B-71834, JANUARY 20, 1948, 27 COMP. GEN. 384

B-71834: Jan 20, 1948

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RETURN OF DEFECTIVE EQUIPMENT - APPLICATION OF CONTRACT CREDIT ALLOWANCE TO PURCHASE PRICE THE RETURN OF A DEFECTIVE BURNER UNDER A CONTRACT PROVIDING FOR A REPLACEMENT PURCHASE CREDIT BASED ON THE NUMBER OF DAYS OF THE GUARANTEE PERIOD THAT THE ORIGINAL BURNER WAS INOPERATIVE IS NOT TO BE CONSIDERED AS A TRADE-IN OF OLD EQUIPMENT CONTEMPLATED BY SECTION 8 OF THE ADMINISTRATIVE EXPENSE STATUTE OF AUGUST 2. IS A TRANSACTION WHEREBY A REDUCTION IS MADE IN THE CONTRACT PRICE OF THE SECOND BURNER. 1948: REFERENCE IS MADE TO YOUR LETTER DATED DECEMBER 4. TO WHICH IS ATTACHED CREDIT MEMORANDUM NO. 28418 OF THAT CORPORATION IN THE AMOUNT OF $57.75. IT IS STATED IN YOUR LETTER THAT SAID CONTRACT PROVIDES THAT BURNERS ARE GUARANTEED OPERATIVE FOR 100 CALENDAR DAYS AND THAT A PRO RATA PERCENTAGE OF THE PURCHASE PRICE IS ALLOWED UNDER THE CONTRACT AS A CREDIT FOR AN OLD BURNER WHICH IS TURNED IN AT THE TIME OF THE PURCHASE OF A NEW BURNER FOR EACH OF THE FIRST 100 DAYS THAT THE OLD BURNER IS NOT IN OPERATION.

B-71834, JANUARY 20, 1948, 27 COMP. GEN. 384

RETURN OF DEFECTIVE EQUIPMENT - APPLICATION OF CONTRACT CREDIT ALLOWANCE TO PURCHASE PRICE THE RETURN OF A DEFECTIVE BURNER UNDER A CONTRACT PROVIDING FOR A REPLACEMENT PURCHASE CREDIT BASED ON THE NUMBER OF DAYS OF THE GUARANTEE PERIOD THAT THE ORIGINAL BURNER WAS INOPERATIVE IS NOT TO BE CONSIDERED AS A TRADE-IN OF OLD EQUIPMENT CONTEMPLATED BY SECTION 8 OF THE ADMINISTRATIVE EXPENSE STATUTE OF AUGUST 2, 1946, AUTHORIZING APPLICATION OF THE PROCEEDS OF SALE OF OLD EQUIPMENT TOWARD THE PURCHASE OF NEW SIMILAR ITEMS, BUT, RATHER, IS A TRANSACTION WHEREBY A REDUCTION IS MADE IN THE CONTRACT PRICE OF THE SECOND BURNER, SO THAT THE APPROPRIATION NEED BE CHARGED ONLY WITH THE NET COST OF THE REPLACING BURNER AFTER DEDUCTION OF THE CREDIT ALLOWANCE.

ACTING COMPTROLLER GENERAL YATES TO W. H. BARRETT, DEPARTMENT OF COMMERCE, JANUARY 20, 1948:

REFERENCE IS MADE TO YOUR LETTER DATED DECEMBER 4, 1947 ( ACCTS JFB), ENCLOSING A VOUCHER STATED IN FAVOR OF THE OZALID DIVISION, GENERAL ANILINE AND FILM CORPORATION, FOR $143.75, TO WHICH IS ATTACHED CREDIT MEMORANDUM NO. 28418 OF THAT CORPORATION IN THE AMOUNT OF $57.75.

THE AFORESAID VOUCHER COVERS PAYMENT FOR THE PURCHASE OF ONE MODEL F. OZALID BURNER NO. 1402-B UNDER BUREAU OF FEDERAL SUPPLY CONTRACT NO. TPS- 75599, ITEM 18-M-303. IT IS STATED IN YOUR LETTER THAT SAID CONTRACT PROVIDES THAT BURNERS ARE GUARANTEED OPERATIVE FOR 100 CALENDAR DAYS AND THAT A PRO RATA PERCENTAGE OF THE PURCHASE PRICE IS ALLOWED UNDER THE CONTRACT AS A CREDIT FOR AN OLD BURNER WHICH IS TURNED IN AT THE TIME OF THE PURCHASE OF A NEW BURNER FOR EACH OF THE FIRST 100 DAYS THAT THE OLD BURNER IS NOT IN OPERATION. IT APPEARS THAT CREDIT MEMORANDUM NO. 28418 COVERS AN ALLOWANCE BY THE CONTRACTOR FOR 33 DAYS DURING WHICH AN OLD BURNER, OS/1136B, WAS NOT IN OPERATION.

THE QUESTION PRESENTED BY YOUR LETTER IS WHETHER THE APPROPRIATION FROM WHICH PAYMENT IS TO BE MADE, THAT IS, SALARIES AND EXPENSES, WEATHER BUREAU, 1947, MAY BE CREDITED WITH THE AMOUNT OF THE SAID CREDIT MEMORANDUM OR WHETHER THE AMOUNT OF THE CREDIT ALLOWANCE MUST BE DEPOSITED INTO THE GENERAL FUND OF THE TREASURY AS A MISCELLANEOUS RECEIPT. IN SUCH CONNECTION, YOU REQUEST TO BE ADVISED AS TO WHETHER THE OLD BURNER COULD BE CLASSIFIED AS A "LABOR SAVING DEVICE" UNDER THE PROVISIONS OF 41 U.S.C. 26, AND THE CREDIT ALLOWANCE APPLIED TO THE APPROPRIATIONS AND, IF NOT, WHETHER THE BURNER COULD BE CLASSIFIED AS "LABORATORY EQUIPMENT" UNDER THE PROVISIONS OF SECTION 8 OF PUBLIC LAW 600, DATED AUGUST 2, 1946.

IT IS UNDERSTOOD THAT THE PROVISION IN THE CONTRACT INVOLVED PERTAINING TO THE ALLOWANCE ON ACCOUNT OF BURNERS NOT OPERATING FOR A PERIOD OF 100 DAYS IS AS FOLLOWS:

EACH BURNER IS GUARANTEED FOR ONE HUNDRED (100) CALENDAR DAYS FOLLOWING THE DATE OF INSTALLATION. ANY BURNER FAILING PRIOR TO THE EXPIRATION DATE MAY BE RETURNED FOR A PRO RATA CREDIT ALLOWANCE AGAINST THE PURCHASE OF A NEW BURNER. FOR EXAMPLE, IF A BURNER FAILS ON THE 50TH CALENDAR DAY, THE REPLACEMENT BURNER WILL BE INVOLVED AT THE FULL PRICE OF THE NEW BURNER AND, UPON RECEIPT OF THE DEFECTIVE BURNER IN JOHNSON CITY, NEW YORK, A CREDIT OF 50 PERCENT OF THE PURCHASE PRICE WILL BE ALLOWED FOR THE UNEXPIRED 50 CALENDAR DAYS. BURNERS WHICH FAIL MUST BE RETURNED BY EXPRESS PREPAID--- INSURED AT FULL INVOICE VALUE--- TO OZALID, DIVISION OF GENERAL ANILINE AND FILM CORPORATION, JOHNSON CITY, NEW YORK, IN THE SPECIAL SHIPPING CASE PROVIDED. CREDIT ALLOWANCES ARE CONTINGENT UPON THE FOLLOWING: (A) BURNERS REACHING US IN A PHYSICALLY UNDAMAGED CONDITION. (B) YOUR HAVING PREVIOUSLY MAILED THE GUARANTEE INSURANCE CARD WHICH ACCOMPANIED THE BURNER. (C) YOUR MAILING US THE FAILURE REPORT CARD WITH THE REQUESTED INFORMATION AT THE TIME THE DEFECTIVE BURNER IS RETURNED.

IN 26 COMP. GEN. 730, IT WAS STATED THAT THE PURPOSE OF SECTION 8 OF PUBLIC LAW 600, 60 STAT. 808, REFERRED TO IN YOUR LETTER, WAS TO EXTEND TO ALL DEPARTMENTS HAVING AUTHORITY TO EXCHANGE EQUIPMENT OF THE TYPES DESCRIBED THEREIN THE AUTHORITY TO APPLY THE EXCHANGE ALLOWANCE OR THE PROCEEDS OF SALES OF SUCH EQUIPMENT TOWARD THE PURCHASE PRICE OF NEW EQUIPMENT. INCLUDED IN THE TYPES OF EQUIPMENT DESCRIBED IN PUBLIC LAW 600 ARE LABORATORY EQUIPMENT AND "OTHER ARTICLES OR ITEMS THE EXCHANGE OF WHICH IS AUTHORIZED BY LAW.' THE PROVISIONS OF SECTION 26, TITLE 41, U.S. CODE, CITED IN YOUR LETTER, ARE TO THE EFFECT THAT EXECUTIVE DEPARTMENTS AND OTHER GOVERNMENT ESTABLISHMENTS AND ALL BRANCHES OF THE PUBLIC SERVICE MAY EXCHANGE TYPEWRITERS, ADDING MACHINES, AND OTHER SIMILAR LABOR-SAVING DEVICES IN PART PAYMENT FOR NEW MACHINES USED FOR THE SAME PURPOSE AS THOSE PROPOSED TO BE EXCHANGED. IT DOES NOT APPEAR, HOWEVER, THAT THE OZALID, MODEL F, WHITEPRINT MACHINE, OR THE BURNER TO BE USED THEREIN, MAY BE CONSIDERED A LABOR-SAVING DEVICE SIMILAR TO A TYPEWRITER OR ADDING MACHINE. ALSO, SINCE THE PURPOSE FOR WHICH THE WHITEPRINT MACHINE HERE INVOLVED IS USED IS NOT DISCLOSED BY THE RECORD, IT IS NOT POSSIBLE TO DETERMINE IF IT MAY BE CLASSED AS LABORATORY EQUIPMENT.

HOWEVER, IT APPEARS THAT THE INSTANT TRANSACTION DOES NOT INVOLVE THE USUAL TRADE-IN OF OLD EQUIPMENT AS CONTEMPLATED BY SECTION 8 OF PUBLIC LAW 600. UNDER SAID PROVISION OF LAW, THE TRADE-IN ALLOWANCE REPRESENTS THE VALUE OF THE OLD EQUIPMENT WHICH, IN EFFECT, IS SOLD TO THE PURCHASER BY THE GOVERNMENT. HOWEVER, UNDER THE CONTRACT PROVISION HERE INVOLVED, QUOTED ABOVE, THERE IS NOT PRESENT A TRADE-IN OR SALE OF OLD EQUIPMENT BY THE GOVERNMENT BUT A TRANSACTION WHEREIN THE CONTRACTOR AGREES THAT, IN THE EVENT 100 DAYS' SERVICE IS NOT PROVIDED BY THE FIRST BURNER, A PRO RATA REDUCTION WILL BE MADE IN THE PRICE OF THE SECOND BURNER PURCHASED. SINCE, UNDER SUCH CONTRACT PROVISION, THE UNITED STATES IS OBLIGATED TO MAKE PAYMENT FOR THE NEW BURNER ONLY AT THE REDUCED PRICE, THE APPROPRIATION INVOLVED NEED BE CHARGED ONLY WITH THE NET COST OF THE PURCHASE AFTER DEDUCTING THE AMOUNT OF THE CREDIT MEMORANDUM.

THE VOUCHER, WHICH, TOGETHER WITH WITH THE CREDIT MEMORANDUM, IS RETURNED HEREWITH, MAY BE CERTIFIED FOR PAYMENT ON THAT BASIS, IF OTHERWISE CORRECT.