B-134707, JUN. 30, 1960

B-134707, JUN. 30, 1960

TO THE SECRETARY OF THE AIR FORCE:

REFERENCE IS MADE TO A LETTER DATED OCTOBER 28, 1959, FROM THE DEPUTY FOR PROCUREMENT AND PRODUCTION, FURNISHING THE REPORT REQUESTED IN OUR LETTER TO YOU OF MAY 28, 1959, ON THE CLAIM OF WESTERN ELECTRIC COMPANY, INC., IN THE AMOUNT OF $624,585, CONCERNING ALLEGED DISALLOWANCE OF UNDER RECOVERIES OF OVERHEAD EXPENSE INCURRED DURING THE PERFORMANCE OF CERTAIN AIR FORCE COST-PLUS-A-FIXED-FEE CONTRACTS.

AS INDICATED IN THE ATTACHED COPY OF OUR DECISION OF TODAY TO THE SECRETARY OF THE NAVY, WE HAVE COMPLETED OUR INVESTIGATION OF THE AIR FORCE CLAIM AND A SIMILAR CLAIM OF THE WESTERN ELECTRIC COMPANY UNDER VARIOUS CONTRACTS AS TO WHICH THE NAVY NEGOTIATED THE PREDETERMINED OVERHEAD RATES APPLICABLE FOR PERIODS PRIOR TO FEBRUARY 27, 1956, AND HAVE CONCLUDED THAT APPROPRIATE ADJUSTMENTS SHOULD BE MADE IN FAVOR OF THE COMPANY FOR ITS CUMULATIVE NET UNDER RECOVERIES OF OVERHEAD COSTS FOR PRIOR PERIODS OF CONTRACT PERFORMANCE. IN CONNECTION WITH THE SEPARATE AIR FORCE CONTRACTS, WE DETERMINED THAT THE CLAIM FOR $624,585 SHOULD BE REDUCED TO $574,885 AND THE CONTRACTOR HAS AGREED TO SUCH REDUCTION.

IN THE CIRCUMSTANCES, IT IS OUR OPINION THAT ADMINISTRATIVE ACTION MAY PROPERLY BE TAKEN TO EFFECT PAYMENT OF THE AMOUNT OF $574,885, SUBJECT TO SUCH AUDIT AS YOUR DEPARTMENT MAY WISH TO CONDUCT IN THE MATTER. REGRET THE FACT THAT WE DID NOT COMPLY EARLIER WITH THE REQUEST MADE IN THE LETTER OF OCTOBER 28, 1959, THAT ADVICE BE FURNISHED AS TO WHETHER THE CLAIM WOULD BE ALLOWED SO THAT FUNDS MIGHT BE RESERVED, BUT IT WAS ONLY RECENTLY THAT OUR AUDITS ON THE TWO CLAIMS WERE COMPLETED AND IT HAD NOT PREVIOUSLY BEEN DECIDED THAT ANY PART OF EITHER CLAIM SHOULD BE ALLOWED.