B-117556, JUN. 6, 1955

B-117556, JUN. 6, 1955

TO NATIONAL SURETY CORPORATION:

REFERENCE IS MADE TO YOUR ATTORNEY'S LETTER OF MAY 14, 1954, WITH ATTACHED BRIEF, REQUESTING REVIEW OF A CERTIFICATE OF INDEBTEDNESS ISSUED BY THE CLAIMS DIVISION OF THIS OFFICE UNDER DATE OF MARCH 30, 1954, IN WHICH THE SUM OF $126,292.06 WAS FOUND TO BE DUE THE UNITED STATES BY SUPERIOR CONSTRUCTION COMPANY AS EXCESS COSTS INCURRED BY THE GOVERNMENT AS A RESULT OF ITS FAILURE TO COMPLETE PERFORMANCE UNDER CONTRACT NO. I2R- 18869 DATED FEBRUARY 24, 1950, IN CONNECTION WITH WHICH YOU ARE SURETY ON THE CONTRACTOR'S PERFORMANCE BOND IN THE SUM OF $98,000.

BY THE CONTRACT REFERRED TO, STANLEY F. WANAMAKER AND LAVERNE C. WOLFRAM WANAMAKER, DOING BUSINESS AS SUPERIOR CONSTRUCTION COMPANY, UNDERTOOK THE COMPLETION OF UTILITY BUILDING, PARKING AREA, AND FOREBAY CHANNEL BRIDGE, UNDER SPECIFICATION NO. 2885, FOR THE DAVIS DAM PROJECT, ARIZONA-NEVADA. DUE TO THE CONTRACTOR'S FAILURE TO PERFORM IN ACCORDANCE WITH THE CONTRACT'S TERMS, ITS RIGHT TO PROCEED WAS TERMINATED BY LETTER OF MARCH 15, 1951. AT THAT TIME YOU WERE REQUESTED TO TAKE OVER AND COMPLETE THE CONTRACT, BUT DECLINED TO DO SO BY LETTER OF MARCH 19, 1951. ACCORDINGLY, AFTER SOLICITING COMPETITIVE BIDS, CONTRACT NO I2R-19524 WAS PLACED WITH JACK WILLSON, DOWNEY, CALIFORNIA, ON JULY 31, 1951, COVERING THE COMPLETION OF THE SUPERIOR CONTRACT.

YOUR COUNSEL'S BRIEF ADMITS A DEFICIENCY OF $19,815.26, BUT ALLEGES EXCESSIVE OR IMPROPER CHARGES TOTALLING $106,476.80, MADE UP OF $40,649.09 CLAIMED TO REPRESENT COSTS INCURRED FOR QUANTITIES OF WORK ITEMS IN EXCESS OF THOSE CALLED FOR BY THE DEFAULTED CONTRACT; $63,871.90 DESCRIBED AS "DAMAGES FOR DELAY ETC.; " $1,191.96 CHARGED UNDER ITEM 23 FOR STEEL DOORS; $113.85 UNDER ITEM 54 FOR AN ELECTRICAL CONDUCTOR; AND $650 LIQUIDATED DAMAGES.

WITH RESPECT TO THE SPECIFICATIONS, THE BUREAU OF RECLAMATION REPORTS THAT IN THE PREPARATION OF SPECIFICATION DC-3467, ON WHICH WILLSON BID AND RECEIVED THE AWARD, THE INVITATION WAS STRICTLY LIMITED TO THE WORK REMAINING TO BE COMPLETED AT THE TIME OF SUPERIOR'S DEFAULT. ITEMS WHICH HAD BEEN COMPLETED BY SUPERIOR WERE OMITTED, AND QUANTITIES SHOWN FOR ITEMS NOT COMPLETED, INDICATED AS ESTIMATES ONLY FOR THE PURPOSE OF EVALUATING BIDS, WERE IN EACH INSTANCE THE DIFFERENCE BETWEEN THE ORIGINAL ESTIMATED QUANTITY AND THE QUANTITY COMPLETED BY SUPERIOR. THE ONLY CHANGES MADE WERE WITH REFERENCE TO THE FLAGPOLE AND IN THE SUBSTITUTION OF A DIFFERENT SIZE WIRE IN ITEM 54.

PARAGRAPH 4 OF SPECIFICATION NO. 2885, IDENTICAL WITH THAT CONTAINED IN SPECIFICATION NO. DC-3467, MAKES THE CONTRACT UNIT PRICES APPLICABLE TO ALL QUANTITIES OF WORK NECESSARILY PERFORMED IN COMPLYING WITH THE CONTRACT, REGARDLESS OF WHETHER THE QUANTITIES REQUIRED ARE MORE OR LESS THAN THE AMOUNTS STATED IN THE BIDDING SCHEDULES. THIS PROVISION READS AS FOLLOWS:

"4. QUANTITIES AND UNIT PRICES. THE QUANTITIES NOTED IN THE SCHEDULE ARE APPROXIMATIONS FOR COMPARING BIDS, AND NO CLAIM SHALL BE MADE AGAINST THE GOVERNMENT FOR EXCESS OR DEFICIENCY THEREIN, ACTUAL OR RELATIVE. PAYMENT AT THE PRICES AGREED UPON WILL BE IN FULL FOR THE COMPLETED WORK AND WILL COVER MATERIALS, SUPPLIES, LABOR, TOOLS, MACHINERY AND ALL OTHER EXPENDITURES INCIDENT TO SATISFACTORY COMPLIANCE WITH THE CONTRACT, UNLESS OTHERWISE SPECIFICALLY PROVIDED.'

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

ADJUSTMENTS OF GRADES IN THE PARKING AREA DID, AS YOU SUGGEST, OCCASION A SUBSTANTIAL INCREASE IN THE VOLUME OF EXCAVATION, BUT THE REPORT STATES THAT SUCH ADJUSTMENTS WERE NOT THE RESULTS OF ANY ERRORS IN THE ORIGINAL PLANS, BUT WERE MINOR REVISIONS MADE TO IMPROVE THE DRAINAGE OF THE PARKING AREA. SUCH REVISIONS WERE SPECIFICALLY CONTEMPLATED AND AUTHORIZED BY PARAGRAPH 38 (E) OF THE SPECIFICATIONS OF THE ORIGINAL CONTRACT (40 (E) OF THE WILLSON CONTRACT), AND, HAVING BEEN MADE BEFORE COMPLETION OF EXCAVATION TO THE ORIGINAL GRADES, COULD NOT HAVE RESULTED IN ANY CHANGE OF THE UNIT PRICES FIXED. SEE SILAS MASON COMPANY V. UNITED STATES, 116 C.CLS. 1, 156.

THE INSTALLATION OF ELECTRICAL CONDUIT ON THE CREST OF THE DAM, IN LIEU OF TRENCH-LAY CABLE AS ORIGINALLY SPECIFIED, IS REPORTED TO HAVE HAD NO EFFECT ON THE EXCAVATING WORK, SINCE THE DIMENSIONS OF THE TRENCH REQUIRED FOR THE CONCRETE ENCLOSURE WERE THE SAME AS ORIGINALLY SPECIFIED FOR THE CABLE--- 26 INCHES DEEP, 12 INCHES WIDE AT THE BOTTOM, WITH SIDE SLOPES OF 1/2 TO 1.

ITEM 23 (ITEM 24, SPECIFICATION DC-3467), COVERING THE FURNISHING AND INSTALLING OF STEEL SWINGING DOORS, WAS THE SAME ON BOTH THE SUPERIOR AND WILLSON CONTRACTS. HOWEVER, DUE TO THE KOREAN WAR AND THE FAILURE OF SUPERIOR TO PLACE AN ORDER FOR THESE DOORS PRIOR TO ITS DEFAULT, STEEL DOORS WERE NOT AVAILABLE WHEN THE WILLSON CONTRACT WAS AWARDED, EXCEPT UPON AT LEAST A YEAR'S DELAY. KALAMEIN DOORS WERE SUBSTITUTED, AT A REDUCTION IN WILLSON'S PRICE FROM $14.37 PER SQUARE FEET TO $12.37 PER SQUARE FEET WITH A RESULTANT SAVING TO THE DEFAULTING CONTRACTOR, WHICH HAS BEEN CHARGED ONLY THE DIFFERENCE BETWEEN ITS PRICE OF $9.75 PER SQUARE FOOT AND THE $12.37 ACTUALLY PAID. SINCE THERE WAS FURNISHED THE BEST AVAILABLE SUBSTITUTE FOR AN UNOBTAINABLE ITEM, THE DIFFERENCE BETWEEN THE ORIGINAL CONTRACTOR'S PRICE AND THE PRICE PAID FOR THE SUBSTITUTE IS PROPERLY CHARGEABLE AGAINST THE DEFAULTING CONTRACTOR. SEE TRI-BULLION SMELTING AND DEV. CO. V. JACOBSEN, 233 F. 646; HARDWOOD LUMBER CO. V. ADAM, 134 GA. 821, 32 L.R.A. (N.S.) 192.

IN ITEM 54 (ITEM 55, SPECIFICATION DC-3467), A 600-VOLT CONDUCTOR WAS SUBSTITUTED FOR A 15,000-VOLT CONDUCTOR, TO CORRECT AN ERROR IN THE ORIGINAL SPECIFICATIONS. THE AMOUNT BILLED AS EXCESS COST WAS THE DIFFERENCE BETWEEN SUPERIOR'S PRICE FOR 15,000-VOLT CONDUCTOR AND WILLSON'S PRICE FOR 600-VOLT CONDUCTOR, WHICH THE ADMINISTRATIVE OFFICE REPORTS WAS SUBSTANTIALLY IN NATIONAL'S FAVOR. HOWEVER, SINCE UPON THE CORRECTION OF THE ERROR, IF SUPERIOR HAD COMPLETED THE CONTRACT, IT WOULD HAVE BEEN ENTITLED TO A CHANGE ORDER AND POSSIBLE ADJUSTMENT OF PRICE, THERE IS NO PROPER BASIS FOR CHARGING EXCESS COST ON THIS ITEM AND THE CHARGE THEREFOR SHOULD BE ELIMINATED.

WITH RESPECT TO THE ITEM OF ADMINISTRATIVE EXPENSE THE BUREAU REPORTS THAT THE LARGEST PORTION IS FOR DIRECT NECESSARY PERSONAL SERVICES. DOES NOT REPRESENT OVERHEAD OR GENERAL EXPENSE. PRIOR TO DEFAULT THE GOVERNMENT HAD EXPENDED SUFFICIENT ENGINEERING, SURVEY TIME, INSPECTION, SUPERVISION AND ADMINISTRATION ON THE CONTRACT TO HAVE ADEQUATELY COVERED THE ENTIRE WORK IF THERE HAD BEEN NO DEFAULT. ACCORDINGLY, ALL EXPENSES DIRECTLY RELATED TO THE COMPLETION OF THE WORK APPEAR TO CONSTITUTE EXCESS COSTS CHARGEABLE AGAINST NATIONAL UNDER ARTICLE 9 OF THE CONTRACT.

THE ITEM OF $650 CHARGED BY THE ADMINISTRATIVE OFFICE AS LIQUIDATED DAMAGES, TO WHICH EXCEPTION IS TAKEN, WAS ASSESSED IN STRICT CONFORMITY TO THE TERMS OF SECTIONS 22 AND 23 OF THE SPECIFICATIONS, BY WHICH THE CONTRACT WAS DIVIDED INTO THREE DISTINCT PORTIONS, WITH SEPARATE COMPLETION SCHEDULES. SCHEDULE 1 (B) WAS FULLY COMPLETED BY SUPERIOR PRIOR TO DEFAULT, BUT WITH 13 DAYS' DELAY, SUBJECT TO LIQUIDATED DAMAGES OF $50 PER DAY.

THE CHARGE OF INORDINATE DELAY IN PROCURING THE COMPLETION CONTRACT IS NOT SUPPORTED BY THE FACTS. DURING THE ENTIRE PERIOD FROM SUPERIOR'S STOPPAGE OF WORK IN JANUARY UNTIL TERMINATION IN MARCH, REPRESENTATIVES OF THE BUREAU OF RECLAMATION WERE ENGAGED IN NEGOTIATIONS WITH REPRESENTATIVES OF YOUR COMPANY AND OF THE CONTRACTOR'S ASSIGNEE IN AN EFFORT TO WORK OUT THE PROBLEM, AND IT WAS NOT UNTIL THESE NEGOTIATIONS FAILED THAT THE CONTRACT WAS TERMINATED. YOU WERE FULLY INFORMED AND AWARE OF THE SITUATION OF SUPERIOR THROUGHOUT THE PERIOD,AND IT IS REPORTED THAT THE DECISION TO ADVERTISE FOR BIDS FOR COMPLETION RATHER THAN TO NEGOTIATE THE COMPLETION CONTRACT WAS MADE AT YOUR REQUEST, BEFORE YOU DECLINED TO TAKE OVER AND COMPLETE THE WORK.

IT IS NOTED THAT YOU CLAIM TO HAVE BEEN UNABLE TO OBTAIN REQUIRED INFORMATION TO ASSIST YOU IN THE PRESENTATION OF YOUR CLAIM. THE BUREAU OF RECLAMATION REPORTS THAT NO REQUEST FOR INFORMATION HAS EVER BEEN DECLINED, AND THAT ALL PERTINENT GOVERNMENT RECORDS ARE AVAILABLE AT THE DAVIS DAM SITE AND MAY BE EXAMINED FOR VERIFICATIONS AT ANY TIME YOUR REPRESENTATIVES MAY DESIRE.

ON THE PRESENT RECORD THE SETTLEMENT PREVIOUSLY STATED APPEARS TO BE CORRECT, WITH THE EXCEPTIONS HEREINBEFORE NOTED. SINCE THE AMOUNT DUE REMAINS SUBSTANTIALLY IN EXCESS OF THE PENALTY OF YOUR BOND, IT IS REQUESTED THAT YOU REMIT THE SUM OF $98,000 FOR WHICH YOU ARE LIABLE.