The copy of the Department's supplementary letter of June 20, 1941, to the Farrand Optical Co., is as follows: In the Navy Department's letter of 19 February 1941, you were advised of an anticipated order to your company covering the manufacture of seven hundred fifty (750) telescopes Mark LX, each with packing case, at a total cost not to exceed $1,494,600.00, contingent upon the Government paying for, and taking title, to, additional equipment at an estimated maximum cost of $225,000.00. It now becomes necessary for the Navy Department to amend the Letter of Intent of 19 February 1941, to include the following: Item No. Periscope for Submarine Attack Teacher. 10 Delivery 1 unit in Jan. 1942. 2 units in December 1942. 1 unit in June 1943. 1 unit in November 1943. This ordnance material will be purchased from funds appropriated and now available for use by the Navy or under authorization for the consummation of contracts. The Secretary of the Navy finds that in the interest of national defense, it is necessary that production be not delayed awaiting the placing of the aforesaid order. You are hereby authorized to purchase such materials and equipment as are necessary for the manufacture of the periscopes in anticipation of the placing of such order, subject to the receipt by the purchasing officer of notification of the items to be purchased with estimated maximum prices and confirmation by the purchasing officer of authorization to proceed with such purchases. All the terms and conditions of the original letter shall apply to this additional equipment. In the event the order for this ordnance material is not placed with you prior to 15 August 1941, the Government will, upon demand made prior to 15 September 1941, reimburse you for the cost incurred by you and will assume your obligation for any commitments you have made in this connection. You will agree in connection with the purchase of such materials and equipment as aforesaid that you will comply with all laws pertaining or relating to the purchase of such materials and equipment. All applicable contract clauses required by Federal Law to be incorporated in contracts for articles of the kind herein contracted for are hereby incorporated herein by reference. Your attention is invited to the national-defense clause included in later contracts. A preference rating of A-1-c will be assigned this additional item of ordnance material. If the foregoing is acceptable to you, will you kindly so indicate on the enclosed three (3) copies of this letter and return to the purchasing officer on or prior to 5 July 1941, thereby constituting this letter an amendment to the Letter of Intent dated 19 February 1941, which letter constitutes a contract until the execution of a formal contract, at which time the Letter of Intent and this amendment thereto will become null and void. Section 3690, Revised Statutes, 31 U. S. C. 712, provides: Except as otherwise provided by law, all balances of appropriations contained in the annual appropriation bills and made specifically for the service of any fiscal year, and remaining unexpended at the expiration of such fiscal year, shall only be applied to the payment of expenses properly incurred during that year, or to the fulfillment of contracts properly made within that year; and balances not needed for such purposes shall be carried to the surplus fund. This section, however, shall not apply to appropriations known as permanent or indefinite appropriations. While the above-quoted letter of February 19 states that it is to constitute a contract, and while the supplementary letter of June 20 states that it is "an amendment to the Letter of Intent dated 19 February 1941, which letter constitutes a contract until the execution of a formal contract," the supplementary letter did not bind the Government to enter into a formal contract for the manufacture of the periscopes, but gave the Department a choice of two alternatives: (1) to order the manufacture of the periscopes and enter into a formal contract therefor; or (2) to withhold the contemplated order and reimburse the company for costs incurred-under the conditions stated in the letter-in purchasing materials and equipment in anticipation of the placing of such order. Although the bare reservation of the option to place an order for the periscopes created no contractual obligation upon the United States, 19 Comp. Gen. 980, the Government clearly was bound by the Farrand Optical Co.'s Acceptance-prior to the expiration of the fiscal year 1941-of the Government's offer to reimburse the company for costs incurred in purchasing materials and equipment for the manufacture of said periscopes. It was not determined, when the agreement was made, whether the Government thereby would be obligated to pay such costs as reimbursement for materials and equipment purchased by the company, or as an inseparable part of the price to be paid under a subsequent formal contract for the manufacture of the periscopes. However it is obvious that the agreement contemplated immediate action by the company to supply what was then characterized as an urgent need of the Government, and the expenses incurred in connection therewith are chargeable to the appropriation for the fiscal year in which the agreement was made, notwithstanding the exact amount of the Government's liability was not determined during that fiscal year. 18 Comp. Gen. 363. Accordingly, the question presented in the concluding paragraph of your letter is answered in the affirmative. (B-21633) PAY-AVIATION DUTY-SCOPE OF NONFLYING OFFICER LIMITATION The restriction in the Marine Corps appropriation for the fiscal year 1942 that the funds provided therein shall not be available for "increased pay for making aerial flights by nonflying officers or observers at rates in excess of those prescribed by law for the Army" relates to nonflying officers under the laws applicable to the Marine Corps and not to nonflying officers under laws applicable to the Army, and, therefore, student aviators in the Marine Corps need not be classed as nonflying officers for the purposes of this restriction. 21 Comp. Gen. 17, distinguished. Assistant Comptroller General Elliott to the Secretary of the Navy, December 16, 1941: There has been received your letter of November 3, 1941, transmitting a letter from the Paymaster, Headquarters United States Marine Corps, dated October 3, 1941, as follows: References: (a) Sec. 20, Act of June 10, 1922. (b) Naval Appropriation Act of 1942. (c) Sec. 1, Act of October 4, 1940. (d) Art. 2140-2 Bureau Supplies and Accounts Memoranda. * * * 1. Reference (a) provides; "That all officers, of the Army, Navy, Marine Corps, and Coast Guard, when by competent authority they are required to participate regularly and frequently in aerial flights * shall receive the same increase of their pay as are authorized for the performance of like duties in the Army." [Italics supplied.] 2. Reference (b), at page 21, provides; "Pay of officers, for increased pay for making aerial flights, none of which shall be available for increased pay for making aerial flights by nonflying officers or observers at rates in excess of those prescribed by law for the Army, which shall be the legal maximum rates as to such nonflying officers or observers; [Italics supplied.] * 3. The term "flying officer" has been defined by law for the Army, reference (c), and is as follows; a flying officer is defined as one who has received an aeronautical rating as a pilot of service types of aircraft or one who has received an aeronautical rating as an aircraft observer or as any other member of combat crew under such regulations as the Secretary of War may prescribe." (Secretary of the Navy for the Navy, Comp. Gen. B-13727, dated January 6, 1941), while for the Navy the term "flying officer" has been defined administratively by the Secretary of the Navy, reference (d) and is as follows: "A flying officer, both in time of peace and of war, may be defined as an officer who is qualified as a naval aviator and has been officially designated as such, or a student naval aviator who has been so designated. [Italics supplied.] 4. A limitation such as appears in the Naval Appropriation Act, 1942, reference (b) appears in the Military Appropriation Act, 1941, and the Comptroller General in construing its provisions, reference (e), held that Army officers who were in training for aeronautical ratings did not come within the statutory definition of the term "flying officer" and, therefore, were subject to the limitation on their pay. 5. Having in mind the provisions of reference (a) and the statutory definition of a "flying officer," reference (d), doubt arises as to whether it is now proper to pay a "Student Naval Aviator" 50% of his pay as remuneration for making aerial flights prior to receipt of an aeronautical rating as a naval aviator (pilot). 6. In order that disbursing officers of the Marine Corps may be properly informed in this matter, it is requested that the Secretary of the Navy advise the paymaster, Marine Corps, of his opinion or, if deemed appropriate, that the matter be referred to the Comptroller General of the United States, for his decision. Section 20 of the act of June 10, 1922, 42 Stat. 632, as amended by section 4 of the act of May 31, 1924, 43 Stat. 250, and section 6 of the act of July 2, 1926, 44 Stat. 782, provides as follows: That all officers, warrant officers, and enlisted men of all branches of the Army, Navy, Marine Corps, and Coast Guard, when by orders of competent authority they are required to participate regularly and frequently in aerial flights, and when in consequence of such orders they do participate in regular and frequent flights as defined by such Executive orders as have heretofore been, or may hereafter be, promulgated by the President, shall receive the same increase of their pay and the same allowance for traveling expenses as are authorized for the performance of like duties in the Army. Exclusive of the Army Air Corps, and student aviators and qualified aircraft pilots of the Navy, Marine Corps, and Coast Guard, the number of officers of any of the services mentioned in the title of this act who may be required by competent authority to participate regularly and frequently in aerial flights as defined by such Executive orders as have heretofore been, or may hereafter be, promulgated by the President shall not at any one time exceed 1 per centum of the total authorized commissioned strength of such service. * * The act of May 6, 1941, Public, No. 48, 77th Congress, 55 Stat. 169, making appropriation for the naval service for the fiscal year ending June 30, 1942, provides, in pertinent part, as follows: Pay, Marine Corps For pay and allowances prescribed by law for all officers on the active list-pay and allowances, $5,577,293, including $517,611, for increased pay for making aerial flights, none of which shall be available for increased pay for making aerial flights by nonflying officers or observers at rates in excess of those prescribed by law for the Army, which shall be the legal maximum rate as to such nonflying officers or observers; The act of June 30, 1941, Public, No. 139, 77th Congress, 55 Stat. 368, making appropriation for the military establishment for the fiscal year ending June 30, 1942, under "Pay of the Army" provides as follows: aviation increase to commissioned and warrant officers, $14,188,834, none of which shall be available for increased pay for making aerial flights by nonflying officers at a rate in excess of $720 per annum, which shall be the legal maximum rate as to such officers, and such nonflying officers shall be entitled to such rate of increase by performing three or more flights within each ninety-day period, pursuant to orders of competent authority, without regard to the duration of such flight or flights; In construing a similar provision contained in the appropriation for the military establishment for the fiscal year ending June 30, 1941, it was held in decision B-17795, dated July 14, 1941, 21 Comp. Gen. 17 (quoting the syllabus), as follows: The provision in the Military Appropriation Act, 1941, limiting to $720 per annum the increased pay of "nonflying officers" for making aerial flights is applicable not only to the pay of flight surgeons and officers from other branches while flying in the capacity of observers but also to the pay of officers from any branch of the Army who cannot be classified as "flying officers" under the statutory definition of that term while undergoing training as aircraft pilots, observers, navigators, bombardiers, etc. The term "flying officers" in the Navy and Marine Corps has not been defined by statute as it has been defined with respect to the organization of the Air Corps of the Army. However, in section 20 of the Joint Service Pay Act, as amended July 2, 1926, the statute has at least recognized that student aviators of the Navy, Marine Corps, and Coast Guard are included in the flying personnel who may be assigned to duty requiring regular and frequent participation in aerial flights without reference to the limitation as to the number of officers on flying status from other branches of the service. The provision is that "Exclusive of the Army Air Corps, and student aviators and qualified aircraft pilots of the Navy, Marine Corps, and Coast Guard" the number of officers assigned to duty requiring them to participate in regular and frequent aerial flights shall not exceed one per centum of the total authorized commissioned strength of the service concerned. This clearly recognizes that student aviators are included among flying personnel of the Navy and Marine Corps, and the departmental interpretation in Article 2140-2, Bureau of Supplies and Accounts Memoranda, is to the same effect. In view of this statutory indication it is concluded that the appropriation restriction in the Marine Corps appropriations relates to nonflying officers under the laws applicable to the Marine Corps and does not necessarily include officers who under the statutory definition for the Army are required to be classed as nonflying officers. See in this connection. B-21167, October 21, 1941, 21 Comp. Gen. 352, to the Secretary of the Navy. (B-18126) FEES ARCHITECT-ENGINEERS LIMITATIONS Payments on a cost-plus-a-fixed-fee basis to architect-engineers under a War Department contract for such services authorized by section 2 of the act of August 7, 1939, may not exceed the statutory maximum of 6 percent of the estimated cost of the project to which the services are applicable, regardless of whether such payments are made as reimbursement of expenditures or as a fixed fee, except that there may be excluded-within the limits set by the contract-reimbursement of traveling expenses, expenditures for expert technical assistants and services, and expenditures for such supplies and equipment as the Government may have failed to furnish in accordance with the contract. 20 Comp. Gen. 632, distinguished. Comptroller General Warren to the Secretary of War, December 18, 1941: There has been considered your letter of September 16, 1941, as follows: Receipt is acknowledged of a letter dated July 29, 1941 (A-WHS-CE), from the Chief, Audit Division, General Accounting Office, addressed to the Director of Purchases and Contracts, Office of the Under Secretary of War, in which reference is made to various contracts received in that office, entered into on a cost-plus-a-fixed-fee basis under the provisions of the act of August 7, 1939 (53 Stat. 1239), the act of June 13, 1940 (54 Stat. 350), and the act of July 2, 1940 (54 Stat. 712), covering architectural and engineering services. In that letter the Chief, Audit Division, invites attention to section 2 of the act of August 7, 1939, which restricts the fees of architects and engineers to a maximum of 6 percent of the estimated cost of the involved project and states that the "maximum fee is considered to be inclusive of all payments for the work performed, whether as reimbursement for expenditures or in payment of |