B-119490, AUG 5, 1954

B-119490: Aug 5, 1954

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WITH THE REQUEST THAT AN ADVANCE DECISION BE RENDERED AS TO WHETHER PAYMENT THEREON IS AUTHORIZED. THE CONTRACTOR WAS DIRECTED TO MAKE SUCH PAYMENTS UNDER THE CONTRACT BY WAGE ADJUSTMENT ORDERS NOS. 4. STATED THAT THE ADJUSTMENTS PROVIDED FOR THEREIN WERE NECESSARY IN ORDER TO COMPLETE THE WORK PROMPTLY AND EFFICIENTLY AND THAT THE CONTRACTOR WOULD BE REIMBURSED UNDER THE CONTRACT FOR THE EXTRA COSTS INVOLVED. PARAGRAPH 1 OF ARTICLE IV OF THE CONTRACT PROVIDED IN MATERIAL PART THAT THE CONTRACTOR WOULD BE REIMBURSED FOR SUCH OF ITS ACTUAL EXPENDITURES IN THE PERFORMANCE OF THE WORK AS WERE APPROVED OR RATIFIED BY THE CONTRACTING OFFICER AND INCLUDED IN THE FOLLOWING ITEMS: "A. SUCH OTHER COSTS AS ARE REIMBURSABLE IN ACCORDANCE WITH THE PERTINENT PART OF SECTION XV.

B-119490, AUG 5, 1954

PRECIS-UNAVAILABLE

MAJOR C.C. WHITESIDE, F.O., U.S. ARMY:

THERE HAS BEEN RECEIVED BY REFERENCE FROM THE OFFICE OF THE CHIEF OF FINANCE YOUR LETTER OF FEBRUARY 8, 1954, TRANSMITTING BUREAU VOUCHER NO. 5950 IN THE AMOUNT OF $1,702.92 STATED IN FAVOR OF FOSTER-CREIGHTON CONSTRUCTORS UNDER COST-PLUS-A-FIXED-FEE CONSTRUCTION CONTRACT NO. DA 40- 058-ENG-1933, DATED JUNE 4, 1953, WITH THE REQUEST THAT AN ADVANCE DECISION BE RENDERED AS TO WHETHER PAYMENT THEREON IS AUTHORIZED.

THE VOUCHER COVERS REIMBURSEMENT TO THE CONTRACTOR FOR CERTAIN AMOUNTS PAID TO THE NATIONAL ELECTRICAL BENEFIT FUND AND TO THE IRONWORKERS DISTRICT COUNCIL OF SOUTHERN OHIO AND VICINITY WELFARE FUND FOR THE ACCOUNT OF THE ELECTRICAL WORKERS AND EACH MEMBER OF THE INTERNATIONAL ASSOCIATION OF BRIDGE, STRUCTURAL AND ORNAMENTAL IRONWORKERS, LOCAL UNION NO. 301, EMPLOYED IN CONNECTION WITH THE CONTRACT WORK. THE AMOUNTS PAID REPRESENT ONE PERCENT OF THE GROSS WAGES PAID TO ALL OF THE ELECTRICAL WORKERS DURING THE PERIODS OF TIME INVOLVED, AND THE AMOUNT DERIVED BY MULTIPLYING THE TOTAL MAN-HOURS WORKED BY THE IRON WORKERS DURING SUCH PERIOD BY $0.075. THE CONTRACTOR WAS DIRECTED TO MAKE SUCH PAYMENTS UNDER THE CONTRACT BY WAGE ADJUSTMENT ORDERS NOS. 4, 11 AND 17, EFFECTIVE JUNE 15, JUNE 30 AND JUNE 29, 1953, RESPECTIVELY, ISSUED BY THE DIRECTION OF THE DIVISION ENGINEER, AS THE AUTHORIZED REPRESENTATIVE OF THE CHIEF OF ENGINEERS. THE ORDERS, WHICH ALSO AUTHORIZED CERTAIN INCREASES IN WAGE RATES, STATED THAT THE ADJUSTMENTS PROVIDED FOR THEREIN WERE NECESSARY IN ORDER TO COMPLETE THE WORK PROMPTLY AND EFFICIENTLY AND THAT THE CONTRACTOR WOULD BE REIMBURSED UNDER THE CONTRACT FOR THE EXTRA COSTS INVOLVED.

PARAGRAPH 1 OF ARTICLE IV OF THE CONTRACT PROVIDED IN MATERIAL PART THAT THE CONTRACTOR WOULD BE REIMBURSED FOR SUCH OF ITS ACTUAL EXPENDITURES IN THE PERFORMANCE OF THE WORK AS WERE APPROVED OR RATIFIED BY THE CONTRACTING OFFICER AND INCLUDED IN THE FOLLOWING ITEMS:

"A. ALL LABOR, ***

"U. SUCH OTHER COSTS AS ARE REIMBURSABLE IN ACCORDANCE WITH THE PERTINENT PART OF SECTION XV, ENTITLED 'CONTRACT COST PRINCIPLES', ARMED SERVICES PROCUREMENT REGULATIONS OF THE DEPARTMENT OF DEFENSE, AS SAME MAY BE HEREAFTER AMENDED. ***"

UNDER PARAGRAPH 3 OF ARTICLE XII OF THE CONTRACT, ALL WAGE RATES FOR LABORERS AND MECHANICS ENGAGED IN WORK THEREUNDER WERE REQUIRED TO BE APPROVED IN WRITING BY THE CHIEF OF ENGINEERS, OR HIS REPRESENTATIVE.

SECTION XV, PART 4, OF THE ARMED SERVICES PROCUREMENT REGULATIONS, AS AMENDED TO APPLY TO CONTRACTS EXECUTED ON OR AFTER JANUARY 1, 1952, 32 CFR 414.402-414.404, PROVIDES IN MATERIAL PART AS FOLLOWS:

"SEC. 414.402 GENERAL BASIS FOR DETERMINATION OF COSTS. THE TOTAL COST OF A COST-REIMBURSEMENT TYPE CONTRACT FOR CONSTRUCTION OR FOR ARCHITECT- ENGINEER SERVICES RELATED TO CONSTRUCTION IS THE SUM OF THE ALLOWABLE COSTS INCIDENT TO THE PERFORMANCE OF THE CONTRACT, LESS APPLICABLE INCOME AND OTHER CREDITS. THE TESTS USED IN DETERMINING THE ALLOWABILITY OF COSTS ALSO INCLUDE (A) REASONABLENESS AND (B) ANY LIMITATIONS AS TO TYPES OR AMOUNTS OF COST ITEMS SET FORTH IN THIS SUBPART OR OTHERWISE INCLUDED IN THE CONTRACT. FAILURE TO MENTION ANY ITEM OF COST IN THIS PART IS NOT INTENDED TO IMPLY THAT IT IS EITHER ALLOWABLE OR NOT ALLOWABLE. ***

"SEC. 414.403 EXAMPLES OF ITEMS OF ALLOWABLE COSTS. ***

"(P) WAGES AND SALARIES.

"SEC. 414.404 EXAMPLES OF ITEMS OF UNALLOWABLE COSTS. THE FOLLOWING ITEMS OF COSTS ARE CONSIDERED UNALLOWABLE ***

"(1) MEMBERSHIPS IN TRADE, BUSINESS AND PROFESSIONAL ORGANIZATIONS."

IN YOUR LETTER YOU STATE THAT DOUBT AS TO THE CONTRACTOR'S RIGHT TO BE REIMBURSED FOR THE AMOUNT INVOLVED ARISES BECAUSE OF AN EXCEPTION TAKEN BY THIS OFFICE TO SIMILAR PAYMENTS MADE TO BLAW-KNOX COMPANY ON D.O. VOUCHER NO. 22013, DATED NOVEMBER 5, 1951, AND OTHERS, ACCOUNTS OF COLONEL W.A. EDGAR, F.C., WITH RESPECT TO WHICH A RECLAIM VOUCHER HAD BEEN FORWARDED TO THIS OFFICE FOR AN ADVANCE DECISION ON DECEMBER 18, 1953.

A DECISION WAS RENDERED TO YOU WITH RESPECT TO THE REIMBURSABILITY OF THE REFERRED-TO EXPENDITURES BY THE BLAW-KNOX COMPANY UNDER DATE OF JUNE 30, 1954, B-118177. THE ITEMS OF EXPENSE THERE INVOLVED WERE ASSESSMENTS PAID TO THE NATIONAL ELECTRICAL CONTRACTORS' ASSOCIATION. SINCE THE LATTER IS A TRADE OR BUSINESS ASSOCIATION, PAYMENTS MADE THERETO ORDINARILY WOULD NOT BE REIMBURSABLE UNDER THE TYPE OF CONTRACT HERE INVOLVED. HOWEVER, THE ORGANIZATIONS TO WHICH PAYMENTS WERE MADE IN THE INSTANT CASE OBVIOUSLY ARE NOT ASSOCIATIONS OPERATED FOR THE BENEFIT OF CONTRACTORS, OF TRADE ASSOCIATIONS, WITHIN THE MEANING OF PARAGRAPH (1) OF SEC. 414.404, SUPRA. THEY ARE EMPLOYEE, OR UNION, ORGANIZATIONS, AND, AS URGED IN 3RD INDORSEMENT OF DECEMBER 22, 1953, FROM THE ARMY AUDIT AGENCY, CHATTANOOGA BRANCH OFFICE, TO THE RESIDENT ENGINEER, HOLSTON ORDNANCE WORKS, THEY WERE MORE IN THE NATURE OF ADDITIONAL COMPENSATION TO THE EMPLOYEES CONCERNED. IN ANY EVENT, IT WAS AN EXPENSE WHICH THE CONTRACTOR WAS DIRECTED TO INCUR IN ORDER TO OBTAIN THEIR SERVICES, AND IT IS PROPERLY REIMBURSABLE TO THE CONTRACTOR AS A "LABOR" EXPENSE UNDER THE PROVISIONS OF PARAGRAPH 1(A) OF ARTICLE IV OF THE CONTRACT.

ACCORDINGLY, THE VOUCHER, TOGETHER WITH SUPPORTING PAPERS, IS RETURNED HEREWITH, AND YOU ARE ADVISED THAT PAYMENT THEREON IS AUTHORIZED, IF OTHERWISE CORRECT.