B-130088, JAN. 24, 1957

B-130088: Jan 24, 1957

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TO PEERLESS INSURANCE COMPANY: FURTHER REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 9. WHICH WAS TERMINATED FOR DEFAULT. IT IS ASSUMED THAT THE PEERLESS INSURANCE COMPANY IS AFFILIATED WITH OR OTHERWISE QUALIFIED TO SPEAK FOR THE PEERLESS CASUALTY COMPANY. THE PEERLESS CASUALTY COMPANY AND THE PEERLESS INSURANCE COMPANY WILL BE TREATED HEREIN AS ONE AND THE SAME. YOU STATE THAT YOU ARE NOT QUESTIONING YOUR LIABILITY FOR THE COSTS INCURRED BY THE GOVERNMENT IN HAVING THE CONTRACT WORK COMPLETED BY THE REPLACING CONTRACTOR. WHEN ONLY 18 DAYS WERE NECESSARY FOR THE COMPLETION OF THE WORK. THE WORK WAS TO BE COMMENCED ON DECEMBER 15. THAT HE WAS HAVING DIFFICULTY IN OBTAINING CERTAIN ELECTRICAL CABLES REQUIRED TO BE USED IN CONNECTION WITH THE PERFORMANCE OF THE CONTRACT.

B-130088, JAN. 24, 1957

TO PEERLESS INSURANCE COMPANY:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 9, 1956, PROTESTING THE DEMAND MADE UPON PEERLESS CASUALTY COMPANY, 40 BROAD STREET, BOSTON, MASSACHUSETTS, IN OUR LETTER OF SEPTEMBER 20, 1956, FOR PAYMENT OF THE AMOUNT OF $4,145, REPRESENTING PEERLESS CASUALTY COMPANY'S LIABILITY AS SURETY UNDER A PERFORMANCE BOND EXECUTED BY ALBERT KATLER, D/B/A ALKAN ELECTRIC COMPANY, AS PRINCIPAL, IN CONNECTION WITH PERFORMANCE OF CONTRACT NO. NOY-29526, DATED DECEMBER 13, 1951, WHICH WAS TERMINATED FOR DEFAULT.

IT IS ASSUMED THAT THE PEERLESS INSURANCE COMPANY IS AFFILIATED WITH OR OTHERWISE QUALIFIED TO SPEAK FOR THE PEERLESS CASUALTY COMPANY. FOR PURPOSES OF SIMPLIFICATION, THE PEERLESS CASUALTY COMPANY AND THE PEERLESS INSURANCE COMPANY WILL BE TREATED HEREIN AS ONE AND THE SAME.

YOU STATE THAT YOU ARE NOT QUESTIONING YOUR LIABILITY FOR THE COSTS INCURRED BY THE GOVERNMENT IN HAVING THE CONTRACT WORK COMPLETED BY THE REPLACING CONTRACTOR, OR FOR THE LIQUIDATED DAMAGES APPLICABLE TO THE 21- DAY PERIOD REQUIRED TO RELET THE CONTRACT, AND THE 18-DAY PERIOD REQUIRED BY THE REPLACING CONTRACTOR TO COMPLETE THE WORK, BUT YOU FEEL THAT YOU SHOULD NOT BE HELD LIABLE FOR THE FULL AMOUNT OF LIQUIDATED DAMAGES CHARGED AGAINST YOU FOR THE REMAINING 94 DAYS OF THE DELAY INCIDENT TO THE COMPLETION OF THE CONTRACT WORK. IN THIS CONNECTION, YOU CONTEND THAT THE GOVERNMENT FAILED TO MITIGATE DAMAGES BY NOT TERMINATING THE CONTRACT SOONER AND RELETTING, INSTEAD OF ALLOWING THE CONTRACTOR TO "RIDE ALONG" FOR 94 DAYS, WHEN ONLY 18 DAYS WERE NECESSARY FOR THE COMPLETION OF THE WORK.

UNDER THE TERMS OF THE CONTRACT, THE WORK WAS TO BE COMMENCED ON DECEMBER 15, 1951, AND TO BE COMPLETED BY APRIL 13, 1952. THE RECORD SHOWS THAT THE CONTRACTOR INFORMED THE CONTRACTING AGENCY BY LETTER OF FEBRUARY 25, 1952, THAT HE WAS HAVING DIFFICULTY IN OBTAINING CERTAIN ELECTRICAL CABLES REQUIRED TO BE USED IN CONNECTION WITH THE PERFORMANCE OF THE CONTRACT. THE CONTRACTING OFFICER'S REPRESENTATIVE REPLIED BY LETTER OF MARCH 7, 1952, STATING THAT, WHILE IT WAS THE PRIME RESPONSIBILITY OF THE CONTRACTOR TO PROCURE NECESSARY MATERIALS FOR THE COMPLETION OF THE WORK, HIS OFFICE HAD MADE AN INFORMAL CANVAS OF MATERIAL VENDORS AND HAD OBTAINED POSSIBLE DELIVERY DATES FOR THE CABLES WHICH WERE MORE FAVORABLE THAN THE CONTRACTOR HAD BEEN ABLE TO OBTAIN, AND THAT THE INFORMATION WOULD BE MADE AVAILABLE TO THE CONTRACTOR IF HE SO DESIRED. ALSO, THE CONTRACTING OFFICER'S REPRESENTATIVE ADVISED THE CONTRACTOR OF THE INFORMATION NECESSARY TO BE SUPPLIED IN SUPPORT OF ANY REQUEST FOR EXTENSION OF TIME UNDER THE CONTRACT DUE TO MATERIAL SHORTAGES. NO REPLY WAS RECEIVED TO THIS LETTER.

BY REGISTERED LETTER OF MAY 9, 1952, THE CONTRACTING OFFICER'SREPRESENTATIVE INFORMED THE CONTRACTOR THAT HIS OFFICE HAD RECEIVED AN INQUIRY FROM THE WESTINGHOUSE ELECTRIC CORPORATION CONCERNING THE DISPOSITION TO BE MADE OF TWO 50KVA TRANSFORMERS WHICH HAD BEEN REMOVED BY THE CONTRACTOR FROM THE GOVERNMENT INSTALLATION BEING MODIFIED UNDER THE CONTRACT AND DELIVERED TO ITS PLANT IN FEBRUARY, 1952, AND THAT WESTINGHOUSE HAD STATED THAT THEY HAD NOT RECEIVED ANY INSTRUCTIONS OR AUTHORITY TO PERFORM WORK ON THE TRANSFORMERS AND WERE RETAINING THE SAME PENDING NOTIFICATION FROM THE CONTRACTOR. THE CONTRACTING OFFICER'S REPRESENTATIVE STATED THAT ONLY APPROXIMATELY 39 PERCENT OF THE CONTRACT WORK HAD BEEN PHYSICALLY COMPLETED AS OF THE DATE OF HIS LETTER, NOTWITHSTANDING THE FACT THAT THE CONTRACT WAS SUPPOSED TO HAVE BEEN COMPLETED BY APRIL 13, 1952; THAT THE CONTRACTOR HAD INDICATED IN HIS LETTER OF FEBRUARY 25, 1952, THAT THE C. C. PIERCE COMPANY HAD QUOTED A 90 -DAY DELIVERY PERIOD FOR THE CABLE REFERRED TO THEREIN AS HAVING BEEN ORDERED ON FEBRUARY 5, 1952, AND HE WOULD ASSUME, THEREFORE, THAT THE CABLE WAS THEN AVAILABLE TO THE CONTRACTOR PENDING INFORMATION TO THE CONTRARY; AND THAT THE CONTRACTOR WAS TO SUPPLY CERTAIN SPECIFIED INFORMATION WITHIN 7 DAYS FROM THE RECEIPT OF THE LETTER FROM THE CONTRACTING OFFICER'S REPRESENTATIVE IN ORDER THAT IT MIGHT BE ASCERTAINED WHETHER THE COMPLETION OF THE CONTRACT WAS BEING EXPEDITED. NO REPLY WAS RECEIVED TO THIS LETTER, AND UNDER DATE OF MAY 28, 1952, THE DISTRICT PUBLIC WORKS OFFICER, 1ST NAVAL DISTRICT, BOSTON, MASSACHUSETTS, WAS NOTIFIED BY THE POST OFFICE DEPARTMENT THAT THE LETTER HAD BEEN RETURNED TO THE SENDER UNDER DATE OF MAY 22, 1952, AS UNCLAIMED.

IN A MEMORANDUM DATED OCTOBER 28, 1953, FROM THE DISTRICT PUBLIC WORKS OFFICER TO THE CHIEF, BUREAU OF YARDS AND DOCKS, SETTING FORTH THE FACTS IN THE MATTER, THAT OFFICIAL MADE THE FOLLOWING RECOMMENDATIONS REGARDING THE ASSESSMENT OF LIQUIDATED DAMAGES UNDER THE CONTRACT:

"2. THE DISTRICT PUBLIC WORKS OFFICER RECOMMENDS A TIME EXTENSION TO SUBJECT CONTRACT FOR 264 DAYS TO AND INCLUDING 2 JANUARY 1953 AND THE ASSESSMENT OF LIQUIDATED DAMAGES FOR 84 DAYS. THIS RECOMMENDATION IS BASED UPON THE FOLLOWING:

(A) LIQUIDATED DAMAGES: FROM 13 APRIL 1952 (COMPLETION DATE SUBJECT CONTRACT) TO 28 MAY 1952 (DATE DISTRICT PUBLIC WORKS OFFICER DETERMINED CONTRACTOR IN DEFAULT--- SEE ENCLOSURES (3) TO REFERENCE (A/--- 45 DAYS; FROM 28 MAY 1952 TO 18 JUNE 1952 (NORMAL TIME REQUIRED TO AWARD NEW CONTRACT/--- 21 DAYS; AND FROM 9 MARCH 1953 (DATE RECEIPT NOTICE TO PROCEED, NOY-75873) TO 27 MARCH 1953 (DATE OF COMPLETION, NOY-75873/--- 18 DAYS.

(B) TIME EXTENSION FOR THE PERIOD FROM 18 JUNE 1952 TO 9 MARCH 1953 (SEE (A) ABOVE/--- 264 DAYS.'

UPON A REVIEW OF THE MATTER, WE BELIEVE THAT THE GOVERNMENT DID FAIL IN ITS DUTY TO MITIGATE DAMAGES BY WAITING UNTIL JULY 16, 1952, TO TERMINATE THE CONTRACT AND THUS ALLOWING LIQUIDATED DAMAGES TO ACCUMULATE UNNECESSARILY. SEE UNITED STATES V. UNITED STATES FIDELITY AND GUARANTY COMPANY, 236 U.S. 512, 526; COLUMBIA CASUALTY COMPANY V. TIBMA, 63 F.2D 538; 11 COMP. GEN. 384; 16 ID. 344, 347. IT SEEMS APPARENT FROM THE FACTS RECITED THAT THE CONTRACT SHOULD HAVE BEEN TERMINATED BY MAY 28, 1952, ALTHOUGH THE REPRESENTATIONS MADE BY THE CONTRACTOR AS TO THE EXPECTED DELIVERY DATE OF THE CABLE APPEAR ADEQUATE TO JUSTIFY THE GOVERNMENT'S FAILURE TO TAKE ANY ACTION PRIOR TO THAT MONTH. IT THEREFORE APPEARS REASONABLE TO US THAT LIQUIDATED DAMAGES SHOULD BE COMPUTED ON THE BASIS SET FORTH IN THE ABOVE-QUOTED MEMORANDUM. IN VIEW THEREOF, THE INDEBTEDNESS SET FORTH IN OUR LETTER OF SEPTEMBER 20, 1956, IS HEREBY REDUCED BY THE AMOUNT OF $980 AND RESTATED AS FOLLOWS:

TABLE

TIME BETWEEN ORIGINAL COMPLETION DATE AND DATE OF DEFAULT

45 DAYS AT $20.00 .................................. $ 900.00

AVERAGE RE-LET TIME

21 DAYS AT $20.00 .................................. 420.00

ACTUAL COMPLETION TIME

18 DAYS AT $20.00 .................................. 360.00

ADDITIONAL COSTS TO THE GOVERNMENT OF

COMPLETING THE CONTRACT ............................ 1,485.00

TOTAL AMOUNT DUE: $ 3,165.00

ACCORDINGLY, IT IS REQUESTED THAT YOU MAKE PROMPT PAYMENT OF THE ABOVE AMOUNT IN THE MANNER INDICATED IN OUR LETTER OF SEPTEMBER 20, 1956, UPON WHICH THE MATTER WILL BE DEEMED CLOSED.