B-142026, APR. 12, 1962

B-142026, APR. 12, 1962

TO THE AGENCY FOR INTERNATIONAL DEVELOPMENT, DEPARTMENT OF STATE:

REFERENCE IS MADE TO OUR LETTER OF AUGUST 14, 1961, TO THE DIRECTOR OF THE INTERNATIONAL COOPERATION ADMINISTRATION TRANSMITTING COPIES OF LETTERS DATED JULY 11 AND JULY 17, 1961, FROM MCGRAW-HYDROCARBON, A JOINT VENTURE BETWEEN F. H. MCGRAW AND COMPANY AND HYDROCARBON RESEARCH, INC., 51 EAST 42ND STREET, NEW YORK 17, NEW YORK, SETTING FORTH CLAIMS UNDER COST-PLUS-A-FIXED-FEE CONTRACT DATED MAY 13, 1955, ENTERED INTO BETWEEN THE CONTRACTOR AND THE REPUBLIC OF KOREA, WITH THE REQUEST THAT WE BE FURNISHED WITH A REPORT ON THE CONTRACTOR'S CONTENTIONS, AND TO LETTER DATED OCTOBER 24, 1961, WITH ATTACHMENTS, RECEIVED FROM THE DEPUTY DIRECTOR FOR OPERATIONS, ICA, SUPPLYING US WITH THE REQUESTED REPORT. REFERENCE IS ALSO MADE TO OUR LETTER OF AUGUST 23, 1961, TO THE INTERNATIONAL COOPERATION ADMINISTRATION, FORWARDING FOR ADMINISTRATIVE EXAMINATION AND REPORT A LETTER DATED JULY 26, 1961, WITH ENCLOSURES, FROM MCGRAW-HYDROCARBON, PRESENTING ANOTHER CLAIM (Z-2053716 (1) ( UNDER THE SAME CONTRACT, AND TO LETTER DATED SEPTEMBER 28, 1961, FROM THE OFFICE OF THE CONTROLLER, ICA, FURNISHING SUCH REPORT.

THE CONTRACTOR'S GENERAL RESPONSIBILITIES UNDER THE CONTRACT AS SET FORTH IN SECTION 1 THEREOF, ENTITLED "SCOPE OF THE WORK," WERE TO "DESIGN, ENGINEER, PROCURE MATERIALS AND EQUIPMENT, RECRUIT LABOR, CONSTRUCT, TRAIN KOREAN CREWS AND PLANT MANAGEMENT IN OPERATION, AND SUPERVISE AND CONDUCT THE INITIAL START-UP OPERATIONS, INCLUDING SUCCESSFUL TEST RUN AS PROVIDED IN SECTION 6.32 OF THIS AGREEMENT, OF A MODERN FERTILIZER PLANT CAPABLE OF PRODUCING AT LEAST 250 METRIC TONS PER OPERATING DAY OF FERTILIZER GRADE PRILLED AREA CONTAINING NOT LESS THAN 45 PERCENT NITROGEN FROM THE PRODUCTION OF AT LEAST 150 METRIC TONS PER OPERATING DAY OF AMMONIA AS AN INTERMEDIATE PRODUCT FROM THE GASIFICATION OF FUEL OIL, IN ACCORDANCE WITH THE TERMS AND CONDITIONS STATED HEREIN.'

WITH RESPECT TO THE TRAINING OF KOREAN CREWS WHICH WAS CONTEMPLATED, IT WAS PROVIDED UNDER SECTION 1.26, TRAINING, THAT AN OBJECTIVE OF THE CONTRACT WAS TO TRAIN KOREAN PERSONNEL IN THE CONSTRUCTION, MAINTENANCE, OPERATION AND MANAGEMENT OF THE FERTILIZER PLANT; THAT IT WAS THE INTENTION OF THE CONTRACTOR, IN THE IMPLEMENTATION OF THIS OBJECTIVE, TO BRING TO THE UNITED STATES OR OTHER COUNTRIES DURING THE PERIOD OF CONSTRUCTION CERTAIN SELECTED KOREAN PERSONNEL FOR SUCH TRAINING; THAT AFTER THE PLANT SHOULD BE COMPLETED,"AS DEFINED IN SECTION 6.32A OF THIS AGREEMENT," THESE PEOPLE WOULD BE ASSIGNED TO THEIR FUNCTIONS IN THE PLANT AND AUGMENTED WITH SUCH ADDITIONAL KOREAN PERSONNEL AS MIGHT BE REQUIRED; THAT THE CONTRACTOR, IN THE EXERCISE OF ITS BEST EFFORTS,WOULD MAINTAIN SUPERVISION OVER THE OPERATION FOR A 12-MONTH PERIOD "AFTER MECHANICAL COMPLETION OF THE PLANT AS DEFINED IN SECTION 6.32A IN ORDER TO EFFECT THE HIGHEST DEGREE POSSIBLE OF THE TRAINING OF KOREAN PERSONNEL; AND THAT, IN ADDITION TO THE KOREAN PERSONNEL TRAINED IN PLANTS OPERATING OUTSIDE OF KOREA AND DURING THE PERIOD OF CONSTRUCTION, ADDITIONAL KOREAN PERSONNEL WOULD BE TAUGHT THE FUNCTIONS OF THE EQUIPMENT AND PROCESSES AS THEY WERE BEING CONSTRUCTED.'

OTHER PROVISIONS OF THE CONTRACT, AS ORIGINALLY EXECUTED, HAVING A BEARING ON THE MATTERS HERE INVOLVED WERE AS FOLLOWS:

"1.2 WORK TO BE DONE BY CONTRACTOR

1.27 START-UP AND INITIAL OPERATION

CONTRACTOR SHALL, IN ACCORDANCE WITH SECTION 6.0 FOR A PERIOD OF TWELVE (12) MONTHS AFTER MECHANICAL COMPLETION OF THE PLANT AS DEFINED IN SECTION 6.32A, CONDUCT START-UP AND TEST RUN OPERATION AND SUPERVISE THE OPERATION OF THE PLANT. IT IS RECOGNIZED THAT THE TYPE AND NUMBER OF THE CONTRACTOR'S NON-KOREAN SUPERVISORY PERSONNEL FOR TRAINING, MAINTENANCE, START-UP, AND INITIAL OPERATING PURPOSES CANNOT BE DETERMINED AT THIS TIME. AFTER SOME DETERMINATION AND EVALUATION OF THE AVAILABILITY OF SKILLED KOREAN PERSONNEL, BUT AT LEAST NINETY (90) DAYS PRIOR TO THE MECHANICAL COMPLETION OF THE PLANT, CONTRACTOR SHALL FURNISH A SCHEDULE OF SUCH NON-KOREAN PERSONNEL AS ARE REQUIRED AND DAILY RATE OR RATES TO APPLY TO THE VARIOUS CLASSIFICATIONS OF SUCH PERSONNEL TO BE FURNISHED BY THE CONTRACTOR.

"2.0 WORK TO BE DONE BY GOVERNMENT

* * * THE OPERATION AND MAINTENANCE OF THE PLANT PRIOR TO ACCEPTANCE BY THE GOVERNMENT, AS DEFINED IN SECTION 6.32 HEREOF, SHALL BE UNDER THE DIRECT SUPERVISION AND TECHNICAL CONTROL OF THE CONTRACTOR'S NON KOREAN SUPERVISORY PERSONNEL. UPON REQUEST OF THE CONTRACTOR, THE GOVERNMENT SHALL PROVIDE KOREAN PERSONNEL, SUPPLIES, ETC., FOR THE START-UP, TESTING, AND INITIAL OPERATION OF THE PLANT, OR A SECTION THEREOF, DURING SUCH PERIODS AS THE CONTRACTOR INDICATES AND IN QUANTITIES AND TYPES SPECIFIED BY THE CONTRACTOR. SUCH OPERATIONS ARE TO BE CONDUCTED UNDER THE SUPERVISION FURNISHED BY THE CONTRACTOR, SO AS TO ENABLE CONTRACTOR TO DETERMINE WHETHER THE PLANT OR SUCH SECTION THEREOF WOULD FULFILL THE OPERATING GUARANTEES DURING A TEST RUN, OR WHAT ADJUSTMENTS, IF ANY, MIGHT BE NECESSARY TO ENABLE THE PLANT, OR SECTION THEREOF, TO MAKE A SUCCESSFUL TEST RUN. IT SHALL BE THE OBLIGATION OF THE GOVERNMENT UNDER THE SUPERVISION OF THE CONTRACTOR TO MAINTAIN AND REPAIR THE PLANT SO THAT THROUGHOUT THE PERIOD OF INITIAL OPERATION, TESTING AND TRAINING, THE EQUIPMENT THEREIN SHALL BE IN GOOD WORKING CONDITION.

"3.0 COMPLETION

THE CONTRACTOR SHALL COMPLETE THE PLANT FACILITIES AS DEFINED IN SECTION 6.32A OF THIS AGREEMENT WITHIN THIRTY (30) MONTHS FROM THE DATE OF THE ESTABLISHMENT OF FUNDS IN ACCORDANCE WITH THIS AGREEMENT * * *.

3.1 DELAYS

IT IS EXPRESSLY AGREED THAT IF THE CONTRACTOR SHALL BE DELAYED OR INTERRUPTED IN THE PERFORMANCE OF COMPLETION OF ITS WORK HEREUNDER BY ANY ACT, NEGLECT OR DEFAULT OF THE GOVERNMENT OR THE FOA, OR ANY EMPLOYEE OF THE GOVERNMENT OR THE FOA, ACTING IN AN OFFICIAL CAPACITY, OR OF ANY OTHER CONTRACTOR EMPLOYED BY THE GOVERNMENT OR THE FOA, * * * OR THE NECESSITY OF COMPLYING WITH ANY ORDER, DIRECTIVE, RULING OR REQUEST OF THE UNITED STATES OF AMERICA OR THE REPUBLIC OF KOREA, * * * THEN THE TIME OF COMPLETION SPECIFIED HEREIN SHALL BE EXTENDED FOR A PERIOD EQUIVALENT TO THE TIME LOST AS A RESULT THEREOF. IN THE EVENT OF ANY SUCH DELAY OR INTERRUPTION, THE CONTRACTOR SHALL BE REIMBURSED IN FULL FOR ALL COSTS AND EXPENSES DIRECTLY RELATED TO CARRYING OUT THE WORK UNDER THIS AGREEMENT, IN ADDITION TO THE EXTENSION OF TIME MENTIONED ABOVE.

3.2 PENALTY FOR NON-COMPLETION WITHIN TIME SPECIFIED

IF, FOR REASONS OTHER THAN THOSE SET FORTH IN SECTION 3.1 OR ANY OTHER APPLICABLE SECTION OF THIS AGREEMENT, THE PLANT FACILITIES COVERED BY THIS AGREEMENT WILL NOT HAVE BEEN COMPLETED WITHIN THIRTY (30) MONTHS, OR AS THE SAME MAY HAVE BEEN EXTENDED, THE CONTRACTOR WILL BE OBLIGED TO CONTINUE WITH ALL OF THE WORK UNTIL SUCH TIME AS THE PLANT WILL HAVE BEEN COMPLETED, BUT, IN THAT EVENT, THE GOVERNMENT WILL NOT BE OBLIGATED TO MAKE ANY FURTHER REIMBURSEMENTS TO THE CONTRACTOR, UNTIL THE PLANT WILL HAVE BEEN COMPLETED, FOR THE COST OF ENGINEERING, PROCUREMENT, EXPEDITING AND INSPECTION, NOR FOR THE COST OF SUPERVISION ON-SITE BY ITS PROJECT MANAGER AND/OR DEPUTY AND OTHER STAFF NECESSARY FOR SUPERVISION OF EXPEDITIOUS COMPLETION OF THE CONSTRUCTION WORK AS DEFINED IN SECTION 6.32A.

"4.0 REIMBURSABLE COSTS

THE GOVERNMENT AGREES TO PAY TO THE CONTRACTOR THE ACTUAL COST OF THE WORK REQUIRED TO BE PERFORMED OR FURNISHED BY THE CONTRACTOR. IT IS THE INTENT OF THIS AGREEMENT THAT THERE SHALL BE INCLUDED IN THE REIMBURSABLE COST OF THE WORK ALL ITEMS OF EXPENSE, EXCEPT AS HEREINAFTER LIMITED, WHICH ARE REQUIRED TO BE INCURRED BY THE CONTRACTOR IN CONNECTION WITH, AND ARISING FROM AND OUT OF, THE PERFORMANCE AND COMPLETION OF THE WORK UNDER THIS AGREEMENT, SUCH ITEMS TO INCLUDE, WITHOUT BEING LIMITED TO, THE FOLLOWING SUBSECTIONS; PROVIDED, HOWEVER, THAT NO COST WHICH IS COVERED UNDER SECTION 4.20 OF THIS AGREEMENT SHALL BE REIMBURSABLE * * *.

4.1 LABOR, CLERICAL, SUPERVISORY AND OTHER PERSONNEL

(1) THE ACTUAL COSTS OF THE CONTRACTOR FOR SALARIES, WAGES, TRAVEL TIME, PREMIUM TIME, OVERTIME, TRAVEL EXPENSE AND ANY SUMS OR ALLOWANCES PAID, INCLUDING OVERSEAS DIFFERENTIAL. * * * CONTRACTOR'S EMPLOYEES, LABORERS OR PERSONNEL SHALL INCLUDE, WITHOUT BEING LIMITED TO, PERSONS ENGAGED IN CONSTRUCTION, ENGINEERING, DESIGN, PURCHASING MATERIALS, SUPPLIES AND EQUIPMENT, EXPEDITING THE PRODUCTION OR TRANSPORTATION OF MATERIALS, SUPPLIES AND EQUIPMENT, RECRUITING EMPLOYEES AND PERFORMING ANY AND EVERY PORTION OF THE WORK COVERED BY THIS AGREEMENT OR IN PERFORMING SERVICES FOR THE BENEFIT OF THE PROJECT, * * * HOWEVER, CONTRACTOR SHALL NOT BE ENTITLED TO REIMBURSEMENT UNDER THIS SECTION FOR PERSONNEL WHO PERFORM WORK IN ANY OF CONTRACTOR'S OFFICES IN THE UNITED STATES, * * * IT BEING UNDERSTOOD THAT * * * COSTS OF CONTRACTOR'S U.S. EMPLOYEES ARE COVERED BY SECTION 4.20.

(6) ALL COSTS PROVIDED FOR IN THIS SUBSECTION 4.1 SHALL BE INCURRED IN ACCORDANCE WITH CONTRACTOR'S CUSTOMARY PRACTICE AND AS APPROVED BY GOVERNMENT.

4.2 MATERIALS, SUPPLIES, EQUIPMENT, FACILITIES, CONSTRUCTION WORK

(4) CONTRACTOR EXPENDITURES FOR SERVICES OF TECHNICIANS FURNISHED BY VENDORS, LICENSORS, SUPPLIERS OR SUBCONTRACTORS IN CONNECTION WITH THE PROCUREMENT, INSTALLATION OR USE OF ANY OF THE ITEMS MENTIONED ABOVE OR OTHERWISE REQUIRED.

(7) * * * IT IS UNDERSTOOD FURTHER THAT THE GOVERNMENT SHALL, WITHOUT COST TO THE CONTRACTOR, FURNISH FUEL, OPERATING AND MAINTENANCE SUPPLIES, AND ALL REQUIRED KOREAN OR OTHER PERMANENT OPERATING PERSONNEL FOR MAINTENANCE PRIOR TO, AND DURING, TESTING, START-UP AND INITIAL OPERATION OF THE PLANT.

4.20 SERVICES IN THE UNITED STATES (FIXED AMOUNTS)

THE CONTRACTOR AT ITS REGULAR OFFICES IN NEW YORK CITY; HARTFORD, CONNECTICUT; PITTSBURGH, PENNSYLVANIA; CHICAGO, ILLINOIS; AND ELSEWHERE IN THE UNITED STATES, IF REQUIRED FOR THE PURPOSES DESCRIBED IN THIS SECTION, SHALL PERFORM THEREIN OR THEREFROM THE FOLLOWING FUNCTIONS:

(1) PREPARE AND PROVIDE THE PROCESS DESIGN AND SPECIFICATIONS, * * * ENGINEERING COST ESTIMATES, SELECTION OF PROCESS EQUIPMENT AND SUCH OTHER DESIGN AND ENGINEERING SERVICES AS ARE REQUIRED; AND

(2) PURCHASE ALL NON-KOREAN MATERIALS AND EQUIPMENT REQUIRED, INSPECT AND EXPEDITE SUCH OF THOSE MATERIALS AND THE EQUIPMENT AS IS CONTRACTOR'S CUSTOMARY PRACTICE * * *

(3) ARRANGE FOR ALL TRANSPORTATION AND FORWARDING; AND

(4)PERFORM ALL ACCOUNTING FUNCTIONS REQUIRED IN THE UNITED STATES FOR ACCUMULATING AND KEEPING PROPER RECORDS OF DISBURSEMENTS, * * * MAINTAIN COMMITMENT SCHEDULES AND FURNISH THE GOVERNMENT AND THE FOA SUPPORTING DATA AS DEFINED ELSEWHERE IN THIS AGREEMENT; AND

(5) FURNISH EXECUTIVE SUPERVISION OVER AND ADMINISTRATIVE SERVICES FOR ALL THE FUNCTIONS DESCRIBED IN THIS SECTION AND ALSO TO THE OVERALL PLANNING AND EXECUTION OF THE WORK AS IS CUSTOMARILY PERFORMED IN THE CENTRAL OFFICE * * *.

FOR THE PURPOSE OF THIS AGREEMENT IT IS AGREED THAT THE FAIR AND REASONABLE COSTS OF ALL THE SERVICES ENUMERATED IN SUB-SECTIONS (1) THROUGH (5) HEREOF (INCLUDING, BUT NOT LIMITED TO, OVERHEAD, AND COSTS OF REPRODUCTIONS, MAILING, CABLES, AND TELEPHONE CALLS) ARE AS FOLLOWS:

TABLE

(1) $1,004,500

(2), (3), (4) 476,400

(5) 210,500

MAKING A TOTAL FIXED AMOUNT FOR SUCH SERVICES OF $1,691,400 PAYMENT OF WHICH FIXED AMOUNT IS PROVIDED FOR UNDER SECTION 7.2 OF THIS AGREEMENT.

"5.0 CHANGES

5.1 THE GOVERNMENT MAY AT ANY TIME ISSUE ORDERS REQUIRING ADDITIONAL WORK OR SERVICES WITHIN THE SCOPE OF THIS AGREEMENT OR DIRECTING THE OMISSION OF OR VARIATION IN WORK OR SERVICES COVERED BY THIS AGREEMENT * * * IF ANY GOVERNMENT ORDER FOR SUCH CHANGE, REVISION, VARIATION, OMISSION, DELETION OR ADDITION RESULTS IN A MATERIAL INCREASE OR DECREASE IN THE AMOUNT OR CHARACTER OF THE WORK OR SERVICES DESCRIBED IN PARAGRAPH 1.2, AN EQUITABLE ADJUSTMENT OF THE FIXED FEE SHALL BE MADE AND THIS AGREEMENT SHALL BE MODIFIED IN WRITING ACCORDINGLY * * *.

5.2 IN THE EVENT OF ANY MATERIAL CHANGE IN THE SCHEDULE OF THE WORK HEREUNDER RESULTING FROM ANY ORDER, REQUEST OR ACTION OF THE GOVERNMENT, OR FROM ANY FACT OR EVENT NOT CAUSED BY THE FAULT OF THE CONTRACTOR, THE PARTIES DO HEREBY AGREE TO NEGOTIATE IN GOOD FAITH FOR AN EQUITABLE INCREASE IN THE FIXED FEE PROVIDED HEREIN, AS THE SAME MAY HEREAFTER BE ADJUSTED PURSUANT TO THE 5.1, PROVIDED, HOWEVER, THAT THE FIXED FEE OR ADJUSTED FIXED FEE SHALL IN NO EVENT BE DECREASED IN THE EVENT THAT THE CONTRACTOR COMPLETES THE WORK AS DEFINED IN SECTION 6.32A IN LESS THAN THE ESTIMATED TIME MENTIONED IN PARAGRAPH 3.0 OF THIS AGREEMENT, OR AS THE SAME MAY BE MODIFIED HEREAFTER, AND SAID FEE SHALL ONLY BE DECREASED IN THE EVENT THAT THERE IS A SUBSTANTIAL DECREASE IN THE SCOPE OF THE WORK PROVIDED HEREUNDER. "6.0 ACCEPTANCE AND GUARANTEES

6.3 PERFORMANCE GUARANTEES THE CONTRACTOR GUARANTEES ON A TEST RUN OR TEST RUNS CONDUCTED AS PROVIDED HEREIN THAT THE PLANT WILL PERFORM IN THE FOLLOWING MANNER:

6.32 TEST RUN PROCEDURE

THE ABILITY OF THE PLANT TO MEET THE GUARANTEES OF THE CONTRACTOR PROVIDED IN SECTION 6.3 ABOVE SHALL BE DETERMINED BY MEANS OF ONE OR MORE TEST RUNS CONDUCTED IN ACCORDANCE WITH THE TERMS OF THE SUB PARAGRAPHS SET FORTH BELOW:

A. COMPLETION OF CONSTRUCTION

CONTRACTOR SHALL MAKE, OR CAUSE TO BE MADE, ALL USUAL TESTS AND INSPECTIONS TO THE END THAT THE CONSTRUCTION WORK SHALL BE PERFORMED IN A WORKMANLIKE MANNER IN CONFORMITY WITH GOOD STANDARD PRACTICES AND WITH QUALIFIED WORKERS, SO THAT WHEN SAID CONSTRUCTION WORK IS FINISHED, THE STRUCTURES, INSTALLATIONS AND IMPROVEMENTS WILL BE COMPLETE, SUBSTANTIAL AND SUITABLE FOR THE INTENDED USE AND THE EQUIPMENT WILL BE PROPERLY INSTALLED IN GOOD WORKING CONDITION. * * * GOVERNMENT SHALL BE NOTIFIED AT LEAST FIVE DAYS PRIOR TO ANY SUCH TESTS THAT CONTRACTOR INTENDS TO PERFORM THEM, AND GOVERNMENT MAY, AT ITS DISCRETION, HAVE OBSERVERS PRESENT TO WITNESS SUCH TESTS. THE DATE OF COMPLETION OF CONSTRUCTION SHALL BE THE DAY ON WHICH CONTRACTOR ADVISES GOVERNMENT IN WRITING THAT ALL OPERATING EQUIPMENT HAS BEEN INSTALLED AND HAS SATISFACTORILY MET MECHANICAL TESTS, AS PROVIDED ABOVE. UPON COMPLETION OF CONSTRUCTION, AS DEFINED ABOVE, GOVERNMENT SHALL WITHIN FIVE (5) DAYS ACKNOWLEDGE IN WRITING TO THE CONTRACTOR THE COMPLETION OF CONSTRUCTION AND MECHANICAL TESTS. IF WITHIN SAID FIVE (5) DAYS, GOVERNMENT DOES NOT FURNISH SUCH A WRITTEN ACKNOWLEDGEMENT OF THE COMPLETION OF THE CONSTRUCTION OF THE PLANT AND MECHANICAL TESTS, THE PLANT SHALL BE DEEMED TO HAVE BEEN MECHANICALLY COMPLETED.

B. OPERATION OF THE PLANT DURING TEST RUNS

THE CONTRACTOR SHALL CONDUCT TEST RUNS UNDER THE DIRECTION OF ITS OPERATING SUPERVISORS AND AS OFTEN AS IT MAY DEEM NECESSARY UNTIL THE PERFORMANCE GUARANTEES OF SECTION 6.3 HAVE BEEN MET. THE FIRST TEST RUNS SHALL BE STARTED WITHIN A PERIOD OF THIRTY (30) DAYS AFTER THE DATE OF COMPLETION OF CONSTRUCTION OF THE PLANT. THE CONTRACTOR SHALL BE ALLOWED A PERIOD OF ONE HUNDRED EIGHTY (180) DAYS AFTER THE MECHANICAL COMPLETION OF THE PLANT AS DEFINED IN SECTION 6.32A HEREOF WITHIN WHICH TO MEET THE GUARANTEES ESTABLISHED IN SECTION 6.3. THIS PERIOD MAY BE EXTENDED IF DELAYS ARE CAUSED BY CONDITIONS BEYOND THE CONTRACTOR'S CONTROL. * * * THE ABILITY OF THE PLANT TO MEET THE PROCESS GUARANTEES PROVIDED IN THE SECTION 6.3 SHALL BE DETERMINED BY AVERAGING THE RESULTS OF A TEST RUN PERIOD OF NOT LESS THAN TEN (10) CONSECUTIVE DAYS OF OPERATION UNDER NORMAL CONDITIONS, BUT THE CONTRACTOR MAY SPECIFY A TEST RUN PERIOD OF LONGER THAN TEN (10) DAYS, IF HE SO DESIRES. * * * WHEN A TEST RUN IS SATISFACTORILY COMPLETED, GOVERNMENT WILL, AT CONTRACTOR'S REQUEST, EXECUTE AND DELIVER TO CONTRACTOR A CERTIFICATE STATING THAT THE CONTRACTOR HAS FULLY PERFORMED ITS OBLIGATIONS UNDER SECTION 6.3 AND THE WORK IS ACCEPTED BY THE GOVERNMENT UNDER THE TERMS AND CONDITIONS HEREOF *

C. FEED STOCK, UTILITIES, SUPPLIES, ETC.

(GOVERNMENT SHALL FURNISH THE FOLLOWING AT ITS OWN EXPENSE:

(3) ALL PERSONNEL (OTHER THAN OPERATING ADVISERS FURNISHED BY THE CONTRACTOR AND OTHER GUARANTORS OF OPERATING PERFORMANCE) NECESSARY FOR THE EFFICIENT AND SATISFACTORY OPERATION AND MAINTENANCE OF THE PLANT.

6.33 LIABILITY

A. ALL LIABILITY OF THE CONTRACTOR UNDER THIS SECTION 6.0 OF THIS AGREEMENT SHALL FINALLY TERMINATE:

(1) UPON THE FULFILLMENT, AS DEMONSTRATED IN A TEST RUN OF THE OPERATING GUARANTEES AS SET FORTH IN SECTION 6.3; OR

C. THE CONTRACTOR'S GUARANTEES WITH RESPECT TO THE ENGINEERING AND PROPER OPERATION OF THE PLANT, SHALL BE LIMITED TO THE GUARANTEES SET FORTH IN SECTION 6.3 * * *.

D. IN NO EVENT, AND UNDER NO CIRCUMSTANCES SHALL THE CONTRACTOR BE LIABLE FOR ANY ALLEGED LOSS OF ANTICIPATED PROFITS, LOSS BY REASON OF PLANT SHUTDOWN, NON-OPERATION, OR INCREASE IN THE EXPENSE OF OPERATING OTHER THAN EQUIPMENT, OR FOR ANY OTHER CONSEQUENTIAL LOSS OR DAMAGE OF ANY NATURE ARISING FROM ANY CAUSE WHATSOEVER.

"7.0 COMPENSATION

7.1 FEE

AS COMPENSATION FOR ITS SERVICES TO BE PERFORMED UNDER THIS AGREEMENT, THE CONTRACTOR WILL BE PAID A TOTAL FIXED FEE OF NINE HUNDRED EIGHTY THOUSAND (U.S. $980,000) IN ACCORDANCE WITH THE FOLLOWING SCHEDULE WHICH ACKNOWLEDGES THE VARYING DEGREES OF COMPLEXITY OF THE CONTRACTOR'S WORK IN THE PROGRESS OF THE DESIGN, PROCUREMENT, CONSTRUCTION, AND START-UP, TESTING, AND INITIAL OPERATION OF THE PLANT AND ASSISTANCE IN TRAINING OF GOVERNMENT'S OPERATIONAL STAFF:

(12) ONE HUNDRED NINETY-SIX THOUSAND U.S. DOLLARS ($196,000) UPON CERTIFICATION OF THE CONTRACTOR AND COUNTERSIGNATURE OF THE GOVERNMENT THAT THE PLANT HAS MET OPERATING GUARANTEES AS PROVIDED IN SECTION 6.3 HEREOF.

(13) FORTY-NINE THOUSAND U.S. DOLLARS ($49,000) UPON COMPLETION OF THE TWELVE MONTHS TRAINING PERIOD PROVIDED FOR IN SECTION 1.26 HEREOF BUT AT NO EVENT SHALL THIS FINAL PAYMENT BE DEFERRED MORE THAN TWELVE (12) MONTHS AFTER THE COMPLETION OF THE PLANT AS DEFINED IN SECTION 6.32A.

7.2 COMPENSATION FOR SERVICES IN THE U.S.

AS COMPENSATION FOR CONTRACTOR'S COSTS FOR THE WORK AND SERVICES DESCRIBED UNDER SECTION 4.20 OF THIS AGREEMENT, THE CONTRACTOR SHALL BE PAID THE AMOUNT OF $1,691,400.00 * * *.

"25.0 TERM OF AGREEMENT

THE EFFECTIVE DATE OF THIS AGREEMENT SHALL BE THE DATE OF THE ESTABLISHMENT OF FUNDS REFERRED TO IN SECTION 8.1 AND 8.2 ABOVE AND THE AGREEMENT SHALL CONTINUE IN FULL FORCE AND EFFECT FOR A PERIOD OF FORTY- TWO MONTHS FROM SUCH DATE UNLESS EARLIER TERMINATED OR EXTENDED AS PROVIDED HEREIN.'

THE TERM "GOVERNMENT" WAS DEFINED IN THE CONTRACT TO MEAN THE GOVERNMENT OF THE REPUBLIC OF KOREA; THE WORDS "GOVERNMENT APPROVAL" WERE DEFINED THEREIN TO MEAN THE APPROVAL IN WRITING OF THE MINISTRY OF COMMERCE AND INDUSTRY OF THE REPUBLIC OF KOREA; AND THE ABBREVIATION "FOA" WAS DEFINED THEREIN TO MEAN THE FOREIGN OPERATIONS ADMINISTRATION OF THE GOVERNMENT OF THE UNITED STATES AND ITS SUCCESSOR AGENCIES OR OFFICIALS.

AN AGREEMENT ENTERED INTO BETWEEN MCGRAW-HYDROCARBON AND THE FOREIGN OPERATIONS ADMINISTRATION UNDER DATE OF JUNE 14, 1955, REFERS TO THE FACT THAT THE GOVERNMENT OF THE REPUBLIC OF KOREA HAD REQUESTED FOA TO ISSUE ITS LETTER OF COMMITMENT TO FINANCE CERTAIN DOLLAR AMOUNTS PAYABLE TO MCGRAW-HYDROCARBON UNDER THE CONTRACT INVOLVED, AND STATES THAT FOA REQUIRED CERTAIN "AGREEMENTS" BY THE CONTRACTOR AS CONDITIONS OR PREREQUISITES TO FOA UNDERTAKING SUCH FINANCING. IN VIEW THEREOF, AND AS SOME OF THE CONDITIONS, IT PROVIDED:

"5. COMPLETION AND ACCEPTANCE. IN CONNECTION WITH THE COMPLETION AND ACCEPTANCE OF THE FERTILIZER PLANT, WHICH WILL INCLUDE BOTH ACKNOWLEDGEMENT THAT THE PLANT IS MECHANICALLY COMPLETE AND ACCEPTANCE OF THE PLANT AS HAVING MET THE PERFORMANCE SPECIFICATIONS PROVIDED IN SECTION 6.3 OF THE AGREEMENT AND IN THE SEPARATE LICENSE AGREEMENT BETWEEN THE GOVERNMENT AND THE VULCAN COPPER AND SUPPLY COMPANY, IT IS UNDERSTOOD THAT CONTRACTOR WILL NOTIFY FOA IN ADVANCE OF THE TIME WHEN ANY TEST RUNS ARE TO BE MADE IN ACCORDANCE WITH SUCH SECTION. IT IS ALSO UNDERSTOOD THAT FOA MAY, IF IT THEN DESIRES, ASSIGN A TECHNICALLY QUALIFIED UNITED STATES CONSULTANT TO REVIEW SUCH PERFORMANCE TESTS TO ASCERTAIN WHETHER THE PLANT AND ITS PERFORMANCES ARE IN ACCORDANCE WITH THE GENERAL SCOPE OF WORK DESCRIBED IN SECTION 1.0 OF THE AGREEMENT AND THE DEFINITIVE OUTLINE SPECIFICATIONS AND DRAWINGS REFERRED TO IN SECTION 1.21, WHETHER THE PLANT HAS BEEN MECHANICALLY COMPLETED IN ACCORDANCE WITH SECTION 6.32A AND HAS MET THE PERFORMANCE QUALIFICATIONS STATED IN SECTION 6.3 AND THE VULCAN COPPER AGREEMENT HEREINABOVE REFERRED TO.

"7. FOA APPROVAL. WHERE ANY ACTION BY CONTRACTOR UNDER THE AGREEMENT REQUIRES OR PROVIDES FOR THE ACTION, CONSENT OR APPROVAL OF GOVERNMENT, CONTRACTOR AGREES THAT IT WILL ALSO REQUEST THE CONSENT OR APPROVAL THERETO OF FOA AS A CONDITION PRECEDENT TO RECEIPT OF DOLLAR PAYMENTS THEREFOR UNDER SAID LETTERS OF COMMITMENT. WHERE THE AGREEMENT REQUIRES NOTIFICATION BY CONTRACTOR TO GOVERNMENT OR ANY REPORT BY CONTRACTOR TO GOVERNMENT, SUCH NOTIFICATION OR REPORT SHALL BE MADE ALSO TO FOA.'

IT APPEARS THAT THE INITIAL FUNDS WERE COMMITTED FOR THE CONTRACT ON SEPTEMBER 5, 1955, THEREBY ESTABLISHING MARCH 5, 1958, AS THE ORIGINAL DATE FOR MECHANICAL COMPLETION OF THE PLANT, AND MARCH 5, 1959, AS THE ORIGINAL DATE FOR TOLLING THE PERIOD DURING WHICH THE CONTRACT WAS TO "CONTINUE IN FULL FORCE AND EFFECT," UNDER THE RESPECTIVE TERMS OF SECTIONS 3.0 AND 25.0 OF THE CONTRACT, SUPRA. HOWEVER, THE GOVERNMENT DIRECTED CERTAIN CHANGES TO BE MADE IN THE WORK REQUIRED TO BE PERFORMED UNDER THE CONTRACT, WHICH WERE THE SUBJECT OF AMENDMENTS NOS. 1 AND 2, DATED DECEMBER 12, 1955, AND JULY 13, 1956, THERETO. THESE AMENDMENTS PROVIDED FOR AN INCREASE IN THE AMOUNTS PAYABLE TO THE CONTRACTOR UNDER THE CONTRACT TO COVER THE ADDITIONAL COSTS OF MATERIAL, EQUIPMENT AND SERVICES (THE LATTER TO BE PERFORMED BY THE CONTRACTOR IN THE UNITED STATES) INCIDENT TO MAKING THE CHANGES, AND THE AMENDMENTS STIPULATED THAT ALL OTHER TERMS OF THE CONTRACT WERE TO REMAIN IN FULL FORCE AND EFFECT "EXCEPT ARTICLES (SECTIONS) 3.1 AND 3.2 WHICH MAY REQUIRE MODIFICATION DUE TO UNAVAILABILITY OF FUNDS TO CONTRACTOR IN THE AMOUNT OF $1,995,000 AS STIPULATED ABOVE.' ALSO BY AMENDMENT NO. 3, DATED SEPTEMBER 24, 1957, THE MAXIMUM AMOUNT PAYABLE TO THE CONTRACTOR UNDER SECTION 3.3 OF THE CONTRACT AS REIMBURSEMENT FOR ITS COSTS INCURRED IN U.S. DOLLARS, AND AS COMPENSATION FOR ITS SERVICES, WAS INCREASED FROM $21,550,000 TO $30,550,000, THE AMENDMENT STIPULATING:

"IT IS UNDERSTOOD THAT NO OTHERWISE VALID CLAIM OF THE GOVERNMENT UNDER SECTION 3.1 OR SECTION 3.2 OF THE AGREEMENT, NOR ANY OTHERWISE VALID OBJECTION OR DEFENSE OF THE GOVERNMENT OR THE CONTRACTOR TO ANY SUCH CLAIM, SHALL BE AFFECTED IN ANY WAY BY THIS AMENDMENT NO. 3.'

UNDER THE TERMS OF AMENDMENT NO. 4, DATED FEBRUARY 7, 1958, SECTIONS 3.0 AND 3.2 OF THE CONTRACT WERE AMENDED BY CHANGING THE WORDS AND FIGURES "THIRTY (30) MONTHS" TO "FORTY-FIVE (45) MONTHS," AND THE FOLLOWING LANGUAGE WAS ADDED AT THE END OF SECTION 1.27:

"IT IS UNDERSTOOD THAT THE AMOUNT UNDER SECTION 3.3 PROVIDED BY AMENDMENT NO. 4 INCLUDES THE BUDGETED SUM OF $260,000 FOR THE SERVICES TO BE PERFORMED UNDER THIS SECTION 1.27; AND THAT THIS AMOUNT OF $260,000 IS SUFFICIENT TO FINANCE NOT MORE THAN 72 MAN-MONTHS OF TECHNICAL SUPERVISION IN ACCORDANCE WITH THE PERSONNEL SCHEDULE SUGGESTED BY THE CONTRACTOR AND WITH THE DAILY RATES AGREED UPON.'

SECTION 3.3, AS THERETOFORE AMENDED, WAS FURTHER AMENDED BY DELETING THE FIGURE $30,550,000" AND SUBSTITUTING THEREFORE THE FIGURE $33,338,000.' SECTION 4.20, WHICH HAD BEEN AMENDED BY AMENDMENT NO. 2 BY DELETING THE FIGURES "$1,004,500, $476,400, $210,500 AND $1,691,400," AND SUBSTITUTING THEREFOR THE FIGURES $1,054,300, $487,400, $213,700 AND $1,755,400," RESPECTIVELY, TO COVER THE UNITED STATES COSTS SPECIFIED IN THE SECTION INCIDENT TO THE WORK ADDED BY AMENDMENT NO. 2, WAS FURTHER AMENDED BY DELETING THE PARAGRAPH THEREOF WHICH BEGAN "FOR THE PURPOSE OF THIS AGREEMENT" AND WHICH ENDED "UNDER SECTION 7.2 OF THIS AGREEMENT," AND SUBSTITUTING THEREFOR THE FOLLOWING WORDS:

"FOR THE PURPOSE OF THIS AGREEMENT, IT IS AGREED THAT THE FAIR AND REASONABLE COSTS OF ALL THE SERVICES ENUMERATED IN SUBSECTIONS (1) THROUGH (5) HEREOF IS $2,130,400.'

A NEW SECTION WAS ADDED TO THE CONTRACT READING AS FOLLOWS:

"4.21 THE CONTRACTOR SHALL BE REIMBURSED FOR ALL COSTS OF MATERIAL, EQUIPMENT AND LABOR REQUIRED AND USED FOR REPAIRS DURING THE PERIOD BETWEEN THE ACCEPTANCE BY GOVERNMENT OF MECHANICAL COMPLETION OF ANY PORTION OF THE PLANT AND THE FINAL ACCEPTANCE BY THE GOVERNMENT OF ALL PORTIONS OF THE PLANT IN ACCORDANCE WITH SECTION 6.3.'

SECTION 7.2, WHICH HAD BEEN AMENDED BY AMENDMENT NO. 2 TO INCLUDE THE ADDITIONAL SUM OF $64,000 IN THE TOTAL AMOUNT PAYABLE AS COMPENSATION FOR CONTRACTOR'S COSTS FOR WORK AND SERVICES TO BE PERFORMED IN THE UNITED STATES, WAS FURTHER AMENDED TO PROVIDE FOR PAYMENT TO THE CONTRACTOR OF THE TOTAL SUM OF $2,130,400 TO COVER THE MODIFICATION IN SECTION 4.20, REFERRED TO ABOVE. SECTION 25.0 WAS AMENDED BY DELETING THEREFROM THE WORDS "FORTY-TWO MONTHS" AND SUBSTITUTING THEREFOR THE WORDS "FIFTY-SEVEN MONTHS.' ALSO, AMENDMENT NO. 4 PROVIDED: "9. IT IS AGREED THAT THE EXTENSION OF TIME AND THE INCREASE IN THE AMOUNT PAYABLE FOR THE CONTRACTOR'S SERVICES UNDER SECTION 4.20, BOTH EFFECTED BY THIS AMENDMENT NO. 4, ARE IN FULL CONSIDERATION FOR DELAYS OCCASIONED TO THE CONTRACTOR PRIOR TO FEBRUARY 15, 1958, AND THE CONTRACTOR SPECIFICALLY WAIVES AND RELEASES ANY OTHER OR FURTHER CLAIMS, UNDER SECTIONS 4.20 AND 7.1, PURSUANT TO SECTION 3.1 OF THE AGREEMENT, OR OTHERWISE, ON ACCOUNT OF SUCH DELAYS.'

UNDER THE TERMS OF AMENDMENT NO. 5, DATED MAY 27, 1960, SECTION 25.0 OF THE CONTRACT WAS FURTHER AMENDED BY DELETING THEREFROM THE WORDS "FIFTY- SEVEN MONTHS" AND SUBSTITUTING THEREFOR THE WORDS "SIXTY-THREE MONTHS.' MCGRAW-HYDROCARBON'S LETTER OF JULY 11, 1961, INVOLVES A CLAIM BY THE CONTRACTOR OF THE RIGHT TO BE PAID AT THE RATE OF $100 PER MAN A CALENDAR DAY, PLUS TRAVEL AND LIVING EXPENSES, FOR CERTAIN TECHNICAL SUPERVISORS FURNISHED UNDER SECTION 1.27 OF THE CONTRACT.

BY LETTER OF FEBRUARY 7, 1958, MCGRAW-HYDROCARBON ADVISED THE MINISTER OF COMMERCE AND INDUSTRY, GOVERNMENT OF THE REPUBLIC OF KOREA, WITH RESPECT TO THE TECHNICAL PERSONNEL WHICH WOULD BE REQUIRED AND WHICH THE CONTRACTOR WOULD FURNISH UNDER THE ABOVE SECTION FOR TECHNICAL SUPERVISION OF THE START-UP AND INITIAL OPERATIONS OF THE PLANT AS FOLLOWS:

"CONFIRMING THE DISCUSSIONS IN FULL COMMITTEE MEETINGS DURING THE PERIOD JANUARY 20 TO FEBRUARY 6, 1958, MCGRAW-HYDROCARBON AGREE TO PROVIDE FOR THIS PURPOSE A MINIMUM OF SIX TECHNICAL SUPERVISORS AND, DEPENDING UPON THE AVAILABILITY OF FUNDS, A MAXIMUM OF FOURTEEN TECHNICAL SUPERVISORS, FOR AN AVERAGE OF TWELVE MONTHS EACH, AT A DAILY RATE OF 100 DOLLARS PER MAN, PER CALENDAR DAY, EXCLUSIVE OF TRAVEL AND LIVING EXPENSES.

"IT IS OUR UNDERSTANDING THAT YOUR MINISTRY AND THE UNITED STATES GOVERNMENT OFFICIALS PRESENT IN SEOUL DESIRE TO INCLUDE 260,000 DOLLARS IN AMENDMENT NO. 4 FOR THE PURPOSE OF PROVIDING FUNDS FOR THE MINIMUM NUMBER OF SIX SUCH TECHNICAL SUPERVISORS.

"UPON RECEIPT OF COPY OF THIS LETTER ACCEPTED BY YOU CONFIRMING THE ABOVE UNDERSTANDING, WE SHALL PROCEED AT ONCE UPON THE SIGNATURE OF AMENDMENT NO. 4 TO SCHEDULE THE TECHNICAL SUPERVISORS TO START ARRIVING AT CHUNG-JU ON OR ABOUT JULY 1, 1958, FOR THE TESTING AND START-UP OF THE AMMONIA PLANT SECTION.'

THE COPY OF THE ABOVE LETTER IN THE FILE INDICATES THAT THE MINISTER OF COMMERCE AND INDUSTRY SIGNIFIED HIS ACCEPTANCE THEREOF FOR THE REPUBLIC OF KOREA ON FEBRUARY 7, 1958. BY LETTER OF THE SAME DATE, HOWEVER, THE ASSISTANT DIRECTOR, OFFICE OF CONTRACT RELATIONS, ICA, ADVISED THE CONTRACTOR WITH REFERENCE TO THE MATTER AS FOLLOWS:

"THIS LETTER WILL ALSO RECORD OUR JOINT UNDERSTANDING THAT THE APPROVAL GIVEN TO YOU BY THE GOVERNMENT OF THE REPUBLIC OF KOREA IN ACCEPTING YOUR LETTER DATED FEBRUARY 7, 1958, OF A DAILY RATE APPLICABLE TO COVER THE COSTS OF TECHNICAL SUPERVISORS UNDER SECTION 1.27 OF THE AGREEMENT IS SUBJECT TO THE FURTHER APPROVAL OF ICA/WASHINGTON.'

BY LETTER OF MAY 21, 1958, MCGRAW-HYDROCARBON SUBMITTED TO THE OFFICE OF CONTRACT RELATIONS, ICA, WASHINGTON, D.C., THE FOLLOWING BREAKDOWN OF COSTS SHOWING THE BASIS UPON WHICH THE DAILY RATE OF $100 PROPOSED TO BE CHARGED FOR FURNISHING THE TECHNICAL SUPERVISORS HAD BEEN COMPUTED AND REQUESTED THE AGENCY'S APPROVAL OF THE RATE:

TABLE

"COST PER MAN PER MONTH MONTHLY SALARY (5 DAY WEEK)

$1200. ADDITION FOR 6TH DAY (20 PERCENT)240. OVERSEAS PAY (25 PERCENT)360.

$1800. OTHER DIRECT COSTS:

CABLE, POSTAGE, REPRODUCTION 65.

INDOCTRINATION, SUBSISTENCE IN

NEW YORK--- 1/2 MONTH 75.

1940.

OVERHEAD AT 55 PERCENT 1067.

$3007. 3007 PLUS 30 EQUALS $100 PER DAY PER MAN * HOTEL AND SUBSISTENCE- -- 15 DAYS AT $20/DAY EQUALS 300. BASE SALARY FOR 15 DAYS (5 DAY WEEK/--- 1200 EQUALS 600.

2

$900. EQUALS

12 $75/MONTH

PRORATED

OVER 12

MONTH

PERIOD"

IN THE LETTER, THE CONTRACTOR EXPLAINED THAT THE DAILY RATE "IS PER CALENDAR DAY AND STARTS FROM DATE OF DEPARTURE FROM NEW YORK AND ENDS ON DATE OF RETURN.'

IT APPEARS FROM MCGRAW-HYDROCARBON'S LETTER OF JULY 18, 1958, TO THE PROJECT ENGINEER, INDUSTRIES DIVISION, ICA, WASHINGTON, D.C., THAT THE LETTER, IN A TELEPHONE CONVERSATION HELD WITH THE CONTRACTOR ON JULY 16, 1958, REQUESTED CERTAIN ADDITIONAL INFORMATION IN REGARD TO THE DAILY RATE PROPOSED TO BE CHARGED FOR THE TECHNICAL SUPERVISORS IN QUESTION, INCLUDING THE REASON FOR INCLUSION OF THE OVERHEAD FACTOR OF 55 PERCENT AND THE AMOUNT OF $65 PER MAN PER MONTH FOR CABLES, POSTAGE AND REPRODUCTIONS AS ELEMENTS OF COST IN ARRIVING AT THE RATE. IN THE LETTER, THE CONTRACTOR STATED THAT AN "OVERHEAD IN THE U.S. OF 55 PERCENT" AND AN AMOUNT TO COVER THE ,OUT-OF-POCKET COSTS" OF CABLES, POSTAGE AND REPRODUCTIONS HAD BEEN INCLUDED THEREIN BECAUSE THE ITEMS WERE NECESSARILY AND PROPERLY A PART OF ITS COSTS FOR FURNISHING THE TECHNICAL SUPERVISORS AND NO AMOUNT HAD BEEN INCLUDED ELSEWHERE IN THE DOLLAR FUNDS PAYABLE TO THE CONTRACTOR TO COVER SUCH COSTS. THE CONTRACTOR PREVIOUSLY HAD FURNISHED THE PROJECT ENGINEER WITH INFORMATION REGARDING THE MANNER IN WHICH THE AVERAGE MONTHLY BASE SALARY OF $1,200 SHOWN IN THE ABOVE BREAKDOWN OF COSTS HAD BEEN COMPUTED BY LETTER OF JUNE 30, 1958.

BY LETTER OF APRIL 28, 1959, TO THE ASSISTANT DIRECTOR, OFFICE OF CONTRACT RELATIONS, ICA/W, THE CONTRACTOR SUBMITTED ADDITIONAL INFORMATION AND REASONS--- FOLLOWING DISCUSSIONS HELD WITH THE ASSISTANT DIRECTOR ON APRIL 23, 1959--- PURPORTING TO SHOW THAT THE OVERHEAD FACTOR AND THE CHARGE FOR CABLES, POSTAGE AND REPRODUCTIONS, REFERRED TO ABOVE, HAD BEEN PROPERLY INCLUDED AS ELEMENTS OF COST IN ARRIVING AT THE $100 DAILY RATE PROPOSED TO BE CHARGED FOR FURNISHING THE TECHNICAL SUPERVISORS, FOR WHICH THE CONTRACTOR WAS STILL SEEKING FINAL APPROVAL. IT APPEARS THAT ICA, WASHINGTON, HAD SO FAR DECLINED TO APPROVE THE $100 RATE ON THE BASIS THAT THESE ELEMENTS OF COST REPRESENTED A DUPLICATION OF THOSE FOR WHICH REIMBURSEMENT WAS PROVIDED UNDER SECTION 4.20 OF THE CONTRACT. IN SUPPORT OF ITS POSITION THAT THE ELEMENTS OF COST IN QUESTION HAD NOT BEEN INCLUDED IN THE AGGREGATE AMOUNT STIPULATED IN SECTION 4.20 TO BE PAID TO MCGRAW HYDROCARBON TO COVER ITS SERVICES IN THE UNITED STATES (OVERHEAD) RELATED TO THE PERFORMANCE OF THE CONTRACT, THE CONTRACTOR FURNISHED A COPY OF THE SCHEDULES SHOWING A BREAKDOWN OF COSTS, EXHIBIT H, DATED MARCH 15, 1955, WHICH IT HAD SUBMITTED TO ICA IN SUPPORT OF THE ESTIMATED AMOUNT OF $1,830,700 WHICH IT PROPOSED INCLUDING IN THE CONTRACT TO COVER OVERHEAD COSTS TO BE INCURRED BY THE CONTRACTOR IN THE UNITED STATES IN CONNECTION WITH THE PERFORMANCE OF THE CONTRACT. THE SCHEDULES SET FORTH FIVE BASIC CATEGORIES OF COST AND THE ESTIMATED COSTS APPLICABLE THERETO AS FOLLOWS:

TABLE

(A) GENERAL OFFICE $172,340

(B) PERSONNEL 40,660

(C) ACCOUNTING 208,100

(D) PURCHASING 275,300

(E) ENGINEERING 1,134,300

$1,830,700

THE CONTRACTOR'S LETTER STATES THAT, AS A RESULT OF NEGOTIATIONS, THE FIXED AMOUNT OF $1,691,400 WAS INCLUDED IN THE CONTRACT (SECTION 4.20) FOR SUCH SERVICES, AND THAT THIS AMOUNT WAS ARRIVED AT BY REDUCING THE ESTIMATED AMOUNTS SHOWN FOR THE ABOVE CATEGORIES OF COST AS FOLLOWS:

TABLE

(A) GENERAL OFFICE $170,340

(B) PERSONNEL 40,160

(C) ACCOUNTING 205,100

(D) PURCHASING271,300

(E) ENGINEERING 1,004,500

$1,691,400

IT WILL BE SEEN THAT THE AMOUNT SHOWN FOR ITEM (E), AS REVISED DURING NEGOTIATIONS, CORRESPONDS TO THE AMOUNT ORIGINALLY SET FORTH IN SECTION 4.20 OF THE CONTRACT TO COVER THE COSTS OF THE TYPE REFERRED TO IN SUBPARAGRAPH (1) THEREOF; THAT THE SUM OF THE AMOUNTS SHOWN FOR ITEMS (C) AND (D) CORRESPONDS TO THE SUM OF THE AMOUNTS SET FORTH IN SECTION 4.20 TO COVER COSTS OF THE TYPE REFERRED TO IN SUBPARAGRAPHS (2), (3) AND (4) THEREOF; AND THAT THE SUM OF THE AMOUNTS SHOWN FOR ITEMS (A) AND (B) CORRESPONDS TO THE AMOUNT SET FORTH IN SECTION 4.20 TO COVER COSTS OF THE TYPE REFERRED TO IN SUBPARAGRAPH (5) THEREOF. THE CONTRACTOR CONTENDED IN THE LETTER OF APRIL 28, 1959, THAT THE PERSONNEL WHOSE VARIOUS CLASSIFICATIONS, LENGTH OF SERVICE AND APPLICABLE AVERAGE MONTHLY SALARY RATES ARE SET FORTH IN THE SCHEDULE DETAILING ITS ESTIMATED COST ($1,134,300) OF ,ENGINEERING (U.S.A.)," AND WHOSE DIRECT SALARIES CONSTITUTED THE BASE TO WHICH AN OVERHEAD FACTOR OF 60 PERCENT WAS APPLIED IN ARRIVING AT THE TOTAL ESTIMATED COST FOR THIS CATEGORY, DID NOT INCLUDE THE TECHNICAL SUPERVISORS WHO WERE REQUIRED TO BE FURNISHED UNDER SECTION 1.27 OF THE CONTRACT. ALSO, THE CONTRACTOR CONTENDED THAT NO AMOUNT HAD BEEN INCLUDED IN THE OTHER CATEGORIES OF COST SHOWN IN ITS ESTIMATE OF COST FOR SERVICES TO BE PERFORMED IN THE UNITED STATES TO COVER ANY COST, INCLUDING CABLE, POSTAGE AND REPRODUCTION COSTS, RELATED TO THE FURNISHING OF THE TECHNICAL SUPERVISORS. IN CONCLUDING ITS ARGUMENT THAT THE ELEMENTS OF COST IN QUESTION WERE PROPERLY INCLUDABLE IN THE PER DIEM RATE, THE CONTRACTOR STATED.

"DURING THE DISCUSSIONS IN KOREA IN JANUARY AND FEBRUARY OF 1958, THE SUBJECT OF THE TECHNICAL SUPERVISORS UNDER 1.27 RECEIVED CONSIDERABLE REVIEW. AT ALL TIMES WE STATED THAT WE RECOGNIZED THE OBLIGATION TO FURNISH THESE TECHNICAL SUPERVISORS AND THAT THE FIXED FEE CONTAINED IN THE CONTRACT WOULD NOT BE SUBJECT TO INCREASE IF A NUMBER NOT TO EXCEED FOURTEEN (14) SUCH SUPERVISORS WERE FURNISHED. THE UNOFFICIAL STENOGRAPHIC RECORD CONTAINS AT LEAST TWO INSTANCES OF AGREEMENT ON THIS POINT REGARDING ADDITIONAL FEE. IT WAS ONLY WITH RESPECT TO FEE THAT WE TOOK ISSUE ON PAGE 185 OF THESE UNOFFICIAL TYPED NOTES WHEN ASKED WHETHER THE PER DIEM RATE INCLUDED FEE AND OVERHEAD; OVERHEAD COSTS HAVE ALWAYS BEEN INCLUDED IN PER DIEM RATES. THE COSTS OF SUCH START-UP AND INITIAL OPERATIONS SERVICES; I.E., OVERHEAD, SALARY, CABLE, POSTAGE REPRODUCTION COSTS, ETC. HAVE FROM THE BEGINNING BEEN THE BASIS FOR COMPUTATION OF A PER DIEM RATE. THIS IS IN ACCORDANCE WITH THE ACCEPTED PRACTICES OF OUR TWO COMPANIES IN SEVERAL OVERSEAS PROJECTS AND NORMAL WITHIN INDUSTRY.'

IN REPLYING TO THE ABOVE LETTER BY LETTER OF MAY 22, 1959, THE ASSISTANT DIRECTOR, OFFICE OF CONTRACT RELATIONS, INFORMED THE CONTRACTOR THAT IT WAS THE DISTINCT RECOLLECTION OF THOSE WHO REPRESENTED ICA IN THE NEGOTIATION OF THE CONTRACT (THE ASSISTANT DIRECTOR HERE APPARENTLY REFERRED TO THE INFORMATION CONTAINED IN TWO MEMORANDUMS DATED MAY 14 AND MAY 15, 1959, FROM ,JAMES J. FORD, AUD 738/R" AND THE PROJECT ENGINEER, INDUSTRIES DIVISION, ICA, RESPECTIVELY, TO THE AGENCY'S DEPUTY GENERAL COUNSEL) THAT THE ADMINISTRATIVE OVERHEAD PAYABLE TO IT FOR THE DURATION OF THE CONTRACT INCLUDED "BACK STOPPING" OF PLANT START-UP SERVICES, AND SUCH REPRESENTATIVES WERE QUITE EMPHATIC IN STATING THAT THEY WOULD NOT HAVE CONCURRED IN THE FIXED AMOUNT OF $210,500 STIPULATED TO BE PAID TO IT FOR THE SERVICES DESCRIBED IN SUBPARAGRAPH (5) OF SECTION 4.20 OF THE CONTRACT, SUPRA, HAD THERE BEEN ANY INDICATION THAT THERE WAS TO BE ANY ADDITIONAL OVERHEAD SUBJECT TO NEGOTIATION AT A LATER DATE. ACCORDINGLY, THE CONTRACTOR WAS ADVISED IN THE LETTER THAT THE "FOREGOING EVIDENCE COMPELS THE CONCLUSION THAT IT WAS THE INTENT OF THE PARTIES THAT THE LUMP SUM OVERHEAD PAYABLE UNDER SECTION 4.20 OF THE CONTRACT WAS ALL-INCLUSIVE AND ACCORDINGLY THAT THE TERM "DAILY RATE" AS USED IN SECTION 1.27 OF THE CONTRACT WOULD NOT INCLUDE ANY OVERHEAD FACTOR;, FOR SIMILAR REASONS, THE CONTRACTOR WAS ADVISED THAT NO BASIS EXISTED FOR INCLUSION OF ANY AMOUNT TO COVER CABLE, POSTAGE AND REPRODUCTION COSTS IN THE DAILY RATE.

THE CONTRACTOR RESPONDED TO THE ABOVE LETTER BY LETTER OF JUNE 15, 1959, STATING THAT IT WAS IN COMPLETE DISAGREEMENT WITH THE CONCLUSIONS REACHED THEREIN FOR THE FOLLOWING, AMONG OTHER, EASONS:

"AS FURTHER PROOF THAT THE U.S. ADMINISTRATIVE "OVERHEAD" FOR PLANT START -UP AND INITIAL OPERATIONS WAS SPECIFICALLY EXCLUDED FROM THE LUMP SUM PAYMENTS UNDER SECTION 7.2, WE PRESENT THE FOLLOWING: "A. THERMOFAX COPY OF MARCH 9, 1955 LETTER FROM F.O.A. (CONTRACT AUDIT BRANCH) TO MCGRAW- HYDROCARBON (COPY ATTACHED) REQUESTING A BREAKDOWN OF CERTAIN PROPOSAL ESTIMATES. EXPLANATORY DETAILS WERE PROVIDED ON ALL ITEMS EXCEPT "PLANT SUPERVISION (US) FOR OPERATIONS" . A THOROUGH REVIEW OF YOUR RECORDS WILL DISCLOSE THAT THIS ITEM OF $240,000 WAS NOT INCLUDED IN THE LUMP SUM NEGOTIATED UNDER SEC-7.2. (THIS ITEM OF REIMBURSABLE U.S. COST--- ADDITIONAL TO FUNDS IN SECTION 7.2--- WAS CARRIED FORWARD IN OFFICIAL CONTRACT ESTIMATES AND REPORTS FOLLOWING THE CONTRACT SIGNATURE).

"B. THE U.S. ADMINISTRATIVE PERSONNEL REPRESENTED IN THE SERVICES UNDER SECTION 4.20 (5) FOR WHICH FUNDS OF ($210,500 WERE PROVIDED UNDER SECTION 7.2 ARE NOT THE U.S. OVERHEAD PERSONNEL REFERRED TO OR REQUIRED TO SERVICE THE TECHNICAL SUPERVISORS FOR START-UP AND INITIAL OPERATIONS. A REVIEW OF EXHIBIT H TO OUR LETTER OF APRIL 28, 1959 WILL DISCLOSE TWO THINGS; FIRST, THAT THE GENERAL OFFICE PERSONNEL IN OUR ESTIMATE OF MARCH 15, 1955 DID NOT INCLUDE THE U.S. TECHNICAL PERSONNEL (PROCESS, OPERATIONS, MECHANICAL AND LABORATORY) ESSENTIAL TO SUPPORT START-UP AND OPERATION; AND SECOND, THAT THE TIME PERIOD INVOLVED FOR THESE GENERAL OFFICE PERSONNEL (AVERAGE 24.4 MONTHS EACH) COULD NOT CONCEIVABLY HAVE BEEN INTENDED TO COVER THE TWELVE (12) MONTH SERVICE UNDER SECTION 1.27, WHICH WAS ADDITIVE TO THE THIRTY (30) MONTH PERIOD FOR COMPLETION OF THE CONSTRUCTION SERVICES ENUMERATED UNDER SECTION 4.2.

"THESE AND OTHER RELATED FACTS SHOULD CLEARLY SHOW THAT THE U.S. COSTS (SO-CALLED OF AN ,OVERHEAD" NATURE BUT ACTUALLY COMPOSED OF SALARIES AND OTHER DIRECT COSTS) OF MCGRAW-HYDROCARBON ENGINEERING PERSONNEL IN NEW YORK FOR SERVICES UNDER SECTION 1.27 WERE NOT PART OF THE SERVICES UNDER SECTION 4.2 FOR WHICH THE LUMP SUM UNDER SECTION 7.2 WAS NEGOTIATED. THE REASONS FOR NOT INCLUDING THESE COSTS WERE EQUALLY CLEAR. NOBODY KNEW--- NOR COULD REASONABLY ESTIMATE--- THE NUMBER OF TECHNICAL SUPERVISORS REQUIRED THIRTY (30) MONTHS HENCE. CONSEQUENTLY, IT WAS IMPOSSIBLE TO ESTABLISH A FAIR AND EQUITABLE SUM FOR THE U.S. SERVICES UNDER SECTION 1.27. INSTEAD, THE CUSTOMARY INDUSTRY PRACTICE OF FURNISHING TECHNICAL OPERATING PERSONNEL AT STANDARD DAILY RATES RANGING FROM $75 TO $150 PER DAY WAS INCORPORATED INTO PARAGRAPH 1.27.'

IN CONCLUSION, THE CONTRACTOR STATED:

"FOR MONTHS--- SINCE JULY 1958--- WE HAVE BEEN PROVIDING THE TECHNICAL SUPERVISION SERVICES UNDER SECTION 1.27. THERE ARE NO PROVISIONS IN OUR CONTRACT WITH THE GOVERNMENT OF THE REPUBLIC OF KOREA FOR PAYMENT OF SALARIES, WAGE EXPENSES AND ALLOWANCES, OR FOR U.S. COSTS AND "OVERHEAD" FOR THESE SERVICES EXCEPT THROUGH THE MEDIUM OF A DAILY RATE (OR RATES) TO BE AGREED UPON. WE REQUEST THAT THE TRUE INTENT OF THE PARTIES BE RECOGNIZED WITHOUT DELAY AND THAT THE AUTHORIZED ICA/W REPRESENTATIVES COME TO OUR SEPARATE OFFICES IN NEW YORK TO REVIEW THE FINANCIAL DETAILS REQUIRED TO ESTABLISH THE DAILY RATE OF $100 PER TECHNICAL SUPERVISOR.

IN A LETTER TO THE CONTRACTOR, DATED JULY 1, 1959, THE ASSISTANT DIRECTOR, OFFICE OF CONTRACT RELATIONS, ADMITTED THAT THE ITEM OF $240,000, REFERRED TO IN THE ABOVE-QUOTED LETTER, HAD BEEN EXCLUDED AS AN ITEM OF COST IN NEGOTIATING THE SUM STIPULATED TO BE PAID TO THE CONTRACTOR IN SECTION 7.2 OF THE CONTRACT, SUPRA. THE ASSISTANT DIRECTOR STATED THAT THE ITEM HAD BEEN EXCLUDED BECAUSE IT WAS NEVER "TO OUR KNOWLEDGE" CONSIDERED AS AN ADMINISTRATIVE OR OVERHEAD ITEM, BUT AS A REIMBURSABLE ITEM. WITH RESPECT TO A STATEMENT WHICH THE CONTRACTOR HAD MADE IN THE ABOVE-QUOTED LETTER THAT IT WOULD NOT HAVE ACCEPTED THE NEGOTIATED INCREASE IN THE LUM-SUM PAYABLE TO THE CONTRACTOR UNDER SECTION 7.2 PROVIDED BY AMENDMENT NO. 4 TO THE CONTRACT IF ANY QUESTION HAD BEEN RAISED BY ICA REPRESENTATIVES AS TO THE CONTRACTOR'S RIGHT TO INCLUDE THE ITEMS OF COST IN QUESTION IN ARRIVING AT THE PER DIEM RATE, THE ASSISTANT DIRECTOR STATED:

"* * * THE FOLLOWING COLLOQUY WITH REGARD TO THE DAILY RATE OF $100 PER DAY FOR START-UP AND TEST-RUN PERSONNEL IN THE MINUTES OF A NEGOTIATING MEETING HELD AT SEOUL, KOREA, ON FEBRUARY 4, 1958, IN CONNECTION WITH AMENDMENT NO. 4 TO THE CONSTRUCTION CONTRACT, IS OF SIGNIFICANCE. KESSLER: "THESE DAILY RATES INCLUDE FEE AND OVERHEAD? " NORTON: "NO" .'

MR. KESSLER, OF COURSE, WAS THE AUTHOR OF THE LETTER, AND THE RECORD INDICATES THAT MR. NORTON WAS THE W. J. NORTON WHO (AS VICE PRESIDENT OF HYDROCARBON RESEARCH, INC.) SIGNED THE LETTER OF FEBRUARY 7, 1958 (ALONG WITH THE RESIDENT VICE PRESIDENT OF F. H. MCGRAW AND COMPANY) FROM MCGRAW- HYDROCARBON TO THE MINISTER OF COMMERCE AND INDUSTRY, GOVERNMENT OF THE REPUBLIC OF KOREA, REFERRED TO HEREINABOVE. IN THE LETTER OF JULY 1, 1959, THE CONTRACTOR WAS ADVISED OF THE AGENCY'S CONCLUSION IN THE MATTER AS FOLLOWS:

"FOR THE REASONS SET FORTH ABOVE AND IN OUR LETTER TO YOU DATED MAY 22, 1959 RELATIVE TO THE SAME SUBJECT, WE HEREBY DENY YOUR CLAIM FOR INCLUSION IN THE DAILY RATE FOR START-UP AND TEST RUN PERSONNEL OF AN OVERHEAD FACTOR. IT IS OUR CONSIDERED CONCLUSION THAT THIS OVERHEAD IS PAID PURSUANT TO SECTION 4.20 AND THAT ANY PAYMENT OF SPECIAL OVERHEAD FOR START-UP AND TEST RUN PERSONNEL WOULD BE A DUPLICATION OF PAYMENTS MADE UNDER SECTION 4.20.'

IN A LETTER TO THE ASSISTANT DIRECTOR, DATED JULY 23, 1959, THE CONTRACTOR, AFTER REFERRING TO THE FACT THAT THE PARTIES HAD BEEN UNABLE TO ARRIVE AT A MUTUALLY ACCEPTABLE PER DIEM RATE DUE TO THEIR OPPOSING VIEWS WITH RESPECT TO WHETHER OVERHEAD COSTS TO COVER "BACKUP OF OUR HOME OFFICE" CONSTITUTED AN APPROPRIATE ELEMENT OF COST TO BE INCLUDED THEREIN, STATED THAT IT WAS THEREBY SUBMITTING A REVISED COST BREAKDOWN WHICH DID NOT INCLUDE ANY OVERHEAD "BACKUP" COSTS FOR ITS HOME OFFICE, AND THAT IT CONSIDERED THAT ALL OF THE ELEMENTS OF COST CONTAINED IN THE BREAKDOWN--- WHICH WAS BEING SUBMITTED IN LIEU OF THAT FURNISHED WITH THE CONTRACTOR'S LETTER OF MAY 21, 1958, AND WAS IN SUPPORT OF A PER DIEM RATE OF $80 PER DAY--- WERE CONSIDERED APPROPRIATE AND IN ACCORDANCE WITH THOSE WHICH ICA RECOGNIZED AS BEING APPLICABLE. THE COST BREAKDOWN DIFFERED IN DETAIL FROM THAT WHICH HAD BEEN FURNISHED WITH ITS LETTER OF MAY 21, 1958, IN THAT THE COST-PER MAN-PER-MONTH FIGURE AND ITEM $1,067 FOR "OVERHEAD AT 55 PERCENT" INCLUDED IN THE LATTER HAD BEEN OMITTED FROM, AND THE COST-PER- MAN-PER MONTH FIGURES AND ITEMS $208.80 FOR "PAYROLL INSURANCE AND TAXES AT 11.6 PERCENT," $200.88 FOR "LEAVE PAY, PAID HOLIDAYS AT 10 PERCENT," AND $30 FOR "RECRUITING (HELP WANTED ADVERTISING)" HAD BEEN INCLUDED IN THE NEW COST BREAKDOWN.

ANSWERING THE ABOVE LETTER BY LETTER OF AUGUST 21, 1959, THE DIRECTOR, OFFICE OF CONTRACT RELATIONS, STATED THAT THE SUBSTANCE OF ICA'S POSITION WAS THAT THE CONTRACTOR WAS "ONLY ENTITLED TO REIMBURSEMENT FOR ACTUAL OUT -OF-POCKET COSTS INCURRED IN CONNECTION WITH THE FURNISHING OF THE SECTION 1.27 PERSONNEL" , AND, HENCE, THE CONTRACTOR SHOULD SUPPLY THE AGENCY WITH A BREAKDOWN OF THE ACTUAL COSTS WHICH THE CONTRACTOR HAD INCURRED UP UNTIL THAT TIME IN FURNISHING PERSONNEL PURSUANT TO SECTION 1.27 IN ORDER THAT IT MIGHT BE IN A POSITION "TO CLAIM REIMBURSEMENT FOR SUCH COSTS ON THE BASIS OF YOUR CERTIFICATION TO THE FACTS AS THEY ACTUALLY EXIST.'

UNDER DATE OF DECEMBER 10, 1959, THE CONTRACTOR WROTE THE DEPUTY GENERAL COUNSEL OF ICA WITH REFERENCE TO THE MATTER AS FOLLOWS:

"* * * IN OUR PREVIOUS DISCUSSION WITH THE ICA CONTRACT OFFICE AND AUDIT BRANCH, AN AGREEMENT WAS REACHED ON A PER DIEM RATE OF $75; THIS FOLLOWED AGREEMENT UPON THE APPROPRIATENESS OF THE ELEMENTS OF COST INCLUDED IN SUCH A RATE. THIS AGREEMENT, WHILE VERBAL, HASNOT AS YET BEEN FURNISHED US IN WRITING BY THE ICA. WE UNDERSTAND THIS AWAITS THE APPROVAL OF YOUR OFFICE.

"WE HAVE ADVISED YOU THAT EACH OF THE COMPANIES OF THE JOINT VENTURE HAVE BEEN FURNISHING THE SERVICES OF SUCH TECHNICAL SUPERVISORY PERSONNEL, AT YOUR REQUEST, FOR NEARLY A YEAR AND A HALF, WITHOUT ANY REIMBURSEMENT WHATSOEVER, DUE TO THE LACK OF WRITTEN ICA APPROVAL OF THE PER DIEM RATE.

"* * * AS WE HAVE INDICATED IN PREVIOUS CORRESPONDENCE AND DO HEREBY CERTIFY, THE PER DIEM RATE OF $75 IS BASED ON ONLY THE COSTS OF OUR RESPECTIVE COMPANIES FOR WHICH WE ARE NOT OTHERWISE REIMBURSED UNDER ANY OTHER PROVISION OF THE CONSTRUCTION CONTRACT.

"WITH OUR ASSURANCE, IN THIS RESPECT, THAT THE PER DIEM RATE CONTAINS ONLY SUCH COST ELEMENTS, WE WOULD APPRECIATE RECEIVING YOUR PROMPT APPROVAL THEREOF AT YOUR VERY EARLIEST CONVENIENCE.'

THE FILE CONTAINS A COPY OF AN INTER-AGENCY MEMORANDUM FOR "JAMES J. FORD, AUD" TO "MR. HENRY T. KING, GC," DATED JANUARY 13, 1960, WHEREIN MR. FORD, IN COMMENTING UPON THE ABOVE LETTER, STATED WITH RESPECT TO THE CONTRACTOR'S CONTENTION THAT IT HAD BEEN FURNISHING THE SERVICES OF THE TECHNICAL PERSONNEL INVOLVED FOR NEARLY A YEAR AND A HALF WITHOUT ANY REIMBURSEMENT WHATSOEVER DUE TO THE LACK OF WRITTEN ICA APPROVAL OF THE PER DIEM RATE THAT AN AUDIT OF THE CONTRACTOR'S RECORDS, WHICH THE AGENCY HAD BEGUN, REVEALED THAT THE CONTRACTOR "HAD ACTUALLY BILLED AND BEEN PAID FOR AN AGGREGATE AMOUNT OF $90,500 FOR 905 MAN DAYS OF SERVICE UP TO JULY 15, 1959 UNDER SECTION 1.27.'

BY LETTER OF JUNE 1, 1961, CLIFFORD S. STRIKE, PRESIDENT OF F. H. MCGRAW AND COMPANY, ON BEHALF OF MCGRAW-HYDROCARBON, TRANSMITTED TO ICA, FOR THE ATTENTION OF THE ASSISTANT DIRECTOR OF THE OFFICE OF CONTRACT RELATIONS, A COPY OF A LETTER DATED MAY 26, 1961, ADDRESSED TO MCGRAW-HYDROCARBON BY LETTERMAN AND WEISER, COUNSEL FOR THE CONTRACTOR, WHEREIN LEGAL ARGUMENTS IN SUPPORT OF THE LATTER'S RIGHT TO BE PAID AT THE RATE OF $100 PER DAY FOR THE TECHNICAL SUPERVISORS WHO HAD BEEN FURNISHED WERE PRESENTED. THEIR LETTER, THE ATTORNEYS REFERRED TO A LETTER DATED AUGUST 19, 1958, FROM THE ASSISTANT DIRECTOR OF THE OFFICE OF CONTRACT RELATIONS TO THE CONTRACTOR AND ICA WITH RESPECT TO THE EXTENT OF THE CONTRACTOR'S OBLIGATIONS UNDER THE CONTRACT IN THE FIELDS OF "START-UP, TEST RUNS, INITIAL OPERATION, AND TRAINING," AND STATED:

"UNDER THE TERMS OF THE CONTRACT MCGRAW-HYDROCARBON MUST PROVIDE PERSONNEL FOR THE START-UP AND TEST RUN OPERATIONS WHO SHALL NOT ONLY OPERATE THE PLANT, BUT SHALL CONDUCT TRAINING AND SUPERVISION OVER AVAILABLE KOREAN PERSONNEL DURING THE PERIOD OF START-UP, TEST RUNS, AND INITIAL OPERATION. SUCH MCGRAW-HYDROCARBON PERSONNEL MUST BE FURNISHED IN SUFFICIENT NUMBERS TO OPERATE THE PLANT DURING THE START UP, TEST RUNS, AND INITIAL OPERATION, AND TO TEACH THE KOREANS THE FUNCTIONS OF EACH PARTICULAR PIECE OF EQUIPMENT SO AS TO FACILITATE KOREAN UNDERSTANDING.

"MCGRAW-HYDROCARBON MUST MAINTAIN AT THE PLANT AFTER COMPLETION OF TEST RUNS AND ACCEPTANCE OF THE ENTIRE PLANT, A LIMITED FORCE WHO WILL EXERCISE ADVISORY SUPERVISORY AND TRAINING RESPONSIBILITIES OVER THE PLANT FOR A PERIOD OF 12 MONTHS FROM THE DATE OF MECHANICAL COMPLETION OF THE PLANT. THE COMPOSITION OF THIS LIMITED FORCE TO BE JOINTLY AGREED UPON BY THE GOVERNMENT OF KOREA AND MCGRAW-HYDROCARBON.

"PLEASE BE ADVISED THAT THE INTERNATIONAL COOPERATION ADMINISTRATION WILL INSIST UPON COMPLETE PERFORMANCE OF THE ABOVE OBLIGATIONS AND THAT FAILURE OF MCGRAW-HYDROCARBON TO CARRY OUT THESE RESPONSIBILITIES LEAVES NO ALTERNATIVE, BUT TO EXERCISE ANY LEGAL REMEDIES AVAILABLE UNDER THE AGREEMENT.'

THE ATTORNEYS CONTENDED THAT THE CONTRACT PROPERLY COULD NOT BE INTERPRETED AS REQUIRING THE CONTRACTOR TO FURNISH THE SUPERVISORY PERSONNEL CALLED FOR UNDER SECTION 1.27 IN ADVANCE OF APPROVAL OF THE PER DIEM RATE TO BE PAID, BUT THAT THE CONTRACTOR WHEN CONFRONTED WITH THE "NAKED THREAT OF (LEGAL) FORCE" IN THE ABOVE-QUOTED LETTER, HAD ACTED REASONABLY IN FURNISHING THEM WITHOUT SUCH APPROVAL, AND THATICA'S ACTION UNDER THE CIRCUMSTANCES CONSTITUTED UNCONDITIONAL AFFIRMATION OF THE $100 DAILY RATE WHICH PREVIOUSLY HAD BEEN APPROVED BY THE REPUBLIC OF KOREA. HOWEVER, THE ATTORNEYS ACKNOWLEDGED THAT THE CONTRACTOR, IN AN EFFORT TO SETTLE THE MATTER, HAD PREVIOUSLY EXPRESSED ITS WILLINGNESS TO ACCEPT LESS THAN THE $100 PER DIEM RATE.

THE ASSISTANT DIRECTOR OF THE OFFICE OF CONTRACT RELATIONS REPLIED TO MR. STRIKE'S LETTER BY LETTER OF JUNE 9, 1961, CONTENDING THAT APPROVAL OF A PER DIEM RATE FOR THE SUPERVISORY PERSONNEL INVOLVED BY "ICA/WASHINGTON" HAD BEEN WITHHELD BECAUSE MCGRAW-HYDROCARBON HAD NEVER FURNISHED THE AGENCY WITH THE INFORMATION NECESSARY TO ENABLE IT TO EVALUATE THE PROPOSED RATE, ALTHOUGH THE AGENCY HAD ON NUMEROUS OCCASIONS ATTEMPTED TO SECURE SUCH INFORMATION. HOWEVER, THE ASSISTANT DIRECTOR STATED THAT RECENTLY "THROUGH THE GOOD OFFICE OF MR. ROBERT BURROUGHS OF YOUR FIRM, WE WERE PERMITTED ACCESS TO THE PAYROLL RECORDS OF MCGRAW-HYDROCARBON AND ARE PRESENTLY REVIEWING THE INFORMATION OBTAINED BY OUR AUDITOR IN AN EFFORT TO ESTABLISH AN EQUITABLE RATE FOR THE SERVICES RENDERED.' ALSO, BY LETTER OF JULY 5, 1961, THE ASSISTANT DIRECTOR ADVISED MR. STRIKE THAT ICA HAD DETERMINED THAT THE CONTRACTOR WAS ENTITLED TO A PER DIEM RATE OF $47.75 PER DAY FOR FURNISHING THE PERSONNEL IN QUESTION, BASED UPON THE INFORMATION GATHERED FROM THE CONTRACTOR'S RECORDS. ATTACHED TO THE LETTER WAS A STATEMENT SHOWING THE METHOD OF DETERMINING THE RATE THUS APPROVED. THE STATEMENT COVERS 3430 CALENDAR DAYS OF SUPERVISORY SERVICES (501 OF WHICH WERE FURNISHED BY F. H. MCGRAW AND COMPANY, THE REMAINDER HAVING BEEN SUPPLIED BY HYDROCARBON RESEARCH, INC.) FURNISHED UNDER SECTION 1.27, AND THE RATE OF $47.75 WAS DERIVED BY TAKING THE TOTAL AMOUNT OF DIRECT SALARIES, INCLUDING VACATION PAY, WORKMEN'S COMPENSATION AND GENERAL LIABILITY INSURANCE, GROUP INSURANCE, MAJOR MEDICAL AND PENSION PLAN, PAID TO, OR ON BEHALF OF, THE PERSONNEL INVOLVED BY THE CONTRACTOR, NAMELY, $166,431 (OF WHICH $29,727.46 WAS PAID BY F. H. MCGRAW AND COMPANY, THE REMAINDER HAVING BEEN PAID BY HYDROCARBON RESEARCH, INC.) SUBTRACTING THEREFROM THE AMOUNT OF $2,649.58, REPRESENTING GROUP INSURANCE, MAJOR MEDICAL AND PENSION PLAN PAYMENTS APPLICABLE TO THE SALARIES PAID BY HYDROCARBON RESEARCH (WHICH WERE DESCRIBED AS "ITEMS INCLUDED IN OVERHEAD"), AND DIVIDING THE REMAINDER, $163,781.42, BY 3430. IT WILL BE SEEN FROM THE CONTRACTOR'S LETTER OF APRIL 28, 1959, QUOTED ABOVE, THAT THE CONTRACTOR ADMITS THAT IT WAS AGREED DURING THE NEGOTIATIONS WHICH LED TO THE EXECUTION OF THE CONTRACT THAT NO FEE OR PROFIT FOR THE CONTRACTOR WAS TO BE INCLUDED IN THE PER DIEM RATE TO BE ESTABLISHED FOR THE SUPERVISORY PERSONNEL REQUIRED TO BE FURNISHED UNDER SECTION 1.27 PROVIDED--- AS APPEARS TO HAVE BEEN THE CASE--- THE NUMBER OF PERSONNEL SUPPLIED DID NOT EXCEED FOURTEEN, BUT THAT IT EMPHATICALLY DENIES THAT THERE WAS ANY SUCH UNDERSTANDING WITH RESPECT TO THE INCLUSION OF OVERHEAD EXPENSES OF THE CONTRACTOR INCIDENT TO THE FURNISHING OF SUCH PERSONNEL. IN STATING: "IT WAS ONLY WITH RESPECT TO FEE THAT WE TOOK ISSUE ON PAGE 185 OF THESE UNOFFICIAL TYPED NOTES WHEN ASKED WHETHER THE PER DIEM RATE INCLUDED FEE AND OVERHEAD; " THE CONTRACTOR APPARENTLY WAS REFERRING TO THE COLLOQUY BETWEEN MR. KESSLER AND MR. NORTON QUOTED IN THE EXCERPT TAKEN FROM THE LETTER OF JULY 1, 1959, FROM THE ASSISTANT DIRECTOR, OFFICE OF CONTRACT RELATIONS, TO THE CONTRACTOR, SUPRA. PRESUMABLY THE AGENCY HAD PRESENTED THIS PORTION OF THE RECORD OF NEGOTIATIONS TO THE CONTRACTOR IN SUPPORT OF ITS POSITION PRIOR TO THE LETTER OF JULY 1, 1959.

THE CONTRACTOR THUS CONTENDS THAT THE REFERRED-TO COLLOQUY WAS NOT SET FORTH CORRECTLY IN THE RECORD OF NEGOTIATIONS. ASSUMING THE CORRECTNESS OF THE CONTRACTOR'S STATEMENT THAT THE UNOFFICIAL STENOGRAPHIC RECORD "CONTAINS AT LEAST TWO INSTANCES OF AGREEMENT ON THIS POINT REGARDING ADDITIONAL FEE," WHICH WAS NOT DISPUTED BY THE AGENCY, IT SEEMS QUITE POSSIBLE THAT AN ERROR MAY HAVE BEEN MADE IN SETTING FORTH MR. NORTON'S REPLY TO MR. KESSLER'S QUESTION. MOREOVER, SINCE THE ITEM OF EXPENSE "PLANT SUPERVISION (U.S.) FOR OPERATIONS," REFERRED TO IN THE CONTRACTOR'S LETTER OF JUNE 15, 1959, FOR WHICH $240,000 HAD BEEN INCLUDED IN THE ESTIMATE OF COSTS SUBMITTED BY THE CONTRACTOR IN CONNECTION WITH THE NEGOTIATION OF THE CONTRACT, WOULD APPEAR AN APPROPRIATE DESIGNATION FOR AN ACCOUNT UNDER WHICH TO ACCUMULATE OVERHEAD EXPENSE RELATED TO FURNISHING SERVICES OF THE TYPE INVOLVED, AND THE ITEM, OR RATHER THE AMOUNT THEREOF, WAS DELETED AT THE INSISTENCE OF ICA IN NEGOTIATING THE FIXED AMOUNT AGREED TO BE PAID TO THE CONTRACTOR TO COVER THE SERVICES DESCRIBED IN SECTION 4.20 OF THE CONTRACT, THE CONTRACTOR'S CONTENTION THAT OVERHEAD EXPENSES RELATED TO THE FURNISHING OF THE SERVICES HERE INVOLVED WERE "SPECIFICALLY EXCLUDED FROM THE LUMP SUM PAYMENTS UNDER SECTION 7.2" APPEARS REASONABLE. ALSO, THE VERY FACT THAT THE PARTIES PROVIDED FOR THE ESTABLISHMENT OF A PER DIEM RATE FOR THE SERVICES PROVIDED FOR UNDER SECTION 1.27, THUS REMOVING THE ITEM FROM THE GENERAL CATEGORY OF COSTS FOR WHICH THE CONTRACTOR WAS TO BE REIMBURSED UNDER THE CONTRACT, IS INDICATIVE OF AN INTENTION TO DISASSOCIATE IT COMPLETELY FROM THE OTHER COSTS TO BE INCURRED, INCLUDING THOSE DESCRIBED IN SECTION 4.20, FOR WHICH LUMP-SUM PAYMENTS WERE PROVIDED. AS INDICATED IN THE CONTRACTOR'S LETTER OF APRIL 28, 1959, NEITHER THE TIME REQUIREMENT NOR THE NUMBER OF SUPERVISORY PERSONNEL WHICH THE CONTRACTOR WOULD BE CALLED UPON THE FURNISH PURSUANT TO SECTION 1.27 WAS DETERMINABLE AT THE TIME THE CONTRACT WAS NEGOTIATED.

FOR THE FOREGOING REASONS, WE ARE OF THE OPINION THAT THE CONTRACTOR HAD A RIGHT TO EXPECT APPROVAL BY ICA, WASHINGTON, OF A PER DIEM RATE BASED UPON A REASONABLE ESTIMATE OF WHAT ITS TOTAL COSTS WOULD BE FOR FURNISHING THE SERVICES IN QUESTION, AND THAT SUCH APPROVAL WOULD BE FORTHCOMING WITHIN A REASONABLE LENGTH OF TIME. WE ARE UNABLE TO AGREE WITH THE CONTRACTOR'S ATTORNEYS IN THEIR CONTENTION THAT ICA'S LETTER OF AUGUST 19, 1958, QUOTED IN MATERIAL PART ABOVE, CONSTITUTED CONSTRUCTIVE APPROVAL OF THE $100 DAILY RATE PROPOSED IN THE CONTRACTOR'S LETTER OF FEBRUARY 7, 1958, TO BE CHARGED FOR FURNISHING THE TECHNICAL SUPERVISORS, SINCE, AS INDICATED BY THE CONTRACTOR'S LETTER OF JULY 18, 1958, TO THE PROJECT ENGINEER, INDUSTRIES DIVISION, ICA, THE CONTRACTOR WAS THEN AWARE THAT THE PROPRIETY OF THE RATE WAS BEING SERIOUSLY QUESTIONED BY THE AGENCY AS A RESULT OF THE INCLUSION THEREIN OF THE OVERHEAD FACTOR OF 55 PERCENT AND THE AMOUNT OF $65 PER MAN PER MONTH FOR CABLES, POSTAGE AND REPRODUCTIONS. MOREOVER, AS INDICATED ABOVE, THE LETTER OF AUGUST 19, 1958, WAS CONCERNED MAINLY WITH A DISPUTE WHICH HAD ARISEN BETWEEN THE CONTRACTOR AND ICA WITH RESPECT TO THE EXTENT OF THE CONTRACTOR'S BASIC OBLIGATIONS UNDER THE CONTRACT. THE AGENCY CONTENDED, AMONG OTHER THINGS, AS MORE FULLY BROUGHT OUT IN A LETTER DATED AUGUST 25, 1958, FROM THE CONTRACTOR TO THE THEN DIRECTOR OF ICA, THAT THE FORMER HAD THE RESPONSIBILITY FOR FURNISHING THE NECESSARY FOREIGN OPERATING TECHNICIANS, AS WELL AS THE NON-KOREAN SUPERVISORY PERSONNEL CALLED FOR UNDER SECTION 1.27, REQUIRED FOR START-UP AND INITIAL OPERATIONS OF THE PLANT WITHOUT ANY ADDITIONAL INCREASE IN FEE UNDER THE CONTRACT, WHEREAS THE CONTRACTOR CONTENDED THAT UNDER SECTION 2.0 OF THE CONTRACT, SUPRA, THE GOVERNMENT OF THE REPUBLIC OF KOREA HAD THE RESPONSIBILITY FOR FURNISHING THE FOREIGN "OPERATING TECHNICIANS," WHICH THE GOVERNMENT HAD FAILED, NOTWITHSTANDING THE CONTRACTOR'S REQUEST THEREFOR, TO DO. ICA APPEARS TO HAVE RECOGNIZED THE CORRECTNESS OF THE CONTRACTOR'S CONTENTION IN THE PREMISES, FOR, UNDER DATE OF MARCH 27, 1959, THE ICA FINANCED "S AND T" (SERVICES AND TRAINING) CONTRACT REFERRED TO IN THE LETTER OF OCTOBER 24, 1961, FROM THE AGENCY'S DEPUTY DIRECTOR FOR OPERATIONS, WAS ENTERED INTO BETWEEN THE GOVERNMENT OF THE REPUBLIC OF KOREA, MCGRAW-HYDROCARBON AND THE INTERNATIONAL COOPERATION ADMINISTRATION, AND IT PROVIDED, AMONG OTHER THINGS, FOR THE FURNISHING OF THE OPERATING TECHNICIANS IN QUESTION BY MCGRAW HYDROCARBON FOR THE ADDITIONAL CONSIDERATION PROVIDED THEREIN. ALSO, HAVING IN MIND THE COLLOQUY WHICH IS REPORTED IN THE RECORD OF NEGOTIATIONS TO HAVE TAKEN PLACE BETWEEN MR. KESSLER AND MR. NORTON RELATIVE TO WHETHER "FEE AND OVERHEAD" WERE INCLUDED IN THE PER DIEM RATE PROPOSED TO BE CHARGED FOR SERVICES TO BE FURNISHED UNDER SECTION 1.27, REFERRED TO ABOVE, WE ARE OF THE OPINION THAT ICA HAD A REASONABLE BASIS FOR CONTENDING THAT THE CONTRACTOR WAS NOT ENTITLED TO INCLUDE ANY AMOUNT TO COVER OVERHEAD EXPENSES IN THE RATE, AND THUS FOR WITHHOLDING APPROVAL OF A RATE UNTIL INFORMATION SHOWING JUST WHAT ELEMENTS OF COST HAD BEEN TAKEN INTO CONSIDERATION IN ARRIVING AT THE PROPOSED RATE COULD BE OBTAINED FROM THE CONTRACTOR. THIS APPARENTLY WAS NOT ACCOMPLISHED UNTIL SHORTLY BEFORE ICA DETERMINED THAT A DAILY RATE OF $47.75 WAS PROPER. HOWEVER, SUCH RATE IS BASED SOLELY UPON THE ELEMENTS OF COST RELATED TO THE SALARIES AND FRINGE BENEFITS PAID TO, OR ON ACCOUNT OF, THE PERSONNEL INVOLVED, WHEREAS WE HAVE CONCLUDED THAT THE CONTRACTOR MAY NOT BE HELD TO THESE ELEMENTS OF COST ALONE IN DETERMINING THE RATE. ACCORDINGLY, SINCE THE CONTRACTOR AGREED IN ITS ABOVE-QUOTED LETTER OF DECEMBER 10, 1959, TO ACCEPT PAYMENT FOR THE SERVICES ON THE BASIS OF A PER DIEM RATE OF $75, WHICH APPEARS TO HAVE BEEN TENTATIVELY APPROVED BY "THE ICA CONTRACT OFFICE AND AUDIT BRANCH" AS REASONABLE, WE ARE OF THE OPINION, ON THE BASIS OF THE PRESENT RECORD, PAYMENT TO THE CONTRACTOR FOR THE SERVICES INVOLVED SHOULD BE MADE ON THAT BASIS. IN EFFECTING PAYMENT TO THE CONTRACTOR AT THE $75 RATE, AN APPROPRIATE ADJUSTMENT SHOULD BE MADE WITH RESPECT TO ANY PREVIOUS PAYMENTS MADE TO THE CONTRACTOR FOR FURNISHING SECTION 1.27 PERSONNEL AT THE $100DAILY RATE, WHICH LACKED APPROVAL.

MCGRAW-HYDROCARBON'S LETTER OF JULY 17, 1961, INVOLVES A CLAIM BY THE CONTRACTOR OF THE RIGHT TO BE PAID THE TWO REMAINING INSTALLMENTS OF THE FIXED FEE ($980,000) STIPULATED IN SECTION 7.1 AS PAYABLE FOR ITS SERVICES UNDER THE CONTRACT, NAMELY, THE AMOUNTS OF $196,000 AND $49,000 PROVIDED FOR IN SUBSECTION (12) AND (13), RESPECTIVELY, OF SAID SECTION, SUPRA. THE CONTRACTOR WAS ADVISED OF ICA'S CONCLUSION THAT IT WAS NOT ENTITLED TO PAYMENT OF THESE AMOUNTS BY LETTER OF MAY 29, 1961, FROM THE ASSISTANT DIRECTOR OF THE OFFICE OF CONTRACT RELATIONS, WHICH ENCLOSED A COPY OF A MEMORANDUM PREPARED BY ICA'S ACTING GENERAL COUNSEL UNDER DATE OF MAY 25, 1961, SETTING FORTH THE LEGAL BASIS FOR THE AGENCY'S POSITION IN THE MATTER. THIS IS THAT SINCE SECTION 25.0 OF THE CONTRACT, AS MODIFIED BY AMENDMENTS NOS. 4 AND 5, SET A FIXED PERIOD OF 63 MONTHS FROM DATE OF ESTABLISHMENT OF FUNDS FOR THE CONTRACT (SEPTEMBER 5, 1955) DURING WHICH THE CONTRACT WAS TO CONTINUE IN FULL FORCE AND EFFECT, IT EXPIRED BY ITS OWN TERMS ON DECEMBER 4, 1960, AND INASMUCH AS THE CONTRACTOR HAD NOT, AS OF THAT DATE, COMPLETED PERFORMANCE OF THE CONTRACT, IT HAD FORFEITED ITS RIGHT TO BE PAID THE AMOUNTS INVOLVED THEREUNDER.

IN THE PREAMBLE OF AMENDMENT NO. 5 TO THE CONTRACT IT IS STATED THAT "CONTRACTOR CONTENDS THAT CONSTRUCTION OF THE PLANT WAS COMPLETED ON SEPTEMBER 1, 1959 AND THE GOVERNMENT CONTENDS THAT CONSTRUCTION HAS NOT YET BEEN COMPLETED," AND THAT "THE PARTIES DESIRE TO EXTEND THE TERM OF THE AGREEMENT UNDER SECTION 25.0 WITHOUT WAIVING ANY OF THEIR RESPECTIVE RIGHTS OR OBLIGATIONS.'

IT APPEARS THAT NOTICE IN WRITING WAS FURNISHED BY THE CONTRACTOR TO THE GOVERNMENT OF KOREA AND THE ICA UNDER DATE OF SEPTEMBER 1, 1959, OF THE MECHANICAL COMPLETION OF THE PLANT, AS PROVIDED FOR BY SECTION 6.32A OF THE CONTRACT, BUT THAT THE GOVERNMENT OF KOREA REPLIED BY LETTER OF SEPTEMBER 5, 1959, DENYING THAT CONSTRUCTION OF THE PLANT HAD BEEN COMPLETED. IT FURTHER APPEARS THAT DURING THE SUMMER AND FALL OF 1959, AN EXTENSIVE STUDY OF RIVER WATER CONDITIONS DURING THE FLOOD SEASON REVEALED THAT THE RIVER WATER INTAKE SYSTEM FOR THE PLANT AS ORIGINALLY DESIGNED MIGHT NOT BE SUFFICIENTLY RELIABLE FOR CONTINUOUS OPERATION, AS A RESULT OF WHICH THE CONTRACTOR DECIDED TO SUPPLEMENT THE INITIAL SYSTEM BY THE ADDITION OF A RIVER INTAKE CHANNEL AND THE CONSTRUCTION OF STORAGE AND SPRAY PONDS TO PROVIDE A RECIRCULATING WATER SYSTEM. ON NOVEMBER 5, 1960, FOLLOWING THE COMPLETION OF THE ADDITIONAL FACILITIES, THE GOVERNMENT OF KOREA AND THE ICA WERE AGAIN ADVISED OF THE COMPLETION OF MECHANICAL CONSTRUCTION, AND IN MCGRAW-HYDROCARBON'S LETTER OF JULY 17, 1961, TO US, THE CONTRACTOR STATES: "ACKNOWLEDGEMENT THEREOF (REFERRING TO THE NOTICE OF COMPLETION) UPON NOTICE TO THE ICA, WAS FURNISHED BY THE GOVERNMENT IN ITS LETTER OF NOVEMBER 9, 1960.'

SINCE THERE IS NOTHING IN THE RECORD INDICATING THAT THE CONTRACTOR'S NOTICE OF NOVEMBER 5, 1960, ADVISING THAT THE PLANT HAD BEEN COMPLETED, DID NOT MEET THE REQUIREMENTS OF SECTION 6.32A OF THE CONTRACT, OR THAT THE REFERRED-TO ACKNOWLEDGMENT THEREOF BY THE GOVERNMENT OF KOREA WAS NOT MADE WITH THE KNOWLEDGE AND CONSENT OF ICA, WE ARE OF THE OPINION THAT CONSTRUCTION OF THE PLANT WITHIN THE MEANING OF THE CONTRACT MUST BE HELD TO HAVE BEEN COMPLETED ON NOVEMBER 5, 1960, IF NOT ON SEPTEMBER 1, 1959, AS CONTENDED BY THE CONTRACTOR. ASSUMING CONSTRUCTION TO HAVE BEEN COMPLETED ON NOVEMBER 5, 1960, THE CONTRACTOR COULD NOT--- AS POINTED OUT IN THE MEMORANDUM OF MAY 25, 1961--- BE SAID TO HAVE BEEN ENTITLED TO THE FEE INSTALLMENTS IN QUESTION ON DECEMBER 4, 1960, BECAUSE IT HAD NOT AS OF THAT DATE FURNISHED THE SUPERVISORY TRAINING SERVICES CALLED FOR UNDER SECTION 1.26, AND THE START-UP AND TEST RUN OPERATIONS CALLED FOR UNDER SECTION 1.27 OF THE CONTRACT, SUPRA. HOWEVER, AS INDICATED IN THOSE SECTIONS, THE SERVICES AND OPERATIONS CALLED FOR THEREUNDER WERE REQUIRED TO BE FURNISHED FOR A PERIOD OF 12 MONTHS "AFTER MECHANICAL COMPLETION OF THE PLANT AS DEFINED IN SECTION 6.32A.' WE AGREE WITH THE CONCLUSION EXPRESSED IN THE MEMORANDUM THAT SINCE THE 42-MONTH PERIOD ORIGINALLY PRESCRIBED IN SECTION 25.0 FOR THE CONTRACT TO "CONTINUE IN FULL FORCE AND EFFECT" WAS EQUAL TO THE SUM OF THE 30 MONTHS ORIGINALLY PROVIDED IN SECTION 3.0 FOR THE CONTRACTOR TO COMPLETE THE PLANT FACILITIES AND THE 12 MONTHS DURING WHICH THE CONTRACTOR WAS TO SUPPLY THE SUPERVISORY TRAINING SERVICES AND THE START-UP AND TEST OPERATIONS, FOLLOWING COMPLETION OF THE PLANT, IT SEEMS EVIDENT THAT THE PARTIES ORIGINALLY CONTEMPLATED THAT SUCH SERVICES WOULD BE FURNISHED WITHIN THE 42-MONTH PERIOD STIPULATED FOR CONTRACT PERFORMANCE IN SECTION 25.0. HOWEVER, AS HEREINABOVE INDICATED, THE 30-MONTH PERIOD DURING WHICH THE PLANT WAS ORIGINALLY REQUIRED TO BE COMPLETED WAS EXTENDED FOR EXCUSABLE CAUSES TO 45 MONTHS BY AMENDMENT NO. 4, AND FUNDS WERE ADDED TO THE CONTRACT BY THAT AMENDMENT TO COVER COMPENSATION TO THE CONTRACTOR AT THE PER DIEM RATE THEN TENTATIVELY AGREED UPON FOR SUPPLYING THE TECHNICAL SUPERVISORS CALLED FOR UNDER SECTION 1.27, WHICH THE CONTRACTOR WAS OBLIGATED TO FURNISH DURING A PERIOD OF 12 MONTHS FOLLOWING COMPLETION OF THE PLANT. UNDER THE CIRCUMSTANCES, WE FIND NO PROPER BASIS FOR TREATING THE EXTENSION OF TIME PROVIDED FOR BY AMENDMENT NO. 5 (THROUGH MODIFICATION OF SECTION 25.0) AS OTHER THAN A GENERAL EXTENSION OF TIME UNDER THE CONTRACT. SECTION 6.32B PROVIDED THAT THE CONTRACTOR WAS TO CONDUCT TEST RUNS "AS OFTEN AS IT MAY DEEM NECESSARY UNTIL THE PERFORMANCE GUARANTEES OF SECTION 6.3 HAVE BEEN MET.' IT ALSO PROVIDED THAT THE FIRST TEST RUNS WERE TO BE STARTED WITHIN A PERIOD OF 30 DAYS AFTER THE DATE OF COMPLETION OF CONSTRUCTION OF THE PLANT; THAT THE CONTRACTOR WAS TO BE ALLOWED A PERIOD OF 180 DAYS AFTER THE MECHANICAL COMPLETION OF THE PLANT WITHIN WHICH TO MEET THE GUARANTEES ESTABLISHED IN SECTION 6.3; THAT THE ABILITY OF THE PLANT TO MEET THE PROCESS GUARANTEES PROVIDED IN SECTION 6.3 WAS TO BE DETERMINED BY "AVERAGING THE RESULTS OF A TEST RUN PERIOD OF NOT LESS THAN TEN (10) CONSECUTIVE DAYS OF OPERATION UNDER NORMAL CONDITIONS"; AND THAT WHEN A TEST RUN SHOULD BE SATISFACTORILY COMPLETED THE GOVERNMENT OF KOREA WOULD AT THE CONTRACTOR'S REQUEST, EXECUTE AND DELIVER TO THE CONTRACTOR A CERTIFICATE STATING THAT THE CONTRACTOR "HAS FULLY PERFORMED ITS OBLIGATIONS UNDER SECTION 6.3 AND THE WORK IS ACCEPTED BY THE GOVERNMENT UNDER THE TERMS AND CONDITIONS HEREOF * * * .'

IT IS ADMITTED IN THE LETTER OF OCTOBER 24, 1961, FROM THE DEPUTY DIRECTOR FOR OPERATIONS, ICA, THAT "THE FIRST SUCCESSFUL TEN-DAY TEST RUN OF THE PLANT OCCURRED ON JANUARY 25, 1961," OR WELL WITHIN THE PERIOD OF 180 DAYS AFTER THE MECHANICAL COMPLETION OF THE PLANT ALLOWED TO THE CONTRACTOR UNDER THE CONTRACT TO MEET THE GUARANTEES ESTABLISHED IN SECTION 6.3. MOREOVER, IT IS NOT CONTENDED THAT THE CONTRACTOR FAILED TO FURNISH THE SUPERVISORY TRAINING SERVICES PROVIDED FOR IN SECTION 1.26. ACCORDINGLY, ON THE BASIS OF THE RECORD BEFORE US, IT IS OUR CONCLUSION THAT THE CONTRACTOR IS ENTITLED TO BE PAID THE FEE INSTALLMENTS PROVIDED FOR IN SUBSECTIONS (12) AND (13) OF SECTION 7.1 OF THE CONTRACT.

MCGRAW-HYDROCARBON'S LETTER OF JULY 26, 1961, INVOLVES A CLAIM (Z 2053716 (1) ( FOR $3,750, ALLEGED TO BE DUE CERTAIN EMPLOYEES ENGAGED IN THE PERFORMANCE OF THE WORK UNDER THE CONTRACT, AND TO BE REIMBURSABLE TO THE CONTRACTOR THEREUNDER UPON PAYMENT.

AS INDICATED ABOVE, UNDER PARAGRAPH (1) OF SECTION 4.1 OF THE CONTRACT IT WAS PROVIDED THAT THE ACTUAL COSTS OF THE CONTRACTOR FOR SALARIES, WAGES, TRAVEL TIME, PREMIUM TIME, OVERTIME, TRAVEL EXPENSE AND ANY SUMS OR ALLOWANCES PAID, INCLUDING OVERSEAS DIFFERENTIAL, ON ACCOUNT OF PERSONNEL PERFORMING SERVICES FOR THE BENEFIT OF THE PROJECT, OTHER THAN IN THE CASE OF PERSONNEL PERFORMING WORK IN ANY OF THE CONTRACTOR'S OFFICES IN THE UNITED STATES, WERE TO BE REIMBURSABLE, BUT IT WAS PROVIDED IN PARAGRAPH (6) OF THAT SECTION THAT ALL OF SUCH COSTS WERE TO BE INCURRED IN ACCORDANCE WITH THE CONTRACTOR'S CUSTOMARY PRACTICE AND "AS APPROVED BY GOVERNMENT.' ALSO, IT WAS PROVIDED IN SECTION 4.16 THAT THE CONTRACTOR WOULD BE REIMBURSED FOR ANY ITEM OF EXPENSE TO WHICH THE CONTRACTOR AND THE "GOVERNMENT" MUTUALLY AGREED "WITH THE APPROVAL OF FOA," THE MEANING OF THE TERMS IN QUOTES, AS USED IN THE CONTRACT, BEING SET FORTH ABOVE.

IN A LETTER DATED OCTOBER 11, 1956, FROM MCGRAW-HYDROCARBON TO THE ASSISTANT CHIEF OF ICA'S MINERALS AND PROCESSING INDUSTRIES BRANCH (ICA HAVING BY THEN SUCCEEDED TO THE DUTIES AND RESPONSIBILITIES AUTHORIZED TO BE PERFORMED BY FOA), THE CONTRACTOR DREW ATTENTION TO THE FACT THAT MANY OF THE 18-MONTH EMPLOYMENT CONTRACTS WHICH HAD BEEN ENTERED INTO WITH EMPLOYEES SERVING IN KOREA WERE ABOUT READY TO EXPIRE, AND THAT THEY PROVIDED THAT THE CONTRACTOR WOULD ONLY BE OBLIGATED TO PAY THE EMPLOYEE FOR HIS RETURN TRANSPORTATION, TRAVEL AND SUBSISTENCE EXPENSES,OR ANY SUM IN LIEU THEREOF,"AFTER THE EMPLOYEE SHALL HAVE RETURNED TO HIS POINT OR ORIGIN.' THE CONTRACTOR STATED THAT IN ITS OPINION IT WOULD BE TO THE ADVANTAGE OF THE PROJECT TO RENEW AN EMPLOYEE'S CONTRACT AT THE JOB SITE, PROVIDED THE EMPLOYEE WAS AGREEABLE, RATHER THAN HAVE HIM TAKE HIS RIGHTFUL RETURN TRIP TO THE UNITED STATES, IN THOSE CASES, AMONG OTHER THINGS,"WHEN SO MANY EMPLOYEES BECOME ELIGIBLE FOR THEIR RETURN TRIP AT ONE TIME THAT TO HAVE ALL OF THEM RETURN SIMULTANEOUSLY WOULD HURT PROJECT OPERATIONS.' ACCORDINGLY, THE CONTRACTOR REQUESTED ICA'S APPROVAL FOR GIVING THE EMPLOYEE A CERTIFICATION TO THE EFFECT THAT IT WOULD PAY HIM A SUM EQUIVALENT TO THE RETURN TRANSPORTATION EXPENSES PROVIDED FOR IN HIS ORIGINAL CONTRACT AT SUCH TIME AS THE EMPLOYEE "COMPLETES HIS SECOND CONTRACT OR OTHERWISE TERMINATES HIS EMPLOYMENT THEREUNDER," WITH THE UNDERSTANDING THAT THIS SUM WOULD BE IN ADDITION TO THE RETURN TRANSPORTATION EXPENSES WHICH HE WOULD BE ENTITLED TO BE PAID UPON SATISFACTORY COMPLETION OF THE SECOND CONTRACT, AS AN INDUCEMENT FOR "RENEWING AT THE JOB SITE.'

ICA'S ASSISTANT DIRECTOR OF CONTRACT RELATIONS ADVISED THE CONTRACTOR BY LETTER OF DECEMBER 14, 1956, THAT THE ABOVE PLAN WOULD BE ACCEPTABLE PROVIDED THAT THE SUM OF MONEY TO BE PAID IN LIEU OF RETURN TRANSPORTATION EXPENSES WAS TREATED AS AN OUTRIGHT BONUS IN AN AMOUNT NOT TO EXCEED $500, DEPENDING UPON THE LENGTH OF SERVICE PERFORMED BY THE EMPLOYEE UNDER THE RENEWAL CONTRACT, AND PROVIDED ICA'S PRIOR APPROVAL OF THE BONUS WERE OBTAINED.

IN A LETTER DATED FEBRUARY 21, 1957, ICA'S ASSISTANT DIRECTOR OF CONTRACT RELATIONS ADVISED MCGRAW-HYDROCARBON THAT IT WAS THEREBY AUTHORIZED TO PROCEED WITH THE PLAN WHICH IT HAD SUBMITTED FOR BONUS PAYMENTS TO EMPLOYEES AT THE JOB SITE FOR CONTRACT RENEWALS SUBJECT, INSOFAR AS MATERIAL, TO THE FOLLOWING CIRCUMSTANCES AND CONDITIONS:

"BONUSES MAY BE PAID IN CONNECTION WITH A RENEWAL AT THE JOB SITE UNDER THE FOLLOWING CIRCUMSTANCES:

"/A) WHEN THE EMPLOYEE HAS SUCH A POSITION THAT HIS ABSENCE WOULD HURT PROJECT OPERATIONS.

"/B) WHEN THE EMPLOYEE HAS A SKILL FOR WHICH THERE IS A GREAT DEMAND IN THE UNITED STATES;

"/C) WHEN SO MANY EMPLOYEES BECOME ELIGIBLE FOR THEIR RETURN TRIP AT ONE TIME THAT TO HAVE ALL THEM RETURN SIMULTANEOUSLY WOULD HURT PROJECT OPERATIONS.

AND IS ACCEPTABLE TO ICA WITH THE FOLLOWING CONDITIONS:

"1. THAT THE SUM OF MONEY TO BE PAID SHALL BE A BONUS IN THE AMOUNT OF:

(A) NOT TO EXCEED $250 FOR SUCH PERSONNEL WHOSE PRESENCE WILL BE REQUIRED TO PERFORM NECESSARY SERVICES NOT TO EXCEED 6 MONTHS OF THEIR 18-MONTH PROPOSED RENEWAL CONTRACT, OR

(B)NOT TO EXCEED $500 FOR THOSE PERSONNEL WHOSE PRESENCE WILL BE REQUIRED TO PERFORM NECESSARY SERVICES FOR A LONGER PERIOD THAN 6 MONTHS OF THEIR 18 MONTHS PROPOSED RENEWAL CONTRACT;

"2. PRIOR APPROVAL OF ICA/W FOR BONUS PAYMENTS WILL NOT BE REQUIRED. THE SELECTION OF PERSONNEL MEETING THE STANDARDS STATED ABOVE WILL BE LEFT TO YOUR FIRM, WITH THE UNDERSTANDING THAT YOUR RECORDS WILL SHOW THAT THE PERSONNEL SELECTED HAVE BEEN FOUND BY YOU TO MEET THOSE STANDARDS. YOU WILL NOTE THAT THIS PROVISION IS A CHANGE FROM THE LANGUAGE OF OUR DECEMBER 14 LETTER, DESIGNED TO COMPLY WITH YOUR REQUEST.

"3. THAT THE AFOREMENTIONED BONUS SHALL BE PAID UPON COMPLETION OF THE SATISFACTORY SECOND TOUR OF DUTY AND YOUR VOUCHER REQUESTING REIMBURSEMENT SHALL CERTIFY THAT SUCH PAYMENTS ARE IN ACCORDANCE WITH THIS ARRANGEMENT.

ALSO, UNDER DATE OF JUNE 6, 1958, ICA'S ASSISTANT DIRECTOR OF CONTRACT RELATIONS ADVISED THE CONTRACTOR AS FOLLOWS:

"THIS WILL REFER TO YOUR LETTER DATED APRIL 10, 1958 REQUESTING AN EXTENSION OF THE SAME BONUS INDUCEMENT FOR A THIRD TOUR OF DUTY AS HERETOFORE APPROVED BY ICA FOR THE SECOND TOUR OF DUTY BY OUR LETTER OF FEBRUARY 21, 1957.

"BONUS INDUCEMENTS FOR THIRD TOURS OF DUTY, PAYABLE IN THE AMOUNTS AND UNDER THE SAME CONDITIONS AS STATED IN OUR LETTER OF FEBRUARY 21, 1957 ARE HEREBY AUTHORIZED SUBJECT TO THE FOLLOWING ADDITIONAL CONDITION: THAT SUCH BONUS INDUCEMENTS SHALL BE OFFERED TO AN EMPLOYEE ONLY AFTER YOU HAVE SECURED THE WRITTEN APPROVAL OF THE APPROPRIATE REPRESENTATIVE OF OEC AND ROK FOR SUCH ACTION WITH RESPECT TO THE PARTICULAR EMPLOYEE INVOLVED.'

IT APPEARS THAT BY LETTER OF OCTOBER 25, 1960, ADDRESSED TO THE MINISTER OF COMMERCE AND INDUSTRY OF THE REPUBLIC OF KOREA (R0K), MCGRAW- HYDROCARBON REQUESTED APPROVAL OF BONUS PAYMENTS, IN THE AGGREGATE AMOUNT OF $3,750, TO EIGHT EMPLOYEES EMPLOYED AT THE PROJECT WHOSE NAMES, CLASSIFICATIONS, DATES OF INITIAL EMPLOYMENT CONTRACTS, DURATION OF EMPLOYMENT, AND DATES OF EXPIRATION OF "LAST CONTRACT," ARE SET FORTH IN EXHIBIT "E," ATTACHED TO THE CONTRACTOR'S LETTER OF JULY 26, 1961, AS FOLLOWS:

CHART

TERM OF DATE LAST

DATE OF 1ST EMPLOYMENT CONTRACT

"NAME CONTRACT NO. OF MONTHS EXPIRED TITLE F. D. CLEMENS 4-9-57 36 4-8-60 COMMISSARY OFFICER R. DIVINEY 3-15-56 48 9-14-60 SECRETARY G. A. FOURNIER 11-1-55 48 4-30-60 STAFF ADMINISTRATOR A. P. HUMMEL

5-20-57 36 5-18-60 PIPEFITTER FOREMAN R. L. JOHNSON 4-30-57 36

4-29-60 BUYER R. J. KANIA 6-6-57 36 6-5 60 ENGINEER CLASS I D. F. LOOS 3- 13-57 36 3-12 60 MILLWRIGHT FOREMAN J. E. HEELY 9-12-55 48 4-5-60 EXPEDITER"

THE REASON GIVEN FOR REQUESTING THE APPROVAL, AS SET FORTH IN THE EXHIBIT, WAS: "DEPARTURE OF EMPLOYEE AT THIS TIME WOULD JEOPARDIZE PROJECT AND SUCCESSFUL COMPLETION OF AND CLOSE OUT OF ALL FUNCTIONS.'

IT FURTHER APPEARS THAT THE MINISTER OF COMMERCE AND INDUSTRY ADVISED THE CONTRACTOR OF ROK'S APPROVAL OF THE BONUS PAYMENTS BY LETTER OF NOVEMBER 22, 1960, AND THAT IN A LETTER DATED JANUARY 18, 1961, THE UNITED STATES OPERATIONS MISSION TO KOREA ADVISED THE CONTRACTOR THAT ICA, WASHINGTON, HAD BEEN INFORMED OF ITS CONCURRENCE IN ROK'S APPROVAL AND REQUESTED TO AUTHORIZE THE PAYMENTS. HOWEVER, THE USOM LETTER CONCLUDED:

"* * * IT SHOULD BE CLEARLY UNDERSTOOD, HOWEVER, THAT THE USOM CONCURRENCE DOES NOT CONSTITUTE THE U.S. GOVERNMENT'S APPROVAL AND AUTHORIZATION FOR SUCH PAYMENTS. SUCH APPROVAL AND AUTHORIZATION MUST BE OBTAINED BY MGH FROM ICA/W.'

IN A LETTER DATED JANUARY 30, 1961, WHICH APPEARS TO HAVE BEEN ADDRESSED TO THE PROJECT ENGINEER, INDUSTRIES DIVISION, INTERNATIONAL COOPERATION ADMINISTRATION, WASHINGTON, D.C; THE CONTRACTOR REQUESTED APPROVAL OF THE BONUS PAYMENTS IN QUESTION. HOWEVER, THE CONTRACTOR WAS ADVISED OF THE DENIAL OF SUCH REQUEST BY LETTER OF APRIL 11, 1961, FROM ICA'S ASSISTANT DIRECTOR OF CONTRACT RELATIONS, FOR THE STATED REASON THAT THE CONTRACTOR HAD NEITHER REQUESTED NOR OBTAINED APPROVAL OF THE BONUS PAYMENTS PRIOR TO THE NEGOTIATION AND EXECUTION OF THE EMPLOYMENT CONTRACT, AS REQUIRED BY THE ABOVE-QUOTED LETTER OF JUNE 6, 1958. THE CONTRACTOR REPLIED TO THIS LETTER BY LETTER OF APRIL 13, 1961, STATING, IN SUBSTANCE, THAT NO WRITTEN RENEWALS OF EMPLOYMENT CONTRACTS HAD BEEN ENTERED INTO WITH THE EIGHT EMPLOYEES CONCERNED; THAT NUMEROUS CASES INVOLVING SECOND AND THIRD EMPLOYMENT CONTRACTS HAD BEEN SUBMITTED FOR APPROVAL OF BONUS PAYMENTS IN THE PAST, AND APPROPRIATE APPROVALS HAD BEEN GRANTED IN EACH CASE; THAT APPROVALS IN THOSE INSTANCES WERE OBTAINED THROUGH USOM, ROK AND CEB, AND DID NOT INVOLVE THE ADDITIONAL REQUIREMENT OF ICA, WASHINGTON, APPROVAL; AND THAT SINCE THE FACTS AND TERMS OF EMPLOYMENT PERTAINING TO THESE EIGHT REMAINING EMPLOYEES AT THE PROJECT WERE IDENTICAL WITH THOSE IN RESPECT TO WHICH THE PRIOR APPROVALS OF BONUS PAYMENTS HAD READILY BEEN EXTENDED, IT WAS AGREED WITH THE EMPLOYEES "TO CONTINUE WITH THEIR SERVICES ON A MONTH- TO-MONTH BASIS UNTIL THE ADMINISTRATIVE PROCEDURE OF OBTAINING NECESSARY APPROVALS HAD BEEN ACCOMPLISHED AND COMPLETE EMPLOYMENT CONTRACTS INCLUDING BONUS MADE AVAILABLE FOR THEIR EXECUTION.'

ICA'S ASSISTANT DIRECTOR OF THE OFFICE OF CONTRACT RELATIONS REPLIED TO THE ABOVE LETTER BY LETTER OF JUNE 26, 1961, STATING THAT HE FOUND IT VERY DIFFICULT TO AGREE WITH THE CONCLUSIONS EXPRESSED THEREIN IN VIEW OF THE EXPIRATION OF THE SERVICES OF THE EMPLOYEES INVOLVED AND THE EXPIRATION OF THE CONSTRUCTION CONTRACT ITSELF; THAT THE CONTRACTOR NEVER HAD AN OBLIGATION TOWARD THE EMPLOYEES, SINCE EMPLOYMENT AGREEMENTS COVERING THE "SUGGESTED BONUS" WERE NEVER EXECUTED; AND THAT,"MORE TO THE POINT," ICA HAD NEVER UNDERTAKEN THE OBLIGATION OF REIMBURSING THE CONTRACTOR THE PARTICULAR BONUS AND IT WAS NOT BELIEVED THAT IT WOULD BE IN THE INTEREST OF THE UNITED STATES "TO DO SO NOW.'

AS POINTED OUT IN THE CONTRACTOR'S LETTER OF JULY 26, 1961, TO US, THERE WAS NO REQUIREMENT IN THE LETTER OF JUNE 6, 1958, THAT PAYMENT OF BONUSES FOR RENEWAL OF EMPLOYMENT CONTRACTS FOR THIRD TOURS OF DUTY BE APPROVED BY ICA, WASHINGTON. THE REQUIREMENT WAS THAT THEY BE APPROVED BY ,APPROPRIATE REPRESENTATIVES OF OEC AND ROK.' THE FOREIGN OPERATIONS ADMINISTRATION GEOGRAPHIC CODE BOOK, JULY 1, 1954, CONTAINED IN ICA MANUAL, CHAPTER 300 (M.O. 300-330.6) SUPERSEDED PAGES, SHOWS THE ABBREVIATION "OEC" AS STANDING FOR "OFFICE OF ECONOMIC COORDINATION (KOREA).' IN MCGRAW-HYDROCARBON'S LETTER OF JULY 18, 1958, TO THE PROJECT ENGINEER, INDUSTRIES DIVISION, ICA, MENTIONED HEREINABOVE IN CONNECTION WITH THE CLAIM INVOLVING THE PER DIEM RATE FOR THE SERVICES FURNISHED UNDER SECTION 1.27 OF THE CONTRACT, THE CONTRACTOR STATED THAT DURING THE NEGOTIATION OF AMENDMENT NO. 4 IN KOREA IN JANUARY AND FEBRUARY, 1958, IT WAS REQUESTED BY "REPRESENTATIVES OF THE ICA, OEC AND ROK," ETC. ALSO, THE LETTER OF JULY 1, 1959, FROM ICA'S ASSISTANT DIRECTOR OF THE OFFICE OF CONTRACT RELATIONS TO THE CONTRACTOR WITH REFERENCE TO THE PER DIEM RATE, QUOTED HEREINABOVE, REFERS TO A LETTER FROM THE CONTRACTOR TO "MR. F. L. MAYER, DIRECTOR, SPECIAL PROJECTS OFFICE, OFFICE OF THE UNC ECONOMIC COORDINATOR.' IN ITS LETTER OF JULY 26, 1961, THE CONTRACTOR STATES THAT USOM WAS "THE SUCCESSOR TO OEC," WHICH ICA DID NOT DENY IN FURNISHING ITS REPORT ON THE "BONUS" CLAIM. THE BONUS PAYMENTS THUS APPEAR TO HAVE BEEN APPROVED BY THE SOURCES CONTEMPLATED BY THE LETTER OF JUNE 6, 1958, BUT THE QUESTION REMAINS WHETHER IT WAS TIMELY OBTAINED IN THOSE INSTANCES WHERE IT WAS REQUIRED, OR, IF NOT, WHETHER THE CONTRACTOR MAY BE SAID TO HAVE BEEN RESPONSIBLE FOR THE DELAY IN APPROVAL. IT WILL BE SEEN FROM THE INFORMATION CONTAINED IN EXHIBIT "E" THAT R. DIVINEY'S FIRST 18-MONTH EMPLOYMENT CONTRACT MUST HAVE EXPIRED ON SEPTEMBER 15, 1957, AND HIS SECOND ON MARCH 15, 1959, WHICH WOULD COVER A PERIOD OF 36 MONTHS. THE CONTRACTOR SEEKS AUTHORITY TO PAY HIM $250 AS BONUS FOR THE ADDITIONAL 12- MONTH PERIOD HE SERVED. ALSO, G. A. FOURNIER'S AND J. E. HEELY'S SECOND TOURS OF DUTY ENDED ON NOVEMBER 1, 1958, AND SEPTEMBER 12, 1958, RESPECTIVELY, AND THE CONTRACTOR SEEKS AUTHORITY TO PAY EACH OF THEM $500 AS BONUSES FOR THE ADDITIONAL 18-MONTH PERIODS THAT THEY SERVED. ALSO, THE CONTRACTOR SEEKS AUTHORITY TO PAY EACH OF THE REMAINING FIVE EMPLOYEES, NAMELY, P. D. CLEMENS, A. P. HUMMEL, R. L. JOHNSON, R. J. KANIA AND D. F. LOOS, THE AMOUNT OF $500 AS BONUSES FOR THE 18-MONTH PERIODS THAT THEY SERVED FOLLOWING THE EXPIRATION OF THEIR INITIAL CONTRACTS OF EMPLOYMENT.

UNDER THE TERMS OF THE LETTER OF JUNE 6, 1958, THE CONTRACTOR WAS REQUIRED TO HAVE OBTAINED WRITTEN APPROVAL OF THE BONUS PAYMENT PROPOSED TO BE MADE TO R. DIVINEY PRIOR TO MARCH 15, 1959, AND OF THOSE PROPOSED TO BE MADE TO G. A. FOURNIER AND J. E. HEELY PRIOR TO NOVEMBER 1, 1958, AND SEPTEMBER 12, 1958, RESPECTIVELY. HOWEVER, AS NOTED ABOVE, THE CONTRACTOR DID NOT SEEK WRITTEN APPROVAL FOR PAYMENT OF ANY OF THE BONUSES UNTIL OCTOBER 25, 1960, WHEN IT REQUESTED SUCH APPROVAL FROM THE MINISTER OF COMMERCE AND INDUSTRY OF THE REPUBLIC OF KOREA. WITH RESPECT TO ITS DELAY IN REQUESTING WRITTEN APPROVAL FOR PAYMENT OF THESE BONUSES, AND ITS BASIS FOR CONTENDING THAT AUTHORITY FOR PAYMENT THEREOF SHOULD BE EXTENDED, THE CONTRACTOR STATES:

"PRIOR TO THE SPRING OF 1960, IT HAD BEEN ESTABLISHED AS PRACTICE THAT WE SUBMITTED REQUESTS FOR APPROVALS OF THIS SORT TO THE COMBINED ECONOMIC BOARD, COMPOSED, AMONG OTHERS, OF A REPRESENTATIVE OF ROK (THE MINISTER OF RECONSTRUCTION) AND THE DIRECTOR OF USOM OR HIS REPRESENTATIVE. AFTER THE APRIL REVOLUTION, FOR A LONG TIME THE MINISTRY OF RECONSTRUCTION WAS NOT FUNCTIONING IN MATTERS OF THIS KIND AND THE CEB WAS INACTIVE, PUTTING OFF MEETING AFTER MEETING. WHEN THE CEB WAS AGAIN PARTIALLY ACTIVE, IT WAS SWAMPED WITH IMPORTANT MATTERS. OUR REPRESENTATIVES SPENT MANY MONTHS VAINLY ATTEMPTING TO GET THIS AND OTHER MATTERS INTO THE PROPER HANDS FOR APPROVAL, BEFORE IT WAS FINALLY DECIDED BY ROK, USOM AND OUR REPRESENTATIVES THAT OUR OCTOBER 25, 1960 REQUEST SHOULD BE MADE TO MCI- ROK, AS WAS DONE.

"IN CONCLUSION, IT SEEMS QUITE CLEAR TO US THAT IF WE HAD ADVISED THESE EMPLOYEES THAT THERE WOULD BE NO BONUS PAYMENTS FOR STAYING ON IN KOREA, WE WOULD HAVE BEEN RUNNING A RISK THAT SOME OF THEM MIGHT HAVE LEFT, TO THE DETRIMENT OF THE PROJECT AND BOTH GOVERNMENTS, WHICH DETRIMENT MIGHT HAVE INCLUDED EXTRA EXPENSES BEYOND THOSE HERE INVOLVED; AND THAT THESE EMPLOYEES WERE IN FACT INDUCED (WHETHER OR NOT IN A MANNER HAVING LEGAL CONSEQUENCES) TO REMAIN, UPON OUR ASSURANCE WE WOULD SEEK APPROVALS IN THE CUSTOMARY MANNER, WHICH THEY AND WE HAD EVERY REASON TO BELIEVE WOULD BE APPROVED WHERE, AS HERE THEY MET WITH PREVIOUSLY ESTABLISHED STANDARDS FOR THEIR ACCEPTANCE.'

INASMUCH AS APPROVAL FOR PAYMENT OF BONUSES TO R. DIVINEY, G. A. FOURNIER AND M. E. HEELY WAS REQUIRED TO HAVE BEEN OBTAINED LONG PRIOR TO THE TIME WHEN THE CONTRACTOR CONTENDS THAT ITS IMPEDIMENT WITH RESPECT TO OBTAINING APPROVALS IN SUCH CASES AROSE, THE CONTRACTOR WOULD APPEAR TO BE PRECLUDED FROM SUCCESSFULLY ASSERTING THE RIGHT TO BE REIMBURSED FOR ANY BONUS PAYMENTS MADE TO THESE EMPLOYEES ON ACCOUNT OF THEIR SERVICES FOR THE PERIODS OF TIME INVOLVED. SEE 24 COMP. GEN. 565. HOWEVER, SINCE THE BONUS PAYMENTS SOUGHT TO BE MADE TO THE REMAINING FIVE EMPLOYEES IN CONSIDERATION OF THEIR AGREEMENT TO REMAIN AT THE PROJECT FOR A SECOND TOUR OF DUTY WERE GOVERNED BY THE PROVISIONS OF ICA'S LETTER OF FEBRUARY 21, 1957, WHICH LEFT IT WITHIN THE DISCRETION OF THE CONTRACTOR--- SUBJECT TO THE CIRCUMSTANCES OUTLINED IN THE LETTER--- AS TO WHETHER BONUS PAYMENTS WOULD BE MADE, WE PERCEIVE NO LEGAL BASIS FOR DENYING REIMBURSEMENT TO THE CONTRACTOR FOR THE AMOUNT OF SUCH BONUS PAYMENTS FOLLOWING PAYMENT THEREOF BY THE CONTRACTOR.

THE COPY OF THE CONTRACT INVOLVED WHICH WAS TRANSMITTED WITH THE LETTER OF SEPTEMBER 28, 1961, FROM THE OFFICE OF THE CONTROLLER, ICA, IS RETURNED HEREWITH AS REQUESTED.