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supplying the Indian service with 328 wagons at prices varying with the different sizes of wagons. This contract was made on Indian Office form 5-082 (copy attached), in which, under article 2, the right is reserved by the Commissioner of Indian Affairs to order a greater or less amount, not to exceed 25 per cent of the quantities specified in the schedule attached thereto. The 328 wagons are now in course of construction and will, no doubt, be delivered in accordance with contract.

"There later developed an additional need for a considerable number of wagons of a given size-one of the sizes included in the original contract of Burt J. Kaull. These wagons were needed for the Sioux allottees, being a part of the benefits accruing to them as a result of treaty stipulations. Under date of July 29, 1913, after proper advertisements, bids were opened for supplying the Indian service with 971 3 feet 9 inch narrow-track, etc., wagons for these allottees. Three bids were received, viz, from the Studebaker Corporation, the Kentucky Wagon Co., and William H. Browning, representing the International Harvester Co. Of these three proposals, that of the Studebaker Corporation, considering price and quality, was the most satisfactory. Also the price quoted by the Studebaker Corporation was the lowest. It developed, however, that this price of the Studebaker Corporation on the wagon wanted was 20 per cent higher than the price specified for the same wagon in the contract of Burt J. Kaull heretofore referred to. The Indiana Wagon Co. did not bid under this second advertisement, either in its own name or in that of its representative, Burt J. Kaull.

"In view of this opportunity to save the Government money, it was decided not to award the contract to the Studebaker Corporation under the second advertisement, but to reject all bids (in accordance with that part of the specifications-copy attached-which provide that the right is reserved by the Commissioner of Indian Affairs to reject any or all bids or any part of a bid), and purchase the additional quantity under the contract of Burt J. Kaull. The right to place the order with Burt J. Kaull, under these conditions, it is believed, accrues under article 2 of the Kaull contract, in which the right to increase the quantity 25 per cent above the amount specified in the schedule attached to the contract is reserved, and under article 9 of the same contract, which provides that 'It is agreed by and between the parties hereto, that the contract may, by mutual consent, be changed, altered, modified, or abrogated, in whole or in part; but no such change, alteration, modification, or abrogation shall entitle the said party of the second part to increased rates of compensation over the rates herein specified,' the party of the second part being the said Burt J. Kaull, who is willing to supply the additional wagons at the contract price.

The right of the Commissioner of Indian Affairs to follow this procedure has been questioned. Doubt is expressed as to the application of article 9 of the contract to article 2 thereof, and to the right of the commissioner under article 9, even with the consent of both parties to the contract, to alter the contract so that a quantity greater than 25 per cent of the amount specified in the schedule can be obtained. It is also argued that the Burt J. Kaull contract should

not be considered in connection with this second purchase, because Mr. Kaull failed to bid under the advertisement of June 27, 1913.

"It is further argued for the Studebaker Corporation that the readvertisement for bids tended to show that the Kaull contract was supposed to have been closed. That necessarily does not follow, however, as it has been the policy of the Indian Öffice, with the consent of the contractor and his sureties, to increase the scheduled quantities of a contract to a greater extent than 25 per cent, where it was to the Government's interest to do so, and this after a second advertisement had failed to produce lower prices. It has been held heretofore by the Indian Office that the 25 per cent clause was placed in the contract so that the contractor might know the limit of his contractual obligation in this respect and at the same time give the Commissioner of Indian Affairs an opportunity to purchase under the original terms to meet the needs of the service, which may arise subsequent to the letting of the contract.

"The Commissioner of Indian Affairs, in taking the action outlined, is following an opinion rendered by your predecessor under date of October 11, 1910 (55 MS. Comp. Dec., 139), in which it was

held as follows:

"The option given in the second paragraph of the contract to increase the quantities by 25 per cent if required, is for the benefit of the Government, and under it you can require the delivery of the increased quantity at the prices specified in the contract. This provision as to an increase in the quantities to be delivered as a matter of right under the contract is exclusive.

"Article 8 of the contract provides that

"This contract may, by mutual consent, be changed, altered, modified, or abrogated in whole or in part, but no such change, alteration, modification, or abrogation shall entitle the said party of the second part to increased rates of compensation over the rates specified therein.

"Under this provision you would have the right, if agreed to by the contractor, to increase the quantities to be delivered under the contract, but not to agree to pay any increased rates of compensation.

"You are therefore advised that if the contractor will consent to a modification increasing the quantities at rates not to exceed those specified in the contract, you would have the right to make it. If increased rates should be demanded, you would not be authorized to modify the original contract so as to provide for the purchase of the increased quantities at the increased rates under the terms of the contract, but would be required to let a new contract after due advertising, as required by section 3709 of the Revised Statutes."

"This opinion seems clear, but in view of the few facts which differ in this case from those on which the opinion of October 11, 1910, was made, the matter is referred to you.

"The difference in the two cases lies in the fact that the said opinion was rendered on contracts based on Indian Office form 5-081 (copy attached), which does not provide for liquidated damages, while the Kaull contract is on its form 5-082, which does provide for liquidated damages in article 4 thereof; also that in the former case the commissioner did not readvertise, whereas in the latter case he

"I shall be glad to have your opinion at the earliest practicable date on the following points, in order that the wagons may be purchased promptly, viz:

"1. Has the commissioner the right to advertise for bids on an article for which a contract, with the 25 per cent provision in it, is already in effect, in order to 'feel' the market, and order under the later bids instead of under the 25 per cent clause of the contract?

2. Has the commissioner the right under article 2 of forms 5-081 and 5-082 to reduce contracts 25 per cent and after readvertisement purchase elsewhere than under the original contract?

"3. Does not the provision in the contracts as to modification, etc., apply to article 2 thereof-i. e., under article 8 of form 5-081 and article 9 of form 5-082 can not the quantity be increased above the 25 per cent provided in article 2, if the contractor and sureties agree?

It seems to me that each of the questions submitted involves a consideration of section 3709 of the Revised Statutes, which provides that

"All purchases and contracts for supplies or services in any of the departments of the Government, except for personal services, shall be made by advertising a sufficient time previously for proposals respecting the same, when the public exigencies do not require the immediate delivery of the articles or performance of the service. When immediate delivery or performance is required by the public exigency, the articles or service required may be procured by open purchase or contract, *

The decision of this office to which you refer, supra (55 MS. Comp. Dec., 139, dated Oct. 11, 1910), appears not to have taken into account the positive requirements of said section 3709 of the Revised Statutes, and, as will presently be shown, is therefore somewhat misleading and erroneous.

In the case submitted it was thought that approximately 328 wagons would be sufficient to meet all the requirements of the Indian service for a given period, and proposals were invited accordingly for furnishing that number of wagons, prospective bidders being advided that that number of wagons, 25 per cent more or less, as the exact needs of the service might dictate, would be required during the period to be covered by the contract. Of the proposals received, that of Kaull was accepted, and contract was entered into accord. ingly.

Now, this procedure was all in accordance with law. All the wagons covered by the Kaull contract have been advertised for as required by law and the contract therefor made as the result of such advertisement. Under that contract the Indian Office can order, and the contractor is obliged to furnish, 328 wagons, or, at its option, 25 per cent more or 25 per cent less. Any number ordered by it, from 246, the minimum, to 410, the maximum number advertised and contracted for, the contractor must furnish.

But any wagons in excess of the maximum number advertised and contracted for-i. e., 410-which the Indian Office might desire could not be ordered as of right under the existing contract. Such additional wagons could be procured only as the result of a new or supplemental contract, and, except in case of exigency requiring their immediate delivery, such new or supplemental contract can be made only after due and proper advertisement. The clause of the Kaull ́and similar contracts which authorizes the change, modification, or abrogation, by mutual consent of such contracts does not have the effect of rendering legal a procedure that would otherwise be illegal er of dispensing with what the law positively requires, and any change or modification in said contract which had the effect of securing without advertisement articles which might properly be purchased only after such advertisement could be regarded in no other light than as an evasion of the law.

And when it later developed that wagons largely in excess of the number covered by the Kaull contract would be in fact required, in the case submitted the Indian Office advertised, as by law required, for the furnishing of such wagons. If Kaull was willing to furnish the increased number of wagons at the same price he was furnishing the wagons covered by his existing contract, he had the privilege of submitting a proposal to that effect. But his prior bid to furnish from 246 to 410 wagons at a given price per wagon could not, by any process of reasoning, be considered as a proposal to furnish 971 additional wagons at the same price. Whether or not any of the bids that were submitted are to be accepted is a matter that the proper administrative officer is to determine; with that question I have no concern. But unless one of them is accepted or unless there is an exigency which will not permit of the delay incident to a readvertisement, the only proper course is to advertise for new proposals. To let the contract for the additional wagons to Kaull, who made no response to the public invitation for bids, because he privately proposes to furnish them at a lower price than was offered by any of the legal bidders would be to contract for said wagons not as a result of advertising as required by law but as a result of private understandings that amounted to an evasion of law.

The specific questions presented for decision are academic in their nature and of too general and indeterminate a character to warrant my undertaking at this time to answer them. The question growing out of the concrete statement of facts presented by you I have answered, and this answer will suffice, for all present purposes, for answer to the more general questions presented.

The holding of Assistant Comptroller Mitchell in his opinion of October 11, 1910 (55 MS. Comp. Dec., 139), referred to by you, is disapproved.

LIQUIDATED DAMAGES FOR DELAY IN COMPLETING WORK CONSISTING OF SEPARATE ITEMS.

Where the same damages will result from a partial as from an entire failure to complete the work covered by a contract, it is proper to agree in advance on the measure of such damages, even though the work to be done consists of separate items and is to be done at a price per item, and it is no objection that such damages are not apportioned according to the extent of the delay where partial completion of the work is of no value or serviceability until all items of the work are completed.

Where a contract makes the decision of a given officer final and conclusive as to certain questions about which disputes are likely to occur, the decision of such officer of such question will, in the absence of any showing of fraud or gross mistake, be accepted as correct.

Decision by Comptroller Downey, October 21, 1913:

William F. Cush requested, September 20, 1913, a revision of the action of the Auditor for the War Department in disallowing, July 3, 1913, his claim (No. 520069) for $4,111.68, retained by the War Department from the contract price of certain work done by said Cush under contract dated April 23, 1912, as liquidated damages, cost of inspection, etc., accruing under said contract by reason of delay in the completion of the work covered thereby.

The auditor disallowed said claim for reasons stated as follows: "The contract provides for the deduction of liquidated damages and cost of superintendence and inspection in case of delay in completion of contract. No part of the delay appears to have been caused by the United States, nor was any part occasioned by any of the causes named in the contract for which no damages should be assessed.

"The total deduction having been made in accordance with the provisions of the contract, no further amount can be allowed by this office, and said claim is therefore disallowed."

The facts giving rise to the claim presented are as follows:

By circular dated March 4, 1912, the Engineer officer in charge of the Washington Aqueduct invited proposals " for excavation, building dam, and construction necessary in remodeling Georgetown Reservoir," prospective bidders being therewith warned and advised that the successful bidder would be expected and required to enter into a written contract that would provide for liquidated damages in an amount of $30 per day "for any period of delay beyond the time agreed upon for completion "; that no work should be done on Sundays, holidays, or at night, except upon the written order or permission of the officer in charge; and (par. 15) that—

"Each bidder will state in his bid the period of time within which he will complete the work, the period to be reckoned from the date of receipt of notification of approval of the contract by the Chief of Engineers. This period will be given due weight in canvassing bids, as indicated by the liquidated damage clause in paragraph 4, and that