B-84005, APR 27, 1949

B-84005, APR 27, 1949

PRECIS-UNAVAILABLE

LIEUTENANT COLONEL ROY W. BARTLETT, F.D. U.S. ARMY:

THERE HAS BEEN RECEIVED BY REFERENCE FROM THE OFFICE OF THE CHIEF OF FINANCE YOUR FIRST INDORSEMENT DATED NOVEMBER 10, 1948, TRANSMITTED BUREAU VOUCHER NO. 1251, PROPOSING PAYMENT IN THE AMOUNT OF $79,257.82 TO THE PACKARD MOTOR CAR COMPANY, COST-PLUS-A-FIXED-FEE CONTRACTOR UNDER CONTRACT NO. W-33-038-AC-1850, WITH THE REQUEST THAT AN ADVANCE DECISION BE RENDERED AS TO WHETHER PAYMENT THEREON IS AUTHORIZED.

THE AMOUNT OF THE VOUCHER, REPRESENTING SALARY PAYMENTS MADE BY THE CONTRACTOR TO CERTAIN OF ITS EMPLOYEES WHO, DUE TO TARDINESS AND LEAVE TAKEN FOR PERSONAL REASONS WERE PAID FOR TIME WHEN NO WORK WAS PERFORMED, WAS PREVIOUSLY REIMBURSED TO THE CONTRACTOR BUT, AS A RESULT OF AN EXCEPTION TAKEN THERETO BY THE AUDIT DIVISION OF THE GENERAL ACCOUNTING OFFICE, THE SAID AMOUNT WAS SUBSEQUENTLY COLLECTED BY DEDUCTION FROM SUMS OTHERWISE DUE THE CONTRACTOR. THE EXCEPTION WAS ISSUED FOR THE PURPOSE OF REQUIRING THE CONTRACTOR TO FURNISH A STATEMENT REGARDING ITS COMPANY-WIDE POLICIES WITH RESPECT TO LEAVE AND TARDINESS.

THE CONTRACT PROVIDES GENERALLY FOR THE FURNISHING OF ENGINEERING AND DEVELOPMENTAL WORK IN CONNECTION WITH THE MANUFACTURE AND DELIVERY OF ROLLS-ROYCE ENGINES, INCONSIDERATION OF THE PAYMENT OF THE FIXED FEE PROVIDED FOR THEREIN AND REIMBURSEMENT FOR THE COST INCURRED IN THE PERFORMANCE OF THE CONTRACT. ARTICLE 3(B) OF THE CONTRACT PROVIDES THAT FOR PURPOSES OF DETERMINING THE AMOUNTS PAYABLE TO THE CONTRACTOR, ALLOWABLE ITEMS OF COST WILL BE DETERMINED BY THE CONTRACTING OFFICER IN ACCORDANCE WITH REGULATIONS FOR THE DETERMINATION OF THE COST OF PERFORMING A CONTRACT AS PROMULGATED BY TREASURY DECISION 5000, APPROVED BY THE SECRETARY OF WAR, AUGUST 2, 1940.

SECTION 26.9 OF T.D. 5000 IS, IMPERTINENT PART, AS FOLLOWS:

"SEC 26.9. COST OF PERFORMING A CONTRACT OR SUBCONTRACT.-- (A) GENERAL RULE.-- THE COST OF PERFORMING A PARTICULAR CONTRACTOR SUBCONTRACT SHALL BE THE SUM OF (1) THE DIRECT COSTS, INCLUDING THEREIN EXPENDITURES FOR MATERIALS, DIRECT LABOR AND DIRECT EXPENSES, INCURRED BY THE CONTRACTING PARTY IN PERFORMING THE CONTRACT OR SUBCONTRACT; AND (2) THE PROPER PROPORTION OF ANY INDIRECT COSTS (INCLUDING THEREIN A REASONABLE PROPORTION OF MANAGEMENT EXPENSES) INCIDENT TO AND NECESSARY FOR THE PERFORMANCE OF THE CONTRACT OR SUBCONTRACT. * * * * *

"(G)-(4) OTHER EXPENSES-- MISCELLANEOUS OFFICE AND ADMINISTRATIVE EXPENSES, *** EMPLOYEES' WELFARE EXPENSES; *** PENSIONS AND RETIREMENT PAYMENTS TO ADMINISTRATIVE OFFICE EMPLOYEES ***."

IN SUPPORT OF ITS CLAIM FOR REIMBURSEMENT, THE CONTRACTOR IN A LETTER DATED OCTOBER 13, 1948, STATES THAT THE EXCEPTION WAS TAKEN BY THE GENERAL ACCOUNTING OFFICE ON THE THEORY THAT A CONTRACTOR OPERATING UNDER A COST- PLUS-A-FIXED-FEE CONTRACT IN ONE STATE, IN WHICH IT IS ENGAGED SOLELY IN EXPERIMENTATION, MUST MAINTAIN THE SAME POLICY WITH RESPECT TO LEAVE AND TARDINESS UNDER THAT CONTRACT THAT IT HAS IN FORCE IN ITS PRIVATELY-OWNED AUTOMOBILE PLANT OPERATED IN AN ADJOINING STATE ON A MASS PRODUCTION BASIS; THAT THERE IS NO REQUIREMENT IN THE CONTRACT INVOLVED OR IN LAW THAT, UNDER SUCH CIRCUMSTANCES, AN IDENTICAL POLICY MUST BE APPLIED TO ALL SALARIED EMPLOYEES, IRRESPECTIVE OF THE PLACE OF THEIR EMPLOYMENT; AND THAT WHILE THE CONTRACTOR'S TOLEDO PLANT HAS BEEN OPERATED SINCE NOVEMBER 1946, UNDER A WRITTEN SALARY POLICY APPROVED BY THE CONTRACTING OFFICER, THE DETROIT PLANT, WHICH IS ENGAGED IN THE PRODUCTION OF AUTOMOBILES, HAS FUNCTIONED WITHOUT THE PROMULGATION OF ANY WRITTEN POLICY AS TO LEAVE AND TARDINESS OF SALARIED EMPLOYEES.

IN LETTER OF OCTOBER 22, 1948, THE CONTRACTING OFFICER STATES "THE CONTRACTING OFFICER ADOPTS THE STATEMENTS IN PACKARD'S LETTER AS HIS OWN IN TOTAL."

WHILE IT NOW HAS BEEN ESTABLISHED THAT THE CONTRACTOR DOES NOT HAVE A WRITTEN COMPANY-WIDE POLICY WITH RESPECT TO LEAVE AND TARDINESS IT APPEARS THAT THE CONTRACTOR UNDER DATE OF AUGUST 10, 1945, PROPOSED SUCH A WRITTEN POLICY TO BE PUT ONTO EFFECT AT ITS PLANTS AT TOLEDO, OHIO, AND WILLOW RUN, MICHIGAN. WITH MINOR CHANGES THE POLICY WAS APPROVED BY THE CONTRACTING OFFICER FOR THE TOLEDO, OHIO PLANT ON MARCH 11, 1947, EFFECTIVE AS OF JANUARY 2, 1947.

UNDER THE TERMS OF THE CONTRACT THE CONTRACTOR IS ENTITLED TO REIMBURSEMENT FOR SALARY PAYMENTS TO ITS EMPLOYEES AND, SUCH PAYMENTS ORDINARILY INCLUDE-- IN ADDITION TO COMPENSATION AT A FIXED RATE FOR TIME ACTUALLY WORKED-- OTHER AMOUNTS FOR WHICH NO CORRESPONDING SERVICES ARE PERFORMED, AS FOR EXAMPLE, VACATION AND SICK LEAVE PAY. SEE 23 COMP.GEN. 621.

IN VIEW OF THE FOREGOING, AND SINCE THE RECORD SHOWS THAT THE CONTRACTING OFFICER'S APPROVAL OF THE WRITTEN POLICIES FOR THE CONTRACTOR'S TOLEDO AND WILLOW RUN PLANTS WAS GIVEN ON THE BASIS THAT SUCH POLICIES WERE REASONABLE, THIS OFFICE IS NOT REQUIRED TO OBJECT TO REIMBURSEMENTS FOR SALARY PAYMENTS MADE IN ACCORDANCE THEREWITH.

ACCORDINGLY, THE VOUCHER, TOGETHER WITH THE SUPPORTING PAPERS, IS RETURNED HEREWITH, AND YOU ARE ADVISED THAT PAYMENT THEREON IS AUTHORIZED, IF OTHERWISE CORRECT.