B-142026, AUG. 11, 1960

B-142026, AUG. 11, 1960

TO MR. JAMES W. RIDDLEBERGER, DIRECTOR, INTERNATIONAL COOPERATION ADMINISTRATION, DEPARTMENT OF STATE:

REFERENCE IS MADE TO OUR LETTER DATED NOVEMBER 3, 1959, TO THE INTERNATIONAL COOPERATION ADMINISTRATION, REQUESTING A REPORT AND RECOMMENDATION RELATIVE TO A LETTER DATED OCTOBER 16, 1959, WITH ENCLOSURES, WHICH WE RECEIVED FROM MCGRAW-HYDROCARBON, A JOINT VENTURE BETWEEN F. H. MCGRAW AND COMPANY AND HYDROCARBON RESEARCH, INC., 51 EAST 42ND STREET, NEW YORK 17, NEW YORK, RELATING TO A DEMAND MADE UPON THE CONTRACTOR BY ICA BY LETTER OF DECEMBER 17, 1957 (DESIGNATED CLAIM NO. 5825-PL-89) FOR REFUND OF THE AMOUNT OF $31,250.95, WHICH IT HAD BEEN PAID AS REIMBURSEMENT FOR CERTAIN ITEMS OF EXPENSE INCURRED UNDER A COST-PLUS-A -FIXED-FEE CONTRACT DATED MAY 13, 1955, ENTERED INTO BETWEEN THE CONTRACTOR AND THE REPUBLIC OF KOREA, ICA FINANCED UNDER PROCUREMENT AUTHORIZATIONS 89-00-501-4318, 89-99-A1-6290 AND 89 99-G2-7264. REFUND OF THE AMOUNT WAS REQUESTED ON THE BASIS THAT THE EXPENDITURES INVOLVED WERE "NOT IN ACCORDANCE WITH THE CONTRACT PROVISIONS.' REFERENCE IS ALSO MADE TO A LETTER DATED DECEMBER 3, 1959, AUD:AAB:PEB, RECEIVED FROM THE CHIEF OF THE ADMINISTRATIVE AUDIT BRANCH, AUDIT DIVISION, OFFICE OF THE CONTROLLER, ICA, IN RESPONSE TO OUR LETTER, WHEREIN WE WERE ADVISED THAT AN ADMINISTRATIVE EXAMINATION HAD BEEN MADE IN THE MATTER AND, BASED UPON SUCH EXAMINATION, YOUR AGENCY "DOES NOT RECOMMEND WITHDRAWAL OF CLAIM NO. 5825-PL-89 IN THE AMOUNT OF $31,250.95.'

THE ITEMS OF EXPENSE IN QUESTION ARE SHOWN TO HAVE BEEN INCURRED DURING THE PERIOD MAY 13, 1955 TO APRIL 30, 1957, AND THEY ARE SET FORTH, WITH THE AMOUNTS APPLICABLE TO THE INDIVIDUAL ITEMS, IN LETTER DATED MARCH 23, 1959, FROM THE CONTRACTOR TO THE DEPUTY GENERAL COUNSEL OF ICA, AS OLLOWS:

CHART

(1) UNUSED ANNUAL LEAVE PAID TO

EMPLOYEES AT THE END OF THEIR

ORIGINAL EMPLOYMENT CONTRACTS $20,386.98

(2) OVERSEAS DIFFERENTIAL PAID TO

M. E. MCDONOUGH AND R. C. MOELLER

WHILE IN U.S. 499.11

(3) RETURN TRANSPORTATION RESIGNED

AND DISCHARGED EMPLOYEES 7,868.73

(4) SALARY PAID STANLEY BACHERT

PRIOR TO ICA SECURITY CLEARANCE $ 2,496.15

IT APPEARS FROM THE COPIES OF CORRESPONDENCE PASSING BETWEEN THE CONTRACTOR AND ICA WITH REFERENCE TO THE MATTER, SUBMITTED WITH THE CONTRACTOR'S LETTER OF OCTOBER 16, 1959, THAT, SUBSEQUENT TO ICA'S REFERRED-TO DEMAND FOR REFUND, THE CONTRACTOR ADMITTED THAT IT WAS NOT ENTITLED TO BE REIMBURSED FOR ITEMS (2) AND (3), ABOVE, AND THAT THE AMOUNTS APPLICABLE TO THOSE ITEMS HAVE, FOR THE MOST PART, IF NOT ENTIRELY, BEEN REFUNDED TO ICA, OR APPLIED AS CREDITS AGAINST AMOUNTS OTHERWISE PAYABLE BY ICA UNDER THE CONTRACTUAL FINANCING ARRANGEMENTS. PARTICULAR REFERENCE IN THIS CONNECTION IS MADE TO THE CONTRACTOR'S LETTER OF MARCH 17, 1958, TO THE CHIEF OF ICA'S CONTRACT AUDIT BRANCH, AND TO THE LETTER OF MARCH 23, 1959, FROM THE CONTRACTOR TO ICA'S DEPUTY GENERAL COUNSEL, REFERRED TO ABOVE. THEREFORE, IT SEEMS APPARENT THAT THE PROTEST MADE IN THE CONTRACTOR'S LETTER OF OCTOBER 16, 1959, IS DIRECTED SOLELY TO THAT PART OF ICA'S DEMAND FOR REFUND WHICH PERTAINS TO ITEMS (1) AND (4), IN THE AGGREGATE AMOUNT OF $22,883.13.

UNDER THE CONTRACT, COVERING THE ENGINEERING, PROCUREMENT AND CONSTRUCTION OF A UREA FERTILIZER PLANT IN KOREA, IT WAS AGREED THAT THE CONTRACTOR WOULD BE PAID THE ACTUAL COST OF THE WORK, IT BEING STATED THEREIN THAT THE INTENT OF THE AGREEMENT WAS THAT THERE SHOULD BE INCLUDED IN THE REIMBURSABLE COST OF THE WORK ALL ITEMS OF EXPENSE, WITH CERTAIN EXCEPTIONS NOT HERE MATERIAL, WHICH WERE REQUIRED TO BE INCURRED BY THE CONTRACTOR IN CONNECTION WITH, AND ARISING FROM AND OUT OF, THE PERFORMANCE AND COMPLETION OF THE WORK UNDER THE CONTRACT. UNDER PARAGRAPH (1) OF SECTION 4.1 OF THE CONTRACT, IT WAS SPECIFICALLY PROVIDED THAT THE ACTUAL COSTS OF THE CONTRACTOR FOR SALARIES, WAGES, TRAVEL TIME, PREMIUM TIME, OVERTIME, TRAVEL EXPENSE AND ANY SUMS OR ALLOWANCES PAID, INCLUDING OVERSEAS DIFFERENTIAL, WERE TO BE REIMBURSABLE, BUT IT WAS PROVIDED IN PARAGRAPH (6) OF THIS SECTION THAT ALL OF SUCH COSTS "SHALL BE INCURRED IN ACCORDANCE WITH CONTRACTOR'S CUSTOMARY PRACTICE AND AS APPROVED BY GOVERNMENT.' ALSO, SECTION 16.1 OF THE CONTRACT STIPULATED:

"CONTRACTOR SHALL OBTAIN FOR ALL NON-KOREAN EMPLOYEES ASSIGNED TO PERFORM AND WORK UNDER THIS AGREEMENT IN KOREA AN FOA SECURITY CLEARANCE * * * PROVIDED THAT WITH RESPECT TO NON-KOREAN EMPLOYEES WHOSE EARNINGS WILL BE LESS THAN $800 PER MONTH, THE CONTRACTOR SHALL SUBMIT FOR FOA APPROVAL A SCHEDULE SHOWING, AMONG OTHER THINGS, ITS POLICY AS TO LIMITATIONS ON WAGES AND SALARIES TO BE PAID IN RELATION TO EMPLOYEES' PAST EARNINGS.'

THE TERM "GOVERNMENT" WAS DEFINED IN THE CONTRACT TO MEAN THE GOVERNMENT OF THE REPUBLIC OF KOREA, AND THE WORDS "GOVERNMENT APPROVAL" WERE DEFINED THEREIN TO MEAN THE APPROVAL IN WRITING OF THE MINISTER OF COMMERCE AND INDUSTRY OF THE REPUBLIC OF KOREA, OR OF SUCH OTHER DULY AUTHORIZED REPRESENTATIVES OR OFFICERS OF THE GOVERNMENT IN KOREA AND THE UNITED STATES AS MIGHT BE DESIGNATED BY THE GOVERNMENT IN WRITING FOR SUCH PURPOSE.

UNDER SECTION 10.2 OF THE CONTRACT, IT WAS PROVIDED THAT ALL BOOKS OF ACCOUNT AND RECORDS RELATING TO THE AGREEMENT WERE TO BE SUBJECT TO INSPECTION AND AUDIT BY THE GOVERNMENT AND THE FOREIGN OPERATIONS ADMINISTRATION, NOW THE INTERNATIONAL COOPERATION ADMINISTRATION. IN THIS CONNECTION, YOUR DEPUTY GENERAL COUNSEL TRANSMITTED TO US BY LETTER OF MARCH 29, 1960, AS INDICATING ICA'S RIGHT TO CLAIM REFUND DIRECTLY OF DOLLAR AMOUNTS IMPROPERLY REIMBURSED UNDER THE CONTRACT, A COPY OF AN AGREEMENT ENTERED INTO BETWEEN MCGRAW-HYDROCARBON AND THE FOREIGN OPERATIONS ADMINISTRATION UNDER DATE OF JUNE 14, 1955. THE AGREEMENT REFERS TO THE FACT THAT THE GOVERNMENT OF THE REPUBLIC OF KOREA HAD REQUESTED FCA TO ISSUE ITS LETTER OF COMMITMENT TO FINANCE CERTAIN DOLLAR AMOUNTS PAYABLE TO MCGRAW-HYDROCARBON UNDER THE CONTRACT INVOLVED, AND STATES THAT FCA REQUIRES CERTAIN AGREEMENTS" BY THE CONTRACTOR AS CONDITIONS OR PREREQUISITES TO FOA UNDERTAKING SUCH FINANCING. IN VIEW THEREOF, AND AS SOME OF THE CONDITIONS, IT PROVIDES:

"4. REIMBURSEMENT ADJUSTMENT. FOA MAY REQUEST REIMBURSEMENT ADJUSTMENTS BASED UPON EXAMINATION OF CONTRACTOR'S PERFORMANCE AND RECORDS, AND TO THE EXTENT THAT WITHDRAWALS BY CONTRACTOR UNDER LETTER OR LETTERS OF COMMITMENT ISSUED BY FOA EXCEED THE AMOUNT OF DOLLAR COSTS REIMBURSABLE UNDER THE AGREEMENT, CONTRACTOR WILL PROMPTLY MAKE SUCH ADJUSTMENTS, IF ANY.

"7. FDA APPROVAL. WHERE ANY ACTION BY CONTRACTOR UNDER THE AGREEMENT REQUIRES OR PROVIDES FOR THE ACTION, CONSENT OR APPROVAL OF GOVERNMENT, CONTRACTOR AGREES THAT IT WILL ALSO REQUEST THE CONSENT OR APPROVAL THERETO OF FOA AS A CONDITION PRECEDENT TO RECEIPT OF DOLLAR PAYMENTS THEREAFTER UNDER SAID LETTERS OF COMMITMENT. * * *

"11. DOCUMENTATION. IT IS UNDERSTOOD AND AGREED THAT LETTERS OF COMMITMENT ISSUED BY FOA IN ACCORDANCE WITH SECTION 8.C OF THE AGREEMENT WILL SPECIFY SUCH DOCUMENTS AS ARE REQUIRED BY FOA REGULATION 1 AS IN EFFECT AT THE DATE HEREOF AND APPLICABLE TO THE AGREEMENT, WHICH MUST BE SUBMITTED BY CONTRACTOR IN OBTAINING REIMBURSEMENT OF DOLLAR COSTS AND PAYMENT OF FEES AND COMPENSATION AS PROVIDED IN THE AGREEMENT, AND CONTRACTOR WILL SUBMIT OR CAUSE TO BE SUBMITTED SUCH DOCUMENTS AS A CONDITION TO SUCH REIMBURSEMENT AND PAYMENTS.'

IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 16.1 OF THE CONTRACT, THE CONTRACTOR BY LETTER OF JUNE 17, 1955, SUBMITTED TO THE FOREIGN OPERATIONS ADMINISTRATION FOR APPROVAL A STATEMENT OF ,PERSONNEL POLICY AND PROCEDURE, KOREAN FERTILIZER PLANT," DATED JUNE 17, 1955, WHICH WAS APPROVED, WITH CERTAIN EXCEPTIONS, BY THE AGENCY'S LETTER OF JULY 29, 1955. THE STATEMENT, AS APPROVED BY FOA, CONTAINS THE FOLLOWING PROVISIONS RELATIVE TO EMPLOYEES' LEAVE:

"4. IN ADDITION TO THE ABOVE, IT IS OUR CUSTOMARY PRACTICE THAT EMPLOYEES MAY ACCRUE LEAVE AT THE RATE OF 1 1/2 DAYS OF THE REGULARLY SCHEDULED WORK WEEK PER MONTH, FOR EACH FULL MONTH OF SERVICE, SUBJECT TO THE FOLLOWING CONDITIONS:

"/A)LEAVE MAY BE GRANTED BY THE CONTRACTOR FOR SUCH TIME AS IS DEEMED IN THE BEST INTEREST OF THE CONTRACTOR.

"/B) ALL LEAVE ACCRUED DURING THE 6 MONTH PERIOD COMMENCING JANUARY 1, AND EACH SUCCEEDING 6 MONTH PERIOD MUST BE TAKEN BY THE EMPLOYEE EITHER DURING THE PERIOD OF ACCRUAL OR WITHIN 12 MONTHS AFTER THE END OF THE PERIOD OF ACCRUAL. LEAVE NOT TAKEN WITHIN THE TIME LIMIT SPECIFIED MAY NOT BE ACCUMULATED. PAYMENT MAY BE MADE IN LIEU OF ACCRUED BUT UNUSED LEAVE WHEN EMPLOYEES ARE TERMINATED.'

WHILE THE CONTRACTOR'S STATEMENT OF PERSONNEL POLICY AND PROCEDURE CONTAINS A PROVISION REQUIRING THE CONTRACTOR TO OBTAIN FOR ALL NON KOREAN EMPLOYEES AND CONSULTANTS ASSIGNED TO PERFORM ANY WORK IN KOREA UNDER THE CONTRACT AN FOA SECURITY CLEARANCE PRIOR TO THEIR DEPARTURE FOR KOREA, SUCH PROVISION WAS MODIFIED BY THE AGENCY'S REFERRED-TO LETTER OF JULY 29, 1955, WHICH STATES:

"IN VIEW OF THE FACT THAT OUR REVISION OF YOUR PROPOSED CHANGE OF OUR ESTABLISHED POLICY WITH REGARD TO THE ENTRANCE ON DUTY OF CONTRACT PERSONNEL IS NOT ACCEPTABLE TO YOU, IT IS NECESSARY THAT SUCH ENTRANCE ON DUTY OF MCGRAW-HYDROCARBON PERSONNEL BE NOT EARLIER THAN UPON NOTIFICATION BY ICA TO YOU OF THE SECURITY CLEARANCE AND ISSUANCE OF THE MILITARY ENTRANCE PERMIT. THIS ESTABLISHED POLICY HAS BEEN WORKING FOR A LONG PERIOD OF TIME IN CONNECTION WITH KOREAN OJECTS.'

THE AMOUNT INVOLVED UNDER ITEM (1) REPRESENTS PAYMENT TO EACH OF 15 OF THE CONTRACTOR'S EMPLOYEES FOR 27 DAYS OF UNUSED ANNUAL LEAVE, PAYMENT TO ONE EMPLOYEE FOR 19 1/2 DAYS OF UNUSED ANNUAL LEAVE, AND PAYMENT TO ANOTHER EMPLOYEE FOR 14 DAYS OF UNUSED ANNUAL LEAVE UPON COMPLETION OF THEIR ORIGINAL 18-MONTH TOURS OF DUTY UNDER THEIR RESPECTIVE 18-MONTH EMPLOYMENT CONTRACTS WHICH PROVIDED IN PART AS FOLLOWS:

"* * * IN ADDITION, THE EMPLOYEE MAY ACCRUE LEAVE AT A RATE NOT TO EXCEED 1 1/2 DAYS OF THE REGULARLY SCHEDULED WORK WEEK PER MONTH, FOR EACH FULL MONTH OF SERVICE. THE CONTRACTOR SHALL ONLY BE OBLIGATED TO PAY THE EMPLOYEE SUCH UNUSED ACCRUED LEAVE AFTER THE EMPLOYEE SHALL HAVE RETURNED TO HIS POINT OF ORIGIN PROVIDED, HOWEVER, THAT THE EMPLOYEE HAS FULLY AND COMPLETELY PERFORMED, IN ALL RESPECTS, ALL OF HIS OBLIGATIONS HEREUNDER.

THE EMPLOYEES INVOLVED SIGNED SECOND EMPLOYMENT CONTRACTS AT THE JOB SITE AND DID NOT RETURN TO THE POINT OF HIRE BETWEEN TOURS OF DUTY.

AS INDICATED IN A LETTER DATED APRIL 30, 1959, FROM THE ASSISTANT DIRECTOR OF ICA'S OFFICE OF CONTRACT RELATIONS TO THE CONTRACTOR, EXCEPTION WAS TAKEN TO REIMBURSEMENT OF THE LATTER FOR ITEM (1) ON THE GROUNDS THAT EMPLOYEES WHO SIGNED A SECOND EMPLOYMENT CONTRACT AND REMAINED ON THE CONTRACTOR'S PAYROLL IN KOREA WERE NOT "TERMINATED" WITHIN THE MEANING OF PARAGRAPH 4 (B) OF THE CONTRACTOR'S STATEMENT OF PERSONNEL POLICY AND PROCEDURE, ABOVE QUOTED. ICA HAS INTERPRETED TERMINATION TO MEAN SEPARATION OF THE EMPLOYEE FROM THE PROJECT, AND, HENCE, HAS CONTENDED THAT AN EMPLOYEE WHO IMMEDIATELY SIGNS A SECOND CONTRACT FOR WORK ON THE SAME PROJECT IS NOT TERMINATED, BUT HAS UNINTERRUPTED EMPLOYMENT. IN SUPPORT OF ITS POSITION THAT THE WORD "TERMINATED" AS USED IN PARAGRAPH 4 (B) CONTEMPLATES SEPARATION OF THE EMPLOYEE FROM THE PROJECT, ICA HAS CITED THE PROVISION OF THE EMPLOYMENT CONTRACTS OBLIGATING THE CONTRACTOR TO PAY THE EMPLOYEE FOR UNUSED ACCRUED LEAVE AFTER THE EMPLOYEE SHALL HAVE RETURNED TO HIS POINT OF ORIGIN. ALSO, IN THE LETTER OF APRIL 30, 1959, THE ASSISTANT DIRECTOR STATES:

"* * * IT SHOULD ALSO BE NOTED THAT THE AMOUNT OF UNUSED LEAVE PAID BY MCGRAW-HYDROCARBON TO THE EMPLOYEES IN QUESTION WAS IN EXCESS OF THAT PERMITTED BY THE POLICY.'

THE CONTRACTOR'S POSITION IS SET FORTH AND EXPOUNDED IN ITS LETTERS OF MARCH 17 AND JULY 10, 1958, TO THE CHIEF OF ICA'S CONTRACT AUDIT BRANCH, AND ITS LETTERS OF MARCH 23 AND OCTOBER 8, 1959, TO ICA'S DEPUTY GENERAL COUNSEL. MCGRAW CONTENDS THAT THE WORD "TERMINATED" AS USED IN ITS STATEMENT OF PERSONNEL POLICY AND PROCEDURE DOES NOT NECESSARILY MEAN ACTUAL PHYSICAL SEPARATION FROM THE PROJECT, AND THAT FROM THE TIME IT SET UP PROCEDURES FOR SECOND EMPLOYMENT CONTRACTS, THE CONTRACTOR HAD ALWAYS CONSIDERED AN EMPLOYEE AS BEING TERMINATED FROM HIS FIRST CONTRACT BEFORE ENTERING INTO THE SECOND, AS EVIDENCED BY ITS LETTER OF OCTOBER 11, 1956, TO THE ASSISTANT CHIEF OF ICA'S MINERALS AND PROCESSING INDUSTRIES BRANCH, INDUSTRIAL SPECIALISTS DIVISION. MCGRAW EXPLAINS THAT THE ABOVE-QUOTED PROVISION OF THE EMPLOYMENT CONTRACTS, UNDER WHICH THE CONTRACTOR DOES NOT BECOME OBLIGATED TO PAY THE EMPLOYEE FOR ACCRUED LEAVE UNTIL AFTER THE EMPLOYEE HAS RETURNED TO HIS POINT OF ORIGIN, WAS INSERTED IN THE CONTRACT FORMS SO THAT THE CONTRACTOR WOULD HAVE THE MEANS OF INDUCING EMPLOYEES ON DESIRABLE ASSIGNMENTS, SUCH AS BERMUDA, TO RETURN TO THE UNITED STATES WITHOUT DELAY, BUT THAT THIS WAS NOT DESIRED IN THE PRESENT INSTANCE, WHEN IT WAS FOR THE ADVANTAGE OF THE WORK TO INDUCE THEM TO SIGN SECOND EMPLOYMENT CONTRACTS AT THE JOB SITE WITHOUT RETURNING TO POINT OF ORIGIN. IN THIS CONNECTION, MCGRAW STATES THAT IT WOULD HAVE BEEN UNFAIR TO MAKE PAYMENTS FOR UNUSED LEAVE TO EMPLOYEES WHO RETURNED TO THE UNITED STATES AND THEN SIGNED CONTRACTS FOR ANOTHER 18 MONTH'S TOUR, WHILE DENYING PAYMENTS TO EMPLOYEES WHO SIGNED SECOND EMPLOYMENT CONTRACTS IN KOREA. ALSO, THE CONTRACTOR CONTENDS--- WITHOUT CONTRADICTION BY ICA--- THAT HAD THE 18 EMPLOYEES HERE INVOLVED RETURNED TO THE UNITED STATES BETWEEN TOURS OF DUTY, THE COST TO THE UNITED STATES (OVER AND ABOVE THE DISPUTED SUM OF $20,386.98 WHICH MCGRAW CONTENDS WOULD HAVE BEEN REQUIRED TO BE PAID IN ANY EVENT) WOULD HAVE BEEN APPROXIMATELY $34,200, AND IN ADDITION THERETO, THE SCHEDULE OF CONSTRUCTION PROBABLY WOULD HAVE BEEN ADVERSELY AFFECTED BY THE ABSENCE OF ALL OF THESE EMPLOYEES AT APPROXIMATELY THE SAME TIME FOR PERIODS OF UP TO 30 DAYS.

IN THE CONTRACTOR'S LETTER OF OCTOBER 11, 1956, REFERRED TO ABOVE, THE CONTRACTOR DREW ICA'S ATTENTION TO THE FACT THAT MANY OF THE 18 MONTH EMPLOYMENT CONTRACTS WERE ABOUT READY TO EXPIRE, AND THAT THEY PROVIDED THAT THE CONTRACTOR WOULD ONLY BE OBLIGATED TO PAY THE EMPLOYEE FOR HIS RETURN TRANSPORTATION, TRAVEL AND SUBSISTENCE EXPENSES, OR ANY SUM IN LIEU THEREOF,"AFTER THE EMPLOYEE SHALL HAVE RETURNED TO HIS POINT OF ORIGIN.' THE CONTRACTOR STATED THAT IN ITS OPINION IT WOULD BE TO THE ADVANTAGE OF THE PROJECT TO RENEW AN EMPLOYEE'S CONTRACT AT THE JOB SITE, PROVIDED THE EMPLOYEE WAS AGREEABLE, RATHER THAN HAVE HIM TAKE HIS RIGHTFUL RETURN TRIP TO THE UNITED STATES, IN THOSE CASES, AMONG OTHERS,"WHEN SO MANY EMPLOYEES BECOME ELIGIBLE FOR THEIR RETURN TRIP AT ONE TIME THAT TO HAVE ALL OF THEM RETURN SIMULTANEOUSLY WOULD HURT PROJECT OPERATIONS.' ACCORDINGLY, THE CONTRACTOR REQUESTED ICA'S APPROVAL FOR GIVING THE EMPLOYEE A CERTIFICATION TO THE EFFECT THAT IT WOULD PAY HIM A SUM EQUIVALENT TO THE RETURN TRANSPORTATION EXPENSES PROVIDED FOR IN HIS ORIGINAL CONTRACT AT SUCH TIME AS THE EMPLOYEE "COMPLETES HIS SECOND CONTRACT OR OTHERWISE TERMINATES HIS EMPLOYMENT THEREUNDER," WITH THE UNDERSTANDING THAT THIS SUM WOULD BE IN ADDITION TO THE RETURN TRANSPORTATION EXPENSES WHICH HE WOULD BE ENTITLED TO BE PAID UPON SATISFACTORY COMPLETION OF THE SECOND CONTRACT, AS AN INDUCEMENT FOR "RENEWING AT THE JOB SITE.'

ICA'S ASSISTANT DIRECTOR OF CONTRACT RELATIONS ADVISED THE CONTRACTOR BY LETTER OF DECEMBER 14, 1956, THAT THE ABOVE PLAN WOULD BE ACCEPTABLE PROVIDED THAT THE SUM OF MONEY TO BE PAID IN LIEU OF RETURN TRANSPORTATION EXPENSES WERE TREATED AS AN OUTRIGHT BONUS IN AN AMOUNT NOT TO EXCEED $500, DEPENDING UPON THE LENGTH OF SERVICE PERFORMED BY THE EMPLOYEE UNDER THE RENEWAL CONTRACT, AND PROVIDED ICA'S PRIOR APPROVAL OF THE BONUS WERE OBTAINED. ICA THUS RECOGNIZED THE IMPORTANCE OF GIVING THE CONTRACTOR'S EMPLOYEES ON INDUCEMENT TO RENEW THEIR EMPLOYMENT CONTRACTS AT THE JOB- SITE, AND CERTAINLY UNUSED ACCRUED LEAVE, MORE THAN SUMS IN LIEU OF RETURN TRANSPORTATION EXPENSES, WAS SOMETHING WHICH THEY WOULD HAVE EXPECTED TO BE PAID FOR AS ONE OF THE CONSIDERATIONS FOR RENEWAL AT THE JOB SITE. MOREOVER, INASMUCH AS THE ORIGINAL EMPLOYMENT CONTRACTS TERMINATED BY THEIR OWN TERMS AT THE EXPIRATION OF THE 18-MONTH PERIOD, THE CONTRACTOR DOES NOT APPEAR TO HAVE BEEN UNREASONABLE IN CONSIDERING THAT THE EMPLOYEES CONCERNED BECAME "TERMINATED" AT THAT POINT SO AS TO ENTITLE THEM TO BE PAID FOR UNUSED ACCRUED LEAVE PURSUANT TO THE ABOVE-QUOTED PROVISIONS OF ITS PERSONNEL POLICY AND THE EMPLOYMENT CONTRACTS. FROM A CONTRACTUAL STANDPOINT, THEY CLEARLY WERE IN THE CATEGORY OF TERMINATED EMPLOYEES AT THAT TIME. SEE GENERALLY 12 AM.JUR., CONTRACTS, SEC. 305; 35 AM.JUR., MASTER AND SERVANT, SEC. 19. IN VIEW THEREOF, AND OF THE OBVIOUS SAVING TO THE UNITED STATES RESULTING FROM EXECUTION OF RENEWAL EMPLOYMENT CONTRACTS AT THE JOB SITE, AND THE BENEFIT TO THE CONTRACT WORK WHICH PRESUMABLY RESULTED FROM THE EMPLOYEES REMAINING ON THE JOB INSTEAD OF TAKING THEIR LEAVE, THERE WOULD APPEAR TO BE NO PROPER BASIS FOR CONCLUDING THAT THE CONTRACTOR WAS NOT ENTITLED TO BE REIMBURSED FOR THE PAYMENTS COMPRISING ITEM (I) INSOFAR AS THEY DID NOT REPRESENT PAYMENT TO THE INDIVIDUAL EMPLOYEES FOR UNUSED LEAVE IN EXCESS OF THE MAXIMUM PERMISSIBLE UNDER PARAGRAPH 4 (B) OF THE ABOVE-QUOTED STATEMENT OF PERSONNEL POLICY. AS WE INTERPRET THE PROVISION, UNUSED LEAVE ACCRUED DURING THE FIRST 6-MONTH PERIOD OF EMPLOYMENT IS FORFEITED UNLESS TAKEN DURING THE SUCCEEDING 12 MONTH PERIOD. THE PROVISION THUS WOULD APPEAR TO RESTRICT THE AMOUNT OF ALLOWABLE LEAVE AT THE END OF THE 18-MONTH PERIOD TO THAT ACCUMULATED DURING THE LAST 12-MONTH PERIOD WHICH, AT THE RATE OF 1 1/2 DAYS PER MONTH, COULD NOT EXCEED 18 DAYS.

IT APPEARS FROM ICA'S REFERRED-TO LETTER OF APRIL 30, 1959, THAT THE AMOUNT INVOLVED UNDER ITEM (4), ABOVE, REPRESENTS SALARY PAYMENTS TO STANLEY BACHERT FROM NOVEMBER 23, 1955, TO MAY 15, 1956, DURING WHICH PERIOD MCGRAW HAD RECEIVED NO SECURITY CLEARANCE FROM ICA FOR MR. BACHERT, AS REQUIRED BY THE ABOVE-QUOTED TERMS OF THE CONTRACT. THE FACTS REGARDING THE MATTER ARE STATED IN ICA'S LETTER TO BE AS FOLLOWS:

"BY LETTER DATED OCTOBER 16, 1955, SECURITY CLEARANCE WAS REQUESTED BY MCGRAW-HYDROCARBON FOR MR. BACHERT. BECAUSE OF INCOMPLETENESS, ADDITIONAL INFORMATION WAS REQUIRED BY ICA AND WAS PROVIDED ON DECEMBER 7, 1955. HOWEVER, MR. BACHERT WAS PLACED ON THE PAYROLL ON NOVEMBER 23, 1955. WAS ALREADY IN KOREA HAVING BEEN PREVIOUSLY EMPLOYED BY THE EIGHTH ARMY. ICA WAS NOT NOTIFIED THAT HE HAD BEEN PLACED ON THE PAYROLL UNTIL MCGRAW- HYDROCARBON'S LETTER OF JANUARY 15, 1956 IN WHICH CONTRACTOR REQUESTED AN EXCEPTION UNDER THE POLICY FOR MR. BACHERT IS ORDER TO PERMIT REIMBURSEMENT FOR HIS SALARY FROM NOVEMBER 23, 1955. * * *"

THE ABOVE LETTER WAS IN REPLY TO THE CONTRACTOR'S LETTER OF MARCH 23, 1959, TO ICA'S DEPUTY GENERAL COUNSEL, WHEREIN THE CONTRACTOR STATED:

"/4) MR. STANLEY BACHERT BEGAN HIS EMPLOYMENT WITH US ON NOVEMBER 23, 1955. HE WAS EMPLOYED IN KOREA, WHERE, UP UNTIL THE DAY BEFORE, HE WAS EMPLOYED BY HEADQUARTERS, KOREA CIVIL ASSISTANCE COMMAND. WE ASSUMED THAT HIS TOP SECRET SECURITY CLEARANCE WAS ADEQUATE FOR TRANSFER TO OUR CONTRACT. BUT WE HAD NEVERTHELESS MADE APPLICATION ON OCTOBER 16, 1955 FOR ICA CLEARANCE. AT YOUR REQUEST, SUPPLEMENTARY INFORMATION WAS SUPPLIED ON DECEMBER 7, 1955. WHEN CLEARANCE WAS GRANTED, IT WAS MADE EFFECTIVE MAY 15, 1956, THE DATE OF THE ICA/W LETTER TO US ADVISING OF SUCH CLEARANCE.'

IN VIEW OF THE FACTS REGARDING THE PLACEMENT OF MR. BACHERT ON THE CONTRACTOR'S PAYROLL AS SET FORTH IN THE ABOVE LETTERS, WHICH SHOW THAT THE CONTRACTOR ACTED IN ENTIRE GOOD FAITH IN THE TRANSACTION AND THAT THE UNITED STATES WAS IN NO WAY DAMAGED BY THE CONTRACTOR'S FAILURE TO OBTAIN ICA CLEARANCE BEFORE PLACING MR. BACHERT ON THE PAYROLL, WE ARE OF THE OPINION THAT THERE IS NO PROPER BASIS FOR CONCLUDING THAT THE CONTRACTOR WAS NOT ENTITLED TO BE REIMBURSED FOR HIS SALARY DURING THE PERIOD OF TIME INVOLVED.

ACCORDINGLY, WE HAVE ADVISED THE CONTRACTOR BY LETTER OF TODAY, COPY HEREWITH, THAT WE HAVE REQUESTED YOUR AGENCY TO REVIEW THE ACTION TAKEN WITH RESPECT TO THE ITEMS OF EXPENSE IN QUESTION.

THE CONTRACT INVOLVED IS RETURNED HEREWITH IN ACCORDANCE WITH THE REQUEST CONTAINED IN ICA'S LETTER OF DECEMBER 3, 1959.