B-111846, OCTOBER 21, 1953, 33 COMP. GEN. 176

B-111846: Oct 21, 1953

Additional Materials:

Contact:

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

 

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

1953: REFERENCE IS MADE TO LETTER DATED APRIL 27. IT IS STATED: THE CONTRACT IN QUESTION CALLED FOR REDETERMINATION OF THE CONTRACT PRICE BY NEGOTIATIONS BETWEEN THE CONTRACTOR AND THE CONTRACTING OFFICER. THE OBJECT OF THIS PRICE REDETERMINATION IS TO ELIMINATE FROM THE FINAL PRICE ANY ALLOWANCE FOR CONTINGENCIES WHICH FAILED TO MATERIALIZE DURING THE PERFORMANCE OF THE CONTRACT. THE REDETERMINED PRICE IS OBTAINED NOT BY OPERATION OF ANY RIGID FORMULAE BUT BY THE MUTUAL AGREEMENT OF THE PARTIES. THESE NEGOTIATIONS ARE BASED UPON ACTUAL EXPERIENCE OF THE CONTRACTOR IN PERFORMANCE OF THE CONTRACT AND. ARE SIMILAR IN NATURE TO INITIAL PRICE NEGOTIATIONS. THE VOLUNTARY REFUND BY THE CONTRACTOR IN THIS CASE WAS MADE IN ANTICIPATION OF NEGOTIATIONS WITH THE CONTRACTING OFFICER TO SETTLE UPON A REDETERMINED PRICE.

B-111846, OCTOBER 21, 1953, 33 COMP. GEN. 176

COLLECTIONS - REFUNDS - CONTRACT OVERPAYMENTS VOLUNTARILY REFUNDED BY CONTRACTOR PRIOR TO RENEGOTIATION - DISPOSITION AN AMOUNT VOLUNTARILY REFUNDED TO AN AGENCY BY A CONTRACTOR FOR THE PURPOSE OF REDUCING THE TOTAL CONTRACT AMOUNT PRIOR TO NEGOTIATIONS FOR A REVISED CONTRACT PRICE MAY BE TRANSFERRED TO THE APPLICABLE APPROPRIATION BY THE AGENCY WITHOUT BEING HELD IN SUSPENSE IN A DEPOSIT FUND ACCOUNT PENDING FINAL PRICE REVISION. B-111846, DECEMBER 29, 1952, MODIFIED.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF THE ARMY, OCTOBER 21, 1953:

REFERENCE IS MADE TO LETTER DATED APRIL 27, 1953, FROM THE UNDER SECRETARY, REQUESTING RECONSIDERATION OF OFFICE DECISION OF DECEMBER 29, 1952, B-111846, TO LIEUTENANT COLONEL C. W. FARNUM, FINANCE OFFICER, RELATIVE TO THE DISPOSITION OF AN AMOUNT ($193,241.30) VOLUNTARILY REFUNDED TO THE CONTRACTING OFFICER BY GENERAL MOTORS CORPORATION ( GMC TRUCK AND COACH DIVISION) FOR THE PURPOSE OF REDUCING THE TOTAL CONTRACT AMOUNT PRIOR TO NEGOTIATIONS FOR A REVISED PRICE PURSUANT TO PROVISIONS OF CONTRACT NO. W-20-089-ORD-4689, DATED MAY 13, 1949, AND SUPPLEMENT NO. 11 THERETO DATED DECEMBER 26, 1951.

IN THE LETTER OF APRIL 27, 1953, IT IS STATED:

THE CONTRACT IN QUESTION CALLED FOR REDETERMINATION OF THE CONTRACT PRICE BY NEGOTIATIONS BETWEEN THE CONTRACTOR AND THE CONTRACTING OFFICER. THE OBJECT OF THIS PRICE REDETERMINATION IS TO ELIMINATE FROM THE FINAL PRICE ANY ALLOWANCE FOR CONTINGENCIES WHICH FAILED TO MATERIALIZE DURING THE PERFORMANCE OF THE CONTRACT. THE REDETERMINED PRICE IS OBTAINED NOT BY OPERATION OF ANY RIGID FORMULAE BUT BY THE MUTUAL AGREEMENT OF THE PARTIES. THESE NEGOTIATIONS ARE BASED UPON ACTUAL EXPERIENCE OF THE CONTRACTOR IN PERFORMANCE OF THE CONTRACT AND, EXCEPT THAT THE ULTIMATE PRICE MUST BE WITHIN CERTAIN PERCENTAGE LIMITATIONS EXPRESSED IN THE CONTRACT, ARE SIMILAR IN NATURE TO INITIAL PRICE NEGOTIATIONS.

THE VOLUNTARY REFUND BY THE CONTRACTOR IN THIS CASE WAS MADE IN ANTICIPATION OF NEGOTIATIONS WITH THE CONTRACTING OFFICER TO SETTLE UPON A REDETERMINED PRICE. IN THIS LIGHT, IT MUST BE CONSIDERED AN ADMISSION BY THE CONTRACTOR THAT THE PRICE SHOULD BE REDETERMINED DOWNWARD TO THE EXTENT OF THE REFUND. IT WOULD OBVIOUSLY BE CONSIDERED SUCH AN ADMISSION BY THE CONTRACTING OFFICER IN BARGAINING FOR THE FINAL REDETERMINED PRICE. THAT THE REFUND MAY PROPERLY BE SO CONSIDERED IS DEMONSTRATED BY THE ABSENCE OF ANY ADVANTAGE TO THE CONTRACTOR IN MAKING A CONDITIONAL DEPOSIT WITH THE GOVERNMENT. THUS, THE REFUND IS IN REALITY THE RETURN OF AN ADMITTED OVERPAYMENT.

IT IS STATED FURTHER THAT HOLDING AMOUNTS SO REFUNDED IN SUSPENSE IN A DEPOSIT FUND ACCOUNT DELAYS THE UTILIZATION OF THESE FUNDS FOR PROCUREMENT OF ADDITIONAL REQUIREMENTS AND MAY NOT ONLY RETARD THE EXPEDITIOUS PLACEMENT OF AWARDS FOR MUNITIONS AND MATERIAL REQUIRED FOR THE NATIONAL DEFENSE BUT MAY ALSO AFFECT THE AVAILABILITY OF THESE FUNDS FOR OBLIGATION; AND IT IS REQUESTED THAT THE DEPARTMENT OF THE ARMY BE AUTHORIZED TO CONTINUE ITS PRESENT PRACTICE OF TRANSFERRING REFUNDS OF THE NATURE IN QUESTION TO THE APPLICABLE APPROPRIATION AS PRESCRIBED BY PARAGRAPH 18, SPECIAL REGULATIONS NO. 35-210-30, DATED JUNE 4, 1952.

THIS OFFICE IS ADVISED INFORMALLY THAT IN SOME CASES AMOUNTS VOLUNTARILY REFUNDED BY CONTRACTORS ARE MUCH LARGER THAN THE AMOUNT REFUNDED UNDER THE CONTRACT ABOVE REFERRED TO AND THAT CONSIDERABLE PERIODS OF TIME SOMETIMES ELAPSE BEFORE FINAL PRICE REVISIONS ARE MADE.

UPON RECONSIDERATION OF THE MATTER, IT IS HELD, IN VIEW OF THE FACTS AND REASONS HEREINABOVE SET OUT, THAT AMOUNTS VOLUNTARILY REFUNDED BY CONTRACTORS IN CASES SUCH AS THAT UNDER CONSIDERATION MAY BE TRANSFERRED TO THE APPLICABLE APPROPRIATION WITHOUT BEING HELD IN SUSPENSE IN A DEPOSIT FUND ACCOUNT PENDING FINAL PRICE REVISIONS. THE DECISION OF DECEMBER 29, 1952, IS MODIFIED ACCORDINGLY.