B-124180, SEP. 14, 1955

B-124180, SEP. 14, 1955

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO FIRST ENDORSEMENT DATED AUGUST 31, 1954 (ENGAG 205), FROM THE OFFICE OF THE CHIEF OF ENGINEERS, TRANSMITTING FOR CONSIDERATION BY THIS OFFICE A REPORT DATED AUGUST 20, 1954, BY THE RESISTANT DIVISION ENGINEER, NEW ENGLAND DIVISION, CONCERNING THE CLAIM OF THE UNITED STATES AGAINST VALLEY ENTERPRISES FOR EXCESS COSTS INCURRED AND LIQUIDATED DAMAGES ASSESSED IN CONNECTION WITH THE COMPLETION OF THE WORK REQUIRED UNDER CONTRACT NO. W-19-016-ENG-3780, DATED MAY 20, 1949, PROVIDING FOR CERTAIN DREDGING IN CLINTON HARBOR, CONNECTICUT, FOR THE ESTIMATED AMOUNT OF $53,750. ALSO, THERE HAS BEEN RECEIVED A LETTER DATED AUGUST 1, 1955, FROM MR. JOHN L. BUCKEY, ASSISTANT, LEGAL DIVISION,TRANSMITTING A/MEMORANDUM DATED JULY 8, 1955, FROM THE OFFICE OF THE DIVISION ENGINEER.

IT APPEARS FROM THE RECORD THAT THE CONTRACTOR WAS ISSUED A NOTICE TO PROCEED ON JUNE 1, 1949, THE RECEIPT OF THE SAME BEING ACKNOWLEDGED JUNE 3, 1949. BY CHANGE ORDER NO. 1, DATED JUNE 2, 1949, RECEIVED BY THE CONTRACTOR ON JUNE 3, 1949, THE CONTRACTOR WAS DIRECTED TO SUSPEND ALL WORK UNDER THE CONTRACT AT THE CLOSE OF BUSINESS ON THE DATE OF THE RECEIPT OF THE CHANGE ORDER AND TO RESUME WORK AS OF THE START OF BUSINESS ON SEPTEMBER 15, 1949. BY LETTER OF NOVEMBER 8, 1949, THE CONTRACTOR'S RIGHT TO PROCEED UNDER THE CONTRACT WAS TERMINATED AND AS OF THAT DATE THE CONTRACTOR HAD EARNED THE SUM OF $3,197.05. THE UNCOMPLETED WORK WAS READVERTISED UNDER DATE OF DECEMBER 5, 1949, AND A NEW CONTRACT WAS AWARDED TO THE HAGLE HYDRAULIC DREDGING COMPANY IN THE ESTIMATED AMOUNT OF $52,890.

THE ORIGINAL CONTRACT COMPLETION DATE, INCLUDING THE TIME EXTENSION GRANTED BY CHANGE ORDER NO. 1, AND EXCLUDING THE PERIOD JANUARY 1 TO MARCH 31, 1950, DURING WHICH NO WORK WAS REQUIRED, WAS ESTABLISHED AS MAY 23, 1950. BY REASON OF CHANGE ORDER NO. 1 TO THE COMPLETING CONTRACT, THE REVISED COMPLETION DATE OF THE INITIAL CONTRACT WAS JUNE 22, 1950, AND THE DATE OF REQUIRED COMPLETION OF THE SECOND CONTRACT WAS OCTOBER 7, 1950. THE DIVISION ENGINEER FOUND THAT LIQUIDATED DAMAGES ARE CHARGEABLE UNDER THE ORIGINAL CONTRACT FOR THE PERIOD JUNE 23 TO SEPTEMBER 29, 1950--- 99 DAYS AT $50 PER DAY--- $4,950--- AND THAT TO SUCH AMOUNT THERE SHOULD BE ADDED ADDITIONAL COSTS OF READVERTISING AMOUNTING TO $531.34, OR A TOTAL OF $5,481.34. DEDUCTING THE AMOUNT OF $3,197.05, EARNED BY THE CONTRACTOR PRIOR TO DEFAULT, LEAVES A BALANCE OF $2,284.29 DUE FROM THE INITIAL CONTRACTOR.

THE TRAVELERS INDEMNITY COMPANY, THE SURETY IN THIS CASE, HAS REMITTED THE SUM OF $531.34 TO COVER THE EXCESS COSTS INCURRED, AND HAS INDICATED ITS UNWILLINGNESS TO PAY THE BALANCE DUE. THE DIVISION ENGINEER IS OF THE VIEW THAT THE ACCEPTANCE OF THE SUMS OF $531.34 AND $3,197.05 IS ADVANTAGEOUS TO THE UNITED STATES SINCE "UPON A JUDICIAL PROCEEDING THE AMOUNT OF LIQUIDATED DAMAGES ASSESSED WOULD BE CONSIDERED TO BE PUNITIVE * * *.' THE DIVISION ENGINEER IS OF THE FURTHER VIEW THAT REDUCTION OF THE AMOUNT OF LIQUIDATED DAMAGES MAY BE JUSTIFIED ON THE BASIS THAT ALTHOUGH THE REPLACEMENT CONTRACT WAS EXECUTED ON JANUARY 11, 1950, NOTICE TO PROCEED WAS NOT ISSUED UNTIL MARCH 1, 1950, AND THAT, THEREFORE, THE COMPLETING CONTRACTOR COULD NOT EXERCISE HIS RIGHT OF ELECTION TO WORK PROVIDED HE MAINTAINED THE SPECIFIED RATE.

IN VIEW OF THE REPORTED FACTS, WE AGREE THAT THE SUGGESTED METHOD OF SETTLEMENT SET FORTH IN THE THIRTEENTH PARAGRAPH OF THE REPORT OF AUGUST 20, 1954, IS ADVANTAGEOUS TO THE UNITED STATES AND THE SAME IS APPROVED.