B-41903, JUNE 12, 1944, 23 COMP. GEN. 943

B-41903: Jun 12, 1944

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ASSIGNMENT OF CONTRACT PAYMENTS AS INCLUDING AMOUNTS DUE UNDER CHANGE ORDERS THE STIPULATION IN A CONTRACT PROVIDING FOR CHANGES OF ANY OF THE ITEMS OR MATERIALS COVERED BY THE CONTRACT AND THE DRAWINGS AND SPECIFICATIONS APPLICABLE THERETO WHEN ORDERED BY THE GOVERNMENT IS AS MUCH AN INTEGRAL PART OF THE AGREEMENT BETWEEN THE PARTIES AS ANY OTHER PART THEREOF. SEPARATE ASSIGNMENTS OF AMOUNTS DUE UNDER CHANGE ORDERS ISSUED PURSUANT TO THE " CHANGES" PROVISION OF THE CONTRACT ARE NOT REQUIRED IN ORDER FOR THE ASSIGNEE TO BE ENTITLED TO PAYMENT OF ALL AMOUNTS PAYABLE UNDER THE CONTRACT. NOTWITHSTANDING THE FACT THAT SEPARATE ASSIGNMENTS OF AMOUNTS DUE UNDER CHANGE ORDERS ISSUED PURSUANT TO THE " CHANGES" PROVISION OF A CONTRACT ARE NOT REQUIRED UNDER THE ASSIGNMENT OF CLAIMS ACT OF 1940 AN ASSIGNEE OF AMOUNTS PAYABLE UNDER A CONTRACT NEVERTHELESS INSISTS UPON SUCH SEPARATE ASSIGNMENTS.

B-41903, JUNE 12, 1944, 23 COMP. GEN. 943

ASSIGNMENT OF CONTRACT PAYMENTS AS INCLUDING AMOUNTS DUE UNDER CHANGE ORDERS THE STIPULATION IN A CONTRACT PROVIDING FOR CHANGES OF ANY OF THE ITEMS OR MATERIALS COVERED BY THE CONTRACT AND THE DRAWINGS AND SPECIFICATIONS APPLICABLE THERETO WHEN ORDERED BY THE GOVERNMENT IS AS MUCH AN INTEGRAL PART OF THE AGREEMENT BETWEEN THE PARTIES AS ANY OTHER PART THEREOF, AND, THEREFORE, THE OBLIGATIONS THUS IMPOSED DATE FROM THE EXECUTION OF THE CONTRACT, EVEN THOUGH THE CONTRACT CONTEMPLATES THE EXECUTION OF AMENDMENTS FROM TIME TO TIME COVERING SUCH CHANGES. WHERE, IN ACCORDANCE WITH THE AUTHORIZATION IN THE ASSIGNMENT OF CLAIMS ACT OF 1940 TO ASSIGN ,MONEYS DUE OR TO BECOME DUE" UNDER A PUBLIC CONTRACT, A CONTRACTOR HAS ASSIGNED TO A PARTICULAR ASSIGNEE "ALL AMOUNTS PAYABLE" UNDER ITS CONTRACT, SEPARATE ASSIGNMENTS OF AMOUNTS DUE UNDER CHANGE ORDERS ISSUED PURSUANT TO THE " CHANGES" PROVISION OF THE CONTRACT ARE NOT REQUIRED IN ORDER FOR THE ASSIGNEE TO BE ENTITLED TO PAYMENT OF ALL AMOUNTS PAYABLE UNDER THE CONTRACT, INCLUDING AMOUNTS PAYABLE FOR WORK UNDER CHANGE ORDERS, UNTIL A DULY EXECUTED RELEASE OF THE ASSIGNMENT HAS BEEN PROPERLY FILED. WHERE, NOTWITHSTANDING THE FACT THAT SEPARATE ASSIGNMENTS OF AMOUNTS DUE UNDER CHANGE ORDERS ISSUED PURSUANT TO THE " CHANGES" PROVISION OF A CONTRACT ARE NOT REQUIRED UNDER THE ASSIGNMENT OF CLAIMS ACT OF 1940 AN ASSIGNEE OF AMOUNTS PAYABLE UNDER A CONTRACT NEVERTHELESS INSISTS UPON SUCH SEPARATE ASSIGNMENTS, THE PROVISIONS OF CIRCULAR LETTER NO. 447 ISSUED BY THE PROCUREMENT DIVISION, TREASURY DEPARTMENT, RELATING TO THE FILING OF NOTICE OF ASSIGNMENTS, ARE NOT FOR APPLICATION; AND NOTICES AND COPIES OF THE ASSIGNMENTS ARE NOT REQUIRED BY LAW TO BE ACKNOWLEDGED.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF THE NAVY, JUNE 12, 1944:

REFERENCE IS MADE TO YOUR LETTER OF MAY 8, 1944, AS FOLLOWS:

THE ASSISTANT FOR DISBURSING, OFFICE OF SUPERVISORY COST INSPECTOR, TWELFTH NAVAL DISTRICT, HAS FORWARDED TO THE NAVY DEPARTMENT AN INSTRUMENT OF ASSIGNMENT DATED 21 FEBRUARY 1944, WITH NOTICE OF ASSIGNMENT, EXECUTED BY JOSHUA HENDY IRON WORKS IN FAVOR OF WELLS FARGO BANK AND UNION TRUST COMPANY, SAN FRANCISCO, CALIFORNIA, WHEREBY SAID JOSHUA HENDY IRON WORKS HAS ASSIGNED ALL AMOUNTS DUE OR TO BECOME DUE IT UNDER CHANGE LETTER NO. 4 TO NAVY CONTRACT NORD-3897.

BY A PREVIOUS ASSIGNMENT DATED 8 SEPTEMBER 1943, JOSHUA HENDY IRON WORKS ASSIGNED TO THE SAME BANK, WELLS FARGO BANK AND UNION TRUST COMPANY, ANY AND ALL AMOUNTS DUE AND OWING OR WHICH MIGHT THEREAFTER BE DUE OR OWING TO IT UNDER THE AFORESAID CONTRACT NORD-3897, "INCLUDING ALL MONEYS DUE OR WHICH MAY HEREAFTER BE OR BECOME DUE OR OWING OR REMAIN UNPAID AT ANY TIME OR TIMES FOR EXTRAS OR CHANGES OR UNDER ANY OPTION OR RIGHT OF CANCELLATION OR TERMINATION EXERCISED BY THE PURCHASER OR UNDER ANY OTHER PROVISION OR PROVISIONS OF SAID CONTRACT OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO.'

THE ASSISTANT FOR DISBURSING STATES THAT THE ASSIGNEE BANK HAS EXPRESSED TO HIM ITS INTENT TO EFFECT, FOR ALL NAVY CONTRACTS HAVING ASSIGNMENTS EXECUTED IN ITS FAVOR, ADDITIONAL INDIVIDUAL ASSIGNMENTS FOR EACH CONTRACT AMENDMENT IN WHICH CONTRACT PRICES ARE AFFECTED.

CONTRACT NORD-3897 MAKES PROVISION FOR CHANGES ( ARTICLE 2), AS DO MOST NAVY CONTRACTS. ASSIGNMENTS UNDER THIS CONTRACT WERE AUTHORIZED BY CHANGE LETTER NO. 1, DATED 13 AUGUST 1943, AND THE PROVISION IN THE CONTRACT RELATING TO ASSIGNMENTS ( ARTICLE 16 (A) (, STATES THAT ANY ASSIGNMENT AUTHORIZED UNDER THE CONTRACT "SHALL COVER ALL AMOUNTS PAYABLE UNDER THIS CONTRACT AND NOT ALREADY PAID," FOLLOWING THE STANDARD FORM OF PROVISION USED IN NAVY CONTRACTS TO COVER ASSIGNMENTS OF CLAIMS.

THE NAVY DEPARTMENT HOLDS THE VIEW THAT WHEN A CONTRACT SPECIFICALLY AUTHORIZES CHANGES, AND WHEN THE CONTRACT REQUIRES ANY ASSIGNMENT TO COVER "ALL AMOUNTS" PAYABLE THEREUNDER, THAT ONE ASSIGNMENT IS SUFFICIENT TO COVER ALL AMOUNTS DUE UNDER ANY CHANGES ISSUED PURSUANT TO THE ARTICLE ON CHANGES, AS WELL AS AMOUNTS DUE UNDER THE CONTRACT AS ORIGINALLY EXECUTED.

BECAUSE OF THE LARGE NUMBER OF CHANGES ISSUED UNDER NAVY CONTRACTS, THE ADMINISTRATIVE BURDEN WOULD BE GREATLY INCREASED IF MANY ASSIGNEES SHOULD FOLLOW THE POLICY OF WELLS FARGO BANK AND UNION TRUST COMPANY OF REQUIRING A SEPARATE ASSIGNMENT FOR EACH CHANGE ISSUED.

IN VIEW OF THE DOUBT THAT HAS BEEN RAISED BY THE ACTION OF WELLS FARGO BANK AND UNION TRUST COMPANY IN THIS CASE, IT IS REQUESTED THAT THE COMPTROLLER GENERAL ADVISE THE NAVY DEPARTMENT WHETHER HE CONSIDERS IT NECESSARY UNDER THE ASSIGNMENT OF CLAIMS ACT, 1940 (31 U.S.C. 203), FOR A CONTRACTOR TO EXECUTE A SEPARATE ASSIGNMENT FOR EACH CHANGE TO A CONTRACT IN WHICH CONTRACT PRICES ARE AFFECTED, OR IF, AFTER AN ASSIGNMENT HAS BEEN MADE UNDER A CONTRACT OF "ALL AMOUNTS" PAYABLE UNDER THE CONTRACT, PAYMENTS MAY SAFELY BE MADE TO THE ASSIGNEE OF AMOUNTS DUE UNDER CHANGES TO THE CONTRACT AS WELL AS UNDER THE CONTRACT ITSELF, UNTIL A DULY EXECUTED RELEASE BY THE ASSIGNEE HAS BEEN MADE AND FILED WITH THE PROPER OFFICERS.

IF THE COMPTROLLER GENERAL HOLDS THAT ONE SUCH ASSIGNMENT IS SUFFICIENT TO COVER ALL CHANGES UNDER A CONTRACT, INFORMATION IS REQUESTED WHETHER, WHERE AN ASSIGNEE INSISTS ON ADDITIONAL ASSIGNMENTS FOR EACH CHANGE, THE NOTICE OF ASSIGNMENT REQUIRED PURSUANT TO PROCUREMENT DIVISION OF THE TREASURY CIRCULAR LETTER NO. 447, SHOULD BE RECEIPTED FOR BY THE OFFICERS OF THE NAVY WITH WHOM IT IS FILED.

THERE MAY BE ACCEPTED AS A PREMISE IN THIS MATTER THE PROPOSITION THAT THE CONTRACTOR, JOSHUA HENDY IRON WORKS, CLEARLY INTENDED BY THE ORIGINAL ASSIGNMENT OF SEPTEMBER 8, 1943, TO ASSIGN TO THE BANK, WELLS FARGO BANK AND UNION TRUST CO., NOT ONLY AMOUNTS DUE OR TO BECOME DUE UNDER THE CONTRACT PROPER BUT, ALSO, AMOUNTS PAYABLE FOR CHANGES MADE PURSUANT TO THE CONTRACT PROVISION ON CHANGES. IN FACT, AS POINTED OUT IN YOUR LETTER, THE INSTRUMENT OF ASSIGNMENT EXPRESSLY SO PROVIDES. HENCE, THE ONLY ISSUE POSSIBLY INVOLVED IS WHETHER AT THE TIME THE SAID ASSIGNMENT WAS EXECUTED THE CONTRACTOR HAD SUCH A RIGHT OR INTEREST IN AMOUNTS SUBSEQUENTLY TO BE EARNED FOR CHANGES MADE PURSUANT TO THE PERTINENT CONTRACT PROVISION AS MIGHT BE THE SUBJECT OF A VALID ASSIGNMENT UNDER THE ASSIGNMENT OF CLAIMS ACT OF 1940, 54 STAT. 1029.

ARTICLE 2 OF CONTRACT NORD-3897, ENTITLED " CHANGES," PROVIDES:

ANY OF THE ITEMS OR MATERIAL COVERED BY THIS CONTRACT AND THE DRAWINGS AND SPECIFICATIONS APPLICABLE THERETO MAY BE CHANGED AT ANY TIME BY WRITTEN ORDER OF THE CONTRACTING OFFICER OR HIS REPRESENTATIVE DULY AUTHORIZED IN WRITING, WHICH AUTHORIZATION MAY BE SPECIFIC OR GENERAL IN ITS SCOPE. SUCH CHANGES MAY BE MADE WITHOUT NOTICE TO THE SURETY, IF ANY, AND THE CONTRACTOR SHALL GIVE EFFECT TO SUCH CHANGES WITHOUT DELAY. CHANGES PROPOSED BY THE CONTRACTOR MAY, IF ACCEPTABLE TO THE CONTRACTING OFFICER OR HIS REPRESENTATIVE SIMILARLY AUTHORIZED, BE SIMILARLY ORDERED. WHERE APPROPRIATE, CHANGES ORDERED OR AGREED TO UNDER THIS SECTION SHALL INCLUDE ACCOMPANYING REVISIONS OF DELIVERY DATES. IF ANY CHANGE SO ORDERED SHALL INVOLVE AN INCREASE OR DECREASE IN THE AMOUNT OR CHARACTER OF THE WORK TO BE DONE OR THE TIME REQUIRED FOR ITS PERFORMANCE, AN EQUITABLE ADJUSTMENT OF THE ESTIMATED COST AND FIXED FEES SHALL BE MADE AS HEREAFTER PROVIDED. AT INTERVALS OF EVERY THREE MONTHS OR WHENEVER REQUESTED BY THE CONTRACTING OFFICER OR BY THE CONTRACTOR AND ASSENTED TO BY THE CONTRACTING OFFICER, THE CONTRACTOR SHALL SUBMIT TO THE CONTRACTING OFFICER, IN SUCH FORM AND DETAIL AS THE CONTRACTING OFFICE MAY REQUEST, A SUMMARY OF THE CHANGES MADE SINCE THE DATE OF ANY PREVIOUS SUMMARY AND AN ESTIMATE OF THE AGGREGATE EFFECT OF SUCH CHANGES ON THE COST OF PERFORMING THE WORK. UPON THE BASIS OF SUCH INFORMATION AND ANY OTHER INFORMATION, AVAILABLE TO THE CONTRACTING OFFICER, EQUITABLE CHANGES IN THE ESTIMATED COST AND FIXED FEES SHALL BE DETERMINED BY MUTUAL AGREEMENT BETWEEN THE CONTRACTOR AND THE CONTRACTING OFFICER AND SUCH CHANGES SHALL BE SET FORTH IN AN AMENDMENT TO THE CONTRACT. WHERE CHANGES IN THE FIXED FEES RELATE TO SUPPLIES PREVIOUSLY INVOICED THE METHOD OF ADJUSTING ANY INCREASE OR DECREASE SHALL BE SPECIFIED BY SUCH AMENDMENT.

THUS, THE CONTRACTOR AGREED UNDER THIS PROVISION TO CHANGE ANY OF THE ITEMS OR MATERIALS COVERED BY THE CONTRACT AND THE DRAWINGS AND SPECIFICATIONS APPLICABLE THERETO WHEN ORDERED TO DO SO BY THE GOVERNMENT. AS TO CHANGES INVOLVING AN INCREASE IN THE AMOUNT OR CHARACTER OF THE WORK TO BE DONE, OR THE TIME REQUIRED FOR ITS PERFORMANCE, IT IS PROVIDED THAT AN EQUITABLE ADJUSTMENT WILL BE MADE IN THE AMOUNT OTHERWISE PAYABLE UNDER THE CONTRACT. THE MANNER OR PROCEDURE FOR EFFECTING SUCH EQUITABLE ADJUSTMENT IS PRESCRIBED. THE NET EFFECT OF THE PROVISION IS TO IMPOSE UPON THE CONTRACTOR AN OBLIGATION TO MAKE SUCH CHANGES AS THE GOVERNMENT MAY ORDER AND UPON THE GOVERNMENT AN OBLIGATION TO PAY FOR CHANGES INVOLVING AN INCREASE IN THE BURDEN OR EXPENSE OF THE CONTRACT PERFORMANCE.

IN MCCORD V. UNITED STATES, 9 C.1CLS. 155, 168, 169, THE COURT, WITH RESPECT TO A SIMILAR PROVISION IN A GOVERNMENT CONTRACT, STATED:

THE CONTRACT FOR THE CONSTRUCTION OF THE ETLAH PROVIDED THAT ALTERATIONS MIGHT BE MADE FROM THE ORIGINAL SPECIFICATIONS, AND THAT, IF THEY CAUSED EXTRA EXPENSE, THAT SHOULD BE PAID FOR; AND IF THEY EFFECTED A REDUCTION OF THE COST, THAT SHOULD BE SUBTRACTED FROM THE CONTRACT PRICE.

THIS PRIVILEGE OF THE UNITED STATES TO MAKE ALTERATIONS ON THE TERMS STATED BEING EXPRESSLY PROVIDED FOR IN THE CONTRACT, THE CONTRACT PRICE RELATED TO THAT PRIVILEGE AS MUCH AS TO ANY OTHER PROVISION IN THE CONTRACT, AND THEREFORE IT MUST BE TAKEN AS INCLUDED IN THAT PRICE, AND PAID FOR IN IT. * * * IN OTHER WORDS, THE PROVISION REGARDING CHANGES IN THE SUBJECT CONTRACT IS AS MUCH AN INTEGRAL PART OF THE AGREEMENT BETWEEN THE PARTIES AS ANY OTHER PART THEREOF; AND, THEREFORE, THE OBLIGATIONS IMPOSED UPON THE PARTIES BY SUCH PROVISION DATE FROM THE EXECUTION OF THE CONTRACT. COMPARE PLACK V. UNITED STATES, 66 C.1CLS. 641.

IT IS TRUE THAT AT THE TIME THE CONTRACT WAS EXECUTED IT WAS NOT KNOWN THAT THERE WOULD, IN FACT, BE ANY CHANGES ORDERED UNDER SAID ARTICLE 2 FOR WHICH THE CONTRACTOR WOULD BE ENTITLED TO BE PAID AN AMOUNT IN ADDITION TO AMOUNTS OTHERWISE PAYABLE UNDER THE CONTRACT. ALSO, IT IS TRUE THAT SAID ARTICLE 2 CONTEMPLATES THE EXECUTION OF AMENDMENTS TO THE CONTRACT FROM TIME TO TIME COVERING SUCH CHANGES. HOWEVER, THE FACT REMAINS THAT THE OBLIGATIONS AND LIABILITIES OF THE PARTIES RESPECTING SUCH CHANGES ARE FIXED BY THE TERMS OF THE ORIGINAL CONTRACT, AND THE VARIOUS AMENDMENTS MERELY RENDER DEFINITE AND LIQUIDATED THE EXTENT OF THE GOVERNMENT'S LIABILITY IN CONNECTION WITH SUCH CHANGES.

MOREOVER, THE ORIGINAL ASSIGNMENT WAS MADE PURSUANT TO THE ASSIGNMENT OF CLAIMS ACT OF 1940, WHICH ACT IS AN AMENDMENT TO PRIOR STATUTES PROHIBITING THE ASSIGNMENT OF CLAIMS AGAINST THE UNITED STATES. THE PRIOR STATUTES WERE ENACTED FOR THE PROTECTION OF THE GOVERNMENT AND IN ORDER THAT IT MIGHT NOT BECOME EMBROILED IN CONFLICTING CLAIMS WITH CONSEQUENT DELAY AND EMBARRASSMENT AND THE CHANCE OF MULTIPLE LIABILITY. SEE MARTIN V. NATIONAL SURETY CO., 300 U.S. 588, 594; UNITED STATES V. CERTAIN LANDS IN TOWN OF HIGHLANDS, N.Y., 49 F.1SUPP. 962, 965. THE CONGRESS RELAXED THESE STATUTORY PROHIBITIONS IN ORDER TO AID IN FINANCING THE NATIONAL DEFENSE PROGRAM BUT AT THE SAME TIME EVIDENCED ITS CONTINUED REGARD FOR THE BASIC PURPOSES OF THE PRICE LEGISLATION BY DEFINING WITH CAUTION AND PARTICULARITY THE REQUIREMENTS FOR A VALID ASSIGNMENT UNDER THE ASSIGNMENT OF CLAIMS ACT. CONSIDERATION FOR THESE PURPOSES AFFORDS GUIDANCE IN THE INSTANT MATTER. IF EACH AMENDMENT COVERING AN AUTHORIZED CONTRACT CHANGE WERE FOR CONSIDERATION AS A SEPARATE AND DISTINCT CONTRACT, SUCH AS TO REQUIRE THE EXECUTION OF A SPECIFIC ASSIGNMENT OF AMOUNTS PAYABLE THEREUNDER, THE ABSENCE OF AN ASSIGNMENT FOR ANY SUCH AMENDMENT--- OR AN ASSIGNMENT TO OTHER THAN THE ORIGINAL ASSIGNEE--- WOULD OCCASION THE VERY DIFFICULTIES AND CONFUSION WHICH THE CONGRESS ATTEMPTED TO AVERT. THUS, THE STATUTORY PERMISSION TO ASSIGN "MONEYS DUE OR TO BECOME DUE" UNDER A PUBLIC CONTRACT, AS WELL AS THE STATUTORY MANDATE THAT SUCH ASSIGNMENTS COVER "ALL AMOUNTS PAYABLE UNDER SUCH CONTRACT," REQUIRES A CONSTRUCTION WHICH WILL ACCORD WITH THE PURPOSES OF THE STATUTE.

ACCORDINGLY, I HAVE TO ADVISE THAT UNDER THE CIRCUMSTANCES OUTLINED IN YOUR LETTER AND OTHERWISE APPEARING OF RECORD HERE, ALL PAYMENTS UNDER CONTRACT NORD-3897 SHOULD BE MADE TO WELLS FARGO BANK AND UNION TRUST CO., INCLUDING AMOUNTS PAYABLE FOR WORK DONE BY THE CONTRACTOR UNDER CHANGE ORDERS ISSUED PURSUANT TO ARTICLE 2 OF THE CONTRACT, REGARDLESS OF WHETHER AMOUNTS PAYABLE FOR SUCH CHANGES HAVE BEEN THE SUBJECT OF A SEPARATE ASSIGNMENT FROM THE CONTRACTOR TO THE BANK, UNLESS AND UNTIL A DULY EXECUTED RELEASE OF THE ASSIGNMENT BY THE ASSIGNEE HAS BEEN FILED WITH THE PROPER OFFICERS. SEE IN THIS LATTER CONNECTION, 22 COMP. GEN. 520, 525, 526. ALSO, IN VIEW OF THE FACT THAT SEPARATE ASSIGNMENTS OF AMOUNTS DUE UNDER SUCH CHANGE ORDERS ARE NOT REQUIRED UNDER THE ASSIGNMENT OF CLAIMS ACT, THE PROVISIONS OF TREASURY CIRCULAR LETTER NO. 447 WOULD APPEAR TO HAVE NO APPLICATION THERETO; AND NOTICES AND COPIES OF SUCH ASSIGNMENTS ARE NOT REQUIRED BY LAW TO BE ACKNOWLEDGED.