B-56712, APR 9, 1946

B-56712: Apr 9, 1946

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PRECIS-UNAVAILABLE THE SECRETARY OF THE NAVY: I HAVE YOUR LETTER OF MARCH 26. THE RESEARCH AND DEVELOPMENT WORK IS OF SUCH A NATURE AS NECESSARILY REQUIRES THE CONTEMPLATION OF CONTINUANCE OF THE WORK OVER A PERIOD OF YEARS. IF VALUABLE RESULTS ARE TO BE OBTAINED. "THE WORK IN QUESTION IS OF A HIGHLY SPECIALIZED NATURE AND IS GIVEN OUT TO THE CONTRACTORS ON THE BASIS OF THEIR EXPERTNESS AND FACILITIES IN HIGHLY SPECIALIZED FIELDS. IT IS DESIRED TO WRITE THE PROPOSED CONTRACTS IN SUCH FASHION AS WILL ENABLE THE NAVY TO CONTINUE TO CALL FOR THE SERVICES OF THE CONTRACTORS AND THEIR ORGANIZATIONS OVER AN EXTENDED PERIOD. IF AND WHEN APPROPRIATIONS ARE AVAILABLE AND THE NAVY DESIRES THE PROJECTED RESEARCH TO BE CONTINUED.

B-56712, APR 9, 1946

PRECIS-UNAVAILABLE

THE SECRETARY OF THE NAVY:

I HAVE YOUR LETTER OF MARCH 26, 1946, AS FOLLOWS:

"THE NAVY DEPARTMENT PROPOSES TO ENTER INTO CONTRACTS

WITH VARIOUS CONTRACTORS, IN PURSUANCE OF ITS PROGRAM OF

RESEARCH AND DEVELOPMENT, CALLING FOR SERVICES,

LABORATORIES, AND FACILITIES OF THE CONTRACTORS, FOR

RESEARCH AND DEVELOPMENT WORK ON A COST-PLUS-FIXED-FEE

BASIS. IN MANY INSTANCES, THE RESEARCH AND DEVELOPMENT

WORK IS OF SUCH A NATURE AS NECESSARILY REQUIRES THE

CONTEMPLATION OF CONTINUANCE OF THE WORK OVER A PERIOD

OF YEARS, IF VALUABLE RESULTS ARE TO BE OBTAINED.

"THE WORK IN QUESTION IS OF A HIGHLY SPECIALIZED

NATURE AND IS GIVEN OUT TO THE CONTRACTORS ON THE

BASIS OF THEIR EXPERTNESS AND FACILITIES IN HIGHLY

SPECIALIZED FIELDS. TO INSURE CONTINUOUS AVAILABILITY

OF THE CONTRACTORS FOR THE PROJECTED RESEARCH, AND

TO AVOID SUCH WASTE AS MUST NECESSARILY RESULT FROM

ANY SYSTEM WHICH COMPELS THE TERMINATION OF SUCH

RESEARCH WORK AT ARBITRARY INTERVALS OF TIME,

WITHOUT REGARD TO THE STATE OF PROGRESS OF THE RESEARCH,

IT IS DESIRED TO WRITE THE PROPOSED CONTRACTS IN SUCH

FASHION AS WILL ENABLE THE NAVY TO CONTINUE TO CALL

FOR THE SERVICES OF THE CONTRACTORS AND THEIR

ORGANIZATIONS OVER AN EXTENDED PERIOD, IF AND WHEN

APPROPRIATIONS ARE AVAILABLE AND THE NAVY DESIRES THE

PROJECTED RESEARCH TO BE CONTINUED. SHORT OF SOME

SUCH ARRANGEMENT, IT WOULD BE DIFFICULT FOR THE NAVY

TO PLAN AND CARRY OUT ANY CONTINUOUS RESEARCH PROGRAM.

"TO THIS END, A PROPOSED FORM OF CONTRACT HAS BEEN

DRAWN UP, WITH THE PURPOSE IN MIND OF GIVING THE NAVY,

IN EFFECT, AN OPTION TO CALL FOR CONTINUATION OF

PROJECTED RESEARCH AND DEVELOPMENT WORK UNDER THE

CONTRACT, IF IT DEEMS SUCH CONTINUANCE FOR THE BEST

INTERESTS OF THE NAVY, WITHOUT OBLIGATING FUTURE

APPROPRIATIONS OR EXCEEDING CURRENT APPROPRIATIONS,

THAT IS, WITHOUT OBLIGATING THE NAVY TO CONTINUANCE

OF THE WORK, IN THE EVENT NO FUTURE APPROPRIATIONS

ARE AVAILABLE, OR IN THE EVENT THAT THE NAVY BELIEVES

CONTINUANCE OF THE WORK IS NOT TO ITS BEST INTERESTS,

OR IN ANY EVENT. THE USUAL CONSIDERATIONS GOVERNING

SUPPLY CONTRACTS ARE NOT APROPOS BECAUSE THE SERVICES

OF THE CONTRACTORS UNDER THE PROPOSED CONTRACTS ARE

UNIQUE AND CANNOT BE DUPLICATED IN THE OPEN MARKET,

AND BECAUSE COMPENSATION IS ON A COST-PLUS-FIXED-FEE

BASIS.

"THE PORTIONS OF THE PROPOSED FORM OF CONTRACT

PERTINENT TO THE QUESTION AT HAND ARE QUOTED

HEREINAFTER FROM A SAMPLE:

"'APPROPRIATION: REIMBURSEMENT SHALL BE MADE FROM

1761502.004, AVIATION NAVY, 1946, ACCOUNT 46860, NOT

EXCEEDING $200,000. THIS AMOUNT SHALL NOT BE

EXCEEDED UNTIL CONTRACT IS AMENDED TO PROVIDE

ADDITIONAL FUNDS, AND THE PAYMENT OF ANY ADDITIONAL

AMOUNTS SHALL BE SUBJECT TO THE LIMITATIONS OF

AVAILABLE APPROPRIATIONS.

TOTAL ESTIMATED COST - $2,657,550.00'

"'SECTION 1. SCOPE OF CONTRACT.

"'DURING THE PERIOD OF THIS CONTRACT AND TO THE

EXTENT OF THE TOTAL ESTIMATED COST SET FORTH HEREIN,

THE CONTRACTOR SHALL *** SUPPLY THE NECESSARY

FACILITIES, SCIENTISTS, PHYSICISTS, SKILLED TECHNICIANS,

CHEMISTS, ENGINEERS, LABORERS AND OTHERS, AND MATERIAL

NECESSARY *** TO CONDUCT WITH DISPATCH THE TASKS

ASSIGNED UNDER THE CONTRACT FROM TIME TO TIME. ***'

"'SECTION 2. COMPENSATION AND PAYMENT.

"'IT IS ESTIMATED THAT THE TOTAL COST TO THE

GOVERNMENT FOR FULL PERFORMANCE OF THIS CONTRACT WILL

NOT EXCEED $2,657,550, INCLUDING THE CONTRACTOR'S

FIXED FEE AS HEREINAFTER PROVIDED. THE CONTRACTOR

AGREES TO USE ITS BEST EFFORTS TO ACCOMPLISH PERFORMANCE

OF THE WORK INVOLVED WITHIN THE SAID ESTIMATE, BUT

NEITHER THE GOVERNMENT NOR THE CONTRACTOR GUARANTEES THE

ACCURACY OF SUCH ESTIMATE OR COST. IF THE AMOUNTS

PAYABLE TO THE CONTRACTOR HEREUNDER SHALL HAVE EQUALED

SUCH FUNDS AS HAVE BEEN APPROPRIATED AND APPORTIONED

TO THIS CONTRACT, OR THE TOTAL ESTIMATED COST,

WHICHEVER IS LESS, THE CONTRACTOR SHALL NOT BE

REQUIRED TO CONTINUE THE PERFORMANCE UNDER THE CONTRACT

UNLESS AND UNTIL THE CONTRACT IS AMENDED TO INCREASE

THE APPROPRIATED FUNDS APPORTIONED TO THE CONTRACT,

OR THE TOTAL ESTIMATED COST, AS THE CASE MAY BE.

"'(A) THE GOVERNMENT SHALL PAY TO THE CONTRACTOR AS

FULL COMPENSATION FOR THE PERFORMANCE OF THIS CONTRACT:

"'(1) A FIXED FEE OF $10,000, PAYABLE JUNE 30,

1946, WHICH SHALL BE PAID FROM THE INITIAL AMOUNT OF

$200,000 APPORTIONED TO THIS CONTRACT. WHEN AND IF

THE CONTRACT IS AMENDED TO PROVIDE ADDITIONAL AMOUNTS,

OUT OF CURRENTLY AVAILABLE APPROPRIATIONS, PROVISION

WILL BE MADE, IN THE AMENDMENT, FOR A FIXED FEE

EQUAL TO $50.00 PER $1000.00 OF THE ESTIMATED COST OF

THE WORK FOR WHICH APPROPRIATIONS ARE AVAILABLE AND

APPORTIONED TO THIS CONTRACT, THE AMOUNT OF THE FIXED

FEE TO BE INCLUDED IN THE AMOUNT OF THE ESTIMATED

COST. ***'

"'SECTION 4. DURATION AND DELIVERIES.

"'THIS CONTRACT SHALL COVER THE PERIOD FROM 1

FEBRUARY 1946 UNTIL 1 JULY 1949. IT IS ESTIMATED

THAT THE FIRST TEST MODEL WILL BE AVAILABLE FOR

DELIVERY 36 MONTHS AFTER THE DATE OF THIS CONTRACT

AND THE SECOND TEST MODEL 38 MONTHS AFTER THE DATE

OF THIS CONTRACT.'

"'SECTION 11. TERMINATION.

"'THIS IS THE UNIFORM TERMINATION CLAUSE PRESCRIBED

BY NAVY PROCUREMENT DIRECTIVE 16211 AND PROVIDES IN

PART: "THE PERFORMANCE OF WORK UNDER THIS CONTRACT

MAY BE TERMINATED BY THE GOVERNMENT IN WHOLE, OR FROM

TIME TO TIME IN PART, WHENEVER FOR ANY REASON THE

CONTRACTING OFFICER SHALL DETERMINE THAT SUCH TERMINATION

IS FOR THE BEST INTERESTS OF THE GOVERNMENT."

"'REVISED STATUTES, SECTION 3679 (31 USC, SEC. 665)

PROVIDE IN PART: "NO EXECUTIVE DEPARTMENT OR

OTHER GOVERNMENT ESTABLISHMENT OF THE UNITED STATES

SHALL EXPEND, IN ANY ONE FISCAL YEAR, ANY SUM IN

EXCESS OF APPROPRIATIONS MADE BY CONGRESS FOR THAT

FISCAL YEAR, OR INVOLVE THE GOVERNMENT IN ANY CONTRACT

OR OTHER OBLIGATION FOR THE FUTURE PAYMENT OF MONEY

IN EXCESS OF SUCH APPROPRIATIONS UNLESS SUCH CONTRACT

OR OBLIGATION IS AUTHORIZED BY LAW."

"'REVISED STATUTES, SECTION 3732 (41 USC, SEC. 11)

PROVIDE IN PART: "NO CONTRACT OR PURCHASE ON BEHALF

OF THE UNITED STATES SHALL BE MADE UNLESS THE SAME

IS AUTHORIZED BY LAW OR IS UNDER AN APPROPRIATION

ADEQUATE TO ITS FULFILLMENT."

"YOUR DECISION IS REQUESTED AS TO WHETHER THE

PROPOSED CONTRACTS ARE VIOLATIVE OF THE STATUTORY

PROHIBITIONS QUOTED, OR ANY OTHER PROVISIONS OF LAW."

IT MAY BE SAID GENERALLY THAT WHERE A VALID CONTRACT IS ENTERED INTO DURING A FISCAL YEAR FOR A NEED WHICH AROSE DURING THAT FISCAL YEAR THE APPROPRIATION CURRENT AT THAT TIME PROPERLY IS CHARGEABLE WITH THE COST OF PERFORMANCE OF THE CONTRACT, NOTWITHSTANDING PERFORMANCE MAY EXTEND INTO THE NEXT FISCAL YEAR. 21 COMP.DEC. 822; 27 ID. 640; 18 COMP.GEN. 363; AND 22 ID. 156. THIS RULE HAS BEEN HELD TO BE APPLICABLE IN CASES AS TO WHICH THERE IS A DEFINITE DETERMINATION WITH RESPECT TO THE TIME THE PUBLIC FUNDS BECAME OBLIGATED FOR THE PAYMENT OF A PARTICULAR LIABILITY, REGARDLESS OF WHETHER THE AMOUNT IS, OR IS NOT, DEFINITE AND CERTAIN AT THE TIME. 18 COMP.GEN. 363, SUPRA. HOWEVER, THIS RULE WOULD NOT BE FOR APPLICATION TO A CONTRACT SUCH AS IS HERE INVOLVED WHICH IS SUSCEPTIBLE OF DIVISION AND APPORTIONMENT FROM YEAR TO YEAR DEPENDING UPON THE AVAILABILITY OF APPROPRIATED FUNDS AND AGREEMENTS OF THE PARTIES. SEE 10 COMP.DEC. 284; AND 17 C.J.S. 785, ET SEQ. ALSO, SEE LEITER V. UNITED STATES, 271 U.S. 204, AND GOODYEAR CO. V. UNITED STATES, 276 U.S. 287.

IN ADDITION TO SECTIONS 3679 AND 3732, REVISED STATUTES, CITED IN YOUR LETTER ABOVE, YOUR ATTENTION IS INVITED TO SECTION 3690, REVISED STATUTES, 31 U.S.C.A. 712, WHICH PROVIDES, AS FOLLOWS:

"EXCEPT AS OTHERWISE PROVIDED BY LAW, ALL BALANCES

OF APPROPRIATIONS CONTAINED IN THE ANNUAL APPROPRIATION

BILLS AND MADE SPECIFICALLY FOR THE SERVICE OF ANY FISCAL

YEAR, AND REMAINING UNEXPENDED AT THE EXPIRATION OF SUCH

FISCAL YEAR, SHALL ONLY BE APPLIED TO THE PAYMENT

OF EXPENSES PROPERLY INCURRED DURING THAT YEAR, OR TO

THE FULFILLMENT OF CONTRACTS PROPERLY

MADE WITHIN THAT YEAR; AND BALANCES NOT NEEDED FOR

SUCH PURPOSES SHALL BE CARRIED TO THE SURPLUS

FUND. THIS SECTION, HOWEVER, SHALL NOT APPLY TO

APPROPRIATIONS KNOWN AS PERMANENT OR INDEFINITE

APPROPRIATIONS."

IT IS MANIFEST THAT THE PURPORT OF THESE SECTIONS OF THE REVISED STATUTES IS THAT, UNLESS OTHERWISE AUTHORIZED, THE GOVERNMENT MAY NOT BE COMMITTED BY CONTRACT OR PURCHASE BEYOND THE EXTENT AND AVAILABILITY OF APPROPRIATIONS.

HOWEVER, IT IS UNDERSTOOD FROM YOUR LETTER THAT THE FORM OF CONTRACT PROPOSED FOR USE BY THE NAVY DEPARTMENT IN CARRYING OUT ITS PROGRAM OF RESEARCH AND DEVELOPMENT WOULD SPECIFICALLY PROVIDE FOR PAYMENT TO THE CONTRACTOR ON A COST-PLUS-A-FIXED-FEE BASIS; THAT THE AMOUNT OF FUNDS APPORTIONED TO THE CONTRACT FOR EXPENDITURE DURING THE FISCAL YEAR 1946, WILL NOT BE EXCEEDED UNTIL THE CONTRACT IS AMENDED TO PROVIDE FOR THE APPORTIONMENT OF ADDITIONAL FUNDS FOR WORK PERFORMED DURING SAID FISCAL YEAR; AND THAT PAYMENT OF ADDITIONAL AMOUNTS DURING SUBSEQUENT FISCAL YEARS WILL BE SUBJECT TO THE LIMITATIONS OF AVAILABLE APPROPRIATIONS AND TO APPORTIONMENT OF ADDITIONAL AMOUNTS TO THE CONTRACT. THE RESERVATION BY THE GOVERNMENT OF A RIGHT TO AMEND THE CONTRACT TO PROVIDE FOR THE APPORTIONMENT OF ADDITIONAL FUNDS TO THE CONTRACT AND THE PROVISION THAT PAYMENT OF ANY ADDITIONAL AMOUNTS DURING SUBSEQUENT FISCAL YEARS SHALL BE SUBJECT TO THE LIMITATIONS OF AVAILABLE APPROPRIATIONS APPARENTLY WOULD PLACE THE GOVERNMENT UNDER NO OBLIGATION BEYOND THE CURRENT FISCAL YEAR 1946, UNLESS AND UNTIL AN APPROPRIATION IS MADE AND THE CONTRACT IS AMENDED TO PROVIDE FOR AN APPORTIONMENT OF ADDITIONAL FUNDS TO THE CONTRACT. UNDER SUCH FACTS AND CIRCUMSTANCES THE FORM OF CONTRACT WOULD NOT APPEAR TO VIOLATE THE PROVISIONS OF SECTIONS 3690 AND 3732, REVISED STATUTES, OR CONTRAVENE THE REQUIREMENT CONTAINED IN SECTION 3679, REVISED STATUTES, IN THAT IT WOULD NOT INVOLVE THE GOVERNMENT IN A CONTRACT FOR THE FUTURE PAYMENT OF MONEY "IN EXCESS OF APPROPRIATIONS MADE BY CONGRESS FOR THAT FISCAL YEAR."

ACCORDINGLY, I HAVE TO ADVISE THAT SHOULD IT BE DETERMINED ADMINISTRATIVELY TO BE IN THE BEST INTEREST OF THE GOVERNMENT TO ENTER INTO CONTRACTS ON THE BASIS PROPOSED, THIS OFFICE PERCEIVES NO LEGAL OBJECTION THERETO.