B-15851, JUNE 30, 1941, 20 COMP. GEN. 928

B-15851, JUNE 30, 1941, 20 COMP. GEN. 928

CONTRACTS - COST-PLUS - INCLUSION OF CHARGES FOR CASHING CHECKS OF CONTRACTORS' EMPLOYEES REASONABLE AMOUNTS PAID TO BANDS AS "ACTIVITY CHARGES" IN CONNECTION WITH CASHING PAY-ROLL CHECKS OF EMPLOYEES OF WAR DEPARTMENT COST-PLUS-A FIXED- FEE CONTRACTORS, WHO ARE REQUIRED BY " CONSTRUCTION DIVISION LETTER NO. 75" TO PROVIDE FACILITIES FOR CASHING SUCH CHECKS WITHOUT COST TO THE EMPLOYEES, MAY BE REIMBURSED UNDER CONTRACTS PROVIDING FOR REIMBURSEMENT OF SUCH ACTUAL EXPENDITURES AS MAY BE APPROVED OR RATIFIED BY THE CONTRACTING OFFICER, INCLUDING " ALL * * * SERVICES * * * NECESSARY FOR EITHER TEMPORARY OR PERMANENT USE FOR THE BENEFIT OF THE WORK.'

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF WAR, JUNE 30, 1941:

I HAVE YOUR LETTER OF JUNE 16, 1941, AS FOLLOWS:

REFERENCE IS MADE TO YOUR DECISION, B-15851 DATED MAY 9, 1941, DENYING REIMBURSEMENT IN THE SUM OF $757.95 COVERING AN ACTIVITY CHARGE MADE BY THE CENTRAL NATIONAL BANK, JUNCTION CITY, KANSAS, INCIDENT TO CASHING OF PAY-ROLL CHECKS ISSUED IN CONNECTION WITH COST-PLUS-A-FIXED FEE CONTRACT NO. W 6139 QM-41 WITH JOHN C. LONG, M.W. WATSON, AND MANHATTAN CONSTRUCTION COMPANY.

SINCE THE PUBLICATION OF THAT DECISION A NUMBER OF PROTESTS AND REQUESTS FOR RECONSIDERATION OF THAT DECISION HAVE BEEN RECEIVED FROM COST-PLUS-A- FIXED-FEE CONTRACTORS ENGAGED IN THE PROSECUTION OF ARMY NATIONAL DEFENSE PROJECTS. THE INCLOSED LETTER DATED JANUARY 3, 1941, FROM THE BURLINGTON SAVINGS BANK ADDRESSED TO A. GUTHRIE AND CO., INC., AND AL JOHNSON CONSTRUCTION COMPANY, CONTRACTORS FOR THE IOWA ORDNANCE PLANT, BURLINGTON, IOWA, UNDER CONTRACT NO. W-6978-QM-1 AND LETTER DATED JUNE 3, 1941, FROM THE CONTRACTORS TO THE CONSTRUCTING QUARTERMASTER, IOWA ORDNANCE PLANT, TYPIFY SUCH PROTESTS AND REQUESTS FOR RECONSIDERATION OF YOUR DECISION.

IT WILL BE NOTED THAT THE CONTRACTORS REFER TO THE REQUIREMENTS OF CONSTRUCTION DIVISION LETTER NO. 75, DATED FEBRUARY 6, 1941 (COPY INCLOSED FOR YOUR INFORMATION), REQUIRING CONTRACTORS TO PROVIDE CASHING FACILITIES FOR PAY CHECKS ON THE PROJECT SITE AT NO COST TO THE EMPLOYEE. THAT REQUIREMENT AND OTHERS SPECIFIED IN CONSTRUCTION DIVISION LETTER NO. 75 WERE CONSIDERED NECESSARY TO ESTABLISH PROPER LABOR RELATIONS ON COST-PLUS -A-FIXED-FEE PROJECTS. THEREFORE, IT IS THE VIEW OF THIS OFFICE THAT IF ADDITIONAL EXPENSE IS IMPOSED UPON THE CONTRACTOR BECAUSE OF SUCH REQUIREMENT IT IS A PROPER REIMBURSABLE ITEM.

THE ONLY ALTERNATIVES TO THE PROCEDURE REFERRED TO IN YOUR DECISION AND IN THE TYPICAL CASE HEREWITH PRESENTED, NAMELY, THAT OF MAKING AVAILABLE TO THE EMPLOYEES INVOLVED CASHING FACILITIES AT A NEARBY BANK FOR CHECKS ISSUED IN PAYMENT OF WAGES, ARE: (1) TO ALLOW PAYMENT BY CHECK AND PLACE THE BURDEN ON THE EMPLOYEES INVOLVED OF PAYING THE CASHING CHARGES THEMSELVES, OR (2) TO REQUIRE COST-PLUS-A-FIXED-FEE CONTRACTORS TO PAY IN CASH AT THE SITE OF THE PROJECT. HOWEVER, IT IS THE VIEW OF THIS OFFICE THAT ALTERNATIVE PROCEDURE (1) IS A VIOLATION OF AT LEAST THE SPIRIT OF THE ACT OF JUNE 13, 1934 (48 STAT. 940: 40 U.S.C. 766 B-C), WOULD NOT BE IN THE INTEREST OF PROPER LABOR RELATIONS, AND WOULD BE IN VIOLATION OF THE REQUIREMENT OF CONSTRUCTION DIVISION LETTER NO. 75, REFERRED TO IN PARAGRAPH 3 ABOVE; AND WITH RESPECT TO ALTERNATIVE PROCEDURE (2) IT IS THE VIEW OF THIS OFFICE THAT IT WOULD BE NECESSARY TO USE ARMORED CAR SERVICE, WHICH WOULD BE MORE EXPENSIVE THAN THE PROCEDURE WHICH HAS BEEN IN USE AND SUCH EXPENSE WOULD BE REIMBURSABLE UNDER THE CONTRACT. IN THIS CONNECTION THERE IS ALSO INCLOSED A LETTER DATED JUNE 11, 1941, ADDRESSED TO THE CONSTRUCTION DIVISION, OFFICE OF THE QUARTERMASTER GENERAL, FROM E. I. DU PONT DE NEMOURS AND COMPANY, INDICATING THE COMPARATIVE COST BETWEEN ARMORED CAR SERVICE AND BANK SERVICE FOR CASHING CHECKS OF EMPLOYEES OF COST-PLUS-A-FIXED-FEE CONTRACTORS.

THEREFORE, IT IS REQUESTED THAT YOU RECONSIDER YOUR DECISION REFERRED TO ABOVE WITH A VIEW OF AUTHORIZING REIMBURSEMENT FOR REASONABLE ACTIVITY CHARGES BY BANKS IN CONNECTION WITH CASHING CHECKS OF EMPLOYEES OF COST- PLUS-A-FIXED-FEE CONTRACTORS.

THE DECISION OF MAY 9, 1941, TO WHICH YOU REFER, WAS AN ADVANCE DECISION TO A DISBURSING OFFICER ON A PROPOSED PAYMENT TO JOHN C. LONG, M. W. WATSON, AND MANHATTAN CONSTRUCTION CO., IN CONNECTION WITH COST PLUS-A- FIXED-FEE CONTRACT NO. W-6139-QM-41 DATED OCTOBER 21, 1940, IN REIMBURSEMENT OF AN ACTIVITY CHARGE IMPOSED BY THE CENTRAL NATIONAL BANK, JUNCTION CITY, KANS., ON PAY-ROLL CHECKS ISSUED BY THE CONTRACTOR. IT WAS HELD THAT THE PROPOSED PAYMENT ON THE VOUCHER SUBMITTED WAS NOT AUTHORIZED FOR THE REASON THAT---

* * * THE CONTRACT PROVIDES, GENERALLY, THAT THE GOVERNMENT WILL REIMBURSE THE CONTRACTOR THE ACTUAL COST OF THE WORK, PLUS A FIXED FEE WHICH INCLUDES PROFIT AND ALL GENERAL OVERHEAD EXPENSES. UNDER ARTICLE II OF THE CONTRACT THERE ARE LISTED THE MANY ITEMS OF EXPENDITURE FOR WHICH REIMBURSEMENT WILL BE MADE, BUT NOWHERE IS THERE SPECIFICALLY MENTIONED AN ITEM SUCH AS HERE CONSIDERED. SECTION 7 OF ARTICLE II PROVIDES THAT "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.' ALTHOUGH MANY ITEMS OF OVERHEAD EXPENSE APPEAR TO BE LISTED IN SECTION 1 OF ARTICLE II, THERE IS NOT "SPECIFICALLY AUTHORIZED" THEREIN AN OVERHEAD ITEM SUCH AS INVOLVED HERE. INCIDENTALLY, IT MAY BE OBSERVED FROM THE FIELD AUDITOR'S LETTER, SUPRA, THAT HE CONSIDERED THIS ITEM AS ,CHARGEABLE TO THE CONTRACTOR'S OVERHEAD.'

IT IS NOTED THAT SEVERAL COST-PLUS-A-FIXED-FEE CONTRACTORS HAVE URGED A RECONSIDERATION OF THAT DECISION, AMONG WHOM ARE THE A. GUTHRIE AND CO., INC., AND AL JOHNSON CONSTRUCTION CO. UNDER CONTRACT NO. W 6978-QM-1. ALSO, A SIMILAR QUESTION HAS ARISEN AS TO CONTRACT NO. W 7011-QM-2, DATED DECEMBER 31, 1940, WITH THE H. K. FERGUSON CO. AND OMAN CONSTRUCTION CO.

YOUR ABOVE-QUOTED LETTER EXPRESSES THE VIEW THAT BECAUSE SUCH CONTRACTORS ARE REQUIRED BY CONSTRUCTION DIVISION LETTER NO. 75 TO PROVIDE FACILITIES FOR CASHING EMPLOYEES' PAY CHECKS WITHOUT COST TO THE EMPLOYEES, THE ADDITIONAL EXPENSE IMPOSED UPON THE CONTRACTOR IS PROPERLY REIMBURSABLE TO HIM.

WHETHER A PARTICULAR ITEM OF EXPENSE IS REIMBURSABLE TO THE CONTRACTOR AS SUCH, OR WHETHER IT IS INCLUDED IN LUMP-SUM/FIXED FEES OR OTHER PAYMENTS MADE DEPENDS UPON THE TERMS OF THE CONTRACT; AND, CONSEQUENTLY, A PROPER CONSIDERATION OF THE MATTER IS NOT POSSIBLE EXCEPT WITH RELATION TO SPECIFIC CONTRACTS. THE QUARTERMASTER CONTRACTS CITED ABOVE ARE, HOWEVER, GENERALLY SIMILAR, HAVING BEEN EXECUTED ON C.P.F.F. FORM NO. 1; AND IT IS ASSUMED THAT CONSTRUCTION DIVISION LETTER NO. 75 HAD REFERENCE TO THIS TYPE OF CONTRACT. IN VIEW OF THOSE INSTRUCTIONS, IT IS EVIDENT THAT ANY CHECKING ACCOUNT ACTIVITY CHARGE IMPOSED ON THE CONTRACTOR BY REASON OF PROVIDING FACILITIES AT OR NEAR THE SITE FOR CASHING EMPLOYEES' PAY CHECKS IS IN FACT AN EXPENSE INCURRED IN ENGAGING A SERVICE REQUIRED BY THE GOVERNMENT IN THE PERFORMANCE OF THE WORK, WITHIN THE SCOPE OF ARTICLE II, PAR. 1 (A) OF THE CONTRACT, WHICH PROVIDES FOR REIMBURSEMENT OF SUCH ACTUAL EXPENDITURES IN THE PERFORMANCE OF THE WORK AS MAY BE APPROVED OR RATIFIED BY THE CONTRACTING OFFICER, INCLUDING, AMONG OTHER ITEMS," ALL * * * SERVICES * * * NECESSARY FOR EITHER TEMPORARY OR PERMANENT USE FOR THE BENEFIT OF THE WORK.' THIS IS MADE MORE APPARENT BY THE FACT THAT, IF THE CONTRACTOR CHOSE TO HIRE THE NECESSARY FIELD EMPLOYEES ON THE SITE OF THE WORK IN ORDER TO MAKE CASH DISBURSEMENTS OF WAGES, SUCH EXPENDITURES CLEARLY WOULD BE REIMBURSABLE UNDER ARTICLE II 1 (G) OF THE CONTRACT, WHICH ALLOWS REIMBURSEMENT OF SALARIES OF FIELD EMPLOYEES OF THE CONTRACTOR IN CONNECTION WITH THE WORK.

YOU ARE ADVISED, THEREFORE, THAT THIS OFFICE WILL NOT OBJECT TO THE REIMBURSEMENT TO THE CONTRACTOR UNDER CONTRACTS SIMILAR TO NOS. W-6139 QM- 41, W-6978-QM-1, AND W-7011-QM-2, OF REASONABLE AMOUNTS PAID TO BANKS AS ACTIVITY CHARGES IN CONNECTION WITH PAYROLL CHECKS OF THE CONTRACTORS' EMPLOYEES, PROVIDED THAT SUCH EXPENSES ARE PROPERLY SUBSTANTIATED, ARE APPROVED OR RATIFIED BY THE CONTRACTING OFFICER, AND ARE VERIFIED IN ACCORDANCE WITH THE TERMS OF THE CONTRACT.