B-123280, JUL. 7, 1955

B-123280: Jul 7, 1955

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WITH THE REQUEST THAT AN ADVANCE DECISION BE RENDERED AS TO WHETHER PAYMENT ON THE VOUCHER IS AUTHORIZED. PAYMENT OF WHICH WAS SUSPENDED ADMINISTRATIVELY FOLLOWING A RULING BY THE STAFF JUDGE ADVOCATE. WHICH WAS BASED ON A QUESTION WHICH WAS RAISED BY THE LOS ANGELES REGIONAL OFFICE OF THE GENERAL ACCOUNTING OFFICE AS TO WHETHER THE SUBCONTRACT WAS LET ON A COST- PLUS-A-PERCENTAGE-OF-COST BASIS. SECTION 1 OF THE SPECIAL CONDITIONS OF THE SUBCONTRACT PROVIDES THAT THE FEE WILL BE A SUM EQUAL TO THREE (3) TIMES THE PRODUCTIVE PAYROLL. THAT ALL MATERIALS SUCH AS PENCILS AND PAPER WILL BE INCLUDED IN THE FEE. THE SUBCONTRACTOR WAS AUTHORIZED AND INSTRUCTED TO PERFORM THE REQUIRED ENGINEERING SERVICES AT A TOTAL COST NOT TO EXCEED $21.

B-123280, JUL. 7, 1955

TO LIEUTENANT COLONEL G. F. WANDRES, FINANCE OFFICER, UNITED STATES AIR FORCE:

THERE HAS BEEN RECEIVED BY REFERENCE FROM THE DIRECTOR OF FINANCE, UNITED STATES AIR FORCE, A RECLAIM VOUCHER IN THE AMOUNT OF $24,197.10, STATE IN FAVOR OF THE DOUGLAS AIRCRAFT COMPANY, INC., UNDER FACILITIES CONTRACT NO. AF 33/038/-1980, WITH THE REQUEST THAT AN ADVANCE DECISION BE RENDERED AS TO WHETHER PAYMENT ON THE VOUCHER IS AUTHORIZED.

THE RECLAIM REPRESENTS COSTS INCURRED UNDER SUBCONTRACT NO. T AND M 1065- ABC, WITH VAN DYKE AND BARNES, ARCHITECTS AND ENGINEERS, PAYMENT OF WHICH WAS SUSPENDED ADMINISTRATIVELY FOLLOWING A RULING BY THE STAFF JUDGE ADVOCATE, HEADQUARTERS, AIR MATERIEL COMMAND, WHICH WAS BASED ON A QUESTION WHICH WAS RAISED BY THE LOS ANGELES REGIONAL OFFICE OF THE GENERAL ACCOUNTING OFFICE AS TO WHETHER THE SUBCONTRACT WAS LET ON A COST- PLUS-A-PERCENTAGE-OF-COST BASIS.

UNDER THE PROVISIONS OF THE SUBCONTRACT, AS AMENDED, THE SUBCONTRACTOR AGREED TO PERFORM ARCHITECTURAL AND ENGINEERING OR STRUCTURAL DESIGN IN ACCORDANCE WITH APPROVED INDIVIDUAL WORK ORDERS ISSUED THEREFOR BY THE PRIME CONTRACTOR DURING THE PERIOD MAY 24, 1951, TO MAY 23, 1954. SECTION 1 OF THE SPECIAL CONDITIONS OF THE SUBCONTRACT PROVIDES THAT THE FEE WILL BE A SUM EQUAL TO THREE (3) TIMES THE PRODUCTIVE PAYROLL, NOT INCLUDING THE PERSONAL TIME OF THE PARTNERS, J. H. VAN DYKE AND S. B. BARNES, AND THAT ALL MATERIALS SUCH AS PENCILS AND PAPER WILL BE INCLUDED IN THE FEE.

BY WORK ORDER NO. C-341-7, DATED FEBRUARY 16, 1953, ISSUED BY DOUGLAS AIRCRAFT COMPANY, INC., THE SUBCONTRACTOR WAS AUTHORIZED AND INSTRUCTED TO PERFORM THE REQUIRED ENGINEERING SERVICES AT A TOTAL COST NOT TO EXCEED $21,400. SUBSEQUENT ADDENDA INCREASED THE MAXIMUM COST TO $24,900. THE SUBCONTRACTOR WAS PAID $24,311.46, OR APPROXIMATELY $688 LESS THAN THE STIPULATED LIMITATION OF $24,900.

NOTWITHSTANDING THE CONTENTIONS OF THE PRIME CONTRACTOR AND THE CONTRACTING OFFICER REGARDING THE CEILING OR MAXIMUM PRICE, THE REASONABLENESS OF THE FEE AND THE CONTROLS EXERCISED OVER THE WORK OF THE SUBCONTRACTOR, THE PROVISION FOR PAYMENT OF A FEE EQUAL TO THREE TIMES THE PRODUCTIVE PAYROLL CONSTITUTES AN AGREEMENT FOR PAYMENT ON A COST-PLUS-A- PERCENTAGE-OF-COST BASIS. THIS METHOD OF CONTRACTING IS PROHIBITED BY SECTION 4 (B) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, 41 U.S.C. 153 (B). B-113334, MARCH 24, 1953; 33 COMP. GEN. 533.

HOWEVER, IN THE LAST REFERRED-TO DECISION, IT WAS HELD THAT PRIME CONTRACTORS HOLDING COST REIMBURSABLE CONTRACTS WHO PROCURED INSTALLATION OF FACILITIES AND OTHER SERVICES PURSUANT TO INVALID "COST-PLUS-A- PERCENTAGE-OF-COST," "ADVISE PRICES," OR "PRICE TO BE NEGOTIATED" AGREEMENTS MAY BE REIMBURSED A REASONABLE PRICE FOR THE SERVICES AND SUPPLIES AS DETERMINED OR AGREED UPON BY THE CONTRACTING OFFICER BASED UPON RECOGNIZED COMMERCIAL STANDARDS AND PROCEDURES PRESCRIBED THEREIN.

ACCORDINGLY, THE VOUCHER, TOGETHER WITH SUPPORTING PAPERS, IS RETURNED HEREWITH FOR FURTHER ADMINISTRATIVE CONSIDERATION UNDER THOSE PROCEDURES.