B-131962, JUL. 29, 1960

B-131962, JUL. 29, 1960

TO CAPTAIN W. R. ANDREWS, ACCOUNTING AND FINANCE OFFICER, HEADQUARTERS, UNITED STATES AIR FORCE:

BY LETTER DATED JULY 1, 1960, FROM THE DEPUTY DIRECTOR OF ACCOUNTING AND FINANCE, COMPTROLLER, HEADQUARTERS, UNITED STATES AIR FORCE, THERE WAS FORWARDED TO OUR OFFICE YOUR LETTER OF APRIL 20, 1960, WITH ENCLOSURES, REQUESTING RECONSIDERATION OF OUR DECISION OF AUGUST 14, 1957, TO LIEUTENANT COLONEL F. J. BEGLEY, CONCERNING BUREAU VOUCHER NO. 1591 IN THE AMOUNT OF $3,076.27, STATED IN FAVOR OF THE BOEING AIRPLANE COMPANY.

THE VOUCHER COVERS A CLAIM FOR REIMBURSEMENT UNDER AIR FORCE CONTRACT AF 33/038/-21096 OF A PART OF THE COST OF BACK PAY AWARDS TO THREE EMPLOYEES OF THE BOEING AIRPLANE COMPANY, ORDERED BY THE NATIONAL LABOR RELATIONS BOARD IN MARCH 1953 AND APPROVED IN A SEPTEMBER 1954 DECISION OF THE UNITED STATES COURT OF APPEALS, NINTH CIRCUIT (BOEING AIRPLANE COMPANY V. NATIONAL LABOR RELATIONS BOARD, 217 F.2D 369). IT APPEARS THAT THE MATTER WAS MADE THE SUBJECT OF A FURTHER DECISION AND ORDER OF THE COURT ISSUED ON APRIL 7, 1955.

IT WAS CONSIDERED IN OUR DECISION OF AUGUST 14, 1957, THAT THE PARTICULAR VIOLATIONS OF THE NATIONAL LABOR RELATIONS ACT RESULTED PRIMARILY FROM ERRORS IN JUDGMENT WHICH MIGHT REASONABLY BE FOUND TO BE EXCUSABLE FROM THE STANDPOINT OF REIMBURSING THE BOEING AIRPLANE COMPANY FOR ITS LABOR COSTS IN PERFORMING GOVERNMENT COST-PLUS-A-FIXED FEE CONTRACTS. HOWEVER, SINCE THE SUSPENSION ACTIONS AGAINST THE THREE EMPLOYEES WERE TAKEN IN THE LATTER PART OF THE YEAR 1948 AND CONTRACT AF 33/038/-21096 WAS NOT THEN IN EXISTENCE, IT WAS DETERMINED IN OUR DECISION THAT THE RECORD BEFORE US WAS INSUFFICIENT TO JUSTIFY THE PAYMENT OF ANY PART OF THE CLAIMED AMOUNT OF $3,076.27 AS AN ALLOWABLE ITEM OF COST UNDER THAT CONTRACT.

BY LETTER DATED MARCH 3, 1958, TO THE AIR FORCE PLANT REPRESENTATIVE, THE CONTRACTOR REQUESTED A RECONSIDERATION OF THE GOVERNMENT'SPOSITION IN THE MATTER, CONTENDING THAT UNDER ITS STANDARD ACCOUNTING PRACTICES A LIABILITY OF THE TYPE HERE INVOLVED IS NOT ACCRUED ON ITS BOOKS UNTIL THE AMOUNT BECOMES DEFINITELY ASCERTAINED AND ITS LIABILITY HAS BEEN FINALLY DETERMINED. THE CONTRACTOR REFERRED TO VARIOUS DIFFICULTIES WHICH WOULD BE ENCOUNTERED IN ATTEMPTS TO REALLOCATE THE PARTICULAR COSTS TO CONTRACT PERFORMANCE DURING THE YEAR 1948 INSTEAD OF CONSIDERING THE COSTS OF THE BACK-PAY AWARDS AS EXPENDITURES FOR THE YEAR 1955.

THE AIR FORCE CONTRACTING OFFICER HAS IN A REPORT DATED MARCH 22, 1960, POINTED OUT THAT IN THE PRIOR SUBMISSION OF THIS MATTER TO OUR OFFICE THE FACTS DID NOT DISCLOSE THAT UNDER THE CONTRACTOR'S APPROVED ACCOUNTING PRACTICES COSTS WOULD BE CHARGED TO CONTRACTS IN THE YEAR WHEN THE CONTRACTOR'S LIABILITY WAS ESTABLISHED AND THE AMOUNT OF SUCH LIABILITY HAD BEEN FINALLY DETERMINED. THE REPORT ALSO REFERS TO A STATEMENT BY THE AIR FORCE RESIDENT AUDITOR THAT: "IT IS REASONABLE TO ASSUME THAT THE CONTRACTOR HAD NO SOUND BASIS TO ACCRUE SUBJECT COSTS PRIOR TO THE NLRB DECISION.'

YOU STATE THAT CONTRACT AF 33/038/-21096 WAS AN ACTIVE CONTRACT WITH THE GOVERNMENT IN 1955 WHEN DECISION WAS RENDERED BY THE UNITED STATES COURT OF APPEALS, NINTH CIRCUIT; THAT THE COURT'S DECISION DEFINITELY ASCERTAINED THE CONTRACTOR'S LIABILITY; AND THAT THE CONTRACTOR CLAIMS THE SUM OF $3,076.27 AS THE PORTION OF THE EXPENSE INVOLVED TO BE CHARGED AGAINST CONTRACT AF 33/038/-21096.

IN THE CIRCUMSTANCES, AND SINCE, AS YOU STATE, THE REFERRED-TO ACCOUNTING PRACTICE OF THE CONTRACTOR HAS BEEN SUBSTANTIATED BY THE AIR FORCE CONTRACTING OFFICER IN HIS REPORT OF MARCH 22, 1960, YOU ARE ADVISED THAT WE NOW HAVE NO OBJECTION TO THE PROPOSED PAYMENT ON BUREAU VOUCHER NO. 1591.

THE DOCUMENTS AND CORRESPONDENCE ENCLOSED WITH YOUR LETTER ARE RETURNED HEREWITH.