B-155678, MAR. 19, 1965

B-155678, MAR. 19, 1965

TO PACIFIC PLASTICS COMPANY, INC.:

REFERENCE IS MADE TO LETTER DATED NOVEMBER 27, 1964, FROM YOUR ATTORNEY, AND SUBSEQUENT CORRESPONDENCE, REQUESTING REMISSION OF LIQUIDATED DAMAGES ALLEGED TO HAVE BEEN IMPROPERLY ASSESSED AS A MATTER OF LAW AGAINST YOUR COMPANY BY THE UNITED STATES DEPARTMENT OF COMMERCE, COAST AND GEODETIC SURVEY, UNDER THE PROVISIONS OF CONTRACT NO. CGS-875 WHICH WAS AWARDED ON DECEMBER 12, 1961.

THE INVITATION FOR BIDS ISSUED ON OCTOBER 13, 1961, SOLICITED PROSPECTIVE CONTRACTORS FOR THE CONSTRUCTION OF SEVEN LAUNCHES, HYDROGRAPHIC SURVEY (PLASTIC), 26-FOOT, INCLUDING MOLDS, DESIGNS AND MARINE ENGINEERING SERVICES AND CONSTRUCTION CONFORMING TO DETAILED SPECIFICATIONS. YOUR FIXED PRICE WAS $250,198, AND TELEGRAPHIC NOTICE OF AWARD WAS GIVEN TO YOU ON DECEMBER 19, 1961. THE ORIGINAL CONTRACT PROVIDED FOR COMPLETION AND DELIVERY OF THE LAUNCHES WITHIN THE FOLLOWING PERIODS:

1. HULLS NOS. 1202, 1203 - 270 DAYS FROM DATE OF AWARD

2. HULLS NOS. 1204, 1205 - 300 DAYS FROM DATE OF AWARD

3. HULLS NOS. 1206, 1207 - 330 DAYS FROM DATE OF AWARD

4. HULL NO. 1208 - 360 DAYS FROM DATE OF AWARD

THE LAUNCHES WERE FOR USE IN CONJUNCTION WITH LARGER SHIPS (MOTHER SHIPS) THAT WERE UNDER CONSTRUCTION. BECAUSE THE LAUNCHES WERE NECESSARY FOR TESTS OF THE LARGER SHIPS, TIME WAS AN ESSENTIAL FACTOR WHEN THE CONTRACT WAS EXECUTED. IN VIEW THEREOF, THE INVITATION FOR BIDS, PAGE 5, CONTAINED THE FOLLOWING PROVISION:

"LIQUIDATED DAMAGES: LIQUIDATED DAMAGES OF $100.00 PER CALENDAR DAY, PER LAUNCH, WILL BE ASSESSED THE CONTRACTOR FOR EACH CALENDAR DAY'S DELAY IF DELIVERY IS NOT MADE WITHIN THE SPECIFIED TIMES UNDER ITEMS 1, 2, 3, 4 AND 5 ABOVE.'

ITEM 5 WAS SUBSEQUENTLY DELETED FROM THE QUOTED PROVISION SINCE THERE WAS NO ITEM 5 IN THE INVITATION WHICH WOULD AFFECT THE LIQUIDATED DAMAGES CLAUSE. IT IS CONTENDED THAT AS A MATTER OF LAW THE ABOVE CLAUSE IS INVALID, BECAUSE THE CONTRACT DID NOT CONTAIN A CLAUSE STATING THAT THE CONTRACTOR SHALL NOT BE CHARGED WITH LIQUIDATED DAMAGES WHEN THE DELAY ARISES OUT OF CAUSES BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE CONTRACTOR AND BECAUSE A CONTRACTUAL PROVISION FOR LIQUIDATED DAMAGES WHICH HAS NO RELATION TO THE CONTRACTOR'S ACTS IS VOID.

WE DISAGREE WITH YOUR CONTENTIONS FOR THE REASONS WHICH WILL BE DISCUSSED BELOW. STANDARD FORM 32, 1957 EDITION, CLAUSE 2, WHICH WAS INCORPORATED INTO THIS CONTRACT BY REFERENCE, SPECIFICALLY PROVIDES AS FOLLOWS:

"CHANGES

"THE CONTRACTING OFFICER MAY AT ANY TIME, BY A WRITTEN ORDER, AND WITHOUT NOTICE TO THE SURETIES, MAKE CHANGES, WITHIN THE GENERAL SCOPE OF THIS CONTRACT, IN ANY ONE OR MORE OF THE FOLLOWING: (I) DRAWINGS, DESIGNS, OR SPECIFICATIONS, WHERE THE SUPPLIES TO BE FURNISHED ARE TO BE SPECIALLY MANUFACTURED FOR THE GOVERNMENT IN ACCORDANCE THEREWITH; (II) METHOD OF SHIPMENT OR PACKING; AND (III) PLACE OF DELIVERY. IF ANY SUCH CHANGE CAUSES AN INCREASE OR DECREASE IN THE COST OF, OR THE TIME REQUIRED FOR, THE PERFORMANCE OF ANY PART OF THE WORK UNDER THIS CONTRACT, WHETHER CHANGED OR NOT CHANGED BY ANY SUCH ORDER, AN EQUITABLE ADJUSTMENT SHALL BE MADE IN THE CONTRACT PRICE OR DELIVERY SCHEDULE, OR BOTH, AND THE CONTRACT SHALL BE MODIFIED IN WRITING ACCORDINGLY. ANY CLAIM BY THE CONTRACTOR FOR ADJUSTMENT UNDER THIS CLAUSE MUST BE ASSERTED WITHIN 30 DAYS FROM THE DATE OF RECEIPT BY THE CONTRACTOR OF THE NOTIFICATION OF CHANGE: PROVIDED, HOWEVER, THAT THE CONTRACTING OFFICER, IF HE DECIDES THAT THE FACTS JUSTIFY SUCH ACTION, MAY RECEIVE AND ACT UPON ANY SUCH CLAIM ASSERTED AT ANY TIME PRIOR TO FINAL PAYMENT UNDER THIS CONTRACT. WHERE THE COST OF PROPERTY MADE OBSOLETE OR EXCESS AS A RESULT OF A CHANGE IS INCLUDED IN THE CONTRACTOR'S CLAIM FOR ADJUSTMENT, THE CONTRACTING OFFICER SHALL HAVE THE RIGHT TO PRESCRIBE THE MANNER OF DISPOSITION OF SUCH PROPERTY. FAILURE TO AGREE TO ANY ADJUSTMENT SHALL BE A DISPUTE CONCERNING A QUESTION OF FACT WITHIN THE MEANING OF THE CLAUSE OF THIS CONTRACT ENTITLED "DISPUTES.' HOWEVER, NOTHING IN THIS CLAUSE SHALL EXCUSE THE CONTRACTOR FROM PROCEEDING WITH THE CONTRACT AS CHANGED.'

IN ESSENCE THIS PROVISION GIVES THE CONTRACTING OFFICER THE RIGHT TO MAKE CHANGES IN THE CONTRACT AS LONG AS HE MAKES AN EQUITABLE ADJUSTMENT IN THE CONTRACT PRICE AND/OR DELIVERY SCHEDULE WHEN IT IS NECESSARY TO DO SO. MOREOVER, NOTHING IN THIS CLAUSE SHALL EXCUSE THE CONTRACTOR FROM PROCEEDING WITH THE CONTRACT AS CHANGED, AND THIS IS SO EVEN THOUGH THE CONTRACTOR MAY DISAGREE WITH THE CHANGES AND THE EQUITABLE ADJUSTMENTS MADE AS A RESULT OF SUCH CHANGES.

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

AS TO THE CASES CITED ON PAGES 3 AND 4 OF THE LETTER OF NOVEMBER 27, IT IS DESIRED TO POINT OUT THAT IN THE CASE OF PRIEBE AND SONS, INC. V. UNITED STATES, 332 U.S. 407, THE CONTRACT THERE INVOLVED CONTAINED TWO PROVISIONS FOR THE ASSESSMENT OF LIQUIDATED DAMAGES. ONE PROVISION FOR LIQUIDATED DAMAGES TO BE ASSESSED FOR FAILURE TO MAKE TIMELY DELIVERY WAS HELD ENFORCEABLE BUT DELIVERY WAS TIMELY. THE OTHER PROVISION WAS FOR THE ASSESSMENT OF LIQUIDATED DAMAGES FOR FAILURE TO HAVE SPECIFIED QUANTITIES OF DRIED EGG PRODUCTS INSPECTED AND READY FOR DELIVERY BY THE DATE SPECIFIED IN THE OFFER WAS HELD NOT ENFORCEABLE BECAUSE THE CONTRACTOR'S ACTS IN FAILING TO HAVE THESE PRODUCTS WERE OF NO CONSEQUENCE IF TIMELY DELIVERY TO THE GOVERNMENT WAS MADE. WE DO NOT DIFFER WITH THE HOLDING IN THAT CASE NOR DO WE FEEL THAT IT IS FOR APPLICATION IN THIS CASE. WITH REGARD TO THE OTHER CASES CITED ON PAGES 3 AND 4 OF THAT LETTER, AN EXAMINATION OF THE FACTS IN EACH CASE INDICATES THAT THE COURT WAS CONFRONTED WITH THE DIFFICULTY OF DETERMINING FROM THE EVIDENCE SUBMITTED JUST HOW MUCH OF THE DELAYS ENCOUNTERED WAS DUE TO ACTS OF THE GOVERNMENT AND HOW MUCH WAS CHARGEABLE TO THE CONTRACTOR AND, THEREFORE, IT APPLIED THE RULE THAT SINCE THE DELAYS CANNOT BE APPORTIONED, THE ENTIRE AMOUNT ASSESSED FOR LIQUIDATED DAMAGES MUST BE REMITTED. THERE IS NO SHOWING IN THE CASE HERE INVOLVED THAT THE DELAYS IN PERFORMANCE OF INSTANT CONTRACT CANNOT BE APPORTIONED.

WHERE THE PARTIES TO A CONTRACT HAVE MADE NO PROVISION FOR A DISPENSATION, THE CONTRACTOR'S OBLIGATION FOR PERFORMANCE CANNOT BE EXCUSED BY UNFORESEEN DIFFICULTIES UNLESS IT IS RENDERED IMPOSSIBLE BY AN ACT OF GOD, BY THE LAW OR THE OTHER PARTY. SEE UNITED STATES V. GLEASON, 175 U.S. 588; CARNEGIE STEEL CO. V. UNITED STATES, 240 U.S. 156; COLUMBUS RY. AND POWER CO. V. COLUMBUS, 249 U.S. 399; AND 13 C.J. 635. ANY DISPUTE AS TO WHETHER THE GOVERNMENT CAUSED ANY OF THE DELAY, AS ALLEGED, IS FOR DETERMINATION UNDER THE "DISPUTES" ARTICLE OF STANDARD FORM 32, MADE A PART OF THE CONTRACT. INSOFAR AS THE RECORD SHOWS, THE LIQUIDATED DAMAGES WERE ASSESSED IN ACCORDANCE WITH THE FINDINGS OF THE CONTRACTING OFFICER.

REGARDING YOUR CONTENTION THAT CONSTRUCTION OF THE LARGER SHIPS WAS NOT COMPLETED WHEN THE LAUNCHES WERE DELIVERED, AND THEREFORE NO ACTUAL DAMAGES WERE SUFFERED BY THE GOVERNMENT, YOU ARE ADVISED THAT UNDER A VALID AGREEMENT FOR LIQUIDATED DAMAGES ON ACCOUNT OF DELAYS IN PERFORMANCE OF A CONTRACT, THE QUESTION WHETHER THE GOVERNMENT SUFFERED ACTUAL DAMAGES, OR THE AMOUNT THEREOF, IS NOT FOR CONSIDERATION. 17 COMP. GEN. 466; 18 ID. 709; ID. 855. AS STATED HEREINABOVE, THE LAUNCHES WERE FOR USE WITH LARGER SHIPS (MOTHER SHIPS) THAT WERE UNDER CONSTRUCTION AND TIME WAS AN ESSENTIAL FACTOR WHEN THE CONTRACT WAS EXECUTED. WHETHER OR NOT A LIQUIDATED DAMAGE CLAUSE AMOUNTS TO A PENALTY MUST BE DECIDED FROM THE FACTS AS THEY EXIST AT THE TIME OF THE EXECUTION OF THE CONTRACT.

IN VIEW OF THE FOREGOING WE FIND NO LEGAL BASIS FOR RELIEVING YOU FROM THE ASSESSMENT OF LIQUIDATED DAMAGES.