B-146588, AUG. 23, 1961

B-146588: Aug 23, 1961

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ONE OF THE AIRCRAFT CRASHED AND WAS TOTALLY DESTROYED. 695 AS REIMBURSEMENT OF THE LOSS OF THE AIRCRAFT AND THE VOUCHER WAS PRESENTED TO YOU FOR PAYMENT. YOU HAVE DOUBTS AS TO WHETHER THE DEPARTMENT OF THE ARMY IS LIABLE FOR THE AMOUNT BILLED FOR THE REASONS HEREINAFTER STATED AND REQUEST OUR DECISION THEREON. THE LOAN AGREEMENT WAS TERMINATED BY SUPPLEMENTAL AGREEMENT NO. 3. SAID AGREEMENT IS HEREBY TERMINATED AND THE PROPERTY IS DISPOSED OF AS FOLLOWS: "A. SERIAL NO. 51-11638 WAS TRANSFERRED TO THE DEPARTMENT OF THE ARMY VIA FORM 1149'S ON A "WHERE IS AS IS" BASIS WITHOUT REIMBURSEMENT. SERIAL NO. 51-11687A CRASHED AND IS HEREBY DELETED.'. WE ARE OF THE VIEW THAT BECAUSE THE AIR FORCE BILLED THE ORDNANCE CORPS FOR THE LOSS OF THE AIRCRAFT APPROXIMATELY TEN MONTHS PRIOR TO THE DATE OF SAID SUPPLEMENTAL AGREEMENT.

B-146588, AUG. 23, 1961

TO FINANCE AND ACCOUNTING OFFICER, DEPARTMENT OF THE ARMY:

YOUR LETTER OF APRIL 18, 1961, TRANSMITTED HERE BY THE DEPUTY CHIEF, FIELD DIVISION, OFFICE OF THE CHIEF OF FINANCE, AUGUST 3, 1961, REFERENCE FINXE-B REIMBURSEMENT TO AIR FORCE FOR DEMOLISHED AIRCRAFT C 45H, REQUESTS AN ADVANCE DECISION AS TO THE PROPRIETY OF PAYMENT OF A VOUCHER TRANSMITTED THEREWITH IN FAVOR OF THE AIR FORCE.

ON AUGUST 8, 1956, THE DEPARTMENT OF THE AIR FORCE AND THE DEPARTMENT OF THE ARMY ENTERED INTO AN INTERDEPARTMENTAL AGREEMENT UNDER AUTHORITY OF SECTION 601 OF THE ECONOMY ACT OF JUNE 30, 1932, AS AMENDED, 31 U.S.C. 686, FOR THE LOAN BY THE AIR FORCE OF TWO AIRCRAFT TO THE ARMY ORDNANCE CORPS. ARTICLE 5 OF THE AGREEMENT PROVIDED:

"SUBJECT TO THE AVAILABILITY OF FUNDS, ORDNANCE SHALL BE LIABLE TO THE AIR FORCE FOR ANY DAMAGE TO, OR LOSS OR DESTRUCTION OF, THE LOANED PROPERTY RESULTING FROM ANY CAUSE WHATSOEVER. IN THE EVENT OF SUBSTANTIAL DESTRUCTION, ORDNANCE SHALL REIMBURSE THE AIR FORCE FOR THE LOSS OF THE PROPERTY LOANED HEREUNDER.'

ONE OF THE AIRCRAFT CRASHED AND WAS TOTALLY DESTROYED. ON MARCH 8, 1960, THE DEPARTMENT OF THE AIR FORCE BILLED THE DEPARTMENT OF THE ARMY FOR $52,695 AS REIMBURSEMENT OF THE LOSS OF THE AIRCRAFT AND THE VOUCHER WAS PRESENTED TO YOU FOR PAYMENT. HOWEVER, YOU HAVE DOUBTS AS TO WHETHER THE DEPARTMENT OF THE ARMY IS LIABLE FOR THE AMOUNT BILLED FOR THE REASONS HEREINAFTER STATED AND REQUEST OUR DECISION THEREON.

THE LOAN AGREEMENT WAS TERMINATED BY SUPPLEMENTAL AGREEMENT NO. 3, OF JANUARY 11, 1961, WHICH PROVIDES IN PERTINENT PART AS FOLLOWS:

"1. PURSUANT TO CLAUSE VI OF THE AGREEMENT, SAID AGREEMENT IS HEREBY TERMINATED AND THE PROPERTY IS DISPOSED OF AS FOLLOWS:

"A. ONE (1) C-45G AIRCRAFT, SERIAL NO. 51-11638 WAS TRANSFERRED TO THE DEPARTMENT OF THE ARMY VIA FORM 1149'S ON A "WHERE IS AS IS" BASIS WITHOUT REIMBURSEMENT.

"B. ONE (1) C-45H AIRCRAFT, SERIAL NO. 51-11687A CRASHED AND IS HEREBY DELETED.'

YOU STATE THAT THE "LIABILITY OF ORDNANCE CORPS APPEARS QUESTIONABLE IN VIEW OF THE PROVISIONS OF SUPPLEMENTAL AGREEMENT NO. 3.' ALSO, YOU QUESTION THE AUTHORITY OF THE CONTRACTING OFFICER TO ENTER INTO AN AGREEMENT TO PROVIDE FOR REIMBURSEMENT IN THE EVENT OF A LOSS SUCH AS HERE INVOLVED, CITING DECISION OF THIS OFFICE PUBLISHED IN 25 COMP. GEN. 322.

IN REGARD TO THE EFFECT OF SUPPLEMENTAL AGREEMENT NO. 3, WE ARE OF THE VIEW THAT BECAUSE THE AIR FORCE BILLED THE ORDNANCE CORPS FOR THE LOSS OF THE AIRCRAFT APPROXIMATELY TEN MONTHS PRIOR TO THE DATE OF SAID SUPPLEMENTAL AGREEMENT, THE DELETION OF THE AIRCRAFT RELATED TO THE INSTRUCTIONS FOR DISPOSITION AS CONTEMPLATED BY ARTICLE VI OF THE BASIC AGREEMENT AND WAS NOT INTENDED TO AFFECT THE LIABILITY FOR THE LOSS THEREOF.

CONCERNING THE AUTHORITY OF THE CONTRACTING OFFICER TO ENTER INTO THE BASIC AGREEMENT PROVIDING FOR REIMBURSEMENT IN THE EVENT OF LOSS, THE GENERAL RULE APPLIED IN THE DECISION CITED BY YOU, 25 COMP. GEN. 322, THAT A LOANING AGENCY IS NOT ENTITLED TO CHARGE FOR THE USE OR DEPRECIATION OF PROPERTY OR TO HAVE LOST PROPERTY REPLACED OR DAMAGED PROPERTY REPAIRED BY THE BORROWING AGENCY, IS NOT FOR APPLICATION IN THE INSTANT CASE. IT WAS HELD IN 30 COMP. GEN. 295, THAT SINCE THE PROVISIONS OF 31 U.S.C. 686, AUTHORIZING AND REQUIRING PAYMENT FOR PERSONAL PROPERTY TRANSFERRED FROM ONE AGENCY TO ANOTHER ON A PERMANENT BASIS LIKEWISE SANCTIONS SIMILAR TRANSACTIONS ON A TEMPORARY LOAN BASIS, THE RULE PROHIBITING REPLACEMENTS OF OR REPAIRS TO PROPERTY GENERALLY, NO LONGER APPLIES TO LOANS OF PERSONAL PROPERTY AS BETWEEN GOVERNMENT AGENCIES WHEN THE LOAN AGREEMENT PROVIDES THAT THE BORROWING AGENCY MUST RETURN THE PROPERTY IN AS GOOD CONDITION AS WHEN LOANED AND THAT THE EXPENSE OF PLACING THE PROPERTY IN SUCH CONDITION WOULD BE BORNE BY THAT AGENCY, SUBJECT, OF COURSE, TO THE AVAILABILITY OF ITS APPROPRIATIONS. SINCE THE BASIC LOAN AGREEMENT WAS ENTERED INTO UNDER AUTHORITY OF 31 U.S.C. 686, THE ACTION OF THE CONTRACTING OFFICER CANNOT BE SAID TO BE IMPROPER IN INCLUDING THE PROVISIONS FOR REIMBURSEMENT IN THE EVENT OF LOSS. WHILE IT IS STATED IN YOUR LETTER THAT NO FUNDS ARE AVAILABLE FOR THE DISCHARGE OF THE OBLIGATION, WE NOTE THAT BY 1ST INDORSEMENT, HEADQUARTERS, DEPARTMENT OF THE ARMY, CHIEF OF ORDNANCE, DATED JULY 17, 1961, THE CHIEF OF FINANCE WAS ADVISED THAT FUNDS, ALTHOUGH NOT AVAILABLE AT BIRMINGHAM ORDNANCE DISTRICT, ARE AVAILABLE AT HIGHER ECHELONS FOR PAYMENT OF THE SUBJECT BILL.

IN ADDITION TO YOUR QUESTIONS AS TO THE LIABILITY OF THE ORDNANCE CORPS FOR THE LOSS OF THE AIRCRAFT, YOU REQUEST TO BE ADVISED WHETHER THE VALUE OF THE AIRCRAFT SHOULD BE ITS ACQUISITION VALUE OR THE VALUE OF SIMILAR AIRCRAFT BEING DISPOSED OF AS SURPLUS PROPERTY. THE ENCLOSURES WITH YOUR LETTER INDICATE THAT THE AIR FORCE IS CURRENTLY DISPOSING OF C-45 AIRCRAFT AS BEING SURPLUS TO AIR FORCE NEEDS, AND THAT A MINIMUM BID OF $3,500 IS PROVIDED IN THE AIR FORCE ADVERTISEMENT OF LIKE AIRCRAFT FOR SALE AS SURPLUS PROPERTY. THE BILLING BY THE AIR FORCE OF $52,695 WAS BASED UPON THE MONETARY VALUE OF THE FRAME $37,330, ENGINE $11,170, PROPS $2,001, ELECTRONICS $2,995, FOR A TOTAL OF $53,496, LESS SALVAGE OF $801. WHILE THE AMOUNT OF THE BILLING APPEARS EXCESSIVE IN VIEW OF THE CURRENT DISPOSAL PROGRAM, THE EXTENT OF THE LIABILITY IS PRIMARILY A MATTER FOR ADJUSTMENT AND SETTLEMENT BETWEEN THE ORDNANCE CORPS AND THE AIR FORCE.

THE VOUCHER AND ENCLOSURES ARE RETURNED HEREWITH, WITH THE ADVICE THAT THERE IS PERCEIVED NO LEGAL BASIS FOR OBJECTION TO PAYMENT.