B-23768, MAR 6, 1942

B-23768: Mar 6, 1942

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IS SUBMITTED FOR ADVANCE DECISION AS TO WHETHER OR NOT SUCH CHARGES FOR SUPPLYING CURRENT NEWS SERVICES TO EMPLOYEES OF THE PRIME CONTRACTOR. IS TO BE CONSTRUED AS NECESSARY FOR THE JOB AND IS THEREFORE A REIMBURSABLE ITEM UNDER ARTICLE II. A FURTHER EXPLANATION OF THE BASIS FOR THE DOUBT AS TO THE PROPRIETY OF MAKING PAYMENT ON THE VOUCHER INVOLVED IS CONTAINED IN YOUR LETTER OF THE SAME DATE TO THE CHIEF OF FINANCE. THE ACCOUNT COVERS THE COST INVOLVED IN FURNISHING DAILY NEWS SERVICE TO EMPLOYEES OF THE CONTRACTOR OVER A LOUD-SPEAKER SYSTEM AND UPON PRESENTATION TO THIS OFFICE FOR REIMBURSEMENT WAS RETURNED TO THE CONTRACTOR. REQUESTING THAT THIS OFFICE BE ADVISED PARAGRAPH NUMBER OF THE PRIME CONTRACT UNDER WHICH REIMBURSEMENT IS BEING CLAIMED.

B-23768, MAR 6, 1942

PRECIS-UNAVAILABLE

MAJOR W. GRITZ, F.D., U.S. ARMY:

C/O CHIEF OF FINANCE, WAR DEPARTMENT:

THERE HAS BEEN RECEIVED, BY REFERENCE FROM THE SECRETARY OF WAR, YOUR LETTER OF JANUARY 22, 1942, AS FOLLOWS:

"1. THE INCLOSED BUREAU VOUCHER NO. 7722 IN THE AMOUNT OF $44.75 HAVING BEEN PRESENTED TO THE UNDERSIGNED DISBURSING OFFICER BY FRUIN COLNON CONTRACTING CO., FRUCO CONSTRUCTION CO., THE MASSMAN CONSTRUCTION CO., THROUGH THE OFFICE OF THE AREA ENGINEER, ST. LOUIS ORDNANCE PLANT, ST. LOUIS, MISSOURI, REQUESTING REIMBURSEMENT UNDER COST-PLUS-A-FIXED-FEE CONTRACT NO. W-6979 QM-2, DATED JANUARY 7, 1941, IS SUBMITTED FOR ADVANCE DECISION AS TO WHETHER OR NOT SUCH CHARGES FOR SUPPLYING CURRENT NEWS SERVICES TO EMPLOYEES OF THE PRIME CONTRACTOR, AS SET FORTH THEREIN, IS TO BE CONSTRUED AS NECESSARY FOR THE JOB AND IS THEREFORE A REIMBURSABLE ITEM UNDER ARTICLE II, PARAGRAPH (1)(P) OF THE CONTRACT."

A FURTHER EXPLANATION OF THE BASIS FOR THE DOUBT AS TO THE PROPRIETY OF MAKING PAYMENT ON THE VOUCHER INVOLVED IS CONTAINED IN YOUR LETTER OF THE SAME DATE TO THE CHIEF OF FINANCE, WAR DEPARTMENT, IN PERTINENT PART AS FOLLOWS:

"2. THE ACCOUNT COVERS THE COST INVOLVED IN FURNISHING DAILY NEWS SERVICE TO EMPLOYEES OF THE CONTRACTOR OVER A LOUD-SPEAKER SYSTEM AND UPON PRESENTATION TO THIS OFFICE FOR REIMBURSEMENT WAS RETURNED TO THE CONTRACTOR, THROUGH THE AREA ENGINEER, REQUESTING THAT THIS OFFICE BE ADVISED PARAGRAPH NUMBER OF THE PRIME CONTRACT UNDER WHICH REIMBURSEMENT IS BEING CLAIMED. IN RESPONSE THERETO THE ACCOUNT WAS RETURNED BY THE AREA ENGINEER SUPPORTED BY MISCELLANEOUS CORRESPONDENCE AND STATING THAT ARTICLE II, PARAGRAPH (1)(P) WAS THE BASIS FOR SUBMISSION AND APPROVAL. PARAGRAPH IN QUESTION IS QUOTED FOR READY REFERENCE:

"'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 PARAGRAPH.'

"3. THIS OFFICE IS IN DOUBT AS TO WHETHER OR NOT THE ABOVE-QUOTED PORTION OF THE CONTRACT CONTAINS SUFFICIENT AUTHORITY TO JUSTIFY A PAYMENT OF THIS NATURE. AS BROAD AND LIBERAL AS THE TERMS OF THE CONTRACT MAY APPEAR TO BE, NEVERTHELESS IT IS BELIEVED THEY DO NOT PROVIDE FOR REIMBURSEMENT OF EVERY CONCEIVABLE EXPENSE WHICH THE CONTRACTOR MAY DECIDE TO INCUR AND WHICH THE AREA ENGINEER MAY APPROVE. WHILE REFERENCE IS MADE TO THE PSYCHOLOGICAL EFFECT ON THE EMPLOYEES BY BEING PERMITTED TO HEAR TWICE DAILY THE LATEST WAR NEWS, IT APPEARS THAT SUCH BENEFITS DERIVED THEREFROM WOULD BE PURELY INCIDENTAL AND MAY NOT BE INCURRED AS A PROPER CHARGE NECESSARY FOR THE PERFORMANCE OF THE WORK.

"4. A RULING IN THE INSTANT CASE WILL BE USED AS A GUIDE IN THE SETTLEMENT OF RECURRING MONTHLY CHARGES WHICH ARE TO BE SUBMITTED IN CONNECTION WITH THE FURNISHING OF SUCH NEWS SERVICE."

THE SAID VOUCHER IS SUPPORTED BY AN ORIGINAL INVOICE AND RECEIPT IN EVIDENCE OF THE PAYMENT OF THE AMOUNT CLAIMED BY THE CONTRACTOR TO THE FIRM OF THOMAS PATRICK, INC., FOR THE NEWS SERVICE FURNISHED DURING THE PERIOD FROM OCTOBER 6 TO NOVEMBER 6, 1941, PURSUANT TO PURCHASE ORDER NO. 4553, DATED OCTOBER 6, 1941, IS VERIFIED BY THE CHIEF PROJECT AUDITOR, AND THE CONTRACTING OFFICER'S REPRESENTATIVE HAS APPROVED IT FOR PAYMENT.

THE CIRCUMSTANCES REPORTED TO HAVE PRECEDED THE INCURRENCE OF THIS EXPENDITURE AND THE BASIS UPON WHICH REIMBURSEMENT THEREFOR IS CLAIMED ARE SET FORTH IN AN ATTACHED UNDATED MEMORANDUM FROM THE CONTRACTOR, AS FOLLOWS:

"THERE IS SUBMITTED IN SUPPORT OF THIS EXPENDITURE TWO COPIES OF SIGNED PROPOSAL OF RADIO STATION K.W.K, THOMAS PATRICK, INC., SETTING FORTH THE CONTRACTURAL RELATIONSHIP GOVERNING THIS SERVICE.

"IT WILL BE NOTED THAT THE NEWS SERVICE IS DONATED AND THE ONLY COST INVOLVED IS THE COST OF TELEPHONE SERVICES IN CONNECTION THEREWITH.

"AS THE RESULT OF CONFERENCE WITH OFFICERS OF THE WAR DEPARTMENT, IT WAS THE CONCLUSION OF THE CONTRACTING OFFICER AND CONSTRUCTING MANAGER THAT THE PSYCHOLOGICAL EFFECT OF TWICE DAILY BROADCASTING TO THE EMPLOYEES ON THE PROJECT THE LATEST VITAL WAR NEWS AND IMPORTANT MESSAGES OF THE PRESIDENT AND SECRETARIES OF WAR AND NAVY WOULD PROVE TO BE ADVANTAGEOUS TO THE PROGRESS OF THE JOB. THE IMPROVEMENT OF THE MORALE OF THE WORKMEN, DUE TO ACCURATE KNOWLEDGE OF THE SERIOUSNESS OF THE SITUATION CONFRONTING OUR NATION AND THE RESULTANT INCREASE IN PRODUCTION, JUSTIFIES THE SMALL EXPENSE INVOLVED, AND IS NECESSARY FOR THE EXPEDITIOUS COMPLETION OF THE PROJECT.

"REIMBURSEMENT IS REQUESTED UNDER THE PROVISIONS OF ARTICLE 2, SECTION 1, SUBDIVISIONS (A) AND (P):

"'(A) ALL LABOR, MATERIAL, TOOLS, MACHINERY, EQUIPMENT, SUPPLIES, SERVICES, POWER, AND FUEL NECESSARY FOR EITHER TEMPORARY OR PERMANENT USE FOR THE BENEFIT OF THE WORK ***.'

"'(P) 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 PARAGRAPH.'"

ALSO, THE ACCOUNT INVOLVED IS SUPPORTED BY THE CONTRACTING OFFICER'S CERTIFICATE WHICH READS--

"I, WILLIAM H. BELL, JR., MAJOR, CORPS OF ENGINEERS, CONTRACTING OFFICER OF THE ST. LOUIS ORDNANCE PLANT, DO HEREBY CERTIFY THAT THE SERVICES RENDERED BY THOMAS PATRICK, INC. K.W.K, AS ABOVE OUTLINED ARE FOR THE BENEFIT OF THE WORK ON THIS PROJECT AND REIMBURSEMENT THEREFOR IS BEING ALLOWED UNDER THE PROVISIONS OF ARTICLE 2, SECTION 1, SUBDIVISION 'P' OF THE CONTRACT."

BY INDORSEMENT OF FEBRUARY 2, 1942, FROM THE OFFICE OF THE CHIEF OF ENGINEERS IT IS STATED AS THE OPINION OF THAT OFFICE "THAT THE INSTANT VOUCHER SHOULD BE PAID IN THE FULL AMOUNT."

CONTRACT NO. W 6979 QM-2, DATED DECEMBER 11, 1940, AND APPROVED BY THE SECRETARY OF WAR JANUARY 7, 1941, UNDER WHICH THE CLAIM HERE INVOLVED AROSE, WAS ENTERED INTO ON A COST-PLUS-A-FIXED-FEE BASIS AS AUTHORIZED UNDER THE ACT OF JULY 2, 1940, 54 STAT. 712, AND PROVIDES, AS AMENDED, FOR THE CONSTRUCTION OF AN ORDNANCE MANUFACTURING PLANT IN CONSIDERATION OF THE REIMBURSEMENT BY THE GOVERNMENT OF THE CONTRACTOR'S COSTS AS DEFINED IN THE CONTRACT, PLUS A STIPULATED FIXED FEE. THE QUESTION PRESENTED IS AS TO WHETHER THE SERVICE COVERED BY THE VOUCHER REPRESENTS A REIMBURSABLE EXPENDITURE UNDER THE TERMS OF THE CONTRACT.

RELATIVE TO REIMBURSEMENT FOR THE CONTRACTOR'S EXPENDITURES, ARTICLE II OF THE CONTRACT 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:

"(P) 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 PARAGRAPH."

THE AUTHORITY THUS VESTED IN THE CONTRACTING OFFICER IN THE MATTER OF DETERMINING WHAT "ACTUAL EXPENDITURES" MADE BY THE CONTRACTOR IN CONNECTION WITH THE PERFORMANCE OF THE CONTRACT ARE TO BE REGARDED AS REIMBURSABLE ITEMS OF "COST OF THE WORK" EVIDENTLY WAS NOT INTENDED TO BE AN UNLIMITED AUTHORITY.

SECTION 1 OF ARTICLE I OF THE CONTRACT PROVIDES THAT THE CONTRACTOR SHALL "DO ALL THINGS NECESSARY FOR THE COMPLETION OF" THE WORK THEREIN DESCRIBED, AND THAT IN CONSIDERATION FOR THAT UNDERTAKING HE SHALL RECEIVE REIMBURSEMENT FOR EXPENDITURES AS PROVIDED UNDER ARTICLE II. HENCE, IT WOULD APPEAR THAT IT IS BEYOND THE SCOPE OF THE AUTHORITY VESTED IN THE CONTRACTING OFFICER TO APPROVE, AS REIMBURSABLE, EXPENDITURES FOR ANY SERVICES NOT NECESSARY FOR THE COMPLETION OF THE WORK.

MANIFESTLY, THE NEWS SERVICE HERE INVOLVED, WHILE POSSIBLY DESIRABLE FROM THE STANDPOINT OF THE CONTRACTOR'S EMPLOYEES, WOULD NOT CONTRIBUTE ANYTHING TANGIBLE IN FURTHERANCE OF THE CONSTRUCTION WORK, AND I CANNOT AGREE THAT IT COULD BE REGARDED AS WITHIN ANY REASONABLE CONCEPT OF THE TERM "NECESSARY SERVICES"-- THAT IS, SERVICES NECESSARY FOR THE COMPLETION OF THE WORK.

CONSEQUENTLY, I HAVE TO ADVISE THAT REIMBURSEMENT OF SUCH EXPENDITURES UNDER THE CONTRACT HERE INVOLVED, OR ANY SIMILAR CONTRACT, IS NOT AUTHORIZED.

THE VOUCHER, WITH ITS ACCOMPANYING PAPERS, IS RETURNED HEREWITH.