United States v. Rice

Background

A contractor agreed to install plumbing, heating, and electrical systems for a Veterans’ Home at Togus, Maine while a separate general contractor prepared the site and built the hospital. The Government told the general contractor to begin in May 1932; the subcontractor was told to start three days later and sent a superintendent in early June. On arrival, the subcontractor found work stopped because unsuitable soil required moving the building site and changing the plans. The subcontractor could not begin until October, paid its workers in colder weather, and incurred extra overhead. The Government extended the time, reduced the subcontractor’s payment by about $1,000 because of construction economies, waived liquidated damages for the extension period, and paid the subcontractor the full amount for work done. The subcontractor sued for roughly $26,000 for delay-related losses.

Reasoning

The Court asked whether the Government’s delayed start and changed specifications breached the contract or whether the contractor’s only remedy was the contract’s adjustment procedures. The contract reserved the Government’s right to change drawings, alter specifications, and suspend work, and it provided for an equitable adjustment of price and time when changes occurred. The Court held that delays caused by permitted changes were not a breach and that the contract’s clauses limit recovery to price adjustments and extensions of time. Article 3 (Changes) and Article 4 (Changed Conditions) were read alike: they provide for adjustment of amount due and time required, not for separate recovery of consequential delay damages.

Real world impact

Because the Court reversed the lower judgment, the subcontractor cannot recover extra delay damages beyond the contract’s extensions and price changes. Contractors on federal projects with similar clauses should expect extensions and contract-price adjustments, not separate awards for delay when the Government lawfully changes plans.