B-131013, MARCH 22, 1957, 36 COMP. GEN. 664

B-131013, MARCH 22, 1957, 36 COMP. GEN. 664

CONTRACTS - RECORDS CLAUSE - EXAMINATION OF ATOMIC ENERGY COMMISSION CONTRACTS WHICH DO NOT INVOLVE EXPENDITURE OF APPROPRIATED FUNDS THE INCLUSION OF AN EXAMINATION OF RECORDS CLAUSE IN A NEGOTIATED RESEARCH AND DEVELOPMENT CONTRACT BETWEEN THE ATOMIC ENERGY COMMISSION AND A NUCLEAR POWER REACTOR COMPANY WHEN THE CONTRACT DOES NOT INVOLVE THE EXPENDITURE OF APPROPRIATED FUNDS IS NOT REQUIRED BY SECTION 166 OF THE ATOMIC ENERGY ACT OF 1954. 32 COMP. GEN. 277, OVERRULED IN PART.

TO THE CHAIRMAN, ATOMIC ENERGY COMMISSION, MARCH 2, 1957:

REFERENCE IS MADE TO LETTER OF MARCH 7, 1957, FROM THE GENERAL MANAGER OF THE COMMISSION REQUESTING OUR VIEWS AS TO THE NECESSITY FOR INCLUDING THE COMPTROLLER GENERAL EXAMINATION OR RECORDS CLAUSE IN THE COMMISSION'S PROPOSED CONTRACT WITH THE POWER REACTOR DEVELOPMENT COMPANY.

NEGOTIATIONS FOR THE CONTRACT HAVE BEEN UNDERTAKEN IN CONNECTION WITH THE COMMISSION'S POWER DEMONSTRATION REACTOR PROGRAM. THE PURPOSE OF THAT PROGRAM IS TO BRING PRIVATE RESOURCES INTO THE DEVELOPMENT OF ENGINEERING INFORMATION ON THE PERFORMANCE OF NUCLEAR POWER REACTORS AND TO ADVANCE THE TIME WHEN NUCLEAR POWER WILL BECOME ECONOMICALLY COMPETITIVE. WHILE NO FINAL CONTRACT WITH PRDC HAS BEEN EXECUTED, SUBSTANTIAL AGREEMENT BY THE PARTIES HAS BEEN REACHED, AND A COPY OF THE PROPOSED CONTRACT WAS FORWARDED WITH THE GENERAL MANAGER'S LETTER.

UNDER THE PROPOSED CONTRACT THE OBLIGATIONS OF THE PARTIES WILL BE SUBSTANTIALLY AS FOLLOWS. PRDC WILL DESIGN, CONSTRUCT, AND OPERATE A NUCLEAR REACTOR PLANT OF THE FAST NEUTRON BREEDER, SODIUM-COOLED TYPE, WITH A NOMINAL CAPABILITY OF 300,000 KW OF HEAT. PRDC WILL ALSO ARRANGE FOR THE DETROIT EDISON COMPANY TO BUILD, OWN, AND OPERATE A STEAM GENERATOR PLANT WITH A CAPABILITY OF ABOUT 150,000 KW OF ELECTRICITY, AND TO PURCHASE STEAM THEREFOR FROM PRDC'S REACTOR PLANT. THE COMMISSION WILL PERFORM UP TO $4,450,000 WORTH OF RESEARCH AND DEVELOPMENT WORK AS ASSISTANCE TO PRDC AND WILL WAIVE ITS CUSTOMARY USE CHARGE FOR SPECIAL NUCLEAR MATERIAL FOR FIVE YEARS. NO PART OF THE CONSTRUCTION COST OF EITHER THE REACTOR PLANT OR THE GENERATING PLANT WILL BE BORNE BY THE COMMISSION. IN RETURN FOR THE RESEARCH ASSISTANCE AND WAIVER OF USE CHARGE PRDC AGREES TO FURNISH TO THE COMMISSION TECHNICAL, OPERATING, AND ECONOMIC DATA ON THE REACTOR PLANT AND TO OBTAIN UNDERTAKINGS TO ENABLE THE COMMISSION TO SECURE SIMILAR INFORMATION ON THE GENERATING PLANT FROM DETROIT EDISON. CERTAIN OTHER RESEARCH WILL BE DONE BY ATOMIC POWER DEVELOPMENT COMPANY WHICH IS, LIKE PRDC, A NONPROFIT MEMBERSHIP CORPORATION, AND SIMILAR ARRANGEMENTS WILL BE MADE FOR THE COMMISSION TO SECURE INFORMATION ON SUCH RESEARCH.

AS WRITTEN, THE PROPOSED CONTRACT CONTAINS NO PROVISION GIVING THE COMPTROLLER GENERAL THE RIGHT TO EXAMINE THE CONTRACTOR'S RECORDS. SINCE THE CONTRACT IS TO BE NEGOTIATED WITHOUT ADVERTISING, THIS RAISES THE QUESTION AS TO THE POSSIBLE APPLICABILITY OF SECTION 166 OF THE ATOMIC ENERGY ACT OF 1954, 42 U.S.C. 2206, WHICH PROVIDES IN PERTINENT AS FOLLOWS:

NO MONEYS APPROPRIATED FOR THE PURPOSES OF THIS ACT SHALL BE AVAILABLE FOR PAYMENTS UNDER ANY CONTRACT WITH THE COMMISSION, NEGOTIATED WITHOUT ADVERTISING * * * UNLESS SUCH A CONTRACT INCLUDES CLAUSE TO THE EFFECT THAT THE COMPTROLLER GENERAL OF THE UNITED STATES OR ANY OF HIS DULY AUTHORIZED REPRESENTATIVES SHALL, UNTIL THE EXPIRATION OF THREE YEARS AFTER FINAL PAYMENT, HAVE ACCESS TO AND THE RIGHT TO EXAMINE ANY DIRECTLY PERTINENT BOOKS, DOCUMENTS, PAPERS AND RECORDS OF THE CONTRACTOR OR ANY OF HIS SUBCONTRACTORS ENGAGED IN THE PERFORMANCE OF, AND INVOLVING TRANSACTIONS RELATED TO SUCH CONTRACTS OR SUBCONTRACTS * * *.

THE GENERAL MANAGER'S LETTER STATES THAT THE WAIVER OF THE USE CHARGE BY THE COMMISSION UNDER THE PRDC CONTRACT DOES NOT INVOLVE PAYMENTS UNDER ANY CONTRACT. HE STATES FURTHER THAT, WHILE THE RESEARCH AND DEVELOPMENT WORK TO BE PERFORMED BY THE COMMISSION UNDER THE CONTRACT WILL INVOLVE AN EXPENDITURE OF APPROPRIATED FUNDS, SUCH EXPENDITURE WILL NOT BE MADE UNDER THE PRDC CONTRACT BUT UNDER OTHER CONTRACTS WHICH ARE SUBJECT TO AUDIT. FOR THESE REASONS, HE STATES IT TO BE THE VIEW OF THE COMMISSION THAT THE REQUIREMENTS OF SECTION 166 ARE NOT APPLICABLE TO THE PROPOSED CONTRACT. A SOMEWHAT SIMILAR CONTRACT WITH THE YANKEE ATOMIC ELECTRIC COMPANY, WHICH WAS CONSIDERED IN OUR DECISION TO YOU B-129114, DATED OCTOBER 10, 1956, 36 COMP. GEN. 295, IS DISTINGUISHED ON THE GROUND THAT DIRECT PAYMENTS WILL BE MADE BY THE COMMISSION TO THE CONTRACTOR UNDER THAT CONTRACT.

THE STATUTORY LANGUAGE WHICH MUST BE CONSTRUED IS AS FOLLOWS:

NO MONEYS APPROPRIATED * * * SHALL BE AVAILABLE FOR PAYMENTS UNDER ANY CONTRACT * * *. IT IS PERTINENT TO NOTE THE DIFFERENCE BETWEEN THIS LANGUAGE AND THAT CONTAINED IN OTHER STATUTES DEALING WITH THE EXAMINATION OF RECORDS CLAUSE. THE ACT OF OCTOBER 31, 1951, 65 STAT. 700, 42 U.S.C. 207, WHICH MADE THAT CLAUSE APPLICABLE TO CONTRACTS NEGOTIATED UNDER THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, 41 U.S.C. 201 NOTE, AND THE ARMED SERVICES PROCUREMENT ACT OF 1947, 41 U.S.C. 151 NOTE, SUPERSEDED BY 10 U.S.C. 2201 ET SEQ., USED THE FOLLOWING LANGUAGE:

ALL CONTRACTS NEGOTIATED WITHOUT ADVERTISING PURSUANT TO AUTHORITY CONTAINED IN THIS ACT SHALL INCLUDE A CLAUSE TO THE EFFECT THAT THE COMPTROLLER GENERAL OF THE UNITED STATES * * * SHALL * * * HAVE * * * THE RIGHT TO EXAMINE ANY DIRECTLY PERTINENT * * * RECORDS OF THE CONTRACTOR * * *. SINCE THE PRDC CONTRACT WILL BE NEGOTIATED, THERE WOULD BE NO QUESTION AS TO THE REQUIREMENT FOR INCLUSION OF THE CLAUSE IN THE CONTRACT IF SECTION 166 CONTAINED LANGUAGE IDENTICAL WITH THAT LAST ABOVE QUOTED. HOWEVER, SINCE THE SECTION SPEAKS ONLY OF CONTRACTS UNDER WHICH PAYMENT OF APPROPRIATED MONEYS WILL BE MADE, AND SINCE NO SUCH PAYMENTS WILL BE MADE UNDER THE PRDC CONTRACT, WE ARE OF THE OPINION THAT THE LAW DOES NOT COMPEL THE INCLUSION OF THE EXAMINATION OF RECORDS CLAUSE IN THE CONTRACT. TO THE EXTENT THAT THE DECISION IN 32 COMP. GEN. 277 IS INCONSISTENT WITH THE VIEWS EXPRESSED HEREIN IT WILL NO LONGER BE FOLLOWED.

OUR CONCLUSION ON THIS POINT MAKES IT ALL THE MORE IMPORTANT THAT THE COMMISSION ITSELF HAVE CONTRACTUAL RIGHTS TO ASSURE ITSELF OF THE ADEQUACY AND ACCURACY OF TECHNICAL, OPERATING, AND ECONOMIC INFORMATION PERTAINING TO THE PROJECT. FURTHER, IT IS OUR OPINION THAT THE GENERAL ACCOUNTING OFFICE WOULD BE IN A POSITION TO MORE EFFECTIVELY DISCHARGE ITS RESPONSIBILITIES TO THE CONGRESS AND RENDER ASSISTANCE TO THE COMMISSION, IF THE CONTRACT PROVIDED IT WITH THE RIGHT TO EXAMINE PRDC'S RECORDS EVEN THOUGH THE LAW DOES NOT SO REQUIRE.

WE HAVE EXAMINED THE PROPOSED CONTRACT BETWEEN THE COMMISSION AND PRDC, PARTICULARLY THOSE ARTICLES QUOTED IN THE GENERAL MANAGER'S LETTER WHICH DEAL WITH THE RIGHT OF THE COMMISSION TO RECEIVE COST INFORMATION OR TO EXAMINE COST AND OTHER RECORDS PERTAINING TO THE CONSTRUCTION AND OPERATION OF THE TWO PLANTS. WE BELIEVE THESE ARTICLES REPRESENT A SUBSTANTIAL IMPROVEMENT OVER SIMILAR ARTICLES IN THE CONTRACT WITH THE YANKEE ATOMIC ELECTRIC COMPANY. WE DO HAVE CERTAIN COMMENTS AND SUGGESTIONS FOR THE COMMISSION'S CONSIDERATION THAT ARE DIRECTED TO CLARIFYING OR STRENGTHENING THE PRESENTLY PROPOSED ARTICLES.

SUBSECTIONS (4) AND (5), ARTICLE II, 1, E, OF THE PROPOSED CONTRACT PROVIDE THAT PRDC WILL OBTAIN FROM ITS CONTRACTORS AN UNDERTAKING EITHER (1) TO PROVIDE PRDC WITH THEIR COST DATA OR TO PERMIT PRDC TO EXAMINE SUCH DATA, OR (2) TO PERMIT THE COMMISSION TO MAKE SUCH AN EXAMINATION. THE COMMISSION'S ASSURANCE AS TO THE ACCURACY OF COST INFORMATION IS, OF COURSE, STRONGER UNDER THE SECOND ALTERNATIVE. HOWEVER, WE UNDERSTAND FROM DISCUSSIONS WITH COMMISSION REPRESENTATIVES THAT IT IS THE INTENTION OF THE PARTIES THAT THIS ALTERNATIVE WILL HAVE LIMITED, IF ANY, APPLICATION.

IN CONNECTION WITH THE WORDING OF ARTICLE II, 1, E, (4) WE NOTE THAT THE PHRASE "OR TO PERMIT THE COMPANY TO EXAMINE ALL RECORDS RELATING THERETO" IS NOT SET OFF PARENTHETICALLY WITH COMMAS IN THE COPIES OF THE PROPOSED CONTRACTS SUBMITTED FOR OUR REVIEW, AS IT IS THE GENERAL MANAGER'S LETTER. WE SUGGEST THAT THE MEANING APPARENTLY INTENDED WOULD BE CLEARER IF THE LANGUAGE OF THE SUBSECTION WERE CHANGED TO READ AS FOLLOWS: * * * IT WILL OBTAIN EITHER (1) AN UNDERTAKING FROM ALL OF ITS CONTRACTORS * * * TO PROVIDE IT WITH REPORTS OF THE ACTUAL COSTS OF PERFORMING SUCH WORK IN SUCH DETAIL AS THE COMMISSION DEEMS IS REASONABLY NECESSARY TO ACHIEVE THE PURPOSES OF THE PROJECT OR TO PERMIT THE COMPANY TO EXAMINE ALL RECORDS RELATED THERETO * * *

PRDC HAS AGREED TO COMMISSION EXAMINATION OF ITS OWN RECORDS, BUT NOTHING IN THE CONTRACT WOULD PRECLUDE PRDC'S CONTRACTING OUT THE CONSTRUCTION AND OPERATION OF THE REACTOR PLANT UNDER COMPETITIVE BIDS. WHILE SUBSECTIONS (4) AND (5) OF ARTICLE II, 1, E, OF THE CONTRACT PROVIDE THAT PRDC WILL OBTAIN FROM ITS CONTRACTORS AN UNDERTAKING EITHER TO PROVIDE PRDC WITH COST DATA OR TO PERMIT PRDC TO EXAMINE SUCH DATA, OR TO PERMIT THE COMMISSION TO MAKE SUCH AN EXAMINATION, THE COMMISSION HAS AGREED TO WAIVE THIS REQUIREMENT IN THE CASE OF CONTRACTS LET BY COMPETITIVE BIDS. IN THE LIGHT OF AN EXPLANATION BY COMMISSION REPRESENTATIVES THAT IT WOULD NOT BE FEASIBLE FOR PRDC TO CONTRACT WITH OTHERS FOR THE CONSTRUCTION OR OPERATION OF THE REACTOR PLANT BY COMPETITIVE BIDDING, WE BELIEVE IT IS UNNECESSARY UNDER THE CIRCUMSTANCES TO PROVIDE FOR SUCH A CONTINGENCY IN THE CONTRACT.

ARTICLE II, 1, E, (4) AND (5) USES THE LANGUAGE "THE RIGHT TO EXAMINE, STUDY, AND TRANSCRIBE DATA" IN CONNECTION WITH THE RIGHT OF EXAMINATION OF RECORDS OF PRDC'S CONTRACTORS. ARTICLE II, 1, F, (1), (3), AND (4) USES THE LANGUAGE "THE RIGHT TO EXAMINE, STUDY, AND OBSERVE" IN CONNECTION WITH THE EXAMINATION OF THE RECORDS OF PRDC, APDA, AND DETROIT EDISON. UNDERSTAND IT WAS NOT INTENDED THAT THE COMMISSION SHOULD HAVE NO RIGHT TO TRANSCRIBE DATA FROM THE RECORDS OF PRDC, APDA, AND DETROIT EDISON, AND WE THEREFORE SUGGEST THAT THE LANGUAGE IN THE TWO ARTICLES BE MADE UNIFORM.