A-35682, MARCH 25, 1931, 10 COMP. GEN. 431

A-35682: Mar 25, 1931

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DEPARTMENTAL TARIFF "G" PROMULGATED BY THE GOVERNOR OF THE PANAMA CANAL TO COVER THE COST OF VARIOUS ITEMS OF ACTUAL EXPENSE THE EXACT AMOUNT OF WHICH IT IS IMPRACTICABLE TO DETERMINE IN EACH INSTANCE. IN WHICH THERE IS INCLUDED A 10 PERCENT SURCHARGE ON BOTH LABOR AND MATERIALS IN CONNECTION WITH THE SERVICES OF THE PANAMA CANAL IN CONSTRUCTING. APPEARING TO HAVE BEEN PAID WITHOUT RAISING ANY QUESTIONS TO THE SURCHARGES INCLUDED THEREIN. WERE ADDED. IS THE PANAMA CANAL DEPARTMENTAL TARIFF G. AS NEARLY AS IT IS PRACTICABLE TO DETERMINE. THE BASIC OR STOCK CARD PRICE IS THE COST OF THE ARTICLE DELIVERED AT A TERMINAL IN THE CANAL ZONE. WHILE THERE IS NOT CONTAINED IN THE ORGANIC ACT. THERE IS FOR CONSIDERATION THE PURPOSE FOR WHICH THE PANAMA CANAL WAS ORGANIZED AND THE NATURE OF ITS ACTIVITIES WHICH DISTINGUISH IT FROM OTHER DEPARTMENTS AND ESTABLISHMENTS OF THE GOVERNMENT.

A-35682, MARCH 25, 1931, 10 COMP. GEN. 431

PANAMA CANAL - SERVICES RENDERED OTHER DEPARTMENTS OF THE GOVERNMENT - SURCHARGES THE ADDITION OF 10 PERCENT AS A SURCHARGE TO BILLS FOR SERVICES RENDERED OTHER DEPARTMENTS OF THE GOVERNMENT BY THE PANAMA CANAL, HAVING BEEN AUTHORIZED BY A TARIFF OF CHARGES DESIGNATED ,DEPARTMENTAL TARIFF "G" PROMULGATED BY THE GOVERNOR OF THE PANAMA CANAL TO COVER THE COST OF VARIOUS ITEMS OF ACTUAL EXPENSE THE EXACT AMOUNT OF WHICH IT IS IMPRACTICABLE TO DETERMINE IN EACH INSTANCE, AND THE CHARGES APPEARING REASONABLE IN AMOUNT AND NOT INCLUDING ANY APPRECIABLE PROFIT, THEY MAY BE REGARDED AS AUTHORIZED BY SECTION 6 OF THE PANAMA CANAL ACT OF AUGUST 24, 1912, 37 STAT. 563.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF THE NAVY, MARCH 25, 1931:

THERE HAS BEEN RECEIVED YOUR LETTER OF MARCH 4, 1931 (L11-10/HG 310227) (, SUBMITTING FOR DECISION A QUESTION AS TO THE LEGALITY OF THE PAYMENT OF SURCHARGES TO THE PANAMA CANAL ON THE COST OF WORK PERFORMED BY IT FOR THE NAVY DEPARTMENT.

THE QUESTION PRESENTED ARISES IN CONNECTION WITH THE SEPTEMBER, 1930, BILLS RENDERED BY THE PANAMA CANAL TO THE COMMANDANT, FIFTEENTH NAVAL DISTRICT, IN WHICH THERE IS INCLUDED A 10 PERCENT SURCHARGE ON BOTH LABOR AND MATERIALS IN CONNECTION WITH THE SERVICES OF THE PANAMA CANAL IN CONSTRUCTING, AT THE NAVAL AIR STATION, COCO SOLO, CANAL ZONE, SIX APARTMENT HOUSES FOR OFFICERS AND SIX APARTMENT HOUSES FOR CHIEF PETTY OFFICERS OF THE NAVY DEPARTMENT, ALL PRIOR BILLS UP TO THE END OF AUGUST, 1930, APPEARING TO HAVE BEEN PAID WITHOUT RAISING ANY QUESTIONS TO THE SURCHARGES INCLUDED THEREIN.

THE BASIS FOR THE ADDITION OF SURCHARGES TO BILLS FOR SUPPLIES FURNISHED AND SERVICES RENDERED TO DEPARTMENTS AND DIVISIONS O THE PANAMA CANAL, THE PANAMA RAILROAD CO., AND OTHER DEPARTMENTS OF THE UNITED STATES GOVERNMENT, ETC., AND UNDER WHICH THE SURCHARGE FOR THE FURNISHING OF SUPPLIES AND THE RENDITION OF SERVICES TO THE NAVY DEPARTMENT DURING SEPTEMBER/1930, WERE ADDED, IS THE PANAMA CANAL DEPARTMENTAL TARIFF G, PROMULGATED JULY 1, 1930, EFFECTIVE THE SAME DATE, AND SUPERSEDING PRIOR TARIFFS OF LIKE CHARACTER. THIS TARIFF AUTHORIZES THE ADDITION OF A SURCHARGE OF 10 PERCENT TO THE COST OF SERVICES WHEN RENDERED TO OTHER DEPARTMENTS OF THE UNITED STATES GOVERNMENT, THE PANAMA RAILROAD STEAMSHIP LINE, EMPLOYEES AND THOSE ENTITLED TO EMPLOYEES' RATES FOR PERSONAL USE, FRATERNAL, RELIGIOUS, AND CHARITABLE ORGANIZATIONS OF EMPLOYEES (WITH AN EXCEPTION NOT HERE MATERIAL), AND ON THE COST OF SUPPLIES WHEN FURNISHED TO BUSINESS DIVISIONS OF THE PANAMA CANAL, THE PANAMA RAILROAD CO., THE PANAMA RAILROAD STEAMSHIP LINE, OTHER DEPARTMENTS OF THE UNITED STATES GOVERNMENT, EMPLOYEES AND THOSE ENTITLED TO EMPLOYEES' RATES, SOCIAL, FRATERNAL, RELIGIOUS, AND CHARITABLE ORGANIZATIONS OF EMPLOYEES.

IN EXPLAINING THE REASON FOR THE ADDITION OF SURCHARGES TO BILLS RENDERED BY THE PANAMA CANAL, THE ACTING GOVERNOR OF THE CANAL, IN A LETTER TO THE COMMANDANT, FIFTEENTH NAVAL DISTRICT, DATED DECEMBER 19, 1930, STATED IN PARAGRAPH 2 OF SAID LETTER THAT ---

THIS 10 PERCENT SURCHARGE REPRESENTS, AS NEARLY AS IT IS PRACTICABLE TO DETERMINE, THE AVERAGE ACTUAL COST TO THE PANAMA CANAL OF ITEMS OF EXPENSE WHICH CAN NOT (WITHOUT UNDUE LABOR AND EXPENSE) BE DIRECTLY ALLOCATED TO THE PARTICULAR LABOR AND MATERIALS BILLED. IN THE CASE OF MATERIALS, THE BASIC OR STOCK CARD PRICE IS THE COST OF THE ARTICLE DELIVERED AT A TERMINAL IN THE CANAL ZONE, AND THE SURCHARGE REPRESENTS THE TRANSPORTATION AND HANDLING INTO AND OUT OF THE STOREHOUSE, THE NECESSARY ACCOUNTING, AND THE EXPENSE INCURRED IN THE RECRUITING AND REPATRIATING SUCH LABOR, EXPENSE OF HANDLING PERSONNEL AND RECORD PAPERS, ACCOUNTING (INCLUDING THE COST OF PAYING SALARIES AND WAGES), HOSPITAL EXPENSES, AND COST OF LABORERS' QUARTERS IN EXCESS OF RENTAL CHARGED SUCH LABOR.

SECTION 6 OF THE ACT OF AUGUST 24, 1912, 37 STAT. 563, AUTHORIZED THE PRESIDENT TO ESTABLISH, MAINTAIN, AND OPERATE, THROUGH THE PANAMA RAILROAD OR OTHERWISE DRY DOCKS, REPAIR SHIPS, YARDS, DOCKS, WHARVES, WAREHOUSES, STOREHOUSES, AND OTHER NECESSARY FACILITIES AND APPURTENANCES FOR THE PURPOSE OF PROVIDING COAL AND OTHER MATERIALS, LABOR, REPAIRS, SUPPLIES FOR VESSELS OF THE GOVERNMENT OF THE UNITED STATES, AND, INCIDENTALLY, FOR SUPPLYING SUCH AT REASONABLE PRICES TO PASSING VESSELS, AND PROVIDED THAT THE MONEYS RECEIVED FROM THE CONDUCT OF SAID BUSINESS MIGHT BE EXPENDED AND REINVESTED FOR SUCH PURPOSES WITHOUT BEING COVERED INTO THE GENERAL FUND OF THE TREASURY OF THE UNITED STATES.

WHILE THERE IS NOT CONTAINED IN THE ORGANIC ACT, OR IN ANY ANNUAL APPROPRIATION ACTS MAKING APPROPRIATIONS FOR THE ACTIVITIES OF THE PANAMA CANAL, ANY SPECIFIC AUTHORITY FOR THE ADDITION OF SURCHARGES TO BILLS RENDERED BY THE PANAMA CANAL FOR SERVICES RENDERED OR SUPPLIES FURNISHED OTHER DEPARTMENTS OF THE GOVERNMENT, THERE IS FOR CONSIDERATION THE PURPOSE FOR WHICH THE PANAMA CANAL WAS ORGANIZED AND THE NATURE OF ITS ACTIVITIES WHICH DISTINGUISH IT FROM OTHER DEPARTMENTS AND ESTABLISHMENTS OF THE GOVERNMENT. THE PANAMA CANAL WAS CREATED AND ORGANIZED FOR THE PURPOSE OF PERFORMING A SERVICE MORE OR LESS COMMERCIAL, RATHER THAN FOR THE PERFORMANCE OF GOVERNMENTAL ACTIVITIES ALONE. AS A CONSEQUENCE, THE DECISIONS APPLICABLE TO THE FURNISHING OF SUPPLIES OR THE PERFORMING OF SERVICES BY ONE DEPARTMENT OR ESTABLISHMENT OF THE GOVERNMENT TO ANOTHER ARE NOT NECESSARILY APPLICABLE TO THE FURNISHING OF SUPPLIES AND THE RENDERING OF SERVICES BY THE PANAMA CANAL TO OTHER DEPARTMENTS AND ESTABLISHMENTS OF THE GOVERNMENT.

THE QUESTION SUBMITTED APPEARS NOT TO HAVE BEEN HERETOFORE DIRECTLY PRESENTED TO THE ACCOUNTING OFFICERS OF THE GOVERNMENT FOR DECISION, BUT ON DECEMBER 20, 1911, THE COMPTROLLER OF THE TREASURY RENDERED A DECISION WHICH THE MATTER WAS AT LEAST INDIRECTLY DECIDED. IN THAT DECISION THE QUESTION WAS WHETHER THE SURCHARGE OF 10 PERCENT ON LABOR AND 15 PERCENT ON MATERIALS SHOULD BE SHOWN ON ACCOUNTS OF THE CANAL COMMISSION AGAINST THE QUARTERMASTER DEPARTMENT OF THE ARMY, OR WHETHER THEY SHOULD BE ABSORBED IN UNIT PRICES. AFTER REFERRING TO THE FACT THAT THE RULES OF THE COMMISSION REQUIRED THAT BILLS RENDERED BE DEFINITE AS TO SURCHARGES AND THAT THE QUARTERMASTER'S DEPARTMENT OF THE ARMY DESIRED SURCHARGES TO BE ABSORBED AND UNITS SHOWN, THE COMPTROLLER OF THE TREASURY SAID:

THE SHOWING IN AN ACCOUNT FOR MATERIAL OR SUPPLIES FURNISHED BY ONE DEPARTMENT TO ANOTHER THAT A SURCHARGE HAS BEEN MADE UPON THE CONTRACT PRICE AT WHICH THE DEPARTMENT FURNISHING OBTAINED THE MATERIAL OR SUPPLIES WOULD APPEAR ORDINARILY TO BE MATTER OF INFORMATION TO THE DEPARTMENT RECEIVING THE SUPPLIES RATHER THAN EVIDENCE NECESSARY FOR THE ACCOUNTING OFFICERS. WHERE, HOWEVER, THE LAW OR REGULATIONS SPECIFICALLY REQUIRE SUCH A SURCHARGE TO BE MADE IT SHOULD BE EXPRESSLY SHOWN IN THE ACCOUNT, OTHERWISE THE ACCOUNTING OFFICERS COULD NOT DETERMINE THAT THE LAW OR REGULATIONS IN THIS RESPECT HAD BEEN COMPLIED WITH.

THE INFERENCE TO BE DRAWN FROM THE ABOVE-QUOTED EXCERPT FROM THE DECISION OF DECEMBER 20, 1911, IS THAT IF THE LAW OR REGULATIONS OF THE PANAMA CANAL REQUIRE THE SO-CALLED SURCHARGES TO BE MADE, THE PAYMENT OF SUCH CHARGES WOULD BE PROPER.

SINCE THE ADDITION OF THESE SO-CALLED SURCHARGES ON THE READILY ASCERTAINABLE COST OF CERTAIN ITEMS SHOWN IN BILLS RENDERED BY THE PANAMA CANAL TO OTHER DEPARTMENTS OF THE GOVERNMENT IS REQUIRED BY PROPER REGULATIONS OF THE PANAMA CANAL, AS SHOWN IN DEPARTMENTAL TARIFF G, AND IT BEING IMPRACTICABLE TO ASCERTAIN MORE ACCURATELY THE AMOUNT OF THE ACTUAL COST OF THE ITEMS TO COVER WHICH THE SO-CALLED SURCHARGES ARE ADDED, AND IT APPEARING THAT SUCH CHARGES ARE REASONABLE IN AMOUNT AND DO NOT INCLUDE ANY APPRECIABLE PROFIT, YOU ARE ADVISED THAT THE INCLUSION OF SUCH CHARGES ON BILLS RENDERED THE NAVY DEPARTMENT WILL NOT BE QUESTIONED AT THIS TIME, AND THERE WOULD APPEAR TO BE NO OBJECTION TO THE PAYMENT OF SUCH CHARGES BY DISBURSING OFFICERS OF THE NAVY DEPARTMENT WHEN INCLUDED ON VOUCHERS PRESENTED TO THEM FOR PAYMENT IF OTHERWISE CORRECT AND PROPER.