B-139864, NOVEMBER 20, 1959, 39 COMP. GEN. 391

B-139864: Nov 20, 1959

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PAYMENTS BY THE DEPARTMENT OF AGRICULTURE FOR RESEARCH SERVICES TO BE PERFORMED BY THE NATIONAL ACADEMY OF SCIENCES WILL NOT BE REGARDED AS IN CONTRAVENTION OF THE ADVANCE PAYMENT PROHIBITION. 39 COMP. THE SUBJECT MATTER OF THAT DECISION WAS CONTRACT NO. PURSUANT TO THE CONTRACT PROVISIONS A PORTION OF THE CONTRACT PRICE WAS PAID IN ADVANCE. THE DEPARTMENT OF AGRICULTURE REFUSED TO PAY THIS ADDITIONAL AMOUNT AND THE MATTER WAS REFERRED HERE FOR SETTLEMENT. THE UNDER SECRETARY POINTS OUT THAT THE CONTRACT WAS EXECUTED BY THE DEPARTMENT PURSUANT TO AUTHORITY CONTAINED IN THE AGRICULTURAL MARKETING ACT OF 1946. IN VIEW OF SUCH AUTHORITY WE AGREE THAT THE ADVANCE PAYMENTS WERE NOT IN CONTRAVENTION OF SECTION 3648.

B-139864, NOVEMBER 20, 1959, 39 COMP. GEN. 391

CONTRACTS - RESEARCH WORK PERFORMED BY NATIONAL ACADEMY OF SCIENCES - ADVANCE PAYMENT PROHIBITION IN VIEW OF THE EXPRESS EXEMPTION IN SECTION 10 (A) OF THE AGRICULTURAL MARKETING ACT OF 1946, 7 U.S.C. 427I (A), FROM THE APPLICATION OF THE ADVANCE PAYMENT PROHIBITION IN 31 U.S.C. 529, PAYMENTS BY THE DEPARTMENT OF AGRICULTURE FOR RESEARCH SERVICES TO BE PERFORMED BY THE NATIONAL ACADEMY OF SCIENCES WILL NOT BE REGARDED AS IN CONTRAVENTION OF THE ADVANCE PAYMENT PROHIBITION. 39 COMP. GEN. 71, MODIFIED.

TO THE SECRETARY OF AGRICULTURE, NOVEMBER 20, 1959:

BY LETTER OF SEPTEMBER 11, 1959, THE UNDER SECRETARY OF AGRICULTURE REQUESTED THAT WE GIVE FURTHER CONSIDERATION THE QUESTIONS INVOLVED IN OUR DECISION OF AUGUST 3, 1959, 39 COMP. GEN. 71.

THE SUBJECT MATTER OF THAT DECISION WAS CONTRACT NO. A-1S-33826, DATED JUNE 30, 1953, AND SUPPLEMENT THERETO, BY WHICH THE NATIONAL ACADEMY OF SCIENCES AGREED TO PERFORM CERTAIN RESEARCH SERVICE FOR THE DEPARTMENT OF AGRICULTURE FOR $42,288. PURSUANT TO THE CONTRACT PROVISIONS A PORTION OF THE CONTRACT PRICE WAS PAID IN ADVANCE. IN THE PERFORMANCE OF THE RESEARCH CALLED FOR BY THE CONTRACT THE ACADEMY INCURRED COSTS WHICH EXCEED THE CONTRACT PRICE BY $25,055.28. THE DEPARTMENT OF AGRICULTURE REFUSED TO PAY THIS ADDITIONAL AMOUNT AND THE MATTER WAS REFERRED HERE FOR SETTLEMENT.

IN OUR DECISION OF AUGUST 3, 1959, WE AUTHORIZED OUR CLAIMS DIVISION TO ALLOW THE CLAIM OF THE NATIONAL ACADEMY OF SCIENCES. WE ALSO STATED THAT THE PROVISION FOR ADVANCE PAYMENT CONTRAVENED SECTION 3648, REVISED STATUTES, 31 U.S.C. 529, AND SUGGESTED THAT FUTURE SIMILAR CONTRACTS LIMIT THE CONSIDERATION TO BE PAID THEREUNDER TO REIMBURSEMENT OF THE ACADEMY'S ACTUAL EXPENSES, WITH A LIMITATION IF DESIRED, ON THE MAXIMUM AMOUNT PAYABLE UNDER THE CONTRACTS.

THE UNDER SECRETARY POINTS OUT THAT THE CONTRACT WAS EXECUTED BY THE DEPARTMENT PURSUANT TO AUTHORITY CONTAINED IN THE AGRICULTURAL MARKETING ACT OF 1946, AND THAT SECTION 10 (A) THEREOF, 7 U.S.C. 427I (A), SPECIFICALLY PROVIDES THAT PAYMENTS MAY BE MADE WITHOUT REGARD TO THE PROVISIONS OF SECTION 3648, REVISED STATUTES. IN VIEW OF SUCH AUTHORITY WE AGREE THAT THE ADVANCE PAYMENTS WERE NOT IN CONTRAVENTION OF SECTION 3648, REVISED STATUTES.

WE DO NOT AGREE, HOWEVER, WITH THE UNDER SECRETARY'S VIEWS THAT THE TERMS OF THE INSTANT CONTRACT ARE IN ACCORD WITH OUR SUGGESTION CONCERNING FUTURE CONTRACT TERMS. OUR SUGGESTION CONTEMPLATED THAT FUTURE CONTRACTS NOT ONLY SHOULD PROVIDE FOR REIMBURSEMENT OF ACTUAL COSTS UP TO STIPULATED MAXIMUM AMOUNT BUT SHOULD ALSO SPECIFICALLY PROVIDE THAT NO COSTS BE INCURRED ABOVE THE AMOUNT SO STIPULATED UNLESS AUTHORIZED BY A SUBSEQUENT AGREEMENT IF SO INTENDED.

IT ALSO IS OUR VIEW THAT THE AGRICULTURAL MARKETING ACT DOES NOT IN ANY WAY AFFECT THE AUTHORITY OF THE ACADEMY AS SET OUT IN SECTION 3 OF THE ACT OF MARCH 3, 1863, 12 STAT. 806, 36 U.S.C. 253, WHICH PROVIDES, IN EFFECT, THAT WHEN THE ACADEMY IS REQUESTED TO PERFORM WORK FOR THE GOVERNMENT THE ACTUAL EXPENSE OF SUCH WORK SHALL BE PAID FROM APPROPRIATIONS MADE FOR THAT PURPOSE.

THE UNDER SECRETARY STATES THAT THE ACADEMY AGREED TO CONTRIBUTE FUNDS OTHERWISE AVAILABLE TO IT TO THE COST OF THE CONTRACT WORK AND CONTENDS THAT THE CONTRACT PRICE AGREED ON MIGHT, THEREFORE, PROPERLY BE LESS THAN THE COST OF THE WORK. IN RESPONSE TO OUR REQUEST FOR COMMENTS ON THIS MATTER THE BUSINESS MANAGER FOR THE ACADEMY, BY LETTER OF NOVEMBER 4, 1959,REPLIED IN PART:

2. THE UNITED SECRETARY OF AGRICULTURE IS CORRECT IN HIS STATEMENT THAT IT WAS CONTEMPLATED THAT THE NATIONAL ACADEMY OF SCIENCES' NATIONAL RESEARCH COUNCIL "WOULD CONTRIBUTE FUNDS OTHERWISE AVAILABLE TO IT TO THE COST OF THE PROJECT.' AGAIN IN REFERENCE TO AN ESTIMATE OF COSTS OF STENOGRAPHIC AND SECRETARIAL ASSISTANCE, HE QUOTES OUR STATEMENT THAT ADDITIONAL REQUIRED SERVICES WOULD BE PROVIDED BY THE ACADEMY-RESEARCH COUNCIL. THE CONTRIBUTIONS OF THE CONTRACTOR FROM FUNDS OTHER THAN THOSE PROVIDED BY CONTRACT NO. A-1S-33826 WERE INDEED QUITE SUBSTANTIAL IN AMOUNT. THE SERVICES OF THE EXECUTIVE SECRETARY OF THE AGRICULTURAL BOARD WERE PROVIDED AT NO COST TO THE CONTRACT. THOSE SERVICES CONSISTED OF SCIENTIFIC OVERSIGHT OF THE PROJECT THROUGHOUT ITS TERM. IN ADDITION, THE SERVICES OF THE SECRETARIAL AND STENOGRAPHIC STAFF OF THE EXECUTIVE SECRETARY OF THE AGRICULTURAL BOARD WERE REQUIRED AND WERE PROVIDED TO A CONSIDERABLE EXTENT IN THE PERFORMANCE OF THE CONTRACT WORK. THOSE SERVICES WERE MOSTLY IN REFERENCE TO (A) CORRESPONDENCE WITH INDIVIDUALS AND ORGANIZATIONS WHO WERE POTENTIAL SOURCES OF DATA OF THE KIND TO BE COMPILED, (B) CORRESPONDENCE WITH MEMBER OF THE COMMITTEE ON FEED COMPOSITION AND WITH OTHER SCIENTISTS ON THE DEVELOPMENT OF CRITERIA AND ON OTHER MATTERS RELATING TO THE ORGANIZATION OF THE DATA TO BE COMPILED AND (C) THE PREPARATION AND DISTRIBUTION OF COMMITTEE MEETING MINUTES AND PERIODIC PROGRESS REPORTS. FURTHER, A PORTION OF THE CONTRACTOR'S EXPENSES OF DISTRIBUTING COPIES OF THE PUBLISHED REPORT, COMPOSITION OF CEREAL GRAINS AND FORAGES, WAS INCURRED SUBSEQUENT TO THE DATE WE CLOSED THE CONTRACT ACCOUNT, AND SUCH EXPENSES HAVE BEEN DEFRAYED FROM OTHER FUNDS.

GENERALLY ACCEPTED ACCOUNTING PRACTICES WOULD HAVE PERMITTED THE ACADEMY TO CHARGE THE ABOVE-DESCRIBED COSTS TO THE CONTRACT ACCOUNT. THE AMOUNT OF THOSE COSTS (NOT ALLOCATED TO THE CONTRACT ACCOUNT) EXCEEDED THE TOTAL OF THE CASH CONTRIBUTIONS FROM THE FOUR SOURCES NAMED IN THE SPECIAL ACKNOWLEDGMENT ON PAGE VII OF THE PUBLISHED REPORT AND REFERRED TO IN THE UNDER SECRETARY'S LETTER. THOSE CONTRIBUTIONS WERE MADE IN CONSIDERATION OF THE FACT THAT THE ACADEMY HAD OBLIGATED ITSELF TO ASSUME A PORTION OF THE COST OF THE WORK REQUIRED UNDER THE CONTRACT.

3. YOU QUOTED THE FOLLOWING FROM THE UNDER SECRETARY'S LETTER OF SEPTEMBER 11: "WE BELIEVE IN THE INSTANT CONTRACT IT WAS CLEARLY UNDERSTOOD BETWEEN THE PARTIES THAT THE ACADEMY WAS TO PROVIDE SUFFICIENT FINANCING TO CARRY OUT THE PROJECT EVEN IF THE AGREED FIXED SUM MIGHT TURN OUT TO BE INADEQUATE.' WE DENY CATEGORICALLY THAT RESPONSIBLE REPRESENTATIVES OF THE ACADEMY UNDERTOOK ON BEHALF OF THE ACADEMY TO UNDERWRITE, WITHOUT LIMITATION, COSTS OF THE WORK WHICH WOULD BE IN EXCESS OF THE CONTRACT AMOUNT. CERTAINLY IT WAS NOT INTENDED THAT ACCEPTANCE OF THE CONTRACT SHOULD COMPLETELY AND IRREVOCABLY DENY TO THE ACADEMY THE RIGHT (A) TO LIMIT ITS FINANCIAL OBLIGATION THEREUNDER AND/OR (B) TO CLAIM AND TO RECEIVE PAYMENT AGREED TO FOR ITS ACTUAL COST OF PERFORMANCE. IS OUR BELIEF THAT THE POSITION TAKEN HEREIN IS CONSISTENT WITH THE TERMS OF THE ACT OF MARCH 3, 1863 WHICH IMPOSES ON THE ACADEMY THE OBLIGATION TO SERVE GOVERNMENT AND THE REQUIREMENT THAT SUCH SERVICES SHALL BE PROVIDED ON A NON-PROFIT BASIS.

IN VIEW OF THE APPARENT MISUNDERSTANDING BETWEEN THE CONTRACTING PARTIES AND THE FACT THAT YOUR DEPARTMENT, EVEN WITH THE ALLOWANCE OF THE CLAIM, PAID LESS THAN THE ACTUAL COST OF THE CONTRACT WORK, WE BELIEVE THAT OUR ALLOWANCE OF THE ACADEMY'S CLAIM REPRESENTED A PROPER SOLUTION OF THE MATTER. IN THIS REGARD YOUR ATTENTION IS INVITED TO LETTER OF DECEMBER 1, 1958, ADDRESSED TO OUR CLAIMS DIVISION BY F. H. SPENCER, EXECUTIVE ASSISTANT ADMINISTRATOR, AGRICULTURAL RESEARCH SERVICE, WHEREIN HE STATED THAT "* * * IF YOU FEEL THAT THE EQUITY OF THE SITUATION WOULD JUSTIFY PAYMENT OF THE CLAIM, WE WOULD HAVE NO OBJECTION.'

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