New Jersey Foundry & Machine Co. v. United States
Headline: Construction-contract ruling requires contractor to pay inspection and supervision costs for delays unless delay fits narrow uncontrollable exceptions, and awards contractor partial reimbursement for improper deductions.
Holding:
- Government contractors can be charged inspection costs for delays unless specific uncontrollable causes apply.
- Written extensions do not automatically erase inspection fee deductions without evidence of listed uncontrollable events.
- Courts may reduce improper deductions and award contractors partial reimbursement.
Summary
Background
A contractor entered into a February 1901 agreement with the Army to build four observation towers at Fort Flagler and Fort Worden in Washington. The contract required work to begin within ninety days after the Chief of Engineers approved the contract and to be finished within seven months after that approval. The government approved the contract on March 25, 1901, making the completion date October 25, 1901. The contractor failed to finish on time because of trouble getting materials from subcontractors and defects in ironwork. With the Chief of Engineers’ written consent, the contractor received an extension and completed the towers on June 8, 1902, and the work was accepted.
Reasoning
The Court examined three contract provisions. One allowed written time extensions for epidemics, floods, ice, local quarantine, or other unavoidable causes. Another said the United States could recover inspection and supervision costs for a contractor’s delay. A specification said inspection costs during any extension would be deducted, except where the extension was granted for the listed uncontrollable events. The contractor argued the extension eliminated inspection deductions if the work was finished within a reasonable time. The Court found no conflict between the clauses, held that the listed exceptions apply only when the record shows those uncontrollable events, and found the contractor had not shown those causes.
Real world impact
The ruling means government contractors generally remain responsible for inspection and supervision charges when they cause delays, unless the extension clearly fits narrow uncontrollable exceptions. The government’s deduction here was large and included improper items, so the Court awarded the contractor $1,329.55 after reviewing what charges were properly inspection expenses.
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