cost-plus-a-percentage-of-cost basis contrary to the provisions of said section 1 (a) is not binding on the United States, but the contractor may be paid on a quantum meruit basis for actual wage payments to employees; Social Security taxes deducted from wages, and those contributed by the contractor, which have actually been paid to the State and Federal Governments; actual payments for equipment rental, etc.; actual overhead costs of supervision and insurance; plus a reasonable fee for performance of the contract. Decision discusses the evidence required in support of such payments.

Comptroller General Warren to the Secretary of War, February 24, 1942:

There has been received by fourth indorsement of February 7, 1942, from the Under Secretary of War, a request for an advance decision on Bureau voucher No. DA-95 proposing payment, in the amount of $8,033.19, to the Associated-Banning Co., Wilmington, Calif., for stevedoring and other services furnished in connection with the loading of United States Army transport Ludington during the period November 13 to 19, 1941, under contract No. DA-W-414– Eng-28, dated November 21, 1941.

The voucher was transmitted by the Finance Officer, United States Army, San Francisco, Calif., to the Chief of Finance by letter of January 17, 1942, as follows:

1. There will be found attached hereto documents as listed:

(a) Copy of Contract No. DA-W-414-Eng-38, entered into by the Corps of Engineers with the Associated-Banning Co. of San Francisco, to cover stevedoring services.

(b) Bureau Voucher No. DA-95 and supporting papers (in duplicate) covering claim for first and final payment under above numbered contract.

(c) Duplicate copies of correspondence pertaining to above-numbered voucher. 2. The file is forwarded primarily for consideration for referral to the General Accounting Office for direct settlement because this office questions the legality of the contract in that payment is provided for on a cost-plus-apercentage basis, such basis being a direct violation of the provisions of section (a) of the act approved July 2, 1940 (Public, No. 703, 76th Congress): said act being quoted in the contract as the authority under which it was entered into.

3. Should it be determined that payment may be made legally under the contract, and if the voucher is returned to this office for payment, it then becomes necessary that opinion be furnished as to whether the voucher may be paid in its present form. Here attention is invited to copy of our letter of December 20, 1941, directed to the Division Engineer, San Francisco, together with copy of letter dated January 5, 1942, directed to the same official by the Associated-Banning Company, both contained in correspondence referred to in 1 (c) above.

4. It does not appear that authorities granted in Decision B 22235, C. G., U. S., December 19, 1941, could be applied in this instance because none of the payments for which reimbursement is claimed were witnessed by a Government representative. It is not believed that endorsements to employees' payroll checks would prove of practical value for the reason that under the method in use in San Francisco, longshoremen are paid through a central pay-off bureau and checks covering any given period of time include all wages earned even though workers may have been employed by several organizations during the period.

5. Next, contractor states that he is required to hold employer and employee contributions to State Unemployment Security and Federal Old Age Assistance funds until the end of each quarter. This requirement is fully understood by this office; nevertheless it is believed that reimbursement may not be made by the United States until contractor has actually made the payments.

6. Contractor states that no receipt has ever been given him for payments made to either of the funds mentioned in preceding paragraph but, in the opinion of this office, it is only because he has never asked for them since this

office has made a great many payments to reimburse other contractors for similar expenditures and there has not been a single instance when claims were not supported by receipts.

7. It is believed that if voucher is returned to this office for payment, remaining discrepancies can be adjusted locally without request for further opinion.

While it is stated in said letter that Bureau voucher No. BA-95 represents a claim for payment for services furnished under contract No. DA-W-414-Eng-38, examination thereof reveals that the services actually were furnished under contract No. DA-W-414-Eng-28, consisting of the contractor's informal bid contained in its letter of November 14, 1941, and acceptance of the United States Engineer Office, Southern Pacific Division, San Francisco, Calif., by purchase order dated November 21, 1941. However, it does appear that on November 20, 1941, contract No. DA-W-414-Eng-38 was entered into between the contractor and the United States Engineer Office, San Francisco, Calif., for the furnishing of stevedoring services and equipment for the loading of vessels at piers in the ports of Los Angeles, Long Beach, and San Pedro, Calif., as may be required during the period November 20, 1941, to June 30, 1942. It is stated on each of the two said contracts that it was entered into without advertising pursuant to section 1 (a) of the act of July 2, 1940, Public No. 703, 54 Stat. 712, as continued in effect by section 9 of the Military Appropriation Act of 1942, Public Law No. 139, 77th Congress, 55 Stat. 393.

With respect to the first question presented by the finance officer in his letter of January 17, 1912, supra, relative to the legality of the contract on the ground that payment is provided for on a cost-plus-apercentage-of-cost basis, contrary to the provisions of section 1 (a) of the act of July 2, 1940, supra, the bid of the contractor, contained in its letter of November 14, 1941, is as follows:

With reference to your telephone request of today, we are quoting below the terms for the loading of the S. S. Ludington.

Loading & receiving entire shipment: Straight time pay roll plus 27%. This 27% includes the following: Insurance 10%; supervision and use of gear 10%; profit 7%; and in addition thereto there will be a charge of 4% of straight time pay roll for Social Security Tax.

Overtime: Cost plus 10% for Insurance, and 4% for Social Security Tax. Guards & watchmen: Cost plus 10% for Insurance. 10% for Supervision and 4% for Social Security Tax.

Any outside equipment as cranes, barges, floating cranes and tow boats at actual cost.

It is understood and agreed that this vessel is to be loaded and cargo secured to your satisfaction.

Section 1 (a) of the act of July 2, 1940, authorizing the Secretary of War to enter into contracts for expediting the strengthening of the national defense, with or without advertising, provides, in pertinent part, that:

Provided further, That the cost-plus-a-percentage-of-cost system of contracting shall not be used under this section; but this proviso shall not be

construed to prohibit the use of the cost-plus-a-fixed-fee form of contract when such use is deemed necessary by the Secretary of War.

It is apparent that the contractor's bid provided for payment on a cost-plus-a-percentage-of-cost basis, and section 1 (a) of the act of July 2, 1940, expressly stipulates that the cost-plus-a-percentage-ofcost system of contracting shall not be used thereunder. Hence, said contract would appear to be in contravention of the terms of the statute. Furthermore, examination of the schedule of payments provided for under contract No. DA-W-414-Eng-38, supra, covering the furnishing of stevedoring services for the period November 20, 1941, to June 30, 1942, shows that that contract, also, provides for payment to the contractor on a cost-plus-a-percentage-of-cost basis contrary to the terms of the act of July 2, 1940. Therefore, on the present record, neither of said contracts may be regarded as legally binding on the United States.

However, while payment for the stevedoring services covered by Bureau voucher No. DA-95, supra, may not be made on the basis contained in contract No. DA-W-414-Eng-28, since such services were rendered at the direction of an authorized contracting officer, the contractor may be paid for the reasonable value thereof on a quantum meruit basis. In this connection, it appears that the items listed on the invoices supporting voucher No. DA-95, include the following:

(1) Actual wages of watchmen and guards, plus 10% insurance, 10% supervision and 4% Social Security tax on the amount of the wages.

(2) Actual wages of stevedores and clerks for straight time worked, plus 27%, plus 4% Social Security tax on the amount of the wages.

(3) Overtime wages of stevedores and clerks, plus 10% insurance and 4% Social Security tax on the amount of the wages.

(4) Payment for 4,637 cu. ft. of fresh water.

(5) Payment for temporary berth assignment.

(6) Payment for crane rentals.

(7) Payment for lumber and other materials furnished.

Of these various items, the contractor may be reimbursed for the actual amounts paid as wages to the watchmen, guards, stevedores, and clerks-including any overtime as well as straight time. However, while the contractor's invoices contain a notation of approval by a representative of the Government, thus indicating that the time worked. and the wages paid to the employees listed thereon are correct, the invoices are not supported by the original pay rolls of the contractor. Accordingly, in order that the hours claimed to have been worked by the various employees and the rates of wages claimed to have been paid to them may be verified both by the administrative officers in your Department and by this office, the invoices should be supported by the contractor's original pay rolls, or other satisfactory evidence, showing the time worked by the various employees listed on its invoices and the rates of wages paid to each. See 20 Comp. Gen. 664. The requirement

that the original pay rolls be furnished appears to be particularly necessary in this case since the record indicates that the actual payments of wages to the employees were made not directly by the contractor, but by the central pay office of the Waterfront Employers Association pursuant to an agreement with the contractor. Furthermore, since the payments of wages were not made by the contractor and since it appears that the payment of employees was not witnessed by a Government representative (B-22235, December 19, 1941, 21 Comp. Gen. 593), the contractor should furnish proper evidence showing that it has made payment to the Waterfront Employers Association for the amounts covered by the pay rolls which pertain to the instant voucher. Also, it appears that the items listed as wage payments to the contractor's employees represent the full amount earned by the employees, including amounts to cover Social Security taxes which were deducted by the employer. Before payment may be made of the full amount of the wages thus claimed, the contractor should furnish receipts or other evidence showing that the amounts deducted from the employees' wages as Social Security taxes actually have been paid by it to the Federal or State Governments. Furthermore, while the contractor may be reimbursed for the 4 percent claimed as Social Security tax paid by it on the amount of the wages, reimbursement thereof may not be made until evidence is furnished showing that the contractor has made payment of such amount to the Federal or State Governments, as the case may be. See 20 Comp. Gen. 664.

With respect to the amounts claimed as payment for materials furnished and equipment rented, listed in items 4, 5, 6, and 7, supra, you are advised that the contractor may be reimbursed for the amounts claimed for such items provided the vendors' original invoices are furnished by the contractor, showing that payment has been made for the materials used and the invoices or voucher are supported further by a certification of a representative of the Government to the effect that such materials actually were used in connection with the loading of the vessel. If the contractor is unable to furnish paid vendors' invoices, then the voucher should be supported by a certification of a Government representative that it has been determined that the amounts claimed as payment for the materials are reasonable and are not in excess of those charged the general public. Also, the items covering payment for temporary berth assignment and crane rentals should be supported by evidence showing that such amounts are reasonable and by a certification of the Government representative that the rented equipment was actually used in connection with the loading of the vessel for the periods claimed by the contractor.

With respect to the items of 10 percent insurance and 10 percent supervision on the wages of watchmen and guards and on the overtime wages of stevedores and clerks, and the item of 27 percent

claimed on the straight time wages of stevedores and clerks, while the contractor may be entitled to a reasonable fee for performance of the contract, together with any actual overhead costs of insurance and supervision, on the present record, I am unable to authorize the payment to the contractor of any amount under these items.

It is understood that several vouchers covering services furnished under contract No. DA-W-414-Eng-38 now are pending before the Finance Officer, San Francisco, Calif. If so, they may be considered by the finance officer along the lines herein indicated.

The voucher and supporting papers are returned herewith.

(B-23914)

CIVILIAN RETIREMENT-REEMPLOYMENT

A civilian officer or employee determined by the appointing authority to possess special qualifications who is separated from the service by retirement for age under section 1 of the Civil Service Retirement Act, as amended by the act of January 24, 1942, may be immediately reemployed pursuant to the authority of section 2 (b) of the latter act without there being an actual break in service, or intervening period for which an annuity is payable. Comptroller General Warren to the President, United States Civil Service Commission, February 24, 1942:

I have your letter of February 12, 1942, as follows:

Section 2 (b) of the amendment to the Civil Service Retirement Act approved January 24, 1942 (Public 411, 77th Congress) provides as follows:

"No person separated from the service who is receiving an annuity under the provisions of section 1 of this act shall be eligible again to appointment to any appointive office, position, or employment under the United States or of the government of the District of Columbia unless the appointing authority determines that he is possessed of special qualifications, in which event payment of his annuity shall be terminated during the period of his appointment. Any such person whose annuity is terminated shall, upon the termination of his appointment, have his subsequent annuity rights determined under the provisions of the law in effect at the time of such termination."

A strict interpretation of the words "who is receiving an annuity" appearing in the above quoted subsection might seem to indicate that before reappointment could be accomplished the person must actually be in receipt of an annuity. This amendment providing for reemployment of age annuitants was presented by the Senate Civil Service Committee. In its report No. 921 of December 22, 1941, on this amendment, the Committee stated:

"Amendments 2 and 3 provide that no person who is retired may be reappointed to a position in the Government or the District of Columbia unless the appointing authority determines that such person possesses special qualifications and his annuity is terminated during the period of his appointment. Upon the conclusion of such appointment his annuity is redetermined under the provisions of the law in effect at that time. This provision would enable the Government to retain in its employ or to call back into service persons of outstanding ability and long experience in a particular field. Such service might be for a short period to perform a particular mission requiring specific qualifications, or for a considerable length of time as the appointing authority may determine. In time of emergencies, such as the present, it would enable the Government to avail itself of the services of numerous retired employees whose knowledge and experience is of inestimable value. Your committee understands that the War and Navy Departments at present have authority to make such reappointments and it seems that other agencies would be benefited by this right."

Under authority granted the War and Navy Departments by the