B-111876, NOVEMBER 7, 1952, 32 COMP. GEN. 227

B-111876, NOVEMBER 7, 1952, 32 COMP. GEN. 227

CONTRACTS - ASSIGNMENT - DEFENSE PRODUCTION EXPLORATION PROJECT CONTRACTS A TRANSFER OF LAND WHICH IS MINED FOR CRITICAL AND STRATEGIC METALS UNDER A GOVERNMENT EXPLORATION PROJECT CONTRACT IS NOT REQUIRED TO BE CONSIDERED AN ASSIGNMENT OF THE CONTRACT WITHIN THE PROHIBITION OF SECTION 3737, REVISED STATUTES, IF IN THE INTEREST OF THE GOVERNMENT, AND THE TRANSFEREE MAY BE RECOGNIZED AS THE LAWFUL SUCCESSOR IN INTEREST OF THE CONTRACTOR WITH THE RIGHT TO PAYMENTS UNDER THE CONTRACT UPON THE GOVERNMENT'S RECEIPT OF DEFINITE EVIDENCE OF THE TRANSFER TOGETHER WITH AN AGREEMENT BY THE TRANSFEREE UNDERTAKING TO PERFORM THE CONTRACT AND A WAIVER FROM THE ORIGINAL CONTRACTOR. COMPARE 9 COMP. GEN. 72.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF THE INTERIOR, NOVEMBER 7, 1952:

THERE HAS BEEN CONSIDERED THE LETTER OF SEPTEMBER 11, 1952, WITH ENCLOSURES, FROM THE ADMINISTRATIVE ASSISTANT SECRETARY, SUBMITTING FOR DECISION THE QUESTION WHETHER THE GOVERNMENT MAY, UNDER CERTAIN CIRCUMSTANCES, CONSENT TO THE ASSIGNMENT OF AN EXPLORATION PROJECT CONTRACT UNDER THE PROVISIONS THEREFOF, AND THEREAFTER MAKE ITS CONTRIBUTION OF MONEY TO THE ASSIGNEE INSTEAD OF THE ORIGINAL OPERATOR (CONTRACTOR). SUCH CONTRACTS ARE ENTERED INTO BETWEEN THE DEFENSE MINERALS EXPLORATION ADMINISTRATION AND PRIVATE PARTIES, UNDER THE AUTHORITY OF THE DEFENSE PRODUCTION ACT OF 1950, 64 STAT. 798, AS AMENDED, PURSUANT TO DMEA ORDER 1 ENTITLED " GOVERNMENT AID IN DEFENSE EXPLORATION PROJECTS.'

TITLE III, SECTION 303 (A) OF THE DEFENSE PRODUCTION ACT OF 1950, 64 STAT. 801, PROVIDES:

TO ASSIST IN CARRYING OUT THE OBJECTIVES OF THIS ACT, THE PRESIDENT MAY MAKE PROVISION * * * (2) FOR THE ENCOURAGEMENT OF EXPLORATION, DEVELOPMENT, AND MINING OF CRITICAL AND STRATEGIC MINERALS AND METALS: * *

TO ACHIEVE THIS PURPOSE YOUR DEPARTMENT ENTERS INTO EXPLORATION PROJECT CONTRACTS WITH THE LANDOWNERS OR WITH THOSE HOLDING POSSESSORY RIGHTS THERETO, IN CERTAIN AREAS WHERE NEW DISCOVERIES OF THE STRATEGIC MATERIALS AND METAL ARE LIKELY TO BE MADE. DISPOSAL BY THE OPERATOR OF HIS INTEREST IN THE LAND INVOLVES ASSIGNMENT OF HIS INTEREST IN THE PERTINENT EXPLORATION PROJECT CONTRACT; AND TO THE EXTENT THAT SUCH ASSIGNMENT WILL FURTHER THE PROJECT, IT IS SAID TO BE IN THE INTEREST OF THE GOVERNMENT.

IN THE FORM OF CONTRACT CAPTIONED " EXPLORATION PROJECT CONTRACT"--- ENCLOSED WITH YOUR LETTER--- ARE SET FORTH UNDER ITS VARIOUS ARTICLES THE STIPULATIONS RELATING TO THE PERFORMANCE, COSTS OF PROJECT, PERCENTAGE CONTRIBUTION BY THE GOVERNMENT, REPORTS, ACCOUNTS AND AUDIT, REPAYMENT BY THE OPERATOR TO THE GOVERNMENT, ASSIGNMENT OF OPERATOR'S INTEREST, ARTICLE 7 OF THE CONTRACT FORM PROVIDES:

ARTICLE 7. ASSIGNMENT, TRANSFER, OR LOSS OF OPERATOR'S INTEREST.--- WITHOUT THE WRITTEN CONSENT OF THE GOVERNMENT, THE OPERATOR SHALL NOT ASSIGN OR OTHERWISE TRANSFER OR HYPOTHECATE THIS CONTRACT OR ANY RIGHTS THEREUNDER. THE OPERATOR SHALL NOT MAKE ANY VOLUNTARY NOR PERMIT ANY INVOLUNTARY TRANSFER OR CONVEYANCE OF THE OPERATOR'S RIGHTS IN THE LAND DESCRIBED IN ARTICLE 2, WITHOUT MAKING SUITABLE PROVISION FOR THE PRESERVATION OF THE GOVERNMENT'S RIGHT TO A PERCENTAGE ROYALTY ON PRODUCTION AND LIEN FOR THE PAYMENT THEREOF: PROVIDED, THAT MERE FAILURE BY THE OPERATOR TO MAINTAIN THE OPERATOR'S RIGHTS IN THE LAND, WITHOUT ANY CONSIDERATION RUNNING TO THE OPERATOR OTHER THAN RELIEF FROM THE COST OF MAINTAINING SUCH RIGHTS (AS BY SURRENDER OF A LEASEHOLD, FAILURE TO PERFORM ASSESSMENT WORK, OR FAILURE TO EXERCISE AN OPTION), COUPLED WITH COMPLETE ABANDONMENT BY THE OPERATOR OF ALL INTEREST IN OR OPERATIONS ON THE LAND FOR A PERIOD OF 10 YEARS FROM THE DATE OF THIS CONTRACT, SHALL NOT CONSTITUTE SUCH TRANSFER OR CONVEYANCE. SHOULD THE OPERATOR MAKE OR PERMIT ANY TRANSFER OR CONVEYANCE IN VIOLATION OF THIS PROVISION, THE OPERATOR SHALL BE AND REMAIN LIABLE FOR PAYMENT TO THE GOVERNMENT OF THE SAME AMOUNTS, AT THE SAME TIMES AS WOULD HAVE BEEN PAID UNDER THE TERMS OF THE PERCENTAGE ROYALTYON PRODUCTION. IF FOR ANY REASON THE NET SMELTER RETURNS, NET CONCENTRATOR RETURNS, OR OTHER NET AMOUNTS REALIZED FROM THE SALE OR OTHER DISPOSITION OF SUCH PRODUCTION ARE NOT AVAILABLE AS A MEANS OF MEASURING THE AMOUNT OF THE OPERATOR'S LIABILITY, THE AMOUNT THEREOF SHALL BE ESTIMATED AS WELL AS MAY BE, AND IN THE EVENT OF DISPUTE AS TO SUCH ESTIMATES, THE DETERMINATION THEREOF BY THE ADMINISTRATOR OF DEFENSE MINERALS EXPLORATION ADMINISTRATION OR BY HIS SUCCESSOR SHALL BE FINAL AND BINDING UPON THE OPERATOR.

WHILE SECTION 3737, REVISED STATUTES, PROHIBITS THE TRANSFER OF CONTRACTS WITH THE UNITED STATES, IT HAS BEEN HELD THAT THIS SECTION IS INTENDED FOR THE PROTECTION OF THE GOVERNMENT WHICH MAY TREAT A CONTRACT AS ANNULLED BY AN ASSIGNMENT OR RECOGNIZE THE ASSIGNMENT AS THE CIRCUMSTANCES IN A PARTICULAR CASE MAY WARRANT. SEE DULANEY V. SCUDDER, 94 F. 6; TINKER AND SCOTT V. UNITED STATES FIDELITY AND GUARANTY COMPANY 169 F. 211.

ACCORDINGLY, WHERE AN OPERATOR DISPOSES OF HIS INTEREST IN THE PROJECT LAND, THE TRANSFEREE MAY BE RECOGNIZED AS THE LAWFUL SUCCESSOR IN INTEREST OF THE CONTRACTOR IF THE INTEREST OF THE GOVERNMENT SO REQUIRES. IN SUCH CASES, THERE SHOULD BE FILED WITH THE CONTRACT DEFINITE EVIDENCE OF THE TRANSFER, TOGETHER WITH AN AGREEMENT BY THE TRANSFEREE UNDERTAKING TO PERFORM THE SERVICE IN ACCORDANCE WITH THE ORIGINAL CONTRACT, AND A STATEMENT OR OTHER SHOWING BY THE ORIGINAL CONTRACTOR WAIVING ALL RIGHTS THEREUNDER AGAINST THE UNITED STATES. CF. 9 COMP. GEN. 72. ALSO, THERE APPEARS NO OBJECTION TO MAKING CONTRIBUTION OF MONEY THEREAFTER TO THE ASSIGNEE OR TRANSFEREE IN ACCORDANCE WITH THE TERMS OF THE CONTRACT AND THE ASSIGNMENT.