B-131968, JUN. 7, 1957

B-131968, JUN. 7, 1957

TO ARTHUR LARSON, DIRECTOR, UNITED STATES INFORMATION AGENCY:

REFERENCE IS MADE TO YOUR AGENCY'S LETTER OF MAY 21, 1957, WITH ITS ENCLOSURES, REQUESTING A DECISION AS TO WHETHER THERE IS AUTHORIZED THE REFORMATION OF COST-PLUS-FIXED-FEE CONTRACT NO. IA-1074, DATED DECEMBER 15, 1954, SO AS TO PERMIT THE REIMBURSEMENT OF CERTAIN INSURANCE COSTS IN THE AMOUNT OF $1,386.65 INCURRED BY THE CONTRACTOR, THE NATIONAL BROADCASTING COMPANY.

BY THE TERMS OF THE CONTRACT, THE NATIONAL BROADCASTING COMPANY AGREED TO BROADCAST OVER TWO RADIO STATIONS, INCLUDING A STATION AT BOUND BROOK, NEW JERSEY, PROGRAMS TO BE FURNISHED BY THE UNITED STATES INFORMATION AGENCY DURING THE PERIOD FROM JULY 1, 1954, TO SEPTEMBER 30, 1955. ARTICLE TENTH, II, F. PROVIDES:

"ITEM 6, INSURANCE

1. THIS ITEM SHALL INCLUDE THE COST OF PUBLIC LIABILITY INSURANCE, APPROVED IN ADVANCE BY THE CONTRACTING OFFICER, AND WORKMEN'S COMPENSATION INSURANCE.

2. IT SHALL NOT INCLUDE THE COST OF INSURANCE OF SELF-INSURANCE TO PROTECT THE CONTRACTOR AGAINST LOSSES AND DAMAGES TO OWNED OR LEASED PROPERTY USED IN CONNECTION WITH THE PERFORMANCE OF THIS CONTRACT.'

IN ITS LETTER OF DECEMBER 10, 1956, THE CONTRACTOR STATES ITS UNDERSTANDING DURING THE NEGOTIATIONS RESULTING IN THE CONTRACT "THAT INSURANCE ON NBC OWNED PROPERTY WOULD BE INCLUDED AS PART OF THE COST ESTIMATES AND HENCE WAS REIMBURSABLE.' IT STATES FURTHER THAT IT INCURRED COSTS FOR INSURANCE ON PROPERTY OWNED OR LEASED BY IT IN THE SAID AMOUNT OF $1,386.65 DURING THE CONTRACT PERIOD.

IN YOUR AGENCY'S LETTER OF MAY 21, 1957, IT IS STATED:

"THE FACT THAT THIS WAS THE INTENT IS OUTLINED IN THE "SUMMARY OF ITEMS OF COST TO BE INCLUDED IN PROPOSED FACILITY CONTRACTS, FY 1955," ATTACHED TO MEMORANDUM DATED JULY 28, 1954, SUBJECT, ,DISCUSSIONS WITH NBC REPRESENTATIVES RELATIVE TO AUDIT AND FISCAL PROVISIONS IN PROPOSED CPFF CONTRACTS," AND STATED IN PART,"ITEM (6) INSURANCE (PROPERTY/--- THIS ITEM SHALL INCLUDE COST OF INSURANCE TO PROTECT CONTRACTOR AGAINST LOSSES TO OWNED OR LEASED PROPERTY USED IN CONNECTION WITH THE PERFORMANCE OF THIS CONTRACT...'"

IN ARTICLE FIRST OF THE CONTRACT IT IS PROVIDED:

"THE CONTRACTOR SHALL PAY COSTS AND EXPENSES OF MANAGEMENT, OPERATION AND MAINTENANCE BEING THE ITEMS HEREINAFTER DESCRIBED IN EXHIBIT A HEREOF, AND SUCH OTHER SPECIAL ITEMS AS MAY FROM TIME TO TIME BE AUTHORIZED BY THE AGENCY AS HEREINAFTER PROVIDED.

"THE AGENCY WILL PAY TO THE CONTRACTOR, AS A FIXED FEE, IN FULL COMPENSATION FOR ITS SERVICES THE SUM OF $31,250.00. IN ADDITION TO SAID COMPENSATION THE AGENCY WILL REIMBURSE THE CONTRACTOR FOR DISBURSEMENTS MADE PURSUANT TO PARAGRAPH II OF THIS ARTICLE (ARTICLE FIRST). ALL PAYMENTS TO THE CONTRACTOR SHALL BE AT THE TIME SPECIFIED IN ARTICLE ELEVENTH AND PURSUANT TO THE PROVISIONS OF EXHIBIT A HEREOF.'

ARTICLE ELEVENTH PROVIDES IN PART:

"ALLOWABLE COSTS ARE HEREBY DEFINED AS CONSTITUTING THE COST INCURRED BY THE CONTRACTOR IN THE PERFORMANCE OF THIS CONTRACT, AS MORE SPECIFICALLY SET FORTH IN EXHIBIT A OF THIS CONTRACT, ENTITLED "ESTIMATE OF COSTS," AND ACCEPTED BY THE AGENCY.'

EXHIBIT A, REFERRED TO AND MADE A PART OF THE CONTRACT, INCLUDES AN ITEM OF $1,231 FOR INSURANCE IN CONNECTION WITH THE BOUND BROOK STATION.

IT THUS APPEARS THAT THE ABOVE-QUOTED PROVISIONS OF ARTICLE TENTH, II, F, OF THE CONTRACT, STATING IN EFFECT THAT INSURANCE COSTS ARE NOT REIMBURSABLE, IS INCONSISTENT WITH OTHER CONTRACT PROVISIONS. IT APPEARS ALSO THAT IT WAS THE UNDERSTANDING AND INTENTION OF THE PARTIES TO THE CONTRACT THAT COSTS INCURRED BY THE CONTRACTOR FOR INSURANCE ON PROPERTY OWNED OR LEASED BY IT FOR USE AT THE BOUND BROOK STATION WOULD BE REIMBURSABLE. ACCORDINGLY, WE OFFER NO OBJECTION TO MODIFICATION OF THE CONTRACT AS PROPOSED. APPROPRIATE REFERENCE TO THIS DECISION SHOULD ACCOMPANY THE MODIFICATION.