B-168128, NOV. 18, 1969

B-168128: Nov 18, 1969

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WHERE CONTRACT MODIFICATION WAS PERFORMED AND STIPULATED CONSIDERATION PAID WHICH PAYMENT WAS ACKNOWLEDGED AS FINAL BY STATE PERSONNEL. HAS RIGHT TO KNOW WHETHER SUPPOSED PAYMENT IS. FINAL AND CONCLUSIVE AND TRANSACTION IS CONSIDERED CLOSED. TO MISS KUHN: REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 6. THE STATE WAS TO BE REIMBURSED BY THE GOVERNMENT FOR ALL INCURRED COSTS. A PREPAYMENT GOVERNMENT AUDIT WAS CONDUCTED. PAYMENT IN THE FULL AMOUNT OF THE INVOICES WAS MADE. SINCE AN ADDITIONAL PAYMENT WAS REQUESTED UNDER WHAT SEEMED TO BE A CLOSED CONTRACT. AN AUDIT WAS PERFORMED TO DETERMINE THE APPROPRIATENESS OF THE INVOICE. THE CLAIM WAS FORWARDED TO OUR OFFICE FOR AN ADVANCE DECISION.

B-168128, NOV. 18, 1969

HIGHWAYS--CONSTRUCTION--FEDERAL AID HIGHWAY PROGRAMS--RELOCATION COSTS- ADDITIONAL COSTS UNDERWATER STORAGE CONTRACT MODIFICATION FOR HIGHWAY RELOCATION CONSTRUCTION BY STATE WITH COSTS REIMBURSABLE FROM GOVERNMENT, WHERE CONTRACT MODIFICATION WAS PERFORMED AND STIPULATED CONSIDERATION PAID WHICH PAYMENT WAS ACKNOWLEDGED AS FINAL BY STATE PERSONNEL, ALTHOUGH GOVT. HAS RIGHT TO KNOW WHETHER SUPPOSED PAYMENT IS, IN FACT, FINAL AND CONCLUSIVE AND TRANSACTION IS CONSIDERED CLOSED, STATE'S CLAIM THEREAFTER FOR ADDITIONAL COSTS MAY BE ALLOWED EVEN IF CONTRACTING OFFICER HAD NO AUTHORITY TO ISSUE CONTRACT MODIFICATION AFTER FINAL PAYMENT UNDER CONTRACT, SINCE GOVT. KNEW OF POSSIBLE CLAIM PRIOR TO FINAL PAYMENT AS ITS AUDITORS HAD NOTED VARIOUS CHARGES NOT BILLED BY STATE.

TO MISS KUHN:

REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 6, 1969, FORWARDING A CERTIFIED VOUCHER STATED IN FAVOR OF THE COMMONWEALTH OF VIRGINIA, IN THE AMOUNT OF $5,297.62, REPRESENTING A CLAIM ARISING OUT OF MODIFICATION NO. 3 TO CONTRACT NO. DA-46-022-CIVENG-61-646, ISSUED BY THE CORPS OF ENGINEERS.

THE SUBJECT MODIFICATION CONSISTED OF A SUPPLEMENTAL AGREEMENT BY WHICH THE GOVERNMENT CONTRACTED FOR THE RELOCATION AND/OR READJUSTMENT BY THE COMMONWEALTH OF CERTAIN HIGHWAYS TO ACCOMMODATE LOW FLOW AUGMENTATION STORAGE FOR WATER QUALITY CONTROL AT THE JOHN W. FLANNAGAN RESERVOIR, POUND RIVER, VIRGINIA. THE STATE WAS TO BE REIMBURSED BY THE GOVERNMENT FOR ALL INCURRED COSTS. THE ESTIMATED INCREASE IN THE BASIC CONTRACT PRICE TOTALED $420,000. SUBSEQUENT TO COMPLETION OF THE WORK, THE STATE SUBMITTED INVOICES DESIGNATED "1 FINAL" AND "1 AND FINAL" IN THE TOTAL AMOUNT OF $414,577.16, REPRESENTING COSTS INCURRED IN THE PERFORMANCE OF THE MODIFICATION REQUIREMENTS. THEREAFTER, A PREPAYMENT GOVERNMENT AUDIT WAS CONDUCTED. STATE PERSONNEL ACKNOWLEDGED THE FIRST AND FINAL PAYMENT CHARACTER OF THE BILLS, WHEREUPON, ON APRIL 8, 1968, PAYMENT IN THE FULL AMOUNT OF THE INVOICES WAS MADE.

ON FEBRUARY 10, 1969, THE STATE SUBMITTED A $5,297.62 "PROGRESS BILL" DESIGNATED "NO. 2 AND FINAL" FOR PAYMENT IN CONNECTION WITH THE SUBJECT MODIFICATION. SINCE AN ADDITIONAL PAYMENT WAS REQUESTED UNDER WHAT SEEMED TO BE A CLOSED CONTRACT, AN AUDIT WAS PERFORMED TO DETERMINE THE APPROPRIATENESS OF THE INVOICE, RESULTING IN A RESERVATION OF FUNDS FOR PAYMENT AND RECOMMENDATIONS FOR PAYMENT. IN VIEW OF THE DOUBT AS TO WHETHER PAYMENT OF THE VOUCHER PROPERLY MAY BE MADE, THE CLAIM WAS FORWARDED TO OUR OFFICE FOR AN ADVANCE DECISION.

IN GENERAL, WHEN A CONTRACT HAS BEEN PERFORMED AND THE STIPULATED CONSIDERATION PAID, THE TRANSACTION IS CONSIDERED TO BE CLOSED. A CLAIM ON THE PART OF A CONTRACTOR ASSERTED TO BE DUE AND PAYABLE UNDER THE TERMS OF A CONTRACT SHOULD BE MADE AT OR BEFORE THE TIME FINAL SETTLEMENT IS EFFECTED. THE GOVERNMENT IS ENTITLED TO KNOW, WHEN IT MAKES WHAT IT BELIEVES TO BE A FINAL PAYMENT ON ITS CONTRACT, WHAT CLAIMS A CONTRACTOR INTENDS TO ASSERT AGAINST IT ON ACCOUNT OF THE CONTRACT. IT IS ITS RIGHT TO KNOW WHETHER THE SUPPOSED FINAL PAYMENT IS IN FACT FINAL AND CONCLUSIVE. POOLS ENGINEERING AND MACHINE COMPANY V UNITED STATES, 57 CT. CL. 232, 234 (1922). SEE ALSO B-122703, APRIL 22, 1959; B-164790, JULY 25, 1968. HOWEVER, APPLICATION OF THOSE RULES WHICH ORDINARILY PRECLUDE FURTHER PAYMENT UNDER A CLOSED CONTRACT IS NOT REQUIRED HERE. THE RECORD REVEALS THAT DURING THE PRE-PAYMENT AUDIT, GOVERNMENT AUDITORS DISCOVERED AND NOTED VARIOUS CONTRACT CHARGES NOT BILLED TO THE GOVERNMENT BY THE STATE. DESPITE THIS DISCOVERY, THESE COSTS WERE NEITHER VERIFIED NOR DISCUSSED WITH STATE REPRESENTATIVES BECAUSE THE AUDITORS DID NOT CONSIDER THEMSELVES AUTHORIZED TO TAKE ACTION THAT WOULD RESULT IN AN ADDITIONAL CLAIM AGAINST THE GOVERNMENT. THEREFORE, THE GOVERNMENT, IN FACT, DID KNOW OF A POSSIBLE CLAIM BY THE COMMONWEALTH PRIOR TO FINAL PAYMENT UNDER THE CONTRACT. SEE B-123212, JULY 13, 1955. IN ADDITION, WE HAVE HELD THAT OUR OFFICE WOULD NOT BE REQUIRED TO OBJECT TO A PROPOSED PAYMENT TO A CONTRACTOR, IN SIMILAR CIRCUMSTANCES, EVEN IF WE FOUND IT NECESSARY TO CONCLUDE THAT THE CONTRACTING OFFICER HAD NO AUTHORITY TO ISSUE A CONTRACT MODIFICATION AFTER FINAL PAYMENT UNDER A CONTRACT. B 150645, MARCH 4, 1963. CLEARLY, THE GOVERNMENT HAS RECEIVED THE BENEFIT OF THE STATE'S WORK PURSUANT TO A PROPER MODIFICATION TO A CONTRACT. B-150645, SUPRA.

IN LIGHT OF THE FOREGOING, THE VOUCHER WHICH IS RETURNED HEREWITH MAY BE PAID IF PROPER IN OTHER RESPECTS.