B-143899, SEPTEMBER 26, 1960, 40 COMP. GEN. 188

B-143899: Sep 26, 1960

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MUST BE INTERPRETED AS BEING ONLY THAT PART OF THE UNDERTAKING FOR WHICH THE ARCHITECT ENGINEER SERVICES ARE TO BE PERFORMED RATHER THAN A LARGER CONSTRUCTION JOB INCLUDING SEVERAL SEGMENTS. IN A COOPERATIVE PUBLIC AND PRIVATE FLOOD PREVENTION AND SOIL CONSERVATION PROJECT UNDER WHICH THE DEPARTMENT OF AGRICULTURE IS RESPONSIBLE FOR SECURING ENGINEERING SERVICES FOR THE SPILLWAY SEGMENT. ON WHICH OUR DECISION IS REQUESTED. YOUR DEPARTMENT IS ENGAGED IN A PROJECT INVOLVING IMPROVEMENT OF A STREAM CHANNEL AS A FLOOD PREVENTION AND SOIL AND WATER CONSERVATION MEASURE IN THE HAWK CREEK. WILL CONDUCT RUNOFF AND FLOOD WATER ACROSS LOW LANDS THAT ARE PRESENTLY SUBJECT TO FLOOD. WHICH WILL DROP THE GRADE OF THE STREAMS SO THAT EACH WILL RUN A MORE NEARLY LEVEL COURSE.

B-143899, SEPTEMBER 26, 1960, 40 COMP. GEN. 188

CONSTRUCTION PROJECTS - ARCHITECT-ENGINEER SERVICES - FEE LIMITATION - PROJECT COMPRISING SEVERAL SEGMENTS THE TERM "PROJECT" IN THE ARCHITECT-ENGINEER FEE LIMITATION IN SECTION 304 (B) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, 41 U.S.C. 254 (B), WHICH PRECLUDES A FEE IN EXCESS OF SIX PERCENT OF THE ESTIMATED COSTS OF THE PROJECT, MUST BE INTERPRETED AS BEING ONLY THAT PART OF THE UNDERTAKING FOR WHICH THE ARCHITECT ENGINEER SERVICES ARE TO BE PERFORMED RATHER THAN A LARGER CONSTRUCTION JOB INCLUDING SEVERAL SEGMENTS; THEREFORE, IN A COOPERATIVE PUBLIC AND PRIVATE FLOOD PREVENTION AND SOIL CONSERVATION PROJECT UNDER WHICH THE DEPARTMENT OF AGRICULTURE IS RESPONSIBLE FOR SECURING ENGINEERING SERVICES FOR THE SPILLWAY SEGMENT, AN ENGINEERING CONTRACT WHICH PERMITS A FEE IN EXCESS OF SIX PERCENT OF THE ESTIMATED COSTS OF THE SEGMENT, ALTHOUGH WITHIN SIX PERCENT OF THE COST OF THE ENTIRE PROJECT, OR A CONTRACT FOR TWO SEGMENTS WHERE ONLY ONE EXCEEDS THE LIMITATION WOULD BE IN CONTRAVENTION OF THE LIMITATION.

TO THE SECRETARY OF AGRICULTURE, SEPTEMBER 26, 1960:

A LETTER DATED SEPTEMBER 13, 1960, FROM THE ADMINISTRATIVE ASSISTANT SECRETARY OF AGRICULTURE CONCERNS A PROBLEM INVOLVING THE INTERPRETATION OF SECTION 304 (B) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED, 41 U.S.C. 254 (B), ON WHICH OUR DECISION IS REQUESTED.

UNDER AUTHORITY OF THE SOIL CONSERVATION AND DOMESTIC ALLOTMENT ACT, AS AMENDED, 16 U.S.C. 590A ET SEQ., YOUR DEPARTMENT IS ENGAGED IN A PROJECT INVOLVING IMPROVEMENT OF A STREAM CHANNEL AS A FLOOD PREVENTION AND SOIL AND WATER CONSERVATION MEASURE IN THE HAWK CREEK, MINNESOTA, WATERSHED. THE PROJECT INCLUDES CONSTRUCTION OF A FLOODWAY AND THREE SPILLWAYS. THE FLOODWAY, WHICH CONSISTS OF STRAIGHTENING, WIDENING, DEEPENING, AND LEVELING AN EXISTING STREAM FOR ABOUT 60 MILES, WILL CONDUCT RUNOFF AND FLOOD WATER ACROSS LOW LANDS THAT ARE PRESENTLY SUBJECT TO FLOOD; AND THE SPILLWAYS, WHICH WILL DROP THE GRADE OF THE STREAMS SO THAT EACH WILL RUN A MORE NEARLY LEVEL COURSE, ARE TO PREVENT EROSION FROM THE VELOCITY OF THE WATERS. THE TOTAL ESTIMATED COST OF THE PROJECT IS $1,608,00, OF WHICH YOUR DEPARTMENT IS TO CONTRIBUTE $755,000; NON-FEDERAL PUBLIC SOURCES, $490,000; AND PRIVATE SOURCES, $363,000. THE FLOOD PREVENTION ASPECT OF THE PROJECT IS ESTIMATED AT $1,156,000, OF WHICH YOUR DEPARTMENT WILL CONTRIBUTE $628,000.

IT IS PROPOSED THAT FOR ENGINEERING SERVICES THE PROJECT BE DIVIDED INTO THREE PARTS: (1) ENGINEERING FOR THE FLOODWAY PROPER, (2) ENGINEERING FOR BRIDGES ACROSS THE CHANNEL, AND (3) ENGINEERING FOR THE SPILLWAYS. ENGINEERING FOR THE FLOODWAY IS TO BE PERFORMED BY GOVERNMENT PERSONNEL LEAVING THE ENGINEERING FOR BRIDGES AND SPILLWAYS TO BE ACCOMPLISHED UNDER CONTRACTS TO BE NEGOTIATED PURSUANT TO SECTION 302 (C) (4) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF AS AMENDED, 41 U.S.C. 252 (C) (4), AND FEDERAL PROCUREMENT REGULATION 1 3.204, 41 U.S.C. APP. 1-3.204. WITH RESPECT TO CONTRACTS FOR ENGINEERING SERVICES, SECTION 304 (B) OF THE ACT, 41 U.S.C. 254 (B), PROVIDES THAT:

* * * A FEE INCLUSIVE OF THE CONTRACTOR'S COSTS AND NOT IN EXCESS OF 6 PERCENTUM OF THE ESTIMATED COST, EXCLUSIVE OF FEES, AS DETERMINED BY THE AGENCY HEAD AT THE TIME OF ENTERING INTO THE CONTRACT, OF THE PROJECT TO WHICH SUCH FEE IS APPLICABLE IS AUTHORIZED IN CONTRACTS FOR ARCHITECTURAL OR ENGINEERING SERVICES RELATING TO ANY PUBLIC WORKS OR UTILITY PROJECT *

SINCE IT IS EXPECTED THAT ENGINEERING FEES FOR THE SPILLWAYS WILL EXCEED 6 PERCENT OF ESTIMATED COST FOR THE SPILLWAY PORTION OF THE PROJECT, OUR OPINION IS REQUESTED ON THE FOLLOWING SPECIFIC QUESTIONS:

(1) MAY WE CONTRACT FOR ENGINEERING SERVICES FOR A SEGMENT OF THE PROJECT WHERE THESE SERVICES ARE IN EXCESS OF 6 PERCENT OF THE ESTIMATED COST OF THAT SEGMENT BUT ARE WITHIN 6 PERCENT OF THE ESTIMATED COST OF THE PROJECT?

(2) MAY WE CONTRACT FOR ENGINEERING SERVICES FOR TWO SEGMENTS OF THIS PROJECT WHERE ONE OF THE SEGMENTS WILL EXCEED 6 PERCENT, BUT THE TOTAL OF THE TWO SEGMENTS WILL NOT EXCEED 6 PERCENT OF THE ESTIMATED CONSTRUCTION COST OF THE TWO SEGMENTS?

TO ANSWER THE QUESTIONS PRESENTED REQUIRES AN INTERPRETATION OF THE WORD "PROJECT" AS IT IS USED IN THE STATUTORY LANGUAGE QUOTED ABOVE. THE ADMINISTRATIVE ASSISTANT SECRETARY SUGGESTS THAT THREE ALTERNATIVE CONSTRUCTIONS ARE POSSIBLE. FIRST, THAT THE "PROJECT" IS THE ENTIRE WORKS INVOLVED; SECOND, THAT THE "PROJECT" IS WORK CONTRACTED TO THE ENGINEER; AND THIRD, THAT THE "PROJECT" IS ALL THAT WORK FOR WHICH ENGINEERING SERVICES ARE CONTRACTED. UNDER THE LAST CONSTRUCTION AND PRESUMABLY THE FIRST, ALTHOUGH NOT SO STATED, ALL CONTRACTS FOR ENGINEERING SERVICES WOULD BE LUMPED TOGETHER TO ASCERTAIN WHETHER THE 6 PERCENT FEE LIMITATION HAD BEEN EXCEEDED. WE ASSUME THAT IN THE SECOND POSSIBLE CONSTRUCTION SUGGESTED IN THE ADMINISTRATIVE ASSISTANT SECRETARY'S LETTER THE WORD "PROJECT" IS CONSTRUED TO MEAN THAT PORTION OF WORK FOR WHICH EACH CONTRACT FOR ENGINEERING SERVICES IS EXECUTED. UNDER THIS CONSTRUCTION EACH ENGINEERING SERVICE CONTRACT WOULD BE CONSIDERED SEPARATELY IN RELATION TO THE SPECIFIC PROJECT SEGMENT INVOLVED RATHER THAN COMBINING THEM, FOR PURPOSES OF APPLYING THE 6 PERCENT LIMITATION.

YOU DEPARTMENT HAS TRACED THE LEGISLATIVE HISTORY OF SECTION 304 (B) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949 BACK TO THE ARMED SERVICES PROCUREMENT ACT OF 1947, 10 U.S.C. 2301, AND THE ACT OF APRIL 25, 1939, 53 STAT. 590.

SECTION 2 OF THE ACT OF AUGUST 7, 1939, 53 STAT. 1240, 5 U.S.C. 221 (1952 USED.), AUTHORIZED THE SECRETARY OF WAR TO EMPLOY BY CONTRACT OR OTHERWISE WITHOUT REGARD TO THE CLASSIFICATION ACT OF 1923, AS AMENDED, OR SECTION 3709, REVISED STATUTES, 41 U.S.C. 5, ARCHITECTURAL AND ENGINEERING SERVICES REQUIRED FOR THE PRODUCTION AND DELIVERY OF DESIGNS, PLANS, DRAWINGS AND SPECIFICATIONS REQUIRED FOR THE ACCOMPLISHMENT OF ANY PUBLIC WORKS OR UTILITIES PROJECT OF THE WAR DEPARTMENT, BUT PROVIDED THAT IN NO CASE SHALL THE FEE PAID FOR ANY SERVICE EXCEED 6 PERCENTUM OF THE ESTIMATED COST, AS DETERMINED BY THE SECRETARY OF WAR, OF THE PROJECT TO WHICH SUCH FEE IS APPLICABLE. THE REPORTS ( HOUSE REPT. NO. 1312, AND SENATE REPT. NO. 667, 76TH CONGRESS), ACCOMPANYING THE BILL WHICH BECAME THAT ACT, INDICATE THAT IT WAS INTENDED TO GRANT THE SAME AUTHORITY CONFERRED ON THE SECRETARY OF THE NAVY BY THE ACT OF APRIL 25, 1939, AND IT WAS STATED WITH RESPECT TO BOTH ACTS THAT " STANDARD FEES HAVE BEEN ESTABLISHED BY REPUTABLE PROFESSIONAL SOCIETIES FOR VARIOUS KINDS OF ENGINEERING AND ARCHITECTURAL WORKS, SO THAT THE QUESTION OF THE MAGNITUDE OF THE FEE DOES NOT ENTER INTO THE SECTION OF AN ENGINEERING OR ARCHITECTURAL FIRM.' SEE PAGE 3 OF THE LAST CITED REPORTS, AS WELL AS PAGE 8 OF HOUSE REPT. NO. 76 AND PAGE 23 OF SENATE REPT. NO. 263, BOTH ACCOMPANYING THE BILL WHICH BECAME THE ACT OF APRIL 25, 1939.

IT WAS CONCLUDED IN 21 COMP. GEN. 580, THAT THE WORD "FEE" WAS USED IN THE LIMITING LANGUAGE OF SECTION 2 OF THE ACT OF AUGUST 7, 1939, IN THE SAME SENSE AS CUSTOMARILY USED BY THE CONCERNED PROFESSIONAL SOCIETIES; AND THAT ITS USUAL FORM WAS "AN AGREED PERCENTAGE OF THE TOTAL COST OF THE PROJECT.' IT WAS HELD THAT "IT WAS THE INTENT OF THE LIMITATION THAT THE ARCHITECT-ENGINEERS WERE NOT TO BE PAID IN EXCESS OF SIX PERCENT OF THE ESTIMATED COST OF THE PROJECT ON ACCOUNT OF ALL ITEMS WHICH NORMALLY ARE INCLUDED IN THE "FEE" PAID UNDER THE PERCENTAGE-FEE CONTRACTS FOR ARCHITECTURAL OR ENGINEERING SERVICES.' OUR DECISION OF NOVEMBER 15, 1951, B-106325, CITED IN THE ADMINISTRATIVE ASSISTANT SECRETARY'S LETTER MAKES SPECIFIC REFERENCE TO 21 COMP. GEN. 580.

THERE IS NO INDICATION THAT THE PROFESSIONAL SOCIETIES ADVOCATED OR THAT CONGRESS SANCTIONED THE BASING OF A FEE ON THE CONSTRUCTION COST OF WORK WHICH WAS NOT INCLUDED IN THE DESIGNS, SPECIFICATION, OR SERVICES SPECIFIED IN THE ARCHITECT-ENGINEER CONTRACT. THEREFORE, THE "PROJECT TO WHICH SUCH FEE IS APPLICABLE" IS THE PROJECT FOR WHICH THE ARCHITECT- ENGINEER UNDERTAKES IN HIS CONTRACT TO PREPARE THE PLANS, ETC., AND NOT ANY LARGER BUDGETARY OR OTHER PROJECT OF WHICH IT MAY FORM A PART. HOLD OTHERWISE WOULD ALLOW THE ARCHITECT-ENGINEER'S FEE TO BE BASED ON THE COST OF WORK FOR WHICH HE RENDERED NO SERVICE. EXAMINATION OF THE LEGISLATIVE HISTORY OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949 DISCLOSES NOTHING THAT CAN BE ACCEPTED AS INDICATING AN INTENTION ON THE PART OF THE CONGRESS TOWARD A DIFFERENT VIEW.

ACCORDINGLY, THE "PROJECT" WITHIN THE INTENT OF SECTION 304 (B) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED, IS ONLY THAT PART OF THE UNDERTAKING TO WHICH THE SERVICES COVERED BY THE ARCHITECT-ENGINEER CONTRACT APPLY AND A NEGATIVE ANSWER IS REQUIRED FOR EACH OF THE QUESTIONS PRESENTED.