in an arm, corps, department, or organization, he shall, for all purposes, except promotion, be considered an officer of such arm, corps, department, or organization while so serving, and shall be an extra number therein.

Under the quoted provision of the act of July 9, 1918, when a retired officer is employed on active duty and assigned to an arm, corps, or department of the Army he is an officer of the arm, corps, or department to which he is assigned and with which he is serving. See Digest of Opinions of the Judge Advocate General of the Army, 1912–1930, section 51, page 30. Upon transfer to the retired list this officer was not divested of the office of captain to which he had been appointed on the active list, and when he was recalled to active duty it was under the same appointment that he held on the active list, the change in status not affecting the office.

Paragraph 21 of War Department Special Orders No. 162 under which this officer was placed upon active duty assigned him to the Office of the Surgeon General, the head of the Medical Department of the Army. He was thus assigned to the Medical Department and in accordance with the provision of the act of July 9, 1918, he must be considered an officer of the Medical Department. Following the reasoning of the decision of March 26, 1941, supra, since he was not an officer of the Medical Corps, Veterinary Corps, or the Dental Corps, the only basis for computation of pay is that fixed and limited for an officer of the Medical Administrative Corps under the provisions of section 10 of the National Defense Act, as amended, supra.

You are not authorized to pay the voucher which is retained in this office.

(B-20442)

CONTRACTS-COST-PLUS-APPLICABILITY OF STATUTORY
RESTRICTIONS ON GOVERNMENT EXPENDITURES

The act of July 2, 1940, authorizing the War Department to contract on a cost-plus-a-fixed-fee basis for certain supplies and work, did not suspend, either expressly or impliedly, any existing statutory limitations or restrictions on the expenditure of public moneys except those expressly mentioned therein, and, therefore, statutory restrictions, such as those with respect to the purchase from appropriated funds of typewriters, passengercarrying vehicles, and supplies manufactured by the Federal Prison Industries, Inc., are applicable to purchases by a cost-plus-a-fixed-fee contractor for which reimbursement is made by the Government. Comptroller General Warren to the Secretary of War, September 29, 1941: I have your letter of September 12, as follows:

Your attention is invited to a Notice of Exception issued July 21, 1941, against a voucher covering reimbursement for typewriters purchased under cost-plus-a-fixed-fee contract No. W-ORD-458, between the United States Government and the E. I. du Pont de Nemours Company, for the construction and operation of the Indiana Ordnance Works, Charlestown, Indiana.

This submission is not designed to obtain a review of the suspension of a particular disbursing officer's account. It is the desire of this Department

to obtain a decision in respect to the theory underlying the exception which creates the issue, in view of the fact that all cost-plus-a-fixed-fee construction contracts executed since the start of the Emergency Construction Program will undoubtedly be found to involve reimbursements which will be subject to exception on the same or similar grounds.

Reference to Public, No. 703, 76th Congress, July 2, 1940, entitled "An act to expedite the strengthening of the national defense," indicates that unusually broad powers were conferred upon the Secretary of War and the President, to the end that all things be done, in the shortest possible time, to strengthen the defenses of the Nation. As the initial step in that direction, and in illustration of its obvious intention to preserve to the Secretary and to the President that freedom of action which is an absolute necessity in a period of national emergency, Congress removed the limitations contained in sections 1136 and 3734, Revised Statutes, that "Permanent barracks or quarters and buildings and structures of a permanent nature shall not be constructed unless detailed estimates shall have been previously submitted to Congress, "," and "Before any new buildings for the use of the United States are commenced, the plans and full estimates therefor shall be prepared and approved by the Secretary of the Treasury, the Postmaster General, and the Secretary of the Interior; and the cost of each building shall not exceed the amount of such estimate."

It was further provided that "any statutory limitation with respect to the cost of any individual project of construction shall be suspended until and including June 30, 1942, with respect to any construction authorized by this act." Thus, in respect to the authority delegated to the President and to the Secretary of War to enter into contracts calling to the service of the Nation all the available construction experience in the country, Congress removed statutory limitations which otherwise would have so restricted the Government's freedom of action as to have made ineffectual any attempt at strengthening the defenses of the Nation in the shortest possible period of time.

The terms of cost-plus-a-fixed-fee contract, Form No. 1, approved by the Assistant Secretary of War, July 12, 1940, in exercise of the authority expressed and implied in Public, No. 703, July 2, 1940, indicate clearly the decision of the War Department to safeguard, in the public interest, the contractor's freedom of action. The Government, under this type of contract, is, in effect, contracting for the services of large construction and contracting companies or groups of associates; it is drawing upon the country's demonstrated organizing ability and actual experience in the field of construction; companies and individuals which can organize and carry forward large-scale construction projects in keeping with the urgency of the situation and the demand for speed. As an indication of the reliance placed on the Contractor and his acknowledged ability to organize and prosecute a large-scale construction effort, article I, paragraph 1, of cost-plus-a-fixed-fee contract, Form No. 1, July 12, 1940, was written to provide that "The contractor shall, in the shortest possible time, furnish the labor, materials, tools, machinery, equipment, facilities, supplies not furnished by the Government, and services, and do all things necessary for the completion of the following work:".

Your attention is invited specifically to the phrase in the shortest possible time in which specific recognition was made of the need for speed in the face of a critical situation; and to the phrase and do all things necessary which definitely declares the intention of the War Department to preserve the contractor's freedom of action in recognition of his acknowledged ability to perform under pressure.

Further illustration of this Department's position in respect to the costplus-a-fixed-fee contract and the situation it was designed to meet is found in the provisions of article II, paragraph 1 (k), and paragraph 1 (p), reading as follows:

"(k) Losses and expenses, not compensated by insurance or otherwise (including settlements made with the written consent of the contracting officer), actually sustained by the contractor in connection with the work and found and certified by the contracting officer to be just and reasonable.

"(p) Such other items as should, in the opinion of the contracting officer, be included in the cost of the work. When such an item is allowed by the contracting officer, it shall be specifically certified as being allowed under this paragraph."

In your decision, to the Chief of Finance, B-15593 [20 Comp. Gen. 632], dated April 14, 1941, you held in part, that "To make certain that the contractor does come out whole, regardless of contingencies, the contract expressly provides in subparagraphs 1 (k) and (p) of article II that the contractor shall be reimbursed-in addition to the numerous items specified in detail in other subparagraphs-for 'Losses and expenses, not compensated by insurance or otherwise * actually sustained by the contractor in connection with the work,' and for 'such other items as should, in the opinion of the contracting officer, be included in the cost of the work.' The purpose, of course, is by thus assuming the risks and, in effect, guaranteeing the contractor against loss, to procure the work for the United States at actual cost, plus only such a comparatively small fixed fee for the contractor's services, etc., as would be appropriate under such conditions. Such provisions are thus of the essence of 'cost-plus-a-fixed-fee' contracts, the use of which is expressly sanctioned by the act of July 2, 1940,

*

This language stated in precise terms this Department's policy in respect to the interpretation of, and administration of, cost-plus-a-fixed-fee contracts. It is noted that article I, paragraph 1, of cost-plus-a-fixed-fee contract, Form No. 1, July 12, 1940, also contains the phrase "* * *, supplies not furnished by the Government, In respect to that phrase, it was the intention of this Department that the Government's activity in connection therewith would be one of assistance, in furtherance of the previously stated determination to preserve the contractor's freedom of action, and not one of restriction or limitation as to the source of supply. It was considered that the tremendous scope of the program would undoubtedly introduce a demand for essential and, perhaps, strategic material to the extent that large-scale purchases, or the creation of huge reserve stock piles by the Government, would be of invaluable assistance to the contractors in their efforts toward attaining the greatest possible speed in construction. Contrarily, it was not the intention of this Department that the contractor be required to conform to, or operate under any form of purchase restriction or limitation, which in the past and at present, find their application to the transactions of established and recognized agencies, departments, and branches of the Government.

In the judgment of this Department, for these purposes, the cost-plus-a-fixedfee contractor, in his relationship to the Government, is an independent contractor whose managerial and organizational abilities, plus his recognized experience, have been retained by the Government on a contract basis. He is subject to supervision, but not subservient thereto. He is an independent entity, operating in a technical and, therefore, a professional capacity. Consequently, it is contended that he is not bound by such purchase restrictions as would limit the authority of a dependent Government official. To conclude otherwise would be to place the constructing quartermaster in a superior technical position, with the contractor, consequently, in a position distinctly subordinate thereto. This would have established a relationship which it was definitely the intention of this Department to avoid. It should be noted that in such a situation there would be little justification for the payment of a fixed fee to the contractor, rather than a salary, and, in effect, the work to be performed would be more in the nature of force-account work than contract work.

In the absence of specific stipulations in the terms of the contract as to the eract materials, equipment, and supplies, responsibility for the procurement of which would be divided between, or accepted by the contractor and the constructing quartermaster, it is doubtful if any contractor could be required to accept a restriction or limitation on his freedom of action in procurement, solely on the basis of administrative determination. In any event, on experience to date, this Department would hesitate to require such action on the part of the contractors since it is our stated intention to remove all obstacles that might impede, even slightly, the rapid progress of the work.

It is contended that, if the instant exception, upon review, be sustained, it would follow that all statutes containing prohibitory provisions in a similar vein would be applicable, in like manner, to all pertinent transactions under cost-plus-a-fixed-fee construction contracts. Thus, exception might be taken to the purchase of passenger-carrying vehicles (5 U. S. C. 78), Deposit of moneys in the Treasury (31 U. S. C. 484; 31 U. S. C. 487), Limitation on rentals (40 U. S. C. 40 a), Mandatory requirement that printing be obtained from the Government Printing Office (44 U. S. C. 111), Mandatory requirement as to purchases of

prison-made goods (18 U. S. C. 744 g), and to the prohibitions contained in many other statutes. The total effect of the application of such restrictions and limitations would be to so seriously impede the progress of the program as a whole, as to defeat the purpose which the whole program was designed to accomplish, namely, "* to expedite the strengthening of the national defense" (Public, No. 703, July 2, 1940).

*

It is the opinion of this Department that the terms of the cost-plus-a-fixed-fee contract do not allow for the application of statutory limitations and prohibitions such as that cited in the instant exception, and above.

It is our view that the terms of the contract are controlling, and that the contract itself recognizes the independence of the contractor, and does not permit the view that the contractor, in respect to his relationship to the Government, is in the position of a dependent Government official and therefore subject to statutory restrictions and prohibitions not stipulated in the contract itself.

In view of the number of cost-plus-a-fixed-fee contracts which will necessarily be affected by the decision in the instant case, it is requested that the matter be reviewed in the light of this Department's stated position on the question, at your earliest convenience.

The Notice of Exception dated July 21, 1941, referred to in your letter, was made on voucher No. 166 of the December 1940 accounts of O. G. Chrisman, major, Finance Department, Jeffersonville, Ind., covering reimbursement to the E. I. du Pont de Nemours Co., a cost-plus-a-fixed-fee contractor under contract No. W-ORD 458, dated July 17, 1940, of amounts expended by it for the purchase, among other items, of seven typewriter machines of various sizes from the Royal Typewriter Company, Inc., Louisville, Ky. The exception was made for the reason that the prices paid by the contractor for the machines were in excess of the prices to be paid for typewriting machines as fixed by law in the Treasury Department Appropriation Act, 1941, 54 Stat. 70, at which prices the vendor, the Royal Typewriter Company, Inc., had agreed to furnish machines to the United States under General Schedule of Supplies Contract No. Tps-35558 covering the period August 1, 1940, to June 30, 1941.

The pertinent provision of the Treasury Department Appropriation Act, 1941, is as follows:

No part of any money appropriated by this or any other act shall be used during the fiscal year 1941 for the purchase of any standard typewriting machines, except bookkeeping and billing machines, at a price in excess of the following for models with carriages which will accommodate paper of the following widths, to wit: Ten inches (correspondence models), $70; twelve inches, $75; fourteen inches, $77.50; sixteen inches, $82.50; eighteen inches, $87.50; twenty inches, $94; twenty-two inches, $95; twenty-four inches, $97.50; twenty-six inches, $103.50; twenty-eight inches, $104; thirty inches, 3105; thirty-two inches, $107.50; or, for standard typewriting machines distinctively quiet in operation, the maximum prices shall be as follows for models with carriages which will accommodate paper of the following widths, to wit: Ten inches, $80; twelve inches, $85; fourteen inches, $90; eighteen inches, $95.

The purchases by the contractor included two 12-inch machines at a unit price of $93.50 each, four 12-inch machines at a unit price of $97.81 each, and one 20-inch machine at a price of $131.83, or a total sum of $176.19 in excess of the statutory prices therefor.

Your letter of September 12 questions the correctness of the action taken in the Notice of Exception and requests a decision

with respect to the theory underlying the exception in view of the fact that all cost-plus-a-fixed-fee construction contracts will undoubtedly be found to involve reimbursements which will be subject to exceptions on the same or similar grounds. The question raised by your submission, in substance, is whether or not certain statutory restrictions imposed by the Congress on the purchases of materials and supplies by the various departments of the Government are applicable to the purchases of similar supplies which are to be used in connection with the performance of work under cost-plus-a-fixedfee construction contracts entered into pursuant to authority contained in the act of July 2, 1940, Public, No. 703, Seventy-sixth Congress, 54 Stat. 712.

It has been recognized in various recent decisions of this office that under the provisions of the act of July 2, 1940, Public, No. 703, the Congress has vested in your Department broad powers in order to expedite the work of strengthening the national defense; and that you are empowered to enter into contracts under such conditions as are determined necessary to accomplish the purposes of the act, including contracts on a cost-plus-a-fixed-fee basis. 20 Comp. Gen. 632. Also, it has been recognized by this office that under the costplus-a-fixed-fee form of contract it is contemplated that the actual cost of the whole work, and the risk thereof, are to be assumed by the Government, and that the contractor is to come out whole, regardless of contingencies, in performing the work in accordance with the contract and the directions and instructions of the contracting officer. 20 Comp. Gen. 632, 636.

However, while under the provisions of Public, No. 703, broad powers are invested in you with respect to the execution of contracts and the determination of the other steps which are necessary to be taken in order to expedite the strengthening of the national defense, it is not clear that under such act the Congress intended, either expressly or impliedly, to suspend the operation of all existing statutory limitations and restrictions on the expenditures of public funds, so that in the carrying out of the purposes of the act by your Department it would not be necessary to observe said restrictions and limitations. The act provides, in pertinent part, as follows:

That (a) in order to expedite the building up of the national defense, the Secretary of War is authorized, out of the moneys appropriated for the War Department for national-defense purposes for the fiscal year ending June 30, 1941, with or without advertising, (1) to provide for the necessary construction, rehabilitation, conversion, and installation at military posts, depots, stations, or other localities, * * for the development, manufacture, maintenance, and storage of military equipment, munitions, and supplies, and for shelter; (2) to provide for the development, purchase, manufacture, shipment, maintenance, and storage of military equipment, munitions, and supplies, and for shelter, at such places and under such conditions as he may deem necessary; • Provided, That the limitations contained in sections 1136 and 3734 of the Revised Statutes, as amended, and any statutory limitation with