B-180714, AUG 5, 1974

B-180714: Aug 5, 1974

Additional Materials:

Contact:

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

 

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

GOVERNMENT HAS NOT FAILED TO MEET ITS LEGAL DUTY TO CONSERVE DAMAGES WHERE PROVISION FOR ASSESSMENT OF SUCH DAMAGES WAS THE ONLY PRACTICAL APPROACH AT THE TIME OF CONTRACT EXECUTION AND THE SERVICES MAY NOT HAVE BEEN PROCURABLE UPON DEFAULT AT REASONABLE RATES ON THE OPEN MARKET. 2. WHERE IT IS "ALLEGED" THAT FACTORS BEYOND CONTRACTOR'S CONTROL MAY HAVE CAUSED DELAY BUT FACTUAL SUPPORT THEREFOR DOES NOT APPEAR IN RECORD PRESENTED. 3. THIS IS A POLICY DETERMINATION OF GENERAL APPLICATION WHICH OF ITSELF DOES NOT ESTABLISH EQUITIES FOR REMISSION ON BEHALF OF PAST CONTRACTORS. EACH OF THE CONTRACTS PROVIDED THAT LIQUIDATED DAMAGES WOULD BE ASSESSED AGAINST THE RESPECTIVE CONTRACTORS FOR FAILURE TO COMPLETE PERFORMANCE WITH IN THE SPECIFIED TIME PERIOD AT THE RATE OF $25.00 PER DAY UNTIL THE REQUIRED SERVICES WERE PERFORMED.

B-180714, AUG 5, 1974

1. NOTWITHSTANDING THE ABSENCE OF ANY ACTUAL DAMAGES AND ASSESSMENT OF LIQUIDATED DAMAGES IN EXCESS OF THE VALUE OF THE SERVICES RENDERED OR GOODS INVOLVED, GOVERNMENT HAS NOT FAILED TO MEET ITS LEGAL DUTY TO CONSERVE DAMAGES WHERE PROVISION FOR ASSESSMENT OF SUCH DAMAGES WAS THE ONLY PRACTICAL APPROACH AT THE TIME OF CONTRACT EXECUTION AND THE SERVICES MAY NOT HAVE BEEN PROCURABLE UPON DEFAULT AT REASONABLE RATES ON THE OPEN MARKET. 2. GAO FINDS NO EQUITABLE BASIS FOR REMISSION OF LIQUIDATED DAMAGES UNDER 41 U.S.C. 256(A), WHERE IT IS "ALLEGED" THAT FACTORS BEYOND CONTRACTOR'S CONTROL MAY HAVE CAUSED DELAY BUT FACTUAL SUPPORT THEREFOR DOES NOT APPEAR IN RECORD PRESENTED. 3. EVEN THOUGH VALID REASONS MAY EXIST FOR LIMITING PERIOD FOR ASSESSING LIQUIDATED DAMAGES TO 30 DAYS FOR FUTURE CONTRACTS COVERING THIS TYPE OF SERVICE, THIS IS A POLICY DETERMINATION OF GENERAL APPLICATION WHICH OF ITSELF DOES NOT ESTABLISH EQUITIES FOR REMISSION ON BEHALF OF PAST CONTRACTORS.

DEPARTMENT OF STATE:

THE ASSISTANT SECRETARY FOR ADMINISTRATION, DEPARTMENT OF STATE, IN ACCORDANCE WITH 41 U.S.C. 256(A) (41 CFR 1-1.315-2(E)), HAS RECOMMENDED THE PARTIAL REMISSION OF LIQUIDATED DAMAGES ASSESSED AGAINST NEPTUNE WORLD WIDE MOVING OF VIRGINIA, INCORPORATED (CONTRACT NO. T-45011 - SCC - 10107): DISTRICT MOVING AND STORAGE, INCORPORATED (CONTRACT NO. T 19007- SCC-10108) AND DELTA OF VIRGINIA (CONTRACT NO. 0000-300414) FOR DELAYS IN CONTRACT ERFORMANCE. THE CONTRACTS PROVIDED FOR EXPORT PACKING AND STORAGE OF HOUSEHOLD EFFECTS OF THE DEPARTMENT'S FOREIGN SERVICE PERSONNEL.

EACH OF THE CONTRACTS PROVIDED THAT LIQUIDATED DAMAGES WOULD BE ASSESSED AGAINST THE RESPECTIVE CONTRACTORS FOR FAILURE TO COMPLETE PERFORMANCE WITH IN THE SPECIFIED TIME PERIOD AT THE RATE OF $25.00 PER DAY UNTIL THE REQUIRED SERVICES WERE PERFORMED. LIQUIDATED DAMAGES IN THE AMOUNT OF $23,725 WERE ASSESSED AGAINST THE THREE CONTRACTORS, OF WHICH THE DEPARTMENT OF STATE RECOMMENDS THAT $3,350 BE REMITTED TO THE FIRMS. THE LATTER AMOUNT REPRESENTS THE SUM TOTAL OF THE LIQUIDATED DAMAGES WHICH ACCURED BEYOND THIRTY DAYS FROM THE TIME PERIOD SPECIFIED FOR THE PERFORMANCE OF THE RESPECTIVE CONTRACTS.

FOR THE REASONS STATED BELOW, WE DO NOT BELIEVE REMISSION SHOULD BE GRANTED ON THE BASIS OF THE RECORD PRESENTLY BEFORE US.

THE DEPARTMENT'S SUBMISSION CITES OUR DECISION 11 COMP. GEN. 384 (1932) FOR THE PROPOSITION THAT LIQUIDATED DAMAGES SHOULD NOT BE PERMITTED TO RUN INDEFINITELY AND IT RAISES THE QUESTION OF WHETHER THIS RULE HAS APPLICATION HERE SINCE IT IS ALLEGED THAT THE DAMAGE ASSESSMENTS FREQUENTLY EXCEEDED THE VALUE OF THE SERVICES OR THE VALUE OF THE SHIPMENT ITSELF. THE CITED DECISION, HOWEVER, DISCUSSED A SITUATION IN WHICH PERFORMANCE WAS READILY PROCURABLE IN THE OPEN MARKET AND THE CONTRACT NEVERTHELESS PROVIDED FOR ASSESSMENT OF LIQUIDATED DAMAGES. IT WAS STATED THAT IN SUCH CIRCUMSTANCES LIQUIDATED DAMAGES SHOULD NOT BE PERMITTED BEYOND THE VALUE OF THE THING PROCURED SINCE A LEGAL DUTY TO CONSERVE DAMAGES IS RECOGNIZED.

IT IS REPORTED, IN THIS CONNECTION, THAT OPPORTUNITIES TO REPURCHASE THE TYPE OF SERVICE REQUIRED HERE AT RATES THAT ARE NOT EXORBITANT ARE UNCOMMON DUE TO ITS EXTREMELY SEASONAL NATURE. MOREOVER, WE ARE ADVISED THAT THESE CONTRACTS PROVIDE FOR ASSESSMENT OF LIQUIDATED RATHER THAN ACTUAL DAMAGES INASMUCH AS DAMAGES ARE INCURRED OVERSEAS AND IT IS IMPRACTICAL TO ASCERTAIN THEM. THUS, IT APPEARS THAT A PROVISION FOR ASSESSMENT OF LIQUIDATED DAMAGES WAS THE ONLY PRACTICAL APPROACH AT THE TIME OF CONTRACT EXECUTION AND WE FIND NO FACTS ESTABLISHING THAT THE GOVERNMENT FAILED TO MEET ITS LEGAL RESPONSIBILITY TO CONSERVE DAMAGES. RATHER, IT APPEARS THE SERVICES MAY NOT HAVE BEEN PROCURABLE UPON DEFAULT AT REASONABLE RATES ON THE OPEN MARKET. MOREOVER, WHICH THE DEPARTMENT IS NOT AWARE OF THE INCURRENCE OF ANY ACTUAL DAMAGES RELATING TO PERFORMANCE DELAYS, THE VALIDITY OF A LIQUIDATED DAMAGE PROVISION IS UNAFFECTED BY THIS CIRCUMSTANCE. 36 COMP. GEN. 143, 145 (1956).

IN SUPPORT OF ITS REQUEST FOR EQUITABLE REMISSION, IT IS REPORTED THAT "DURING THE PAST YEAR THE OCCURRENCE OF SIGNIFICANT WOOD AND PAPER SHORTAGES ALLEGEDLY CAUSED THESE DAMAGE ASSESSMENTS TO ASSUME PROPORTIONS THAT FREQUENTLY EXCEEDED THE VALUE OF THE SERVICES PERFORMED AND, IN SOME CASES, THE GROSS VALUE OF THE SHIPMENT ITSELF." UPON FURTHER INQUIRY, THE DEPARTMENT HAS ADVISED THAT THERE IS NO ASSERTION, OR EVIDENCE, OF EXCUSABILITY IN THE CASE OF DISTRICT OR NEPTUNE BUT THAT DELTA HAS INDICATED ITS INTENTION TO APPEAL THE ASSESSED DAMAGES TO THE BOARD OF CONTRACT APPEALS ON THE BASIS OF EXCUSABLE DEFAULT OF A SUBCONTRACTOR FOR PLYWOOD SHORTAGES.

THIS OFFICE EXERCISES ITS AUTHORITY TO REMIT LIQUIDATED DAMAGES, UPON ADMINISTRATIVE RECOMMENDATION, AS MAY BE JUST AND EQUITABLE, WHEN WE BELIEVE PERSUASIVE EQUITIES EXIST ON BEHALF OF THE CONTRACTOR. EQUITY, HOWEVER, DOES NOT RELIEVE ONE FROM THE CONSEQUENCES OF HIS OWN NEGLIGENCE OR CARELESSNESS. 46 COMP. GEN. 252, 256 (1966 . WHILE IT HAS BEEN "ALLEGED" THAT FACTORS OUTSIDE THE CONTROL OF ONE CONTRACTOR MAY HAVE CAUSED SOME OF THE DELAY, THERE HAS NOT BEEN PRESENTED HERE ANY FACTUAL SUPPORT FOR THIS ALLEGATION.

THE DEPARTMENT ALSO ADVISES THAT A DECISION HAS BEEN MADE TO LIMIT THE PERIOD FOR ASSESSING LIQUIDATED DAMAGES IN ALL NEW CONTRACTS TO A MAXIMUM OF 30 DAYS AND CONSISTENT WITH THIS DECISION, REMISSION IS RECOMMENDED IN THE INSTANT CONTRACTS TO THE EXTENT THAT PERIODS IN EXCESS OF 30 DAYS ARE INVOLVED. IN OUR OPINION, EVEN THOUGH VALID REASONS ANY EXIST FOR LIMITING IN THE FUTURE THE PERIOD FOR ASSESSING LIQUIDATED DAMAGES FOR THIS TYPE OF SERVICE, THIS IS A POLICY DETERMINATION OF GENERAL APPLICATION WHICH OF ITSELF DOES NOT ESTABLISH EQUITIES FOR REMISSION ON BEHALF OF THE INSTANT CONTRACTORS.

ACCORDINGLY, IT IS OUR OPINION THAT NO ADEQUATE BASIS HAS BEEN PRESENTED TO SUPPORT A DETERMINATION BY THIS OFFICE THAT JUSTICE AND EQUITY WOULD BE SERVED BY REMISSION IN THIS CASE.