B-28072, AUGUST 28, 1942, 22 COMP. GEN. 169

B-28072: Aug 28, 1942

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IS FOR THE GOVERNMENT'S BENEFIT AND MAY BE WAIVED WHEN IN ITS INTEREST TO DO SO. A PRIMA FACIE PRESUMPTION ARISES THAT STRICT COMPLIANCE WITH SUCH PROVISION IS TO THE GOVERNMENT'S INTEREST AND. REIMBURSEMENT FOR DEMURRAGE CHARGES IS NOT ALLOWABLE UNDER SUCH A CONTRACT IN THE ABSENCE OF EVIDENCE SUFFICIENT TO REBUT SUCH PRESUMPTION. SUCH POWERS ARE NOT UNLIMITED IN THEIR APPLICATION. INCLOSED HEREWITH ARE THREE APPROVED VOUCHERS. VOUCHERS SUBMITTED HEREWITH ARE FOR PAYMENT OF DEMURRAGE ON RAILROAD CARS. WHICH WERE IN THE HANDS OF THE CONTRACTOR. THE QUESTION ARISES AS TO WHETHER OR NOT PAYMENT ON THESE VOUCHERS IS AUTHORIZED DUE TO THE FACT THAT IT IS THE CONTENTION OF THE CONTRACTING OFFICER THAT THE COST OF BUILDING ADEQUATE STORAGE FACILITIES WOULD HAVE EXCEEDED THE COST OF DEMURRAGE. 3.

B-28072, AUGUST 28, 1942, 22 COMP. GEN. 169

CONTRACTS - COST-PLUS - DEMURRAGE CHARGES; CONTRACTING OFFICER'S AUTHORITY A PROVISION IN A COST-PLUS-A-FIXED-FEE CONTRACT REQUIRING THE CONTRACTOR TO UNLOAD FROM RAILROAD CARS PROMPTLY UPON ARRIVAL ALL SHIPMENTS CONSIGNED TO HIM, AND TO PROVIDE STORAGE AND OTHER FACILITIES NECESSARY FOR THAT PURPOSE, IS FOR THE GOVERNMENT'S BENEFIT AND MAY BE WAIVED WHEN IN ITS INTEREST TO DO SO, BUT A PRIMA FACIE PRESUMPTION ARISES THAT STRICT COMPLIANCE WITH SUCH PROVISION IS TO THE GOVERNMENT'S INTEREST AND, THEREFORE, REIMBURSEMENT FOR DEMURRAGE CHARGES IS NOT ALLOWABLE UNDER SUCH A CONTRACT IN THE ABSENCE OF EVIDENCE SUFFICIENT TO REBUT SUCH PRESUMPTION. WHILE COST-PLUS-A-FIXED-FEE CONTRACTS GENERALLY VEST THE GOVERNMENT'S CONTRACTING OFFICER WITH BROAD AND GENERAL POWERS IN THE MATTER OF APPROVING REIMBURSABLE ITEMS, SUCH POWERS ARE NOT UNLIMITED IN THEIR APPLICATION, NOR MAY THEY BE REGARDED AS AFFECTING IN ANY MANNER WHATEVER THE STATUTORY DUTY OF THIS OFFICE TO REQUIRE NECESSARY EVIDENCE IN SUPPORT OF PAYMENTS TO BE MADE BY DISBURSING OFFICERS FROM APPROPRIATED MONEYS.

COMPTROLLER GENERAL WARREN TO MAJOR W. K. PAYNE, U.S. ARMY, AUGUST 28, 1942:

THERE HAS BEEN RECEIVED, BY REFERENCE FROM HEADQUARTERS, SERVICES OF SUPPLY, FISCAL DIVISION, YOUR LETTER OF JULY 6, 1942, AS FOLLOWS:

1. INCLOSED HEREWITH ARE THREE APPROVED VOUCHERS, STANDARD FORMS NO. 1034, PUBLIC VOUCHERS FOR PURCHASES AND SERVICES OTHER THAN PERSONAL, FORWARDED FOR ADVANCE DECISION.

2. VOUCHERS SUBMITTED HEREWITH ARE FOR PAYMENT OF DEMURRAGE ON RAILROAD CARS, WHICH WERE IN THE HANDS OF THE CONTRACTOR, AT THE POINT OF DESTINATION. ARTICLE XVIII OF CONTRACT NO. W-436-ENG-7390, DATED MARCH 25, 1941, PROVIDES THAT: " THE CONTRACTOR SHALL LOAD PROMPTLY ALL RAILROAD CARS FURNISHED FOR LOADING UPON HIS ORDER, AND SHALL UNLOAD FROM RAILROAD CARS PROMPTLY UPON ARRIVAL ALL SHIPMENTS CONSIGNED TO HIM, AND SHALL PROVIDE STORAGE FACILITIES AND OTHER FACILITIES NECESSARY FOR THESE PURPOSES; * * * UPON ARRIVAL.' THE QUESTION ARISES AS TO WHETHER OR NOT PAYMENT ON THESE VOUCHERS IS AUTHORIZED DUE TO THE FACT THAT IT IS THE CONTENTION OF THE CONTRACTING OFFICER THAT THE COST OF BUILDING ADEQUATE STORAGE FACILITIES WOULD HAVE EXCEEDED THE COST OF DEMURRAGE.

3. THE UNDERSIGNED IS A DISBURSING OFFICER AND THESE VOUCHERS HAVE BEEN SUBMITTED TO HIM FOR PAYMENT.

BUREAU VOUCHER NO. 723, IN FAVOR OF THE HARDAWAY CONTRACTING COMPANY, COLUMBUS, GEORGIA, AND BUREAU VOUCHERS NOS. 730 AND 733 IN FAVOR OF THE GEORGIA NORTHERN RAILWAY COMPANY, ALBANY, GEORGIA, TRANSMITTED WITH YOUR LETTER, COVER CLAIMS FOR PAYMENT IN THE NET AMOUNTS OF $272.80, $250.80, AND $34.10, RESPECTIVELY, FOR DEMURRAGE CHARGES ALLEGED TO HAVE BEEN INCURRED BY THE HARDAWAY CONTRACTING COMPANY UNDER ITS COST-PLUS-A-FIXED- FEE CONTRACT NO. W-436-ENG-7390, DATED MARCH 25, 1941.

THE PERTINENT PROVISIONS OF THE CONTRACT ARE AS FOLLOWS:

ARTICLE II--- COST OF THE WORK.

REIMBURSEMENT FOR CONTRACTOR'S EXPENDITURES

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.

ARTICLE XVIII--- LOADING AND UNLOADING RAILWAY CARS.

THE CONTRACTOR SHALL LOAD PROMPTLY ALL RAILROAD CARS FURNISHED FOR LOADING UPON HIS ORDER, AND SHALL UNLOAD FROM RAILROAD CARS PROMPTLY UPON ARRIVAL ALL SHIPMENTS CONSIGNED TO HIM, AND SHALL PROVIDE STORAGE FACILITIES AND OTHER FACILITIES NECESSARY FOR THESE PURPOSES; AND THE CONTRACTOR SHALL NOT ORDER RAILWAY CARS FOR LOADING UNLESS THEY CAN BE LOADED PROMPTLY, AND SHALL NOT CAUSE OR PERMIT SHIPMENTS TO BE CONSIGNED TO HIM UNLESS THEY CAN BE UNLOADED FROM RAILROAD CARS PROMPTLY UPON ARRIVAL.

WHILE IT IS NOT SO STATED IN EXPRESS TERMS, IT OBVIOUSLY WAS THE INTENT AND PURPOSE OF ARTICLE XVIII TO PROTECT THE GOVERNMENT, BY AGREEMENT, AGAINST THE RUNNING OF DEMURRAGE CHARGES. ACCORDINGLY, AND SINCE THE PROVISIONS OF THE SAID ARTICLE MAY REASONABLY BE CONSTRUED AS HAVING CONSTITUTED NOTICE TO THE CONTRACTOR THAT DEMURRAGE CHARGES WOULD NOT BE PAYABLE OR REIMBURSABLE UNDER THE CONTRACT, IT IS EVIDENT THAT THERE IS NO LEGAL OBLIGATION ON THE PART OF THE GOVERNMENT TO MAKE PAYMENT ON THE VOUCHERS.

FURTHERMORE, WHILE IT MAY BE THAT, SINCE ARTICLE XVIII WAS INCORPORATED INTO THE CONTRACT FOR THE BENEFIT OF THE GOVERNMENT, THE PROVISIONS THEREOF MIGHT BE WAIVED IN CASES WHERE IT WOULD BE IN THE INTEREST OF THE GOVERNMENT TO DO SO, IT IS NOT ESTABLISHED BY THE RECORD THAT SUCH IS THE CASE. BY SECOND INDORSEMENT DATED JUNE 20, 1942, THE AREA ENGINEER HAS STATED, IN EFFECT, THAT IT WAS CONSIDERED MORE ECONOMICAL TO INCUR THE DEMURRAGE CHARGES THAN TO CONSTRUCT TEMPORARY WAREHOUSES FOR THE PURPOSE OF STORING MATERIALS, AND THAT, IN ADDITION, THERE WAS A SAVING OF LABOR IN HANDLING THE MATERIAL FROM THE CARS DIRECTLY TO THE JOB INSTEAD OF FROM THE CARS TO WAREHOUSES THENCE TO THE JOB AS NEEDED. HOWEVER, THIS STATEMENT APPARENTLY PRESUPPOSES THAT THE DEMURRAGE EXPENSE AROSE SOLELY BECAUSE OF THE LACK OF STORAGE FACILITIES, WHEREAS THERE MAY HAVE BEEN OTHER MATERIAL CAUSES FOR THE DELAY IN LOADING AND UNLOADING THE SHIPMENTS, SUCH AS, FOR EXAMPLE, NEGLIGENCE ON THE PART OF THE CONTRACTOR. MOREOVER, THE SAID STATEMENT IS NOT SUPPORTED BY ANY EVIDENCE OF RECORD SHOWING THE BASIS THEREFORE. IN FACT, THE INSERTION OF THE PROVISIONS OF ARTICLE XVIII INTO THIS AND SIMILAR CONTRACTS INDICATES THAT IT HAS BEEN FOUND THROUGH EXPERIENCE TO BE MORE ADVANTAGEOUS TO THE GOVERNMENT TO REIMBURSE COST-PLUS-A-FIXED-FEE CONTRACTORS FOR THE EXPENSE OF PROVIDING PROPER STORAGE SPACE THAN TO BEAR THE DEMURRAGE EXPENSE THAT OTHERWISE MIGHT BE EXPECTED TO ARISE. THUS, THERE EXISTS IN THIS CASE A PRIMA FACIE PRESUMPTION THAT IT WOULD HAVE BEEN TO THE GOVERNMENT'S INTEREST HAD THE CONTRACTOR RENDERED PERFORMANCE IN STRICT COMPLIANCE WITH THE REQUIREMENTS OF THE SAID PROVISIONS, AND THERE WOULD BE NO AUTHORITY TO MAKE PAYMENT FOR THE DEMURRAGE CHARGES INCURRED UNLESS THIS PRIMA FACIE PRESUMPTION SHOULD BE OVERCOME THROUGH THE SUBMISSION OF SUCH EVIDENCE AS WOULD CONCLUSIVELY ESTABLISH AS A FACT, NOT ONLY THAT THE LACK OF STORAGE FACILITIES WAS THE SOLE CAUSE OF THE INCURRENCE OF THE CHARGES, BUT, ALSO, THAT THE AMOUNT OF THE CHARGES IS LESS THAN THE COST THAT WOULD HAVE BEEN INCURRED HAD PROPER STORAGE FACILITIES BEEN PROVIDED. IN THIS CONNECTION IT SHOULD BE NOTED THAT, WHILE THE ABOVE-QUOTED PROVISIONS OF PARAGRAPH 1 (P), OF ARTICLE II, OF THE CONTRACT, UNDER WHICH THE VOUCHERS HAVE BEEN APPROVED FOR PAYMENT BY REPRESENTATIVES OF THE CONTRACTING OFFICER, VEST THE CONTRACTING OFFICER WITH BROAD AND GENERAL POWERS IN THE MATTER OF APPROVING REIMBURSABLE ITEMS, SUCH POWERS ARE NOT UNLIMITED IN THEIR APPLICATION, NOR MAY THEY BE REGARDED AS AFFECTING IN ANY MANNER WHATEVER THE STATUTORY DUTY OF THIS OFFICE TO REQUIRE NECESSARY EVIDENCE IN SUPPORT OF PAYMENTS TO BE MADE BY DISBURSING OFFICERS FROM APPROPRIATED MONEYS.

ACCORDINGLY, THE THREE VOUCHERS TRANSMITTED WITH YOUR LETTER ARE RETURNED HEREWITH, AND YOU ARE ADVISED THAT, ON THE PRESENT RECORD, PAYMENT THEREON IS NOT AUTHORIZED.