B-195272, JANUARY 29, 1980, 59 COMP.GEN. 232

B-195272, JANUARY 29, 1980, 59 COMP.GEN. 232

CLAIMS - SETTLEMENT BY GENERAL ACCOUNTING OFFICE - "CONTRACT DISPUTES ACT OF 1978" EFFECT - EXPRESS V. INFORMAL CONTRACTUAL COMMITMENTS EXECUTIVE AGENCIES SHOULD CONTINUE TO REFER DEMANDS FOR PAYMENT ARISING UNDER INFORMAL COMMITMENTS TO GENERAL ACCOUNTING OFFICE FOR SETTLEMENT. CONTRACT DISPUTES ACT OF 1978 DOES NOT CONFLICT WITH STATUTORY AUTHORITY OF GAO TO PASS UPON PROPRIETY OF EXPENDITURES OF PUBLIC FUNDS.

MATTER OF: CONTRACT DISPUTES ACT OF 1978, JANUARY 29, 1980:

THE UNITED STATES ARMY FINANCE AND ACCOUNTING CENTER ASKS US TO RECONSIDER THE ACTION OF THE PAYMENT BRANCH OF OUR CLAIMS DIVISION WHICH RETURNED A VOUCHER FROM THAT AGENCY WITHOUT SETTLEMENT. THE FINANCE CENTER HAD ASKED US TO CONCUR THAT AN INVOICE SUBMITTED BY THE GEORGIA LIONS EYE BANK TO THE DEPARTMENT OF THE ARMY SHOULD BE PAID AND TO CERTIFY THE ARMY'S VOUCHER FOR PAYMENT. THE PAYMENT BRANCH RETURNED THE VOUCHER TO THE FINANCE CENTER, QUESTIONING WHETHER THE MATTER SHOULD BE SETTLED BY OUR OFFICE IN LIGHT OF THE CONTRACT DISPUTES ACT OF 1978, P.L. 95-563, NOVEMBER 1, 1978, 41 U.S.C. 601 NOTE. WE ARE INSTRUCTING THE PAYMENT BRANCH TO DETERMINE WHETHER THE VOUCHER SHOULD BE CERTIFIED FOR PAYMENT.

THE FACTS ARE THESE. AN ARMY MEDICAL OFFICER ORDERED A CORNEA FROM THE GEORGIA LIONS EYE BANK FOR TRANSPLANT TO AN ELIGIBLE PATIENT. THE DOCTOR THOUGHT THERE WOULD BE NO CHARGE FOR THE CORNEA. HE BELIEVED THAT EYE DONATIONS FROM NON-PROFIT ORGANIZATIONS WERE FREE OF CHARGE AND THE PROCUREMENT PROCEDURES WERE NOT USED. IN FACT, THE GEORGIA LIONS EYE BANK'S PRACTICE IS TO CHARGE A $200 PROCESSING FEE. THE ARMY, BELIEVING THE INVOICE SHOULD BE PAID, STATES THAT $200 IS A REASONABLE FEE, THAT THE CORNEAL LENS WAS RECEIVED AND USED, AND THAT IF THE FEE HAD BEEN KNOWN IN ADVANCE A PURCHASE ORDER WOULD HAVE BEEN ISSUED.

THE CONTRACT DISPUTES ACT OF 1978 PROVIDES THAT ALL CLAIMS BY A CONTRACTOR AGAINST THE GOVERNMENT RELATING TO A CONTRACT SHALL BE SUBMITTED TO THE CONTRACTING OFFICER FOR A DECISION. (SECTION 6(A) OF THE ACT, 41 U.S.C. 605.) SECTION 2 OF THE ACT, 41 U.S.C. 601) DEFINES THE CONTRACTS TO WHICH THE ACT APPLIES AS INCLUDING "ANY EXPRESS OR IMPLIED CONTRACT * * * ENTERED INTO BY AN EXECUTIVE AGENCY FOR (THE PROCUREMENT OF PROPERTY, SERVICES OR CONSTRUCTION WORK ON REAL PROPERTY)."

THE INVOICE OF THE GEORGIA LIONS EYE BANK WAS FORWARDED HERE BECAUSE OF THE ABSENCE OF AN EXPRESS CONTRACT UNDERLYING THE REQUEST FOR PAYMENT. OUR PAYMENT BRANCH ADVISED THE AGENCY THAT CLAIMS ARISING FROM AN EXPRESS OR IMPLIED CONTRACT ENTERED INTO BY AN EXECUTIVE AGENCY SHOULD BE SETTLED BY THE AGENCY UNDER THE PROVISIONS OF THE CONTRACT DISPUTES ACT OF 1978.

THE THRESHOLD QUESTION, HOWEVER, IS WHETHER THE GEORGIA LIONS EYE BANK HAS SUBMITTED A CLAIM WHICH MUST BE DECIDED BY THE CONTRACTING OFFICER UNDER THE DISPUTES PROVISIONS OF THE ACT. WE HOLD IT HAS NOT, AND THAT THIS MATTER SHOULD BE REFERRED TO OUR OFFICE FOR SETTLEMENT UNDER 31 U.S.C. 71, 74(1976).

THE APPLICABILITY OF THE CONTRACT DISPUTES ACT BEGINS WITH THE CONTRACTOR'S FILING OF A "CLAIM." THE ACT DOES NOT IN ANY WAY DEFINE THE TERM "CLAIM." WHILE IN ITS BROADEST SENSE, "CLAIM" COULD BE READ TO INCLUDE SUCH ROUTINE MATTERS AS PROGRESS PAYMENT REQUESTS, PRICE PROPOSALS ON FORMAL CHANGES AND EVEN INVOICES, THE CONTEXT OF THE ACT ITSELF CLEARLY INDICATES THAT "CLAIM" AS USED IN THE ACT IS INTENDED TO REFER TO SITUATIONS WHERE THE ENTITLEMENT TO RECOVERY OR THE AMOUNT OF RECOVERY IS DISPUTED BY THE GOVERNMENT.

THE ACT STATES, AS NOTED ABOVE, THAT: "ALL CLAIMS BY A CONTRACTOR AGAINST THE GOVERNMENT SHALL BE IN WRITING AND SHALL BE SUBMITTED TO THE CONTRACTING OFFICER FOR A DECISION." IN PRACTICE, VIRTUALLY ALL MATTERS (WHETHER OR NOT DENOMINATED AS CLAIMS) ARE SUBMITTED TO THE CONTRACTING AGENCY EITHER FOR PAYMENT, AS IN THE CASE OF SIMPLE PROGRESS PAYMENTS, OR FOR NEGOTIATION, AS IN THE CASE OF COMPLEX CHANGES. CUSTOMARILY, THESE MATTERS ARE NOT IN THE FIRST INSTANCE SUBMITTED TO THE CONTRACTING OFFICER FOR A FINAL DECISION, THEREBY INITIATING THE DISPUTES-RESOLVING PROCEDURES OF THE ACT. IT IS ONLY AFTER THE SETTLEMENT PROCESS FAILS THAT THE CONTRACTOR SEEKS A DECISION BY THE CONTRACTING OFFICER.

THIS HAS BEEN RECOGNIZED BY THE OFFICE OF PROCUREMENT POLICY (OFPP) WHICH IS EMPOWERED TO ISSUE GUIDELINES UNDER THE ACT. (SECTION 8(2)(H) OF THE ACT.) OFPP HAS PROPOSED THE FOLLOWING DEFINITION:

"CLAIM" MEANS

(1) A WRITTEN REQUEST SUBMITTED TO THE CONTRACTING OFFICER

(2) FOR PAYMENT OF MONEY, ADJUSTMENT OF CONTRACT TERMS, OR OTHER RELIEF;

(3) WHICH IS IN DISPUTE OR REMAINS UNRESOLVED AFTER A REASONABLE TIME FOR ITS REVIEW AND DISPOSITION BY THE GOVERNMENT; AND

(4) FOR WHICH A CONTRACTING OFFICER'S FINAL DECISION IS DEMANDED. FED.REG. 12524, MARCH 7, 1979.

THE AGENCY DOES NOT DISAGREE WITH THE GEORGIA LIONS EYE BANK THAT THE INVOICE SHOULD BE PAID. IN FACT, THE ARMY STATES IT WILL PAY THE INVOICE IF AUTHORIZED BY OUR OFFICE. SINCE THERE IS NO DISPUTE BETWEEN THE PARTIES, EITHER WITH REGARD TO ENTITLEMENT TO PAYMENT OR AMOUNT OF PAYMENT, THE DISPUTES-RESOLVING PROCEDURES OF THE ACT SHOULD NOT BE INVOLVED. THAT IS TO SAY, THE INVOICE SUBMITTED IS NOT A "CLAIM" UNDER THE ACT FOR WHICH A DECISION BY THE CONTRACTING OFFICER IS REQUIRED. RATHER, THE INVOICE HERE IS SIMPLY A REQUEST FOR PAYMENT. BECAUSE THERE IS NO EXPRESS CONTRACT UNDERLYING THIS REQUEST, THE AGENCY HAS ASKED US TO CERTIFY ITS VOUCHER.

WHERE PROPER PROCUREMENT PROCEDURES ARE NOT USED, SUCH AS THIS CASE, CERTAIN STEPS MUST BE TAKEN BEFORE PAYMENTS PROPERLY MAY BE MADE. THIS IS BECAUSE INFORMAL COMMITMENTS, UNLIKE EXPRESS CONTRACTS WHICH ARE SUBJECT TO VARIOUS PROCEDURAL SAFEGUARDS TO INSURE COMPLIANCE WITH APPROPRIATION AND PROCUREMENT REQUIREMENTS IMPOSED BY STATUTE OR REGULATION, BY THEIR VERY NATURE ARE NOT SUBJECTED TO THE SAME SAFEGUARDS AS EXPRESS CONTRACTS. THUS, BEFORE AN IMPLIED PROCUREMENT CONTRACT TO WHICH THE UNITED STATES IS A PARTY MAY BE LEGALLY RECOGNIZED, QUESTIONS MUST BE RESOLVED WHICH CONCERN NOT ONLY THE AUTHORITY OF GOVERNMENT OFFICIALS TO ENTER INTO OR RATIFY A CONTRACTUAL ARRANGEMENT, BUT ALSO WHETHER THE PURPORTED CONTRACT IS PROHIBITED BY A STATUTE OR NOT WITHIN THE AGENCY'S STATUTORY AUTHORIZATION. ALSO, THERE MAY BE QUESTIONS CONCERNING THE AVAILABILITY OF FUNDS TO PAY AN INVOICE RESULTING FROM AN INFORMAL COMMITMENT, EVEN IF IT IS CLEAR THAT THERE IS NO LEGAL IMPEDIMENT TO RECOGNIZING AN IMPLIED CONTRACTUAL RELATIONSHIP.

THESE ARE QUESTIONS THAT WE HAVE TRADITIONALLY DECIDED UNDER 31 U.S.C. 71, 74. WE SEE NO CONFLICT BETWEEN THE DISPUTES-RESOLVING PROCEDURES OF THE ACT AND OUR RESPONSIBILITY TO SETTLE AND ADJUST DEMANDS AGAINST THE GOVERNMENT AND TO RENDER BINDING DECISIONS INVOLVING THE PAYMENT OF APPROPRIATED FUNDS. IN RESPONSE TO A SITUATION SUCH AS THIS, A CONTRACTING AGENCY SHOULD REFER THE QUESTION REGARDING PROPRIETY OF PAYMENT TO THIS OFFICE FOR DECISION.

TO HOLD OTHERWISE WOULD BE INCONSISTENT WITH THE STATUTORY AUTHORITY OF OUR OFFICE TO PASS UPON THE PROPRIETY OF EXPENDITURES OF PUBLIC FUNDS AND WOULD RESULT, IN EFFECT, IN A REPEAL BY IMPLICATION OF 31 U.S.C. 71, 74, A CONSTRUCTION NOT FAVORED BY THE LAW. 1A SUTHERLAND, STATUTES AND STATUTORY CONSTRUCTION, 23.10(4TH ED. C. SANDS 1973). MOREOVER, OUR INTERPRETATION PROVIDES FOR A HARMONIOUS READING OF DIFFERENT STATUTES, A RESULT WHICH IS FAVORED BY THE LAW. 2A SUTHERLAND 51.02.

ACCORDINGLY, WE ARE INSTRUCTING THE PAYMENT BRANCH TO CONSIDER THE MATTER IN ACCORDANCE WITH THIS DECISION. THE CONTRACTING AGENCY IS ADVISED THAT REQUESTS FOR PAYMENT, BASED ON INFORMAL COMMITMENTS, SHOULD CONTINUE TO BE REFERRED TO OUR OFFICE IN ACCORDANCE WITH 4 GAO 5.1.