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LUBELL BROS., INC.

FEBRUARY 21, 1945.-Committed to the Committee of the Whole House and

ordered to be printed

Mr. KEOGH, from the Committee on Claims, submitted the following

REPORT

[To accompany H. R. 1630)

The Committee on Claims, to whom was referred the bill (H. R. 1630) for the relief of Lubell Bros., Inc., having considered the same, report favorably thereon with an amendment and recommend that the bill as amended do pass.

The amendment is as follows: At the end of the bill add: Provided, That no part of the amount appropriated in this Act in excess of 10 per centum thereof shall be paid or delivered to or received by any agent or attorney on account of services rendered in connection with this claim, and the same shall be unlawful, any contract to the contrary notwithstanding. Any person violating the provisions of this Act shall be deemed guilty of a misdemeanor and upon conviction thereof shall be fined in any sum not exceeding $1,000.

The purpose of the proposed legislation is to pay the sum of $104,511.12 to Lubell Bros., Inc. in full settlement of all claims against the United States. Such sum represents liquidated damages for delay in deliveries of certain shirts under contracts between the said Lubell Bros., Inc., and the United States. Such delayed deliveries resulted in no loss or damage to the United States, and on March 3, 1944, the Quartermaster General recommended to the General Accounting Office the allowance of this claim. Such allowance cannot be made by the General Accounting Office under existing provisions of law.

STATEMENT OF FACTS

It appears that these contracts were let to the Lubell Bros., Inc. in January and February 1941, and the six contracts called for the manufacture and delivery of 1,108,000 shirts. Lubell Bros. have been in the shirt business for many years and are one of the largest shirt manufacturers in the country. They did a considerable amount of work for the Government during the last war, and when in January 1941, the Selective Service was first operating, the Quartermaster Department had great need for additional shirts and were faced with considerable difficulty in obtaining facilities for the manufacture of them.

The Office of Production Management, the predecessor of the War Production Board, was then organized and it undertook to aid the War Department in securing the needed supplies. It was at the insistence and request of the Office of Production Management, and in fact at its insistence, that the War Department entered into contract with Lubell Bros. Both the Office of Production Management and the War Department knew that the facilities of Lubell Bros. were inadequate to meet the delivery requirements in these contracts, and it was specifically agreed that a major portion of the goods would be sublet by Lubell Bros. to subcontractors, approved by the Quartermaster Department, and that was done.

The sum shown in this bill represents the amount of liquidated damages withheld from the prime contractor, Lubell Bros. As a result of the delays in deliveries on the part of the subcontractors, and it is interesting to note that while this was the first contract let for shirts, and the War Department specifically approved the subcontractors that were doing the bulk of the manufacturing and delivery, that subsequent prime contracts were let by the War Department with the same subcontractors at increased prices. The delays in delivery were caused by strikes, slow-downs, and other factors, principally on the part of the employees and the management of the subcontractors, and also on account of difficulty in obtaining materials.

The War Department, in a rather lengthy report seeks to justify its retention of this sum of liquidated damages. It is significant and in accordance with the policy, a submission of the War Department was made to the Bureau of the Budget, and the Bureau of the Budget indicated in its report to the Secretary of War, that while it had no objection to the submission of the unfavorable report, it deemed it advisable to call to the attention of the War Department and of the Congress the fact that the Quartermaster General, in a letter dated April 9, 1943, indicated that if the General Accounting Office should ask that office for a report on the claim, he, the Quartermaster General, would recommend that the claim be allowed, and would state that the relief requested would have been granted had it been within the power of the Quartermaster General to do so.

On November 3, 1944, the War Department requested the Director of the Bureau of the Budget for advice as to whether there was any objection to the submission to Congress of the foregoing report on this bill. On December 4, 1944, the Director of the Bureau of the Budget transmitted the following reply to that inquiry:

Receipt is acknowledged of your letter of November 3, 1944, transmitting two copies of your proposed adverse report to the chairman of the House Committee on Claims, relative to H. R. 4744, a bill to relieve Lubell Bros., Inc., from the imposition of liquidated damages under certain contracts with the War Department.

In reply, you are advised that while there would be no objection to the Department submitting such report on the bill as it may deem appropriate, it is believed that, in view of the following considerations, the enactment of legislation granting relief in this case should not be considered in conflict with the program of the President:

1. The Quartermaster General, in a letter dated April 9, 1943, addressed to the contractor, indicated that if the General Accounting Office should ask that office for a report on the case, he, the Quartermaster General, would recommend that the claim be allowed and would state that the relief requested would have been granted had it been within the power of the Quartermaster General to do so.

2. The information available to this office does not indicate that the Government suffered any fiscal loss or any substantial inconvenience by reason of the failure to comply with terms of the contracts within limitations specified.

3. It is understood that subsequent to the making of the six contracts with the claimant early in 1941, the War Department has not required the inclusion of liquidated camages provisions in its war contracts.

4. With respect to the suggestion in your proposed report that relief from the imposition of liquidated damages should be supplied by general legislation rather than by private relief acts, attention is called to the fact that the Congress has seen fit to adopt a policy of dealing with each case on its own merits and has passed, and the President has approved, a number of private relief bills of this character (see Private 283, approved March 14, 1940; Private, 537, approved August 14, 1940; Private, 32, approved April 11, 1941; Private, 34, approved April 11, 1941; Private, 214, approved November 21, 1941; Private, 453, approved June 11, 1942; Private, 39, approved April 29, 1943; and Private, 58, approved June 26, 1943).

You are further advised, however, that any provision for the allowance of nterest on the claim would not be in accord with the program of the President.

Therefore your committee recommend favorable consideration to the proposed bill, and append hereto report of the War Department, together with other pertinent evidence.

DECEMBER 15, 1944. Hon. Dan R. McGEHEE, Chairman, Committee on Claims,

House of Representatives, Washington, D. C. DEAR MR. McGEHEE: The War Department is opposed to the enactment of H. R. 1630 Seventy-eighth Congress, a bill for the relief of the Lubell Bros., Inc.

This bill would authorize and direct the Secretary of the Treasury to pay "to Lubell Bros., Inc., 806 Broadway, New York City, N. Y., the sum of $104,302.76, together with interest on such sum at the rate of 6 percent per annum for the period beginning December 1, 1941.” The bill further states that “such sums represent penalties for delay in deliveries of certain shirts under contracts between the said Lubell Bros., Inc., and the Department of War (contract Nos.: W-669 QM-10585; W-669-QM-10618; W-669-QM-10697; W-669-QM-10759; W-669 QM-10787; W-669-0 M-10980) entered into between January 6 and February 11, 1941, and other miscellaneous withheld and unpaid items under such contracts.”

In January 1941, the Quartermaster Corps faced difficulty in meeting the shirt requirements of the expanding Army. Lubell Bros., Inc., of 806 Broadway, New York, N. Y., which had made shirts for the Army during World War I, but had since neither made Army shirts nor retained the facilities necessary for the manufacture of the same, was requested by the Office of Production Management to furnish such shirts. Six contracts for the manufacture of a total of 1,108,000 shirts were entered into between Lubell Bros., Inc. and the Government. Three of the contracts were for shirts to be manufactured from materials supplied by Lubell Bros., Inc., namely:

W-669-QM-10585, dated January 6, 1941, 84,000 shirts.
W-669- QM-10618, dated January 10, 1941, 396,000 shirts.
W-669-QM-10697, dated January 17, 1941, 120,000 shirts.

The remaining three contracts were for shirts to be manufactured from materials and findings furnished by the Government, namely:

W-669-QM-10759, dated January 24, 1941, 100,000 shirts.
W-669-QM-10787, dated January 29, 1941, 336,000 shirts.
W-669-QM-10980, dated February 11, 1941, 72,000 shirts.

The total amount payable by the Government under the six contracts was the sum of $791,120, the price per shirt ranging from $0.50 to $0.92Y2. Article 17 of each of the contracts provided in pertinent part as follows:

the contractor shall not be charged with liquidated damages or any excess cost when the delay in delivery is due to unforeseeable causes beyond the control and without the fault or negligence of the contractor, including, but not restricted to, acts of God or the public enemy, acts of the Government

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fires, floods, epidemics, quarantine restrictions, strikes, freight embargoes, unusually severe weather, and delays of a subcontractor due to such causes unless the contracting officer shall determine that the materials or supplies to be furnished under the subcontract are procurable in the open market, if the contractor shall notify the contracting officer in writing of the cause of any such delay, within 10 days from the beginning thereof, or within such further period as the contracting officer shall, with the approval of the head of the department or his duly authorized representative, prior to the date of final settlement of the contract, grant for the giving of such notice.

Each of the six contracts contained a provision for liquidated damages for delay in delivery. Some of the contracts provided for liquidated damages for delay in the amount of two-fifths of 1 percent of the contract price, while the others provided for liquidated damages of one-half of 1 percent for such delay. The provision in the contracts which provided for liquidated damages in the amount of two-fifths of 1 percent in case of delay reads as follows:

"Liquidated damages: Under the terms and conditions stipulated in article 17 of this contract, the contractor shall pay to the Government, as liquidated damages, for each calendar day of delay in the delivery of any article, a sum equal to two-fifths of 1 percent of the price of such article for each day's delay after the time specified for delivery.”

A similar provision providing for liquidated damages was contained in each of the remaining contracts except that the amount there stated was one-half of 1 percent.

At the time the foregoing contracts were executed, the parties understood that to fulfill its prime contracts with the Government, Lubell Bros., Inc., would be required to subcontract the bulk of its performance to other manufacturers. Substantially all of the shirts contracted for were delivered to the Government, but not within the time prescribed in the contracts. The controversy between Lubell Bros., Inc., and the Government concerns the causes for the delay and the resulting withholding by the Government of the liquidated damages provided for in the contracts.

Lubell Bros., Inc., from the outset encountered difficulties in the performance of its contracts due, it asserted, to the failure of its subcontractors to make deliveries on time. The contractor thereupon requested from the contracting officer, Philadelphia Quartermaster Depot, the following separate extensions of time in which to complete performance:

(a) Two weeks on contracts numbered W-669-QM-10585, W-669-QM-10618 and W-669-QM-10697 because it was asserted the Government erroneously rejected the cloth submitted to the Philadelphia Quartermaster Depot by Pacific Mills, one of the contractor's sources of supplies.

(6) Two weeks on contracts numbered W-669-QM-10585, W-669-QM-10618 and W-669-QM-10759 because it was asserted the Government entered into prime contracts with certain subcontractors of Lubell Bros., Inc., after the Government had inspected the facilities of such subcontractors and found them adequate for the performance of the subcontracts to be awarded to them by Lubell Bros., Inc., in the fulfillment of its prime contracts with the Government.

(c) One week on contracts numbered W-669-QM-10585, W-669-QM-10618 and W-669-QM-10697 because of a strike at the United States Finishing Co. which was finishing cloth for Classic Mills, Inc., one of the sources of supplies of Lubell Bros., Inc.

(d) Three weeks on contracts numbered W-669-QM-10585, W-669-QM-10618 and W-669-QM-10697 because of alleged delay in securing folding and creasing machines.

(e) One week on contracts numbered W-669-QM-10618 and W-669-QM-10697 because it was asserted folding machines used by subcontractors broke down.

(f) Three weeks on contracts numbered W-669-QM-10618, W-669-QM-10697, W-669-QM-10759, and W-669-QM-10787 because of alleged slow-downs by the employees of certain subcontractors,

(g) One week on contracts numbered W-669-QM-10618 and W-669-QM-10759 because of a strike of the employees of the subcontractor Clyde Shirt Co., Inc.

(h) Two weeks on contract numbered W-669-Q1-10618 because of a strike of the employees of the subcontractor D & D Shirt Co.

The records of the War Department do not indicate that Lubell Bros., Inc., requested any extension of time for performance of contract numbered W-669QN1-10980 or for a refund of the liquidated damages deducted from the contract price for the delay in deliveries under that contract.

On December 31, 1941, the contracting officer, in accordance with article 17 of the contracts, after an exhaustive investigation into the facts and circumstances

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