B-149922, DEC. 13, 1962

B-149922, DEC. 13, 1962

TO UNITED STATES FIDELITY AND GUARANTY COMPANY:

FURTHER REFERENCE IS MADE TO YOUR LETTER DATED AUGUST 20, 1962, CONCERNING CERTAIN CLAIMS BEING ASSERTED AGAINST YOUR COMPANY AS SURETY UNDER A NUMBER OF CONTRACTS ENTERED INTO BETWEEN THE UNITED STATES AND THE MERCURY AUTOMATIC FIRE ALARM COMPANY, AND ROBERT W. SWEATT, T/A MERCURY ELECTRONIC COMPANY. REFERENCE ALSO WAS MADE IN YOUR LETTER TO CERTAIN COUNTERCLAIMS ASSERTED BY YOUR COMPANY AGAINST THE UNITED STATES. FOR THE REASONS SET FORTH IN YOUR LETTER YOU DECLINED TO MAKE ANY PAYMENT AND ASKED FOR A CONFERENCE RESPECTING THE GOVERNMENT'S CLAIMS AS WELL AS THE COUNTERCLAIMS ASSERTED BY YOUR COMPANY.

ARRANGEMENTS WERE MADE FOR THE REQUESTED CONFERENCE AND ON OCTOBER 29, 1962, YOUR MR. GEORGE P. TERRELL DISCUSSED THE RESPECTIVE CLAIMS WITH MR. STEPHEN P. HAYCOCK, ASSISTANT GENERAL COUNSEL. IT WAS STATED IN YOUR LETTER OF AUGUST 20, 1962, THAT CLAIMS WERE BEING ASSERTED AGAINST YOUR COMPANY FOR THE SUMS OF $140.56, $826.17, $10,729.30, AND $16,208.42, REPRESENTING AMOUNTS DUE THE UNITED STATES UNDER CONTRACTS NOS. AF-44/600/ -887, AF-07/603/-655, DA-30-109-ENG-6774, AND DA-30-075 ENG-8160, RESPECTIVELY. THE CLAIM OF THE UNITED STATES ARISING UNDER THE LAST INDICATED CONTRACT, REFERRED TO IN YOUR LETTER AS BEING IN THE AMOUNT OF $16,208.42, WAS REPORTED AS IN THE SUM OF $3,182.27. MR. TERRELL WAS INFORMED THAT BY REASON OF MATHEMATICAL ERROR THE STATED AMOUNT OF $2,182.27 SHOULD BE REDUCED BY THE AMOUNT OF $532.50, RESULTING IN A NET BALANCE OF $1,649.77 BEING DUE THE UNITED STATES UNDER THE CONTRACT IN QUESTION. ON THE BASIS OF OUR RECORDS, THEREFORE, YOUR COMPANY APPEARS TO BE LIABLE TO THE UNITED STATES FOR SUMS AGGREGATING $13,345.86 UNDER THE FOUR CONTRACTS PREVIOUSLY REFERRED TO. MR. TERRELL ADVISED MR. HAYCOCK THAT YOUR COMPANY IS WILLING TO FOREGO ITS CLAIMS FOR SOME $19,000 (PLUS SOME $100,000 DAMAGES FOR THE ALLEGED FAILURE OF THE GOVERNMENT TO PROMPTLY TERMINATE CERTAIN CONTRACTS) IF THE GOVERNMENT WILL FOREGO ITS CLAIMS FOR $13,345.86.

THE RATHER VOLUMINOUS FILES OF OUR OFFICE HAVE BEEN EXAMINED AND WE ARE UNABLE TO DETERMINE HOW YOUR COMPANY ARRIVED AT THE SUM OF $19,000 CLAIMED. HOWEVER, REFERENCE TO A NUMBER OF LETTERS FROM YOUR COMPANY DEALING WITH SPECIFIC INDIVIDUAL CLAIMS ASSERTED BY YOU INDICATES THAT NO MATERIAL PART THEREOF CAN BE REGARDED AS HAVING SUBSTANTIAL LEGAL MERIT.

IN A LETTER DATED MARCH 30, 1960, MAKING REFERENCE TO THE ACTION TAKEN BY THE CONTRACTING OFFICER UNDER CONTRACT NO. AF-44/600/-887 FOR CERTAIN WORK AT LANGLEY FIELD, VIRGINIA, YOUR COMPANY ALLEGED, AMONG OTHER THINGS, THAT THE GOVERNMENT TOLERATED THE CONTRACTOR'S DEFAULT IN THE PROGRESS OF THE WORK AND IN THE PAYMENT OF LABOR CLAIMS, AND ENCOURAGED THE ACCRUAL OF MATERIAL CLAIMS AGAINST YOUR BOND. YOUR LETTER CONTAINED THE FOLLOWING PARAGRAPH:

"IT IS OUR CONTENTION THAT THE TERMINATION MODIFICATION SHOULD HAVE CREDITED THE CONTRACTOR WITH THE $1,026.17 COSTS OF THESE SPECIALLY FABRICATED MATERIALS PLUS A REASONABLE ALLOWANCE FOR OVERHEAD AND PROFIT, AS WELL AS THE VALUE OF SUCH WORK AS WAS PERFORMED BY THE CONTRACTOR BETWEEN AUGUST 6TH, 1958 AND OCTOBER 11TH, 1958, THE DATE UPON WHICH THE CONTRACTOR LAST PERFORMED WORK ON THIS PROJECT. PROPER CONSIDERATION OF THESE ITEMS WOULD, OF COURSE, YIELD SURPLUS CONTRACT FUNDS WHICH SHOULD BE MADE AVAILABLE TO THIS COMPANY IN ITS OWN RIGHT OR SHOULD BE UTILIZED BY THE GOVERNMENT IN OFFSETTING OTHER CLAIMS WHICH IT MAY HAVE AGAINST THIS COMPANY AS SURETY EITHER FOR ROBERT W. SWEATT TRADING AS MERCURY ELECTRONICS COMPANY OR MERCURY AUTOMATIC FIRE ALARM CO., C.'

UNDER DATE OF APRIL 27, 1960, OUR CLAIMS DIVISION REFERRED THE LETTER OF MARCH 30, 1960, TO THE DEPARTMENT OF THE AIR FORCE FOR AN ADMINISTRATIVE EXAMINATION AND REPORT. IN REPLY THERE WAS FORWARDED A LETTER DATED MAY 27, 1960, FROM HEADQUARTERS, WARNER ROBINS AIR MATERIAL AREA, ROBINS AIR FORCE BASE, GEORGIA, INCLUDING FINDINGS BY THE CONTRACTING OFFICER CONCERNING THE ALLEGATIONS CONTAINED IN YOUR LETTER. IT APPEARS FROM HIS FINDINGS THAT THE CONTRACTING OFFICER GAVE FULL CONSIDERATION TO THE SEVERAL MATTERS SET FORTH IN YOUR LETTER BUT, FOR THE REASONS STATED IN HIS REPORT, HE DETERMINED THAT---

"/1) GOVERNMENT'S CONTRACTING OFFICERS ACTED IN GOOD FAITH, IN A TIMELY MANNER, AND THEIR DECISIONS WERE BASED UPON SUFFICIENT EVIDENCE OF A SUBSTANTIVE NATURE.

"/2) THE GOVERNMENT HAS EXERTED EVERY EFFORT NOT TO AGGRAVATE DAMAGES RESULTING FROM CONTRACTOR'S DEFAULT.

"/3) THE GOVERNMENT ELECTS NOT TO TAKE TITLE TO SUCH COMPONENT PARTS AS ENTRANCE BOXES WHICH WERE NOT AFFIXED BY THE CONTRACTOR TO THE ELECTRICAL SYSTEM PRIOR TO DEFAULT.

"/4) TERMINATION CONTRACTING OFFICER'S LETTER OF 23 JUNE 59, TOOK INTO ACCOUNT ALL ACCEPTABLE WORK PERFORMED BY THE DEFAULTED CONTRACTOR.

"/5) SURETY IS LIABLE TO THE GOVERNMENT IN THE AMOUNT OF $140.60 FOR THE COST OF LABOR AND MATERIALS EXPENDED PURSUANT TO CONTRACTOR'S REQUEST.'

OUR RECORDS CONTAIN A LETTER DATED MAY 4, 1960, WHEREIN YOUR COMPANY MADE REFERENCE TO ELEVEN CERTAIN CONTRACTS UNDER WHICH YOU HAD FURNISHED PERFORMANCE BONDS. THE LETTER CONTAINED A SUMMARIZATION OF FACTS IN THE NATURE OF CLAIMS. OUR CLAIMS DIVISION REPLIED BY LETTER DATED MAY 20, 1960, TO THE EFFECT THAT ACTION WAS BEING HELD IN ABEYANCE PENDING THE RECEIPT OF CERTAIN REPORTS FROM THE ADMINISTRATIVE OFFICE INVOLVED. THAT TIME OUR OFFICE WAS AWAITING THE RECEIPT OF REPORTS WHICH HAD BEEN REQUESTED PURSUANT TO CLAIMS PREVIOUSLY ASSERTED BY YOU UNDER CERTAIN OF THE CONTRACTS REFERRED TO IN THE LETTER OF MAY 4, 1960.

BY LETTER DATED MARCH 28, 1960, YOU MADE REFERENCE TO CONTACT NO. DA 30- 075-ENG-8160 COVERING CERTAIN WORK AT WEST HAMPTON, LONG ISLAND, NEW YORK. FOR THE REASONS SET FORTH IN YOUR LETTER YOU INSISTED THAT YOUR COMPANY WAS ENTITLED TO A REFUND OF A DEPOSIT OF $5,500; ALSO, YOU ALLEGED THAT DELAY IN TERMINATING AND RELETTING OF THE CONTRACT RESULTED IN THE USE BY THE CONTRACTOR OF LABOR WHICH WAS NON-PRODUCTIVE AND WHICH MATERIALLY INCREASED THE COSTS OF COMPLETION DUE TO THE FACT THAT WINTER HAD SET IN BEFORE THE COMPLETING CONTRACTOR COULD START WORK. IT WAS THEN STATED THAT THESE FACTORS COUPLED WITH A WRONGFUL PAYMENT TO THE ASSIGNEE BANK RESULTED IN DAMAGE TO YOU IN AN AMOUNT ESTIMATED TO BE APPROXIMATELY $45,000.

THE LETTER OF MARCH 28, 1960, WAS REFERRED TO THE DEPARTMENT OF THE ARMY FOR A REPORT AND IN ORDER THAT YOU MAY BE FULLY ADVISED AS TO THE POSITION OF THAT DEPARTMENT WE ARE ENCLOSING A COPY OF THE REPORT OF THE CONTRACTING OFFICER, WHICH CONCLUDES WITH THE FOLLOWING RECOMMENDATION:

"UPON ALL OF THE FOREGOING, IT IS RECOMMENDED THAT THE SURETY'S REQUEST FOR PARTIAL REMISSION, (THE RETURN OF ITS CHECK FOR $5500) OF THE TOTAL ASSESSMENT FOR LIQUIDATED DAMAGES IN THE AMOUNT OF $11,000, BE DENIED, AND THAT THE SURETY BE HELD LIABLE FOR ALL OF THE CLAIMS OF THE GOVERNMENT, AS SET FORTH IN PARAGRAPH 12 OF PART I OF THIS REPORT.'

BY AN ADDITIONAL LETTER DATED MARCH 30, 1960, YOU MADE REFERENCE TO CONTRACT NO. DA-30-109-ENG-6774 COVERING CERTAIN WORK AT THE DOVER AIR FORCE BASE, DELAWARE. THIS IS THE SAME CONTRACT UNDER WHICH THE GOVERNMENT IS ASSERTING A CLAIM AGAINST YOUR COMPANY IN THE AMOUNT OF $10,729.36, REPRESENTING EXCESS COSTS INCURRED AND LIQUIDATED DAMAGES ASSESSED THEREUNDER. THE CONCLUDING PARAGRAPH OF YOUR LETTER IS AS FOLLOWS:

"THE GOVERNMENT HAD A DUTY TO MITIGATE DAMAGES AND RETENTION OF THE PROGRESS ESTIMATE RELEASED TO THE BANK WOULD HAVE LEFT IN ITS HANDS FUNDS MORE THAN SUFFICIENT TO PAY ALL GOVERNMENT CLAIMS. IN VIEW OF THIS FACT, IT IS SUBMITTED THAT IT WOULD BE INEQUITABLE TO NOW CALL UPON THE SURETY FOR ANY PAYMENT IN CONNECTION WITH THIS CONTRACT. WE FEEL THAT OUR LETTER OF MAY 6TH SETS FORTH AMPLE GROUNDS FOR A TIME EXTENSION EITHER TO THE CONTRACTOR OR TO THE SURETY ON EQUITABLE GROUNDS OF A SUFFICIENT NUMBER OF DAYS TO ELIMINATE ANY CLAIM FOR LIQUIDATED DAMAGES. FINALLY, WE FEEL THAT ANY CLAIM WHICH THE GOVERNMENT MAY HAVE BY REASON OF THIS CONTRACT SHOULD BE SATISFIED BY OFFSETTING FUNDS WHICH MAY BE DUE ROBERT W. SWEATT T/A MERCURY ELECTRONICS COMPANY OR MERCURY AUTOMATIC FIRE ALARM COMPANY, INC. ON WHICH THIS COMPANY IS SURETY.'

UNDER DATE OF APRIL 27, 1960, OUR CLAIMS DIVISION REFERRED YOUR LETTER TO THE DEPARTMENT OF THE ARMY FOR AN ADMINISTRATIVE EXAMINATION AND REPORT. AGAIN, WE ENCLOSE FOR YOUR INFORMATION A COPY OF THE CONTRACTING OFFICER'S REPORT AND FINDINGS OF FACT DATED JUNE 15, 1960 (16 PAGES), WHEREIN THE MATTERS INVOLVED WERE CONSIDERED AT LENGTH AND WHICH CONCLUDED WITH THE FOLLOWING RECOMMENDATION:

"IT IS RECOMMENDED THAT THE PETITION FOR RELIEF OF SAID SURETY BE DENIED IN VIEW OF THE FOREGOING ADMINISTRATIVE REPORT, FINDINGS OF FACT AND RESPONSE THERETO, AND THAT THE GOVERNMENT CLAIM OF $10,729.36 FOR EXCESS COSTS AND LIQUIDATED DAMAGES BE VIGOROUSLY PROSECUTED TO FINAL COLLECTION.'

THE CONCLUSIONS REACHED BY THE ADMINISTRATIVE DEPARTMENTS CONCERNING YOUR SEVERAL CLAIMS APPEAR TO BE SUBSTANTIALLY SUPPORTED BY THE FACTS REPORTED TO OUR OFFICE. IN THE ABSENCE OF A CLEAR SHOWING OF FACTS TO SUPPORT A CONTRARY CONCLUSION, THAT IS TO SAY, TO ESTABLISH A LEGAL LIABILITY ON THE PART OF THE UNITED STATES, WE MUST ACCEPT THE ADMINISTRATIVE VERSION OF THE FACTS, WHICH APPEARS TO SUPPORT THE ACTION TAKEN. ON THE BASIS OF THE PRESENT RECORD YOUR CLAIMS ARE THEREFORE DENIED. IT IS REQUESTED THAT YOU TRANSMIT TO OUR OFFICE YOUR CHECK FOR THE SUM OF $13,345.86, REPRESENTING THE AGGREGATE AMOUNT SHOWN BY OUR RECORDS TO BE DUE THE UNITED STATES. THE EVENT THE REQUESTED PAYMENT IS NOT MADE WE WILL HAVE NO ALTERNATIVE BUT TO REFER THE CLAIMS AGAINST YOUR COMPANY TO THE DEPARTMENT OF JUSTICE FOR APPROPRIATE ACTION.

THE PROPOSAL MADE BY MR. TERRELL AT THE CONFERENCE ON OCTOBER 29, 1962, RESPECTING THE SETTLEMENT OF THE CLAIMS, IS IN THE NATURE OF AN OFFER OF COMPROMISE WHICH OUR OFFICE IS WITHOUT JURISDICTION TO CONSIDER. HOWEVER, THE ATTORNEY GENERAL OF THE UNITED STATES IS VESTED WITH SUCH AUTHORITY. ON THE BASIS OF THE FACTS AT PRESENT OF RECORD IN THIS CASE AND IN VIEW OF OUR HOLDING AS HEREINBEFORE SET FORTH ANY REFERENCE BY US OF THE MATTER TO THE ATTORNEY GENERAL AS AN OFFER IN COMPROMISE WOULD NECESSARILY BE ACCOMPANIED BY AN ADVERSE RECOMMENDATION.