B-149259, DEC. 7, 1962

B-149259: Dec 7, 1962

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INCORPORATED: REFERENCE IS MADE TO LETTER DATED SEPTEMBER 5. IT IS STATED IN YOUR COUNSEL'S LETTER THAT: "* * * AERODEX. IS PERFECTLY WILLING FOR APPROPRIATE REPRESENTATIVES OF THE GENERAL ACCOUNTING OFFICE TO EXAMINE AND AUDIT ALL RECORDS OF THE CONTRACTOR DIRECTLY PERTINENT TO THE CONTRACT AS MAY BE REQUIRED UNDER PARAGRAPH 10 OF THE GENERAL PROVISIONS OF THE CONTRACTS IN QUESTION (STANDARD FORM 33) INSERTED UNDER THE PROVISIONS OF 10 U.S.C. SEC. 2313 (B) AND THE ADDITIONAL GENERAL PROVISIONS OF THE CONTRACT RELATING TO EXAMINATION OF RECORDS OF COSTS AND EXPENSES FOR WHICH REIMBURSEMENT IS CLAIMED. THE CONTRACTOR IS OF THE OPINION THAT THE AFORESAID PROVISIONS DO NO (NOT) PERMIT YOU TO AUDIT AND EXAMINE RECORDS PERTAINING TO THE ORIGINAL COSTS OF PARTS AND MATERIAL ACQUIRED BY THE CONTRACTOR PRIOR TO THE CONTRACT AND SUPPLIED TO THE CONTRACT ON A FIXED PRICE BASIS UNDER THE TERMS OF THE CONTRACT.'.

B-149259, DEC. 7, 1962

TO AERODEX, INCORPORATED:

REFERENCE IS MADE TO LETTER DATED SEPTEMBER 5, 1962 (COPY ENCLOSED), RECEIVED FROM ROBERT V. SMITH, ESQUIRE, AS COUNSEL FOR YOUR FIRM, RELATING TO THE EXAMINATION OF AERODEX RECORDS PERTAINING TO THE PERFORMANCE OF CERTAIN CONTRACTS NEGOTIATED WITH THE UNITED STATES ARMY TRANSPORTATION MATERIAL COMMAND AS REQUESTED IN LETTER DATED APRIL 23, 1962, FROM OUR REGIONAL OFFICE MANAGER AT ATLANTA, GEORGIA.

IT IS STATED IN YOUR COUNSEL'S LETTER THAT:

"* * * AERODEX, INC. IS PERFECTLY WILLING FOR APPROPRIATE REPRESENTATIVES OF THE GENERAL ACCOUNTING OFFICE TO EXAMINE AND AUDIT ALL RECORDS OF THE CONTRACTOR DIRECTLY PERTINENT TO THE CONTRACT AS MAY BE REQUIRED UNDER PARAGRAPH 10 OF THE GENERAL PROVISIONS OF THE CONTRACTS IN QUESTION (STANDARD FORM 33) INSERTED UNDER THE PROVISIONS OF 10 U.S.C. SEC. 2313 (B) AND THE ADDITIONAL GENERAL PROVISIONS OF THE CONTRACT RELATING TO EXAMINATION OF RECORDS OF COSTS AND EXPENSES FOR WHICH REIMBURSEMENT IS CLAIMED, INSERTED UNDER THE PROVISIONS OF ASPR 7-203.7.

"HOWEVER, THE CONTRACTOR IS OF THE OPINION THAT THE AFORESAID PROVISIONS DO NO (NOT) PERMIT YOU TO AUDIT AND EXAMINE RECORDS PERTAINING TO THE ORIGINAL COSTS OF PARTS AND MATERIAL ACQUIRED BY THE CONTRACTOR PRIOR TO THE CONTRACT AND SUPPLIED TO THE CONTRACT ON A FIXED PRICE BASIS UNDER THE TERMS OF THE CONTRACT.'

THE THEORY ON WHICH THE STATED OPINION IS BASED IS SET OUT IN SOME DETAIL IN THE LETTER, ALL OF WHICH WAS DISCUSSED AT LENGTH DURING A CONFERENCE BETWEEN MR. SMITH AND REPRESENTATIVES OF OUR OFFICE ON JULY 17, 1962. DURING THIS CONFERENCE MR. SMITH WAS FULLY INFORMED THAT IT IS OUR POSITION, WHICH WE BELIEVE IS CONSISTENT WITH THE PROVISIONS OF THE STATUTE AND THE CONTRACTS, THAT ALL BOOKS, DOCUMENTS, PAPERS AND OTHER RECORDS RELATING TO THE PRICING AND COST OF PERFORMANCE OF NEGOTIATED CONTRACTS ARE RECORDS RELATING DIRECTLY TO THE CONTRACTS; THAT SUCH BOOKS, DOCUMENTS, PAPERS AND OTHER RECORDS ARE NOT RESTRICTED TO FORMAL COST ACCOUNTING RECORDS AND THEIR SUPPORTING DATA, BUT EMBRACE ALL UNDERLYING DATA CONCERNING CONTRACT OPERATIONS AND PERFORMANCE WHICH INVOLVE IN ANY MANNER THE INCURRENCE OF COST BY THE CONTRACTOR; AND THAT THE LEGISLATIVE HISTORY OF THE APPLICABLE LEGISLATION (WHICH WAS REVIEWED WITH MR. SMITH AND THEREFORE NEED NOT BE REPEATED) AMPLY ESTABLISHES THAT ITS PURPOSE IS TO PROVIDE FOR ACCESS TO SUCH RECORDS UNDER NEGOTIATED CONTRACTS WITHOUT ANY LIMITATION AS TO WHETHER THEY ARE FIXED-PRICE OR COST-REIMBURSEMENT TYPE CONTRACTS OR CONTRACTS HAVING SOME ATTRIBUTES OF BOTH TYPES. ADHERE TO THESE VIEWS.

AS YOU ARE AWARE, REPRESENTATIVES OF OUR OFFICE PRESENTLY ARE ENGAGED IN THE REVIEW PROGRAMMED AT YOUR PLANT WHICH HAS BEEN EXPANDED TO INCLUDE AIR FORCE CONTRACTS. YOU ARE URGED TO FURNISH PROMPTLY SUCH RECORDS AS MAY BE REQUIRED AND REQUESTED BY THEM DURING THIS REVIEW. COMPLIANCE WITH THESE REQUESTS WILL SERVE TO MINIMIZE COSTLY DELAYS AND, OF COURSE, WILL FACILITATE EXPEDITIOUS COMPLETION OF THE EXAMINATION. WE THEREFORE TRUST THAT APPROPRIATE ARRANGEMENTS WILL CONTINUE TO BE MADE ON A MUTUALLY SATISFACTORY BASIS.

IT IS NOT WITHOUT SOME CONCERN, HOWEVER, THAT WE NOTE THE STATEMENT IN THE LAST PARAGRAPH OF MR. SMITH'S LETTER TO THE EFFECT THAT "THE CONTRACTOR HAS NO DESIRE TO OBSTRUCT THE PERFORMANCE OF YOUR (OUR) DUTIES ON BEHALF OF CONGRESS," BUT WITH THE SUGGESTION THAT IN THIS PARTICULAR CASE THIS "CAN BE ACCOMPLISHED BY MEANS OTHER THAN AN EXHAUSTIVE DETAILED EXAMINATION OF THE CONTRACTOR'S RECORDS.' EVERY EFFORT IS BEING MADE BY US TO ELIMINATE UNNECESSARY WORK IN THE REVIEW UNDERTAKEN. HOWEVER, THIS REVIEW MAY NOT BE ACCOMPLISHED BY OTHER MEANS.

IT IS THEREFORE REQUESTED THAT APPROPRIATE STEPS BE TAKEN BY YOU TO INSURE PROMPT ACCESS TO ALL THE RECORDS REQUIRED AND REQUESTED BY OUR REPRESENTATIVES.