B-170724, SEP. 22, 1970

B-170724: Sep 22, 1970

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SINCE AEC WILL HAVE TO PAY ITS CPFF CONTRACTOR WITH AEC SUPPORT SERVICES. BANKRUPT CONTRACTOR WHO WAS FURNISHED SERVICES BY AEC. THE SUBJECT CONTRACT OR INTERAGENCY AGREEMENT WAS EXECUTED FEBRUARY 1968 IN ORDER TO PERMIT PROOF FIRING OF CERTAIN NAVY GUN BARRELS BY THE NAVY AT THE AEC'S NATIONAL REACTOR TESTING STATION (NRTS) IN IDAHO. IT WAS PROVIDED THAT: "COSTS. ASSOCIATED WITH SUCH FIRING WILL BE BORNE BY THE NAVY". THE COST OF SUCH SERVICES WAS TO BE ASSUMED BY THE NAVY. NAVY'S CONTRACTOR ON THE PROJECT WAS S&A FABRICATING. INC AND WRIGHT ARE COST-TYPE CONTRACTORS FOR AEC. S&A FABRICATING IS NOW BANKRUPT. BOTH INC AND WRIGHT HAVE PAST DUE CLAIMS AGAINST THE BANKRUPT FOR SERVICES PERFORMED ON THIS PROJECT.

B-170724, SEP. 22, 1970

CONTRACTS - INTERAGENCY AGREEMENTS LIABILITY DETERMINATION THAT NAVY MUST PAY AEC FOR COSTS INCIDENT TO PROOF FIRING OF CERTAIN NAVY GUN BARRELS AND UNDER INTERAGENCY AGREEMENT, SINCE AEC WILL HAVE TO PAY ITS CPFF CONTRACTOR WITH AEC SUPPORT SERVICES. NAVY SHOULD TAKE SET-OFF ACTION AGAINST S&A FABRICATING, INC., BANKRUPT CONTRACTOR WHO WAS FURNISHED SERVICES BY AEC.

TO DR. SEABORG:

BY LETTER DATED AUGUST 21, 1970, THE CONTROLLER, ATOMIC ENERGY COMMISSION (AEC), FORWARDED A REQUEST FOR A DECISION AS TO THE PROPRIETY OF A CONTEMPLATED PAYMENT OF $5,566.11 UNDER CONTRACT NO. AT (10-1)-1280, BETWEEN THE DEPARTMENT OF THE NAVY, NAVAL ORDANCE SYSTEMS COMMAND, AND THE AEC, IDAHO OPERATIONS OFFICE.

THE SUBJECT CONTRACT OR INTERAGENCY AGREEMENT WAS EXECUTED FEBRUARY 1968 IN ORDER TO PERMIT PROOF FIRING OF CERTAIN NAVY GUN BARRELS BY THE NAVY AT THE AEC'S NATIONAL REACTOR TESTING STATION (NRTS) IN IDAHO. IT WAS PROVIDED THAT: "COSTS, BOTH DIRECT AND INDIRECT, ASSOCIATED WITH SUCH FIRING WILL BE BORNE BY THE NAVY". THE AGREEMENT CALLED FOR THE AEC, ACTING THROUGH ITS CONTRACTORS, TO FURNISH REQUESTED SUPPORT SERVICES. THE COST OF SUCH SERVICES WAS TO BE ASSUMED BY THE NAVY.

NAVY'S CONTRACTOR ON THE PROJECT WAS S&A FABRICATING, INCORPORATED, DURING 1969 S&A ISSUED PURCHASE ORDERS AND WORK REQUESTS TO HOWARD S. WRIGHT & ASSOCIATES AND IDAHO NUCLEAR CORPORATION (INC) FOR VARIOUS SUPPORT SERVICES AND EQUIPMENT LEASE. INC AND WRIGHT ARE COST-TYPE CONTRACTORS FOR AEC. INC HAS PRIME RESPONSIBILITY FOR CERTAIN OPERATIONS AND SERVICES AT NRTS AND WRIGHT HAS SIMILAR RESPONSIBILITY FOR PERFORMING CERTAIN CONSTRUCTION SERVICES THERE.

S&A FABRICATING IS NOW BANKRUPT, AND BOTH INC AND WRIGHT HAVE PAST DUE CLAIMS AGAINST THE BANKRUPT FOR SERVICES PERFORMED ON THIS PROJECT. THESE CLAIMS INCLUDE $4,574.46 PAYABLE TO INC AND $991.65 PAYABLE TO WRIGHT, OR A TOTAL AMOUNT OF $5,566.11. NAVY AGREES THAT THE SERVICES PROVIDED WERE OF THE TYPE CONTEMPLATED BY THE NAVY/AEC AGREEMENT BUT RESISTS PAYMENT BECAUSE THE SERVICES WERE INITIALLY DEFINED AND ORDERED BY S&A FABRICATING AND NOT BY THE NAVY. YOU REPORT THAT IF NAVY DOES NOT PAY ON THESE CLAIMS, THE AEC WILL BE LEGALLY RESPONSIBLE FOR THE COSTS UNDER ITS CPFF CONTRACTS WITH INC AND WRIGHT. OUR DECISION ON THE MATTER IS REQUESTED.

IT APPEARS AS INDICATED BY THE LETTER OF FEBRUARY 24, 1969, FROM THE IDAHO OPERATIONS OFFICE TO WRIGHT (WE ASSUME A SIMILAR LETTER WAS SENT TO INC), THAT WRIGHT AND INC PERFORMED THE WORK AT THE INSTANCE OF AEC. THEREFORE, WE AGREE THAT NOTWITHSTANDING THE PROVISION FOR BILLING S&A FABRICATING DIRECTLY FOR THE SERVICES FURNISHED, AEC WHETHER AS CONTRACTOR OR GUARANTOR IS OBLIGATED TO PAY THE AMOUNTS CLAIMED IF OTHERWISE CORRECT. SINCE THE INTERAGENCY AGREEMENT PROVIDES THAT THE NAVY WILL BEAR ALL THE COSTS ASSOCIATED WITH THE PROOF FIRINGS AND SINCE THE COSTS IN QUESTION ARE ASSOCIATED WITH THE FIRINGS, WE CONCLUDE THAT THE AMOUNT CLAIMED, IF OTHERWISE CORRECT, SHOULD BE PAID BY NAVY TO AEC IN ACCORDANCE WITH THE TERMS OF THE INTERAGENCY AGREEMENT.

WITH REGARD TO THE PENDING BANKRUPTCY PROCEEDINGS INVOLVING S&A FABRICATING WE ASSUME THAT THE NAVY WILL TAKE THE NECESSARY ACTION TO PROTECT THE GOVERNMENT'S INTERESTS. WE UNDERSTAND THAT THE NAVY HAS SET- OFF CLAIMS AGAINST THE BANKRUPT. IN THIS CONNECTION, THE GOVERNMENT MAY HAVE A SET-OFF CLAIM AGAINST S&A FABRICATING ARISING FROM THE BANKRUPT'S FAILURE TO PAY THE AEC CONTRACTORS.

A COPY OF THIS LETTER HAS BEEN FORWARDED TO THE SECRETARY OF THE NAVY.