B-98785, NOVEMBER 17, 1950, 30 COMP. GEN. 191

B-98785: Nov 17, 1950

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CONTRACTS - DAMAGES - ACTUAL - DELAYS IN DELIVERY WHERE DUE TO THE FAILURE OF A CONTRACTOR TO MAKE DELIVERY OF TRANSFORMERS AND LIGHTNING ARRESTERS WITHIN THE TIME STIPULATED IN THE CONTRACT IT WAS NECESSARY FOR THE GOVERNMENT TO PURCHASE ELECTRIC ENERGY AND INCUR EXPENSES FOR LABOR AND MATERIALS TO MAKE MAXIMUM USE OF EXISTING FACILITIES. THE ADDITIONAL EXPENSES SO INCURRED WERE SUCH AS MIGHT REASONABLY HAVE BEEN CHARGEABLE TO THE CONTRACTOR NOTWITHSTANDING THE CONTRACT DID NOT CONTAIN PROVISIONS FOR EITHER LIQUIDATED OR ACTUAL DAMAGES. 1950: REFERENCE IS MADE TO A LETTER DATED OCTOBER 13. REQUESTING DECISION WHETHER THE BUREAU OF RECLAMATION WAS AUTHORIZED TO DEDUCT FROM SUMS OTHERWISE DUE THE STANDARD TRANSFORMER COMPANY AN AMOUNT SUFFICIENT TO COVER ACTUAL DAMAGES SUSTAINED BY THE GOVERNMENT AS A DIRECT AND PROXIMATE RESULT OF THE FAILURE OF SAID COMPANY TO DELIVER CERTAIN TRANSFORMERS AND LIGHTING ARRESTERS WITHIN THE TIME STIPULATED IN CONTRACT NO. 12R 17462.

B-98785, NOVEMBER 17, 1950, 30 COMP. GEN. 191

CONTRACTS - DAMAGES - ACTUAL - DELAYS IN DELIVERY WHERE DUE TO THE FAILURE OF A CONTRACTOR TO MAKE DELIVERY OF TRANSFORMERS AND LIGHTNING ARRESTERS WITHIN THE TIME STIPULATED IN THE CONTRACT IT WAS NECESSARY FOR THE GOVERNMENT TO PURCHASE ELECTRIC ENERGY AND INCUR EXPENSES FOR LABOR AND MATERIALS TO MAKE MAXIMUM USE OF EXISTING FACILITIES, THE ADDITIONAL EXPENSES SO INCURRED WERE SUCH AS MIGHT REASONABLY HAVE BEEN CHARGEABLE TO THE CONTRACTOR NOTWITHSTANDING THE CONTRACT DID NOT CONTAIN PROVISIONS FOR EITHER LIQUIDATED OR ACTUAL DAMAGES.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF THE INTERIOR, NOVEMBER 17, 1950:

REFERENCE IS MADE TO A LETTER DATED OCTOBER 13, 1950, FROM THE ACTING SECRETARY OF THE INTERIOR, REQUESTING DECISION WHETHER THE BUREAU OF RECLAMATION WAS AUTHORIZED TO DEDUCT FROM SUMS OTHERWISE DUE THE STANDARD TRANSFORMER COMPANY AN AMOUNT SUFFICIENT TO COVER ACTUAL DAMAGES SUSTAINED BY THE GOVERNMENT AS A DIRECT AND PROXIMATE RESULT OF THE FAILURE OF SAID COMPANY TO DELIVER CERTAIN TRANSFORMERS AND LIGHTING ARRESTERS WITHIN THE TIME STIPULATED IN CONTRACT NO. 12R 17462, DATED JANUARY 16, 1947.

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

DELIVERY--- URGENCY OF. TIME OF DELIVERY IS IMPORTANT, AND COMPLETE SHIPMENT FROM THE SHIPPING POINT OR POINTS IS URGENTLY NEEDED WITHIN THREE HUNDRED AND FIFTY (350) CALENDAR DAYS AFTER DATE OF RECEIPT BY THE CONTRACTOR OF NOTICE OF AWARD OF CONTRACT. * * *

THE CONTRACT CONTAINED NO PROVISION WITH RESPECT TO LIQUIDATED DAMAGES OR FOR ACTUAL DAMAGES IN THE EVENT OF THE FAILURE OF THE CONTRACTOR TO COMPLETE PERFORMANCE WITHIN THE SPECIFIED TIME.

THE FACTS IN THE MATTER, AS TO WHICH THERE APPARENTLY IS NO DISPUTE, ARE SET FORTH IN THE LETTER OF OCTOBER 13, 1950, AND CORRESPONDENCE SUBMITTED THEREWITH, AND MAY BE SUMMARIZED AS FOLLOWS: FINAL SHIPMENT OF ALL ITEMS UNDER THE CONTRACT WAS NOT COMPLETED UNTIL DECEMBER 7, 1949, AFTER A DELAY OF 505 DAYS. THE TRANSFORMERS FURNISHED UNDER ITEMS 1 AND 2 FOR THE GARLAND SUBSTATION AND THE HEART MOUNTAIN SWITCHYARD WERE DELIVERED ON DECEMBER 28 AND 29, 1949, RESPECTIVELY. INSTALLATIONS WERE COMPLETED ON FEBRUARY 23, 1950, AND THE TRANSFORMERS WERE PLACED IN SERVICE ON FEBRUARY 24, 1950. AS A RESULT OF THE CONTRACTOR'S DELAY IN THE PERFORMANCE OF THE CONTRACT, IT BECAME NECESSARY FOR THE GOVERNMENT TO PURCHASE ELECTRIC ENERGY TO REPLACE ENERGY THAT COULD HAVE BEEN GENERATED IN THE HEART MOUNTAIN AND SHOSHONE POWER PLANTS AT A COST OF $22,142.22 AND TO INCUR EXPENSES FOR LABOR AND MATERIALS IN PROVIDING "EXPEDIENTS AND IMPROVISATIONS" TO MAKE THE MAXIMUM USE OF EXISTING FACILITIES IN THE SUM OF $3,792.79, THEREBY RESULTING IN ACTUAL DAMAGES TO THE GOVERNMENT IN THE TOTAL AMOUNT OF $25,935.01. ACCORDINGLY, IN MAKING PAYMENT UNDER THE CONTRACT, THE SAID SUM WAS DEDUCTED FROM AMOUNTS OTHERWISE DUE THE CONTRACTOR.

WHILE THE CONTRACTOR ADMITS THAT IT DID NOT COMPLETE THE CONTRACT WITHIN THE TIME SPECIFIED THEREIN, IT CONTENDS THAT SINCE NO SPECIFIC PROVISION WAS MADE IN THE CONTRACT FOR EITHER LIQUIDATED OR ACTUAL DAMAGES IN THE EVENT OF DELAYS IN DELIVERY, THE CONTRACTOR WAS NOT LIABLE FOR DAMAGES OF ANY NATURE AND WAS NOT PROPERLY CHARGEABLE FOR ANY EXPENSES INCURRED BY THE GOVERNMENT ON ACCOUNT OF DELAYS IN PERFORMANCE.

IT IS WELL ESTABLISHED THAT A PARTY WHO IS INJURED BY ANOTHER'S BREACH OF CONTRACT IS ENTITLED TO RECOVER FROM THE LATTER SUCH DAMAGES AS ARE THE DIRECT, NATURAL, AND PROXIMATE RESULT OF THE BREACH, OR WHICH, IN THE ORDINARY COURSE OF EVENTS, WOULD LIKELY RESULT FROM THE BREACH AND WHICH REASONABLY MAY BE SAID TO HAVE BEEN FORESEEN, CONTEMPLATED, OR EXPECTED BY THE PARTIES AT THE TIME THEY EXECUTED THE CONTRACT AS A PROBABLE AND NATURAL RESULT THEREOF. 15 AM.JUR. 449, 450, 25 C.J.S. 525; 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; UNITED STATES V. BEHAN, 110 U.S. 338; GRAND TRUNK WESTERN R. CO. V. H. W. NELSON CO., 116 F.2D 823.

PARAGRAPH 17 OF THE SPECIFICATIONS PLAINLY STATED THAT TIME OF DELIVERY WAS IMPORTANT AND--- NOTWITHSTANDING THE FACT THAT THE CONTRACTOR WAS NOT REQUIRED TO COMPLETE SHIPMENT UNTIL 550 DAYS AFTER DATE OF NOTICE OF AWARD --- THAT COMPLETE SHIPMENT WAS URGENTLY NEEDED WITHIN 350 CALENDAR DAYS AFTER RECEIPT BY THE CONTRACTOR OF NOTICE OF AWARD OF THE CONTRACT. HENCE, IT MAY NOT BE SUCCESSFULLY CONTENDED BY THE CONTRACTOR THAT THE TIME OF THE EXECUTION OF THE CONTRACT, IT WAS NOT ON ACTUAL NOTICE THAT TIME WAS OF THE ESSENCE UNDER THE TERMS THEREOF. IN THAT CONNECTION, IT MAY BE POINTED OUT THAT IN A LETTER DATED JUNE 5, 1950, FROM THE DISTRICT FINANCE OFFICER TO THE CONTRACTOR, IT WAS STATED THAT BY LETTER OF APRIL 28, 1948, THE CONTRACTOR WAS INFORMED THAT THE GOVERNMENT WOULD SUFFER ACTUAL DAMAGES IF THE TRANSFORMERS WERE NOT DELIVERED AS SCHEDULED.

IN VIEW OF THE FOREGOING, IT IS AT ONCE APPARENT THAT THE ACTUAL DAMAGES SUSTAINED BY THE GOVERNMENT AS A RESULT OF THE CONTRACTOR'S FAILURE TO MAKE TIMELY DELIVERY WERE SUCH AS MIGHT REASONABLY HAVE BEEN EXPECTED TO FLOW FROM THE CONTRACTOR'S DELAYS IN PERFORMANCE. IT FOLLOWS THAT THE DEDUCTION OF $25,935.01 FROM AMOUNTS OTHERWISE DUE THE CONTRACTOR WAS PROPER. 18 COMP. GEN. 483; 16 COMP. GEN. 277. CF. 28 COMP. GEN. 717; 23 COMP. GEN. 717. THE DECISION IS ACCORDINGLY.