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B-117556, AUG. 3, 1956

B-117556 Aug 03, 1956
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TO THE NATIONAL SURETY CORPORATION: REFERENCE IS MADE TO YOUR ATTORNEY'S LETTER OF JANUARY 3. 292.06 TO BE DUE THE UNITED STATES FROM SUPERIOR CONSTRUCTION COMPANY AS A RESULT OF THE DEFAULT AND YOUR MAXIMUM LIABILITY AS SURETY ON THE CONTRACTOR'S PERFORMANCE BOND IS $98. THE AMOUNT OF THE INDEBTEDNESS WAS REDUCED SLIGHTLY AS SET OUT THEREIN. IT IS UNDERSTOOD FROM THE LETTER OF JANUARY 3. IT IS REPORTED THAT FURTHER INVESTIGATION REVEALS THAT NO PART OF THE OVERRUN IN EXCAVATION WAS DUE TO ANY REVISION OF SLOPES IN THE PARKING AREA. IT IS STATED THAT NO GRADING IN THE PARKING LOT WAS PERFORMED UNDER THE COMPLETING (WILLSON) CONTRACT. THAT "THE ENTIRE AMOUNT OF EXCAVATION PERFORMED UNDER THE WILLSON CONTRACT WAS EXPRESSLY REQUIRED UNDER THE SUPERIOR CONSTRUCTION COMPANY CONTRACT.

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B-117556, AUG. 3, 1956

TO THE NATIONAL SURETY CORPORATION:

REFERENCE IS MADE TO YOUR ATTORNEY'S LETTER OF JANUARY 3, 1956, AND PRIOR CORRESPONDENCE, RELATIVE TO YOUR INDEBTEDNESS TO THE UNITED STATES ARISING FROM THE DEFAULT OF SUPERIOR CONSTRUCTION COMPANY UNDERCONTRACT NO. I2R- 18869, DATED FEBRUARY 24, 1950, COVERING CONSTRUCTION AT THE DAVIS DAM PROJECT, ARIZONA-NEVADA. THE LETTER INCLUDED AN ITEMIZATION OF CHARGES CONCEDED BY YOUR ATTORNEY TO BE PROPER AS EXCESS COST TOTALING $52,994.23. HE SUGGESTED, ALSO, THAT DAMAGES CHARGEABLE FOR DELAY RESULTING FROM THE DEFAULT BE LIMITED TO A PERIOD OF 90 DAYS AFTER SUSPENSION OF THE WORK AT THE RATE OF $50 PER DAY, THAT BEING THE RATE FIXED IN THE CONTRACT AT LIQUIDATED DAMAGES.

AS SET OUT IN OUR DECISION OF JUNE 6, 1955, TO YOU, THE CERTIFICATE OF INDEBTEDNESS ISSUED BY THE CLAIMS DIVISION OF THIS OFFICE UNDER DATE OF MARCH 30, 1954, SHOWS $126,292.06 TO BE DUE THE UNITED STATES FROM SUPERIOR CONSTRUCTION COMPANY AS A RESULT OF THE DEFAULT AND YOUR MAXIMUM LIABILITY AS SURETY ON THE CONTRACTOR'S PERFORMANCE BOND IS $98,000. THE SURVEYS, SUPERVISION, AND ADMINISTRATION INCURRED AS A RESULT OF THE DEFAULT. IN THE DECISION OF JUNE 6, 1955, THE AMOUNT OF THE INDEBTEDNESS WAS REDUCED SLIGHTLY AS SET OUT THEREIN.

IT IS UNDERSTOOD FROM THE LETTER OF JANUARY 3, 1956, THAT YOUR ATTORNEY CONCEDES AN INDEBTEDNESS OF THE SUPERIOR CONSTRUCTION COMPANY IN THE AMOUNT OF $52,994.23 PLUS DAMAGES OF $4,500 (90 DAYS AT $50 PER DAY/--- A TOTAL INDEBTEDNESS OF $57,494.23. HOWEVER, THE DEPARTMENT OF THE INTERIOR STATES THAT CONTRACT HOLDBACKS AND UNPAID EARNINGS UNDER THE CONTRACT TOTAL $31,920.02, WHICH WOULD BE FOR APPLICATION AGAINST THE INDEBTEDNESS. THEREFORE, IT SEEMS THAT THE NET PAYMENT PROPOSED TO BE MADE BY YOU AS SURETY WOULD BE ONLY $25,574.21.

IN RESPONSE TO OUR REQUEST, THE DEPARTMENT OF THE INTERIOR HAS FURNISHED A FURTHER REPORT IN THE MATTER, WITH SPECIAL REFERENCE TO THE CONTENTIONS MADE BY YOUR ATTORNEY IN THE LETTER OF JANUARY 3, 1956, AND IN HIS SUPPLEMENTAL MEMORANDUM ON REQUEST FOR REVIEW SUBMITTED TO THIS OFFICE ON DECEMBER 29, 1955. WITH RESPECT TO ITEMS OF EXCAVATION, BACKFILL, AND COMPACTING BACKFILL (ITEMS 1, 2, AND 3 OF THE SCHEDULE OF SPECIFICATIONS NO. 2885), IT IS REPORTED THAT FURTHER INVESTIGATION REVEALS THAT NO PART OF THE OVERRUN IN EXCAVATION WAS DUE TO ANY REVISION OF SLOPES IN THE PARKING AREA. IT IS STATED THAT NO GRADING IN THE PARKING LOT WAS PERFORMED UNDER THE COMPLETING (WILLSON) CONTRACT, AS THIS WORK HAD BEEN PERFORMED UNDER AN EARLIER CONTRACT WITH UTAH CONSTRUCTION COMPANY, AND THAT "THE ENTIRE AMOUNT OF EXCAVATION PERFORMED UNDER THE WILLSON CONTRACT WAS EXPRESSLY REQUIRED UNDER THE SUPERIOR CONSTRUCTION COMPANY CONTRACT, AND NO PART OF THIS EXCAVATION RESULTED FROM CHANGES OR FROM REVISIONS OF SLOPES AND DIMENSIONS AS SPECIFIED IN THE SUPERIOR CONTRACT.'

CONCERNING THE OVERRUN IN REENFORCEMENT STEEL AND THE EXCESS COST OF LIGHT STANDARDS REFERRED TO ON PAGE 10 OF YOUR SUPPLEMENTAL MEMORANDUM, THE DEPARTMENT STATES IN SUBSTANCE THAT THE LIGHT STANDARD FOUNDATIONS WERE CONSTRUCTED EXACTLY AS SHOWN ON THE PLANS AND SPECIFICATIONS FOR BOTH THE ORIGINAL AND THE COMPLETING CONTRACTS, BUT THAT SINCE NO PAY ITEM WAS INCLUDED IN THE ORIGINAL CONTRACT TO PROVIDE FOR PAYMENT FOR CONCRETE IN THE LIGHT STANDARDS NO CHARGE WAS MADE AGAINST YOU FOR THIS CONCRETE. HOWEVER, IT IS REPORTED THAT YOU WERE CHARGED ERRONEOUSLY FOR 559 POUNDS OF REENFORCEMENT STEEL USED IN THE LIGHT STANDARDS, WHICH CHARGE IN THE AMOUNT OF $40.53 (559 POUNDS AT 7 1/4 CENTS PER POUND) SHOULD BE REMOVED.

REFERRING TO THE OBJECTION SET OUT AT PAGE 11 OF YOUR SUPPLEMENTAL MEMORANDUM AS TO INCREASED ADMINISTRATION AND INSPECTION CHARGES RESULTING FROM DELAYS, THE REPORT STATES THAT THE AMOUNT OF $43,525.90 CLAIMED FOR SURVEYS, INSPECTIONS, AND OFFICE ENGINEERING ARE THE ACTUAL COSTS PROPERLY CHARGEABLE FOR THE ONE-YEAR PERIOD FOLLOWING DEFAULT. SINCE SUCH ADDITIONAL COSTS WOULD NOT HAVE BEEN INCURRED IF THERE HAD BEEN NO DEFAULT UNDER THE ORIGINAL CONTRACT, IT APPEARS THAT THEY ARE PROPERLY CHARGEABLE AS EXCESS COSTS.

IN ANSWER TO YOUR CONTENTION THAT COSTS OF INSPECTION WERE EXCESSIVE AND THAT A TOTAL OF 66 INSPECTORS WERE EMPLOYED ON THE WORK ALTHOUGH NOT MORE THAN 35 MEN WERE EMPLOYED IN THE PERFORMANCE OF THE WORK AT ANY ONE TIME, IT IS REPORTED THAT AN AVERAGE OF 6.77 MEN WERE EMPLOYED ON THIS PROJECT FOR ENGINEERING, INSPECTION, AND COST KEEPING DURING THE COMPLETING CONTRACT PERIOD. AS TO THE SUGGESTION ON PAGE 11 OF THE SUPPLEMENTAL MEMORANDUM THAT ALL INSPECTIONS AND DELAYS WERE IMPOSED BY THE GOVERNMENT'S FIELD FORCES IN ORDER TO CONTINUE THEIR EMPLOYMENT "SINCE WILLSON WAS THE ONLY CONTRACTOR ON THE SITE," IT IS STATED THAT "APPROXIMATELY 1 MONTH AFTER ISSUANCE OF NOTICE TO PROCEED UNDER THE WILLSON CONTRACT, NOTICE TO PROCEED WAS GIVEN UNDER A CONTRACT WITH GRAFE- CALLAHAN CONSTRUCTION COMPANY UNDER SPECIFICATIONS NO. DC-3413, A CONTRACT INVOLVING WORK AT DAVIS DAM AMOUNTING TO MORE THAN $2,750,000, AND WORK UNDER THIS CONTRACT CONTINUED UNTIL MAY 6, 1953, OR MORE THAN 1 YEAR AFTER COMPLETION OF THE WILLSON CONTRACT.' IT IS STATED FURTHER, CONTRARY TO YOUR CHARGE THAT THE ELECTRICAL WORK WAS SUPERVISED BY 15 INSPECTORS, THAT A MAXIMUM OF FOUR ELECTRICAL INSPECTORS WAS CHARGED TO THE JOB ON ANY ONE DAY, AND ON THAT DAY ONLY 22 MAN-HOURS WERE CHARGED; AND THAT THE ELECTRICAL INSPECTION TIME CHARGED AGAINST THE COMPLETING CONTRACT AVERAGES 0.42 MAN-DAY PER DAY DURING THE CONTRACT PERIOD.

IN YOUR SUPPLEMENTAL MEMORANDUM IT IS CONCLUDED THAT EXTRA WORK AND INCREASED QUANTITIES OF WORK PERFORMED UNDER THE COMPLETING CONTRACT WERE OF SUCH MAGNITUDE AS TO WARRANT AN EXTENSION OF TIME FOR COMPLETION AND THAT THE ORIGINAL CONTRACT AND SURETY SHOULD BE RELIEVED OF ADMINISTRATIVE COSTS FOR A PERIOD SET OUT, IT APPEARS THAT NO SUBSTANTIAL AMOUNT OF ADDITIONAL WORK RESULTED FROM ANY CHANGE IN PLANS OR SPECIFICATIONS. FURTHERMORE, IN THE REPORT OF THE DEPARTMENT OF THE INTERIOR IT IS STATED:

"* * * A REVIEW OF THE FACTS DISCLOSES THAT THE WORK CONTROLLING THE ACTUAL COMPLETION OF THE CONTRACT WAS IN THE UTILITY BUILDING; WHEREAS THE OVERRUNS, FOR THE MOST PART, WERE IN CONNECTION WITH EXCAVATION FOR OTHER FEATURES. ACCORDINGLY, IT DOES NOT APPEAR THAT THE QUANTITY OVERRUNS WERE OF ANY SUBSTANTIAL SIGNIFICANCE IN DETERMINING THE DATE ON WHICH THE WORK WAS COMPLETED. THEREFORE, EVEN IF SUPERIOR HAD COMPLETED THE CONTRACT, IT DOES NOT APPEAR THAT IT WOULD HAVE BEEN ENTITLED TO A TIME EXTENSION BECAUSE OF QUANTITY OVERRUNS.'

FOR THE REASONS ABOVE SET OUT, TOGETHER WITH THOSE STATED IN OUR DECISION OF JULY 6, 1966, IT SEEMS CLEAR THAT THE EXCESS COSTS PROPERLY CHARGEABLE AGAINST SUPERIOR CONSTRUCTION COMPANY SUBSTANTIALLY EXCEED THE PENALTY OF YOUR BOND. ACCORDINGLY, IT IS AGAIN REQUESTED THAT PAYMENT OF THE AMOUNT OF THE PENALTY ($98,000) BE MADE PROMPTLY. IF SUCH PAYMENT IS NOT RECEIVED WITHIN 30 DAYS FROM THE DATE OF THIS DECISION, THE MATTER WILL BE REFERRED TO THE DEPARTMENT OF JUSTICE FOR APPROPRIATE ACTION.

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