B-17143, JUNE 19, 1941, 20 COMP. GEN. 917

B-17143, JUNE 19, 1941, 20 COMP. GEN. 917

CONTRACTS - PAYMENTS - ADVANCE OF DELIVERY OF ARTICLE WHILE, UNDER THE ADVANCE PAYMENT PROHIBITION OF SECTION 3648, REVISED STATUTES, PAYMENT MAY NOT BE MADE FOR ARTICLES IN WHICH THE UNITED STATES HAS ACQUIRED NO RIGHT OR INTEREST AND FROM WHICH IT DERIVES NO BENEFIT, PAYMENT MAY BE MADE FOR ARTICLES IN ADVANCE OF ACTUAL DELIVERY IF TITLE THEREIN HAS VESTED IN THE GOVERNMENT AT THE TIME OF PAYMENT, OR IF THE ARTICLES ARE IMPRESSED WITH A VALID LIEN IN FAVOR OF THE UNITED STATES IN AN AMOUNT AT LEAST EQUAL TO THE PAYMENT. 15 COMP. DEC. 74, DISTINGUISHED. WHERE THE GOVERNMENT IS PRESENTLY UNABLE TO FULFILL ITS OBLIGATION UNDER A CONTRACT FOR OFFICE EQUIPMENT BY ACCEPTING AND MAKING FINAL PAYMENT THEREFOR, THE CONTRACT MAY BE MODIFIED TO PROVIDE FOR THE TAKING OF TITLE TO THE EQUIPMENT IN STORAGE AND TO PERMIT PARTIAL PAYMENT, PROVIDED THE CONTRACTOR'S PERFORMANCE BOND SURETY WILL CONSENT THERETO, AND IF THE MODIFYING INSTRUMENT PROVIDE THAT THE CONTRACTOR SHALL BE RESPONSIBLE ABSOLUTELY FOR THE CARE AND PROTECTION OF THE EQUIPMENT, AND THAT THE CONTRACTOR WILL REMAIN LIABLE FOR THE FULFILLMENT OF THE TERMS AND CONDITIONS OF THE ORIGINAL CONTRACT.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF THE NAVY, JUNE 19, 1941:

THERE HAS BEEN CONSIDERED YOUR LETTER OF MAY 22, 1941, AS FOLLOWS:

UNDER DATE OF JUNE 17, 1940, THE NAVY DEPARTMENT ENTERED INTO CONTRACT NOD-1418 WITH THE SECURITY STEEL EQUIPMENT CORPORATION FOR STEEL DOCUMENT FILE EQUIPMENT FOR THE BUREAU OF NAVIGATION, NAVY DEPARTMENT, WASHINGTON, D.C., FOR A TOTAL COST OF $15,167.94.

ARTICLE 1 OF THE CONTRACT REQUIRED THE EQUIPMENT TO BE DELIVERED AND ERECTED ON THE THIRD FLOOR OF THE NAVY BUILDING, WASHINGTON, D.C., WITHIN ONE HUNDRED TWENTY (120) CALENDAR DAYS FROM ITS DATE OR APPROXIMATELY OCTOBER 14, 1940.

UNDER DATE OF AUGUST 7, 1940, THE BUREAU OF NAVIGATION, THE AGENCY REQUIRING THE EQUIPMENT, REPORTED THAT, SINCE ENTERING INTO THE CONTRACT, THE ALLOCATION TO THAT BUREAU OF ROOMS IN WHICH IT WAS PROPOSED TO INSTALL EQUIPMENT COVERED BY THE CONTRACT HAD BEEN REVOKED AND IT WOULD, THEREFORE, BE NECESSARY TO EXTEND THE OUTSIDE DATE ON WHICH DELIVERY MUST BE MADE TO DECEMBER 15, 1940.

DUE TO THE CONTINUED INABILITY OF THE GOVERNMENT TO TAKE DELIVERY OF THE EQUIPMENT BY THE LAST-MENTIONED DATE, THE CONTRACTOR AGREED TO WITHHOLD SHIPMENT UNTIL MARCH 1, 1941, WITHOUT EXTRA CHARGE. HOWEVER,ON THE INCIDENCE OF THIS DATE IT DEVELOPED THAT THE SPACE WAS STILL UNAVAILABLE AND THEREFORE A MODIFICATION OF THE CONTRACT WAS AUTHORIZED APRIL 1, 1941, PROVIDING FOR THE PAYMENT OF AN ADDITIONAL SUM OF $850.00 TO THE CONTRACTOR FOR CRATING AND UNCRATING AND, IN ADDITION, $112.00 A MONTH FOR STORAGE FROM MARCH 1, 1941, TO DATE OF SHIPMENT.

THE CRATING AND UNCRATING CHARGES WERE MADE NECESSARY FOR THE REASON THAT THE CONTRACTOR HAD BEEN AUTHORIZED INITIALLY TO TRANSPORT THE EQUIPMENT BY TRUCK UNCRATED IN ORDER TO SAVE THE EXPENSE OF FREIGHT WHICH, UNDER THE SPECIFICATIONS FORMING A PART OF THE CONTRACT, WAS THE OBLIGATION OF THE GOVERNMENT.

PRIOR TO ENTERING INTO THIS MODIFICATION, INQUIRY HAD BEEN MADE OF THE PUBLIC BUILDINGS ADMINISTRATION AS TO THE AVAILABILITY OF GOVERNMENT-OWNED SPACE AND REPLY WAS RECEIVED TO THE EFFECT THAT THERE WAS NO SUCH SPACE IN WASHINGTON THAT COULD BE ALLOCATED FOR THE PURPOSE AND ALSO THAT THE STORAGE CHARGE NAMED BY THE CONTRACTOR APPEARED TO BE A FAIR RENTAL.

THE LATEST REPORT FROM THE BUREAU OF NAVIGATION INDICATES THAT THE ACCEPTANCE OF THE EQUIPMENT IS DEPENDENT ON THE COMPLETION OF THE NAVY DEPARTMENT ANNEX IN ARLINGTON, VIRGINIA, AND THE APPROXIMATE DATE SET FOR THE OCCUPANCY OF THIS BUILDING IS AUGUST 1, 1941.

BY REASON OF THIS LONG DELAY WHICH WAS NOT ANTICIPATED AT THE TIME THE CONTRACT WAS ENTERED INTO, THE CONTRACTORS HAVE REQUESTED THAT THEY BE PAID AT LEAST 90 PERCENT OF THE CONTRACT PRICE AT THIS TIME SINCE THEY HAVE HAD THEIR FUNDS FOR LABOR AND MATERIAL TIED UP FOR MANY MONTHS AND ARE WORKING ON BORROWED CAPITAL.

IN A DECISION OF OCTOBER 8, 1908 (15 COMP. DEC. 76) THE COMPTROLLER OF THE TREASURY HELD THAT UNDER A CONTRACT PROVIDING FOR PARTIAL PAYMENT "ONLY ON ESTIMATES OF THE VALUE OF MATERIAL DELIVERED ON THE SITE AND ERECTED IN PLACE" PAYMENT COULD BE MADE FOR WORK COMPLETED AND READY FOR SHIPMENT BUT NOT ERECTED IN PLACE WHERE THE GOVERNMENT WAS AT FAULT AND DID NOT FURNISH THE CONTRACTOR THE SITE UPON WHICH TO PLACE THE MACHINERY CONTRACTED FOR.

THE PRESENT CASE POSSESSES FEATURES ANALOGOUS IN MANY RESPECTS TO THOSE CONSIDERED IN THE CITED DECISION. THE SECURITY STEEL EQUIPMENT CORPORATION IS IN NO WAY RESPONSIBLE FOR THE DELAY AND VOLUNTARILY WITHHELD SHIPMENT UNTIL MARCH 1, 1941, FOR A PERIOD OF OVER FOUR MONTHS WITHOUT EXTRA COMPENSATION. IT IS BELIEVED THAT THEY ARE ENTITLED TO SUCH FINANCIAL RELIEF AS MAY BE POSSIBLE DUE TO THE UNEXPECTED CONDITIONS CREATED BY THE EXISTING EMERGENCY THAT PREVENT THE NAVY DEPARTMENT FROM ACCEPTING DELIVERY OF THE COMPLETED EQUIPMENT AT THE TIME SPECIFIED IN THE CONTRACT.

IN VIEW OF THE FOREGOING, DECISION IS REQUESTED AS TO WHETHER OBJECTION WOULD BE RAISED TO A MODIFICATION OF THE CONTRACT AUTHORIZING A PAYMENT AT THIS TIME OF 90 PERCENT OF THE CONTRACT PRICE ON CONDITION THAT THE CONTRACTOR FURNISH A BOND IN SAID AMOUNT TO GUARANTEE THE FAITHFUL PERFORMANCE BY IT OF ALL OF THE OBLIGATIONS OF THE CONTRACT.

WHILE ARTICLE 8 OF THE CONTRACT PROVIDES THAT THE CONTRACTOR SHALL BE PAID FOR ARTICLES DELIVERED AND ACCEPTED, AS INDICATED IN YOUR LETTER, THE TERMS OF THE CONTRACT AFFORD NO BASIS FOR PAYMENT TO THE CONTRACTOR IN ANY AMOUNT UPON THE FACTS NOW APPEARING. IT DOES NOT APPEAR THAT THE UNITED STATES HAS ACQUIRED ANY RIGHT, TITLE, OR INTEREST IN THE EQUIPMENT, 19 COMP. GEN. 198, OR THAT IT HAS RECEIVED ANY PRESENT BENEFIT FROM THE WORK THUS FAR PERFORMED UNDER THE CONTRACT. THEREFORE, AND ASIDE FROM THE TERMS OF THE CONTRACT, ANY PAYMENT TO THE CONTRACTOR AT THIS TIME IS PRECLUDED BY SECTION 3648, REVISED STATUTES, WHICH IS IN PERTINENT PART AS FOLLOWS:

NO ADVANCE OF PUBLIC MONEY SHALL BE MADE IN ANY CASE WHATEVER. AND IN ALL CASES OF CONTRACTS FOR THE PERFORMANCE OF ANY SERVICE, OR THE DELIVERY OF ARTICLES OF ANY DESCRIPTION, FOR THE USE OF THE UNITED STATES, PAYMENT SHALL NOT EXCEED THE VALUE OF THE SERVICE RENDERED, OR OF THE ARTICLES DELIVERED PREVIOUSLY TO SUCH PAYMENT. * * *

AS STATED BY YOU, PAYMENT WAS AUTHORIZED, UNDER SOMEWHAT SIMILAR CIRCUMSTANCES, IN A DECISION REPORTED IN 15 COMP. DEC. 74. IT IS PRESUMED, HOWEVER, THAT THE PROVISIONS OF THE CITED SECTION OF THE REVISED STATUTES WERE OVERLOOKED IN THAT INSTANCE, SINCE THE DECISION MAKES NO REFERENCE TO SAID SECTION. A DIFFERENT CONCLUSION WAS REACHED IN A LATER DECISION, 17 COMP. DEC. 231, INVOLVING A SIMILAR CASE. SEE, ALSO, 20 COMP. GEN. 230, AND 20 OP. ATTY. GEN. 746.

WHILE, UNDER THE PROHIBITION OF THE STATUTE, PAYMENT MAY NOT BE MADE FOR ARTICLES IN WHICH THE UNITED STATES HAS ACQUIRED NO RIGHT OR INTEREST AND FROM WHICH IT DERIVES NO BENEFIT, PAYMENT MAY BE MADE FOR ARTICLES IN ADVANCE OF THEIR DELIVERY INTO THE ACTUAL POSSESSION OF THE UNITED STATES IF TITLE THEREIN HAS VESTED IN THE GOVERNMENT AT THE TIME OF SUCH PAYMENT, OR IF THE ARTICLES ARE IMPRESSED WITH A VALID LIEN IN FAVOR OF THE UNITED STATES IN AN AMOUNT AT LEAST EQUAL TO THE PAYMENT. 1 COMP. GEN. 143; 17 COMP. DEC. 894; 29 OP. ATTY. GEN. 46. AND, WHERE SUCH PROCEDURE WOULD BE IN THE INTEREST OF THE GOVERNMENT, AN EXISTING CONTRACT MAY BE MODIFIED TO PROVIDE THAT TITLE TO ARTICLES TO BE FURNISHED THEREUNDER WILL PASS TO THE UNITED STATES, AND PARTIAL PAYMENTS MAY BE MADE UNDER A CONTRACT SO MODIFIED. SEE DECISION OF JUNE 29, 1939, A-96745, TO THE SECRETARY OF THE TREASURY. SEE ALSO 21 OP. ATTY. GEN. 12.

SINCE IT APPEARS THE GOVERNMENT PRESENTLY IS UNABLE TO FULFILL ITS OBLIGATION UNDER THE CONTRACT BY ACCEPTING AND MAKING FINAL PAYMENT FOR THE EQUIPMENT, AND SINCE A CONTINUED FAILURE TO PERFORM ITS PART OF THE AGREEMENT DOUBTLESS WOULD ADVERSELY AFFECT THE GOVERNMENT'S POSITION IN THE MATTER, IT WOULD SEEM TO BE ADVANTAGEOUS TO THE UNITED STATES TO MODIFY THE CONTRACT TO PROVIDE FOR THE TAKING OF TITLE TO THE PROPERTY IN STORAGE AND TO PERMIT THE MAKING OF A PARTIAL PAYMENT IN SUCH AMOUNT AS WILL PROPERLY PROTECT THE INTERESTS OF THE GOVERNMENT IN THE MATTER.

ACCORDINGLY, THIS OFFICE WILL NOT OBJECT TO SUCH A MODIFICATION--- AND PAYMENT IN ACCORDANCE THEREWITH--- PROVIDED THE SURETY ON THE CONTRACTOR'S PERFORMANCE BOND WILL CONSENT THERETO. OF COURSE, IT SHOULD BE PROVIDED DEFINITELY IN THE INSTRUMENT MODIFYING THE CONTRACT THAT THE CONTRACTOR SHALL BE RESPONSIBLE ABSOLUTELY, AND NOT AS A MERE BAILEE, FOR THE CARE AND PROTECTION OF THE GOVERNMENT'S EQUIPMENT WHICH IS TO REMAIN IN THE POSSESSION OF THE CONTRACTOR, AND THAT THE CONTRACTOR WILL REMAIN LIABLE FOR THE FULFILLMENT OF ALL OF THE TERMS AND CONDITIONS OF THE ORIGINAL CONTRACT, AS AMENDED BY THE CHANGE ORDERS REFERRED TO IN THE ABOVE-QUOTED LETTER.