B-152463, JUL. 24, 1964

B-152463, JUL. 24, 1964

TO RICHARD K. W. TOM, INC.:

REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 5, 1963, REQUESTING REMISSION OF LIQUIDATED DAMAGES ASSESSED AGAINST YOU FOR DELAY IN COMPLETION OF CONTRACT NO. DA 94-600-PAC-2890, WITH THE DEPARTMENT OF THE ARMY. YOU ALSO ALLEGE THAT A MISTAKE WAS MADE IN YOUR BID, AND IN A LETTER TO THE CONTRACTING OFFICER DATED JANUARY 25, 1964, YOU CLAIM $4,000 AS TO THE APPROXIMATE DIFFERENCE BETWEEN THE SUM OF $6,558 INCLUDED IN YOUR BID PRICE FOR ELECTRICAL WORK AND THE ACTUAL COST OF COMPLETING THIS WORK, WHICH WAS $10,451.50.

ON JUNE 11, 1962, BIDS WERE REQUESTED FOR ALTERATION OF TRANSFORMER VAULTS AT SCHOFIELD BARRACKS, HAWAII. YOU WERE AWARDED THE CONTRACT AS LOW BIDDER IN THE AMOUNT OF $23,299. THREE OTHER BIDS WERE RECEIVED RANGING FROM $32,396 TO $39,233, AND THE GOVERNMENT'S ESTIMATE OF THE COST OF THE WORK WAS $23,126.56. UNDER THE TERMS OF THE CONTRACT, WORK WAS TO BE COMPLETED WITHIN 120 CALENDAR DAYS AFTER RECEIPT OF NOTICE TO PROCEED, WHICH WAS ACKNOWLEDGED BY YOU ON JULY 12, 1962, THEREBY FIXING NOVEMBER 9, 1962, AS THE CONTRACT COMPLETION DATE. THE CONTRACT FURTHER PROVIDED FOR ASSESSMENT OF LIQUIDATED DAMAGES IN THE AMOUNT OF $15 FOR EACH CALENDAR DAY OF DELAY NOT DUE TO EXCUSABLE CAUSES BEYOND YOUR CONTROL AND WITHOUT YOUR FAULT OR NEGLIGENCE.

BY LETTER DATED OCTOBER 30, 1962, YOU ADVISED THE ARMY THAT YOU HAD CANCELLED YOUR ELECTRICAL SUBCONTRACT WITH PRECISION ELECTRIC SERVICE, LTD., ON OCTOBER 24, 1962, FOR NONPERFORMANCE, AND THAT FAILING TO SECURE THE NECESSARY MATERIALS LOCALLY, YOU HAD PLACED AN ORDER FOR SAME WITH A MAINLAND SUPPLIER. YOU ALSO REQUESTED AN EXTENSION OF YOUR COMPLETION DATE DUE TO THE ANTICIPATED DELAY. THE CONTRACT WAS COMPLETED FEBRUARY 9, 1963, OR AFTER A DELAY OF 89 CALENDAR DAYS, AND THE CONTRACTING OFFICER, BY HIS DECISION DATED MARCH 28, 1963, DETERMINED THAT NO PART OF THE DELAY IN CONTRACT PERFORMANCE WAS DUE TO ANY CAUSE BEYOND YOUR CONTROL AND WITHOUT YOUR FAULT OR NEGLIGENCE, AND THAT LIQUIDATED DAMAGES SHOULD BE ASSESSED IN THE AMOUNT OF $1,335 FOR 89 DAYS AT $15 PER DAY. UPON FURTHER CONSIDERATION, THE CONTRACTING OFFICER DETERMINED THAT 10 OF THE 89 DAYS WERE EXCUSABLE BECAUSE OF THE GOVERNMENT'S DELAY IN APPROVING THE HARDWARE MATERIAL LIST SUBMITTED BY YOU, AND HE THEREFORE EXTENDED THE DELIVERY DATE 10 DAYS, WHICH REDUCED THE AMOUNT OF LIQUIDATED DAMAGES TO $1,185.

YOUR APPEAL OF THIS FINAL ASSESSMENT OF LIQUIDATED DAMAGES WAS DENIED BY THE UNITED STATES ARMY, HAWAII, BOARD OF CONTRACT APPEALS, IN A DECISION DATED MARCH 18, 1964. IN ACCORDANCE WITH THE "DISPUTES" CLAUSE OF THE CONTRACT, THIS DECISION, AS TO QUESTIONS OF FACT, IS FINAL AND CONCLUSIVE UPON THE PARTIES TO THE CONTRACT, UNLESS FRAUDULENT, ARBITRARY, CAPRICIOUS, OR SO GROSSLY ERRONEOUS AS NECESSARILY TO IMPLY BAD FAITH, OR NOT SUPPORTED BY SUBSTANTIAL EVIDENCE.

IT IS YOUR CONTENTION THAT THE LIQUIDATED DAMAGE PROVISION SHOULD NOT BE ENFORCED BECAUSE THE GOVERNMENT DID NOT IN FACT SUFFER ANY DAMAGE. YOU CONTEND FURTHER THAT THE DELAY CAUSED BY THE DEFAULT OF PRECISION ELECTRICAL SERVICE, LTD., WAS EXCUSABLE AND THAT THE GOVERNMENT SHOULD HAVE WARNED YOU OF THE SUBCONTRACTOR'S UNRELIABILITY. IT ALSO APPEARS TO BE YOUR FEELING THAT THE GOVERNMENT SHOULD HAVE MAINTAINED CLOSER SUPERVISION OVER THE PERFORMANCE OF THE CONTRACT AND COULD HAVE REDUCED THE DELAY AND THE RESULTING LIQUIDATED DAMAGES BY TERMINATING YOUR RIGHT TO PROCEED.

IT IS AN ACCEPTED PRINCIPLE OF LAW THAT WHERE DAMAGES ARE OF AN UNCERTAIN NATURE THE PARTIES MAY ESTIMATE AND AGREE UPON THE MEASURE OF DAMAGES WHICH MAY BE SUSTAINED FROM THE BREACH OF AN AGREEMENT, AND WHEN THE AMOUNT OF DAMAGES IS THUS LIQUIDATED IN ADVANCE, THE COURTS WILL ENFORCE THE CONTRACT TERMS UNLESS IT IS CLEAR THAT THE INTENTION OF THE PARTIES WAS TO STIPULATE A PENALTY AS SECURITY FOR PERFORMANCE AND NOT TO ESTIMATE AND AGREE UPON THE DAMAGES. WISE, TRUSTEE IN BANKRUPTCY OF STANNARD V. UNITED STATES, 249 U.S. 361; UNITED STATES V. BETHLEHEM STEEL COMPANY, 205 U.S. 105. A REASONABLE CONSTRUCTION OF THE INSTANT CONTRACT JUSTIFIES THE CONCLUSION THAT THE INTENTION OF THE PARTIES IS FAIRLY EXPRESSED AND THAT THE STIPULATION FOR LIQUIDATED DAMAGES IS EXACTLY WHAT IT PURPORTS TO BE, AND WHERE IT IS ESTABLISHED THAT THE LIQUIDATED DAMAGE PROVISION IS VALID, IT IS NOT ONLY UNNECESSARY TO PROVE ACTUAL DAMAGES, BUT EVIDENCE IN CONNECTION THEREWITH IS NOT EVEN ADMISSIBLE. SUN PRINTING AND PUBLISHING ASSOCIATION V. MOORE, 183 U.S. 642, 674.

THE CONTRACT DOES NOT CONTEMPLATE APPROVAL OF SUBCONTRACTORS BY THE CONTRACTING OFFICER AND THE SUBMISSION TO HIM OF A LIST OF SAME WAS NOT FOR THIS PURPOSE. NEITHER IS THERE ANY INDICATION THAT THE CONTRACTING OFFICER HAD INFORMATION TO THE EFFECT THAT PRECISION ELECTRICAL SERVICE, D., WAS NOT RESPONSIBLE.

ADMITTEDLY IT IS THE OBLIGATION OF A CONTRACTING PARTY TO MITIGATE DAMAGES, BUT SUPERVISING THE PERFORMANCE OF SUBCONTRACTORS WAS PRIMARILY YOUR RESPONSIBILITY AND THE FACTS OF THE PRESENT CASE DO NOT INDICATE THAT THERE WAS ANY DERELICTION ON THE PART OF THE CONTRACTING OFFICER IN NOT TERMINATING YOUR RIGHT TO PROCEED. SINCE LIQUIDATED DAMAGES WOULD HAVE CONTINUED TO RUN AND YOU WOULD HAVE BEEN CHARGEABLE WITH THE EXCESS COST OF COMPLETION, THERE IS NO REASON TO BELIEVE THAT TERMINATION WOULD HAVE EFFECTED ANY SAVING.

IN ORDER TO JUSTIFY RELIEF ON THE BASIS OF A MISTAKE ALLEGED AFTER ACCEPTANCE OF A BID, THE EVIDENCE MUST BE SUCH AS TO SHOW CONCLUSIVELY THAT A MISTAKE WAS MADE AND THAT IT WAS MUTUAL OR SO APPARENT THAT IT MUST BE PRESUMED THE CONTRACTING OFFICER, AT THE TIME OF ACCEPTANCE, KNEW OF THE MISTAKE AND SOUGHT TO TAKE ADVANTAGE THEREOF.

THERE WAS ACTUALLY NO MISTAKE MADE BY YOU IN THE SUBMISSION OF YOUR BID, WHICH WAS EXACTLY AS INTENDED. SUCH MISTAKE AS MAY HAVE BEEN MADE WAS IN THE QUOTATION OF YOUR SUBCONTRACTOR FOR THE ELECTRICAL WORK, UPON WHICH YOU RELIED IN THE PREPARATION OF YOUR BID, AND SINCE YOU, AS PRIME CONTRACTOR, FAILED TO QUESTION THE ACCURACY OF THE QUOTATION, THERE WOULD APPEAR TO BE NO BASIS FOR EXPECTING THE CONTRACTING OFFICER TO QUESTION YOUR BID.

OF THE FOUR BIDS RECEIVED, THE SECOND LOW BID WAS APPROXIMATELY $9,000 HIGHER THAN YOURS AND THE DIFFERENCE BETWEEN THE SECOND LOW BID AND THE HIGH BID WAS APPROXIMATELY $7,000. AS PREVIOUSLY STATED THE GOVERNMENT'S ESTIMATE OF THE COST OF THE WORK WAS $23,126.56, WHICH WAS WITHIN $200 OF THE AMOUNT OF YOUR BID. IN THE CIRCUMSTANCES, THERE WOULD APPEAR TO BE NO JUSTIFICATION FOR CONCLUDING THAT THE CONTRACTING OFFICER SHOULD HAVE SUSPECTED THE EXISTENCE OF AN ERROR BY REASON OF ANY DIFFERENCES IN THE AMOUNTS BID, NOR WAS THERE ANYTHING ELSE ON THE FACE OF YOUR BID TO SUGGEST THAT AN ERROR HAD BEEN MADE. THE MERE FACT THAT YOU SUFFERED A LOSS IS NOT A SUFFICIENT GROUND FOR AVOIDING THE CONTRACT. 19 COMP. GEN. 168 AND CASES CITED THEREIN.

FOR THE REASONS STATED, WE CONCLUDE THAT THE ACCEPTANCE OF YOUR BID IN GOOD FAITH BY THE CONTRACTING OFFICER RESULTED IN A BINDING CONTRACT, OBLIGATING YOU TO PERFORM AT THE CONTRACT PRICE, AND THAT NO ADDITIONAL AMOUNT MAY BE ALLOWED THEREFOR.

SINCE THE LIQUIDATED DAMAGE ASSESSMENT WAS CLEARLY PROPER UNDER THE TERMS OF THE CONTRACT, RELIEF THEREFROM COULD BE ALLOWED ONLY UNDER THE PROVISIONS OF 10 U.S.C. 2312, WHICH PERMITS REMISSION OF ALL OR PART OF SUCH DAMAGES, UPON THE RECOMMENDATION OF THE HEAD OF THE CONTRACTING AGENCY. IN THIS INSTANCE THE RECOMMENDATION IS ADVERSE, AND REMISSION MUST THEREFORE BE DENIED.