SEPTEMBER 6, 1921, 1 COMP. GEN. 115

SEPTEMBER 6, 1921, 1 COMP. GEN. 115

SUPPLEMENTAL CONTRACTS - FISCAL YEAR APPROPRIATION CHARGEABLE WITH PRICE OF GASOLINE ORDERED LATE IN JUNE THE WELL-ESTABLISHED RULE OF LAW THAT THE AMENDMENT, MODIFICATION, OR SUPPLEMENT OF A GOVERNMENT CONTRACT MUST BE IN THE INTEREST OF THE UNITED STATES, IS COMPLIED WITH IF THERE IS AN ACTUAL SAVING IN MONEY TO THE GOVERNMENT, REGARDLESS OF THE FACT THAT THE PURCHASE PRICE OF A COMMODITY MAY BE INCREASED; HENCE, CONTRACTS FOR FURNISHING GASOLINE TO THE GOVERNMENT FIXING A CERTAIN PRICE PER GALLON AND SPECIFYING CERTAIN METHODS OF DELIVERY MAY BE SUPPLEMENTED BY INCREASING THE PRICE PER GALLON, IF THE METHOD OF DELIVERY IS SO CHANGED AS TO NET THE GOVERNMENT AN ACTUAL SAVING. WHERE CONTRACTS FOR DELIVERY OF LARGE QUANTITIES OF GASOLINE WERE ENTERED INTO LATE IN JUNE, 1921, PROVIDING FOR DELIVERY IN MONTHLY INSTALLMENTS OVER A PERIOD OF EIGHT MONTHS DURING THE FISCAL YEAR 1922, IT IS APPARENT THAT THE GASOLINE WAS REQUIRED FOR THE CURRENT MONTHLY NEEDS OF THE SERVICE FOR THE FISCAL YEAR 1922, AND THE PURCHASE PRICE MUST BE CHARGED TO THE APPROPRIATIONS FOR THAT YEAR.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF WAR, SEPTEMBER 6, 1921:

BY LETTER DATED AUGUST 31, YOU TRANSMIT A CONTRACT WITH THE MIDCO OIL CO. DATED JUNE 27, 1921, THE DRAFT OF A PROPOSED AGREEMENT SUPPLEMENTAL THERETO AND CERTAIN OTHER PAPERS AND REQUEST AN OPINION "AS TO THE LEGALITY OF THE PROPOSED SUPPLEMENTAL AGREEMENT IN ALL ITS PHASES IN ORDER TO BIND THE UNITED STATES AND THE CONTRACTOR IN ITS PERFORMANCE AS WRITTEN, AND THE DISBURSEMENT OF FUNDS IN THE SETTLEMENT OF THE DELIVERIES PROVIDED FOR THEREIN FROM THE APPROPRIATION "AIR SERVICE, ARMY, 1921.'"

IN REPLY I HAVE TO ADVISE THAT IT IS NO PART OF THE DUTY OF THIS OFFICE TO CONSTRUE PROVISIONS IN, OR RENDER OPINIONS AS TO THE LEGALITY OF, PROPOSED CONTRACTS, AND NOTHING THAT MAY BE SAID HEREIN IS TO BE INTERPRETED AS PREVENTING THE GENERAL ACCOUNTING OFFICE FROM HAVING AND EXERCISING ENTIRE FREEDOM OF ACTION IN PASSING UPON ANY ACCOUNT OR CLAIMS THAT MAY HEREAFTER COME BEFORE IT INVOLVING ANY PAYMENTS UNDER THE CONTRACT OF JUNE 27, 1921, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO.

THE CONTRACT DATED JUNE 27, 1921, PROVIDED FOR THE FURNISHING OF GASOLINE FOR DELIVERY IN CONTRACTOR'S TANK CARS AT VARIOUS FLYING FIELDS THROUGHOUT THE UNITED STATES AT STIPULATED PRICES PRESUMED TO BE BASED ON THE PRICE OF 15 7/8 CENTS PER GALLON AT THE REFINERY PLUS AN AMOUNT SUFFICIENT TO COVER COST OF DELIVERY, THE FIXED PRICES RANGING FROM 18 1/4 CENTS FOR DELIVERY AT POST FIELD, OKLA., AND SCOTT FIELD, ILL., TO 25 CENTS FOR DELIVERIES TO FIELDS IN CALIFORNIA.

THE CONTRACTOR'S PROPOSAL ON WHICH THE CONTRACT WAS BASED QUOTED A PRICE OF 19 CENTS IN GOVERNMENT TANK CARS AND 15 7/8 CENTS IN CONTRACTOR'S TANK CARS, F.O.B. REFINERY, IN ADDITION TO THE DELIVERED PRICES IN CONTRACTOR'S TANK CARS AT THE VARIOUS FLYING FIELDS HEREINBEFORE REFERRED TO. THE CONTRACTOR'S BID WAS ACCEPTED AND CONTRACT AWARDED AT THE DELIVERED PRICES FOR QUANTITIES AGGREGATING 2,439,000 GALLONS FOR DELIVERY AT 14 DIFFERENT FIELDS, AND FOR 419,250 GALLONS TO BE DELIVERED IN THE CONTRACTOR'S TANK CARS AT THE REFINERY AT 15 7/8 CENTS, BUT THE GOVERNMENT EXPRESSLY RESERVED THE RIGHT TO ACCEPT ANY QUANTITY F.O.B. REFINERY IN GOVERNMENT'S TANK CARS AT 19 CENTS.

IT APPEARS THAT ALTHOUGH THE GASOLINE WAS REQUIRED AND PURCHASED FOR THE AIR SERVICE THE CONTRACT WAS MADE BY THE QUARTERMASTER CORPS AND THAT AFTER THE CONTRACT WAS EXECUTED THE AIR SERVICE ADVISED THE QUARTERMASTER GENERAL THAT THERE WERE NO STORAGE FACILITIES AT THE FLYING FIELDS TO WHICH DELIVERIES ARE TO BE MADE UNDER THE CONTRACT AND THAT THEREFORE THE TANK CARS CAN BE UNLOADED ONLY AS THE GASOLINE IS USED FROM DAY TO DAY, THUS ENTAILING LARGE AND EXTRAORDINARY EXPENDITURES TO COVER THE COST OF DEMURRAGE AND STORAGE FOR THE DETENTION OF THE CONTRACTOR'S TANK CARS IN WHICH DELIVERY IS MADE. IT IS DUE TO THIS ALLEGED CONDITION THAT THE SUPPLEMENTAL AGREEMENT IS PROPOSED TO PROVIDE FOR DELIVERIES IN GOVERNMENT TANK CARS INSTEAD OF IN CONTRACTOR'S TANK CARS, THE PRICE STIPULATED IN THE PROPOSED SUPPLEMENTAL AGREEMENT FOR DELIVERIES AGGREGATING 2,439,00 GALLONS AT THE 14 STATIONS RANGING FROM 20.6 CENTS FOR DELIVERY AT CHANUTE FIELD, ILL., TO 27.1 CENTS FOR DELIVERY AT CARLSTROM FIELD, FLA., AND ARE ALLEGED TO BE BASED ON THE REFINERY PRICE OF 18 CENTS PER GALLON IN GOVERNMENT TANK CARS (NOT 19 CENTS AS PROVIDED IN THE ORIGINAL CONTRACT), PLUS TRANSPORTATION CHARGES. I MAY STATE HERE THAT THERE IS A DISCREPANCY IN THE STATEMENT OF THE PRICE IN SEVERAL CASES IN THE PROPOSED SUPPLEMENTAL AGREEMENT, FOR STANCE,"TWENTY-SEVEN AND 1/100 CENTS ($0.271) PER GALLON," WHICH EVIDENTLY WAS INTENDED TO BE ,TWENTY SEVEN AND 1/10 ($0.271) PER GALLON. WITH REFERENCE TO THE REMAINDER, CONSISTING OF 419,250 GALLONS, PROVISION IS MADE FOR DELIVERY AS FOLLOW:

F.O.B. DESTINATIONS TO BE NAMED BY THE CONTRACTING OFFICER, IN GOVERNMENT TANK CARS, TO BE FURNISHED BY THE CONTRACTING OFFICER AT CONTRACTOR'S REFINERIES AT A NET PRICE PER GALLON MADE UP ON A BASIS OF EIGHTEEN (?18) CENTS F.O.B. CARS AT LOADING POINTS PLUS ACTUAL FREIGHT RATE TO DESTINATION. CONTRACTOR'S INVOICES WILL INDICATE FREIGHT RATE USED IN COMPUTING UNIT PRICE AT DESTINATION. THE WORD "DESTINATION" AS USED HEREIN SHALL BE CONSTRUED TO MEAN GOVERNMENT SIDING AT FIELD WHERE CARS ARE UNLOADED.

THE PROPOSED SUPPLEMENTAL AGREEMENT ALSO CONTAINS A RESERVATION AS FOLLOWS:

THE GOVERNMENT RESERVES THE RIGHT TO ACCEPT ANY QUANTITY F.O.B. REFINERY IN GOVERNMENT TANK CARS AT EIGHTEEN (?18) CENTS PER GALLON, ORIN CONTRACTOR'S TANK CARS F.O.B. REFINERY AT FIFTEEN AND SEVEN EIGHTHS (15 7/8 ( CENTS PER GALLON OR F.O.B. ANY OTHER DESTINATION HEREAFTER DESIGNATED BY THE CONTRACTING OFFICER AT A UNIT PRICE PER GALLON AT DESTINATION ESTABLISHED ON THE BASIS OF THE PRICES HEREINBEFORE MENTIONED F.O.B. REFINERY, IN EITHER CONTRACTOR'S OR GOVERNMENT TANK CARS, PLUS FREIGHT RATE TO DESTINATION.

THE REASON ASSIGNED BY THE CONTRACTOR FOR QUOTING A LOWER PRICE FOR DELIVERY IN ITS OWN TANK CARS THAN FOR DELIVERY IN GOVERNMENT TANK CARS IS THAT BY THE USE OF ITS OWN TANK CARS IT WOULD RECEIVE FROM THE CARRIER FOR SUCH USE A DRAWBACK OR PAYMENT AMOUNTING TO 3 CENTS PER MILE ON THE MOVEMENT OF LOADED CARS. IT IS ALSO ALLEGED THAT THE GOVERNMENT WOULD RECEIVE A LIKE DRAWBACK FOR THE USE OF ITS TANK CARS AND THAT CONSIDERING THIS ITEM, TOGETHER WITH THE DEMURRAGE RESULTING FROM THE NECESSARY DETENTION OF CONTRACTOR'S TANK CARS WHEN DELIVERIES ARE MADE THEREIN, THE PROPOSED SUPPLEMENTAL AGREEMENT, EVEN WITH THE INCREASED PRICES STIPULATED THEREIN, WILL BE IN THE INTEREST OF THE UNITED STATES AND RESULT IN A CONSIDERABLE SAVING IN MONEY OVER THE ORIGINAL CONTRACT. IF SUCH ARE THE FACTS, AND OF COURSE THIS OFFICE CAN ASSUME NO RESPONSIBILITY FOR THE CORRECTNESS OF THE ALLEGATIONS OR THE EXISTENCE OF THE FACTS, I DO NOT UNDERSTAND WHY THERE SHOULD HAVE BEEN ANY DOUBT AS TO THE AUTHORITY TO ENTER INTO A SUPPLEMENTAL AGREEMENT, BECAUSE IT IS TOO WELL ESTABLISHED TO REQUIRE THE CITATION OF AUTHORITIES THAT A GOVERNMENT CONTRACT ALWAYS CAN BE AMENDED, MODIFIED, OR SUPPLEMENTED BY THE CONTRACTING OFFICER WITH THE CONSENT OF THE CONTRACTOR WHEN SUCH AMENDMENT, MODIFICATION, OR SUPPLEMENT IS CLEARLY IN THE INTEREST OF THE UNITED STATES.

THE PROPOSED SUPPLEMENTAL AGREEMENT PURPORTS TO COVER THE ENTIRE PURCHASE, ALTHOUGH DELIVERIES UNDER THE ORIGINAL CONTRACT WERE TO BE MADE IN EQUAL MONTHLY INSTALLMENTS BEGINNING JULY 1, 1921, AND ENDING FEBRUARY 28, 1922. IT IS ASSUMED THAT DELIVERIES HAVE BEEN MADE AS REQUIRED UNDER THE ORIGINAL CONTRACT FOR THE MONTHS OF JULY AND AUGUST AND SO FAR AS NOW APPEARS THE INCREASE PRICES STIPULATED IN THE PROPOSED SUPPLEMENTAL AGREEMENT CAN NOT BE MADE TO APPLY TO SUCH DELIVERIES.

I NOTE THAT THE ORIGINAL CONTRACT AS WELL AS THE PROPOSED SUPPLEMENTAL AGREEMENT INDICATES THAT THE EXPENDITURES INVOLVED ARE TO BE CHARGED TO THE APPROPRIATION FOR THE FISCAL YEAR 1921. THIS WOULD APPEAR TO BE A CLEAR CASE OF MISAPPLICATION OF AN APPROPRIATION. THE ADVERTISEMENT REQUESTING BIDS IN THIS CASE STATED THAT THE BIDS WOULD BE OPENED JUNE 27, 1921, AND THE CONTRACT PURPORTS TO HAVE BEEN ENTERED INTO ON SAID DATE, BUT IT EXPRESSLY PROVIDES THAT DELIVERIES SHALL BE MADE IN EQUAL MONTHLY INSTALLMENTS BEGINNING WITH THE MONTH OF JULY, 1921, AND EXTENDING OVER A PERIOD OF EIGHT MONTHS ENDING FEBRUARY 28, 1922, ON CALLS MADE BY THE OFFICE OF THE CHIEF OF AIR SERVICE. IT IS ALSO SHOWN THAT THERE WERE NO STORAGE FACILITIES AND THAT THE GASOLINE WAS TO BE CONSUMED AS DELIVERED. THERE WAS NO EXIGENCY DURING THE FISCAL YEAR 1921 REQUIRING THE PURCHASE OF THE LARGE QUANTITY OF GASOLINE FOR IMMEDIATE DELIVERY TO SUPPLY THE NEEDS OF SAID FISCAL YEAR. ON THE CONTRARY NO DELIVERIES WERE REQUIRED OR AUTHORIZED PRIOR TO JULY 1, 1921, AND IT IS SHOWN CONCLUSIVELY THAT THE GASOLINE WAS REQUIRED FOR THE CURRENT MONTHLY NEEDS OF THE AIR SERVICE FOR THE FIRST EIGHT MONTHS OF THE FISCAL YEAR 1922. IT IS NOT DIFFICULT TO UNDERSTAND HOW THE NEED FOR AN ARTICLE OF EQUIPMENT, SUCH AS A TYPEWRITER, MIGHT ARISE DURING THE FISCAL YEAR 1921 AND ITS PURCHASE BE DELAYED UNTIL THE LATTER PART OF JUNE, BUT AS TO SUPPLIES THAT ARE CONSUMED AS USED, SUCH AS GASOLINE IT CAN NOT BE HELD THAT THEY WERE PURCHASED TO SUPPLY A NEED OF THE FISCAL YEAR 1921 WHEN THE CONTRACT IS MADE LATE IN THE MONTH OF JUNE AND EXPRESSLY PRECLUDES THE POSSIBILITY OF DELIVERY BEFORE JULY 1, 1921.