Case Name: BATES & ROGERS CONSTRUCTION COMPANY v. THE UNITED STATES
Court: United States Court of Claims
Jurisdiction: United States
Decision Date: 1923-05-28
Citations: 58 Ct. Cl. 392
Docket Number: No. 34438
Parties: BATES & ROGERS CONSTRUCTION COMPANY v. THE UNITED STATES.
Judges: 
Reporter: United States Court of Claims Reports
Volume: 58
Pages: 392–397

Head Matter:
BATES & ROGERS CONSTRUCTION COMPANY v. THE UNITED STATES.
[No. 34438.
Decided May 28, 1923.]
On the Proofs.
Contract, cost-plus; hond for performance; premium part of cost.— Where a bond for faithful performance of the work under a cost-plus contract is required by statute and by the contract, the premium paid thereon by plaintiff is part of the cost of the work under said contract, and plaintiff is entitled to recover the amount of such premiums deducted by the auditor from other moneys due said plaintiff.
Same; liability insurance. — Where plaintiff, acting under instructions of the representative on the work of the contracting officer, took out policies of public liability insurance, and its action in taking out such insurance was subsequently approved by the contracting officer, the premiums paid on such policies by plaintiff were part of the cost of the work under said contract, and plaintiff is entitled to recover the amount of such premium withheld by the Government.
The Reporter's statement of the ease:
Mr. George R. Shields for the plaintiff. King da King were on the briefs.
Mr. John E. Hoover, with whom was Mr. Assistant Attorney General Robert H. Lovett, for the defendant.
Tre following are the facts of the case as found by the court:
I. The plaintiff, the Bates & Rogers Construction Co., a corporation organized under the laws of the State of Illinois, entered into certain contracts in writing with the United States for the construction of cantonments and other wartime utilities as follows:
(a) Contract dated June 21, 1917, for the construction of cantonment known as Camp Grant. A copy of said contract is annexed to the petition as Exhibit A and is by reference made a part hereof.
(b) Contract dated July 19, 1917, for the constniction of roads at Camp Grant. Said contract is annexed to the petition as Exhibit B and is by reference made a part hereof.
(c) Contract dated April 26, 1918, for the construction and completion of sewers, excavation, grading, and other work at quartermaster warehouse, New Cumberland, Pa. A copy of said contract is annexed to the petition as Exhibit C and is by reference made a part hereof.
(d) Contract dated October 21,1918, for the construction and completion of water mains and other facilities at Middle-town, Pa. A copy of this contract is annexed to the petition as Exhibit D and is by reference made a part hereof.
II. Maj. Wm. A. Dempsey was the contracting officer signing the contract of June 21, 1917, and referred to in Article XV of snob contract, but by order of the Secretary of War he was on July 16, 1917, succeeded as such by Col. I. W. Littell, Q,. M. C., in charge of cantonment construction of the Army, who remained as contracting officer until his retirement in 1918, when his successor, Brig. Gen. It. C. Marshall, jr., Q. M. C., became the authorized contracting officer. The contract of July 19, 1917, was signed by Maj. D. H. Sawyer, assistant to Colonel Littell, as contracting-officer. The contracts of April 26 and October 21,1918, were signed by Gen. B. C. Marshall, jr., Q. M. C., as contracting officer. The contracts referred to were identical in form except as to subject matter’, consideration involved, amount of bond required, and fees to be paid the contractor.
III. Before any of the contracts set forth in Finding I or any other contract for cantonments or any other construction for war purposes was signed negotiations were entered into between the War Department and the various surety companies as to the premium or rate of premium to be charged on bonds that would be required in connection with all such contracts, the Secretai'y of War having directed that such premiums should be treated as part of the cost of the work. As a result of these negotiations the surety companies agreed to charge a premium at the rate of 1 per cent upon the penalty of the bond, their rate of premium theretofore having been 2 per cent on the amount of work involved.
The War Department decided to fix the bond for the construction of each of the 16 cantonments for the National Army, including the Camp Grant cantonment, at $250,000’. The contract of June 21, 1917, with the plaintiff was for the construction of one of these cantonments, and the bond under said contract was fixed at $250,000. The bonds required under the later contracts with it were fixed at varying amounts. Colonel Littell, in charge of cantonment construction, notified both the plaintiff and the contracting officer that the rate had been fixed at 1 per cent and directed the quartermaster to refuse to take any bond not complying with the requirements of the War Department as to premium. The plaintiff was required to and did furnish bonds with sureties satisfactory to the respective contracting of- fleers under each of the contracts set forth in Finding I as follows:
Under the contract of June 21, 1917, bond of $250,000; under the contract of July 19, 1917, bond for $5,500; under the contract of April 26, 1918, bond for $50,000; and under the contract of October 21, 1918, bond for $2,500. Each of sand bonds was required by the contracting officer and was approved by him as satisfactory.
IV. In accordance with the arrangement which had been made by the War Department with the bonding companies the Fidelity & Deposit Company of Maryland, which was the surety on the several bonds set forth in Finding III, fixed the premium on each of said bonds at the rate of 1 per cent on the amount of liability involved in each case and charged the plaintiff premiums as follows:
On the bond furnished with contract of June 21, 1917, $2,500; on the bond furnished with the contract of July 19, 1917, a premium of $55; on the bond furnished with the contract of April 26, 1918, a premium of $500; and on the bond furnished with the contract of October 21, 1918, a premium of $25, making a total premium charge of $3,080, all of which the plaintiff paid and for which it obtained receipts. In due course the plaintiff submitted statements of expenditures made by it under the contract to the contracting officer, including its expenditures made for bond premiums, and on approval by the contracting officer of such expenditures it was reimbursed the items of expenditure made by it, including all expenditures made for cost of premiums on bonds amounting to $3,080 as a part of the cost of the work. Five hundred or more of such payments were made by the United States to contractors who had cost-plus contracts with the United States.
In January, 1920, in pursuance of a decision of the Comptroller of the Treasury that such premiums on surety bonds were not allowable as parts of the cost of the work under cost-plus contracts, said sum of $3,080 was deducted from a sum of money otherwise due the plaintiff from the United States under another contract, and it has not since been restored to it.
V. Acting under instructions of the constructing quartermaster, who was the representative on the work of the contracting officer, the plaintiif took out policies of public liability insurance and paid premiums thereon to the insurance companies amounting to the sum of $11,764.59. the rates of which insurance had been fixed by agreement between the insurance companies and the contracting quartermaster, representative on the work of the contracting officer, which rates were substantially less than the usual and customary rates of such insurance. Major Dempsey, who on July 16,1917, had ceased to be the contracting officer, on July 19 through a subordinate officer refused to approve policies of insurance that had been submitted including public liability. The plaintiif protested that the liability insurance had been taken out under instructions of the representatives of the contracting officer; that such insurance was necessary alike for the protection of the Government and the contractor; and that such insurance could not safely be dispensed with. The disapproval of the above-named officer extended not alone to the liability insurance taken out by the plaintiff but to that taken out by other cantonment contractors. On December 22, 1917, Col. I. W. Littell, contracting officer, approved the action of the contractor for cantonment at Camp Taylor in taking out policies of liability insurance and authorized and directed the representative, the constructing quartermaster, to reimburse that contractor for the cost of premiums on such insurance. The construction quartermaster submitted the question of payment of cost of such insurance to the Comptroller of the Treasury, who decided that the amount paid for insurance should not be reimbursed to the contractor there involved. This decision was taken as extending to like expenditures made by other contractors, including the plaintiff, by both Colonel Littell, who was then contracting officer, and General Marshall, his successor. ■ The contracting officer, as above stated, approved the cost of liability insurance under another contract as a proper part of the reimbursible cost of the work, and on March 26,1918, in submitting the case of another contractor to the auditor for payment decided that the cost of premiums upon public liability insurance was a legitimate part of the cost of work under “ the contract for emergency work,” and in letter of December 30, 1919, the contracting officer stated that he had refused to approve claims of other contractors similar to the Mason & Hanger Co. claim only because of the action of the comptroller in that case and that there was no difference between the claim of the plaintiff company and that of the Mason & Hanger Co. The plaintiff made a total expenditure of $11,764.59 on account of cost of public liability insurance, for no part of which has it been reimbursed by the United States.
VI. The foregoing findings of fact, I to V inclusive, were requested by plaintiff, and the defendant makes no objection to the same. There is a stipulation filed in the case entered into between the attorneys for the plaintiff and Mr. Bobert H. Lovett, Assistant Attorney General, as follows:
“ It is hereby stipulated and agreed by the parties to the above-entitled cause, acting by their respective counsel, that further prosecution of same shall be deferred, until the decision of the Supreme Court in the case of Mason and Hager Oom-pamj v. United States, No. 34208, and that the further disposition of this case shall in all respects be governed by tlie decision of the Supreme Court in the Mason and Hanger Company case."

Opinion:
MEMORANDUM: BT THE COURT.
In the defendant's brief it is stated that " this case is similar in all essential respects to the case of Mason db Hanger Company, No. 34208, decided by this court on April 18, 1921," and that, " moreover, by stipulation between the parties it was agreed that this case should be governed by the decision of the Supreme Court of the United States in the Mason <& Hanger case" 260 U. S. 323, and judgment has been rendered accordingly in the instant case.
Judgment for plaintiff in the sum of $14,844.59.