B-20140, SEPTEMBER 22, 1941, 21 COMP. GEN. 241

B-20140: Sep 22, 1941

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"ALL ROUTINE MAINTENANCE AND NORMAL RUNNING REPAIRS" ARE TO BE MADE BY THE LESSEE (PRIME CONTRACTOR) WITHOUT EXPENSE TO THE LESSORS AND THE EXPENSES THEREOF WERE NOT INCLUDED BY THE LESSORS IN COMPUTING THE RENTAL RATES. WHERE RENTAL RATES WERE CONSIDERED NORMALLY TO INCLUDE AN ALLOWANCE FOR WEAR AND TEAR INCIDENT TO THE USE OF THE EQUIPMENT. 1941: THERE WAS RECEIVED BY INDORSEMENT FROM THE CHIEF OF FINANCE YOUR LETTER OF AUGUST 16. SAME ARE TRANSMITTED HEREWITH FOR AN ADVANCE DECISION AS TO THE PROPRIETY OF PAYMENT. AS THIS OFFICE IS IN DOUBT AS TO WHETHER THE PROVISIONS OF ARTICLE II OF THE STANDARD EQUIPMENT RENTAL AGREEMENT CONTAINS SUFFICIENT AUTHORITY TO JUSTIFY PAYMENT OF THESE ACCOUNTS. 2.

B-20140, SEPTEMBER 22, 1941, 21 COMP. GEN. 241

CONTRACTS - COST-PLUS - REPAIRS TO RENTED EQUIPMENT WHERE, UNDER RENTAL AGREEMENTS ENTERED INTO BY A COST-PLUS-A-FIXED FEE CONTRACTOR,"ALL ROUTINE MAINTENANCE AND NORMAL RUNNING REPAIRS" ARE TO BE MADE BY THE LESSEE (PRIME CONTRACTOR) WITHOUT EXPENSE TO THE LESSORS AND THE EXPENSES THEREOF WERE NOT INCLUDED BY THE LESSORS IN COMPUTING THE RENTAL RATES, THE PRIME CONTRACTOR MAY BE REIMBURSED BY THE GOVERNMENT FOR THE COST OF SUCH REPAIRS. 20 COMP. GEN. 632, WHERE RENTAL RATES WERE CONSIDERED NORMALLY TO INCLUDE AN ALLOWANCE FOR WEAR AND TEAR INCIDENT TO THE USE OF THE EQUIPMENT, DISTINGUISHED.

COMPTROLLER GENERAL WARREN TO LT. COL. H. M. DENNING, UNITED STATES ARMY, SEPTEMBER 22, 1941:

THERE WAS RECEIVED BY INDORSEMENT FROM THE CHIEF OF FINANCE YOUR LETTER OF AUGUST 16, 1941, AS FOLLOWS:

1. THE UNDERSIGNED BEING A DULY APPOINTED DISBURSING OFFICER OF THE FINANCE DEPARTMENT, AND IN RECEIPT OF THE ENCLOSED BUREAU VOUCHERS, NO. T 253 AND NO. T 230, IN THE AMOUNTS OF $387.06 AND $245.21, RESPECTIVELY, PERTAINING TO THE ACCOUNT OF COLEMAN BROS. CORP. AND JOHN BOWEN CO. UNDER CONTRACT W 6101 QM 148, FOR REIMBURSEMENT OF EXPENDITURES COVERING REPAIRS AND REPLACEMENTS TO RENTED EQUIPMENT; SAME ARE TRANSMITTED HEREWITH FOR AN ADVANCE DECISION AS TO THE PROPRIETY OF PAYMENT, AS THIS OFFICE IS IN DOUBT AS TO WHETHER THE PROVISIONS OF ARTICLE II OF THE STANDARD EQUIPMENT RENTAL AGREEMENT CONTAINS SUFFICIENT AUTHORITY TO JUSTIFY PAYMENT OF THESE ACCOUNTS.

2. IT WILL BE NOTED THAT ARTICLE II OF THE STANDARD EQUIPMENT RENTAL AGREEMENT APPLICABLE TO BUREAU VOUCHER NO. T 253 READS AS FOLLOWS:

"ALL NECESSARY MINOR OR FIELD REPAIRS TO EQUIPMENT SHALL BE MADE BY THE LESSEE WITHOUT COST TO LESSOR. OTHER THAN MINOR OR FIELD REPAIRS SHALL BE MADE BY THE LESSOR WITHOUT COST TO THE SSEE.' WHEREAS ARTICLE II OF THE STANDARD EQUIPMENT RENTAL AGREEMENT APPLICABLE TO BUREAU VOUCHER NO. T 230 READS AS FOLLOWS:

"EQUIPMENT SHALL BE MAINTAINED IN GOOD REPAIR AND WORKING CONDITION BY THE LESSOR WITHOUT COST TO THE LESSEE. ROUTINE MAINTENANCE AND NORMAL RUNNING REPAIRS BY THE LESSEE IS APPROVED.'

IN CONNECTION WITH THE FOREGOING, REFERENCE HAS BEEN MADE TO YOUR DECISION B-15593 DATED APRIL 14, 1941, AND WHILE IT IS APPRECIATED THAT SAID DECISION CONSIDERED THE MATTER OF LOSS OR DAMAGE TO RENTED EQUIPMENT, YET THAT PORTION THEREOF WHICH STATES:

"SUCH USUAL RENTAL RATES FOR EQUIPMENT NORMALLY INCLUDE NOT ONLY A FAIR PROFIT, BUT AN ALLOWANCE FOR WEAR AND TEAR INCIDENT TO THE USE OF THE EQUIPMENT FOR THE PURPOSE RENTED AND, UNDER THE SETTLED RULES OF BAILMENT LAW, A MARGIN TO COMPENSATE THE OWNER FOR THE RISK OF LOSS AND DAMAGE EXCEPT THAT RESULTING FROM THE NEGLIGENCE OF THE BAILEE," APPEARS TO BE IN CONFLICT WITH ARTICLE II OF THE STANDARD EQUIPMENT RENTAL AGREEMENTS REFERRED TO ABOVE.

WITH YOUR LETTER THE CHIEF OF FINANCE TRANSMITTED A REPORT BY THE CONTRACTING OFFICER DATED AUGUST 1, 1941, AS FOLLOWS:

1. REFERENCE IS MADE TO ORIGINAL COMMUNICATIONS CONCERNING REIMBURSEMENT VOUCHERS FOR PARTS AND/OR REPAIRS TO CONSTRUCTION EQUIPMENT RENTED AT FORT DEVENS, MASSACHUSETTS, BY COLEMAN BROTHERS CORP., AND JOHN BOWEN COMPANY, UNDER THE TERMS OF CONTRACT NO. W 6101 QM-148.

2. PERSONAL FIELD INVESTIGATION WITH REGARD TO THE REPAIR OF RENTED EQUIPMENT UNDER THE ABOVE CONTRACT WAS MADE BY THE CONTRACTING OFFICER. IT HAS BEEN DETERMINED THAT AT THE INCEPTION OF THE CONSTRUCTION WORK AT FORT DEVENS THE GOVERNMENT REPRESENTATIVES AND THE GENERAL CONTRACTOR AGREED THAT, DUE TO THE WIDE-SPREAD SCALE OF OPERATIONS AND THE EMERGENCY CONDITIONS UNDER WHICH THE WORK WAS TO BE DONE, EFFICIENT OPERATION COULD BE ACCOMPLISHED ONLY IF THE NORMAL RUNNING REPAIRS TO EQUIPMENT WERE HANDLED ON THE SITE BY THE CONTRACTOR'S FORCES ON A REIMBURSABLE BASIS. MOREOVER, WHEN THE EQUIPMENT LESSORS WERE INFORMED THAT THEIR EQUIPMENT WAS TO BE USED 24 HOURS A DAY, SEVEN DAYS A WEEK THROUGHOUT THE WINTER, THEY TOOK THE POSITION THAT THEY WOULD NOT BE WILLING TO RENT THE EQUIPMENT UNDER SUCH CONDITIONS UNLESS THE MAKING OF ROUTINE RUNNING REPAIRS WAS ASSUMED BY THE LESSEE. ACCORDINGLY, IT BECAME THE UNDERSTANDING BETWEEN THE VARIOUS EQUIPMENT LESSORS AND THE GENERAL CONTRACTOR THAT THE LATTER WOULD ASSUME ALL ROUTINE MAINTENANCE AND NORMAL RUNNING REPAIRS WITHOUT COST TO THE LESSORS.

3. THE AGREEMENTS REFERRED TO ABOVE WERE NOT REDUCED TO WRITING AT THE TIME INASMUCH AS THE STANDARD CONTRACT FORM FOR EQUIPMENT RENTAL AGREEMENTS WAS NOT RECEIVED FROM WASHINGTON UNTIL SEVERAL WEEKS AFTER OPERATIONS HAD BEGUN. ARTICLE II OF THE STANDARD EQUIPMENT RENTAL AGREEMENT, HOWEVER, PROVIDED THAT: "EQUIPMENT SHALL BE MAINTAINED IN GOOD REPAIR AND WORKING CONDITION BY THE LESSOR WITHOUT COST TO THE LESSEE.' IN ORDER TO OFFSET THIS PROVISION, WHICH OBVIOUSLY WAS CONTRARY TO THE PRACTICE AND INTENTION OF THE PARTIES, THE FOLLOWING PROVISION WAS ADDED TO ARTICLE II OF THE CONTRACT PRIOR TO EXECUTION: "ROUTINE MAINTENANCE AND NORMAL RUNNING REPAIRS BY THE LESSEE IS APPROVED.' IT WAS THE DEFINITE UNDERSTANDING OF THE GENERAL CONTRACTOR AND THE EQUIPMENT OWNERS, AS WELL AS THE GOVERNMENT REPRESENTATIVES, THAT THIS ADDED PROVISION SERVED TO INCORPORATE INTO THE WRITTEN CONTRACT AND GIVE EFFECT TO THEIR ORIGINAL VERBAL AGREEMENT; I.E., THAT THE GENERAL CONTRACTOR AS LESSEE WAS TO MAKE ALL ROUTINE AND NORMAL RUNNING REPAIRS TO THE RENTED EQUIPMENT.

4. IT APPEARS, THEREFORE, THAT AT NO TIME DURING THE PERIOD OF OPERATIONS WAS IT THE INTENTION OF THE PARTIES CONCERNED THAT THE LESSORS WERE TO BE RESPONSIBLE FOR THESE REPAIRS. THIS STATEMENT IS SUBSTANTIATED BY THE FACT THAT DURING THE ENTIRE CONTRACT PERIOD ALL SUCH REPAIRS WERE MADE BY THE GENERAL CONTRACTOR AT REPAIR SHOPS CONSTRUCTED BY HIM FOR THAT SPECIFIC PURPOSE. WITH RESPECT TO VOUCHERS COVERING REIMBURSEMENT OF COST OF REPAIRS MADE UNDER THOSE EQUIPMENT RENTAL AGREEMENTS WHEREIN ARTICLE II HAS BEEN AMENDED AS DESCRIBED ABOVE, THE CONTRACTING OFFICER FINDS THAT SUCH EXPENSES WERE INCURRED IN ACCORDANCE WITH THE TERMS OF THE CONTRACT AND ARE, THEREFORE, REIMBURSABLE TO THE GENERAL CONTRACTOR UNDER ARTICLE II, PARAGRAPH 1 (D) OF THE PRIME CONTRACT.

5. AS THE WORK ON THE PROJECT PROGRESSED, OTHER RENTAL AGREEMENTS FOR EQUIPMENT WERE ENTERED INTO WITH ADDITIONAL PARTIES, BUT IN EACH INSTANCE, AS IN ALL PREVIOUS CASES, IT WAS THE CLEAR INTENTION OF THE PARTIES THAT ROUTINE AND NORMAL RUNNING REPAIRS WERE TO BE MADE BY THE LESSEE. HOWEVER, IT WAS SUBSEQUENTLY DISCOVERED THAT IN CERTAIN OF THE RENTAL AGREEMENTS, THE ADDED PROVISIONS REFERRED TO ABOVE WHICH PLACED RESPONSIBILITY FOR REPAIRS UPON THE LESSEE, WAS INADVERTENTLY OMITTED. IS EVIDENT THIS OVERSIGHT WAS CLEARLY A MISTAKE AND WAS CONTRARY TO THE INTENTION OF THE PARTIES FOR, AS STATED ABOVE, THE FACTS ARE THAT IT WAS NEVER CONTEMPLATED THAT ROUTINE REPAIRS WERE TO BE MADE BY THE LESSORS. CONSEQUENTLY, IN THOSE CASES WHERE THE OMISSION OCCURRED, THE CONTRACTING OFFICER FINDS THE EXPENSE OF EQUIPMENT REPAIRS TO BE A REIMBURSABLE ITEM OF COST UNDER ARTICLE II, PARAGRAPH 1 (P), OF THE CONSTRUCTION CONTRACT.

6. IN VIEW OF THE ABOVE, THE VOUCHERS FORWARDED WITH THE ORIGINAL COMMUNICATIONS ARE CERTIFIED FOR PAYMENT.

7. A COPY OF THE REPORT OF THE CONSTRUCTING QUARTERMASTER AT FORT DEVENS AS TO THIS MATTER IS ENCLOSED FOR YOUR INFORMATION.

ARTICLE II OF THE CONTRACT HERE INVOLVED PROVIDES, IN PERTINENT PART, AS FOLLOWS:

1. THE CONTRACTOR SHALL BE REIMBURSED IN THE MANNER HEREINAFTER DESCRIBED FOR SUCH OF HIS ACTUAL EXPENDITURES IN THE PERFORMANCE OF THE WORK AS MAY BE APPROVED OR RATIFIED BY THE CONTRACTING OFFICER AND AS ARE INCLUDED IN THE FOLLOWING ITEMS:

(C) RENTAL ACTUALLY PAID BY THE CONTRACTOR, AT RATES NOT TO EXCEED THOSE APPROVED BY THE CONTRACTING OFFICER, FOR CONSTRUCTION PLANT IN SOUND AND WORKABLE CONDITION, SUCH AS PUMPS, DERRICKS, CONCRETE MIXERS, BOILERS, CLAMSHELL OR OTHER BUCKETS, ELECTRIC MOTORS, ELECTRIC DRILLS, ELECTRIC HAMMERS, ELECTRIC HOISTS, MECHANICAL SHOVELS, LOCOMOTIVE CRANES, POWER SAWS, ENGINEERS' LEVELS AND TRANSITS, AND SUCH OTHER EQUIPMENT EXCEEDING $300 IN VALUE AS MAY BE NECESSARY FOR THE PROPER AND ECONOMICAL PROSECUTION OF THE WORK. EACH CONTRACT FOR THE RENTAL OF CONSTRUCTION PLANT OR PARTS THEREOF BY THE CONTRACTOR FROM THIRD PARTIES SHALL BE IN A FORM PRESCRIBED BY THE SECRETARY OF WAR, SHALL BE SUBJECT TO APPROVAL BY THE CONTRACTING OFFICER, AND SHALL CONTAIN THE SAME PROVISIONS ENTITLING THE GOVERNMENT TO ACQUIRE TITLE TO SUCH PLANT OR ANY PART THEREOF UPON THE SAME CONDITIONS AS THOSE CONTAINED IN PARAGRAPH 2 OF ARTICLE II OF THIS CONTRACT.

(D) LOADING AND UNLOADING AT THE SITE OF THE WORK OF CONSTRUCTION PLANT, OWNED OR RENTED BY THE CONTRACTOR; THE TRANSPORTATION THEREOF TO THE PLACE OR PLACES WHERE IT IS TO BE USED IN CONNECTION WITH SAID WORK AND RETURN TRANSPORTATION F.O.B. CARS TO THE POINT OF ORIGINAL SHIPMENT OR EQUIVALENT MILEAGE, EXCEPT AS HEREINAFTER SET FORTH; THE INSTALLATION AND DISMANTLING THEREOF, AND SUCH REPAIRS AND SPARE PARTS AS ARE NOT INCLUDED IN THE RENTAL; PROVIDED SUCH REPAIRS OR SPARE PARTS ARE NOT MADE NECESSARY BY DEFECTS IN SUCH PLANT, OR PARTS THEREOF, OR BY THE FAULT OR NEGLIGENCE OF THE CONTRACTOR OR HIS EMPLOYEES: * * *.

IT IS THE GENERAL RULE THAT RENTAL RATES FOR EQUIPMENT ARE CONSIDERED NORMALLY TO INCLUDE AN ALLOWANCE FOR WEAR AND TEAR INCIDENT TO THE USE OF THE EQUIPMENT FOR THE PURPOSE RENTED. SEE 20 COMP. GEN. 632. HOWEVER, THAT GENERAL RULE IS NOT FOR APPLICATION WHERE THE EQUIPMENT RENTAL CONTRACTS PROVIDE OTHERWISE.

IT WOULD APPEAR FROM THE PROVISIONS REPORTED TO BE CONTAINED IN THE CONTRACTS FOR RENTAL OF THE EQUIPMENT AND THE EXPLANATION OF THE CONTRACTING OFFICER THAT IT WAS THE INTENTION OF ALL PARTIES CONCERNED THAT "ALL ROUTINE MAINTENANCE AND NORMAL RUNNING REPAIRS" BE MADE BY THE PRIME CONTRACTOR WITHOUT EXPENSE TO THE LESSORS AND THAT THE EXPENSES THEREOF WERE NOT INCLUDED BY THE LESSORS IN COMPUTING RENTAL RATES. SINCE SUCH REPAIRS ARE NOT INCLUDED IN THE RENTAL, IT IS EVIDENT THAT THE COST THEREOF IS REIMBURSABLE TO THE CONTRACTOR UNDER THE PROVISIONS OF PARAGRAPH 1 (D) OF ARTICLE II OF THE CONTRACT.

ACCORDINGLY, IN THIS AND SIMILAR CASES, THE PRIME CONTRACTOR MAY BE REIMBURSED FOR THE COST OF SUCH REPAIRS TO RENTED EQUIPMENT AS CONSTITUTE ROUTINE MAINTENANCE AND NORMAL RUNNING REPAIRS, WHEN THE RESPONSIBILITY FOR SUCH REPAIRS IS UPON SUCH CONTRACTOR. WHETHER A REPAIR IN ANY PARTICULAR INSTANCE IS OF THE TYPE WHICH IS REQUIRED TO BE MADE BY THE CONTRACTOR IS A MATTER GENERALLY WHICH SHOULD BE CONSIDERED BY THE CONTRACTING OFFICER BEFORE APPROVING OR RATIFYING THE EXPENDITURE FOR REIMBURSEMENT, IN ACCORDANCE WITH THE APPLICABLE TERMS OF THE CONTRACT, AS HAS EVIDENTLY BEEN DONE IN THIS CASE.

IT IS NOTED THAT IN PARAGRAPH 5 OF HIS REPORT, THE CONTRACTING OFFICER REFERS TO OTHER CONTRACTS FOR RENTAL OF EQUIPMENT WHEREIN THERE WAS INADVERTENTLY OMITTED "THE ADDED PROVISION REFERRED TO ABOVE WHICH PLACED RESPONSIBILITY FOR REPAIRS UPON THE LESSEE.' AS TO THESE CONTRACTS, IN VIEW OF THE SAID REPORT, IT MAY BE CONSIDERED THAT SUCH CONTRACTS ARE IN THE SAME CATEGORY AS THOSE HEREIN DISCUSSED.

THE VOUCHERS WITH SUPPORTING PAPERS ARE RETURNED HEREWITH AND YOU ARE ADVISED THAT PAYMENT THEREON IS AUTHORIZED, IF OTHERWISE CORRECT.