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B-133433, OCT. 7, 1957

B-133433 Oct 07, 1957
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UNITED STATES ATOMIC ENERGY COMMISSION: REFERENCE IS MADE TO THE DEPUTY GENERAL MANAGER'S LETTER OF AUGUST 13. WHERE THAT FEE FOR COMMUNITY MANAGEMENT IS AT A RATE IN EXCESS OF $90. WHEN THE FEE LIMITATION WAS FIRST ENACTED IN 1950. COMMUNITY MANAGEMENT FUNCTIONS AT LOS ALAMOS WERE BEING PERFORMED BY THE ZIA COMPANY. IS A SUBSIDIARY OF THE ZIA COMPANY WHICH WAS FORMED SOMETIME LATER AT THE REQUEST OF THE COMMISSION TO TAKE OVER CERTAIN WORK THERETOFORE PERFORMED BY ZIA. THE REASON FOR THE FORMATION OF A NEW CORPORATION WAS TO AVOID ANY QUESTION WHETHER THE WORK INVOLVED WAS SUBJECT TO THE MINIMUM WAGE PROVISIONS OF THE DAVIS-BACON ACT. INCLUDING PAINTING AND DECORATING" WAS ASSIGNED TO THAT CORPORATION.

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B-133433, OCT. 7, 1957

TO THE HONORABLE LEWIS L. STRAUSS, CHAIRMAN, UNITED STATES ATOMIC ENERGY COMMISSION: REFERENCE IS MADE TO THE DEPUTY GENERAL MANAGER'S LETTER OF AUGUST 13, 1957, CONCERNING THE APPLICABILITY OF THE COMMUNITY MANAGEMENT FEE APPROPRIATION LIMITATION TO THE COMMISSION'S CONTRACT WITH LOS ALAMOS CONSTRUCTORS, INC.

THE LIMITATION, WHICH HAS APPEARED IN THE ATOMIC ENERGY COMMISSION APPROPRIATION ACTS SINCE 1951, INCLUDING THE CURRENT APPROPRIATION ACT (71 STAT. 451), PROVIDES AS FOLLOWS:

"* * * NO PART OF THIS APPROPRIATION SHALL BE USED IN CONNECTION WITH THE PAYMENT OF A FIXED FEE TO ANY CONTRACTOR OR FIRM OF CONTRACTORS AT ANY INSTALLATION OF THE COMMISSION, WHERE THAT FEE FOR COMMUNITY MANAGEMENT IS AT A RATE IN EXCESS OF $90,000 PER ANNUM * * *.'

WHEN THE FEE LIMITATION WAS FIRST ENACTED IN 1950, COMMUNITY MANAGEMENT FUNCTIONS AT LOS ALAMOS WERE BEING PERFORMED BY THE ZIA COMPANY. LOS ALAMOS CONSTRUCTORS, INC., IS A SUBSIDIARY OF THE ZIA COMPANY WHICH WAS FORMED SOMETIME LATER AT THE REQUEST OF THE COMMISSION TO TAKE OVER CERTAIN WORK THERETOFORE PERFORMED BY ZIA. THE REASON FOR THE FORMATION OF A NEW CORPORATION WAS TO AVOID ANY QUESTION WHETHER THE WORK INVOLVED WAS SUBJECT TO THE MINIMUM WAGE PROVISIONS OF THE DAVIS-BACON ACT, 40 U.S.C. 276 (A). AFTER THE FORMATION OF LOS ALAMOS CONSTRUCTORS ALL WORK WHICH MIGHT BE CONSIDERED TO BE "CONSTRUCTION, ALTERATION, AND/OR REPAIR, INCLUDING PAINTING AND DECORATING" WAS ASSIGNED TO THAT CORPORATION, WHILE THE ZIA COMPANY CONTINUED TO PERFORM THE OTHER WORK PREVIOUSLY DONE BY IT. IT IS STATED IN THE DEPUTY MANAGER'S LETTER THAT THE WORK PERFORMED BY LOS ALAMOS CONSTRUCTORS IS WORK WHICH WOULD, BUT FOR THE DAVIS BACON QUESTION, BE PERFORMED BY ZIA.

WE CONSIDERED THE MEANING AND EFFECT OF THE APPROPRIATION LIMITATION IN DECISION B-99488, DATED DECEMBER 20, 1950, WHERE WE STATED IT APPEARED TO HAVE BEEN THE INTENT OF THE CONGRESS TO LIMIT TO $90,000 ANNUALLY THE FEES PAID TO CONTRACTORS HAVING COMMUNITY MANAGEMENT CONTRACTS, REGARDLESS OF THE FACT THAT SUCH CONTRACTORS ALSO PERFORMED WORK IN ADDITION TO COMMUNITY MANAGEMENT. WHILE IT IS TRUE THAT THE SPECIFIC QUESTION CONSIDERED IN THAT DECISION INVOLVED THE TOWN OF OAK RIDGE, THE CONCLUSION IS EQUALLY APPLICABLE TO LOS ALAMOS. IT IS CONTENDED BY LOS ALAMOS CONSTRUCTORS THAT THE APPROPRIATION LIMITATION SHOULD BE CONSTRUED AS PROHIBITING THE PAYMENT OF MORE THAN $90,000 ANNUALLY FOR COMMUNITY MANAGEMENT FUNCTIONS, BUT AS PERMITTING THE PAYMENT OF AN ADDITIONAL FEE FOR OTHER WORK. THIS IS PRECISELY THE QUESTION WHICH WAS INVOLVED IN THE PREVIOUS DECISION. THE COMMUNITY MANAGEMENT CONTRACTOR AT OAK RIDGE ALSO PERFORMED CONSTRUCTION WORK, AND ITS CONTRACT PROVIDED FOR ADDITIONAL FEES BASED ON THE ESTIMATED COST OF SUCH CONSTRUCTION WORK. WE POINTED OUT IN THE DECISION THAT IT HAD BEEN CLEARLY MADE KNOWN TO THE CONGRESSIONAL COMMITTEES THAT THE WORK PERFORMED AT OAK RIDGE INCLUDED MUCH THAT PROPERLY COULD NOT BE CONSIDERED COMMUNITY MANAGEMENT FUNCTIONS. THE SAME INFORMATION WAS GIVEN WITH RESPECT TO THE WORK PERFORMED BY THE ZIA COMPANY. FOR EXAMPLE, AT PAGES 2187 AND 2197 OF THE HEARINGS BEFORE THE HOUSE APPROPRIATIONS SUBCOMMITTEE, AN AEC REPRESENTATIVE STATED AS FOLLOWS:

"* * * THE ZIA OPERATION AT LOS ALAMOS IS AN OPERATION SIMILAR TO THAT OF ROANE-ANDERSON, BUT INCLUDES NOT ONLY MAINTENANCE AND OPERATION OF THE TOWN BUT MAINTENANCE AND OPERATION OF THE PHYSICAL PART OF THE WHOLE LABORATORY AS WELL. * * *"

"* * * THE LABORATORY PART OF THEIR WORK IS SOMETHING OVER 49 PERCENT. * * THAT IS A NET FEE OF $154,000 FOR THE COMPLETE OPERATION, OF WHICH 49 PERCENT IS WHOLLY DEVOTED TO MAINTENANCE AND OPERATION WITHIN THE LABORATORY AREA.'

ALSO, AT PAGE 372 OF THE HEARINGS BEFORE THE SENATE APPROPRIATIONS SUBCOMMITTEE, APPEARS THE FOLLOWING STATEMENT BY ANOTHER REPRESENTATIVE OF THE COMMISSION:

"* * * WE HAVE UNDERSTOOD FROM THE RECORD, OUR RECORD BEFORE THE HOUSE, WHAT THE HOUSE MEANS BY COMMUNITY MANAGEMENT IS THE OVER-ALL OPERATION PERFORMED BY THE ZIA CO. AND THE ROANE-ANDERSON CO. THE ZIA CO., AT LOS ALAMOS, IT WAS MADE REPEATEDLY CLEAR IN THE HOUSE HEARINGS, DOES TWO THINGS, SIR; IT OPERATES THE COMMUNITY PROPER FOR US AND IT ALSO DOES ALL OF THE MAINTENANCE AND SERVICE WORK FOR THE TECHNICAL LABORATORY THERE WHICH IS RUN BY THE UNIVERSITY OF CALIFORNIA. NOW WE HAVE VERBALLY HAD CONFIRMATION FROM A MEMBER OF THE HOUSE COMMITTEE THAT IN THEIR USE OF THE WORDS "COMMUNITY MANAGEMENT," THEY MEANT THE WHOLE JOB DONE BY THESE TWO OPERATING CONTRACTORS. * * *"

IN THE LIGHT OF THE LEGISLATIVE HISTORY OF THE FEE LIMITATION PROVISION, THE CONCLUSION MUST BE REACHED THAT THE CONGRESS INTENDED TO LIMIT THE FEE TO BE PAID THE ZIA COMPANY FOR ALL ITS ACTIVITIES AT LOS ALAMOS, WHETHER THEY INVOLVED THE TOWN OR THE LABORATORY, AND WHETHER THEY INCLUDED WORK WHICH MIGHT BE COVERED BY THE DAVIS-BACON ACT OR NOT.

THIS CONCLUSION DOES NOT OVERLOOK THE FACT THAT THE ZIA COMPANY OF LOS ALAMOS CONSTRUCTORS ARE SEPARATE CORPORATIONS. FOR THE PURPOSES OF THE APPROPRIATION LIMITATION WE BELIEVE THEY MUST BE CONSIDERED TOGETHER BECAUSE OF THEIR CLOSE RELATIONSHIP. WE REALIZE THAT LOS ALAMOS CONSTRUCTORS WAS FORMED AT THE REQUEST OF THE ATOMIC ENERGY COMMISSION FOR REASONS HAVING NOTHING TO DO WITH THE FEE LIMITATION. HOWEVER, IT IS APPARENT THAT THE PAYMENT OF MORE THAN $90,000 ANNUAL FEE CANNOT BE JUSTIFIED MERELY BECAUSE THE FUNCTIONS OF THE ZIA COMPANY HAVE BEEN DIVIDED AND PART THEREOF ASSIGNED TO A NEW SUBSIDIARY CORPORATION.

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