B-120993, SEPTEMBER 27, 1954, 34 COMP. GEN. 145

B-120993: Sep 27, 1954

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REFUNDS REPRESENT AN ADJUSTMENT IN THE CONTRACT PRICE AND MAY BE DEPOSITED TO THE CREDIT OF THE APPROPRIATION CURRENT AT TIME RECEIVED ONLY WHEN ORIGINAL PAYMENT FOR THE WORK WAS MADE FROM SUCH APPROPRIATION. 1954: REFERENCE IS MADE TO YOUR LETTER DATED AUGUST 10. IT IS STATED IN THE MEMORANDUM THAT ONE OF THE FUNCTIONS OF THE AERONAUTICAL CENTER AT OKLAHOMA CITY. IS TO CONTRACT FOR AND SUPERVISE THE OVERHAUL OF AIRCRAFT ENGINES AND COMPONENTS FOR CIVIL AERONAUTICS ADMINISTRATION AIRCRAFT. IN THE EVENT IT IS NECESSARY TO REMOVE THE ENGINE FROM THE AIRCRAFT PRIOR TO THE EXPIRATION OF 500 FLIGHT-HOURS AS A RESULT OF MALFUNCTIONING NOT CAUSED BY IMPROPER OPERATION ON THE PART OF THE CIVIL AERONAUTICS ADMINISTRATION AT THE RATE SET FORTH BELOW FOR EACH OF THE UNUSED HOURS OF THE GUARANTEE TIME.

B-120993, SEPTEMBER 27, 1954, 34 COMP. GEN. 145

APPROPRIATIONS - REIMBURSEMENT - REFUNDS OF CONTRACT PAYMENTS UNDER A CONTRACT FOR OVERHAULING AIRCRAFT ENGINES WHICH GUARANTEED A MINIMUM NUMBER OF FLIGHT HOURS FOR THE OVERHAULED ENGINES AND PROVIDED FOR REFUNDS OR CREDITS COMPUTED ON THE NUMBER OF HOURS THE ENGINES FAILED TO FUNCTION WITHIN THE GUARANTY PERIOD, REFUNDS REPRESENT AN ADJUSTMENT IN THE CONTRACT PRICE AND MAY BE DEPOSITED TO THE CREDIT OF THE APPROPRIATION CURRENT AT TIME RECEIVED ONLY WHEN ORIGINAL PAYMENT FOR THE WORK WAS MADE FROM SUCH APPROPRIATION. REFUNDS ACCRUING TO THE GOVERNMENT FROM CONTRACTOR WHO PERFORMED ORIGINAL OVERHAUL OF AIRCRAFT ENGINES AND, WHEN ENGINES FAILED TO FUNCTION, PERFORMED A SECOND OVERHAUL UNDER CONTRACT WHICH GUARANTEED THE PERFORMANCE OF THE ENGINES AND PROVIDED FOR REFUNDS OR CREDITS COMPUTED ON THE NUMBER OF HOURS THE ENGINES FAILED TO FUNCTION WITHIN THE GUARANTY PERIOD, MAY BE APPLIED AS A CREDIT ON ANY AMOUNT DUE CONTRACTOR ON OTHER BILLS, IF THE BILLS FOR THE SERVICES WOULD OTHERWISE BE FOR CREDIT AND CHARGEABLE AGAINST THE SAME APPROPRIATION. CF. 27 COMP. GEN. 384.

ACTING COMPTROLLER GENERAL WEITZEL TO THE SECRETARY OF COMMERCE, SEPTEMBER 27, 1954:

REFERENCE IS MADE TO YOUR LETTER DATED AUGUST 10, 1954, ENCLOSING FOR CONSIDERATION AND REPLY A MEMORANDUM DATED JULY 30, 1954, OF THE ACTING ADMINISTRATOR OF CIVIL AERONAUTICS POSING CERTAIN QUESTIONS WITH RESPECT TO THE HANDLING OF REFUNDS AND CREDITS RECEIVED UNDER CONTRACTS FOR THE OVERHAUL OF AIRCRAFT ENGINES.

IT IS STATED IN THE MEMORANDUM THAT ONE OF THE FUNCTIONS OF THE AERONAUTICAL CENTER AT OKLAHOMA CITY, OKLAHOMA, IS TO CONTRACT FOR AND SUPERVISE THE OVERHAUL OF AIRCRAFT ENGINES AND COMPONENTS FOR CIVIL AERONAUTICS ADMINISTRATION AIRCRAFT, AND THAT A TYPICAL ENGINE OVERHAUL CONTRACT CONTAINS A GUARANTEE-WARRANTY CLAUSE, THE PERTINENT PORTION OF WHICH READS AS FOLLOWS:

GUARANTEE-1WARRANTY: THE CIVIL AERONAUTICS ADMINISTRATION EXPECTS, BASED UPON THE AGE AND PAST OPERATING EXPERIENCE OF EACH ENGINE TO BE OVERHAULED UNDER THIS CONTRACT, TO OBTAIN FROM 800 TO 1,000 FLIGHT HOURS OF SATISFACTORY OPERATION FROM EACH ENGINE.

BY AWARD OF THIS CONTRACT, THE CONTRACTOR GUARANTEES A MINIMUM OF 500 FLIGHT-HOURS USED FOR EACH ENGINE PRIOR TO THE NECESSITY OF REMOVING SUCH ENGINE FROM THE AIRCRAFT BY REASON OF MALFUNCTIONING. IN THE EVENT IT IS NECESSARY TO REMOVE THE ENGINE FROM THE AIRCRAFT PRIOR TO THE EXPIRATION OF 500 FLIGHT-HOURS AS A RESULT OF MALFUNCTIONING NOT CAUSED BY IMPROPER OPERATION ON THE PART OF THE CIVIL AERONAUTICS ADMINISTRATION AT THE RATE SET FORTH BELOW FOR EACH OF THE UNUSED HOURS OF THE GUARANTEE TIME. (THE RATE PER HOUR SO SPECIFIED BELOW IS BASED ON AVERAGE OVERHAUL COST TO THE ENGINE OF THE TYPE SPECIFIED; PLUS TRANSPORTATION COST TO AND FROM THE CONTRACTOR'S OVERHAUL STATION AND PLUS THE COST OF INSTALLING THE ENGINE IN AN AIRCRAFT AND ITS REMOVAL THEREFROM.)

CHART DESIGNATION OF ENGINE PENALTY PER UNUSED FLIGHT HOUR R-985-AN-1, 2 OR 3 ---------------------------------------------- $2.50 R-1830-90D OR 92 ----------------------------------------------- $5.50 R-2000-7 ----------- ------------------------------------------- - $8.50

THE ENGINES OVERHAULED OR RE-OVERHAULED, IT IS STATED, ARE PLACED IN STOCK FOR LATER USE IN AIRCRAFT OTHER THAN THE ONES FROM WHICH THEY WERE REMOVED, AND MALFUNCTIONING OF AN ENGINE MIGHT NOT BE DISCOVERED FOR SEVERAL MONTHS, SOMETIMES THE NEXT FISCAL YEAR, AFTER THE COMPLETION OF THE OVERHAUL. SINCE REFUNDS AND CREDITS RECEIVED UNDER THE GUARANTEE- WARRANTY CLAUSE REPRESENT THE ESTIMATED VALUE OF THE REMAINING SERVICE DUE THE ADMINISTRATION UNDER THE CONTRACT, THE POSITION IS ADVANCED THAT THEY BE HANDLED SOMEWHAT IN THE MANNER OF REPLACEMENT CONTRACTS, OR AS LIQUIDATED DAMAGES, AND FOR CREDIT TO THE APPROPRIATION, RATHER THAN FOR DEPOSIT INTO THE TREASURY AS MISCELLANEOUS RECEIPTS UNDER THE REQUIREMENT OF SECTION 3617 OF THE REVISED STATUTES, 31 U.S.C. 484.

THE SPECIFIC QUESTIONS PRESENTED BY THE ADMINISTRATION ARE AS FOLLOWS:

1. MAY THE CAA REDEPOSIT TO THE CREDIT OF THE CURRENT APPROPRIATION FUNDS RECEIVED FROM ENGINE OVERHAUL CONTRACTORS FOR MALFUNCTIONING OF OVERHAULED ENGINES PRIOR TO EXPIRATION OF THE GUARANTEE PERIOD, REGARDLESS OF WHETHER PAYMENT WAS ORIGINALLY MADE FROM THE CURRENT APPROPRIATION?

2. IF THE REPLY TO QUESTION 1 IS IN THE NEGATIVE, MAY FUNDS RECEIVED BE REDEPOSITED TO THE CURRENT APPROPRIATION IF THE ORIGINAL PAYMENT WAS MADE FROM THAT APPROPRIATION?

3. IF THE SAME OVERHAUL CONTRACTOR PERFORMS THE SECOND OVERHAUL AFTER FAILURE OF AN ENGINE TO PERFORM AS GUARANTEED, MAY THE CREDIT BE APPLIED ON OTHER BILLS OF HIS AGAINST THE CAA?

UNDER THE INSTANT CONTRACT PROVISION THE CONTRACTOR AGREES THAT IN THE EVENT 500 HOURS SERVICE IS NOT PROVIDED BY AN OVERHAULED ENGINE, REIMBURSEMENT OR CREDIT WILL BE GIVEN AT A PRESCRIBED RATE FOR EACH UNUSED HOUR. THE AMOUNT OF SUCH REIMBURSEMENTS OR CREDITS REPRESENTS THE ESTIMATED VALUE OF THE REMAINING SERVICE AND THEREFORE MAY REASONABLY BE CONSIDERED AS AN ADJUSTMENT IN THE CONTRACT PRICE. CF. 27 COMP. GEN. 384. WHILE CREDIT TO AN APPROPRIATION OTHER THAN THAT ORIGINALLY CHARGED WITH THE CONTRACT WORK WOULD AMOUNT TO AN AUGMENTATION THEREOF, CREDIT MAY PROPERLY BE MADE TO THE APPROPRIATION ORIGINALLY CHARGED UNDER THE CONTRACT. IN THE EVENT SUCH APPROPRIATION HAS LAPSED, THE REFUNDS SHOULD BE DEPOSITED IN THE MISCELLANEOUS RECEIPT ACCOUNT "3590 REPAYMENTS, LAPSED APPROPRIATIONS.'

IN LINE WITH THE FOREGOING QUESTION NO. 1 IS ANSWERED IN THE NEGATIVE; QUESTION NO. 2 IN THE AFFIRMATIVE; AND QUESTION NO. 3 IN THE AFFIRMATIVE IN THOSE INSTANCES WHEN THE REFUND AND THE BILL FOR SERVICES WOULD OTHERWISE BE FOR CREDIT TO AND CHARGEABLE AGAINST THE SAME APPROPRIATION.