B-158478, MAY 11, 1966, 45 COMP. GEN. 678

B-158478: May 11, 1966

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- IS A PERMISSIBLE METHOD OF CONTRACTING FOR THESE PROFESSIONAL SERVICES PURSUANT TO SECTION 1-3.406-2 OF THE FEDERAL PROCUREMENT REGULATIONS. IS A PRACTICABLE AND FEASIBLE METHOD TO OBTAIN THE DESIRED END. 1966: REFERENCE IS MADE TO YOUR LETTER OF JANUARY 26. THAT THIS IS CURRENTLY DONE BY ANALYZING DATA COLLECTED FROM PURCHASERS OF NATIONAL FOREST TIMBER. THAT THE SUCCESS OF SUCH ANALYSIS IS DEPENDENT UPON YOUR KNOWLEDGE OF THE CONTENTS. YOU FURTHER STATE YOU PROPOSE TO CONTRACT ON A TEST BASIS WITH A CERTIFIED PUBLIC ACCOUNTANT FIRM TO PERFORM THIS ANALYSIS AND TO ISSUE A CERTIFICATE STATING WHETHER THE DATA EXAMINED IS QUALIFIED FOR USE BY THE FOREST SERVICE. THE PROPOSED TYPE OF CONTRACT IS THE "LABOR-HOUR" CONTRACT AS NOTED IN THE FEDERAL PROCUREMENT REGULATIONS (FPR).

B-158478, MAY 11, 1966, 45 COMP. GEN. 678

ACCOUNTANTS - HIRE - ROUTINE OPERATIONS THE EMPLOYMENT OF CERTIFIED PUBLIC ACCOUNTANT FIRMS TO APPRAISE NATIONAL FOREST TIMBER AND TO CERTIFY THAT THE DATA ANALYZED QUALIFIES THE TIMBER FOR SALE BY THE FOREST SERVICE, A ROUTINE OPERATION EVEN THOUGH PERFORMED BY PERSONS OF PROFESSIONAL QUALIFICATIONS, MAY BE AUTHORIZED ON A TEMPORARY BASIS BY THE DEPARTMENT OF AGRICULTURE UNDER SECTION 706 (A) OF THE ORGANIC ACT, 1944 (5 U.S.C. 574), WITHOUT APPLYING THE DOLLAR LIMITATION ON HIRING EXPERTS AND CONSULTANTS (5 U.S.C. 55A) PRESCRIBED IN THE 1966 FUNDS APPROPRIATED FOR THE FOREST SERVICE, AND THE "LABOR-HOUR" TYPE CONTRACT--- A VARIANT OF THE TIME AND MATERIALS CONTRACT--- IS A PERMISSIBLE METHOD OF CONTRACTING FOR THESE PROFESSIONAL SERVICES PURSUANT TO SECTION 1-3.406-2 OF THE FEDERAL PROCUREMENT REGULATIONS, AND HOURLY BILLING RATES FOR APPLIED HOURS, PLUS TRAVEL AND TRANSPORTATION EXPENSES, SUBJECT TO A FIXED MAXIMUM LIMIT, IS A PRACTICABLE AND FEASIBLE METHOD TO OBTAIN THE DESIRED END, THE CONTRACTING OFFICER TO DETERMINE THE REASONABLENESS OF THE BILLING RATES AND TIME SPENT ON THE JOB.

TO O. G. BROWN, UNITED STATES DEPARTMENT OF AGRICULTURE, MAY 11, 1966:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 26, 1966, AND ENCLOSURES, REQUESTING AN ADVANCE DECISION ON THE MATTER OF CONTRACTING FOR PROFESSIONAL SERVICES WITH CERTIFIED PUBLIC ACCOUNTANT FIRMS.

YOU STATE THAT AS A PREREQUISITE TO OFFERING NATIONAL FOREST TIMBER FOR SALE THE FOREST SERVICE MUST APPRAISE ITS VALUE; THAT THIS IS CURRENTLY DONE BY ANALYZING DATA COLLECTED FROM PURCHASERS OF NATIONAL FOREST TIMBER; AND, THAT THE SUCCESS OF SUCH ANALYSIS IS DEPENDENT UPON YOUR KNOWLEDGE OF THE CONTENTS, ACCURACY, RELIABILITY, AND REPRESENTATIVENESS OF THE DATA. YOU FURTHER STATE YOU PROPOSE TO CONTRACT ON A TEST BASIS WITH A CERTIFIED PUBLIC ACCOUNTANT FIRM TO PERFORM THIS ANALYSIS AND TO ISSUE A CERTIFICATE STATING WHETHER THE DATA EXAMINED IS QUALIFIED FOR USE BY THE FOREST SERVICE. THE PROPOSED TYPE OF CONTRACT IS THE "LABOR-HOUR" CONTRACT AS NOTED IN THE FEDERAL PROCUREMENT REGULATIONS (FPR), SECTION 1- 3.406-2. THE CPA FIRM WOULD MAKE ITS TIME RECORDS AVAILABLE TO SUBSTANTIATE FEES WHICH WOULD BE BASED ON THE FOLLOWING PER HOUR SCHEDULE:

CHART

PARTNERS $25.00

SENIOR ACCOUNTANTS 20.00

OTHER STAFF 15.00

STENOGRAPHERS 5.00

SPECIFICALLY, YOU REQUEST THAT WE ANSWER THE FOLLOWING QUESTIONS:

1. CAN WE LEGALLY CONTRACT FOR SERVICES OF THIS NATURE?

2. IS THE "LABOR-HOUR" TYPE CONTRACT PERMISSIBLE?

3. IF THE ANSWER TO (1) AND (2) IS YES, IS THE PROPOSED METHOD OF DETERMINING REASONABLENESS OF BILLING RATE ACCEPTABLE, AND IS THE PROPOSED METHOD OF DETERMINING TIME ACCEPTABLE?

IN REGARD TO THE PERMISSIBILITY OF CONTRACTING FOR THESE SERVICES, WE NOTE THAT UNDER SECTION 706 (A) OF THE ORGANIC ACT, 1944 (5 U.S.C. 574), THE DEPARTMENT OF AGRICULTURE HAS AUTHORITY TO EMPLOY PERSONS OR ORGANIZATIONS ON A TEMPORARY BASIS BY CONTRACTOR OTHERWISE WITHOUT REGARD TO THE CLASSIFICATION ACT OF 1949 (5 U.S.C. 1071 NOTE) WITHIN THE LIMITATIONS OF APPLICABLE APPROPRIATIONS. ALSO, SECTION 15 OF THE ADMINISTRATIVE EXPENSES ACT OF 1946 (5 U.S.C. 55A) IS AS FOLLOWS:

THE HEAD OF ANY DEPARTMENT, WHEN AUTHORIZED IN AN APPROPRIATION OR OTHER ACT, MAY PROCURE THE TEMPORARY (NOT IN EXCESS OF ONE YEAR) OR INTERMITTENT SERVICES OF EXPERTS OR CONSULTANTS OR ORGANIZATIONS THEREOF, INCLUDING STENOGRAPHIC REPORTING SERVICES, BY CONTRACT, AND IN SUCH CASES SUCH SERVICE SHALL BE WITHOUT REGARD TO THE CIVIL SERVICE CLASSIFICATION LAWS (BUT AS TO AGENCIES SUBJECT TO THE CLASSIFICATION ACT OF 1949 AT RATES NOT IN EXCESS OF THE PER DIEM EQUIVALENT OF THE HIGHEST RATE PAYABLE UNDER SUCH ACT, UNLESS OTHER RATES ARE SPECIFICALLY PROVIDED IN THE APPROPRIATION OR OTHER LAW) AND, EXCEPT IN THE CASE OF STENOGRAPHIC REPORTING SERVICES BY ORGANIZATIONS WITHOUT REGARD TO SECTION 5 OF TITLE 41.

TITLE II OF THE DEPARTMENT OF THE INTERIOR AND RELATED AGENCIES APPROPRIATION ACT, 1966, 79 STAT. 188, UNDER THE HEADING "ADMINISTRATIVE PROVISIONS, FOREST SERVICE" READS IN PART AS OLLOWS:

APPROPRIATIONS TO THE FOREST SERVICE FOR THE CURRENT FISCAL YEAR SHALL BE AVAILABLE FOR * * * (B) EMPLOYMENT PURSUANT TO THE SECOND SENTENCE OF SECTION 706 (A) OF THE ORGANIC ACT OF 1944 (5 U.S.C. 574), AND NOT TO EXCEED $25,000 FOR EMPLOYMENT UNDER SECTION 15 OF THE ACT OF AUGUST 2, 1946 (5 U.S.C. 55A) * * *.

THE EXPLANATION OF THE APPROPRIATION PROVISION AS GIVEN ON PAGE 240, PART 2 OF THE HEARINGS ON THE APPROPRIATION BILL BEFORE THE HOUSE COMMITTEE ON APPROPRIATIONS INDICATES A PURPOSE TO APPLY THE DOLLAR LIMITATION ONLY TO TEMPORARY EMPLOYMENT OF EXPERTS AND CONSULTANTS UNDER SECTION 15 OF THE ACT OF AUGUST 2, 1946.

IF THE SERVICES HERE TO BE OBTAINED ARE "CONSULTANT," OR "EXPERT," THEIR PROCUREMENT IS SUBJECT TO THE DOLLAR LIMITATION PRESCRIBED IN THE APPROPRIATION ACT. HOWEVER, THE SUPPLEMENTAL INFORMATION FURNISHED BY THE DEPARTMENT IN CONNECTION WITH THIS SUBMISSION INDICATES THAT THE WORK TO BE PERFORMED BY THE FIRMS IS PRIMARILY ONE OF VERIFYING DATA USED IN APPRAISING NATIONAL FOREST TIMBER, FOLLOWING GUIDE LINES IN THE FOREST SERVICES HANDBOOK. THE DEPARTMENT VIEWS THIS WORK AS ROUTINE IN NATURE, NOT REQUIRING AN EXPERT, AND IS OF THE OPINION THAT SUCH SERVICES ARE NOT NECESSARILY EXPERT SERVICES BECAUSE THEY ARE REQUIRED TO BE PERFORMED BY PERSONS WITH PROFESSIONAL QUALIFICATIONS. SEE OUR DECISION IN 28 COMP. GEN. 226 TO A SIMILAR EFFECT.

ON THE BASIS OF THE INFORMATION NOW FURNISHED, WE ACCEPT THE DETERMINATION OF THE DEPARTMENT AS TO THE ROUTINE NATURE OF THE WORK. THEREFORE, THE SERVICES ARE TO BE REGARDED AS BEING AUTHORIZED BY SECTION 706 (A) OF THE ORGANIC ACT OF 1944, 5 U.S.C. 574.

IN CONNECTION WITH THE METHOD OF PROCUREMENT WE NOTE THAT SECTION 1 1.301 -3, FPR STATES:

IF THE USE OF FORMAL ADVERTISING IS NOT FEASIBLE AND PRACTICABLE, PURCHASES AND CONTRACTS FOR PROPERTY AND SERVICES MAY BE NEGOTIATED IN ACCORDANCE WITH THE DETAILED REQUIREMENTS AND PROCEDURES SET FORTH IN PART 3 OF THIS CHAPTER.

SECTION 1-3.204 AMPLIFIES THE ABOVE:

PURSUANT TO THE AUTHORITY OF SECTION 302 (C) (4) OF THE ACT (41 U.S.C. 252 (C) (4) (, PURCHASES AND CONTRACTS MAY BE NEGOTIATED WITHOUT FORMAL ADVERTISING IF "FOR PERSONAL OR PROFESSIONAL SERVICES.'

IN ACCORDANCE WITH THE ABOVE AUTHORITY, YOUR FIRST QUESTION IS ANSWERED IN THE AFFIRMATIVE.

YOUR NEXT QUESTION IS WHETHER THE "LABOR-HOUR" TYPE OF CONTRACT IS A PERMISSIBLE METHOD OF CONTRACTING FOR THESE PROFESSIONAL SERVICES? FPR 1- 3.406-2 STATES THE "* * * LABOR-HOUR CONTRACT IS A VARIANT OF THE TIME AND MATERIALS TYPE CONTRACT * * *" WHICH IS DESCRIBED IN FPR 1-3.406-1 (A) AS PROVIDING FOR THE PROCUREMENT OF PROPERTY OR SERVICES ON THE BASIS OF DIRECT LABOR HOURS AT SPECIFIED FIXED-HOURLY RATES, WHICH RATES INCLUDE DIRECT AND INDIRECT LABOR, OVERHEAD AND PROFIT. THE REGULATIONS FURTHER PROVIDE THIS TYPE OF CONTRACT SHOULD BE USED ONLY WHEN IT IS NOT POSSIBLE AT THE TIME OF CONTRACTING "TO ESTIMATE THE EXTENT OR DURATION OF THE WORK OR TO ANTICIPATE COSTS WITH ANY REASONABLE DEGREE OF CONFIDENCE AND ONLY WHEN CLOSE GOVERNMENT SURVEILLANCE IS MAINTAINED OVER THE CONTRACTOR'S WORK.' FPR 1-3.406-1 (B). HOWEVER THIS MAY BE, AND REGARDLESS OF THE NAME GIVEN TO THE TYPE OF CONTRACT USED, WE FEEL THE METHOD PROPOSED IN YOUR LETTER, I.E., HOURLY BILLING RATES FOR APPLIED HOURS, PLUS TRAVEL AND TRANSPORTATION EXPENSES SUBJECT TO A FIXED-MAXIMUM LIMIT IS A PRACTICABLE AND FEASIBLE METHOD FOR THIS SITUATION. IN ADDITION, IT IS THE PRACTICE OF MOST CPA FIRMS TO CHARGE BY THE HOUR RATHER THAN BY THE COMPLETE JOB. ACCORDINGLY, WE DO NOT OBJECT TO THE METHOD OF CONTRACTING PROPOSED IN YOUR LETTER.

FINALLY, IN REPLY TO YOUR THIRD QUESTION, CONCERNING THE REASONABLENESS OF THE METHODS SUGGESTED FOR DETERMINING BILLING RATES AND TIME SPENT ON THE JOB, THIS OFFICE FEELS THAT IT SHOULD PRESCRIBE NO ONE METHOD OR MEANS TO OBTAIN THE DESIRED END, BUT SHOULD ALLOW THE CONTRACTING OFFICER TO EXERCISE HIS SOUND DISCRETION ACCORDING TO THE FACTS AND CIRCUMSTANCES OF THE PARTICULAR SITUATION. SINCE THE FEES PROPOSED BY THE TEST CPA FIRM SEEM TO BE REASONABLE AND COMPARABLE TO THOSE CHARGED BY MOST OTHER CPA FIRMS IN THE AREA, WE HAVE NO OBJECTION TO THEM. BILLING RATES AND TIME SPENT ON THE JOB MAY BE DETERMINED BY ANY REASONABLE AND RELIABLE METHOD WHICH WILL SATISFY THE CONTRACTING OFFICER OF THEIR CORRECTNESS.