B-41611, MAY 11, 1944, 23 COMP. GEN. 873

B-41611: May 11, 1944

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CONTRACTS - COST-PLUS - COMMISSIONS FROM PAY TELEPHONES IN GOVERNMENT OWNED PLANT LEASED TO PRIVATE CONTRACTOR WHERE A GOVERNMENT-OWNED NAVAL ORDNANCE PLANT WAS LEASED TO A CONTRACTOR AT A RENTAL OF $1 PER ANNUM UNDER A CONTRACT WHICH GAVE THE CONTRACTOR "COMPLETE SUPERVISION AND OPERATION OF THE PLANT. AS FOLLOWS: THE NAVY DEPARTMENT IS IN RECEIPT OF A REQUEST FROM THE COMMANDANT. IS OPERATED BY WESTINGHOUSE ELECTRIC AND MANUFACTURING COMPANY UNDER A CONTRACT WITH THE NAVY DEPARTMENT. COSTS OF TELEPHONE SERVICE ARE CHARGED AGAINST THE CONTRACT AND ARRANGEMENTS FOR THE INSTALLATIONS OF THE PAY TELEPHONES WHICH ARE CHIEFLY FOR THE USE OF THE CONTRACTOR'S PERSONNEL HAVE BEEN MADE BY THE CONTRACTOR.

B-41611, MAY 11, 1944, 23 COMP. GEN. 873

CONTRACTS - COST-PLUS - COMMISSIONS FROM PAY TELEPHONES IN GOVERNMENT OWNED PLANT LEASED TO PRIVATE CONTRACTOR WHERE A GOVERNMENT-OWNED NAVAL ORDNANCE PLANT WAS LEASED TO A CONTRACTOR AT A RENTAL OF $1 PER ANNUM UNDER A CONTRACT WHICH GAVE THE CONTRACTOR "COMPLETE SUPERVISION AND OPERATION OF THE PLANT," BUT SPECIFICALLY PROVIDED THAT THE PLANT SHALL BE OPERATED FOR THE "EXCLUSIVE BENEFIT OF THE GOVERNMENT," COMMISSIONS ACCRUING FROM PAY TELEPHONES INSTALLED AT THE PLANT FOR THE CONVENIENCE OF THE CONTRACTOR'S PERSONNEL REPRESENT INCOME INCIDENT TO THE USE OF SAID GOVERNMENT BUILDING, AND, THEREFORE, SHOULD BE DEPOSITED AND COVERED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS IN ACCORDANCE WITH SECTION 3617, REVISED STATUTES, RATHER THAN APPLIED IN REDUCTION OF THE GROSS CONTRACT COST.

COMPTROLLER GENERAL WARREN TO THE ACTING SECRETARY OF THE NAVY, MAY 11, 1944:

THERE HAS BEEN CONSIDERED THE MATTER PRESENTED IN LETTER OF APRIL 24, 1944 ( JAG:II:HJM:AMP), FROM THE JUDGE ADVOCATE GENERAL OF THE NAVY, AS FOLLOWS:

THE NAVY DEPARTMENT IS IN RECEIPT OF A REQUEST FROM THE COMMANDANT, NINTH NAVAL DISTRICT, GREAT LAKES, ILLINOIS FOR INFORMATION AS TO THE DISPOSITION OF COMMISSIONS ACCRUING ON COLLECTIONS FROM PAY TELEPHONES INSTALLED IN THE U.S. NAVAL ORDNANCE PLANT, CANTON, OHIO.

THE NAVAL ORDNANCE PLANT, CANTON, OHIO, IS OPERATED BY WESTINGHOUSE ELECTRIC AND MANUFACTURING COMPANY UNDER A CONTRACT WITH THE NAVY DEPARTMENT, WHICH CONTRACT GIVES THE CONTRACTOR COMPLETE SUPERVISION AND OPERATION OF THE PLANT SUBJECT TO CERTAIN CONTRACT PROVISIONS. COSTS OF TELEPHONE SERVICE ARE CHARGED AGAINST THE CONTRACT AND ARRANGEMENTS FOR THE INSTALLATIONS OF THE PAY TELEPHONES WHICH ARE CHIEFLY FOR THE USE OF THE CONTRACTOR'S PERSONNEL HAVE BEEN MADE BY THE CONTRACTOR. A COPY OF PERTINENT PROVISIONS OF THE CONTRACT BETWEEN THE NAVY DEPARTMENT AND THE WESTINGHOUSE ELECTRIC AND MANUFACTURING COMPANY IS ENCLOSED. ATTENTION IS PARTICULARLY INVITED TO ARTICLE XI (B).

THE QUESTION ARISES AS TO WHETHER THE COMMISSIONS FROM THE PAY TELEPHONES SHOULD BE DEPOSITED IN THE TREASURY TO THE CREDIT OF " MISCELLANEOUS RECEIPTS 173230, COMMISSIONS ON TELEPHONE PAY STATIONS IN FEDERAL BUILDINGS OUTSIDE OF WASHINGTON, D.C., " PURSUANT TO THE DECISIONS OF THE COMPTROLLER GENERAL OF 11 SEPTEMBER 1934 (14 COMP. GEN. 203) AND THE LETTER OF THE COMPTROLLER GENERAL TO THE SECRETARY OF THE NAVY OF 24 APRIL 1943, RELATIVE TO COLLECTIONS OF TELEPHONE COMMISSIONS BY SHIP SERVICE STORES AND OTHER ACTIVITIES, OR SHOULD PROPERLY BE RETAINED BY THE CONTRACTOR.

A DECISION IN THE PREMISES IS REQUESTED.

SECTION 3617, REVISED STATUTES (31 U.S.C. 484), PROVIDES AS FOLLOWS:

THE GROSS AMOUNT OF ALL MONEYS RECEIVED FROM WHATEVER SOURCE FOR THE USE OF THE UNITED STATES, EXCEPT AS OTHERWISE PROVIDED IN THE NEXT SECTION, SHALL BE PAID BY THE OFFICER OR AGENT RECEIVING THE SAME INTO THE TREASURY, AT AS EARLY A DAY AS PRACTICABLE, WITHOUT ANY ABATEMENT OR DEDUCTION ON ACCOUNT OF SALARY, FEES, COSTS, CHARGES, EXPENSES, OR CLAIM OF ANY DESCRIPTION WHATEVER. * * *

UNDER THE PROVISIONS OF THE ABOVE-QUOTED LAW IT IS CLEAR THAT IF THE COMMISSIONS IN QUESTION ARE FOR PAYMENT DIRECT TO THE UNITED STATES THEY ARE FOR DEPOSITING AND COVERING INTO THE TREASURY OF THE UNITED STATES AS MISCELLANEOUS RECEIPTS. 14 COMP. GEN. 203. AND IT EQUALLY IS CLEAR THAT SINCE THE PAY TELEPHONES IN THE SITUATION PRESENTED ARE LOCATED ON GOVERNMENT-OWNED PROPERTY, THE UNITED STATES IS ENTITLED TO DIRECT PAYMENT OF SUCH COMMISSIONS FROM THE INVOLVED TELEPHONE COMPANY UNLESS BY VIRTUE OF A CONTRACT, LEASE, OR OTHERWISE, THE UNITED STATES HAS DIVESTED ITSELF OF THAT RIGHT. ACCORDINGLY, THERE IS FOR CONSIDERATION HERE WHETHER, UNDER THE TERMS OF CONTRACT NOS-79128 BETWEEN THE NAVY DEPARTMENT AND THE WESTINGHOUSE ELECTRIC AND MANUFACTURING COMPANY, THE UNITED STATES HAS RELINQUISHED ITS RIGHT TO INCOME ACCRUING FROM THE USE OF THE PAY TELEPHONES.

SECTIONS (A) AND (C), RESPECTIVELY, OF ARTICLE I OF THE CONTRACT PROVIDE AS FOLLOWS:

THE GOVERNMENT DOES HEREBY LEASE TO THE CONTRACTOR FOR AN ANNUAL RENTAL OF ONE DOLLAR THE PROPERTY, PLANT, AND FACILITIES OF THE UNITED STATES NAVAL ORDNANCE PLANT AT CANTON, OHIO, HEREINAFTER CALLED PLANT, FOR A TERM OF ONE YEAR FROM THE DATE ON WHICH THE CHIEF OF THE BUREAU OF ORDNANCE, OR HIS AUTHORIZED REPRESENTATIVE AND CONTRACTOR, DETERMINE THAT THE PLANT IS READY TO BEGIN OPERATIONS, WITH THE RIGHT OF RENEWAL FOR SUCCEEDING YEARLY PERIODS, UPON THE SAME TERMS AND CONDITIONS, UNTIL TERMINATED, AS SPECIFICALLY PROVIDED HEREIN.

THE CONTRACTOR AGREES TO OPERATE THE PLANT FOR THE EXCLUSIVE BENEFIT OF THE GOVERNMENT AND TO PERFORM ANY WORK FOR WHICH THE PLANT IS EQUIPPED AND THAT IS ORDERED BY THE GOVERNMENT. THE CONTRACTOR WILL DO NO WORK WITHIN THE PLANT THAT IS NOT DIRECTLY OR INDIRECTLY REQUIRED BY JOB ORDERS ISSUED TO THE CONTRACTOR BY THE GOVERNMENT AND FOR THE PROPER MAINTENANCE OF THE PROPERTY AND PLANT.

IT IS TRUE, AS STATED IN THE ABOVE-QUOTED LETTER OF APRIL 24, 1944, THAT THE "CONTRACT GIVES THE CONTRACTOR COMPLETE SUPERVISION AND OPERATION OF THE PLANT.' HOWEVER, THE CONTRACT SPECIFICALLY PROVIDES THAT THE PLANT SHALL BE OPERATED FOR THE "EXCLUSIVE BENEFIT OF THE GOVERNMENT.' MOREOVER, THE PLANT WAS LEASED TO THE CONTRACTOR FOR THE SOLE PURPOSE OF PERFORMING THE WORK COVERED BY THE CONTRACT AND, UNLESS THE INSTALLATION OF THE TELEPHONES WAS INCIDENT TO THAT WORK, THE CONTRACTOR EXCEEDED ITS AUTHORITY IN HAVING THEM INSTALLED; AND IF THE INSTALLATION WAS INCIDENT TO THE WORK ANY BENEFIT DERIVED THEREFROM MUST ACCRUE TO THE GOVERNMENT. HENCE, COMMISSIONS ACCRUING FROM THE PAY TELEPHONES REPRESENT INCOME INCIDENT TO THE USE OF THE GOVERNMENT BUILDING IN QUESTION, EVEN THOUGH THE WESTINGHOUSE ELECTRIC AND MANUFACTURING COMPANY PRESENTLY HAS SUPERVISION AND OPERATION OF THE PROPERTY UNDER THE TERMS OF THE CONTRACT.

ARTICLE XI (B) OF THE CONTRACT--- REFERRED TO IN THE LETTER, SUPRA-- PROVIDING FOR THE APPLICATION OF CASH AND TRADE DISCOUNTS, REBATES, ALLOWANCES, CREDITS, SALVAGE, COMMISSIONS, AND BONDIFICATIONS IN REDUCTION OF THE GROSS COST OF THE CONTRACT--- HAS NO APPLICATION TO THE RECEIPTS DERIVED FROM THE INSTALLATION AND USE OF THE PAY TELEPHONES. THAT IS TO SAY, ASIDE FROM THE EFFECT SUCH PROVISION OTHERWISE MIGHT HAVE IT IS, BY ITS VERY TERMS, LIMITED TO RECEIPTS, REBATES, ETC., ACCRUING TO THE CONTRACTOR IN CONNECTION WITH THE PROCUREMENT OF ARTICLES AND MATERIALS REQUIRED FOR THE PURPOSES OF THE CONTRACT.

ACCORDINGLY, I HAVE TO ADVISE THAT THE "COMMISSIONS FROM THE PAY TELEPHONES" SHOULD BE DEPOSITED AND COVERED INTO THE TREASURY OF THE UNITED STATES AS MISCELLANEOUS RECEIPTS UNDER THE PROVISIONS OF SECTION 3617, REVISED STATUTES, SUPRA. ..END :