80TH CONGRESS 2d Session } SENATE REPORT No. 1733 AMENDING SECTION 17 OF THE CONTRACT SETTLEMENT ACT OF 1944 JUNE 16 (legislative day, JUNE 15), 1948.-Ordered to be printed Mr. WILEY, from the Committee on the Judiciary, submitted the following REPORT [To accompany H. R. 5040] The Committee on the Judiciary, to whom was referred the bill (H. R. 5040), to amend the Contract Settlement Act of 1944, to provide that claims under section 17 must be filed within 6 months to be allowable, to stop further accrual of such claims, and for other purposes, having considered the same, do now report the bill to the Senate favorably, with amendments, and recommend that the bill, as amended, do pass. AMENDMENTS Amendment No. 1: On page 2, line 3, following the word "before", delete everything through the letters "section" on line 4, and insert in lieu thereof "June 30, 1949." Amendment No. 2: On page 2, after line 14, insert a new section numbered "3" as follows: SEC. 3 (a). The Office of Contract Settlement, with the assistance of the interested Government agencies, shall present to Congress, not later than February 1, 1949, a full report on the Strategic Metals and Minerals Programs of the Government, including particularly the following: (1) A statement of the development of these minerals and metals programs since September 8, 1939, showing the materials involved; the efforts made by the Government to stimulate their production; the types of contracts offered to producers of these materials and the circulars making general public offers to purchase; and information concerning financial arrangements available to producers from the Government. (2) A statement of the claims, which have been filed under any section of the Contract Settlement Act of 1944 by producers of these materials, showing the action taken by the agencies involved and by the Appeal Board of the Office of Contract Settlement. (3) A statement of the rules which the Appeal Board of the Office of Contract Settlement has applied and is now applying to these claims. (b) The report made under the provisions of subsection (a) shall include any recommendations for relevant legislation which may be deemed advisable. Amendment No. 3: Amend the title so as to read: A bill to amend section 17 of the Contract Settlement Act of 1944, and for other purposes. EXPLANATION OF AMENDMENTS The limitation date of "6 months after the date of the enactment of this subsection" was changed to read "June 30, 1949," for the purpose of allowing any claimants who may arise out of legislation which may be enacted pursuant to the report denoted in section 3 (b) of this bill, a 5-month period to file their claims. During the progress of the hearings on this bill testimony was introduced for the purpose of showing the need for a minerals relief bill. Time, however, prevented the subcommittee from receiving a complete presentation of the circumstances surrounding the strategic and critical metals and minerals programs conducted by the Government during the war or a satisfactory basis for giving more favorable treatment to producers of these materials than is given to producers of other materials which were needed in the war effort. To meet this problem the committee decided to amend the bill by adding a third section which in effect is a request of the Office of Contract Settlement, with the assistance of interested Government agencies, to present to the next Congress a full report on this subject. STATEMENT Applicable parts of the House report (No. 1703) are as follows: Section 17 of the Contract Settlement Act of 1944 deals with an entirely different subject matter from the remainder of that act. It requires contracting agencies to pay fair compensation to any person who has arranged to furnish, or furnished, materials, services, or facilities for the prosecution of the war without a formal contract or pursuant to written or oral instructions or request to proceed from a contracting agency. It further requires contracting agencies not to take advantage of formal or technical defects in prime contracts or in the authority of offices or agents who order materials, services, or facilities, to amend, confirm, or ratify contracts or commitments in order to cure such defects, and to make fair settlement of obligations created or incurred. It is by now well settled that this section not only permits the enforcement of contracts not evidenced by writing but creates new classes of obligations when there were mere requests or instructions to proceed and no contracts even of a defective or informal nature. Claims totaling approximately $65,000,000 have been filed against contracting agencies under section 17, and it is believed that claims for many further millions exist but have not yet been disclosed. There appears to be no Federal statute which would stop the presentation of such claims perhaps even as long as 10 years after their alleged accrual. This situation may result in a serious detriment to the interests of the Government. Frequently the evidence which controls the decision of a section 17 claim consists of oral testimony. Some of the claims are against agencies which are now being, or have been, completely liquidated, for example, the Civilian Production Administration (formerly WPB); others, although against permanent agencies, are founded on the alleged acts of bureaus or divisions no longer in existence, or of personnel no longer in the service of the Government. Under these circumstances the possibility of successful enforcement of fraudulent claims tends to increase as time passes. The reported bill would amend section 17 by cutting off any claim thereunder not presented in writing to the contracting agency in the form required by regulation 12 of the Office of Contract Settlement, within 6 months after enactment of this bill. The committee has also considered the allied question of whether it would be possible for any new claims under section 17 to accrue at the present time. According to the better view, this would not be possible. However, there may be some doubt as to this because of the fact that legally the war has not ended and, to a limited extent, war powers are still being exercised. Therefore, the bill also includes a clause providing that no further section 17 claims shall accrue after the date of the amendment. Of course, no admission is, or should be, implied that any claim could accrue up to the date of the amendment, and a section is included in the bill to that effect. The bill has received the approval of the Bureau of the Budget, as well as that of the Treasury Department, the Interior Department, the Department of the Army, and the Comptroller General. Hearings were conducted, and no opposition was voiced on the part of contractors who would be affected by its enactment. There are made a part of this report a report from the Department of the Army, a letter of transmittal from the Treasury Department, and a report from the Comptroller General. Hon. EARL C. MICHENER, Chairman, Committee on the Judiciary, DEPARTMENT OF THE ARMY, Washington, D. C., March 12, 1948. House of Representatives. DEAR MR. MICHENER: The Department of the Army favors the enactment of H. R. 5040, Eightieth Congress, a bill to amend the Contract Settlement Act of 1944, to provide that claims under section 17 must be filed within 6 months to be allowable, to stop further accrual of such claims, and for other purposes. The bill would amend section 17 of the Contract Settlement Act of 1944 to prevent all persons from recovering compensation or receiving settlement of any alleged obligation or obtaining any amendment, confirmation, ratification, or formalization of any alleged contract or commitment under said section unless such person file a proper claim furnishing the information required by Regulation 12 of the Office of Contract Settlement with the contracting agency concerned on or before 6 months after the date of enactment of the bill. It also would prevent the utilization of any instruction or request to proceed and any defective, informal, or quasi contract made or entered into after the date of enactment of the bill as a basis of liability under said section. Since the incidents upon which claims filed under section 17 of the Contract Settlement Act of 1944 are predicated arose during the period of actual hostilities, and in a few instances a short time thereafter, it is considered that ample time already has been afforded for the presentation of valid claims arising thereunder. Allowance of a further period of time within which to file claims would aggravate the already serious administrative problem of determining the validity of claims of this character. Due to the fact that hearings on the bill have been scheduled for March 12, 1948, and the committee has requested the report before such hearings, it has not been possible to secure the comments of the Bureau of the Budget with respect hereto, and the report is submitted without advice as to the position of the Bureau of the Budget in the matter. The Department of the Army is unable to estimate the fiscal effects of the bill. Sincerely yours, KENNETH C. ROYALL, TREASURY DEPARTMENT, January 2, 1948. The SPEAKER OF THE HOUSE OF REPRESENTATIVES. My Dear MR. SPEAKER: There is enclosed herewith draft of a proposed bill o amend the Contract Settlement Act of 1944, to provide that claims under ection 17 must be filed within 6 months to be allowable, to stop further accrual f such claims, and for other purposes. Section 17 of the Contract Settlement Act of 1944 deals with an entirely diferent subject matter from the remainder of that act. It requires contracting gencies to pay fair compensation to any person who has arranged to furnish, or irnished, materials, services, or facilities for the prosecution of the war, without formal contract or pursuant to written or oral instructions or request to proeed from a contracting agency. It further requires contracting agencies not to ake advantage of formal or technical defects in prime contracts or in the auhority of officers or agents who order materials, services, or facilities, to amend, onfirm, or ratify contracts or commitments in order to cure such defects, and to ake fair settlement of obligations created or incurred. It is by now well seted that this section not only permits the enforcement of contracts not evienced by writing, but creates new classes of obligations when there were mere quests or instructions to proceed and no contracts even of a defective or formal nature. S. Repts., 80-2, vol. 4- -88 Claims totaling approximately $65,000,000 have been filed against contracting agencies under section 17, and it is believed that claims for many further millions exist but have not yet been disclosed. There appears to be no Federal statute which would stop the presentation of such claims perhaps even as long as 10 years after their alleged accrual. This situation may result in a serious detriment to the interests of the Government. Frequently the evidence which controls the decision of a section 17 claim consists of oral testimony. Some of the claims are against agencies which are now being, or have been, completely liquidated, for example, the Civilian Production Administration (formerly WPB); others, although against permanent agencies, are founded on the alleged acts of bureaus or divisions no longer in existence, or of personnel no longer in the service of the Government. Under these circumstances, the possibility of successful enforcement of fraudulent claims tends to increase as time passes. Therefore, after consulting the Contract Settlement Advisory Board created by section 5 of the act, I have decided to request the Congress to amend section 17 by cutting off any claim under section 17 not presented in writing to the contracting agency in the form required by Regulation 12 of the Office of Contracts Settlement within 6 months after approval of the amendment. The enclosed draft of a bill would, if enacted, accomplish that purpose. I have also considered the allied question of whether it would be possible for any new claims under section 17 to accrue at the present time. I am advised that according to the better view this would not be possible. However, there may be some doubt as to this because of the fact that legally the war has not ended and, to a limited extent, war powers are still being exercised. Therefore, the draft also includes a clause providing that no further section 17 claims shall accrue after the date of the amendment. Of course, no admission is, or should be, implied that any claim could accrue up to the date of the amendment, and a section is included in the bill to that effect. It is respectfully requested that you lay the proposed bill before the House of Representatives. A similar bill has been transmitted to the President pro tempore of the Senate. I would be pleased to furnish any further information which the Congress may require in connection with this bill. The Department has been advised by the Bureau of the Budget that there is no objection to the submission of this proposed legislation to the Congress. Very truly yours, Hon. EARL C. MICHENER, Chairman, Committee on the Judiciary, JOHN W. SNYDER, Secretary of the Treasury. GENERAL ACCOUNTING OFFICE, House of Representatives. MY DEAR MR. CHAIRMAN: There has come to my attention H. R. 5040, Eightieth Congress, entitled "A bill to amend the Contract Settlement Act of 1944, to provide that claims under section 17 must be filed within 6 months to be allowable, to stop further accrual of such claims, and for other purposes," pending before your committee. For the use of your committee in considering the above bill, there is transmitted herewith copy of my report of February 10, 1948, to the Honorable Alexander Wiley, chairman of the Senate Committee on the Judiciary, with respect to S. 1983, Eightieth Congress, the provisions of which are identical to those of H. R. 5040. Sincerely yours, FRANK L. YATES, Acting Comptroller General of the United States. GENERAL ACCOUNTING OFFICE, Hon. ALEXANDER WILEY, Chairman, Committee on the Judiciary, United States Senate. MY DEAR MR. CHAIRMAN: Further reference is made to your letter of January 23, 1948, acknowledged the same date, requesting a report in triplicate on S. 1983, Eightieth Congress, second session, entitled "A bill to amend the Contract Settle ment Act of 1944, to provide that claims under section 17 must be filed within 6 months to be allowable, to stop further accrual of such claims, and for other purposes." The bill provides as follows: "That section 17 of the Contract Settlement Act of 1944 (58 Stat. 665; U. S. C., 1940 edition, Supp. V, title 41, sec. 117), is hereby amended by adding at the end thereof two new subsections, as follows: "(e) No person shall be entitled to recover compensation or receive a settlement of any alleged obligation, or obtain the benefit of any amendment, confirmation, ratification, or formalization, of any alleged contract or commitment under this section, unless such person shall on or before six months after the date of enactment of this subsection have filed a claim with the contracting agency, in the form, and furnishing the information, required by Regulation Numbered 12 of the Office of Contract Settlement (10 F. R. 1278; 32 CFR, 1945 Supp., pt. 8060) as it may be amended from time to time. "(f) Any instruction or request to proceed, and any defective, informal, or quasi-contract, may be the basis of liability under this section only if made or entered into before the date of enactment of this subsection.' "SEC. 2. No liability shall accrue by reason of enactment of this Act which would not have otherwise accrued." It is the view of this Office that the Contract Settlement Act of 1944 should be repealed in its entirety. The Comptroller General opposed the enactment of this statute and has since criticized it because of the unnecessary and tremendous authority that it conferred upon the contracting agencies and of the finality it accorded their settlements Most of the war-contract-termination program has been completed, so that the purpose for which the act was enacted has largely passed and its continuance is not necessary to wind up the termination-settlement program. The recommendation of the Comptroller General that the act be repealed and that no statute be enacted at this time in its place, with the reasons therefor, briefly were stated at hearings of September 9, 10, 11, and 12, 1947, before the Procurement and Buildings Subcommittee of the Committee on Expenditures in the Executive Departments, House of Representatives, Eightieth Congress, first session. (See p. 112 of pt. 3 (Fraud and Overpayment in Government Procurement Contracts) of said hearings.) I have nothing to add at this time to that recommendation, which sets forth in substance the position of the General Accounting Office in the matter. Although it is my opinion that the interest of the Government will be fully subserved only by the repeal of the Contract Settlement Act in its entirety, if it is not repealed, since the enactment of the proposed legislation will tend to curb some of the authority granted thereunder, favorable consideration thereof is recommended. |