A-14184, JUNE 28, 1926, 5 COMP. GEN. 1029

A-14184: Jun 28, 1926

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PAYMENT OF THE SPECIFIED SAVING BONUS TO THE CONTRACTOR ON THE MONTHLY SAVING TO THE GOVERNMENT AS EFFECTED BY LOWERING THE PRODUCTION COSTS IS AUTHORIZED. REQUESTING DECISION AS TO WHETHER YOU ARE AUTHORIZED TO MAKE PAYMENT ON A VOUCHER SUBMITTED FOR $521.90 IN FAVOR OF THE LINDE AIR PRODUCTS CO. WHICH WAS TRANSFERRED TO THE JURISDICTION OF THE BUREAU OF MINES IN ACCORDANCE WITH THE ACT OF MARCH 3. DURING ANY CALENDAR MONTH THAT THE SAID PLANT IS OPERATED TO PRODUCE HELIUM. THE QUESTION INVOLVED IN THE SUBMISSION IS AS TO THE LEGALITY OF THE BONUS PROVISION OF THE CONTRACT. A BONUS IS GENERALLY UNDERSTOOD TO BE A SUM GIVEN OR PAID BEYOND WHAT IS LEGALLY REQUIRED. IT IS NOT A GIFT OR GRATUITY.

A-14184, JUNE 28, 1926, 5 COMP. GEN. 1029

CONTRACTS, BONUS FOR SAVING - HELIUM PRODUCTION WHERE A CONTRACT FOR THE MANUFACTURE OF HELIUM FOR THE UNITED STATES PROVIDED FOR AN ADDITIONAL PAYMENT OF COMPENSATION TO THE CONTRACTOR BY WAY OF THE "COST SAVING BONUS" PLAN; I.E., SHOULD THE COSTS OF PRODUCTION BE REDUCED BY THE CONTRACTOR DURING ANY CALENDAR MONTH BELOW THAT ESTIMATED AND FIXED BY THE CONTRACT, PAYMENT OF THE SPECIFIED SAVING BONUS TO THE CONTRACTOR ON THE MONTHLY SAVING TO THE GOVERNMENT AS EFFECTED BY LOWERING THE PRODUCTION COSTS IS AUTHORIZED.

COMPTROLLER GENERAL MCCARL TO S. A. SNYDER, SPECIAL DISBURSING AGENT, BUREAU OF MINES, JUNE 28, 1926:

THERE HAS BEEN RECEIVED YOUR LETTER OF APRIL 30, 1926, REQUESTING DECISION AS TO WHETHER YOU ARE AUTHORIZED TO MAKE PAYMENT ON A VOUCHER SUBMITTED FOR $521.90 IN FAVOR OF THE LINDE AIR PRODUCTS CO., REPRESENTING THE "COST SAVING BONUS" ALLEGED TO BE DUE CONTRACTOR FOR THE MONTH OF JANUARY, 1926, UNDER ITS CONTRACT DATED JANUARY 5, 1926, FOR THE PRODUCTION OF HELIUM FOR THE UNITED STATES.

BY SAID CONTRACT THE LINDE AIR PRODUCTS CO. OBLIGATED ITSELF TO FURNISH CERTAIN SERVICES, ETC., NECESSARY TO OPERATE AND MAINTAIN FOR A PERIOD OF SIX MONTHS FROM JANUARY 1, 1926, THE UNITED STATES HELIUM PRODUCTION PLANT, LOCATED AT FORT WORTH, TEX., AND WHICH WAS TRANSFERRED TO THE JURISDICTION OF THE BUREAU OF MINES IN ACCORDANCE WITH THE ACT OF MARCH 3, 1925, 43 STAT. 1110, AND TO PRODUCE THEREIN HELIUM AS STIPULATED FOR THE ACCOUNT AND USE OF THE UNITED STATES. SECTION 13, ARTICLE III, OF THE CONTRACT PROVIDES:

WHENEVER, DURING ANY CALENDAR MONTH THAT THE SAID PLANT IS OPERATED TO PRODUCE HELIUM, THE COST OF COMPANY OPERATED UNITS, AS DEFINED IN SECTIONS 9 AND 10 OF ARTICLE III HEREOF, SHALL BE LESS THAN AN AMOUNT (HEREINAFTER CALLED "BONUS BASIS") EQUAL TO THE SUM OF (A) ELEVEN THOUSAND ($11,000.00) DOLLARS, AND (B) THE PRODUCT OF FIFTEEN AND SIXTEEN HUNDREDTHS ($15.16) DOLLARS, MULTIPLIED BY THE NUMBER OF THOUSANDS OF CUBIC FEET OF CONTAINED HELIUM PRODUCED DURING SAID MONTH, THE BUREAU SHALL PAY TO THE COMPANY, IN ADDITION TO THE PAYMENTS HEREINBEFORE PROVIDED FOR, A SUM OF MONEY HEREIN CALLED THE COST SAVING BONUS, EQUAL TO TWENTY-FIVE PERCENT (25 PERCENT) OF THE DIFFERENCE BETWEEN THE BONUS BASIS AND THE COST OF COMPANY OPERATED UNITS FOR SAID MONTHS; PROVIDED, THAT THE AMOUNT OF CONTAINED HELIUM PRODUCED DURING SAID MONTH SHALL BE COMPUTED ON A PRESSURE BASIS OF 14.65 POUNDS PER SQUARE INCH ABSOLUTE, AND A TEMPERATURE BASIS OF 70 DEGREES FAHRENHEIT, AND SHALL BE DETERMINED FROM THE QUANTITIES OF HELIUM SEPARATED FROM THE HELIUM-BEARING NATURAL GAS AND COMPRESSED INTO CYLINDERS OR OTHERWISE PREPARED FOR TRANSPORTATION OR OTHER PURPOSES DURING SAID MONTH AND THE WEIGHTED AVERAGE PURITY OF SAID HELIUM, AND PROVIDED, FURTHER, THAT THE AMOUNT PAID UNDER THE PROVISIONS OF THIS SECTION SHALL NOT EXCEED THE SUM OF FORTY FIVE HUNDRED DOLLARS ($4,500.00) FOR ANY ONE MONTH.

THE VOUCHER SUBMITTED FOR $521.90 COVERS THE CLAIM OF THE CONTRACTOR UNDER THE ABOVE-QUOTED SECTION OF THE CONTRACT FOR ITS SHARE OF THE SAVINGS EFFECTED IN PRODUCTION COSTS DURING THE MONTH OF JANUARY 1926.

THE QUESTION INVOLVED IN THE SUBMISSION IS AS TO THE LEGALITY OF THE BONUS PROVISION OF THE CONTRACT. A BONUS IS GENERALLY UNDERSTOOD TO BE A SUM GIVEN OR PAID BEYOND WHAT IS LEGALLY REQUIRED. IT IS NOT A GIFT OR GRATUITY, BUT IS PAID FOR SOME SERVICES OR CONSIDERATION AND IS IN ADDITION TO WHAT WOULD ORDINARILY BE GIVEN. KENICOTT V. WAYNE COUNTY, 16 WALL./U.S.) 452. THE ADOPTION BY THE GOVERNMENT OF THE "COST SAVING BONUS" PLAN IN THE CONTRACT HEREIN INVOLVED APPEARS TO HAVE BEEN FOR THE EXPRESS PURPOSE OF INDUCING THE CONTRACTOR TO MAKE A SPECIAL EFFORT TO LOWER PRODUCTION COSTS, THEREBY REDUCING GOVERNMENT EXPENDITURES FOR HELIUM UNDER THE CONTRACT.

IT HAS BEEN HELD THAT A BONUS PROVISION IN A CONTRACT FOR SAVINGS THROUGH SPECIAL ENDEAVOR, AS APPEARS TO BE THE CASE HERE, IS NOT IMPROPER AND DOES NOT INVALIDATE THE CONTRACT. 27 COMP. DEC. 898; COHEN, ENDEL AND CO. V. UNITED STATES, 60 CT.CLS. 512. SEE ALSO DECISION OF THIS OFFICE OF AUGUST 19, 1921, APPEAL 35614.

THE CONTRACT HERE PROVIDES FOR A BONUS PAYMENT TO THE CONTRACTOR OF 25 PERCENT OF THE SAVINGS EFFECTED IN PRODUCTION COSTS OF HELIUM DURING ANY MONTH OF THE CONTRACT, LIMITED TO $4,500. IT IS APPARENT THAT THE UNITED STATES WOULD DERIVE BENEFITS FROM SUCH SAVINGS. A DETAILED STATEMENT PREPARED BY A GOVERNMENT ACCOUNTANT FROM THE COST RECORDS OF THE UNITED STATES HELIUM PRODUCTION PLANT, AND ATTACHED TO THE VOUCHER SUBMITTED, DISCLOSES THAT THE COST-SAVING BONUS UNDER THE CONTRACT FOR THE MONTH OF JANUARY, 1926, WAS DETERMINED AS FOLLOWS:

TABLE HELIUM COMPRESSED FOR TRANSPORTATION ----------- 689,216 CUBIC FEET WEIGHTED AVERAGE PURITY OF HELIUM -------------- 94.02 PERCENT CONTAINED HELIUM PRODUCED--- 689,216 TIMES 94.02

PERCENT ------------------------------------ 648,001 CUBIC FEET BONUS BASIS--- $11,000 (648,001 TIMES 15.16) -- $20,823.70 COST OF COMPANY- OPERATED UNITS ---------------- $18,736.10

THUS THE DIFFERENCE BETWEEN THE "BONUS BASIS" AND THE "COST OF COMPANY- OPERATED UNITS" FOR THE MONTH OF JANUARY, 1926, WAS $2,087.60.

THE CONTRACTOR HAVING EFFECTED A SAVING TO THE GOVERNMENT BY LOWERING THE PRODUCTION COSTS OF HELIUM MANUFACTURED $2,087.60 FOR THE MONTH OF JANUARY, 1926, IT IS ENTITLED UNDER THE CONTRACT TO 25 PERCENT OF SUCH SAVINGS, OR $521.90.

YOU ARE ADVISED THAT PAYMENT ON THE VOUCHER IS AUTHORIZED, IF OTHERWISE CORRECT.