A-69810, MARCH 7, 1936, 15 COMP. GEN. 772

A-69810: Mar 7, 1936

Additional Materials:

Contact:

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

 

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

AS FOLLOWS: INCLOSED IS COPY OF YOUR LETTER DATED NOVEMBER 25. WHEREIN STATEMENT IS MADE THAT FIGURES ARE NOW IN PREPARATION FOR THE NATIONAL BITUMINOUS COAL COMMISSION. WHICH WILL SHOW THE INCREASE IN COST OF COAL RESULTING FROM A WAGE INCREASE WHICH BECAME EFFECTIVE OCTOBER 1. QUESTION IS ASKED IF THE INCREASED COST AS SHOWN IN THE COMPILATION TO BE SUBMITTED TO THE COMMISSION WILL BE ACCEPTABLE AS FURNISHING THE COST INCREASE DATA CALLED FOR IN PARAGRAPH 3 OF STANDARD GOVERNMENT PURCHASE CONDITIONS (COAL) (STANDARD FORM NO. 43) IN CONNECTION WITH COAL CONTRACTS BETWEEN UTAH COAL OPERATORS AND THE GOVERNMENT. THE FURTHER STATEMENT IS NOTED THAT IF THE COST DATA SO SHOWN WILL BE ACCEPTABLE.

A-69810, MARCH 7, 1936, 15 COMP. GEN. 772

COAL CONTRACTS - INCREASED PRODUCTION COSTS - MINE EMPLOYEES' WAGE INCREASES GOVERNMENT COAL CONTRACTS STIPULATING A DEFINITE PROCEDURE WITH REFERENCE TO THE FILING OF CLAIMS THEREUNDER FOR INCREASED COST OF PRODUCTION BECAUSE OF MINE EMPLOYEES' WAGE INCREASES, NO AUTHORITY EXISTS FOR THE SUBSTITUTION THEREFOR OF A REPORT UNDER PREPARATION BY CERTAIN COAL OPERATORS FOR THE NATIONAL BITUMINOUS COAL COMMISSION SHOWING THE INCREASE IN COST OF PRODUCTION RESULTING FROM A RECENT WAGE INCREASE.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF THE TREASURY, MARCH 7, 1936:

THERE HAS BEEN CONSIDERED YOUR LETTER OF JANUARY 6, 1936, AS FOLLOWS:

INCLOSED IS COPY OF YOUR LETTER DATED NOVEMBER 25, 1935, ADDRESSED TO THE FUEL COMMITTEE, PROCUREMENT DIVISION, TREASURY DEPARTMENT, BY MR. B. P. MANLEY, EXECUTIVE SECRETARY, UTAH COAL OPERATORS ASSOCIATION, WHEREIN STATEMENT IS MADE THAT FIGURES ARE NOW IN PREPARATION FOR THE NATIONAL BITUMINOUS COAL COMMISSION, WHICH WILL SHOW THE INCREASE IN COST OF COAL RESULTING FROM A WAGE INCREASE WHICH BECAME EFFECTIVE OCTOBER 1, 1935, AND QUESTION IS ASKED IF THE INCREASED COST AS SHOWN IN THE COMPILATION TO BE SUBMITTED TO THE COMMISSION WILL BE ACCEPTABLE AS FURNISHING THE COST INCREASE DATA CALLED FOR IN PARAGRAPH 3 OF STANDARD GOVERNMENT PURCHASE CONDITIONS (COAL) (STANDARD FORM NO. 43) IN CONNECTION WITH COAL CONTRACTS BETWEEN UTAH COAL OPERATORS AND THE GOVERNMENT.

THE FURTHER STATEMENT IS NOTED THAT IF THE COST DATA SO SHOWN WILL BE ACCEPTABLE, THE PRODUCER WOULD BE RELIEVED OF THE EXPENSE OF EMPLOYMENT OF CERTIFIED PUBLIC ACCOUNTANTS--- UNDER THE REFERRED TO PARAGRAPH 3, THE REPORT OF A CERTIFIED PUBLIC ACCOUNTANT IS CALLED FOR. THE ASSOCIATION ALSO REQUESTS THAT THE 60-DAY LIMIT, SPECIFIED IN PARAGRAPH 3 OF THE REFERRED TO PURCHASE CONDITIONS, BE EXTENDED UNTIL THE REPORTS FOR THE COMMISSION, NOW IN PREPARATION, ARE COMPLETED.

YOUR ANSWERS TO THE QUESTIONS PRESENTED IN THE INCLOSED LETTER WILL BE APPRECIATED.

IN THE LETTER OF NOVEMBER 25, 1935, ABOVE REFERRED TO, A COPY OF WHICH WAS TRANSMITTED WITH ABOVE QUOTED LETTER, THE UTAH COAL OPERATORS ASSOCIATION STATED:

IN CONSIDERATION OF THE FACT THAT THE COST OF COAL TO UTAH PRODUCERS HAS BEEN INCREASED BECAUSE OF WAGE INCREASES WHICH BECAME EFFECTIVE OCTOBER 1ST, 1935, AND SUCH INCREASES WHEN DETERMINED WILL PROPERLY APPLY TO COAL SHIPPED TO GOVERNMENT AGENCIES SUCH AS C.C.C. CAMPS AND POSSIBLY SOME U.S. ARMY STATIONS, THE UTAH COAL PRODUCERS INVOLVED RESPECTFULLY REQUEST THAT, BECAUSE THE AMOUNTS INVOLVED ARE NOT LARGE, AND BECAUSE THE EMPLOYMENT OF CERTIFIED PUBLIC ACCOUNTANTS WOULD BE UNDULY EXPENSIVE, THAT THE TERMS OF PARAGRAPH 3 OF STANDARD FORM NO. 43 BE RELAXED TO THE EXTENT OF ALLOWING THE COST INCREASES WHICH ARE NOW BEING PREPARED IN ACCORDANCE WITH THE ORDERS OF THE NATIONAL BITUMINOUS COAL COMMISSION, AND WHICH WILL BE SHORTLY SUBMITTED TO THEM, TO SERVE THE PURPOSES OF THE PROCUREMENT DIVISION AND BE CONSIDERED SATISFACTORY EVIDENCE OF COST INCREASES.

THOSE FIGURES, WHEN SUBMITTED TO THE NATIONAL BITUMINOUS COAL COMMISSION, ARE SUBJECT TO VERIFICATION BY THEM. THE FIGURES NOW IN PREPARATION FOR THE COMMISSION WILL READILY DISCLOSE THE INCREASED COST PER TON THAT HAS OCCURRED SINCE OCT. 1ST, 1935. WILL YOU KINDLY GIVE YOUR APPROVAL TO THE PROCEDURE AND THUS ELIMINATE THE ADDITIONAL EXPENSE THAT WOULD BE INCURRED IF THE TERMS OF PARAGRAPH 3 OF STANDARD FORM NO. 43 ARE STRICTLY ADHERED TO?

PARAGRAPH 3 OF THE STANDARD GOVERNMENT COAL PURCHASE CONDITIONS (STANDARD FORM 43), WHICH FORMS A PART OF THE GOVERNMENT COAL CONTRACTS, PROVIDES:

THE CONTRACT PRICE SPECIFIED HEREIN FOR THE COAL IS BASED UPON THE WAGE SCALES IN EFFECT WITH MINE EMPLOYEES ON THE DATE OF OPENING OF BIDS, AND ANY INCREASE OR DECREASE IN THE COST OF PRODUCTION OF SAID COAL CAUSED BY CHANGES IN SUCH WAGE SCALES SHALL CORRESPONDINGLY INCREASE OR DECREASE THE CONTRACT PRICE OF COAL ON ANY TONNAGE MINED AND SHIPPED THEREAFTER NOT IN ARREARS AT THE TIME THE CHANGE IN WAGE SCALES BECOMES EFFECTIVE: PROVIDED, HOWEVER, THAT IN EVENT OF ANY SUCH INCREASE IN COST OF PRODUCTION DUE TO INCREASE IN WAGE SCALES, THE CLAIM SHALL BE PRESENTED WITHIN 60 DAYS AND SUPPORTED BY THE AFFIDAVIT OF THE SUPERINTENDENT OR CORRESPONDING OFFICER OF THE MINE OR MINES FROM WHICH THE COAL WAS PRODUCED AND BY REPORT OF A CERTIFIED PUBLIC ACCOUNTANT SHOWING THE COST OF MINING THE COAL BEFORE THE INCREASE IN THE WAGE SCALES, THE AMOUNT OF THE INCREASE IN THE WAGE SCALES AFTER THE DATE OF THE OPENING OF BIDS, AND THE AMOUNT OF SUCH INCREASE APPLICABLE TO THE COAL DELIVERED UNDER THIS CONTRACT AFTER THE DATE OF SUCH INCREASE. THE BOOKS OF THE CONTRACTOR SHALL BE SO KEPT AS TO SHOW THE FOREGOING FACTS AND SHALL BE OPEN TO INSPECTION BY AN AUTHORIZED OFFICER OR EMPLOYEE OF THE GOVERNMENT. NO INCREASE OVER THE CONTRACT PRICE SHALL BE ALLOWED UNLESS THE CLAIM IS SO PRESENTED AND THE BOOKS OF THE CONTRACTOR ARE SO KEPT. IN EVENT OF A DECREASE IN COST OF PRODUCTION DUE TO DECREASE IN THE WAGE SCALES, THE DECREASE IN THE CONTRACT PRICE SHALL BE COMPUTED ON THE BASIS OF THE AFFIDAVIT OR AFFIDAVITS OF THE SUPERINTENDENT OR OTHER CORRESPONDING OFFICER OF THE MINE OR MINES FROM WHICH THE COAL WAS PRODUCED OR UPON OTHER EVIDENCE. WHEN THERE HAS BEEN NO CHANGE IN THE WAGE SCALES DURING THE PRODUCTION OF THE CONTRACT COAL, THE CONTRACTOR SHALL SO CERTIFY ON INVOICES OR VOUCHERS SUBMITTED FOR PAYMENT.

IT APPEARS, THEREFORE, THAT THE TERMS OF THE GOVERNMENT COAL CONTRACTS REQUIRE THAT THE CLAIMS TO BE FILED THEREUNDER FOR INCREASED COST OF PRODUCTION, DUE TO CHANGES IN THE WAGE SCALES OF THE MINE EMPLOYEES, BE PRESENTED WITHIN 60 DAYS FROM THE EFFECTIVE DATE OF THE CHANGES IN THE WAGE SCALES OF THE MINE EMPLOYEES; AND THAT THERE BE PRESENTED IN SUPPORT OF SUCH CLAIMS THE AFFIDAVITS OF THE SUPERINTENDENT OR CORRESPONDING OFFICER AT THE MINE FROM WHICH THE COAL WAS PRODUCED AND A REPORT OF A CERTIFIED PUBLIC ACCOUNTANT, SHOWING (1) THE COST OF MINING THE COAL BEFORE THE INCREASE IN THE WAGE SCALES; (2) THE AMOUNT OF THE INCREASE IN THE WAGE SCALES AFTER THE DATE OF THE OPENING OF THE BIDS; AND (3) THE AMOUNT OF SUCH INCREASES APPLICABLE TO THE COAL DELIVERED AFTER THE DATE OF SUCH INCREASE. UNDER THE PROVISIONS OF SUCH CONTRACTS THE COAL CONTRACTORS ARE REQUIRED, ALSO, TO KEEP THEIR BOOKS SO AS TO SHOW THE FACTS REQUIRED IN SAID PARAGRAPH 3 OF THE COAL-PURCHASE CONDITIONS RELATIVE TO THE COAL PRODUCED AND DELIVERED, AND THEIR BOOKS ARE TO BE OPEN TO INSPECTION BY AN AUTHORIZED OFFICER OR EMPLOYEE OF THE GOVERNMENT, WHEN REQUIRED. SAID PARAGRAPH 3 OF THE COAL PURCHASE CONDITIONS PROVIDES FURTHER THAT INCREASES OVER THE STIPULATED CONTRACT TONNAGE PRICES FOR THE COAL FURNISHED SHALL NOT BE ALLOWED TO THE CONTRACTORS UNLESS CLAIMS THEREFOR ARE SO PRESENTED AND THE BOOKS OF THE CONTRACTORS ARE SO KEPT.

THE REQUIREMENTS OF SAID PARAGRAPH 3 OF THE COAL PURCHASE CONDITIONS RELATIVE TO THE TIME OF PRESENTING CLAIMS FOR INCREASED COST OF PRODUCTION AND TO THE FURNISHING OF THE SPECIFIED EVIDENCE IN SUPPORT THEREOF ARE CONDITIONS PRECEDENT WHICH THE CONTRACTORS MUST COMPLY WITH IN ORDER THAT THEIR CLAIMS FOR ADDITIONAL PAYMENTS DUE TO INCREASED PRODUCTION COSTS MAY BE CONSIDERED UNDER THE CONTRACT (A-52312, AUG. 13, 1935, AND A-60226, MAR. 7, 1935).

IT IS ONLY WHEN THE INCREASED COST OF PRODUCTION OF THE COAL MINED FOR DELIVERY UNDER THE GOVERNMENT COAL CONTRACTS IS ESTABLISHED BY THE SPECIFIED EVIDENCE AS HAVING BEEN DUE TO CHANGES IN THE WAGE SCALES OF THE MINE EMPLOYEES IN ACCORDANCE WITH THE REQUIREMENTS OF SAID PARAGRAPH 3 OF THE COAL PURCHASE CONDITIONS THAT THE CONTRACTORS ARE ENTITLED TO BE PAID ANY INCREASED PRODUCTION COST.

IT IS A RULE OF LAW THAT THE PARTIES TO A CONTRACT ARE BOUND TO PERFORM IT IN ACCORDANCE WITH ITS TERMS, NOTWITHSTANDING THE CONTRACT MAY OPERATE HARSHLY OR UNJUSTLY ON ONE OF THE PARTIES. 13 CORPUS JURIS 627-635.