B-141586, APR. 25, 1962

B-141586, APR. 25, 1962

TO ALLEN M. CAMPBELL COMPANY:

REFERENCE IS MADE TO YOUR LETTER OF MARCH 27, 1962, CONCERNING YOUR CLAIM FOR $183,282.99 REPRESENTING INCREASED COSTS INCURRED BY REASON OF UNREASONABLE DELAYS BY THE GOVERNMENT IN EFFECTING CHANGES UNDER CONTRACT NO. NBY-6406, DATED APRIL 25, 1957.

WITH OUR LETTER OF MARCH 23, 1962, WE SENT YOU A SCHEDULE ON WHICH THERE WAS ITEMIZED THE RESULT OF A REVIEW OF YOUR CLAIM BY OUR DEFENSE ACCOUNTING AND AUDITING DIVISION. IN THE LAST COLUMN OF THAT SCHEDULE WERE LISTED CERTAIN ITEMS CONSIDERED AS OF DOUBTFUL VALIDITY AND THE AMOUNTS OF THESE ITEMS WERE CONSIDERED IN OUR LETTER AS NOT ENTITLED TO FAVORABLE CONSIDERATION. YOU REQUEST THAT A CONFERENCE WITH REPRESENTATIVES OF OUR OFFICE BE ARRANGED WITH REGARD TO THE ITEMS LISTED UNDER "DOUBTFUL ALLOWABILITY.' THE TOTAL OF THESE ITEMS IS $57,278.41. HOWEVER, AS TO ITEMS 14 TO 18, INCLUSIVE, WE STATED IN OUR LETTER OF MARCH 23, 1962, THAT OUR AUDITORS DID NOT ATTEMPT TO VERIFY THE AMOUNTS CLAIMED- -- A TOTAL OF $4,268.19--- DUE TO THE INORDINATE AMOUNT OF AUDIT TIME WHICH WOULD BE REQUIRED. HENCE, WE WOULD BE WILLING TO GIVE FAVORABLE CONSIDERATION TO AUTHORIZING PAYMENT OF THAT SUM. THEREFORE, THE BALANCE OF THE ITEMS TO BE CONSIDERED AMOUNTS TO $53,010.22.

THE SUM OF $53,010.22 MAY BE DIVIDED, FOR THE SAKE OF DISCUSSION, INTO TWO CATEGORIES. THE AMOUNT OF $35,984.42 REPRESENTS PROFIT AND INTEREST CLAIMED BY YOU IN YOUR OWN BEHALF AS WELL AS IN BEHALF OF YOUR SUBCONTRACTORS. THE AMOUNTS OF $9,169.20 AND $18,338.40, ITEMS 31 AND 32 OF THE SCHEDULE, REPRESENT AMOUNTS CLAIMED IN YOUR OWN BEHALF. THE INTEREST IN THE AMOUNT OF $2,955.40 CLAIMED IN BEHALF OF BEALS PLUMBING AND HEATING, INC., IS INCLUDED IN THE SUM OF $12,219.53 LISTED UNDER ITEM 13 OF THE SCHEDULE. LIKEWISE, THE AMOUNT OF $2,338.68 CLAIMED AS PROFIT IS INCLUDED UNDER ITEM 13 AND AN AMOUNT OF $3,182.74 CLAIMED AS PROFIT BY ROGERS ELECTRIC COMPANY IS LISTED UNDER ITEM 12 OF THE SCHEDULE. FOR REASONS STATED ON PAGES 3 AND 4 OF OUR LETTER OF MARCH 23, 1962, WE COULD NOT GIVE FAVORABLE CONSIDERATION TO THE ALLOWANCE OF THESE ITEMS TOTALING $35,984.42.

AS TO THE BALANCE OF $17,025.80, THIS SUM IS COMPOSED OF THE FOLLOWING ITEMS:

TABLE

ITEM 13 OF SCHEDULE, LESS $5,294.08 CONSIDERED ABOVE

ADDITIONAL SUPERVISION - FOREMAN $2,200.00

EXTRA RENTAL IN EQUIPMENT AND DRAYAGE 375.00

COMPREHENSIVE AND LIABILITY INSURANCE 226.60

SUBSISTENCE - SUPERINTENDENT 366.00

EXTRA ENGINEERING, TELEPHONE CALLS, ETC.382.00

OVERHEAD 3,375.85

$6,925.45

ITEM 21 OF SCHEDULE 6,336.50

ITEM 29 OF SCHEDULE 3,763.85

TOTAL $17,025.80

ALL OF THE ABOVE ITEMS WERE CONSIDERED IN GREAT DETAIL BY OUR AUDITORS AND WE WILL SET OUT HEREINAFTER THE REASONS ASSIGNED FOR NOT GIVING THESE ITEMS FAVORABLE CONSIDERATION.

AS TO THE AMOUNT OF $2,200 THE SUBCONTRACTOR WAS UNABLE TO PROVIDE ANY INFORMATION TO DEMONSTRATE THAT ADDITIONAL SUPERINTENDENT'S SALARY COSTS WERE INCURRED. THE SUPERINTENDENT WAS EMPLOYED TO SUPERVISE FIVE JOBS IN NEW IBERIA, LOUISIANA (INCLUDING CONTRACT NO. NBY-6406), AND DID SO FROM MAY 21, 1957, UNTIL NOVEMBER 18, 1959. THE SUBCONTRACTOR DID NOT MAINTAIN A COMPLETE RECORD RELATING TO THE AMOUNT OF TIME THE SUPERINTENDENT WORKED ON EACH OF THESE JOBS, AND THEREFORE OUR AUDITORS DID NOT HAVE ANY BASIS FOR DETERMINING WHETHER THE NAVY STOP ORDER DID IN FACT RESULT IN ADDITIONAL SUPERINTENDENT'S SALARY COST TO THE SUBCONTRACTOR. AS TO THE AMOUNT OF $375 CLAIMED FOR ADDITIONAL RENTAL AND DRAYAGE COSTS, THE SUBCONTRACTOR DID NOT FURNISH ANY DOCUMENTARY EVIDENCE TO SUPPORT THIS PORTION OF HIS CLAIM. WITH REGARD TO THE AMOUNT OF $226.60 CLAIMED AS COMPREHENSIVE AND LIABILITY INSURANCE APPLICABLE TO THE AMOUNT OF $2,200 CLAIMED AS ADDITIONAL SUPERINTENDENT'S SALARY COSTS AS DISCUSSED ABOVE, SINCE OUR AUDITORS COULD NOT DETERMINE WHETHER THE NAVY STOP ORDER DID RESULT IN ADDITIONAL SUPERINTENDENT'S SALARY COST TO THE SUBCONTRACTOR, THIS AMOUNT LIKEWISE MUST BE REGARDED AS NOT BEING ESTABLISHED AS REPRESENTING ADDITIONAL COSTS.

WITH REGARD TO THE AMOUNT OF $366 CLAIMED BY THE SUBCONTRACTOR AS SUBSISTENCE FOR HIS SUPERINTENDENT, OUR AUDITORS HAVE STATED THAT THE SUPERINTENDENT CERTIFIED THAT HE WAS PAID $25 PER WEEK FOR SUBSISTENCE DURING THE PERIOD THAT HE WAS AT NEW IBERIA, LOUISIANA. HOWEVER, SINCE AVAILABLE INFORMATION DID NOT SHOW WHETHER THE SUBCONTRACTOR INCURRED ADDITIONAL SUPERINTENDENT'S SALARY COST TO THE SUBCONTRACTOR, THIS AMOUNT ORDER, THERE WAS NO SOUND METHOD THAT COULD BE USED FOR DETERMINING WHETHER THE SUBCONTRACTOR INCURRED ADDITIONAL SUBSISTENCE COSTS FOR THE SUPERINTENDENT AS A RESULT OF THE NAVY STOP ORDER. THE AMOUNT OF $382 CLAIMED BY THE SUBCONTRACTOR WAS ALLEGED TO REPRESENT THE COSTS OF TELEPHONE CALLS TO ITS SUPPLIERS, AND CONFIRMING TELEGRAMS, EXPLAINING THE NATURE OF THE STOP ORDER AND EXTRA ENGINEERING COSTS INCURRED IN ESTIMATING THE COST OF THE PROPOSED DESIGN CHANGES. HOWEVER, THE SUBCONTRACTOR WAS UNABLE TO PROVIDE ANY DOCUMENTARY EVIDENCE TO SUPPORT THIS CLAIM. AS TO THE AMOUNT OF $3,375.85 CLAIMED BY THE SUBCONTRACTOR FOR OVERHEAD, OUR AUDITORS REPORTED THAT HE DID NOT HAVE SUFFICIENT RECORDS TO PERMIT A DETERMINATION OF THE REASONABLENESS OF THE AMOUNT CLAIMED.

WITH REGARD TO THE AMOUNT OF $6,336.50 CLAIMED BY YOU FOR CLEARING AND LAYOUT REWORK, OUR AUDITORS HAVE STATED THAT THIS CLAIM IS BASED ON AN ESTIMATE. THEY HAVE REPORTED THAT YOUR RECORDS INDICATE THAT THE COSTS OF INITIAL CLEARING AND LAYOUT WORK TOTALED ABOUT $377 AND THAT AFTER THE NAVY STOP ORDER WAS WITHDRAWN YOU INCURRED ADDITIONAL CLEARING AND LAYOUT COSTS OF $249. THESE RECORDS FURTHER INDICATE THAT YOU ALSO INCURRED LABOR COSTS TOTALING $1,932.14 FOR EXCAVATION AND BACKFILL WORK WHICH THE RECORDS INDICATE WAS NOT PERFORMED BEFORE THE STOP ORDER WAS ISSUED. YOU ADVISED THAT THE COSTS OF THE EXCAVATION AND BACKFILL WORK HAVE BEEN INCLUDED IN THIS PORTION OF THE CLAIM BECAUSE YOU FELT THAT THESE COSTS RESULTED FROM THE DELAY BY THE NAVY. WHILE, AS INDICATED ABOVE, YOU INCURRED COSTS FOR CLEARING AND LAYOUT WORK, AND EXCAVATION AND BACKFILL WORK TOTALING $2,181.14, OUR AUDITORS REPORT THAT IT WOULD APPEAR THAT YOU HAD NOT COMPLETED THE INITIAL CLEARING AND LAYOUT WORK WHEN THE NAVY STOP ORDER WAS ISSUED AND THAT THE REWORK COST OF $2,181.14 ACTUALLY INCLUDES COSTS WHICH WOULD HAVE BEEN INCURRED IF THE NAVY STOP ORDER HAD NOT BEEN ISSUED. ALSO, THEY HAVE REPORTED THAT AVAILABLE RECORDS DO NOT CLARIFY THIS MATTER NOR DO THEY SUBSTANTIATE YOUR CONTENTION THAT THE EXCAVATION AND BACKFILL WORK WAS REQUIRED BECAUSE OF THE NAVY STOP ORDER. INTERVIEWS WITH COGNIZANT NAVY PERSONNEL INDICATED THAT ONLY LIMITED CLEARING AND LAYOUT REWORK HAD TO BE DONE AFTER THE NAVY STOP ORDER WAS WITHDRAWN. VIEW OF THE LACK OF ACTUAL DATA AND CONTRADICTORY INFORMATION OBTAINED THE AUDITORS WERE UNABLE TO DETERMINE A REASONABLE ESTIMATE OF THE AMOUNT OF CLEARING AND LAYOUT COSTS INCURRED BY YOU BECAUSE OF THE NAVY STOP ORDER.

AS TO THE AMOUNT OF $3,763.85, ITEM 29 OF THE SCHEDULE, THE AUDITORS REPORTED AS FOLLOWS:

"THE CONTRACTOR DOES NOT ALLOCATE ITS HOME OFFICE OVERHEAD EXPENSES TO INDIVIDUAL JOBS. THEREFORE, THE CONTRACTOR'S RECORDS OFFERED NO SUPPORT FOR THE AMOUNT CLAIMED. CONSEQUENTLY, OUR EVALUATION OF THE AMOUNT OF ADDITIONAL COSTS ATTRIBUTABLE TO THE GOVERNMENT-CAUSED DELAY WAS BASED UPON OUR OWN ALLOCATION OF SUCH COSTS. THE BASIS FOR OUR ALLOCATION WAS DIRECT COSTS INCURRED ON THE VARIOUS JOBS. IN MAKING OUR ALLOCATION WE MADE THE FOLLOWING ASSUMPTIONS:

"1. HAD THE NAVY STOP ORDER NOT BEEN ISSUED, THE CONTRACTOR COULD HAVE COMPLETED THE WORK UNDER CONTRACT NBY-6406 IN DECEMBER 1957, WITH THE EXPENDITURE OF DIRECT COSTS EQUIVALENT TO THOSE ESTIMATED IN PREPARING HIS PROPOSAL FOR CONTRACT NBY-6406.

"2. HOME OFFICE OVERHEAD IS GENERALLY A FIXED COST THAT WILL NOT FLUCTUATE WITH THE VOLUME OF CONSTRUCTION WORK THAT IS UNDERTAKEN. HOWEVER, IF A JOB IS EXTENDED OVER A LONGER PERIOD--- AS IN THIS CASE- - THE CONTRACTOR IS PRECLUDED FROM UNDERTAKING ADDITIONAL WORK TO ABSORB HIS OVERHEAD DURING THE DELAY PERIOD AND HE THEREFORE DOES SUSTAIN ADDITIONAL EXPENSE AS A RESULT OF THE DELAY.

"IN ACCORDANCE WITH THESE ASSUMPTIONS WE DETERMINED $15,548.87 TO BE THE AMOUNT OF ADDITIONAL HOME OFFICE OVERHEAD COSTS ATTRIBUTABLE TO THE DELAY. IN ESSENCE THIS AMOUNT REPRESENTED THE HOME OFFICE OVERHEAD ALLOCABLE TO THIS CONTRACT DURING THE 10-MONTH DELAY PERIOD. IT IS OUR REASONING THAT DURING THIS PERIOD THE CONTRACTOR WAS PRECLUDED FROM UNDERTAKING ADDITIONAL WORK TO ABSORB THIS OVERHEAD BY THE EXISTENCE OF CONTRACT NBY-6406.

"THE ACTUAL PERFORMANCE OF THE CONTRACT EXTENDED OVER A CONSIDERABLY LONGER PERIOD THAN WAS PRESCRIBED BY THE CONTRACT; HOWEVER, THE INCREASED CONSTRUCTION PERIOD WAS AUTHORIZED BY NAVY CHANGE ORDERS.

"OUR EVALUATION OF THIS COST ELEMENT IS AN ESTIMATE MADE FROM THE BEST INFORMATION WE WERE ABLE TO OBTAIN. IT IS, HOWEVER, AN ESTIMATE RATHER THAN AN EXACT DETERMINATION OF ADDITIONAL COST.'

IN OUR LETTER OF MARCH 23 WE POINTED OUT THAT OUR AUDITORS MADE REASONABLE APPROXIMATIONS OF THE COSTS RESULTING FROM THE DELAY, WHEREVER POSSIBLE. AS TO THE AMOUNT OF $17,025.80 WHICH MAY BE IN DISPUTE FROM A FACTUAL STANDPOINT OUR AUDITORS HAVE EXHAUSTED ALL MEANS AT THEIR DISPOSAL TO RESOLVE THE DISPUTE. IF, HOWEVER, YOU HAVE ANY RECORDS WHICH THEY FAILED TO CONSIDER OR ANYTHING WHICH YOU CAN OFFER IN WRITING AND WHICH WAS NOT HERETOFORE CONSIDERED, WE WOULD APPRECIATE IT IF YOU COULD PRESENT IT IN WRITING SO IT MAY BE CONSIDERED. ADDITIONAL DOCUMENTATION WOULD BE NECESSARY AS A BASIS FOR ANY CHANGE IN OUR VIEW ON THE DISPUTED QUESTIONS OF FACT INVOLVED IN THIS MATTER AND IN THE ABSENCE OF SUCH ADDITIONAL EVIDENCE WE WOULD NOT FEEL THAT A CONFERENCE WITH REPRESENTATIVES OF OUR OFFICE WOULD SERVE ANY FURTHER PURPOSE.