B-163206, B-163433, JUL. 25, 1968

B-163206, B-163433, JUL. 25, 1968

TO MR. SECRETARY:

REFERENCE IS MADE TO LETTER DATED JULY 11, 1968, FROM THE ASSISTANT SECRETARY OF THE ARMY (INSTALLATIONS AND LOGISTICS), REQUESTING CLARIFICATION OF OUR DECISIONS B-163206, APRIL 11, 1968, AND B-163433, APRIL 17, 1968, CONCERNING CONTRACT PAYMENT IN VIETNAMESE PIASTERS.

IN THE LETTER OF JULY 11, THE ASSISTANT SECRETARY STATES THAT THE QUESTION CONSIDERED IN THE CITED DECISIONS DEALT WITH A SITUATION WHERE THE CONTRACT PROVIDED FOR PAYMENT IN PIASTERS AT THE RATE OF EXCHANGE RECOGNIZED BY THE U.S. GOVERNMENT ON THE DATE PAYMENT IS MADE OR ON THE DATE APPROVED INVOICES ARE PRESENTED FOR PAYMENT. HE ALSO STATES THAT BASED UPON OUR DECISIONS THE PROCUREMENT ACTIVITY IN VIETNAM HAS BEEN INSTRUCTED THAT CONTRACTS CONTAINING SIMILAR PAYMENT PROVISIONS SHOULD BE PAID IN PIASTERS AT THE RATE OF 80 TO U.S. $1.00 RATHER THAN 118 TO U.S. $1.00.

THE ASSISTANT SECRETARY FURTHER STATES, HOWEVER, THAT IN CERTAIN CONTRACTS WRITTEN IN THE PAST EITHER DURING NEGOTIATIONS OR IN THE CONTRACT ITSELF, BOTH THE U.S. GOVERNMENT AND THE CONTRACTOR ARE CLEARLY SHOWN TO HAVE AGREED THAT THE RATE OF EXCHANGE WAS 118 PIASTERS TO U.S. $1.00 AT THE TIME THE CONTRACT WAS WRITTEN AND BOTH PARTIES RELIED UPON THIS RATE IN NEGOTIATING THE CONTRACT PRICE. ATTACHED TO THE ASSISTANT SECRETARY'S LETTER AS AN EXAMPLE OF SUCH AGREEMENT IS A CLAUSE WHICH PROVIDES IN PERTINENT PART AS FOLLOWS:

"ANY PAYMENTS MADE IN PIASTERS WILL BE AT THE RATE OF EXCHANGE OFFICIALLY RECOGNIZED BY THE U.S. GOVERNMENT ON THE DATE PAYMENT IS MADE. THIS RATE IS NOW 118$ VN TO 1.00$ US.' IN VIEW OF THE FOREGOING, THE ASSISTANT SECRETARY STATES THAT WHERE THERE IS CLEAR AND CONVINCING EVIDENCE THAT THE PARTIES BOTH AGREED AND RELIED UPON SOME OTHER RATE PREVAILING THAN THE LONG STANDING RATE OF 80 PIASTERS TO U.S. $1.00 RATE AND WHERE THERE WAS AT LEAST AN APPARENT BASIS FOR SUCH AGREEMENT (THE VIETNAMESE DECREE- LAW 002/SLU OF JUNE 17, 1966, AS AMENDED BY DECREE-LAW 035/SLU OF AUGUST 29, 1967), THE DEPARTMENT OF THE ARMY IS OF THE OPINION THAT SUCH AGREEMENT SHOULD BE HONORED AND PAYMENT MADE AT THE RATE AGREED UPON.

UNDER THE ABOVE-QUOTED CLAUSE IT IS INDICATED THAT THE PARTIES TO THE CONTRACT INTENDED THAT PAYMENT IN PIASTERS WAS TO BE MADE AT THE RATE OF EXCHANGE OFFICIALLY RECOGNIZED BY THE UNITED STATES ON THE DATE OF PAYMENT. THE CLAUSE FURTHER INDICATES THAT THE CONTRACTING PARTIES BELIEVED THAT THE OFFICIAL RATE OF EXCHANGE AT THE TIME THE CONTRACT WAS ENTERED INTO WAS 118$ VN TO 1.00$ U.S. FOR THE REASONS STATED IN OUR ABOVE -CITED DECISIONS IT APPEARS THAT THE OFFICIAL RATE OF EXCHANGE HAS BEEN AND CONTINUES TO BE 80 PIASTERS TO U.S. $1.00. HENCE, THE RATE OF 118 PIASTERS TO U.S. $1.00 STATED IN THE PAYMENT CLAUSE WAS INCORRECT. INASMUCH AS IT APPEARS, HOWEVER, THAT THE PRICE AGREED UPON IN THE CONTRACT WAS BASED UPON THE EXCHANGE RATE OF 118 PIASTERS TO U.S. $1.00 IT WOULD BE INEQUITABLE TO NOW REQUIRE THE CONTRACTOR TO ACCEPT PAYMENT FOR THE SUPPLIES OR SERVICES FURNISHED AT THE RATE OF 80 PIASTERS TO U.S. $1.00.

ACCORDINGLY, WE AGREE WITH THE RECOMMENDATION MADE BY THE ASSISTANT SECRETARY IN HIS LETTER OF JULY 11, 1968.