A-9225, FEBRUARY 11, 1926, 5 COMP. GEN. 608

A-9225: Feb 11, 1926

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THE EMPLOYMENT OF A FIRM OF ACCOUNTANTS FOR COST-ASCERTAINMENT WORK IN CONNECTION WITH AN INVESTIGATION OF THE METHODS OF HANDLING DIFFERENT CLASSES OF MAIL IS IN CONTRAVENTION OF THE ACT OF APRIL 6. THE PROVISIONS OF WHICH ARE NOT RENDERED INAPPLICABLE BY THE AUTHORITY GIVEN THE POST OFFICE DEPARTMENT. OF THE PECULIAR CIRCUMSTANCES LEADING UP TO THIS CONTRACT AND THE APPARENT GOOD FAITH OF THE PARTIES IN ASSUMING THAT THE PROCEDURE WAS IN ACCORDANCE WITH RECOGNIZED PRECEDENTS ESTABLISHED BY SIMILAR CONTRACTS IN CONNECTION WITH THE SAME WORK. PAYMENT OF THE CLAIM IS AUTHORIZED. 1926: THERE IS FOR CONSIDERATION BY THIS OFFICE THE CLAIM OF THE ACCOUNTING FIRM OF ERNST AND ERNST FOR $50. THE WORK OF COST ASCERTAINMENT IN QUESTION APPEARS TO HAVE ORIGINATED IN A PROVISION IN THE POST OFFICE APPROPRIATION ACT APPROVED APRIL 24.

A-9225, FEBRUARY 11, 1926, 5 COMP. GEN. 608

CONTRACTS - PERSONAL SERVICES IN THE ABSENCE OF SPECIFIC STATUTORY AUTHORITY FOR SUCH PROCEDURE, PERSONAL SERVICES MAY NOT BE PROCURED BY CONTRACTING WITH A FIRM TO FURNISH THE SERVICES WITHOUT ADMINISTRATIVE SUPERVISION. THE EMPLOYMENT OF A FIRM OF ACCOUNTANTS FOR COST-ASCERTAINMENT WORK IN CONNECTION WITH AN INVESTIGATION OF THE METHODS OF HANDLING DIFFERENT CLASSES OF MAIL IS IN CONTRAVENTION OF THE ACT OF APRIL 6, 1914, 38 STAT. 335, THE PROVISIONS OF WHICH ARE NOT RENDERED INAPPLICABLE BY THE AUTHORITY GIVEN THE POST OFFICE DEPARTMENT, IN AN APPROPRIATION FOR PERSONAL SERVICES, TO COMPLETE THE WORK STARTED BY A CONGRESSIONAL COMMITTEE WHICH HAD THERETOFORE EMPLOYED SIMILAR SERVICES BY CONTRACT. VIEW, HOWEVER, OF THE PECULIAR CIRCUMSTANCES LEADING UP TO THIS CONTRACT AND THE APPARENT GOOD FAITH OF THE PARTIES IN ASSUMING THAT THE PROCEDURE WAS IN ACCORDANCE WITH RECOGNIZED PRECEDENTS ESTABLISHED BY SIMILAR CONTRACTS IN CONNECTION WITH THE SAME WORK, PAYMENT OF THE CLAIM IS AUTHORIZED.

DECISION BY COMPTROLLER GENERAL MCCARL, FEBRUARY 11, 1926:

THERE IS FOR CONSIDERATION BY THIS OFFICE THE CLAIM OF THE ACCOUNTING FIRM OF ERNST AND ERNST FOR $50,000 FOR SERVICES RENDERED IN OCTOBER AND NOVEMBER, 1924, FOR THE POST OFFICE DEPARTMENT IN CONNECTION WITH THE WORK OF ASCERTAINING THE COST OF HANDLING DIFFERENT CLASSES OF MAIL MATTER.

THE WORK OF COST ASCERTAINMENT IN QUESTION APPEARS TO HAVE ORIGINATED IN A PROVISION IN THE POST OFFICE APPROPRIATION ACT APPROVED APRIL 24, 1920, 41 STAT. 583, WHICH CREATED THE JOINT COMMISSION ON POSTAL SERVICE AND AUTHORIZED THAT COMMISSION TO EMPLOY AND FIX THE COMPENSATION OF SUCH "ENGINEERS, SPECIAL EXPERTS, CLERKS, AND OTHER EMPLOYEES" AS IT MIGHT DEEM EXPEDIENT. THE ACT ALSO PROVIDED THAT THE EXPENSES OF THE COMMISSION AND ITS EMPLOYEES "SHALL BE ALLOWED AND PAID UPON PRESENTATION OF ITEMIZED VOUCHERS THEREFOR, APPROVED BY THE CHAIRMAN OF THE COMMISSION, WHICH APPROVAL SHALL BE CONCLUSIVE UPON THE ACCOUNTING OFFICERS OF THE TREASURY DEPARTMENT.'

THE COMMISSION WAS CONTINUED FROM TIME TO TIME BY SUBSEQUENT PROVISIONS OF LAW UNTIL JUNE 30, 1923. SEE ACT OF MARCH 1, 1921, 41 STAT. 1155, AND ACT OF JUNE 19, 1922, 42 STAT. 659. ONE OF THE ACTIVITIES UNDERTAKEN BY THE COMMISSION WAS THE ASCERTAINMENT OF THE COST OF HANDLING VARIOUS CLASSES OF MAIL AND IN CONNECTION WITH THIS WORK IT EMPLOYED BY CONTRACT THE FIRM OF W. B. RICHARDS AND CO. THE COST-ASCERTAINMENT WORK NOT HAVING BEEN COMPLETED DURING THE CONTINUANCE OF THE COMMISSION, THE ACT OF FEBRUARY 14, 1923, 42 STAT. 1251, MADE THE FOLLOWING PROVISION:

FOR TEMPORARY AND AUXILIARY CLERK HIRE AND FOR SUBSTITUTE CLERK HIRE FOR CLERKS AND EMPLOYEES ABSENT WITH PAY AT FIRST AND SECOND CLASS POST OFFICES AND TEMPORARY AND AUXILIARY CLERK HIRE AT SUMMER AND WINTER RESORT POST OFFICES, $9,000,000: PROVIDED, THAT $500,000 OF THIS SUM MAY BE USED FOR THE PURPOSE OF COMPLETING THE WORK OF DETERMINING THE COST TO THE DEPARTMENT OF HANDLING THE DIFFERENT CLASSES OF MAIL MATTER.

THEREAFTER THE POST OFFICE DEPARTMENT ENTERED INTO AN AGREEMENT WITH THE FIRM OF W. B. DICKENSON AND CO., WITH WHICH FIRM THERE WAS THEN CONNECTED THE EFFICIENCY EXPERT WHO FORMERLY HAD BEEN ENGAGED ON THAT WORK WHILE WITH THE FIRM OF W. B. RICHARDS AND CO., TO CONTINUE THE WORK OF COST ASCERTAINMENT.

THEREAFTER, TO WIT, ON OCTOBER 4, 1924, THE EXECUTIVE ASSISTANT TO THE POSTMASTER GENERAL ADDRESSED A COMMUNICATION TO MR. A. C. ERNST OF THE FIRM OF ERNST AND ERNST AS FOLLOWS:

AT THE REQUEST OF THE POSTMASTER GENERAL YOU HAVE BEEN MAKING A SURVEY OF THE WORK OF THIS DEPARTMENT IN ASCERTAINING THE COST OF HANDLING THE SEVERAL CLASSES OF MAIL MATTER AND OF CONDUCTING THE SPECIAL SERVICES.

A PROPOSAL FROM YOU IS DESIRED AT THE EARLIEST PRACTICABLE DATE STATING THE SUM FOR WHICH YOU WILL MAKE A REPORT NOT LATER THAN NOVEMBER 5, 1924, COVERING SUBSTANTIALLY THE FOLLOWING:

1. REVIEW AND STATEMENT AS TO ADEQUACY OF METHODS.

2. INVESTIGATION OF METHOD USED IN SELECTING OFFICES.

3. REVIEW OF EDUCATION IN THE FIELD.

4. EXAMINATION OF DATA RECEIVED FROM THE FIELD.

5. EXAMINATION OF MANNER AND THOROUGHNESS OF HANDLING EVIDENT OR APPARENT ERRORS ON DATA SUBMITTED BY THE FIELD.

6. EXAMINE THE COMPUTING AND TABULATING DONE TO ATTAIN THE FINAL RESULT.

7. DISCUSSION OF EFFECT OF APPROXIMATIONS ON RESULT.

YOUR REPORT SHOULD BE BASED UPON SUFFICIENT OBSERVATIONS AND COMPARISONS OF THE COST ASCERTAINMENT WORK IN POST OFFICES AND THE RAILWAY MAIL SERVICE TO ENABLE YOU TO FORM JUDGMENT AS TO THE METHODS AND REASONABLE ACCURACY OF THE WORK.

IN RESPONSE TO THAT REQUEST THE FOLLOWING PROPOSAL OR ESTIMATE WAS SUBMITTED UNDER DATE OF OCTOBER 7, 1924:

ACKNOWLEDGING RECEIPT OF YOUR LETTER OF OCTOBER 4TH, WE ESTIMATE THE CHARGE FOR THE SERVICES OF OUR FIRM, INCLUDING CASH EXPENSES, AT $40,000 TO $50,000. SUCH SERVICES TO COVER THE SUBJECTS OUTLINED IN YOUR LETTER, WITH THE UNDERSTANDING HOWEVER THAT ON ACCOUNT OF THE SHORT TIME AVAILABLE TO US FOR THE COMPLETION OF THIS WORK, WE, OF NECESSITY, WILL BE REQUIRED TO LIMIT OUR VERIFICATION TO TEST CHECKS WHICH WILL BE MADE ON A BASIS TO BE APPROVED BY YOURSELF AND MR. DENNING.

WE HAVE, AS YOU KNOW, SELECTED A NUMBER OF INDIVIDUAL POST OFFICES FOR VERIFICATION OF CERTAIN DETAILS AFTER CONFERENCE WITH MR. DENNING AND WE ARE PURSUING THE SAME COURSE IN RESPECT TO THE OTHER VERIFICATION WORK OUTLINED IN YOUR LETTER. IT IS, THEREFORE, ON THE BASIS OF THE PROGRAM WHICH HAS ALREADY BEEN APPROVED BY MR. DENNING THAT WE MAKE THE ABOVE PROPOSAL.

THE ACCEPTANCE BY THE POST OFFICE DEPARTMENT WAS MADE OCTOBER 8, 1924, IN THE FOLLOWING LANGUAGE:

I HAVE YOUR LETTER OF THE 7TH INSTANT IN REPLY TO MINE OF THE 4TH, IN WHICH YOU PROPOSE TO CARRY ON AND COMPLETE THE WORK INDICATED IN SAID LETTER AS STATED IN YOURS FOR A CHARGE AT $40,000 TO $50,000. THIS IS SATISFACTORY AND IS HEREBY ACCEPTED.

VERY SINCERELY,

(SIGNED) JOSEPH STEWART,

EXECUTIVE ASSISTANT TO THE POSTMASTER GENERAL.

APPROVED.

(SIGNED) HARRY S. NEW,

POSTMASTER GENERAL.

WHILE IT IS NOT CLEAR FROM THE COMMUNICATION OF OCTOBER 7, 1924, OF ERNST AND ERNST, WHETHER IT WAS INTENDED TO BE A MERE ESTIMATE OF THE PROBABLE COST OF THE WORK OR A DEFINITE PROPOSAL TO DO THE WORK WITHIN THE MAXIMUM SUM STATED, IT WAS EVIDENTLY CONSIDERED AS A DEFINITE PROPOSAL BY THE POST OFFICE DEPARTMENT AND SO TREATED IN ITS ACCEPTANCE OF OCTOBER 8, 1924. AND ANY DOUBT AS TO THE INTENTION OF THE PARTIES IN THE MATTER WAS REMOVED BY THEIR SUBSEQUENT ACTIONS RELATIVE THERETO. IT MUST BE CONCLUDED, THEREFORE, THAT, ASIDE FROM THE OBJECTIONS HEREINAFTER SET FORTH, THERE EXISTED A CONTRACT FOR THE PERFORMANCE OF A SERVICE AT A STIPULATED LUMP- SUM PRICE.

THE CLAIM OF ERNST AND ERNST WAS ORIGINALLY SUBMITTED, WITHOUT ITEMIZATION, FOR THE MAXIMUM AMOUNT ESTIMATED IN ITS PROPOSAL, I.E. $50,000. WHEN ASKED FOR AN ITEMIZED STATEMENT IT SUBMITTED THE FOLLOWING:

STATEMENT SERVICES RENDERED AND TRAVELING AND HOTEL EXPENSES INCURRED IN CONNECTION WITH THE AUDIT OF THE DATA AND REPORT PREPARED IN CONNECTION WITH THE ASCERTAINMENT OF COST OF THE POST OFFICE SERVICE AND POST OFFICE DEPARTMENT, AS AUTHORIZED BY THE POSTMASTER GENERAL. MEMBERS OF FIRM, 71 DAYS AT $100.00 PER DAY ---------------- $ 7,100.00 MANAGERS AND SUPERVISORS, 215 DAYS AT $50.00 PER DAY ------ 10,750.00 SENIOR ACCOUNTANTS, 705 DAYS AT $30.00 PER DAY ----------- - 21,150.00 JUNIOR ACCOUNTANTS, 504 DAYS AT $20.00 PER DAY ----------- - 10,080.00

TOTAL SERVICES ----------------------------------------- 49,080.00 TRAVELING AND HOTEL EXPENSES ------------------------------- 8,806.34

TOTAL SERVICES AND EXPENSES ---------------------------- 57,886.34

----------- MAXIMUM COST TO POST OFFICE DEPARTMENT AS AGREED ----------- 50,000.00

IT APPEARS TO HAVE BEEN THE UNDERSTANDING OF THE POST OFFICE DEPARTMENT THAT THE AUTHORIZATION TO USE A PART OF THE APPROPRIATION TO COMPLETE THE WORK OF DETERMINING THE COST OF HANDLING THE DIFFERENT CLASSES OF MAIL MATTER AUTHORIZED IT ALSO TO USE THE SAME METHODS TO ACCOMPLISH THAT RESULT AS HAD BEEN EMPLOYED BY THE CONGRESSIONAL COMMISSION. HOWEVER, I AM CONSTRAINED TO HOLD THAT SUCH WAS NOT THE PURPOSE OR EFFECT OF THE AUTHORIZATION. THE WORK OF THE COMMISSION WAS NOT CARRIED ON WHOLLY BY CONTRACT, ASSISTANCE HAVING BEEN RENDERED BY THE FIELD FORCE AND OTHER PERSONNEL OF THE POSTAL SERVICE AND BY EMPLOYEES OF OTHER GOVERNMENT ESTABLISHMENTS DETAILED FOR THAT PURPOSE. THE APPROPRIATION OF $9,000,000 IN WHICH THE PROVISION IS FOUND WAS ENTIRELY ONE FOR "HIRE" OF PERSONAL SERVICES OF TEMPORARY, AUXILIARY AND SUBSTITUTE CLERKS AT FIRST AND SECOND CLASS AND WINTER AND SUMMER RESORT POST OFFICES, AND THE AUTHORITY TO USE A PORTION THEREOF FOR WORK OF A CLASS NOT ORDINARILY PERFORMED BY SUCH CLERKS DID NOT CHANGE THE FUNDAMENTAL CHARACTER OF THE APPROPRIATION WHICH CONTEMPLATED THE DIRECT HIRE OF PERSONAL SERVICES AND NOT THE CONTRACTING FOR PERSONAL SERVICES TO BE RENDERED WITHOUT THE SUPERVISION OF ADMINISTRATIVE OFFICERS OF THE GOVERNMENT. FURTHERMORE, SERVICES ESSENTIALLY PERSONAL IN THEIR CHARACTER, SUCH AS HERE INVOLVED, ARE NOT FOR PROCUREMENT BY CONTRACTING WITH A FIRM TO SUPPLY SUCH SERVICES, IN THE ABSENCE OF SPECIFIC STATUTORY AUTHORITY FOR SUCH PROCEDURE. 5 COMP. GEN. 450.

THERE ARE ALSO FOR CONSIDERATION THE PROVISIONS OF SECTION 5 OF THE ACT OF APRIL 6, 1914, 38 STAT. 335, AS FOLLOWS:

THAT NO PART OF ANY MONEY APPROPRIATED IN THIS OR ANY OTHER ACT SHALL BE USED FOR COMPENSATION OR PAYMENT OF EXPENSES OF ACCOUNTANTS OR OTHER EXPERTS IN INAUGURATING NEW OR CHANGING OLD METHODS OF TRANSACTING THE BUSINESS OF THE UNITED STATES OR THE DISTRICT OF COLUMBIA UNLESS AUTHORITY FOR EMPLOYMENT OF SUCH SERVICES OR PAYMENT OF SUCH EXPENSES IS STATED IN SPECIFIC TERMS IN THE ACT MAKING PROVISION THEREFOR AND THE RATE OF COMPENSATION FOR SUCH SERVICES OR EXPENSES IS SPECIFICALLY FIXED THEREIN * * * AND SUCH RATES OF COMPENSATION OR EXPENSES SO FIXED SHALL BE PAID ONLY TO THE PERSON SO EMPLOYED.

WHILE THE CONTRACT WITH THE ACCOUNTING FIRM IN THIS INSTANCE WAS IN ITSELF NOT SPECIFICALLY ONE FOR INAUGURATING NEW OR CHANGING OLD METHODS OF TRANSACTING BUSINESS, IT HAD ITS INCEPTION IN THE INVESTIGATION OF THE JOINT COMMISSION ON POSTAL SERVICE AUTHORIZED BY THE ACT OF APRIL 24, 1920, SUPRA, WHICH PRESCRIBED THE DUTIES OF THE COMMISSION AS FOLLOWS:

(C) THE COMMISSION SHALL INVESTIGATE ALL PRESENT AND PROSPECTIVE METHODS AND SYSTEMS OF HANDLING, DISPATCHING, TRANSPORTING, AND DELIVERING THE MAILS AND THE FACILITIES THEREFOR; AND ESPECIALLY ALL METHODS AND SYSTEMS WHICH RELATE TO THE HANDLING, DELIVERY AND DISPATCHING OF THE MAILS IN THE LARGE CITIES OF THE UNITED STATES.

IT CLEARLY APPEARS THEREFORE THAT THE ASCERTAINMENT OF THE COST OF HANDLING OF DIFFERENT CLASSES OF MAIL MATTER WAS INCIDENT TO AND IN CONNECTION WITH THE CONTEMPLATED INAUGURATION OF NEW OR THE CHANGING OF OLD METHODS OF TRANSACTING THE BUSINESS OF THE POSTAL SERVICE AND WITHIN THE PURVIEW OF THE ACT OF APRIL 6, 1914, SUPRA. SEE MANUSCRIPT DECISION OF COMPTROLLER OF THE TREASURY TO THE GOVERNOR OF THE PANAMA CANAL, APRIL 14, 1914. THE PROVISIONS OF THIS ACT ARE NOT LIMITED TO THE FISCAL YEAR TO WHICH THE APPROPRIATIONS MADE IN THE SAME ACT APPLY, BUT ARE FOR APPLICATION TO ALL SUBSEQUENT APPROPRIATIONS AND HAVE BEEN CONSISTENTLY SO APPLIED BY THIS OFFICE. 1 COMP. GEN. 93; ID. 252; AND MANUSCRIPT DECISION OF JANUARY 21, 1922, TO SECRETARY OF AGRICULTURE.

WHILE THE CONTRACTING FOR THE SERVICES OF THE ACCOUNTING FIRM IN THIS CASE WAS UNAUTHORIZED, IN VIEW OF THE PECULIAR CIRCUMSTANCES LEADING UP TO THE CONTRACT AND THE APPARENT GOOD FAITH OF THE PARTIES IN ASSUMING THAT THE PROCEDURE WAS IN ACCORDANCE WITH RECOGNIZED PRECEDENTS ESTABLISHED BY SIMILAR CONTRACTS IN CONNECTION WITH THE SAME WORK, PAYMENT OF THE CLAIM WILL BE AUTHORIZED IN THIS INSTANCE IN THE SUM OF $50,000 FOR WHICH CHECK WILL ISSUE IN DUE COURSE.