[Protest of Air Force Contract Award]

B-129289, DEC. 5, 1956

TO HONORABLE H. V. HIGLEY, ADMINISTRATOR, VETERANS ADMINISTRATION:

REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 20, 1956, REQUESTING A DECISION AS TO WHETHER VETERANS WHO HAVE BEEN GRANTED SCHOLARSHIPS UNDER THE GRADUATE STUDY PROGRAM ESTABLISHED BY THE HUGHES AIRCRAFT COMPANY--- THE EXPENSES OF WHICH ARE RECOVERED BY THE COMPANY, IN WHOLE OR IN PART, UNDER ITS GOVERNMENT COST-PLUS-A-FIXED-FEE CONTRACTS--- MAY BE PAID THE EDUCATION AND TRAINING ALLOWANCES AUTHORIZED BY THE VETERANS' READJUSTMENT ASSISTANCE ACT OF 1952, PUBLIC LAW 550, 82D CONGRESS. THE QUESTION ARISES AS A RESULT OF THE PROVISIONS OF SECTION 232/H) OF THIS ACT PROHIBITING PAYMENT OF THE ALLOWANCES WHEN THEY WOULD CONSTITUTE A DUPLICATION OF BENEFITS PAID FOR BY THE GOVERNMENT.

THE RECORD DISCLOSES THAT IN COOPERATION WITH A NUMBER OF UNIVERSITIES, THE HUGHES AIRCRAFT COMPANY, CULVER CITY, CALIFORNIA, HAS ESTABLISHED UNDER THE DIRECTION OF THE HUGHES RESEARCH AND DEVELOPMENT LABORATORIES, A NUMBER OF FELLOWSHIP PROGRAMS AS A MEANS OF FOSTERING ADVANCE STUDIES IN CERTAIN FIELDS OF ENGINEERING AND SCIENCE, SUCH AS AERONAUTICAL ENGINEERING, ELECTRICAL ENGINEERING, MECHANICAL ENGINEERING, GENERAL ELECTRONICS, AERODYNAMICS AND PHYSICS. THE HUGHES MASTER OF SCIENCE FELLOWSHIP PROGRAM, SPECIFICALLY REFERRED TO IN YOUR LETTER, WAS ESTABLISHED IN 1951 TO ENABLE OUTSTANDING GRADUATE STUDENTS WITH B.S. DEGREES TO OBTAIN MASTER OF SCIENCE DEGREES. EACH APPLICANT IS PERMITTED TO SELECT A GRADUATE SCHOOL OF STUDY FROM THE LIST OF COOPERATING INSTITUTIONS AND MUST MEET THE ENTRANCE REQUIREMENTS OF THE SELECTED INSTITUTIONS. DUE TO ARRANGEMENT LIMITATIONS MOST OF THE FELLOWSHIPS ARE FOR STUDY AT THE UNIVERSITY OF SOUTHERN CALIFORNIA OR THE UNIVERSITY OF CALIFORNIA AT LOS ANGELES. QUALIFIED CANDIDATES PURSUE A SCHEDULE OF GRADUATE WORK REQUIRING TWO YEARS FOR COMPLETION, ARE EMPLOYED IN THE HUGHES RESEARCH AND DEVELOPMENT LABORATORIES FULL-TIME IN THE SUMMER MONTHS AND A MAXIMUM OF 26 HOURS PER WEEK DURING THE ACADEMIC YEAR UNDER THE GUIDANCE OF EXPERIENCED SCIENTISTS AND ENGINEERS, IF THE UNIVERSITY OF SOUTHERN CALIFORNIA OR THE UNIVERSITY OF CALIFORNIA AT LOS ANGELES, IS SELECTED. IF ONE OF THE OTHER UNIVERSITIES IS SELECTED, THE PRESCRIBED STUDY AND WORK SCHEDULE ARE FOLLOWED. SALARIES ARE PAID COMMENSURATE WITH THE INDIVIDUAL'S ABILITY, EXPERIENCE AND ASSIGNMENT IN THE LABORATORIES RANGING FROM APPROXIMATELY $500 A MONTH. ALL COMPANY BENEFITS AVAILABLE TO FULL-TIME STAFF MEMBERS ARE ACCORDED THE PARTICIPANTS IN THE PROGRAM AND, WHERE NECESSARY, TRAVEL AND MOVING EXPENSES ARE ALSO PAID. TUITION, ADMISSION FEES AND BOOKS ARE PAID BY THE COMPANY DIRECTLY TO THE SELECTED INSTITUTIONS.

FROM OUR REVIEW OF THE COMPANY'S RECORDS FOR THE THREE 6-MONTH OVERHEAD PERIODS FROM JANUARY 1, 1955, THROUGH JUNE 30, 1956, IT WAS DISCLOSED THAT THE COST OF TUITION, FEES AND BOOKS UNDER THE HUGHES MASTER OF SCIENCE FELLOWSHIP PROGRAM WAS INCLUDED IN THE OVERHEAD POOL USED AS THE BASIS FOR NEGOTIATING THE FIXED RATE OF OVERHEAD TO BE APPLIED TO ALL HUGHES RESEARCH AND DEVELOPMENT WORK. UNDER THESE CONTRACTS, HOWEVER, NO PROVISION IS MADE FOR FURNISHING EDUCATION AND TRAINING NOR IS THE HUGHES AIRCRAFT COMPANY ACTING AS AN AGENT OF THE GOVERNMENT. CF. ALABAMA V. KING AND BOOZER, 314 U.S. 1. IT WAS ALSO DISCLOSED THAT 97.6 PERCENT OF THE CONTRACTOR'S TOTAL LABOR COST FOR RESEARCH AND DEVELOPMENT DURING THESE PERIODS WAS APPLICABLE TO GOVERNMENT CONTRACTS, BOTH FIXED PRICE AND COST-PLUS-A-FIXED-FEE. HENCE, IT IS APPARENT THAT 97.6 PERCENT OF THE COST OF THE PROGRAM DURING THE PERIODS STATED WAS RECOVERED BY THE HUGHES AIRCRAFT COMPANY UNDER ITS GOVERNMENT CONTRACTS, AND INASMUCH AS THE COMPANY'S WORK IS ALMOST ENTIRELY GOVERNMENT, WE CAN ANTICIPATE THAT ALMOST ALL OF THE ESTIMATED COST OF THE PROGRAM FOR THE ACADEMIC YEAR 1956 --- 1957 WILL LIKEWISE BE ALLOCATED TO GOVERNMENT CONTRACTS.

SECTION 232/H) OF THE VETERANS' READJUSTMENT ASSISTANT ACT OF 1952, 38 U.S.C. 942, PROVIDES IN PERTINENT PART AS FOLLOWS:

"NO ELIGIBLE VETERAN SHALL BE PAID AN EDUCATION AND TRAINING ALLOWANCE UNDER THIS TITLE FOR ANY PERIOD DURING WHICH (1) HE IS ENROLLED IN AND PURSUING A COURSE OF EDUCATION OR TRAINING PAID FOR BY THE UNITED STATES UNDER ANY PROVISION OF LAW OTHER THAN THIS TITLE, WHERE THE PAYMENT OF SUCH ALLOWANCE WOULD CONSTITUTE A DUPLICATION OF BENEFITS PAID TO THE VETERAN FROM THE FEDERAL TREASURY, * * *.'

IT MAY BE NOTED THAT AN EXPRESS PROHIBITION OF THIS CHARACTER WAS NOT INCLUDED IN THE SERVICEMEN'S READJUSTMENT ACT OF 1944, PROVIDING FOR THE PAYMENT OF THE CUSTOMARY COST OF TUITION DIRECTLY TO THE INSTITUTIONS IN WHICH VETERANS RECEIVING BENEFITS UNDER THAT ACT WERE ENROLLED. ALSO, AS YOU ARE AWARE, AN ATTEMPT BY REGULATION TO REQUIRE CONSIDERATION OF FEDERAL FUNDS RECEIVED BY LAND-GRANT COLLEGES IN DETERMINING THE COST OF TUITION PAYABLE BY THE GOVERNMENT UNDER THE 1944 ACT WAS DISAPPROVED BY THE CONGRESS WHEN THE REGULATION WAS NULLIFIED BY THE PROVISIONS OF PUBLIC LAW 571, 81ST CONGRESS, 64 STAT. 254. PERHAPS IT WAS WITH A VIEW TO CLARIFYING ANY MISCONCEPTION WHICH MIGHT HAVE ARISEN FROM THIS ACTION THAT CONGRESS INCLUDED THE EXPRESS PROHIBITION PROVIDED BY SECTION 232 (H) IN THE 1952 ACT THEREBY AFFIRMING ITS ADHERENCE TO THE FUNDAMENTAL PRINCIPLE- -- UNIFORMLY FOLLOWED BY ADMINISTRATIVE AND ACCOUNTING OFFICERS--- THAT TWO PAYMENTS FOR THE SAME GOVERNMENTAL UNDERTAKING OR OBLIGATION ARE NOT AUTHORIZED FROM FEDERAL APPROPRIATIONS. HOWEVER, THERE IS A DEARTH OF INFORMATION IN THE LEGISLATIVE HISTORY OF THE 1952 ACT AS TO THE PURPOSE AND SCOPE OF THE PROHIBITION AND ONLY ONE MATERIAL REFERENCE TO SECTION 232 (H) HAS BEEN FOUND. THIS APPEARS AT PAGE 33 OF THE REPORT OF THE COMMITTEE ON VETERANS' AFFAIRS, NO. 1943, 82D CONGRESS, ACCOMPANYING H.R. 7656, WHICH LATER BECAME PUBLIC LAW 550, WHERE IT IS STATED: "THIS BAR IS INTENDED TO PRECLUDE EDUCATION AND TRAINING ALLOWANCE TO STUDENTS WHO ARE RECEIVING ALLOWANCES BASED UPON THE PURSUIT OF AN ENTIRE COURSE OF TRAINING BUT IS NOT INTENDED TO PRECLUDE PAYMENTS WHERE STUDENTS RECEIVE INCIDENTAL ALLOWANCES FOR SPECIFIC MILITARY ASSIGNMENTS SUCH AS THE ROTC PROGRAMS OF THE ARMY.'

IN VIEW OF THE FOREGOING, AND HAVING IN MIND THAT ALL THOSE CONCERNED WITH THIS LEGISLATION RECOGNIZED THAT PERSONAL FINANCIAL STATUS OR NEED SHOULD NOT BE CONSIDERED AS A FACTOR IN GRANTING SUCH EDUCATION AND TRAINING ALLOWANCES, IT SEEMS CLEAR AS INDICATED IN YOUR LETTER THAT THE PROHIBITION PROVIDED BY SECTION 232 (H) OF THE ACT IS DIRECTED SOLELY AT SITUATIONS WHERE VETERANS ARE RECEIVING EDUCATION AND TRAINING UNDER PROGRAMS SPONSORED BY THE GOVERNMENT AND PAID FOR FROM FEDERAL APPROPRIATIONS. DENIAL OF THE ALLOWANCES MANIFESTLY WAS NOT INTENDED BECAUSE A VETERAN WAS THE RECIPIENT OF A SCHOLARSHIP OR FELLOWSHIP OR SIMILAR EDUCATIONAL BENEFIT FROM A STATE OR OTHER GOVERNING BODY, OR FROM A PUBLIC OR PRIVATE INSTITUTION OR CORPORATION, OR FROM AN INDIVIDUAL GRANTOR. IT MAY, THEREFORE, BE REASONABLY CONCLUDED THAT THERE IS NO LEGAL JUSTIFICATION FOR DENYING THE ALLOWANCES PROVIDED BY THE ACT MERELY BECAUSE THE ECONOMIC BURDEN OF BENEFITS RECEIVED BY THE VETERAN FROM OTHER THAN FEDERAL SOURCES ULTIMATELY MAY SHIFT TO THE GOVERNMENT, AS IN THE CASE OF THE HUGHES MASTER OF SCIENCE FELLOWSHIPS ESTABLISHED BY THE HUGHES AIRCRAFT COMPANY WHERE THIS RESULTS AS AN ORDINARY CONSEQUENCE OF THE PAYMENT FOR SUPPLIES AND SERVICES FURNISHED BY THE COMPANY UNDER ITS CONTRACTS WITH FEDERAL AGENCIES.

ACCORDINGLY, IT IS OUR VIEW THAT PAYMENT OF THE ALLOWANCES AUTHORIZED BY THE VETERANS' READJUSTMENT ASSISTANCE ACT OF 1952 UNDER THE CIRCUMSTANCES INDICATED IS NOT PROHIBITED BY SECTION 232 (H) OF THE ACT.