B-151399, B-151458, B-151668, JUN. 28, 1963

B-151399,B-151668,B-151458: Jun 28, 1963

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VIOLATED THE COST-PLUS-A-PERCENTAGE-OF COST PROHIBITION SET OUT IN 41 U.S.C. 254 (B) AND THAT THE GOVERNMENT'S LIABILITY THEREUNDER IS. TO THE HONORABLE CLARENCE CANNON IN WHICH WE EXPRESSED THE CONCLUSION THAT THE PURCHASE AND DISTRIBUTION OF CUFF LINKS AND BRACELETS IS MORE IN THE NATURE OF PERSONAL GIFTS RATHER THAN PROMOTIONAL MATERIAL AND. WE UNDERSTAND THAT THE CONTRACT UNDER WHICH THE CUFF LINKS AND BRACELETS WERE PROCURED IS OF THE TYPE WE CONCLUDED VIOLATED THE COST PLUS-A- PERCENTAGE-OF-COST PROHIBITION. WE WISH TO POINT OUT THAT OUR GENERAL ALLOWANCE OF REASONABLE VALUE PAYMENTS UNDER THESE CONTRACTS IS NOT APPLICABLE TO THE CUFF LINKS AND BRACELETS SITUATION. SUMS APPROPRIATED FOR THE VARIOUS BRANCHES OF EXPENDITURE IN THE PUBLIC SERVICE SHALL BE APPLIED SOLELY TO THE OBJECTS FOR WHICH THEY ARE RESPECTIVELY MADE.

B-151399, B-151458, B-151668, JUN. 28, 1963

TO THE SECRETARY OF COMMERCE:

BY LETTER OF MAY 31, 1963, WE ADVISED YOU THAT CONTRACT NO. CC-4784 WITH INTERPUBLIC, INCORPORATED, VIOLATED THE COST-PLUS-A-PERCENTAGE-OF COST PROHIBITION SET OUT IN 41 U.S.C. 254 (B) AND THAT THE GOVERNMENT'S LIABILITY THEREUNDER IS, AT MOST, FOR THE REASONABLE VALUE OF SERVICES RENDERED. WE SUGGESTED THAT AN AUDIT BE CONDUCTED OF THE OPERATIONS AND EXPENDITURES UNDER ALL CONTRACTS OF THIS TYPE AND THAT ANY PAYMENTS DUE BE ADJUSTED TO REFLECT THE REASONABLE VALUE OF ALL SERVICES RECEIVED.

SUBSEQUENTLY, WE FORWARDED YOU A COPY OF OUR LETTER OF JUNE 12, 1963, TO THE HONORABLE CLARENCE CANNON IN WHICH WE EXPRESSED THE CONCLUSION THAT THE PURCHASE AND DISTRIBUTION OF CUFF LINKS AND BRACELETS IS MORE IN THE NATURE OF PERSONAL GIFTS RATHER THAN PROMOTIONAL MATERIAL AND, THEREFORE, NOT AUTHORIZED BY THE INTERNATIONAL TRAVEL ACT OF 1961.

WE UNDERSTAND THAT THE CONTRACT UNDER WHICH THE CUFF LINKS AND BRACELETS WERE PROCURED IS OF THE TYPE WE CONCLUDED VIOLATED THE COST PLUS-A- PERCENTAGE-OF-COST PROHIBITION. WE WISH TO POINT OUT THAT OUR GENERAL ALLOWANCE OF REASONABLE VALUE PAYMENTS UNDER THESE CONTRACTS IS NOT APPLICABLE TO THE CUFF LINKS AND BRACELETS SITUATION. SECTION 3678, R.S., 31 U.S.C. 628, PROVIDES THAT:

"EXCEPT AS OTHERWISE PROVIDED BY LAW, SUMS APPROPRIATED FOR THE VARIOUS BRANCHES OF EXPENDITURE IN THE PUBLIC SERVICE SHALL BE APPLIED SOLELY TO THE OBJECTS FOR WHICH THEY ARE RESPECTIVELY MADE, AND FOR NO OTHERS.'

THE PROCUREMENT OF CUFF LINKS AND BRACELETS FOR USE AS GIFTS BEING UNAUTHORIZED, PAYMENT THEREFOR, WHETHER UNDER THE TERMS OF THE APPLICABLE CONTRACT OR ON THE BASIS OF QUANTUM MERUIT, WOULD BE INCONSISTENT WITH THE QUOTED STATUTORY RESTRICTION.

ACCORDINGLY, PAYMENT FOR THE CUFF LINKS AND BRACELETS IS NOT AUTHORIZED. IF PAYMENT HAS ALREADY BEEN EFFECTED, THE DETERMINATION PURSUANT TO OUR LETTER OF MAY 31, 1963, OF THE REASONABLE VALUE OF SERVICES RENDERED UNDER THE VARIOUS CONTRACTS INVOLVED SHOULD EXCLUDE ANY COMPENSATION FOR THESE ITEMS. ANY AMOUNTS COVERING THE SUBJECT ITEMS WHICH WE FIND INCLUDED IN THE ULTIMATE PAYMENTS MADE UNDER THESE CONTRACTS WILL BE DISALLOWED.

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