B-28466, OCT 8, 1942

B-28466: Oct 8, 1942

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THE SECRETARY OF WAR: I HAVE YOUR LETTER OF AUGUST 21. WHICH COSTS AND EXPENSES SHALL INCLUDE BUT SHALL NOT BE LIMITED TO THE FOLLOWING ITEMS: "'Q. *** A PROPORTIONATE SHARE OF THE COST OF WELFARE AND OTHER EMPLOYEE RELATIONS PLANS MAINTAINED BY THE CONTRACTOR TO THE EXTENT THAT SUCH PLANS ARE MADE APPLICABLE TO ITS EMPLOYEES AT SAID PLANT. *** IN MAKING OF EXPENDITURES PURSUANT TO OR IN THE MAINTENANCE OF WELFARE OR OTHER PLANS FOR THE BENEFIT OF EMPLOYEES AT SAID PLANT. THE GOVERNMENT SHALL BE CHARGEABLE THEREFORE INSOFAR AS THE SAME ARE CONSISTENT WITH THE CONTRACTOR'S GENERAL EMPLOYEE RELATIONS POLICIES. *** IT IS RECOGNIZED THAT SUCH BENEFITS AND THE COST OF SUCH SERVICES RENDERED TO EMPLOYEES OF THE CONTRACTOR AT THIS PLANT SHALL BE TREATED AS PART OF THE COST OF OPERATION HEREUNDER.'.

B-28466, OCT 8, 1942

PRECIS-UNAVAILABLE

THE HONORABLE, THE SECRETARY OF WAR:

I HAVE YOUR LETTER OF AUGUST 21, 1942, AS FOLLOWS:

"TRANSMITTED HEREWITH FOR ADVANCE DECISION IN BUREAU VOUCHER NO. 5434 IN THE AMOUNT OF $5.70 COVERING REIMBURSEMENT TO E.I. DU PONT DE NEMOURS & COMPANY FOR THE PURCHASE OF VICTROLA RECORDS, USED IN CONNECTION WITH THE OPERATION OF ALABAMA ORDNANCE WORKS, SYLACAUGA, ALABAMA, UNDER COST-PLUS-A -FIXED-FEE CONTRACT W-ORD-497.

"TITLE IV, ARTICLE IV-A-1-Q OF THE CONTRACT PROVIDES:

"'1. THE CONTRACTOR SHALL BE REIMBURSED IN THE MANNER HEREINAFTER DESCRIBED FOR ALL COSTS AND EXPENSES OF EVERY CHARACTER AND DESCRIPTION INCURRED IN THE PERFORMANCE OF THE WORK UNDER THIS CONTRACT, WHEN APPROVED OR RATIFIED BY THE CONTRACTING OFFICER, WHICH COSTS AND EXPENSES SHALL INCLUDE BUT SHALL NOT BE LIMITED TO THE FOLLOWING ITEMS:

"'Q. *** A PROPORTIONATE SHARE OF THE COST OF WELFARE AND OTHER EMPLOYEE RELATIONS PLANS MAINTAINED BY THE CONTRACTOR TO THE EXTENT THAT SUCH PLANS ARE MADE APPLICABLE TO ITS EMPLOYEES AT SAID PLANT. *** IN MAKING OF EXPENDITURES PURSUANT TO OR IN THE MAINTENANCE OF WELFARE OR OTHER PLANS FOR THE BENEFIT OF EMPLOYEES AT SAID PLANT, THE GOVERNMENT SHALL BE CHARGEABLE THEREFORE INSOFAR AS THE SAME ARE CONSISTENT WITH THE CONTRACTOR'S GENERAL EMPLOYEE RELATIONS POLICIES. *** IT IS RECOGNIZED THAT SUCH BENEFITS AND THE COST OF SUCH SERVICES RENDERED TO EMPLOYEES OF THE CONTRACTOR AT THIS PLANT SHALL BE TREATED AS PART OF THE COST OF OPERATION HEREUNDER.'

"IN LETTER DATED MAY 22, 1942, WHICH IS ATTACHED TO THE VOUCHER FROM THE CHIEF ACCOUNTING OFFICER OF THE CONTRACTOR TO THE AREA ENGINEER OF THE ALABAMA ORDNANCE WORKS, IT IS STATED THAT THE RECORDS ARE PLAYED WHILE THE MEN ARE GOING THROUGH THE CLOCK ALLEYS IN THE MORNING AND AFTERNOON, ARE PLAYED FOR THE PURPOSE OF MAINTAINING ORDER DURING WAITING PERIODS, ARE USED TO ATTRACT THE ATTENTION OF EMPLOYEES, AND BETWEEN THE PLAYING OF RECORDS REMARKS ARE MADE REGARDING SAFETY PRACTICES.

"THE COMMANDING OFFICER, BY 6TH INDORSEMENT DATED JUNE 26, 1942, STATES THAT HE IS OF THE OPINION THAT THE EXPENDITURES ARE PROPERLY REIMBURSABLE UNDER THE ABOVE QUOTED PARAGRAPH OF THE CONTRACT.

"THERE HAS NOT BEEN OVERLOOKED YOUR DECISION B-23768 DATED MARCH 6, 1942, WHEREIN IT WAS HELD THAT THE COST OF FURNISHING DAILY NEWS SERVICE TO EMPLOYEES OF THE CONTRACTOR OVER A LOUD-SPEAKER SYSTEM WAS NOT A REIMBURSABLE ITEM UNDER THE TERMS OF A QAURTERMASTER CORPS COST PLUS-A- FIXED-FEE CONTRACT. IT SHOULD BE NOTED THAT THE TERMS OF CONTRACT W-ORD- 497 ARE DIFFERENT FROM THE QUARTERMASTER CONTRACT CONSIDERED IN THAT DECISION IN THAT THE CONTRACT NOW UNDER CONSIDERATION CONTAINS WHAT IS COMMONLY DESIGNATED AS THE 'WELFARE CLAUSE', TITLE IV, ARTICLE IV-A-1-Q. ALSO, THERE IS FOR CONSIDERATION THE FACT THAT IN THAT CASE, NEWS SERVICE WAS BEING FURNISHED EMPLOYEES. IN THE INSTANT CASE, THE RECORDS ARE USED TO CREATE A BETTER FEELING AMONG THE EMPLOYER AND EMPLOYEES, TO MAINTAIN ORDER DURING IDLE PERIODS AND TO ATTRACT THE ATTENTION OF EMPLOYEES AT WHICH TIME REMARKS AND ANNOUNCEMENTS ARE MADE REGARDING SAFETY PRACTICES.

"IT IS THE OPINION OF THIS DEPARTMENT THAT THE GOVERNMENT, ACTING THROUGH COST-PLUS-A-FIXED-FEE CONTRACTORS, OWES SEVERAL DUTIES TO THE EMPLOYEES OF SUCH CONTRACTORS WHO HAVE BEEN DRAWN TO GOVERNMENT PLANTS, ONE OF WHICH IS TO CONSTANTLY REMIND THE EMPLOYEES WITH RESPECT TO SAFETY PRACTICES, NOT ONLY FOR THE PROTECTION OF THEMSELVES AND THEIR FELLOW WORKERS, BUT FOR THE PROTECTION OF GOVERNMENT-OWNED PROPERTY AND EQUIPMENT. THE PLAYING OF VICTROLA RECORDS SUCH AS 'THIS IS MY COUNTRY', ADMITTEDLY DOES ATTRACT ATTENTION OF THE EMPLOYEES AND TENDS TO PUT HIM ON 'EDGE'. HE BECOMES ALERT AND ATTENTIVE AND HENCE, MORE RECEPTIVE TO SUGGESTIONS ON HOW TO IMPROVE SAFETY MEASURES AND HOW TO PREVENT ACCIDENTS.

"FURTHER, THERE IS NOTHING QUITE SO DETRIMENTAL TO EMPLOYEE MORALE AS IDLENESS WHICH RESULTS WHEN PRODUCTION CEASES FOR SHORT PERIODS DURING WORKING HOURS. THE EMPLOYEES, THROUGH NO FAULT OF THEIR OWN, ARE FORCED TO AMUSE THEMSELVES AS BEST THEY CAN UNTIL THE MACHINES AND PRODUCTION START AGAIN. THEIR MINDS MAY BE KEPT OCCUPIED BY THE PLAYING OF PATRIOTIC MUSIC, WHICH PUTS THE EMPLOYEES IN THAT SPIRIT AND FRAME OF MIND SO ESSENTIAL TO THE WAR EFFORT AT THIS TIME. WHEN AN EMPLOYEE IS IDLE IN MIND AND BODY, HIS MORALE TENDS TO DECREASE. FOR EFFECTIVE PRODUCTION, IT IS NECESSARY TO KEEP THIS EMPLOYEE MORALE AT THE HIGHEST PITCH. IT IS ENTIRELY IN THE INTEREST OF THE GOVERNMENT THAT THIS BE DONE SO THAT EMPLOYEE EFFICIENCY AND THE PRODUCTION AT THE PLANT IN WHICH THEY ARE EMPLOYED WILL NOT BE IMPAIRED.

"YOUR EXPEDITIOUS CONSIDERATION OF THE MATTER AND A DECISION THEREON, WILL BE APPRECIATED."

THE REFERRED TO LETTER OF MAY 22, 1942, FROM THE CHIEF ACCOUNTING OFFICER OF THE CONTRACTOR TO THE AREA ENGINEER OF THE ALABAMA ORDNANCE WORKS, IN EXPLANATION OF THE PURPOSES INTENDED TO BE ACHIEVED BY THE PLAYING OF THE PHONOGRAPH RECORDS IS, IN PERTINENT PART, AS FOLLOWS:

"THE ITEMS LISTED ON THIS VOUCHER ARE RECORDS AND SUPPLIES. THESE RECORDS ARE PLAYED THROUGH THE PUBLIC ADDRESS SYSTEM AT THE CLOCK ALLEYS. THEY ARE PLAYED DURING THE TIME THE MEN ARE GOING THROUGH THE CLOCK ALLEYS IN THE MORNING AND AGAIN WHEN THEY ARE GOING OUT IN THE AFTERNOON. THEY ARE USED AS A METHOD OF MAINTAINING ORDER DURING WAITING PERIODS. THEY ARE USED TO CREATE A BETTER FEELING BETWEEN EMPLOYER AND EMPLOYEE. THEY ARE USED TO ATTRACT THE ATTENTION OF EMPLOYEES AND BETWEEN THE PLAYING OF THESE RECORDS REMARKS ARE MADE REGARDING SAFETY PRACTICES."

CONTRACT NO. W-ORD-497 ENTERED INTO ON A COST-PLUS-A-FIXED-FEE BASIS PROVIDES GENERALLY FOR THE DESIGN, CONSTRUCTION, EQUIPPING AND OPERATION OF A PLANT FOR THE MANUFACTURE OF NITROCELLULOSE SMOKELESS POWDER AND DIPHENYLAMINE, IN CONSIDERATION OF THE REIMBURSEMENT OF THE CONTRACTOR'S COSTS AS DEFINED IN THE CONTRACT, PLUS STIPULATED FIXED FEES. THE QUESTION PRESENTED IS AS TO WHETHER THE ARTICLES COVERED BY THE VOUCHER HERE INVOLVED REPRESENT A REIMBURSABLE EXPENDITURE.

THE DETERMINATION OF WHETHER A PARTICULAR ITEM OF EXPENSE INCURRED IN THE PERFORMANCE OF A COST-PLUS-A-FIXED-FEE CONTRACT IS REIMBURSABLE TO THE CONTRACTOR AS SUCH, OR WHETHER IT IS TO BE REGARDED AS INCLUDED IN THE FIXED FEES COVERING COMPENSATION OR GENERAL OVERHEAD EXPENSES AND PROFIT, NECESSARILY IS DEPENDENT UPON THE NATURE OF THE EXPENSE, CONSIDERED IN THE LIGHT OF THE TERMS AND PURPOSES OF THE CONTRACT INVOLVED. WITH RESPECT TO REIMBURSEMENT FOR EXPENDITURES UNDER THE CONTRACT HERE INVOLVED, TITLE IV, ARTICLE IV-A-1-Q, PROVIDES IN PERTINENT PART AS FOLLOWS:

"1. THE CONTRACTOR SHALL BE REIMBURSED IN THE MANNER HEREINAFTER DESCRIBED FOR ALL COSTS AND EXPENSES OF EVERY CHARACTER AND DESCRIPTION INCURRED IN THE PERFORMANCE OF THE WORK UNDER THIS CONTRACT, WHEN APPROVED OR RATIFIED BY THE CONTRACTING OFFICER, WHICH COSTS AND EXPENSES SHALL INCLUDE BUT SHALL NOT BE LIMITED TO THE FOLLOWING ITEMS:

"Q. *** A PROPORTIONATE SHARE OF THE COST OF WELFARE AND OTHER EMPLOYEE RELATIONS PLANS MAINTAINED BY THE CONTRACTOR TO THE EXTENT THAT SUCH PLANS ARE MADE APPLICABLE TO ITS EMPLOYEES AT SAID PLANT. *** IN THE MAKING OF EXPENDITURES PURSUANT TO OR IN THE MAINTENANCE OF WELFARE OR OTHER PLANS FOR THE BENEFIT OF EMPLOYEES AT SAID PLANT, THE GOVERNMENT SHALL BE CHARGEABLE THEREFORE INSOFAR AS THE SAME ARE CONSISTENT WITH THE CONTRACTOR'S GENERAL EMPLOYEE RELATIONS POLICIES. *** IT IS RECOGNIZED THAT SUCH BENEFITS AND THE COST OF SUCH SERVICES RENDERED TO EMPLOYEES OF THE CONTRACTOR AT THIS PLANT SHALL BE TREATED AS PART OF THE COST OF OPERATION HEREUNDER."

THE CONTRACT FURTHER PROVIDES, UNDER TITLE VI, ARTICLE VI-J:

"ACCIDENT PREVENTION:

"THE CONTRACTOR SHALL AT ALL TIMES EXERCISE REASONABLE PRECAUTIONS FOR THE SAFETY OF EMPLOYEES ON THE WORK ***."

THE VOUCHER INVOLVED IS APPROVED FOR PAYMENT BY THE CONTRACTING OFFICER'S REPRESENTATIVE. BY 5TH INDORSEMENT OF JUNE 22, 1942, FROM THE ORDNANCE OFFICE TO THE COMMANDING OFFICER, ALABAMA ORDNANCE WORKS, IT IS STATED TO BE THE OPINION OF THE ORDNANCE DEPARTMENT "THAT THE EXPENDITURE IS PROPERLY REIMBURSABLE UNDER THE SO-CALLED 'WELFARE CLAUSE' (PARAGRAPH Q, ARTICLE IV-A-1, TITLE IV) OF THE CONTRACT," WHICH OPINION IS CONCURRED IN BY THE COMMANDING OFFICER OF THE ALABAMA ORDNANCE WORKS.

IN VIEW OF THE EXPLANATION AS TO THE PURPOSES SOUGHT TO BE ACHIEVED BY THE USE OF THE ITEMS PURCHASED IN THIS INSTANCE, IT WOULD APPEAR THAT THE EXPENDITURE COMES WITHIN THE TERMS OF THE CONTRACT AND WAS DESIGNED TO FURTHER THE PROSECUTION OF THE WORK THEREUNDER. WHILE THE AUTHORITY 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" IS NOT UNLIMITED, THE DETERMINATION MADE IN THIS INSTANCE, IN THE LIGHT OF THE FOREGOING, DOES NOT APPEAR TO BE SO UNREASONABLE AN EXERCISE OF SUCH AUTHORITY AS TO REQUIRE THIS OFFICE TO OBJECT THERETO.

ACCORDINGLY, THE VOUCHER, TOGETHER WITH ACCOMPANYING PAPERS, IS RETURNED AND YOU ARE ADVISED THAT PAYMENT THEREON IS AUTHORIZED, IF OTHERWISE CORRECT.