B-30706, JANUARY 25, 1943, 22 COMP. GEN. 695

B-30706: Jan 25, 1943

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THERE IS NO LEGAL OBJECTION TO THE DISTRICT OF COLUMBIA ALLEY DWELLING AUTHORITY ENTERING INTO COST-PLUS A/FIXED-FEE CONTRACTS FOR THE CONSTRUCTION OF SUCH TEMPORARY HOUSING SHELTERS. IS NOT SUPPORTED BY A VALID CONSIDERATION WHERE. IN ADDITION TO THE FACT THAT THE ESTIMATED COSTS WERE MADE EXCEPTIONALLY LIBERAL DUE TO INABILITY TO APPROXIMATE CLOSELY EXPECTED ACTUAL COSTS AND CONSEQUENTLY DO NOT REPRESENT A REASONABLY ACCURATE MEASURE OF THE EXPECTED COSTS OF PROPER AND EFFICIENT OPERATION SUCH AS RAISES A PRESUMPTION THAT ANY SAVINGS BELOW THE ESTIMATED COST MUST HAVE BEEN DUE TO SPECIAL EFFORT ON THE PART OF THE CONTRACTOR. THERE IS. PAYMENTS UNDER THE SAID BONUS CLAUSE ARE NOT AUTHORIZED. 5 COMP.

B-30706, JANUARY 25, 1943, 22 COMP. GEN. 695

CONTRACTS - COST-PLUS-A-FIXED-FEE - BONUS FOR COST SAVINGS IN VIEW OF THE EXPRESS TERMS OF THE ACT OF MARCH 1, 1941, AUTHORIZING THE PROVIDING, BY CONSTRUCTION, OR OTHERWISE, OF EMERGENCY TEMPORARY DEFENSE HOUSING SHELTERS WITHOUT REGARD TO THE ADVERTISING REQUIREMENTS OF SECTION 3709, REVISED STATUTES, THERE IS NO LEGAL OBJECTION TO THE DISTRICT OF COLUMBIA ALLEY DWELLING AUTHORITY ENTERING INTO COST-PLUS A/FIXED-FEE CONTRACTS FOR THE CONSTRUCTION OF SUCH TEMPORARY HOUSING SHELTERS. A "COST SAVINGS BONUS CLAUSE" IN A COST-PLUS-A-FIXED-FEE CONTRACT, WHICH ENTITLES THE CONTRACTOR--- IN ADDITION TO ITS FIXED FEE--- TO SHARE IN ANY COST SAVINGS IN THE CONSTRUCTION OF EMERGENCY TEMPORARY DEFENSE HOUSING SHELTERS, IS NOT SUPPORTED BY A VALID CONSIDERATION WHERE, IN ADDITION TO THE FACT THAT THE ESTIMATED COSTS WERE MADE EXCEPTIONALLY LIBERAL DUE TO INABILITY TO APPROXIMATE CLOSELY EXPECTED ACTUAL COSTS AND CONSEQUENTLY DO NOT REPRESENT A REASONABLY ACCURATE MEASURE OF THE EXPECTED COSTS OF PROPER AND EFFICIENT OPERATION SUCH AS RAISES A PRESUMPTION THAT ANY SAVINGS BELOW THE ESTIMATED COST MUST HAVE BEEN DUE TO SPECIAL EFFORT ON THE PART OF THE CONTRACTOR; THERE IS, ALSO, NO EXPRESS REQUIREMENT THAT THE CONTRACTOR MAKE ANY SPECIAL EFFORT, INCUR ANY EXPENSE, OR DO ANYTHING EXTRA TO EARN THE BONUS, AND, THEREFORE, PAYMENTS UNDER THE SAID BONUS CLAUSE ARE NOT AUTHORIZED. 5 COMP. GEN. 1059, DISCUSSED AND DISTINGUISHED.

COMPTROLLER GENERAL WARREN TO THE EXECUTIVE OFFICER, THE ALLEY DWELLING AUTHORITY FOR THE DISTRICT OF COLUMBIA, JANUARY 25, 1943:

THERE HAVE BEEN BROUGHT TO MY ATTENTION CONTRACTS NOS. ADTS-7, DATED MAY 2, 1942, AND ADTS-24, DATED MAY 19, 1942, ENTERED INTO BETWEEN THE ALLEY DWELLING AUTHORITY FOR THE DISTRICT OF COLUMBIA AND THE UNITED FABRICATORS, INC., AND IRON AND REYNOLDS, INC., RESPECTIVELY, FOR THE CONSTRUCTION OF 178 AND 75 DEMOUNTABLE DWELLING UNITS ON A COST-PLUS-A FIXED-FEE BASIS.

IT APPEARS THAT THE CONTRACTS WERE MADE UNDER AUTHORITY CONTAINED IN THE PRESIDENT'S LETTER OF ALLOCATION NO. TS-19, ISSUED FEBRUARY 3, 1942, PURSUANT TO THE ACT OF MARCH 1, 1941, 55 STAT. 14 ( PUBLIC LAW 9), AS AMENDED BY THE ACT OF DECEMBER 17, 1941, 55 STAT. 810, 818. THE SAID ACT OF MARCH 1, 1941, PROVIDES, IN PERTINENT PART, AS FOLLOWS:

DEFENSE HOUSING: TO ENABLE THE PRESIDENT OF THE UNITED STATES, THROUGH SUCH AGENCIES OF THE GOVERNMENT AS HE MAY DESIGNATE, WITHOUT REGARD TO SECTION 3709, REVISED STATUTES, TO PROVIDE TEMPORARY SHELTER, EITHER BY THE CONSTRUCTION OF BUILDINGS OR OTHERWISE, INCLUDING APPURTENANCES AND INCLUDING THE ACQUISITION OF LAND OR INTERESTS THEREIN, IN LOCALITIES WHERE BY REASON OF NATIONAL DEFENSE ACTIVITIES A SHORTAGE OF HOUSING EXISTS, AS DETERMINED BY THE PRESIDENT, AND WHERE IT IS NOT PRACTICABLE UNDER THE ACT OF OCTOBER 14, 1940 ( PUBLIC, NUMBERED 849, SEVENTY-SIXTH CONGRESS), OR OTHER ACTS OF CONGRESS OR THROUGH PRIVATE ENTERPRISE TO MEET THE IMMEDIATE NEED FOR EMERGENCY HOUSING, FISCAL YEAR 1941, $5,000,000, TO BE AVAILABLE UNTIL JUNE 30, 1942 * * *. THE AMENDMENT OF DECEMBER 17, 1941, MAKES AN ADDITIONAL APPROPRIATION OF $300,000,000 TO BE EXPENDED FOR THE SAME PURPOSES AND UNDER THE SAME TERMS AND CONDITIONS.

ARTICLE 2 OF CONTRACT NO. ADTS-7, PROVIDES AS FOLLOWS:

ARTICLE 2. ESTIMATED COST.--- IT IS ESPECIALLY PROVIDED, HOWEVER, THAT THE ESTIMATED COST OF FABRICATION, AND CONSTRUCTION OR ERECTION, OF THE HOUSES ON THE SITE (EXCLUSIVE OF CONTRACTOR'S FEE) WILL BE FOUR HUNDRED SEVENTY-SIX THOUSAND, TWO HUNDRED FORTY-SEVEN DOLLARS AND SIXTY-SIX CENTS ($476,247.66), OR AN AVERAGE COST OF THREE THOUSAND, FOUR HUNDRED FIFTY- ONE DOLLARS AND SEVEN CENTS ($3,451.07) PER DWELLING UNIT. IN THE EVENT SUCH COST EXCEEDS THIS SUM, THE EXCESS AMOUNT SHALL BE CHARGED AGAINST THE CONTRACTOR'S FEE TO THE EXTENT OF, BUT NOT EXCEEDING, TWO HUNDRED AND THIRTY-FIVE DOLLARS ($235.00) PER DWELLING UNIT. IF THE FABRICATION AND ERECTION OR CONSTRUCTION COSTS, EXCLUSIVE OF ITEMS 1, 2, 3, 4 AND 6 IN ARTICLE 1 HEREOF RUN IN EXCESS OF THE ABOVE STATED ESTIMATED COSTS, PLUS CONTRACTOR'S FEE, THEN SUCH EXCESS COSTS SHALL BE PAID BY THE GOVERNMENT. IF THE COST OF FABRICATION AND ERECTION OR CONSTRUCTION, EXCLUSIVE OF ITEMS 1, 2, 3, 4 AND 6 IN ARTICLE 1 HEREOF, ARE LESS THAN THE SUM OF FOUR HUNDRED SEVENTY-SIX THOUSAND, TWO HUNDRED FORTY-SEVEN DOLLARS AND SIXTY- SIX CENTS ($476,247.66), OR AN AVERAGE OF THREE THOUSAND, FOUR HUNDRED AND FIFTY-ONE DOLLARS AND SEVEN CENTS ($3,451.07) PER DWELLING UNIT, THEN IN THAT EVENT THE CONTRACTOR SHALL BE PAID AS COMPENSATION IN ADDITION TO THAT SPECIFIED IN ARTICLE 4 HEREOF THE SUM OF TWENTY-FIVE CENTS ($0.25) ON EVERY DOLLAR SAVED.

ARTICLE 2 OF CONTRACT NO. ADTS-24 CONTAINS SUBSTANTIALLY THE SAME COST- REIMBURSEMENT PROVISIONS, BUT DOES NOT INCLUDE ANY PROVISION FOR PAYMENT OF A BONUS FOR SAVINGS BELOW THE ESTIMATED COST. BOTH CONTRACTS PROVIDE FOR PAYMENT OF A FIXED FEE OF $235 PER UNIT AS COMPENSATION TO THE CONTRACTORS.

IT FURTHER APPEARS THAT, IN CONNECTION WITH THE PRELIMINARY EXAMINATION OF THE CONTRACTS, THE AUDIT DIVISION OF THIS OFFICE, BY LETTER OF SEPTEMBER 29, 1942, REQUESTED A REFERENCE TO THE AUTHORITY FOR ENTERING INTO CONTRACT NO. ADTS-24 ON A COST-PLUS-A-FIXED-FEE BASIS, AND BY LETTER OF OCTOBER 5, 1942, REQUESTED LIKE INFORMATION WITH RESPECT TO CONTRACT NO. ADTS-7 AND, ALSO, ASKED AN EXPLANATION OF ARTICLE 2 THEREOF.

YOUR REPLY OF OCTOBER 20, 1942, TO SAID LETTER OF SEPTEMBER 29, 1942, IS, IN PERTINENT PART, AS FOLLOWS:

PUBLIC LAW NO. 9 SPECIFICALLY STATES THAT THE PURPOSES OF THE ACT SHOULD BE ACCOMPLISHED WITHOUT REGARD TO SECTION 3709, REVISED STATUTES, THE STATUTE REQUIRING ADVERTISING FOR COMPETITIVE BIDS FOR GOVERNMENT CONTRACTS. PUBLIC NO. 9 ALSO STATES "WHERE IT IS NOT PRACTICABLE UNDER THE ACT OF OCTOBER 14, 1940" ( PUBLIC LAW NO. 849, 76TH CONGRESS, LANHAM ACT TO DEVELOP * * *). THE LANHAM ACT REFERRED TO THEREIN STATES,"PROVIDED, THAT THE COST-PLUS-A-PERCENTAGE-OF-COST SYSTEM OF CONTRACTING SHALL NOT BE USED, BUT THIS PROVISO SHALL NOT BE CONSTRUED TO PREVENT THE USE OF THE COST-PLUS-A-FIXED-FEE FORM OF CONTRACT.'

THE ALLEY DWELLING AUTHORITY PROCEEDED UPON THE PREMISE THAT IT WAS THE INTENTION OF CONGRESS, AS CONTAINED IN MOST OF THE EMERGENCY ACTS, TO AUTHORIZE GOVERNMENT COST-PLUS-FIXED-FEE CONTRACTS TO EXPEDITE THE VARIOUS DEFENSE HOUSING PROGRAMS, AND THAT THE WORDING IN THE STATUTE,PUBLIC 9, AUTHORIZED NEGOTIATED AND COST-PLUS-FIXED-FEE CONTRACTS. TO HOLD OTHERWISE WOULD APPEAR TO DEFEAT THE PURPOSE OF THE LEGISLATION.

YOUR ATTENTION IS DIRECTED TO THE TERM "TEMPORARY SHELTER" AS USED IN PUBLIC LAW NO. 9. THIS TYPE OF CONSTRUCTION PRESENTS MANY NEW PROBLEMS NOT EXPERIENCED IN THE USUAL TYPE OF PERMANENT CONSTRUCTION. IT WAS NECESSARY FOR THIS AUTHORITY TO CAREFULLY STUDY THE VARIOUS METHODS AND TYPES OF TEMPORARY HOUSING. CAREFUL CONSIDERATION WAS ALSO GIVEN TO THE PROBABLE COSTS FOR CONSTRUCTING THE VARIOUS TYPES OF REMOVABLE OR DEMOUNTABLE HOUSES. THE RESULT WAS THAT VERY FEW CONTRACTORS WERE FOUND WHO WERE FAMILIAR WITH TEMPORARY DEMOUNTABLE HOUSES AND WHO WERE IN A POSITION TO SATISFACTORILY AND EXPEDITIOUSLY CONSTRUCT THE SAME. THE ELEMENT OF COSTS WAS DIFFICULT TO ESTABLISH FOR THIS TYPE OF CONSTRUCTION EVEN WITH THOSE CONTRACTORS WHO WERE FAMILIAR WITH IT. THEREFORE THIS AUTHORITY NEGOTIATED A MODIFIED COST PLUS-FIXED-FEE TYPE OF CONTRACT AND ESTIMATED UPSET FIGURE OF COSTS WAS ESTABLISHED AND A FIXED FEE BASED UPON THAT UPSET FIGURE WAS INCORPORATED IN THE CONTRACT DOCUMENTS.

ALSO, THERE WAS RECEIVED IN THIS OFFICE ON OCTOBER 23, 1942, YOUR UNDATED LETTER REPLYING TO THE LETTER OF OCTOBER 5, 1942, SUPRA, OUTLINING YOUR REASONS FOR WRITING INTO CONTRACT NO. ADTS-7 THE COST SAVINGS BONUS PROVISION OF ARTICLE 2, REFERRED TO ABOVE. SAID LETTER IS, IN PERTINENT PART, AS FOLLOWS:

REFERENCE IS MADE TO PUBLIC LAW NO. 9, 77TH CONGRESS, AND THE AUTHORITY UNDER WHICH THIS AUTHORITY ENTERED THIS TYPE OF CONTRACT. YOUR LETTER TO US OF SEPTEMBER 29 PRESENTED THE SAME QUESTION WITH RESPECT TO A CONTRACT OF THIS AUTHORITY WITH IRONS AND REYNOLDS, INC. I REFER YOU TO OUR LETTER OF THIS SAME DATE, ADDRESSED TO YOU, IN REPLY THERETO, AS AN ANSWER TO YOUR INQUIRY DISCUSSED HEREIN.

CONTRACT ADTS-7 WAS THE INITIAL CONTRACT FOR THE TEMPORARY SHELTER PROGRAM NEGOTIATED BY THE ALLEY DWELLING AUTHORITY. AS MENTIONED BEFORE, THE ESTIMATION OF COSTS WAS EXCEEDINGLY DIFFICULT AT THAT TIME DUE TO THE TYPE OF CONSTRUCTION. THEREFORE, THAT WAS THE PRIMARY REASON FOR INCORPORATING THE BONUS SAVINGS CLAUSE IN THE CONTRACT. THE IDEA WAS THAT ANY SAVINGS OVER THE ESTIMATED COST, WHICH WOULD RESULT FROM ACTUAL EXPERIENCE IN THIS TYPE OF CONSTRUCTION, WOULD ACCRUE TO THE UNITED STATES AT THE RATE OF 75 CENTS ON EACH DOLLAR SAVED.

OUR LEGAL DIVISION APPROVED THIS PROVISION AFTER CAREFUL CONSIDERATION UPON THE AUTHORITY FOUND IN THE DECISION OF THE COMPTROLLER GENERAL, A- 14184, DATED JUNE 28, 1926, WHEREIN IT IS STATED:

"THE QUESTION INVOLVED IN THE SUBMISSION IS AS TO THE LEGALITY OF THE BONUS PROVISION OF THE CONTRACT. A BONUS IS GENERALLY UNDERSTOOD TO BE A SUM GIVEN OR PAID BEYOND WHAT IS LEGALLY REQUIRED. IT IS NOT A GIFT OR GRATUITY, BUT IS PAID FOR SOME SERVICES OR CONSIDERATION AND IS IN ADDITION TO WHAT WOULD ORDINARILY BE GIVEN. KENICOTT V. WAYNE COUNTY, 16 WALL. ( U.S.) 452. THE ADOPTION BY THE GOVERNMENT OF THE "COST SAVING BONUS" PLAN IN THE CONTRACT HERE INVOLVED APPEARS TO HAVE BEEN FOR THE EXPRESS PURPOSE OF INDUCING THE CONTRACTOR TO MAKE A SPECIAL EFFORT TO LOWER PRODUCTION COSTS, THEREBY REDUCING GOVERNMENT EXPENDITURES FOR HELIUM UNDER THE CONTRACT.

"IT HAS BEEN HELD THAT BONUS PROVISION IN A CONTRACT FOR SAVINGS THROUGH SPECIAL ENDEAVOR, AS APPEARS TO BE THE CASE HERE, IS NOT IMPROPER AND DOES NOT INVALIDATE THE CONTRACT. 27 COMP. DEC. 898: COHEN, ENDEL AND CO. V. UNITED STATES, 60 CT.CLS. 512. SEE ALSO DECISION OF THIS OFFICE OF AUGUST 19, 1921, APPEAL 35614.'

THE DECISION OF THE COMPTROLLER GENERAL, DATED JULY 28, 1941, TO WHICH YOU DIRECT US, REFERS TO THE FACT THAT THE WAR DEPARTMENT IN NEGOTIATING CONTRACTS OF THIS TYPE UNDER THE SUPPLEMENTAL DEFENSE APPROPRIATIONS WAS LIMITED BY CONGRESS TO THE PAYMENT OF A FIXED FEE NOT TO EXCEED 6 PERCENT OF THE ESTIMATED COST. THIS AUTHORITY WAS UNDER NO SUCH EXPRESS RESTRICTION SO FAR AS PUBLIC LAW NO. 9 IS CONSTRUED. HOWEVER, THE FIXED FEE ESTABLISHED IN THIS CONTRACT AMOUNTS TO APPROXIMATELY .068 PERCENT. MENTION IS ALSO MADE THAT SUCH PROVISION MIGHT BE HELD UNENFORCEABLE BY A COURT AS BEING AGAINST PUBLIC POLICY. IN LIGHT OF THE DECISION WE ABOVE QUOTED, THERE SEEMS TO BE SOME DOUBT AS TO A FINDING ON THIS BASIS.

BASED UPON ALL AVAILABLE CALCULATIONS OF THE PROGRESS AND CONDITION OF THIS PROJECT AS OF THE PRESENT TIME, IT IS THE OPINION OF THIS AUTHORITY THAT THE CONTRACTOR WILL ENJOY NO BONUS SAVINGS UNDER THE SAID PROVISION OF HIS CONTRACT. HOWEVER, IF YOUR OFFICE FEELS THAT A MODIFICATION OF THIS PROVISION IS NECESSARY, WE WILL RENEGOTIATE WITH THE CONTRACTOR AT YOUR REQUEST.

AS INDICATED IN YOUR LETTER LAST-QUOTED ABOVE, THERE APPEARS TO BE NO LEGAL OR STATUTORY OBSTACLE TO THE ENTERING INTO OF COST-PLUS-FIXED FEE CONTRACTS PURSUANT TO THE ACT OF MARCH 1, 1941, AS AMENDED, SUPRA, IN VIEW OF THE EXPRESS TERMS THEREOF REMOVING THE INHIBITIONS OF SECTION 3709, REVISED STATUTES; ALTHOUGH IT IS TO BE NOTED, IN THIS CONNECTION, THAT THE AUTHORITY TO MAKE SUCH CONTRACTS IS NOT UNDERSTOOD TO BE, AS STATED IN YOUR LETTER OF OCTOBER 20, 1942, IN ANY WAY RELATED TO THE REFERENCE TO COST-PLUS-FIXED-FEE CONTRACTS IN THE ACT OF OCTOBER 14, 1940, 54 STAT. 1126--- THE LANHAM ACT--- WHICH WAS FOR AN ENTIRELY DIFFERENT PURPOSE.

HOWEVER, AND NOTWITHSTANDING THE MATTERS SET FORTH IN YOUR LETTERS, THERE APPEARS NO LEGAL BASIS FOR INCLUSION OF THE COST SAVINGS BONUS CLAUSE ( ARTICLE 2) IN CONTRACT NO. ADTS-7, AND THE DECISION OF THE FORMER COMPTROLLER GENERAL DATED JUNE 28, 1926, A-14184 (5 COMP. GEN. 1029), CITED BY YOU IN SUPPORT THEREOF, WOULD NOT APPEAR TO BE CONTROLLING. THAT DECISION, AS WELL AS THE AUTHORITIES CITED THEREIN, IS READILY DISTINGUISHED FROM THE CASE AT HAND. THE CONCLUSION REACHED THERE WAS BASED, PRIMARILY, UPON A DETERMINATION, FROM THE FACTS APPEARING, THAT THE BONUS WAS TO BE PAID IN CONSIDERATION OF A "SPECIAL EFFORT" ON THE PART OF THE CONTRACTOR WHICH THE GOVERNMENT HAD NO RIGHT TO DEMAND OTHERWISE, AND THAT BY REASON THEREOF THE GOVERNMENT RECEIVED AN EXTRA BENEFIT. OBVIOUSLY, THEN, IT WAS CONTEMPLATED, ALSO, WHEN THE CONTRACT WAS MADE, THAT THE COSTS UPON WHICH THE BONUS WAS TO BE COMPUTED REPRESENTED A REASONABLY ACCURATE MEASURE OF THE EXPECTED COSTS OF PROPER AND EFFICIENT OPERATION--- THAT IS, A STANDARD WAS SET FOR WHAT THE GOVERNMENT COULD EXACT UNDER ITS CONTRACT WITHOUT PAYMENT OF A BONUS, CORRESPONDING, PERHAPS, TO THE CARE WHICH THE CONTRACTOR ORDINARILY WOULD EXERCISE IN COMMERCIAL OPERATION FOR ITS OWN BENEFIT-- AND THAT, ECONOMY BEING OF PARAMOUNT IMPORTANCE, THE CONTRACTOR SHOULD BE REWARDED BY A BONUS FOR EXTRAORDINARY EFFORTS TO ECONOMIZE. IN OTHER WORDS THERE WAS A PRESUMPTION THAT ANY SAVINGS BELOW THE ESTIMATED COST ACCRUING TO THE GOVERNMENT WOULD RESULT ONLY FROM SUCH SPECIAL EFFORT ON THE PART OF THE CONTRACTOR. CLEARLY, THE CONSIDERATION FOR THE BONUS IN THAT CASE INVOLVED BOTH A BENEFIT TO THE GOVERNMENT AND A DETRIMENT TO THE CONTRACTOR. SEE, IN THIS CONNECTION, COHEN, ENDEL AND CO. V. THE UNITED STATES, 60 C.1CLS. 513, 519, WHEREIN, WITH REFERENCE TO THE VALIDITY OF A BONUS CLAUSE IN A GOVERNMENT CONTRACT, THE COURT SAID:

WE THINK THE FACTS IN THIS CASE CLEARLY SHOW THAT THE UNITED STATES DERIVED A BENEFIT FROM THE EXECUTION OF THE CONTRACT, THAT THE CONTRACT WAS JUSTIFIED BY THE CIRCUMSTANCES ATTENDING ITS MAKING, AND THAT THE PLAINTIFFS DID ADDITIONAL WORK, GAVE SPECIAL CARE, AND INCURRED EXPENSE WHICH THEY WERE NOT OBLIGED TO DO UNDER THE ORIGINAL CONTRACT OF JUNE 29, 1917. * * * SINCE THAT DECISION WAS CITED IN 5 COMP. GEN. 1029, SUPRA, SIMILAR CONSIDERATIONS UNDOUBTEDLY PROMPTED THE CONCLUSION REACHED THEREIN.

BUT, IN THE CONTRACT HERE INVOLVED, THERE IS NO SUCH PRESUMPTION AS TO WHERE CREDIT SHOULD REST FOR SAVINGS, OR EVIDENCE OF ANY CORRESPONDING BENEFIT OR DETRIMENT. FROM THE EXPLANATION OFFERED IN YOUR LETTER OF OCTOBER 20, 1942, TO WIT--- * * * THE ELEMENT OF COSTS WAS DIFFICULT TO ESTABLISH FOR THIS TYPE OF CONSTRUCTION EVEN WITH THOSE CONTRACTORS WHO WERE FAMILIAR WITH IT. THEREFORE THIS AUTHORITY NEGOTIATED A MODIFIED COST -PLUS-FIXED-FEE TYPE OF CONTRACT AND ESTIMATED UPSET FIGURE OF COSTS WAS ESTABLISHED AND A FIXED FEE BASED ON THAT UPSET FIGURE WAS INCORPORATED IN THE CONTRACT DOCUMENTS. ( ITALICS SUPPLIED.) IT APPEARS THAT, DUE TO INABILITY EVEN TO APPROXIMATE CLOSELY EXPECTED ACTUAL COSTS, THE COSTS ESTIMATED IN SUCH CONTRACTS WERE PURPOSELY MADE EXCEPTIONALLY LIBERAL TO PROVIDE FOR ANY AND ALL CONTINGENCIES. THEREFORE, IT IS APPARENT, ALSO, THAT SAID COSTS WERE NOT INTENDED TO REPRESENT STANDARD OF PERFORMANCE BY THE CONTRACTOR SUCH AS WAS CONTEMPLATED IN THE CONTRACT CONSIDERED IN 5 COMP. GEN. 1029, SUPRA. NOR IS THE PRESENT CONTRACTOR REQUIRED TO MAKE ANY SPECIAL OR UNUSUAL EFFORT OR INCUR ANY EXPENSE, OR TO DO ANYTHING EXTRA AT ALL, TO EARN THE BONUS; QUITE TO THE CONTRARY, IN FACT, THE WAY IS LEFT OPEN TO IT TO BE MORE CARELESS THAN USUAL AND STILL EARN A BONUS. THUS, IT IS ABUNDANTLY EVIDENT THAT ANY BENEFIT THE GOVERNMENT MAY RECEIVE NEED NOT BE DUE TO THE EFFORTS OF THE CONTRACTOR, BUT MAY BE PURELY INCIDENTAL. THE GOVERNMENT IS TO PAY ALL THE COSTS AND THE CONTRACTOR MAY CONTRIBUTE NOTHING. PLAINLY, UNDER SUCH CIRCUMSTANCES, THERE IS NO VALID CONSIDERATION FOR THE GOVERNMENT TO SHARE ITS SAVINGS IN COSTS WITH THE CONTRACTOR.

MOREOVER, THE BONUS PAYMENTS STIPULATED IN THE CONTRACT IN QUESTION, BEING DESIGNED ESPECIALLY TO CONSERVE COSTS OR MATERIALS OR BOTH, RATHER THAN TIME, WELL MIGHT BE TERMED REPUGNANT TO THE EXPRESSED INTENTION OF THE CONGRESS IN ENACTING THE LAW PURSUANT TO WHICH THE CONTRACT WAS MADE. SUCH PAYMENT PROVISIONS SEEM TO IMPLY A SACRIFICE OF SPEED, WITHIN REASONABLE BOUNDS, OR AT LEAST THE ABSENCE OF A PRIME NECESSITY THEREFORE, WHEREAS THE SOLE PURPOSE OF THE ACT OF MARCH 1, 1941, SUPRA, IS UNDERSTOOD TO BE THE ACCOMPLISHMENT OF WORK OF THE UTMOST URGENCY, WHERE DELAY WOULD BE INIMICAL TO THE NATIONAL INTEREST, SO THAT THE ACTUAL COST MAY BE SAID TO BE RATHER SECONDARY IN IMPORTANCE. THERE IS TO BE OBSERVED, TOO, IN THIS RESPECT, THE AUTHORIZATION IN SAID ACT TO ENTER INTO CONTRACTS FOR TEMPORARY SHELTER WITHOUT REGARD TO SECTION 3709, REVISED STATUTES--- ONE OF THE FUNDAMENTAL SAFEGUARDS OF THE GOVERNMENT IN THE INTEREST OF ECONOMY.

IN EXECUTING CONTRACTS OF THE CHARACTER HERE INVOLVED IT IS, OF COURSE, A MATTER OF ADMINISTRATIVE DUTY TO PROTECT THE INTEREST OF THE UNITED STATES AND TO OBTAIN A CONTRACT ON TERMS MOST FAVORABLE TO THE GOVERNMENT. THIS DUTY WOULD NOT APPEAR TO BE FULFILLED BY THE INCLUSION IN GOVERNMENT CONTRACTS OF A COST SAVINGS BONUS PROVISION SUCH AS THAT IN ARTICLE 2 OF CONTRACT NO. ADTS-7, SUPRA. SEE BURKE AND JAMES INC. V. UNITED STATES, 63 C.1CLS. 36 AND J. J. PREIS AND CO. V. UNITED STATES, 58 C.1CLS. 81.

ACCORDINGLY, WHILE THERE HAS BEEN NOTED YOUR STATEMENT THAT FROM PRESENT INDICATIONS NO BONUS WILL BE EARNED BY THE CONTRACTOR, THE MATTER IS BROUGHT TO YOUR ATTENTION FOR SUCH ACTION AS MAY BE DEEMED NECESSARY TO INSURE THAT NO PAYMENTS WILL BE MADE UNDER THE BONUS PROVISION CLAUSE OF THE CONTRACT.