B-136397, JUL. 1, 1958

B-136397, JUL. 1, 1958

TO THE SECRETARY OF AGRICULTURE:

REFERENCE IS MADE TO A LETTER DATED JUNE 6, 1958, FROM THE ADMINISTRATIVE ASSISTANT SECRETARY, TRANSMITTING THE REQUEST OF MIDWEST AERIAL SURVEYS FOR REMISSION OF LIQUIDATED DAMAGES ASSESSED UNDER CONTRACT NO. 12-33-001- 1220 FOR DELAY IN DELIVERY OF PHOTOGRAPHIC MATERIALS.

THE CONTRACT, DATED DECEMBER 8, 1955, PROVIDES FOR THE FURNISHING OF AERIAL PHOTOGRAPHS OF CERTAIN AREAS IN FLORIDA AND MINNESOTA FOR THE FIXED PRICE OF $28,778.40. PARAGRAPH 28 OF THE CONTRACT REQUIRES THAT THE SHIPMENT OF PHOTOGRAPHIC MATERIALS TO THE GOVERNMENT BE MADE WITHIN 20 CALENDAR DAYS AFTER DATE THE ORIGINAL PHOTOGRAPHY OF A SUBPROJECT, INCLUDING NECESSARY REFLIGHTS AT THE DISCRETION OF THE CONTRACTOR, IS COMPLETED, OR WITHIN 15 DAYS AFTER COMPLETION OF REFLIGHT PHOTOGRAPHY ORDERED BY THE GOVERNMENT. LIQUIDATED DAMAGES IN THE AMOUNT OF $10 PER DAY FOR EACH DAY OF DELAY AFTER EXPIRATION OF THE TIME ALLOWANCE SPECIFIED IN PARAGRAPH 28 ARE PROVIDED FOR IN PARAGRAPH 32 OF THE CONTRACT SPECIFICATIONS. IT IS REPORTED THAT THE CONTRACTOR DELAYED SHIPMENT OF THE PHOTOGRAPHIC MATERIALS FOR AN AGGREGATE OF 2,789 DAYS RESULTING IN THE ACCRUAL OF LIQUIDATED DAMAGES TOTALLING $27,890. THE CONTRACTING OFFICER HAS DETERMINED THAT THE CAUSES OF THE DELAY ARE NOT EXCUSABLE UNDER THE STANDARD DELAYS-DAMAGES CONTRACT PROVISION. ALTHOUGH THE RIGHT OF THE CONTRACTOR TO PROCEED COULD HAVE BEEN TIMELY TERMINATED UNDER THE STANDARD CONTRACT ,DEFAULT" CLAUSE, IT IS STATED THAT SUCH WOULD HAVE BEEN IMPRACTICABLE BECAUSE:

"* * * THE CONTRACT REQUIRED THAT THE CONTRACTOR SUBMIT PHOTOGRAPHIC MATERIALS WITHIN 20 DAYS FROM THE DATE OF COMPLETION OF PHOTOGRAPHY FOR A SUBPROJECT, AND ALSO REQUIRES THE CONTRACTOR TO REPORT THE DATE OF SUCH COMPLETION. SINCE THE CONTRACTOR IN THIS CASE REPORTED THE DATE OF COMPLETION, WE ANTICIPATED THAT THE MATERIAL WOULD BE SUBMITTED. THE DELAY IN THE SUBMISSION OF THE MATERIALS RESULTED IN THE LIQUIDATED DAMAGES. AS THE DELAY CONTINUED WE REALIZED THAT UNLESS THE MATERIAL WAS ACCEPTABLE IT COULD NEITHER BE USED NOR REFLOWN IN THE SAME SEASON. TERMINATING THE CONTRACTOR'S RIGHT TO PROCEED AT THIS POINT, WOULD NOT HAVE GIVEN US THE MATERIALS FOR THE AREAS WHICH THIS CONTRACTOR HAD PHOTOGRAPHED AND WOULD REQUIRE A NEW CONTRACTOR TO DUPLICATE THE PHOTOGRAPHY OF THE AREAS INVOLVED. SINCE SUCH A PROCEDURE WOULD RESULT IN CONSIDERABLE DELAY IN THE RECEIPT OF USEABLE COMPLETED MATERIALS, IT APPEARED TO BE TO THE DISTINCT DISADVANTAGE OF THE GOVERNMENT TO TAKE SUCH ACTION.'

IT IS FURTHER REPORTED THAT THE EXCESSIVE NUMBER OF DAYS' DELAY IN THE SUBMISSION OF PHOTOGRAPHIC MATERIALS AFTER PHOTOGRAPHY WAS COMPLETED WAS DUE PARTIALLY TO CONTRACTOR'S OVER-OPTIMISTIC VIEW OF THE SITUATION, AND HIS POOR JUDGMENT IN DETERMINING CERTAIN AREAS TO BE SATISFACTORILY PHOTOGRAPHED, WHEN IN FACT THEY WERE NOT AND SHOULD HAVE BEEN REFLOWN BY HIM BEFORE BEING CONSIDERED AS COMPLETE AND THEREBY DUE FOR DELIVERY WITHIN 20 DAYS. FURTHER DELAYS APPARENTLY WERE CAUSED BY THE CONTRACTOR'S LOSS OF PERSONNEL AT HIS HOME BASE LABORATORY IN MINNESOTA, PARTICULARLY DURING THE PERIOD WHEN HE WAS FLYING THE FLORIDA AREA, AND HIS SUBSEQUENT INABILITY TO REPLACE SUCH PERSONNEL.

IT IS ADMINISTRATIVELY RECOMMENDED THAT THE ASSESSMENT OF DAMAGE BE LIMITED TO THE AMOUNT OF $3,907.68 AND THAT THE BALANCE OF $23,982.32 BE REMITTED. THE BASIS OF THE RECOMMENDATION IS AS FOLLOWS:

"THE FLORIDA AND MINNESOTA COUNTIES INVOLVED ARE PHOTOGRAPHED ON AN AVERAGE OF ABOUT EVERY SIX YEARS. IF PHOTOGRAPHY IS USED THE FIRST YEAR AFTER A COUNTRY IS PHOTOGRAPHED, FULLEST USE HAS BEEN MADE OF THE PHOTOGRAPHY AND THERE WOULD BE NO LOSS IN VALUE. IF PHOTOGRAPHY CANNOT BE USED UNTIL THE SECOND YEAR AFTER THE COUNTRY IS PHOTOGRAPHED, IT IS ESTIMATED THAT THE LOSS IN VALUE OF THE PHOTOGRAPHS IS APPROXIMATELY 25 PERCENT. ON THIS BASIS A MORE REALISTIC ESTIMATE ON THE AMOUNT OF DAMAGE TO THE GOVERNMENT WOULD BE 25 PERCENT OF THE CONTRACT PRICE FOR EACH OF THE FIFTEEN COUNTIES INVOLVED. * * *"

WITH RESPECT TO THE DISCRETIONARY AUTHORITY CONFERRED ON OUR OFFICE TO WAIVE OR REMIT LIQUIDATED DAMAGES, 41 U.S.C. 256 (A) PROVIDES:

"WHENEVER ANY CONTRACT MADE ON BEHALF OF THE GOVERNMENT BY THE HEAD OF ANY FEDERAL AGENCY, OR BY OFFICERS AUTHORIZED BY HIM SO TO DO, INCLUDES A PROVISION FOR LIQUIDATED DAMAGES FOR DELAY, THE COMPTROLLER GENERAL UPON RECOMMENDATION OF SUCH HEAD IS AUTHORIZED AND EMPOWERED TO REMIT THE WHOLE OR ANY PART OF SUCH DAMAGES AS IN HIS DISCRETION MAY BE JUST AND EQUITABLE.'

THE RECORD BEFORE OUR OFFICE DOES NOT DISCLOSE THE EXISTENCE OF STRONG AND PERSUASIVE EQUITIES IN FAVOR OF THE CONTRACTOR (32 COMP. GEN. 67); RATHER, IT IS QUITE CLEAR THAT THE CONTRACTOR THROUGH THE EXERCISE OF REASONABLE DILIGENCE COULD HAVE AVOIDED A SUBSTANTIAL PORTION OF THE DELAY. THE STATUTORY AUTHORITY ABOVE-QUOTED MAY NOT BE INVOKED BY OUR OFFICE IN THE ABSENCE OF SUBSTANTIAL EQUITIES AND WHERE THE DELAY, AS HERE, WAS ATTRIBUTABLE TO THE CONTRACTOR AND NOT INDUCED OR CONTRIBUTED TO BY THE GOVERNMENT. HENCE, WE FIND NO EQUITABLE BASIS EXISTS UNDER THE STATUTE FOR REMISSION OF PART OF THE LIQUIDATED DAMAGES WHICH ACCRUED UNDER THE CONTRACT. SEE 36 COMP. GEN. 143.

HOWEVER, THERE IS FOR APPROPRIATE CONSIDERATION WHETHER THE AMOUNT OF LIQUIDATED DAMAGES ASSESSED IS DISPROPORTIONATE TO THE PROBABLE DAMAGE OR LOSS AS TO CONSTITUTE A PENALTY. SEE RESTATEMENT, CONTRACTS, SECTION 339. THE FACT THAT LIQUIDATED DAMAGES AS ASSESSED CLOSELY APPROXIMATE THE CONTRACT CONSIDERATION IS INDICATIVE THAT SUCH AMOUNT WOULD CONSTITUTE A PENALTY AND NOT AS A MEASURE OF JUST COMPENSATION. SEE GERMAIN LUMBER COMPANY V. UNITED STATES, 56 F.SUPP. 1001; KOTHE, TRUSTEE V. R. C. TAYLOR TRUST, 280 U.S. 224; STEFFEN V. UNITED STATES, 213 F.2D 266; 17 COMP. GEN. 827.

ACCORDINGLY, UNDER THE FACTS OF THIS CASE IT IS OUR OPINION THAT NO LEGAL REQUIREMENT EXISTS FOR THE ASSESSMENT OF LIQUIDATED DAMAGES UNDER THE CONTRACT, SINCE TO DO SO WOULD CONSTITUTE A PENALTY. HOWEVER, WE AGREE THAT DAMAGES SHOULD BE ASSESSED ON THE BASIS SET FORTH IN LETTER OF JUNE 6, 1958, IN THE AMOUNT OF $3,907.68 AS CONSTITUTING A MORE REALISTIC ESTIMATE OF THE AMOUNT OF DAMAGE TO THE GOVERNMENT ON ACCOUNT OF THE CONTRACTOR'S DEFAULT.