B-86076, JUNE 17, 1949, 28 COMP. GEN. 717

B-86076: Jun 17, 1949

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CONTRACTS - DAMAGES - ACTUAL - AWARD TO OTHER THAN LOW BIDDER ON BASIS OF EARLIER DELIVERY WHILE A GOVERNMENT CONTRACTOR HAD ACTUAL NOTICE THAT AWARD WAS MADE TO IT AT A HIGHER PRICE BECAUSE IT PROMISED EARLIER DELIVERY THAN THE LOW BIDDER. THE CONTRACTOR IS ENTITLED TO PAYMENT OF THE CONTRACT PRICE UNLESS ACTUAL DAMAGES WERE SUSTAINED BY THE GOVERNMENT AS A RESULT OF THE DELAY. 9 COMP. 1949: REFERENCE IS MADE TO LETTER OF THE ASSISTANT SECRETARY DATED MAY 4. IT WAS AGREED THAT THE CONTRACTOR WOULD COMPLETE DELIVERY OF THREE DISTRIBUTION TRANSFORMERS FOR THE HEART MOUNTAIN POWER PLANT WITHIN 320 CALENDAR DAYS AFTER RECEIPT OF NOTICE OF AWARD OF CONTRACT. TIME OF DELIVERY IS IMPORTANT. COMPLETE SHIPMENT FROM THE SHIPPING POINT OR POINTS IS URGENTLY NEEDED WITHIN TWO HUNDRED AND FORTY (240) CALENDAR DAYS AFTER DATE OF RECEIPT BY THE CONTRACTOR OF NOTICE OF AWARD OF CONTRACT.

B-86076, JUNE 17, 1949, 28 COMP. GEN. 717

CONTRACTS - DAMAGES - ACTUAL - AWARD TO OTHER THAN LOW BIDDER ON BASIS OF EARLIER DELIVERY WHILE A GOVERNMENT CONTRACTOR HAD ACTUAL NOTICE THAT AWARD WAS MADE TO IT AT A HIGHER PRICE BECAUSE IT PROMISED EARLIER DELIVERY THAN THE LOW BIDDER, IN THE ABSENCE OF ANY AGREEMENT--- EXPRESS OR IMPLIED--- IN THE SPECIFICATIONS ACCOMPANYING THE INVITATION FOR BIDS, OR IN THE CONTRACT, PROVIDING FOR THE ASSESSMENT OF DAMAGES IN THE EVENT OF LATE DELIVERY, DAMAGES INCIDENT TO THE CONTRACTOR'S FAILURE TO MAKE DELIVERY WITHIN THE SPECIFIED TIME MAY NOT BE ASSESSED ON THE BASIS OF THE DIFFERENCE BETWEEN THE CONTRACT PRICE AND THE LOW BID, AND, THEREFORE, THE CONTRACTOR IS ENTITLED TO PAYMENT OF THE CONTRACT PRICE UNLESS ACTUAL DAMAGES WERE SUSTAINED BY THE GOVERNMENT AS A RESULT OF THE DELAY. 9 COMP. GEN. 65, OVERRULED.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF THE INTERIOR, JUNE 17, 1949:

REFERENCE IS MADE TO LETTER OF THE ASSISTANT SECRETARY DATED MAY 4, 1949, WITH ENCLOSURES, REQUESTING A DECISION AS TO WHETHER THERE PROPERLY MAY BE DEDUCTED FROM AN AMOUNT OTHERWISE DUE THE STANDARD TRANSFORMER COMPANY THE SUM OF $271.22 BECAUSE OF DELAY IN SHIPMENT OF EQUIPMENT FURNISHED UNDER CONTRACT NO. 12R-17486, DATED MARCH 6, 1947, AS PROPOSED ON A FINAL PAYMENT VOUCHER IN THE AMOUNT OF $582.88 FORWARDED WITH YOUR LETTER.

UNDER THE TERMS OF THE CONTRACT, IT WAS AGREED THAT THE CONTRACTOR WOULD COMPLETE DELIVERY OF THREE DISTRIBUTION TRANSFORMERS FOR THE HEART MOUNTAIN POWER PLANT WITHIN 320 CALENDAR DAYS AFTER RECEIPT OF NOTICE OF AWARD OF CONTRACT. PARAGRAPH 17 OF THE SPECIFICATIONS, SUBSEQUENTLY MADE A PART OF THE CONTRACT, ADVISED PROSPECTIVE BIDDERS THAT:

17. DELIVERY--- URGENCY OF. TIME OF DELIVERY IS IMPORTANT, AND COMPLETE SHIPMENT FROM THE SHIPPING POINT OR POINTS IS URGENTLY NEEDED WITHIN TWO HUNDRED AND FORTY (240) CALENDAR DAYS AFTER DATE OF RECEIPT BY THE CONTRACTOR OF NOTICE OF AWARD OF CONTRACT. BIDDERS ARE REQUIRED TO STATE, IN THE BLANK PROVIDED THEREFOR IN THE SCHEDULE, A DEFINITE PERIOD OF TIME WITHIN WHICH SHIPMENT WILL BE MADE, AND THE TIME SO STATED, IF IN EXCESS OF THE TIME SPECIFIED ABOVE, MAY BE CONSIDERED IN MAKING AWARD OF CONTRACT. DELAYS DUE TO THE OPERATION OF THE NATIONAL PRIORITIES SYSTEM BECOMING EFFECTIVE SUBSEQUENT TO THE DATE OF THE BID WILL BE CONSIDERED TO BE DELAYS DUE TO UNFORESEEABLE CAUSES AND AND BEYOND THE CONTROL OF THE CONTRACTOR.

THE CONTRACT CONTAINED NO PROVISION FOR THE ASSESSMENT OF LIQUIDATED DAMAGES IN THE EVENT OF DELAY BEYOND THE TIME SPECIFIED FOR SHIPMENT.

IN MEMORANDUM DATED APRIL 19, 1949, FORWARDED WITH THE ASSISTANT SECRETARY'S LETTER, THE CHIEF ENGINEER, BUREAU OF RECLAMATION, DENVER, COLORADO, REPORTED THAT FOUR BIDS WERE RECEIVED FOR FURNISHING THE TRANSFORMERS AS FOLLOWS:

DELIVERY COST

TO GOVERNMENT DELIVERY (DAYS) ALLIS-CHALMERS MFG. CO ---- -- $3,396.09 805 ( ITEM 1).

525 ( ITEM 2). GENERAL ELECTRIC CO ----------- (1) 3,490.65 540 ( ITEM 1).

690 ( ITEM 2). THE STANDARD TRANSFORMER CO -- (2) 3,885.85 320 ( BOTH ITEMS). WAGNER ELECTRIC CORP ---------- 4,109.77370 ( BOTH ITEMS).

(1) INCLUDES MAXIMUM ESCALATION OF 30 PERCENT.

(2) INCLUDES MAXIMUM ESCALATION OF 15 PERCENT.

IN SUPPORT OF THE AWARD TO THE STANDARD TRANSFORMER COMPANY, THE CHIEF ENGINEER STATED THAT, AT THE TIME BIDS WERE EVALUATED, THE SCHEDULE FOR CONSTRUCTION OF THE HEART MOUNTAIN POWER PLANT AND FOR THE INSTALLATION OF EQUIPMENT WAS SUCH THAT THE TRANSFORMERS WOULD CONSTITUTE THE FINAL INSTALLATION PRIOR TO ENERGIZING THE SYSTEM; THAT IT WAS APPARENT THAT ANY DELAY IN THE INSTALLATION OF THESE TRANSFORMERS WOULD DELAY THE DELIVERY OF POWER; THAT IT WAS ESTIMATED THAT THE LOSS IN REVENUE TO THE GOVERNMENT WOULD BE $300 PER DAY FOR EACH DAY OF DELAY IN THE DELIVERY OF POWER; AND THAT " ON THIS BASIS THE SAVINGS TO THE GOVERNMENT BY AWARD TO THE STANDARD TRANSFORMER COMPANY WOULD FAR EXCEED THE DIFFERENCE BETWEEN THIS BID AND EITHER THE LOW OR SECOND LOW BID.' HENCE, THE CONTRACT WAS AWARDED TO THE STANDARD TRANSFORMER COMPANY ON THE BASIS OF ITS OFFER TO MAKE DELIVERY WITHIN 320 DAYS. IN THE NOTICE OF AWARD THE CONTRACTOR WAS ADVISED, IN PERTINENT PART, AS FOLLOWS:

YOU ARE NOT THE LOWEST BIDDER UNDER THIS SPECIFICATION, BUT THE MATERIAL IS URGENTLY NEEDED, AND AWARD IS BEING MADE TO YOU ON THE BASIS OF YOUR DELIVERY PROMISE. YOU WILL BE EXPECTED TO MAINTAIN YOUR PROMISE TO SHIP WITHIN THE 320 CALENDAR DAYS STATED IN YOUR BID.

THE CHIEF ENGINEER REPORTED THAT THE CONTRACTOR RECEIVED NOTICE OF AWARD ON MARCH 10, 1947, THEREBY FIXING THE FINAL DATE FOR COMPLETE SHIPMENT OF THE EQUIPMENT COVERED BY BOTH ITEMS NOS. 1 AND 2 AS JANUARY 24, 1948; THAT SHIPMENT OF THE EQUIPMENT COVERED BY ITEM NO. 1 WAS COMPLETED ON OCTOBER 15, 1948, OR 265 DAYS LATE; AND THAT SHIPMENT OF THE EQUIPMENT COVERED BY ITEM NO. 2 WAS COMPLETED ON JUNE 10, 1948, OR 138 DAYS LATE. BY LETTER DATED MAY 10, 1948, AFTER THE CONTRACTOR'S REPRESENTATIVE HAD INDICATED THAT THERE WOULD BE A DELAY OF AT LEAST 112 DAYS IN SHIPMENT OF THE EQUIPMENT, THE CONTRACTOR'S ATTENTION WAS CALLED THE FACT THAT IT WAS NOT THE LOW BIDDER; THAT IT WAS GIVEN THE AWARD BECAUSE OF A PROMISED EARLIER DELIVERY DATE; AND THAT, IN ACCORDANCE THE RULE STATED IN 9 COMP. GEN. 65, IT WOULD BE NECESSARY TO DEDUCT FROM THE PAYMENTS BECOMING DUE UNDER THE CONTRACT A PROPORTIONATE AMOUNT OF THE DIFFERENCE BETWEEN THE LOW BID AND THE CONTRACTOR'S BID, BASED ON THE RATIO BETWEEN THE NUMBER OF DAYS' DELAY IN MAKING DELIVERY AND THE DIFFERENCE IN TIME STATED IN THE CONTRACTOR'S BID AND THAT OF THE LOW BIDDER. IN LETTER DATED MAY 19, 1948, THE CONTRACTOR ADVISED THAT IT FOUND NOTHING IN THE BID FORMS WHICH WOULD JUSTIFY THE PROPOSED REDUCTION IN THE PRICE OF THE TRANSFORMERS AND THAT IT WOULD NOT HAVE BID ON TRANSFORMERS SUBJECT TO SUCH A CLAUSE.

THE CHIEF ENGINEER REPORTED THAT CONSTRUCTION OF THE HEART MOUNTAIN POWER PLANT WAS NOT COMPLETED UNTIL JULY 1948, AND THAT THE GENERATORS WERE NOT INSTALLED UNTIL SEPTEMBER 1948. HE REPORTED FURTHER THAT THE DISTRICT POWER MANAGER, CODY, WYOMING, IN A MEMORANDUM DATED FEBRUARY 23, 1949, CONCLUDED THAT BECAUSE OF THE DELAY IN COMPLETION OF THE HEART MOUNTAIN POWER PLANT AND THE FURTHER DELAY INCIDENT TO THE LATE DELIVERY OF OTHER EQUIPMENT NOT HERE INVOLVED, THE FAILURE TO MAKE SHIPMENT OF THE TRANSFORMERS WITHIN THE TIME SPECIFIED DID NOT DELAY COMPLETION OF THE POWER PLANT OR RESULT IN ACTUAL DAMAGES TO THE GOVERNMENT.

THE ESTABLISHED RULE IS THAT THE MEASURE OF DAMAGES FOR DELAY IN PERFORMANCE OF A CONTRACT BEYOND THE TIME AGREED UPON IS THE LOSS SUSTAINED AS A RESULT OF THE CONTRACTUAL BREACH. SEE UNITED STATES. BEHAN, 110 U.S. 338; UNITED STATES V. WYCKOFF PIPE AND CREOSOTING CO., 271 U.S. 263; THE GLOBE REFINING CO. V. LANDA COTTON OIL CO., 190 U.S. 540, 543; GRAND TRUNK WESTERN R. CO. V. H. W. NELSON CO., 116 F.2D 823, REHEARING DENIED, 118 F.2D 252; WISCONSIN BRIDGE AND 1. CO. V. ALPENA, 238 MICH. 164, 213 N.W. 93, 51 A.L.R. 1209; AND KOLKER V. UNITED STATES, 40 F.1SUPP. 972. IN WISCONSIN BRIDGE AND I. CO. V. ALPENA, SUPRA, IT WAS HELD THAT THE DAMAGES CHARGEABLE AGAINST A CONTRACTOR ON ACCOUNT OF DELAY IN PERFORMANCE COULD NOT BE BASED UPON THE DIFFERENCE BETWEEN THE CONTRACT PRICE AND AN UNACCEPTED ALTERNATIVE BID BY THE SAME CONTRACTOR TO DO THE WORK FOR A LESS PRICE IF GIVEN A LONGER PERIOD OF TIME FOR PERFORMANCE. IN THE KOLKER CASE, WHICH WAS AN ACTION TO RECOVER BALANCES ALLEGEDLY DUE ON CONTRACTS WITH THE GOVERNMENT CONTAINING NO PROVISION FOR LIQUIDATED DAMAGES IN THE EVENT OF DELAY IN DELIVERY, IT WAS HELD THAT THE DIFFERENCE BETWEEN THE CONTRACTOR'S BID AND A LOW BID FOR MATERIALS WHICH WAS REJECTED BY THE GOVERNMENT COULD NOT BE ACCEPTED AS THE MEASURE OF THE GOVERNMENT'S DAMAGES FOR DELAY IN DELIVERY.

IN THE PRESENT CASE, IT IS SHOWN THAT WHILE THE CONTRACTOR HAD ACTUAL NOTICE THAT AWARD WAS MADE TO IT AT A HIGHER PRICE BECAUSE IT PROMISED EARLIER DELIVERY THAN THE LOW BIDDER, NEITHER THE SPECIFICATIONS ACCOMPANYING THE INVITATION FOR BIDS NOR THE CONTRACT PROVIDED FOR THE DEDUCTION OF ANY AMOUNT IN THE EVENT OF A LATE DELIVERY. HAD THE PARTIES INTENDED THE CONTRACT TO PROVIDE FOR ANY SUCH ASSESSMENT IN HE EVENT OF DELAY, A SPECIFIC PROVISION TO THAT EFFECT SHOULD HAVE BEEN MADE. IN THE ABSENCE OF ANY SUCH AGREEMENT ON THAT SCORE--- EITHER EXPRESS OR IMPLIED-- - AND UPON THE AUTHORITY OF WISCONSIN BRIDGE AND I. CO. V. ALPENA, SUPRA, AND KOLKER V. UNITED STATES, SUPRA, DAMAGES FOR THE DELAY IN SHIPMENT SHOULD NOT BE COMPUTED ON THE BASIS SET FORTH IN 9 COMP. GEN. 65, AND THAT DECISION WILL NO LONGER BE FOLLOWED. ACCORDINGLY, THE CONTRACTOR IS ENTITLED TO PAYMENT AT THE PRICES STATED IN THE CONTRACT UNLESS ACTUAL DAMAGES WERE SUSTAINED BY THE UNITED STATES AS A RESULT OF THE DELAY FOR WHICH THE GOVERNMENT IS ENTITLED TO BE COMPENSATED. THEREFORE, IF IT BE ADMINISTRATIVELY DETERMINED THAT NO ACTUAL DAMAGES WERE SUSTAINED BY THE UNITED STATES AS A RESULT OF THE DELAY AND A CERTIFICATE TO THAT EFFECT IS PLACED ON OR ATTACHED TO THE FINAL PAYMENT VOUCHER, THIS OFFICE WILL NOT OBJECT THERETO IN THE AUDIT, IF OTHERWISE CORRECT. CF. 23 COMP. GEN. 717.