B-105631, MAY 8, 1953, 32 COMP. GEN. 497

B-105631, MAY 8, 1953, 32 COMP. GEN. 497

CONTRACTS - DAMAGES - DELAYS - CONTRACTOR'S SUPPLIER OR SUBCONTRACTOR - RELIEF UNDER DEFENSE PRODUCTION ACT THE ACT OF JUNE 30, 1952, WHICH AMENDED THE DAMAGE RELIEF PROVISION OF SECTION 707 OF THE DEFENSE PRODUCTION ACT OF 1950 BY GRANTING RELIEF TO CONTRACTORS WHOSE DELAY OR DEFAULT IN THE PERFORMANCE OF THE CONTRACT WAS DUE TO SUPPLIERS-, SUBCONTRACTORS-, OR OTHER PERSONS' COMPLIANCE WITH NPA ORDERS, IS NOT RETROACTIVE OR APPLICABLE TO CASES INVOLVING DELAYS DUE TO COMPLIANCE WITH NPA ORDERS PRIOR TO JUNE 30, 1952, BY PERSONS OTHER THAN THE CONTRACTOR.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF COMMERCE, MAY 8, 1953:

REFERENCE IS MADE TO LETTER OF MARCH 13, 1953, FROM THE ACTING SECRETARY REQUESTING MY OPINION AS TO THE EFFECT OF THE AMENDMENT ON JUNE 30, 1952, OF SECTION 707 OF THE DEFENSE PRODUCTION ACT OF 1950, 64 STAT. 798,818.

PRIOR TO AMENDMENT, SECTION 707 READ, IN PERTINENT PART, AS FOLLOWS:

NO PERSON SHALL BE HELD LIABLE FOR DAMAGES OR PENALTIES FOR ANY ACT OR FAILURE TO ACT RESULTING DIRECTLY OR INDIRECTLY FROM HIS COMPLIANCE WITH A RULE, REGULATION, OR ORDER ISSUED PURSUANT TO THIS ACT * * *. (ITALICS SUPPLIED.)

BY DECISION OF FEBRUARY 19, 1952, 31 COMP. GEN. 408, THIS OFFICE HELD THAT THE RELIEF ACCORDED BY THE FOREGOING LANGUAGE OF SECTION 707 WAS AVAILABLE ONLY TO A PERSON WHOSE ALLEGED LIABILITY WAS THE RESULT OF HIS OWN COMPLIANCE WITH REGULATIONS UNDER THE ACT. UNDER THIS CONSTRUCTION OF SECTION 707 A CONTRACTOR COULD NOT BE RELIEVED FROM LIABILITY IN CASES WHERE HIS DEFAULT WAS DUE TO HIS SUPPLIER'S COMPLIANCE WITH DEFENSE PRODUCTION ACT REGULATIONS, BY REASON OF WHICH COMPLIANCE THE SUPPLIER FAILED TO FURNISH ESSENTIAL CONTRACT MATERIAL ON TIME.

WHEN THE DEFENSE PRODUCTION ACT OF 1950 WAS AMENDED IN 1952, THE WORD "HIS" IN THE FIRST SENTENCE OF SECTION 707 WAS DELETED. SEE SECTION 118, ACT OF JUNE 30, 1952, 66 STAT. 306. THE COMMITTEE REPORT ON THE BILL WHICH BECAME THE ACT OF JUNE 30, 1952 ( SENATE REPORT NO. 1599, 82D CONGRESS, P. 29), CONTAINS THE FOLLOWING LANGUAGE WITH RESPECT TO THIS DELETION:

IT HAS BEEN CALLED TO THE ATTENTION OF YOUR COMMITTEE THAT SECTION 707 IS IN ONE RESPECT SUBJECT TO A NARROWER INTERPRETATION THAN THE SIMILAR PROVISION IN THE SECOND WAR POWERS ACT, 1942. SECTION 707, LIKE THE STATUTE ( PUBLIC LAW 89, 77TH CONG., 55 STAT. 236) PRECEDING THE SECOND WAR POWERS ACT, 1942, PROVIDES PROTECTION AGAINST LIABILITY CAUSED BY "HIS COMPLIANCE.' THE SECOND WAR POWERS ACT, 1942, AMENDED THE PROVISION BY DELETING THE WORD "HIS.'

THIS CHANGE MAKES IT CLEAR THAT THE PROTECTION APPLIES TO CASES WHERE THE LIABILITY IS CAUSED BY THE COMPLIANCE OF ANOTHER PERSON, FOR EXAMPLE, WHERE A CONTRACTOR IS UNABLE TO CARRY OUT A CONTRACT BECAUSE HIS SUPPLIERS ARE PROHIBITED FROM MAKING OR SHIPPING HIM THE PARTS HE NEEDS TO CARRY OUT THE CONTRACT.

YOUR COMMITTEE HAD NOT INTENDED TO PROVIDE A NARROWER FORM OF RELIEF IN THIS RESPECT THAN WAS PROVIDED UNDER THE SECOND WAR POWERS ACT, 1942. ACCORDINGLY, IN ORDER TO REMOVE ANY ERRONEOUS INFERENCE THAT THE INCLUSION OF THE WORD "HIS" IN SECTION 707 WAS INTENDED TO GIVE THE PROVISION A NARROWER EFFECT, AND TO MAKE IT ENTIRELY CLEAR THAT THE BROADER EFFECT IS INTENDED, YOUR COMMITTEE DELETED THE WORD "HIS" FROM THE FIRST SENTENCE OF SECTION 707.

MY OPINION IS REQUESTED AS TO WHETHER, IN VIEW OF THE PRESENT LANGUAGE OF SECTION 707 AND ITS LEGISLATIVE HISTORY, LIQUIDATED DAMAGES FOR DELAYS DUE TO COMPLIANCE WITH NPA ORDERS BY PERSONS OTHER THAN THE CONTRACTORS, MAY BE ASSESSED AGAINST GOVERNMENT CONTRACTORS UNDER CONTRACTS MADE (1) PRIOR TO THE PASSAGE OF THE DEFENSE PRODUCTION ACT ON SEPTEMBER 8, 1950, OR (2) AFTER THE PASSAGE OF THE ACT BUT PRIOR TO THE AMENDMENT OF SECTION 707, OR (3) AFTER THE AMENDMENT OF SECTION 707.

IT SHOULD BE NOTED THAT THE PROVISIONS OF SECTION 707 DEAL WITH DAMAGES FOR ANY ACT OR FAILURE TO ACT, WHETHER UNDER A GOVERNMENT OR A PRIVATE CONTRACT, OR EVEN IF UNRELATED TO ANY CONTRACT. THERE WOULD APPEAR TO BE NO DOUBT THAT THE SECTION, BOTH BEFORE AND AFTER ITS AMENDMENT, WAS INTENDED TO APPLY TO LIABILITY WHICH OTHERWISE MIGHT ATTACH TO ANY PERSON'S ACT OR FAILURE TO ACT, REGARDLESS OF THE DATE OF THE CONTRACT, IF ANY, UNDER WHICH SUCH LIABILITY ACCRUED. HENCE, DETERMINATION OF THE BASIC QUESTION PRESENTED IN THE LETTER OF MARCH 13, 1953, DOES NOT DEPEND UPON THE DATE OF THE CONTRACTS INVOLVED BUT UPON THE CONSTRUCTION TO BE GIVEN SECTION 707 BEFORE AND AFTER ITS AMENDMENT.

THERE CAN BE NO QUESTION AS TO THE EFFECT OF THE AMENDMENT UPON LIABILITY ACCRUING THEREAFTER. AS STATED IN THE COMMITTEE REPORT THEREON, THE PROTECTION OF THE AMENDED SECTION APPLIES THEREAFTER TO CASES WHERE THE LIABILITY RESULTS FROM THE COMPLIANCE OF ANOTHER PERSON, AS WELL AS FROM THE COMPLIANCE OF THE PERSON SOUGHT TO BE HELD LIABLE. ACCORDINGLY, DELAY ON THE PART OF A GOVERNMENT CONTRACTOR, RESULTING DIRECTLY OR INDIRECTLY FROM COMPLIANCE ON AND AFTER JUNE 30, 1952, WITH DEFENSE PRODUCTION ACT REGULATIONS, EITHER BY THE CONTRACTOR OR BY HIS SUPPLIER OR SUBCONTRACTOR, COMES WITHIN THE PURVIEW OF SECTION 707 REGARDLESS OF THE DATE OF THE CONTRACT INVOLVED.

BUT THE AMENDMENT WAS NOT SPECIFICALLY MADE RETROACTIVE, AND DESPITE THE STATEMENTS IN THE COMMITTEE REPORT REFERRED TO ABOVE THAT THE PHRASE "HIS COMPLIANCE" WAS NOT INTENDED TO LIMIT THE BENEFITS OF THE SECTION TO PERSONS WHOSE LIABILITY RESULTED FROM THEIR OWN COMPLIANCE, I AM COMPELLED TO CONCLUDE, FOR THE REASONS STATED IN MY DECISION OF FEBRUARY 19, 1952, THAT THE LANGUAGE OF THE SECTION PRIOR TO AMENDMENT WAS SO CLEAR AS TO REQUIRE THIS CONSTRUCTION. ACCORDINGLY, THE FACT THAT DELAY ON THE PART OF A GOVERNMENT CONTRACTOR RESULTED SOLELY FROM COMPLIANCE PRIOR TO JUNE 30, 1952, WITH DEFENSE PRODUCTION ACT REGULATIONS BY HIS SUPPLIER OR SUBCONTRACTOR IS NOT SUFFICIENT TO RELIEVE THE CONTRACTOR FROM LIQUIDATED DAMAGES OTHERWISE CHARGEABLE BECAUSE OF SUCH DELAY.

ADMITTEDLY, THIS CONSTRUCTION OF SECTION 707 AS ORIGINALLY WRITTEN MAY CREATE INEQUITIES. IT MAY BE NOTED, HOWEVER, THAT IN MANY CASES THE COMMON-LAW DOCTRINES OF FRUSTRATION AND IMPOSSIBILITY OF PERFORMANCE MIGHT EXCUSE DELAYS BY A CONTRACTOR WHICH RESULTED FROM HIS SUPPLIER'S COMPLIANCE WITH NPA ORDERS. IT MAY BE, TOO, THAT IN SOME CASES INVOLVING CONTRACTS SUCH DELAYS PROPERLY COULD BE DETERMINED EXCUSABLE UNDER THE TERMS OF THE CONTRACT EVEN THOUGH NOT EXCUSABLE UNDER THE STATUTE. ALSO, SO FAR AS GOVERNMENT CONTRACTORS ARE CONCERNED, LIQUIDATED DAMAGES FO SUCH DELAYS MAY BE RECOMMENDED FOR REMISSION UNDER SECTION 10 OF THE ACT OF SEPTEMBER 5, 1950, 64 STAT. 591.