A-60541, APRIL 2, 1935, 14 COMP. GEN. 729

A-60541: Apr 2, 1935

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CONTRACTS - DEFAULT - EXCESS COST WHERE A CONTRACT IS CANCELLED FOR FAILURE OF THE CONTRACTOR TO COMPLY WITH A NATIONAL RECOVERY CODE. IS RELET. TO THE SAME CONTRACTOR AT A HIGHER GROSS PRICE BUT WITH A STIPULATION THAT THERE WILL BE DEDUCTED FROM THE BID PRICE THE DIFFERENCE BETWEEN THAT AND THE ORIGINAL CONTRACT PRICE. THE AMOUNT SO DEDUCTED IS TO BE CHARGED AGAINST THE APPROPRIATION AND DEPOSITED AND COVERED INTO THE TREASURY TO THE CREDIT OF MISCELLANEOUS RECEIPTS. "WHEREAS THE SAID FORMER CONTRACT WAS CANCELLED BECAUSE OF THE DETERMINATION BY THE ADMINISTRATOR FOR NATIONAL INDUSTRIAL RECOVERY THAT THE CONTRACTOR WAS IN VIOLATION OF THE APPLICABLE CODE OF FAIR COMPETITION. AT THE TIME INVOICES WERE PRESENTED TO THE FINANCE OFFICE AT WEST POINT COVERING PERFORMANCE HAD UNDER THE CONTRACT OF JULY 28.

A-60541, APRIL 2, 1935, 14 COMP. GEN. 729

CONTRACTS - DEFAULT - EXCESS COST WHERE A CONTRACT IS CANCELLED FOR FAILURE OF THE CONTRACTOR TO COMPLY WITH A NATIONAL RECOVERY CODE, AND IS RELET, AFTER COMPETITION, TO THE SAME CONTRACTOR AT A HIGHER GROSS PRICE BUT WITH A STIPULATION THAT THERE WILL BE DEDUCTED FROM THE BID PRICE THE DIFFERENCE BETWEEN THAT AND THE ORIGINAL CONTRACT PRICE, THE AMOUNT SO DEDUCTED IS TO BE CHARGED AGAINST THE APPROPRIATION AND DEPOSITED AND COVERED INTO THE TREASURY TO THE CREDIT OF MISCELLANEOUS RECEIPTS.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF WAR, APRIL 2, 1935:

THERE HAS BEEN CONSIDERED YOUR LETTER OF FEBRUARY 25, 1935, AS FOLLOWS:

CONTRACT NO. W 6519 QM 201 DATED JULY 28, 1934, WITH JOHN E. MULLANEY AND F. CARROLL TAYLOR, TRUSTEES OF J. A. MAHLSTEDT LUMBER AND COAL COMPANY, COVERING THE FURNISHING OF CONCRETE MASONRY UNITS AT WEST POINT, CONTAINED THE FOLLOWING PROVISION UNDER ARTICLE 21:

"ARTICLE 21. DEDUCTIONS FROM INVOICES.--- WHEREAS THE GOVERNMENT HAD THE RIGHT UNDER A FORMER CONTRACT WITH THE CONTRACTOR NAMED IN THIS INSTRUMENT TO PURCHASE THE SUPPLIES HEREIN DESCRIBED AT PRICES LOWER THAN THOSE SET FORTH HEREIN, AND

"WHEREAS THE SAID FORMER CONTRACT WAS CANCELLED BECAUSE OF THE DETERMINATION BY THE ADMINISTRATOR FOR NATIONAL INDUSTRIAL RECOVERY THAT THE CONTRACTOR WAS IN VIOLATION OF THE APPLICABLE CODE OF FAIR COMPETITION, AND

"WHEREAS THE COMPTROLLER GENERAL OF THE UNITED STATES HAS RULED THAT IN SUCH CASES THE CONTRACTOR UNDER THE CANCELLED CONTRACT SHALL DEFRAY THE ADDITIONAL COST, IF ANY, OF REPURCHASING THE SUPPLIES CONTEMPLATED AND UNDELIVERED UNDER THE CANCELLED CONTRACT:

"THEREFORE, THE CONTRACTOR SHALL DEDUCT FROM EACH AND EVERY INVOICE RENDERED FOR SUPPLIES FURNISHED UNDER THIS INSTRUMENT, AMOUNTS DETERMINED BY APPLYING THE FOLLOWING UNIT PRICES TO THE QUANTITIES SET FORTH ON THE INVOICES:

TABLE

$8.50 PER THOUSAND FOR 7 3/4 BY 7 3/4 BY 15 3/4 REGULAR WALL

BLOCKS.

$18.50 PER THOUSAND FOR 7 3/4 BY 7 3/4 BY 15 3/4 HEADER

BACK-UP BLOCKS.

$0.00 PER THOUSAND FOR 3 3/4 BY 7 3/4 BY 15 3/4 REGULAR

PARTITION BLOCKS.

$40.00 PER THOUSAND FOR 7 3/4 BY 7 3/4 BY 15 3/4 SPLAYED

JAMB BLOCKS (WHOLES).

$15.00 PER THOUSAND FOR 7 3/4 BY 7 3/4 BY 7 3/4 SPLAYED JAMB

BLOCKS (HALVES).'

AT THE TIME INVOICES WERE PRESENTED TO THE FINANCE OFFICE AT WEST POINT COVERING PERFORMANCE HAD UNDER THE CONTRACT OF JULY 28, 1934, THE DIFFERENCE BETWEEN THE PRICE FOR THE CONTRACT ARTICLE NAMED IN THE CANCELED CONTRACT AND SUCH PRICE NAMED IN THE CONTRACT DATED JULY 28, 1934, WAS TREATED BY THE FINANCE OFFICER AS A COLLECTION; AND THE AMOUNTS SO COLLECTED ARE NOW HELD BY THE FINANCE OFFICER AT WEST POINT IN HIS SPECIAL DEPOSIT ACCOUNT UNDER SYMBOL NO. 95445, APPROPRIATION NIR, WAR, QMC 1933-35.

IN VIEW OF THE EXPRESS STIPULATION IN THE CONTRACT OF JULY 28, 1934, QUOTED ABOVE AS TO THE MANNER IN WHICH THE INVOICES SUBMITTED THEREUNDER WERE TO BE PREPARED BY THE CONTRACTOR, YOUR DECISION IS REQUESTED ASTO WHETHER OR NOT THE AMOUNTS NOW HELD BY THE FINANCE OFFICER IN HIS SPECIAL DEPOSIT ACCOUNT COVERING VOUCHER COLLECTIONS MAY BE DEPOSITED TO THE CREDIT OF THE APPLICABLE APPROPRIATION CHARGEABLE WITH THE COST OF THE WORK IN QUESTION FOR OBLIGATION OR SHOULD SUCH AMOUNTS BE COVERED INTO MISCELLANEOUS RECEIPTS.

PAYMENT FOR THE FIRST DELIVERY UNDER THE CONTRACT OF JULY 28, 1934, WAS MADE ON VOUCHER NO. 41, OCTOBER 1934, ACCOUNTS OF MAJOR M. T. LEGG, FINANCE DEPARTMENT. THE OCTOBER ACCOUNTS OF MAJOR LEGG WERE TRANSMITTED TO THE GENERAL ACCOUNTING OFFICE UNDER DATE OF JANUARY 7, 1935.

IT IS A WELL-ESTABLISHED RULE THAT WHERE A CONTRACTOR DEFAULTS, MAKING IT NECESSARY TO PROCURE SUPPLIES OR SERVICES ELSEWHERE AT A HIGHER COST, THE EXCESS COST IS CHARGEABLE AGAINST THE ORIGINAL CONTRACTOR AND IS FOR DEPOSITING AND COVERING INTO THE TREASURY OF THE UNITED STATES AS A MISCELLANEOUS RECEIPT. UNDER SUCH CIRCUMSTANCES,THE ENTIRE COST OF THE NEW CONTRACT IS TO BE CHARGED AGAINST THE APPROPRIATION. (SEE 8 COMP. GEN. 284.) THE FACT THAT IN THE PRESENT CASE THE NEW CONTRACT IS WITH THE SAME CONTRACTOR AS THE ORIGINAL ONE MAKES NO MATERIAL DIFFERENCE. ACCORDINGLY, THE AMOUNT NOW HELD IN THE SPECIAL DEPOSIT ACCOUNT, BEING THE DIFFERENCE BETWEEN THE GROSS CONSIDERATION NAMED IN THE SECOND CONTRACT AND THE CONSIDERATION FIXED IN THE ORIGINAL CONTRACT, SHOULD BE DEPOSITED AND COVERED INTO THE TREASURY AS A MISCELLANEOUS RECEIPT.