B-61447, NOVEMBER 26, 1946, 26 COMP. GEN. 365

B-61447: Nov 26, 1946

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IN THE ABSENCE OF EVIDENCE THAT THE PROPOSAL WAS WITHDRAWN PRIOR TO ACCEPTANCE. THE FACT THAT THERE WAS A DELAY BY THE GOVERNMENT. 1946: I HAVE YOUR LETTER OF OCTOBER 23. THE ABOVE-MENTIONED OFFER WAS ACCEPTED BY THE DEPARTMENT UNDER DATE OF MARCH 29. THIS ACTION WAS TAKEN PRIOR TO THE TIME THE DEPARTMENT WAS ADVISED OF THE PROVISIONS OF THE VETERANS' HOUSING PROGRAM ORDER NO. 1. THE MATTER OF OBTAINING AUTHORITY TO BEGIN CONSTRUCTION OF THE PROPOSED BUILDING WAS TAKEN UP WITH THE CIVILIAN PRODUCTION ADMINISTRATION IN THE CUSTOMARY MANNER. THE COST OF MATERIALS HAVE INCREASED CONSIDERABLY AND THE PROPONENT IS REQUESTING AN INCREASE IN RENTAL FROM $1. THERE IS ATTACHED A COMMUNICATION FROM THE SUCCESSFUL PROPONENT.

B-61447, NOVEMBER 26, 1946, 26 COMP. GEN. 365

CONTRACTS - OFFER AND ACCEPTANCE; INCREASED PERFORMANCE COSTS - DELAYED ACCEPTANCE; ACTS OF GOVERNMENT AS SOVEREIGN THE FAILURE OF THE GOVERNMENT TO ACCEPT PROMPTLY AN OFFEROR'S PROPOSAL TO ERECT A BUILDING AND LEASE SPACE THEREIN FOR POST OFFICE QUARTERS MAY NOT BE REGARDED AS SUCH A DEFECT AS TO PRECLUDE THE CONSUMMATION OF A BINDING CONTRACT UPON ACCEPTANCE, OR AS ANY LEGAL BASIS FOR INCREASING THE RENTAL RATE STIPULATED IN THE ACCEPTED PROPOSAL TO COMPENSATE THE OFFEROR FOR INCREASED COSTS OF CONSTRUCTION ALLEGEDLY RESULTING FROM SUCH DELAYED ACCEPTANCE, IN THE ABSENCE OF EVIDENCE THAT THE PROPOSAL WAS WITHDRAWN PRIOR TO ACCEPTANCE, THAT THE OFFEROR, WHEN NOTIFIED OF THE ACCEPTANCE, CONSIDERED IT UNTIMELY, OR THAT HE REGISTERED A PROMPT PROTEST. THE FACT THAT THERE WAS A DELAY BY THE GOVERNMENT, ACTING IN ITS SOVEREIGN CAPACITY THROUGH THE CIVILIAN PRODUCTION ADMINISTRATION, IN GRANTING A CONTRACTOR THE AUTHORITY TO BUILD QUARTERS TO BE LEASED BY IT TO THE GOVERNMENT AS A POST OFFICE, WITH THE RESULT THAT THE COST OF CONSTRUCTION HAD INCREASED OVER THAT CONTEMPLATED BY THE CONTRACTOR IN PREPARING HIS BID, MAY NOT BE REGARDED AS A LEGAL BASIS FOR INCREASING THE ANNUAL RENTAL STIPULATED IN THE AGREEMENT TO CONSTRUCT AND LEASE THE BUILDING.

COMPTROLLER GENERAL WARREN TO THE POSTMASTER GENERAL, NOVEMBER 26, 1946:

I HAVE YOUR LETTER OF OCTOBER 23, 1946, AS FOLLOWS:

UNDER DATE OF OCTOBER 12, 1945, MR. JAMES R. BOLAND SUBMITTED A PROPOSAL TO ERECT A BUILDING AND LEASE SPACE OF APPROXIMATELY 1,500 SQUARE FEET FOR QUARTERS FOR A PROPOSED STATION (TO BE KNOWN AS HESSVILLE) OF THE POST OFFICE AT HAMMOND, INDIANA, FOR A PERIOD OF TEN YEARS FROM JULY 1, 1946, OR DATE THEREAFTER OF COMPLETION OF BUILDING, ETC. AT RENTAL OF $1,600 PER ANNUM, INCLUDING WATER, WITH OPTION FOR AN ADDITIONAL TERM OF TEN YEARS AT THE SAME RATE.

THE ABOVE-MENTIONED OFFER WAS ACCEPTED BY THE DEPARTMENT UNDER DATE OF MARCH 29, 1946. THIS ACTION WAS TAKEN PRIOR TO THE TIME THE DEPARTMENT WAS ADVISED OF THE PROVISIONS OF THE VETERANS' HOUSING PROGRAM ORDER NO. 1. LATER WHEN THE PROVISIONS OF THIS ORDER BECAME KNOWN TO THE DEPARTMENT, THE MATTER OF OBTAINING AUTHORITY TO BEGIN CONSTRUCTION OF THE PROPOSED BUILDING WAS TAKEN UP WITH THE CIVILIAN PRODUCTION ADMINISTRATION IN THE CUSTOMARY MANNER.

DUE TO THE DELAY IN ACCEPTING THE PROPOSAL AND TO DELAYS ON ACCOUNT OF THE ACTION OF THE CIVILIAN PRODUCTION ADMINISTRATION IN REFUSING AUTHORITY TO BUILD AND TO DELAYS IN OBTAINING NECESSARY MATERIALS, THE COST OF MATERIALS HAVE INCREASED CONSIDERABLY AND THE PROPONENT IS REQUESTING AN INCREASE IN RENTAL FROM $1,600 TO $2,180 PER ANNUM FOR THE PROPOSED QUARTERS FOR THE ABOVE-MENTIONED UNIT. IN CONNECTION WITH THIS MATTER, THERE IS ATTACHED A COMMUNICATION FROM THE SUCCESSFUL PROPONENT, MR. JAMES R. BOLAND, REQUESTING THAT THE RENTAL FOR THE QUARTERS BE INCREASED TO $2,180 PER ANNUM.

IN VIEW OF THE DIFFICULTIES ENCOUNTERED BY THE PROPONENT IN CARRYING OUT THE TERMS OF THE CONTRACT, A RULING FROM YOU WILL BE APPRECIATED IN REGARD TO THE PROPONENT'S REQUEST FOR INCREASED RENTAL OVER THAT SPECIFIED IN THE ACCEPTED PROPOSAL.

IN THE CONTRACTOR'S LETTER OF OCTOBER 11, 1946, TRANSMITTED WITH YOUR LETTER, IT IS STATED:

THE ANNUAL RENTAL OF $1,600 SPECIFIED IN THE PROPOSAL WAS BASED ON ESTIMATED CONSTRUCTION COST OF ABOUT $16,000. THIS ESTIMATE OF COST WAS FURNISHED TO ME BY SEVERAL RELIABLE BUILDING CONTRACTORS. THIS PROPOSAL WAS NOT ACCEPTED BY THE POST OFFICE DEPARTMENT UNTIL MARCH 29, 1946. DUE TO THE DELAY IN ACCEPTANCE AND TO DELAYS ON ACCOUNT OF THE ACTION OF THE CIVILIAN PRODUCTION ADMINISTRATION IN INDIANAPOLIS IN REFUSING AUTHORITY TO BUILD AND TO DELAYS IN OBTAINING NECESSARY MATERIALS, THERE WAS AN INCREASE IN THE COST OF CONSTRUCTION OF ABOUT $6,000, MAKING THE COST OF THE BUILDING, EXCLUSIVE OF LAND AND OTHER CHARGES, ABOUT $21,800 INSTEAD OF THE APPROXIMATELY $16,000 AS ESTIMATED AT THE TIME OF SUBMITTING THE PROPOSAL. IN VIEW OF THIS INCREASE IN COST DUE TO THE DELAY OF THE DEPARTMENT IN ACCEPTING MY PROPOSAL AND TO THE DELAY OF THE CIVILIAN PRODUCTION ADMINISTRATION IN GRANTING THE AUTHORITY TO BUILD, I CONSIDER THAT THE ANNUAL RENTAL IN THE PROPOSAL SHOULD BE ON THE BASIS OF THE FINAL COST OF THE PROJECT, OR $2,180.

REQUEST IS RESPECTFULLY MADE THAT THE EXISTING AGREEMENT BE CHANGED ACCORDINGLY.

UNDER THE PROPOSAL OF OCTOBER 12, 1945, MR. BOLAND AGREED TO LEASE FOR A TERM OF TEN YEARS "FROM JULY 1, 1946, OR DATE THEREAFTER OF COMPLETION OF BUILDING * * * FOR THE USE OF THE POST OFFICE AT HESSVILLE STA., HAMMOND, IND., AT A RENTAL OF SIXTEEN HUNDRED DOLLARS ($1,600) PER ANNUM, PAYABLE MONTHLY, AND SUBJECT TO THE PROVISIONS OF THE FORM OF LEASE USED BY THE POST OFFICE DEPARTMENT," A ONE-STORY BRICK BUILDING TO BE ERECTED IN ACCORDANCE WITH CERTAIN PLANS AND SPECIFICATIONS AT 6626 KENNEDY AVENUE, AND THAT THE BUILDING WOULD BE READY FOR OCCUPANCY ON THE DATE SPECIFIED AS THE BEGINNING OF THE PROPOSED LEASE TERM, PROVIDED NOTICE OF ACCEPTANCE OF THE PROPOSAL BY THE POST OFFICE DEPARTMENT SHOULD BE PROMPTLY RECEIVED. HE AGREED FURTHER TO GRANT AN OPTION FOR AN ADDITIONAL TERM OF TEN YEARS AT A RENTAL RATE OF $1,600 PER ANNUM. AS INDICATED IN YOUR LETTER, MR. BOLAND'S PROPOSAL WAS ACCEPTED BY THE POST OFFICE DEPARTMENT ON MARCH 29, 1946, AND IT IS UNDERSTOOD THAT THE BUILDING IS NOW PRACTICALLY COMPLETED.

IT IS WELL SETTLED THAT WHERE THE OFFER DOES NOT SPECIFY THE TIME WITHIN WHICH IT MAY BE ACCEPTED, IT MUST BE ACCEPTED WITHIN A REASONABLE TIME AND THAT WHAT IS A REASONABLE TIME IS DETERMINED BY CONSIDERATION OF ALL THE CIRCUMSTANCES IN THE CASE VARYING WITHIN WIDE LIMITS. MINNEAPOLIS AND ST. LOUIS R. CO. V. COLUMBUS ROLLING MILL, 119 U.S. 149, 151; MILLIKEN- 1TOMLINSON CO. V. AMERICAN SUGAR REFINING CO., 9 F.2D 809; SECTION 54, WILLISTON ON CONTRACTS; DECISIONS OF THIS OFFICE OF NOVEMBER 25, 1941, B- 21841; FEBRUARY 2, 1942, B-23158; AND MARCH 30, 1942, B-24555, TO YOUR PREDECESSOR. MOREOVER, WHERE SUCH AN OFFER IS ACCEPTED WITHIN ANY PERIOD WHICH COULD BE REGARDED AS REASONABLE, COURTS HAVE ATTACHED GREAT SIGNIFICANCE TO A FAILURE ON THE PART OF THE OFFEROR TO MAKE KNOWN HIS INTENTION NOT TO BE BOUND. SEE SECTION 93, WILLISTON ON CONTRACTS, MILLIKEN-1TOMLINSON CO. V. AMERICAN SUGAR REFINING CO., SUPRA. AND, IN THAT CONNECTION, THERE IS NOTHING OF RECORD INDICATING THAT MR. BOLAND WHEN NOTIFIED OF THE ACCEPTANCE OF HIS PROPOSAL CONSIDERED SUCH ACCEPTANCE AS UNTIMELY OR THAT HE FILED ANY PROTEST AT THAT TIME WITH RESPECT TO THE DELAYED ACCEPTANCE. NOR IS THERE ANY EVIDENCE TO INDICATE THAT DURING THE INTERIM BETWEEN THE DATE OF THE PROPOSAL AND THE DATE OF ACCEPTANCE MR. BOLAND TOOK ANY ACTION TO WITHDRAW HIS OFFER TO LEASE. HENCE, IT MUST BE CONCLUDED THAT WHILE THE GOVERNMENT WOULD APPEAR TO HAVE ACCEPTED THE PROPOSAL WITHIN A REASONABLE TIME--- CONSIDERING THE NATURE OF THE AGREEMENT AND ATTENDANT CIRCUMSTANCES--- ANY POSSIBLE DEFECT IN SUCH ACCEPTANCE DUE TO THE INTERVENING LAPSE OF TIME WAS WAIVED BY THE PROPONENT BY REASON OF HIS FAILURE TO REGISTER A PROMPT PROTEST.

FURTHERMORE, WHILE APPARENTLY A FORMAL LEASE AS PROVIDED FOR IN THE ACCEPTED PROPOSAL HAS NOT BEEN EXECUTED, A BINDING CONTRACT BECAME EFFECTIVE UPON THE ACCEPTANCE OF SAID PROPOSAL. UNITED STATES V. NEW YORK AND PORTO RICO STEAMSHIP COMPANY, 239 U.S. 88; UNITED STATES V. PURCELL ENVELOPE COMPANY, 249 U.S. 313. MOREOVER, IT IS A WELL SETTLED PRINCIPAL OF LAW THAT VALID CONTRACTS ARE TO BE ENFORCED AND PERFORMED AS WRITTEN AND THE FACT THAT SUPERVENING OR UNFORESEEN CAUSES RENDER PERFORMANCE MORE BURDENSOME OR LESS PROFITABLE, OR EVEN OCCASION A LOSS, IS NOT SUFFICIENT TO EXCUSE PERFORMANCE OR TO ENTITLE A CONTRACTOR TO ADDITIONAL COMPENSATION. 19 COMP. GEN. 560, AND AUTHORITIES THEREIN CITED. ALSO, IT IS A WELL ESTABLISHED RULE THAT AGENTS AND OFFICERS OF THE GOVERNMENT HAVE NO AUTHORITY TO GIVE AWAY THE MONEY OR PROPERTY OF THE UNITED STATES, OR TO WAIVE CONTRACTUAL RIGHTS WHICH HAVE ACCRUED TO THE UNITED STATES, OR TO MODIFY EXISTING CONTRACTS WITHOUT A COMPENSATING BENEFIT TO THE GOVERNMENT. UNITED STATES V. AMERICAN SALES COMPANY, 27 F.2D 389, AFFIRMED 32 F.2D 141, CERTIORARI DENIED, 280 U.S. 574; PACIFIC HARDWARE COMPANY V. UNITED STATES, 49 C.1CLS. 327, AND BAUSCH AND LOMB OPTICAL CO. V. UNITED STATES, 78 C.1CLS. 584.

INSOFAR AS THE CONSTRUCTION OF THE BUILDING MAY HAVE BEEN DELAYED, OR THE COST OF THE BUILDING INCREASED, AS A RESULT OF THE ACTION OF THE CIVILIAN PRODUCTION ADMINISTRATION, IT IS SETTLED LAW THAT THE UNITED STATES, AS CONTRACTOR,"CANNOT BE HELD LIABLE FOR THE OBSTRUCTION OF PERFORMANCE OF A PARTICULAR CONTRACT RESULTING FROM ITS PUBLIC AND GENERAL ACTS AS A SOVEREIGN.' HOROWITZ V. UNITED STATES, 267 U.S. 458; 19 COMP. GEN. 903, 906; MAXWELL V. UNITED STATES, 3 F.2D 906, AFFIRMED 271 U.S. 647.

ACCORDINGLY, YOU ARE ADVISED THAT UPON THE BASIS OF THE FACTS REPORTED IN YOUR LETTER, THERE IS NO LEGAL BASIS FOR INCREASING THE RENTAL RATE IN THE ACCEPTED BID OF MR. BOLAND.