B-162868, JAN. 9, 1969

B-162868: Jan 9, 1969

Additional Materials:

Contact:

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

 

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

INC.: REFERENCE IS MADE TO YOUR LETTER DATED APRIL 4. THE CONSTRUCTION OF THE FEDERAL OFFICE BUILDING HERE INVOLVED WAS DIVIDED INTO TWO PHASES. INVITATION FOR BIDS FOR THE CONSTRUCTION OF THE SUPERSTRUCTURE WAS ISSUED ON MAY 22. SUBSTRUCTURE FOR FEDERAL OFFICE BUILDING IS NOW IN CONSTRUCTION ON THE SITE. COMPLETION OF THE WORK UNDER CONTRACT FOR THE SUBSTRUCTURE IS ANTICIPATED ABOUT SEPTEMBER 8. 1964. " THE PHASE II CONTRACT WAS AWARDED TO BATESON ON JULY 24. THE SURVEY CONDUCTED BY AMERICAN BRIDGE REVEALED THAT THE STRUCTURAL STEEL ERECTED BY THE PHASE I CONTRACTOR HAD BEEN IMPROPERLY INSTALLED WITH THE RESULT THAT WORK COULD NOT COMMENCE UNDER THE PHASE II CONTRACT UNTIL THE DEFECTS IN THE PHASE I WORK WERE REMEDIED.

B-162868, JAN. 9, 1969

TO J. W. BATESON COMPANY, INC.:

REFERENCE IS MADE TO YOUR LETTER DATED APRIL 4, 1968, WITH ENCLOSED BRIEF, AND SUBSEQUENT CORRESPONDENCE, CONCERNING YOUR CLAIM FOR ADDITIONAL COMPENSATION UNDER CONTRACT NO. GS-03B-14080 WITH THE GENERAL SERVICES ADMINISTRATION (GSA), FOR THE CONSTRUCTION OF THE SUPERSTRUCTURE OF A FEDERAL OFFICE BUILDING IN BALTIMORE, MARYLAND.

THE CONSTRUCTION OF THE FEDERAL OFFICE BUILDING HERE INVOLVED WAS DIVIDED INTO TWO PHASES; PHASE I FOR THE CONSTRUCTION OF THE BUILDING'S SUBSTRUCTURE AND PHASE II FOR THE CONSTRUCTION OF THE SUPERSTRUCTURE. INVITATION FOR BIDS FOR THE CONSTRUCTION OF THE SUPERSTRUCTURE WAS ISSUED ON MAY 22, 1964, BEFORE THE COMPLETION OF THE SUBSTRUCTURE, SO THAT THERE WOULD BE NO DELAY BETWEEN CONTRACTS. THE PHASE II INVITATION, HOWEVER, CONTAINED THE FOLLOWING PROVISION IN SECTION 2-03 OF THE SPECIAL CONDITIONS:

"A. SUBSTRUCTURE FOR FEDERAL OFFICE BUILDING IS NOW IN CONSTRUCTION ON THE SITE, UNDER OTHER CONTRACTS WITH THE GOVERNMENT AND INDICATED ON THE SITE PLANS AND SITE UTILITY DRAWINGS AS ,EXISTING" OR "INSTALLED" UNDER ANOTHER CONTRACT, SHALL NOT BE DISTURBED ... ALL WORK OF THIS CONTRACT, OR INTERFERENCES WITH THIS WORK, IF SUCH ARISE, DIRECTLY RELATED TO AND INTERDEPENDENT UPON OTHER NEW CONSTRUCTION ON THE SITE SHALL BE SUBJECT TO THE REVIEW, DECISIONS AND APPROVAL OF THE CONSTRUCTION ENGINEER BEFORE PROCEEDING WITH ANY OF THE WORK, OR REMOVAL OF INTERFERENCES, SO RELATED. COMPLETION OF THE WORK UNDER CONTRACT FOR THE SUBSTRUCTURE IS ANTICIPATED ABOUT SEPTEMBER 8, 1964. "

THE PHASE II CONTRACT WAS AWARDED TO BATESON ON JULY 24, 1964, AND REQUIRED COMPLETION WITHIN 750 DAYS. UPON RECEIPT OF THE AWARD, BATESON ENTERED INTO CERTAIN SUBCONTRACTS IN ORDER TO ASSURE TIMELY COMPLETION OF ITS CONTRACT AND AUTHORIZED ITS STRUCTURAL STEEL SUBCONTRACTOR, THE AMERICAN BRIDGE DIVISION OF UNITED STATES STEEL CORPORATION, TO CONDUCT A SURVEY OF THE STRUCTURAL STEEL ERECTED BY THE PHASE I CONTRACTOR. THE SURVEY CONDUCTED BY AMERICAN BRIDGE REVEALED THAT THE STRUCTURAL STEEL ERECTED BY THE PHASE I CONTRACTOR HAD BEEN IMPROPERLY INSTALLED WITH THE RESULT THAT WORK COULD NOT COMMENCE UNDER THE PHASE II CONTRACT UNTIL THE DEFECTS IN THE PHASE I WORK WERE REMEDIED. THIS SITUATION WAS BROUGHT TO THE ATTENTION OF GSA IN AUGUST 1964, IMMEDIATELY AFTER IT WAS DISCOVERED, AND CORRECTIVE WORK WAS ULTIMATELY REQUIRED UNDER THE GUARANTEE CLAUSE OF THE PHASE I CONTRACT. AS A RESULT, WORK UNDER THE BATESON CONTRACT WAS DELAYED FROM NOVEMBER 1, 1964, UNTIL MARCH 15, 1965, A PERIOD OF 19 WEEKS.

SUBSEQUENTLY, A CLAIM WAS FILED WITH THE CONTRACTING OFFICER BY BATESON FOR DAMAGES SUSTAINED AS A RESULT OF THE DELAY AND FOR EXTRA COSTS INCURRED AS A RESULT OF CHANGED CONDITIONS. BECAUSE THE CONTRACT DID NOT CONTAIN A "SUSPENSION OF WORK" CLAUSE AND BECAUSE IT WAS DETERMINED BY THE CONTRACTING OFFICER THAT THE DELAY PORTION OF THE BATESON CLAIM WAS NOT COGNIZABLE UNDER ANY OF THE OTHER STANDARD CONTRACT CLAUSES, THAT PORTION OF THE CLAIM REPRESENTING DELAY DAMAGES WAS TREATED BY BATESON AND GSA AS A CLAIM ARISING OUT OF THE BREACH BY THE GOVERNMENT OF ITS IMPLIED CONTRACTUAL OBLIGATION NOT TO INTERFERE WITH THE ORDERLY PERFORMANCE OF THE CONTRACT WORK. AFTER NEGOTIATIONS BETWEEN BATESON AND THE CONTRACTING OFFICER, BATESON AGREED TO ACCEPT $138,022 IN FULL AND FINAL SETTLEMENT OF ITS CLAIM. THE AGREED AMOUNT INCLUDES $7,154 FOR THE ADDITIONAL WORK CAUSED BY CHANGED CONDITIONS, WHICH AMOUNT IS ADMINISTRATIVELY COGNIZABLE UNDER THE "CHANGED CONDITIONS" CLAUSE OF THE CONTRACT.

SINCE THE BULK OF THE CLAIMED AMOUNT WAS FOR UNLIQUIDATED DAMAGES ARISING OUT OF AN ALLEGED BREACH OF CONTRACT BY THE GOVERNMENT, THE MATTER WAS SUBMITTED TO OUR OFFICE BY GSA FOR SETTLEMENT. BY YOUR LETTER DATED APRIL 4, 1968, YOU SUBMITTED A BRIEF, THE SUBSTANCE OF WHICH WAS TO THE EFFECT THAT THE DELAY IN DIRECTING THE NECESSARY CORRECTIVE WORK ON THE PART OF GSA FROM AUGUST 1964, WHEN IT WAS ADVISED BY BATESON OF THE IMPROPERLY ERECTED PHASE I STRUCTURAL STEEL, UNTIL MARCH 1965, WHEN THE NECESSARY CORRECTIONS HAD BEEN MADE AND BATESON WAS ABLE TO PROCEED UNDER THE PHASE II CONTRACT, WAS SO UNREASONABLE AS TO AMOUNT TO A BREACH BY THE GOVERNMENT. YOU ALSO POINT OUT THAT THE ACTUAL TIME REQUIRED FOR THE NECESSARY CORRECTIVE WORK BY THE PHASE I CONTRACTOR WAS A LITTLE LESS THAN 1 MONTH.

YOUR BRIEF ALSO ADDRESSES ITSELF TO THE QUESTION OF WHETHER THE DECISION OF THE SUPREME COURT IN UNITED STATES V HOWARD P. FOLEY CO., INC., 329 U.S. 64 (1946), WILL PREVENT THE PAYMENT OF DELAY DAMAGES. THAT CASE GENERALLY STANDS FOR THE PROPOSITION THAT WHERE, AS HERE, A CONTRACT CONTAINS NO IMPLIED WARRANTY THAT THE WORK SITE WILL BE MADE AVAILABLE AT A CERTAIN TIME AND WHERE NO FAULT CAN BE ATTRIBUTED TO THE GOVERNMENT FOR THE DELAY ENCOUNTERED, THE GOVERNMENT WILL NOT BE HELD LIABLE FOR DAMAGES INCURRED AS A RESULT OF THE DELAY. TO THE SAME GENERAL EFFECT ARE SUCH CASES AS GILBANE BUILDING COMPANY V UNITED STATES, 333 F.2D 867 (1964); COMMERCE INTERNATIONAL COMPANY, INC. V UNITED STATES, 338 F.2D 81; PETER KIEWIT SONS' CO., INC., ET AL. V UNITED STATES, 138 CT. CL. 668. IT IS YOUR CONTENTION SIMPLY THAT THE DELAY INCURRED IN THE INSTANT CASE WAS IN FACT CAUSED BY THE FAULT OR NEGLIGENCE OF THE GOVERNMENT, THEREBY DISTINGUISHING IT FROM FOLEY, AND THAT YOUR CLAIM THEREFORE SHOULD BE HONORED BY OUR OFFICE.

FOR REASONS DISCUSSED BELOW, WE ARE UNABLE TO CONCLUDE THAT FAULT OR NEGLIGENCE ON THE PART OF THE GOVERNMENT HAS BEEN SO CLEARLY ESTABLISHED AS TO WARRANT ALLOWANCE OF YOUR CLAIM BY OUR OFFICE. WHILE THE INITIAL SUBMISSION BY GSA RECOMMENDED SETTLEMENT OF YOUR CLAIM, THE RECORD TRANSMITTED CONTAINED NO INFORMATION WITH REGARD TO THE GOVERNMENT'S FAULT OR NEGLIGENCE. ACCORDINGLY, A SUPPLEMENTAL REPORT WAS REQUESTED FROM GSA DETAILING THE EVENTS RESULTING IN THE CLAIM FOR DELAY DAMAGES. WITH REGARD TO THE SEQUENCE OF EVENTS FROM THE TIME GSA WAS NOTIFIED OF THE FAULTY PHASE I ERECTION UNTIL CORRECTIVE WORK WAS COMPLETED, THE SUPPLEMENTAL REPORT STATES THAT A MEETING WAS HELD ON SEPTEMBER 21, 1964, WHICH CONCLUDED THAT SUBSTRUCTURE STEEL COLUMNS WERE OFF LOCATION IN EXCESS OF THE TOLERANCES ALLOWED BY THE PHASE II SPECIFICATIONS AND RECOGNIZED THE NEED FOR CORRECTIVE ACTION; THAT AN INQUIRY TO ASCERTAIN WHETHER THE MISALIGNMENT EXCEEDED THE TOLERANCES ALLOWED BY THE PHASE I SPECIFICATIONS WAS DIRECTED ON SEPTEMBER 29, 1964; AND THAT THE PHASE I CONTRACT WAS FURNISHED WITH A LIST OF DEFECTS, INCLUDING THE MISALIGNED STRUCTURAL STEEL, SHORTLY THEREAFTER.

BY LETTER DATED OCTOBER 9, 1964, HOWEVER, THE PHASE I CONTRACTOR CONTESTED THE GSA DETERMINATION THAT THE PHASE I STRUCTURAL STEEL WAS NOT WITHIN SPECIFICATION TOLERANCES. ON OCTOBER 28, 1964, A GSA MEMORANDUM STATED THAT THE MISALIGNMENT FIGURES SUPPLIED BY AMERICAN BRIDGE GENERALLY AGREED WITH THOSE ARRIVED AT BY A SURVEY COMMISSIONED BY THE PHASE I CONTRACTOR BUT STATED THAT A DIFFERENCE OF OPINION EXISTED AS TO WHETHER THE PHASE I STEEL WAS WITHIN SPECIFICATION TOLERANCES. ON NOVEMBER 9, 1964, THE CONTRACTING OFFICER SENT A LETTER TO THE PHASE I CONTRACTOR CONTAINING DRAWINGS SHOWING THE MAGNITUDE OF THE PHASE I MISALIGNMENT. THIS LETTER, HOWEVER, WAS ALSO DISPUTED BY THE PHASE I CONTRACTOR WITH THE RESULT THAT A SECOND SURVEY WAS CONDUCTED AND FURTHER ENGINEERING STUDIES WERE MADE. FINALLY, ON JANUARY 5, 1965, AGREEMENT WAS REACHED BETWEEN GSA AND THE PHASE I CONTRACTOR AS TO THE NECESSARY CORRECTIVE WORK TO BE PERFORMED. CORRECTIVE WORK WAS COMMENCED BY THE PHASE I CONTRACTOR ON JANUARY 11, 1965, AND WAS COMPLETED IN MID-FEBRUARY 1965.

THE MAJOR PORTION OF THE TIME EXPENDED DURING THE PERIOD OF DELAY WAS SPENT IN VERIFYING THE EXTENT OF THE MISALIGNMENT AND IN THE CONDUCT OF NEGOTIATIONS WITH THE PHASE I CONTRACTOR WHICH NECESSARILY HAD TO BE CONCLUDED TO THE MUTUAL SATISFACTION OF THE PARTIES BEFORE CORRECTIVE WORK COULD BE PERFORMED. HENCE, WHILE IT MAY BE ARGUED THAT GSA SHOULD HAVE ACTED WITH GREATER ALACRITY IN RESOLVING THE PROBLEMS CAUSED BY THE MISALIGNED STEEL, WE DO NOT BELIEVE THAT THE GOVERNMENT WAS AT FAULT IN CONSUMING A LITTLE MORE THAN 3 MONTHS IN RESOLVING THE CONTROVERSY WITH THE PHASE I CONTRACTOR.

ALSO, WHILE THE PHASE II CONTRACT ANTICIPATED THAT THE WORK SITE WOULD BE AVAILABLE AT A SPECIFIC TIME, AS EVIDENCED BY SECTION 2-03 OF THE SPECIAL CONDITIONS, QUOTED ABOVE, THAT SECTION DID NOT GUARANTEE THAT THE SITE WOULD BE AVAILABLE TO BATESON AT THE ANTICIPATED TIME.

ARGUMENTS SUBSTANTIALLY SIMILAR TO THOSE ADVANCED IN YOUR COUNSEL'S BRIEF WERE CONSIDERED BY THE U.S. DISTRICT COURT FOR THE EASTERN DISTRICT OF SOUTH CAROLINA IN SLOANE V UNITED STATES, 196 F.SUPP. 643. IN THAT CASE, THE GOVERNMENT WAS FOUND NOT LIABLE FOR NEGLIGENT BREACH OF CONTRACT FOR THE CONSTRUCTION OF FLOATING PONTOONS TO BE INSTALLED IN SPUD PILE BENTS CONSTRUCTED UNDER ANOTHER SEPARATE CONTRACT. THE COURT HELD THAT THE DELAY IN THE AVAILABILITY OF THE CONSTRUCTION SITE CAUSED BY THE OTHER CONTRACTOR'S CONDUCT WAS NOT DUE TO ANY NEGLIGENT OR WILLFUL MISCONDUCT ON THE PART OF THE GOVERNMENT. IN ARRIVING AT ITS DECISION, THE COURT CONSIDERED THE CASES, CITED BY YOU, OF FOLEY AND PETER KIEWIT SONS-. AS TO THE KIEWIT CASE, THE COURT IN THE SLOANE CASE DISTINGUISHED THAT CASE AND HELD AT PAGE 649:

"* * * THERE, ALTHOUGH A SIMILAR CONTRACT WAS INVOLVED, THE GOVERNMENT WAS REQUIRED TO FURNISH CERTAIN MATERIAL AS A PART OF THE CONTRACT, AND WITHOUT IT, THE CONTRACT COULD NOT BE COMPLETED. THE COURT FOUND AS A FACT THAT WHEN THE GOVERNMENT GAVE NOTICE TO THE CONTRACTOR TO PROCEED, IT HAD KNOWLEDGE THAT THE MATERIALS WHICH IT WAS TO FURNISH WERE IN SHORT SUPPLY. THE COURT FURTHER FOUND THAT NOT ONLY DID THE GOVERNMENT NOT MAKE THIS INFORMATION AVAILABLE TO THE CONTRACTOR, BUT IN FACT PLACED AN ORDER WITH AN EARLIER DELIVERY DATE FOR THE SAME MATERIAL WITH THE SUPPLIER AND BY THIS AFFIRMATIVE ACT CAUSED THE CONTRACTOR TO BE DELAYED. IN THE PRESENT CASE, THE EVIDENCE IS TO THE CONTRARY IN THAT THE GOVERNMENT WAS NOT RESPONSIBLE FOR THE FURNISHING OF ANY MATERIALS AND THE CAUSE OF THE DELAY AND RESULTING DAMAGES TO THE PLAINTIFF WAS THE FAILURE OF ANOTHER CONTRACTOR TO HAVE THE SITE AVAILABLE. IN THIS REGARD, THE GOVERNMENT UPON LEARNING THAT MANU-MINE WAS NOT PROCEEDING WITH ITS WORK RE NEGOTIATED THE CONTRACT FOR THE CONSTRUCTION OF THE SPUD PILE BENTS ON APRIL 15, 1957, WHICH WAS SOME SIX MONTHS PRIOR TO THE DATE SET BY PLAINTIFF UNDER HIS WORK SCHEDULE FOR THE DELIVERY OF THE FIRST PONTOON.

"THE GOVERNMENT WAS NOT GUILTY OF ANY NEGLIGENCE OR WILFUL MISCONDUCT IN CONNECTION WITH THIS CONTRACT, AND, THEREFORE, THE ONLY REMEDY AVAILABLE TO THE PLAINTIFF FOR THE DELAY IN CONSTRUCTION WAS THE EXTENSION OF THE DELIVERY DATE. HAVING EXTENDED THE DATE BY CHANGE ORDER E, THE GOVERNMENT GRANTED THE MAXIMUM RELIEF TO THE PLAINTIFF.'

ACCORDINGLY, IN VIEW OF THE LONG-ESTABLISHED RULE THAT BREACH OF CONTRACT CLAIMS MAY BE ALLOWED ONLY WHEN THE LIABILITY OF THE GOVERNMENT HAS BEEN CONVINCINGLY ESTABLISHED (44 COMP. GEN. 353, 358), AND IN VIEW OF OUR CONCLUSION THAT THE FAULT OR NEGLIGENCE OF THE GOVERNMENT HAS NOT BEEN CLEARLY ESTABLISHED, THAT PORTION OF YOUR CLAIM PERTAINING TO DELAY DAMAGES MUST BE DENIED. WITH REGARD TO YOUR CLAIM FOR EXTRA WORK, WE ARE ADVISING GSA THAT SUCH CLAIM MAY BE SETTLED ADMINISTRATIVELY UNDER THE "CHANGED CONDITIONS" CLAUSE OF THE CONTRACT.