A-35987, MAY 8, 1931, 10 COMP. GEN. 510

A-35987: May 8, 1931

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COLLECTIONS - DEFAULTING CONTRACTORS - MISCELLANEOUS RECEIPTS AMOUNTS RECOVERED FROM DEFAULTING CONTRACTORS FOR LOSSES OR DAMAGES ON ACCOUNT OF THE FAILURE OF SAID CONTRACTORS TO PERFORM UNDER THEIR CONTRACTS ARE NOT FOR CREDITING TO THE APPROPRIATION UNDER WHICH CONTRACT PAYMENTS WERE MADE. ARE FOR DEPOSITING AND COVERING INTO THE TREASURY AS MISCELLANEOUS RECEIPTS AS REQUIRED BY SECTIONS 3617 AND 3618. IT WAS THE PRACTICE FOR MANY YEARS TO CREDIT SUCH ITEMS TO THE APPROPRIATION IN ORDER TO COVER THE ADDITIONAL CHARGES DUE TO THE DEFAULT OF THE ORIGINAL CONTRACTOR. FAILURE TO OBTAIN SUCH CREDITS TO THE APPROPRIATION MIGHT RESULT IN SOME INSTANCES IN INABILITY TO COMPLETE A PROJECT UNTIL AN ADDITIONAL APPROPRIATION WAS PROVIDED BY CONGRESS.

A-35987, MAY 8, 1931, 10 COMP. GEN. 510

COLLECTIONS - DEFAULTING CONTRACTORS - MISCELLANEOUS RECEIPTS AMOUNTS RECOVERED FROM DEFAULTING CONTRACTORS FOR LOSSES OR DAMAGES ON ACCOUNT OF THE FAILURE OF SAID CONTRACTORS TO PERFORM UNDER THEIR CONTRACTS ARE NOT FOR CREDITING TO THE APPROPRIATION UNDER WHICH CONTRACT PAYMENTS WERE MADE, BUT ARE FOR DEPOSITING AND COVERING INTO THE TREASURY AS MISCELLANEOUS RECEIPTS AS REQUIRED BY SECTIONS 3617 AND 3618, REVISED STATUTES.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF WAR, MAY 8, 1931:

CONSIDERATION HAS BEEN GIVEN LETTER (3504 (VICKSBURG/--- 461), DATED MARCH 18, 1931, FROM THE CHIEF OF ENGINEERS, WAR DEPARTMENT, TO THIS OFFICE AS FOLLOWS:

IT APPEARS THAT YOUR CERTIFICATE OF SETTLEMENT NO. F15259-W, JULY 30, 1930, ACCOUNTS OF CAPT. F. J. FITZPATRICK, CORPS OF ENGINEERS, VICKSBURG, MISS., STATES THAT THERE SHOULD BE DEPOSITED AS ,MISCELLANEOUS RECEIPTS" CERTAIN ITEMS REPRESENTING COLLECTIONS OF EXCESS COSTS OF WORK DONE DUE TO THE DEFAULT OF CONTRACTORS.

UNDER THE DECISION OF THE COMPTROLLER OF THE TREASURY DATED DECEMBER 16, 1909 (16 COMP. DEC. 384), IT WAS THE PRACTICE FOR MANY YEARS TO CREDIT SUCH ITEMS TO THE APPROPRIATION IN ORDER TO COVER THE ADDITIONAL CHARGES DUE TO THE DEFAULT OF THE ORIGINAL CONTRACTOR. FAILURE TO OBTAIN SUCH CREDITS TO THE APPROPRIATION MIGHT RESULT IN SOME INSTANCES IN INABILITY TO COMPLETE A PROJECT UNTIL AN ADDITIONAL APPROPRIATION WAS PROVIDED BY CONGRESS, WITH POSSIBLE DETRIMENT TO THE PUBLIC INTERESTS.

IT APPEARS TO BE A REASONABLE ASSUMPTION THAT THE PRIMARY PURPOSE OF CONGRESS IN PROVIDING AN APPROPRIATION IS TO INITIATE WORK ON A PROJECT AND CARRY IT ON TO COMPLETION RATHER THAN TO INCREASE THE REVENUES OF THE TREASURY BY CREDITING COLLECTIONS OF DAMAGES ON ACCOUNT OF A DEFAULT IN A CONTRACT TO "MISCELLANEOUS RECEIPTS.'

ATTENTION IS INVITED IN THIS CONNECTION TO THE ACT OF MARCH 3, 1883 (U.S.C. TITLE 5, PAR. 218), WHICH PROVIDES THAT ANY EXCESS COST RESULTING FROM THE FAILURE OF A SUCCESSFUL BIDDER TO ENTER INTO A CONTRACT MAY BE RECOVERED FROM HIM OR HIS SURETY FOR THE USE OF THE WAR DEPARTMENT. WOULD APPEAR TO BE MORE ESSENTIAL TO CREDIT AMOUNTS TO AN APPROPRIATION, WHICH ARE DEDUCTED FROM PAYMENTS DUE DEFAULTING CONTRACTOR OR WHICH ARE RECOVERED FROM HIS SURETY AFTER A PROJECT HAD BEEN PARTIALLY COMPLETED.

IT IS, THEREFORE, REQUESTED THAT THIS MATTER BE RECONSIDERED WITH A VIEW OF ALLOWING SUCH ITEMS TO BE CREDITED TO AN APPROPRIATION INSTEAD OF BEING DEPOSITED IN THE TREASURY AS "MISCELLANEOUS RECEIPTS.'

IN A LETTER OF JUNE 20, 1929, A-24614, BY THIS OFFICE TO THE CHIEF OF ENGINEERS IN ANSWER TO AN INQUIRY RELATIVE TO THE APPLICATION OF THE DECISION 16 COMP. DEC. 384, HOLDING THAT MONEYS RECEIVED FROM BONDSMEN OF DEFAULTING CONTRACTORS TO COVER LOSS AND DAMAGE WERE NOT MONEYS RECEIVED FOR THE USE OF THE UNITED STATES WITHIN THE MEANING OF SECTION 3617, REVISED STATUTES, AND THEREFORE NOT REQUIRED TO BE DEPOSITED AND COVERED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS, IT WAS SAID THAT THE SAME QUESTION WAS CONSIDERED MANY TIMES SINCE 1909 WHEN THE DECISION IN QUESTION WAS RENDERED, AND THAT SINCE DECEMBER 20, 1916, 23 COMP. DEC. 352, IT HAD BEEN CONSISTENTLY HELD BY THE ACCOUNTING OFFICES THAT IN SUCH CASES ARISING FROM THE BREACH OF GOVERNMENT CONTRACTS, SECTIONS 3617 AND 3618, REVISED STATUTES, REQUIRED COLLECTIONS MADE IN CONSEQUENCE OF LOSSES AND DAMAGES TO BE DEPOSITED AND COVERED INTO TREASURY AS MISCELLANEOUS RECEIPTS, CITING NUMEROUS DECISIONS, INCLUDING DECISION OF MARCH 20, 1929, TO YOU AS AMPLIFIED BY RECONSIDERATION OF AUGUST 8, 1929, A-26073.

AS TO THE PROVISIONS OF THE ACT OF MARCH 3, 1883, 22 STAT. 487, AS INCORPORATED IN SECTION 218, TITLE 5, U.S. CODE, REFERRED TO IN LETTER OF THE CHIEF OF ENGINEERS, THEY APPEAR TO HAVE NO APPLICATION TO THE PRESENT MATTER. WITHOUT DECIDING HERE WHETHER THE TERMS USED IN THAT ACT "FOR THE USE OF THE WAR DEPARTMENT" WERE INTENDED TO BE A MODIFICATION OF THE PRIOR SECTIONS OF THE REVISED STATUTES HEREIN REFERRED TO, THE LAW OF 1883 RELATES IN PARTICULAR AND ONLY TO COLLECTIONS ON ACCOUNT OF FAILURE OF A BIDDER TO ENTER INTO A CONTRACT WHEN HIS BID IS ACCEPTED, AND CAN HAVE NO APPLICATION IN A CASE SUCH AS HERE INVOLVED IN WHICH THE COLLECTIONS REPRESENT THE DIFFERENCE BETWEEN THE PRICES STIPULATED FOR IN A CONTRACT DULY AWARDED AND PRICES PAID ON ACCOUNT OF THE FAILURE OF THE CONTRACTOR TO MAKE DELIVERY AS STIPULATED FOR UNDER HIS CONTRACT.

WITH RESPECT TO THE STATEMENT IN THE LETTER OF THE CHIEF OF ENGINEERS THAT FAILURE TO OBTAIN CREDIT TO THE APPROPRIATION FOR THE COLLECTIONS HEREIN DISCUSSED MIGHT RESULT IN SOME INSTANCES IN INABILITY TO COMPLETE A PROJECT UNTIL AN ADDITIONAL APPROPRIATION IS PROVIDED BY THE CONGRESS, WITH POSSIBLE DETRIMENT TO THE PUBLIC INTERESTS, IT MAY BE STATED THAT THE APPROPRIATIONS ARE CHARGEABLE WITH THE ACTUAL AMOUNT NECESSARY FOR THE PROCUREMENT OF THE SUPPLIES OR THE DOING OF THE WORK FOR WHICH THE APPROPRIATIONS ARE MADE AVAILABLE AND THE ACTUAL AMOUNT CHARGEABLE IS THE AMOUNT PAID FOR THE GOODS OR SERVICES WHETHER OBTAINED UNDER A CONTRACT OR OTHERWISE.

ACCORDINGLY, THERE MUST BE AND ARE AFFIRMED THE DECISIONS TO THE EFFECT THAT IN CASES OF DEFAULTING CONTRACTORS THE AMOUNT RECOVERED FOR LOSSES OR DAMAGES AS THE RESULT OF THE FAILURE OF THE CONTRACTOR TO PERFORM ARE FOR DEPOSITING AND COVERING INTO THE TREASURY AS MISCELLANEOUS RECEIPTS AS PROVIDED BY SECTIONS 3617 AND 3618, REVISED STATUTES.