B-151242, NOV. 10, 1964

B-151242: Nov 10, 1964

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OUR TRANSPORTATION DIVISION IS NOW AUDITING PAYMENTS RECEIVED BY CAPITOL FOR SERVICES PERFORMED UNDER THESE CONTRACTS AND HAS ASKED YOUR COMPANY TO REFUND OVERPAID AMOUNTS. CAPITOL GUARANTEES THAT ITS AIRCRAFT WILL HAVE A CERTAIN LIFT CAPACITY OF PASSENGERS OR CARGO. THE GOVERNMENT GUARANTEES THAT IT WILL GENERATE AN AMOUNT OF CARGO OR NUMBER OF PASSENGERS EQUAL TO THE GUARANTEED ACL. AF 11/626/-388 IS BY ITS TERMS A CALL AGREEMENT TO BE INCORPORATED INTO AND TO FORM A PART OF SERVICE ORDERS ISSUED BY THE CONTRACTING OFFICER. THE SERVICE ORDERS ARE AWARDED TO THE CARRIER AS A RESULT OF THE ACCEPTANCE BY MATS OF AN OFFER BY THE CARRIER IN RESPONSE TO REQUESTS FOR PROPOSALS ISSUED BY MATS UNDER THE CALL AGREEMENT.

B-151242, NOV. 10, 1964

TO CAPITAL AIRWAYS, INC.:

IN YOUR LETTER OF MARCH 11, 1964, YOU QUESTION THE PROPRIETY OF CERTAIN ADJUSTMENTS MADE BY OUR OFFICE IN PAYMENTS FOR OVERSEAS AIR TRANSPORTATION FURNISHED THE MILITARY AIR TRANSPORT SERVICE (MATS) BY CAPITOL AIRWAYS, INC. (CAPITOL), UNDER CONTRACTS NO. AF 11/626/-388 AND AF 11/626/-434.

THESE CONTRACTS COVERED THE OVERSEAS AIR TRANSPORTATION OF PLANELOAD LOTS OF PASSENGERS AND CARGO DURING FISCAL YEAR 1962 (CONTRACT NO. AF 11/626/- 388 AND FISCAL YEAR 1963 (CONTRACT NO. AF 11/626/-434. OUR TRANSPORTATION DIVISION IS NOW AUDITING PAYMENTS RECEIVED BY CAPITOL FOR SERVICES PERFORMED UNDER THESE CONTRACTS AND HAS ASKED YOUR COMPANY TO REFUND OVERPAID AMOUNTS. THE OVERPAYMENT DETERMINATIONS PROMPTED AN EXCHANGE OF CORRESPONDENCE BETWEEN CAPITOL AND OUR TRANSPORTATION DIVISION. YOU MENTION CERTAIN STATEMENTS MADE IN THE TRANSPORTATION DIVISION'S LETTERS OF DECEMBER 16, 1963, AND JANUARY 30, 1954, AS BEING IN CONFLICT.

THE CONTROVERSY IN THE PRESENT INSTANCES STEMS FROM THE APPLICATION OF THE SO-CALLED GUARANTEE PROVISIONS OF THE CONTRACTS. UNDER THESE PROVISIONS, CAPITOL GUARANTEES THAT ITS AIRCRAFT WILL HAVE A CERTAIN LIFT CAPACITY OF PASSENGERS OR CARGO, CALLED THE GUARANTEED AIRCRAFT CABIN LOAD (ACL), AND THE GOVERNMENT GUARANTEES THAT IT WILL GENERATE AN AMOUNT OF CARGO OR NUMBER OF PASSENGERS EQUAL TO THE GUARANTEED ACL.

THE TWO CONTRACTS CONTAIN SUBSTANTIALLY SIMILAR PROVISIONS AND THE PROVISIONS OF CONTRACT NO. AF 11/626/-388 MAY BE USED TO ILLUSTRATE THE SITUATION GIVING RISE TO THE OVERPAYMENTS. OUR CONCLUSIONS SHOULD THEREFORE BE EQUALLY APPLICABLE TO THE SITUATIONS SUBJECT TO THE PROVISIONS OF CONTRACT NO. AF 11/626/-434, OR ANY OTHER CONTRACT CONTAINING SIMILAR TERMS.

CONTRACT NO. AF 11/626/-388 IS BY ITS TERMS A CALL AGREEMENT TO BE INCORPORATED INTO AND TO FORM A PART OF SERVICE ORDERS ISSUED BY THE CONTRACTING OFFICER. THE SERVICE ORDERS ARE AWARDED TO THE CARRIER AS A RESULT OF THE ACCEPTANCE BY MATS OF AN OFFER BY THE CARRIER IN RESPONSE TO REQUESTS FOR PROPOSALS ISSUED BY MATS UNDER THE CALL AGREEMENT. THERE WERE 50 SERVICE ORDERS ISSUED UNDER THE PROVISIONS OF CONTRACT NO. AF 11/626/-388. THE DETAILS OF ONE TRIP, NO. 1473/10, OPERATED UNDER SERVICE ORDER NO. 35, WILL SERVE TO REPRESENT THE GENERAL SITUATION.

IN MARCH 1962, MATS ACCEPTED CAPITOL'S OFFER FOR THE TRANSPORTATION SERVICE SET FORTH IN REQUEST FOR PROPOSALS NO. 11-626-62-122 BY ISSUING SERVICE ORDER NO. 35. THE SERVICE ORDER SPECIFIED IN 6 ITEMS VARIOUS AIR TRANSPORTATION SERVICES TO BE PERFORMED DURING THE MONTH OF APRIL 1962. ITEM NO. 1 COVERED 100 TONS OF CARGO TO BE TRANSPORTED ONE WAY FROM TRAVIS AIR FORCE BASE, CALIFORNIA, TO BANGKOK, THAILAND, VIA (FOR ON-LOAD AND OFF -LOAD PURPOSES) HICKAM AIR FORCE BASE, HONOLULU, HAWAII; CLARK AIR FORCE BASE, PHILIPPINE ISLANDS; AND SAIGON, SOUTH VIET NAM. THE UNIT PRICE WAS $2,096.325 PER TON DELIVERED, THE TYPE OF AIRCRAFT WAS SHOWN AS "L-1049H" (A LOCKHEED CONSTELLATION), AND THE GUARANTEED ACL WAS 20 TONS (40,000 POUNDS). UNDER THESE TERMS, 5 TRIPS WOULD BE REQUIRED TO TRANSPORT THE 100 TONS OF CARGO SPECIFIED IN THE SERVICE ORDER.

TRIP NO. 1473/10 WAS 1 OF 5 TRIPS SCHEDULED BY THE PARTIES TO TRANSPORT THE CARGO SPECIFIED IN ITEM NO. 1 IN THE SERVICE ORDER. THE DETAILS OF ITS PERFORMANCE ARE RECORDED ON THE CIVIL AIR CERTIFICATE, MATS FORM 8, PREPARED FOR THIS TRIP. THE MATS FORM 8 IS DESCRIBED IN MATS MANUAL NO. 70-1 AS "A DOCUMENT FOR CERTIFYING TO THE TRANSPORTATION SERVICE RENDERED BY COMMERCIAL CARRIERS PURSUANT TO THE TERMS OF CONTRACTS FOR PLANELOAD LOTS.' AMONG OTHER THINGS, IT CONTAINS PERTINENT CONTRACT TERMS, INCLUDING THE GUARANTEED ACL SPECIFIED IN THE CONTRACT FOR THE PARTICULAR TRIP. IT ALSO CONTAINS A "REMARKS" SPACE WHICH IS FOR USE BY THE CONTRACT COORDINATOR (RESCON) TO EXPLAIN THE FACTUAL REASONS WHY THE DEPARTURE LOAD IS NOT THE SAME AS THE GUARANTEED ACL. THIS DOCUMENT, PREPARED FOR EACH TRIP (MATS MANUAL 70-1, SECTION D, PAR. 35) AND REQUIRED BY THE CONTRACT TO SUPPORT PAYMENT TO THE CARRIER (PART V OF THE CONTRACT), IS IMPORTANT BECAUSE, AMONG OTHER THINGS, IT CONTAINS PRIMA FACIE EVIDENCE OF THE PERFORMANCE OF A TRIP AND OF ANY FACTUAL VARIATIONS FROM THE DETAILS PROGRAMMED OR SCHEDULED FOR THAT TRIP.

A MATS FORM 8 WAS PREPARED FOR EACH OF THE 5 TRIPS ORDERED UNDER SERVICE ORDER NO. 35. ON EACH OF THE 5 TRIPS, THE FORM 8 SHOWS THAT IN NO CASE DID CAPITOL POSITION A PLANE AT TRAVIS HAVING THE GUARANTEED ACL. FOR EXAMPLE, THE FORM 8 ON TRIP NO. 1473/10 SHOWS THAT CAPITOL OFFERED 31,000 POUNDS ACL AT TRAVIS. THE PLANE LEFT TRAVIS WITH 30,451 POUNDS, AND MADE STOPS TO OFF-LOAD AND ON-LOAD CARGO AT HICKAM FIELD, WAKE ISLAND, GUAM, CLARK FIELD, AND SAIGON, CONSISTENT WITH THE TERMS OF THE SERVICE ORDER.

ON ITS BILL NO. M-757 CAPITOL COLLECTED $41,926.50 FOR THIS TRIP. THESE CHARGES RESULT FROM MULTIPLYING 20 TONS OF CARGO BY $2,096.325 PER TON, THE GUARANTEED ACL AND PRICE STATED IN ITEM NO. 1 OF SERVICE ORDER NO. 35. IN THE AUDIT OF THE PAID BILL, OUR TRANSPORTATION DIVISION DETERMINED THAT CAPITOL HAD BEEN OVERPAID $9,433.46 ON TRIP NO. 1473/10. THE BASIS OF THE OVERPAYMENT WAS STATED ON THE NOTICE OF OVERPAYMENT (USGAO FORM 1003) AS FOLLOWS:

"THE GUARANTEE OF THE PARTIES SET FORTH IN SERVICE ORDER NO. 35 (ITEM NUMBER 1) IS 20 TONS, HOWEVER THE MATS FORM 8 EXECUTED IN CONNECTION WITH TRIP CKA 1473/10 SHOWS AN OFFERED ACL OF ONLY 31,000 LBS., AND SINCE THE ACTUAL CARGO LOADED WAS NOT IN EXCESS THEREOF FROM POINT OF ORIGIN, OR ANY ENROUTE STATION, CHARGES ARE COMPUTED ON THE BASIS OF THE OFFERED ACL:

31,000 LBS. OR 15.5 TONS AT 2096.325 PER TON EQUALS $32,493.04"

IT IS CAPITOL'S POSITION, AS EXPLAINED IN YOUR MARCH 11 LETTER, THAT WHILE THE CARRIER DID NOT HAVE AVAILABLE AT TRAVIS, THE ORIGIN OF THE TRIP, A LIFT CAPACITY EQUALING THE GUARANTEED ACL, IT IS "INDISPUTABLE THAT THE FULL GUARANTEED PAYLOAD WAS OFFERED AT THE ENROUTE STOPS BEYOND HONOLULU TO THE FINAL DESTINATION OF THE CHARTER.' YOU URGE THAT, UNDER GENERAL PROVISION 35E OF THE CONTRACT, THE CARRIER SHOULD BE PAID ON THE BASIS OF A LIFT CAPACITY OF 31,000 POUNDS FROM TRAVIS TO HONOLULU, AND OF 20 TONS (40,000 POUNDS/--- THE GUARANTEED ACL--- FROM HONOLULU TO BANGKOK, THAILAND, THE DESTINATION OF THE TRIP. WE DISAGREE. WE BELIEVE THAT THE BASIS SET FORTH ON THE U.S. GENERAL ACCOUNTING OFFICE FORM 1003 IS CORRECT AND THAT IT REPRESENTS THE MAXIMUM LIABILITY OF THE GOVERNMENT UNDER CONTRACT NO. AF 11/626/-388 FOR TRIP NO. 1473/10.

YOUR CONTENTION THAT CAPITOL SHOULD BE ALLOWED CHARGES FOR TRIP NO. 1473/10 ON THE BASIS OF 31,000 POUNDS TO HICKAM, PLUS THE FULL GUARANTEED ACL (40,000 POUNDS) BEYOND THAT POINT IS BASED ON THE FOLLOWING SENTENCE IN PARAGRAPH E OF GENERAL PROVISION NO. 35:

"* * * IF THE FAILURE TO PROVIDE TRANSPORTATION IS FOR ONLY A PORTION OF THE TRIP FOR WHICH A STATED PRICE IS PROVIDED IN THE CONTRACT, THE STATED PRICE WILL BE PRORATED FOR THE DISTANCE INVOLVED TO DETERMINE AMOUNTS UNDER THIS PARAGRAPH E.'

THE APPLICATION OF THIS FORMULA WOULD PRODUCE A RATE OF 22.5 CENTS PER TON MILE, DERIVED FROM 9,317 MILES, THE DISTANCE FROM TRAVIS TO BANGKOK, THAILAND, VIA THE ROUTE OF FLIGHT COVERED BY NO. 1473/10, DIVIDED BY THE CONTRACT RATE OF $2,096.325 PER TON. APPARENTLY YOU WOULD APPLY THE 22.5 CENT RATE ON 31,000 POUNDS TO HICKAM, PLUS THE SAME RATE ON 20 TONS (40,000 POUNDS) FROM HICKAM TO BANGKOK. THIS BASIS WOULD PRODUCE CHARGES OF $39,459.04 FOR THE FLIGHT COVERED BY NO. 1473/10. IN THAT CASE THE OVERCHARGE WOULD BE $2,467.46 ($41,926.50 PAID LESS $39,459.04) INSTEAD OF $9,433.46, AS STATED IN OUR FORM NO. 1003.

IT SEEMS CLEAR, HOWEVER, FROM A STUDY OF THE AGREEMENT TERMS AND CONDITIONS AND SERVICE ORDER NO. 35 THAT THE PRORATE BASIS SUGGESTED BY YOU IS NOT APPLICABLE TO THESE FLIGHTS. SERVICE ORDER NO. 35 (ITEM NO. 1) CALLS FOR ONE-WAY CARGO AIR TRANSPORTATION SERVICE FROM TRAVIS AIR FORCE BASE, CALIFORNIA, TO BANGKOK, THAILAND, VIA HICKAM, GUAM, CLARK AND SAIGON FOR "ON/OFF LOAD.' THE QUANTITY TO BE TRANSPORTED WAS 100 TONS AND THE AVAILABLE CABIN LOAD (ACL) WAS 20 TONS.

THUS, THE SERVICE ORDER CALLED FOR THE TRANSPORTATION OF 20 TONS OF CARGO FOR EACH TRIP OVER THE ROUTE SHOWN, WITH THE PRIVILEGE OF REMOVING AND ADDING CARGO AT INTERMEDIATE STOPS EN ROUTE TO FINAL DESTINATION. NOTHING IN THE SERVICE ORDER SPECIFIES THE AMOUNT OF CARGO THAT MAY BE LOADED ON OR OFF EN ROUTE. NOR DOES THE SERVICE ORDER CONTAIN ANY REQUIREMENT THAT 20 TONS BE DELIVERED AT BANGKOK. WHAT IS ORDERED FROM THE CONTRACTOR IS SOMEWHAT COMPARABLE TO THE "PEDDLER" CAR SERVICE AFFORDED BY SURFACE CARRIERS SUCH AS RAILROADS. IN OTHER WORDS, IF THE FLIGHT BEGINS AT POINT OF ORIGIN (TRAVIS) WITH THE GUARANTEED 20 TONS OF ACL, ANY VARIANCE IN THE CARGO LOAD AS A RESULT OF OFF-LOADING AND ON-LOADING CARGO AT INTERMEDIATE POINTS DOES NOT IN THIS ASPECT OF THE MATTER VARY THE ALLOWABLE COMPENSATION WHICH, UNDER THE TERMS OF THE SERVICE ORDER, AND THE UNDERLYING AGREEMENT WAS PRACTICALLY FIXED WHEN ARRANGEMENTS AND TAKE-OFF WERE COMPLETED AT TRAVIS. UNDER THE CIRCUMSTANCES, SINCE ONLY A 31,000 POUND ACL WAS OFFERED BY THE CARRIER AT TRAVIS, WE GENERALLY VIEW THAT WEIGHT AS THE CARRIER GUARANTEED ACL PREVAILING FOR THE ENTIRE TRIP TO FINAL DESTINATION, AND PAYMENT FOR THE TRANSPORTATION INVOLVED MUST BE LIMITED TO THAT WEIGHT BASIS OR SUCH HIGHER ACTUAL WEIGHT AS MIGHT HAVE BEEN LOADED AT AND TRANSPORTED FROM STOP-OFF POINTS EN ROUTE TO FINAL DESTINATION.

USING THE OFFERED ACL AT POINT OF ORIGIN AS THE USUAL MEASURE OF THE GENERALLY APPLICABLE CHARGE BASIS IS BELIEVED TO BE CONSISTENT WITH WHAT THE PARTIES INTENDED BY THE UNDERSTANDING REACHED UPON CAPITOL'S FAILURE TO OFFER THE GUARANTEED ACL AT TRAVIS. AS CONFIRMING THE PROPRIETY OF LIMITING CAPITOL'S COMPENSATION TO THE ACTUAL LOAD BASIS, WE NOTE THAT MODIFICATION NO. 9 (EFFECTIVE JULY 25, 1963) TO CONTRACT NO. AF 11/626/- 434 ADDED TO PART V B/2) OF THAT CONTRACT, WHICH CORRESPONDS TO PART III B/2) OF CONTRACT NO. AF 11/626/ 388, THE FOLLOWING PROVISION:

"HOWEVER, ON ANY TRIP WHERE THE CONTRACTOR IS NOT READY, WILLING, OR ABLE TO CARRY THE FULL GUARANTEED ACL, THIS OBLIGATION OF THE GOVERNMENT WILL BE LIMITED TO PAYMENT FOR THAT AMOUNT OF CARGO AND/OR NUMBER OF PASSENGERS THAT THE CONTRACTOR IS READY, WILLING, AND ABLE TO TRANSPORT ON SAID TRIP. IN ANY SUCH INSTANCE, THE TOTAL GUARANTEED ACL WILL BE REDUCED BY THE DIFFERENCE BETWEEN THE GUARANTEED ACL FOR SAID TRIP AND THE AMOUNT OF CARGO AND/OR NUMBER OF PASSENGERS THAT THE CONTRACTOR IS READY, WILLING, AND ABLE TO TRANSPORT ON SAID TRIP.' THE COMPENSATION DETERMINED TO BE ALLOWABLE UNDER CONTRACT NO. AF 11/626/-434 IS ALSO BEING DISPUTED BY CAPITOL.

YOUR RELIANCE ON PARAGRAPH E OF GENERAL PROVISION NO. 35 SEEMS IMPROPER. FROM A READING OF THE ENTIRE PROVISION IT SEEMS CLEAR THAT THE PRO RATA FORMULA INDICATED IN THE LAST SENTENCE OF PARAGRAPH E, OPERATIVE UPON THE CARRIER'S FAILURE TO PROVIDE TRANSPORTATION FOR "ONLY A PORTION OF THE TRIP," IS FOR APPLICATION ONLY WHEN ANY AMOUNT OF CARGO TENDERED TO THE CONTRACTOR BY THE GOVERNMENT AS A PART OF THE GUARANTEED ACL OF A SCHEDULED TRIP IS NOT TRANSPORTED BY THE AIRCRAFT UPON ITS DEPARTURE FROM THE ORIGINATING STATION OR FROM ANY EN ROUTE STATION AND THE GOVERNMENT ELECTS TO USE THE REMEDIES OF CANCELLATION IN WHOLE OR IN PART OR OF SUBSTITUTED SERVICE EXPRESSLY SET FORTH IN GENERAL PROVISION NO. 35. THE DESCRIBED CONDITIONS DID NOT EXIST IN CONNECTION WITH THE TRANSPORTATION HERE IN QUESTION.

THE AMOUNTS SHOWN AS DUE THE UNITED STATES ON THE NOTICES OF OVERPAYMENT (FORM 1003) STATED AGAINST CAPITOL AIRWAYS, INC., IN CONNECTION WITH THE MENTIONED CONTRACTS WERE COMPUTED CONSISTENT WITH THE FOREGOING AND SHOULD BE REFUNDED ON THE MONTHLY BASIS PREVIOUSLY ARRANGED WITH OUR TRANSPORTATION DIVISION.