B-26111, JUNE 12, 1942, 21 COMP. GEN. 1110

B-26111: Jun 12, 1942

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WAS RENDERED INOPERATIVE BY SECTION 303 OF THE ACT OF SEPTEMBER 9. UNLESS THE CONTRACTOR'S LABORERS AND MECHANICS ARE PAID TIME AND ONE-HALF FOR ALL HOURS WORKED IN EXCESS OF 8 HOURS PER DAY. THE AUTHORITY TO WITHHOLD FROM THE CONTRACT PRICE THE AMOUNT DUE AS PENALTIES IS VESTED IN THE GOVERNMENT AS A MATTER OF CONTRACTUAL RIGHT. THERE IS NO LEGAL AUTHORITY TO REFRAIN FROM THE ASSESSMENT AND COLLECTION OF SUCH AMOUNT. 1942: I HAVE YOUR LETTER OF MAY 16. THIS BID WAS THE LOWEST RECEIVED. W 355 QM-1 WAS ENTERED INTO BETWEEN THE WAR DEPARTMENT AND ATLANTA LAUNDRIES. EXCEPT UPON CONDITION THAT COMPENSATION IS PAID SUCH LABORER OR MECHANIC IN ACCORDANCE WITH THE PROVISIONS OF THIS ARTICLE.

B-26111, JUNE 12, 1942, 21 COMP. GEN. 1110

CONTRACTS - EIGHT-HOUR LAW - APPLICABILITY TO ARMY, NAVY, AND COAST GUARD CONTRACTS; PENALTY WAIVER AUTHORITY SECTION 5 (B) OF THE ACT OF JUNE 28, 1940, SUSPENDING THE EIGHT-HOUR LAW OF 1912 WITH RESPECT TO PERSONS ENGAGED UPON WORK COVERED BY ARMY, NAVY, AND COAST GUARD CONTRACTS, WAS RENDERED INOPERATIVE BY SECTION 303 OF THE ACT OF SEPTEMBER 9, 1940, WHICH, IN FURTHER AMENDING THE EIGHT-HOUR LAW OF 1912, PERMITS THE EMPLOYMENT OF LABORERS AND MECHANICS IN EXCESS OF 8 HOURS PER DAY IF THEY BE PAID TIME AND ONE HALF FOR THE EXCESS. WHERE A WAR DEPARTMENT CONTRACT PROPERLY INCLUDES A PROVISION FOR A PENALTY FOR EACH VIOLATION OF THE EIGHT-HOUR LAW OF 1912, AS AMENDED BY SECTION 303 OF THE ACT OF SEPTEMBER 9, 1940, UNLESS THE CONTRACTOR'S LABORERS AND MECHANICS ARE PAID TIME AND ONE-HALF FOR ALL HOURS WORKED IN EXCESS OF 8 HOURS PER DAY, THE AUTHORITY TO WITHHOLD FROM THE CONTRACT PRICE THE AMOUNT DUE AS PENALTIES IS VESTED IN THE GOVERNMENT AS A MATTER OF CONTRACTUAL RIGHT, AND THERE IS NO LEGAL AUTHORITY TO REFRAIN FROM THE ASSESSMENT AND COLLECTION OF SUCH AMOUNT.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF WAR, JUNE 12, 1942:

I HAVE YOUR LETTER OF MAY 16, 1942, AS FOLLOWS:

ON JANUARY 5, 1942, ATLANTA LAUNDRIES, INC., A GEORGIA CORPORATION HAVING ITS PLACE OF BUSINESS IN ATLANTA, GEORGIA, SUBMITTED A BID FOR THE PERFORMANCE OF LAUNDRY SERVICES TO CAMP GORDON. THIS BID WAS THE LOWEST RECEIVED, AND AS A RESULT CONTRACT NO. W 355 QM-1 WAS ENTERED INTO BETWEEN THE WAR DEPARTMENT AND ATLANTA LAUNDRIES, INC.

PARAGRAPH 20 OF THIS CONTRACT PROVIDED THAT:

"NO LABORER OR MECHANIC DOING ANY PART OF THE WORK CONTEMPLATED BY THIS CONTRACT, IN THE EMPLOY OF THE CONTRACTOR OR ANY SUBCONTRACTOR CONTRACTING FOR ANY PART OF SAID WORK CONTEMPLATED, SHALL BE REQUIRED OR PERMITTED TO WORK MORE THAN EIGHT (8) HOURS IN ANY ONE CALENDAR DAY UPON SUCH WORK AT THE SITE THEREOF, EXCEPT UPON CONDITION THAT COMPENSATION IS PAID SUCH LABORER OR MECHANIC IN ACCORDANCE WITH THE PROVISIONS OF THIS ARTICLE. THE WAGES OF EVERY LABORER AND MECHANIC EMPLOYED BY THE CONTRACTOR OR ANY SUBCONTRACTOR ENGAGED IN THE PERFORMANCE OF THIS CONTRACT SHALL BE COMPUTED ON A BASIC DAY RATE OF EIGHT HOURS PER DAY AND WORK IN EXCESS OF EIGHT HOURS PER DAY IS PERMITTED ONLY UPON THE CONDITION THAT EVERY SUCH LABORER OR MECHANIC SHALL BE COMPENSATED FOR ALL HOURS WORKED IN EXCESS OF EIGHT HOURS PER DAY AT NOT LESS THAN ONE AND ONE-HALF TIMES THE BASIC RATE OF PAY. FOR EACH VIOLATION OF THE REQUIREMENTS OF THIS ARTICLE A PENALTY OF FIVE DOLLARS SHALL BE IMPOSED UPON THE CONTRACTOR FOR EACH LABORER OR MECHANIC FOR EVERY CALENDAR DAY IN WHICH SUCH EMPLOYEE IS REQUIRED OR PERMITTED TO LABOR MORE THAN EIGHT HOURS UPON SAID WORK WITHOUT RECEIVING COMPENSATION COMPUTED IN ACCORDANCE WITH THIS ARTICLE, AND ALL PENALTIES THUS IMPOSED SHALL BE WITHHELD FOR THE USE AND BENEFIT OF THE GOVERNMENT; PROVIDED: THAT THIS STIPULATION SHALL BE SUBJECT IN ALL RESPECTS TO THE EXCEPTIONS AND PROVISIONS OF U.S. CODE, TITLE 40, SECTIONS 321, 324, 325 AND 326, RELATING TO HOURS OF LABOR, AS IN PART MODIFIED BY THE PROVISIONS OF SECTION 5 (B) OF PUBLIC ACT NO. 671, 76TH CONGRESS, APPROVED JUNE 28, 1940, AND SECTION 303 OF PUBLIC ACT NO. 781, 76TH CONGRESS APPROVED SEPTEMBER 9, 1940, RELATING TO COMPENSATION FOR OVERTIME.'

FROM JANUARY 6, 1942, TO JANUARY 23, 1942, BOTH DATES INCLUSIVE, THE CONTRACTOR ADMITS THAT, ALLEGEDLY BECAUSE OF AN ERROR ON THE PART OF THE SUPERVISORY EMPLOYEE, IT DID NOT COMPLY WITH THE PROVISIONS OF PARAGRAPH 20. ON JANUARY 23, 1942, AN INVESTIGATION BY THE CONTRACTING OFFICER AT CAMP GORDON REVEALED THIS NONCOMPLIANCE, AND ON FEBRUARY 28 THE OFFICE OF THE QUARTERMASTER GENERAL DIRECTED THE CANCELLATION OF THE CONTRACT. THE COMPANY WAS SO NOTIFIED ON MARCH 5, 1942. PENDING DETERMINATION OF THE LEGAL QUESTIONS RAISED BELOW AND OF THE EXACT NUMBER OF EMPLOYEES INVOLVED AND THE EXACT NUMBER OF DAYS UPON WHICH EACH EMPLOYEE WAS REQUIRED TO WORK IN EXCESS OF EIGHT HOURS PER DAY WITHOUT PROPER OVERTIME COMPENSATION, PAYMENT OF INVOICES SUBMITTED BY THE CONTRACTOR HAS BEEN WITHHELD.

THE EIGHT-HOUR LAW (37 STAT. 137-138, 40 U.S.C. SEC. 325) PROVIDES IN PART:

"THAT EVERY CONTRACT * * * WHICH MAY REQUIRE OR INVOLVE THE EMPLOYMENT OF LABORERS OR MECHANICS SHALL CONTAIN A PROVISION THAT NO LABORER OR MECHANIC DOING ANY PART OF THE WORK CONTEMPLATED BY THE CONTRACT, IN THE EMPLOY OF THE CONTRACTOR OR ANY SUBCONTRACTOR CONTRACTING FOR ANY PART OF SAID WORK CONTEMPLATED, SHALL BE REQUIRED OR PERMITTED TO WORK MORE THAN EIGHT HOURS IN ANY ONE CALENDAR DAY UPON SUCH WORK; AND EVERY SUCH CONTRACT SHALL STIPULATE A PENALTY FOR EACH VIOLATION OF SUCH PROVISION IN SUCH CONTRACT OF FIVE DOLLARS FOR EACH LABORER OR MECHANIC FOR EVERY CALENDAR DAY IN WHICH HE SHALL BE REQUIRED OR PERMITTED TO LABOR MORE THAN 8 HOURS UPON SAID WORK * * *.'

SECTION 5 (B) OF PUBLIC, NO. 671 (76TH CONGRESS, 3D SESSION, APPROVED JUNE 28, 1940) PROVIDES THAT:

"DURING THE NATIONAL EMERGENCY DECLARED BY THE PRESIDENT ON SEPTEMBER 8, 1939, TO EXIST, THE PROVISIONS OF THE LAW PROHIBITING MORE THAN EIGHT HOURS LABOR IN ANY ONE DAY OF PERSONS ENGAGED UPON WORK COVERED BY ARMY, NAVY AND COAST GUARD CONTRACTS SHALL BE SUSPENDED.'

SECTION 303 OF PUBLIC, NO. 781 (76TH CONG., 3D SESS., APPROVED SEPTEMBER 9, 1940) PROVIDES HAT:

"NOTWITHSTANDING ANY OTHER PROVISION OF LAW, THE WAGES OF EVERY LABORER OR MECHANIC EMPLOYED BY ANY CONTRACTOR OR SUBCONTRACTOR ENGAGED IN THE PERFORMANCE OF ANY CONTRACT OF THE CHARACTER SPECIFIED IN THE ACT OF JUNE 19, 1912 ( U.S.C., TITLE 40, SECTION 324, 325) SHALL BE COMPUTED ON A BASIC DAY RATE OF EIGHT HOURS PER DAY AND WORK IN EXCESS OF EIGHT HOURS PER DAY SHALL BE PERMITTED UPON COMPENSATION FOR ALL HOURS WORKED IN EXCESS OF EIGHT HOURS PER DAY AT NOT LESS THAN ONE AND ONE-HALF TIMES THE BASIC RATE OF PAY.'

IT WOULD, THEREFORE, APPEAR THAT ON JANUARY 5, 1942, THE EIGHT HOUR LAW (37 STAT. 137-138, 40 U.S.C. SEC. 325) WAS NOT APPLICABLE TO ARMY CONTRACTS, AND THAT HENCE THERE WAS NO STATUTORY REQUIREMENT OR AUTHORIZATION OF THE STIPULATION OF PARAGRAPH 20 OF CONTRACT NO. W 355 QM- 1 THAT:

"FOR EACH VIOLATION OF THE REQUIREMENTS OF THIS ARTICLE A PENALTY OF FIVE DOLLARS SHALL BE IMPOSED UPON THE CONTRACTOR FOR EACH LABORER OR MECHANIC FOR EVERY CALENDAR DAY IN WHICH SUCH EMPLOYEE IS REQUIRED OR PERMITTED TO LABOR MORE THAN EIGHT HOURS UPON SAID WORK WITHOUT RECEIVING COMPENSATION IN ACCORDANCE WITH THIS ARTICLE, AND ALL PENALTIES THUS IMPOSED SHALL BE WITHHELD FOR THE USE AND BENEFIT OF THE GOVERNMENT: * * *"

IN VIEW OF THE FOREGOING, A DECISION IS REQUESTED AS TO WHETHER THE WAR DEPARTMENT MAY PROPERLY WITHHOLD FROM THE SUMS DUE THE CONTRACTOR THE PENALTIES STIPULATED BY THE ABOVE PROVISION OF PARAGRAPH 20 OF THE CONTRACT. IT SHOULD BE EMPHASIZED THAT PARAGRAPH 20 DOES NOT CONTEMPLATE THE PAYMENT OF LIQUIDATED DAMAGES, BUT IS A STRAIGHT PENALTY. IN THE EVENT THAT IT IS DECIDED THAT THE WAR DEPARTMENT MAY PROPERLY WITHHOLD THE PENALTIES FOUND TO HAVE BEEN INCURRED UNDER THIS PROVISION OF THE CONTRACT, A FURTHER DECISION IS REQUESTED AS TO WHETHER THE WAR DEPARTMENT MAY, IN ITS DISCRETION, REFRAIN FROM ENFORCEMENT OF THE PENALTY PROVISION, PAYING TO THE CONTRACTOR THE FULL SUM DUE IT FOR WORK PERFORMED WITHOUT DEDUCTION OF $5 FOR EACH VIOLATION OF THE REQUIREMENTS OF PARAGRAPH 20 OF THE CONTRACT.

THE CONTRACT PROVISION HERE INVOLVED, EXCEPT FOR THE REFERENCE THEREIN TO SECTION 5 (B) OF THE ACT OF JUNE 28, 1940, 54 STAT. 676, 679, IS IDENTICAL WITH THE REVISED EIGHT-HOUR PROVISION PRESCRIBED FOR INCLUSION IN THE STANDARD FORM CONSTRUCTION CONTRACT, U.S. STANDARD FORM NO. 23, BY TREASURY DEPARTMENT, PROCUREMENT DIVISION, CIRCULAR NO. 435, DATED SEPTEMBER 20, 1940, THE SUBJECT OF QUARTERMASTER GENERAL CIRCULAR LETTER NO. 73 OF SEPTEMBER 24, 1940, AND PRESUMABLY WAS BASED THEREON. THE EFFECT OF SECTION 303 OF THE SECOND SUPPLEMENTAL NATIONAL DEFENSE APPROPRIATION ACT, 1941, APPROVED SEPTEMBER 9, 1940, 54 STAT. 872, 884, ON THE EIGHT-HOUR LAW OF JUNE 19, 1912, 37 STAT. 137, IN CONNECTION WITH THE INCLUSION IN THE SAID REVISED FORM OF THE PENALTY PROVISION REFERRED TO IN YOUR LETTER, WAS COVERED BY DECISION OF OCTOBER 31, 1940, 20 COMP. GEN. 233, TO THE SECRETARY OF THE INTERIOR, IN PERTINENT PART, AS FOLLOWS:

THE EIGHT-HOUR LAW OF 1912 (40 U.S.C. 324-325), PROVIDES, GENERALLY, THAT EVERY CONTRACT WITHIN THE SCOPE THEREOF SHALL CONTAIN A PROVISION THAT NO LABORER OR MECHANIC EMPLOYED THEREUNDER SHALL BE REQUIRED OR PERMITTED TO WORK MORE THAN 8 HOURS IN ANY ONE CALENDAR DAY UPON SUCH WORK AND THAT AS A MEANS OF ENFORCING SUCH PROVISION THERE SHALL BE STIPULATED, AS A MATTER OF CONTRACT, A PENALTY OF $5 FOR EACH LABORER OR MECHANIC FOR EVERY CALENDAR DAY IN WHICH HE SHALL BE REQUIRED OR PERMITTED TO LABOR MORE THAN 8 HOURS UPON SUCH WORK. SECTION 303 OF PUBLIC, NO. 781, SUPRA, DID NOT REPEAL THE EIGHT-HOUR LAW OF 1912, BUT MERELY REMOVED THE PROHIBITION AGAINST EMPLOYING LABORERS OR MECHANICS IN EXCESS OF 8 HOURS PER DAY PROVIDED THAT THE CONTRACTOR PAY SUCH LABORERS AND MECHANICS WAGES AT THE RATE OF TIME AND ONE-HALF FOR ALL HOURS WORKED IN EXCESS OF 8 HOURS PER DAY. THE LATER STATUTE IS MERELY SUPPLEMENTARY TO THE FORMER, WHICH CONTINUES IN FULL EFFECT WITH THE QUALIFICATION CONTAINED IN THE LATER ACT. WHEREAS THE 1912 STATUTE PROHIBITS EMPLOYMENT OF LABORERS AND MECHANICS IN EXCESS OF 8 HOURS PER DAY UNDER PENALTY OF $5 FOR EACH VIOLATION THEREOF, SECTION 303 OF PUBLIC, NO. 781, SUPRA, RECOGNIZES THE EXISTENCE AND EFFECT OF THE 1912 STATUTE BUT AUTHORIZES THE EMPLOYMENT OF LABORERS AND MECHANICS IN EXCESS OF 8 HOURS PER DAY ON THE CONDITION, AND ONLY ON THE CONDITION, THAT TIME AND ONE-HALF BE PAID FOR ALL HOURS OF WORK IN EXCESS OF 8 HOURS PER DAY. OBVIOUSLY, IF A CONTRACTOR PERMITS OR REQUIRES A LABORER OR MECHANIC TO WORK IN EXCESS OF 8 HOURS PER DAY AND DOES NOT PAY TIME AND ONE-HALF FOR WORK IN EXCESS OF 8 HOURS, THE ACT OF SEPTEMBER 9, 1940, CONTAINS NO AUTHORITY FOR SUCH EXCESS WORK AND THE CONTRACTOR CANNOT ESCAPE THE PENALTY OF THE 1912 STATUTE BY RELIANCE UPON THE 1940 ACT. THE 1940 STATUTE IS MERELY PERMISSIVE, AS DISTINGUISHED FROM RESTRICTIVE OR PROHIBITIVE, AND, IN EFFECT, SIMPLY WAIVES THE PENALTY SPECIFIED IN THE 1912 STATUTE SO LONG AS A CONTRACTOR PAYS TIME AND ONE- HALF FOR THE OVERTIME. THE 1940 STATUTE DOES NOT REQUIRE A CONTRACTOR TO PAY TIME AND ONE-HALF FOR ALL HOURS WORKED PER DAY IN EXCESS OF EIGHT BY ANY LABORER OR MECHANIC--- IT MERELY PERMITS THE EMPLOYMENT OF SUCH PERSONS IN EXCESS OF 8 HOURS PER DAY UPON THE CONDITION THAT TIME AND ONE- HALF BE PAID FOR OVERTIME. HENCE, ANY FAILURE TO PAY TIME AND ONE HALF IS A VIOLATION NOT OF THE 1940 STATUTE BUT OF THE 1912 STATUTE. THE VIOLATION IN SUCH CASE DOES NOT RELATE TO THE WAGES PAID BUT RATHER TO THE EMPLOYMENT IN EXCESS OF 8 HOURS PER DAY AND AS SUCH IS SUBJECT TO THE PENALTY SPECIFIED IN THE 1912 STATUTE. * * *

WHAT WAS SAID THEREIN IS APPLICABLE TO, AND DETERMINATIVE OF, YOUR FIRST QUESTION. IN VIEW OF THE PLAIN MANDATE OF THE SAID EIGHT-HOUR LAW OF 1912, AS AMENDED, IT MUST BE HELD THAT THE INCLUSION IN THIS AND OTHER CONTRACTS, EXECUTED ON AND AFTER SEPTEMBER 9, 1940, AND SUBJECT TO THE TERMS THEREOF, OF A PROVISION PROHIBITING THE EMPLOYMENT OF LABORERS AND MECHANICS IN EXCESS OF EIGHT HOURS PER DAY, EXCEPT UPON CONDITION THAT THEY ARE PAID AT THE RATE OF TIME AND ONE-HALF FOR SUCH EXCESS HOURS, AND OF A STIPULATION FOR A PENALTY OF $5 FOR EACH VIOLATION THEREOF, NOT ONLY WAS AUTHORIZED BUT WAS REQUIRED. INSOFAR AS CONCERNS THE REFERENCE MADE IN THE INSTANT CONTRACT AND IN YOUR LETTER TO SECTION 5 (B) OF THE ACT OF JUNE 28, 1940, SUPRA, WHICH SUSPENDED THE OPERATION OF THE SAID EIGHT-HOUR LAW WITH RESPECT TO "PERSONS ENGAGED UPON WORK COVERED BY ARMY, NAVY AND COAST GUARD CONTRACTS," THE PHRASEOLOGY AND MANIFEST IMPORT OF SECTION 303 OF THE ACT OF SEPTEMBER 9, 1940, ARE SUCH AS TO RENDER THIS SUSPENSION INOPERATIVE THEREAFTER. THE ACT OF JUNE 28, 1940, WAS A "PROVISION OF LAW" IN EFFECT AT THE TIME OF THE PASSAGE OF THE ACT OF SEPTEMBER 9, 1940, AND, BEING IN CONFLICT AND INCONSISTENT THEREWITH, WAS WITHIN THE PURVIEW OF THE RASE,"NOTWITHSTANDING ANY OTHER PROVISION OF LAW," APPEARING IN THE LATER ACT. IN THIS CONNECTION, ON THE BASIS OF THE STATEMENT MADE IN YOUR LETTER OF DECEMBER 12, 1940, CONSIDERED IN MY DECISION OF DECEMBER 19, 1940, TO YOU, B-13996, THAT "CONTRACTORS WERE NOTIFIED BY THE WAR DEPARTMENT ON OR ABOUT SEPTEMBER 24, 1940, OF THE PASSAGE AND APPLICATION OF THE ACT OF SEPTEMBER 9, 1940," IT WAS ASSUMED THAT YOUR DEPARTMENT RECOGNIZED THE APPLICATION OF THE SAID EIGHT-HOUR LAW OF 1912, AS AMENDED, TO THOSE CONTRACTS EXECUTED BY IT ON AND AFTER SEPTEMBER 9, 1940.

IN THE LIGHT OF THE FOREGOING, I HAVE TO ADVISE THAT WHERE, AS HERE, THE CONTRACT PROPERLY INCLUDES A PROVISION FOR A PENALTY OF $5 FOR EACH VIOLATION OF THE EIGHT-HOUR LAW UNLESS LABORERS AND MECHANICS ARE PAID AT THE RATE OF TIME AND ONE-HALF FOR ALL HOURS WORKED IN EXCESS OF EIGHT HOURS PER DAY, THE AUTHORITY TO WITHHOLD FROM THE CONTRACT PRICE THE AMOUNT DUE AS PENALTIES IS VESTED IN THE GOVERNMENT AS A MATTER OF CONTRACTUAL RIGHT. THEREFORE, YOUR FIRST QUESTION IS ANSWERED IN THE AFFIRMATIVE. COMPARE DECISION OF JUNE 14, 1941, TO YOU, 20 COMP. GEN. 890.

WITH RESPECT TO THE FURTHER QUESTION PRESENTED IN YOUR LETTER, AS TO WHETHER YOUR DEPARTMENT MAY REFRAIN FROM ENFORCEMENT OF THE PENALTY PROVISION THUS PROVIDED FOR IN THE CONTRACT, THE ACT OF JUNE 19, 1912, SUPRA, IS MANDATORY IN ITS REQUIREMENT THAT, UNLESS THE VIOLATION IS DUE TO CERTAIN CONDITIONS NOT HERE PRESENT, THERE BE IMPOSED UPON THE CONTRACTOR A PENALTY OF $5 FOR EACH VIOLATION OF THE EIGHT-HOUR LAW PROVISION OF THE CONTRACT AND THAT THE FULL AMOUNT OF SUCH PENALTIES BE WITHHELD, FOR THE USE AND BENEFIT OF THE UNITED STATES, FROM SUCH MONEYS AS MAY OTHERWISE BE DUE TO THE CONTRACTOR. IN VIEW OF THIS STATUTORY REQUIREMENT AND OF THE FAMILIAR RULE THAT AGENTS AND OFFICERS OF THE GOVERNMENT HAVE NO AUTHORITY TO GIVE AWAY THE MONEY OR PROPERTY OF THE UNITED STATES, TO WAIVE CONTRACTUAL RIGHTS WHICH HAVE ACCRUED TO THE UNITED STATES, OR TO MODIFY CONTRACTS WITHOUT A COMPENSATING BENEFIT TO THE GOVERNMENT, IT MUST BE HELD THAT THERE IS NO LEGAL AUTHORITY FOR REFRAINING FROM THE ASSESSMENT AND COLLECTION OF SUCH AMOUNT AS MAY BE DUE THE GOVERNMENT UNDER THE SAID PENALTY PROVISION OF THE CONTRACT. SPECIFICALLY, THE SECOND QUESTION PRESENTED IS ANSWERED IN THE NEGATIVE.