B-115772, DECEMBER 6, 1956, 36 COMP. GEN. 456

B-115772: Dec 6, 1956

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VESSELS - CONSTRUCTION - DIFFERENTIAL SUBSIDIES - CONTRACT MODIFICATION MARINER SALES CONTRACTS WHICH WERE EXECUTED AT A TIME WHEN CERTAIN WORK ITEMS WERE EXCLUDED FROM CONSTRUCTION-DIFFERENTIAL SUBSIDY PAYMENTS MAY NOT BE MODIFIED TO INCREASE THE SUBSIDY PAYMENTS ON THE BASIS OF A SUBSEQUENT DETERMINATION THAT THE ITEMS ARE PROPERLY FOR INCLUSION IN DETERMINATION OF SUBSIDY PAYMENTS. 1956: REFERENCE IS MADE TO A LETTER OF AUGUST 20. IN ORDER TO PAY CONSTRUCTION- DIFFERNETIAL SUBSIDY ON CERTAIN ITEMS OF WORK WHICH WAS DENIED AT THE TIME OF EXECUTION OF THE SUBJECT CONTRACTS. ENCLOSED WITH THE LETTER WAS A COPY OF A MEMORANDUM OF APRIL 4. WAS GRANTED CONSTRUCTION-DIFFERENTIAL SUBSIDY IN CONNECTION WITH ITS PURCHASE OF FOUR MARINERS WHICH INCLUDED WORK ITEMS OF THE SAME NATURE AS THOSE DENIED THE PACIFIC FAR EAST LINE IN ITS 1953 CONTRACTS FOR THE PURCHASE OF THREE MARINERS.

B-115772, DECEMBER 6, 1956, 36 COMP. GEN. 456

VESSELS - CONSTRUCTION - DIFFERENTIAL SUBSIDIES - CONTRACT MODIFICATION MARINER SALES CONTRACTS WHICH WERE EXECUTED AT A TIME WHEN CERTAIN WORK ITEMS WERE EXCLUDED FROM CONSTRUCTION-DIFFERENTIAL SUBSIDY PAYMENTS MAY NOT BE MODIFIED TO INCREASE THE SUBSIDY PAYMENTS ON THE BASIS OF A SUBSEQUENT DETERMINATION THAT THE ITEMS ARE PROPERLY FOR INCLUSION IN DETERMINATION OF SUBSIDY PAYMENTS.

TO THE CHAIRMAN, FEDERAL MARITIME BOARD, DECEMBER 6, 1956:

REFERENCE IS MADE TO A LETTER OF AUGUST 20, 1956, FROM THE VICE CHAIRMAN OF THE FEDERAL MARITIME BOARD, INQUIRING AS TO WHETHER WE PERCEIVE ANY OBJECTION TO THE BOARD'S PROPOSAL TO AMEND MARINER SALES CONTRACTS NOS. FMB-24, FMB-25 AND FMB-26, DATED AUGUST 28, 1953, WITH PACIFIC FAR EAST LINE, INC., IN ORDER TO PAY CONSTRUCTION- DIFFERNETIAL SUBSIDY ON CERTAIN ITEMS OF WORK WHICH WAS DENIED AT THE TIME OF EXECUTION OF THE SUBJECT CONTRACTS. ENCLOSED WITH THE LETTER WAS A COPY OF A MEMORANDUM OF APRIL 4, 1956, FROM COUNSEL FOR PACIFIC FAR EAST LINE, INC., IN SUPPORT OF THE VIEW THAT THE BOARD HAS AUTHORITY TO AMEND THE CONTRACTS AS PROPOSED AND AN OPINION OF THE BOARD'S GENERAL COUNSEL REACHING A CONTRARY CONCLUSION.

IN SUBSEQUENT SALES CONTRACT NOS. MA-1017, MA-1018, MA-1019 AND MA 1020, DATED FEBRUARY 28, 1955, THE AMERICAN PRESIDENT LINES, LTD. WAS GRANTED CONSTRUCTION-DIFFERENTIAL SUBSIDY IN CONNECTION WITH ITS PURCHASE OF FOUR MARINERS WHICH INCLUDED WORK ITEMS OF THE SAME NATURE AS THOSE DENIED THE PACIFIC FAR EAST LINE IN ITS 1953 CONTRACTS FOR THE PURCHASE OF THREE MARINERS. YOU STATE THAT THE BOARD DESIRES, IF IT IS LEGALLY PROPER, TO AMEND THE LATTER'S CONTRACTS IN THE INTEREST OF UNIFORMITY OF ITS DECISIONS AS TO SUBSIDIZED OPERATORS.

IN THE MEMORANDUM FROM THE COUNSEL FOR PACIFIC FAR EAST LINE, SECTION 207 OF THE MERCHANT MARINE ACT, 1936, 46 U.S.C. 1117, IS CITED AS THE LEGAL BASIS FOR THE VIEW THAT THE BOARD HAS AUTHORITY TO AMEND THE EXISTING CONTRACTS TO INCREASE THE GOVERNMENT'S SUBSIDIZATION.

THE ESTABLISHED RULE PROHIBITING MODIFICATION OF GOVERNMENT CONTRACTS UNLESS MADE IN THE INTEREST OF THE UNITED STATES IS CORRECTLY STATED BY YOUR GENERAL COUNSEL. SECTION 207 OF THE ACT AUTHORIZES THE BOARD TO ENTER INTO CONTRACTS "IN THE SAME MANNER THAT A PRIVATE CORPORATION MAY CONTRACT WITHIN THE SCOPE OF THE AUTHORITY CONFERRED BY ITS CHARTER.' (ITALICS SUPPLIED) THE BOARD'S AUTHORITY TO EXECUTE CONSTRUCTION- DIFFERENTIAL SUBSIDY CONTRACTS IS PROVIDED BY TITLE V OF ITS CHARTER ( MERCHANT MARINE ACT, 1936) WHICH CONTEMPLATES THAT THE EXECUTION OF SUCH CONTRACTS IS THE CONSUMMATION OF ADMINISTRATIVE DETERMINATIONS MADE IN ACCORDANCE WITH THE PROVISIONS OF THE STATUTE AND ACCEPTANCE THEREOF BY THE OPERATOR. ACCORDINGLY, THE LEGAL RIGHTS AND LIABILITIES OF BOTH THE GOVERNMENT AND PACIFIC FAR EAST LINE WERE ESTABLISHED BY THE 1953 CONTRACTS. A SUBSEQUENT CHANGE IN ADMINISTRATIVE POLICY AS TO ITEMS PROPERLY INCLUDABLE FOR SUBSIDY PURPOSES DOES NOT PROVIDE A LEGAL BASIS FOR AMENDING EXISTING VALID CONTRACTS TO INCREASE THE AMOUNT OF GOVERNMENT SUBSIDTY ANY MORE THAN IT WOULD WARRANT A REDUCTION IN THE AMOUNT OF THE GOVERNMENT'S SUBSIDY. IN OTHER WORDS, IF THE BOARD SHOULD AT SOME FUTURE DATE DETERMINE THAT ITS SUBSIDIZATION OF CERTAIN ITEMS IN THE PAST SHOULD BE DISCONTINUED, OBVIOUSLY SECTION 207 WOULD PROVIDE NO LEGAL BASIS FOR AMENDING THE EXISTING AMERICAN PRESIDENT LINES CONTRACTS TO DECREASE THE AMOUNT OF THE GOVERNMENT'S SUBSIDY THEREIN PROVIDED. YOUR GENERAL COUNSEL CONCLUDES THAT SINCE NO POSSIBLE GAIN WOULD INURE TO THE GOVERNMENT BY NOW GIVING ADDITIONAL SUBSIDTY THROUGH THE PROPOSED MODIFICATION OF THE CONTRACTS, THERE IS NO LEGAL AUTHORITY IN THE BOARD TO GRANT THE REQUEST OF PACIFIC FAR EAST LINES.

YOU ARE ADVISED THAT WE CONCUR IN THE REASONS AND CONCLUSION OF YOUR GENERAL COUNSEL.