B-30791, SEPTEMBER 6, 1943, 23 COMP. GEN. 171

B-30791: Sep 6, 1943

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FOR WHICH COMPENSATION IS INCLUDED IN THE FIXED FEE. 1943: REFERENCE IS MADE TO YOUR LETTER OF MAY 19. REIMBURSEMENT FOR WHICH WAS CLAIMED UNDER COST-PLUS-A-FIXED-FEE CONTRACT NO. THE GOVERNMENT SHALL BE CHARGEABLE THEREFOR INSOFAR AS THE SAME ARE CONSISTENT WITH THE GENERAL EMPLOYEE RELATIONS POLICIES EXISTING THROUGHOUT THE AFFILIATED GROUP OF CORPORATIONS OF WHICH THE CONTRACTOR IS A MEMBER. OR ARE INCURRED PURSUANT TO AGREEMENT MADE AS A RESULT OF COLLECTIVE BARGAINING WITH THE REPRESENTATIVES OF EMPLOYEES. OR ARE EXPRESSLY AUTHORIZED IN WRITING BY THE REPRESENTATIVES OF THE CONTRACTING OFFICER. IT IS RECOGNIZED THAT THE COST OF PROVIDING FOR SUCH BENEFITS AND SERVICES RENDERED TO DIRECT EMPLOYEES OF THE CONTRACTOR IN CONNECTION WITH THIS CONTRACT SHALL BE TREATED AS PART OF THE COST OF WORK DONE HEREUNDER.

B-30791, SEPTEMBER 6, 1943, 23 COMP. GEN. 171

CONTRACTS - COST-PLUS - EXPENSES INCIDENT TO MAINTAINING EMPLOYEES' MORALE EVEN THOUGH IN ACCORD WITH A COST-PLUS-A-FIXED-FEE CONTRACTOR'S EMPLOYEE RELATIONS PLAN, THE EXPENSES INCURRED IN GIVING A BARBECUE TO INCREASE THE MORALE OF ITS EMPLOYEES MAY NOT BE REGARDED AS A REIMBURSABLE ITEM OF COST UNDER A CONTRACT PROVIDING FOR REIMBURSEMENT OF ACTUAL EXPENDITURES INCURRED IN PERFORMANCE OF THE CONTRACT WORK, INCLUDING EXPENDITURES UNDER THE CONTRACTOR'S EMPLOYEE RELATIONS PLAN, BUT, RATHER, SUCH EXPENSES MUST BE REGARDED AS PERTAINING TO A RESPONSIBILITY OF THE CONTRACTOR IN MAINTAINING PROPER MORALE AND SPIRIT WITHIN ITS ORGANIZATION, FOR WHICH COMPENSATION IS INCLUDED IN THE FIXED FEE.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF WAR, SEPTEMBER 6, 1943:

REFERENCE IS MADE TO YOUR LETTER OF MAY 19, 1943, WITH ENCLOSURES, REQUESTING RECONSIDERATION OF THE DECISION OF JANUARY 6, 1943, RENDERED AT THE REQUEST OF COLONEL F. RICHARDS, FINANCE DIVISION, UNITED STATES ARMY, RELATIVE TO THE PROPRIETY OF PAYMENT ON BUREAU VOUCHER NO. 645, IN FAVOR OF THE BRECON LOADING COMPANY, TALLADEGA, ALABAMA, OF THE AMOUNT OF $391.86, REPRESENTING THE EXPENSES INCURRED INCIDENT TO A BARBECUE GIVEN BY THE COMPANY FOR ITS EMPLOYEES, REIMBURSEMENT FOR WHICH WAS CLAIMED UNDER COST-PLUS-A-FIXED-FEE CONTRACT NO. W-ORD-501, DATED FEBRUARY 10, 1941.

THE CONTRACT INVOLVED PROVIDES, GENERALLY, FOR MANAGEMENT SERVICES IN CONNECTION WITH THE DESIGN AND CONSTRUCTION OF AN ORDNANCE MANUFACTURING PLANT AND FOR THE EQUIPPING AND SUBSEQUENT OPERATION THEREOF UPON ITS COMPLETION, IN CONSIDERATION OF THE REIMBURSEMENT BY THE GOVERNMENT OF THE CONTRACTOR'S COSTS AS DEFINED IN THE CONTRACT, PLUS STIPULATED FIXED FEES. RELATIVE TO REIMBURSEMENT FOR EXPENDITURES UNDER THE SAID CONTRACT, TITLE V, ARTICLE V-A, PROVIDES, IN PERTINENT PART, AS FOLLOWS:

REIMBURSEMENT FOR CONTRACTOR'S EXPENDITURES

1. THE CONTRACTOR SHALL BE REIMBURSED IN THE MANNER HEREINAFTER DESCRIBED FOR SUCH OF ITS ACTUAL EXPENDITURES IN THE PERFORMANCE OF THE WORK UNDER THIS CONTRACT AS MAY BE APPROVED OR RATIFIED BY THE CONTRACTING OFFICER AND WHICH COST AND EXPENSES SHALL INCLUDE BUT SHALL NOT BE LIMITED TO THE FOLLOWING ITEMS:

P. EXTRA COMPENSATION TO EMPLOYEES, ANY DISCONTINUANCE WAGES, CHARGES UNDER ALL WELFARE AND OTHER EMPLOYEE RELATIONS PLANS MAINTAINED BY THE CONTRACTOR. IN THE PAYMENT OF EXTRA COMPENSATION, DISCONTINUANCE WAGES AND IN THE MAKING OF EXPENDITURES PURSUANT TO OR IN THE MAINTENANCE OF WELFARE OR OTHER PLANS FOR THE BENEFIT OF EMPLOYEES, THE GOVERNMENT SHALL BE CHARGEABLE THEREFOR INSOFAR AS THE SAME ARE CONSISTENT WITH THE GENERAL EMPLOYEE RELATIONS POLICIES EXISTING THROUGHOUT THE AFFILIATED GROUP OF CORPORATIONS OF WHICH THE CONTRACTOR IS A MEMBER, OR ARE INCURRED PURSUANT TO AGREEMENT MADE AS A RESULT OF COLLECTIVE BARGAINING WITH THE REPRESENTATIVES OF EMPLOYEES, OR ARE EXPRESSLY AUTHORIZED IN WRITING BY THE REPRESENTATIVES OF THE CONTRACTING OFFICER. IT IS RECOGNIZED THAT THE COST OF PROVIDING FOR SUCH BENEFITS AND SERVICES RENDERED TO DIRECT EMPLOYEES OF THE CONTRACTOR IN CONNECTION WITH THIS CONTRACT SHALL BE TREATED AS PART OF THE COST OF WORK DONE HEREUNDER. IT APPEARS TO BE CONCEDED THAT THE PROPRIETY OF REIMBURSING THE EXPENDITURE HERE INVOLVED IS DEPENDENT UPON IT BEING AUTHORIZED UNDER THE CONTRACT PROVISION QUOTED ABOVE.

YOUR LETTER OF MAY 19, 1943, SUMMARIZES THE ACTION TAKEN BY THIS OFFICE IN THE PREVIOUS CONSIDERATION OF THIS MATTER, AS FOLLOWS:

DECISION B-30791 RENDERED BY YOUR OFFICE ON JANUARY 6, 1943, HELD THAT THE EVIDENCE OF RECORD, AS PRESENTED, FAILED TO ESTABLISH, WITH ANY DEGREE OF CONCLUSIVENESS, THAT THE CONTRACTOR HAS MADE OR WILL MAKE ANY ACTUAL EXPENDITURES TO COVER THE COST OF THE BARBECUE OR THAT SAID COSTS REPRESENT CHARGES UNDER A WELFARE PLAN MAINTAINED BY THE CONTRACTOR FOR THE BENEFIT OF THE EMPLOYEES, CONDITIONS PRECEDENT UNDER THE TERMS OF THE CONTRACT, TO REIMBURSEMENT TO THE CONTRACTOR FOR EXPENSES INCIDENT TO THE BARBECUE. THE VOUCHER WAS RETURNED TO THE FINANCE OFFICER ADVISING THAT ON THE PRESENT RECORD, PAYMENT OF THE VOUCHER WAS NOT AUTHORIZED.

IT IS TO BE OBSERVED THAT THE SAID DECISION WAS CONFINED TO A CONSIDERATION OF WHETHER THERE WAS COMPLIANCE WITH THE EVIDENTIAL REQUIREMENTS PRESCRIBED BY THE CONTRACT AS A PREREQUISITE TO THE REIMBURSEMENT OF EXPENDITURES OF THE NATURE HERE INVOLVED AND SINCE, FOR THE REASONS THEREIN STATED, THERE WAS A FAILURE IN THAT RESPECT, IT WAS UNNECESSARY, AT THAT TIME, TO DETERMINE WHETHER THE EXPENDITURE OTHERWISE CONSTITUTED A PROPER CHARGE TO THE GOVERNMENT. ACCORDINGLY, WHILE, ON THE BASIS OF YOUR LETTER AND ACCOMPANYING PAPERS, IT NOW APPEARS THAT THE EXPENSE INCIDENT TO THE BARBECUE WAS BORNE EXCLUSIVELY BY THE CONTRACTOR AND IT IS STATED THAT THE INCURRENCE OF THIS TYPE OF EXPENDITURE IS IN ACCORD WITH THE EMPLOYEE RELATIONS PLAN OF THE CONTRACTOR'S PARENT COMPANY, THE COCA-COLA COMPANY, THERE REMAINS FOR CONSIDERATION THE DETERMINATION OF WHETHER, UNDER THE TERMS OF THE CONTRACT, THIS EXPENDITURE IS REIMBURSABLE TO THE CONTRACTOR OR WHETHER COMPENSATION THEREFOR IS REQUIRED TO BE REGARDED AS INCLUDED IN THE CONTRACTOR'S FIXED FEES.

IT IS STATED IN THE CONTRACTOR'S LETTER OF FEBRUARY 25, 1943, TO THE COMMANDING OFFICER, THAT THE PURPOSE OF THE BARBECUE WAS TO INCREASE THE MORALE OF THE EMPLOYEES. A FURTHER EXPLANATION OF THE MOTIVE FOR THE EXPENDITURE IS CONTAINED IN THE CONTRACTOR'S EMPLOYEES' RELATIONS PLAN OF APRIL 19, 1943, IN PERTINENT PART, AS FOLLOWS:

ATHLETICS, PICNICS, PARTIES, ETC.

AS AN AWARD TO OUR EMPLOYEES FOR PAST ACCOMPLISHMENTS, FOR LOYALTY, FOR INTEREST IN THE PROMOTION OF CONTINUED GOOD WILL, AS WELL AS AN AID TO INCREASE PRODUCTION FOR THE WAR EFFORT, ATHLETICS, PICNICS, PARTIES, ETC., MAY BE ARRANGED AND PAID FOR BY THE BRECON LOADING COMPANY.

THIS OFFICE IS NOT UNMINDFUL OF THE NECESSITY FOR THE EXISTENCE OF HARMONIOUS RELATIONS BETWEEN THE CONTRACTOR AND ITS EMPLOYEES AND OF THE CONNECTION BETWEEN THE MORALE OF THE EMPLOYEES AND THE EFFICIENT PROSECUTION OF THE CONTRACT WORK. HOWEVER, WHILE IT MAY BE CONCEDED THAT THE FOSTERING OF CONGENIAL RELATIONS WITH ITS EMPLOYEES CONSTITUTES A REASONABLE AND ORDINARY BUSINESS EXPENSE OF THE CONTRACTOR AND OF PRIVATE FIRMS IN GENERAL WHO, BY THE GOOD WILL THUS ENGENDERED, DIRECTLY PROMOTE THEIR OWN INTERESTS, THE BENEFITS, IF ANY, DERIVED THEREFROM BY THE GOVERNMENT ARE PURELY INCIDENTAL AND, SO FAR AS THE CONSTRUCTION AND OPERATION OF A PLANT ON BEHALF OF THE GOVERNMENT IS CONCERNED, MAY NOT UNDER ANY FAIR AND REASONABLE CONSTRUCTION OF THE CONTRACT TERMS BE VIEWED AS A COST OR EXPENSE TO BE BORNE BY THE GOVERNMENT. SEE 21 COMP. GEN. 447.

IT SEEMS ONLY REASONABLE TO ASSUME THAT THE FEES PAID TO THE CONTRACTOR ARE FOR CERTAIN SERVICES ON ITS PART INCLUDING, AMONG OTHERS, AS EXPRESSLY SET FORTH IN ARTICLE VI-R OF THE CONTRACT, THE OBLIGATION TO PERFORM THE WORK "IN THE BEST AND MOST WORKMANLIKE MANNER BY QUALIFIED, CAREFUL, AND EFFICIENT WORKERS.' ALSO, SEPARATE AND APART FROM ANY SPECIFIC PROVISION TO THAT EFFECT, IT WOULD APPEAR THAT THE MAINTENANCE OF PROPER MORALE AND SPIRIT WITHIN ITS ORGANIZATION IS THE RESPONSIBILITY AND DUTY OF THE CONTRACTOR--- NOT OF THE GOVERNMENT. IT NECESSARILY FOLLOWS THAT, THE CONTRACTING OFFICER'S APPROVAL OF THE REIMBURSEMENT THEREOF, WITH A VIEW TO SHIFTING THIS ITEM OF EXPENSE FROM THE CONTRACTOR TO THE GOVERNMENT, MUST BE VIEWED AS BEING BEYOND THE SCOPE OF HIS AUTHORITY.

ACCORDINGLY, I HAVE TO ADVISE THAT REIMBURSEMENT OF THE EXPENSE INCURRED INCIDENT TO THE BARBECUE IS NOT AUTHORIZED.