B-48063, OCTOBER 4, 1968, 48 COMP. GEN. 179

B-48063: Oct 4, 1968

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CONTRACTS - COST PLUS - REIMBURSEMENT - UNCLAIMED AMOUNTS UNCLAIMED WAGES AND OTHER OBLIGATIONS ARISING OUT OF COST-REIMBURSABLE TYPE CONTRACTS WITH THE UNITED STATES WHICH A CONTRACTOR IS REQUIRED TO REPORT AND PAY TO SHATE AUTHORITIES UNDER ESCHEAT LAWS ARE REIMBURSABLE TO THE CONTRACTOR. UNDER THE CRITERIA THAT WAGES OR OTHER OBLIGATIONS PAY TO STATE AUTHORITIES UNDER ESCHEAT LAWS ARE REIMBURSABLE TO THE CONTRACTOR. NEED NOT BE POSTPONED UNTIL UNCLAIMED AMOUNTS ARE ACTUALLY PAID TO A STATE UNDER ITS ESCHEAT LAWS. THE GOVERNMENT WOULD BE ENTITLED TO RECOVER PAYMENTS TO A CONTRACTOR WHERE THE CLAIMANTS WERE NOT SUBSEQUENTLY LOCATED AND THEIR LAST KNOWN ADDRESSES ARE IN STATES WHICH DO NOT REQUIRE AN ACCOUNTING FOR UNCLAIMED PROPERTY AFTER THE EXPIRATION OF STATED PERIODS OF TIME.

B-48063, OCTOBER 4, 1968, 48 COMP. GEN. 179

CONTRACTS - COST PLUS - REIMBURSEMENT - UNCLAIMED AMOUNTS UNCLAIMED WAGES AND OTHER OBLIGATIONS ARISING OUT OF COST-REIMBURSABLE TYPE CONTRACTS WITH THE UNITED STATES WHICH A CONTRACTOR IS REQUIRED TO REPORT AND PAY TO SHATE AUTHORITIES UNDER ESCHEAT LAWS ARE REIMBURSABLE TO THE CONTRACTOR, THE UNCLAIMED AMOUNTS CONSTITUTING PART OF THE COST OF PERFORMING THE CONTRACT AND MEETING THE COST-PRINCIPLES OF PARAGRAPH 15- 201.2 OF THE ARMED SERVICES PROCUREMENT REGULATION. UNDER THE CRITERIA THAT WAGES OR OTHER OBLIGATIONS PAY TO STATE AUTHORITIES UNDER ESCHEAT LAWS ARE REIMBURSABLE TO THE CONTRACTOR, NEED NOT BE POSTPONED UNTIL UNCLAIMED AMOUNTS ARE ACTUALLY PAID TO A STATE UNDER ITS ESCHEAT LAWS. HOWEVER, THE GOVERNMENT WOULD BE ENTITLED TO RECOVER PAYMENTS TO A CONTRACTOR WHERE THE CLAIMANTS WERE NOT SUBSEQUENTLY LOCATED AND THEIR LAST KNOWN ADDRESSES ARE IN STATES WHICH DO NOT REQUIRE AN ACCOUNTING FOR UNCLAIMED PROPERTY AFTER THE EXPIRATION OF STATED PERIODS OF TIME. MODIFIES B-48063, MARCH 21, 1945.

TO THE SECRETARY OF DEFENSE, OCTOBER 4, 1968:

REFERENCE IS MADE TO OUR LETTER TO YOU OF FEBRUARY 26, 1968, AND A LETTER DATED APRIL 15, 1968, FROM THE ASSISTANT SECRETARY, COMPTROLLER, CONCERNING THE REQUEST OF THE DOUGLAS AIRCRAFT COMPANY, SANTA MONICA, CALIFORNIA, THAT WE RECONSIDER OUR DECISION, B-48063, MARCH 21, 1945, IN WHICH IT WAS HELD THAT CONTRACTORS ARE NOT ENTITLED TO REIMBURSEMENT FOR COSTS UNDER COST-PLUS-A-FIXED-FEE CONTRACTS EXCEPT TO THE EXTENT OF THEIR ACTUAL EXPENDITURES AND THAT, NOTWITHSTANDING STATE ESCHEAT LAWS, UNCLAIMED AMOUNTS INCLUDED IN PAYMENTS TO THE CONTRACTORS AS COSTS OF PERFORMANCE SHOULD BE RECOVERED BY THE GOVERNMENT AND DEPOSITED IN A PRESCRIBED TRUST FUND RECEIPT ACCOUNT OR IN PROPER APPROPRIATION ACCOUNTS, AND RETAINED EXCEPT TO THE EXTENT NECESSARY FOR THE PAYMENT OF CLAIMS LATER SUBMITTED BY PERSONS OR FIRMS FOR THE PREVIOUSLY UNCLAIMED AMOUNTS DUE THEM FROM THE CONTRACTORS.

THE DECISION OF MARCH 21, 1945, WAS USED AS A PRECEDENT FOR THE ISSUANCE BY THE DEFENSE CONTRACT AUDIT AGENCY OF A NOTICE OF CONTRACT COSTS SUSPENDED AND/OR DISALLOWED IN CONNECTION WITH THE AUDIT OF PAYMENTS MADE UNDER CERTAIN AIR FORCE COST-REIMBURSABLE TYPE CONTRACTS WHICH WERE ENTERED INTO WITH THE DOUGLAS AIRCRAFT COMPANY BEFORE IT WAS OPERATING AS A DIVISION OF THE MCDONNELL DOUGLAS CORPORATION. THE DOUGLAS AIRCRAFT COMPANY CONTENDED THAT NO ADJUSTMENT WAS DUE THE GOVERNMENT SINCE THE GOVERNMENT HAD RECEIVED THE BENEFIT OF THE WORK PERFORMED BY ITS FORMER EMPLOYEES AND THE SUPPLIES OR SERVICES FURNISHED BY OTHER CREDITORS, AND THE UNCLAIMED AMOUNTS DUE SUCH EMPLOYEES AND OTHER CREDITORS REPRESENT VALID OBLIGATIONS OF EITHER THE DOUGLAS AIRCRAFT COMPANY OR THE MCDONNELL DOUGLAS CORPORATION, REGARDLESS OF WHETHER THE PARTIES ENTITLED THERETO EVENTUALLY REQUEST PAYMENT.

THE DOUGLAS AIRCRAFT COMPANY INDICATED THAT, UNDER THE UNIFORM DISPOSITION OF UNCLAIMED PROPERTY ACT, ADOPTED BY THE STATE OF CALIFORNIA IN 1959, CALIFORNIA CODE OF CIVIL PROCEDURE, SECTION 1500 THROUGH SECTION 1527, AND THE LAWS OF VARIOUS OTHER STATES, THE DOUGLAS AIRCRAFT COMPANY OR THE MCDONNELL DOUGLAS CORPORATION IS REQUIRED TO REPORT AND PAY TO THE STATES ANY UNCLAIMED WAGES DUE THEIR FORMER EMPLOYEES AND ANY UNCLAIMED AMOUNTS DUE OTHER CREDITORS WITHIN CERTAIN PERIODS OF TIME AFTER THE OBLIGATIONS TO MAKE PAYMENTS OF SUCH AMOUNTS FIRST ACCRUED. THE COMPANY ALSO INDICATED THAT, DURING AND PRIOR TO THE YEAR 1959, IT HAD ALLOWED PROPORTIONATE OVERHEAD COST CREDITS FOR UNCLAIMED WAGES AND OTHER UNCLAIMED AMOUNTS IN CONNECTION WITH THE SETTLEMENT OF ITS REIMBURSEMENT CLAIMS UNDER GOVERNMENT COST REIMBURSABLE TYPE CONTRACTS, BUT THAT THIS PRACTICE WAS DISCONTINUED IN 1959 BECAUSE OF THE ADOPTION IN THAT YEAR OF THE UNIFORM DISPOSITION OF UNCLAIMED PROPERTY ACT BY THE STATE OF CALIFORNIA, AND BECAUSE THE VAST MAJORITY OF THE COMPANY'S EMPLOYEES LIVED AND WORKED IN CALIFORNIA.

IN OUR PRELIMINARY REVIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, AS SET FORTH IN OUR LETTER OF FEBRUARY 26, 1968, IT WAS CONSIDERED THAT THERE MAY BE A SUBSTANTIAL BASIS FOR CONCLUDING THAT OUR 1945 DECISION SHOULD NO LONGER BE APPLIED, BUT THAT THE GOVERNMENT WAS CLEARLY ENTITLED TO RECOVER PORTIONS OF UNCLAIMED AMOUNTS IN THE ACCOUNTS OF A COST-REIMBURSABLE TYPE CONTRACTOR TO THE EXTENT THAT SUCH AMOUNTS REPRESENTED SUMS DUE PERSONS OR FIRMS WHOSE LAST KNOWN ADDRESSES WERE IN STATES WHICH DID NOT REQUIRE AN ACCOUNTING FOR UNCLAIMED PROPERTY. WE REFERRED TO THE APPARENT DIFFERENCE BETWEEN THE PAYMENT PROVISIONS OF COST-REIMBURSABLE TYPE CONTRACTS ENTERED INTO DURING OR PRIOR TO THE YEAR 1945 AND THE METHODS OF PAYMENT PROVIDED FOR IN THE COST PRINCIPLES OF PARAGRAPH 15, PART 2, ARMED SERVICES PROCUREMENT REGULATION (ASPR). HOWEVER, WE SUGGESTED THAT, IN ANY EVENT, THE GOVERNMENT'S OBLIGATION TO MAKE COST REIMBURSEMENTS UNDER A COST- REIMBURSEABLE TYPE CONTRACT APPARENTLY COULD NOT BE HELD TO HAVE BEEN COMPLETELY DISCHARGED IF THE GOVERNMENT REFUSED TO REIMBURSE THE CONTRACTOR FOR THOSE PORTIONS OF COSTS REPRESENTING AMOUNTS PAID TO STATES UNDER APPLICABLE ESCHEAT LAWS OR PAID TO THE CONTRACTOR'S EMPLOYEES OR OTHER CREDITORS BEFORE THE AMOUNTS INVOLVED WERE REQUIRED TO BE PAID TO THE STATES.

WE NOTED BUT DID NOT CITE IN OUR LETTER OF FEBRUARY 26, 1968, THE OCTOBER 2, 1962 DECISION OF THE SUPREME COURT OF CALIFORNIA, TRAYNOR, J., IN THE CASE OF DOUGLAS AIRCRAFT COMPANY V CRANSTON, 374 P.2D 819, TO THE EFFECT THAT A STATE EMPLOYER COULD NOT BE REQUIRED TO PAY TO THE STATE CONTROLLER UNCLAIMED WAGES FOR NONGOVERNMENTAL WORK DONE IN THE STATE OF CALIFORNIA ON WHICH THE STATE STATUTE OF LIMITATIONS HAD RUN BEFORE THE EFFECTIVE DATE OF THE 1959 CALIFORNIA LAW CONCERNING THE DISPOSITION OF UNCLAIMED PROPERTY. ALTHOUGH THAT CASE INVOLVED SOLELY THE QUESTION WHETHER THE LAW SHOULD BE GIVEN A RETROACTIVE EFFECT WITH RESPECT TO UNPAID WAGES ON WHICH THE STATUTE OF LIMITATIONS HAD RUN, THE COURT STATED THAT THE DOUGLAS AIRCRAFT COMPANY HAD IN THE PAST CREDITED TO THE UNITED STATES UNCLAIMED WAGES ARISING OUT OF ITS CONTRACTS WITH THE UNITED STATES, AND THAT THE STATE CONTROLLER "MAKES NO CLAIM THAT SUCH WAGES SHOULD BE REPORTED OR PAID TO HIM.'

THE LETTER DATED APRIL 15, 1968, FROM YOUR DEPARTMENT, SETS FORTH THAT, WHILE CURRENT CONTRACT COST PRINCIPLES DO NOT NECESSARILY REQUIRE PROOF OF PRIOR PAYMENT IN ORDER TO PERMIT THE APPROVAL AND PAYMENT OF VOUCHERS ON A DAY TO DAY BASIS, PAYMENTS UNDER A COST-REIMBURSEABLE TYPE CONTRACT ARE NEVERTHELESS SUBJECT TO A SUBSEQUENT AUDIT IN DEPTH FOR THE PURPOSE OF DETERMINING THE FINAL ALLOWABLE COSTS. IT IS STATED THAT THE COST PRINCIPLES OF PARAGRAPH 15, PART 2, ASPR, NEED NOT BE INTERPRETED TO AUTHORIZE OR REQUIRE REIMBURSEMENT FOR UNCLAIMED WAGES AND THAT, SINCE THE GOVERNMENT HAS NOT, IN EFFECT, REIMBURSED THE CONTRACTOR IN THIS CASE FOR UNCLAIMED WAGES, IT MIGHT BE ARGUED THAT THE CONTRACTOR HAS NO UNCLAIMED WAGES IN ITS POSSESSION WHICH COULD ESCHEAT TO THE STATE OF CALIFORNIA OR TO OTHER STATES. THE LATTER STATEMENT APPEARS TO BE BASED IN PART UPON INFORMATION FURNISHED BY THE DOUGLAS AIRCRAFT COMPANY, AND CONFIRMED BY YOUR DEPARTMENT, THAT THE SUM OF $40,004, REPRESENTING COSTS SUSPENDED AND/OR DISALLOWED BY THE DEFENSE CONTRACT AUDIT AGENCY, WAS DEDUCTED ON A VOUCHER COVERING PAYMENT OF AN AMOUNT OTHERWISE DUE THE MCDONNELL DOUGLAS CORPORATION UNDER AIR FORCE CONTRACT NO. AF 04/695/-C-0012.

THE DEPARTMENTAL LETTER SUGGESTS THE POSSIBILITY THAT, BY DISCRETIONARY ACTION ON THE PART OF THE CONTROLLER OF THE STATE OF CALIFORNIA, AN EXEMPTION FROM THE REQUIREMENT OF REPORTING AND PAYING UNCLAIMED WAGES MAY BE AVAILABLE TO AN EMPLOYER SO FAR AS SUCH UNCLAIMED WAGES MAY RELATE TO THE PERFORMANCE OF DEFENSE CONTRACTS ON A COST-REIMBURSABLE BASIS. THAT CONNECTION, THE LETTER REFERS TO THE CASE OF DOUGLAS AIRCRAFT COMPANY V CRANSTON, SUPRA, AS INDICATING THAT, IN ADDITION TO DETERMINING THAT NO CLAIM SHOULD BE MADE AGAINST THE COMPANY FOR UNCLAIMED WAGES ARISING OUT OF ITS CONTRACTS WITH THE UNITED STATES, THE STATE CONTROLLER APPARENTLY ALSO CONSIDERED THAT THE COMPANY WAS NOT EVEN REQUIRED TO REPORT SUCH UNCLAIMED WAGES. THE LETTER OTHERWISE SETS FORTH THAT YOUR DEPARTMENT IS NOT AWARE OF ANY CALIFORNIA COURT DECISION RENDERED SUBSEQUENT TO OCTOBER 2, 1962, OR OF ANY FORMAL STATEMENT MADE BY THE CONTROLLER OF THE STATE OF CALIFORNIA, TO THE EFFECT THAT UNCLAIMED WAGES ARISING OUT OF COST REIMBURSABLE TYPE CONTRACTS WITH THE UNITED STATES SHOULD BE REPORTED AND PAID TO THE STATE CONTROLLER.

IN THE PARTICULAR CIRCUMSTANCES, IT IS STATED IN THE CONCLUDING PARAGRAPH OF THE APRIL 15, 1968, LETTER THAT YOUR DEPARTMENT IS INCLINED TO THE VIEW AS EXPRESSED IN OUR 1945 DECISION THAT REIMBURSEMENT FOR UNCLAIMED WAGES AND OTHER UNCLAIMED AMOUNTS SHOULD CONTINUE TO BE DISALLOWED IN THE ABSENCE OF AN AUTHORITATIVE JUDICIAL DETERMINATION TO THE CONTRARY.

A COPY OF THE DEPARTMENTAL LETTER WAS FURNISHED TO THE DOUGLAS AIRCRAFT COMPANY AND THERE WAS SUBSEQUENTLY SUBMITTED ON THE COMPANY'S BEHALF A LETTER DATED AUGUST 22, 1968, FROM THE HONORABLE JOHN F. HASSLER,JUDGE OF THE MUNICIPAL COURT OF THE STATE OF CALIFORNIA, PASADENA, CALIFORNIA, WHO WAS THE DEPUTY ATTORNEY GENERAL FOR THE STATE OF CALIFORNIA AT THE TIME THE CASE OF DOUGLAS V CRANSTON WAS HEARD. JUDGE HASSLER'S LETTER INDICATES THAT THE STATE OF CALIFORNIA ORIGINALLY ASSERTED ENTITLEMENT TO UNCLAIMED WAGES ARISING OUT OF CONTRACTS BETWEEN DOUGLAS AND THE UNITED STATES; THAT JUSTICE TRAYNOR'S REMARKS, AS QUOTED IN THE LETTER OF APRIL 15, 1968, RELATED ONLY TO STIPULATED FACTS; THAT THE OFFICE OF THE STATE ATTORNEY GENERAL HAD BEEN ADVISED THAT UNCLAIMED WAGES WERE THE SUBJECT OF OFFSET CREDITS UNDER CONTRACTS BETWEEN DOUGLAS AND THE UNITED STATES AND THAT, WHILE IT WAS CONSIDERED THAT THE CALIFORNIA LAW DID NOT RELATE TO THOSE FUNDS, THE STATE OF CALIFORNIA DID MAINTAIN FULL ENTITLEMENT TO ALL UNCLAIMED WAGES WHICH WERE NOT AFFECTED BY THE CREDITS ALLOWED BY DOUGLAS UNDER ITS CONTRACTS WITH THE UNITED STATES BEFORE THE ADOPTION IN THE YEAR 1959 OF THE UNIFORM DISPOSITION OF UNCLAIMED PROPERTY ACT BY THE STATE OF CALIFORNIA.

THE 1959 CALIFORNIA LAW CONCERNING THE DISPOSITION OF UNCLAIMED PROPERTY DOES NOT SPECIFICALLY EXEMPT TRANSACTIONS BETWEEN A CALIFORNIA CONTRACTOR AND THE UNITED STATES, AND THE FACT THAT THE CALIFORNIA LEGISLATURE DID NOT INTEND THAT ANY SUCH EXEMPTION WOULD BE AVAILABLE SEEMS TO BE FAIRLY EVIDENT FROM THE CONCURRENT STATUTE CITED BY JUDGE HASSLER (SECTION 1600 THROUGH SECTION 1615, CALIFORNIA CODE OF CIVIL PROCEDURE), WHICH WAS ENACTED WITH A VIEW TOWARD FACILITATING THE DISCOVERY AND TRANSFER TO THE STATE OF CALIFORNIA FROM THE UNITED STATES OF UNCLAIMED PROPERTY IN THE CUSTODY OF ITS OFFICERS, DEPARTMENTS AND AGENCIES. IT WOULD THEREFORE APPEAR THAT THE STATE CONTROLLER WOULD NOT HAVE BEEN AUTHORIZED, AS A DISCRETIONARY MATTER, TO EXEMPT AN EMPLOYER FROM THE REQUIREMENTS OF REPORTING AND PAYING UNCLAIMED WAGES TO THE STATE OF CALIFORNIA SO FAR AS SUCH UNCLAIMED WAGES RELATED TO WORK PERFORMED UNDER COST-REIMBURSABLE TYPE CONTRACTS WITH THE UNITED STATES.

JUDGE HASSLER REFERRED TO PROPOSED FEDERAL LEGISLATION DURING RECENT YEARS DESIGNED FOR THE PURPOSE OF ENABLING THE STATES TO DISCOVER AND OBTAIN THE TRANSFER OF UNCLAIMED PROPERTY IN THE CUSTODY OF THE OFFICERS, DEPARTMENTS AND AGENCIES OF THE UNITED STATES. IT APPEARS THAT THE LATEST PROPOSED FEDERAL LEGISLATION ON THAT SUBJECT WAS INCLUDED IN SENATE BILL NO. S. 3503, 89TH CON., 2D SESS., INTRODUCED ON JUNE 15, 1966. JUDGE HASSLER STATED AS HIS OPINION THAT THE STATE OF CALIFORNIA HAS A VALID CLAIM AGAINST THE UNITED STATES FOR THE CREDITS GIVEN BY THE DOUGLAS AIRCRAFT COMPANY DURING AND PRIOR TO THE YEAR 1959 FOR UNCLAIMED WAGES ARISING OUT OF THE COMPANY'S COST REIMBURSABLE TYPE CONTRACTS WITH THE UNITED STATES. WE EXPRESS NO OPINION ON THAT QUESTION BUT THE RECORD BEFORE US DISCLOSES NO INDICATION THAT THE DOUGLAS AIRCRAFT COMPANY OR THE MCDONNELL DOUGLAS CORPORATION HAS QUESTIONED THE AUTHORITY OF THE CONTROLLER OF THE STATE OF CALIFORNIA TO REQUIRE REPORTS AND PAYMENTS WITHIN CERTAIN PERIODS OF TIME WITH RESPECT TO UNCLAIMED WAGES ACCRUED SINCE THE YEAR 1959 WHICH HAD BEEN EARNED BY EMPLOYEES WHOSE LAST KNOWN ADDRESSES ARE IN THE STATE OF CALIFORNIA, REGARDLESS OF WHETHER THE EMPLOYEES WORKED ON GOVERNMENT COST-REIMBURSABLE TYPE CONTRACTS.

WE AGREE THAT PARTIAL PAYMENTS MADE UNDER A COST-REIMBURSABLE TYPE CONTRACT ARE SUBJECT TO A SUBSEQUENT AUDIT IN DEPTH TO DETERMINE THE FINAL ALLOWABLE COSTS. WE DOUBT, HOWEVER, THAT IT COULD REASONABLY BE HELD THAT THE COST PRINCIPLES OF PARAGRAPH 15, PART 2, ASPR, NEED NOT BE INTERPRETED TO AUTHORIZE OR REQUIRE REIMBURSEMENT FOR UNCLAIMED WAGES, THE AMOUNTS OF WHICH HAVE BEEN AND WERE LEGALLY REQUIRED TO BE PAID TO STATE AUTHORITIES UNDER APPLICABLE ESCHEAT LAWS. IN OUR OPINION, SUCH PAYMENTS WOULD CLEARLY CONSTITUTE A PART OF THE TOTAL COST OF PERFORMING THE CONTRACT AND THEY WOULD ALSO MEET THE COST ALLOWABILITY STANDARDS OF REASONABLENESS, ALLOCABILITY AND APPLICATION, AS SET FORTH IN ASPR 15-201.2.

IN ASPR 15-201.3, IT IS STATED THAT A COST IS REASONABLE IF, IN ITS NATURE AND AMOUNT, IT DOES NOT EXCEED THAT WHICH WOULD BE INCURRED BY AN ORDINARILY PRUDENT PERSON IN THE CONDUCT OF COMPETITIVE BUSINESS, AND IT WOULD NOT SEEM REASONABLE TO DENY REIMBURSEMENT TO A CONTRACTOR FOR PAYMENTS MADE TO STATE AUTHORITIES AS REQUIRED UNDER ESCHEAT LAWS. CONTRACTOR MIGHT QUESTION THE APPLICATION OF A PARTICULAR ESCHEAT LAW BUT THERE APPEARS TO HAVE BEEN IN THIS CASE NO COMPELLING REASON WHY THE CONTRACTOR SHOULD HAVE TAKEN THE POSITION THAT THE 1959 CALIFORNIA LAW DOES NOT REQUIRE PAYMENTS TO BE MADE TO THE STATE CONTROLLER FOR UNCLAIMED WAGES DUE FOR WORK PERFORMED UNDER GOVERNMENTAL AND NONGOVERNMENTAL CONTRACTS EXCEPT TO THE EXTENT THAT SUCH UNCLAIMED WAGES INVOLVED PRIOR CREDITS GIVEN TO OTHER PARTIES AND POSSIBLE CLAIMS ON WHICH THE STATE STATUTE OF LIMITATIONS HAD RUN BEFORE THE EFFECTIVE DATE OF THE 1959 LAW. ALTHOUGH THE DOUGLAS AIRCRAFT COMPANY WAS NOT REQUIRED TO PAY AMOUNTS WHICH IT HAD PREVIOUSLY CREDITED TO THE UNITED STATES, THERE APPEARS TO HAVE BEEN NO BASIS UPON WHICH THE COMPANY COULD HAVE SUCCESSFULLY MAINTAINED THAT IT WAS NOT OBLIGATED TO PAY TO THE STATE CONTROLLER UNCLAIMED WAGES ARISING OUT OF THE PERFORMANCE OF CONTRACTS WITH THE UNITED STATES DURING PERIODS SUBSEQUENT TO THE YEAR 1959 WHEN THE PRACTICE OF ALLOWING OVERHEAD COST CREDITS FOR UNCLAIMED WAGES EARNED IN THE PERFORMANCE OF SUCH CONTRACTS WAS DISCONTINUED BECAUSE OF THE REPORTING AND PAYMENT REQUIREMENTS OF THE 1959 LAW.

IT IS ALSO OUR OPINION THAT THERE IS NO REASONABLE BASIS FOR ANY CONTENTION THAT, IF A CONTRACTOR HAS NOT BEEN REIMBURSED BY THE GOVERNMENT FOR UNCLAIMED WAGES, IT HAS NO UNCLAIMED WAGES IN ITS POSSESSION WHICH COULD ESCHEAT TO THE STATES. REGARDLESS OF THE STATUS OF AN ACCOUNT BETWEEN A CONTRACTOR AND THE GOVERNMENT, THE CONTRACTOR WOULD REMAIN LIABLE TO ITS EMPLOYEES FOR UNCLAIMED WAGES UNTIL SUCH TIME AS THE EMPLOYEES' RIGHTS PASSED TO THE STATES AND THE CONTRACTOR WOULD THEN BE REQUIRED TO REPORT AND PAY THE AMOUNTS INVOLVED TO THE STATES. SO LONG AS THE CONTRACTOR IS NOT INSOLVENT, THERE WOULD APPEAR TO BE NO SUBSTANTIAL BASIS FOR CONSIDERING THAT THE UNCLAIMED WAGES ARE NOT IN THE CONTRACTOR'S POSSESSION. WITH RESPECT, GENERALLY, TO THE DISPOSITION OF CLAIMS FOR AMOUNTS DUE EMPLOYEES OF A BANKRUPT CONCERN, SEE JOINT INDUSTRY BOARD V UNITED STATES, 391 U.S. 224.

AS WAS NOTED IN OUR LETTER OF FEBRUARY 26, 1968 (B-48063), THERE HAS BEEN A CHANGE IN THE CRITERIA FOR REIMBURSEMENT OF LABOR COSTS. OUR ORIGINAL DECISION OF MARCH 21, 1945, INVOLVED A CONTRACT WHICH LIMITED REIMBURSEMENT TO ACTUAL EXPENDITURES BY THE CONTRACTOR, WHILE CURRENT COST CRITERIA PERMIT REIMBURSEMENT FOR WAGES "PAID CURRENTLY OR ACCRUED * * * WHETHER PAID IMMEDIATELY OR DEFERRED.' EVEN UNDER THE FORMER COST CRITERIA WE BELIEVE THE GOVERNMENT IS OBLIGATED TO MAKE REIMBURSEMENTS FOR PREVIOUSLY UNCLAIMED AMOUNTS DUE EMPLOYEES AND OTHER CREDITORS OF THE CONTRACTOR AFTER THE CONTRACTOR HAS EITHER LOCATED AND PAID THE EMPLOYEES OR OTHER CREDITORS, OR HAS PAID THE UNCLAIMED AMOUNTS TO STATE AUTHORITIES AS UNCLAIMED PROPERTY SUBJECT TO ESCHEAT LAWS. TO THE EXTENT OUR 1945 DECISION WOULD PRECLUDE SUCH REIMBURSEMENTS IN THE ABSENCE OF AN AUTHORITATIVE JUDICIAL DETERMINATION TO THE CONTRARY, IT IS OVERRULED.

UNDER THE EXISTING CRITERIA OF REIMBURSABILITY FOR WAGES PAID OR ACCRUED THERE WOULD APPEAR TO BE NO JUSTIFICATION FOR POSTPONING REIMBURSEMENT UNTIL THE CONTRACTOR HAS ACTUALLY PAID UNCLAIMED WAGES OVER TO THE STATE UNDER ITS ESCHEAT LAWS. HOWEVER, AS INDICATED IN OUR LETTER OF FEBRUARY 26, 1968, IT IS CLEAR THAT THE GOVERNMENT WOULD BE ENTITLED TO RECOVER AND RETAIN THE AMOUNTS OF UNCLAIMED WAGES OR OTHER UNCLAIMED OBLIGATIONS OF A CONTRACTOR IN SITUATIONS WHERE THE PROSPECTIVE CLAIMANTS HAVE NOT BEEN SUBSEQUENTLY LOCATED AND PAID AND THEIR LAST KNOWN ADDRESSES ARE IN STATES WHICH DO NOT REQUIRE AN ACCOUNTING FOR UNCLAIMED PROPERTY AFTER THE EXPIRATION OF STATED PERIODS OF TIME.