B-153365, FEB. 6, 1964

B-153365, FEB. 6, 1964

TO WALTER N. TO BRINER:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 24, 1964, REQUESTING A DECISION AS TO THE PROPRIETY OF THE ASSESSMENT OF LIQUIDATED DAMAGES UNDER CONTRACT NO. S-13414 ENTERED INTO ON APRIL 18, 1963, WITH MAGEE HALE PARK- O-METER COMPANY FOR FURNISHING PARKING METERS.

PURSUANT TO THE CONTRACT A PURCHASE ORDER DATED APRIL 24, 1963, WAS ISSUED, REQUIRING DELIVERY OF 500 PARKING METERS WITHIN 30 DAYS OF THE DATE OF SAID PURCHASE ORDER, OR BY MAY 24, 1963, AND AN ADDITIONAL 1,000 METERS WITHIN 60 DAYS, OR BY JULY 23, 1963. BY CHANGE ORDER DATED APRIL 29, 1963, THE CONTRACT QUANTITY WAS INCREASED BY 200 METERS, TO BE DELIVERED BY JULY 28, 1963. CONTRACT PERFORMANCE WAS SUSPENDED ON MAY 23, 1963, BY THE DISTRICT TO PERMIT REVIEW OF AN ALLEGED IRREGULARITY IN BIDS. NO IRREGULARITY WAS DISCOVERED AND THE DELIVERY DATES WERE EXTENDED BY 10 DAYS, TO JUNE 3, AUGUST 2 AND 7, 1963, RESPECTIVELY.

LIQUIDATED DAMAGES WERE TO BE ASSESSED FOR DELAYS IN DELIVERY IN ACCORDANCE WITH THE PROVISIONS OF PARAGRAPH 1 OF SPECIAL CONDITIONS WHICH IS IN PERTINENT PART AS FOLLOWS:

"* * * SHOULD THE CONTRACTOR REFUSE OR FAIL TO COMPLETE THE WORK AS SPECIFIED IN THE CONTRACT, ACTUAL DAMAGES TO THE DISTRICT WILL BE IMPOSSIBLE TO DETERMINE, AND IN LIEU THEREOF THE CONTRACTOR SHALL PAY TO THE DISTRICT, AS FIXED, AGREED, AND LIQUIDATED DAMAGES AND NOT AS A PENALTY, THE SUM OF ONE DOLLAR ($1.00) PER METER PER DAY OF UNDELIVERED TIME UNTIL COMPLETION. THE DISTRICT MAY, BY WRITTEN NOTICE, TERMINATE THE CONTRACTOR'S RIGHT TO PROCEED WITH THE CONTRACT, OR, AT ITS DISCRETION, ONLY WITH SUCH PART THEREOF AS IS DELINQUENT. IN WHICH EVENT THE DISTRICT MAY PROCURE THE SAME OR SIMILAR SERVICE ELSEWHERE BY CONTRACT OR OTHERWISE, AND THE CONTRACTOR AND HIS SURETIES SHALL BE LIABLE FOR ANY EXCESS COSTS OCCASIONED THE DISTRICT THEREBY, PLUS LIQUIDATED DAMAGES ACCRUING FROM THE FIRST DAY OF DELAY UNTIL THE DELINQUENT SUPPLIES MAY BE REASONABLY PROCURED ELSEWHERE. LIQUIDATED DAMAGES OR EXCESS COSTS SHALL NOT APPLY WHEN DELAY IS DUE TO CAUSES BEYOND THE CONTROL AND WITHOUT FAULT OR NEGLIGENCE BY THE CONTRACTOR INCLUDING, BUT NOT RESTRICTED TO, ACTS OF GOD, THE PUBLIC ENEMY, THE UNITED STATES GOVERNMENT, THE DISTRICT OF COLUMBIA, FIRES, FLOODS, EPIDEMICS, QUARANTINES, STRIKES, FREIGHT EMBARGOES, UNUSUALLY SEVERE WEATHER, OR DELAYS OF A SUBCONTRACTOR DUE TO SUCH CAUSES, PROVIDED THE DISTRICT SHALL HAVE DETERMINED THAT THE DELINQUENT SUPPLIES ARE NOT PROCURABLE IN THE OPEN MARKET AND PROVIDED FURTHER, THE CONTRACTOR SHALL NOTIFY THE PROCUREMENT OFFICER IN WRITING OF THE CAUSE OF SUCH DELAY, WITHIN TEN (10) CALENDAR DAYS OR AUTHORIZE EXTENSION THEREOF FROM THE BEGINNING OF THE DELAY, BUT PRIOR TO THE DATE OF FINAL SETTLEMENT OF THE CONTRACT. THE PROCUREMENT OFFICER SHALL ASCERTAIN THE FACTS AND IF, IN HIS JUDGMENT, THE FACTS SO JUSTIFY, GRANT AN EXTENSION OF DELIVERY TIME; HIS FINDINGS OF FACT SHALL BE CONCLUSIVE, SUBJECT TO APPEAL, WITHIN THIRTY (30) CALENDAR DAYS BY THE CONTRACTOR TO THE CONTRACT APPEALS BOARD, WHOSE DECISION SHALL BE FINAL AND CONCLUSIVE, SUBJECT TO SEC. 3 (B) (2) OF THE REORGANIZATION PLAN NO. 5 OF 1052, 66 STAT., 824.'

THE PRICE PER METER WAS $55.50 PER UNIT, TRADE-IN ALLOWED, LESS $3.90 PER METER DISCOUNT FOR PROMPT PAYMENT, OR A NET PRICE OF $51.60 PER METER.

THE CONTRACTOR DELIVERED 500 METERS ON MAY 24, 1963, AND 99 METERS WERE REJECTED UPON SHOP INSPECTION. INSTALLATION OF 401 METERS WAS DELAYED PENDING RECEIPT OF METER COIN BOXES. HOWEVER, ALL WERE SUBSEQUENTLY REJECTED ON JUNE 28, 1963, AFTER BEING IN SERVICE. THE LAST METER WAS REMOVED ON JULY 2, 1963, AND THE 500 METERS WERE RETURNED THE NEXT DAY TO THE CONTRACTOR. ON JUNE 19, 1963, A SHIPMENT OF 112 METERS WAS REJECTED AFTER SHOP INSPECTION AND RETURNED TO THE CONTRACTOR. SUBSEQUENTLY A TOTAL OF 1,705 METERS WAS DELIVERED. OF THIS QUANTITY 1 METER WAS RETURNED AS DEFECTIVE BUT 1,338 METERS WERE INSTALLED DURING THE PERIOD FROM JULY 13 TO AUGUST 2, 1963. THE REMAINING 366 METERS WERE PLACED IN STORAGE DURING THE PERIOD FROM AUGUST 2 TO OCTOBER 7, 1963, DUE TO CERTAIN CONSTRUCTION WORK IN THE AREA WHERE THEY WERE TO BE INSTALLED.

YOU STATE THAT IT HAS BEEN YOUR EXPERIENCE THAT METERS WHICH PASS SHOP INSPECTION GENERALLY PASS THE PERFORMANCE TESTS IN SERVICE. ANY MINOR CORRECTABLE DEFICIENCY WHICH SHOWS UP OCCASIONALLY IS GENERALLY CORRECTED BY DISTRICT OF COLUMBIA SHOP PERSONNEL AND MORE SERIOUS DEFECTS USUALLY ARE CORRECTED BY THE CONTRACTOR UNDER THE WARRANTY CLAUSE. METERS WHICH FAIL SHOP INSPECTION ARE USUALLY RETURNED TO THE CONTRACTOR. IN THIS CASE, HOWEVER, THE METERS WHICH PASSED SHOP INSPECTION DEVELOPED A CHAIN OF VARIOUS OPERATING DEFECTS AFTER INSTALLATION. EVENTUALLY, THE TOTAL INADEQUACY OF THE COLLECTION SYSTEM IN CONJUNCTION WITH THE CHAIN OF OTHER FAILURES FORCED THE REJECTION OF ALL METERS. BY LETTER OF SEPTEMBER 12, 1963, THE CONTRACTING OFFICER TERMINATED THE CONTRACTOR'S RIGHT TO PROCEED, ADVISED IT THAT PURCHASE WOULD BE MADE FROM ANOTHER SOURCE AND THAT ALL EXCESS COSTS OCCASIONED THEREBY, AS WELL AS ALL ACCRUED LIQUIDATED DAMAGES, WOULD BE CHARGEABLE TO IT.

THE AMOUNT OF THE LIQUIDATED DAMAGES ASSESSED AT THE RATE OF $1.00 PER METER PER DAY OF UNDELIVERED TIME HAS BEEN COMPUTED AS $137,700, OR ABOUT $50,000 IN EXCESS OF THE CONTRACT PRICE. OTHER COSTS CHARGEABLE TO THE CONTRACTOR SUCH AS EXCESS COSTS AND WORK PERFORMED BY THE DISTRICT IN CONNECTION WITH THE REJECTED METERS AMOUNT TO $15,268.12, OR A TOTAL OF $152,968.12. AN APPEAL BY THE CONTRACTOR HAS BEEN FILED WITH THE CONTRACT APPEALS BOARD OF THE DISTRICT OF COLUMBIA IN ACCORDANCE WITH THE PROVISIONS OF THE CONTRACT BUT THIS HAS BEEN HELD IN ABEYANCE PENDING THE NOTIFICATION OF THE DEFAULTING CONTRACTOR BY THE CONTRACTING OFFICER OF THE AMOUNT OF THE INDEBTEDNESS.

YOUR DOUBT AS TO THE AMOUNT OF LIQUIDATED DAMAGES TO BE ASSESSED ARISES BY REASON OF THE FACT THAT THE METERS WHICH WERE FURNISHED BY THE DEFAULTING CONTRACTOR AND INSTALLED "DID PERFORM TO A SUBSTANTIAL DEGREE, WHILE THEY WERE ON CITY STREETS" AND THE AREA OF FAILURE WAS NOT TO ANY GREAT EXTENT IN THE PERFORMANCE OF REGULATING THE PARKING OR COLLECTING AND PROTECTING THE REVENUES BUT IN CONSTANT BREAKDOWNS DURING COLLECTION OF THE MONEY PUT INTO THE METERS. ALSO, IT IS STATED THAT THE METERS RESISTED ATTEMPTS BY VANDALS TO LOOT THE REVENUE AND THAT THE DAMAGE CAUSED IN THESE ATTEMPTS WAS MINOR. YOU RAISE A "QUESTION AS TO THE EQUITY OF APPLYING LIQUIDATED DAMAGES DURING THE PERIOD THE METERS WERE ACTUALLY INSTALLED AND SUBSTANTIALLY MEETING THE NEEDS OF THE DISTRICT.' YOU FURNISH A TABULATION TO SHOW THAT IF "LIQUIDATED DAMAGES ARE NOT ASSESSABLE FOR THOSE DAYS ON WHICH THE CONTRACTOR'S METERS WERE IN SERVICE," THE CHARGES AGAINST THE DEFAULTING CONTRACTOR WILL BE LIQUIDATED DAMAGES IN THE AMOUNT OF $32,966 PLUS OTHER CHARGES OF $15,268.12 OR A TOTAL OF $48,234.12.

SINCE THE DISTRICT WAS RECEIVING THE BENEFIT OF REVENUES DURING THE TIME THE DEFAULTING CONTRACTOR'S INSTALLED METERS WERE BEING USED AND SINCE IT IS PROPOSED TO CHARGE FOR THE COST OF WORK REQUIRED TO CORRECT THE DEFICIENCIES IN THESE METERS, WE AGREE WITH YOUR SUGGESTION THAT NO LIQUIDATED DAMAGES SHOULD BE ASSESSED DURING THE TIME THEY WERE IN USE. IT IS NOTED FROM THE TABULATION THAT THE DEFAULTING CONTRACTOR HAS BEEN GIVEN CREDIT THEREIN FOR "METER DAYS IN ERVICE" DURING PERIODS WHEN NO LIQUIDATED DAMAGES ACCRUED SUCH AS FROM OCTOBER 8 TO 16, 1963, AND WHERE THE CREDIT FOR THE NUMBER OF "METER DAYS" SERVICE IS IN EXCESS OF THE NUMBER OF "METER DAYS" REPRESENTING THE DELINQUENCY OF THE CONTRACTOR, SUCH AS FROM JULY 26 TO AUGUST 2, 1963, DURING WHICH PERIOD THERE WAS A DELINQUENCY IN DELIVERY OF 500 METERS ONLY. HOWEVER, IF THIS IS TO BE REGARDED AS A CREDIT FOR THE USE OF THE METERS AND A DETERMINATION TO THIS EFFECT IS MADE, WE WOULD NOT BE REQUIRED TO OBJECT TO A DETERMINATION OF THE CONTRACTOR'S INDEBTEDNESS ON THIS BASIS.