B-54971, AUG 15, 1950

B-54971, AUG 15, 1950

PRECIS-UNAVAILABLE

MAJOR GENERAL E.M. FOSTER:

CHIEF OF FINANCE, DEPARTMENT OF THE ARMY:

REFERENCE IS MADE TO YOUR LETTER OF APRIL 11, 1950, FORWARDING FOR APPROPRIATE ACTION A LETTER DATED MARCH 21, 1950, FROM THE NASH KELVINATOR CORPORATION, DETROIT, MICHIGAN, WHEREIN REQUEST WAS MADE FOR RECONSIDERATION OF OFFICE DECISIONS DATED APRIL 15, 1946, APRIL 9, 1947, AND MARCH 23, 1948, B-54971, IN WHICH CERTAIN RECLAIMS FILED BY THE CONTRACTOR UNDER CONTRACT NO. DA-W-535-AC-149 WERE CONSIDERED.

ATTENTION IS INVITED TO THE ATTACHED COPY OF MY LETTER OF TODAY TO THE NASH-KELVINATOR CORPORATION RELATIVE TO THE MATTER. THE PAPERS FORWARDED WITH YOUR LETTER WILL BE RETAINED IN THIS OFFICE.

ENCLOSURE

NASH-KELVINATOR CORPORATION

14250 PLYMOUTH ROAD

DETROIT, MICHIGAN

THERE HAS BEEN RECEIVED BY REFERENCE FROM THE CHIEF OF FINANCE YOUR LETTER DATED MARCH 21, 1950, TO THE DETROIT A.F. PROCUREMENT OFFICE, AIR MATERIAL COMMAND, REQUESTING THAT THE SAID OFFICE FORWARD YOUR RECLAIM VOUCHERS UNDER CONTRACT NO. DA-W-535-AC-149, DATED JUNE 28, 1941, TO THE FINANCE OFFICER FOR PAYMENT.

YOU STATED THAT UNDER DATE OF APRIL 14, 1948, THE LOCAL FINANCE OFFICER OFFERED YOU A CHECK FOR THE SUM OF $199.83 IN FULL SETTLEMENT OF YOUR CLAIMS BUT THAT YOU HAD NOT CASHED THIS CHECK IN ORDER NOT TO PREJUDICE YOUR RIGHT TO REIMBURSEMENT FOR THE OTHER ITEMS OF YOUR CLAIM. YOU STATE FURTHER THAT YOU RETURNED THE CHECK TO THE DETROIT A.F. PROCUREMENT OFFICE UNDER DATE OF JANUARY 10, 1950. YOUR REQUEST THAT PAYMENT OF THE OTHER ITEMS OF YOUR CLAIM BE MADE WAS PREDICATED UPON ALLEGED CURRENT RULINGS BY THE UNITED STATES AIR FORCE RECLAIM VOUCHER BOARD, THE APPEAL BOARD OF THE OFFICE OF CONTRACT SETTLEMENT AND THE COURTS. THE ITEMS OF COST FOR WHICH REIMBURSEMENT WAS CLAIMED REPRESENT EXPENDITURES PREVIOUSLY REIMBURSED UNDER THE CONTRACT BUT SUBSEQUENTLY COLLECTED FROM YOU AS THE RESULT OF EXCEPTIONS TAKEN BY THE AUDIT DIVISION OF THE GENERAL ACCOUNTING OFFICE. THE ITEMS WERE SUMMARIZED IN YOUR LETTER OF MARCH 21, 1950, AS FOLLOWS:

"DIRECTOR'S FEES AND EXPENSES . . . . . . . . . . . . $5,696.58

SALARY PAID TO SECRETARY TO CHAIRMAN OF THE BOARD . . 522.65

CONTRIBUTIONS TO SPARROW HOSPITAL, LANSING, MICHIGAN. 2,500.00

MARYLAND FRANCHISE FEES . . . . . . . . . . . . . . . 199.83"

IN OFFICE DECISION OF MARCH 23, 1948, TO LIEUTENANT COLONEL ROY W. BARTLETT, F.D. U.S. ARMY, THE ITEM OF $199.83, REPRESENTING THE COST OF MARYLAND FRANCHISE FEES WAS HELD TO BE A REIMBURSABLE ITEM OF COST UNDER THE CONTRACT. THE OTHER ITEMS OF COST, EXCEPT THE ITEM OF $2,500 WERE ALSO CONSIDERED IN THE DECISION OF MARCH 23, 1948, AND IT WAS THERE HELD, FOR THE REASONS STATED, THAT THE SAID ITEMS WERE NOT REIMBURSABLE. THE ITEM OF $2,500 WAS CONSIDERED IN OFFICE DECISIONS OF APRIL 15, 1946, AND APRIL 9, 1947, TO COLONEL ROY J. CAPERTON, F.D., U.S. ARMY, WHEREIN IT WAS HELD THAT SAID ITEM AND A SIMILAR ITEM OF $2,500 CLAIMED UNDER CONTRACT NO. W-535-AC-25049 WERE NOT REIMBURSABLE. HOWEVER, YOU STATED IN YOUR LETTER OF MARCH 21, 1950, THAT THE LATTER ITEM OF $2,500 HAD BEEN ALLOWED AS AN ITEM OF COST UNDER SUPPLEMENTAL AGREEMENT DATED MARCH 10, 1949, TO THE AFORESAID CONTRACT NO. W-535-AC-25049.

WITH RESPECT TO THE RECLAIM FOR $2,500 UNDER CONTRACT NO. DA-W-535 AC- 149, IT APPEARS THAT A CONTRIBUTION IN THE AMOUNT OF $5,000 ($2,500 CLAIMED AS AN ITEM OF COST UNDER CONTRACT NO. DA-W-535-AC-149, AND $2,500 CLAIMED UNDER CONTRACT NO. DA-W-535-AC-25049) WAS MADE BY YOU AFTER A LOCAL APPEAL HAD BEEN MADE BY THE EDWARD SPARROW HOSPITAL IN LANSING, MICHIGAN, FOR FUNDS TO PROVIDE INCREASED HOSPITAL FACILITIES NECESSITATED BY THE INFLUX OF A LARGE NUMBER OF PEOPLE DUE TO WAR WORK BEING CARRIED ON IN THAT VICINITY BY YOUR CORPORATION. YOU HAD NOT PREVIOUSLY BEEN ENGAGED IN WAR WORK IN LANSING AND YOUR OPERATION OF TWO GOVERNMENT-OWNED PLANTS LOCALLY CAUSED AN INFLUX OF AN UNPRECEDENTED NUMBER OF PEOPLE, THEREBY OVERTAXING THE HOSPITAL FACILITIES IN THAT LOCALITY. YOU URGED IN SUPPORT OF YOUR RECLAIM FOR REIMBURSEMENT OF THE TOTAL SUM OF $5,000 THAT YOU NOT ONLY HAD NO INTENTION OF REMAINING IN LANSING FOR POST WAR PRODUCTION, BUT THAT COST OF CONSTRUCTING AND MAINTAINING HOSPITAL FACILITIES AT YOUR OWN EXPENSE WOULD HAVE BEEN PROHIBITIVE. THEREFORE, YOU BELIEVED IT EXPEDIENT TO DONATE THE SUM OF $5,000 TO THE HOSPITAL.

AS A BASIS FOR DENYING YOUR CLAIM FOR REIMBURSEMENT OF THE $5,000 IT WAS STATED IN THE DECISION OF APRIL 15, 1946, THAT THE HOSPITAL FOR WHICH THE CONTRIBUTION WAS MADE CONSTRUCTED FOR THE BENEFIT OF THE ENTIRE POPULATION OF LANSING, MICHIGAN, AND THAT WHILE IT MAY HAVE BEEN OF SOME BENEFIT TO THE GOVERNMENT IN THAT YOUR EMPLOYEES COULD BE HOSPITALIZED THERE, THE CONTRIBUTION COULD NOT BE VIEWED AS A COST "INCIDENT TO AND NECESSARY FOR THE PERFORMANCE OF THE CONTRACT," NOR AS COMING WITHIN THE MEANING OF THE TERM "ORDINARY AND NECESSARY BUSINESS EXPENSE." ALSO, IT WAS STATED IN THE DECISION OF APRIL 9, 1947, THAT THE BENEFITS ALLEGEDLY DERIVED FROM THE CONTRIBUTION WERE ENTIRELY TOO REMOTE TO JUSTIFY THE CONCLUSION THAT THE SAID CONTRIBUTION WAS INCIDENT TO AND NECESSARY FOR THE PERFORMANCE OF THE TWO CONTRACTS.

THERE IS NOTHING CONTAINED IN YOUR LETTER TO JUSTIFY A CONCLUSION DIFFERENT FROM THAT REACHED IN THE DECISIONS OF APRIL 15, 1946, APRIL 9, 1947, AND MARCH 23, 1948. THE FACT THAT 50 PERCENT, OR $2,500 OF THE CONTRIBUTION OF $5,000 WAS LATER REIMBURSED TO YOU BY THE ADMINISTRATIVE OFFICE AFFORDS NO BASIS FOR SIMILAR ACTION BY THIS OFFICE ON YOUR RECLAIM FOR $2,500 UNDER CONTRACT NO. DA-W-535-AC-149. UNDER THE PROVISIONS OF THE CONTRACT SETTLEMENT ACT OF 1944, 58 STAT. 649, THE DETERMINATION OF THE DEPARTMENT OF THE ARMY WITH RESPECT TO ITEMS INVOLVED IN TERMINATION SETTLEMENTS EXECUTED PURSUANT TO THE AUTHORITY OF THAT ACT ARE FINAL AND CONCLUSIVE. HOWEVER, NEITHER ADMINISTRATIVE RULINGS BY THE UNITED STATES AIR FORCE RECLAIM VOUCHER BOARD NOR ACTION BY THE OFFICE OF CONTRACT SETTLEMENT IN OTHER CASES ARE CONTROLLING ON THIS OFFICE IN THE AUDIT OF ACCOUNTS INVOLVING PAYMENTS MADE UNDER CONTRACTS WHICH ARE NOT AFFECTED BY SPECIAL STATUTORY AUTHORITY.

THE CHECK FOR $199.83, WHICH WAS FORWARDED TO THIS OFFICE, IS RETURNED HEREWITH.