B-144342, JUL. 26, 1961

B-144342: Jul 26, 1961

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LANWEHR: REFERENCE IS MADE TO LETTER OF SEPTEMBER 21. WAS FORWARDED HERE BY THE ASSISTANT COMPTROLLER OF THE NAVY BY LETTER OF OCTOBER 26. WHICH WERE WITHHELD ON D.O. CHRYSLER CORPORATION WAS REQUIRED TO DESIGN. SECTION D OF THE CONTRACT PROVIDED THAT THE CONTRACTOR WAS TO BE PAID. WHICH WERE THEREIN DEFINED AS (I) OVERHEAD IN THE AMOUNT DETERMINED IN ACCORDANCE WITH SUBPARAGRAPH (K) OF SECTION D. CERTAIN ITEMS OF ADDITIONAL EQUIPMENT WHICH WERE TO BE FURNISHED TO THE CONTRACTOR BY THE GOVERNMENT WOULD BE REQUIRED FOR THE PERFORMANCE OF THE WORK AND WERE TO BE CONSIDERED AS GOVERNMENT FURNISHED MATERIAL. IT WAS PROVIDED IN THE GENERAL PROVISIONS THEREOF AS FOLLOWS: "SECTION 6. THE MATERIAL OR EQUIPMENT WHICH THE SCHEDULE OR THE SPECIFICATIONS STATE THE GOVERNMENT WILL FURNISH (HEREINAFTER REFERRED TO AS THE "GOVERNMENT-FURNISHED MATERIAL").

B-144342, JUL. 26, 1961

TO LIEUTENANT (JG) THOMAS H. LANWEHR:

REFERENCE IS MADE TO LETTER OF SEPTEMBER 21, 1960, FD-150, ADDRESSED TO US BY THE OFFICER IN CHARGE, NRAO GLAKES, ILLINOIS, TRANSMITTING VIATHE COMPTROLLER OF THE NAVY BUREAU (RECLAIM) VOUCHERS NOS. 7-R AND 285-R, IN THE AMOUNTS OF $3,343.66 AND $25,235.43, RESPECTIVELY, DRAWN IN FAVOR OF CHRYSLER CORPORATION UNDER CONTRACT NOA (S/-7143, WITH THE REQUEST THAT AN ADVANCE DECISION BE RENDERED WITH RESPECT TO THE PROPRIETY OF MAKING PAYMENT THEREON. THE LETTER, TOGETHER WITH THE VOUCHERS AND SUPPORTING PAPERS, WAS FORWARDED HERE BY THE ASSISTANT COMPTROLLER OF THE NAVY BY LETTER OF OCTOBER 26, 1960, NCT131 7560/CHRYSLER CORP., WHICH REQUESTED THAT THE DECISION BE RENDERED TO THE DISBURSING OFFICER INVOLVED THROUGH THE COMPTROLLER OF THE NAVY.

THE VOUCHERS REPRESENT RECLAIMS FOR AMOUNTS, AGGREGATING $28,579.09, WHICH WERE WITHHELD ON D.O. VOUCHERS NOS. 129641 AND 133524, DATED JANUARY 29 AND FEBRUARY 5, 1957, IN THE ACCOUNTS OF H. J. OLSON, SYMBOL 845, UNDER CONTRACTS NOAS 56-702C AND NOAS-1119 TO COVER EXCEPTIONS TAKEN BY THE GENERAL ACCOUNTING OFFICE TO CERTAIN PAYMENTS MADE TO THE CONTRACTOR ON D.O. VOUCHERS NOS. 49307, 53840, 80638, 80640, 93384, 93385 AND 109955, IN THE ACCOUNTS OF D. G. VAN RIPER, SYMBOL 540-474, PERIOD SEPTEMBER 1, 1949, TO MAY 6, 1950, UNDER CONTRACT NOA (S/-7143.

UNDER CONTRACT NO. NOA (S/-7143 DATED JUNE 30, 1945, ENTERED INTO BY THE NAVY DEPARTMENT, BUREAU OF AERONAUTICS, CHRYSLER CORPORATION WAS REQUIRED TO DESIGN, DEVELOP, CONSTRUCT AND TEST AN EXPERIMENTAL 1000 HP GAS TURBINE POWER PLANT OF A TYPE ULTIMATELY INTENDED FOR AIRCRAFT USE. SECTION D OF THE CONTRACT PROVIDED THAT THE CONTRACTOR WAS TO BE PAID, AS FULL COMPENSATION FOR ITS PERFORMANCE OF THE CONTRACT, THE ALLOWABLE COSTS THEREOF, WHICH WERE THEREIN DEFINED AS (I) OVERHEAD IN THE AMOUNT DETERMINED IN ACCORDANCE WITH SUBPARAGRAPH (K) OF SECTION D, AND (II) ALL NECESSARY COSTS OF THE NATURE DESCRIBED IN SUBPARAGRAPHS (A) TO (J) OF THAT SECTION INCURRED DIRECTLY IN THE PERFORMANCE OF THE CONTRACT WHICH SHOULD BE CLAIMED BY THE CONTRACTOR AND ACCEPTED AS SUCH COSTS BY THE BUREAU OF SUPPLIES AND ACCOUNTS IN ACCORDANCE WITH THE ITEMS SET FORTH IN THE REFERRED-TO SUBPARAGRAPHS OF SECTION D, INCLUDING THE FOLLOWING:

"/B)THE SALARIES AND WAGES OF SCIENTISTS, ENGINEERS, TECHNICIANS,DRAFTSMEN, AND WORKMEN DIRECTLY EMPLOYED IN THE PERFORMANCE OF THIS CONTRACT AND PROPERLY CHARGEABLE DIRECTLY THERETO AT RATES COMPUTED IN ACCORDANCE WITH A SOUND ACCOUNTING METHOD CONSISTENTLY FOLLOWED BY THE CONTRACTOR, EXCLUDING THEREFROM OLD AGE BENEFIT TAXES, AND SOCIAL SECURITY TAXES PERTAINING TO SUCH EMPLOYMENT.

"/C) PURCHASE AND INSTALLATION COST OF SPECIAL TOOLS, DIES, JIGS, ETC., NECESSARY FOR THE PERFORMANCE OF THE CONTRACT, BUT NOT CONSIDERED AS CAPITAL ITEMS, AS WELL AS THE COST OF NECESSARY PLANT RE ARRANGEMENT FOR THE INSTALLATION OF SUCH SPECIAL TOOLS, DIES, JIGS, ETC., AND THE COST OF REMOVAL THEREOF.

"/K) AN AMOUNT FOR ALL OVERHEAD INDIRECT CHARGES AND OTHER ELEMENTS OF COST EXCLUDED FROM OR NOT COVERED BY SUBPARAGRAPHS (A) TO (J) INCLUSIVE, TO EQUAL THE SUM OF:

"/I) ONE HUNDRED AND THIRTY PERCENT (130 PERCENT) OF THAT PART OF THE SALARIES AND WAGES, COVERED BY SUBPARAGRAPH (B) ABOVE, WHICH SHALL BE INCURRED IN THE CONTRACTOR'S ENGINEERING PLANT, AND * * *.'

THE CONTRACT, IN SECTION K, GOVERNMENT FURNISHED MATERIAL, PARAGRAPHS (B) AND (C), AND SECTION M, LEASED FACILITIES AND EQUIPMENT, PARAGRAPH (A), PROVIDED THAT CERTAIN GOVERNMENT-OWNED EQUIPMENT, INSTRUMENTS, FIXTURES, TOOLS, DIES, MOLDS, PATTERNS, ENGINE PARTS AND OTHER PROPERTY THEN IN POSSESSION OF THE CONTRACTOR AS A RESULT OF HAVING PERFORMED WAR DEPARTMENT CONTRACT W-535-AC-18195, CERTAIN PROPERTY, FACILITIES AND EQUIPMENT THEN IN POSSESSION OF THE CONTRACTOR (PLANCOR NO. 203) UNDER AN AGREEMENT OF LEASE DATED AUGUST 18, 1941, AS AMENDED, BETWEEN THE DEFENSE PLANT CORPORATION AND THE CONTRACTOR, AND CERTAIN ITEMS OF ADDITIONAL EQUIPMENT WHICH WERE TO BE FURNISHED TO THE CONTRACTOR BY THE GOVERNMENT WOULD BE REQUIRED FOR THE PERFORMANCE OF THE WORK AND WERE TO BE CONSIDERED AS GOVERNMENT FURNISHED MATERIAL. RELATIVE TO MATERIAL OR EQUIPMENT FURNISHED TO THE CONTRACTOR BY THE GOVERNMENT UNDER THE CONTRACT, IT WAS PROVIDED IN THE GENERAL PROVISIONS THEREOF AS FOLLOWS:

"SECTION 6--- GOVERNMENT-FURNISHED MATERIAL

"/A) THE GOVERNMENT SHALL DELIVER TO THE CONTRACTOR, FOR USE IN CONNECTION WITH AND UNDER THE TERMS OF THIS CONTRACT, THE MATERIAL OR EQUIPMENT WHICH THE SCHEDULE OR THE SPECIFICATIONS STATE THE GOVERNMENT WILL FURNISH (HEREINAFTER REFERRED TO AS THE "GOVERNMENT-FURNISHED MATERIAL"), * * *.

"/C) UPON THE COMPLETION OR TERMINATION OF THIS CONTRACT, THE CONTRACTOR SHALL DELIVER TO THE GOVERNMENT AT SUCH PLACE AS SHALL BE SPECIFIED BY THE CONTRACTING OFFICER ANY OF THE GOVERNMENT-FURNISHED MATERIAL NOT CONSUMED IN THE MANUFACTURE (OR GOVERNMENT-DIRECTED TEST) OF THE ARTICLES COVERED BY THE TERMS OF THIS CONTRACT OR NOT INCORPORATED IN SUCH ARTICLES OR NOT ALREADY PAID FOR BY THE CONTRACTOR * * *.'

BY BILL OF SALE AND ASSIGNMENT DATED JUNE 30, 1948, THE RECONSTRUCTION FINANCE CORPORATION, AS SUCCESSOR TO ALL RIGHTS AND ASSETS OF DEFENSE PLANT CORPORATION, TRANSFERRED AND ASSIGNED TO THE UNITED STATES (DEPARTMENT OF THE NAVY) THE TITLE TO THE PROPERTY IDENTIFIED AS PLANCOR NO. 203, AND THE RIGHTS AND OBLIGATIONS WHICH HAD BEEN ACQUIRED BY RFC UNDER THE AGREEMENT OF LEASE. BY AN AGREEMENT BETWEEN THE UNITED STATES AND CHRYSLER CORPORATION, DESIGNATED PERMIT NOA-5046, WHICH RECITES (APPARENTLY IN ERROR) THAT IT WAS ENTERED INTO ON JUNE 1, 1948, THE REFERRED-TO AGREEMENT OF LEASE WAS TERMINATED. HOWEVER, THE SUPERSEDING AGREEMENT PROVIDED IN ARTICLE 1 THAT "NOTHING IN THIS PERMIT SHALL AFFECT ANY RIGHTS OR OBLIGATIONS BETWEEN THE RECONSTRUCTION FINANCE CORPORATION AND THE PERMITTEE WHICH ACCRUED OR WHICH WERE INCURRED PRIOR TO THE EFFECTIVE DATE HEREOF.'

UNDER THE PERMIT, THE CONTRACTOR WAS GRANTED THE RIGHT TO USE THE PROPERTY IDENTIFIED AS PLANCOR 203 IN THE PERFORMANCE OF CONTRACT NOA/S/- 7143 AND FOR NO OTHER PURPOSE. THE PERMIT PROVIDED THAT THE CONTRACTOR WAS TO PROTECT, PRESERVE, MAINTAIN AND REPAIR THE EQUIPMENT IN ACCORDANCE WITH SOUND INDUSTRIAL PRACTICE AND AS THE DEPARTMENT OF THE NAVY MIGHT FROM TIME TO TIME REASONABLY REQUIRE AND DIRECT, AND THAT, UPON THE REVOCATION OR TERMINATION OF THE CONTRACTOR'S RIGHT TO USE THE EQUIPMENT, THE CONTRACTOR WAS TO REDELIVER THE SAME TO THE GOVERNMENT. THE PERMIT FURTHER PROVIDED THAT THE CONTRACTOR WAS TO BE REIMBURSED FOR THE COST OF ANY REBUILDING, REPLACEMENT OR REPAIR OF THE EQUIPMENT INCURRED BY THE CONTRACTOR PURSUANT TO THE DIRECTION OF THE DEPARTMENT OF THE NAVY, EXCEPT AS OTHERWISE SPECIFIED, AND THAT THE CONTRACTOR'S RIGHT TO USE THE EQUIPMENT MIGHT BE REVOKED AT ANY TIME BY THE CONTRACTING OFFICER. HOWEVER, IT WAS STIPULATED THEREIN THAT IT WAS NOT THE INTENTION OF THAT OFFICIAL TO REVOKE THE PERMIT SO LONG AS THE EQUIPMENT WAS REQUIRED FOR THE PERFORMANCE OF THE WORK UNDER CONTRACT NOA/S/-7143.

WITHIN 90 DAYS AFTER REVOCATION OF THE PERMIT, THE DEPARTMENT OF THE NAVY WAS TO ISSUE INSTRUCTIONS FOR THE REMOVAL OF THE EQUIPMENT FROM THE PREMISES OF THE CONTRACTOR, AND IN THAT CONNECTION, ARTICLE 9 (C) OF THE PERMIT PROVIDED:

"* * * AT THE ELECTION OF THE DEPARTMENT, THE PERMITTEE SHALL PREPARE THE EQUIPMENT OR SUCH ITEM THEREOF FOR SHIPMENT AS DIRECTED BY THE DEPARTMENT AND SHALL DELIVER IT TO THE GOVERNMENT F.O.B. COMMON CARRIER AT OR NEAR THE PERMITTEE'S PLANT.'

ALSO, THE PERMIT PROVIDED IN ARTICLE 7, REIMBURSEMENT, AS FOLLOWS:

"THE PERMITTEE SHALL NOT BE REIMBURSED HEREUNDER FOR ANY EXPENSES INCURRED IN CARRYING OUT THE PROVISIONS OF THIS PERMIT. NOTHING CONTAINED HEREIN, HOWEVER, SHALL PREVENT THE PERMITTEE FROM SEEKING REIMBURSEMENT FOR SUCH EXPENSES UNDER CONTRACT NOA/S/-7143 IN ACCORDANCE WITH THE PROVISIONS OF SECTION D THEREOF ENTITLED "COMPENSATION.'"

CONTRACT NOA/S/-7143, AS AMENDED BY AMENDMENT NO. 5, DATED SEPTEMBER 21, 1948, PROVIDED THAT THE TOTAL COST OF THE PERFORMANCE OF THE WORK WAS NOT TO EXCEED THE SUM OF $6,819,300, AND THE BUREAU OF AERONAUTICS APPEARS TO HAVE NOTIFIED THE CONTRACTOR BY LETTER OF APRIL 21, 1949, THAT IT DID NOT PLAN TO CONTINUE DEVELOPMENT OF THE EXPERIMENTAL AIRCRAFT ENGINE INVOLVED AFTER THE COST LIMITATION HAD BEEN REACHED. REPLYING BY LETTER OF MAY 5, 1949, THE CONTRACTOR PROPOSED TO STOP ALL WORK UNDER THE CONTRACT ON JUNE 30, 1949, EXCEPT FOR THE WRITING AND SUBMISSION OF CERTAIN REPORTS REQUIRED TO BE FURNISHED THEREUNDER, AND THE BUREAU WAS REQUESTED TO FURNISH THE CONTRACTOR WITH INSTRUCTIONS REGARDING "THE DELIVERY OF THE POWER PLANTS AND DISPOSITION OF THE PARTS, RESIDUAL INVENTORY AND EQUIPMENT PROCURED UNDER THE CONTRACT.'

A LETTER DATED JUNE 30, 1949, FROM BUREAU OF AERONAUTICS GENERAL REPRESENTATIVE, USN, CENTRAL DISTRICT, WRIGHT PATTERSON AIR FORCE BASE, DAYTON, OHIO, TO THE CONTRACTOR, REFERS TO THE FACT THAT IT HAD BEEN GENERALLY AGREED IN A CONFERENCE HELD WITH THE CONTRACTOR THAT THE "NAVY OWNED PROPERTY LOCATED IN YOUR OAKLAND AVE., PLANT AND ACQUIRED UNDER CONTRACT NOA/S/-7143 AND REVOCABLE PERMIT NOA-5046 PLUS THAT PROPERTY TRANSFERRED TO NAVY FROM AIR FORCE CONTRACT W-535-AC-18195 HAD BEEN SO INTEGRATED INTO ONE COMPLETE INSTALLATION FOR DEVELOPMENT WORK UNDER NOA/S/-7143, THAT IT WOULD NOT BE ADVISABLE TO CONSIDER THE PROPERTY UNDER TWO OR THREE DIFFERENT HEADINGS.' THE LETTER STATED THAT THE CONTRACTOR WAS, THEREFORE, PREPARING A LIST OF "ALL EQUIPMENT," WHICH COULD NOT, HOWEVER, BE ACCOMPLISHED PRIOR TO JULY 15, 1949. IN VIEW THEREOF, THE CONTRACTOR WAS REQUESTED IN THE LETTER TO EXTEND THE DEADLINE FOR NAVY'S FURNISHING SHIPPING INSTRUCTIONS FOR THE EQUIPMENT INVOLVED TO OCTOBER 5, 1949, TO WHICH THE CONTRACTOR AGREED.

THE LIST OF GOVERNMENT-OWNED EQUIPMENT WHICH HAD BEEN FURNISHED TO THE CONTRACTOR UNDER THE CONTRACT, DESIGNATED CHRYSLER CORPORATION INVENTORY LIST AR-47, WAS FURNISHED TO THE BUREAU OF AERONAUTICS BY THE CONTRACTOR'S LETTER OF JULY 28, 1949, AND BY LETTER OF AUGUST 1, 1949, THE BUREAU OF AERONAUTICS GENERAL REPRESENTATIVE, CENTRAL DISTRICT, INFORMED THE CONTRACTOR THAT IT COULD PROCEED TO DISMANTLE, CRATE, SKID, PACK AND PRESERVE FOR STORAGE THE 14 ITEMS OF GOVERNMENT FURNISHED EQUIPMENT REFERRED TO IN THE GENERAL REPRESENTATIVE'S LETTER, THE PARTS AND ACCESSORIES TO THE ITEMS TO BE BOXED OR CRATED AND TO BE IDENTIFIED AS PART OF THE BASIC MACHINE BY APPROPRIATE MARKINGS. ALSO, THE CONTRACTING OFFICER, IN A LETTER DATED AUGUST 10, 1949, DIRECTED TO THE CONTRACTOR VIA THE BUREAU OF AERONAUTICS GENERAL REPRESENTATIVE, CENTRAL DISTRICT, AFTER REFERRING TO THE PROVISION CONTAINED IN SECTION 6 (C) OF THE GENERAL PROVISIONS OF THE CONTRACT, QUOTED ABOVE, ADVISED THE CONTRACTOR AS FOLLOWS:

"YOU ARE HEREBY REQUESTED TO PREPARE FOR SHIPMENT AND TO DELIVER TO THE GOVERNMENT IN ACCORDANCE WITH THE INSTRUCTIONS OF THE BUREAU OF AERONAUTICS GENERAL REPRESENTATIVE, CENTRAL DISTRICT, THOSE ITEMS OF MACHINERY, EQUIPMENT AND OTHER PROPERTY FURNISHED BY THE GOVERNMENT FOR USE BY YOU IN THE PERFORMANCE OF CONTRACT NOA/S/-7143. THE FACILITIES COVERED BY REVOCABLE PERMIT NOA-5046 AND FURNISHED IN ACCORDANCE WITH SECTION M OF CONTRACT NOA/S/-7143 ARE INCLUDED HEREUNDER.

"THIS LETTER CONSTITUTES THE CONTRACTING OFFICER'S APPROVAL OF THE EXPENSES INCURRED BY YOU FOR WORK PERFORMED PURSUANT TO THIS REQUEST AS AN ALLOWABLE ITEM OF COST, BUT DOES NOT ESTABLISH THE ACTUAL AMOUNT TO BE REIMBURSED UNDER THE CONTRACT. THE AMOUNT TO BE REIMBURSED SHALL BE DETERMINED BY THE COST INSPECTION SERVICE IN ACCORDANCE WITH THE TERMS OF THE CONTRACT.'

THE ABOVE LETTER WAS FORWARDED TO THE CONTRACTOR BY FIRST ENDORSEMENT OF THE BUREAU OF AERONAUTICS GENERAL REPRESENTATIVE, CENTRAL DISTRICT, THEREON, WHICH STATED THAT THE LETTER AUTHORIZED THE CONTRACTOR TO PROCEED WITH THE PLANT CLEARANCE OF NAVY-OWNED PROPERTY UNDER THE CONTRACT AND REVOCABLE PERMIT INVOLVED AND TO CHARGE THE EXPENSE THEREOF TO CONTRACT NOA/S/-7143.

IN A LETTER DATED SEPTEMBER 8, 1949, TO THE BUREAU OF AERONAUTICS GENERAL REPRESENTATIVE, CENTRAL DISTRICT, THE CONTRACTOR DREW ATTENTION TO THE FACT THAT IT SO FAR HAD BEEN AUTHORIZED TO DISMANTLE, CRATE, SKID, PACK AND PRESERVE FOR STORAGE THE 14 SPECIFIC ITEMS OF EQUIPMENT REFERRED TO IN THE GENERAL REPRESENTATIVE'S LETTER OF AUGUST 1, 1949, AND INFORMATION WAS REQUESTED REGARDING DISPOSITION TO BE MADE OF THE REMAINING ITEMS OF GOVERNMENT-FURNISHED PROPERTY, AS WELL AS SHIPPING INSTRUCTIONS WITH RESPECT TO THE 14 ITEMS. REPLYING BY LETTER OF SEPTEMBER 16, 1949, THE GENERAL REPRESENTATIVE INSTRUCTED THE CONTRACTOR TO CONTINUE THE WORK OF DISMANTLING, CRATING, SKIDDING AND PACKING FOR SHIPMENT "ALL OF THE ITEMS OF PLANT EQUIPMENT REMAINING IN YOUR PLANT WHICH ORIGINATED FROM CONTRACTS NOA/S/-7143 AND NOA-5046," AND THAT SHIPPING INSTRUCTIONS WERE EXPECTED TO BE ISSUED WITHIN TEN DAYS, WHEN THE CONTRACTOR COULD PROCEED WITH THE REMOVAL OF THE PROPERTY. SHIPPING INSTRUCTIONS WERE FORWARDED TO THE CONTRACTOR WITH RESPECT TO ALL OF THE PROPERTY INVOLVED BY THE BUREAU OF AERONAUTICS REPRESENTATIVE, U.S.N., DETROIT, MICHIGAN, BY LETTER OF OCTOBER 11, 1949, AND THE CONTRACTOR SUBSEQUENTLY BILLED THE GOVERNMENT AND WAS PAID ON THE D.O. VOUCHERS REFERRED TO ABOVE FOR THE COST OF DIRECT MATERIALS, DIRECT LABOR AND OVERHEAD (COMPUTED ON THE BASIS OF 130 PERCENT OF DIRECT LABOR CHARGES) INCURRED BY THE CONTRACTOR IN REDELIVERING THE PROPERTY TO THE GOVERNMENT. EXCEPTIONS WERE TAKEN BY THE GENERAL ACCOUNTING OFFICE TO THAT PART OF THE PAYMENTS RELATING TO OVERHEAD, AGGREGATING THE AMOUNT OF $28,579.09, FOR THE REASON, AS STATED THEREIN, THAT THE LABOR INVOLVED IN PLANT CLEARANCE COULD NOT PROPERLY BE CONSIDERED AS DIRECTLY EMPLOYED IN THE PERFORMANCE OF THE CONTRACT SO AS TO AUTHORIZE THE INCLUSION OF THE OVERHEAD CHARGES PROVIDED FOR IN SUBPARAGRAPH (K) (I) OF SECTION D OF THE CONTRACT, AND THAT THE ENTIRE ITEM OF EXPENSE PROPERLY CAME UNDER SUBPARAGRAPH (C) OF THAT SECTION, TO WHICH OVERHEAD COULD NOT BE PRORATED. IN RESPONDING TO NAVY'S REPLY TO THE EXCEPTION TAKEN TO THE PAYMENT MADE ON D.O. VOUCHER 109955, IT WAS STATED THAT THIS POSITION WAS CONSIDERED TO BE CORRECT "PARTICULARLY IN VIEW OF THE FACT THAT SUBSTANTIALLY ALL OF THE EQUIPMENT INVOLVED WAS NOT ACQUIRED UNDER SUBJECT CONTRACT BUT FURNISHED UNDER THE TERMS OF PLANCOR 203 OF DEFENSE PLANT CORPORATION IN 1941 (LATER TRANSFERRED TO THE NAVY DEPARTMENT) UNDER AGREEMENT WHEREBY OVERHEAD WAS NOT APPLICABLE TO COST OF ARRANGEMENT OR REMOVAL THEREOF.'

THE AGREEMENT OF LEASE DATED AUGUST 18, 1941 (REFERRED TO ABOVE AS PLANCOR 203), AS AMENDED BY LETTER DATED JANUARY 8, 1948, FROM THE RECONSTRUCTION FINANCE CORPORATION TO CHRYSLER CORPORATION, EXPIRED BY ITS TERMS ON FEBRUARY 29, 1948, AND IT WOULD NOT, IN ANY EVENT, HAVE ENTITLED THE GOVERNMENT TO HAVE THE CONTRACTOR PACK AND PREPARE THE EQUIPMENT FOR SHIPMENT AND MAKE DELIVERY TO THE GOVERNMENT, AS WAS DONE HERE. UNDER ITS TERMS, THE CONTRACTOR WAS SIMPLY REQUIRED, UPON EXPIRATION, TERMINATION OR CANCELLATION OF THE LEASE, TO PLACE THE DEFENSE PLANT CORPORATION, OR ITS SUCCESSOR,"IN PEACEFUL POSSESSION OF" THE MACHINERY OR EQUIPMENT TO BE PROVIDED THEREUNDER. THE DEFENSE PLANT CORPORATION WAS GIVEN THE "RIGHT TO REMOVE" THE MACHINERY OR EQUIPMENT, AND THE AGREEMENT OF LEASE PROVIDED, MORE SIGNIFICANTLY, THAT THE DEFENSE PLANT CORPORATION "SHALL," UPON THE WRITTEN REQUEST OF THE CONTRACTOR,"PROMPTLY REMOVE, AT ITS OWN EXPENSE, SUCH MACHINERY.' HENCE, THE GOVERNMENT MAY NOT BE SAID TO HAVE ACQUIRED THE RIGHT TO OBTAIN THE SERVICES HERE INVOLVED WITHOUT BEING REQUIRED TO BEAR ANY OF THE CONTRACTOR'S OVERHEAD COSTS AS A RESULT OF THE SAVING PROVISION CONTAINED IN ARTICLE 1 OF PERMIT NOA-5046, QUOTED HEREINABOVE. THE RIGHTS OF THE PARTIES MUST, THEREFORE, BE DETERMINED STRICTLY IN ACCORDANCE WITH THE PROVISIONS OF SECTION D OF CONTRACT NOA/S/ -7143, AS CONTEMPLATED BY ARTICLE 7 OF THE PERMIT, QUOTED HEREINABOVE.

IN OUR OPINION, IT MAKES NO DIFFERENCE, INSOFAR AS DETERMINING THE RIGHTS OF THE PARTIES IS CONCERNED, WHETHER THE EQUIPMENT HERE INVOLVED CAME WITHIN THE CATEGORY OF SPECIAL TOOLS, DIES, JIGS, ETC., AS REFERRED TO IN SUBPARAGRAPH (C) OF SECTION D, ABOVE, OR WHETHER, AS CONTENDED BY THE CONTRACTOR, IT WAS COMPRISED LARGELY OF STANDARD MACHINES, MOTORS, PARTS, OR OTHER TYPES OF STANDARD PROPERTY CAPABLE OF BEING USED ON ANY NUMBER OF JOBS, WHICH DO NOT COME WITHIN THIS CATEGORY. IT CONSTITUTED GOVERNMENT- FURNISHED MATERIAL AND EQUIPMENT WHICH, UNDER THE TERMS OF SECTION 6 OF THE GENERAL PROVISIONS OF THE CONTRACT, SUPRA, WAS REQUIRED TO BE DELIVERED TO THE GOVERNMENT FOLLOWING COMPLETION OR TERMINATION OF THE CONTRACT. ALSO, UNDER THE TERMS OF ARTICLE 9 (C) OF THE PERMIT, SUPRA, THE CONTRACTOR WAS REQUIRED TO PREPARE THE LEASED EQUIPMENT FOR SHIPMENT AS DIRECTED BY THE DEPARTMENT OF THE NAVY PREPARATORY TO DELIVERY THEREOF TO THE GOVERNMENT, AND ARTICLE 7 OF THE PERMIT PROVIDED, IN EFFECT, THAT THE CONTRACTOR WAS TO BE REIMBURSED FOR THE EXPENSES INCIDENT TO COMPLYING WITH THIS PROVISION "UNDER CONTRACT NOA/S/-7143 IN ACCORDANCE WITH THE PROVISIONS OF SECTION D THEREOF ENTITLED "COMPENSATION.'"

IT WOULD BE UNREALISTIC TO ASSUME THAT THE PARTIES ATTACHED A MEANING TO THE TERM "COST," AS USED IN SUBPARAGRAPH (C) OF SECTION D OF THE CONTRACT, WHICH WOULD BE INCONSISTENT WITH THE GENERAL DEFINITION OF "ALLOWABLE COSTS" CONTAINED IN THAT SECTION. AS INDICATED ABOVE, ,ALLOWABLE COSTS" WERE THEREIN DEFINED AS INCLUDING AN AMOUNT FOR OVERHEAD REPRESENTING 130 PERCENT OF THAT PART OF THE SALARIES AND WAGES COVERED BY SUBPARAGRAPH (B) OF THE SECTION AS WERE INCURRED IN THE CONTRACTOR'S ENGINEERING PLANT. THE SALARIES AND WAGES COVERED BY SUBPARAGRAPH (B) WERE THOSE PAID TO SCIENTISTS, ENGINEERS, TECHNICIANS, DRAFTSMEN AND WORKMEN DIRECTLY EMPLOYED IN THE PERFORMANCE OF THE CONTRACT.

THE SALARIES AND WAGES CHARGED AS A PART OF THE DIRECT COSTS OF RETURNING THE EQUIPMENT INVOLVED TO THE GOVERNMENT ARE STATED TO HAVE BEEN THOSE RELATED TO THE CONTRACTOR'S ENGINEERING DIVISION AND NO QUESTION HAS BEEN RAISED WITH RESPECT TO THE CONTRACTOR'S RIGHT TO REIMBURSEMENT OF SUCH DIRECT COSTS, THE ONLY QUESTION BEING WHETHER THE OVERHEAD FACTOR IS PROPERLY APPLICABLE THERETO. IN OUR OPINION, THIS QUESTION MUST BE ANSWERED IN THE AFFIRMATIVE SINCE RETURN OF THE PROPERTY INVOLVED TO THE GOVERNMENT WAS A RESPONSIBILITY OF THE CONTRACTOR UNDER THE TERMS OF THE CONTRACT.

ACCORDINGLY, THE VOUCHERS, TOGETHER WITH SUPPORTING PAPERS, ARE RETURNED HEREWITH, AND YOU ARE ADVISED THAT PAYMENT THEREON IS AUTHORIZED, IF OTHERWISE CORRECT.