B-21209, NOVEMBER 12, 1941, 21 COMP. GEN. 447

B-21209: Nov 12, 1941

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CONTRACTS - COST-PLUS - PAYMENTS - FINALITY OF CONTRACTING OFFICERS' APPROVAL A CONTRACTOR WHO IS TO OPERATE AN ORDNANCE MANUFACTURING PLANT FOR THE GOVERNMENT ON A COST-PLUS-A-FIXED-FEE BASIS MAY NOT BE REIMBURSED THE COST OF MEMBERSHIP IN A LOCAL CHAMBER OF COMMERCE WHERE SUCH MEMBERSHIP HAS NO REASONABLE RELATION TO THE WORK TO BE PERFORMED UNDER THE CONTRACT. IS SUBMITTED FOR ADVANCE DECISION AS TO WHETHER OR NOT SUCH CHARGES FOR LOCAL CHAMBER OF COMMERCE FEES AS SET FORTH THEREIN IS TO BE CONSTRUED AS NECESSARY FOR THE JOB AND IS THEREFORE A REIMBURSABLE ITEM UNDER TITLE 3. AN EXPLANATION OF THE EXPENDITURE AND THE BASIS FOR HIS APPROVAL THEREOF IS SET FORTH BY THE CONTRACTING OFFICER'S REPRESENTATIVE.

B-21209, NOVEMBER 12, 1941, 21 COMP. GEN. 447

CONTRACTS - COST-PLUS - PAYMENTS - FINALITY OF CONTRACTING OFFICERS' APPROVAL A CONTRACTOR WHO IS TO OPERATE AN ORDNANCE MANUFACTURING PLANT FOR THE GOVERNMENT ON A COST-PLUS-A-FIXED-FEE BASIS MAY NOT BE REIMBURSED THE COST OF MEMBERSHIP IN A LOCAL CHAMBER OF COMMERCE WHERE SUCH MEMBERSHIP HAS NO REASONABLE RELATION TO THE WORK TO BE PERFORMED UNDER THE CONTRACT, EVEN THOUGH THE CONTRACTING OFFICER'S REPRESENTATIVE HAS APPROVED THE PAYMENT UNDER A CONTRACT PROVISION WHICH PROVIDES FOR REIMBURSEMENT OF "SUCH OTHER ITEMS AS SHOULD, IN THE OPINION OF THE CONTRACTING OFFICER, BE INCLUDED IN THE COST OF THE WORK.'

COMPTROLLER GENERAL WARREN TO MAJ. W. GRITZ, U.S. ARMY, NOVEMBER 12, 1941:

THERE HAS BEEN RECEIVED BY REFERENCE FROM THE UNDER SECRETARY OF WAR, YOUR LETTER OF SEPTEMBER 22, 1941, AS FOLLOWS:

1. THE ENCLOSED BUREAU VOUCHER NO. 1383-ORD-172, IN THE AMOUNT OF $100.00, HAVING BEEN PRESENTED TO THE UNDERSIGNED DISBURSING OFFICER BY ATLAS POWDER COMPANY, THROUGH THE OFFICE OF THE COMMANDING OFFICER, WELDON SPRING ORDNANCE WORKS, WELDON SPRING, MISSOURI, REQUESTING REIMBURSEMENT UNDER COST-1PLUS-1A-1FIXED-1FEE CONTRACT NO. W-ORD-482, DATED OCTOBER 23, 1940, IS SUBMITTED FOR ADVANCE DECISION AS TO WHETHER OR NOT SUCH CHARGES FOR LOCAL CHAMBER OF COMMERCE FEES AS SET FORTH THEREIN IS TO BE CONSTRUED AS NECESSARY FOR THE JOB AND IS THEREFORE A REIMBURSABLE ITEM UNDER TITLE 3, ARTICLE 3 (A), PARAGRAPH R, OF THE CONTRACT.

AN EXPLANATION OF THE EXPENDITURE AND THE BASIS FOR HIS APPROVAL THEREOF IS SET FORTH BY THE CONTRACTING OFFICER'S REPRESENTATIVE, IN FIRST INDORSEMENT OF SEPTEMBER 15, 1941, TO YOU, AS FOLLOWS:

1. IN CONNECTION WITH BU VOUCHER 1383-ORD-172, COVERING REIMBURSEMENT TO THE ATLAS POWDER COMPANY FOR INVOICE 4176 IN FAVOR OF THE ST. LOUIS CHAMBER OF COMMERCE IN THE AMOUNT OF $100.00, HE IS ADVISED THAT THIS EXPENDITURE WAS AUTHORIZED UNDER TITLE 3, ARTICLE 3 (A), PARAGRAPH R.

2. THIS APPROVAL WAS GRANTED BECAUSE IT IS THE POLICY OF THE ATLAS POWDER COMPANY TO TAKE MEMBERSHIP IN THE CHAMBER OF COMMERCE IN THE LOCALITY WHERE THEY OPERATE A PLANT OR FACTORY. THE BENEFITS WHICH WILL BE DERIVED TOWARD OPERATION OF THIS PLANT AS A RESULT OF SUCH MEMBERSHIP INCLUDE VARIOUS SERVICES RENDERED WHICH JUSTIFY THE MEMBERSHIP COST. ALREADY, THE ST. LOUIS CHAMBER OF COMMERCE HAS BEEN CONSULTED AND HAS FURNISHED HELPFUL ACTION TOWARD DETERMINING WAGE RATES TO BE PAID VARIOUS OPERATORS, PROVIDED A LIST OF HOSPITALS, THEIR CAPACITIES AND THEIR DISTANCES, IN TERMS OF TIME AND MILEAGE FROM THE WELDON SPRING ORDNANCE WORKS. IT IS HIGHLY PROBABLE THAT FROM TIME TO TIME INFORMATION OF A SIMILAR NATURE WILL BE REQUESTED OF THAT ORGANIZATION TOWARD THE SOLUTION OF THE MANY PROBLEMS CONFRONTING THE OPERATING CONTRACTOR.

3. FOR THIS REASON THIS INVOICE WAS APPROVED FOR PAYMENT UNDER THE SECTION OF THE CONTRACT CITED IN PARAGRAPH 1 ABOVE.

4. CERTIFICATE IS THEREFORE BEING PLACED ON THE REVERSE OF THE REIMBURSEMENT VOUCHER TO THE EFFECT THAT THIS ITEM IS REIMBURSABLE UNDER THE PARAGRAPH OF THE CONTRACT SHOWN ABOVE.

ALSO, IN FURTHER REFERENCE THERETO, IT IS STATED IN THIRD INDORSEMENT, DATED OCTOBER 7, 1941, FROM THE OFFICE OF THE CHIEF OF ORDNANCE, TO THE CHIEF OF FINANCE, AS FOLLOWS:

1. THE ATTACHED VOUCHER COVERS REIMBURSEMENT TO THE ATLAS POWDER COMPANY, UNDER CONTRACT NO. W-ORD-482, FOR ONE YEAR'S MEMBERSHIP DUES IN THE ST. LOUIS CHAMBER OF COMMERCE.

2. CONTRACT NO. W-ORD-482 COVERS THE CONSTRUCTION AND OPERATION ON A COST -PLUS-A-FIXED-FEE BASIS OF A POWDER PLANT AT WELDON SPRING, MISSOURI, WHICH IS NEAR ST. LOUIS, MISSOURI.

3. THE CONTRACTING OFFICER'S REPRESENTATIVE HAS FOUND THAT THE MEMBERSHIP DUES ARE REIMBURSABLE UNDER TITLE III, ARTICLE 3 (A), PARAGRAPH R, WHICH STATES THAT REIMBURSEMENT WILL BE MADE FOR "SUCH OTHER ITEMS AS SHOULD IN THE OPINION OF THE CONTRACTING OFFICER, BE INCLUDED IN THE COST OF THE WORK. WHEN SUCH AN ITEM IS ALLOWED BY THE CONTRACTING OFFICER IT SHALL BE SPECIFICALLY CERTIFIED AS BEING ALLOWED UNDER THIS ITEM.' THE CONTRACTING OFFICER'S REPRESENTATIVE STATES THAT APPROVAL WAS GRANTED BECAUSE IT IS THE POLICY OF THE ATLAS POWDER COMPANY TO TAKE MEMBERSHIP IN THE CHAMBER OF COMMERCE IN THE LOCALITY WHERE THEY OPERATE A PLANT OR FACTORY.

4. IT IS RECOGNIZED THAT IT IS THE USUAL CUSTOM AND POLICY OF MANUFACTURERS TO OBTAIN MEMBERSHIP IN THE CHAMBER OF COMMERCE IN THE LOCALITY IN WHICH THEY OPERATE. THE REASONS FOR SUCH MEMBERSHIPS ARE OBVIOUS.

5. INASMUCH AS THE CONTRACTING OFFICER'S REPRESENTATIVE HAS SPECIFICALLY FOUND THAT THE EXPENSES SET FORTH ON THE ATTACHED VOUCHER ARE PROPER FOR REIMBURSEMENT UNDER THE CONTRACT, AND AS SUCH EXPENSES ARE CUSTOMARY AND IN ACCORDANCE WITH COMPANY POLICY, IT IS RECOMMENDED THAT THE ITEM BE ALLOWED FOR REIMBURSEMENT.

CONTRACT NO. W-ORD-482, ENTERED INTO ON A COST-PLUS-A-FIXED-FEE BASIS AS AUTHORIZED UNDER THE ACT OF JULY 2, 1940, 54 STAT. 712, PROVIDES, UNDER TITLE I THEREOF, FOR CONSULTANT SERVICE IN CONNECTION WITH THE DESIGNING, EQUIPPING AND CONSTRUCTION OF AN ORDNANCE MANUFACTURING PLANT, IN CONSIDERATION OF A LUMP-SUM PAYMENT TO THE CONTRACTOR, AND, UNDER TITLE II, FOR NECESSARY PREPARATION FOR THE SUBSEQUENT OPERATION OF SAID PLANT, INCLUDING THE TRAINING OF KEY PERSONNEL, AND FOR THE OPERATION OF THE PLANT UPON ITS COMPLETION, IN CONSIDERATION OF THE REIMBURSEMENT BY THE GOVERNMENT OF THE CONTRACTOR'S EXPENDITURES AS PROVIDED IN THE CONTRACT, PLUS STIPULATED FIXED FEES. SINCE THE PAYMENT OF THE EXPENSE INVOLVED OBVIOUSLY COULD NOT LEGALLY BE REIMBURSED BY THE GOVERNMENT IN CONNECTION WITH WORK FOR WHICH THE GOVERNMENT AGREED TO PAY A FIXED AMOUNT, IT IS ASSUMED THAT THE PROPOSED REIMBURSEMENT OF THIS ITEM IS ON THE BASIS THAT IT REPRESENTS AN EXPENSE INCURRED IN THE PERFORMANCE OF THE SERVICES REQUIRED UNDER THE LATTER TITLE.

WHETHER A PARTICULAR ITEM OF EXPENSE IS REIMBURSABLE TO A CONTRACTOR AS SUCH UNDER THIS FORM OF CONTRACT, OR WHETHER IT IS TO BE ABSORBED BY THE CONTRACTOR AS BEING INCLUDED IN THE LUMP-SUM-FIXED-FEES OR OTHER PAYMENTS MADE, DEPENDS UPON THE NATURE OF THE EXPENSE AND THE TERMS OF THE CONTRACT. WITH RESPECT TO REIMBURSEMENT FOR EXPENDITURES UNDER THE CONTRACT HERE INVOLVED, ARTICLE III-A PROVIDES, IN PART:

1. THE GOVERNMENT SHALL BEAR ALL COSTS AND EXPENSES OF EVERY CHARACTER AND DESCRIPTION INCURRED BY THE CONTRACTOR UNDER TITLE II, WHEN APPROVED IN ADVANCE OR SUBSEQUENTLY RATIFIED BY THE CONTRACTING OFFICER, IN CONNECTION WITH THE OPERATING OF SAID PLANT OR ANY PART THEREOF (INCLUDING ALTERATIONS, MAINTENANCE, AND CLOSING-DOWN) WHICH COSTS AND EXPENSES SHALL INCLUDE BUT SHALL NOT BE LIMITED TO THE FOLLOWING ITEMS, TO WIT:

A CAREFUL EXAMINATION OF THE MANY ITEMS OF REIMBURSABLE EXPENDITURES LISTED THEREUNDER DOES NOT REVEAL AN ITEM SUCH AS INVOLVED IN THIS CASE, UNLESS PROVISION FOR REIMBURSEMENT MAY BE CONSIDERED AS AUTHORIZED BY SUBPARAGRAPH (R), WHICH PROVIDES FOR REIMBURSEMENT OF "SUCH OTHER ITEMS AS SHOULD, IN THE OPINION OF THE CONTRACTING OFFICER, BE INCLUDED IN THE COST OF THE WORK.'

AS BROAD AND LIBERAL AS THE TERMS OF THE CONTRACT MAY APPEAR TO BE, NEVERTHELESS THEY DO NOT PROVIDE FOR THE REIMBURSEMENT OF EVERY CONCEIVABLE EXPENSE WHICH THE CONTRACTOR MAY DECIDE TO INCUR AND WHICH THE CONTRACTING OFFICER MAY APPROVE. BY THE TERMS OF ARTICLE III OF THE CONTRACT, AS HEREINABOVE QUOTED, REIMBURSEMENT OF THE CONTRACTOR'S EXPENDITURES, INCLUDING THOSE APPROVED UNDER THE SAID SUB-PARAGRAPH (R), NECESSARILY IS LIMITED AND RESTRICTED TO SUCH COSTS AND EXPENSES AS ARE INCURRED "IN CONNECTION WITH THE OPERATING OF SAID PLANT," AND IT IS NOT PERCEIVED IN WHAT MANNER IT MAY BE SERIOUSLY CONTENDED THAT MEMBERSHIP IN A LOCAL CHAMBER OF COMMERCE--- THE FUNCTIONS OF WHICH ARE TO PROMOTE THE COMMERCIAL INTERESTS OF THE LOCALITY--- MAY BE CONSIDERED AS REASONABLY RELATED TO "THE OPERATING OF SAID PLANT.' WHILE REFERENCE IS MADE TO CERTAIN INFORMATION WHICH HAS BEEN AND MAY BE OBTAINED BY REASON OF SUCH MEMBERSHIP, IT APPEARS FROM THE FACTS OF RECORD THAT SUCH BENEFITS ARE PURELY INCIDENTAL, THAT IS, THE APPROVAL BY THE CONTRACTING OFFICER'S REPRESENTATIVE OF THE EXPENSE OF THE MEMBERSHIP FEE IN THE CHAMBER OF COMMERCE IS NOT BY REASON OF ITS HAVING BEEN INCURRED IN PURSUANCE OF ANY LEGAL OBLIGATION OR IN THE FURTHERANCE OF ANY DUTY REQUIRED UNDER THE CONTRACT, BUT IS "GRANTED BECAUSE IT IS THE POLICY OF THE ATLAS POWDER CO. TO TAKE MEMBERSHIP IN THE CHAMBER OF COMMERCE IN THE LOCALITY WHERE THEY OPERATE A PLANT OR FACTORY.' WHILE IT MAY BE CONCEDED THAT SUCH IS THE POLICY OF THE CONTRACTOR AND OF PRIVATE FIRMS IN GENERAL WHO, BY PROMOTING THE GENERAL TRADE AND COMMERCE OF THE LOCALITY IN WHICH THEY OPERATE, THUS DIRECTLY OR INDIRECTLY PROMOTE THEIR OWN INTERESTS, SUCH MEMBERSHIP, INSOFAR AS THE OPERATION OF A PLANT ON BEHALF OF THE GOVERNMENT IS CONCERNED, MAY NOT UNDER ANY FAIR AND REASONABLE CONSTRUCTION OF THE CONTRACT TERMS BE VIEWED AS A COST OR EXPENSE PERTINENT TO, OR NECESSARY FOR, THE PROPER PERFORMANCE OF THE WORK THEREUNDER.

ACCORDINGLY, YOU ARE ADVISED THAT PAYMENT ON THE VOUCHER IS NOT AUTHORIZED.