The Secretary of Defense

• Decision Date: 12 December 1966
• Docket Number: B-152306
• Citation: 46 Comp.Gen. 556
• Parties: THE SECRETARY OF DEFENSE
• Court: Comptroller General of the United States

46 Comp.Gen. 556

THE SECRETARY OF DEFENSE

No. B-152306

Comptroller General of the United States

December 12, 1966

Contracts - architect, engineering, etc., services - fees - limitations all types of contracts the 6-percent limitation on architectural and engineering fees applying to both fixed-price and cost-plus-a-fixed-fee contracts executed by the military departments pursuant to the acts of April 25 1939, and August 7, 1939, and codified at 10 U.S.C. 4540 7212, and 9540, the fact that the codification of section 4 (B) of the armed services procurement act of 1947 at 10 U.S.C. 2306 (D) refers only to "cost-plus-a-fixed-fee contracts" does not restrict the fee limitation of the section to one type or class of contracting, as section 4 (B) from which section 2306 (D) derives was intended to accomplish the same legislative purpose as the 1939 acts and therefore, all architectural and engineering contracts executed by the military departments regardless of type are subject to a 6 -percent limitation on fees. Statutory construction - legislative history, title, etc. - absence of ambiguity under the "plain meaning" rule of statutory construction, although in the absence of ambiguity in a statutory provision, the examination of prior statutes is precluded, when a literal interpretation of an unambiguous statute leads to an unreasonable, unjust, or impracticable result, the legislative history of the statute May be examined. As the 6-percent fee limitation in 10 U.S.C. 2306 (D), restricted to cost-plus a-fixed-fee architectural and engineering contracts could be avoided by contracting on a fixed-price basis, resort to the legislative history of section 4 (B) of the armed services procurement act of 1947 codified in section 2306 (D), is permitted, and section 4 (B) intended to accomplish the same purpose as the acts of April 25, 1939 and August 7, 1939, imposing a 6-percent fee limitation on all architectural and engineering contracts the omission of reference to fixed-price contracts in section 2306 (D) is considered an inadvertent error and, therefore, the fee limitation is not restricted to cost-plus-a-fixed fee contracts. Contracts - architect, engineering, etc., services - fees - limitations - computation although the exclusion of certain costs that do not relate to the furnishing of designs, plans, drawings, etc., has been permitted in the computation of the 6-percent fee limitation imposed by the acts of April 25, 1939 and August 7, 1939, on architectural and engineering contracts, there is no justification for excluding such costs from the operation of the fee limitation prescribed by 10 U.S.C. 2306 (D), in view of the fact that section 4 (B) of the armed services procurement act of 1947, codified in 10 U.S.C. 2306 (D), fixes the maximum fee payable, whereas the 1939 statutes relate to the cost of the professional services involved in furnishing designs, plans, etc. However, while section 2306 (D) permits no exclusion of costs from the application of the 6-percent fee limitation, no action will be taken on the exclusion of costs pending conclusion of the government-wide review of architect-engineer contracting procedures. Contracts - architect, engineering, etc., services - negotiation authority the architectural and engineering contracts authorized by the acts of April 25, 1939 and August 7, 1939, codified at 10 U.S.C. 4540, 7212, and 9540, are for negotiation under 10 U.S.C. 2304 (A) (17) as "otherwise authorized by law, " upon determination, in accordance with the 1939 statutes, that the procurement is advantageous to the national defense and that the existing military facilities are inadequate, as the negotiation authority in 10 U.S.C. 2304 (A) (4), which relates to personal or professional services, is limited to situations where no other exemption is available, and the permissive exclusions of costs from the fee limitation imposed on architectural and engineering contracts May be reflected in the contracts negotiated under the 1939 acts, but not in the contracts negotiated under 10 U.S.C. 2304 (A) (4) and subject to the fee limitation of 10 U.S.C. 2306 (D). Contracts - architect, engineering, etc., services - contractor selection base the longstanding administrative practice of selecting architect and engineer contractors on the basis of ability as the standards of professional practice do not permit the price competition contemplated by the negotiation authority in 10 U.S.C. 2304 (G), will not be questioned, but the congress will be informed of the practice in the report on the government-wide review of the interpretations and applications of the statutory 6-percent fee limitation imposed on architect-engineer contracts, with recognition given in the report to the fact that the cost or pricing and the certification requirements of 10 U.S.C. 2306 (B) are being followed.

By letter dated November 5, 1966, the assistant secretary of defense(installations and logistics) furnished us with replies to certain questions which we raised in a letter dated September 9, 1966, with reference to our current government-wide study on the applications and interpretations of the fee limitations imposed by four statutes codified in title 10 of the United States code.

In our letter of September 9 we asked the following five questions:

1. Whether the 6-percent fee limitations imposed by the various statutes on the three military departments are applicable to both fixed-price and cost-type contracts. In this connection we held in decision 46 Comp.Gen. 183 that the fee limitation in 41 U.S.C. 254 (B) should not be administratively restricted to cost-type contracting only.

2. What is the legal basis for excluding certain contract costs in applying the various statutory fee limitations? We have taken the position that all costs--- without exception--- incurred in rendering architectural or engineering services in connection with public works projects are technically subject to the statutory 6-percent fee limitation imposed by 41 U.S.C. 254 (B).

3. Under what circumstances is the authority in 10 U.S.C. 2304 (A) (4); Id. 2304 (A) (17); 4540; 7212; and 9540 involved in negotiating architect- engineer contracts?

4. What is the justification for negotiating contracts under 10 U.S.C. 4540; 7212; and 9540 in view of the broad authority of 10u.S.C. 2304 (A) (4/? Is the architect-engineer contract entered into by a particular military department considered to be subject to 10 U.S.C. 2306 (D) or to the limitation in the above-reference sections?

5. Are architect-engineer contracts negotiated in accordance with 10 U.S.C. 2304 (G) and 2306 (F) as implemented by the pertinent provisions of the armed services procurement regulation? If the requirements of these sections are not considered to be applicable in the negotiation of architect-engineer contracts please explain the basis of such position.

The responses of the assistant secretary to these questions were as follows:

1. The six percent fee limitation applies to all architect-engineer contracts. 10 U.S.C. 2306 (D) applies to cost-plus-fixed-fee contracts; 10 U.S.C. 4540, 7212 and 9540 apply to fixed-price and cost type contracts.

2. In accordance with the above statutory provisions, costs incurred in the production and delivery of designs, plans, drawings and specifications are considered to be subject to the 6 percent fee limitation. However, it is understood that certain costs need not be treated as being within the 6 percent fee limitation. These include, for example, reimbursement of travel expenses, expenditures for expert technical assistance and amounts representing payments for technical supervision of the construction work. See 21 Comp.Gen. 580; 22 Comp.Gen. 464. In addition, we have considered that certain preliminary costs such as field surveys and investigations are not subject to the six percent limitation.

3. And 4. Both the army and the air force utilize the authority of 10 U.S.C. 2304 (A) (4) to negotiate domestic architect-engineer contracts. As you are aware, 10 U.S.C. 7212, applying only to the navy, provides for contracts "without advertising.' therefore, since the use of 10 U.S.C. 2304 (A) (4) is limited by the armed services procurement regulation to situations in which no other negotiation exception is available, navy architect-engineer contracts cite 10 U.S.C. 2304 (A) (17) as negotiation "otherwise authorized by law.'

It is considered that 10 U.S.C. 2306 (D) applies to cost-plus-fixed fee contracts only. The fee limitations of 10 U.S.C. 4540, 7212 and 9540 apply to both fixed-price and cost-type contracts and, whether or not used as authority to negotiate, the fee limitations therein are considered applicable to all architect-engineer contracts.

5. Concerning the requirement of 10 U.S.C. 2304 (G) for competition, the provisions of section XVIII of the armed services procurement regulation are followed with respect to the solicitations and award of architect- engineer contracts. Since the standards of professional practice for architects and engineers do not permit them to compete for contracts on a price basis, the selection of a contractor is based on technical ability. As set forth in ASPR 18 402.2, a minimum of three firms are selected. Negotiations are then conducted with the first-selected firm. In the event that a fair and reasonable price not in excess of the government estimate cannot be obtained, negotiations are then conducted with the firm next in order of preference. See ASPR 18-306.2. We believe that this procedure requires the maximum competition consistent with the nature and requirements of the services being procured. With respect to 10 U.S.C. 2306 (F), the provisions of the armed services procurement regulation are followed in that cost or pricing data...