B-127281, APR. 10, 1956

B-127281: Apr 10, 1956

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TO THE HONORABLE SECRETARY OF THE ARMY: REFERENCE IS MADE TO A LETTER DATED MARCH 8. IT IS REPORTED THAT SINCE THE TOWN OF FORSYTH DID NOT HAVE THE NECESSARY FACILITIES TO PERFORM THE WORK REQUIRED UNDER THE CONTRACT. CERTAIN SUBCONTRACTS WERE ENTERED INTO BY THE PRIME CONTRACTOR. IT IS STATED IN THE LETTER OF MARCH 8 1956. THAT IT IS PROPOSED. UNLESS OBJECTION IS INTERPOSED BY THIS OFFICE. THAT IS TO SAY. IT IS PROPOSED TO INCREASE THAT AMOUNT BY $2. IT IS REPORTED THAT ALTHOUGH ARTICLE 3A OF THE CONTRACT PROVIDES THAT "THE CONTRACTOR AGREES TO ACCEPT THE LUMP-SUM AMOUNT OF $7. " THE FACT OF THE MATTER IS THAT NO SUM WHATEVER WAS INCLUDED IN THAT AMOUNT FOR OVERHEAD. IT IS REPORTED FURTHER THAT THE RELOCATION WAS INITIATED BY THE GOVERNMENT.

B-127281, APR. 10, 1956

TO THE HONORABLE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO A LETTER DATED MARCH 8, 1056, FROM THE ASSISTANT SECRETARY OF THE ARMY (LOGISTICS), SUBMITTING FOR CONSIDERATION THE MATTER OF A PROPOSED MODIFICATION OF CONTRACT NO. DA 03-050-ENG-108, DATED JANUARY 5, 1950, WITH THE BOARD OF TRUSTEES OF THE TOWN OF FORSYTH, MISSOURI, FOR THE RELOCATION OF CERTAIN WATER AND STREET FACILITIES IN CONNECTION WITH THE BULL SHOALS DAM AND RESERVOIR PROJECT.

THE RECORD SHOWS THAT UNDER THE CONTRACT OF JANUARY 5, 1950, THE GOVERNMENT AGREED TO REIMBURSE THE BOARD OF TRUSTEES OF THE TOWN OF FORSYTH, THE PRIME CONTRACTOR, FOR THE COST OF THE WORK NECESSARY TO REPLACE STREETS AND WATER FACILITIES IN THE TOWN OF FORSYTH IN CONNECTION WITH THEIR RELOCATION, NOT TO EXCEED THE SUM OF $85,300, INCLUDING THE SUM OF $7,300 FOR ENGINEERING EXPENSE, OVERHEAD, ETC. IT IS REPORTED THAT SINCE THE TOWN OF FORSYTH DID NOT HAVE THE NECESSARY FACILITIES TO PERFORM THE WORK REQUIRED UNDER THE CONTRACT, CERTAIN SUBCONTRACTS WERE ENTERED INTO BY THE PRIME CONTRACTOR.

WITH LETTER OF DECEMBER 9, 1955, COLONEL STAUNTON BROWN, DISTRICT ENGINEER, TRANSMITTED A VOUCHER IN THE NET AMOUNT OF $2,633.23, REPRESENTING A CLAIM BY THE BOARD OF TRUSTEES OF THE TOWN OF FORSYTH FOR REIMBURSEMENT OF EXPENSES INCURRED IN THE PROSECUTION OF THE WORK CONTEMPLATED BY THE CONTRACT OF JANUARY 5, 1950. IT IS STATED IN THE LETTER OF MARCH 8 1956, THAT IT IS PROPOSED, UNLESS OBJECTION IS INTERPOSED BY THIS OFFICE, TO INCREASE THE FIGURE OF $7,300 TO THE SUM OF $9,685 SO AS TO PERMIT PAYMENT OF THE AMOUNT CLAIMED ON THE VOUCHER; THAT IS TO SAY, IN ADDITION TO THE SUM OF $7,300 PREVIOUSLY PAID TO THE CONTRACTOR AS OVERHEAD AND ENGINEERING EXPENSES, IT IS PROPOSED TO INCREASE THAT AMOUNT BY $2,385 ON ACCOUNT OF OBLIGATIONS INCURRED BY THE BOARD OF TRUSTEES OF THE TOWN OF FORSYTH FOR ENGINEERING AND CERTAIN ADMINISTRATIVE AND LEGAL SERVICES.

IT IS REPORTED THAT ALTHOUGH ARTICLE 3A OF THE CONTRACT PROVIDES THAT "THE CONTRACTOR AGREES TO ACCEPT THE LUMP-SUM AMOUNT OF $7,300 FOR ALL OVERHEAD, SUPERVISION, ENGINEERING AND INSPECTION CHARGES INCURRED BY THE CONTRACTOR IN CONNECTION WITH THE WORK," THE FACT OF THE MATTER IS THAT NO SUM WHATEVER WAS INCLUDED IN THAT AMOUNT FOR OVERHEAD. IT IS REPORTED FURTHER THAT THE RELOCATION WAS INITIATED BY THE GOVERNMENT, WAS NOT INVITED BY THE PRIME CONTRACTOR, AND WAS UNDERTAKEN BY THE CONTRACTOR SOLELY FOR THE ACCOMMODATION OF THE GOVERNMENT, THAT THERE IS NO ELEMENT OF PROFIT OR OTHER ADVANTAGE ACCRUING TO THE BENEFIT OF THE TOWN, AND THAT IT WAS THE UNDERSTANDING OF ALL PARTIES TO THIS CONTRACT, AS IT IS IN ALL COST-REIMBURSABLE RELOCATION CONTRACTS, THAT THE GOVERNMENT WOULD REIMBURSE THE CONTRACTOR FOR ALL LEGITIMATE COATS ARISING OUT OF THE WORK PERFORMED UNDER THE CONTRACT.

IT IS A GENERAL RULE, OF COURSE, THAT CONTRACTS MAY NOT BE MODIFIED OR REFORMED SUBSEQUENT TO THEIR COMPLETION AND PAYMENT THEREUNDER. HOWEVER, IN VIEW OF THE FACTS PRESENT HERE WHICH CLEARLY SHOW THAT THE PARTIES INTENDED THAT THE CONTRACTOR WOULD BE REIMBURSED FOR ITS ACTUAL COSTS OF PERFORMANCE, THAT THERE IS NO ELEMENT OF PROFIT OR OTHER ADVANTAGE ACCRUING TO THE BENEFIT OF THE TOWN, AND THAT UNDER THE PROPOSED MODIFICATION THE CONTRACTOR WILL RECEIVE AN AMOUNT CONSIDERABLY LESS THAN THE TOTAL ESTIMATED CONTRACT PRICE, WE WILL NOT OBJECT TO THE PROPOSED MODIFICATION. APPROPRIATE REFERENCE TO THIS DECISION SHOULD BE MADE ON THE CHANGE ORDER ISSUED UNDER THE CONTRACT TO FACILITATE AUDIT THEREOF BY THE GENERAL ACCOUNTING OFFICE.