACTOR, PLUS THE EXCESS COST OF COMPLETION UNDER THE REPLACING CONTRACT. INDICATED IN YOUR LETTER OF DECEMBER 14, 1951, THIS VIEW OF THE MATTER WILL REQUIRE A DETERMINATION AS TO THE EXTENT OF EXCUSABLE DELAY UNDER THE CONTRACT.