B-159546, DECEMBER 7, 1966, 46 COMP. GEN. 554

B-159546, DECEMBER 7, 1966, 46 COMP. GEN. 554

CONTRACTS - DEFAULT - PROCUREMENT FROM ANOTHER SOURCE - EXCESS COST LIABILITY - DISPOSITION OF COLLECTION THE MONIES RECOVERED AS THE EXCESS COSTS OF REPLACEMENT CONTRACTS INCIDENT TO THE DEFAULT OF A CONTRACTOR UNDER GOVERNMENT CONTRACTS FOR THE ERECTION OF JOB CORPS CAMP FACILITIES ARE FOR DEPOSIT INTO THE TREASURY AS MISCELLANEOUS RECEIPTS AND NOT FOR RETURN TO THE APPROPRIATION ACCOUNT FROM WHICH EXPENDED UNDER THE PRINCIPLE THE APPROPRIATION HAD BEEN ERRONEOUSLY CHARGED IN THE FIRST INSTANT. CONTRACTS - DAMAGES - LIQUIDATED - DISPOSITION - APPROPRIATION V. MISCELLANEOUS RECEIPTS ALTHOUGH LIQUIDATED DAMAGES MAY BE RETAINED IN AN APPROPRIATION ACCOUNT WHEN AN AUTHORIZED REDUCTION IS EFFECTED IN A CONTRACT PRICE, OR IN ORDER TO HAVE THE MONEY AVAILABLE FOR RETURN IN THE EVENT THE CONTRACTOR IS RELIEVED OF LIABILITY FOR LIQUIDATED DAMAGES, THE "OUT-OF POCKET" EXPENSES --- PER DIEM AND TRAVEL EXPENSES--- SUSTAINED BY THE GOVERNMENT, EXPENSES CONTEMPLATED FOR REIMBURSEMENT UNDER THE LIQUIDATED DAMAGES PROVISION OF CONTRACTS FOR THE ERECTION OF JOB CORPS CAMP FACILITIES, MAY NOT BE CREDITED TO THE APPROPRIATION FROM WHICH EXPENDED, AS NO MONIES ARE DUE THE DEFAULTING CONTRACTOR, AND THE REMISSION OF LIQUIDATED DAMAGES HAS BEEN DENIED. THEREFORE, ABSENT THE REQUIREMENT TO CREDIT TO OR RETAIN IN THE APPROPRIATION ACCOUNT, THE AMOUNTS COLLECTED OR WITHHELD AS LIQUIDATED DAMAGES, THE MONIES RECOVERED UNDER THE DEFAULTED CONTRACTS ARE FOR DEPOSIT INTO THE TREASURY AS MISCELLANEOUS RECEIPTS.

TO THE DIRECTOR, OFFICE OF ECONOMIC OPPORTUNITY, DECEMBER 7, 1966:

THIS RESPONDS TO PART NO. 2 OF YOUR GENERAL COUNSEL'S LETTER OF AUGUST 27, 1966, CONCERNING THE PROPER DISPOSITION OF MONIES RECOVERED FROM MOBILE STRUCTURES, INC., IN CONNECTION WITH THAT FIRM'S DEFAULTS ON DEPARTMENT OF AGRICULTURE, FOREST SERVICE, CONTRACTS NOS. 33-400 AND 33- 401 FOR THE ERECTION OF JOB CORPS CAMP FACILITIES AT PAGOSA SPRINGS, COLORADO, AND PINE RIDGE, NEBRASKA.

MOBILE STRUCTURES' LIABILITY TO THE UNITED STATES WAS COMPUTED BY AGRICULTURE TO BE $145,339.48 FOR EXCESS COSTS AND $158,510.98 AS LIQUIDATED DAMAGES. IT IS STATED THAT YOUR AGENCY HAS BEEN ADVISED BY AGRICULTURE THAT PAYMENT OF APPROXIMATELY $130,000 OWNING TO THE CONTRACTOR OR ITS ASSIGNS UNDER ANOTHER CONTRACT HAS BEEN WITHHELD, AND THAT YOUR AGENCY PROPOSES TO DIRECT THE RETURN OF THAT AMOUNT TO YOUR APPROPRIATION ACCOUNT TOGETHER WITH SUCH ADDITIONAL SUMS THAT ARE RECOVERED FROM THE CONTRACTOR AS MAY BE NECESSARY TO OFFSET THE GOVERNMENT'S EXPENSES ARISING FROM THE CONTRACTOR'S BREACH, INCLUDING THE EXCESS COSTS OF REPROCUREMENT AND THE $16,275.36 IN DIRECT EXPENSES SUSTAINED DURING THE DELAY PERIOD IN CONNECTION WITH THE STAFFS WHICH HAD BEEN RECRUITED FOR THE TWO CAMPS. IT IS FURTHER PROPOSED TO DEPOSIT IN THE TREASURY AS MISCELLANEOUS RECEIPTS ANY ADDITIONAL MONIES RECOVERED FROM THE CONTRACTOR. IN SUPPORT OF SUCH PROPOSALS, YOUR GENERAL COUNSEL STATES:

THE DECISION OF YOUR OFFICE ARTICULATE A GENERAL RULE THAT AMOUNTS RECOVERED FROM DEFAULTING CONTRACTS AS EXCESS COSTS ARE TO BE DEPOSITED IN THE TREASURY AS MISCELLANEOUS RECEIPTS PURSUANT TO 31 U.S.C.A. SEC. 484 (SEE 44 COMP. GEN. 623, 626; 40 COMP GEN. 590, 592; 34 COMP. GEN. 577, 578) WHILE THOSE RECEIVED AS LIQUIDATED DAMAGES SHOULD BE CREDITED TO THE AGENCY'S APPROPRIATION ACCOUNT (44 COMP. GEN. 623, 626; 23 COMP. GEN. 365; 9 COMP. GEN. 398). HOWEVER, AN EXAMINATION OF THE DECISIONS IN 44 COMP. GEN. 623 AND 34 COMP. GEN. 577 IN WHICH YOU DIRECTED THAT MONIES RECOVERED AS EXCESS COSTS BE RETURNED TO THE APPROPRIATION ACCOUNT SUGGESTS JUST THE CONTRARY. IT WOULD SEEM THAT THE CONTROLLING CONSIDERATION IN DETERMINING THE DISPOSITION OF RECOVERIES FROM DEFAULTING CONTRACTORS SHOULD BE WHETHER SUCH RECOVERIES AUGMENT THE AGENCY'S APPROPRIATION, IN WHICH CASE THEY SHOULD BE DEPOSITED IN THE TREASURY AS MISCELLANEOUS RECEIPTS, OR WHETHER THEY MERELY OFFSET ADDITIONAL GOVERNMENT EXPENSES RESULTING FROM THE CONTRACTOR'S BREACH, IN WHICH CASE THEY SHOULD BE CONSIDERED IN THE NATURE OF AN ADJUSTMENT AND RETURNED TO THE APPROPRIATION ACCOUNT. THIS LATTER SITUATION, THE RECOVERIES DO NO MORE THAN PERMIT THE AGENCY TO CARRY OUT THE PROGRAM CONTEMPLATED BY THE CONGRESS WITHOUT HAVING TO RETURN FOR AN ADDITIONAL APPROPRIATION BECAUSE OF THE FAILURE OF THE CONTRACTOR TO PERFORM (BUT CF. 40 COMP. GEN. 590, 591-2; 8 COMP. GEN. 284).

WHILE THE REASONS ADVANCED BY YOUR GENERAL COUNSEL FOR THE RETURN OF MONIES RECOVERED AS EXCESS COSTS TO THE APPROPRIATION ACCOUNT ARE NOT REGARDED AS BEING WITHOUT MERIT, OUR DECISION AT 44 COMP. GEN. 623 WAS NOT INTENDED, NOR IS IT VIEWED, AS CONSTITUTING OR SUGGESTING A CHANGE IN, OR A DEVIATION FROM, THE GENERAL RULE STATED THEREIN THAT AMOUNTS RECOVERED FROM DEFAULTING CONTRACTORS AS THE EXCESS COSTS OF REPLACEMENT CONTRACTS ARE FOR DEPOSIT INTO THE TREASURY AS MISCELLANEOUS RECEIPTS. IN THAT DECISION IT SHOULD BE NOTED THAT CREDIT TO THE APPROPRIATION ACCOUNT (OTHER THAN FOR LIQUIDATED DAMAGES) WAS AUTHORIZED, NOT ON BEHALF OF THE REPLACEMENT CONTRACT INVOLVED, BUT TO THE EXTENT THAT THE CREDIT REPRESENTED PAYMENTS IN EXCESS OF THE VALUE OF THE WORK PERFORMED AND ON THE PRINCIPLE THAT THE APPROPRIATION HAD BEEN ERRONEOUSLY CHARGED THEREWITH IN THE FIRST INSTANCE.

ACCORDINGLY, SINCE SUCH CONSIDERATIONS ARE NOT PRESENT IN THE INSTANT CASE YOUR PROPOSAL TO CREDIT THE APPROPRIATION ACCOUNT WITH THE AMOUNTS RECOVERED FROM THE CONTRACTOR AS REIMBURSEMENT FOR THE ADDITIONAL COSTS IN AWARDING REPLACING CONTRACTS IS NOT APPROVED.

CONCERNING THE $16,275.36 "OUT-OF-POCKET" EXPENSES SUSTAINED BY THE GOVERNMENT AS A RESULT OF THE CONTRACTOR'S BREACH, THE RECORD SHOWS THAT THOSE EXPENSES ARE COMPRISED PRINCIPALLY OF PER DIEM AND TRAVEL EXPENSES INCURRED BY THE STAFF PERSONNEL FOR THE TWO CAMPS DURING THE DELAY PERIOD. IT APPEARS THEREFORE THAT SUCH EXPENSES WERE OF A TYPE CONTEMPLATED FOR REIMBURSEMENT UNDER THE LIQUIDATED DAMAGES PROVISION OF THE CONTRACTS. HOWEVER, IT IS TO BE NOTED THAT THE RATIONALE IN OUR EARLIER DECISIONS FOR RETAINING LIQUIDATED DAMAGES IN THE APPROPRIATION ACCOUNT, RATHER THAN DEPOSITING SUCH COLLECTIONS INTO THE TREASURY AS MISCELLANEOUS RECEIPTS, IS THAT THEY EFFECTED AN AUTHORIZED REDUCTION IN THE PRICE OF THE INDIVIDUAL CONTRACT CONCERNED AND, FURTHER, THAT THEY WOULD BE AVAILABLE FOR RETURN TO THE CONTRACTOR IN THE EVENT IT WAS SUBSEQUENTLY DETERMINED THAT THE CONTRACTOR SHOULD BE RELIEVED OF HIS LIABILITY FOR LIQUIDATED DAMAGES FOR DELAY. 9 COMP. GEN. 398; 23 ID. 365. SINCE NO AMOUNT WAS EARNED BY THE CONTRACTOR UNDER THE DEFAULTED CONTRACTS AND AS REMISSION OF THE LIQUIDATED DAMAGES ASSESSED AGAINST MOBILE STRUCTURES WAS DENIED BY OUR DECISION 46 COMP. GEN. 252, SEPTEMBER 30, 1966, A COPY OF WHICH WAS FURNISHED YOU BY LETTER OF THAT DATE, THERE APPEARS TO BE NO REQUIREMENT FOR CREDITING THE APPROPRIATION WITH, OR RETAINING THEREIN, AMOUNTS COLLECTED OR WITHHELD FROM THE CONTRACTOR AS LIQUIDATED DAMAGES, AND THE PROPOSED ACTION REGARDING THE $16,275.36 IS LIKEWISE NOT APPROVED.

ANY ADDITIONAL AMOUNTS RECOVERED FROM THE CONTRACTOR SHOULD ALSO BE DEPOSITED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS, AS PROPOSED.