B-74105, MAY 17, 1948, 27 COMP. GEN. 690

B-74105, MAY 17, 1948, 27 COMP. GEN. 690

CONTRACTS - COST-PLUS - INTEREST ON MONIES BORROWED BECAUSE OF REIMBURSEMENT DELAYS A CLAIM FOR DAMAGES OR LOSS OF PROFITS RESULTING FROM THE GOVERNMENT'S FAILURE TO REIMBURSE PROMPTLY A CONTRACTOR FOR HIS PROPER AND ORDINARY EXPENDITURES IN CONNECTION WITH THE PERFORMANCE OF CONSTRUCTION WORK UNDER A COST-PLUS-A-FIXED-FEE CONTRACT, WHICH DELAY FORCED THE CONTRACTOR TO BORROW MONEY AND TO PAY INTEREST THEREON IN ORDER TO CARRY ON THE CONTRACT WORK, IS, NOTWITHSTANDING ITS FORM, A CLAIM FOR INTEREST PAYMENT OF WHICH IS PRECLUDED IN VIEW OF THE GENERAL PRINCIPLE OF NON-LIABILITY ON THE PART OF THE UNITED STATES FOR INTEREST AND THE TERMS OF SAID CONTRACT MAKING INTEREST ON MONIES A NON REIMBURSABLE ITEM OF COST.

COMPTROLLER GENERAL WARREN TO HENRY M. LEEN, MAY 17, 1948:

REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 5, 1948, REQUESTING, ON BEHALF OF THE CASPER RANGER CONSTRUCTION COMPANY, HOLYOKE, MASSACHUSETTS, REVIEW OF SETTLEMENT OF THIS OFFICE DATED JANUARY 28, 1948, WHICH DISALLOWED THAT COMPANY'S CLAIM FOR $21,909.87, REPRESENTING LOSS OF ANTICIPATED PROFITS ALLEGED TO HAVE BEEN SUSTAINED IN CONNECTION WITH THE PERFORMANCE OF COST-PLUS-A-FIXED-FEE CONTRACTS, NOS. HA (ME-17031) CPH-113 AND HA (ME-13039) CPH-227, DATED JULY 25, 1942, NOVEMBER 16, 1942, RESPECTIVELY, ENTERED INTO WITH THE FEDERAL PUBLIC HOUSING AUTHORITY.

THE CONTRACTS IN QUESTION COVER THE CONSTRUCTION OF CERTAIN EMERGENCY WAR HOUSING PROJECTS AT SOUTH PORTLAND, MAINE, AND PROVIDE GENERALLY FOR THE REIMBURSEMENT TO THE CONTRACTOR OF ITS CONSTRUCTION COSTS AS DEFINED THEREIN PLUS THE PAYMENT OF CERTAIN STIPULATED FIXED FEES. BY PARAGRAPH 6 THEREOF, SAID CONTRACTS PROVIDE EXPRESSLY THAT THE CONTRACTOR'S CONSTRUCTION COSTS, FOR WHICH REIMBURSEMENT WOULD BE AUTHORIZED UNDER THE CONTRACTS, SHOULD NOT INCLUDE GENERAL AND OFF-SITE OVERHEAD EXPENSES OF THE CONTRACTOR. ALSO, BY PARAGRAPH 7 THEREOF, IT IS PROVIDED THAT THE CONTRACTOR'S FEES SHALL REPRESENT THE SUM OF THE CONTRACTOR'S GROSS ANTICIPATED PROFITS AND THE CONTRACTOR'S GENERAL AND OFF-SITE OVERHEAD EXPENSES, WHICH SAID EXPENSES SHALL INCLUDE "INTEREST UPON MONIES.'

THE BASIS OF THE PRESENT CLAIM ARISES FROM THE FAILURE OF THE GOVERNMENT PROMPTLY TO REIMBURSE THE CONTRACTOR FOR ITS PROPER AND ORDINARY EXPENDITURES IN CONNECTION WITH THE PERFORMANCE OF THE WORK UNDER THE CONTRACTS. IT IS THE CONTRACTOR'S CONTENTION THAT, SINCE THE CONTRACTS PROVIDED FOR THE PROMPT REIMBURSEMENT TO THE CONTRACTOR DURING THE PERIOD OF THE PERFORMANCE OF THE WORK, REIMBURSEMENT BY THE GOVERNMENT OF EXPENDITURES SHOWN TO HAVE BEEN MADE BY IT WAS REQUIRED TO BE MADE WITHIN A REASONABLE TIME AFTER PAYMENT OF SUCH EXPENSES BY THE CONTRACTOR. FOR THE PURPOSE OF ITS CLAIM, THE CONTRACTOR HAS ASSUMED THAT REIMBURSEMENT TO IT FOR ITS EXPENDITURES PROPERLY SHOULD HAVE BEEN MADE BY THE GOVERNMENT WITHIN 30 DAYS FROM THE PAYMENT THEREOF BY THE CONTRACTOR. TO THIS END THERE HAVE BEEN SUBMITTED CERTAIN WORK SHEETS SETTING FORTH THE DATE OF PAYMENT OF THE VARIOUS EXPENSES BY THE CONTRACTOR; THE TIME OF ACTUAL REIMBURSEMENT BY THE GOVERNMENT; AND THE EXCESS DAYS OVER THIRTY FOR WHICH THE CONTRACTOR CONTENDS IT IS ENTITLED TO INTEREST SHOWN ACTUALLY TO HAVE BEEN PAID BY IT ON THE SUMS SO WITHHELD.

WHILE, CONSIDERING THE FACTS AND CIRCUMSTANCES PRESENT HERE, THERE IS SERIOUS DOUBT AS TO WHETHER THE DELAY ON THE PART OF THE GOVERNMENT IN MAKING REIMBURSEMENT TO THE CONTRACTOR FOR ITS EXPENDITURES WAS UNREASONABLE OR WITHOUT JUSTIFICATION, AND WAS NOT CONTRIBUTED TO IN SOME DEGREE BY THE CONTRACTOR, SUCH FACT WOULD NOT APPEAR MATERIAL TO THE QUESTION AT HAND. IN OTHER WORDS, EVEN IF IT BE ASSUMED THAT IT COULD BE ESTABLISHED THAT SUCH DELAY WAS UNREASONABLE AND MAY HAVE CONSTITUTED A BREACH BY THE GOVERNMENT OF ITS OBLIGATIONS UNDER THE CONTRACT, NEVERTHELESS, IN THE LIGHT OF THE AUTHORITIES HEREINAFTER SET FORTH THE CONTRACTOR'S CLAIM MUST FAIL.

AS WAS STATED IN THE SETTLEMENT OF JANUARY 28, 1948, IT IS WELL SETTLED THAT THE UNITED STATES IS NOT LIABLE FOR INTEREST ON ITS OBLIGATIONS EXCEPT WHERE INTEREST IS STIPULATED FOR IN LEGAL AND PROPER CONTRACTS, OR WHERE THE ALLOWANCES OF INTEREST IS SPECIFICALLY DIRECTED BY STATUTE. ANGARICA V. BAYARD, 127 U.S. 251; SEABOARD AIR LINE RAILWAY COMPANY V. UNITED STATES, 261 U.S. 299. IN THE PRESENT CASE THE CONTRACTS PROVIDE EXPRESSLY THAT INTEREST ON MONIES SHALL NOT BE CONSIDERED AS A REIMBURSEMENT ITEM OF COST BUT SHALL BE COMPENSATED BY THE FEES PAID TO THE CONTRACTOR UNDER THE CONTRACTS. MOREOVER, WHILE IT IS CONTENDED, IN EFFECT, THAT THE INTEREST HERE CLAIMED REPRESENTS DAMAGES OR LOSS OF PROFITS RESULTING FROM A BREACH BY THE GOVERNMENT OF ITS OBLIGATIONS UNDER THE CONTRACT, AS DISTINGUISHED FROM INTEREST IN ITS GENERALLY RECOGNIZED SENSE, NO SUCH DISTINCTION APPEARS EVER TO HAVE BEEN RECOGNIZED BY THE COURTS. IN THE CASE OF MYERLE V. UNITED STATES, 31 C.CLS. 105, THE COURT, IN RULING ON THE PRECISE QUESTION HERE PRESENTED, STATED---

AS TO THE INTEREST ON BORROWED MONEY: THE DELAY FORCED THE CONTRACTOR TO BORROW MONEY TO CARRY ON HIS CONTRACT, AND FOR THIS HE WAS FORCED TO PAY INTEREST, AN EXTRA EXPENSE; THE RECOVERY OF THIS SUM IN THIS COURT IS FORBIDDEN BY STATUTE, AND WHETHER IT BE CLAIMED IN THE GUISE OF A DAMAGE CAUSED BY DELAY, OR IN SOME OTHER FORM, IT REMAINS IN FACT A CLAIM FOR INTEREST, AND SUCH CLAIM WE ARE PROHIBITED FROM ALLOWING. ( REV. STAT., SEC. 1091.) THE DISTINCTION (BY PLAINTIFF SOUGHT TO BE MADE) IS ONE OF TERMS ONLY, NOT OF SUBSTANCE. IF PLAINTIFF HAD USED HIS OWN MONEY AND SO LOST THE INTEREST WHICH IT MIGHT HAVE EARNED FOR HIM, THE CLAIM WOULD HAVE BEEN AS MERITORIOUS, BUT WOULD NOT HAVE DIFFERED IN PRINCIPLE FROM THAT NOW MADE. SEE, ALSO, THE AUSTIN CO. V. UNITED STATES, 58 C.1CLS. 98, 137; WILLIAMSON HEATER CO. V. UNITED STATES, 58 C.CLS. 63; MORAN BROS. CO. V. UNITED STATES, 61 C.CLS. 73. OF LIKE IMPORT IS THE CASE OF RUDOLPH AXMAN V. UNITED STATES, 47 C.CLS. 538, 553, WHEREIN, NOTWITHSTANDING A FINDING THAT THE WITHHOLDING OF PAYMENTS FROM A CONTRACTOR WAS UNREASONABLE AND ARBITRARY THE COURT NEVERTHELESS REFUSED TO ALLOW RECOVERY OF INTEREST ON MONIES REQUIRED TO BE BORROWED BY THE CONTRACTOR TO CONTINUE THE CONTRACT WORK.

IN THE LIGHT OF THE FOREGOING AUTHORITIES, THERE CLEARLY APPEARS NO BASIS UPON WHICH THIS OFFICE WOULD BE WARRANTED IN AUTHORIZING THE ALLOWANCE OF ANY PART OF THE AMOUNT CLAIMED AND, ACCORDINGLY, THE SETTLEMENT OF JANUARY 28, 1948, IS SUSTAINED.