B-126419, JAN. 26, 1956

B-126419: Jan 26, 1956

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UNITED STATES ATOMIC ENERGY COMMISSION: REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 15. WHICH SUM WAS WITHHELD FROM AMOUNTS OTHERWISE DUE THE CLAIMANT UNDER CONTRACT NO. THE INVITATION PROVIDED THAT THE WORK WAS TO BE COMPLETED . THE BID OF AUTOMATIC ELECTRIC SALES CORPORATION WAS NOT RESPONSIVE TO THE INVITATION IN SEVERAL RESPECTS. SINCE IT WAS THE ONLY BIDDER RESPONDING TO THE INVITATION. AUTOMATIC'S BID WAS ACCEPTED BY THE GOVERNMENT ON DECEMBER 7. THE FORMAL CONTRACT WAS EXECUTED DECEMBER 16. WAS ISSUED TO THE CONTRACTOR. THE WORK OF THE CONTRACT WAS NOT COMPLETED UNTIL JUNE 9. IN MAKING FINAL PAYMENT TO THE CONTRACTOR THERE WAS DEDUCTED THE SUM OF $4. IT IS REPORTED THAT AN AUDIT WAS MADE OF THE ACTUAL ADDITIONAL COST FOR MANUAL OPERATION OF THE FACILITY FROM APRIL 17.

B-126419, JAN. 26, 1956

TO MR. REX L. RAY, AUTHORIZED CERTIFYING OFFICER, UNITED STATES ATOMIC ENERGY COMMISSION:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 15, 1955, WITH ENCLOSURES, WHEREIN YOU REQUEST AN ADVANCE DECISION AS TO THE PROPRIETY OF CERTIFYING FOR PAYMENT A VOUCHER FOR $4,855.91, IN FAVOR OF THE AUTOMATIC ELECTRIC SALES CORPORATION, WHICH SUM WAS WITHHELD FROM AMOUNTS OTHERWISE DUE THE CLAIMANT UNDER CONTRACT NO. AT/45-1/ 809, DATED DECEMBER 16, 1953, TO COMPENSATE THE GOVERNMENT FOR THE DAMAGES SUSTAINED AS THE RESULT OF A 66- DAY DELAY IN THE COMPLETION OF THE CONTRACT WORK.

BY INVITATION NO. AT/45-1/-809, ISSUED AUGUST 12, 1953, THE U.S. ATOMIC ENERGY COMMISSION, HANFORD OPERATIONS OFFICE, INVITED PROPOSALS ON CERTAIN WORK COVERING THE DESIGN, FABRICATION, INSTALLATION AND TESTING OF EQUIPMENT FOR THE 100-KBC TELEPHONE EXCHANGE, 100-K AREA, HANFORD WORKS, NEAR RICHLAND, WASHINGTON. THE INVITATION PROVIDED THAT THE WORK WAS TO BE COMPLETED ,WITHIN 180 CALENDAR DAYS AFTER THE DATE OF RECEIPT OF WRITTEN NOTICE TO PROCEED," AND REQUESTED EACH BIDDER TO STIPULATE IN HIS BID "THE SHORTEST PERIOD OF TIME IN WHICH HE PROPOSES TO COMPLETE THE WORK.' THE BID OF AUTOMATIC ELECTRIC SALES CORPORATION WAS NOT RESPONSIVE TO THE INVITATION IN SEVERAL RESPECTS, INCLUDING THE TIME REQUIRED FOR PERFORMANCE, IT HAVING OFFERED TO COMPLETE THE WORK WITHIN 15 MONTHS AFTER DATE OF RECEIPT OF NOTICE TO PROCEED, IN LIEU OF 180 DAYS, AS STIPULATED. HOWEVER, SINCE IT WAS THE ONLY BIDDER RESPONDING TO THE INVITATION, AUTOMATIC'S BID WAS ACCEPTED BY THE GOVERNMENT ON DECEMBER 7, 1953. THE FORMAL CONTRACT WAS EXECUTED DECEMBER 16, 1953, AFTER WHICH THE NOTICE TO PROCEED WITH THE WORK, EFFECTIVE JANUARY 4, 1954, WAS ISSUED TO THE CONTRACTOR, THUS FIXING APRIL 4, 1955, AS THE CONTRACT COMPLETION DATE. THE CONTRACT CONTAINED NO PROVISION FOR LIQUIDATED DAMAGES AND NO PROVISION FOR EXCESS COSTS EXCEPT IN THE EVENT OF TERMINATION FOR DEFAULT BY WRITTEN NOTICE TO THE CONTRACTOR.

THE WORK OF THE CONTRACT WAS NOT COMPLETED UNTIL JUNE 9, 1955, OR AFTER AN UNEXCUSED DELAY OF 66 DAYS. WHILE THE CONTRACTOR MADE REQUESTS FOR EXTENSIONS OF TIME FOR PERFORMANCE, THE CONTRACTING OFFICER ON EACH OCCASION DENIED THE REQUESTS SINCE HE DID NOT CONSIDER THE EVIDENCE OFFERED SUFFICIENT TO JUSTIFY AN EXTENSION IN THE CONTRACT TIME.

IN MAKING FINAL PAYMENT TO THE CONTRACTOR THERE WAS DEDUCTED THE SUM OF $4,855.91. IT IS REPORTED THAT AN AUDIT WAS MADE OF THE ACTUAL ADDITIONAL COST FOR MANUAL OPERATION OF THE FACILITY FROM APRIL 17, 1955, THE DATE THE AUTOMATIC FACILITY WOULD HAVE GONE INTO OPERATION HAD THE CONTRACTOR NOT BEEN IN DEFAULT, THROUGH JUNE 17, 1955, THE DAY PRECEDING THE DATE THE EQUIPMENT WAS ACTUALLY PLACED INTO OPERATION; AND THAT THE FINDINGS OF THE AUDIT WERE THAT THE ADDITIONAL COST IN DIRECT MANUAL OPERATOR'S WAGES, ISOLATION PAY AND PAYROLL TAXES, WITHOUT APPLICATION OF ANY OVERHEAD CHARGES, WAS THE SAID SUM OF $4,855.91.

SINCE THE FACTS INVOLVED IN DECISION OF OCTOBER 24, 1955, 35 COMP. GEN. 228, DO NOT DIFFER IN ANY MATERIAL RESPECT FROM THOSE HERE INVOLVED, THE LEGAL PRINCIPLES OUTLINED THEREIN WOULD APPEAR TO BE FOR APPLICATION HERE. IT WAS STATED THEREIN THAT:

"IT IS WELL ESTABLISHED THAT A PARTY WHO IS INJURED BY ANOTHER'S BRANCH OF CONTRACT IS ENTITLED TO RECOVER FROM THE LATTER SUCH DAMAGES AS ARE THE DIRECT, NATURAL, AND PROXIMATE RESULT OF THE BREACH, OR WHICH, IN THE ORDINARY COURSE OF EVENTS, WOULD LIKELY RESULT FROM THE BREACH AND WHICH REASONABLY COULD BE SAID TO HAVE BEEN FORESEEN, CONTEMPLATED, OR EXPECTED BY THE PARTIES AT THE TIME THEY EXECUTED THE CONTRACT AS A PROBABLE AND NATURAL RESULT THEREOF. SEE 30 COMP. GEN. 191, 193, AND THE COURT CASES THERE CITED.

"IN THE INSTANT CASE THE SPECIFICATIONS CLEARLY PLACED THE CONTRACTOR ON NOTICE THAT TIME WAS OF THE ESSENCE OF THE CONTRACT AND IT READILY COULD BE FORESEEN WHEN THE AGREEMENT WAS EXECUTED THAT THE GOVERNMENT WOULD SUFFER ACTUAL DAMAGES IF THE PRESCRIBED DELIVERY SCHEDULES WERE NOT MET. IN CASES WHERE DAMAGES ARE FOR ASSESSMENT THE MEASURE OF THE DAMAGES IS THE LOSS SUSTAINED AS A RESULT OF THE CONTRACTUAL BREACH. SEE UNITED STATES V. BEHAN, 110 U.S. 338. ALSO, SEE WING AND BOSTWICK CO. V. UNITED STATES FIDELITY AND GUARANTY CO., 150 F. 672, 676-7; AND MASSACHUSETTS BONDING AND INSURANCE CO. V. JOHN R. THOMPSON CO., 88 F.2D 825, 832. HERE THE $800.01 CLEARLY WAS A COST WHICH THE GOVERNMENT NECESSARILY INCURRED AS A DIRECT AND IMMEDIATE CONSEQUENCE OF THE CONTRACTOR'S FAILURE TO DELIVER ON TIME. IT FOLLOWS THAT THE DEDUCTION OF THAT SUM FROM AMOUNTS OTHERWISE DUE THE CONTRACTOR WAS CORRECT AND PROPER, NOTWITHSTANDING THE FACT THAT DELAYED PERFORMANCE BY THE CONTRACTOR SUBSEQUENTLY WAS ACCEPTED.

"IT IS WELL SETTLED THAT ACCEPTANCE OF DELAYED PERFORMANCE UNDER A CONTRACT IS NOT INCONSISTENT WITH A RIGHT TO DEMAND DAMAGES FOR DELAY, AND HENCE, IS NOT IN AND OF ITSELF A WAIVER. COHN V. UNITED STATES SHIPPING BOARD, 20 F.2D 56; VERNON LUMBER CORP. V. HARCON CONST. CO., 155 F.2D 348; MAWHINNEY V. MILLBROOK WOOLEN MILLS, 137 N.E. 318. SEE ALSO SECTION 49 (93) OF THE UNIFORM SALES ACT, AND SECTION 1390, WILLISTON ON CONTRACTS. THE CONTRARY STATEMENT IN 29 COMP. GEN. 57, WHICH WAS NOT NECESSARY TO THE DECISION IN THAT CASE, IS HEREBY DISAPPROVED.'

THE RECORD IN THIS CASE ESTABLISHES THAT BOTH PARTIES KNOW, AT THE TIME OF EXECUTION OF THE INSTANT CONTRACT, THAT THE AUTOMATIC SWITCHBOARD WHICH WAS CONTRACTED FOR BY THE UNITED STATES ATOMIC ENERGY COMMISSION FOR USE AT ITS HANFORD OPERATIONS OFFICE WAS BEING PROCURED AS A REPLACEMENT FOR THE MANUALLY OPERATED EXCHANGE THEN BEING UTILIZED IN THE 100-K AREA, NEAR RICHLAND, WASHINGTON, AND THAT ANY DELAYS IN PERFORMANCE NECESSARILY WOULD RESULT IN THE CONTINUED MAINTENANCE, AT THE GOVERNMENT'S EXPENSE, OF A STAFF OF PERSONNEL TO OPERATE THE OLD EXCHANGE.

IN APPLYING THE CITED PRINCIPLES OF LAW TO THE FACTS IN THIS CASE, IT IS DIFFICULT TO PERCEIVE HOW ANY EXPENSES OR DAMAGES RESULTING FROM BREACH OR DEFAULT COULD BE CONSIDERED AS BEING MORE DIRECTLY TRACEABLE TO SUCH BREACH THAN THE DAMAGES HERE CLAIMED BY THE GOVERNMENT. ALL THAT IS BEING CHARGED TO THE ACCOUNT OF THE CONTRACTOR IN THIS INSTANCE IS THE ADDITIONAL PAYROLL EXPENSE, EXCLUSIVE OF OVERHEAD, INCIDENT TO THE MANUAL OPERATION OF THE OLD SWITCHBOARD FROM APRIL 17, 1955, THE DATE THE AUTOMATIC EQUIPMENT WAS SCHEDULED TO GO INTO OPERATION, THROUGH JUNE 17, 1955, WHICH IS THE DAY PRIOR TO THE DATE THE NEW EQUIPMENT ACTUALLY WAS PLACED IN OPERATION. IN THE CIRCUMSTANCES, THE CONCLUSION IS REQUIRED THAT THE DAMAGES WITHHELD FROM THE CONTRACTOR IN THIS INSTANCE WERE SUCH AS COULD READILY HAVE BEEN FORESEEN AND ANTICIPATED BY THE PARTIES AT THE TIME THE CONTRACT WAS EXECUTED, AND ALSO ARE SUCH AS MAY READILY BE TRACED TO THE CONTRACTOR'S BREACH OF THE PERFORMANCE CONDITIONS OF ITS CONTRACT. HENCE, SUCH DAMAGES PROPERLY ARE FOR RETENTION BY THE GOVERNMENT.

FOR THESE REASONS, THE VOUCHER, WHICH IS RETURNED HEREWITH WITH THE OTHER DOCUMENTS, MAY NOT BE ..END :