B-142529, JUL. 5, 1960

B-142529: Jul 5, 1960

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VETERANS ADMINISTRATION: REFERENCE IS MADE TO YOUR LETTER OF APRIL 6. IT APPEARS THAT YOU ARE CONSIDERING A DISPUTED CASE IN WHICH A CONTRACTOR HAS RAISED A QUESTION INVOLVING THE PROPER INTERPRETATION OF CLAUSE 5 (C) OF STANDARD FORM 23A (CONSTRUCTION CONTRACTS) WITH REFERENCE TO A DELAY IN COMPLETION OF HIS WORK WHICH HE CLAIMS IS DUE TO CAUSES BEYOND HIS CONTROL AND WITHOUT HIS FAULT OR NEGLIGENCE. THE BID WAS ACCEPTED ON JUNE 18. THE MANUFACTURER FROM WHOM STEEL HAD BEEN ORDERED WAS UNABLE TO FURNISH THE REQUIRED STEEL. THE REQUEST WAS DENIED. THE CONTRACTOR THEN REQUESTED AN EXTENSION OF CONTRACT TIME WHICH WAS ALSO DENIED BY THE CONTRACTING OFFICER. IT IS INDICATED THAT THE CONTRACTOR DID BEGIN WORK ON SEPTEMBER 14.

B-142529, JUL. 5, 1960

TO ADMINISTRATOR, VETERANS ADMINISTRATION:

REFERENCE IS MADE TO YOUR LETTER OF APRIL 6, 1960, REQUESTING OUR OPINION REGARDING THE PROPER INTERPRETATION TO BE PLACED UPON CLAUSE 5 (C) OF STANDARD FORM 23A, ENTITLED "GENERAL PROVISIONS (CONSTRUCTION CONTRACTS)," UNDER THE FACTS AND CIRCUMSTANCES PRESENTED.

IT APPEARS THAT YOU ARE CONSIDERING A DISPUTED CASE IN WHICH A CONTRACTOR HAS RAISED A QUESTION INVOLVING THE PROPER INTERPRETATION OF CLAUSE 5 (C) OF STANDARD FORM 23A (CONSTRUCTION CONTRACTS) WITH REFERENCE TO A DELAY IN COMPLETION OF HIS WORK WHICH HE CLAIMS IS DUE TO CAUSES BEYOND HIS CONTROL AND WITHOUT HIS FAULT OR NEGLIGENCE. YOU REPORT THAT THE CONTRACTOR SUBMITTED A BID ON WHICH HE PROPOSED TO FURNISH THE LABOR, EQUIPMENT AND MATERIALS AND PERFORM ALL THE WORK FOR ENCLOSING A SUN DECK AT BUILDING NO. 1, VETERANS ADMINISTRATION HOSPITAL, WILKES BARRE, PENNSYLVANIA. THE BID WAS ACCEPTED ON JUNE 18, 1959, AND THE CONTRACTOR EXECUTED THE CONSTRUCTION CONTRACT ON JUNE 24, 1959. A STEEL STRIKE STARTED ON JULY 14, 1959, AND THE MANUFACTURER FROM WHOM STEEL HAD BEEN ORDERED WAS UNABLE TO FURNISH THE REQUIRED STEEL. ON JULY 30, 1959, THE CONTRACTOR WROTE THE CONTRACTING OFFICER THAT HE COULD OBTAIN THE NECESSARY STEEL FROM A WAREHOUSE AT AN ADDITIONAL COST OF $420 AND HE REQUESTED THAT SUCH ADDITIONAL COST BE ALLOWED. THE REQUEST WAS DENIED. THE CONTRACTOR THEN REQUESTED AN EXTENSION OF CONTRACT TIME WHICH WAS ALSO DENIED BY THE CONTRACTING OFFICER. THE CONTRACTOR HAS ENTERED AN APPEAL FROM THE DENIAL OF EXTENSION OF TIME. IT IS INDICATED THAT THE CONTRACTOR DID BEGIN WORK ON SEPTEMBER 14, 1959, ALTHOUGH THE STRIKE HAD NOT YET BEEN SETTLED.

THE SPECIFIC QUESTION YOU HAVE SUBMITTED IS WHETHER CLAUSE 5 (C) OF GENERAL PROVISIONS (CONSTRUCTION CONTRACTS) SF 23A, WHICH IS THE CLAUSE HERE INVOLVED, PROTECTS THE CONTRACTOR WHEN HE FAILS TO PURCHASE SUPPLIES NEEDED IN HIS CONSTRUCTION WHEN THEY ARE AVAILABLE ON THE OPEN MARKET, AT AN INCREASED PRICE, BUT MAY NOT BE OBTAINED FROM HIS USUAL SOURCE OF SUPPLY BECAUSE OF A STRIKE.

CLAUSE 5 (C) OF STANDARD FORM 23A PROVIDES, IN PERTINENT PART, AS FOLLOWS:

"/C) THE RIGHT OF THE CONTRACTOR TO PROCEED SHALL NOT BE TERMINATED, AS PROVIDED IN PARAGRAPH (A) HEREOF, NOR THE CONTRACTOR CHARGED WITH LIQUIDATED OR ACTUAL DAMAGES, AS PROVIDED IN PARAGRAPH (B) HEREOF BECAUSE OF ANY DELAYS IN THE COMPLETION OF THE WORK DUE TO UNFORESEEABLE CAUSES BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE CONTRACTOR, INCLUDING, BUT NOT RESTRICTED TO, ACTS OF GOD, OR OF THE PUBLIC ENEMY, ACTS OF THE GOVERNMENT, IN EITHER ITS SOVEREIGN OR CONTRACTUAL CAPACITY, ACTS OF ANOTHER CONTRACTOR IN THE PERFORMANCE OF A CONTRACT WITH THE GOVERNMENT, FIRES, FLOODS, EPIDEMICS, QUARANTINE RESTRICTIONS, STRIKES, FREIGHT EMBARGOES, AND UNUSUALLY SEVERE WEATHER, OR DELAYS OF SUBCONTRACTORS OR SUPPLIERS DUE TO SUCH CAUSES: * * *"

AS EXPLAINED BY THE SUPREME COURT IN UNITED STATES V. BROOKS CALLOWAY CO., 318 U.S. 120, THE PURPOSE AND SENSE OF A PROVISO SUCH AS IS CONTAINED IN CLAUSE 5 (C) OF THE GOVERNMENT CONSTRUCTION CONTRACT IS TO---

"* * * REMOVE UNCERTAINTY AND NEEDLESS LITIGATION BY DEFINING WITH SOME PARTICULARITY THE OTHERWISE HAZY AREA OF UNFORESEEABLE EVENTS WHICH MIGHT EXCUSE NONPERFORMANCE WITHIN THE CONTRACT PERIOD. THUS CONTRACTORS KNOW THEY ARE NOT TO BE PENALIZED FOR UNEXPECTED IMPEDIMENTS TO PROMPT PERFORMANCE, AND, SINCE THEIR BIDS CAN BE BASED ON FORESEEABLE AND PROBABLE, RATHER THAN POSSIBLE HINDRANCES, THE GOVERNMENT SECURES THE BENEFIT OF LOWER BIDS AND AN ENLARGED SELECTION OF BIDDERS. * * *"

THE DECISION OF THE COURT IN THAT CASE WAS THAT THE LISTED EVENTS WERE NOT TO BE REGARDED AS UNFORESEEABLE PER SE, BUT THAT THE EVENT, EVEN THOUGH ONE OF THOSE SPECIFICALLY MENTIONED, MUST BE UNFORESEEABLE AND BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE CONTRACTOR.

IT HAS OFTEN BEEN HELD THAT CONTRACTS CONTAINING CLAUSES EXCUSING PERFORMANCE DUE TO AN ACT OF GOD, OR SOME OTHER CAUSE, DO NOT GIVE THE PERFORMING PARTY THE RIGHT TO REFUSE TO PERFORM WHEN IT IS WITHIN HIS POWER TO PERFORM. SEE MEADE V. POPPENBERG, 153 N.Y.SUPP. 182; ALSO ANNOTATIONS AT 51 ALR 990; AND 35 ALR 721; WILLISTON, CONTRACTS (REV.ED.) PAR. 1968.

CLAUSE 11 (C) OF STANDARD FORM 32, THE STANDARD GOVERNMENT SUPPLY CONTRACT, WHICH IS SIMILAR IN EFFECT TO CLAUSE 5 (C), PROVIDES THAT THE CONTRACTOR SHALL NOT BE LIABLE FOR ANY EXCESS COSTS IF HIS FAILURE TO PERFORM ARISES OUT OF CAUSE BEYOND HIS CONTROL AND WITHOUT HIS FAULT OR NEGLIGENCE "UNLESS THE SUPPLIES OR SERVICES TO BE FURNISHED BY THE SUBCONTRACTOR WERE OBTAINABLE FROM OTHER SOURCES IN SUFFICIENT TIME TO PERMIT THE CONTRACTOR TO MEET THE REQUIRED DELIVERY SCHEDULE.' YOU PROPOUND THE QUESTION WHETHER THE ABSENCE OF SUCH PROVISION IN CLAUSE 5 (C) ACTS TO FREE THE CONTRACTOR FROM ANY DUTY TO SEEK THE NEEDED CONSTRUCTION SUPPLIES OUTSIDE HIS USUAL SOURCES.

WE DO NOT BELIEVE THAT THE INCLUSION OF THE QUOTED PROVISO IN CLAUSE 11 (C) OF THE STANDARD GOVERNMENT SUPPLY CONTRACT OFFERS ANY REASON TO ASSUME THAT THE ABSENCE OF A SIMILAR PROVISO IN CLAUSE 5 (C) OF THE STANDARD GOVERNMENT CONSTRUCTION CONTRACT RELIEVES THE CONTRACTOR FROM THE DUTY TO PERFORM ACCORDING TO THE OBLIGATIONS OF HIS CONTRACT IF PERFORMANCE IS POSSIBLE IN SPITE OF THE OCCURRENCE OF ONE OR MORE OF THE CONTINGENCIES SPECIFIED THEREIN. SEE SUNSERI V. GARCIA AND MAGGINI COMPANY, 148 A 81, 67 ALR 1428.

ASSUMING THAT ONE OF THE EVENTS ENUMERATED IN CLAUSE 5 (C) HAS OCCURRED, AND THAT IT WAS UNFORSEEABLE AND WITHOUT THE FAULT OR NEGLIGENCE OF EITHER THE CONTRACTOR OR HIS SUBCONTRACTOR OR SUPPLIER, IT STILL MUST BE ESTABLISHED BY THE CONTRACTOR THAT SUCH EVENT WAS IN FACT THE DIRECT AND EFFECTIVE CAUSE OF HIS DELAY OR DEFAULT. "TO EXCUSE PERFORMANCE UNDER AN ABSOLVING CLAUSE, THE CAUSE RELIED ON MUST HAVE BEEN THE PROXIMATE CAUSE OF THE FAILURE TO PERFORM.' SWIFT AND CO. V. COLUMBIA R. GAS AND E. CO., 17 F.2D 46. IF NEEDED SUPPLIES ARE REASONABLY AVAILABLE DESPITE THE UNFORESEEN CONTINGENCY, THEN THAT CONTINGENCY CANNOT BE RELIED UPON AS AN EXCUSE FOR FAILURE TO OBTAIN THEM. THERE MAY BE OCCASIONS, HOWEVER, WHEN THE COST OF OBTAINING SUPPLIES FROM OTHER SOURCES WOULD PLACE AN UNREASONABLE BURDEN UPON THE CONTRACTOR IN RELATION TO THE CONTEMPLATED COSTS OF PERFORMANCE. IN THESE CIRCUMSTANCES IT IS RECOGNIZED THAT A REASONABLE LIMIT MUST BE PLACED ON THE CONTRACTOR'S OBLIGATION TO OVERCOME THE UNFORESEEN OBSTACLE. SEE DILLON V. UNITED STATES, 140 C.CLS. 508; MITCHELL CANNERIES, INC. V. UNITED STATES, 111 C.CLS. 228, 250-251.

WE ARE THEREFORE OF THE VIEW THAT IF IT BE FOUND THAT THE CONTRACTOR'S FAILURE TO PURCHASE SUPPLIES REASONABLY OBTAINABLE ON THE OPEN MARKET, RATHER THAN THE STRIKE, WAS THE PROXIMATE CAUSE OF THE DELAY, SUCH DELAY IS NOT EXCUSABLE UNDER THE PROVISIONS OF CLAUSE 5 (C) OF GENERAL PROVISIONS (CONSTRUCTION CONTRACTS) SF 23A.