B-121248, NOVEMBER 22, 1954, 34 COMP. GEN. 239

B-121248, NOVEMBER 22, 1954, 34 COMP. GEN. 239

APPROPRIATIONS - OBLIGATION - FISCAL YEAR - REPLACEMENT CONTRACTS THE RULE THAT THE APPROPRIATIONS ORIGINALLY OBLIGATED WITH THE COST OF A CONTRACT, WHICH IS IN DEFAULT, ARE AVAILABLE FOR A REPLACEMENT CONTRACT PROVIDED THE NEED CONTINUES TO EXIST, IS NOT AFFECTED BY SECTION 1311 OF THE SUPPLEMENTAL APPROPRIATION ACT, 1944, RESPECTING DOCUMENTARY EVIDENCE OF OBLIGATIONS, SO THAT FUNDS OBLIGATED FOR A DRILLING CONTRACT WHICH HAS BEEN TERMINATED FOR THE CONVENIENCE OF THE GOVERNMENT REMAIN AVAILABLE FOR THE EXECUTION OF A REPLACEMENT CONTACT.

ACTING COMPTROLLER GENERAL WEITZEL TO THE SECRETARY OF THE INTERIOR, NOVEMBER 22, 1954:

REFERENCE IS MADE TO YOUR LETTER OF AUGUST 31, 1954, RELATIVE TO THE TERMINATION OF CONTRACT NO. I-GS-13575, DATED JUNE 23, 1952, WITH THE MAC EXPLORATION COMPANY, GARRISON, NORTH DAKOTA, FOR EXPLORATORY DRILLING IN THE TINTIC MINING DISTRICT, UTAH COUNTY, UTAH.

BY ADMINISTRATIVE DECISION CA-202, DATED DECEMBER 16, 1953, RENDERED IN CONNECTION WITH AN APPEAL MADE BY THE CONTRACTOR UNDER ARTICLE 9 OF THE CONTRACT ENTITLED " DISPUTES," IT WAS DETERMINED THAT THE CONTRACTOR'S RIGHT TO PROCEED UNDER THE CONTRACT HAD BEEN ERRONEOUSLY TERMINATED BY THE CONTRACTING OFFICER. THEREAFTER, BY AGREEMENT OF MARCH 11, 1954, DESIGNATED AS AMENDATORY CONTRACT TO CONTRACT NO. I-GS 13575, THE CONTRACT WAS TERMINATED FOR THE CONVENIENCE OF THE GOVERNMENT AND THE CONTRACTOR AGREED TO ACCEPT THE AMOUNT OF $25,720 IN FULL AND FINAL SETTLEMENT OF ALL RIGHTS INCIDENT TO AND ARISING OUT OF THE TERMINATED CONTRACT.

IT IS STATED IN YOUR LETTER THAT ON JUNE 3, 1954, BIDS WERE SOLICITED FOR COMPLETION OF THE UNFINISHED WORK UNDER CONTRACT NO. 1-GS 13575; THAT ONLY ONE BID WAS RECEIVED BY THE OPENING DATE OF JUNE 21; THAT THE BID PRICE WAS GREATLY IN EXCESS OF THE AMOUNT ESTIMATED TO COMPLETE THE WORK; AND THAT IS IS INTENDED TO INVITE NEW BIDS BASED UPON REVISED SPECIFICATIONS WHICH, IN THE OPINION OF YOUR DEPARTMENT, SHOULD RESULT IN A SUBSTANTIALLY LOWER BID PRICE.

UNDER ARTICLE 3 OF THE SPECIFICATIONS MADE A PART OF CONTRACT NO. I GS- 13575, THE GOVERNMENT GUARANTEED THAT THE AMOUNT OF THE WORK TO BE PERFORMED AT THE CONTRACT UNIT PRICES WOULD RESULT IN PAYMENTS TOTALING A MINIMUM OF $70,000, BUT RESERVED THE RIGHT TO REQUIRE THE CONTRACTOR TO PERFORM ANY AND ALL OF THE SPECIFIED UNITS OF WORK "BEYOND THE MINIMUM AMOUNT GUARANTEED IN THIS ARTICLE, AND UP TO A MAXIMUM AMOUNT OF $105,000.00 INCLUDING THE MINIMUM.'

IT APPEARS THAT OVER $40,000 WAS PAID TO THE MAC EXPLORATION COMPANY BEFORE ITS CONTRACT WAS TERMINATION AND THAT BY PAYMENT OF THE ADDITIONAL SUM OF $25,720 UNDER THE SETTLEMENT AGREEMENT OF MARCH 11, 1954, THE TOTAL AMOUNT PAID TO THAT COMPANY APPROXIMATES THE SUM OF $71,000, WHICH IS $34,000 LESS THAN THE MAXIMUM OF $105,000 OBLIGATED BY THE CONTRACT FOR PAYMENT FROM FUNDS APPROPRIATED UNDER THE HEADING "1GEOLOGICAL SURVEY" IN THE INTERIOR DEPARTMENT APPROPRIATION 1952, 65 STAT. 248, 258. YOU REQUEST ADVICE AS TO WHETHER THIS OFFICE WOULD BE REQUIRED TO OBJECT TO THE EXPENDITURE OF THE REMAINDER OF $34,000 AS A CHARGE AGAINST THE 1952 FISCAL YEAR APPROPRIATION.

IN CASES WHERE A CONTRACT PERFORMANCE PERIOD HAS EXTENDED BEYOND THE EXPIRATION OF THE PERIOD OF AVAILABILITY FOR OBLIGATION OF A FISCAL YEAR APPROPRIATION, AND WHERE IT HAS BECOME NECESSARY TO TERMINATE THE CONTRACT BECAUSE OF THE CONTRACTOR'S DEFAULT, THIS OFFICE HAS TAKEN THE POSITION THAT THE FUNDS OBLIGATED UNDER THE ORIGINAL CONTRACT WOULD BE AVAILABLE FOR THE PURPOSE OF ENGAGING ANOTHER CONTRACTOR TO COMPLETE THE UNFINISHED WORK, PROVIDED A NEED FOR THE WORK, SUPPLIES, OR SERVICES EXISTED AT THE TIME OF EXECUTION OF THE ORIGINAL CONTRACT AND THAT IT CONTINUED TO EXIST UP TO THE TIME OF EXECUTION OF THE REPLACEMENT CONTRACT. CF. 32 COMP. GEN. 565. CONSIDERING THAT THE INSTANT CONTRACT ORIGINALLY WAS TERMINATED FOR DEFAULT AND THAT THE SUBSEQUENT TERMINATION FOR CONVENIENCE OF THE GOVERNMENT WAS DESIGNED MERELY TO SETTLE THE CONTRACTOR'S CLAIM FOR DAMAGES, THE FACTS OF THE PRESENT CASE APPEAR SUFFICIENT TO MEET THESE REQUIREMENTS. FURTHERMORE, IT IS NOT PERCEIVED THAT THE APPLICATION OF THIS RULE IS AFFECTED BY SECTION 1311 OF THE SUPPLEMENTAL APPROPRIATION ACT, 1955, PUBLIC LAW 663, 83RD CONGRESS, APPROVED AUGUST 26, 1954, 68 STAT. 830. THAT SECTION PROVIDES, IN PERTINENT PART, AS FOLLOWS:

(A) AFTER THE DATE OF ENACTMENT HEREOF NO AMOUNT SHALL BE RECORDED AS AN OBLIGATION OF THE GOVERNMENT OF THE UNITED STATES UNLESS IT IS SUPPORTED BY DOCUMENTARY EVIDENCE OF---

(1) A BINDING AGREEMENT IN WRITING BETWEEN THE PARTIES THERETO, INCLUDING GOVERNMENT AGENCIES, IN A MANNER AND FORM AND FOR A PURPOSE AUTHORIZED BY LAW, EXECUTED BEFORE THE EXPIRATION OF THE PERIOD OF AVAILABILITY FOR OBLIGATION OF THE APPROPRIATION OR FUND CONCERNED FOR SPECIFIC GOODS TO BE DELIVERED, REAL PROPERTY TO BE PURCHASED OR LEASED, OR WORK OR SERVICES TO BE PERFORMED * * * (ITALICS SUPPLIED.)

(D) NO APPROPRIATION OR FUND WHICH IS LIMITED FOR OBLIGATION PURPOSES TO A DEFINITIVE PERIOD OF TIME SHALL BE AVAILABLE FOR EXPENDITURE AFTER THE EXPIRATION OF SUCH PERIOD EXCEPT FOR LIQUIDATION OF AMOUNTS OBLIGATED IN ACCORD WITH SUBSECTION (A) HEREOF; BUT NO SUCH APPROPRIATION OR FUND SHALL REMAIN AVAILABLE FOR EXPENDITURE FOR ANY PERIOD BEYOND THAT OTHERWISE AUTHORIZED BY LAW.

THE ORIGINAL CONTRACT IN THIS CASE APPEARS TO HAVE BEEN A VALID BINDING AGREEMENT WHICH WAS EXECUTED PRIOR TO THE TIME THE PERIOD OF AVAILABILITY FOR OBLIGATION OF 1952 FUNDS EXPIRED. ACCORDINGLY, AND IN VIEW OF THE MANNER IN WHICH THE ORIGINAL CONTRACT WAS TERMINATED, YOU ARE ADVISED THAT THIS OFFICE WILL NOT BE REQUIRED TO OBJECT TO THE EXPENDITURE OF THE AMOUNT OF $34,000 AS A CHARGE AGAINST THE 1952 FISCAL YEAR APPROPRIATION IN CONNECTION WITH THE TIMELY EXECUTION OF A NEW CONTRACT FOR THE PERFORMANCE OF THE UNFINISHED WORK UNDER CONTRACT NO. I-GS-13575.