B-27657, SEP 15, 1942

B-27657, SEP 15, 1942

PRECIS-UNAVAILABLE

LIEUTENANT COLONEL C. B. LENOW, F.D., U.S. ARMY:

THERE HAS BEEN FORWARDED HERE, BY SIXTH ENDORSEMENT OF JULY 23, 1942, FROM THE DIRECTOR, FISCAL DIVISION, WAR DEPARTMENT, YOUR LETTER OF MAY 30, 1942, REQUESTING PREAUDIT OF BUREAU VOUCHER NO. B-532, TRANSMITTED THEREWITH, IN FAVOR OF FIRESTONE TIRE & RUBBER COMPANY, IN THE AMOUNT OF $88,427.66. INASMUCH AS PREAUDIT ACTION BY THIS OFFICE HAS BEEN DISCONTINUED, THE DIRECTOR, FISCAL DIVISION, REQUESTS THAT YOUR LETTER BE CONSIDERED AS A REQUEST FOR ADVANCE DECISION AND IT WILL BE SO CONSIDERED.

THE SAID VOUCHER PURPORTS TO COVER THE CLAIM OF THE FIRESTONE TIRE & RUBBER COMPANY FOR FINAL PAYMENT UNDER CONTRACT NO. W-266-CWS-1, DATED DECEMBER 14, 1939, WHEREBY THE SAID COMPANY, IN CONSIDERATION OF A TOTAL PRICE OF $328,329, AGREED TO PROCURE, INSTALL IN ITS PLANT, OPERATE, MAINTAIN AND SERVICE ALL COMMERCIAL EQUIPMENT AND ALL NONCOMMERCIAL EQUIPMENT NOT FURNISHED BY THE GOVERNMENT, AND GAGES, DIES, JIGS, TOOLS, AND OTHER MANUFACTURING AIDS NECESSARY TO MANUFACTURE, ASSEMBLE, TEST AND PACK FOR SHIPMENT 100,000 STANDARD SERVICE GAS MASKS PER MONTH; PRODUCE AND DELIVER 10,000 MASKS FOR THE PURPOSE OF PROVING PRODUCTION RATE; AND FURNISH A PRODUCTION ANALYSIS BASED UPON EXPERIENCE GAINED IN OPERATING THE PLANT. THE SAID CONTRACT CONSTITUTED AN "EDUCATIONAL ORDER" SUCH AS PROVIDED FOR BY THE ACT OF JUNE 16, 1938, 52 STAT. 707, AS AMENDED BY SECTION 13 OF THE ACT OF APRIL 13, 1939, 53 STAT. 560. IT IS NOTED THAT THE CERTIFIED INVOICE ATTACHED TO THE VOUCHER REFERS TO CERTAIN EQUIPMENT "WHICH HAS NOT BEEN ACCEPTED TO THE PRESENT TIME" AND TO THE "NET BALANCE DUE AT THE PRESENT TIME." HOWEVER, SINCE THE VOUCHER PURPORTS TO COVER FINAL PAYMENT AND APPEARS TO DO SO IN PRACTICAL EFFECT, THERE BEING NO SHOWING THAT ANY OF THE EQUIPMENT WILL BE ACCEPTED AND PAID FOR SUBSEQUENTLY, THE VOUCHER WILL BE REGARDED AS A FINAL PAYMENT VOUCHER FOR THE PURPOSES OF THIS DECISION.

ARTICLE 22 OF THE CONTRACT PROVIDES THAT TITLE TO THE SAID EQUIPMENT, MASKS AND PRODUCTION ANALYSIS SHOULD VEST IN THE UNITED STATES UPON PAYMENT OF THE CONTRACT PRICE; OR, IN CASE OF PARTIAL PAYMENT, AS PROVIDED IN ARTICLE 34, WHICH PROVIDES, IN PART, AS FOLLOWS:

"ARTICLE 34. PARTIAL PAYMENTS.

"PARTIAL PAYMENTS WILL BE MADE DURING THE PROGRESS OF THE WORK AS FOLLOWS:

"A. SUCH PARTIAL PAYMENTS SHALL NOT EXCEED 75% OF THE COST TO THE CONTRACTOR OF THE ARTICLES UPON WHICH PAYMENT IS MADE, WHICH COST SHALL BE DETERMINED FROM EVIDENCE SUBMITTED BY THE CONTRACTOR AND SATISFACTORY TO THE CONTRACTING OFFICER; AND PROVIDED FURTHER THAT PARTIAL PAYMENTS SHALL NOT BE MADE MORE FREQUENTLY THAN ONCE A MONTH EXCEPT IN THE CASE OF EQUIPMENT PURCHASED BY THE CONTRACTOR FOR THE GOVERNMENT. EQUIPMENT SO PURCHASED SHALL BE PAID FOR IN FULL BY THE GOVERNMENT PROMPTLY ON PRESENTATION BY THE CONTRACTOR OF PROPER INVOICES AND EVIDENCE SATISFACTORY TO THE CONTRACTING OFFICER THAT THE CONTRACTOR HAS RECEIVED AND PAID FOR SAID EQUIPMENT.

"B. TITLE OF PROPERTY: THE TITLE TO ALL PROPERTY UPON WHICH ANY PARTIAL PAYMENT IS MADE PRIOR TO COMPLETION OF CONTRACT, SHALL VEST IN THE GOVERNMENT IN ITS THEN CONDITION FORTHWITH UPON THE MAKING OF ANY SUCH PARTIAL PAYMENT OR PAYMENTS; ***"

WITH RESPECT TO FIRE INSURANCE, IT IS PROVIDED IN ARTICLE 34 (D.) THAT THE CONTRACTOR SHALL OBTAIN INSURANCE ON ALL PROPERTY UPON WHICH A PARTIAL PAYMENT IS ABOUT TO BE MADE, KEEPING SUCH INSURANCE IN EFFECT UNTIL DELIVERY OF THE PROPERTY TO THE GOVERNMENT; AND ARTICLE 35 PROVIDES:

"ARTICLE 35. FIRE INSURANCE OF GOVERNMENT PROPERTY.

"IN ADDITION TO ANY INSURANCE WHICH MAY BE REQUIRED UNDER ANY OTHER PROVISION, THE CONTRACTOR HEREBY AGREES TO INSURE AGAINST FIRE ALL OTHER PROPERTY OF THE GOVERNMENT IN HIS CUSTODY. SUCH ADDITIONAL INSURANCE SHALL BE IN AN AMOUNT EQUAL TO THE FULL VALUE OF SUCH PROPERTY. ANY INSURANCE POLICY OR POLICIES SHALL BE TAKEN OUT WITH A COMPANY OR COMPANIES SATISFACTORY TO THE CONTRACTING OFFICER, AND SHALL PROVIDE THAT LOSS, IF ANY, SHALL BE PAYABLE TO THE CONTRACTOR AND TO THE GOVERNMENT AS THEIR RESPECTIVE INTERESTS MAY APPEAR. ALL SUCH POLICIES OR CERTIFICATES OF ISSUANCE OF SAME SHALL BE FILED WITH THE CONTRACTING OFFICER AND SHALL BE SUBJECT TO HIS APPROVAL AS TO FORM AND SUBSTANCE."

BY SUPPLEMENTAL AGREEMENT NO. 1, DATED JUNE 25, 1941, CERTAIN CHANGES WERE MADE WHEREBY THE TOTAL CONTRACT COST WAS REDUCED FROM $328,329 TO $328,270.87; AND BY SUPPLEMENTAL AGREEMENT NO. 2, DATED JANUARY 15, 1942, THE COST WAS FURTHER REDUCED TO $327,820.87. IT IS NOTED THAT THE VOUCHER IN QUESTION IS BASED ON THE CONTRACT COST AS ADJUSTED BY SUPPLEMENTAL AGREEMENT NO. 1; BUT THE FURTHER REDUCTION PROVIDED FOR IN SUPPLEMENTAL AGREEMENT NO. 2, IN THE AMOUNT OF $450, IS GIVEN PROPER EFFECT BY DEDUCTING THAT AMOUNT FROM THE CONTRACT COST. SEE THE CERTIFIED INVOICE ATTACHED TO THE VOUCHER.

YOUR DOUBT AS TO THE PROPRIETY OF MAKING PAYMENT ON THE SAID VOUCHER APPEARS TO ARISE FROM THE REPORTED FACT THAT A FIRE AT THE CONTRACTOR'S PLANT DESTROYED NUMEROUS RECORDS CONTAINING DATA NEEDED IN SUPPORT OF THE VOUCHER. THERE ARE ATTACHED TO THE VOUCHER PAID INVOICES IN THE AMOUNT OF $4,281, TOGETHER WITH AFFIDAVIT DATED APRIL 24, 1942, BY J. J. SHEA, VICE PRESIDENT AND TREASURER OF THE SAID COMPANY, WITH RESPECT TO THE SAID LOSS BY FIRE, WHEREIN IT IS STATED, AMONG OTHER THINGS, THAT THE AMOUNT CLAIMED IN THE VOUCHER "COVERS ITEMS OF FREIGHT, SALARIES, TRAVEL, SUPPLIES, ENGINEERING, STORES, PERFORMANCE BOND AND INSURANCE PREMIUMS, INCLUDING MISCELLANEOUS LABOR, SERVICE, EXPENSES AND MARK-UP."

THE INVOLVED CONTRACT WAS NOT ENTERED INTO ON A COST-PLUS BASIS BUT ON A FIXED-PRICE BASIS. IT IS TRUE THAT IN ACCORDANCE WITH ARTICLE 34, ABOVE QUOTED IN PART, PARTIAL PAYMENTS, INCLUDING PAYMENTS ON EQUIPMENT PURCHASED BY THE CONTRACTOR FOR THE GOVERNMENT, COULD BE MADE PROPERLY ONLY ON ESTABLISHMENT OF THE COST INCURRED BY THE CONTRACTOR FOR THE ARTICLES UPON WHICH PAYMENT WAS TO BE MADE. HOWEVER, AS HEREINBEFORE INDICATED, THE VOUCHER IN QUESTION COVERS THE CONTRACTOR'S CLAIM FOR FINAL PAYMENT UNDER THE CONTRACT. ACCORDINGLY, THE COST INCURRED BY THE CONTRACTOR IS IMMATERIAL IN THE CONSIDERATION OF THE PROPRIETY OF PAYMENT ON THE VOUCHER, THE ONLY PERTINENT QUESTIONS BEING WHETHER THE CONTRACTOR HAS FULFILLED ITS OBLIGATIONS IN ACCORDANCE WITH THE TERMS OF THE CONTRACT AS CHANGED BY THE SAID SUPPLEMENTAL AGREEMENTS, CHANGE ORDERS, ETC., AND WHETHER THE AMOUNT CLAIMED ON THE VOUCHER AS FINAL PAYMENT HAS BEEN COMPUTED CORRECTLY, HAVING REGARD FOR THE CONTRACT CONSIDERATION DEFINITELY FIXED IN THE CONTRACT AS AMENDED, THE PARTIAL PAYMENTS HERETOFORE MADE AND THE CONTEMPLATED ARTICLES OR SERVICES NOT FURNISHED BY THE CONTRACTOR OR ACCEPTED BY THE GOVERNMENT.

IN VIEW OF THE FOREGOING, YOU ARE ADVISED THAT PAYMENT ON THE SAID VOUCHER NEED NOT BE REFUSED BECAUSE OF THE ABSENCE OF SUPPORTING EVIDENCE AS TO THE COST INCURRED BY THE CONTRACTOR, ALTHOUGH NO OPINION IS EXPRESSED AS TO WHETHER THE SUPPORTING EVIDENCE ACCOMPANYING THE VOUCHER WOULD BE SUFFICIENT IF EVIDENCE AS TO THE COST INCURRED BY THE CONTRACTOR WERE REQUIRED. HOWEVER, THERE SHOULD BE FURNISHED A CERTIFICATE BY THE CONTRACTING OFFICER THAT THE EQUIPMENT TO BE FURNISHED UNDER THE CONTRACT, WITH THE EXCEPTIONS SET OUT IN THE CONTRACTOR'S CERTIFIED INVOICE, HAS BEEN ACCEPTED AND INSTALLED IN THE CONTRACTOR'S PLANT IN ACCORDANCE WITH THE TERMS OF THE CONTRACT; ALSO, THAT THE PROVISIONS OF ARTICLES 34 AND 35 OF THE CONTRACT AS TO INSURANCE HAVE BEEN COMPLIED WITH.

THE VOUCHER IS RETURNED HEREWITH AND YOU ARE ADVISED THAT PAYMENT THEREON IS NOT AUTHORIZED OTHERWISE THAN ON THE BASIS AND SUBJECT TO THE ADDITIONAL REQUIREMENTS HEREIN INDICATED.