B-152747, MAY 20, 1965, 44 COMP. GEN. 746

B-152747: May 20, 1965

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

ETC. - DISASTER RELIEF - UNCOMPLETED CONSTRUCTION THE FACT THAT AN IRRIGATION DISTRIBUTION SYSTEM BEING CONSTRUCTED UNDER A BUREAU OF RECLAMATION CONTRACT AND WHICH WAS DAMAGED BY FLOODS PRIOR TO COMPLETION AND ACCEPTANCE IS LOCATED IN A DECLARED MAJOR DISASTER AREA DOES NOT MAKE THE CONTRACTOR ELIGIBLE FOR RELIEF UNDER THE FEDERAL DISASTER ACT (42 U.S.C. 1855) FOR THE COST OF RECONSTRUCTING THE DAMAGE. THERE IS NO AUTHORITY TO RELIEVE THE CONTRACTOR FROM THE CONTRACTUAL OBLIGATIONS UNDERTAKEN. THE UNITED STATES HAS A VESTED RIGHT TO HAVE THE IRRIGATION SYSTEM COMPLETED AT THE CONTRACTOR'S EXPENSE. RECONSTRUCTION OF PORTIONS OF AN IRRIGATION SYSTEM WHICH WERE DAMAGED BY THE DISASTROUS FLOODS DURING LATE DECEMBER 1964 AND EARLY JANUARY 1965.

B-152747, MAY 20, 1965, 44 COMP. GEN. 746

STATES - FEDERAL AID, GRANTS, ETC. - DISASTER RELIEF - UNCOMPLETED CONSTRUCTION THE FACT THAT AN IRRIGATION DISTRIBUTION SYSTEM BEING CONSTRUCTED UNDER A BUREAU OF RECLAMATION CONTRACT AND WHICH WAS DAMAGED BY FLOODS PRIOR TO COMPLETION AND ACCEPTANCE IS LOCATED IN A DECLARED MAJOR DISASTER AREA DOES NOT MAKE THE CONTRACTOR ELIGIBLE FOR RELIEF UNDER THE FEDERAL DISASTER ACT (42 U.S.C. 1855) FOR THE COST OF RECONSTRUCTING THE DAMAGE, THE ACT ONLY PROVIDING EMERGENCY ASSISTANCE TO STATES AND LOCAL GOVERNMENTS, INCLUDING DISTRICTS, TO ALLEVIATE THE IMMEDIATE EFFECTS OF DISASTERS, AND THE PERMANENT IMPROVEMENTS REMAINING THE RESPONSIBILITY OF LOCAL GOVERNMENTS, THERE IS NO AUTHORITY TO RELIEVE THE CONTRACTOR FROM THE CONTRACTUAL OBLIGATIONS UNDERTAKEN, AND THE CONTRACT PLACING THE RESPONSIBILITY FOR DAMAGE REPAIR ON THE CONTRACTOR UNTIL COMPLETION AND FINAL ACCEPTANCE OF THE WORK, THE UNITED STATES HAS A VESTED RIGHT TO HAVE THE IRRIGATION SYSTEM COMPLETED AT THE CONTRACTOR'S EXPENSE, NOTWITHSTANDING THE DAMAGE RESULTED FROM AN ACT OF GOD, AND, THEREFORE, THE CONTRACT MAY NOT BE AMENDED WITHOUT A COMPENSATING BENEFIT TO THE GOVERNMENT.

TO THE SECRETARY OF THE INTERIOR, MAY 20, 1965:

BY LETTER OF APRIL 29, 1965, THE ASSISTANT SECRETARY REQUESTED OUR OPINION CONCERNING A PROPOSAL TO ISSUE AN ORDER FOR CHANGES UNDER BUREAU OF RECLAMATION CONTRACT NO. 14-06-D-4014, SPECIFICATIONS NO. DC 6004, DIRECTING THE CONTRACTOR TO PROCEED WITH THE REPAIR, RESTORATION, AND RECONSTRUCTION OF PORTIONS OF AN IRRIGATION SYSTEM WHICH WERE DAMAGED BY THE DISASTROUS FLOODS DURING LATE DECEMBER 1964 AND EARLY JANUARY 1965. FROM INFORMATION CONTAINED IN THE ASSISTANT SECRETARY'S LETTER, THE FACTS IN THE MATTER MAY BE SUMMARIZED AS FOLLOWS:

THE DAMAGED WORK IS PART OF THE IRRIGATION DISTRIBUTION SYSTEM BEING CONSTRUCTED FOR THE DALLES IRRIGATION DISTRICT IN WASCO COUNTY, OREGON, WITHIN THE MAJOR DISASTER AREA DECLARED BY THE PRESIDENT ON DECEMBER 24, 1964. THE CONTRACT FOR CONSTRUCTION OF THE IRRIGATION SYSTEM WAS AWARDED BY THE BUREAU ON OCTOBER 3, 1963, TO THE BEASLEY ENGINEERING COMPANY, INC., EMERYVILLE, CALIFORNIA, AT A TOTAL ESTIMATED PRICE OF $3,051,811. THE CONTRACT WAS SCHEDULED FOR COMPLETION ON MARCH 12, 1965. AT THE TIME THE FLOODS OCCURRED, PROGRESS UNDER THE CONTRACT WAS AHEAD OF SCHEDULE WITH APPROXIMATELY 86 PERCENT OF THE WORK COMPLETED AND 96 PERCENT OF THE PIPELINE DISTRIBUTION SYSTEM IN PLACE. THE COMPLETED FACILITIES HAD BEEN INSPECTED AND WERE READY FOR ACCEPTANCE BY THE UNITED STATES SUBJECT ONLY TO OPERATIONAL TESTING. THE UNPRECEDENTED AND UNEXPECTED FLOODS CAUSED DAMAGE TO COMPLETED PORTIONS OF THE SYSTEM NECESSITATING CONSIDERABLE REDESIGN AND REPAIR WORK AT A TOTAL ESTIMATED COST OF $300,000.

THE IRRIGATION SYSTEM IS BEING CONSTRUCTED FOR THE DALLES IRRIGATION DISTRICT WHICH HAS CONTRACTED WITH THE UNITED STATES TO REPAY A PORTION OF THE CONSTRUCTION COSTS. TO MEET THE DISTRICT'S CURRENT NEEDS FOR IRRIGATION SUPPLIES AND TO AVOID SERIOUS LOSSES TO FARMERS AND FRUIT RANCHERS, IT IS ESSENTIAL THAT REPAIR OF THE DAMAGED FACILITIES BE ACCOMPLISHED AS SOON AS POSSIBLE, ALTHOUGH THE UNITED STATES IS NOT CONTRACTUALLY BOUND TO FURNISH WATER TO THE DISTRICT ON ANY SPECIFIC DATE. TOWARD THIS END THE OFFICE OF EMERGENCY PLANNING, PURSUANT TO THE PROVISIONS OF PUBLIC LAW 875, 81ST CONGRESS, AS AMENDED, 42 U.S.C. 1855 ET SEQ., AND VARIOUS IMPLEMENTING DIRECTIVES, REQUESTED THE BUREAU OF RECLAMATION TO PERFORM THE FOLLOWING MAJOR DISASTER ASSISTANCE AT THE DALLES IRRIGATION DISTRICT IN WASCO COUNTY, OREGON:

"RESTORE THE ESSENTIAL IRRIGATION FACILITIES THAT WERE DAMAGED OR DESTROYED BY THE DECEMBER, 1964 AND JANUARY, 1965 FLOODS.'

IN MAKING THIS REQUEST, THE OFFICE OF EMERGENCY PLANNING STIPULATED THAT FUNDING FOR THE ABOVE WORK WAS TO BE FROM CURRENT BUREAU OF RECLAMATION APPROPRIATIONS AND NOT FROM THE PRESIDENT'S DISASTER FUNDS. AND IT WAS UNDERSTOOD THAT THE QUESTION OF THE CONTRACTOR'S PERFORMANCE RESPONSIBILITY UNDER THE CONTRACT WAS A MATTER FOR THE BUREAU TO DECIDE.

THE ASSISTANT SECRETARY STATES THAT IN VIEW OF THE RECORD, HE BELIEVES THE BUREAU OF RECLAMATION MAY PROCEED WITH THE RESTORATION OF THE DAMAGED FACILITIES USING FUNDS UNDER AUTHORITY OF THE DISASTER ACT AND TO THAT EXTENT RELIEVING THE CONTRACTOR FROM ASSUMING ANY OF THE COSTS ASSOCIATED THEREWITH. WE HAVE BEEN REQUESTED TO RENDER AN OPINION AS TO THE PROPRIETY OF THE PROPOSED ACTION.

APART FROM THE DISASTER ACT AUTHORITY RELIED UPON, THE CONTRACTOR, AS SUGGESTED BY THE ASSISTANT SECRETARY, WOULD BE LIABLE FOR COMPLETION OF THE CONTRACT WORK WITHOUT THE RIGHT TO ADDITIONAL COMPENSATION FOR RESTORATION OF THOSE PORTIONS DESTROYED OR DAMAGED BY THE FLOODS. THE RECORD IS NOT SUFFICIENTLY COMPLETE FOR A CONCLUSIVE DETERMINATION OF THE CONTRACTOR'S PRECISE RIGHTS AND LIABILITIES WITH RESPECT TO EACH ITEM OF WORK WHICH MAY BE INVOLVED, HOWEVER, THE FOLLOWING CONTRACT CLAUSES AND LEGAL AUTHORITIES POINT CONVINCINGLY IN THE DIRECTION OF FULL LIABILITY ON THE PART OF THE CONTRACTOR:

CLAUSE 7 (D) OF THE GENERAL PROVISIONS (CONSTRUCTION CONTRACT), STANDARD FORM 23-A, INCORPORATED INTO THE CONTRACT, PROVIDES THAT:

"ALL MATERIAL AND WORK COVERED BY PROGRESS PAYMENTS MADE SHALL THEREUPON BECOME THE SOLE PROPERTY OF THE GOVERNMENT, BUT THIS PROVISION SHALL NOT BE CONSTRUED AS RELIEVING THE CONTRACTOR FROM THE SOLE RESPONSIBILITY FOR ALL MATERIAL AND WORK UPON WHICH PAYMENTS HAVE BEEN MADE OR THE RESTORATION OF ANY DAMAGED WORK, OR AS WAIVING THE RIGHT OF THE GOVERNMENT TO REQUIRE THE FULFILLMENT OF ALL OF THE TERMS OF THE CONTRACT.'

CLAUSE 12 AS SUPPLEMENTED PROVIDES IN PART THAT:

"THE CONTRACTOR * * * SHALL ALSO BE RESPONSIBLE FOR ALL MATERIALS DELIVERED AND WORK PERFORMED UNTIL COMPLETION AND ACCEPTANCE OF THE ENTIRE CONSTRUCTION WORK, EXCEPT FOR ANY COMPLETED UNIT OF CONSTRUCTION THEREOF WHICH THERETOFORE MAY HAVE BEEN ACCEPTED. UPON COMPLETION OF THE CONTRACT, OR FINAL ACCEPTANCE OF ANY COMPLETED UNIT THEREOF, THE WORK SHALL BE DELIVERED COMPLETE AND UNDAMAGED.'

THE EFFECT OF THESE PROVISIONS WOULD APPEAR TO PLACE RESPONSIBILITY FOR DAMAGE TO THE CONTRACT WORK UPON THE CONTRACTOR UNTIL ITS FINAL ACCEPTANCE BY THE GOVERNMENT, NOTWITHSTANDING THAT SUCH DAMAGE MAY HAVE BEEN CAUSED BY AN ACT OF GOD. SEE COLUMBIA RAILWAY, POWER AND LIGHT CO. V. CITY OF COLUMBUS, OHIO, ET AL., (1919) 249 U.S. 399, 412, FOR THE PROPOSITION THAT ONLY IMPOSSIBILITY OF PERFORMANCE BY VIRTUE OF AN ACT OF GOD, RATHER THAN MERE UNFORESEEN DIFFICULTIES, WILL EXCUSE THE CONTRACTOR; EUGENE DE ARMAS V. UNITED STATES (1947) 108 CT.CL. 436, 468; THE ARUNDEL CORPORATION V. UNITED STATES (1945) 103 CT.CL. 688, HOLDING THAT AN ACT OF GOD DOES NOT EFFECT A CHANGED CONDITION WITHIN THE MEANING OF CONTRACT TERM AUTHORIZING ADDITIONAL COMPENSATION FOR CHANGED CONDITIONS; FRED G. KOENEKE ET AL., ASBCA 3163 (1957); PALMER CONSTRUCTION COMPANY, ASBCA 839 (1951); AND HAROLD J. REDDING AND ASSOCIATES, ASBCA 1611 (1955), WALLACE CANDLER, INC., ASBCA 4868 (1959) TO THE SAME EFFECT WHEREIN THE CONTRACT WORK INVOLVED, ALTHOUGH NOT FINALLY ACCEPTED, WAS COMPLETED TO A SUBSTANTIAL DEGREE. SEE ALSO 16 COMP. GEN. 975, 25 ID. 332, 35 ID. 211. CF. BEACON CONSTRUCTION COMPANY OF MASSACHUSETTS, INC., ASBCA 6849 (1962), WHEREIN THE BOARD CONSTRUED A SPECIFIC CONTRACT CLAUSE SUCH AS IS NOT INVOLVED HERE AS RELIEVING THE CONTRACTOR OF LIABILITY.

THE FEDERAL DISASTER ACT PROVIDES, SO FAR AS IS PERTINENT HERE, FOR FEDERAL ASSISTANCE TO STATES AND LOCAL GOVERNMENTS (INCLUDING DISTRICTS) IN CARRYING OUT THEIR RESPONSIBILITIES TO ALLEVIATE SUFFERING AND DAMAGE RESULTING FROM MAJOR DISASTERS AND TO REPAIR ON A TEMPORARY AND EMERGENCY BASIS ESSENTIAL PUBLIC FACILITIES IN MAJOR DISASTERS. THE UNDERLYING PURPOSE OF THE ACT IS TO PROVIDE THAT RELIEF WHICH IS ESSENTIAL TO THE HEALTH AND WELL-BEING OF THE RESIDENTS OF MAJOR DISASTER AREAS. IT WAS THE INTENT THAT SUCH RELIEF WOULD BE ON AN EMERGENCY BASIS ONLY, WITH ONLY TEMPORARY REPAIR OR MAJOR REPLACEMENT OF PUBLIC FACILITIES MADE DURING AND IMMEDIATELY AFTER DISASTERS WITHOUT MAKING PERMANENT REPAIRS OR REHABILITATION. ASSISTANCE FURNISHED BY THE FEDERAL GOVERNMENT WAS INTENDED FOR THE ALLEVIATION OF THE IMMEDIATE EFFECTS OF DISASTERS. SEE PARTICULARLY 42 U.S.C. 1855B. AFTER SUCH FEDERAL ASSISTANCE, IT WAS CONSIDERED THAT THE RESTORATION, REPLACEMENT, OR PERMANENT IMPROVEMENT OF PUBLIC FACILITIES WAS A RESPONSIBILITY OF THE LOCAL GOVERNMENTS. SEE ALSO HOUSE OF REPRESENTATIVES REPORT NO. 2727, DATED JULY 25, 1950. THE ENTIRE TENOR OF THE ACT IS TO ASSIST LOCAL GOVERNMENTS WITH RESPECT TO THEIR OBLIGATIONS IN MEETING THE IMMEDIATE NEEDS OF LOCAL CITIZENS FOLLOWING MAJOR DISASTERS.

WE FIND NOTHING IN THE ACT, ITS LEGISLATIVE HISTORY, OR THE REGULATIONS PROMULGATED IN IMPLEMENTATION OF THE ACT, 32 CFR 1710 ET SEQ., WHICH COULD EVEN REMOTELY BE CONSTRUED AS AUTHORITY FOR THE RELIEF OF A CONTRACTOR FROM THE CONTRACTUAL OBLIGATIONS UNDERTAKEN BY HIM. TO THE EXTENT THAT THE CONTRACTOR IS LIABLE FOR THE RESTORATION AND REPAIR WORK HERE INVOLVED, THE UNITED STATES HAS A VESTED CONTRACT RIGHT TO HAVE SUCH WORK COMPLETED AT THE CONTRACTOR'S EXPENSE. AND WE ARE NOT AWARE OF ANY APPROPRIATE AUTHORITY UNDER WHICH SUCH VESTED RIGHT MIGHT PROPERLY BE WAIVED IN THIS CASE, THE WELL-ESTABLISHED RULE BEING THAT NO OFFICER OF THE GOVERNMENT HAS AUTHORITY TO WAIVE CONTRACTUAL RIGHTS OR TO MODIFY EXISTING CONTRACTS WITHOUT A COMPENSATING BENEFIT TO THE UNITED STATES. SEE 41 COMP. GEN. 169, 172, AND CASES CITED THEREIN.

ACCORDINGLY, WE MUST CONCLUDE THAT THE REQUEST OF THE OFFICE OF EMERGENCY PLANNING FOR THE BUREAU OF RECLAMATION TO RESTORE THE FACILITIES IN QUESTION MAY NOT BE RELIED UPON, AS SUGGESTED, TO RELIEVE THE CONTRACTOR FROM ASSUMING ANY OF THE ASSOCIATED COSTS.