A-6328, DECEMBER 13, 1924, 4 COMP. GEN. 535

A-6328: Dec 13, 1924

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

A SUPPLEMENTAL AGREEMENT IS ENTERED INTO CHANGING THE PERCENTAGE OF PROGRESS PAYMENTS TO BE MADE TO THE CONTRACTOR SUCH SUPPLEMENTAL AGREEMENT WILL NOT BE OBJECTED TO IF THE CHANGE IS IN THE INTEREST OF THE GOVERNMENT AND THE PAYMENT OF SUCH PERCENTAGES DOES NOT EXCEED THE VALUE OF THE SERVICES RENDERED OR THE MATERIALS FURNISHED. 1924: I HAVE YOUR LETTER OF NOVEMBER 14. AS FOLLOWS: YOUR ATTENTION IS INVITED TO A CONTRACT PREPARED BY THE SUPERINTENDENT OF THE STATE. THE SPECIFICATIONS FOR THIS WORK STATE THAT: "PAYMENT IN THE AMOUNT OF 90 PERCENT OF THE CONTRACT PRICE WILL BE MADE UPON THE COMPLETION OF THE ENTIRE WORK TO BE PERFORMED UNDER THIS CONTRACT. THE REMAINING 10 PERCENT WILL BE PAID AFTER THE PLANT HAS BEEN OPERATING IN A SATISFACTORY MANNER FOR A PERIOD OF 30 DAYS AFTER COMPLETION AND AFTER FINAL ACCEPTANCE BY THE SUPERINTENDENT.'.

A-6328, DECEMBER 13, 1924, 4 COMP. GEN. 535

CONTRACTS, SUPPLEMENTAL - PROGRESS PAYMENTS WHERE, DURING THE PERFORMANCE OF A CONTRACT FOR PUBLIC WORK AND BEFORE PAYMENT OF PRINCIPAL, A SUPPLEMENTAL AGREEMENT IS ENTERED INTO CHANGING THE PERCENTAGE OF PROGRESS PAYMENTS TO BE MADE TO THE CONTRACTOR SUCH SUPPLEMENTAL AGREEMENT WILL NOT BE OBJECTED TO IF THE CHANGE IS IN THE INTEREST OF THE GOVERNMENT AND THE PAYMENT OF SUCH PERCENTAGES DOES NOT EXCEED THE VALUE OF THE SERVICES RENDERED OR THE MATERIALS FURNISHED.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF STATE, DECEMBER 13, 1924:

I HAVE YOUR LETTER OF NOVEMBER 14, 1924, AS FOLLOWS:

YOUR ATTENTION IS INVITED TO A CONTRACT PREPARED BY THE SUPERINTENDENT OF THE STATE, WAR AND NAVY DEPARTMENT BUILDINGS FOR THE INSTALLATION OF TWO CONCRETE FUEL OIL STORAGE AND SERVICE TANKS IN THE COURTYARD OF TEMPORARY BUILDING NO. 6 AT 19TH STREET AND VIRGINIA AVENUE N.W., WASHINGTON, D.C.

THE SPECIFICATIONS FOR THIS WORK STATE THAT:

"PAYMENT IN THE AMOUNT OF 90 PERCENT OF THE CONTRACT PRICE WILL BE MADE UPON THE COMPLETION OF THE ENTIRE WORK TO BE PERFORMED UNDER THIS CONTRACT, THE SATISFACTORY COMPLETION OF THE ACCEPTANCE TEST AND THE ACCEPTANCE OF THE WORK BY THE SUPERINTENDENT, LESS ANY CREDITS DUE THE GOVERNMENT; THE REMAINING 10 PERCENT WILL BE PAID AFTER THE PLANT HAS BEEN OPERATING IN A SATISFACTORY MANNER FOR A PERIOD OF 30 DAYS AFTER COMPLETION AND AFTER FINAL ACCEPTANCE BY THE SUPERINTENDENT.'

AFTER THE AWARD WAS MADE TO THE CONCRETE OIL TANK CO., THAT COMPANY MADE THE FOLLOWING PROPOSITION IN A LETTER TO THE SUPERINTENDENT UNDER DATE OF OCTOBER 27, 1924:

"IF PARTIAL PAYMENTS ARE MADE, INSTEAD OF WAITING UNTIL THE ENTIRE JOB IS COMPLETE, ON THE BASIS OF RECEIVING FORTY (40) PERCENT OF CONTRACT PRICE UPON DELIVERY OF ALL EQUIPMENT, AND FROM LUMBER AND THE COMPLETION OF NECESSARY EXCAVATIONS FOR BOTH TANKS, AND AN ADDITIONAL PAYMENT OF THIRTY (30) PERCENT OF CONTRACT PRICE UPON COMPLETION OF FIRST TANK,WITH THE UNDERSTANDING THAT TEN (10) PERCENT OF THESE PAYMENTS ARE RETAINED UNTIL COMPLETION OF ENTIRE CONTRACT, WE WILL ALLOW A DISCOUNT OF TWO (2) PERCENT OF ALL PARTIAL PAYMENTS MADE.'

THE OFFER OF THE CONTRACTOR WOULD MEAN AN APPROXIMATE SAVING TO THE GOVERNMENT OF $95, BUT THE ATTENTION OF THE SUPERINTENDENT WAS DIRECTED TO YOUR DECISION, VOL. 1, PAGE 529, STATING "THAT IT IS NOT WITHIN THE POWER OR JURISDICTION OF ANY CONTRACTING OFFICER OF THE ARMY OR THE WAR DEPARTMENT TO MAKE A SUPPLEMENTAL AGREEMENT WITH A CONTRACTOR TO PAY ANY PART OF THE CONTRACT PRICE BEFORE IT IS DUE IN CONSIDERATION OF THE REDUCTION OF THE TOTAL AMOUNT TO BE PAID UNDER THE ORIGINAL CONTRACT, WHERE NO CHANGE IN THE WORK COVERED BY THE ORIGINAL CONTRACT IS INVOLVED.'

AS THE INTERESTS OF THE GOVERNMENT ARE FULLY PROTECTED BY THE DELIVERY, IN THE FIRST INSTANCE, OF THE MATERIAL NECESSARY FOR THE INSTALLATION OF THESE STORAGE TANKS AND THE NECESSARY EXCAVATIONS FOR SAME AT THE TIME OF THE FIRST CONTEMPLATED PAYMENT AND BY THE COMPLETION AT THE TIME OF THE SECOND CONTEMPLATED PAYMENT, OF ONE OF THE TANKS, LEAVING 30 PERCENT OF THE ENTIRE AMOUNT STILL DUE WHEN THE FIRST TANK IS COMPLETED, IT WOULD SEEM THAT IT WOULD BE TO THE MANIFEST INTEREST OF THE GOVERNMENT TO TAKE ADVANTAGE OF THE 2 PERCENT DISCOUNT INVOLVED, AND YOUR DECISION IS DESIRED AS TO WHETHER THE SUPERINTENDENT MAY LEGALLY ENTER INTO THIS AGREEMENT.

WITH REFERENCE TO THE MANUFACTURE AND INSTALLATION OF THE TANKS THE CONTRACT PROVIDES:

A. IT IS MUTUALLY UNDERSTOOD AND AGREED THAT THE CONTRACTOR WILL FURNISH ALL LABOR AND MATERIAL, WITH THE EXCEPTION OF THE REINFORCING STEEL, WHICH WILL BE FURNISHED BY THE GOVERNMENT, AND WILL INSTALL COMPLETE, READY FOR USE, TWO (2) CONCRETE FUEL OIL STORAGE AND SERVICE TANKS IN THE COURTYARD OF TEMPORARY BUILDING NO. 6 AT 19TH STREET AND VIRGINIA AVENUE, NORTHWEST, WASHINGTON, D.C., TOGETHER WITH ALL NECESSARY EQUIPMENT, FITTINGS, AND SPECIALTIES, THE WORK TO INCLUDE THE EXCAVATION AND BACKFILL AND TO BE LOCATED IN THE 16 FOOT DRIVEWAY, WEST OF BOILER HOUSE TO BE ERECTED UNDER ANOTHER CONTRACT, WITH A CLEAR DISTANCE OF 12 FEET, MORE OR LESS, BETWEEN THE TANKS WHICH SHALL BE RECTANGULAR IN SHAPE, APPROXIMATELY 15 FEET OUTSIDE WIDTH, 34 FEET 6 INCHES OUTSIDE LENGTH, AND 7 FEET 6 INCHES OUTSIDE DEPTH, AND WHICH SHALL BE BURIED IN AN EXCAVATION APPROXIMATELY 9 FEET BELOW GRADE.

THIS APPEARS AS A SIMPLE PROPOSITION OF NECESSITIES OF A CONTRACTOR IN RELIEF OF WHICH HE IS WILLING TO PAY A PERCENTAGE OF THE CONTRACT PRICE IN THE FORM OF A DISCOUNT--- PROBABLY A LESSER AMOUNT THAN BORROWING A SUM AT INTEREST. THE UNITED STATES SHOULD NOT BE PLACED IN SUCH A POSITION WITH CONTRACTORS. IF THE WORK IS SUCH THAT PAYMENTS ON ACCOUNT ARE PROPER BEFORE COMPLETION, THE CONTRACT SHOULD PROVIDE FOR PROGRESS PAYMENTS. WHERE IT IS NOT SO PROVIDED THE CONCLUSION IS JUSTIFIED THAT THE WORK IS SUCH THAT THE INTERESTS OF THE UNITED STATES REQUIRE NO PAYMENT TO BE MADE UNTIL COMPLETION OF THE WORK. THIS IS CALLED TO ATTENTION AS IT IS IMPORTANT THAT CONTRACTS BE CAREFULLY DRAWN WITH RESPECT TO PAYMENTS TO BE MADE THEREUNDER. THE AMENDMENT IN QUESTION WILL NOT BE OBJECTED TO IN THIS INSTANCE, THE CONSENT OF THE SURETY TO APPEAR IN CONNECTION THEREWITH.