B-154572, AUG. 18, 1965

B-154572, AUG. 18, 1965

TO THE SECRETARY OF THE INTERIOR:

WE REFER TO OUR DECISION B-154572, DATED APRIL 14, 1965, WHICH DISALLOWED A PART OF THE CLAIM OF GUNTHER AND SHIRLEY COMPANY AND E. V. LANE CORPORATION FOR $82,068.64, ALLEGED TO BE DUE ON ACCOUNT OF DELAYS BY THE BUREAU OF RECLAMATION IN FURNISHING GOVERNMENT MATERIAL AND EQUIPMENT, FOR EQUIPMENT INSTALLATION AND TRANSFORMER CIRCUIT RECONSTRUCTION FOR UNIT N-8 FOR THE HOOVER POWERPLANT AND SWITCHYARDS AT BOULDER CANYON, PURSUANT TO CONTRACT NO. 14-06-D-3369, DATED DECEMBER 3, 1959. THIS MATTER WAS THE SUBJECT OF A LETTER DATED MAY 22, 1964, FROM THE CHIEF ENGINEER, BUREAU OF RECLAMATION, DENVER, COLORADO (REFERENCE: D-280).

BRIEFLY, NOTICE TO PROCEED WAS ISSUED TO THE CONTRACTOR ON DECEMBER 22, 1959. UNDER THE TERMS OF THE CONTRACT THE WORK WAS DIVIDED INTO FOUR PARTS, EACH PART TO BE COMPLETED A SPECIFIED NUMBER OF DAYS AFTER RECEIPT OF THE NOTICE TO PROCEED. THE CONTRACTOR WAS REQUIRED TO FURNISH A PROPOSED PROGRAM OF OPERATIONS BASED ON THE REQUIRED COMPLETION DATES, AND THE GOVERNMENT WAS REQUIRED TO FURNISH CERTAIN EQUIPMENT TO THE CONTRACTOR, INCLUDING A HYDRAULIC TURBINE WITH PRESSURE REGULATOR AND A BUTTERFLY VALVE. AT THE TIME OF AWARD TO GUNTHER AND LANE THE TURBINE AND THE BUTTERFLY VALVE WERE BEING MANUFACTURED FOR THE GOVERNMENT UNDER SEPARATE SUPPLY CONTRACTS. THE GUNTHER AND LANE CONTRACT DID NOT CONTAIN ANY PROMISED DATES OF DELIVERY FOR THE GOVERNMENT-FURNISHED EQUIPMENT, BUT THE DELIVERY SCHEDULE WAS SET FORTH IN THE SPECIFICATIONS IN THE CASE OF THE TURBINE, AND A COPY OF THE INVITATION FOR THE BUTTERFLY VALVE WAS AVAILABLE UPON REQUEST. BY DECEMBER OF 1959, HOWEVER, WHEN THE GUNTHER AND LANE CONTRACT WAS AWARDED, BOTH SUPPLIERS HAD ALREADY NOTIFIED THE GOVERNMENT (THE BUREAU OF RECLAMATION) THAT DELIVERY OF THE RESPECTIVE EQUIPMENT WOULD BE DELAYED DUE TO STRIKES. ALSO, ON DECEMBER 16, 1959, BETWEEN THE TIME OF THE DECEMBER 3 DATE OF AWARD AND THE DECEMBER 22 ISSUANCE OF NOTICE TO PROCEED TO GUNTHER AND LANE, A CHANGE ORDER WAS ISSUED UNDER THE TURBINE SUPPLY CONTRACT WHICH EXTENDED THE DELIVERY DATES FOR 60 DAYS. SUBSEQUENTLY, IN JANUARY OF 1960, THE GOVERNMENT GRANTED A 91 DAY EXTENSION IN DELIVERY TIME TO THE BUTTERFLY VALVE MANUFACTURER DUE TO THE STRIKE (A MACHINISTS' STRIKE), WHILE, IN DECEMBER OF 1960, THE TURBINE MANUFACTURER WAS GRANTED A 60-DAY EXTENSION DUE TO A STRIKE (THE NATIONWIDE STEEL STRIKE, FROM JULY TO NOVEMBER OF 1959).

FURTHER EXTENSIONS WERE GRANTED TO THE TURBINE MANUFACTURER: (1) 14 DAYS DUE TO REPAIR OF DAMAGED EQUIPMENT; (2) 5 DAYS DUE TO UNUSUALLY SEVERE WEATHER; AND (3) 2 DAYS DUE TO LABOR DIFFICULTIES. THE EVENTS GIVING RISE TO THESE EXTENSION, HOWEVER, OCCURRED WHILE GUNTHER AND LANE WERE ALREADY PERFORMING. THE BUTTERFLY VALVE MANUFACTURER WAS ALSO GRANTED A 57-DAY EXTENSION IN DELIVERY TIME (IN ADDITION TO THE 91 DAYS GRANTED FOR THE STRIKE) BECAUSE OF THE OPERATIONS OF THE NATIONAL PRIORITIES SYSTEM. ALTHOUGH THE PERIOD COVERED BY THIS DELAY COMMENCED IN NOVEMBER OF 1959, OR BEFORE THE GUNTHER AND LANE CONTRACT WAS AWARDED, IT APPEARS THAT THE GOVERNMENT WAS FIRST ADVISED OF THE DELAY BY LETTER OF MARCH 7, 1961. (THE 57-DAY EXTENSION WAS GRANTED ON MARCH 24, 1961.) IN THIS CONNECTION, PARAGRAPH 17 (C) OF THE GUNTHER AND LANE CONTRACT PROVIDED THAT THE TIME FOR PERFORMANCE WOULD BE EXTENDED TO COMPENSATE FOR OPERATIONS OF ANY UNITED STATES NATIONAL PRIORITIES OR MATERIAL ALLOCATION SYSTEM. ADDITION, BOTH SUPPLIERS ALSO ENCOUNTERED DELAYS FOR WHICH TIME EXTENSIONS WERE NOT GRANTED.

AS A RESULT OF ALL THESE DELAYS, THE GOVERNMENT WAS UNABLE TO FURNISH THE TURBINE AND VALVE EQUIPMENT TO GUNTHER AND LANE BY OCTOBER OF 1960, AS ORIGINALLY ANTICIPATED, IN TIME FOR THE CONTRACTOR TO CONTINUE PARTS 2 AND 3 OF THE CONTRACT WORK AS SET FORTH UNDER THE CONTRACTOR'S PLAN OF OPERATION. THE EQUIPMENT FOR THE MOST PART WAS NOT FURNISHED UNTIL THE END OF MARCH 1961. DURING THE PERIOD NOVEMBER 1, 1960, THROUGH MARCH 15, 1961, THE CONTRACTOR WAS REQUIRED TO SHUT DOWN MOST OF ITS OPERATIONS. UNDER CHANGE ORDER NO. 4, DATED MAY 31, 1961, GUNTHER AND LANE WERE GRANTED A 160-DAY EXTENSION ON PARTS 2 AND 3 OF THE CONTRACT WORK FOR LATE DELIVERY OF THE GOVERNMENT-FURNISHED TURBINE EQUIPMENT. (PRESUMABLY THIS TIME EXTENSION ALSO COVERED THE DELAY ON THE BUTTERFLY VALVE.) ALSO, THE CONTRACTOR WAS DIRECTED TO ACCELERATE THE WORK ON PARTS 2 AND 3, FOR WHICH PAYMENT WAS AUTHORIZED IN THE AMOUNT OF $76,240. THE FINAL COMPLETION DATE, PART 4 OF THE WORK, WAS EXTENDED 134 DAYS.

THE CONTRACTOR CLAIMED $82,068.64 AS THE AMOUNT ALLEGED TO BE DUE FOR THE 134 DAYS THAT THE FINAL COMPLETION DATE WAS EXTENDED.

YOUR DEPARTMENT WAS OF THE VIEW THAT THE GOVERNMENT DID NOT BREACH ANY CONTRACTUAL DUTIES WITH REGARD TO THE MATERIAL IT FURNISHED TO THE CONTRACTOR, BUT RATHER TOOK EVERY ACTION TO SECURE SHIPMENT OF THE GOVERNMENT-FURNISHED MATERIAL AND EQUIPMENT AS SOON AS POSSIBLE.

IN OUR PRIOR DECISION, WE NOTED THAT WHEN THE NOTICE TO PROCEED WAS ISSUED TO THE CONTRACTOR YOUR DEPARTMENT WAS AWARE OF THE POSSIBILITY THAT THE EQUIPMENT MIGHT BE DELAYED, BUT THAT THE CONTRACTOR WAS NOT MADE AWARE OF THIS POSSIBILITY. FURTHER, WE FOUND THAT YOUR DEPARTMENT COULD HAVE ADOPTED ALTERNATIVE COURSES OF ACTION TO DECREASE THE CONTRACTOR'S DELAY EXPENSES. THAT IS, IT COULD HAVE DELAYED ISSUANCE OF THE NOTICE TO PROCEED AND EXTENDED THE CONTRACTOR'S SCHEDULED TIME FOR COMPLETING THE PROJECT; IT COULD HAVE ADVISED THE CONTRACTOR OF THE POSSIBLE DELAYS BEFORE THE CONTRACTOR PLANNED ITS PROPOSED SCHEDULE OF OPERATIONS; IT COULD HAVE ISSUED A SUSPENSION OF WORK WHEN THE GOVERNMENT-FURNISHED EQUIPMENT WAS DELAYED; OR IT COULD HAVE TERMINATED THE CONTRACT AND SETTLED WITH THE CONTRACTOR. IT SEEMED TO US THAT YOUR DEPARTMENT FOLLOWED A PROCEDURE WHICH, IN THE CIRCUMSTANCES, LEAST PROTECTED THE CONTRACTOR FROM INCURRING DELAY EXPENSES. BASED ON OUR REVIEW OF THE AUTHORITIES, WE CONCLUDED THAT THE GOVERNMENT WAS LIABLE TO THE CONTRACTOR FOR THE DELAY EXPENSES WHICH AROSE FROM AFFIRMATIVE ACTION ON THE PART OF THE GOVERNMENT. ON THIS BASIS, WE FOUND THAT ONLY WITH RESPECT TO THE CHANGE ORDER ISSUED ON DECEMBER 16, 1959, UNDER THE TURBINE SUPPLY CONTRACT, DID THE GOVERNMENT FAIL TO FULFILL ITS CONTRACTUAL OBLIGATIONS TO THE CONTRACTOR. SPECIFICALLY, WE STATED AS FOLLOWS:

"WITH RESPECT TO CHANGE ORDER NO. 1 (THE CHANGE ORDER UNDER THE TURBINE SUPPLY CONTRACT) WE CANNOT SAY THAT YOUR DEPARTMENT PURSUED AVAILABLE ALTERNATIVES WHICH WOULD HAVE ENABLED GUNTHER AND LANE TO ECONOMICALLY PERFORM ITS CONTRACT. IN VIEW OF THE DISCUSSION ABOVE WE FELL THERE IS AMPLE AUTHORITY FOR PAYMENT OF THIS PORTION OF GUNTHER AND LANE'S CLAIM. THE COURT CASES CITED IN THE REPORT FROM YOUR DEPARTMENT TO OUR OFFICE ARE DISTINGUISHABLE AND WOULD NOT PRECLUDE PAYMENT OF THIS PORTION OF GUNTHER AND LANE'S CLAIM.'

WE REFERRED THE MATTER BACK TO YOUR DEPARTMENT TO COMPUTE THE COSTS ATTRIBUTABLE TO THIS 60-DAY DELAY AND TO DETERMINE WHETHER SUCH DETERMINED AMOUNT WOULD BE ACCEPTABLE TO THE CONTRACTOR IN SATISFACTION OF THAT PORTION OF THE CLAIM.

THE CONTRACTOR REQUESTS THAT WE RECONSIDER OUR PRIOR HOLDING AS TO THE EXTENT OF THE GOVERNMENT'S LIABILITY.

UPON RECONSIDERATION, WE SEE NO VALID REASON FOR DISTINGUISHING BETWEEN THE DELAY INCIDENT TO THE CHANGE ORDER AND THE DELAY INCIDENT TO THE STRIKES WHERE THE GOVERNMENT HAD NOTICE PRIOR TO AWARD TO GUNTHER AND LANE THAT ITS SUPPLIERS WERE CLAIMING DELAY. THE RECORD INDICATES THAT THE GOVERNMENT KNEW OR SHOULD HAVE KNOWN THAT IT WOULD BE UNABLE TO SUPPLY GUNTHER AND LANE WITH THE TURBINE AND THE BUTTERFLY VALVE IN TIME FOR THE WORK TO PROCEED IN AN ORDERLY MANNER AND TO BE COMPLETED WITHIN THE SCHEDULED PERIOD. IT APPEARS THAT WITH RESPECT TO THIS FACTOR OF DELAY THE GOVERNMENT DID NOT REASONABLY CONSIDER THE CONTRACTOR'S INTERESTS. ALTHOUGH THE GOVERNMENT WAS NOT RESPONSIBLE FOR THE STRIKES, IT HAD AN OBLIGATION--- THE EVER-PRESENT OBLIGATION OF ANY CONTRACTING PARTY--- TO REASONABLY COOPERATE WITH THE CONTRACTOR SO THAT THE CONTRACTOR COULD HAVE ECONOMICALLY PERFORMED THE CONTRACT. COMMERCE INTERNATIONAL COMPANY V. UNITED STATES CT.CL., 1964) 338 F.2D 81, 85-6; LITCHFIELD MANUFACTURING CORPORATION V. UNITED STATES CT.CL., 1964) ID. 94, 97; PETER KIEWIT SONS' CO., INC. V. UNITED STATES (CT.CL., 1957) 151 F.SUPP. 726, 731. THE CONTRACTOR IS ENTITLED TO THE DELAY EXPENSES CAUSED BY THE GOVERNMENT'S FAILURE TO ACT PRUDENTLY.

WE DO NOT HOLD THE GOVERNMENT RESPONSIBLE FOR THE DELAY DUE TO THE HIGHER PRIORITY CONTRACT. THE GOVERNMENT WAS NOT ADVISED OF THIS DELAY UNTIL AFTER GUNTHER AND LANE WERE PERFORMING, AND THE CONTRACT LIMITED RECOVERY FOR SUCH DELAY TO AN EXTENSION OF TIME. NOR DO WE BELIEVE THAT THE GOVERNMENT IS LIABLE FOR THE DELAYS DUE TO SEVERE WEATHER AND TO THE DAMAGED EQUIPMENT. THESE CONDITIONS WERE NOT CAUSED BY GOVERNMENT NEGLIGENCE AND AROSE AFTER GUNTHER AND LANE HAD STARTED PERFORMANCE. THIS RESPECT WE RE-AFFIRM OUR PRIOR DECISION. SEE BARLING V. UNITED STATES, (CT.CL., 1953) 111 F.SUPP. 878.

THE CONTRACTING OFFICER FOUND THAT GUNTHER AND LANE WERE EXCUSABLY DELAYED A TOTAL OF 160 DAYS FOR LATE DELIVERY OF THE GOVERNMENT FURNISHED EQUIPMENT. WE PREVIOUSLY CONCLUDED THAT THE DELAY EXPENSES ATTRIBUTABLE TO THE CHANGE ORDER UNDER THE SUPPLY CONTRACT WERE PAYABLE. A 60-DAY EXTENSION IN DELIVERY WAS ALLOWED THE TURBINE SUPPLIER UNDER THIS CHANGE ORDER. UNDER A FINDING OF FACT DATED DECEMBER 14, 1960, ANOTHER 60-DAY EXTENSION OF CONTRACT TIME WAS ALLOWED THE TURBINE SUPPLIER DUE TO DELAYS CAUSED BY THE NATIONWIDE STEEL STRIKE. HENCE WE FIND THAT OF THE TOTAL 160 DAYS OF DELAY SUFFERED BY GUNTHER AND LANE, A TOTAL OF 120 DAYS, OR 75 PERCENT OF THE TOTAL 160-DAY DELAY, IS ATTRIBUTABLE TO THE GOVERNMENT. (THIS 120 DAY PERIOD OF DELAY WOULD COVER THE 91 DAYS OF DELAY ARISING UNDER THE SUPPLY CONTRACT FOR THE BUTTERFLY VALVE.) IN REACHING THE TOTAL ALLEGED AMOUNT OF $82,068.64, THE CONTRACTOR HAS COMPUTED DELAY DAMAGES ON 134 DAYS, THAT IS THE 160 DAYS OF DELAY LESS THE REDUCTION IN TIME RESULTING FROM THE ORDER TO EXPEDITE THE WORK.

WE THEREFORE ASK YOUR DEPARTMENT TO DETERMINE THE TOTAL DELAY COSTS INCURRED BY THE CONTRACTOR DUE TO THE LATE DELIVERY OF THE GOVERNMENT FURNISHED EQUIPMENT. SUCH AMOUNT SHOULD BE REDUCED BY FACTOR OF 25 PERCENT TO REPRESENT THE PORTION OF THE DELAY FOR WHICH THE GOVERNMENT SHOULD NOT BE HELD LIABLE TO THE CONTRACTOR. IF THE REMAINING AMOUNT (THE 75 PERCENT) IS ACCEPTABLE TO THE CONTRACTOR IN FULL AND FINAL SETTLEMENT OF ALL CLAIMS UNDER THE CONTRACT, A VOUCHER COVERING THE AMOUNT AGREED UPON MAY BE SUBMITTED TO THIS OFFICE TOGETHER WITH YOUR FIGURES INDICATING THE AMOUNT DUE, AND THE MATTER WILL BE GIVEN FULL CONSIDERATION BY OUR OFFICE.