B-29051, OCT 22, 1942

B-29051: Oct 22, 1942

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WHICH HAVE BEEN PRESENTED TO THE UNDERSIGNED DISBURSING OFFICER BY WINSTON BROS. ARE SUBMITTED FOR AN ADVANCE DECISION AS TO WHETHER OR NOT RADIO BROADCAST SERVICE CAN BE CONSTRUED AS BEING A REIMBURSABLE ITEM AND PAYABLE DIRECT TO VENDOR IN VIEW OF YOUR DECISION B- 23768. EVEN THOUGH AN ACTUAL SAVING IS EFFECTED BY THE SERVICES AS STATED IN THIRD INDORSEMENT FROM THE AREA ENGINEER.". THE SAID VOUCHERS ARE SUPPORTED BY ORIGINAL INVOICES. ARE VERIFIED BY THE CHIEF PROJECT AUDITOR AND HAVE BEEN APPROVED FOR PAYMENT BY THE CONTRACTING OFFICER'S REPRESENTATIVE. THERE IS ALSO FURNISHED RECEIPT EVIDENCING PAYMENT OF THE AMOUNT CLAIMED THEREON BY THE CONSTRUCTOR TO RADIO STATION KCMC. THE CIRCUMSTANCES REPORTED TO HAVE PRECEDED THE INCURRENCE OF THESE OBLIGATIONS AND THE BASIS UPON WHICH REIMBURSEMENT AND/OR PAYMENT IS CLAIMED ARE SET FORTH IN AN INDORSEMENT DATED JUNE 19.

B-29051, OCT 22, 1942

PRECIS-UNAVAILABLE

COLONEL CHARLES LEWIS, F.D., U.S. ARMY:

C/O HEADQUARTERS, SERVICES OF SUPPLY, FISCAL DIVISION

THERE HAS BEEN RECEIVED BY ENDORSEMENT OF SEPTEMBER 16, 1942, FROM HEADQUARTERS, SERVICES OF SUPPLY, FISCAL DIVISION, YOUR LETTER OF JUNE 22, 1942, IN PERTINENT PART, AS FOLLOWS:

"1. THE INCLOSED BUREAU VOUCHERS OAE-A-68 AND WHMS-A-73 IN THE AMOUNTS OF $330.00 AND $660.00, RESPECTIVELY, WHICH HAVE BEEN PRESENTED TO THE UNDERSIGNED DISBURSING OFFICER BY WINSTON BROS. CO., ET AL, THROUGH AREA ENGINEER, LONE STAR ORDNANCE PLANT, TEXARKANA, TEXAS FOR REIMBURSEMENT AND DIRECT PAYMENT TO FIRMS UNDER COST-PLUS-A-FIXED-FEE CONTRACT W 1963-ORD- 516-DA-W 1963-ORD-3 SUB-2, 7/23/41, ARE SUBMITTED FOR AN ADVANCE DECISION AS TO WHETHER OR NOT RADIO BROADCAST SERVICE CAN BE CONSTRUED AS BEING A REIMBURSABLE ITEM AND PAYABLE DIRECT TO VENDOR IN VIEW OF YOUR DECISION B- 23768, MARCH 6, 1942, EVEN THOUGH AN ACTUAL SAVING IS EFFECTED BY THE SERVICES AS STATED IN THIRD INDORSEMENT FROM THE AREA ENGINEER."

THE SAID VOUCHERS ARE SUPPORTED BY ORIGINAL INVOICES, ARE VERIFIED BY THE CHIEF PROJECT AUDITOR AND HAVE BEEN APPROVED FOR PAYMENT BY THE CONTRACTING OFFICER'S REPRESENTATIVE. AS TO VOUCHER WHMS-A-73, THERE IS ALSO FURNISHED RECEIPT EVIDENCING PAYMENT OF THE AMOUNT CLAIMED THEREON BY THE CONSTRUCTOR TO RADIO STATION KCMC.

THE CIRCUMSTANCES REPORTED TO HAVE PRECEDED THE INCURRENCE OF THESE OBLIGATIONS AND THE BASIS UPON WHICH REIMBURSEMENT AND/OR PAYMENT IS CLAIMED ARE SET FORTH IN AN INDORSEMENT DATED JUNE 19, 1942, FROM THE OFFICE OF AREA ENGINEER, LONE STAR ORDNANCE PLANT, TEXARKANA, TEXAS, AS FOLLOWS:

"1. IN VIEW OF THE POLICY IN EFFECT WITH REFERENCE TO PAYMENT OF EMPLOYEES, THE FACTS ARE WHERE EMPLOYEES REPORT FOR DUTY AND BY REASON OF INCLEMENT WEATHER OR OTHERWISE, NO WORK CAN BE PERFORMED, SAID EMPLOYEES ARE COMPENSATED TO THE EXTENT OF TWO HOURS PAY.

"2. IT CAN BE READILY UNDERSTOOD THAT ANY MEANS EMPLOYED WHEREBY EMPLOYEES COULD BE ADVISED IN ADVANCE WHETHER OR NOT TO REPORT FOR WORK WOULD EFFECT A GREAT SAVINGS, ESPECIALLY IS THIS TRUE IN THE INSTANT CASE, SINCE, APPROXIMATELY 20,000 EMPLOYEES WERE DIRECTLY INVOLVED.

"3. AFTER DUE CONSIDERATION BY CONCERNED OFFICIALS, THE MOST PRACTICAL SOLUTION WAS FOLLOWED, VIS, NEGOTIATE A CONTRACT WITH A LOCAL RADIO BROADCASTING STATION, PROVIDING A MEANS OF CONTACT WITH CONCERNED EMPLOYEES BEFORE REPORTING, THUS ELIMINATING NECESSITY OF PAYMENT WHERE NO WORK WAS PERFORMED.

"4. THIS SERVICE WAS INSTITUTED UPON THE INSTRUCTIONS OF COL. BARLOW WINSTON, WHO WAS AT THE TIME AREA ENGINEER, IN ORDER TO REDUCE THE EXCESSIVE EXPENSE INCURRED FOR REPORTING NON-PRODUCTIVE TIME ON THIS PROJECT.

"5. IT CAN READILY UNDERSTOOD WHERE A MISINTERPRETATION OF THE ATTENDING AND SURROUNDING CIRCUMSTANCES WOULD DISCREDIT THE NECESSITY FOR SUCH AN EXPENDITURE. HOWEVER, ACTUAL FACTS PREDICATED ON A SURVEY INDICATE SAVINGS WERE ACTUALLY AFFECTED IN AN AMOUNT AGGREGATING APPROXIMATELY $40,000.

"6. IT APPEARS A REASONABLE INTERPRETATION OF A NECESSARY EXPENDITURE IN THE PERFORMANCE OF THE CONTRACT WOULD OBVIOUSLY INCLUDE ANY EXPENDITURE EFFECTING A SUBSTANTIAL SAVINGS IN THE EXECUTION OF THE WORK.

"7. IT IS, THEREFORE, CLEAR THAT THE EXPENDITURE IN THE INSTANT CASE IS NOT COMPARABLE TO THE FACTS INCORPORATED IN CITATION REFERRED TO WITH REFERENCE TO PAYMENT FOR NEWS SERVICE. CONTRARILY SPEAKING, IT APPEARS THE EXPENDITURE SHOULD BE CLASSIFIED AS A DIRECTIVE FOR THE SPECIFIC PURPOSE OF CURTAILING UNNECESSARY EXPENSES IN CONNECTION WITH THE PAYMENT FOR SERVICES RENDERED WHERE NONE WERE PERFORMED.

"8. IT CANNOT BE SAID THAT ANY BENEFIT, DIRECTLY OR INDIRECTLY ACCRUED TO THE CONTRACTORS' EMPLOYEES, CONVERSELY IT APPEARS THE EXPENDITURE REPRESENTED A PAYMENT IN FURTHERANCE OF THE CONTRACT, PARTICULARLY ADVANTAGEOUS TO THE GOVERNMENT FROM A MONETARY STANDPOINT, ALSO EFFECTING A FURTHER SAVINGS IN RELIEVING CONGESTION AT A TIME WHEN AN UNNECESSARY OVERPLUS OF EMPLOYEES INTERFERED WITH ORDERLY CONTROL OF ESSENTIAL WORK UNDER ABNORMAL CONDITIONS."

ATTACHED TO THE VOUCHERS ARE INVOICES PREPARED BY RADIO STATION KCMC WHICH DESCRIBE THE SERVICES RENDERED AS FOLLOWS:

"BROADCAST SERVICE CONSISTS OF THE FOLLOWING: INFORMATION FOR THE PURPOSE OF ADVISING EMPLOYEES OF THE LONE STAR ORDNANCE PLANT OF WORKING CONDITIONS AND SCHEDULES; BROADCASTS EACH MORNING FROM 6:00 UNTIL 7:00 O'CLOCK WITH ADDITIONAL SPECIAL ANNOUNCEMENTS BETWEEN 7:00 AND 8:00 A.M. AND AT A SPECIAL PERIOD AT 2:00 P.M. AT THE RATE OF $11.00 PER DAY OR $77.00 PER WEEK."

SUBCONTRACT NO. 2 TO CONTRACT W-ORD-516-DA-W-ORD-3, DATED JULY 23, 1941, UNDER WHICH THE CLAIMS HERE INVOLVED AROSE, WAS AUTHORIZED UNDER THE TERMS OF THE PRIME CONTRACT AND WAS ENTERED INTO ON A COST-PLUS-A FIXED-FEE BASIS. SUCH SUBCONTRACT PROVIDES FOR THE CONSTRUCTION OF AN ORDNANCE MANUFACTURING PLANT, IN CONSIDERATION OF THE REIMBURSEMENT BY THE GOVERNMENT OF THE CONSTRUCTOR'S COSTS, AS DEFINED THEREIN, PLUS A STIPULATED FIXED FEE. THE QUESTION PRESENTED IS AS TO WHETHER THE SERVICE COVERED BY THE VOUCHERS REPRESENTS A REIMBURSABLE EXPENDITURE UNDER THE TERMS OF THE CONTRACT.

RELATIVE TO REIMBURSEMENT FOR EXPENDITURES INCURRED BY THE SUBCONTRACTOR, REFERRED TO IN THE SUBCONTRACT AS THE "CONSTRUCTOR", ARTICLE II OF THE SUBCONTRACT PROVIDES, IN PERTINENT PART AS FOLLOWS:

"1. REIMBURSEMENT FOR CONSTRUCTOR'S EXPENDITURES. THE CONSTRUCTOR 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 CONTRACTOR AND THE CONTRACTING OFFICER, AND AS ARE INCLUDED IN THE FOLLOWING ITEMS:

"A. ALL LABOR, MATERIAL, TOOLS, MACHINERY, EQUIPMENT, SUPPLIES, SERVICES, POWER, AND FUEL NECESSARY FOR EITHER TEMPORARY OR PERMANENT USE FOR THE BENEFIT OF THE WORK. ALL ARTICLES OF MACHINERY OR EQUIPMENT VALUED AT $300 OR LESS SHALL BE CLASSED AS TOOLS AND SHALL BE CHARGED DIRECTLY TO THE WORK.

"'9. IT IS UNDERSTOOD AND AGREED THAT THE GOVERNMENT AND NOT THE CONTRACTOR SHALL PERFORM ALL FUNCTIONS OF AUDITING AND ACCOUNTING, INCLUDING THE PREPARATION OF PAYROLLS AND ALL CHECKING, IN CONNECTION WITH PAYMENTS TO BE MADE TO THE CONSTRUCTOR ALL SUMS DUE THE CONSTRUCTOR UNDER THIS SUBCONTRACT. THE CONTRACTOR SHALL HAVE NO OBLIGATION REGARDING AND NO RESPONSIBILITY IN CONNECTION WITH THE AFOREMENTIONED FUNCTIONS AND PAYMENTS, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS SUBCONTRACT.'

IT APPEARS THAT THE INCURRENCE OF THE EXPENDITURE HERE INVOLVED WAS WITH THE APPROVAL OF THE CONTRACTING OFFICER AND THAT THE SERVICES FOR WHICH REIMBURSEMENT AND/OR PAYMENT IS CLAIMED, WERE PROCURED FOR THE PURPOSE OF RELIEVING CONGESTION AT THE PLANT AND TO REDUCE THE COST OF NON-PRODUCTIVE LABOR, THEREBY RESULTING IN A SUBSTANTIAL SAVINGS TO THE GOVERNMENT.

AS POINTED OUT IN YOUR LETTER OF JUNE 22, 1942, QUOTED ABOVE, IN MY DECISION OF MARCH 6, 1942, B-23768, ON THE BASIS OF THE FACTS PRESENTED, I WAS CONSTRAINED TO HOLD THAT SINCE SUCH SERVICE, WHILE POSSIBLY DESIRABLE FROM THE STANDPOINT OF THE CONTRACTOR'S EMPLOYEES, WOULD NOT CONTRIBUTE ANYTHING TANGIBLE IN FURTHERANCE OF THE CONSTRUCTION WORK, AND COULD NOT REASONABLY BE CONSTRUED TO HAVE BEEN NECESSARY TO THE COMPLETION OF THE WORK INVOLVED, THE APPROVAL OF THE EXPENDITURES, THEREFOR, AS REIMBURSABLE, WAS BEYOND THE SCOPE OF THE AUTHORITY VESTED IN THE CONTRACTING OFFICER. BUT THAT DECISION INVOLVED THE BROADCAST OF CURRENT NEWS ITEMS AND THE SERVICES PERFORMED HAD NO RELATIONSHIP TO THE CONTRACT WORK. HOWEVER, IN THE MATTER PRESENTLY UNDER CONSIDERATION, THE ADDITIONAL FACTS PRESENTED ARE SUCH AS WOULD, BY A REASONABLE CONSTRUCTION, WARRANT A CONCLUSION THAT THE SERVICE FOR WHICH REIMBURSEMENT IS CLAIMED WAS REASONABLY INCIDENT TO THE PERFORMANCE OF THE WORK INVOLVED AN SERVED A USEFUL PROPOSE IN FULFILLING THE CONTRACT REQUIREMENTS, IT BEING UNDERSTOOD IN THIS CONNECTION THAT THE BROADCASTS, AT THE DIFFERENT PERIODS, ARE CONFINED PRIMARILY AND LARGELY TO MATTERS RELATED TO PERFORMANCE OF THE CONTRACT, SUCH AS PLANT WORKING CONDITIONS, SCHEDULES, ETC. IN THAT RESPECT, AND HAVING REGARD FOR THE SAVINGS IN LABOR COSTS RESULTING, THE SERVICES DEFINITELY WOULD APPEAR TO BE "FOR THE BENEFIT OF THE WORK." UNDER SUCH CIRCUMSTANCES, THE APPROVAL OF THE EXPENDITURE INVOLVED BY THE CONTRACTING OFFICER WOULD NOT APPEAR TO BE SUCH AN UNREASONABLE EXERCISE OF THE AUTHORITY VESTED IN HIM BY THE TERMS OF THE CONTRACT, AS WOULD REQUIRE THIS OFFICE TO OBJECT THERETO.

ACCORDINGLY, THE VOUCHERS TOGETHER WITH THE ACCOMPANYING PAPERS ARE RETURNED AND YOU ARE ADVISED THAT IF THE FACTS BE AS INDICATED ABOVE, PAYMENTS THEREON ARE AUTHORIZED, IF OTHERWISE CORRECT.