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ATTORNEY AT LAW: REFERENCE IS MADE TO YOUR LETTERS OF NOVEMBER 5 AND 10. IT IS CONTENDED THAT WALLAS SUFFERED A LOSS OF OVERHEAD COSTS ARISING FROM DELAYS IN COMMENCING WORK UNDER THE CONTRACTS DUE TO THE FAILURE OF THE GOVERNMENT TO PROVIDE PROMPTLY REVISED SPECIFICATIONS. A THOROUGH AUDIT REVIEW OF THE CLAIM WAS MADE BY OUR OFFICE TO DETERMINE WHETHER SUCH A LOSS OF OVERHEAD DID. WHETHER SUCH LOSS PROPERLY WAS CHARGEABLE TO THE GOVERNMENT AS RESULTING FROM CHANGES NOT TIMELY ACCOMPLISHED BY THE GOVERNMENT. LOUIS AIR PROCUREMENT DISTRICT AND RECORDS MADE AVAILABLE BY WALLAS WERE EXAMINED. WE FOUND THAT THE ACCOUNTING RECORDS OF THE CLAIMANT WERE IN POOR CONDITION AND THE BASIC DATA USED IN ITS CLAIM COMPUTATIONS WERE NOT CONCLUSIVELY VERIFIED OR SUBSTANTIATED.

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B-137991, SEP. 29, 1959

TO MR. MURRAY STEINBERG, ATTORNEY AT LAW:

REFERENCE IS MADE TO YOUR LETTERS OF NOVEMBER 5 AND 10, 1958, AND SUBSEQUENT CORRESPONDENCE, REQUESTING RECONSIDERATION OF THE CLAIM OF SEYMOUR WALLAS AND COMPANY IN THE AMOUNT OF $11,993.56, REPRESENTING LOWS OF OVERHEAD INCIDENT TO THE PERFORMANCE OF CONTRACTS NOS. AF 33/602/-6572 AND 6766, DATED MAY 23, 1955, AND JUNE 28, 1955, RESPECTIVELY.

IT IS CONTENDED THAT WALLAS SUFFERED A LOSS OF OVERHEAD COSTS ARISING FROM DELAYS IN COMMENCING WORK UNDER THE CONTRACTS DUE TO THE FAILURE OF THE GOVERNMENT TO PROVIDE PROMPTLY REVISED SPECIFICATIONS, CORRECT DRAWINGS, AND OTHER TECHNICAL DATA NECESSARY TO PRODUCTION.

A THOROUGH AUDIT REVIEW OF THE CLAIM WAS MADE BY OUR OFFICE TO DETERMINE WHETHER SUCH A LOSS OF OVERHEAD DID, IN FACT, RESULT FROM THE PERFORMANCE OF THE CONTRACTS, AND, IF SO, WHETHER SUCH LOSS PROPERLY WAS CHARGEABLE TO THE GOVERNMENT AS RESULTING FROM CHANGES NOT TIMELY ACCOMPLISHED BY THE GOVERNMENT. PERTINENT RECORDS OF THE ST. LOUIS AIR PROCUREMENT DISTRICT AND RECORDS MADE AVAILABLE BY WALLAS WERE EXAMINED. BASED UPON SUCH AUDIT REVIEW, WE MUST CONCLUDE THAT THE LOSS OF OVERHEAD AS CLAIMED DID NOT RESULT FROM PERFORMANCE OF THE CONTRACTS, AND THAT WALLAS HAS NOT DEMONSTRATED LIABILITY OF LOSS IN ANY AMOUNT CHARGEABLE TO THE GOVERNMENT BECAUSE OF CHANGES NOT ACCOMPLISHED BY THE GOVERNMENT IN A TIMELY MANNER.

WE FOUND THAT THE ACCOUNTING RECORDS OF THE CLAIMANT WERE IN POOR CONDITION AND THE BASIC DATA USED IN ITS CLAIM COMPUTATIONS WERE NOT CONCLUSIVELY VERIFIED OR SUBSTANTIATED. IN OUR REVIEW, IT APPEARED THAT THE LOSS OF OVERHEAD CLAIMED CONSISTED MERELY OF MATHEMATICAL ALLOCATIONS OF OVERHEAD COSTS TO SOME OF THE CONTRACTS ON WHICH ACTUAL DELIVERIES FROM MONTH TO MONTH WERE LESS THAN PROJECTED DELIVERIES SCHEDULED UNDER THE CONTRACTS. IT FURTHER APPEARED THAT THE CLAIM ALLOCATED ALL OF THE COMPUTED "LOSS" OF OVERHEAD TO THE TWO CONTRACTS INVOLVED AND TO CONTRACT NO AF 33/602/-6806 WHICH HAD BEEN PREVIOUSLY TERMINATED, EVEN THOUGH THERE WERE A NUMBER OF OTHER CONTRACTS ON WHICH DELIVERIES WERE BEHIND SCHEDULE DURING THE SAME CONTRACT PERIODS. THUS, IT WOULD SEEM THAT THE COMPUTED "LOSS" SHOULD HAVE BEEN ALLOCATED TO ALL OF SUCH CONTRACTS IN ORDER TO APPLY THE METHOD OF ALLOCATION CONSISTENTLY.

THE ALLOCATIONS ESSENTIALLY CONSISTED OF THE FOLLOWING COMPUTATIONS FOR SEPTEMBER AND OCTOBER 1955, PLUS AN ADMITTEDLY DIFFERENT AND INCONSISTENT COMPUTATION FOR NOVEMBER 1955 ON CONTRACTS 6572 AND 6766, AND ALSO FOR AUGUST 1955 ON CONTRACT 6806. CONTRACT 6806 WAS INCLUDED IN THE COMPUTATION BUT WAS EXCLUDED FROM THE SUBJECT CLAIM BECAUSE IT HAD BEEN COVERED IN A PREVIOUS TERMINATION CLAIM SETTLED BY NEGOTIATION BASED ON TERMINATION FOR THE CONVENIENCE OF THE GOVERNMENT. USING SEPTEMBER 1955 FIGURES TO ILLUSTRATE, THE "LOSS" WAS COMPUTED AS FOLLOWS:

CHART

A. TOTAL OVERHEAD DIVIDED BY TOTAL ACTUAL SALES EQUALS OVERHEAD

RATIO ON ACTUAL SALES

$10,004.73 PLUS $15,098.44 EQUALS 66.2 PERCENT

B. TOTAL OVERHEAD DIVIDED BY THE SUM OF TOTAL ACTUAL SALES

PLUS SCHEDULED ADDITIONAL SALES ON THE THREE CONTRACTS

EQUALS OVERHEAD RATIO ON SCHEDULED SALES

$10,004.73 PLUS $61,804.84 EQUALS 16.2 PERCENT

C. OVERHEAD RATIO ON ACTUAL MINUS OVERHEAD RATIO ON SCHEDULED SALES

EQUALS OVERHEAD "LOSS" RATIO

66.2 PERCENT MINUS 16.2 PERCENT EQUALS 50 PERCENT

D. TOTAL OVERHEAD TIMES OVERHEAD "LOSS" RATIO EQUALS TOTAL

"LOSS"

$10,004.73 TIMES 50 PERCENT EQUALS $5,002.38

E. SCHEDULED ADDITIONAL SALES ON EACH OF THREE CONTRACTS DIVIDED

BY TOTAL SCHEDULED ADDITIONAL SALES ON ALL THREE CONTRACTS EQUALS

PROPORTION OF SCHEDULED ADDITIONAL SALES PER CONTRACT

CONTRACT ADDITIONAL SALES PERCENT

6806 $ 9,031.40 19.33

6766 8,250.00 17.66

6552 29,425.00 63.01

TOTAL $46,706.40 100.00

F. TOTAL "LOSS" TIMES PROPORTION OF SCHEDULED ADDITIONAL SALES

PER CONTRACT EQUALS "LOSS" ON EACH CONTRACT

6806 $5,002.38 TIMES 19.33 PERCENT EQUALS $966.96

6766 5,002.38 TIMES 17.66 PERCENT EQUALS 883.42*

6572 5,002.38 TIMES 63.01 PERCENT EQUALS 3,152.00*

100.00 PERCENT $5,002.38

*PERCENT CLAIM $4,035.42

OUR REVIEW REVEALED THAT THE TOTAL OVERHEAD AMOUNTS PER CLAIM COMPUTATION WERE NOT ALL IN AGREEMENT WITH THE GENERAL LEDGER ACCOUNTS, AND THE ACTUAL SALES AMOUNTS WERE NOT ALL IN AGREEMENT WITH THE GENERAL LEDGER ACCOUNTS. NEITHER COULD THE SCHEDULED SALES AMOUNTS BE VERIFIED BECAUSE THE TIMING IN SOME OF THE CONTRACT DELIVERY SCHEDULES DID NOT COINCIDE WITH THE CALENDAR MONTHS, BUT THERE WERE SUBSTANTIAL DIFFERENCES BETWEEN THE CLAIM AMOUNTS AND THE AUDIT CALCULATIONS OF DELIVERIES SCHEDULED BY MONTHS.

NEITHER THE CLAIMANT NOR ANYONE IN HIS EMPLOY COULD ASSIST IN VERIFYING THE CLAIM DATA, NOR THE METHOD OF COMPUTING IT, INDICATING THAT IT HAD BEEN PREPARED BY A FORMER EMPLOYEE RATHER THAN FROM VERIFIABLE RECORDS AND DOCUMENTS. IT WAS NOTED THAT AIR FORCE AUDIT REPORTS, AND DISALLOWANCES OF AMOUNTS CLAIMED ON TERMINATION OF CONTRACT 6806, ALSO CONCLUDED THAT OVERHEAD COSTS ATTRIBUTABLE TO AIR FORCE DELAYS COULD NOT BE DETERMINED FROM THE ACCOUNTING RECORDS, AND THAT UNSUPPORTED COSTS WERE INCLUDED IN CLAIMED AMOUNTS ON PRIOR OCCASIONS.

IT IS FUNDAMENTAL, OF COURSE, THAT PERSONS WHO PRESENT CLAIMS AGAINST THE GOVERNMENT MUST ESTABLISH CLEARLY THE FACTS AND PRINCIPLES ON WHICH THEIR CLAIMS ARE BASED AND THIS BURDEN MUST BE MET SQUARELY IN EACH CASE TO JUSTIFY OUR OFFICE TO CERTIFY SUCH CLAIMS FOR PAYMENT. THIS CRITERIA CLEARLY HAS NOT BEEN MET BY THE CLAIMANT. MOREOVER, IT IS QUITE EVIDENT THAT THE AMOUNT OF THE CLAIM CANNOT BE MADE DEFINITE AND CERTAIN BY REFERENCE TO ANY EXISTING FACTS OR BY ARITHMETICAL PROCESSES.

ACCORDINGLY, FOR THE REASONS SET OUT ABOVE, IT IS CONCLUDED THAT NO LEGAL BASIS EXISTS FOR ALLOWANCE OF ANY PART OF THE CLAIM. THEREFORE, THE SETTLEMENT OF OCTOBER 13, 1958, DISALLOWING THE CLAIM, IS SUSTAINED.

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