B-33617, MAY 1, 1943, 22 COMP. GEN. 1013

B-33617, MAY 1, 1943, 22 COMP. GEN. 1013

COAL CONTRACTS - PRICE ADJUSTMENT - INCREASED MINING COSTS RESULTING FROM OVERTIME PAYMENT THE PAYMENT OF TIME AND ONE-HALF OVERTIME PAY TO COAL MINE EMPLOYEES PURSUANT TO A LABOR UNION-MINE OPERATORS AGREEMENT PERMITTING, BUT NOT REQUIRING, THE WORKING OF MINE EMPLOYEES IN EXCESS OF 35 HOURS PER WEEK WITH TIME AND ONE-HALF PAY FOR THE EXCESS HOURS' WORK DOES NOT CONSTITUTE A WAGE RATE CHANGE, EVEN THOUGH RESULTING IN INCREASED LABOR COSTS OF MINING, WITHIN THE MEANING OF A CONTRACT FOR THE PURCHASE OF COAL PROVIDING FOR A CHANGE IN THE CONTRACT PRICE IF THE WAGE SCALES OF MINE EMPLOYEES BE CHANGED DURING THE TERM OF THE CONTRACT.

COMPTROLLER GENERAL WARREN TO THE POSTMASTER GENERAL, MAY 1, 1943:

I HAVE YOUR LETTER OF APRIL 3, 1943, AS FOLLOWS:

THERE ARE TRANSMITTED COPIES OF LETTERS FROM J. EDWARD HIBLINE, DATED FEBRUARY 15, 1943, BANNER FUEL COMPANY, DATED FEBRUARY 16, 1943, AND THE WINSLOW-1KNICKERBOCKER COAL COMPANY, DATED MARCH 15, 1943, ADDRESSED TO THE PURCHASING AGENT OF THIS DEPARTMENT. THESE ARE TYPICAL OF A NUMBER OF LETTERS WHICH HAVE BEEN RECEIVED FROM COAL CONTRACTORS STATING THAT THE INVOICED PRICE OF COAL WOULD HAVE TO BE INCREASED ON ACCOUNT OF THE INCREASED COST OF MINING, CAUSED BY THE OPERATION OF THE SIX-DAY WEEK IN THE BITUMINOUS COAL INDUSTRY.

A COPY OF THE PROPOSAL AND SPECIFICATIONS UNDER WHICH BIDS WERE SUBMITTED TO THE OFFICE OF THE PURCHASING AGENT FOR FURNISHING COAL TO VARIOUS PUBLIC BUILDINGS DURING THE PRESENT FISCAL YEAR IS ALSO ENCLOSED. IT WILL BE NOTED THAT THE BIDDER IS REQUIRED TO INSERT THE WAGE RATE IN EFFECT ON THE DATE OF THE OPENING OF BIDS, AND PROVISION IS MADE FOR ADJUSTING THE CONTRACT PRICE IN THE EVENT OF A CHANGE IN THE WAGE SCALE AGREEMENT WITH MINE EMPLOYEES DURING THE TERM OF THE CONTRACT.

THIS DEPARTMENT HAS BEEN CERTIFYING PAYMENTS AT THE CONTRACT PRICE DESPITE HIGHER INVOICED PRICES ON THE BASIS THAT THE ACTUAL BASIC HOURLY WAGE RATE HAD NOT BEEN CHANGED. THOUGH THE OPERATION OF THE SIX-DAY WEEK INCREASED THE CONTRACTORS' COST OF DOING BUSINESS, THE CONTRACT DID NOT PROVIDE FOR ANY CHANGE IN THE PRICE SPECIFICALLY ON THAT ACCOUNT.

THERE IS ENCLOSED COPY OF A SUPPLEMENTAL AGREEMENT, DATED JANUARY 12, 1943, BY THE UNITED MINE WORKERS OF AMERICA AND THE WESTERN PENNSYLVANIA COAL OPERATORS ASSOCIATION, AMENDING THE JOINT WAGE AGREEMENT TO PROVIDE FOR TIME AND ONE-HALF OR RATE AND ONE-HALF FOR WORKING HOURS IN EXCESS OF THIRTY-FIVE HOURS IN ANY ONE WEEK.

THE OFFICE OF PRICE ADMINISTRATION ADJUSTED THE MAXIMUM PRICES UPWARD ON ACCOUNT OF INCREASED LABOR COSTS OF MINING, ON ACCOUNT OF THE OPERATION OF THE SIX-DAY WEEK. A COPY OF AMENDMENT NO. 34 TO PRICE REGULATION NO. 120, INCREASING THE MAXIMUM PRICES FOR BITUMINOUS COAL PRODUCED IN DISTRICT NO. 2 IS TRANSMITTED AS AN EXAMPLE. THE STATEMENT OF CONSIDERATIONS EXPLAINS THE REASON FOR THE CHANGE IN OPERATION TO A SIX-DAY BASIS AND CITES THE INCREASE IN COST OF MINING CAUSED BY IT. IT IS THE CONTENTION OF THE MINE OPERATORS THAT THE INCREASE IN WAGES ON ACCOUNT OF THE OVERTIME COMPENSATION FOR THE SIX-DAY WEEK HAS THE SAME EFFECT AS AN INCREASE IN THE HOURLY RATE FOR A THIRTY-FIVE HOUR WEEK.

IN ORDER THAT THE BONDED CERTIFYING OFFICERS OF THE DEPARTMENT MAY BE PROTECTED, A DECISION IS REQUESTED AS TO WHETHER THE INCREASED COST FOR LABOR ON ACCOUNT OF THE OPERATION OF THE SIX-DAY WEEK AT THE REQUEST OF THE GOVERNMENT IS SUFFICIENT CAUSE FOR AN ADJUSTMENT OF THE INVOICED PRICE OF COAL UNDER THE TERMS OF THE POST OFFICE DEPARTMENT CONTRACTS AND, IF SO, WHAT PERCENTAGE OF THE INCREASE AS AUTHORIZED BY THE OFFICE OF PRICE ADMINISTRATION MAY BE ALLOWED.

WHILE YOUR LETTER DOES NOT FURNISH A COMPLETE REFERENCE TO THE SEVERAL CONTRACTS UNDER WHICH THE CONTRACTORS CLAIM THAT THE CONTRACT PRICE OF COAL SHOULD BE INCREASED BY REASON OF THE FACT THAT A 6-DAY WORK WEEK FOR MINE EMPLOYEES WAS AUTHORIZED--- IN LIEU OF A 5-DAY WEEK OF 35 HOURS--- WITH TIME AND ONE-HALF PAY FOR WORK IN EXCESS OF 35 HOURS PER WEEK, IT IS ASSUMED THAT SAID CONTRACTS PROVIDE FOR CHANGING THE CONTRACT PRICE IN THE EVENT OF A CHANGE IN THE WAGE SCALES OF MINE EMPLOYEES DURING THE TERM OF EACH CONTRACT, BASED ON THE REQUIREMENTS AND CONDITIONS SET FORTH IN PARAGRAPHS 10 TO 14, INCLUSIVE, OF SPECIAL INSTRUCTIONS TO BIDDERS ( REVISED 4-1-42), TRANSMITTED WITH YOUR LETTER. THAT IS TO SAY, WHERE THE CONTRACTOR QUOTED IN CONFORMITY WITH THE BITUMINOUS COAL ACT OF 1937, 50 STAT. 72, THE METHOD STATED IN SAID SPECIAL INSTRUCTIONS FOR INCREASING OR DECREASING THE CONTRACT PRICE WOULD BE APPLIED ONLY DURING THE INTERIM, IF ANY, BETWEEN THE DATE OF THE CHANGE IN WAGE SCALES AND THE EFFECTIVE DATE OF THE ESTABLISHMENT BY THE BITUMINOUS COAL DIVISION, DEPARTMENT OF THE INTERIOR, OF A MINIMUM PRICE TO SUCCEED THE MINIMUM PRICE WHICH WAS EFFECTIVE ON THE DATE PRECEDING THE DATE OF THE CHANGE IN WAGE SCALES, AND WHERE THE CONTRACTOR QUOTED NOT IN CONFORMITY WITH THE BITUMINOUS COAL ACT OF 1937, SAID METHOD FOR INCREASING OR DECREASING THE CONTRACT PRICE WOULD BE APPLIED DURING THE TIME THE CHANGE IN WAGE SCALES WAS IN EFFECT.

IT IS UNDERSTOOD THAT PRIOR TO JANUARY 12, 1943, WHEN THE THEN EXISTING WAGE AGREEMENT BETWEEN THE UNITED MINE WORKERS OF AMERICA AND THE WESTERN PENNSYLVANIA COAL OPERATORS ASSOCIATION WAS AMENDED TO AUTHORIZE A 6-DAY WORK WEEK WITH TIME AND ONE-HALF FOR ALL WORK IN EXCESS OF 35 HOURS PER WEEK, MINE EMPLOYEES WERE NOT PERMITTED, EXCEPT UNDER SPECIAL CIRCUMSTANCES, TO WORK IN EXCESS OF 35 HOURS PER WEEK; TIME AND ONE-HALF TO BE PAID FOR ALL WORK IN EXCESS THEREOF. THE SUPPLEMENTAL AGREEMENT OF JANUARY 12, 1943, DID NOT INCREASE THE WAGE RATE OF MINE EMPLOYEES BUT MERELY REMOVED A RESTRICTION THERETOFORE PLACED UPON THE WORK OF MINE EMPLOYEES GENERALLY, BY PERMITTING WORK ON A 6-DAY PER WEEK BASIS. MOREOVER, SAID SUPPLEMENTAL AGREEMENT DID NOT REQUIRE THE COAL PRODUCERS TO OPERATE 6 DAYS PER WEEK. IT IS NO DOUBT TRUE THAT THE COAL PRODUCERS WHO OPERATE 6 DAYS PER WEEK HAVE INCURRED INCREASED COSTS IN THE PRODUCTION OF COAL BY REASON OF BEING REQUIRED TO PAY TIME AND ONE-HALF FOR WORK ON SATURDAYS. HOWEVER, UNDER THE CONDITIONS CONTAINED IN SPECIAL INSTRUCTIONS TO BIDDERS--- STATED TO HAVE BEEN MADE A PART OF THE SEVERAL CONTRACTS INVOLVED--- THE GOVERNMENT DID NOT AGREE TO ADJUST THE CONTRACT PRICE FOR ANY AND ALL INCREASED COSTS OF PRODUCING COAL, BUT ONLY WHEN THERE HAD BEEN A CHANGE IN THE WAGE RATE. THE REMOVAL OF THE PROHIBITION AGAINST WORK IN EXCESS OF 35 HOURS PER WEEK MAY IN NOWISE BE CONSIDERED A WAGE RATE CHANGE. NOR MAY THE FACT THAT THE OFFICE OF PRICE ADMINISTRATION INCREASED THE MAXIMUM PRICE OF COAL ON ACCOUNT OF INCREASED LABOR COSTS OF MINING OBLIGATE THE GOVERNMENT TO PAY SUCH MAXIMUM PRICE SINCE THERE APPEARS NOTHING TO SHOW THAT THE MAXIMUM PRICE WAS TO BE REGARDED AS THE MINIMUM PRICE, OR TO PROHIBIT THE SALE OF COAL AT PRICES BELOW SUCH MAXIMUM PRICE.

ACCORDINGLY, YOU ARE ADVISED THAT UNDER THE FACTS REPORTED THERE APPEARS NO LEGAL BASIS FOR ADJUSTMENT OF THE CONTRACT PRICE OF COAL ON ACCOUNT OF INCREASED LABOR COSTS OCCASIONED BY OPERATION OF THE 6-DAY WEEK.