(i) Buildings and equipment required for necessary field offices, commissary, hospital, and other facilities * (3) Premiums on such bonds and insurance policies as the Contracting Officer may require for the protection of the Government; the cost of all public liability, employer's liability, workmen's compensation, fidelity, fire, theft, burglary, and other insurance that the Contracting Officer may approve as reasonably necessary for the protection of the Contractor. (k) Losses and expenses, not compensated by insurance or otherwise (including settlements made with the written consent of the Contracting Officer), actually sustained by the Contractor in connection with the work and found and certified by the Contracting Officer to be just and reasonable. (1) The cost of reconstructing and replacing any of the work destroyed or damaged, and not covered by insurance, but expenditures under this item must have the written authorization of the Contracting Officer in advance. (p) Such other items as should, in the opinion of the Contracting Officer, be included in the cost of the work. When such an item is allowed by the Contracting Officer, it shall be specifically certified as being allowed under this paragraph. GENERAL. 7. No salaries of the Contractor's executive officers, no part of the expense incurred in conducting the Contractor's main office or regularly established branch offices, and no overhead expenses of any kind, except as specifically authorized in section 1 of this article, shall be included in the cost of the work; nor shall any interest on capital employed or on borrowed money be included in the cost of the work. 8. * * * In determining the actual net cost of articles and materials of every kind required for the purpose of this contract, there shall be deducted from the gross cost thereof all cash and trade discounts, rebates, allowances, credits, salvage, commissions, and bonifications which have accrued to the benefit of the Contractor or would have so accrued except for the fault or neglect of the Contractor. ARTICLE V-Special requirements. 1. The Contractor hereby agrees that he will: (a) Procure and thereafter maintain such bonds and insurance in such forms and in such amounts and for such periods of time as the Contracting Officer may approve or require. * (f) The Contracting Officer may require the Contractor to dismiss from the work such employee as the Contracting Officer deems incompetent, careless. insubordinate, or otherwise objectionable. (g) At all times use his best efforts in all acts hereunder to protect and subserve the interest of the Government. While no generally applicable rule as to the Government's obligation to reimburse the contractor for losses caused by the negligence of the employees of the contractor or of a subcontractor can be drawn from these quoted provisions, certain limitations are evident. Article II 1 (d) expressly provides that the contractor will be reimbursed for expenditures for such repairs and spare parts of construction plant, owned or rented by the contractor, as are not included in the rental, provided such repairs or spare parts are not made necessary by defects in such plant, or parts thereof, "or by the fault or negligence of the Contractor or his employees." Clearly, under this provision, the contractor assumes the risk of damage to his own or rented construction plant caused by the fault or negligence of his own employees and, consequently, may not be reimbursed for the expense of repairing such damage. That the contractor is not necessarily to come out whole regardless of negligence is further shown by the provisions of Article II 8 which, in effect, charge the contractor with all discounts, rebates, allowances, etc., accruing to the contractor or which "would have so accrued except for the fault or neglect of the Contractor." Article II 1 (j) provides that the contractor will be reimbursed for premiums on such bonds and insurance policies as the contracting officer may require for the protection of the Government or may approve as reasonably necessary for the protection of the contractor; and the contractor expressly agrees in article V 1 (a) that he will procure and maintain such bonds and insurance as the contracting officer may approve or require. Should the contractor be remiss in fulfilling his obligation to procure and maintain bonds and insurance required or approved by the contracting officer, he would not be entitled to reimbursement for losses which could have been covered thereby. As was pointed out in the decision of April 14, 1941, the express inclusion in such provision respecting insurance of public liability, employer's liability, and fidelity insurance "shows that the Government is thus indirectly to assume even the risk of insurable losses resulting from the negligence or defalcations of the contractor's employees." The broader question here is whether this is the limit of the Government's obligation in such respects, or whether the contract contemplates that losses of such character not covered by insurance may, also, be reimbursed, and, if so, to what extent and under what conditions. That the insurance provision is not expected necessarily to cover all possible losses and damages which may occur is shown by the provisions of subparagraphs 1 (k) and (1) of article II that the contractor will be reimbursed for "Losses and expenses, not compensated by insurance or otherwise," actually sustained by the Contractor in connection with the work and found and certified by the Contracting Officer to be just and reasonable, and for "The cost of reconstructing and replacing any of the work destroyed or damaged, and not covered by insurance," where expenditures are authorized in advance by the contracting officer. These provisions are general and do not expressly exclude losses or damages caused by the negligence of the contractor's employees. In this respect such provisions are in marked contrast with the provisions concerning repairs of the contractor's construction plant and the taking of discounts, etc., which expressly exclude losses due to the fault or negligence of the contractor or his employees. The omission of similar exceptions in said subparagraphs (k) and (1) raises a reasonable inference that such limitations were not there contemplated or intended; and looking to the basic purpose and design of such contracts to obtain the work for the Government at actual cost plus only a limited fixed fee for the services of the contractor, I think it may be concluded that such provisions for reimbursement of losses and damages incurred by the contractor in connection with the work may include those due to the negligence of his own employees, where such reimbursement is not otherwise excluded and where the contractor is not chargeable with any breach of his contractual duties and obligations. See, in this connection, the case of King and Boozer v. State of Alabama, No. 3, Div. 351, Special Term 1941, - Ala., where the Supreme Court of Alabama in discussing such a Federal cost-plus-a-fixed-fee contract in relation to State taxation said that such contract "partakes of the nature in some respects of an independent contractor, and in some of an agency of the Government." One of the primary duties and obligations of the contractor is to furnish and maintain a force of competent and careful employees. By article I 4 the contractor agrees to execute the work in the best and most workmanlike manner "by qualified, careful, and efficient workers." While, under article II 1 (g) no person may be assigned to service by the contractor as superintendent of construction or other named responsible administrative positions in the contractor's field organization until the contracting officer has approved a statement of the qualifications and experience of such person and, under article V1 (f), the contracting officer may require the contractor to dismiss from the work any employee whom the contracting officer deems incompetent, careless, insubordinate, or otherwise objectionable, such provisions do not relieve the contractor of primary responsibility for the exercise of due care in the selection and retention of employee; and if the contractor is remiss in the performance of such obligation he has no basis to claim reimbursement for losses or damages resulting from the carelessness or negligence of the employees involved. If, knowingly or without appropriate investigation, the contractor employs a thief to carry the pay roll or an inebriate to drive a truck or keeps on the job a worker known to be careless, he takes the risk and must bear the consequences. On the other hand, even the most exacting care in the selection of a large force of workmen may afford no guarantee against negligent losses. Persons habitually careful may on occasion suffer lapses of attention or momentary indecision. Under stress of emotion or through overconfidence or temporary confusion in an unusual situation they may take chances or fall into conduct which may be branded as negligence when measured retrospectively against the legal standard of the conduct of the average prudent man under similar circumstances. Ordinarily, of course, as between the party who engages an independent contractor to do construction work and such contractor, the contractor must bear the risk of such conduct or negligence on the part of his own employees. Though unavoidable on the part of the contractor it is a part of the contractual risk to be covered as an element of the cost in fixing the contract price. But, under the form of contract here involved, there is no contract price fixed to cover such risks as an element of the cost. Instead the Government is to reimburse the contractor his actual costs, of which such unavoidable negligent losses are, or may be, an element. If such losses are not reimbursed by the Government they must come out of the contractor's fee, and if that is not sufficient, out of his pocket. But the contract contemplates that for faithful performance the contractor shall come out whole, plus the stipulated fee as compensation for his services, etc. It follows that while the contractor may be reimbursed such losses as an element of his actual costs, where not otherwise excluded by the contract, he may not be so reimbursed in cases where he has failed to exercise reasonable care in the selection and employment of the individual workers involved, or where such persons have been retained after the contractor has reason to know that they are not trustworthy and careful. That is, the contractor may not be reimbursed for losses where his failure to perform his contractual duties and obligations is a proximate cause of the loss. With respect to losses caused by the negligence of employees of a subcontractor the right of the contractor to reimbursement by the Government would appear to depend primarily on the terms of the subcontract and the legal liability thereunder as between the contractor and the subcontractor for a particular loss. Ordinarily the subcontract would be on a lump-sum basis and the subcontractor would be liable thereunder for any losses or damages caused by the negligence of his employees. That would be a matter for the contractor to settle with the subcontractor and only in exceptional cases should there arise any question of the Government reimbursing the contractor. However, if the circumstances of the case were such that compensation could not be obtained from the subcontractor and the loss must otherwise be borne by the contractor, there appears no reason why the contractor, if free of fault, should not be reimbursed, pursuant to the principles stated above, under the provisions of said article II 1 (k) providing for the reimbursement of "Losses and expenses, not compensated by insurance or otherwise * actually sustained by the contractor in connection with the work and found and certified by the contracting officer to be just and reasonable." * * You ask what effect the contributory neglect of a Government employee would have on the Government's liability in such cases. While the import of this question is not entirely clear, it may be noted generally that the law, except admiralty, will not apportion the fault or the damages between joint tort-feasors and that one who is guilty of negligence or contributory negligence will not be allowed compensation or damages from others also negligent, but, as between themselves, they will be left where their own negligence or contributory negligence placed them. Little v. Hackett, 116 U. S. 366; Baltimore & P. R. Co. v. Jones, 95 U. S. 439. While the Government is not liable for the torts of its officers, agents or employees, it has been held that the Government may not recover for negligent injury where its employees are guilty of contributory negligence. That is, the contributory negligence of the Government employee may be set up as a defense against the Government's claim. United States v. Moscow-Idaho Seed Co., 92 F. (2d) 170. See, also, United States v. The Thekla, 266 U. S. 328; In re United States Steel Products Co., 24 F. (2d) 657. These principles would appear equally applicable where the obligation to reimburse for negligent injury is founded on contract. See The Gulf Transit Co. v. United States, 43 Ct. Cls. 183; Osborn v. Cline, 263 N. Y. 434, 189 N. E. 483. It would follow that under the forms of contract here involved if the contractor was at fault, as discussed above, but the Government, through its employees, is chargeable with contributory negligence in causing the loss or damage in a particular case, the parties should be left in status quo, that is, if the property damaged or lost was that of the contractor the Government would not be required to reimburse him for the loss or for the cost of repairing or replacing such property, but if the property belonged to the Government and was lost or damaged by the contributory negligence of the Government's employees, the contractor would not be required to repair or replace such property at his own expense, but would be entitled to reimbursement of expenditures ordered for that purpose. As indicated above, the questions raised can be answered only thus generally on the basis of your present submission, and it is realized that the principles discussed may be difficult of application to the facts and circumstances of particular cases. However, any payments made under such forms of contract in reimbursement of losses or damages involving the negligence of the employees of a contractor or of a subcontractor should be supported by a sufficient showing of the facts as found and certified by the contracting officer to bring the payment within the principles here stated; and if there be substantial doubt in particular cases as to whether reimbursement is authorized, the matter may, of course, be submitted to this office for an advance decision. |