B-173735, JUL 25, 1972, 52 COMP GEN 45

B-173735: Jul 25, 1972

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CONTRACTS - DEFAULT - PROCUREMENT FROM ANOTHER SOURCE - EXCESS COST LIABILITY - DISPOSITION OF COLLECTION THE EXCESS COSTS THAT ARE DUE THE GOVERNMENT INCIDENT TO A REPLACEMENT CONTRACT AWARDED UPON DEFAULT BY THE ORIGINAL CONTRACTOR MAY BE DEDUCTED FROM THE AMOUNT EARNED BUT WITHHELD FROM THE DEFAULTING CONTRACTOR AND THE EXCESS COSTS TRANSFERRED FROM THE APPROPRIATION ACCOUNT IN WHICH HELD TO THE MISCELLANEOUS RECEIPTS ACCOUNT "3032 MISCELLANEOUS RECOVERIES OF EXCESS PROFITS AND COSTS" IN ACCORDANCE WITH THE GENERAL RULE THAT EXCESS COSTS RECOVERED FROM DEFAULTING CONTRACTORS OR THEIR SURETIES ARE REQUIRED BY SECTION 3617. THERE IS NO DISTINCTION BETWEEN AMOUNTS EARNED BY BUT WITHHELD FROM DEFAULTING CONTRACTORS AND THOSE RECOVERED FROM VOLUNTARY PAYMENTS.

B-173735, JUL 25, 1972, 52 COMP GEN 45

CONTRACTS - DEFAULT - PROCUREMENT FROM ANOTHER SOURCE - EXCESS COST LIABILITY - DISPOSITION OF COLLECTION THE EXCESS COSTS THAT ARE DUE THE GOVERNMENT INCIDENT TO A REPLACEMENT CONTRACT AWARDED UPON DEFAULT BY THE ORIGINAL CONTRACTOR MAY BE DEDUCTED FROM THE AMOUNT EARNED BUT WITHHELD FROM THE DEFAULTING CONTRACTOR AND THE EXCESS COSTS TRANSFERRED FROM THE APPROPRIATION ACCOUNT IN WHICH HELD TO THE MISCELLANEOUS RECEIPTS ACCOUNT "3032 MISCELLANEOUS RECOVERIES OF EXCESS PROFITS AND COSTS" IN ACCORDANCE WITH THE GENERAL RULE THAT EXCESS COSTS RECOVERED FROM DEFAULTING CONTRACTORS OR THEIR SURETIES ARE REQUIRED BY SECTION 3617, REVISED STATUTES, 31 U.S.C. 484, TO BE DEPOSITED IN THE TREASURY AS MISCELLANEOUS RECEIPTS. FURTHERMORE, THERE IS NO DISTINCTION BETWEEN AMOUNTS EARNED BY BUT WITHHELD FROM DEFAULTING CONTRACTORS AND THOSE RECOVERED FROM VOLUNTARY PAYMENTS, LITIGATION, OR OTHERWISE.

TO PAUL J. GRAINGER, UNITED STATES DEPARTMENT OF AGRICULTURE, JULY 25, 1972:

REFERENCE IS MADE TO YOUR LETTER DATED JULY 6, 1971, RECEIVED HERE ON JULY 30, CONCERNING A VOUCHER THAT HAS BEEN PRESENTED TO YOU FOR CERTIFICATION WHICH PROPOSES TO TRANSFER THE SUM OF $2,464.65 FROM THE APPROPRIATION ACCOUNT "12-20X8102(11), FEDERAL AID HIGHWAYS TRUST FUND" TO THE MISCELLANEOUS RECEIPTS ACCOUNT "3032 MISCELLANEOUS RECOVERIES OF EXCESS PROFITS AND COSTS."

IT IS EXPLAINED IN YOUR LETTER THAT -

*** THIS AMOUNT REPRESENTS EXCESS COSTS DUE TO A REPLACEMENT CONTRACT AWARDED TO COMPLETE WORK STARTED AND DEFAULTED BY THE ORIGINAL CONTRACTOR, R. D. BOTTORFF. WHEN THE DEFAULT OCCURRED, THERE WAS $4,136.00 EARNED BY BOTTORFF, BUT UNPAID. OF THIS AMOUNT $1,085.86 IS DUE THE DEPARTMENT OF LABOR FOR VIOLATION OF THE SERVICE CONTRACT ACT, 41 U.S.C. 351, ET SEQ. AFTER PAYMENT TO THE DEPARTMENT OF LABOR THERE REMAINS IN THE APPROPRIATION $3,050.14 EARNED, BUT UNPAID TO THE DEFAULTING CONTRACTOR, BOTTORFF. AS PREVIOUSLY MENTIONED $2,464.65 IS SCHEDULED FOR DEPOSIT TO MISCELLANEOUS RECEIPTS. PRIOR TO EFFECTING THIS TRANSFER WE REQUEST YOUR RULING AS TO THE PROPER DISPOSITION OF EXCESS COSTS.

YOU REFER TO OUR DECISIONS 8 COMP. GEN. 284(1928); 10 ID. 510(1931); 14 ID. 106(1934); 40 ID. 590(1961); 44 ID. 623(1965); AND 46 ID. 554(1966), ALL OF WHICH ARTICULATE THE GENERAL RULE THAT EXCESS COSTS RECOVERED FROM DEFAULTING CONTRACTORS OR THEIR SURETIES ARE REQUIRED BY SECTION 3617, REVISED STATUTES, 31 U.S.C. 484, TO BE DEPOSITED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS. HOWEVER, YOU STATE THAT IN NONE OF THE DECISIONS THAT YOU HAVE REVIEWED HAVE YOU FOUND SPECIFIC DISCUSSION CLARIFYING WHETHER AMOUNTS EARNED AND NOT PAID MUST BE DEPOSITED AS A COLLECTION. THE DECISION APPEARING IN 8 COMP. GEN. 284 IS STATED TO BE THE CLOSEST BUT YOU FEEL THAT IT IS AMBIGUOUS AND YOU ARE NOT SURE THAT THERE PROPERLY WAS CONSIDERED THEREIN THE DIFFERENCE BETWEEN UNEXPENDED FUNDS AND COLLECTIONS OR RECOVERIES.

WHILE THE DECISION IN 8 COMP. GEN. 284 REQUIRED THAT AN AMOUNT EARNED BY AND WITHHELD FROM THE DEFAULTING CONTRACTOR BE DEPOSITED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS, THE QUESTION PRIMARILY INVOLVED THEREIN WAS WHETHER OR NOT THE AMOUNT SHOULD INSTEAD BE DEPOSITED INTO THE RECLAMATION FUND PURSUANT TO A STATUTORY PROVISION PROVIDING GENERALLY THAT ALL MONEYS RECEIVED IN CONNECTION WITH OPERATIONS OF THE RECLAMATION LAW BE DEPOSITED INTO THE RECLAMATION FUND.

THE DECISIONS 10 COMP. GEN. 510 AND 14 COMP. GEN. 106 LIKEWISE CONCERNED AMOUNTS EARNED BY AND WITHHELD FROM DEFAULTING CONTRACTORS AND WHICH WERE REQUIRED TO BE DEPOSITED AS MISCELLANEOUS RECEIPTS; HOWEVER THERE WAS NOT DISCUSSED THEREIN ANY DISTINCTION BETWEEN AMOUNTS EARNED BUT UNPAID AND AMOUNTS OTHERWISE RECOVERED FROM DEFAULTING CONTRACTORS.

THE CASE IN 44 COMP. GEN. 623 CONCERNED, IN PART, AN EARNED BUT WITHHELD AMOUNT TO BE TAKEN INTO CONSIDERATION FOR THE PURPOSE OF COMPUTING THE AMOUNT OF EXCESS COSTS TO BE RECOVERED FROM THE DEFAULTING CONTRACTOR. WHILE IT WAS NOT SPECIFICALLY STATED IN THAT DECISION THAT THE AMOUNT WITHHELD PROPERLY MIGHT REMAIN IN THE APPROPRIATION OR WHETHER IT MUST BE DEPOSITED AS MISCELLANEOUS RECEIPTS, THE GENERAL RULE WITH RESPECT TO DISPOSITION OF EXCESS COSTS WAS SET OUT THEREIN AND REFERENCE WAS MADE TO 8 COMP. GEN. 284 AND 14 ID. 106 WHICH, AS STATED ABOVE, REQUIRED SUCH AMOUNTS EARNED BUT WITHHELD TO BE DEPOSITED AS MISCELLANEOUS RECEIPTS.

THE MOST RECENT DECISION WHICH YOU REFERRED TO, 46 COMP. GEN. 554(1966), CONCERNED THE WITHHOLDING OF AN AMOUNT OWING TO THE DEFAULTING CONTRACTOR UNDER A CONTRACT OTHER THAN THE CONTRACT UNDER DEFAULT. WHILE THAT AMOUNT AS WELL AS ANY THAT MIGHT OTHERWISE BE COLLECTED AS EXCESS COSTS WERE DIRECTED TO BE DEPOSITED AS MISCELLANEOUS RECEIPTS, NO DISTINCTION WAS DRAWN BETWEEN AMOUNTS WITHHELD AND THOSE OTHERWISE RECOVERED.

THE REMAINING DECISION REFERRED TO IN YOUR LETTER, 40 COMP. GEN. 590, AS PARTIALLY QUOTED IN THE LETTER PERMITTED THE BALANCE REMAINING UNDER THE DEFAULTED CONTRACT TO BE USED FOR REPROCUREMENT, BUT NO PORTION OF SUCH BALANCE HAD BEEN EARNED BY THE DEFAULTING CONTRACTOR. THE DECISION ALSO REPEATED THE GENERAL RULE THAT AMOUNTS RECOVERED FROM DEFAULTING CONTRACTORS ARE REQUIRED TO BE DEPOSITED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS. IT FOUND NO AUTHORITY WHEREBY ANY EXCESS COSTS RECOVERED FROM THE DEFAULTING CONTRACTOR OR HIS SURETY COULD BE USED TO REIMBURSE THE APPROPRIATION INVOLVED BUT HELD THAT SUCH EXCESS COSTS NEED NOT BE CONSIDERED IN COMPUTING STATUTORY MAXIMUM COST LIMITATIONS. THERE WERE NOT FOR CONSIDERATION ANY AMOUNTS EARNED BY THE DEFAULTING CONTRACTOR BUT NOT PAID TO HIM. SUCH CASE, THEREFORE, IS NOT RELEVANT TO THE MATTER HERE INVOLVED.

WE AGREE WITH YOUR OBSERVATION THAT IN THE DECISIONS INVOLVING RECOVERY OF EXCESS COSTS THERE HAS BEEN LITTLE OR NO DISCUSSION REGARDING THE DISTINCTION TO BE MADE BETWEEN AMOUNTS EARNED BY BUT WITHHELD FROM DEFAULTING CONTRACTORS AND THOSE RECOVERED THROUGH VOLUNTARY PAYMENTS, LITIGATION, OR OTHERWISE, NOR, IN GENERAL, DO WE BELIEVE ANY DISTINCTION PROPERLY CAN BE MADE.

ACCORDINGLY, AND IF OTHERWISE CORRECT, THE VOUCHER WHICH IS RETURNED HEREWITH PROPERLY MAY BE CERTIFIED.