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TITLE 13—BUSINESS CREDIT CHAPTER I-RECONSTRUCTION FINANCE CORPORATION

NOTE: Executive Order 9440, May 9, 1944, Title 3, supra, provides in part as follows:

The functions, powers, and duties, with respect to placing orders for materials, supplies, equipment, work, or services, of any kind that any requisitioned Federal agency may be in a position to supply, or to render or to obtain by contract, which are vested in the War Department, Navy Department, Treasury Department, Civil Aeronautics Administration, and the Maritime Commission under section 7 (a) of the act of May 21, 1920 (41 Stat. 613), as amended by section 601 of the act of June 30, 1932 (47 Stat. 417), and the act of July 20, 1942 (56 Stat. 661, 31 U.S.C., 686), and which are also vested in the War Food Administration by virtue of Executive Order 9418 of January 29, 1944, may be exercised also by the Reconstruction Finance Corporation, and by any constituent, subsidiary or controlled agency or corporation thereof designated by the Reconstruction F1nance Corporation. Any provision of any Executive order or proclamation conflicting with this order is superseded to the extent of such conflict.

Part 50 War contract terminations, claims,

settlements, and interim financing. [Added]

as

PART 50_WAR CONTRACT TERMI.

NATIONS, CL A IMS, SETTLE-
MENTS, AND INTERIM FINANC-
ING [ADDED]

NOTE: Order, Chairman, Reconstruction Finance Corporation, Oct. 21, 1944, 9 F.R. 12910, provides in part as follows:

Whereas, Reconstruction Finance Corporation, Defense Plant Corporation, Metals Reserve Company, Defense Supplies Corporation and Rubber Reserve Company (hereinafter referred to as "said companies") have been included among the contracting agencies to which the Contract Settlement Act of 1944 is applicable; and

Whereas, the Boards of Directors of said companies deem it advisable that a supervisory organization be established for the purpose of seeing that policies with respect to settlements of terminated war contracts established for all procuring agencies are carried out by said companies;

Now, therefore:

(1) There is hereby created a Committee of five members to be kown as the "RFC Contract Settlement Committee". Such Committee shall consist of the following members, all of whom are members of the Boards of Directors of said companies: Charles B. Henderson (Chairman), Charles T. Fisher, Jr., Sam H. Husbands, Howard J. Klossner, and Henry A. Mulligan.

The Committee shall meet at such times and at such places as the Chairman from time to time may specify and any two members shall constitute a quorum for the transaction of any business. The Committee shall appoint a Secretary who shall attend all

meetings of the Committee and record the minutes thereof.

(2) The respective Boards of Directors of said companies hereby authorize the Committee to effectuate within said companies the policies established for all procuring agencies. The Committee shall (a) supervise the termination activities of said companies to the extent necessary to insure prompt and equitable settlement of terminated contracts, (b) maintain close contact with the Office of Contract Settlement, and (c) submit to said Office problems of said companies which involve policies of major importance to the Government or to which uniformity of action on the part of the several contracting agencies is desirable.

(3) In order to carry out the functions enumerated in paragraph (2) hereof, the Committee is authorized to require said companies (a) to maintain current information as to (1) the termination settlements in process within said companies, (ii) the personnel available for any work incident to such settlements, and (iii) the progress made from time to time in terms of settlements affected; and (b) to maintain information as to available personnel in such manner as to facilitate the temporary assignment of technical personnel to related work in connection with other settlements within said companies or by other agencies and to make such information available to other agencies upon request as needs arise.

(4) The Committee may take such action as it may deem necessary to achieve the purposes of this authorization.

(5) This authorization shall remain in full force and effect until revoked in writing by

the joint action of the Boards of Directors of said companies, or until such time as the Committee created by paragraph (1) declines in writing the further exercise of the discretion and authority herein delegated to it. Sec. 50.1 General policies. 50.2 Negotiated settlements. 50.3 Settlements not made by agreement. 50.4 Arbitration settlements. 50.5 Defective, informal and quasi con

tracts. 50.6 Priority in settlements. 50.7 Interim financing. 50.8 Removal and storage of materials. 50.9 Interest on termination claims. 50.10 Settlement of terminated subcon

tracts, 50.11 Notices to the companies. 50.12 Definitions.

AUTHORITY: $$ 50.1 to 50.12, inclusive, issued under 58 Stat. 649.

SOURCE: $ $ 50.1 to 50.12, inclusive, contained in Contract Termination Regulation 1, Chairman, Reconstruction Finance Corporation, Oct. 21, 1944, 9 F.R. 12911.

CROSS REFERENCE: For Renegotiation Regulations issued by the War Contracts Price Adjustment Board, see Title 32, Chapter XIV.

$ 50.1 General policies. (a) The Contract Settlement Act of 1944 (58 Stat. 649) became effective July 21, 1944. This law requires the Reconstruction Finance Corporation, Defense Plant Corporation, Defense Supplies Corporation, Metals Reserve Company, and Rubber Reserve Company (herein called "the companies") to carry out the policies and procedures established therein and the regulations promulgated thereunder by the Director of Contract Settlement.

(b) Subject to such limitations as may from time to time be imposed by, and in the discretion of, the heads of the several divisions within each company, employees of the companies are hereby authorized, pursuant to subsection (f) of section 20 of the act, as a part of their official duties, to advise, aid, and assist war contractors in preparing and presenting termination claims, in obtaining interim financing, and in related matters, provided the employee does not receive therefor benefit or compensation of any kind, directly or indirectly, from any war contractor.

(c) All policies and procedures relating to termination of war contracts, termination settlements, and interim financing, prescribed by the Boards of Directors of the companies, the heads of

the several divisions within the companies, and the RFC Contract Settlement Committee, or pursuant to the authority of any of them, in effect upon the effective date of the act, and not inconsistent with the act, shall remain in full force and effect unless and until duly superseded.

$ 50.2 Negotiated settlements. It is the policy of the companies to settle termination claims by agreement to the maximum extent feasible.' Upon receipt of the termination notice the war contractor should notify the party from whom he received the termination notice whether or not he expects to present any termination claim. If the war contractor intends to present a termination claim he should immediately commence negotiations to settle the claim by agreement. For this purpose the contractor will submit a settlement proposal on such forms and in accordance with such instructions as may be prescribed by the Director of Contract Settlement' or, in the absence thereof, on such forms and in accordance with such instructions as may be approved by the respective companies. Contractors may present their settlement proposals on any basis which would result in their receiving fair compensation for the termination, including the presentation of costs on the basis of actual, standard, average, or estimated costs, or a percentage of the contract price based on the estimated percentage of completion of work under the terminated contract, or on any other basis approved by any company or authorized by the Director of Contract Settlement: ' Provided, however, That a contractor whose accounting system is such as to permit the ascertainment of costs on the basis of actual costs shall present his

In this connection see Regulation 6, dated October 4, 1944 (9 F.R. 12283), and Regulation 7, dated October 5, 1944 (9 F.R. 12285), of the Director of Contract Settlement.

See Office of Contract Settlement Forms 1, la, lb 2a, 2b, 2c, 2d and 3 and instructions for use of Standard Contract Settlement Proposal Forms (dated October 1, 1944) which were prescribed by the Director of Contract Settlement by Regulation 8, dated October 13, 1944 (9 F.R. 12541), for use by contractors and subcontractors in settling terminated fixed price war supply contracts.

3 See, for example, General Regulation 8, dated September 27, 1944 (9 F.R. 11854), Regulation 6, dated October 4, 1944 (9 F.R. 12283), and Regulation 7, dated October 5, 1944 (9 F.R. 12285), of the Director of Contract Settlement.

2

settlement proposal to the extent practicable on an actual cost basis: And provided, further, That the percentage of coinpletion basis will not be used in the case of war supply contracts where the contractor can present his costs on the basis of actual, standard, average or estimated costs.

$ 50.3 Settlements not made by agreement. (a) In cases where termination claims are not settled by agreement and the amount of fair compensation is determined by the company pursuant to subsection (a) of section 13 of the act, the company will take into account the includable charges, and shall exclude as elements of cost, the items listed in subsection (d) of section 6 of the act; subject, however, to such inclusions or exclusions as the Director of Contract Settlement may by regulation prescribe; ' however, where the small size of claims or the nature of production or performance or other factors make it impracticable to apply the principles stated in subsection (d) of section 6 of the act, to any class of settlements which are subject to such subsection, the companies, in determining fair compensation for that class of termination claims, shall use such other standards or methods as in the particular case will result in the contractor receiving fair compensation: Provided, That the aggregate amount of compensation in accordance with this paragraph (excluding costs of the kind referred to in paragraphs (3) and (4) of subsection (d) of section 6 of the act) shall not exceed the total contract price reduced by the amount of payments otherwise made or to be made under the contract

(b) In cases where the contractor and the company are unable to settle a claim in full by agreement and the contractor desires to have the company determine the amount due on the claim or unsettled part pursuant to clause (2) of subsection (a) of section 13 of the act, the contractor shall make written demand on the company for such determination.

(c) Contractors normally will be given advance notice of the intention on the part of the company, pursuant to clause (1) of subsection (a) of section 13 of the act, to make a determination of the amount due on any claim or any unset

tled part of any claim in cases where the termination claim has not been settled by agreement or has been so settled only in part. Notice of the intention to make any such determination, the amount ultimately determined to be payable, and a copy of the findings by the company indicating the basis of the determination, shall be forwarded to the contractor over the signature of the president, executive vice-president or any vice-president of the company concerned.

$ 50.4 Arbitration settlements. (a) Pursuant to subsection (e) of section 13 of the act the company responsible for settling any claim and the war contractor asserting the claim, by agreement, may submit all or any part of the termination claim to arbitration, without regard to the amount in dispute. Any war contractor asserting any such claim and desiring so to arbitrate shall serve written notice thereof on the company concerned, and shall give such other notice thereof as may be required by the terms of the war contract.

(b) Pursuant to subsection (f) of section 13 of the act, whenever any dispute exists between any war contractor and a subcontractor regarding any termination claim, either of them, by agreement with the other, may submit the dispute to the company concerned for mediation or arbitration. The war contractor and subcontractor will be notified by the company as to whether it will undertake the mediation or arbitration. If the company is willing to mediate or arbitrate the dispute and so notifies the war contractor and subcontractor, the war contractor and subcontractor shall thereafter be precluded from withdrawing the submission without the consent of the company.

$ 50.5 Defective, informal and quasi contracts. (a) In order to effectuate subsection (a) of section 17 of the act, in cases where any person has arranged to furnish or furnished to a company or to a war contractor any materials, seryices, or facilities related to the prosecution of the war, without a formal contract, relying in good faith upon the apparent authority of an officer or agent of the company, written or oral instructions, or any other request to proceed from the company, and where such person feels that he is entitled to receive fair compensation therefor from the company, such person shall reduce his

* See, for example, Regulation 7, dated October 5, 1944 (9 F.R. 12285) of the Director of Contract Settlement.

claim to writing and shall submit it to the company in the manner prescribed in paragraph (b) hereof with a full presentation of the facts and circumstances in support of the claim.

(b) The claimant shall make any such claim under subsection (a) of section 17 of the act under oath, verified by the claimant or by a principal oficer of the claimant and supported in accordance with the following:

(1) Each such claim shall be accompanied by affidavits of the representatives of the claimant and other persons having knowledge of relevant circumstances.

(2) If the claimant relied upon written or oral instruction from he company, he shall furnish with his claim the original or photostatic copies of such written instructions and he shall reduce the oral instructions to writing and include copies thereof in support of his claim.

(3) If the claimant furnished the materials, services, or facilities relying in good faith upon the apparent authority of an officer or agent of the company, the claimant shall identify the officer or agent, show the nature of the authority on which the claimant relied, why it appeared to the claimant that the officer or agent has such authority, and the extent to which the claimant inquired into the actual authority of the officer or agent.

(4) The claimant will furnish a full description of the materials, services, or facilities for which such claimant is claiming fair compensation.

(5) The claimant shall show when the materials, services, or facilities were furnished, or the arrangements made for furnishing same, whether the materials, services, or facilities furnished were the ones called for under the written or oral instructions or other request to proceed from the company, and shall describe any guaranties, warranties or indemnities that are customarily furnished with such materials, services, or facilities or that were specifically required under the oral or written instructions or request to proceed from the company.

(6) The claimant shall disclose the nature of his performance in respects other than indicated under subparagraph (5) of this paragraph, what commitments were made by the claimant with third parties in reliance upon the written or oral instructions or other request to proceed from the company, shall furnish documentary evidence of any such

commitments, and shall show what payments or settlements, if any, were made by the claimant with respect to such commitments.

(7) The claimant shall show what payments, if any, were received by him from the company or oficer or agent of the company with respect to such materials, services, or facilities.

(8) The claimant shall furnish a certified statement showing the actual costs and expenses incurred by the claimant in connection with the furnishing of or arranging to furnish such materials, seryices, or facilities.

(9) The claimant shall submit with his claim a draft of such agreement as he considers suitable to cover the furnishing of the materials, services, or facilities, and, in cases where the materials, services, or facilities have not been furnished, shall state whether the claimant would be willing, if requested by the company, to proceed with the furnishing of, and furnish, the materials, services, or facilities.

(10) The claimant shall show what steps, if any, he has taken to mitigate losses and reduce his claim to a minimum.

(11) The claimant shall furnish such additional evidence in support of his claim as he considers appropriate or as may be requested by the company.

(c) In order to effectuate subsection (b) of section 17 of the act, in cases where any formal or technical defect or omission in any prime contract, or in any grant of authority to an officer or agent of a company who ordered any materials, services, or facilities, might invalidate the contract or commitment, and where the contractor desires to have such contract or commitment amended, confirmed, or ratified in order to cure such defect or omission, such contractor shall present the claim in writing to the company concerned. The claimant shall include with his claim a full statement of the relevant circumstances. The claimant will be notified whether the claim is of such a lature that it must be supported in the manner set forth in paragraph (b) of this section.

(d) All claims submitted under section 17 of the act will be investigated and the claimant notified of the disposition made or proposed disposition of the claim.

$ 50.6 Priority in settlements. Pursuant to subsection (a) of section 6 of the act contractors whose facilities are privately owned or privately operated are to receive priority in making settlements of terminated war contracts.

$ 50.7 Interim financing. (a) Applications for advance or partial payments on account of the termination claim of a war contractor should be made to the party from whom the war contractor received notice of termination. Such application shall be made in such form as may be prescribed by the Director of Contract Settlement or, in the absence of such prescribed form, in such form as may be approved by the Company concerned. In determining the amount of the partial or advance payment to be made, such company will consider the provisions of sections 8 and 9 of the act and the regulations issued under subsection (c) of section 8 by the Director of Contract Settlement.

(b) In any case where any termination claim is submitted or settled, or interim financing is applied for or made, war contractors, without financial liability in the absence of fraud on their part, may rely upon such certificates relating to termination claims or interim financing as the Director of Contract Settlement or the company prescribes or approves.

$ 50.8 Removal and storage of materials. The removal and storage of termination inventories and companyowned equipment shall be governed by the following:

(a) Termination inventory located in a plant of a war contractor which the war contractor does not retain, dispose of, or store, except that which may be determined by the company concerned not to be allocable to the terminated war contract or contracts, will, within 60 days or such other period as may be prescribed by the Director of Contract Settlement or such longer period as the war contractor may agree, after demand of the war contractor, unless the contract

otherwise provides or storage arrangements are made with him, be removed by the company concerned from the plant of the war contractor. Such demand of the war contractor shall be on such forms of termination inventory schedules and on such certificate as may be prescribed by the Director of Contract Settlement' or, in the absence thereof, on such forms and certificate as may be approved by the company concerned. The demand for removal shall be made by the war contractor on the company concerned through the representative of the company who issued the notice of termination to the prime contractor. Unless otherwise provided by regulation of the Director of Contract Settlement, the demand by a subcontractor for removal of termination inventories shall be accompanied by a certificate of the prime contractor and intervening subcontractors to the effect that the subcontract had been terminated by reason of the termination of the prime contract and intervening subcontracts, and that the property involved is believed to be properly allocable to the terminated prime contract and intervening subcontracts.

(b) Such removal or storage of property does not entitle the war contractor to direct payment for the property by the company. In the case of fixed price prime contracts the transfer of property allocable to the terminated portion of the contract is made by the contractor pursuant to his obligation under the contract and termination article and payment is effected through the settlement of his termination claim. In the case of fixed price subcontractors the subcontractor is paid through settlement of his termination charge for the allocable property removed or stored; in turn the settlement of the termination charge of the subcontractor is included in the termination charges of intervening subcontractors, if any, and of the applicable prime contractor-payment is thus accomplished through settlement of termination claims in the usual manner. Where the property is determined not to be allocable to the terminated prime contract, the company will be liable to the war contractor concerned only for the return of the property to such war contractor or for its disposal value at the

With respect to partial payments, see General Regulation 2, dated September 8, 1944 (9 F. R. 11275), of the Director of Contract Settlement.

See, for example, the certificates included in Office of Contract Settlement Forms 1, la, 1b, 2a, 2b, 2c, 2d, and 3, and Instructions, dated October 1, 1944 (9 F.R. 12541), and 8008.79 of General Reg. 2, dated September 8, 1944 (9 F.R. 11275).

? See Office of Contract Settlement Forms 2a, 2b, 2c and 2d and the Instructions (dated October 1, 1944, 9 F.R. 12542).

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