DALE CONSTRUCTION CO. v. THE UNITED STATES, SEABOARD SURETY COMPANY, INTERVENOR, 168 Ct. Cl. 692

Per Curiam : This case was referred pursuant to Rule 45 (since April 1, 1964, Rule 57) to Trial Commissioner Herbert N. Maletz with directions to make findings of fact and recommendation for conclusion of law. The Commissioner has done so in an opinion 'and report filed December 10,1963. Exceptions to the Commissioner’s findings were taken by the parties, briefs were filed and the case was submitted to the court on oral argument of counsel.

Since the court is in agreement with the opinion, findings and recommendation of the Trial Commissioner, as hereinafter set forth, it hereby adopts the same, with correction of inadvertent minor errors, as the basis for its judgment in this case. Therefore, plaintiff is entitled to recover of and from the United States in the sum of $71,241.33 and the defendant, United States, is entitled to recover on its counterclaim from the Seaboard Surety Company, intervenor, in the sum of $13,145.37.

OPINION OF COMMISSIONER This is a suit for damages for an alleged breach of contract by the Army in terminating a contract for default. The principal issue is whether the termination was justified or not. An unusual feature of the case is the Government’s challenge of an administrative determination by the Armed Services Board of Contract Appeals on behalf of the Secretary of the Army that the alleged grounds asserted by the contracting officer for the default termination were not supported by the evidence of record.

The Government maintains (1) that the administrative findings are devoid of support in the record, and (2) that in any event, since the ultimate issue in the case is one of law, i.e., a breach of contract, the determination, though on a question of fact, is not final or conclusive. Plaintiff also seeks damages for various delays allegedly caused by the Government during performance of the Army contract and reimbursement for increased costs resulting from underground obstructions, etc.

It further contends that wrongful termination of the Army contract was responsible for its default on a Navy contract and that the latter default was, therefore, due to causes beyond its control and without its fault and should be treated as one for the convenience of the Government.

In early June 1950, plaintiff, Dale Construction Co. (Dale), submitted the low bid on a bid invitation issued by the Army which called for replacement of a deteriorated 16" cast-iron high service water main at the Boston, Massachusetts Army Base and for installing in its place an estimated quantity of 6,794 linear feet of new water pipe, consisting of 2,080 feet of 16" diameter cast-iron pipe, 3,884 feet of 16" cement-asbestos pipe, and 880 feet of 12" cement-asbestos pipe.

Dale’s bid was in the amount of $164,400, which was an estimate since payment was to be made on the number of feet of pipe actually installed. When bids were opened, Dale discovered that its proposed price was some $75,000 less than the next lowest one.

It then sought to withdraw its bid on the ground that the disparity indicated a mistake in. computation; however, it rescinded the attempted withdrawal and executed a contract with the Army on June 27, 1950, after receiving assurances from the contracting officer and the post engineer that it would not be required to do anything unnecessarily expensive or unreasonable and that the Army would assist it and make the work easier. As prescribed by the contract, the contractor furnished performance and payment bonds in the amount of $164,000 issued by the Seaboard Surety Company.

The contract required operations to begin on July 17,1950, and to be completed by January 12, 1951, but difficulties in obtaining pipe and other materials as a result of the Korean hostilities, delayed the start until October 24, 1950, when Dale proceeded with a

section of the cement-asbestos replacement line along Dry Dock Avenue which is located on the adjacent South Boston Navy Yard Annex. Claim for Damages in Connection With Failure of City of Boston To Turn Off Water Supply At the beginning of the job the post engineer had issued instructions to the contractor that the valves on the Army-Base were not to be turned off or on unless performed and/or ordered by his office.

In accordance with these instructions Dale, on October 25 (the day after it started work on the contract), notified the post engineer that it needed the water shut off in a specified locality so that it could remove the old pipe. The day after tills an employee of the post engineer instructed the City of Boston’s- Water Department to shut, off the water supply to the locality in question. On the following day a representative of the contractor checked with the post engineer’s office and was assured that the water supply had been turned off by the City.

In view of this assurance, Dale’s work force started to crack the old pipe preparatory to taking it out of the trench and replacing it with the new cement-asbestos pipe. But unbeknownst either to the contractor or the post engineer, the water supply had not, in fact, been turned off by the City. As a consequence, a large amount of water began gushing out of the cracked pipe and eventually filled the trench excavation and spilled over to an adjoining area.

An emergency crew from the City Water Department was called to the site and found that the department had turned off the wrong valve; it also found that the proper valve was imbedded in asphalt in the street and was, therefore, not visible. In any event, Dale found it necessary to undertake rather extensive pumping and dewatering operations; also it was delayed in its contract operations for some 5 days. Plaintiff filed a claim with the contracting officer who denied it and expressed the opinion that it should be submitted to the City. Dale’s appeal to the ASBCA was dismissed on the ground that it was untimely.

It is, of course, settled that absent fault or negligence or an unqualified warranty on the part of its representátives, the Government is not liable for damages resulting from the action of third parties. United States v. Foley, 329 U.S. 64 (1946); Ozark Dam Constructors v. United States, 153 Ct. Cl. 120, 129, 288 F. 2d 913, 918 (1961); Ben C. Cerwich v. United States, 152 Ct. Cl. 69, 77, 285 F. 2d 432, 436 (1961); George A. Fuller Co. v. United States, 108 Ct. Cl. 70, 101, 69 F. Supp. 409, 415 (1947); Standard Accident Insurance Co. v. United States, 102 Ct. Cl. 770, 790 (1945), cert den. 325 U.S. 870.

It is in this context that the record clearly establishes that the post engineer was not at fault in this incident; hence the Government may be held liable in damages only if the circumstances show that it extended a warranty to the contractor which was breached. In essence a -warranty is an assurance by one party to an agreement of the existence of a fact upon which the other party may rely; it is intended precisely to relieve the promisee of any duty to ascertain the facts for himself. Thus, a warranty amounts to a promise to indemnify the promisee for any loss if the fact warranted proves untrue.

Metropolitan Coal Co. v. Howard, 155 F. 2d 780, 784 (2d Cir. 1946). Cf., The Fred Smartley, Jr., 108 F. 2d 603, 606 (4th Cir. 1950); Pennsylvania Railroad Co. v. McAllister Brothers, 137 F. Supp. 788, 794 (SDNY 1956). The facts here appear to fall squarely within this concept.

In assuming responsibility to have the water supply turned off and assuring the contractor that this had been done, the post engineer, in effect, gave plaintiff an unqualified assurance upon which the latter was entitled to and did actually rely; further, that assurance plainly was intended by the parties to relieve the contractor of any obligation to ascertain the facts for itself. Plaintiff is, therefore, reasonably entitled to recover $822.54 — the amount of loss it suffered when the assurance on which it relied turned out to be incorrect. Cf., Maxwell v. United States, 156 Ct.

Cl. 72, 297 F. 2d 554 (1962); Lenry, Inc. v. United States, 156 Ct. Cl. 46, 297 F. 2d 550 (1962). Suspension of "Worh Dale continued work on the cement-asbestos

section along Dry Dock Avenue until the end of December 1950 when the weather became so cold that there was danger that the water in the pipe that was to be removed would freeze upon excavation of the trench. Since this might present a hazard to the Base’s water supply, the post engineer advised Dale that he preferred that operations not be continued in these weather conditions; for that reason, work was largely suspended until the latter part of March 1951 when work was resumed on the cement-asbestos line in the Navy Yard on Dry Dock Avenue.

Claim for Damages Resulting From Delays Caused by Government'’s Failure To Malee Work Space Available In the latter part of April 1951, Dale’s work force approached an area in the Navy Annex leased to the Corps of Engineers where excavation and pipe-laying work was required to be undertaken. Despite the need for the space, the Corps of Engineers refused for a week to prevent its employees from parking their cars in the area. The plaintiff was ultimately forced to place barricades around the area so as to prevent further parking until its pipe-laying operations were completed.

Though this was done, the Corps of Engi-ners’ refusal to have the parked cars removed when the space was first needed unnecessarily delayed plaintiff’s performance for several days — a delay for which the Government is liable in damages. For in the absence of a right reserved in the contract or an exculpatory provision “it is ... an implied provision of every contract, whether it be one between individuals or between an individual and the Government, that neither party to the contract will do anything to prevent performance thereof by the other party or that will hinder or delay him in its performance.” George A.

Fuller Co. v. United States, 108 Ct. Cl. 70, 94, 69 F. Supp. 409, 411 (1947). See also Allied Contractors v. United States, 129 Ct. Cl. 400, 124 F. Supp. 366 (1954); Arundel Corp. v. United States, 121 Ct. Cl. 741 (1952); Cauldwell-Wingate Co. v. United States, 109 Ct. Cl. 193 (1947); Speck, Delays-Damages on Government Contracts, 26 G.W.L. Rev. 505, 518 et seq. (1958); Seltzer & Gross, Federal Government Construction Contracts: Liability for Belays Caused by the Government, 25 Ford. L. Rev. 423 (1956). It is found that a reasonable amount of damages for the delay is $230.00.

Claim for Damages Resulting From Belays Caused by Government's Requirement for Bacteria Testing The specifications required that each

section of completed water pipeline be sterilized with a specified dosage of chlorine before that

section would be accepted for domestic operations. As an additional safeguard, the post engineer, in accordance with Army policy, insisted that Dale have samples of water taken from the completed

section and sent to an Army Medical Laboratory for bacteria testing; furthermore, until the test report for that

section was received from the laboratory, found satisfactory, and the completed

section placed into service, the post engineer would not permit Dale to proceed with work on the next

section of the line. The principal reason for this was that the post engineer considered that the need for maintaining an adequate water supply to certain storage areas on the Base in the event of fire required that not more than one or two sections of the line in such areas be serviced by a temporary hose connection. About four days usually elapsed before a test report on a completed

section was received from the Army laboratory, during which time Dale’s operations were delayed or brought to a standstill. In all, a total of 20 days of delay was caused for which recovery is now sought. In connection with this claim, it may be observed that while bacteria testing was required by Army policy as specified in a Corps of Engineers’ manual, the provisions of that manual were not incorporated in the contract expressly or by implication; nor did the contract otherwise contain any requirement for bacteria testing. Moreover, the record fails to establish that such testing was standard industry practice.

In light of these considerations, plaintiff could not reasonably have contemplated that bacteria testing would be required by the post engineer, let alone that pending receipt of a test report, forward work on the line would be forbidden. And even were it assumed that bacteria testing should have been contemplated, plaintiff could not have anticipated, when it executed the contract, that four days would be required before a test report on a completed

section would be received from the Army laboratory during which time it could not proceed with the next section. The issue is not the Government’s right to test, but its right to do so at the contractor’s expense by causing unreasonable delay. See e.g., Donald M. Drake Co. v. United States, 153 Ct. Cl. 433, 443 (1961), Continental Ill. Nat. Bank v. United States, 126 Ct. Cl. 631, 638-39, 115 F. Supp. 892, 896 (1953). Cf., Crown Goat Front Co. v. United States, 154 Ct. Cl. 613, 292 F. 2d 290 (1961). Plaintiff is reasonably entitled to recover $2,000.00 as damages for 20 days of delay.

Olaim for Increased Oosts Due to Underground Obstructions Within a month after the start of contract operations and continuing thereafter during the progress of the work, Dale encountered some 79 underground obstructions on the job site, none of which were visible above ground, shown on the contract drawings, or indicated in the specifications. Such obstructions (which included buried wood piers and heavy timbers that had been filled over many years before; a concrete block weighing almost 2 tons; a concrete encasement; cables; etc.) materially slowed the progress of the work.

For when the contractor encountered an underground obstruction, it had to dig out the excavation around the old pipe by hand rather than by using a backhoe in accordance with its normal practice; thus, the delay represented the difference in time between that required for the backhoe to dig out the excavation and the time required for laborers to dig it out by hand. As an indication of the extra time required, an area 8 feet wide, 8 feet long and 10 feet deep can be excavated by a backhoe in about 20 minutes, while excavation of the same area by hand requires the labor of two men working an entire day.

Plaintiff made frequent verbal reports to the post engineer as the obstructions were encountered, and the parties eventually agreed that the matter would be determined at the end of the contract, prior to final settlement. Such determination did not, in fact, take place because of the events discussed below. The evidence establishes that approximately 95 calendar days were required to overcome the obstructions and that plaintiff, for reasons which are considered later, is reasonably entitled to recover the sum of $7,449.50 for the increased costs that resulted therefrom.

Claim, for Damages Resulting From Incorredt Representations on Plans Dale also claims damages as a result of incorrect representations on the plans with respect to 10 specified items consisting of valves and pipes that had to be replaced. The plans showed the items to be of a specified size, whereas on excavation they were found to be of a different size so that the contractor was required to obtain different materials than were originally scheduled to be used in that portion of the work. In addition, in several instances the plans were incorrect in depicting the location of these items.

As illustrative of the nature of the incorrect representations, in February 1951, a 16" valve was discovered upon excavating in the Navy area instead of a 12" valve as represented in the plans. Also in that area, a 12" low surface water line was found to be closer to the pipe that had to be replaced than was shown on the plans so that special precautions had to be taken to protect the 12" line. In April 1951 an 8" cast-iron lateral, completely encased in concrete, was found instead of a 6" uncased pipe depicted in the plans.

In May 1951 a manhole, completely covered with asphalt paving, was discovered in the pipeline system in a different location than shown on the plans. The record leaves no doubt that the plans with respect to the 10 items in question were in error. It establishes also that plaintiff was fully justified in relying on the representations contained therein. For not only would an investigation of the facts represented as to these underground items have been entirely impractical, the plans themselves failed to include any caveat that the representations might be incorrect.

Moreover, plaintiff could not have been able, by searching other sources furnished or made available to it, to ascertain the facts as to these subsurface items. In short, the contractor was misled since it neither knew nor had reason to know that the representations were not correct. The Government is, therefore, liable for damages caused by the incorrect representations. See e.g. Hollerbach v. United States, 233 U.S. 165 (1914); Christie v. United States, 237 U.S. 234 (1915); Flippin Materials Co. v. United States, 160 Ct. Cl. 357, 365, 312 F. 2d 408 (1963), and cases cited in footnote 8, Spiers v.

United States, 155 Ct. Cl. 614, 296 F. 2d 757 (1961). It is found that a reasonable amount for such damage is $625.00. Claim for Damages Resulting From Nmy's Removal of a Temporary Bridge Belonging to Dale In August 1951 the Navy, without knowledge of the contractor, removed a prefabricated, temporary wooden bridge belonging to Dale. (The bridge was used for the purpose of enabling pedestrians and vehicles to cross trench excavations.) Dale reported the bridge’s disappearance to the post engineer and some two months later two sections of the birdge were recovered.

This action by the Navy constituted, of course, a breach of defendant’s implied obligation not to hinder or delay performance of the contract for which plaintiff is entitled to damages. Plaintiff is reasonably entitled to the sum of $180.00 for delays incurred in not having the bridge available and for the expenses of its repair. Claim for Replacement of Rusted Pipe In October 1951 the contracting officer approved a

schedule submitted by the contractor which, among other things, called for installation of a temporary 2%"

section of pipe to service Army vessels with drinking water. Dale installed a new black-iron pipe, which it had acquired for the purpose, but due to exposure to tbe elements, tlie interior of the pipe had become somewhat rusted. Quite understandably, the Government inspector rejected the pipe and insisted on galvanized pipe. The contractor complied and submitted a claim for extras in the amount of $64.18 which was disallowed by the contracting officer on the ground that the inspector had used sound judgment in rejecting the rusted pipe.

Apart from the fact that timely appeal was not taken under the disputes clause, disallowance of the claim was reasonable. Glaim for Damages in CJormection With Repair of Leah in Pipe In October 1951 a leak was discovered in certain cement-asbestos pipe which Dale had installed near the Maritime Restaurant area of the Base. This leak, it is found, was due to loosened lead caulking in the joints caused by vibrations from a gigantic pile driver being operated in the area by another Army contractor.

Dale’s claim in the amount of $97.23 was denied by the contracting officer on the ground that the leak was in existence prior to the advent of the other contractor on the job. While this finding is not supported by the evidence of record, plaintiff has failed to produce any evidence that the damage was attributable to any fault on the part of the Government and the claim must, therefore, be disallowed.

Claim for Damages Resulting From, Bursting of Pipe Joints On November 6, 1951, Dale, in accordance with prior instructions, requested that on the following day the Government inspector turn on the water supply for a

section of a newly-installed

section of the cement-asbestos line. At the time of the request, the pipe had not been braced by backfilling, but the contractor anticipated this would be done by the next day. In fact, this expectation did not come to pass because a longshoremen’s strike prevented delivery of the sand needed for the backfill. The inspector, however, was unaware that the pipe had not been braced by backfilling and he turned the water supply on as had been requested. Since the pipe was unbraced, the pressure of the water caused it to move ahead with consequent bursting of the joints.

Plaintiff was required to replace the pipe for which it now seeks damages of $100.00. It is clearly not entitled to recover inasmuch as the Government inspector (as plaintiff has conceded) was in nowise to blame for the occurrence. Claim for Damages in Connection With Repair of Hydrant On several occasions during progress of the work, the contracting officer called Dale’s attention to a leaking hydrant in a particular locality on the Base.

In November 1951 Dale and the contracting officer agreed that the contractor would repair the valve; they also agreed that if the repairs were found to be caused by debris from Dale’s operations, the plaintiff would bear the cost, but that if the repairs were found to be required by normal wear and tear, the cost of the repairs would be considered air “extra” under the contract. The evidence establishes that the leak was partially Dale’s fault and partially the Government’s.

Dale was partly to blame since some jute yam of a type it used in pipeline installation had gotten into the hydrant; the Government was partly to blame because the rubber gaskets and valve parts of the hydrant were 30 years old and completely inoperative due to age and deterioration. Dale claims that the repair cost of $110.00 should be split equally and that on this basis it is entitled to $55.00. This claim has merit and should be allowed. Controversies Between Parties as WorJe in Cement-Asbestos Area Progressed During progress of the work on the cement-asbestos

section of the pipeline, growing differences developed between the contractor, on the one hand, and the post engineer and the Government inspector, on the other.

For example, Dale objected on the ground of delay to an order of the post engineer prohibiting the opening or closing of valves unless 24 hours advance notice was given; the post engineer de-dined to allow the contractor permission to use two crews on the ground that traffic conditions at the Base had increased appreciably after the start of the Korean emergency; on various occasions payment to the contractor for work that had been completed was unreasonably delayed.

Controversy also developed over the contractor’s failure to shore, brace and support a number of railroad tracks, with the contracting officer insisting that this be done while the contractor complained that the post engineer had given pre-award assurances that only two critical railroad lines would have to be shored and that traffic over the other tracks would be re-routed. (This matter was eventually resolved to the contracting officer’s satisfaction.) Another source of controversy resulted from the post engineer’s insistence, beginning in mid-August 1951, that Dale submit a weekly

schedule setting forth the time and location of its operations for the succeeding week, so that he could have advance notice and make working space available for the contractor’s use. While not invariably true, the post engineer ordinarily would not permit Dale to proceed with the work until he had approved the schedule.

In this connection, it was necessary on a number of occasions for the post engineer to make repeated requests to Dale before it submitted a schedule; and not infrequently, the contractor failed to complete a portion of the work in accordance with the estimates set forth in the schedule.' Beyond this, Government representatives complained about the manner and quality of Dale’s work in the cement-asbestos

section of the job and cited specific deficiencies, most of which were later corrected in a manner acceptable to the contracting officer. Also, as worked progressed, personal relations between the parties grew increasingly bitter. For one thing, the Government inspector developed an intense personal dislike for Dale’s foreman.

Thus, in his official reports to the post engineer he referred to the foreman in such terms as an “upstart (who) just doesn’t give a damn”; as a man whose “weakness is his egotistical pride in his rank as 1st Lieutenant in the active Reserve . . . (who) is supposed to belong to a group of untouchables who are in no danger of being called up for full active service — what a pity? as a person “on record for falsehoods and evasion of responsibility on several occasions” ; and as a person with whom he felt “very insecure in being obliged to work . .

The inspector’s reports also contained various ad hominem comments reflecting on the contractor’s honesty and integrity — comments which find no support in the record. In addition, the post engineer (who was described by the Government inspector and one of defendant’s witnesses as a “rigid sort of person”) refused to talk to the contractor’s foreman after a heated argument in which the latter, in a fit of temper, made an unfortunate comment about the post engineer’s veracity.

Later, relations between contractor-personnel and the post engineer became so strained that the contracting officer found it necessary to direct the contractor to channel all communications through his office. Extension of Completion Date On October 27, 1951, Dale wrote to the contracting officer requesting an extension of time to complete the contract on the ground of delays caused by unforeseen and other specified circumstances. (Previously the completion date had been extended from January 12,1951 to September 28,1951).

The contractor stated that if it were able to work through the winter “we may expect to be completed by March 1952” but that “due to cold weather which may interfere with the temporary water supplies, we may have to stop operations when real freezing comes in; and in that case we expect to resume work in the spring (probably late March) and complete in mid-summer.” Upon receipt of this request, the contracting officer discussed the matter with the contractor and agreed to extend the time for contract completion to June 2, 1952, but insisted that the work be definitely completed by that date.

About a month later the contracting officer wrote Dale that “Steps are now being taken to advance the date of completion (final acceptance) from 28 September 1951 to 2 June 1952,” adding that he would “insist on this contract work being accomplished and accepted on or prior to June 2,1952.” The contracting officer stated further that he saw “no reason to curtail activities due to winter weather, since the new 16" line immediately East of Building #4 could be installed at that time, as no temporary water lines would be involved;” and that “It is of paramount importance that your company bend every effort toward pushing this contract work to successful completion, in order to meet the final completion date of 2 June 1952.” The contracting officer also commented that the delays cited by the contractor as justification for the extension “were caused ... (by) your inability to set a

schedule and adhere to it... ” Sheathing and Pressure Testing Requirements m Respect to the Oast-Iron

Section of the Pipeline By late November 1951 Dale had completed the installation of some 4,300 feet of the cement-asbestos

section of the line and had submitted a

schedule proposing to work next on the cast-iron portion. There then began a series of rather confusing events — stemming from controverises over sheathing and pressure-testing requirements under the contract— which culminated in the termination for default. In order to place these events in proper focus, it is necessary to consider now the contract requirements in question.

Paragraph 2-03 of the specifications required the contractor “to completely sheathe the trench excavation along the cast-iron pipe replacement line.” The area along that line consisted of filled land reaching out into the Boston Harbor and the post engineer anticipated that the soil when excavated would be highly unstable because of its mud and clay content. Thus the sheathing provision was included primarily for safety reasons, that is, to protect the men working in the trench excavation from cave-ins.

By contrast, because of the expected compact nature of the soil in the cement-asbestos pipe replacement area, the specifications contained no requirement for sheathing trenches in that area. However, the provisions of a “Safety Requirements” handbook were incorporated in the contract and required (1) that all trenches over 8 feet in length and 5 feet or more in depth in hard compact material be braced by skeleton sheathing; and (2) that all trenches 4 feet or more in depth in partly saturated, filled or unstable soils be secured by the use of continuous vertical sheet piling and suitable braces.

Article 27 of the contract provided that if the contractor failed or refused to comply with these safety requirements, the contracting officer was empowered to issue an order stopping all or any part of the work; the

article also provided that when satisfactory corrective action was taken, a start order was to be issued. With respect to pressure testing, paragraph 2-05 of the specifications provided that after the cast-iron pipe was laid, the joints completed and the trench partially backfilled (but only to a point where the joints were still visible), the newly-laid pipe was to- be subjected to a pressure test.

The paragraph also permitted pressure testing when the joints were' not visible but only where immediate backfilling to grade level was necessary because the pipe was laid below water level or where the joint was made with a material (e.g. sulphur) which expanded with age. As to these provisions, in early July 1950 (after the contract had been executed but before work was started) the post engineer had advised Dale that he would permit a variation so that the contractor could pressure test a

section of newly-laid cast-iron pipe either after the trench had been partially backfilled and the pipe joints were still exposed or after the trench had been backfilled to level and the joints were no longer visible. Also in the early part of July 1950, the post engineer had approved a method of operations proposed by Dale under which it would excavate a

section of pipe at a time, remove the old pipe, install the new cast-iron pipe, cover it with limestone (as required by the specifications), backfill immediately to the level of the trench and then pressure test the pipe. The contractor anticipated that under this approved method of operation, backfilling to level would obviate the need for sheathing the trench in the cast-iron pipe area. Termination of Army Oontraot for Default It is in this setting that Dale, on November 26, 1951, started excavation and pipe-laying work on the cast-iron portion of the line in accordance with a

schedule approved by the post engineer a few days before. The soil in the excavation area proved to be firm and compact — -far superior, in short, to the unstable conditions the post engineer had anticipated. Indeed, the soil was of such compactness that sheathing was, in fact, unnecessary from an engineering standpoint. Against this background, the contracting officer wrote Dale on November 28 stating that he had noted that the contractor had “started operations on the 16" C-I pipe laying”.

He added: “Regarding sheathing you are well.aware of the requirements, but we will leave this matter up to the inspector and the Safety Engineer.” By December 3 the contractor had installed 2 lengths of cast-iron pipe and proposed next to backfill the trench immediately to level and then pressure test the joints — a method of operation that the post engineer had previously approved and which, Dale contemplated, would obviate the need for sheathing.

The inspector, however, considered this method of testing the joints “risky” and would not permit Dale to backfill to level; he insisted instead that the joints remain exposed and pressure tested by visual examination. In such circumstances, the inspector cautioned Dale that it must use some accepted type of trench sheathing. Dale interposed no objection and indicated that material for such sheathing was on the ¡way to the site.

However, in view of the inspector’s instructions, a conference was held on December 5 between the post engineer and Dale, at which time the post engineer told Dale that he would not allow any limestone or partial backfill to be placed around the newly-laid pipe before an entire

section was pressure tested — a directive that appears contrary to the contract specifications which provided in part that “After the pipe is laid, the joints completed, and the trench partially backfilled, leaving the joints exposed for examination, the newly laid pipe . . . shall be . . . subject to a pressure test . . .” In any case, Dale stated that it would request the pipe manufacturer to send a representative to the job site to determine' whether or not complete backfilling of the trench to level prior to pressure testing was appropriate.

In addition, the post engineer issued oral instructions at the conference that Dale sheathe the trench excavation immediately, and the latter agreed to do so. By December 6 Dale had excavated some 125 feet of trench, removed the old pipe, and laid new cast-iron pipe. However, the entire trench had been left open in view of the post engineer’s instructions prohibiting any backfilling prior to testing of the pipe; furthermore, the trench had not been sheathed as of that time. It may be further noted that as of December 6 the soil in the trench excavation was of such compactness that the work in the 125-foot

section could have been completed within two or three days without sheathing. In any event, Dale obtained on December 7 a small quantity of lumber for sheathing but did little work on the open trench itself between December 6 and 12.

It advised the inspector that since the post engineer had disapproved of its proposed method of operations under which it proposed to backfill before testing, it was awaiting advice from the pipe manufacturer as to whether testing could be performed after the trench was backfilled, and that pending the arrival of the expert it was unable to continue excavation, pipe-laying and backfilling.

On December 12 the manufacturer advised Dale that a visit by its expert to the site was unnecessary, adding that on many pipe jobs, tests had been made after the line was completely backfilled and that the practice of backfilling or not prior to testing was normally covered in the specifications for each individual job. On December 12 the contracting officer wrote Dale directing it to sheathe the trench immediately.

Upon receipt of this letter, Eobbins (Dale’s representative) had a conference on December 13 with the contracting officer at which time the latter indicated that the contractor could proceed with skeleton sheathing. In Eobbins’ words the following conversation took place: I said to Mr. Curtis (the contracting officer) : “We are under the impression that all orders relating to this contract are to come directly from you, and I received a letter stating that you want the trench sheathed now. And this varies with the prior instructions and the approved

schedule under which we are operating, and we are forced to change our method of operation. All we can do is put a claim in. It will change it, and we will put a claim in for having started under one method of operation, and then the other.” So Mr. Curtis said: “Isn’t there some compromise we can make ? Suppose you put in the trench to satisfy the engineers so that they won’t lose face and you won’t lose face,” as he put it, “sheathing consisting of planks about every four or five feet, braced.” And that is known in the trade as “stay sheathing” or “stay bracing,” as opposed to continuous sheathing.

And he said: “That won’t cost you very much and you can do it.” And I agreed to it. The day after this conversation, Eobbins directed 3 members of the contractor’s work force to install skeleton sheathing in the open trench; however, they reported back that the post engineer had ordered them out of the trench on the ground that he would not approve skeleton sheathing. Robbins then went to see the contracting officer who again stated that he would allow Dale to resume and put in skeleton sheathing.

Also at this time, the deputy post commander wrote Dale complaining that the work was proceeding very slowly and that he wanted a letter from Dale stating its intention to vigorously prosecute the work from then on. On December 18 the contracting officer met with Robbins in order to have Dale resume operations at a rate that would eliminate the 125-foot open trench. At this time the contracting officer understood that Dale was having difficulties with the post engineer and accordingly requested that in the future it channel all further communications through his office.

On the next day, several of Dale’s workmen again started to install skeleton sheathing in the open trench but left the site in the afternoon because of the cold weather. For the remainder of December, a succession of cold weather, storms, snow and then rain, prevented the contractor from accomplishing any significant work in the trench area.

Meanwhile, the contracting officer wrote Dale on December 20 calling attention to 8 specified deficiencies in connection with the work, including “16” C-I pipe in place in 125' trench approximate, untested, unsheathed for over three weeks.” On December 26 Dale wrote the contracting officer complaining that the post engineer had, some few days before, stopped its men from backfilling a small portion of the line with limestone and that as a result the men went home because of lack of work. The contractor indicated it was in a quandary as to what it was supposed to do.

On December 27 Robbins again met with the contracting officer and agreed to correct immediately all deficiencies that had been specified. On the following day the contracting officer wrote Dale confirming the agreement.

He also wrote that one of the contractor’s “first acts should be to comply with the directive in the letter dated 12 December 1951 to sheathe the trench and that “. . . the specification calls for complete sheathing of the entire length of any trench in which iron pipe is to be laid.” This was a reversal from the position he had taken on December 13 when he advised Dale that only skeleton sheathing was necessary. On January 2, 1952, the contractor had 5 men at the job site to install continuous sheathing in the open trench.

By this time storms, snow and rain had caused the sides of the trench to cave in so that the pipe was covered by mud and earth. In these circumstances, Dale’s efforts to install continuous sheathing without re-excavating the pipe were unsuccessful. The contractor concluded that it would be necessary to remove all the cast-iron pipe that had been installed, re-excavate the trench, and re-install the pipe as was originally done, with the exception that this time the trench would be sheathed and left open.

On January 12, 1952, Dale wrote the contracting officer setting forth in detail the events that had occurred, adding that it was confused over the conflicting stories and methods it was asked to proceed on, and requesting the contracting officer to set forth in detail each step-by-step procedure he wanted plaintiff to follow. Enclosed with the letter was a claim for $648.60 which Dale stated was the estimated cost, profit and overhead for excavation of a 150' trench, installing about 130' of 16" cast-iron pipe, removing the pipe and backfilling the trench.

Upon receipt of this communication, the contracting officer requested Dale to submit a new schedule. In accordance with this request, Dale wrote the contracting officer on January 15, 1952, enclosing a proposed

schedule for completing the work, as to which it requested the contracting officer’s reaction. Under this

schedule the contractor proposed no work until March 1 because of the winter weather and estimated that the contract would be substantially completed by August 1. Pending word from the contracting officer on the proposed schedule, Dale, during the period from January 8 to January 18, corrected most of the deficiencies (with the exception of the sheathing) that had been called to its attention previously by the contracting officer.

On January 18 Dale wrote the contracting officer that it had received no word on the proposed schedule; that the weather for the past few days had been good and that it could, therefore, accomplish some of the work if it knew how the contracting officer wished it to proceed. It also indicated that pending receipt of the contracting officer’s reply to the proposed schedule, it was taking care of the deficiencies.

On the same day — January 18, 1952 — the contracting officer, after consulting with the post engineer, sent a letter to Dale terminating the contract immediately for default on the basis of the following findings:

(1) Deficiencies occurring in past peformance were not corrected within a reasonable time after notice thereof and some still remain uncorrected.

(2) Progress is not being made at a rate that will insure completion by the date specified, as extended.

(3) Instructions to proceed in accordance with specifications, first verbally and then directed in letter of 12 December (1951) have not been complied with. There has been little activity since that date and at present no work has been done for a considerable period of time. The notice for default read further: In view of the foregoing, there is no recourse but to declare the contract inexcusably in default. Pursuant to the authority vested in the Government in

Article 9 of the contract, your right to perform thereunder is terminated immediately upon receipt of this letter. It is the Government’s intention to prosecute the work to completion by contract or otherwise and to hold you and your surety liable for any excess costs occasioned the Government thereby. The Government reserves all rights and remedies provided by law or under the contract in addition to charging excess costs. This notice constitutes a finding of fact pursuant to

Article 15 (Disputes) of the contract, from which you have the right of appeal as specified therein. As to the first of these findings that “Deficiencies occurring in past performance were not corrected within a reasonable time after notice thereof and some still remain uncorrected”, the record shows that on various occasions the contracting officer, the post engineer and the inspector had called Dale’s attention to specified deficiencies in its work.

These included, in addition to a number of minor deficiencies, failure to sheathe the trench excavation in the cast-iron pipe area; to brace and support various railroad tracks; and to complete the paving in the Navy area. Since the failure to sheathe the trench excavation constitutes the principal basis for the third finding, it is treated in connection therewith. The evidence establishes that most of the other deficiencies were corrected in a manner acceptable to the contracting officer prior to the notice of termination, although not always within what the contracting officer regarded as a reasonable time.

However, the record does not support the conclusion that these past delays in correcting deficiencies were such as to have prevented the contractor from completing the work by the specified date. The purpose of the default provision in a Government contract is to get the work finished on time. See National Surety Corp. v. United States, 102 Ct. Cl. 671, 680 (1945). Apart from that, there is no warrant for the Government to cancel a contract for default on the basis of deficiencies later corrected to its satisfaction. See Pigeon v. United States, 27 Ct. Cl. 167, 175 (1892).

Nor can the few deficiencies that still existed on the date of termination support .the default action: such deficiencies were minor in nature; the contractor had evidenced a clear intent to correct them promptly; and the time needed for their correction would not have prevented the contract from being completed on time.

With respect to the second finding that the contractor was not making progress at a rate that would insure completion by June 2, the evidence demonstrates that at the time of termination Dale had completed about two-thirds of the work and that barring further delays resulting from subsurface obstructions or Government-caused delays of a nature that had hitherto retarded progress of the work, it could have completed the work by June 2, 1952, if the contracting officer required it to work during the winter months.

The evidence further shows that excluding Government-caused delays and delays due to unforeseeable causes beyond its control, Dale’s progress in its past performance of the contract had been such that it could have completed the job by the specified time. Indeed, the contracting officer testified that provided Dale did not stop work until March, it could have finished the job by the extended time. Nor does the record demonstrate that the contractor abandoned or intended to abandon the work.

On the contrary, at the time of termination Dale was not only ready, willing and able to proceed with the work to completion in accordance with contract specifications, it had on the job site all the cast-iron pipe needed for the remainder of the work, together with several carloads of limestone and various items of heavy equipment. It is quite true that on January 15, 1952, Dale had, in accordance with the contracting officer’s request, transmitted for the latter’s approval a

schedule proposing to suspend work during the winter months, to resume on March 1 and have the job substantially completed by August 1. But this communication was not an indication of the contractor’s intention to shut down the job or to abandon the work; it was simply a proposal sent to the contracting officer for his reaction and pursuant to his request — a proposal which the contracting officer could have accepted or rejected as he saw fit.

The third finding that the contractor had failed to comply with verbal instructions and instructions contained in a letter of December 12, 1951, has reference, of course, to the controversy regarding sheathing of the trench in the cast-iron area. It seems apparent that the failure complained of was occasioned not by inexcusable fault on the part of the contractor but, rather, by the conflicting nature of the instructions themselves.

It will be recalled that on December 5 the post engineer had issued oral instructions that the contractor sheathe the trench excavation immediately and that on December 12 the contracting officer had sent Dale a written directive to the same effect. Yet, a day later — on December 13 — the contracting officer (who was the authorized representative of the Government, not the post engineer) advised plaintiff that it could proceed with skeleton sheathing.

Nevertheless, when the contractor’s work force started to proceed with skeleton sheathing, the post engineer, in effect, countermanded the contracting officer’s directive and ordered the crew out of the trench on the ground that such sheathing would not suffice. The contractor was thus caught in a cross-fire, with the contracting officer authorizing work to be done one way and the post engineer demanding it be done another. And it was not until December 28 that this conflict was ironed out, when the contracting officer advised plaintiff that “complete sheathing” of the entire length of the trench was necessary.

The record shows, in brief, that a large part of the blame for the lack of progress in December on the cast-iron pipe area must be laid at the door of the Government representatives. Furthermore, once the directive of December 28 was issued, making it clear that continuous sheathing was required, plaintiff, within a few days, sent 5 members of its work force to the trench area to proceed in accordance with the directive. This negatives any conclusion that the plaintiff did not intend to comply with the specifications.

While this sheathing work was unsatisfactory, it seems evident that if the contractor had been allowed to proceed along the lines suggested in its letter of January 12, 1952 (which included continuous sheathing of the trench), it would have completed on time all the work called for by the contract. Withal, it appears that the major reason for the termination was not the contractor’s lack of diligence but rather its submission on January 12,1952, of a claim for extras. Thus, the contracting officer testified: Q. . . .

And there was nothing to lead you to believe that he could not have completed the work prior to 2 June 1952 ? A. If he began or continued instead of stopping until March, yes. Q. . . . There was no point in January of contacting the plaintiff and telling them that they must go ahead and complete the work otherwise you were going to default them? A. It seemed to me we were in an impasse that had not been resolved. Q. What was the impasse? A. Having to do with the sheathing of the trench. Q.

And this was his (sic) main thing that bothered you, the fact that if they did sheathe they intended to put in a claim for extras ? A. That is correct. Q. And you felt that they had absolutely no right to do this, the contract was clear ? A. I felt I had no right to authorize such a thing. Q,. . . . And you felt that they had no right to even ask it because the contract specifications were clear? A. I felt the specifications were clear.

Of course, there was no justification for cancelling the contract for default because Dale asserted a claim; were this the case, a contractor would risk termination every time it submitted a claim. In

summary, the conclusion is inescapable that the termination for default was unreasonable and unjustified. See e.g., Largura Const. Co. v. United States, 88 Ct. Cl. 531 (1939) ; Coast Coaling & Eng. Co. v. United States, 60 Ct. Cl. 857 (1925); Universal Power Corp. v. United States, 112 Ct. Cl. 97 (1948). And it is settled that “if the Government terminates a contract without justification, such termination is a breach of the contract and the Government becomes liable for all the damages resulting from the wrongful act. . . .

The damages will include not only the injured party’s expenditures and losses in partially performing the contract, but also, if properly proved, the profits that such party would have realized if he had been permitted to complete the contract. The objective is to put the injured party in as good a position pecuniarily as he would have been in if the contract had been completely performed. . .” G. L. Christian and Associates v. United States, 160 Ct. Cl. 1, 11 (1963), 312 F. 2d 418, 423, cert. den. 375 U.S. 964.

ASBOA Decision on Termination of Army Contract These considerations aside, it is not without significance that the contracting officer’s superior, the Secretary of the Army (acting through his representative, the ASBCA) had previously determined in 1954 that the alleged grounds asserted by the contracting officer terminating the contract for default were not supported by the evidence of record.

Specifically, the ASBCA found, on the basis of an extensive record (consisting of 8 days of hearings and voluminous documentary data), that the alleged deficiencies cited by the contracting officer in his first finding had been corrected before the notice of termination; that the fact that Dale had completed the installation of more than two-thirds of the required quantity of new pipe tended to negate the conclusion that it could not have completed the contract by June 2,1952; and that the contracting officer did not terminate the contract because of the slowness with which the work was proceeding but rather because of disagreement as to the sheathing requirements of the contract.

The board found that the contractor’s failure to sheathe, when advised, was due to this disagreement and as to who would pay for the cost of complete sheathing; that if the contractor had been permitted to proceed along the lines suggested in its letter of January 12, 1952, which included complete sheathing of the trench, it would have completed all the work called for by the contract; and that the contractor’s assertion of a claim did not afford an adequate basis for terminating the contract for default. The Government strongly assails these findings (which are, of course, findings of fact, Holpuch v.

United States, 102 Ct. Cl. 795, 804, 58 F. Supp. 560, 564 (1945)), insisting that they are devoid of any valid, evidential basis. The Government further contends that the ultimate issue in the case is one of law, i.e., a breach of contract, and hence says that neither the contracting officer nor the head of the department (on appeal) has the authority to finally decide the legal question of breach; and thus that the board’s decision— while on a question of fact — may not be accorded finality under the Wunderlich Act.

The plaintiff argues, on the other hand, that the ASBCA decision is supported by substantial evidence and that it is res adjudicate/,. . In plaintiff’s view the parties clearly intended that the Government would abide by its administrative decisions when favorable to the contractor — otherwise, it says, the entire administrative procedure established by the Government would be of no avail.

As to these contentions, it is sufficient to observe that it could well be argued that the board decision is entitled to weight — at least as an acknowledgment or admission by the Secretary of the Army that plaintiff was not in default, especially since examination of the administrative record makes it apparent that the board’s findings are supported by substantial evidence. But in the last analysis, neither that question nor the issue of finality need here be decided.

For a trial de novo has (over plaintiff’s objections) been held in this court — and the record of that trial, without more, demonstrates that the termination was unreasonable and unjustified. This being the case, it is unnecessary for this court to consider the force and effect of the previous administrative findings. Claim for Damages Resulting From Army's Taking Possession of Materials and Equipment Belonging to Plaintiff Upon termination of the contract, the contracting officer, in accordance with

Article 9, took possession of various materials on the job site that were necessary for finishing the work and turned them over to the surety which utilized them therefor. Plaintiff seeks recovery for the value of these materials which included some 1800 feet of cast-iron pipe, several carloads of limestone and a small amount of lumber; it also seeks reimbursement for the cost of unloading the pipe.

As previously pointed out, the Government’s improper termination of the contract constituted a breach of contract for which plaintiff is entitled to recover such amount as would put it in as good a position pecuniarily as it would have been had the contract been fully performed. In the circumstances of the present case, this “amount would be the value of the payments . . . which would have come to (plaintiff) if the contract had been fulfilled, less the cost (it) would have incurred in completing (its) own performance. . .

If, having proved the damage on this basis, (plaintiff) recovers the full value of the expected benefits, then there is no place for a recovery of (its) expense incurred for performance. The expenditures were the price of the benefits.” McCormick on Damages (1935 ed.) § 142. See also United States v. Behan, 110 U.S. 338 (1884) . Plaintiff also makes claim for the reasonable market value of various other items taken by the Army on termination.

In this connection, the record shows that the contracting officer not only took possession of materials necessary for completion of the work, he also took possession of some 200 other items belonging to Dale that were found on the job site, most of which were neither necessary for, nor utilized in, completion of the contract. These included such items as a complete clutch and pressure plate, oil filters, cargo hooks, grease guns, auto and building jacks, hardware poles, surplus 16" cement-asbestos pipe, empty drums, a spare starter motor, truck tires, hand tools of various kinds, rubber boots, etc.

Dale made several complaints to the contracting officer about the matter and succeeded in having returned a few pieces of equipment needed for a Navy contract, and some scrap lumber; however, it was not successful in obtaining release of the great majority of the items. Plaintiff is entitled to recover the reasonable market value of such items which is found to be $4,000. Guerini Stone Co. v. Carlin Constr. Co., 248 U.S. 884 (1919); Suburban Contracting Co. v. United States, 76 Ct. Cl. 533, 544 (1932); Kennedy v. United States, 24 Ct. Cl. 122, 143 (1889).

Completion of the Army Oontract by the Surety At the same time as he terminated Dale’s contract, the contracting officer notified Seaboard Surety that it could take over and complete the contract or, alternatively, that the Government would readvertise and have the work performed by contract, in which event the surety and Dale would be held liable for excess costs and actual damages.

Seaboard elected to complete the contract and executed a supplemental agreement with the Army for that purpose, which provided, among other things, that the Army would pay to Seaboard all monies due under the contract, including retained percentages. To finish the work, the surety retained a contractor who had been doing other work at the Army Base. The contract was completed at a net loss to the surety of $31,870.38.

Termination of Navy Contract for Default; ASBCA Decision Meanwhile, Dale, as low bidder, had obtained in June 1951 a contract in the amount of $39,995 from the Navy for installing new underground cables to replace the existing fire alarm and police signal system at the South Boston Annex of the Boston Navy Yard and furnished performance and payments bonds also issued by Seaboard Surety. In mid-February 1952 Dale was forced to suspend work on that contract owing to the manufacturer’s inability, because of a copper cutback, to deliver the needed cable.

Several months later Seaboard Surety, which had an indemnity agreement with Dale, brought suit against the latter in the Federal District Court in Boston for recovery of the amount it had lost in perf orming the Army contract. In August 1952 it obtained an ex parte temporary restraining order prohibiting Dale from accepting any payment from the Navy on account of the delivery of the 38-conductor cable without first obtaining the surety’s consent, an order which was followed the next month by issuance of a preliminary injunction of similar import.

In the meantime, in August the Navy advised Dale that the cable was en route and that it was expected to make arrangements for its unloading. On September 11, 1952, the Navy wrote Dale that the cable had arrived on August 25; that it did not understand why th*, contractor had not accepted delivery and proceeded with the performance of the work; and that continued delay would endanger performance of the contract.

On September 12, 1952, the Navy again wrote Dale that it was not “concerned with the merits of either your position or the surety . . . (and) that the continuance of (the) impasse between you and the surety may result in default of your contract.” Ultimately, on October 3,1952, the Navy terminated the contract immediately for default. Dale appealed to the ASBCA contending that the default was due to causes beyond its control and without its fault or negligence, namely the action of the surety and the District Court in issuing an injunction based on the alleged default under the Army contract.

In 1956 the ASBCA, after hearing, denied the appeal, finding that Dale had not proved that it was unable to perform due to lack of financial ability; that the contractor was unwilling and refused to enter into any agreement whereby payments which would have become due it under the contract would have been put into a joint bank account subject to withdrawals by its joint signature with the surety; and that Dale could not be said to have failed to perform the contract due to causes beyond its control and without its fault or negligence.

At this point it is well to observe that in the case of the Navy contract, the ultimate question — unlike that involving the Army contract — is not whether there was a default (for that is conceded), but, rather, whether the default was excusable. This, it is clear, is a question of fact rather than of law. Anthony P. Miller, Inc. v. United States, 161 Ct. Cl. 455, 474-75 (1963), cert. den. 375 U.S. 879. Automatic Screw Products Co. v. United States, 145 Ct. Cl. 94, 169 F. Supp. 951 (1959); Whitlock Corp. v. United States, 141 Ct. Cl. 758, 764, 159 F. Supp. 602, 607 (1958), cert. den. 358 U.S. 815.

Thus, under the Wunderlich statute, the decision of the ASBCA is final and conclusive absent a showing that it was fraudulent, arbitrary or capricious, or not based upon substantial evidence. In this connection, the record shows that the purpose of the restraining order was mainly to insure that the cable manufacturer was paid for the cable when delivered so that it would not be a lien claim against the surety.

The record further establishes that the Navy was willing to make a payment of 50 per cent of the value of the cable upon delivery; that the manufacturer was willing to release the cable for delivery on these terms; and that the surety was willing to make any reasonable arrangement with Dale, including establishment of joint control arrangements under which, among other things, the amount received from the Navy would be paid to the manufacturer subject to joint concurrence of Dale and the surety.

The testimony also demonstrates that Dale refused to consider any arrangement with the surety on the ground that it would interfere with its orderly course of business in the performance of the contract — a reason which is devoid of evidentiary basis. It is apparent from this that the record fully supports the board’s decision that Dale’s default was not due to causes beyond its control and without its fault or negligence, and, accordingly, that decision is final and conclusive.

Damages It is a settled principle that where the fact of damage has been established, absolute certainty or precise mathematical accuracy as to the amount of damages is not necessary. Such damages will be allowed as in the judgment of fair men resulted from the breach. Dale Construction Co. v. United States, 161 Ct. Cl. 825, 829 (1963); Houston Ready-Cut House Co. v. United States, 119 Ct. Cl. 120, 96 F. Supp. 629 (1951); Reiss & Weinsier v. United States, 126 Ct. Cl. 713, 116 F. Supp. 562 (1953); F. H. McGraw and Co. v. United States, 131 Ct. Cl. 501, 130 F. Supp. 394 (1955); First-Citizens Bank & Trust Co. v.

United States, 110 Ct. Cl. 280, 76 F. Supp. 250 (1948); Needles v. United States, 101 Ct. Cl. 535 (1944). Certainly the defendant which “has violated. (its contract should) not be permitted to reap advantage from (its) own wrong . . . (and) to escape liability because of the lack of a perfect measure of the damages caused by (its) breach.” Hoffer Oil Co. v. Carpenter, 34 F. 2d 589, 592 (10th Cir. 1929). See also Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359 (1927); Modern Industrial Bank v. United States, 101 Ct. Cl. 808 (1944).

Against this background, not only has the fact of damage been established as to each of the claims listed below, it is found, on the basis of estimates that were the subject matter of credible testimony, that plaintiff is reasonably entitled to recover the following amounts therefor: (1) $822.54 for costs resulting from defendant’s breach of warranty in connection with City of Boston’s failure to turn off water supply, an amount which includes reimbursement for operation and rental of 3 pumps for 4 days; labor costs for that period; rental of a crane for 8 hours to remove silt from trench; and 10% for overhead. (2) $230.00 for costs of delays resulting from defendant’s failure to make work space available. (3) $2000.00 for costs of approximately 20 days of delay resulting from defendant’s action in prohibiting forward work to proceed until the results of bacteria tests on a completed

section were received. This amount is based on Dale’s daily cost of operations which generally approximated not less than $100.00. (4) $625.00 for increased costs resulting from incorrect representation on the plans. (5) $180.00 for costs resulting from Navy’s removal of a temporary bridge, an amount which includes the expense for repairing the bridge and. costs attributable to delay in not having the bridge available. (6) $55.00 for cost of.repairing hydrant. With respect to the claim for increased costs resulting from underground obstructions, the record shows that plaintiff submitted a

schedule to defendant’s auditor showing the type of obstruction encountered, the approximate days required to overcome each obstruction, and the specific dates when this was done. By comparing this

schedule with a blueprint of the Army Base, defendant’s auditor was able to verify the existence of 79 obstructions, to overcome which, according to the schedule, 95% days were required. Plaintiff’s witness estimated in his testimony that the actual cost for overcoming these obstructions (not including overhead, profit or stand-by cost for equipment) came to $12,100 — a figure which was arrived at by taking an average of the number of men working on the Army Base each day, computing the cost per day of the men, and multiplying that figure by the number of days of delay.

However, this amount appears somewhat overstated in light of the fact that Dale in its appeal to the ASBCA in 1952 from the contracting officer’s termination action claimed a total amount of $7,449.20 for underground obstructions — an amount that it stated represented the sum of total labor costs of $6,900 for 3,450 hours of extra labor at $2.00 per hour; $572.00 for material and equipment costs; and 10% for profit and overhead, less a credit of $700.00 for machine excavation.

Considering the more detailed nature of this estimate and the fact that it was prepared some 11 years earlier than the one submitted at trial, it is entitled to greater probative weight, lienee, while there can be no doubt that plaintiff’s performance was materially slowed by a plethora of underground obstructions, it is concluded that a reasonable amount for the costs needed to overcome them was $7,449.20. Defendant contends, however, that plaintiff may not recover on this claim on the ground that it has failed to exhaust its administrative remedies.

Plaintiff, as has been mentioned previously, had made frequent verbal reports to the post engineer as underground obstructions were encountered and the parties ultimately agreed to postpone consideration of the question until the end of the contract prior to final settlement. This remained the situation when the contracting officer terminated the contract in January 1952, and later that month executed an agreement with the surety for completion of the work.

Against this background, plaintiff in its appeal to the ASBCA in February 1952 from the termination action included therein a claim of $7,449.20 for underground obstructions.

In the following month — while this appeal was pending — the contracting officer wrote Dale that “it is now desired to take up the matter of underground obstructions which you encountered from the beginning until you suspended operations.” The letter continued: “(I)t is requested that you list the obstructions encountered, together with the amounts you claim are due because of excess costs occasioned by these obstructions.” The contracting officer further indicated that the list would be checked and a finding made by him establishing the amount for which Dale might receive credit.

The record does not show whether Dale replied to this communication, but, in any event, in June 1952 the contracting officer made findings of fact that Dale, prior to termination, had found it necessary to remove some 54 hidden subsurface obstructions; that trenching operations by backhoe were severely restricted due to these obstructions and necessitated more expensive hand-shovelling methods; and that Seaboard Surety’s claim of $2,435 for these obstructions was fair and reasonable. The contracting officer then proceeded to pay the surety this amount.

It is problematical as to whether Dale had standing at this juncture to take an administrative appeal from this determination since the surety, as a result of the termination action, had stepped into its shoes. Thus, by improperly canceling the contract, the contracting officer may well have deprived Dale of a right to a timely administrative appeal from his decision in respect to underground obstructions.

Perhaps the ASBCA, once it had upset the default termination, could then have proceeded to resolve the problem on the record before it by treating Dale’s claim for underground obstructions as, in effect, a nune fro tumo appeal from the contracting officer’s findings in that regard. However, the board did not follow that course, but instead held (over Dale’s objection) that plaintiff’s claim for underground obstructions should be submitted to the contracting officer for subsequent action.

But, since the contracting officer had decided that matter two years earlier, further recourse to him by plaintiff might have been an idle gesture. See United States v. Smith, 256 U.S. 11, 16 (1921); Lundstrom v. United States, 53 F. Supp. 709, 711 (D. Oreg. 1941), aff’d 139 F. 2d 792 (9th Cir. 1943). Be that as it may, considering the unusual administrative confusion and delay, for which defendant was largely responsible, and considering also that the claim was before the ASBCA when it heard the case, plaintiff’s failure to resort to further administrative proceedings is not a fatal bar to its proceeding here.

Reinking Lumber Co. v. United States, 151 Ct. Cl. 307, 311, 283 F. 2d 527, 529 (1960); Garod Radio Corp. v. United States, 158 Ct. Cl. 596, 600, 307 F. 2d 945, 947 (1962); Lester Bros., Inc. v. United States, 151 Ct. Cl. 536, 539 (1960); United States v. Heaton, 195 F. Supp. 742, 746-47 (D. Neb. 1961). “Further hearings and litigation would tend to eat up the substance of these claims.” Armstrong v. United States, 152 Ct. Cl. 731, 738, 287 F. 2d 577, 580 (1961).

While plaintiff is allowed judgment of $7,449.50 for underground obstructions, the Government is entitled to recover from the surety, pursuant to its contingent counterclaim, $2,435 — the amount it paid the latter for underground obstructions encountered by plaintiff. Since the termination was unjustified, it is manifest that the Government’s payment of this sum to the surety was erroneous and may be recovered by way of a third-party counterclaim. Maryland Casualty Co. v. United States, 135 Ct. Cl. 428, 141 F. Supp. 900 (1956); Seaboard Surety Co. v. United States, 144 Ct. Cl. 686 (1959).

Plaintiff is also entitled to recover $10,710.37, the amount of retained percentages that was withheld from it by the Government and paid to the surety. By the same token, the Government may recover this sum from the surety pursuant to the contingent counterclaim. Ibid. Plaintiff claims $15,904 which it estimated to be the total cost of the tools, equipment, spare parts and other items taken by the Army. In this connection it introduced in evidence a 10-page inventory describing each of the items, which was prepared in February 1952 and submitted to the contracting officer at that time.

This evidence is found to be persuasive as to the items taken by the Army and not returned. However, in the absence of supporting testimony by way of books, records, invoices, etc., it is believed that plaintiff’s estimate of the total cost thereof is overstated, particularly when it is considered that in its appeal to the ASBCA plaintiff indicated that the approximate cost of these items was $4,000.

While it is not possible from the record to determine the exact value of the items, examination of the inventory list makes it sufficiently clear to find, on the basis of a jury verdict, that the total reasonable value of the items in question was at least $4,000 and plaintiff is entitled to judgment in that amount. Dee Hong Lúe v. United States, 150 Ct. Cl. 655, 667, 280 F. 2d 849, 856 (1960). As previously observed, when Dale’s right to proceed was terminated, the surety, at the defendant’s invitation, took over and completed the contract at a loss of $31,870.38.

Dale subsequently consented to entry of judgment against it for a sum including this amount. It seeks recovery of this loss. Defendant contends, however, that under the indemnity agreement between Dale and the surety, as construed by the Circuit Court of Appeals, the surety could have stepped in at any time and completed the contract and that, therefore, Dale’s liability to Seaboard was not caused by the Army’s termination action, but rather was the product of its contractual arrangements with the surety. This argument is not persuasive.

In the first place, the Court of Appeals did not hold that Seaboard had carte blanche right to take over the contract; it held rather that the surety could take over only were it shown that Dale’s prosecution of the work under the contract was so slow and so much at variation with specifications that the surety in good faith believed it desirable to step in to protect its interests. See supra, footnote 31. What is more, there was no judicial determination of the issue since the parties entered into a settlement agreement after the court’s remand. Ibid.

Second, Seaboard, regardless of its agreement with Dale, could not have become a transferee under the contract without consent of the Government by reason of the anti-assignment statute and there is no showing whatever that in the absence of a default termination, the Government would, in fact, have consented to such assignment. The situation here is that the Government itself precipitated the transfer by its wrongful action.

Having forced the surety to take over and complete the contract (as an alternative to paying excess costs) , the Government cannot then exculpate itself from liability on the ground that it might in other circumstances have consented to a transfer. In short, defendant’s argument overlooks the most salient consideration of all: that the surety took over and completed the contract as the direct and immediate result of the Government’s termination of Dale’s right to proceed.

That termination being improper, the Government is liable for the completion loss inasmuch as it was a direct and foreseeable result of the breach. United States v. Behan, 110 U.S. 338, 346 (1884); United States v. Spearin, 248 U.S. 132 (1918); Chain Belt Co. v. United States, 127 Ct. Cl. 38, 115 F. Supp. 701 (1953); Seatrain Lines, Inc. v. United States, 99 Ct. Cl. 272, 317 (1943); Joplin v. United States, 89 Ct. Cl. 345, 360 (1939); Williston on Contracts, § 1344 (Eev. Ed.); Restatement, Contracts, § 330. Cf. Locke v. United States, 151 Ct. Cl. 262, 270-71, 283 F. 2d 521, 526 (1960).

Plaintiff also claims $35,000 for loss of anticipated profits on the Army contract. With respect to this claim, plaintiff’s direct costs, np to the time of termination, as verified by defendant, amounted to $89,507 which included an expenditure of $17,333 for the cast-iron pipe needed for the remainder of the work. Beyond this, plaintiff’s witness estimated that the total additional cost needed to complete the work was $28,745, less an estimated salvage recovery of $6,000, making a total completion cost of $22,745, on which basis plaintiff’s total direct costs for contract performance would be $112,252.

To this, of course, must be added overhead cost and depreciation expense for the equipment needed to perform the contract. In this connection, a reasonable amount for plaintiff’s total overhead costs would be 10% of the total direct cost, or $11,225, while a reasonable amount for depreciation would be $6,760, so that plaintiff’s total cost of performance would be $130,237. Since the final contract price (exclusive of underground obstructions) was $162,486.02, plaintiff’s anticipated profit on the contract would thus come to $32,249.02.

However, this amount, predicated as it is on plaintiff’s estimated cost of completion of $22,745, appears overstated. For one thing, it is not without significance that the surety’s total completion cost was over $90,000. It is true that generally it is more expensive for a new contractor to complete a job started by another than for the original contractor to finish the work in view of such factors as the need for a learning period, installation of a new plant, training new men, and getting organized.

It is also true that the contractor retained by the surety to complete the job was a higher priced one than Dale. Nevertheless, the wide disparity between Dale’s estimated completion cost and the surety’s actual cost therefor militates against the conclusion that Dale could have completed the work for $22,000. Second, when the surety brought suit against it, Dale filed a counterclaim, alleging that its loss of anticipated profits on the Army contract was $10,000— an admission which has considerable relevance here.

Third, the amount claimed by Dale is at variance with its usual practice of estimating 10% profit on a job. In the circumstances of the present case, it would seem that the most reliable method for measuring plaintiff’s total cost of performance is to ascertain its direct cost of performance allocable to the portion of the work that had been completed as of termination and then to determine, by projection of that amount, its direct cost for the remainder of the work.

Plaintiff’s total cost of performance would hence be the sum of these figures to which would be added the other relevant cost items disclosed by the record. At the time of termination plaintiff had installed complete-in-place 4,355 linear feet of cement-asbestos pipe, of which 3,884 feet was 16" cement-asbestos pipe, while 471 feet was 12" cement-asbestos pipe. The unfinished work consisted of installing complete-in-place 2,030 feet of cast-iron pipe and 409 feet of 12" cement-asbestos pipe.

In this context, Dale’s total costs of $89,507 up to termination included the following verified expenditures for the unfinished work: (1) $17,333 for cast-iron pipe; (2) $1,100 for unloading that pipe; (3) $752.00 for limestone to cover the cast-iron pipe; and (4) $1,227 for 409 feet of 12" cement-asbestos pipe. Thus, $20,412 of the total expenditure of $89,507 was attributable to the unfinished part of the job while the balance, $69,095, was allocable to the work that had been completed. The record further shows that the cost of the 16" and 12" cement-asbestos pipe that was installed in the completed

section of the work amounted to $20,713. Hence, exclusive of pipe cost, Dale’s total direct cost for the work that had been completed was $48,382 ($69,095 less $20,7

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