B-137343, AUG. 12, 1964

B-137343, AUG. 12, 1964

TO THE HONORABLE DAVID E. BELL, ADMINISTRATOR, AGENCY FOR INTERNATIONAL DEVELOPMENT:

REFERENCE IS MADE TO A LETTER DATED MARCH 31, 1964, C/FRD/VEB: 3 BA, FROM THE OFFICE OF THE CONTROLLER TO OUR CLAIMS DIVISION, FURNISHING A REPORT ON THE CLAIM OF ARTHUR D. LITTLE, INCORPORATED, CAMBRIDGE, MASSACHUSETTS, FOR $10,721.78, COVERING CLAIMED ADJUSTMENTS OF PROVISIONAL OVERHEAD RATES APPLIED IN MAKING PAYMENT FOR SERVICES PERFORMED DURING THE YEARS 1954, 1955, AND 1956 UNDER CONTRACT NO. TA 62-102-4001 (EGYPT) DATED APRIL 5, 1954. THE CLAIM WAS COMPUTED ON THE BASIS OF DIFFERENCES BETWEEN OVERHEAD RATES USED DETERMINING ALLOWABLE COSTS UNDER CERTAIN CONTRACTS OF THE ARTHUR D. LITTLE COMPANY WITH THE MILITARY DEPARTMENTS, AND THE PROVISIONAL RATES OF 94 PERCENT AND 116.5 PERCENT OF DIRECT LABOR COSTS INCURRED BY THE COMPANY AT ITS WESTERN DIVISION OFFICE, AND AT ITS HOME AND FIELD OFFICES, IN RELATION TO THE PERFORMANCE OF THE CONTRACT OF APRIL 5, 1954.

IT APPEARS FROM AN ANALYSIS OF THE CLAIM THAT THE CORRECT AMOUNT THEREOF IS $10,686.01, COMPUTED AS FOLLOWS:

CHART

DIRECT LABOR COST BILLINGS $67,651.02

DISALLOWED SALARY ITEM 1,610.22

ALLOWED DIRECT LABOR COSTS $66,040.80

OVERHEAD AT CLAIMED RATES 1954 131.43 PERCENT OF $26,669.53 $35,051.76 1955 133.47 PERCENT OF 36,903.78 49,255.48 1955 130.17 PERCENT OF 65.69

85.51 1956 130.9 PERCENT OF 2,401.80 3,216.01

ACTUAL OVERHEAD COSTS $87,608.76

PAYMENTS MADE AT PROVISIONAL RATES 116.5 PERCENT OF $65,975.11 $76,861.00

94 PERCENT OF 65.75 61.75 76,922.75

APPARENT CORRECT AMOUNT OF CLAIM $10,686.01

THE CLAIM WAS RECOMMENDED FOR DISALLOWANCE BECAUSE OF A BELIEF THAT PAYMENT OF ANY AMOUNT THEREON WOULD RESULT IN EXCEEDING THE COST LIMITATION OF THE CONTRACT AND BECAUSE THE CONTRACTOR DID NOT NOTIFY THE GOVERNMENT BEFORE THE EXPIRATION DATE OF THE CONTRACT THAT A COST OVERRUN WOULD BE EXPERIENCED. IT WAS INDICATED IN THE PAPERS ACCOMPANYING THE ADMINISTRATIVE REPORT ON THE CLAIM THAT YOUR AGENCY DOES NOT AGREE THAT THE CLAIMED OVERHEAD RATES REFLECT THE CONTRACTOR'S ACTUAL OVERHEAD COSTS IN PERFORMING THE CONTRACT OF APRIL 5, 1954. HOWEVER, COMPLETE INFORMATION IS NOT FURNISHED TO SHOW THE RATES CONSIDERED BY YOUR AGENCY TO BE REASONABLE.

ARTICLE IV B 5 OF THE CONTRACT PROVIDES FOR THE USE OF PROVISIONAL RATES AND FOR THE RETROACTIVE ADJUSTMENT OF SUCH RATES TO FIXED OVERHEAD RATES BY NEGOTIATION. IF THE PARTIES ARE UNABLE TO AGREE ON THE FIXED RATES, THE QUESTIONS INVOLVED ARE FOR CONSIDERATION UNDER THE DISPUTES CLAUSE OF APPENDIX A TO THE CONTRACT. THESE CONTRACT PROVISIONS SERVE AS A PROTECTION TO EACH OF THE CONTRACTING PARTIES AND IT WOULD APPEAR THAT THE CONTRACT PROCEDURES FOR ESTABLISHMENT OF FINAL OVERHEAD RATES SHOULD BE FOLLOWED REGARDLESS OF ANY QUESTION AS TO WHETHER AN ADDITIONAL AMOUNT COULD BE PAID TO THE CONTRACTOR IN VIEW OF THE COST LIMITATION FEATURE OF THE CONTRACT.

OUR RECORDS INDICATE THAT THE FUNDED AMOUNT OF THE CONTRACT WAS EVENTUALLY INCREASED TO $317,686.76 AND THAT THERE WOULD BE APPROXIMATELY $15,310.04 STILL REMAINING AVAILABLE FOR CONTRACT PAYMENTS IF THE CONTRACTOR IS CORRECT IN STATING THAT IN 1958 IT ACCEPTED ADMINISTRATIVE DISALLOWANCES AMOUNTING TO $15,310.04, OF WHICH $10,000 WAS COLLECTED BY SETOFF AND THE BALANCE OF $5,310.04 PAID TO THE GOVERNMENT BY A CHECK ISSUED ON OCTOBER 15, 1962.

THE MAKING OF AN EQUITABLE ADJUSTMENT AT THIS TIME FOR OVERHEAD COSTS WHICH EXCEEDED ALLOWANCES TO THE ARTHUR D. LITTLE COMPANY AT THE PROVISIONAL RATES MIGHT BE PROPER SINCE THIS OFFICE HAS ALLOWED SIMILAR CLAIMS WHERE IT APPEARED THAT CONTRACT COST LIMITATIONS WERE EXCEEDED SOLELY BECAUSE OF THE CONTRACTORS' INABILITY TO ASCERTAIN DURING CONTRACT PERFORMANCE WHETHER THE SPECIFIED PROVISIONAL OVERHEAD RATE IN THEIR CONTRACTS WERE SUFFICIENT TO COVER ALL ALLOWABLE TYPES OF OVERHEAD COSTS.

ACCORDINGLY, IT IS REQUESTED THAT THE ENTIRE MATTER BE RECONSIDERED BY YOUR AGENCY WITH A VIEW TOWARD SETTLEMENT OF THIS CLAIM ADMINISTRATIVELY IN ACCORDANCE WITH THE CONTRACT TERMS, SINCE IT DOES NOT APPEAR THAT IT WOULD BE PROPER FOR THIS OFFICE TO GIVE FURTHER CONSIDERATION TO THE CLAIM ON ITS MERITS UNTIL AFTER THE CONTRACTOR HAS EXHAUSTED ITS ADMINISTRATIVE REMEDIES UNDER THE CONTRACT. SEE, GENERALLY, B. H. DEACON COMPANY V. UNITED STATES, 189 F.SUPP. 146; AND HAPPEL V. UNITED STATES, 176 F.SUPP. 787, AFFIRMED 279 F.2D 88. A COPY OF THIS LETTER IS BEING MAILED TO THE ARTHUR D. LITTLE COMPANY.