#### McCLINTIC-MARSHALL COMPANY v. THE UNITED STATES

[No. A-250.

Decided June 9, 1924]

*On the Proofs*

*Contract; delays; inorease in cost of labor and materials.*— Where the Government, after work has commenced, without fault on the part of plaintiff, causes delay in its progress, during which the cost of labor and material have greatly increased, thereby causing a corresponding increase in the cost of plaintiff’s work under his contract, he is entitled to recover for such increased cost.

*Same; refusal to sign general release; withholding*compensation.— The custom of the Bureau of Yards and Docks requiring a contractor who refuses *to*sign a general release on the payment of a sum admitted to be due for work performed, to consent to the Government’s withholding two per cent of any claim he may have for additional compensation, is illegal, and such contractor may recover the amount so withheld.

*818
      *The Reporters*statement of the case:

*Mr. G. Botodoin Graighill*for the plaintiff. *McKenney d Flcmnery, Gordon & Smith,*and *Mr. John G. BwJumm.*were on the briefs.

*Mr. Edwin S. McCrary,*with whom was *Mr. Assistant Attorney General Robert II. Lovett,*for the defendant.

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

I. The plaintiff is a corporation duly created and existing under the l'aws of the State of Pennsylvania for the purpose of cai-rying on the business of manufacturing, fabricating, selling, erecting, and trafficking in steel and other metals, and has its principal office and place of business in the city of Pittsburgh, State of Pennsylvania.

The plaintiff has at all times borne true faith and allegiance to the Government of the United States of America and has in no way aided, 'abetted, or given encouragement to rebellion against said Government.

II. On or about April 21, 1917, plaintiff entered into a formal contract (known as BY & D Contract No. 2819) with the United States for the construction of crane runways for shipbuilding slips at the United States Navy Yard, Norfolk, Virginia, which was duly executed by the plaintiff and on behalf of the United States by F. D. Roosevelt, Acting Secretary of the Navy. A true copy thereof, with accompanying specifications, general provisions, and bond, is attached to the petition marked “ .Exhibit A,” and is made a part hereof by reference. This contract No. 2819 was performed by plaintiff, the compensation therein stipulated paid by the United States and it was not directly involved in the present action (except as stated in Finding NV hereof), but it formed the basis for supplemental contract. No. 2319-A hereinafter described.

III. On or about July 16, 1917, plaintiff entered into a formal contract with the United States known as BY & D Supplemental Contract No. 2319-A, for the construction of said crane rumvay for a shipbuilding slip at the navy yard, New York, such supplemental contract being executed on behalf of the United States by F. D. Roosevelt, Acting *819Secretary of tlie Navy, and a true copy thereof, with accompanying bond, is attached to the petition marked “ Exhibit B,” and is made a part hereof by reference.

In and by said contract No. 2319-A plaintiff agreed to furnish the material for and. construct the crane runway at New York Navy Yard in accordance with the general provisions and specifications forming a part thereof and to complete same on or before March 25, 1918, for which the plaintiff was to receive from the United States the sum of $111 for each ton of steel entering into the runway.

IY. Subsequently by “ Change E ” in said contract No. 2319-A, plaintiff was required by the Bureau of Yards and Docks to clean and paint the runway structure and the contract price was increased by the sum of $9,051.75, the time for the completion of tire contract being at the same time extended for thirty calendar days.

Y. Subsequently by “ Change F in said contract N o. 2319-A, plaintiff was authorized by the Bureau of Yards and Docks to store temporarily approximately four thousand tons of structural steel at Greenville. New Jersey, because of the Government’s inability to provide storage facilities at the site of the work as contemplated by paragraph 6 of the general provisions forming part of the contract, and the contract price was increased by the sum of $3,760.09.

YI. Subsequently by “ Change G ” in said contract No, 2319-A, plaintiff was directed to furnish and install certain limit switch angles for the runway and the contract price was increased by tire sum of $193.

YII. Upon completion of the work, plaintiff rendered invoices to the Navy Department as follows:

3.982.125 tons delivered at $92.94 per ton:-$365, 451. 70

3,931.824 tons erected and painted at $18.06 per ton — 1 71, 008. 74

($92.94 plus $18.06=$11], being the contract price per ton. The slight difference in tonnage delivered and tonnage erected due to plaintiff furnishing certain track bolts which were not erected or painted.)

“ Change E,” for cleaning and painting- 9, 051. 75

“ Change F,” storage at Greenville, N. U- 8, 760. 09

“ Change G,” limit switches- , 193. 00

Total $449,465. 2S

*820and plaintiff lias received from tlie United States on account thereof the sum of $448,490.92, the Government having retained the difference of $974.36, the same being 2 per cent of $48,717.95, which plaintiff claimed is still due from the United States on account of said contract No. 2319-A.

VIII. During the course of its performance of the work under said contract No. 2319-A, and prior thereto, however, plaintiff was subjected to additional expense and loss by the failure of the Government to perform its covenants and agreements under the contract, the many delays caused by the Government prior to and during the prosecution of the work and by the manner in which the Government compelled plaintiff, over the latter’s protest, to do the- work, as hereinafter more fully set forth; and when plaintiff accepted said sum of $448,490.92 from the United States on account of its compensation under the contract, it declined to execute a full release and acquittance in favor of the United States and continued to reserve, as it had frequently theretofore done, the right to prosecute this claim against the United States for compensation for such additional work and expense in said sum of $48,717.95.

IX. Paragraph 2 of the Special Provisions of the contract provided:

“ 2. General intention. — It is the declared and acknowledged intention and meaning to provide and secure one or two structural steel crane runways for shipbuilding slips in accordance with this specification and the accompanying drawings erected complete *on foundations installed by the*Government.”

Paragraph 11 of the Special Provision further provided:

“ 11. Work not included in the *contract.*— Gleaning *and preparing the site for the crane rumoays;*foundations, placing of anchor bolts,” etc.

Contract No. 2319-A was executed on July 16, 1917, upon the understanding that the foundations for the crane runway would be completed within a reasonable time thereafter so that erection of the runway, which would require several months, could be started during the fall Or early winter of 1917, as the contract required the entire work to be com-*821pletecl by March 25, 1918. Upon the execution of the contract, plaintiff promptly proceeded with the work of fabricating the material and after repeated inquiries by plaintiff and promises by the Government to give notice when the site would be ready for plaintiff to proceed with the work of erection, on August 23, 1918, plaintiff was finally informed that such work could be started by October 1,1918.

X. On or shortly before November 14, 1918, plaintiff began its work at the site at the insistence of the Public Works Office, although the site and foundations were not then in shape to permit the work to go forward with economy and without interruption. In a letter to the Public Works officer dated November 14, 1918, the plaintiff gave notice that the work would be done under protest and compensation demanded for-the increased cost. • ■ ■

The condition of the shipways at the site did not permit plaintiff to assemble any trusses until November 26, 1918, pr to raise any steel.until January 24,1919, about ten months after the contract required the work to be completed. .

■ After much delay, resulting from the site being unprepared for the work of erection, the plaintiff erected about 55 per cent of the steel, but could proceed no further because of the condition of the site and of the fact that other .Government contractors who were working on the foundations were far behind their schedules. A conference was held in the Public Works office on.February 20, 1919, to formulate a plan for future .prosecution of’ the world , At the request of the Public Works officer plaintiff wrote him a letter under date of February 22, 1919, in which forir different methods were suggested for the*completion of the work, and it was stated:

“ We ask that prompt decision be rendered as. to -what program is to be carried out as we must plan our work, furthermore, if we áre to disband our organization we should know this promptly so that we can provide other berths for our men in an endeavor to have the men available when we resume the work, as these men are in geneal the ones we had at Norfolk and have been trained on this special erection problem and we do not want to have to educate another crew. . ...

*822“Altor you have instructed us which program to pursue we ask that you arrange a conference so that proper adjustment can be made of our contract for erection of these shipways, so that we are reimbursed for the additional expense to us on account of the postponement of the work and very peculiar conditions under which it is being constructed.”

As no decision was made by the Government, plaintiff again wrote to the Public Works officer on March 7, 1919, as follows:

“ It is our understanding that the program for erection of the balance of the steel of the above structure has not been definitely decided upon and that you are not sure whether you will decide upon one of the four of those suggested in our letter of Feb. 22, or substitute an alternate scheme.

“ There is not enough work ahead of our men to keep our present force properly employed and we are therefore throwing one of our locomotive cranes out of commission on March 8th and the end of next week will have to break the organization of our traveler gangs and possibly throw our other crane out of commission. You will, of course, recognize that the slowing up of the work, also the breaking of the organization is an expensive matter and will make it difficult to get the work going properly when we are permitted to resume.

“If it is at all possible to get the work lined up so no break will be experienced, we urge that such action be. taken. If the writer's presence is desired at a conference to this end he will come to New York at your convenience on receipt of a letter or telegram stating date and hour.

“ We trust that at this same conference decision can be made as to proper adjustment of our contract for erection of these ship-ways so that we are reimbursed for the additional expense *to*us on account of the postponement of the work and the special conditions under which it is being handled.”

On March 10, 1919, the Public Works office authorized plaintiff to go forward with one of the programs theretofore suggested and this was confirmed by a conference between plaintiff’s representatives and the Public Works officer on March 11, 1919.

Plaintiff was, however, required to suspend work almost entirely on March 13, 1919, at which time it was obliged to lay off many of its bridgemen and break up its organization, *823and the other Government contractors did not get the site in a condition to permit plaintiff to resume operations until May 26, 1919, during which period one of plaintiff’s .cranes, its traveler and equipment were lying idle.

It was not until on or about June 1, 1919, that the other Government contractor finished work which had to be done before the plaintiff could erect the last of its steel. Thereafter plaintiff proceeded as expeditiously as possible and completed its work on or about August 27, 1919.

XI. High crane runways over shipbuilding slips have to be erected with a tower traveler, which runs on the ground and backs off from the wofk as the steel is erected, so that the customary and most economical method of erection is to start at the water end and have the traveler move landward as the work progresses. If the process of erection be reversed, the traveler must back off into the water to such a distance that it will be in deep water when erecting the water end of the structure; or, as was finally done under contract 2319-A, the traveler may erect the land end of the structure and then, upon completion of the foundations at the water end, it may be. reversed so as to make a fresh start at the water end and work backward to connect with the portion previously erected on the land. But this method of procedure is not only expensive and unusual, but previous to October, 1918, was unheard of by plaintiff, although it was familiar with the method of erecting similar ship-ways in various parts of this country and, in fact, had erected most of such structures.

Under contract No. 2319, plaintiff had erected the runway at Norfolk in the usual way, beginning at the water end, and expected to be able to erect the runway at New York in the same manner under supplemental contract No. 2319-A, but upon starting the work of erection, plaintiff was forced over its repeated protests to adopt this most unusual and expensive method. In view of war conditions and its exceptional facilities for doing work of this character and the fact that it had then fabricated a large part of the steel which together with plaintiff’s organization might have been’ commandeered under the provisions of the Act of Congress of March 4, 1917, 39 Stats. 1193, and of the Act of *824Congress of June 15, 1917, 401 Stats. 182, plaintiff felt obliged to complete the work under protest.

XII. Paragraph, six of the General Provisions forming paid; of the contract provided:

“ 6. *Facilities.*— Unless otherwise specifically stated, the contractor shall be allowed reasonable space at the site of the work and access *to*the same for receiving-, handling, storing, and working material. Employees, material, and plant shall be confined to the space assigned.”

Paragraph 28' of the Special Provisions further provided:

“ 28. *Method of erection.*— The contractor shall store and erect the steelwork in such manner as to cause the least' interference with the construction of the building slips, which will proceed at the same time as the erection of the steelwork for runways. Each contractor shall submit to the officer in charge as soon as practicable, a schdule of contemplated progress in order that the officer in charge may arrange space reservations so as to cause the least interference and at the same time insure the earliest possible completion and use of the slips by the Government. The officer in charge will designate from time to time, as the work progresses,, such space limitations as are necessary, arranging same, if practicable, so that both contracts may proceed without interference or delay.”

The Government being unable to provide storage facilities at the site of the work authorized plaintiff to store temporarily nearly 4,000 tons of steel at Greenville, N. J., and allowed extra compensation in the sum of $3,760.09 on account thereof, but repeated postponements of erection on account of the foundations being incomplete forced plaintiff to keep steel in storage much longer than was anticipated and the Public Works officer ordered plaintiff to remove a considerable amount of steel from one location near the site to a new storage area. Had the work proceeded-in the customary way plaintiff would have been able to unload at least 50 per cent of the steel directly from the railroad cars and distribute same where it was needed along , the ways. The lack of storage space and location of same made necessary much additional handling of the steel, which resulted in additional loss of time and expense to plaintiff.

*825The storage of material at Greenville, N. J., caused plain-till expense, inconvenience, and delay far in excess of any benefit or the amount allowed as extra compensation, because the material had to be reloaded on cars at Greenville, moved to the dock, transferred to lighters, and then transported- to the navy yard, which required as much handling and about as much time as would have been required in shipping-such steel from plaintiff’s plant at Pottstown, Pa., directly to the dock for transportation to the navy yard.

XIII. *Item 1.*The lack of space at the site for storing and handling material, as well as the improper method of erection which plaintiff was required to adopt, greatly increased the cost of unloading and distributing the steel.

Plaintiff sustained a loss on this account of at least 40 cents per ton on the 3,932 tons erected, or a total of $1,572.80.

*Item.*0. Plaintiff was required to start work at the navy yard before the site was completely ready, which occasioned a slowing up of the work. During the period from October, 1918, through January, 1919, plaintiff’s foreman, timekeeper, Avatclnnan, and crane engineer were not kept continuously engaged on this work, and plaintiff lost a part of the services of these men for a part of this period. The wages of these men totaled $34 a day. How many days these men lost does not appear. One of the plaintiff’s cranes was idle for a part of this time and the usual rental value of said crane Avas $30 per day. No evidence is offered of the number of days the crane stood idle.

*Item 3.*As a result of repeated postponements on account of foundations not being ready the Government compelled plaintiff to move large quantities of steel from one location to a neAV storage area at the site in order to make room for plate racks for the storage of ship steel. The cost of moving this steel amounted to $529.20, as shown by plaintiff’s daily labor costs, and plaintiff sustained a loss of said sum of $529.20 on account thereof.

*Item*J. Upon instructions received from the Public Works officer, plaintiff started erection at the land end and after the first four panels were erected plaintiff was delayed by the foundations being incomplete. Later plaintiff Avas instructed to turn the traAreler around 180°, crib it over the *826water, move traveler to water end and make a new start on erection there, working back to the fourth panel. Other methods of continuing the erection could have been adopted which would have been much more economical to plamtiff, and the additional expense incurred as a result of doing the work in the manner required by the Government amounted to $1,125.70, as shown by plaintiff’s daily labor costs.

*Item 5.*If the work had been done in the usual Avay beginning at the water end no crib would have been required at the water end, but a smaller one vrould have been necessary at the land end. The cost of the crib at the water end was $4,800.68, whereas the plaintiff’s expense in connection with the work on the Norfolk contract shows that in doing the work in the usual way the cost of the crib at the land end was only $1,087.14. Plaintiff, therefore, sustained a loss of the difference of $3,713.54.

*Item 6.*As a result of the improper method of erection which plaintiff was required by the Government to adopt, it was necesary to erect the two northerly panels, over water, which was much slower and more expensive than similar erection over land, as every move was interferred with and required extra men and extra handling. On this account plaintiff claims but does not prove a loss of $800.

*Item 7.*As a further result of the improper method of erection which plaintiff was required by the Government to adopt the breaking of erection when the fourth panel was completed caused plantiff to abandon its method of erecting central longitudinal trusses with main traveler and auxiliary traveler running on top of the structure and it became necessary for the plaintiff to place a gin pole 175 feet in the air and rig same to help main traveler handle the central trusses, thus incurring an additional expense, the amount of which has not been proven.

*Item 8.*Plaintiff was compelled by reason of the Government’s failure to have the foundations completed, to suspend work from March 13 to May 26,1919 — a period of 63 days— and during such period plaintiff laid off many of its bridge men, but it was necessary to retain its foreman and his assistants, using the latter wherever possible, though uneconomically. But what loss the plaintiff incurred is not proven.

*827During the same period one of the plaintiff’s cranes was lying idle for 63 days at $30 per day and its traveler was lying idle for 63 days at $50 per day, which were the fair rental values of such equipment. Plaintiff incurred a loss of $5,040 on account thereof.

*Item 0.*By reason of the suspension of the work from March 13 to May 26,1919, the plaintiff laid off some men and incurred some expense in rehiring them which is not shown as chargeable to defendant, and the amount sought ($800) as its damage therein by plaintiff is not supported by evidence.

*Item 10.*If the Government had supplied the foundations as required by the contract and had not caused the many delays above enumerated plaintiff could have completed its work on or before March 25, 1918, the time specified in the contract, and during the period expiring on that date a much lower rate of wages, payable to all classes of employees, was in force than the rate in force later. By reason of the failure of the Government to supply foundations plaintiff was not able to start its work until about one year after the time when it should have been started under the contract, and by reason of the many subsequent delays caused by the Government the work was not finished until August 27, 1919 — 17 months after it should have been finished. These delays, over which the plaintiff had no control and all of which were caused by the Government, threw the work into a period ¡of much higher wages, thus necessarily increasing plaintiff’s costs.

The Government’s failure to provide proper storage facilities also caused delay. The storage space furnished at Greenville, New Jersey, afforded little relief, because the steel had to be shipped “knocked down” and space was needed immediately adjacent to the site for assembling purposes.

By a careful computation from plaintiff’s pay-roll records it appears that the excess wages actually paid by plaintiff as a result of the delays caused by the Government aggregated $13,475, Avhich amounts to 22.35 per cent of plaintiff’s pay roll on the entire job, so that said sum must be decreased by $2,787.25, which is 22.35 per cent of the pay roll contained in above items 1 to 9, inclusive, leaving a net loss to plaintiff upon this item of $10,687.75.

*828
      *Item 11.*The plaintiff sustained a loss overhead or operating expenses on this work of $9,351.10.

*Item IS.*The cost of paint and wages of. painters also greatly increased between 1917 and 1919 and plaintiff was required to pay the higher costs and wages because of the delays caused by the Government, as fully set forth in connection with above item 10. The paint and painting at New York Navy Yard was sublet by plaintiff in 1919 at the rate of 65 cents per ton over plaintiff’s subcontract to same party in 1917 at the Norfolk Navy Yard. Plaintiff accordingly sustained a loss on the 3,932 £pns of 65 cents'per ton, or a total of $2,555.80, on account of said painting.

*Item 13.*The foregoing items allowed, aggregate $34,575.-89, and a profit of 10 per cent thereof, or $3,457.58, is reasonable and fair. ■

XIV. At the time settlement was made under said contract No. 2319 for the work at the Norfolk Navy Yard plaintiff declined to sign a general release in favor of the Government because it had a claim then pending for additional compensation in the sum of $17,960.92, and before the Government would pay the plaintiff the amount which the Government admitted to be due on said contract the plaintiff was compelled to consent to the withholding of 2 per cent of the amount of said claim — that is to- say, the sum of $359.21, the Government stating that this 2 per cent deduction was made pursuant to a custom of the Bureau of Yards and Docks to require a contractor to consent thereto upon the Government paying over the balance without requiring a general release from such contractor. Such custom not being authorized by any statutory authority plaintiff is entitled to recover the amount deducted:

XV. Similarly as stated in Finding VII hereof, when the Government paid plaintiff $448,490.92 on account of said contract No. 2319-A, it admitted that the sum of $449,465,2S was justly due plaintiff but withheld the difference of $974.36 as representing 2 per cent of plaintiff’s present claim - for additional compensation in the sum of $48,717.95, as summarized in Finding XIV hereof. Plaintiff is, therefore, entitled to recover the $974.36 so deducted.

*829XVI. Plaintiff lias fully performed all of tlie terms, conditions, and requirements of said contract upon its part to be performed and the Government has accepted and had the use and benefit of said crane runways.

MEMORANBUM BY THE COURT

The amount of $32,081.97 of this claim is conceded by the Government to be due to the plaintiff. The additional items which have been allowed have been carefully examined by the court and have been proved by competent evidence. The other items of the plaintiff’s claim are disallowed for want of proof.

Judgment for plaintiff in the sum of $39,367.0-1 under findings XIII, XIV, and XV. The petition as to all other items is dismissed.