Ordnance Plant as necessitating the deputizing of the plant guards is set forth in 2nd indorsement of February 3, 1942, to the Chief of Ordnance, as follows:

1. The deputizing of the guards at the Des Moines Ordnance Plant is an accomplished fact. These steps were taken due to the fact that the Federal Government had not obtained exclusive jurisdiction of the plant site, and the guards, therefore, had no authority to make arrests or otherwise protect property. Without such protection, the guards themselves, and the company which is operating the plant, were subject to suit for false arrest, should they attempt to make such arrests.

Also, in further reference thereto and in specific response to the request of the Chief of Ordnance for a report as to whether the expenditure was approved and, if so, under what provision of the contract, it is stated by the contracting officer's representative in 1st indorsement, dated June 12, 1942, in pertinent part, as follows:

3. The initial group of one hundred fifty (150) guards were deputized on December 8, 1941, in compliance with the laws of the State of Iowa. Since said date, all guards upon accepting employment at the plant site were likewise deputized. The question as to whether the Government had exclusive or concurrent jurisdiction with the State of Iowa over the plant site was a very doubtful, questionable, and undecided one on December 8, 1941, and its status still remains undetermined as of this date. In view of the state of emergency which existed on said date, it became incumbent upon the contractor to have the guards deputized for its proper protection of property and against possible suits for false arrest. 4. As a result of the foregoing facts, the Commanding Officer recommends that the contractor be reimbursed for guard bond premiums as urgent, necessary, and proper expenditures. It is further the opinion of this office that the contractor's right to reimbursement is covered by contract W-ORD-528, under Title I, Article I-B-2-a; Title V, Article V-A-1, h, k, m; and Title VII, Article VII-A.

The views of the Chief of Ordnance, with respect to the expenditure involved, are set forth in 3rd indorsement of July 21, 1942, to the Chief of Finance, as follows:

1. Complying with 2nd indorsement, Office, Chief of Finance, dated March 24, 1942, there is furnished, as the remark and recommendation requested, a copy of 1st indorsement from Commanding Officer, Des Moines Ordnance Plant, dated June 12, 1942, and inclosures thereto, which express the view of such office, of the contractor, and of the Chief, Insurance Section, Ordnance Department, and the following further remark of the Ordnance Department.

2. Under the instant contract (W-ORD-528), it is provided in Title V, Article V-A that:

"1. The Contractor shall be reimbursed in the manner hereinafter described for such of its actual expenditures in the performance of the work under this contract, as may be approved or ratified by the Contracting Officer, and as are included in the following items:

*

"h. Premiums on such bonds and insurance policies as the Contracting Officer or the Secretary of War may approve or require as reasonably necessary for the protection of the Government or the Contractor."

"It is also provided in Title VII, Article VII-G that the contractor hereby agrees that it will:

"1. Procure and thereafter maintain such bonds and insurance in such forms and in such amounts and for such periods of time as the Contracting Officer may approve or require in writing.

"2. Procure all necessary permits and licenses; obey and abide by all applicable laws, regulations and ordinances and other rules of the United States of America, of the state, territory, or subdivision thereof wherein the work is done, or of any other duly constituted public authority." [Italics supplied.]

It is evident from the above that, if in the performance of the work under the contract, the contractor has secured bonds (fidelity or otherwise) then the amount paid therefor is reimbursable upon a showing that (a) the amount claimed has been actually

expended by the contractor for the bonds, (b) the Contracting Officer's approval for the purchase of such bonds has been obtained, and (c) it is shown that the same are reasonably necessary for the protection of the Government or the contractor.

Looking to these tests we find that there can be no question as to the fact of payment or of approval by the Contracting Officer's Representative, since the papers forming part of the file herewith are self evident on these points. Any question, therefore, that does arise in the mind of the Finance Officer, is with respect to the fact of necessity of such bonds for the protection of the Government or the contractor. As to this necessity it is the considered opinion of this Office that there is ample evidence of such shown by the statements of the contractor, the Contracting Officer's Representative, and the Chief of the Insurance Section of the Ordnance Department in the file herewith. The Finance Officer, himself, admits such necessity in the proposed submission to the Comptroller General, when he states in paragraph 2 thereof:

"* * * From the correspondence filed with the inclosed voucher, it is apparent that bonds were obtained by the contractor as a protective measure insofar as the State Laws of Iowa were concerned,

3. There remains for discussion, however, the statements of the Finance Officer made in the proposed submission to the Comptroller General to the effect that: a. The purchase of bonds was not necessary in fulfilling the requirements for employment for guards, and

b. Comptroller General's decision A-52713 dated January 5, 1934, prohibits payment of premiums on bonds,

both of which will be discussed in detail in the following subparagraphs.

As to a, it is not admitted by the Ordnance Department that the purchase of bonds was not necessary in fulfilling the requirement of employment as guards. To the contrary, the evidence shows that:

(1) The designation of such guards as peace officers authorized to carry fire arms in Iowa affords the reasonable protection to the contractor which the contractor is entitled to under the terms of the instant contract,

(2) By deputizing the contractor's employees guards they can better carry out their duties from the viewpoint of law and authority and can cover the plant and the outside areas, both of which appear to be within the territorial jurisdiction of the State of Iowa, more adequately, and

(3) They cannot be so deputized as sheriffs authorized to carry firearms in Iowa without furnishing such a bond to protect the high sheriff and the County, and in turn the contractor and the Government.

Of course, the Finance Officer, carrying things to an unreasonably technical absoluteness, could argue that a man can guard without such bond. Carrying such reasoning forward, it is submitted that he could also guard without the furnishing to him of a gun and a uniform, but the rule of reason as applied by the Contracting Officer's Representative and the General Accounting Office allows such items. See letter from Chief, Audit Division, General Accounting Office, dated March 24, 1942, made part of the file herewith.

As to b, the decision cited by the Finance Officer, A-52713, dated January 5, 1934, 13 Comp. Gen. 185, this Office is of the opinion that the situation at hand does not involve its application. The case, as decided by the Comptroller General, involved employees of the Division of Investigation of the United States Department of the Interior who clearly come within the scope of the Act of August 5, 1909, 36 Stat. 125, which states in pertinent part that:

66% * * The United States shall not pay any part of the premium or other costs of furnishing bonds required by law or otherwise of any officer or employee of the United States." [Italics supplied.]

The syllabus of the Comptroller General's decision reads as follows:

"Premiums on bonds of officers or employees of the Federal Government are not chargeable to the United States." [Italics supplied.]

In the instant case, it can hardly be argued that employees of the cost-plus-afixed-fee contractor are officers or employees of the United States. The Supreme Court of the United States in the case of Alabama v. King and Boozer, et al. 314 U. S. 1 and Curry v. United States, 314 U. S. 14 both decided on November 10, 1941, held that such cost-plus-a-fixed-fee contractors were independent contractors and not agents or instrumentalities of the Government. On this highest authority, it follows that they and their employees are not in the class covered by either the decision of the Comptroller General, or the Act, above quoted, p

The Comptroller General himself has expressed the view that the cost-plus-afixed-fee contractor is not an agent of the United States in decisions B-19052, B-19726, dated January 20, 1942, 21 Comp. Gen. 682 and B-23012 dated February 9, 1942, both to the effect that the cost-plus-a-fixed-fee contractor must be specifically authorized to pledge the credit of the United States and designated an agent of the United States before it could act as the United States. The Comptroller General stated further, with respect to the latter designation as agents, that:

64* * * it may be stated that the designation of the contractors as agents of the Government would not necessarily be controlling upon the question of agency. See J. B. McCrary Engineering Company v. White Coal Power Company, 35 F. (2d) 142, 146, and Young v. Fosburg Lumber Company, 60 S. E. 654, 16 L. R. A. (N. S.) 255, to the effect that the relationship between parties to a contract is for determination largely upon the basis of their actions, and not sclely upon the basis of conclusions of law which may be expressed in the terms of the contract. Similarly, it may be observed that in the King and Boozer case supra, the Supreme Court of the United States did not content itself with an examination of the terms of the contract, but gave full consideration to the facts and circumstances of the case and stated that "The course of business followed in the purchase of the lumber conformed in every material respect to the contract."

The Attorney General of the United States in 34 Op. Att. Gen. 241 construed a statute similar to that which the Finance Officer thinks applicable in the instant case in that it contained an inhibition restraining officers of the Government from employing Pinkerton detectives or armed guards. In that case Pinkerton detectives had been employed by the United States, and the question was presented as to the right of the corporation to legally secure such guards. The Attorney General, after reviewing the hearings and court decision stated:

"Since I regard the Act of March 3, 1893, as relating only to employees of the United States or of the District of Columbia and since I do not consider employees of the Emergency Fleet Corporation to be employees of the United States, it is my opinion that the United States Shipping Board Emergency Fleet Corporation may legally secure through private detective agencies guards for laid up ships.' [Italics supplied.]

Looking to the above and to summarize in conclusion of point b raised by the Finance Officer, it may be stated that:

(1) The Supreme Court of the United States had held that cost-plus-a-fixed-fee contractors are not agents or instrumentalities of the United States.

(2) The Comptroller General has expressed a similar view based upon the Supreme Court holding, and stated further that to become such agents there must be a specific designation of agency, in the contract or amendment thereto, and the actions of the parties must indicate such agency,

(3) The Attorney General's decision cited is to the effect that a statutory inhibition against the hiring of guards directed to officers or employees of the United States does not affect a United States corporation (and by implication a cost-plus-a-fixed-fee contractor), from hiring guards since they are not officers or employees of the United States, and, therefore,

(4) It follows that a similar inhibition restraining the payment of premiums on bonds of officers or employees of the United States is likewise inapplicable to costplus-a-fixed-fee contractors, or their employees since they can not be considered the statutory officers or employees of the United States unless (and the facts are to the contrary in the instant case) such officers and employees have been specifically designated as such officers, and by their actions show the existence of such agency.

4. While Comptroller General's decision B-23214, dated February 14, 1942, was not cited by the Finance Officer, it has not been overlooked by the Ordnance Department in its review of the question. That decision was on the right of a contractor to purchase a license for a driver, and in its pertinent part stated:

11* * * while it appears that the chauffeur for whom the license was procured was an employee of the contractor and not of the Government, since it appears that the obtaining of the license was an incident of his employment, and thus a personal expense, reimbursement of the amount paid for the chauffeur's license is not such an expense as is contemplated by the terms of the contract here involved for reimbursement to the contractor."

The reasoning of the Comptroller General is to the effect that the customary and proper prerequisites of employment as a chauffeur require the person hired to be legally competent to drive an automobile, that such legal competence includes

being licensed as an operator thereof, and that in the usual case it would be unsound and inefficient to teach people to drive, and then license them.

In the hiring of guards we have presented a different situation. Obviously, there is no supply of "deputized" or "licensed" guards available as such in the labor markets wherein most of the Ordnance Plants are located. It is, therefore, necessary to hire men who meet the prerequisite moral and physical standard, and train and equip them. Following their selection and employment as guards a certain number of the force, a selected group, is chosen for additional services for which deputizing is necessary.

To illustrate: In many cases, particularly with respect to those projects which were part of the earlier stages of the program, the need for deputization was not foreseen and did not arise until guard force was established and under way. Then insufficient police facilities from local officials and unwillingness on the part of local governing bodies to provide funds for increasing their facilities made it necessary for the Government, through the cost-plus-a-fixed-fee contractors, to provide the necessary service off the plant site. It is apparent that this vesting of police powers, general or limited, could well be vital to production. The regulation of traffic on highways adjacent to the plant, with authority to apprehend violators, is vital to production both because accidents occurring due to inadequate traffic regulations may damage vital materials in the course of transportation and because such accidents may result in injury to personnel whose services are necessary.

Aside from the traffic aspect, the maintenance of a force with police powers near the plant site is necessary for another reason. At many plants built in isolated areas there develops a concentration of population housed in trailer camps and similar informal communities. Naturally there also spring up numerous businesses devoted to the sale of beer, stronger intoxicants, and the dissemination of juke box music, at which establishments (frequently the only source of recreation), spirits run high and there are sometimes fights and other forms of disorderly conduct. It is clear that, especially in sections where racial feeling may be strong, such occurrences, if not properly policed, may result in injury to persons whose services are vital or have serious labor consequences. With these aspects, it is apparent that the deputization of guards is a matter of benefit to the contractor and the Government in the prosecution of the work.

Particularizing on the facts in the instant case, the Ordnance Department feels they are clearly distinguishable from those upon which the above Comptroller General's decision was rendered. Here the deputizing of the guards was considered necessary for the protection of the contractor and the Government, and the administrative approval of the Commanding Officer required by the terms of the contract, was given. Here the contract specifically provided for such bonds as are reasonably necessary for the protection of the Government or the contractor. Here the contractor states (letter of June 4, in file herewith) that it is his usual policy to pay for fidelity bonds, and had guards been maintained in his commercial plant, he would pay for such bonds as would be required of him as part of the general employee relations policy. This, it is contended, is not an unreasonable view.

It is not unreasonable since the Ordnance Department in the interpretation of the various provisions of the cost-plus-a-fixed-fee contract utilizes the guide followed by the Comptroller General in B-18773, dated November 21, 1941. That guide reads:

"In the interpretation of the provisions of the cost-plus-a-fixed-fee form of contract, it is appreciated that this type of contract establishes the basis for a highly cooperative undertaking between the contractor and the Government and that such provisions require and are entitled to a liberal construction; that if the intent of the parties cannot be determined from the express provisions of the contract, the practical interpretation of the contracting parties is of great weight, if not controlling, in ascertaining their intention at the time of its execution; that the enumeration in the contract of the various particular items of cost as to which reimbursement is authorized is not intended to be exclusive of other items which may arise and which may not be expressly provided for; and that, as stated in my decision of April 14, 1941, 20 Comp. Gen. 632, 636, "the contract basically contemplates that the actual cost of the whole work and the risk thereof are to be assumed by the Government: that is, that the contractor is to come out whole * * * in performing the work in accordance with the contract * * * "" [Italics supplied.]

5. For the reasons above stated, the Ordnance Department regards the item of bonds for the deputizing of guards as a reimbursable item. In the event, however, that there is still doubt in the mind of the Finance Officer as to the propriety of the payment, it may be stated that the Ordnance Department has no objection to the submission of the question to the Comptroller General.

Contract No. W-ORD-528, dated July 18, 1941, entered into on a cost-plus-a-fixed-fee basis as authorized under the act of July 2, 1940, 54 Stat. 712, provides, generally, for management services in connection with the design and construction of an ordnance manufacturing plant, and for the equipping and subsequent operation thereof upon its completion, in consideration of the reimbursement by the Government of the contractor's expenditures as defined in the contract, plus stipulated fixed fees. The question presented is as to whether the expenditure covered by the voucher here involved is reimbursable under the terms of the contract.

The determination of whether a particular item of expense incurred in the performance of a cost-plus-a-fixed-fee contract is reimbursable to the contractor as such necessarily is dependent upon the nature of the expense, considered in the light of the terms of the contract involved. So far as concerns the terms of the instant contract, quoted above in pertinent part in the indorsement from the Chief of Ordnance, it appears to be recognized that the approval by the contracting officer's representative of the expense incident to the deputizing of guards is not sufficient in itself to authorize the payment thereof; that, in addition thereto, as a prerequisite to allowance thereof as an item of cost under the contract, it is required to be established that the appointment of the plant guards as deputy sheriffs was "reasonably necessary for the protection of the Government or the Contractor."

The reasons assigned by the contracting officer's representative in the indorsement of February 3, 1942, supra, for deputizing the plant guards suggest a misapprehension as to their authority in their capacity as private employees charged by the contractor with the protection of the plant. If it were a fact, as stated by that officer, that, unless deputized, these guards "had no authority to make arrests or otherwise protect plant property", or if such were necesssary to enable the guards to perform more effectively their duty of patrolling the project site, of preventing unauthorized persons from entering thereon, and of preventing acts of sabotage to, or theft of, the property during the period of construction and operation of the plant, there would be no hesitation in approving the charge involved as a proper expenditure for reimbursement by the Government. However, such does not appear to be the case. It is the understanding of this office that, within the confines of the project site, a guard has no less authority than a police officer so far as concerns the protection of the property with which he is entrusted and that, when the circumstances authorizing it exist, a guard, as well as any other private person, has the same