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Executive Order 9786—Regulations Regard the Consideration, Adjustment, and Settlement of Claims Under Public Law 657, Approved August 7, 1946

October 05, 1946

By virtue of and pursuant to section 1 of Public Law 657, 79th Congress, 2d Session, approved August 7, 1946, and in the interest of the expeditious disposition of claims under contracts to which this order is applicable, the following Regulations are hereby prescribed to govern the filing, considerations, adjustment, and settlement of claims by contractors against department and agencies of the Government under said Public Law.

Part I - Definitions

101. As used in these Regulations -

101.1 The term "Act" means Public Law 657, 79th Congress, 2d Session, approved August 7, 1946.

101.2 The term "agency" mean any department or agency of the Government.

101.3 The term "war agency" means any department or agency of the Government which, prior to August 14, 1945, was authorized to entered into contracts and amendments or modifications of contracts under section 201 of the First War Powers Act, 1941 (50 U. S. C., Supp. IV, App., sec. 611). The term "war agency" also includes any successor agency standing in the place of an agency so authorized.

101.4 The term "statutory period" means the period September 16, 1940, to August 14, 1945, inclusive.

101.5 The term "contract" means any agreement of any kind (whether in the form of a letter of intent, purchase order, or otherwise) entered into by an agency pursuant to which work, supplies, or services were furnished by the contractor to the Government at any time during the statutory period.

101.6 The term "subcontract" means any agreement of any kind (whether in the form of a letter of intent, purchase order, or otherwise) pursuant to which work, supplies, or services required for the performance of a prime contractor were furnished by a subcontractor (including a materialman) to a prime contractor of higher tier subcontractor of any agency at any time during the statutory period.

101.7 The term "cost of performance" means the reasonable and necessary cost to a contractor or subcontractor of work, supplies or services furnished during the statutory period pursuant to a contract or subcontract, determined in accordance with the accounting practices of the contractor or subcontractor consistently applied during performance of the contract or subcontract consistently applied during performance of the contract or subcontract, provided such practices accord with recognized commercial accounting practices. Such cost shall include, to the extent reasonable and necessary, direct costs and a properly allocable proportion of indirect costs, but shall not include the following items:

a. Interest on invested capital.

b. Unreasonable compensation paid to officers or employees, including any compensation in excess of wages or salaries approved under applicable wage and salary stabilization regulations; bonuses which constitute distribution of profits; and royalties paid to officers and employees.

c. Profit on transactions with business enterprises, of any kind, direc6tly or indirectly controlling, con trolled by, or under common control with, the contractor or subcontractor.

d. Cost of unreasonable spoilage or defective work and excessive inventories of materials and supplies.

e. Entertainment expenses.

f. Donations.

g. Taxes and expenses on issues and transfers of stock.

h. Income and excess profits taxes.

i. Losses on other contracts or subcontracts, not limited to contracts and subcontracts as herein defined; losses from sales or exchanges of capital assets; losses on investments; and bad debt losses and charges to reserve therefor, including expenses of collection and exchange.

j. Cost or losses arising from fraud or willful misconduct of any officer, employee, or agent, or negligence of any officer, of the contractor or subcontractor.

k. Fines and penalties.

l. Amortization of unrealized appreciation of values of assets; amortization or depreciation of facilities at rates in excess of rates having a reasonable relations to actual useful life; and expenses, maintenance, and depreciation of excess facilities, other than reasonable stand-by facilities.

m. Provisions in reserve accounts for contingencies, repairs, and compensation insurance except self-insurance reserves established consistently with state laws and at rates not in excess with lawful or approved insurance company rates less allowance for acquisition costs incurred by insurance companies.

n. Any item of cost which the contract or subcontract negotiations therefor expressly contemplated would not b reimbursed or compensated or allowed for.

101.8 The term "contract price" means the aggregate of all amounts (before taxes and statutory renegotiation) paid or payable to a contractor or subcontractor for work, supplies, or services furnished during the statutory period pursuant to a contract or subcontract, including any amount paid or payable pursuant to any amendment, adjustment, or settlement of or on account of such contract or subcontract under the First War Powers Act, 1941, the Contract Settlement Act of 1944 (41 U. S. C., Supp. IV, secs. 101-125), or otherwise.

101.9 The term "loss" means the amount by which the cost of performance of a contract or subcontract exceeds the contract price thereof.

101.10 The term "profit" means the amount by which the contract price of a contract or subcontract exceeds the cost of performance thereof.

101.11 The term "net loss" means the amount by which the aggregate of the costs of performance under all contracts and subcontracts exceeds the aggregate of the contract prices under all contracts and subcontracts, after giving appropriate effect to action in renegotiation proceedings in respect of the statutory period. [re-proof this!!!!]

101.12 The term "claim" means a claim for relief under the Act.

101.13. The term "claimant" means a contractor of subcontractor who files a claim under the Act.

PART II - FILING OF CLAIM

201. No claim shall be received or considered by any war agency unless properly filed in accordance with the Act and these Regulations on or before February 7, 1947.

202. Each claim shall be in writing and shall contain or shall be accompanied by:

a. A statement of the total amount claimed.

b. A statement of the contract price, cost of performance, and loss claimed, for each contract with a war agency or subcontract under a contract of a war agency or subcontract of a war agency with respect to which claim is made.

c. A statement of the contract price, cost of performance, and profit or loss on each contract and subcontract. The claimant shall identify each such contract by agency, number, and date, and shall identify each subcontract by names of contracting parties, number (if any), and date. In addition, in the case of each subcontract, the claimant shall similarly identify the related prime contract and each intervening higher tier subcontract to the greatest extent possible.

d. A statement of the net loss on all the contracts and subcontracts listed under subparagraph c hereof.

e. A copy of each written request filed on or before August 14, 1945, with the war agency concerned, for relief with respect to the losses claimed.

f. A copy of any other written request filed prior or subsequent to August 14, 1945, with any agency for relief with respect to the losses claimed.

h. A statement of the amount (if any) refunded to the Government pursuant to section 403 of the Sixth Supplemental National Defense Appropriation Act, 1942, as amended (50 U. S. C., Supp. IV, App., sec 1191), for each fiscal year of the claimant subject to statutory renegotiation; a copy of each renegotiation agreement or order enter into or received by claimant; and a statement of the extent to which any loss for which claim for relief is filed hereunder reduced the amount of profits reported in a renegotiation proceeding.

i. A statement in detail of all claims and settlement made or entered into by the claimant under section 17 of the Contract Settlement Act of 1944.

j. A statement in detail, as to each loss claimed, of the facts and circumstances which caused the loss and the period or periods of time during which the loss occurred.

k. A statement, supported by reasonable detail, showing that the loss or losses claimed occurred through no fault or negligence on the claimant's part.

l. A list of all business enterprises, of any kind, directly or indirectly controlling, controlled by, or under common control with, the claimant, and with respect to each such business enterprise, a description of the means of such control.

m. A statement show the amount by which any loss, in respect to which a claim is made, reduced income or excess profits taxes of the claimant of any taxable year or years.

n. An affidavit by two officers or other responsible officials of the claimant, one of whom shall be the chief accounting officer of the claimant, that the statements, information, and other data set forth in the claim and supporting papers have been carefully verified, have been prepared from the accounting and other records of the claimant, have been prepared in accordance with the requirements of the Act and these Regulations and in all respects are true and correct to the best of their knowledge and belief.

203. No more than one claim shall be filed under the Act by any one claimant. Each claim shall be filed in quadruplicate with the war agency with respect to whose contracts and subcontracts claim for loss is made. When claim for loss is made with respect to contracts and subcontracts of more than one war agency, the claim shall be filed with the war agency with respect to whose contracts and subcontracts the largest claim for loss is made.

204. No claim for loss under and contract or subcontract of a war agency shall be received or considered unless a written request for relief with respect thereto was filed with such war agency on or before August 14, 1945; and no claim shall be considered if final action with respect thereto was taken on or before that date.

205. Upon request by a war agency with which a claim has been filed, the claimant shall furnish promptly additional copies of its claim or any additional evidence which may be requested an which is within the possession of or available to the claimant, bearing upon the claim or any of the matters referred to in section 2 (a) of the Act. Such additional evidence shall be verified by the claimant in accordance with subparagraph n of paragraph 202 of these Regulations.

PART III - SETTLEMENT OF CLAIMS

301. Upon receipt of a claim, the war agency shall transmit a copy of the claim to the General Accounting Office for verification of the list of contracts and subcontracts shown in the claim. The General Accounting Office shall be requested to advise the war agency of any discrepancies between its records and the list of contracts and subcontracts set forth in the claim, and to furnish any facts in its files pertinent to the consideration and settlement of the claim. Before any claim is paid under the Act or these Regulations the war agency considering the claim shall notify the General Accounting Office as to the proposed settlement, and the General Accounting Office shall ascertain from the contracting and lending agencies of the Government whether they have any claims against the claimant and shall notify the agency concerned with respect thereto. As soon after February 7, 1947, as practicable, the General Accounting Office shall prepare a list of all claimants under the Act and shall furnish each contracting or lending agency of the Government, and the Department of Justice, a copy thereof. Each such agency shall thereupon notify the General Accounting Office as to any claim or claims it may have against any claimant named in such list.

302. When claim for loss is made with respect to contracts and subcontracts of more than one war agency, the war agency with which the claim is filed pursuant to paragraph 203 of these Regulations shall proceed to consider and settle the claim, subject to the approval of each other war agency concerned as to that portion of the proposed of the proposed settlement which relates to the contracts or subcontracts of that agency, which approval of, or determination with respect to, such portion shall be final. Each war agency considering a claim involving losses under contracts and subcontracts of other war agencies shall advise and consult with such other war agencies, and may request information or comment from any other agency with respect to matters bearing upon the claim.

303. Each war agency, in considering a claim, shall take into consideration (a) action taken with respect to the claimant under section 403 of the Sixth Supplemental National Defense Appropriation Act, 1942, as amended, the Contract Settlement Act of1944, or similar legislation; (b) relief granted the claimant under section 201 of the First War Powers Act, 1941, or otherwise; and (c) relief proposed to be granted the claimant by any other war agency under the Act. Whenever a war agency finds that a loss affected the computation of the amount of the claimant's excessive profits determined n a renegotiation agreement or order, and to the extend that the war agency finds such amount was thereby reduced, no claim for such loss shall be allowed under the Act or these Regulations. Each war agency, in considering a claim, shall give such regard as may be proper to any reduction in income or excess profits taxes of the claimant resulting from the loss in respect of which the claim is made.

304. No claim shall be allowed by any war agency except if and to the extend that the war agency finds that the claim is (a) equitable under all the circumstances and (b) for losses incurred without fault or negligence on the part of the claimant.

305. No claimant shall be granted relief under the Act and these Regulations in any amount in excess of the amount of the net loss (less the amount of any relief granted subsequent to the establishment of such loss) on all contracts and subcontracts held by the claimant pursuant to which work, supplies, or services were furnished for the Government during the statutory period.

306. A war agency considering a claim shall determine the extent to which information and data sworn to and filed by the claimant shall be verified.

307. Relief with respect to a particular loss claimed shall not be granted under the Act and these Regulations unless the war agency considering the claim find, or, in the case such loss was incurred under the contracts and subcontracts of another war agency, such other war agency finds, that relief would have been granted under the First War Powers Act, 1941, if final action with respect thereto had been taken by the war agency on or before August 14, 1945.

308. Where a claim is settled by agreement between the war agency and the claimant, the agreement shall be reduced to writing and signed by both parties and shall include an unconditional release by the claimant of all claims whatsoever of the claimant against the Government or any department or agency thereof as to all contracts and subcontracts involved in consideration of the claims. Payment, within the limits of appropriations available for such purposes, shall be made by the war agency upon the basis of the executed agreement.

309. Where a claim is not settled by agreement, the war agency shall deliver to the claimant a written statement as to the amount, if any, due on the claim, but shall make no payment of any amount so found to be due until the claimant shall have delivered to the war agency an unconditional release of all claims whatsoever of the claimant against the Government or any department or agency thereof as to all contracts and subcontracts involved in consideration of the claims.

PART IV - REPORTS

401. Each war agency shall report to the Congress quarterly the name of each claimant to whom relief has been granted under the Act, together with the amount of such relief and a brief statement of the facts and the administrative decision. A copy of each such report to the Congress shall be transmitted to the Bureau of Internal Revenue.

PART V - ADMINISTRATION

501. The head of any agency may prescribe supplementary regulations for his agency consistent with the provisions of these Regulations and the Act.

HARRY S. TRUMAN

THE WHITE HOUSE,

October 5, 1946

Harry S Truman, Executive Order 9786—Regulations Regard the Consideration, Adjustment, and Settlement of Claims Under Public Law 657, Approved August 7, 1946 Online by Gerhard Peters and John T. Woolley, The American Presidency Project https://www.presidency.ucsb.edu/node/278269

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