A-4379, FEBRUARY 3, 1926, 5 COMP. GEN. 579

A-4379, FEBRUARY 3, 1926, 5 COMP. GEN. 579

CONTRACTS - LIQUIDATED DAMAGES DELAYS ON THE PART OF THE CONTRACTOR IN MAKING DELIVERIES UNDER A CONTRACT FOR THE FURNISHING OF UPHOLSTERING LEATHER DUE TO VAGUE SPECIFICATIONS, TO ERRONEOUS REJECTIONS BY INEXPERIENCED INSPECTORS, AND TO REJECTIONS OF LEATHER WHICH WHILE MEETING THE CONTRACT SPECIFICATIONS DID NOT MEET THE NEEDS OF THE GOVERNMENT ARE PROPERLY "DUE TO ACTION OF THE UNITED STATES," OR "DUE TO UNAVOIDABLE CAUSES," AND SHOULD NOT BE CHARGED TO THE CONTRACTOR. 4 COMP. GEN. 609, REVERSED.

DECISION BY COMPTROLLER GENERAL MCCARL, FEBRUARY 3, 1926:

THE EAGLE-OTTAWA LEATHER CO. REQUESTED JANUARY 29, 1926, RECONSIDERATION OF DECISION DATED JANUARY 16, 1925, 4 COMP. GEN. 609, APPLYING THE SUM OF $534.74, OTHERWISE DUE FOR UPHOLSTERING LEATHER, IN REDUCTION OF INDEBTEDNESS TO THE UNITED STATES IN THE SUM OF $31,902.75, AS A PAYMENT RECEIVED BY IT IN JULY, 1920, AS REFUND OF LIQUIDATED DAMAGES DEDUCTED BY REASON OF DELAYS IN DELIVERY UNDER CONTRACTS NOS. EL-20-21, 28, AND 48, DATED NOVEMBER 7, 1917, AND EL 84, DATED MARCH 5, 1918. THE CONTENTION IS REPEATED THAT THE REFUND OF LIQUIDATED DAMAGES WAS PROPER.

AS STATED IN THE DECISION OF JANUARY 16, 1925, THE CONTRACTS REQUIRED DELIVERY OF THE LEATHER ON OR BEFORE CERTAIN SPECIFIED DATES AND THERE WERE 225 DAYS' DELAY IN DELIVERY, WHICH THE CONTRACTING OFFICER FOUND TO BE DUE TO SHORTAGE OF FUEL, SHORTAGE OF PROPER HIDES, AND EXPERIMENTATIONS TO MEET REQUIREMENTS OF THE ORDNANCE DEPARTMENT. THE DEDUCTIONS HAD THERETOFORE BEEN MADE AND NO ACTION WAS TAKEN TOWARD REFUND THEREOF UNTIL MARCH 25, 1920, WHEN THE CONTRACTOR FILED CLAIM UNDER THE DENT ACT OF MARCH 2, 1919, 40 STAT. 1272, FOR ALLEGED EXTRA COST OF MANUFACTURING THE LEATHER, AND THE CLAIMS BOARD IN LIEU THEREOF ALLOWED REFUND OF THE LIQUIDATED DAMAGES DEDUCTED.

THE CONTRACTS SIMILARLY PROVIDED THAT IN MAKING SETTLEMENTS IN WHICH CHARGES FOR LIQUIDATED DAMAGES WERE INVOLVED:

* * * THE CONTRACTOR SHALL RECEIVE CREDIT FOR ALL DELAYS WHICH THE CONTRACTING OFFICER, OR HIS SUCCESSOR, MAY DETERMINE TO HAVE BEEN DUE TO ACTION OF THE UNITED STATES, AND FOR SUCH OTHER DELAYS AS THE SAME AUTHORITY MAY DECIDE TO HAVE BEEN DUE TO SUCH UNAVOIDABLE CAUSES, INCLUDING FIRES, UNSEASONABLY SEVERE STORMS, AND LABOR STRIKES IN THE WORKS OF THE CONTRACTOR, AS OCCURRED BEFORE THE DATE UPON WHICH FINAL DELIVERY IS DUE * * * AND AS THE DELAYS DID NOT APPEAR TO HAVE RESULTED FROM THE CAUSES SPECIFIED IN THE CONTRACTS AS ENTITLING TO EXTENSIONS OF TIME WITH REMISSION OF LIQUIDATED DAMAGES THIS OFFICE CHARGED THE REFUND OF $31,902.75 TO THE CONTRACTOR AS A PAYMENT IMPROPERLY MADE AND APPLIED THE SUM OF $534.74 OTHERWISE DUE IN PARTIAL SETTLEMENT THEREOF. SEE TAGGART V. UNITED STATES, 17 CT.CLS. 322.

THE MATTER HAVING ARISEN UNDER CONTRACTS EXECUTED IN ACCORDANCE WITH LAW WAS NOT FOR CONSIDERATION UNDER THE DENT ACT OF MARCH 2, 1919, SUPRA, BUT FOR SETTLEMENT IN THIS OFFICE AS PROVIDED BY SECTION 305 OF THE BUDGET AND ACCOUNTING ACT OF JUNE 10, 1921, 42 STAT. 24, AMENDING SECTION 236, REVISED STATUTES BUT WITH RESPECT TO THESE WAR-TIME TRANSACTIONS THIS OFFICE HAS ADOPTED THE PROCEDURE OF IGNORING THE FORM AND MANNER OF SETTLEMENTS IN EVENT SUCH WAR-TIME SETTLEMENTS PROPERLY PROTECTED THE RIGHTS OF THE UNITED STATES.

IT NOW APPEARS THAT THE BIDS FOR FURNISHING THE LEATHER STATED THAT: "THIS LEATHER IS OUR REGULAR COMMERCIAL STRAP AND BAG LEATHER" AND THAT THE PRELIMINARY ORDERS OF THE GOVERNMENT FOR SUCH LEATHER STATED THAT THE "LEATHER WILL BE STUFFED TO GOVERNMENT SPECIFICATIONS, OTHERWISE CONTRACTOR'S COMMERCIAL PRODUCT.' THE COMMERCIAL PRODUCT AFTER HAVING BEEN STUFFED AS REQUIRED BY THE SPECIFICATIONS APPEARS NOT TO HAVE SATISFACTORILY MET THE GOVERNMENT'S TESTS AND THE CONTRACTOR WAS REQUIRED TO SHELVE A LARGE QUANTITY OF LEATHER AND SECURE AND TAN UNDER DIFFERENT CONDITIONS QUANTITIES OF LEATHER TO MEET THE SPECIFICATIONS. THE CHIEF INSPECTOR OF LEATHER DURING THE PERIOD IN QUESTION FOR THE DISTRICT IN WHICH THE CONTRACTOR'S ACTIVITIES WERE CONDUCTED STATED JANUARY 9, 1926, THAT:

1. MY OFFICIAL POSITION AS 1ST LIEUT. IN THE ORDNANCE DEPARTMENT GAVE ME CHARGE OF THE LEATHER INSPECTORS IN THE DISTRICT IN WHICH THE EAGLE-OTTAWA LEATHER COMPANY'S PLANT IS LOCATED.

2. THE VERBAL AND INFORMAL ORDERS PLACED FOR RUSSET STRAP LEATHER CALLED FOR "COMMERCIAL SELECTION," WHICH, UNDER THE RULING OF THE ORDNANCE DEPARTMENT, I COULD NOT ACCEPT--- THEREBY REDUCING QUITE MATERIALLY THE PERCENTAGE OF SIDES THAT THIS CONCERN TANNED THAT WERE SUITABLE FOR GOVERNMENT REQUIREMENTS.

3. WHEN THE ORDER WAS PLACED A LARGE AMOUNT OF BLACK LEATHER WAS PURCHASED ALSO, WHICH THE GOVERNMENT HAD NO USE FOR, AND A LARGE AMOUNT OF TIME WAS WASTED IN MAKING THIS LEATHER, WHICH PERIOD COULD HAVE BEEN APPLIED TO THE ADVANCEMENT OF THE KIND OF LEATHER THAT THE GOVERNMENT WAS MOST IN NEED OF. THIS SITUATION WAS NOT DISCOVERED UNTIL ALONG IN OCTOBER OR NOVEMBER, 1917. BAG LEATHER WAS ALSO PRODUCED IN LARGE QUANTITIES--- MORE THAN THE GOVERNMENT HAS IMMEDIATE NEED OF--- AND A GOOD DEAL OF THAT LEATHER WAS LEFT ON THE HANDS OF THE EAGLE-OTTAWA LEATHER COMPANY FOR WEEKS AWAITING SHIPPING DIRECTIONS.

4. THE INSPECTORS UNDER MY CHARGE WERE MEN WHO HAD PRACTICALLY NO TANNING EXPERIENCE WHATEVER AND IN MANY CASES WENT TO THE EXTREME IN REJECTING LEATHER FOR ONE REASON OR ANOTHER, AS THEY WERE TIMID ABOUT ACCEPTING ANY LEATHER THAT THERE WAS ANY DOUBT ABOUT. THIS LEATHER WAS HELD FOR MY FINAL INSPECTION, WHICH NATURALLY ENTAILED DELAY, AS I HAD A LARGE TERRITORY TO COVER. IN PRACTICALLY EVERY CASE, THAT I REMEMBER, I PASSED THE LEATHER AND I CAN NOT RECALL OF ANY INSTANCE WHERE THE EQUIPMENT HAD NOT PASSED THE FINAL INSPECTION. THE GOVERNMENT'S SPECIFICATIONS WERE ENTIRELY TOO VAGUE, ESPECIALLY ON THE MATTER OF TENSILE STRENGTH, WHICH, TO SOME EXTENT, WAS THE BUG-A-BOO OF THE WHOLE SITUATION. NO TWO MEN COULD POSSIBLY AGREE AS TO WHAT CONSTITUTED THE TENSILE STRENGTH THAT THE GOVERNMENT REQUIRED.

THERE WERE MANY OTHER LEGITIMATE REASONS FOR DELAY, SUCH AS LABOR AND COAL, ETC., BUT AFTER A LAPSE OF EIGHT YEARS I CAN NOT RECALL THESE VARIOUS INSTANCES, BUT IT WOULD SEEM TO ME THAT CREDIT SHOULD BE GIVEN FOR ALL OF THE TIME THAT WAS LOST IN MAKING UP THAT BLACK LEATHER AND IN THE DEFERRED DELAYS IN ACCEPTING AND GIVING SHIPPING DIRECTIONS ON THE BAG LEATHER.

IT NOW APPEARS, AS IT DID NOT WHEN THE DECISION OF JANUARY 26, 1925, WAS MADE, THAT THE CONTRACTOR WAS NOT RESPONSIBLE FOR THE DELAYS IN DELIVERY AND SAME MAY PROPERLY BE CONSIDERED AS DUE TO CAUSES SPECIFIED IN THE CONTRACT AS ENTITLING THE CONTRACTOR TO AN EXTENSION OF TIME WITH REMISSION OF LIQUIDATED DAMAGES. SEE DECISION OF THIS OFFICE DATED DECEMBER 31, 1925 (A-4523); EMPIRE ENGINEERING CO. V. UNITED STATES, 59 CT.CLS. 904.

THE CHARGE OF $31,902.75 WILL BE DISCONTINUED AND THE SUM OF $534.74 IS CERTIFIED DUE THE CONTRACTOR.