B-38775, JANUARY 21, 1944, 23 COMP. GEN. 529

B-38775, JANUARY 21, 1944, 23 COMP. GEN. 529

CONTRACTS - CANCELLATION OF STAR/ROUTE MAIL CONTRACTS UNDER ACT OF MAY 31, 1940 UNDER THE ACT OF MAY 31, 1940, AUTHORIZING THE POSTMASTER GENERAL TO READVERTISE AND AWARD NEW CONTRACTS FOR THE PURPOSE OF RELEASING STAR/ROUTE CONTRACTORS AND THEIR SURETIES WHERE THE COMPENSATION FOR SUCH ROUTE IS WHOLLY INADEQUATE, PROVIDED THE CONTRACTOR GIVES 90 DAYS' ADVANCE NOTICE OF HIS DESIRE TO BE RELEASED, IT IS NOT REQUIRED THAT THE AWARD OF A NEW CONTRACT SHOULD AWAIT THE EXPIRATION OF THE 90-DAY PERIOD, BUT IF NO NEW CONTRACT IS AWARDED DURING THAT PERIOD AND THE CONTRACTOR THEREAFTER DEFAULTS, THE CONTRACTOR IS LIABLE FOR THE EXPENDITURES MADE BY THE GOVERNMENT IN SECURING TEMPORARY SERVICE, EVEN THOUGH IN EXCESS OF THE CONTRACT RATE.

COMPTROLLER GENERAL WARREN TO THE POSTMASTER GENERAL, JANUARY 21, 1944:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 4, 1943, AS FOLLOWS:

ON MARCH 14, 1941, AWARD OF CONTRACT FOR CARRYING THE MAILS ON ROUTE 416002 AT CLARKSBURG, WEST VIRGINIA, DURING THE TERM FROM JULY 1, 1941, TO JUNE 30, 1945, WAS MADE TO CHARLEY STUTTLER AT $2,524.00 PER ANNUM. STUTTLER MAINTAINED SERVICE UNDER THE CONTRACT UP TO JANUARY 31, 1942, INCLUSIVE, AND THEREAFTER, THE SURETIES ON HIS BOND AND CONTRACT WERE PLACED IN CHARGE OF THE ROUTE. THESE SURETIES ARE G. C. FISHER AND C. G. DAVIS OF GLENVILLE, WEST VIRGINIA. A FORMAL ORDER WAS ISSUED BY THE DEPARTMENT CALLING UPON THEM TO ASSUME THE SERVICE EFFECTIVE FEBRUARY 1, 1942, WHICH THEY DID. NOT WISHING TO MOVE TO CLARKSBURG, THEY EMPLOYED CHARLEY STUTTLER TO MANAGE THE PERFORMANCE OF SERVICE ON THE ROUTE. STUTTLER'S FATHER-IN-LAW, J. H. SHUMAN OF GLENVILLE, OWNED THE MOTOR VEHICLES USED IN THAT WORK. STUTTLER QUIT AS MANAGER APRIL 7, 1942, AND SHUMAN ASSUMED MANAGEMENT FOR SURETIES THEREAFTER.

UNDER DATE OF MAY 19, 1943, G. C. FISHER AND C. G. DAVIS, IN CHARGE, SERVED 90-DAY NOTICE ON THE DEPARTMENT OF THEIR INTENTION TO CEASE SERVICE ON THE ROUTE DUE TO THE FINANCIAL HARDSHIP THEN BEING IMPOSED UPON THEM BY CONDITIONS CREATED BY THE WAR, AND IN ADDITION SUBMITTED A WAIVER OF THE ONE MONTH'S EXTRA PAY AUTHORIZED BY LAW WHERE CONTRACTS ARE CANCELLED UNDER SECTION 1807 1/2 (D), POSTAL LAWS AND REGULATIONS. THAT NOTICE EXPIRED AUGUST 17, 1943. THEREUPON THIS DEPARTMENT ORDERED AN INVESTIGATION BY AN INSPECTOR TO ASCERTAIN THE FACTS. HE RECOMMENDED READVERTISING AND RELETTING THE CONTRACT WITH A VIEW TO RELEASING THE CONTRACTOR AND THE SURETIES AND THE DEPARTMENT THEREFORE READVERTISED THE ROUTE UNDER DATE OF OCTOBER 23, 1943. NO PROPOSALS, HOWEVER, WERE RECEIVED IN RESPONSE THERETO AND THE SURETIES IN CHARGE WERE INSTRUCTED TO RESUME SERVICE UNDER THE ORIGINAL CONTRACT WHICH THEY DID BEGINNING SEPTEMBER 2, 1943, THEY HAVING ARRANGED WITH J. H. SHUMAN TO PERFORM THE SERVICE EFFECTIVE THAT DATE.

UPON EXPIRATION OF THE TERMINATION NOTICE SERVED BY THE SURETIES, THEY CEASED TO PERFORM SERVICE TEMPORARILY AND THE POSTMASTER MAINTAINED THE SAME USING VEHICLES OF THE CONTRACTOR, DURING THE PERIOD FROM AUGUST 18TH TO 23RD 1943, BUT REPORTED THAT IT WAS IMPOSSIBLE BECAUSE OF THE MAN-POWER SHORTAGE AT HIS OFFICE TO CONTINUE DOING SO. BEGINNING AUGUST 23RD TO SEPTEMBER ST, INCLUSIVE THE POSTMASTER EMPLOYED TEMPORARY SERVICE AT THE LOWEST POSSIBLE COST ON THE WHOLE ROUTE BY THE EVANS TRANSFER AND MOVERS, INCORPORATED, AT THE RATE OF $2.50 FOR 243 HOURS, OR A TOTAL COST OF $607.50 FOR THE TEN DAYS INVOLVED. THE CONTRACT RATE OF PAY $2,524 PER ANNUM WAS APPROXIMATELY $70.00 FOR THE SAME PERIOD.

IN THE LIGHT OF THE FACT THAT NO BIDS WERE RECEIVED UNDER THE BULLETIN ADVERTISEMENT ABOVE REFERRED TO AND THE CONTRACTOR IS STILL SEEKING RELIEF, THE DEPARTMENT HAS UNDER CONSIDERATION THE ISSUANCE OF ANOTHER BULLETIN ADVERTISEMENT UNDER THE PROVISIONS OF SECTION 1807 1/2, POSTAL LAWS AND REGULATIONS, 1940, WITH A VIEW TO TERMINATING THE EXISTING CONTRACT AND LETTING A NEW CONTRACT.

THE POSTMASTER, HAS BEEN AUTHORIZED TO PAY FOR SERVICE PERFORMED UNDER THE CONTRACT FROM JULY 1, 1943, TO OCTOBER 31, 1943, AT THE CONTRACT RATE OF PAY, LESS $607.50 TO COVER THE TEMPORARY SERVICE RENDERED BY THE EVANS TRANSFER AND MOVERS, INCORPORATED, WHICH BILL REMAINS UNPAID, ALTHOUGH DEMAND HAS BEEN MADE UPON THE POSTMASTER FOR SETTLEMENT.

IN VIEW OF THE CIRCUMSTANCES IN THIS CASE THE DEPARTMENT WOULD APPRECIATE A DECISION AS TO WHETHER IT WOULD BE JUSTIFIED IN PAYING FOR A TEMPORARY SERVICE AT A COST IN EXCESS OF THE CONTRACT RATE OF PAY, AND, IF SO, WHETHER THE AMOUNT PAID IN EXCESS OF THE CONTRACT RATE SHOULD BE CHARGED TO THE CONTRACTOR AND THE SURETIES.

BRIEFLY, IT APPEARS THAT THE CONTRACT PERIOD WAS FROM JULY 1, 1941, TO JUNE 30, 1945; THAT THE CONTRACTOR PERFORMED THE CONTEMPLATED SERVICES FROM JULY 1, 1941, TO JANUARY 31, 1942; THAT THE SURETIES PERFORMED THE SERVICES FROM FEBRUARY 1, 1942, TO AUGUST 17, 1943 (90 DAYS AFTER DATE OF THEIR NOTICE OF INTENTION TO CEASE SERVICE); THAT THE POSTMASTER, USING THE CONTRACTOR'S VEHICLES, MAINTAINED SERVICE FROM AUGUST 18, 1943, TO AUGUST 23, 1943; THAT FROM AUGUST 23, 1943, TO SEPTEMBER 1, 1943, THE SERVICE WAS PERFORMED BY EVANS TRANSFER AND MOVERS, INC., EMPLOYED FOR THAT PURPOSE BY THE POSTMASTER; AND THAT THE SAID SURETIES RESUMED SERVICE SEPTEMBER 2, 1943, AND HAVE CONTINUED RENDERING SERVICE UNDER THE CONTRACT SINCE THAT DATE. IT APPEARS FURTHER THAT THE CONTRACT RATE OF PAY IS $2,524 PER ANNUM AND THAT THE SAID EVANS TRANSFER AND MOVERS, INC., HAVE PRESENTED TO THE POSTMASTER A BILL IN THE AMOUNT OF $607.50 ($2.50 PER HOUR FOR 243 HOURS) FOR THEIR SERVICES DURING THE 10-DAY PERIOD FROM AUGUST 23, 1943, TO SEPTEMBER 1, 1943.

THE ACT OF MAY 31, 1941, 54 STAT. 227 (SECTION 1807 1/2, POSTAL LAWS AND REGULATIONS, 1940, REFERRED TO IN THE ABOVE-QUOTED LETTER) PROVIDES IN PART:

THE POSTMASTER GENERAL MAY, IN HIS DISCRETION AND IN THE INTEREST OF THE POSTAL SERVICE, READVERTISE AND AWARD NEW CONTRACTS FOR THE PURPOSE OF RELEASING CONTRACTORS AND THEIR SURETIES UNDER THE FOLLOWING CONDITIONS: * * * (D) WHERE IT IS FOUND AFTER FULL INVESTIGATION THAT THE COMPENSATION OF SUCH CONTRACTORS IS WHOLLY INADEQUATE AND THAT THE CONTINUATION OF THE CONTRACT WOULD IMPOSE UNDUE HARDSHIP UPON THE CONTRACTOR: PROVIDED, THAT PROVISION (D) SHALL BE EFFECTIVE ONLY UPON THE GIVING BY THE CONTRACTOR OF NINETY DAYS' ADVANCE NOTICE OF HIS DESIRE TO BE RELEASED: PROVIDED FURTHER, THAT SUCH CONTRACTOR SHALL WAIVE THE ONE MONTH'S EXTRA PAY AUTHORIZED BY LAW WHERE CONTRACTS ARE CANCELED UNDER SECTION (D).

PRIOR TO ENACTMENT OF THE SAID ACT OF MAY 31, 1940, THERE APPEARS TO HAVE BEEN NO PROVISION FOR THE RELIEF OF STAR/ROUTE CONTRACTORS UNDER SUCH CIRCUMSTANCES AS THOSE OBTAINING IN THE INSTANT MATTER. IN THE CONSTRUCTION OF STATUTES, IT IS PRESUMED THAT THE LEGISLATIVE BODY DOES NOT INTEND TO MAKE ANY CHANGE IN EXISTING LAW BEYOND WHAT IS EXPRESSLY DECLARED OR NECESSARILY IMPLIED; ALSO, THAT THERE IS NO INTENTION TO SURRENDER PUBLIC RIGHTS EXCEPT AS SPECIFICALLY STATED IN THE STATUTE. LEWIS' SUTHERLAND, STATUTORY CONSTRUCTION (2D EDITION), VOLUME 2, PAGE 931; 19 COMP. GEN. 453, AND AUTHORITIES THEREIN CITED. ACCORDINGLY, THE ABOVE-QUOTED PROVISION OF THE SAID ACT OF MAY 31, 1940, MUST BE CONSTRUED AS AUTHORIZING THE POSTMASTER GENERAL, IN HIS DISCRETION, TO RELIEVE CONTRACTORS ONLY AFTER THE 90-DAY PERIOD OF ADVANCE NOTICE SHALL HAVE ELAPSED AND ONLY WHEN NEW CONTRACTS SHALL HAVE BEEN AWARDED. HOWEVER, IT MAY BE STATED IN THIS CONNECTION THAT THE STATUTE DOES NOT APPEAR TO REQUIRE THAT THE CONTEMPLATED INVESTIGATION AND AWARD OF A NEW CONTRACT SHOULD AWAIT THE EXPIRATION OF THE SAID 90-DAY PERIOD OF ADVANCE NOTICE. ON THE CONTRARY, IT WOULD SEEM THAT THE SAID PERIOD IS PROVIDED FOR THE DEFINITE PURPOSE OF ENABLING THE POSTMASTER GENERAL, IN HIS DISCRETION, TO MAKE THE NECESSARY INVESTIGATION AND TO AWARD THE NEW CONTRACT WITHIN THAT PERIOD IN ORDER THAT THE ORIGINAL CONTRACTOR MAY BE RELIEVED PROMPTLY AT THE EXPIRATION OF THE PERIOD IF SO DETERMINED.

IN THE INSTANT MATTER, NO NEW CONTRACT HAVING BEEN AWARDED AS YET, THE CONTRACTOR AND THE SURETIES MUST BE HELD LIABLE FOR THE AMOUNT OF EXPENDITURES PROPERLY MADE BY THE GOVERNMENT FOR TEMPORARY SERVICE, IRRESPECTIVE OF WHETHER THE RATE OF SUCH EXPENDITURES EXCEEDS THE CONTRACT RATE OF PAY. IN THIS CONNECTION, ATTENTION IS INVITED TO THE ACT OF JULY 26, 1892, 27 STAT. 268 (SEE SECTION 1848, POSTAL LAWS AND REGULATIONS, 1940), WHICH PROVIDES THAT THE POSTMASTER GENERAL MAY EMPLOY TEMPORARY SERVICE "AT A RATE WHICH HE MAY DEEM REASONABLE, AT THE EXPENSE OF ANY SUCH FAILING BIDDER OR CONTRACTOR.' ALSO, SEE THE ACT OF MAY 18, 1916, 39 STAT. 161, WHICH PROVIDES IN PART AS FOLLOWS:

SEC. 8. THAT WHENEVER AN ACCEPTED BIDDER SHALL FAIL TO ENTER INTO CONTRACT, OR A CONTRACTOR ON ANY MAIL ROUTE SHALL FAIL OR REFUSE TO PERFORM THE SERVICE ON SAID ROUTE ACCORDING TO HIS CONTRACT, OR WHEN A NEW ROUTE SHALL BE ESTABLISHED OR NEW SERVICE REQUIRED, OR WHEN, FROM ANY OTHER CAUSE, THERE SHALL NOT BE A CONTRACTOR LEGALLY BOUND OR REQUIRED TO PERFORM SUCH SERVICE, THE POSTMASTER GENERAL MAY MAKE A TEMPORARY CONTRACT FOR CARRYING THE MAIL ON SUCH ROUTE, WITHOUT ADVERTISEMENT, FOR SUCH PERIOD AS MAY BE NECESSARY; NOT IN ANY CASE EXCEEDING ONE YEAR, UNTIL THE SERVICE SHALL HAVE COMMENCED UNDER A CONTRACT MADE ACCORDING TO LAW: PROVIDED, THAT THE COST OF TEMPORARY SERVICE RENDERED NECESSARY BY REASON OF THE FAILURE OF ANY ACCEPTED BIDDER TO ENTER INTO CONTRACT OR A CONTRACTOR TO PERFORM SERVICE SHALL BE CHARGED TO SUCH BIDDER OR CONTRACTOR.

WHILE THE COST OF HAVING THE TEMPORARY SERVICE PERFORMED WAS MANY TIMES THE CONTRACT RATE ON AN ANNUAL BASIS--- THOUGH NOT NECESSARILY SO ON AN HOURLY BASIS--- NEVERTHELESS THERE IS NOTHING IN THE RECORD TO INDICATE THAT THE CHARGE OF $2.50 PER HOUR FOR TEMPORARY SERVICE WAS SO UNREASONABLE OR UNCONSCIONABLE AS TO RELIEVE THE GOVERNMENT FROM LIABILITY FOR THE PAYMENT THEREOF. CF. HUME V. UNITED STATES, 132 U.S. 406. WHILE THE DETAILED FACTS WITH RESPECT TO THE EMPLOYMENT OF TEMPORARY SERVICE ARE NOT SET FORTH IN YOUR LETTER IT IS STATED THAT SUCH SERVICE WAS OBTAINED "AT THE LOWEST POSSIBLE COST.' IF SUCH BE THE FACT, THERE IS NO BASIS FOR EXCUSING THE DEFAULTING CONTRACTOR FROM PAYMENT OF THE EXCESS COSTS INVOLVED EVEN THOUGH THE AMOUNT THEREOF APPEARS TO BE GREATLY IN EXCESS OF THE ANNUAL RATE UNDER THE DEFAULTED CONTRACT. IN THIS CONNECTION, IT IS INDICATED FROM THE FACTS AND CIRCUMSTANCES REPORTED THAT THE RATE UNDER THE DEFAULTED CONTRACT MAY NOT NOW REPRESENT A REASONABLE COMPENSATION FOR THE SERVICES REQUIRED.

ACCORDINGLY, IN THE ABSENCE OF A SHOWING THAT THE AMOUNT CHARGED FOR THE TEMPORARY SERVICE IS UNCONSCIONABLE OR THAT SUCH SERVICE REASONABLY COULD HAVE BEEN OBTAINED AT A MUCH LOWER COST, THE DEFAULTING CONTRACTOR MUST BE HELD LIABLE FOR THE EXCESS COSTS INCURRED AND THE TWO QUESTIONS PRESENTED IN THE LAST PARAGRAPH OF YOUR ABOVE QUOTED LETTER ARE ANSWERED IN THE AFFIRMATIVE.