B-159328, MAY 15, 1967

B-159328: May 15, 1967

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"EXCESS TRANSPORTATION COST" AS USED IN SUCH LETTERS REFERS TO THAT PORTION OF THE TRANSPORTATION COST WHICH EXCEEDS THE PRICE THE POST OFFICE WOULD HAVE PAID A CARRIER IF THE PROCURED ITEM HAD WEIGHED NO MORE THAN THE CONTRACTOR HAD GUARANTEED IN HIS CONTRACT. THE PROCEDURES PROVIDE FOR MAKING AN INITIAL DETERMINATION OF EXCESS TRANSPORTATION COSTS ON THE ASSUMPTION THAT THE FREIGHT COST PER POUND OF THE ACTUAL WEIGHT SHIPPED WOULD HAVE BEEN THE SAME ON A SHIPMENT OF THE LESSER GUARANTEED WEIGHT. THIS CALCULATION IS NOW MADE BY THE NEW YORK POSTAL DATA CENTER WITH THE USE OF A MACHINE TABULATED RECORD. THE TAB-RUN IS MADE AFTER PAYMENT TO THE CARRIER AND BEFORE THE ORIGINAL BILL OF LADING IS FORWARDED TO OUR OFFICE FOR POST AUDIT.

B-159328, MAY 15, 1967

TO THE POSTMASTER GENERAL:

IN LETTERS DATED JUNE 1 AND OCTOBER 24, 1966, THE THEN DIRECTOR OF THE PROCUREMENT DIVISION REQUESTED OUR APPROVAL OF POST OFFICE PROCEDURES FOR CALCULATING, AND PROPOSED PROCEDURES FOR DECIDING TO ATTEMPT OR NOT TO ATTEMPT COLLECTING," EXCESS TRANSPORTATION COSTS FROM A CONTRACTOR. "EXCESS TRANSPORTATION COST" AS USED IN SUCH LETTERS REFERS TO THAT PORTION OF THE TRANSPORTATION COST WHICH EXCEEDS THE PRICE THE POST OFFICE WOULD HAVE PAID A CARRIER IF THE PROCURED ITEM HAD WEIGHED NO MORE THAN THE CONTRACTOR HAD GUARANTEED IN HIS CONTRACT.

SPECIFICALLY, HE WISHED TO DISCONTINUE A FORMAL CHECKING OF RATES AND RATINGS TO DETERMINE EXCESS TRANSPORTATION COSTS. WITH RESPECT TO CONTRACTS PREDATING JUNE 1, 1966, HE HAD REFERENCE TO USING A SO CALLED "EYE-BALL AUDIT" METHOD (LOCKING AT THE DIFFERENCE BETWEEN THE ACTUAL AND THE GUARANTEED WEIGHT, AND MAKING AN EDUCATED GUESS AS TO THE DIFFERENCE IN COST) TO ESTIMATE EXCESS TRANSPORTATION COSTS. WITH RESPECT TO CONTRACTS ENTERED INTO AFTER JUNE 1, THE PROCEDURES PROVIDE FOR MAKING AN INITIAL DETERMINATION OF EXCESS TRANSPORTATION COSTS ON THE ASSUMPTION THAT THE FREIGHT COST PER POUND OF THE ACTUAL WEIGHT SHIPPED WOULD HAVE BEEN THE SAME ON A SHIPMENT OF THE LESSER GUARANTEED WEIGHT. THIS CALCULATION IS NOW MADE BY THE NEW YORK POSTAL DATA CENTER WITH THE USE OF A MACHINE TABULATED RECORD, OR "TAB-RUN," OF THE BILL OF LADING NUMBER AND THE TOTAL FREIGHT COST OF THE SHIPMENT. THE TAB-RUN IS MADE AFTER PAYMENT TO THE CARRIER AND BEFORE THE ORIGINAL BILL OF LADING IS FORWARDED TO OUR OFFICE FOR POST AUDIT.

REGARDLESS OF THE METHOD OF INITIALLY DETERMINING EXCESS TRANSPORTATION COSTS, FURTHER ACTION WAS TO BE DISCONTINUED WHERE THE AMOUNT INITIALLY CALCULATED AS REPRESENTING THE EXCESS TRANSPORTATION COSTS WAS LESS THAN $10, A FIGURE ESTIMATED TO BE THE MINIMUM COST OF A FORMAL CALCULATION AND COLLECTION. ALSO WITH RESPECT TO THE CONTRACTS ENTERED INTO AFTER JUNE 1, GENERAL USE WOULD BE MADE OF A PROVISION INCORPORATED IN POST OFFICE CONTRACTS WHEREBY THE CONTRACTOR BECOMES RESPONSIBLE FOR ASCERTAINING AND PAYING THE DIFFERENCE BETWEEN ACTUAL AND GUARANTEED WEIGHTS, AND IS SUBJECT TO HAVING 5 PERCENT OF HIS CONTRACT PRICE WITHHELD, UNTIL SUCH TIME AS A FORMAL CALCULATION CAN BE MADE, IF HE DOES NOT MEET THAT RESPONSIBILITY.

SUBSEQUENTLY, WE WERE INFORMALLY ADVISED BY YOUR STAFF THAT A FORMAL CALCULATION RATHER THAN AN "EYE-BALL AUDIT" WOULD BE MADE IN CONNECTION WITH THE CONTRACTS PREDATING JUNE 1, 1966. IN A LETTER OF MARCH 9, 1967, THE THEN ACTING DIRECTOR OF THE PROCUREMENT DIVISION, ASKED TO WITHDRAW THE REQUEST FOR OUR APPROVAL OF YOUR PROCEDURES IN VIEW OF THE EFFECT OF THE FEDERAL CLAIMS COLLECTION ACT OF 1966, PUBLIC LAW 89-508, 80 STAT. 308, APPROVED JULY 19, 1966.

IN RELEVANT PART, THE CITED STATUTE PROVIDES THAT WITH RESPECT TO CLAIMS OF THE UNITED STATES NOT EXCEEDING $20,000,"THE HEAD OF AN AGENCY OF HIS DESIGNEE, PURSUANT TO REGULATIONS PRESCRIBED BY HIM AND IN CONFORMITY WITH SUCH STANDARDS AS MAY BE PROMULGATED JOINTLY BY THE ATTORNEY GENERAL AND THE COMPTROLLER GENERAL, MAY * * * CAUSE COLLECTION ACTION ON ANY SUCH CLAIM TO BE TERMINATED OR SUSPENDED WHERE IT APPEARS * * * THAT THE COST OF COLLECTING THE CLAIM IS LIKELY TO EXCEED THE AMOUNT OF RECOVERY.' STANDARDS FOR TERMINATING OR SUSPENDING COLLECTION OF SUCH CLAIMS HAVE BEEN JOINTLY PROMULGATED AND PUBLISHED IN THE FEDERAL REGISTER OF OCTOBER 15, 1966, AT PAGES 13383 AND AT 13384, 4 C.F.R. 104. PARAGRAPH 104.3 (C) OF THE REGULATION PROVIDES: "COST WILL EXCEED RECOVERY. COLLECTION ACTION MAY BE TERMINATED ON A CLAIM WHEN IT IS LIKELY THAT THE COST OF FURTHER COLLECTION ACTION WILL EXCEED THE AMOUNT RECOVERABLE THEREBY.'

IN OUR JUDGMENT, THE FEDERAL CLAIMS COLLECTION ACT OF 1966 DOES NOT ADDRESS ITSELF TO QUESTIONS CONCERNING THE COST OF CALCULATING THE AMOUNT OF THE GOVERNMENT'S CLAIM SUBJECT TO COLLECTION OR DISCONTINUANCE OF COLLECTION PROCEEDINGS, AND WE THEREFORE QUESTION WHETHER THE PROVISIONS OF THAT ACT ARE DISPOSITIVE OF THE QUESTIONS RAISED IN YOUR ORIGINAL SUBMISSION. WE CERTAINLY APPROVE OF THE DECISION TO DISCONTINUE GENERAL USE OF THE SO-CALLED "EYE-BALL AUDITS," AND, ON THE BASIS OF THE RECORD BEFORE US, PERCEIVE NO OBJECTION TO THE NEW YORK POSTAL DATA CENTER'S USING THE ,TAB-RUN" METHOD OF INITIALLY CALCULATING EXCESS TRANSPORTATION COSTS. HOWEVER, WE SUGGEST THE POSSIBILITY THAT CALCULATION COSTS MAY BE FURTHER REDUCED IF THE "TAB-RUN" OF PAID BILLS OF LADING IS REVISED TO SHOW, IN ADDITION TO THE BILL OF LADING NUMBER AND THE TOTAL FREIGHT COST, THE WEIGHT (OR CUBIC FOOTAGE WHERE APPROPRIATE) OF THE SHIPMENT AND THE COST PER POUND, FOOT, OR OTHER UNIT, OF EACH SHIPMENT. IF IT IS APPARENT THAT THE TOTAL FREIGHT COST IS BASED ON A MINIMUM WEIGHT OR VOLUME, THE MINIMUM WEIGHT OR MINIMUM VOLUME WOULD APPEAR MATERIAL IN DETERMINING WHETHER EXCESS COSTS WERE INCURRED BECAUSE OF DEVIATIONS BETWEEN THE GUARANTEED AND ACTUAL WEIGHTS, AND IF PRACTICABLE TO DO SO, SUCH MINIMUMS MIGHT BE INCLUDED IN THE TAB-RUNS.

IT WOULD APPEAR THAT GENERAL USE OF THE CONTRACT PROVISION FOR WITHHOLDING FIVE PERCENT OF THE CONTRACT PRICE MAY FURTHER REDUCE THE COST OF COLLECTION ACTION. HOWEVER, IT IS NOT CLEAR FROM THE ADMINISTRATIVE REPORT WHAT, IF ANY, METHOD OF VERIFICATION OF THE CONTRACTORS FIGURES IS TO BE USED, AND THE LANGUAGE OF THE PROVISION IN QUESTION STILL LEAVES THE GOVERNMENT UNDER THE BURDEN OF ASCERTAINING THE EXCESS COST IF THE CONTRACTOR DOES NOT DO SO.

SINCE THE POSSIBLE METHODS OF CALCULATING AND COLLECTING EXCESS TRANSPORTATION COSTS APPEAR TO INVOLVE DIFFERENT ADMINISTRATIVE COSTS, WE RECOMMEND THAT A POLICY ON THESE MATTERS BE FORMULATED TO FACILITATE DECISIONS AS TO WHICH METHODS OF CALCULATION SHOULD BE USED IN SPECIFIC CIRCUMSTANCES, AND WHETHER THE COST OF FURTHER COLLECTION ACTION WILL EXCEED THE POSSIBLE AMOUNT OF RECOVERY. SEE OUR LETTER B 117604, DATED OCTOBER 19, 1966, TO THE HEADS OF DEPARTMENTS, IN WHICH WE RECOMMENDED THAT PROMPT ACTION BE TAKEN TO PROMULGATE APPROPRIATE PROCEDURES FOR TERMINATING COLLECTION ACTION.

IF YOUR SHOULD FEEL WE SHOULD BE OF ANY FURTHER ASSISTANCE AFTER YOU HAVE HAD AN OPPORTUNITY TO ESTABLISH APPROPRIATE PROCEDURES, PLEASE DO NOT HESITATE TO CALL UPON US. ..END :