B-14424, JANUARY 29, 1941, 20 COMP. GEN. 418

B-14424, JANUARY 29, 1941, 20 COMP. GEN. 418

CONTRACTS - MODIFICATION - INCREASED LABOR COSTS LUMP-SUM CONTRACTS FINANCED UNDER NATIONAL DEFENSE APPROPRIATION ACTS MAY NOT BE MODIFIED TO PROVIDE FOR REIMBURSING THE CONTRACTORS FOR INCREASED COSTS RESULTING FROM PAYING LABORERS AND MECHANICS AT RATES HIGHER THAN THE MINIMUM WAGE RATES SPECIFIED IN SAID CONTRACTS, EVEN THOUGH THE CONTRACTORS MAY BE REQUIRED TO PAY THE HIGHER RATES BEING PAID IN THE AREA ON COST-PLUS-A-FIXED-FEE CONTRACTS IN ORDER TO RETAIN SUFFICIENT WORKERS TO COMPLETE THEIR CONTRACTS WITHIN THE TIME SPECIFIED FOR PERFORMANCE.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF WAR, JANUARY 29, 1941:

I HAVE YOUR LETTER OF JANUARY 10, 1941, AS FOLLOWS:

THE CONTRACTORS UNDER LUMP-SUM CONTRACT NO. W 6579 QM-68 FOR THE CONSTRUCTION OF TEMPORARY HOUSING AT SAVANNA ORDNANCE DEPOT, PROVING GROUND, ILLINOIS, HAVE ASKED WHETHER THEY ARE ENTITLED TO ADDITIONAL COMPENSATION TO REIMBURSE THEM FOR PAYMENT OF HIGHER WAGE RATES OF LABORERS AND MECHANICS EMPLOYED ON THE PROJECT IN ORDER TO SECURE AND RETAIN THE NECESSARY LABOR ON THE PROJECT IN THE COMPLETION WITH CONTRACTORS UNDER COST-PLUS-A-FIXED-FEE CONTRACTS IN THE VICINITY. THE LOCAL CONSTRUCTION QUARTERMASTER PRESENTED THE QUESTION INVOLVED IN HIS TELEGRAPH OF DECEMBER 30, 1940, IN THE FOLLOWING LANGUAGE:

"LOCAL LUMP-SUM CONTRACTORS ADVISE THEY ARE HAVING TROUBLE COMPETING WITH COST-PLUS PERCENTAGE JOB AT CAMP GRANT, SEVENTY MILES AWAY, IN PROCURING CARPENTERS. UNDERSTAND CARPENTERS WAGE SCALE AT CAMP GRANT RAISED SINCE LOCAL CONTRACTS LET. CARPENTERS LEAVING HERE FOR CAMP GRANT. BASS AND SMITH CONTRACT W 6579-QM-68 ATTEMPTING TO DOUBLE PERSONNEL BUT ADVISE THEY CANNOT HOLD INITIAL FORCE FROM COST PLUS PERCENTAGE CONTRACTORS. CAMP GRANT AND FORT RILEY COMPLETION DATE THREATENED. WILL LOCAL CONTRACTORS BE ENTITLED TO INCREASED COMPENSATION IF LOCAL LABOR RATES MUST BE INCREASED TO COMPLETE WITH COST-PLUS PERCENTAGE JOBS WHERE RATES HAVE BEEN INCREASED BY GOVERNMENT SINCE THESE CONTRACTS WERE LET? CQM 152.'

IT IS EXPECTED THAT OTHER REQUESTS WILL BE RECEIVED FROM OTHER LUMP SUM CONTRACTORS AFFECTED BY SIMILAR CONDITIONS. THEREFORE IT IS REQUESTED THAT YOU ADVISE WHETHER LUMP-SUM CONTRACTS, WHICH ARE BEING FINANCED UNDER NATIONAL DEFENSE APPROPRIATION ACTS, AND WHICH ARE IN THE SAME LABOR AREA AS COST-PLUS-A-FIXED-FEE PROJECTS UNDERWHICH THE MECHANICS AND LABORERS ARE BEING PAID HIGHER WAGE RATES THAN THOSE SPECIFIED AS MINIMUM IN THE LUMP-SUM CONTRACTS, AND IT IS ESTABLISHED THAT THE PAYMENT OF WAGE RATES COMMENSURATE WITH THOSE BEING PAID ON COST-PLUS-A-FIXED-FEE PROJECTS IN THE VICINITY IS NECESSARY IN ORDER TO HAVE SUCH LUMP-SUM PROJECTS COMPLETED WITHIN THE TIME SPECIFIED IN THE CONTRACTS, MAY BE MODIFIED TO ALLOW REIMBURSEMENT FOR SUCH INCREASED WAGE RATE.

UNDER CONTRACT NO. W-6579-QM-68, DATED NOVEMBER 1, 1940, JOSEPH A. BASS CO. AND W. C. SMITH, C., AGREED TO CONSTRUCT AND COMPLETE CERTAIN TEMPORARY HOUSING AT SAVANNA ORDNANCE DEPOT, PROVING GROUND, ILL., FOR THE LUMP SUM OF $283,400, SUBJECT TO INCREASE OR DECREASE IN THE EVENT OF AUTHORIZED CHANGES IN THE WORK. IT WAS AGREED THE WORK WOULD BE COMPLETED ON OR BEFORE FEBRUARY 4, 1941, BUT THAT IN THE EVENT OF DELAY IN COMPLETION, NOT EXCUSABLE UNDER ARTICLE 9 OF THE CONTRACT, THE CONTRACTOR WOULD BE CHARGED LIQUIDATED DAMAGES AT THE RATE OF $5 PER BUILDING FOR EACH DAY OF DELAY IN THE COMPLETION OF THE INDIVIDUAL BUILDINGS. THE CONTRACT COVERS CONSTRUCTION OF 37 BUILDINGS. IT WAS AGREED, ALSO, THAT THE CONTRACTOR WOULD PAY LABORERS AND MECHANICS NOT LESS THAN CERTAIN SPECIFIED WAGE RAGES WHICH THE SECRETARY OF LABOR HAD PREDETERMINED TO BE PREVAILING IN THE LOCALITY IN WHICH THE WORK WAS TO BE PERFORMED. WAGES WERE TO BE PAID AT THE RATE OF TIME AND ONE-HALF FOR HOURS WORKED IN EXCESS OF 8 PER DAY, PURSUANT TO SECTION 303 OF PUBLIC ACT NO. 781, APPROVED SEPTEMBER 9, 1940.

IT IS UNDERSTOOD FROM YOUR LETTER THAT THE CONTRACTOR IS PAYING LABORERS AND MECHANICS THE MINIMUM WAGE RATES SPECIFIED IN ITS CONTRACT BUT THAT, BY REASON OF AN INCREASE IN THE WAGE RATES BEING PAID CARPENTERS UNDER A COST-PLUS-A-FIXED-FEE CONTRACT IN THE VICINITY, CARPENTERS ARE LEAVING THE JOB TO ACCEPT EMPLOYMENT AT THE HIGHER RATES PAID UNDER THE COST-PLUS-A- FIXED-FEE CONTRACT. BY REASON THEREOF THE QUESTION ARISES AS TO WHETHER THE CONTRACT MAY BE MODIFIED TO PROVIDE THAT THE CONTRACTOR PAY HIGHER WAGE RATES, SUBJECT TO REIMBURSEMENT BY THE GOVERNMENT, IN ORDER TO RETAIN EMPLOYEES ON THE JOB AND AVOID POSSIBLE DELAY IN COMPLETION OF THE CONTRACT.

THE RESPONSIBILITY FOR COMPLETING THE CONTRACT WITHIN THE SPECIFIED TIME IS, OF COURSE, THAT OF THE CONTRACTOR AND IT SHOULD BE REQUIRED TO ADOPT ALL REASONABLE MEANS TO THAT END. THE CONTRACTOR WAS GIVEN NO ASSURANCE THAT THE RATES OF WAGES PREVAILING AT THE TIME THE CONTRACT WAS AWARDED MIGHT NOT LATER BE LESS THAN THE RATES OF WAGES PREVAILING AT SOME SUBSEQUENT TIME BEFORE COMPLETION OF THE WORK, AND THE RATES SPECIFIED IN THE CONTRACT WERE CLEARLY STATED TO BE THE MINIMUM WHICH THE CONTRACTOR SHOULD PAY. IT WAS AND IS THE RESPONSIBILITY OF THE CONTRACTOR TO EMPLOY SUFFICIENT LABOR ON THE WORK TO INSURE ITS COMPLETION WITHIN THE TIME SPECIFIED AND NO RECOURSE AGAINST THE GOVERNMENT IS PROVIDED IN THE EVENT PREVAILING RATES INCREASE AFTER THE AWARD OF A CONTRACT. IT IS RECOGNIZED THAT THE NATIONAL DEFENSE PROGRAM AND LABOR LEGISLATION INCIDENT THERETO HAVE CREATED AN ABNORMAL CONDITION WITH RESPECT TO LABOR AND GENERAL ECONOMIC CONDITIONS BUT SUCH SITUATION WAS WELL KNOWN TO THE CONTRACTOR AT THE TIME IT ENTERED INTO ITS CONTRACT ON NOVEMBER 1, 1940. WHETHER, IN THE KNOWLEDGE OF THOSE CONDITIONS, THE CONTRACTOR INCLUDED IN ITS BID PRICE AN AMOUNT DESIGNED TO PROTECT IT AGAINST SUCH AN EVENTUALITY AS AN INCREASE IN PREVAILING WAGE RATES DOES NOT APPEAR, BUT THE FACT REMAINS THAT IN AGREEING TO PERFORM THE WORK WITHIN A GIVEN TIME, FOR A STIPULATED PRICE, THE CONTRACTOR ASSUMED SUCH A RISK. THE GOVERNMENT DID NOT UNDERTAKE, BY THE CONTRACT, TO PROTECT THE CONTRACTOR AGAINST LOSS OR SUBSEQUENT CONDITIONS WHICH MIGHT MAKE PERFORMANCE OF THE CONTRACT LESS PROFITABLE OR MORE BURDENSOME, NOR IS THERE ANY AUTHORITY IN LAW NOW TO UNDERTAKE TO DO SO THROUGH A MODIFICATION OF THE CONTRACT IN THE MANNER CONTEMPLATED BY THE QUESTION PRESENTED. IT IS A LONG-ESTABLISHED RULE THAT AGENTS AND OFFICERS OF THE GOVERNMENT HAVE NO AUTHORITY TO GIVE AWAY THE MONEY OR PROPERTY OF THE UNITED STATES, TO WAIVE CONTRACTUAL RIGHTS WHICH HAVE ACCRUED TO THE UNITED STATES, OR TO MODIFY EXISTING CONTRACTS WITHOUT A COMPENSATING BENEFIT TO THE GOVERNMENT, AND NOTHING APPEARS HERE TO JUSTIFY OR AUTHORIZE A DEPARTURE FROM THAT RULE. UNITED STATES V. AMERICAN SALES CO., 27 F./2D) 389, AFFIRMED 32 F./2D) 141, CERTIORARI DENIED 280 U.S. 574; PACIFIC HARDWARE CO. V. UNITED STATES, 49 CT.1CLS. 327; AND BAUSCH AND LOMB OPTICAL CO. V. UNITED STATES, 78 CT.1CLS. 584.

ACCORDINGLY, THE QUESTION PRESENTED MUST BE AND IS ANSWERED IN THE NEGATIVE.