B-63216, MARCH 3, 1947, 26 COMP. GEN. 647

B-63216: Mar 3, 1947

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1947: REFERENCE IS MADE TO YOUR LETTER OF JANUARY 21. THE CONTRACT WAS EXECUTED JULY 12. WORK WAS STARTED ON THE SAME DATE AND WAS COMPLETED ON DECEMBER 22. COPY OF THE AFORESAID DETERMINATION IS ATTACHED. I HAVE ADMINISTRATIVELY DETERMINED TO ADOPT. ARE AS FOLLOWS: 1. BIDS WERE RECEIVED ON JUNE 28. THE CONTRACT WAS EXECUTED ON JULY 12. NEITHER MACDOUGALD CONSTRUCTION COMPANY NOR ANY OTHER BIDDER WAS NOTIFIED OF THE AFORESAID AMENDMENT TO THE PREFERENCE RATING. 7. THE PROGRESS OF THE WORK WAS DELAYED BY REASON OF THE INABILITY OF THE CONTRACTOR TO OBTAIN THE LUMBER ELIMINATED BY THE AFORESAID AMENDMENT TO THE PREFERENCE RATING. 8. THE LUMBER COULD HAVE BEEN READILY OBTAINED. TO THIS EXTENT THE DELAY IN THE PROGRESS OF THE WORK WOULD NOT HAVE OCCURRED.

B-63216, MARCH 3, 1947, 26 COMP. GEN. 647

CONTRACTS - DAMAGES OCCASIONED BY DELAYS RESULTING FROM GOVERNMENT'S FAILURE TO FURNISH PREFERENCE RATING IN THE ABSENCE OF ANY WARRANTY OR GUARANTY RESPECTING A WAR PRODUCTION BOARD PREFERENCE RATING IN A CONSTRUCTION CONTRACT, A NOTATION OF A RATING --- UNDER WHICH, IN ITS ORIGINAL FORM, A CONTRACTOR READILY COULD OBTAIN MATERIALS BUT WHICH HAD BEEN AMENDED TO ELIMINATE CERTAIN LUMBER ITEMS PRIOR TO SUBMISSION OF THE ACCEPTED BID--- ON THE COVER OF SPECIFICATIONS ISSUED TO BIDDERS DOES NOT CONSTITUTE A CONTRACT PROVISION THAT ANY PARTICULAR RATING WOULD BE GRANTED OR THAT SUCH PRIORITY ORDERS WOULD BE GRANTED AS WOULD ENABLE THE CONTRACTOR TO COMPLETE THE WORK WITHIN THE CONTRACT PERIOD. EVEN THOUGH A NOTATION OF A WAR PRODUCTION BOARD PREFERENCE RATING ON THE COVER OF BID SPECIFICATIONS FOR A CONSTRUCTION PROJECT BE REGARDED AS OBLIGATING THE GOVERNMENT TO FURNISH THE EXACT RATING REFERRED TO SO THAT THE CONTRACTOR READILY COULD OBTAIN ALL NECESSARY MATERIALS, THE GOVERNMENT, UPON FAILURE TO FURNISH SUCH RATING, WOLD NOT BE LIABLE UNDER THE PROVISIONS OF THE CONSTRUCTION CONTRACT INVOLVED FOR DAMAGES RESULTING FROM A DELAY OCCASIONED THEREBY, BUT WOULD BE REQUIRED ONLY TO RELIEVE THE CONTRACTOR FROM PAYMENT OF LIQUIDATED DAMAGES BY REASON OF THE DELAY.

COMPTROLLER GENERAL WARREN TO THE ADMINISTRATOR, FEDERAL WORKS AGENCY, MARCH 3, 1947:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 21, 1947, AS FOLLOWS:

UNDER AUTHORITY OF TITLE II OF THE LANHAM ACT, THE UNITED STATES OF AMERICA, ACTING THROUGH THE FEDERAL WORKS ADMINISTRATOR, ENTERED INTO CONTRACT NUMBERED WAAT 899 WITH THE MACDOUGALD CONSTRUCTION COMPANY, FOR THE CONSTRUCTION OF HOSPITAL FACILITIES AT ANNISTON, ALABAMA ( F.W.A. PROJECT, ALA. 1-115) IN THE LUMP SUM AMOUNT OF $390,717. THE CONTRACT WAS EXECUTED JULY 12, 1943; WORK WAS STARTED ON THE SAME DATE AND WAS COMPLETED ON DECEMBER 22, 1944.

THE CONTRACTOR FILED A CLAIM FOR DAMAGES RESULTING FROM DELAYS ALLEGEDLY CAUSED BY THE GOVERNMENT. AFTER CONSIDERING THIS CLAIM, THE DIVISION ENGINEER OF THIS AGENCY, ON SEPTEMBER 5, 1945, DELIVERED TO THE CONTRACTOR, A WRITTEN DETERMINATION EMBODYING, (A) FINDINGS OF FACT, AND (B) CONCLUSIONS AND DECISIONS DISALLOWING THE CLAIM IN ITS ENTIRETY. COPY OF THE AFORESAID DETERMINATION IS ATTACHED.

FROM THIS DETERMINATION, THE CONTRACTOR APPEALED TO THE FEDERAL WORKS ADMINISTRATOR, AS HEAD OF THE AGENCY. A REPRESENTATIVE OF THE ADMINISTRATOR, SPECIALLY APPOINTED TO ACT UPON THE APPEAL, GRANTED THE CONTRACTOR A HEARING ON NOVEMBER 13, 1945, AND THEREAFTER ON DECEMBER 13, 1945, RENDERED HIS WRITTEN REPORT, RECOMMENDING THAT THE CONTRACTOR'S CLAIM BE DISALLOWED IN ITS ENTIRETY. I ATTACH COPIES OF THIS REPORT AND OF A MEMORANDUM, DATED DECEMBER 14, 1945, FROM THE GENERAL COUNSEL OF THIS AGENCY PRESENTING HIS VIEWS ON THE REPORT.

AFTER CONSIDERATION OF THE DOCUMENTS AFORESAID, I HAVE ADMINISTRATIVELY DETERMINED TO ADOPT, AS MY OWN, THE AFORESAID REPORT OF MY SPECIAL REPRESENTATIVE, AS TO ALL ASPECTS OF THE CONTRACTOR'S CLAIM EXCEPT THAT PORTION RELATING TO THE PREFERENCE RATING PROMISED BY THE GOVERNMENT.

ON THIS QUESTION, THE FACTS, AS FOUND BY THE DIVISION ENGINEER AND BY THE SPECIAL REPRESENTATIVE, ARE AS FOLLOWS:

1. THE COVER OF THE SPECIFICATIONS (FORMING PART OF THE CONTRACT DOCUMENTS) DELIVERED BY THE GOVERNMENT TO ALL BIDDERS, INCLUDING MACDOUGALD CONSTRUCTION COMPANY BORE THE WORDS;

" PREFERENCE RATING AA-4

" UNDER PREFERENCE RATING ORDER P-19-H

" SERIAL NO. 40122.'

2. THE CONTRACT DOCUMENTS CONTAIN NO OTHER REFERENCE TO PREFERENCE RATINGS.

3.THE WAR PRODUCTION BOARD HAD ISSUED THE AFORESAID PREFERENCE RATING ON FEBRUARY 10, 1943, AND HAD AMENDED IT ON MAY 24, 1943, SO AS TO ELIMINATE CERTAIN LUMBER.

4. BIDS WERE RECEIVED ON JUNE 28, 1943, AND THE CONTRACT WAS EXECUTED ON JULY 12, 1943. 8 5. THE CONTRACT DOCUMENTS, AT ALL TIMES PRIOR TO AND INCLUDING THE DATE OF EXECUTION OF THE CONTRACT, REQUIRED THE CONTRACTOR TO FURNISH ALL MATERIALS COVERED BY SAID PREFERENCE RATING IN ITS ORIGINAL FORM, AND DID NOT EXCLUDE FROM SUCH REQUIREMENTS THE LUMBER ELIMINATED BY THE AFORESAID AMENDMENT TO THE PREFERENCE RATING.

6. PRIOR TO THE EXECUTION OF THE CONTRACT, NEITHER MACDOUGALD CONSTRUCTION COMPANY NOR ANY OTHER BIDDER WAS NOTIFIED OF THE AFORESAID AMENDMENT TO THE PREFERENCE RATING.

7. THE PROGRESS OF THE WORK WAS DELAYED BY REASON OF THE INABILITY OF THE CONTRACTOR TO OBTAIN THE LUMBER ELIMINATED BY THE AFORESAID AMENDMENT TO THE PREFERENCE RATING.

8. HAD THE PREFERENCE RATING REMAINED IN ITS ORIGINAL FORM, THE LUMBER COULD HAVE BEEN READILY OBTAINED, AND TO THIS EXTENT THE DELAY IN THE PROGRESS OF THE WORK WOULD NOT HAVE OCCURRED.

THE GENERAL COUNSEL OF THIS AGENCY HAS RENDERED HIS OPINION THAT THESE FACTS CONSTITUTE, IN LAW, A CONTRACTUAL OBLIGATION BY THE GOVERNMENT TO FURNISH A SPECIFIED PRIORITY, FOR THE BREACH OF WHICH THE GOVERNMENT IS LIABLE IN CONTRACT. I AGREE WITH THIS OPINION.

I AM AWARE, OF COURSE, OF THE FAMILIAR DOCTRINE THAT THE GOVERNMENT, WHEN ACTING IN A CONTRACTUAL CAPACITY, IS NOT LIABLE IN DAMAGES FOR ITS ACTIONS AS A SOVEREIGN.

MAXWELL V. UNITED STATES, 3 F/2D) 906 AFF-D 271 U.S. 647.

GOTHWAITE V. UNITED STATES, 102 CT.CL. 400-401.

J.F. BARBOUR AND SONS V. UNITED STATES ( COURT OF CLAIMS NOV. 5, 1945) 63 F.1SUPP. 349.

THAT DOCTRINE, HOWEVER, IS NOT APPLICABLE TO THE FACTS HERE. AS STATED IN THE SPECIAL REPRESENTATIVE'S REPORT, THE ABOVE NOTED QUOTATION ON THE COVER OF THE SPECIFICATIONS "MUST HAVE BEEN INTENDED TO HAVE AND DID HAVE SOME SIGNIFICANCE.' TO MY MIND THE SIGNIFICANCE IS CLEAR. THE NOTATION WAS INTENDED TO ASSURE THE CONTRACTOR THAT ALL MATERIALS, REQUIRED BY THE SPECIFICATIONS, COULD READILY BE OBTAINED UNDER THE SPECIFIED PREFERENCE RATING. AND INDEED THAT WAS TRUE WITH RESPECT TO THE PREFERENCE RATING IN ITS ORIGINAL FORM.

THE GOVERNMENT, IT SEEMS TO ME, HAS THE CAPACITY TO CONTRACT WITH ANOTHER ON RESPECT TO THE PERFORMANCE OF ITS SOVEREIGN ACTS. AND EVEN THOUGH THE CONTROL OF PREFERENCE RATINGS WAS VESTED IN THE W.P.B. RATHER THAN IN THE FEDERAL WORKS ADMINISTRATOR, I CONCEIVE THAT THE FEDERAL WORKS ADMINISTRATOR, WAS AUTHORIZED TO PERFECT ARRANGEMENTS WITH THE W.P.B. RESPECTING PREFERENCE RATINGS, AND TO REPRESENT TO OTHERS THAT HE HAD DONE SO. ON THIS POINT, A DICTUM APPEARING IN THE OPINION RENDERED BY THE COURT OF CLAIMS IN J. F. BARBOUR AND SONS V. THE UNITED STATES, ( SUPRA) IS MOST PERTINENT. ON THE FACTS OF THAT CASE, THE COURT HELD THAT THE GOVERNMENT WAS NOT LIABLE. BUT IN EXPLAINING ITS DECISION, THE COURT SAID, INTER ALIA,"THERE WAS NO PROVISION IN THE CONTRACT THAT ANY PARTICULAR PRIORITY RATING WOULD BE GRANTED FOR THIS PROJECT, OR THAT PLAINTIFF WOULD BE GRANTED SUCH PRIORITY ORDERS AS WOULD ENABLE IT TO COMPLETE THE BUILDING WITHIN THE CONTRACT PERIOD OF 210 DAYS.'

THERE WAS SUCH A PROVISION IN THE INSTANT CONTRACT.

ON THE AMOUNT OF DAMAGE, THE CONTRACTOR CLAIMS THE SUM OF $93,112.15 AS EVIDENCED BY HIS SUBMISSION ON THIS POINT (COPY ATTACHED). IN A SPECIAL REPORT (COPY ATTACHED) THE DIVISION ENGINEER CONCLUDED THAT THE CORRECT AMOUNT OF DAMAGE RESULTING FROM FAILURE TO FURNISH THE PROMISED PREFERENCE RATING IS $22,808.62. IT IS THIS LESSER AMOUNT, THAT I HAVE ADMINISTRATIVELY DETERMINED TO BE PROPERLY DUE AND OWING TO THE CONTRACTOR.

AS THERE DOES NOT APPEAR ANY REPORTED CASE, OR DECISION OF YOUR OFFICE, PRECISELY DECISIVE OF THE QUESTION, I SHOULD LIKE TO INQUIRE, BEFORE MAKING PAYMENT TO THE CONTRACTOR, WHETHER YOUR OFFICE WOULD BE REQUIRED TO OBJECT TO SUCH PAYMENT.

AT THE OUTSET IT MAY BE POINTED OUT THAT, FROM YOUR STATEMENT OF THE FACTS, THE CLAIM OF THE MACDOUGALD CONSTRUCTION COMPANY APPEARS TO BE ONE FOR UNLIQUIDATED DAMAGES ALLEGED TO HAVE BEEN SUSTAINED BY REASON OF THE GOVERNMENT'S MISREPRESENTATION RESPECTING THE PREFERENCE RATING ASSIGNED TO THE CONTRACT WORK, AND IT IS WELL-SETTLED THAT SUCH CLAIMS FOR UNLIQUIDATED DAMAGES ARE NOT FOR SETTLEMENT BY THE HEAD OF THE DEPARTMENT CONCERNED. WILLIAM E. CRAMP SONS CO. V. UNITED STATES, 216 U.S. 494; 33 OP. ATTY. GEN. 354. ALSO SEE 31 U.S.C. 71; 21 COMP. DEC. 134; ARTHUR W. LANGEVIN V. UNITED STATES, 100 C.1CLS. 15.

THE MAIN CONTENTION IS THAT SINCE REFERENCE WAS MADE ON THE COVER OF THE SPECIFICATIONS TO A CERTAIN PREFERENCE RATING ISSUED BY THE WAR PRODUCTION BOARD UNDER WHICH THE CONTRACTOR READILY COULD OBTAIN, AMONG OTHER ITEMS, CERTAIN LUMBER--- WHICH PREFERENCE RATING LATER WAS AMENDED TO ELIMINATE THE ITEM OF LUMBER--- THERE WAS A CONTRACTUAL OBLIGATION ON THE PART OF THE GOVERNMENT TO FURNISH A SPECIFIED PRIORITY, FOR THE BREACH OF WHICH THE GOVERNMENT IS LIABLE IN DAMAGES. THE ARGUMENT IS MADE THAT THE PROGRESS OF THE WORK WAS DELAYED BY REASON OF THE INABILITY OF THE CONTRACTOR TO OBTAIN THE LUMBER ELIMINATED BY THE AMENDMENT TO THE PREFERENCE RATING AND THAT HAD THE PREFERENCE RATING REMAINED IN ITS ORIGINAL FORM, THE LUMBER COULD HAVE BEEN READILY OBTAINED, AND TO THIS EXTENT THE DELAY IN THE PROGRESS OF THE WORK WOULD NOT HAVE OCCURRED.

IN THIS CONNECTION, THERE IMMEDIATELY COMES TO ATTENTION THE FACT OF THE ABSENCE OF ANY WORDS OF WARRANTY OR GUARANTEE IN THE CONTRACT WHICH RELATE TO ANY PREFERENCE RATINGS OR PRIORITIES, AS IT IS NOTED THAT WITH THE EXCEPTION OF THE BARE NOTATION ON THE COVER OF THE SPECIFICATIONS THERE WAS NO OTHER REFERENCE IN THE CONTRACT DOCUMENTS TO ANY PREFERENCE RATING. CF. JOSEPH A. HOLPUCH CO. V. UNITED STATES, DECIDED BY THE SUPREME COURT OF THE UNITED STATES, MAY 20, 1946, 328 U.S. 234. AT THIS POINT IT SEEMS NECESSARY TO RELATE CERTAIN FACTS HAVING A DIRECT BEARING ON THE MATTER. THE RECORD INDICATES THAT THE REFERRED-TO PREFERENCE RATING WAS ISSUED ON FEBRUARY 12, 1943; THAT INVITATIONS FOR BIDS WERE ISSUED MAY 14, 1943; THAT ON MAY 24, 1943, THE PREFERENCE RATING WAS AMENDED ELIMINATING CERTAIN LUMBER; THAT ON JUNE 28, 1943, THE CONTRACTOR SUBMITTED ITS BID; AND THAT ON JULY 12, 1943, THE CONTRACT HERE INVOLVED WAS EXECUTED. THUS IT IS SEEN THAT AT THE TIME CONTRACTOR SUBMITTED ITS BID THERE WAS NO PREFERENCE RATING IN EFFECT RELATING TO THE LUMBER IN CONTROVERSY AND HAD NOT BEEN FOR MORE THAN A MONTH PRIOR THERETO, AND THIS FACT COULD EASILY HAVE BEEN ASCERTAINED BY THE CONTRACTOR. IN VIEW THEREOF, IT IS CLEAR THAT THERE WAS NO PROVISION IN THE CONTRACT THAT ANY PARTICULAR PRIORITY RATING WOULD BE GRANTED FOR THIS PROJECT, OR THAT CONTRACTOR WOULD BE GRANTED SUCH PRIORITY ORDERS AS WOULD ENABLE IT TO COMPLETE THE WORK WITHIN THE CONTRACT PERIOD. CF. J. F. BARBOUR AND SONS V. UNITED STATES, 63 F.1SUPP. 349.

BUT, EVEN IF IT COULD BE HELD THAT THE AFORESAID NOTATION ON THE SPECIFICATIONS CONSTITUTED A PROVISION IN THE CONTRACT THAT THE GOVERNMENT WOULD FURNISH THE EXACT PREFERENCE RATING THERE REFERRED TO, IT IS NOT BELIEVED THAT THE FAILURE TO FURNISH SAID RATING COULD IMPOSE ANY LIABILITY ON THE GOVERNMENT FOR DAMAGES CAUSED THE CONTRACTOR BY REASON OF SUCH FAILURE. WITH THAT PROVISION IN THE CONTRACT THERE IS NOT PERCEIVED ANY MATERIAL DIFFERENCE BETWEEN SUCH A CONTRACT AND A CONTRACT PROVIDING FOR THE FURNISHING BY THE GOVERNMENT OF CERTAIN SPECIFIED MATERIALS OR ONE PROVIDING THAT THE GOVERNMENT SHALL PERFORM CERTAIN CONSTRUCTION WORK PREPARATORY TO WORK BY THE CONTRACTOR. THE COURTS HAVE HELD THAT THE GOVERNMENT IS NOT LIABLE FOR DAMAGES CAUSED A CONTRACTOR BY REASON OF THE GOVERNMENT'S FAILURE TO MAKE THE WORK AVAILABLE, UNITED STATES V. THE HOWARD P. FOLEY COMPANY, INC., DECIDED BY THE SUPREME COURT OF THE UNITED STATES NOVEMBER 25, 1946, 329 U.S. 64, OR THE FAILURE TO DELIVER PROMPTLY NECESSARY PROTECTOR UNITS, J. J. KELLY COMPANY V. UNITED STATES, NO. 46032, DECIDED BY THE COURT OF CLAIMS JANUARY 6, 1947, AND CITING THE FOLEY CASE, SUPRA.

THE CONTRACTS INVOLVED IN THOSE DECISIONS, AS HERE, CONTAINED ARTICLE 9 ENTITLED " DALAYS-DAMAGES.' IN UNITED STATES V. FOLEY, SUPRA, THE COURT SAID:

IN NO SINGLE WORD, CLAUSE, OR SENTENCE IN THE CONTRACT DOES THE GOVERNMENT EXPRESSLY COVENANT TO MAKE THE RUNWAYS AVAILABLE TO RESPONDENT AT ANY PARTICULAR TIME. CF. U.S. V. BLAIR, 321 U.S. 730, 733-734. IT IS SUGGESTED THAT THE OBLIGATION OF RESPONDENT TO COMPLETE THE JOB IN 120 DAYS CAN BE INVERTED INTO A PROMISE BY THE GOVERNMENT NOT TO CAUSE PERFORMANCE TO BE DELAYED BEYOND THAT TIME BY ITS NEGLIGENCE. BUT EVEN IF THIS PROVISION STANDING ALONE COULD BE STRETCHED TO MEAN THAT THE GOVERNMENT OBLIGATED ITSELF TO EXERCISE THE HIGHEST DEGREE OF DILIGENCE, AND THE UTMOST GOOD FAITH IN EFFORTS TO MAKE THE RUNWAYS PROMPTLY AVAILABLE, THE FACTS OF THIS CASE WOULD SHOW NO BREACH OF SUCH AN UNDERTAKING. * * *

* * * ARTICLE 9 OF THE CONTRACT ENTITLED " DALAYS-DAMAGES," SET OUT A PROCEDURE TO GOVERN BOTH PARTIES IN CASE OF RESPONDENT'S DELAY IN COMPLETION, WHETHER SUCH DELAY WAS CAUSED BY RESPONDENT, THE GOVERNMENT, OR OTHER CAUSES. IF DELAY WERE CAUSED BY RESPONDENT, THE GOVERNMENT COULD TERMINATE THE CONTRACT, TAKE OVER THE WORK, AND HOLD RESPONDENT AND ITS SURETIES LIABLE. OR, IN THE ALTERNATIVE, THE GOVERNMENT COULD COLLECT LIQUIDATED DAMAGES. IF, ON THE OTHER HAND, DELAY WERE DUE TO "ACTS OF THE GOVERNMENT" OR OTHER SPECIFIED EVENTS, INCLUDING "UNFORESEEABLE CAUSES," PROCEDURE WAS OUTLINED FOR EXTENDING THE TIME IN WHICH RESPONDENT WAS REQUIRED TO COMPLETE ITS CONTRACT, AND RELIEVING HIM FROM PENALTIES OF CONTRACT TERMINATION OR LIQUIDATED DAMAGES.

IN THE CROOK ( CROOK V. UNITED STATES, 270 U.S. 4) AND RICE ( UNITED STATES V. RICE, 317 U.S. 61) CASES WE HELD THAT THE GOVERNMENT COULD NOT BE HELD LIABLE FOR DELAY IN MAKING ITS WORK AVAILABLE TO CONTRACTORS UNLESS THE TERMS OF THE CONTRACT IMPOSED SUCH LIABILITY. THOSE CONTRACTS, PRACTICALLY IDENTICAL WITH THE ONE HERE, WERE HELD TO IMPOSE NONE. SEE ALSO U.S. V. BLAIR, SUPRA. * * * THE QUESTION ON WHICH ALL THESE CASES TURN IS, DID THE GOVERNMENT OBLIGATE ITSELF TO PAY DAMAGES TO A CONTRACTOR SOLELY BECAUSE OF DELAY IN MAKING THE WORK AVAILABLE? WE HOLD AGAIN THAT IT DID NOT FOR THE REASONS ELABORATED IN THE CROOK AND RICE DECISIONS.

THAT CASE, IN ALL LEGAL ASPECTS, APPEARS DIRECTLY IN POINT HERE. OTHER WORDS, ASSUMING A PROVISION IN THE CONTRACT TO FURNISH A SPECIFIED PREFERENCE RATING, IN THE EVENT OF FAILURE TO FURNISH SUCH A PREFERENCE RATING, THE MOST THE GOVERNMENT WOULD BE REQUIRED TO DO WOULD BE TO RELIEVE THE CONTRACTOR FROM THE PAYMENT OF LIQUIDATED DAMAGES BY REASON OF ANY DELAY CAUSED THEREBY. ACCORDINGLY, I HAVE TO ADVISE THAT, ON THE PRESENT RECORD, THE PROPOSED PAYMENT IS NOT AUTHORIZED.