B-151470, FEB. 26, 1965

B-151470, FEB. 26, 1965

TO GOODWIN, PROCTER AND HOAR:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 11, 1965, WITH ENCLOSURE, REQUESTING THAT WE RECONSIDER CERTAIN ASPECTS OF THE CLAIM ASSERTED BY THE AGENCY FOR INTERNATIONAL DEVELOPMENT (AID) AGAINST CHAS. T. MAIN, INC., ON ACCOUNT OF ERRONEOUS REIMBURSEMENTS OF CERTAIN COSTS UNDER A COST-PLUS-A- FIXED-FEE CONTRACT DATED JUNE 23, 1950, BETWEEN MAIN AND ETIBANK FOR CONSULTING SERVICES ON A HYDROELECTRIC POWER PROJECT AT SARIYAR, TURKEY.

SPECIFICALLY, YOU REQUEST THAT WE RECONSIDER OUR DECISIONS OF FEBRUARY 4 AND MAY 13, 1964, WHEREIN WE DENIED RELIEF FROM LIABILITY FOR ITEMS 1, 2, 4, 5, 6, 8 AND 9 OF THE AID CLAIM TOTALING $112,233.81.

ITEMS 1 AND 2 TOTALING $88,134.50, REPRESENTING TERMINAL LEAVE PAYMENTS TO 32 EMPLOYEES OF MAIN AND THE OVERHEAD THEREON, WERE DISALLOWED BECAUSE THE CONTRACT, AS AMENDED, PROVIDED FOR TERMINAL LEAVE PAYMENTS IN THE CASE OF INCOMPETENT EMPLOYEES ONLY AND BECAUSE NO CONTRACT PROVISION WAS MADE FOR COMPETENT EMPLOYEES WHO HAD COMPLETED THEIR TERMS OF EMPLOYMENT. ARTICLE XVII OF THE CONTRACT PROVIDED:

"1--- THE OWNER MAY REQUEST THE ENGINEER TO DISMISS FROM WORK SUCH EMPLOYEE OR EMPLOYEES AS THE OWNER DEEMS INCOMPETENT, CARELESS, OR WHOSE CONTINUED EMPLOYMENT IS DEEMED INIMICAL BY THE OWNER TO ITS INTEREST.'

BY MODIFICATION NO. 2, DATED SEPTEMBER 19, 1953, THE FOLLOWING LANGUAGE WAS ADDED TO ARTICLE XVII:

"EXCEPT COVERED BY ARTICLE II, ITEM NO. 4 PARAGRAPH (C) THE OWNER WILL DISCUSS THE DISMISSAL OR CANCELLATION OF THE CONTRACT OF ANY EMPLOYEE WITH THE ENGINEER'S PROJECT MANAGER PRIOR TO ANY ACTION BEING TAKEN THEREON. IN CASE OF DIFFERENCE OF OPINION BETWEEN THE OWNER AND THE ENGINEER REGARDING REMOVAL OF AN EMPLOYEE THE DECISION OF THE OWNER WILL BE FINAL. HOWEVER, EXCEPT UPON SERIOUS BREACH OF GOOD CONDUCT AN EMPLOYEE WILL NOT BE SUMMARILY DISMISSED. INSTEAD, HIS EMPLOYMENT CONTRACT WILL BE CANCELLED, IN WHICH CASE THE OWNER WILL PAY HIS RETURN EXPENSES TO THE UNITED STATES PLUS TWO MONTHS' SALARY AFTER HE REACHES THE UNITED STATES IF HE HAS BEEN EMPLOYED IN TURKEY MORE THAN ONE YEAR, OR ONE MONTH'S SALARY IF LESS THAN ONE YEAR.'

IT IS POINTED OUT THAT AT LEAST FIVE EMPLOYEES, AT THE TIME OF THE 1953 MODIFICATION, ALREADY HAD THEIR EMPLOYMENT TERMINATED FOR REASONS UNRELATED TO INCOMPETENCY WITH ALLOWANCE FOR TERMINAL LEAVE PAYMENTS. IS FURTHER ARGUED, AND SUPPORTED BY AN AFFIDAVIT OF A MAIN OFFICIAL HAVING PERSONAL KNOWLEDGE OF THE SITUATION, THAT THE GRANT OF TERMINAL LEAVE FOR COMPETENT EMPLOYEES WAS IN ACCORDANCE WITH MAIN'S USUAL PRACTICE; THAT IT WAS FORMULATED BY ETIBANK IN ACCORDANCE WITH TURKISH LAW, AND THAT IT WAS AN IMPLIED CONDITION OF THE EMPLOYMENT CONTRACTS. WE NOTE THAT REPRESENTATIVE EMPLOYEE TERMINATION AGREEMENTS WHICH PREDATE THE 1953 MODIFICATION EXPRESSLY PROVIDED FOR TERMINAL LEAVE PAYMENTS. IN VIEW OF THE FOREGOING, AND THE MORE COMPLETE RECORD NOW BEFORE US, IT IS NOT UNREASONABLE TO CONCLUDE THAT THE TERMINAL LEAVE PAYMENTS TO COMPETENT EMPLOYEES WERE IN ACCORDANCE WITH MAIN'S ESTABLISHED POLICY WHICH EXISTED PRIOR TO THE TIME THE CONTRACT WAS AMENDED TO AUTHORIZE TERMINAL LEAVE IN THE CASE OF INCOMPETENT EMPLOYEES. IN THESE CIRCUMSTANCES, AN ANOMALY WOULD EXIST IF REIMBURSEMENT FOR TERMINAL LEAVE PAYMENTS WAS TO BE DENIED AS TO COMPETENT EMPLOYEES BUT ALLOWED AS TO INCOMPETENTS. WE THEREFORE CONCLUDE THAT THESE TERMINAL LEAVE PAYMENTS, TOGETHER WITH THE RELATED OVERHEAD, MAY PROPERLY BE REGARDED AS REIMBURSABLE UNDER THE CONTRACT AND, THEREFORE, NEED NOT NOW BE REFUNDED TO THE GOVERNMENT. CF. 23 COMP. GEN. 621; 22 ID. 306.

ITEM 4 IN THE AMOUNT OF $9,963 RELATES TO THE EXPENSES APPLICABLE TO THE EMPLOYMENT OF MR. MANLEY WHO FAILED TO PERFORM THE DUTIES ASSIGNED TO HIM IN TURKEY AND, FOR THAT REASON, WAS DISCHARGED. WE NOTE THAT ETIBANK FIRST DISALLOWED EXPENSES INCIDENT TO THE EMPLOYMENT AND TRAVEL EXPENSES OF MR. MANLEY BUT LATER ALLOWED THESE COSTS UPON FURTHER CONSIDERATION. IT WAS HELD IN 21 COMP. GEN. 149, 156, THAT A COST-PLUS-A-FIXED-FEE CONTRACTOR MAY NOT BE REIMBURSED FOR LOSSES DUE TO THE NEGLIGENCE OR UNTRUSTWORTHINESS OF EMPLOYEES WHERE HE HAS FAILED TO EXERCISE REASONABLE CARE IN THEIR SELECTION AND EMPLOYMENT, OR WHERE SUCH PERSONS HAVE BEEN RETAINED AFTER THE CONTRACTOR HAS REASON TO KNOW THAT THEY WERE NOT TRUSTWORTHY. THE RECORD IS NOT CLEAR WHETHER MAIN WAS PATENTLY NEGLIGENT IN EMPLOYING MR. MANLEY. BUT IT IS CLEAR THAT NO BENEFITS ACCRUED UNDER THE CONTRACT BY REASON OF MR. MANLEY'S EMPLOYMENT AFTER HE ARRIVED IN TURKEY. WHILE MR. MANLEY REFUSED TO PERFORM ANY DUTIES IN TURKEY APPARENTLY BECAUSE HE WAS REASSIGNED TO ANOTHER JOB WHICH HE WAS ALSO QUALIFIED TO PERFORM, IT WOULD APPEAR THAT HAD MR. MANLEY BEEN PERMITTED TO PERFORM HIS CONTEMPLATED DUTIES, NO DIFFICULTIES WOULD HAVE ARISEN. HOWEVER, DUE TO CIRCUMSTANCES BEYOND ETIBANK'S OR MAIN'S CONTROL, MR. MANLEY WAS RELIEVED FROM THE POSITION HE DESIRED AND WAS REASSIGNED TO A POSITION OF LESSER APPEAL. AT THE TIME OF EMPLOYMENT, MAIN WAS UNAWARE OF THE POSSIBILITY THAT MR. MANLEY WOULD NOT BE ABLE TO PERFORM THE DUTIES OF THE POSITION DESIGNATED FOR HIM OR OF THE FACT THAT MR. MANLEY MIGHT BE ASSIGNED TO AN ENTIRELY DIFFERENT POSITION FOR REASONS NOT RELATED TO HIS COMPETENCY. ALTHOUGH WE CANNOT, AT THIS TIME, APPORTION RESPONSIBILITY FOR THE MR. MANLEY SITUATION, WE CANNOT SAY THAT THE RECORD SUPPORTS A CONCLUSION THAT MAIN WAS NEGLIGENT IN EMPLOYING MR. MANLEY OR IN TRANSPORTING HIM TO TURKEY FOR A PARTICULAR ASSIGNMENT. WE ARE PERSUADED THAT THE SUBJECT COSTS SHOULD BE REGARDED AS PROPERLY REIMBURSABLE, ESPECIALLY SINCE ETIBANK AFTER THOROUGH CONSIDERATION REVERSED ITS PRIOR POSITION AND ALLOWED THESE EXPENSES. THEREFORE, THIS ITEM OF COST AMOUNTING TO $9,963 NEED NOT BE REFUNDED BY MAIN.

CONCERNING ITEM 5 WHICH REPRESENTS SALARY COSTS OF NEW EMPLOYEES PRIOR TO REPORTING FOR DUTY AT MAIN'S HOME OFFICE, IT IS CONTENDED THAT SUCH EMPLOYEES WERE FULLY OCCUPIED ON THE PROJECT WORK WHILE PREPARING AND MOVING THEMSELVES ACROSS COUNTRY FOR ASSIGNMENT TO A FOREIGN JOB. ARTICLE IX OF THE CONTRACT PROVIDED THAT SALARIES OR WAGES WOULD BE REIMBURSED ON ACCOUNT OF EMPLOYEES ,DIRECTLY ENGAGED IN THE WORK.' ARTICLE X PROVIDED THAT MAIN WOULD BE REIMBURSED FOR ACTUAL HOURS OF WORK "DIRECTLY EXPENDED ON THIS PROJECT.' WE FIND NOTHING IN THE RECORD BEFORE US WHICH WOULD SUPPORT A CONCLUSION THAT SALARY PAYMENTS TO EMPLOYEES PRIOR TO THEIR DIRECT PARTICIPATION IN THE CONTRACT WORK WERE REIMBURSABLE ITEMS OF COSTS. IN OUR OPINION, THESE SALARY PAYMENTS WERE NOT PROPERLY REIMBURSABLE SINCE THEY REPRESENTED, INSOFAR AS THE CONTRACT WORK WAS CONCERNED, GRATUITIES TO THE EMPLOYEES WHICH BORE NO DIRECT RELATION TO THE CONTRACT WORK. THIS ITEM AMOUNTING TO $7,500 WAS AN EXPENDITURE WHICH SHOULD NOT HAVE BEEN SHIFTED TO THE GOVERNMENT. IT CONSTITUTED AN OBLIGATION FOR WHICH MAIN WAS SOLELY RESPONSIBLE. HENCE, WE FIND NO BASIS TO RELIEVE MAIN FROM THIS OVERPAYMENT. SEE 22 COMP. GEN. 1008.

ITEM 6, AMOUNTING TO $3,469, REPRESENTS OVERSEAS DIFFERENTIAL INCLUDED IN EMPLOYEES' SALARIES WHILE EMPLOYED AT MAIN'S HOME OFFICE. UPON REVIEW, WE CONCLUDE THAT THIS AMOUNT SHOULD NOT HAVE BEEN REIMBURSED TO MAIN AS AN ALLOWABLE ITEM OF COST UNDER THE CONTRACT. THE EMPLOYMENT AGREEMENT WITH O. L. DOWZER, TRANSMITTED WITH YOUR LETTER, PROVIDED THAT HIS SALARY "WILL BE ON A STRAIGHT MONTHLY BASIS AT THE RATE OF * * * ($900.00) PER MONTH, INCLUDING OVERSEAS PREMIUM.' ARTICLE X OF THE CONTRACT, AS AMENDED BY MODIFICATION NO. 5, CLEARLY CONTEMPLATED THAT OVERSEAS PREMIUMS WOULD BE PART OF SALARIES WHILE EMPLOYED IN TURKEY. WHILE THE AMOUNT OF OVERSEAS PREMIUMS APPLICABLE TO THESE SALARY PAYMENTS WAS ESTIMATED, THIS FIGURE OF $3,469 WAS DEVELOPED AS A RESULT OF OUR AUDIT OF THE CONTRACT COSTS AND WAS CONFIRMED BY THE AID INTERNAL AUDITORS. SINCE THE CONTRACT DID NOT AUTHORIZE THE INCLUSION OF OVERSEAS PREMIUM IN SALARIES WHILE EMPLOYEES WERE EMPLOYED IN MAIN'S HOME OFFICE, AND SINCE OVERSEAS PREMIUM ENTITLEMENT WAS INCONSISTENT WITH HOME OFFICE EMPLOYMENT, WE ARE UNABLE TO RELIEVE MAIN FROM LIABILITY FOR THIS OVERPAYMENT.

ITEM 8 REPRESENTS EXCESSIVE TRAVEL COSTS OF $2,253.03 INCURRED BY EMPLOYEES WHO TRAVELED TO TURKEY BY VESSEL RATHER THAN BY AIR. BY LETTER DATED MARCH 24, 1954, THE FOREIGN OPERATIONS ADMINISTRATION (FOA) ADVISED MAIN THAT ITS CONTRACT POLICY WAS TO PAY DOLLAR SALARIES AND PER DIEM OF PERSONNEL DURING TRAVEL ONLY TO THE EXTENT OF DIRECT AIR TRAVEL. HOWEVER, IN THAT SAME LETTER MAIN WAS ADVISED:

"IT IS POSSIBLE THAT YOU MAY HAVE AGREEMENTS WITH EMPLOYEES ASSIGNED UNDER THE ORIGINAL CONTRACT TO TRAVEL BY STEAMSHIP TO OR FROM TURKEY. WILL BE WILLING TO CONSIDER THE RETROACTIVE EFFECT OF THE ABOVE POLICY UPON SUBMISSION BY YOU OF EVIDENCE OF ANY FIRM AGREEMENTS OF THIS NATURE ENTERED INTO BETWEEN CHAS. T. MAIN, INC. AND EMPLOYEES BEFORE THE EFFECTIVE DATE OF MODIFICATION NO. 3.'

MODIFICATION NO. 3 DATED OCTOBER 1, 1953, PROVIDED IN PERTINENT PART:

"REIMBURSEMENT TO THE ENGINEER SHALL BE MADE IN DOLLARS FOR THE COST OF ALL SUCH TRANSPORTATION IN THE UNITED STATES AND FOR THE PER DIEM ALLOWANCE OF $10.00 PER DAY PER PERSON WHILE IN SUCH TRAVEL STATUS AND ON THE RETURN TRIP FROM TURKEY TO THE UNITED STATES. OVERSEAS TRANSPORTATION FROM POINT OF EMBARKATION IN THE UNITED STATES TO TURKEY AND RETURN WILL BE PROVIDED BY THE OWNER, EXCEPT THAT IF THE CONTRACTOR CERTIFIES THAT PROCUREMENT OF OVERSEAS TRANSPORTATION BY STEAMSHIP IS NECESSARY FOR PERSONNEL UNABLE TO TRAVEL BY AIR AND THAT THE STEAMSHIP CARRIER CONTACTED REFUSED TO ACCEPT PAYMENT IN TURKISH LIRA, REIMBURSEMENT IN U.S. DOLLARS SHALL BE MADE FOR SUCH TRANSPORTATION COSTS, INCLUDING HOUSEHOLD EFFECTS, BY ETIBANK UPON APPROVAL BY FOA.'

THE PAPERS SUBMITTED WITH YOUR LETTER REASONABLY SUPPORT YOUR POSITION THAT THE INVOLVED EMPLOYEES CONDITIONED THEIR OVERSEAS EMPLOYMENT TO TRAVEL BY VESSEL, AND THAT SUCH TRAVEL WAS PERMISSIBLE UNDER THE ABOVE- QUOTED PROVISIONS OF MODIFICATION NO. 3. WE, THEREFORE, WILL NOT INSIST UPON REPAYMENT OF THIS ITEM.

WITH RESPECT TO ITEM 9 COVERING VACATION PAYMENTS TO CERTAIN EMPLOYEES IN TURKEY, IT APPEARS THAT SUCH OVERPAYMENTS RESULTED FROM MINOR BOOKKEEPING ERRORS. FOLLOWING THE RATIONALE OF 23 COMP. GEN. 467, WE WILL NOT INSIST UPON REPAYMENT OF THE $914.28 INVOLVED.

UPON RECONSIDERATION, WE THEREFORE HAVE DETERMINED THAT THE AMOUNT OF $10,969 SHOULD BE RECOVERED FROM MAIN AS CONSTITUTING IMPROPER REIMBURSEMENTS UNDER THE CONTRACT. A CHECK IN THIS AMOUNT SHOULD BE DRAWN IN FAVOR OF THE UNITED STATES GENERAL ACCOUNTING OFFICE AND FORWARDED PROMPTLY TO POST OFFICE BOX 2610, WASHINGTON, D.C. 20013, MAKING REFERENCE TO CLAIM NO. Z-1812285/1).