B-120714, FEB. 27, 1958

B-120714, FEB. 27, 1958

TO THE SECRETARY OF COMMERCE:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF MAY 16, 1955, REQUESTING OUR DECISION RELATIVE TO AN APPEAL FROM A DETERMINATION BY THE CONTRACTING OFFICER THAT EMERSON RADIO AND PHONOGRAPH CORPORATION SHOULD REFUND APPROXIMATELY $176,000, REPRESENTING OVERPAYMENTS RECEIVED BY IT ON ACCOUNT OF OVERHEAD CLAIMED UNDER CERTAIN RESEARCH AND DEVELOPMENT CONTRACTS ENTERED INTO WITH THE NATIONAL BUREAU OF STANDARDS. OUR DECISION ON THE QUESTIONS PRESENTED WAS ADDRESSED TO YOU AUGUST 4, 1955, B -120714, 35 COMP. GEN. 63.

YOU WERE ADVISED IN THE DECISION (1) THAT UNDER THE CONTRACTS INVOLVED AND THE FACTS OF RECORD IN THIS CASE THE CONTRACTING OFFICER WAS WELL WITHIN HIS AUTHORITY IN DETERMINING THE AMOUNT OF THE OVERPAYMENTS AND REQUESTING REPAYMENT BY THE CONTRACTOR, AND THAT HE WOULD HAVE BEEN REMISS IN HIS DUTY HAD HE NOT TAKEN THE ACTION INDICATED INASMUCH AS THE ADMINISTRATIVE AGENCY CONCERNED IS PRIMARILY RESPONSIBLE FOR RECOVERING PAYMENTS ILLEGALLY OR ERRONEOUSLY MADE UNDER ITS ONTRACTS; (2) THAT THE CONTRACTOR, HAVING SUBMITTED HIS RECORDS AND PAPERS FOR EXAMINATION, IS LEGALLY OBLIGATED TO REFUND THE AMOUNT OF THE PAYMENTS WHICH HAD BEEN ILLEGALLY OR ERRONEOUSLY RECEIVED BY IT FROM THE GOVERNMENT AS REQUESTED BY THE CONTRACTING OFFICER, (3) THAT THE CONTRACTING OFFICER WAS ACTING REASONABLY AND WITHIN HIS AUTHORITY IN DEMANDING THAT THE CONTRACTOR COMPUTE THE OVERHEAD CHARGEABLE ON THE BASIS OF THE CONTRACTOR'S OWN COST ACCOUNTING SYSTEM, ESTABLISHED AND USED BY IT IN DETERMINING THE ACTUAL OVERHEAD COSTS INCURRED AND DISTRIBUTED TO THE CONTRACTS AND, FURTHER, THAT THE RECORD ADEQUATELY SUPPORTS THE CONCLUSION THAT, HAD THE CONTRACTOR PROPERLY ADVISED AND INFORMED THE CONTRACTING OFFICER REGARDING ITS COST-ACCOUNTING PRACTICES, AS IT WAS LEGALLY OBLIGATED TO DO, APPROPRIATE ADJUSTMENTS WOULD HAVE BEEN MADE PURSUANT TO THE TERMS OF THE CONTRACTS ON A MORE CURRENT BASIS.

IN RESPONSE TO HIS LETTER OF NOVEMBER 23, 1955, WITH FURTHER REFERENCE TO THIS MATTER, MR. BERNARD A. STOL, ASSISTANT GENERAL COUNSEL OF YOUR DEPARTMENT, WAS ADVISED THAT THE DECISION WAS CONCLUSIVE ON YOUR DEPARTMENT AS TO THE QUESTIONS OF LAW INVOLVED BUT IT WAS UNDERSTOOD THAT THE NORMAL APPEAL PROCEDURE WOULD BE FOLLOWED AND THAT THE ULTIMATE DETERMINATION PRESUMABLY WOULD BE BASED UPON A REVIEW OF THE ENTIRE MATTER. HE WAS ADVISED FURTHER THAT A RECONSIDERATION OF THE DECISION MIGHT BE REQUESTED IN THE EVENT YOU SO DESIRED.

FOLLOWING A NUMBER OF CONFERENCES HELD IN YOUR DEPARTMENT DURING 1955 AND 1956, ATTENDED BY REPRESENTATIVES OF OUR OFFICE, HEARINGS ON THE CONTRACTOR'S APPEAL WERE BEGUN MAY 1, 1957, BY THE APPEALS BOARD OF THE DEPARTMENT OF COMMERCE, APPEALS BOARD DOCKET NO. NBS-1, AND REPRESENTATIVES OF OUR OFFICE WERE CALLED AND APPEARED BEFORE THE BOARD. THE BOARD ISSUED ITS OPINION AND DECISION DATED AUGUST 14, 1957, WHICH GRANTED THE CONTRACTOR'S APPEAL AND INCLUDED AN ORDER THAT APPROPRIATE STEPS BE TAKEN BY NATIONAL BUREAU OF STANDARDS TO RELIEVE THE CONTRACTOR FROM "ANY FURTHER OBLIGATION UNDER THE BUREAU'S LETTER TO EMERSON DATED SEPTEMBER 22, 1954, AND UNDER ANY OTHER DOCUMENT CONSTITUTING A DEMAND FOR REFUND WITHIN THE AREA COVERED BY THE AFOREMENTIONED $176,312.17.'

A COPY OF THE BOARD'S DECISION WAS TRANSMITTED INFORMALLY TO OUR OFFICE AND ALSO A COPY OF A LETTER DATED SEPTEMBER 5, 1957, FROM THE CONTRACTING OFFICER TO THE CONTRACTOR. IN THIS LETTER THE CONTRACTING OFFICER REFERRED TO THE OPINION AND DECISION OF THE APPEALS BOARD OF AUGUST 14, 1957, AND STATED THAT "IN COMPLIANCE WITH THE ORDER CONTAINED IN THE FINDINGS OF THE APPEALS BOARD IT IS THE PURPOSE OF THIS LETTER TO RELIEVE THE EMERSON RADIO AND PHONOGRAPH CORPORATION FROM ANY FURTHER OBLIGATION UNDER MY LETTER TO YOU DATED SEPTEMBER 22, 1954, AND ANY OTHER DOCUMENTS WHICH MAY CONSTITUTE A DEMAND FOR REFUND WITHIN THE AREA COVERED BY THE AFOREMENTIONED $176,312.17.'

WE ARE ENCLOSING A COPY OF A REPORT ON THE OPINION AND DECISION OF THE BOARD IN THIS MATTER WHICH CONTAINS AN ANALYSIS BY REPRESENTATIVES OF OUR OFFICE OF THE FINDINGS AND CONCLUSIONS OF THE BOARD. AFTER A CAREFUL EXAMINATION OF THE ENTIRE RECORD AVAILABLE HERE WE ARE UNABLE TO AGREE WITH THE CONCLUSIONS OF THE BOARD AND ARE OF THE OPINION THAT THE BOARD'S DECISION IS ERRONEOUS AND THAT IT IS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE. THEREFORE, THE BOARD'S OPINION AND DECISION MAY NOT BE REGARDED AS FINAL AND CONCLUSIVE OR AS AFFORDING ANY PROPER BASIS FOR RELIEVING THE CONTRACTOR FROM LIABILITY FOR THE OVERPAYMENTS RECEIVED BY IT ON ACCOUNT OF THE PERFORMANCE OF THE CONTRACTS INVOLVED AS DETERMINED BY THE CONTRACTING OFFICER. IN THIS CONNECTION, YOUR ATTENTION IS INVITED TO THE CASE OF NORTHRUP AIRCRAFT, INC. V. UNITED STATES, 130 C.CLS. 626 (1955).

ACCORDINGLY, APPROPRIATE STEPS NECESSARY TO EFFECT COLLECTION OF THE AMOUNT DUE THE GOVERNMENT ON ACCOUNT OF THESE OVERPAYMENTS IN THE SUM OF $176,312.17 SHOULD BE TAKEN PROMPTLY. IT IS REQUESTED THAT YOU ADVISE US OF THE ACTION TAKEN BY YOUR DEPARTMENT TO ACCOMPLISH THIS COLLECTION.