B-102564, JUN 28, 1951

B-102564: Jun 28, 1951

Additional Materials:

Contact:

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

 

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

PRECIS-UNAVAILABLE THE SECRETARY OF THE AIR FORCE: REFERENCE IS MADE TO A LETTER DATED APRIL 4. IT IS STATED THAT THE OFFER IS MADE WITHOUT ACKNOWLEDGEMENT OF LEGAL LIABILITY TO THE GOVERNMENT. THAT THE OFFER IS CONDITIONED UPON ACCEPTANCE BY THE DEPARTMENT OF THE AIR FORCE WITHOUT OBJECTION BY THIS OFFICE. WERE TERMINATED UNDER SETTLEMENT AGREEMENTS ENTERED INTO PURSUANT TO THE CONTRACT SETTLEMENT ACT OF 1944. THAT OTHER CONTRACTS AND SUBCONTRACTS WERE COMPLETED BY THE CONTRACTOR. THAT THERE IS A POSSIBILITY IT MAY RECEIVE FROM THE LATTER SOURCE OTHER AMOUNTS. THE EXTENT OF WHICH IS NOT DISCLOSED. 994.12 IS ALLOCABLE TO THE WAR AND NAVY CONTRACTS INVOLVED. IT IS STATED IN THE LETTER OF APRIL 4.

B-102564, JUN 28, 1951

PRECIS-UNAVAILABLE

THE SECRETARY OF THE AIR FORCE:

REFERENCE IS MADE TO A LETTER DATED APRIL 4, 1951, WITH ENCLOSURES, FROM THE ASSISTANT SECRETARY OF THE AIR FORCE, RELATIVE TO A VOLUNTARY PAYMENT BY KAISER METAL PRODUCTS, INC., OF AN AMOUNT REALIZED PRINCIPALLY FROM A TAX REFUND. IT IS STATED THAT THE OFFER IS MADE WITHOUT ACKNOWLEDGEMENT OF LEGAL LIABILITY TO THE GOVERNMENT, THAT THE MONEY HAS BEEN TENDERED WITHOUT PREJUDICE TO THE CONTRACTOR SOLELY FOR THE PURPOSE OF THE PROPOSED SETTLEMENT, AND THAT THE OFFER IS CONDITIONED UPON ACCEPTANCE BY THE DEPARTMENT OF THE AIR FORCE WITHOUT OBJECTION BY THIS OFFICE.

IT APPEARS THAT KAISER METAL PRODUCTS, INC., HAD VARIOUS CONTRACTS WITH THE WAR DEPARTMENT AND THE NAVY DEPARTMENT AND, ALSO, HAD SUBCONTRACTS FOR THE FURNISHING OF AIRPLANES AND SUPPLIES AND EQUIPMENT THEREFOR. THE RECORD INDICATES THAT CERTAIN OF THE PRIME CONTRACTS WITH THE WAR AND NAVY DEPARTMENTS, AND SUBCONTRACTS HERE INVOLVED, WERE TERMINATED UNDER SETTLEMENT AGREEMENTS ENTERED INTO PURSUANT TO THE CONTRACT SETTLEMENT ACT OF 1944, 58 STAT. 649; THAT OTHER CONTRACTS AND SUBCONTRACTS WERE COMPLETED BY THE CONTRACTOR; AND THAT, SUBSEQUENTLY, THE CONTRACTOR RECEIVED AN AMOUNT IN EXCESS OF $450,000 AS A REFUND OF OVERPAYMENTS OF PENNSYLVANIA UNEMPLOYMENT TAXES, THE SUM OF $2,500 ON ACCOUNT OF REALIZED CREDITS UNDER THE "LOSS CARRY-BACK" PROVISIONS OF THE PENNSYLVANIA CORPORATE INCOME TAX LAW, AND THAT THERE IS A POSSIBILITY IT MAY RECEIVE FROM THE LATTER SOURCE OTHER AMOUNTS, THE EXTENT OF WHICH IS NOT DISCLOSED. RECORDS OF THIS OFFICE INDICATE THAT, OF THE TOTAL REFUND RECEIVED BY THE CONTRACTOR, THE AMOUNT OF $236,994.12 IS ALLOCABLE TO THE WAR AND NAVY CONTRACTS INVOLVED, AND THAT OF THAT AMOUNT THE SUM OF $110,114.37 HAS BEEN CREDITED TO THE GOVERNMENT IN FINAL TERMINATION SETTLEMENTS UNDER THE NAVY CONTRACTS, LEAVING THE AMOUNT OF $126,879.75 AS UNSETTLED UNDER THE WAR DEPARTMENT (OR DEPARTMENT OF THE AIR FORCE) CONTRACTS. IN THAT CONNECTION, IT IS STATED IN THE LETTER OF APRIL 4, 1951, THAT THE AUDITORS OF THE AIR FORCE HAVE DETERMINED THAT OF THE REFUNDS RECEIVED BY THE CONTRACTOR, THE AMOUNT OF $125,669.75 IS ALLOCABLE TO AIR FORCE CONTRACTS. IT IS UNDERSTOOD FROM THE FILE SUBMITTED WITH SAID LETTER THAT THE TERMINATION AGREEMENTS CONTAIN NO PROVISION WITH RESPECT TO THE PAYMENT TO THE GOVERNMENT OF THE REFUNDS RECEIVED BY THE CONTRACTOR.

YOUR DEPARTMENT APPARENTLY TAKES THE POSITION THAT, AT THE TIME OF THE NEGOTIATIONS FOR THE TERMINATION OF THE CONTRACTS, THE CONTRACTOR WAS AWARE OF THE POSSIBILITY THAT IT WOULD RECEIVE REFUNDS FROM THE SOURCES MENTIONED ABOVE AND THAT, IN GOOD FAITH, IT SHOULD HAVE DIVULGED SUCH INFORMATION BUT THAT ITS REPRESENTATIVES FAILED TO DO SO WITH THE RESULT THAT THE REFUNDS WERE NOT CONSIDERED IN THE NEGOTIATIONS. ON THE OTHER HAND, THE CONTRACTOR CONTENDS THAT IT WAS NOT THEN AWARE OF THE POSSIBILITY THAT IT MIGHT RECEIVE THE REFUNDS AND, CONSEQUENTLY, IT NOW IS UNDER NO LEGAL LIABILITY TO PAY ANY PART THEREOF TO THE GOVERNMENT. THE CONTRACTOR ORIGINALLY CLAIMED THAT IT WAS ENTITLED TO APPROXIMATELY $80,000, REPRESENTING CERTAIN UNREIMBURSED COSTS, FOR SET OFF IN ITS FAVOR, BUT HAS REDUCED ITS CLAIM THEREFOR TO $44,415.24.

IT APPEARS THAT AFTER CONSIDERABLE DISCUSSION AND NEGOTIATIONS BETWEEN REPRESENTATIVES OF THE AIR FORCE AND THE CONTRACTOR, THE CONTRACTOR HAS MADE THE OFFER OF SETTLEMENT REFERRED TO ABOVE. IN THE LETTER OF APRIL 4, 1951, IT IS STATED THAT THE CONTRACTOR NOW OFFERS TO PAY TO THE GOVERNMENT (A) THE SUM OF $62,500 OF THE AMOUNT OF THE REFUND OF THE OVERPAYMENTS MADE ON ACCOUNT OF PENNSYLVANIA UNEMPLOYMENT TAXES, (B) $2,500 ON ACCOUNT OF REALIZED CREDITS RECEIVED BY IT AS SUBCONTRACTOR UNDER THE "LOSS CARRY- BACK" PROVISIONS OF THE PENNSYLVANIA CORPORATE INCOME TAX LAW, AND (C) POSSIBLE ADDITIONAL, UNDETERMINED AMOUNTS OF REFUNDS UNDER THE SAID LAW. THE AMOUNT OF THE OFFER IS ESTIMATED TO TOTAL BETWEEN $67,500 AND $70,000, AND YOUR DEPARTMENT RECOMMENDS THE ACCEPTANCE THEREOF.

WITH RESPECT TO THOSE CONTRACTS AND SUBCONTRACTS WHICH WERE TERMINATED UNDER THE CONTRACT SETTLEMENT ACT OF 1944, IT MAY BE OBSERVED THAT SETTLEMENT AGREEMENTS ENTERED INTO PURSUANT TO THAT ACT - WITH CERTAIN EXCEPTIONS WHICH ARE NOT ESTABLISHED BY THE RECORD NOW BEFORE THIS OFFICE TO BE INVOLVED HERE - ARE FINAL AND CONCLUSIVE ON THE PARTIES THERETO, AND THE DETERMINATION OF AMOUNTS WHICH MAY BE DUE A CONTRACTOR THEREUNDER IS A MATTER EXCLUSIVELY WITHIN THE JURISDICTION OF THE CONTRACTING AGENCY CONCERNED AND IS NOT FOR CONSIDERATION BY THIS OFFICE.

IN THE LETTER OF APRIL 4, 1951, IT IS STATED FURTHER THAT THE OFFER OF PAYMENT REFERRED TO "HAS BEEN OBTAINED AFTER MANY MONTHS OF INVESTIGATION, CONFERENCE, AND NEGOTIATIONS," AND THAT IF THE OFFER "IS NOT ACCEPTED, THE ALTERNATIVE WILL PROBABLY BE LITIGATION." MOREOVER, INFORMATION DEVELOPED IN THIS OFFICE INDICATES THAT IF THE OFFER IS NOT ACCEPTED AND LITIGATION IS RESORTED TO, THE TIME AND EXPENSE REQUIRED TO ASSEMBLE THE RECORDS AND TO PERFORM A NEW AND COMPLETE AUDIT OF ALL THE FACTORS INVOLVED, IN ADDITION TO THE POSSIBILITY OF THE FILING BY THE CONTRACTOR OF CLAIMS FOR THE REIMBURSEMENT OF ITEMS OF COST NOT HERETOFORE ASSERTED, MIGHT WELL AMOUNT TO A CONSIDERABLE SUM AND POSSIBLY COULD EXCEED THE AMOUNT OF THE ITEMS NOW IN CONTROVERSY.

ACCORDINGLY, SINCE THE RECORD, CONSIDERED IN ITS ENTIRETY, INDICATES THAT THE PROPOSED SETTLEMENT WOULD BE IN THE INTEREST OF THE GOVERNMENT, AND IN VIEW OF THE RECOMMENDATION CONTAINED IN THE LETTER OF APRIL 4, 1951, THIS OFFICE WOULD NOT BE REQUIRED TO OBJECT TO THE ACCEPTANCE BY YOUR DEPARTMENT OF THE PAYMENT OFFERED BY THE CONTRACTOR.

THE ENCLOSURES SUBMITTED WITH THE LETTER OF APRIL 4, 1951, ARE RETURNED HEREWITH.