B-15593, APRIL 14, 1941, 20 COMP. GEN. 632

B-15593: Apr 14, 1941

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WHICH FORM OF CONTRACT IS EXPRESSLY SANCTIONED BY THE ACT OF JULY 2. IS NOT CONTRARY TO THE PRINCIPLES OF 18 COMP. THAT CONTRACT STIPULATIONS WHICH MAY INCREASE THE COST OF PERFORMANCE ARE UNAUTHORIZED UNLESS REASONABLY REQUISITE TO THE ACCOMPLISHMENT OF THE PURPOSES OF THE APPROPRIATION INVOLVED. SPECIAL STATUTORY PROVISIONS FOR THE SETTLEMENT OF CLAIMS FOR DAMAGE TO OR LOSS OF PRIVATE PROPERTY ARE NOT FOR APPLICATION WHERE THE OBLIGATIONS OF THE PARTIES WITH RESPECT TO THE DAMAGE OR LOSS ARE CONTRACTUALLY GOVERNED. SUBMISSION MAY BE MADE TO THIS OFFICE FOR ADVANCE DECISION OR DIRECT SETTLEMENT OF ITEMS WHERE SUCH OBLIGATION IS IN DOUBT. ADMINISTRATIVE PAYMENTS UNDER THE COST-PLUS-A-FIXED-FEE FORM OF CONTRACT FOR DAMAGE OR LOSS OF THE CONTRACTOR'S EQUIPMENT MUST BE SUPPORTED BY SUFFICIENT EVIDENCE TO ESTABLISH THAT SUCH DAMAGE OR LOSS WAS SUSTAINED "IN CONNECTION WITH THE WORK.

B-15593, APRIL 14, 1941, 20 COMP. GEN. 632

CONTRACTS - COST-PLUS - DAMAGE AND LOSS PROVISIONS - PAYMENT PROCEDURE A CLAUSE IN A COST-PLUS-A-FIXED-FEE CONTRACT, WHICH FORM OF CONTRACT IS EXPRESSLY SANCTIONED BY THE ACT OF JULY 2, 1940, PROVIDING FOR REIMBURSEMENT TO THE CONTRACTOR FOR LOSSES SUSTAINED IN CONNECTION WITH THE WORK AND FOR SUCH ITEMS AS SHOULD IN THE OPINION OF THE CONTRACTING OFFICER BE INCLUDED IN THE COST OF THE WORK, IS NOT CONTRARY TO THE PRINCIPLES OF 18 COMP. GEN. 285, THAT CONTRACT STIPULATIONS WHICH MAY INCREASE THE COST OF PERFORMANCE ARE UNAUTHORIZED UNLESS REASONABLY REQUISITE TO THE ACCOMPLISHMENT OF THE PURPOSES OF THE APPROPRIATION INVOLVED, OR UNLESS SPECIFICALLY AUTHORIZED BY STATUTE. SPECIAL STATUTORY PROVISIONS FOR THE SETTLEMENT OF CLAIMS FOR DAMAGE TO OR LOSS OF PRIVATE PROPERTY ARE NOT FOR APPLICATION WHERE THE OBLIGATIONS OF THE PARTIES WITH RESPECT TO THE DAMAGE OR LOSS ARE CONTRACTUALLY GOVERNED. AMOUNTS PAID A COST-PLUS-A-FIXED-FEE CONTRACTOR FOR THE USE OF ITS OWN EQUIPMENT AT THE USUAL RENTAL RATES IN THE LOCALITY INCLUDE A MARGIN TO COMPENSATE THE OWNER FOR THE RISK OF LOSS AND DAMAGE TO THE EQUIPMENT EXCEPT AS TO THAT RESULTING FROM THE NEGLIGENCE OF THE BAILEE. WHERE LOSS OR DAMAGE TO THE EQUIPMENT OF A COST-PLUS-A-FIXED-FEE CONTRACTOR APPEARS CLEARLY TO BE THE LEGAL OBLIGATION OF THE UNITED STATES UNDER THE TERMS OF THE CONTRACT, AMOUNTS REPRESENTING SUCH LOSS OR DAMAGE MAY BE PAID BY ADMINISTRATIVE DISBURSING OFFICERS UPON PROPER CERTIFICATION BY THE CONTRACTING OFFICER, BUT SUBMISSION MAY BE MADE TO THIS OFFICE FOR ADVANCE DECISION OR DIRECT SETTLEMENT OF ITEMS WHERE SUCH OBLIGATION IS IN DOUBT. ADMINISTRATIVE PAYMENTS UNDER THE COST-PLUS-A-FIXED-FEE FORM OF CONTRACT FOR DAMAGE OR LOSS OF THE CONTRACTOR'S EQUIPMENT MUST BE SUPPORTED BY SUFFICIENT EVIDENCE TO ESTABLISH THAT SUCH DAMAGE OR LOSS WAS SUSTAINED "IN CONNECTION WITH THE WORK; " THAT THE RISK OF SUCH LOSS WAS GOVERNMENT AND NOT THE CONTRACTOR; THAT THE LOSS WAS "NOT COMPENSATED BY INSURANCE OR OTHERWISE; " AND THAT THE AMOUNT PAID WAS "FOUND AND CERTIFIED BY THE CONTRACTING OFFICER TO BE JUST AND REASONABLE," ALL AS REQUIRED OR CONTEMPLATED BY SPECIFIC PROVISION OF SUCH FORM OF CONTRACT.

COMPTROLLER GENERAL WARREN TO CAPT. C. A. COZART, UNITED STATES ARMY, APRIL 14, 1941:

THERE WAS RECEIVED MARCH 17, 1941, BY ENDORSEMENT FROM THE CHIEF OF FINANCE, YOUR LETTER OF JANUARY 31, 1941, AS FOLLOWS:

1. THE UNDERSIGNED IS A DISBURSING OFFICER AT RARITAN ARSENAL, N.J., AND VOUCHER WHICH IS SUBMITTED HEREWITH HAS BEEN PRESENTED TO ME FOR PAYMENT.

2. APPLICATION IS HEREBY MADE FOR A DECISION AS TO THE LEGAL AUTHORITY FOR PAYMENT OF THE VOUCHER OF WHICH I HAVE REASONABLE DOUBT AS TO THE LEGAL AUTHORITY FOR PAYMENT, AND IN ADVANCE OF WHICH PAYMENT AUTHORITATIVE INSTRUCTIONS ARE DESIRED.

3. THE VOUCHER REFERRED TO ABOVE IS IN FAVOR OF BRANN AND STUART CO., INC., 1447 BROAD STREET STATION BUILDING, PHILADELPHIA,PENNA., IN THE AMOUNT OF $2,894.62, COVERING THE COST OF REPAIRING AND THE COST OF THE COMPLETELY DESTROYED EQUIPMENT WHICH WAS CAUSED BY GOVERNMENT OWNED EQUIPMENT AS EXPLAINED IN A REPORT BY A BOARD OF OFFICERS, DATED JANUARY 8, 1941, A COPY OF WHICH IS ATTACHED TO THE VOUCHER.

4. THE DOUBT AS TO THE LEGAL AUTHORITY FOR PAYMENT OF THE ACCOMPANYING VOUCHER IS DUE TO AN APPARENT CONFLICT BETWEEN THE COMPTROLLER GENERAL'S DECISIONS 18:285; 2:16 AND ARTICLE II, PARAGRAPH 1, SUBPART. (D), (K), (P) OF THE CONTRACT. THIS FORM OF CONTRACT BEING AUTHORIZED BY THE ACT OF JULY 2, 1940 ( PUBLIC NUMBER 703, 76TH CONGRESS).

WITH YOUR LETTER OF THE CHIEF OF FINANCE TRANSMITTED AN ENDORSEMENT OF MARCH 11, 1941, BY THE CHIEF OF ORDNANCE, AS FOLLOWS:

1. IT IS THE OPINION OF THIS OFFICE THAT THE CLAIM OF BRANN AND STUART CO., INC., SHOULD BE TRANSMITTED TO THE GENERAL ACCOUNTING OFFICE FOR DECISION FOR THE REASON THAT THE QUESTION OF DAMAGES IS ONE WHICH HAS NOT BEEN DECIDED BY THE GENERAL ACCOUNTING OFFICE UNDER THE COST-PLUS-A-FIXED- FEE TYPE OF CONTRACT. ALTHOUGH THE TYPE OF CONTRACT REFERRED TO PROVIDES REIMBURSEMENT TO THE CONTRACTOR FOR ALL EXPENSES INCURRED IN PERFORMING HIS CONTRACTUAL OBLIGATIONS UNDER THE CONTRACT, IT IS NOT CLEAR FROM THE DECISIONS CITED IN THE PRECEDING ENDORSEMENT AS WELL AS OTHER RULINGS OF THE COMPTROLLER GENERAL WHETHER A DISBURSING OFFICER UNDER THIS TYPE OF CONTRACT HAS THE AUTHORITY OF LAW TO SETTLE SUCH CLAIMS WHEN THEY ARE IN EXCESS OF A CERTAIN AMOUNT.

2. IT IS, THEREFORE, REQUESTED THAT THIS MATTER BE TRANSMITTED TO THE GENERAL ACCOUNTING OFFICE WITH SPECIFIC REQUEST AS TO THE EXTENT WHICH A DISBURSING OFFICER IS AUTHORIZED TO SETTLE DAMAGE CLAIMS UNDER THE COST- PLUS-A-FIXED-FEE TYPE OF CONTRACT. IT IS EXPECTED THAT NUMEROUS CLAIMS WILL ARISE IN THE EXECUTION OF THESE CONTRACTS, AND A DECISION AT THIS TIME WILL FACILITATE THE HANDLING OF FUTURE CLAIMS BY FINANCE OFFICERS THROUGHOUT THE COUNTRY. IT WOULD BE WELL, ALSO, TO DETERMINE THE EVIDENCE WHICH SHOULD ACCOMPANY SUCH VOUCHERS WHEN SUBMITTED FOR PAYMENT IN ORDER THAT THE GENERAL ACCOUNTING OFFICE WILL BE PROVIDED WITH EVIDENCE SUFFICIENT TO ENABLE A PROPER AUDIT.

SECTION 1 OF THE CITED ACT OF JULY 2, 1940, PUBLIC, NO. 703, 54 STAT. 712," TO EXPEDITE THE STRENGTHENING OF THE NATIONAL DEFENSE," PROVIDES IN PART:

THAT (A) IN ORDER TO EXPEDITE THE BUILDING UP OF THE NATIONAL DEFENSE, THE SECRETARY OF WAR IS AUTHORIZED, OUT OF THE MONEYS APPROPRIATED FOR THE WAR DEPARTMENT FOR NATIONAL-DEFENSE PURPOSES FOR THE FISCAL YEAR ENDING JUNE 30, 1941, WITH OR WITHOUT ADVERTISING, (1) TO PROVIDE FOR THE NECESSARY CONSTRUCTION, REHABILITATION, CONVERSION, AND INSTALLATION AT MILITARY POSTS, DEPOTS, STATIONS, OR OTHER LOCALITIES, OF PLANTS, BUILDINGS, FACILITIES, UTILITIES, AND APPURTENANCES THERETO * * * FOR THE DEVELOPMENT, MANUFACTURE, MAINTENANCE, AND STORAGE OF MILITARY EQUIPMENT, MUNITIONS, AND SUPPLIES * * * AND (3) TO ENTER INTO SUCH CONTRACTS * * * AS HE MAY DEEM NECESSARY TO CARRY OUT THE PURPOSES SPECIFIED IN THIS SECTION: * * * PROVIDED FURTHER, THAT THE COST-PLUS-A-PERCENTAGE-OF-COST SYSTEM OF CONTRACTING SHALL NOT BE USED UNDER THIS SECTION; BUT THIS PROVISO SHALL NOT BE CONSTRUED TO PROHIBIT THE USE OF THE COST-PLUS-A- FIXED FEE FORM OF CONTRACT WHEN SUCH USE IS DEEMED NECESSARY BY THE SECRETARY OF WAR.

THUS THE ACT EXPRESSLY AUTHORIZES THE SECRETARY OF WAR "WITH OR WITHOUT ADVERTISING" TO "ENTER INTO SUCH CONTRACTS" AS HE MAY DEEM NECESSARY TO CARRY OUT THE PURPOSES SPECIFIED IN SAID SECTION 1, AND, WHILE PROHIBITING THE USE OF "COST-PLUS-A-PERCENTAGE-OF-COST" CONTRACTS, IN EFFECT EXPRESSLY SANCTIONS THE USE OF "COST-PLUS-A-FIXED FEE" CONTRACTS.

THE PARTICULAR COST-PLUS-A-FIXED-FEE CONTRACT HERE INVOLVED, NO. W 727- ORD-737, WAS ENTERED INTO OCTOBER 16, 1940, WITH BRANN AND STUART CO., INC., ON C.P.F.F. FORM NO. 1, WAS APPROVED OCTOBER 25, 1940," BY DIRECTION OF THE SECRETARY OF WAR," BY THE ASSISTANT SECRETARY OF WAR, AND PROVIDES, IN PART, AS FOLLOWS:

ARTICLE I. STATEMENT OF WORK.--- 1. THE CONTRACTOR SHALL, IN THE SHORTEST POSSIBLE TIME, FURNISH THE LABOR, MATERIALS, TOOLS, MACHINERY, EQUIPMENT, FACILITIES, SUPPLIES NOT FURNISHED BY THE GOVERNMENT, AND SERVICES, AND DO ALL THINGS NECESSARY FOR THE COMPLETION OF THE FOLLOWING WORK:

THE REHABILITATION OF THE ENTIRE RAIL NET WITHIN THE CONFINES OF RARITAN ARSENAL, METUCHEN, NEW JERSEY; THE WORK INCLUDES REESTABLISHMENT OF GRADE ON ALL EXISTING RAIL LINES, THE REPLACING OF ALL NECESSARY TIES AND BALLASTING THE ENTIRE SYSTEM WITH CRUSHED ROCK BALLAST; IN ADDITION ALL NECESSARY REPAIRS OR REPLACEMENT OF ALL RAILJOINTS, SWITCHES, FROGS, PLATES AND RAILS; THE REHABILITATION OF CROSS-OVERS AND SUCH DRAINAGE WORK AS MAY BE NECESSARY, AND ANY OTHER WORK INCIDENTAL TO THE ABOVE. ACCORDANCE WITH THE DRAWINGS AND SPECIFICATIONS OR INSTRUCTIONS CONTAINED IN APPENDIX A HERETO ATTACHED AND MADE A PART HEREOF, OR TO BE FURNISHED HEREAFTER BY THE CONTRACTING OFFICER AND SUBJECT IN EVERY DETAIL TO HIS SUPERVISION, DIRECTION, AND INSTRUCTIONS.

IT IS ESTIMATED THAT THE TOTAL COST OF THE CONSTRUCTION WORK COVERED BY THIS CONTRACT WILL BE APPROXIMATELY FOUR HUNDRED SIXTY-SEVEN THOUSAND DOLLARS ($467,000.00), EXCLUSIVE OF THE CONTRACTOR'S FEE, * * *.

IN CONSIDERATION FOR HIS UNDERTAKING UNDER THIS CONTRACT THE CONTRACTOR SHALL RECEIVE THE FOLLOWING:

(A) REIMBURSEMENT FOR EXPENDITURES AS PROVIDED IN ARTICLE II.

(B) RENTAL FOR CONTRACTOR'S EQUIPMENT AS PROVIDED IN ARTICLE II.

(C) A FIXED FEE IN THE AMOUNT OF TWENTY THOUSAND DOLLARS ($20,000.00), WHICH SHALL CONSTITUTE COMPLETE COMPENSATION FOR THE CONTRACTOR'S SERVICES, INCLUDING PROFIT AND ALL GENERAL OVERHEAD EXPENSES.

ARTICLE II. COST OF THE WORK.

REIMBURSEMENT FOR CONTRACTOR'S EXPENDITURES

1. THE CONTRACTOR SHALL BE REIMBURSED IN THE MANNER HEREINAFTER DESCRIBED FOR SUCH OF HIS ACTUAL EXPENDITURES IN THE PERFORMANCE OF THE WORK AS MAY BE APPROVED OR RATIFIED BY THE CONTRACTING OFFICER AND AS ARE INCLUDED IN THE FOLLOWING ITEMS:

(A) ALL LABOR, MATERIAL, TOOLS, MACHINERY, EQUIPMENT, SUPPLIES, SERVICES, POWER, AND FUEL NECESSARY FOR EITHER TEMPORARY OR PERMANENT USE FOR THE BENEFIT OF THE WORK. ALL ARTICLES OF MACHINERY OR EQUIPMENT VALUED AT $300 OR LESS SHALL BE CLASSED AS TOOLS AND SHALL BE CHARGED DIRECTLY TO THE WORK. TITLE THERETO SHALL THEREUPON PASS TO THE GOVERNMENT.

(C) RENTAL ACTUALLY PAID BY THE CONTRACTOR, AT RATES NOT TO EXCEED THOSE MENTIONED IN THE SCHEDULE OF RENTAL RATES IN APPENDIX B, HERETO ATTACHED AND MADE A PART HEREOF, EXCEPT AS HEREINAFTER SET FORTH, FOR CONSTRUCTION PLANT IN SOUND AND WORKABLE CONDITION, SUCH AS PUMPS, DERRICKS, CONCRETE MIXERS, BOILERS, CLAMSHELL OR OTHER BUCKETS, ELECTRIC MOTORS, * * * AND SUCH OTHER EQUIPMENT EXCEEDING $300 IN VALUE AS MAY BE NECESSARY FOR THE PROPER AND ECONOMICAL PROSECUTION OF THE WORK. * * *

(D) LOADING AND UNLOADING OF CONSTRUCTION PLANT, OWNED OR RENTED BY THE CONTRACTOR; THE TRANSPORTATION THEREOF TO THE PLACE OR PLACES WHERE IT IS TO BE USED IN CONNECTION WITH SAID WORK, EXCEPT AS HEREINAFTER SET FORTH; THE INSTALLATION AND DISMANTLING THEREOF, AND SUCH REPAIRS AND SPARE PARTS AS ARE NOT INCLUDED IN THE RENTAL; PROVIDED SUCH REPAIRS OR SPARE PARTS ARE NOT MADE NECESSARY BY DEFECTS IN SUCH PLANT, OR PARTS THEREOF, OR BY THE FAULT OR NEGLIGENCE OF THE CONTRACTOR OR HIS EMPLOYEES * * *.

(J) PREMIUMS ON SUCH BONDS AND INSURANCE POLICIES AS THE CONTRACTING OFFICER MAY REQUIRE FOR THE PROTECTION OF THE GOVERNMENT; THE COST OF ALL PUBLIC LIABILITY, EMPLOYER'S LIABILITY, WORKMEN'S COMPENSATION, FIDELITY, FIRE, THEFT, BURGLARY, AND OTHER INSURANCE THAT THE CONTRACTING OFFICER MAY APPROVE AS REASONABLY NECESSARY FOR THE PROTECTION OF THE CONTRACTOR.

(K) LOSSES AND EXPENSES, NOT COMPENSATED BY INSURANCE OR OTHERWISE (INCLUDING SETTLEMENTS MADE WITH THE WRITTEN CONSENT OF THE CONTRACTING OFFICER), ACTUALLY SUSTAINED BY THE CONTRACTOR IN CONNECTION WITH THE WORK AND FOUND AND CERTIFIED BY THE CONTRACTING OFFICER TO BE JUST AND REASONABLE.

(P) SUCH OTHER ITEMS AS SHOULD, IN THE OPINION OF THE CONTRACTING OFFICER, BE INCLUDED IN THE COST OF THE WORK. WHEN SUCH AN ITEM IS ALLOWED BY THE CONTRACTING OFFICER, IT SHALL BE SPECIFICALLY CERTIFIED AS BEING ALLOWED UNDER THIS PARAGRAPH.

RENTAL FOR CONTRACTOR'S EQUIPMENT

2.RENTAL SHALL BE PAID TO THE CONTRACTOR FOR SUCH CONSTRUCTION PLANT OR PARTS THEREOF AS HE MAY OWN AND FURNISH, AT NOT TO EXCEED THE RATES MENTIONED IN THE SCHEDULE OF RENTAL RATES HERETO ATTACHED, EXCEPT AS HEREINAFTER SET FORTH. * * * IF SUCH PLANT, OR ANY PART THEREOF, IS NOT IN SOUND AND WORKABLE CONDITION WHEN IT ARRIVES AT THE SITE OF THE WORK, THE RENTAL PERIOD THEREFOR SHALL NOT BEGIN UNTIL SUCH PLANT, OR PARTS THEREOF, SHALL HAVE BEEN PLACED IN SOUND AND WORKABLE CONDITION AT THE EXPENSE OF THE CONTRACTOR, * * *. SLIGHT DELAYS IN THE USE OF SUCH PLANT, OR PARTS THEREOF, CAUSED BY NECESSARY MINOR OR FIELD REPAIRS AND REPLACEMENTS SHALL NOT INTERRUPT THE RENTAL PERIOD, BUT NO RENTAL SHALL BE PAID FOR THE PERIOD OF ANY DELAY IN THE USE OF SUCH PLANT, OR PARTS THEREOF, CAUSED BY OTHER THAN NECESSARY MINOR OR FIELD REPAIRS. * * *

6. RATES OF RENTAL AS SUBSTITUTES FOR SCHEDULED RENTAL RATES MAY BE AGREED UPON IN WRITING BETWEEN THE CONTRACTOR AND THE CONTRACTING OFFICER, SUCH RATES TO BE IN CONFORMITY WITH SIMILAR RATES OF RENTAL CHARGED IN THE PARTICULAR TERRITORY IN WHICH THE WORK COVERED BY THIS CONTRACT IS TO BE PERFORMED. * * *

7. NO SALARIES OF THE CONTRACTOR'S EXECUTIVE OFFICERS, NO PART OF THE EXPENSE INCURRED IN CONDUCTING THE CONTRACTOR'S MAIN OFFICE OR REGULARLY ESTABLISHED BRANCH OFFICES, AND NO OVERHEAD EXPENSES OF ANY KIND, EXCEPT AS SPECIFICALLY AUTHORIZED IN SECTION 1 OF THIS ARTICLE, SHALL BE INCLUDED IN THE COST OF THE WORK; NOR SHALL ANY INTEREST ON CAPITAL EMPLOYED OR ON BORROWED MONEY BE INCLUDED IN THE COST OF THE WORK.

ARTICLE III. PAYMENTS.

REIMBURSEMENT FOR COST

1. THE GOVERNMENT WILL CURRENTLY REIMBURSE THE CONTRACTOR FOR EXPENDITURES MADE IN ACCORDANCE WITH ARTICLE II UPON CERTIFICATION TO AND VERIFICATION BY THE CONTRACTING OFFICER OF THE ORIGINAL SIGNED PAY ROLLS FOR LABOR, THE ORIGINAL PAID INVOICES FOR MATERIALS, OR OTHER ORIGINAL PAPERS. GENERALLY, REIMBURSEMENT WILL BE MADE WEEKLY BUT MAY BE MADE AT MORE FREQUENT INTERVALS IF THE CONDITIONS SO WARRANT.

RENTAL FOR CONTRACTOR'S EQUIPMENT

2. RENTAL AS PROVIDED IN ARTICLE II FOR SUCH CONSTRUCTION PLANT OR PARTS THEREOF AS THE CONTRACTOR MAY OWN AND FURNISH SHALL BE PAID MONTHLY UPON PRESENTATION OF PROPER VOUCHERS.

PAYMENT OF THE FIXED-FEE

3. THE FIXED FEE PRESCRIBED IN ARTICLE I SHALL BE COMPENSATION IN FULL FOR THE SERVICES OF THE CONTRACTOR, INCLUDING PROFIT AND ALL GENERAL OVERHEAD EXPENSES. NINETY PERCENT (90 PERCENT) OF SAID FIXED FEE SHALL BE PAID AS IT ACCRUES, IN MONTHLY INSTALLMENTS BASED UPON THE PERCENTAGE OF THE COMPLETION OF THE WORK AS DETERMINED FROM ESTIMATES MADE AND APPROVED BY THE CONTRACTING OFFICER. UPON COMPLETION OF THE WORK AND ITS FINAL ACCEPTANCE, ANY UNPAID BALANCE OF THE FEE SHALL BE PAID TO THE CONTRACTOR. * * *

ARTICLE V. SPECIAL REQUIREMENTS.--- 1. THE CONTRACTOR HEREBY AGREES THAT HE WILL (A) PROCURE AND THEREAFTER MAINTAIN SUCH BONDS AND INSURANCE IN SUCH FORMS AND IN SUCH AMOUNTS AND FOR SUCH PERIODS OF TIME AS THE CONTRACTING OFFICER MAY APPROVE OR REQUIRE.

* * * * * * * READING THESE PROVISIONS TOGETHER SHOWS THAT THE CONTRACT BASICALLY CONTEMPLATES THAT THE ACTUAL COST OF THE WHOLE WORK AND THE RISK THEREOF ARE TO BE ASSUMED BY THE GOVERNMENT; THAT IS, THAT THE CONTRACTOR IS TO COME OUT WHOLE, REGARDLESS OF CONTINGENCIES, IN PERFORMING THE WORK IN ACCORDANCE WITH THE CONTRACT AND THE DIRECTIONS AND INSTRUCTIONS OF THE CONTRACTING OFFICER, PLUS ONLY A LIMITED FIXED FEE AS COMPENSATION FOR SERVICES, GENERAL OVERHEAD, USE OF THE CONTRACTOR'S OWN OR BORROWED MONEY, AND PROFIT. IN ADDITION TO THE PROVISIONS EXPRESSLY STATING WHAT THE FIXED FEE IS TO COVER, THE COMPARATIVELY SMALL AMOUNT OF SUCH FIXED FEE IN THIS CONTRACT, $20,000 OR LESS THAN 5 PERCENT, IN RELATION TO THE ESTIMATED COST OF THE WORK, $467,000, SHOWS THAT THERE IS NO MARGIN INCLUDED IN SUCH FEE TO COMPENSATE THE CONTRACTOR FOR THE RISKS AND CONTINGENCIES OF WORK OF SUCH CHARACTER AND MAGNITUDE WHICH ORDINARILY ARE ASSUMED BY A CONTRACTOR AND COVERED BY THE CONTRACT PRICE. THE PROVISION IN ARTICLE II 1 (J) THAT THE GOVERNMENT WILL REIMBURSE THE CONTRACTOR FOR PREMIUMS ON BONDS AND INSURANCE POLICIES WHICH THE CONTRACTING OFFICER MAY REQUIRE FOR THE PROTECTION OF THE GOVERNMENT OR MAY APPROVE AS REASONABLY NECESSARY FOR THE PROTECTION OF THE CONTRACTOR, INDIRECTLY IMPOSES THE COST OF SUCH RISKS ON THE GOVERNMENT, AND FURTHER DEMONSTRATES THAT THE GOVERNMENT AND NOT THE CONTRACTOR IS TO BEAR THE RISKS INVOLVED IN THE PERFORMANCE OF THE CONTRACT. THE EXPRESS INCLUSION IN SUCH PROVISION OF PUBLIC LIABILITY EMPLOYER'S LIABILITY, AND FIDELITY INSURANCE SHOWS THAT THE GOVERNMENT IS THUS INDIRECTLY TO ASSUME EVEN THE RISK OF INSURABLE LOSSES RESULTING FROM THE NEGLIGENCE OR DEFALCATIONS OF THE CONTRACTOR'S EMPLOYEES. TO MAKE CERTAIN THAT THE CONTRACTOR DOES COME OUT WHOLE, REGARDLESS OF CONTINGENCIES, THE CONTRACT EXPRESSLY PROVIDES IN SUBPARAGRAPHS 1 (K) AND (P) OF ARTICLE II THAT THE CONTRACTOR SHALL BE REIMBURSED--- IN ADDITION TO THE NUMEROUS ITEMS SPECIFIED IN DETAIL IN OTHER SUBPARAGRAPHS--- FOR " LOSSES AND EXPENSES, NOT COMPENSATED BY INSURANCE OR OTHERWISE * * * ACTUALLY SUSTAINED BY THE CONTRACTOR IN CONNECTION WITH THE WORK," AND FOR " SUCH OTHER ITEMS AS SHOULD, IN THE OPINION OF THE CONTRACTING OFFICER, BE INCLUDED IN THE COST OF THE WORK.' THE PURPOSE, OF COURSE, IS BY THUS ASSUMING THE RISKS AND, IN EFFECT, GUARANTEEING THE CONTRACTOR AGAINST LOSS, TO PROCURE THE WORK FOR THE UNITED STATES AT ACTUAL COST, PLUS ONLY SUCH A COMPARATIVELY SMALL FIXED FEE FOR THE CONTRACTOR'S SERVICES, ETC., AS WOULD BE APPROPRIATE UNDER SUCH CONDITIONS. SUCH PROVISIONS ARE THUS OF THE ESSENCE OF "COST-PLUS-A FIXED-FEE" CONTRACTS, THE USE OF WHICH IS EXPRESSLY SANCTIONED BY THE ACT OF JULY 2, 1940, SUPRA, AND SO ARE NOT CONTRARY TO THE PRINCIPLES OF THE DECISION, 18 COMP. GEN. 285, CITED IN YOUR LETTER, THAT CONTRACT STIPULATIONS WHICH MAY INCREASE THE COST OF PERFORMANCE ARE UNAUTHORIZED UNLESS REASONABLY REQUISITE TO THE ACCOMPLISHMENT OF THE LEGISLATIVE PURPOSES OF THE CONTRACT APPROPRIATION INVOLVED, OR UNLESS SUCH STIPULATIONS ARE AUTHORIZED BY STATUTE.

IT FOLLOWS THAT THE GOVERNMENT IS LEGALLY OBLIGATED, UNDER SUCH FORM OF CONTRACT CONTAINING THE EXPRESS PROVISIONS HERE INVOLVED, TO REIMBURSE THE CONTRACTOR, INTER ALIA, AS A PART OF " REIMBURSEMENT FOR CONTRACTOR'S EXPENDITURES" FOR "/K) LOSSES AND EXPENSES, NOT COMPENSATED BY INSURANCE OR OTHERWISE * * * ACTUALLY SUSTAINED BY THE CONTRACTOR IN CONNECTION WITH THE WORK AND FOUND AND CERTIFIED BY THE CONTRACTING OFFICER TO BE JUST AND REASONABLE.' SUCH LANGUAGE IS CLEARLY BROAD ENOUGH TO INCLUDE LOSSES AND EXPENSES RESULTING FROM DAMAGE OR DESTRUCTION OF THE CONTRACTOR'S EQUIPMENT, WHERE "SUSTAINED BY THE CONTRACTOR IN CONNECTION WITH THE WORK," AND "NOT COMPENSATED BY INSURANCE OR OTHERWISE.' YOUR LETTER CITES THE DECISION, 2 COMP. GEN. 18, APPARENTLY WITH RESPECT TO THE QUESTION OF ADMINISTRATIVE AUTHORITY TO MAKE PAYMENTS AS INVOLVING THE SETTLEMENT OF DAMAGE CLAIMS. THAT DECISION DEALT WITH A CLAIM UNDER PROVISIONS IN ANNUAL APPROPRIATION ACTS FOR THE SETTLEMENT BY THIS OFFICE, UPON THE APPROVAL AND RECOMMENDATION OF THE SECRETARY OF WAR, OF CLAIMS NOT TO EXCEED $500 FOR DAMAGES TO AND LOSS OF PRIVATE PROPERTY INCIDENT TO THE TRAINING, PRACTICE, OPERATION, OR MAINTENANCE OF THE ARMY. IN ADDITION, THE ACT OF DECEMBER 28, 1922, 42 STAT. 1066, CONFERS UPON THE HEAD OF EACH DEPARTMENT AND ESTABLISHMENT ACTING ON BEHALF OF THE GOVERNMENT AUTHORITY TO CONSIDER, ASCERTAIN, ADJUST, AND DETERMINE, CLAIMS FOR DAMAGES TO OR LOSS OF PRIVATELY OWNED PROPERTY, NOT EXCEEDING $1,000, CAUSED BY THE NEGLIGENCE OF ANY OFFICER OR EMPLOYEE OF THE GOVERNMENT ACTING WITHIN THE SCOPE OF HIS EMPLOYMENT, AND TO CERTIFY TO CONGRESS SUCH AMOUNT AS MAY BE FOUND DUE. HOWEVER, THESE SPECIAL PROVISIONS FOR THE SETTLEMENT OF CLAIMS FOR DAMAGE TO OR LOSS OF PRIVATE PROPERTY ARE NOT REGARDED AS FOR APPLICATION IN CASES WHERE THE OBLIGATIONS OF THE PARTIES WITH RESPECT TO DAMAGE OR LOSS OF THE PROPERTY ARE CONTRACTUALLY FIXED AND GOVERNED. SEE 8 COMP. GEN. 448; 11 ID. 62. CF. 18 COMP. GEN. 17. IN THE PRESENT MATTER, IF THERE BE ANY OBLIGATION TO PAY THE CONTRACTOR FOR THE LOSS OF ITS EQUIPMENT, IT ARISES FROM THE EXPRESS PROVISIONS OF THE CONTRACT TO REIMBURSE THE CONTRACTOR FOR ITS EXPENDITURES, INCLUDING, INTER ALIA," LOSSES AND EXPENSES, NOT COMPENSATED BY INSURANCE OR OTHERWISE * * * ACTUALLY SUSTAINED BY THE CONTRACTOR IN CONNECTION WITH THE WORK AND FOUND AND CERTIFIED BY THE CONTRACTING OFFICER TO BE JUST AND REASONABLE; " AND AS ANY SUCH OBLIGATION WOULD BE ONE OF THE SPECIFIC CLASSES OF EXPENDITURE UNDER ARTICLE II WITH RESPECT TO WHICH ARTICLE III EXPRESSLY PROVIDES THAT THE GOVERNMENT WILL "CURRENTLY REIMBURSE THE CONTRACTOR" UPON CERTIFICATION TO AND VERIFICATION BY THE CONTRACTING OFFICER, WHERE IT IS SHOWN THAT THE AMOUNT REPRESENTS A LEGAL OBLIGATION OF THE UNITED STATES UNDER THE TERMS OF THE CONTRACT. THIS, HOWEVER, WOULD NOT PRECLUDE SUBMISSION OF ANY SUCH ITEMS TO THIS OFFICE FOR ADVANCE DECISION OR FOR DIRECT SETTLEMENT WHERE THERE IS DOUBT WHETHER THE GOVERNMENT IS CONTRACTUALLY OBLIGATED TO REIMBURSE THE LOSS.

IN SUCH CASES OF DAMAGE OR LOSS OF THE CONTRACTOR'S EQUIPMENT, IN CONNECTION WITH THE WORK, THE PRIMARY QUESTION IS WHETHER THE LOSS AND EXPENSE IS "COMPENSATED BY INSURANCE OR OTHERWISE" WITHIN THE MEANING OF THE CONTRACT PROVISION. IF SO, THEN NO PAYMENT IS AUTHORIZED. FOR THE USE OF ITS OWN EQUIPMENT THE CONTRACTOR IS NOT PAID ON A "REIMBURSEMENT" BASIS BUT SEPARATELY ON A "RENTAL" BASIS. BY PARAGRAPH 6, ARTICLE II, THE RENTAL RATES MAY BE--- AND PRESUMABLY USUALLY WOULD BE--- ,IN CONFORMITY WITH SIMILAR RATES OF RENTAL CHARGED IN THE PARTICULAR TERRITORY.' THAT IS, FOR THE USE OF ITS OWN EQUIPMENT, THE CONTRACTOR IS TO BE PAID THE USUAL RENTAL RATES IN THE LOCALITY. SUCH USUAL RENTAL RATES FOR EQUIPMENT NORMALLY INCLUDE NOT ONLY A FAIR PROFIT, BUT AN ALLOWANCE FOR WEAR AND TEAR INCIDENT TO THE USE OF THE EQUIPMENT FOR THE PURPOSE RENTED, AND, UNDER THE SETTLED RULES OF BAILMENT LAW, A MARGIN TO COMPENSATE THE OWNER FOR THE RISK OF LOSS AND DAMAGE EXCEPT THAT RESULTING FROM THE NEGLIGENCE OF THE BAILEE. SEE 18 COMP. GEN. 17, AND AUTHORITIES THEREIN CITED. ANALOGY, THE PAYMENT OF SIMILAR "RENTAL" RATES TO A CONTRACTOR FOR THE USE OF HIS OWN EQUIPMENT ON GOVERNMENT WORK MUST BE VIEWED AS INCLUDING COMPENSATION FOR THE RISK OF LOSS OR DAMAGE NOT DUE TO THE NEGLIGENCE OF THE GOVERNMENT'S EMPLOYEES OR AGENTS, AND, HENCE, AS EXCLUDING LIABILITY OF THE GOVERNMENT TO REIMBURSE THE CONTRACTOR FOR ANY LOSS OR DAMAGE UNDER THE SAID PROVISIONS OF SUBPARAGRAPH 1 (K) OF ARTICLE II OF THE FORM OF CONTRACT HERE USED, UNLESS SHOWN TO BE CAUSED BY THE NEGLIGENCE OF THE GOVERNMENT, OR IT IS CLEARLY ESTABLISHED THAT THE AGREEMENT AS TO RENTAL RATES CASTS THE RISK OF OTHER LOSS OR DAMAGE ON THE GOVERNMENT. THIS PRINCIPLE IS RECOGNIZED BY THE PROVISION IN SUBPARAGRAPH 1 (D) OF ARTICLE II OF THE CONTRACT THAT THE CONTRACTOR SHALL BE REIMBURSED FOR SUCH REPAIRS AND SPARE PARTS OF CONSTRUCTION PLANT OWNED OR RENTED BY THE CONTRACTOR "AS ARE NOT INCLUDED IN THE RENTAL; PROVIDED SUCH REPAIRS OR SPARE PARTS ARE NOT MADE NECESSARY BY DEFECTS IN SUCH PLANT, OR PARTS THEREOF, OR BY THE FAULT OR NEGLIGENCE OF THE CONTRACTOR OR HIS EMPLOYEES.' ( ITALICS SUPPLIED.) AS CONTRACTORS UNDER THIS FORM OF CONTRACT ARE PAID REGULAR RENTAL RATES FOR THE USE OF THEIR EQUIPMENT, THEY GENERALLY MAY NOT BE REGARDED AS IN ANY BETTER POSITION WITH RESPECT TO DAMAGE OR LOSS OF SUCH EQUIPMENT THAN ARE OTHER PERSONS WHO MAY RENT EQUIPMENT OR OTHER PERSONAL PROPERTY TO THE GOVERNMENT. ACCORDINGLY, ANY ADMINISTRATIVE PAYMENTS UNDER THIS FORM OF CONTRACT FOR DAMAGE OR LOSS OF THE CONTRACTOR'S EQUIPMENT MUST BE SUPPORTED BY SUFFICIENT EVIDENCE TO ESTABLISH THAT SUCH DAMAGE OR LOSS WAS SUSTAINED BY THE CONTRACTOR "IN CONNECTION WITH THE WORK; " THAT IT WAS CAUSED BY THE NEGLIGENCE OF THE GOVERNMENT'S EMPLOYEES OR AGENTS (OR OTHERWISE THAT THE RISK WAS ON THE GOVERNMENT AND NOT THE CONTRACTOR); THAT THE LOSS WAS "NOT COMPENSATED BY INSURANCE OR OTHERWISE; " AND THAT THE AMOUNT PAID WAS "FOUND AND CERTIFIED BY THE CONTRACTING OFFICER TO BE JUST AND REASONABLE," ALL AS REQUIRED OR CONTEMPLATED BY THE SAID SUBPARAGRAPH 1 (K) OF ARTICLE II OF SUCH FORM OF CONTRACT.

IN THE PRESENT CASE, THE SUPPORTING PAPERS WITH THE VOUCHER SHOW THAT A POWER JACK AND THE POWER UNIT OF A TRACK BALLASTER BEING USED ON THE CONTRACT WORK AND STORED FOR THE NIGHT ON A SIDE TRACK WITH OTHER RAILROAD EQUIPMENT BELONGING TO THE CONTRACTOR AT RARITAN ARSENAL WERE WRECKED ON THE NIGHT OF DECEMBER 31, 1940, IN A COLLISION WITH EMPTY CARS BEING SWITCHED BY AN ARSENAL SWITCHING CREW. THE BOARD OF OFFICERS APPOINTED TO INVESTIGATE THE ACCIDENT AND FIX RESPONSIBILITY FOUND THAT IT OCCURRED BECAUSE THE CONDUCTOR OF THE SWITCHING CREW, A GOVERNMENT EMPLOYEE, DID NOT CHECK THE POSITION OF THE SIDING SWITCH BEFORE PASSING OVER IT. IT APPEARS THE POWER JACK AND POWER UNIT OF THE TRACK BALLISTER WERE SO BADLY DAMAGED THAT THE CONTRACTING OFFICER APPROVED AN AUTHORIZATION FOR THE CONTRACTOR TO PURCHASE REPLACEMENT ARTICLES. THE VOUCHER SUBMITTED IS IN THE AMOUNT OF $2,894.62 AS THE COST OF SUCH REPLACEMENT, SUPPORTED BY THE SUPPLIERS' INVOICES, LESS A CREDIT OF $96.77 TO THE GOVERNMENT FOR RENTAL PAID BY THE GOVERNMENT FOR THE POWER JACK FOR THE MONTH OF DECEMBER, THE DAMAGED EQUIPMENT APPARENTLY HAVING BEEN TURNED OVER TO THE GOVERNMENT AFTER THE ACCIDENT. THIS RECORD SUFFICIENTLY ESTABLISHES THAT THE LOSS WAS SUSTAINED IN CONNECTION WITH THE WORK AND THAT IT WAS CAUSED BY THE NEGLIGENCE OF THE GOVERNMENT. THERE IS NO SHOWING, HOWEVER, THAT THE LOSS WAS "NOT COMPENSATED BY INSURANCE OR OTHERWISE," OR THAT THE CONTRACTING OFFICER HAS ,FOUND AND CERTIFIED" THAT THE AMOUNT PROPOSED TO BE PAID IS JUST AND REASONABLE, AS REQUIRED BY THE SAID SUBPARAGRAPH 1 (K) OF ARTICLE II OF THE CONTRACT. IN THE ABSENCE OF SUCH SHOWING, PAYMENT ON THE VOUCHER IS NOT AUTHORIZED. HOWEVER, PAYMENT MAY BE MADE ON THE VOUCHER IF IT BE FURTHER SUPPORTED BY THE CERTIFICATE OF THE CONTRACTING OFFICER THAT THE LOSS IS NOT COMPENSATED BY INSURANCE OR OTHERWISE AND THAT HE HAS FOUND THE AMOUNT PROPOSED TO BE PAID TO BE JUST AND REASONABLE.