B-21978, DECEMBER 10, 1941, 21 COMP. GEN. 548

B-21978, DECEMBER 10, 1941, 21 COMP. GEN. 548

VEHICLES - PASSENGER-CARRYING - PURCHASE UNDER COST-PLUS CONTRACTOR'S RENTAL AGREEMENT WHERE IT IS IN THE GOVERNMENT'S INTEREST TO EXERCISE THE RIGHT RESERVED FOR ITS BENEFIT IN A COST-PLUS-A-FIXED-FEE CONTRACTOR'S AGREEMENT WITH ITS EQUIPMENT RENTAL CONTRACTOR TO ACQUIRE TITLE TO ANY OF THE PASSENGER- CARRYING MOTOR VEHICLES FURNISHED UNDER THE AGREEMENT BY PAYING THE DIFFERENCE BETWEEN THE ACCRUED RENTAL AND THE SALE PRICE, THE AMOUNT PAID AS RENTAL IS NOT TO BE CONSIDERED AS PART OF THE PURCHASE PRICE OF A VEHICLE IN DETERMINING WHETHER THE PRICE IS WITHIN THE STATUTORY LIMITATION FOR SUCH VEHICLES.

COMPTROLLER GENERAL WARREN TO THE ACTING FEDERAL WORKS ADMINISTRATOR, DECEMBER 10, 1941:

I HAVE YOUR LETTER OF NOVEMBER 17, 1941, AS FOLLOWS:

ON DECEMBER 12, 1941, PUBLIC BUILDINGS ADMINISTRATION, ACTING AS AGENT FOR THE FEDERAL WORKS ADMINISTRATOR, ENTERED INTO A CONTRACT ON A COST- PLUS-A-FIXED-FEE BASIS FOR THE CONSTRUCTION OF 3,000 DWELLING UNITS AT SAN DIEGO, CALIFORNIA ( PROJECT NO. CAL-4092, CONTRACT NO. WA1-PB 2008).

A LARGE NUMBER OF PASSENGER-CARRYING MOTOR VEHICLES WERE REQUIRED FOR USE IN CONNECTION WITH THE CONTRACT BECAUSE OF THE LARGE AREA OCCUPIED BY THE 3,000 DWELLING UNITS. THE CONTRACTOR'S REQUIREMENTS EXHAUSTED THE SUPPLY OF SUCH VEHICLES AVAILABLE FOR RENTING IN THE VICINITY AND THE CONTRACTOR WAS COMPELLED TO SATISFY HIS NEEDS BY PROCURING TWENTY-ONE (21) PASSENGER- CARRYING AUTOMOBILES FROM A LOCAL RETAIL AUTOMOBILE DEALER UNDER A RENTAL AGREEMENT AT RATES WHICH, WHEN COMPUTED ON A YEARLY BASIS, AMOUNTED TO LESS THAN $750 PER ANNUM IN ALL CASES EXCEPT ONE WHERE THE YEARLY RENTAL EXCEEDED THAT AMOUNT. THE AGREEMENT FURTHER PROVIDED THAT AT ANY TIME DURING OR AFTER THE RENTAL PERIOD THE CONTRACTOR MIGHT ELECT TO ACQUIRE TITLE TO THE AUTOMOBILES IN QUESTION BY PAYING THE DIFFERENCE BETWEEN THE ACCRUED RENTAL AND THE PURCHASE PRICE. THE CONTRACTOR HAS ADVISED THIS OFFICE THAT THE OPTIONS TO PURCHASE WERE TAKEN FOR THE BENEFIT OF THE GOVERNMENT.

DELIVERIES OF THE VEHICLES WERE MADE DURING THE MONTHS OF FEBRUARY AND MARCH 1941. RENTAL HAS ACCRUED IN SUCH AMOUNTS THAT IT IS NOW POSSIBLE TO SECURE TITLE TO EACH OF THE VEHICLES IN QUESTION BY PAYMENT OF A SUM WHICH WOULD IN NO EVENT EXCEED $750 AND IN MOST CASES CONSTITUTES ONLY A SMALL FRACTION OF THE PURCHASE PRICE OF THE VEHICLES IN QUESTION. HOWEVER THE SUM OF THE ACCRUED RENTAL PLUS THE AMOUNT OF THE MONEY REQUIRED TO SECURE TITLE TO ANY ONE OF THE VEHICLES EXCEEDS $750. IT IS NOW DIFFICULT TO OBTAIN IN THE MARKET NEW EQUIPMENT OF THE TYPE HERE INVOLVED AND THIS OFFICE IS DESIROUS OF EXERCISING THE OPTION TO PURCHASE THE VEHICLES IN QUESTION, SINCE A NUMBER OF THEM CAN BE USED BY DEFENSE HOUSING MANAGEMENT OFFICES AND REQUESTS FOR THOSE REMAINING HAVE BEEN RECEIVED FROM A NUMBER OF GOVERNMENT AGENCIES, INCLUDING THE PUBLIC ROADS ADMINISTRATION, THE WORK PROJECTS ADMINISTRATION AND THE RECONSTRUCTION FINANCE CORPORATION.

IN YOUR RECENT DECISION ADDRESSED TO THE SECRETARY OF WAR, ON SEPTEMBER 29, 1941 (B-20442) YOU INDICATED THAT SECTION 302 (A) OF THE TREASURY AND POST OFFICE DEPARTMENTS APPROPRIATION ACTS, 1941 AND 1942 (54 STAT. 55 AND PUBLIC, NO. 88, 77TH CONGRESS, APPROVED MAY 31, 1941) MIGHT BE APPLICABLE TO PURCHASES OF COST-PLUS-A-FIXED-FEE CONTRACTORS. THE SECTIONS ARE IDENTICAL EXCEPT AS TO THE YEAR. THAT FOR 1942 PROVIDES AS FOLLOWS:

"NO APPROPRIATION AVAILABLE FOR THE EXECUTIVE DEPARTMENTS AND INDEPENDENT ESTABLISHMENTS OF THE GOVERNMENT FOR THE FISCAL YEAR ENDING JUNE 30, 1942, WHETHER CONTAINED IN THIS ACT OR ANY OTHER ACT, SHALL BE EXPENDED---

"/A) TO PURCHASE ANY MOTOR-PROPELLED PASSENGER-CARRYING VEHICLE (EXCLUSIVE OF BUSSES, AMBULANCES, AND STATION WAGONS), AT A COST, COMPLETELY EQUIPPED FOR OPERATION, AND INCLUDING THE VALUE OF ANY VEHICLE EXCHANGED, IN EXCESS OF $750, UNLESS OTHERWISE SPECIFICALLY PROVIDED FORIN THE APPROPRIATION.'

IN VIEW OF THE RECENT DECISION OF THE UNITED STATES SUPREME COURT IN THE CASE OF ALABAMA V. KING AND BOOZER, DECIDED ON NOVEMBER 10, 1941 ( NO. 602, OCTOBER TERM 1941) WHICH HOLDS THAT A COST-PLUS-A-FIXED FEE CONTRACTOR IS AN INDEPENDENT CONTRACTOR AND NOT AN AGENT OF THE GOVERNMENT, IT IS OUR OPINION THAT THE STATUTE IN QUESTION IS NOT APPLICABLE TO PURCHASES MADE BY COST-PLUS-A-FIXED-FEE CONTRACTORS. IN THE LIGHT OF THE DECISION THE MONEY EXPENDED SHOULD BE CONSIDERED AS HAVING BEEN EXPENDED FOR THE CONSTRUCTION OF THE HOUSING PROJECT AND NOT FOR THE PURCHASE OF MOTOR-PROPELLED PASSENGER-CARRYING VEHICLES.

EVEN THOUGH IT COULD BE CONSIDERED THAT THE MONEY WAS EXPENDED FOR THE PURCHASE OF SUCH VEHICLES, WITH WHICH WE DO NOT AGREE, IT IS OUR FURTHER CONTENTION THAT THE PURCHASE PRICE OF THE VEHICLES IN QUESTION SHOULD BE REGARDED AS THE AMOUNT PRESENTLY REMAINING TO BE PAID IN ORDER THAT TITLE MAY BE ACQUIRED AND THAT THE BALANCE OF THE EXPENDITURE MUST BE REGARDED AS PAID FOR EQUIPMENT RENTAL AND NOT FOR THE PURCHASE OF THE VEHICLES.

IN THE LIGHT OF THE FOREGOING DISCUSSION, THIS OFFICE RESPECTFULLY REQUESTS YOUR DECISION AS TO WHETHER OR NOT THE GOVERNMENT MAY ACQUIRE TITLE TO THE TWENTY-ONE (21) VEHICLES IN QUESTION, BY PAYING FOR EACH THE DIFFERENCE BETWEEN THE ACCRUED RENTAL AND THE PURCHASE PRICE.

THE TERMS OF CONTRACT NO. WA1PB 2008, HERE INVOLVED, PROVIDE FOR THE REIMBURSEMENT TO THE CONTRACTOR OF THE CONSTRUCTION COST OF PERFORMING THE STIPULATED WORK, AND WITH REFERENCE TO THE EXPENDITURES AND CHARGES AGREED BY THE PARTIES AS BEING INCLUDED IN SUCH CONSTRUCTION COST, PARAGRAPH NUMBERED 5 OF THE GENERAL CONDITIONS, INCORPORATED AS A PART OF THE CONTRACT, PROVIDES, IN PERTINENT PART, THAT:

* * * THE CONTRACTOR'S " CONSTRUCTION COST" SHALL COMPRISE THE SUM OF COSTS AND EXPENSES INCURRED IN TWO CATEGORIES DESIGNATED AS " PRODUCTION COST" AND " PLANT RENTAL," BOTH OF WHICH ARE HEREINAFTER DEFINED IN APPROPRIATE SUBITEMS.

UNDER SECTION "B" OF THE SAID GENERAL CONDITIONS, THE LATTER TYPE OF CONSTRUCTION COST IS DEFINED, AS FOLLOWS:

CONTRACTOR('S PLANT IS DEFINED TO INCLUDE ALL OF THOSE ITEMS UTILIZED BY THE CONTRACTOR FOR THE CONDUCT OF ITS OPERATIONS IN THE PERFORMANCE OF ITS CONTRACT AS SUCH ITEMS ARE ENUMERATED IN THE PUBLICATION " CONTRACTOR'S EQUIPMENT RENTAL SCHEDULE" * * *.

AN EXAMINATION OF THE SAID " SCHEDULE" DISCLOSES THAT, AMONG OTHER DESIGNATED TYPES OF EQUIPMENT, IT WAS CONTEMPLATED BY THE PARTIES THAT AUTOMOBILES (INDICATED AS REFERRING TO PASSENGER-CARRYING VEHICLES) MIGHT BE USED BY THE CONTRACTOR IN THE EFFICIENT CONDUCT OF THE CONTRACT OPERATIONS. THEREFORE, IN VIEW OF THE QUOTED PROVISIONS OF THE CONTRACT, IT WOULD APPEAR THAT, AS SUGGESTED BY YOU, SUCH AMOUNTS AS HAVE BEEN PAID TO THE CONTRACTOR FOR THE RENTAL OF THE VEHICLES SO FURNISHED "SHOULD BE CONSIDERED AS HAVING BEEN EXPENDED FOR THE CONSTRUCTION OF THE HOUSING PROJECT.' FURTHERMORE, THE ARRANGEMENTS ENTERED INTO BY THE CONTRACTOR FOR OBTAINING THE NECESSARY AUTOMOBILES IN NO MANNER AFFECT THE PAYMENTS MADE TO THE CONTRACTOR FOR THE RENTAL THEREOF AND NO BASIS IS PERCEIVED FOR REGARDING THE CHARACTER OF SUCH EXPENDITURES AS HAVING BEEN CHANGED FROM THAT OF EQUIPMENT RENTAL TO A PART OF THE PURCHASE PRICE BY REASON OF THE SUBSEQUENT PURCHASE OF THESE OR OTHER USED PASSENGER-CARRYING VEHICLES.

ACCORDINGLY, IN VIEW OF THE FOREGOING AND SINCE IT IS REPORTED THAT THE AMOUNT NOW TO BE PAID FOR ANY OF THE VEHICLES IS LESS THAN $750, OR, WITHIN THE STATUTORY LIMITATION IMPOSED BY THE TREASURY DEPARTMENT APPROPRIATION ACT, 1941, 54 STAT. 78, YOU ARE ADVISED THAT THERE APPEARS NO LEGAL OBJECTION TO THE ACQUISITION OF TITLE THERETO, IF DETERMINED TO BE IN THE INTEREST OF THE GOVERNMENT AND THE APPROPRIATION SOUGHT TO BE CHARGED IS AVAILABLE FOR THE PURCHASE OF PASSENGER-CARRYING VEHICLES.