B-1507, APRIL 10, 1939, 18 COMP. GEN. 777

B-1507: Apr 10, 1939

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- THAT IS. 1939: THERE WAS RECEIVED YOUR LETTER OF FEBRUARY 8. NET RATES ARE STATED IN FRACTIONS AS LOW AS ONE TEN THOUSANDTH OF A CENT. A CERTAIN RATE WAS QUOTED BY WIRE. THE WRITTEN CONFIRMATION SHOWED A DIFFERENCE OF ONE TEN-THOUSANDTH OF A CENT PER HUNDRED POUNDS AND THE APPLICANT FOR THE INFORMATION MADE FURTHER INQUIRY BY WIRE AS TO WHICH RATE WAS CORRECT. IN THIS INSTANCE THE TOTAL DIFFERENCE ON AS MUCH AS ONE MILLION POUNDS WOULD HAVE AMOUNTED TO ONLY TEN CENTS. IT IS PROPOSED THAT A DISPOSITION OF FRACTIONS RULE BE ESTABLISHED UNDER WHICH LAND-GRANT RATES WILL BE STATED IN WHOLE OR HALF CENTS ONLY. THIS DEPARTMENT IS OF THE OPINION THAT SHOULD THE AUTHORIZATION OF SOME SUCH SIMPLIFIED BASIS FOR CALCULATING NET RATES BE AUTHORIZED IT WOULD RESULT IN LITTLE.

B-1507, APRIL 10, 1939, 18 COMP. GEN. 777

TRANSPORTATION - LAND-GRANT DEDUCTIONS - FRACTIONAL CENT COMPUTATIONS CHARGES FOR TRANSPORTATION OF GOVERNMENT PROPERTY, ETC., OVER LAND GRANT ROADS SHOULD BE THOSE OBTAINED BY THE USE OF NET LAND-GRANT RATES COMPUTED IN ACCORDANCE WITH THE PRESENT LONG-STANDING PRACTICE--- THAT IS, ON THE BASIS OF NET RATES FIGURED TO THE THIRD DECIMAL POINT OF CENTS PER HUNDRED POUNDS OR PER TON--- AND NOT, AS ADMINISTRATIVELY PROPOSED, ON THE BASIS OF THE DISPOSITION OF FRACTIONS BY THE DROPPING OF A FRACTION LESS THAN 0.25 CENT; BY CONSIDERING THE FRACTION AS 1/2 CENT FOR FRACTIONS OF 0.25 TO 0.74 CENT, INCLUSIVE; AND BY INCREASING TO THE NEXT WHOLE CENT FRACTIONS OF 0.75 CENT AND HIGHER.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF THE TREASURY, APRIL 10, 1939:

THERE WAS RECEIVED YOUR LETTER OF FEBRUARY 8, 1939, AS FOLLOWS:

IN THE COMPUTATION OF NET LAND-GRANT RATES IT HAS BEEN THE PRACTICE OF ALL GOVERNMENT AGENCIES TO EXTEND THE RATES PER HUNDRED POUNDS OR PER TON, AS THE CASE MAY BE, FIVE PLACES BEYOND THE DECIMAL POINT. IN OTHER WORDS, NET RATES ARE STATED IN FRACTIONS AS LOW AS ONE TEN THOUSANDTH OF A CENT. IN EFFECT, THE RECOGNITION OF SUCH SMALL FRACTIONS MERELY SERVES TO MAGNIFY THE DETAIL OF COMPUTATION TO UNWIELDY PROPOSITIONS. IT DOES NOT ATTAIN GREATER PRACTICAL ACCURACY BUT FREQUENTLY DOES RESULT IN EXTENDED CORRESPONDENCE HAVING AS ITS OBJECT THE RECONCILIATION OF EXTREMELY SMALL DIFFERENCES IN THE TOTAL COST.

TO ILLUSTRATE THE RESULT OF THIS PRACTICE, IN RESPONSE TO A TELEGRAPHIC REQUEST, A CERTAIN RATE WAS QUOTED BY WIRE. THE WRITTEN CONFIRMATION SHOWED A DIFFERENCE OF ONE TEN-THOUSANDTH OF A CENT PER HUNDRED POUNDS AND THE APPLICANT FOR THE INFORMATION MADE FURTHER INQUIRY BY WIRE AS TO WHICH RATE WAS CORRECT. IN THIS INSTANCE THE TOTAL DIFFERENCE ON AS MUCH AS ONE MILLION POUNDS WOULD HAVE AMOUNTED TO ONLY TEN CENTS.

IN THE INTEREST OF SIMPLIFYING AND THEREFORE EXPEDITING THE COMPUTATION OF LAND-GRANT RATES, AND ALSO TOWARD ELIMINATING AVOIDABLE CORRESPONDENCE, IT IS PROPOSED THAT A DISPOSITION OF FRACTIONS RULE BE ESTABLISHED UNDER WHICH LAND-GRANT RATES WILL BE STATED IN WHOLE OR HALF CENTS ONLY, ON THE FOLLOWING BASIS: SHOULD A NET RATE WORK OUT TO A FRACTION OF LESS THAN 0.25 OF A CENT THE FRACTION WOULD BE OMITTED,FRACTIONS OF 0.25 TO 0.74 OF A CENT, INCLUSIVE, WOULD BE STATED AS 1/2 CENT, AND FRACTIONS OF 0.75 AND HIGHER WOULD BE INCREASED TO THE NEXT WHOLE CENT. THIS DEPARTMENT IS OF THE OPINION THAT SHOULD THE AUTHORIZATION OF SOME SUCH SIMPLIFIED BASIS FOR CALCULATING NET RATES BE AUTHORIZED IT WOULD RESULT IN LITTLE, IF ANY, DIFFERENCE IN THE TOTAL COST OF TRANSPORTATION TO THE GOVERNMENT BUT WOULD EFFECT SUBSTANTIAL REDUCTIONS IN ADMINISTRATIVE COSTS. IF THE DROPPING OF ALL FRACTIONS OF LESS THAN 1/2 CENT AND THE CONVERSION INTO THE NEXT WHOLE CENT OF ALL FRACTIONS OF 1/2 CENT OR OVER IS ACCEPTABLE AS A PRACTICE IT WOULD FURTHER IMPROVE THE BENEFITS SUGGESTED BY THIS PROPOSAL.

CONSIDERATION OF THE ABOVE PROPOSAL IS ACCORDINGLY REQUESTED.

WHILE THE ADOPTION OF THE PROPOSED RULE FOR THE DISPOSITION OF FRACTIONS TO BE APPLIED TO THE FINAL RESULTS OBTAINED FROM THE APPLICATION OF DIVISIONS AND LAND-GRANT DEDUCTIONS TO COMMERCIAL RATES PROBABLY WOULD CONTRIBUTE TO SIMPLICITY OF OPERATION IN THE COMPUTATION OF CHARGES, IT IS CLEAR THAT IN SOME INSTANCES AT LEAST THE RESULTS WOULD BE QUITE DIFFERENT FROM THOSE OBTAINED ON THE BASIS OF THE PRESENT PRACTICE--- EMPLOYED BY BOTH THE CARRIERS AND THE GOVERNMENT FOR MANY YEARS--- OF USING NET RATES FIGURED TO THE THIRD DECIMAL POINT OF CENTS PER HUNDRED POUNDS OR PER TON.

AS ILLUSTRATIVE OF THE MATTER THERE MAY BE CONSIDERED THE FOLLOWING SITUATION REFLECTED IN THE FILES OF THIS OFFICE. THE GOVERNMENT CONTRACTED FOR THE PURCHASE OF 335,000 BARRELS OF PORTLAND CEMENT F.O.B. A GIVEN SHIPPING POINT, X, FOR TRANSPORTATION THENCE TO A GIVEN DESTINATION, Y, THE NET RATES BETWEEN THE TWO POINTS BEING 22.75 CENTS PER HUNDRED POUNDS. UNDER THE PROPOSED RULE THE NET RATE WOULD HAVE BEEN 23 CENTS PER HUNDRED POUNDS. THE WEIGHT OF THE CEMENT, COMPUTED ON THE BASIS OF 4 BAGS TO THE BARREL AND 96 POUNDS TO THE BAG, WAS 128,640,000 POUNDS. THE DIFFERENCE IN THE AGGREGATE FREIGHT CHARGES ARISING THROUGH THE USE OF THE ABOVE NET RATES WOULD BE CONSIDERABLE, AS SHOWN BY THE FOLLOWING COMPUTATION:

CHART 128,640,000 LBS. AT 23 CENTS PER CWT. OR ------------------ $295,872.00 128,640,000 LBS. AT 22.75 CENTS PER CWT. OR -------------- 292,656.00 DIFFERENCE IN FAVOR OF THE CARRIER IF THE PROPOSED RULE

HAD BEEN FOR APPLICATION ------------------------------- 3,216.00

IT IS EVIDENT FROM THIS ILLUSTRATION THAT THE RESULT IN THIS INSTANCE MATERIALLY INCREASES THE LIABILITY OF THE GOVERNMENT. ALSO, IF THE FRACTIONAL DISPOSITION IN ANOTHER INSTANCE SHOULD PRODUCE A CONVERSE RESULT, IT IS AT LEAST DOUBTFUL WHETHER THE CARRIER WOULD ACQUIESCE IN THE CHANGED METHOD OF COMPUTATION. FURTHERMORE, THE ABOVE ILLUSTRATION RELATES TO A JOINT LINE MOVEMENT AND IT IS UNDERSTOOD THAT, IN APPORTIONING REVENUE BETWEEN ITSELF AND CONNECTING LINES, THE DELIVERING CARRIER ORDINARILY MAKES AN INTERLINE SETTLEMENT BY DIVIDING THE REVENUE RATHER THAN THE RATE, SO THAT, UNLESS NET RATES ARE EXTENDED SUFFICIENTLY AND THE FRACTIONS OBSERVED, THERE ARE LIKELY TO OCCUR DISCREPANCIES BETWEEN THE AMOUNTS CONSIDERED BY THE CARRIERS TO BE DUE FOR SERVICES RENDERED, AND THE AMOUNTS TENDERED BY THE GOVERNMENT IN PAYMENT THEREON.

THERE IS FOR CONSIDERATION, ALSO, THE FACT THAT FREQUENTLY THE QUESTION OF THE NET RATE EMPLOYED WILL AFFECT THE LIABILITY OF A CONTRACTOR BY REASON OF ADJUSTMENT FOR TRANSPORTATION CHARGES ON SUPPLIES AND MATERIALS FURNISHED THE GOVERNMENT; AND WHILE IT MIGHT BE THAT, AS BETWEEN THE GOVERNMENT AND THE CARRIERS, THE VARIATIONS IN CHARGES ARISING UNDER THE PROPOSED RULE WOULD BE MORE OR LESS MUTUALLY COMPENSATING AS APPLIED OVER ANY CONSIDERABLE PERIOD OF TIME, DUE TO THE INCREASE IN CHARGES IN SOME INSTANCES, IT IS DOUBTFUL THAT A SIMILAR SITUATION WOULD OCCUR, AS A GENERAL PROPOSITION, WITH RESPECT TO INDIVIDUAL CONTRACTORS FURNISHING THE GOVERNMENT WITH MATERIALS AND SUPPLIES.

MOREOVER, IT IS TO BE OBSERVED THAT THE RESULTS OBTAINED THROUGH THE USE OF NET RATES COMPUTED IN ACCORDANCE WITH THE PRESENT PRACTICE WOULD SEEM MORE NEARLY TO CONFORM TO THE PROVISIONS OF THE STATUTES RELATING TO PAYMENT OF CHARGES FOR TRANSPORTATION OVER LAND-GRANT ROADS THAN WOULD BE THE CASE UNDER THE PROPOSED RULE FOR DISPOSITION OF FRACTIONS. THE ACT OF JUNE 7, 1924, 43 STAT. 486, PROVIDES:

THAT HEREAFTER PAYMENT SHALL BE MADE AT SUCH RATES AS THE SECRETARY OF WAR SHALL DEEM JUST AND REASONABLE AND SHALL NOT EXCEED 50 PERCENTUM OF THE FULL AMOUNT OF COMPENSATION, COMPUTED ON THE BASIS OF THE TARIFF OR LOWER SPECIAL RATES FOR LIKE TRANSPORTATION PERFORMED FOR THE PUBLIC AT LARGE, FOR THE TRANSPORTATION OF PROPERTY OR TROOPS OF THE UNITED STATES OVER ANY RAILROAD WHICH UNDER LAND-GRANT ACTS WAS AIDED IN ITS CONSTRUCTION BY A GRANT OF LAND ON CONDITION THAT THE SAID RAILROAD SHALL BE AND REMAIN A PUBLIC HIGHWAY FOR THE USE OF THE UNITED STATES, AND FOR WHICH ADJUSTMENT OF COMPENSATION IS REQUIRED IN ACCORDANCE WITH DECISIONS OF THE SUPREME COURT CONSTRUING SUCH LAND GRANT ACTS, OR OVER ANY RAILROAD WHICH WAS AIDED IN ITS CONSTRUCTION BY A GRANT OF LAND ON CONDITION THAT SUCH RAILROAD SHOULD BE A POST ROUTE AND MILITARY ROAD, SUBJECT TO SUCH REGULATIONS AS CONGRESS MAY IMPOSE RESTRICTING THE CHARGE FOR SUCH GOVERNMENT TRANSPORTATION, AND SUCH PAYMENT SHALL BE ACCEPTED AS IN FULL FOR ALL DEMANDS FOR SUCH SERVICE.

IT IS OBVIOUS THAT IN MANY INSTANCES THE CHARGES, PARTICULARLY WITH RESPECT TO SHIPMENTS OF GREAT WEIGHT, WOULD MUCH MORE NEARLY APPROXIMATE THE 50-PERCENT LIMITATION PRESCRIBED ABOVE IF COMPUTED ON THE BASIS OF NET RATES FIGURED TO THE THIRD DECIMAL POINT OF CENTS PER HUNDRED POUNDS OR PER TON, AS UNDER THE PRESENT PRACTICE, THAN WOULD BE THE CASE IF FIGURED ON THE BASIS OF THE PROPOSED RULE FOR DISPOSITION OF FRACTIONS.

IN VIEW OF THE MATTERS NOTED IT DOES NOT APPEAR THAT THE CHANGE SUGGESTED, INVOLVING THE ADOPTION OF AN ARBITRARY RULE CONTRARY TO THE PRACTICE THAT HAS MAINTAINED FOR SO MANY YEARS, WOULD BE WARRANTED, UNDER THE PRESENT CIRCUMSTANCES, EVEN THOUGH DESIGNED TO SIMPLIFY AND EXPEDITE COMPUTATION OF LAND-GRANT CHARGES.