CONTRACT(Sanitized)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP57-00384R000700070035-2
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 2
• Document Creation Date: December 12, 2016
• Document Release Date: April 16, 2001
• Sequence Number: 35
• Publication Date: October 25, 1951
• Content Type: MFR

1AUNT1A 1 IfAV
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25 October 1951 ti~ " ,
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MEMORANDUM FOR THE RECORD
1. Progress under this contract has been unsatisfactory and
the Procurement Office is holding up payment of vouchers in the
amount of approximately 26,000, which have been submitted by the
contractor. The estimated cost of the contract is approximately
;200,000. The contractor is in financial difficulties because of
lack of operating capital and has filed a petition for arrange-
man?.irith creditors under Chapter 11 of the Bankruptcy Act (11 USC
2. It is the desire of the operational and procurement f-
fices to have the work completed by another contractor. ,
the question is raised whether the 1951 funds obligated under
this contract would thereby be lost and 1952 funds required for
the new contract. It is understood that some doubt has been ex-
pressed on this point by members of the Fiscal and Finance Divi-
sions.
3. I have discussed the question informally with the Gen-
eral Counsel's Office of GAO, which advises that it is settled
that the old funds may be used where there is termination for de-
fault under a fixed-price contract and purchase against the ac-
count of the contractor. The Digest Section of GAO has made a
search but has been unable to find any precedent for the case of
cost-plus contracts. However, it seems that the same result would
be reached, although it might be argued that there is a distinc-
tion since there is no purchase against the account of the contrac-
tor. Support for this conclusion is found in 2 Comp. Gen. 130,
where a project order had been issued within the Government, and
the original funds were held still to be available for purchase
elsewhere when the requisitioned agency was unable to furnish the
equipment.
.. A contrary result was reached in 24 Comp. Gen. 555, -,,There
the Comptroller held that the old appropriation was not available
since the contract was terminated not for default but because of
the inability of the Government to obtain the agreed priority rat-
ing for materials needed in performance. Under such circumstances
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the Comptroller said that the original contract was completely dis-
solved and the replacement contract had no connection with it.
Hence, the appropriation current at the time of the second contract
must be charged.
5. In order to avoid such a result in thel the
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lt and final settlement with
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termination should be for
should not be made earlier than the effective date of the replace-
ment contract.
6. Since the Contracts Branch does not now have the necessary
justification and documentation to support a termination for de-
fault, it will first investigate the possibility that these 1951
funds may be used in some other way by the Agency. If not, and if
it is important to save them for the requisitioY'ng activity, Con-
tracts -s, ill proceed along the lines of termination for default,
in consultation with this office.
7. Further investigation could profitably be made on the ap-
propriation point here involved. The principal statute to be con-
strued is found in 31 USC ? 712 a t:iich provides that balances of
appropriations shall only be applied to the payment of expenses
properly incurred or the fulfillment of contracts properly made
within the year for which the funds were appropriated.
Chrono
Subject /Legal Decision
25X1A Vital Document
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