(A-22586)

CLAIMS-ACT OF APRIL 10, 1928-CONTRACTS-DAMAGES DUE TO DELAYS OF GOVERNMENT

Where a contract provides for the removal of a deck house, etc., from a steamer and its placing on a new steamer to be furnished by the Government on a specified date and the new steamer is not furnished, with the result that the contractor is required to maintain insurance and watchmen on the old steamer, the claim for reimbursement of the wages of the watchmen and insurance premiums during the period of delay can not be paid under appropriations for doing the work but the matter presents such elements of legal liability or equity that the claim will be reported to Congress pursuant to the act of April 10, 1928, 45 Stat. 413, with recommendation that payment of the claim be authorized.

Decision by Comptroller General McCarl, May 3, 1928:

Ayer & Lord Tie Co. requested March 27, 1928, review of settlement No. 0203116, dated January 27, 1928, wherein was disallowed its claim under contract dated August 21, 1926, for $2,306.64, on account of additional cost of insurance and wages of watchmen in connection with repairs to S. S. Mississippi resulting from delays on the part of the United States in furnishing materials specified in the contract. The claim was disallowed on the ground that there was no provision in the contract obligating the Government to pay the additional expenses.

The contract of August 21, 1926, required the contractor to transfer the cabin from the old to the new steamer Mississippi and to erect certain machinery in the new steamer. The new hull was being constructed by the Howard Ship Yards & Dock Co. and manifestly the main work to be done by the contractor was dependent upon the delivery of the new hull. Paragraph 21 of the specifications of the contract of August 21, 1926, provided that the steamer would be ready for delivery as soon as the contract had been awarded or as soon thereafter as river conditions would permit and that the new hull would be ready for delivery about October 15, 1926, and that it was expected all of the specified machinery would be delivered about November 1, 1926. Paragraph 22 of the contract provided that:

Before the first partial payment is made, the contractor shall insure the new vessel against fire and marine risk, at his own expense, for and in behalf of the United States, and in the name of the contracting officer to at least the amount of such partial payment; and thereafter, before each subsequent partial payment is made, he shall increase the amount of such insurance, if necessary, so that the vessel shall be at all times insured to at least the full amount of all payments made by the United States thereon. This insurance shall remain in force until the vessel has been delivered to the United States. The contractor shall likewise insure the new hull for $60,000 while in his care; and the old vessel for the sum of $100,000, the insurance to take effect immediately upon arrival of the vessel at the place designated in the bid, and to also cover the parts to be transferred while being transferred to and during erection of and trials of the new vessel. This insurance shall be so apportioned that an insurance of $50,000 remains to cover the old hull and old machinery, etc., after the parts to be removed have been removed.

The contractor shall also similarly insure the new machinery and boilers, enumerated in paragraph 21, at their full value, while they are in his care. The approximate value of this machinery is $48,000.

All insurance policies shall be delivered to the contracting officer. The cost of all of the above required insurance shall be included in the price bid.

The contract also provided, in paragraph 23, that "If an effective system of watching at night is maintained at the contractor's yard, same shall include the old steamer; if same is not satisfactory to the contracting officer, the contractor shall employ a special night watchman on the vessel."

The contractor was required to complete the work on or before March 10, 1927, with a stipulation, in article 5, that contractor should be charged with all cost for inspection and superintendence, including all other actual losses and damages to the United States after the date fixed for completion, with the further stipulation that:

no charge for inspection and superintendence shall be made for such period after the date fixed for completion of this contract, as, in the judgment of the contracting officer, approved by the Chief of Engineers, shall equal the time which shall have been lost through any cause for which the United States is responsible, either in the beginning or prosecution of the work, or in the performance of extra work ordered by the contracting officer, or on account of unusual freshets, ice, rainfall, or other abnormal force or violence of the elements, or by strikes, epidemics, local or State quarantine restrictions, or other unforeseeable cause of delay arising through no fault of the contractor, and which actually prevented such contractor from delivering the material or commencing or completing the work within the period required by the contract. The findings of the contracting officer, approved by the Chief of Engineers, shall be accepted by the parties hereto as final. But such waiver of the time limit and remission of charges shall in no other manner affect the rights or obligations of the parties under this contract, nor be construed to prevent action under article 4 hereof in case the contractor shall fail, in the judgment of the contracting officer, to make reasonable and satisfactory progress after such waiver of the time limit.

There was delay of 118 days in the delivery of the new hull to the contractor, and on voucher No. 1090, February, 1927, accounts of Willis E. Teale, there was deducted the sum of $3,693.24 as liquidated damages and costs of inspection and superintendence from payment to the Howard Ship Yards & Dock Co. on account of the delay in the delivery of the new hull. Ayer & Lord Tie Co. have submitted claim for $944 as wages of two watchmen for 118 days at $4 each, and for $1,362.64 as insurance premiums paid in accordance with paragraph 22 of the specifications, supra, during the 118 days' delay, and the district engineer, with approval of the Chief of Engineers of the Army, has recommended that the contractor be allowed said sum of $2,306.64 as reimbursement of increased expenses during the period the Government was delayed in delivery of the new hull.

The appropriation for the work does not in terms provide for the payment of increased expenses resulting from delays of the Government nor does the delay appear to have proximately contributed to the performance of the work. Under section 3678, Revised Statutes,

all appropriations made for the various branches of expenditure in the public service are required to "be applied solely to the objects for which they are specifically made and for no others." It results, therefore, that there is no appropriation from which this claim for increased expenses may be paid in addition to the contract price of $109,500 for the work on the vessel.

However, Public No. 247, approved April 10, 1928, 45 Stat. 413, provided:

That when there is filed in the General Accounting Office a claim or demand against the United States that may not lawfully be adjusted by the use of an appropriation theretofore made, but which claim or demand in the judgment of the Comptroller General of the United States contains such elements of legal liability or equity as to be deserving of the consideration of the Congress, he shall submit the same to the Congress by a special report containing the material facts and his recommendation thereon.

The question is whether the claim presents such elements of legal liability or equity as to justify this office reporting the same to the Congress with recommendations that an appropriation be made for its payment.

The above quoted stipulations of the contract required the contractor to carry insurance on both the old and new vessels and on the machinery to be installed in the latter after the same had been delivered for installation and to provide satisfactory watchman service. The contractor had no option in the matter of furnishing watchmen and carrying insurance on the old vessel and on the machinery until it was delivered; that is, during the period of delay. It is not just and equitable that the Government should, through its delay, have increased the contractor's cost of performance of the contract. The claim is unlike that considered in H. E. Crook Company, Inc., v. United States, 270 U. S. 4, but is similar to that considered in Detroit Steel Products Company v. United States, 62 Ct. Cls. 686, where the contractor was allowed judgment for increased expenses resulting from delays of the Government after the contractor had commenced performance of the contract. Here the contractor commenced performance when the old vessel was delivered and, during the period of delay, it was required to place watchmen thereon and to carry insurance on the vessel and to place additional insurance from time to time as the machinery for installation on the new vessel was delivered at the contractor's yards. The delay was due to the failure of another independent contractor to deliver the hull of the new steamship and for which the United States has deducted liquidated damages.

The claim for reimbursement of the increased expenses resulting through no fault of the contractor presents such elements of both legal and equitable liability that I shall report the matter to the Congress in accordance with the act of April 10, 1928, supra, with a recommendation that payment of the claim be authorized.

(A-22515)

NAVY ENLISTED MEN-TRANSFERS TO FLEET NAVAL RESERVE

An enlisted man of the Navy who is insane or otherwise physically disqualified for active service and by reason thereof can not validly obligate himself to serve in the Navy during war or national emergency as required by section 4 of the act of February 28, 1925, 43 Stat. 1081, is not entitled to be transferred to the Fleet Naval Reserve under section 26 of the act by reason of having had the service as required by that section.

A former enlisted man of the Navy may not be transferred to the Fleet Naval Reserve while not in an enlisted status in the Navy.

Comptroller General McCarl to the Secretary of the Navy, May 4, 1928:

There has been received your letter of April 10, 1928, transmitting letter of Lieut. W. Dismukes (SC), United States Navy, dated March 21, 1928, and requesting decision of the questions therein presented, viz: (1) Whether or not Peter Austin, apprentice seaman, class 4-c, F. N. R., is entitled to retainer pay as a transferred member of the Fleet Naval Reserve; and (2) if it is decided that Austin is entitled to retainer pay, whether or not such pay shall be based on the rating of apprentice seaman, the rating to which reduced by sentence of general court-martial, or on the rating of water tender, second class, rating held at the time of trial.

It appears that Austin had completed 16 years' service in the Navy when he reenlisted December 20, 1923, to serve 4 years; that having been tried and convicted by a general court-martial he was sentenced, as approved July 9, 1925, to be reduced to the rating of apprentice seaman, to be confined for a period of 3 years, then to be dishonorably discharged, and to suffer all the other accessories of said sentence; that a board of medical survey convened September 15, 1927, found Austin to be suffering from dementia praecox, origin in line of duty, not the result of his own misconduct, and recommended that he be discharged from the United States naval service and retained in St. Elizabeths Hospital; that under date of February 25, 1928, the Secretary of the Navy directed, in view of the finding of the board of medical survey and in accordance with the recommendation of the Chief of the Bureau of Navigation, “so much of the unexecuted portion of the general court-martial sentence in Austin's case as relates to confinement and dishonorable discharge is hereby remitted and he will be transferred to the Fleet Naval Reserve."

The act of February 28, 1925, 43 Stat. 1080, et seq., effective July 1, 1925, by section 1, abolished the Naval Reserve Force established under the act of August 29, 1916, 39 Stat. 587, and in lieu thereof created and established, as a component part of the United States Navy, a Naval Reserve which shall consist of three classes, namely: The Fleet Naval Reserve, the Merchant Marine Naval Reserve, and the Volunteer Naval Reserve, and by section 3, repealed all prior pro

visions of law relating to the Naval Reserve Force excepting those contained in the act of June 10, 1922, 42 Stat. 625.

The act further provided, in so far as here material, as follows: SEC. 4. That the Naval Reserve shall be composed of male citizens of the United States and of the insular possessions of the United States of eighteen years of age or over who by appointment or enlistment therein, under regulations prescribed by the Secretary of the Navy, or by transfer or assignment thereto as in this act provided, obligate themselves to serve in the Navy in time of war or during the existence of a national emergency declared by the President:

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SEC. 23. Men who enlist in the regular Navy after the passage of this act, except as herein otherwise provided, may be transferred to the Fleet Naval Reserve only upon the completion of at least twenty years' naval service and provided they are then found physically and otherwise qualified to perform duty in time of war and apply for such transfer, and thereafter, except when on active duty, shall be paid at the rate of one-half of the base pay they are receiving at the time of transfer: *

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SEC. 26. Enlisted men serving in the regular Navy on the date of the approval of this act, or who, having been discharged therefrom, reenlist in the regular Navy within three months from date of discharge, or who are serving in the Naval Reserve Force on the date of this act in an enrollment entered into within four months from the date of their discharge from the regular Navy and hereafter reenlist in the regular Navy within three months from the date of their discharge from the Naval Reserve, herein created, shall be entitled to be transferred to the Fleet Naval Reserve on the completion of sixteen or more years' naval service, and when so transferred shall, except when on active duty, be entitled to receive, if they have had sixteen but less than twenty years' naval service, pay at the rate of one-third the base pay they are receiving at the time of transfer, plus all permanent additions thereto, and if they have had twenty or more years' naval service, pay at the rate of one-half of the base pay they are receiving at the time of transfer, plus all permanent additions thereto : * * *

SEC. 27. That in time of peace all enlisted men so transferred to the Fleet Naval Reserve in accordance with the preceding section may be required to perform not more than two months' active duty in each four-year period and shall be examined physically at least once during each four-year period, and if upon such examination they are found not physically qualified they shall be transferred to the retired list of the regular Navy, with the pay they are then receiving, and upon the completion of thirty years' service, including naval service, time in the Fleet Naval Reserve and time on the retired list of the Navy, they shall receive the allowances to which enlisted men of the regular Navy are entitled on retirement after thirty years' naval service: * * *

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SEC. 36. That the Secretary of the Navy shall prescribe all necessary and proper regulations, not inconsistent with the provisions of this act, for the recruiting, organization, government, administration, training, inspection, and mobilization of the Naval Reserve hereby created and established.

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The Naval Reserve Regulations issued in pursuance of the said act define the mission of the Naval Reserve as follows:

H-1101. Mission.-The mission of the Naval Reserve is to procure, organize, and train the officers and men necessary in the event of war for the expansion and operation of the United States Fleet and Naval Transportation Service.

And of the Fleet Naval Reserve in particular as follows:

H-2101. Mission.-The mission of the Fleet Naval Reserve is to create and mobilize trained organizations for service on board vessels of the United States Fleet and Naval Transportation Service in the theater of operations.

Paragraph H-1202 of the regulations, under the head of "Eligibility for membership," is a statement of the provisions in section 4