A-7500, MARCH 26, 1925, 4 COMP. GEN. 811

A-7500: Mar 26, 1925

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THE FACT THAT THE RESERVED ITEM WAS NOT PROPERLY FOR CONSIDERATION UNDER THE DENT ACT DOES NOT PRECLUDE THE REOPENING OF THE PRIOR SETTLEMENT AND DISPOSING OF THE ITEM RESERVED AS PROPERLY COMING UNDER THE CONTRACT. THE UNITED STATES IS NOT ORDINARILY LIABLE FOR THE COST OF A SAMPLE ARTICLE. WHEREIN THERE WAS ALLOWED SAID COMPANY THE SUM OF $10. FROM WHICH AMOUNT THERE WAS DEDUCTED $2. IT IS CONTENDED THAT THE CONTRACTOR HAD NOT BEEN OVERPAID ON ACCOUNT OF THE WAR DEPARTMENT CONTRACTS AND THAT THE ACTION TAKEN IN THE SETTLEMENT IN MAKING THE CHARGE AGAINST AN AMOUNT OTHERWISE ADMITTED TO BE DUE THE COMPANY WAS THEREFORE IMPROPER. ORDER 20747 WAS GIVEN THE CLAIMANT COMPANY FOR 1 C.C. THE OTHER CONTRACTS INVOLVED IN THE SETTLEMENT IN CONNECTION WITH WHICH THE ALLEGED OVERPAYMENT WAS MADE ARE AS FOLLOWS: MAY 7.

A-7500, MARCH 26, 1925, 4 COMP. GEN. 811

CONTRACTS, TERMINATION - WAR DEPARTMENT WHERE, IN THE SETTLEMENT OF A CANCELLED CONTRACT, THE CONTRACTOR RELEASED THE UNITED STATES FROM ALL CLAIMS, DEMANDS, ETC., GROWING OUT OF THE CONTRACT EXCEPT THE RIGHT TO PROSECUTE A CLAIM ARISING THEREUNDER ALREADY FILED UNDER THE DENT ACT OF MARCH 2, 1919, 40 STAT. 1272, THE FACT THAT THE RESERVED ITEM WAS NOT PROPERLY FOR CONSIDERATION UNDER THE DENT ACT DOES NOT PRECLUDE THE REOPENING OF THE PRIOR SETTLEMENT AND DISPOSING OF THE ITEM RESERVED AS PROPERLY COMING UNDER THE CONTRACT. WHERE A CONTRACTOR AGREES TO FURNISH ARTICLES FOR A STIPULATED PRICE, THE UNITED STATES IS NOT ORDINARILY LIABLE FOR THE COST OF A SAMPLE ARTICLE, MADE BY THE CONTRACTOR FOR THE PURPOSE OF DEMONSTRATING HIS ABILITY TO PERFORM THE WORK.

DECISION BY COMPTROLLER GENERAL MCCARL, MARCH 26, 1925:

THE AMERICAN GAS ACCUMULATOR CO. REQUESTED, JANUARY 14, 1925, REVIEW OF SETTLEMENT NO. 055647-C, DATED DECEMBER 20, 1924, WHEREIN THERE WAS ALLOWED SAID COMPANY THE SUM OF $10,192.50, AS PAYMENT FOR 150 A-50 ACETYLENE CYLINDERS FURNISHED THE BUREAU OF LIGHTHOUSES' DEPOT, TOMPKINSVILLE, N.Y., UNDER CONTRACT DATED MAY 13, 1924, FROM WHICH AMOUNT THERE WAS DEDUCTED $2,845.26 ON ACCOUNT OF AN ALLEGED OVERPAYMENT TO SAID COMPANY IN CONNECTION WITH A SETTLEMENT BASED UPON CERTAIN WAR DEPARTMENT CONTRACTS.

IT IS CONTENDED THAT THE CONTRACTOR HAD NOT BEEN OVERPAID ON ACCOUNT OF THE WAR DEPARTMENT CONTRACTS AND THAT THE ACTION TAKEN IN THE SETTLEMENT IN MAKING THE CHARGE AGAINST AN AMOUNT OTHERWISE ADMITTED TO BE DUE THE COMPANY WAS THEREFORE IMPROPER.

UNDER DATE OF MARCH 11, 1918, ORDER 20747 WAS GIVEN THE CLAIMANT COMPANY FOR 1 C.C. INTERRUPTER GEAR COMPLETE, FOR $52.36, FOR IMMEDIATE DELIVERY. THE OTHER CONTRACTS INVOLVED IN THE SETTLEMENT IN CONNECTION WITH WHICH THE ALLEGED OVERPAYMENT WAS MADE ARE AS FOLLOWS: MAY 7, 1918, CONTRACT 3821 FOR 1,000 DOUBLE LEWIS GUN YOKES, AT $18.08 EACH, AND 1,000 DUPLEX TRIGGER CONTROLS, AT $7.61 EACH, TO BE DELIVERED WITHIN 120 DAYS AFTER RECEIPT OF ORDER; MAY 7, 1918, CONTRACT 3826 FOR 1,000 SINGLE LEWIS GUN YOKES, AT $11.54 EACH, TO BE DELIVERED WITHIN 120 DAYS AFTER RECEIPT OF ORDER; AND JUNE 8, 1918, CONTRACT 4013, FOR 750 C.C. INTERRUPTER GEARS AT $85.30 EACH, 200 TO BE DELIVERED BY JULY 1, 1918, AND 200 PER WEEK THEREAFTER UNTIL COMPLETE.

WITH THE EXCEPTION OF TWO SAMPLE INTERRUPTER GEARS CLAIMED TO HAVE BEEN DELIVERED IN APRIL, 1918, UNDER ORDER OF MARCH 11, 1918, FOR ONE SUCH GEAR, AND THE TRIGGER CONTROLS UNDER CONTRACT OF JUNE 8, 1918, DELIVERED IN DECEMBER, 1918, NONE OF THE MATERIAL CONTRACTED FOR WAS EVER DELIVERED TO THE GOVERNMENT, PERFORMANCE UNDER THE OTHER CONTRACTS HAVING BEEN SUSPENDED AS A RESULT OF THE ARMISTICE OF NOVEMBER 11, 1918. BY A TERMINATION SETTLEMENT AGREEMENT DATED JUNE 8, 1919, IT WAS AGREED THAT THE UNITED STATES SHOULD PAY THE CONTRACTOR THE SUM OF $49,732.49 AS THE BALANCE DUE IN FULL SETTLEMENT UNDER THE ORDER AND CONTRACTS, WITH A RELEASE AND RESERVATION AS FOLLOWS:

THE CONTRACTOR DOES HEREBY FOR ITSELF, ITS SUCCESSORS AND ASSIGNS, REMISE, RELEASE AND FOREVER DISCHARGE THE GOVERNMENT OF AND FROM ALL AND ALL MANNER OF DEBTS, DUES, SUM OR SUMS OF MONEY, ACCOUNTS, RECKONINGS, CLAIMS AND DEMANDS WHATSOEVER DUE OR TO BECOME DUE IN LAW OR IN EQUITY UNDER OR BY REASON OF OR ARISING OUT OF SAID ORIGINAL CONTRACT, EXCEPT THAT NOTHING HEREINBEFORE STATED SHALL BE CONSTRUED TO RELEASE THE CONTRACTOR'S RIGHT TO PROSECUTE A CLAIM ALREADY FILED UNDER THE ACT OF MARCH 2, 1919, FOR EXPERIMENTAL WORK IN THE DEVELOPMENT OF INTERRUPTER GEARS; WHICH WORK WAS PERFORMED UNDER AN INFORMAL CONTRACT.

THE CLAIM THUS SPECIFICALLY RESERVED FROM THE OPERATION OF THE RELEASE THERETOFORE HAD BEEN PRESENTED BY CLAIMANT AS ITEM (1) OF ITS CLAIM FOR $53,452.91 WHICH FORMED THE BASIS OF THE SETTLEMENT OF JUNE 8, 1919. SAID CLAIM WAS ITEMIZED AS FOLLOWS;

TABLE

(1) ACTUAL COST OF MATERIALS, LABOR AND OVERHEAD

APPLICABLE TO TWO INTERRUPTER GEARS -------- $2,681.80

10 PERCENT --------------------------------- 268.18

--------- $ 2,949.98

(2) RAW MATERIALS ON HAND -------------------------------- 4,359.14

(3) PARTLY FINISHED PRODUCTS ON HAND ----------- 33,720.87

(4) COST OF SPECIAL TOOLS NECESSARY AND USABLE

FOR THESE CONTRACTS ONLY ------------------ 8,228.03

TOGETHER ------------------------------- 41,948.90

(5) 10 PERCENT ALLOWANCE ON WORK IN PROGRESS --- 4,194.89

--------- 46,143.79

53,452.91

THE AMOUNT ALLOWED ON SAID CLAIM UNDER THE SETTLEMENT OF JUNE 8, 1919, WAS PAID BY CAPT. W. B. PETTUS, A.S.A., ON VOUCHER 883, OF HIS ACCOUNT FOR THE MONTH OF JULY, 1919. THE AMOUNT THUS PAID WAS MADE UP OF THE FOLLOWING:

TABLE ITEM 1. RAW MATERIALS ON HAND ----------------------------- $4,359.14 ITEM 2. PARTLY FINISHED PRODUCTS ON HAND ------------------ 33,720.87 ITEM 3. COST OF SPECIAL TOOLS NECESSARY AND USABLE FOR

THESE CONTRACTS ONLY --------------------------- 8,228.03 ITEM 4. PERCENT ALLOWANCE ON ITEM 2 -------------------- 3,372.09 ITEM 5. PAYMENT FOR SAMPLE GEAR, ORDER 20747 -------------- 52.36

49,732.49

IT WILL BE NOTED THAT THE SETTLEMENT DISALLOWED THE AMOUNT CLAIMED AS 10 PERCENT ON ITEM (4) OF THE CLAIM, ELIMINATED ENTIRELY ITEM (1) OF THE CLAIM AND ALLOWED AN ITEM OF $52.36 WHICH HAD NOT BEEN CLAIMED.

THE ORDER 20747 OF MARCH 11, 1918, CALLED FOR THE DELIVERY OF ONLY ONE INTERRUPTER GEAR AT A PRICE OF $52.36, BUT THE CONTRACTOR MANUFACTURED AND DELIVERED TWO SUCH GEARS NEITHER OF WHICH HAD BEEN PAID FOR WHEN, DUE TO THE ARMISTICE, WORK WAS SUSPENDED ON ALL CONTRACTS. IN SUBMITTING CLAIM BY REASON OF THE CANCELLATION OF THE CONTRACTS, THE VICE PRESIDENT AND GENERAL MANAGER OF THE COMPANY, IN AN AFFIDAVIT DATED MARCH 31, 1919, WITH RESPECT TO THESE TWO GEARS AVERRED THAT:

NO PAYMENT HAS BEEN RECEIVED ON ACCOUNT OF THE ARTICLES REFERRED TO ABOVE, AND IT WAS ARRANGED BETWEEN THIS CONTRACTOR AND OFFICERS OF THE BUREAU OF AIRCRAFT PRODUCTION AT WASHINGTON, D.C., THAT THE COST OF THESE TWO EXPERIMENTAL INTERRUPTER GEARS SHOULD BE AND ACTUALLY WAS COVERED BY THE FIXED CONTRACT PRICE FOR 750 C.C. INTERRUPTER GEARS CONTRACTED FOR UNDER CONTRACT NO. 4013, ORDER NO. 21273, DATED JUNE 8 AND 5, 1918, RESPECTIVELY.

IT THUS APPEARS THAT THE FORMAL CONTRACT OF JUNE 8, 1918, WAS INTENDED TO SUPERSEDE THE INFORMAL AGREEMENT OF MARCH 11, 1918. THAT IS TO SAY, AS A PART OF THE CONSIDERATION FOR THE PRICE OF $85.30 PER GEAR AS FIXED IN THE CONTRACT OF JUNE 8, 1918, FOR THE 750 GEARS, THE CONTRACTOR WAIVED AND RELEASED ITS RIGHT TO CLAIM PAYMENT FOR EITHER OF THE TWO GEARS FURNISHED UNDER THE ORDER OF MARCH 11, 1918. IT IS CLEAR THAT IF NO CONTRACT FOR INTERRUPTER GEARS HAD BEEN ENTERED INTO AFTER THE ORDER OF MARCH 11, 1918, FOR THE SAMPLE GEAR, CLAIMANT WOULD HAVE BEEN ENTITLED TO NO REIMBURSEMENT OR COMPENSATION ON ACCOUNT OF THE EXPENSES INCURRED FOR EXPERIMENTAL WORK OR OTHERWISE IN THE PRODUCTION OF SAID GEAR OTHER THAN ON THE BASIS OF THE STIPULATED PRICE OF $52.36. UNITED STATES V. STEAMSHIP COMPANY, 239 U.S. 88, ALSO DUESENBERG MOTORS CORP. V. UNITED STATES, 260 U.S. 115, AND BALTIMORE AND OHIO RAILROAD CO. V. UNITED STATES, 261 U.S. 166. IT IS ALSO CLEAR THAT IF THE CONTRACT OF JUNE 8, 1918, FOR THE 750 GEARS HAD GONE ON TO COMPLETION AND THE 750 GEARS HAD BEEN PAID FOR AT THE AGREED PRICE OF $85.30 EACH, THE CONTRACTOR WOULD HAVE HAD NO CLAIM ON ACCOUNT OF THE TWO GEARS DELIVERED, OR ON ACCOUNT OF THE EXPENDITURES MADE BY IT IN CONNECTION WITH THE EXPERIMENTAL WORK IN THE DEVELOPMENT OF THE GEARS. BUT AS THE SAID CONTRACT OF JUNE 8, 1918, WAS TERMINATED BY THE GOVERNMENT BEFORE ANY OF THE 750 GEARS WAS FURNISHED OR PAID FOR, IT WOULD HAVE BEEN PROPER FOR THE CLAIMS BOARD IN THE TERMINATION SETTLEMENT OF JUNE 8, 1919, TO HAVE CONSIDERED AND ALLOWED, AS A PART OF THE CONTRACTOR'S EXPENDITURES IN CONNECTION WITH SAID CONTRACT, THE AMOUNT SHOWN TO HAVE BEEN EXPENDED IN THE EXPERIMENTAL WORK; BUT SAID BOARD, PRESUMABLY WITHOUT A FULL KNOWLEDGE OF ALL THE FACTS, ADVISED CLAIMANT THAT SAID ITEM WAS NOT FOR CONSIDERATION BY IT AS A CLAIM ARISING UNDER THE FORMAL CONTRACT OF JUNE 8, 1918, BUT SHOULD BE PRESENTED TO ANOTHER BOARD FOR CONSIDERATION AS A CLAIM UNDER THE DENT ACT OF MARCH 2, 1919, 40 STAT. 1272. ACCORDINGLY, THE ITEM WAS ELIMINATED FROM THE SETTLEMENT OF JUNE 8, 1919, AND THE RESERVATION WITH RESPECT THERETO WAS MADE AS HEREINBEFORE SHOWN.

WHEN THE CLAIM FOR THIS ELIMINATED ITEM WAS CONSIDERED BY THE BOARD OF CONTRACT ADJUSTMENTS UNDER THE ACT OF MARCH 2, 1919, RELIEF WAS DENIED ON THE GROUND THAT AS THE INFORMAL AGREEMENT OF MARCH 11, 1918, WAS MERGED IN THE SUBSEQUENT FORMAL CONTRACT OF JUNE 8, 1918, FOR 750 C.C. INTERRUPTER GEARS NO ALLOWANCE COULD BE MADE UNDER SAID ACT FOR THE EXPERIMENTAL WORK. THE MATTER WAS THEREUPON REFERRED TO THE AIR SERVICE CLAIMS BOARD WITH THE SUGGESTION THAT THE SETTLEMENT AGREEMENT OF JUNE 8, 1919, BE REOPENED FOR CONSIDERATION OF THIS ITEM AS A PART OF THE CLAIM UNDER THE FORMAL CONTRACT, WHICH SUGGESTION THAT BOARD REFUSED TO ADOPT. BUT UPON APPEAL TO THE SECRETARY OF WAR IT WAS RULED THAT THE EXPENDITURES IN CONNECTION WITH THE EXPERIMENTAL WORK WERE PROPERLY TO BE CONSIDERED AS EXPENDITURES IN PREPARATION FOR CARRYING OUT OF THE FORMAL CONTRACT OF JUNE 8, 1918, AND THE PAPERS WERE THEN RETURNED TO THE AIR SERVICE CLAIMS BOARD FOR NECESSARY ACTION IN ACCORDANCE WITH THE RULING OF THE SECRETARY OF WAR; AND THE ACTION OF THAT BOARD ON THE MATTER IS EMBODIED IN THE AGREEMENT OF JULY 31, 1920, WHICH PROVIDED FOR PAYMENT OF $2,897.62, THE AMOUNT THEN CLAIMED, WHICH WAS THE AMOUNT ORIGINALLY CLAIMED LESS THE AMOUNT OF THE ITEM OF $52.36 PAID IN THE SETTLEMENT OF JUNE 8, 1919. PAYMENT OF SAID AMOUNT, LESS $17.73 DUE THE UNITED STATES FOR SHORTAGE OF MATERIALS, OR $2,879.89, WAS MADE BY MAJ. C. E. GRAY, QUARTERMASTER CORPS, ON VOUCHER NO. 2006, OF HIS ACCOUNTS FOR AUGUST, 1920, BUT CREDIT FOR THE PAYMENT WAS DISALLOWED IN THE AUDIT OF MAJOR GRAY'S ACCOUNTS, AND THE AMOUNT THEREOF, LESS $52.36 AS THE CONTRACT PRICE FOR THE SECOND GEAR DELIVERED UNDER ORDER 20747, OR $2,845.26, WAS DEDUCTED, IN THE SETTLEMENT HERE UNDER REVIEW, FROM THE AMOUNT ALLOWED FOR THE ACETYLENE CYLINDERS FURNISHED THE LIGHTHOUSE SERVICE.

UPON THE FACTS NOW APPEARING IT WOULD SEEM TO BE CLEAR THAT THE FIRST BOARD ERRED IN HOLDING THAT THE ITEM OF $2,949.98 WAS NOT FOR CONSIDERATION BY IT AND WAS FOR CONSIDERATION AS A DENT ACT CLAIM. THEREFORE THE SETTLEMENT AGREEMENT OF JULY 31, 1920, MADE UNDER THE DIRECTION OF THE SECRETARY OF WAR IN THE NATURE OF A SUPPLEMENT TO THE SETTLEMENT AGREEMENT OF JUNE 8, 1919, WOULD APPEAR TO HAVE BEEN AUTHORIZED UNLESS THE RELEASE HEREINBEFORE QUOTED FROM THE SETTLEMENT AGREEMENT OF JUNE 8, 1919, PRECLUDED SUCH ACTION. SAID RELEASE SPECIFICALLY RESERVED TO CLAIMANT THE "RIGHT TO PROSECUTE A CLAIM ALREADY FILED UNDER THE ACT OF MARCH 2, 1919, FOR EXPERIMENTAL WORK IN THE DEVELOPMENT OF INTERRUPTER GEARS.' IT WILL BE NOTED THAT WHILE THE CLAIM WITH RESPECT TO WHICH THE RESERVATION IS MADE IS DESCRIBED AS "A CLAIM ALREADY FILED UNDER THE ACT OF MARCH 2, 1919," THE RESERVATION OF THE RIGHT TO PROSECUTE SAID CLAIM IS NOT LIMITED TO A RIGHT TO PROSECUTE UNDER SAID ACT. HENCE, IT WOULD APPEAR THAT THE RELEASE WAS INTENDED TO AND DID RESERVE TO THE CLAIMANT THE RIGHT TO HAVE ITS CLAIM ON ACCOUNT OF THE EXPERIMENTAL WORK CONSIDERED BY ANY BOARD OR TRIBUNAL HAVING JURISDICTION OR AUTHORITY TO CONSIDER AND ADJUST SAID CLAIM, AND THIS APPEARS TO HAVE BEEN THE VIEW OF THE WAR DEPARTMENT AS WELL AS OF THE CLAIMANT. SEE IN THIS CONNECTION CASE OF GEM HAMMOCK AND FLY NET COMPANY V. UNITED STATES, DECIDED BY THE COURT OF CLAIMS JANUARY 26, 1925, NO. C-963.

IT FOLLOWS, THEREFORE, THAT THE PAYMENT OF $2,879.89 MADE BY MAJOR GRAY UNDER THE SETTLEMENT OF JULY 31, 1920, WAS CORRECT AND PROPER, AND ACCORDINGLY THE AMOUNT OF $2,845.26 WITHHELD FROM CLAIMANT IN THE SETTLEMENT OF DECEMBER 20, 1924, WILL NOW BE ALLOWED AND PAID TO IT.

THE CHECK FOR $7,347.24 TRANSMITTED WITH THE REQUEST FOR REVIEW WILL BE RETURNED TO CLAIMANT AND CHECK FOR $2,845.26 IN FAVOR OF CLAIMANT WILL ISSUE IN DUE COURSE.