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B-158227, MAR 6, 1974

B-158227 Mar 06, 1974
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SINCE LIQUIDATED DAMAGES ASSESSED UNDER LIQUIDATED DAMAGES CLAUSE IN GSA CONTRACT WAS MAXIMUM AMOUNT THAT COULD BE ASSESSED AGAINST GSA CONTRACTOR FOR DELAY DAMAGES. 2. IF AGREEMENT IS RECEIVED FROM SURETY INDEMNIFYING UNITED STATES AGAINST ANY LOSS BY REASON OF PAYMENT. WAS AWARDED TO MIKE BRADFORD COMPANY. THE PROJECT WAS COMPLETED BY METROPOLITAN SOUTH CONSTRUCTION COMPANY. 017.57 WHICH ORDINARILY WOULD HAVE BEEN PAID TO MIKE BRADFORD. A UNITED STATES TREASURY CHECK FOR THIS AMOUNT WAS FORWARDED TO OUR OFFICE FOR DISBURSEMENT TO THE PARTY DETERMINED BY OUR OFFICE TO BE ENTITLED TO THE FUND. WITH SUCH DILIGENCE AS WILL INSURE ITS COMPLETION WITHIN THE TIME SPECIFIED IN THIS CONTRACT. WHETHER OR NOT THE CONTRACTOR'S RIGHT TO PROCEED WITH THE WORK IS TERMINATED.

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B-158227, MAR 6, 1974

1. AMOUNT PAID CONTRACTOR UNDER DEPARTMENT OF AGRICULTURE CONTRACT FOR DELAYS ATTRIBUTABLE TO CONTRACTOR ON GSA CONTRACT CANNOT BE RECOVERED FROM CONTRACT BALANCE DUE UNDER GSA CONTRACT, SINCE LIQUIDATED DAMAGES ASSESSED UNDER LIQUIDATED DAMAGES CLAUSE IN GSA CONTRACT WAS MAXIMUM AMOUNT THAT COULD BE ASSESSED AGAINST GSA CONTRACTOR FOR DELAY DAMAGES. 2. CONSTRUCTION CONTRACTOR NOT HAVING FILED CLAIM FOR $15,017.57 BALANCE DUE UNDER DEFAULTED CONTRACT, PAYMENT MAY BE MADE TO CONTRACTOR'S SURETY, WHICH PAID $175,939.07 TO CONTRACTOR'S LABORERS AND MATERIALMEN, IF AGREEMENT IS RECEIVED FROM SURETY INDEMNIFYING UNITED STATES AGAINST ANY LOSS BY REASON OF PAYMENT.

TO EMPLOYERS COMMERCIAL UNION COMPANIES, U.S. DEPARTMENT OF AGRICULTURE, GENERAL SERVICES ADMINISTRATION:

DURING FEBRUARY 1966 GENERAL SERVICES ADMINISTRATION (GSA) CONTRACT NO. GS-07B-0983, FOR THE CONSTRUCTION OF THE SOUTHERN UTILIZATION RESEARCH LABORATORY, DEPARTMENT OF AGRICULTURE, NEW ORLEANS, LOUISIANA, WAS AWARDED TO MIKE BRADFORD COMPANY, INC. (MIKE BRADFORD). HOWEVER, MIKE BRADFORD DEFAULTED AND THE CONTRACTING OFFICER IN MARCH 1968 TERMINATED THE CONTRACT. SUBSEQUENTLY, THE PROJECT WAS COMPLETED BY METROPOLITAN SOUTH CONSTRUCTION COMPANY.

AFTER DEDUCTING THE COST OF COMPLETING THE PROJECT AND LIQUIDATED DAMAGES DUE UNDER THE TERMS OF CONTRACT NO. GS-07B-0983, THERE REMAINED $15,017.57 WHICH ORDINARILY WOULD HAVE BEEN PAID TO MIKE BRADFORD. A UNITED STATES TREASURY CHECK FOR THIS AMOUNT WAS FORWARDED TO OUR OFFICE FOR DISBURSEMENT TO THE PARTY DETERMINED BY OUR OFFICE TO BE ENTITLED TO THE FUND.

BY LETTER OF MAY 11, 1970, EMPLOYERS COMMERCIAL UNION COMPANIES, ON BEHALF OF THE SUBSIDIARY, AMERICAN EMPLOYERS' INSURANCE COMPANY, THE SURETY ON THE PERFORMANCE AND PAYMENT BONDS ON THE CONTRACT WITH MIKE BRADFORD, FILED A CLAIM FOR THE $15,017.57 ON THE BASIS OF SUBROGATION. ALSO, THE DEPARTMENT OF AGRICULTURE, BY LETTER OF DECEMBER 7, 1971, CLAIMED ENTITLEMENT TO $14,523.00 OF THE FUND, STATING THAT THE DEPARTMENT HAD AWARDED A CONTRACT TO GURTLER, HEBERT & CO., INC. (GURTLER, HEBERT), FOR ADDITIONAL WORK IN THE BUILDING BEING CONSTRUCTED BY MIKE BRADFORD AND THAT THE DEPARTMENT HAD ENTERED INTO A COMPROMISE WITH GURTLER, HEBERT IN SETTLEMENT OF THE COMPANY'S CLAIM FOR $40,324.01 BECAUSE OF DELAYS ATTRIBUTABLE TO MIKE BRADFORD.

IN OUR OPINION, THE DELAY DAMAGES INCURRED IN THE GURTLER, HEBERT CASE CANNOT BE RECOVERED FROM THE CONTRACT BALANCE IN THE MIKE BRADFORD CASE. PARAGRAPH 5 OF THE GENERAL PROVISIONS OF THE CONTRACT WITH MIKE BRADFORD PROVIDES, IN PERTINENT PART, AS FOLLOWS:

"5. TERMINATION FOR DEFAULT - DAMAGES FOR DELAY - TIME EXTENSIONS

"(A) IF THE CONTRACTOR REFUSES OR FAILS TO PROSECUTE THE WORK, OR ANY SEPARABLE PART THEREOF, WITH SUCH DILIGENCE AS WILL INSURE ITS COMPLETION WITHIN THE TIME SPECIFIED IN THIS CONTRACT, OR ANY EXTENSION THEREOF, OR FAILS TO COMPLETE SAID WORK WITHIN SUCH TIME, THE GOVERNMENT MAY, BY WRITTEN NOTICE TO THE CONTRACTOR, TERMINATE HIS RIGHT TO PROCEED WITH THE WORK OR SUCH PART OF THE WORK AS TO WHICH THERE HAS BEEN DELAY. IN SUCH EVENT THE GOVERNMENT MAY TAKE OVER THE WORK AND PROSECUTE THE SAME TO COMPLETION, BY CONTRACT OR OTHERWISE, AND MAY TAKE POSSESSION OF AND UTILIZE IN COMPLETING THE WORK SUCH MATERIALS, APPLIANCES, AND PLANT AS MAY BE ON THE SITE OF THE WORK AND NECESSARY THEREFOR. WHETHER OR NOT THE CONTRACTOR'S RIGHT TO PROCEED WITH THE WORK IS TERMINATED, HE AND HIS SURETIES SHALL BE LIABLE FOR ANY DAMAGE TO THE GOVERNMENT RESULTING FROM HIS REFUSAL OR FAILURE TO COMPLETE THE WORK WITHIN THE SPECIFIED TIME.

"(B) IF FIXED AND AGREED LIQUIDATED DAMAGES ARE PROVIDED IN THE CONTRACT AND IF THE GOVERNMENT SO TERMINATES THE CONTRACTOR'S RIGHT TO PROCEED, THE RESULTING DAMAGE WILL CONSIST OF SUCH LIQUIDATED DAMAGES UNTIL SUCH REASONABLE TIME AS MAY BE REQUIRED FOR FINAL COMPLETION OF THE WORK TOGETHER WITH ANY INCREASED COSTS OCCASIONED THE GOVERNMENT IN COMPLETING THE WORK."

FURTHER, THE CONTRACT PROVIDED FOR LIQUIDATED DAMAGES IN THE AMOUNT OF $170 PER CALENDAR DAY FOR EACH DAY OF DELAY AFTER THE FINAL COMPLETION DATE AND MIKE BRADFORD WAS ASSESSED $63,070.00 FOR 371 DAYS DELAY IN COMPLETION.

THE GENERAL RULE IS THAT WHERE THE CONTRACTING PARTIES SPECIFICALLY PROVIDE OR STIPULATE LIQUIDATED DAMAGES, SUCH DAMAGES ARE IN LIEU OF ANY ACTUAL DAMAGES SUFFERED AND RECOVERY IS LIMITED TO THE AMOUNT AGREED UPON, WHICH IN THE PRESENT CASE WAS $170 PER CALENDAR DAY OF DELAY. SEE TRANS WORLD AIRLINES V. TRAVELERS INDEMNITY COMPANY, 262 F.2D 321, 325 (1959). THIS RULE IS SET FORTH IN 22 AM JUR 2D DAMAGES SEC 235, AS FOLLOWS:

"THE EFFECT OF A CLAUSE FOR STIPULATED DAMAGES IN A CONTRACT IS TO SUBSTITUTE THE AMOUNT AGREED UPON AS LIQUIDATED DAMAGES FOR THE ACTUAL DAMAGES RESULTING FROM BREACH OF THE CONTRACT, AND THEREBY PREVENTS A CONTROVERSY BETWEEN THE PARTIES AS TO THE AMOUNT OF DAMAGES. IF A PROVISION IS CONSTRUED TO BE ONE FOR LIQUIDATED DAMAGES, THE SUM STIPULATED FORMS, IN GENERAL, THE MEASURE OF DAMAGES IN CASE OF A BREACH, AND THE RECOVERY MUST BE FOR THAT AMOUNT. NO LARGER OR SMALLER SUM CAN BE AWARDED EVEN THOUGH THE ACTUAL LOSS MAY BE GREATER OR LESS***."

IN REGARD TO THE CLAIM BY THE SURETY, IT HAS STATED THAT IT PAID LABORERS AND MATERIALMEN $175,939.07 AND AS OF MARCH 10, 1972, WAS IN THE PROCESS OF ATTEMPTING TO SETTLE THE LAST OUTSTANDING CLAIM. MOREOVER, NO CLAIM FOR THE CONTRACT BALANCE HAS BEEN RECEIVED IN OUR OFFICE FROM THE CONTRACTOR. ACCORDINGLY, THE TRANSPORTATION AND CLAIMS DIVISION HAS BEEN AUTHORIZED TO RELEASE THE CONTRACT BALANCE TO THE SURETY UPON RECEIPT OF AN AGREEMENT FROM THE SURETY INDEMNIFYING THE UNITED STATES AGAINST ANY LOSS BY REASON OF PAYMENT. SEE B-178870, MARCH 20, 1973.

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