Evening star., 1954-10-31
Dixon-Yotes
No Chiconey, but Several Deviotions Noted
In Contracts Departure From Normal Form
BY Phil Yeoaer

cepted Government practice. Bid
ding is not required where Cd the
amount involved is less than $100,
(2) immediate delivery is required,
CD only one supplier is available.
In addition the Acc, at it's option.
need not advertise where it feels
secrecy is required.
1t should be noted that, under
exception (3), most contracts to buy
power are not subject to bidding.
But the question here is whether
the Dixon-Yates plan belongs to the
general run of power-purchase con-
tracts.
The Acc believes it does and in
SistS DiXon-Yates is the only private
power group in the area competent
to do the job. This view is con-
tested by New York Financier Wal
ter Won TreSckow, who heads q rival
syndicate interested in the project.
While Won Tresckow's competitive
position is weak due to the nom
technical nature of his syndicate, it
is nonetheleSS possible that the con.
tract award procedure could prove
a legal Achilles-heel.
4. Tex Compensation
Early versions of the Dixon.
Yates contract provided for rein-
bursement for taxes, but this years
Atomic Energy Act outlawed direct
reimbursement for Federal taxes.
The present contract, however, re-
portedly recognizes" Federal in
come tax factor and provides a
formula for indirect quarterly tax
adjustments. In effect Dixon-Yates
might get some of its tax money
back.
1t is open to question whether this
conforms to law. Acting Controller
General Frank H. Weitzel has given
an opinion that it does, and At
torney General Brownell is expected
to concur. While these opinions
carry much weight, they do not
make the contract legal or illegal.
Only the courts can do that. -
5. Cancellation Costs >
Most government contracts per-
init cancellation at the convenience
of the Government. in which in
stance reasonable" settlement
costs are allowed. The Dixon-Yates
plan contains a formula whereby
Uncle Sam, in extreme circum-
stances, might be required to pay
cancellation costs up to $40 million.
Ordinarily what is reasonable"
is determined after a cancellation
occurs. Here it seems to be spelled
out in advance and is, therefore, q
departure from practice.
The maximum amount involved
might also be challenged as exces-
sive. --
Finally, most contracts not re-
sulting from bidding are subject to
"renegotiation" which permits the
government to recapture any ex-
cessive earnings. While contracts to
buy electric energy are usually ex-
empt from this. there is again the
question: of whether this is merely
a power-purchase contract. If it
is not, the agreement falls under
renegotlation laws and could be
NA1A4S1 ok1C O11 tklAS SCUlC.
Monopoly Question
Beyond these basic contract is
sues there is. of course, the prob
lem of whether Dixon-Y Yates has
violated the antitrust laws in
alleged suppression of competition.
The Senate is looking into this
aspect now.
If it should decide there has been
violation and if Dixon-Yates were
SO convicted in court, then the con-
tract itself might automatically be
held invalid-though this is not a
legal certainty.
In any case. there is little doubt
that the DiXon-Yates device deviates
from the usual Government busi-
ness practice. Whether the cir
cumstances warrant this deviation
is a matter for the politicians to
figure out.
AS to the legal aspects, only the
courts can finally decide. But the
above enumeration of points would
seem to indicate that there could
be long legal battle over some
phases of the Dixon-Yates contract.
On the other hand, almost all
contracts are subject to argument
and Interpretation. Whether the
courts ever get chance to Judge
this contracts legality may depend
on how good case Dixon Yates
enemies think they can make.