#### THE AUSTIN COMPANY v. THE UNITED STATES

[No. B-124.

Decided April *7,*1924]

*On the Proofs*

*Contract; rental value of plant.*— Where there is no satisfactory evidence of the basis of the rental valúe of a plant fixed by the contract, the contractor is entitled to the reasonable reital value for his plant adopted by the Government and itself during the time such plant was in use by the Government.

*Same; delays in delwery; Government control of railroads.*— The Government is not responsible *prima facie*for delays in the delivery of a plant rented by it where the charges in the bills for rent show it was used for a period prior to Government control of railroads.

*555case:

*Mr. W. B. Stewart*for the plaintiff. *Dustin, MeKeehan, Merrick, Arter ds Stewart*were on the briefs.

*Mr. Alexander H. McGormiek,*with whom was *Mr. Assistant Attorney General Robert H. Lovett,*for the defendant.

The following are the facts of the case 'as found by the court:

I. The plaintiff, the Austin Company, is a corporation. During and prior to November, 1917, it was a general contractor for work for the Government being prosecuted at the Naval Proving Grounds at Indian Head, Maryland. A contract known as No. 2713 had been executed by the plaintiff and the United States which involved the construction of a large number of houses, buildings, and structures of different kinds, some of which were called for by the original contract No. 2713 'and a large number being additional projects, were called for by what were known as “ change orders ” issued by the Government under the authority of the original contract, and to be complied with according to its terms and provisions. This contract No. 2713 and the said change orders were upon the cost-plus b'asis, the plaintiff being the general contractor.

II. Indian Head Proving Grounds was an isolated location, and access to it was by dirt road and by the Potomac Diver. It w'as deemed necessary that certain railroad connection be made. The inability to handle material affecting-all new construction and other activity at the Proving-Grounds was to be remedied by the construction of this railroad. Plans for it and advertisement for proposals for the work were made. Several bids were filed, but the Bureau of Yards and Docks decided to place this work of construction of the railroad upon the cost-plus basis and turn it over to the contractor engaged upon the other work at Indian Head, who was the Austin Company, the plaintiff. One reason for this decision was that by placing all the work under one contract it would relieve the question of competition over labor, which was scarce and difficult to get, 'and if there were two contractors this competition would be the *556more troublesome. Having decided upon this course, the said bureau directed the Austin Company to proceed with the work. The McLean Contracting Company, a Maryland corporation, w'as the low bidder for the construction of the railroad, but its bid and others were, rejected on November Ik, 1917, when the decision was reached to proceed under one contractor. The Austin Company was directed to confer with the McLean Company with reference to the latter’s doing the work.

III. On or about December 5, 1917, the plaintiff began negotiating with the McLean Company for the doing of said work. The McLean Company was a large contractor and had the necessary equipment for such work. These parties discussed the rental rates for this equipment, consisting of ste'am shovels, dinkies, engines, pumps, boilers, rails, etc., and also discussed the question of securing labor and the operation of a commissary. The McLean Company refused to undertake the work on the basis of the payment to it of an amount equal to two and one-h'alf per cent of the estimated cost of a similar new plant, but did offer to furnish its plant or equipment at stated monthly rates for the different elements of equipment. It was not at that time possible to get a new plant c'apable of doing the work without a delay of ten or twelve months, nor was it possible at that time to get a figure for the rental value of a new plant. The Austin Company investigated the reasonableness of the proposed rental hates by the McLean Company and found it could not get a contractor to do the work on the basis of two and one-half per cent, predicated on the value above stated, and also found that there would be great delay in the work, if it could be contracted for at 'all upon the said last-named basis of payment. The schedule of rates adopted and approved as below stated were lower than the prevailing rates for similar equipment in the vicinity of the work. The Army offered higher rates for equipment th'an the subcontract in this case called for. At the time, the construction of cantonments was at its height. The rates stated in the McLean Company’s proposal were reasonable and fair and they were agreed upon by the company and the plaintiff for the equipment used by the McLean Company on *557the work in question. There is no evidence of the value or estimated cost of a new plant similar to that which was used by McLean Company in said work.

IY. The Austin Company reported the proposal of the McLean Company with the result of its investigation into the reasonableness of the charges to said bureau and to the defendant’s officer in charge. The Government’s representative insisted that there should be also a provision in the agreement with the subcontractor to the effect that the Government could take over the subcontractor’s plant when the rentals approximated or equaled the estimated value. A provision of this general nature was inserted in the contract between the contractor and the subcontractor, a copy of which forms Exhibit No. 2 to the petition herein. The McLean Company addressed a letter to the Austin Company at the time it transmitted the written agreement, Exhibit No. 2 aforesaid, for execution by Austin Company, in which it stated that the term general contractor, as used in the agreement, represented the Government and that the provision relative to taking over the plant should apply only to the Government. In December, 1917, a letter was transmitted to the Austin Company by direction of the Chief of Bureau of Yards and Docks, which stated that the bureau approved an agreement made by the contractor with the McLean Company for the excavation of railroad track on the basis of 100 days for completion from December 8, 1917, with a penalty of $50.00 per day. The Austin Company reported to the Bureau of Yards and Docks the rentals for the equipment 'and recommended that they be accepted. Later the proposed written contract between Austin Company and the McLean Company was submitted to the defendant’s officer in charge. It incorporated the proposed rentals as they noAV appear in the Exhibit No. 2, already mentioned. The officer in charge approved the rentals subject to the condition that “ when total rentals equal estimated cost when brought on the work, the plant becomes the property of the Government.” In his letter approving the schedule of rentals the officer in charge refers to the McLean Company as subcontractors on contract No. 2713 for construction of railroad at said proving ground. At *558that time contract No. 2687 had not been executed, and the officer in charge believed when he approved the subcontract that a change order under contract No. 2713 had , been issued in writing.

Y. As already stated the work of construction of the railroad had been ordered to proceed under contract No. 2713 on or about December 5, 1917. The custom was to issue what was called a change order in writing by the authorized Government agents to the Austin Company, which change order would indicate the alteration or addition to the work, and the terms of the contract No. 2713 would apply to the work ordered in the change order. Whether a change order in writing was actually issued for the work in question does not satisfactorily appear from the evidence. No copy of such an order is brought into the record. The said negotiations between the parties and the preparations by plaintiff for the work proceeded upon the theory that a change order was or would be issued. The work was in progress for some time before a separate contract was executed, and it was being actively prosecuted by McLean Company when - the separate contract No. 2687 between the Government and the Austin Company, dated January 28, *1918, was*executed. A copy *of*this contract No. 2687 is attached to the petition herein and is made a part of these findings by reference:

The defendant’s agents determined upon a sep arate contract, and accordingly, on or about January 25, 1918, prepared and delivered to the Austin Company the form of contract No. 2687, Exhibit No. 1 to petition, and the same was duly executed on January 28, 1918. This contract No. 2687 in its terms was similar in all respects to the contract No. 2713, excepting only the description of the work to be done thereunder.

VI. Shortly after the execution of the contract No. 2687 the Austin Company and the McLean Company, on the 5th day of February, 1918, executed the contract, a copy of which is attached to the petition, as Exhibit No. 2, and is made a part of these findings by reference. This contract is dated December 8, 1917, but was executed on February 5, 1918. The earlier date was inserted because of the agree-*559meat made in December to complete within 100 days from that date. The Austin Company having secured from the McLean Company the estimated valuation of the plant at which the Government could purchase it by crediting the monthly rentals upon the purchase price, submitted the contract and valuation to the defendant’s officer in charge, and this officer approved the same. The work upon the railroad construction was then and had been in operation for some time, and it continued in operation until the completion of the work. The work was completed and accepted January 16, 1919. For reasons they deemed satisfactory, there was no assessment of liquidated damages on the contractor or subcontractor by the Bureau of Yards-and Docks. It was found that when the work was undertaken the estimated amount of material to be moved was 75,000 yards and the actual amount moved was 233,000 cubic yards, and that there was a loss of time on account of 'abnormal weather conditions. It was accordingly held that the delay in completion was unavoidable within the meaning of contract provisions and that no deductions for delay would be assessed.

VII. After the execution of said contracts the defendant’s officer in charge wrote a letter to the Austin Company, under date of February 26,1918, stating that on Contract No. 2687 rentals would be based on two and one-half per cent of valuation of equipment in lieu of schedule of rentals previously approved, and that the prior approval would be superseded by this letter. This notice was in substance renewed by a letter, dated June 11, 1918, referring to all contracts with the Austin Company.

VIII. The amount of rentals due the McLean Company upon the basis of rates in the contract between it and the Austin Company and from dates of deliveries at the works to date of completion, January 16,1919, was $43,091.74. The Bureau of Yards and Docks allowed and paid the sum of $24,805.48, leaving a balance of $18,286.26, which has not been paid. The payment was predicated on the construction given to the contract that rentals should be upon the basis of two and one-half per cent of the plant valuation. This stated valuation was the valuation of McLean Company’s *560plant in the event it was taken over by the Government. The defendant did not attempt to exercise any right to purchase the equipment by crediting payments thereon.

. IX. The McLean Company conducted in a careful and skillful manner a commissary and furnished over 100,000 meals to workmen employed on said work. In the proper conduct of the commissary it expended $66,349.22, and it received from all sources applicable to the commissary expense the sum of $59,441.84. It sustained a net loss in the conduct of the commissary of $6,908.08. A statement of the amount claimed, with percentages added, was furnished by the McLean Company to the Austin Company, and by the latter to the officer in charge, who approved the same for payment. The officer in charge forwarded it to the Navy Department and it was approved for payment. No part of the said sum of $6,908.08 has been paid.

X. The McLean Company expended in procuring the necessary labor for said work the sum of $2,785.87. Said sum was properly expended, and is reasonable in amount. A statement of the amount was presented to and approved by the defendant’s officer in charge, who forwarded it to the said Bureau. No part of this sum has been paid.

XI. The parties plaintiff and defendant have duly stipulated by written stipulation, signed by the plaintiff’s attorneys, and by the Assistant Attorney General for the defendant, that in addition to all other amounts above stated or found due to the plaintiff there is also due and owing to plaintiff by the Government the sum of $7,360.65, for labor done and materials furnished under said contract No. 2687, which sum includes a percentage of profit of five per centum.

Campbell, *Chief*Justice,

delivered the opinion of the court.

There is only one question about which serious controversy arises. Several of the questions that would otherwise call for discussion are concededly settled by the earlier case of *Austin*Company, 58 C. Cls. 98. The one question referred to involves the rental rates which should be allowed to McLean Company, who, as subcontractor, performed the work. *561In considering this question when the matter of settlement between the Austin Company and the Government was pending, the Bureau of Yards and Docks took the position that the rental rates should not exceed *2y2*per cent per month on the estimated value of the subcontractor’s plant. The contract between the plaintiff and Government provided that in case of the utilization of old plant “ secured for the work by the contractor on a rental basis, the Government will pay to the contractor a rental price for such plant, the rental charge to be 2% per cent per month of the estimated cost of similar new plant.” Construing this stipulation as limiting the right of the officer in charge to approve any higher rate, the board allowed, and there was paid on the rental item, $24,805.48. The facts show that the McLean Company expressly refused to undertake the work and use its equipment at these rates, and it was not until the matter was thoroughly investigated and it was apparent that the work could not proceed at all upon the basis of these rates that the McLean Company was informed that the rental rates submitted by it would be paid. The proposed rates were reasonable and fair and did not exceed, but in several instances were less than, rates for similar plant and equipments being at the time paid by other Government branches. Indeed, except at rates such as were agreed upon the work would have been indefinitely delayed.

A contract was drawn between the plaintiff and the McLean Company, signed by them and approved by the officer in charge. It bears date December 8, but was not in fact executed until February 5. However, on January 17, the officer in charge by letter confirmed the schedule of rental rates as it subsequently appears in the contract. Up to that time all parties were proceeding apparently as if the work was to be done in accordance with the stipulations of an existing contract between plaintiff and the Government, known as Contract No. 2713, and that- what was. called a change order was issued for this new work under the Contract No. 2713. These change orders were the method by which new or additional projects were brought under the operation of the contract. See *Austin Co.*case, *supra.*It does not ap*562pear, however, that such a change order was actually issued, though it does appear that parties began and continued their negotiations upon the theory that it would be or had issued. It has not been brought into the record, and if it in fact *existed there*is no reasonable explanation for the execution of the new Contract No. 2687. In our view, this situation does not defeat the subcontractor’s right to compensation based upon the schedule of rates stated in his contract with plaintiff, since they are in every way just and fair rates. If the Government be not bound by this contract rate, it is at least bound to pay the reasonable rental value of the equipment actually used, and by the use of which it benefited. In our opinion, payment of these rates should be made for the period of use, and we find no authority for charging the rates from the dates of shipment or bills of lading of the several parts of equipment. The suggestion that the Government control of railroads should make it responsible for delays in delivery is not tenable, because such control did.not occur until the end of December, while rents1 are charged in the bills filed from earlier periods. The abnormal weather conditions, which sufficed to relieve the subcontractor of liability for liquidated damages because of delay in completing the work, were no doubt influential in causing other delays. The statements of its bills whereby the subcontractor credits the Government with one-half of the time of delay (after allowing one week for delivery) is not consistent with a claim that the Government was bound for all the time of delay.

The board allowed, as we have said, 2% per cent per month on the stated value of the plant, but the contract calls for 2% per cent per month of the “ estimated cost of similar new plant.” The amount of estimated cost of new plant does not appear. The value given by the subcontractor of its plant for the purpose of fixing the price at which the Government could take it over was apparently adopted by the board as the basis of rentals, but this valuation does not with much certainty show an estimated value of similar new plant. The evidence satifies us that the schedule of rentals was reasonable and just and should be applied in the circumstances of this case from the times of arrival of the different parts of *563the equipment at the place of work until the work was completed, and judgment is awarded on this item accordingly. The findings show other items for which judgment is also allowed.

The plaintiff is entitled to recover the several sums following: (1) the said sum, of $43,091.74, mentioned in Finding VIII, after deducting therefrom the amount already paid, which leaves a balance of $18,286.26; (2) the further sum of $6,908.08, mentioned in Finding IX, with 15 per cent added for percentages due the contractor and subcontractor, aggregating $7,944.29, and (3) the further sum of $2,785.87 mentioned in Finding X, with 15 per cent added for percentages due the contractor and subcontractor aggregating $3,203.75, and (4) also to recover the further sum of $7,360.65 mentioned in Finding XI, said several amounts aggregating the sum of $36,794.95.

Hay, *Judge,;*DowNey, *Judge;*and Booth, *Judge,*concur.