B-28322, OCTOBER 15, 1942, 22 COMP. GEN. 349

B-28322, OCTOBER 15, 1942, 22 COMP. GEN. 349

CONTRACTS - COST-PLUS - CONTRACTING OFFICER'S EXPENDITURE APPROVAL AUTHORITY; BACK WAGES OF EMPLOYEES DISCHARGED AND REINSTATED THE BROAD AUTHORITY VESTED IN A CONTRACTING OFFICER BY A COST-PLUS-A FIXED-FEE CONTRACT TO DETERMINE WHAT ACTUAL EXPENDITURES INCURRED BY THE CONTRACTOR IN PERFORMANCE OF THE CONTRACT WORK ARE TO BE REGARDED AS REIMBURSABLE ITEMS OF COST IS NOT AN UNLIMITED AUTHORITY, AND WHEN HE ACTS IN A WAY CONTRARY TO THE MANDATE OF THE CONTRACT OR WITHOUT PROPER REGARD FOR THE INTERESTS OF THE UNITED STATES, IT IS THE DUTY OF THIS OFFICE TO QUESTION HIS DECISION. A COST-PLUS-A-FIXED-FEE CONTRACTOR WHO DISCHARGED CERTAIN OF ITS EMPLOYEES FOR ALLEGED UNION ACTIVITIES AND SUBSEQUENTLY REINSTATED THEM WITH BACK PAY IN ORDER TO AVOID POSSIBLE PENALTIES UNDER THE PROVISIONS OF THE NATIONAL LABOR RELATIONS ACT MAY NOT BE REIMBURSED THE BACK WAGES PAID SUCH EMPLOYEES, EVEN THOUGH APPROVED BY THE CONTRACTING OFFICER UNDER HIS CONTRACT AUTHORITY TO DETERMINE WHAT ACTUAL EXPENDITURES INCURRED BY THE CONTRACTOR IN PERFORMANCE OF THE CONTRACT WORK ARE TO BE REGARDED AS REIMBURSABLE ITEMS OF COST, WHERE THE UNITED STATES WAS NOT RESPONSIBLE FOR THE CONTRACTOR'S ACTION AND RECEIVED NO TANGIBLE BENEFIT FROM THE EXPENDITURE.

COMPTROLLER GENERAL WARREN TO LT. COL. W. GRITZ, U.S. ARMY, OCTOBER 15, 1942:

THERE HAS BEEN RECEIVED, BY REFERENCE FROM HEADQUARTERS, SERVICES OF SUPPLY, FISCAL DIVISION, YOUR LETTER OF JULY 7, 1942, AS FOLLOWS:

1. INCLOSED IS A REQUEST FOR ADVANCE DECISION, ADDRESSED TO THE COMPTROLLER GENERAL OF THE UNITED STATES, SUPPORTED BY BUREAU VOUCHER NO. C.O. - 830, $509.96, SUBMITTED FOR REIMBURSEMENT BY THE SHERWIN WILLIAMS DEFENSE CORPORATION UNDER COST-PLUS-A-FIXED-FEE CONTRACT NO. W-ORD-522 DA- W-ORD-18, DATED AUGUST 18, 1941.

2. ATTENTION IS INVITED TO VARIOUS CORRESPONDENCE ATTACHED TO THE VOUCHER. IT WILL BE NOTED THAT 2ND ENDORSEMENT TO LETTER OF THE CONTRACTOR, DATED APRIL 23, 1942, STATES THAT THE APPROVAL OF THE FIELD AUDITOR AND THE CONTRACTING OFFICER'S REPRESENTATIVE AS INDICATED ON FORM 1034 IS SUBJECT TO THE PROVISION THAT THIS VOUCHER WILL BE FORWARDED FOR AN ADVANCE DECISION.

3. APPARENTLY, PAYMENT WAS MADE BY THE CONTRACTOR AS THE RESULT OF A HEARING BEFORE THE LABOR BOARD, BUT DOUBT EXISTS AS TO THE PROPRIETY OF MAKING REIMBURSEMENT, INASMUCH AS THE VOUCHER COVERS PAYMENT OF WAGES FOR SERVICES WHICH WERE NOT PERFORMED.

AN EXPLANATION OF THE EXPENDITURE IS SET FORTH BY THE CONTRACTOR IN A LETTER DATED MAY 23, 1942, TO YOU, AS FOLLOWS:

1. REFERENCE IS MADE TO PREVIOUS CORRESPONDENCE ON THIS MATTER COMMENCING WITH OUR LETTER TO YOU DATED APRIL 23, 1942.

2. OUR VOUCHER IN THE TOTAL AMOUNT OF $509.96 IS HEREWITH ATTACHED AND REPRESENTS ITEMS OF WAGES PAID THREE (3) EMPLOYEES. REQUEST IS HEREBY MADE FOR AN ADVANCE DECISION BY THE COMPTROLLER GENERAL ON THE QUESTION OF THE REIMBURSEMENT OF THESE ITEMS.

3. THE THREE EMPLOYEES INVOLVED WERE TERMINATED ON JANUARY 20, 1942. THE EMPLOYEES, THROUGH THE UNITED CONSTRUCTION WORKERS' ORGANIZING COMMITTEE, AFFILIATED WITH THE C.I.O., FILED A COMPLAINT WITH THE NATIONAL LABOR RELATIONS BOARD, FOURTEENTH REGIONAL OFFICE, ST. LOUIS, MISSOURI, IN CASE NO. XIV-C-606. THE COMPLAINT CHARGED THE SHERWIN-WILLIAMS DEFENSE CORPORATION WITH REFUSAL TO BARGAIN COLLECTIVELY WITH UNION REPRESENTATION AND TERMINATION OF THE THREE EMPLOYEES BECAUSE OF UNION ACTIVITY.

4. INVESTIGATION OF THE COMPLAINT BY THE LABOR BOARD DEVELOPED EVIDENCE STRONGLY SUPPORTING THE CHARGES, AND IN AN INFORMAL CONFERENCE WITH THE BOARD, BECAUSE OF THE EVIDENCE, A PROBABLE DECISION IN FAVOR OF THE EMPLOYEES WAS INDICATED. IN VIEW OF SUCH A PROBABLE ADVERSE DECISION, A CONFERENCE WITH THE UNION WAS HELD AND A SETTLEMENT WAS TENTATIVELY AGREED UPON, WHICH SETTLEMENT WAS APPROVED IN WRITING BY THE COMMANDING OFFICER, ILLINOIS ORDNANCE PLANT, MAJOR NORMAN E. GILLESPIE. THE TERMS OF THE SETTLEMENT WERE LESS ONEROUS THAN THE DECISION OF THE LABOR BOARD WOULD HAVE BEEN AND FOR OTHER REASONS HAD STRATEGICAL VALUE FROM THE STANDPOINT OF HANDLING LABOR PROBLEMS AT THE ORDNANCE PLANT, AND FOR THAT REASON IT WAS ADVISABLE TO ENTER INTO THE SETTLEMENT.

5. PAYMENT OF LOST WAGES TO THE THREE EMPLOYEES INVOLVED DURING THE PERIOD OF SEVERANCE WAS ONE OF THE CONDITIONS OF SETTLEMENT, AND ACCORDINGLY THE AMOUNTS WERE DETERMINED AND PAYMENT MADE AS FOLLOWS:

CHART (1) WAGES FROM JANUARY 20, 1942 (DATE OF TERMINATION) TO

AND INCLUDING MARCH 25, 1942 ----------------------- $318.82

(REINSTATED AS OF MARCH 26, 1942)

LESS EARNINGS AS FIREMAN FOR THE CITY OF HERRIN,

ILLINOIS ------------------------------------------- $232.00

NET ------------------------------------------ $ 86.82 (2) WAGES FROM JANUARY 20, 1942 (DATE OF TERMINATION) TO

AND INCLUDING MARCH 25, 1942 ----------------------- $318.82

(REINSTATED AS OF MARCH 26, 1942)

LESS EARNINGS AS FIREMAN FOR THE CITY OF MARION,

ILLINOIS ------------------------------------------- $181.55

NET ------------------------------------------ $137.27 (3) WAGES FROM JANUARY 20, 1942 (DATE OF TERMINATION) TO

AND INCLUDING MARCH 25, 1942 ----------------------- $318.82

(REINSTATED AS OF MARCH 26, 1942)

LESS EARNINGS AS GUARD AT MENARD PRISON, CHESTER,

ILLINOIS - 9 DAYS ---------------------------------- $ 32.95

NET ------------------------------------------ $285.87

6. IT IS REQUESTED THAT THESE PAYMENTS BE APPROVED FOR REIMBURSEMENT FOR THE FOLLOWING EASONS:

(A) THEY WERE PAID BY VIRTUE OF AN AGREEMENT MADE NECESSARY BECAUSE OF AN IMPENDING ORDER OF THE LABOR BOARD, WHICH ORDER WOULD HAVE BEEN LESS TO THE INTEREST OF THE PLANT THAN THE TERMS OF THE SETTLEMENT.

(B) THE TERMS OF THE SETTLEMENT WERE APPROVED BY THE COMMANDING OFFICER BEFORE THEY WERE CONCLUDED.

(C) IF THE LOST EARNINGS HAD NOT BEEN PAID UNDER THE SETTLEMENT, THE CASE WOULD HAVE GONE TO DECISION BY THE LABOR BOARD, RESULTING IN A DELAY WHICH WOULD INCUR INCREASED LOSSES, THE PAYMENT OF WHICH WOULD HAVE BEEN ORDERED BY THE BOARD.

(D) THE VOUCHERS HAVE BEEN APPROVED FOR PAYMENT BY THE CONTRACTING OFFICER'S REPRESENTATIVE UNDER PARAGRAPH R, ARTICLE V-A-1 (PAGE 21) OF THE PRIME CONTRACT, NO. W-ORD-522, WHICH READS AS FOLLOWS:

"SUCH OTHER ITEMS AS SHOULD, IN THE OPINION OF THE CONTRACTING OFFICER, BE INCLUDED IN COST OF THE WORK. WHEN SUCH AN ITEM IS ALLOWED BY THE CONTRACTING OFFICER, IT SHALL BE SPECIFICALLY CERTIFIED AS BEING ALLOWED UNDER THIS PARAGRAPH.'

7. AS STATED ABOVE, ADVANCE OPINION OF THE COMPTROLLER GENERAL AS TO REIMBURSEMENT OF THESE ITEMS IS REQUESTED.

BY THIRD ENDORSEMENT OF AUGUST 1, 1942, TO THE CHIEF OF FINANCE, THE ORDNANCE DEPARTMENT MADE THE FOLLOWING STATEMENT WITH RESPECT TO THE EXPENDITURE FOR WHICH REIMBURSEMENT IS CLAIMED ON THE VOUCHER:

1. WHILE THE ORDNANCE DEPARTMENT IS OF THE OPINION THAT THE ITEM IN QUESTION IS REIMBURSABLE UNDER THE TERMS OF THE CONTRACT ( NO. W-ORD- 522DA-W-ORD-18) IT DOES NOT, IN VIEW OF THE FACT THAT THE QUESTION IS ONE OF IMPORT UPON WHICH THERE IS NO DECISION, OBJECT TO THE SUBMISSION OF THE CASE TO THE COMPTROLLER GENERAL. THE VIEWPOINT OF THE COMMANDING OFFICER, ILLINOIS ORDNANCE PLANT, EXPRESSED IN 2ND INDORSEMENT DATED JUNE 4, 1942, IS THEREFORE CONCURRED IN.

CONTRACT NO. W-ORD-522, DA-W-ORD-18, ENTERED INTO ON A COST-PLUS-A FIXED- FEE BASIS AS AUTHORIZED BY THE ACT OF JULY 2, 1940, 54 STAT. 712, PROVIDES UNDER TITLE I THEREOF FOR MANAGEMENT SERVICE IN CONNECTION WITH THE DESIGNING, CONSTRUCTION, AND EQUIPPING OF AN ORDNANCE MANUFACTURING PLANT AT OR NEAR CARBONDALE, ILLINOIS; UNDER TITLE II FOR DETERMINATION OF THE PRODUCTION EQUIPMENT REQUIREMENTS FOR THE PLANT AND FOR THE PROCUREMENT OF THE EQUIPMENT REQUIRED THEREFOR; UNDER TITLE III FOR TRAINING OF KEY PERSONNEL; AND UNDER TITLE IV FOR NECESSARY PREPARATION FOR THE SUBSEQUENT OPERATION OF SAID PLANT, INCLUDING THE NECESSARY TRAINING OF PERSONNEL IN ADDITION TO THE KEY PERSONNEL TRAINED PURSUANT TO TITLE III OF THE CONTRACT, IN CONSIDERATION OF THE REIMBURSEMENT BY THE GOVERNMENT OF THE CONTRACTOR'S EXPENDITURES AS PROVIDED IN THE CONTRACT, PLUS STIPULATED FIXED FEES.

THE VOUCHER SUBMITTED IS SUPPORTED BY THE CONTRACTOR'S ORIGINAL PAY ROLL NO.'A," EVIDENCING PAYMENT OF WAGES TO THE EMPLOYEES DURING THE PERIOD FROM JANUARY 20 TO MARCH 25, 1942, AND BY RECEIPTS SIGNED BY THE EMPLOYEES AS EVIDENCE OF THE RECEIPT BY THEM OF THE AMOUNTS IN QUESTION. ALSO, THE PAY ROLL CONTAINS A STATEMENT BY THE REPRESENTATIVE OF THE CONTRACTING OFFICER THAT THE VOUCHER WAS BEING APPROVED FOR PAYMENT BY HIM UNDER SUBPARAGRAPH R OF ARTICLE V-A 1 OF THE CONTRACT, WHICH PROVIDES, IN PART, THAT THE CONTRACTOR SHALL BE REIMBURSED "SUCH OTHER ITEMS AS SHOULD, IN THE OPINION OF THE CONTRACTING OFFICER, BE INCLUDED IN THE COST OF THE WORK. * * *"

WITH REFERENCE TO THE QUESTION PRESENTED, THERE WAS RECEIVED FOR CONSIDERATION IN CONNECTION WITH YOUR SUBMISSION A LETTER DATED SEPTEMBER 28, 1942, FROM THE SECRETARY OF WAR, IN PERTINENT PART, AS FOLLOWS:

THAT THE PROBLEM IS ONE OF CONCERN IS INDICATED BY THE FACT THAT THE ARMY AND NAVY ON JUNE 22, 1942, ISSUED A STATEMENT OF LABOR POLICY TOBE FOLLOWED IN GOVERNMENT-OWNED, CONTRACTOR-OPERATED PLANTS, WHICH POLICY WAS WORKED OUT IN COLLABORATION WITH REPRESENTATIVES OF THE AMERICAN FEDERATION OF LABOR, AND THE CONGRESS OF INDUSTRIAL ORGANIZATION. THIS STATEMENT OF POLICY EMPHASIZED THE POINT THAT THESE PLANTS EMBODY A NEW AND UNIQUE TRIPARTITE RELATIONSHIP AMONG GOVERNMENT, LABOR AND MANAGEMENT, THE RELATIONSHIP BEING SET UP TO GET MAXIMUM PRODUCTION OF ( ORDNANCE) MATERIALS AND SUPPLIES.

THE PERTINENT PART OF SUCH POLICY WITH RESPECT TO THE QUESTION NOW BEFORE YOUR OFFICE, IS CONTAINED IN SECTIONS 5 AND 9 OF SUCH STATEMENT OF POLICY, READING AS FOLLOWS:

"5. (A) DISCHARGES DIRECTED BY THE WAR OR THE NAVY DEPARTMENT FOR SUSPICION OF SUBVERSIVE ACTIVITIES WILL BE HANDLED IN ACCORDANCE WITH THE PROVISIONS OF THE - JOINT MEMORANDUM ON REMOVAL OF SUBVERSIVES FROM NATIONAL DEFENSE PROJECTS OF IMPORTANCE TO ARMY OR NAVY PROCUREMENT-, DATED JAN. 10, 1942.

"/B) DISCHARGES DIRECTED BY THE ARMY OR NAVY OFFICER IN CHARGE IN THE INTEREST OF THE PLANT SECURITY WILL BE HANDLED IN THE FOLLOWING MANNER: (1) THE OFFICER, OR HIS REPRESENTATIVE, WILL DIRECT THE CONTRACTOR TO SUSPEND THE EMPLOYEE IN QUESTION IMMEDIATELY; (2) THE EMPLOYEE WILL BE ADVISED IN DETAIL OF THE SPECIFIC REASONS FOR HIS SUSPENSION AND OF HIS RIGHT TO A HEARING; (3) IF REQUESTED, A HEARING WILL BE HELD BY THE OFFICER, OR HIS REPRESENTATIVE, WITHIN A REASONABLE PERIOD, AND AT SUCH HEARING THE SUSPENDED EMPLOYEE WILL HAVE AN OPPORTUNITY TO PRODUCE WITNESSES AND PRESENT EVIDENCE AND TO BE ASSISTED BY COUNSEL; (4) BASED ON SUCH HEARING, THE OFFICER, OR HIS REPRESENTATIVE WILL DIRECT THE REINSTATEMENT (WITH AUTHORITY TO GRANT BACK PAY) OR THE DISCHARGE OF SUCH EMPLOYEE; (5) AN EMPLOYEE SO DISCHARGED WILL HAVE THE RIGHT, UPON REQUEST, TO HAVE HIS CASE REVIEWED BY THE WAR OR NAVY DEPARTMENT.

"/C) DISCHARGES EFFECTED BY THE CONTRACTOR OR HIS REPRESENTATIVES FOR VIOLATION OF PLANT RULES, INEFFICIENCY, OR OTHER REASONS, WILL BE SUBJECT TO REVIEW THROUGH THE ESTABLISHED GRIEVANCE PROCEDURE.

"9. THIS STATEMENT OF POLICY SHALL BE APPLICABLE TO ALL SUCH PLANTS EXCEPT THAT WHERE ANY PROVISION OF THE STATEMENT CONFLICTS WITH A PROVISION IN AN EXISTING CONTRACT SUCH CONTRACT WILL NOT BE ALTERED EXCEPT BY MUTUAL CONSENT.'

SECTION 5, ABOVE QUOTED, ESTABLISHES THE FACT THAT THERE WILL BE DISCHARGES, SETS UP A PROCEDURE TO BE FOLLOWED BY THE PARTIES IF SUCH EVENT OCCURS, AND AS A REMEDY TO THE AGGRIEVED PERSON IN CASE OF A WRONGFUL DISCHARGE BY THE CONTRACTING OFFICER OR HIS REPRESENTATIVE, DIRECTS REINSTATEMENT WITH AUTHORITY IN THE CONTRACTING OFFICER TO GRANT BACK PAY. IN THE EVENT THE DISCHARGE IS BY THE CONTRACTOR OR HIS REPRESENTATIVE, IT DIRECTS ACTION IN ACCORDANCE WITH THE ESTABLISHED GRIEVANCE PROCEDURE, AND SUCH PROCEDURES IN THE MODERN TYPE OF COLLECTIVE BARGAINING AGREEMENT PROVIDE FOR REVIEW OF DISCHARGES THROUGH VARIOUS STEPS ENDING WITH ARBITRATION. GENERALLY THE ARBITRATORS ARE EMPOWERED TO AWARD BACK PAY IN PROPER CASES.

THE GRIEVANCE PROCEDURE FOLLOWED IN THE PRESENT CASE APPEARS TO BE IN ACCORDANCE WITH THAT SET UP IN THE WAR- NAVY STATEMENT OF POLICY EVEN THOUGH THE EVENTS IN CASE OCCURRED BEFORE THIS STATEMENT ISSUED. IN THE PRESENT CASE, THERE WAS A DISCHARGE OF CERTAIN EMPLOYEES, WHICH EMPLOYEES FILED A COMPLAINT WITH THE NATIONAL LABOR RELATIONS BOARD AND IN THE INVESTIGATION SUPPORTED THEIR CONTENTION THAT THE DISCHARGE WAS WRONGFUL, WHEREUPON THE MANAGEMENT BY CONFERENCE ADJUSTED THE MATTER AND AWARDED THE EMPLOYEES BACK PAY COVERING THE PERIOD OF SEVERANCE.

THE FACTS INDICATE, THEREFORE, THAT THE INSTANT CASE ( CLASS (C)BELOW) IS ONE IN WHICH, UNDER PRESENT DAY LABOR RELATIONS PRACTICES, BACK PAY IS USUALLY AWARDED FOR WRONGFUL LAYOFF OR DISCHARGE. SUCH BACK PAY MAY BE REQUIRED OF THE EMPLOYER---

(A) PURSUANT TO AWARDS UNDER THE NATIONAL LABOR RELATIONS ACT BY THE NATIONAL LABOR RELATIONS BOARD WHERE BY DECISION OR AGREEMENT OF SETTLEMENT A FINDING IS MADE OF UNFAIR LABOR PRACTICE DISCHARGE FOR REASONS CONNECTED WITH UNION ACTIVITIES BY THE EMPLOYEES INVOLVED.

(B) PURSUANT TO AWARDS MADE BY ARBITRATION TRIBUNALS SET UP UNDER COLLECTIVE BARGAINING AGREEMENTS. IN THESE CASES THE AWARDS WOULD ONLY IN RARE INSTANCES BE CONNECTED WITH UNFAIR LABOR PRACTICE DISCHARGES. THE DISCHARGE OR LAYOFF WILL MOST USUALLY BE FOR ALLEGED INEFFICIENCY OR OTHER REASON, REVIEW OF WHICH IS EXPRESSLY PROVIDED BY THE COLLECTIVE BARGAINING CONTRACT.

(C) PURSUANT TO SETTLEMENT AGREEMENTS BETWEEN THE CONTRACTOR AND EMPLOYEES (USUALLY ACTING THROUGH UNION REPRESENTATIVES) AND CONSEQUENT TO REVIEW UNDER A GRIEVANCE PROCEDURE CALLING FOR NEGOTIATION IN SUCCESSIVE STEPS BETWEEN EMPLOYEE REPRESENTATIVES AND CONTRACTOR REPRESENTATIVES. THESE CASES ALSO THE ISSUES INVOLVED WILL NOT USUALLY BE CONCERNED WITH UNFAIR LABOR PRACTICES BUT ALMOST ALWAYS WITH DISPUTES CONCERNING ALLEGED INEFFICIENCY OR LAYOFFS IN VIOLATION OF SENIORITY RULES OR THE LIKE. UNDER THE TERMS OF THE INSTANT AND OTHER COST-PLUS-A-FIXED-FEE CONTRACTS AND LOOKING TO SECTION 5 OF THE ABOVE QUOTED ARMY-NAVY LABOR POLICY, THE CONTRACTOR WOULD BE ENTITLED TO REIMBURSEMENT FOR EXPENDITURES COVERING BACK PAY UPON PAYMENT OF THE SAME AT THE DIRECTION OF THE CONTRACTING OFFICER, IN A CASE WHERE THE DISCHARGE HAD BEEN DIRECTED BY THE CONTRACTING OFFICER OF THE PLANT, AND SUBSEQUENT INVESTIGATION SHOWED THE DISCHARGE TO BE WRONGFUL.

FOLLOWING THE SAME REASONING, IT WOULD APPEAR THAT THERE MAY BE CASES AS THE PRESENT ONE WHERE THE CONTRACTOR'S REPRESENTATIVES DETERMINE THAT THE DISCHARGE OF A CERTAIN PARTY IS NECESSARY, MAKE IT, AND UPON INVESTIGATION AND A SHOWING THAT SUCH DISCHARGE WAS WRONGFUL, REINSTATE THE EMPLOYEE AND AWARD BACK PAY. IN CLAIMING REIMBURSEMENT FOR SUCH BACK PAY IT IS THE BELIEF OF ORDNANCE THAT THE CONTRACTOR IS ENTITLED TO TREATMENT NO LESS FAVORABLE THAN THAT WHICH WOULD BE GIVEN HIM IN THE SITUATION WHERE THE WRONGFUL DISCHARGE WAS DIRECTED BY THE CONTRACTING OFFICER. EVEN IF SOME MERE NEGLIGENCE WERE SHOWN IN THE HANDLING OF THE DISCHARGE, NEVERTHELESS, THE EXPENSE IS ONE FOR WHICH THE CONTRACTOR IS ENTITLED TO INDEMNIFICATION THROUGH REIMBURSEMENT. OTHERWISE, HE IS HELD TO A HIGHER STANDARD OF ACTION THAN THAT TO WHICH THE GOVERNMENT ACTING THROUGH THE CONTRACTING OFFICER IS HELD.

IT IS THE BELIEF OF ORDNANCE, TOO, THAT NEGLIGENCE SHOULD NOT BE INFERRED AS A MATTER OF LAW SOLELY FROM THE FACT THAT A DISCHARGE OR LAYOFF IS FOUND TO HAVE BEEN IMPROPER, OR IS AGREED BY A CONTRACTOR TO HAVE BEEN IMPROPER, EITHER IN THE INSTANT SITUATION OR THOSE ABOVE REFERRED TO. THIS CONCLUSION IS REACHED FROM CONSIDERATION OF THE FOLLOWING:

(A) EACH OF THE GOVERNMENT-OWNED, PRIVATELY-OPERATED FACILITIES REQUIRES THE EMPLOYMENT OF VERY LARGE NUMBERS OF EMPLOYEES IN A TYPE OF OPERATION WITHOUT ANY BACKGROUND OR PREVIOUS EXPERIENCE. MOST OF THE SUPERVISORY PERSONNEL HAD TO BE TRAINED IN A NEW KIND OF WORK. EMPHASIS IN EVERY CASE WAS ON SPEED TO THE END OF HAVING EACH FACILITY PRODUCE AS QUICKLY AS POSSIBLE AND IN MAXIMUM AMOUNTS CONDUCIVE WITH SAFE OPERATION, WHICH IS A PARAMOUNT CONSIDERATION. THERE HAS NOT BEEN SUFFICIENT TIME, THEREFORE, TO EDUCATE SUFFICIENTLY PERSONNEL IN THE OBLIGATIONS AND RESPONSIBILITIES IMPOSED UPON THEM IN THE LABOR RELATIONS FIELD. THE NECESSITY FOR GREATER PRODUCTION HAS NECESSITATED THE SUBORDINATION OF EDUCATIONAL WORK OF THIS KIND. NEVERTHELESS AS A MATTER OF LAW THE CONTRACTOR-OPERATOR IS HELD RESPONSIBLE FOR THE IMPROPER PRACTICES OF THE LOWEST LEVELS OF SUPERVISORY PERSONNEL, EVEN THOUGH SUCH CONDUCT IS NOT APPROVED BY, AND INDEED MAY BE CONTRARY TO EXPRESS INSTRUCTIONS OF, TOPSIDE MANAGEMENT. VERY FREQUENTLY THE FACTS ESTABLISHING UNFAIR LABOR PRACTICES IN THE HANDLING OF DISCHARGES AND LAYOFFS ARE NOT DISCLOSED UNTIL A PROCEEDING RESPECTING THE DISCHARGE OR LAYOFF HAS BEEN BROUGHT. WHEN DISCLOSED, TOPSIDE MANAGEMENT FOR THE FIRST TIME LEARNS THE FACTS WHICH LEGALLY REQUIRE REINSTATEMENT WITH BACK PAY. THE DISCHARGE OR LAYOFF QUITE USUALLY HAS BEEN BROUGHT ABOUT BY LOWER LEVEL SUPERVISION IN THE HONEST BELIEF OF ITS PROPRIETY AND IN IGNORANCE OF THE LEGAL PRINCIPLES MAKING IT IMPROPER. NO ELEMENT OF NEGLIGENCE OR IMPROPER INTENT IS INVOLVED.

(B)IT IS NOW AN ACCEPTED PRINCIPLE OF LABOR RELATIONS THAT COLLECTIVE BARGAINING AGREEMENTS SHOULD PROVIDE FOR ARBITRATION OF DISPUTES ARISING FROM LAYOFFS AND DISCHARGES WITHOUT REGARD TO WHETHER THE REASON FOR THE LAYOFF OR DISCHARGE HAS ANY CONNECTION WITH UNION ACTIVITIES. THE NATIONAL WAR LABOR BOARD AND ALL OTHER GOVERNMENTAL AGENCIES CONCERNED URGE UPON, AND INDEED DIRECT, ACCEPTANCE BY EMPLOYERS OF THE PRINCIPLE OF ARBITRATION TO SETTLE DISPUTES OF THIS NATURE. WHERE COLLECTIVE BARGAINING AGREEMENTS CALL FOR ARBITRATION OF THESE CASES, THE CASES REVIEWED INCLUDE CASES OF DISCHARGE OR LAYOFF DIRECTED BECAUSE OF ALLEGED INEFFICIENCY OF EMPLOYEES INVOLVED. MANAGEMENT MAY BE PRESUMED TO EXERCISE AN HONEST JUDGMENT IN ITS CONCLUSIONS REGARDING EFFICIENCY AND YET ON REVIEW A BOARD OF ARBITRATION MAY NOT CONCUR IN MANAGEMENT'S JUDGMENT AND, THEREFORE, DIRECT REINSTATEMENT WITH BACK PAY. HERE AGAIN, NO ELEMENT OF NEGLIGENCE OR INTENT WILL BE INVOLVED.

(C) THE STATEMENT OF LABOR POLICY PROMULGATED BY THE SECRETARIES OF WAR AND THE NAVY SET FORTH A SENIORITY RULE APPLICABLE TO THESE FACILITIES. THIS RULE READS: "SENIORITY SHALL BE A DETERMINING FACTOR IN MATTERS AFFECTING LAYOFF AND RE-EMPLOYMENT, TRANSFERS, DEMOTIONS AND PROMOTIONS, ONLY IF OTHER FACTORS OF ABILITY AND APTITUDE ARE EQUAL.' THIS RULE DIFFERS FROM THAT GENERALLY APPLIED IN PRIVATE INDUSTRY WHERE SUFFICIENCY RATHER THAN EQUALITY OF APTITUDE AND ABILITY IS THE TEST. BECAUSE OF THE VERY HAZARDOUS CHARACTER OF THE OPERATIONS AT THESE FACILITIES IT WAS DEEMED NECESSARY TO LAY OFF, PROMOTE AND REHIRE ON THE BASIS PRIMARILY OF APTITUDE AND ABILITY RATHER THAN OF LENGTH OF SERVICE. HIS JUDGMENT HOWEVER, OF RELATIVE ABILITIES OF EMPLOYEES IS SUBJECT TO REVIEW UNDER GRIEVANCE PROCEDURE, WHETHER OR NOT INCORPORATED IN A COLLECTIVE BARGAINING AGREEMENT. A JUDGMENT HONESTLY ARRIVED AT MAY ON REVIEW NOT BE CONCURRED IN AND REINSTATEMENT WITH BACK PAY FOR SOME EMPLOYEES WILL BE DIRECTED. HOWEVER, NO ELEMENT OF NEGLIGENCE OR INTENT WILL BE INVOLVED.

IT IS THE OPINION OF ORDNANCE THAT DENIAL TO THE CONTRACTOR OF REIMBURSEMENT FOR BACK PAY PAID ITS WRONGFULLY DISCHARGED EMPLOYEES BASED SOLELY ON AN INFERENCE THAT THE CONTRACTOR'S ACTION IN DISCHARGING THE EMPLOYEE IS GROUNDED IN NEGLIGENCE, AND WITHOUT REGARD TO WHETHER SUCH CONTRACTOR'S ACTION IN DISCHARGING OR LAYING OFF IS THE RESULT OF BAD FAITH OR WILLFUL MISCONDUCT, WOULD LEAD TO THE FOLLOWING UNFORTUNATE AND DANGEROUS RESULTS.

(A) CONTRACTORS WILL NOT EXERCISE THEIR RESPONSIBILITY FOR SAFE AND EFFICIENT CONDUCT OF THEIR OPERATIONS BECAUSE THEY WILL NOT MAKE DISCHARGES AND LAYOFFS WHERE THEY RUN THE RISK THAT REVERSAL OF THEIR JUDGMENT BY APPROPRIATE AUTHORITY WILL MEAN THAT THEY CANNOT BE REIMBURSED FOR BACK PAY AWARDS. THEY WILL RETAIN INEFFICIENT EMPLOYEES OR EMPLOYEES WHOSE CONDUCT ENDANGERS THE SAFETY OF THEMSELVES AND OTHERS, EVEN THOUGH IN THEIR HONEST JUDGMENT SUCH EMPLOYEES SHOULD BE DISCHARGED.

(B) CONTRACTORS IN NEGOTIATING COLLECTIVE BARGAINING AGREEMENTS WILL REFUSE TO INCLUDE PROVISIONS FOR ARBITRATION THEREIN AND THEREBY BE OUT OF LINE WITH NATIONAL POLICY TO ENCOURAGE ARBITRATION AS A MEANS OF SETTLEMENT OF LABOR DISPUTES.

(C) IN NEGOTIATIONS FOR VOLUNTARY SETTLEMENT OF LABOR DISPUTES, THE REFUSAL OF CONTRACTORS TO CONSIDER BACK PAY AS A METHOD OF ADJUSTMENT WILL AGGRAVATE SITUATIONS WHICH MIGHT OTHERWISE BE SATISFACTORILY DISPOSED OF, AND PERHAPS LEAD TO STOPPAGES AND STRIKES INTERFERING WITH PRODUCTION.

IN ARRIVING AT THE CONCLUSION THAT THE AMOUNT CLAIMED BY THE CONTRACTOR IN CASE IS A REIMBURSABLE ITEM UNDER THE CONTRACT, THE ORDNANCE DEPARTMENT HAS BORNE IN MIND THE NECESSITY FOR CLOSE RELATIONSHIPS AND CONTINUAL HARMONY BETWEEN THE GOVERNMENT, LABOR AND MANAGEMENT. THE APPROVAL OF THE CONTRACTING OFFICER'S REPRESENTATIVE WAS GIVEN THE VOUCHER WITH THIS IN MIND, AND WHILE ADVANCE DECISION WAS REQUESTED, THIS SHOULD NOT BE CONSTRUED AS CONFESSING A DOUBT ON THE PART OF THE CONTRACTING OFFICER'S REPRESENTATIVE AS TO THE REIMBURSABILITY OF SUCH ITEMS. RATHER, IT SHOULD BE CONSTRUED AS A WILLINGNESS ON HIS PART TO HAVE PLACED BEFORE YOUR OFFICE, AS SOON AS POSSIBLE, A QUESTION OF IMPORT ON WHICH THERE HAS BEEN NO DECISION AS YET RENDERED.

FOR YOUR INFORMATION, IT MAY BE STATED THAT THE ABOVE VIEW IS CONCURRED IN BY THE WAR DEPARTMENT. IT IS HOPED, THEREFORE, THAT ON THE BASIS OF THE FILE BEFORE YOU, SUPPLEMENTED BY THIS ADDITIONAL MATERIAL, A FAVORABLE DECISION MAY BE GIVEN, AND REIMBURSEMENT ALLOWED.

WHILE THE TERMS OF THE CONTRACT ARE BROAD AND LIBERAL, AND CONTEMPLATE THAT THE ACTUAL COST OF THE WORK AND THE RISK THEREOF ARE TO BE ASSUMED BY THE GOVERNMENT AND THAT THE CONTRACTOR IS TO BE REIMBURSED ALL EXPENSES ACTUALLY INCURRED IN CONNECTION WITH PERFORMANCE OF THE WORK, PLUS LIMITED FIXED FEES AS COMPENSATION FOR ITS SERVICES, GENERAL OVERHEAD, ETC., MANIFESTLY THE TERMS OF THE CONTRACT MAY NOT BE CONSTRUED AS IMPOSING UPON THE GOVERNMENT COSTS INCURRED AS A RESULT OF THE CONTRACTOR'S OWN FAULT OR FOLLY. 21 COMP. GEN. 149. IT IS TRUE THAT THE CONTRACT, IN EFFECT, GUARANTEES TO THE CONTRACTOR LIMITED FIXED FEES FOR ITS SERVICES IN ADDITION TO REIMBURSEMENT OF THE ACTUAL COST OF THE WORK, BUT THE PROVISIONS THEREOF CONTEMPLATE THAT THE FEES ARE TO BE PAID TO OBTAIN FAITHFUL PERFORMANCE OF THE WORK BY THE CONTRACTOR AND THAT THE PROVISION FOR REIMBURSEMENT OF ACTUAL COSTS ARE NOT TO BE TAKEN AS AUTHORITY FOR IMPOSING UPON THE GOVERNMENT COSTS WHICH THE CONTRACTOR INCURRED AS A CONSEQUENCE OF HAVING VIOLATED SOME DUTY OR RESPONSIBILITY IMPOSED UPON IT BY LAW AND WHICH DID NOT IN ANY WAY FURTHER THE PROSECUTION OF THE WORK COVERED BY THE CONTRACT.

THE NATIONAL LABOR RELATIONS ACT, APPROVED JULY 5, 1935, 49 STAT. 449, DECLARED IT TO BE THE POLICY OF THE UNITED STATES TO ELIMINATE THE CAUSES OF CERTAIN SUBSTANTIAL OBSTRUCTIONS TO THE FREE FLOW OF COMMERCE AND TO MITIGATE AND ELIMINATE THESE OBSTRUCTIONS, WHEN THEY HAVE OCCURRED, BY ENCOURAGING THE PRACTICE AND PROCEDURE OF COLLECTIVE BARGAINING AND BY PROTECTING THE EXERCISE BY WORKERS OF FULL FREEDOM OF ASSOCIATION, SELF- ORGANIZATION, AND DESIGNATION OF REPRESENTATIVES OF THEIR OWN CHOOSING, FOR THE PURPOSE OF NEGOTIATING THE TERMS AND CONDITIONS OF THEIR EMPLOYMENT OR OTHER MUTUAL AID OR PROTECTION. SECTION 7 OF THE ACT, 49 STAT. 452, PROVIDES THAT EMPLOYEES SHALL HAVE THE RIGHT TO SELF- ORGANIZATION; TO FORM, JOIN, OR ASSIST LABOR ORGANIZATIONS; TO BARGAIN COLLECTIVELY THROUGH REPRESENTATIVES OF THEIR OWN CHOOSING; AND TO ENGAGE IN CONCERTED ACTIVITIES FOR THE PURPOSE OF COLLECTIVE BARGAINING OR OTHER MUTUAL AID OR PROTECTION. SECTION 8, 49 STAT. 452, DEFINES "UNFAIR LABOR PRACTICES," AND SECTION 10 (C), 49 STAT. 454, EMPOWERS THE NATIONAL LABOR RELATIONS BOARD, WHEN IT HAS FOUND THE EMPLOYER GUILTY OF UNFAIR LABOR PRACTICES, TO REQUIRE HIM TO DESIST FROM SUCH PRACTICES AND TO TAKE SUCH AFFIRMATIVE ACTION, INCLUDING REINSTATEMENT OF EMPLOYEES WITH OR WITHOUT BACK PAY, AS WILL EFFECTUATE THE POLICIES OF THE ACT.

IT THUS APPEARS THAT THE FUNDAMENTAL PURPOSE OF THE STATUTE IS TO SAFEGUARD THE RIGHTS OF EMPLOYEES TO SELF-ORGANIZATION AND TO SELECT REPRESENTATIVES OF THEIR OWN CHOOSING FOR COLLECTIVE BARGAINING OR OTHER MUTUAL PROTECTION, WITHOUT RESTRAINT OR COERCION BY THEIR EMPLOYER. WHILE THE STATUTE IS CLEARLY FOR APPLICATION IN ANY CASE AFFECTING COMMERCE WHERE THE EMPLOYER VIOLATES THE RIGHT OF EMPLOYEES TO SELF-ORGANIZATION AND TO BARGAIN COLLECTIVELY THROUGH REPRESENTATIVES OF THEIR OWN CHOOSING, IT DOES NOT AFFECT THE NORMAL RIGHT OF THE EMPLOYER TO SELECT ITS EMPLOYEES OR TO DISCHARGE THEM FOR CAUSES NOT INHIBITED BY THE ACT. THIS CONNECTION, ATTENTION IS INVITED TO THE FOLLOWING QUOTATION FROM THE OPINION OF THE SUPREME COURT OF THE UNITED STATES IN NATIONAL LABOR RELATIONS BOARD V. JONES AND LAUGHLIN STEEL CORP., 301 U.S. 1, PAGES 45- 46:

* * * THE ACT DOES NOT INTERFERE WITH THE NORMAL EXERCISE OF THE RIGHT OF THE EMPLOYER TO SELECT ITS EMPLOYEES OR TO DISCHARGE THEM. THE EMPLOYER MAY NOT, UNDER COVER OF THAT RIGHT, INTIMIDATE OR COERCE ITS EMPLOYEES WITH RESPECT TO THEIR SELF-ORGANIZATION AND REPRESENTATION, AND, ON THE OTHER HAND, THE BOARD IS NOT ENTITLED TO MAKE ITS AUTHORITY A PRETEXT FOR INTERFERENCE WITH THE RIGHT OF DISCHARGE WHEN THAT RIGHT IS EXERCISED FOR OTHER REASONS THAN SUCH INTIMIDATION AND COERCION. THE TRUE PURPOSE IS THE SUBJECT OF INVESTIGATION WITH FULL OPPORTUNITY TO SHOW THE FACTS. WOULD SEEM THAT WHEN EMPLOYERS FREELY RECOGNIZE THE RIGHT OF THEIR EMPLOYEES TO THEIR OWN ORGANIZATIONS AND THEIR UNRESTRICTED RIGHT OF REPRESENTATION THERE WILL BE MUCH LESS OCCASION FOR CONTROVERSY IN RESPECT TO THE FREE AND APPROPRIATE EXERCISE OF THE RIGHT OF SELECTION AND DISCHARGE.

IN THE PRESENT CASE, THE PROVISIONS OF THE NATIONAL LABOR RELATIONS ACT WERE KNOWN TO THE CONTRACTOR AS WELL AS TO THE EMPLOYEES WHO FILED THE COMPLAINT WITH THE NATIONAL LABOR RELATION BOARD ( MIDLAND STEEL PRODUCTS COMPANY V. NATIONAL LABOR RELATIONS BOARD, 113 F/2D) 800), AND THE CONTRACTOR KNEW, OR SHOULD HAVE KNOWN, THAT IF ANY OF ITS EMPLOYEES WERE DISCHARGED BECAUSE OF UNION ACTIVITY OR FOR ANY CAUSE AFFECTED BY THE ACT, IT WOULD BE SUBJECT TO POSSIBLE REMEDIAL ACTION BY THE BOARD. WHETHER OR NOT AN EMPLOYER HAS FAILED TO DISCHARGE ITS OBLIGATIONS TO ITS EMPLOYEES UNDER THE ACT IS A QUESTION OF FACT TO BE ASCERTAINED FROM THE RECORD EVIDENCE PRESENTED TO THE BOARD, AND IF THE CHARGES FILED AGAINST THE CONTRACTOR IN THE INSTANT CASE HAD BEEN PERMITTED TO PROCEED TO A FINAL DETERMINATION AND A SETTLEMENT HAD BEEN IMPOSED UPON THE CONTRACTOR UNDER THE MANDATORY PROVISIONS OF THE ACT, IT IS APPARENT THAT THE CONTRACTOR WOULD HAVE HAD NO RIGHT TO CLAIM REIMBURSEMENT FROM THE GOVERNMENT FOR THE AMOUNT OF ANY CHARGES IMPOSED BY THE BOARD. TO HOLD OTHERWISE WOULD ENABLE THE CONTRACTOR TO DEFEAT ONE OF THE PURPOSES FOR WHICH THE STATUTE WAS ENACTED BY TRANSFERRING TO THE UNITED STATES CHARGES IMPOSED UPON, AND WHICH SHOULD BE BORNE BY, THE CONTRACTOR. IT APPEARS TO BE ESTABLISHED THAT THE CONTRACTING OFFICER WAS NOT IN ANY WAY RESPONSIBLE FOR THE DISCHARGE OF THE EMPLOYEES AND THAT THERE IS NO QUESTION OF GOVERNMENT INTERFERENCE OR RESPONSIBILITY IN THE MATTER. WHILE THE SETTLEMENT TO WHICH THE CONTRACTOR AGREED AND UNDER WHICH THE EMPLOYEES WERE REINSTATED AND PAID BACK WAGES WAS NOT MADE PURSUANT TO A FINAL DETERMINATION BY THE BOARD, THE CONCLUSION TO BE DRAWN FROM THE STATEMENTS MADE BY THE CONTRACTOR AND FROM THE OTHER REPORTS IN THE CASE IS THAT THE CONTRACTOR VIOLATES THE PROVISIONS OF THE ACT AND, REALIZING THAT FACT, ACCEPTED THE LESS ONEROUS SETTLEMENT IN PREFERENCE TO HAVING THE MATTER PROCEED TO A FINAL DETERMINATION BY THE BOARD. THIS OFFICE IS NOT UNMINDFUL OF THE "NECESSITY FOR CLOSE RELATIONSHIP AND CONTINUAL HARMONY BETWEEN THE GOVERNMENT, LABOR AND MANAGEMENT" IN THE PROSECUTION OF WORK UNDER THIS AND SIMILAR CONTRACTS AND OF THE LABOR PROBLEMS WHICH INEVITABLY WILL ARISE IN CONNECTION WITH THE CONSTRUCTION AND OPERATION OF PLANTS OF THE MAGNITUDE OF THE ONE HERE INVOLVED. HOWEVER, IT IS NOT APPARENT HOW SUCH RELATIONSHIP WOULD BE PROMOTED BY THE GOVERNMENT, RATHER THAN THE CONTRACTOR, ASSUMING THE CONSEQUENCES OF THE UNAUTHORIZED DISCHARGE OF THE EMPLOYEES.

AS STATED IN MY DECISION OF SEPTEMBER 19, 1942, B-28641, 22 COMP. GEN. 250, TO YOU, THE DETERMINATION OF THE TYPES AND AMOUNTS OF EXPENSES FOR WHICH A CONTRACTOR IS TO BE REIMBURSED BY THE GOVERNMENT UNDER A "COST- PLUS" CONTRACT IS DEPENDENT PRIMARILY UPON THE TERMS OF THE PARTICULAR CONTRACT INVOLVED AND UPON THE FACTS PERTAINING TO A PARTICULAR TRANSACTION RATHER THAN UPON THE BASIS OF ANY GENERAL THEORIES RELATING TO THE STATUS OF COST-PLUS-A-FIXED-FEE CONTRACTORS OR THEIR EMPLOYEES. IT IS MANIFEST FROM THE TERMS OF ARTICLE V-A, PARAGRAPH 1, OF THE CONTRACT HERE INVOLVED, THAT THE GENERAL INTENTION AND PURPOSE OF THE PARTIES THERETO WERE TO REIMBURSE THE CONTRACTOR FOR THE ACTUAL EXPENDITURES INCURRED IN THE PERFORMANCE OF THE WORK COVERED BY THE CONTRACT. SUCH PURPOSE AND INTENTION MAY NOT BE CONSTRUED TO COMPREHEND EXPENDITURES WHICH HAVE BEEN IMPOSED UPON THE CONTRACTOR BY STATUTE OR OTHERWISE AS A CONSEQUENCE OF ITS OWN FAULT OR DISREGARD OF THE PROVISIONS OF AN APPLICABLE STATUTE, PARTICULARLY WHERE, AS HERE, THE UNITED STATES WAS NOT IN ANY WAY RESPONSIBLE FOR THE CONTRACTOR'S ACTION IN THE MATTER AND RECEIVED NO TANGIBLE BENEFIT FROM THE EXPENDITURE WHICH ADDED NOTHING TO THE ACTUAL PERFORMANCE OF THE WORK.

MOREOVER, THE AUTHORITY VESTED IN THE CONTRACTING OFFICER IN THE MATTER OF DETERMINING WHAT ACTUAL EXPENDITURES INCURRED BY THE CONTRACTOR IN CONNECTION WITH THE PERFORMANCE OF THE CONTRACT ARE TO BE REGARDED AS REIMBURSABLE ITEMS OF COST OF THE WORK IS NOT AN UNLIMITED AUTHORITY AND, CONSEQUENTLY, WHEN HE ACTS IN A WAY CONTRARY TO THE MANDATE OF THE CONTRACT OR WITHOUT PROPER REGARD FOR THE INTERESTS OF THE UNITED STATES, IT IS THE DUTY OF THIS OFFICE TO QUESTION HIS DECISION. IN VIEW THEREOF, THE FACT THAT THE EXPENDITURE HAS BEEN APPROVED BY A REPRESENTATIVE OF THE CONTRACTING OFFICER MAY NOT OPERATE TO SHIFT FROM THE CONTRACTOR TO THE GOVERNMENT THE CONSEQUENCES OF THE CONTRACTOR'S ACTION WHICH RESULTED IN ITS HAVING TO PAY THE EMPLOYEES FOR A PERIOD DURING WHICH THEY PERFORMED NO SERVICES ON THE CONTRACT WORK.

ACCORDINGLY, I HAVE TO ADVISE THAT PAYMENT ON THE VOUCHER SUBMITTED IS NOT AUTHORIZED.