EXECUTIVE MANSION, _Washington, April 4, 1888_.
_To the House of Representatives_:
I return herewith without approval House bill 2477, entitled "An act for
the relief of Nathaniel McKay and the executors of Donald McKay."
It is proposed by this bill to allow the beneficiaries named therein to
present to the Court of Claims for determination certain demands made
by them against the Government on account of the construction of two
ironclad monitors called the _Squando_ and the _Nauset_ and a
side-wheel steamer called the _Ashuelot_.
The contracts for building these vessels were made early in 1863. It was
agreed that they should be completed within six or eight months. It was
also provided in these contracts that the Government "should have the
privilege of making alterations and additions to the plans and
specifications at any time during the progress of the work, as it may
deem necessary and proper," and that if said alterations and additions
should cause extra expense to the contractors the Government would "pay
for the same at fair and reasonable rates."
It thus appears that the time allowed for the completion of these
vessels was with the assent of the contractors made exceedingly short;
that notwithstanding this fact they consented to permit such alterations
of plans as must almost necessarily prolong the time, fixing no limit to
such extension, and that in the same breath they fix their measure of
compensation for such alterations and an extended time consequent
thereon at "a fair and reasonable rate" for the extra expense caused
thereby.
Almost immediately upon the beginning of their work alterations and
changes were made in the original plans for these vessels, and they were
repeated and continued to such a degree that the completion of the
vessels was delayed many months.
In the latter part of the year 1864 and early in the year 1865 payments
in excess of the contract price were made by the Navy Department to the
contractors under the provisions of the contract above recited. The
contract price for the _Squando_ was $395,000. The contractors
claimed extra compensation amounting to $337,329.46, and there was
allowed $194,525.70. The contract price of the _Nauset_ was
$386,000, the extra compensation claimed was $314,768.93, and the amount
allowed $192,110.98. The contract price of the side-wheel steamer
_Ashuelot_ was $275,000, the extra compensation claimed was
$81,447.50, and the amount allowed was $22,415.92. The different sums as
thus adjusted were received by the contractors in settlement of their
claims for extra expense, and receipts in full were given by them to the
Government.
A number of other contractors had done like work for the Government and
claimed to have demands growing out of the same for extra compensation.
Evidently with the view of investigating and settling these claims, on
the 9th day of March, 1865, the Senate passed the following resolution:
_Resolved_, That the Secretary of the Navy be requested to organize
a board of not less than three persons, whose duty it shall be to
inquire into and determine how much the vessels of war and steam
machinery contracted for by the Department in the years 1862 and 1863
cost the contractors over and above the contract price and allowance
for extra work, and report the same to the Senate at its next session;
none but those that have given satisfaction to the Department to be
considered.
This board was appointed by the Secretary of the Navy on the 25th
day of May, 1865, and consisted of a commodore, a chief engineer,
and a paymaster in the Navy. Its powers were broad and liberal, and
comprehended an inquiry touching all things that made up "the cost to
the contractors" of their work in excess of the contract price and
allowances for extra work.
The board convened on the 6th day of June, 1865, and sat continuously
until the 23d day of December following, and made numerous awards to
contractors. The parties mentioned in the bill now under consideration
were notified on the 9th and 15th days of June, 1865, to prepare and
submit testimony to the board in support of their claims, and they
repeatedly signified their intention to do so.
Donald McKay was the contractor for the construction of the monitor
_Nauset_ and the steamer _Ashuelot_. The proceedings of the
board show that on the 11th day of August, 1865, he notified the board
that the only claim he made for loss was on the hull, boiler, and
machinery of the _Ashuelot_, which he would be prepared to present
in about six weeks.
Neither of these parties presented any statement to the board, and no
claim of theirs was passed upon.
On the 2d day of March, 1867, an act was passed directing the Secretary
of the Navy to investigate the claims of all contractors for building
vessels of war and steam machinery for the same under contracts made
after May 1, 1861, and before January 1, 1864. He was by said act
required "to ascertain the additional cost which was necessarily
incurred by each contractor in the completion of his work by reason of
any changes or alterations in the plans and specifications required and
delays in the prosecution of the work occasioned by the Government which
were not provided for in the original contract." It was further provided
that there should be reported to Congress a tabular statement of each
case, which should contain "the name of the contractor, a description of
the work, the contract price, the whole increased cost of the work over
the contract price, and the amount of such increased cost caused by the
delay and action of the Government as aforesaid, and the amount already
paid the contractor over and above the contract price."
Under this act Commodore J.A. Marchand, Chief Engineer J.W. King, and
Paymaster Edward Foster, of the Navy, were designated by the Secretary
of the Navy to make the investigation required. These officers on the
26th day of November, 1867, made a report of their proceedings, which
was submitted to the Senate with a tabulated statement of all the claims
examined by them and their findings thereon.
It appears by this report that the claims of the beneficiaries mentioned
in the bill herewith returned were examined by the board, and that
nothing was found due thereon under the terms of the law directing their
examination.
These claims have frequently been before Congress since that time. They
have been favorably reported and acted upon a number of times, and have
also been more than once strongly condemned by committees to whom they
were referred.
A resolution was passed in 1871 by the Congress referring these and
other claims of a like character to the Court of Claims for
adjudication, but it was vetoed by the President for reasons not
necessarily affecting the merits of the claims.
The case of Chouteau _vs_. The United States, reported in Fifth
Otto, page 61, which arose out of the contract to build a vessel called
the _Etlah_, appears to present the same features that belong to
the claims here considered. It is stated in the report of the House
committee on this bill that "the _Squando_ and _Nauset_ were
identical in the original plans and the changes and alterations thereon
with the _Etlah_ and _Shiloh_, built in St. Louis;" and yet
the Supreme Court of the United States distinctly decided in the
_Etlah_ case that the only pretext for further compensation should
be sought for in the contract, where the contractor had evidently been
content to provide for all the remedy he desired.
It seems, then, that the contractors mentioned in this bill, after
entering into contracts plainly indicating that changes of plans and
consequent delay in their work were in their contemplation, availed
themselves of the remedy which they themselves had provided, and
thereupon received about 50 per cent in the case of two of these vessels
of the contract price for extra work, giving the Government a receipt in
full. When soon thereafter opportunity was offered them to make further
claim of as broad a nature as they could desire, they failed to do so,
and one of them disclaimed any right to recover on account of one of the
vessels, though all are now included in the present bill. In 1867 the
claims were fully examined under a law of Congress and rejected, and the
Supreme Court in an exactly similar case finds neither law nor equity
supporting them.
If it be claimed that no compensation has been yet allowed solely for
the increase in the price of labor and material caused by delay in
construction, it is no hardship to say that as the contractors made
provision for change of plans and delay they must be held to have taken
the risk of such rise in price and be satisfied with the provision they
have made against it. Besides, much of the increase in the price of
labor and material is included in the extra cost which has already been
reimbursed to them.
But the bill does not provide that these contractors shall be limited in
the Court of Claims to a recovery solely for loss occasioned by increase
of the cost of labor and material during the delay caused by the
Government. By the terms of the proposed act the court is directed to
ascertain the additional cost necessarily incurred in building the
vessels by reason of any changes or alterations in the plans and
specifications and delays in the prosecution of the work. This, it seems
to me, would enable these contractors to open the whole question of
compensation for extra work.
It hardly seems fair to the Government to permit these claims to be
presented after a lapse of twenty-three years since a settlement in full
was made and receipts given, after the opportunity which has been
offered for establishing further claims if they existed, and when, as a
consequence of the contractor's neglect, the Government would labor
under great disadvantages in its defense.
I am of the opinion, in view of the history of these claims and the
suspicion naturally excited as to their merit, that no injustice will be
done if they are laid at rest instead of being given new life and vigor
in the Court of Claims.