Full opinion text
FINDINGS OF FACT AND CONCLUSIONS OF LAW DANIEL HOLCOMBE THOMAS, District Judge. HISTORY OF CASE 1. This proceeding should serve for years to come as a classic example of the economic futility of litigation of this nature and the need for settlement of such controversies. 2. In 1967, Providence Hospital of Mobile (Providence), a Catholic hospital operated by the Sisters of Charity, decided to substantially expand its facilities and to renovate and remodel its existing buildings. Providence obtained a Hill-Burton Federal Grant in the amount of $1,000,000.00. On October 27, 1967, Providence entered into a standard form architectural contract with Charles H. McCauley Associates, Inc. (McCauley), a large architectural firm in Alabama with wide experience in hospital construction. Pursuant to this contract, McCauley prepared plans, specifications and contract documents. On April 12, 1968, McCauley advertised the job for bids to be received until July 18, 1968. Seven contractors submitted bids. On July 29, 1968, the contract was let by Providence to Manhattan Construction Company of Texas (Manhattan) for a total contract price of $6,117,500.00. Manhattan entered into a subcontract with E. C. Ernst, Inc. (Ernst) under which Ernst agreed to furnish the materials and equipment and perform all of the electrical work for a cost of $982,215.00. Under this subcontract, Ernst was required to provide emergency generators which it later contracted to purchase from Fairbanks-Morse, Inc. (Fairbanks-Morse), a fifth party to this litigation. 3. The contract between Manhattan and Providence incorporated the plans and specifications prepared by McCauley and provided that Manhattan was required to complete the project within 730 days. If the project was not completed within this specified period and any granted extensions of time, Manhattan agreed to pay liquidated damages of $250.00 per day until completion. The subcontract between Manhattan and Ernst provided the same time schedule and liquidated damages plus an indemnification agreement from Ernst to Manhattan. 4. The order to proceed was issued August 19, 1968. Therefore, the original completion date was August 18, 1970. During the period of construction, the time was extended by appropriate change orders for 185 days. Accordingly, the revised completion date was February 19, 1971. The job was accepted on May 17, 1972, making an overrun of 453 days. 5. This extended litigation was commenced on August 28, 1970, by Ernst filing a complaint against all other parties seeking a declaratory judgment and order “preventing the purchase and installation of any substitute equipment” in place of the Fairbanks-Morse emergency generator, with engines, which Ernst had proposed to install under its contract with Manhattan. The Court set the matter for hearing on January 27, 1971, on the sole issue of the sufficiency of the Fairbanks-Morse emergency generator system. Hearing on this issue was concluded on February 4, 1971, when this Court issued an order specifically finding that: “The emergency generator system (proposed to be furnished) does not meet the requirements of the specifications”, and that: “The Dorman engines proposed by Fairbanks-Morse to power the emergency generator system do not fulfill the horsepower requirements of the specifications. “The Court finds from the evidence that the material submitted to Mc-Cauley by Fairbanks-Morse, Ernst and Manhattan, or any one or more of them, failed to establish that the emergency generator system proposed to be supplied by Fairbanks-Morse, met the requirements of the specifications.” 6. This suit triggered a long pleading war with a series of amendments, cross-claims, counterclaims, and motions, bearing little resemblance to the original complaint and resulting in many issues between and among the parties. 7. On April 11, 1973, this matter was set down for pretrial, and the attorneys were instructed to have present at the pretrial, a representative of each litigant who had authority to negotiate settlement of this matter. Besides all attorneys being present, the litigants were represented as follows: Ernst, by a Vice President; Fairbanks-Morse, by a director; McCauley, by its liability carrier; Manhattan, by a Vice President; Providence, by its Administrator. At the commencement of the pretrial, the Court made the following statement: “Gentlemen, this is a case which should be settled between the parties. In present day thinking, it seems to be the idea that any problem can be cured in a Federal District Court. This, I assure you, is an erroneous approach. There is not a lawyer in this courtroom capable of operating the Providence Hospital. There is not a lawyer in this courtroom capable of running Manhattan Construction Company; there is not a lawyer in this room capable of running McCauley Associates; nor a lawyer in this room capable of running Fairbanks-Morse; nor a lawyer capable of running Ernst, and I assure you there is not a Judge in this courtroom capable of doing so. All of you litigants are successful operators or you would not be participating in a six million dollar contract. Lawyers in their zeal to represent their clients many times fail to see but one side of the litigation and that is the side of his client. This litigation is not a one-sided bit of litigation, it is a five-sided bit of litigation. I stated at the outset that this was a case that should be settled between the parties. I said that because this is a classic example where the cost of proper preparation of the case for trial is completely disproportionate to the benefits any of the parties could hope to derive. You’all are represented by capable attorneys. None of the attorneys want to go to trial in this ease unless and until they have properly and thoroughly prepared their case for trial. This entails much pretrial discovery and pretrial discovery entails much lawyer time, much travel, much hotel expense. The point is, it is extremely expensive. Not only does this continued litigation require discovery expenses, it entails expenses in the appellate court. This case is already no stranger to the Fifth Circuit nor the U. S. Supreme Court. Yes, litigation is expensive, but remember the courts do not create litigation, it is created by the litigants. I have asked that you representatives of the litigants be here today. Although I know you have been kept abreast of this litigation by your attorneys, I wanted you to hear directly from the trial judge his thoughts on this matter. You litigants are in a fairly closely related field. Being trained in this field, you are in a far better position to adjust your differences than those untrained in these related fields. As an illustration, I, who have had no training whatsoever in engineering, had to determine whether or not the emergency generator system proposed to be furnished by Fairbanks-Morse, met the specifications, when experts couldn’t agree. That is a strange bit of logic. If this ease is not settled quickly, it is going to trial quickly, properly prepared or otherwise. To try this case will probably take not only days, but weeks, and I wish to state to all of you litigants and all attorneys here and now, if this case is not settled, it will be tried during the month of August, 1973, and it will take the precedence over vacations or any other business conflict. The object of litigation is to do substantial justice between the parties litigant, but the parties litigant should realize that, in most situations, they are by their particular training better able to accomplish this among themselves. This is your court, it is the peoples’ court. It is properly staffed and ready, willing and able to try this case and will do so in August. Regardless of the outcome, an appeal is almost certain. This will entail more expense and more delay. Having thusly expressed myself, we will now proceed with the pretrial of this case. I will ask you representatives of the litigants to remain throughout this pretrial as your presence will most likely be helpful.” 8. The case was not settled, and the trial was commenced on August 6, 1973. It entailed 40 days of court time, 41 witnesses (34 live and 7 by deposition) and 1056 exhibits. Presentation of the evidence was finally concluded on November 27, 1973. Thereafter, the litigants were given until the 28th day of January, 1974, within which to file Findings of Fact and Conclusions of Law. This time was extended to February 11, 1974. The Court after studying these Findings and Conclusions set the matter for final argument on May 22, 1974, each litigant being given one hour’s time. The pretrial order entered in this case on the 26th day of April 1973, and amended on the 6th day of July 1973, is attached hereto and made a part of this Finding hereof as Exhibit 2. As stated above, portions of this case have already been before the Fifth Circuit and the Supreme Court. Docket numbers 72-3073 and 73-1287, Fifth Circuit and A-129, Supreme Court. Each contains a part of the history of this litigation. 9. PARTIES — The following parties are litigants in this action: Plaintiff, E. C. Ernst, Inc. (Ernst), is a corporation incorporated under the laws of the District of Columbia and has its principal place of business in the District of Columbia. Defendant Manhattan Construction Company of Texas (Manhattan) is a corporation incorporated under the laws of the State of Texas and has its principal place of business in the State of Texas. Defendant Fairbanks-Morse, Inc. (Fairbanks-Morse) is a corporation incorporated under the laws of the State of Delaware and has its principal place of business in the State of Wisconsin. Defendant Providence Hospital (Providence) is a corporation incorporated under the laws of the State of Alabama. Defendant Charles H. McCauley Associates, Inc. (McCauley) is a corporation incorporated under the laws of the State of Alabama and has its principal place of business in the State of Alabama. 10. DESIGNATION OF BUILDINGS — In the plans and specifications and in the testimony of witnesses, various portions of the construction project are referred to by separate building designations, although all of the work was inter-related and not separable into independent units. The project upon completion was a single integrated structure. The structure as it existed prior to commencement of the new construction or remodeling was referred to as the “existing building”. The newly constructed six floor addition was referred to as “Building A” and consisted principally of patient rooms, operating suites, x-r'ay facilities and treatment rooms. A new single story addition with basement was added to the front of the existing building and was referred to as “Building B”. It contained principally administrative spaces, entrance lobby, and records library (Tr. 2119). The kitchen and cafeteria of the existing building were expanded by another one story addition referred to as “Building C”. (PX 14A) 11. CLAIMS — The matter in controversy exceeds, exclusive of interests and costs, the sum of Ten Thousand Dollars ($10,000.00). The following claims are asserted by the different parties: A. ERNST AGAINST MANHATTAN — Ernst seeks damages against Manhattan for delays and disruptions caused by Manhattan’s breach of its obligations to do the following: To provide accurate plans, drawings and specifications for the project; to complete all preliminary work necessary in order to allow Ernst to perform its work; to coordinate the work of and among the various subcontractors; to make or obtain prompt decisions on all questions requiring an answer from the owner, architect or general contractor; to supply promptly information required from the owner, architect or general contractor; to act promptly and dispositively, or to procure others to so act, upon all requests for approval of material and equipment; to make available to Ernst in timely fashion the specific areas necessary for the performance of each part of Ernst’s work; to coordinate the work performed by Manhattan and other subcontractors so as to prevent any interference with the timely performance . of Ernst’s work; to promptly make, issue or procure understandable and feasible clarifications of specifications, drawings or plans, and to issue promptly any directions necessitated thereby; and to do all things necessary to be done in order to complete, or to permit the completion of, the project within the time frame specified therefor. In addition to the above, Ernst claims a balance of $6,-252.60 due from Manhattan under the contract. Finally, Ernst asserts that a novation was agreed to among Manhattan and Tube-O-Matic, Inc., one of Manhattan’s subcontractors, whereby Manhattan was directed in writing to pay Ernst a sum of money on account of work done by Ernst in fulfillment of Tube-O-Matic’s obligations on the project. B. ERNST AGAINST FAIRBANKS-MORSE — Ernst claims damages against Fairbanks-Morse for breach of its obligations under their contract for the procurement of an acceptable emergency generator system. Manhattan has withheld from Ernst funds due it total-ling $143,293.65 on account of claimed costs to Manhattan in furnishing, in lieu of the Fairbanks-Morse system, an emergency generator system which complied with the plans and specifications. Ernst therefore claims damages in an amount, plus interest, equal to all or any portion of such back charges which are sustained as proper by this court and which are in excess of $83,740.00, such latter sum being the contract price to Ernst for the Fairbanks-Morse system. If all back charges are sustained, then the damages sought by Ernst hereunder would be $59,553.65 plus interest. Ernst also seeks general damages for any losses it has sustained which are attributable to delays or disruptions caused by Fairbanks-Morse’s attempt to supply and have accepted its non-complying emergency generator system. In addition, Ernst claims that Fairbanks-Morse is obligated pursuant to their contract to indemnify Ernst against any losses for which Ernst is held liable and which resulted from Fairbanks-Morse’s failure to furnish timely a complying emergency generator, said indemnification to include all of Ernst’s legal fee's and expenses in this action. Finally, Ernst claims punitive and compensatory damages against Fairbanks-Morse for wilfully and knowingly making fraudulent misrepresentations to Ernst relating to its generator’s compliance with all specifications of the Contract Document and Ernst’s own purchase order, Ernst having relied upon such misrepresentations. Ernst asserts that such misrepresentations regarded, among other matters, horsepower ratings and merchantability, the latter despite the used, failed, rebuilt and cannibalized condition of the generators supplied by Fairbanks-Morse. C. ERNST AGAINST PROVIDENCE — As a third-party beneficiary of the contract between Providence and Manhattan, Ernst claims damages against Providence for delays and costs of court caused by Providence’s breach of its contract to do the following: to supply plans, drawings and specifications for the project which correctly and completely depicted the work to be performed and which were feasible for the accomplishment of the work; to promptly supply such information as was required from it in the course of the performance of the work; to promptly issue such clarifications as were required from it in the course of the performance of the work; to act promptly upon necessary approvals of material or equipment to be used in the course of performance of the work; and to promptly do all things required in order to enable all persons, including Ernst, timely and in an orderly manner to perform their obligations under their contracts and subcontracts within the time frame specified therein. D. ERNST AGAINST McCAULEY —As a contractee with McCauley in connection with the procurement of the plans and specifications, Ernst claims damages against McCauley for breach of its warranty that the plans and specifications were in all respects accurate, complete and sufficient so as to allow proper evaluation of work to be done under the contract. Ernst asserts that McCauley’s breach of its warranty caused delays and disruptions in the supply of equipment and materials and ultimately in the completion of the project. As third-party beneficiary of the contract between Providence and Mc-Cauley, Ernst claims damages against McCauley for failure to provide plans and specifications suitably for determining the scope and cost of work to be performed and for feasible construction; for failure to timely effect necessary clarifications, corrections and changes in the plans and specifications; and for failure to promptly act upon submittals of data, samples and the like which were required to be submitted to the architect. E. MANHATTAN AGAINST PROVIDENCE — Manhattan initially claimed that a balance of $334,473.79 was due it under its contract with Providence. On July 27, 1973, the Court ordered Providence to make a payment of $211,475.00, thus reducing the balance due to $123,000.00. In addition, Manhattan claims damages against Providence for intentional interference with Manhattan’s timely performance of the contract by failing to deliver portions of the “existing building” for renovation and by employing incompetent agents and representatives. Manhattan claims further damages for improper processing of submittals, improper handling of the patient bed light fixtures selection and installation, and improper handling of the emergency generator selection and installation. F. MANHATTAN AGAINST Mc-CAULEY — Manhattan seeks damages against McCauley for failure to perform general contractual duties, for failure to properly process submittals, for failure to handle properly the bed light fixtures selection and installation and for failure to handle properly the emergency generator selection and installation. G. MANHATTAN AGAINST ERNST — Manhattan seeks indemnification from Ernst as to any liquidated damages for which Manhattan is deemed liable to Providence and for recoveries against Manhattan by any cross-claimant or plaintiff. Manhattan also seeks damages based on contract and fraud theories relating to the furnishing of the patient bed light fixtures, the explosion-proof receptacles, the wiring and the emergency generator. Manhattan alleges that Ernst and Fairbanks-Morse, jointly and independently beginning in October 1968, represented to Manhattan that the Fairbanks-Morse generator system met the required specifications, that said representations were made knowing them to be false and that Manhattan relied on the misrepresentations to its detriment. Manhattan alleges a conspiracy to defraud it by Ernst and Fairbanks-Morse and seeks punitive damages against Ernst for its fraud. H. MANHATTAN AGAINST FAIRBANKS-MORSE — Manhattan seeks damages against Fairbanks-Morse based on contract and fraud theories relating to the furnishing of the emergency generator. Manhattan also seeks punitive damages against Fairbanks-Morse. I. CLAIMS BY PROVIDENCE ■ — Providence has no formal claim for liquidated damages. However, this issue was framed by the Court in its pretrial order. Rule 15(b) provides that, “[w]hen issues not raised by the pleadings are tried by the express or implied consent of the parties, they shall be treated in all respects as if they had been raised in the pleadings.” Providence has also pleaded over against McCauley for indemnification as to any liability Providence might have on the various claims asserted by Manhattan against Providence. 12. McCauley and Fairbanks-Morse make no claims against any of the other litigants. Their sole position being defensive. 13. The pleadings as framed are more the product of fertile legal minds that they are definitive of the real issues involved in the law suit. Every conceivable issue was raised even though many would have no effect on the outcome of the case. The real issues are: a. What was the actual number of days of overrun for which liquidated damages are to be assessed, and who was responsible therefor? b. Did the question of whether or not to use a sewage ejector pump or a gravity system cause any delay in the completion of the entire contract? c. Did the installation of the explosive proof receptacles in the new operating rooms cause any delay in the ultimate completion of the job ? d. Did the decision as to what patient room light fixtures would be used cause any delay in the ultimate completion of the job? e. Did the problems in selection and installation of the emergency generator system cause any delay in ultimate completion of the job? f. Did Ernst’s activities during the selection and installation of the emergency generator constitute fraud? g. Was Fairbanks-Morse guilty of fraud in regards to the emergency generator system ? h. Did the method in which the hospital released space in the old building to Manhattan cause any delay in the ultimate completion of the job ? i. Did Manhattan fail in its duty to supervise and coordinate the work, and, if so, did it delay the ultimate completion of the job ? j. Is Providence entitled to a judgment over against McCauley? FINDINGS OF FACT The Issue of Liquidated Damages 14. The claim of Providence, raised sua sponte by the Court, for liquidated damages under its construction contract creates several factual issues, primary of which is the period of time for which these damages should be applied. This question is resolved by determining the number of days for which extensions were granted or should have been granted beyond the scheduled completion date of August 18, 1970. The number of days for which extensions were approved, or should have been approved, should be subtracted from the 638 days between August 18, 1970, and May 17, 1972, when the project was conditionally accepted. Another question relates to the extent, if any, that Providence may have been responsible for delays which caused the project to extend beyond its scheduled completion date. 15. There was a dispute with respect to a request by Manhattan for an extension of time for 39 days. Manhattan contended that it experienced that much delay in obtaining access to the old operating room area, which had necessarily been kept in operation until occupancy of the new operating area. (EX-492, 493) By letter of April 27, 1972, McCauley had recommended approval of the request to Providence. (EX-493) On April 28, 1973, Providence first denied the request (EX-494), but then, by letter of May 10, 1972, it advised that it would grant the extension of 39 calendar days. (EX-495) On May 18, 1972, Providence changed its position and directed McCauley to disregard its approval letter of May 10, 1972, and to deny the requested extension (EX-494) The Court finds that the extension requested should have been, and was, approved by Providence and therefore allows it in the computation herein. 16. Additional extensions of time were requested and denied. These requests were properly denied and will be considered in connection with the discussion of the portion of the work to which they were related. The extensions properly granted and due to be deducted from the 638 total days overrun comprise 185 days which total includes the disputed 39 days discussed above and extensions granted in connection with Change Orders 1-12, inclusive. There should also be deducted 65 days for which Providence was responsible in regard to the. sewage ejector pump and 29V2 days in regard to the bed light fixtures, as are hereinafter discussed. In addition, for the purpose of computing liquidated damages, there must be deducted from the total overrun the delays caused by McCauley, it being Providence’s agent, which were 29 % days in regard to the bed light fixtures and 80% days in regard to the emergency generator, also hereinafter discussed. Accordingly, the overrun for which liquidated damages are due is 248% days for a total of $62,125.00 in damages, the contract providing for liquidated damages of $250.00 per day. 17. The more difficult determination confronting this Court is how the blame for this overrun should be assessed among the parties and what effect this will have on the right of Providence to recover the liquidated damages sought. From the foundation to the finish work there were multiple difficulties, many of which should have been anticipated-in a job of this magnitude involving new construction and the remodeling of hospital facilities where sick patients had to be treated, operations performed, and hospital functions continued without interruption. 18. In summary form, to be further detailed in connection with the more specific issues to follow, the progress was substantially as follows: In 1968 and early 1969, foundations for the additions to the existing hospital (Buildings A and B) were being laid. Inclement weather and the necessity for some unexpected work on the pilings on which the foundation would rest (for which all extensions requested were granted) put the project behind schedule. Manhattan prepared a bar chart showing anticipated commencement and completion dates for cataloged portions of the job, but admittedly abandoned the chart during the early parts of the project. There is testimony that there was a period of progress during the time that Building A was being raised to its full six stories, but there were difficulties regarding certain materials and equipment to be installed, specifically the emergency generator system, bed light fixtures, and deficiencies discovered in the explosion-proof receptacles. Delays involving these items will be discussed in more detail. In 1970 work continued on the new building. Building B was completed in November 1970, and the renovation work begun in the non-patient areas of the existing building. By Janury 1971, Building A had reached a point in its construction where it could have promptly been made ready for patient occupancy if the emergency generators had been available. Apparently, Manhattan and its subcontractors did not push to complete the building during the winter of 1970-1971. After the emergency generator arrived and was installed, Building A was occupied by patients from the existing building, and portions of the existing building were turned over from time to time, by Providence to Manhattan for renovation. 19. On May 3, 1971, it was discovered that the explosion-proof receptacles (FX-115, p. 328) which were required in the new operating rooms in Building A had been defectively and dangerously installed, thereby delaying occupancy until the defects could be corrected. This meant that Providence had to continue to use the operating rooms' in the existing building which to some extent disrupted Manhattan’s renovation of the existing building. There were further problems with the emergency generator, but the work continued through May 1972, in connection with renovations in the existing building. 20. The various witnesses at the trial attempted to allocate periods of delay which prolonged the ultimate completion of the project. However, the Court finds it impossible to affix periods of delay with any degree of accuracy, except with respect to the emergency generator, the explosion-proof receptacles and the bedlight fixtures. There is some evidence that Providence delayed completion of the project through a lack of coordination in turning over parts of the existing building to Manhattan. There is other evidence that Providence was conscientious in providing access to the existing building but necessarily was at times delayed in view of the recognized commitment to keep the hospital operational. It is apparent that Manhattan and Ernst underestimated the difficulties inherent in this renovation under the contract conditions. 21. Representatives of the various parties attempted to assess the responsibility for delay on others than themselves. Every witness testified that there was some overlap with respect to the delays experienced and the cause therefor. They further testified that the delays were due to various causes, as to a portion of which some defendants admittedly could not be held responsible. Sewage Ejection Pump 22. The plans and specifications for the project provided for the sewage outflow line serving the hospital to be placed underground beneath the floor of the Building B addition. An electric sewage ejection pump was to be installed for the purpose of lifting or pumping the sewage up to the level at which it could be discharged into the municipal sewer lines. By November 1968, Manhattan had completed the excavation for the basement of Building B (an area approximately two hundred feet by fifty feet by ten feet deep) and the reinforcing steel for the pilings and had in place the pile caps, the walls and the underground piping. Manhattan was now ready to pour the basement floor. At this time, McCauley directed that the pouring be held up. The building engineer for Providence had belatedly realized that, by running the sewage line through the basement rather than under the floor, the sewage could be made to flow out of the hospital by gravity and that the need for the ejection pump could be eliminated along with its resulting cost and operating and maintenance expense. (PX 3, Tr. 2116-2123) 23. On November 14, 1968, Manhattan was requested by McCauley to propose a change in the contract price for eliminating the pump and changing the sewage line to a gravity flow system. Had the gravity flow arrangement been originally designed by McCauley, it would have been less expensive than the underground pipe and pump system. However, the work had progressed so far at the time the change was proposed that it would then have cost more to change the design to a gravity-flow line than it would have cost to proceed with installation of the pump. Manhattan and its plumbing subcontractor submitted to McCauley a proposal for the change on December 11, 1968. That proposal was disapproved for the reason that it did not coincide with an estimate made by one of McCauley’s consulting engineers. The proposal was resubmitted on February 21, 1969. Manhattan was notified on March 25, 1969, that the proposal was rejected. Manhattan was then permitted to resume its work and to install the pump as originally designed. (MX 244, Tr. 2116-2123) 24. Installation of the sewage ejection pump system was stopped on November 14, 1968, and resumed again on March 25, 1969. Thus, there was a delay of some 131 days in the installation of the sewage system. Manhattan requested an extension on its contract of 131 days because of this delay, but its request was denied by the architect. At trial, Manhattan insisted that it was entitled to this extension. Fairbanks-Morse joined Manhattan in this position. Ernst also insisted at trial that it was entitled to an extension of 131 days with the delay being attributed to Providence and McCauley. Both McCauley and Providence argued that the extension was properly denied. 25. It is true that there was a delay of 131 days in the installation of the sewage system and that this particular delay resulted from the failure of Providence and McCauley to decide promptly which sewage system would be used. However, the Court does not find that this delay caused a corresponding delay of 131 days in the completion of the project as a whole. According to his 'testimony (EX 244), Manhattan’s own Vice President, Mr. Roberts, originally had felt that this 131 days could have been absorbed within the contract’s time limit for the job. Although Mr. Roberts later changed his mind, the Court shares his original thoughts to the extent that with proper supervision and coordination by Manhattan and McCauley, this entire time could have been absorbed. However, the fact is that it was not absorbed. Providence is the one who originally came up with the idea of the gravity system, and this caused the stoppage of this phase of the work. While it is impossible to determine to a certainty the number of days delay which this problem caused in the ultimate completion of the job, suffice it to say that such delay, as there was, was caused by Providence. The Court feels therefore that one-half of this 131 days is as accurate an estimate as can be made of the actual resulting delay, that 65 days of delay should be charged against Providence and that Providence should not be paid liquidated damages for that period. Explosion-Proof Receptacles 26. The specifications provided, in part: “Receptacles: “Explosion-proof receptacles in operating rooms and hazardous area shall be flush mounted, 125 volt, 20 amps, 3 pole (grounding) with armored cord grip plug for each receptacle, polished chrome finish, Hubbell No. 24309 and No. 24312 cap.” (PX 3, pg. 18-26; Tr. 499) “Type of Installation: “(c) All work installed in Operating, Delivery and Emergency Rooms and areas containing combustible anesthetics shall be in accordance with requirements of the National Electric Code for Class I Group C installation of all equipment within five feet of the floor. Other equipment in areas shall comply with N.F.D.A. No. 56.” (PX 3, p.18-6; Tr. 499) “Standards of Materials and Workmanship : “All materials shall be new and shall be listed as approved by the Underwriters’ Laboratories, Inc., in every case where a standard has been established for the particular type of material in question. All work shall be executed in a workmanlike manner and shall present a neat and mechanical appearance when completed.” (PX 3, pg. 18-3) 27. An explosive-proof receptacle, of the type involved in this litigation, is a device consisting of three principal parts. The largest part is a heavy cast-steel, cube-shaped box fitted with screw-out plugs for attachment to electrical conduits at various points. The box is hollow, and one side has a threaded opening three inches in diameter. Into this threaded opening is screwed a cast-steel collar, the threaded' portion of which is approximately 1% inches long. On the outer end of the collar is a flange plate 4% inches in diameter and % inch thick. The outer face is machined perfectly flat, and it has four threaded holes for the attachment of the third part. The third part of the device has a heavy cast-steel face plate, the outer face of which is chrome plated and the inner face is machined so as to seal against the face of the flange on the collar. On the inner side of the face plate is a sealed can-type unit containing the electrical contact portion of the receptacle. When assembled, four screws pass through holes in the face plate and into the holes in the collar flange, making an airtight seal between the machined faces of each. The face plate contains the female portion of the receptacle, into which a specially-designed male plug may be inserted. (EX 706; EX 511) 28. The codes referred to in the specifications quoted above require the use of explosion-proof receptacles for all installations in operating rooms and similar areas below the level of five feet above the floor in order to eliminate the risks of explosion and fire. Gases used for anesthesia are highly flammable and explosive. Operating rooms where these gases are used are kept under positive air pressure to minimize the possibility of entry of contaminants. Ventilating air is introduced at points high in the room and exhausted near the floor, so that any explosive gas leaking in the room would be drawn downward and exhausted. The area below five feet above the floor is considered hazardous because any explosive gas which escaped would be drawn downward. The explosive-proof receptacle is so designed and constructed so that when properly installed, if any explosive gas is forced into the wall cavity and into the receptacle by the pressure in the operating room and there ignited by a spark from the receptacle, the force of a resulting explosion would be contained within the device. Fire or hot gases would therefore not be permitted to escape and cause a larger explosion inside the operating room. (Tr. 500-2) 29. For a proper and safe installation in a wall, the cited codes require that at least five full turns, or threads, of the collar must be engaged in the threads of the box and that the machined faces of the collar flange and the face plate must be tightly drawn together with not more than .00015 inch clearance between them. If either of these requirements is not complied with, fire and hot gases could escape from the device in the event of an explosion inside of it. (Tr. 501) 30. As the walls in which the explosion-proof receptacles were to be installed were constructed, it was the responsibility of the electricians employed by Ernst to insure that the electrical conduit and the box portion of the device were properly positioned. This was necessary so that the face plate portion could be installed flush with the outer surface of the wall while obtaining the necessary engagement of the collar at least five full threads into the box and the seal between the face plate and the collar flange. (Tr. 910, 913, 3442) When the electricians installed the face plates, they knew whether or nor they had the proper seal and thread engagement. (Tr. 893, 913, 971) ■31. On May 3, 1971, Mr. Lacefield, McCauley’s electrical consultant for this project, made an inspection of the electrical work at the project, including the operating rooms in Building A. (Tr. 506-7) At that time, the explosion-proof receptacles had been installed by Ernst. To all outward appearances, the receptacles had been properly installed. The face plates were in place against the walls. (Tr. 510) However, the receptacles had actually been improperly installed by Ernst. On many of the devices, the collars were not engaged five threads into the boxes, and the machined faces of the collar flanges were not in contact with the machined faces of the face plates. (Tr. 510, 894, 974, 978) It was necessary to remove the face plates in order to discover the improper installations and the hazardous condition thereby created. (Tr. 510, 974) 32. The Ernst electricians, who knew that they had installed the receptacles in an improper manner and thereby created the potential for a disastrous explosion in an operating room, had nevertheless concealed the hazard by procuring screws longer than those provided for attachment of the face plates to the collar flanges. These long screws were extended through the holes in the face plates, making it possible to secure the face plates to the wall without the machined surfaces of the face plates and the collars being in contact. (Tr. 1801-4, 1810, 1817) Mr. Johnson, a Vice President of Ernst, admitted that Ernst's installation and concealment of the defects had been improper. (Tr. 974, 978) 33. After discovery of the condition created by Ernst, it was necessary to find some method of correcting the defects and providing a safe installation. It was decided that this could best be done by obtaining collars having a longer threaded portion, which could be screwed five or more turns into the boxes and still meet the face plates with an airtight seal. These had to be ordered from the manufacturer and specially fabricated. This process and required testing by the Underwriters’ Laboratories, Inc. required over three months. (Tr. 944-5, 948) Ernst acknowledged its responsibility for the installation of the receptacles by ordering and paying for the special long collars without asking for repayment by Manhattan or any other party. (Tr. 947-8, 956-7; EX 709) 34. By October 6, 1971, the longer collars had been delivered and installed. On that date,- Mr. Lacefield made an inspection of the operating rooms and found most of the explosion-proof receptacles to be acceptably installed. Three or them were still not proper, however, and one had been pounded on the face plate in an effort to drive it into the wall far enough to fit. (Tr. 508-9; McX 84, pgs. 174-5) These installations were subsequently corrected. (Tr. 512) 35. With the exception of the explosion-proof receptacles, the operating rooms in Building A were complete and ready for use on July 1, 1971, when the remainder of the building was accepted and occupied. (Tr. 269, 2288) The operating rooms could not be used until proper and approved installation of the receptacles had been made. Providence was finally able to move into the new rooms on October 15 and 16, 1971. The first surgeries were performed in Building A on October 17 or 18, 1971. (Tr. 257, 270) 36. Since use of the operating rooms in the existing building had to be continued until the operating rooms in Building A could be used, the scheduled renovation of the areas of the existing building occupied by the surgical rooms, recovery rooms, labor and delivery rooms and the nursery were delayed as the direct result of Ernst’s improper installation and concealment of the explosion-proof receptacles. This delay was for a period of 108 days, i. e. July 1 to October 16, 1971. (Tr. 269-73, 2152-5, 2288-90, 2311, 2670, 4423, 2601) 37. Ernst contended that the improper installation of the explosion-proof receptacles was caused by Manhattan’s failure to build the walls in accordance with the plans and specifications. No convincing evidence of defective construction was presented. In any event, the matter became a problem and caused delay in the completion of the project only because Ernst’s employees knowingly installed the receptacles in an unacceptable manner and concealed their wrongdoing with the long screws. The responsibility for the delay is solely that of Ernst, and it contributed 108 days to the total overrun 'on the project as a whole. Bed Light Fixtures 38. The plans and specifications for the project required that each of the patient bedrooms in Building A would have installed in them a wall-mounted lighting fixture. The fixture consisted of a fluorescent lighting feature and a console which contained outlet connections for oxygen, nitrogen, vacuum, telephone and electricity. An integral part of the fixture was a back box, which was recessed and mounted into the wall at the time the wall was constructed. The required connections to electrical conduits and plumbing piping were made into the back box, which was concealed by a front, or exterior portion of the fixture when installation was completed. 39. The bedlight fixtures were required to have two lamps, or bulbs, one of which would shine primarily downward, providing a reading light for the patient, as well as some indirect illumination of the room. The other lamp would shine primarily upward for indirect room illumination. This lamp would be controllable by a switch convenient to the patient and by a switch near the entrance to the room. In order to have this two-point switching capability, it was required that the fixture contain two lamp ballasts. (Tr. 462) It was also required that the fixture be of brushed aluminum with an anodized finish and that it have rounded edges. (Tr. 463) 40. The patient rooms in the existing building were equipped with fixtures manufactured by the Sunbeam Lighting Fixture Company and designated as “Centron 10”. In the planning stages of the project, the employees of Providence had decided that they desired that the patient rooms in the new addition be furnished with fixtures designated as “Centron 5”, a fixture also manufactured by Sunbeam, but having all of the desired features. The specifications for the project were written to describe the Centron 5 fixtures which Providence wanted installed. (Tr. 477, 479, 816, 519) The lighting fixture schedule said that they were to be Centron 5 fixtures (further described by the catalog numbers from the Sunbeam catalog) or an “approved equal”. (PX 3, pg. E-30, Tr. 453) At the time he prepared the specifications, Mr. Laeefield, the consulting electrical engineer employed by Mc-Cauley, was not aware of any fixture manufacturer, other than Sunbeam, who produced a fixture which would comply with the requirements of the specifications. (Tr. 529-30, 532) He had determined that the Centron 5 would comply. (Tr. 525-6) 41. This project being partially financed by a Hill-Burton Grant required that the funding of the monies be supervised by the Bureau of Health Facilities Construction of the Alabama State Health Department. (Tr. 611) 42. Regulations of the Department of Health, Education and Welfare (HEW) and the State Health Department applicable to projects receiving Federal funding under the Hill-Burton Act required very strictly that free and competitive bidding be permitted and encouraged for all work and materials being supplied. These regulations were distributed to all architects and others involved in hospital construction matters. (Tr. 612, 616) Each section of the specifications contained the required wording, set out in footnote 1, in the form of a paragraph of very small print in the upper right corner of the first page. It appeared at the beginning of Section 18 covering the electrical work. (PX 3, pg. 18-1) 43. The plans and specifications and the instructions to bidders on the project, which were distributed to prospective bidders in June, 1968, contained a requirement that any bidder who proposed to use an article different from the one designated by name in the specifications was required to obtain the architect’s approval for such substitution not less than ten days prior to the bid date. The State Health Department deemed this provision to contravene the requirements for competitive bidding and directed that it be withdrawn. This was done by McCauley by an addendum issued shortly before the bid date. (Tr. 618) 44. The architect’s specifications, to the extent that they named only one manufacturer and one model — Sunbeam Centron-5 — made by that manufacturer, were in violation of HEW and Bill-Burton regulations for a project of this kind. 45. Ernst, whose responsibility it was under the electrical subcontract to supply all of the light fixtures, including the patient bed lights, had estimated in preparing its bid to Manhattan that the fixtures would cost $141,910.00 and that, because of its buying practice, it could reduce that cost by $35,377.00 in actually making the purchase. (Tr. 844) Ernst entered into a purchase order contract with Moore-Handley, Inc., a supplier, to furnish the required fixtures. The purchase order did not designate manufacturers or models but merely incorporated the requirements of the plans and specifications. It put the burden on Moore-Handley to furnish the fixtures which would comply with the requirements and satisfy McCauley and Providence. (MX 171; EX 699; Tr. 846-7) Moore-Handley proposed to furnish bed light fixtures called “Versalux” manufactured by Pacific Associated Company (Palco) as equal to the Centron-5. Moore-Handley prepared material concerning all of the light fixtures for submission to McCauley for approval. The submittal included shop drawings showing details of the proposed fixtures. In accordance with the contractual relationships, Moore-Handley forwarded the material to Ernst, who forwarded it to Manhattan, who forwarded it to Mc-Cauley, who submitted it to Lacefield. 46. By letter of October 4, 1968, McCauley asked that samples be furnished of all light fixtures that Ernest proposed to furnish, so it could be determined that Providence would get what it wanted. This request was forwarded to Ernst, to Moore-Handley and to Associated Manufacturers Agents, the representative of the fixture manufacturer. (PX 16; Tr. 747-8) 47. There was a substantial interval of time between the initial submission of Palco for approval and the ultimate acceptance of Palco for installation on the job. In this interval, which ran from approximately January . 1969 through April 1970, submissions were made to the architect and returned as rejected for “reasons noted”, but with no reasons noted. Although no sample was submitted with the first submissions on January 19, 1969, when a sample was submitted at McCauley’s offices in Birmingham in October 1969, Mc-Cauley refused to look at it. At this point in time, because of the desire of Providence or McCauley that Sunbeam Manufacturers fixtures only be supplied, it was concluded that this equipment would be removed from the existing contract and Sunbeam fixtures procured independently by Providence. Subsequently, after further delay and in the intercession of the Alabama State Depart-. ment of Health, Palco fixtures, which were at all times the functional equivalent of the Sunbeam and of equal quality, were designated and approved for installation and were actually installed. 48. Providence and McCauley should have accepted and approved the Palco fixtures in January 1969, when the first submittal was made, rather than 14 months later in March 1970, since it was unquestionably “equal” to the specified Sunbeam Centron-5 unit. The failure to do so was the result of Providence’s decision in advance of the submission of bids on the project that it wanted nothing but the Centron-5 fixtures installed, as discussed above. Conclusive evidence of this decision and of the lack of good faith on the part of Providence and McCauley in their repeated disapproval of the Palco Fixtures is found in several facts. Prior to the bidding on the project, a request for approval of the Palco fixtures was made to McCauley pursuant to the requirements for pre-bid approval of alternate products, which requirement was subsequently deleted from the specifications. See Finding 43, supra. Mc-Cauley and Providence made no response to that request for approval and did not inform the prospective supplier that a decision had been made to accept only Centron-5 fixtures. (Tr. 577) Subsequently, McCauley refused even to look at a sample of the Palco fixture delivered to its offices. (Tr. 775) Each of the submittals on the Palco fixtures was marked “disapproved for reasons noted”, but no reasons were given. (Tr. 744, McX 88, pg. 22; McX 73, pg. 152; Tr. 745; McX 88, pg. 42; Tr. 484) During the time that Providence and McCauley were engaging in the unwarranted and unexplained objections to the Palco fixtures, McCauley approved the purchase and use of plumbing connections for the back boxes of the patient bed light fixtures which would only fit the Centron-5 units, and not the Palco fixtures. (EX 782; Tr. 1998-9; Tr. 1985-92) During the same period, McCauley was stating that Providence intended to procure the fixtures itself. 49. Providence’s and McCauley’s handling of the selection of the bed light fixtures caused a delay in the completion of the overall project. Due to that delay, Manhattan requested a 59 day extension of the completion date. . Providence refused the extension. The Court, however, finds that the requested extension was justified and mandated by the acts of Providence and McCauley. Therefore, for purposes of calculating liquidated damages due Providence, this 59 day extension is treated as if it had been granted. In addition, the Court finds that McCauley’s mishandling of the selection caused 50% of this delay and that, therefore, McCauley was responsible for 29% days delay in the project as a whole. The Emergency Generators A. IN GENERAL 50. The plans and specifications for the project required the furnishing of an emergency generator system, including two diesel-driven generators, to provide a standby source of electrical power for the hospital in the event of a failure of the regular supply from the utility company. The specifications for the system were extremely detailed and lengthy. All of the general specifications and the regulations under the Hill-Burton Act were also applicable to the emergency generator system, as were State Health Board Regulations. 51. Certain pertinent requirements of the speefications regarding the emergency generator system were: (a) All components must be of American manufacturer. (b) All components must be standard products of a manufacturer of the generator units for at least two years, (c) The units must be of proven reliability. (d) The generator must produce 600W in continuous operation and have a ten percent overload capacity for two hours, (e) The engines powering the generators must produce a minimum of 950 horsepower at 1800 RPM under specifically stated conditions of operation with all auxiliary equipment attached and working, (f) All components must be new and of best quality. 52. It was the obligation of Ernst under its subcontract with Manhattan to furnish and install the emergency generator system in compliance with the plans and specifications for the project. (EX 12) As noted above, on February 4, 1971, following a prior hearing in this action, the Court made and entered Findings of Fact adjudging that the emergency generator system which Ernst and Fairbanks-Morse proposed to furnish and install in the project did not comply with the requirements of the specifications. See Exhibit 1 hereto attached. Those findings are supported and reinforced by the evidence adduced at this trial. 53. Prior to the submission to Manhattan of its bid for the electrical work in the project, Ernst solicited price quotations on emergency generator systems from many suppliers. (MX 31) Among those submitted was Fairbanks-Morse’s which quoted a price of $83,740.00 for its system including two Fairbanks model 600 TCW 12 generators which units were the ones ultimately proposed by Ernst for installation. (MX 33; Tr. 1008) 54. On June 25, 1968, Fairbanks-Morse wrote to McCauley requesting approval of Model 600 TCW 12 units for use in the project. Enclosed with that letter was a Fairbanks-Morse brochure of technical data on the units showing, inter alia, brake horsepower of 935 at 1800 RPM. (MX 33) The specifications required “not less than 950 at 1800 RPM.” By memorandum of June 26, 1968, Lacefield noted, “O.K. provided they meet requirements of plans & specs”. (MX 33) By letter on July 5, 1968, McCauley told Fairbanks-Morse that the units were approved provided the requirements of the plans and specifications were met. (MX 36) 55. During August of 1969, at the time construction was just commencing on the project, an employee of the Caterpillar distributor in Mobile, wrote Lace-field telling him that the generators • units proposed by Fairbanks-Morse were powered by imported Dorman ■ engines and did not comply with the specifications. (Tr. 2879-2884; Tr. 2965-9) 56. On August 27, 1968, Ernst entered into a purchase order contract with Fairbanks-Morse to supply the two engine generator units and all other components of the system for a total delivered price of $83,740.00. This contract did not designate any make, model or manufacturer of the generator units, but rather, merely recited the requirements for the various components from the specifications. Ernst, by drafting of its purchase order, put the burden on its supplier to provide equipment which would be approved as satisfying the requirements of the specifications. (Tr. 1105) 57. On October 18, 1969, the first submittal of information and material seeking approval of the proposed emergency generator system was made by Fairbanks-Morse, through Ernst and Manhattan, to McCauley and referred to and reviewed by Lacefield. By letter, Lacefield sent to McCauley a list of comments and omissions concerning the submittal. He held the submittal pending receipt of additional material. No question was raised or mention made that the diesel engines were imported from England or that they were not standard products of Fairbanks-Morse. (MX 42) Additional material and information seeking approval of the generator system was forwarded by Fairbanks-Morse and Ernst on December 16, 1968, and January 3, 1969. (MX 43, 45, 46, 426, 427) All of the submittals were disapproved by McCauley on January 8, 1969, based upon a letter from Lacefield dated January 7, 1969, which noted 17 points of noncompliance. However, again there is no mention of the origin of the diesel engines. Lacefield’s letter was transmitted to Manhattan and Ernst. (MX 45) Ernst severely criticized Fairbanks-Morse for the poor quality of the submittal material and demanded prompt action to obtain approval of the generators. (MX 428) 58. In addition to the correspondence and formal submittals of information by Fairbanks-Morse and Ernst in their efforts to obtain McCauley’s approval of the proposed Fairbanks-Morse generator units, conversations and meetings took, place. On February 4, 1969, Lacefield met in McCauley’s offices with representatives of Fairbanks-Morse and Ernst to discuss the emergency generators. It was agreed that, in addition to all required material and information, Fairbanks-Morse. would submit a list of existing installations of the units and complete data covering the diesel engines. (MX • 47) On February 13, 1969, Fairbanks-Morse again met with Lacefield in Birmingham for discussion of the generators. The following day, Lacefield advised Mc-Cauley that he did not consider the Fairbanks-Morse units acceptable because, “The engine which is proposed for use on the sets is not manufactured by Fairbanks-Morse, but is made by the Dorman Company in England.” For the first time, more than four months after receipt of the first submittal, Lacefield rejected the generators on the basis of information which he had had for over six months. (See 55 above) Ernst informed Fairbanks-Morse on March 20, 1969, that McCauley was rejecting the units based on the foreign manufacture of the engines. Ernst furnished Fairbanks-Morse a copy of the “General Conditions” section of the Specifications, as requested, and again demanded immediate action to resolve the generator matter. (MX 429) 59. Following a telephone conversation between Manhattan and McCauley on March 13, 1969, McCauley wrote to Manhattan that the submittal generators were not considered acceptable. It said, “It is our understanding that these particular generators are made by the Dorman Company in England and marketed in this country by Fairbanks-Morse. We will accept the Fairbanks-Morse Company generators that are manufactured in this country. We request that you resubmit the generators.” (MX 49) On March 20, 1969, Lacefield disapproved other shop drawings for the emergency generators stating only, “The generator sets submitted are not considered equal to those specified.” (MX 50) 60. Ernst forwarded the disapproved submittals to Fairbanks-Morse on March 26, 1969, accusing Fairbanks-Morse of substituting items and placing the burden on it to obtain approval. Ernst pointed out that the delay in approval was already causing problems in the progress of the work and demanded immediate resolution of the problem to avoid far more serious consequences. (MX 430) 61. On April 8, 1969, Fairbanks-Morse telephoned McCauley to discuss further the generator situation. Mc-Cauley told Fairbanks-Morse that its disapproval of the proposed Fairbanks-Morse engine generators was based primarily on a concern over the future availability of repair parts for the engines, a point nor required or mentioned in the specifications. McCauley did not indicate that it was rejecting the equipment because the engines were imported. By letter of April 14, 1969, Fairbanks-Morse assured McCauley that the same type of engines had been used satisfactorily in many installations for many years and enclosed a list of 33 installation locations and dates. Fairbanks-Morse stated that its decision to change marketing procedures on the engine would have no effect on its responsibility to maintain service parts for the engines and other components of the system. Fairbanks-Morse offered to guarantee and furnish a bond, if requested, that the parts would be available for at least 10 years. Fairbanks-Morse also stated that the standard warranty would be in effect on th