B-28763, OCT 6, 1942

B-28763: Oct 6, 1942

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WAR DEPARTMENT: IN HAVE BY REFERENCE FROM HEADQUARTERS. YOUR ADVANCE DECISION IS REQUESTED AS TO THE PROPRIETY FOR PAYMENT OF THE ATTACHED VOUCHER IN FAVOR OF THE CARRIER EXCAVATING & FOUNDATION COMPANY. A COPY OF THE PRIME CONTRACT IS ON FILE IN YOUR OFFICE. "THE BASIS OF THE CLAIM IS THE BALANCE DUE FOR THE RECAPTURE OF RENTAL EQUIPMENT BY THE GOVERNMENT UNDER THE TERMS OF THE RENTAL AGREEMENT CONTRACT (PHOTOSTAT COPY OF WHICH IS ATTACHED TO THE VOUCHER). 100% OF RENTALS PAID ARE TO APPLY ON RECAPTURE OF EQUIPMENT. 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: "(B) ALL SUBCONTRACTS MADE IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT.

B-28763, OCT 6, 1942

PRECIS-UNAVAILABLE

LIEUTENANT COLONEL GEORGE DOBERT, F.D.:

C/O HEADQUARTERS, SERVICES OF SUPPLY, FISCAL DIVISION,

WAR DEPARTMENT:

IN HAVE BY REFERENCE FROM HEADQUARTERS, SERVICES OF SUPPLY, FISCAL DIVISION, YOUR LETTER OF AUGUST 6, 1942, AS FOLLOWS:

"UNDER AUTHORITY OF THE ACT OF JULY 31, 1894, (28 STAT. 208), AS AMENDED BY THE ACT OF JUNE 10, 1921 (42 STAT. 24), YOUR ADVANCE DECISION IS REQUESTED AS TO THE PROPRIETY FOR PAYMENT OF THE ATTACHED VOUCHER IN FAVOR OF THE CARRIER EXCAVATING & FOUNDATION COMPANY, INC., LOUISVILLE, KENTUCKY, IN THE AMOUNT OF $1,898.10, WHICH HAS BEEN PRESENTED TO ME FOR PAYMENT AS A DISBURSING OFFICER OF THE UNITED STATES.

"THE PAYEE (CARRIER EXCAVATING & FOUNDATION COMPANY, INC.) AS A SUB CONTRACTOR OF THE WINSTON BROS. COMPANY, C.F. HAGLIN AND SONS, INC., THE MISSOURI VALLEY BRIDGE AND IRON COMPANY, AND THE SOLLITT CONSTRUCTION COMPANY, INC., HOLDERS OF PRIME CONTRACT NO. W-7013-QM-2 OF THE HOOSIER ORDNANCE PLANT, CHARLESTOWN, INDIANA. A COPY OF THE PRIME CONTRACT IS ON FILE IN YOUR OFFICE.

"THE BASIS OF THE CLAIM IS THE BALANCE DUE FOR THE RECAPTURE OF RENTAL EQUIPMENT BY THE GOVERNMENT UNDER THE TERMS OF THE RENTAL AGREEMENT CONTRACT (PHOTOSTAT COPY OF WHICH IS ATTACHED TO THE VOUCHER).

"THE TERMS OF ARTICLE VII OF THE EQUIPMENT RENTAL AGREEMENT (THE RECAPTURE CLAUSE), AS AMENDED, ALLOWS BUT 60 CENTS AN HOUR TO BE APPLIED TOWARD THE RECAPTURE OF THE EQUIPMENT BY THE GOVERNMENT, WHEREAS UNDER THE TERMS OF THE PRIME CONTRACT (W-7013-QM-2), 100% OF RENTALS PAID ARE TO APPLY ON RECAPTURE OF EQUIPMENT. ARTICLE II - 1 (C) READS IN PART AS FOLLOWS:

"'EACH CONTRACT FOR THE RENTAL OF CONSTRUCTION PLANT OR PARTS THEREOF BY THE CONTRACTOR FORM THIRD PARTIES SHALL BE IN A FORM PRESCRIBED BY THE SECRETARY OF WAR, SHALL BE SUBJECT TO APPROVAL BY THE CONTRACTING OFFICER, AND SHALL CONTAIN THE SAME PROVISIONS ENTITLING THE GOVERNMENT TO ACQUIRE TITLE TO SUCH PLANT OR PART THEREOF UPON THE SAME CONDITIONS IN PARAGRAPH 2 OF ARTICLE II OF THIS CONTRACT'.

"DOUBT EXISTS AS TO THE LEGALITY OF THE CONTRACT WHICH PERMITS OF GREATER PAYMENTS TO A SUB-CONTRACTOR THAN WOULD ACCRUE TO THE PRIME CONTRACTOR FOR THE RECAPTURE OF LIKE EQUIPMENT UNDER THE SAME CONTRACT."

THE VOUCHER TRANSMITTED WITH YOUR LETTER COVERS CLAIM BY THE CARRIER EXCAVATING AND FOUNDATION CO., INC., LOUISVILLE, KENTUCKY, FOR THE AMOUNT OF $1,898.10, REPRESENTING THE BALANCE DUE FOR THE PURCHASE OF CERTAIN TRUCKS RENTED UNDER SUBCONTRACT NO. W-7020-CE-6, DATED JUNE 2, 1941, ENTERED INTO PURSUANT TO COST-PLUS-A-FIXED-FEE CONTRACT NO. W 7013-QM-2, DATED JANUARY 10, 1941, WITH THE WINSTON BROTHERS CO., AND C.F. HAGLIN AND SONS, INC., MINNEAPOLIS, MINNESOTA, THE MISSOURI VALLEY BRIDGE AND IRON CO., LEAVENWORTH, KANSAS, AND SOLLITT CONSTRUCTION CO., INC., SOUTH BEND, INDIANA, COVERING THE CONSTRUCTION OF AN ORDNANCE PLANT AT CHARLESTOWN, INDIANA.

WITH RESPECT TO REIMBURSEMENT FOR THE RENTAL OF EQUIPMENT AND RECAPTURE OF RENTED EQUIPMENT, ARTICLE II OF THE PRIME CONTRACT PROVIDES, IN PERTINENT PART, THAT:

"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:

"(B) ALL SUBCONTRACTS MADE IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT.

"(C) RENTAL ACTUALLY PAID BY THE CONTRACTOR, AT RATES NOT TO EXCEED THOSE APPROVED BY THE CONTRACTING OFFICER, FOR CONSTRUCTION PLANT IN SOUND AND WORKABLE CONDITION, SUCH AS PUMPS, DERRICKS, CONCRETE MIXERS, BOILERS, CLAMSHELL OR OTHER BUCKETS, ELECTRIC MOTORS, ELECTRIC DRILLS, ELECTRIC HAMMERS, ELECTRIC HOISTS, MECHANICAL SHOVELS, LOCOMOTIVE CRANES, POWER SAWS, ENGINEERS' LEVELS AND TRANSITS, AND SUCH OTHER EQUIPMENT EXCEEDING $300 IN VALUE AS MAY BE NECESSARY FOR THE PROPER AND ECONOMICAL PROSECUTION OF THE WORK. EACH CONTRACT FOR THE RENTAL OF CONSTRUCTION PLANT OR PARTS THEREOF BY THE CONTRACTOR FROM THE THIRD PARTIES SHALL BE IN A FORM PRESCRIBED BY THE SECRETARY OF WAR, SHALL BE SUBJECT TO APPROVAL BY THE CONTRACTING OFFICER, AND SHALL CONTAIN THE SAME PROVISIONS ENTITLING THE GOVERNMENT TO ACQUIRE TITLE TO SUCH PLANT OR ANY PART THEREOF UPON THE SAME CONDITIONS AS THOSE CONTAINED IN PARAGRAPH 2 OF ARTICLE II OF THIS CONTRACT.

"2. *** WHEN AND IF THE TOTAL RENTAL PAID TO THE CONTRACTOR FOR ANY SUCH PART SHALL EQUAL THE VALUATION THEREOF, PLUS ONE PERCENT (1%) PER MONTH FOR EACH MONTH OR FRACTION THEREOF SUCH PART HAS BEEN IN USE, NO FURTHER RENTAL THEREFOR SHALL BE PAID TO THE CONTRACTOR, AND TITLE THERETO SHALL VEST IN THE GOVERNMENT. AT THE COMPLETION OF THE WORK OR UPON TERMINATION OF THE CONTRACT AS PROVIDED IN ARTICLE VI, THE GOVERNMENT MAY AT ITS OPTION PURCHASE ANY PART OF SUCH CONSTRUCTION PLANT BY PAYING TO THE CONTRACTOR THE DIFFERENCE BETWEEN THE VALUATION OF SUCH PART OR PARTS, PLUS ONE PERCENT (1%) PER MONTH FOR EACH MONTH OR FRACTION THEREOF SUCH PART OR PARTS HAVE BEEN IN USE AND THE TOTAL RENTALS THERETOFORE PAID FOR SUCH PART OR PARTS."

IN VIEW OF THESE PROVISIONS OF THE PRIME CONTRACT, YOU HAVE QUESTIONED THE LEGAL PROPRIETY OF MAKING PAYMENT ON THE INVOLVED VOUCHER, SINCE THE AMOUNT CLAIMED IS COMPUTED ON THE BASIS OF APPLYING THE RATE OF $0.60 PER HOUR TO THE RECAPTURE OF THE TRUCKS RENTED UNDER THE SUBCONTRACT INSTEAD OF THE FULL RENTAL RATE OF $1.10 PER HOUR STIPULATED HEREIN.

ARTICLE VII OF THE SUBCONTRACT PROVIDED, IN EFFECT, THAT UPON COMPLETION OF THE WORK OR THE TERMINATION OF THE PRIME CONTRACT THE GOVERNMENT COULD AT ITS OPTION PURCHASE THE TRUCKS RENTED BY PAYING THE DIFFERENCE BETWEEN THEIR VALUATION, PLUS ONE PERCENT PER MONTH FOR EACH MONTH OR PART OF A MONTH THE SAME WERE USED, AND $0.60 PER HOUR OF THE RENTALS PAID; AND UNDER THE TERMS OF ARTICLE II IT WAS AGREED THAT THE SUBCONTRACTOR WOULD FURNISH ALL GREASE AND OIL USED IN THE OPERATION OF THE TRUCKS, TOGETHER WITH ALL NECESSARY REPAIRS WHICH, OF COURSE, WOULD INCLUDE MAINTENANCE AND A CERTAIN AMOUNT OF SUPERVISION. THUS, IT IS CLEAR THAT THE DIFFERENCE BETWEEN THE HOURLY RENTAL RATE OF $1.10 AND THE RATE OF $0.60 PER HOUR EXPRESSLY APPLYING TO THE RECAPTURE OF THE TRUCKS REPRESENTS THE AGREED VALUE OF THE ADDITIONAL ITEMS FURNISHED BY THE SUBCONTRACTOR, AND THAT, THEREFORE, THE SAID RATE OF $0.60 PER HOUR CONSTITUTES THE TRUE RENTAL RATE ACTUALLY PAID BY THE GOVERNMENT FOR THE USE OF THE TRUCKS. THE CORRECTNESS OF THIS CONCLUSION APPEARS TO BE CONFIRMED BY THE FOLLOWING TABULATION WHICH IS CONTAINED IN SCHEDULE B ATTACHED TO AND MADE A PART OF THE SUBCONTRACT:

"$1.10 PER HOUR

.075 - SUPERVISION .275 - MAINTENANCE .15 - GREASE .60 - RECAPTURE CLAUSE

$1.10"

UNDER THE CIRCUMSTANCES THE TERM "TOTAL RENTALS THERETOFORE PAID" AS USED IN THE ABOVE-QUOTED PROVISIONS OF ARTICLE II OF THE PRIME CONTRACT OBVIOUSLY SHOULD NOT BE CONSTRUED AS EMBRACING THE ENTIRE CONSIDERATION STIPULATED IN THE SUBCONTRACT. IN OTHER WORDS, IT FOLLOWS FROM THE FOREGOING THAT THERE IS NO LEGAL BASIS IN THIS CASE FOR QUESTIONING THE VALIDITY OF THE RECAPTURE CLAUSE OF THE SUBCONTRACT OR THE APPLICATION OF THE RATE OF $0.60 PER HOUR IN THE CONSUMMATION OF THE PURCHASE OF THE TRUCKS AS PROVIDED THEREIN.

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