B-121200, OCT. 10, 1955

B-121200, OCT. 10, 1955

TO JOHN F. FORBES AND COMPANY:

FURTHER REFERENCE IS MADE TO THE CLAIMS OF WASHINGTON PHYSICIANS SERVICE, INC., FOR AMOUNTS ALLEGED TO BE DUE FOR ADMINISTRATIVE COSTS INCURRED BY THE CONTRACTOR IN CONNECTION WITH THE PERFORMANCE OF CONTRACT NO. V100IM- 155, DATED SEPTEMBER 13, 1948.

UNDER THE TERMS OF THE CONTRACT, AS RENEWED, THE CONTRACTOR AGREED TO PROVIDE, THROUGH ITS PROFESSIONAL MEMBERS, MEDICAL SERVICES FOR BENEFICIARIES OF THE VETERANS ADMINISTRATION. PROVISIONS OF THE CONTRACT PERTINENT TO THE INSTANT CLAIMS ARE AS FOLLOWS:

"4.THE CONTRACTOR WILL BE RESPONSIBLE TO SEE THAT DIAGNOSIS, TREATMENT AND COST REPORTS REQUIRED BY THE VETERANS ADMINISTRATION ARE IN PROPER FORM, AND THAT PROPER RECORDS ARE MAINTAINED, WHICH WILL BE AVAILABLE FOR REVIEW BY THE VETERANS ADMINISTRATION AT ANY TIME. THE VETERANS ADMINISTRATION WILL REVIEW REPORTS OF SERVICES AND WILL RETURN TO THE CONTRACTOR FOR FURTHER ACTION, WITHOUT ADDITIONAL COST TO THE VETERANS ADMINISTRATION, THOSE WHICH DO NOT MEET THE REQUIREMENTS OF THE VETERANS ADMINISTRATION.

"6. (A) FEES FOR MEDICAL SERVICES WILL BE PAID TO THE CONTRACTOR BY THE VETERANS ADMINISTRATION IN ACCORDANCE WITH THE FEE SCHEDULE, WHICH IS ATTACHED HERETO AND MADE A PART OF THIS AGREEMENT, PLUS AN ADDITIONAL TEN (10) PERCENT OF THE TOTAL OF THE FEES BEING BILLED, WHICH PERCENTAGE REPRESENTS THE ADMINISTRATIVE COST TO THE CONTRACTOR AS REIMBURSEMENT FOR ITS SPECIAL SERVICES. IT IS MUTUALLY UNDERSTOOD THAT THE FEES STATED IN THE FEE SCHEDULE REPRESENT THE MAXIMUM AMOUNT THAT MAY BE CHARGED, AND DO NOT REPRESENT THE AMOUNT TO BE PAID IN EVERY CASE. * *

"9. THE CONTRACTOR CONTEMPLATES THAT THE PERFORMANCE OF THIS AGREEMENT WILL BE WITHOUT PROFIT OR LOSS TO IT, AND IF OPERATING RESULTS ARE AT VARIANCE WITH THIS INTENTION, REVISIONS WILL BE PROPOSED TO PRODUCE NEITHER A PROFIT OR LOSS TO THE CONTRACTOR.

"A. THE ADMINISTRATIVE COST REPORTS REQUIRED BY THIS AGREEMENT SHALL BE FURNISHED THE VETERANS ADMINISTRATION AT QUARTERLY INTERVALS. THE VETERANS ADMINISTRATION OR THE CONTRACTOR ON THE BASIS THEREOF, OR ON THE BASIS OF THE REPORTS OF THE VETERANS ADMINISTRATION SUPERVISORS, WHO SHALL BE PERMITTED TO EXAMINE THE RECORDS OF THE CONTRACTOR FOR THE PURPOSE OF ANALYSIS OF THE STATEMENTS OF COST, INCLUDING RENT PAID, NUMBER OF PERSONS EMPLOYED, PAYMENT OF SALARIES, TRAVEL EXPENSES, ETC., MAY NEGOTIATE SUCH CHANGES AS WILL PRODUCE THE RESULT CONTEMPLATED BY THIS PARAGRAPH.'

BY INFORMAL INQUIRY DATED SEPTEMBER 12, 1950, AND SUPPLEMENT NO. 1 DATED SEPTEMBER 26, 1950, ISSUED BY THE REGIONAL AUDIT OFFICE OF THE GENERAL ACCOUNTING OFFICE, SEATTLE, WASHINGTON, THERE WAS CALLED TO THE ATTENTION OF THE CONTRACTING AGENCY THE FACT THAT PAYMENTS TO THE CONTRACTOR FOR ADMINISTRATIVE COSTS HAD NOT BEEN ADJUSTED TO RESULT IN NEITHER PROFIT NOR LOSS TO THE CONTRACTOR AS PROVIDED BY PARAGRAPH 9A OF THE CONTRACT QUOTED ABOVE. ON THE BASIS OF THE PERCENTAGE OF THE COMBINED ADMINISTRATIVE COSTS OF THE KING AND SKAGIT COUNTY OFFICES TO THE TOTAL INCOME RECEIVED BY SUCH OFFICES DURING LIKE PERIODS IT WAS STATED THAT 7.65 PERCENT WAS CONSIDERED AS A FAIR MEASURE OF PAYMENT TO COVER THE CONTRACTOR'S ADMINISTRATIVE COSTS INSOFAR AS THE RECORDS EXAMINED WERE CONCERNED. AS A RESULT OF THE INQUIRY, THE SUM OF $6,277.86 WAS DEDUCTED FROM VARIOUS VOUCHERS PAID IN MARCH 1951 COVERING SERVICES TO DECEMBER 12, 1950, THEREBY REDUCING REIMBURSEMENT FOR ADMINISTRATIVE COSTS FOR THE PERIOD PRIOR TO DECEMBER 1950 TO 7.65 PERCENT. ADMINISTRATIVE COSTS FROM DECEMBER 12, 1950, TO JUNE 30, 1951, WERE ALSO REIMBURSED AT 7.65 PERCENT.

IN YOUR LETTER OF MARCH 2, 1954, YOU STATE THAT THE ACTUAL ADMINISTRATIVE COSTS INCURRED DURING THE PERIOD DECEMBER 7, 1950, TO JUNE 30, 1951, WERE $8,858.52, BUT REIMBURSEMENT WAS MADE ONLY IN THE AMOUNT OF $5,721.44, AT THE RATE OF 7.65 PERCENT OF THE MEDICAL SERVICES RENDERED, OR A DIFFERENCE OF $3,137.08. FOR THE PERIOD OF OCTOBER 1, 1948, TO DECEMBER 6, 1950, YOU STATE THAT THE CONTRACTOR LIKEWISE WAS REIMBURSED AT THE RATE OF 7.65 PERCENT, LEAVING A DIFFERENCE OF ADMINISTRATIVE COSTS FOR THIS PERIOD OF $4,310.23.

ADMITTEDLY, THE FINDINGS OF THE GENERAL ACCOUNTING OFFICE WHICH WERE BASED UPON THE BEST AVAILABLE RECORDS OF ONLY TWO OF THE TWENTY TWO COUNTY OFFICES INVOLVED ARE NOT ACCURATE. HOWEVER, SINCE, UNDER THE TERMS OF THE CONTRACT, IT WAS INCUMBENT UPON THE PARTIES TO AFFECT AN ADJUSTMENT OF THE 10 PERCENT OPERATING COST PAYMENTS SO AS TO MEET THE NO PROFIT, NO LOSS REQUIREMENT, THE MATTER WAS BROUGHT TO THE ATTENTION OF THE CONTRACTING AGENCY UNDER THE ASSUMPTION THAT A CORRECT FIGURE COULD BE ASCERTAINED UPON CONSIDERATION OF THE OPERATING COST DATA FROM THE ENTIRE 22 OFFICES. FAILING TO SECURE THIS DATA, THE CONTRACTING AGENCY ADJUSTED THE ADMINISTRATIVE COST PAYMENTS FOR THE TWO PERIODS INVOLVED ON THE BASIS OF THE GENERAL ACCOUNTING OFFICE FIGURE OF 7.65 PERCENT.

SINCE THE CLAIM FOR $4,310.23 FOR THE PERIOD OCTOBER 1, 1948, TO DECEMBER 6, 1950, LIKEWISE IS BASED ON THE ADMINISTRATIVE COSTS INCURRED IN ONLY TWO OF THE TWENTY-TWO OFFICES INVOLVED, AND SINCE THE CLAIM FOR $3,137.08 WHICH PERTAINS TO WORK PERFORMED BY THE CONTRACTOR IN ITS SEATTLE OFFICE IS NOT SUPPORTED BY SATISFACTORY DATA AS TO ITS ALLOCATIONS OF COSTS, OUR OFFICE, UNDER DATE OF NOVEMBER 29, 1954, REQUESTED A FURTHER REPORT FROM THE VETERANS ADMINISTRATION BASED ON SUCH ADDITIONAL INFORMATION AS THE CONTRACTOR MIGHT BE ABLE TO FURNISH. THE REQUESTED REPORT HAS BEEN RECEIVED, TOGETHER WITH A LETTER DATED AUGUST 8, 1955, FROM THE MANAGER, WASHINGTON PHYSICIANS SERVICES, TO THE MANAGER OF THE SEATTLE REGIONAL OFFICE OF THE VETERANS ADMINISTRATION IN WHICH IT IS STATED THAT IT IS THE OPINION OF THE CONTRACTOR THAT THERE IS NO NEED TO SUBMIT ANY EVIDENCE IN ADDITION TO THAT ATTACHED TO THE TWO CLAIM VOUCHERS.

AS REPRESENTATIVE OF THE CONTRACTOR, YOU HAVE REVIEWED THE ACCOUNTS OF ONLY THE KING COUNTY OFFICE IN PREPARING THE STATEMENT SUPPORTING THE CLAIM FOR $4,310.23 AND NEITHER YOU NOR THE CONTRACTOR HAVE ATTEMPTED TO BASE THE CLAIM ON THE APPLICABLE PROVISIONS OF THE CONTRACT. YOU RELY ON THE FACT THAT THE KING COUNTY OFFICE BOOKS AS CLOSED FOR ITS FISCAL YEAR WERE AT A VARIANCE WITH FIGURES FURNISHED BY THE KING COUNTY OFFICE TO OUR AUDITORS AND USED BY US IN BRINGING THE CONTRACT PROVISIONS FOR ADJUSTMENT TO THE ATTENTION OF THE CONTRACTING AGENCY. WE DO NOT CONTEND THAT OUR INFORMAL INQUIRY FIGURES WHICH WERE INCOMPLETE, AND LATER FOUND TO HAVE BEEN BASED ON INCORRECT INFORMATION FURNISHED BY THE CONTRACTOR, CONSTITUTED A PROPER BASIS FOR THE RATE ADJUSTMENT AND COLLECTION MADE BY THE VETERANS ADMINISTRATION. ON THE OTHER HAND, WE DO NOT AGREE THAT CORRECTION OF THE KING COUNTY COST DATA WHICH RESULTED IN COMPUTATION OF A HIGHER COST PERCENTAGE FIGURE THEN WAS USED IN OUR STATEMENT REPRESENTS A PROPER BASIS FOR ADJUSTMENT OF THE CONTRACT RATE OF PAYMENT. REGARDING A CLAIM FOR $3,137.08, COVERING WORK PERFORMED BY THE CONTRACTOR IN ITS SEATTLE OFFICE, IT APPEARS FROM EACH OF THE AUDIT REPORTS OF THE VETERANS ADMINISTRATION AND OUR OFFICE THAT THE CONTRACTOR HAS FAILED TO PRODUCE SATISFACTORY SUPPORTING DATA FOR ITS ALLOCATIONS OF COSTS TO THE CONTRACT WORK SO AS TO WARRANT THE NEGOTIATION OF A REVISED RATE FOR THE PERIOD INVOLVED PURSUANT TO THE APPLICABLE PROVISIONS OF THE CONTRACT.

IT LONG HAS BEEN THE ESTABLISHED RULE OF OUR OFFICE AND THE COURTS THAT THOSE ASSERTING CLAIMS AGAINST THE UNITED STATES HAVE THE BURDEN OF ESTABLISHING THEIR VALIDITY AND THE ACCOUNTING OFFICERS ARE NOT REQUIRED OR AUTHORIZED TO CERTIFY FOR PAYMENT CLAIMS NOT SO ESTABLISHED. LONGWILL V. UNITED STATES, 17 C.CLS. 288, 291; CHARLES V. UNITED STATES, 19 C.CLS. 316, 319; 18 COMP. GEN. 199; 26 ID. 778, 781. ACCORDINGLY, SINCE THE PRESENT RECORD DOES NOT CONTAIN SUFFICIENT EVIDENCE IN SUPPORT OF THE CLAIMS, AND SINCE YOU HAVE DECLINED TO FURNISH ANY ADDITIONAL INFORMATION, THERE IS NO ALTERNATIVE BUT TO DISALLOW THE AMOUNTS CLAIMED.