The opinion of the court was delivered by: FOLLMER
1. The defendant, Charles B. Montgomery, d.b.a. Montgomery Construction Company, as the prime contractor, on June 30, 1952, entered into a contract with the United States for the construction of two warehouses at Letterkenny Ordnance Depot, Chambersburg, Pennsylvania, within the Middle District of Pennsylvania.
2. On June 30, 1952, the defendant, Charles B. Montgomery, d.b.a. Montgomery Construction Company, executed and delivered a bond to the United States in the sum of $ 577,560 on which the defendant, Montgomery Construction Company, was principal and the defendant, United States Fidelity & Guarantee Company, a Maryland corporation, was surety. Said bond was conditioned upon the prompt payment of persons supplying labor and material in the prosecution of the work provided for in the said contract and was in accordance with the requirements of 40 U.S.C.A. § 270a.
3. Charles B. Montgomery's bid was a 'lump sum' or total bid which did not set up any separate unit basis or amount for excavation work.
4. The total bid of Charles B. Montgomery included a sum for 'roughly what the (excavation) job was going to cost, within a few thousand dollars either way' based on the amount and type of excavation indicated in the Government's plans and specifications, on the basis of an hourly rental rate for 'equipment with operators' which James R. Soda had indicated he would charge.
5. By letter dated August 18, 1952, James R. Soda, d.b.a. Soda Construction Company, submitted the rates for various equipment on an hourly basis with operators and supervision supplied. This offer was accepted orally by Charles B. Montgomery, whereupon equipment fully operated was moved in and excavation work begun.
6. The contract was for the rental of equipment on an hourly basis, with operators and supervision, to perform whatever excavation work was required to be done by Charles B. Montgomery, with Charles B. Montgomery retaining primary supervision and direction.
8. There was no agreement that James R. Soda would be bound by the terms, conditions, drawings or specifications of the general contract.
9. The general contract between the United States and Charles B. Montgomery contained a provision as follows:
'4. Changed Conditions. -- Should the contractor encounter, or the Government discover, during the progress of the work subsurface and/or latent physical conditions at the site materially differing from those shown on the drawings or indicated in the specifications, or unknown physical conditions of an unusual nature differing materially from those ordinarily encountered and generally recognized as inhering in work of the character provided for in the drawings and specifications, the contracting officer shall be notified promptly in writing of such conditions before they are disturbed. The contracting officer shall thereupon promptly investigate the conditions, and if he finds that they do so materially differ the contract shall be modified to provide for any increase or decrease of cost and/or difference in time resulting from such conditions. * * *'
10. Shortly after the work of excavation was started, it was found that there was rock which was not indicated by the plans and specifications of the general contract and which would require more equipment and time than had been contemplated by the parties to the general contract.
11. A conference between representatives of the United States and Charles B. Montgomery was held in relation to such changed conditions on March 31, 1953. James R. Soda was invited to and did participate in this conference.
12. At this conference, to assist Charles B. Montgomery to arrive at a determination with the representatives of the United States of an amount to be added to the total general contract cost price by reason of the increased cost caused by the necessity of excavating rock, James R. Soda agreed to deduct $ 3,000 from his total charges provided a satisfactory settlement could be arrived at between the United States and Charles B. Montgomery at such conference and be approved by the proper Federal agency so that the payment of the pertinent portion of the general ...