B-71886 January 28, 1947

B-71886 January 28, 1947

Posner, Berge, Fox and Arent, Ring Building, 1200 18th Street N.W., Washington, 6, D.C.

Gentlemen:

Reference is made to your letter of December 9, 1947, concerning contract No. TPS-7641 [76401], dated July 19, 1946, entered into between the Treasury Department and the Arrow Oil Company for the furnishing of petroleum products to various Government activities.

Briefly, under the terms of the contract, the contractor agreed to furnish and deliver to various ordering activities of the Government petroleum products in the quantities and for the prices specified therein. Thereafter, on September 19, 1946, the contract was amended--upon a determination that such amendment would facilitate the prosecution of the war--so as to provide that, effective August 1, 1946, the prices for delivery thereunder should be the contractor's posted prices in effect at the time and place of delivery and, also, for an adjustment in the prices stipulated in the original contract in the event the Government should again assume control of the petroleum products inlcuded therein and reestablish maximum prices with respect thereto.

A similar amendment was the subject of consideration in Office decisions dated March 28 and July 8, 1947, B-59792. In the decision of July 8, 1947, it was pointed out that, since the amendment there in question was entered into more than a year after actual hositilities had ceased, it could not be said in good faith that the amendment would facilitate the prosecution of the war and, accordingly, it was concluded that the execution thereof was without authority of law. For the same reason, it is evident that the amendment here involved was not authorozed.

In your letter of December 9, 1947, you state that, as a result of the decisions referred to, Major F. Bigley, the Finance Officer at Aberdeen Proving Ground, has notified the company that his office is withholding payments due for current deliveries as offsets against overpayments made pursuant to the aforesaid amendment to contract No. TPS-76401. You further state that the overpayments may be in excess of $10,000; that the withholding of so great an amount would put the company out of business; and that is believed the decisions of March 28 and July 8, 1947, may be reversed by court action. In view thereof, you request, in effect, that current payments be made to the company and, in lieu of any withholding, the company be allowed to post a commercial bond to protect the Government with respect to the total amount of the overpayments together with interest in the event that it is finally determined that the amendment was unauthorized; that the bonding company be one approved by this Office; and that the bond also contain a provision requiring the company to initiate court action within a reasonable period of time.

With respect to your request that the company be allowed to substitute a bond for the moneys being withheld from amounts currently due the company to satisfy previous overpayments made to it, you are advised that there is no express provision of law authorizing this Office to accept a bond of indeminty as security for the payment of such an account. The practical effect of the action urged by you would be to deprive the United States of the use of the amount involved for an indefinite period of time, in order to confer an equal benefit upon the company, which company would be permitted to subsitute for its obligation a bond upon which the United States well might be required to initiate legal proceedings. Manifestly, such action would be contrary to the interests of the United States. The hardship, if there be any, may not be assumed by the Government but must rest where it falls. Moreover, the offset of amounts due the company obviously is best fitted to protect the United States, especially in cases of disputed liability.

Accordingly, the request to substitute a bond for the amounts now being withheld from the company, must be denied.

Respectfully,

Comptroller General of the United States