B-119002, JUL. 8, 1955

B-119002: Jul 8, 1955

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TO THE HONORABLE SECRETARY OF THE NAVY: REFERENCE IS MADE TO A COMMUNICATION DATED MAY 4. WERE OMITTED FROM THE ELECTRICAL SUBCONTRACTOR'S FINAL COST STATEMENT OR ESTIMATE WHICH WAS UTILIZED IN DETERMINING THE APPROVED ADJUSTMENT OF $7. THE FACTUAL BACKGROUND UPON WHICH THE CLAIM IS BASED IS SET FORTH IN THE CONTRACTOR'S LETTER OF MARCH 21. THE CLAIMANT WAS REQUESTED IN ADMINISTRATIVE LETTER OF NOVEMBER 17. - THE CONTRACTOR WAS DIRECTED TO FURNISH A MORE DETAILED BREAKDOWN OF ITS COSTS AFFECTING THE ELECTRICAL WORK REQUIRED. THIS LATTER STATEMENT WAS INCORPORATED BY REFERENCE INTO THE CONTRACTOR'S MEMORANDUM NO. WHICH LATER DOCUMENT WAS UTILIZED IN DETERMINING THE ADJUSTMENT OF $461. THE ALLEGED MISTAKE SHOULD HAVE BEEN READILY DETECTED BY THE CONTRACTING AUTHORITIES.

B-119002, JUL. 8, 1955

TO THE HONORABLE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO A COMMUNICATION DATED MAY 4, 1955, FILE L 400C/SM NOY-70934, FROM THE BUREAU OF YARDS AND DOCKS, TRANSMITTING FOR OUR CONSIDERATION COPY OF A LETTER DATED MARCH 21, 1955, FROM THEPLATT CONTRACTING COMPANY, INC., REQUESTING RECONSIDERATION OF THAT PART OF OUR DECISION OF JULY 30, 1954, TO YOU, WHICH APPROVED ONLY $7,427.30 OF ITS CLAIM FOR $11,574.18, ARISING UNDER CONTRACT NO. NOY 70934.

THE RECLAIMED AMOUNT OF $4,146.88 REPRESENTS VARIED PERCENTAGES OF OVERHEAD, INSURANCE, TAXES AND PROFIT WHICH, ALLEGEDLY THROUGH MISTAKE, WERE OMITTED FROM THE ELECTRICAL SUBCONTRACTOR'S FINAL COST STATEMENT OR ESTIMATE WHICH WAS UTILIZED IN DETERMINING THE APPROVED ADJUSTMENT OF $7,427.30 FOR THE ELECTRICAL SERVICES REQUIRED IN WIRING THE HEATING PLANT AT THE NAVAL ADVANCE BASE DEPOT, DAVISVILLE, RHODE ISLAND.

THE FACTUAL BACKGROUND UPON WHICH THE CLAIM IS BASED IS SET FORTH IN THE CONTRACTOR'S LETTER OF MARCH 21, 1955, AND THE PERTINENT FACTS RECITED THEREIN APPEAR TO BE SUBSTANTIATED, IN SUBSTANCE, IN THE BUREAU'S LETTER OF MAY 4, 1955. IT APPEARS THAT BY VIRTUE OF AMENDMENT NO. 2, ISSUED OCTOBER 30, 1952, AUTHORIZING EXTENSIVE CHANGES IN THE CONTRACT SPECIFICATIONS, THE CLAIMANT WAS REQUESTED IN ADMINISTRATIVE LETTER OF NOVEMBER 17, 1952, TO FURNISH AN ESTIMATE OF THE ADJUSTMENTS IN PRICE NECESSITATED BY SUCH CHANGES. THE CONTRACTOR THEREUPON PRESENTED ITS FIRST OR ORIGINAL STATEMENT OF THE COSTS OF PERFORMING THESE ADDITIONAL SERVICES, WHICH INCLUDED ITEMIZATIONS OF THE COSTS OF LABOR AND MATERIALS, AND ALSO CERTAIN ADDITIONAL ITEMS OF OVERHEAD, INSURANCE, TAXES AND PROFIT, COMPUTED UPON SUCH COSTS. HOWEVER, AT A MEETING HELD ON JANUARY 7, 1953, BETWEEN REPRESENTATIVES OF THE CONTRACTOR AND THE CONTRACTING AGENCY'S BOARD OF CHANGES--- CONVENED PURSUANT TO ARTICLE 10 OF THE CONTRACT FOR THE PURPOSE OF DETERMINING THE AMOUNT OF THE ADJUSTMENT PAYABLE UNDER THE TERMS OF THE AMENDMENT--- THE CONTRACTOR WAS DIRECTED TO FURNISH A MORE DETAILED BREAKDOWN OF ITS COSTS AFFECTING THE ELECTRICAL WORK REQUIRED. PURSUANT TO SUCH DIRECTIVE, HE SUBMITTED HIS SECOND COST STATEMENT, CONSISTING OF AN ESTIMATE PREPARED BY HIS ELECTRICAL SUBCONTRACTOR, WHICH SHOWED ONLY THE LABOR AND MATERIAL COSTS INVOLVED, EXCLUSIVE OF THE PREVIOUSLY REPORTED ITEMS OF OVERHEAD, AND RELATED COSTS. THIS LATTER STATEMENT WAS INCORPORATED BY REFERENCE INTO THE CONTRACTOR'S MEMORANDUM NO. B-207 (A), DATED JANUARY 27, 1953, WHICH LATER DOCUMENT WAS UTILIZED IN DETERMINING THE ADJUSTMENT OF $461,500 SPECIFIED IN CHANGE A, ISSUED FEBRUARY 9, 1954.

ON FEBRUARY 12, 1954, OR SHORTLY AFTER ISSUANCE OF CHANGE A, THE CONTRACTOR ALLEGED ERRORS IN THE STATEMENT FORWARDED WITH ITS MEMORANDUM B -207 (A), POINTING OUT THAT CERTAIN CHARGES AND CREDITS INCLUDED IN ITS FIRST STATEMENT HAD NOT BEEN INCLUDED IN THE SECOND ESTIMATE PREPARED BY THE SUBCONTRACTOR, AND REQUESTING A MODIFICATION OF CHANGE A TO PROVIDE FOR THE CLAIMED INCREASE OF $11,574.18, OF WHICH $7,427.30 ALREADY HAS BEEN AUTHORIZED BY THIS OFFICE TO ADJUST A SIMILAR ERROR OF OMISSION CAUSED BY THE CONTRACTOR'S FAILURE TO INCLUDE IN ITS COST ESTIMATES THE EXPENSES INCIDENT TO WIRING THE HEATING PLANT AT THE PROJECT.

IN RECLAIMING THE DISALLOWED ITEMS, TOTALING $4,146.88, THE CONTRACTOR CONTENDS THAT A COMPARISON OF ITS FIRST AND SECOND COST STATEMENTS CLEARLY DEMONSTRATES THE EXISTENCE OF AN ERROR, CONSISTING OF THE OMISSION FROM THE LATTER ESTIMATE OF THE PREVIOUSLY REPORTED ITEMS OF OVERHEAD, INSURANCE, TAXES AND PROFIT. HE FURTHER CONTENDS THAT BECAUSE OF THE SUBSTANTIAL REDUCTION OF APPROXIMATELY 30 PERCENT IN THE COSTS SHOWN IN HIS SECOND ESTIMATE, THE ALLEGED MISTAKE SHOULD HAVE BEEN READILY DETECTED BY THE CONTRACTING AUTHORITIES. FINALLY, IT IS CONTENDED THAT THE OMITTED ITEMS OF OVERHEAD HERE INVOLVED STAND UPON THE SAME FACTUAL AND LEGAL FOOTING AS THE OMITTED CHARGES FOR THE INTERIOR ELECTRICAL WORK PERFORMED IN THE HEATING PLANT, FOR WHICH PAYMENT WAS AUTHORIZED IN OUR DECISION OF JULY 30, 1954.

IN ITS REPORT DATED MAY 4, 1955, THE BUREAU OF YARDS AND DOCKS HAS CONCEDED THAT A COMPARISON OF THE CONTRACTOR'S FIRST ESTIMATE (EXHIBIT D) WITH THE SUBCONTRACTOR'S SECOND ESTIMATE FOR THE WORK (EXHIBIT F) "REVEALS THE FORMER TO SHOW THE ADDITION OF OVERHEAD 15 PERCENT, INSURANCE 13.711 PERCENT OF LABOR, TAXES 4 PERCENT AND PROFIT 6 PERCENT AND THE LATTER TO SHOW NO SUCH ADDITIONS," AND THAT, UPON THE BASIS OF SUCH COMPARISON, THE BUREAU, WHEN CONSIDERING THE CONTRACTOR'S EARLIER CLAIM TO THIS OFFICE,"SURMISED THAT OVERHEAD, INSURANCE, TAXES, AND PROFIT HAD NOT BEEN ADDED TO LABOR AND MATERIAL.' IT APPEARS, HOWEVER, THAT THESE ITEMS WERE NOT CONSIDERED AND PREVIOUSLY REPORTED UPON BY THE BUREAU OF YARDS AND DOCKS FOR THE SOLE REASON THAT THEY WERE NOT SPECIFICALLY MENTIONED IN THE CONTRACTOR'S COMMUNICATION OF FEBRUARY 15, 1954, TO THAT OFFICE. THEREFORE, THE SAID BUREAU, WHILE CONCEDING THAT ITS REPRESENTATIVES SHOULD HAVE BEEN AWARE OF THE OMISSION OF THE PREVIOUSLY APPROVED ITEMS OF ELECTRICAL WORK INVOLVED IN WIRING THE HEATING PLANT, MAKES NO SUCH CONCESSION WITH RESPECT TO THE OMITTED ITEMS OF OVERHEAD, ET CETERA, PRINCIPALLY BECAUSE OF ITS ASSUMPTION THAT THESE ITEMS MIGHT HAVE BEEN INCLUDED IN THE LABOR AND MATERIAL ESTIMATES FOR THIS WORK. AFTER A CAREFUL ANALYSIS OF THE FOREGOING FACTS AND CIRCUMSTANCES REPORTED IN THE MATTER, IT IS LOGICAL TO CONCLUDE THAT THE NOTED DISPARITIES IN THE FIRST AND SECOND ESTIMATES FURNISHED BY THE CONTRACTOR FOR THE ADDITIONAL ELECTRICAL WORK INVOLVED EITHER SHOULD HAVE BEEN NOTICED BY THE BUREAU, OR AT LEAST SUSPICIONED FROM A MERE COMPARISON OF THESE COST ESTIMATES AND, IF SUCH A COMPARISON ACTUALLY HAD BEEN MADE, THERE IS LITTLE ROOM FOR DOUBT BUT THAT THE ITEMS INADVERTENTLY OMITTED FROM THE ELECTRICAL SUBCONTRACTOR'S COST ESTIMATES WOULD HAVE BEEN DISCOVERED. WHEN VIEWING THE BUREAU'S ADMISSION THAT IT HAD "SURMISED" THAT THESE ITEMS OF OVERHEAD HAD NOT BEEN ADDED TO THE LABOR AND MATERIAL COSTS SHOWN IN THE SECOND ESTIMATE IN CONJUNCTION WITH THE FACT THAT THE CONTRACTING OFFICIALS ADMITTEDLY MADE NO EFFORT TO SECURE FROM THE CONTRACTOR A CONFIRMATION OF THE ITEMS AS TO WHICH ERROR WAS SUSPICIONED, THE CONCLUSION IS INESCAPABLE THAT THE BUREAU OF YARDS AND DOCKS HAD CONSTRUCTIVE NOTICE OF THESE ERRORS OF OMISSION. ACCORDINGLY, THE ACCEPTANCE BY THE CONTRACTOR OF CHANGE A IN THESE CIRCUMSTANCES CANNOT OPERATE TO PRECLUDE PAYMENT TO IT FOR THE FAIR AND REASONABLE VALUE OF THE ADDITIONAL ELECTRICAL SERVICES PERFORMED IN THIS INSTANCE. SEE 30 COMP. GEN. 220; CF. 26 ID. 899, 901; 20 ID. 533, 537-538, AND THE COURT CASES THERE CITED.

ACCORDINGLY, CHANGE A MAY BE FURTHER MODIFIED TO PROVIDE FOR PAYMENT TO THE CONTRACTOR OF THE ADDITIONAL AMOUNT OF $4,146.88.