A-85795, OCTOBER 19, 1937, 17 COMP. GEN. 354

A-85795, OCTOBER 19, 1937, 17 COMP. GEN. 354

CONTRACTS - DAMAGES - LIQUIDATED - CONTRACTOR'S LIABILITY; WAIVERS; CONSIDERATION OF ACTUAL DAMAGES WHERE IT HAS BEEN ADMINISTRATIVELY DETERMINED THAT POWER SHOVELS FURNISHED DID NOT MEET CONTRACT SPECIFICATIONS, THE CONTRACTOR MAY NOT BE RELIEVED OF ITS LIABILITY FOR LIQUIDATED DAMAGES FOR DELAY IN FURNISHING ACCEPTABLE SHOVELS AS EXPRESSLY FIXED BY THE CONTRACT, ON THE GROUND THAT THE DEFICIENCY COULD HAVE BEEN DETERMINED BY A FACTORY INSPECTION, WHEN THE GOVERNMENT WAS NOT CONTRACTUALLY OBLIGATED TO MAKE SUCH INSPECTION AND SHIPMENT WAS MADE BEFORE ARRIVAL OF THE GOVERNMENT INSPECTOR AT CONTRACTOR'S FACTORY. WHERE A CONTRACT EXPRESSLY PROVIDES FOR PAYMENT TO THE UNITED STATES OF LIQUIDATED DAMAGES FOR DELAY IN PERFORMANCE NOT EXCUSABLE UNDER THE CONTRACT TERMS, THE RIGHT TO THE STIPULATED LIQUIDATED DAMAGES ACCRUES TO, AND VESTS IN, THE UNITED STATES BY REASON OF SUCH DELAY, AND NO OFFICER OF THE GOVERNMENT HAS AUTHORITY TO WAIVE SUCH PROVISION OF THE CONTRACT OR TO REMIT THE CLAIM OF THE GOVERNMENT FOR THE AMOUNT OF LIQUIDATED DAMAGES LEGALLY ACCRUING TO THE UNITED STATES THEREUNDER. A VALID CONTRACTUAL STIPULATION FOR LIQUIDATED DAMAGES IS FOR ENFORCEMENT ACCORDING TO ITS TERMS, AND, THE PARTIES HAVING AGREED IN ADVANCE ON THE AMOUNT OF SUCH DAMAGES, THE QUESTION OF ACTUAL DAMAGES OR THE AMOUNT THEREOF RESULTING FROM A BREACH OF THE CONTRACT, IS NOT FOR CONSIDERATION.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE LIMA LOCOMOTIVE WORKS, INC., OCTOBER 19, 1937:

REFERENCE IS MADE TO YOUR CLAIM FOR $20,800 WITHHELD IN SETTLEMENT NO. 0430787, DATED DECEMBER 14, 1936, PENDING DETERMINATION OF THE LIQUIDATED DAMAGES ACCRUING TO THE UNITED STATES AS A RESULT OF YOUR DELAY IN COMPLETING DELIVERIES TO THE FOREST SERVICE OF FOUR POWER SHOVELS AS REQUIRED BY CONTRACT NO. ER-ALS-1652, DATED JUNE 26, 1936, AND TO YOUR LETTER OF JULY 7, 1937, INCLOSING A STATEMENT FROM YOUR CHIEF ENGINEER AS TO THE BASIS FOR ASSUMING THAT THE CATERPILLAR DIESEL ENGINES WITH WHICH THE SHOVELS WERE ORIGINALLY EQUIPPED MET THE "LINE PULL" PERFORMANCE REQUIREMENT OF THE CONTRACT SPECIFICATIONS.

THE CHIEF OF THE FOREST SERVICE HAS REPORTED AS FOLLOWS CONCERNING THE MATTER:

ALTHOUGH THE LIMA LOCOMOTIVE WORKS WAS DULY NOTIFIED BOTH BY LETTER AND VERBALLY THROUGH ITS LOCAL REPRESENTATIVES THAT AN INSPECTION WOULD BE MADE OF THE UNITS AT THE FACTORY, THE UNITS WERE SHIPPED IN ADVANCE OF THE ARRIVAL OF THE INSPECTOR. WHEN THE INSPECTOR ARRIVED AT THE PLANT, IT WAS POINTED OUT TO THE OFFICIALS OF THE COMPANY THAT THE CATERPILLAR ENGINES FURNISHED IN THESE UNITS WERE, ACCORDING TO THE CATERPILLAR COMPANY'S PUBLISHED CURVES, TOO SMALL TO COMPLY WITH THE SPECIFICATIONS AND THESE OFFICIALS READILY AGREED THAT THE ENGINES SO FURNISHED DID NOT COMPLY WITH THAT PART OF OUR ADVERTISED SPECIFICATION READING AS FOLLOWS:

"17. POWER UNIT.--- (A) THE POWER UNIT SHALL BE OF THE FULL DIESEL TYPE ENGINE HAVING NOT LESS THAN FOUR CYLINDERS. THE NORMAL GOVERNED SPEED SHALL BE ON THE HIGH SPEED SIDE OF THE PEAK OF THE TORQUE CURVE AND SHALL NOT EXCEED 1,500 R.P.M. THE POWER UNIT SHALL BE EQUIPPED WITH ALL NECESSARY ACCESSORIES INCLUDING AN OIL FILTER, AN EFFICIENT OIL BATH AIR CLEANER, FUEL INJECTOR PUMPS, FILTERS, ALL NECESSARY GAUGES, ETC., AND SHALL BE EQUIPPED WITH A COMPLETE, EFFICIENT, STARTING SYSTEM, EITHER A 24 -VOLT, OR PREFERABLY A 32-VOLT, ELECTRIC SYSTEM, OR AN AUXILIARY GASOLINE ENGINE STARTER EQUIPPED WITH A MAGNET WITH IMPULSE COUPLING. THE POWER UNIT MUST FURNISH AT GOVERNED SPEED, A POWER ON THE LINE OF NOT LESS THAN THE FOLLOWING:

"ITEM 1.--- 2,600,000 FT.LBS. PER MIN.; I.E. 17,500 LBS. PULL AT 150 FT. PER MIN.

"ITEM 6.--- 1,980,000 FT.LBS. PER MIN.; I.E. 13,200 LBS. PULL AT 150 FT. PER MIN.

"A TOLERANCE IN LINE SPEED OF 5 PERCENT MORE OR LESS THAN 150 WILL BE ALLOWED ON THE HOIST LINE. THE DRAG CABLE SPEED SHALL BE NOT LESS THAN 125 FEET PER MINUTE NOR MORE THAN 140 FEET PER MINUTE. PROVISION MUST BE MADE BY SUCCESSFUL BIDDER TO TEST THE LINE SPEED AND PULL DURING THE INSPECTION AT FACTORY.'

ADDENDUM ISSUED MAY 28 CHANGED THE ITEM TO READ AS FOLLOWS:

"ITEM 1.--- 2,775,000 FT.LBS. PER MIN.; I.E. 18,500 LBS. PULL AT 150 FT. PER MIN.'

INASMUCH AS THE ABILITY OF A SHOVEL "TO DO WORK" DEPENDS UPON THE POWER AT THE DIPPER, IT IS NECESSARY TO SPECIFY THE POWER REQUIRED IN FOOT- POUNDS AT THE DIPPER. MANY TESTS HAVE DETERMINED THAT THE POWER LOSS, DUE TO FRICTION THROUGH THE MACHINE, FROM THE ENGINE TO THE DIPPER VARIES FROM ABOUT 10 TO 20 PERCENT, DEPENDING UPON MANY FACTORS, SOME OF WHICH ARE: THE TYPE OF TRANSMISSION, KIND OF BEARINGS, DRUM AND SHEAVE ARRANGEMENT, AND IN NO SMALL DEGREE UPON THE WORKMANSHIP IN MAKING AND ASSEMBLING THE VARIOUS PARTS. THE LIMA COMPANY ENGINEERS USED 10 PERCENT POWER LOSS IN THEIR CALCULATIONS. THE SPECIFIED FIGURE OF 2,775,000 FOOT-POUNDS REPRESENTS AN ACTUAL 84.01 BRAKE HORSEPOWER THAT MUST BE DEVELOPED AT THE DIPPER.

THE LIMA LOCOMOTIVE WORKS ORIGINALLY FURNISHED A CATERPILLAR D 8800 DIESEL ENGINE. A SHEET, DATED JANUARY 17, 1936, SHOWING THE PUBLISHED CHARACTERISTIC CURVES FOR THIS MOTOR IS ATTACHED, INDICATING A MAXIMUM HORSEPOWER OF 84 WITH FULL EQUIPMENT. THEREFORE, THE BEST THAT COULD POSSIBLY BE OBTAINED AT THE DIPPER WOULD BE 10 PERCENT LESS THAN SPECIFIED. THE CATERPILLAR COMPANY RECOMMENDS A WORKING SPEED OF 850 R.P.M. AS INDICATED BY (A) ON THE ATTACHED CHART AT WHICH THE HORSEPOWER AVAILABLE IS 80--- WHICH WOULD PRODUCE 72 HORSEPOWER AT THE DIPPER--- 14 PERCENT LESS THAN SPECIFIED.

THE LIMA COMPANY ENGINEERS POINTED OUT THAT THEIR MACHINES COULD LIFT 18,500 POUNDS, AND WHILE THIS IS TRUE THE MAXIMUM LINE SPEED FOR THIS PULL WOULD BE (BASED ON 10 PERCENT FRICTION LOSS) 10 PERCENT LESS THAN 150 OR 135 FEET PER MINUTE WITH MOTOR OPERATING AT ITS MAXIMUM OF 84 HORSE POWER. IT IS ALSO TRUE THAT THE MACHINES WILL PRODUCE A LINE SPEED OF 150 FEET PER MINUTE, BUT AT THIS SPEED THE MAXIMUM LOAD WILL BE 10 PERCENT LESS THAN 18,500 POUNDS AND ANY COMBINATION OF SPEED AND PULL WILL AT BEST FALL 10 PERCENT UNDER THE 2,775,000 FOOT-POUNDS PER MINUTE SPECIFIED. RECOMMENDED WORKING SPEEDS THE AVAILABLE POWER WILL STILL BE LESS, AS PREVIOUSLY MENTIONED.

THE ENGINES IN THESE POWER SHOVELS WERE REPLACED BY CUMMINS HD 6 DIESEL MOTORS WITH A GUARANTEED NET HORSE POWER OF 108 WITH ALL ACCESSORIES ATTACHED. WITH THE INSTALLATION OF THESE MOTORS THE POWER REQUIREMENTS ARE COMPLIED WITH AND THE REQUIREMENT TO LIFT 18,500 POUNDS AT A SPEED OF 150 FEET PER MINUTE IS EXCEEDED.

THE COMPANY WAS AWARE OF THE ADDENDUM ISSUED MAY 28, 1936, AND SUBMITTED BID ACCORDINGLY UNDER DATE OF JUNE 3, 1936. THE ACCEPTED COPY OF BID AND RELATED PAPERS ARE ATTACHED HERETO.

IT IS BELIEVED THAT THE COMPANY WAS SINCERE IN ITS BELIEF THAT THE ENGINES FURNISHED WOULD SATISFY THE REQUIREMENTS OF THE SPECIFICATIONS AND AFTER REALIZING ITS MISTAKE EVERY EFFORT WAS MADE TO EXPEDITE THE DELIVERY AND INSTALLATION OF ENGINES WHICH DID COMPLY. IN THE EXCHANGE OF ENGINES THE GOVERNMENT BENEFITED TO THE EXTENT OF RECEIVING UNITS WHICH EVEN SURPASSED THE SPECIFICATIONS AND WHILE THIS BUREAU WAS DENIED THE USE OF THE SHOVELS WHILE THE EXCHANGE WAS BEING EFFECTED, BECAUSE OF ADVERSE WEATHER CONDITIONS, NO SERIOUS DAMAGE TO THE GOVERNMENT RESULTED THEREFROM.

IN VIEW OF THIS ADMINISTRATIVE REPORT IT MUST BE HELD THAT DELIVERIES OF EQUIPMENT COMPLYING WITH THE CONTRACT SPECIFICATIONS WERE NOT MADE UNTIL THE DATES WHEN THE ENGINE SUBSTITUTIONS WERE COMPLETED, THERE HAVING BEEN NO ACCEPTANCE OF DELIVERIES OR USE OF THE EQUIPMENT BEFORE THEN. IT IS UNFORTUNATE THAT THE FAILURE OF THE ORIGINAL ENGINES TO MEET CONTRACT REQUIREMENTS WAS NOT DETERMINED BY AN INSPECTION AT THE FACTORY BEFORE THE EQUIPMENT WAS SHIPPED, BUT THERE WAS NO CONTRACTUAL OBLIGATION ON THE PART OF THE GOVERNMENT TO MAKE SUCH INSPECTION AND DETERMINATION PRIOR TO SHIPMENT, AND AS THE ENTIRE RESPONSIBILITY FOR DELIVERING EQUIPMENT STRICTLY COMPLYING WITH THE CONTRACT SPECIFICATIONS RESTED ON YOU, THERE IS NO BASIS FOR EXCUSING DELAY ON THE GROUND THAT THE DEFICIENCY IN PERFORMANCE COULD HAVE BEEN DETERMINED BY A FACTORY INSPECTION BEFORE SHIPMENT.

THE CONTRACT EXPRESSLY PROVIDED THAT YOU WOULD PAY THE GOVERNMENT LIQUIDATED DAMAGES IN THE AMOUNT OF ONE PERCENT OF THE PURCHASE PRICE PER UNIT FOR EACH CALENDAR DAY OF DELAY NOT EXCUSABLE UNDER THE TERMS OF THE CONTRACT. UNDER THIS PROVISION THE RIGHT TO THE STIPULATED LIQUIDATED DAMAGES ACCRUED TO, AND VESTED IN, THE UNITED STATES BY REASON OF SUCH DELAY, AND NO OFFICER OF THE GOVERNMENT HAS AUTHORITY TO WAIVE SUCH PROVISION OF THE CONTRACT OR TO REMIT THE CLAIM OF THE GOVERNMENT FOR THE AMOUNT OF LIQUIDATED DAMAGES LEGALLY ACCRUING TO THE UNITED STATES THEREUNDER. PACIFIC HARDWARE CO. V. UNITED STATES, 49 CT.CLS. 327, 335, 337; BAUSCH AND LOMB OPTICAL CO. V. UNITED STATES, 78 CT.CLS. 584, 607; AMERICAN SALES CORPORATION V. UNITED STATES, 27 F./2D) 389, AFFIRMED 32 F./2D) 141, CERTIORARI DENIED, 280 U.S. 574. IT IS SETTLED THAT A VALID CONTRACTUAL STIPULATION FOR LIQUIDATED DAMAGES WILL BE ENFORCED ACCORDING TO ITS TERMS, AND, THE PARTIES HAVING AGREED IN ADVANCE ON THE AMOUNT OF SUCH DAMAGES, THE QUESTION OF ACTUAL DAMAGES, OR THE AMOUNT THEREOF RESULTING FROM A BREACH OF THE CONTRACT, IS NOT FOR CONSIDERATION. SUN PRINTING AND PUBLISHING ASSOCIATION V. MOORE, 183 U.S. 642; UNITED STATES V. BETHLEHEM STEEL CO., 205 U.S. 105; WISE V. UNITED STATES, 249 U.S. 361; PACIFIC HARDWARE CO. V. UNITED STATES, 49 CT.CLS. 327; MCDONALD V. UNITED STATES, 78 CT.CLS. 572.IN FRICK CO. V. RUBEL CORPORATION, 62 F./2D) 765, DECIDED BY THE CIRCUIT COURT OF APPEALS, SECOND CIRCUIT, JANUARY 23, 1933, IT WAS HELD THAT WHERE A CONTRACT FIXED LIQUIDATED DAMAGES FOR BREACH, THE LOWER COURT PROPERLY EXCLUDED AS IMMATERIAL CERTAIN EVIDENCE WHICH HAD BEEN OFFERED TO PROVE THAT THE ACTUAL LOSS CAUSED BY THE BREACH WAS INFINITESIMALLY SMALL AS COMPARED WITH THE STIPULATED LIQUIDATED DAMAGES, AND PROPERLY DIRECTED A VERDICT FOR THE AMOUNT OF LIQUIDATED DAMAGES AGREED UPON IN THE CONTRACT, IRRESPECTIVE OF THE AMOUNT OF ACTUAL DAMAGES.

IT FOLLOWS THAT YOU ARE LEGALLY CHARGEABLE WITH LIQUIDATED DAMAGES AT THE CONTRACT RATE FOR ALL DELAY FROM THE DATE YOU WERE REQUIRED TO MAKE SHIPMENT UNTIL THE DATES WHEN THE REPLACEMENT OF THE ENGINES WAS COMPLETED FOR THE DIFFERENT UNITS TO MAKE THEM COMPLY WITH THE CONTRACT SPECIFICATIONS, LESS THE ACTUAL TRANSPORTATION TIME OF THE DIFFERENT UNITS TO THEIR VARIOUS DESTINATIONS (WHICH WAS NOT WITHIN THE CONTRACT DELIVERY TIME), AND YOUR CLAIM FOR THE BALANCE OF THE CONTRACT PRICE WILL BE SETTLED ACCORDINGLY.