B-114664, APRIL 29, 1953, 32 COMP. GEN. 479

B-114664: Apr 29, 1953

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PROVIDED THEY ARE REPORTED TO BE BASED UPON THE COST OF RENDERING THE SERVICES AND DO NOT APPEAR TO BE EXCESSIVE. 1953: REFERENCE IS MADE TO LETTER OF APRIL 13. OTHER EXISTING LEGISLATION IS (A) RESPONSIBLE FOR SEEING THAT CHARGES BILLED TO IT FOR SERVICES FURNISHED BY ANOTHER AGENCY ARE BASED ON ACTUAL COST TO THAT AGENCY. THIS LANGUAGE WAS DISCUSSED IN 22 COMP. GEN. 74 AND IT WAS THERE HELD THAT THE STATUTE REQUIRED REIMBURSEMENT TO BE MADE "ON THE BASIS OF THE ACTUAL COST OF PERFORMING THE SERVICE "AS MAY BE AGREED UPON" BY THE AGENCIES CONCERNED.'. SUCH COST WAS CONSTRUED IN THE SAID DECISION TO INCLUDE OVERHEAD OR INDIRECT COSTS. - "ITEMS WHICH COMMONLY ARE RECOGNIZED AS ELEMENTS OF COST.

B-114664, APRIL 29, 1953, 32 COMP. GEN. 479

INTERAGENCY SERVICES - REIMBURSEMENT ON COST BASIS - NECESSITY OF AUDIT BY PROCURING AGENCY TO DETERMINE CORRECTNESS OF CHARGES WHILE SECTION 701 OF THE ECONOMY ACT OF 1932 AND OTHER LEGISLATION WHICH AUTHORIZE THE PROCUREMENT AT COST OF SUPPLIES AND SERVICES BETWEEN GOVERNMENT AGENCIES DO NOT REQUIRE OR CONTEMPLATE THAT THE REQUISITIONING AGENCY MAKE AN AUDIT OF THE COSTS OF SUCH SERVICES TO DETERMINE THE CORRECTNESS OF THE CHARGES, AN AGENCY MAY CONTRACT FOR INTER-AGENCY SERVICES AND PAY THE CHARGES FOR SUCH SERVICES AT RATES ESTABLISHED BY THE SERVICING AGENCY, PROVIDED THEY ARE REPORTED TO BE BASED UPON THE COST OF RENDERING THE SERVICES AND DO NOT APPEAR TO BE EXCESSIVE.

COMPTROLLER GENERAL WARREN TO THE DIRECTOR, MUTUAL SECURITY AGENCY, APRIL 29, 1953:

REFERENCE IS MADE TO LETTER OF APRIL 13, 1953, FROM THE DEPUTY DIRECTOR FOR MUTUAL SECURITY, REQUESTING A DECISION AS TO WHETHER THE MUTUAL SECURITY AGENCY, IN MAKING PAYMENT ON A COST BASIS FOR REIMBURSABLE ITEMS OR SERVICES FROM ANOTHER GOVERNMENT AGENCY UNDER THE PROVISIONS OF SECTION 601 OF THE ECONOMY ACT OF JUNE 30, 1932, 47 STAT. 417, AS AMENDED, 31 U.S.C. 686, AND OTHER EXISTING LEGISLATION IS (A) RESPONSIBLE FOR SEEING THAT CHARGES BILLED TO IT FOR SERVICES FURNISHED BY ANOTHER AGENCY ARE BASED ON ACTUAL COST TO THAT AGENCY, OR, WHETHER THE MUTUAL SECURITY AGENCY (B) MAY CONTRACT FOR AND PAY CHARGES AT RATES ESTABLISHED BY THE SERVICING AGENCY AS LONG AS THEY DO NOT APPEAR TO BE PATENTLY EXCESSIVE.

SECTION 601 OF THE ECONOMY ACT WITH RESPECT TO PAYMENT FOR ITEMS OR SERVICES OBTAINED FROM OTHER AGENCIES OF THE GOVERNMENT, PROVIDES THAT THE PROCURING AGENCY "* * * SHALL PAY PROMPTLY * * * ALL OR PART OF THE ESTIMATED OR ACTUAL COST THEREOF AS DETERMINED BY (THE REQUISITIONED AGENCY) * * * BUT PROPER ADJUSTMENTS ON THE BASIS OF THE ACTUAL COST OF THE (ITEM OR SERVICES) * * * PAID FOR IN ADVANCE, SHALL BE MADE AS MAY BE AGREED UPON BY THE (AGENCIES) * * * CONCERNED * * *.'

THIS LANGUAGE WAS DISCUSSED IN 22 COMP. GEN. 74 AND IT WAS THERE HELD THAT THE STATUTE REQUIRED REIMBURSEMENT TO BE MADE "ON THE BASIS OF THE ACTUAL COST OF PERFORMING THE SERVICE "AS MAY BE AGREED UPON" BY THE AGENCIES CONCERNED.' SUCH COST WAS CONSTRUED IN THE SAID DECISION TO INCLUDE OVERHEAD OR INDIRECT COSTS--- "ITEMS WHICH COMMONLY ARE RECOGNIZED AS ELEMENTS OF COST, NOTWITHSTANDING SUCH ITEMS MAY NOT HAVE RESULTED IN DIRECT EXPENDITURES * * *.' ALSO, IT WAS STATED THEREIN THAT "THE QUESTION AS TO THE "PROPER ADJUSTMENTS" TO BE MADE AS REIMBURSEMENT FOR SERVICES RENDERED UNDER THE TERMS OF THE APPLICABLE STATUTE IS ONE PRIMARILY FOR ADMINISTRATIVE CONSIDERATION, TO BE DETERMINED BY AGREEMENT BETWEEN THE AGENCIES CONCERNED.'

THE STATUTE AS THUS CONSTRUED CLEARLY ESTABLISHES THE PRINCIPLE THAT PAYMENT FOR THE SERVICES SHALL BE UPON A COST BASIS AND SUCH PRINCIPLE IS BINDING UPON BOTH THE PROCURING AND REQUISITIONED AGENCY IN FIXING THE CHARGES TO BE BILLED AND PAID. HOWEVER, AND APPARENTLY IN RECOGNITION OF THE FACT THAT BOTH AGENCIES ARE THOSE OF THE ONE GOVERNMENT AND THAT SLIGHT UNDER OR OVER CHARGES WOULD NOT RESULT IN AN ACTUAL LOSS OF GOVERNMENT FUNDS, THE STATUTE DOES NOT REQUIRE OR CONTEMPLATE THAT THE REQUISITIONING AGENCY MAKE A DETAILED AUDIT OF THE COSTS OF THE AGENCY RENDERING THE SERVICE BUT RATHER THAT THE AMOUNT TO BE PAID BE FIXED BY AGREEMENT BETWEEN THE AGENCIES CONCERNED.

THE OTHER EXISTING LAWS CONTEMPLATING REIMBURSEMENT TO OTHER GOVERNMENT AGENCIES ON A COST BASIS REFERRED TO IN THE DEPUTY DIRECTOR'S LETTER PRESUMABLY ARE SECTION 113 (A) OF THE ECONOMIC COOPERATION ACT OF 1948, 62 STAT. 148, 22 U.S.C. 1511 (A) AND SECTION 403 OF THE MUTUAL DEFENSE ASSISTANCE ACT OF 1949, 63 STAT. 717, 22 U.S.C. 1574. SECTION 113A OF THE ECONOMIC COOPERATION ACT OF 1948, INSOFAR AS MATERIAL PROVIDES THAT REIMBURSEMENT OR PAYMENT FOR SERVICES PROCURED FROM ANOTHER AGENCY OF THE GOVERNMENT SHALL BE MADE "AT REPLACEMENT COST, OR, IF REQUIRED BY LAW, AT ACTUAL COST, OR AT ANY OTHER PRICE AUTHORIZED BY LAW AND AGREED TO BETWEEN THE ADMINISTRATOR ( DIRECTOR FOR MUTUAL SECURITY) AND SUCH AGENCY.' SECTION 403 OF THE MUTUAL DEFENSE ASSISTANCE ACT SO FAR AS MATERIAL PROVIDES THAT REIMBURSEMENT "SHALL INCLUDE EXPENSES ARISING FROM OR INCIDENT TO OPERATIONS UNDER THIS ACT" AND "IN AN AMOUNT EQUAL TO THE VALUE OF SUCH EQUIPMENT AND MATERIALS, SERVICES (OTHER THAN SALARIES OF MEMBERS OF THE ARMED FORCES OF THE UNITED STATES) OR OTHER ASSISTANCE AND SUCH EXPENSES.' THE SECTION DEFINES VALUE AS TO CERTAIN SPECIFIC ITEMS AND AS TO THE REMAINDER AS THE GROSS COST TO THE UNITED STATES OF SUCH EQUIPMENT AND MATERIALS TO BE PRICED ,IN ACCORDANCE WITH THE CURRENT STANDARD PRICING POLICIES" OF THE SERVICING AGENCY.

ACCORDINGLY, AND IN ANSWER TO THE SPECIFIC QUESTIONS OF THE DEPUTY DIRECTOR, YOUR AGENCY AS WELL AS THE SERVICING AGENCY IS BOUND BY THE GENERAL REQUIREMENT THAT THE SERVICES BE FURNISHED AT COST BUT SUCH RESPONSIBILITY DOES NOT EXTEND TO YOUR AUDITING THE COSTS OF THE SERVICING AGENCY TO DETERMINE THE CORRECTNESS OF THE CHARGES MADE BY IT AND YOU MAY CONTRACT FOR SUCH INTER-AGENCY SERVICES AND PAY CHARGES THEREFOR AT RATES ESTABLISHED BY THE SERVICING AGENCY SO LONG AS THEY ARE REPORTED TO BE BASED UPON THE COST OF RENDITION OF THE SERVICE AND DO NOT APPEAR TO BE EXCESSIVE.