B-130515, JUL 29, 1971

B-130515, JUL 29, 1971

CONTRACTS - GOVERNMENT LIABILITY - AUTHORITY TO ENTER INTO COST PLUS PERCENTAGE OF COST CONTRACT DECISION DENYING CLAIM FOR $83,553.81 ALLEGED TO BE DUE INCIDENT TO A COST-PLUS-PERCENTAGE-OF-COST CONTRACT WITH THE DIRECTOR OF THE CONCENTRATED EMPLOYMENT PROGRAM (CEP), IN PROVIDENCE, R. I., TO RENOVATE A WAREHOUSE TO BE USED BY A LOCAL ANTIPOVERTY AGENCY. IT IS CLEAR THAT THE DIRECTOR OF CEP COULD NOT ENTER INTO THE CONTRACT WITHOUT THE APPROVAL OF THE DEPARTMENT OF LABOR, AND THAT IN ANY CASE, THE DEPARTMENT OF LABOR HAD NO AUTHORITY TO APPROVE COST-PLUS PERCENTAGE-OF- COST CONTRACT. IN ACCORDANCE WITH GAO'S RECOMMENDATIONS OF APRIL 6, 1970, THE CONTRACTOR WAS PAID $105,000 ON ITS CLAIM FOR $159,330 PLUS INTEREST. IT IS THE COMP. GEN.'S VIEW THAT THE OBLIGATION OF THE U.S. HAS BEEN DISCHARGED AND THE CLAIM FOR AN ADDITIONAL AMOUNT

TO RAYMOND CONSTRUCTION COMPANY, INCORPORATED:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 15, 1970, WITH ENCLOSURES, REQUESTING THAT THIS OFFICE REVIEW AND DETERMINE THE LIABILITY OF THE GOVERNMENT WITH RESPECT TO A COST-PLUS-PERCENTAGE-OF COST CONTRACT ENTERED INTO ON DECEMBER 18, 1968, BETWEEN THE DIRECTOR OF THE CONCENTRATED EMPLOYMENT PROGRAM (CEP), IN PROVIDENCE, RHODE ISLAND, AND YOUR FIRM FOR THE RENOVATION OF A FACILITY LOCATED AT 358 PUBLIC STREET IN PROVIDENCE.

THE RATHER COMPLEX SERIES OF EVENTS LEADING TO THE SUBMISSION OF THIS REQUEST ARE FULLY DOCUMENTED IN A REPORT ISSUED BY LETTER DATED APRIL 6, 1970, TO CONGRESSMAN ROBERT O. TIERNAN, WHICH YOU INCLUDED IN YOUR SUBMISSION. IN VIEW OF THE ABOVE-MENTIONED REPORT WE FEEL THAT ONLY A SHORT SUMMARY OF THE FACTS IS NECESSARY FOR THE PURPOSES OF THIS DECISION.

ON JUNE 20, 1968, THE DEPARTMENT OF LABOR (DOL) ENTERED INTO A COST REIMBURSEMENT CONTRACT WITH PROGRESS FOR PROVIDENCE, INCORPORATED (PFP), A LOCAL ANTI-POVERTY AGENCY, FOR CONDUCTING A CONCENTRATED EMPLOYMENT PROGRAM (CEP), IN PROVIDENCE, RHODE ISLAND. PFP'S TOTAL BUDGET WAS ABOUT $1.9 MILLION, $62,500 OF WHICH WAS ALLOCATED FOR RENT AND REPAIRS. PFP ENTERED INTO A FIVE-YEAR LEASE FOR THE RENTAL OF A FORMER WAREHOUSE AT A COST OF $12,000 FOR THE FIRST YEAR, AND $10,000 ANNUALLY FOR THE SUCCEEDING YEARS. THE LEASE PROVIDED THAT REPAIRS AND RENOVATION COULD BE MADE BY PFP.

ON SEPTEMBER 13, 1968, PFP ENTERED INTO A FIXED-PRICE CONTRACT FOR $12,580, WITH YOUR FIRM FOR RENOVATION OF THE BUILDING. LATER, THE CEP DIRECTOR, WITHOUT PRIOR APPROVAL FROM DOL OR PFP, ENTERED INTO A SERIES OF ORAL AGREEMENTS WITH YOUR FIRM TO MAKE EXTENSIVE REPAIRS TO THE WAREHOUSE IN ORDER THAT THE FACILITY MEET THE REQUIREMENTS OF THE PROVIDENCE BUILDING CODE. ON DECEMBER 18, 1968, WITH APPROXIMATELY ONE THIRD OF THE TOTAL RENOVATION WORK COMPLETED, THE CEP DIRECTOR, WITH THE APPARENT CONSENT OF A DOL REPRESENTATIVE ENTERED INTO A WRITTEN COST-PLUS- PERCENTAGE-OF-COST ARRANGEMENT WITH YOUR FIRM, WHICH CONTAINED NEITHER SPECIFICATIONS DESCRIBING THE WORK TO BE PERFORMED NOR AN ESTIMATED COST. ON FEBRUARY 5, 1969, AT THE REQUEST OF PFP AND BECAUSE OF THE RENOVATION WORK WHICH HAD BEEN DONE, THE BASIC CONTRACT BETWEEN LABOR AND PFP WAS MODIFIED TO INCREASE THE ALLOTMENT FOR RENT AND REPAIRS. UPON COMPLETION OF THE WORK, AND AFTER MANY NEGOTIATION SESSIONS, YOUR FIRM SUBMITTED A FINAL REVISED INVOICE IN THE AMOUNT OF $159,330 ON JULY 26, 1969.

ON APRIL 6, 1970, THIS OFFICE ISSUED ITS REPORT WHICH CONCLUDED IN PART THAT NEITHER THE CEP DIRECTOR NOR PFP HAD AUTHORITY TO ENTER INTO THE CONTRACT OF DECEMBER 18, 1968, FOR THE ADDITIONAL RENOVATIONS WITHOUT THE APPROVAL OF DOL, AND THAT IN ANY CASE DOL HAD NO AUTHORITY TO APPROVE A COST-PLUS-PERCENTAGE-OF-COST (CPPC) CONTRACT. IN ADDITION THE REPORT CONTAINED THE FOLLOWING RECOMMENDATIONS TO THE SECRETARY OF LABOR:

(1) THAT DOL DETERMINE THE LIABILITY OF THE FEDERAL GOVERNMENT WITH RESPECT TO THE COSTS INCURRED FOR THE RENOVATION OF THE CEP FACILITY AND ASSIST PFP IN RESOLVING THE OUTSTANDING ISSUES UNDER THE CONTRACT WITH RAYMOND CONSTRUCTION, AND

(2) THAT DOL PLACE GREATER EMPHASIS ON CONTINUAL MONITORING OF CEP ACTIVITIES, ESPECIALLY THOSE RELATING TO THE ACQUISITION OF ACCEPTABLE FACILITIES FOR THE PROGRAM.

IN ACCORDANCE WITH THE ABOVE-CITED CONCLUSIONS AND RECOMMENDATIONS PFP PAID YOUR FIRM $105,000 ON YOUR CLAIM FOR $159,330 PLUS INTEREST.

BY LETTER DATED DECEMBER 15, 1970, YOU SUBMITTED A CLAIM TO THIS OFFICE FOR $83,553.81 PLUS ALLOWANCES FOR TRAVEL, LEGAL AND MISCELLANEOUS EXPENSES, OVERHEAD OVERRUN AND PUNITIVE DAMAGES. AN ANALYSIS OF THE RATHER LENGTHY SUBMISSION INDICATES THAT YOU BASE YOUR CLAIM PRIMARILY ON THE CONTENTION THAT THE GOVERNMENT RATIFIED THE DECEMBER 18 CONTRACT BY ALLOWING THE WORK TO GO FORWARD WITH FULL KNOWLEDGE OF THE CONTRACT. YOU ALSO CONTEND THAT DOL HAS FAILED TO FOLLOW THE RECOMMENDATIONS OF THE GAO REPORT BY LIMITING PAYMENT TO $105,000.00, A DETERMINATION REACHED BEFORE OUR REPORT WAS ISSUED. DOL TAKES THE POSITION THAT THEY HAVE FULLY COMPLIED WITH THE RECOMMENDATIONS OF OUR REPORT AND THEIR LEGAL OBLIGATIONS BY THE $105,000 PAYMENT.

AT THE OUTSET IT MUST BE ASSERTED THAT THE LEGAL LIABILITY OF THE GOVERNMENT TO YOUR FIRM UNDER THE CONTRACT OF DECEMBER 18 HAS ALREADY BEEN CONSIDERED BY THIS OFFICE IN OUR REPORT OF APRIL 6. AS STATED IN THAT REPORT, YOUR CPPC CONTRACT WITH PFP CAN NOT BE APPROVED BY THE GOVERNMENT. 41 U.S.C. 254(B). HOWEVER, DOL DOES HAVE AUTHORITY TO APPROVE REIMBURSEMENT TO PFP AS THE DOL DEEMS FAIR AND REASONABLE FOR THE WORK DONE UNDER THE IMPROPER CONTRACT. IN OUR OPINION THE CONTRACT MODIFICATION OF FEBRUARY 5, 1969, HAD THE EFFECT OF SUCH AN APPROVAL TO THE EXTENT OF THE AMOUNT ALLOWED. 33 COMP. GEN. 533 (1954).

IN VIEW OF THE FOREGOING, WE MUST CONCLUDE THAT YOUR CLAIM FOR AN ADDITIONAL AMOUNT CANNOT BE ALLOWED.