B-109832, JUNE 27, 1952, 31 COMP. GEN. 685

B-109832, JUNE 27, 1952, 31 COMP. GEN. 685

CONTRACTS - MODIFICATION AFTER PERFORMANCE AND PAYMENT - REQUESTS FOR RELIEF UNDER THE FIRST WAR POWERS ACT, 1941 REQUESTS BY CONTRACTORS FOR RELIEF UNDER THE PROVISIONS OF FIRST WAR POWERS ACT, 1941, AS AMENDED, AND EXECUTIVE ORDER NO. 10210, FEBRUARY 2, 1951, WHICH AUTHORIZE ADMINISTRATIVE AGENCIES CONCERNED WITH NATIONAL DEFENSE TO AMEND OR MODIFY CONTRACTS "HERETOFORE OR HEREAFTER MADE" WITHOUT REGARD TO OTHER PROVISIONS OF LAW IN ORDER TO FACILITATE NATIONAL DEFENSE, MAY BE CONSIDERED AND GRANTED AFTER FULL PERFORMANCE OF THE CONTRACT AND AFTER FINAL PAYMENT, PROVIDED SUCH REQUESTS ARE FILED DURING PERFORMANCE OF THE CONTRACT AND BEFORE FINAL PAYMENT HAS BEEN MADE UNDER THE CONTRACT. 24 COMP. GEN. 723, MODIFIED.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF THE ARMY, JUNE 27, 1952:

REFERENCE IS MADE TO LETTER DATED MAY 20, 1952, FROM THE ASSISTANT SECRETARY OF THE ARMY, REQUESTING TO BE ADVISED WHETHER THE ACCEPTANCE BY A GOVERNMENT CONTRACTOR OF A PAYMENT WHICH ORDINARILY WOULD BE CONSIDERED TO CONSTITUTE "FINAL PAYMENT" UNDER A CONTRACT PRECLUDES THE GRANTING OF RELIEF OTHERWISE AUTHORIZED UNDER THE PROVISIONS OF THE FIRST WAR POWERS ACT, AS AMENDED, AND EXECUTIVE ORDER 10210, WHERE THE CONTRACTOR'S APPLICATION FOR RELIEF WAS MADE PRIOR TO AND IS BEING ACTIVELY CONSIDERED AT THE TIME OF SUCH PAYMENT.

THE FOLLOWING EXAMPLE IS GIVEN TO ILLUSTRATE THE QUESTION. ON MARCH 24, 1950, A DEFENSE CONTRACTOR WAS AWARDED A FIXED PRICE CONTRACT FOR THE MANUFACTURE OF ARMY ORDNANCE ITEMS. IN APRIL 1951, WHILE A SUBSTANTIAL PORTION OF THE CONTRACT REMAINED TO BE PERFORMED, THE CONTRACTOR FILED APPLICATION WITH THE CONTRACTING OFFICER FOR RELIEF IN THE FORM OF AN AMENDMENT TO THE CONTRACT. THE CONTRACT CONTAINED NO PROVISION FOR PRICE REDETERMINATION, BUT AN INCREASE IN THE CONTRACT PRICE WITHOUT CONSIDERATION COULD HAVE BEEN GRANTED UNDER THE FIRST WAR POWERS ACT, AS AMENDED, AND EXECUTIVE ORDER 10210, ISSUED FEBRUARY 2, 1951. IN DECEMBER 1951, WHILE HIS APPLICATION FOR RELIEF WAS UNDER CONSIDERATION IN THE OFFICE, CHIEF OF ORDNANCE, THE CONTRACTOR COMPLETED THE LAST DELIVERY REQUIRED BY THE TERMS OF THE CONTRACT AND SUBMITTED AN INVOICE THEREFOR. SHORTLY THEREAFTER THE CONTRACTOR RECEIVED AND CASHED A CHECK WHICH COMPLETED PAYMENT OF ALL AMOUNTS PAYABLE BY THE TERMS OF THE CONTRACT, BUT NO RELEASE WAS EXECUTED BY HIM.

THE LETTER OF MAY 20, 1952, REFERS TO CERTAIN DECISIONS OF THIS OFFICE, INCLUDING 24 COMP. GEN. 723, WHEREIN IT WAS HELD THAT---

* * * THE PROVISIONS OF THE FIRST WAR POWERS ACT HAVE NO APPLICATION TO A CONTRACT WHICH HAS BEEN FULLY COMPLETED--- THAT IS TO SAY, WHERE THE WORK HAS BEEN PERFORMED AND FINAL PAYMENT MADE THEREFOR. THE BASIS FOR SUCH HOLDING IS THAT AFTER COMPLETION THERE CEASES TO EXIST A CONTRACT UPON WHICH THE PROVISIONS OF THE ACT AND EXECUTIVE ORDERS ISSUED PURSUANT THERETO LEGALLY CAN OPERATE. * * *

HOWEVER, AS STATED IN THE LETTER OF MAY 20, 1952, NONE OF THE DECISIONS REFERRED TO INVOLVED A STATE OF FACTS WHERE THE REQUEST FOR RELIEF WAS MADE PRIOR TO PAYMENT OF THE FULL AMOUNT CALLED FOR BY THE CONTRACT; AND IT IS SUGGESTED THAT A PROPERLY ALLOWABLE REQUEST FOR RELIEF MADE PRIOR TO COMPLETION OF A CONTRACT MIGHT, AND EQUITABLY SHOULD, BE GRANTED EVEN AFTER THE CONTRACT OTHERWISE IS COMPLETED.

AS AMENDED AND REACTIVATED BY THE ACT OF JANUARY 12, 1951, SECTION 201 OF THE FIRST WAR POWERS ACT, 64 STAT. 1257, PROVIDES THAT THE PRESIDENT MAY AUTHORIZE ANY DEPARTMENT OR AGENCY OF THE GOVERNMENT EXERCISING FUNCTIONS IN CONNECTION WITH THE NATIONAL DEFENSE, IN ACCORDANCE WITH REGULATIONS PRESCRIBED BY THE PRESIDENT FOR THE PROTECTION OF THE INTERESTS OF THE GOVERNMENT---

* * * TO ENTER INTO CONTRACTS AND INTO AMENDMENTS OR MODIFICATIONS OF CONTRACTS HERETOFORE OR HEREAFTER MADE AND TO MAKE ADVANCE, PROGRESS AND OTHER PAYMENTS THEREON, WITHOUT REGARD TO THE PROVISIONS OF LAW RELATING TO THE MAKING, PERFORMANCE, AMENDMENT, OR MODIFICATION OF CONTRACTS WHENEVER HE DEEMS SUCH ACTION WOULD FACILITATE THE NATIONAL DEFENSE * *

HOWEVER, THE AUTHORITY SO GRANTED WILL EXPIRE JUNE 30, 1952, UNLESS EXTENDED BY THE CONGRESS.

PURSUANT TO THE AUTHORITY THUS GRANTED THE PRESIDENT ISSUED EXECUTIVE ORDER 10210 ON FEBRUARY 2, 1951, AUTHORIZING THE SECRETARIES OF DEFENSE, THE ARMY, THE NAVY, AND THE AIR FORCE TO ENTER INTO AND MODIFY CONTRACTS WITHOUT REGARD TO OTHER PROVISIONS OF LAW. THE EXECUTIVE ORDER ALSO EMBODIED CERTAIN IMPLEMENTING REGULATIONS WHICH PROVIDE, INTER ALIA, THAT-

4. THE DEPARTMENT OF DEFENSE MAY BY AGREEMENT MODIFY OR AMEND OR SETTLE CLAIMS UNDER CONTRACTS HERETOFORE OR HEREAFTER MADE * * * AND MAY ENTER INTO AGREEMENTS WITH CONTRACTORS OR OBLIGORS, MODIFYING OR RELEASING ACCRUED OBLIGATIONS OF ANY SORT, INCLUDING ACCRUED LIQUIDATED DAMAGES OR LIABILITY UNDER SURETY OR OTHER BONDS, WHENEVER, IN THE JUDGMENT OF THE SECRETARIES OF DEFENSE, THE ARMY, THE NAVY, OR THE AIR FORCE, RESPECTIVELY, OR THEIR DULY AUTHORIZED REPRESENTATIVES, THE NATIONAL DEFENSE WILL BE THEREBY FACILITATED. AMENDMENTS AND MODIFICATIONS OF CONTRACTS MAY BE WITH OR WITHOUT CONSIDERATION AND MAY BE UTILIZED TO ACCOMPLISH THE SAME THINGS AS ANY ORIGINAL CONTRACT COULD HAVE ACCOMPLISHED HEREUNDER, IRRESPECTIVE OF THE TIME OR CIRCUMSTANCES OF THE MAKING, OR THE FORM, OF THE CONTRACT AMENDED OR MODIFIED, OR OF THE AMENDING OR MODIFYING CONTRACT, AND IRRESPECTIVE OF RIGHTS WHICH MAY HAVE ACCRUED UNDER THE CONTRACT OR THE AMENDMENTS OR MODIFICATIONS THEREOF.

THERE CAN BE LITTLE ARGUMENT, I CONCEIVE, AS TO THE VALIDITY OF THE PROPOSITION THAT A CONTRACT CANNOT BE AMENDED AFTER IT HAS CEASED TO EXIST. ANY SUCH PURPORTED AMENDMENT, IF VALID, WOULD BE IN LEGAL EFFECT A NEW CONTRACT. ON THE OTHER HAND, SO LONG AS SOME RIGHT OR OBLIGATION UNDER A CONTRACT REMAINS UNSETTLED, THE CONTRACT ITSELF CONTINUES IN EXISTENCE. IN THE CASE OF REQUESTS FOR RELIEF UNDER THE FIRST WAR POWERS ACT, IT CANNOT BE SAID THAT THE CONTRACTOR HAS ANY CONTRACTUAL RIGHT TO SUCH RELIEF, THE GRANTING OF WHICH IS DISCRETIONARY WITH THE ADMINISTRATIVE AGENCY INVOLVED. HOWEVER, IT MIGHT WELL BE ARGUED THAT BY REASON OF THE IMPACT OF THE STATUTE AND THE EXECUTIVE ORDER UPON ALL CONTRACTS COGNIZABLE THEREUNDER, A CONTRACTOR DOES HAVE A RIGHT TO MAKE A REQUEST FOR RELIEF AND TO HAVE HIS REQUEST ACTED UPON BEFORE THE CONTRACT CONCERNED MAY BE CONSIDERED AT AN END. CERTAINLY THE EQUITIES OF THE MATTER FAVOR SUCH A CONCLUSION.

UNDER THE CIRCUMSTANCES, AND IN VIEW OF THE PURPOSES SOUGHT TO BE SERVED BY THE FIRST WAR POWERS ACT, IT IS THE VIEW OF THIS OFFICE THAT REQUESTS FOR RELIEF UNDER THAT ACT SEASONABLY FILED DURING PERFORMANCE OF A CONTRACT AND A REASONABLE TIME PRIOR TO WHAT OTHERWISE WOULD BE FINAL PAYMENT THEREUNDER MAY BE CONSIDERED AND GRANTED, IF OTHERWISE PROPER, AFTER COMPLETION OF THE CONTRACT WORK AND SUCH PAYMENT.