B-218241, 64 Comp. Gen. 623
Matter of: Pitney Bowes, Inc., June 18, 1985
General Accounting Office (GAO) will not consider a protest where the
issues presented are before a court of competent jurisdiction and the
court has not expressed any interest in a GAO decision, or where the
issues have already been decided by the court.
GAO will not award attorneys fees or other costs of pursuing a
protest where GAO has made no determination on the merits of the protest
because the matter was decided by a court by competent jurisdiction.
Pitney Bowes, Inc. protests an award of contract by the U.S. Army
Defense Supply Service-Washington ("Army") to Whitaker Brothers
("Whitaker") under solicitation No. MDA903-85-B-0014. The solicitation
is for ten high-volume mailing systems, including mailing machines,
electronic scales, a postal-meter tape-dispensing mechanism, and an
accumulator to tabulate mailings and postage costs. Pitney Bowes
contends that the awardee's bid was nonresponsive because it offered
equipment which was reconditioned rather than new, and the Invitation
for Bids made no provision for acceptance of such equipment.
We dismiss the protest.
Pitney Bowes filed its protest with our Office on February 26, 1985.
Under Section 2741 of the Competition in Contracting Act of 1984
("CICA"), P.L. 98-369, and section 21.4 of our Bid Protest Regulations
implementing CICA, 4 C.F.R. 21.0 et seq. (1985) ("Regulations"), the
Army was required immediately upon receipt of the protest to direct the
awardee, Whitaker, to cease performance under the contract and to
suspend any related activities that might result in additional
obligations being incurred by the United States under that contract as
long as the protest was pending. The Army refused to suspend contract
performance, however, and Pitney Bowes filed suit in the United States
District Court for the District of Columbia on March 13, seeking to
enjoin the agency from proceeding with the contract. Pitney Bowes also
sought from the court declaratory relief on the merits of its protest,
bid preparation costs plus costs and attorneys fees. Pitney Bowes v.
United States, Civ. Action No. 85-0832. The District Court issued a
Temporary Restraining Order, enjoining the Army from proceeding with
performance of the Whitaker contract. On April 1, 1985, the District
Court granted Pitney Bowes' Motion for Summary Judgment, holding that
the Army's award to Whitaker Brothers violated Federal Acquisition
Regulation, section 10.010 and finding the contract therefore void.
Although the court enjoined performance of the Whitaker contract, it did
not order that the contract be awarded to Pitney Bowes, the next low
bidder, nor did it award costs or fees. The Army has indicated to the
protester that it has not yet made a decision on whether such award will
be made.
Pitney Bowes has requested a determination of its protest,
notwithstanding the District Court's decision. The protester does not
seek to disturb the decision of the District Court on the merits of its
case, but wishes to apply to our Office for costs of filing and pursuing
its protest, to which it believes it is entitled under CICA and Section
21.6(d) of our regulations.
Our Bid Protest Regulations require the dismissal of any protest
where the matter involved is the subject of litigation before a court of
competent jurisdiction, (unless the court requests a decision by the
General Accounting Office) or where the matter involved has been decided
by the court, 4 C.F.R. Section 21.9, and it has long been the policy of
our Office not to decide protests that come within these guidelines in
the present regulation. Santa Fe Corp., B-218234.2, Mar. 27, 1985, 64
Comp. Gen. 429, 85-1 CPD Paragraph 361; see Raycomm Industries, Inc.,
B-182170, Feb. 3, 1975, 75-1 CPD Paragraph 72.
The issues presented in Pitney Bowes' court proceeding are identical
to the issues presented in this protest, with the exception of the
protester's claim for costs and attorney's fees. Therefore, the court's
determination of the lawsuit controls the resolution of the bid protest
issues. Under the doctrine of res judicata, the court's determination
of these issues is final and binding on the protester and the Army.
Therefore, it would be pointless for us now to consider the merits of
Pitney Bowes' complaint.
Pitney Bowes argues that it is nevertheless entitled to a
determination of its claim for costs, since this issue was not addressed
by the court. Pitney Bowes asserts that it did not voluntarily elect to
pursue a remedy in court, but was forced to resort to litigation when
the Army refused to suspend performance of the contract while the
protest filed with our Office was pending. After the court granted a
temporary restraining order, both parties filed motions for summary
judgement; Pitney Bowes expressed in its motion its willingness for the
court to seek an advisory opinion from this Office. The protester
argues, therefore, that it was at all times willing to have the matter
resolved by this Office. Furthermore, Pitney Bowes objects that the
Army's refusal to comply with the stay provisions of CICA necessitated
the court action and should not now have the less direct result of
denying Pitney Bowes any forum in which to pursue the remedies made
available by statute.
We recognize the difficulty of the situation created by the agency's
refusal to adhere to the provisions of CICA. However, the fact remains
that Pitney Bowes actively sought relief from the court. Thus, the
protester accepted the possibility that the court would decide the case
without requesting our opinion and indeed invited the court to do so.
Where a protester seeks and obtains substantive relief from a court with
no decision by this Office, it is not entitled to the award of attorneys
fees by the Comptroller General.
The responsibility of this Office under CICA is to decide if a
protested procurement action violates a statute or regulation. Such a
decision on the merits of a protest is an essential condition to a
declaration that the protester is entitled to the award of reasonable
costs of filing and pursuing the protest, including attorneys fees. 4
C.F.R. 21.6(d). Thus, the authority to declare entitlement to these
costs is ancillary to our decision regarding compliance with the
procurement statutes and regulations. The legality of the Army's action
in this case has been finally determined by a United States District
Court, and our regulations therefore require dismissal of the protest.
The protest is dismissed.
B-216914.2, 64 Comp. Gen. 620
Matter of: Pacific Sky Supply, Inc., June 17, 1985
General Accounting Office denies protest alleging that agency failed
to comply with Pub. L. No. 98-72 requirement that intent to place
noncompetitive orders under a basic ordering agreement be synopsized in
the Commerce Business Daily where a spot check indicates that the orders
were in fact synopsized except in cases where the urgency exception was
properly invoked.
Pacific Sky Supply, Inc. protests the allegedly improper actions of
the San Antonio Air Logistics Center, Kelly Air Force Base, Texas, in
issuing 32 delivery orders for aircraft engine parts to General Motors
Corporation, Allison Gas Turbine Operations (Detroit Allison). The
orders, placed in August and September 1984 against Detroit Allison's
basic ordering agreement (BOA), No. F34601-83-G-0276, were for T56
engine components applicable to the C130 aircraft.
We deny the protest.
Pacific Sky contends that the synopsis and approval requirements of
Public Law No. 98-72 were not met, stating that its personnel did not
see any notices in the Commerce Business Daily (CBD) before the
noncompetitive orders were placed.
Public Law No. 98-72 amended section 8(e) of the Small Business Act
to enhance small business competition by improving access to procurement
information. See 15 U.S.C. Section 637 (Supp. I 1983). The section
requires that a proper notice be published in the CBD for all
procurements of $10,000 or more (with certain exceptions). In the case
of a BOA, notice of an intent to place an order must be published at
least 30 days before competition is foreclosed. 15 U.S.C. Section
637(e)(2). Agencies are prohibited from commencing negotiations on a
sole source contract until at least 30 days after the publication of a
proper notice of intent to contract. 15 U.S.C. Section 637(e)(4)
further states that before negotiating a sole source contract of more
than $1,000,000 (in fiscal year 1984), the head of the procuring
activity or his deputy must approve such a contract; in addition, the
contracting officer must evaluate all responses to the CBD notice.
Pacific Sky questions whether these approval requirements were met
and argues that the contracting officer could not have evaluated
responses unless the intent to place the orders had been properly
synopsized. The protester also contends that the Air Force's waiver of
the synopsis requirements for eight of the orders on the basis of
urgency was improper because of the long period of time, i.e., up to 2
years after award, permitted for delivery.
The Air Force responds that it complied with the statute and
applicable sections of the Federal Acquisition Regulation, 48 CFR
Sections 5.201-5.203 (1984). Synopses for 24 of the proposed orders
were transmitted to the CBD between August 8, 1983 and August 10, 1984;
this exceeds the statutory time requirements. The agency states that
the remaining eight orders were not synopsized because of urgency, an
exception permitted by 15 U.S.C. Section 637(e)(1)(B). In addition,
according to the Air Force, sole source approvals were obtained for all
awards of more than $1,000,000; two of the orders did not require such
approval, since the purchase request estimates were less than this
amount.
The Air Force has provided us with a random sample of the CBD notices
published between June and August 1984. This sample shows the following
synopses published:
TABLE OMITTED
Based upon this information, it appears that the Air Force did in
fact comply with the synopsis requirements of Public Law No. 98-72. In
the absence of any evidence to the contrary, we find no basis to
question the Air Force's compliance with regard to 24 of the protested
orders. We can only conclude that Pacific Sky failed to see the CBD
notices, some of which appeared as much as a year before the awards, and
mistakenly concluded that they had not appeared.
As for Pacific Sky's contention that the Air Force improperly invoked
the urgency exception for the remaining eight, the record shows that the
Air Force did so only after considering such factors as administrative
lead time, production lead time, inventory levels, pipeline time, flying
hour programs, and maintenance schedules. The contracting officer
states that support of T56 engine components is of extreme concern to
the major commands and that to ensure continuity of support, they had
requested contractual coverage at the earliest possible date. Pacific
Sky has made only general allegations concerning the 2 years allowed for
delivery and has not refuted the Air Force's arguments as to the actual
lead times. Under these circumstances, we find no basis to question the
Air Force's determinations of urgency for the eight orders.
Pacific Sky finally contends that it should have been awarded two
orders that allegedly would have resulted in a substantial savings to
the Air Force. We note, however, that all T56 engine components are
assigned acquisition method codes indicating that only approved sources
can be considered for award. Since Pacific Sky is not an approved
source (and according to the Air Force has not submitted sufficient data
to permit approval), the firm could not have been awarded a contract for
any of the components covered by the protested delivery orders. We note
that Pacific Sky is fully aware of the approved source requirement and
that the firm has on several occasions been found nonresponsive for
failure to provide sufficient data to enable the Air Force to qualify
it. See Pacific Sky Supply, Inc., B-215189, et al., Jan. 18, 1985, 64
Comp. Gen. 194, 85-1 CPD Paragraph 53.
The protest is denied.
B-215511, 64 Comp. Gen. 617
Matter of: Betsy L. Randall - Relocation Expenses - Employment Offer
Withdrawn, June 12, 1985
Travel and transportation expenses for new appointees to manpower
shortage positions in the Federal service are authorized by law and the
Federal Travel Regulations. Claimant was selected for appointment to
such a position in Asheville, N.C. and signed a 12-month service
agreement. Agency issued a travel order and advanced funds to claimant
for travel expenses, but withdrew offer of employment prior to reporting
date due to budget constraints. Claimant is not liable for portion of
travel advance paid by agency relating to relocation travel since
failure to fulfill service agreement was for reasons beyond her control.
There is no authority to allow remainder of expenses. However, since
Ms. Randall acted in good faith reliance on her selection for
appointment and representations of agency officials, we conclude the
equities of the case warrant our reporting this matter to Congress under
the Meritorious Claims Act.
This decision is in response to a request from the United States
Department of Agriculture concerning the continuation of collection
efforts against Ms. Betsy L. Randall, to recover a travel advance made
to her as an appointee to a manpower shortage position. For the reasons
which follow, only a portion of the expenses may be retained. However,
we are reporting this matter to Congress pursuant to the Meritorious
Claims Act.
On December 22, 1981, Ms. Randall was offered and accepted a position
as a GS-11 Supervisory Plant Pathologist with the Forest Service, United
States Department of Agriculture, in Asheville, North Carolina, with a
reporting date of January 25, 1982. The offer advised Ms. Randall that
she was entitled to reimbursement for travel and relocation expenses
from Raleigh, North Carolina, to Asheville, North Carolina, in that the
position was determined to be a shortage category appointment. See
para. 2-1.2a(3) of the Federal Travel Regulations, FPMR, 101-7
(September 1981) (FTR) incorp. by ref., 41 C.F.R. Section 101-7.003
(1983). Ms. Randall was given a Travel Authorization, AD-202, dated
January 6, 1982, along with a travel advance in the amount of $2,339.25.
The Travel Authorization authorized per diem, mileage, and
transportation and storage of household goods for her and her husband.
Subsequent to the issuance of the Travel Authorization to Ms.
Randall, the Forest Service determined, due to budget constraints, that
it would be unable to fill the position offered to Ms. Randall, and on
January 21, 1982, she was notified that the job offer was rescinded.
Prior to January 21, 1982, but subsequent to the issuance of the Travel
Authorization, Ms. Randall incurred expenses for the rental of an
apartment in Asheville, heating oil, water and sewage deposit,
electricity, and mileage. By letter of May 28, 1982, Ms. Randall repaid
$1,767.43 of the travel advance, but retained $571.82 to cover the
expenses she had incurred incident to her travel to Asheville and the
rental of an apartment there along with the connection of utilities.
The Forest Service requested that Ms. Randall refund the portion of the
travel advance that she retained since she never became a Forest Service
employee and was not entitled to any relocation reimbursement. Ms.
Randall has requested that she be permitted to retain these funds as she
incurred the underlying expenses in good faith reliance on the offer of
employment, the written travel authorization, and the advance of travel
funds.
The authorization for the payment by the Government of the travel and
transportation expenses of new appointees to a position in the United
States for which it is determined there is a manpower shortage is
statutory. Section 5723(a) of title 5, United States Code, authorizes
the reimbursement of travel and transportation expenses for new
appointees appointed to manpower shortage positions. The statute in
section 5723(b) expressly conditions such reimbursement on the
individual's agreement to remain in the Government Service for 12 months
after the appointment unless separated for reasons beyond his or her
control which are acceptable to the agency. Section 5723(c) further
provides that the agency may pay these expenses whether or not the
individual selected has been appointed at the time of travel. The
regulations implementing the statutory provisions appear in the FTR.
Paragraph 2-1.5a(1)(b) of the FTR expressly provides that, "(i)n case of
violation of such an agreement, including failure to effect the
transfer, any funds expended by the United States for such travel,
transportation, and allowances shall be recoverable from the individual
concerned as a debt due the United States."
It is not necessary that an individual be appointed before an agency
may pay the travel and transportation expenses. Although section
5723(a) refers only to a "new appointee," the language of section
5723(a) is specifically made subject to the implementing regulations and
to subsections (b) and (c) of section 5723. Section 5723(b) states that
an agency may pay expenses under subsection (a) "only after the
individual selected agrees in writing to remain in the Government
service for 12 months after his appointment * * * unless separated for
reasons beyond his control which are acceptable to the agency
concerned." If the agreement is made, subsection (b) further provides
that, if the individual violates the agreement, the expenses paid by the
agency are recoverable as a debt due the United States. In our opinion,
section 5723(a) when read together with section 5723(b) clearly covers
individuals selected for appointment as well as "new appointees." See
Dr. William Post, Jr., B-196795, June 5, 1980.
In the present case, Ms. Randall was an individual selected for
appointment to a manpower shortage position, and she did sign the
12-month service agreement. Hence the Forest Service was authorized to
pay her expenses under section 5723(a). The record shows that Ms.
Randall did not complete the service obligation for reasons clearly
beyond her control, i.e., her offer of employment was rescinded.
Therefore, Ms. Randall is entitled to be reimbursed for her travel
expenses, including mileage allowance and applicable per diem, for her
trip from Raleigh to Asheville. However, Ms. Randall has charged a
roundtrip mileage allowance against her travel advance ($96.00). Since
we are not aware of any authority, including 5 U.S.C. Section 5723,
which authorizes return mileage for a new employee hired and employed
within the continental United States after the expiration of the term of
service, Ms. Randall would not have been eligible for return travel to
Raleigh even if she had been allowed to complete her service agreement.
Therefore, only $48 of the claimed $96 mileage allowance may be
approved.
The agency questions the effect of its recission of Ms. Randall's job
offer prior to her actual reporting date on her entitlement to travel
allowances. As indicated above, Ms. Randall's actual reporting date is
not one of the operative facts from which her travel entitlement
accrues. Since at the time of her travel from Raleigh to Asheville, Ms.
Randall was an individual selected for appointment and since she
traveled under properly executed travel orders prior to the rescission
of her job offer, she is entitled to a $48 mileage allowance without
regard to her actual reporting date.
However, 5 U.S.C. Section 5723, as amended, does not authorize a new
appointee reimbursement for residence purchase or rental expenses. Of
the $571.82 which Ms. Randall charged against her travel advance, only
the mileage charge is not related to her rental of an apartment in
Asheville. Her other expenses for rent and utilities could not have
been reimbursed even if Ms. Randall had commenced work for the Forest
Service as originally proposed.
Ms. Randall received a travel advance in the amount of $2,339.25, as
noted above, of which she has already refunded $1,767.43. This Office
has always considered travel expense advancements to be in the nature of
a loan. 54 Comp. Gen. 190 (1974). Thus, the money was loaned to Ms.
Randall for the purpose of traveling to Asheville in connection with her
proposed appointment. Hence, we find no basis for Ms. Randall to keep
the amount of the advance, except for the mileage allowance. See 5
U.S.C. Section 5705 (1982).
However, in view of the fact that Ms. Randall acted in good faith
reliance on her selection for appointment and the representations of
agency officials, we feel the equities in the instant case are such as
to warrant our reporting this matter to the Congress pursuant to the
Meritorious Claims Act, 31 U.S.C. Section 3702(d) (1982).
Accordingly, we are forwarding a report to the Congress requesting
that Ms. Randall be relieved from liability to the United States for the
balance of $523.82 remaining due on her travel advance. Further
collection action should be suspended pending congressional
consideration of our request.
B-217354, 64 Comp. Gen. 612
Matter of: Dan Barclay, Inc., June 11, 1985
The Navy contracted with a specialized motor carrier to transport a
ship's propeller from Virginia to California from where it was to be
transported by the Air Force to the Philippines. Upon arrival in
California, rather than unload the propeller from the tractor-trailer,
the Navy borrowed the carrier's tractor and trailer, equipped with a
fixture specially designed for ships' propellers, and one driver for 20
days, all of which were then flown by the Air Force cargo plane from
California to the Philippines, and returned to California transporting a
damaged propeller for repair. The carrier is entitled to payment on a
quantum meruit basis, in the absence of an agreement as to the charges
for the services performed between California and the Philippines.
Where the carrier fails to show that the Government ordered or received
certain services, received a benefit for certain services allegedly
provided, or where changes for certain services are duplicative of other
charges paid, the General Services Administration's disallowance of the
carrier's claim for charges for such services is sustained.
Dan Barclay, Inc., asks the Comptroller General to review settlement
action taken by the General Services Administration (GSA) on its claim
for services performed in relation to the transportation of ships'
propellers for the Department of the Navy between Virginia and the
Philippines during the period from September 23 to October 24, 1983. Of
the $236,872.83 billed by the carrier, GSA allowed $35,130.76. Based on
the record before us, we sustain GSA's action on the holding that
Barclay has not shown that it is entitled to the additional $201,742.07.
On September 23, 1983, a team of two drivers employed by Dan Barclay,
Inc., a specialized motor carrier with headquarters in New Jersey,
arrived at the Naval Supply Center, Williamsburg, Virginia, in a tractor
pulling a semi-trailer equipped with a fixture specially designed to
accommodate ships' propellers. Propellers, apparently because of their
irregular dimensions and shape, must be transported at an unusual angle,
a situation that complicates transportation. The fixture includes a
"jig" to hold the propeller with hydraulic valves and cylinders (powered
by an engine-driven pump), which is capable of lifting, raising and
lowering propellers to a secure position.
Under a Government Bill of Lading, No. S-5540187, the carrier agreed
to provide transportation and all necessary accessorial services, such
as obtaining necessary over-dimensional highway permits, for movement of
a four-bladed ship's propeller from Williamsburg, Virginia, to Travis
Air Force Base, California. The propeller, which was marked for the
Naval Ship Repair Facility, Subic Bay, Philippines, weighed 39,000
pounds; was 15 feet high; 12 feet, 8 inches wide; and occupied
roughly 1,000 cubic feet of space.
The carrier tendered delivery at Travis on September 27, 1983, thus
completing performance under the contract, for which payment has been
made. The rates and charges for the services performed under the
contract for the transportation from Williamsburg to Travis are not the
subject of review here. Review relates to services performed outside
the contract from September 27 to October 18 between Travis and the
Philippines under circumstances that were highly unusual for a motor
carrier. No written contract between the carrier and the Government
provided charges for these services, nor did the carrier have tariffs or
rate tenders specifically applicable to such a shipment outside the
United States.
When the carrier's vehicle arrived at Travis, the Military Sealift
Command decided that, instead of unloading the propeller from the
carrier's equipment and providing independent means of moving and
bracing it on an Air Force C5A aircraft to be flown to the Philippines,
it would be preferable to leave the propeller intact on the carrier's
equipment and use the entire unit as a convenient and safe means of
handling incident to the air transportation. Barclay agreed with the
proposal and assigned the second driver of the team to accompany the
unit.
The carrier's tractor and trailer with the propeller were then loaded
on the Air Force aircraft which departed Travis on September 30, 1983,
and after stops in Hawaii and Guam, it arrived in the Philippines on
October 2. When the propeller was unloaded from the carrier's equipment
2 days later, the Navy instructed the driver to load a damaged propeller
for return to Travis, and after several cancellations the plane,
carrying the equipment, driver, and damaged propeller, departed the
Philippines on October 14. After the usual stops en route, the plane
landed at Travis on October 16. Two days later, the driver departed
Travis and delivered the propeller to the Naval Supply Center, Oakland,
California. On the following day he departed with the unladen vehicle,
for New Jersey.
The transportation of the damaged propeller from Travis to Oakland
was performed under Government Bill of Lading No. S-3737261. The
charges for that portion of the shipment have been paid and are not in
question here.
The charges under review here are those for services rendered after
the initial arrival of the shipment from Williamsburg at Travis, through
the return from the Philippines to Travis. Because of the time
constraints involved, formal contracting procedures were not followed
for this portion of the shipment. The carrier's bills for its services
during this period were broken down into separate charges, including:
1. Jig (fixture) detention
2. Vehicle detention
3. Special services support staff
4. Driver services
5. Storage
6. Other, including engineering services, telegram, telephone,
office assistance, etc.
The GSA disallowed all or a major part of the charges.
Barclay contends that it is not due the full amount billed,
$236,872.83, it is entitled to $171,993, the amount the Navy allegedly
paid for services provided by the Air Force; or as a minimum,
$94,253.11, which is the total for 19 days at a daily rate ($4,960.69)
derived from dividing the carrier's charges billed for the services
performed from Virginia to California under the Government Bill of
Lading contract by the number of days that portion of the shipment took.
The thrust of the carrier's claim is the premise that the services were
requested to meet an "emergency" since the Navy considered it "critical"
that the new propeller be transported as quickly as possible to replace
a damaged propeller on a ship of the Seventh Fleet.
Where there is no specific agreement between the parties as to rates,
payment is made for services, actually requested and performed on a
quantum meruit basis. 36 Comp. Gen. 529, 531 (1957). On that basis,
the claimant is entitled to payment for the reasonable value of the work
or labor. To recover, the claimant must show that the Government
received a benefit. B-173765, November 18, 1971. Where benefit is
shown, payment may be based on the lowest rates available to the
Government for the same or similar services. Starflight, Inc.,
B-212279, November 13, 1984. The burden of proof is on the claimant.
52 Comp. Gen. 945, 948 (1973); 41 C.F.R. Section 101-41.603-3 (1984).
Where there are disputed questions of fact, we rely on the statements
furnished by the administrative officers of the Government. 45 Comp.
Gen. 99 (1965).
We do not consider the amount paid by the Navy to the Air Force,
$171,993, to be a reasonable basis for payment to Barclay because the
services performed by each were substantially different. The Air Force
provided crews, ground support and multi-million dollar cargo aircraft
for the round-trip transportation between California and the
Philippines. Barclay provided the use of a tractor and trailer with
fixture and one driver, for incidental ground use.
Also, we fail to see how the average daily charges for the carrier's
transportation services performed under the Government Bill of Lading
contract can be a reasonable standard either. Under that contract,
Barclay performed full carrier services, including all the
transportation, and assumed common carrier liability for the cargo, plus
the care for its own equipment, whereas between Travis and Subic Bay,
Barclay simply provided its equipment for the use of the Government;
the Government provided the transportation services, assumed
responsibility for the cargo, and as bailee, the responsibility for the
care of Barclay's equipment while in transit.
Barclay's Tender No. 23, as amended, and the Heavy and Specialized
Tariff Bureau Tariff 401-A publish line-haul rates and charges for
accessorial services performed within the continental United States.
Although the line-haul rates have no use as a standard of reasonableness
since the Air Force, rather than Barclay, performed the transportation
services, we see no reason why the accessorial charges cannot be used as
a basis of reasonableness to the extent the services performed by
Barclay overseas were the same or similar. Therefore, as explained
below, we find GSA's settlement on this basis appropriate.
Barclay contends that the jig is an expensive piece of equipment for
which it is entitled to detention charges in addition to detention
charges for the vehicle. Barclay states that it is currently making two
jigs for the Navy at a cost of over $74,000 each, and that in previous
contracts shippers paid over $100 per hour for jig detention. Thus, it
claims that $100 per hour should be used as a reasonable standard for
payment here. On that basis Barclay claims $48,000 for 20 days' jig
detention.
As GSA previously advised Barclay, the evidence of record does not
support the contention that separate jig detention is due. We note that
neither tariff 401-A nor tender 23 provides a separate charge for jig
detention. The GSA allowed the carrier over $24,000 for vehicle
detention based on rates in the carrier's tariff which apply to the
detention of the carrier's vehicle when transporting heavy and
specialized commodities or articles requiring special equipment or
handling. Tariff 401-A, item 1507. However, GSA disallowed additional
jig detention charges on the theory that the vehicle detention
provisions covered all equipment, including any trailer fixtures, in the
absence of a specific provision for the fixture. We agree with this
determination.
The carrier billed $134,775 for special services support staff. This
was based on $450 per hour, 24 hours per day, 7 days a week, for standby
of three company executives who made themselves available for contact by
telephone at company headquarters in New Jersey or at home. Barclay
contends that these services were required because Government agents
requested expeditious service for a critical transportation movement.
The Military Sealift Command states that no such request for standby of
company executives was made and that no such standby was necessary. The
Sealift Command has stated that, with the exception of a few telephone
calls on one weekend totaling about 1 hour, all contracts with Barclay
were made during normal working hours. The GSA was correct in accepting
the statements of the Military Sealift Command personnel in this regard.
There is no evidence that the Government received any benefit from such
special service the carrier claims to have provided and there is no
evidence that the Government requested such service. Thus, we agree
with the disallowance of this item.
The carrier contends that in addition to detention charges it is
entitled to storage charges at a rate of $77.50 per day, as published in
item 1751 of tariff 401-A, for the same period of time on the theory
that detention and storage charges are separate.
Although the tariff contains separate provisions for detention and
storage, it does not follow that they apply simultaneously. Item 1751
provides that "carrier's trailers" may be used for storage upon request,
while item 1507 provides an hourly rate for the detention of a
"tractor-trailer combination" and does not apply to "trailers without
motive power." Thus, it appears that these are mutually exclusive
charges. In addition, there is no evidence that the trailer here was
requested for storage purposes. Instead, the tractor-trailer
combination was detained for the use of the Government, and the charge
for the use of the trailer was included in the detention charge. Thus,
we agree with GSA that storage charges in addition to payment of vehicle
detention charges of $24,000 for use of the carrier's equipment is not
appropriate.
While noting that under item 1535 of tariff 401-A there is no extra
charge for a driver between the hours of 7 a.m. and 5 p.m., GSA allowed
hourly charges for the driver 24 hours per day since the driver was
outside the United States for most of the period. Barclay, however,
contends that the rates applied by GSA from item 1535 of the tariff were
erroneous. Under item 1535 the rates are higher for a second driver
than for the first driver. Barclay states that of the two-man team that
operated the vehicle to California, the second driver accompanied the
propeller to the Philippines. This fact is irrelevant because the item
applies only where a request is made for more than one driver. For the
transportation from Travis to the Philippines and return only one driver
was requested and only one was dispatched.
We have reviewed the other charges and find that the carrier failed
to show that the Government received any benefit from the services that
allegedly were performed, that such services were requested by the
Government, or that they were actually provided.
We conclude that, based on the facts as stated by the Government, and
in the absence of proof that the carrier is entitled to more than the
amount allowed by GSA, we cannot authorize payment of any additional
amount.
Accordingly, GSA's action is sustained.
B-217339, 64 Comp. Gen. 609
Matter of: Technical Sergeants Brenda J. Sykes, USAF, and Lee A.
Sykes, USAF, June 11, 1985
Two Air Force members divorced from each other claim basic allowance
for quarters at the "with dependent" rate based on their one child as a
dependent. A court awarded child custody to the mother and ordered the
father to make monthly child-support payments of $100. The regulations
required monthly support payments of at least $113.40 to qualify the
non-custodial parent for the increased allowance. The non-custodial
member voluntarily offered to supplement the court-ordered amount to
meet the regulation's qualifying amount. The custodial member attempted
to reject the excess. The regulations do not give the non-custodial
member power to alter, unilaterally, the obligations of the members
established by the court; therefore, in the absence of a court decree
ordering him to pay at least the monthly qualifying amount, or the
custodial member's voluntary acceptance of the extra amount, the
non-custodial member is not entitled to the increased quarters
allowance, while the custodial member may be paid the increased
allowance.
This case concerns the question of whether a divorced member of a
uniformed service is entitled to the basic allowance for quarters at the
"with dependent" rate on the basis of having legal custody of the only
child of a marriage to another military member who also claims the
allowance based on an offer to voluntarily supplement a monthly
court-ordered child-support payment of $100 per month that would not
qualify him otherwise for the increased allowance. /1/ We conclude that
where the non-custodial member is ordered by the court to make a monthly
support payment that is less than the amount required by regulation for
entitlement to the "with dependent" rate, a claim by the custodial
member for the same allowance may be paid where she/he is contributing a
substantial amount of the child's support and is not occupying
Government quarters.
Technical Sergeant Brenda J. Sykes claims a basic allowance for
quarters at the "with dependent" rate on behalf of her child which she
has in her legal custody. The propriety of paying the claim arose when
her former husband and father of the child, Technical Sergeant Lee A.
Sykes, also claimed the allowance on the basis that the child should be
considered his dependent because he makes payments to Brenda for the
support of the child.
A June 28, 1982 divorce decree incorporating a separation agreement
awarded the mother custody of the child and ordered the father to pay
$100 per month child support. He paid $100 per month from April 1982
through October 1983, then increased the amount to $110 in November and
December 1983, and again increased it to $125 in January 1984, an amount
that he has paid ever since. With a letter to him of February 21, 1984,
Brenda Sykes returned $45, the excess over the $100 court-ordered
monthly amount she received in November and December 1983, and January
1984, and announced her intentions to refuse any amount in excess of
$100 unless the increased amount was ordered by the court. However, Lee
Sykes returned her $45 check and she then began receiving a $125 monthly
allotment from his pay in April 1984.
Lee Sykes occupied non-Government quarters during the relevant
period. Until January 1984, he received quarters allowance at the
"without dependent" rate. Effective January 23, 1984, he requested, and
since then has received the allowance at the "with dependent" rate.
Brenda Sykes departed Government quarters and filed her claim for
quarters allowance at the "with dependent" rate on January 16, 1984.
The difference between the "with" and "without" dependent rates for
Lee Sykes for the period of the claim was $113.40. As indicated, he
offered $125 monthly support payments beginning in January 1984. The
question presented by these circumstances is whether the custodial
member (Brenda) is entitled to the increased allowance on the theory
that the court-ordered support payment is less than the amount required
by regulation, or whether the non-custodial member (Lee) is entitled to
it on the basis of his voluntary, though disputed, offer of an amount to
supplement the deficient court/ordered payment which, in combination,
would exceed the amount of child support required by the regulation as a
basis for the entitlement to him.
The extra amount of quarters allowance at the "with dependent" rate,
provided under 37 U.S.C. Section 403 (1982), is intended to reimburse
members for part of the expense of providing quarters for their
dependents. 60 Comp. Gen. 399 (1981). Two members may not receive the
increased allowance on the basis of the same dependent. 51 Comp. Gen.
413 (1972), and Sergeants Mason and Smith, 64 Comp. Gen. 121, 123
(1984). Paragraph 30236 of the Department of Defense Military Pay and
Allowances Entitlements Manual generally governs the situation where one
member-parent is paying support for a child who is in the other
member-parent's custody. See Sergeant Leocadia Doerfer, USAF B-189973,
February 8, 1979. As a general rule, where a non-custodial member pays
child support in the amount required by the regulations, he/she
qualifies for the entitlement. Technical Sergeant Mary L. Fabian,
B-215235, March 19, 1985. More specifically, however, the regulation as
a whole reflects the principle that where the amount of court ordered
support is less than the difference between the "with" and "without"
dependents quarters allowance rates, the member having legal custody may
claim the child if that member is providing substantial support and is
not occupying Government quarters. Where the custody and support
obligations of divorced members are created by court order or by
separation agreement, their entitlements, if any, remain unchanged until
the obligations change either by a new court order or by mutual
agreement. Airman McCoy and Sergeant Cooper, 62 Comp. Gen. 315, 318
(1983).
Here, a court established the members' custody and child-support
obligations. The court awarded child custody to Brenda Sykes and
ordered Lee Sykes to pay $100 per month for the child's support. It is
undisputed that the $100 court-ordered amount does not satisfy the
minimum support payment required by paragraph 30236(a)(1) of the Pay and
Allowances Manual. That paragraph requires that where a member is
ordered to pay support, he/she is entitled to the "with dependent" rate,
provided the "monthly support ordered is not less than the difference
between that member's 'with' and 'without' dependent BAQ rates." In this
case the difference was $113.40.
Although the regulation also provides that "when BAQ rates are later
increased, support payments must be adjusted accordingly," we do not
believe that that language was intended to convey to the non-custodial
member the power to alter, unilaterally, the obligations of the members
established by the court order. It would seem that any modification of
the obligations would have to come from the court or by mutual agreement
between the parties before any change could be made in the entitlement.
Lee Sykes' voluntary offer of the supplemental amount had no effect on
the legal obligations of the parties; Lee Sykes' court-ordered
obligation for monthly child support remains at $100. As long as Brenda
Sykes refuses to accept the additional amount and the court-ordered
obligation remains unchanged, Lee Sykes' support obligation is
insufficient to allow him to claim the child as his dependent.
Therefore, he would not be eligible for the increased allowance. Brenda
J. Sykes, however, would be entitled to the additional allowance, so
long as she is providing substantial support to the child, as appears to
be the case. See Sergeant Leocadia Doerfer, USAF, B-189973, supra.
Concerning the "with dependent" rate quarters allowance payments
which have been made to Lee Sykes since January 1984, it appears that
Brenda attempted to return the extra $25 child support she received for
January but it was returned to her by Lee. It is not clear how much she
received for February and March, but she indicates that in April she
began receiving a $125 monthly allotment. In any event, since Brenda
Sykes made a good-faith effort to return the extra amounts and made it
clear that she did not consider the amount of Lee Sykes' support
obligation increased, Lee Sykes' support obligation for those months
should be considered to be only $100 per month. Therefore, Brenda is
entitled to the "with dependent" allowance for that period, not Lee.
The finance officer should make payment to Brenda accordingly, and take
appropriate collection action from Lee.
(1) The request was submitted by Captain R. D. Watson, USAF,
Accounting and Finance Officer, Headquarters 438th Military Airlift
Wing, McGuire Air Force Base, New Jersey. It was approved by the
Department of Defense Military Pay and Allowance Committee as Air Force
submission number DO-AF-1448.
B-214561.2(2), 64 Comp. Gen. 606
To Frederick R. DeCesaris, United States District Court for the
District of Rhode Island, June 11, 1985
Pursuant to the request of an accountable officer for whom relief was
denied under 31 U.S.C. 3527 (1982), and in accordance with the
requirements of 5 U.S.C. 5512 (1982), General Accounting Office reports
the balance claimed due against the accountable officer to the Attorney
General of the United States in order that legal action be instituted
against the officer.
Accountable officers are automatically and strictly liable for public
funds entrusted to them. When a loss occurs, if relief pursuant to an
applicable statute has not been granted, collection of the amount lost
by means of administrative offset is required to be initiated
immediately in accordance with 5 U.S.C. 5512 (1982) and section 102.3 of
the Federal Claims Collection Standards, 4 CFR ch. II (1985). Should
the accountable officer request it, GAO is required by section 5512 to
report the amount claimed to the Attorney General, who is required to
institute legal action against the officer. There is no discretion to
not report the debt or to not sue the officer; the act is mandatory.
Collection by administrative offset under section 5512 should proceed
during the pendency of the litigation, but may be made in reasonable
installments, rather than by complete stoppage of pay. Collection of
the debt prior to or during the pendency of litigation does not present
the courts with a moot issue since the issue at trail concerns the
original amount asserted against the officer, not the balance remaining
to be paid.
This responds to your letter of September 4, 1984, concerning the
Federal Government's claim against you and over the unexplained loss of
$4,301 entrusted to persons under your supervision. This matter was
discussed in our decision, 63 Comp. Gen. 489 (1984). As you know, our
decision declined to relieve you from liability for that loss. In your
letter, you requested that the General Accounting Office report this
claim to the Attorney General of the United States, pursuant to 5 U.S.C.
Section 5512(b) (1982), so that this matter may be adjudicated in the
Federal courts. By letter of today's date (copy enclosed), we have
complied with your request. Presumably, you will be hearing from an
appropriate official of the Department of Justice shortly.
In your letter, you stated that it was your understanding, based on
information from officials of the Administrative Office of the United
States Courts, that no deductions from your paycheck may be made to
collect this claim until the matter has been fully litigated. This
information is not correct. Under the law, accountable officers are
automatically and strictly liable for funds entrusted to them. See,
e.g., Serrano v. United States, 612 F.2d 525, 528 (Ct. Cl. 1979); 54
Comp. Gen. 112, 114 (1974). The provisions of section 5512 reflect this
principle. That act provides:
(a) The pay of an individual in arrears to the United States
shall be withheld until he has accounted for and paid into the
Treasury of the United States all sums for which he is liable.
(b) When pay is withheld under subsection (a) of this section,
the General Accounting Office, on request of the individual, his
agent, or his attorney, shall report immediately to the Attorney
General the balance due; and the Attorney General, within 60
days, shall order suit to be commenced against the individual. 5
U.S.C. Section 5512 (1982).
Previous decisions of the Comptroller of the Treasury, the Attorney
General of the United States, and the Comptroller General, all indicate
that the provisions of this act are mandatory, may not be waived, and
require the Government to immediately commence collection of an
accountable officer's debts, without regard to the pendency of
litigation on the underlying indebtedness. 4 Op. Att'y Gen. 33 (1842);
10 Comp. Dec. 288 (1903); 39 Comp. Gen. 203 (1959). See also Al Parker
v. United States, 187 Ct. Cl. 553, 559 (1969); Serrano v. United
States, 612 F.2d at 529.
Originally, both the Comptroller of the Treasury and the Attorney
General held that section 5512 requires the complete stoppage of an
accountable officer's pay until the debt has been paid in full. See,
e.g., 21 Op. Att'y Gen. 420 (1831); 8 Comp. Dec. 101 (1901). This was
held to be the case, regardless of the hardship that would be imposed on
the officer. 2 Op. Att'y Gen. at 425; 8 Comp. Dec. at 101. For a
variety of reasons, GAO does not adopt that position. Instead, we have
held that installment deductions may be allowed in place of a complete
stoppage of pay. 2 Comp. Gen. 689, 691-92 (1923); B-180957-O.M., Sept.
25, 1979. Cf. 19 Comp. Gen. 312 (1939).
However, there is no requirement that suit be filed or completed
prior to the initiation or completion of collection by means of offset.
4 Op. Att'y Gen. 33; 17 Op. Att'y Gen. 30 (1881). Compare Serrano v.
United States, 612 F.2d at 529. In fact, it has been held in the past
that section before 5512 contemplates the initiation of collection by
offset before litigation is instituted against the officer (4 Op. Att'y
Gen. at 35-36; 17 Op. Att'y Gen. at 31; A-2423, et al., May 31, 1928;
38 Comp. Gen. 731 (1959), and that in order to invoke the provisions of
section 5512(b), an accountable officer must submit evidence to show his
pay has actually been stopped (A-20796, Dec. 9, 1927). Finally, it has
been held that, even after litigation has been initiated, collection of
a debt by offset should continue. A-22201, Feb. 15, 1929; B-8188,
Sept. 27, 1941. This construction of section 5512 does not present the
courts with litigation of "moot" issues since the issues at trial under
section 5512(b) concerns not the collection of any amounts remaining to
be paid, but rather, the amount and validity of the Government's total
original claim on that debt. A-11893-O.M., July 20, 1936. Should the
officer win in court, the amount withheld is refunded to him. A-22201,
June 1, 1928; A-11893-O.M., July 20, 1936.
Based on the foregoing precedents and principles, we are advising the
Administrative Officer of the United States Courts that it should
immediately begin collection of your debt by means of salary offset, as
required by 5 U.S.C. Section 5512(a). In view of the statutory
provision in section 5512(b) for adjudication of this matter in the
courts (as well as the fact that you participated, through written
submissions, in our original decision on this matter, and you have not
disputed the existence or amount of the loss with which you are charged,
or requested reconsideration of the legal conclusions of this Office's
decision), there is no need to afford you with an additional hearing on
this matter. See Federal Claims Collection Standards (FCCS), 4 C.F.R.
Sections 101.4 102.3(b)(2)(ii) (1985). Otherwise, collection should
proceed generally in accordance with the provisions of the FCCS,
including those provisions which include the assessment of interest and
other charges. See FCCS, 4 C.F.R. Section 102.13, implementing 31
U.S.C. Section 3717 (1982). Of course, these conclusions do not
preclude you from pursuing any other legal rights or remedies available
to you. See, for example, Louisel v. Mortimer, 277 F. 882 (5th Cir.
1922).
Should you have any questions in this matter, please do not hesitate
to contact Mr. Neill Martin-Rolsky of my staff, at 202-275-5544.
B-214561.2(1), 64 Comp. Gen. 605
To the Honorable Edwin Meese, III, Attorney General of the United
States, June 11, 1985
Pursuant to the request of an accountable officer for whom relief was
denied under 31 U.S.C. 3527 and in accordance with the requirements of 5
U.S.C. 5512, General Accounting Office reports the balance claimed due
against the accountable officer to the Attorney General of the United
States in order that legal action be instituted against the officer.
Mr. Frederick R. DeCesaris has requested, by letter dated September
4, 1984 (copy enclosed), that the General Accounting Office report to
you that the amount of $4,301 plus interest (as required by 31 U.S.C.
Section 3717 (1982) is claimed due and asserted against him by the
United States. This request was made by Mr. DeCesaris pursuant to 5
U.S.C. Section 5512(b) (1982) so that suit may be instituted against him
to adjudicate the matter in the appropriate United States district
court.
Mr. DeCesaris is the clerk of the United States district court for
the District of Rhode Island. The amount claimed represents the total
amount of and balance due on funds entrusted to and unaccounted for by
persons working under the direct supervision of Mr. DeCesaris. The
facts and circumstances of this loss are discussed in some detail in our
decision 63 Comp. Gen. 489 (1984) (copy enclosed). Under the law,
accountable officers are automatically and strictly liable for funds
entrusted to them. See Serrano v. United States, 612 F.2d 525, 528 (Ct.
Cl. 1979). Our decision concerned a request for relief under 31 U.S.C.
Section 3527 (1982) submitted by the Administrative Officer of the
United States Courts on behalf of Mr. DeCesaris and two of his
subordinates. We declined to grant relief to Mr. DeCesaris.
It has been the position of prior Attorneys General that the
provisions of 5 U.S.C. Section 5512 are mandatory. The collection of
this debt is required to be undertaken immediately, by means of salary
offset. Moreover, should the accountable officer request it, GAO is
required to report his debt to the Attorney General, who is required to
institute litigation against the officer within 60 days. E.g., 4 Op.
Att'y Gen. 33 (1842) (the act "requires" the accounting officers of the
United States to initiate administrative offset, and "there shall be no
discretion to sue or not to sue" on an account reported to the Attorney
General pursuant to the request of the accountable officer). Cf. 10
Comp. Dec. 288 (1903); 39 Comp. Gen. 203 (1959).
By letter of today's date, we are advising Mr. DeCesaris and his
agency of this referral and the requirement that offset against Mr.
DeCesaris' pay be effected during the pendency of this litigation. A
copy of that letter is enclosed. Also enclosed, are copies of all the
relevant materials in our files pertaining to this matter. Should you
have any questions on this matter, please feel free to have your staff
contact Mr. Neill Martin-Rolsky of my staff, at 202-275-5544.
B-218404.2, B-218474, 64 Comp. Gen. 603
Matter of: Richard Sanchez Associates, June 10, 1985
Agency decision to terminate negotiations with small business offeror
under solicitation for architect-engineer services need not be referred
to Small Business Administration under certificate of competency
procedures since agency decision is based on evaluation of offeror's
qualifications relative to other offerors as prescribed by Brooks Act,
40 U.S.C. 541-544, not a negative responsibility determination.
Richard Sanchez Associates protests the decision by the Corps of
Engineers to terminate negotiations with the firm under two
solicitations, request for proposals (RFP) No. DACA63-84-R-0107, for
engineering design work for dormitory renovation at Bergstrom Air Force
Base, Texas, and RFP No. DACA63-84-R-0022, under which the agency would
award three indefinite delivery contracts for multidiscipline design
work at various military installations in Texas and Louisiana. Both
solicitations were issued under the Brooks Act, 40 U.S.C. Sections
541-544 (1982), which prescribes procedures for acquiring
architect-engineer (A-E) services. The protester, a small business,
contends that the termination of negotiations with it constituted a
negative responsibility determination which should have been referred to
the Small Business Administration (SBA) for a certificate of competency
(COC) determination under 15 U.S.C. Section 637(b)(7)(A) (1982). We
deny the protests.
Under the procedures for acquiring A-E services set out in 40 U.S.C.
Sections 541-544, the contracting agency first must publicly announce
its requirements. An evaluation board set up by the agency then
evaluates the A-E performance data and statements of qualifications
already on file, as well as those submitted in response to the specific
project. Discussions then must be held with "no less than three firms
regarding anticipated concepts and the relative utility of alternative
methods or approach" for providing the services requested. The board
then prepares a report for the selection official, ranking in order of
preference no fewer than the three firms considered most qualified. The
selection official makes the final choice of the three most qualified
firms and negotiations are conducted with the highest ranking firm. If
the contracting officer is unable to reach agreement with that firm on a
fair and equitable price, negotiations are terminated and the
second-ranked firm is invited to submit its proposed fee.
RFP No. DACA63-84-R-0107 was announced in the Commerce Business Daily
(CBD) on October 9, 1984. On December 27, the protester was informed
that its was selected as the most qualified firm for the project. The
agency's evaluation was based on information in the standard forms (SF)
254 and 255 /1/ submitted by the protester regarding the experience and
size of the firm and its capacity to accomplish the work in the
specified time. A predesign conference was held on January 24, 1985,
and the protester submitted its proposal on February 15.
On February 18, the agency project manager received information from
another branch in the agency indicating that the protester did not have
seven employees as shown on the SF 255 submitted in response to the RFP.
In a telephone conversation with the project manager on February 21,
the protester confirmed that his firm had three technical employees,
himself, a draftsman and a junior architect. During a visit to the
protester's office on February 22, the agency's field project manager
noted that there were only two technical employees present, the
protester and a draftsman, and that the protester had stated that he
planned to hire two more architects to work on the agency's project at
Bergstrom Air Force Base.
Based on this information, the agency decided that the SF 255 did not
accurately reflect the current composition of the protester's firm. In
view of the actual personnel capacity of the firm, the agency determined
that the protester was not the most qualified offeror and terminated
negotiations with the firm.
The second solicitation, RFP No. -0022, was announced in the CBD on
November 16, 1984. The agency determined that the protester was one of
the three highest ranking offerors and, by letter dated December 31,
notified the protester that he would receive one of the three indefinite
delivery contracts to be awarded under the RFP.
The SF 255 submitted by the protester on November 23 indicated a
total of 13 employees in the firm. During a visit to the firm on
January 11, 1985, however, the project manager found a total of only
three technical personnel -- the protester, a draftman, and a junior
architect. Based on the actual personnel capacity of the firm, the
agency decided that the protester was not among the three most qualified
firms for the project and terminated negotiations with the firm.
The Brooks Act specifically provides for termination of negotiations
with the most qualified firm if the contracting agency and the firm are
unable to reach an agreement on price. See 40 U.S.C. Section 544(b).
Here, in comparison, the agency discussed during negotiations that its
original assessment of the protester's qualifications was based on
inaccurate information. It then decided that negotiations with the
protester were no longer appropriate. The protester maintains that the
agency's decision to terminate negotiations under both RFPs constituted
a determination that the protester was not a responsible offeror, since
the firm is a small business, the protester argues, the agency was
required to forward its determination to the SBA for a final decision on
the protester's responsibility under the COC procedures. We disagree.
There is no indication in the statute which prescribes the procedures
for acquiring A-E services or its legislative history that the ranking
of small business firms competing for an A-E procurement was intended to
be referred to the SBA. See 40 U.S.C. Sections 541-544; S. Rep. No.
1219, 92nd Cong., 2d Sess. (1972). To the contrary, under the statutory
scheme it is the contracting agency which is authorized to compare the
relative merits of the participating A-E firms in the context of the
particular services, required by the agency. Further, unlike a
responsibility determination, which concerns whether a bidder has the
minimum capability to perform as required, the agency's evaluation in an
A-E procurement focuses on each offeror's capability and qualifications
relative to the other offerors. In an analogous context, we have held
that it is appropriate in negotiated procurements to use
responsibility-related factors in making relative assessments of the
merits of competing proposals; if a small business is found deficient
in such situations, COC procedures do not apply. Electrospace Systems,
Inc., 58 Comp. Gen. 415, 425 (1979), 79-1 CPD Paragraph 264; Anderson
Engineering and Testing Co., B-208632, Jan. 31, 1983, 83-1 CPD Paragraph
99.
We conclude that the agency was not required to submit its decision
to terminate negotiations with the protester to the SBA for a
responsibility determination.
The protests are denied.
(1) SF 254 is the statement of qualifications submitted annually by
firms wishing to be considered for A-E contracts. Among other things,
it requires each firm to indicate its total number of employees by
discipline. SF 255, a supplement to SF 254, lists a firm's additional
qualifications with respect to the specific project. It requires the
firm to list by discipline the number of personnel presently employed.
B-215738, 64 Comp. Gen. 593
Matter of: Galaxy Custodial Services, Inc.; Government Contractors
Inc.; Trinity Services, Inc., June 10, 1985
One-hundred-percent performance bond can be required for janitorial
services contract which involves cleaning of considerable amount of
government property, including rooms containing electronic equipment and
spacecraft, and where unacceptable or late performance would be
intolerable. Such a properly justified bonding requirement does not
unreasonably restrict competition or improperly prejudice small
business' bonding capacity where 12 bids received on the IFB.
Protester has not met burden of proving that specification for
janitorial services is deficient because estimated quantities or
"mandays" needed to clean certain buildings are consistent with sizes of
buildings.
General unsupported protest after bid opening that invitation for
bids/(IFB) is not "definite," "simple," "comprehensible," or
"understandable" and, therefore, violative of Federal Acquisition
Regulations does not state grounds of protest cognizable under Bid
Protest Procedures and is untimely in any case.
Protester, which alleges that agency improperly failed to circulate
its pre-bid-opening protest to other prospective bidders for comments,
is not "interested party" under Bid Protest Procedures to raise this
issue, since protest is essentially on behalf of these other bidders.
In any case, the protester has not indicated how it was prejudiced by
this alleged failure.
Agency need not perform preaward survey on non-responsive bidders.
Where an invitation for bids for janitorial services requires bidders
to submit with their bids a base rate necessary for the operation of the
Economic Price Adjustment clause, which provides for upward and downward
price adjustments based on fluctuations from a based rate quoted in the
successful bid, bids not quoting this rate must be rejected as
nonresponsive. Failure to provide such information at bid opening is
material because the legal rights of the contractor and government are
affected.
An Economic Price Adjustment clause in an invitation for bids for
janitorial services which provides for price adjustments based on
fluctuations from a base rate quoted in the successful bid may not
adequately protect the government's legal rights. Although this base
rate is supposed to be based on labor rates on which the bid price is
based, there is an economic incentive for a bidder to submit a base rate
less than that on which it based its bid price to enhance the
possibility of an upward price adjustment and minimize the possibility
of a downward price adjustment. In this case, the bid base rate of the
low responsive bidder is significantly lower than next low bidder
although the difference between the bids is not significant;
consequently, verification of this base should be made before award.
Bid, which quoted monthly unit prices instead of the requested
man-hour unit prices on an invitation for bids for janitorial services,
may be corrected as a clerical error obvious from the face of the bid,
where the unit prices quoted are one-twelfth of the extended yearly
prices and the man-hour unit prices are easily ascertainable by dividing
the total yearly prices by the estimated man-hour quantities stated in
the invitation for bids.
Galaxy Custodial Services, Inc., Government Contractors Inc. (GCI),
and Trinity Services, Inc., protest the proposed award under invitation
for bids (IFB) F08650-84-B-0011 to American Maintenance Company. This
IFB, issued by the Air Force, solicited both unit and extended
fixed-price bids for six line items for the performance of janitorial
services at the Cape Canaveral Air Force Station. The solicited
services covered the period October 1, 1984, to September 30, 1985, with
two priced, evaluated 1-year options. Only one award is to be made
under the IFB.
The IFB, as amended, contains an Economic Price Adjustment (EPA)
clause which required the bidders to provide certain information with
their bids. No award has been made.
We dismiss Galaxy's protest in part and deny the remainder. We deny
GCI's and Trinity's protests.
On January 25, 1984, the IFB was issued, followed by a number of
amendments. On July 9, 1984, Galaxy protested to this Office. This
protest concerns the IFB requirement for a performance bond and certain
alleged inconsistencies in the IFB concerning "manday" requirements and
the sizes of the buildings to be serviced.
While this protest was pending 12 bids were received and opened on
July 24, 1984. The four lowest bids, including option prices, were:
Galaxy ....... $5,314,920.00
GCI .......... 6,085,510.56
American ..... 6,529,896.00
Trinity ...... 6,532,908.00
At bid opening, the Air Force specifically noted that Galaxy and GCI
had not supplied the information requested by the EPA clause, and that,
therefore, these bids were nonresponsive and rejected. In addition,
certain discrepancies were noted in the unit prices of some line items
in American's bid. The Air Force subsequently decided that American had
made a mistake in these unit prices which could be corrected as an
obvious clerical error apparent from the face of the bid. Therefore,
American is considered by the Air Force to be the successful bidder.
On July 31, 1984, Trinity protested an award to any firm other than
itself. Trinity's primary argument was that American's mistake should
not be corrected, but that American should be permitted to withdraw its
bid. On August 1, 1984, GCI protested the rejection of its bid as
nonresponsive. GCI argues that its failure to furnish the requested EPA
clause information could be waived as a minor informality. On August 3,
1984, Galaxy submitted a number of additional protest grounds as
discussed below.
Galaxy timely protests the IFB requirement for a 100-percent
performance bond. Galaxy notes that the IFB is set aside for small
business and alleges that if this large performance bond is required, it
would be virtually impossible for a small business to secure bonding on
other procurements.
Although a bond requirement may in some circumstances result in a
restriction of competition, it nevertheless can be a necessary and
proper means of securing to the government fulfillment of the
contractor's obligations under the contract in appropriate
circumstances. Renaissance Exchange, Inc., B-216049, Nov. 14, 1984,
84-2 C.P.D. Paragraph 534. Bonds are required for construction
contracts by statute. Under Defense Acquisition Regulation (DAR)
Section 10-104.2 reprinted in 32 C.F.R. pts. 1-39 (1984), performance
bonds may be required on nonconstruction contracts "when the terms of
the contract provide for the contractor to have the use of government
material, property or funds and further provides for the handling
thereof by the contractor in a specified manner" or for financial
reasons where it "is necessary to protect the interests of the
government."
This contract involves the use and cleaning of a considerable amount
of government property, including rooms which contain highly
sophisticated electronic equipment and spacecraft, where a considerable
degree of care and specialization is required because of the need for a
"particle free environment." The Air Force indicates that unacceptable
or late performance on this contract cannot be tolerated because that
could delay missile launches or contaminate missile "payloads."
We have held that where a decision to require bonding on
nonconstruction contracts is reasonable and made in good faith, we will
not disturb such a determination, and that the protester bears the
burden of demonstrating that the determination is unreasonable or in bad
faith. K. H. Services, B-212172, Sept. 15, 1983, 83-2 C.P.D. Paragraph
329; Wright's Auto Repair & Parts, Inc., B-210680.2, June 28, 1983,
83-2 C.P.D. Paragraph 34. A determination that continuous operations
are absolutely required, as was effectively made here, itself is a
reasonable basis for requiring a performance bond. Renaissance
Exchange, Inc., B-216049, supra. Moreover, 12 bids, including Galaxy's,
were received from small businesses under the IFB. This is strongly
indicative that this was not an unreasonable restriction of competition.
See Executive-Suite Services, Inc., B-212416, May 29, 1984, 84-1 C.P.D.
Paragraph 577; Cantu Services, Inc., B-208148.2, Dec. 6, 1982, 82-2
C.P.D. Paragraph 507. Consequently, from our review, we believe that
the Air Force bond requirements were justified and not unreasonably
restrictive of competition. Galaxy's protest on this point is denied.
Galaxy also protests that a bidder does not know, when it bids on the
IFB, the amount of the performance bond required because the contract
price is adjusted biweekly as payments are made. We find no ambiguity
as to the amount of the 100-percent performance bond that will be
required in this case, the total bid price for the basic 1-year contract
period. The contract price does not change based on the biweekly
payments as alleged by Galaxy. Because some of the line items are based
on estimated quantities, the contract price may eventually change if the
estimated quantities turn out to be different from the quantities
eventually performed. However, this change in contract value would not
affect the amount of the initial 100-percent performance bond.
Galaxy also protests that the IFB was deficient because certain
specified "mandays" needed to clean certain buildings are inconsistent
with the sizes of these buildings. Galaxy cites a number of examples to
support this allegation. However, the Air Force indicates there are no
inconsistencies because some of the buildings are open spaces (hangars)
and some are offices. It is apparent that more square feet can be
cleaned in open spaces than in offices in the same period of time. From
our review, we do not believe Galaxy has met its burden of showing that
the estimated "mandays" or building square footage is erroneous or
inconsistent. See Gulf Coast Defense Contractors, Inc., B-212641, Feb.
28, 1984, 84-1 C.P.D. Paragraph 243. Consequently, Galaxy's protest on
this point is denied.
In its August 3, 1984, protest, Galaxy contends that the IFB was not
"definite," "simple," "comprehensible," or "understandable" and that,
therefore, it violates the Federal Acquisition Regulation (FAR). Galaxy
only expanded on this protest basis by referencing the various
nonresponsive bids and the proposed award to American. These general
unsupported assertions do not state grounds of protest cognizable under
our Bid Protest Procedures. Alice Roofing, B-216277, Sept. 18, 1984,
84-2, C.P.D. Paragraph 321; John Crane Houdaille, Inc., B-212829.2,
Dec. 16, 1983, 83-2 C.P.D. Paragraph 698. In any case, these grounds of
protest are not timely under our Bid Protest Procedures, since they were
not asserted prior to the bid opening data, 4 C.F.R. 21.2(b)(1) (1984).
Galaxy's protest on this basis is dismissed.
Galaxy also protests that agency improperly failed to circulate its
initial protest to all prospective bidders prior to bid opening so they
could submit relevant comments to this Office. Section 21.1(a) of our
Bid Protest Procedures, 4 C.F.R. Section 21.1(a) (1984), requires that
in order for a protest to be considered by our Office, a protester must
be an "interested party." This protest basis is essentially on behalf of
other potential bidders, which could be adversely affected by the Galaxy
protest. These other firms would be the proper interested parties to
complain about their failure to be notified of Galaxy's protest.
Superior Boiler Works, Inc.; Conservco, Inc., B-215836, et al., Dec. 6,
1984, 84-2 C.P.D. Paragraph 633. Under these circumstances, Galaxy's
protest on this point is dismissed. In any case, Galaxy has not
indicated how it was prejudiced by a failure of the agency to notify
other potential bidders of its protest. See Searle CT Systems,
B-191307, June 13, 1978, 78-1 C.P.D. Paragraph 433.
Galaxy also protests that the Air Force is reneging on its earlier
commitment that it would perform a preaward evaluation of the three low
bidders to determine their ability to perform the contract work. As
indicated below, Galaxy's bid was properly found to be nonresponsive.
No useful purpose is served in reviewing a nonresponsive bidder's
responsibility. Consequently, the Air Force's failure to perform such a
survey on Galaxy was entirely appropriate. See ITE Imperial
Corporation, Subsidiary of Gould, Inc., B-190759, Aug. 14, 1978, 78-2
C.P.D. Paragraph 116 at 16; Seal-O-Matic Dispenser Corporation,
B-187199, June 7, 1977, 77-1 C.P.D. Paragraph 399 at 6.
Galaxy has never specifically protested the Air Force's rejection of
its bid as nonresponsive for failing to supply the information requested
by the EPA clause. However, it has timely protested the Air Force's
failure to provide it with written reasons as to why its bid was
rejected. The Air Force indicates that Galaxy's representative was at
bid opening when the contracting officer announced that Galaxy's bid was
nonresponsive. Also, the Air Force correctly indicates that no
regulation requires such a written notification. Consequently, Galaxy's
protest on this point is denied.
Galaxy's and GCI's bids were rejected as nonresponsive for failing to
provide certain information requested by the EPA clause. GCI timely
protested this determination. Since the reasons for bid rejection are
the same for both Galaxy's and GCI's bids, the following analysis is
applicable to both bids.
The EPA clause essentially provides a system for postaward price
adjustments based on particular price fluctuations. The basic purpose
of an EPA provision is to protect the government in case of a decrease
in the cost of labor or material and the contractor in the event of an
increase. Sentinel Electronics, Inc., B-212770, Dec. 20, 1983, 84-1
C.P.D. Paragraph 5; American Transparents Plastic Corporation,
B-210898, Nov. 8, 1983, 83-2 C.P.D. Paragraph 539.
The EPA clause in this case was particularly complex and was included
in an amendment to the IFB pursuant to a special deviation to the DAR.
Under this clause, bidders were requested to provide certain data with
their bids and were cautioned as follows:
Again, Bidders are reminded to complete the blanks which appear
in * * * the revised clause. Failure by the Bidder to furnish the
information which is required to be shown in these blanks shall
cause the Bid to be considered nonresponsive and it shall be
rejected. If any Bidder has any questions regarding this clause,
he or she should contact the Buyer * * * .
The information solicited was a "Base Composite Weighted Average
Labor Rate" for the first option year (hereinafter "Base Rate") and
"Base Quantity of SCA (Service Contract Act) -- Employee Direct Labor
Hours" (hereinafter "Base Hours") for both the first and second option
years. No EPA clause information was solicited for the basic contract
period because there was no provision for an EPA price adjustment for
that period. The IFB defines the "Base Rate" as the result of dividing
the total bid SCA-employee direct labor dollars, including fringe
benefits, for the basic contract period by the total SCA-employee direct
labor hours bid for that period. The Base Hours to be furnished with
the bid are the labor hours bid for SCA employees for each option
period. Presumably, bidders are supposed to calculate the Base Rate and
Base Hours from their individual bid worksheets on which they based
their bid and option prices.
The EPA clause provides for both upward and downward price
adjustments for the option periods if two separate "triggerband
arrangements" are satisfied. That is, a price adjustment would only be
called for if (1) the actual composite weighted average labor rate (the
labor dollars actually incurred divided by the direct labor hours for
the option period) (hereinafter "Actual Rate") differed by one percent
or more from the Base Rate bid and (2) if the average Consumer Price
Index for Urban Wage Earners and Clerical Workers for the initial
contract period differed by one percent or more from the average index
rate for the option period. If both these thresholds are satisfied, the
EPA clause then provides for an upward or downward price adjustment.
The amount of this adjustment is based on calculation involving the Base
Rate and the Actual Rate and the Base Hours or actual hours worked, or
the aforementioned consumer price indices and Base or actual hours
worked, whichever is less.
Where an IFB containing an EPA clause clearly and unequivocably
advises that certain information necessary to the implementation and
operation of the EPA clause is required with a bid in order for the bid
to be considered responsive, a bidder which fails to provide such
information by bid opening must be rejected as nonresponsive. Patriot
Oil, Inc., B-191607, Sept. 7, 1978, 78-2 C.P.D. Paragraph 177. Contrast
Ashland Chemical Company, B-206882, Jan. 18, 1983, 83-1 C.P.D. Paragraph
57, and Roarda, Inc., B-204524.5, May 7, 1982, 82-1 C.P.D. Paragraph
438, where low bids were properly considered responsive, despite failing
to provide certain EPA clause information, because the IFB's did not
clearly require the absent information. In this case, the IFB clearly
requires specific information with the bid to implement the EPA clause
and warns that the bid will be rejected as nonresponsive if it does not
do so.
GCI argues that the failure to provide the EPA clause information
does not relate to bid responsiveness because the requested information
in no way affects what the bidder is bound to perform or any other
aspect of the bidder's compliance with the IFB provisions. GCI argues
that a matter which does not relate to bid responsiveness cannot be used
to reject bids as nonresponsive. However, we have consistently
recognized that a bid is also nonresponsive if a bid effectively limits
the bidder's liability to the government under the IFB. See
Hewlett-Packard Company, B-216530, Feb. 13, 1985, 85-1 C.P.D. Paragraph
193. The EPA clause is a material contract provision which
significantly affects the legal rights of the government and the legal
obligations of the contractor. Aqua-Trol Corp. B-191648, July 14, 1978,
78-2 C.P.D. Paragraph 41; Patriot Oil, Inc., B-191607, supra.
GCI argues that the only result of not furnishing the Base Rate and
Base Hours for the EPA clause would be that a contractor may not then be
entitled to a price adjustment under the EPA clause. However, the most
notable material legal obligation of the contractor to the government
under the EPA provision is the possibility of a downward contract price
adjustment. Even assuming that the possibility of a downward adjustment
is remote in this case, we have held that if the government is precluded
from making such an adjustment, this would materially change the legal
rights of the parties. See Aqua-Trol Corporation, B-191648, supra
(failure to acknowledge IFB amendment adding an EPA clause cannot be
waived as minor informality).
Further, in this case, the EPA price adjustment figures were not to
be considered in determining the low bid. In view of this fact, GCI
cites Roarda Inc., B-204524.5, supra, to support its position that its
bid is responsive. GCI argues that Roarda holds that the EPA price
adjustment must be part of the agency's determination of the low bid
price in order to affect bid responsiveness. In Roarda, the low bid was
found to be responsive despite failing to provide certain information
relating to operation of the EPA clause. We did mention in that
decision that the EPA price adjustment data was not to be part of the
determination of the low bid. However, as we indicated in Ashland
Chemical Co., B-206882, Supra, at 3-4, the Roarda case did not turn on
this point; rather, we stated that Roarda turned on the fact that the
EPA clause did not require the missing information to be supplied with
the bid so the bid could not be rejected as nonresponsive.
GCI argues that supplying the Base Hours and Base Rate with the bid
serves no useful purpose, since actual option hours can be used under
the EPA clause in lieu of the Base Hours to allow the clause to operate
and since the Base Rate is easily determinable by a simple mathematical
exercise. We will not discuss the matter of the failure to provide the
Base Hours since the omission of the Base Rate with the bid would
clearly render a bid nonresponsive as discussed below.
In this case, the Base Rate to be supplied by the bidder with its bid
is essential both for determining whether the "triggerband" percentage
differential, which would call for a price adjustment, has been
satisfied and the amount of the price adjustment. The failure to supply
a Base Rate means that the specified EPA clause price adjustment
mechanism cannot operate. Cost of living index changes could preclude
or limit price adjustments under the EPA clause. However, in order for
the EPA clause to operate as advertised, the Base Rate is necessary.
Further, the allegedly simple mathematical exercise to determine the
Base Rate can only be done by referring to the bidder's workpapers used
to prepare its bid, information not submitted with the bid. Since the
matter is material and bidders were clearly advised of the need to
supply the Base Rate with the bid, the failure to provide such
information with the bid affects the legal rights of the parties, such
that the acceptance of a bid without this information would, by its
nature, be prejudicial to the other bidders. Hewlett-Packard Company,
B-216530, supra; Aqua-Trol Corp., B-191648, supra. Under the
circumstances, it would be impermissible to allow a bidder to make its
bid responsive by submitting this information after bid opening. See
Hewlett-Packard Co., B-216530, supra.
In view of the foregoing, Galaxy's and GCI's bids were properly
rejected as nonresponsive and GCI's protest is denied.
Notwithstanding the foregoing, we are concerned that the EPA clause
in this IFB would permit an award which would not adequately protect the
government's legal rights under this clause. See Hampton Metropolitan
Oil Co.; Utility Petroleum, Inc., B-186030, et al., Dec. 9, 1976, 76-2
C.P.D. Paragraph 471. Specifically, there would seem to be some
economic incentive for a bidder to submit a Base Rate less than that on
which it actually based its bid with the hope of enhancing the
possibility of an upward price adjustment under the EPA clause and
minimizing the possibility of a downward price adjustment.
In this case, American has proposed a significantly lower Base Rate
and less Base Hours than Trinity, although the difference between their
bid prices is not significant. Further, although American submitted its
bid worksheets to support its mistake in bid claim, the basis for the
Base Rate quoted in American's bid is not apparent from those
worksheets. An inaccurate Base Rate could prejudice the Government's
rights under the EPA clause. See Holland Oil Co., Armed Services Board
of Contract Appeals (ASBCA), No. 26603, June 21, 1982, reprinted in 82-1
BCA Paragraph 15908 (CCH 1982); Fermont Division, Dynamics Corporation
of American, ASBCA No. 21949, March 19, 1979, reprinted in 82-1 BCA
Paragraph 13774 (CCH 1982), where the government was held bound to
erroneous EPA index rates by virtue of acceptance of the bids.
Therefore, we believe that the Air Force, in determining American's
responsibility, should take whatever steps are appropriate to satisfy
itself that American's Base Rate and Base Hours are not too low, such
that the government's rights under the EPA clause would be prejudiced,
before it makes an award to American. See Hampton Metropolitan Co.,
Inc.; Utility Petroleum, Inc., B-188030, et al., supra. If American's
Base Rates or Base Hours are so unarguably false as to amount to fraud,
it would be appropriate to reject its bid.
Trinity protests any award to a bidder other than itself. Trinity's
protest concerns the discrepancies between American's unit prices and
the total extended prices for a number of the IFB line items.
American's bid for the basic contract period was as follows (American
filled in blanks):
TABLE OMITTED
FAR, 48 C.F.R. Section 14.406-2 (1984), provides that "any clerical
mistake, apparent on its face in the bid, may be corrected by the
contracting officer before award." American claims that it made a
correctable clerical error by quoting monthly unit prices rather than
man-hour unit prices for line items 01AC, 01AD, 01AE, and 01AF, but that
the total extended amounts for those line items were correct. Trinity
alleges that it would be improper to permit correction of American's bid
because this would prejudice the competitive bid system and Trinity, but
that American should be permitted to withdraw its bid.
In this case, the unit prices for the line items in question are
exactly one-twelfth of the total yearly amount and are considerably more
than what a man-hour unit price would be. Consequently, it is apparent
that these unit prices are monthly prices. Moreover, the man-hour, unit
prices for these line items are easily ascertainable simply by dividing
the total line item price by the stated estimated man-hour quantity. In
this case, the rounded-off unit prices would be $11.60 per man-hour for
line item 01AC, $12.33 per man-hour for line item 01AD, $14.97 per
man-hour 01AF. Under these circumstances, we believe that correction of
American's unit prices is proper. See Atlantic Maintenance Company, 54
Comp. Gen. 686, (1975), 75-1 C.P.D. Paragraph 108 (bid which erroneously
quoted monthly unit price for a line item instead of the requested
square footage unit price may be corrected by dividing the total line
item price by the stated estimated square footage); Dependable
Janitorial Service and Supply Co., B-188812, July 13, 1977, 77-2 C.P.D.
Paragraph 20 (bid which erroneously quoted square footage price for line
item instead of the requested monthly unit price may be corrected by
dividing the total yearly price for the line item by 12); Federal
Aviation Administration -- Bid Correction, B-187220, Oct. 8, 1976, 76-2
C.P.D. Paragraph 326 (bid which erroneously inserted obviously excessive
linear foot unit price on one line item may be corrected by dividing the
total line item price by the stated estimated linear footage).
Trinity references the language in standard form 33A which had been
incorporated by reference into the IFB, which states "in case of
discrepancy between a unit price and extended price, the unit price will
be presumed to be correct, subject, however, to correction to the same
extent or in the same manner as any other mistake." However, we have
held that extended bid prices should govern, where, as here, the unit
prices are clearly erroneous, even where this language is included in
the IFB. Miller Disposal Services, Inc., B-205715, June 7, 1982, 82-1
C.P.D. Paragraph 543 at 5-6.
Trinity cites 35 Comp. Gen. 33 (1955) and RAJ Construction, Inc.,
B-191708, Mar. 1, 1979, 79-1 C.P.D. Paragraph 140, to support its
position that it would be improper to permit bid correction in this
case. However, in both those cases the low bidder submitted obviously
"ridiculously" low unit prices for one IFB line item and the bidders
then attempted to refuse an upward correction of these unit prices
because the correction would no longer make them the low bidder. That
is not the case here.
Therefore, Trinity's protest is denied. However, the appropriate
unit prices for these line items are required to be added to the
contract at the time of award. See FAR, 48 C.F.R. Section 4.406-2(b).
B-217344, 64 Comp. Gen. 591
Matter of: Steel Erectors, Inc. - David-Bacon Act Debarment, June 7,
1985
The Department of Labor recommended debarment of a contractor under
the Davis-Bacon Act because the contractor had falsified certified
payroll records, and failed to pay its employees overtime compensation.
Based on our independent review of the record in this matter, we
conclude that the contractor disregarded its obligations to its
employees under the Act. There was a substantial violation of the Act
in that the underpayment of employees was intentional. Therefore, the
contractor will be debarred under the Act.
The Assistant Administrator, Employment Standards Administration,
United States Department of Labor (DOL), by a letter to the Comptroller
General, dated July 12, 1984, has recommended that the names of Gary
Gregory, individually and as owner of Steel Erectors, Inc., and of Steel
Erectors, Inc., be placed on the debarred bidders list for violations of
the Davis-Bacon Act, 40 U.S.C. Sections 276a to 276a-5 (1982) and the
Contract Work Hours and Safety Standards Act, 40 U.S.C. Sections 327-332
(1982). For the following reasons, we concur with DOL's recommendation,
order its implementation, and further order that the funds on deposit
with our Office in this matter be distributed to the workers involved.
Steel Erectors performed work under contract number
DE-AC04-82AL18822, with the Department of Energy for construction of a
building at the Rocky Flats Plant, Golden, Colorado. The contract was
subject to the Davis-Bacon Act requirements that certain minimum wages
be paid. Further, pursuant to 29 C.F.R. Section 5.5(2) (1984), the
contractor was to submit payroll records certified as to correctness and
completeness.
The DOL found as a result of an investigation that employees were not
paid the minimum wages required pursuant to the Davis-Bacon Act.
Further, DOL found that certified payrolls were falsified and
incomplete, and that employees were not paid overtime compensation under
the Contract Work Hours and Safety Standards Act. The DOL notified
Steel Erectors of the violations of which it was charged by certified
letter, together with an admonition that debarment was possible.
Further, Steel Erectors was given an opportunity for a hearing before an
administrative law judge in accordance with 29 C.F.R. Section 5.12(b)
(1984). The DOL reported to us that while the record indicates that the
letter was received, no hearing was requested. After reexamining the
record, DOL found that Steel Erectors violated the Davis-Bacon Act
without any factor militating against debarment. Therefore, DOL
recommended that the names Steel Erectors, Inc., and Gary Gregory,
individually and as owner of Steel Erectors, Inc. be placed on the
ineligible bidders list for violations of the Davis-Bacon Act which
constituted a disregard of obligations to employees under the Act. We
concur in this recommendation.
The Davis-Bacon Act provides that the Comptroller General is to debar
persons or firms whom he has found to have disregarded their obligations
to employees under the Act. 40 U.S.C. Section 276a-2. Further, as
stated above, the DOL recommended debarment. In B-3368, March 19, 1957,
we distinguished between "technical violations" which result from
inadvertence or legitimate disagreement concerning classification, and
"substantial violations" which are intentional as demonstrated by bad
faith or gross carelessness in observing obligations to employees with
respect to the minimum wage provisions of the Davis-Bacon Act.
Falsification of payroll records is a basis for debarment under the
Davis-Bacon Act. See e.g., Metropolitan Home Improvement Roofing Co.,
Inc., B-215945, January 25, 1985.
Based on our independent review of the record in this matter, we
conclude that Steel Erectors, Inc., and Gary Gregory, individually and
as owner of Steel Erectors, Inc., disregarded their obligations to their
employees under the Davis-Bacon Act in that the underpayment of
employees was intentional as demonstrated by Steel Erectors' bad faith
in the falsification of certified payroll records. In addition, the
record indicates that Steel Erectors failed to pay its employees
overtime compensation.
Therefore, the names Steel Erectors, Inc., and Gary Gregory,
individually and as owner of Steel Erectors, Inc., will be included on a
list to be distributed to all departments of the Government, and,
pursuant to statutory direction (40 U.S.C. Section 276a-2), no contract
shall be awarded to them or to any firm, corporation, partnership, or
association in which they, or any of them, have an interest until 3
years have elapsed from the date of publication of such list.
B-217330, 64 Comp. Gen. 589
Matter of: Family Construction Company - Davis-Bacon Act Debarment,
June 7, 1985
The Department of Labor recommended debarment of a contractor for
violations of the Davis-Bacon Act because the contractor had underpaid
employees and maintained payroll records that were not complete as
required. Based on our independent review of the record in this matter,
we conclude that the contractor disregarded its obligations to its
employees under the Act. There was a substantial violation of the Act
in that the underpayment of employees was grossly careless, coupled with
an indication of bad faith. Therefore, the contractor will be debarred
under the Act.
The Assistant Administrator, Employment Standards Administration,
United States Department of Labor (DOL), by a letter dated May 3, 1984,
recommended that the names Family Construction Company (Family
Construction), Edwin Green, and Sylvia Green, be placed on the
ineligible bidders list for violations of the Davis-Bacon Act, 40 U.S.C.
Sections 276a to 276a-5 (1982), which constituted a disregard of
obligations to employees under the Act. We concur in DOL's
recommendation.
Family Construction performed work under contract YA-5110-CT3-240029
with the United States Bureau of Land Management constructing a fence
line. This contract was subject to the Davis-Bacon Act requirements
that certain minimum wages be paid. Further pursuant to 29 CFR Section
5.5(a) (1984), the contractor was to submit payroll records certified as
to correctness and completeness, specifying for each worker -- among
other things -- classifications of work performed, daily and weekly
hours worked, rates of pay, and wages paid.
The DOL found as a result of an investigation that employees were not
paid the minimum wages required pursuant to the Davis-Bacon Act.
Further, DOL found that Family Construction's payrolls were certified by
Edwin Green and Sylvia Green to be accurate and complete; yet those
payrolls failed to show the required classification of work performed,
daily and weekly hours worked, rate of pay, and wages paid. The DOL
informed us that by certified letter dated April 4, 1984, Family
Construction was given constructive notice at its last known address in
detail of the violations with which it was charged, and that debarment
was possible. Further, Family Construction was given an opportunity for
a hearing on the matter before an administrative law judge in accordance
with 29 CFR Section 5.12(b) (1984). The DOL reported to us that these
letters were returned by the United States Postal Service marked "Box
closed due to non-payment," and that further attempts to locate the
contractor were unsuccessful. After reexamining the record, DOL found
that Family Construction violated the Davis-Bacon Act without any
factors militating against debarment. Therefore, DOL recommended that
Family Construction Company, Edwin Green, and Sylvia Green, be placed on
the ineligible bidders list for violations of the Davis-Bacon Act which
constituted a disregard of obligations to employees under the Act.
The Davis-Bacon Act provides that the Comptroller General is to debar
persons or firms whom he has found to have disregarded their obligations
to employees under the Act. 40 U.S.C. Section 276a-2. In Circular
Letter B-3368, March 19, 1957, we distinguished between "technical
violations" which result from inadvertence or legitimate disagreement
concerning classification and "substantial violations" which are
intentional as demonstrated by bad faith or gross carelessness in
observing obligations to employees with respect to the minimum wage
provisions of the Davis-Bacon Act.
Based on our independent review of the record in this matter, we
conclude that Family Construction Company, Edwin Green, and Sylvia
Green, disregarded their obligations to their employees under the
Davis-Bacon Act. There was a substantial violation of the Davis-Bacon
Act in that the underpayment of employees was grossly careless as
demonstrated by Family Construction's submission of payrolls certified
by Edwin Green and Sylvia Green to be accurate and complete; yet those
payrolls failed to show the required classification of work performed,
daily and weekly hours worked, rates of pay, and wages paid. Further,
they did not cooperate in the investigation, which is an indication of
bad faith.
Therefore, the names Family Construction Company, Edwin Green, and
Sylvia Green, will be included on a list to be distributed to all
departments of the Government, and, pursuant to statutory direction (40
U.S.C. Section 276a-2), no contract shall be awarded to them or to any
firm, corporation, partnership, or association in which they, or any of
them, have an interest until 3 years have elapsed from the date of
publication of such list.
B-203681, 64 Comp. Gen. 582
Matter of: United States Information Agency: National Endowment for
Democracy Grant Administration, June 6, 1985
United States Information Agency (USIA), in providing statutory grant
funds to National Endowment for Democracy, has essentially the same
oversight rights and responsibilities as any other Federal grantor
agency. General Accounting Office finds that language and legislative
history of authorizing legislation do not support Endowment's view that
USIA was not intended to have any substantial role in seeing that grant
monies are expended for authorized purposes.
This responds to a request from Thomas E. Harvey, General Counsel and
Congressional Liaison, United States Information Agency (USIA), for our
opinion as to USIA's role in administering grants provided to the
National Endowment for Democracy under authority of the National
Endowment for Democracy Act, title V of Public Law 98-164. Both USIA
and the Endowment have widely divergent views as to USIA's
responsibility for overseeing the Endowment's disposition of funds
provided under the Act. They have, however, agreed to submit the
question to GAO.
As discussed in further detail below, it is our view that USIA, in
its relationship with the Endowment, has essentially the same oversight
rights and responsibilities as any other Federal grantor agency. We
reject the Endowment's contention that it is not required to account to
the agency for its use of grant funds, or that the agency has no right
of access to the Endowment's records of its activities.
The National Endowment for Democracy was established on November 18,
1983, as a private nonprofit District of Columbia corporation. It was
created to promote democratic institutions abroad, particularly through
the provision of assistance to third-party organizations such as the two
major American political parties, labor, and business. The existence of
the Endowment was statutorily recognized 4 days after its creation in
the National Endowment for Democracy Act. Pub. L. No. 98-164, tit. V,
97 Stat. 1017, 1039-42 (1983) (22 U.S.C.A. Section 4411-4413 (West Supp.
1984)).
Section 503(a) of the Endowment's authorizing legislation provides as
follows:
The Director of the United States Information Agency shall make
an annual grant to the Endowment to enable the Endowment to carry
out its purposes as specified in section 502(b). Such grants
shall be made with funds specifically appropriated for grants to
the Endowment or with funds appropriated to the Agency for the
"Salaries and Expenses" account. Such grants shall be made
pursuant to a grant agreement between the Director and the
Endowment which requires that grant funds will only be used for
activities which the Board of Directors of the Endowment
determines are consistent with the purposes described in section
502(b), that the Endowment will allocate funds in accordance with
subsection (e) of this section, and that the Endowment will
otherwise comply with the requirements of this title. The grant
agreement may not require the Endowment to comply with
requirements other than those specified in this title. 22
U.S.C.A. Section 4412(a).
Subsection (e) of section 503 specifies earmarks for two labor and
business sub-grantees. See B-214585, March 22, 1985, 64 Comp. Gen. 388.
Other requirements specifically delineated in the Act are that: (1)
the Endowment and its grantees are subject to "appropriate"
Congressional oversight (Section 503(d)); (2) grants to the Endowment
are conditional upon its agreement to comply with the provisions of the
Act, and its use of funds must be consistent with the purposes set out
in the Act (Section 504(a) and (b)(2)); (3) the Endowment may not carry
out programs directly, must abide by certain restrictions on the
compensation of its officers and Board of Directors, and must not issue
stock or dividends (Section 504(b)(1), (c), (d)(1)); (4) the
Endowment's accounts are to be audited annually by certified public
accountants, with reports from such audits provided as part of an annual
report to the Congress (Section 504(e)); and (5) the Endowment's
financial transactions may be audited by the Comptroller General, who is
to have access to all records of the Endowment and its sub-grantees
(Section 504(f)). In addition to these provisions, section 503(b) of
the Act states that "otherwise applicable limitations on the purposes
for which funds appropriated to the United States Information Agency may
be used shall not apply to funds granted to the Endowment." 22 U.S.C.A.
Section 4412(b).
The Endowment has cited three principal factors in support of its
view that USIA has little or no role in seeing how its grant to the
Endowment is administered. First, the Endowment notes the absence in
the language of its authorizing legislation of specific authority
permitting review by USIA. Second, the Endowment states that nothing in
the language or legislative history of the enactment indicates that USIA
was intended to have such a role in administering the grant. Third (and
most important) the Endowment states that the explicit language of the
grant authorization -- specifically the underlined portion of section
503(a) quoted above -- prohibits USIA from taking on such a role in the
absence of specific statutory authority.
The Federal Government uses a number of different methods to provide
financial assistance to private organizations, or to State and local
governments. The type of funding device chosen determines the Federal
Government's relationship with the recipient.
In some cases, there may be almost no ongoing relationship between
the two. Where, for example, assistance is provided through a gift or
direct unconditional appropriation, funds are to be used at the
discretion of the recipient, subject only to review by the Congress.
See 42 Comp. Gen. 289, 293 (1962). Two more commonly-used forms of
financial assistance are cooperative agreements and traditional grant
agreements. Cooperative agreements are to be used when substantial
involvement is expected to be required between the recipient and the
applicable Federal agency; grant agreements are to be used when little
involvement between the two is anticipated. See 31 U.S.C. Sections
6304-6305 (1982). Both types of funding mechanisms, however, involve
the establishment of an ongoing relationship between Federal agency and
recipient, with the precise terms of that relationship established by
the agreement itself.
An agency must ordinarily have statutory authority to utilize a grant
mechanism to further its authorized policies or functions. 59 Comp.
Gen. 1, 8 (1979). That provision of statutory authority, however, may
take one of many forms. In many cases, the authority simply consists of
a specification that an agency head may make grants for a specified
purpose. See, e.g., USIA's general authority to make grants under title
II of the United States Information Educational Exchange Act of 1948, as
amended, 22 U.S.C. Section 1471(1) (1982). It is frequently the case
that the authorizing legislation does not specifically state that the
grantor agency has the right to oversee the expenditure of funds under
the grant, or that the grantee must account to the grantor agency for
its use of grant monies. Those requirements, however, are implicit in
the creation of the grantor-grantee relationship, and are ordinarily
carried out through the administration of the applicable grant
agreement. /1/ Thus, we do not find it legally relevant in the present
case that no specific oversight authority was specified for the USIA in
its relationship to the Endowment. We find that authority to be
implicit in the Congress' selection of a grant agreement as the funding
mechanism to be used to support the Endowment's activities. /2/
The Endowment has cited the legislative history of the National
Endowment for Democracy Act in support of the view that USIA was not
intended to oversee the Endowment's use of grant monies and that
congressional and GAO oversight provisions alone were considered
sufficient to ensure accountability. On the House side, according to
the Endowment, neither Congressman Fascell (floor manager of the bill)
nor any other member "indicated that USIA oversight of the Endowment was
among the protections included in the Act or that it should have been."
We do not, however, find the record to be so clear. For example,
Congressman Fascall, in responding to another member's postulation of a
situation in which Endowment funding might be misused, indicates that
the agency would indeed have a role in overseeing the expenditure of
funds:
But for his scenario to actually occur, you would have to
assume that the Congress has given up all oversight. You would
have to assume that the executive branch, whatever administration
is in power, has no concept and cares less about what is going on,
because this money is not automatic. It has to be budgeted, it
has to go through the agency, it has to be authorized, it has to
be appropriated. And there is continual oversight. It assumes
that nobody will know what is happening. 129 Cong. Rec. H3816
(daily ed. June 9, 1983).
Similarly, Senator Percy, floor manager in the Senate, stated, in his
explanation of the Endowment's authorization:
As for the boondoggle allegation, the Endowment will come under
continuous and extensive scrutiny by the appropriate committees of
both Houses of Congress. The additional provisions for GAO
oversight, as well as the terms of the USIA grant agreement under
which it will function, assure a convergence of oversight
procedures virtually unique among grantees of Federal funds. 129
Cong. Rec. S12714 (daily ed. Sept. 22, 1983).
This statement, although quoted by the Endowment in support of its
view that an audit role for USIA was not contemplated by the drafters of
the legislation, indicates instead that the USIA grant agreement was
considered one of many oversight mechanisms; it could not be considered
such, however, unless the USIA had the power to oversee and enforce its
terms.
The Endowment's principal argument in support of its position is that
USIA's role in administering its grant to the Endowment is limited by
the inclusion of language in the authorization that the USIA grant
agreement "may not require the Endowment to comply with requirements
other than those specified" in the enactment. The question, therefore,
is whether this language removes the Endowment from being subject to the
ordinary oversight and financial controls implicit in the creation of a
Federal grantor-grantee relationship, but not specifically delineated in
the authorization. It is our conclusion that it does not.
The provision in question, to our knowledge, is unique to the
Endowment's authorization. We know of no other grant authorization that
is similarly limited. The legislative history of the enactment does not
provide any useful explanation for its inclusion. The original version
of the bill eventually enacted as the National Endowment for Democracy
Act simply had authorized USIA to make grants to the Endowment to carry
out the purposes of the Act. H.R. 2915, Section 610, 98th Cong., 1st
Sess. (1983), set forth in 129 Cong. Rec. 3812 (daily ed. June 9, 1983).
The language was contained in a comprehensive amendment to the bill
during Senate consideration, offered by Senator Percy. The amendment
restructured the authorization in essentially the form later enacted.
See 129 Cong. Rec. S14139-44 (daily ed. Oct. 19, 1983). The only
explanation of the amendment at the time was Senator Percy's statement
that he was "offering a technical, perfecting amendment drafted by its
sponsors in order to guarantee the constitutional perfection of the
bill." /3/
The USIA has interpreted the language in question as meaning only
that the Endowment was intended to be free of USIA's programmatic
restrictions and criteria, and not that it would be without fiscal or
administrative accountability to USIA for grant monies. According to
USIA:
The usual limitation on this Agency's program activities, such
as the ban on the domestic dissemination of program materials and
our normal internal grant review process, would not, therefore
apply to the Endowment. Nothing in the authorizing legislation or
history indicates that Congress intended the Endowment to be so
unique as to exempt it from the type of fiscal accountability long
required by the General Accounting Office of Federal grantees and
from such significant legislation as the civil rights laws and the
Fly America Act.
We agree with this view.
A strict interpretation of the language of section 503(a) is urged
upon us by the Endowment. Such an interpretation would, in effect,
render the grant agreement unenforceable by the grantor agency. Under
this view, USIA would have no authority to review expenditures of funds
under the grant, nor to enforce the terms of the grant through exercise
of financial control, as the enactment does not specifically authorize
the agency to peform these functions. In our view such an extreme
limitation would be inconsistent with the Congress' selection of a grant
as the device to be used to carry out the purpose of the program. The
creation of a grantor-grantee relationship between the agency and the
Endowment would be meaningless if the grantor's role was limited to the
ministerial function of disbursing funds at the grantee's request. We
therefore find USIA's interpretation of the language cited to be a
reasonable one -- i.e. that it was intended to prohibit the agency from
specifying programmatic requirements other than those included in the
act.
It is our view as well that USIA, in administering the grant in
question, is responsible for seeing that all other relevant statutory
restrictions are complied with by the Endowment. The Endowment's own
submission recognizes that other statutory restrictions (such as Title
VI of the 1964 Civil Rights Act) apply to the Endowment by their own
terms, and may be included in the grant agreement, if not otherwise in
conflict with the Endowment's authorizing legislation. We agree, and
conclude that USIA, as administrator of grant assistance to the
Endowment, has a duty to ensure the Endowment's compliance with such
requirements through the exercise of appropriate financial controls.
However, USIA may not, in its exercise of financial control over the
Endowment, impose restrictions not specifically intended to fulfill the
purposes specified in the authorizing legislation, or that are not
otherwise separately applicable by statute.
We would note that, in exercising its oversight role, USIA may
require the Endowment to comply with procedural mechanisms designed as
tools to see that grant funds are used only to carry out Circular A-122,
July 8, 1980. See B-203681, September 27, 1982. In applying those
procedures, however, the limitations described above should be kept in
mind, i.e., that procedural requirements not specifically related to the
Endowment's fulfillment of grant purposes -- or not otherwise separately
applicable by statute -- should not be considered to apply.
Finally, USIA has requested that we review its standard list of
general grant conditions to see which, under the analysis presented
above, would be applicable to the Endowment. We have briefly summarized
our views below:
I. Entertainment (grantee agrees not to use grant monies for the
purpose of entertainment). In our view, this provision would be
applicable, but is derived from (and should be interpreted in the
context of) the requirement that grant monies be used only for purposes
specified in the authorization. Compare, for example, inclusion of
entertainment costs as unallowable in OMB Circular A-122, July 8, 1980.
To the extent that entertainment expenses may be justified as necessary
to carry out the purposes of the grant, they may be allowable. See
B-196690, March 14, 1980 (grant to American Samoan Judiciary may be used
to entertain foreign dignitaries if in furtherance of official
purposes).
II. Documentation (requires grantee to maintain its files and
financial records to facilitate documentation of allowable costs). This
provision is intended to permit verification that expenses incurred are
for authorized grant purposes, and would therefore be applicable.
III. Amendments (permits amendments as necessary). This provision
would be applicable to the extent that amendments are for the purpose of
furthering (or overseeing) authorized grant purposes.
IV. Reassignment of Funds (prohibits reassignment without prior
approval of the agency's contracting officer "except when authorized
above"). This provision is unnecessary, as both the authorization and
grant agreement specifically authorize the Endowment to provide grant
monies to other private-sector organizations.
V. Examination of Records (permits USIA and GAO access to records of
the grantee or its subcontractors). This provision also permits
verification that expenses incurred are for authorized grant purposes,
and thus may be applicable.
VI. Officials not to Benefit (prohibits Members of Congress,
Delegates, or resident commissioners from benefiting from the grant).
The inclusion of this restriction would ordinarily be advisable to
protect against any appearance of impropriety (and may in fact be
applicable to some or all of the categories of individuals named, under
some independent authority). Nonetheless, grants (or sub-grants) to the
individuals listed would not, per se, be contrary to the purposes
specified in the authorizing legislation. Thus, as the restriction
reflects a policy not specifically related to delineated grant purposes
or specified in the authorization, it may not be required by USIA unless
applicable to the Endowment under separate statutory authority.
VII. Covenant Against Contingent Fees (grantee warrants that grant
was not solicited under an agreement for later compensation). This
provision is unnecessary, as the Endowment is a statutory grantee.
VIII. Disputes (established procedures for resolving factual
questions arising during the course of the grant). This provision
facilitates grant administration, and may be included as applicable to
the Endowment.
IX. Equal Opportunity (requires the grantee to agree not to
discriminate, and to take certain steps to that end). This provision is
applicable to the extent it is consistent with the requirements imposed
on the Endowment by the Civil Rights Act of 1964, or other statutory
authority.
X. Compliance with Federal and State Laws (grantee agrees to comply
with applicable employment laws and regulations). This provision also
reflects policies to which the Endowment is separately subject, and thus
may be required by USIA.
XI. Termination (both grantor and grantee may terminate after 30
days' written notice). This provision, although applicable, should be
read in the context of the authorizing legislation. The Endowment
clearly has the right to refuse to accept grant monies and thus may at
any time choose to exercise its right to terminate the grant agreement.
The USIA, because this is a statutory grant, may only terminate under
limited circumstances.
XII. Termination for Convenience of the Government (Agreement may be
terminated whenever contracting officer determines it is in best
interest of the Government). This provision is not applicable, because
of the Endowment's position as a statutory grantee. The grantor agency
may not terminate for convenience, only for cause (i.e. if the grantee
violates the grant agreement, or otherwise fails to comply with its
statutory responsibilities).
XIII. Interest and Refunds (interest on advances, unexpended funds,
and refunds to be returned to the U.S. Government). These requirements
are applicable to the Endowment. They are based on the principle that a
federal grantee may use funds only for the purposes authorized;
grantees may not utilize unused grant monies to build cash reserves.
See B-203681, September 27, 1982.
XIV. Non-Discrimination. See item IX.
XV. (Deleted by USIA.)
XVI. Employment of the Handicapped. This provision may be
applicable to the extent it is consistent with the requirements imposed
on the Endowment by 29 U.S.C. Section 794, or other statutory authority.
XVII. Preference for U.S. Flag Carriers. This provision may be
applicable to the extent it is consistent with the requirements of 49
U.S.C. 1517, or other statutory authority.
XVIII. Convict Labor. This provision, not specified in the
authorizing legislation, may not be included by USIA unless applicable
to the Endowment under separate statutory authority.
XIX. Listing of Employment Openings. Section 2012 of Title 38, from
which this requirement is derived, applies to procurement contracts, and
does not appear applicable to the Endowment.
XX. Payment of Interest on Contractors' Claims (provides for
interest on disallowed cost allowances overturned on appeal under the
disputes clause). This provision may be included by USIA to the extent
that agency considers it necessary to facilitate grant administration.
Such a clause, however, may also be more appropriate for
procurement-type contracts. E.g. 41 U.S.C. Sections 601-13 (1982).
(1) Compare, B-203681, September 27, 1982, which described the
indirect cost accounting method specified in the applicable grant
agreement as a tool for fulfilling the grantee's responsibility to
account for its use of grant monies. In that case, we considered the
grantee's responsibilities to be inherent in the creation of the
grantor-grantee relationship. There, as here, the applicable
authorizing language did not specify that the grantee had to account to
the grantor agency for its use of funds, or that the grantor agency had
a right to oversee the grantee's use of funds.
(2) The Endowment's authorizing legislation should be contrasted with
that of the Corporation for Public Broadcasting (CPB), contained in 47
U.S.C. Section 396 (1982). The CPB's authorization contains many
similarities with that of the Endowment. One principal difference,
however, is the funding mechanism chosen by the Congress. The CPB is
funded through annual appropriations made to a special fund within the
Treasury. Although the CPB;s use of funds so provided is subject to a
number of conditions, funds are made available directly, and not through
a grant agreement with any Federal agency.
(3) The original bill would have named two seated members of the
Congress to serve as "incorporators" of the Endowment, and further
specified that Congressman Fascell was to serve as chairman of the
incorporators, and as interim chairman of the Endowment. H.R. 2915,
Section 604(a), 98th Cong. 1st Sess. (1983), set forth in 129 Cong. Rec.
H3811 (daily ed. June 9, 1983). It thus appears that the restructuring
of the bill was primarily intended to forestall any allegation that this
arrangement would have violated article I, section 6 of the
Constitution, which prohibits any member of Congress from being
appointed to civil office under authority of the United States Congress
from being appointed to civil office under authority of the United
States created during the period of his tenure (and which prohibits any
person holding office under the United States from being a member of
Congress during his continuance in office).
B-218209, 64 Comp. Gen. 578
Matter of: Devils Lake Sioux Manufacturing Corporation, June 4, 1985
While contract modifications generally are the responsibility of the
procuring agency in administering the contract, the General Accounting
Office will consider a protest that a modification went beyond the
contract's scope and should have been the subject of a new procurement,
since such a modification has the effect of circumventing the
competitive procurement statutes.
Where a contract as modified is materially different from the
original contract, the subject of the modification should be
competitively procured unless a sole-source award is appropriate. A
modification consisting of a new agreement to deliver among other
things, manufacturing and production machinery and equipment to expand
the government's in-house production capabilities under an original
contract for supplies and technical assistance exceeds the contract's
scope and cannot be justified on a sole-source basis where both the
modification and the original contract should have been competed.
Devils Lake Sioux Manufacturing Corporation (DLS) protests a decision
of Federal Prison Industries, Inc. (FPI), Department of Justice, to fill
its needs for uncured helmet shell assemblies manufactured from kevlar
ballistic aramid cloth by modifying an existing contract with Gentex
Corporation rather than procuring the assemblies competitively. The
assemblies are used for the production of military helmets. DLS also
protests the original sole-source award. While FPI announced in the
Commerce Business Daily on November 20, 1984, that it intended to
competitively acquire the aramid cloth, a solicitation was never issued
because a mutually satisfactory agreement was concluded between FPI and
Gentex for continued delivery under the existing contract. DLS
challenges several aspects of FPI's decision not to procure the
assemblies competitively, insisting that the modification went beyond
the scope of the original contract. We sustain the protest.
As a preliminary matter, Gentex questions our continued jurisdiction
concerning protests of procurements by FPI under the Competition in
Contracting Act of 1984 (Act), Pub. L. No. 98-369, Section 2741(a), 98
Stat. 1175, 1199. We have consistently exercised jurisdiction over
protests of FPI acquisitions, see, e.g., Niagara Machine & Tool Works,
B-214288, July 16, 1984, 84-2 CPD Paragraph 48, and we believe that we
have continued authority to do so. Under the Act, our jurisdiction
extends to "Federal agencies" which term includes wholly owned
government corporations such as FPI. See 40 U.S.C. Section 472 (1982);
31 U.S.C. Section 9101 (1982). Moreover, although FPI does not receive
annual appropriations from Congress, FPI has an operating fund which we
have found to constitute a continuing appropriation for authorized
expenditures of FPI. See 60 Comp. Gen. 323 (1981). Accordingly, we
have authority over protests of procurements by FPI.
Generally, we do not review protests concerning contract
modifications because they involve contract administration which is
primarily the responsibility of the contracting agency and outside the
scope of our bid protest function. Sierra Pacific Airlines, B-205439,
July 19, 1982, 82-2 CPD Paragraph 54. We will consider such a protest,
however, where it is alleged that the modification is beyond the scope
of the original procurement and should have been the subject of a new
procurement. Nucletronix Inc., B-213559, July 23, 1984, 84-2 CPD
Paragraph 82. In this regard, we have stated that if a contract as
modified is materially different from the original contract, the subject
of the modification should have been competitively procured unless a
sole-source award was appropriate. Department of the Interior --
Request for an Advance Decision, B-207389, June 15, 1982, 82-1 CPD
Paragraph 589. In so stating, we express our concern so that improper
contract modifications tantamount to unjustified sole-source awards, in
lieu of competitive procurements, will not adversely impact upon the
integrity of the competitive procurement process. See American Air
Filter Co. -- DLA Request for Reconsideration, 57 Comp. Gen. 567 (1978),
78-1 CPD Paragraph 443.
Background
FPI, beginning in 1982, was awarded contracts by the Department of
Defense (DOD) for the production and delivery of military helmets.
These ballistic helmets are manufactured from fabric woven from kevlar
yarn, a trade-mark of E.I. DuPont and Company. /1/ Since FPI does not
have the capability of manufacturing ballistic cloth, it purchases the
cloth from outside sources. After having been awarded these contracts
by DOD, FPI issued a solicitation for the cloth and several interested
sources responded, including Gentex which was ultimately awarded the
contract under this solicitation. However, Gentex also presented FPI,
outside the framework of this procurement, with a proposal that it
asserted would significantly improve FPI's ability to manufacture
military helmets. The proposal contained what Gentex considered to be a
"unique and revolutionary process" for manufacturing the military
helmets that was especially attractive to FPI since the process would
not appreciably reduce use of convict labor but would virtually
eliminate convict handling of kelvar cloth scrap, a potentially
dangerous situation. Further, it was claimed that the use of this
process would also significantly reduce FPI's capital expenditures. A
sole-source negotiated contract was entered into between Gentex and FPI
on July 8, 1983, which was subsequently modified on October 21, 1983.
The contract, as originally awarded to Gentex, provided that the
contractor would provide uncured helmet shell subassemblies consisting
of numerous plies of kevlar cloth "layed up" in a certain configuration
for subsequent molding by FPI. Gentex further provided technical
assistance and processing advice, under a non-disclosure agreement,
required to fabricate the helmet. The entire manufacturing process
employed by Gentex is proprietary and a trade secret with a patent
application pending. The contract was modified on October 21, 1983,
under which Gentex agreed to further disclose art and intellectual
property to enable FPI "to more efficiently and effectively * * *
convert the (helmet shell)" into the finished helmet assembly. Further,
in consideration of the disclosure of this proprietary information, FPI
agreed to purchase all of this proprietary information, FPI agreed to
purchase all of its requirements for shell material from Gentex for a
5-year period.
Under the current modification, Gentex agrees to further disclosures
of intellectual property relating to the process of manufacturing, and
also agrees to provide testing and certification. Further, delaying
quantities are established based upon awards by DOD to FPI for the year,
and certain required government clauses not at issue here are added to
the contract. However, under the modification, Gentex, for the first
time, also provides significant manufacturing and production machinery
and equipment, such as presses and joiners. Also, for the first time,
instead of Gentex merely supplying uncured helmet shells, actual preform
manufacturing of the shells is not performed at FPI's facilities. We
questioned these provisions and requested further information from FPI
on this matter. FPI insists that the Gentex machinery is part of an
integrated system which includes customized dies central to the Gentex
proprietary process. Further, FPI states that it could not have
modified generic manufacturing equipment without use of Gentex
proprietary data which is barred by the non-disclosure agreement. FPI
is therefore arguing, in essence, that a sole-source modification was
justified because data was unavailable to permit a competitive
procurement.
GAO Analysis
As stated previously, if a contract as modified is materially
different from the original contract, the subject of the modification
should have been competitively procured unless a sole-source award was
appropriate. Department of the Interior -- Request for an Advance
Decision, supra. The agency argues that the acquisition of
manufacturing machinery and extended on-site production capabilities are
a natural extension of a valid sole-source contract based on the sharing
of technology of a unique manufacturing process. Specifically, the
agency states that the "machinery could not have been purchased
separately from anyone else (because) the machinery is part of an
integrated system which includes the attachment of customized dies,
which are central to the proprietary Gentex process."
First, we note that even a cursory review of the original contract
and the modification reveals that delivery of production equipment and
on-site preform manufacturing were never contemplated by the parties
under the original agreement. It was only after experience showed that
FPI's manufacturing "was not being enhanced by Gentex's processes as
anticipated," that FPI issued the November 20, 1984 CBD announcement for
a solicitation to acquire the aramid cloth assemblies from another
source for the purpose of protecting FPI's ability to continue
operations. FPI's manufacturing was not being enhanced because Gentex
was not delivering kelvar material that met specifications, and there
was apparently no improvement in FPI's manufacturing capability. As we
indicated earlier, the competitive solicitation was not issued, but
instead, the amendment in issue was negotiated with Gentex. In our
view, then, the modification is beyond the scope of the original
contract.
Second, even if we accept the agency's argument that the modification
represents a justifiable sole-source procurement because it is a
legitimate addition to the original purchase, it follows that the
modification is only valid if the initial sole-source award was valid.
In this connection, while the protest over the original award appears to
be untimely, the agency is attempting to justify a further expansion of
a sole-source contract that itself has been challenged as illegally
awarded. Under these circumstances, we think the propriety of the
initial sole-source award must be examined to determine the propriety of
the current modification.
In support of its argument concerning the validity of the initial
sole-source award, the agency states that at the time there were no
other firms capable of "doing any more than providing the raw kevlar
material in rolls or sheets." The record simply does not support this
factual assertion. There were then and there are currently other
producers of helmets for DOD, each ostensibly with its own proprietary
manufacturing process. In this regard, manufacturing technology is an
appropriate subject of competitive procurement. See AVCO Corporation,
System Division, B-216015, Feb. 27, 1985, 85-1 CPD Paragraph 245. Thus,
regardless of the bona fide proprietary nature of the manufacturing
process employed by Gentex, the record shows that other suppliers, using
their own methods, can potentially deliver satisfactory material and
processes. While Gentex's proprietary process, utilizing its machinery,
may best fill FPI's requirements for its manufacturing operations, that
proposition ought to be tested competitively.
We therefore believe that both the modification and the initial
sole-source awards were improper. We recommend that the procurement be
reopened, that other firms be allowed to compete, and that if ultimately
the most advantageous proposal or offer is received from another firm,
the Gentex contract be terminated for the convenience of the government.
The protest is sustained.
(1) In order to be assembled into a helmet shell, the ballistic cloth
is coated with resinous materials, cut into appropriate pattern, layered
to the desired thickness and sealed into a lay-up." Proprietary
technology may be used in cutting, layering and sealing the cloth and
resin into the lay-up. FPI, under the original contract, used its own
equipment to mold this lay-up into a shell. Accessories are then added
to complete the helmet.
B-218541, 64 Comp. Gen. 577
Matter of: ADB-ALNACO, Inc., June 3, 1985
To be considered an interested party so as to have standing to
protest under the Competition in Contracting Act of 1984 and the General
Accounting Office implementing Bid Protest Regulations, a party must be
an actual or prospective bidder or offeror whose direct economic
interest would be affected by the award of a contract or by the failure
to award a contract. A manufacturer which supplies equipment to
potential bidders or offerors in a federal procurement, but which is not
a potential bidder or offeror in its own right, is not an interested
party.
ADB-ALNACO, Inc., protests as overly restrictive the specifications
of solicitation No. N62864-85-R-0139 issued by the Naval Facilities
Engineering Command. The basis for protest is that the solicitation
requires the use of a particular manufacturers products by brand name,
part number, and other proprietary specifications which restrict
competition to a sole source. The Navy reports that ADB-ALNACO is
neither a bidder nor, according to the protester's sales engineer, a
prospective bidder; ADB-ALNACO was provided a copy of the Navy's report
and has not disputed this statement.
Under 31 U.S.C. Section 3551 et seq., as added by section 2741(a), of
Pub. L. 98-369, title VII (the Competition in Contracting Act of 1984
(CICA)), an interested party is defined as an "actual or prospective
bidder or offeror whose direct economic interest would be affected by
the award of the contract or by the failure to award the contract." This
statutory definition of an "interested party" is reflected in the
language of our Bid Protest Regulations which implement the CICA. 4
C.F.R. Section 21.0(a) (1985). Accordingly, with respect to all bid
protests filed on or after January 15, 1985, the effective date of this
authority, only protest involving a direct federal procurement filed by
a party that comes within the statutory definition of an interested
party can be considered. See PolyCon Corp., B-218304; B-218305, May
17, 1985, 64 Comp. Gen. 523, 85-1 CPD Paragraph 567. Under CICA and our
implementing Bid Protest Regulations, ADB-ALNACO's interest as a
manufacturer of equipment to be supplied to potential bidders is not
sufficient for it to be considered an interested party.
We dismiss the protest.
B-217744, 64 Comp. Gen. 570
To The Honorable John D. Dingell, June 3, 1985
Environmental Protection Agency (EPA) is responsible for designing
and administering fuel economy performance test and computing Corporate
Average Fuel Economy (CAFE) ratings for auto makers. Request questioned
EPA's handling of CAFE tests and ratings in three specific areas.
Findings are: (1) EPA has broad statutory authority to refine test
procedures, even if harder tests have the effect of raising CAFE
standards slightly; (2) EPA's use of informal Advisory Circulars
instead of rulemaking procedures to effect test changes is improper
unless test changes are "technical and clerical amendment(s)" exempted
from rulemaking by statute, or unless one of the Administrative
Procedure Act exceptions applies; and (3) Rulemaking proposing
adjustments to CAFE ratings is a legally adequate response to a court
order to address discrepancies resulting from test changes EPA made in
1979. To Rep. Dingell.
Your letter of February 8, 1985, requested our views on several
matters relating to the Environmental Protection Agency's (EPA) handling
of its testing responsibilities under the Corporate Average Fuel Economy
(CAFE) program. Specifically, your concerns are: (1) the scope of
EPA's authority to modify test procedures; (2) whether test
modifications may be accomplished informally; and (3) whether EPA has
adequately responded to an order of the Sixth Circuit Court of Appeals
to address discrepancies resulting from test modifications made in 1979.
A fourth issue regarding light trucks has been deferred by agreement
with your staff.
Our views are, briefly, that EPA did not exceed its broad authority
to change test procedures, but changes should have been made formally,
unless one of the specific limited exceptions applied to a particular
change, and that EPA's proposed rulemaking adequately responded to the
court order. Our reasoning is explained more fully below.
In response to the energy crisis, the Congress created a
comprehensive body of laws dealing with the production and conservation
of energy resources. Among these new laws was the Energy Policy and
Conservation Act, which included an amendment to the Motor Vehicle Cost
Savings and Information Act. The latter amendment created the CAFE
program. Pub. L. No. 94-163, Section 301, 89 Stat. 871, 806, codified
at, 15 U.S.C. Sections 2002-12 (1982). For the express purpose of
reducing gasoline consumption by motor vehicles, Congress established
average fuel economy standards. 89 Stat. 874, Section 2(5). Through
design improvements, technological advances, sales efforts and any other
means available, each manufacturer was required on the average to meet a
predetermined annual standard. Determination of a manufacturer's
average fuel economy rating was based on the performance of
representative vehicles on laboratory tests and computed with reference
to the total sales of all vehicles of the representative type. 15
U.S.C. Section 2003 (1982).
The law established the 1978-80 model year standards at 18, 19 and 20
miles per gallon, respectively. It also set the standard for 1985 and
thereafter at 27.5 mpg. The Secretary of Transportation was authorized
to set the 1981-84 incremental standards and to review individual
manufacturer petitions for variances from the set standards.
EPA's responsibilities under the Act are to design and conduct the
tests (which also measure exhaust emissions for Clean Air Act
compliance), and to calculate manufacturers' CAFE ratings applying test
results and sales data according to the statutory formula.
Manufacturers that fail to meet their CAFE standard face a penalty of
$5 per 1/10th of an mpg per car produced by the manufacturer that year.
A CAFE shortfall of 1/10th mpg for its fleet could easily cost a major
manufacturer $20 million in penalties.
Issues presented in this case relate to EPA's execution of its
authority to design and conduct the fuel economy performance tests. The
main statutory provision relating to test design is as follows:
(d)(1) Fuel economy for any model type shall be measured, and
average fuel economy of a manufacturer shall be calculated, in
accordance with testing and calculation procedures established by
the EPA Administrator, by rule. Procedures so established with
respect to passenger automobiles * * * shall be the procedures
utilized by the EPA Administrator for model year 1975 (weighed 55
percent urban cycle, and 45 percent highway cycle, or procedures
which yield comparable results. * * * 15 U.S.C. Section
2003(d)(1)(1982)
Also relevant is subparagraph (3) of the same section, which reads:
(3) Testing and calculation procedures applicable to a model
year, and any amendment to such procedures (other than a technical
or clerical amendment), shall be promulgated not less than 12
months prior to the model year to which such procedures apply. 15
U.S.C. Section 2003(d)(3) (1982).
The statute also provides that persons adversely affected by actions
taken under the CAFE law may seek judicial review of those actions under
the Administrative Procedure Act (APA) before their enforcement. 15
U.S.C. Section 2004(a) (1982). This section applies to testing
decisions as well as standard setting, and determinations of credits and
penalties, etc.
Several issues raised in the request relate to EPA's authority to
modify the 1975 fuel economy performance test. EPA has argued that it
has authority to make test changes to improve test accuracy and close
loopholes. The automobile manufacturers claim that these changes make
it more difficult for their cars to achieve the predetermined standard.
The effect of such changes, they say, is to raise the CAFE stnadard
contrary to the statute.
No one seriously contends that the Congress cast the 1975 test in
concrete, never to be changed. The statute expressly acknowledges the
possibility of amendments to the test procedures and requires only that
they be promulgated a year in advance and that they yield comparable
results to the 1975 test. The legislative history elaborated somewhat
on EPA's authority. The House Report stated:
The words "or procedures which yield comparable results" are
intended to give EPA wide latitude in modifying the 1975 test
procedures, so long as the modified procedure does not have the
effect of substantially changing the average fuel economy
standards. H.R. Rep. No. 340, 94th Cong., 1st Sess. 92.
(Hereafter, House Report.)
The relationship between tighter test procedures and more stringent
standards was recognized. Though "comparable results" are not
statutorily defined, the House Report would clearly have allowed slight
changes in the fuel economy standards as a result of test procedure
improvements. The provision originated in the House, and there is no
other indication anywhere in the legislative history as to the proper
construction of the term "comparable results," so we must assume the
House Report was authoritative.
EPA also claimed authority to close loopholes in the 1975 test
procedures. We think it has that authority within the limits set in the
House Report cited above. It is obvious that Congress intended the CAFE
law to produce dramatic reductions in fuel consumption, not just paper
improvements in test results. Anticipated fuel savings were more than 3
million barrels of crude oil per day. The House Report also expressed
the opinion that legally enforceable standards and penalties were
indispensable to the success of the program. House Report at 86-87.
Viewed in this context EPA's authority to close loopholes also seems
clear.
At hearings in 1979, the Administrator of the National Highway
Traffic Safety Administration testified that the gap between EPA test
mileage and actual on-the-road mileage had increased significantly
between 1975 and 1979. Motor Vehicle Fuel Efficiency: Hearings Before
the Subcomm. on Energy and Power of the House Comm. on Interstate and
Foreign Commerce, 96th Cong., 1st Sess. 19 (statement of Joan Claybrook)
(hereafter Oversight Hearings). Given the statutory mandate to produce
results comparable to the 1975 test and to reduce actual fuel
consumption, we think EPA could have legitimately made test changes
designed to narrow the gap between EPA test mileage and actual
on-the-road mileage to its 1975 level. In other words, EPA could
justify closing the loopholes that allowed such discrepancies to
increase after 1975.
We are not in a position to analyze the efficacy of the test changes
that have actually been made, or to evaluate their impact on the CAFE
ratings of any specific manufacturer, but we think test changes are
clearly authorized.
Procedures
Prior Test Changes
In the past, EPA used Advisory Circulars to notify automakers of
proposed test changes and to seek their input. Advisory Circulars are
informal and, according to EPA, nonbinding. Oversight Hearings at 93.
EPA characterized its decisions made by Advisory Circular as
supplementary to the existing regulations. Id. at 91-93. EPA also
maintained that only minor changes to the test procedures were made by
Advisory Circulars. However, EPA officials acknowledged that what
constituted a "minor" change was essentially a judgment call on the
agency's part. We cannot assess the technical aspects of the test items
handled by Advisory Circular, but it seems fairly clear that some
changes informally authorized affected manufacturers' CAFE ratings.
Legal Requirements for Changes
The CAFE statute provides that test procedures shall be "established
by the (EPA) Administrator, by rule." 15 U.S.C. Section 2003(d)(1)
(1982). Additionally, the statute provides that except for "technical
and clerical amendment(s)" changes to test procedures shall be
"promulgated not less than 12 months prior to the model year to which
(they) apply." 15 U.S.C. Section 2003(d)(3).
The statute expressly requires rulemaking in section 2003(d)(1) and
reinforces the requirement for formal rulemaking in section 2003(d)(3)
by using the word "promulgated" to describe the publication requirement.
The statute allows only one exception to rulemaking, and that is for
"technical and clerical amendment(s)" to the rules. The statute does
not distinguish between "minor" and other changes, as EPA has argued it
is entitled to do.
EPA has never claimed that the changes that the changes accomplished
by Advisory Circular were only technical and clerical amendments, and
the burden would be on the agency both to claim that exemption and to
prove it if challenged. However, since a statutory exception exists, we
are not prepared to rule out conpletely the possibility that EPA's past
actions fall within the exception. If the changes accomplished by
Circular were not "technical and clerical" matters, rulemaking was
required by the statute, no matter how cumbersome it might have been to
conduct.
Future Use of Advisory Circulars
In a Notice of Proposed Rulemaking (NPRM), discussed more fully
below, EPA proposed to continue the use of Advisory Circulars for
so-called "minor" test changes. 48 Fed. Reg. 56526-36 at 56533. In a
later related NPRM, EPA attempted to define a "significant CAFE penalty"
as occurring when a test change or changes would likely have a negative
CAFE impact of .10 mpg or more. 49 Fed. Reg. 48024. Logically, that
would imply that "minor test changes" are those with an anticipated
impact of -- .10 mpg or less. See also 48 Fed. Reg. 56528 at note 14.
As to future test changes, the applicability of the rulemaking
requirement depends on whether proposed test changes are "technical and
clerical" pursuant to the statute. This does not neatly translate into
a mileage equivalent, but rather relates to both the purpose and effect
of the change.
In addition to the statutory exception, there are also exceptions to
the notice and comment requirements of the APA, 5 U.S.C. Section 553
(1982) which might provide a legitimate basis for informal action on
test changes. Again, if challenged, EPA would have to prove the
applicability of these exceptions.
Interpretative rules need not be subjected to formal rulemaking.
EPA's explanations of its use for Advisory Circulars at the 1979
Oversight Hearing might be construed as an argument that the changes it
discussed were only interpretative rules. Oversight Hearings at 91-93.
However, EPA has not yet claimed that this exception applies.
The second broad exception comes into play "when the agency for good
cause finds * * * that notice and public procedure thereon are
impracticable, unnecessary, or contrary to the public interest." 5
U.S.C. Section 553(b)(B) (1982). EPA mentioned the "good cause"
exception in the same NPRM in which it announced its intention to
continue Advisory Circulars. 48 Fed. Reg. 56533 at note 19. However,
the APA exception requires that to claim it, the agency must state its
findings and incorporate "a brief statement of the reasons therefor in
the rules issued." 5 U.S.C. Section 553(b)(B) (1982). This latter
prerequisite to the exception has not yet been accomplished.
The exceptions to formal rulemaking discussed above should obviously
be employed on a case-by-case basis. They are not amenable to a blanket
advance approval by rule as EPA has attempted in 48 Fed. Reg. 56533.
Since these reasonable exceptions do exist, we are not prepared to state
categorically that all future test changes must be done by rulemaking.
However, we do think that EPA should clearly state its legal basis for
choosing informal procedures any time it elects to issue a test change
by Advisory Circular and that it should be prepared to defend its claim
to an exception if challenged.
In 1979 General Motors and Ford petitioned EPA for relief from
changes the agency made to the 1979 test procedures. The questioned
changes had been made by Advisory Circular. When EPA denied the
petition and reconsideration, the companies filed suit in the Sixth
Circuit Court of Appeals.
In its order, dated January 26, 1982, the Court's finding was:
The EPA has made certain changes in the relevant (test)
procedures. Now both Ford and General Motors seek adjustments so
that current testing is comparable to the 1975 test procedures.
They contend that the EPA made the proposed adjustments without
complying with the Administrative Procedure Act, 5 U.S.C.A.
Section 551, et seq., (1978) as 15 U.S.C.A. Section 2004 (1980
Supp.) dictates it must.
We deem it appropriate to remand this case to the EPA so that
it may initiate a proper rulemaking proceeding concerning
procedures for establishing an adjustment factor for current tests
to determine the corporate average fuel economy of manufactured
vehicles covered by this statute. General Motors v. Costle, Nos.
80-3271, 80-3272, 80-3655 (6th Cir. Jan. 26, 1982).
A narrow, but reasonable, reading of the order is that EPA was
obligated to consider in a formal rulemaking the issue of CAFE
adjustments to compensate for informal test changes. The court made no
decision on the merits. This left unresolved the substantive issues of
the validity of Advisory Circulars, their application by EPA to "minor"
test changes, and the meaning of "comparable results." However it left
EPA almost total discretion as to how to deal with the consequences of
its 1979 test changes.
EPA responded by issuing an NPRM on December 21, 1983, almost 2 years
after the court order was entered. /1/ 48 Fed. Reg. 56526-36. The NPRM
requested comments on three alternative proposals: netting of test
change results; manufacturer specific adjustments to CAFE ratings; and
an industry-wide average (CAFE rating adjustment. These proposals seem
logically to proceed from an assumption that manufacturers were damaged
in their CAFE ratings by EPA's 1979 changes to the test procedures.
We are not in a position to analyze the validity of the technical
judgments which underlie any of the proposed alternatives. Nor do we
feel we should endorse or criticize any of the proposals, since the
rulemaking is still open. We do not want to substitute our judgment for
that of the agency. However, we do feel that the NPRM generally was a
legally adequate response to the Sixth Circuit's mandate to address
possible adjustment factors in a rulemaking.
We also thoroughly examined the statute and legislative history to
determine whether there was an legislative mandate to make specific CAFE
adjustments. While the statute directs the method for the original CAFE
calculation and for the computation of CAFE credits, it does not address
the possibility of corrections to the CAFE ratings because of
deficiencies in the test procedures. The legislative history likewise
provides no guidance. A statutory injunction to compute the CAFE
adjustment in any particular way would only be by analogy to the other
computation procedures. Absent a firm statutory basis, we are not
persuaded that the Administrator's discretion to fashion a remedy for
past test procedure inadequacies should by in any way curtailed.
Because we are unaware of possible technical or clerical reasons
which might justify EPA's past handling of the CAFE testing program or
the proposed CAFE adjustments, we are not in a position to raise legal
objections to those changes. We do think that in the future, EPA should
use formal rulemaking to accomplish test changes, unless a specific
exception ("technical and clerical amendment(s)" or APA exception)
applies. Furthermore, decisions about exceptions should be made on a
case-by-case basis.
We hope the foregoing information is useful to you. Unless you
release it earlier, this opinion will be available to the public 30 days
from today.
(1) This same NPRM also contained EPA's announcement that it would
continue the Advisory Circular system, and was discussed in that context
on p. 5 above.
B-217462, 64 Comp. Gen. 568
Matter of: Marshall L. Dantzler, June 3, 1985
A transferred employee refinanced his residence at the old duty
station in order to obtain assumable financing for the purchaser. The
expenses involved in refinancing are reimbursable to the extent such
costs are reasonable and customary in the area and otherwise allowable
under the Federal Travel Regulations.
An employee may be reimbursed for the reasonable and necessary costs
incurred in refinancing his residence at the former duty station in
order to obtain assumable financing for the purchaser. /1/
Mr. Marshall L. Dantzler, an employee of the Department of
Agriculture, was authorized a permanent change of station from Fairfax,
Virginia, to Montgomery, Alabama, by a travel authorization dated August
1, 1983. In connection with the transfer Mr. Dantzler sold his
residence in Fairfax. As part of the sales transaction he refinanced
his house in order that the purchaser could assume a mortgage under more
favorable terms. The refinance, assumption, and closing were part of
the same transaction.
In connection with the cost of refinancing the mortgage on his old
residence Mr. Dantzler has claimed reimbursement for the following
expenses:
Loan Origination Fee ....................... $794.50
Title Insurance ............................. 190.00
ERA-BPP (Buyers protection policy) .......... 280.00
State Revenue Stamp ......................... 165.00
Recording Fees ............................... 36.00
Power of Attorney ............................ 11.00
Insurance Binder ............................. 50.00
Total ............................... 1,526.50
The certifying officer has requested our opinion on whether these are
allowable costs since they were part of the same transaction as the
assumption and sale. The certifying officer also asks whether the fact
that a purchaser would normally pay some of these costs if it were a new
mortgage instead of a refinancing package affects the employee's
reimbursement.
The statutory and regulatory authority for reimbursement of real
estate expenses incurred by a Federal civilian employee upon transfer of
official station is contained in 5 U.S.C. Section 5724a(a)(4) and Part
6, Chapter 2 of the Federal Travel Regulations, incorp. by ref., 5
C.F.R. Section 101-7.003 (1983). Under these authorities we have
allowed reimbursement of the expenses incurred by an employee in
obtaining a new mortgage or a second mortgage on his residence at his
former duty station where the mortgage transaction on that residence was
part of the "total financial package" essential to the purchase of a
residence at the new duty station. Arthur J. Kerns, Jr., 60 Comp. Gen.
650 (1981), and James R. Allerton, B-206618, March 8, 1983. In Kerns
the second mortgage obtained by the employee was not on the residence
which he was purchasing but on his old residence which he had been
unable to sell. The purpose of the second mortgage transaction was to
obtain funds to make the downpayment on the residence which he was
purchasing at his new duty station. We viewed the second mortgage
transaction as being a part of the total financial package essential to
the purchase of the new residence. In Allerton the employee refinanced
his residence at the old duty station in order to facilitate its sale
and in order to obtain a downpayment for purchase of a residence at the
new duty station. Costs of the refinancing were allowed. The mortgages
in both Kerns and Allerton were secured by the employees' interests in
the old residences and were, therefore, considered real estate
transaction expense and not merely personal financing.
We have also permitted an employee to be reimbursed for the cost of
refinancing his old residence in order to obtain an assumable mortgage
for the new purchaser and a downpayment on his new residence. Charles
A. Onions, B-210152, June 28, 1983. The common thread present in all of
these decisions is that the financial transactions involved, a second
mortgage, a new mortgage, and a refinanced mortgage, were secured by the
employee's interest in his residence at the old duty station. We have
disallowed claims where the financial package involved a property not
located at the old or the new duty station. Roger L. Flint, 62 Comp.
Gen. 426 (1983). Since the employee in most instances must sell his old
residence or secure a second mortgage on the old residence in order to
purchase a residence at the new official station, we viewed the
financial transactions as being one total financial package.
In Mr. Dantzler's case the money obtained by him was not used as a
downpayment on a new residence. He had already purchased a new
residence before his former residence was sold. The financial
transaction was solely to facilitate the sale of his former residence.
However, we recognized in Onions that the obtaining of an assumable
mortgage for a prospective purchaser was often necessary in today's real
estate market. The general principle behind the case in question is
that costs involved in the financing and refinancing of the old
residence in order to facilitate residence transactions may be allowed.
Accordingly, we find that the claimed real estate expenses may be
allowed, if otherwise proper.
Reimbursement for a title insurance policy may be allowed where the
title insurance is purchased primarily for the protection of the lender.
James E. King, B-183958, April 14, 1976, and FTR, para. 2-6.2c. This
is to be distinguished from a buyer's or owner's protection policy, the
cost of which is not generally reimbursable. See FTR, para.
2-6.2d(2)(a). In this connection the insurance binder would be
reimbursable to the extent it covered the title insurance policy. A
loan origination fee of one percent is reimbursable for transfers
occurring after October 1982. Robert E. Kigerl, 62 Comp. Gen. 534
(1983). Powers of attorney and recording fees are reimbursable under
FTR paragraph 2-6.2c. State revenue stamps are reimbursable under FTR
paragraph 2-6.2d(e). In summary, the $280 claim for buyer's title
protection should not be allowed. The $50 insurance binder may be
allowed if required by the lender. Other claimed items appear to be
allowable items.
In response to the question concerning whether the seller or
purchaser should pay these costs, we point out that this is a
refinancing package. The party obtaining the financing is responsible
for payment of the expenses as a part of the cost of the financing
package and may be reimbursed under the travel regulations to the extent
that the costs are reasonable and customary for the area. Charles A.
Onions, B-210152, supra.
Action should be taken on Mr. Dantzler's claim in accordance with the
above.
(1) Mr. W. D. Moorman, an authorized certifying officer with the
Department of Agriculture's National Finance Center, has requested an
advance decision on the claim of Marshall L. Dantzler for certain
expenses incurred in connection with the sale of his residence.
B-217350, 64 Comp. Gen. 565
Matter of: A&C Building and Industrial Maintenance Corporation, June
3, 1985
Where the Small Business Administration, after initially agreeing to
accept a janitorial services contract under section 8(a) of the Small
Business Act, decided to reject the contract only 3 days before the
existing one expired, the procuring agency was not justified in
negotiating a sole-source contract with the 8(a) firm without soliciting
an offer from the incumbent, since a sole-source contract is improper
even in an urgent situation where there is more than one source capable
of meeting the agency's needs.
An agency may not decide to forego soliciting an offer from the
incumbent for the next contract period, and instead award a sole-source
contract to another firm, based on its view that deficient past
performance indicates the incumbent is not responsible, since a
nonresponsibility determination should follow, not precede, a
competition and, in the case of a small business like the incumbent, by
law is subject to review by the Small Business Administration.
A&C Building and Industrial Maintenance Corporation (A&C) protests
the award by the Department of Housing and Urban Development (HUD) of
the contract on a sole-source basis to Eastern Services, Inc. (Eastern),
to perform janitorial services at the HUD building in Washington, D.C.
The contract is for a 6-month period, from December 1, 1984, to May 31,
1985, with options to extend for an additional 2 1/2 years.
We sustain the protest.
A&C was incumbent contractor for the services under a contract with
the General Services Administration (GSA). On October 1, 1984, GSA
transferred to HUD the operation and maintenance of the HUD Headquarters
Building, including janitorial services; A&C's existing contract was to
expire on November 30, 1984.
In anticipation of the expiration of the existing contract and the
delegation of authority from GSA, HUD determined to secure further
janitorial services through the Small Business Administration (SBA)
under section 8(a) of the Small Business Act, 15 U.S.C. Section 637(a)
(1982), which authorizes the SBA to enter into contracts with government
departments and to arrange for performance by letting subcontracts to
socially and economically disadvantaged business concerns. The SBA, on
August 31, initially approved HUD's proceeding with preliminary
negotiations for a section 8(a) subcontract and authorized HUD to
negotiate directly with Eastern. Accordingly, on September 19, HUD
issued a solicitation package to Eastern, which responded with a
proposal for the work.
Because the contract value was estimated to be $1,250,000, and
Eastern's records had never been audited by a governmental agency, a
comprehensive audit was scheduled to be conducted by the Defense
Contract Audit Agency (DCAA). The existing contract with A&C was due to
expire before completion of the audit, however, and HUD therefore
proposed to enter into a letter contract with Eastern under the section
8(a) program, subject to SBA approval, pending completion of the audit
and negotiation of a final 8(a) contract. On November 27, 3 days before
the expiration of the existing contract, the SBA refused to accept the
services for the 8(a) program because it had determined, in accordance
with internal SBA policy, that the removal of the requirement from
competition would have too adverse an impact on the incumbent
contractor.
Since only 3 days remained until the expiration of the existing
maintenance contract, HUD convened an emergency meeting of the HUD
Procurement Review Board, which approved an emergency sole-source
negotiated contract with Eastern. As originally contemplated, the
contract with Eastern, executed on November 30, was to be for a period
of 6 months with the option to extend the term of the contractor for 2
1/2 more years. HUD since has requested reconsideration of SBA's
decision not to enter into a section 8(a) contract.
A&C contends that HUD has made an unjustified sole-source award at a
higher price for allegedly lesser service requirements than under the
contract A&C had with GSA. A&C argues that janitorial services are
readily available from numerous companies that could be expected to
compete for a government contract, and points out that A&C itself had
offered to extend the existing contract on a month-to-month basis.
Finally, A&C contends that, in any event, the public exigency did not
justify entering into a sole-source contract that, with options, could
extend for 3 years.
HUD responds that a sole-source award was justified by the public
exigency since janitorial services must be uninterrupted and since HUD,
notified only 3 days prior to the expiration of the existing contract
that SBA would not approve an 8(a) contract, had insufficient time to
request proposals from other possible offerors. HUD states that it did
not simply extend A&C's contract, or seek a competitive offer from the
firm to compare with Eastern's, because A&C's performance as the
incumbent had been deteriorating steadily and was seriously deficient.
HUD also states that the option provision originally contemplated will
not be included in Eastern's contract; HUD advises that if SBA reverses
its decision, a contract will be entered into with SBA under section
8(a), but if SBA affirms its decision, HUD will conduct a competitive
procurement.
We do not believe that award to Eastern on a sole-source basis was
proper.
We recognize that from August 31, when SBA initially approved HUD's
request to negotiate with Eastern, until November 27, SBA gave no
indication to HUD of any possibility that a contract under section 8(a)
with Eastern as subcontractor would not be approved. Thus, when SBA
notified HUD that it would not accept a section 8(a) contract, HUD
legitimately needed to take quick action to assure its needs would be
met, at least on an interim basis while it considered other procurement
approaches. See International Business Services, Inc., B-209279.2, Feb.
8, 1983, 83-1 C.P.D. Paragraph 142.
Nevertheless, government procurements generally must be conducted on
a competitive basis to the maximum extent practicable. Work System
Design, Inc., B-213451, Aug. 27, 1984, 84-2 C.P.D. Paragraph 226. A
sole-source award therefore is justified where time is of the essence
only if there is no other known source that could meet the agency's
needs within the required time-frame. Id. Where there are other
available sources, the agency must make reasonable efforts to generate
competition by, for example, soliciting oral offers with short response
times based on as complete a set of specifications as practical, or such
other short-cuts as may reasonably be necessary under the circumstances.
See Las Vegas Communications, Inc. -- Reconsideration, B-195966.2, Oct.
28, 1980, 80-2 C.P.D. Paragraph 323. Since a services contractor
already in place, like A&C, logically should be viewed as a source
available to continue the same or similar services, these principles
suggest that HUD should have solicited an offer from A&C, on an
expedited basis, to judge against Eastern's.
We also recognize that HUD was so dissatisfied with A&C's performance
as the incumbent that the agency probably would not have accepted an
offer from the firm even if it were lower in price than Eastern's. The
decision that a firm is incapable of providing acceptable services based
on its past performance, however, constitutes a negative determination
of responsibility, which is supposed to follow, not precede, the firm's
participation in the procurement, and which, in the case of a small
business like A&C, must by law be referred to SBA for its review before
the firm can be rejected. 15 U.S.C. Section 637(b)(7) (1982). Thus, if
HUD considered A&C nonresponsible, the agency should have so concluded
after receiving the firm's offer, and then solicited SBA input.
Accordingly, it was improper for HUD not to include the protester in an
expedited competition with Eastern based on what in effect constituted a
prospective determination that A&C was nonresponsible.
As to the propriety of the protested option provisions in Eastern's
6-month contract, we understand that HUD has not actually deleted the
option provisions, but apparently simply does not intend to extend the
contract. (The agency anticipates that SBA will approve a new 8(a)
contract award). On that basis, we dismiss the protest on this issue as
academic. Nevertheless, we point out that it would, in our view, be
incongruous for a sole-source contract award based on the public
exigency to contain option provisions like those here. See NRC Corp.;
General Systems Corp., B-208143, et al., Apr. 14, 1983, 83-1 C.P.D.
Paragraph 403; International Business Services, Inc., B-209279.2,
supra.
The protest against the sole-source award is sustained. Since the
6-month period is practically over, however, and since the contract will
not be extended, no remedial action is practicable.
B-218230, 64 Comp. Gen. 561
Matter of: W.G. James, Inc., May 31, 1985:
Where firm submits three copies of its bid, each with a total price
of $820,000; prices masonry work at $495 on two copies and $4,495 on
the third; and claims that $495 was intended and that the total bid
should be $816,000 ($820,000 incorpoates the $4,495 figure), it is not
clear what the bid actually intended was, particularly since $4;495 is
consistent with the other four bidders' prices for the work.
W.G. James, Inc. (James), protests award of a contract to Certified
Mechanical Contractors, Inc. (CMC), under invitation for bids (IFB) No.
2994 issued by the Federal Bureau of Investigation (FBI) for
construction services for secure communications renovation of the FBI's
Chicago Field Office. James, which was tied with CMC as the apparent
low bidder, complains that CMC was permitted to correct its bid
downward.
We sustain the protest.
Each bidder was required to submit three copies of the bidding
documents, which were bound in a Bidding Submittals Booklet. Although
award was to be based on low total price, appendix "B" to the
solicitation, entitled Base Bid Price Breakdown, provided for the
listing of prices by divisions. Each of the 16 divisions covered a type
of material and labor, including overhead and profit, within the scope
of the work to be performed.
James and CMC submitted total bids of $820,000. However, review of
the three copies of appendix "B" submitted by CMC disclosed a
discrepancy in division four, covering the price for masonry work. On
two of the copies, the amount for division four was listed as $495;
whereas, on the third copy, the price for division four was listed as
$4,495. At the $495 figure, the total bid would be $816,000 and would
be the low bid. At the $4,495 figure, the total bid would be $820,000
as bid on each of the three copies of CMC's bid. The other four bidders
listed $4,500, $5,000, $7,000 and $7,900 (James) for the division four
masonry work.
In response to an inquiry by the FBI, CMC advised that $495 was the
intended price for the division four work and that the total bid should
be $816,000. In support, CMC submitted a copy of its masonry takeoff
and pricing sheet, dated the same date as bid opening, showing $495 as
the price for masonry. The FBI also contacted the architectural firm
that had prepared the plans for the construction and was told that this
firm estimated the price for the masonry work on division four to be
$470. Finally, the FBI field office engineer computed the probably cost
of the masonry work from a standard industry guide and advised the
contracting officer that a price of $495 was reasonable. The FBI
considered the evidence to be clear and convincing of the mistake and
the bid intended; permitted CMC to correct its bid; and awarded the
contract to that firm as low bidder.
James complains that the FBI used evidence outside CMC's bid to
permit correction. In this regard, the procurement regulations provide
that a determination may be made to permit a bidder to correct a mistake
if clear and convincing evidence establishes both the existence of the
mistake and the bid actually intended, except that if this correction
would result in displacing one or more "lower bids," the mistake and the
bid actually intended must be ascertainable substantially from the
solicitation and the bid itself. Federal Acquisition Regulation (FAR),
48 CFR Section 14.406 (1984). James further contends that in view of
the other four individual prices quoted for the masonry work, the $4,495
amount was the only reasonable interpretation of the conflicting
figures. James asserts that the masonry subcontractor it intended to
use for the division four work has advised that it quoted both CMC and
James a price of $4,495. At best, James argues, the bid should have
been rejected as ambiguous.
The FBI justifies resort to CMC's masonry worksheet by the fact that
the regulations only preclude such evidence where a lower bidder will be
displaced; whereas, here, FBI points out, there is a tie bid situation.
The FBI also argues that, even where a lower bidder would be displaced,
an agency may consider extrinsic evidence over which the bidder has no
control, like the architectural firm's and the FBI engineer's
post-bid-opening estimates, which the FBI asserts provide clear and
convincing evidence of the mistake and the intended bid. The FBI
discounts the other four bidders' prices for the masonry work because
the masonry work accounts for only about 0.0006 percent of the cost of
the project, and such a small job thus might be performed either by the
prime contractor or subcontracted, so that considerable price variation
might be expected. Finally, as to the alleged masonry subcontractor
quotation of $4,495 to both James and CMC, the FBI notes that James
actually priced the work at $7,900 and suggests CMC may well have
received a lower quotation than the one alleged by James.
Even considering CMC's masonry worksheet and the two post-bid-opening
estimates for division four, we cannot agree with the FBI that the
evidence clearly and convincingly establishes that CMC meant to bid $495
for the division four work. The total bid CMC entered on each of the
three copies of the bid was $820,000, which includes the $4,495 figure,
and on one the firm entered a price for division four of $4,495. While
the two estimates are closer to the allegedly intended price of $495, it
is significant that the price alleged to be in error is much more in
line with the prices of other actual bidders on the IFB: $4,500,
$5,000, $7,000 and $7,900. Under these circumstances, we think it just
as likely that CMC intended to bid the total it actually entered,
$820,000, as the total it alleges it really meant, $816,000. We
therefore believe the evidence of the allegedly intended bid was not
clear and convincing, so that correction of the bid downward was
improper.
Generally, where a bid price is subject to two reasonable
interpretations and the bid would be low under only one of them, the bid
must be rejected. See Hudgins Construction Co., Inc. B-213307, Nov. 15,
1983, 83-2 C.P.D. Paragraph 570. Here, however, except for the
correction of CMC's bid, the award of the contract would have been
determined in accordance with the tie-bid provision of FAR, 48 C.F.R.
Section 14.407-6, under which priority is given in the following order:
small business labor surplus area concerns; other small businesses;
and other labor surplus area concerns. The regulation further provides
that if two or more bidders remain equally eligible even then, award is
determined by drawing lots. Since the FBI advises that neither CMC nor
James would have been entitled to a priority, so that the award would
have been determined by lot, CMC still would have had a chance at award
even at $820,000.
We therefore, are recommending to the FBI that award of the contract
be redetermined by lot in accordance with the provisions of FAR, 48
C.F.R. Section 14.407-6; if James wins by lot, the contract with CMC
should be terminated for the convenience of the government and reawarded
to James.
We point out that our recommendation is made without regard to the
extent of contract performance to date, since performance has proceeded
despite the protest filing. Where, as here, a federal agency receives,
within 10 days of the date of contract award, notice of a protest filing
/1/ under the statutory bid protest provisions at 31 U.S.C. Section
3551-3556, as added by the Competition in Contracting Act, Pub. L. No.
98-369, 98 Stat. 1199 (1984), the agency must suspend performance of the
contract until the protest is resolved. 31 U.S.C. Section 3553(d)(1).
The only exceptions are where the head of the responsible procuring
activity makes a written finding that either contract performance is in
the best interests of the United States, or there are urgent and
compelling circumstances significantly affecting the interests of the
United States which do not permit waiting for a decision, and so
notifies this Office. 31 U.S.C. Section 3553(d)(2) (A), (B). Further,
the statute requires that our Office, in making are commendation in
connection with the resolution of a bid protest, disregard any cost or
disruption from terminating, recompeting, or reawarding the contract if
the head of the procuring agency determined to proceed with contract
performance. 31 U.S.C. Section 3554(b)(2). Not only did the FBI not
suspend preformance in this case but, in fact, we are not aware that the
procuring activity head even made the requisite finding to authorze
continued performance.
Accordingly, we make our recommendation irrespective of any factors
other than that the contract award was improper.
Should the FBI fail to adopt our recommendation, we declare James to
be entitled to the costs of filing and pursuing the protest, including
reasonable attorney's fees, and the costs of preparing its bid in
response to the solicitation, as expressly authorized by statute. 31
U.S.C. Section 3554(c)(1); see also our Bid Protest Regulations
implementing that authority, 4 C.F.R Section 21.6 (1985).
The protest is sustained.
(1) The contract was awarded on February 20; James filed the protest
in our Office on February 25; and we notified the FBI of the filing on
that same date.
B-218138, 64 Comp. Gen. 559
Matter of: ConDiesel Mobile Equipment, May 29, 1985:
Agency is not required to procure component of an item listed on the
industrial readiness program planning list on an unrestricted basis
unless the component itself is on the list and a large business listed
as a Planned Emergency Producer of the component desires to be a source
of supply.
ConDiesel Mobile Equipment protests the rejection of its low bid and
the award of a contract to Freund Precision, Inc., under invitation for
bids (IFB) No. DAAA09-85-B-0031, issued and set aside for small business
by the United States Army Armament, Munitions, and Chemical Command,
Rock Island, Illinois. The solicitation sought offers to supply
manifold assembles that are components of M198/M39 155 millimeter
howitzer carriages. ConDiesel, a large business, contends that, since
it is a Planned Emergency Producer of the howitzer carriages and since
it wished to compete, applicable regulations prohibit the Army from
restricting the procurement to small business.
We deny the protest.
The Federal Acquisition Regulation (FAR), 48 C.F.R. Section 19.502-2
(1984), requires agencies to set aside a procurement for exclusive small
business participation if the contracting officer determines that there
is a reasonable expectation that offers will be obtained from at least
two responsible small business concerns and that award will be made at a
reasonable price. The regulation makes an exception to this general
rule for items that are on an established planning list under the
Department of Defense (DoD) Industrial Readiness Planning Program. 48
C.F.R. Section 19.502-5 states that a total set-aside shall not be made
when the planning list contains "a large business Planned Emergency
Producer of the item" that desires to be the source of supply.
The manifold assemblies being procured by the Army in this case are
spare parts for M198/M39 howitzer carriages. As a Planned Emergency
Producer of these carriages, ConDiesel argues that the procurement may
not be set aside for small business as long as it desires to supply the
manifold assemblies. The protester has previously supplied the manifold
assemblies as components under contracts for howitzer carriages and as
spare parts under a contract for the manifold assemblies.
ConDiesel initially protested to the Army concerning the decision to
set aside the procurement before bid opening, which took place on
January 8, 1985. At the contracting officer's suggestion, ConDiesel
submitted a bid while the Army considered the protest. On January 30,
ConDiesel received a letter from the Army confirming its decision to set
aside the procurement.
In response to ConDiesel's protest to our Office, filed on February
7, the Army points out that the manifold assemblies are themselves not
on an established planning list. The agency argues that since ConDiesel
is not a planned producer of the assemblies, the restriction on small
business set-asides in FAR Section 19.502-5(b) is inapplicable.
We agree. DoD's Industrial Readiness Planning Program (also
described as the Industrial Preparedness Production Planning Program)
encompasses planning by DoD with possible producers of essential
military items in order to assure the capability for production during
periods of national emergency. See DoD FAR Supplement, 48 C.F.R.
208.070 (1984). In selecting items for industrial readiness planning,
defense agencies are required to include and list separately components
of essential military end items which meet the criteria established for
selection of the end items themselves, such as those which require a
long lead time for production or require specialized production
equipment. DoD Instruction 4005.3, "Industrial Defense Preparedness
Planning Procedures" (July 28, 1972), p. 2. Defense agencies enter into
planning agreements with subcontractors which manufacture critical
components that are included on the list of items in the planning
program. DoD Manual 4005.3-M, "Industrial Preparedness Planning Manual"
(July 1972), pp. 33-47.
In view of the policy DoD to include separately critical components
on the established planning list, we do not believe that an agency is
prohibited from setting aside its requirement for a component of a
military item unless the compenent is itself on the list and a large
business Planned Emergency Producer of the component desires to be the
source of supply. Since the manifold assemblies being procured by the
Army are not on the established planning list, the Army could restrict
the procurement to participation by small businesses. We therefore,
find that the Army properly rejected ConDiesel's low bid, since the firm
was not eligible for an award.
The protest is denied.
B-217063, 64 Comp. Gen. 557
Matter of: Bonnie S. Petrucci - Reimbursement of Real Estate
Broker's Commission - Exchange of Residences at Old Duty Station, May
28, 1985:
Employee exchanged residence at old duty station for another
residence in the vicinity of the old duty station incident to a change
of official station. Employee may be reimbursed under 5 U.S.C.
5724a(a)(4) for real estate broker's commission and other allowable
expenses incurred as "seller" in the exchange of residence since the
assumption of the balance of the employee's mortgage loan is tantamount
to a cash payment. Amount of broker's commission which is reimbursable
is governed by the Federal Travel Regulations, para. 2-6.2a, as amended,
and is limited by the amount generally charged for such services by the
broker or by the brokers in the locality where the residence is located.
This decision is in response to a request by Mr. Don E. Hansen,
Chief, Fiscal Standards Branch, Financial Systems Division, Office of
Accounting, Federal Aviation Administration (FAA), Department of
Transportation, for a decision as to whether a travel voucher submitted
by Ms. Bonnies. Petrucci, an employee of the agency, may be certified
for payment. The voucher is for reimbursement of a real estate broker's
commission, document preparation charge, and state revenue stamps paid
by Ms. Petrucci in an exchange of residences at her old duty station.
For the reasons hereafter stated, the expenses may be certified for
payment in accordance with the applicable law and regulations.
Ms. Petrucci was authorized a permanent change of station from
Dayton, Ohio, to Miami, Florida, pursuant to a travel order dated June
26, 1984. Ms. Petrucci and her husband entered into a real estate
exchange contract with the Baileys, husband and wife, under which they
exchanged their residence in Tipp City, Ohio, for a house owned by the
Baileys in Monroe, Ohio. The sales price of the property owned by the
Petruccis was $183,600, and the sales price of the property owned by the
Baileys was $96,350. The loan portion of the Petrucci sales price was
assumed by the Baileys. /1/
Ms. Petrucci is claiming reimbursement of $12,852 as the real estate
broker's commission for the sale of her residence. However, this amount
is not shown on the settlement statement for the "sale" of the Petrucci
residence to the Baileys. Upon questioning of this fact, Ms. Petrucci
obtained a letter from the lender (Milton Federal Savings and Loan
Association) which acknowledged the payment of a 7 per cent real estate
commission to a realty company on a selling price of $183,600,
associated with the sale of the Petrucci residence to the Baileys. The
lender stated that the commission amount, $12,852, should have been
inserted on line 703 of its closing statement dated July 24, 1984, in
connection with the sale of the Petrucci residence.
The FAA points out that the amount of $12,852 is identified as an
expense paid by the Petruccis on the "purchase" of the Baileys"
property. Further, no other real estate commission is shown on the two
closing statements, indicating that the commission involved in the trade
of properties was paid entirely by the Petruccis, and none paid by the
Baileys.
The fiscal officer asks the following questions concerning this
transaction:
1. May the Government reimburse the employee for costs
incurred in trading a residence at the old duty station for
another residence in the same area?
2. If so, is the letter from Milton Federal sufficient to
indicate that the real estate commission was related to the sale
portion of the transaction?
3. Is it reasonable that the entire commission in this
transaction was paid by our employee?
4. May we properly reimburse the employee for the $12,852.00
real estate commission involved in this transaction?
The reimbursement of real estate expenses incurred in connection with
a federal employee's change of duty station is governed by 5 U.S.C.
Section 5724a(a)(4) and the implementing regulations, Chapter 2, Part 6
of the Federal Travel Regulations (Supp. 4, August 23, 1982), incorp. by
ref., 41 C.F.R. Section 101-7.003 (1984) (FTR). Paragraph 2-6.1 of the
FTR provides that to the extent allowable "the Government shall
reimburse an employee for expenses by him/her in connection with the
sale of one residence at his/her old official station, * * *." We have
recognized that the regulation permits reimbursement of certain expenses
incurred for the purpose of transferring title by other than the usual
sale or purchase transaction. 61 Comp. Gen. 112 (1981).
In responding to the questions asked by the fiscal officer, first,
the FAA may reimburse Ms. Petrucci for the allowable costs incurred in
the sale and exchange of her residence for another house, both in the
vicinity of the employee's old duty station. In a case with similar
factual circumstances, involving an exchange of residential properties
at the old duty station, we stated that the assumption of the balance of
the mortgage loan of the employee by another party was tantamount to a
cash payment to the employee. We recognized the transaction as a sale
within the meaning of the predecessor law and regulations of 5 U.S.C.
Section 5724a(a)(4) and FTR para. 2-6.1. See B-166419, April 22, 1969.
Our review of the letter from the lender, as well as informal contact
with the writer of the letter, discloses that the real estate broker's
commission of $12,852 was inadvertently entered on the closing statement
for the Bailey's property. In line with the usual and local custom that
the seller pay the broker's commission and since the realty company had
listed the employee's (Petrucci) property for sale and made efforts to
sell it, such commission should have been listed on line 703 of the
closing statement for the sale and exchange of the Petrucci property.
Therefore, the letter is sufficient to show that the broker's commission
was related only to the sale and exchange of the Petrucci residence and
further, that it was reasonable that the entire broker's commission be
paid by Ms. Petrucci and her husband. Questions 2 and 3 are answered
accordingly.
As to whether Ms. Petrucci may be properly reimbursed the real estate
broker's commission, the commission may be certified for payment
provided it is not in excess of the rates generally charged for such
services by the broker or by brokers in the locality of the old duty
station. See FTR paras. 2-6.2a and 2-6.3c.
(1) While the Petrucci's exchanged one residence for another at Ms.
Petricci's old duty station, we have no reason to question that this
transaction was prompted by, and related to, her change of station. In
any event, a specific determination to this effect is not necessary in
the circumstances of this case in order to establish eligibility for
reimbursement of real estate expenses. See Warren L. Shipp, 59 Comp.
Gen. 502, 504 (1980).
B-216068, 64 Comp. Gen. 553
Matter of: Grumman Aerospace Corporation, May 24, 1985:
General Accounting Office Bid Protest Procedures encourage protesters
to seek resolution of their complaints initially with the contracting
agency. Where protest was timely filed initially with the contracting
agency and subsequent protest to GAO was filed within 10 working days of
the contracting agency's initial adverse action on the protest, protest
to GAO is timely.
Bidders may elect not to charge the government for certain services,
and when they have indicated that they are aware of and willing to
commit themselves to furnishing the item in question -- as by inserting
a zero, "no charge," or "not separately priced," -- the bid is
responsive and the bidder may be considered for award notwithstanding
agency's desire for dollar amount entry to serve as incentive to perform
the service.
Grumman Aerospace Corporation (Grumman) protests the award to
Burnside-Ott under solicitation No. N61339-84-B-0031 issued by the Naval
Training Equipment Center, Orlando, Florida, as a two-step, formally
advertised procurement of services under the Contractor Operation and
Maintenance of Simulators (COMS) program. The COMS program was
developed to provide contractor operation and maintenance of training
equipment formerly operated and maintained by civilian employees and
military personnel. Grumman submitted its technical proposal in the
first step, was found to be technically acceptable, and was invited to
submit its bid under the second step. Grumman's apparent low bid was
rejected as nonresponsive because Grumman failed to include a positive
dollar amount for a specific line item as directed by an oral amendment
to the solicitation. Grumann protests that it was improperly
disqualified for failing to follow a purported telephonic directive
which it contends it did not understand and never received in writing,
thereby prejudicing its ability to compete and rendering the procurement
defective.
We sustain the protest.
On June 20, 1984, the invitation for bids (IFB) was issued to the
three firms that had submitted technically acceptable offers under the
first step of this two-step procurement. Under the terms of the IFB,
the contract would include a mobilization or preparation period of 2
months, a 1-year base period, four 1-year option periods, and a 2-month
transition phase /1/ to take effect at the end of the basic performance
period (or at the end of the last option period for which the option was
exercised). Bid opening was scheduled for July 23.
The IFB initially contained spaces for the price for the transition
phase at the end of the base performance period and at the end of each
option period, although only one transition period would be performed.
The IFB indicated that the average price of all five transition period
prices would be used to evaluate the total price to the government.
On July 12, 1984, the Navy issued amendment 0002, which revised the
solicitation to require only one price for the transition phase work and
to eliminate from the evaluation of prices the averaging concept with
regard to the transition period. The Navy reports that amendment 0002
did not convey the Navy's intent that all bidders place a positive
dollar amount (as opposed to "no charge (NC)" or "not separately priced
(NSP)") in the space provided for pricing the transition phase line
item.
This perceived deficiency in the solicitation became apparent to the
Navy when a Grumman official called the contracting officer on July 18,
1984, to discuss pricing aspects of the mobilization phase line item for
which Grumman contemplated submitting a "0" bid to reflect its ability
to assign trained maintenance personnel from an existing contract with
another government activity on the site. The Navy deferred answering
the Grumman official's inquiry and sought advice of legal counsel
concerning the manner by which offerors were required to price
independent services for the mobilization and transition periods.
The Navy determined that offerors were required to enter a positive
dollar amount in their bids on each of the contract line items for the
mobilization phase and the transition phase. The Navy reasoned that if
the "transition phase" item entry contained expressions such as "no
charge (NC)," "not separately priced (NSP)," or "$0" as the
consideration for the effort, the government would not be able to
enforce performance of that transition effort.
According to the Navy, on July 19, 1984, a Navy contracting official
contacted each offeror to inform them that some positive dollar amount
was required for the mobilization line item and the transition line item
and that bid entries of "no charge," "not separately priced," or "$0"
would render a bid nonresponsive. The Navy did not provide confirming
written notification of this telephonic amendment.
Bid opening on July 23, 1984, revealed that Grumman's overall bid was
the lowest of the three offers by approximately $150,000. However,
Grumman's bid included an "NC" (no charge) bid entry for the transition
phase line item. Accordingly, Grumman's bid was declared nonresponsive
for failing to include a positive dollar amount in accordance with the
telephonic amendment of July 19, and the Navy awarded the contract to
the next low bidder, Burnside-Ott, on July 23. Grumman was notified of
the award to Burnside-Ott on July 24 and, on July 25, protested the
award to the contracting officer. By letter of July 27, received by
Grumman on July 30, the contracting officer denied Grumman's protest.
Grumman filed its protest with this Office on August 10.
The Navy contends that Grumman's protest is untimely under section
21.2(b)(2) of our Bid Protest Procedures (4 C.F.R. part 21 (1984),
because it was filed with our Office 17 days after Grumman knew that the
contract had been awarded to Burnside-Ott. Citing our decision in TSI,
Inc. -- Reconsideration, B-202171, May 6, 1981, 81-1 C.P.D. Paragraph
357, the Navy points out that a protester's continuing to pursue its
protest at the contracting agency level after initial adverse agency
action on its protest does not toll the running of the 10-day filing
requirement. The Navy considers notification that award was made to
Burnside-Ott to be the initial adverse agency action on Grumman's
protest to the Navy. Thus, the Navy concludes that Grumman's protest is
untimely and not for consideration on the merits by this Office.
We conclude that Grumman's protest was timely filed with this Office.
Grumman is protesting the rejection of its low bid as nonresponsive and
award to the second low bidder. Grumman could not have known its basis
for protest until July 24, when it was notified of the rejection of its
bid and the award to Burnside-Ott. Our procedures encourage protesters
to seek resolution of their complaints initially with the contracting
agency. 4 C.F.R. Section 21.2(a) (1984). This is what Grumman did with
its letter of protest to the Navy on July 25, just 1 day after it
learned the basis for its protest. Thus, Grumman's protest to the Navy
was timely. 4 C.F.R. 21.2(b)(2) (1984). If a protest is filed
initially with the contracting agency, as is the case here, any
subsequent protest to our Office must be filed within 10 working days of
the protester's learning of the initial adverse action by the agency on
the protest. 4 C.F.R. Section 21.2(a) (1984). Here, the Navy's denial
of Grumman's protest was received by Grumman on July 30 and constituted
the agency's initial adverse action on Grumman's protest. Accordingly,
Grumman's filing of its protest with this Office 9 working days later,
on August 10, 1984, was timely.
We turn next to the merits of Grumman's protest that its bid was
fully responsive to the requirements of the IFB as written and that it
should have been awarded the contract. Having indicated in the cover
letter to its bid dated July 10, 1984, that "Grumman offers to provide
the services as described within our Technical Proposal for a total Firm
Fixed Price of $2,101,247," and having specifically bid "NC" (or "no
charge") on the transition phase item, Grumman argues that its bid was
fully responsive to the written requirements of the IFB, because it
clearly offered to provide all of the services called for at the total
firm, fixed price offered. Grumman urges that the Navy's rejection of
its "no charge" bid on the transition phase is unsupportable when viewed
against evidence that the Navy would have accepted even a "$1" bid on
this item. As to the Navy's assertion that it issued a telephonic
amendment making a positive dollar amount on the transition phase item a
material matter of bid responsiveness, Grumman counters that although
telephone conversations did take place between Grumman personnel and a
Navy contracting official, it was never Grumman's understanding that a
"no charge" bid on the transition phase item would be considered
unacceptable.
We find this purported telephonec amendment had no effect on the
responsiveness of Grumman's bid. While the Navy contends that it made
bidding a positive dollar amount on the transition phase a material
matter of bid responsiveness by its telephone directives of July 19,
1984, the Navy also admits it did not comply with the requirement of
Federal Acquisition Regulation (FAR), 48 C.F.R. Section 14.208 (1984)
that such conversations be followed up in writing where they have a
material effect on the solicitation's requirements. See I.E. Levick and
Assoc., B-214648, Dec. 26, 1984, 84-2 C.P.D. Paragraph 695. Since there
were no mitigating circumstances offered by the Navy to justify its
failure to provide a written amendment confirming the telephonic change
to the alleged material pricing provision as required by FAR, 48 C.F.R.
Section 14.208, the bidders would not be bound by the ostensible
requirements of the failed amendment. Cf. Porta-Fab Corp., B-213356,
May 7, 1984, 84-1 C.P.D. Paragraph 511, where we held that oral
amendments to a written solicitation are authorized -- even if not
subsequently confirmed -- where exigent circumstances and urgent
requirements would not permit the delay attendant to the processing of
written amendments. However, in any event, we do not agree that the
inclusion of a positive dollar amount on the transition phase could be
construed as a material matter of bid responsiveness in this case.
The Navy's stated reason for requiring a positive dollar amount to be
entered for the transition phase work, instead of allowing bids of "no
charge" or "not separately priced" for this item, was to allow it to
enforce performance of the transition effort. We point out, however,
that we have specifically held that a bidder may elect not to charge the
government for certain work and still have its bid be responsible. See
National Mediation Board -- Request for Advance Decision, B-209037, Oct.
8, 1982, 82-2 C.P.D. Paragraph 323. All that is necessary is some
affirmative indication in the bid -- such as inserting a zero, the words
"no charge," dashes, etc. -- that the bidder is aware of and intends to
furnish the services required. Id. at 4.
We view the test of a bid's responsiveness as whether the bid as
submitted complies with the IFB's material provisions without exception.
Lusardi Construction Co., B-210276, Sept. 2, 1983, 83-2 C.P.D.
Paragraph 297, at 6. We find Grumman has committed itself to perform
and is therefore contractually bound to perform all services, including
the transition phase, required by the solicitation. Where the bidder is
thus obligated to perform the required service the entry of a positive
price for that line item simply serves as an incentive without changing
the nature of the existing legal obligation. Practically, the Navy's
concern that Grumman might fail to perform in the transition phase is a
matter of hypothetical hesitancy obviated by its own finding that
Grumman is a responsible bidder. Thus, this incentive or informational
line item figure was not in itself material and the failure to submit it
could not render Grumman's bid nonresponsive in these circumstances.
In view of our conclusion, we recommend that the Navy consider the
feasibility of terminating Burnside-Ott's contract for convenience and
awarding Grumman a contract for this requirement. Alternatively, if the
Navy determines that termination is not feasible, we recommend that the
Navy not exercise the options in the Burnside-Ott contract and recompete
those requirements among the three technically acceptable firms which
competed here. By letter of today, we are advising the Secretary of the
Navy of our findings and recommendation.
Since this decision contains a recommendation for corrective action,
we are furnishing copies to the Senate Committees on Governmental
Affairs and Appropriations and to the House Committees on Government
Operations and Appropriations in accordance with section 236 of the
Legislative Reorganization Act of 1970, 31 U.S.C. Section 720 (1982),
which requires the submission of written statements by the agency to the
committees concerning the action taken with respect to our
recommendations.
(1) The "transition phase" describes the 60-day period of time at the
end of a contract when the incumbent COMS contractor is turning over the
operation and maintenance of specified training devices to a successor
contractor or to the government. The incumbent contractor will be
tasked, via a priced option in the existing contract, to provide
transitional support while the successor contractor is preparing for
COMS takeover coincident with the successor contractor's mobilization
phase.
B-218025.1 & .2, 64 Comp. Gen. 551
Matter of: Omega World Travel, Inc,; Society of Travel Agents in
Government, Inc., May 23, 1985:
The Navy is not required to follow procurement procedures to
establish a scheduled airline traffic office (SATO) through which to
acquire travel services, since establishment of a SATO does not involve
a procurement of services within the meaning of the Competition in
Contracting Act of 1984.
Omega World Travel, Inc. and the Society of Travel Agents in
Government, Inc. (STAG) protest the Navy's plan to establish a scheduled
airline traffic office (SATO) to provide travel management services in
the Washington, D.C. metropolitan area. A SATO is an office run by a
joint venture of air carriers to provide airline ticket reservations and
related travel services. The protesters contend that the Navy is
required to acquire its travel management services through an agreement
to establish a SATO. We deny the protests.
Under a memorandum of understanding (MOU) dated April 6, 1981, the
Department of Defense (DOD) and the Air Transport Association agreed to
the terms and conditions under which SATOs would operate at military
installations. In essence, the SATO agreed to reserve and issue airline
tickets, and arrange for hotel accommodations, car rentals and other
services related to the air travel. In addition, the SATO would furnish
certain management data and reports to the installation in return for
which DOD agreed that the military installation would furnish office
space and other services related to operating the SATO on the
installation. The MOU provides that the SATO arrangement may be
terminated by either party on 90 days notice.
Prior to April 1984, our Office for many years prohibited the use of
commercial travel agents to procure official government travel. 4
C.F.R. Section 52.3 (1980). During the period when the prohibition was
in effect, DOD's practice apparently was to acquire travel management
services through the establishment of SATOs at military installations.
In April 1984, our Office lifted the prohibition on the use of
commercial travel agents. 49 Fed. Reg. 17,721 (1984). As a result, the
protesters contend, the Navy may not continue the practice of entering
into an agreement to establish a SATO; it now must conduct a
competitive procurement to acquire its travel management services. We
disagree.
The purchase of travel services provided by the air carriers and
other concerns has been exempted from the procurement statutes. See 40
U.S.C. Section 481 (1982); Federal Property Management Regulations
subpart 101-41.2, 41 C.F.R. Subpart 101-41.2 (1984); Joint Travel
Regulations, para. C2250; Federal Acquisition Regulation Section
47.000, 48 C.F.R. Section 47.000 (1984). The Competition in Contracting
Act of 1984, Pub. L. No. 98-369, title VII, 98 Stat. 1175 (1984), does
not affect this exemption. Thus, government agencies generally are free
to obtain travel services directly from the providers without using the
procedures in the Act and its implementing regulations.
The SATO arrangement is no more than a management vehicle to
facilitate the Navy's purchase of travel services which themselves are
exempt from the procurement procedures. Using a SATO does not affect
the cost of the travel services themselves since the government does not
pay the SATO for the management services. The government provides only
office space and related services to the SATO, the cost of which would
be incurred by the government in any event as general overhead. Thus,
the Navy's plan to establish a SATO is not subject to the Competition in
Contracting Act. The protests are denied.
We recognize that since the prohibition on use of commercial travel
agents was lifted, many government agencies have conducted competitive
procurements to establish travel services offices. In addition, under
Defense Transportation Program Policy memorandum 84-6, issued on May 11,
1984, to provide interim policy guidance regarding selection of travel
services systems, the military departments are called on to use
competitive procedures as a general rule when establishing travel
services offices. Whether the Navy's plan is consistent with the policy
set out in the DOD Memorandum, however, is a matter of internal agency
policy, not an issue cognizable under our jurisdiction to review bid
protests, 31 U.S.C. Section 3551 et seq., added by section 2741(a) of
the Competition in Contracting Act.
Both protesters claim the costs of filing and pursuing the protests.
The Competition in Contracting Act and our Bid Protest Regulations
provide for recovery of costs only where a protest is found to have
merit. See 31 U.S.C. Section 3554(c)(1), as added by section 2741(a) of
the Competition in Contracting Act; 4 C.F.R. Section 21.6(d) (1985).
Here, since we have denied the protests, we also deny the protesters'
claim for recovery of costs.
B-217337, 64 Comp. Gen. 549
Matter of: Bryant Paint Contracting, Inc., - Davis-Bacon Act
Debarment, May 23, 1985:
The Department of Labor recommended debarment of a contractor under
the Davis-Bacon Act because the contractor had falsified certified
payroll records, and induced several of its employees to rebate
substantial portions of their back wages. Based on our independent
review of the record in this matter, we conclude that the contractor
disregarded its obligations to its employees under the Act. There was a
substantial violation of the Act in that the underpayment of employees
and rebate inducement was intentional. Therefore, the contractor will
be debarred under the Act.
The Deputy Administrator, Employment Standards Administration, United
States Departement of Labor (DOL), by a letter dated April 17, 1984,
recommended that the names Bryant Paint Contracting, Inc. (Bryant); Roy
W. Bryant, individually; and Ralph W. Newcombe, individually; be
placed on the ineligible bidders list for violations of the Davis-Bacon
Act, 40 U.S.C. Sections 276a to 276a-5 (1982), which constituted a
disregard of obligations to employees under the Act. For reasons that
follow, we concur in DOL's recommendation.
Bryant performed work under thirteen contracts (DABT 39-76-C-5058,
DABT 39-76-C-5014, DABT 39-76-C-5007, DACA 63-75-C-0233, DACA
63-75-C-0182, DACA 63-76-C-0277, DACA 63-75-C-0228, DACA 63-75-C-0193,
DACA 63-75-C-0236, DACA 63-77-C-0184, DACA 63-77-C-0139, DACA
63-75-C-0179, DACA 63-76-C-0227), variously with the Department of the
Army and Air Force doing painting and related work. These contracts
were subject to the Davis-Bacon Act requirements that certain minimum
wages be paid. Further, pursuant to 29 C.F.R. Section 5.5(a) (1984),
the contractor was to submit payroll records certified as to correctness
and completeness.
The DOL found as a result of an investigation that employees were not
paid the minimum wages required pursuant to the Davis-Bacon Act.
Further, DOL found that certified payrolls were falsified and
incomplete, and that employees were induced to rebate portions of their
back wages. The DOL informed us that by certified letters dated October
14, 1983, Bryant was given notice in detail of the violations with which
it was charged, and that debarment was possible. Further, Bryant was
given an opportunity for a hearing on the matter before an
administrative law judge in accordance with 29 C.F.R. Section 5.12(b)
(1984). The DOL reported to us that while the record indicates that
these letters were received, no hearing was requested. After
reexamining the record, DOL found that Bryant violated the Davis-Bacon
Act without any factors militating against debarment. Therefore, DOL
recommended that the names Bryant Paint Contracting, Inc,; Roy W.
Bryant, individually; and Ralph W. Newcombe, individually; be placed
on the ineligible bidders list for violations of the Davis-Bacon Act
which constituted a disregard of obligations to employees under the Act.
We concur in this recommendation.
The Davis-Bacon Act provides that the Comptroller General is to debar
persons or firms whom he has found to have disregarded their obligations
to employees under the Act. 40 U.S.C. Section 276a-2. The DOL
recommended that Bryant and Messrs. Bryant and Newcombe, individually
and as owners of Bryant, be debarred for violations of the Davis-Bacon
Act constituting a disregard of obligations to the employees under the
Act. In B-3368, March 19, 1957, we distinguished between "technical
violation" which result from inadvertence or legitimate disagreement
concerning classification, and "substantial violations" which are
intentional as demonstrated by bad faith or gross carelessness in
observing obligations to employees with respect to the minimum wage
provisions of the Davis-Bacon Act. Falsification of payroll records is
a basis for debarment under the Davis-Bacon Act. See, e.g.,
Metropolitan Home Improvement Roofing Co., Inc., B-215945, January 25,
1985.
Based on our independent review of the record in this matter, we
conclude that Bryant and Messrs. Bryant and Newcomb, individually and as
owners of Bryant, disregarded their obligations to their employees under
the Davis-Bacon Act. There was a substantial violation of the
Davis-Bacon Act in that the underpayment of employees was intentional as
demonstrated by Bryant's bad faith in the falsification of certified
payroll records. In addition, the record indicates that Bryant induced
several of its employees to rebate substantial portions of their back
wages.
Therefore, the names Bryant Paint Contracting, Inc., Roy W. Bryant,
and Ralph W. Newcombe, individually and as owners of Bryant Paint
Contracting, Inc., will be included on a list to be distributed to all
departments of the Government, and, pursuant to statutory direction (40
U.S.C. Section 276a-2), no contract shall be awarded to them or to any
firm, corporation, partnership, or association in which they, or any of
them, have an interest until 3 years have elapsed from the date of
publication of such list.
B-217072.2, 64 Comp. Gen. 540
Matter of: Joule Engineering Corporation - Reconsideration, May 23,
1985:
Where protester's statement that written protest to procuring agency,
initially viewed by General Accounting Office as untimely, was merely
confirmation of timely oral protest is unquestioned by agency, it
establishes that protest to GAO was timely.
Agency's failure to include protester's proposal in the competitive
range, based upon the evaluation of proposals and revised technical
scores reflecting projected improvement in proposals if discussions were
held, was not unreasonable or in violation of applicable statutes and
regulations.
Joule Engineering Corporation requests reconsideration of our
decision in Joule Engineering Corporation, B-217072, Nov. 26, 1984, 84-2
CPD Paragraph 575 dismissing its protest. Joule had protested a
National Aeronautics and Space Administration (NASA) determination that
the company's proposal under request for proposals (RFP) No. 5-01919/603
was not within the competitive range and thus not eligible for further
consideration. In its protest letter to our Office, Joule represented
that it had initially filed a protest with NASA on September 26, 1984.
Based upon this information, we held that Joule's protest to our Office
was untimely under our Bid Protest Procedures, 4 C.F.R. Section 21.2(a)
(1984), because the NASA protest had not been filed within 10 days after
Joule knew of the basis for its protest. In its request for
reconsideration, Joule states that it orally protested to NASA on August
15, 2 days after learning of the NASA competitive range determination,
and that its September 26 protest letter was in confirmation of the
timely oral protest. NASA has not contested this account, and, based
upon the new information provided by Joule, we find the protest to have
been timely and reverse our earlier decision. On the merits, however,
we deny the protest.
The RFP sought proposals for engineering and related services to
support sounding rocket and balloon programs, aeronautical programs, and
launch range operations at Wallops Flight Facility, Wallops Island,
Virginia. The procurement is the result of the merger of requirements
currently being performed under two separate contracts. Joule is the
current contractor for metal trades and instrumentation services, about
one-third of the effort to be required under the protested procurement.
The solicitation provided that proposals would be evaluated based upon
four weighted "mission suitability" factors, cost experience and past
performance, and "other factors" such as financial condition and
capability and stability of labor-management relations.
NASA received four proposals and on August 8 it infomred Joule that
the Source Evaluation Board found Joule's proposal outside the
competitive range. The agency stated that Joule's proposal contained
numerous technical weaknesses under three of the four mission
suitability factors, that there was a deficiency under one of those
factors, and that Joule's experience and past performance had been
determined to be weak.
Joule contends that, in excluding its proposal from further
consideration, NASA failed to address the extent to which the proposal
could be improved through written or oral discussions with the agency.
In a procurement such as this one, in which evaluations are conducted in
accordance with the NASA Source Evaluation Board Manual (NHB5103.6A),
the Source Evaluation Board must include proposals "which have a
reasonable chance of being selected for final award" within the
competitive range for purposes of conducting written or oral
discussions. NASA Procurement Regulation Section 3-804-3(b)(4),
reprinted in 41 C.F.R. ch. 18 (1983). The Board must evaluate the
potential for improving each proposal by written or oral discussion in
determining the competitive range. Id.
The Board did that here. First, it gave the initial proposals
numerical scores on each of the mission suitability factors described in
the RFP, with a possible maximum total of 1000 points. /1/ The other
evaluation areas were rated as "good," "adequate" or "poor" without
numerical scores. The Joule proposal was initially scored third of the
four proposals received on the mission suitability factors. (820, 739,
398 (Joule) and 80.) NASA then rescored each proposal based upon assumed
positive responses that it anticipated it would receive during
discussions regarding ambiguities and uncertainties found in the initial
evaluation. The total projected scores were 825, 771, 477 (Joule) and
210. Again, the Joule proposal scored third, well below the two more
highly rated proposals. NASA also conducted an evaluation of each
offeror's cost/price proposal to determine its probable cost to the
government. All four proposals were relatively close with regard to
both initial estimated costs and their probable costs to the government.
The experience and past performance of the offerors and most of the
"other factors" evaluated were in NASA's view unlikely to be improved
through written or oral discussions, and NASA did not project
improvements in those areas in determining which proposals were within
the competitive range.
Joule does not agree that its proposal should have been evaluated as
it was. Moreover, Joule argues that NASA's conclusion that the Joule
proposal had insufficient potential for improvement is unreasonable.
According to Joule, the weaknesses and deficiencies perceived in its
proposals were "of the type easily improvable through oral discussions."
In reviewing complaints about the reasonableness of the evaluation of
a technical proposal, and the resulting determination of whether an
offeror is within the competitive range, our function is not to
reevaluate the proposal and to make our own determination about its
merits. That determination is the responsibility of the contracting
agency, which is most familiar with its needs and must bear the burden
of any difficulties resulting from a defective evaluation. Procuring
officials have a reasonable degree of discretion in evaluating
proposals, and we therefore determine only whether the evaluation was
arbitrary, that is, unreasonable or in violation of the procurement laws
and regulations. Essex Electro Engineers Inc.; ACL-Filco Corp.,
B-211053.2; B-211053.3, Jan. 17, 1984, 84-1 CPD Paragraph 74.
Although Joule has the burden of affirmatively proving its case, NASA
has denied the company access to most of the written procurement record
because the agency is withholding contractor selection pending our
decision on this protest. NASA is concerned that Joule would have a
competitive advantage after receiving access to the evaluation record if
it is included within the competitive range as a result of our decision.
The agency did meet with Joule officials to provide an oral debriefing
about the evaluation decision, and based upon Joule's submissions to our
Office, it appears the debriefing provided Joule with considerable
detail about the reasons for NASA's determination. In any event,
consistent with our practice in such situations, we have examined the
record in camera to determine whether the evaluation had a reasonable
basis. See RMI, Inc., B-203652, Apr. 20, 1983, 83-1 CPD Paragraph 423.
The governing statute, 10 U.S.C. Section 2304(g) (1982), requires
that oral or written discussions be held with all offerors within a
competitive range. Such discussions must be meaningful, and in order
for discussions to be meaningful, agencies must point out weaknesses,
excesses or deficiencies in proposals unless doing so would result in
disclosure of one offeror's approach to another or result in technical
leveling when the weakness or deficiency was caused by a lack of
diligence or competence. The Advantech Corp., B-207793, Jan. 3, 1983,
83-1 CPD Paragraph 3; Ford Aerospace & Communication Corp., B-200672,
Dec. 19, 1980, 80-2 CPD Paragraph 439.
Consequently, in projecting the potential for improvement of a
proposal during discussions, an agency must base its projection upon the
assumption that the discussions would be meaningful. Our review of the
Board's findings in this case will be based on the requirement for
meaningful discussions.
The first mission suitability factor described in the RFP is
"Management." This factor is given the highest weight (43 percent) of
the four mission suitability factors, and is divided into the following
criteria: 1.1 Organizational Structure, 1.2 Task Assignment
Administration, and 1.3 Staffing Plan and Personnel Administration.
With regard to 1.1 Orgainzational Structure, the Board found several
weaknesses, most of which concerned insufficient information in the
proposal. Assuming a positive response to discussion of the need for
additional information, NASA projected an improvement of Joule's
weighted score on Organizational Structure from 62.22 to 96.22 (out of
170 possible points). One major weakness, the unacceptability of
Joule's proposed organization at the Wallops Island facility, is not
related to a lack of information in the proposal, but represents the
Board's judgment on Joule's management approach. Joule claims that its
proposed method of operation could be improved through discussions.
This might be true if NASA were to point out the weakness to Joule
during discussions. We believe, however, that it is reasonable to
consider the weakness in Joule's proposed local organization to be one
which is inherent in the offeror's proposed management structure and
would likely require extensive proposal revisions to resolve. We do not
believe it was improper for NASA to conclude that this matter would be
excluded from discussions.
The Board considered Joule's proposal to be adequate in regard to the
second management criterion, 1.2 Task Assignment Administration, and it
did not cite specific weaknesses. Consequently, the Board reasonably
projected no improvement in Joule's initial weighted score (66 out of a
possible 110). The weaknesses found in the proposal concerning the
third criterion, 1.3 Staffing Plan and Personnel Administration,
substantially concerned matters which Joule did not address in its
proposal, such as a failure to provide an initial staffing plan for
personnel not already employed by the company. This need for
information would have been included as a subject of discussions with
Joule, and NASA projected a substantial improvement in Joule's score --
from 60 to 105 (out of 150 possible points). In sum, the Board
concluded that the Joule proposal has a strong potential for improvement
in the management factor score from 188 to 267.
The protester argues that, because tt is the current incumbent
contractor for a large portion of the work described in the RFP, its
proposal should have been considered particularly capable of improvement
in the management area. It is not clear why Joule's prior experience
would give its proposal more potential for improvement than others.
Joule's current contract is not necessarily a positive factor with
respect to aspects of the work which it has not previously performed.
For example, the Board emphasized that Joule provided an inadequate
initial staffing plan in spite of the fact that it already employed
personnel in one-third of the required positions. It can be argued that
an incumbent contractor that scored as low as Joule on its initial
proposal may have less potential for improvement since it may be less
likely to revise its proposed personnel and method of operations during
discussions. In any event, we do not find NASA's evaluation of the
"Management" factor to have been unreasonable.
The second mission suitability evaluation factor, "Understanding
Requirements," is divided into two criteria: 2.1 Designated Positions
and Commitment Thereof, and 2.2 Total Compensation Plan for Professional
Employees. The first criterion requires offerors to describe in their
proposals specific personnel that meet detailed qualifications for 25
positions listed in the RFP and that are available for the listed jobs.
This criterion is considered very important because it gives NASA a
specific measure of each offeror's understanding of what is required to
perform the work and its demonstrated capacity to fill the designated
positions. The second criterion is used to evaluate each offeror's
total proposed compensation compared to levels paid by the predecessor
contractor for the same work. The RFP cautions offerors that lowered
compensation for the same professional work may be considered a lack of
sound management judgment in addition to a lack of understanding of the
contract requirements.
The Board gave Joule only 68 out of a possible 170 points for
Designated Positions and projected no improvement during discussions.
This was primarily because, according to the resumes submitted, more
than one-third of the individuals proposed did not meet the education or
experience qualification requirements listed in the RFP. Joule also did
not provide required evidence of commitments by the individuals to
assume the desinated positions at the salaries proposed. Joule asserts
that it contemplated hiring incumbent personnel for all of the
designated positions, but, because the individuals not already employed
by Joule were concerned about reprisals from their current employer,
Joule could not include their resumes in the proposal. The protester
contends that the resumes submitted were for "similarly qualified"
personnel, and that any weaknesses could be improved through
discussions.
The resumes submitted for designated positions do not meet the
unambiguous qualifications listed in the RFP. Joule's proposal offered
no explanation of why, based upon the company's understanding of the
work, the proposed personnel need not meet the required qualifications.
We share NASA's view that this is a major weakness either reflecting a
lack of understanding of the requirements to perform the work or
resulting from a lack of diligence or competence in proposal
preparation. Discussions would effectively result in NASA rewriting
Joule's proposal in this area, bringing the proposal toward the level of
other superior proposals. We believe that NASA reasonably considered
this weakness in Joule's proposal to be one that need not be pointed
out, and, therefore, not one that would be improved during discussions.
Further, in this regard, Joule does not address the omission from its
porposal of salary commitments for designated positions. It contends
that the salary commitments for three key persons required in another
section of the posposal were omitted by error. In that case, Joule
believes NASA should have recognized that the omission for key personnel
was inadvertent rather than assuming that no commitments existed. The
protester argues that, if NASA pointed out that omission during
discussions, the company would supply the commitments. We believe that
the same argument is applicable to the omission of salary commitments
for designated personnel. An inquiry during discussions would quickly
resolve whether the salary commitments for designated positions were
omitted by error or resulted from an inability of Joule to obtain the
commitments. NASA should have anticipated a rating improvement based
upon some positive response to discussions in this area.
The Board gave the Joule proposal a relatively low rating (11.7 out
of 50) for Total Compensation Plan for Professional Employees, and
projected no potential for improvement. NASA cited such weaknesses in
the proposal as a reduction in professional employee salaries posing the
possibility of hiring difficulties, and absence of detail regarding
medical and disability benefits, and a lack of a pension plan. Joule
replies that its ability to negotiate lower salaries under the
prospective contract should not be viewed as a weakness, and that
further detail regarding its medical and disability benefits would have
been provided upon request.
Joule proposes to reclassify 13 positions involving 25 employees from
being exempt from the requirements of the Service Contract Act to not
being exempt. Twenty-six of the remaining exempt positions (31
employees) were to receive salary reductions averaging 16 percent, while
5 positions (5 employees) were to receive increases averaging 4 percent.
Salary reductions averaging 12.9 percent were proposed for 19 exempt
personnel currently employed by Joule, while 3 would receive raises
averaging 2.3 percent. In view of the protester's failure to provide an
initial hiring plan and the required evidence of a commitment to
specific salaries by prospective personnel in designated positions, we
do not consider unreasonable the Board's view that Joule would have a
problem hiring qualified personnel. Further, we do not believe that
NASA erred in considering this weakness to be inherent in the company's
management judgment and unnecessary to include in possible discussions.
See Dynalectron Corp., Lockheed Electronics Co., Inc., 54 Comp. Gen.
562,570-1 (1975), 75-1 CPD Paragraph 17 at 14-15, aff'd on recon. 54
Comp. Gen. 1009 (1975), 75-1 CPD Paragraph 341. We do, however,
question whether NASA should not have attributed some potential for
improvement in Joule's proposal with respect to the need for details on
medical and disability benefits. While offerors are reasonably expected
to discuss medical and disability plans in connection with their
porposed total compensation for professional employees, the RFP does not
indicate the level of detail desired. We believe that this weakness was
more in the nature of a lack of clarity rather than a weakness inherent
in Joule's judgment or level of competence, and NASA should have
recognized some potential for improvement.
The third mission suitability factor, "Corporate Resources,"
represents an evaluation of proposed corporate technical support to
personnel performing the contract work. Here, the Board believed that
the Joule proposal had two strong points, and cited no weakness or
uncertainties. The proposal was rated 90 out of 150 points, with no
projected improvement during discussions. Joule does not take specific
exception to this score, and based on our review of the proposals we
have no reason to question the Board's judgment in the rating given the
Joule proposal for corporate support.
The Board gave the Joule proposal a low score for the "Key Personnel"
factor (40 out of 200 possible points), which is used to evaluate the
qualifications of the Contract Manager, the Metal Trades Supervisor and
the Instrumentation Construction Supervisor. The Board found that the
proposed Contract Manager had good plant management experience but no
service contract management experience and limited engineering
expertise, a major weakness since two-thirds of the required work
consists of engineering services in many technical areas. The Board
also cited minor weaknesses based upon its findings that the Metal
Trades Supervisor does not have the required general or related
experience listed in the RFP for the position, and that no salary
commitments for key personnel were provided.
Joule argues that NASA should have discussed with the proposed
Contract Manager his experience and should not have relied only upon the
resume in the proposal and discussions with references listed in the
resume. The protester does not suggest what addittonal facts NASA might
learn from such a discussion, stating merely that the matter would be
"clarified." We believe that NASA was reasonable in basing its
evaluation upon the resume and references, and have no reason to
question the evaluation itself.
Joule argues that the proposed Metal Trades Supervisor has been
performing the job for 10 years with no complaints. Indeed, the Joule
proposal described the individual's current position and the record
establishes that the Board was informed of his work on the predecessor
contract. The RFP, however, states a requirement for 4 years of recent
journeyman experience that Joule's proposed Metal Trades Supervisor
lacks. Thus, it was reasonable for the Board to conclude that the
proposal contained a minor weakness in this respect.
As discussed previously, Joule contends that its failure to comply
with the requirement of the RFP for commitments of key personnel to work
at proposed salaries constituted an oversignt. We believe that NASA
should have anticipated discussions to determine if the omission of
salary commitments resulted from Joule's inability to reach an agreement
with the proposed employees or constituted a minor oversight in proposal
preparation. Thus, the agency should have projected some improvement in
score based upon a positive response during discussions.
The Board attributed Joule's performance of approximately one-third
of the contract work for 14 years as a strong point. Joule, however,
did not demonstrate across-the-board technical experience or depth in
past performance. The company only cited five government contracts in
its proposal which were of a comparable or related nature and complexity
and under which work was performed in the past 5 years -- two for
support of programs at the Wallops Flight Facility under which the
agency rated Joule's performance as adequate, two other NASA contracts
under which no work had begun, and a $50,000 Navy contract completed in
1979. The RFP contemplates an award fee contract, and no experience
with such contracts was cited in the proposal. Also, apparently none of
the corporate references about subcontract performance responded to NASA
contacts.
Joule contends that its potential for improvement in this area is
strong because of its experience at the Wallops Flight Facility. We
disagree, since by its nature Joule's experience had to have been
accumulated prior to this procurement. There is no reason to assume
that Joule omitted from the proposal relevant government contract
experience at Wallops Island or in addition to its NASA Wallops Island
support contracts that would be disclosed during discussions. Moreover,
Joule has not contended that it has additional relevant experience that
would present a potential for improvement during discussions.
Joule also argues that NASA should have pursued the corporate
references or discussed the lack of responses. The proposal contains
the name, address, and telephone number of individuals in five companies
or divisions of companies for which Joule provided subcontract services
related to the proposed NASA work. The protester included no
description of the services rendered to the companies, no dates for
performance, or any other information helpful in evaluating experience
and past performance. The individuals listed as references apparently
did not respond to NASA contacts, and Joule was given no credit for
whatever experience and past performance it may have had. We do not
believe that NASA was obligated to pursue references listed in Joule's
proposal who did not respond to initial contacts, particularly since
there was no evidence of how closely related Joule's subcontract
experience was to the proposed contract work. Although difficulties in
reaching the references might be a subject of discussion, Joule's
failure to provide details about its subcontract experience makes any
projection of an improvement highly speculative. Nevertheless, if
apprised during discussions of difficulties in reaching corporate
references, Joule might have been able to establish the necessary
contacts. Consequently, some potential for improvement based upon the
references should have been considered by NASA.
The Board determined that the Joule proposal was not within the
competitive range because its projected score on mission suitability
factors and its rating for experience and past performance fell so far
below the two more highly rated proposals that there was no reasonable
chance for Joule to receive an award. This approach to determining the
competitive range based upon the array of initial evaluation scores and
the offeror's relative standing is acceptable. Art Anderson Associates,
B-193054, Jan. 29, 1980, 80-1 CPD Paragraph 77.
In our view, crediting the Joule proposal with improvements in the
areas in which we think the Board should have considered potential
improvement would not substantially change Joule's relative standing or
place it within the competitive range. NASA considered the omission of
salary commitments for designated and key personnel and the lack of
detail about medical and disability benefits to be minor weaknesses. In
each of the evaluation factors or criteria in which these minor
weaknesses were found, the Joule proposal had other major weaknesses.
Even if the proposal were credited with one-third of all available
points in the Understanding Requirements and Key Personnel factors (140
and 160 possible points, respectively), Joule's projected score (577)
would remain almost 200 points below that of the next more highly rate
offeror (771). Similarly, Joule's expertence and past performance as
disclosed in its proposal is so far below that of the two more highly
rated proposals that discussions with the company's subcontract
references could increase its standing very little. Consequently, we do
not believe that Joule was prejudiced by the NASA evaluation approach,
and that exclusion of its proposal from the competitive range was not
unreasonable or in violation of applicable statutes or regulations.
The protest is denied.
(1) The Board initially gave each proposal a score between 0 and 5
(from "unacceptable" to "outstanding") for each factor or, if a factor
was divided into criteria, for each criterion. Each of these raw scores
was then "weighed" by multiplying the number of points available for the
factor or criterion by the raw score divided by 5. I.e., a raw score of
3 for a factor having 100 possible points would result in a weighed
score of 60 for that factor. The scores discussed in this decision are
all weighed scores.
B-217236.2, 64 Comp. Gen. 535
Matter of: Accountable Officer for Bankruptcy Fees and Registry
Funds, May 22, 1985:
The Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub. L.
No. 98-353, establishes a bankruptcy court as a unit of the district
court, in each judicial district. The bankruptcy judges may appoint
clerks of bankruptcy courts. Amendment of 28 U.S.C. 1930 providing that
bankruptcy filing fees are to be paid to "the clerk of the court" does
not exclude payment to the bankruptcy clerk as the accountable officer
for the funds. Incident to his office, the bankruptcy clerk also is the
accountable officer for registry funds entrusted to the bankruptcy
court.
A judge of the U.S. Bankruptcy Court for the Eastern District of
Kentucky, on behalf of the clerk of the district court and of the clerk
of the bankruptcy court, Eastern District of Kentucky, requests our
views as to which clerk is the proper accountable officer for bankruptcy
fees and registry funds under the Bankruptcy Amendments and Federal
Judgeship Act of 1984, Pub. L. No. 98-353, enacted on July 10, 1984.
The judge refers to a memorandum issued by the Administrative Office of
the U.S. Courts which indicates that the clerk of the district court
rather than the clerk of the bankruptcy court is now responsible both
for bankruptcy fees and costs and for the maintenance of registry funds.
The bankruptcy judge disagrees with the memorandum and is of the
opinion that the bankruptcy clerk is the proper accountable officer for
bankruptcy fees and costs, as well as for registry funds.
For the reasons indicated below, it is our opinion that the clerk of
bankruptcy court is the appropriate accountable officer for bankruptcy
fees and costs, and for registry funds, in connection with bankruptcy
matters before the bankruptcy court.
Changes in the structure of bankruptcy courts in recent years have
affected the status of the clerks of these courts. The judge asks us to
determine how the accountability of the clerks has been affected by
these changes. The Bankruptcy Reform Act of 1978, Pub. L. No. 95-598,
92 Stat. 2549, codified and enacted the law relating to bankruptcy as
title 11 of the U.S. Code. The Act also amended title 28 of the U.S.
Code to provide the United States District Courts with original and
exclusive jurisdiction of all cases under title 11, with certain
specified exceptions, and to provide the bankruptcy court for the
district in which a case under title 11 is commenced, with the
jurisdiction conferred by the Act on the district courts. 28 U.S.C.
Section 1471 (1982).
The Act further provided that the bankruptcy court, based on need,
"may appoint a clerk who shall be subject to removal only by the court."
28 U.S.C. Section 771 (1982). It also provided that the clerk of each
bankruptcy court would pay into the Treasury all fees, costs and other
moneys collected by him. Id. It stated, as well, that "the parties
commencing a case under title 11 shall pay to the clerk of the
bankruptcy court * * * filing fees." 28 U.S.C. Section 1930 (1982).
The Act amended 28 U.S.C. Section 451 (see note to this section in
1982 edition of United States Code) to change the term "court of the
United States" to include "bankruptcy courts, the judges of which are
entitled to hold office for a term of 14 years."
In Northern Pipeline Construction Co. v. Marathon Pipe Line Co., 458
U.S. 50, June 28, 1982, the U.S. Supreme Court struck down the
bankruptcy court's jurisdiction under section 1471 because the
bankruptcy judges were not afforded the protections set forth in Article
III of the Constitution to insure the independence and impartiality of
the Federal judiciary. A stay of entry of the Supreme Court's order was
granted and extended to December 24, 1982, to provide the Congress time
to correct the constitutional problem and to protect the orderly
administration and adjudication of bankruptcy cases in the interim. On
December 25, 1982, in the absence of congressional action or a further
extension of the stay, the bankruptcy system began operating under a
suggested temporary emergency rule issued by the Judicial Conference.
See H.R. Rep. No. 9, Part 1, 98th Cong., 1st Sess. 2-4 (1983).
On July 10, 1984, the Bankruptcy Amendments and Federal Judgeship Act
of 1984, Pub. L. No. 98-353, 98 Stat. 333, was enacted. Under section
113 of the Act, the provisions concerning the bankruptcy court and
bankruptcy clerk described above, sections 1471, 771 and 451 of title
28, among other provisions of the Bankruptcy Reform Act of 1978, whose
effective dates had been postponed, were not to become effective. /1/
Similar to the 1978 Act, the 1984 Act amended 28 U.S.C. Section 1334
to provide, with certain stated exceptions, that the U.S. District
Courts shall have original and exclusive jurisdiction of bankruptcy
cases. Section 101(a), 98 Stat. 333. The Act, however, added section
151 to title 28 of the U.S. Code, Section 104(a), 98 Stat. 336. It
states that --
In each judicial district, the bankruptcy judges in regular
active service shall constitute a unit of the district court to be
known as the bankruptcy court for that district. Each bankruptcy
judge, as a judicial officer of the district court, may exercise
the authority conferred under this chapter * * * except as
otherwise provided by law or by rule or order of the district
court.
Further, in a change particularly important to this case, the Act
amended 28 U.S.C. Section 1930 to provide that parties commending a case
under title 11 shall pay filing fees to the "clerk of the court."
Section 111(a), 98 Stat. 342. Section 1930 had previously required
payment to be made to the clerk of the bankruptcy court.
Additionally, the Act amended 28 U.S.C. Section 156 to provide that
the bankruptcy judges for a district, after making the required
certification of need, may appoint an individual to serve as clerk of
the bankruptcy court. Section 104(a), 98 Stat. 339. The Bankruptcy
Clerk, may with the approval of the bankruptcy judges, appoint and
remove deputies. Id.
The Director of the Administrative Office of the U.S. Courts, in his
memorandum dated October 11, 1984, addressed the issue of fees in
bankruptcy petitions. These are principally filing fees paid by the
party commencing a case under title 11. He indicated that under 28
U.S.C. Section 1930, as amended, bankruptcy fees are to be paid to the
clerk of the district court because the amendment which requires that
the fees be paid to the "clerk of the court," refers to the clerk of the
district court. Thus, the memorandum concludes "(t)his means that the
clerk of the district court is an accountable officer for such fees and
costs."
Under the Bankruptcy Reform Act of 1978, a bankruptcy court was to
exercise the jurisdiction of a district court in bankruptcy matters.
Under that legislative plan bankruptcy matters would have gone directly
to a district bankruptcy court, which was given the status of a "court
of the United States." The bankruptcy court was empowered to appoint and
remove a clerk of the bankruptcy court to whom filing fees would be
paid. Under the Bankruptcy Amendments and Federal Judgeship Act of 1984
this plan was changed so that the district court decides if bankruptcy
matters are referred to the bankruptcy court in that district, which is
not a separate "court of the United States" but rather a unit of the
district court. The bankruptcy judges, upon a certification of need,
may appoint bankruptcy clerks to serve at their pleasure.
In light of this background we do not read the current Act, which
provides that bankruptcy fees are to be paid to "the clerk of the
court," to require payment only to the clerk of the district court. The
disputed language seems to us to be the result of an effort to
accommodate those potential situations created under the Act, for cases
where there is no bankruptcy court clerk.
Under the 1984 Act, bankruptcy matters sometimes may be retained by a
district court rather than be dealt with by the bankruptcy court in that
district. Also the judges of the district courts of the territories
serve as the bankruptcy judges for those courts. (Section 104(a) of the
Act, 28 U.S.C. Section 152(b)(4).) Finally, in some districts a
bankruptcy clerk may not be appointed because of an insufficient
caseload. In all these instances the clerk of the district court will
receive the fees paid incident to the bankruptcy proceedings since in
the first two cases he is the clerk of the court in which the
proceedings will be held, and in the latter case, he is the only
available court clerk.
When, however, the bankruptcy judges in a particular district appoint
a clerk and the bankruptcy matter is handled in the bankruptcy court,
the bankruptcy clerk is, in fact, the clerk of the cognizant court.
Because of the change in court structure, the current Bankruptcy Act
provides that payment will be paid to the "clerk of the court" where
formerly filing fees were to be paid to "the clerk of the bankruptcy
court." The 1978 Act contemplated that the bankruptcy court established
under that Act would handle bankruptcy matters within district court
jurisdiction. However, as we have seen, under the present arrangement
this may not always be the case since in response to the Marathon case,
the Congress has provided for the retention of bankruptcy matters by the
district courts.
Accordingly, it appears that the purpose in changing reference to the
clerk of the bankruptcy court to the "clerk of the court" was not to
preclude the bankruptcy court clerk from having responsibility for the
fees, but rather to recognize that a bankruptcy court might not be the
appropriate or available forum for some bankruptcy matters; or that
there might not be a bankruptcy clerk appointed. The legislative
history we have examined does not show an intention to preclude the
bankruptcy court clerk from prime responsibility for fees paid to him
incident to bankruptcy matters. Indeed, there seems little purpose to
requiring the district court clerk to be the accountable officer for the
bankruptcy fees when a functioning bankruptcy court clerk will receive
the fees, and he is not, as noted by the memorandum of the
Administrative Office, subordinate or responsible to the district court
clerk.
Subsequent to the passage of the 1984 Act, an interview with Senators
Dole and DeConcini, conference committee managers for the Senate,
appeared in the American Bankruptcy Institute Newsletter (Winter
1984/1985, Vol III, No. 3). They were asked whether it was the intent
of Congress to augment the role of the district court clerks in
bankruptcy. Senator Dole replied that:
No change in their functions and duties was anticipated. Cases
should still be filed with the bankruptcy court, not the district
court. There was also no change anticipated regarding the
handling of monies coming through the bankruptcy court.
Senator DeConcini made the following comments:
I agree. These battles were fought years ago, and despite
differences in approach to the court system, nobody had any desire
to revisit the concerns of "consolidation" and the like. We
sought to maintain the status quo.
While these comments were made after passage of the Act, they confirm
our understanding of congressional intent and our conlusion that the
bankruptcy court clerk is the sole accountable officer for fees that
come to him.
Regarding registry funds, which are disupted assets of the bankrupt
estate paid into the court subject to disbursement in accord with the
bankruptcy proceedings, the Director in his memorandum of October 11,
1984, stated:
Bankruptcy clerks no longer have statutory authority for the
maintenance of registry funds. Under 28 U.S.C. Section 2041, that
authority is vested in the district courts. Therefore, registry
accounts formerly maintained by bankruptcy clerks must be
redesignated as district court accounts to comply with section
2014. This does not preclude the district court from designating
the bankruptcy clerk as the accountable officer for the bankruptcy
portion of the registry funds * * *
Section 2041 of title 28, U.S. Code states that:
All moneys paid into any court of the United States, or
received by officers thereof, in any case pending or adjudicated
in such court, shall be forthwith deposited with the Treasurer of
the United States or a designated depository, in the name and to
the credit of such court.
Under the Bankruptcy Reform Act of 1978, bankruptcy courts were to be
included as "courts of the United States." However the amendment of 28
U.S.C. Section 451 which was to be effective on June 28, 1984, by virtue
of section 113 of the 1984 Act, "shall not be effective." Today,
therefore, a bankruptcy court is not a "court of the United States," but
is instead a unit of the District court for the district in which it is
located.
Section 2041 places a specific limitation on where funds received by
courts of the United States may be deposited -- either with the
Treasurer of the United States or a designated depositary. By its
terms, this section does not constitute a grant of authority to receive
funds, which appears to be assumed. It is derived from the Act of March
24, 1871, ch. 2, sec. 1, 17 Stat. 1, which referred to "all moneys in
the registry of any court of the United States." In presenting the
Committee on Finance's favorable report on S. 74, a bill relating to
moneys paid into the courts of the United States, Senator Sherman told
the Senate that, "It is a bill to guard the Treasury." Cong. Globe, 42nd
Cong., 1st Sess. 90 (1871).
The clerk of the bankruptcy court, which is a unit of the district
court, would appear to us subject to 28 U.S.C. Section 2041 as an
officer of the district court. Even in the absence of this provision he
would be accountable for the funds placed in his care.
Accordingly, it is our view that the bankruptcy clerk is the
accountable officer for the registry funds which are to be entrusted to
him for matters before the bankruptcy court even without an official
designation as such by the district court. A court order as recommended
in the Administrative Office's memorandum that would make the clerk of a
bankruptcy court the accountable officer for registry funds would
therefore be redundant.
From the foregoing, it follows that the clerk of a district court is
not the accountable officer for either fees or registry funds received
by the bankruptcy court clerk. The bankruptcy court clerk is the
accountable officer in the described circumstance. We think this
conclusion provides the most appropriate means of carrying out the
legislative scheme created by the Congress.
(1) The effective date of the e sections was originally established
by section 402(b) of the 1978 Act, id., at 92 Stat. 2682. This
effective date was postponed several times; the last date prior to the
cancellation was June 28, 1984, estblished by Pub. L. No. 98-325, 98
Stat. 268 (1984).
B-217218, 64 Comp. Gen. 528
Matter of: Ray Service Company, May 22, 1985:
Protest that specifications are in excess of contracting agency's
minimum needs and unduly restrictive of competition is denied where
there is no showing that agency lacked a reasonable basis for requiring
contractor (1) to respond to request for emergency service on
refrigeration equipment at commissary store within 3 hours, and with the
tools the agency considered minimally necessary for prompt and efficient
service, in order to avoid spoilage of perishable refrigerated food
items, and (2) to schedule routine preventive maintenance when the
commissary store is closed so as to minimize disruption of commissary
operations.
That requirement for contractor to respond to emergency service calls
within 3 hours and agency refusal to pay travel expenses to and from the
place of performance may leave some potential bidders at a competitive
disadvantage vis-a-vis competitors located closer to the place of
performance does not in itself render the solicitation unduly
restrictive of competition. A contracting agency is under no obligation
to compensate for the advantages enjoyed by some firms, advantages which
are not the result of preferential or unfair government action, in order
to equalize the competitive position of all potential bidders.
Section 13.107(c) of the Federal Acquisition Regulation, 48 C.F.R.
13.107(c) (1984), which requires contracting officers to evaluate
requests for quotations inclusive of transportation charges, does not
require contracting agency to provide in a formally advertised
invitation for bids for the payment of travel expenses to and from the
place of performance.
Allegation that solicitation will create an illegal personal services
contract is denied where protester fails to demonstrate that government
employees will actually supervise the contractor's personnel so as to
creat an employer-employee relationship between the government and
contracting personnel.
Protest of solicitation provision limiting reimbursement for spare
parts under a time-and-materials maintenance contract to the "actual
cost invoiced to" the contractor is denied where protester fails to
demonstrate that contracting officials abused their discretion when they
determined that it would be more appropriate for a contractor to recover
its material handling costs and any profit on the parts under its fixed
labor rate rather than on a cost reimbursement basis.
Protest in which protester argues for more restrictive specifications
-- that a safety observer be present whenever maintenance or repair work
is performed on refrigeration equipment -- is denied where protester
fails either to present evidence of fraud or willful misconduct by
government officials or to point to a particular regulation which
clearly requires the presence of a safety observer under the
circumstances.
Ray Service Company (Ray) protests as unduly restrictive and
otherwise defective the specifications in invitation for bids No.
FO8651-84-B-0105, issued by the Department of the Air Force (Air Force)
for the maintenance and repair of refrigeration equipment at the
commissary store at Eglin Air Force Base, Florida. We deny the protest.
The Air Force solicited bids for award of a time-and-materials
contract under which the contractor would be paid (1) a fixed price for
scheduled initial, monthly and yearly preventive maintenance on the
refrigeration equipment, (2) an hourly labor rate for nonscheduled,
emergency service work calls, and (3) the "actual cost invoiced to" the
contractor for any required parts and materials.
Prior to bid opening, Ray protested that a number of the
specifications unduly restricted competition, exceeded the agency's
minimum needs, tended to create a personal services contract, or failed
sufficiently to protect the interests of the government and the safety
of those servicing the refrigeration equipment. Although the Air Force
amended certain solicitation provisions in response to the protest, it
refused to make all the changes requested. Ray thereupon filed this
protest with our Office.
Ray initially alleges that the solicitation provisions requiring the
contractor to respond to a request for a service work call within 3
hours and denying the contractor reimbursement under the hourly labor
rate for travel time to and from the base, except when travel to the
nearest parts supply source has been authorized, are unduly restrictive
of competition in that they give bidders located adjacent to the base a
distinct competitive advantage over bidders, such as Ray, located
further away.
Ray, moreover, questions the necessity for any required response time
of less than 4 hours, alleging that Air Force contracts for servicing
air-conditioning equipment at certain types of radar sites only require
a 4-hour response time. Ray also questions the necessity for the
requirement in the solicitation that the contractor provide certain
refrigeration service instruments during service work calls or
preventive maintenance, arguing that a competent contractor will have
the necessary equipment available and that contracting officials need
only concern themselves with whether the job is done. In addition, Ray
both questions the necessity for the solicitation requirement that
scheduled monthly and yearly preventive maintenance commence on the
morning of the first Monday of every month, and expresses concern that
adverse weather may prevent a contractor from meeting this schedule.
In response, the Air Force points out that it has already amended the
solicitation to increase the required maximum response time from 2 to 3
hours and insists that it can relax this requirement no further. It
argues that the response time is critical to the preservation of the
refrigerated and frozen foods stored at the commissary because
temperatures sufficient to avert spoilage can be maintained only for a
short period after failure of the refrigeration equipment. The Air
Force disputes the relevance of the 4-hour response time allegedly
permitted in contracts to maintain air-conditioning equipment at certain
radar sites, stating that substantially more time would be required for
damage to occur as a result of the failure of the air-conditioning
equipment at radar sites than for deterioration of food items to occur
as a result of the failure of the refrigeration equipment at the
commissary.
The Air Force also defends the other solicitation provisions to which
Ray objects. The agency argues that it has neither the obligation nor
the authority to pay travel expenses to and from the commissary in order
to redress the cost disadvantage suffered by Ray vis-a-vis its
competitors located closer to the base. It contends that the tools and
test equipment required under the solicitation are the minimum necessary
for properly repairing and maintaining the refrigeration equipment. The
Air Force justifies restricting the times at which preventive
maintenance may be undertaken as necessary in order to minimize the
disruption of commissary operations. It notes that since the commissary
is closed on Monday, scheduling routine work for that day enables the
store to avoid the loss of business likely to result from shutting down
the refrigerated display cases on other days. Moreover, the Air Force
denies that the contractor is at risk from adverse weather, stating that
servicing the equipment occurs indoors and that, in any case, delays
caused by adverse weather may be excused under the contract.
Finally, the Air Force questions the extent to which any of the
contested provisions in fact restricted competition, noting that three
other firms submitted bids under the solicitation.
The determination of the government's minimum needs and the best
method of accommodating those needs are primarily the responsibility of
the contracting agencies. We have recognized that government
procurement officials, since they are the ones most familiar with the
conditions under which supplies, equipment or services have been used in
the past and how they are to be used in the future, are generally in the
best position to know the government's actual needs. Consequently, we
will not question an agency's determination of its actual minimum needs
unless there is a clear showing that the determination has no reasonable
basis. Sunbelt Industries, Inc., B-214414.2, Jan. 29, 1985, 85-1 C.P.D.
Paragraph 113.
When a protester challenges a specificiation as unduly restrictive of
competition, the burden initially is on the procuring agency to
establish prima facie support for its contention that the restrictions
it imposes are needed to meet its minimum needs. But, once the agency
establishes this prima facie support, the burden is then on the
protester to show that the requirements complained of are clearly
unreasonable. See Sunbelt Industries, Inc., B-214414.2, supra, at 5-6.
Ray has failed to rebut the agency's justification for the
specifications in question. It has not demonstrated that the Air Force
lacked a reasonable basis for requiring the contractor to arrive within
3 hours after the request for a service call, with the tools which the
Air Force deemed minimally necessary for prompt and efficient service,
in order to avoid the spoilage of perishable refrigerated food items.
Nor has it demonstrated that the Air Force lacked a reasonable basis for
requiring the contractor to commence routine, preventive maintenance at
the time most likely to prove least disruptive to the operation of the
commissary.
That some of the solicitation provisions, such as the required
response time and the refusal to pay the hourly labor rate for travel to
and from the base, may leave Ray at a competitive disadvantage vis-a-vis
other firms because of Ray's greater distance from the base does not in
itself render those provisions unduly restrictive of competition. A
contracting agency is under no obligation to compensate for the
advantages enjoyed by some firms, advantages which are not the result of
preferential or unfair government action, in order to equalize the
competitive position of all potential bidders. See Superior Boiler
Works, Inc.; Conservco, Inc., B-215836; B-215836.3, Dec. 6, 1984, 84-2
C.P.D. Paragraph 633 (specifications which express the agency's minimum
needs are not unduly restrictive because some bidders are unable to meet
them); Emerson-Sack-Warner Corporation, B-206123, Nov. 30, 1982, 82-2
C.P.D. Paragraph 488 (no entitlement to reimbursement for travel costs
to and from the place of performance in order to equalize the
competitive position of all bidders); cf. Stayfresh Processing
Corporation, B-181116, Nov. 7, 1974, 74-2 C.P.D. Paragraph 243
(requirement for delivery of milk within 72 hours after pasteurization).
We note that Ray further objects to the Air Force's refusal to pay
travel expenses to and from the commissary on the ground that it is in
violation of Federal Acquisition Regulation (FAR), Section 13.107(c), 48
C.F.R. Section 13.107(c) (1984). That section provides that:
Contracting officers shall evaluate quotations inclusive of
transportation charges from the shipping point of the supplier to
the delivery destination.
However, nothing in that section, which concerns quotations received
in response to a request for quotations for supplies, requires an agency
to provide in a formally advertised invitation for bids for services
that it will pay travel expenses to and from the place of performance.
Ray next argues that the solicitation provisions requiring the
contractor to provide certain tools and equipment, specifying the time
at which the contractor must commence preventive maintenance, and
limiting reimbursement for parts provided under the contract to the
"actual cost invoiced to" the contractor tends to "put the contract in a
quasi personal services status."
The general rule, established by decisions of our Office and the
former Civil Service Commission, is that personal services may not be
obtained on a contractural basis, but, rather, must be performed by
personnel employed in accordance with the civil service and
classification laws. Contracts for services are proscribed if they
establish an employer-employee relationship between the government and
contracting personnel. The critical factor in determining whether an
employer-employee relationship exists is the presence of actual
supervision of contractor personnel by government officers and
employees. See Computer Sciences Corp., B-210800, Apr. 17, 1984, 84-1
C.P.D. Paragraph 422.
Ray has failed to demonstrate the existence of factors creating a
prohibited relationship. While the solicitation provided for government
quality assurance evaluators to evaluate the contractor's performance,
nothing in the solicitation, or otherwise brought to our attention,
indicates that government employees will actually supervise the
contractor's personnel so as to create an employer-employee
relationship. On the contrary, the solicitation required the contractor
to furnish "all management, personnel, equipment" necessary to perform
the preventive maintenance and service work calls.
Ray further argues that the limitation of reimbursement for parts to
the "actual cost invoiced to" the contractor forces a bidder either to
"'load profit' into the labor rate," thereby rendering its bid
noncompetitive, or to forego a reasonable profit. In addition, Ray
argues that by forcing the contractor to finance the costs of
maintaining a stock of spare parts, the limitation is likely to result
in a smaller spare parts inventory and, accordingly, more government
financed trips to the nearest parts supply source.
The Air Force, on the other hand, views the supply of spare parts as
merely incidental to the supply of the services and maintains that
overhead and profit should be included in the pricing of the other
items. It questions whether any bidder suffered competitive prejudice
since all bidders bid on the same basis, ie., supplying parts at cost.
Moreover, it believes that any contractor in the refrigeration business
will already stock the parts normally required here.
The Department of Defense FAR Supplement, Section 16.601, 48 C.F.R.
Section 216.601 (1984), provides that a time-and-materials contract may
be used in the procurement of repair, maintenance or overhaul services.
While FAR, Section 16.601(b)(3), permits agencies, under certain
circumstances, to enter into a time-and-materials contract which
provides for charging materials on a basis other than cost, we have
recognized that the option of doing so is within the discretion of the
contracting agency. See Advanced Business Systems, et al., B-195117, et
al., Nov. 6, 1979, 79-2 C.P.D. Paragraph 329. Ray has not demonstrated
that contracting officials abused this discretion by choosing to
reimburse for parts on a cost basis, without provision for the
contractor to include in the reimbursement for the materials a profit on
the materials.
As for the Air Force's decision to reimburse the contractor only for
the "actual cost invoiced to him," with no provision for the direct
reimbursement of the costs incurred by the contractor in handling the
parts, we note that FAR, Section 16.601(a), describes a
time-and-materials contract as providing for the acquisition of supplies
or services on the basis of "materials at cost, including, if
appropriate, material handling costs as part of material costs" (Italic
supplied.). That the cost of materials to be reimbursed by an agency
under a time-and-material contract need not include material handling
costs is further suggested by FAR, Section 16.601(b)(2), which states
that "(w)hen included as part of material costs, material handling costs
shall include only costs clearly excluded from the labor-hour rate"
(Italic supplied.).
We also note that in a prior decision, Advanced Business Systems et
al., B-195117, et al., supra, at 4-5, where the protester argued that
overhead costs directly related to parts should be added to the
contractor's cost for the parts, we recognized the force of the agency's
justification for the cost limitation, that the government had
previously been overcharged for parts on time-and-materials contracts
and that parts-related overhead could be anticipated and, thus, covered
in the hourly labor rates, and we therefore denied the protest. Under
these circumstances, in particular given the risk of the government
being overcharged for parts, we do not believe that Ray had demonstrated
that contracting officials abused their discretion by determining that
it would be more appropriate for the contractor to recover its material
handling costs under its fixed labor rate than on a cost reimbursement
basis.
Finally, Ray questions the refusal of the Air Force to require that a
safety observer, a second "technician," be present whenever work is
performed on the refrigeration equipment, noting that a safety observer
could obtain rapid assistance for an injured coworker. Ray argues that
the failure to require a safety observer violates Occupational Safety
and Health Administration (OSHA) and Air Force regulations and may
expose the government to liability in the event of an accident.
The solicitation as issued provided that the contractor would be paid
the hourly labor rate for no more than one refrigeration journeyman for
each service work call unless the contractor requested and received
written authorization from contracting officials for an additional
journeyman. No specific provision was made with respect to the number
of journeymen authorized for preventive maintenance work, for which, as
previously indicated, the contractor was to be paid the predetermined
fixed price set forth in the contract. In response to the above
concerns expressed by Ray, the Air Force amended the solicitation to
provide that the contractor could request verbal authorization from
contracting officials for an additional journeyman. Payment for the
additional journeyman, however, was contigent upon receipt of subsequent
written confirmation of the oral authorization.
As a general rule, we will not consider the merits of an allegation
that a more restrictive specification is necessary to serve the
government's interest. The purpose of our role in resolving bid
protests is to ensure that the statutory requirements for free and open
competition are met; a protester's presumable interest as a beneficiary
of more restrictive specifications is not protectable under our bid
protest function. Procurement officials and the user activities are
responsible for ensuring that solicitations utilize sufficiently
rigorous specifications to meet the government's legitimate needs and to
protect the government's interest, since they suffer the consequences of
obtaining inadequate services or supplies. Therefore, absent evidence
of possible fraud or willful misconduct by government officials,
evidence which Ray has not presented here, we consistently have refused
to review allegations that a contracting agency should have used more
restrictive specifications. See Olson and Associates Engineering, Inc.,
B-215742, July 30, 1984, 84-2 C.P.D. Paragraph 129.
Moreover, even where a protester has alleged that OSHA or other
regulations require more restrictive specifications, our Office has held
that absent a specific regulation which clearly requires an agency to
tailor its specifications in a particular way, there is nothing for us
to enforce. See King-Fisher Company -- Request for Reconsideration,
B-209097.2, Sept. 2, 1983, 83-2 C.P.D. Paragraph 289.
The solicitation included Department of the Air Force FAR Supplement
Section 52.223-9004, subsection (b) of which provides that if the
contract is to be performed on an Air Force installation, then Air Force
Occupational Safety and Health Standards (AFOSH) shall apply. The Air
Force reports that although AFOSH require the presence of a safety
observer where work is to be done on energized equipment with a voltage
of 600 volts or greater, there is no requirement under AFOSH for a
safety observer where, as here, the work is to be done on equipment with
a maximum voltage of only 110/208 volts and while the power is off. In
addition, the Air Force reports that it was informed by OSHA that there
was no OSHA requirement for a safety observer under these circumstances.
We note in this regard that OSHA has reserved section 1910.331-1910.398
of its regulations in 29 C.F.R. (1984) for the future issuance of
regulations pertaining to Safety-Related Work Practices, Safety-Related
Maintenance and Safety Requirements for Special Equipment.
Since Ray has neither presented evidence of fraud or willful
misconduct by government officials, nor shown us particular regulations
which clearly require the presence of a safety observer under these
circumstances, we will not consider the merits of its contention that
more restrictive specifications, a requirement for a safety observer,
were necessary to serve the government's interest and conform to
applicable regulations.
The protest is denied.
B-217202, 64 Comp. Gen. 524
Matter of: Weinschel Engineering Co., Inc., May 21, 1985:
Where a solicitation provides that award will be made to the
technically acceptable offeror offering the lowest price and the
protester's proposal is technically acceptable, the procuring agency
properly may conduct detailed technical discussions with a technically
deficient offeror while only affording the protester an opportunity to
furnish a best and final offer; an agency need conduct detailed
discussions only with offerors whose proposals contain technical
uncertainties.
A statement from the procuring agency to the low offeror following
submission of best and final offers does not constitute improper
discussions where award is to be made to the low technically acceptable
offeror; the offeror already had been found technically acceptable;
and the statement thus was not part of an effort to determine the
acceptability of the offeror's proposal.
Allegations that (1) the agency should have cancelled the
solicitation after relaxing technical requirements; (2) the amended
solicitation contained an ambiguous specification; and (3) the 30 days
allowed to prepare best and final offers was insufficient are untimely
and not for consideration since the facts on which the allegations are
based should have been apparent prior to the final closing date, but
they were not raised until after that date.
Weinschel Engineering Co., Inc. (Weinschel), protests the award of a
contract to Hewlett Packard Company (Hewlett) under request for
proposals (RFP) N00123-84-R-0070 issued by the Department of the Navy.
The RFP contemplated the award of a fixed-price contract for 14
microwave signal generator calibrators. Weinschel contends that, due to
several procurement deficiencies, the award to Hewlett was improper. We
deny the protest in part and dismiss it in part.
Weinschel and Hewlett were the only companies that submitted
proposals in response to the December 15, 1983, RFP. Following a
technical evaluation, the Navy found Weinschel's proposal to be
technically acceptable and Hewlett's to be technically unacceptable.
Hewlett challenged this determination in a May 7, 1984, letter,
explaining how it intended to meet the Navy's requirement. After
reviewing this letter, the Navy determined that the company's proposal,
while still technically unacceptable, was susceptible of being made
acceptable. The Navy meanwhile determined that certain of the RFP's
technical specifications should be revised to reflect more accurately
calibration requirements for the signal generators identified in the
solicitation, and that the award criteria should be modified to provide
that award would be made to the responsible, technically acceptable
offeror proposing the lowest price. In a letter dated July 19, the Navy
informed Weinschel of the intended specification and award criteria
changes and stated that all competitive offerors would be allowed to
submit best and final offers. The Navy informed Hewlett at the same
time that its proposal was found capable of being made technically
acceptable.
By letter of September 19, the Navy requested that best and final
offers be submitted by October 19. Both companies submitted timely
responses -- Weinschel choosing, however, to let its original proposal
stand without revision. The Navy evaluated Hewlett's best and final as
technically acceptable and, because Hewlett's revised price was lower
than Weinschel's, prepared to make award to Hewlett. Although Weinschel
protested prior to award, the Navy made a determination to proceed with
the award on April 26, 1985.
Weinschel charges that the Navy violated the statutory mandate of 10
U.S.C. Section 2304(g) (1982) to hold discussions with all offerors in
the competitive range by failing to hold discussions with Weinschel at
any time prior to making the decision to award to Hewlett. At the same
time, Weinschel contends, the Navy conducted detailed technical
discussions with Hewlett after initially finding its proposal
technically unacceptable. Weinschel considers this unequal, improper
treatment.
We have held that a mere request for best and final offers will
satisfy the discussions requirement where a proposal contains no
technical uncertainties. Information Management, Inc., B-212358, Jan.
17, 1984, 84-1 C.P.D. Paragraph 76. Here, since Weinschel's proposal
was found technically acceptable under both the original and revised
specifications, there were no technical deficiencies or uncertainties
that required discussion. As Weinschel's offered price apparently was
not deemed unreasonable, the Navy simply had nothing to discuss with
Weinschel. Under these circumstances, the Navy's request for
Weinschel's best and final offer was sufficient to satisfy the
requirement for discussions with that firm.
Our conclusion is not altered by the fact that the Navy's
communications with Hewlett regarding the acceptability of its proposal
may have constituted detailed discussions. Applying the same rule as
above, since Hewlett's proposal was viewed as technically deficient, the
Navy could not merely request Hewlett's best and final offer without
first informing Hewlett of the deficiencies. An agency is not required
to hold the same detailed discussions with all offerors, since the
degree of proposal weaknesses or deficiencies, if any, obviously will
vary. See Bank Street College of Education, B-213209, June 8, 1984, 63
Comp. Gen. 393, 84-1 C.P.D. Paragraph 607. It thus was not improper or
unfair for the Navy to conduct technical discussions with Hewlett.
Weinschel also asserts that the Navy told the company that it was the
only offeror in the competitive range and that further negotiations
would be held with it following the Navy's receipt of its best and final
offer. Weinschel claims that, relying on this information, it did not
submit it lowest price in its best and final offer and argues that,
since it was misled, it should now be afforded a second opportunity to
modify its price.
The Navy denied it told Weinschel that further negotiations would be
conducted following the submission of best and final offers and states
that it informed Weinschel from the very beginning that the procurement
was competitive. The record shows, furthermore, that the Navy informed
Weinschel in its July 19 letter that while at one point the company was
the only offeror in the competitive range, Weinschel and "other
offerors" were going to be allowed to submit best and final offers. We
thus do not understand how Weinschel reasonably could have expected
further negotiations after the submission of best and final offers.
In any case, it long has been our view that offerors rely on oral
advice at their own risk, Trident Motors, Inc., B-213458, Feb. 2, 1984,
84-1 C.P.D. Paragraph 142, and we have specifically held this rule
applicable to oral representations that negotiations will be reopened
after receipt of best and final offers. See Asgard Technology, Inc.,
B-215706, Aug. 13, 1984, 84-2 C.P.D. Paragraph 171. Thus, when an
offeror is asked to submit a "best and final" offer, it is responsible
for assuring that it submits just such an offer, even if the offeror
believes it is in a sole-source position. An offeror certainly will not
be afforded a second chance to reduce its price where it did not do so
in its initial best and final offer simply because the offeror believed
there would be no price competition.
Weinschel also contends it must be allowed to submit a new best and
final offer because the Navy negotiated with Hewlett subsequent to the
submission of best and final offers. The Navy apparently contacted
Hewlett after best and finals to ask whether the company understood that
it would be bound by the RFP terms and conditions and to inform Hewlett
that the Navy would hold its "feet to the fire" on the technical
specifications. Weinschel argues that this had the effect of eliciting
information essential for determining the acceptability of Hewlett's
proposal and, thus, constituted discussions.
Weinschel is correct that discussions may not be conducted with one
offeror after best and final offers without conducting discussions with
all offerors in the competitive range. ABT Associates, Inc., B-196365,
May 27, 1980, 80-1 C.P.D. Paragraph 362. Discussions occur if an
offeror is afforded an opportunity to revise or modify its proposal, or
information requested and provided is essential for determining the
acceptability of the proposal. Alchemy, Inc., B-207338, June 8, 1983,
83-1 C.P.D. Paragraph 621. The record shows that while the Navy
initially wanted further clarification from Hewlett, it ultimately
decided on its own that the company's best and final offer was
technically acceptable as submitted. Thus, the Navy's communication
with Hewlett was not for the purpose of determining the acceptability of
Hewlett's proposal and, thus, did not constitute discussions
necessitating reopening negotiations.
Weinschel raises several arguments we find to be untimely. Weinschel
argues that after determining that some of the solicitation's technical
specifications could be relaxed, the Navy should have canceled the RFP
and resolicited the requirement instead of amending the RFP. Weinschel
takes the position that cancellation and resolicitation were necessary
to comply with the statutory requirement to maximize competition.
Weinschel also argues that the RFP should have been canceled because one
of the changed specifications was ambiguous. Finally, Weinschel
believes it should be given a chance to submit a new best and final
offer because the 30 days allowed for preparing its initial best and
final were insufficient.
Under our Bid Protest Procedures, alleged solicitation improprieties
which do not exist in the initial solicitation, but which subsequently
are incorporated therein, must be protested no later than the next
closing date for receipt of proposals. 4 CFR 21.2(b)(1) (1984). The
fact that the Navy did not plan to cancel and resolicit should have been
apparent to Weinschel from the September 19 best and final offer
request, which set forth the changed specifications and award criteria.
Likewise, this September 19 request also put Weinschel on notice of any
allegedly ambiguous specification and any inadequacy in the time allowed
to respond. /1/ Weinschel did not raise any of these arguments until
mid-November, however, 1 month after the closing date for submitting
best and final offers. More specifically, Weinschel did not raise these
matters until it learned that the Navy intended to award to Hewlett. We
will not now consider these untimely allegations. See Stewart &
Stevenson Services, Inc., B-213949, Sept. 10, 1984, 84-2 C.P.D.
Paragraph 268.
Finally, Weinschel objects to the Navy's awarding of a contract prior
to the resolution of its protest. While an award ordinarily must be
withheld pending resolution of a protest, we have consistently held that
the alleged failure to follow regulatory requirements in making an award
notwithstanding a pending protest is merely a procedural defect which
does not affect the validity of an otherwise valid award. Creative
Electric Inc., B-206684, July 15, 1983, 83-2 C.P.D. Paragraph 95.
Weinschel's protest is denied in part and dismissed in part.
(1) We have recognized an exception to the requirements that alleged
ambiguities be raised prior to the closing date where the protester was
not aware, before that date, that its interpretation was not the only
reasonable one possible. A November 16 telex from Weinschel to the Navy
indicates that Weinschel was previously aware of alleged problems with
one of the changed specifications (involving the required measurement
accuracy of the calibrators), however, and Weinschel has not responded
to the Navy's express assertion that any ambiguity in this specification
should have been apparent to Weinschel prior to the October 19 closing
date. The exception to our timeliness requirements thus is
inapplicable.
B-218304, B-218305, 64 Comp. Gen. 523
Matter of: PolyCon Corporation, May 17,1985:
To be considered an interested party so as to have standing to
protest under the Competition in Contracting Act of 1984 and the General
Accounting Office implementing Bid Protest Regulations, a party must be
an actual or prospective bidder or offeror whose direct economic
interest would be affected by the award of a contract or by the failure
to award a contract. A potenetial subcontractor on a direct federal
procurement cannot be consisdered an actual or prospective bidder or
offeror.
PolyCon Corporation (PolyCon) protests the specifications included in
inviatations for bids (IFB) DAKF11-85-B-0035 and DAKF11-85-B-0040, both
issued by the Department of the Army at Fort McPherson, Georgia.
Respectively, the solicitations are for the replacement of the
condensate line from building 210 to building 208 and for the
replacement of the steam distribution system that runs from building 160
to various other buildings, all at Fort McPherson. The protests are
dismissed.
Concerning both solicitations, PolyCon, a supplier of underground
heat distribution systems and a potential subcontractor, protests that
certain of the specifications are at variance with PolyCon's
federal-agency-approved brochure, but that there are no apparent
circumstances that would justify the extra expense required by the
deviation. PolyCon also contends that other requirements of IFB
DAKF11-85-B-0040 exclude its system from consideration.
Prior to the enactment of the Competition in Contracting Act of 1984
(CICA), Pub. L. 98-369, our Bid Protest Procedures required, as a
prerequisite to our consideration of a protest, that the protesting
party have a sufficiently legitimate interest in the procurement. 4
C.F.R. Section 21.1(a) (1984). In determining whether a protester
satisfied the interested party requirements, we considered the nature of
the issues raised and the direct or indirect benefit or relief sought by
the protester. Edison Chemical Systems, Inc., B-212048, Mar. 27, 1984,
84-1 C.P.D. Paragraph 353. Generally, a potential subcontractor was not
considered to be an interested party essentially because it did not
stand in a position to assert a right concerning which it had the
greatest interest and, therefore, was not likely to be the most zealous
protector. See Elec-Trol, Inc., 56 Comp. Gen. 730 (1977), 77-1 C.P.D.
Paragraph 441.
In certain limited circumstances, however, we have found that a
potential subcontractor met the interested party requirement where no
other immediate party had a greater interest in the issue raised or
where there was a possibility that the subcontractor's interest would
not be adequately protected if our bid protest forum were restricted
solely to potential awardees. See Radix II Incorporated, B-208557.3,
Nov. 29, 1982, 82-2 C.P.D. Paragraph 484; see also Die Mesh
Corporation, 58 Comp. Gen. 111 (1978), 78-2 C.P.D. Paragraph 374.
However, under section 2741(a) of the CICA (to be codified at 31
U.S.C. Section 3551, et seq.), an interested party is defined as an
"actual or prospective bidder or offeror whose direct economic interest
would be affected by the award of the contract or by failure to award
the contract." This statutory definition of an "interested party" is
reflected in the language of our Bid Protest Regulations which implement
the CICA. 4 C.F.R.Section 21.0(a)(1985). Accordingly, with respect to
all bid protests filed on or after January 15, 1985, the effective date
of subtitle "D" of the CICA, only protests involving a direct federal
procurement filed by a party that comes within the statutory definition
of an interested party can be considered. Thus, our Office will no
longer consider subcontractor protests except where the subcontract is
by or for the government. 4 C.F.R. Section 21.3(f)(10) (1985).
As a potential subcontractor-supplier, the protester in this case is
not an actual or prospective bidder or offeror on the protested
solicitations, and the solicitations do not involve subcontracts by or
for the government. Therefore, under the CICA and our implementing Bid
Protest Regulations, PolyCon is not an interested party and its protests
will not be considered.
The protests are dismissed.
B-218167, 64 Comp. Gen. 519
Matter of: International Shelter Systems, Inc., May 15, 1985:
The apparent low bid on a contract for a 1-year base period and two
1-year options is materially unbalanced where there is reasonable doubt
that acceptance of the bid will result in the lowest ultimate cost to
the government. Such doubt may exist where the bid has a substantially
front-loaded base period and does not become low until well into the
last option year.
International Shelter Systems, Inc. (ISS) protests the Navy's award
of contract to Coastal American Corporation (Coastal) under Invitation
for Bids (IFB) No. N00421-85-B-0083. The Patuxent River Naval Air
Station issued this solicitation in order to lease a mobile office
facility for engineers working at its Naval Air Test Center. The lease
was to cover a base period of 1 year, and to include two additional
1-year options. ISS challenges the Navy's rejection of its bid as
materially unbalanced and thus nonresponsive. We deny the protest.
The solicitation required bidders to submit prices for the base year
and option periods, and for installation/removal costs. ISS and Coastal
submitted the following bids:
ISS argues that its own bid was low, based on the total amounts
submitted by each bidder, and that it is therefore entitled to award.
In support of this argument, the protester refers to Section M of the
IFB, entitled "Evaluation Factors for Award," which provides that the
government will evaluate offers by adding the total price for all
options to the total price for the basic requirement.
In response, the Navy points out that IFB Section M further provided
that the Government may reject an offer as nonresponsive if it is
materially unbalanced as to prices for the basic requirement and the
option quantities. A materially unbalanced offer was defined as one
based on prices significantly less than cost for some work and
significantly overstated for other work. The Navy argues that ISS's bid
was heavily front-loaded and therefore mathematically unbalanced.
Furthermore, the Navy argues that prices listed for each of the lease
years do not accurately represent the true costs for those periods.
There are two aspects to unbalanced bidding. The first is a
mathematical evaluation of the bid to determine whether each bid item
carries its share of the cost of the work plus profit, or whether the
bid is based on nominal prices for some work and enhanced prices for
other work. The second aspect, that of material unbalancing, involves
an assessment of the cost impact of a mathematically unbalanced bid. A
bid is materially unblanaced if there is a reasonable doubt that award
to the bidder submitting a mathematically unbalanced bid will not result
in the lowest ultimate cost to the government -- a bid found to be
materially unbalanced may not be accepted. Solon Automated Services,
Inc., B-206449.2, Dec. 20, 1982, 82-2 CPD Paragraph 548.
ISS contends that its bid is not mathematically unblanaced because it
accurately reflects the true costs of providing the modular building.
The protester insists that all of the major costs for constructing the
custom-design, single-use building would be incurred in the first year
of the lease, and that it is therefore appropriate for the bidder to
seek to recover those costs during the base-year period. ISS reasons
that although its base-year bid is significantly higher than its bid for
the two option-years, the base-year price nonetheless only carries its
proportional share of cost and profit. Therefore, ISS contends, it
would receive no unjust enrichment if the options were not exercised,
but would only receive an appropriate return on its initial investment.
According to ISS, the only costs that the bidder would incur during
the option years would be the cost of insurance and limited maintenance
expenses, and thus the price to the government should be much lower
during these periods. Moreover, ISS emphasizes that buildings of this
sort have little or no salvage value once the original tenant is
finished using them so that, apparently, the useful life of the asset
should be deemed to be the base period of the contract.
However, both the Navy and Coastal contend that the modular building
is not unique; rather it is a five-unit structure composed of
individual sections that can be combined in different ways to suit the
specific needs of each tenant. The Navy reasons that the structure can
therefore be resold or rented at any time. In support of this argument,
the Navy notes that ISS's bid was the only unbalanced bid among the four
bids the Navy received. Additionally, Coastal has submitted an
affidavit from its sales manager stating that the office facility in
question is a standard type that can be easily modified for different
uses, and which Coastal has been able to sell and lease in the past.
Our Office generally has been willing to consider a bidder's business
reasons for front-loading its bid only where a majority of the submitted
bids had similarly front-loaded pricing structures. Crown Laundry & Dry
Cleaners, Inc., B-208795.2, B-209311, Apr. 22 1983, 83-1 CPD Paragraph
438. Here, we note that the other bidders are able to distribute their
costs over the natural life of the asset and to charge a proportionate
amount for each year of the lease. Moreover, although business reasons
for front-loading bids may well exist in a particular circumstance, we
cannot ignore the fact that a bid with this pricing structure enables
the bidder to receive during the base contract period government funds
more properly allocable to option periods, and permits a windfall to the
bidder if all options for some reason are not exercised. The proper
test for determining whether a bid is mathematically unbalanced focuses
on the pricing structure of all bids and the scope and nature of the
services to be rendered, rather than focusing on the business reasons of
each bidder. Id. In this regard, we observe that the business reason
ISS offers for its bid, i.e., the recoupment of all building costs in
the first year even though it will own and use the equipment in
subsequent years, assumes that it is proper to obtain in the base year
government funds that are more properly allocable to the option years.
Since ISS's bid for the base period is more than 100 times its price
for each of the two option years, even though the goods and services to
be provided are the same during each of these periods, we find that the
bid is mathematically unbalanced. Furthermore, since ISS submitted the
only front-loaded bid, we will not consider whether its internal
business reasons justify this pricing method.
However, it is still necessary to determine whether the bid is
materially unbalanced. A bid is materially unbalanced if there is a
reasonable doubt that award to the bidder submitting a mathematically
unbalanced bid will result in the lowest ultimate cost to the
government. Solon Automated Services, Inc., supra. The determination
of whether reasonable doubt exists is a factual one which varies
depending upon the particular circumstances of each procurement. Id.
ISS argues that its bid will result in the lowest cost to the
government because the Navy reasonably expects that the requirement will
exist and that funds will be available during the two option periods.
The protester stresses that the Navy expressed a strong expectation that
the options would be exercised, and that similar options had uniformly
been exercised in the past. ISS reasons that since there is no
reasonable doubt that the options will be exercised, there is a
reasonable doubt that its own bid will provide the lowest cost to the
government over the 3-year period.
Prior to our decision in Lear Siegler, Inc., B-205594.2, June 29,
1982, 82-1 CPD Paragraph 632, the material unbalancing analysis was
limited to determining whether the government reasonably expected to
exercise the options. If the exercise was reasonably anticipated, we
concluded that the bid was not materially unbalanced. E.g., Jimmy's
Appliance, 61 Comp. Gen. 444 (1982), 82-1 CPD Paragraph 542. We
modified this test, however, in the Lear Siegler case. We held that
even though the Army expected to exercise the options, since the bid in
question was extremely unbalanced and would not become low until the
39th month of a possible 42-month contract, there was a reasonable doubt
whether the unbalanced bid would ultimately provide the lowest cost to
the government. We recognized that despite the intent to exercise the
options, intervening events could cause the contract not to run its full
term, resulting in an inordinately high cost to the government and a
windfall to the bidder. Here, the front-loaded bid would require the
government to pay 86 percent of the total 3-year price in the first
year. ISS's bid would not become low until both of the options had been
exercised.
Although the Navy generally does expect to exercise the options under
this contract, it has expressed some uncertainty in this regard. The
agency notes, for example, that the mobile offices would be used by
overflow personnel working on a broad range of projects, and that
fluctuations in the need for personnel and workspace are more difficult
to estimate in this situation than where the specific needs of a single
client are involved. Under the circumstances, we are persuaded that
there is a reasonable doubt that ISS's bid would actually result in the
lowest cost to the government. Therefore, we find that ISS's bid is
materially unbalanced and was properly rejected as nonresponsive.
Finally, ISS argues that it has successfully submitted front-loaded
bids in the past, and that none of those bids were determined to be
materially unbalanced. However, the government's acceptance of an ISS
bid in the past is irrelevant to the evaluation of the present bid.
Each contract award is a separate transaction, and an agency is not
required to accept an offer simply because a previous offer with similar
terms was considered acceptable under a different set of circumstances.
See M.S. Ginn Co., B-215579, Dec.26, 1984, 84-2 CPD Paragraph 701. As
discussed above, the determination of whether a bid is materially
unbalanced may vary according to the particular circumstances of each
procurement.
The protest is denied.
B-217280, 64 Comp. Gen. 517
Matter of: Richard L. Leonard, May 13, 1985:
An Internal Revenue Service employee moved from leased premises at
one location to another residence in the vicinity of his Canadian post
of duty when his landlord refused to renew or extend his 1-year lease.
The employee's claim for reimbursement of drayage expenses cannot be
allowed as an administrative expense of the agency involved since his
move was not the result of any official action. 52 Comp. Gen. 293
(1972).
We have been asked to determine whether a Government employee may be
reimbursed the costs of local drayage of household goods between leased
premises at a post of duty outside the United States. /1/ Since the
employee's move between local quarters was not the result of official
action, there is no legal basis for reimbursement.
Mr. Richard L. Leonard, an employee of the Internal Revenue Service,
filed a claim with his agency for $490.98, the amount he paid to have
his household effects moved to a different residence in the vicinity of
his post of duty.
In May 1982, the Internal Revenue Service transferred Mr. Leonard to
Vancouver, British Columbia, Canada. Incident to that transfer the
Government paid for the transportation of his household effects.
Delivery was made to the West Vancouver residence he occupied under a
1-year lease. In May of the following year he was notified that title
to the property would be conveyed to another party and that the lease
would be terminated. He located another residence in the Vancouver area
and on June 30, 1983, his household goods were moved to his new
residence by a commercial mover at a cost of $490.98.
Mr. Leonard contends that he is entitled to reimbursement for the
$490.98 drayage charge based on language contained in regulations issued
by the Department of State. He refers to a specific provision in title
6 of the Foreign Affairs Manual, which he contends provides
circumstances under which relief may be granted to employees covered by
the manual who, despite reasonable precautions, exceed allowances
authorized by the manual. These circumstances include expenses in the
nature of those incurred by Mr. Leonard in connection with his local
move between rental quarters. Foreign Affairs Manual, title 6, Section
121.1-4 (August 10, 1982). He explains that the termination of his
lease was a matter beyond his control. He states that when he was
transferred to Vancouver he signed a 1-year lease for the West Vancouver
residence only after two real estate agents informed him that market
conditions and local law made it unlikely that he would be able to rent
any residence under a lease for a period in excess of 1 year.
The Foreign Affairs Manual is not applicable to employees of the
Internal Revenue Service. Mr. Leonard states, however, that in the
absence of an agency regulation covering local moves, the Department of
State rule applies to his case as a matter of Department of the Treasury
policy. This statement was refuted by the Director, Finance Division,
of the Internal Revenue Service in a letter dated April 16, 1985. He
explains that the Department of the Treasury applies the Federal Travel
Regulations to travel and transportation matters and he correctly points
out that the expenses claimed by Mr. Leonard may not be paid under the
Federal Travel Regulations. These regulations, issued pursuant to 5
U.S.C. Chapter 57, do not permit payment of costs associated with local
moves. See generally, 52 Comp. Gen. 293, 296 (1972).
Despite the absence of specific statutory authority we have
recognized that expenses associated with local moves may be paid as
administrative expenses where the relocation was the result of
governmental action. For example, we authorized reimbursement of costs
incurred by an Air Force member who was officially ordered to relocate
his mobile home from an off-base trailer park to another location for
sanitary and safety reasons. See 52 Comp. Gen. 69 (1972). The same
rationale is evident in the following excerpt from 52 Comp. Gen. 293,
297:
As in the case of military members, civilian employees who are
obliged to obtain other non-government quarters because their
landlords refuse to renew leases or otherwise permit them to
remain in their local economy housing, but who do not move their
household goods as the direct result of or in connection with an
official order or action, are not entitled to Government drayage
as such change of quarters is not for the convenience of the
Government * * *.
Our decisions would not provide a basis for reimbursement to Mr.
Leonard inasmuch as his move was not the result of governmental action.
The termination of his lease, though due to no fault of his own, is a
matter of a personal nature and the costs assoicated with his local move
to a new residence may not be paid as an administrative expense of the
agency involved.
Accordingly, Mr. Leonard's claim may not be allowed.
(1) The request for an advance decision, made by Thomas N. Lyall,
Authorized Certifying Officer of the Internal Revenue Service,
Department of the Treasury (reference RM:F:A:V), includes the employee's
travel voucher and related correspondence.
B-218090.2, 64 Comp. Gen. 515
Matter of: AFL-CIO Appalachian Council Inc. - Reconsideration, May
10, 1985:
Fact that the contracting agency sent its protest report directly to
the protester instead of to the firm's counsel does not affect the
propriety of General Accounting Office (GAO's) dismissal of the protest
for failure to comment on the report within 7 working days after the
date anticipated for receipt. Counsel was advised when the protest was
filed that receipt would be presumed to be on the anticipated date, yet
failed to advise us of any problem in that respect within the 7-day
comment period, as required by GAO's Bid Protest Regulations.
AFL-CIO Appalachian Council Inc. requests reconsideration of our
March 19, 1985, dismissal of its protest under the Department of Labor's
request for proposals No. JC-1-84-01. The protester objected to the
technical evaluation and ultimate rejection of its offer to provide
recruitment services for the Department's Job Corps program. We
dismissed the protest because we did not receive the protester's
comments responding to the contracting agency's report on the protest
within 7 working days after we received the report, as required by our
Bid Protest Regulations, 4 C.F.R. Section 21.3(e) (1985). The
Regulations provide that the protester's failure within the 7-day period
to file comments, or to file a statement requesting that the protest be
decided on the existing record, or to request an extension of the period
for submitting comments, will result in the dismissal of the protest.
We affirm the dismissal.
The 7-day comment period ended March 19, 1985. The protester,
through counsel, explains that while a copy of its protest was filed
with the contracting agency and specifically stated that notices
regarding the protest should be addressed to counsel, the contracting
agency sent a copy of its report directly to the protester. Counsel
states that the person having knowledge of the protest at the AFL-CIO
Appalachian Council did not discover the report until March 21 when he
returned from a business trip, and furnished the report to counsel the
following day. March 22 also was the day the counsel received our
dismissal notice, which was dated the eighth working day after we
received the agency report. Based on these circumstances, the protester
argues that the 7-day period for filing comments should have begun on
the date counsel actually received a copy of the report. We disagree.
When the protest was filed with this Office, we promptly sent counsel
a standard acknowledgement notice (dated January 30) advising it that
the contracting agency's report was due on March 7, and that it should
receive a copy of the report at about that time. The letter further
stated that counsel should promptly notify our Office if it did not
receive the report, and that:
Unless we hear from you we will assume that you received your
copy of the report when we received ours. . . . If we have not
heard from you by the seventh working day (after our receipt of
the report), we will close our file without action.
Counsel thus knew that our Office would presume that the 7-day period
commenced on the date after the report was due unless we were notified
by counsel within the period that it had not received the report on that
date; we received no such notice, however.
The effect of the presumption regarding receipt of the report is to
place the slight burden on the protester or its counsel to advise us if
it did not receive an agency report when due, since we otherwise have no
way of knowing whether or not it received the report. Our Office
generally is required to issue a final decision within 90 working days
after the protest is filed, while the contracting agency is afforded 25
working days after notification of the protest to prepare its report.
31 U.S.C. Sections 3553 and 3554, as added by the Competition in
Contracting Act, Pub. L. No. 98-369, 2741, 98 Stat. 1175, 1199 (1984).
If there were no requirement that a protester notify us of its failure
to receive a report, then the protester could idly await the report for
an indefinite time to the detriment of the protest system generally, as
well as to our ability to resolve bid protests expeditiously.
The protester argues that it is unfair to place the burden on the
protester to advise us of its failure to receive a report within 7
working days after the report's due date without first publishing formal
notice of the requirment in the Federal Register. We point out,
however, that the protester had actual notice of the requirement since
there is no question, but that the protester's counsel received our
acknowledgement letter, dated more than 6 weeks before the protester's
comments were due.
Accordingly, our dismissal of the protest, because we received no
notice from the protester's counsel that it had failed to receive its
copy of the agency report within seven working days after the report was
due, is affirmed.
B-217216, 64 Comp. Gen. 511
Matter of: SAFECOR Security and Fire Equipment Corporation, May 10,
1985:
Where performance-type specifications adequately inform bidders of
government's requirements for sound level audibility of fire alarm
system in all building areas, fact that contractor is responsible for
providing speakers in the quantities and locations necessary to satisfy
the specified performance requirements does not make specifications
insufficient to permit bidding on an intelligent and equal basis.
SAFECOR Security and Fire Equipment Corporation (SAFECOR) protests
the specifications for an alarm communication system under invitation
for bids (IFB) No. GS-03-84-B-0413 issued by the General Services
Administration (GSA). SAFECOR contends that the specifications and
drawings are "ambiguous" because part of the design is left to the
determination of the contractor and, as such, the solicitation does no
comply with regulations governing formally advertised procurements.
SAFECOR contends that the IFB should be canceled and the procurement
conducted through two-step formal advertising or negotiation.
We deny the protest.
GSA issued the IFB on September 20, 1984, for the installation of a
fire alarm, voice communication and emergency telephone system at the
United States Customs House in Philadelphia, Pennsylvania. Prompted by
inquiries from prospective bidders concerning technical requirements,
GSA issued IFB amendment No. 1, which extended the bid opening date to
November 21, 1984, in order to permit review and clarification of the
specifications. Amendment No. 2, dated November 9, modified the
specifications and extended the bid opening date to November 27, 1984.
On the day before bid opening, SAFECOR telephoned GSA, alleged that the
specifications were defective, urged that the IFB be canceled and stated
that otherwise it would protest to our Office. After consideration of
the points raised by SAFECOR's oral protest, GSA advised SAFECOR by
telephone that the IFB would not be canceled. Ten bids were opened on
November 27, 1984; the low bid was submitted by S.O.S. Defender, Inc.,
in the total amount of $276,428. SAFECOR, the ninth low bidder at
$490,000, filed a protest with our Office after bid opening on November
27, 1984. Subsequently, award was made to S.O.S. Defender, Inc., on
March 7, 1985.
According to the protester, the specifications and drawings are
"ambiguous" because they fail to specify the quantity and location of
speakers required for the voice communication system, whether speakers
would be required in the stair towers or elevators, and whether the
system would be tested with office doors opened or closed. SAFECOR
further contends that these defects are the result of the government's
failure to "properly engineer the job to show all devices required on
the drawings and not leave the design up to the various contractors."
SAFECOR thereby contends that the government's needs should have been
stated in terms of specific design requirements rather than performance
requirements; otherwise, the government should have conducted this
procurement under this procedures for competitive negotiation or
two-step formal advertising.
GSA generally contends that the contract specifications and drawings
clearly delineate specific requirements concerning the capacity, quality
and quantity of all components of the fire alarm system, except for the
quantity of speakers. The specification covering Voice Communication
System Equipment provides as follows in paragraph 2.3.2.1, section
16723, of the IFB:
2.3.2.1 Speakers shall be UL listed audible signal appliances
for fire alarm use. The sound pressure levels at signals
generated in alarm operation shall be at least 85 dBA measured 5
feet above the floor in any area except that level shall be at
least 15dB above the ambient noise-in mechanical rooms.
Uniformity of sound over any occupied area shall be plus 9dB.
GSA states that under this performance requirement, the quantity of
speakers required would change based upon the capacity of the speaker
that the individual bidder chose to provide just as the location of
these speakers would also be determined by the choice of that particular
brand of speaker the bidder intended to provide. According to GSA, the
specifications were designed to be performance oriented, allowing
prospective contractors maximum flexibility to utilize their expertise,
with the government receiving the benefit.
GSA further reports that its region 3 procuring office had recent
experience with a similar fire alarm system procurement using a
design-type speaker specification. In that procurement, performance
deviations were encountered in the testing phase which required
promulgation of change orders on speakers and speaker placements
resulting in both delay and additional expense to the government. In
addition, GSA states, through the widespread commercial use of similar
fire alarm systems, experienced fire alarm contractors have demonstrated
their ability to provide satisfactory results utilizing their own
designs. Therefore, GSA framed its specifications in the belief that
government-mandated design requirements in this area are unnecessary and
would not foster the government's policy of obtaining full and free
competition.
With regard to SAFECOR's contention that the specifications fail to
state whether speakers would be required in the stair towers or
elevators, GSA points out that paragraph 3.2, section 16723, of the IFB
provides as minimum requirements that the system shall be tested to show
that alarm signals are audible in all building areas. In addition, the
new fire alarm riser diagram on drawing 9E17 also reflects the
requirement that the voice communication system speakers shall provide
total building coverage. The stair towers and elevators were not
excepted from these performance requirements. Accordingly, the actual
location of the speakers required to provide coverage in the stair
towers and elevators is the contractor's design responsibility.
Finally, SAFECOR complains that specifications failed to state
whether the system would be tested with the office doors opened or
closed. GSA responds that the primary purpose of the fire alarm system
is to provide audible alarm signals in all building areas for the safety
of all building occupants and, if office doors, or any other doors,
remained open during system tests, there would be no assurance that
building occupants would hear alarm signals in the event of an actual
emergency. In GSA's view, this would present an unacceptable threat to
life, health and safety. Accordingly, since occupants may have their
office doors closed and since the specifications stipulate that the
system shall be tested to show that alarm signals are audible in all
building areas, GSA concludes that it would be unreasonable for a bidder
to assume system testing with office doors open.
As the protester acknowledges, its "major problem" with this
solicitation is that the specifications for the voice communication
system speakers are of the performance type, which means that the choice
of speakers and the selection of their location are within the judgment
of the bidder, providing that the performance requirements are met.
SAFECOR contends that this approach is impermissible in a formally
advertised procurement and mandates some other method of procurement in
which firms compete on the basis of technical proposals which describe,
in detail, the system each proposes to furnish.
With regard to the use of formal advertising as the method of
contracting, the Federal Acquisition Regulation (FAR), 48 C.F.R. Section
14.103-1 (1984), provides that contracts shall be awarded in accordance
with formal advertising procedures whenever feasible and practicable,
and this rule shall be followed even where specified conditions would
permit negotiating a contract. The specifications used in a formally
advertised procurement must provide a description of the technical
requirements for the product or service that includes the criteria for
determining whether these requirements are met. At the same time,
however, the specifications shall state only the government's actual
minimum needs in a manner to encourage maximum practicable competition,
FAR, 48 C.F.R. Section 10.001 (1984), and unnecessarily restrictive
specifications or requirements that might unduly limit the number of
bidders must be avoided. FAR, 48 C.F.R. Section 14.101.
We view these regulations as requiring that specifications used in a
formally advertised IFB must be unambiguous and inform bidders of the
minimum requirements of contract performance so that they may bid
intelligently and based on equal information. Operational Support
Services, B-215853, supra, citing Crimson Enterprises, Inc., B-209918.2,
June 27, 1983, 83-2 C.P.D. Paragraph 24. We have also recognized that
to ensure specifications are stated in terms that will permit the
broadest field of competition within the minimum needs of the agency,
such specifications may be performance oriented, requiring offerors to
use their own inventiveness and ingenuity in devising approaches that
will meet the government's performance requirements. GTE Automatic
Electric, Inc., B-209393, Sept. 19, 1983, 83-2 C.P.D. Paragraph 340;
Auto-Trol Corporation, B-192025, Sept. 5, 1978, 78-2 C.P.D. Paragraph
171. Indeed, we have found that the requirements of a design
specification may inappropriately restrict competition for a
solicitation where an agency is capable of stating its minimum needs in
terms of performance specifications which alternative designs could
meet. See Viereck Company, B-209215, Mar. 22, 1983, 83-1 C.P.D.
Paragraph 287.
Here, prospective bidders were on notice of what would be expected of
them in meeting contract performance requirements and, since paragraph
1.7, section 16723, of the IFB indicates that the electrical contractor
performing the installation must be experienced in such systems and have
manufacturer representation for the installation, presumably each bidder
is knowledgeable enough to recognize the effort and risks associated
with that expectation. See Talley Support Services, Inc., B-209232,
June 27, 1983, 83-2 C.P.D. Paragraph 22 at 4. And, in this case, where
the specification in question refers to usage by an established trade,
such as the firm alarm system here, we find that the specification
provides an adequate frame of reference on which bidders may prepare
their bids. Crimson Enterprises Inc., B-209918.2, supra, citing
Industrial Maintenance Services, Inc., B-207949, Sept. 29, 1982, 82-2
C.P.D. Paragraph 296.
Although the IFB specifications were not in the detail or format
suggested by the protester, they did not conceal the performance
requirements in the protested areas. Operational Support Services,
B-215853, supra, citing Palmer and Sicard, Inc., B-192994, June 22,
1979, 79-1 C.P.D. Paragraph 449. A bidder preparing a bid could have
reasonably interpreted the IFB requirements when read as a whole in only
one way. That is, the specifications and drawings require that voice
communication system speakers shall be installed throughout the entire
building in order to achieve the prescribed sound pressure levels in all
areas, except the enclosed parking areas and garages, where bells are
required instead of speakers. The system shall be tested to show that
alarm signals are audible in all building areas, and that voice messages
are intelligible in all areas of coverage. Therefore, the contractor is
responsible for providing speakers in the quantities and locations
necessary to satisfy the specified performance requirements.
While SAFECOR contends that these provisions are ambiguous, it is
clear from the protest that SAFECOR understands the requirements and is
actually complaining about the reasonableness of the specifications.
See Kleen-Rite Corporation, B-212743, Jan. 16, 1984, 84-1 C.P.D.
Paragraph 73. We believe that the IFB documents provided adequate
explanation of the solicitation's minimum requirements and are adequate
to permit competitive bidding. The IFB provisions complained of affect
all potential bidders equally and the fact that bidders may respond
differently in formulating their approaches and calculating their prices
is a matter of business judgment and does not preclude a fair
competition. See Saxon Corporation, B-214977, supra. In this regard,
we also noted that of the 10 bidders submitting bids, only SAFECOR
complained concerning the reasonableness of the solicitation. This fact
leads us to believe that the level of alleged uncertainty and attendant
risk in bid preparation was altogether acceptable. Compare Industrial
Maintenance Services, Inc., B-207949, supra, and KenCom, Inc., B-200871,
Oct. 5, 1981, 81-2 C.P.D. Paragraph 275.
The protest is denied.
B-215972, 64 Comp. Gen. 507
Matter of: Caelter Industries, Inc., May 10, 1985:
A company may qualify for waiver of first article testing and product
approval on the basis of the contract and production history of its
predecessor company when the facilities, personnel, assets and products
of the two companies are similar or identical.
Based on its predecessor's production history, successor corporation
to a government contractor properly was found to meet a solicitation
requirement that the item to be offered must have been previously
produced and sold commercially or to the government, where there have
been no substantial changes in the product, manufacturing process, or
staff.
General Accounting Office will not review a procuring agency's
affirmative determination of responsibility in the absence of a showing
of fraud or an allegation of failure to apply definitive responsibility
criteria.
Caelter Industries, Inc. (Caelter), protests the award to SMI
Industries USA, Inc. (SMI), of a contract for two airport runway to wed
sweepers under request for proposals (RFP) F09603-84-R-0157, issued by
Warner Robins Air Logistics Center, Robins Air Force Base, Georgia. We
deny the protest in part and dismiss it in part.
The RFP invited firms to submit offers based on first article testing
or based on waiver of the requirement. Award was to be based on the
lowest evaluated cost to the government. The contracting agency
received three proposals that complied with the solicitation
requirements for waiver of first article testing /1/ and, after
evaluation, awarded the contract to SMI, the low offeror.
Caelter's protest is founded upon its contentions that the awardee is
a "newly orgnanized nonmanufacturing subsidiary" of a Canadian
corporation. Caelter protests the award on three bases: that the
contracting officer improperly waived the first article requirement for
SMI; that the contracting officer failed to conduct an adequate
preaward survey of SMI facilities; and that SMI's proposal was not
responsive in that it did not offer "an established end product" that
had been supported with spare or repair parts, as required by the
solicitation.
The history of the corporate relationship between the protester and
the contract awardee is important to the resolution of the issues of
this protest. The protester, Caelter Industries, Inc., is a New York
corporation located on Purdy Avenue, Watertown, New York. This
corporation operates a manufacturing division in Watertown called
Sicard. Prior to June 1984, Caelter's Sicard division was called SMI
New York. Caelter Industries, Inc., was formerly the wholly owned
subsidiary of a Canadian subsidiary of a Canadian corporation, Caelter
Enterprises, Ltd., which had a manufacturing facility in Quebec, Canada.
In December 1982, Caelter Enterprises, Ltd., went bankrupt. Most of
the assets of that bankrupt Canadian corporation were purchased in May
1983 by another Canadian corporation, now known as SMI Industries
Canada, Ltd. The assets of Caelter Enterprises Ltd., that were
purchased by SMI Industries Canada, Ltd., included all of its machinery
and equipment, work in process and finished goods, parts and components
inventory, drawings, designs, trademarks and patents.
In September 1983, SMI Industries Canada, Ltd., formed SMI Industries
USA, Inc. That company assumed operations on Bradley Street Road,
Watertown, New York, in October 1983 and was incorporated under the laws
of the state of New York in 1984.
The solicitation set forth conditions under which the first article
testing requirement could be waived, as follows:
L.45 Conditions For Waiver of First Article Requirements
a. * * *
b. First Article test requirements may be waived by the
Contracting Officer under the following conditions:
(1) If the contract is awarded to a contractor currently in
production, under a Government contract or a subcontract to a
Government prime contractor, of end articles identical or similar
to those specified in this solicitation.
(2) If the contract is award to a contractor not presently in
production of the item who has previously satisfactorily
furnished, under a Government contract or a subcontract to a
Government prime contractor, end articles identical or similar to
those specified in this solicitation. * * *
The solicitation also required that the offeror list the contract
numbers, if any, under which identical or similar supplies were
previously accepted from the offeror by the government and stated that
if first article test requirements were waived, the contractor had to
furnish end items identical to those furnished under its most recent
previous government prime contract or subcontract.
SMI's request for waiver of first article testing was made on the
basis that the runway sweepers SMI offered complied with solicitation
specifications, and that its product had passed all first article
testing requirements since it was the same equipment that was previously
manufactured by Caelter under the brand name "SMI 300." SMI also
indicated that the Air Force then had in excess of 150 of the SMI units
it was offering. In response to the Air Force's request for the
contract numbers under which the sweepers had previously been supplied
to the government, SMI listed the three most recent contracts between
Caelter and the government for the SMI runway sweepers. SMI also
explained to the Air Force contracting officer that its company was the
successor company to Caelter Enterprises, Ltd./Sicard, which formerly
controlled all the engineering, design, production, and quality
assurance for the SMI series 300 runway sweepers that SMI then owned
and, by court order, had exclusive right to use the SMI product name and
trademark. The first article test requirement was waived with respects
to SMI based in large part on the information provided.
The first issue is whether SMI qualified for waiver of first article
testing following SMI Industries Canada, Ltd.'s purchase of the assets
of Caelter Enterprises, Ltd., based on its apparent assumption of that
company's operations.
Caelter contends that SMI did not qualify for waiver of first article
testing because it had not previously manufactured or produced the SMI
runway sweeper or provided the sweeper under a government contract as it
claimed in its representations to the contracting officer. Although the
protester admits that this equipment was manufactured by its now defunct
former parent, Caelter Enterprises, Ltd., it is of the view that
production of the equipment by its former parent is unrelated to SMI's
ability to offer the product.
As a general rule, the determination as to whether an offeror
qualifies for waiver of first article testing is within the discretion
of the contracting agency, and we will not overturn the agency's
decision unless it was arbitrary or capricious. Julian A. McDermott
Corp., B-189798, Dec. 9, 1977, 77-2 C.P.D. Paragraph 449. Further, we
have held that the contract history of a predecessor company may qualify
a successor company for waiver of first article testing based on the
similarities of the companies' manufactured products, facilities,
management, staff, production and quality control processes. See Keco
Industries, Inc., B-207114, Aug. 23, 1982, 82-2 C.P.D. Paragraph 165;
Kan-Du Tool & Instrument Corp., B-183730, Feb. 23, 1976, 76-1 C.P.D.
Paragraph 121.
SMI states that its Canadian manufacturing plant has the same
equipment, engineering designs and personnel as the former Caelter
Enterprises, Ltd. According to the record, SMI manufactures the same
SMI runway sweepers at its Canadian facility that were formerly
manufactured and produced by Caelter. The former executive vice
president and plant manager of Caelter Industries, Inc., is now
president of SMI Industries USA. Although Caelter argues that SMI did
not acquire or take over the actual operations of its former Canadian
manufacturing company, and that SMI has no relationship to that defunct
corporation, Caelter has not suggested that there is any substantive
difference between the runway sweeper formerly manufactured by Caelter
Enterprises, Ltd., and that offered by SMI; nor has Caelter shown any
substantive change in the management, personnel or plant location of the
two companies. Under these circumstances, we cannot find that waiver of
first article testing for SMI, based on the experience and previous
contract history of Caelter Enterprises, Inc., was arbitrary or
capricious. Keco Industries, Inc., B-207114, supra; Julian A.
McDermott Corp., B-189798, supra; Kan-Du Tool & Instrument Corp.,
B-183730, supra. The protest on this issue is denied.
Caelter further contends that SMI's proposal was not acceptable in
that it did not meet the solicitation requirements for providing an
established end product and spare parts. The solicitation states that
the end product offered must have been previously produced and sold
commercially or sold to the government. In the alternative, it must be
substantially the same as such product, and it must have been routinely
supported by spare/repair parts produced or sold in the normal course of
business. It appears that Caelter's contention on this point is founded
upon its view, discussed above, that SMI has no corporate relationship
with the former Caelter Enterprises, Ltd., or any right to benefit from
its production history.
The contracting agency, however, determined that the runway sweeper
and spare/repair parts support offered by SMI were substantially the
same as that previously sold to, and then in use by, the government. In
corporate transfer cases such as this, we see nothing improper in the
agency looking to the actual circumstances to determine whether there
have been any changes in those factors that impact upon the product
itself. When there have been no substantial changes in the product,
manufacturing processes or staff of a previously qualified predecessor
company, we see no reason to require rejection to the offer under a
qualifying provision such as the one used here. The protest on this
point, therefore, is denied.
Caelter also contends that the Air Force failed to conduct an
adequate preaward survey to determine whether SMI was a responsible
offeror.
The record indicates that on the basis of a preaward survey, Air
Force procuring officials determined that SMI was capable of performing
the contract as required. A contracting agency's decision concerning an
offeror's responsibility involves a high degree of discretion on the
part of the procuring officials and is essentially a matter of business
judgment. Therefore, we will not review a protest against the agency's
affirmative determination of responsibility in the absence of a showing
of possible fraud on the part of the procuring officials or an
allegation of failure to apply definitive responsibility criteria.
Elliott Co., et al., B-212897; B212897.2, Jan. 30, 1984, 84-1 C.P.D.
Paragraph 130. Caelter's disagreement with the Air Force's decision on
SMI's responsibility does not involve either situation and, therefore,
we will not review the agency's decision.
The protest is denied in part and dismissed in part.
(1) A fourth company submitted a proposal that did not meet the
requirements for waiver of first article; that proposal was evaluated
on that basis.
B-216647, 64 Comp. Gen. 505
Matter of: Allen County Builders Supply, May 7, 1985:
A bid bond is defective when no penal sum has been inserted on the
bond, either as a percentage of the bid amount or as a fixed sum. Prior
General Accounting Office cases to the contrary, including 51 Comp. Gen.
508 (1972), are hereby overruled.
Allen County Builders Supply (Allen County) protests the rejection of
its bid under invitation for bids (IFB) No. F12617-84-B0021, issued by
the Air Force for the repair of siding on a building located at Grissom
Air Force Base, Indiana. The bid was rejected as nonresponsive because
no penal sum had been entered on the bid bond accompanying the bid, as
required by the IFB.
We deny the protest.
The IFB required each bidder to submit with its bid a bid bond in the
amount of 20 percent of the total bid price. The bid bond penalty
amount could be expressed either as a fixed sum or as a percentage of
the total bid price. The solicitation cautioned, in compliance with the
applicable Federal Acquisition Regulation, that failure to furnish a bid
bond in the proper form and amount by the time set for bid opening might
be cause for rejection of the bid. See 48 C.F.R. Section 28.101-4
(1984).
When the bids were opened, Allen County was the apparent low bidder.
However, when the Air Force conducted a technical evaluation of the
bids, it discovered that Allen County's bid bond did not include any
penal sum or percentage figure to indicate the amount of the bond, nor
had the bond been signed by the principal. The Air Force contracting
officer found Allen County's bid nonresponsive because of these
deficiencies and rejected it. The protester argues that the
deficiencies in the bid did not affect the bid in substance, but only in
form, and contends it should have been granted an opportunity to cure
such deficiencies.
The purpose of a bid bond is to assure that a bidder will not
withdraw its bid within the time specified for acceptance; it secures
the liability of a surety to the government in the event the bidder
fails to fulfill its obligations. Hydro-Dredge Corp., B-214408, Apr. 9,
1984, 84-1 CPD Paragraph 400. Thus, the sufficiency of a bid bond will
depend on whether the surety is clearly bound by its terms; when the
liability of the surety is not clear, the bond properly may be regarded
as defective. Id.
When required, a bid bond is a material part of a bid and must
therefore be furnished with the bid. Baucom Janitorial Services, Inc.,
B-206353, Apr. 19, 1982, 82-1 CPD Paragraph 356. When a bidder supplies
a defective bond, the bid itself is rendered defective and must be
rejected as nonresponsive. Truesdale Construction Co., Inc., B-218094,
Nov. 18, 1983, 83-2 CPD Paragraph 591. As with other matters relating
to the responsiveness of a bid, the determination as to whether a bid
bond is acceptable must be based solely on the bid documents themselves
as they appear at the time of bid opening. See Central Mechanical,
Inc., 61 Comp. Gen. 566 (1982), 82-2 CPD Paragraph 150.
While Allen County's bid bond was not signed by the principal, this
constitutes a minor formality that can be waived where the unsigned bond
is submitted with a signed bid, as was the case here. Geronimo Service
Co., B-209613, Feb. 7, 1983, 83-1 CPD Paragraph 130. However, the
failure to indicate the penal amount of the bond presents a more serious
problem.
Although the protester asserts that its intention was to submit a bid
bond for the required 20 percent of the bid amount and for the surety to
be bound thereby, it is not the bidder's intent which controls. The
relevant inquiry, rather, is whether the surety's obligation has been
objectively manifested on the bidding documents so that the extent and
character of its liability is clearly ascertainable therefrom. See
Hydro-Dredge Corp., supra. Here, we find that the requisite obligation
could not be clearly created without inserting a specific penal sum or
percentage in the place provided on the bond.
It is a general rule of the law of suretyship that no one incurs a
liability to pay a debt or to perform a duty for another unless he
expressly agrees to be so bound, for the law does not create
relationships of this character by mere implication. See 44 Comp. Gen.
495 (1965). Therefore, in the event of default by the bidder in this
case, the blank bond could be challenged by the surety, and the purpose
of the bid bond would be defeated.
Moreover, we note that the language of the bid bond specifically
refers to the liability of the surety as being "the above penal sum."
The question presented in cases where bonds do not comply with
invitation requirements is whether the government obtains the same
protection in all material respects under the bond actually submitted as
it would under a bond complying with the requirement. See Ameron, Inc.
v. United States Army Corps of Engineers, Civ. No. 85-1064, slip op. at
10-11 (D.N.J. Mar. 27, 1985); General Ship and Engine Works, Inc., 55
Comp. Gen. 422 (1975), 75-2 CPD Paragraph 269. Where no penal sum is
inserted on the bond, no obligation in a sum certain is undertaken by
the surety. Therefore the same protection simply is not afforded by a
bond lacking a penal sum as would be provided by a fully completed bond.
Accordingly, we conclude that the bid bond was defective here, and that
the government was required to reject Allen County's bid as
nonresponsive.
We note that although the Air Force originally rejected the
protester's bid as nonresponsive because of the defective bid bond, it
later concluded that Allen County's protest should be sustained in
accordance with 50 Comp. Gen. 508 (1972), which permitted the penal sum
of a bid bond to be inferred from a reference on the bond to the IFB
number. No corrective action was taken, however, because the contract
had already been performed.
While the Air Force's reliance on our prior decision was entirely
proper, we have concluded that the decision should no longer be
followed. We now hold that a bid must be rejected as nonresponsive
where no penal sum has been inserted in the bid bond accompanying the
bid. 51 Comp. Gen. 508, supra, and any other decisions to the same
effect, are hereby overruled.
The protest is denied.
B-218196.2, 64 Comp. Gen. 504
Matter of: Transamerican Steamship Corporation, May 6, 1985:
General Accounting Office (GAO) regulations provide that protests are
to be dismissed unless the protester submits either comments on the
agency report or a statement requesting GAO to decide the matter on the
existing record within 7 days after receiving the report. If a
conference is held, the protester must submit either comments or a
similar request for a decision on the existing record within 5 working
days
after the conference.
Transamerican Steamship Corporation protests the award of a contract
to Sea Mobility, Inc. under request for proposals No. NOOO33-84-R-4003,
issued by the Military Sealift Command. Transamerican challenges the
responsiveness of Sea Mobility's proposal and the responsibility of the
company, arguing that the Navy changed the basis for award after
submission of proposals and gave misleading information to it during
discussions.
We dismiss the protest.
By letter dated February 21, 1985, we acknowledged Transamerican's
protest and cautioned the company that under our Bid Protest
Regulations, 4 CFR Section 21.3(e) (1985), a protester must submit
written comments on the agency's report concerning the protest or a
statement that the protest should be decided on the existing record
within 7 working days following receipt of the report. The report of
the Military Sealift Command was provided to Transamerican on or about
March 25.
On April 1, at the invitation of our Office, representatives of the
firm attended a bid protest conference requested by Marine Transport
Lines, Inc., another protester of the same Military Sealift Command
procurement. Although not formally a conference on Transamerican's
protest, the April 1 conference was intended to encompass issues
presented in that protest if the firm wished to attend and raise them.
Section 21.5 of our regulations provides that when a conference is held
on a protest, the protest will be dismissed unless the protester files
comments on the conference and/or the agency report, files a statement
requesting a decision on the existing record, or requests an extension
of the time in which to file comments within 5 working days following
the conference. Those attending the April 1 conference were reminded
that comments were due on or before April 8.
Transamerican has not commented on the agency report or requested
that we decide the protest on the existing record, which it was required
to do on or before April 4. Even if we view section 21.5 as applicable
to this case because the Marine Transport Lines conference encompasses
issues raised by Transamerican, Transamerican therefore had until April
8 to file the necessary comments or a statement with our Office. It has
not done that either. Consequently, we dismiss the protest.
B-216326, 64 Comp. Gen. 501
Matter of: Rent Plus Housing Allowance, May, 2, 1985:
When two members entitled to and receiving housing allowances share a
residence, their "rent plus" housing allowance must be paid at the
sharer's rate regardless of the financial arrangements between the
members. Although the regulations were not entirely clear in defining a
sharer's entitlement, the fact that the Government is paying each member
a housing allowance, although of different types, supports the
conclusion that sharing arrangements should be taken into account even
though costs may not, in fact, be shared so that sharers cannot
manipulate the allowances to their advantage.
Two members of the uniformed services reside together in Hawaii where
they are entitled to housing allowances. Controlling regulations
require that when members share a residence the "rent plus" housing
allowance is based on each member's equal share of the cost of quarters.
In this case one member claims a "rent plus" housing allowance as an
unaccompanied member (a non-sharer) on the basis that the other member
was merely a guest and paid no expenses. This results in a higher "rent
plus" allowance for the claimant. The other member received a housing
allowance at a flat rate. We find that the member claiming the "rent
plus" allowance is only entitled to a sharer's rate since the
regulations do not, nor were they intended to, provide a distinction for
the member not sharing in the expenses. /1/
Housing allowances for members of the armed services stationed
outside the United States or in Hawaii or Alaska are authorized by 37
U.S.C. Section 405. Regulations implementing this broad authority are
in Chapter 4, Part G, of Volume 1 of the Joint Travel Regulations.
Housing allowances are to two types. One is called a housing allowance,
the other is called a "rent plus" housing allowance. The housing
allowance is based on an index of average housing costs in an area.
This allowance is paid in a flat rate to a member and is not affected by
the actual costs of housing that a member incurs. The "rent plus"
allowance is based on actual costs incurred for living quarters. A
ceiling limits the amount of allowance which may be paid. Cost factors
used in arriving at the rent plus housing allowance include rent or
purchase price, costs of utilities and recurring maintenance, and
expenses or moving in and moving out. The member's entitlement to Basic
Allowance for Quarters for a Family Separation Allowance (Type I) is
subtracted from the cost of quarters to arrive at the amount of the rent
plus allowance to be paid.
This actual cost-based allowance is prorated when members share a
residence. When the rent plus system was made applicable to Hawaii, the
flat rate housing allowance was phased out as members in receipt of that
allowance who chose not to change to the rent plus program were
transferred to other locations.
Beginning in June 1982 when the rent plus housing allowance was first
put into effect in Hawaii, an Air Force captain began receiving that
allowance as an unaccompanied member who was not sharing a residence.
In March 1983, the Accounting and Finance Officer became aware of the
fact that the captain, who is male, was sharing his residence with a
female enlisted member. She was eligible for a flat rate housing
allowance during the period he was receiving the rent plus allowance
under the hold-over provisions applicable to individuals in receipt of
such an allowance when the rent plus program was initiated. Since, as
noted above, the computation of the amount paid under the rent plus
system is based upon costs, a lower allowance is paid when two or more
members share a residence. The Accounting and Finance Officer
determined that the allowance paid the captain should have been
calculated based on the fact that he was sharing his quarters and
commenced collection of the difference between the non-sharer's
entitlement and the amount to be paid based on shared quarters. The two
members involved were subsequently married and their allowance
entitlements were recalculated.
The captain objects to the collection on the basis that, at the time
he became entitled to the rent plus housing allowance on June 1, 1982,
Volume 1 of the Joint Travel Regulations did not define "sharer." The
definition of sharer was added to the regulations effective August 23,
1982. Additionally, he points out that in June 1982 all references in
Volume 1 of the Joint Travel Regulations regarding sharing of quarters
were to sharing the costs. He says that the member who resided in his
residence was merely a guest, and did not pay costs, nor did she own any
interest in his home or have any rights as a renter. As a result he
contends that he is entitled to the allowance as a non-sharer at the
unaccompanied rate.
The captain is correct in stating that the governing regulations did
not define "sharer" in June 1982, when the rent plus housing allowance
was made applicable to the location in Hawaii which is involved in this
case. But, effective August 24, 1982, 1 JTR paragraph M4300-3 was
amended to include such a definition, which is:
* * * a member who is entitled to a housing allowance and is
residing with one or more members of the Uniformed Services and/or
one or more Federal civilian employees who are authorized a living
quarters allowance.
Prior to the effective date of that amendment in 1 JTR paragraph
M4300-3, the Per Diem, Travel and Transportation Allowance Committee had
issued a message, in May 1982, which provided with respect to sharers
that:
For the purposes of rent plus calculations, derived rent for
members is calculated by dividing purchase price of house by 120
and then by number of members. Consider members sharing equally
regardless of percentage of purchase price claimed by each member.
Member can share without being named in sales agreement.
Additionally, local instructions implementing the rent plus program
provided that payments to military members who were sharing a home would
be based on each member's share of the rent or rental equivalent
"computed by dividing the 'rent' by the number of military members in
the home." This rule applied to members married to members and members
sharing with other members.
As the captain notes, other sections of the Joint Travel Regulations
in force in 1982 indicated that the actual amount of the cost shared was
to be used to determine an individual's allowance. However, those
provisions relate only to determining the amount of the
Utility/Recurring Maintenance Allowance, which is only part of the total
rent plus housing allowance. See 1 JTR paragraph M4301-3d. In June
1982 the regulations did not provide for the allocation of rent or
purchase costs when sharing quarters was involved.
While the regulations in force in June 1982 may have been somewhat
misleading, when sharing of rent was specifically considered by the Per
Diem, Travel and Transportation Allowance Committee, members entitled to
housing allowances who were living together as sharers were considered
to have equal obligations to pay rent regardless of the financial
arrangements between them. This is clear from the message issued in May
1982, and the regulation amendment issued in August of that year. Local
instructions issued earlier adopted the same approach.
The fact that the Government is paying a housing allowance to each
member, although in this case the allowances are of different types,
supports the conclusion that the Government should not be obligated to
pay the higher rate rent plus allowance where only one member assumes an
obligation to pay the housing cost. Allowing this to happen would
permit sharing members to manipulate the housing allowances to their
advantage.
Since the controlling regulation did not provide for allocating rent
or payments in lieu of rent on an actual expense basis instead of
sharing them equally and since it is clear that equal division of those
costs was contemplated and is in keeping with the purpose of rent plus
housing allowance, we conclude that the captain was not entitled to the
rent plus as a non-sharer. His entitlement must be based on the
sharer's computation for the period involved.
(1) This matter is the subject of a request for advance decision by
Captain B.A. Schroeder, USAF, Accounting and Finance Officer,
Headquarters 15th Air Base Wing (PACAF), Hickam Air Force Base, Hawaii,
and has been assigned PDTATAC Control No. 84-10, by the Per Diem, Travel
and Transportation Allowance Committee.
B-218313, 64 Comp. Gen. 500
Matter of: Pacific Coast Welding & Machine, Inc., Apr. 30, 1985:
A potential subcontractor complaining about definitive responsibility
criteria that a bidder would have to meet as a prerequesite to award of
the prime contract is not an interested party since to be an interested
party under the Competition in Contracting Act of 1984 and the General
Accounting Office implementing Bid Protest Regulations a party must be
an actual or prospective bidder or offeror whose direct economic
interest would be affected by the award of a contract or by the failure
to award a contract.
Pacific Coast Welding & Machine, Inc. protests any award under
invitation for bids (IFB) No. N62467-83-B-0426, issued by the Department
of the Navy. The basis for protest is that certain definitive
responsibility criteria that relate to the experience of the contractor
are unduly restrictive of competition. Pacific is reported to be a
potential subcontractor.
We now consider bid protests pursuant to 31 U.S.C. Section 3551 et
seq., as added by section 2741(a) of Pub. L. 98-369, title VII (the
Competition in Contracting Act). The law defines an interested party as
an "actual or prospective bidder or offeror whose direct economic
interest would be affected by the award or by failure to award the
contract." The language of our implementing Bid Protest Regulations
mirrors the definition contained in the statute. 4 C.F.R. Section
21.0(a) (1985).
In this case, the agency reports that Pacific was neither a bidder
nor, according to its Vice President, a prospective bidder. Pacific's
interest in the qualifications that a bidder would have to meet for
award of the prime contract is that of a potential subcontractor only.
Under the law and our implementing Bid Protest Regulations, Pacific's
interest is not sufficient for it to be considered an interested party.
Its protests therefore will not be considered.
The protest is dismissed.
B0214679, 64 Comp. Gen. 493
Matter of: Greenstreet Farms, Inc., April 29, 1985:
Debtor may contractually agree to procedures different from those
specified in 31 U.S.C. 3716(a), or may completely waive entitlement to
those procedures, as long as the variance or waiver is made voluntarily,
knowingly, and intelligently.
Unless parties expressly agree to the contrary, a creditor's
acceptance of a work-out agreement from the debtor does not discharge
the pre-existing debt, unless and until the work-out agreement itself is
completely paid. If the work-out agreement is breached, the creditor
may proceed on the original debt as if the work-out agreement had not
existed, and may use offset to collect the entire pre-existing debt, not
just the installments that were past due under the work-out agreement.
The Soil Conservation Service (SCS) of the Department of Agriculture
has requested our decision on two questions concerning the impact of
section 10 of the Debt Collection Act of 1982, 31 U.S.C. Section 3716
(1982), on the authority of the United States to take administrative
offset.
The first question concerns the need to promulgate regulations prior
to taking administrative offset. The second question concerns offsets
taken under contractual agreements which provide for offset after
completion of specified due process-styled procedures which differ from
those contained in section 10. As is explained below, we conclude that
the procedures in section 10 do not apply to this case, and therefore it
is not necessary for us to answer the first question at this time.
Instead, we find that the debt at issue here is governed by contractual
agreements which provided the substantial equivalent of the section 10
procedures. Upon completion of those procedures, and the valid waiver
of any further rights under them, SCS was authorized to collect the full
amount of the debt.
On June 17, 1977, SCS entered into a contract (No. AG48SCS04589) with
Greenstreet Farms, Inc. pursuant to the Great Plains Conservation
Program, as authorized by 16 U.S.C. Section 590p(b), and implemented by
7 C.F.R. pt. 631 (1977). Under the contract, and in accordance with the
implementing regulations, Greenstreet Farms agreed to take certain
measures intended to properly conserve, develop, and utilize the soil
and water resources or property it owned, in return for which SCS agreed
to finance those measures. The contract specifically provided that
Greenstreet Farms:
* * * agrees to all of the regulations issued by the Secretary
of Agriculture governing the (Great Plains Conservation) program,
which regulations are hereby made a part of this contract (and) to
forfeit all right to further payments or grants under the contract
and refund to the United States all payments or grants received
thereunder upon (its) violation of the contract * * *.
The implementing regulations which were incorporated by reference
into the contract specified the procedures to be followed by SCS when
determining whether the contract had been violated, including detailed
requirements for notice and an opportunity for hearing on the issue of
whether a violation had occurred, as well as procedures for
administratively appealing the agency's initial decision. 7 C.F.R.
Section 631.25. The regulations also provided that if a farm accused of
violating a contract admits to the violation and agrees in writing to
accept a forfeiture, refund, payment adjustment, or termination of the
contract, then "no further (due process-styled) proceedings shall be
undertaken." 7 C.F.R. Section 631.25(a). Finally, the implementing
regulations authorized the taking of administrative setoffs against
amounts payable under the program in order to recover any indebtedness
owed to any agency of the United States. 7 C.F.R. Section 631.29.
According to SCS, the contract was modified on several occasions to
afford Greenstreet Farms additional time to carry out the specified
measures. However, on November 24, 1981, SCS advised Greenstreet Farms
in writing that the contract could not be modified again and that, if
Greenstreet failed to take the agreed upon measures by June 1, 1982, it
would be considered to have violated the contract. On July 22, 1982,
SCS advised Greenstreet Farms in writing that it believed that the the
contract had been violated. Subsequently, on October 1, 1982,
Greenstreet Farms signed a document entitled "Agreement Covering
Non-Compliance with Provisions of Contract (under the) Great Plains
Conservation Program." This non-compliance agreement stipulated that
Greenstreet Farms had failed to carry out certain provisions of the
contract; that the nature and effect of that non-compliance warranted
termination of the contract; that Greenstreet Farms thereby forfeited
all rights to further payments under the contract; and that Greenstreet
Farms should refund $4,493.20 to SCS for payments that it had previously
received under the contract. The non-compliance agreement concluded
with the statement that Greenstreet Farms:
* * * agrees that (the) forfeiture or refund * * * is proper
and any amounts in connection therewith * * * are due and owing.
(Greenstreet Farms) waives the right to any further proceedings
under the regulations governing contract violations.
A notation on the non-compliance agreement indicated that Greenstreet
Farms sought permission to pay back the agreed refund by means of a
3-year installment work-out agreement with the first payment due on
August 1, 1983. On October 14, 1982, SCS sent a letter to Greenstreet
Farms agreeing to the installment proposal. However, SCS stated that
such an arrangement would require the assessment of "late charges" on
any payment that might become past due.
A year later, on August 11, 1983, when Greenstreet Farms failed to
make its first installment payment, SCS wrote Greenstreet Farms to
request a payment of the past due principal, plus interest. SCS warned
Greenstreet Farms that if the past due amount was not received by
December 1, efforts would be taken to collect the amounts owed through
administrative offset, or any other means available to the agency. On
September 28, 1983, when payment still was not received, SCS sent
another letter to Greenstreet Farms to advise it that, in view of
Greenstreet Farms' failure to make payment as agreed, "the (work-out)
agreement is now void." Therefore, SCS demanded payment of the entire
debt, plus interest. SCS stated that action had been taken to begin
collection by means of administrative offset.
On December 20, 1983, administrative offset was effected against a
$2,126.15 payment owed to Greenstreet Farms by the Commodity Credit
Corporation under the Feed Grain, Rice, Upland Cotton, and Wheat
Programs for Crop Years 1982-1985. In order to participate in those
programs, Greenstreet Farms had filed a form ASCS-477, "Intention to
Participate and Application for Payment." On that form, Greenstreet
Farms agreed "(t)o comply with the regulations governing the applicable
program and payment limitations," which may be found in 7 C.F.R. pt.
713. Those regulations specifically authorize the use of administrative
offset against payments to be made under those programs in order to
collect any debts owed to any agency of the United States Government. 7
C.F.R. Section 713.113. Those regulations also set out the procedures
to be followed in order to obtain reconsideration and review of the
agency's actions. 7 C.F.R. Section 713.114.
At no time since it breached the original contract and the workout
agreement has Greenstreet Farms ever attempted to dispute its debt or
invoke the due process-styled procedures in any of the relevant
regulations. However, Greenstreet Farms did write to SCS to protest the
offset. Although it still did not dispute the amount or validity of its
debt, or the fact that payment was past due, Greenstreet Farms explained
that adverse weather conditions had prevented it from earning the funds
necessary to make the first installment payment. Greenstreet Farms
requested that SCS return the offset funds and agree to enter into a new
repayment plan, to begin in August 1984. Greenstreet Farms also
asserted that the SCS offset activities were illegal on several grounds,
including the failure to promulgate regulations under section 10 of the
Debt Collection Act of 1982 prior to taking administrative offset; the
assessment of interest on the debt without Greenstreet Farms' agreement;
the absence of authority to "accelerate" its debt (as opposed to
collecting only the past due installment payments) and the failure to
properly serve Greenstreet Farms with legal "notice" prior to the taking
of offset.
In view of these facts and the assertions of Greenstreet Farms, SCS
seeks our answers to two questions:
1. Does the Debt Collection Act of 1982 preclude the SCS from
the use of administrative setoff until agency regulations have
been promulgated to implement the act?
2. If SCS is not precluded from the use of administrative
offset pending promulgation of rules, in your opinion, will SCS
have provided (Greenstreet Farms) due process after response to
its January 17, 1984, letter has been made, or do you feel that
something additional should be done?
Because we think the Greenstreet Farms debt is governed by the
provisions of its contractual agreements with SCS (and the regulations
incorporation by reference therein), we need not answer th first
question posed by SCS at this time. For this reason, we proceed
directly to the second question. In order to answer that question, we
must first determine what procedures, if any, are applicable to this
case; second, whether SCS complied with these procedures; and finally,
if all else was proper, whether SCS could take offset to collect the
full amount of Greenstreet Farms' debt.
Greenstreet Farms has suggested that, regardless of the procedures
set out in the contract and incorporated regulations, before it may take
offset, SCS is required to follow the procedures set forth in section 10
of the Debt Collection Act of 1982 (DCA). The DCA amended the Federal
Claims Collection Act of 1966. Both acts have been codified in title 31
of the U.S. Code, chapter 37. According to its legislative history, the
DCA was intended to "put some teeth into Federal (debt) collection
efforts " by giving the Government "the tools it needs to collect these
debts, while safeguarding the legitimate rights of privacy and due
process of debtors." 128 Cong. Rec. S12328 (daily ed. Sept. 27, 1982)
(statement of Sen. Percy). Section 10 of the DCA provides that agencies
may collect claims owed to the United States by means of administrative
offset, after the debtor has been accorded certain procedural rights 31
U.S.C. Section 3716(a).
In the absence of particular statutory /1/ or contractual provisions
authorizing offset and specifying the procedures to be followed, we
would agree that an agency is required to follow the procedural
provisions of section 10, as implemented in section 102.3 of the Federal
Claims Collection Standards (FCCS), as amended, 49 Fed. Reg. 8889
(1984). B-215128, Dec. 14, 1984, 64 Comp. Gen. 142. The procedures
prescribed by section 10 are mandatory and, in our view, apply to
already outstanding debts, as well as to debts arising after enactment
of the DCA.
In this case, however, there were contractual provisions which,
together with the regulations incorporated therein, authorized offset
and specified the procedures to be followed. For the reasons given
below, we find that these procedures, rather than those prescribed by
section 10, govern collection of the Greenstreet Farms debt.
In essence, Greenstreet Farms is arguing that, rather than follow the
contractual agreements which it entered into before the enactment of the
DCA, section 10 of that act should be applied "retrospectively" to
govern the collection of its debt. The traditional view has been that
statutes are to be given prospective application absent clear indication
to the contrary. However, in Bradley v. School Board, 416 U.S. 696,
711, 715 (1974), the Supreme Court established that "a court is to apply
the law in effect at the time it renders its decision (i.e.,
restrospectively), unless doing so would result in manifest injustice or
there is statutory direction or legislative history to the contrary."
We are not aware of anything in the language or legislative history
of section 10 which addresses the question of prospective/retrospective
application. Thus, the question becomes whether retrospective
application of the procedural requirements of section 10 would result in
"manifest injustice" in this case. This, according to the Bradley
Court, requires consideration of "(a) the nature and identity of the
parties, (b) the nature of their rights, and (c) the nature of the
impact of the change in law upon those rights." Id. at 717.
We have carefully considered the Bradley decision and conclude that
it does not require retrospective application of the section 10
procedures in this case. Unlike Bradley, this case involves the simple
collection of a debt, and is analogous to a "routine private lawsuit."
Bradley, 416 U.S. at 718. Also, retrospective application here would
affect the Government's "matured unconditional right" to collect a debt
owed to it. Id., at 720. Further, restrospective application would
impose a significant additional burden upon the Government with no
corresponding benefit to Greenstreet Farms except to produce additional
delay in the payment of an admittedly past due debt. A key factor in
our conclusion is our finding, to which we now turn, that the procedures
SCS actually followed in this case provided the substantial equivalent
of what section 10 now required.
The purpose of the procedural protections in section 10 was to
guarantee that debtors receive their "due process" rights. According to
the legislative history of section 10:
In establishing these procedures, it is the (Congress')
intention to provide the debtor with his full due process rights.
It is not the (Congress') intention to unreasonably delay the set
off procedure when it has been (properly) determined that it
should be used. * * *" S. Rep. No. 378, supra, at 24. /2/
Clearly, the section 10 procedures were intended to assure that
debtors receive only their "full due process rights," not duplicative
procedures that would "unreasonably delay the set off." This conclusion
is consistent with the provisions of the revised FCCS which provide:
In cases where the procedural requirements specified in
(section 102.3 of the FCCS) have previously been provided to the
debtor in connection with the same debt under some other statutory
or regulatory authority, * * * the agency is not required to
duplicate these requirements before taking offset. FCCS, Section
102.3(b)(2)(ii), 49 Fed. Reg. at 8898. /3/
In order to evaluate the adequacy of the procedures followed by SCS
prior to offset against Greenstreet Farms, we compared those procedures
to the procedures specified in section 10. The procedures followed by
SCS were prescribed in the various contractual agreements between
Greenstreet Farms and the Government which incorporated by reference the
provisions of the governing regulations, 7 C.F.R. pts. 631 and 713. In
the original contractual agreement, Greenstreet Farms agreed to be bound
by the SCS regulations which governed the Great Plains Conservation
Program. Those regulations include detailed provisions for a due
process-styled notice and opportunity to be heard, as well as provision
for administrative setoff. 7 C.F.R. Section 631.25. In the
non-compliance agreement, Greenstreet Farms admitted that it had
violated the contract and agreed to refund to SCS the amount that it had
received in violation of the contract. Greenstreet Farms was then
allowed to enter into an installment repayment agreement.
Up to this point, we think it is clear that the precedures followed
in this case were substantially equivalent to those required by section
10, and did provide "full due process rights." Compare 31 U.S.C. Section
3716(c); S. Rep. No. 378, supra, at 24. The next step, the waiver by
Greenstreet Farms of any further rights of notice and appeal, was also
proper. The Supreme Court has recognized that constitutional and
statutory rights to notice and hearing may be waived, so long as the
waiver is voluntarily, knowingly, and intelligently made. E.g., D.H.
Overmyer Co. v. Frick Co., 405 U.S. 174, 185-86 (1972), citing National
Equipment Rental Ltd. v. Szukhent, 375 U.S. 311, 315-16 (1964). Thus,
for example, even though section 10 is mandatory, debtors and agencies
implicitly retain the authority to contractually agree to, and become
legally bound by, different procedures. While Greenstreet Farms, of
course, did not waive any rights under section 10 (it could not have
done so since both the original agreement and the non-compliance
agreement were executed before section 10 was enacted), it could and did
waive its rights under the substantially equivalent provisions of the
relevant contracts and regulations. Consequently, we think Greenstreet
Farms (1) received its "full due process rights" under the procedures
followed by SCS, and (2) effectively waived its rights to any further
notice or procedures.
When it acknowledged its debt, Greenstreet Farms asked SCS to enter
into a 3-year installment work-out agreement with a year delay built
into it. At that time, SCS was legally entitled to take any action
available to it, including offset, to recoup the entire amount owed by
Greenstreet Farms. SCS did not have to accede to the request of
Greenstreet Farms. Nevertheless, SCS chose to forebear on its right to
immediate collection of the full amount, and agreed to enter into an
installment work-out agreement, conditioned upon certain rights to which
SCS would have been entitled under the common law, including the
assessment of interest on past due amounts. /4/ Greenstreet Farms did
not object to the terms specified by SCS and thus apparently agreed to
the offer put forth by SCS.
Greenstreet Farms failed to live up to its obligations under the
work-out agreement which it had requested. Payment was not made on the
date due or at anytime thereafter. After affording Greenstreet Farms
ample time and opportunity to make up the late payment or offer an
explantion of its failure, SCS considered the work-out agreement "void"
and proceeded to initiate collection on the original debt. Contrary to
the assertions of Greenstreet Farms, the actions of the SCS did not
constitute an illegal acceleration of the installment work-out
agreement. Under long-settled ruling of the Supreme Court, except when
expressly agreed by the parties, the acceptance of a work-out agreement
does not discharge indebtedness arising under the original contract
unless and until the work-out agreement itself is completely paid. If
the work-out agreement is breached, the creditor may proceed on the
original debt as if the work-out agreement did not exist. /5/
Consequently, SCS was fully justified in treating the work-out
agreement as void and initiating collection pursuant to the terms of the
original contract and non-compliance agreement. The argument that SCS
failed to properly serve notice upon Greenstreet Farms prior to taking
offset is equally without merit. Under the terms of the various
contracts, agreements, and incorporated regulations, Greenstreet Farms
had already wavied any further notice rights, see, e.g., 7 C.F.R.
Section 631.25(a), and had authorized the taking of offset against the
payments due it under the Feed Grain, Rice, Upland Cotton, and Wheat
Programs in order to collect any debt it owed to the United States, 7
C.F.R. Section 713.113 (incorp. by ref., 7 C.F.R. pt. 13).
Accordingly, we conclude that SCS has satisfied the requirements for
due process-styled procedures that are applicable in this case, and may
use administrative offset to collect the debt of Greenstreet Farms.
(1) Section 10 specifically provides that it shall not apply "when a
statute explicitly provides for or prohibits using administrative offset
to collect the claim or type of claim involved." 31 U.S.C. Section
3716(c)(2). (Italic supplied.) With this in mind, we note that 16
U.S.C. Section 590p(b)(v) requires farmers who participate in the Great
Plains Conservation Program to enter into contractual agreements
containing "such additional provisions as the Secretary (of Agriculture)
determines are desirable * * * to effectuate the purposes of the program
or to facilitate the practical administration of the program." We do not
view 16 U.S.C. Section 590p(b)(v) as providing the statutory authority
necessary to satisfy the exception to section 10 just mentioned, because
the former statute does not "explicitly" provide for or prohibit
administrative offset.
(2) These comments were originally made with regard to language
contained in section 5 of the Senate version (S. 1249) of the bill which
became the DCA. Virtually identical language was subsequently inserted
into the new section 10 of the final version which became the DCA.
Compare S. 1249 97th Cong., 1st Sess. Section 5 (July 17, 1981) with
DCA, Section 10, Pub. L. Nol 97-365, 96 Stat. 1749, 1754-55 (1982).
(3) See also the Supplementary Information statement which
accompanied the revised FCCS. 49 Fed Reg. 8889, 8891 ("Another
commenter pointed out that an agency should not be required to provide
procedural protections twice on the same debt. We agree, and have added
a new Section 102.3(b)(2)(ii) to reflect this).
(4) See B-212222, Aug. 23, 1983, citing Young v. Godbe, 82 U.S. (15
Wall.) 562, 565 (1873) (common law authority to assess interest).
(5) See, e.g., The Kimball, 70 U.S. (3 Wall.) 37, 45 (1865); Segrist
v. Crabtree, 131 U.S. 287, 289-90 (1889). See also Mid-Eastern
Electronics v. First National Bank of Southern Maryland, 455 F.2d 141,
144-45 (4th Cir. 1970); In re Mid-Atlantic Piping Products of
Charlotte, 24 Bankr. 314 (Bankr. W.D.N.C. 1982).
B-216971, 64 Comp. Gen. 489
Matters of: Ensign Cheryl R. Dallman, USNR, and Ensign Linda J.
Brake, USNR, April 26, 1985:
Travel allowances authorized by statute for members of the uniformed
services are for the purpose of reimbursing them for the expenses
incurred in complying with travel requirements imposed on them by the
needs of the service over which they have no control. Expenses of
temporary duty travel performed in whole or in part for personal benefit
or convenience under permissive orders are thus nonreimbursable,
notwithstanding that the Government may derive some benefit from the
optional duty undertaken. Hence, two Navy officers who traveled to
their home towns to perform temporary recruiting duty under orders
clearly stating that the duty was permissive rather than directive in
nature and that no travel allowances were authorized for such duty are
not entitled to reimbursement of the travel expenses involved.
There is nothing inherently objectionable about directive military
and naval travel orders which contain separate provisions for the
performance of permissive temporary duty for which travel allowances
will not be paid. The Bureau of Naval Personnel therefore acted
properly in issuing directive change-of-station orders to two Navy
officers with provisions authorizing them while enroute to undertake
permissive temporary recruiting duty assignments in their home towns.
The officers' travel allowance entitlements are for computation on the
basis of constructive travel performed over a direct route in compliance
with the directive change-of-station provisions of the orders.
The issue presented here is whether two Navy ensigns are entitled to
travel allowances based on their performance of temporary recruiting
duty in their home towns under permissive orders. /1/ We conclude that
they are not entitled to the travel allowances at issue.
Ensign Cheryl R. Dallman, USNR, was commissioned as an officer of the
Navy in November 1983 upon her graduation from Officer Candidate School
at the Naval Education Training Center, Newport, Rhode Island. The
Bureau of Naval Personnel issued orders directing her to proceed to
Naval Air Station, Chase Field, Beeville, Texas, for permanent duty.
The orders stated that in addition to allowable travel time she could
take up to 15 days of advance leave en route. The orders also contained
this provision:
* * * YOU ARE AUTHORIZED TO REPORT CO NRD /2/ MONTGOMERY ALA
TEMPORARY DUTY ABOUT ONE MONTH WITH THE UNDERSTANDING THAT YOU WILL NOT
BE ENTITLED TO REIMBURSEMENT FOR ANY TRAVEL TRANSPORTATION PER DIEM OR
MISCELLANEOUS EXPENSES IN EXCESS OF THAT ALLOWED BY THE ABOVE ORDERS.
IN CASE YOU DO NOT DESIRE TO PERSONALLY BEAR THESE EXPENSES YOU MAY
CHOOSE NOT TO EXECUTE THIS AUTHORIZTION AND WILL CONSIDER IT CANCELLED.
In compliance with these orders, Ensign Dallman departed Newport,
Rhode Island, on November 18. 1983, and she reported to her permanent
duty station at Beeville, Texas, on January 3, 1984. She spent the
period from November 21 to December 30, 1983, at home in Pensacola,
Florida, as a participant in the Navy's Hometown Area Recruiting Progran
under the quoted provision of her orders which permitted temporary duty
en route for that purpose. The other days spent en route apparently
involved necessary automobile travel time, so that she was not charged
with having taken any leave.
The other Navy officer concerned in this matter, Ensign Linda J.
Brake, USNR, was graduated from Officers Candidate School at Newport,
Rhode Island, on February 17, 1984. In compliance with her orders from
the Bureau of Naval Personnel, she reported to Naval Air Station, Chase
Field in Beeville, Texas, for permanent duty on March 16, 1984. While
en route she spent 3 weeks at Springfield, Missouri, performing
temporary recruiting duty in her home town under a permissive
authorization in her orders similar to the one contained in Ensign
Dallman's orders.
To settle their claims for travel allowances, Ensign Dallman and
Ensign Brake filed vouchers containing descriptions of their itineraries
with their disbursing officer after their arrival in Texas. The issue
presented is whether they should be paid travel allowances based on
constructive change-of-station travel by automobile over a direct route
between Newport, Rhode Island, and Beeville, Texas, or whether instead
they should be paid enhanced travel allowances based on their actual
itineraries involving additional automobile travel and the temporary
duty at their home towns.
Navy disbursing officials essentially indicate that this issue has
arisen because of their doubts concerning the validity of the provisions
contained in the two ensigns' orders authorizing the performance of
temporary recruiting duty without entitlement to travel allowances.
They note that the Joint Travel Regulations contain no provisions
specifically treating the subject of directive change-of-station orders
with permissive temporary duty en route. They also note that in two
previous decisions involving Army members on temporary recruiting duty,
we held that provisions in the members' orders purporting to limit their
travel allowance entitlements were invalid. /3/ The disbursing
officials therefore question whether it was proper for the Bureau of
Naval Personnel to authorize the two ensigns to perform temporary
recruiting duty without travel allowances while en route on a directed
change-of-station assignment.
Subsection 404(a) of title 37, United States Code, provides that
under regulations prescribed by the Secretaries concerned, members of
the uniformed services are entitled to travel and transportation
allowances for travel performed under orders upon a change of permanent
station or when away from their designated posts of duty. Under
subsection 404(b) the Secretaries concerned are authorized to prescribe
the conditions under which travel allowances are authorized and the
allowances for the kinds of travel.
Implementing regulations are contained in Volume 1 of the Joint
Travel Regulations (1 JTR). Those regulations contain provisions
prescribing the monetary allowances to be paid to service members to
reimburse them for the expenses of travel performed under orders. The
decisions referred to by the disbursing officials concerned Army members
who were required by directive orders to perform temporary duty
assignments involving recruiting activities, and in those decisions we
essentially concluded that the order-issuing officials could not
properly provide for the payment of travel allowances in the orders at
rates lesser, or other, than as prescribed by the governing provisions
of regulation contained in 1 JTR. /4/
Regarding permissive rather than directive travel orders, however,
paragraph M6453, 1 JTR, specifically provides as follows:
M6453 TRAVEL UNDER PERMISSIVE ORDERS
An order permitting a member to travel as distinguished from
directing a member to travel does not entitle him to expenses to
travel.
This provision of the regulations is consistent with the fundamental
general principle long followed by our Office and the courts of the
United States that the travel allowances authorized by statute for
members of the uniformed services are for the purpose of reimbursing
them for the expenses incurred in complying with travel requirements
imposed on them by the needs of the service over which they have no
control. /5/ It is well settled that the expenses of temporary duty
travel performed in whole or in part for personal benefit or convenience
under permissive orders are non-reimbursable, notwithstanding that the
Government may derive some benefit from the optional duty undertaken by
the service member. /6/ Moreover, there is nothing inherently
objectionable about directive orders containing separate provision for
the performance of permissive temporary duty for which travel allowances
will not be paid. /7/
In the present case, the optional temporary duty assignments appear
to have been offered to Ensign Dallman and Ensign Brake partly for their
personal convenience and benefit, since the arrangement provided the two
newly appointed officers with an opportunity for a respite at home,
without being charged with advance leave, following their completion of
Officer Candidate School. /8/ Furthermore, it appears that the
assignments were determined to be beneficial, but not necessarily
essential to Navy recruiting activities, since the two ensigns were
placed under no requirement to accept those assignments. In any event,
our view is that the overriding circumstances for consideration in this
case are that the temporary duty was clearly permissive rather than
directive, and in those circumstances the provisions of paragraph M6453,
1 JTR, plainly preclude payment of the travel expenses involved.
Accordingly, we conclude that the two ensigns' orders are valid, and
that they are, therefore, entitled only to travel allowances under those
orders based on constructive change-of-station travel by automobile over
a direct route between Newport, Rhode Island, and Beeville, Texas,
rather than on the basis of their actual itineraries. The vouchers and
supporting documents are returned for further processing consistent with
the conclusion.
(1) This action is in response to a request from the Associate
Disbursing Officer, Navy Personnel Support Activity, Corpus Christi,
Texas, for an advance decision concerning the payments to be made on
travel vouchers submitted by Ensign Cheryl R. Dallman, USNR,
000-00-2395, and Ensign Linda J. Brake, USNR, 000-00-9677. The request
was forwarded here by the Per Diem, Travel and Transportation Allowance
Committee after being assigned control number 84-20.
(2) Meaning "Commanding Officer, Navy Recruiting District."
(3) With specific reference to 53 Comp. Gen. 454 (1974); and
B-177676, May 17, 1973.
(4) See 53 Comp. Gen. 454 and B-177676, supra (footnote 3).
(5) See, generally, 49 Comp. Gen. 663, 666 (1970); 33 Comp. Gen. 196
(1953); 6 Comp. Dec. 93 (1899); Perrimond v. United States, 19 Ct. Cl.
509 (1884); and United States v. Phisterer, 94 U.S. 219, 221-222
(1876).
(6) See, e.g., 45 Comp. Gen. 245 (1965); 39 Comp. Gen. 718 (1960).
See also 54 Comp. Gen. 387, 388-389 (1974).
(7) Compare, for example, 51 Comp. 691 (1972, involving an Air Force
officer's directed permanent change-of-station transfer from Hawaii to
Virginia with permissive temporary duty authorized en route at the
University of Southern California. In such cases, it has long been the
rule that reimbursement is limited to the constructive cost of
officially required travel over a direct route. See 7 Comp. Gen. 840
(1928); and 6 Comp. Dec. 93, supra (footnote 5).
(8) Service members earn 30 days' paid leave per year, and newly
appointed or enlisted members who take advance leave which they have not
yet earned are left with negative leave account balances, resulting in
curtailed leave opportunities and possible financial liability
thereafter. See, generally, 10 U.S.C. Sections 701, 704; and
Department of Defense Directive 1327.5.
B-218178, 64 Comp. Gen. 488
Matter of: P.O.M. Inc., April 24. 1985:
Competition in Contracting Act of 1964, Pub. L. No. 98-369, sec.
2741, 98 Stat. 1175, 1199-1203 (to be codified at 31 U.S.C. 3551-3556),
provides for the consideration of protests filed with General Accounting
Office (GAO) by an interested party to a solicitation issued by a
"federal agency" for the procurement of property on services. Since the
District of Columbia, which by definition is not a federal agency, has
informed GAO of its decision that GAO no longer consider protests
concerning procurements by the District, protest concerning solicitation
issued by the District and which is filed after the Jan. 15, 1985,
effective date of the provisions of the act pertaining to bid protests
submitted to GAO is dismissed.
P.O.M. Inc., (P.O.M.) protests any award to another firm under
invitation for bids No. 0066-11-35-0-5-EJ, issued by the District Of
Columbia (District), Department of Public Works for the supply of
parking meters. P.O.M. alleges that the District unfairly evaluated the
offered parking meters, testing for characteristics not provided for in
the specifications, and maintains that it submitted the low, responsive
bid. We dismiss the protest.
The Competition in Contracting Act of 1984, Pub. L. No. 98-369,
Section 2741, 98 Stat. 1175, 1199-1203 (to be codified at 31 U.S.C.
Sections 3551-3556), provides for the consideration of protests filed
with the General Accounting Office by an interested party to a
solicitation issued by a "federal agency" for the procurement of
property or services. By definition, the government of the District of
Columbia is not a "federal agency." 40 U.S.C. Section 472 (1982). With
respect to other, nonstatutory protests, such as those filed in regards
to procurements by the District, section 21.11 of our new Bid Protest
Regulations, 4 C.F.R. Section 21.11 (1985), provides that our Office may
consider the protests "if the agency involved has agreed in writing to
have its protests decided by the General Accounting Office."
The District has recently informed us in writing of its decision that
we no longer consider protests filed with our Office concerning
procurements by the District.
Since this protest was filed after the January 15, 1985, effective
date of the provisions in the Competition in Contracting Act pertaining
to bid protests submitted to the Comptroller General, we will not
consider it.
The protest is dismissed.
B-216958, 64 Comp. Gen. 485
Matter of: Systems Associates, Inc., April 24, 1985:
Protest that agency's specifications for equipment are unduly
restrictive is untimely under General Accounting Office's (GAO) Bid
Protest Procedures where the protester filed a timely protest with the
contracting agency before responses to the specifications were due, but
waited almost 4 months to file with GAO after the agency received
responses from vendors without taking the action requested in the
protest to the agency.
In reviewing an agency's evaluation of written responses to a
Commerce Business Daily notice of intent to place an order against a
particular vendor's nonmandatory automated data processing equipment
schedule contract, GAO's role is to ascertain whether there was a
reasonable basis for the evaluation and whether the evaluation was
consistent with seeking a competitive solicitation, if possible, of the
agency's requirements.
Systems Associates, Inc., protests the Department of Health and Human
Services' (HHS) purchase under NBI, Inc.'s nonmandatory automated data
processing (ADP) schedule contract of equipment, plus installation, for
a shared resource, integrated word processing system for the Social
Security Administration's claims modernization project. Systems
Associates compalains that HHS's purchase requirements were unduly
restrictive because they specified NBI's equipment. Systems Associates
contends that it has equipment which meets the agency minimum needs at a
price lower than NBI's.
We dismiss the protest in part and deny it in part.
HHS had published in the Commerce Business Daily (CBD) notice of the
agency's intent to place an order against an ADP schedule contract. The
notice identified the requirement as an NBI system 64, or equivalent,
and listed the various items of equipment for the system. Interested
schedule and nonschedule vendors were invited to request a copy of the
request for information (RFI) listing the detailed functional
requirement and desirable features and were advised that any responses
would be used for assessing capable sources.
Sixteen companies, including Systems Associates, asked for copies of
the RFI. Immediately after receiving the RFI, Systems Associates filed
a protest with HHS alleging that certain technical specifications were
overly restrictive and that the requirement for NBI or equivalent
equipment constituted an unjustified sole-source procurement. At the
RFI's listed closing date, a total of five companies, including Systems
Associates and NBI, responded with technical information and equipment
prices. Systems Associates, shortly after submitting its information
and prices, again protested the RFI's equipment specifications to the
agency.
After evaluating the responses of the five companies, HHS determined
that only NBI's equipment met its needs. With regard to Systems
Associates, HHS found that the company did not provide for (1) a
required equipment cabling length of 5,000 feet; (2) "a floppy diskette
drive with at least 1 (megabyte) of storage on the (central processing
unit)," for individual document archiving and storage purposes; (3) a
stand-alone workstation with a 1-megabyte disk drive; and (4) a
stand-alone/shared resource workstation with 1-megabyte disk drives. A
delivery order for the equipment was issued to NBI at a price of
$142,938.
Following notification of the award, Systems Associates protested to
HHS that its equipment met the government's needs. Systems Associates
filed a protest with our Office after HHS denied the protest at that
level.
Systems Associates contends that the RFI's specifications were unduly
restrictive of competiton, and that they essentially describe NBI's
equipment. The protester asserts that it has copies of two other
solicitations under which NBI competed that described the requirements
the same as does the RFI -- according to Systems Associates, NBI gave
the contracting activities sample specifications as guides for writing
equipment requirements and "the wording between these three
specifications leave little doubt that they were originated from the
same source document."
Systems Associates also objects to HHS's finding that the company's
equipment did not meet the government's minimum needs. Specifically,
Systems Associates alleges that the system it described to HHS showed a
cable length that could support a computer terminal at a distance of
6,000 feet, exceeding HHS's requirement of 5,000 feet. With regard to
the need to provide 1-megabyte of floppy diskette storage with the
central processing unit, Systems Associates argues that neither it nor
NBI actually is capable of providing 1-megabyte diskette storage, since
the operating software stored on a 1-megabyte diskette uses part of the
storage capability, but both companies are capable of storing documents
with 350 or more pages; Systems Associates suggests that HHS's real
need is for the capability to store "archive documents" up to 350 pages
in length. In addition, Systems Associates states that the system it
described to HHS has a 17-megabyte cassette drive on the central
processing unit, and the 17-megabyte cassette is "more practical" than a
floppy diskette drive in dealing with a large storage requirement.
HHS argues that Systems Associates' protest with regard to the
restrictiveness of the agency's equipment requirements is untimely.
Since Systems Associates initially objected to HHS with respect to the
specifications, the agency takes the position that any subsequent
protest had to be filed with our Office within 10 working days of
initial adverse agency action. According to HHS, initial adverse action
occurred when time specified in the RFI for receipt of responses passed
without amendment of the RFI. HHS asserts that Systems Associates
therefore should have filed a protest with us within 10 working days
after the RFI closed.
As to the equipment offered by Systems Associates, HHS states that it
was essential that an offeror's equipment conform in all material
aspects to the RFI's requirements. Since Systems Associates' equipment
was found to be noncompliant in four material areas, HHS argues that the
company's equipment was properly determined to be unacceptable.
We dismiss as untimely the protest that the specifications were
unduly restrictive, for the reason proffered by HHS. Our Bid Protest
Procedures require that where a timely protest is filed initially with
the contracting agency, any subsequent protest to our Office must be
filed within 10 working days of the contracting agency's initial adverst
action on the protest. 4 CFR Section 21.2(a) (1984). Here, System
Associates properly protested against the specifications to HHS before
responses to the RFI were due. 4 CFR Section 21.2(b)(1). The time for
filing with our Office, however, started when HHS received the responses
without taking the action requested by Systems Associates; we
consistently have held that type of inaction by an agency to be initial
adverse action within the meaning of our Procedures. See
Castle/Division of Sybron Corp., B-216551, Oct. 15, 1984, 84-2 C.P.D.
Paragraph 407. Since Systems Associates did not protest to our Office
within the required time -- the firm waited almost 4 months to file --
we dismiss the protest on this issue as untimely.
System Associates' complaint that HHS improperly rejected the firm's
response and accepted NBI's is timely, since the firm protested that
matter to HHS within 10 working days after it learned of these actions,
see 4 CFR Section 21.2(b)(2), and appealed to our Office within 10
working days after HHS's adverse response. Nevertheless, we find no
legal merit to System Associates' position.
Initially, we point out that nonmandatory ADP schedule contracts are
not awarded on a competitive basis. The reason for testing the ADP
market through a CBD notice and evaluation of responses in a situation
like this one is to determine whether there are vendors without schedule
contracts who are interested in competing for the requirements at prices
that would make competition practicable. See CMI Corp., B-210154, Sept.
23, 1983, 83-2 C.P.D. Paragraph 364. In reviewing an agency's
evaluation of responses to its announced intention to place an order
against a nonmandatory ADP schedule, our concern is whether there was a
reasonable basis for the evaluation and whether the evaluation was
consistent with seeking the maximum practicable competition. Id.
In our view, there was a reasonable basis for HHS's evaluation of the
protester's response to the RFI. The RFI set forth in detail the
mandatory functional requirements for the word processing system
intended to be purchased. The RFI also cautioned that the written
response of any source had to show that its equipment met all the
mandatory functional requirements. Systems Associates competed against
the specification for a 1-megabyte storage capability, yet admits that
it is not capable of meeting that requirement. Further, Systems
Associates has offered nothing to refute HHS's finding that its written
response made no provision for either stand-alone workstations, or a
stand-alone/shared resource workstation with 1-megabyte disk drives.
The protester has the burden of proving its case, that is, that its
ADP system is qualitatively equivalent to the schedule vendor's
equipment. NCR Corp., B-215048, Dec. 26, 1984, 84-2 C.P.D. Paragraph
698. Here, System Associates simply has not shown that HHS's evaluation
of the firm's response to the RFI was unreasonable. The protest on this
issue therefore is denied.
The protest is dismissed in part and denied in part.
B-218055, 64 Comp. Gen. 482
Matter of: Big State Enterprises, April 22, 1985:
The fact that the protester may have submitted a nonresponsive bid
does not prevent the protester from being considered an interested party
where the protester seeks resolicitation of a procurement allegedly
conducted on the basis of defective specifications and would have the
opportunity to rebid if the requirement is resolicited.
A contract awarded on the basis of defective specifications should
not be terminated and the requirement resolicited where no competitive
prejudice to any bidder is apparent and the government met its minimum
needs at reasonable prices after adequate competition.
Big State Enterprises protests the award of a contract to JLS Rentals
by the Department of the Air Force under invitation for bids (IFB) No.
F41685-84-B-0023 for the rental and maintenance of clothes washers and
dryers. Big State contends that the washers offered by JLS and accepted
by the agency do not comply with the specifications, and that the
specifications are impossible to meet and did not reflect the agency's
actual need. The protester asserts that the contract awarded to JLS
should therefore be terminated for the convenience of the government and
the requirement resolicited.
We deny the protest.
The agency contends that Big State's bid was nonresponsive for
failure to acknowledge receipt of a material solicitation amendment, and
that Big State therefore is not an interested party to have it protest
reviewed by our Office. We disagree. Assuming that the bid was
nonresponsive and not eligible for award under the solicitation, that
does not automatically preclude Big State from being considered an
interested party. Where, as here, the protester seeks resolicitation of
a procurement allegedly conducted on the basis of defective
specifications, it is an interested party since if it prevails, it would
have an opportunity to bid under the resolicitation. See Olympia USA,
Inc., B-216509, Nov. 8, 1984, 84-2 CPD Paragraph 513. Therefore, we
will review the merits of Big State's protest.
The IFB specifications required heavy-duty, commercial-type washers
with an 18 pound tub capacity, and specifically stated that household
type and coin-operated machines would not be acceptable. The washers
also had to have built-in, self-cleaning lint filters. Of the four bids
received, that of Big State, the incumbent contractor, was second low
and that of JLS was the lowest. Neither took any exception to the
specifications.
After bid opening, the agency, Big State, and JLS for the first time
became aware of the fact that the specification requirement for an 18
pound tub capacity was defective because the capacity of washers has
been rated by the manufacturers since 1977 in terms of cubic feet,
rather than in pounds. This resulted from a rule issued by the Federal
Energy Administration that prescribed test procedures to be used by
manufacturers in determining the energy efficiency of their washers.
/1/ Nevertheless, the agency determined that it would be less
prejudicial to the bidders whose prices had been exposed to proceed with
the award than it would be to resolicit. The award was made to JLS on
January 17 and Big State's protest was received by our Office on January
24.
In addition, after the award, the agency discovered that the washers
furnished by JLS did not have the specified self-cleaning filters. The
agency found that the lint filters were nonessential since even the best
are only 15 percent effective and washing can reasonably be done without
them. It concluded that contract termination was not necessary because
the contract was not awarded with the intent to modify it, and the
washers meet its minimum needs.
The Federal Acquisition Regulation (FAR) provides that the
preservation of the integrity of the competitive bidding system dictates
that after bid opening, award must be made to the responsible bidder
with the lowest, responsive bid, unless there is a compelling reason for
not doing so. 48 C.F.R. Section 14.404-1(a)(1) (1984). Inadequate or
ambiguous specifications is one of the bases on which a contracting
officer may determine to cancel a solicitation after bid opening. 48
C.F.R. Section 14.404-1(c). The use of inadequate specifications,
however, does not itself provide a compelling reason to cancel a
solicitation and resolicit. If acceptance of a bid will satisfy the
government's needs without prejudice to any bidder, award should be made
notwithstanding the deficiency. Dunlin Corp., B-207964, Jan. 4, 1983,
83-1 CPD Section 7. The contracting officer's decision as to whether
the circumstances warrant cancellation will not be disturbed by our
Office unless that decision was arbitrary, capricious or not supported
by substantial evidence. Chamberlain Mfg. Corp., B-209187, Mar. 10,
1983, 83-1 CPD Paragraph 243.
On the basis of the facts presented here, we have no reason to
question the reasonableness of the agency's decision to proceed with the
award after discovering the deficiency in the specification requirement
for an 18 pound tub capacity. Although Big State asserts that it was
prejudiced by this decision because it could have offered cheaper
machines at a lower price if it did not have to meet the 18 pound
capacity requirement, we are not persuaded by this contention. Big
State concedes that washers with capacity expressed in pounds are no
longer available and that there is no meaningful way that capacity
expressed in cubic feet can be converted to its equivalent in pounds.
Thus, Big State's bid could not have been based on supplying washers
with tub capacities of 18 pounds, and there is no basis for concluding
that Big State was uniquely prejudiced by the solicitation defect here.
Further, the agency obtained adequate competition, reasonable prices and
washers which meet its minimum needs. Accordingly, we believe that in
spite of the specification deficiency, the determination to make an
award was reasonable and less of a compromise to the competitive bidding
system than resolicitation after exposure of all prices would have been.
See GAF Corp. et al., 53 Comp. Gen. 586 (1974), 74-1 CPD Paragraph 68.
With respect to Big State's contention that the lack of self-cleaning
lint filters on the JLS machines requires resolicitation, we note that
the fact that JLSA' washers did not have self-cleaning filters was not
known to the agency until after the contract award. Therefore, the
decision as to whether the contract should be modified rather than
terminated involves a matter of contract administration. We do not
review contract administration matters except in limited circumstances
not present here. See BVI, Engravers, Inc., B-208830, Oct. 20, 1982,
82-2 CPD Paragraph 351.
The protest is denied.
(1) Those requirements are now found in the regulations of the
Department of Energy. 10 CFR Part 430 (1984).
B-217174, 64 Comp. Gen. 480
Matter of: Harris Corporation, April 22, 1985:
A protest is sustained where the agency rejected a potential source
of supply by making award on a sole-source basis prior to the expiration
of the mandatory 30-day Commerce Business Daily (CBD) publication
requirement outlined in the Small Business Act, as amended by Publ. L.
98-72, and where the protester's offered products comply with the
requirements of the procurement as outlined in the CBD synopsis.
Harris Corporation (Harris) protests the sole-source award of
delivery order (DO) DABT-84-F-7882, to IBM Corporation (IBM), by the
United States Army, Fort Dix, New Jersey (Army), for the purchase and
installation of video display terminals, matrix printers, remote
controllers and other related automatic data processing equipment
(ADPE). Harris contends that the Army improperly failed to consider its
equipment because the Army made award in less than the required 30-day
period after synopsizing the procurement.
We sustain the protest.
On August 24, 1984, the contracting officer forwarded to the Commerce
Business Daily (CBD) the synopsis of the procurement. CBD did not
publish the notice, however, until September 12, 1984. On September 21,
1984, the Army issued a delivery order to IBM. Four days later, on
September 25, 1984, the Army received Harris' response to the CBD
notice.
By letter dated October 9, 1984, the Army notified Harris that award
was made to IBM without considering Harris' offer because the offer was
not received by September 12, 1984. That date was calculated based on
the Army's belief that award could be made after the 15th day after the
date in which the synopsis could be presumed to be published in the CBD.
The Army relied on Department of Defense Federal Acquisition Regulation
Supplement (DOD FAR Supp.) Section 5.203, 48 C.F.R. Section 205.203
(1984), which provides that when a synopsis is required, the contracting
officer shall not issue a competitive solicitation until at least 15
days after the date of publication of a proper notice in the CBD and
that the contracting officer may presume that notice has been published
5 days following transmittal to the CBD.
Pub. L. 98-72, 97 Stat. 403 (1983), which amends section 8(e) of the
Small Business Act, requires all government agencies not to foreclose
competition until at least 30 days (rather than 15 days as relied on by
the Army) have elapsed from the date of publication of a proper CBD
notice of intent to place an order under a basic ordering agreement or
similar arrangement. See 15 U.S.C. Section 637(e)(2)(B) (Supp. I 1983);
Math Box Inc., B-217098, Mar. 28, 1985, 85-1 C.P.D. Paragraph. . . .
We have held that GSA ADPE schedule contracts, such as the one involved
here, are in the nature of basic ordering agreements, do not involve the
issuance of a competitive solicitation, and therefore the 30-day CBD
notice requirement, stated above, applies. Math Box Inc., B-217098,
supra. Therefore, the Army should not have placed an order until after
September 28, 1984, 30 days after it could presume that the CBD
published its notice. Harris' September 25, 1984, response to the CBD
notice was timely received and should have been reconsidered.
In its report on the protest, the Army contends that even if it
failed to comply with the 30-day CBD notice requirement, this error did
not prejudice Harris because Harris' offer, which was eventually
evaluated by the Army, did not evidence compliance with all of the
technical requirements established in the synopsis.
The Army's evaluation, dated November 13, 1984, states that the
terminals and printers offered do meet all of the technical
requirements. The evaluation, however, states that insufficient
information concerning the 9116 communications controller is provided.
Specifically, the Army argues that the controller is required to have
the ability to interface with an IBM 4331 mainframe using Synchronous
Data Link Control (SDLC) communications protocol while the information
provided specifies interface with an IBM mainframe using Systems Network
Architecture (SNA).
Harris contends that the Army has attempted to coverup its initial
error by ruling out Harris' controller in the evaluation. Harris argues
that its statement of interest letter shows that the 9116 model offered
is a substitute for the IBM 3274 which was ultimately purchased. Harris
contends that since its brochure stated that the 9116 had IBM SNA
compatibility it automatically implied compatibility with IBM SDLC
communications protocol. Harris states that SNA and SDLC are industry
standards and their relationship is well known. Harris has submitted a
brochure for the 9116 with its protest which lists as a standard
feature, "SNA/SDLC communication protocol." The Army argues, however,
that the information in the proposal was inadequate to show that the
Harris 9116 would function using SDLC communications protocol. The
Army, citing Informatics, Inc., B-194926, July 2, 1980, 80-2 C.P.D.
Paragraph 8, states that technical evaluations are made on the basis of
information submitted with a proposal and the offeror cannot instead
expect it to be evaluated on the basis of industry knowledge.
While we agree that generally proposals received in response to
requests for proposals are evaluated on the basis of information
submitted rather than on industry knowledge, we believe that the
products offered by Harris did not receive fair consideration here.
First, the evaluation document clearly states that the "terminals and
printers offered do meet all required technical" requirements. Second,
while the CBD announcement stated that all items must be compatible with
IBM 4331, it did not state that offerors must show that their
controllers had SDLC compatibility. We believe that the Army could have
found that Harris' 9116 controller had SDLC compatibility by the fact
that SNA compatibility was stated, or if any doubt existed, it could
have easily resolved the matter by contacting Harris. This is
particularly so because Harris' letter of interest indicated that its
9116 is a substitute for the IBM 3274 which was purchased. In our view,
it was the Army's duty to make its essential requirements clear to
potential offerors and allow them an opportunity to demonstrate their
ability to comply before rejecting them as potential sources of supply.
See Masstor Systems Corporation, 64 Comp. Gen. 118 (1984), 84-2 C.P.D.
Paragraph 598. We conclude that the Army lacked a reasonable basis for
rejecting Harris as a source of supply, and that Harris was prejudiced
by the premature award to IBM.
The protest is sustained.
The Army advises us that all of the ordered equipment, except the
terminals and printers, have been delivered, installed, and paid for and
that the terminals and printers have been delivered. Therefore, it is
impracticable to recommend termination of the contract. By letter of
today, however, we are recommending to the Secretary of the Army that
steps be taken to prevent the recurrence of the procurement deficiencies
found in this case.
B-216950, 64 Comp. Gen. 476
Matter of: Robert T. Celso - Real Estate Expenses - Return to Former
Duty Station, April 22, 1985:
An employee was transferred back to a former duty station after a
12-year absence. He temporarily occupied a residence at that station
which he had purchased 14 years before, but had rented out during most
of that time. He then purchased another residence there and claims real
estate expenses for this purchase. The agency disallowed his claim
based on Warren L. Shipp, 59 Comp. Gen. 502 (1980), which held that,
once an employee is officially notified of retransfer to a former duty
station, reimbursement of real estate expenses is limited to those
already incurred or which cannot be avoided. Shipp is hereby limited to
situations where the employee is notified of retransfer to a former duty
station before expiration of the time allowed for reimbursement of real
estate expenses incident to the original transfer. Since this time
period had expired years before the retransfer in the present case,
Shipp does not apply and the claim is allowed.
This decision is in response to a request from J.R. Goldston, Jr.,
Finance and Accounting Officer, Corpus Christi Army Depot, Department of
the Army. It concerns the entitlement of a civilian employee to be
reimbursed for real estate expenses incurred incident to a permanent
change of station in June 1981. We hold that the employee may be
reimbursed for the following reasons.
The employee, Mr. Robert T. Celso, was transferred by the Army to the
Corpus Christi Army Depot, Corpus Christi, Texas. He reported for duty
there on June 15, 1981. Incident to that transfer, he was authorized
reimbursement of real estate expenses.
According to Mr. Celso, upon his arrival in Corpus Christi, he rented
quarters for himself and his family, pending the purchase of a residence
in the Corpus Christi area and the sale of his former residence at his
old duty station. In July 1981, he was informed by the real estate
broker handling the sale of his former residence that due to market
conditions, there was virtually no chance that his residence could be
sold before spring 1982.
Mr. Celso was not new to the Corpus Christi area. He had been
stationed there previously and he owned a house in Corpus Christi which
he had purchased in 1967 and had used then as his residence. However,
he had not resided in that home since 1969, renting it out instead.
Since the purchase of a new residence in Corpus Christi was dependent on
the sale of his residence at his former duty station and since the
tenant in the rental house vacated it during July 1981, Mr. Celso and
his family moved into that house in July 1981, and remained there until
September 1982. At that time, Mr. Celso obtained a second mortgage on
the rental property and purchased another dwelling in Corpus Christi as
his residence.
Mr. Celso filed a claim for $1,950.50, representing his expenses
incident to the purchase of his new residence in Corpus Christi. Mr.
Celso's claim was disallowed by the Army, based on our decision in
Warren L. Shipp, 59 Comp. Gen. 502 (1980), in which we held that once an
employee is notified of a transfer back to a former duty station, the
Government's obligation to reimburse real estate expenses is limited to
those already incurred or those which cannot be avoided.
The statutory provisions governing reimbursement of residence
transaction expenses of transferred employees are contained in 5 U.S.C.
Section 5724a (1982). The implementing regulations are contained in
Chapter 2, Part 6 of the Federal Travel Regulation, FPMR 101-7 (May
1973) (FTR), and, to the extent applicable, restated in the September
1981 edition of the FTR. /1/
Pursuant to paragraph 2-6.1e of the FTR, prior to its amendment by
Supplement 4, August 23, 1982, a transferred employee had a maximum of 2
years in which to buy or sell a residence. The 1982 amendment to FTR
paragraph 2-6.1e extended the 2-year period for an additional year when
necessary.
As noted, the agency referred to our decision in Warren L. Shipp,
cited above, as the basis for disallowance. The Shipp case involved the
transfer of an employee from one duty station to another and then a
transfer back to the original duty station approximately 1 year later.
We recognized in that case that the initial transfer created a right in
the employee to sell his residence at his original duty station and to
be reimbursed those expenses since the transfer was in the interest of
the Government. The record in that case showed that Mr. Shipp did not
enter into a contract to sell that residence until after he had received
official notice of his transfer back to his original station. However,
he succeeded in selling that residence prior to his actual return to his
former duty station. He submitted a claim for and was reimbursed the
expenses of that sale. Since he no longer owned a residence at his
original duty station, upon his actual return to that location he
purchased a new residence there and sought reimbursement for the
purchase expenses.
Shipp was submitted to this Office by the employing agency because of
its doubts about the propriety of reimbursing Mr. Shipp for the purchase
of a home at his new duty station under those circumstances. Although
we authorized reimbursement because our cases then permitted it, we also
reexamined those cases and changed our views prospectively. We applied
the rationale of mitigation of costs based upon our decisions involving
canceled transfers. In those decisions we analogized a canceled
transfer to a transfer to another duty station and an immediate
retransfer to the old duty station, and held that an employee whose
transfer was canceled must mitigate his costs and do all he can to limit
the expenses he incurs. Thus, reimbursement was limited to those
expenses that the employee was legally obligated to pay at the time he
was notified of his transfer back to his former duty station.
While not expressly stated therein, our Shipp decision was based on
the fact that the period between an employee's original transfer from a
particular duty station and the later transfer back to that duty station
was relatively brief. Therefore, it was reasonable to assume that upon
transfer back, the property remained a suitable residence for the
employee. This assumption clearly is not reasonable when there is an
intervening period of many years, as in the present case. To apply
Shipp in such circumstances would go beyond the rational and intent of
that decision. Accordingly, the Shipp doctrine must be limited by an
objective standard that can be reasonably applied by the appropriate
accountable officers.
As set out above, there is a maximum time within which a transferred
employee must complete his transfer-related real estate transactions if
he is claiming reimbursement. As expanded by Supplement 4 to the FTR
(August 23, 1982), the maximum time available is now 3 years. This
limitation provides the basis for an objective standard to use in
determining the applicability of our holding in shipp. If an employee
is notified of his or her transfer back to a former duty station after
the time has expired for completion of real estate transactions which
qualify for reimbursement incident to the original transfer, then the
rationale in Shipp is not applicable and the employee may be reimbursed
for the purchase of a residence at what is both his former and his new
duty station, even if he owns another house there.
Establishment of a limited time for the application of the holding in
Shipp, provides both employees and employing agencies with an objective
standard governing reimbursement of real estate expenses when employees
are returned to their former duty stations. This standard will enable
agencies to practice prudent travel management policies, while allowing
employees to return to former duty stations without undue burdens being
placed on their real estate transactions, when such transfers to former
duty stations are in the Government's interest.
Thus, since Mr. Celso was transferred back to Corpus Christi long
after the time limit had expired for any reimbursement of real estate
expenses connected with his transfer away from Corpus Christi, he may by
reimbursed for the expenses of purchasing a home there in September
1982. In that regard, the record shows that Mr. Celso reported for duty
in June 1981. In April 1982 he requested and was granted a 1-year
extension of the time limit contained in former FTR, paragraph 2-6.1e.
In September 1982 he purchased his new residence.
Accordingly, since the extension of time was approved and he
purchased a new residence within the then maximum 2-year period, Mr.
Celso's expenses for its purchase in September 1982 are properly
reimbursable, subject, of course, to administrative determination as to
the propriety of the expense items claimed and the amounts involved.
(1) Incorp. by ref., 41 C.F.R. Section 101-7.003 (1984).
B-216845, 64 Comp. Gen. 474
Matter of: Nationwide Roofing and Sheet Metal, Inc., April 22, 1985:
Use of bid bond form other than required Standard Form 24 is not
objectionable where intent of surety and principal to be bound and
identity of United States as intended and true obligee is clearly shown
by bond itself. Contrary interpretation of regulation by protester is
inconsistent with underlying concept of responsiveness, rejected.
Where applicable federal law exists, General Accounting Office will
not look to state law to determine the validity of a bid bond submitted
for a federal procurement.
Nationwide Roofing and Sheet Metal, Inc. (Nationwide), protests the
termination for the convenience of the government of the contract
awarded it under Wright-Patterson Air Force Base invitation for bids
(IFB) No. F33601-84-B-9094 and the subsequent award of the contract to
the low bidder, ABCO Roofing & Sheet Metal, Inc. (ABCO), whose bid had
been originally found to be nonresponsive. Nationwide requests that the
contract be reawarded to itself.
We deny the protest.
The contracting agency originally found the ABCO bid to be
nonresponsive because ABCO submitted the required bid guarantee on
United States Postal Service (USPS) Bid Bond Form 7324 rather than the
General Services Administration (GSA) Standard Form 24 (SF-24) specified
in the IFB. The USPS form stated that ABCO and its surety were liable
to the "United States Postal Service" rather than to the "United States
Government," as would have been the case had ABCO submitted the SF-24.
The contracting agency subsequently reversed its opinion on the basis of
our decisions B-170694, December 3, 1970, and B-178824, August 16, 1973,
in which our Office held, in factual situation similar to the one here,
that the defect was not sufficient to render a bid nonresponsive.
The Nationwide protest is basically twofold. First, Nationwide
contends that finding the ABCO bid to be responsive is inconsistent with
the two cited decisions of our Office. In this regard, Nationwide
points out that the regulation (paragraph 10-102.5 of the Armed Services
Procurement Regulation) then in effect stated that "* * * noncompliance
with a solicitation requirement that the bid be supported by a bid
guarantee will require rejection of the bid * * *," whereas this
procurement is governed by the Federal Acquisition Regulation (FAR), 48
C.F.R. Section 28-101.4 (1984), which states that "Noncompliance with a
solicitation requirement for a bid guarantee requires rejection of the
bid. * * *" Nationwide asserts that the latter provision mandates bid
rejection for failure to comply strictly with any solicitation
requirement regarding bid guarantees. Thus Nationwide contends, the
ABCO bid was nonresponsive because it was not submitted on the specified
form. Second, Nationwide contends that the controlling law is that of
the state in which contract formation occurred. The state law involved
here, Nationwide asserts, requires finding the ABCO bid to be
nonresponsive.
As a threshold matter, we do not agree with Nationwide's assertion
that state law govern this matter. The general rule is that the
validity and construction of contracts of the United States and their
consequences on the rights and obligations of the parties present
questions of federal law not controlled by the law of any state. R.H.
Pines Corp., 54 Comp. Gen. 527 (1974), 74-2 C.P.D. Paragraph 385, and
cases cited therein. While we have looked to state law in our
consideration of complaints involving procurements conducted by state
and private grantees under federal grants, see, e.g., Bradford National
Corp., B-198117, Jan. 6, 1981, 81-1 CPD Paragraph 5, in considering
protests against direct federal procurements, such as this one, we view
federal statutes, regulations, contract terms and decisions, including
the decisions of this Office, as applicable federal law, and look to
state law for guidance only in the absence of a source of federal law.
See, e.g., HLI Lordship Industries, Inc., B-197847, Aug. 4, 1981, 81-2
CPD Paragraph 88. In our judgment, the FAR and our decisions provide
the proper basis for consideration of this matter.
Contrary to Nationside's view, we interpret the current language of
the FAR pertaining to solicitation bond requirements as little more than
a restatement of the predecessor requirement. The position which
Nationside advocates would lead to the rejection of legally binding --
and therefore responsive -- bonds solely for matters of form without
regard to their legal sufficiency. In our opinion, this would be
inconsistent with the underlying concept of responsiveness, i.e.,
whether the bid is a binding offer to do or deliver the thing called for
in accordance with the terms of the solicitation, see, e.g.,
Astronautics Corporation of America, B-216014, Dec. 13, 1984, 84-2 CPD
663; Lamari Electric Co., B-216397, Dec. 21, 1984, 84-2 CPD Paragraph
689, and must be rejected.
Moreover, we believe that the contracting agency's application of our
decisions to this procurement was correct. In each of the two decisions
on which the agency relied (see also Perkin-Elmer, 63 Comp. Gen. 529
(1984), 84-2 CPD Paragraph 158), the bidder used a bid bond which listed
a state rather than the United States as the obligee of the principal
and surety. We held that while the bid bond did not list the United
States as the obligee, it identified the correct principal, the correct
location and type of work to be done, the correct invitation for bids,
and was in all other respects identical to SF 24. Thus, since the
intention of the surety and the principal to be bound by the bond and
the identity of the United States as the intended and true obligee were
clearly shown by the bond itself, we did not believe that the surety
could successfully defend a suit by the United States on the bond.
Consequently, we concluded that the bid bond was enforceable as
submitted.
In this case USPS bid bond form 7324 is the same as SF-24, with the
exception of the name of the obligee. The bid bond submitted by ABCO on
this form identified the correct principal, the correct location of and
type of work to be done, and the correct IFB number of the contracting
agency. We therefore believe that the surety would be bound by the bond
and, consequently, that the ABCO bid was responsive.
Nationwide states that, should we rule against its request to be
reawarded the contract, the procurement should be recompeted since the
Nationwide contract was awarded during the 1984 fiscal year and no award
in fiscal year 1984 could be made under the original solicitation to any
party other than Nationwide without violating funding limitation
statutes. The contracting agency has advised that under the terms of
the invitation for bids, either fiscal year 1984 or fiscal year 1985
funds may be utilized. Nationwide does not contest this nor does it
explain why a second award using fiscal year 1985 funds would, in view
of the invitation provision, be improper.
Accordingly, the protest is denied.
B-217519, 64 Comp. Gen. 472
Matter of: Riva Fralick, et al. - Multiple Househunting Trips, April
18, 1985:
Employees who were permanently transferred from Miami to Orlando,
Fla., seek reimbursement for serveral househunting trips. The claims
are denied since each employee may be reimbursed travel and
transportation expenses for only one round trip of employee and spouse
between the localities of the old and new duty stations for the purpose
of seeking residence quarters. 5 U.S.C. 5724a(a) (2) (1982). The fact
that the employees may have been given erroneous advice does not create
a right to reimbursement where the expenses claimed are precluded by
law.
This decision is in response to a request by Mr. E. Hansen, Manager,
Fiscal Standards Branch. Office of Accounting, Federal Aviation
Administration (FAA), United States Department of Transportation, for a
determination as to whether multiple househunting trips by employees and
their spouses are reimbursable. For the reasons hereafter stated, only
one round trip, not several trips, by the employee and spouse may be
reimbursed. The claims of the employees for reimbursement of additional
househunting trips are, therefore, denied.
The facts, briefly stated, are as follows. In January 1983, the
employees of the Miami Airports District Office (ADO), FAA, were
notified that they would be relocating to Orlando, Florida. In a
telephone conference between the ADO employees and the Southern Regional
travel office concerning the 1982 changes to relocation allowances, the
ADO staff was advised that the advance househunting trip by employee and
spouse could be split into separate trips but that reimbursement of the
costs would still be limited to one round trip.
Apparently the employees interpreted this advice to authorize
multiple househunting trips by employee and spouse together, rather than
a separate househunting trip by the employee and spouse traveling at
different times. Consequently, five ADO employees and their spouses
made multiple househunting trips and incurred costs for each trip. The
five employees submitted travel vouchers claiming reimbursement of the
costs of the multiple househunting trips made to the Orlando area. The
FAA declined to pay for more than one househunting trip by an employee
and spouse based upon the provisions of paragraph 2-4.1a, Federal Travel
Regulations, FPMR 101-7 (Supp. 4, October 1, 1982) FTR incorp. by ref.,
41 C.F.R. Section 101-7.003 (1983), and our decision, 47 Comp. Gen. 189
(1967). In 47 Comp Gen. 189, 23 held that househunting could not extend
over several trips until the then-applicable maximum of 6 days' per diem
reimbursement for employee and spouse was exhausted.
The employees believe they should be reimbursed for the costs of the
multiple househunting trips for the following reasons:
1. Misinformation was given them by FAA travel office personnel.
2. Our decision in 47 Comp. Gen. 189 was decided prior to the 1982
changes to the FTR.
3. The FAA discouraged absences from the office for extended periods
of time; therefore, multiple househunting trips made on weekends were
advantageous to the government.
Section 5724a(a)(2) of title 5, United States Code, 1982, provides
that the expenses incurred in seeking permanent residence quarters at a
new official station may be allowed "only for one round trip" in
connection with each change of station of the employee. The
implementing regulation, paragraph 2-4.1a of the FTR, Supplement 4,
effective October 1, 1982, provides that:
Payment of travel and transportation expenses of the employee
and spouse traveling together, or the employee or spouse traveling
individually instead of travel by the other or together, for one
round trip between the localities of the old and new duty stations
for the purpose of seeking residence quarters, may be authorized
when circumstances warrant. Separate round trips by the employee
and spouse may be allowed provided the overall cost to the
Government is limited to the cost of one round trip for the
employee and spouse traveling together (Emphasis in original.)
In our decision, 47 Comp. Gen 189, supra, we interpreted the
statutory provision and the predecessor regulatory provision to mean
that only one round trip, not several trips, is contemplated. While
that decision was rendered prior to the 1982 changes to the FTR, the
statutory provision has not changed and the above-quoted regulation
still contemplates only one round trip of the employee and spouse
between the localities of the old and new duty stations for the purpose
of seeking residence quarters. See 47 Fed. Reg. 44567 (1982), where the
revised regulation was explained, in part, as follows:
Paragraph 2-4.1a is revised to allow reimbursement for separate
househunting trips for the employee and spouse provided the cost
is limited to the cost of one rount trip for employee and spouse
traveling together (expenses of only one round trip are allowed by
statute) * * *.
We therefore affirm our holding in 47 Comp. Gen. 189 in regard to
this issue.
Although the ADO employees may have been misinformed as to the
meaning of the 1982 changes to the FTR, it is a well-established rule
that, in the absence of specific statutory authority, the United States
is not liable for the erroneous acts of its officers, agents, or
employees, even though committed in the performance of their official
duties. See 55 Comp. Gen. 747 (1975), and cases cited therein. The
erroneous advice or authorization does not, in itself, create a right to
reimbursement where the expenses claimed are precluded by law. Eugene
B. Roche, B-205041, May 28, 1982.
Finally, the fact that the ADO employees performed the multiple
househunting trips on weekends so as to avoid extended periods of
absence from the office, and such actions may have been advantageous to
the government, does not establish a basis for derogation or waiver of
the express provisions of the statute and regulations or create
additional entitlement to reimbursement.
Accordingly, in a change of official station, reimbursement of travel
and transportation expenses may be made for only one round trip of
employee and spouse between the localities of the old and new duty
stations for the purpose of seeking residence quarters. Therefore, the
claims of the five employees for reimbursement of the expenses of
additional househunting trips by an employee and spouse are denied.
B-215145, 64 Comp. Gen. 467
Matter of: Bank of Bethesda - Claim Against Navy for Reimbursement
of Costs, April 17, 1985:
Bank of Bethesda is not entitled to be reimbursed for purchase of
vault and related equipment for branch office on Navy installation.
Bank sought payment under Navy regulations authorizing such equipment to
be furnished at Government expense to bank offices certified as
"nonself-sustaining." General Accounting Office agrees with Navy,
however, that there is no basis to authorize payment where purchases
were made prior to certification, and where authorizing regulation is
clear on its face that benefits thereunder are available only after
certification. Bank, as voluntary creditor of the Government, is not
authorized to recover cost of goods allegedly purchased on behalf of the
Government where direct expenditure by the Navy would not have been
authorized.
This responds to a request by the Bank of Bethesda that we review its
claim for reimbursement of expenses incurred in purchasing and
installing equipment, including a vault and an alarm system, for a new
branch office at the Naval Medical Command in Bethesda, Maryland. The
Bank's claim was originally filed with the Navy, which denied it based
upon the Bank's status as a voluntary creditor of the Government. For
the reasons discussed below, we agree that the Bank is not entitled to
reimbursement.
According to its submission, the Bank of Bethesda was required by the
Navy to move its branch office at the Naval Medical Command as part of
an overall facilities relocation in 1983. Although original
notification of the proposed move came as early as July 1979, the Bank
apparently received no instructions to relocate until March of 1983. At
that time, the Navy informed Bank officials that the branch office would
be required to move to temporary space by April 11, 1983, and to a new
permanent location by June 1983.
The Bank states that, because of the restrictive time requirements
imposed upon it by the Navy, it was required to make immediate
arrangements to order a vault, alarm system, and counter-equipment for
the new facility. According to the Bank, its officers approached the
Navy during March 1983, about the possibility of obtaining financial
support from the Government to cover the costs of this equipment,
particularly since the branch office was not making any significant
profit at the time. The Bank indicates that Navy officials assured Bank
officers that, if the branch was indeed unprofitable, the vault and
related equipment could be paid for or provided by the Government. The
Bank says that it immediately ordered the vault and alarm system in
reliance on these representations. The details of how the Navy would
contribute, however, were not make clear to the Bank (through provision
of a copy of the applicable Navy regulation) until well after it had
ordered the equipment in question.
By letter dated May 18, 1983, Commander Q.E. Crews of the Naval
Medical Command provided the Bank with a copy of Secretary of the Navy
Instruction (SECNAVINST) 5381.1G March 7, 1983, which governs the rights
and requirements of banking institutions operating on Navy and Marine
Corps installations. Section 8(c) of that instruction provides that any
bank office on a Navy or Marine Corps installation, once certified as
"nonself-sustaining," may be provided Government-owned property and
services (including vaults and other necessary equipment) without
charge. Commander Crews informed the Bank that, because the Naval
Medical Command had received no evidence to the contrary, the Bank of
Bethesda branch at the Command was presumed to be self-sustaining and
therefore ineligible for the benefits accorded to nonself-sustaining
bank offices. He also noted that a self-sustaining bank may use its own
funds to modify or renovate on existing Government space.
On August 29, 1983, the Bank of Bethesda wrote to Commander Crews,
requesting that the Naval Medical Command branch be certified as
nonself-sustaining, based upon a review of the branch's finances by the
Bank's accountants. The Bank also requested that the Navy reimburse the
Bank for vault and equipment costs incurred during the move in June.
According to the Bank, the Navy certified the branch's
nonself-sustaining status on December 12, 1983, but denied the request
for reimbursement on the grounds that (1) the equipment was ordered
before the branch was certified, and (2) the Bank failed to follow
competitive bidding requirements. The Bank responded on December 21,
1983, with a request that the specific requirements of the applicable
regulation be waived so that reimbursement might be granted. The Navy,
on March 12, 1984, again declined to reimburse the Bank, this time on
the basis of a legal opinion of the Office of Counsel for the Navy
Comptroller, stating that the regulation in question could not be waived
by the Navy and that, even if it could, the claim could not be paid
under the so-called "voluntary creditor rule." The Bank of Bethesda has
appealed the question to this Office.
The applicable Navy regulation, SECNAVINST 5381.1G, March 7, 1983,
delineates two separate categories of banking offices on Navy or Marine
Corps installations: self-sustaining and nonself-sustaining. The
distinction is significant, as bank offices falling under the latter
classification are eligible for such benefits as free rent and
utilities. All offices are considered to be self-sustaining --
* * * until the banking institution provides NCD4 (Office of
the Navy Comptroller, Banking and Contract Financing Director),
through the installation commander, profit-center financial
statements (certified by the Bank's certified public accountant)
indicating that the profitability of that office has fallen below
seven (7) percent of gross expenses incurred for four (4)
consecutive calendar quarters. Free rent and utilities may then
be authorized by NCD4. At this time the banking office is
categorized as a nonself-sustaining office. SECNAVINST 5381.1G
Section 8(b)(1).
Once categorized as nonself-sustaining, the banking office is to be
furnished "space in government-owned buildings" under a 5-year no-cost
license, subject to cancellation upon a change in the status of the
banking office. The regulation further states that:
Adequate space shall be made available (to nonself-sustaining
bank offices) -- including steel bars; grillwork; security
doors; a vault, safes, or both; burglar alarm system; other
security features normally used by banking institutions;
construction of counters and teller cages; and other necessary
modifications and alterations in existing buildings. Id. Section
8(c)(3).
The Bank of Bethesda's original request for reimbursement was based
upon a construction of SECNAVINST 5381.1G that would have permitted the
benefits conveyed therein to be provided on a retroactive basis, that
is, for the period prior to actual certification of nonself-sustaining
status by the Navy. We agree, however, with the Navy that the
regulation in question is, by its own terms, applicable on a prospective
basis only. Entitlement to the benefits provided under the regulation
is not based upon achievement of the nonself-sustaining status described
in the regulation, but rather upon recogniztion of that status through
certification by the Navy. As the regulation states, "(f)ree rent and
utilities may then (i.e., after certification) be authorized" by the
Navy. SECNAVINST 5381.1G Section 8(b)(1) (Italic supplied). The
language of the regulation is clear on its face, and provides no
authority to award benefits for periods prior to certification by the
Navy. There is no basis under the authorizing regulation for payment
under the Bank's claim.
Once it became apparent that the Navy would not apply the regulation
on a retroactive basis, the Bank of Bethesda sought a "waiver" based
upon the equities of the circumstances involved, in particular the
Navy's pressure on the Bank to move rapidly, together with its
assurances as to the availability of reimbursement. As indicated
previously, the Navy denied the Bank's "waiver" request on grounds that
it had no authority to waive a DOD-wide policy. The Navy's ultimate
disposition of the claim, however was on the basis that the Bank acted
as a "voluntary creditor" -- i.e., one who pays what is perceived to be
an obligation of the Government to a third party, with the belief that
his actions would thereby create a valid claim in his favor. A
voluntary creditor, as a general rule, is not entitled to reimbursement
except when public necessity can be established. 62 Comp. Gen. 419, 424
(1983).
The voluntary creditor rule is related to the Antideficiency Act's
prohibition against the acceptance by the Government of voluntary
services. See 31 U.S.C. Section 1342 (1982). Its underlying rationale
is that, where a valid obligation of the Government exists, specific
procedures and mechanisms exist to see that that obligation is
fulfilled; to permit a volunteer to intervene in the process would
interfere with the Government's interest in seeing that its procedures
are followed. See 62 Comp. Gen. 419 (1983), for a thorough review of
the origins and applications of the voluntary creditor rule.
The voluntary creditor rule is not an absolute bar to recovery.
Under certain exceptional circumstances, one who makes a payment on
behalf of the Government may recover the amount paid. In 62 Comp. Gen.
419, supra, we delineated guidelines for determining when the rule would
or would not be applied. We stated that, as a preliminary matter, there
are three types of cases in which we will continue to apply the rule
strictly. They are:
Cases in which the underlying expenditure is unauthorized;
Cases in which the claimant requests reimbursement for purchasing an
item to be used primarily for his or her own use, where the item is
authorized -- but not required -- to be furnished at Government expense;
and
Cases involving claims not involving the procurement of goods or
services. 62 Comp. Gen. at 423.
If a claim by a voluntary creditor does not fall into any of these
categories, it may be considered for payment, although certain other
stringent requirements (particular a showing of public necessity) must
also be met. Id. at 424.
In the present case, we find it unnecessary to proceed beyond the
initial inquiry. As indicated above, we agree with the Navy's
conclusion that SECNAVINST 5381.1G provided no legal authority to
reimburse the Bank for expenses incurred prior to certification.
Consequently, as the Navy would not have been authorized to purchase the
equipment directly for the Bank, the voluntary actions of the Bank can
have no legal effect. This case thus falls within the first of the
three categories, outlined above, for which we have stated the voluntary
creditor rule should be strictly applied. /1/
Because of our conclusion that the Bank's claims are barred under the
voluntary creditor rule, it is unnecessary to address the quantum meruit
or estoppel arguments at any length. We should point out, however, that
while it is true that the Comptroller General may authorize payment on a
quantum meruit basis to a person who has provided services to the
Government, pursuant to the Comptroller General's claim settlement
authority (31 U.S.C. Section 3702), he too must first make the threshold
determination that the procurement would have been authorized at the
time it was made. As stated above, the procurement would not have been
permissible when made even if the Bank had secured a written commitment
to reimburse it for its purchases. See B-207557, July 11, 1983;
pb0212430, June 11, 1984. Moreover, a Government agency may not be
estopped by unauthorized representations of its employees (even if such
representations have actually been made), particularly when they purport
to waive binding agency regulation. See Federal Crop Insurance Corp. v.
Merrill, 332 U.S. 380 (1947).
Finally, it is our view that any bank operating an office on a
military installation is responsible for familiarizing itself with those
regulations, issued by the military service, specifically governing the
establishment, operation, and termination of such banking facilities.
The regulation in question, SECNAVINST 5831.1G is comprehensive in
nature, and covers a wide range of requirements, from the types of
banking services which are to be rendered to the use of promotional
material by the Bank. The regulation's predecessor was in fact
specifically incorporated by reference in the Bank of Bethesda's support
agreement with the Navy dated August 30, 1982, and the Bank therefore
had constructive notice of the regulation. We thus give little weight
to the Bank's complaint that the Navy did not furnish it a copy of the
regulations until after it had made the purchase for which it now seeks
reimbursement. The Bank should have been familiar with the regulation,
and had it been so, could not have claimed to rely on any Navy
official's mistaken assertion of the availability, under the regulation,
of reimbursement.
Based upon the foregoing, we affirm the Navy's conclusion that
reimbursement of the purchase value of the vault and related equipment
is not authorized.
(1) The present situation also appears comparable to those cases
falling within the second category, as the items for which the Bank
requests reimbursement are goods purchased primarily for its own use.
B-208604, 64 Comp. Gen. 456
Matter of: Accountable officer liability for lost or stolen
travelers checks, April 9, 1985:
Blank travelers checks obtained by the Government for issuance to its
employees in lieu of cash travel advances do constitute official
Government funds, the physical loss or disappearance of which would
entail financial liability for the accountable officer involved. That
liability may be relieved by General Accounting Office, under 31 U.S.C.
3527 (1982), in the same manner as liability for a loss involving cash
or other Government funds.
The Acting Director of the Office of Finance and Management of the
United States Department of Agriculture (USDA), has requested our
opinion concerning the liability of imprest fund cashiers for lost,
stolen, or otherwise unaccounted for commercial travelers checks which
USDA is now issuing to its employees in lieu of cash travel advances.
USDA asks whether we agree that blank travelers checks which have been
entrusted to imprest fund cashiers under this program constitute
official Government funds. If so, USDA also asks whether the cashiers
would have the right, under 31 U.S.C. Section 3527 (1982), to obtain
relief from GAO for liability arising from a loss or shortage in
cashiers' accounts with regard to the checks entrusted to them.
As explained below, we conclude that blank travelers checks obtained
by the Government for issuance to its employees in lieu of cash travel
advances do constitute official Government funds, the loss of which
would entail financial liability for the accountable officers involved.
We also conclude that an accountable officer's liability for a physical
loss involving blank travelers checks is relievable under 31 U.S.C.
Section 3527 in the same manner as liability for a loss involving cash
or other Government funds.
In May 1984, USDA began issuing travel advances /1/ to its employees
in the form of travelers checks, rather than cash. This action was
undertaken by USDA in accordance with the provisions of a General
Services Administration (GSA) requirements contract (No. GS-00T-42299)
with Citicorp Services, Inc. Under the contract, Citicorp agreed to
provide blank travelers checks, as needed, to agencies of the Federal
Government for use, in lieu of cash, when making authorized travel
advances to Government employees.
The GSA contract provides that agencies will accept delivery of
Citicorp travelers checks in accordance with the terms and conditions of
a "Trust Receipt/Trust Agreement." Among other things, this trust
receipt agreement contains provisions:
Requiring the Government to safeguard the travelers checks, "giving
them the same protection as cash and to hold the Checks at the
(Government's) own sole risk of loss resulting from employee dishonesty
or negligence or disappearance of any or all of the Checks. (paragraph
(e));
Requiring the Government to reimburse Citicorp for "the face value of
any Checks which have disappeared or which the (Government) fails to
return to (Citicorp) upon demand due to employee dishonesty or
negligence" (paragraph (g));
Requiring the Government to "maintain at all times insurance
providing adequate coverage for any and all losses resulting from
employee dishonesty or negligence or the disappearance of any or all of
the Checks" (paragraph (h)); /2/ and
Specifying that "notwithstanding any notice to (Citicorp) that a
Check has been lost, stolen, or destroyed, (Citicorp) may, at its sole
discretion, pay such Check upon presentation, whether or not it is
legally liable therefor (paragraph (j)).
According to USDA, GSA has issued no guidance concerning the
liability of accountable officers for the loss of travelers checks
before they have been issued to and signed by traveling employees. /3/
USDA added that:
While the contractor, Citicorp Services, Inc. (CSI) takes
responsibility for losses or shortages up to a CSI-approved limit,
absent employee malfeasance or negligence, we can envision certain
circumstances where CSI would not take responsibility and for
which we feel the cashier, as an accountable officer, would be
able to request relief from (GAO). /4/
Accountable officers are automatically and strictly liable for
Government funds entrusted to them. E.g., Serrano v. United States, 612
F.2d 525, 528 (Ct. Cl. 1979); 54 Comp. Gen. 112, 114 (1974). However,
under the provisions of 31 U.S.C. Section 3527, GAO is authorized to
relieve accountable officers from liability for "the physical loss or
deficiency of public money, vouchers, checks, securities, or records"
when GAO concurs with the determination of the head of the employing
agency that the loss occurred in the course of the accountable officer's
official duties, and was not the result of fault or negligence on the
part of the accountable officer.
Legal commentators suggest that travelers checks were created in
1891:
* * * in response to the need for an instrument with the
marketability of cash and yet the safety of a bank draft. The
important feature of a traveler's check is the
signature-countersignature scheme, and because of it the owner may
carry the check without fear of suffering a financial setback if
it is lost or stolen, but nevertheless may properly cash it
without proving his identity. To assure continued acceptance of
traveler's checks by the public, issuers often absorb losses
rather than assert possible defenses against redemption * * *.
Annot., 42 A.L.R. 3d 846, 848 Section 2 (1972) (citations
omitted).
Travelers checks are generally regarded as negotiable, bearer
instruments which were intended to be, and have become, widely accepted
by the public as substitutes for cash. /5/ The GSA contract and the
trust receipt agreement reflect these facts. Citicorp travelers checks
are to be issued in place of, and as the functional equivalent to, cash
travel advances. Moreover, the contract and trust receipt agreement
require the Government to "safeguard the Checks * * *, giving them the
same protection as cash and to hold the Checks at the (Government's)
sole risk of loss * * * or disappearance." Since the Government is
liable for the loss of Citicorp travelers checks as though they were
cash, /6/ it stands to reason that accountable officers should be held
liable for, and relievable from, losses of travelers checks as though
they were cash. /7/
Another approach is reflected in our decision B-190506, December 20,
1979, in which we concluded that the disappearance of Treasury bonds and
interest coupons resulted in a loss to the United States. In that case,
the accountable officer argued that the United States suffered no loss
for which the accountable officer might legally be held liable. Her
argument was based on the fact that the bonds had not yet been cashed
and that a "stop payment" notice had been placed on them. We disagreed
and pointed out that the bonds and coupons were negotiable, bearer
instruments, and that a "stop payment" notice neither prevents the
cashing of the bonds and coupons, nor completely extinguishes the
Government's liability to pay on them. We think the analysis used in
B-190506, supra, may be applied wtth equal force to the facts of the
present case. Both cases involve negotiable, bearer instruments. /8/
In neither case can the Government effectively prevent the payment of
the stolen bonds or travelers checks. /9/
Based on the foregoing, we conclude that the loss or disappearance of
a travelers check while in the custody of an accountable officer, to the
extent the Government is obligated to pay for it (i.e., to the extent
the issuer, in this case Citicorp, has not accepted responsibility under
the governing agreements), does give rise to a loss of Government funds
for which the accountable officer involved would be liable. In
addition, the relief authority provided in 31 U.S.C. Section 3527 would
be available in appropriate cases, just as with other losses of public
funds.
As a final note, we emphasize that this decision is concerned solely
with the liability and relief of accountable officers, and not the
employee performing the travel. The "custody" of the accountable
officer ends when the travelers check is properly turned over to the
traveler. The traveler, while accountable for the funds, is not
eligible for relief under the accountable officer statutes. 54 Comp.
Gen. 190 (1974); B-183489, June 30, 1975. However, under the terms of
Citicorp's Travelers Checks Purchase Agreements, Federal employees who
receive their travel advances in the form of travelers checks may be
reimbursed by Citicorp for travelers checks that are lost or stolen.
(1) Under various statutes, e.g., 5 U.S.C. section 5705 (1982), the
Government is authorized to give cash advances to employees assigned to
official travel in order to cover their reimbursable expenses.
(2) We are not aware that any Government agency under this program
has actually purchased, or has been expected to purchase, commercial
insurance. We understand that the trust receipt agreement is the same
form Ctticorp uses in dealing with private sector customers, and assume
that the Government's policy of self-insurance would be viewed as
compliance with the quoted provision. Further, in view of that policy,
we question whether the purchase of commercial insurance in this context
would be a permissible use of appropriated funds.
(3) GSA has promulgated a "Temporary Regulation" which sets the
policies and procedures governing use of travelers checks in lieu of
cash travel advances. 49 Fed. Reg. 33248 (1984) (to be codified in 41
C.F.R. ch. 101). However, that regulation does not discuss accountable
officer liability for travelers checks.
(4) The situations in which Citicorp is contractually obligated to
"take responsibility for losses or shortages" are not entirely clear to
us. For purposes of this decision, however, it is sufficient to
recognize that there will be situations in which the Government may be
required to pay for lost or stolen checks.
(5) See, e.g., American Express Co. v. Anadarko Bank & Trust Co., 67
P.2d 55, 58 (Okla. 1937); Transcontinental & Western Air, Inc. v. Bank
of America, 116 P.2d 791, 795-96 (Cal. Dist. Ct. App. 1941); American
Express Co. v. Rona Travel Serv., 77 N.J. Super. 566, 187 A.2d 206,
210-11 (N.J. Super. Ct. Ch. Div. 1962); Ashford v. Thomas Cook & Son
(Bankers) Ltd., 471 P.2d 530, 533-34 (Hawaii 1970). See also Note, 41
Georgetown L.J. 91 (1952); Annot., 42 A.L.R. 3d, supra, Sections 2, 3
at 848-55.
(6) Cf., e.g., American Express Co. v. Rona Travel Serv. 187 A.2d at
211-12 (terms of contract between travelers check company and travel
agency selling checks on commission basis determined the liabilities of
the parties and were construed to mean that travelers checks were the
equivalent of cash, the loss of which must be borne by the travel
agency, not the issuer of the checks). See also, Mellon Nat'l Bank v.
Citizens Bank & Trust Co., 88 F.2d 128, 133 (8th Cir. 1937);
Transcontinental & Western Air, Inc., 116 P.2d at 795.
(7) Cf., e.g., Ashford, 471 P.2d at 534 ("(I)f travelers checks are
intended by the issuer and accepted by the public as a medium of
exchange to take the place of money, they should be subject to the same
rules of law applicable to money under like circumstances.")
(8) In Transcontinental & Western Air, Inc., 116 P.2d at 795-96,
travelers checks are compared to and treated in the same manner as
"Government bonds." Similarly, in Ashford, 471 P.2d at 534, quoting from
Cooke v. United States, 91 U.S. 389 (1875), the court found that
travelers checks should be treated in a manner similar to "Treasury
notes." Cf., e.g., Peoples Savings Bank v. American Surety Co., 15
F.Supp. 911, 913-14 (D. Mich. 1936) (travelers checks are held to be
"securities," for the purposes of an indemnity bond agreement covering
losses that might be suffered by the bank).
(9) The contract, as quoted earlier, specifically provides that,
notwithstanding any nottce by the Government to Citicorp, stolen
travelers checks may be paid by Citicorp. Even had the contract not so
provided, there is case law to support the proposition that that
Citicorp might be required to honor stolen travelers checks if the
signatures on the travelers check matched each other. See, e.g.,
Transcontinental & Western Air, Inc., 116 P.2d at 795-96; American
Express Co. v. Anadarko Bank & Trust Co., 67 P.2d at 57-58; Ashford,
471 P.2d at 533-34. See also, Annot., 42 A.L.R. 3d at 850-51
(discussing Uniform Commercial Code Sections 3-115, 3-407(3)).
B-216421, 64 Comp. Gen. 460
Matter of: Indian and Native American Employment and Training
Coalition, April 16, 1985:
Protest contending that a contract modification was beyond the scope
of the contract and thus improperly suppressed competition is sustained
where the modification resulted in the procurement of services
materially different from that for which the competition was held.
The Indian and Native American Employment and Training Coalition
(Coalition) has protested a task order issued by the Department of
Labor, Office of the Inspector General (OIG) under contract No.
J-9-M-3-0119 whereby the contractor, Rodriguez, Roach & Assoc., P.C., is
to provide specified technical assistance and training to Native
American grantees. The Coalition believes that the modification to the
contract by the task order is improper since the services to be provided
under the task order are outside the scope of the request for proposals
on which the contract is based. Furthermore, the Coalition contends
that the contractor's additional responsibilities under the contract as
modified place the contractor in an organizational conflict of interest
with respect to the contractor's duties under the original contract. We
sustain the protest on the first basis; the second therefore is
academic.
The contract, as originally awarded to Rodriguez, Roach, provided
that the contractor would provide professional accounting/audit services
on a task order basis, supportive of the OIG. The contract was for a
1-year period with an option for the government to extend the contract
for 1 additional year. On July 23, 1984, task order No. 101 was added
to the contract, pursuant to which Rodriguez, Roach discussed with
representatives of the OIG and the Department of Labor's Employment and
Training Administration (ETA) the latter's plans for providing technical
assistance and training to Native American and farmworker grantees. On
September 28, 1984, the OIG added modification No. 3 to task order No.
101 whereby Rodrigues, Roach would provide technical assistance and
training to Native American grantees on financial management and
management information systems. This technical assistance and training
for approximately 194 Native American grantees would be in the form of
training workshops and also on-site technical assistance and training to
approximately 35 of the grantees. Task order No. 101 added a cost of
approximately $433,000 to the prior total amount of the contract of
about $990,000.
The Coalition objects to the modification of the contract by task
order No. 101 to include the technical assistance and training services
to grantees on the basis that such services are outside the scope of the
request for proposals (RFP) on which the contract is based. The
Coalition contends that every aspect of the RFP for the contract created
the impression that the OIG was procuring audit services, not technical
assistance and training services, and that the procurement of
specialized technical assistance and training services through the
modification improperly suppressed competition.
We generally do not review protests concerning contract modifications
because they involve contract administration which is primarily the
responsibility of the contracting agency and beyond the scope of our bid
protest function. Sierra Pacific Airlines, B-205439, July 19, 1982,
82-2 C.P.D. Paragraph 54. We will consider such a protest, however,
where it is alleged that the modification is outside the scope of the
original procurement and should have been the subject of a new
procurement. Nucletronix, Inc., B-213559, July 23, 1984, 84-2 C.P.D.
Paragraph 82. In this regard, we have stated that if a contract as
modified is materially different from the contract for which competition
was held, the subject of the modification should have been competitively
procured unless a sole-source award was appropriate. Department of the
Interior -- Request for an Advance Decision, B-207389, June 15, 1982,
82-1 C.P.D. Paragraph 589. Whether a modification is outside the scope
of the original procurement is determined on the facts of each case,
taking into account the circumstances attending the procurement that was
conducted and whether the changes accomplished by the modification are
of a nature which would be reasonably anticipated under the changes
clause in the original contract. CPT Corp., B-211464, June 7, 1984,
84-1 C.P.D. Paragraph 606.
The Department of Labor asserts that the on-site technical assistance
and training and the workshops on financial management and management
information systems (financial) are within the scope of the contract as
shown by the following language contained in the RFP's Scope of Work
provision:
In addition, the contractor may be required to conduct surveys,
provide technical expertise, prepare audit plans and reports, and
perform such other work required by the OIG to carry out the
Inspector General Act of 1978 including audit coordination,
training and orientation. (Italic supplied.)
The quoted sentence is extracted from the following Scope of Work
provision:
The Contractor shall provide professional accounting/audit
services, on a Task Order basis, supportive of the U.S. Department
of Labor, Office of the Inspector General (OIG). The principal
officers of the public accounting firm hereinafter referred to as
"contractor" must be independent Certified Public Accountants.
The contractor must also be certified or licensed by a regulatory
authority of a State or other political sub-division of the United
States and must meet applicable State Board of Accountancy
requirements. The contractor may perform financial and compliance
audits, economy and efficiency audits, program results audits,
full scope audits and other types of audits required by the OIG.
The contractor may perform pre-award surveys, pricing reviews,
quality control evaluations, analyses, and follow-up required by
the OIG. In addition, the contractor may be required to conduct
surveys, provide technical expertise, prepare audit plans and
reports, and perform such other work required by the OIG to carry
out the responsibilities placed on the Inspector General by the
Inspector General Act of 1978 including audit coordination,
training, and orientation. The contractor may be required to
provide services relating to any or all Department of Labor
organizations, programs, activities and functions, including, but
not limited to the Employment and Training Administration (ETA),
Employment Standards Administration (ESA), Labor-Management
Services Administration (LMSA), Mine Safety and Health
Administration (MSHA), and Occupational Safety and Health
Administration (OSHA). The contractor may also be required to
provide services relating to other Federal Agencies especially in
those instances in which the Department of Labor has been
designated as the cognizant audit agency.
Following the Scope of Work was another provision, the Statement of
Work, which began with this paragraph:
A. Requirements
The Contractor shall provide qualified personnel to perform the
audits, surveys, reviews and other tasks needed by the Office of
Inspector General, U.S. Department of Labor, to carry out the
responsibilities placed on the Inspector General by the Inspector
General Act of 1978.
The other paragraphs of the Statement of Work were:
B. Administrative Reporting Requirements
C. Reports
D. Submission of Reports
E. Workpapers
F. Entrance and Exit Conference
G. Auditee Notification
H. Audit Resolution
As these headings indicate, the Statement of Work focused upon the
conduct of audits.
Those who responded to this RFP were to submit technical proposals.
The instructions for the preparation of those proposals advised each
offeror that by submitting a proposal the offeror was granting the
Department of Labor authorization to check references of the offeror's
principal clients for which "financial and/or investigative audit
services" had been provided in the last two years. (Emphasis in
original.) Each offeror was further advised that its proposal would be
evaluated in accordance with the following criteria:
In satisfaction of the single most important criterion, "Client
Experience," the offeror was the "provide a list of its prinicpal
clients * * * for which financial and/or investigative audit services
have been provided in the last two years." (Emphasis in original.) With
regard to the second most important criterion, "Personnel Qualifications
and Experience," offerors were to submit resumes of senior staff
including information concerning "years of auditing experience," "years
of supervisory auditing experience if appropriate," "prior experience *
* * in performing pre-award surveys, pricing reviews, indirect cost
audits, and financial and investigative audits of Federal, State, County
or local governments and non-profit organization * * *" and "prior
experience pertaining to commercial enterprises." (Emphasis in
original.)
The "Project Management" evaluation criterion was described in the
RFP as follows:
The offeror must describe the management structure and
supervision to be exercised over the work to be performed under
the contract, including the proposed system for field audit review
and office review of reports and workpapers. The offeror must
identify the personnel that are to provide the management and
supervision. In addition, the offeror must provide an estimate of
each individual's time to be spent overall along with an estimate
of the percent of time that each individual is to spend at the
audit site managing/supervising the work to be performed under
this contract (the individuals who are to conduct the qulaity
control review of the workpapers and audit before submission of
the reports to the Government must be specifically identified).
In addition, the final evaluation criterion, "Understanding Scope of
Work," stated in pertinent part:
The offeror shall provide a narrative to demonstrate the
offeror's technical understanding of the work to be performed
under this contract by describing the various types of audits that
may be performed under this contract. The offeror must also
provide an analysis of the distinctions between each of the
various types of audits and describe how statistical sampling may
be used to accomplish the audits.
Finally, we note that the RFP advised that the successful offeror
would be required to attend a postaward conference "held to review the
terms of the contract; to discuss the Department's audit requirements,
especially those requirements relating to the understanding of the work
to be performed and the attainment of quality audits; and to provide an
orientation session for the auditors of the successful firm."
As we have indicated above, in three places within the RFP the agency
emphasized, through underscoring, the importance of an offeror's
experience in financial and investigative audits. In contrast, the word
"workshops" does not appear in the RFP's Instructions for Preparing
Technical Proposals and Contract Schedule. "Training" appears only in
the sixth sentence of the Scope of Work provision, quoted above.
"Technical assistance" appears only in the following context in the
Statement of Work:
H. Audit Resolution
The Contractor is required to provide technical assistance in
resolving audit findings to the DOL/OIG and testify (at) ALJ
hearings, in accordance with the terms of the task orders issued
under this contract.
Offerors were not asked to describe, nor advised that they would be
evaluated upon, their experience in on-site technical assistance and
training or in conducting workshops.
Rodriguez, Roach's technical proposal, which subsequently was
incorporated into the contract, was consistent with the RFP's emphasis
upon experience in financial and investigative audits. Although there
is mention in the firm's statement of its experience that it has trained
accounting personnel and the resumes of several of its members indicate
that they have instructed at a seminar, the firm placed no particular
emphasis on this aspect of its experience. We note, too, that in
responding to the last evaluation criterion -- the firm's understanding
of the work to be performed -- Rodriguez, Roach primarily focused upon
the conduct of audits and made no mention of providing on-site training
and technical assistance or conducting workshops.
Task Order No. 101, the subject of this protest, consists of an
initiating memorandum and several subsequent modifications, under which
Rodriguez, Roach was paid almost $29,000:
To travel to Washington, D.C. to conduct preliminary discussions with
the Department of Labor: "the details (of the proposed on-site visits
and workshops) will be discussed in this session and a modification to
this Task Order developed based on the agreement reached to expand on
the Statement of Work, Period of Performance, and Compensation, and to
add sections for deliverables and progress reports."
To attend an additional meeting with the Department of Labor to
"review the firm's proposal on how it plans to conduct the training" and
to attend two meetings with grantee representatives "to solicit their
input and to evaluate the progress made in developing the training
program."
To expand the Statement of Work to include the following tasks:
A. Review ETA monitoring reports relating to program.
B. Review audit reports relating to program.
C. Identify grantees and issues related to grantees.
D. Discuss program weaknesses related to financial management areas
with ETA and OIG officials.
E. Compile profile of grantees.
F. Compile data for meetings.
G. Compile data for workshops agenda.
H. Coordinate efforts with another contractor.
A subsequent modification to task order No. 101 amended the
contract's Statement of Work, in detail, to provide for the conduct of
up to four regional training workshops, and for on-site training and
technical assistance for approximately 35 grantees (as designated by
ETA), at a cost of approximately $405,000.
In contending that the work to be performed under task order No. 101
was within the scope of Rodriguez, Roach's contract and therefore need
not have been separately competed, the agency notes that the RFP's Scope
of Work provision states that the contractor may be required, among
other things, to "provide technical expertise" and to "perform such
other work required by the OIG to carry out the responsibilities placed
on the Inspector General by (statute) including audit coordination,
training, and orientation." These references, the agency argues,
evidence its "intent to have the discretion and flexibility to provide
training and technical assistance when deemed necessary." The contract
modification is consistent with the statutory responsibilities of the
OIG, the agency maintains, "to promote economy, efficiency and
effectiveness in the administration of * * * programs and operations."
We agree with the protester that there is nothing in the RFP upon
which Rodriguez, Roach's contract is based which would have indicated to
potential offerors that the contractor could be called upon to provide
more than $400,000 in on-site training and technical assistance to
approximately 35 grantees and four regional workshops on financial
management matters to Native American grantees receiving funds under the
Job Training Partnership Act. This concept does not appear in the RFP
even in the briefest outline. Although the agency contends that its
intention to procure such services is evidenced by the RFP's statement
that the contractor may be required to provide "technical expertise" and
"training," this language appears in the context of a solicitation
almost wholly devoted to audit services and, therefore, more reasonably
would be read as referring to services to be provided to agency
personnel rather than to grantees.
The language which the agency underscored in the RFP, the
instructions to offerors for preparing proposals and the content and
weighting of the factors used in evaluating proposals, all focused upon
experience in conducting financial and investigative audits. Rodriguez,
Roach's proposal was consistent with this emphasis and nowhere addressed
the possibility of conducting the kind of training later added to the
contract by modification. In this regard, we note that the contractor
essentially developed its proposal for conducting the on-site training
and technical assistance and the workshops through the performance of
some $29,000 in preliminary tasks under task order No. 101. The
magnitude of the preliminary work required of the contractor before it
was in a position to begin this work, and the fact that the contractor's
Statement of Work had to be amended by task order No. 101 to include
this effort, suggest to us that it was not within the scope of the
original contract. We note, too, that the funds for this effort were
appropriated under the Job Training Partnership Act -- not normally
administered by the OIG -- and this effort was added to the contract
only in conjunction with the transfer of the necessary funds from the
Employment and Training Administration. It is not clear to us how at
the time of award the contract could have included within its scope an
effort in support of a program administered by another entity within the
Department of Labor using funds appropriated for that purpose.
Accordingly, we conclude that the modification made by task order No.
101 was outside the scope of the contract. The issue now, therefore
becomes whether, in effect, a sole-source award to Rodriguez, Roach for
the technical assistance and training services was appropriate.
A sole-source acquisition is authorized when the legitimate needs of
the government so require, e.g., when time is of the essence and only
one known source can meet the agency's needs within the required
timeframe. W.H. Mullins, B-207200, Feb. 16, 1983, 83-1 C.P.D. Paragraph
158. It is well-established that administrative expediency or
convenience by itself provides no basis for restricting competition.
W.H. Mullins, B-207200, supra. The agency does not attempt to justify a
sole-source award here and we see nothing in the record which would
justify a sole-source procurement of the technical assistance and
training services. We therefore sustain the protest on this issue.
The Coalition also contends that the technical assistance and
training responsibilities involved in task order No. 101 place
Rodriguez, Roach in an organizational conflict of interest with respect
to its audit duties under the same contract. The Coalition asserts that
such a conflict exists since the audits to be conducted by the
contractor involve expressing opinions on the same financial management
practices that the contractor is to assist the grantees/auditees in
developing.
The agency has advised us that in order to avoid a conflict of
interest situation it has established procedures to assure that the
contractor that provides on-site training to a grantee would not in any
instance later conduct an audit of that same entity. Since we sustain
the Coalition's protest on the basis that task order No. 101 is outside
the scope of the contract, we need not decide the conflict of interest
issue.
Task order No. 101 was formally effected on September 28, 1984,
notwithstanding the Coalition's protest. The Department of Labor has
indicated that the workshops have been completed but that the contractor
has not yet commenced providing the on-site technical assistance and
training to designated grantees. Accordingly, we are recommending to
the Secretary of Labor that the contract modification under task order
No. 101 be terminated for the convenience of the government and that a
new solicitation be issued for the procurement of the on-site technical
assistance and training services.
Since this decision contains a recommendation that corrective action
be taken, we are furnishing copies to the Senate Committees on
Governmental Affairs and Appropriations, and to the House Committees on
Government Operations and Appropriations in accordance with section 236
of the Legislative Reorganizational Act of 1970, 31 U.S.C. Section 720
(1982), which requires the submission of written statements by the
agency to the committees concerning the action taken with respect to our
recommendation.
B-218188, 64 Comp. Gen. 452
Matter of: Lear Siegler, Inc., April 8, 1985:
Agency head has statutory authority to waive application of Buy
American Act restrictions after bid opening where he determines such
action to be in the public interest.
Lear Siegler, Inc., protests the award of a contract for aircraft
fuel tanks by the Naval Air Systems Command (Navy) to Israel Military
Industries (IMI), an Israeli firm, under invitation for bids (IFB) No.
N00019-84-B-0004. Lear contends that the Navy should have added a
50-percent evaluation factor to IMI's low bid price pursuant to the Buy
American Act, 41 U.S.C. Section 10a, et seq. (1982), which would have
made IMI's evaluated price higher than the price offered by lear.
Lear also filed suit in the United States District Court for the
Central District of California, Lear Siegler, Inc., Energy Products
Division v. John Lehman, et al., Civil Action No. 85-1125, seeking
injunctive and declaratory relief and raising substantially the same
issues as raised in the protest. The court has indicated an interest in
our decision. We deny the protest.
Under the Buy American Act, supplies which have been manufactured in
the United States are to be acquired by the United States government
unless the head of the procuring agency determines it to be
"inconsistent with the public interest" or "the cost to be
unreasonable." 10 U.S.C. Section 10a (1982). In accordance with
Department of Defense Federal Acquisiton Regulations Supplement (DOD FAR
Supplement) Section 25.205(71) (Defense Acquisition Circular No. 84-1,
March 1. 1984), an offer of goods from a "non-qualifying country" is to
be evaluated by adding a 50-percent evaluation factor to its price. A
"qualifying country" is defined in DOD FAR Supplement Section 25.001 as
including a defense cooperation country that has an agreement with the
United States for which the Secretary of Defense has made a
determination and finding waiving the Buy American Act restrictions for
specified items. In the case of IMI, a Memorandum of Agreement (MOA)
was entered into between the United States Secretary of Defense and the
Israeli Defense Minister on March 19, 1979. The MOA states that it only
applies to manufactured items which are listed in Annex "B" to the MOA
and that for such manufactured items, no price differentials resulting
from "Buy National Laws and Regulations" will be applied for evaluation
of offers.
On March 19, 1984, the United States and Israel amended and renewed
the MOA, but subsequently experienced delays in finalizing a revised
Annex "B." Therefore, as an interim measure, the Under Secretary of
Defense (Research and Engineering) issued the following instructions:
(T)he Services will consider exemption of the Buy American
Act/Balance of Payments Program on a purchase-by-purchase basis if
absent these penalty factors the offer of an Israeli product is
the lowest price. My intent is not to exclude competition from
Israeli products only because a new Annex "B" has not been
published. This is consistent with the provisions of the 1984
MOA.
The Under Secretary of Defense (International Programs and
Technology) reaffirmed this position in subsequent correspondence with
the Israeli Defense Mission to the United States. On January 16, 1985,
2 months after bid opening, and with the revised Annex "B" still not
finalized, the Assistant Secretary of the Navy (Shipbuilding and
Logistics) issued a determination and findings pursuant to the interim
instructions exempting IMI from the application of the Buy American Act
differential because he found that it would be "inconsistent with the
public interest to apply the restrictions of the Buy American Act" to
IMI's low offer. Award was thereafter made on February 19, 1985,
notwithstanding the pendency of Lear's protest.
We have recognized that a determiniation of whether a particular
purchase from a domestic source under the Buy American Act is
inconsistent with the public interest is a matter of discretion vested
in the head of the department or agency concerned. Keuffel & Esser Co.,
B-193083, July 17, 1979, 79-2 CPD Paragraph 35. Lear nevertheless
contends that any agency discretion to grant a Buy American Act waiver
to a foreign firm ceases at the time of bid opening. According to Lear,
any post-bid-opening waiver constitutes a change in the stated
evaluation criteria and compromises the integrity of the formal
advertising system inasmuch as bid evaluation factors "must be
objectively determinable, rigidly applied, and may not lawfully be
changed after bid opening." Thus, Lear objects to the "secret" internal
waiver granted by the Navy approximately 2 months after bid opening
which, according to Lear, improperly displaced the firm as the true low
bidder under the evaluation scheme existing at the time of bid opening.
/1/ Lear insists that there must be some point at which discretion
ceases. Lear cites regulations referenced in the solicitation which
provide (DOD FAR Supplement Section 25.7502(b)):
The Buy American Act and the Balance of Payments Program
restrictions are waived only for items listed in appropriate
annexes to the agreements with the defense cooperation country.
However, the absence of an item from the defense equipment list is
without prejudice to the authority of the Secretary to determine
in any individual case that application of the restrictions to
that item would be inconsistent with the public interest. /2/
Lear believes that this regulation neither authorizes the Secretary
to "change" evaluation criteria after bid opening nor provides notice to
bidders of such a possibility. Therefore, Lear requests that our Office
recommend termination of IMI's contract as illegally awarded.
For the reasons that follow, we find this protest to be without
merit. First, the Buy American Act, supra, expressly provides that
"(n)otwithstanding any other provision of law, and unless the head of
the department or independent establishment concerned shall determine it
to be inconsistent with the public interest, or the cost to be
unreasonable * * * only (domestic goods) shall be acquired for public
use." As explained below, we find nothing in the language of the act or
its legislative history which limits the authority of the agency head to
grant waivers before or after bid opening. Further, we find that agency
regulations implementing the Act have consistently recognized the
authority of the agency head to make determinations under the Act in
particular instances after bid opening.
Concerning the restriction imposed on foreign purchases, we find
pertinent the following legislative history (H.R. Rep. No. 882, 72d
Cong., 1st Sess. 1 (1932)):
"This is a restriction upon the governmental purchasing
officers and agents, but permits the exercise of judgment on the
part of any such officer or agency in allowing him to purchase
goods not complying with such requirements if he determines that
compliance in a given case is inconsistent with the public
interest, or if he determines that the cost of complying with the
requirement would be unreasonable * * *
We first note that an agency head, under the statutory scheme, must
determine whether cost is "unreasonable" in a "given case" by examining
bid prices after bid opening and then exercising the discretion he has
under the statute to make the necessary determination. (Imposing a
fixed percentage factor to the price of a foreign bid on a
governmentwide basis only began after the issuance of Executive Order
No. 10582, December 17, 1954, 19 F.R. 8723.) Thus, we stated in 48 Comp.
Gen. 487 (1969):
* * * It was stated in 39 Comp. Gen 309, at page 311, that "it
is obvious from a review of the legislative history of the Buy
American Act that the unreasonableness of domestic bid prices was
to be determined by comparison with foreign bid prices." See,
also, A-48328, April 28, 1933, which held, soon after the
enactment of the Buy American Act, that "the question whether
there may be accepted and used foreign articles is one to be
determined after the bids have been received and not before, as it
cannot be determined whether the difference in price be
unreasonable."
We also recognized soon after the enactment of the Buy American Act
that Congress imposed upon the agency head a "specific duty involving
the exercise of judgment and discretion" to determine whether the
purchase of domestic articles "in the particular instance" would be
inconsistent with the public interest. 14 Comp. Gen. 601 (1935). Thus,
prior to 1954, the agency head clearly had authority to waive Buy
American restrictions in a particular procurement after bid opening.
Even if we assume that Executive Order No. 10582, by establishing
formulas for evaluating foreign bids, ended the discretionary authority
of the agency head to determine in a particular instance whether the
offered price of a domestic good was unreasonable in relation to an
offered foreign price, we think that the agency head retained authority
under the statute to determine whether the purchase of domestic articles
in a given procurement would be inconsistent with the public interest.
Executive Order 10582 provided:
Sec. 3. Nothing in this order shall affect the authority or
responsibility of an executive agency:
(a) To reject any bid or offer for reasons of the national
interest not described or referred to in this order . . .
Further, implementing military services procurement regulations since
1954 typically provide as follows (Armed Services Procurement Regulation
(ASPR) Sections 6-103.3, 6-104.4 (1955 ed. Rev. 45)):
6-103.3 Unreasonable Cost or Inconsistency with the Public
Interest. The restrictions of the Buy American Act do not apply
when it is determined by the Secretary concerned that the cost of
a domestic source end product would be unreasonable or that its
acquisition would be inconsistent with the public interest. Such
determination shall be made in accordance with ASPR 6-104.4.
== * * * * * * *
6-104.4(3) Proposed awards shall be submitted, in accordance
with Departmental procecures, to the Secretary concerned for
decision where:
(i) Rejection of an acceptable low foreign bid is considered
necessary to protect essential national security interests, such
as maintenance of a mobilization base; or
(ii) Rejection of any bid or proposal for other reasons of the
national interst is considered necessary.
ee also ASPR Sections 6-103.3, 6-104.4 (1963 ed.); ASPR Sections
6-103.3, 6-104.4 (1976 ed.)
Any such rejection of an acceptable foreign bid or rejection of any
domestic bid or proposal must necessarily occur after bid opening. We
see no distinction between rejection of a domestic bid because of
national interest considerations or acceptance of a foreign bid through
waiver of the Buy American restrictions after bid opening because of
public interest considerations. We therefore will not question the
Secretary's determination to exempt IMI's bid from the Buy American Act
restrictions.
Lear also asserts that the Navy's internal determination to waive the
Buy American restrictions was based on a consideration of IMI's total
price, including options, contrary to the terms of the solicitation
which provided only for evaluation of the price of the basic
requirements. However, since IMI's bid price was low by about $1.6
million for the basic requirement and about $3.7 million with the
options, we find no abuse of discretion here.
Finally, Lear complains that the Navy failed to follow applicable
procedures in making an award notwithstanding a protest under the
Competition in Contracting Act of 1984, Pub. L. No. 98-369, 98 Stat.
1175, 41 U.S.C. 2151 note. We merely note that the Department of
Justice is contesting the constitutionality of this act, the matter is
currently in litigation, and we therefore see no need to further comment
on this matter.
The protest is denied.
(1) The Israeli Ministry of Defense submitted a request to the
Department of Defense to include the subject fuel tanks in Annex "B" 1
week prior to bid opening. Lear notes that the MOA itself states that
requests for exemption by each government "shall" be submitted to its
"opposite Annex "B" Subcommittee chairman at least two weeks before
proposals are due." Both the Navy and IMI contend that this language is
inoperative until finalization of a revised Annex "B." We need not
resolve this question.
(2) Similar language also appears in the MOA.
B-218232.2, 64 Comp. Gen. 450
Matter of: Shannon County Gas - Reconsideration, April 1, 1985:
Reliance on agency advice that a protest could be filed with General
Accounting Office within 30 days of denial of a protest to the agency is
not good cause for filing an untimely protest by the protester's
attorney where material accompanying the agency's letter clearly stated
that such protests must be filed within 10 days.
Shannon County County Gas requests reconsideration of our dismissal
of its protest concerning the award of a contract for bottled and
propane gas to Blu-Gas of Rushville, Nebraska, under invitation for bids
(IFB) No. A00-0426, issued by the Bureau of Indian Affairs, Department
of the Interior. We affirm our dismissal of the protest.
By letter dated February 19, 1985, received here on February 25, an
attorney for Shannon County Gas filed a protest with this Office
complaining about the agency's failure to award the firm a contract
under the IFB and to comply with the agency procedures that implement
the Indian Self-Determination and Education Assistance Act, Pub. L.
93-638, 88 Stat. 2203 (1975) 25 U.S.C. 450, (codified in numerous titles
of the U.S. Code) and the Buy Indian Act, 25 U.S.C. Section 47 (1982).
We dismissed the protest as untimely because it was filed more than 1
month after the denial on January 21 of Shannon County Gas' protest to
the agency. Our Bid Protest Regulations provide that, in such
circumstances, protests to this Office must be filed within 10 days of
when the protester learns of adverse agency action on its agency
protest. 4 C.F.R. Section 21.2(a)(3) (1985).
In requesting reconsideration, the protester contends that the reason
its protest here was untimely was because of a statement in the agency's
January 21 decision advising the protester that it could file a further
protest with this Office within 30 days of receipt of the agency's
decision. The protester says it was misled by this advice and therefore
we should consider its protest under section 21.2(c) of our Regulations
which provides for consideration of an untimely protest when the
protester shows that it had good cause for filing late. The protester
also urges us to consider its protest because the issues raised are
significant.
In our view, the protester has not shown that it had good cause for
not filing its protest in a timely manner. The good cause exception
contained in both our former Bid Protest Procedures, 4 C.F.R. Section
21.2(c) (1984), and in our current Regulations, which were effective
January 15, generally refers to situations where some compelling reason
beyond the protester's control prevents the protester from timely filing
its protest. Owl Technical Associates, Inc. -- Reconsideration,
B-206753.2, Oct. 29, 1982, 82-2 CPD Paragraph 382. In this case,
although the agency's January 21 decision incorrectly stated that the
protester could file a protest with our Office within 30 days, the
decision cited our Bid Protest Procedures, and indicated that a copy was
attached. It is not clear whether the copy actually attached was of our
former procedures or of our new Regulations. Regardless of which was
attached, however, a reading of either would have revealed that the
period within which to file a protest here was 10 not 30, days from
receipt of the adverse decision on the agency protest. In addition,
since our Regulations have been published in the Federal Register, the
protester was charged with at least constructive knowledge of our filing
requirements. See Holmes Ambulance Service Corp., B-213743, Feb. 2,
1984, 63 Comp. Gen. 186, 84-1 CPD Paragraph 143. While the agency's
incorrect advice to the protester is regrettable, we do not think it is
sufficient to relieve the protester from complying with our timeliness
rules, see Peter A. Tomaino, Inc., B-208167, Oct. 29, 1982, 82-2 CPD
Paragraph 385, particularly since the protester was represented by
counsel.
We also decline to consider the merits of this protest under the
significant issue exception to our timeliness rules. In order to
prevent our timeliness requirements from becoming meaningless, this
exception is strictly construed and seldom used, Kearflex Engineering
Co., B-212537, Feb. 22, 1984, 84-1 CPD Paragraph 214, and generally
applies only to issues of widespread interest to the procurement
community that have not been considered previously. Sequoia Pacific
Corp., B-199583, Jan. 7, 1981, 81-1 CPD Paragraph 13. In this case,
while we recognize the importance of the issues to the protester, it
does not appear that our resolution of these issues would benefit anyone
other than the protester. See Universal Design Systems Inc. --
Reconsideration, B-211547.3, Aug. 16, 1983, 83-2 CPD Paragraph 220.
Moreover, we note that the regulations under section 7(b) of the
Indian Self-Determination and Education Assistance Act with which the
protester claims the agency did not comply involve procedures for the
award of subcontracts to Indian-owned firms, not prime contracts. See
American Indian Technical Services, Inc., B-207275, May 17, 1982, 82-1
CPD Paragraph 470. We further note that, to the extent the protester is
contending that the Buy Indian Act required the procurement to be set
aside for Indian-owned firms, this Office will not review the broad
discretion to implement such a setaside that the agency enjoys under the
Act unless there is a clear showing that this descretion may have been
abused. Wakon Redbird & Associates, B-205995, Feb. 8, 1982, 82-1 CPD
Paragraph 111. There has been no such showing here.
We affirm our dismissal of the protest.
B-217011, 64 Comp. Gen. 447
Matter of: Department of Housing and Urban Development - Excess
Subsistence Expenses - Subsistence at Official Duty Station, April 1,
1985:
The Department of Housing and Urban Development (HUD) requests a
decision on whether foreign delegations on invitational travel and their
official HUD escorts may be paid subsistence expenses exceeding the
statutory limitation for Federal travel reimbursement. We find no basis
to make an exception to the statutory limitation in this case. United
States Information Agency, B-219375, December 7, 1982, is distinguished.
The Department of Housing and Development (HUD) requests a decision
on whether HUD employees escorting foreign delegations may be paid
subsistence expenses at their official duty stations. The Federal
Travel Regulations provide that an employee may not be paid per diem or
actual subsistence expenses at his or her permanent duty station. There
are certain exceptions, but we find no exception that would apply in
this case. Therefore, employee escorts at their permanent duty stations
may not be paid subsistence expenses.
The Director, Office of Finance and Accounting, Department of Housing
and Urban Development (HUD), has requested a decision concerning
subsistence expenses for foreign delegations on invitational travel and
their agency escorts. In essence, the Director asks for our
determination that HUD be permitted to rent hotel accomodations via
purchase orders for members of foreign delegations and the HUD employees
assigned as escort officers at a cost exceeding the allowable
subsistence expense limitation under 5 U.S.C. Section 5702 (1982). The
Director cites as precedent for this our decision in United States
Information Agency-Excess Cost of Hotel Rooms, B-209375, December 7,
1982. The Director also requests our determination that subsistence
expenses may be authorized for the HUD escort officer when a foreign
delegation travels to his or her official duty station.
For the reasons stated below, we conclude that HUD's foreign
delegations and their official escorts are subject to the applicable
statutory limits on daily reimbursement of subsistence expenses.
Therefore, HUD may not rent lodgings for the performance of official
business on a basis that would cause the subsistence expense limitation
to be exceeded for the foreign visitors or escorts. Also, we conclude
that the HUD escorts cannot be authorized subsistence expenses at their
official duty stations.
Under the provisions of 5 U.S.C. Section 5702 (1982), and the Federal
Travel Regulations, FPMR 101-7 (September 1981), incorp. by ref., 41 CFR
Section 101-7.003 (1983) (FTR), Parts 7 and 8, maximum subsistence
expense reimbursements are established for Federal employee travel.
Generally, the same travel allowances apply for invitational travel as
for travel by Federal employees. See 5 U.S.C. Section 5701(2);
Category "Z" Travel, B-187402, May 19, 1977. Also, we have held that
while agencies may contract for lodgings and meals outside of the
District of Columbia, /1/ they cannot thereby avoid the subsistence
expense limitations. Bureau of Indian Affairs, 60 Comp. Gen. 181,
182-183 (1981):
* * * since it is well established that officers of the
Government may not do indirectly that which a statute or
regulation forbids doing directly, we conclude that the statutory
and regulatory limitations on per diem rates or actual expense
rates are equally applicable to contracts or purchase orders
entered into by agencies for lodgings or meals. Thus,
appropriated funds are not available to pay for subsistence
expenses in excess of the amounts authorized by statute or the
implementing regulations, regardless of whether the employee is
reimbursed for such expenses or the agency has procured lodgings
or meals by contract. * * *
While apparently recognizing the general applicability of the above
rules, HUD submits that an exception is warranted in the case of the
foreign delegations sponsored by HUD based on our decision in United
States Information Agency, B-209375, supra. This decision held that the
United States Information Agency (USIA) could contract for lodgings and
meals without regard to the subsistence limitations in certain
situations, including the situation when USIA invites foreign
dignitaries to the United States and assigns an agency official to act
as an escort officer. We stressed that the exception is limited to
situations where "(a) use of the particular accommodations is an
integral part of the employee's job assignment, and (b) failure to
provide such accommodations would frustrate the ability of the Agency to
carry out its statutory mandate." Moreover, USIA proposed to authorize
exceptions only in response to individual applications setting forth the
specific circumstances justifying the request and incorporating further
safeguards. The decision also pointed out that this approach was
consistent with USIA's past practice.
The HUD letter states that, in many instances, the subsistence
requirements of its foreign delegations and their official escorts may
be in excess of the current maximum statutory rate of $75 per day.
Further, HUD states that use of the particular accommodations required
is an integral part of the Department's mission and that failure to
reimburse the excess subsistence expenses of its foreign visitors and
their agency escorts would frustrate the ability of HUD to carry out its
statutory mandate.
In responding to the HUD request, we note, preliminarily, that our
United States Information Agency decision was not intended to have
general application. Instead, it recognized a narrow exception to the
normal rules based on USIA's particular statutory mission. For the
reasons stated hereafter, that decision does not apply here.
First, the HUD letter offers no explanation or information to show
how the conditions set forth in the United States Information Agency
decision are met. It merely submits a conclusory statement without
further support. This is not a sufficient basis upon which we could
justify extending the narrow exception stated in our United States
Information Agency decision.
Second, the statutory authority that HUD uses for its foreign
delegation travel program precludes any exception to the $75 per day
statutory maximum. Section 1701d-4 of Title 12, United States Code
(1982) authorizes the Secretary of Housing and Urban Development to
exchange data and participate with other nations in carrying out his
responsibilities and to pay the travel expense of foreign delegations
engaging in advisory activities. Subsection (a)(1) of that section
specifically provides that "* * * such travel expenses shall not exceed
those authorized for regular officers and employees traveling in
connection with said activities * * *." In view of this provision, we do
not believe HUD can reasonably maintain that the conditions present in
the United States Information Agency decision apply to it.
With regard to HUD's second question, we observe that the HUD
employee escorts may be reimbursed the same rates for hotel
accommodations and meals/miscellaneous expenses as members of the
foreign delegation. However, HUD employee escorts at their permanent
duty stations may not be paid subsistence expenses. In FTR paras.
1-7.6a and 1-8.1a (Supp. 1, September 28, 1981), it is provided that an
employee may not be paid per diem or actual subsistence expenses at his
permanent duty station.
Applying this requirement in Richard Washington, B-185885, November
8, 1976, we denied an employee's claim for subsistence expenses at his
permanent duty station in the absence of specific statutory authority,
even though his continued presence at a local hotel was required as the
coordinator of a Federal forum there. Also, in Ronald Erickson,
B-213970, April 4, 1984, we denied an employee's claim for subsistence
(meal) expenses at his permanent duty station where he was serving as an
escort to a tourism official of a foreign government and his duties
included being present during meals.
The circumstances presented by HUD appear to be indistinguishable
from those in Ronald Erickson, B-213970, supra. We have been advised of
no specific statutory authority for HUD to pay employee escort
subsistence expenses at their permanent duty stations. Therefore, HUD
employee escorts at their permanent duty stations may not be paid
subsistence expenses.
(1) See 40 U.S.C. Section 34 (1982) concerning the rental of space in
the District of Columbia
B-216820, 64 Comp. Gen. 443
Matter of: Thomas L. Wingard-Phillips - Computing Constructive Cost
of Travel, April 1, 1985:
An employee, in computing constructive travel by common carrier,
claims mileage and parking as if his spouse drove the employee to and
from the airport. However, for computing constructive travel costs,
only the usual taxicab or airport limousine faries, plus tip, should be
used for comparison purposes.
An employee and his agency disagree over the proper computation of
the cost of a Government vehicle in determining the employee's
constructive travel claim between his headquarters and temporary duty
station. However, for the purposes of the constructive cost of common
carrier transportation, the cost of a Government vehicle may not be used
since it is defined in the Federal Travel Regulations as a special
conveyance and not a common carrier.
An employee, in computing his constructive travel claim, claims
parking fees at the temporary duty location. Paragraph 1-4.3 of the
Federal Travel Regulations provides a limit on reimbursement based on
the constructive cost of traveling to and from the temporary duty area.
Thus, local travel costs at the temporary duty area are separate from
constructive travel costs to and from the temporary duty area. The
employee should be reimbursed for only those local travel costs actually
incurred without limitation by constructive cost.
The issues in this decision involve the proper computation of
constructive travel by common carrier where, for reasons of personal
preference, the employee traveled by his privately-owned vehicle (POV).
We hold that for constructive travel to and from the common carrier
terminal, the employee must determine constructive travel on the basis
of the usual taxicab or airport limousine fares, not on the basis of
mileage and other expenses incurred in using the employee's
privately-owned vehicle. In addition, we hold that in determining the
constructive cost of travel to and from the temporary duty location, a
Government-owned or leased vehicle may not be used in the cost
comparison. Finally, we hold that local travel costs at the temporary
duty area are separate from the constructive travel costs to and from
the temporary duty location; such local travel costs may be paid only
as they are actually incurred.
This decision is tn response to a request from Robert A. Carlisle,
Director, Division of Accounting, Fiscal and Budget Services, Region X,
Social Security Administration (SSA), concerning the travel claim of Mr.
Thomas L. Wingard-Phillips, an SSA employee.
Mr. Wingard-Phillips was authorized to travel from Seattle,
Washington, to Salem, Oregon, in order to perform temporary duty during
November 13-18, 1983. His travel order authorized travel by airplane to
Portland and Salem, or General Services Administration (GSA) vehicle
from Portland to Salem, but Mr. Wingard-Phillips chose to drive his own
POV.
Mr. Wingard-Phillips claims reimbursement for actual travel and per
diem in the amount of $371.35, and he computed his constructive travel
on the basis of air travel from Seattle to Portland, Oregon, and use of
a GSA vehicle from Portland. According to Mr. Wingard-Phillips, the
constructive travel would have cost $400.95, but the agency disputes
this figure in three respects. First, the agency denied his claim for
$4 in constructive travel for parking at the Seattle airport on the
basis that an employee can claim either parking or mileage but not both.
Second, the agency denied his constructive claim for $39.65 as the
daily rental charge ($7.93/day for 5 days) for the GSA car on the basis
that the "Park and Fly" GSA vehicles at the Portland airport are leased
to the agency and the rental charge is paid regardless of the use of the
vehicle.
Finally, the agency denied the constructive travel claim of $22.50
for parking at the Salem office since it was unclear why the employee
did not incur this cost under his actual travel. Mr. Wingard-Phillips
states that the cost of parking at the Salem office would have been
$4.50 per day ($22.50/week), except when his spouse accompanied him and
drove his POV to and from the Salem office each day.
Under the provisions of the Federal Travel Regulations, FPMR 101-7
(September 1981) (FTR), para. 1-2.2d and 1-4.3, incorp. by ref., 41
C.F.R. Section 101-7.003 (1983), an employee who uses a POV as a matter
of personal preference instead of a common carrier may be reimbursed for
actual travel plus per diem, but limited to the total constructive cost
of common carrier transportation and constructive per diem by that
method of transportation. The comparison is between total actual costs
and total constructive costs. Carl H. Cotterill, 55 Comp. Gen. 192
(1974) and Rand E. Glass, B-205694, September 27, 1982.
We note that the agency denied the $4 claim for parking on the basis
that Mr. Wingard-Phillips can either claim round-trip mileage to and
from the airport (drop-off by spouse) or mileage and parking at the
airport (POV left at the terminal), but not both. However, the
applicable regulation contained in FTR para. 1-2.3c provides that for
local transportation to and from carrier terminals, reimbursement is
allowed for the usual taxicab and airport limousine fares, plus tip,
between the terminal and the employee's home or place of business. We
believe, in computing Mr. Wingard-Phillips' constructive travel, that
the usual taxicab or airport limousine fare must be used for comparison
purposes, rather than the mileage and other costs associated with use of
a POV to and from the common carrier terminal. The issue of airport
parking is therefore not relevant to Mr. Wingard-Phillips' constructive
travel claim, and his constructive travel cost should be recomputed on
the basis of the usual taxicab or limousine fares to and from the
airport terminal.
Mr. Wingard-Phillips also claims as part of his constructive travel
claim the daily rental charge of $7.93 for use of the GSA rental vehicle
plus a mileage charge of 9 cents per mile. The agency allowed him a
higher rate of 12 cents per mile, but denied his claim for the daily
rental charge since the "Park and Fly" vehicles leased by the agency are
charged to the agency whether or not they are in use.
As noted above, FTR para. 1-4.3 provides that when a POV is used for
official purposes as a matter of personal preference instead of common
carrier transportation, the employee is reimbursed for the actual travel
performed, based on the mileage rate prescribed in para. 1-4.2(a) plus
per diem, not to exceed the total constructive cost of travel by common
carrier. Paragraph 1-4.3a describes the modes of travel to be used for
comparison, airplane, train, and bus, but there is no reference to
GSA-leased vehicles.
In our decisions in Cotterill, 55 Comp. Gen. 192, and Glass,
B-205694, cited above, we held that rental cars and taxis may not be
included in the constructive cost of common carrier transportation under
FTR para 1-4.3, except for the usual transportation costs to and from
the common carrier terminals. The rationale behind this is that rental
cars and taxis are special conveyances under the FTR rather than common
carriers. See FTR para. 1-1.3c(5) and 1-2.2c(4). We believe the same
rationale applies to Government-owned or Government-leased vehicles.
See FTR para. 1-1.3c(5) which includes Government-furnished
transportation in the definition of special conveyances. Therefore,
such vehicles are not forms of common carrier transportation and are not
listed for comparison purposes under FTR para. 1-4.3a.
Accordingly, we conclude that Mr. Wingard-Phillips constructive
travel should be computed on the basis of common carrier transportation
between Seattle and Salem, plus the usual transportation to and from the
terminals. The agency's comparison using the constructive cost of a GSA
vehicle is improper and may not be followed. Mr. Wingard-Phillips claim
for constructive costs should be recomputed based on the above
discussion.
The last item in Mr. Wingard-Phillips' claim is the constructive cost
of parking at the temporary duty location, Salem, Oregon. Mr.
Wingard-Phillips claims that when his spouse accompanies him on his trip
to Salem, instead of parking his POV at the Salem office each day at a
cost of $4.50 per day, she drives him to and from the office. The
agency denied his claim for the constructive cost of parking in Salem
(if he had used the GSA vehicle) since it was unclear that Mr.
Wingard-Phillips spouse accompanied him on this trip.
It is the purpose of FTR para. 1-4.3, previously cited above, to
provide a limitation on reimbursement based on the constructive costs of
traveling to and from the temporary duty area. Thus, our decisions have
held that local travel costs in the temporary duty area are separate
from constructive travel costs to and from the temporary duty area, and
such local travel costs are not to be considered as a unit in
determining the constructive cost of travel by common carrier. Glass,
B-205694, cited above, and Albert L. Hedrich, B-181046, November 12,
1974. Therefore, we need not consider the constructive cost of parking
at the temporary duty location; Mr. Wingard-Phillips should be
reimbursed only for those expenses he actually incurred at the Salem
location, in this instance local mileage to and from the office each day
(30 miles for the week.)
Accordingly, Mr. Wingard-Phillips' travel voucher may be paid
consistent with the above discussion.
B-216707, 64 Comp. Gen. 441
Matter of: Riverport Industries, Inc., April 1, 1985:
Agency acted reasonably in allowing correction of a mistake in bid
where the bidder's worksheets show an inadvertent error in failing to
add a $7.00 item, thus clearly establishing that a mistake was made, how
the mistake occurred, and the amount of the intended bid.
Bid that was grossly unbalanced mathematically should have been
rejected since acceptance of the bid was tantamount to allowing an
advance payment.
Riverport Industries, Inc. protests an award to B-K Manufacturing
Company, Inc., under invitation for bids (IFB) No. DAAH01-84-B-0090
issued by the United States Army Missile Command. Riverport contends
that B-K was improperly permitted to correct a mistake in its bid after
bid opening. Riverport also contends that B-K's bid was unbalanced and
should have been rejected as nonresponsive.
We deny the protest in part and sustain it in part.
The IFB solicited bids to furnish 38,431 TOW Missile overpacks plus
two units for first article testing. Five bids were submitted; B-K and
Riverport submitted the two lowest bids, as set out in an Appendix to
this decision. Riverport submitted a single unit price for the
overpacks and a price ($250.00 each) for first article testing. B-K bid
a price for first article testing ($185,000.00 per unit) and two unit
prices, one to be applied if first article testing was required and
another to be applied if first article testing was waived.
After bid opening, B-K notified the contracting officer that a
mistake had been made and requested an opportunity to correct its bid.
B-K explained that it had made an error in addition by inadvertently
failing to add a $7.00 item identified on its work papers. The item in
question concerned the cost of plywood, wire and miscellaneous
materials. B-K was allowed to correct its bid after the agency
determined from the worksheets and supporting statements that the nature
and existence of the mistake and the bid actually intended had been
proven by clear and convincing evidence.
Riverport contends that the correction of B-K's bid was improper
because it allowed B-K two opportunities to bid on the contract.
Riverport questions B-K's evidence, which it does not find to be
convincing. However, Riverport has not explained why it thinks this is
so.
In our view, the Army acted properly in allowing correction of B-K's
bid. A bid that would remain low after correction may be corrected
where the bidder provides clear and convincing evidence of the existence
of a mistake, the manner in which the mistake was made, and of the
intended price. Butler Corp., B-212497, Oct. 31, 1983, 83-2 CPD
Paragraph 518. We have examined B-K's worksheets and the other evidence
provided to the Army. The worksheets clearly show that B-K broke out
the cost of the material in question but failed to add this cost when it
calculated its unit cost for the 38,431 overpacks. Since B-K relied on
its erroneously calculated unit cost to calculate its bid prices with
and without first article testing, these prices were in error by similar
amounts. In the circumstances, we agree with the Army that the evidence
of the mistake, of how the mistake was made and of the amount of B-K's
intended bid is clear and convincing. Therefore, this portion of the
protest is denied.
Riverport also argues that B-K's bid should have been rejected
because it was unbalanced. Riverport says that B-K bid $185,000 each on
the two first article units while other bids ranged from no charge to
$1,000 per unit. Also, B-K's bid on the 38,431 production units was low
compared to the other bidders' prices. Riverport argues that B-K's
bidding allows it "to receive payments for a substantial portion of its
contract prior to performing an equivalent amount of work under said
contract." According to Riverport, this will result in a windfall for
B-K and will deprive the government of the use of its funds earlier than
would a more balanced bidding structure.
A bid to be rejected as unbalanced must be both mathematically and
materially unbalanced. While a bid is said to be mathematically
unbalanced if it does not carry its share of cost plus profit, it is
materially unbalanced if, for example, there is reasonable doubt that
award will not result in the lowest ultimate cost to the government.
Jimmy's Appliance, 61 Comp. Gen. 444 (1982), 82-1 CPD Paragraph 542.
The Army correctly points out that B-K's overall bid offers the lowest
cost and urges, therefore, that B-K's bid be viewed as not materially
unbalanced.
We think, however, that when a bid is grossly unbalanced
mathematically it should be viewed as materially unbalanced since
acceptance of the bid would be tatamount to allowing an advance payment.
Advance payments, that is payments made in advance of performance of
work are prohibited by 31 U.S.C. Section 3324 (formerly 31 U.S.C.
Section 529), except as otherwise expressly authorized by law. 10
U.S.C. Section 2307 (1982) allows the Secretary of the Army to make
advance, partial, progress or other payments under contracts in cases
where the contractor gives adequate security and the Secretary
determines such action would be in the public interest. However,
requests for advance payments generally must be separately approved
under the Federal Acquisition Regulation (FAR), 48 C.F.R. Section 32.408
(1984).
In view of the significantly lower value placed on first articles by
the other bidders, it is implausible on this record that first articles
are worth anything like $370,000. Since B-K's first article price is
far in excess of the value of the first articles, its first article
price does not appear to be related to the work required to produce
first articles, but rather, appears to include a substantial additional
payment. Accordingly, we think B-K's bid should have been rejected as
unbalanced.
We have been informed by the Army that first articles have been
delivered and approved under B-K's contract and that delivery of
production units has begun. Because the government has already incurred
the cost of first article testing, contract termination and
reprocurement at this time would only increase its costs and would not
be in its best interests. Solon Automated Services, Inc., B-206449.2,
Dec. 20, 1982, 82-2 CPD Paragraph 548, aff'd, Crown Laundry and Dry
Cleaners, Inc., Solon Automated Services, Inc. -- Reconsideration,
B-206449.3, B-206449.4, Apr. 5, 1983, 83-1 CPD Paragraph 355.
Accordingly, while we will not recommend corrective action, we are by
separate letter, bringing our concerns regarding the award of this
contract to the attention of the Secretary of the Army.
The protest is sustained in part and denied in part.
B-216516.2, 64 Comp. Gen. 439
Matter of: CACI, Inc. - Federal, April 1, 1985:
Award of a cost-plus-award-fee contract at proposed estimated cost
plus 10 percent award fee does not violate regulatory limitation on
award fee, even where the government's cost realism analysis indicates
that actual cost of performance will be $920,000 less than proposed
cost. Cost realism analysis is only an evaluation and selection tool,
and award fee must be based on the amount specified in the contract.
The Navy request reconsideration of our decision in CACI-Inc. --
Federal, B-216516, Nov. 19, 1985, 64 Comp. Gen. 71, 84-2 CPD Paragraph
542, in which we sustained the protest of CACI against an award of a
contract to Bechtel Operating Services Corporation under a request for
proposals issued by the Naval Supply Center, Oakland, California. This
cost-plus-award-fee contract, No. N00228-84-C-5005, was for warehousing
and associated services for portable hospital units. As indicated
below, we modify that decision on one point.
In our decision, we sustained the protest on two separate grounds.
First, we held that the Navy had performed a deficient analysis of
CACI's costs proposal by adding, as a direct cost, personnel proposed by
CACI as part of its indirect cost pool, without properly verifying how
the particular cost was treated under CACI's Accounting system and the
Cost Accounting Standards.
Second, we held that Bechtel's proposed award fee violated a 10
percent regulatory limitation. This was because the Navy, in its cost
realism analysis, estimated that Bechtel's cost of performance would be
$15,818,637, and based its selection on this amount. The
subsequently-awarded contract, however, was for $16,739,709, the full
amount proposed by Bechtel. This means, we stated, that a proposed
award fee of $1,673,961 is 10.59 percent of the estimated cost of the
contract, and thus exceeds the 10 percent limitation in Defense
Acquisition Regulation (DAR) Section 3-405(d), reprinted in 32 C.F.R.
pts. 1-39 (1984).
Based on the foregoing, we recommended that the Navy conduct further
negotiations with the offerors in the competitive range and then solicit
revised cost proposals. Unless Bechtel was the successful offeror on
this competition, we recommended that its contract be terminated.
The Navy requests reconsideration of the portion of our opinion
concerning the fee limitation, asserting that our decision is legally
incorrect on this point and has no regulatory support. However, the
Navy also states that it intends to follow our recommendations in this
matter. The decision was requested by the United States District Court
for the District of Columbia in connection with CACI, Inc. -- Federal v.
United States et al. (Civil Action No. 84-2971). The court has
subsequently dismissed this action without prejudice. Since the matter
has been dismissed without prejudice by the court, we will reconsider
the fee limitation portion of our decision. See Optimum Systems, Inc.,
56 Comp. Gen. 934 (1977), 77-2 CPD Paragraph 165; Planning Research
Corporation Public Management Services Inc., 55 Comp. Gen. 911 (1976),
76-1 CPD Paragraph 202.
As noted above, DAR Section 3-405(d) states that the maximum fee
(base fee plus award fee) on cost-plus-award-fee contracts shall not
exceed the limitations stated in DAR Section 3-405.6(c)(2), as follows:
* * * 10 U.S.C. 2306(d) provides that in the case of a
cost-plus-fixed-fee contract, the fee shall not exceed ten percent
(10%) of the estimated cost of the contract, exclusive of the fee,
as determined by the Secretary concerned at the time of entering
into such contract * * *.
We stated in CACI:
As indicated in DAR Section 3-405.6(c)(2), supra, the estimated
cost is to be determined by the government at the time of entering
into a contract. This government determination could only be done
at a price or cost analysis. * * *
The Navy's basic disagreement with our decision in CACI concerns the
interpretation of the phrase "estimated cost of the contract," as used
in the regulation. The Navy asserts that a "cost realism estimate" such
as it used to evaluate CACI's and Bechtel's proposals is separate and
distinct from the "estimated cost" for which it has contracted and which
it used to determine the award fee. The Navy concludes that it
determined the "estimated cost of the contract" when it accepted
Bechtel's proposal, including proposed costs, and that this was a matter
within the Navy's discretion.
The Navy's action in this case, i.e., executing a contract in an
amount that is $920,000 more than it expected performance to cost, was
unusual. Indeed, in most cases the estimated cost for award selection
purposes would be the same as or higher than the estimated cost
specified in the contract. Consequently, we believe such a discrepancy
between proposal and agency-anticipated costs would ordinarily warrant
reopening price negotiations.
In our prior decision, we interpreted DAR Section 3-405.6(c)(2) as
requiring the same estimate used for award selection purposes to be used
for determining the fee limitation. However, upon further reflection,
we now agree that the Navy has a valid point and that the regulation
must be interpreted such that the controlling figure for calculating an
award fee should be that objective estimated cost figure specified in
the contract. In this case, this amount appears to be bona fide as
CACI's intended estimated cost of the contract; there is no indication
here that this higher estimated cost was intended solely to justify a
fee in excess of what would otherwise be the fee limitation. Our
original recommendation, as the Navy points out, would require the
agency unilaterally to set the contract price, which it legally could
not do. Here, without further negotiations, the Navy could only have
accepted the best and final price proposed by Bechtel. This "estimated
cost" is then the maximum amount that will be funded, and an award fee
that does not exceed 10 percent of this amount does not violate DAR
Section 3-405.6(c)(2). This is so even if this estimated cost
ultimately turns out to be erroneously high, so that actual fee earned
may exceed ten percent of the actual costs incurred.
To the extent indicated, we modify our prior decision.
B-215998, 64 Comp. Gen. 435
Matter of: Robert L. Neal, Douglass F. Roy, April 1, 1985:
Reinstated employees who elected to retire when improperly removed
from the Forest Service may be reimbursed for life insurance premiums
deducted from their annuities during the period of erroneous retirement.
However, in computing the backpay due the employees there must be
deducted premiums for the same insurance coverage applicable to them as
employees for the erroneous retirement period. Thus, they will be in
the same financial position they would have been in absent the improper
personnel action.
Insurance coverage is determined on the basis of the election of the
employee. Administrative errors in processing forms do not alter the
rights and liabilities of the employee. Therefore, when the agency
reimburses an employee for backpay for period he was improperly
separated and retired, the computation of his insurance deductions
should be made on the basis of the insurance coverage actually elected.
This action concerns whether or not two employees of the Forest
Service, Department of Agriculture, who were improperly removed and
retired and subsequently reinstated, should be reimbursed for deductions
made from their annuities for life insurance premiums. /1/
The employees elected to retire when they were removed from the
Forest Service and both elected to continue coverage under the Federal
Employees Group Life Insurance Program. Premiums were deducted from
their annuities. When the employees were reinstated, they included a
claim for reimbursement for the insurance premiums in their claims for
backpay. We find that the employees should be reimbursed for the
premiums deducted from their retirement annuities, but the appropriate
premiums applicable to them as employees for the same type of coverage
must be deducted from their backpay award.
Mr. Robert L. Neal, Jr. and Mr. Douglass F. Roy are employees of the
Forest Service, Department of Agriculture. On June 14, 1982, both
employees were placed in an "absent without leave" status and were later
removed from their positions for failure to accept assignments outside
of their commuting areas. Both employees elected to retire at the time
of removal. They appealed the removal actions to the Merit Systems
Protection Board. The Board found that the employees had been
improperly removed and ordered the Forest Service to reinstate the
employees to their former positions as of June 14, 1982.
The employees were under age 65 during the period in question and
were eligible for continued life insurance coverage when they retired.
Both elected to carry the "No Reduction" or non-declining option for
basic life insurance. In addition Mr. Neal also elected coverage under
options A, B, and C. They now claim they should be reimbursed for the
amounts deducted from their retirement annuities for insurance.
The authorized certifying officer, however, questions whether these
credits may be allowed because the employees elected the insurance
coverage, were covered by the insurance during the period of erroneous
retirement, and therefore do not appear to be due a refund.
The issue involved is whether an employee who elects to retire at the
time of an improper removal and elects to have premiums for life
insurance deducted from his annuity is entitled to a refund of this
amount upon his reinstatement.
The statutory authority for Government life insurance for Federal
employees is 5 U.S.C. Section 8701-8716 (1982). Under this authority
the Office of Personnel Management issues regulations which prescribe
the time at which and the conditions under which an employee is eligible
for coverage. These regulations are found at 5 C.F.R. Parts 870-873.
See also Federal Personnel Manual (FPM) Chapter 870, and FPM Supplement
870-1.
An employee who retires from an insured position, who was insured for
the 5 years immediately preceding retirement, who does not convert to an
individual policy and who retires on an immediate annuity, may continue
to be covered by Federal life insurance. 5 U.S.C. Section 8706(b)(1)
(1982). However, the eligible employee must make an election at the
time of his retirement. The election affects the type of insurance
coverage he will have after he reaches age 65 (or if the employee is
over 65, it will affect the insurance coverage he will have when he
retires).
The employee has three choices regarding the coverage for basic
insurance he will have after age 65. He may elect "75 Percent
Reduction" (after age 65, benefits are reduced monthly by 2 percent
until they are 25 percent of the amount of insurance that would have
been available at retirement). 5 C.F.R. Section 870.601(c)(2).
Employees who select the "75 Percent Reduction" pay no premiums for
coverage after retirement. 5 C.F.R. Section 870.501(g). He may elect
"50 Percent Reduction (after age 65 benefits are reduced monthly by 1
percent until they are 50 percent of the amount that would have been
available at retirement) or "No Reduction" (benefits remain the same
after age 65). 5 C.F.R. Section 870.601(c)(3) and (4). For the 50
percent or the no reduction elections, the retiree's annuity is reduced
by an amount based on the type of election made. 5 C.F.R. Section
870.501(f)(2) and (3).
In addition, employees may elect to continue optional coverage.
Option A provides standard life insurance, option B, additional life
insurance in multiples of the employee's annual basic pay at retirement
and option C provides insurance of family members. Payment for optional
insurance is deducted from the retiree's annuity until he reaches age
65, at which time deductions cease and coverage is gradually reduced. 5
C.F.R. Sections 871.401(b), 871.601, 872.401(b), 872.601(a), 873.401(b)
and 873.601.
As is indicated above, both employees selected the "No Reduction"
option and Mr. Neal also elected optional coverage. Appropriate
deductions were made from their annuities. They assert that since they
were both under age 65 during the period in question, the amounts
deducted for basic insurance purchased no "current" insurance, that is,
no insurance for the period of erroneous retirement, and they should be
reimbursed for the total amount that was deducted for that coverage. In
addition it is argued that the law waives deductions for life insurance
from backpay awards.
First, as to the waiver of premiums from backpay awards, the law, 5
U.S.C. Section 8706(e), provides that if the life insurance of an
employee stops because of a separation which is thereafter found to be
erroneous, the employee is deemed to have been insured for the period of
separation. This section also states that deductions for insurance that
would have been made during that period should not be deducted from any
backpay award, unless death or accidental dismemberment of the employee
occurs during that period.
Since this statute directs waiver only in cases where insurance had
been stopped, it is not applicable to the case before us where insurance
coverage was continued during the period involved. This conclusion is
supported by the legislative history of the statute which indicates that
the purpose of the law was to remedy the specific problem of deduction
of life insurance premiums from the backpay awards of reinstated
employees to pay for insurance coverage for a period when the insurance
had been stopped, the employee was not covered, and had he died during
the period of separation, his beneficiaries would have received no
benefits. /2/
The employees also argue that although the life insurance premiums
were deducted from their annuities, they received no immediate or
"current" benefit from the payments made during the period of erroneous
retirement for basic coverage. Since both retired at an age under 65
years old, had either of them died during the period of erroneous
retirement, the benefits that would have been received by their
beneficiaries under the "No Reduction" election would have been the same
as they would have received if the employees had selected the "75
Percent Reduction" and nothing had been deducted from their annuities.
The agency points out that the employees elected insurance and were
covered by the insurance during the entire period. They received the
benefit of coverage under a nondeclining plan and should therefore not
be reimbursed. (We note that regarding the basic life insurance, the
employees would not have received any additional benefits under the "No
Reduction" election had they died prior to reaching age 65; however,
amounts paid for options A, B or C in addition to basic life insurance
did provide "current" and additional insurance during the period of
erroneous retirement).
Section 5596 of title 5 provides for backpay for an employee affected
by an unjustified personnel action. The regulations implementing the
statute are found in 5 C.F.R. Section 550.801, et seq. A reinstated
employee may receive an amount equal to all or any part of the pay,
allowances and differentials which he would normally have earned during
the period if the personnel action had not occurred, less certain
deductions. The employee is deemed to have performed service for the
agency during the entire period. In essence, to the extent possible,
the employee is financially "made whole" through an award of pay,
allowances and differentials. 5 C.F.R. Section 550.805. However, the
employee may not be granted more for pay, allowances and differentials
than he would have received had the unjustified separation not occurred.
5 C.F.R. Section 550.805(b).
In the present case, but for the erroneous retirement the employees
would not have been receiving annuities and they would not have been
paying premiums for insurance as annuitants. However, they presumably
would have been paying for the insurance as employees.
The backpay award should place the employees in the same financial
position they would have been in had the improper action never occurred.
Therefore, in computing their backpay award, they should be refunded
premiums withheld for insurance during the erroneous retirement period.
However, the premiums for the same type of insurance chargeable to them
as employees must be deducted from the backpay award.
Regarding Mr. Neal's case, the agency found that errors had been made
in the deductions for option A and B of his insurance during the
erroneous retirement period. The Office of Personnel Management
neglected to deduct for option A for a period of months, and for option
B, deducted at the rate for five times his annual pay at retirement
rather than for three times his pay as he selected. The agency asks how
this error should be dealt with.
It is well established that insurance coverage is determined on the
basis of the election of the employee. An election or waiver by an
employee if done in accordance with the applicable law and regulations,
is determinative of his rights and liabilities. Administrative errors
in processing forms or in making deductions do not alter those rights
and liabilities. See 34 Comp. Gen. 257 (1954); Bernard J. Killeen,
B-198207, January 14, 1981.
Since by virtue of his election, Mr. Neal was covered under option A,
and had he died at any time during the period of erroneous retirement,
his beneficiaries would have been entitled to the benefits under option
A, properly calculated premiums for option A coverage applicable to an
employee should be included in the premiums deducted from his backpay
award. Of course, the full amount he actually paid for option B while
he was erroneously retired should be included in the amount refunded to
him.
Accordingly, the amounts creditable to Mr. Neal and Mr. Roy for
insurance coverage should be calculated as outlined in this decision.
(1) The matter was presented as a request for an advance decision by
Betty Deaver, Authorized Certifying Officer, National Finance Center,
Office of Finance and Management, U.S. Department of Agriculture, New
Orleans, Louisiana.
(2) Pub. Law 92-529, October 21, 1972, 86 Stat. 1050, added the
provisions now contained in 5 U.S.C. Section 8706(e). The purpose of
those provisions is discussed in S. Rep. No. 92-1301, 92d Cong., 2d
Sess., reprinted in 1972 U.S. Code Cong. and Ad. News, 4232-4233, and
H.R. Rep. No. 92-1289, 92d Cong., 2d Sess.
B-205508, 64 Comp. Gen. 431
Matter of: Disposition of amounts recovered for damage to Government
motor vehicles, March 29, 1985:
Amounts recovered by Govt. agency from private party or insurer
representing liability for damage to Govt. motor vehicle may not be
retained by agency for credit to its own appropriation, but must be
deposited in general fund of Treasury as miscellaneous receipts in
accordance with 31 U.S.C. 3302(b). 61 Comp. Gen. 537 is distinguished.
The assistant Attorney General for Administration, Department of
Justice, asked whether the Department may retain, for credit to its own
appropriation, amounts received from private parties or their insurers
for liability resulting from motor vehicle accidents. Although the
request is limited to motor vehicle accidents, the principles involved
would appear to apply to other Government property as well. As
discussed below, we see no reason to depart from the traditional
principle that the monies must be deposited in the general fund of the
Treasury as miscellaneous receipts.
In the hypothetical situation presented, a private party negligently
collides with a parked Government vehicle, causing damage in the amount
of $1,500. The agency then proceeds to have the vehicle repaired. The
Government is entitled to pursue a claim for damages against the private
party (or its insurer) under common law tort principles. The Assistant
Attorney General states that the Department's practice thus far has been
to account for such recoveries as miscellaneous receipts.
At the outset, we note that, as a practical matter, we are primarily
talking about vehicles purchased or leased by a particular agency and
not General Services Administration (GSA) motor pool vehicles. GSA
motor pool vehicles are governed by the Federal Property Management
Regulations. If a GSA motor pool vehicle is damaged by the negligent or
wrongful act of an identifiable party other than the user agency or its
employee, GSA will pursue the Government's claim and the user agency
will not be charged for the repairs. 41 C.F.R. Sections 101-39.805,
101-39.807 (1983).
The disposition of monies received for the use of the United States
is governed by 31 U.S.C. Section 3302(b) (1982) (formerly 31 U.S.C.
Section 484), which requires prompt deposit in the general fund of the
Treasury unless there is statutory authority for some other disposition.
In addition, an agency may retain receipts which qualify as "refunds to
appropriation" as defined in Treasury Department-GAO Joint Regulation
No. 1, Section 2b, September 22, 1950, reprinted in GAO Policy and
Procedures Manual for Guidance of Federal Agencies, title 7, Appendix B.
/1/ Since there is no statutory authority which would permit agency
retention of recoveries in the situation under consideration, the
question is whether the recovery may be deemed a "refund" within the
scope of the regulation.
It is suggested that agency retention of the recovery in this case
follows from our decision in 61 Comp. Gen. 537 (1982). In that
decision, we held that an agency may retain amounts received from a
carrier or insurer for damage to an employee's personal property where
the agency has paid a claim by the employee under 31 U.S.C. Section
3721, and may credit those amounts to the appropriation from which the
employee's claim was paid.
As we pointed out in 61 Comp. Gen. 537, an agency has a choice, based
on its own policy determination, when considering claims under 31 U.S.C.
Section 3721. The agency may, if it so chooses, pay the employee's
claim immediately without awaiting any third-party settlement. The
agency then becomes subrogated to the employee's claim against the
liable third party. Alternatively, the agency may require the employee
to pursue the third-party claim first, and consider any remaining claim
by the employee only after the third-party claim has been settled.
If the agency chooses the latter policy, it will not receive
third-party recoveries but will pay correspondingly lesser amounts to
its employees in cases where there is third-party liability. If the
agency chooses the former policy, it will be paying somewhat higher
amounts to its employees in the first instance, in anticipation of the
third-party recovery. In this situation, we concluded that "it is
entirely legitimate to treat a third-party recovery as a reduction in
the amount previously disbursed rather than as an augmentation of the
agency's appropriation." 61 Comp. Gen. at 540. The recovery is
analogous to the recovery of an overpayment or the return of an unused
advance, and may properly be treated as a refund to the disbursing
appropriation.
It is the nature of the agency's discretion under 31 U.S.C. Section
3721, as described above, that distinguishes 61 Comp. Gen. 537 from the
instant situation. If the agency wishes to have its motor vehicle
repaired (and in many cases it will have no choice), it must pay for the
repairs, and the amount it pays bears no relationship to the possibility
of a third-party recovery.
By way of contrast, the instant situation is similar to our decision
in 52 Comp. Gen. 125 (1972), holding that recoveries from tort-feasors
pursuant to the Federal Medical Care Recovery Act must be deposited in
the Treasury as miscellaneous receipts. See 61 Comp. Gen. at 539-40.
While recoveries in the instant case, as in 52 Comp. Gen. 125, are
certainly "related" to a prior expenditure, they are not "adjustments"
of a prior disbursement as contemplated in the regulation. /2/
The Assistant Attorney General also notes our decisions to the effect
that no impermissible augmentation results where the private party
responsible for the damage either replaces the property in kind or makes
payment directly to the party making the repairs. E.g., 14 Comp. Dec.
310 (1907). While this is true, it is nothing more than an exception
that may be advantageous if the timing of repair and payment can be made
to coincide.
Finally, we note that where the Congress has found it desirable to
permit agency retention of recoveries in the type of situation involved
in this case, it has provided the necessary authority by statute. For
example, the GSA motor pool system, noted earlier in this decision, is
financed by means of the General Supply Fund. 40 U.S.C. Section 491(d).
Recoveries for damage to property procured through the Fund are
expressly authorized to be credited to the Fund. 40 U.S.C. Section
756(c).
In view of the foregoing, absent statutory authority to the contrary,
amounts received by an agency for liability resulting from damage to
Government property must be deposited in the Treasury as miscellaneous
receipts. 26 Comp. Gen. 618 (1947). The Treasury Department has
established a receipt account for this purpose, account no. 3019,
"Recoveries for Government property lost or damaged, not otherwise
classified."
(1) Refunds to appropriations, as defined in Section 2b, "represent
amounts collected from outside sources for payments made in error,
overpayments, or adjustments for previous amounts disbursed, including
returns of authorized advances."
(2) To look at it another way, a recovery in the instant situation
would amount to the refund of an "earned payment," which must be
accounted for as a miscellaneous receipt. 39 Comp. Gen. 647, 649
(1960).
B-218234.2, 64 Comp. Gen. 429
Matter of: Santa Fe Corporation, March 27, 1985:
A dismissal with prejudice by a court consitutues a final
adjudication on the merits of a complaint which is conclusive not only
as to matters which were decided, but also as to all matters that might
have been decided. Therefore, General Accounting Office will not
consider a protest involving issues which were or could have been raised
in the court action.
Santa Fe Corporation protests the award of a contract to Allied
Defense Industries (ADI) by the Department of the Navy under
solicitation No. N00033-84-R-0110, a small business set-aside for hull
roughness surveys and analyses. We dismiss the protest.
Santa Fe originally protested to GAO against the award to ADI on
September 20, 1984. Santa Fe alleged that the award was improper
because Santa Fe's offer was more advantageous to the government, cost
and other factors considered, and because a former Santa Fe employee
participated in the evaluation process. Subsequently, another
disappointed offeror, NKF Engineering Associates, Inc., protested to the
agency that ADI was not an eligible small business concern for purposes
of the solicitation. The agency and Santa Fe then agreed to suspend
action on Santa Fe's protest until the Small Business Administration
(SBA) issued a final ruling on ADI's size status. We therefore closed
our file on Santa Fe's protest subject to reopening if the SBA found ADI
qualified as a small business.
On February 11, 1985, the SBA Office of Hearings and Appeals found
ADI qualified as a small business for purposes of the solicitation. On
February 19, 1985, Santa Fe and NKF filed suit in the United States
District Court for the District of Columbia (Civil Action No. 85-0599)
seeking a temporary restraining order and a preliminary and a permanent
injunction to prevent the Navy from implementing the award to ADI. The
grounds for the suit were that ADI is not eligible as a small business
concern because of its affiliation with a foreign firm, that the award
to ADI is precluded by the conflict of interest provision in the
solicitation and that several contract provisions are rendered
unenforceable by ADI's affiliation with the foreign corporation.
The court dismissed Santa Fe and NKF's complaint with prejudice,
concluding that the plaintiffs had "utterly failed to show any wrongful
act" by the defendants. Santa Fe then filed this protest with our
Office. In the protest, Santa Fe raises the same issues presented in
its suit as well as the issues contained in its original protest.
A dismissal with prejudice by a court constitutes a final
adjudication on the merits and bars further action by this Office.
Cecile Industries, Inc., B-211475.4, Sept. 23, 1983, 83-2 CPD Paragraph
367; see Fed. R. Civ. P. 41(b). Further, the effect of such a judgment
extends not only to matters which were decided, but also to all matters
that might have been decided. See Frontier Science Associates, Inc. --
Reconsideration, B-192654, Dec. 26, 1978, 78-2 CPD Paragraph 433; Perth
Amboy Drydock Co., B-184379, Nov. 14, 1975, 75-2 CPD Paragraph 307.
Although Santa Fe's protest presents two issues which were not expressly
raised in its suit, /1/ those issues clearly could have been raised in
the court action. Therefore, we consider the court's dismissal of the
protester's complaint as a full adjudication on the merits of the issues
presented by its protest, and we will not consider them further.
Santa Fe's protest is dismissed.
NKF has filed comments on Santa Fe's protest in which it alleges that
the solicitation should have provided for the evaluation of estimated
travel and per diem costs. NKF argues that these costs should have been
considered because there are significant savings inherent in an award to
a firm whose technical personnel are located in the United States rather
than in a foreign country. NKF also contends that the agency engaged in
improper discussion with ADI prior to the submission of best and final
offers.
We will not consider NKF's contentions. NKF joined in Santa Fe's
lawsuit and these issues could have been raised there. Therefore, our
consideration of NKF's latest allegations would not be proper, in view
of the court's dismissal of the suit with prejudice. Further, we note
that contract award was made to ADI in September of 1984, but NKF did
not raise these concerns until March of 1985. Accordingly, they appear
to be untimely under section 21.2(a) of our Bid Protest Regulations. 49
Fed. Reg. 49,417, 49,420 (1984) (to be codified at 4 C.F.R. Part 21).
(1) The two additional issues are that Santa Fe's offer was more
advantageous to the government and that the participation of Santa Fe's
former employee in the evaluation process was improper.
B-215281.3 & .4, 64 Comp. Gen. 425
Matter of: Energy Maintenance Corporation; Turbine Engine Services
Corporation, March 25, 1985:
Agency did not have a compelling reason to cancel an invitation for
bids and resolicit, and a protest requesting reinstatement of the IFB is
sustained where, even though the bidding schedule did not enumerate all
of the tasks comprising the agency's needs, the remainder of the IFB and
the attached standard specification did fully enumerate these tasks;
award to the low responsive bidder based on such a clear statement of
the work meet the agency's actual needs and would not be prejudicial to
other bidders.
An ambiguity as to the low bidder's intended price does not render
the bid nonresponsive or otherwise unacceptable; where the bid would be
low by a significant margin under the least favorable interpretation,
the intended price can be clarified after bid opening.
A protest that specifications in a resolicitation are inadequate is
dismissed as academic where award is recommended under the original
solicitation.
Energy Maintenance Corporation (EMC) protests the United States Coast
Guard's cancellation of invitation for bids (IFB) No. DTCG40-84-B-0173
(hereinafter IFB 0173) and the resolicitation of the requirement under
IFB No. DTCG40-84-B-0281. EMC seeks award under the original
solicitation. Turbine Engine Services Corp. (Turbine) maintains that
the specifications in the new IFB are inadequate and ambiguous in
several respects.
We sustain EMC's protest and dismiss Turbine's protest as academic.
IFB 0173 covered a Coast Guard requirement for overhauling gas
turbine generator engines used in Coast Guard vessels, and included
Standard Repair Specification No. 2630 which called for a major shop
inspection, repair, reassembly, testing, and other tasks in performing
the overhaul. The bidding schedule in the solicitation called for 2
separate prices: one price for a definite item entitled simply "Gas
Generator Major Shop Inspection," but intended by the Coast Guard to
refer to all of the tasks enumerated in the standard specification; and
one price for an indefinite item -- the replacement parts which might be
used in performing the overhauls (the IFB also included a list of parts,
each to be priced individually). Award was to be based on the lowest
total price for the 2 items. The Coast Guard received the following
responsive bids:
Turbine's bid was rejected as nonresponsive.
Following bid opening, the Coast Guard determined that the IFB was
ambiguous and should be canceled based on its suspicion that bidders had
been confused as to what tasks were encompassed by the term "Gas
Generator Major Shop Inspection." The wide disparity in the definite
item bid prices led the Coast Guard to suspect that, notwithstanding the
clear enumeration of all the required overhaul tasks in the standard
specification, different bidders may have read the term "Gas Generator
Major Shop Inspection" as requiring performance of different
combinations of the enumerated tasks. The Coast Guard believed the fact
that Airwork Corporation (Airwork), the firm which ordinarily performs
EMC's major shop inspection work, bid $9,000 more than EMC on the
definite item further supported its suspicion that bidders were confused
by the schedule. As a result of this perceived ambiguity, the Coast
Guard was unsure whether an award based on the original IFB would meet
the government's actual needs, and thus canceled the IFB and issued a
new solicitation with all of the overhaul tasks from the standard
specification now specifically listed under the definite item.
EMC maintains that since the specification attached to the
solicitation fully apprised bidders of the work to be performed, the
IFB, read as a whole, was not ambiguous. EMC asserts that its bid was
based on all tasks described in the specification and argues that it
thus was entitled to the award under the original IFB. We agree.
A contracting officer must have a compelling reason to cancel an IFB
after bid opening. Federal Acquisition Regulation, 48 C.F.R. Section
14.404-1(a)(1) (1984); Dyneteria, Inc,; Tecom, Inc., B-210684,
B-210684.2, Dec. 21, 1983, 84-1 C.P.D. Paragraph 10. While IFB
specifications defiencies may constitute a compelling reason to cancel,
cancellation on this ground generally is not justified except where an
award under the ostensibly deficient IFB would not satisfy the
government's actual needs, or would prejudice other bidders. American
Mutual Protective Bureau, 62 Comp. Gen. 354 (1983), 83-1 C.P.D.
Paragraph 469. Neither exception has been established here.
A contract award will satisfy an agency's needs, essentially, even in
the fact of some solicitation deficiency, where bidders can be said to
have offered to perform the work actually required by the agency. We do
not believe an agency's mere failure to include on a bid schedule every
task already enumerated in an attached standard specification
automatically renders an IFB so ambiguous as to support a conclusion
that bidders were not offering to be bound to perform all the required
tasks. Here, while the schedule alone may not have reflected all
required tasks, it is undisputed that the remainder of the IFB and the
attached specification did set forth these tasks. Thus, viewing the IFB
as a whole, see JVAN, Inc., B-202357, Aug. 28, 1981, 81-2 C.P.D.
Paragraph 184, the IFB fully set forth the Coast Guard's requirements.
Listing all of the required tasks on the schedule might make the IFB
clearer, but the IFB as originally issued, read together with the
standard specification, was sufficient to assure that bidders understood
what they were bidding on and thus, that an award to EMC would satisfy
the Coast Guard's acutal needs as reflected in the specification.
Because we do not believe the IFB was materially deficient, we do not
believe other bidders would be prejudiced by an award to EMC. Prejudice
would exist only if the IFB contained some deficiency which prevented
bidders from competing on the same basis. We already have found that
the IFB, read as a whole, set forth the Coast Guard's actual
requirements with sufficient clarity that all bidders should have been
aware that their bid prices on the definite item bound them to perform
all of the tasks in the attached standard specification. In order to be
misled by the schedule into bidding on less than all of the required
work, a bidder literally would have had to ignore the attached
specification. Such a selective reading of the IFB would have been
unreasonable, and thus would not be a sufficient basis for a finding of
prejudice.
As to the evidence that the Coast Guard relied on, the fact that
widely disparate prices were bid, by itself, does not establish that
bidders were bidding to perform different portions of the required work.
The Coast Guard has furnished us neither its own estimated cost for
this procurement, nor data indicating the historical cost for meeting
this requirement, and has neither asserted nor shown that this omitted
information is inconsistent with EMC's bid or the range of bids,
generally. No firm, including the 2 protesters here, ever complained of
confusion as to what tasks were encompassed by the term "Gas Generator
Major Shop Inspection." Further, while the Coast Guard bases much of its
suspicion of confusion on the 500 percent range of bid prices on the
definite item, we note that there is a similar 450 percent disparity in
the prices bid on the indefinite item. Since these prices were merely
the total prices for all of the listed parts, there is no reason to
believe bidders were materially confused in calculating their indefinite
item prices. In addition, we consider it significant that the bidders'
definite item prices bear a relatively constant relation to the bidders'
indefinite item prices. These considerations suggest to us that,
contrary to the Coast Guard's view, the overall disparity of prices was
not attributable to confusion over what was required.
We also do not think the Coast Guard's suspicion concerning the
difference in the EMC and Airwork bids was a sufficient basis for
assuming there was confusion over the schedule. Neither firm had
complained it was confused and, given the disparity in the bid prices
generally, it is not evident to us how these two bids could be deemed so
aberrant as to cast doubt on the adequacy of the schedule. Airwork
(commonly a subcontractor according to the Coast Guard) simply may not
have been able to perform the entire contract as inexpensively as EMC.
For the same reason, other presumably experienced contractors found it
necessary to bid far greater prices than either EMC or Airwork.
The Coast Guard suggests the EMC's bid may have been "qualified"
because it listed the prices of 2 parts (under the indefinite item) as
"per Stator" and the price of a third part as "per Quadrant." The Coast
Guard states it could not determine the exact meaning of this added
language, but that it could indicate EMC's intent to increase its listed
prices for these parts as much as eightfold (or $22,500), depending on
how the language is interpreted. EMC states that it clarified to the
Coast Guard after bid opening that the prices listed were its total
prices for the parts.
The ambiguity as to EMC's price did not render its bid nonresponsive
or otherwise unacceptable. Frontier Contracting Co., Inc., B-214260.2,
July 11, 1984, 84-2 C.P.D. Paragraph 40. Rather, since the bid would be
low by a significant margin even under the least favorable
interpretation, it was a matter which properly could be clarified by EMC
after bid opening. See Pacific Coast Utilities Service, Inc., B-210285,
June 29, 1983, 83-2 C.P.D. Paragraph 43. EMC did explain after bid
opening that it intended to be bound to perform at the lowest price in
the range of uncertainty, not at some higher price. In view of this
explanation we see no reason why EMC's listed price for the indefinite
item should not be accepted as its intended price.
The Coast Guard argues that this qualification of EMC's bid is
further evidence of confusion over IFB requirements. We do not believe,
however, that one bidder's listing of 3 part prices with explanatory
language evidences a misunderstanding of the work required sufficient to
warrant cancelling the IFB. Such confusion, by itself, would be
immaterial in any event given our conclusion that the IFB as a whole
adequately set forth the work required.
We sustain EMC's protest and therefore are recommending that IFB 0173
be reinstated and award made to EMC (if otherwise found to be eligible
for the award.)
Because Turbine's protest challenges the specifications of the
resolicitation, and we are recommending that award be made under the
original IFB, Turbine's protest is dismissed as academic. See Phil Con
Corp., B-207082, July 23, 1982, 82-2 C.P.D. Paragraph 70.
EMC's protest is sustained; Turbine's protest is dismissed.
B-214765, 64 Comp. Gen. 419
Matter of: Crews of Vessels - Pay Limitation on Premium Pay, March
25, 1985:
Civilian marine employees whose pay is set administratively under 5
U.S.C. 5348(a) (1982) are not subject to pay caps on their premium pay
increases. The pay cap language does not apply to premium pay. In
addition, the Court of Claims overturned one agency's attempt to limit
such increases in fiscal years 1979 and 1980, and there is no evidence
of subsequent legislative intent to overrule that decision. See
National Maritime Union v. United States, 682 F.2d 944 (Ct. Cl. 1982).
The issue in this decision is whether the premium pay received by
civilian marine employees (crews of vessels) is subject to certain pay
limitations imposed by statute. We hold that the premium pay of these
employees whose pay is set under 5 U.S.C. Section 5348(a) (1982) is not
subject to the pay caps imposed by statutes in recent fiscal years, for
the reasons stated below.
This decision is in response to a request from Robert P. Gajdys,
Chief, Personnel Division, National Oceanic and Atmospheric
Administration (NOAA), concerning the overtime and premium pay received
by NOAA wage marine employees. This decision is subject to our
labor-management procedures contained in 4 C.F.R. Part 22 (1984), and in
that regard we received comments on this question from two other federal
agencies and five labor unions. Those comments are summarized below.
The request from NOAA states that NOAA ships which are engaged in
nautical surveys and oceanographic and biological research are manned by
civilian employees whose rates of pay are fixed administratively
pursuant to 5 U.S.C. Section 5348(a) (1982). That statute provides that
the pay of crews of vessels shall be fixed and adjusted consistent with
the public interest and in accordance with the prevailing rates and
practices of the maritime industry.
The request states further that in fiscal years 1979 and 1980, NOAA
capped the basic pay of its wage marine employees based on the
determination that it would be inconsistent with the public interest to
increase pay rates above the statutory pay caps imposed on most other
federal employees. Although NOAA also capped overtime and premium pay
in those years, that was held to be an abuse of discretion and was
reversed in National Maritime Union v. United States, 682 F.2d 944 (Ct.
Cl. 1982).
Since 1981, NOAA has applied the pay caps enacted by the Congress to
the basic pay of its wage marine employees, but not to the overtime and
premium pay of those employees. However, NOAA is aware of an opinion by
the Office of General Counsel, Office of Personnel Management (OPM), to
the effect that any premium pay received by wage marine employees that
is calculated from basic pay is subject to the pay cap.
The request from NOAA states that NOAA and the Office of General
Counsel, Department of Commerce, agree with OPM's opinion, but NOAA
points out that the Military Sealift Command (MSC), Department of the
Navy, does not agree with OPM opinion and does not apply the pay cap to
the overtime and premium pay of MSC's wage marine employees. Since NOAA
is reluctant to impose a pay cap unilaterally in view of prior court
decisions overturning NOAA pay practices, /1/ the agency asks our
opinion whether the pay caps for fiscal years 1981 through 1983 apply to
the overtime and premium pay received by wage marine employees and, if
so, what action should be taken to reduce those overtime and premium pay
rates.
The OPM opinion referred to by NOAA was contained in a letter dated
December 2, 1983, to the Department of the Interior, concerning the
application of the fiscal year 1983 pay cap to the pay of wage marine
employees. The OPM opinion cited Public Laws 97-276, section 109, and
97-377, section 107, /2/ which, in subsection (a) of the cited sections
of each law, limited pay increases to prevailing rate employees and
crews of vessels paid under 5 U.S.C. Section 5348 to the pay increase
granted General Schedule employees (4 percent). See also Federal
Personnel Manual (FPM) Bulletin 532-47, November 18, 1982. The OPM
letter next cites subsection (e) of the cited sections of both Public
Laws which provides:
(e) For the purpose of administering any provision of law,
rule, or regulation which provides premium pay, retirement, life
insurance, or any other employee benefit, which requires any
deduction or contribution, or which imposes any requirement or
limitation, on the basis of a rate of salary or basic pays the
rate of salary or basic pay payable after the application of this
section shall be treated as the rate of salary or basic pay.
The OPM opinion, citing FPM Bulletin 532-47, states that where an
agency administratively, by rule or regulation, adopts a pay practice
under which premium pay is calculated from basic pay, the premium pay
would be subject to the same 4 percent pay limitation. Since the pay of
crews of vessels is set administratively by the employing agency /3/ and
since the agency would adopt a pay practice through a rule or
regulation, the OPM opinion concludes that the pay cap applies to any
premium pay calculated from the basic pay of wage marine employees.
The OPM opinion takes notice of the decision in National Maritime
Union, cited above, where the court overturned NOAA's action in fiscal
years 1979 and 1980 to limit increases in premium pay for wage marine
employees to that amount provided to other prevailing wage employees.
The OPM opinion distinguishes the court's decision in that case since
the limitation did not depend on statutory pay caps but rather was an
administrative decision by NOAA which was in conflict with the pay
practices of MSC.
In response to our request for comments, Morris A. Simms, Director of
Personnel, Department of the Interior, took notice of the OPM opinion,
referred to above, and agrees that overtime and premium pay for fiscal
years 1981 through 1983 should be capped. The letter also points out
Interior's past practice to cap premium pay of the "relatively small
number of vessel employees" employed by Interior.
We also received comments from the Deputy Assistant Secretary of
Defense (Civilian Personnel Policy and Requirements) which state that
the ruling in the National Maritime Union decision governs this question
and that new legislation enacted subsequent to that considered by the
court has not materially altered the court's decision.
The letter states that DOD concluded in 1979 that the then-applicable
pay cap /4/ applied only to basic pay. See also the Presidential
Memorandum dated January 4, 1979, concerning the application of a 5.5
percent limitation on federal pay which is set administratively. Since
then, DOD has capped only basic pay and not overtime and premium pay for
fiscal years 1980 through 1983.
The letter from DOD states further that OPM's opinion conflicts with
the decision in National Maritime Union where the court overturned
NOAA's decision to cap premium and overtime pay rates in fiscal years
1979 and 1980. In addition, DOD points out that the language of the pay
caps in Public Laws 97-276 and 97-377 (fiscal year 1983) can be traced
back to Public Law 95-429 (fiscal year 1979) when DOD adopted its policy
which was later reviewed by the court in the National Maritime Union
case. The letter from DOD concludes that MSC's interpretation of
premium pay for mariners is legal, reasonable, and in accord with the
public interest.
In accordance with our labor-management procedures contained in 4
C.F.R. Part 22 (1984), we requested and received comments from five
unions representing wage marine employees.
The International Organization of Masters, Mates and Pilots argues
that capping premium pay would depart from the intent of the law as well
as from the court's ruling in the National Maritime Union case. We
received similar comments from the Marine Staff Officers and the
Seafarers International Union.
The Radio Officers Union, D-3, argues that there has been no change
in the language of the pay caps since fiscal year 1979 which would
support a theory that the Congress intended to overrule the court's
decision in the National Maritime Union case. Furthermore, the union
contends that premium pay in the maritime industry is not subject to a
simple calculation method as described in the pay legislation, citing
Appendix One of the decision in Blaha. /5/
Finally, District No. 1, Pacific Coast District, Marine Engineers'
Beneficial Association, points out that the "vast majority of Federal
sector mariners" are employed by MSC. The union argues that application
of the pay cap legislation is arbitrary and that there is no definitive
interpretation of subsection (e) (quoted earlier) as it relates to
premium pay. Finally, the union argues that premium pay for civilian
mariners is not "calculated from base pay" but rather is based on
prevailing premium rates paid in the maritime industry as required by 5
U.S.C. Section 5348.
In order to place the issues raised here in perspective, we must go
back to the situation presented in National Maritime Union, cited above.
That case addressed pay rates for federal mariners during fiscal years
1979 and 1980. For those two fiscal years, the basic pay of all federal
mariners subject to 5 U.S.C. Section 5348(a) was limited, in accordance
with a presidential memorandum, to the rates allowed under the statutory
pay caps applicable to other federal employees. While the 1979 and 1980
pay cap language did not refer to 5 U.S.C. Section 5348(a), the court
held that the discretion allowed in fixing the mariners' pay under
section 5348(a) was sufficeintly broad to support capping their basic
pay by administrative action.
The court then turned to the overtime and premium pay rates for the
mariners for fiscal years 1979 and 1980. Unlike the treatment of basic
pay which was capped for all mariners, federal agencies differed here in
that NOAA extended the pay caps to overtime and premium pay rates but
MSC did not. The court described the Government's position in this
regard as follows:
Defendant (the Government) responds with a general theory for
the application of pay ceilings to overtime and premium pay.
Defendant suggests that the pay ceilings apply to base pay and, by
implication, to all pay calculated from base pay. Thus, the
fiscal 1979 and 1980 pay caps applied to overtime pay, which is
calculated from base pay, but not to premium pay, which is set
independently, based on prevailing rates. Defendant therefore
confesses judgment for premium pay not paid by NOAA and reserves
the right to make a counterclaim for overtime pay improperly paid
by MSC. 682 F.2d at 955.
The court accepted the Government's confession of judgment as to
NOAA's action in capping premium pay. It went on to hold that whatever
discretion the Government might have possessed to cap overtime pay rates
in 1979 and 1980 was abused since NOAA and MSC had acted inconsistently.
Therefore, the court overturned NOAA's action in capping overtime pay
as well. Id. at 955-56.
Against this background we turn to OPM's opinion "that any premium
pay received by these employees (the mariners) that is calculated from
basic pay is subject to the pay cap." The OPM opinion recognized the
argument that the National Maritime Union case "could be pertinent," but
responds:
* * * as we indicated above, however, in fiscal year 1983, both
basic pay and premium pay calculated (from) basic pay is
specifically limited by statute. The holding in National Maritime
Union of America, supra, therefore would not be controlling. * *
*
We have two fundamental problems with the OPM analysis. First, we
find no change in the pay cap language subsequent to National Maritime
Union that would affect the holding of the case with respect to premium
pay. It is true that the statutory pay cap language for fiscal year
1981 and thereafter expressly covers the basic pay of federal mariners
fixed pursuant to 5 U.S.C. Section 5348(a). However, the court in
National Maritime Union affirmed the Government's action in capping 1979
and 1980 basic pay for the mariners through administrative action, yet
concluded at the same time that premium pay for the mariners was not
capped. Thus, we see no reason why the fact that basic pay for the
mariners is now capped by statute rather than by administrative action
would be material to the holding in National Maritime Union as it
applies to premium pay. If anything, Congress' action in expressly
covering the mariners' basic pay in the pay cap language but including
no comparable language on premium pay tends to reinforce the conclusion
that premium pay is not capped.
The only other pay cap language referred to by OPM is subsection (e),
quoted in full previously, which states in relevant part:
(e) For the purpose of administering any provision of law,
rule, or regulation which provides premium pay * * * on the basis
of a rate of salary for basic pay, the rate of salary or basic pay
payable after the application of this section shall be treated as
the rate of salary or basic pay.
Essentially the same language was included in the 1979 and 1980 pay
cap statutes that were before the court in National Maritime Union.
Thus, there is nothing new in this language that would change the impact
of National Maritime Union. /6/ While the quoted language was not
specifically addressed in the National Maritime Union case, this
probably is because the language seems to have little relevance to the
issue of whether premium pay is capped. By its plain terms, the quoted
language provides only that when premium pay is calculated from a rate
of basic pay which is capped, the capped basic rate, as opposed to the
basic rate that would have applied absent the cap, shall be used for the
calculation. This language has no application whatever to premium pay
which is not calculated from basic pay. And even if premium pay is
calculated from basic pay, the language affects only the basic pay
component of the calculation; it does not limit either the aggregate
amount of premium pay that can be received or the percentage rate used
to calculate premium pay from basic pay.
We have a second fundamental problem with the OPM opinion. The
opinion asserts only that premium pay is capped when it is "calculated
from basic pay." However, as discussed previously, the Government in
National Maritime Union conceded that premium pay was not subject to the
pay cap because it was not, in fact, calculated from basic pay but was
"set independently, based on prevailing rates." The OPM opinion does not
suggest that the method or methods used to calculate premium pay for
federal mariners have changed since the National Maritime Union case.
On the contrary, we have been advised informally that premium pay
calculation practices remain as they were at the time of National
Maritime Union. Thus, it is our understanding that premium pay rates
generally are established and expressed as dollar amounts reflecting
prevailing rates, rather than as a percentage of basic pay, i.e., 1
1/2times base pay.
In view of this, it is unclear to us what, if any, premium pay would
be reached by the OPM opinion even if the National Maritime Union case
did not exist. In any event, for all of the reasons given above, it
appears to us that the National Maritime Union case remains fully
controlling with regard to the premium pay of mariners fixed under 5
U.S.C. Section 5348.
Finally, we note that while the Government in National Maritime Union
treated "premium pay" and "overtime pay" as two different categories of
pay calculated through different means, the submission to us in the
present case characterizes "overtime pay" as one form of "premium pay."
The OPM opinion refers only to "premium pay" without elaboration on
whether it uses this term to include or excluse "overtime pay." We
recognize that there may be categories of "overtime pay" for mariners,
perhaps occasionally referred to as "premium pay," in which the rate is
established as a percentage of basic pay. We also recognize that the
court in National Maritime Union may have left the door open for the
Government to exercise its discretion to cap such overtime pay
administratively if done prospectively and uniformly by all agencies.
However, this is not the case now. Therefore, we find no basis to
conclude that any "overtime" rates or "premium" pay rates for federal
mariners are currently subject to the pay cap.
Accordingly, we hold that the overtime and premium pay increases
granted to civilian marine employees under 5 U.S.C. Section 5348(a) are
not subject to the pay cap limitations.
(1) National Maritime Union v. United States, cited above, and Blaha
v. United States, 511 F.2d 1165 (Ct. Cl. 1975).
(2) Public Law 97-276, Section 109, Stat. 1186, 1191-92, October 2,
1982; Public Law 97-377, Section 107, 96 Stat. 1830, 1909-10, December
21, 1982.
(3) International Organization of Masters, Mates and Pilots v. Brown,
698 F.2d 536 (D.C. Cir. 1983).
(4) Public Law 95-429, Section 614(a), 92 Stat. 1001, 1018-19,
October 10, 1978.
(5) Blaha, cited above in Footnote 1.
(6) See Public Law 95-429, footnote 4, supra, Section 614(b), 92
Stat. 1018; Public Law 96-74, Section 613(a), 93 Stat. 559, 576,
September 29, 1979.
B-214716.4, 64 Comp. Gen. 415
Matter of: Bullock Associates Architects, Planners, Inc., March 25,
1985:
Even though solicitation evaluation criteria could have been better
written, the contracting agency did not act improperly where it used an
annual basis for evaluating costs, because the solication, stated that
offers would be so evaluated and the selection made meets government's
needs.
Estimate of overtime usage developed for purpose of evaluating cost
of competing offers could be revised without advising offerors of the
change, and without allowing them to amend their proposals, because the
estimate was not stated in the solicitation and offerors were neither
aware of nor entitled to rely on the original, defective estimate.
Whether an awardee under a contract to lease real property will be
able to deliver title and occupancy of the premises is a matter of
responsibility that General Accounting Office will not consider absent
evidence of possible fraud by contracting officials or the existence of
definitive responsibility criteria in the solication.
Bullock Associates Architects, Planners, Inc. protests the award of a
lease to Magnolia-Boyd Corporation under Veterans Administration (VA)
solicitation for offers (SFO) VACO83-210 for outpatient clinic space in
Pensacola, Florida. According to Bullock, VA's decision is the result
of an improper application of the SFO evaluation criteria. Bullock
asserts that its proposal is both the least costly and most favorable to
the government. Further, Bullock charges that Magnolia-Boyd's proposal
is a nullity because, Bullock says, Magnolia-Boyd does not have title to
the property offered. We deny the protest.
Subsequent to filing this protest, Bullock filed suit in the United
States District for the District of Columbia. We consider the protest
in light of the indication in a January 4, 1985 order, transmitted to
our Office by the protester on February 15, that the court desires our
opinion in this matter. /1/ See, e.g., Applicators, Inc., B-215035,
June 21, 1984, 84-1 CPD Paragraph 656.
This procurement was the subject of our decision, Magnolia-Boyd
Corporation, et al., B-214716 et al., Oct. 5, 1984, 84-2 CPD Paragraph
388, where we sustained a protest filed by Magnolia-Boyd of the proposed
award of a lease to Bullock. Magnolia-Boyd contented that an initial VA
selection of Bullock was improper because VA had not applied the SFO
evaluation criteria properly and had incorrectly evaluated total rental
price. We sustained that firm's protest because we concluded that VA
had improperly considered certain overtime charges. Had these charges
been considered correctly, we found, VA would have concluded that
Magnolia-Boyd submitted the lowest cost offer and that Magnolia-Boyd was
in line for award. We recommended that VA correct its evaluation of
proposals and make an appropriate award. /2/
As indicated in our prior decision, VA evaluated offers by taking
four cost factors into account:
1. Rent;
2. The cost of services included in rent but subject to an
annual adjustment based on the consumer price index;
3. The cost of government provided services; and
4. The cost of any lump-sum payment for preparing the premises
for occupancy.
VA calculated the present value of these costs on the basis of annual
cost per square foot of usable space. The methodology for doing so was
set out in the SFO and is explained in our prior decision.
In the current protest, Bullock contends its proposal would have been
evaluated as low had VA applied the discount factors as discussed in our
prior decision. Bullock charges that VA improperly favored
Magnolia-Boyd by overstating the government's cost of providing services
and utilities charged to Bullock and the VA improperly reduced the
amount of overtime usage assumed in accounting for off-hours charges for
heating and air conditioning of the building. Bullock also argues that
its proposal should have been selected because it was otherwise more
advantageous to the government than was Magnolia-Boyd's proposal.
We disagree.
Bullock's first line of argument, that VA disregarded our decision in
reevaluating offers, focuses on footnote 2 of our decision. In the body
of that decision, we stated that we calculated the present value of
payments on an annual basis because, as the decision indicates, we
construed the SFO as providing for such an evaluation. In footnote 2,
we observed that the SFO price evaluation clause was inconsistent with
the SFO provisions concerning the payment of rent because rent was due
on a monthly basis.
Bullock maintains that VA should have reevaluated offers by using
discount factors based on monthly payments. We think, however, that VA
acted properly in using the annual basis and that our reasons for
rejecting the monthly basis approach in our original decision remain
sound. It is well settled that offers must be evaluated on the basis
stated in the solicitation. Everhart Appraisal, Inc., B-213369, May 1,
1984, 84-2 CPD Paragraph 485. In this instance, the SFO clearly
provided that rent would be discounted on an annual basis,
Magnolia-Boyd's selection will meet VA's needs and, as we observed in
our prior decision, the time for protesting the apparent discrepancy
between the SFO evaluation and payment provision had long since passed.
/3/
Concerning Bullock's contention that VA overstated the government's
cost of providing services and utilities for the property it proposed,
we point out that VA evaluated those costs by using data Bullock
submitted with its offer. Bllock cannot fault VA for its own errors if
VA was unaware of them; moreover, if Bullock's cost data was
overstated, Bullock has not explained where the error is.
Likewise, Bullock has not explained why it believes VA's action in
reducing its estimate of overtime usage was improper. Bullock only says
it was injured because, had it known of the reduced requirement, it
might have reduced its prices on other items.
We agree with Bullock that, had the SFO indicated that VA would
calculate overtime charges on the basis of 10 hours per week, VA could
not have reduced the number of hours on which it based its calculation
without advising offerors of the change. Everhart Appraisal Services
Inc., supra. However, the SFO did not indicate the number of hours VA
would use and there is no indication in the record that offerors were
aware of the original estimate.
In the circumstances, no offeror had any right to rely on the
original 10-hour figure, and since the record indicates VA subsequently
determined that 10 hours per week exceeded its need, we can see no basis
for legal objection to its decision to correct its analysis so the final
evaluation would accurately reflect its actual requirements.
We also reject Bullock's assertion that its offer should have been
accepted because it was the most advantageous once technical
considerations are taken into account. As our prior decision indicates,
there appears to have been some confusion between offerors concerning
the role that factors other than price would play in the selection of an
awardee. However, this confusion was largely resolved by VA in the
cover letter transmitted with SFO, which reads:
As stated in the solicitation, price per net square foot will
be the primary determining factor in the award of this lease. The
basic effect of the Award Factors will be that where offers are
received that are substantially equal in price, those offers which
satisfy all the award factors will be favored over those that do
not.
In Bullock's protest submissions to our Office, the protester urges
that this language removes all doubt concerning the evaluation of
technical factors; Bullock urges that it should receive the contract
based on factors other than price because, it says, the offers received
were substantially equal in price. According to Bullock an in camera
examination of the record by our Office should confirm this.
Our examination of the record, however, does not support Bullock's
position. Our original decision was based on calculations that showed a
relatively small difference in the evaluated price of the Magnolia-Boyd
and Bullock proposals. Upon reexamining the data, VA determined that
its allowance for overtime charges was excessive because it was based on
an allocation of too many overtime hours. The effect of VA's
reevaluation of overtime charges is an increase of approximately $4,400
per year in the evaluated price differential between the Bullock and
Magnolia-Boyd proposals. In the circumstances, we see no basis for
questioning VA's view, implicit in it's award decision, that offers were
not substantially equal in price.
Finally, Bullock contends that Magnolia-Boyd's proposal is null and
void because Magnolia-Boyd lacks the legal right to possess and develop
the parcel of land offered to VA. Bullock also contends that the
contracting officer was required to reject the Magnolia-Boyd offer
because that firm cannot meet the occupancy date established in the
solicitation.
Bullock has offered no evidence to support these assertions, which in
any event, do not state a basis for protest. Whether an offerer will be
able to deliver title and occupancy are matters concerning its ability
to fulfill the obligations it offered to assume, and thus, raises
concerns that go to that firm's responsibility. VA's decision to
proceed with award to Magnolia-Boyd imports an affirmative determination
of responsibility, based largely on business judgment, which our Office
will not question absent evidence of possible fraud on the part of
contracting officials, or the existence of definitive responsibility
criteria in the SFO. Alan Scott Industries, et al., B-212703, et al.,
Sept. 25, 1984, 84-2 CPD Paragraph 349. No such circumstances are
present here.
The protest is denied.
(1) In addition to a copy of the court's order, Bullock forwarded a
list of 35 enumerated questions, the answer to which Bullock suggested
would be of interest to the court. There is no indication in the
court's order that this is the court's desire, or that the court is even
aware of Bullock's list, and we, therefore, decline to respond to the
questions Bullock posed.
(2) Concerning Bullock's role in the prior case, we point out that
Bullock was expressly invited by our Office to respond to the agency
report and to attend the conference conducted in that case. Bullock
elected not to participate. For that reason, Bullock is not a party
entitled to request reconsideration of our decision under 4 C.F.R.
Section 21.9 (1984). We have considered Bullock's present protest
insofar as it challenges VA's actions subsequent to our prior decision,
but we stand on our prior decision to the extent Bullock may be
indirectly seeking its reconsideration.
(3) We also noted in our prior decision that the difference between
discounting on an annual or monthly basis appeared to have no
significant impact on our decision, a fact which our examination of VA's
revised pricing indicates is still true.
B-214551, 64 Comp. Gen. 410
Matter of: HUD Obligation of Public Housing Authority Operating
Subsidy Funds by Letters-of-Intent, March 25, 1985:
The Department of Housing and Urban Development should treat the
amounts it obligates by letter-of-intent for Public Housing Authorities'
operating subsidies under subsection 9(a) of the United States Housing
Act of 1937 (42 U.S.C. 1437g(a) (1982) as estimates subject to later
adjustements on the basis of its regulatory criteria when all the
necessary information is available.
Amounts obligated on an estimated basis during one fiscal year which
are later found to be in excess of a Public Housing Authority's
operating subsidy eligibility under 42 U.S.C. 1437g(a) (1982) and under
24 C.F.R. part 990 must be deobligated and returned to the Treasury at
the close of the fiscal year. It is a violation of the bona fide need
rule, 31 U.S.C. 1502, to send the funds instead to the Authority's
operating reserve to offset the amount of subsidy needed for the
following fiscal year.
The Inspector General, Department of Housing and Urban Development
(HUD), has asked for a decision on the legality of HUD's interpretation
of its authority in obligating annual appropriations to pay operating
subsidies to State Public Housing Authorities for low-income housing
projects. He is particularly concerned because when HUD is unable to
determine the exact amount payable to the Authorities before the end of
the fiscal year, it obligates an estimated amount by means of a
letter-of-intent, but then treats it as a firm obligation rather than as
an estimate subject to adjustment. As a result, if the exact amount to
which the State Authority is entitled is later determined to be less
than the amount obligated, the Authority is permitted to retain the
excess funds in an operating reserve in order to reduce its subsidy
needs in subsequent years.
We agree with the Inspector General that HUD should treat the amounts
obligated by means of letters-of-intent as estimates, which should be
adjusted appropriately as soon as HUD has determined the exact amount of
its subsidy liabilities for the fiscal year in question.
Except when exercising its limited authority to redistribute excess
funds on an emergency basis to specific lower income housing projects,
pursuant to 42 U.S.C. Section 1437g(d), HUD should deobligate amounts
which exceed its liability, and return the surplus unobligated budget
authority to the Treasury at the close of the fiscal year, pursuant to
31 U.S.C. Section 1552(a)(2)(1982).
Under the United States Housing Act of 1937 (Act), as amended, 42
U.S.C. Section 1437 et seq. (1982), the Secretary of HUD is authorized
to provide various forms of financial assistance to States (or political
subdivisions of States) to develop and operate low income housing
projects. An assistance commitment is made, subject to the availability
of funds, in an annual contribution contract entered into between HUD
and a State Public Housing Authority.
Section 9 of the Act, as amended, 42 U.S.C. Section 1437g (1982),
authorized the Secretary of HUD to make annual contributions
specifically for the operation of lower income housing projects. The
statute provides that:
* * * The contributions payable annually under this section
shall not exceed the amounts which the Secretary determines are
required (A) to assure the lower income character of the projects
involved, (B) to achieve and maintain adequate operating services
and reserve funds. * * *
Standards for determining the proper amount of contributions are set
forth in regulations, known as the Performance Funding System, 24 C.F.R.
part 990. The regulations include a formula based on the amounts needed
to operate a "prototype well-managed project." 42 U.S.C. Section
1437g(a); 24 C.F.R. 990.101(c). The subsidy amount is generally the
difference between the State Authority's projected expenses and
projected operating income for the year. The Authority is required to
submit this information in the form of an annual operating budget for
each project covered by its annual contribution contract, which must
then be approved by HUD.
In some cases, however, HUD has to obligate appropriations for
operating subsidies on the basis of estimates rather than approved
operating budgets. This occurs primarily in the case of Authorities
having fiscal years which coincide with the Federal Government's fiscal
year and which have not had time to submit approvable operating budgets.
In such cases, HUD issues a document known as a letter-of-intent which
contains an estimate of its total subsidy obligation on the basis of
which it records the obligation.
It was a GAO decision -- or rather, a misinterpretation of that
decision -- which gave rise to the practices of which the Inspector
General now complains. In our decision on HUD's Obligating No Year
Contract Authority, B-197274, February 16, 1982, we held that HUD's use
of reservation and notification letters under various housing assistance
programs under section 8 of the 1937 Act, as amended, 42 U.S.C. Section
1437f (1982), to determine when no-year contract authority was
considered obligated for purposes of reporting to the Congress, was
inappropriate. At the time the reservation and notification letters
were issued, HUD had taken no action imposing a legal liability upon the
Government which could result in the expenditure of funds at a later
time or which could mature into a legal liability of the Government by
virtue of actions the part of other parties beyond the control of the
Government. Unlike the section 9 program we have been discussing, HUD
had not entered into an annual contribution contract or any other firm
commitment prior to issuing the letters. Therefore, no "obligation" as
such had been incurred. The recording of obligations on the basis of
such preliminary documents presented a misleading picture to the
Congress as to the need for funds for new projects.
Following our decision, several HUD Regional Accounting Divisions
stopped disbursing section 9 subsidy payments based upon
letters-of-intent because they were concerned that our decision on the
section 8 program prohibited such payments. In response, relying upon
advice obtained from HUD's Office of General Counsel, the Assistant
Secretary for Housing issued a memorandum on April 20, 1982, addressing
this concern.
Applying the test contained in our decision of February 16, 1982,
HUD's Deputy Assistant Secretary concluded that: "letters-of-intent
constitute valid documents for obligating and disbursing operating
subsidies, but only if they do not condition the obligation of funds on
future discretionary actions by the Department (e.g., future downward
adjustments)." The Deputy Assistant Secretary concluded that subsequent
adjustments to estimates based on the HUD regulation, established
conditions not "beyond the control of the United States" and therefore,
the letters-of-intent could not be used to obligate appropriations if
they contained that condition. The result was that the estimated
amounts contained in the letters-of-intent were transformed from
estimates into fixed obligations, not subject to deobligation.
HUD was then confronted with a dilemma. It could not deobligate any
excess funds obligated but neither could it disburse them, because of
the requirement in 42 U.S.C. Section 1437g that annual contributions may
not exceed the amount determined to be necessary. It resolved the
matter by sending any excess to the appropriate State Authority's
operating reserve fund. The Authority, in such cases, would use the
funds to offset operating expenses in subsequent fiscal years, thus
reducing the amount of HUD's subsidy obligation for those years. The
net effect was an increase in the amount of obligation authority
available to HUD in a subsequent fiscal year by use of an amount
appropriated in a prior fiscal year.
This practice was approved in a legal opinion issued by HUD's General
Counsel on June 17, 1983. The Inspector General included a copy of the
opinion with his request and we have considered it in formulating this
opinion. HUD's Office of General Counsel has indicated informally that
the legal opinion continues to represent the views of that Office.
HUD should consider the amounts which it obligates by
letters-of-intent for section 9 operating subsidies to be estimates
subject to adjustment. The letters-of-intent amendments which HUD made
following our February 1982 decision were, as indicated earlier, based
on a misinterpretation of our February 1982 decision.
The 1982 opinion questioned whether reservation and notification
letters used in four housing programs under section 8 of the Act, as
amended, 42 U.S.C. Section 1437f (1982) constituted obligating documents
under 31 U.S.C. Section 1501 (then 31 U.S.C. Section 200). We found in
the case of each of the four programs that the letters could not
obligate no-year budget authority because they did not authorize
applicants to incur any costs for which HUD would be liable for payment
prior to the final approval of an application for assistance and before
entering into a contribution contract. Thus the letters-of-intent could
not bind HUD or "mature into a legal liability by virtue of actions on
the part of the other party (the applicants) beyond the control of the
United States."
In contrast, the section 9 operating subsidy letters-of-intent are
issued after HUD has entered into annual contributions contracts which
make the United States liable for subsidy payments in some amount, even
though the exact amount cannot be determined until the operating budget
has been reviewed and approved.
A major purpose of the recording statute, 31 U.S.C. Section 1501, is
to provide to the Congress a reasonably precise picture of an agency's
financial requirements so that it can assess more accurately that
agency's appropriation needs for the upcoming fiscal year in question.
A rule which prohibits an agency from recording an obligation if its
underlying obligation is subject to a condition precedent, the
satisfaction of which is in the Government's control, results in a more
accurate picture of an agency's needs being presented to the Congress
because unless and until the agency acts to satisfy the condition, it
really has no need for funds. This was the situation we dealt with in
our 1982 decision.
In the instant case, the approval of the operating budget is a
condition subsequent, which merely permits HUD to adjust its estimate on
the basis of its new information. To say that HUD should not record
binding liabilities as obligations merely because HUD cannot determine
the exact amount of its liability under its regulations until a later
time runs contrary to the recording statute's purposes of having
obligations be accurate reflections of agency financial requirements.
HUD is required to adjust the amount of its estimated operating
subsidy for the section 9 program up or down, as appropriate, once it
has approved the operating budget. Any suggestion in the
letters-of-intent that the estimated amount is fixed and not subject to
later deobligation, if excessive, is invalid.
Generally, a fiscal year appropriation may be obligated only to meet
a legitimate, or bona fide, need arising in the fiscal year for which
the appropriation was made. 31 U.S.C. Section 1502. See 58 Comp. Gen.
471, 473 (1979); 54 Comp. Gen. 962, 966 (1975); B-183184, May 30,
1975. While actual expenditures of funds previously obligated may take
place after the close of the fiscal year, the need for which they are
being expended must have arisen prior to the close of the fiscal year.
The Congress makes an annual appropriation for payment of section 9
contributions to assist the Authorities in meeting that year's deficits
in operating revenue caused by the low-income nature of the project.
Thus, when HUD adds the excess over-obligated letter-of-intent funds to
an Authority's operating reserve so that its subsidy needs for the next
fiscal year are reduced, it is not using such funds to meet a legitimate
need of the fiscal year for which they were appropriated. Rather, the
excess funds are being used to meet a need arising during a subsequent
fiscal year to the one for which the appropriation is intended to apply.
Accordingly, HUD was violating the bona fide need rule in the absence
of specific authority to so use the excess obligation.
We are aware of only one instance in which HUD received specific
authority to use its annual section 9 appropriation for operating
subsidies payable in fiscal year 1983. HUD's fiscal year 1983
appropriation act provides:
* * * That funds heretofore provided under this heading in
Public Law 97-101 shall remain available for obligation for the
fiscal year ending September 30, 1983, and shall be used by the
Secretary for fiscal year 1983, requirements in accordance with
section 9(a), notwithstanding section 9(d) of the United States
Housing Act of 1937, as amended. Pub. L. No. 97-272, Sept. 30,
1982, 96 Stat. 1161.
As far as we are aware, this exceptional authority was not repeated
in any subsequent fiscal year appropriation acts. Therefore, HUD should
discontinue the practice of adding over-obligations to the operating
reserves of the State Authorities immediately, unless it is able to
obtain comparable legislative carry-over authority.
B-207731, 64 Comp. Gen. 408
Matter of: Collection of User Fees in National Forests by Contractor
Personnel, March 25, 1985:
Department of Agriculture proposal to permit contractor employees to
collect recreation fees in national forests is permissible. General
Accounting Office decision in 62 Comp. Gen. 339 (1982), holding that a
similar proposal involving volunteers was not permissible, is not
pertinent in view of current plan to use contractor employees. Further,
in view of a recent change in Office of Management and Budget Circular
No. A-76, the collection of established fees should not be considered to
be an inherent governmental function, and therefore need not be
performed only by government employees. This decision distinguishes 62
Comp. Gen. 339.
This decision is in response to a request from the Secretary of
Agriculture for reconsideration of our decision in 62 Comp. Gen. 339
(B-207731, April 12, 1983). In that decision we declined to approve the
proposal of the Department of Agriculture to permit individuals who are
designated for public volunteer service pursuant to the Volunteers in
the National Forests Act of 1972 to collect camping fees and similar
types of recreation user fees. The Department now contemplates having
the fees collected by contractor employees, rather than by volunteers.
Based on that change, and a recent change in Office of Management and
Budget (OMB) Circular No. A-76, we conclude that the Department of
Agriculture proposal, as now contemplated, would be permissible.
In 62 Comp. Gen. 339 (1982), we reviewed a Department of Agriculture
proposal to use public volunteers to collect recreation user fees in
national forests. The volunteers were to be retained pursuant to the
Volunteers in the National Forests Act of 1972, which authorizes the use
of volunteers "for or in aid of interpretive functions, visitor
services, conservation measures and development, or other activities in
and related to areas administered by the Secretary (of Agriculture)
through the Forest Service." 16 U.S.C. Section 558a (1982). The
volunteers were to periodically empty campground collection boxes, in
which campers were expected to deposit their payments.
We concluded that the volunteer collection plan proposed by the
Department of Agriculture was not permissible for three reasons: (1)
there was no indication that Congress intended that volunteers under the
Volunteers in the National Forests Act would perform such a function,
(2) "fee collection is an inherent governmental function which may be
performed only by Government employees," and (3) it would have been
difficult or impossible to obtain necessary surety bonds to protect the
Government against loss. 62 Comp. Gen. at 342-43.
We conclude that our analysis in 62 Comp. Gen. 339 is not applicable
in the instant case in view of a critical change in the Department of
Agriculture's proposal and a change in an OMB Circular and our
interpretation of it.
Initially, we note that under the proposal as now contemplated, the
fee collection will not be done by volunteers, but rather by contractor
personnel. Accordingly, our fist objection in 62 Comp. Gen. 339, the
use of volunteers for purposes not contemplated by the Congress, is no
longer relevant.
Second, we no longer find it necessary to reach the conclusion that
"fee collection is an inherent governmental function which may be
performed only by Government employees." 62 Comp. Gen. at 342. That
conclusion was based in large part on our reading of OMB Circular No.
A-76, March 29, 1972, entitled, "Policies for Acquiring Commercial or
Industrial Products and Services Needed by the Government." Circular No.
A-76 included "monetary transactions and entitlements" within a group of
functions which could not be contracted out "due to a special
relationship in executing governmental responsibilities." We concurred
in the conclusion of the Department of Agriculture legal staff that "the
contracting out of the collection function was thus precluded, and that,
by analogy, 'the delegation of such function outside the Department (of
Agriculture) to a non-employee would appear to be inappropriate.'" 62
Comp. Gen. at 340-41.
However, subsequent to our decision in 62 Comp. Gen. 339, the Office
of Management and Budget revised Circular No. A-76 so that it now
defines a Government function as:
* * * a function which is so intimately related to the public
interest as to mandate performance by Government employees * * *
(including) those activities which require either the exercise of
discretion in applying Government authority or the use of value
judgment in making decisions for the Government. * * * OMB
Circular No. A-76, August 4, 1983.
In B-215326, December 14, 1984, 64 Comp. Gen. 149, a case involving a
General Services Administration proposal to sell used government
vehicles on consignment through private auction houses, we interpreted
revised Circular No. A-76. We concluded:
Although "monetary transactions and entitlements" are still
defined as inherently governmental under the revised definition,
it appears in the context of this case that only the setting of a
minimum fee should be viewed as an inherently governmental
function because it requires discretion and judgment. The
administrative task of collection, however, need not be so
considered, in our view. * * *
Here, the contractor personnel will merely be performing the
"administrative task of collection" and will not be involved in setting
fees or any other discretionary governmental function. Accordingly, our
analysis in 64 Comp. Gen. 339 is no longer pertinent, and we conclude
that the collection of established fees would not constitute an inherent
governmental function which could not properly be delegated to
contractor personnel.
Finally, we conclude that the proposal of the Department of
Agriculture would provide sufficient protection of the Government's
interests. The Department has recognized that "a system of internal
controls, guarantees, and adequate safekeeping facilities * * * would be
required." We recommend that that system include bonding of the
contractor employees. Because profit-making contractors, rather than
volunteers will be involved in the instant case, we do not question the
availability of adequate bonding in these circumstances. B-215326,
December 14, 1984, 64 Comp. Gen. 149.
B-215703, 64 Comp. Gen. 406
Matter of: Randall R. Pope and James L. Ryan - Meals at Headquarters
Incident to Meetings, March 22, 1985:
Employees of the National Park Service sought reimbursement for meal
costs incurred while attending a monthly Federal Executive Association
luncheon meeting. Meal cost may not be reimbursed. The meetings were
held at the employees' official duty station and the employees meals
were not incidental to the meetings, a prerequisite for reimbursement,
since the meetings took place during the luncheon meals. B-198471, May
1, 1980, explained. This decision distinguishes B-198882, Mar. 25,
1981.
This responds to a request from an authorized certifying officer of
the National Park Service, Midwest Region, asking whether two employees
may be reimbursed for luncheon meal expenses incurred while attending a
Federal Executive Association meeting within the employees' duty station
area. We conclude that the meals may not be reimbursed upon the
vouchers as submitted.
It is the policy of the Midwest Region of the National Park Service
for a Park Service representative to attend monthly luncheon meetings of
the Omaha-Lincoln Federal Executive Association (FEA). The purpose of
these meetings is to enable representatives of various Government
agencies to meet and discuss issues of mutual concern and interest. In
May 1984, Mr. Randall Pope attended the FEA meeting in Millard,
Nebraska, located within the corporate limits of Omaha, his official
duty station. He submitted a claim for reimbursement that included
$5.25 representing the cost of a meal served at the meeting. In June
1984, Mr. James Ryan, the Associate Regional Director, attended a
meeting held in Omaha, also his official duty station, and submitted a
claim for reimbursement of $6 for the cost of a meal.
The certifying officer asks whether these two employees may be
reimbursed for their expenses in light of the apparent conflicting
holdings in our decision in Frank W. Kling, B-198882, March 25, 1981,
where reimbursement under similar circumstances was denied, and 38 Comp.
Gen. 134 (1958), which allowed reimbursement.
As a general rule, an employee may not be paid a per diem allowance
in lieu of subsistence at his permanent duty station. Federal Travel
Regulation, para. 1-7.6a (Supp. 1, September 28, 1981), incorp. by ref.
41 C.F.R. Section 101-7.003 (1982). We have consistently held that,
absent specific statutory authority, the Government may not pay
subsistence expenses or furnish free meals to civilian employees at
their official duty stations. Our decision in Frank W. Kling, B-198882,
supra, reflected this general rule. There, the heads of various law
enforcement agencies in Detroit, Michigan, attended monthly luncheon
meetings to maintain and facilitate open communication within the law
enforcement community. We held that an IRS employee could not be
reimbursed for these luncheons, even though they benefitted his agency,
since they were held at his official duty station thus clearly in
contravention of Federal Travel Regulations (FTR), para. 1-7.6a. See
also, 53 Comp. Gen. 457 (1974).
Reimbursement is available if an employee pays a fee to attend a
conference at his official duty station and a meal is provided at no
additional or separable cost. This was our holding in 38 Comp. Gen. 134
(1958). Specific authority for such reimbursements is found in 5 U.S.C.
Section 4110 (1982) which provides:
Appropriations available to an agency for travel expenses are
available for expenses of attendance at meetings which are
concerned with the functions or activities for which the
appropriation is made or which will contribute to improved
conduct, supervision, or management of the functions or
activities.
Reimbursement under 5 U.S.C. Section 4110 has been allowed in limited
circumstances where the only charge made in connection with a meeting
was for meals. In B-198471, May 1, 1980, reimbursement for meals only
was authorized for employees attending the 3-day 1980 annual meeting of
the President's Committee on Employment of the Handicapped. A luncheon
and two banquets were integral parts of the annual meeting. The
decision explained that where meals are not included in a registration
fee, reimbursement is appropriate only if (1) the meals are incidental
to the meeting, (2) attendance of the employee at the meals is necessary
to full participation in the business of the meeting; and (3) the
employee was not free to partake of his meals elsewhere without being
absent from essential formal discussions, lectures or speeches
concerning the purpose of the meeting.
What distinguishes the above case from the Kling case, supra, and
from the case at hand is that the President's annual meeting was a 3-day
affair with meals clearly incidental to the overall meeting, while in
the other cases the only meetings which took place were the ones which
took place during a luncheon meal. It is therefore difficult to
determine whether the meals were incidental to the meetings or whether
the meetings were incidental to the meals. In order to meet the three
part test, a meal must be part of a formal meeting or conference that
includes not only functions such as speeches or business carried out
during a seating at a meal but also includes substantial functions that
take place separate from the meal. In any event, we are unwilling to
conclude that a meeting which lasts no longer than the meal during which
it is conducted qualifies for reimbursement. We therefore conclude that
reimbursement for meal expenses in this case should not be allowed even
though participation at the meetings was clearly beneficial to the
employing agency.
B-214919, 64 Comp. Gen. 395
Matter of: Public Health Service Officer, March 22, 1985:
An active duty Public Health Service commissioned officer provided
medical consulting services for which he was paid on an hourly basis
under personal services contracts with the Social Security
Administration over a period of 13 years. The officer was not entitled
to receive compensation for services rendered under this arrangement
because as an officer of the Public Health Service, a uniformed service,
he occupied a status similar to that of a military officer and his
performance of services for the Govt. in a civilian capacity was
incompatible with his status as a commissioned officer. Also, receipt
of additional pay for additional services by such an officer is an
apparent violation of a statutory prohibition, 5 U.S.C. 5536.
Compensation paid to an active duty commissioned officer of the
Public Health Service for medical consulting services he performed under
personal services contracts with the Social Security Administration
constituted erroneous payments because he was entitled to receive only
the pay and allowances that accrued to him as a member of the uniformed
services. He is, therefore, indebted to the Govt., for the compensation
paid to him for the services he rendered to the Social Security
Administration.
The debt of an officer of the Public Health Service, occasioned by
his receipt of erroneous pay from the Social Security Administration,
may be collected by administrative offset against his current Public
Health Service pay, or upon his separation or retirement from the
Service, offset may be affected against any final pay, lump-sum leave
payment and retired pay to which he may be entitled. The 10-year
limitation on collection by setoff does not apply in this case where
facts material to the Govt.'s right to collect were not known by Govt.
officials until 13 years after the erroneous payments began. Amounts
collected are to be deposited into the general fund of the Treasury as
miscellaneous receipts.
The Government's claim against a member of the uniformed services for
erroneous dual pay is not barred from court action if the facts material
to the claim were discovered within less than 6 years of the date that
an action is filed. Nor is the claim barred from consideration under
the statute waiving the Govt.'s claims for dual pay if not received in
the General Accounting Office within 6 years when it was received in
that Office within 6 years of the last date of an unbroken period during
which the individual occupied a status in which he was to receive
compensation.
An active duty commissioned officer of the Public Health Service who
illegally performed personal services under contract for the Social
Security Administration is not entitled to retain compensation he
received for the performance of those services on the basis of de facto
employment or quantum meruit, and his debt may not be waived, in the
absence of clear and convincing evidence that he performed the civilian
Govt. services in good faith.
This action responds to a request for an advance decision regarding
the legality of payment of compensation to an active duty commissioned
officer of the Public Health Service for work he performed as a Federal
civilian medical consultant for the Social Security Administration. /1/
We conclude that the officer's performance fo compensated services for
the Social Security Administration was improper, and he is liable to the
Government for the compensation paid to him for those services.
This case concerns a physician who is a commissioned officer in the
Regular Corps of the Public Health Service. He has been on continuous
active duty since 1959, and is currently assigned to the National
Institute on Aging, National Institutes of Health, at the Gerontology
Research Center, Baltimore, Maryland. As a commissioned officer he
receives the pay and allowances to which he is entitled as a member of
the uniformed services. This officer also worked, under a series of
personal service contracts, as a medical consultant to the Office of
Disability Programs, Social Security Administration, from 1970 until
July 1983, when an investigation of his dual employment was commenced by
the Office of the Inspector General of the Department of Health and
Human Services. /2/
Medical consultants working for the Social Security Administration
under personal services contracts, as this officer was, are paid by the
hour for hours spent working at the Social Security Administration
facility. The number of hours a consultant works and for which he or
she is to be paid is documented by sign-in and sign-out sheets
maintained by the office of the project officer who is responsible for
medical consultant contracts. Generally, the officer in this case
performed his consulting services for the Social Security Administration
outside his normal hours of duty at the Gerontology Research Center.
Those hours were from 8:30 a.m. until 5 p.m. However, it is stated that
based on information obtained from agency time records, there were "many
occasions" when he signed in for work at the Social Security
Administration prior to 5:30 p.m., which is said to be the earliest
time, after his regular duty hours, in which he reasonably could have
traveled from his duty station at the Gerontology Research Center to the
site where he performed his contract services. These records would,
therefore, seem to indicate that the officer has periodically received
pay for services performed under his contract with the Social Security
Administration for the same time he was to be performing his duties as
an officer of the Public Health Service at the Gerontology Research
Center.
Regulations of the Department of Health and Human Services require
that employees (including Public Health Service commissioned officers)
obtain administrative approval, in writing, prior to engaging in
professional and consultative services outside of their regular duties
(45 C.F.R. Section 73.735-708). However, the record shows that this
officer did not seek or receive approval from the National Institute on
Aging or the National Institutes of Health to engage in the consultant
services he performed for the Social Security Administration, although
he did request and obtain administrative approval for other outside
professional activities.
The officer states that he cannot recall that such formalized
administrative procedures for accepting outside professional commitments
were in effect in 1970 when he began working under these contracts, and
that when he later became aware of the advance administrative approval
requirement, he did not deem it necessary to seek approval for activity
with which he had been involved for so long. He states further that to
the best of his knowledge he has never received a copy of the Department
of Health and Human Services Standards of Conduct, although he has seen
references to them in Public Health Service circulars. In spite of the
fact that he did obtain the required administrative approval for other
outside professional activities, he states that he never informed anyone
at the Gerontology Research Center of his consulting services for the
Social Security Administration because he considered that his "personal
business," which he does not discuss with his professional associates.
Certain of this officer's personnel records (cirriculum vitae) that
he filed in connection with his most recent request for renewal of his
Social Security Administration contract (and with the Gerontology
Research Center) incorrectly indicate that he was employed by the
Department of Medicine, Baltimore City hospitals, not by the Public
Health Service. Social Security Administration Officials responsible
for approving his contracts with that agency have stated that they were
not aware that he was a Government employee. It appears that the
contract officers were misinformed or misled regarding his employment in
a Government position due to his omission or misrepresentation
concerning his status in the Public Health Service.
Between October 1978 and June 1983 while he was on active duty as a
Public Health Service commissioned officer, this officer received a
total of $77,704 for medical consulting services he performed under
contract for the Social Security Administration. The amount he received
for contract services performed between 1970 and 1978 has not yet been
determined because necessary records, now filed at the Federal Records
Center, have not yet been obtained by the Department of Health and Human
Services.
In connection with the facts and circumstances of this case, the
Department of Health and Human Services has asked the following
questions:
1. Is the long-standing rule, articulated in prior decisions
of the Comptroller General, which prohibits military members on
active duty from concurrently engaging in compensated Federal
civilian employemnt, also applicable to members of a non-military
Uniformed Service -- specifically, to officers of the PHS
Commissioned Corps?
2. If the above-referenced rule is applicable to members of
PHS, was it violated in the present case?
3. If item number 2 is answered in the affirmative, is there
legal authority to recover the improper SSA compensation?
4. If item number 2 is answered in the negative, is there
legal authority to recover the improper SSA compensation because
of (the) prohibition against contracting with Federal employees
set forth in 41 CFR 1-1.302-3(a) and (b)?
5. If SSA payments are recoverable, what is the appropriate
mechanism for accomplishing such recovery? Specifically, may the
funds be recovered by PHS through administrative offset against
the officer's active duty or retured pay? If so, what would be
the proper disposition of such recovered funds? May they be
transferred from PHS to the SSA account from which originally
disbursed?
6. If the SSA payments are recoverable, is there any authority
under which recovery may be waived?
7. If the SSA payments are recoverable, is there any
recognized principle under which (the officer) could assert a
right to retain any portion of these payments? For example, could
he contend that he was entitled to retention of such payment as a
'de facto' employee or under the principles of quantum meruit or
similar contract-type remedies?
While the Public Health Service is not an armed service, /3/ it is
one of the "uniformed services," along with the National Oceanc and
Atmospheric Administration, and the Armed Services -- the Army, Navy,
Air Force, Marine Corps and the Coast Guard. 42 U.S.C. Section 201(p);
37 U.S.C. Section 101(3). We have held that officers of the Regular
component of the Commissioned Corps of the Public Health Service.
As noted in the agency's submission, we have long held that any
agreement or arrangement by a member of a military service for the
rendition of services to the Government in another position or
employment is incompatible with the member's actual or potential
military duties, and additional payment therefor is not authorized
unless there is specific statutory authority authorizing it. /4/ We
have held that the fact that military service members may have hours of
relaxation and relief from the actual performance of duty during which
they may attend to personal affairs, including the performance of other
duty, is not the test of whether the other duty is incompatible. The
obligation to render military service is the superior -- the controlling
-- obligation. 18 Comp. Gen. 213, 216 (1938). The time of one in the
military service is not his own, however limited the duties of a
particular assignment may be, and any agreement or arrangement for the
rendition of services to the Government in another position so
employment is incompatible with military duties, actual or potential.
18 Comp. Gen. at 217.
While the Commissioned Corps of the Public Health Service is included
among the military services only when, in time of war or national
emergency, the President declares the Corps to be a military service, it
is one of the uniformed services and its members hold a status like that
of military officers. Under the pay system applicable to members of the
uniformed services, members are entitled to pay based on their status as
members and not based on the rendition of specific numbers of hours of
duty. 37 U.S.C. Section 204. They occupy the status of uniformed
service members 24 hours a day, notwithstanding that they may actually
only perform duties during certain hours, and their pay is paid on the
basis of that status and not the hours of duty they perform. They are
not entitled to any additional pay for performing services for another
component of the Government. See, e.g., 5 Comp. Gen. 206 (1925).
In addition to the general rule of incompatibility, under 5 U.S.C.
Section 5536 an employee or a member of the uniformed services whose pay
is fixed by statute or regulation is specifically prohibited from
receiving additional pay "for any other service or duty," unless
specifically authorized by law. That statutory prohibition has been
held not to apply where there are two distinct offices, places or
employments, each of which has its own duties and its own compensation
which both may be held by any one person at the same time. United
States v. Saunders, 120 U.S. 126 (1887). However, that exception to the
prohibition would not appear to apply in this case because the status of
commissioned officer is not compatible with the holding of any other
Federal Government position.
Furthermore, both the Public Health Service and the Social Security
Administration are components of the Department of Health and Human
Services (previously the Department of Health, Education and Welfare)
and this officer was performing medical services for both. If the
officer's services were needed by the Social Security Administration, he
could have been detailed there to provide the additional services on a
part-time basis at no extra cost to the Government. /5/
Thus, while an officer of the Public Health Service Commissioned
Corps may receive permission to pursue private employment which does not
interfere with the performance of his or her duties as an officer of the
Corps, he or she may not be otherwise employed by the United States.
For these reasons, in answer to question 1, it is our view that the
rule prohibiting payment to members of the military services for
services rendered to the Government in a civilian capacity is applicable
to commissioned officers of the Regular Corps of the Public Health
Service. As to question 2, the officer involved in this case should not
have been paid additional compensation to perform consulting services
for the Social Security Administration. 47 Comp. Gen. 505, supra; Air
Force Dental Officers, B-207109, supra.
Since the officer in this case was only entitled to receive pay from
the Government for the performance of his official duties as an active
duty commissioned officer of a uniformed service, he was not entitled to
the additional compensation for the personal contract services rendered
to the Social Security Administration. Therefore, all such compensation
paid to him constituted erroneous payments. 47 Comp. Gen. at 506-507;
Air Force Dental Officers, B-207109, supra, at 13.
Persons who receive public funds erroneously paid by a Government
agency acquire no right to those funds and are liable to make
restitution. United States v. Sutton Chemical Co., 11 F.2d 24 (1926);
Dr. Frank A. Peak, 60 Comp. Gen. 71 (1980). We thus conclude that the
officer in this case is indebted to the Government for compensation paid
to him on account of his personal services contracts with the Social
Security Administration. 49 Comp. Gen. at 402. Question 3, therefore,
is answered in the affirmative, and question 4 requires no answer.
Question 5 concerns the procedures for the collection of the debt
that has resulted from erroneous payments made to this officer and the
proper disposition of the funds collected.
It appears that the provisions of 5 U.S.C. Section 5514, which
specifically authorize collection of erroneous payments made to "an
employee, member of the Armed Forces or Reserve of the Armed Forces" by
deduction in reasonable amounts from the individual's current pay, do
not apply to Public Health Service commissioned officers since such
officers are not included in the definitions of the categories of
individuals covered by that statute. That is, the statute covers only
"employee(s)" and members of the "Armed Forces," neither of which is
defined to include Public Health Service officers, members of the
"uniformed services." See 5 U.S.C. Sections 2101, 2105.
In this case the general provisions of 31 U.S.C. Sections 3711-3720,
which provide for the collection of claims of the Government, are
applicable. Under those provisions, and implementing regulations, the
head of the agency is to try to collect a claim arising out of the
activities of, or referred to, the agency. 31 U.S.C. Section 3711(a).
Under certain conditions he may collect the claim by administrative
offset, which means withholding money payable by the United States
Government to, or held by the Government for, a person to satisfy a debt
the person owes the Government. 31 U.S.C. Section 3701(a). These
provisions are broad enough to encompass withholding money payable to
the officer in this case for pay and allowances, accrued leave or
retired pay due him, where the more specific provision of 5 U.S.C.
Section 5514 are not applicable to him. See 31 U.S.C. Section
3716(c)(2). /6/ The procedural standards promulgated jointly by the
Attorney General, and the Comptroller General and agency regulations
implementing 31 U.S.C. Section 3711, et seq., should be followed in
taking the collection action. See 4 C.F.R. Parts 101-105, as revised,
49 Fed. Reg. 8896 (1984), particularly sections 102.1-102.3.
Concerning the proper disposition of the erroneous payments upon
collection, a refund of payments or fees paid in consideration of some
benefit to the Government is to be deposited into the general fund of
the Treasury as miscellaneous receipts, since to credit an appropriation
with a refund of earned payments would constitute an augmentation of the
appropriation. See 39 Comp. Gen. 647 (1960), and 31 U.S.C. Section
3302(b) (1982) (previously 31 U.S.C. Section 484). Therefore, payments
that are refunded by the officer or collected from him by setoff or
other means should be transferred to the general fund of the Treasury.
Although not specifically stated in the submission to us, the
question arises whether collection of the payments which the officer
received more than 6 years prior to the discovery of the matter by the
Inspector General may be time-barred. The statute of limitations in 28
U.S.C. Section 2415(d) could, under certain circumstances, prevent court
action to recover overpayments if the complaint is not filed within 6
years after the right of action accrues. However, periods during which
facts material to the right of action are not known and reasonably could
not be known by officials, whose responsibility it is to take action,
are excluded from the limitation period. 28 U.S.C. Section 2416(c).
Moreover, in appropriate circumstances outstanding claims may be
recovered by administrative setoff under 31 U.S.C. Section 3716 for up
to 10 years. And, this 10-year limitation does not apply in a case such
as this where facts material to the Government's right to collect the
debt were not known and could not reasonably have been known by the
officials of the Government charged with the responsibility to discover
and collect the debt. 4 C.F.R. Section 102.3(b)(3), as revised, 49 Fed.
Reg. 8898 (1984).
It is also noted that 31 U.S.C. Section 3712(d) establishes a statute
of limitations for claims arising from receipt of dual pay. That
provision is as follows:
(d) The Government waives all claims against a person arising
from dual pay from the Government if the dual pay is not reported
to the Comptroller General for collection within 6 years from the
last date of a period of dual pay.
In considering a question arising under 31 U.S.C. Section 237a, the
statute from which 31 U.S.C. Section 3712(d) is derived, we held that no
part of a dual pay claim against an employee is waived under this
provision if the debt is reported to this Office within 6 years of the
last date of an unbroken period during which a person drew dual
compensation. 43 Comp. Gen. 165 (1963). The record in this case states
that the officer has engaged in the performance of the services in
question while also serving as a commissioned officer in the Public
Health Service since 1970. It is further stated that on or about July
30, 1983, he was ordered to cease work under his contract in effect at
that time until inquiries into the matter of his contract services were
settled. Thus, it appears that he was performing contract services and
was in receipt of pay for those services at least through July 1983.
The Government's claim against him on account of his receipt of
erroneous pay for these services was received in this Office on April
10, 1984. Accordingly, if this officer has been under contract each
year since 1970 to render services for the Social Security
Administration, it would appear that no part of the Government's claim
against him for compensation which he received for those services since
1970 is barred under 31 U.S.C. Section 3712(d). See B-203209, July 15,
1981. Therefore, the entire amount of the Government's claim that has
accrued since 1970 may be collected by administrative setoff.
Questions 6 and 7 concern whether this officer is entitled to retain
the erroneous payments on the bases that he was de facto employee of the
Social Security Administration or under quantum meruit or similar
principles, or to have the Government's claim against him waived.
A de facto officer or employee is one who holds a public office or
position with apparent right, but without actual entitlement because of
some defect in his qualifications or in the action placing him in the
office or position. Air Force Dental Officers, B-207109, supra, at 12.
In certain cases where an individual was discovered to have been
improperly serving the Government in dual capacities, we have held that
the services performed by that individual could be considered as having
been rendered in a de facto status. In those cases the recoupment of
pay for services performed, or forfeiture of other entitlements, was not
required. 52 Comp. Gen. 700 (1973); 40 Comp. Gen. 51 (1960).
However, in this case the applicability of the principle of de facto
employment is similar to that in Air Force Dental Officers, B-207109,
supra. In that decision we addressed the question of the applicability
of the doctrine of de facto employment to two Air Force dentists who had
performed fee contract services for the Verterans Administration. There
we said that although it is not clear whether the de facto emplyoment
doctrine is applicable to fee basis physicians since they do not hold a
public office or position with the contracting agency (45 Comp. Gen. 81
(1965)), the doctrine is generally for application only if the
individual claiming relief on that basis can demonstrate his good faith
in having improperly entered into the subject employment. See Air Force
Dental Officers, B-207109, supra at 13. See also Victor M. Valdez, Jr.,
58 Comp. Gen. 734 (1979).
As is stated previously, the record indicates that the officer in
this case never sought or obtained administrative approval from the
National Institute on Aging or the National Institutes of Health to
perform consulting services under contract for the Social Security
Administration. While this officer has offered various explanations for
the discrepancies and improprieties surrounding his performance of
contract services, we find his explanations and justifications
unpersuasive. On the basis of the facts as presented to us, it appears
that he deliberately concealed his performance of contract services from
those who might have questioned or sought to prevent his continued
services in this capacity. Although he was on notice that
administrative approval was required, he failed to comply with that
requirement. Under these circumstances it appears doubtful that he
acted in good faith in requesting and performing the contract services
while an active duty commissioned officer of the Public Health Service.
In the absence of clear and convincing evidence that he did, in fact,
act in good faith in contracting for and performing these contract
services, he does not qualify under the principle of de facto employment
to retain the compensation paid to him for rendering those services.
Air Force Dental Officers, B-207109, supra, at 16.
There is a well-established rule that the Government is not obligated
to pay contractors or others who have provided services without proper
authorization. General Clinical Research Center, B-212430, June 11,
1984. However, where performance by one party has benefited another,
equity requires that the party receiving the benefit should not gain a
windfall at the expense of the performing party, even though the
contract between them was unenforceable. The courts and our Office have
recognized that in these instances, the Government is obliged to pay the
reasonable value of the services on an implied contract for quantum
meruit.
Before we will authorize a quantum meruit payment, we must make a
threshold determination that the services would have been a permissible
procurement if the proper procedures had been followed. Then we must
find that (1) the contractor acted in good faith, (2) the Government
received and accepted a benefit, and (3) the amount claimed represents
the reasonable value of the benefit received. See 33 Comp. Gen. 533,
537 (1954); 40 Comp. Gen. 447, 451 (1961); and B-207557, July 11,
1983.
We do not question, in general, the procurement of the subject
medical consulting services by the Office of Disability Programs of the
Social Security Administration. It was not proper, however, for the
agency to negotiate such a contract with an active duty commissioned
officer of the Public Health Service.
Nevertheless, and, even if such a contract were authorized, a
significant impediment to this officer's entitlement to retain
compensation he received under these personal service contracts is the
apparent lack of good faith on his part in providing those services. By
his own admission, at the time he began performing these services he had
doubts as to the propriety of his participation in the Social Security
Administration Office of Disability Programs, yet he did not inquire
into the matter to the point of obtaining an authoritative response.
The fact that over a period of 13 years he continued to request renewal
of his contract to perform contract services within the same Government
department in which he was regularly employed without ever requesting
approval to perform those services, as required for any outside
professional activities under department regulations, precludes a
determination that he acted in good faith. We conclude, therefore, that
this officer has no remedy for retention of erroneous pay on the basis
of an invalid contract for quantum meruit.
The Comptroller General is authorized to waive, in whole or in part,
a claim for the recovery of an erroneous payment of pay or allowances
made to an employee of an agency or a member of the uniformed services
if the collection of the debt "would be against equity and good
conscience and not in the best interests of the United States." 5 U.S.C.
Section 5584(a); 10 U.S.C. Section 2774(a). A claim may not be waived
under this authority if in the opinion of the Comptroller General there
is, in connection with the claim, " * * * an indication of fraud,
misrepresentation, fault, or lack of good faith" on the part of the
employee or member. 5 U.S.C. Section 5584(b); 10 U.S.C. Section
2774(b).
In cases in which an employee has received erroneous payments in
contravention of the dual compensation laws, we have looked favorably on
requests for waiver where the individual had made no secret of dual
employment and had no reason to know in the circumstances that he was in
violation of those laws. See, e.g., Reserve Members Restored to Duty,
57 Comp. Gen. 554 (1978); 53 Comp. Gen. 377 (1973).
Under the circumstances of the case now before us, however, we do not
consider waiver of the Government's claim appropriate. As previously
stated, the fact that this officer failed to seek approval of this
subject outside employment in accordance with applicable regulation, of
which he had knowledge, and, from all appearances, took steps to prevent
staff members where he was assigned as a Public Health Service officer
from knowing of his involvement in this particular outside professional
activity, indicate that he was not without fault and did not act in good
faith in the matter. Thus, we may not waive the Government's claim
against him for compensation he received to which he was not entitled.
(1) The request for this decision was submitted by Mr. Thomas S.
McFee, Assistant Secretary for Personnel Administration, Department of
Health and Human Services, Washington, D.C.
(2) Both the Public Health Service and the Social Security
Administration are agencies within the Department of Health and Human
Services.
(3) Except in time of war, or emergency involving the national
defense when the President may declare the Commissioned Corps of the
service to be a military service. 42 U.S.C. Section 217 (1982). hold a
status like that of Regular commissioned officers of the armed forces.
51 Comp. Gen. 780 (1972). That is, Regular commissioned officers of the
Public Health Service are appointed by the President with the advice and
consent of the Senate 42 U.S.C. Section 204 (1982), as are Regular
officers of the armed services, 10 U.S.C. Section 531 (1982), 14 U.S.C.
Section 211 (1982). Public Health Service officers are appointed to
grades which correspond to grades of Army officers and are compensated
under the pay and allowance system applicable to armed services
officers. 42 U.S.C. Section 207 (1982, and 37 U.S.C. Section 101, et
seq. (1982)). The provisions pertaining to retirement of commissioned
officers of the Public Health Service, 42 U.S.C. Section 212, are
similar to those pertaining to officers of the armed services. 51 Comp.
Gen. 780 (1972). And, Public Health Service officers enjoy most of the
benefits, rights, privileges and immunities enjoyed by armed services
officers, including medical care for themselves and their dependents,
and survivor benefits. 42 U.S.C. Sections 213, 213a; 10 U.S.C. chapt.
55.
(4) See, e.g., Air Force Dental Officers, B-207109, November 29,
1982; Martin P. Merrick and Albert Jackson, Jr., B-20533, December 30,
1981. 47 Comp. Gen. 505 (1968; 46 Comp. Gen. 400 (1966).
(5) See Woodell v. United States, 214 U.S. 82 (1909), and Mullett v.
United States, 150 U.S. 566 (1893), where employees assigned additional
duties to perform for agencies other than their employing agencies were
held not entitled to additional compensation in view of R.S. Section
1765, the predecessor to 5 U.S.C. Section 5536.
(6) See also B-215128, December 14, 1984, 64 Comp. Gen. 142. We note
that 31 U.S.C. Section 3701(d) provides that debt collection under 31
U.S.C. Sections 3711-3720 is not applicable to a claim or debt under the
Social Security Act (42 U.S.C. Section 301, et seq.). That exclusion
does not apply to debts owned by persons employed by agencies
administering the Social Security Act, unless the debt arose under that
Act. 4 C.F.R. Section 102.19(b), 49 Fed. Reg. 8902 (1984). Thus, 31
U.S.C. Section 3701(d) would not preclude the application of 31 U.S.C.
Section 3711-3720 in this case where the debt is for erroneous payments
of pay.
B-214585, 64 Comp. Gen. 388
To The Honorable Hank Brown, House of Representatives, March 22,
1985:
The National Endowment for Democracy, a private non-profit
organization, was authorized to receive $31.3 million in fiscal year
1984 in grant monies, to be provided by USIA. Funding, however, was
subject to earmarks of $13.8 million and $2.5 million for two specific
subgrantees. Subsequent to enactment of the authorization, the
Endowment received $18 million in its fiscal year 1983 appropriation.
General Accounting Office concludes that, contrary to the actual
disposition of grant funds by the Endowment, the earmark language of the
authorization was binding on the Endowment, and that the Endowment must
comply with earmark requirements in future grant awards.
By letter dated October 12, 1984 (supplemented by your letter of
February 4, 1985), you requested that this Office provide you with a
legal ruling as to whether the National Endowment for Democracy, in
providing grant funds to subgrantee organizations during fiscal year
1984, complied with section 503(e) of the National Endowment for
Democracy Act, which earmarks specific funding levels for two named
subgrantee organizations. This letter responds to your request. As
explained in detail below, we conclude that the Endowment's disposition
of grant funds did not comply with the statutory earmark language.
The National Endowment for Democracy was established on November 18,
1983, as a private nonprofit District of Columbia corporation. It was
created, among various purposes, to use private-sector initiatives to
promote democratic institutions abroad. The existence of the Endowment
was statutorily recognized 4 days after its creation in the National
Endowment for Democracy Act, Pub. L. No. 98-164, tit. V, 97 Stat. 1017,
1039-42 (1983) (22 U.S.C.A. Sections 4411-4413 (West Supp. 1984)). That
Act requires the Director of USIA to make an annual grant to the
Endowment, from the USIA's "salaries and expenses" account, or from
funds specifically appropriated therefor. 22 U.S.C.A. Section 4412(a).
Funds so provided are to be used by the Endowment to carry out its
specified purposes, which include the provision of assistance to
third-party organizations, "especially the two major American political
parties, labor, and business." 22 U.S.C.A. Section 4411(b). Two of
those third-party organizations are specifically identified in the
authorizing statute, which also specifies minimum amounts to be provided
to them by the Endowment, as follows:
Of the amounts made available to the Endowment for each of the
fiscal years 1984 and 1985 to carry out programs in furtherance of
the purposes of this Act --
(1) Not less than $13,800,000 shall be for the Free Trade Union
Institute; and
(2) Not less than $2,500,000 shall be to support private
enterprise development programs of the National Chamber
Foundation. 22 U.S.C.A. Section 4412(e) (West Supp. 1984).
Contained as a separate title in the same public law that includes
the National Endowment for Democracy Act is the Department of State
Authorization Act for fiscal years 1984 and 1985. Section 205 of that
Act provides that "not less than $31,300,000" of the amounts
appropriated for the USIA for fiscal years 1984 and 1985 shall be
available for a grant to the National Endowment for Democracy. Pub. L.
No. 98-164, tit. I, Section 205, 97 Stat. 1017, 1031 (1983).
On November 28, 1983, six days following enactment of the National
Endowment for Democracy Act (and the accompanying funding
authorization), the Department of State and Related Agencies
Appropriation Act, 1984, was enacted into law. That Act contained the
fiscal year 1984 appropriation for the Endowment, significantly lower
than the amount authorized:
For grants made by the United States Information Agency to the
National Endowment for Democracy as authorized by the National
Endowment for Democracy Act, $18,000,000: Provided, That these
funds shall be available for obligation only upon enactment into
law of authorizing legislation. Pub. L. No. 98-166, tit. III, 97
Stat. 1071, 1098 (1983).
The Endowment held its first organizational meeting on December 16,
1983, and, after extensive negotiations, received an $18 million grant
from USIA under an agreement signed on March 19, 1984. /1/
On April 9, 1984, the Board of Directors approved a fiscal year 1984
budget, based on the $18 million grant, as follows:
-- $11 million for the Free Trade Union Institute;
-- $1.7 million for the National Chamber Foundation's Center
for International Private Enterprise;
-- $1.5 million each for the International Institutes of the
Democratic and Republican Parties; and
-- $2.3 million for Endowment administration, and for
discretionary grants to other organizations.
Actual grant amounts were based on specific grant proposals from the
third party organizations, with totals corresponding to the above
budgetary figures. Consequently, grants to the two statutory
subgrantees (the Free Trade Union Institute and the National Chamber
Foundation) were actually less than the amounts specified in section
503(e) of the authorizing legislation, a fact not disputed by the
Endowment.
The legal question presented here is whether the earmarking language
specified in the Endowment's authorizing legislation was binding on the
Endowment, notwithstanding the fact that the actual appropriation act
provided funding at a level significantly less than the full amount
authorized.
A review of the authorization and appropriation acts in question here
reveals no obvious conflict between the two. The program authorization
for the Endowment specifies that "of amounts made available" to the
Endowment, no less than $13.8 million is for the Free Trade Union
Institute, and $2.5 million is for the National Chamber Foundation. The
amount actually provided to the Endowment totaled $18 million, a figure
clearly less than the total amount authorized, but sufficient to meet
the earmark requirements and still leave $1.7 million for the
Endowment's administrative costs (and for discretionary grants, to the
extent that any funds were left over). USIA, although agreeing with the
Endowment's distribution, concludes that a "literal reading" of the
earmark seems to require that it be complied with. Furthermore, in
similar circumstances we have concluded that earmark language should be
applied.
In B-207343, August 18, 1982, the funding authorization for the
ACTION agency included a specific earmark of $16 million for the VISTA
program, out of a total appropriation of $25.8 million. The earmark
language in the ACTION authorization provided that "(o)f the amounts
appropriated under this section, not less than $16,000,000 shall be
first available for carrying out (the VISTA program)." The actual
appropriation was contained within a larger lump-sum figure incorporated
by reference in the continuing appropriations resolution for that year.
That resolution, however, reduced each appropriation account by 4
percent, with a simultaneous requirement that no program or project
within each account be reduced by more than 6 percent.
The ACTION agency concluded that the earmark language of the
authorization act could not be reconciled with the reduced level of
funding provided in the appropriations act. The principal basis for
this conclusion was ACTION's view that compliance with the earnmark
language would require offsetting reductions of more that 6 percent in
other programs within the title of the Domestic Volunteer Service Act of
1973. Our decision, however, disagreed with ACTION's conclusion that
the two statutes could not be reconciled. We noted that the
appropriation "account" in question was for all programs under the Act,
and not just for title I; therefore, ACTION could make offsetting
reductions (up to 6 percent) in a large number of programs within the
same account, in order to retain VISTA funding at the earmarked level.
In the present case, however, the Endowment contends that the express
language of the two enactments cannot be reconciled in a way that would
provide a program consistent with the overall requirements of the
authorizing legislation. In a submission prepared at the request of
this Office, the Endowment's attorneys stated that allocation of the
amounts earmarked would have left an insufficient sum for meaningful
funding of other programs and administration, and that the Endowment
would not have been able effectively to fulfill its statutory mission.
In addition, the Endowment contends that the legislative history of the
appropriations act supports the view that Congress did not intend the
authorization earmarks to govern distribution of the lesser amount
actually provided. /2/
With regard to the Endowment's first argument, we cannot agree that
compliance with the authorization earmark would have prevented the
Endowment from effectively fulfilling its statutory mission. Although
we recognize that a variety of organization categories are identified in
the authorization act's delineation of the Endowment's purposes, we
cannot agree with the Endowment's contention that the statute imposes a
legal obligation to provide assistance to all such groups. The
Endowment's interpretation of the purposes clause, in effect, treats all
mentioned categories of organizations as if earmarked for funding, when
in fact only two organizations, the Free Trade Union Institute and the
National Chamber Foundation, are so treated under the statute.
A review of the legislative history of the authorization supports our
view. The principal beneficiaries of the Endowment's failure to comply
with the authorization earmarks were the international affairs
institutes of the Democratic and Republican political parties, and,
indeed, the two political parties are described as potential
beneficiaries in the purposes clause of the act. See 22 U.S.C.A.
Section 4411(b). At one time prior to its enactment, the authorization
bill specifically earmarked funding for the two parties ($5 million
each), in the same section now earmarking funds for the Free Trade Union
Institute and National Chamber Foundation. See, e.g., H.R. Rep. No.
130, 98th Cong., 1st Sess. 90 (1983). The participation of the two
political parties in the Endowment's programs, however, was an issue
subject to much opposition during consideration of the bill in the
House. See, e.g., 129 Cong. Rec. H3811-21 (daily ed. June 9, 1983).
The House eventually deleted the earmark language for the political
parties, as well as all but one reference to the parties in the purposes
clause of the bill. Id. at H3814-18. No similar attempt was made
during consideration of the bill in the Senate, where all four earmarks
were retained. See 129 Cong. Rec. S12703-21 (daily ed. September 22,
1983). In conference, all previous references to the two political
parties were restored to the purposes clause, but the deletion of
earmarks for these organizations remained unchanged. The Conference
Report noted that earmarks for the party institutes were dropped without
prejudice to their receipt of funds from the Endowment. H. Rep. No.
563, 98th Cong., 1st Sess. 77 (1983).
The fact that earmarking for the two political party institutes was
deleted while similar earmarking for labor and business was retained by
the Congress demonstrates that Congress intended to give priority to the
latter two groups over the former. The retention of references to the
two political parties as examples of eligible recipients, without
retention of mandatory earmark language concerning such organizations,
indicates an intention that such groups be funded to the extent
possible, but not to the detriment of the two organizations for which
earmarks were specified.
In addition to the foregoing, we do not agree with the Endowment's
view that the legislative history of the appropriation act supports the
allocations actually made. The original House version of the fiscal
year 1984 appropriation bill contained an appropriation for the
Endowment equal to the full amount authorized ($31.3 million). See H.R.
Rep. No. 226, 98th Cong., 1st Sess. 60 (1983). The Senate version
contained no such funding, but was amended on October 21, 1983, to
appropriate $23 million for the Endowment. See 129 Cong. Rec. S14441
(daily ed. Oct. 21, 1983). The House later reduced the amount further,
to the level eventually enacted ($18 million). 129 Cong. Rec. H9592
(daily ed. Nov. 9, 1983). The only detailed explanation of any of these
decreases (from the authorization figure) is contained in the floor
discussion during Senate consideration. This language has been cited by
the Endowment to support its view that Congress did not intend the two
labor and business organizations to receive all funds earmarked for
them:
I would have much preferred an amendment to provide the full
$31,300,000 fiscal year 1984 funding for the National Endowment
for Democracy. I therefore regret that the Appropriations
Committee will accept an amendment funding only three-quarters of
the amount authorized for the Endowment. However, I understand
that there will be some delay in the establishment of the various
institutions that will be receiving grants, therefore $23 million
should cover the costs associated with the startup of this
program. 129 Cong. Rec. S14442 (daily ed. Oct. 21, 1983) (remarks
of Senator Pell).
It is not clear, however, that Senator Pell's remarks were directed
at every potential recipient organization. While it is true that the
two political party institutes were not operational at the time of these
proceedings (the organizations were incorporated in April of 1983 but
were not funded or staffed until April of 1984), the AFL-CIO had been
carrying out such activities for three decades. See 129 Cong. Rec.
H3813 (daily ed. June 9, 1983) (remarks of Congressman Gilman).
Similarly, although the National Chamber Foundation did not create its
Center for International Private Enterprise until June 1983,
privately-funded programs carried out by the U.S. Chamber of Commerce
(with which the National Chamber Foundation is affiliated) were in
existence well before creation of the Endowment. See Report of the
Democracy Program pp. 38-39 (November 30, 1983). It is not clear,
therefore, that Senator Pell intended his remarks to refer to those two
programs. Furthermore, the relevance of these remarks to the $18
million appropriation ultimately passed is questionable. When Senator
Pell made his remarks an additional $5 million was under consideration
which, if appropriated, would have provided further amounts for grants
to unearmarked organizations.
Additionally, remarks by Senator Hatch during the same proceedings
specifically refer to the earmark intended for labor:
Mr. President, it will come as no surprise to my colleagues in
this body that I have a particular commitment to support the
superb work done on behalf of free trade unionism abroad by the
AFL-CIO international programs. Therefore, I take special pride
in the fact that the AFL-CIO especially should find it possible to
utilize the funds earmarked for its work under the Endowment in
the very near future on behalf of efforts to strengthen democratic
trade unions. I urge the support of my colleagues in a vital
means to strengthen democratic process throughout the world. It
is my understanding that this amendment (to provide funding at a
$23 million level) is acceptable to the managers of the bill. 129
Cong. Rec. at S14441.
These remarks clearly do not reflect an intention to override the
earmark provisions of the authorization act by reducing overall funding
levels.
In addition to those arguments addressed above, the Endowment states
in its submission to us that the two labor and business organizations
agreed with, and did not apply for more than, the amounts actually
provided to them. According to the Endowment, it would have been
unlawful to provide these organizations with more than they had
requested. In later correspondence, the Endowment characterized this
argument as its "primary submission." We agree that in the absence of an
application or a proposal to spend the earmarked amounts, awards should
not be made, but the consequence of this is not to free the unobligated
earmarks for other projects. Under the earmark language we are asked to
interpret, funds are not available for other than the earmarked purpose
and, to the extent they have been misdirected, should be returned to
USIA. In its subsequent submission, the Endowment cites Train v. City
of New York, 420 U.S. 35 (1975) in support of its argument. This case
involved the obligation of less than available amounts; it does not
involve the use of unused appropriations for alternative purposes.
Moreover, unlike the Endowment, we do not afford a great deal of
significance to the fact that the two statutory subgrantees acceded in
the Endowment's distribution of grant funds, since ultimate control of
those funds clearly rests with the Endowment itself. We do not agree
with the Endowment's implication that its hands were tied by the fact
that the two statutory subgrantees did not submit grant proposals for
the full amount of the earmarks. Rather, it appears that those
proposals were drawn to correspond to budget amounts set in advance by
the Endowment's Board of Directors. It seems unlikely to us that the
two organizations in question would not have presented grant requests
for the full amounts contained in the earmarks, if given the opportunity
by the Endowment. /3/ The kind of earmarking of an appropriation used
by Congress in this case would appear to be a device designed to prevent
the very allocation that took place here.
Based on the foregoing analysis, it is our conclusion that the
earmark language of the Endowment's authorization was binding on the
Endowment in its distribution of grant funds, even though actual
appropriation levels were less than the full amount contemplated under
the authorization.
As a general rule, grant funds that have been misapplied by a grantee
must be recovered by the grantor agency, even in those cases where
expenditures have been incurred innocently by the grantee. See 51 Comp.
Gen. 162 (1971). In the present case, grant funds were misapplied to
the extent that non-earmarked organizations -- although otherwise
eligible as recipients -- received Endowment funding from the earmark.
It is apparent here, however, that the Endowment's officers and Board
of Directors believed that subgrant allocations were made in accordance
with the statutory requirements; it seems to us that this belief was
the result of a misinterpretation that is understandable in view of the
legislative background described previously. In light of this, we would
not object if USIA, as the grantor agency, does not recover fiscal year
1984 funds from the Endowment that were provided to non-earmark
subgrantees. Recovery of funds provided these subgrantees would place
both the subgrantees and the Endowment in jeopardy, since all appear to
have no significant alternative source of funding from which disallowed
grant costs could be paid.
With regard to fiscal year 1985 funds, we note that there is now a
specific prohibition on the provision of funds to the international
affairs institutes of the two major political parties. See Department
of State and Related Agencies Appropriation Act, 1985, Pub. L. No.
98-411, tit. III, 98 Stat. 1545, 1570 (1984). We understand that, of
$18.5 million appropriated for the Endowment for fiscal year 1985, the
Endowment has allocated the following sums for the first half of the
fiscal year: $11,560,788 to the Free Trade Union Institute, $1,438,326
to the National Chamber Foundation, and $1,080,565 to other private
sector organizations. This leaves $4,420,321 to be allocated for the
second half of the fiscal year. In accordance with the conclusions
stated above, the Endowment should ensure that its allocations to the
two earmarked organizations for the second half of the fiscal year are
in amounts sufficient to fulfill the requirements of section 503(e) of
the authorizing legislation.
We hope the foregoing is of assistance to you. As agreed to by your
staff, we are sending copies of this letter to the Endowment and to
USIA.
(1) The negotiations were complicated by the Endowment's contention
that it was entitled to a grant for the full amount of the
authorization, $31.3 million (presumably with USIA making up the balance
from its own salaries and expenses account). The Endowment eventually
accepted the lesser grant, while reserving the right to continue "with
efforts to procure additional funding." See minutes of the April 3, 1984
Board of Directors meeting. For a general review of the establishment
of the Endowment, see our report "Events Leading to the Establishment of
the National Endowment for Democracy," GAO/NSIAD-84-121, July 6, 1984.
(2) These two factors are cited by the Endowment in arguing that the
present case is not comparable to the ACTION case described above. The
Endowment also attempts to distinguish the present case on the grounds
that it, unlike ACTION, is required to fund only those programs
consistent with the purposes specified in the authorizing legislation.
Every recipient of Federal grant funds, however, is required to utilize
those funds only for purposes specified in the legislation authorizing
the grant. 31 U.S.C. Section 1301(a) (1982); see 42 Comp. Gen. 682
(1963) (use of NIH grant for purposes other than those authorized). In
this respect, the Endowment is no different than ACTION.
(3) Documents dating from the period in which the original grant
agreement was negotiated with USIA, in fact, reflect concern by labor
that the agreement might improperly give the Endowment discretion to
deviate from the earmark language of section 503(e). See letter from
Lane Kirkland, AFL/CIO President, to Allen Weinstein, NED Acting
Director, dated February 13, 1984 ("I, therefore, cannot support a grant
agreement that suggests that Section 503(e) has some true meaning that
cannot be discerned from its plain language."). Mr. Weinstein's
response, dated February 21, 1984, describes the authorization and
appropriations acts as "two conflicting texts," and indicates that
earmark language was tied to the "benchmark" of $31.3 million contained
in the authorization. Mr. Weinstein reminded Mr. Kirkland that USIA was
unwilling to negotiate using that figure. The two labor and business
organizations appear to have accepted this view, although it is likely
that they did so with the understanding that the earmarks would be
honored should NED persuade USIA to provide additional funding.
B-218208.2, 64 Comp. Gen. 384
Matter of: Siska Construction Company, Inc. - Request for
Reconsideration, March 21, 1985:
A protester has the burden of presenting sufficient evidence to
establish its case. General Accounting Office does not conduct
investigations to establish the validity of a protester's assertions.
Prior decision is affirmed on request for reconsideration where
protester has not shown that the dismissal of its protests resulted from
an error of law or fact.
Standard representations and certifications in the bid form such as
affiliation and parent company data and certificate of independent
pricing concern bidder responsibility, not the responsiveness of the
bid, and, therefore, may be supplied after bid opening.
Absence of corporate seal on bid does not render bid nonresponsive
since evidence of the signer's authority to bind the company may be
presented after bid opening.
Bid bond is not invalid as a result of the absence of corporate seals
of bidder and surety. Corporate seals may be furnished after bid
opening. In addition, validity of bid bond is not affected by time
limitation on authority of surety's representative where it is
undisputed that surety's representative had authority to execute bid
bond at the time the bond was executed.
Siska Construction Company, Inc. (Siska), requests that we reconsider
our decision in Siska Construction Company, Inc., B-217066, Feb. 5,
1985, 85-1 C.P.D. Paragraph . . ., in which we dismissed Siska's protest
of the rejection by the National Park Service, Department of the
Interior, of Siska's bid under a small business set-aside procurement,
for construction and renovation work at Lowell National Historical Park,
Massachusetts. Also, in our February 5, 1985, decision, we dismissed
Siska's protest concerning the resolicitation for the construction and
renovation project at Lowell National Park. In addition to its request
for reconsideration, Siska also protests the propriety of the awardee's
bid. Award was made to Trust Construction on February 6, 1985, and
Siska timely protested.
We affirm our prior decision and deny Siska's protest concerning the
awardee's bid.
In our earlier decision, we dismissed as untimely Siska's protest of
the rejection of its bid under the original solicitation. In addition,
we dismissed as untimely Siska's protest of the agency's extension of
the period for receipt of bids under the readvertised procurement. We
also dismissed Siska's objections to bids received under the
resolicitation where Siska made unsupported general allegations
regarding the size status of some of the other bidders and the receipt
of multiple bids from allegedly affiliated bidders, without identifying
those firms. We stated that we would not consider the merits of a
protest in which the protester did not identify which bidders were the
subject of its allegations and to which each allegation pertained.
Furthermore, we stated that, generally, multiple bids from more than one
commonly owned and/or controlled company are not improper unless such
bids are prejudicial to the interests of the government or other
bidders. Lastly, we advised Siska that our Office does not consider
size status protests in view of the statutory authority of the Small
Business Administration to make conclusive determinations on such
matters.
In its request for reconsideration, Siska alleges that a number of
circumstances suggest that we did not consider its protests on the
merits because of pressure exerted by the congressman who represents the
congressional district which includes Lowell National Park and the place
of business of the awardee. Although the congressman did indicate to
our Office his interest that the protests be resolved expeditiously, our
decision, of course, was based solely on our evaluation of the legal
merits of the case following a careful review of the entire written
record submitted by Siska and the procuring agency. We determined that
Siska's protests were properly for dismissal on the basis of the facts
and for the reasons set forth in our decision.
Siska first asserts that an objective consideration of its protests
would have included an investigation into its allegations and a request
that Siska provide us with additional information or clarification if
any was needed. It is well established, however, that it is the
protester who bears the burden of proving its case. Our Office does not
conduct investigations for the purpose of establishing the validity of a
protester's assertions. A-1 Pure Ice Company, B-215215, Sept. 25, 1984,
84-2 C.P.D. Paragraph 357. Moreover, our Bid Protest Procedures afford
all parties reasonable notice and an opportunity to be heard. Our
decision was based on the written record which included Siska's protest
letters and its comments on the agency's report.
Siska next suggests that we dismissed as umtimely its protests of the
rejection of its bid and of the extension of the period for receipt of
bids under the resolicitation as a device to avoid the merits of these
issues. Siska contends that if these protests were in fact untimely,
our Office would have dismissed them "months ago." The untimeliness of
Siska's protests was not definitely established until our Office
received the agency's report on Siska's protest, Siska's response to
that report, and a copy of the agency's bidders mailing list used in the
procurement. A proper determination of the timeliness issue required
our examination of that information. Our dismissal of Siska's protests
as untimely was based upon the chronology of events as established by
the entire written record.
In this regard, our Bid Protest Procedures applicable to this case
require that a request for reconsideration contain a detailed statement
of the factual and legal grounds upon which reversal or modification is
deemed warranted. A request must specify any errors of law made or
information not previously considered. 4 C.F.R. Section 21.9(a) (1984).
In its request for reconsideration, Siska has not pointed out any
errors in our understanding of the chronology of partinent events which
affected the timeliness of its protests. Also, Siska has not pointed
out any specific errors of law in the application of our timeliness
rules, contained in our published procedures, to the facts of this case.
Siska also has objected to our dismissal as "untimely" of its protest
against the bids submitted by other bidders on the basis that Siska
cannot be expected "to foretell who the bidders might be and protest in
advance of their submitting a bid." This is a misstatement of our
holding and of the facts of the case. Siska's letter alleging that
other bidders were ineligible for award because they were affiliated or
were not small business concerns was dated 2 days after bids were opened
under the resolicitation. We did not require it, as Siska alleges, to
"see into the future." Furthermore, our dismissal of this aspect of
Siska's protest was not based on timeliness, but on the fact that Siska
did not identify which bidders were the subject of its allegations.
Accordingly, our prior decision is affirmed.
In conjunction with its request for reconsideration, Siska has also
raised a number of objections concerning the propriety of the awardee's
bid. Siska questions the accuracy of the Certification of Independent
Price Determination, see Federal Acquisition Regulation (FAR), 48 C.F.R.
Section 52.203-2 (1984), and the statement concerning Parent Company and
Identifying Data, see FAR, 48 C.F.R. Section 52.214-8, in the awardee's
bid, because certain information available to Siska suggests that the
awardee is affiliated with another firm. Siska alleges that the awardee
and another bidder, Devi Realty, operate from the same address, share
the same telephone number, and that the president of Devi is the husband
of a vice president of the awardee. These facts do not establish that
the Certificate of Independent Price Determination was violated or that
the awardee erroneously represented that it was not "owned or
controlled" by a parent company.
The types of representations and certifications listed pertain to the
bidder's responsibility and are not necessary to decide whether the bid
is responsive. See Marathon Enterprises, Inc., B-213646, Dec. 14, 1983,
82-2 C.P.D. Paragraph 690, and Dependable Janitorial Service and Supply,
B-190956, Apr. 13, 1978, 78-1 C.P.D. Paragraph 283. The failure of a
bidder to complete such items may be corrected after bid opening as a
minor irregularity. See Dependable Janitorial Service and Supply,
B-190956, supra, 78-1 C.P.D. Paragraph 283 at 3, and Southern Plate
Glass Co., B-188872, Aug. 22, 1977, 77-2 C.P.D. Paragraph 135. We note
that the purpose of the Certification of Independent Price Determination
is to assure that bidders do not collude to set prices or to restrict
competition by inducing others not to bid. Protimex Corporation,
B-204821, Mar. 16, 1982, 82-1 C.P.D. Paragraph 247. We have stated that
evidence that two bidders have the same business address and may have
common officers and directors does not establish that the bidders
falsely certified in their bids that their bid prices were arrived at
independently. See Aarid Van Lines, Inc., B-206080, Feb. 4, 1982, 82-1
C.P.D. Paragraph 92. In any event, it is within the jurisdiction of the
Attorney General and the federal courts, not our Office, to determine
whether a criminal statute has been violated. Aarid Van Lines, Inc.,
B-206080, supra.
Siska also alleges that the awardee's bid should not have been
accepted because the awardee's corporate seal did not appear on the
Certificate of Authority to sign bids/proposals. The failure of a
bidder to furnish a corporate seal with its bid may be waived or cured
as a minor informality since the decisions of this Office provide that
evidence of an agent's bidding authority may be furnished after bid
opening. See Excavation Construction Incorporated, B-180553, May 31,
1974, 74-1 C.P.D. Paragraph 292.
Siska further maintains that there were defects in the bid bond
furnished with the awardee's bid which should have led to the bid's
rejection. First, Siska states that the bid bond lacked the corporate
seals of the awardee and the surety. The failure to affix corporate
seals to the bid bond does not render the bid nonresponsive and such
seals may be furnished after bid opening. See Securities Exchange
Commission, B-184120, July 2, 1975, 75-2 C.P.D. Paragraph 9, and
B-164453, July 16, 1968. Last, Siska contends that the bid bond which
was executed on November 28, 1984, had expired prior to the contract
award in February 1985 since the power of attorney of the surety's
attorney-in-fact expired on December 31, 1984. It is not disputed that
the surety's attorney-in-fact had authority to execute the bid bond on
the date it was executed. The termination of the attorney-in-fact's
authority subsequent to the execution of the bid bond would not affect
the validity of the bid bond since the rights and liabilities of the
parties became fixed upon the execution of the bid bond. See B-178730,
Nov. 6, 1973. The bid bond provided that the surety's obligation under
the bid bond would not be affected by any extension of time for
acceptance of the bid which the principal (the bidder) may grant to the
government.
Accordingly, we conclude that the bid bond submitted by the awardee
was proper in form and did not render the bid nonresponsive.
B-217555, 64 Comp. Gen. 382
To The Honorable Fortney H. Stark, House of Representatives, March
20, 1985:
General Accounting Office is unable to act on Congressman's request
to invoke $300 penalty against agency head who sent holiday greeting
letters as penalty mail because jurisdiction over penalty mail is with
the Postmaster General. However, postal regulations were relaxed in
1984 giving the impression that it might be permissible to mail
Christmas cards at Government expense. GAO believes that agency heads
are still obliged to follow the longstanding injunction of this Office
against sending Christmas cards at public expense absent specific
statutory authority for such printing and mailing. If our rules are
followed, agency heads must determine that it is not proper to mail
holiday greetings as penalty mail.
Your letter of December 27, 1984, asked us to investigate a possible
violation of the penalty mail provisions by the Director of the Federal
Emergency Management Agency, Louis O. Giuffrida. Your request arises in
connection with a holiday greeting letter you received from Mr.
Giuffrida in a penalty cover. The General Accounting Office has no
jurisdiction over what may be transmitted as penalty mail. B-128938,
January 10, 1979; See 24 Comp. Dec. 111 (1917). These standards are
set by the Postmaster General. However, since appropriations pay the
postage of penalty mail items (not to mention the cost of preparing the
items themselves), an agency head responsible for interpreting and
enforcing the Postal Service's rules on penalty mail use must apply
those rules with reference to Comptroller General decisions. Because
the agency head is the mailer in this case, we think it is appropriate
to offer you our independent analysis of the situation, even though we
have no official role in determining the issue or in enforcing the
penalty for misuse of penalty mail. For the reasons explained below we
think the holiday greeting letter was a violation of our longstanding
rule against sending Christmas cards with appropriated funds, and
consequently, an improper use of penalty mail.
Penalty mail is authorized by 39 U.S.C. Sections 3201-09 (1982). The
permissible contents of penalty mail are specified in the Domestic Mail
Manual (DMM) (incorporated by reference, 39 C.F.R. Section 111.1
(1984)). The Manual provides that penalty mail is strictly limited to:
* * * official mail sent by agencies of the United States
Government containing matter relating exclusively to the business
of the Government of the United States * * * . DMM Section
137.21, as amended, 49 Fed. Reg. 33567 (1984).
In addition, the DMM has traditionally included an express
prohibition on mailing Christmas cards as penalty mail. See, eg., DMM
Section 137.22a (1983) (copy enclosed). However, the Postal Service
amended the Manual in August of 1984. Agency heads are now required to
issue guidelines governing:
* * * the circumstances, if any, when officers and employees
may mail retirement announcements, Christmas cards, job resumes,
complaints, grievances, and similar materials as penalty mail. *
* * DMM Section 137.241, 49 Fed. Reg. 33567 (1984).
The revision creates the impression that there might be some
circumstances in which Christmas cards could legitimately be sent at
public expense as penalty mail. Since the DMM must be read in
conjunction with other rules applying to expenditures of appropriated
funds, an agency head would not be free to conclude that the revision
opened a loophole for Christmas card mailings.
Our Office has long taken the position that the cost of greeting
cards is a personal expense of the officer who authorizes their use,
and, therefore, is not properly charged to appropriations. We first
applied this doctrine to Christmas cards in 7 Comp. Gen. 481 (1928). We
reasoned first, that there was no specific authority to send cards and
second, that sending the cards did not materially aid in the
accomplishment of the purpose for which the appropriation was made.
Based on these two premises, and citing earlier decisions by the
Comptroller of the Treasury, we concluded that the cards were a personal
expense of the officer who ordered and sent them.
We further clarified our position in 37 Comp. Gen. 360 (1957).
There, the Christmas cards bore the imprint of the agency name, rather
than the signature of an individual. We still found them to be a
personal expense of the official who ordered the cards. We applied the
same analysis as in 7 Comp. Gen. 481; namely, that if not specifically
authorized by law Christmas cards could not be considered an expense
necessary to carry out the agency mission. We pointed out that the true
purpose of the cards was apparently, "to secure the recipient's
good-will and cooperation in carrying out (the) Agency's work." Id. at
361. We stated that such a purpose would not materially aid in
achieving the purpose for which the agency's appropriation was made.
Cf. B-205292, June 2, 1982 (July 4th fireworks display may not be
charged to appropriated funds although intended to establish good
relations with surrounding community).
The question remains whether the letter from Mr. Giuffrida is a
Christmas card. The whole text of the letter, which is signed by Mr.
Giuffrida, reads as follows:
The entire staff of the Federal Emergency Management Agency
joins me in wishing you a joyous holiday. We look forward to
working with you and your staff throughout the coming year.
The letter transacts no official business. Its sole purpose is to
extend Mr. Giuffrida's personal greetings with the obvious intent of
securing "the recipient's good-will and cooperation." This is the
essence of a Christmas card as described in 37 Comp. Gen. 360, discussed
above. Therefore, we must conclude that the letter was a "Christmas
card" for which appropriations should not have been charged.
We applied the same kind of analysis in B-149151, July 20, 1962 where
we held that other kinds of greeting cards were prohibited. The cards
in that case read "Thank you for Hospitality."
We are sending a copy of the letter to Mr. Giuffrida and we will make
this opinion available to the public 30 days after its issuance.
B-211373, 64 Comp. Gen. 370
Matter of: Department of Health and Human Services detail of Office
of Community Services employees, March 20, 1985:
The Department of Health and Human Services did not act improperly in
fiscal year 1983 in terminating the functions of the regional offices of
the Office of Community services (OCS). There was no statutory
requirement that the offices remain open, and the managers of the
Department and the OCS had broad discretion to determine how they would
carry out the OCS block grants program and how they would spend the
money in the fiscal year 1983 appropriation to the OCS, Pub. L. No.
97-377, 96 Stat. 1830, 1892 (1982).
Expenditure by the Dept. of Health and Human Services of $1.776
million from funds appropriated to the Office of Community Services
(OCS) for Community Services Block Grants, Pub. L. No. 97-377, 96 Stat.
1830, 1892 (1982), on the detail of some 78 OCS employees did not
constitute a de facto impoundment. The expenditures constituted neither
a failure to obligate or expend funds nor a withholding or a delaying of
the obligation or expenditure of funds but rather reflected a management
decision about how appropriated funds were to be expended.
Impoundment Control Act of 1971, Pub. L. No. 93-344, 88 Stat. 297,
332, applies to appropriations covering salaries and expenses. There is
nothing in the Act specifically differentiating between "program"
appropriations and "salaries and expense" appropriations.
Except under limited circumstances, nonreimbursable details of
employees from one agency to another violates the law that
appropriations be spent only for the purposes for which appropriated,
(31 U.S.C. 1301(a)), and unlawfully augments the appropriations of the
agencies making use of the detailed employees. The appropriations of a
loaning agency may not be used in support of programs for which its
funds have not been appropriated.
Nonreimbursable details of employees from one agency to another or
between separately funded components of the same agency continue to be
permissible where the details pertain to a matter similar or related to
those ordinarily handled by the loaning agency, and will aid the loaning
agency in accomplishing a purpose for which its appropriations are
provided or when the fiscal impact on the appropriation supporting the
detail is negligible.
To the extent that they are inconsistent with this decision, 13 Comp.
Gen. 234 (1934), 59 Comp. Gen. 366 (1980), and all similar decisions,
will no longer be followed. Since this decision represents a change in
our views on nonreimbursable details, it only will apply prospectively.
The American Federation of Government Employees (AFGE) has asked
whether it was lawful for the Department of Health and Human Services
(HHS) to detail on a nonreimbursable basis some 63 Office of Community
Services (OCY) employees to other parts of HHS and 15 employees to a
number of other Federal agencies. The details involved a cost of $1.776
million, and were paid for from fiscal year 1983 funds appropriated to
the OCS for Community Services Block Grants. Pub. L. No. 97-377, 96
Stat. 1830, 1892 (1982). The AFGE contends that the details constituted
an unauthorized use of funds and a de facto impoundment of the funds
spent on the details. The AFGE also contends that HHS failed to carry
out congressional intent regarding the closing down of OCS regional
offices.
For the reasons given below, we conclude (1) that HHS did not act
improperly in closing down its regional offices; and (2) that
expenditure of the $1.776 million on the details did not constitute a de
facto impoundment of OCS appropriations. On the other hand, although we
do not find unlawful the nonreimbursable details of the 78 OCS
employees, we have reconsidered our previous decisions on inter and
intra-agency details in general, and conclude that they should no longer
be followed. We now hold that these details may not be made on a
nonreimbursable basis except under the circumstances described later in
this opinion.
The Community Services Block Grant Act, Pub. L. No. 97-35, Title VI,
Subtitle B, 95 Stat. 511 (1981), repealed the Economic Opportunity Act
of 1964 and established the Office of Community Services to carry out a
new program of block grant funding of local anti-poverty agencies by
providing Federal funds to state governments.
We have been advised by an HHS Assistant General Counsel that from
the beginning of this new program, HHS decided to administer it from its
headquarters office. However, on October 6, 1981, HHS published in the
Federal Register (46 Fed. Reg. 49211) a Statement of Organization,
Functions and Delegations of Authority for OCS ("functional statement")
which stated that the regional offices of OCS would carry out activities
with respect to both the new and old grant programs. This division of
responsibilities was never implemented by HHS. In fact, the only
functions assigned to the regional offices by OCS were the monitoring
and closing out of the old Economic Opportunity Act grants, and this
work was completed in March 1983.
For fiscal year 1982, $360,500,000 was appropriated to the OCS for
Community Services Block Grants. Pub. L. No. 97-377, 96 Stat. 1830,
1892 (1982). This figure was an increase of $257 million over the
budget request, and, according to the committee reports, it was an
amount sufficient to continue the block grants program at fiscal year
1982 levels. H.R. Rep. No. 894, 97th Cong., 2d Sess. 6, 92 (1982). In
this regard, the Senate report directed that funds be expended during
fiscal year 1982 "to staff the Office (of) Community Services at a level
not lower than the number of on-board staff as of October 1, 1982." S.
Rep. No. 680, 97th Cong., 2d Sess. 99 (1982). /1/ Thus, the lump-sum
included both monies for the block grants and for the salaries and
expenses of OCS employees.
In March 1983, HHS informally arranged placements of regional office
employees on unreimbursed details in other parts of HHS, and, in some
cases, in other Federal agencies. The Department told us that some 78
employees were detailed in fiscal year 1983 -- 63 within the Department
and 15 outside. The 15 detailed outside the agency went to the
Departments of Labor (1), Agriculture (1), Energy (2), and Housing and
Urban Development (2), and to the Federal Emergency Management Agency
(4), ACTION (2), the Veterans Administration (2), and the Nuclear
Regulatory Commission (1). The functions performed by the detailed
employees varied. Many had nothing to do with their work at the OCS.
The estimated costs for the salaries and expenses of all the detailed
employees was $1.776 million. /2/ At the end of fiscal year 1982, eight
of those detailed were permanently reassigned to other Federal
positions; 40 were retired, primarily because of a reduction-in-force
(RIF); and all who remained received RIF notices. After the
reduction-in-force, 24 were placed in other positions and eight were
separated with severance pay.
The AFGE contends that HHS failed to carry out congressional intent
to "fully staff the OCS, which necessarily includes the existing
regional offices." It maintains that by limiting and then terminating
the functions of the regional offices and detailing their employees
elsewhere, thereby failing to carry out the terms of the HHS functional
statement, the agency did not follow congressional intent to "keep OCS
intact." The AFGE also maintains that detailing of the OCS employees
constituted a de facto impoundment of OCS appropriations. Thus, its
submission states: "If, rather than detailing the employees, OCS had
furloughed or RIF'd them, thereby not spending money that would
otherwise go for their salaries, there would be a traditional
impoundment * * *. Here, OCS is failing to spend its appropriations on
its own programs. That is precisely the nature of an impoundment."
Furthermore, the Union argues that detailing the OCS employees to other
parts of HHS and to other agencies and continuing to pay them out of OCS
appropriations is a violation of 31 U.S.C. Section 1301(a) which
requires that appropriations be spent only on the objects for which they
have been appropriated.
HHS advises us that the Community Services Block Grants Program for
fiscal year 1983 was fully funded and was carried out completely. All
fiscal year 1983 funds allocated were obligated. /3/ It argues that OCS
managers had broad discretion in determining what work OCS was to
perform and that the head of OCS had discretion in granting to the
regional offices only the functions of monitoring and closing out former
grants. As regards impoundment, HHS contends that "(t)here is nothing
in either the Impoundment Act, its legislative history, or the case law
* * * which would lead to a conclusion that an impoundment occurs when
the personnel of one agency are made available to assist another
agency," and that "Congress did not intend the Impoundment Act to apply
to funds appropriated solely for salaries and expenses."
Furthermore, HHS argues that the details were undertaken to avoid a
reduction-in-force, particularly in light of committee report language
evidencing a congressional intent that OCS maintain its staffing through
Fiscal year 1982 at the number of employees in place at the beginning of
that fiscal year. See "Explanation of the Recommendations of the Senate
Committee on Appropriations on the Departments of Labor, Health and
Human Services, and Education and Related Agencies Appropriation Bill,
1982, (H.R. 7205)," 128 Cong. Rec. S14133, 14161-62 (daily ed. December
8, 1982).
HHS contends that the interagency details are justified on the basis
of decisions by the GAO that in the absence of a written agreement
providing specifically for the reimbursement by one agency for personal
services provided by another, "the loan of personnel will be regarded as
having been made as an accommodation for which no reimbursement or
transfer of appropriations will be made * * *." 13 Comp. Gen. 234, 237
(1934). According to HHS, the intra-agency details were carried out in
conformity with the requirements of section 3341 of title 5 of the
United States Code. From the documents provided by HHS, it appears that
these details were for 6 months.
We agree with HHS that it was authorized to close down the OCS
regional offices. As recognized by AFGE in its submission to us, "the
functions of OCS, provided in the 1981 Act, are general in terms of what
must be done to administer and monitor the state block grants * * *.
Thus, the managers of HHS and OCS have broad discretion to determine
exactly how much work they are going to have the agency do." We think
this discretion extends to agency determinations of what functions will
be carried out by various units within the agency. The HHS functional
statement suggesting a regional office role does not bind the Secretary
of HHS to carry out its provision, nor does it limit the Secretary's
statutory discretion in administering the program. Similarly, the
functional statement does not create a legal obligation of the
Government to the employees working in the regional offices. Cf.
Schweiker v. Hanson, 450 U.S. 785, 789 (1981) (an internal claims manual
for the use of Social Security Administration employees is not a
regulation; it has no legal force and is not binding on the agency).
Further, in our reading of the relevant legislative history, we find
no congressional intent to include the existing or proposed regional
office structure or functions in committee recommendations that OCS
expends funds sufficient to remain staffed at a level "not lower than
the number of on-board staff as of October 1, 1982." S. Rep. No. 680,
97th Cong., 2d Sess. 99 (1982). Nothing in this statement directs the
retention of a particular administrative structure, or suggests that
regional office employees continue to work in the regional offices. The
AFGE argues that the use of the appropriated moneys to pay salaries of
employees who will not be doing the work of the entity for which the
appropriation was made is an unauthorized use of the appropriation. The
Department counters by pointing out that by March 1982, the work of the
OCS with respect to the block grants was completed and there was no
further work for OCS staff to do even at headquarters. Since it felt
obliged, because of the Committee directives, to maintain the specified
staffing level, it detailed staff on a non-reimbursable basis to other
intra- and inter-departmental units.
The Impoundment Control Act of 1974, Pub. L. No. 93-344, 88 Stat.
297, 332, codified at 2 U.S.C. Section 681 and following, was intended
to tighten congressional control over impoundments, and to establish
procedures that would provide a means for the Congress to pass upon
executive branch proposals to impound budget authority. 54 Comp. Gen.
453, 454, (1974). The Act covers both rescissions and deferrals. A
recission exists when the President determines that "all or part of any
budget authority will not be required to carry out the full objectives
or scope of programs for which it is provided or * * * should be
rescinded for fiscal policy or other reasons * * *." 2 U.S.C. Section
683(a). A deferral is a withholding or delaying of the obligation or
expenditure of budget authority provided for projects or activities, or
any other type of executive action or inaction that effectively
precludes obligation or expenditure of budget authority. /4/ Id.
Section 682(1).
Consistent with the Act, expenditure of the $1.776 million on the
nonreimbursable details did not constitute a de facto impoundment. The
expenditures constituted neither a failure to obligate or expand funds
nor a withholding or a delaying of the obligation or expenditure of
funds, but rather reflected a management decision about how appropriated
funds were to be expended. In this regard, we have held that the Act
does not apply to program implementation decisions, as such,
irrespective of their impact on budget authority. B-200685, December
23, 1980. (Where a program decision does not preclude obligation or
expenditure of funds, impoundment would not result.)
As an auxiliary matter we should point out that we disagree with HHS'
contention that "Congress did not intend the Impoundment Act to apply to
funds appropriated solely for salaries and expenses." First, it would
appear that HHS is characterizing incorrectly the 1983 appropriations to
OCS for block grants. The appropriation is a lump sum that covers both
the grants and the salaries and expenses of the Federal employees
implementing the grant program; there is no specific appropriation for
salaries and expenses. In any event, we find nothing in the Impoundment
Control Act specifically differentiating between "program"
appropriations and "salary and expense" appropriations. See
B-115398.32, November 20, 1974 (to the extent the plan for reductions in
Federal positions will result in net savings of salaries and expenses,
the plan would require special messages under the Impoundment Control
Act).
Although the Act and its legislative history do indicate that the Act
was aimed at failure of the executive branch to carry out congressional
"programs", it seems evident that, in most instances, Government
programs require Government employees to carry them out. Therefore,
reducing the number of Federal employees working on a program could very
well effect the extent to which a program can be implemented. In this
regard, it makes no difference whether the appropriation is one that
provides lump sums that include monies both for program activities and
the salaries and expenses of the employees involved, or one
appropriating monies strictly for salaries and expenses covering
employees whose activities could pertain to several or many programs.
The record shown that HHS detailed some 78 OCS employees to various
Government agencies outside of HHS and to other divisions within HHS, as
we understand it to perform work that, for the most part, had nothing to
do with the fiscal year 1983 appropriations to OCS for community
services block grants. HHS maintains that the details were necessary to
avoid a reduction-in-force and to carry out Congress' intention to staff
OCS in fiscal 1983 at the number of employees in place on October 1,
1982, S. Rep. No. 680, 97th Cong., 2d Sess. 99 (1982). Although we are
not convinced that a reduction-in-force was HHS' only alternative, /5/
at this time, some two years after they were carried out, we will not
object to the details. Nevertheless, as the size of details far exceed
those we have permitted in the past, we think this case provides an
appropriate opportunity to reconsider our general position on their
propriety.
A "detail" is the temporary assignment of an employee to a different
position for a specified period, with the employee returning to regular
duties at the end of the detail. Federal Personnel Manual, ch. 300,
Section 8-1 (Inst. 262, May 7, 1981). The detailing of Federal
employees from one agency to another on a nonreimbursable basis already
had been a Government practice for a number of years prior to the
Treasury Comptroller discussing the issue in 14 Comp. Dec. 294 (1907).
In that case, the Comptroller stated that the practice originated in
instances in which the head of one department had available an officer,
clerk, or employee who could perform a service for another department
and whose services were not needed for the time engaged on the detail.
It was therefore in the interest of good Government and economy to
utilize the employee's services. Id. at 296.
The legal question raised by nonreimbursable details was whether they
were consistent with the law requiring that appropriations be spent only
for the purposes for which appropriated, 31 U.S.C. Section 1301(a), and
the rule prohibiting unlawful augmentations of agency appropriations.
In past GAO decisions analyzing the relationship of details to the
purpose law and the augmentation question, we said that appropriations
of a loaning agency need not be reimbursed by those of a receiving
agency when the work entails no additional expenses since the agencies
of the Government fundamentally are branches of one whole system. The
performance of services at no increased cost is a matter of comity in
the interest of Government service generally, and is not to be treated
in the same basis as a commercial arrangement between two unrelated
business organizations. A-31040, May 6, 1930, cited in 10 Comp. Gen.
275, 278 (1930). Thus, we held that appropriations of the loaning
agency normally should pay the salaries of the detailed employees.
Reimbursement from the receiving agency to the loaning agency would be
authorized only when the loaning of services to, or the doing of work
for, another department or establishment resulted in expenditures
additional to regular salaries and expenses. 10 Comp. Gen. 193, 196
(1930). Accordingly, we reasoned that nonreimbursable details did not
violate the purpose law or the augmentation rule.
Nevertheless, the detailing of Federal employees from one agency to
another on a nonreimbursable basis was of concern to the Congress. In
1932 the Congress passed the Economy Act, section 601, of which
authorized the departments of the Federal Government, or units of a
single department, operating under separate appropriations to enter into
written agreements for the performance of services by the personnel of
one department for the other or, one unit of a department for another,
for which reimbursement or transfer of appropriations might be made. 31
U.S.C. Section 1535. Section 601 was enacted partly in response to our
nonreimbursable detail rule. 57 Comp. Gen. 674, 677 (1978).
The bill on which section 601 of the Economy Act was based H.R.
10199, 71st Cong. 2d Sess., authorized among other things, interagency
procurement of work with reimbursement to be based on "actual cost".
During hearings on the bill, Congressman French, the bill's sponsor,
stated that the Comptroller General's decisions permitting
nonreimbursable details prevented "the free use by the Government of its
own facilities for the reason that no department can afford to neglect
its own work and use the time of its employees on work for another
department." Hearings on H.R. 10199 before the House Committee on
Expenditures in the Executive Departments, 71st Cong., 2d Sess. 5. He
also said that if the department obtaining the service did not reimburse
the loaning agency, the purpose law and augmentation rule would be
violated. Id. at 4. Moreover, the House Reports accompanying both H.R.
10199 and an almost identical provision that was included as section 801
of H.R. 11597, 72d Cong., 1st Sess., stated that it was unfair for the
loaning department to have to pay the cost from its appropriations and
that "work done should be paid for by the department requiring such * *
* services." /6/ H.R. Rep. No. 2201, 71st Cong., 2d Sess. 2-3 (1931);
H.R. Rep. No. 1126, 72d Cong., 1st Sess. 15-16 (1932). Thereafter H.R.
11597 was incorporated as Part II of H.R. 11267, 72d Cong., 1st Sess.,
which became the Legislative Branch Appropriation Act for fiscal year
1933, Pub. L. No. 72-212, 47 Stat. 382, 417-18. That law contained the
Economy Act. See generally 57 Comp. Gen. 647, 677-80 (1978).
Notwithstanding the legislative history of the Economy Act, we have
continued to permit nonreimbursable details. Nearly all cases involving
nonreimbursable details considered since passage of the Economy Act have
involved limited numbers of employees for limited periods of time. /7/
Thus, in 13 Comp. Gen. 234 (1934), we sustained a nonreimbursable detail
of one employee from the Interstate Commerce Commission to the United
States Shipping Board at a cost of $200. /8/ We said that in the
absence of an Economy Act Agreement, the loan of personnel should be
regarded as an accommodation for which no reimbursement or transfer of
appropriations for salaries should be made.
More recently, we permitted details of eight employees from numerous
agencies to the National Commission on the Observance of International
Women's Year and the State Department at a cost of approximately
$220,000 over a 2-year period. We said that, under our prior decisions,
non-reimbursable detials of personnel were not prohibited by the law
requiring that appropriations only be spent on the objects for which
they were appropriated, provided that (1) the employees detailed were
not required by law to be engaged exclusively on work for which their
salaries were appropriated, and (2) the employees' services could be
spared for the details. B-182398, March 29, 1976.
In two analgous decisions, we held on the basis of the purpose law
that an agency could make nonreimbursable details to congressional
investigating committees only in instances where (1) the committee's
investigation involved matters similar or related to those ordinarily
handled by the agency, thus furthering the purpose for which the
agency's appropriations were made, and (2) the services of the employee
could be spared without detriment to the agency's work and without
necessitating employment of an additional employee. 21 Comp. Gen. 954,
956-57 (1942); 21 Comp. Gen. 1055, 1057-58 (1942). Moreover, in 21
Comp. Gen. at 1057-58, we said that it was not enough that there was a
mutuality of interest between the work of the congressional
investigating committee and the executive agency, or that the knowledge
or information gained by a congressional investigating committee might
be of interest or even helpful to an executive agency, "but it must
appear that the work of the committee to which the detail or loan of the
employee is made will actually aid the agency in the accomplishment of a
purpose for which its appropriation was made such as by obviating the
necessity for the performance by such agency of the same or similar
work." Although both these cases involved details of employees by
executive branch agencies to congressional committees, the
interpretation of the purpose law seems equally applicable to details
between agencies.
The discussion above shows that the purpose law has been used both to
support and to criticize nonreimbursable details. In reviewing our
cases, we conclude that the latter position is correct. We no longer
accept the view that because the agencies of the Government
fundamentally are branches of one whole system, these details are
consistent with the purpose law and thus the appropriations of the
loaning agency should not be increased at the expense of those of the
receiving agency when the detail involves no additional expense.
Although Federal agencies may be part of a whole system of Government,
appropriations to an agency are limited to the purposes for which
appropriated, generally to the execution of particular agency functions.
Absent statutory authority, those purposes would not include
expenditures for programs of another agency. Since the receiving agency
is gaining the benefit of work for programs for which funds have been
appropriated to it, those appropriations should be used to pay for the
work. Thus, a violation of the purpose law does occur when an agency
spends money on salaries of employees detailed to another agency for
work essentially unrelated to the loaning agency's functtons. Moreover,
it follows that the appropriations of the receiving agency are
unlawfully augmented by the amount the loaning agency pays for the
salaries and expenses of the loaned employees. The legislative history
of section 601 of the Economy Act, discussed earlier, shows that the
Congress recognized this problem and enacted section 601 partly as a
remedy.
Nonreimbursable details raise additional problems. To the extent
that agencies detail employees on a nonreimbursable basis instead of
through Economy Act agreements, which require reimbursement, they may be
avoiding congressional limitations on the amount of moneys appropriated
to the receiving agency for particular programs. Similarly, agencies
could circumvent personnel ceilings by receiving detailed employees.
Congressional concerns with nonreimbursable details was expressed
during the process of enacting amendments clarifying the authority for
employing personnel in the White House Office and the President's
authority to employ personnel to meet unanticipated needs. Pub. L. No.
95-570, 92 Stat. 2445, 2449-50. Prior to those amendments the law
allowed details of "(e)mployees of the executive departments and
independents establishment * * * from time to time to the White House
Office for temporary assistance." See Pub. L. No. 80-771, 62 Stat. 672,
679. As amended, the law currently requires reimbursement to the
loaning agency "for any period occuring during any fiscal year after 180
calendar days after the employee is detailed in such year", and the
President to report to the Congress for each fiscal year, among other
things, the number of individuals detailed to the White House for more
than 30 days, the number of days in excess of 30 each individual is
detailed and the aggregate amount of reimbursement made. 3 U.S.C.
Sections 112,113. The committee reports and floor debate accompanying
the amendments show that the Congress intended to place restrictions on
nonreimbursable details to the White House. S. Rep. No. 868, 95th
Cong., 2d Sess. 1, 4, 11 (1978); H.R. Rep. No. 979, 95th Cong., 2d
Sess. 10-11 (1978); 124 Cong. Rec. 20806-08 (1978) (Comments of
Senators Sasser and Percy); 124 Cong. Rec. 10109-11 (1978) (Comments of
Representatives Schroeder and Harris).
Although we conclude that nonreimbursable interagency details
generally are improper, there are limited circumstances in which they
still may be allowed. Consistent with our decisions in 21 Comp. Gen.
954, 956-57 (1942) and 21 Comp. Gen. 1055, 1057-58 (1942), pertaining to
details to congressional committees, details between executive branch
agencies are permissible where they involve a matter similar or related
to matters ordinarily handled by the loaning agency and will aid the
loaning agency in accomplishing a purpose for which its appropriations
are provided.
In addition, we adopt the guidance provided in the Federal Personnel
Manual (Ch. 300, subchapter 8, Inst. 262, May 7, (1981) for intra-agency
details and apply it to interagency details as well. The FPR permits
such details for brief periods when necessary services cannot be
obtained, as a practical matter, by other means and the numbers of
persons and cost involved are minimal. Id. Section 8-3. While the
purpose restriction technically applies even in such cases, we would not
feel obliged to object when the fiscal impact on the appropriation is
negligible. We also leave open the question whether nonreimbursable
details may be permitted when an agency is faced only with the choice of
implementing those details or carrying out a reduction in force.
The analysis of the statutory appropriation restriction which led us
to conclude that nonreimbursable interagency details are improper
applies equally to intra-agency details. Congresssional control over
the funding levels of various programs can be thwarted just as
effectively when their respective appropriations are swelled by an
unreimbursed detail within the same department.
Moreover, congressional disquiet with GAO-SANCTIONED post practices
which regarded unreimbursed details as an "accommodation" and which led
to enactment of the "Economy Act" (see earlier discussion) applied
equally to intra-agency and interagency details. All Economy Act
transactions must be made pursuant to a written agreement on a
reimbursable basis.
We recognize that not all inter- or intra-agency provisions of goods
or services are made pursuant to the Economy Act. (The Economy Act was
enacted to provide authority for such exchanges in the absence of some
other specific statutory authority.) However, it does not follow that
because a service or procurement is authorized, that it is necessarily
authorized to be provided on a nonreimbursable basis, unless the
statutory authority so states. In the instant case, we note that
intra-agency details are specifically authorized by 5 U.S.C. Section
3341. However, section 3341 is silent on the matter of reimbursement.
The intra-agency detail authority first was provided for in the Act
of March 3, 1853, 10 Stat. 189, 211, and, subsequently, became section
166 of the Revised Statutes. It was amended by the Act of May 28, 1896,
29 Stat. 140, 179 and was codified, as it presently appears, by Publ. L.
No. 89-554, 80 Stat. 378, 424. In 1894, the United States Attorney
General was asked whether clerks drawing salaries from a lump-sum
appropriation for a specific purpose legally could be detailed to
perform work in other divisions of the same department funded by
separate appropriations. In reliance on section 166 of the Revised
Statutes, the Attorney General found that the clerks could be so
detailed; however, they could not be paid from appropriations of the
detailing division, unless such payment specifically was authorized by
law. 20 Op. Atty. Gen. 750, 751-52 (1894).
Consistent with the Attorney General's opinion, we think it the
better view that section 166, as amended, did not intend nonreimbursable
details but merely provided authority to make the details. In this
regard, we point out that there are other statutes authorizing details
which specifically provide that the details may be done on a
non-reimbursable basis. Thus, for example, section 3343 of title 5,
which authorizes details to international organizations, states that the
details may be made "without reimbursement to the United States by the
international organization * * *."
To the extent that this decision prohibits nonreimbursable details
except under the limited circumstances described, we recognize it could
have a widespread effect on current agency practice. Accordingly, since
our decision represents a change in our views, it will only apply
prospectively. To the extent that they are inconsistent with this
decision, 13 Comp. Gen. 234 (1934), 59 Comp. Gen. 366 (1980), and all
similar decisions, will no longer be followed.
(1) For fiscal year 1984, $352,300,00 was appropriated for Community
Services Block Grants. Pub. L. No. 98-139, 97 Stat. 871, 885. This
amount represented an increase of some $349 million over the amount
requested by the Administration. H.R. Rep. No. 357, 98th Cong., 1st
Sess. 7 (1983). The conference report shows that for Federal
administration of Community Services Block Grants, the Congress intended
to provide for "70 full-time equivalent positions in the national
office." H.R. Rep. No. 422, 98th Cong., 1st Sess. 19 (1983).
(2) HHS did not provide us with a breakdown on how much of this money
was spent on the interagency details and how much on the intra-agency
details.
(3) Nonetheless, the agency has informed us that some $6 million of
$20 million carried over from fiscal year 1982 for financing a
comtemplated reduction-in-force remained unobligated.
(4) The Act calls for the executive branch to submit proposed
recissions and deferrals for consideration by Congress. 2 U.S.C.
Sections 683-84.
(5) For example, HHS could have continued the regional office
structure, provided work at its headquarters for the 78 employees,
attempted to arrange reimbursable details under section 601 of the
Economy Act, 31 U.S.C. Section 1535, or, consistent with our views
below, attempted to arrange nonreimbursable details involving work which
would have aided HHS in accomplishing a purpose for which its OCS
appropriations were provided. We point out as well that the legislative
history shows there was a conflict between the executive and legislative
branches about the extent to which the OCS grant program was to be
carried out. The Congress intended the fiscal year 1983 grant program
to be funded at the same level as that for fiscal year 1982. H.R. Rep.
No. 894. 97th Cong., 2d Sess. 6 (1982). This represented some $257
million more than the amount proposed by the executive department.
(6) The Chief Coordinator of the Bureau of the Budget, who prepared
the bill, maintained that the Comptroller General's ruling in effect
"penalized the performing department's appropriation * * * and makes it
loath to perform services for other departments and establishments for
fear that its own work might be crippled thereby * * *." Hearings on
H.R. 10199 before the House Committee on Expenditures in the Executive
Departments, 71st Cong., 2d Sess. 13-14.
(7) Congressman French suggested that even Economy Act transfers
should be limited in scope. Thus, he did not think "any legislation
ought to authorize one bureau or department to transfer its work in a
large way, to another department. * * *" Hearings on H.R. 10199 before
the House Committee on Expenditures in Executive Departments, 71st
Cong., 2d Sess. at 6.
(8) In 59 Comp. Gen. 366, 367-68 (1980) we reaffirmed the position we
took in 13 Comp. Gen. 234 (1934).
B-198137, 64 Comp. Gen. 366
Matter of: GSA Transportation Audit Contracts, March 20, 1985:
Under 31 U.S.C. 3718(b), transportation audit contractors engaged by
the General Services Administration (GSA) to assist in carrying out
GSA's responsibilities under 31 U.S.C. 3726 may be paid from proceeds
recovered by carriers and freight forwarders, but only for services
attributable to the recovery of "deliquent" amounts (as defined in sec.
101.2(b) of the Federal Claims Collection Standards), as opposed to
audits and other services in connection with non-deliquent accounts.
The term "collection services," used in 31 U.S.C. 3718(a), does not
include the servicing of non-deliquent accounts, but rather is limited
to actions taken to collect amounts that have become "deliquent," as
defined in sec. 101.2(b) of the Federal Claims Collection Standards (to
be codified in 4 C.F.R. ch. II). Therefore, the exception to the
miscellaneous receipts act (31 U.S.C. 3302) contained in sec. 3718(b)
authorizes agencies to pay debt collection contractors from the proceeds
of their activities to collect deliquent amounts, but does not authorize
payment from proceeds for contractors who service non-deliquent
accounts.
Under 31 U.S.C. Section 3726 (1982), the General Services
Administration (GSA) is responsible for performing post-audits of
amounts paid by Government agencies to carriers and freight forwarders
for transportation services. In carrying out its duties under this
statute, GSA has engaged contractors to, among other things, examine
bills already paid, identify overcharges or other erroneous payments
made by the Government, request repayment on behalf of the United States
for those erroneous payments, and take such other actions as may be
necessary and appropriate to effect collection of those amounts.
Because of constrained budget resources, GSA would like to use the
proceeds recovered under those contracts to reimburse its contractors
for their services. The General Counsel of GSA asks whether the limited
exception to the so-called "miscellaneous receipts" act, 31 U.S.C.
Section 3302, provided by section 13 of the Debt Collection Act of 1982
(as amended in 1983), 31 U.S.C. Section 3718(a), provides the necessary
authority.
As explained below, we conclude that for those services directly
related to collection of an established and deliquent claim, the GSA
contractors may be paid from the recovered proceeds. However, the
majority of the described services are not debt collection services for
which payment from proceeds was authorized by section 3718(b).
Under 31 U.S.C. Section 3726, carriers or freight forwarders are
entitled to be paid upon presentation of their bills for transportation
services -- in some cases, even before the transportation is completed.
The Administrator of GSA then has the duty to conduct a postaudit of the
charges and to deduct the amount of any overpayment identified from
subsequent amounts owed to the provider of the services. GSA has been
using private contractors to perform many of the tasks necessary to
carry out its duties under this act and wishes to continue this program.
According to the GSA submission, its contractors will perform the
following functions:
1. Contractors will examine carriers' paid billings to
identify overcharges and other improper payments.
2. Contractors will send notices of overcharge and other
notices to carriers advising them of specific mistakes in their
billings and make demand for refunds, with remittances to be made
payable to the Government and sent to the contractor.
3. Contractors will collect remittances and forward same
directly to GSA, with payment to the contractor to be made from
these remittances.
4. Though carrier protests will initially be sent direct to
GSA, contractors will examine each protest and draft a response
for review and final determination by GSA, which is the procedure
currently employed.
5. Contractors will perform such other functions which are
consistent with the debt collection process as specified in the
contract, such as follow-up letters and telephone calls.
GSA advises us that it will "retain the authority to resolve
disputes, compromise claims, terminate collection actions, and initiate
legal action." As indicated in B-198137, June 3, 1982, as long as GSA
retains inherently governmental functions, such as those described
above, we have no objection to the utilization of contractors to perform
any or all of the five functions listed above. Our problem is with the
source of funding proposed to pay for these services.
Because of a reduction in its budget authority, GSA would like to
conserve its appropriations and to pay for the contractors' services
under a contingency arrangement from the proceeds of any overcharge
reimbursements collected from the carriers. The General Counsel is
aware that 31 U.S.C. Section 3302(b) requires, unless otherwise provided
by law, that officials "receiving money for the Government from any
source shall deposit the money in the Treasury as soon as practicable
without deduction for any charge or claim." (Italic supplied.) She
suggests, however, that section 13 of the Debt Collection Act of 1982
(DCA), 31 U.S.C. Section 3718, as amended by Pub. L. No. 98-167, 97
Stat. 1104 (1983), may provide the necessary "otherwise provided"
authority.
Section 13 of the DCA provides that an agency "may make a contract
with a person for collection services to recover indebtedness owed to
the United States Government." It also provides that:
Notwithstanding section 3302(b) of this title, a contract under
subsection (a) of this section may provide that a fee a person
charges to recover indebtedness owed United States Government is
payable from the amount recovered. 31 U.S.C. Section 3718(b).
The GSA General Counsel suggests that the term "collection services,"
be used as in section 13, may be construed to encompass the audit of the
vouchers, the identification and processing of any overcharges
discovered, the handling of any protests to the Government's claim for
reimbursement, and finally, the collection of any indebtedness
determined to be due. We do not agree with GSA's interpretation of the
term, "collection services." In our view, section 13 refers to contract
for collection of amounts previously found to be past due and owing,
having afforded the alleged debtor the right to protest, have his
protest adjudicated administratively, and generally to have the benefit
of all due process procedures to which he is entitled by law.
For example, the initial tasks to be performed by the GSA contractors
entail the examination of bills paid by the Government in order to
determine whether the payments were proper. Once an erroneous payment
has been identified, the contractor is to send the overpaid company a
letter which, among other things, explains the contractor's
determination that a debt exists, and demands a refund on behalf of the
United States by a certain date. Up to this point, there was no debt
owed to the United States, since 31 U.S.C. Section 3726 specifically
provides for payment in the full amount of the carrier's bill, subject,
of course, to later adjustments as a result of GSA's post-audit
processes. After receipt of that initial letter, there is a debt or a
claim, but we would not consider it to be deliquent until any dispute
over the existence or amount of the Government's claim has been resolved
administratively and the claim is not paid by the specified due date.
Conceptually, the tasts to be performed under these contracts fall
into two categories: "account servicing" and "debt collection."
"Account servicing" generally refers to the provision of such services
as billing, accounting, record keeping, and receipt and processing of
payments on non-deliquent accounts. These tasks appear to encompass the
major portion of the services for which GSA has or plans to contract.
"Debt collection," in contrast, generally refers to action taken to
collect amounts that have become deliquent. In our opinion, section 13
does not address the use of private contractors to service non-deliquent
accounts and therefore does not provide the "other authority" necessary
to overcome the miscellaneous receipts statute, discussed earlier.
Although section 13 itself does not use the term "deliquent
accounts," the legislative history of the DCA is replete with statements
to the effect that Congress was primarily concerned with and intended
this act to address, the collection of deliquent debts. /1/
Moreover, section 13 provides that persons who enter into contracts
to collect debts owed to the United States must comply with the
provisions of the Fair Debt Collection Practices Act (FDCPA). That act
prohibits the use of abusive, deceptive, and unfair debt collection
practices (15 U.S.C. Section 1692(e)), and imposes a number of
affirmative disclosure requirements (e.g., 15 U.S.C. Section 1692(g)).
The FDCPA definition of "debt collectors" specifically excepts
"servicing agents." See, 15 U.S.C. Section 1692a(6)(G)(iii). See also
S. Rep. No. 382, 95th Cong., 1st Sess. 3-4 (The term, "debt collector"
does not include "mortgage service companies and others who service
outstanding debts for others, so long as the debts were not in default
when taken for servicing."). As explained in Federal Trade Commission
staff interpretives (the FTC has primary administrative responsibility
for enforcing the FDCPA), the exception excluding servicing agents,
"contemplates a situation in which a bona fide servicing arrangement is
entered into prior to the time the debt goes into default." 2 FTC
Interpretives 37 (June 14, 1978). It also observed that "servicing an
account is quite different from engaging in collecting efforts," 2 FTC
Interpretives 55 (July 28, 1978), and "Congress specifically meant to
exclude from the (FDCPA's) coverage, mortgage service companies, and
others who service outstanding debts for others, so long as the debts
were not in default when taken for servictng," 1 FTC Interpretives 55
(Jan. 25, 1978). Consequently, it would be illogical, contrary to the
legislative history of Section 13, and inconsistent with the position of
the staff of the agency charged with enforcement of the FDCPA to treat
servicing agents as though they were debt collectors.
Finally, we point out that section 102.6 of the joint GAO and
Department of Justice Federal Claims Collection Standards, which
implements section 13 of the DCA, specifically provides that "all
agencies have authority to contract for collection services to recover
deliquent debts * * *." 49 Fed. Reg. at 8899 (to be codified as 4 C.F.R.
Section 102.6) (Italic supplied.) The comments accompanying the Federal
Register publication of the revised FCCS specifically explain that
section 102.6 "is intended to apply only to the recovery of deliquent
debts and not to routine servicing arrangements for non-deliquent
debts." 49 Fed. Reg. at 8892.
For these reasons, we conclude that the term, "collection services,"
as used in section 13, may not be construed to include "account
servicing." Therefore, only the portion of the proceeds recovered by
GSA's transportation audit contractors properly attributable to
collection of "deliquent" amounts, as defined in section 101.2(b) of the
FCCS, 49 Fed. Reg. at 8896, may be used to pay for the contractors'
services. All other amounts collected by the GSA transportation audit
contractors must be deposited into the Treasury, without deduction, as a
credit to the appropriation or fund account against which the original
payments were charged or to miscellaneous receipts if the accounts are
not readily identifiable. Cf. 41 C.F.R. Section 101-41.505.
(1) E.g., S. Rep. No. 378, 97th Cong., 2d Sess. 2-4 (1982); S. Rep.
No. 287, 97th Cong., 2d Sess. 5, 14 (1981); 128 Cong. Rec. E4653 (Daily
ed. Oct. 1, 1982) (Rep Derwinski); 128 Cong. Rec. H8052 (daily ed.
Sept. 30, 1982) (Rep. Conable); Id. at H8053 (Rep. Horton and Rep.
Butler); 128 Cong. Rec. S12327-29 (daily ed. Sept. 27, 1983) (sen.
Percy); Id. at S12329 (Sen. Dole); 128 Cong. Rec. H1734 (daily ed. May
4, 1982) (rep. Rostenkowski); 127 Cong. Rec. S5501 (daily ed. May 21,
1981) (Sen. Percy).
B-217722, 64 Comp. Gen. 359
To the Honorable Lowell Weiker, Jr., Subcommittee on Labor, Health
and Human Services, and Education, Committee on Appropriations, United
States Senate, March 18, 1985:
Executive branch is not bound by directions in appropriations
committee reports indicating the total number of research grants to be
funded by the Act appropriating fiscal year 1985 monies to the National
Institutes of Health, Pub. L. No. 96-619. 98 Stat. 3305, 3313-14.
Directions in committee reports, floor debates and hearings, or
statements in agency budget justifications are not legally binding on an
agency unless incorporated, either expressly or by reference, in an
appropriation act itself or in some other statute.
Executive branch plan to fund some 646 National Institutes of Health
research project grants for 3 fiscal years with monies appropriated to
NIH for fiscal 1985 violates Bona Fide Need Rule, 31 U.S.C. 1502(a).
Legislation authorizing grant program contains no express authority to
obligate 1-year appropriations for the funding needs of subsequent
years.
Executive branch plan to fund some 646 National Institutes of Health
research project grants for 3 fiscal years with fiscal year 1985 monies
does not at the time of this decision violate the Impoundment Control
Act. The executive branch's intention to date, as evidenced by the
(albeit improper) obligation of the funds, has not been to withhold or
delay the availability of the funds for the program period.
By letter of February 4, 1985, you raised various questions about the
availability and use of funds appropriated to the National Institutes of
Health (NIH) for bio-medical research grants in the Departments of
Labor, Health and Human Services, and Education and Related Agencies
Appropriations Act for fiscal year 1985. Pub. L. No. 98-619, 98 Stat.
3305, 3313-14.
Specifically, you asked (1) whether the executive branch violated the
language and spirit of the appropriations act by significantly deviating
from a congressional directive setting a particular level of program
activity for NIH new and competing research grants; (2) whether the
executive branch would be usurping congressional perogatives and
violating congressional intent if it funds some 646 NIH grant projects
for a 3-year period with funds that were appropriated only for the needs
of fiscal year 1985; (3) for a description of the legislative history
of a similar multi-year funding problem that was before the subcommittee
in 1974; and (4) whether the described actions of the executive branch
were in compliance with the Impoundment Control Act of 1974, Pub. L. No.
93-344, 88 Stat. 297, 332, codified at 2 U.S.C. Sections 681 et seq.,
and other pertinent statutes.
For the reasons given below, we find that the executive branch is not
legally bound to comply with the level of program activity set forth in
congressional committee reports for new and competing NIH grants. On
the other hand, the executive branch plan to fund some 646 NIH research
grants on a 3-year basis with fiscal year 1985 funds is unlawful,
because in the absence of specific statutory authroity, such actions
violate 31 U.S.C. Section 1502(a). While the Administration's action in
obligating the funds on a 3-year basis is improper, we cannot say that
it is at this time a violation of the Impoundment Control Act.
In your letter you stated that in arriving at the level of annual
appropriations for the NIH, the Congress has traditionally based its
decisions upon a complex set of factors which, taken together, represent
the level of effort which it believes is necessary to fulfill the NIH
mission. Among these factors are the number of new, competing renewal,
and non-competing research grants applied for and funded, as well as the
number of clinical trials, research centers, and training fellowships
being supported by the agency. Also considered is the level of research
effort being carried out through the agency's intramural program.
Consistent with these considerations, for fiscal year 1985 the House
recommended an appropriation to NIH of close to $4.9 billion for
bio-medical research grants, an increase of some $503.3 million over the
Administration's budget estimates. The Committee stated that although
the number of new and competing grants in recent years had stabilized at
approximately 5,000, the award rates and paylines for these grants had
declined and many high calibre investigators had not received funding.
H.R. Rep. No. 911, 98th Cong., 2d Sess. 29-30 (1984). In this regard,
the Committee was concerned that the President's budget request for
fiscal year 1985 proposed significantly decreased appropriations which
threatened the scope of the research being conducted. To change this
situation, the House Committee recommended increased funding to support
an estimated 6,200 new and competing research project grants Id. at 30.
The Senate Committee on Appropriations expressed the same concerns
and recommended increased funding for some 1,850 new and competing
grants over the 5,000 level requested. S. Rep. No. 544, 94th Cong., 2d
Sess. 50 (1984); 130 Cong. Rec. S. 11688 (daily ed. Sept. 21, 1984)
(statement of Senator Proxmire). Although the conference report did not
mention the total number of grants intended for support, it recommended
a compromise appropriation for NIH biomedical research grants between
the amounts proposed by the Senate and House, which was later enacted as
proposed. H.R. Rep. No. 1132, 98th Cong., 2d Sess. 15-19 (1984).
Notwithstanding the number of grants which the Committees intended to
support, the executive branch has decided to fund only 5,000 new and
competing research project grants in fiscal year 1985. Moreover, to
insure year-to-year stability in the number of grants NIH is able to
support, and to lower fiscal commitments in fiscal years 1986 and 1987,
the executive plans to fund some 646 of the 4,000 grants by committing
enough fiscal year 1985 monies to take care of the grantees' estimated
needs for 3 fiscal years. /1/ In this manner, the entire fiscal year
1985 appropriation will be obligated. Department of Health and Human
Services, III Justification of Appropriation Estimates for the Committee
on Appropriations for Fiscal Year 1986, 1-3 (1985).
A. Conflict With Committee Directives on Number of Grants Awarded
The executive branch's plan to limit NIH to 5,000 new and competing
bio-medical research grants in fiscal year 1985, does conflict with the
Committee's intention to increase substantially the number of grants
awarded. Nevertheless, if all the funds are properly obligated for
purposes consistent with NIH's program authorization and appropriation
statutes, we could not find that the law itself was violated. As
explained in Section B, we do think that the multiyear funding proposed
for a portion of the grants would be a violation of a statutory funding
restriction but the fact that the total number of grants awarded does
not correspond to the directives in the committee reports does not, by
itself, amount to a circumvention of NIH's appropriation act.
It is a general principle of appropriation law that directions in
committee reports, floor debates and hearings, or statements in agency
budget justifications are not legally binding on an agency unless they
are incorporated, either expressly or by reference, in an appropriation
act itself or in some other statute. See, e.g., 55 Comp. Gen. 307, 319,
325-26 (1975). The rule applies whether the legislative history shows
mere acquiescence in an agency's budget request or is an affirmative
expression of intent. As the lump sums appropriated to the various NIH
institutes say nothing about the number of grants to be funded, there is
no legal requirement that the committee directions be followed.
We add, however, that this does not mean that agencies are free to
ignore the legislative history applicable to the use of appropriated
funds, as was expressed by the Congress in the Committee reports
described above. They do so at the peril of strained relations with the
Congress. Thus, the executive branch has a practical, though not a
legal, duty to abide by such expressions of intent. 55 Comp. Gen. at
319, 325.
B. Multiyear Funding
As described in the background section, the executive branch intends
to use fiscal year 1985 appropriations to NIH to fund some 646 research
project grants for 3 fiscal years. The legislation authorizing research
grants to the various NIH units does not provide for multiyear grant
funding. 42 U.S.C. Sections 241, 243, 281 et seq., 300b-1. Moreover,
none of the fiscal year 1985 appropriations to the various NIH
institutes supporting the grants provide for this type of funding. Pub.
L. No. 98-619, 98 Stat. 3305, 3313-14. As a matter of fact, with very
few exceptions (e.g., Department of Defense major weapons acquisitions,
or General Services Administration leasing and public utilities
authorities), most agencies do not have specific multiyear authority.
Without express statutory authority, no agency may obligate an
appropriation made for the needs of a limited period of time (usually, 1
year, as in the present case) for the needs of subsequent years. This
is a paraphrase of a law that first appeared on the statute books in
1789, and is found in its codified form at 31 U.S.C. Section 1502(a).
GAO refers to the statute in its decisions as the "Bona Fide Need Rule."
See, e.g., 58 Comp. Gen. 471, 473 (1979); 33 Comp. Gen. 57, 61 (1953).
From what can be gleaned from the sparse legislative history, the
intent of the Congress when this law was first passed was to instill a
sense of fiscal responsibility on the part of its newly formed
departments and agencies. It wanted the balance of any appropriation
not really needed for that year's operations to be returned to the
Treasury so that it could be reappropriated the following year in
accordance with the Congress' current priorities. Of even more
importance to the Congress today, a limited period of availibility means
that an agency has to come back to its oversight or authorizing
committees and then to its appropriations committees to justify
continuing the program or to debate about how much is needed to carry on
the program at the same or a different level.
These same concerns were raised by your subcommittee in 1974. S.
Rep. No. 814, 93rd Cong., 2d Sess., 65-66. At that time, your
subcommittee complained that unauthorized multiyear funding inhibited
the Congress' ability to increase (or decrease) the levels of funding
for specific programs because the agency need not return each year to
justify the need -- or lack thereof -- of continued support for grants
made in the previous year.
The report stated that traditionally the Congress had rejected this
concept and had funded grants for only 1 year at a time. If found that
multiyear funding rendered the Congress powerless to increase the level
of funding for any given priority program. Whatever the Congress added
to the budget, a department could use to cover the following or future
years' costs. The report reaffirmed the Congress' position that all
grant awards be made on a 12-month basis unless specifically provided to
the contrary by the Congress. Any attempt to provide multiyear grant
funding or forward funding would be in direct opposition to the will of
the Congress, and could violate the court rulings mandating the release
of previously impounded funds. Id.
Similar concerns were expressed in floor debate. 120 Cong. Rec.
17659-62 (1974) (comments of Senators Magnuson and Bayh); Id. at
13276-78 (comments of Senator Magnuson). The debate also indicated that
the problem had been resolved. Thus, Senator Magnuson stated that the
Secretary of Health, Education and Welfare agreed that all multiyear
funding would cease as of May 3, 1974 -- the date the Senate report was
issued. Id. at 17659-60. Correspondence between Senator Magnuson and
HEW Secretary Weinberger and OMB Director Ash also reflected the
Committee's concerns with multiyear funding and the Secretary's decision
to limit multiyear grants. We enclose copies of some of that
correspondence.
As discussed in your letter, many of the same questions your
subcommittee raised in 1974 are still applicable today. It is certainly
true that to the extent that the Administration commits its fiscal year
1985 funds for the second and third years' needs of 646 grantees, these
funds are unavailable for increasing the number of new and competing
grants awarded, or for raising the award rates and paylines for high
calibre investigators. It appears, then, that the problems which the
Bona Fide Need Rule was designed to avoid are very much in evidence in
the present situation.
The official reasons offered for the reduction in the total number of
grants for research studies and research centers, and for the multiyear
funding of some of these projects, are found in the President's budget
justification for 1986, Department of Health and Human Services, III
Justification of Appropriations Estimates for the Committee on
Appropriations for Fiscal Year 1986, 1-3 (1985). There is no mention in
that document of the appropriation restriction in 31 U.S.C. Section
1502(a). The proposed actions were supported entirely on budgetary
grounds; that is, to ensure year-to-year "stability" in the number of
grants NIH is able to support, and to lower its financial commitments in
fiscal years 1986 and 1987.
Informally, staff members of the HHS Office of General Counsel and of
OMB have indicated that they are well aware of the restrictions of the
Bona Fide Need Rule (31 U.S.C. Section 1502(a)), but thought that it
didn't foreclose multiyear grants in this situation. They relied, they
said, on discussions of the Rule in GAO's published manual, Principles
of Federal Appropriations Law, at pages 4-9, 4-10, 13-16, and 13-17
(1982). Applying these principles, both HHS and OMB view each of the
646 grants as single research projects and contend that they are
non-severable on the ground that there is a present need to have the
research performed. Funds may thus be obligated in fiscal year 1985 to
meet that need, even though performance may not be completed for 2 or
more years.
We think that the principles discussed in our manual were applied
inappropriately. Determination of what constitutes a bona fide need of
a particular fiscal year depends largely on the facts and circumstances
of each case. 37 Comp. Gen. 155, 159 (1957). Over the years we have
held that where continuous and recurring services are needed on a
year-to-year basis, contracts for the services are severable and must be
charged to the fiscal year in which they are rendered. 33 Comp. Gen.
90, 92 (1953); 60 Comp. Gen. 219, 221-22 (1981). Thus, we have decided
that contracts entered into with fiscal year appropriations purporting
to bind or obligate the Government beyond the fiscal year involved must
be construed as binding the Government only to the end of the fiscal
year unless otherwise authorized by law. 48 Comp. Gen. 497, 499-500
(1969).
The legislation providing the principal basis for the NIH research
grant program is very broad, anticipating extensive, continuous work
"relating to the causes, diagnosis, treatment, control, and prevention
of physical and mental diseases and impairments of man * * *." 42 U.S.C.
Section 241. It is evident that the legislation reflects a Government
policy to stimulate particular kinds of research that will be needed
year-after-year for substantial periods of time, if not indefinitely.
The House report accompanying the fiscal year 1985 appropriations act
suggests that the research grant program has been ongoing for some 35
years. H.R. Rep. No. 911, 98th Cong., 2d Sess. 29 (1984). Thus, to the
extent that the NIH grant program is continuous and involves projects
that contemplate a number of years' work, they resemble continuous
service or multiyear contracts and the same bona fide need principle
would apply to them.
Although we have not been provided with information on the usual
duration of NIH grants, it appears that some may take several years or
longer to complete. For purposes of the bona fide need rule, we think
the salient point is that the need for the grant work continues from
year-to-year. In this regard, although both OMB and HHS suggest that
the 646 grants are single projects, and thus for funding purposes are
not severable, they also acknowledge that any number of these grants
could be renewed in fiscal 1988. We also point out that neither the HHS
budget justification nor the informal comments of HHS and OMB suggest
that the 3-year funding of the 646 grants is due to the research work
being needed in fiscal 1985. The reasons given for this manner of
funding are purely budgetary: to avoid significant fluctuations in the
number of grants NIH is able to support and having to fund the same
grants in fiscal 1986 and 1987.
At the same time, we recognize that there are fundamental differences
between a contract for materials or services and a research grant. The
severability concept is not altogether analogous to the NIH research
grants, which resemble subsidies rather than contracts for services. In
this respect, the grants are more like level-of-effort contracts.
Nevertheless, consistent with the NIH legislation authorizing support
for important investigations that may some day enrich our store of
knowledge about "the causes, diagnosis, treatment, control, and
prevention of physical and mental diseases and impairments of man * *
*." 42 U.S.C. Section 241, more often than not the grants do not
contemplate a required outcome or product. /3/ Thus, it cannot be said
that there is a need for an end product in any particular fiscal year.
As there is no such need, the bona fide rule is violated when funds are
obligated for more than 1 year for these grants.
We think the Senate report discussed above and the NIH practice of
funding its research grants from year-to-year supports the view that
decisions about funding the grants are to be made on an annual basis.
Accordingly, until the Congress acts to renew its appropriations for a
subsequent year, NIH has no authority to make a commitment to a
researcher or research project for such subsequent year.
C. Impoundment
An impoundment is an action or inaction by an officer or employee of
the United States that precludes the obligation or expenditure of budget
authority provided by the Congress. The Impoundment Control Act of
1974, Pub. L. No. 93-344, 88 Stat. 297, 332, codified at 2 U.S.C.
Sections 681 and following, was intended to tighten congressional
control over impoundments and to establish procedures that would provide
a means for the Congress to pass upon executive branch proposals to
impound budget authority. 54 Comp. Gen. 453, 454 (1974). The Act
covers both recissions and deferrals. A recission exists when the
President determines that "all or part of any budget authority will not
be required to carry out the full objectives or scope of programs for
which it is provided or * * * should be rescinded for fiscal policy or
other reasons * * *." 2 U.S.C. Section 683(a). A deferral is a
withholding or delaying of the obligation or expenditure of budget
authority provided for projects or activities or any other type of
executive action or inaction that effectively precludes obligation or
expenditure of budget authority. Id. Section 682 (1). The Act calls
for the executive branch to submit proposed recissions and deferrals for
consideration by Congress. Id. Sections 683-84.
Consistent with the Impoundment Act, in B-200685, December 23, 1980,
we pointed out that for an impoundment to occur, budget authority must
be withheld or delayed from obligation by executive action or inaction.
We also said that if a program decision did not preclude the obligation
or expenditure of funds, an impoundment would not result. Thus, we
cannot say that a violation of the Impoundment Control Act has taken
place at this time because the Administration's intention to date, as
evidenced by the (albeit improper) obligation of the funds, has not been
to withhold or delay the availability of the funds for the program
period.
(1) For similar reasons, approximately 45 of 500 research centers to
be funded in fiscal 1985 will be awarded 2 years of support from fiscal
year 1985 funds.
(2) As you requested expedited consideration of this matter, we did
not have time to seek formally the views of HHS or the Office of
Management and Budget (OMB). (We understand that OMB orally directed
the manner of funding.)
(3) There are, of course, research and development grants and other
targeted, applied research grants in which a specific line of inquiry is
requested to meet the Government's own needs which resemble 'government
contracts more closely. The GAO has recommended legislation to permit
multiyear funding of this type of grant in appropriate circumstances in
testimony before the House Committee on Science and Technology (April 5,
1979 and June 4, 1980), and in a report to the Congress, "Multiyear
Authorizations for Research and Development," B-202294, PAD-81-61, April
21, 1981.
B-216924, B-217057, 64 Comp. Gen. 355
Matter of: Sess Construction Co., March 18, 1985:
Section 401 of the Small Business and Federal Procurement Competition
Enhancement Act of 1984, Pub. L. No. 98-577, 98 Stat. 3082, Oct. 30,
1984, prohibits the Small Business Administration (SBA) from
establishing any exemption from requirement for referral of
nonresponsibility determinations. That section of the law was effective
upon enactment and therefore all such determinations must be referred to
SBA for review under the SBA's Certificate of Competency procedures.
Where bidder includes in its bid statement that its price for option
periods was "plus rate of inflation, fuel, labor and gravel," and where
invitation for bids stated that the option years would be evaluated for
award, bid was properly rejected for failure to offer firm, fixed price.
The protester has the burden of proving bias or favoritism on the
part of the procuring officials. Where there are conflicting statements
of fact and the protester's position is supported by no other evidence,
we conclude that the protester has failed to meet its burden.
Sess Construction Co., protests the rejection of its bids under
invitations for bids (IFB) Nos. R8-7-84-65 and R8-7-84-66 issued by the
United States Forest Service for road maintenance work in the Biloxi
Ranger District. The work under the IFBs consisted of blading aggregate
surfaced roads, blading nonsurfaced roads and cleaning and reshaping
ditches. Bids for both IFB's were opened on September 24, 1984 and
covered maintenance work for a 1-year period with two 1-year options.
Sess contends that the Forest Service's rejection of its bids was
improper and has alleged that the Forest Service has unfairly
discriminated against the firm.
For the reasons set forth below, Sess's protest under IFB No.
48-7-84-65 is sustained and its protest under IFB No. R-8-7-84-66 is
denied.
Six responses to the IFB were received by the Forest Service. Sess
submitted the apparent low bid of $8,392 per year. This price was
approximately 50 percent below the government estimate of $16,612 and
because of this, the Forest Service requested that Sess verify its bid
price. In addition, since Sess had not held any previous Forest Service
road maintenance contract, the Forest Service requested a demonstration
of the equipment which would be utilized.
Sess verified its bid price as the price which was intended.
Thereafter, a demonstration of Sess's equipment was conducted. Based on
that demonstration, the Forest Service determined that some of Sess's
proposed equipment would not perform the work required by the
specifications and that providing alternate equipment to perform the
work would pose a serious financial hardship on Sess. On this basis,
the Forest Service found Sess nonresponsible and by letter dated
November 5, 1984, informed Sess that its bid was rejected. On November
6, the contract was awarded to Mr. Bobby Hunt in the amount of $14,535.
Sess is a small business concern. The Forest Service, however, did
not refer the matter of Sess's responsibility to the Small Business
Administration (SBA) for review under the SBA's Certificate of
Competency (COC) procedures. Sess's bid price was less than $10,000 and
the Forest Service states that, under current SBA regulations, it is
within the contracting officer's discretion as to whether a referal
should be made when the contract value is less than $10,000. See 13
C.F.R. Section 125.5(d)(1984). The Forest Service argues that its
nonresponsibility determination was reasonable and that, under the
circumstances, it was not required to refer the matter to the SBA for
further review.
The record indicates that Sess applied to the SBA for a COC. Due to
the recent enactment of the Small Business and Federal Procurement
Competition Enhancement Act of 1984, Pub. L. No. 98-577, 98 Stat. 3082,
October, 1984 (hereinafter referred to as the Act), the SBA is no longer
empowered to establish any exemption from referral. Although the
regulatory provision in effect at the time the contract was awarded did
state that it was within the contracting officer's discretion to refer a
nonresponsibility determination when the contract value is less than
$10,000, section 401 of the Act, which was effective immediately upon
enactment, provides that all nonresponsibility determinations must be
referred to the SBA for review under the SBA's COC procedures, as long
as the affected small business concern wishes its application to be
considered. The SBA advised the Forest Service of this development and
that notwithstanding the dollar value of this contract the matter of
Sess's responsibility should have been referred to the SBA.
Subsequently, the SBA considered Sess's application and by letter dated
December 18, 1984, issued a COC.
In view of the change in the law and SBA's determination to issue a
COC in this matter, we find that the Forest Service's award under this
IFB cannot be upheld. Although we recognize that the contracting
officer's actions in not referring the matter to SBA may have conformed
with published SBA regulations at the time the determination was made,
the legislative history concerning the enactment of section 401 clearly
indicates that the provision was effective immediately upon enactment
and was designed to "* * * overturn the agency's (SBA's) arbitrary
regulation relating to the imposition of a dollar threshold for small
business access to the certificate of competency program." S. Rep. No.
98-523, 98th Cong., 2nd Sess. 55 (1984). Thus, under the law, the
Forest Service was required to refer the nonresponsibility determination
to SBA. /1/
Under the circumstances, and since SBA has issued a COC which found
Sess to be fully capable of performing this contract, we recommend that
the current contract be terminated for the convenience of the government
and an award made to Sess. While the SBA has informally advised our
Office that section 125.5(d) will be revised to eliminate the exemption
from referral when the contract value is less than $10,000, we note that
more than 4 months has elapsed since the enactment of the statute and
the regulation has not yet been changed. Accordingly, by separate
letter, we are advising the SBA to notify contracting agencies of the
change in the law pending the publication of the revised regulation.
The protest under IFB No. R8-7-84-65 is sustained.
In its response to this IFB, Sess stated that its price for the
option periods of the contract was "plus rate of inflation, fuel, labor
and gravel." The Forest Service concluded that the statement qualified
Sess's bid and the bid was rejected as nonresponsive.
We find that the Forest Service's rejection of Sess's bid was proper.
Bid responsiveness requires an unequivocal offer to provide without
exception exactly what is required at a firm-fixed price. Medi-Car of
Alachua County, B-205634, May 7, 1982, 82-1 C.P.D. Paragraph 439. If a
bidder attempts to qualify its bid to protect it against future price
changes, the bid must be rejected as nonresponsive. Joy Manufacturing
Co., 54 Comp. Gen. 237 (1974), 74-2 C.P.D. Paragraph 183; Federal
Acquisition Regulation, 48 C.F.R. Section 14.404-2(d)(i) (1984)). We
have held that only material available at bid opening may be considered
in making a responsiveness determination and that post-opening
explanations by the bidder cannot be considered. United McGill
Corporation and Lieb-Jackson, Inc., B-190418, Feb. 10, 1978, 78-1 C.P.D.
Paragraph 119.
Here, Sess's bid price for the option years was clearly condidtioned
on the rate of inflation, as well as the cost of labor, fuel and gravel.
The IFB stated that the option years would be evaluated for award
purposes and as a result of the statement included with its bid, Sess's
total bid price could not be determined. Although Sess suggests that
the deficiency be waived as a minor informality, Sess did not submit a
firm, fixed price as required in advertised procurements and the Forest
Service was justified in rejecting Sess's bid on that basis.
Sess has raised additional charges which in Sess's view, demonstrate
that the Forest Service acted in a biased manner towards Sess. Sess
complains that the Forest Service improperly excluded Sess from the
bidder's mailing list and that Sess was unfairly denied a pre-contract
tour. In addition, Sess alleges that the contractors currently
performing are not complying with the requirements set forth in the
IFBs.
With respect to the mailing list, the Forest Service states that Sess
was added to the list and should have been receiving copies of the
solicitation. The Forest Service states that it is possible that an
administrative error was made in mailing the invitations but that it is
the Forest Service's policy to include all interested bidder's on the
mailing list and there was no intention to exclude Sess. In addition,
the Forest Service states that its personnel were present for a
pre-contract tour at the location which was specified and that Sess must
have gone to the wrong place. The Forest Service argues that Sess has
been treated fairly and that there has been no discriminatory action
taken towards the firm.
Based on the record, we cannot conclude that Sess was treated
unfairly by the Forest Service. In this regard, we note that the
protester has the burden of affirmatively proving its case and unfair or
prejudicial motives will not be attributed to procurement officials on
the basis of inference or supposition. Mechanical Equipment Company,
Inc., B-213236, Sept. 5, 1984, 84-2 C.P.D. Paragraph 256. Furthermore,
where there are conflicting statements of fact and the protester's
position is supported by no other evidence, we conclude that the
protester has failed to meet its burden and we will accept the agency's
position. T.E. DeLoss Equipment Rentals, B-214029, July 10, 1984, 84-2
C.P.D. Paragraph 35. Moreover, where the subjective motivation of an
agency's procurement personnel is being challenged, it is difficult for
a protester to establish -- on the written record which forms the basis
for our Office's decision in protest -- the existence of bias. Joseph
Legat Architects, B-187160, Dec. 13, 1977, 77-2 C.P.D. Paragraph 458.
In view of the Forest Service's explanations regarding Sess's
allegations, we find that the record does not support a finding of bias
or unfair action towards Sess.
Finally, we note that Sess's complaint concerning the performance by
the current contractors involve matters of contract compliance and the
administration, which are the responsibility of the contracting agency,
not our Office under our bid protest function. Lion Brothers Company,
Inc., B-212960, Dec 20, 1983, 84-1 C.P.D. Paragraph 7.
This decision contains a recommendation for corrective action to be
taken. Therefore, we are furnishing copies to the Senate Committees on
Governmental Affairs and Appropriations and the House Committee on
Government Operations and Appropriations in accordance with section 236
of the Legislative Reorganization Act of 1970, 31 U.S.C. Section 720
(1982), which requires the submission of written statements by the
agency to the committees concerning the action taken with respect to our
recommendation.
B-215672, 64 Comp. Gen. 349
Matter of: Albert D. Parker, March 18, 1985:
In view of authority granted to the Equal Employment Opportunity
Commission by statute, the Comptroller General does not render decisions
on the merits of, or conduct investigations into, allegations of
discrimination (including age discrimination) in employment in other
agencies of the Govt. However, based upon the authroity to determine
the legality of expenditures of appropriated funds, he may determine the
legality of awards agreed to by agencies in informal settlements of
discrimination complaints.
An agency may settle a discrimination complaint informally for an
amount which does not exceed the maximum amount that would be
recoverable under Title VII of the Civil Rights Act, if a finding of
discrimination were made. The amount that can be awarded under an
informal settlement must be related to backpay and generally cannot
exceed the gross amount of backpay less any interim earnings. The Equal
Employment Opportunity Commission regulations direct use of the same
standards in computing amounts payable in age discrimination cases.
Therefore, an agency does not have the authority to make an award in
informal settlement of an age discrimination complaint to the extent it
exceeds the amount of backpay which could be recovered if a finding of
discrimination were made.
An amount agreed to in compromise settlement at the administrative
level of a Federal employee's complaint under the Age Discrimination in
Employment Act may not include attorney fees and costs. In 59 Comp.
Gen. 728 (1980), the Comptroller General indicated that he would not
object if regulations were promulgated authorizing Federal agencies to
pay attorney fees in settling such cases. However, in view of the lack
of specific statutory authority and subsequent court decisions holding
that attorney fees are not payable at the administrative level in
Federal employee age discrimination cases, that decision will no longer
be followed concerning attorney fees in age discrimination compaint
settlements. 59 Comp Gen. 728 was overruled in part.
The judgment fund provided by 31 U.S.C. does not encompass payment of
awards made in administrative settlement of an age discrimination
complaint. The language of the relevant provisions clearly contemplates
final judgments of a court of law and settlements entered into under the
authority of the Attorney General.
The Savannah District, Corps of Engineers, Department of the Army,
seeks to make a lump-sum payment in an informal settlement of an age
discrimination complaint filed by Mr. Albert D. Parker, a former
employee of that agency. /1/ The submission lacks enough information
about the settlement for us to make a specific determination of the
amount payable, but the amount of the proposed settlement appears to
exceed the amount allowable under the guidelines outlined in this
decision.
Mr. Parker was a civilian employee of the Corps of Engineers in a
GS-1171-11 appraiser position. He held one of two such positions
located in Cary, North Carolina, in the North Carolina Area Real Estate
Project Office, Real Estate Division of the Savannah District. On March
30, 1983, he requested advance sick leave of 245 hours and in April
1983, while he was on sick leave, he was visited by his immediate
supervisor who informed him that his job was to be abolished effective
June 30, 1983. Mr. Parker was also informed that only 24 hours of sick
leave could be approved since that was the amount that would accrue to
the date that his job would be abolished. He was told, however, that if
he accepted an offer of reassignment, adjustment would be made for the
remainder of advance leave he had requested. He was offered a position
as a realty specialist, GS-1170-11, in Savannah, Georgia.
In May 1982, Mr. Parker accepted the offer, "subject to judicial
discretion." He returned to duty on May 12, and contacted an Equal
Employment Opportunity counselor on June 20, 1983. On June 28, 1983, he
submitted a request for retirement in lieu of accepting the
reassignment. His retirement was effective June 30, 1983. He filed a
formal complaint on July 27, 1983, alleging discrimination on the basis
of age.
An investigation was conducted by the United States Army Civilian
Appellate Review Agency. Its report concluded that although management
had articulated a legitimate nondiscriminatory reason for implementing
the personnel action, the reason was a pretext to mask discrimination
because of Mr. Parker's age and associated eligibility for retirement.
The Appellate Review Agency's report recommended reinstatement of Mr.
Parker to a position comparable to his former position with attendant
backpay and benefits.
After negotiations with Mr. Parker and his attorney, the agency
determined that it was in the best interest of the Government to accept
a settlement of the complaint by paying Mr. Parker $45,000, plus
attorney fees. On the basis of Mr. Parker's assertion that but for the
action of the agency he would not have retired before July 1, 1985, the
agency calculated Mr. Parker's losses in the following manner:
$18,889.89 -- net backpay (July 1, 1983-July 1, 1984).
$29,219.62 -- net salary loss (July 1, 1984-July 1, 1985).
20,359.56 -- annuity loss (at $130/monthly for 13 years).
The agency requests an advance decision concerning payment of this
settlement in view of our decision 62 Comp. Gen. 239 (1982). The agency
contends that its settlement does not fall within the prohibitions of
that decision, and therefore may be paid. The agency also asks whether
or not payment of this sum may be made from the permanent judgment fund.
In view of the authority granted to the Equal Employment Opportunity
Commission by statute, we do not render decisions on the merits of, or
conduct investigations into, allegations of discrimination in employment
in other agencies of the Government. See 29 U.S.C. Section 633a (1982),
and 62 Comp. Gen 239 (1983). As is the case with actions brought under
Title VII of the Civil Rights Act of 1964, the General Accounting Office
has no authority to review the merits of age discrimination cases.
However, we may determine the legality of awards agreed to by agencies
in informal settlements of discrimination complaints, based upon our
authority to determine the legality of expenditures of appropriated
funds. See 63 Comp. Gen. 239, supra.
Although not stated in the agency's submission, we assume that since
the complaint in this case was based on age discrimination, it was filed
with the agency pursuant to the Age Discrimination in Employment Act of
1967, 29 U.S.C. Section 621, et seq., as amended, rather than under
Title VII of the Civil Rights Act of 1964, 42 U.S.C. Section 2000e, et
seq. The Age Discrimination Act was passed in 1967 to protect older
members of the nation's workforce from discrimination premised on age
differences. Lorillard v. Pons, 434 U.S. 575 (1978).
Section 15 of the Age Discrimination Act, which was added by
amendment in 1974, provides a cause of action for discrimination on
account of age in Federal Government employment. 29 U.S.C. Section
633a. Regulations developed pursuant to the Age Discrimination Act are
found in 29 C.F.R. Section 860.1, et seq., and 29 C.F.R. Section
1613.501, et seq. (1983).
The Age Discrimination Act is more than a simple extension of Tttle
VII of the Civil Rights Act. Although, like Title VII, the Age
Discrimination Act is directed toward elimination of discrimination, it
has its own separate statutory scheme of remedies and enforcement
provisions. Fellows v. Medford Corp., 432 F. Supp. 199 (1977).
The Age Discrimination Act as originally enacted, specifically in 29
U.S.C. Section 626, incorporated by reference parts of the Fair Labor
Standards Act, including 29 U.S.C. Sections 216 and 217; which provide
that only unpaid wages and compensation which would have been due from
an employer who violated the Fair Labor Standards Act, are available for
damages. See Lorillard v. Pons, supra. Section 15 of the Age
Discrimination Act (29 U.S.C. Section 633a) was added in 1974 to protect
Federal employees from discrimination on account of age. A 1978
amendment, adding section 15(E), made the sections in the Fair Labor
Standards Act inapplicable to claims of age discrimination in Federal
Government employment. Swain v. Secretary, 27 FEP Cases 1434 (1982),
aff'd without opinion, 701 F.2d 222 (App. DC 1983). Section 633a of
title 29, United States Code, provides that the Equal Employment
Opportunity Commission may enforce the provision:
* * * through appropriate remedies, including reinstatement or
hiring of employees with or without backpay, as will effectuate
the policies of this section. * * * (Italic supplied.)
The statute specifically mentions backpay as a monetary award. It
does not specifically provide for awards of compensatory or punitive
damages. We have approved the interpretation of similar language in
Title VII of the Civil Rights Act as limiting awards in informal
settlements to an amount related to backpay and not to exceed the amount
that would be recoverable if a finding of discrimination were made. 62
Comp. Gen. 239, 244.
We do not question the agency's authority to make informal
settlements in cases brought under the Age Discrimination Act. Nor do
we question that informal settlement is encouraged under both that Act
and Title VII of the Civil Rights Act. However, we question the
propriety of payment of $45,000 in settlement of this claim.
The agency, in its submission, asserts that it has followed the
procedures outlined in 29 C.F.R. Section 1613.217 (1983), which allows
informal settlement of complaints in Title VII cases. The regulations
pertaining to age discrimination provide that acceptance and processing
of age discrimination complaints shall comply with the principles and
requirements of various provisions of the regulations governing Title
VII complaints including 29 C.F.R. Section 1613.217. See 29 C.F.R.
Section 1613.511. This appears consistent with the nearly identical
language concerning remedies used in the two statutes as they relate to
Federal employees. See 42 U.S.C. Section 2000e-16(b) and 29 U.S.C.
Section 633a(b).
Under 19 C.F.R. Section 1613.217 an agency may settle informally for
an amount which does not exceed the maximum amount which would be
recoverable if a finding of discrimination were made under Title VII.
We have held that the amount that may be awarded under an informal
settlement must be related to backpay and generally may not exceed the
gross amount of backpay the employee lost, minus any interim earnings
and other deductions. 62 Comp. Gen. 239, supra, at 244-245.
It is our view that this settlement authorization and limitation also
applies in Federal employee age discrimination cases. Thus, the payment
agreed upon by the agency would be limited generally to the net backpay
Mr. Parker could have received had he been successful in his
discrimination complaint.
It appears that the amount of $45,000 is a compromise settlement
agreed upon between the claimant and the agency. We do not find that a
lump-sum compromise settlement is improper but the amount of the award
may not exceed the amount of backpay which could be recovered under a
finding of discrimination.
In computing the maximum settlement allowable the agency should
determine the total pay and allowances which would have been paid from
the date of separation to the date of settlement and deduct from that
amount interim earnings and other deductions as prescribed by
regulation. 62 Comp. Gen. at 245.
The agency proposes to pay attorney fees and costs of the complaint
as part of the settlement agreement. Although attorney fees are
available at the administrative level in claims brought under Title VII
of the Civil Rights Act (see 29 C.F.R. Section 1613.217), we now hold
that they are not available for claims brought under the Age
Discrimination Act.
In this regard, we stated in 59 Comp. Gen. 723 (1980), that we would
have no objection if the Equal Employment Opportunity Commission were to
revise its regulations and provide payment of attorney fees at the
administrative level in age discrimination cases. The Equal Employment
Opportunity Commission did not modify the applicable regulations, and in
light of subsequent event , we have reevaluated our decision and for the
following reasons, as it relates to paying attorney fees in age
discrimination cases, it is overruled.
In 59 Comp. Gen. 728, we noted that the "American rule" or "general
rule" regarding attorney fees is that each party bears its own costs.
The rule was clearly established in Alyeska Pipeline Service Co. v.
Wilderness Society, 421 U.S. 240 (1974). While recognizing that the
matter was not entirely clear, we stated that, since an award of
attorney fees had been provided under the acts prohibiting other types
of discrimination, and since we found no indication that Congress
intended to deny attorney fees in age discrimination cases, we would not
object if the Equal Employment Opportunity Commission drafted
regulations which would provide for payment of attorney fees at the
administrative level in age discrimination cases.
Subsequent to our decision, the courts have specifically held that
attorney fees at the administrative level are not available in age
discrimination cases. See, Kennedy, v. Whitehurst, 690 F.2d 951 (1982);
Swain v. Secretary, supra; Lehman v. Nakshian, 435 U.S. 156 (1981).
The decisions emphasize the standard articulated in Alyeska Pipeline,
supra: "specific statutory authorization for an award of fees is
required before the incidence of counsel costs can be shifted." Kennedy
v. Whitehurst, supra.
The court in Kennedy, reviewed the legislative history of the Age
Discrimination Act and explained that the differences in enforcement
schemes between Title VII of the Civil Rights Act and the Age
Discrimination Act make clear that only Title VII permits award of
attorney fees at the administrative level. Title VII of the Civil
Rights Act requires an exhaustion of administrative remedies prior to
the filing of a law suit. The Age Discrimination Act requires only that
notice of the existence of a complaint be given to the Government before
a lawsuit may be filed. Thus, attorney fees were intended to be
available in Title VII cases. where the administrative process is
mandatory, but were not provided in age discrimination cases which make
the adminsitrative process optional.
In view of the above, it is now our position that sufficient
statutory authority does not exist which would allow the agency to award
attorney fees at the administrative level. Accordingly, a settlement
agreement in which the agency awards attorney fees at the administrative
level would be prohibited.
The agency asks whether the settlement, if proper, may be paid from
the permanent indefinite appropriation for judgments established under
31 U.S.C. Section 1304 (1982) (formerly 31 U.S.C. Section 724a). This
statute provides for payments when certified by the Comptroller General,
of "final judgments, awards, and compromise settlements." 31 U.S.C.
Section 1304(a).
However, 31 U.S.C. section 1304 does not encompass payment of
administrative awards. The language of the relevant provision clearly
contemplates final judgments of a court of law and settlements entered
into under the authority of the Attorney General. See EEO
Regulations-Attorney's Fees, B-199291, June 19, 1981. Therefore,
payment of the lump-sum settlement may not be paid from the permanent
appropriation for judgments.
(1) Mr. P. M. Baldino, Chief, Finance and Accounting Division,
Directorate of Resource Management, Office of the Chief of Engineers,
forwarded the Savannah District Disbursing Officer's request for an
advance decision to us.
B-215124, 64 Comp. Gen. 344
Matter of: Advanced Technology Systems, Inc., March 18, 1985:
Protest contending that agency failed to conduct proper cost realism
analysis resulting in defective evaluation and improper award to
technically inferior, but 23-percent lower cost, proposal, is sustained
where: (1) agency was concerned about the realism of the awardee's
costs; (2) agency's cost realism analysis fails to assure that the
awardee's proposed costs are realistic; and (3) agency's attempt to
resolve question of cost realism by capping awardee's direct and
indirect costs is of questionable efficacy in view of RFP provision
which gives the awardee the right to reject, negotiate and dispute
specific task orders leaving open the possibility that a contractor
unable to perform within the confines of the cap will use its rights
under the provision to excuse nonperformance.
Advanced Technology Systems, Inc. (ATS), protests the Department of
Housing and Urban Development (HUD) award of a cost reimbursement,
requirements-type contract under request for proposals (RFP) No.
HC-12450 to Group Operations, Inc. (GOI). ATS, replying on an RFP
clause which states, in part, "an offeror's proposal will not be
considered when costs are determined to be unrealistically low,"
contends that HUD should have rejected the GOI proposal as
unrealistically low. ATS argues that GOI's offer was a "buy-in" and
"non-responsive" to the RFP's realistic cost requirement quoted above.
We sustain the protest.
The solicitation is for automated data processing (ADP) development
support services. The bulk of the work consists of furnishing technical
personnel, although the successful offeror is required to also provide
all necessary materials, services, equipment and facilities. Part of
the work is to be performed onsite at HUD and part offsite at the
contractor's facility. The RFP provided a fixed, lump-sum number of
technical staff hours for each category of required personnel. Offerors
submitted both technical and cost proposals describing their proposed
approach to the work and the costs associated with that approach.
The RFP indicates that technical and cost factors will be evaluated
for award. It is clear that the technical portion of the proposal will
be point-scored and the cost portion examined for realism; however,
there is no indication of the relative weight of the two factors. It
appears that HUD intended to accord both factors substantially equal
weight; which is consistent with our decision in University Research
Corporation, B-196246, Jan. 28, 1981, 81-1 C.P.D. Paragraph 50.
The source evaluation board (SEB) eliminated five of the eight
proposals received from the competitive range after an initial
evaluation. Oral discussions were held with the three remaining
offerors, resulting in the following evaluation of best and final
offers:
ATS's technical score was 13 points, or 23 percent, better than
GOI's; however, GOI's estimate of its cost was $873,071, or 23 percent
lower, than ATS's costs. The SEB recommended (by a three to one margin)
that the source selection official (SSO) award the contract to ATS.
However, the SEB's contract advisor objected on the ground that both ATS
and GOI were technically capable of performing the work and that ATS's
13-point technical edge over GOI was not worth the $873,071 difference.
The SSO requested additional information on: (1) the nature of ATS's
technical superiority; and (2) the reason for the $873,071 difference
in proposed costs. The Defense Contract Audit Agency (DCAA) furnished
information on GOI's current cost rate experience on other similar
government contracts. After reviewing the DCAA information and
acknowledging the concern of one SEB number that GOI was "low balling"
its proposed personnel costs (direct labor rates), the dissenting
contract advisor prepared a cost realism analysis for the SSO, which
concluded:
It is apparent after reviewing the DCAA information that GOI is
willing to perform at a lower cost than what they are experiencing
currently. This same situation occurred when ATS won their first
contract with HUD. If a contract is negotiated with GOI, ceilings
will have to be established on the cost items to prevent the
Contractor from buying in and making up the difference after the
contract award.
HUD reports that:
After reviewing the cost realism analysis, the SSO overruled
the SEB and recommended that a contract be worked out with GOI
which would ensure that reimbursement costs would not exceed the
costs proposed by GOI for each component cost category comprising
the total contract cost. This was to include the option period of
the contract as well as the 18-month base period.
On April 26, 1984, HUD awarded GOI the 18-month (with one 18-month
option), cost-plus-fixed-fee contract in the amount of $3,722,644
($1,822,673 for the base period and $1,899,991 for the option period).
HUD justifies the award on the basis that:
* * * GOI's technical score was within the competitive range,
and GOT's proposal was determined to be most advantageous to the
Government, price and other factors considered; e.g., the cost
proposal offered a large saving to the Government.
When the Government contemplates the award of a cost-reimbursement
contract, the issues of buy-in and cost realism become proper issues for
our review, because, as a rule, buying in on a fixed-price contract (the
submission of a below-cost proposal) provides no basis for protest as
long as the offeror buying in is responsible since it is the offeror's
loss and not the government's if the cost of providing the required
service or item exceeds the contract price. Fresh Flavor Meals, Inc.,
B-208965, Oct. 4, 1982, 82-2 C.P.D. Paragraph 310.
However, when the contract to be awarded is a cost-reimbursement
contract, the risk of loss as a result of a cost overrun shifts to the
government. It is therefore necessary in cost-reimbursement contracting
to be aware of the possibility of a buy-in and guard against its
occurrence by analyzing proposed costs in terms of their realism since,
regardless of the costs proposed by the offeror, the government is bound
to pay the contractor actual and allowable costs. Bell Aerospace
Company; Computer Sciences Corp., 54 Comp. Gen. 352 (1974), 74-2 C.P.D.
Paragraph 248. In this regard, Federal Acquisition Regulation, Section
15.605(d), 48 Fed. Reg. 42,102 (1983) (to be codified at 48 C.F.R.
Section 15.605(d)), provides:
(d) In awarding a cost-reimbursement contract, the cost
proposal should not be controlling, since advance estimates of
cost may not be valid indicators of final actual costs. There is
no requirement that cost-reimbursement contracts be awarded on the
basis of lowest proposed cost, lowest proposed fee, or the lowest
total proposed cost plus fee. The award of cost-reimbursement
contracts primarily on the basis of estimated costs may encourage
the submission of unrealistically low estimates and increase the
likelihood of cost overruns. The primary consideration should be
which offeror can perform the contract in a manner most
advantageous to the Government, as determined by evaluation of
proposals according to the established evaluation criteria.
In this vein, we have held it improper to award a cost-reimbursement
contract on the basis that the costs proposed are reasonable, per se,
merely because they are low when compared to other offers, without an
appropriate analysis adequately measuring the realism of such low costs.
Moreover, where the award of the contract is based ultimately on the
estimated cost for performance of the contract, a determination of cost
realism requires more than the acceptance of proposed costs as
submitted. Joule Technical Corporation, B-192125, May 21, 1979, 58
Comp. Gen. 550 79-1 C.P.D. Paragraph 364. For these reasons, the
evaluation of competing cost proposals requires the exercise of informed
judgment which we believe must be left to the administrative discretion
of the contracting agencies involved, since they are in the best
position to assess "realism" of cost and technical approaches and must
bear the major criticism for any difficulty or expenses resulting from a
defective cost analysis. 50 Comp. Gen. 390 (1970). Since the cost
analysis is a function of the contracting agency, we will not disturb an
agency's determination unless it clearly lacks a reasonable basis.
Moshman Associates, Inc., B-192008, Jan. 16, 1979, 79-1 C.P.D. Paragraph
23.
Notwithstanding the general rule that the government bears the risk
of cost overruns in the administration of a cost-reimbursement contract,
there is an exception where the contractor has agreed to a cap or
ceiling on its reimbursement for a particular category or type of work.
In such a case, any loss occasioned by a cost overrun will be borne by
the contractor and not the government. 51 Comp. Gen. 72 (1971), at 77.
For this reason there are many cases where imposition of a cap or
ceiling on direct and indirect costs can substitute for the performance
of a cost realism analysis.
It is well established that selection officials (SSO) are not bound
by the recommendations and conclusions of evaluators, like the SEB, and
GAO will defer to an SSO's judgment, even when he disagrees with an SEB
composed of technical experts. Moreover, the SSO's selection decision,
reliance upon the results of technical/cost evaluations, and tradeoff
decisions, if any, between technical superiority and cost are limited
only by the tests of rationality and consistency with established
evaluation factors. Grey Advertising, Inc., 55 Comp. Gen. 1111 (1976),
76-1 C.P.D. Paragraph 325.
We agree with the protester that the award to GOI was inconsistent
with the RFS's cost realism evaluation factor and that HUD's imposition
of a cap on direct and indirect costs is of questionable efficacy, as a
substitute for the performance of a cost realism analysis, under the
particular circumstances of this case.
The record shows that HUD was concerned about the realism of GOI's
proposed costs. HUD performed an inadequate cost realism analysis of
GOI's proposed costs. The analysis consists of the following: (1) a
statement that GOI understands that HUD intends to impose ceilings; (2)
a calculation of GOI's base period (based on the rates which DCAA
reports GOI is currently experiencing) showing an increase of $460,627
over GOI's proposed costs; (3) a calculation of ATS's costs based on
ATS's ceiling rates; and (4) two comparisons -- GOI's proposed cost
versus ATS's proposed cost (showing GOI lower by $873,071 over 36
months) and GOI's current costs versus ATS's proposed ceiling costs
(showing GOI lower by $431,546 over 36 months). None of the above
provides a reason for concluding that GOI's proposed costs are
realistic. HUD's cost analysis only compared the two proposals on the
same basis once, simply subtracting GOI's proposed cost from ATS's
proposed cost. Such calculation does nothing to assure realistic costs,
but merely shows the difference between the two proposers. The other
comparison utilized GOI's current cost experience against ATS's ceiling
costs (the most performance by ATS would cost the government). This
does not result in a usable cost analysis because of the different basis
used for each offeror. We note ATS argues that if its proposed costs
are compared with GOI's current costs, ATS is almost $100,000 lower.
In view of the above, the question becomes whether imposition of caps
on GOI's proposed direct and indirect costs can substitute for an
adequate cost realism analysis. We can only condone such a substitution
when it is clear that the cap imposed will protect the government to the
same extent that an adequate analysis would. While HUD appears to have
capped GOI's indirect costs, it is not clear that GOI's direct labor
costs are effectively capped. The record shows that GOI initially
resisted HUD's plan to impose caps. In fact, GOI warned HUD, at the
time HUD began negotiating the cost ceilings, that imposition of the
ceilings would prevent GOI from using the higher skilled personnel which
HUD actually required to perform the work.
We are concerned that the cap imposed on GOI's direct labor is a cap
on the average cost of a particular labor category. The average results
from the combination of the salaries of all GOI personnel within the
given category (both high salary and low salary). HUD does not appear
to have determined exactly what skill mix and therefore what salary mix
was represented by the average which GOI agreed to cap. We cannot
conclude that such an arrangement will assure HUD of the availability of
the necessary mix of personnel (high salary v. low salary) within a
particular labor category to perform the contract.
Moreover, Article VIII of the contract grants GOI the right to reject
a HUD task order in the event that GOI believes the prescribed work
cannot be accomplished within the hours designated in the task order.
Assuming that higher skilled, and presumably higher paid, contractor
personnel can perform tasks at a higher speed, we think that a
contractor, who submitted unrealistically low proposed costs, would be
forced by the caps to propose less skilled, lower paid and slower
personnel in order to stay within the ceilings. Consequently, it can be
anticipated that such a contractor would reject task orders on the basis
that more time was required for performance. In this regard we note
that the ceilings on GOI's proposed costs are well below the costs that
GOI is currently experiencing. Article VIII directs:
J. Immediately upon receipt of a rejected task specification,
the Contracting Officer shall commence negotiations with the
Contractor to resolve problems that made the task specification
unacceptable. In the event no resolution on questions of fact can
be obtained, the task specification in question may be subjected
to General Provisions, Clause 13, entitled "Disputes."
We think that HUD's substitution of caps for an adequate cost realism
analysis is ineffective because, at best, it sets up a situation certain
to generate endless disputes in the event that the contractor actually
had submitted unrealistically low proposed costs.
Consequently, notwithstanding HUD's imposition of cost ceilings, we
cannot find that HUD realized the cost safeguard's thought necessary by
the SSO and the SEB. We think that a proper cost analysis is necessary
in this kind of procurement.
As noted above, the SSO overruled the SEB and made award to the lower
technically rated offeror, GOI, based on its lower cost proposal. We
find, based on the above, that such action was not rationally based in
view of the lack of a cost analysis and the inadequacy of the cost
ceilings. However, there was also no adequate cost analysis performed
on ATS. At this time, it is impracticable to attempt to conduct a
proper cost analysis.
Therefore, there was no assurance that award was made in the best
interest of the government. In view of the stage of performance of the
initial contract period and the time necessary to conduct a
reprocurement, we recommend that the option not be exercised.
B-214459, 64 Comp. Gen. 337
Matter of: Unauthorized Use of United States Government National
Credit Card, March 18, 1985:
Generally, the Govt. should not pay for unauthorized transactions
involving the use of a United States Government National Credit Card
(SF-149) when (1) the expiration date embossed on the SF-149 passed
before the transaction occurred; (2) the purchaser was not properly
identified as a Federal agent or employee; or (3) the vehicle was not
properly identified as an official vehicle. However, where these three
items are satisfied, the Govt. should reimburse oil companies for
otherwise legitimate purchases involving SF-149'S, even though the
authorized purchaser later made unauthorized use of the supplies or
services so acquired (unless it can be demonstrated that the oil company
or its agents or employees knew, or had strong reason to know, that the
transaction was not authorized or would be used for unauthorized
purposes). In those cases, after paying the oil company, the Govt.
should seek reimbursement from the person who improperly acquired or
misused the purchased services and supplies.
The Controller of the General Services Administration (GSA) has
requested our opinion on the liability of the Government for
unauthorized use of the United States Government National Credit Card
(SF-149). For the reasons given below, we find that, under the terms of
the governing contracts and regulations, the Government is not bound to
pay for unauthorized uses of the SF-149. However, we recommend that the
Defense Fuel Supply Center (DFSC) of the Defense Logistics Agency and
GSA revise their respective contracts and regulations to make this
clearer.
The SF-149 is a plastic credit card issued by GSA which may be used
by Government officials and employees (pursuant to a series of
procurement contracts issued and administered by DFSC) to make credit
purchases of fuel and other supplies and services from commercial oil
company retailers for use in Government vehicles engaged on official
business. 41 C.F.R. Section 101-26.406-1 (1983). The card is embossed
with a billing account number, agency name, card identification number,
expiration date, and replacement code. See Federal Supply Schedule FSC
75, pt. VII, Section 13 (sch3 Nov. 30, 1982) (hereafter referred to as
"FSC 75"). In addition to the embossed information, the following
information is printed on the front and back of the card, respectively.
This card is valid only for the supplies and services listed on
the reverse side when furnished (1) to the vehicle bearing the tag
or identification shown below or (2) if no tag number is shown to
any properly identified U.S. Government vehicle, boat or small
aircraft. If found please return to GSA, YTF, Washington, DC
20406.
In accordance with the terms of Defense Supply Center Contract
Bulletin DSA600-3.33, when presented, this card may be used to
purchase any of the following supplies or services for properly
identified U.S. Government motor vehicles, boats, or small
aircraft:
(a) For motor vehicles -- regular and premium grade gasoline,
leaded and unleaded; diesel fuel; regular and premium grade
lubricating oil; lubricating services; oil filter elements; air
filter service; tire and tube repairs; battery charging;
washing and cleaning services; mounting and dismounting chains;
permanent type antifreeze, emergency replacement of defective
spark plugs, fan belts, windshield wiper arms and blades; lamps;
and other minor emergency repairs.
(b) For boats -- regular and premium grade gasoline, leaded and
unleaded; diesel fuel; and regular and premium grade lubricating
oil.
(c) For small aircraft -- aviation fuel and lubricating oil.
USE OF THIS CARD FOR OTHER THAN OFFICIAL PURPOSES AS STATED
ABOVE IS A CRIMINAL OFFENSE SUBJECT TO FINE AND/OR IMPRISONMENT.
FSC 75, Section 14. (Italic supplied.)
Under the applicable GSA regulation, the identification number on an
SF-149 represents either the license tag of a specific vehicle, or a
unique serial number assigned to that card. 41 C.F.R. Section
101-38.1202(a)(1). Cards with vehicle license tags for identification
numbers may be used to procure services or supplies only for that
vehicle. Cards embossed with unique serial identification numbers may
be used to procure supplies or services for "any properly identified
U.S. Government vehicle, boat, small aircraft, nonvehicular equipment or
motor vehicle that is leased or rented for sixty continuous days or more
and is officially identified in accordance with (41 C.F.R.) Section
101-38.305-1." Id. (The legend on the front of the card, as quoted
above, generally restates these provisions.)
Section 101-38.305-1, referred to above, provides that "(e)ach motor
vehicle acquired for official purposes * * * shall display official U.S.
Government tags mounted on the front and rear of the vehicle * * *."
Particular Government vehicles may be exempted from the requirement to
display "official U.S. Government tags" whenever "conspicuous
identification on the vehicles would interfere with the performance of
the functions for which the vehicles were acquired and are used." 41
C.F.R. Section 101-38.601. See generally 41 C.F.R. subpt. 101-38.6.
However, under the GSA regulations, SF-149's normally would not be used
to service or supply vehicles when disclosure of the official status of
the vehicles "would interfere with the performance of the functions for
which the vehicles were acquired and are used. 41 C.F.R. Section
101-26.406-1(a).
In addition to displaying U.S. Government license tags, official
governmental vehicles are also required to display the words "U.S.
Government," the agency name, and the words, "For Official Use Only." 41
C.F.R. Section 101-38.401. This requirement is also subject to the
exceptions, discussed above, for vehicles covered by 41 C.F.R. Sections
101-38.601 through 101-38.605.
As noted above, the statement printed on the back of the SF-149
stipulates that the card's use is subject to the terms of the Defense
Supply Center Contract Bulletin DSA600-3.33. That bulletin contains,
among other things, the standard terms of the contracts that oil
companies enter into with DFSC. By those terms, the oil companies agree
to "honor" the SF-149 and bill the Government at a later date for the
supplies and services rendered. Clause No. L157 and L159. The
standardized terms specifically provide that the oil companies, through
local service stations with which they are affiliated, shall "deliver
and provide petroleum products, related supplies and services called for
in (the) contract when and in such quantities as may be ordered by the
ordering officer * * * in consideration of which the contractor shall be
paid at the contract price." Clause No. L157. The term "ordering
officer" is defined to mean one of a number of high ranking Government
officials (or their designees), or "the driver of a Federal vehicle or
boat, or pilot of a Federal aircraft authorized to place orders under a
service station contract." Clause No. L105(f)(xiii). Under the standard
terms, title to the supplies obtained under the contract passes to the
Government "upon formal acceptance, regardless of when or where the
Government takes possession." Clause No. L6.03(a). The contractors are
entitled to be paid "upon submission of proper invoices for supplies
and/or services rendered and accepted." Clause No. L159(a). When
submitted, the contractors' invoices must be accompanied by "delivery
receipts" which show:
(i) Name and address of service station and date of delivery;
(ii) Item, quantity, and grade of product, other supplies or
service delivered;
(iii) For each individual item delivered, the unit price with
extended totals;
(iv) License tag or identification number of the vehicle;
The signature of the credit card holder making the purchase,
acknowledging receipt of delivery. Clause No. L158(a).
Neither the DFSC contracts, nor the GSA regulations, directly or
expressly address the question of who bears liability for the purchase
of supplies or services through an unauthorized use of an SF-149. For
example, a lost or stolen SF-149 might be presented to and honored by an
oil company in order to service a nonofficial vehicle, or an employee
entrusted with a card might use it to service his or her privately-owned
vehicle for personal use.
According to GSA, each year SF-149's are used in over 3.5 million
transactions to purchase $70 million worth of fuel, oil, and other
products and services from commercial service stations. GSA anticipates
that its new "Credit Card Accounts Payable System" will detect and
report many unauthorized uses of SF-149's. GSA asked us to determine
whether the Government is required to pay those portions of bills that
are found to represent unauthorized transactions. Among the factors GSA
suggests we consider are whether (1) the expiration date embossed on the
card has passed before the transaction occurred; (2) the purchaser was
at that time a Federal employee; (3) the vehicle was appropriately
marked and identifiable as a Government vehicle, and (4) the oil company
was unaware of the illegal nature of the transaction.
We understand that, in response to previous oil company inquiries,
officials of the DFSC have taken the position that the contracts under
which the SF-149's are used do not constitute an agreement by the
Government to pay for unauthorized uses of SF-149's. That conclusion is
based on DFSC's analysis of the contract clauses quoted above. The DFSC
argues that the contracts only bind the Government to pay for orders
placed and accepted by "ordering officers" (Clause No. L158, L159(a),
L6.03(a)), who primarily are the drivers or pilots of Government
vehicles who have been authorized to place orders (Clause No.
L105(f)(xiii)). From this, DFSC concludes that a person who is not an
"ordering officer," i.e., who has not been authorized to use an SF-149
for a private vehicle, or uses the supplies or services procured with an
SF-149 for private purposes rather than official purposes, cannot bind
the Government under the contract. Moreover, DFSC concludes that
unauthorized uses of SF-149's do not accomplish delivery to or
acceptance by the Government (as required in Clause No. L159(a)). This
is because the person misusing the SF-149 was not acting as an agent of
the Government. DFSC maintains that two of our previous decisions, 23
Comp. Gen. 582 (1944), and 32 Comp. Gen. 524 (1953), support these
conclusions.
We generally agree with DFSC's construction of the relevant contract
provisions and the applicable legal principles. With regard to DFSC's
construction of the oil company contracts, we agree that the Government
has not contracted to accept liability for unauthorized purchases
involving SF-149's. The DFSC contracts, GSA regulations, and the terms
of the SF-149 itself, expressly contemplate presentment of an SF-149 by
a Government employee for use in purchasing supplies or services for a
properly identified Government vehicle. The DFSC contracts only bind
the Government to pay for the supplies and the services ordered and
accepted by authorized Government employees. The GSA regulations and
the terms printed on the SF-149 itself clearly limit use of the card to
the purchase by properly identified Government employees of specific
services or supplies for a properly identified Government vehicle.
In the past, in the context of the theft and misuse of commercial
credit cards assigned to the Government for official use, this Offtce
has applied the established principle that the Government "is neither
bound nor stopped by acts of officers or agents acting without
authority," nor is it bound by "acts of persons (such as thieves) who
never have been its agents." 23 Comp. Gen. at 584. See also 32 Comp.
Gen. at 525. In those decisions, it was noted that:
* * * (I)t is a basic principle of the law of agency that every
person dealing with an agent is bound to investigate and assure
himself that an agency (relationship) actually exists. * * *
* * * A distinction between the liability of individuals and
that of the Government with respect to their agents has long been
recognized by the courts. Although the former are liable to the
extent of the power apparently given to their agents, due to the
necessity of protecting the public interests the Government is
liable only to the extent of the authority or power it has
actually given to its agents." 23 Comp. Gen. at 583-84. See also
32 Comp. Gen. 524-25.
Keeping these principles in mind, we turn to the specific questions
raised by GSA.
(1) Is the Government liable for a purchase made through the use of
an expired SF-149? Each SF-149 is embossed with a clearly designated
expiration date. The use of expiration dates on credit cards is a
common practice among companies that issue commercial credit cards,
including most, if not all, of the oil companies that have contracted
with DFSC to honor the Government's SF-149. It should be obvious to the
oil companies that the honoring of an SF-149 after the expiration date
on the card has passed is not consistent with the DFSC contracts and GSA
regulation. Consequently, the Government clearly is not liable under
the DFSC contracts to reimburse oil companies for transactions involving
expired SF-149's. However, with regard to transactions involving
expired SF-149's where, but for the expiration, the transaction would
otherwise be legitimate, it may be possible, depending on the facts and
circumstances of the particular case, to reimburse the oil company under
the principles of quantum meruit or quantum valebat. See, e.g., 62
Comp. Gen. 337, 338-39 (1983).
(2) Is the Government liable for purchases made through the use of a
SF-149 by a person who was not a Federal officer of employee?
Obviously, the acceptance of an SF-149 by an oil company contractor
where the person offering the card is not properly identified as a
Government employee transcends the bounds of the agreement between the
oil company and the Government. Lost or stolen credit cards and
vehicles constitute facts of life which are frequently encountered by
merchants. Long ago, this Office pointed out that:
* * * The possession of a credit card, or of the official car
identified thereon, in itself alone, does not justify an extension
of credit to the bearer as a representative of the United States.
The service station employees to whom such cards are presented
should require competent evidence as to the identity and official
status of the persons holding them. All Federal employees
authorized to use official cars and purchase gasoline and oil on
the credit of the Government have available means of readily
establishing these facts. 23 Comp. Gen. at 583. See also 32
Comp. Gen. 525.
Oil company contractors are not significantly or unfairly burdened by
the requirement that they investigate the bearer's actual authority to
make a purchase using an SF-149 (Government employees involved in
"undercover" or other assignments in which it would be inappropriate for
them to carry credentials to establish their official status normally
would not carry or use SF-149's. Cf. e.g., 41 C.F.R. subpt. 101-38.6
and 41 C.F.R. Section 101-26.406-1(a).) In any event, by accepting an
SF-149, the oil company binds itself under the GSA regulations and DFSC
contracts (as reiterated on the card itself) to verify the bearer's
official status, and may not be reimbursed by the Government unless it
can demonstrate that it did so.
(3) Is the Government liable for transactions in which SF-149's were
used to service or supply vehicles not appropriately marked and
identified as official Government vehicles? The DFSC contracts and the
GSA regulations limit the card's use to the purchase of services or
supplies for properly identified Government vehicles. Since GSA
regulations require most official Government vehicles to display
Government license tags and the words "U.S. Government" and "For
Official Use Only," the oil companies are neither significantly nor
unfairly burdened by the requirement to verify the vehicle's official
status. Cf. 23 Comp. Gen. 582, supra; 32 Comp. Gen. 524, supra. (As
noted above, SF-149's normally would not be used for vehicles involved
in certain types of "undercover" work.) Where the vehicles are not so
identified, the instructions on the SF-149 limit its use to the vehicle
bearing the tag or identification listed on the credit card.
Consequently, the oil companies have contractually bound themselves to
verify the official nature of the vehicle, and may not be reimbursed
unless they can demonstrate that they did so.
(4) Is the Government's liability affected by the fact that the oil
company may have been unaware of the illegal nature of the transaction?
Here, we must distinguish between purchase and subsequent use. As has
been discussed, the authority to make a purchase using the SF-149 is
reasonably easy to verify. If the merchant fails to compare the name of
the SF-149 and the name on the employee's Government identification card
and further fails to examine the vehicle tags or other identifying
markings to be sure it is a Government car, he should bear the
consequences of failing to do so.
Of course, it is possible that a given purchase may be entirely
legitimate on its face, but the subsequent use of the gasoline purchased
may be unauthorized. For example, a Government employee with proper
credentials might purchase gasoline for a properly identified Government
vehicle, and then proceed to use the vehicle for personal (unauthorized)
matters. In our opinion, merchants should not be held responsible for
this later unauthorized use as long as all the required identifications
were properly verified at the time the purchase was made.
Based on the foregoing discussion, we conclude generally that the
Government should not pay for unauthorized transactions involving the
use of SF-149's when (1) the expiration date embossed on the SF-149
passed before the transaction occurred; (2) the purchaser was not
properly identified as a Federal agent or employee; or (3) the vehicle
was not properly identified as an official vehicle. However, where
these three items are satisfied, the Government should reimburse oil
companies for otherwise legitimate purchases involving SF-149's; even
though an authorized purchaser later made unauthorized use of the
supplies or services so acquired (unless it can be demonstrated that the
oil company or its agents or employees knew, or had strong reason to
know, that the transaction was not authorized or would be used for
unauthorized purposes). In those cases, after paying the oil company,
the Government should seek reimbursement from the person who improperly
acquired or misused the purchased services and supplies. Collection
should be pursued in accordance with the Federal Claims Collection
Standards, 4 C.F.R. ch. II, as amended, 49 Fed. Reg. 8889 (1984).
While we think these conclusions follow from existing law and the
applicable contractual and regulatory provisions, we nevertheless urge
GSA and DFSC to amend those regulations and contracts to expressly state
and make clear the situations in which the Government will and will not
be liable. This should reduce future disputes and guarantee that oil
companies know and understand the obligations that they have assumed.
Finally, we suggest that GSA explore the feasibility of developing a
system for reporting lost or stolen credit cards to the oil companies
with which DFSC has contracted. This would enable the oil companies to
distribute lists of lost/stolen cards to the individual retailers,
similar to the lists used for commercial credit cards, and thereby help
to reduce the potential for unauthorized use of the cards.
B-218148.2, 64 Comp. Gen. 336
Matter of: Storage Technology Corporation, March 11, 1985:
Dismissal of original protest contesting propriety of agency issuance
of a purchase order for computer equipment to higher priced competitor
is affirmed where the protester failed to furnish a copy of its protest
to the contracting agency within 1 day after the protest was filed with
General Accounting Office.
Storage Technology Corporation (STC) requests reconsideration of our
dismissal of its protest concerning request for proposals (RFP) No.
FO4699-85-R-OA002, issued by the Department of the Air Force. In its
protest, STC contended that the Air Force improperly placed a purchase
order for computer equipment to a competitor even though STC's own
equipment was technically acceptable and lower priced. We dismissed the
protest because STC failed to furnish a copy of its protest to the
contracting agency within 1 day after the protest was filed with our
Office. For the reasons that follow, we conclude that the protest was
properly dismissed.
STC's protest was filed on Friday, February 8, 1985. Under our Bid
Protest Regulations, STC was required to furnish a copy of its protest
to the contracting agency by Monday, February 11. See Section 21.1(d)
of our Bid Protest Regulations, 49 Fed. Reg. 49,417 49,420 (1984) (to be
codified at 4 C.F.R. Section 21.2(d)). The protester states that it
"believes" that the contracting agency received at least the enclosure
to its protest, if not the protest itself, on Monday, February 11 and
therefore that it materially complied with this provision. However, on
Tuesday, February 12, the contracting agency informed our Office that it
still had not received any communication whatsoever from the protester.
In fact, the agency now informs us that the first communication that was
received from the protester was a telefaxed copy of the protest
documents on Wednesday, February 13. The actual protest documents did
not arrive until Thursday, February 14.
The Competition in Contracting Act of 1984, Pub. L. No. 98-369
Section 2741(a), 98 Stat. 1175, 1198, 31 U.S. Code 3551, and our
implementing regulations impose a strict time limit of 25 working days
for an agency to file a written report with our Office from the date of
the telephone notice of the protest from our Office. Section 21.3(c),
49 Fed. Reg. 49,420. Extensions are considered exceptional and are
sparingly granted. Any delay in furnishing a copy of the protest to the
contracting agency therefore necessarily delays all subsequent protest
proceedings and frustrates our efforts to provide effective and timely
consideration of all objections to agency procurement actions. We do
not think that this purpose would be served by reopening our file on
this protest.
The dismissal is affirmed.
B-217040, 64 Comp. Gen. 333
Matter of: Captain Kathy A. Montgomery, USAF, March 11, 1985:
A member of the uniformed services who adopted her 26-year old
disabled brother who is incapable of self-support, may claim him as her
dependent to receive basic allowance for quarters at the with dependent
rate. In this case the "child" is legally adopted, is in fact dependent
upon the member for support and resides with the member; thus, a bona
fide parent and child relationship exists. 42 Comp. Gen. 578 (1963),
amplified.
The question presented in this case is whether a member of the
uniformed services may receive basic allowance for quarters on behalf of
an adopted child when that child is a legally adopted blood relative,
over the age of 21, who is in fact dependent upon the member for support
and resides with the member. We hold that under circumstances such as
these, the member may receive basic allowance for quarters at the "with
dependent" rate. /1/
Captain Kathy A. Montgomery, USAF, has requested basic allowance for
quarters at the "with dependent" rate on account of her adopted son,
Steven, whom she legally adopted in 1983 at age 26. Steven is also her
blood relative, a twin brother, who is quadraplegic and incapable of
self-support. Captain Montgomery explains that her brother and adopted
son was severely injured in an automobile accident at the age of 19 in
1976 and in addition to being quadraplegic, is brain damaged, and has
vision, hearing and a variety of other medical problems. He must be
closely supervised and relies on Captain Montgomery for everything. He
has resided with her for 4 years, and will continue to reside with her
since their father is dead and their mother is incapable of caring for
him. Other than Captain Montgomery, his only means of support is a $235
per month social security disability payment.
The Air Force has not allowed payment of the increased allowance
pending our decision because of 42 Comp. Gen. 578 (1963). In that case,
we held that an officer of the uniformed services who adopted her
unemployable older brother and sister over 21 years of age, who did not
reside with the Officer, did not have an established parental
relationship with the adopted children to have them considered as her
children under 37 U.S.C. Section 401. Thus, we held that the officer
was not entitled to the basic allowance for quarters on their account.
Section 401 of title 37 defines "dependent" as it is used in 37
U.S.C. Section 403, the statute authorizing basic allowance for
quarters, stating in pertinent part:
In this chapter, "dependent", with respect to a member of a
uniformed service, means --
(2) his unmarried child (including any of the following
categories of children if such child is in fact dependent on the
member: * * * an adopted child; * * *) who either --
(A) Is under 21 years of age;
(B) Is incapable of self-support because of a mental or
physical incapacity, and in fact dependent on the member for over
one-half of his support; * * *
As is indicated above, we have held that certain adoptions by members
of the uniformed services did not create a bona fide parental
relationship and members could not receive the increased allowance based
on those dependents. See 42 Comp. Gen. 578, supra, where the member
adopted her older brother and sister, who did not reside with her, and
B-150929, May 21, 1973, where the member adopted his elder sister who
did not reside with him. In another case we found that a bona fide
relationship did not exist between the member and his adopted child
since the child, although a minor, was the member's brother who lived
with his natural parents rather than with the member. The child was
dependent financially upon his natural parents rather than the member,
and it appeared that the member had merely "adopted" the child for
purposes of making the child his heir. 7 Comp. Gen. 6 (1927).
The law has not always recognized adopted children under the
definition of a dependent for quarters allowance purposes. See 9 Comp.
Gen. 299 (1930) where we discussed the effect of the Act of February 21,
1929, 45 Stat. 1254, which amended section 4 of the Act of June 10,
1922, 42 Stat. 627, to include an adopted child. In discussing the
language used in the 1929 Act, we noted that it was intended to prevent
payments of increased allowances in situations where a member adopts a
near relative, but the "child" remains in the custody of its natural
parent or parents, and prima facie, no purpose is served other than to
give the member a basis for claiming increased allowances on the basis
of having an adopted child. See also B-150929, supra.
This concern is not applicable to the case before us. Here, Captain
Montgomery has complete responsibility for the care, maintenance and
support of her adopted son. He cannot function as an adult since he is
both mentally and physically disabled. He resides with the member and
has resided with her for a number of years. Also, from the dependency
statement submitted, it appears he is dependent upon her for over
one-half of this financial support. Thus, the adopted child in this
case is dependent upon the member as completely as, or perhaps more
than, any other adopted child would be upon his parents. /2/
As is indicated above, in denying payment, the Air Force has relied
upon our holding in 42 Comp. Gen. 478, supra, where we stated at page
580:
* * * We do not believe that by including adopted children with
the meaning of the term "children" it was intended to broaden the
scope of the law to cover situations where the parent and child
relationship did not exist when the children reached the age of 21
and the disability existed at the time of adoption. * * *
While generally this is true, particularly when considered in
connection with all the facts of that case, we think that the holding in
the case has been too broadly construed. In that case, a member had
adopted her older "unemployable" siblings. Although she had a technical
status as a parent, the "children" lived independently elsewhere. In
considering these cases, the age of the adoptee, the existence of a
disability and the living arrangements should be reviewed to determine
whether a bona fide parent and child relationship exists for the purpose
of the additional quarters allowance.
That is what should be the determinative factor, as is indicated in
the next sentence of that case where we went on to state:
* * * In any event, it appears extremely doubtful that the
Congress contemplated the extension of the benefits of the law to
an officer who adopts a brother, sister, or other relative over
the age of 21 where no bona fide relationship of parent and child
exists. * * *
When read as a whole, the case makes the existence of a bona fide
parent and child relationship a determinative factor in the decision to
allow or deny the additional quarters allowance. In determining whether
or not a bona fide parent and child relationship exists, the service
should consider all the circumstances, including the age of the adoptee,
the existence of a disability at the time of the adoption, and whether
the adopted child remains with his natural parents or actually lives
with and is dependent upon the member for at least half his support.
The purpose of the increased allowance is to at least partially
reimburse members for the expense of providing quarters for their
dependents when Government quarters are unavailable, but not to grant
the higher allowance as a bonus merely for the technical status of being
married or a parent. See 42 Comp. Gen. 642 (1963). Therefore, in cases
such as the present where an adopted child who has reached the age of 21
is being considered, the actual dependence of the child on the member,
and the existence of a bona fide parent and child relationship should be
considered. In the circumstances of this case, the age of the adopted
child and the existence of his disability at the time of adoption should
not bar receipt of the additional allowance when a bona fide parent and
child relationship exists.
As mentioned above, Captain Montgomery's child was disabled at the
age of 19 and is completely unable to care for himself. She has
parental control over and responsibility for all matters concerning him
including medical, financial and legal matters, and his daily
supervision and activity. Thus, the facts provide reasonable grounds to
conclude that a bona fide parent and child relationship exists between
the member and her adopted son.
Accordingly, Captain Montgomery may be paid basic allowance for
quarters at the "with dependent" rate on account of her adopted son.
(1) This decision is in response to a request submitted by Major T.
H. Cuevas, USAF, Chief Accounting and Finance Branch, Comptroller,
Headquarters San Antonio Air Logistics Center, Kelly Air Force Base,
Texas. The submission was approved by the Department of Defense
Military Pay and Allowance Committee as Air Force Submission DO-AF-1447.
(2) We note that adoption of an adult is authorized under Tennessee
law. Tenn. Code Ann Sections 36-116, 36-139. In Coker v. Celebrezze,
241 F. Supp. 783 (E.D. Tenn. 1965), a grandfather's adoption of his
disabled adult grandson, who lives with the grandfather and who was
dependent upon him, was held to establish a valid parent-child
relationship for Social Security purposes.
B-218088.3, 64 Comp. Gen. 331
Matter of: Marconi Electronics, Inc. - Reconsideration, March 8
1985:
Protester that failed to furnish a copy of its protest to the
contracting officer 1 day after filing with General Accounting Office
(GAO) failed to comply with Bid Protest Regulations.
Concepts of "significant issue" and "good cause" in sec. 21.2(c) of
Bid Protest Regulations apply only to protests which are untimely filed
with GAO and not to protests timely. filed, but otherwise deficient.
Marconi Electronics, Inc. (Marconi), has requested reconsideration of
our dismissal notice of February 5, 1985, which dismissed the company's
February 1, 1985, protest against a purchase order awarded by the Naval
Surface Weapons Command (Navy) on January 25, 1985, for signal
generators to "Hewlett-Packard Company * * * under the Federal Supply
Schedule Program."
We dismissed the February 1 protest because we concluded that the
protester had not complied with section 21.1(d) of our Bid Protest
Regulations, 49 Fed. Reg. 49,417, 49,420 (1984)(to be codified at 4
C.F.R. Section 21.1(d)).
Section 21.1(d) provides:
The protester shall furnish a copy of the protest (including
relevant documents not issued by the contracting agency) to the
individual or location designated by the contracting agency in the
solicitation for receipt of protests. If there is no designation
in the solicitation, the protester shall furnish a copy of the
protest to the contracting officer. The designated individual or
location, or if applicable, the contracting officer must receive a
copy of the protest no later than 1 day after the protest is filed
with the General Accounting Office. The protest document must
indicate that a copy has been furnished or will be furnished
within 1 day to the appropriate individual or location.
Although Marconi filed its February 1 protest with our Office on
February 4, 1985, there was no indication that the protester had
transmitted a copy of its protest to the appropriate individual or
location at the procuring agency.
On requesting reconsideration, Marconi states that it furnished a
copy of its February 1, 1985, protest to "contracting agency personnel
at the same time that (the February 1 protest) was furnished to the
GAO."
The Navy advises informally that there was no individual or location
designated for receipt of protests in the informal solicitation for
quotations which Marconi received for the purchase order in January
1985. Consequently, under section 21.1(d) of our Bid Protest
Regulations, above, Marconi was obligated to furnish a copy of its
February 1 protest to the contracting officer no later than February 5.
Marconi and the Navy have advised informally that the copy of
Marconi's February 1 protest was addressed to the Navy legal office --
not the contracting officer. And Marconi informed us that it cannot
question Navy's further statement that the copy of its February 1
protest was not received until February 7 at the Navy legal office and
not by the contracting officer until a later date. Consequently,
Marconi failed to comply with the above regulation.
Marconi also argues that it had transmitted to the procuring agency a
copy of an earlier (January 28, 1985) protest filed with our Office. We
dismissed this January 28, 1985, protest by dismissal notice dated
January 30, 1985, since this earlier protest was found not to state a
basis for protest. Marconi does not contest our finding that its
January 28 protest did not state a basis for protest. Therefore, it is
irrelevant as to which date the Navy received Marconi's January 28
protest since this earlier protest was defective on its face.
Finally, Marconi requests that its protest be considered because it
"raises significant issues" and because Marconi "has spent considerable
time and expense in formulating its protest." The concepts of
"significant issue" and "good cause" in section 21.2(c) of our Bid
Protest Regulations apply only to protests which are untimely filed with
our Office under section 21.2 ("Time for Filing") of our Bid Protest
Regulations, above. These concepts are not for application in
determining whether a protest -- timely filed with our Office but
otherwise deficient -- should be considered.
In view of the foregoing, the prior dismissal is affirmed and the
request issued to the Navy for a formal report after the receipt of the
request for reconsideration is canceled. See section 21.3(f) of our Bid
Protest Regulations, 49 Fed. Reg. 49,417, 49,421 (1984) (to be codified
at 4 C.F.R. Section 21.3(f)).
B-216736, 64 Comp. Gen. 330
Matter of: Alliance Properties Inc., March 8, 1985:
General Accounting Office generally does not consider mistake in bid
claimes alleged after award, since they are claims "relating to"
contract within the meaning of the Contract Disputes Act of 1978, which
requires that all such claims be filed with the contracting officer for
decision.
Alliance Properties Inc. (API) requests that our Office review the
Air Force's decision to deny API's request to modify its bid under
invitation for bids No. F41800-84-B-9339 after bid opening but before
award due to a mistake.
On September 25, 1984, API accepted award of the contract while
attempting to reserve its rights to pursue any remedies permitted by
law. However, the Air Force letter denying the requested correction
advised API that it could either withdraw its bid or waive its claim of
error and accept award of the contract. The Air Force did not agree to
a reservation of rights or that our Office should consider the claim.
API's claim was received in this Office on October 9, 1984.
Our Office generally does not consider mistake in bid claims alleged
after award. The reason is that such matters are claims "relating to"
contracts within the meaning of the Contract Disputes Act of 1978, 41
U.S.C. Sections 601-613 (1982), which requires that all such claims be
filed with the contracting officer for decision. Rainey's Security
Agency, Inc., B-214653, July 2, 1984, 84-2 C.P.D. Paragraph 6.
Since API's claim was not brought to our attention until after the
award, we find that it should be filed and processed in accordance with
the Contract Disputes Act. Although API argues that a reservation of
claim has been recognized by our Office as a permissible method of
guaranteeing our review of the question, the cases API relies on were
decided before the Contract Disputes Act was effective. We will only
review such matters now when both parties agree to our review, which the
Air Force has not done here.
The matter is dismissed.
B-218154.2, 64 Comp. Gen. 329
Matter of: Brunk Tool & Die Company, March 6, 1985:
Dismissal of original protest for failure to file copy of protest
with agency affirmed where the contracting agency had not been furnished
a copy of the protest 6 working days after receipt of the protest by
General Accounting Office.
Brunk Tool & Die Company requests reconsideration of our dismissal of
its protest concerning invitation for bids (IFB) No. DAA09-84-B-0844,
issued by the Department of the Army. We dismissed the protest because
Brunk failed to furnish a copy of its protest to the contracting agency
within 1 day after the protest was filed with our Office. For the
reasons that follow, we conclude that the protest was properly
dismissed.
Brunk's protest was filed on Monday, February 11, 1985. Under our
Bid Protest Regulations, Brunk was required to furnish a copy of its
protest to the contracting agency by Tuesday, February 12. See Section
21.1(d) of our Bid Protest Regulations, 49 Fed. Reg. 49,417, 49,420
(1984) (to be codified at 4 C.F.R. Section 21.1(d)). The agency had not
received a copy of Brunk's protest as of Friday, February 20.
The protester states that it was unaware of this "unrealistic"
regulatory requirement; that it sent a copy of its protest to the
contracting agency by regular mail (its protest to our Office was filed
via commercial courier); that it was therefore unable to verify receipt
by the contracting agency; and that it notified the contracting agency
by telephone of the filing of the protest so that they were "aware of
the situation."
First, the protester's lack of actual knowledge of our regulations
provides no basis for reopening the file since our Bid Protest
Regulations are published in the Federal Register and protesters
therefore are charged with constructive notice of their contents. See
Peter A. Tomaino, Inc. -- Request for Reconsideration, B-208167.2, Jan.
10, 1983, 83-1 CPD Paragraph 19. Second, the Competition in Contracting
Act of 1984, Pub. L. No. 98-369, Section 2741(a), 98 Stat. 1175, 1199,
31 U.S. Code 3551, and our implementing regulations impose a strict time
limit of 25 working days for an agency to file a written report with our
Office from the date it receives telephone notice of the protest from
our Office. Section 21.3(c), 49 Fed. Reg. 49,420. Extensions are
considered exceptional and are sparingly granted. Despite the
protester's contentions, the fact remains that the agency still had not
received a copy of the protest 9 calendar days and 6 working days after
receipt of the protest by our Office. Any such delay in furnishing a
copy of the protest to the contracting agency necessarily delays all
subsequent protest proceedings and frustrates our effort to provide
effective and timely consideration of all objections to agency
procurement actions. We do not think that this purpose would be served
by reopening our file on this protest.
The dismissal is affirmed.
B-218033, 64 Comp. Gen. 325
Matter of: Sabreliner Corporation, March 6, 1985:
Protest concerning responsiveness of awardee's bid is timely since it
was filed with 10 working days of date agency determined bid responsive
and awarded firm the contract.
Under section 21.1(d) of GAO Bid Protest Regulations, 49 Fed. Reg.
49417, 49420 (to be codified at 4 C.F.R. 21.1(d)), a protest may be
dismissed where the protester failed to furnish a copy of the protest to
the contracting officer within 1 day after the protest is filed with
GAO. Dismissal is not warranted in this case of first impression where
agency was aware of protest basis, raised no objections prior to filing
its protest report, and timely filed the protest report. However, GAO
emphasizes criticality of compliance with this filing requirement.
Bid containing notation "N/C Pan Stock" as a material cost for
several line items is ambiguous, at best, and should have been rejected.
Record shows that pan stock refers to ancillary items which are
normally provided by the contractor and phrase could reasonably be
interpreted as obligating bidder to provide only pan stock items at no
charge or providing the required materials only to the extent they could
be supplied from pan stock.
Sabreliner Corporation protests the award of a contract to Midcoast
Aviation, Inc. under invitation for bids (IFB) No. N68520-85-B-9102,
issued by the Department of the Navy for the repair and scheduled
maintenance of a CT-39E aircraft which had been heavily damaged in a
crash. Sabreliner contends that Midcoast's bid was nonresponsive and
should have been rejected.
We sustain the protest. This decision is issued pursuant to the
express option provision set forth in section 21.8 of our Bid Protest
Regulations, 49 Fed. Reg. 49417, 49422 (1984) (to be codified at 4
C.F.R. Section 21.8), and is rendered within 45 calendar days of the
date the protest was filed.
Initially, we note that the Navy contends that the protest was not
timely filed. The Navy argues that Sabreliner knew or should have known
the basis for its protest when bids were opened on January 7, 1985.
Since Sabreliner did not file a written protest within 10 working days
of that date, the Navy concludes that the protest is untimely and should
not be considered on the merits. In addition, the Navy urges that we
dismiss Sabreliner's protest for failure to comply with section 21.1(d)
of our Bid Protest Regulations, 49 Fed. Reg. 49417, 49420 (to be
codified at 4 C.F.R. Section 21.1(d)), which requires that a copy of the
protest be furnished to the contracting officer or his designee within 1
day after the protest is filed with GAO.
In our view, Sabreliner's protest is timely since it was filed within
10 working days of the date the Navy awarded the contract to Midcoast.
A protester is not obligated to protest until an agency takes some
action adverse to the protester's interest. Brandon Applied Systems,
Inc., 57 Comp. Gen. 140 (1977), 77-2 CPD Paragraph 486. Although
Sabreliner may have known, as of bid opening, the basis for its
allegation that Midcoast's bid was nonresponsive, it is the agency's
acceptance of the alleged nonconforming bid which forms the basis for
protest. It was not until the Navy determined the firm eligible for
award and awarded Midcoast the contract that the Navy took some action
adverse to the protester's position. Since the protest was filed within
10 working days of that date, the protest is timely. See M&M Services,
Inc., EPD Enterprises, Inc., B-208148.3, B-208148.4, May 23, 1983, 83-1
CPD Paragraph 546.
Concerning the Navy's argument that the protest should be dismissed
because of the protester's failure to furnish a copy of the protest to
the agency within 1 day after the protest was filed, our regulations
provide that the failure to comply with this provision may result in
dismissal of the protest. See Bid Protest Regulations, Section 21.1(f),
49 Fed. Reg. 49417, 49420 (to be codified at 4 C.F.R. Section 21.1(f)).
Under Section 3553(b)(2) of the Competition in Contracting Act of 1984
(CICA), Pub. L. No. 98-369, 98 Stat. 494, July 18, 1984, and 21.3(c) of
our Bid Protest Regulation, the agency is required to furnish its report
on the protest with our Office within 25 working days (or 10 days under
our express option procedures, Bid Protest Regulations Section
21.8(d)(1)), from the date of telephone notice of the protest from our
Office. Clearly, the agency will not be in a position to comply with
this requirement unless it promptly receives a copy of the protest. The
time limits set forth in CICA, and in our regulations, are designed to
ensure that protests will be resolved expeditiously. Therefore,
whenever a protester fails to furnish a copy of the protest to the
agency within 1 day after the protest is filed, as required by section
21.1(d), the protest may be dismissed as a result. Otherwise, the
ability of our Office and the contracting agencies to comply with the
statutory time frames is jeopardized.
In this case, however, we do not find that dismissal of the protest
is required. We note that Sabreliner pursued its protest intitally with
the Navy and, although the Navy may not have timely received a copy of
the submission filed with our Office, the Navy had actual knowledge of
the grounds which formed the basis for Sabreliner's protest at the time
the protest was filed with our Office. Also, the Navy filed its protest
report in a timely manner under our express option procedures and at no
time prior to that date did the Navy object to the protester's failure
to comply with this provision. Under the circumstances, and in view of
the fact that the application of section 21.1(d) is an issue of first
impression, we find that dismissal is not required and the merits of the
protest will be considered.
The IFB indicated that award would be made to the contractor
submitting the lowest responsive bid and that the low price would be
determined by the total aggregate price of the contract line items, the
evaluated labor rates applied to the government's best estimate of hours
to perform the work and the prices provided by the contractors in
Attachments 1 and 4. Attachment 1 was comprised of nine line items and
required bidders to submit a firm fixed price for the material cost and
installation of these items. Bidders were also notified that some of
the items might not be ordered because the Navy had a limited supply in
stock.
The bid submitted by Midcoast contained the notation "N/C Pan Stock"
for the material cost for eight of the nine line items in Attachment 1.
The remaining item required the bidder to conduct an inspection and for
this item, Midcoast bid "O." Sabreliner contends that the notation "N/C
Pan Stock" renders Midcoast's bid nonresponsive since the phrase could
be interpreted as an offer to provide only pan stock items at no charge
or, alternatively, to provide the required items only to the extent the
material could be furnished from Midcoast's pan stock. Pan Stock
generally refers to ancillary items, such as tubings, wires, connectors,
clamps, and screws, which are not normally provided with the required
materials but which are necessary for their installation. Since the
materials required by Attachment 1 could not be furnished from pan
stock, Sabreliner argues that under one interpretation of Midcoast's
bid, Midcoast did not include a price for the material cost of several
required items and under another construction, Midcoast qualified its
bid.
In addition, Sabreliner notes that the Navy contacted Midcoast
regarding its bid after bid opening and that as a result of that
contact, Midcoast submitted an additional statement indicating that all
the materials required by Attachment 1 would be furnished at no cost.
Sabreliner argues that the fact that the Navy found it necessary to
contact Midcoast demonstrates that there was confusion regarding the
meaning of the notation in Midcoast's bid. Sabreliner contends that the
Navy should have found the bid nonresponsive and should not have
permitted Midcoast to explain the ambiguity.
The Navy argues that Midcoast's bid bound the firm to provide all the
materials required by Attachment 1 at no charge. The Navy indicated
that it considered the term "pan stock" irrelevant and assumed that the
term merely referred to where the materials would be obtained by
Midcoast. The Navy argues that since the phrase has no impact on price,
quantity, quality or delivery, Midcoast's bid was responsive to the
requirements of the IFB and was properly accepted. Furthermore, the
Navy states that Midcoast was contacted simply to verify its price and
that it was not allowed to alter its bid in any manner.
The question of the responsiveness of a bid concerns whether a bidder
has unequivocally offered to provide the requested items in total
conformance with the terms and specification requirements of the
invitation at a fixed price. M.A. Barr, Inc., B-189142, Aug. 3, 1977,
77-2CPD Paragraph 77. If the bid is subject to more than one reasonable
interpretation, it is ambiguous and must be rejected as nonresponsive
under the rigid rules applicable to procurement made by formal
advertising. The Kerite Company, B-212206, Aug. 10, 1983, 83-2 CPD
Paragraph 198. A bidder's intention must be determined from the bid
itself at the time of bid opening and only material available at bid
opening may be considered in making a responsiveness determination.
International Waste Industries, B-210500.2, June 13, 1983, 83-1 CPD
Paragraph 652.
Here, we believe that the phrase "N/C Pan Stock" may reasonably be
interposed as obligating Midcoast only to supply pan stock items at no
charge and therefore, Midcoast did not enter a bid for the material cost
for those items. Although we recognize that Sabreliner's installation
costs for Attachment 1 were somewhat higher than those submitted by
Midcoast, the fact remains that Sabreliner's proposed material costs
were approximately $37,000 and Midcoast's failure to provide prices for
these items cannot be waived as minor. Also, the phrase could be
interpreted as requiring Midcoast to furnish the required items only to
the extent they could be supplied from pan stock. We note that the
record clearly indicates that "pan stock" items do not encompass the
materials which were required by Attachment 1. Although the Navy argues
that the phrase refers to where the required materials would be
obtained, Midcoast itself states that pan stock materials are ancillary
items which must be furnished by the contractor. Furthermore, the fact
that Midcoast bid "O" for the remaining item in Attachment 1 where no
materials were required casts further doubt on what meaning is to be
given the "N/C Pan Stock" entries. Accordingly, we find that Midcoast's
bid is ambiguous, at best, and should have been rejected.
The protest is sustained. We recommend that the contract awarded to
Midcoast be terminated and award be made to Sabreliner. See Bid Protest
Regulations, Section 21.6, 49 Fed. Reg. 49417, 49422 (to be codified at
4 C.F.R. Section 21.6).
This decision contains a recommendation for corrective action to be
taken. Therefore, we are furnishing copies to the Senate Committees on
Governmental Affairs and Appropriations and the House Committees on
Government Operations and Appropriations in accordance with section 236
of the Legislative Reorganization Act of 1970, 31 U.S.C. Section 720
(1982), which requires the submission of written statements by the
agency to the committees concerning the action taken with respect to our
recommendation.
B-216075, 64 Comp. Gen. 323
Matter of: Nathan F. Rodman - Forfeited Real Estate Deposit, March
6, 1985:
Under a lease with an option to purchase agreement a transferred
employee forfeited the $3,500 amount paid as consideration for the
option because he had not exercised the option to purchase the leased
residence before he was transferred. Since agency transfer of employee
appears to be the proximate cause of forfeiture, the deposit may be
claimed as a miscellaneous relocation expense to the extent authorized
under FTR para. 2-3.3. However, forfeited deposit may not be reimbursed
as a real estate transaction expense. This decision distinguishes
B-207420, February 1, 1983.
The issue in this decision is whether an employee may be reimbursed
money paid on a lease for an exclusive option to purchase during the
lease period which he forfeited when he was transferred to a new duty
station prior to the exercise of the option. We hold that the forfeited
deposit may be reimbursed as a miscellaneous expense under 5 U.S.C.
Section 5724a(b) (1982), as implemented by the Federal Travel
Regulations, FPMR 101-7 (September 1981) (FTR), para. 2-3.3, but not as
an expense of the sale or purchase of a residence as provided for under
5 U.S.C. Section 5724a(a)(4).
This decision is in response to a request from an authorized
certifying officer of the Internal Revenue Service (IRS), Southeast
Region, concerning the claim of Mr. Nathan F. Rodman, an IRS employee,
for reimbursement of a forfeited real estate deposit under a lease with
an option to purchase agreement. On March 14, 1983, Mr. Rodman signed a
6-month lease with an option to purchase on or before October 15, 1983,
in consideration of an option fee in the amount of $3,500. The purchase
clause provided for a purchase price of $95,000 with credit of the
option fee to be given against the purchase price. However, if the
option was not exercised, the clause provided for the option fee to be
retained by the owner-landlord as consideration for the granting of the
exclusive option to purchase.
Mr. Rodman lived in the leased premises, located in Fort Lauderdale,
Florida, until he was requested to transfer to Sarasota, Florida, in May
or early June 1982. Mr. Rodman reported for duty in Sarasota in August
1983 and vacated his Fort Lauderdale residence on September 12, 1983.
He did not exercise the option to purchase and forfeited the $3,500 he
had deposited under the agreement.
Mr. Rodman has informed our Office of the circumstances surrounding
his decision to buy the option to purchase at the time he entered into
his lease agreement and his intention to exercise that option before its
expiration had he not been required to transfer. At the time that Mr.
Rodman leased his Ft. Lauderdale residence he owned another house that
he was trying to sell. The house that he was trying to sell was
occupied by his wife with whom he was in divorce proceedings. Mr.
Rodman needed his share of the equity from his former residence in order
to obtain the necessary financing required to exercise the option to
purchase in question. Additionally, when Mr. Rodman signed his lease
agreement, interest rates were historically very high and he received
advice that he might obtain more advantageous financing if he could
delay purchasing. Mr. Rodman explained that he is not of independent
means and would not have paid $3,500 cash on his IRS salary for the
option to purchase had he not had every intention of exercising that
option.
The IRS has reimbursed Mr. Rodman for the forfeited deposit as a
miscellaneous expense under 5 U.S.C. Section 5724a(b) and FTR para.
2-3.3 which resulted in reimbursement of $873.20 of the $3,500
forfeited. The IRS relied on our decision B-177595, March 2, 1973, in
which we allowed reimbursement for a forfeited purchase deposit as an
item of miscellaneous expense pursuant to a lease-purchase contract.
Mr. Rodman has requested our review of the IRS determination limiting
his reimbursement of the forfeited deposit.
The provisions of 5 U.S.C. Section 5724a authorize payment of
relocation expenses to transferred employees. Subsection (a)(4)
provides, in part, for the payment of expenses of the sale of a
residence, or the settlement of an unexpired lease, of the employee at
the old official station, and for purchase of a home at the new official
station.
The execution of a lease with an option to purchase has been held not
to constitute a purchase of a residence under the meaning of section
5724a(a)(4). In the case of Marion B. Gamble, B-185095, August 13,
1976, the employee entered into a lease-purchase agreement upon arrival
at his new duty station and, upon exercising his option 10 months later,
sought reimbursement for the total expenses. On the question of whether
such expenses were proper for reimbursement, we held that section
5724a(a)(4) does not apply to lease-purchase transactions in which only
an interest in property, rather than legal or equitable title, is
passed. A purchase, for purposes of section 5724a(a)(4) and the
implementing regulations, consists of the conveyance of some form of
ownership. A mere interest, such as the opportunity to purchase the
property, does not suffice. In fact, until Mr. Rodman exercised the
option to purchase, he was under no obligation to purchase the residence
at all. In the present case the lease-purchase agreement did not pass
title to Mr. Rodman. Therefore, payment is not authorized under 5
U.S.C. Section 5724a(a)(4).
As an alternative to reimbursement under 5 U.S.C. Section
5724a(a)(4), employees may be paid in certain circumstances for
miscellaneous expenses incurred due to the discontinuance of one
residence and the establishment of a residence at a new location. FTR
para. 2-3.1. The forfeiture of a deposit made on a residence is among
the expenses that have been covered. 55 Comp. Gen. 628 (1976).
Paragraph 2-3.1c of the FTR states that the miscellaneous expense
allowance will not be used to reimburse the employees for "expenses
brought about by circumstances, factors, or actions in which the move to
a new duty station was not the proximate cause."
The evidence before us establishes that Mr. Rodman's transfer to
Sarasota, Florida, was the proximate cause of the forfeiture. The
circumstances surrounding Mr. Rodman's decision to obtain the option to
purchase and his ordered transfer as set forth above, the interest rates
prevalent at the time, the circumstances of his divorce, and his need to
capture the equity from his house for sale, strongly suggest that had
Mr. Rodman not been requested to transfer he would have exercised the
option for which just 3 months prior he had expended $3,500 to acquire.
We have disallowed reimbursement for a forfeited purchase deposit as
an item of miscellaneous expenses in Lillie L. Beaton, B-207420,
February 1, 1983. This case is distinguishable from Mr. Rodman's
because the facts of record in Lillie L. Beaton failed to establish that
Ms. Beaton's transfer was the proximate cause of the forfeiture whereas,
as indicated above, we are satisfied that Mr. Rodman's transfer was.
Accordingly, we will not object to the reimbursement of the option
payment forfeited by Mr. Rodman to the extent authorized by para. 2-3.3
of the FTR. Mr. Rodman's claim for expenses in excess of the maximum
amount reimbursable as miscellaneous expenses may not be paid.
B-217025, 64 Comp. Gen. 319
Matter of: Student-Dependents of Government Personnel Stationed
Overseas - Baggage Shipments, March 4, 1985:
Federal agencies and officials must act within the authority granted
to them by statute in issuing regulations. The construction of a
statute as expressed in implementing regulations by those charged with
its execution, however, is to be sustained in the absence of plain
error, particularly when the regulations have been long followed and
consistently applied with Congressional assent. Hence, regulations of
the Secretary of State in effect since 1960 authorizing shipments of
unaccompanied baggage for the student-dependents of Federal civilian
employees stationed overseas on occasions when those dependents travel
to and from schools located in the United States, issued under a statute
broadly authorizing reimbursement of their "travel expenses," are upheld
as valid.
A statute enacted in 1983 provides that under regulations prescribed
by the Secretary of Defense, members of the uniformed services stationed
overseas may be paid a "transportation allowance" for their dependent
children who attend school in the United States. The legislative
history reflects that Congress intended to provide service members with
benefits similar to those authorized by a law enacted in 1960 to cover
the "travel expenses" of the student-dependents of civilian employees
stationed overseas. Regulations of the Secretary of State under the
1960 enactment properly include provision for unaccompanied personal
baggage shipments, so that there is no objection to a similar provision
adopted through regulations by the Secretary of Defense under the 1983
enactment, since related statutes should be construed together in a
consistent manner.
The Secretary of Defense and the Secretary of State have issued
regulations authorizing shipments of unaccompanied baggage for the
student-dependents of Government personnel stationed overseas on
occasions when those dependents travel to and from schools located in
the United States. The question presented here is whether those
regulations are without a statutory basis and invalid. /1/ We conclude
that the regulations are valid under the governing provisions of
statute.
Section 430 of title 37, United States Code, provides that under
regulations to be prescribed by the Secretary of Defense, a member of a
uniformed service who is assigned a permanent duty station outside the
United States --
may be paid a transportation allowance for each unmarried
dependent child, who is under 23 years of age and is attending a
school in the United States for the purpose of obtaining a
secondary or undergraduate college education, of one annual trip
between the school being attended and the member's duty station in
the overseas area and return.
This provision was added to the United States Code by a law enacted
in 1983. /2/ The Congressional reports relating to that enactment
contain these remarks concerning its purpose:
Foreign Service personnel and civilian employees of the federal
government who serve overseas are currently authorized
reimbursement for one round trip annually for their children who
attend college in the United States. No such authority exists to
reimburse military personnel stationed overseas for similar travel
by their dependents.
In order to eliminate this disparity, the Committee recommends
that military personnel serving overseas be reimbursed for the
annual round trip transportation of their dependents to attend
school in the United States. /3/
Statutory authority for the annual round-trip transportation of the
children of Foreign Service personnel and civilian employees stationed
overseas had been enacted earlier in 1960, in a law providing for the
payment of "(t)he travel expenses of dependents of an employee to and
from a school in the United States to obtain an American secondary or
undergraduate college education." /4/ Implementing regulations issued by
the Secretary of State since 1960 have included "expenses for
transportation of unaccompanied personal baggage" as a reimbursable
item. /5/
After 37 U.S.C. Section 430 was enacted into law in 1983, the
responsible officials of the uniformed services apparently determined
that it would be appropriate to prescribe a similar authorization by
regulation for the shipment of unaccompanied baggage for the children of
service members stationed overseas. Consequently, when Volume 1 of the
Joint Travel Regulations was amended to implement 37 U.S.C. Section 430,
the following new paragraph was included in the amendment:
M7353 UNACCOMPANIED BAGGAGE
Unaccompanied baggage, not to exceed 225 pounds (gross), may be
transported at Government expense in connection with each trip
authorized between the school and the member's duty station under
this Part. (Change 372, 1 JTR, February 1, 1984)
Questions have recently been raised by officials of one of the
military departments concerning the validity of the regulations
authorizing baggage shipments for the student-dependents of Federal
personnel stationed overseas when those students travel to and from
schools located in the United States. In a memorandum accompanying the
request for a decision in this matter, they note that 37 U.S.C. Section
430, and the statute enacted earlier in 1960 to provide for the "travel
expenses" of civilian employees' children, contain no specific and
separate authorization for the transportation of a student's
unaccompanied baggage. It is further noted that the baggage shipments
at issue are not authorized under those provisions of statute contained
elsewhere in the United States Code which prescribe specific rules
concerning the transportation of baggage and household goods for
Government personnel. /6/ It is therefore suggested that the
regulations in question may lack a statutory basis and may thus be
invalid.
It is fundamental that Federal agencies and officials must act within
the authority granted to them by statute in issuing regulations. /7/ It
is equally fundamental, however, that regulations are deemed to be
within an agency's statutory authority and consistent with Congressional
intent unless shown to be arbitrary or contrary to the statutory
purpose. /8/ It is a settled rule of statutory construction that the
interpretation of a provision of statute, as expressed in implementing
regulations by those charged with the execution of the statute, is to be
sustained in the absence of any showing of plain error, particularly
when the regulations have been long followed and consistently applied,
and the Congress has declined to alter the administrative interpretation
in later amendments to the statute. /9/
Regarding the question raised in the present matter about the
validity of the regulations issued by the Secretary of State which
provide for unaccompanied personal baggage shipments under the statute
enacted in 1960, we note that a version of the statute as initially
passed by the House of Representatives would have limited reimbursement
to "the cost of transporting dependents." When the proposed legislation
was subsequently considered in the Senate, concern was expressed that
this term might be construed to "prevent payment of more than the actual
air or ship fare." The term "travel expenses" was consequently
substituted in the Senate version with the intent of "authorizing the
usual expenses of transportation, per diem, and related costs." /10/
This substitution was then adopted by the Congress as a whole and
enacted into law.
Thus, while the 1960 legislation authorizing payment of the "travel
expenses" of the student-dependents of civilian employees overseas does
not specifically refer to shipments of unaccompanied baggage, the
legislative history of the statute reflects that the Congress intended
to authorize reimbursement of not only the fares of personal travel but
also other usual transportation expenses and related costs associated
with annual travel by students to and from schools. This statutory
authorization has consistently been construed in the implementing
regulations during the past 25 years to include authority for a shipment
of unaccompanied personal baggage, and the Congress has not disturbed
this administrative construction placed on the original legislation in
later amendments to the statute. /11/ In these circumstances, we are
unable to conclude that the regulations in question which have been
issued by the Secretary of State are contrary to the statutory purpose
or lack a statutory basis.
As to the validity of paragraph M7353 of the Joint Travel
Regulations, the governing provisions of statute contained in 37 U.S.C.
Section 430 authorize members of the uniformed services stationed
overseas to be paid a "transportation allowance" for an "annual trip" of
their dependent children who are attending a school in the United
States. Although the statute does not specifically list the trip or
transportation expenses to be covered by the allowance, as indicated,
the Congress intended that the legislation be applied to provide service
members with benefits similar to those previously granted to civilian
employees in 1960. Consequently, our view is that the 1983 and 1960
enactments are related and are to be construed consistently together.
/12/ While the language of neither statute is as clear in this regard as
it might be, since it is our view that the civilian statute may properly
be construed to include the transportation of unaccompanied personal
baggage, we do not object to regulations providing a similar benefit for
service members as part of the "transportation allowance" authorized
under 37 U.S.C. Section 430. Hence, we find that there is a statutory
basis for paragraph M7353 of the Joint Travel Regulations and that the
paragraph furthers the legislative purpose of 37 U.S.C. Section 430.
Accordingly, we conclude that the regulations brought into question
in this matter are valid.
(1) This action is in response to a request for a decision received
from the Chairman of the Per Diem, Travel and Transportation Allowance
Committee (PDTATAC/68/0423D).
(2) Section 910 of the Department of Defense Authorization Act, 1984,
Public Law 98-94, approved September 24, 1983, 97 Stat. 614, 638-639.
(3) S. REP. NO. 174, 98th Cong., 1st Sess. 223, reprinted in 1983
U.S. CODE CONG. & AD. NEWS 1081, 1113. See also H.R. REP. NO. 352
(CONF.), 98th Cong., 1st Sess. 225, reprinted in 1983 U.S. CODE CONG. &
AD. NEWS 1160, 1162; S. REP. NO. 213 (CONF.), 98th Cong., 1st Sess. 225
(1983); and H.R. REP. NO. 107, 98th Cong., 1st Sess. 211 (1982).
(4) Subsection 221(4)(B) of the Overseas Differentials and Allowances
Act, Public Law 86-707, approved September 6, 1960, 74 Stat. 792, 794.
This subsection, as amended, is currently codified in 5 U.S.C. Section
5924(4)(B).
(5) See section 285, Standardized Regulations (Government Civilians,
Foreign Areas); Transmittal Letter SR-368, dated September 4, 1983
(current); and Transmittal Letter SR-104, dated April 2, 1961
(superseded).
(6) With specific reference to 37 U.S.C. Section 406, 5 U.S.C.
Sections 5722-5729, and 5 U.S.C. Section 5742.
(7) See, for example, 56 Comp. Gen. 943, 949 (1977); 53 Comp. Gen.
547 (1974); and 52 Comp. Gen. 769 (1973).
(8) See, generally, 58 Comp. Gen. 635, 637-638 (1979); and 42 Comp.
gen. 27 (1962).
(9) Red Lion Broadcasting Co. v. FCC, 395 U.S. 367, 381 (1969);
Udall v. Tallman, 380 U.S. 1, 16-17 (1965; 58 Comp. Gen. at 638; 49
Comp. Gen. 510, 516-517 (1970); 48 Comp. Gen. 5, 9 (1968); 2A
SUTHERLAND, STATUTES AND STATUTORY CONSTRUCTION Section 49.05 (4th ed.
C.D. Sands 1973).
(10) See S. REP. NO. 1647, 86th Cong., 2d Sess. 7-8, reprinted in
1960 U.S. CODE CONG. & AD. NEWS 3338, 3344-3345.
(11) See, e.g., the amendment of 5 U.S.C. Section 5924(4)(B) by
Public Law 96-465, Section 2308, October 17, 1980, 94 Stat. 2165;
Public Law 96-132, Section 4(h), November 30, 1979; 93 Stat. 1045; and
Public Law 93-475, Section 13, October 26, 1974, 88 Stat. 1443.
(12) That is, we consider the statutes in pari materia. See 2A
SUTHERLAND, STATUTES AND STATUTORY CONSTRUCTION Sections 51.01-51.03
(4th ed. C.D. Sands 1973).
B-217047, 64 Comp. Gen. 317
Matter of: Dakota Woodworks, February 27, 1985
Where initial protest is untimely filed with the contracting agency
(more than 10 working days after protest basis is known), subsequent
protest to General Accounting Office will not be considered even though
it was filed within 10 working days of the agency denial of the
protester's initial protest.
Dakota Woodworks (Dakota) protests the rejection of its bid as
nonresponsive under invitation for bids (IFB) No. F32605-84-B-0059,
issued by the Contracting Division, Grand Forks Air Force Base (Air
Force), for the repair, alteration and renovation of the 319th Bomb Wing
Headquarters, building 607. Dakota's bid was rejected because it was
considered to be materially unbalanced.
We dismiss the protest.
The Air Force states that on October 4, 1984, a representative of
Dakota took delivery of a letter of the same date from the Air Force
detailing the reasons for the rejection of Dakota's bid. On October 22,
1984, Dakota filed a protest with the Air Force against the rejection of
its bid. The Air Force denied Dakota's protest by letter dated October
29, 1984, and Dakota protested here on November 6, 1984.
Our Bid Protest Procedures require that protests be received in our
Office or the contracting agency within 10 working days after the basis
of the protest is known. 4 CFR Section 21.2(b)(2) (1984); Schlegel
Associates, Inc., B-213739, June 28, 1984, 84-1 C.P.D. Paragraph 688.
A protest initially filed with the contracting agency and
subsequently filed with our Office within 10 days of the protester's
notification of the initial adverse agency action will be considered
only if the initial protest to the agency was filed in accordance with
the time limits set forth in Section 21.2(b) of our Bid Protest
Procedures, outlined in pertinent part above. See 4 CFR Section
21.2(a); Century Metal Parts Corp., B-194421, Apr. 17, 1979, 79-1
C.P.D. Paragraph 272. Although Dakota's protest to our Office was filed
within 10 working days of the Air Force's denial of its protest,
Dakota's initial protest was not filed with the Air Force within the
time limits outlined above, a prerequisite to our consideration of the
protest before us. Dakota was notified on October 4, 1984, that its bid
was rejected and Dakota did not protest to the Air Force until October
22, 1984, more than 10 working days after Dakota learned of the basis of
its protest. The fact that Dakota protests the rejection of its bid in
the context of the Air Force's denial of its protest does not change the
fact that the grounds of the protest were and are untimely presented for
resolution. Our Bid Protest Procedures may not be waived by the actions
of a procuring agency such as considering an untimely protest. See
Evans Inc. -- Request for Reconsideration, B-213289.3, Feb. 27, 1984,
84-1 C.P.D. Paragraph 240; Century Metal Parts Corp., B-194421, supra.
The protest is dismissed.
B-216208, 64 Comp. Gen. 314
Matter of: Foreign-Flag Vessels, February 7, 1985
The Foreign Service Travel Regulations impose "personal financial
responsibility" on employees for using a foreign-flag vessel under
certain conditions. Since those regulations do not specify the amount
of financial responsibility, they may be interpreted as precluding
reimbursement of any part of the cost of such travel only if an
American-flag vessel is also available. If American-flag vessels are
not available, then the regulations are viewed as imposing financial
responsibility for such use to the extent that the cost of the
foreign-flag vessel exceeds the constructive cost of less than
first-class airfare.
The question in this case is whether the Foreign Service Travel
Regulations preclude reimbursement when an employee travels on a
foreign-flag vessel without obtaining specific authority for such travel
as provided in the regulations or whether they allow reimbursement in
such circumstances to the extent of the constructive cost of less than
first-class airfare. /1/ Since the language of the applicable
regulations does not clearly and unequivocally preclude constructive
cost reimbursement in these conditions, reimbursement to the extent of
the constructive cost of less than first-class airfare should be
allowed.
The Foreign Service Act of 1980 gives the Secretary of State the
authority to prescribe regulations for the payment of specified
relocation and travel expenses for foreign service officers. Section
206 and 901, Pub. L. 96-465, October 17, 1980, 94 Stat. 2071, 2079,
2124; 22 U.S.C. Sections 3926, 4081 (1982). The applicable regulations
are contained in the Foreign Service Travel Regulations published in the
Foreign Affairs Manual (FAM), Volume 6. These regulations cover travel
and relocation expenses for foreign service officers and employees of
State, AID, and USIA.
Relevant to the question presented 6 FAM, para. 133.2-1 provides:
A foreign-flag ship may be used only * * *
a. When the use of air transportation by the traveler would be
hazardous or detrimental to his health or well-being and:
(1) American-flag ships do not operate between the ports
servicing the points of origin and destination which are
reasonably accessible by adequate surface transportation; or
(2) American-flag ships do operate but space or service is
unavailable and the traveler would be delayed more than 15 days
awaiting available American-flag service.
Further, 6 FAM para. 133.4 provides:
Failure to comply with the provisions of section 133 will
subject the employee to personal financial responsibility. * * *
Obviously, these regulations do not allow employees to use a
foreign-flag vessel without qualifying for a special exception. But the
financial responsibility paragraph does not indicate the amount of the
employee's personal responsibility when he does use a foreign-flag
vessel without qualifying for a special exception.
The financial responsibility paragraph has been interpreted as
precluding reimbursement of any part of the transportation cost to an
employee who travels by a foreign-flag vessel without qualifying for a
special exception. However, this interpretation has been questioned in
view of the conclusion reached in a memorandum of instruction from the
General Counsel of the General Accounting Office to the Director of the
Claims Division, B-194689-O.M., July 20, 1979. In that memorandum the
General Counsel did not consider the language of the Foreign Service
Travel Regulations, but advised the Director of the Claims Division that
when an employee of the United States Information Agency used a
foreign-flag vessel he could be reimbursed on a constructive cost basis
because no American-flag vessel was available. We find that the
financial responsibility paragraph should be interpreted to provide for
two different amounts of employee personal responsibility, depending on
the circumstances.
The quoted provisions of the Foreign Service Travel Regulations were
issued to implement section 901 of the Merchant Marine Act of 1936, 46
U.S.C. Section 1241(a) (1982). 6 FAM paras. 133.1 and 181.3, Section
901 precludes the use of a foreign-flag vessel when an American-flag
vessel is otherwise available and specifically requires that no
reimbursement be allowed for use of a foreign-flag vessel when an
American-flag vessel is available. Therefore, the personal financial
responsibility provision of 6 FAM para. 133.4 must necessarily be
interpreted to preclude reimbursement of any part of the cost of travel
by a foreign-flag vessel when an American-flag vessel is also available.
However, section 901 does not restrict reimbursement when an
American-flag vessel is not available. Thus, any personal
responsibility under paragraph 133.4 for the cost of travel by
foreign-flag vessel when an American-flag vessel is not available
results from the exercise of Secretary of States authority to prescribed
regulations.
The Secretary generally has not attached any personal financial
responsibility for traveling on a vessel. 6 FAM para. 131.1-1. The
traveler does not suffer any personal financial responsibility for
traveling on a foreign-flag vessel if he qualifies for a special
exemption. 6 FAM para. 133.2-1. Although the traveler does suffer an
unspecified financial responsibility under 6 FAM para. 133.4 when he
does not qualify for a special exemption, there appears to be no reason
why that amount should be any greater than the amount specified for
indirect travel in 6 FAM para. 131.3-2(a):
Reimbursement for costs incurred on that portion of the journey
which is traveled by indirect route is limited to the total cost
of per diem, incidental expenses, and transportation by less than
first-class air accommodations (regardless of mode of travel used
in indirect travel * * * ) which would have been incurred by
traveling on a usually traveled route.
When the employee is given a greater degree of personal financial
responsibility under the Foreign Service Travel Regulations, that
greater degree is ordinarily stated in clear and specific terms. See 6
FAM para. 134.6, entitled "Traveler's Financial Responsibility." We
believe the better view is that in the circumstance where an
American-Flag vessel is not available, reimbursement on a constructive
basis should be allowed.
That is consistent with the result reached when the Federal Travel
Regulations were applied to an employee's use of a foreign-flag vessel
when travel by sea was not authorized. Thomas H. Hamara, B-183310,
December 3, 1976.
We are further inclined to this view because we do not think that an
employee should be denied reimbursement, at least on a constructive cost
basis, for travel performed on official business except when the
consequences of the employee's actions are made clear and when there is
a substantial reason justifying such drastic action. The Fly America
Act, section 1117, Pub. L. 85-726, added by section 5(a), Pub. L.
93-623, January 3, 1975, 88 Stat. 2104, as amended, 49 U.S.C. App.
Section 1517, and section 901 of the Merchant Marine Act deny
reimbursement to employees when they use foreign means of transportation
when similar American Services are available. These, however, are
statutory restrictions.
When an employee is not in violation of those Acts and when cost of
transportation is reimbursed on a constructive basis and leave is
charged for excess travel time, the cost to the Government is not
increased. The employee should not be subjected to the further penalty
of denying reimbursement even on a constructive cost basis unless a
substantial Government purpose is served.
Accordingly, when an American-flag vessel is not also available and
when the employee does not qualify for a special exemption from
foreign-flag vessel travel under the regulations, the cost of his travel
on a foreign-flag vessel may be reimbursed under the Foreign Service
Travel Regulations to the extent of the constructive cost of less than
first-class airfare for comparable travel.
(1) Robert C. Myers, Chief, Transportation Division, Department of
State, submitted this question.
B-216119, 64 Comp. Gen. 310
Matter of: Steve Stone - Subsistence Expenses for Excess Traveltime
- Charging of Annual Leave, February 26, 1985
A handicapped employee claims reimbursement for additional
subsistence expenses he incurred when he arrived at his temporary duty
site several days early, and then delayed returning to his official duty
station, in order to avoid driving in inclement weather. We hold that
the employee may be reimbursed for the additional subsistence expenses
because he acted prudently in incurring those expenses. Furthermore,
reimbursement is justified as a "reasonable accommodation" to the
employee under the Rehabilitation Act of 1973.
A handicapped employee arrived early at his temporary duty site in
order to avoid driving in inclement weather. Whether or not the
employee should be charged annual leave in connection with his early
arrival is primarily a matter of administrative discretion. However,
under the circumstances of this case, we would not object to an
administrative determination to excuse the employee for the time in
question, without a charge to his annual leave account.
Mr. James D. Clark, an authorized certifying officer with the
National Park Service, Rocky Mountain Regional Office, requests an
advance decision concerning the claim of Mr. Steve Stone. The principle
issue for our determination is whether Mr. Stone, a handicapped
employee, may be reimbursed for the additional subsistence expenses he
incurred when he arrived early at his temporary duty site and then
delayed his return travel in order to avoid driving in inclement
weather. We hold that Mr. Stone may be reimbursed for the additional
subsistence expenses because he acted prudently in incurring those
expenses, and reimbursement is supported by the Rehabilitation Act of
1973, as amended, 29 U.S.C. Section 701, et seq., (1982).
Mr. Stone, an Outdoor Recreation Planner with the National Park
Service in Denver, Colorado, was scheduled to perform temporary duty in
San Francisco, California, during the months of March and April 1983.
Pursuant to a General Travel Authorization, Mr. Stone completed and
obtained approval of an itinerary for travel beginning March 24 and
ending April 18, 1983.
Mr. Stone has severe physical disabilities as the result of an
automobile accident, and is medically classified as a quadriplegic.
Because of his handicap, the agency authorized Mr. Stone to use his own
specially equipped automobile for the temporary duty travel.
On Monday, March 21, 1983, Mr. Stone advised his supervisor that he
intended to begin driving to San Francisco that day, 3 days before his
scheduled departure date, because a severe snowstorm was predicted for
the days on which he had planned to travel. His supervisor verbally
approved the early departure, and Mr. Stone left Denver at 10 p.m. on
Monday, March 21. He arrived in Concord, California, on the evening of
Wednesday, March 23, and lodged there in a private residence until the
morning of Sunday, March 27. Mr. Stone claimed meal costs, but no
lodging expenses, for the period of his stay in Concord.
Mr. Stone traveled from Concord to San Francisco on Sunday, March 27,
and began his temporary duty assignment on the following Monday morning.
He completed his assignment on the afternoon of Friday, April 8, but
chose to delay his return travel to Denver because weather reports
indicated poor driving conditions in the Rocky Mountains. Mr. Stone
lodged in a private residence in San Francisco on Saturday, April 9 and
Sunday, April 10, claiming meal expenses but no lodging costs for the
weekend. He used annual leave on Monday, April 11 and Tuesday, April
12, and then performed return travel to Denver between Wednesday, April
13 and Friday, April 15, 1983.
The agency allowed Mr. Stone's claim for subsistence expenses during
the 2-week period of his temporary duty assignment, and for the days he
spent traveling during the periods March 21 to March 23 and April 13 to
April 15, 1983. However, the agency denied Mr. Stone reimbursement for
the meal expenses he incurred between Thursday, March 24 and Saturday,
March 26, the days following his early arrival in Concord, and for
Saturday, April 9 and Sunday, April 10, the weekend after he had
completed his temporary duty assignment. /1/
Mr. Stone reclaimed the disallowed meal expenses, arguing that poor
weather conditions forced him to travel from Denver to San Francisco
earlier than he had planned, and then to delay his return travel to
Denver. He explains that, as a physically handicapped individual, he
would be exposed to extraordinary problems if he were required to drive
in adverse weather conditions. Further, Mr. Stone refers to the
Rehabilitation Act of 1973 and its implementing regulations, which, as
discussed below, require Federal agencies to make reasonable
accommodations to the physical limitations of qualified handicapped
employees, unless such accommodations would impose an undue hardship on
the agencies' programs. Finally, Mr. Stone has furnished his
supervisor's statement that he could not have postponed his trip to San
Francisco pending the improvement of weather conditions.
Against this background, the agency questions whether Mr. Stone may
be reimbursed for the additional subsistence expenses associated with
his early arrival in, and late departure from, California. In support
of reimbursement, the agency cites para. 2-2.3d(2) of the Federal Travel
Regulations, FPMR 101-7 (September 1981) (FTR), incorp. by ref., 41
C.F.R. Section 101-7.003 (1983), which allows additional per diem for
delays during relocation travel where the delays are caused by an
employee's physical handicap, an act of God, or other circumstances
beyond the traveler's control. Also, the agency cites several of our
decisions allowing additional per diem where employees interrupt
temporary duty travel because of inclement weather. See, for example,
52 Comp. Gen. 135 (1972); and 41 Comp. Gen. 605 (1962). However, the
agency notes that FTR para. 2-2.3d(2) and the cited decisions governing
temporary duty travel concern delays en route, rather than the "early
arrival" and "late departure" involved in Mr. Stone's case.
The agency also cites the provisions of the Rehabilitation Act of
1973 and its implementing regulations which, as noted previously,
require agencies to accommodate the limitations of qualified handicapped
employees to the extent that such accommodations do not impose an undue
hardship on the agencies' programs. The National Park Service states
that Mr. Stone qualifies as a handicapped employee within the meaning of
the Rehabilitation Act, and that the expenditure involved in this case
would not impose an undue hardship on its program.
Additionally, the agency questions whether it must charge Mr. Stone
annual leave for Thursday, March 24, 1983, the day after he arrived in
Concord, since he was neither traveling nor in a duty status on that
day. /2/
The general rules governing reimbursement for travel and subsistence
expenses are found in Chapter 1 of the FTR. Under FTR para. 1-1.3a, an
employee traveling on official business is expected to exercise the same
care in incurring expenses that a prudent person would exercise if
traveling on personal business. The provisions of FTR par. 1-1.3b
further state that reimbursable travel expenses are confined to those
essential to the transaction of official business. The determination as
to whether an employee has used due care in incurring a travel expense,
and whether the expense is officially necessary, depends upon the facts
and circumstances involved in each case. See Walter Wait, B-208727,
January 20, 1983; and 33 Comp. Gen. 221 (1953).
In this case, Mr. Stone chose to begin his travel to San Francisco 3
days before his scheduled departure date because a snowstorm had been
predicted for the scheduled days of travel. After completing his
temporary duty assignment in San Francisco, he remained there for
several days pending the abatement of a snowstorm in the Rocky
Mountains. In view of Mr. Stone's physical limitations and the
extraordinary problems he could encounter by traveling in inclement
weather, we believe he exercised good judgment and prudence in departing
early for his temporary assignment in San Francisco, and in delaying his
return trip to Denver.
Furthermore, as both the agency and Mr. Stone point out, regulations
implementing the Rehabilitation Act of 1973 require agencies to make
reasonable accommodations to known physical limitations of qualified
handicapped employees, unless such accommodations would impose an undue
hardship on the agencies' programs. 29 CFR 1613.704 (1984). Our
decisions reflect this commitment to assist handicapped employees. See
the discussion in B-211812, March 26, 1984, 63 Comp. Gen. 270. Thus, in
Norma Depoyan, B-215616, October 30, 1984, 64 Comp. Gen. 30, we held
that a handicapped employee could be reimbursed for the cost of shipping
her specially equipped automobile pursuant to a permanent change of
station, because the expenditure represented a "reasonable
accommodation" under the Rehabilitation Act of 1973, and did not impose
an undue hardship on the agency's travel program.
Here, it appears that payment of the additional subsistence expenses
incurred by Mr. Stone would represent a "reasonable accommodation" under
the Rehabilitation Act of 1973. The agency has determined that Mr.
Stone qualifies as a handicapped individual within the meaning of the
Act, and that the character and amount of the expenditure would not
impose an undue hardship on the operation of its travel program.
Accordingly, we conclude that Mr. Stone acted prudently in incurring
additional subsistence expenses, and that payment of the expenses is
further supported by the Rehabilitation Act of 1973 and its implementing
regulations. Therefore, Mr. Stone may be paid the meal expenses he has
claimed for the period Friday, March 25 through Saturday, March 26,
1983, and for the weekend of April 9 and 10, 1983.
Finally, the agency questions whether Mr. Stone should be charged
annual leave for Thursday, March 24, 1983, since he was neither
traveling nor in a duty status that day. We have held that the charging
of annual leave is primarily a matter of administrative discretion.
Laxman S. Sundae, B-185652, December 28, 1976. However, under the
circumstances of this case, we would not object to an administrative
determination to excuse Mr. Stone on Thursday, March 24, without a
charge to his annual leave account. Thus, he would also be entitled to
his meal expenses as claimed for that date.
For the reasons stated above, we hold that Mr. Stone's claim for
additional subsistence expenses may be allowed.
(1) Apparently, Mr. Stone did not claim subsistence expenses for
April 11 and 12, 1983, since he was in an annual leave status on those
days.
(2) The agency states that it does not question Mr. Stone's leave
status on Friday, March 25, because he worked a compressed work schedule
and Friday was his regular day off.
B-216251, 64 Comp. Gen. 306
Matter of: Mark Kroczynski - Real Estate Expenses - Loan Origination
Fee - Hazard Insurance, February 25, 1985
A transferred employee purchased a new residence and was charged 1
percent of his loan, plus $250, as a "loan origination fee." He was
reimbursed the 1 percent and now claims the additional $250. Under the
Federal Travel Regulations (FTR) para. 2-6.2d(1)(b), such fees are
reimbursable not to exceed amounts customarily charged. Since HUD
advised that the customary range of fee charged in the area is 1 to 1
1/2 percent of the loan, the maximum of the customary range may be used
for FTR purposes and when reduced to a dollar amount, establishes the
not to exceed amount which may be reimbursed in any one case. Thus, the
employee may be reimbursed an additional amount up to the maximum of 1
1/2 percent.
A transferred employee purchased hazard insurance on his new
residence as a condition of obtaining a mortgage loan. He claims
reimbursement based on his agency's "Employees Relocation Guide"
publication as authority. The Federal Travel Regulations, FPMR 101-7
(September 1981) (FTR), which are specifically authorized by law and
have the force and effect of law, strictly govern the relocation expense
entitlements of Federal employees. The cited publication is
administrative and does not have the force and effect of law.
Therefore, to the extent that such publication may be inconsistent with
provisions of the FTR it is not binding on the Government.
A transferred employee was required to purchase hazard insurance as a
condition of obtaining a mortgage loan. He claims that since it was
property insurance and required by the lender, it is reimbursable. The
term "property insurance" is a term describing, generally, all types of
real or personal property insurance and is not a term used in the FTR to
describe such potentially reimbursable cost. Under FTR, para.
2-6.2(d)(1) only the cost of the one type of property insurance, title
insurance, may be reimbursed and then only if it is required by a
lender. Hazard insurance is another type of property insurance which
relates to financial protection against loss or damage to structures or
improvements to real estate, occasioned by specific catastrophic events.
Since FTR, para. 2-6.2(d)(2)(a) specifically precludes reimbursement of
the costs of loss and damage insurance, the claims may not be paid.
This decision is in response to a request from an Authorized
Certifying Officer, Internal Revenue Service (IRS), Southwest Region,
Department of the Treasury. The matter involves the entitlement of one
of its employees to be reimbursed certain real estate related expenses
which were incurred incident to a permanent change-of-station transfer
in June 1983. We conclude that the employee may be reimbursed, in part,
for the following reasons.
Mr. Mark Kroczynski, an IRS employee, received a permanent
change-of-station transfer from New York, New York, to Lake Charles,
Louisiana. He reported for duty at his new station on June 11, 1983.
By supplemental travel voucher, Mr. Kroczynski sought reimbursement
for expenses incurred attendant to the purchase of a residence in the
area of his new duty station, in the amount of $1,510. All of the
expenses claimed on that voucher, including a 1 percent loan origination
fee, with the exception of an additional $250 fee charged by the lending
institution, and $283 fee charged as a premium for hazard insurance,
were allowed. The two items which were disallowed, were disallowed for
the reason that the $250 charge by the lending institution in addition
to the 1 percent loan origination fee was not a customary charge in that
area, and that insurance against loss or damage to property is not
reimbursable, citing to Internal Revenue Manual (IRM) 1763, section
593(1)(d)(2).
Mr. Kroczynski submitted a reclaim voucher for the disallowed items.
In support of entitlement, he asserts that the information supplied the
agency concerning loan origination fees only pertains to FHA loans and
that since his was a conventional loan the additional $250 charge is
properly reimbursable. In support of reimbursement for the cost of
hazard insurance, he refers to the Internal Revenue Service, Employees
Relocation Guide, Document 6076 (Rev. 1/83), which provides, in part,
that property insurance is a nonreimbursable expense "if purchased for
the protection of you and not required by the lender." He asserts that
the lender required him to purchase and maintain such insurance as one
of the conditions contained in his mortgage loan agreement.
The provisions governing reimbursement for real estate expenses
incident to a transfer of duty station are contained in 5 U.S.C. Section
5724a (1982), and regulations issued thereunder. Those regulations are
contained in Chapter 2 of the Federal Travel Regulations, FPMR 101-7
(September 1981) (FTR), as amended, in part, by GSA Bulletin FPMR A-40,
Supp. 4 (October 1982). Since these regulations are specifically
authorized by law, they have the force and effect of law. In the
absence of terms in the law or the regulations otherwise permitting, the
provisions of the FTR may not be modified by agency regulations or
waived in an individual case by the employing agency or our Office. See
Dominic D. D'Abate, B-210523, October 4, 1983, 63 Comp. Gen. 2, and
Charles R. Stebbins, B-215263, October 1, 1984. Therefore, an
employee's right to be reimbursed for relocation expenses is strictly
limited to that authorized by statute and the Federal Travel
Regulations.
Paragraph 2-6.2d of the FTR, as amended by GSA Bulletin FPMR A-40,
Supp. 4 (October 1982), provides, in part:
d. Miscellaneous expenses.
(1) Reimbursable items. The expenses listed below are
reimbursable in connection with the * * * purchase of a residence,
provided they are customarily paid * * * by the purchaser of a
residence at the new official station to the extent they do not
exceed amounts customarily paid in the locality of the residence.
(b) Loan origination fee;
A loan origination fee, generally, is a fee assessed a mortgagor by a
lending institution to compensate the lender for the time and expenses
associated with originating a loan, such as, processing documents,
securing a credit investigation on the prospective mortgagor and
performing other related activities. While the most common method of
charging for these expenses is stating it as a percentage of the amount
to be loaned, the charge for those services can also be stated as set
charge not specifically tied to the amount of the loan, or, as in the
present case, a percentage of the loan, plus a set charge.
A complicating feature of a loan origination fee is that many lenders
will include a mortgage discount or "points" to the charges made,
especially where the method of charging is as a percentage of the loan.
We have defined a mortgage discount or "points" as being part of the
price paid for the hire of money where the interest rate charged on the
loan is below the mortgage market level, or lower than the interest rate
income available to the lending institution from alternative investment
opportunities. B-164812, September 3, 1970; and Roger J. Salem,
B-214018, June 27, 1984, 63 Comp. Gen. 456.
In decision Roger J. Salem, above, we considered a situation in which
a particular lending institution charged 5 percent of the loan as a loan
origination fee. On analysis, we expressed the view that the amount
charged was so unreasonable that it could not possibly represent only
administrative costs associated with the making of the loan or a
reasonable approximation thereof and concluded that the excess
represented a mortgage discount add on. We ruled, therefore, since much
of the charge represented a mortgage discount, we would give great
weight to the information provided by the Department of Housing and
Urban Development (HUD). Since they determined that the customary
charge in the home purchase locality was 1 percent of the loan, we held
that in the absence of a definitive showing that the customary charge
there was higher, reimbursement was limited to 1 percent.
In the present case, we have been informally advised through the HUD
office servicing the Lake Charles, Louisiana, area that the customary
method of charging a loan origination fee is as a percentage of the loan
and that the customary percentage range is between 1 and 1 1/2 percent
of the loan. The method used by the particular lending institution
servicing Mr. Kroczynski's account, i.e., 1 percent of the loan, plus
$250, clearly is a departure from the customary method of charging.
However, when all percentages are reduced to dollar amounts in this
case, he paid $552 as a loan origination fee. Since the upper limit of
the customary range of fee charging in that locality was 1 1/2percent,
that limit may be used to establish the not to exceed amount in this
case. On that basis, the maximum loan origination fee on his loan
($30,200), would have been $453. In view of the fact that the
limitation expressed in paragraph 2-6.2d of the FTR, as amended, is that
the reimbursement may "not exceed the amounts customarily paid," and
based on the information from HUD, Mr. Kroczynski's reimbursement is
limited to $453. Since he has already been reimbursed $302, an
additional $151 may be certified for payment to him for his loan
origination fee.
Mr. Kroczynski has sought reimbursement for the cost of this
insurance by asserting that it is an otherwise reimbursable property
insurance item described in his agency's relocation guide, because its
purchase was required by his mortgage lender.
The publication in question (Internal Revenue Service, Employees
Relocation Guide, Document 6076 (Rev. 1/83)), merely provides employees
with a general outline of their rights and responsibilities on permanent
change-of-station transfers. The Federal Travel Regulations govern
employee relocation expense entitlement. Thus, to the extent that the
cited publication may be inconsistent with the FTR, any erroneous
information contained therein is not binding on the Government. See
D'Abate and Stabbins, above.
Paragraph 2-6.2d(2) of the FTR provides in part:
(2) Nonreimbursable items.
(a) * * * insurance against loss or damage of property * * * .
The term "property insurance" is a broad generic term often used to
describe, generally, all types of insurance an individual may purchase
which relates to ownership or possession of property, real or personal.
The FTR provisions regarding insurance cost reimbursement do not deal in
such a broad descriptive term. They deal only with certain specific
types of property insurance. For example, under FTR para. 2-6.2(d)(1),
the only insurance costs which are deemed reimbursable are the premiums
charged for a mortgage title insurance policy where required by the
lender as a condition of the loan, and an owner's title insurance
policy, under certain stipulated circumstances. In contrast to that
type of insurance, hazard insurance is typically insurance which
provides financial protection against loss or damage to structures and
improvements to real estate, occasioned by specific potentially
catastrophic events, such as, fire, flood, windstorm or earthquake.
Regardless of whether a lending institution requires the purchase of
such insurance as a condition of making the mortgage loan, since FTR
para. 2-6.2d(2)(a) provides, without exception, that the cost of loss
and damage insurance is nonreimbursable, Mr. Kroczynski's hazard
insurance cost claim may not be certified for payment.
B-215194, 64 Comp. Gen. 303
Matter of: Liability of Accountable Officer for Lost Interest,
February 25, 1985
Accountable officer who embezzled collections is liable only for the
actual shortage of funds in her account. Although her failure to
deposit the funds in a designated depositary caused the Government to
lose substantial interest on the funds, the loss interest should not be
included in measuring her pecuniary liability as an accountable officer.
Upon convicting an accountable officer of embezzlement, court ordered
restitution as condition of probation as authorized by 18 U.S.C. 3651.
Since agency was still attempting to mitigate its loss, amount submitted
to court was an estimate not intended to reflect full amount of actual
loss. In these circumstances, lower amount in restitution order does
not preclude agency from asserting civil claim for actual loss as
finally determined.
An Authorized Certifying Officer of the Forest Service, United States
Department of Agriculture, has requested our opinion as to the liability
of Bernette Floyd Jackson, a former Forest Service collection officer,
for unrecovered losses caused by her misappropriation of funds and for
interest lost to the Government as a result of her failure to place
these funds in the designated depositary. The question is whether Ms.
Jackson should be held liable for both the actual loss of funds in her
account and for the lost interest. For the reasons stated below, we
find that Ms. Jackson is not liable for the lost interest. Ms.
Jackson's liability is limited to the unrecovered losses in her account.
Ms. Jackson's position as a Forest Service collection officer
required her to deposit funds in a local designated depositary on a
periodic basis. An investigation revealed that for several months, Ms.
Jackson failed to deposit a total approximating $760,000. Ms. Jackson
was subsequently found guilty of 19 counts of embezzlement (18 U.S.C.
Section 649). Most of the funds consisted of uncashed checks which were
later replaced, and the actual loss of funds in Ms. Jackson's account
has been determined to be $973.10. However, Ms. Jackson's fraudulent
scheme also caused the Government to lose $56,279.56 it would have
earned in interest had Ms. Jackson deposited the funds according to
procedure.
An accountable officer of the Government is an insurer of the public
funds in his custody and is excusable only for loss due to acts of God
or the public enemy. United States v. Thomas, 82 U.S. (15 Wall) 337
(1872). Under 31 U.S.C. Section 3527(a), the General Accounting Office
is authorized to relieve an accountable officer from liability for the
physical loss or deficiency of public funds, upon concurrence with
agency determinations that the loss occurred while the accountable
officer was acting in the discharge of official duties and that it
occurred without fault or negligence on his part. Since the accountable
officer in this case has been convicted of embezzlement, there is, of
course, no question of relief. The only question is the extent of Ms.
Jackson's liability.
In B-190290, November 28, 1977, we decided that an accountable
officer of the Farmers Home Administration who negligently delayed
forwarding collections from borrowers to the proper office for deposit
was not liable for the interest charges that accrued during the delay.
We held that the loss "is not the type of loss which is cognizable under
the law applicable to accountable officers."
There are several points of distinction between that case and this
one. First, in B-190290, the Farmers Home Administration actually had
to pay the account of the lost interest since it pays daily interest on
money borrowed from the U.S. Treasury. There is no corresponding
payment requirement here. Second, the lost interest here stems directly
from a loss of funds for which the accountable officer is clearly
liable, whereas there was no similar underlying loss or deficiency in
the account of the accountable officer in B-190290. Finally, in
B-190290, while there was a loss to the Farmers Home Administration, it
is not clear that there was actually a net loss to the United States.
Nevertheless, we think the result in B-190290 is equally applicable
here. The essence of our 1977 decision is that the strict liability of
an accountable officer does not extend to money which the Government
never had, even though the reason the Government never had it may have
been fault or negligence on the part of the accountable officer. While
there was certainly a loss to the Government in this case, the lost
interest is not money which was ever actually in the custody of or in
the "account" of the accountable officer. As such, as in B-190290, we
do not think the loss here is the type of loss contemplated by the laws
relating to the liability and relief of accountable officers.
A conceptually similar situation is the acceptance of a personal
check subject to collection. If the check proves uncollectible and the
Government has not parted with something of value in exchange for the
check, there is no loss or deficiency within the scope of the
accountable officer laws. B-201673 et al., September 23, 1982. As we
said in that case, "the Government incurs a loss in the sense that it
does not have money to which it was legally entitled, but it had not
lost anything that it already had."
Accordingly, while there may be other consequences flowing from Ms.
Jackson's conduct in a situation like this, /1/ her liability by virtue
of her status as an accountable officer is limited to the actual loss or
deficiency in her account.
Having said this, determining the proper amount of Ms. Jackson's
liability in this case raises another issue. The Forest Service has
computed the actual loss to be $973.10. However, according to the
Judgment and Probation/Commitment Order, the court suspended a portion
of Ms. Jackson's sentence, placed her on probation for 5 years, and
ordered restitution of $700 as a condition of the probation. The
question is the relationship of the $700 to the $$973.10.
The order of restitution was authorized by 18 U.S.C. Section 3651
which, as relevant here, provides that a defendant may, as a condition
of probation, "be required to make restitution or reparation to
aggrieved parties for actual damages or loss caused by the offense for
which conviction was had." /2/
In discussing a state statute with restitution language similar to
that of 18 U.S.C. Section 3651, the Oregon Supreme Court noted that a
court could order restitution in an amount less than the victim's actual
loss, and that in any event, any amount paid as restitution should be
set off against any civil judgment arising from the same incident.
State v. Stalheim, 275 Ore. 683, 552 P.2d 829, 832 n.8 (1976). While we
are not aware of any Federal cases discussing this issue with respect to
18 U.S.C. Section 3651, we see no reason why similar concepts should not
apply.
As noted earlier, the receipts which Ms. Jackson failed to deposit
totalled nearly $760,000 consisting of some cash but mostly checks. The
checks were apparently never negotiated. We have been informally
advised that, during the course of the criminal proceedings, the Forest
Service was in the process of contacting the makers of the checks to
seek replacement checks, a process which turned out to be largely
successful. When the court was ready for sentencing, the Forest Service
had not yet completed this process and thus was not able to state the
amount of its loss with certainty. The $700 figure submitted to the
court, we are advised, was merely an estimate based on the cash count,
and was not intended to represent the actual amount of the loss.
Thus, assuming there is nothing in the record of the court
proceedings to indicate the contrary, it would appear that the $700
ordered as restitution was never intended to reflect the full amount of
Ms. Jackson's civil liability. Accordingly, we think the Forest Service
may proceed to assert its civil claim against Ms. Jackson for $973.10
without the need to seek amendment of the restitution order. The $700,
of course, is to be treated as part of the $973.10 and not in addition
to it.
We understand further that there is approximately $5,000 in Ms.
Jackson's Civil Service Retirement account against which any unpaid
portion of her indebtedness may be offset. Offsets against Civil
Service Retirement monies are made in accordance with the Federal Claims
Collection Standards, specifically, 4 CFR Section 102.4 (49 Fed. Reg.
8889, 8899, March 9, 1984). While the Forest Service should still
notify Ms. Jackson of its intent to collect by offset, the court
proceedings have obviated any need for further "administrative review"
of the indebtedness. See 4 CFR Section 102.3(b)(2)(ii), 49 Fed. Reg. at
8898 (no need to duplicate "due process" protections).
As a final note, while we have concluded that lost interest may not
be included in determining Ms. Jackson's liability as an accountable
officer, there may be some basis for asserting a claim for the lost
interest on common-law tort principles. Should the Forest Service wish
to explore the feasibility of such a claim, we suggest that it consult
with the Department of Justice.
(1) B-201673 et al., September 23, 1982, at 6. See also 45 Comp.
Gen. 447 (1966).
(2) For offenses occurring after January 1, 1983, restitution is
addressed in more detail in 18 U.S.C. Sections 3579 and 3580.
B-214315, 64 Comp. Gen. 301
Matter of: Antoni Sniadach, February 25, 1985
A retired civil service employee requests the time of his voluntary
retirement be backdated from Jan. 8 to Jan. 3, 1983, so that he may be
allowed an annuity payment for the month of Jan. 1983. The employee
suggests that his selection of Jan. 8 as the retirement date resulted
from a mistake or ignorance of the law. The Office of Personnel
Management is vested with exclusive authority to adjudicate civil
service retirement annuity claims. Regarding amount of pay already paid
the claimant there is no basis to change the employee's status as an
employee on duty and on leave based on the claimant's assertion that he
was not aware of the requirements of existing law.
The question presented is whether a retired civilian employee of the
United States Coast Guard, Mr. Antoni Sniadach, may have his civil
service records modified to change the date of his retirement from
January 8 to January 3, 1983. /1/ We are unable to find a lawful basis
for allowing this proposed revision of the official records.
In November 1982 Mr. Sniadach applied to be retired from the Coast
Guard on December 31, 1982. Several weeks after submitting that
application he read an article about civil service retirements in a
commercial newsletter. The article contained information to the effect
that Federal employees who postponed their pending retirement until
January 1983 would gain eligibility for social security medicare
coverage. The article further advised that those retiring on January 8,
the end of the leave year for most employees, could also collect payment
for excess annual leave which they would forfeit if they retired after
that date.
On the basis of this information, Mr. Sniadach elected to change the
date of his pending retirement from December 31, 1982, to January 8,
1983, and he was paid his Coast Guard salary until he entered retirement
on January 8. Under a provision of the retirement laws, payment of a
civil service retirement annuity to him was delayed until February 1,
1983. /2/
Mr. Sniadach indicates that after he retired he learned that the
retirement laws had been amended on December 21, 1982, to grant
immediate rather than delayed annuities to employees who served 3 days
or less in the month of their retirement. /3/ He further indicates that
if he had been aware of this amendment at the time it was enacted, he
would have elected to retire on January 3 rather than on January 8,
1983. For that reason he requests that his civil service records now be
changed to backdate the time of his retirement to January 3, 1983. In
effect, this request sets out a monetary claim for a civil service
retirement annuity payment for the period from January 3 to January 31,
1983.
The Office of Personnel Management is by specific provision of
statute vested with exclusive authority to adjudicate civil service
retirement annuity claims, subject solely to administrative appeal to
the Merit Systems Protection Board and further judicial review by the
United States Court of Appeals for the Federal Circuit. /4/ We are
without jurisdiction to render authoritative decisions on claims for
civil service annuity payments. /5/ Moreover, with respect to matters
properly within our jurisdiction, we have held that as a general rule a
civil service separation may not be changed retroactively after it has
become an accomplished fact, and exceptions to this rule are not
warranted by bare assertions of mistake or ignorance of the law. /6/
In the present case, we may not properly consider or adjudicate Mr.
Sniadach's claim for a civil service retirement annuity payment for the
month of January 1983, and we are otherwise unable to find any proper
basis for sanctioning the alteration of his official employment records
to show a retirement date that is contrary to the actual facts.
The question presented is answered accordingly.
(1)This decision is issued at the request of the Commandant of the
Coast Guard.
(2) 5 U.S.C. Section 8345(b)(1)(A) directs payment of an annuity
commencing on the first day of the month after separation from service,
except as otherwise provided by law.
(3) See section 124 of the Further Continuing Appropriations Act,
1983, Public Law 97-377, approved December 21, 1982, 96 Stat. 1913.
(4) See 5 U.S.C. Section 8347(b) and (d).
(5) Compare 41 Comp. Gen. 460, 463 (1962); 30 Comp. Gen. 51 (1950);
and 19 Comp. Gen. 352, 354 (1939).
(6) See, generally, 22 Comp. Gen. 291, 292 (1942); 14 Comp. Gen. 585
(1935); 10 Comp. Gen. 11 (1930); and 26 Comp. Dec. 448 (1919).
B-216205, 64 Comp. Gen. 299
Matter of: Alan Wood - Real Estate Expenses - Title Requirements,
February 22, 1985
A transferred employee who was divorced from his wife after reporting
for duty at his new duty station but prior to the sale of his residence
at his old duty station may be reimbursed for only one-half of the real
estate expenses incurred since his wife, with whom he held title to the
residence, was not a member of his immediate family at the time of
settlement.
This decision results from the request of G. J. Pellon, an authorized
certifying officer with the Internal Revenue Service (IRS), for our
opinion concerning the entitlement of Mr. Alan Wood to reimbursement for
expenses incurred incident to the sale of his residence at his former
duty station. The IRS reimbursed Mr. Wood for only one-half of the
expenses he claimed because on the date of settlement he was divorced
from his wife, with whom he held title to the residence, and, therefore,
was deemed to have had only a one-half interest in the residence. We
hereby affirm the determination of the IRS.
Mr. Wood was transferred fron his position with the IRS in Florence,
South Carolina, to one in Tampa, Florida, effective March 16, 1981. In
May 1983, Mr. Wood separated from his wife, and on September 30, 1983,
they were divorced. Their former residence was sold, with the closing
taking place on October 17, 1983. (Mr. Wood had requested and was
granted two 1-year extensions of the time limit for reimbursement of
real estate expenses.)
One of the prerequisites for reimbursement of real estate expenses,
found in 5 U.S.C. Section 5724a(a)(4) (1984) and its implementing
regulation, paragraph 2-6.1c of the Federal Travel Regulations, FPMR
101-7 (September 1981) (FTR), is that title to the residence must be in
the name of the employee alone, or in the joint names of the employee
and one or more members of his immediate family, or solely in the name
of one or more members of his immediate family. We have consistently
held that where the employee holds title to a residence with an
individual who is not a member of his immediate family, the employee may
be reimbursed only to the extent of his interest in that residence. See
Thomas G. Neiderman, B-195929, May 27, 1980; James A. Woods, B-184478,
May 13, 1976; B-167962, November 7, 1969.
The IRS determined that since his former wife was not a member of his
immediate family on the date of settlement, Mr. Wood could be reimbursed
only to the extent of his interest in the residence. Mr. Wood contends
that he should receive full reimbursement because on the date he
reported for duty his former wife was a member of his immediate family.
Although there is no statutory definition of immediate family, FTR
para. 2-1.4d defines immediate family to include:
(1) Any of the following named members of the employee's
household at the time he/she reports for duty at the new permanent
duty station or performs authorized or approved overseas tour
renewal agreement travel or separation travel:
(a) Spouse;
This definition would seem to support Mr. Wood's contentions.
However, it must be examined in connection with the other provisions
concerning reimbursement of real estate expenses. Both 5 U.S.C. Section
5725a(a)(4) and FTR para. 2-6.1 provide that an employee must have been
required to pay any real estate expenses for which reimbursement is
sought. Our decisions, cited above, which provide that reimbursement
should be limited to the extent of an employee's interest when he holds
title with an individual who is not a member of his immediate family are
based on the presumption that in such situations, the liability for
expenses is shared.
Since the expenses of a real estate transaction are generally paid at
settlement we hold that that date is the appropriate date to use to
determine how the employee holds title to the residence. In this case,
because Mr. Wood was divorced from his wife before the date of
settlement he did not hold title with a member of his immediate family
when the property was actually sold. We find no evidence in the record
which would rebut the presumption that liability for expneses was to be
shared. In fact, that appears to have been the specific intention of
the parties, since the IRS had informed us that the divorce agreement
provided that the proceeds of the sale of the residence were to be split
between Mr. and Mrs. Wood.
We note Mr. Wood's argument that he could have delayed the divorce
until after the settlement and thus qualified for full reimbursement.
We have held, however, that since a separated spouse is not a member of
an employee's household, such a spouse does not fall within the
definition of immediate family. See William A. Cromer, B-205869, June
8, 1982, and cases cited therein.
In previous cases we have held, as we do in this case, that employees
who are divorced at the time of settlement, may be reimbursed only to
the extent of their interest in the residence as determined at that
time. Charles R. Holland, B-205891, July 19, 1982; Gerald S. Beasley,
B-196208, February 28, 1980. Those cases differed from the present one
in that the employees were separated from their spouses at the time they
reported for duty at their new duty stations. However, for the reasons
explained earlier we do not believe the present case can be
distinguished from those cases on that basis.
We hereby affirm the determination of the IRS to reimburse Mr. Wood
for his claimed expenses in direct proportion to the extent of his
interest in the residence at the time of settlement.
B-216203, 64 Comp. Gen. 296
Matter of: Raymond P. Keenan - Real Estate Expenses, February 22,
1985
A transferred employee sold his residence at his old duty station.
Among the expenses claimed incident to the sale was a tax certification
fee imposed by the local taxing authority to certify that all real
estate taxes on the property had been paid. Paragraph 2-6.2c of the
Federal Travel Regulations (FTR) authorizes reimbursement of the cost of
title search and "similar expenses." Since the purpose of a title search
is to determine whether title in the seller is in any way encumbered by
recorded liens, and since a claim by a taxing authority for real
property taxes not paid always runs against the property, a
certification of taxes paid is an essential element in establishing
clear title. Thus, the fee charged by a taxing authority qualifies as a
reimbursable sellers cost as a "similar expense" under the cited FTR
provision.
A transferred employee purchased a residence at his new duty station
and was charged a loan assumption fee. Para. 2-6.2d(1) of the FTR, as
amended, effective Oct. 1, 1982, permits reimbursement of loan
origination fees and similar fees and charges, but not items considered
to be finance charges. The employee's loan assumption fee may be
reimbursed where it is assessed in lieu of a loan origination fee, since
it involves charges for services similar to those otherwise covered by a
loan origination fee.
A transferred employee sold his residence at his old duty station.
Among the expenses claimed incident to that sale was the cost of an ERA
warranty, which protects him as seller against the cost of replacement
or repair of latent defects in the residence for a specified period
after its sale. His claim is denied since FTR para. 2-6.2d(2)
specifically excludes the cost of property loss and damage insurance and
maintenance costs.
This decision is in response to a request from an Authorized
Certifying Officer, Southeast Region, Internal Revenue Service (IRS),
Department of the Treasury. It involves the entitlement of one of its
employees to be reimbursed certain real estate transaction expenses
incident to a permanent change-of-station transfer in January 1984.
Reimbursement is authorized, in part, for the following reasons.
Mr. Raymond P. Keenan, an IRS employee, received a permanent
change-of-station transfer from New York, New York, to Memphis,
Tennessee, in January 1984. As an incident of his transfer he was
authorized reimbursement for relocation expenses.
Following completion of his transfer to Memphis, Mr. Keenan submitted
a claim totaling $15,581.44, for travel and relocation expenses. The
agency allowed $13,953.99 and provided an itemized explanation as to why
the remaining claimed real estate transaction expenses totaling
$1,627.45 were either suspended or disallowed.
On reclaim, Mr. Keenan asserted entitlement to all suspended and
disallowed items and provided either an explanation, or evidence of
expense incurred, for each. On administrative reconsideration,
reimbursement of the following items pertaining to the sale of his house
at his old station and purchase of a house at his new station remained
in doubt:
1. Tax certification fee -- $30
2. Loan assumption fee -- $893.95
3. ERA warranty -- $330
The provisions of law governing reimbursement of residence
transaction expenses of transferred employees are contained in 5 U.S.C.
Section 5724a (1982), and implementing regulations. Those regulations
are contained in Part of Chapter 2, Federal Travel Regulations (FPMR
101-7, September 1981) (FTR), as amended, in party, by GSA Bulletin FPMR
A-40, Supp. 4 (October 1982).
The authorized certifying officer has suggested that this item is for
disallowance based on our ruling in decision George J. Wehrstedt,
B-192851, May 11, 1979. We do not agree.
In Wehrstedt, we considered, in part, the propriety of reimbursing an
employee for a tax service charge. The fee there was a charge made by
the lender to the employee as the purchaser of a residence for a service
performed by the lender to compute and prorate the tax obligation of the
parties for the tax year in which settlement was made. We concluded
that the charge made was an expense incident to the extension of credit,
which in actuality, was a finance charge, and not reimbursable. See
also John G. Barry, B-199944, April 16, 1981, and John S. Derr,
B-215709, October 24, 1984.
According to Mr. Keenan, the tax certification fee was charged to him
by the taxing authority for the Township of Northhampton, Pennsylvania,
to provide a certificate attesting that all real estate taxes due on the
property he was selling were paid.
Paragraph 2-6.2c of the FTR provides, in part, for reimbursement of
legal and related expenses incurred in connection with the sale of a
residence if such costs are customarily paid by the seller of a
residence at the old official station, but not to exceed the amount
customarily charged in that locality. These permitted expenses include,
among others, the cost of searching title, preparing abstracts,
preparing conveyances, other instruments and "similar expenses."
The purpose of a title search is to determine whether the seller has
clear title to the property being sold and whether it is in any way
encumbered. One such encumbrance would be a recorded real property tax
lien. Thus, the failure to have a tax lien recorded, even as late as
the date of settlement, would not defeat the lien since a property tax
claim always runs against the property. Therefore, a certification by a
taxing authority that all property tax payments are current is an
essential element in the ability of the seller to pass clear title.
Accordingly, while such expense is not specifically listed in FTR para.
2-6.2c, we believe that it does qualify as a reimbursable seller's cost
as a "similar expenst," and Mr. Keenan may be reimbursed the $30
claimed.
We wish to note that this case is to be distinguished from those
cases where we have denied reimbursement for a tax certification on the
basis that it was a finance charge. Here, Mr. Keenan was the seller,
not the purchaser, and the certification service was not performed
incident to obtaining financing. Compare J.S. Derr, above.
As an incident of his transfer, Mr. Keenan purchased a residence in
the Memphis, Tennessee, area and assumed the mortgage loan of his
seller. The authorized certifying officer disallowed reimbursement on
the basis that it was not specifically authorized under FTR para.
2-6.2d, as revised and restated in GSA Bulletin FMPR A-40, Supp. 4
(October 1982).
The matter of reimbursement of a loan assumption fee incident to the
purchase of a residence at an employee's new station, was the subject of
decision Edward W. Aitkin, B-214101, May 7, 1984, 63 Comp. Gen. 355. We
noted in that decision that FTR para. 2-6.2d(1)(f), as revised, allows
reimbursement of "other fees and charges similar in nature" to those
listed in para. 2-6.2d(1)(a-e), unless specifically prohibited in para.
2-6.2d(2). Accordingly, we held that where a loan assumption fee
involves costs similar to those covered by a loan origination fee, was
not specifically prohibited by the FTR, and is assessed instead of a
loan origination fee, it may be reimbursed under FTR para. 2-6.2d(1) as
a miscellaneous expense. See also Lawrence R. Lyons, B-214255, July 30,
1984.
Therefore, Mr. Keenan may be reimbursed the loan assumption fee
charged him, not to exceed the amount customarily paid in the locality
of his new residence.
On reclaim, Mr. Keenan admits that the warranty obtained was
insurance. He states, however, that because of heavy competition from
new residence construction in the Northhampton area, the selling of a 17
year old, one-family dwelling was difficult. As a result, he found that
in order for him to dispose of his residence in a reasonable time it was
necessary for him to secure such a warranty.
The agency disallowance of this item was based on our decisions
Phillip R. Rosen, B-187493, April 1, 1977, and Vincent A. Crovetti,
B-189662, October 4, 1977.
In our Rosen and Crovetti decisions we considered the question
whether the cost of an insurance contract which provided an employee, as
the seller of a residence, with protection against the cost of replacing
or repairing latent defects discovered within a specified period after
its sale, may be reimbursed as a miscellaneous expense under FTR para.
2-6.2d. In the process of analyzing the matter, we established as a
test whether the contract for such protection was required by law,
custom or the lending institution as a condition of making the mortgage
loan. We ruled that so long as the contract was not so required, its
cost could not be reimbursed.
In our decision John D. Garrity, B-193578, August 20, 1979, which
also involved a service maintenance contract, we rejected the test used
in Rosen, above, to determine whether that expense could be reimbursed.
We concluded in Garrity that since the contract was insurance, then
regardless of whether it was required and by whom, its cost may not be
reimbursed since insurance against loss and damage of property as well
as maintenance costs are specifically excluded under para 2-6.2d of the
FTR. The holding in Garrity has been consistently followed. See Daniel
J. Everman, B-210297, July 12, 1983.
As we understand the situation here, an ERA warranty is in the nature
of insurance which was secured by Mr. Keenan through his real estate
agent. Its purpose was to minimize or eliminate his potential liability
to the buyer for latent defects in the home and the cost of maintenance
or repair should such defects become apparent during a specified period
following sale. Therefore, it is our view that the decisions in Garrity
and Everman, above, are controlling here and the $330 cost of the ERA
warranty may not be certified for payment.
B-216319, 64 Comp. Gen. 290
Matter of: Nuclear Metals, Inc., February 21, 1985
Protest relating to awards under a prior solicitation is untimely and
not for consideration.
Competitive advantage allegedly enjoyed by a mobilization base
producer because of award of a prior contract at a high unit price is
not improper since it was statutorily permissible and did not result
from unfair government action.
Where a contracting agency determined to fill an additional
requirement by option exercise at a reduced price, with changed delivery
terms, it was required to negotiate with both contractors eligible for
award.
Although negotiations for an additional requirement may have been
conducted informally because of the contracting agency's belief that it
was only exercising an option, no prejudice resulted where the only
eligible offerors were both afforded equal information and an equal
opportunity to compete for the requirement.
Nuclear Metals, Inc. (Nuclear) protest the award by the Army of a
contract for penetrator cores to Aerojet Ordinance Company (Aerojet),
under solicitation No. DAAA09-84-R-0084. Nuclear asserts that it had
been awarded this requirement by the Army's exercise of an option under
an award to Nuclear, and that subsequently improper negotiations were
conducted with, and an award made to, Aerojet.
We deny the protest in part and dismiss it in part.
The award at issue is characterized by the Army as the exercise of an
option for a quantity increase to run concurrently with performance
under an existing contract. The original contract to Aerojet was part
of a split award under the above-referenced solicitation. The
procurement was negotiated pursuant to 10 U.S.C. Section 2304(a)(16)
(1982), as implemented by Defense Acquisition Regulation (DAR) Section
3-216, as a procurement restricted to Aerojet and Nuclear as industrial
mobilization base producers. This RFP, issued on February 10, 1984, was
for the 106,820 cores, with a 100 percent option provision. Evaluation
was on the base quantity exclusive of the option quantity. On March 30,
1984, the Army awarded Nuclear a contract for 65,000 cores at a unit
price of $205.20. Nuclear's unit option price was $225.72 f.o.b.
origin, or $226.12 f.o.b. destination. On April 20, the Army awarded
Aerojet a contract for the balance of the requirement, 41,820 cores, at
a unit price of $251.00. Aerojet's unit option price was $433.10 f.o.b.
origin, and $433.90 f.o.b. destination.
The reason for the split award, with award to Aerojet at the higher
price, was the Army's desire to maintain its mobilization base for
production of the cores, as authorized under the above-cited statute and
regulations. As our Office has recognized, procurements negotiated
thereunder are conducted with the normal concern of insuring maximum
competition placed secondary to the needs of industrial mobilization,
which permits award to a predetermined contractor or contractors in
order to create or maintain their readiness to produce military supplies
in the future. Pioneer Tool & Die Company, et al., B-211891, et al.,
Nov. 18, 1983, 83-2 C.P.D. Paragraph 584; National Presto Industries,
Inc., B-195679, Dec. 19, 1979, 79-2 C.P.D. Paragraph 418; 49 Comp. Gen.
846 (1970).
After making awards, the Army determined that it had an additional
requirements for 12,751 cores. The Army's characterization of the
ensuring course of events is that the additional requirement, eventually
increased to 19,339 cores, was awarded to Aerojet by exercise of the
option on August 23, implemented by a contract modification which
reflected Aerojet's reduced option unit price of $175.00 per core, with
the existing monthly delivery schedule modified to incorporate a
concurrent production increase. The Army indicates that this action was
taken after both Nuclear and Aerojet were advised of the additional
requirement and given an opportunity to submit reduced option prices.
Nuclear's understanding of the events is different. Nuclear asserts
that on July 19 it received an award of 12,751 additional cores by the
Army's exercise of Nuclear's option at a price equal to the base unit
price of $205.20 reduced in exchange for a shortened delivery schedule.
In particular, Nuclear alleges that an Army contract specialist
specifically negotiated and agreed to this arrangement with Nuclear
personnel by telephone calls which occurred on July 19. Nuclear states
that the Army had also previously made contract modifications by such
telephone calls. Nuclear further asserts that it was advised on July 19
that a contract modification reflecting the oral agreement would be in
place in time for the forthcoming shipment, and that Nuclear was advised
to proceed with a production rate which reflected the increase. Nuclear
contends that in reliance on this representation, it took steps to
produce and ship the cores in accordance with the increased production
level.
Nuclear states that on July 25, it received the following mailgram
dated July 23, from the Army which Nuclear asserts is consistent with
its oral agreement:
The Government has an additional requirement for 12,751 ea core
f/projectile 105MM, APFSDS-T, M833. In accordance with the option
for increased quantity CH-20 of referenced contract. Request your
option price be based on concurrent (extended) delivery for this
increased quantity. The deliveries should be spread equally over
the contract performance period or as a minimum of 10 months
period.
Request your option price be forwarded to the PCO as soon as
possible.
Nuclear states that its copy of the mailgram, unlike the copy in the
agency report, did not indicate that Aerojet had received a similar
communication. Nuclear also states that on July 24, it received a
letter confirming the change in delivery schedule. This letter states:
Reference Contract DAAA09-84-C-0453.
In an attempt to level out the production schedule of the
referenced contract, Nuclear Metals is hereby authorized to ship
to the following delivery schedule.
30 Jul 84 thru 30 Nov 84 -- 6,000 each
30 Dec 84 thru 30 June 85 -- 5,000 each
Modification P00003 will be issued to the contract to reflect
this delivery schedule change.
Nuclear points out that a notice was published on July 26 in the
Commerce Business Daily (CBD), which refers to Nuclear's initial
contract and states that:
* * * Exercise of the option provision in Contract * * * to
Mobilization Base Producer Nuclear Metals, Inc. * * * -- Award
date o/a 16 Aug. 84 -- * * * .
Nuclear contends that by these actions, the Army made award to
Nuclear under the option clause of the original contract. Nuclear
asserts that some time after award was made, the Army entered into
negotiations with Aerojet. Nuclear indicates that it was aware of a
correcting CBD notice of August 3, which states that the Army was
contemplating award of the referenced additional cores "by exercise of
the option provision in the contract to mobilization base producers,"
(plural) on or about August 16." Nuclear also indicates that on August 7
and 10, it was telephonically advised by the Army that the option
quantity requirement had increased, and in each instance it verified by
letter that its price would remain the same. On August 24, Nuclear
learned that the Army had awarded the contract to Aerojet on August 23,
at $175 per unit for the 19,339 cores.
In addition to its assertion that it had already received an award,
Nuclear protests that the negotiations with Aerojet were undertaken
without notice to Nuclear that another offer was being considered, which
it considers to be unfair, secret dealings by the Army. Nuclear also
objects that Aerojet's low price was the result of the government
subsidy which was provided by the initial award to Aerojet at a high
unit price, and that the award of the option to Aerojet results in a
higher overall price than would have resulted form award to Nuclear.
With respect to Nuclear's allegation that it had been awarded an oral
contract for the option exercise, the Army disputes Nuclear's version of
the facts. In particular, the Army contract specialist states that he
had no conversation with any Nuclear personnel on July 19, and that
while on either July 17 or 18, he spoke with Nuclear personnel, this was
only to solicit Nuclear's interest in the requirement for 12,751
additional cores. The specialist states that he advised Nuclear that
award of the additional requirement would be made to only one of the two
contractors, and sought to obtain Nuclear's price for the additional
requirement. The contracting specialist states that he gave no
assurances that the option quantities could be delivered during the
current delivery schedule, rather than subsequently, as provided for
under the contract. The Army agrees that it published a CBD notice
which stated an intention to award by exercise of its option under the
Nuclear contract. However, the Army points out that this notice
referred only to 12,751 cores, rather than the 19,339 cores which were
actually awarded, and that it refers not to an award already made, but
rather to an award proposed to be made on or about August 16. In
addition, the Army points to the CBD notice of August 3, which
specifically indicated that it was a correction of the previous notice,
and stated that award was contemplated by exercise of an option to
"mobilization base producers."
The Army contends that there is no evidence of any award to Nuclear,
other than Nuclear's disputed version of the July 19 telephone
conversation. In this regard, it points out that the Army's July 23
mailgram formally advised both contractors that there was an additional
requirement, and requested a new option price. Regarding the July 24
letter to Nuclear, the Army points out that it merely refers to leveling
out the existing production schedule, and makes no change in the
quantity awarded. The Army states that even under Nuclear's version of
the alleged award conversation, the quantity discussed was substantially
different than that eventually awarded, and, thus, there is no
indication of agreement on material terms of the alleged contract.
Finally, the Army asserts that Nuclear's protest is untimely since, at
the latest, Nuclear had notice on August 3, by the corrected CBD notice,
that it had not been awarded the contract, but Nuclear did not file its
initial protest with the Army until August 27, more than 10 working days
after it had knowledge of its basis for protest.
We agree that to the extent Nuclear is alleging that it was awarded a
contract on July 19, its protest filed more than 10 working days after
it had actual or constructive notice (by the August 3 CBD notice) that
the agency did not so view the situation, is untimely under our Bid
Protest Procedures. 4 C.F.R. Section 21.2 (b)(2) (1984); Econometric
Research, Inc., B-213947, Jan. 23, 1984, 84-1 C.P.D. Paragraph 103.
Nuclear also asserts that award to Aerojet constituted bad
procurement policy, because it is at a higher overall price than would
have resulted from award to Nuclear, and that Aerojet's low option unit
price is the result of the subsidy which Aerojet received by its initial
award at a unit price substantially in excess of the unit price of
Nuclear's award.
To the extent that this allegation protests the initial award to
Aerojet, it is clearly untimely under our Bid Protest Procedures, 4
C.F.R. Section 21.2(b)(2). The award to Aerojet was made on April 20,
and Nuclear's protest was not filed with GAO until September 7.
Regarding Nuclear's allegation that the award to Aerojet results in a
higher total price than award to Nuclear, this allegation is incorrect.
Aerojet's unit price is $175 versus Nuclear's unit price of $205.20.
Only by combining the prices of the original award with the price for
the additional requirements can Nuclear assert that its total price
would be lower. The present issue concerns only Nuclear's higher quoted
price for the option. Moreover, in addition to the fact that the
protest of the earlier award is untimely, as noted above the Army was
acting within its right to maintain mobilization capacity by awarding
part of the original contract to Aerojet at a higher price.
Regarding the alleged "subsidy" which Aerojet received by virtue of
its initial award, the price differential between the two awards was
less than 20 percent (Nuclear's unit price was $205.20 versus Aerojet's
unit price of $251). This is really a protest against the initial award
to Aerojet and is untimely. If viewed as a protest against the
evaluation formula in the initial solicitation, which considered only
base price, without evaluation of option prices, it is also untimely. 4
C.F.R. Section 21.2(b)(1). To the extent that Nuclear is objecting to
any competitive advantage which Aerojet obtained by virtue of the
earlier award, our Office has consistently held that the government is
under no obligation to eliminate an advantage which a firm may enjoy
because of its particular circumstances, including the award of other
contracts by the government, unless the advantage has resulted from
unfair action on the part of the government. Pioneer Tool & Die, et
al., B-211891, supra; Lanson Industries, Inc., 60 Comp. Gen. 661, 666
(1981), 81-2 C.P.D. Paragraph 176. We have specifically held that any
advantage obtained as the result of an award such as this to maintain
mobilization readiness, does not constitute a proscribed unfair
advantage. Pioneer Tool & Die Company, et al., supra.
Nuclear's assertion that the Army engaged in prohibited secret
dealings or negotiations with Aerojet is unsupported by the record. The
Army characterizes its negotiations with Aerojet and Nuclear as testing
the market after it determined pursuant to the Federal Acquisition
Regulation, Section 17.207(d) that both contractor's prices were
excessively high. The Army offered both contractors an opportunity to
lower their option prices in consideration of the right to deliver the
additional requirement on a concurrent basis, rather than a follow-on
basis. The Army contends that either the award constituted an option
exercise, or that its action constituted proper negotiations with both
parties.
As the Army correctly points out, our decisions in Varian Associates,
Inc., B-208281, Feb. 16, 1983, 83-1 C.P.D. Paragraph 160, and Department
of the Army -- Reconsideration, B-208281.2, July 12, 1983, 83-2 C.P.D.
Paragraph 78, require that where an agency offers an incumbent the
opportunity to reduce its option price, it is required to conduct
negotiations where the facts indicate that price competition may be
available. Having determined that the option prices were excessive, and
having given Nuclear an opportunity to reduce its option price, the
agency properly provided Aerojet a similar opportunity. While no formal
negotiations were conducted, we believe that this is a question of form
only. The Army had made an appropriate determination that these were
the only two mobilization base producers with which negotiations for the
item in question could be conducted. In the August 3, correcting CBD
notice, the Army provided notice that both producers were being
considered for award of the additional requirement. Both eligible
offerors were given the same opportunity to reduce their option prices,
and were apprised of the same information with respect to quantity and
delivery changes. We do not see any prejudice to Nuclear resulting from
the fact that more formalized negotiation procedures were not employed,
or from the fact that the award was characterized by the Army as an
option exercise.
To the extent that Nuclear believes it was entitled to award on the
sole source basis, by option exercise at a modified price, this is
clearly impermissible. Varian Associates, Inc., B-208281, supra.
Moreover, with respect to an option exercisable at the sole discretion
of the government, as here, our Office will not consider under our Bid
Protest Procedures an incumbent contractor's contention that an agency
should have exercised or is obligated to exercise such an option
provision. Lanson Industries, Inc., 60 Comp. Gen. 661, 664, supra.
Similarly, our Office will not review a protest that an agency should
award a contract on a sole-source basis since the objective of our bid
protest function is to insure full and free competition for government
contracts. Kisco Company, Inc., B-212832, Sept. 23, 2983, 83-2 C.P.D.
Paragraph 372.
Accordingly, we dismiss the protest in part and deny it in part.
B-214172, 64 Comp. Gen. 282
Matter of: Reconsideration of B-214172, July 10, 1984, February 20,
1985
Spending levels established in authorizing legislation for three
Small Business Administration (SBA) loan programs in 1984 fiscal year
were not superseded or repealed by higher levels indicated in conference
report on 1984 SBA appropriation which appropriated two lump-sums to
fund these and other SBA programs. The authorizing legislation and the
appropriation provision were entirely consistent with one another on
their face. In these circumstances, an express statutory limitation
cannot be superseded or repealed by contrary indications contained only
in committee reports or other legislative history. 36 Comp. Gen. 240
(1956) and B-148736, September 15, 1977, distinguished. B-214172, July
10, 1984, affirmed.
Expenditures by SBA in 1984 fiscal year that exceeded statutory
ceilings in the authorizing legislation on the amount of direct loans
that SBA could make in two of its direct loan programs would violate the
Antideficiency Act since such expenditures would exceed available
appropriations as that term is used in the Antideficiency Act. However,
since a loan guarantee is only a contingent liability that does not
require an actual obligation or expenditure of funds, SBA would not
violate the Antideficiency Act if it exceeded the statutory ceiling on
the amount of loans it could guarantee in a particular program in the
1984 fiscal year. B-214172, July 10, 1984, affirmed as modified.
This decision is in response to a letter dated September 5, 1984,
from the Administrator of the Small Business Administration (SBA),
asking our Office to reconsider our opinion B-214172, July 10, 1984,
concerning the legal operating level for certain loan programs
administered by SBA. Our opinion in that case was written in response
to a request from the Chairman of the House Committee on Small Business
for us to resolve what SBA believed was a conflict between the spending
levels established for these programs in SBA's authorizing legislation
and the levels provided for the same programs in SBA's appropriation for
the 1984 fiscal year, as explained by the report of the conference
committee on the 1984 appropriation act.
Our opinion of July 10, 1984, concluded that the lower spending
levels established in the authorizing legislation for the three loan
programs in the fiscal year "have not been superseded or repealed and
remain in effect." Furthermore, we said that SBA should take whatever
actions were necessary "to avoid overobligating or overspending the
amounts legally available for each program." In the event the authorized
spending level for any of the three programs involved had already been
exceeded, we said that SBA "should make the reports and take the actions
required by the Antideficiency Act, 31 U.S.C. Section 1341." SBA is now
asking us to reconsider our conclusions as to the legal spending levels
for these three programs in the 1984 fiscal year and the possible
violation of the Antideficiency Act if any of those levels were
exceeded. Having done so, it is our view for the reasons set forth
hereafter, that with one minor modification explained below, the
position we reached in our opinion of July 10, 1984, was correct.
SBA's authorization for the 1984 fiscal year, set forth in subsection
20(q) of the Small Business Act as amended, 15 U.S.C. Section 631
(note), established 1984 program levels of $15 million for direct loans
to the handicapped, $35 million for direct purchases of debentures and
preferred securities issued by Minority Enterprise Small Business
Investment Companies (MESBICs), and $160 million for guaranteed loans
issued by Small Business Investment Companies (SBICs). In addition,
subsection 20(r) of the Act, 15 U.S.C. Section 631 (note), authorized a
total appropriation to SBA in the 1984 fiscal year of $804 million, of
which $531 million was to be made available to carry out various
programs, including the three programs involved here, and numerous
others also authorized by subsections 20(q)(1) (2) and (3) of the Act.
All of the loan programs authorized by subsection 20(q) (1-3) of the
Act, including the three involved here, are funded out of the business
loan and investment fund, established pursuant to section 4(c)(1)(B) of
the Act, 15 U.S.C. Section 633(c)(1)(B).
SBA's appropriation for the 1984 fiscal year appropriated two
lump-sums for the programs funded out of the business loan and
investment fund, as follows:
For additional capital for the "Business loan and investment
fund", authorized by the Small Business Act, as amended,
$230,000,000, to remain available without fiscal year limitation;
and for additional capital for new direct loan obligations to be
incurred by the "Business loan and investment fund," authorized by
the Small Business Act, as amended, $133,400,000, to remain
available without fiscal year limitation. Departments of
Commerce, Justice, and State, the Judiciary, and Related Agencies
Appropriation Act, 1984, Pub. L. No. 98-166, 97 Stat. 1071, 1080,
November 28, 1983.
The conference report on the appropriation act contains a table which
breaks down the amounts appropriated for SBA's business loan and
investment fund in the 1984 fiscal year on a program-by-program basis.
H.R. (Conf.) Rep. No. 478, 98th Cong., 1st Sess. 19 (1983). The table
lists the amount appropriated for handicapped direct loans, MESBIC
debentures and guaranteed SBIC loans at $20 million, $41 million, and
$250 million, respectively (as opposed to limits in the authorizing
legislation for these programs of $15, $35, and $160 million,
respectively).
It is SBA's position that the appropriation act provision, as
explained by the information in the conference report, necessarily
conflicts with the program levels established in the authorizing
legislation. Therefore, since the appropriation act was the more
recently enacted legislation, SBA maintains that Congress must have
intended to supersede the program levels specified in the authorizing
legislation for these three programs with the higher levels indicated in
the conference report.
The primary basis for the conclusion we reached in our July 10
opinion that the spending levels specified in the authorizing
legislation had not been superseded by the appropriation act was our
determination that the two statutes did not, in fact, conflict with one
another. Therefore, the so-called "later-in-time" rule, relied upon by
SBA, did not apply, in our view. Our determination that the two
statutes were not in conflict, and actually tended to complement each
other, was based on three factors. First, the two specific lump-sum
amounts in the 1984 SBA appropriation for the loan program funded out of
the business loan and investment funds were well within the total
authorized spending levels established by section 20(q) of the Small
Business Act. Second, the total amount appropriated for these loan
programs in fiscal year 1984 was only $363.4 million whereas subsection
20(r) of the Small Business Act authorized an appropriation of
$531,000,000 for these programs. In this respect, we recognized that if
the lump-sum amounts had been greater than the total authorized
appropriation for these programs "there might be good reason to consult
the conference report or other legislative history materials for an
explanation." Third, the appropriation act provision specifically
referred to the authorizing legislation in a manner that indicated an
intent to incorporate by reference the authorized program levels
provided for in the Small Business Act.
We do not quarrel with the basic proposition, that "Congress may
appropriate funds in excess of a cost limitation contained in the
original authorization act and that the agency is thereby authorized to
continue the program at the higher level." 55 Comp. Gen. 289, 292
(1975). However, it must be clear that Congress intended to amend or
supersede the prior limitation. It is especially difficult to find
clear evidence of such intent where, as here, the only indication that
the statutory ceiling established in the authorizing legislation have
been superseded in a table in the appropriation conference report which
lists higher amounts for several programs than is set forth in the
authorization.
As stated above, the appropriation act in this case merely
appropriated two lump-sums for SBA loan programs funded out of the
business loan and investment fund. Our Office has consistently held
that "when Congress merely appropriates lump-sum amounts without
statutorily restricting what can be done with these funds, a clear
inference arises that it does not intend to impose legally binding
restrictions, and indicia in committee reports and other legislative
history as to how the funds should or are expected to be spent do not
establish any legal requirements on Federal agencies." 55 Comp. Gen.
303, 319 (1975). Implicit within this holding is the more basic
proposition, as stated in our July 10 opinion, that "an existing
statutory limitation cannot be superseded or repealed by statements,
explanations, recommendations, or tables contained only in committee
reports or in other legislative history." In other words, if
explanations or other comments in committee reports do not create any
legally binding restrictions on an agency's discretionary authority to
spend a lump-sum appropriation as it chooses, how can such comments
supersede an existing statutory limitation that does impose a binding
legal restriction on the agency's authority to dispose of a lump-sum
appropriation.
SBA cites two of our prior decisions in support of its position in
this case. While these decisions might at first glance appear to
support SBA's position, we believe that both decisions were limited in
scope and dealt with unusual factual situations that are distinguishable
from the one involved here. In 36 Comp. Gen. 240 (1956) we considered a
situation in which Congress authorized $7 million in 1946 for the
construction of two new four-lane bridges across the Potomac River to
replace the existing bridge. After 10 years of construction, one of the
bridges was completed at a final cost of approximately $6.8 million.
The question presented to us was whether an additional $1,750,000
appropriation for the second bridge, included within a lump-sum amount
contained in the District of Columbia Appropriation Act, 1957, was
available to begin construction of the second bridge. We concluded that
since there was "no question * * * that the * * * Appropriation Act,
1957, made an appropriation of $1,750,000 for construction of the
replacement bridge * * * ," the lack of specific legislation "increasing
the ceiling on the cost of construction of the two bridges as fixed in
the original authorization does not affect the validity or availability
of the appropriation in question for the purpose for which provided."
The holding in 36 Comp. Gen. 240 was premised on our determination
that there was no question that the District of Columbia Appropriation
Act included $1,750,000 for the second bridge. This determination that
Congress clearly intended to include these additional moneys for the
second bridge in the lump-sum appropriation for "Capital Outlay,
Department of Highways" and thereby supersede the $7,000,000 limit
contained in the authorizing legislation was based on several factors
that are not present in the instant case. At the time the appropriation
involved was enacted, approximately 10 years after the authorizing
legislation, the first bridge had been completed and the $7,000,000
authorized ceiling had essentially been reached. The legislative
history of the appropriation act demonstrates Congress was well aware of
this fact, when the 1957 fiscal year appropriation for the District of
Columbia was enacted. Moreover, the legislative history of the
appropriation act clearly establishes that Congress intended to
appropriate $1,750,000 to begin construction of the second bridge and
knew that the $7,000,000 ceiling would be exceeded as a result.
The factors that allowed us to ascertain in 36 Comp. Gen. 240 that it
was the intent of Congress to supersede the prior authorization
limitation are not present here. The only evidence supporting SBA's
position is a table in the conference report. There is absolutely
nothing to indicate that Congress knew or intended that distribution of
the SBA lump-sum appropriation along the lines indicated in the
conference report table would exceed or was otherwise inconsistent with
the statutory ceilings in the authorizing legislation. In fact, as
stated above, based on the actual language of the SBA appropriation
provision, Congress would have had every reason to believe that the
statutes were entirely consistent with one another (as we believe they
were). As noted in our July 10, 1984 opinion, the appropriation
provision specifically referred to the authorizing legislation in a
manner indicating an intent to incorporate by reference the program
ceilings "authorized by the Small Business Act, as amended." SBA argues
that the quoted phrase "authorized by the Small Business Act, as
amended" in the appropriation act simply refers to the business loan and
investment fund authorized by section 4(c)(1) of the Small Business Act.
While SBA's contention may be an arguable one, we believe the quoted
phrase is essentially the same as the phrase "as authorized by * * *
which we have interpreted as requiring the funds involved to "be
obligated only in accord with the applicable authorization act," 61
Comp. Gen. 532, 536 (1982). Accordingly, we do not believe that our
holding in 36 Comp. Gen. 240 establishes a precedent that supports SBA's
position in this case.
The second case cited by SBA is B-148736, September 15, 1977. In
that case, we concluded that the National Park Service could expend a
lump-sum appropriation provided for park planning and construction in
the manner indicated in the legislative history of the appropriation act
even though expenditures for several specific parks would exceed amounts
authorized to be appropriated for those parks. In our view, this
decision is distinguishable from the present case for many of the same
reasons set forth in the preceding discussion of the applicability of 36
Comp. Gen. 240. Of particular importance is the absence of any language
in the Park Service appropriation that is similar to the phrase
"authorized by the Small Business Act, as amended" appearing in SBA's
1984 fiscal year appropriation, the significance of which is explained
above. Moreover, based on the Park Service's statement that the
ceilings on individual parks were being exceeded because of the
"unprecedented increase" in the level of funding provided for park
development and construction, we assumed that Congress was aware of the
existing statutory limitations in the authorizing legislation when it
approved the appropriation in question. Accordingly, it was reasonable
for us to conclude that Congress had intended to supersede the ceilings
in the authorizing legislation. As explained previously there is no
justification in the present case for us to make a similar assumption.
Thus, the circumstances that were present in each of the precedent cases
cited by SBA which led to our conclusion in those cases that the later
action of the Congress in appropriating funds superseded the
pre-existing authorization limits do not exist here.
Finally, SBA also contends that our opinion of July 10, 1984,
mistakenly relied on the Supreme Court's decision in Tennessee Valley
Authority (RVA) v. Hill, 437 U.S. 153 (1978). That case involved a
situation in which the appropriation committee report indicated that
included within a lump-sum appropriation for the TVA was an amount for a
particular project which was otherwise prohibited by a substantive
statutory provision. In holding that the substantive provision had not
been amended or repealed the Supreme Court said that "(e)xpressions of
committees dealing with requests for appropriations cannot be equated
with statutes enacted by Congress * * * ." SBA contends that the Supreme
Court's holding in Hill is not applicable here primarily because in Hill
the statutory provision that TVA maintained should have been amended or
repealed by the appropriation report language was a substantive
provision of law that was part of an unrelated statute.
We disagree with SBA's contention. Our reading of Hill convinces us
that the factors SBA argues should distinguish that case from the
present one were not the basis for the Supreme Court's holding. To the
contrary, several factors relied upon by the Supreme Court in reaching
its conclusion, such as the lack of jurisdiction of the Appropriations
Committees over non-appropriations legislation, and the absence of any
indication that "Congress as a whole, was aware" of the alleged conflict
between the two statutes, are present in the instant case as well.
Accordingly, we remain convinced that our position in this case is
supported by Hill.
For the foregoing reasons, we reaffirm the conclusion reached in our
opinion of July 10, 1984, that the applicable spending levels for these
three loan programs in the 1984 fiscal year are these contained in
section 20(q) of the Small Business Act.
Our July 10, 1984 opinion also concluded that if SBA exceeded the
authorized spending level for any of the three loan programs in the 1984
fiscal year, it should treat the over-expenditures as violations of the
Antideficiency Act, 31 U.S.C. Section 1341. SBA maintains that even if
our opinion was correct as to the applicable spending levels for these
programs the expenditure of funds "in excess of the authorized levels
does not violate the Antideficiency Act, 31 U.S.C. Section 1341, when
the expenditures are within the level of funds provided in the
appropriation act." SBA argues that "Congress created the Antideficiency
Act to prevent Government agencies from subjecting the Government to
obligations of payments beyond available appropriations." Therefore, SBA
concludes that obligations that do not exceed the amount appropriated do
not violate the Act. We disagree with SBA's position. However, having
reconsidered the matter, it is now our view, as explained hereafter,
that some modification of what we said in our opinion is required.
The applicable provision in the Antideficiency Act is contained in 31
U.S.C. Section 1341(a)(1), which reads as follows:
(a)(1) An officer or employee of the United States Government *
* * may not -- (A) make or authorize an expenditure or obligation
exceeding an amount available in an appropriation or fund for the
expenditure or obligation * * * .
It is our view that expenditures by SBA in fiscal year 1984 that were
greater than the authorized spending levels for the programs, as set
forth in section 20(q) of the Small Business Act, would have exceeded
"available" appropriations as that term is used in the Antideficiency
Act. It would make little sense for us to conclude that the information
in the appropriation act's legislative history, while insufficient to
justify a determination that the authorized spending levels for these
programs had been increased, would support the conclusion that
expenditures by SBA that exceeded those levels did not violate the
Antideficiency Act's prohibition against exceeding available
appropriations.
Several recent decisions support the conclusion that the
Antideficiency Act is applicable in this situation. In 60 Comp. Gen.
440, (1981) we considered whether the Customs Service's violation of a
provision in its 1980 fiscal year appropriation prohibiting it from
paying more than $80,000 in overtime pay to any employee violated the
Antideficiency Act. The Customs Service maintained that the
Antideficiency Act did not deal "with the circumstance of the obligation
of available funds contrary to a statutory limitation." We held that the
"Antideficiency Act prohibits not only expenditures which exceed the
amount appropriated, but also expenditures which violate statutory
restrictions or limitations on obligations or spending." See, also
B-204230, October 13, 1981. While both of these cases involved
limitations that were contained in an appropriation act, we believe that
the rationale behind those decisions would apply equally to a limitation
contained in authorizing legislation. The broadly worded holding of 60
Comp. Gen. 440, quoted above, supports this view.
If SBA exceeded authorized spending levels for those programs, we do
not doubt that it did so in good faith believing that the spending
levels established for these programs in the authorizing legislation had
been superseded. Nevertheless, for purposes of determining if the
Antideficiency Act has been violated, it is immaterial whether or not
the agency is at fault. See 58 Comp. Gen. 46 (1978). The statute
flatly prohibits an agency from making expenditures or entering into
obligations exceeding the amount available for that purpose regardless
of the reason.
Notwithstanding the foregoing, it is our view that some modification
of our position is indicated. In concluding that SBA would have to
follow the procedures set forth in the Antideficiency Act if it exceeded
the authorized amounts for these programs, we did not make any
distinction between the three programs involved. Upon reviewing our
position in this respect, we believe it is necessary to distinguish
between the two direct loan programs on the one hand and the guaranteed
loan program on the other. We continue to believe that if SBA exceeded
the $15 million limit on direct loans to the handicapped or the $35
million limit on direct purchase of MESBIC debentures in the 1984 fiscal
year, SBA is required to treat the overexpenditures as violations of the
Antideficiency Act. However, if SBA exceeded the $160 million limit on
guaranteed SBA loans, the situation would be different, in our view.
When an agency makes a direct loan, it enters into a valid obligation
requiring the agency to disburse funds to the borrower in accordance
with the terms of the loan. A loan guarantee, however, only constitutes
a contingent liability that does not require the agency to make any
initial disbursement of appropriated funds to the borrower. Ordinarily,
when a loan is guaranteed by the Federal Government, the Government does
not obligate or expend any funds unless and until the borrower defaults.
See 60 Comp. Gen. 700, 703 (1981). Therefore, even if SBA guaranteed
more than $160 million in SBIC loans in the 1984 fiscal year, thereby
exceeding the authorized level for that program, SBA would not be making
or authorizing "an expenditure or obligation" in excess of available
appropriations, as that term is used in the Antideficiency Act. This
does not mean that SBA, or any other agency with loan guarantee
authority, is free to ignore Congressionally imposed limitations or
ceilings on the allowable level of loan guarantee activity in a
particular fiscal year. If such limitations are set forth in an
authorization, appropriation, or other statutory enactment, they are
legally binding on the agency involved and should be followed. See 60
Comp. Gen. 700 )1981). However, an agency's failure to adhere to a
statutory ceiling in the level of loan guarantee activity, while
unauthorized, is not a violation of the Antideficiency Act. Our opinion
of July 10, 1984, is modified accordingly.
B-217678, 64 Comp. Gen. 281
To The Honorable Don Sundquist, House of Representatives, February
19, 1985
Possibly with the exception of 18 U.S.C. 1913, a penal antilobbying
statute administered by the Dept. of Justice, there is no antilobbying
restriction against the use of TVA fiscal year 1985 appropriations for
grass roots lobbying activities.
Your January 25, 1985 letter enclosed a copy of your request to the
Department of Justice for an opinion on a lobbying question. The
question concerns a letter from a Tennessee Valley Authority (TVA)
District Administrator to members of the public urging them to contact
members of Congress in opposition to budget cuts being proposed for TVA.
On February 11, 1985, an attorney from this Office contacted Mr.
Thomas J. McNamara of your staff and advised him that with the possible
exception of 18 U.S.C. Section 1913, a penal statute which is the
subject of your letter to the Department of Justice, there is no
antilobbying appropriation restriction applicable to fiscal year 1985
TVA appropriations. Mr. McNamara requested us to provide you with a
written response on this point.
TVA's fiscal year 1985 appropriations are contained in Public Law
98-360, July 16, 1984, 98 Stat. 403, an act making appropriations for
energy and water development for the fiscal year ending September 30,
1985, and for other purposes. That act does not contain a restriction
prohibiting the use of TVA appropriations for lobbying activities.
In the years prior to fiscal year 1984, the annual Treasury, Postal
Services and General Government appropriation act contained an
antilobbying appropriations restriction which was applicable to
appropriations contained in that act for a given fiscal year as well as
all other appropriation acts for the particular fiscal year. As such,
all appropriations, including those of TVA, were covered by that
antilobbying restriction. This generally was the case even when the
annual Treasury, Postal Services and General Government appropriation
bill failed to pass and was incorporated by reference in a law
continuing appropriations for a particular year.
During floor debate in the House on the fiscal year 1984 Treasury,
Postal Services and General Government appropriation act, a point of
order was raised against the antilobbying restriction which caused it to
be stricken from the bill. See 129 Cong. Rec. H8735, October 27, 1983.
The stricken provision was not included in the fiscal year 1985
Treasury, Postal Services and General Government appropriation act.
Accordingly, we are unaware of any non-penal antilobbying
appropriation restriction which would be applicable to TVA's
appropriations.
B-216676, 64 Comp. Gen. 279
Matter of: Leslie & Elliott Company, February 19, 1985
Failure to provide a price for a bid item as requested by an
amendment may be waived as a minor informality where bidder acknowledged
receipt of the amendment, the change effected by the amendment was
immaterial, and waiver would not be prejudicial to other bidders. E.H.
Morrill Company, 63 Comp. Gen. 348 (1984), 84-1 C.P.D. 508; Goodway
Graphics of Virginia, Inc., B-193193, Apr. 3, 1979, 79-1 C.P.D. 230.
This decision modifies 63 Comp. Gen. 348 and B-193193, Apr. 3, 1979.
Leslie & Elliott Company protests the rejection of its bid as
nonresponsive under invitation for bids (IFB) No. N62472-84-B-3314,
issued by the Department of the Navy to replace street lighting at the
Naval Submarine Base New London, Groton, Connecticut.
Although Leslie & Elliott acknowledged receipt of amendment 3 to the
IFB, its low bid was rejected because it did not contain a price for the
bid item 2. After bid opening, Leslie & Elliott notified the
contracting officer that it included the cost of bid item 2 in bid item
1. Leslie & Elliott maintains that its failure to provide a price for
bid item 2 is a minor informality which should be waived by the Navy.
The Navy is withholding award pending our resolution of the protest. We
sustain the protest.
The IFB, as issued, called for bids on two items. Bid item 1 was for
all construction work except for that covered in bid item 2. Bid item 2
was for removing an estimated 20 cubic yards of hard material and
replacing it with clean backfill. The bid instructions called for a
combined "fixed-price lump-sum" and "requirements" type contract, with
the requirements portion covering the work under bid item 2. The
government did not guarantee that any work under bid item 2 would be
required. Award would be made to the conforming responsible bidder
offering the low aggregate sum of the bid item prices.
The bid form in the IFB package only contained a space for bid item
1. Amendment 3 noted that the bid form inadvertently omitted bid item 2
and furnished a new bid form with both bid items. Leslie & Elliott
acknowledged amendment 3, but submitted its bid on the original bid form
which did not show a price for item 2. After bid opening, Leslie &
Elliott notified the contracting officer that it had included the
estimated 20 cubic yards of rock removal requested by the bid item 2 at
$50 per cubic yard ($1,000) in its $466,666 price for bid item 1.
Leslie & Elliott also contended that if there was any problem with its
bid, it was a minor informality which should be waived by the Navy.
In its report to our Office, the Navy concludes that the imperfection
in the bid does not justify its rejection. The government estimate was
$420,000 for bid item 1 and $1,000 for bid item 2. The second low
bidder's total price was $560,000, of which $2,000 was for item 2. The
government estimate for bid item 2 was 0.238 percent of the total
government estimate, 0.214 percent of the protester's bid, and 1.071
percent of the $93,334 difference between the protester's bid and that
of the second low bidder. From these figures, the Navy concludes that
the bid item 2 work is de minimis and that it would be in the
government's best interest to find the protester's bid responsive. We
agree.
A contracting officer can waive a defect in a bid as a minor
informality if the defect is immaterial and if waiver will not be
prejudicial to other bidders. The defect is immaterial if the effect on
price, quantity, quality or delivery is negligible when contrasted with
the total cost or scope of the services being acquired. Federal
Acquisition Regulation (FAR), Section 14.405, 48 Fed. Reg. 42,102,
42,180 (1983) (to be codified at 48 C.F.R. Section 14.405). No precise
standard can be employed in determining whether a change effected by an
amendment is negligible in terms of price and, consequently, a
determination must be based on the particular facts of each case.
However, in determining whether the value of an amendment is negligible.
we look at the amendment's estimated impact on bid prices and the
relationship of that impact to the difference between the two low bids.
52 Comp. Gen. 544 (1973). We use the government's estimate of cost
significance, not the protester's, when determining materiality. See
Marino Construction Company, 61 Comp. Gen. 269 (1982), 82-1 C.P.D.
Paragraph 167.
In this case, amendment 3 changed the bid form by asking for a price
on both bid items 1 and 2, instead of just bid item 1. The government
estimate for bid item 2 was 0.238 percent of the total government
estimate, 0.214 percent of the protester's bid, and 1.071 percent of the
difference between the protester's bid and that of the second low
bidder. The value of the change effected by amendment 3 was negligible
in terms of price.
The effect of Leslie & Elliott's omission of a price for bid item 2
on quality, quantity or delivery also appears negligible, when
contrasted with the total cost of the services being acquired. The
agency estimated that under bid item 2, only 20 cubic yards of hard
material would be required to be removed and replaced with clean
backfill. Given the great disparity in bid prices offered by Leslie &
Elliott and the second low bidder, Leslie & Elliott's failure to include
a price for bid item 2 also had no effect on the competitive standing of
the bidders.
The second low bidder in this case argues that Leslie & Elliott's
omission of a price for item 2 should not be waived as a minor
informality, based on our decision in E.H. Morrill Company, 63 Comp.
Gen. 348 (1984), 84-1 C.P.D. Paragraph 508. In that case, we found
nonresponsive a bid that did not provide prices for option work added by
an amendment whose receipt was acknowledged. The circumstances in that
case differ from those here. In Morrill, and also in Goodway Graphics
of Virginia, Inc., B-193193, Apr. 3, 1979, 79-1 C.P.D. Paragraph 230,
the facts show that the omitted item was an essential and integral part
of the overall contract performance, material and indivisible from the
other aspects of performance. Here, there is no need for the same
contractor, who is installing lights, to remove the hard material, if
encountered. We believe that where an omitted item is divisible from
the contract requirements, is de minimis as to total cost, and would
clearly not affect the competitive standing of the bidders, it may be
waived. We find the facts here support waiver of the omission.
Therefore, the Navy should waive Leslie & Elliott's defect in bid as a
minor informality, since the defect is immaterial and waiver will not be
prejudicial to other bidders. To the extent that Morrill, Goodway, and
similar cases imply that the failure to price a line item automatically
requires rejection of the bid, they are modified in accordance with the
above.
The protest is sustained and we recommend that if Leslie & Elliott is
determined to be responsible, award be made to it.
B-216461, 64 Comp. Gen. 273
Matter of: University Research Corporation, February 19, 1985
As a general rule, offerors must be given sufficient detail in a
request for proposals to enable them to compete intelligently and on a
relatively equal basis.
When a protester alleges that specifications are excessively general
and vague so as to prevent the submission of an intelligent proposal,
General Accounting Office will not only analyze the specifications to
see if they adequately detail the agency's requirements, but will also
consider whether other proposals were received in order to determine
whether the level of uncertainty and risk in the solicitation was
acceptable.
A contracting agency may impose a restriction on the competition only
if it can be shown that the restriction is deemed necessary to meet its
actual minimum needs.
In a negotiated procurement, any information that is given to a
prospective offeror must be promptly furnished to all other prospective
offerors as a solicitation amendment if the information is necessary in
submitting proposals, or if the lack of such information would be
prejudicial.
University Research Corporation (URC) protests the award of a
contract to Meridian House International, the incumbent contractor,
under request for proposals (RFP) No. ROD-NEB-84-10, issued by the
Agency for International Development (AID). The procurement was for the
acquisition of a contractor-operated program providing reception,
orientation, and hospitality services to foreign nationals participating
in various programs in the United States under AID auspices. We sustain
the protest.
URC, which did not submit a proposal, believes that the agency
favored retaining Meridian House as the contractor from the outset of
the procurement. In this regard, URC contends that the RFP's
specifications were drafted in such a general and vague manner that only
Meridian House, with its background knowledge as the incumbent, could
effectively compete. Additionally, URC complains that certain
specifications unduly restricted competition by requiring offerors to
have the necessary physical facilities and qualified volunteer staff in
place at the time of award. URC further asserts that the competition
was defective because AID provided particular detailed information to
the firm prior to the proposal closing date, which information was not
furnished to the other prospective offerors by amendment.
In January of 1984, AID published a notice in the Commerce Business
Daily (CBD) of its intent to issue a solicitation for the services in
question at some future point. Interested firms were requested to
furnish detailed statements to AID regarding their ability to meet the
agency's needs, and were advised that copies of the solicitation would
only be sent to those firms submitting such information.
Seven firms including URC furnished capability statements and
accordingly were sent copies of the RFP when it was issued on August 23,
1984. The RFP contemplated that the successful offeror would develop
and provide a wide range of services for foreign participants in the
AID-supported programs, such as: arranging hotel reservations or other
suitable accommodations in the Washington, D.C. area and negotiating
discounts when possible; maintaining a staffed reception office 7 days
a week to meet the participants upon arrival and arrange transportation
to their accommodations; conducting various orientation programs;
arranging hospitality in American homes in the area; facilitating
attendance at and participation in various social, cultural, and
educational activities; conducting tours; and providing financial
information and assistance. Also, the contractor was required to
develop and publish participant-oriented publications regarding such
matters as "volunteer activity, significant developmental achievements,
and follow-up."
The RFP also required offerors to demonstrate in their proposals that
they would have suitable physical facilities and a qualified and trained
volunteer staff in place at the time of award. (It is apparent that AID
anticipated from prior experience with the incumbent that
contractor-furnished volunteers would be used as staffing for many of
the services.) The RFP indicated that AID desired a great degree of
flexibility on the contractor's part, as the specifications stated that
the number of foreign participants per week could vary from 1 or 2
individuals to groups of 50 to 100 or more, with an estimated annual
total of 1200, and that as little time as a same-day notice might be
given before arrivals in certain instances.
Prior to the September 24 closing date, URC complained to AID by
letter that the specifications heavily favored Meridian House in view of
its background knowledge as the incumbent, and requested AID to provide
more detailed information in numerous specification areas. URC also
pointed out that only Meridian House could have the required facilities
and trained volunteer staff in place at the time of proposal submission,
thereby gaining an undue competitive advantage over the other
prospective offerors. URC felt that it would be economically infeasible
for other firms to meet these requirements prior to receiving the
contract award. URC complained that the 30-day response time was
insufficient, and accordingly asked AID to extend the closing date.
AID did in fact provide URC with additional information in writing,
which it did not furnish to the other firms, but refused to extend the
closing date. URC did not submit a proposal because the firm felt that
AID's responses to its concerns were inadequate. URC then timely
protested to this Office prior to the closing date, challenging the
RFP's specifications. Meridian House was the only firm to submit a
proposal and AID awarded it the contract in the face of the protest.
The contract was awarded for a 5-year period (November 16, 1984 through
November 15, 1989) on cost-plus-fixed-fee basis, with the total price
estimated to be approximately $4.3 million.
(1) Specification Inadequacy
As a general rule, offerors must be given sufficient detail in an RFP
to enable them to compete intelligently on a relatively equal basis.
Specifications must be free from ambiguity, and must describe the
agency's minimum needs accurately. Worldwide Marine, Inc., B-212640,
Feb. 7, 1984, 84-1 CPD Paragraph 152. When a protester alleges that
specifications are excessively general and vague so as to prevent the
submission of an intelligent proposal, we will not only analyze the
specifications to see if they adequately detail the agency's
requirements, but will also consider whether other proposals were
received in response to the RFP in order to determine whether the level
of uncertainty and risk in the solicitation was acceptable. See Memorex
Corporation, B-212660, Feb. 7, 1984, 84-1 CPD Paragraph 153.
In this matter, we have no doubt that AID was justified in seeking a
great degree of flexibility from the contractor in terms of planning and
operation, given the types of services being provided. For example,
although URC complained that the RFP did not contain an estimate of the
number of volunteer staff that would be required, AID responded that
there was no required number, but that the contractor should be able to
field enough volunteers to handle groups in the sizes expected. Because
the expected group sizes themselves varied so greatly in range, we do
not think that AID realistically could have provided an estimated number
of the volunteers that would be needed. Essentially, it was left to the
offerors to propose a suitable number of volunteers to perform
adequately the required services, and we do not think that the
specifications can be regarded as overly vague on this point.
Similarly, since the RFP specified that the group sizes could range from
1 to 100 individuals or more, and that the total number of participants
was estimated to be 1200 per year, we do not believe that URC can
successfully argue that not enough information was provided to offerors
in this area so as to prohibit intelligent proposal preparation.
However, we believe that certain other specifications were so
indefinite as to lead to the conclusion that AID's requirements could
have been set forth in a more appropriate manner. We note that the
specifications did not indicate the number and content of the
orientation programs that the contractor was required to conduct, other
than to state in vague terms that the orientation programs would range
in length from 1 to 5 days. As we believe URC rightly points out, it
would be impossible for offerors to determine from this whether they
were to conduct many short programs, or to conduct a lesser number of
more extensive ones. Also, the RFP required the contractor to conduct
seminars or other specific programs for special groups, several hours or
days in length, but never established what would be a "specific" program
or what would constitute a "special" group. We believe this requirement
was too general since it stated only that the length of such programs
might vary from several hours to several days in length, without giving
offerors more detailed information as to what was expected in terms of
both time and content. With respect to the participant-oriented
publications required from the contractor, there was no clear indication
in the solicitation as to the nature, quality, or quantity of such
publications. Therefore, offerors could only guess as to what kinds of
publications would meet the agency's requirements.
Most importantly, we note that there were no offerors under this
solicitation other than the incumbent, even though seven firms submitted
capability statements in response to the CBD notice. Because of this
circumstance, we believe that the other prospective offerors may have
viewed the procurement in the same way as URC; that is, that there was
an unacceptable amount of uncertainty and risk in the solicitation which
precluded them from submitting proposals. Memorex Corporation, supra.
/1/
(2) Unduly Restrictive Requirements
We agree with URC that the RFP's requirements that offerors have
dedicated facilities and a qualified and trained volunteer staff in
place at the time of award, and demonstrate compliance with these
requirements in their proposals, unduly restricted competition. A
contracting agency may impose a restriction on the competition only if
it can be shown that the restriction is deemed necessary to meet its
actual minimum needs, since the benefit of competition both to the
government and to the public in terms of price and other factors is
directly proportional to the extent of the competition. Tennent Co.,
B-205914.2, Dec. 20, 1982, 82-2 CPD Paragraph 546. When a protester
challenges particular specifications as being unduly restrictive of
competition, the burden is upon the agency to establish prima facie
support for the restrictions. Lista International Corp., 63 Comp. Gen.
447 (1984), 84-1 CPD Paragraph 665. We do not believe that AID has met
that burden here.
It is apparent from the record that only Meridian House, because of
its incumbent status, had the requisite facilities and volunteer staff
in place at the time of proposal submission. We agree with URC that it
would have been economically prohibitive for offerors other than
Meridian House to negotiate the necessary facility leases and to recruit
and train a qualified volunteer staff before being selected to receive
the contract award. (For that matter, the RFP never stated what kind of
qualifications were required in the volunteers, nor how and to what
extent they were to be trained.) In addition, the other offerors were
given only 30 days to meet these requirements, which we believe would
have been particularly onerous. AID urges that the other offerors could
have satisfied the requirements by negotiating leases which were
contingent upon receiving the contract award. Although this may have
been feasible in certain instances, we do not think that contingent
leases would have been possible or practical on a large-scale basis for
every offeror, nor does this approach address the problem of recruiting
and training the volunteer staff prior to contractor selection.
In our view, although we fully recognize AID's need for uninterrupted
contract services, these requirements could have been set forth in a
less restrictive manner. The RFP indicated that performance was to
commence immediately upon award, so that only Meridian House, with its
facilities and volunteer staff already established and functioning,
could meet the requirements as of that date. We think it would have
been more appropriate for the RFP to have provided that a specific
period of time, such as 30 or 60 days, would be available between the
date of selection for award and the effective date of the contract in
order to enable a successful offeror to obtain the requisite facilities
and recruit and train a qualified volunteer staff. /2/
Our conclusion is based on the long-standing statutory requirement
with respect to negotiated procurements that proposals shall be
solicited from the maximum number of qualified sources consistent with
the nature of the supplies or services being procured. See 10 U.S.C.
Section 2304(g) (1982). This requirement is fully embodied in the
Federal Acquisition Regulation (FAR), 48 C.F.R. Section 15.105 (1984),
which specifically provides as well that negotiated contracts shall be
awarded competitively "to the maximum practical extent." In our view,
AID's specifications regarding facilities and volunteer staff were set
forth in the RFP in such a manner that a more extensive competition,
which could have been achieved through better solicitation
draftsmanship, was effectively precluded to the benefit of Meridian
House. See Aero Corporation, 59 Comp. Gen. 146 (1979), 79-2 CPD
Paragraph 430. It is our opinion that the challenged specification
requirements unduly restricted the competition, and we find nothing in
AID's administrative report which sets forth sufficient prima facie
support for this necessity. Lista International Corporation, supra.
We thus conclude that the procurement did not promote competition "to
the maximum practical extent," 48 C.F.R. Section 15.105, because of the
manner in which the specifications were drafted, thereby resulting in a
de facto sole-source award to Meridian House. See Worldwide Marine,
Inc., supra.
(3) Failure to Provide Additional Information
We also think that competition may have been precluded because of
AID's failure to furnish the additional information it had provided to
URC to the other prospective offerors, irrespective of the fact that URC
itself did not submit a proposal. In this regard, any information that
is given to a prospective offeror under a negotiated procurement must be
promptly furnished to all other prospective offerors as a solicitation
amendment if the information is necessary in submitting proposals, or if
the lack of such information would be prejudicial. 48 C.F.R. Section
15.410(c). We believe that AID should have been cognizant of this
regulatory provision and have furnished by amendment the information it
had given to URC to the other firms to which it had sent copies of the
RFP, on the reasonable assumption that the information might be material
for the preparation of competitive proposals.
URC's requested relief in this matter is that AID terminate Meridian
House's contract for the convenience of the government at the end of the
first year, thereby enabling the collection of substantial contract
performance data in the meantime, and to recompete the remaining
requirements under a new solicitation which will contain more properly
drafted specifications to allow for effective competition. We believe
that this is an appropriate and reasonable remedy, given the on-going
nature of the requirements, and the agency's undoubted need to avoid any
disruption in services. Therefore, by separate letter of today, we are
recommending to the Administrator of AID that the present contract be
terminated for convenience as of November 15, 1985, and that a new RFP
be issued sufficiently in advance to that date so that the competition
will be concluded and the successful offeror ready to continue
performance immediately upon the termination.
Since this decision contains a recommendation that corrective action
be taken, we are furnishing copies to the Senate Committees of
Governmental Affairs and Appropriations and the House Committee on
Government Operations and Appropriations under section 236 of the
Legislative Reorganization Act of 1970, 31 U.S.C. Section 720 (1982),
which requires the submission of written statements by the agency to the
committees concerning the action taken with respect to our
recommendation.
The protest is sustained.
(1) The only contrary evidence on this point is a statement from AID
that another prospective offeror informed the agency that it did not
compete because it had shifted most of its operations to New York City
and had drastically reduced its Washington, D.C. staff, not because it
objected to the specifications. We do not find this to be persuasive.
(2) Under this procurement approach, Meridian House, if unsuccessful,
could continue performance until the successor firm was fully
operational, and the government would not have to pay for any start-up
costs incurred by the successor firm because the preparation period in
question would still be prior to the effective date of the contract.
B-216197, 64 Comp. Gen. 268
Matter of: John E. Wright - Travel and Relocation Expenses -
Long-Term Training, February 19, 1985
An employee was sent to a location away from his old duty station for
long-term training to be followed by a permanent change of station (PCS)
to a then undetermined location. Employee claims reimbursement for his
move to the training site as a PCS move since he was promoted for
purpose of that travel under agency merit promotion program. Since
travel to a location for training contemplates either a return to the
old duty station or another permanent duty station upon its completion,
a training site is but an intermediate duty station. Until the employee
is actually transferred to a new permanent duty station, the duty
station from which he traveled to the training site remains his
permanent duty station.
An employee received a PCS, with long-term training at an
intermediate location en route. Employee claims travel and relocation
expenses to the training location under 5 U.S.C. 5724 and 5724a.
Although PCS expense reimbursements are governed by secs. 5724 and
5724a, travel and transportation rights for long-term training are
specifically governed by 5 U.S.C. 4109. Hence, an employee's
entitlements for travel to a training location are limited by those
provisions. Since an agency is authorized to limit reimbursement under
sec. 4109, where employee was informed before being accepted into the
training program that all travel and transportation expenses to the
training site would have to be borne by him as a condition of acceptance
and all trainees were treated equally, his travel and transportation
expenses to the training location may be certified for payment.
An employee received a PCS, with long-term training at an
intermediate location en route. Employee was reimbursed for travel and
relocation expenses under 5 U.S.C. 5724 and 5724a from the training site
to a new PCS location, but at old duty station. His claim for the sales
expenses is allowed. An employee away from his duty station for
training has not effected a change of station during pendency of that
assignment. Therefore, where an employee and family are not actually
residing at the old duty station because of long-term training
elsewhere, such residence nonoccupancy does not preclude reimbursement
for expenses of the residence sale upon his move to his new permanent
duty station, so long as all other conditions of entitlement are met.
This decision is in response to a request from the Director, Office
of Budget and Finance, Veterans Administration. It involves the
entitlement of one of its employees to be reimbursed for travel and
relocation expenses incurred incident to training under 5 U.S.C. Section
4109 and to a subsequent permanent change of station. The employee's
claim may be allowed, in part, for the following reasons.
Mr. John E. Wright, an employee of the Veterans Administration (VA)
Medical Center, Martinez, California, applied for and was accepted into
an agency sponsored training program. This program, which was part of
the agency's merit promotion program, was designed to develop technical,
supervisory, and managerial skills in the trainees in order that they
could ultimately administer a prosthetics assistance program in the
various VA Medical Centers. The particular training program in which
Mr. Wright participated was to be conducted at any one of six selected
locations; it would be for a 12-month period; and, upon successful
completion of the training, each participant would be transferred to one
of the medical centers within the VA system, the location of which was
to be determined at or near the completion of training.
The training site selected for Mr. Wright was the VA Medical Center,
Kansas City, Missouri. By Intra-Agency Transfer Request, dated August
4, 1982, he was sent there, effective August 22, 1982. Following
completion of his training, he was transferred to the VA Outpatient
Clinic, El Paso, Texas, and reported for duty there on or about
September 22, 1983.
Subsequent to his transfer to El Paso, Mr. Wright claimed and was
reimbursed expenses incurred incident to his move from Kansas City,
Missouri, to El Paso, Texas, including expenses associated with the
purchase of a residence in the El Paso area. In addition, he sought
reimbursement for the expenses attendant to his and his family's August
1982 travel from Martinez, California, to Kansas City, Missouri,
temporary quarters subsistence expense in Kansas City, and movement of
his household goods to that location. He also included in that claim
the expenses incurred in selling his home in Martinez, California, in
August 1983.
The additional claim was disallowed by the VA in its entirety because
Mr. Wright had been informed before he was accepted into the training
program that, as a condition of acceptance, none of the expenses he
might incur incident to moving to Kansas City for training or while
there would be reimbursed by the Government. He also had been informed
that the time spent traveling from Martinez, California, to Kansas City,
Missouri, would be charged to annual leave, or he would be placed in a
leave without pay status, at his option, but in no event would he be
granted administrative leave. The disallowance was concurred in by the
Director, Finance Service, Department of Medicine and Surgery, Veterans
Administration, citing to our decision Stephen T. Croall, 60 Comp. Gen.
478 (1981), as authority.
Mr. Wright has appealed that determination. Although he admits he
was told that he was not entitled to moving expenses or administrative
leave for his move to Kansas City, he contends that none of the
documents which he was required to sign made specific reference to the
fact that the expenses of the move would not be reimbursed. Further, he
contends that his move to Kansas City was a permanent change of station
in the interest of the Government under the VA merit promotion program,
since he was promoted at the time of his transfer to Kansas City. As
such, he claims that his expenses incident to that transfer are
reimbursable, citing to our decision Eugene R. Platt, 59 Comp. Gen. 699
(1980).
The agency submission seems to characterize Mr. Wright's transfer
from Martinez, California, to Kansas City, Missouri, and then to El
Paso, Texas, for permanent duty, as constituting two separate and
distinct transfers with only the latter being as a merit promotion
transfer. We do not agree.
An employee's entitlement to be reimbursed the expenses of travel and
relocation upon a permanent change of station arises under 5 U.S.C.
Sections 5724 and 5724a (1982), and is conditioned upon the
determination by the head of the agency concerned that the transfer is
in the interest of the Government and is not primarily for the
convenience or benefit of the employee, or at his request. See
paragraph 2-1.3 of the Federal Travel Regulations, FPMR 101-7 (September
1981) (FTR). See also Michael J. DeAngelis, B-192105, May 16, 1979, and
Paul J. Walski, B0190487, February 23, 1979.
In situations involving merit promotion transfers where an agency's
own regulations provide that such transfers are in the Government's
interest, we have allowed relocation expenses, even where the agency
informed the employee that he would have to pay his own expenses.
Stephen P. Szarka, B-188048, November 30, 1977.
In decision Eugene R. Platt, 59 Comp. Gen. 699 (1980), and
Reconsideration of Platt, 61 Comp. Gen. 156 (1981), we addressed the
issue of merit promotion transfers in the absence of agency regulations.
In those decisions, we ruled that, while an agency is not precluded
from limiting relocation benefits by regulation for merit promotion
transfers, where there are no limiting agency regulations, vacancy
announcements under a merit promotion program are considered to be
recruitment actions in the interest of the Government and relocation
allowances are payable.
In the present case, the initial announcement concerning the training
program was contained in a TWIX, dated May 5, 1982, from the VA Central
Office. Item 5 of the announcement provided, in part, that
"(a)ggressive action will be taken * * * to recruit high quality
candidates for the * * * program."
The vacancy announcement, which was actually issued May 18, 1982,
provided that the entry grade for a prosthetics representative trainee
was a grade GS-5/6/7 and that the placement position following training
was in grade GS-7 or 9.
Mr. Wright was already serving in one of the entry level grades
before he was accepted into the program and could have simply been given
a lateral transfer into the prosthetics representative career ladder.
Nothwithstanding that, the record shows that Mr. Wright was promoted to
grade GS-7, step 1, effective August 22, 1982, the date he was
transferred to Kansas City, Missouri, for training. Therefore, it is
our position that the announcement for training was a merit promotion
announcement contemplating a permanent change of station to a then
undetermined location for qualified applicants, with long-term training
at an intermediate location en route. Notwithstanding that position, it
is our view that the benefits under 5 U.S.C. Sections 5724 and 5724a are
not available to Mr. Wright for all parts of his permanent change of
station.
Under the facts, Mr. Wright's permanent change-of-station travel was
in two distinct parts. The first part was his journey from Martinez,
California, to Kansas City, Missouri, an intermediate duty station for
training, and the second part was his journey from Kansas City,
Missouri, to El Paso, Texas, his new permanent duty station. Since
travel expense reimbursement rights for long-term training are governed
by a specific statutory provision (5 U.S.C. Section 4109), our
decisions, Eugene R. Platt and Reconsideration of Platt, cited above,
which construe merit promotion travel and transportation benefits under
5 U.S.C. Sections 5724 and 5724a, would not apply to Mr. Wright's
possible travel and transportation benefits for his journey from
Martinez, California, to Kansas City, Missouri.
Section 4109 of Title 5, United States Code, provides, in part in
subsection (a)(2) that an agency may pay or reimburse an employee for
all or part of the necessary expenses of training, including the costs
of --
(A) travel and per diem instead of subsistence * * * ;
(B) transportation of immediate family, household goods and
personal effects packing, crating, temporarily storing, draying,
and unpacking * * * when the estimated cost of transportation and
related services are less than the estimated aggregate per diem
payments for the period of training * * * ;
In decision Michael G. Pond, 58 Comp. Gen. 253 (1979), and
Reconsideration of Pond, B-193197, January 10, 1980, we analyzed the
type of duty assignment contemplated by the above provision and the
benefits available to the individuals incident to such assignments. We
stated therein that "(i)t must be recognized that travel for training is
not ordinary TDY or PCS travel but is in a class by itself." Michael G.
Pond, at 257. We ruled, therefore, that the travel expenses payable in
connection with long-term training assignments are limited to those
expense items specifically authorized in 5 U.S.C. Section 4109, and not
otherwise limited by agency proscription. See also Stephen T. Corall,
above.
As we understand it, other than the expenses immediately associated
with the administrative cost of training given at each location, none of
the VA trainees were reimbursed for travel to their training sites. In
this regard, Mr. Wright acknowledges that he was specifically informed
before he was accepted into the training program that all expenses
attendant to his move to Kansas City would have to be borne by him as a
condition to his acceptance into the program. We also note that the VA
Form 5-3918, Intra-Agency Transfer Request, initiated by the personnel
office of the VA Medical Center, Kansas City, on August 2, 1982,
relating to that training, and signed by Mr. Wright on August 4, 1982,
provides in item 15 thereof, that travel and transportation was not
authorized. In view thereof, the expenses claimed by Mr. Wright as
having been incurred incident to his move from Martinez, California, to
Kansas City, Missouri, may not be certified for payment.
Notwithstanding the foregoing, it is our view that the real estate
sales expenses incurred by Mr. Wright and not previously allowed may be
reimbursed.
Paragraphs 2-1.4i and 2-6.1d of the FTR, when read in combination,
generally establish the requirement that in order for an employee to be
reimbursed the expenses of the sale of the residence at his old station,
he must live there at the time of transfer notice and that it is the
place where he regularly commutes to and from work. Notwithstanding
that general requirement, since an employee away from his duty station
on Government business does not effect a change of station during the
pendency of such assignment (52 Comp. Gen. 834 (1973)), we have
recognized exceptions to the "actual residence" rule when a permanent
change of station occurs while an employee is on extended temporary duty
(Frank M. Lindeen, B-188657, December 30, 1977); is constantly in a
travel status with no single, true official duty station (Bill L.
Kenney, B-188706, December 14, 1978); or is performing a long-term
training assignment contemplating a return to his then permanent duty
station upon completion of training (B-164043, May 28, 1968). It is our
view that the principle embodied in those decisions is equally
applicable here. That is, where the employee and his family are not
residing in their residence at the old duty station because of
Government training or travel requirements at the time a permanent
change-of-station move occurs, such residence nonoccupancy does not
preclude reimbursement for the expenses of selling their residence at
the old permanent station upon that subsequent move, so long as all
other conditions of entitlement are met. See also Hughie L. Ratliff,
B-192614, March 7, 1979.
In this regard, we have held that real estate expenses incurred prior
to and in anticipation of a transfer of an employee's official duty
station may be allowed, but only if a travel order is subsequently
issued on the basis of a previously existing administrative intent to
transfer the employee at the time the expenses were incurred. 48 Comp.
Gen. 395 (1968); Joan E. Marci, B-188301, August 16, 1977; and Bernard
J. Silbert, B-202386, September 8, 1981. Compare Edwin C. Hoffman, Jr.,
B-213085, January 16, 1984.
In the present case, Mr. Wright sold his residence in the Martinez,
California, area on August 4, 1983. Although his transfer to El Paso
had a reporting date of September 22, 1983, we were informed that Mr.
Wright was definitely advised of this transfer on or about June 15,
1983. In view of these facts, his expenses for selling his old
residence are properly reimbursable as part of his transfer to El Paso,
subject, of course, to administrative analysis as to the propriety of
the items claimed and the amounts involved.
B-216121, 64 Comp. Gen. 266
Matter of: Stevan C. Little, Sr., February 19, 1985
An employee who upon transfer sold his residence at his former duty
station claims reimbursement for the loan discount or mortgage placement
fee, also known as seller's points, which he paid as a part of the cost
of selling his former residence. The claim may not be paid even though
under Regulation Z, which implements the Federal Truth in Lending Act,
seller's points are no longer included among finance charges, because
reimbursement for points or mortgage discounts as a miscellaneous
expense of a real estate transaction is specifically prohibited by the
Federal Travel Regulations and Volume 2 of the Joint Travel Regulations.
This action is in response to a request for an advance decision as to
whether an employee who sold his residence at his old duty station in
connection with a transfer is entitled to reimbursement of a loan
discount or mortgage placement fee, also known as seller's point, which
he paid as a part of the cost of selling his residence. /1/ As is
specifically provided in current regulations, the employee is not
entitled to reimbursement for a mortgage placement fee, loan discount,
or seller's points.
Mr. Stevan C. Little, Sr., an employee of the Defense Criminal
Investigative Service, Defense Logistics Agency, was transferred from
Philadelphia, Pennsylvania to Hartford, Connecticut, under travel orders
issued May 10, 1983. In connection with the transfer Mr. Little sold
his former residence in Runnemede, New Jersey. In the sales contract
Mr. Little agreed to pay a mortgage placement fee not to exceed $1,230.
The settlement statement lists the fee as a loan discount. Such a fee
or discount is commonly called seller's points.
We have been asked to determine whether such a cost is reimbursable
in light of recent changes to both the travel regulations and the
Federal Reserve System's Regulation Z.
A Federal employee who relocates in connection with a permanent
change of station may, under the provisions of 5 U.S.C. Section 5724a,
be reimbursed for certain real estate expenses incurred in selling his
former residence or purchasing a new residence. This statute is
implemented by the Federal Travel Regulations, Part 2, Chapter 6,
incorp. by ref., 41 C.F.R. 101-7.003 (1983) (FTR). For civilian
employees of the Department of Defense these regulations are reflected
in Volume 2 of the Joint Travel Regulations (2 JTR) which are
substantially identical with the FTR.
Various miscellaneous expenses related to the real estate
transactions for which a transferred employee may be reimbursed are
listed in FTR para. 2-6.2d(1), as amended by General Services
Administration Bulletin FPMR A-40, General Supplement 4 (August 23,
1982), and in 2 JTR para. C14002-1d(1) (Change 208, February 1, 1983),
both of which became effective on October 1, 1982. Nonreimbursable
miscellaneous items of residence transactions are listed in 2 JTR para.
C14002-1d(2), and FTR para. 2-6.2d(2), the latter of which provides in
relevant part:
(2) Nonreimbursable items. Except as otherwise provided in (1)
above, the following items of expense are not reimbursable.
(b) Interest on loans, points, and mortgage discounts;
(e) No fee, cost, charge or expense determined to be part of
the finance charge under the Truth in Lending Act, Title I, Pub.
L. 90-321, and Regulation Z issued in accordance with Pub. L.
90-321 by the Board of Governors of the Federal Reserve System,
unless specifically authorized in (1), above * * *
Under Regulation Z, 12 C.F.R. 226.4(b)(3), points (loan discount
fees) were designated as finance charges and, therefore, have previously
been considered nonreimbursable items of real estate transaction
expenses under FTR para. 2-6.2d(2)(e) (2 JTR para. C14002-1d(2)(5), as
well as FTR para. 2-6.2d(b) (2 JTR para. C14002-1d(2)(2). Robin J.
Zeldin, B-211262, August 12, 1983. However, as Mr. Little points out,
Regulation Z was amended, effective April 1, 1981, to exclude seller's
points from finance charges. 12 C.F.R. 226.4(c)(5) (1983). He,
therefore, asks if the travel regulations have "mischaracterized" a
mortgage discount as a finance charge since Regulation Z was revised.
We recently considered the question of whether seller's points are
reimbursable under the travel regulations since they are no longer
included within the definition of a finance charge under Regulation Z.
We found that the fact that seller's points are no longer considered a
finance charge and are not excluded from reimbursement under FTR para.
2-6.2d(2)(e) has no bearing on the fact that they may not be considered
reimbursable expenses because they are mortgage discounts which are
specifically excluded from reimbursement by FTR para. 2-6.2e(2)(b).
Thus, they are not reimbursable expenses regardless of the change in
Regulation Z. Harvey B. Anderson, B-214277, June 25, 1984.
Accordingly, Mr. Little may not be reimbursed for this cost.
(1) This request for an advance decision was submitted by R. G.
Bordley, Chief, Accounting and Finance Division, Office of the
Comptroller, Headquarters, Defense Logistics Agency, Cameron Station,
Alexandria, Virginia. The request was forwarded by the Per Diem, Travel
and Transportation Allowance Committee and assigned Control No. 84-14.
B-218122, 64 Comp. Gen. 265
Matter of: Riverport Industries, Inc., February 14, 1985
Agency may properly award to "all or none" bidder notwithstanding
invitation for bids provision that award will be by individual items.
Protest that competitor's bid may be mistaken because it seems too
low is dismissed since only the contracting parties may assert rights
and bring forth all necessary evidence to resolve mistake in bid
questions. Moreover, submission of bid considered by another firm as
too low does not constitute a legal basis for precluding award.
Riverport Industries, Inc. (Riverport), protests the Navy's award of
a contract to T.M. Systems, Inc. (TMS), under invitation for bids (IFB)
No. NOO197-85-B-0008 issued by the Naval Ordnance Station, Louisville,
Kentucky. Riverport contends that TMS is nonresponsive because of
Riverport's belief that the IFB precluded the submission of "all or
none" bids. Riverport also believes that TMS may have made a mistake in
its bid because TMS's overall bid seems much too low.
We summarily dismiss the protest for failure to state a valid basis
for protest under section 21.3(f) of our Bid Protest Regulations. 49
Fed. Reg. 49,417, 49,421 (1984) (to be codified at 4 C.F.R. Section
21.3(f)).
Riverport reports that the IFB contains a provision which reads:
"Note: Award will be by individual items." Riverport argues that the
above provision requires the Navy to award to the lowest bidder on each
item. We have held, however, that similar phrases, "award will be made
on lot basis only" and "award will be made on an item-by-item * * *
basis," did not preclude the award to bidders who bid on an "all or
none" or combination basis. The Interior Steel Equipment Co., B-209016,
Feb. 8, 1983, 83-1 C.P.D. Paragraph 139; 42 Comp. Gen. 415 at 417
(1963). For this reason, there is no basis for concluding that TMS's
"all or none" bid was nonresponsible to the IFB.
Regarding Riverport's contention that TMS may have made a mistake in
its bid, we have held that only the contracting parties -- the
government and the firm in line for award -- are in a position to assert
rights and bring forth all necessary evidence to resolve mistake in bid
questions. Bill Conklin Associates, Inc., B-210927, Aug. 8, 1983, 83-2
C.P.D. Paragraph 177. Moreover, consideration of a protest such as this
in effect would necessitate that we judge whether the low bid appears
unreasonably low and, if it does, whether the government must reject it.
We have held, however, that the submission of a bid considered by a
competitor as too low does not constitute a legal basis for precluding
award. Bill Conklin Associates, Inc., B-210927, supra.
B-217626, 64 Comp. Gen. 263
To the Chairman, Subcommittee on Commerce, Justice, State, and the
Judiciary, Committee on Appropriations, United States Senate, February
14, 1985
Fiscal Year 1985 appropriation to Board of International Broadcasting
provided that not to exceed $15,000 was available for consulting fees
and no such fees could be paid after January 1, 1985, if Director's
position was vacant. The phrase "not to exceed" sets maximum amount
that can be expended in fiscal year 1985 whether or not Director's
position is filled.
This is in response to your joint letter with Senator Ernest F.
Hollings dated January 18, 1985, asking us to review a letter to you
dated December 18, 1984, from Mr. Frank Shakespeare, Chairman, Board of
International Broadcasting. Mr. Shakespeare concludes that the Board's
appropriation for fiscal year 1985 does not necessarily restrict the
Board to a maximum expenditure of $15,000 for engineering consulting
fees. We disagree and conclude that the appropriation language does
restrict expenditures to a maximum of $15,000 during fiscal year 1985.
Under the Department of State and Related Agencies Appropriation Act,
1985, Pub. L. No. 98-411, 98 Stat. 1564 (1984), the Board received its
annual appropriation. The Act states:
For expenses of the Board for International Broadcasting,
including grants to RFE/RL, Inc., $97,498,000, * * * Provided That
not to exceed $15,000 shall be available for engineering
consultant fees, and no such fees shall be paid after January 1,
1985 at any time the Board's Director of Engineering position is
vacant, 98 Stat. 1568.
As you indicate, it is the Committee's position that under no
conditions may the Board expend more than $15,000 for engineering
consultants in fiscal year 1985.
The Board interprets the provision as limiting it to a maximum
expenditure of $15,000 only until the Director has been appointed.
Specifically, the Board states:
We understand that the $15,000 maximum for "engineering
consultant fees" specified in the 1985 Appropriations measure
restricts our ability to make expenditures in excess of that
amount only for as long as the Director of Engineering position
remains vacant. We further understand that when the position has
been duly filled by either a regular or acting appointee the BIB
(Board) and the Radios (RFE/RL, Inc.) will then be legally able to
spend in excess of that amount.
The Senate Report prepared by the Committee on Appropriations
reflects that the language regarding consulting fees for engineering
services was added because the Committee was concerned about the
expenditures made by the Board for consulting fees since August 1980,
the date the position of Director of Engineering became vacant. S.
Rept. No. 514, 98th Cong. 2d Sess. 73 (1984). The Committee therefore,
"include(d) bill language to limit expenditures by BIB for engineering
consultant fees contingent upon filling the position of Director of
Engineering by January 1, 1985," Id. The Committee recognized that the
Board might desire to abolish the position of Director of Engineering
and so stated. The Committee, however, stressed that it "(would) not
allow more than $15,000 to be spent in 1985 for engineering consultant
fees," Id.
We consider the language of the appropriation as clearly and
concisely accomplishing what the Committee intended. Specifically the
limiting language, "not to exceed $15,000," is susceptible of but one
meaning which is that the Board may not expend more than $15,000 for
engineering consultant fees during fiscal year 1985 and any expenditures
in excess of that amount would be unlawful. See A-79741, August 17,
1936; Cf. 36 Comp. Gen. 526, 528 (1957) (an earmark of $18 million for
the construction of a ship sets the maximum amount which is available
for the ship).
The language in the appropriation for the Board providing that no
engineering consulting fees should be paid after January 1, 1985, if the
Director's position is vacant is merely a condition which must be met if
the $15,000 is to be spent after January 1, 1985. That is, from October
1, 1984 to December 31, 1984, the Board could expend funds for
engineering consultant services whether or not the Director's position
was filled; but, after January 1, 1985, the Board may not expend any
funds for engineering consultant services unless the Director's position
is filled. It is to be emphasized, however, that the total expenditure
for the entire fiscal year, whether or not the Director's position is
filled, is limited to $15,000.
Unless requested otherwise by your office, we will make this letter
available to the public 30 days from today.
B-216417, 64 Comp. Gen. 260
Matter of: Wayne H. Coloney Co. Inc., February 12, 1985
General Accounting Office (GAO) will not disturb determination and
findings justifying negotiation for purchase of mobilization base item,
since under 10 U.S.C. 2304(a)(16), determination is final. However, GAO
will consider whether findings support the determination. In addition,
determination of itself does not justify sole source award when defense
agency's immediate requirements apparently can be met by other
suppliers.
GAO will deny protest against sole source award for mobilization base
item when it is based on assessment of defense agency's requirements,
amount needed to support producer's capability, and other factors
particularly within the agency's expertise.
Wayne H. Coloney Company, Inc., protests the proposed sole source
award of 10,073 30-millimeter ammunition shipping and storage containers
designated CNU-332A/E to Lanson Industries, Inc. The United States Army
Armament, Munitions and Chemical Command, Rock Island, Illinois, issued
the solicitation, No. DAAA09-84-R-0483, on July 27, 1984. Coloney also
protests the proposed sole source award of an additional 11,953 units
(for a total of 22,026) to Lanson under a September 18, 1984, amendment
to the solicitation.
We deny the protest.
The sole-source solicitation was issued to Lanson pursuant to 10
U.S.C. 2304(a)(16) (1982), which permits negotiations where the
cognizant Secretary:
Determines that (A) it is in the interest of national defense
to have a plant, mine, or other facility, or a producer,
manufacturer, or other supplier, available for furnishing property
or services in case of a national emergency; or (B) the interest
of industrial mobilization in case of such an emergency, or the
interest of national defense is maintaining active engineering,
research, and development, would otherwise be subserved.
In this case, an Assistant Secretary of the Army executed a class
determination and findings (D&F) authorizing negotiation for a number of
ammunition items and associated items "to maintain, establish or expand
production capacity for ammunition." The D&F stated that because of the
complexity of these items, sources of supply are limited. The Army
believes that in the interest of national defense, these sources should
be kept available. In addition, according to the D&F, in the event of a
national emergency, requirements for these supplies will substantially
exceed the production capacity of all companies. Therefore, the Army
concludes, in addition to maintaining the manufacturing facilities of
all companies, it is essential that their engineering and production
skills be maintained in order to be available for training other
companies in the manufacture of the supplies in question.
In the appendices to the D&F, Lanson is identified as the sole
authorized mobilization base producer of the ammunition containers for a
quantity in excess of the 22,026 being procured here. In the report on
the protest, the contracting officer indicates that there are
insufficient requirements to justify expansion of the mobilization base
to more than one producer.
The mobilization base producer program encompasses planning with
possible industrial producers of critical items that the Department of
Defense (DOD) will need for mobilization in preparing for war or other
national emergencies so as to assure a capability for sustained
production of such essential military items. See American Air Filter
Company, Inc., 55 Comp. Gen. 703, 705-706 (1976), 76-1 CPD Paragraph 73.
The results of this planning are ordinarily reflected on an approved DD
Form 1519, "DOD Industrial Preparedness Program Production Planning
Schedule," which is essentially an agreement between the government and
the mobilization base producer regarding what is needed to sustain the
producer's production capability. See American Air Filter Company,
Inc., 55 Comp. Gen. supra, at 706; True Machine Co., B-215885, Jan. 4,
1985, 85-1 CPD Paragraph 18. Before a DD Form 1519 is executed,
government production planning officials survey the facilities in
question and negotiate with plant management the production planning
schedule set forth on the DD Form 1519. See True Machine Co., B-215885,
supra at 3. After agreement is reached on a DD Form 1519, a firm then
becomes a mobilization base producer. American Air Filter Company,
Inc., 55 Comp. Gen. supra; True Machine Co., B-215885, supra.
Coloney protests that the designation of Lanson as the sole
mobilization base producer of this item is arbitrary and capricious
because Coloney also can and has produced this item and because the
quantity being procured from Lanson allegedly is for more than that
needed to keep a mobilization base producer viable. In this regard,
Coloney asserts that only 2,000 units could maintain its own production
capability, and that, based upon Coloney's intimate knowledge of the
facilities and capabilities of Lanson (a previous subcontractor to
Coloney, this same quantity is all that would be necessary to support
Lanson's production capability.
We have previously found that sole source awards may properly be made
under the authority of 10 U.S.C. Section 2304(a)(16). See, e.g., Norton
Company, Safety Products Division, 60 Comp. Gen. 341, 351 (1981), 81-1
CPD Paragraph 250 and cases cited therein. As we stated in National
Presto Industries Inc., B-195679, Dec. 19, 1979, 79-2 CPD Paragraph 418
at 4, in a procurement negotiated under this section, the normal concern
with ensuring maximum competition is secondary to the needs of
industrial mobilization. The award of a contract for current needs
becomes not only an end in itself, but a means to another goal -- the
creation and/or maintenance of mobilization capacity. For this reason,
contracts are awarded to particular plants or producers to create or
maintain their readiness to produce essential military supplies in the
future.
Further, in reviewing the propriety of a sole source award under this
section, our Office will not disturb the findings justifying the
determination to negotiate, since they are made final by statute. 10
U.S.C. Section 2310(b) (1982); Norton Co., 60 Comp. Gen. supra, at
351-352, 81-1 CPD Paragraph 250 at 18. However, we will consider
whether the findings of fact legally support both the determination to
negotiate and the determination to sole source the requirement. Id.
We have held that 10 U.S.C. Section 2304(a)(16) does not, as a matter
of course, justify a procurement restricted to a single source when it
appears that immediate mobilization base requirements can be met by
other suppliers. Saft America, Inc., B-193759, July 12, 1979, 79-2 CPD
Paragraph 28. Moreover, in the case of a sole source, the D&Fshould
state all findings necessary to support the designated source.
Here, we find that although the D&F clearly justifies negotiation, it
does not, in and of itself, make sufficient factual findings to support
a sole source award. In this regard, the D&F designates only Lanson as
a mobilization base producer for this item and designates the number of
items which can be procured under authority of 10 U.S.C. Section
2304(a)(16). There is no specific finding in the D&F which indicates
that only Lanson has the requisite exclusive capability or any other
specific findings why there is only one mobilization base producer for
this item. Further, the D&F provides no information or findings as to
the derivation of the number of items to be procured under this
authority. Finally, the D&F does not indicate that it is based on any
particular review of Lanson's production capability or a DD Form 1519.
Although we think the D&F should have been more precise so as to
specifically justify the sole source award to Lanson, we note that
neither Lanson nor the Army contracting officer believes that Army
requirements do justify having more than one mobilization base producer.
Lanson states that the authorized amount needed to support its
production capabilities was the subject of a DD Form 1519 and various
reviews by cognizant DOD activities, all of which determined that a
quantity of 2,000 units is far less than necessary to support Lanson's
mobilization capabilities. Further, the D&F, justifying Lanson as the
sole mobilization base producer for a quantity in excess of the 22,026
ammunition containers being procured here, is presumably based on the
Lanson DD 1519 assessment of capability and production capacity as well
as overall military and industry factors, particularly within the Army's
expertise. The protester's assertions, on the other hand, are based on
its own more limited experience with Lanson as a subcontractor for the
same item.
Under these circumstances, we find that neither the capabilities of
Coloney nor the requirement for maximizing competition require the Army
to procure the ammunition containers competitively. As we stated in
national Presto, B-195679, supra, the DOD is responsible for developing
an industrial preparedness program that will ensure the nation's ability
to respond to a military emergency. In implementing this goal, the
department must continually reassess current and future weaponry needs
and decide which producers are in the best position to rapidly expand
production if necessary. The decision as to which and how many
producers of a particular item must be kept in active production is a
complex judgment which must be left to the discretion of the military
agencies. We would only overturn such a decision if the evidence
convincingly demonstrated that the agency had abused its discretion. We
cannot find that the Army abuse its discretion in this case.
Coloney's protest is denied.
B-218048.2, 64 Comp. Gen. 259
Matter of: International Development Institute, February 11, 1985
General Accounting Office (GAO) will not reopen a case which was
closed because the protester did not send an indication of its continued
interest in the protest within 10 working days after receiving the
agency report where the protester's alleged lack of proper notification
of requirement for a statement of continued interest resulted from the
protester's failure to advise GAO of change of corporate official
representing the protester in the proceedings.
International Development Institute requests that we reopen the file
on its protest concerning the award of a contract by the Agency for
International Development under solicitation No. AN-84-002. We closed
our file because the protester did not send a timely reply to our
request for a statement of its continued interest in the protest after
receipt of the agency report on the matter. We decline to reopen the
case.
International states that our letter was "mis-sent" because it was
addressed to an employee who was no longer employed by International at
the time our request for comments was mailed. (Apparently our letter
was treated as personal mail of the former employee and was not opened
by representatives of International.) Our records indicate, however,
that our letter was correctly addressed to the employee of International
who filed the initial protest to our Office. Further, we were never
thereafter advised of any change of the corporate official responsible
for representing the protester in this proceeding. We therefore believe
that the responsibility for the failure of appropriate corporate
officials to be informed of our notice solely rests with the protester.
In any event, our Bid Protest Procedures clearly indicate that a
protester must file comments on the agency report with our Office within
10 working days after receipt of the report or face dismissal of its
protest. See 4 C.F.R. Section 21.3(d) (1984). Since our procedures are
published in the Federal Register, protesters are charged with
constructive notice of their contents. Custom Caterers, B-212635, Sept.
6, 1983, 83-2 CPD Paragraph 306. Therefore, even if International did
not receive our letter at all, it was on notice of its obligation to
file comments with our Office, or otherwise express continued interest
in the protest, and it failed to comply with this obligation.
Although our decision may seem harsh to International, we regard bid
protests as serious matters which require effective and equitable
procedural standards both so that parties have a fair opportunity to
present their cases and so that protests can be resolved in a reasonably
speedy manner. See Edron, Inc. -- Reconsideration, B-207353.2, Sept. 8,
1982, 82-2 CPD Paragraph 207. Our procedures are intended to provide
for expeditious consideration of objections to procurement actions
without unduly disrupting the government's procurement process.
Reopening the file in International's protest at this time would be
inconsistent with this purpose. Therefore, the fill will remain closed.
B-218085, 64 Comp. Gen. 258
Matter of: Isratex, Inc., February 8, 1985
Protest that a former employee of the protester participated in a
procurement on behalf of both the protester and a competitor at the same
time is dismissed since the allegation involves either a dispute between
private parties, an issue to be considered by the contracting officer in
determining the awardee's responsibility, or a matter for the Department
of Justice.
Isratex, Inc. protests the award of a contract to Lakewin, Inc. under
solicitation No. DLA100-85-B-0029, issued by the Defense Personnel
Support Center, Defense Logistics Agency, Philadelphia, Pennsylvania.
Isratex complains that one of its former employees who was involved in
preparing the firm's bid was at the same time competing in this
procurement on behalf of Lakewin. Isratex says this violates the
competitive bidding system, but does not specify further the basis for
its complaint.
To the extent that this protest involves an allegation that the
former employee improperly used information obtained from Isartex in
preparing the Lakewin bid, this is essentially a dispute between private
parties which this Office will not decide. See Genasys Corporation,
B-213830, Jan. 23, 1984, CPD Paragraph 102. Further, to the extent that
Isratex is alleging a possible violation of the solicitation's
Certificate of Independent Price Determination, see the Federal
Acquisition Regulation, 48 C.F.R. Section 52.203-2 (1984) -- a provision
designed to prevent collusive bidding that would restrict competition --
this allegation raises an issue that is in the first instance a matter
to be considered by the contracting officer in the context of a
responsibility determination, Keystone Elevator Company, Inc., B-215540,
July 20, 1984, 84-2 CPD Paragraph 72, and could be a matter also for the
Department of Justice. Portland Mailing Services, Inc., B-213321, Nov.
7, 1983, 83-2 CPD Paragraph 535. It is not a question for this Office
to decide.
Under section 21.3(f) of our Bid Protest Regulations, 49 Fed. Reg.
49417 (1984) (to be codified at 4 C.F.R. Part 21), we will dismiss a
protest without requiring the submission of a report from the
contracting agency when the issues raised are not for consideration by
this Office. We dismiss this protest.
B-214634, 64 Comp. Gen. 245
Matter of: Technical Services Corporation, February 7, 1985
Protest against assigning four times as many evaluation points to
technical factors as to cost factors is denied where protester fails to
show that agency's conclusion that the higher cost of a technically
superior offer would be more than offset by the increased savings
expected from such an offer lacked a reasonable basis.
Protest that agency conducted discussions with offerors, thus
rendering the award on the basis of initial proposals improper, is
denied where contracting agency either withdrew request to offerors for
additional information before they had an opportunity to respond or
protester was not competitively prejudiced by any discussions it may
have had with agency.
Protest that agency improperly considered whether personnel proposed
by offerors had experience in breakout reviews when evaluating proposals
in procurement for breakout reviews is denied where solicitation listed
personnel qualifications as an evaluation criterion and requested
offerors to submit in this regard information concerning the experience
of proposed personnel. Although solicitation did not identify
experience with breakout reviews as an evaluation criterion, agencies
need not identify the various aspects of stated evaluation criteria
which may be taken into account if, as here, such aspects are reasonably
related to the stated criteria.
Protest that in evaluating proposals agency improperly considered
whether proposals indicated experience with certain types of spare parts
which the agency expected to ask the contractor to evaluate under any
contract is denied where solicitation listed personnel qualifications as
an evaluation criterion and requested offerors to submit in this regard
information about the experience of the proposed personnel and where the
solicitation also set forth the types of spare parts expected to be
evaluated under the contract.
Protest that agency misled offerors by stating in the solicitation
that cost was an important factor which should not be ignored when
undisclosed evaluation scheme assigned only 20 percent of available
evaluation points to cost and when 25 percent was assigned to only one
of the technical factors is denied. Solicitation need only advise
offerors of the broad scheme of scoring to be employed and give
reasonably definite information concerning the relative importance of
evaluation factors. Here, solicitation listed the technical factors in
descending order of relative importance and indicated that cost, while
significant, nevertheless was of secondary importance to the technical
factors.
In reviewing an agency's technical evaluation General Accounting
Office will not evaluate the proposal de novo, but will instead examine
the evaluation to ensure that it had a reasonable basis. Protest
against agency evaluation is denied where the protester failed to carry
its burden of showing that the evaluation was unreasonable.
Protester fails to prove bias against it in evaluation of proposals
where it advances no more than supposition in support of the allegation
and where the evaluations were either reasonable, or if unreasonable,
any errors were in the protestor's favor and protester thereby suffered
no competitive prejudice as a result.
Where the solicitation, in describing the relative importance of cost
vis-a-vis technical factors, in effect notified offerors that the agency
had predetermined the trade-off between technical merit and price, then
the evaluation point scores were to be controlling unless selection
officials determined that, notwithstanding a difference in the technical
scores of the proposals, there were no significant differences in their
technical merit, in which event price would become the deciding factor.
Protest that agency made award in a negotiated small business
set-aside without allowing offerors at least 5 working days in which to
protest size status of apparent successful offeror is denied where
contracting officer determined that award must be made without delay in
order to protect the public interest and protester does not allege that
awardee was other than a small business.
Agency's failure to submit an administrative report responding to the
protest in a timely manner, i.e., within 25 working days, does not
render invalid the otherwise proper award.
Technical Services Corporation (TSC) protests the award of
cost-reimbursement-plus-fixed-fee contracts to DHD, Inc., and Resource
Consultants, Inc. (RCI), under request for proposals (RFP) No.
N00393-84-R-1422, issued by the Department of the Navy for in-depth
technical reviews (full screen breakout reviews) of the possibility of
procuring on a competitive basis certain aeronautical spare parts. TSC
alleges that the awards were improperly made on the basis of initial
proposals, without affording offerors an opportunity to submit best and
final offers, and under evaluation criteria other than those set forth
in the solicitation. TSC also challenges the technical evaluation of
the proposals and the cost-versus-technical tradeoff made by the Navy.
We deny the protest.
The solicitation required the contractor selected by the Navy to
provide a full screen breakout review for aeronautical spare parts
selected by the Navy's Aviation Supply Office (ASO). Full screen
reviews, as described in the solicitation, include a determination as to
whether the available technical data on a spare part is sufficient to
permit its competitive procurement, a determination as to the economic
feasibility of completing an inadequate data package, the completion of
the data package where practicable, and the consideration of the cost
effectiveness of undertaking a breakout or competitive procurement of
the part. In addition, the contractor was required to review the
breakout screening procedures being used by ASO and to determine whether
categories of items managed by ASO should be removed from competitive
procurement.
The amended RFP divided the work to be performed into two lots. Each
lot consisted of an anticipated level of effort of 49,244 man-hours of
direct labor during a base period from the date of award through
September 30, 1984, and a further 49,244 man-hours under an option to
extend the contract an additional 12 months. Lot I was to be awarded on
an unrestricted basis, Lot II was designated a 100-percent small
business set-aside.
The solicitation provided that award would be made to that
responsible offeror whose offer was most advantageous to the government,
price and other factors considered. The RFP listed in descending order
of relative importance Personnel Qualifications, Technical Approach,
Management Approach and Corporate Experience as the criteria to be
applied in evaluating the technical proposals. The precise numerical
weight assigned to each evaluation criterion was not disclosed. As for
cost, the solicitation indicated that:
The evaluation of the contractor's costing/fee proposals shall
be of secondary importance to the evaluation of technical
proposals in making the award under this solicitation.
Although cost is of secondary importance, it is an important
factor and should not be ignored. The degree of its importance
will increase with the degree of equality of the proposal in
relation to the other factors on which selection is based. * * *
Under the evaluation scheme adopted by the Navy, proposals could
receive a maximum of 80 points for technical factors, including 25 for
the qualifications of the proposed personnel, 23 for the technical
approach, 17 for the management approach, and 15 for corporate
experience. An additional 20 points were assigned to cost.
The Navy received five proposals for Lot I and four for Lot II.
Although TSC submitted proposals for each lot, as well as an alternate
proposal for a combined award of both lots, and submitted resumes for
personnel sufficient to perform the work under both, it failed to
indicate which personnel would work on Lot I and which would work on Lot
II. Accordingly, by letter of September 7, 1983, the contracting
officer requested TSC, "(f)or the purpose of clarifying the technical
proposal," to specify which personnel would be assigned to which lot.
TSC was "required to respond" by February 8.
By letter of February 8, TSC designated the personnel among those for
which it had submitted resumes which would be assigned, if TSC received
a contract for either lot. TSC did not allocate its personnel between
the two lots, but instead assigned the same personnel to Lot I as it
assigned to Lot II. Nevertheless, the contracting officer determined
that TSC should be allowed to assign the same personnel to both lots
because a small business such as TSC might not be awarded Lot I, which
was not a small business set-aside.
However, both TSC and DHD, which had likewise furnished the same
resumes for Lot II as were furnished for Lot I, submitted alternate
proposals based upon a combined award of both . lots. Accordingly, on
February 14, the contracting officer wrote DHD and TSC to inform them
that:
In the event you desire to be considered for an award for both
lots, it is required that you allocate your total number of
personnel over Lots I and II. If you do not wish to be considered
for award of both lots, then your proposals will be evaluated as
submitted.
On the same day that the February 14 letter was made available for
pickup by TSC and DHD, the Navy telephoned TSC to ask that it not
respond to the letter yet. On the following day contracting officials
called TSC to withdraw the letter, instructing TSC to ignore it and
rebuffing TSC's attempt to explain its proposal. TSC was informed that
"in order not to prejudice anyone" the question raised in the letter
would be deferred until technical discussions. We understand that the
letter to DHD also was withdrawn.
The Navy in fact found that it had insufficient time to conduct
subsequent discussions with offerors. A goal of competing 25 percent of
purchases made for the fiscal year ending September 30 had been
established. As of February 24, ASO had a backlog of 5,850 full screen
breakout reviews requiring completion prior to May 1, with an additional
5,500 required to be completed by September 30. Since the contract was
expected to account for one-third of the total full screen reviews, the
Navy determined that reaching the goals for competitive procurements
would be seriously jeopardized if awrads were not made by March 1.
Accordingly, the Navy made award based upon an evaluation of the initial
proposals.
As indicated below, DHD's proposals received the highest point scores
for both lots while RCI's proposals received the second highest scores.
After satisfying himself as to the reasonableness of the prices and
costs proposed by DHD and determining that the greater cost of its
proposal reflected a technical superiority which would likely result in
offsetting cost savings, the contracting officer made award to DHD for
Lot I. Since DHD proposed to use the same personnel for Lot II as were
proposed for Lot I, and since the urgency of the procurement precluded
further negotiations, the contracting officer determined that DHD's
proposal for Lot II was no longer acceptable and accordingly made award
to RCI for that lot. TSC thereupon filed this protest with our Office.
TSC characterizes the information requested in the Navy's February 7
and 14 letters as essential to any determination of the acceptability of
TSC's proposals. It contends that substantive written and oral
discussions occurred between the Navy and TSC and that the Navy's
subsequent failure to request best and final offers and the making of
award on the basis of initial proposals was, given such discussions,
therefore improper.
Award may be made on the basis of initial proposals, without
discussions, where it can be clearly demonstrated from the existence of
adequate competition that acceptance of the most favorable initial
proposal without discussions would result in a fair and reasonable
price, provided that the solicitation advised offerors of the
possibility that award might be made without discussions, and provided
that award is in fact made without discussions. Discussions occur if an
offeror is afforded an opportunity to revise or modify its proposal or
when the information requested and provided is essential for determining
the acceptability of the proposal. Clarifications are inquiries to
eliminate minor uncertainties or irregularities. While an agency may
request "clarifications" when award is made on the basis of initial
proposals, when it conducts "discussions" it must afford all offerors in
the competitive range the opportunity to submit revised proposals. See
Emerson Electric Co., B-213382, Feb. 23, 1984, 84-1 C.P.D. Paragraph
233; see also Alchemy, Inc., B-207338, June 8, 1983, 83-1 C.P.D.
Paragraph 621 (discussions versus clarifications); Defense Acquisition
Regulation (DAR) Section 3-805.1, reprinted in 32 C.F.R. pts. 1-39
(1983).
We note that although contracting officials characterized the
information they were seeking in the February 7 letter as merely a
clarification of TSC's proposals, the Navy admits that the contracting
officer now believes that TSC was given an opportunity to revise its
proposals and that, therefore, the letter and TSC's response could be
viewed as constituting discussions. Nevertheless, whether discussions
or clarification then occurred, we fail to see how TSC suffered any
competitive prejudice from the Navy's action. Cf. Lou Ana Foods, Inc.
B-209540, Mar. 21, 1983, 83-1 C.P.D. Paragraph 278; ABA
Electromechanical Systems, Inc. B-188735, Nov. 28, 1977, 77-2 C.P.D.
Paragraph 411. The solicitation required offerors to submit resumes of
the personnel with which they intended to perform the contract.
Offerors were instructed to detail the experience and availability of
the personnel and to identify the solicitation requirement to which they
related. By identifying which employees would work on which lot, TSC
did no more than address the requirements of the solicitation.
As for the February 14 letters, the Navy withdrew its request for
information before TSC and DHD had an opportunity to respond and
contracting officials thereafter rebuffed TSC's attempt to supply the
information. Further, not only do we question whether discussions
occurred in these circumstances, but, even if the Navy had considered
the information TSC had attempted to convey, we again see no prejudice
to TSC. The urgency of the procurement prevented consideration of TSC's
alternate proposal, in regards to which the information had been
requested.
TSC argues that, given the type of work required, contracting
officials abused their discretion in assigning only 20 percent of the
available evaluation points to cost.
Selection officials are relatively free to determine the manner in
which proposals will be evaluated so long as the method chosen provides
a rational basis for any source selection and the actual evaluation
comports with the established evaluation criteria stated in the
solicitation. STEAC, Inc., supra, 62 Comp. Gen. at 586, 83-2 C.P.D.
Paragraph 121 at 9-10. TSC has failed to show that the Navy lacked a
rational basis for considering technical factors to be four times as
important as cost indicated above. The Navy has concluded that the
higher cost of a technically superior proposal can be more than offset
by the increased savings to be realized from award on that proposal
since the increased level of production and higher quality of reviews
expected from a technically superior offeror would lead to a larger
number of cost-saving competitive procurements.
TSC alleges that contracting officials in their evaluation of
proposals considered evaluation criteria other than those set forth in
the solicitation.
The RFP listed "Personnel Qualifications" among the evaluation
criteria and required in this regard that technical proposals address:
Experience: The degree to which the experience cited in the
resumes submitted satisfy the minimum experience identified in
Section C for the two levels of Equipment Specialists and
Engineers to be made available.
Initial Availability: the contractor should have available
sufficient Equipment Specialist and Engineer personnel who are
qualified to perform the task at the time of contract award.
The evaluation submitted by the technical evaluation team indicated
that:
The major grading differences were in the critical areas of
personnel experience and availability * * * Personnel experience
was rated based on SOW (statement of work) minimum requirements
including direct breakout and Inventory Control Point (ICP)
experience. In addition to educational requirements and a general
technical background, it is essential that direct breakout and/or
ICP experience be documented for a grade of excellent. Due to the
size, scope and short duration of the contract, a grade of
excellent for personnel availability equates to fully qualified
personnel documented to be available at time of contract award.
Personnel meeting minimum SOW requirements, but with little
breakout/ICP experience were not considered fully "qualified to
perform" and could not be rated as excellent.
DHD's technical proposals were rated as excellent in regards to the
qualifications of the personnel it proposed and received the maximum of
25 evaluation points for this category. RCI's proposals were considered
"good" in this regard and received 19.16 points.
On the other hand, although TSC's proposals were rated as "excellent"
in regards to technical approach, management approach and corporate
experience, the qualifications of the personnel it proposed were
described as only "average" and its proposals given only 11.25 points
for this category. The evaluation team explained that its evaluation
was based upon two factors:
(a) Personnel Experience -- Average
TSC personnel are rated as average because 50 percent of the
junior equipment specialist lack direct breakout experience.
Additionally, none of the onsite management or supervisory
personnel have ICP experience and breakout experience is rare.
The four commodity managers (excellent organization) lack breakout
experience, and although very qualified supervisors and
technicians, they will need much training in order to be effective
and innovative in the breakout arena. The majority of the senior
ES's (equipment specialists) are rated good or excellent.
(b) Personnel Availability -- Average
It is extremely difficult to tell when the TSC people will be
available for work. The management staff and key personnel should
be available immediately but full operations may take three weeks.
With the lack of direct ICP and or breakout experience this
workforce will not be qualified to perform the task at the
beginning of the contract as directed in the SOW.
TSC argues that consideration of its breakout experience was improper
because that subfactor was not mentioned in the soliciation.
While agencies are required to identify the major evaluation factors
applicable to a procurement, they need not explicitly identify the
various aspects of each which may be taken into account, provided that
such aspects are reasonably related to the stated criteria. See
Information Management, Inc., B-212358, Jan. 17, 1984, 84-1 C.P.D.
Paragraph 76. The solicitation listed personnel qualifications as an
evaluation criterion and requested offerors to submit in this regard
information concerning the experience of the personnel with which they
proposed to perform breakout reviews. Whether that experience was in
performing breakout reviews, the very object of the procurement, was
reasonably related to the experience and qualifications of the personnel
proposed and thus properly considered by the Navy. United Food
Services, Inc., B-211117, Oct. 24, 1983, 83-2 C.P.D. Paragraph 476;
Genasys Corp., 56 Comp. Gen. 835 (1977), 77-2 C.P.D. Paragraph 60.
TSC likewise argues that consideration of Inventory Control Point
(ICP) experience was improper since ICP experience was not listed as an
evaluation criterion.
The Navy indicates that the phrase as used by the evaluation team
referred to "experience relatable to data review for the type of
material ASO buys (as an Inventory Control Point) * * * ." The
solicitation identifies the type of material for which ASO will request
breakout reviews. Whether the experience of the proposed personnel
related to data review for such material was reasonably related to the
stated evaluation criteria and thus properly considered by the Navy.
TSC further contends that the solicitation failed to inform potential
offerors of the true relationship between cost and technical factors,
arguing that describing cost as "an important factor * * * (which should
not be ignored" was misleading when the Navy had in fact only assigned
20 percent of the available evaluation points to cost and when 25
percent of the available points were assigned to personnel
qualifications, only one of several technical factors.
Although a solicitation must advise offerors of the broad scheme of
scoring to be employed and give reasonably definite information
concerning the relative importance of the evaluation factors, the
precise numerical weight to be used in evaluation need not be disclosed.
See Bendix Corp., B-208184, Sept. 16, 1983, 83-2 C.P.D. Paragraph 332.
Here, the solicitation indicated the relative importance of the
evaluation factors by listing the technical factors in descending order
of relative importance and by indicating that cost was of secondary
importance to the technical factors. As for the warning that cost was
an important factor which should not be ignored, 20 percent is a
significant percentage, and such a warning cannot reasonably be
interpreted as a representation that cost will necessarily be allocated
more than 20 percent of the available points where the solicitation also
cautioned that cost was of secondary importance. Further, we are aware
of no requirement that under these circumstances the solicitation must
reveal the relative weight accorded cost vis-a-vis each individual
technical factor, as opposed to merely informing offerors of its
relative weight vis-a-vis the technical factors as a whole.
Not only does TSC challenge the Navy's selection and the adequacy of
its disclosure of evaluation criteria, it also challenges the
application of those criteria.
TSC initially objects to the technical evaluation team penalizing
TSC's technical proposals for allegedly not indicating that personnel
would be immediately available upon award of the contract. TSC denies
that the solicitation imposed any requirement that all of TSC's proposed
personnel be available on the first day of the contract, pointing to the
language in paragraph L-1281, "STAFFING LEVELS," of the solicitation
which warns that:
It is understood and agreed that the rate of manhours per month
may fluctuate in pursuit of ASO's technical objective provided
such fluctuation does not result in the utilization of the total
manhours of effort prior to the expiration of the term hereof.
All personnel may not be required for actual performance for
months after award of contract. The Government will not reimburse
the contractor for any personnel until such personnel are actually
performing under this contract.
TSC also indicates that it was informed by contracting officials that
the government would only reimburse the contractor for personnel
effectively and productively employed. TSC interprets the above as
recognition that all of the proposed personnel could not be effectively
employed on the first day of the contract period.
TSC finds corroboration for that conclusion in paragraph No. 4.0,
"Work Site," which, as amended, provides that:
This contract shall be performed within (15) fifteen miles of
the Aviation Supply Office Compound. If the contractor is
required to lease a facility within this area, rental costs shall
be reimbursed in accordance with DAR 15-205.34.
TSC contends that this provision clearly envisions the possibility
that an awardee might have to lease new facilities in order to comply
and maintains that "it would be completely irrational to employ a total
work force prior to establishment of a work site."
In any case, argues TSC, it in fact satisfied any requirement for
immediate availability since it submitted resumes indicating that the
proposed employees were immediately available.
The Navy, on the other hand, cites the description of initial
availability in the solicitation, that the "contractor should have
available sufficient * * * personnel * * * to perform the task at the
time of contract award," as evidence that the solicitation required the
contractor to have his workforce available and ready to work on the
first day of the contract. The Navy explains that TSC's proposals were
penalized for failing to meet this requirement because TSC proposed a
30-day startup or phase-in plan according to which TSC would only be
ready "to accept initial data packages at the beginning of the third
week after contract award" and the proposed buildup of personnel would
continue into the fourth week after contract award.
The solicitation clearly stated that the contractor should have
available at the time of contract award the personnel to perform the
work required under the solicitation -- i.e., to accept data relevant to
certain spare parts selected by ASO and to review the possibility of
procuring such parts competitively. We agree with the Navy in viewing
clause L-1281 as merely a warning that the government would only pay the
contractor for personnel productively employed and not as releasing the
contractor from the requirement of immediate availability. In effect,
the Navy required the contractor to bear the risk of any fluctuations in
the Navy's needs, forcing the contractor to have available sufficient
personnel to meet peak demand on day one of the contract, but denying
the contractor reimbursement if such personnel were in fact not needed.
In reviewing an agency's technical evaluation, we will not evaluate
the proposal de novo, but will instead only examine the evaluation to
ensure that it had a reasonable basis. In addition, the protester bears
the burden of showing that the agency's evaluation was unreasonable.
Essex Electro Engineers, Inc.; ACL-Filco Corp. B-211053.2, B-211053.3,
Jan. 17, 1984, 84-1 C.P.D. Paragraph 74.
TSC has failed to demonstrate that the Navy was unreasonable in
determining that TSC's proposal did not meet the requirement of
immediate availability as defined in the solicitation. While the
personnel proposed by TSC may have bpen immediately available to TSC, as
indicated on the resumes, nothing in TSC's proposal indicates that they
were available at the time of contract award immediately to begin data
reviews. On the contrary, under TSC's proposed startup plan, TSC would
begin to accept data packages only at the beginning of the third week
after award.
TSC further objects to the Navy's evaluation of proposals on the
ground that alleged discrepancies between the technical evaluation
team's narrative descriptions of the proposals and the resulting point
scores for those proposals demonstrate unacceptable prejudice against
TSC. In particular, TSC objects to assigning RCI 19.16 points for
personnel qualifications even though RCI's proposal was criticized by
the evaluation team for proposing two few junior personnel, thus raising
the possibility that overtime might be required, and for proposing to
fill two engineer positions with nonengineers. TSC contrasts the 19.16
points assigned to RCI in this regard with the 11.25 points received by
TSC. TSC also alleges that it was unfair to assign 12.5 points to DHD
for corporate experience when the evaluation team found at DHD lacked
direct corporate experience in breakout analysis and when TSC, which the
team considered to have excellent corporate experience and which claims
to have extensive corporate breakout experience, only received 15
points.
The protester has the burden of proving bias, and unfair or
prejudicial motives will not be attributed to procurement officials on
the basis of inference or supposition. See Martin-Miser Associates,
B-208147, Apr. 8, 1983, 83-1 C.P.D. Paragraph 373.
TSC has failed to demonstrate that the point scores given for the
qualifications of the proposed personnel were biased or even without a
reasonable basis. It would appear that in assigning a score to RCI's
proposal for personnel qualifications, the technical evaluation team in
fact took into account the deficiencies which were identified in the
narrative portion of the evaluation and cited by TSC. RCI received only
19.16 of 25 points available in this regard even though the evaluation
team otherwise found 70 percent of RCI's proposed personnel to be
excellent and found the initial availability proposed by RCI to be
excellent. That TSC received only 11.25 points appears to reflect the
evaluation team's reasonable conclusion that the lack of direct breakout
experience in the personnel proposed by TSC and TSC's unwillingness or
inability to begin breakout reviews until the third week after the
contract were serious deficiencies in a procurement to meet an urgent
requirement.
As for the points assigned for corporate experience, TSC received the
maximum number of points available while DHD received 16.7 percent less
because of its perceived lack of direct breakout experience. The
technical evaluation team explained the amount of the penalty as
resulting from the team's conclusion that although DHD lacked direct
breakout experience, this deficiency would be offset by the value of
DHD's excellent automatic data processing (ADP) experience in performing
the data evaluation required under the contract. Moreover, the
evaluation report also indicated in regards to DHD's "Corporation
Qualification," a subcriterion under management approach, that the
personnel proposed by DHD, which were rated as "excellent in direct
experience," would compensate for some of DHD's corporate inexperience.
Although TSC contests the relevance of this experience, we need not
resolve the dispute since the Navy now indicates that the statement in
the evaluation report that DHD lacked direct breakout experience was
erroneous. DHD in fact stated in its proposals that under a contract
with the Naval Air Systems Command:
Life Cycle cost analysis, cost comparative analysis, source
qualification, reverse engineering and specification development
were performed (by DHD) as part of the Breakout function that was
required in this contract.
Accordingly, any mistakes in the Navy's evaluation of corporate
experience cannot be said to have resulted, on balance, in net
competitive prejudice to TSC. See Martin-Miser Associates, B-208147,
supra, 83-1 C.P.D. Paragraph 373 at 11; See also Lou Ana Foods, Inc.,
B-209540, supra, 83-1 C.P.D. Paragraph 278 at 3.
TSC objects to the tradeoff made by the Navy between cost and
technical factors. It alleges that TSC's technical proposals were
essentially equal to those submitted by DHD and that DHD proposed an
unreasonably high price. Accordingly, concludes TSC award on Lot I
should have been made on the basis of TSC's lower priced proposal.
The solicitation, in describing the relative importance of cost
vis-a-vis the technical factors, in effect notified offerors that the
agency had predetermined the tradeoff between technical merit and price.
Therefore, under these circumstances, the point scores were to be
controlling unless source selection officials determined that,
notwithstanding a difference in the technical scores of the proposals,
there was no significant difference in their technical merit, in which
event price would have become the deciding factor. Cf. Eaton-Kenway,
B-212575.2, June 20, 1984, 84-1 C.P.D. Paragraph 649 (solicitation
listed evaluation criteria in relative order of importance and advised
that award would be made on a numerical formula). Here, contracting
officials found that DHD's higher technical scores, approximately 13
points or over 20 percent, higher than TSC's raw technical scores,
reflected a significant technical superiority. Given the previously
discussed deficiencies in TSC's proposals, we do not believe that TSC
has demonstrated that contracting officials abused their discretion in
finding a significant technical difference between TSC's and DHD's
proposals. See Sperry Flight Systems B-212229, Jan. 19, 1984, 84-1
C.P.D. Paragraph 82.
TSC maintains that the Navy's disregard for proper procedures is
further evidenced by the Navy's failure to give unsuccessful offerors 5
working days prior to award in which to challenge the size status of the
apparent successful offeror for Lot II, the small business set-aside,
and by the Navy's failure to submit the administrative report responding
to this protest in a timely manner.
While a contracting officer generally should not make award prior to
the deadline for submitting a size status protest set forth in the
notice to unsuccessful offerors, a deadline which usually should be 5
working days plus a reasonable time for the notice to reach the
unsuccessful offerors, nevertheless, award may be made before such time
where the contracting officer determines in writing that award must be
made without delay in order to protect the public interest. DAR,
Sections 1-703(b)(1) and 1-703(b). The contracting officer here made
such a determination. In any case, TSC has not alleged that RCI was
other than a small business and thus that TSC suffered identifiable
competitive prejudice from the agency's actions.
As for the agency's failure to submit an administrative report in a
timely manner, we note that although we request agencies to submit a
complete report to our Office as expeditiously as possible, generally
within 25 working days, 4 C.F.R. Section 21.2(c) (1984), failure to do
so has no bearing on the validity of an otherwise proper award. See
Creative Electric Inc., B-206684, July 15, 1983, 83-2 C.P.D. Paragraph
95.
The protest is denied.
B-218113, 64 Comp. Gen. 244
Matter of: Federal Employees Metal Trades Council, Save Our Jobs
Committee, February 6, 1985
Determination under Office of Management and Budget Circular No. A-76
to contract for services rather than have them performed in-house is a
matter of executive branch policy not reviewable pursuant to a bid
protest filed by a union local representing federal employees.
Protest may be dismissed where protester failed to submit most of the
specific information required to be included in a submission under
General Accounting Office bid protest regulations.
The Federal Employees Metal Trades Council, Save Our Jobs Committee,
protests the award of a contract to Reliable Trash Services for refuse
collection and disposal services at Fort Benning, Georgia. We dismiss
the protest.
This protest involves a challenge to an agency's determination under
Office of Management and Budget Circular No. A-76 to contract for
services rather than perform them in-house. The protester, representing
a group of federal wage grade employees, states that a prior contract
for refuse services at Fort Benning called for the services to be
performed by an outside contractor using government-owned equipment.
Under the current contract being challenged by the protester, the
services are to be performed by an outside contractor using its own,
different equipment. The protester maintains that, because of the
change in the type of equipment being used, the agency was required to
conduct a new cost study before deciding to contract for the services.
Our Office has repeatedly declined to render decisions concerning the
propriety of an agency's determination under Circular A-76 to contract
for services instead of performing the work in-house. These
determinations are beyond the scope of our bid protest decision function
because the provisions of the Circular are matters of executive branch
policy which do not create legal rights or responsibilities. See Local
F76, International Association of Firefighters, B-194084, Mar. 28, 1979,
79-1 CPD Paragraph 209.
We do, however, consider it detrimental to the competitive system for
the government to decide to award or not award a contract based on a
cost comparison analysis that did not conform to the terms of the
solicitation under which the bids were submitted. See Crown Laundry and
Dry Cleaners, Inc., B-194505, July 18, 1979, 79-2 CPD Paragraph 38. For
that reason we do entertain protests which allege faulty or misleading
cost comparisons of in-house estimates with bids received. See
Serv-Air, Inc.; AVCO, 60 Comp. Gen. 44 (1980), 80-2 CPD Paragraph 317.
Even in those cases, however, our review is intended only to protect the
parties that competed from the arbitrary rejection of their bids; our
review does not extend to protests by non-bidders such as federal
employees or union locals that represent federal employees. Hawaii
Federal Lodge No. 1998, International Association of Machinists and
Aerospace Workers, B-21404, Jan. 23, 1984, 84-1 CPD Paragraph 109.
Similarly, our new bid protest regulations provide that protests may be
filed only by an actual or prospective bidder or offeror whose direct
economic interest would be affected by the award of a contract or by the
failure to award a contract. See GAO Bid Protest Regulations, Sections
21.0(a) and 21.1(a), 49 Fed. Reg. 49,417-49,423 (1984). It appears from
the face of the protest that the protester here is not a bidder and thus
is not eligible to file a protest.
Moreover, the protester has failed to submit most of the information
required to be included in a submission under our regulations.
Specifically, the protester does not identify the number of the
solicitation or contract being challenged; request a ruling by the
Comptroller General; state the form of relief it requests; or indicate
its own telephone number, all items required by section 21.1(c) of our
regulations to be included in a portest filed with our Office. In
addition, the protest does not indicate that a copy has been furnished
to the contracting agency, as required by section 21.1(d). Under
section 21.1(f) of our regulations, a protester's failure to comply with
these requirements constitutes grounds for dismissing its protest.
The protest is dismissed.
B-218101, 64 Comp. Gen. 243
Matter of: The George Sollitt Construction Company, February 6, 1985
Complaint regarding rejection of bid by grantee is dismissed since
General Accounting Office no longer reviews complaints concerning
contracts under federal grants.
The George Sollitt Construction Company complains of the
determination by the Village of Addison, Illinois that its bid is
nonresponsive under an invitation for bids issued by an Environmental
Protection Agency grantee for expansion of a waste water treatment
plant, Project No. 0174.
On January 29, 1985, we published a notice in the Federal Register,
50 Fed. Reg. 3978 (1985), stating that our review of grantee compliance
with federal bidding requirements is no longer necessary. The notice
stated that, effective January 29, we would no longer review complaints
concerning the award of contracts under grants. The complaints by
Sollitt was filed in our Office on January 31. Consequently, we dismiss
the complaint.
B-217492, 64 Comp. Gen. 242
Matter of: Northwest Maintenance, Inc., February 4, 1985
Agency properly awarded a small business set-aside contract to a firm
determined to be small by a Small Business Administration (SBA) Regional
Office where the award was made after the Regional Office's decision but
prior to the agency's notification that the protester appealed to the
SBA's Office of Hearings and Appeals for a final ruling. Whether
options under this contract should be exercised is a matter to be
resolved by the agency in accordance with applicable regulations.
Northwest Maintenance, Inc. (Northwest), protests the award of a
contract to DESCO, Inc., the low bidder under invitation for bids (IFB)
No. N62474-84-B-9003, a small business set-aside issued for maintenance
of military family housing at the Naval Air Station, Adak, Alaska
(Navy), for 1 year with 3 option years.
We summarily deny the protest.
On August 27, 1984, the Seattle Regional Small Business
Administration (SBA) Office rejected a size protest in which Northwest
argued that DESCO was affiliated with another business thereby making
DESCO a large business. The decision of the SBA Regional Office, that
DESCO is a small business, was timely appealed on September 5, 1984, to
SBA's Office of Hearings and Appeals. Northwest notified the Navy of
its appeal by certified letter received September 7, 1984. On September
6, 1984, however, the Navy awarded the contract to DESCO. Northwest's
appeal to SBA resulted in a final decision on November 28, 1984, that
DESCO was a large business.
On December 5, 1984, Northwest requested that in view of the SBA's
final determination, the Navy terminate DESCO's contract and make award
to Northwest, or, in the alternative, resolicit the procurement. The
Navy responded to Northwest's request stating:
As this Office has been advised by the Small Business
Administration that the contract can remain in force, it is not
anticipated that any action will be taken affecting this
procurement. Information is being gathered at this time as to the
effect on the option year(s).
Northwest argues that the Navy, by relying on advice from the SBA,
abdicated its responsibility to determine whether DESCO's certification
as a small business was made in good faith or not. We disagree.
The Navy made award to DESCO based upon the determination of August
27 by the SBA Regional Office that DESCO was a small business. Such
determination was binding on the contracting officer. See Federal
Acquisition Regulations, Section 19.301(c), 48 Fed. Reg. 42,102, 42,246
(1983) (to be codified at 48 C.F.R. Section 19.301(c)). The award, made
in September 1984, months before the SBA's Office of Hearings and
Appeals reversed the determination of the Seattle Regional SBA Office,
and before the Navy was notified of Northwest's appeal of the SBA
Regional Office decision to SBA's Office of Hearings and Appeals,
resulted in a valid contract. See FAR, Section 19.302(g)(2), 48 Fed.
Reg. 42,102, 42,247; John C. Holland Enterprises, B-216250, Sept. 24,
1984, 84-2 C.P.D. Paragraph 336. Accordingly, the contracting officer
was not required to determine, after the SBA final decision that DESCO
was large, whether DESCO's certification as a small business was made in
good faith or not.
Northwest argues that even if the award was not improper, the Navy
should be precluded from exercising the options under the contract with
DESCO. Of course, the exercise of this option is a matter to be
resolved in accordance with applicable regulations. See FAR Section
17.207, 48 Fed. Reg. 42,102, 42,237; Triple A. Shipyards, B-213738,
July 2, 1984, 84-2 C.P.D. Paragraph 4; Gallegos Research Corporation --
Reconsideration, B-209992.2, B-209992.3, Nov. 21, 1983, 83-2 C.P.D.
Paragraph 597. Although this contract should not be continued as a
small business contract, the exercise of an option is not precluded if
done in accordance with applicable regulations. Triple A Shipyards,
B-213738, supra; Gallegos Research Corporation -- Reconsideration,
B-209992.2, B-209992.3, supra. At this time, the propriety of any
option exercise is premature.
The protest is denied.
B-216495, 64 Comp. Gen. 239
Matter of: MII/Lundia, February 4, 1985
An agency which is a mandatory user of a multiple-award federal
supply schedule (FSS) contract may purchase lower priced non-FSS items
which are identical (in terms of make and model) to those included on
the FSS contract from the schedule contractor that submitted the low
quote under the original request for quotations. There is nothing in
the Federal Acquisition Regulation which would compel the agency to
recompete the non-FSS items.
MII/Lundia protests the Department of the Army's issuance of a
purchase order for certain items of mobile shelving to Advance
Manufacturing Corporation. Quotations were originally solicited under
request for quotations (RFQ) No. DADA-15-84-Q-0515. Lundia contends
that the Army issued the purchase order without obtaining adequate
competition. We deny the protest.
The Army issued the RFQ on April 26, 1984, seeking quotations from
four firms -- including Lundia and Advance -- who hold multiple-award,
mandatory federal supply schedule (FSS) contracts /1/ for the shelving
being acquired. The RFQ was issued on a brand name or equal basis, with
the Lundia product specified as the brand. Four quotes were received,
but two of them were rejected for noncompliance with the specifications.
Both Advance and Lundia offered acceptable products with Advance
submitting the low quote at $36,907.00. Lundia was second low at
$38,896.50. Accordingly, the Army issued a delivery order for the
shelving to Advance on July 23.
Shortly thereafter, Lundia protested to the Army that certain items
of the shelving offered by Advance were in fact not on that firm's FSS
contract. Advance acknowledged that this was the case and, by a
modification dated September 19, those items, representing about 30
percent of the total acquisition, were deleted from the delivery order.
However, on September 24, the Army issued a purchase order to Advance
for the deleted items at a price of $11,316.95, which was lower than
Lundia's FSS contract price for the items.
Lundia asserts that the Army improperly acquired the non-schedule
items from Advance without obtaining competition. In this regard,
Lundia refers to the Federal Acquisition Regulation (FAR), Section
8.404-1, 48 Fed. Reg. 42,102, 42,135 (1983) (to be codified at 48 C.F.R.
Section 8.404-1), which sets forth the particular circumstances where
the mandatory use of a multiple-award schedule by an executive agency is
not required. Subsection (e) of that section provides:
Lower prices for identical items.
(1) When an ordering office finds that an identical product
(make and model) included on a multiple-award schedule is
available from another source at a price lower than the schedule
price, the office may purchase the item subject to the
requirements to obtain competition. * * * /2/
Lundia argues that the language used in subsection (e), "subject to
the requirements to obtain competition," compelled the Army to recompete
the non-schedule shelving items, rather than issue a purchase order for
them to Advance. Lundia implies that it would have quoted a lower price
for these items under a recompetition than it quoted when responding to
the original RFQ, which contemplated a 100 percent FSS buy. We see no
merit in the firm's argument.
We have held in a similar situation that an agency may award a
combined contract for FSS and non-FSS items to an offeror who submitted
the low aggregate quote. Synergetics International, Inc., B-213018,
Feb. 23, 1984, 84-1 CPD Paragraph 232. In that case, the protester had
alleged that the successful offeror had misrepresented that certain
products and services were on its FSS contract. The protester claimed
that because an award was made for these non-schedule items on the basis
of the offeror's low quote, the agency violated the prohibition against
awarding contracts on a noncompetitive basis. We did not accept the
protester's argument since the agency showed that it would have acquired
the non-FSS items in any event from the successful offeror due to
compatibility considerations, even if it had known that the items were
not on the firm's schedule, and since the cost of the non-FSS items was
small compared with the total cost of the procurement.
We do not think that the present situation is fundamentally
different. Here, both Lundia and Advance responded to the original RFQ
by quoting prices for the entire requirement, and Advance was the low
offeror. When the Army learned as the result of Lundia's protest that
30 percent of the requirement was not on Advance's FSS contract, the
Army deleted that portion from the initial delivery order and awarded
those items to Advance separately. Lundia has made no affirmative
showing that it would have offered a price lower than Advance's for
those items if it had had an additional opportunity to do so. We assume
that Lundia's original quote, contemplating a 100 percent FSS buy,
represented the firm's best offer to the government, since
multiple-award schedule contracts such as that held by Lundia are
negotiated on the basis of discounts offered by the contractor from its
established catalog prices. Although it is true that Lundia could have
offered to supply the shelving items listed on its FSS contract, offered
by Advance as non-FSS items, at lower prices than the schedule prices,
Synergetics International, Inc., supra, we point out that, under the
standard price reduction clause that is contained in all multiple-award
FSS contracts, any such reductions would have been applicable to all
future orders of these items by the government during the FSS contract
period. See GSA -- Multiple Award Schedule Multiyear Contracting,
B-199079, Dec. 23, 1983, 63 Comp. Gen. 129, 84-1 CPD Paragraph 46. In
our view, nothing in the record establishes that Lundia would have
reduced its FSS prices to become the low offeror for these items if they
had been recompeted, and the firm thus was not prejudiced because the
Army did not do so.
In any event, we cannot reasonably construe FAR, Section 8.404-1(e),
supra, to require such a recompetition. In other words, Lundia had the
opportunity, through open competition, to reduce its FSS prices had it
chosen to do so. We do not believe the regulation requires that Lundia
be given another opportunity to compete under the circumstances.
We also note that the acquisition of the non-FSS items was, given the
dollar amount involved, a small purchase procurement. Because small
purchase procedures are designed to minimize the administrative costs of
acquiring relatively inexpensive items, thus affording contracting
officers a wide degree of discretion, we have held that agencies need
only solicit quotations from a reasonable number of potential sources,
judge the advantages and disadvantages of each quotation in relation to
the prices quoted, and determine in good faith which quotation will best
meet the needs of the government. R.E. White & Associates, Inc., 61
Comp. Gen. 320 (1982), 82-1 CP Paragraph 294. Here, the Army clearly
fulfilled its obligation to solicit a reasonable number of quotations by
originally soliciting the four FSS contractors, since we note that the
small purchase procedures contemplate that the solicitation generally
should be limited to three suppliers. /3/ Hence, we conclude that the
Army in turn met its obligation under FAR, Section 8.404-1(e), supra,
"to obtain competition."
Accordingly, we cannot find that the purchase order for the non-FSS
shelving items was issued to Advance on a noncompetitive basis so as to
make the award legally objectionable.
The protest is denied.
(1) FSC Group 71, Part 3, Section J, FSC Class 7125.
(2) Lundia originally urged that the non-schedule items furnished by
Advance were not identical to those on Lundia's FSS contract. After a
series of meetings with the Army, Lundia conceded that Advance's items
were in fact identical ot Lundia's shelving in terms of make and model.
(3) See FAR, Section 13.106(b)(5), 48 Fed. Reg. 42,102, 42,165 (1983)
(to be codified at 48 C.F.R. Section 13.106(b)(5)).
B-216261, 64 Comp. Gen. 236
Matter of: Hugo H. Huslig, February 4, 1985
An employee on temporary duty who used the return portion of a "super
saver" airline ticket for his weekend voluntary return travel to his
permanent duty station claims that the difference between the regular
one-way coach fare and the "super saver" fare should be used in the
computation of the maximum allowable reimbursement for his voluntary
return travel. He argues that the "super saver" fare applied only to
round trips, and if he had not used the return portion, the Government
would have had to pay the full coach fare for his travel to the
temporary duty point because his other travel was performed by
automobile with another employee. The agency properly limited his
reimbursement to the per diem which he would have received if he had
remained at the temporary duty station. There is no basis to include
costs other than those the employee would have incurred had he remained
at his temporary duty station.
An employee traveled to his temporary duty station by commercial air
carrier at a "super saver" fare which was only available for round-trip
travel. After learning that he could return to his permanent duty
station as a passenger in another employee's automobile upon the
completion of his assignment, the employee used the return portion of
the ticket for voluntary return to his permanent duty station over
nonworkdays. The employee's use of the return portion of the round-trip
"super saver" ticket for his voluntary return travel allowed the
Government to be charged only the "super saver" fare for his travel to
his temporary duty station. The question presented is whether the
amount thus saved by the Government may be included in the computation
of the maximum allowable reimbursement for the employee's voluntary
return travel. /1/
The employee apparently contends that his use of the return portion
of the ticket enabled the Government to save money for his travel to the
temporary duty station because the "super saver" fare applied only to
round trips. He indicates that if he had not used the return portion
for his personal travel, the Government would have been charged the full
one-way coach fare for his travel to the temporary duty point. We find
that the difference between regular coach fare and the "super saver"
fare for one-way travel, $55.50, may not be included in the
determination of the allowable reimbursement for the employee's
voluntary return travel on nonworkdays.
Mr. Hugo H. Huslig, an employee of the Wichita, Kansas office of the
Internal Revenue Service, Department of the Treasury, was assigned to
perform temporary duty at Little Rock, Arkansas, during the period from
January 24 to February 17, 1983, for the purpose of teaching a course
there from February 2 to 17, 1983. Mr. Huslig traveled to Little Rock
on Trans World Airlines on a discount "super saver" fare ticket which he
had purchased with a Government Travel Request. Mr. Huslig advises that
the "super saver" fare was only available for round-trip travel. He
states that subsequent to his purchase of the "super saver" ticket he
discovered that another employee from the Wichita office would be
attending the training classes and that the employee would be traveling
by automobile. Mr. Huslig states that based on this information he
arranged to return to his permanent duty station for personal reasons on
February 4, 1983, for the weekend. He used the return portion of the
"super saver" ticket for his travel to Wichita. He then returned to his
temporary duty station on February 6, as a passenger in the automobile
driven by the other employee in the Wichita office who was attending the
classes at Little Rock. Upon completion of the temporary duty
assignment Mr. Huslig returned to Wichita on February 17, as a passenger
in the other employee's automobile.
Mr. Huslig claims that the maximum allowable reimbursement for his
voluntary return travel should include the $55.50 difference in cost
between the regular one-way coach fare between Little Rock and Wichita
($163) and the cost of one-half of the round-trip "super saver" fare
($107.50). The apparent basis for his claim is that his return travel
on the return portion of the round-trip "super saver" ticket enabled the
Government to receive the benefit of his travel at the "super saver"
rate from Wichita to Little Rock. Mr. Huslig's voucher indicates that
in addition to his use of the "super saver" ticket, which cost $107.50
(prorated for one-way travel), he incurred $4 in airport limousine costs
incident to his return travel.
The agency has allowed Mr. Huslig reimbursement for the cost of his
voluntary return to his permanent duty station to the extent of the per
diem which he would have been allowed if he had remained at his
temporary duty station. The agency apparently had authorized Mr. Huslig
per diem at the rate of $49 while at Little Rock. Taking into
consideration that he was on leave status for more than half the workday
on his date of departure for Wichita, the agency determined that the
total per diem which would have been allowable to Mr. Huslig if he had
remained at his temporary duty station would have been $61.25.
The agency's reimbursement for Mr. Huslig's voluntary return travel
is based on section 342.1(2) of Internal Revenue Manual 1763, which
provides in part that when a traveler voluntarily returns to his place
of residence or post of duty over nonworkdays, reimbursement for
transportation expenses and per diem en route is limited to the per diem
that would have been allowed had the employee remained at the temporary
duty station. This regulation supplements and is not inconsistent with
paragraphs 1-7.5c and 1-8.4f of the Federal Travel Regulations (FPMR
101-7) (September 28, 1981) incorp. by ref. at 41 C.F.R. Section
101-7.003. Under these paragraphs an employee on temporary duty may
voluntarily return on nonworkdays to his official duty station or place
of residence from which he commutes to his official duty station and be
reimbursed for transportation and per diem not to exceed the per diem or
actual subsistence expenses and travel expenses which would have been
allowed had the employee remained at his temporary duty station. See
Coleman Mishkoff, B-212029, August 13, 1984, and Howard E. Johnson, 59
Comp. Gen. 293 (1980).
Thus, in order to compute the maximum amount properly reimbursable it
is necessary to determine the constructive amount which would have been
allowable if the employee had remained at his duty station. Coleman
Mishkoff, B-212029, supra. We are not aware of any basis upon which the
maximum allowable reimbursement for voluntary return travel under
paragraph 1-7.5c of the Federal Travel Regulations may be computed on
the basis of expenses other than those the employee would have incurred
if he had remained at his temporary duty station. Cf. Thomas D. Salter,
B-194166, June 4, 1979. Since Mr. Huslig would not have incurred air
transportation expenses on his nonworkdays had he remained at his
temporary duty station, there is no basis for including the difference
between regular coach fare and the "super saver" fare for one-way travel
between Wichita and Little Rock in the computation of the maximum
allowable reimbursement for his voluntary return to his permanent duty
station.
While Mr. Huslig's use of the "super saver" ticket for his voluntary
weekend return travel to Wichita and subsequent return from Little Rock
to Wichita at the end of the assignment with another employee at no
additional cost to the Government did save the Government some money for
his return travel, it does not provide a basis for increasing his
reimbursement from the Government for his voluntary travel. In addition
we note that he also directly benefited from the use of the "super
saver" ticket since it reduced by $55.50 his personal cost for such
travel, the difference between the regular $163 one-way coach fare and
the $107.50 "super saver" fare prorated for the one-way travel.
Accordingly, payment on the reclaim voucher is not authorized.
(1) The request for an advance decision is presented by Mr. Larry W.
Faulkner, Chief, Accounting Section, Internal Revenue Service, Southwest
Region.
B-216162, 64 Comp. Gen. 234
Matter of: Gunnery Sergeant Michael M. McClure, February 4, 1985
When use of a privately owned vehicle for the performance of official
duties is determined to be advantageous to the government, a breakdown
and resultant delay may be viewed as being incident to the official
travel. Travel or transportation expenses caused by the delay may be
reimbursed if the period of delay is reasonable and the traveler is
acting under administrative approval or the actions of the traveler are
subsequently approved.
The issue presented in this case is whether a member of the Marine
Corps who is ordered to temporary additional duty and is authorized
travel by commercial air, using a government transportation request, may
be reimbursed for excess transportation charges when, for reasons beyond
his control, he is unable to travel on the scheduled flight for which he
has obtained a ticket using a government transportation request and was
required to pay excess charges in order to perform his travel in a
timely manner. /1/ In these circumstances reimbursement is authorized.
Gunnery Sergeant Michael M. McClure, USMC, who was stationed at Camp
Pendleton, California, was ordered to perform temporary additional duty
at Nellis Air Force Base, Nevada, from May 12, 1983, through May 15,
1983. Travel from San Diego, California, to Las Vegas, Nevada, via
commercial air using a government transportation request was directed.
Use of his privately owned vehicle from Camp Pendleton to San Diego was
also authorized.
Sergeant McClure encountered mechanical difficulties with his vehicle
en route to the San Diego Airport and arrived too late to board his
scheduled flight. Due to the time constraints involved in his
assignment, he purchased a ticket to Las Vegas via Los Angeles.
Apparently, since he did not have a government transportation request
available there was an excess charge of $45 over the cost of his
original flight.
The order issuing authority has issued an amendment to the original
orders, authorizing the additional cost of the flight citing Volume 1
Joint Travel Regulations (1 JTR) para. M4416 as authority for the added
cost. The Marine Corps asks whether the retroactive amendment to the
order was authorized so as to permit payment of the added cost.
It is the general rule that travel orders may not be revoked or
modified retroactively so as to increase or decrease the rights which
have accrued or become fixed under the law and regulations when the
ordered travel has already been performed. Dr. Sigmund Fritz, 55 Comp.
Gen. 1241 (1976). It also has been consistently held that the travel
allowances authorized for members of the uniformed services are for the
purpose of reimbursing them for the expense incurred in complying with
the travel requirements imposed upon them by the needs of the service
over which they have no control. See 51 Comp. Gen. 548 (1972).
In the present case, modification of the travel orders was to permit
payment of the excess cost of transportation which occurred because
government transportation request was not used. The regulation cited as
authority, 1 JTR para. M4416, provides for reimbursement of "other
necessary incidental expenses related to travel not specifically
enumerated in this Part." Such expenses may be reimbursed if authorized
in the travel order or approved after travel has been performed.
However, 1 JTR para. M4416 is in Part I of 1 JTR which enumerates
miscellaneous reimbursable expenses in connection with travel and
temporary duty.
Under 1 JTR para. M4202 the reimbursable expenses covered by Part I
do not include transportation expenses but are expenses in addition to
per diem allowances and transportation expenses. Thus, the regulation
cited in the amending travel order is not an appropriate justification
for payment of the cost incurred by Sergeant McClure.
However, the excess charge appears to be reimbursable under the
provisions of 1 JTR para. M4203 pursuant to Sergeant McClure's original
order. Those orders do require transportation to be procured using
government transportation requests, but 1 JTR para. M4203-3e provides
that when orders direct the use of transportation requests but
transportation requests are not available for the member's travel by
common carrier, the provisions of M4203-3b are applicable. Under that
provision the full cost of commercial air travel may be reimbursed to
the member.
Thus, if it is held that a transportation request was not available
for procurement of necessary transportation in the circumstances of this
case, that full cost of commercial travel may be paid. The need to
purchase another ticket resulted from the delay caused by the breakdown
of the traveler's privately owned vehicle. We have held that when use
of a privately owned vehicle for the performance of official duties is
determined to be advantageous to the government, the delay caused by a
breakdown of the vehicle may be viewed as being incident to the official
. travel. See 42 Comp. Gen. 436.
Since use of a privately owned vehicle to and from San Diego Airport
was specifically authorized in Sergeant McClure's orders, the added cost
resulting from the breakdown may be borne by the government.
In the present case, the delay in arriving at the airport in San
Diego required an immediate change in Sergeant McClure's travel
arrangement. Since it is clear that he could not obtain a government
transportation request in time to use it to procure transportation
aboard the only alternate flight that would permit him to comply with
his orders, the full cost of transportation may be borne by the
government. Accordingly, the claim may be allowed.
(1) This question was submitted by Lieutenant Colonel M. K.
Chetkovich, Disbursing Officer, Marine Corps Base, Camp Pendleton,
California. The request was approved by the Department of Defense Per
Diem, Travel and Transportation Committee and has been assigned Control
Number PDTATAC 84-15.
B-218064, 64 Comp. Gen. 233
Matter of: Wilton Corporation, February 1, 1985
An agency may waive a bidder's failure to sign its bid as a minor
informality, thus obviating rejection of the bid as nonresponsive, when
the bid is accompanied by other documentation signed by the bidder which
clearly evinces the bidder's intent to be bound, such as an acknowledged
amendment.
Wilton Corporation protests the acceptance of the unsigned bid of
Brink and Cotton Manufacturing Company under invitation for bids (IFB)
No. FEN-SV-A5204-A-1-7-85, issued by the General Services Administration
(GSA). GSA waived the failure to sign the bid as a minor informality
because the bid was accompanied by Amendment No. 1 to the IFB, which
Brink and Cotton had acknowledged by signing and returning. Wilton
asserts that this waiver was improper. We dismiss the protest.
In general, a bid which is not signed must be rejected as
nonresponsive because, without an appropriate signature, the bidder
would not be bound upon the government's acceptance of the bid. See,
e.g., Inge Ellefson, B-212785, Sept. 2, 1983, 83-2 CPD Paragraph 303.
However, we have recognized an exception to this general rule that
allows for waiver of the failure to sign the bid as a minor informality
when the bid is accompanied by other documentation signed by the bidder
(such as a properly executed bid bond) which clearly evinces the
bidder's intent to be bound by the bid submitted. Mountain Cascade,
Inc., B-211460, July 14, 1983, 83-2 CPD Paragraph 93; cf. Cable
Consultants, Inc., B-215138, July 30, 1984, 63 Comp. Gen. 521, 84-2 CPD
Paragraph 127 (in which an accompanying irrevocable letter of credit was
held not to negate a bidder's failure to sign its bid because it did not
require the bidder's signature as a party to the instrument).
In addition, the Federal Acquisition Regulation (FAR), Section
14.405(c)(1), 48 Fed. Reg. 42,102, 42,180 (1983) (to be codified at 48
C.F.R. Section 14.405(c)(1)), provides that a bidder's failure to sign
its bid may be waived as a minor informality when the bid
is accompanied by other material indicating the bidder's
intention to be bound by the unsigned bid (such as the submission
of a bid guarantee or a letter signed by the bidder, with the bid,
referring to and clearly identifying the bid itself) * * *
Here, GSA waived Brink and Cotton's failure to sign its bid as a
minor informality because the bid was accompanied by Amendment No. 1,
which the firm had acknowledged by signing and returning. We believe
that GSA's action was proper.
Wilton urges that the amendment was not legally sufficient to
indicate Brink and Cotton's affirmative intent to be bound by its bid,
because the amendment in fact had been issued prior to the IFB itself,
and because, allegedly, the amendment was immaterial and GSA did not
require its acknowledgment. We find no merit to the firm's position.
The amendment bore the bidder's signature, which is the prime
consideration for determining the bidder's intent to be bound. See
Cable Consultants, Inc., supra. Moreover, by its very nature, the
amendment referred to and identified the bid, thus fully comporting with
the requirements of FAR, Section 14.405(c)(1), supra, with respect to
the legal sufficiency of accompanying documentation.
Hence, it is our view that an amendment bearing the bidder's
signature which accompanies an unsigned bid is a clear indication of the
bidder's intent to be bound by its bid, and, accordingly, permits
acceptance of the bid.
Under section 21.3(f) of our new Bid Protest Regulations effective
January 15, 1985, we will summarily dismiss a protest without requiring
the submission of an agency report when on its face the protest does not
state a valid basis for protest. See 49 Fed. Reg. 49,417, 49,421 (1984)
(to be codified at 4 C.F.R. Section 21.3(f)). We find no valid basis
for protest here, and, accordingly, we have not requested a report from
GSA.
The protest is dismissed.
B-216315.3, 64 Comp. Gen. 231
Matter of: ISS Energy Services, Inc. - Request for Reconsideration,
January 29, 1985
General Accounting Office (GAO) affirms its dismissal of a protest
against the propriety of a cost comparison performed pursuant to OMB
Circular A-76 when the solicitation contained a provision setting forth
an administrative appeals procedure that the protester did not exhaust.
This administrative procedure is the final level of agency review
afforded protesters, and until such time as this procedure is completed
the protester has not exhausted its administrative remedies.
Pre-opening protest to contracting officer, requesting that
Government's bid, prepared for cost comparison purposes, be rejected as
nonresponsive because of alleged use of incorrect wage rates, is not a
substitute for a timely-filed appeal of the cost comparison. Protests
and cost comparison appeals are separate administrative procedures; the
cost comparison appeal has nothing to do with bid responsiveness, but
rather is used to determine the correctness of the figures used to
decide whether an agency should contract-out or perform in-house.
ISS Energy Services, Inc. for a second time requests reconsideration
of our decision ISS Energy Services, Inc., B-216315, Sept. 17, 1984,
84-2 CPD Paragraph 305, aff'd on reconsideration, Dec. 4, 1984, 84-2 CPD
Paragraph 620, regarding contract No. GS-11C-40321.
We affirm our dismissal.
ISS's protest concerned alleged deficiencies in a cost comparison
performed by the General Services Administration in accord with Office
of Management and Budget (OMB) Circular No. A-76. We dismissed the
protest because ISS had not exhausted the administrative appeals
procedures established by GSA. In its first request for
reconsideration, ISS insisted that GSA had no such procedure and
therefore the requirement for exhaustion was inapplicable. We pointed
out, however, that GSA had indeed provided for an appeals procedure
which was set forth in the solicitation. We therefore affirmed our
dismissal of September 17, 1984.
ISS, in its second request for reconsideration, acknowledges that it
did not file an appeal in accord with the procedure set forth in the
solicitation. Before bid opening, however, ISS had written the
contracting officer, stating that it believed GSA's bid, for cost
comparison purposes, would be based on incorrect wage rates. If so, ISS
requested that the bid be rejected as nonresponsive. Before the start
of the 15-day period for public review of the cost comparison, however,
GSA rejected this request. ISS argues that this exchange should satisfy
the requirement for exhaustion of administrative remedies because the
result of a later appeal, filed under the procedure set forth in the
solicitation, would not have been any different.
The Federal Acquisition Regulation (FAR), in accord with OMB Circular
No. A-76, requires that agencies establish appeals procedures for
informal administrative review of cost comparisons. The regulations
further provide that this type of procedure must afford prospective
contractors an independent, objective review of the initial cost
comparison result reached by the agency. FAR, Section 7-307, 48 Fed.
Reg. 42,102, 42,128 (1983) to be codified at 48 C.F.R. Section 7-307).
The administrative appeals procedure established by GSA implements this
regulation.
Although initially expressed in terms of bid responsiveness, ISS's
allegation concerns the correctness of the figures used in the
calculation of GSA's bid and consequently, the propriety of the cost
comparison between this bid and the bids submitted by prospective
contractors. This allegation therefore should have been raised under
the cost comparison appeals procedure, where the government's bid would
have been adjusted, if appropriate, rather than rejected as
nonresponsive.
While GSA's procedure does not preclude a prospective contractor from
filing a protest, the regulatory scheme contemplates that such matters
will be raised under the appeals procedure after an initial
cost-comparison result is reached and publicly announced. In a formally
advertised procurement, this occurs at bid opening. See FAR, Section
7.306(a). We do not believe that the filing of a protest can be used as
a substitute for the filing of a cost comparison appeal, as the appeal
process is distinct from the protest procedures prescribed in FAR,
Section 14-407-8. /1/ This process is the final level of agency review
afforded prospective contractors and accordingly, administrative
remedies are not exhausted until such time as it is completed.
ISS did not avail itself of GSA's appeals procedure. In addition to
the solicitation provision advising bidders that such a procedure
existed, the record shows that ISS received a letter from the
contracting officer stating when the 15-day public review period would
begin and end. ISS could have filed, but elected not to file, a timely
challenge to the cost comparison results.
We again affirm our dismissal of September 17, 1984.
objectively.
(1) Protests and appeals of cost comparisons are two separate
administrative procedures. They differ in a number of respects. Most
importantly, protests may be decided by contracting officers, as was the
case with ISS's protest, whereas cost comparison appeals are considered
by officials other than contracting officers. This ensures that appeals
are reviewed independently
B-216112, 64 Comp. Gen. 227
Matter of: Prevailing Rate Employees at Barksdale A.F.B., Louisiana,
January 29, 1985
The cap on wage increases for prevailing rate employees during fiscal
year 1982 and similar provisions for fiscal years 1983 and 1984 are
applicable to prevailing rate employees at Barksdale A.F.B., Louisiana,
even though that wage area was initially covered by the Monroney
Amendment, 5 U.S. Code 5343(d), in fiscal year 1982. Higher wage rates
which resulted from considering wage rates from another area as required
by the Monroney Amendment must not be implemented to the extent that
they exceed the statutory increase cap. There is nothing in either the
language or the legislative history of the Monroney Amendment or the pay
increase cap provisions which would support the view that the pay
increase caps are not applicable to the initial establishment of wages
under the provisions of the Monroney Amendment.
The matter before us concerns whether the maximum salary increase for
prevailing rate employees in effect for fiscal year 1982, and similar
pay increase maximums or caps for fiscal years 1983 and 1984 are
applicable to wage schedules which are established pursuant to the
initial application of the Monroney Amendment, 5 U.S.C. Section 5343(d),
to a wage area. /1/ Wage schedules and rates which are set in
accordance with the provisions of the Monroney Amendment are subject to
the pay increase caps in effect for fiscal years 1982, 1983, and 1984.
The National Federation of Federal Employees as the representative of
prevailing rate employees at Barksdale Air Force Base, Louisiana,
contends that those employees were erroneously denied their proper rates
of pay during fiscal years 1982, 1983 and 1984. The Federation advises
that the pay rates of these prevailing rate employees are set in
accordance with the provisions of the Monroney Amendment. Ordinarily,
the wage schedules of prevailing rate employees are based upon a survey
of wages paid by private employers in the local wage area for similar
work performed by regular full-time employees. See 5 U.S.C. Section
5343. However, under the Monroney Amendment when, for a principal type
of federal wage position, there is an insufficient number of comparable
jobs in private industry in the local wage area, the pay for comparable
positions in private industry in the nearest similar wage area must be
considered. The wage schedules and rates are then determined on the
basis of both the local private industry rates and the rates for the
nearest similar wage area.
The Shreveport, Louisiana area, which includes Barksdale Air Force
Base, first qualified for the application on the Monroney Amendment in
fiscal year 1982. However, in establishing the wage schedules for the
Shreveport area, after complying with the data gathering requirements of
the Monroney Amendment, the lead agency (the Department of Defense) /2/
applied the pay cap of 4.8 percent which was applicable to federal
employees in fiscal year 1982. The Office of Personnel Management
concurs with the lead agency's view that the pay cap was applicable to
the employees in question. The National Federation of Federal Employees
contends that the application of the 4.8 percent pay cap denies the
employees involved the benefits intended to be conferred by the Monroney
Amendment.
During fiscal years 1982 through 1984 there were caps on the pay
increases which could be allowed prevailing rate employees. /3/ The pay
increase cap in effect in fiscal year 1982 at the time the Monroney
Amendment first became applicable to the wage area which includes
Barksdale Air Force Base provided:
(b)(1) Notwithstanding any other provision of law, in the case
of a prevailing rate employee described in section 5342(a)(2) of
title 5, United States Code, or an employee covered by section
5348 of that title --
== * * * * * * *
(B) any adjustment under subchapter IV of chapter 53 of such
title to any wage schedule or rate applicalbe to such employee
which results from a wage survey and which is to become effective
during the fiscal year beginning October 1, 1981, shall not exceed
the amount which is 4.8 percent above the schedule or rate payable
on September 30, 1981 * * * Section 1701(b), Omnibus Budget
Reconciliation Act of 1981, Public Law 97-35, August 13, 1981, 95
Stat. 357, 754.
Similar restrictions on increases in wage rates of prevailing rate
employees were enacted each year since fiscal year 1979. The
legislative history of the first of this type of cap on wage increases
for prevailing rate employees shows that the cap was enacted so that
prevailing rate employees would be subject to a pay cap similar to that
applicable to General Schedule employees. See S. Rep. No. 939, 95th
Cong. 2d Sess, 55-56 (1978).
The National Federation of Federal Employees contends that the pay
rates which result from the initial application of the Monroney
Amendment to a wage area are not to be regarded as wage survey
adjustments for purposes of the pay caps on prevailing rate pay
increases. The basis for this view is the decision 50 Comp. Gen. 266
(1970), in which we held that retroactive adjustments made when the
Monroney Amendment was initially put into effect were not adjustments
made pursuant to wage surveys, but were adjustments required to being
the wage rates involved in line with the requirements of law as
contained in the Monroney Amendment.
Wage schedules under the Monroney Amendment were first issued almost
2 years subsequent to the effective date of that amendment because the
method of computing wage rates under the new requirements had not been
resolved. It was not until July 14, 1970, that the Civil Service
Commission issued its regulations implementing the amendment although it
had been effective and applicable to all surveys ordered or in process
on or after the date of enactment, October 12, 1968.
The question was whether the provision in 5 U.S.C. Section 5344,
authorizing retroactive increases in pay when adjustments resulting from
wage surveys are delayed, was to be applied to the initial retroactive
adjustments under the Monroney Amendment. If that section had been
applicable, retroactive payments to employees no longer employed would
not have been allowed by the specific terms of the section. However, we
held that these initial retroactive increases did not result from an
"order granting the increases" in terms of that section, but that the
wage schedules originally applied were invalid since they had not been
computed in accordance with the Monroney Amendment. Thus, employees
paid under the original schedules were not properly compensated under
the law, and the retroactive increases in pay resulting from the
adjusted schedules implementing the Monroney Amendment were to be
regarded as corrections required by the Monroney Amendment and not the
result of an order granting an increase in pay pursuant to a wage
survey.
The National Federation of Federal Employees argues that the
implementation of a new wage survey following a wage area's initial
qualification for the application of the Monroney Amendment is to be
distinguished from the ordinary wage survey process since the Monroney
Amendment requires a new survey which, unlike the prior surveys, uses
data from both the wage area in question and from another wage area.
Its view is that the pay increase for the initial year in which an areas
qualifies under the Monroney Amendment is not an increase which results
from wage survey adjustments, but results from the fact that the
employees in that area qualify for use of a new pay schedule. In the
circumstances under consideration in 50 Comp. Gen. 266, the pay
adjustments initially made pursuant to wage surveys had been erroneous
because those adjustments did not take into consideration the elements
required to be considered by the Monroney Amendment. The retroactive
revisions in those pay adjustments, to make pay comply with the Monroney
Amendment, were corrections required by law and all persons who had been
paid at the incorrect rates were entitled to retroactive pay. However,
the holding in that decision does not support the proposition that pay
adjustments which are established pursuant to the initial application of
the Monroney Amendment -- which involves a wage survey -- are not to be
regarded as adjustments in pay rates or schedules which result from a
wage survey for the purpose of the application of the pay cap to
prevailing rate employees.
In the situation under consideration no erroneous pay rates were
implemented. A survey was concluded and pay adjusted as a result
thereof. There is nothing in either the express language or the
legislative history of the Monroney Amendment which would support the
view that the initial pay rates or schedules established in a particular
wage area pursuant to the Monroney Amendment are not to be regarded as
pay adjustments which result from a wage survey. Furthermore, neither
the language nor the legislative history of the provisions caping the
pay increases of prevailing rate employees for fiscal years 1982 through
1984 indicate that pay established pursuant to the initial application
of the Monroney Amendment is not deemed to be a wage survey adjustment.
Furthermore, the language and legislative history of prevailing rate
employees' pay caps for fiscal years 1979 through 1985 /4/ provide no
basis to distinguish schedules established pursuant to the initial
application of the Monroney Amendment to a wage area.
The National Federation of Federal Employees contends that it would
be contrary to the doctrine disfavoring repeals by implication /5/ to
hold that the caps on the annual pay adjustment of prevailing rate
employees also apply to initial adjustments under the Monroney
Amendment. They argue that a measure intended to equalize the annual
cost-of-living increases of wage grade and General Schedule employees
should not be interpreted in a manner that repeals a measure which is
intended to ensure a fair rate of pay for workers in certain areas.
We note, however, that although the pay increase caps may modify the
effect of the Monroney Amendment, the caps do not repeal the provisions
of the Monroney Amendment. Employees previously covered continue to
benefit from the application of the Monroney Amendment, and wage
increases of newly covered employees may be enhanced because of that
amendment if the local wage data would have produced an increase of less
than the maximum allowable under the cap. We note that the Office of
Personnel Management has apparently determined that, in the absence of
the Monroney Amendment, the average pay schedule increase in the
Shreveport wage area for fiscal year 1982 would have been approximately
4.3 percent rather than the average wage schedule increase of 4.74
percent, the maximum allowable under the pay ceiling after rounding of
the pay increase.
In view of the above, we conclude that an adjustment of pay resulting
from the initial application of the Monroney Amendment in a wage area
was not exempt from the pay caps in effect during fiscal years 1982
thorugh 1984.
(1) This matter has been presented by Mr. James M. Pierce, President,
National Federation of Federal Employees, under our procedures set forth
at 4 C.F.R. Part 22 for decisions on appropriated fund expenditures
which are of mutual concern to agencies and labor organizations. The
General Counsel, Office of Personnel Management, submitted the comments
of that agency on January 11, 1985.
(2) The lead agency is the agency designated by the Office of
Personnel Management to plan and conduct a wage survey, analyze the
survey data and issue the required wage schedules for a wage area. See
5 C.F.R. Section 532.201.
(3) See section 2202 of the Deficit Reduction Act of 1984, Public Law
98-369, July 18, 1984, 98 Stat. 494, 1058; section 202(b) of the
Omnibus Budget Reconciliation Act of 1983, Public Law 98-270, April 18,
1984, 98 Stat. 158, 159; section 110 of Public Law 98-107, October 1,
1983, 97 Stat. 733, 741; section 107 of Public Law, 97-377, December
21, 1982, 96 Stat. 1830, 1909; section 109 of Public Law 97-276,
October 2, 1982, 96 Stat. 1186, 1191; and section 1701(b) of the
Omnibus Budget Reconciliation Act of 1981, Public Law 97-35, August 13,
1981, 95 Stat. 357, 754. (5 U.S.C. Code 5343 note).
(4) Section 114 of Public Law 96-369, October 1, 1980, 94 Stat. 1351,
1356; section 613 of the Treasury, (5 U.S. Code 5343 note) Postal
Service, and General Government Appropriations Act, 1979, Public Law
95-429, October 10, 1978, 92 Stat. 1001, 1018.
(5) See Tennessee Valley Authority v. Hill, 437 U.S. 153 at 190
(1978).
B-215441, B-215630, 64 Comp. Gen. 224
Matter of: Major Garry R. Scott, USAF and Captain Christopher
Bonwich, USAF, January 29, 1985
A divorced member of the uniformed services, who is paying child
support for a dependent residing with the member's former spouse in
Government quarters, is not entitled to a basic allowance for quarters
at the with-dependent rate. However, if the dependent resides with the
member in private quarters for more than 3 months, he or she is entitled
to the increased allowance, since under 37 U.S.A. Code 403 and the
pertinent regulations, periods in excess of 3 months are considered
nontemporary.
A divorced member of the uniformed services who is paying child
support for a dependent child in an amount greater than the amount
specified in the applicable regulation is entitled to receive basic
allowance for quarters at the with-dependent rate unless his or her
dependent resides in Government quarters. Questions have arisen
concerning the member's entitlement when a dependent who normally lives
with the former spouse in Government quarters visits the member, who is
not residing in Government quarters, for an extended period of time.
/1/ We find that a member is entitled to the increased allowance when
the dependent resides with the member for more than 3 months.
Major Gary R. Scott and his spouse were divorced in 1978. Under the
terms of their divorce decree, the child of their marriage was placed in
the custody of its mother. Major Scott was ordered to pay child
support, the amount of which exceeds the difference between the
with-dependents and the without-dependents basic allowance for quarters
rates. He was also permitted visitation rights. While the child is
visiting him, he has the duty to the child of care, control, protection
and reasonable discipline, and the duty to provide him with food,
clothing, and shelter.
Major Scott's former wife is now remarried to another member of the
uniformed services. His dependent child resides with its mother and
stepfather in Government quarters. Since a member is not entitled to
basic allowance for quarters at the with-dependents rate when his
dependent(s) on account of whom the increased allowance is paid, resides
in Government quarters, Major Scott is paid basic allowance for quarters
as a member without dependents while his child resides with its mother
and stepfather in the assigned quarters. (See Department of Defense
Military Pay and Allowances Entitlements Manual (DODPM), paragraph
30237a(2) (change 79); 58 Comp. Gen. 100 (1978)).
However, since Major Scott's child resided with him in his own
private quarters during a visitation period from June 15 to September 5,
1983, Major Scott has presented a claim for payment of basic allowance
for quarters at the with-dependents rate for that period.
In June 1981, Captain Christopher Bonwich was married to Captain
Rosemary Bonwich each having at that time a child. In January 1983,
Christopher and Rosemary Bonwich were divorced. Under their divorce
decree, Mrs. Bonwich was awarded custody of both children and Mr.
Bonwich was awarded reasonable visitation rights, including continuous
visitation during 4 months of the year with his own natural child, and
30 days' continuous visitation with Mrs. Bonwich's natural child. Mr.
Bonwich is to pay support for thw two children in the amount of $334 per
month, but he is not required to pay any child support during any
continuous visitation period of 30 days with either of the children.
Mr. Bonwich is stationed at Hill Air Force Base, Utah where he
resides in private quarters. Mrs. Bonwich is stationed at Myrtle Beach
Air Force Base, South Carolina, where she and the two children reside in
Government quarters. Mr. Bonwich claims basic allowance for quarters
and variable housing allowance as a member with dependents, covering a
period of continuous visitation with his natural child from April 6,
1984, through September 1, 1984.
Under the applicable statutes and regulations, members of the
uniformed services who are entitled to basic pay are entitled to a basic
allowance for quarters unless they are provided Government quarters
adequate for themselves and their dependents. 37 U.S.C. Section 403,
implemented by part 3, chapter 2 of the Department of Defense Military
Pay and Allowances Entitlements Manual (DODPM). If the dependent of two
members who are divorced or legally separated resides in private
quarters, the parent who does not have custody may be paid an increased
allowance on account of that dependent if that member pays support on
behalf of his or her dependent in a monthly amount equal to or greater
than the difference between the basic allowance for quarters without
dependents and the increased allowance on account of dependents. DODPM,
paragraph 30236a(1). If, on the other hand, that member's dependent
resides in Government quarters, the member is not entitled to an
increased quarters allowance on account of his dependent, even though he
pays support. DODPM, paragraph 30237.
Basically, the question to be resolved is what period of time
constitutes more than a short visit for the purposes of providing an
increased allowance to the members in the circumstances presented.
In a similar situation involving entitlement to an increased
allowance for members whose dependents visit or reside in Government
quarters assigned to another member the question arose as to how long
the dependents could stay in the Government quarters before the member
lost entitlement to the increased allowance. We concluded that 3 months
was a reasonable time period for the dependents to reside in Government
quarters assigned to another member before loss of entitlement to the
increased allowance. 37 Comp. Gen. 517 (1958); DODPM, Table 3-2-4,
Note 11. That conclusion was based in part on the fact that under the
applicable law members without dependents continued to receive a basic
allowance for quarters while performing periods of field duty or sea
duty of less than 3 months since such periods were considered temporary.
See 37 U.S.C. Section 403(c)(3). By analogy this rule was extended to
the situation where a member's dependents reside in Government quarters
assigned to another member.
It is our opinion that, in the absence of a controlling regulation to
the contrary, the same rationale should be applied in these cases. That
is, when the dependent who resides with the former spouse in Government
quarters, resides with the member paying child support for a period in
excess of 3 months it should not be considered of a temporary nature
within the meaning of the law authorizing the allowance. Thus, the
member is entitled to the basic allowance for quarters at the
with-dependent rate. Similarly, a member who is not paying child
support during the period the dependent resides with the member would be
entitled to the increased allowance if the period is more than 3 months.
Under that rule Major Scott is not entitled to the increased
allowance while his dependent resides with him since the period of time
is considered to be temporary (less than 3 months), even though he
continues to pay child support during the period of the visit.
Captain Christopher Bonwich is entitled to the increased allowances
since at least one dependent resides with him for a period of time
considered nontemporary (3 months or more). This is the case regardless
of whether he pays child support during this period.
(1) Questions were submitted by two different disbursing officers,
the Chief, Accounting and Finance Branch, Comptroller Division,
Barksdale Air Force Base, Louisiana, and the Accounting and Finance
Officer, Hill Air Force Base, Utah. The Department of Defense Military
Pay and Allowance Committee assigned submission number DO-AF-1442 to the
matter. We have combined the submissions and will treat them as one
case because of the similarity.
B-217020, 64 Comp. Gen. 221
To The Honorable William D. Ford, United States House of
Representatives, January 28, 1985
Omnibus Reconciliation Act of 1981 language established a new
subchapter to ch. 45 of title 5, U.S.C. (5 U.S.C. 4511-4514). The
section 4514 of title 5 reads as follows: "No award may be made under
this title after September 30, 1984." Question posed is whether use of
the word "title" in section 4514 should be read literally which would
mean that all title 5 awards authority expired after Sept. 30, 1984. It
is clear from the legislative history that the reference to "title"
should have been "subchapter." The clear congressional intent as shown
from the legislative history is controlling over the drafting error
contained in the statutory language. Federal courts have allowed the
expressed intention of Congress to prevail over the erroneous language
of a statute.
This is in response to your letter dated October 18, 1984 stating
that some uncertainty exists as to whether authority to make "awards"
under title 5, United States Code, other than those provided for in 5
U.S.C. Sections 4511-4514, still exists and requesting our opinion on
this matter. We have reviewed the relevant statutory language in light
of applicable principles of statutory construction, and are of the
opinion that the language of 5 U.S.C. Section 4514 does not affect any
of the award provisions in title 5 except the provisions for awards for
cost savings disclosures found in 5 U.S.C. Sections 4511-4514.
You have stated that the uncertainty regarding the awards provisions
of title 5 originated in section 1703 of the Omnibus Budget
Reconciliation Act of 1981, Pub. L. No. 97-35a, approved August 13,
1981, 95 Stat. 357, 755, which authorized the payment of cash awards to
Federal employees who disclose fraud, waste, or mismanagement. It did
so by adding a new subchapter II to chapter 45 of title 5, United States
Code (5 U.S.C. Sections 4511-4514). The new section 4514 of title 5
reads as follows:
No award may be made under this title after September 30, 1984.
This provision, if read literally, would mean that all title 5 awards
authority expired after September 30, 1984. You state that it is clear
that Congress intended the termination provision of 5 U.S.C. Section
4514 to apply only to the cash awards program established under the new
subchapter II of chapter 45, title 5 U.S.C. Accordingly, you advise us
that the reference to "title" in section 4514 should be to "subchapter."
The legislative history of the Omnibus Act provides a useful
background. Section 1703 originated in the House of Representatives,
and, as passed by the House, provided permanent authority to make cash
awards for cost savings disclosures. However, during the conference
with the Senate, it was agreed to establish the program on an
experimental basis, and the conferees further agreed that authority to
make these awards under the new subchapter would terminate after fiscal
year 1984. This agreement is reflected in 5 U.S.C. Section 4514, quoted
above, and is explained in the conference report as follows:
The second amendment agreed to by the conferees provides that
no award may be made under the new cash awards program after
September 30, 1984. The three-year life of the program conforms
with the three-year reconciliation instructions and provides
opportunity for Congressional review of the effectiveness of the
cash awards program. H.R. Rep. No. 208, 97th Cong., 1st Sess. 914
(1981).
It is clear, therefore, that the reference to "title" in section 4514
should have been "subchapter" since that section is part of the newly
created "Subchapter II -- Awards For Cost Savings Disclosures" under
section 1703 of the Omnibus Budget Reconciliation Act of 1981. The
drafting error may have occurred because the new subchapter II was
enacted as part of title XVII of the Omnibus Act. In any event, it is
our opinion that the clear congressional intent, as shown in the quoted
Conference Report, is controlling over the drafting error contained in
the statutory language.
There is ample authority for this approach. In cases similar to this
case, federal courts have allowed the expressed intention of Congress or
a state legislature to prevail over the erroneous language of a statute.
See Southeastern Financial Corp. v. Smith, 397 F. Supp. 649 (D. Ala.
1975); Ronson Patents Corp. v. Sparklets Devices, Inc., 102 F. Supp.
123 (E.D. Mo. 1951); Fleming v. Salem Box Co., 38 F. Supp. 997 (D. Ore.
1940).
In Fleming, the court refused to accept at face value a specific
reference in section 17 of the Fair Labor Standards Act of 1938 to
section 20 of the Anti-Trust Act. After examining the legislative
history of the Fair Labor Standards Act, the court concluded that:
(I)t is certain that a mistake was made in the substitution of
the figures and that the intention was to refer to Section 17 of
the Anti-Trust Act. A palpable clerical error clearly shown
should not override legislative intention. 38 F. Supp. at 998.
In Ronson, the defendant moved to dismiss a patent infringement suit
on the ground that a private act of Congress extending plaintiff's
patent for 7 years was ineffective because the act had incorrectly
specified the reissue date of the patent as "December 12, 1923." The
correct date of reissue was December 12, 1933. In denying defendant's
motion, the court observed that:
We understand the law to be, if the error in a legislative act
is apparent on the face of the act and can be corrected by other
language of the act, it is not fatal. The rule is stated in 59
C.F. 991: "Mere verbal inaccuracies, or errors in statutes in the
use of words, numbers, grammer, punctuation, or spelling, will be
corrected by the court, whenever necessary to carry out the
intention of the legislature as gathered from the entire act. If
the legislative intent is clear, it must be given effect
regardless of inaccuracies of language. * * *" 102 F. Supp. at
124; accord, J. Sutherland, Statutory Construction Sections 47.36
and 47.37 (4th ed. Sands 1973).
Clerical or other errors in legislation are ordinarily construed so
as to give effect to a demonstrated legislative purpose. A clear
exposition of the limited scope of the "plain meaning rule" is found in
the following excerpt from United States v. American Trucking
Associations, Inc., 310 U.S. 534, 543-544 (1940):
There is, of course, no more persuasive evidence of the purpose
of a statute than the words by which the legislature undertook to
give expression to its wishes. Often these words are sufficient
in and of themselves to determine the purpose of the legislation.
In such cases we have followed their plain meaning. When that
meaning has led to absurd or futile results, however, this Court
has looked beyond the words to the purpose of the act.
Frequently, however, even when the plain meaning did not produce
absurd results but merely an unreasonable one "plainly at variance
with the policy of the legislation as a whole" this Court has
followed that purpose, rather than the literal words. When aid to
construction of the meaning of words, as used in the statute, is
available, there certainly can be no "rule of law" which forbids
its use, however clear the words may appear on "superficial
examination." * * * Emphasis should be laid, too, upon the
necessity for appraisal of the purposes as a whole of Congress in
analyzing the meaning of clauses or sections of general acts. A
few words of general connotation appearing in the text of statutes
should not be given a wide meaning, contrary to a settled policy,
"excepting as a different purpose is plainly shown." (Footnotes
omitted.)
Cases applying these principles, often in reliance upon American
Trucking, are numerous. Thus, though a statutory provision may be
thought literally unambiguous in isolation, we nonetheless should
consider the legislation as a whole and may also look to its legislative
history in determining its purpose and its proper construction.
Indisputably, the purpose of the expiration of authority language of
5 U.S.C. Section 4514, enacted simultaneously with and placed in the
same subchapter as the awards for cost savings disclosures, was limited
to terminating the cost savings disclosure awards authority after 3
years. Undoubtedly, that provision's reference to "title" rather than
"subchapter" was simply a legislative inadvertence or mistake. A
cardinal rule of statutory construction is to "ascertain from the entire
statute the intention to be accomplished by the enactment. When that
intention is clear it should be carried out, even though it may be
necessary to strike out or insert certain words." Pressman v. State Tax
Commission, 102 A.2d 821 (Md. 1954).
We have here a situation where a congressional intention, otherwise
clear, was in part mistakenly or inaccurately stated. Under such
circumstances courts have allowed the substitution of language in order
to carry out the demonstrable legislative intention, observing, however,
when doing so, that this technique of construction is to be exercised
with caution. See 2A Sutherland, Statutory Construction, Section 47-36
(4th ed. 1973).
Accordingly, for the reasons given above, we conclude that the
language of 5 U.S.C. Section 4514 does not affect any of the award
provisions found in title 5, United States Code, other than the
provisions for awards for cost savings disclosures found in 5 U.S.C.
Sections 4511-4514.
B-214091, 64 Comp. Gen. 217
Matter of: General Services Administration Concession Contract,
January 28, 1985
The concession contract between the General Services Administration
and Guest Services Inc. (GSI), which includes a clause requiring that a
percentage of GSI's gross profits be credited to a reserve to be used by
GSI for the replacement of Government property, does not violate 31 U.S.
Code 3302(b) (1982), because the reserve is not "money for the
Government." Further, the contract does not violate 40 U.S. Code 303b
(1982) because of the historically unique nature of the GSA-GSI
agreement. Distinguishes 35 Comp. Gen. 113.
This decision is in response to a request from the Inspector General
of the General Services Administration (GSA). The Inspector General
inquires regarding the validity of a food service concession contract
entered into between Guest Services, Inc. (GSI) and GSA in view of 31
U.S.C. Section 3302(b) (1982), which requires that money received for
the Government be deposited in the Treasury, and 40 U.S.C. Section 303b
(1982), which requires that leases of Government property be for money
consideration only and that no part of the consideration be "any
provision for the alteration, repair, or improvement" of the property.
As set forth below, we conclude that the contract in question violates
neither 31 U.S.C. Section 3302(b) nor 40 U.S.C. 303b.
Pursuant to a July 21, 1971 contract with GSA, GSI operates food
concessions and other services in public buildings. GSA, in turn,
provides appropriate space in Government buildings as well as certain
equipment. Although no rent is charged, GSA assesses standard level
user charges for the space used by GSI in Government buildings against
the agencies occupying the buildings. The contract also includes a
provision whereby GSI is to credit a certain percentage of its income to
a reserve which is to be used for the purchase of new equipment.
Contract clause IX provides in part:
B. RESERVE FOR PURCHASE AND REPLACEMENT OF GOVERNMENT-OWNED
EQUIPMENT:
GSI shall establish a Reserve in its accounting system for the
replacement of Government-owned equipment which shall be used with
the approval of GSA for the replacement of Government-owned
equipment and its component parts. The Reserve shall also be
available with the joint approval of the contracting parties for
the purchase of new equipment, which shall thereupon become the
property of the Government.
C. At the end of each accounting period GSI shall credit to
the Reserve on its books an amount up to one and one-half (1 1/2%)
percent of its gross income under this Agreement for such periods,
and such amounts shall be a general obligation of the Corporation
for the above purpose. * * *
The contract further provides that all equipment acquired under the
reserve fund provision "shall become the property of the Government."
(Clause VIIC.) In the event of contract termination, the balance of the
reserve is paid by GSI to GSA, either in cash or in assets. (Clause
XVIIF.) Prior to contract termination, the reserve fund remains
exclusively within the control of GSI.
The first statute to which the Inspector General addresses his
inquiry is 31 U.S.C. Section 3302(b) (1982) which reads:
* * * (A)n official or agent of the Government receiving money
for the Government from any source shall deposit the money in the
Treasury as soon as practicable without deduction for any charge
or claim.
This statute requires an agency to deposit into the General Fund of
the Treasury any funds it receives from sources outside of the agency
unless the receipt constitutes an authorized repayment or unless the
agency has statutory authority to retain the funds for credit to its own
appropriations. See, e.g., 62 Comp. Gen. 678, 679-80 (1983); 62 Comp.
Gen. 70, 72-73 (1982).
The second statute for consideration is 40 U.S.C. Section 303b
(1982), which reads:
* * * (E)xcept as otherwise specifically provided by law, the
leasing of buildings and properties of the United States shall be
for a money consideration only, and there shall not be included in
the lease any provision for the alteration, repair, or improvement
of such buildings or properties as a part of the consideration for
the rental to be paid for the use and occupation of the same. The
moneys derived from such rentals shall be deposited and covered
into the Treasury as miscellaneous receipts.
This statute requires that Federal agencies lease their property for
money consideration only. It expressly prohibits the Government from
accepting agreements to alter, repair, or improve leased property as
consideration. B-205685, December 22, 1981.
In 35 Comp. Gen. 113 (1955), we reviewed a somewhat similar
concession contract covering Government buildings outside the District
of Columbia. The contract in 35 Comp. Gen. 113 included a reserve
clause, which, like the clause here under review, required that a fixed
percentage of the contractor's gross revenue be set aside in an account
to be used for the repair and replacement of Government-supplied
equipment. However, unlike the reserve clause here under review, the
reserve clause in 35 Comp. Gen. 113 required the actual deposit of funds
in a "special account in a bank," rather than a simple book entry in the
contractor's internal accounts.
We concluded in 35 Comp. Gen. 113 that the reserve clause there under
review violated both 31 U.S.C. Section 484 (now Section 3302(b)) and 40
U.S.C. Section 303b. We found that funds deposited pursuant to the
reserve clause constituted "money for the use of the United States"
within the meaning of section 484, and accordingly, those funds were
required to be deposited as miscellaneous receipts.
We conclude that 35 Comp. Gen. 113 is distinguishable from the case
at hand, and that the reserve clause here under review does not violate
either 31 U.S.C. Section 3302(b) or 40 U.S.C. Section 303b. Here, the
reserve constitutes a mere bookkeeping entry in the internal accounts of
GSI. Unlike the circumstances in 35 Comp. Gen. 113, there is no actual
transfer of funds into a bank account for the future use of the
Government. The reserve in this case does not constitute "money for the
Government," which would be required to be deposited as miscellaneous
receipts pursuant to 31 U.S.C. Section 3302(b) or 40 U.S.C. Section 303b
(assuming that the GSA-GSI agreement is a "lease" under the latter
section), but rather constitutes a balance sheet indication of the
extent of GSI's responsibility to repair and replace Government
property. In the past we have taken the position that when a private
party responsible for loss or damage to Government property agrees to
replace it or have it repaired, the agency may accept the offer and is
not required to transfer an amount equal to the cost of the repair or
replacement to miscellaneous receipts. B-87636, August 4, 1949. See
also 14 Comp. Dec. 310 (1907). (We note, however, that any reserve
balance paid to GSA upon contract termination would be required to be
deposited in the Treasury as miscellaneous receipts.)
On the question of whether the agreement under consideration in 35
Comp. Gen. 113 was a lease under 40 U.S.C. Section 303b, we observed
that:
Whether the contracts are leases or not, they partake of the
nature of leases to such an extent that the provisions of 40
U.S.C. Section 303(b) properly may be regarded as at least
persuasive that * * * there should not be included in the
consideration any provision for repair or improvement of the
properties involved. 35 Comp. Gen. at 116.
We reached the same result and found agreements to violate section
303b in 41 Comp. Gen. 493 (1962) (concession contract for visitor
services in national parks), 42 Comp. Gen. 650 (1963) (audio tour system
in the National Zoo), and 49 Comp. Gen. 476 (1970) (management contract
for parking garage in Federal building).
However, in view of the unique nature of the GSA-GSI agreement here
under review, we conclude that the analysis in 35 Comp. Gen. 113, and
subsequent cases, should not be applied in the instant case. As the
submission of the GSA General Counsel points out, GSI historically has
maintained a very close relationship with the Federal Government.
During its early history, and until years after the signing of the
agreement here in question, GSI served the Federal Government only,
operated exclusively on Federal property and was substantially
controlled by the Government. In a 1978 report, this Office reviewed
the same GSA-GSI agreement here under review. General Accounting
Office, Benefits General Services Administration Provides By Operating
Cafeterias In Washington, D.C., Federal Buildings, LCD-78-316, B-114820,
May 5, 1978. In that report, we concluded:
Although GSA could charge GSI for the use of cafeteria space,
the July 21, 1971, agreement between GSA and GSI provides, in
part, the GSA is to furnish suitable space and certain equipment
at no charge other than the consideration of GSI's operating and
using them for the benefit of the Government. GSA is given the
right to review GSI's annual budget and the menu pricing structure
for foods and beverages. We determined that the agreement between
GSA and GSI does not involve a lease of space but, instead, is a
license to use assigned space in consideration of the performance
of the agreed to services. The agreement is not unlawful,
improper, or contrary to public policy, even though GSI may appear
to enjoy a competitive advantage over other food service operators
in the vicinity of Federal cafeterias.
If cafeteria operations were required to be fully
self-supporting, the cost of food to the customer would increase
considerably. These cafeterias cannot be compared to commercial
ones, because operating hours are limited to breakfast and lunch
during regular Government workdays only. A captive but limited
clientele is served, and food prives must be approved by GSA. If
the meal prices were set to cover full costs, the drop in
patronage might be so great as to make the operations impractical.
Without the substantial indirect assistance provided, GSA
believes that the contractor could not provide reasonably priced
food service in Federal buildings. Id. at Appendix I, 3-4, 6.
Our conclusion that the GSA-GSI agreement constitutes a license, not
a lease, and was not unlawful was based on such factors as the absence
of rent, absence of a specific term, limitations on the right of
exclusive possession and control, and the right to revoke the permit at
any time. B-114820-0.M., December 14, 1977.
Therefore, we conclude thatit would not be appropriate in the case at
hand to apply the analysis of 35 Comp. Gen. 113, and subsequent cases,
in view of the historically unique nature of the GSA-GSI agreement and
our conclusion in our 1978 audit report, discussed above, that the
agreement was not unlawful. Accordingly, we conclude that the 1971
GSA-GSI concession contract here under review violates neither 31 U.S.C.
Section 330.2(b) (1982) nor 40 U.S.C. Section 303b (1982).
We note that the submission of the GSA Inspector General indicates
that the relationship between GSI and the Government has been evolving
into a more arms-length relationship. For example, no active Federal
employees are now on GSI's board, and GSI is now audited by a private
firm, rather than by the General Accounting Office. We conclude,
nonetheless, that enough of the unique relationship between GSI and the
Government remains, such that our conclusion in our 1978 report that the
1971 GSA-GSI agreement is not unlawful continues to be valid.
B-215598, 64 Comp. Gen. 215
Matter of: Bobbie W. Curtis - Real Estate Espenses - Extension of
Time Limit, January 23, 1985
An employee entered into a "land sale agreement" in order to sell his
former residence at his previous permanent duty station. Claim is
denied here since the expenses in question were not incurred until 3
years and 26 days after the employee reported for duty at his new duty
station. This is in excess of the maximum allowable period permitted
for the completion of real estate transactions, 3 years in this case.
Larry W. Day, 57 Comp. Gen. 770 (1978), clarified.
This decision is in response to a request from Mr. Kenneth F. Chute,
Finance and Accounting Officer, National Security Agency (NSA), Fort
George G. Meade, Maryland. The question presented is whether an NSA
employee may be reimbursed for certain otherwise allowable relocation
expenses resulting from the sale of his residence at his former duty
station where the residence was sold through a "land sale" agreement and
the expenses in question were not actually incurred until 3 years and 26
days after he reported for duty at his new duty station. We hold that
the employee's claim must be denied since the expenses in question were
not incurred within the maximum allowable time period of 3 years.
Mr. Bobbie W. Curtis, an employee of NSA, was authorized permanent
change of station (PCS) travel and relocation expenses from his former
residence in Shrewsbury, Pennsylvania, to his new duty station in Omaha,
Nebraska, by a travel order dated November 7, 1980. He reported for
duty in Omaha on January 5, 1981. His former residence was sold through
a "land sale" agreement, which was executed on July 20, 1981. In August
1981, NSA paid certain expenses connected with this agreement. However,
the "final settlement" for other expenses was not made until January 31,
1984, which was 3 years and 26 days after Mr. Curtis reported for duty
in Omaha, Nebraska. These other expenses for which Mr. Curtis seeks
reimbursement amount to $917.35, consisting of $167.35 for costs of
transfer of deed, and $750 for the transfer tax. The agency does not
dispute the difficulties that Mr. Curtis had in selling his former
residence, which was also a reason for using a "land sale" agreement.
Consequently, under the provisions of Joint Travel Regulations, vol. 2,
para. C14000-2 (Change No. 208, February 1, 1983), (JTR), NSA granted
Mr. Curtis an extension of time to complete his real estate transactions
to January 5, 1984. See also paragraph 2b of GSA Bulletin FPMR A-40,
Supplement 4, August 23, 1982, which is the basis for the above JTR
provision.
Our decisions regarding what are variously referred to as "land sale
agreements," "land sale installment contracts," or "contracts for deed"
are applicable since such contractual arrangements typically involve
transfer of the deed only after full payment of the purchase price by
installments over a period of time, as is the case here. Drawing on the
common law notion of equitable conversion, we have held that the
transfer of equitable ownership of property which is effected through a
valid land sale contract amounts to a "purchase" for purpose of
reimbursement. Larry W. Day, 57 Comp. Gen. 770 (1978), citing Larry J.
Light, B-188300, August 29, 1977. In this case, although legal title to
the property was retained by the seller (Mr. Curtis), the effect of the
contract was to transfer equitable ownership of the property to the
buyer. Thus, the "settlement date" involved in this transaction was the
date the contract was executed, namely, July 20, 1981. See Larry J.
Light, B-188300, supra, at 3.
The question which arises is whether Mr. Curtis' expenses may be
considered as having been incurred within the time period allowed for
reimbursement. See Larry W. Day, 57 Comp. Gen. 770, 772 (1978). Based
on the rationale that all employees should be treated uniformly, Day
held that an employee who enters into a "contract for deed" transaction
may only be reimbursed for real estate expenses incurred within 2 years
of the date of his transfer, i.e., the date on which he reported to his
new permanent duty station.
The 2-year period was used in Day because, under the then existing
version of paragraph 2-6.1e of the Federal Travel Regulations, the
maximum time period that could be allowed for the completion of real
estate transactions was 2 years. We note however, that in Mr. Curtis'
case the maximum 2-year time limit of the earlier version of the Federal
Travel Regulations, FPMR 101-7 (September 1981) (FTR), could be and was
extended to a maximum of 3 years because of a subsequent change in the
FTR. The new provisions permitting an extension of the 2-year time
limitation for completion of residence transactions to 3 years, were
added to FTR para. 2-6.1e by GSA Bulletin FPMR A-40, Supplement 4,
August 23, 1982, and were effective for employees whose 2-year
entitlement period had not expired prior to August 23, 1982. See
paragraph 2b of GSA Bulletin FPMR A-40, Supplement 4, August 23, 1982.
Accordingly, the time allowable for employees in Mr. Curtis' situation
is a maximum of 3 years. Larry W. Day, 57 Comp. Gen. 770 (1978), which
allowed only a maximum of 2 years, is thus clarified to recognize that
the period for incurring reimbursable expenses in a "land sale" or
"contract for deed" type cases is the maximum time period permitted for
the completion of real estate transactions under the applicable
provisions of the Federal Travel Regulations.
In the present case, since the expenses for which Mr. Curtis seeks
reimbursement were incurred after January 5, 1984 (3 years from the date
on which he reported to his new permanent duty station), they were not
incurred within the applicable maximum time limitation of 3 years.
Thus, these expenses are not reimbursable.
Accordingly, the voucher submitted by Mr. Curtis will be retained in
this Office and may not be certified for payment.
B-216016, 64 Comp. Gen. 205
Matter of: Bertram C. Drouin - Temporary Duty vs. Permanent Change
of Station, Relocation Expenses, and Reimbursement for Automobile Rental
Charges, January 22, 1985
An employee received travel and subsistence allowances during an
alleged 6-month detail in Washington, D.C., and then was permanently
assigned to Washington. Whether a particular location should be
considered a temporary or permanent duty station is a question of fact
to be determined from the orders directing the assignment, the duration
of the assignment, and the nature of the duties to be performed. Under
the facts and circumstances of this case, we conclude that the
employee's 6-month detail in Washington constituted a legitimate
temporary duty assignment. Therefore, he was entitled to temporary duty
allowances in Washington until the day he received definite notice of
his transfer there.
An employee was transferred from Chicago, Illinois, to Washington,
D.C., following a 6-month temporary duty assignment in Washington. The
employee's claim for moving expenses may be allowed if otherwise proper,
since the change of an employee's official station to the location of
his temporary duty assignment will not defeat his entitlement to the
relocation expenses authorized by 5 U.S.C. 5724 and 5724a.
An employee was reimbursed for the costs of renting an automobile to
transport his personal effects from his permanent duty station to his
temporary duty site, and for local transportation at his temporary duty
station. The employee may not retain full reimbursement for the
automobile rental charges since the rental was not approved based on a
determination of advantage to the Government, and there is no authority
to reimburse rental costs for periods in which no official business is
performed. However, the employee may retain reimbursement attributable
to his use of the rental car for official travel, limited to the
constructive cost of transportation by a more advantageous mode.
The Commissioner of Customs has requested our decision concerning Mr.
Bertram C. Drouin, a former employee of the United States Customs
Service stationed in Chicago, Illinois, who was allegedly detailed to
Washington, D.C., for 6 months prior to a permanent reassignment there.
The Commissioner frames the issues for our determination as follows:
(1) whether Mr. Drouin's 6-month detail in Washington should be regarded
as temporary duty or as a permanent change of station; (2) whether Mr.
Drouin must repay any portion of the temporary duty allowances he
received during the 6-month detail; (3) whether Mr. Drouin may be
allowed reimbursement for relocation expenses associated with his
transfer from Chicago to Washington; and (4) whether Mr. Drouin may
retain reimbursement for the costs of renting and storing and automobile
during the period of his detail in Washington.
For the reasons discussed below, we hold that Mr. Drouin's 6-month
detail constituted a legitimate temporary duty assignment, and,
therefore, that he may retain the travel and subsistance expenses he
received in Washington. However, if Customs determines that Mr. Drouin
received definite notice of his transfer to Washington prior to the end
of his detail, he may not retain the temporary duty allowances he
received after the date of that notice. Further, we hold that Mr.
Drouin may be paid relocation expenses associated with his transfer from
Chicago to Washington, even though the transfer followed an extended
period of temporary duty. Finally, we hold that Mr. Drouin may not
retain full reimbursement for the automobile rental and storage charges
in question, since the rental was not authorized as advantageous to the
Government, and the automobile was used primarily for personal travel.
However, Mr. Drouin may be allowed rental charges attributable to his
use of the automobile for official travel, limited to the constructive
cost of transportation by a mode which is more advantageous to the
Government.
In 1982, Customs abolished its Office of Special Enforcement in
Washington, D.C., leaving the agency without an office to handle
international enforcement. At the request of the Deputy Director,
Office of Investigations, Mr. Drouin was detailed from his position as
Regional Director (Investigations), Chicago, Illinois, to Washington,
D.C., and assigned responsibility for establishing and organizing a new
office for the supervision of international enforcement. The Deputy
Director, who supervised Mr. Drouin during the detail, states that he
selected Mr. Drouin for the assignment because he had previously managed
international enforcement, and because local personnel lacked the
necessary experience.
On August 9, 1982, Mr. Drouin reported for duty in Washington under
orders authorizing travel for the period August 9 to September 7, 1982,
and describing the purpose of the travel as a "detail to headquarters."
He was not assigned to any established position during the detail, but
served under a series of different job titles until February 19, 1983.
On that date, Mr. Drouin was permanently transferred to Washington and
assigned to the newly created position of Director, Office of
International Enforcement Staff. Between August 9, 1982, and February
19, 1983, Mr. Drouin received $8,959.56 in temporary duty allowances.
Following an audit of various travel and relocation claims filed by
Mr. Drouin, Customs' Office of Internal Affairs decided that Mr.
Drouin's 6-month detail represented a permanent change of station rather
than a temporary duty assignment, and therefore, that he should repay
the temporary duty allowances he had received. As support for this
conclusion, Internal Affairs cited our decisions holding that an
employee who is notified of a permanent change of station may not be
paid per diem after he arrives there. For reasons which are discussed
below, Internal Affairs found that Mr. Drouin knew he would be
transferred to Washington before he reported for temporary duty there on
August 9, 1982.
The Office of Internal Affairs also found it significant that,
shortly after Mr. Drouin began his detail in Washington, the Regional
Commissioner (Enforcement), North Central Region, requested that the
region be reimbursed for his per diem and salary expenses. Further, the
Office of Internal Affairs noted that Mr. Drouin relinquished his
apartment in Chicago after beginning his detail in Washington, and that
his family maintained a separate residence in the Washington area.
The Deputy Assistant Commissioner, Office of Enforcement, disagreed
with Internal Affairs' conclusion that Mr. Drouin knew he would be
transferred to Washington before he reported for temporary duty there.
In view of this disagreement, the Commissioner of Customs asked us to
determine whether Mr. Drouin's detail during the period August 9, 1982,
to February 19, 1983, should be regarded as temporary duty or as a
permanent change of station, and whether he must repay any portion of
the temporary duty allowances he received during that period.
The Federal Travel Regulations, FPMR 101-7 (September 1981) (FTR), do
not contain a formal definition of a "temporary duty assignment."
However, under the provisions of FTR para. 1-7.6a, an employee may not
be paid per diem or actual subsistance expenses at his permanent duty
station or at the place of abode from which he commutes daily to his
official station.
The agency's designation of an employee's permanent duty station is
not determinative. Frederick C. Welch, 62 Comp. Gen. 80 (1982). In 31
Comp. Gen. 289, 291 (1952), we stated that:
* * * the authority to determine and designate the post of duty
of an officer or employee of the Government includes only the
authority to fix the place at which the employee should actually
establish official headquarters, and from which he should in fact
operate, which, ordinarily is the place where the employee would
be required to spend most of his time. The designation of any
other place, for the purpose of giving the employee a subsistence
allowance for the greater portion, or all, of his time, is not
within the authority vested in the head of a department or other
administrative official charged with the duty of designating posts
of duty of Government employees, and does not entitle an employee
to per diem when absent therefrom and performing duty at another
place, which latter place is in fact his post of duty. (Citations
omitted.)
We have held that the question whether an assignment to a particular
location should be considered a temporary duty assignment or a permanent
change of station is a question of fact to be determined from the orders
directing the assignment, and from the nature and duration of the
assignment. J. Michael Tabor, B-211626, July 19, 1983; and Don L.
Hawkins, B-210121, July 6, 1983. The duration and nature of the duties
assigned are of particular importance in making the determination as to
whether an assignment to a particular location is a permanent change of
station. Peter J. Dispenzirie, 62 Comp. Gen. 560 (1983); and Don L.
Hawkins, supra, at 4.
1. The duration of the assignment. Although there is no hard and
fast rule as to the permissible duration of a temporary duty assignment,
we have generally stated that such assignments are of brief duration.
See J. Michael Tabor, B-211626, supra, at 5; and 36 Comp. Gen. 757, 758
(1957). Thus, in Peck and Snow, B-198887, September 21, 1981, we
determined that an assignment of 2 years and 9 months was, in fact, a
permanent change of station rather than a temporary duty assignment.
Similarly, in Peter J. Dispenzirie, 62 Comp. Gen. 560, above, we held
that a 2-year assignment could not be regarded as temporary duty.
Further, in J. Michael Tabor, B-211626, cited previously, we determined
that an assignment of 18 months was far in excess of the reasonable
duration of a temporary duty assignment. See also 36 Comp. Gen. 757.
On the other hand, we have held that assignments lasting for 2 to 4
months generally should be regarded as temporary duty assignments.
Nelson J. Krohn, B-200745, September 1, 1981; and Peck and Snow,
B-198887, supra, at 5. In Frederick C. Welch, 62 Comp. Gen. 80, above,
we held that the assignment of an employee to a seasonal worksite for 6
months every year constituted a "long term" temporary duty assignment,
rather than a permanent change of station. Also, in Robert E. Larrabee,
57 Comp. Gen. 147 (1977), we approved an agency's designation of a 17
month assignment as temporary since the assignment was initially
intended to cover only a 5 month period, and was twice extended for no
more than 6 months at a time.
Mr. Drouin reported for duty in Washington on August 9, 1982, under
orders authorizing temporary duty travel for a 1-month period ending
September 7, 1982. His detail was extended to February 19, 1983, for a
total duration of 6 months. Under these circumstances, and in line with
the above cited decisions, we hold that Mr. Drouin's detail was of
sufficiently short duration to constitute a legitimate temporary duty
assignment.
2. The nature of the duties performed. As we discussed previously,
the character of an assignment must be determined not only from its
duration, but also from the nature of the duties assigned. Examples of
duties normally associated with a temporary duty assignment include: an
assignment to a replacement pool for further assignment; an assignment
to a school as a student for the purpose of pursuing a course of
instruction of definite duration; or an assignment to a particular
station under conditions contemplating a further assignment to a new
duty station or a return to the old duty station 24 Comp. Gen. 667, 670
(1945). In contrast, we held in Peter J. Dispenzirie, 62 Comp. Gen.
560, cited previously, that the assignment of an employee to act as the
head of a regional office for 2 years is not the type of assignment
which is normally made on a temporary basis. In J. Michael Tabor,
B-211626, above, we held that an employee serving as an administrative
assistant for 17 months could not be considered to be on temporary duty,
since the record did not show that he had special skills needed to
perform the assignment, or that local personnel could not have been
assigned to the duties.
In this case, Mr. Drouin was detailed to Washington for the purpose
of establishing and organizing a new office of international
enforcement. The Deputy Director, Office of Investigations, states that
he requested the temporary assignment because Mr. Drouin had previously
managed international enforcement, his assistance was "critically needed
due to a headquarters reorganization," and "no one in headquarters could
manage the (new) division because of the lack of experience." During the
period of the detail, Mr. Drouin was not assigned to an established
position but served under a series of different job titles.
Considering the transitory nature of the project to which Mr. Drouin
was assigned, and the agency's need for his special skills and
experience, we conclude that Mr. Drouin's assignment in Washington
fulfilled a legitimate objective of temporary duty. Compare J. Michael
Tabor, B-211626, above. Accordingly, for the reasons stated above, we
hold that Mr. Drouin was properly assigned to a temporary duty status
for the period beginning August 9, 1982.
As indicated previously, the Office of Internal Affairs determined
that Mr. Drouin was not entitled to temporary duty allowances in
Washington because he knew he would be transferred there before
beginning his detail on August 9, 1982. Apparently, this finding was
based on an interview conducted with Mr. Drouin on January 31, 1983, in
which he stated that the Commissioner of Customs had decided "more than
6 months ago" to permanently reassign him to Washington. Internal
Affairs also relied on an interview with the Assistant Regional
Commissioner (Enforcement) in Chicago, who said that Mr. Drouin had
informed him of the transfer "sometime prior to October 1, 1982."
The Deputy Assistant Commissioner, Office of Enforcement, disagreed
with the conclusion reached by Internal Affairs, explaining the relevant
facts as follows. In the latter part of 1981, the Commissioner of
Customs tentatively offered Mr. Drouin a permanent reassignment to
Washington, and Mr. Drouin rejected this offer. Sometime prior to
August 1982, Customs officials generally discussed the staffing of
management positions in the new office of international enforcement and
identified Mr. Drouin as a candidate for reassignment, but deferred the
selection of personnel pending the creation of the new office. At the
time Mr. Drouin reported for temporary duty in Washington, he was an
applicant for positions in several of Customs' regional offices. It was
not until after Mr. Drouin reported for temporary duty in Washington
that he applied for a permanent position there. The Commissioner of
Customs selected Mr. Druoin for reassignment to Washington in January
1983, and his permanent position there was established on February 17,
1983.
As pointed out by Internal Affairs, we have held that a transfer is
effective on the date an employee arrives at his new duty station.
Thomas S. Roseburg, B-188093, October 18, 1977. On this basis, we have
held that an employee who receives definite notice of a permanent change
of station prior to reporting for temporary duty at the new station is
not entitled to be paid per diem or actual subsistence expenses after he
arrives there. See John W. Corwine, B-203492, December 7, 1982.
The record before us does not support a determination that Mr. Drouin
received definite notice that he would be transferred to Washington
before he reported for temporary duty there in August 1982. While Mr.
Drouin may have been aware prior to August 1982, that he was being
considered for a permanent reassignment to Washington, the Commissioner
of Customs did not select him for the reassignment until January 1983.
Under these circumstances, we conclude that Mr. Drouin could not have
received definite notice of his appointment to a permanent position in
Washington before January 1983. See generally Modesto Canales,
B-186595, July 7, 1977, and April 10, 1978.
We note, however, that per diem may not be allowed at a place where
an employee is on temporary duty after he receives notice that such
place is to become his permanent duty station, even though there may be
an administrative delay in the processing and issuance of a formal
transfer order. See Modesto Canales, B-186595, cited above. Although
the record indicates that the Commissioner of Customs decided to
permanently reassign Mr. Drouin to Washington in January 1983, there is
no documentation concerning the date upon which this decision was
communicated to Mr. Drouin. Accordingly, Customs should ascertain
whether Mr. Drouin received notice of the transfer before the end of his
detail on February 19, 1983, and if necessary, redetermine his
entitlement to temporary duty allowances.
As further support for its determination that Mr. Drouin's assignment
to Washington represented a permanent change of station, the Office of
Internal Affairs points out that the Regional Commissioner
(Enforcement), North Central Region, requested and received
reimbursement for Mr. Drouin's salary and temporary duty expenses
beginning October 1, 1982. However, the Assistant Regional Commissioner
(Enforcement) of the North Central Region, who initiated the request for
reimbrusement, explains that, "(a)lmost without question, when someone
requests an employee who I have control over for a TDY (temporary duty)
assignment, I want to know who is going to pay the expenses. That's a
routine with me and I did it in the case of Mr. Drouin." Since it
appears that the North Central Region routinely requests reimbursement
for salary and subsistence expenses associated with the temporary duty
travel of its employees, we do not believe that its request for
reimbursement of Mr. Drouin's temporary duty expenses has any bearing on
the character of his assignment in Washington.
The Office of Internal Affairs also considers it significant that Mr.
Drouin gave up his apartment in Chicago after beginning his detail in
Washington, D.C., and that his family maintained a separate residence in
the Washington area. However, there is no requirement that an employee
maintain a residence at his permanent duty station in order to qualify
for per diem or actual subsistence expenses while on temporary duty away
from that station. See Robert E. Larrabee, 57 Comp. Gen. 147 (1977), at
150, 151; and Nicholas G. Economy, B-188515, August 18, 1977.
Furthermore since it appears that Mr. Drouin did not reside with his
family during the period of his temporary duty assignment in Washington,
there is no basis for reducing his lodging expenses during that period.
Compare Sanford O. Silver, B-187129, January 4, 1977, 56 Comp. Gen. 223.
Mr. Drouin incurred $837.71 in relocation expenses during the period
March 6 to April 8, 1983. While the record does not contain a
description of the claimed expenses, Customs poses a general question as
to whether relocation expenses are allowable where an employee is
transferred to the location at which he has been preforming extended
temporary duty.
As noted previously, an employee who is transferred to the location
at which he is performing temporary duty may not be paid per diem after
he receives definite notice of the transfer. However, the fact that an
employee is transferred to his temporary duty site does not defeat his
entitlement to the relocation expenses authorized by 5 U.S.C. Sections
5724 and 5724a (1982). See Steven F. Kinsler, B-169392, October 28,
1976; and NOAA Ship DISCOVERER, B-167022, July 12, 1976. Under
sections 5724 and 5724a, a transferred employee may be reimbursed for
various moving expenses including the costs of transporting his family
and household effects to the new duty station, residence sale and
purchase expenses, and miscellaneous expenses. Accordingly, Mr. Drouin
may be reimbursed for relocation expenses in the amount of $837.71, if
payment for the claimed items is otherwise allowable under 5 U.S.C.
Sections 5724 and 5724a.
Mr. Drouin periodically rented an automobile while he was temporarily
stationed in Washington, D.C. After he was reimbursed for rental and
storage charges totaling $1,877.42, Customs' Office of Internal Affairs
questioned his entitlement to be reimbursed for those expenses.
The audit report prepared by Internal Affairs shows that, shortly
after Mr. Drouin reported for temporary duty in Washington, his
supervisor verbally authorized him to use a rental car to return to
Chicago for the purpose of picking up his personal effects. Mr. Drouin
traveled to Chicago by a mode of transportation not described in the
record, and, on October 26, 1982, he rented a car there. On October 29,
1982, Mr. Drouin used the rental car to travel from Chicago to
Cincinnati, Ohio, where he apparently performed temporary duty for 2
days. He left Cincinnati on November 1, arrived in Washington on
November 2, and returned the car to the rental company on November 7,
1982. During the period October 26 to November 7, 1982, Mr. Drouin
incurred automobile rental charges totaling $872.03.
The remaining rental and storage charges are attributable to Mr.
Drouin's use of a rental car for local transportation in Washington
during the period August 9 to November 14, 1982. Mr. Drouin rented a
car locally on 5 different occasions, retaining the car for periods of 2
days to 3 weeks without the knowledge or approval of his supervisor.
Mr. Drouin states that he rented the car for official purposes,
explaining that he and other Customs employees temporarily stationed in
Washington used a rental car to commute between their lodgings and the
temporary worksite.
The Office of Internal Affairs concluded that Mr. Drouin was indebted
for the cost of renting and storing an automobile in Washington, since
he could have used a less expensive mode of local transportation.
However, Internal Affairs found that Mr. Drouin could be reimbursed for
the automobile rental charges he incurred in moving his personal effects
from Chicago to Washington, not to exceed the cost of common carrier
transportation between those two points.
Under FTR para. 1-3.2, an employee may use a rental car only if an
appropriate official has determined that the use of a common carrier or
other method of transportation would not be more advantageous to the
Government. See Robert P. Trent, B-211688, October 13, 1983. Even if
competent authority determines that a rental car is more advantageous to
the Government, an employee may not be reimbursed for the cost of the
rental unless he uses the automobile for official purposes. FTR para.
1-1.3b. See also Raymond E. Vener, B-199122, February 18, 1981.
Accordingly, we must determine whether Mr. Drouin received proper
authorization for the rental of an automobile, and used the automobile
for official purposes, (1) for his travel from Chicago to Washington,
during the period October 26 to November 7, 1982; and (2) for local
transportation in Washington, between August 9 and November 14, 1982.
1. Travel from Chicago to Washington. As indicated above, the
record indicates that Mr. Drouin's supervisor verbally authorized him to
rent an automobile to transport his personal effects from Chicago to
Washington. However, there is no evidence that this official determined
that Mr. Drouin's rental of an automobile would be more advantageous to
the Government than his use of a common carrier or other method of
transportation, as is required by FTR para. 1-3.2.
Furthermore, we note that Mr. Drouin rented the car in Chicago on
October 26, used it for travel between October 29 and November 2, and
did not return it to the rental agency until November 7, 1982. Thus,
the rental car either sat idle or was retained for Mr. Drouin's personal
convenience on 8 days during the 12-day rental period. Also, Mr.
Drouin's use of the rental car to transport his belongings from Chicago
to Washington must be regarded as peronal, since, at the time, he was
only temporarily assigned to Washington and had not been permanently
transferred there. See Laddie V. Birge, Jr., B-190525, April 7, 1978.
As we indicated previously, there is no authority to reimburse the cost
of car rental for a period in which no official business is performed.
See Lawrence B. Perkins, B-192364, February 15, 1979.
We note, however, that Mr. Drouin traveled from Chicago to Washington
via Cincinnati, Ohio, where he apparently performed temporary duty for 2
days. Where an employee performs official travel by a mode of
transportation not authorized as advantageous to the Government, we have
allowed reimbursement limited to the constructive cost of transportation
by a more advantageous mode. See Robert P. Trent, B-211688, supra, at
10, 11; and Sandra Massetto, B-206472, August 30, 1982. Therefore, if
Customs determines that Mr. Drouin actually performed temporary duty in
Cincinnati, he may be reimbursed for his return travel to Washington,
not to exceed the constructive cost of travel by common carrier or
another permissible mode of transportation.
2. Local travel in Washington, D.C. As indicated above, Mr. Drouin
periodically rented an automobile in Washington so that he and other
Customs employees could commute between their lodgings and the temporary
duty site. However, this rental was not approved based on a
determination of advantage to the Government, as is required by FTR
para. 1-3.2. Furthermore, we note that FTR para. 1-2.3, pertaining to
local transportation, contemplates that an employee on temporary duty
will ordinarily lodge in close proximity to the temporary duty site.
Thus, we have disallowed local travel expenses occasioned by an
employee's remote lodging, unless the employee demonstrates that
adequate lodging in the immediate vicinity was unavailable or that he
achieved an overall cost savings in travel expenses. Seymour A.
Kleiman, B-211287, July 12, 1983; and James Wasserman, B-192112,
October 11, 1978.
There is nothing in the record to show that Mr. Drouin was unable to
obtain lodging in an area serviced by public transportation, or that he
secured lodgings in a remote area in order to achieve an overall cost
savings. Absent such evidence, Mr. Drouin may not retain reimbursement
for those rental charges which exceed the cost of allowable local
transportation by a mode which is determined to be advantageous to the
Government. See Robert P. Trent, B-211688, supra, at 10, 11.
For the reasons stated above, the Commissioner's four questions are
answered as follows: (1) Mr. Drouin's 6-month detail in Washington was
in fact a temporary duty assignment; (2) he may, therefore, retain all
temporary duty allowances he received during the detail, unless Customs
determines that he received definite notice of his transfer prior to the
end of the detail; (3) Mr. Drouin may be paid relocation allowances
associated with his transfer from Chicago to Washington; and (4) Mr.
Drouin may retain reimbursement for automobile rental and storage
charges only to the extent that he used the automobile for official
purposes, and then limited to the constructive cost of travel by a more
advantageous mode of transportation. In collecting amounts owed by Mr.
Drouin, Customs should comply with the procedures set forth in 5 U.S.C.
Section 5514, as amended by the Debt Collection Act of 1982, Public Law
97-365, Section 5, 96 Stat. 1751.
B-215768, 64 Comp. Gen. 203
Matter of: Mary E. Branham, January 22, 1985
The Survivor Benefit Plan is an income maintenance program for the
families of deceased service members. Social security "offset"
provisions were included in this program because annuities are intended
to complement a Plan participant's social security coverage. No
reduction of an annuity by this offset is appropriate, however, if the
Social Security Administration determines that the annuitant is
completely ineligible for social security survivor benefits. Therefore,
an annuity offset is not required in the case of an Army Reserve
sergeant's widow who was determined ineligible for social security
survivor benefits because of her receipt of a governmental pension based
on her own employment.
The question presented is whether a military Survivor Benefit Plan
annuity may properly be subjected to reduction under social security
offset provision contained in the Plan even though the Social Security
Administration has determined that the annuitant is not entitled to
social security survivor benefits. /1/ We conclude that the Survivor
Benefit Plan annuity is not subject to reduction in those circumstances.
Mrs. Mary E. Branham is the surviving spouse of Sergeant Major Roy L.
Branhma, USAR (Retired). Prior to his death Sergeant Branham had become
qualified for retirement with pay as a member of the Army Reserve, and
he had elected to participate in the Survivor Benefit Plan, thus
choosing to receive military retired pay at a reduced rate in order to
provide the annuity authorized by that Plan for his wife if she survived
him.
Mrs. Branham is a retired Federal employee and is entitled to a civil
service annuity in her own right. Following her husband's death, a
Social Security Administration claims representative made a
determination that she was ineligible for social security survivor
benefits because of her status as a civil service annuitant, under
provisions of the social security laws and regulations applicable to
certain persons receiving pensions based on governmental employment not
covered by social security. /2/
Army finance and accounting officials have determined that Mrs.
Branham is entitled to a Survivor Benefit Plan annuity. Doubts have
arisen, however, concerning the matter of whether that annuity should be
reduced under a social security "offset" provision of the Survivor
Benefit Plan by an amount equal to the social security survivor benefit
that would apparently otherwise have been paid to her based on her
marriage to Sergeant Branham, but for the fact that she is also entitled
to the civil service annuity based on her own employment.
The Survivor Benefit Plan, 10 U.S.C. Sections 1447-1455, is an income
maintenance program for the families of deceased service members. The
provision of this statutory Plan brought into question here, subsection
1451(a)(3), prescribes a formula for the reduction of an annuity payable
to a surviving spouse predicated on --
* * * the amount of the survivor benefit, if any, to which the
widow or widower would be entitled under title II of the Social
Security Act (42 U.S.C. 401 et seq.) based solely upon service by
the person concerned * * * .
The Congress included this social security "offset" provision in the
Survivor Benefit Plan legislation because members of the uniformed
services have social security coverage, and annuities under the Plan
were generally designed to complement social security benefits. /3/
We have consistently held that this offset against a Survivor Benefit
Plan annuity is to be based on social security benefits attributable to
the military service of the deceased Plan participant to which the
annuitant "would be entitled," even if the annuitant may not have
actually applied for such benefits and may otherwise, for example, have
elected instead to receive social security payments based on personal
employment or the employment of some third person. /4/ We have also
expressed the view, however, that an offset is inappropriate if the
Social Security Administration has made a determination that the
annuitant is ineligible for such benefits. /5/
In the present case, the Social Security Administration made a
determination that Mrs. Branham had no eligibility for or entitlement to
social security survivor benefits in any amount whatever during the
period in question. That determination is not subject to review by the
Department of the Army, or by us. /6/
As indicated, the Social Security Administration's determination was
based on provisions of law and regulation which place restrictions on
the social security survivor benefits payable to certain persons
receiving pensions based on governmental employment. We are unaware of
any similar provision contained in the Survivor Benefit Plan, however,
which might operate to reduce an annuity under the Plan on account of
the recipient's independent and concurrent entitlement to a civil
service annuity.
As further indicated, the Survivor Benefit Plan was designed as a
family income maintenance program, and social security offset provisions
were included because Plan annuities were intended to complement service
members' social security coverage. Here, the determination was that
Mrs. Branham would not be eligible for or entitled to any social
security survivor benefits as the result of Sergeant Branham's death, so
that there appears to be no basis for a reduction in the amount of her
Survivor Benefit Plan annuity under the social security offset provision
specifically brought into question, or for any other reason.
Accordingly, we conclude that Mrs. Branham's Survivor Benefit Plan
annuity was not subject to reduction. The voucher presented for
decision is returned for payment, if otherwise correct.
(1) This action is in response to a request received from Mr. J. E.
Boone, Special Disbursing Agent, U.S. Army Finance and Accounting
Center, for an advance decision concerning the propriety of certifying a
voucher for payment in the amount of $1,087.50 in favor of Mrs. Mary E.
Branham, which amount represents additional Survivor Benefit Plan
annuity moneys due to her for the period ending May 31, 1984, if it is
concluded that her annuity is not subject to the social security offset.
The request was forwarded here by the Office of the Comptroller of the
Army after it was assigned submission number DO-A-1443 by the Department
of Defense Military Pay and Allowance Committee.
(2) 42 U.S.C. Section 402(b)(4)(A) and 20 C.F.R. Section 404.408a.
(3) See, generally, S. Rep. No. 1089, 92d Cong., 2d Sess. 29,
reprinted in 1972 U.S. Code Cong. & Ad. News 3288, 3304; H.R. Rep. No.
481, 92d Cong., 1st Sess. 14 (1971).
(4) See, generally, Mary L. Lott, 60 Comp. Gen. 129, 132 (1980);
Marjorie S. Nester, 58 Comp. Gen. 795 (1979); Mary K. Bitterman and
Carmen K. (Kincaid) Klimes, 57 Comp. Gen. 339, 341-343 (1978).
(5) Mary K. Bitterman and Carmen K. (Kincaid) Klimes, 57 Comp. Gen.
at 340-341.
(6) See 42 U.S.C. Section 405; 20 C.F.R. Section 404.900 et seq.
B-215528, 64 Comp. Gen. 200
Matter of: Administrative Law Judges - Court Leave, January 22, 1985
Seven Administrative Law Judges (ALJs) seek court leave for service
as witnesses for plaintiff in Assn. of Administrative Law Judges, Inc.
v. Heckler, Civil Action No. 83-0124 (D.D.C.). The suit was brought by
the plaintiff association to challenge certain practices of the Social
Security Administration in management of ALJs and their caseloads. The
ALJs attended the trial subject to court issued subpoenas and each
testified for the plaintiff. They are entitled to court leave under 5
U.S. Code 6322(a)(2) (1982) for necessary traveltime, time spent
testifying, and time waiting to testify.
Seven Administrative Law Judges (ALJs) seek court leave for service
as witnesses for plaintiff in Assn. of Administrative Law Judges, Inc.
v. Heckler, Civil Action No. 83-0124 (D.D.C.). Although each Judge is a
member of the Association, none of them is an individual plaintiff nor
is the lawsuit maintained as a class action. The Judges are not
precluded from court leave under our decisions holding that such leave
is not available to an employee who is a party to the lawsuit.
The Department of Health and Human Services (Agency and the
Association of Administrative Law Judges, Inc. (Association) have
jointly requested an opinion of the Comptroller General regarding court
leave under 5 U.S.C. Section 6322 for seven Administrative Law Judges
(ALJs) who were witnesses for the plaintiff in the matter of Association
of Administrative Law Judges, Inc. v. Margaret M. Heckler, Civil Action
No. 83-0124 (D.D.C.). The suit was brought by the plaintiff, an
Association of ALJs in the Social Security Administration (SSA), to
challenge certain practices of SSA in management of ALJs and their case
loads.
The trial in the case commenced on Tuesday, February 28, 1984, and
concluded on Monday, March 12, 1984. On February 22, 1984, plaintiff's
counsel mailed subpoenas to the seven ALJs that counsel intended to call
as witnesses, ordering them to appear in the federal courthouse in
Washington, D.C., on February 28, 1984. /1/ The Regional Chief
Administrative Law Judges were instructed to grant to each ALJ who
testified for the plaintiff court leave for each day of travel, 1 day
for the day on which the judge was ordered to appear, and leave for the
day on which the judge actually testified. No judge testified for more
than 1 day. /2/
At the end of the pay period, each judge signed for the court leave
to which he or she believed himself or herself entitled and, pending our
decision, no changes have been made in the amounts claimed by the
individual judges on their leave cards. The agency states that when it
receives our decision, adjustments will be made as appropriate.
The statute generally applicable to court leave for government
employees as witnesses in actions to which the United States is a party
is 5 U.S.C. Section 6322, which provides in subsection (a) that a
Federal employee is entitled to leave, without loss of or reduction in
pay or leave to which he is otherwise entitled, when in response to a
summons in connection with a judicial proceeding he serves: (1) as a
juror, or (2) except as provided in subsection 6322(b), as a witness on
behalf of any party when the United States, the District of Columbia, or
a state or local government is a party to the proceeding.
Section 6322(a) was amended to its present form in 1976 with a view
toward "eliminating inequities" between Government employees appearing
on behalf of the Government who are effectively paid for the court time,
"and those who are required to take annual leave or leave without pay
when they appear as witnesses on behalf of a private party in a judicial
proceeding to which the United States is a party." S. Rep. No. 830, 94th
Cong., 2d Sess. (1976), reprinted in 1976 U.S. Code Cong. & Admin. News,
1207-08. Thus, the legislative intent is to treat witnesses for and
against the Government and Government agencies on equal terms.
Our past decisions have held that the authority of 5 U.S.C. Section
6322 to grant court leave to a government employee summoned as a witness
in certain proceedings does not extend to an employee who is the
plaintiff in such action. Wilma Pasake, 59 Comp. Gen. 290 (1980), and
James L. Sweeney, B-201602, April 1, 1981. In 62 Comp. Gen. 87 (1982),
we applied this same rationale to deny court leave to an employee who
was the defendant in a state court action.
This line of decisions, however, is not applicable to the present
case. The preclusion of court leave for an employee who is a "party in
the court action" does not extend to the members of a plaintiff or
defendant organization where the individual members are not, in fact,
parties. In this case, the Association of Administrative Law Judges, an
incorporated organization, was the only plaintiff. While the
Association presumably sought to serve the interests of its membership
by this lawsuit, none of the members was named as a plaintiff nor was
the suit maintained as a class action on behalf of the members.
For the above reasons, each of the ALJs is qualified for court leave
in connection with their service as witnesses. The only issue that
remains is the amount of court leave to which they are entitled. The
submissions by the agency and the ALJs do not come to grips directly
with this issue. As noted previously, the agency allowed court leave
only for travel days, the day the judge was ordered to appear, and the
day he or she actually testified. It is not entirely clear from the
record before us whether the additional leave claimed by the ALJs
represents time that the ALJs were required to spend at the trial
incident to their roles as witnesses or whether it represents time they
spent there as observers or advisors to the Association's counsel.
We do not believe that court leave may be used for periods of time
beyond that reasonably incident to the employee's role as a witness. In
addition to necessary traveltime and time spent testifying, this would
include time waiting to testify. With regard to this case, the ALJs do
not specifically assert, nor do their affidavits demonstrate that their
claims cover only witness/related time. On the other hand, the agency
does not specifically assert that the claims go beyond witness-related
time. The agency does say, as noted above, that appropriate adjustments
will be made when our decision is received.
Accordingly, we cannot resolve this issue on the present record.
Instead, we conclude that the claims should be allowed as stated unless
the agency determines, after consultation with the ALJs and counsel for
the Association, that the amount of time claimed is excessive under the
standard set forth above.
Each of the seven ALJs attended the trial in question in response to
a summons in connection with a judicial proceeding for which they served
as witnesses on behalf of a plaintiff organization where the United
States was a party to the proceeding. Accordingly, we conclude that the
seven ALJs should be allowed court leave under 5 U.S.C. Section
6322(a)(2) for the amount of time that each judge is entitled to under
the standards set forth above.
If any annual leave that is credited to the seven Administrative Law
Judges as a result of this decision is required to be forfeited by the
maximum carry-over provision of 5 U.S.C. Section 6304(a), then such
forfeited leave should be treated as having been caused by
administrative error and credited to a separate leave account for the
employee under 5 U.S.C. Section 6304(d)(1) and (2).
(1) Several ancillary issues have been resolved through the
compilation and augmentation of the administrative record in this case.
For example, the agency alleged that subpoenas for the ALJs lacked the
seal of the District Court and all the ALJs to whom they were mailed
resided beyong the 100-mile limit set forth in Rule 45 of the Federal
Rules of Civil Procedure. The Association has verified that while the
embossed seal may not be visible on the photocopies of the subpoenas the
originals were stamped with the seal of the District Court for the
District of Columbia. The Association also convincingly argues that the
witnesses became subject to the subpoenas when they arrived within the
100-mile limit and remained under the compulsion thereof until they were
released by the Association's attorneys. In any event, it is clear from
the court leave statute and its legislative history that an official
"subpoena" is not needed in order to satisfy the requirement of a
"summons" contained in 5 U.S.C. Section 6322. S. Rep. 1371, 91st Cong.,
2d Sess., reprinted in 1970 U.S. Code Cong. & Ad. News 5014, 5019 (a
summons is an official request, invitation, or call, evidenced by an
official writing); S. Rep. No. 830, 94th Cong., 2d Sess. reprinted in
1976 U.S. Code Cong. & Ad. News 1207. Finally, the agency expressed
uncertainty as to whether the ALJs received customary witness fees with
regard for 5 U.S.C. Section 5515. The Association advised this Office
that the ALJs were asked to waive those fees and no such fees were in
fact paid.
(2) The dates on which the judges actually testified in the courtroom
are as follows: Judge Charles N. Bono testified on February 28. Judges
Robert B. Murdock, Francis Mayhue, David T. Hubbard, Jerry Thomasson,
and Joyce Krutick Barlow testified on February 29 and Judge Ainsworth H.
Brown testified as a rebuttal witness on March 12. Because the trial
did not proceed as quickly as plaintiff's counsel had anticipated,
several of the ALJs (Thomasson, Hubbard and Mayhue), who testified on
the 29th had been expected to testify on the 28th.
B-215189, et al., 64 Comp. Gen. 194
Matter of: Pacific Sky Supply, Incorporated, January 18, 1985
When record indicates that a protester has had difficulty in
obtaining information as to whether, when, and at what price awards have
been made, General Accounting Office (GAO) will consider protests that,
so far as can be determined from the record, were filed within 10 days
of the protester's notice that its offers had been rejected or that
orders had been placed with other sources.
When spare parts are critical to the safe and effective operation of
aircraft propellers, with tolerances measured in ten thousandths of an
inch, Defense Acquisition Regulation 1-313, which states that parts
generally should be procured only from sources that have satisfactorily
manufactured or furnished them in the past, is applicable.
Blanket offer to meet all specifications is not legally sufficient to
make a nonresponsive bid or offer responsive, and it is not enough that
the bidder or offeror believes that its produce meets specifications.
GAO therefore will deny a protest against rejection of an offer from an
unqualified source when the protester has not supplied evidence such as
test reports that it can meet extremely precise specifications and has
not demonstrated the existence of quality assurance procedures.
When protester's price is not the lowest offered, a protest against
award to any other firm at a higher price is without legal merit.
Agency's determination that it is unable to evaluate an offer because
of lack of technical information and test data need not be referred to
Small Business Administration, since in rejecting the offer, the agency
has not reached the question of the offeror's responsibility.
This decision responds to multiple protests by Pacific Sky Supply,
Incorporated, a small business whose unsolicited offers for spare parts
for the C-130 aircraft have repeatedly been rejected by the Air Force
because the firm is not a prime equipment manufacturer and has not
otherwise been approved as a source for the parts in question.
We deny the protests, but note that under legislation enacted by the
98th Congress, Pacific Sky in the future may have a greater opportunity
to become an approved source than it has for the protested procurements.
The majority of Pacific Sky's protests are against the issuance of
purchase requests under basic ordering agreements negotiated by Warner
Robins Air Logistics Center, Robins Air Force Base, Georgia. /1/ The
firm consistently contends that it would supply spare parts meeting Air
Force specifications at prices lower than those of the approved source.
According to the Air Force, data sufficient for competitive
procurement is not available, and acquisition of such data would not be
economical. It therefore has procured the spare parts using a
restricted procurement method code. In virtually every case, the
solicitation and Commerce Business Daily synopsis have advised offerors
that to be considered for award, they must (1) be an approved source;
(2) submit evidence of having satisfactorily supplied the required part
directly to the Government or to the prime equipment manufacturer; or
(3) submit other documentation that would allow the Air Force to
determine that the part being offered is technically suitable for use
with the C-130.
The Air Force argues that, to the extent Pacific Sky challenges this
requirement as unduly restrictive, the protests are untimely under our
Bid Protest Procedures. These require protests against alleged
improprieties that are apparent on the face of a solicitation to be
filed by bid opening or the closing date for receipt of initial
proposals. 4 C.F.R. Section 21.2(b)(1) (1984). With only two
exceptions, the protested solicitations closed on or before March 30,
1984, but Pacific Sky did not protest to our Office until May 10, 1984.
/2/
We find, however, that the protests are not against the approved
source requirement per se, but against the Air Force's rejection of
Pacific Sky's unsolicited offers as nonresponsive. Pacific Sky states
that it had difficulty in obtaining information as to whether, when, and
at what price awards had been made. We therefore will consider those
protests that, so far as we can determine from the record, were filed
with our Office within 10 days of the Pacific Sky's notice that its
offers had been rejected or that orders had been placed with approved
sources. See 4 C.F.R. Section 21.2(b)(2).
The first timely protest concerns purchase request No.
FD2060-84-58656, which was issued on December 23, 1983, closed on
January 27, 1984, and awarded to Hamilton Standard Division of United
Technologies on April 19, 1984. Pacific Sky states that it was not
advised of the award price until May 7, 1984, a fact the Air Force does
not dispute. Under this purchase request, the Air Force sought prices
for 294 cams to be used in the C-130 propeller. Pacific Sky offered to
supply the cams at a unit price of $36.50, compared with Hamilton
Standard's $45.36.
In its protest, Pacific Sky states that in September 1983, in
response to solicitation No. FD2060-83-31684, it had quoted the same
price for 288 of the same cams. In connection with that procurement,
the Air Force asked Pacific Sky to submit a sample, as well as
engineering drawings and specifications. Since these apparently are
still being evaluated, and since no award has been made under the
September solicitation, Pacific Sky objects to rejection of its later
offer.
The Air Force, however, states that the request for the sample and
other information was an error on the part of inexperienced contracting
personnel who did not consider whether the Air Force would be able to
evaluate it. According to the Air Force, the drawings, which Pacific
Sky certifies that it obtained legally, are (1) outdated and (2) do not
contain test procedures. Since the Air Force has not independently
developed such procedures, it cannot test the cams or ensure that they
meet tolerances measured in ten thousandths of an inch. The Air Force
therefore argues that its rejection of Pacific Sky's offer for the cams
was reasonable and proper.
The Air Force raises the same objection, i.e., insufficient data to
evaluate the spare parts, to all of Pacific Sky's unsolicited offers.
In addition, it states that its discussions with Pacific Sky reveal that
the firm has no production capability and subcontracts to different,
unidentified vendors. According to the Air Force, even qualification of
a particular subcontractor would not be an adequate safeguard unless
Pacific Sky agreed to use only that subcontractor. Further, the Air
Force states, Pacific Sky deals in surplus parts, which may not be
acceptable.
In all of Pacific Sky's protests, the primary issue is whether the
Air Force requirements for an approved source are consistent with
statutory and regulatory requirements for maximum practicable
competition. Given the critical nature of the parts in question, we
find the Air Force's requirements, and resulting rejection of Pacific
Sky's unsolicited offers, reasonable and in accord with the Defense
Acquisition Regulation (DAR), Section 1-313, reprinted in 32 C.F.R. pts.
1-39 (1984).
The purpose of this regulation is to ensure "safe, dependable, and
effective operation of equipment," as well as the "requisite reliability
and changeability of parts." It therefore permits their procurement on a
restricted basis when fully adequate data, test results, and quality
assurance procedures are not available or when the Government lacks the
right to use them for procurement purposes. In such cases, DAR, Section
1-313(c) states, the parts generally should be procured only from
sources that have satisfactorily manufactured or furnished them in the
past. The regulation concludes:
The exacting performance requirements of specially designed
military equipment may demand that parts be closely controlled and
have proven capabilities of precise integration with the system in
which they operate, to a degree that precludes the use of
apparently identical parts from new sources, since the functioning
of the whole may depend upon latent characteristics of each part
which are not definitely known. * * *
The same language appears in the Department of Defense Supplement to
the Federal Acquisition Regulation, Section 17.7203 (1984).
In our opinion, the critical tolerances and the essential function of
parts for the C-130 propeller clearly bring the procurements protested
by Pacific Sky within the scope of DAR, Section 1-313. For example, the
record reveals that one of the cams being procured under purchase
request FD2060-84-58656, part no. 546446, controls the pitch of the
propeller blades and protects the propeller against overspeed and
negative torque on the engine during flight. This cam, according to
Hamilton Standard, the prime manufacturer, is therefore critical to the
safe operation of the 54H60 propeller on the C-130 aircraft. Pacific
Sky has not previously supplied the part either directly to the Air
Force or to Hamilton Standard.
Other than a blanket offer to meet all specifications, which is not
legally sufficient, cf. Zero Manufacturing Co., B-210123.2, Apr. 15,
1983, 83-1 CPD Paragraph 416 (blanket statement that bidder will comply
with all material specifications does not make an otherwise
nonresponsive bid responsive); Sutron Corp., B-205082, Jan. 29, 1982,
82-1 CPD Paragraph 69 (in brand name or equal procurement, bidder must
demonstrate that product meets all salient characteristics, and it is
not enough that the bidder believes its product is equal or makes a
blanket statement to this effect), Pacific Sky has provided our Office
with no evidence that it can manufacture the parts in question to the
extremely precise dimensions required. For example, it has not provided
us with copies of reports from the FAA-approved repair station that it
offered to have perform functional tests on the spare parts. Nor has
Pacific Sky demonstrated the existence of quality control procedures or
offered any assurances that it will use only qualified subcontractors
and will supply only newly-manufactured parts. Pacific Sky's protests
against awards at prices higher than its own are therefore denied. See
Compressor Engineering Corp., R-213032, Feb. 13, 1984, 84-1 CPD
Paragraph 180.
In two instances, Pacific Sky's protests are without merit because
its price was not the lowest offered. In response to purchase request
FD1060-84-59906, covering 2030 retaining rings, part no. 584086,
California Propeller, an approved source and the proposed awardee,
quoted unit and extended prices of $9.70 and $19,700.70, respectively,
while Pacific Sky quoted $10.25 and $20,817.75. Under invitation for
bids F09603-84-B-0261, which called for two first articles and 524
production units of a control drive sleeve, part no. 514826, Skyspares
Parts, Inc. was the low bidder at $125 for each of the first articles
and $24.15 for each of the production units. Pacific Sky bid $49.20
each without quoting a price for the first articles.
In addition to its protests on the basis of price differentials,
Pacific Sky contends that the Air Force should have referred its
determination that the offers were nonresponsive to the Small Business
Administration.
Responsiveness is a term generally associated with formally
advertised procurements; it is occasionally used in connection with
negotiated procurements (which in most cases these were) to denote a
material requirement. Center for Employment Training, B-203555, Mar.
17, 1982, 82-1 CPD Paragraph 252. Responsiveness refers to the bidder's
or offeror's unconditional agreement to supply precisely what is called
for in a solicitation. Responsibility, on the other hand, refers to the
bidder's or offeror's ability to do so; it includes financial status,
experience, and the like. See Raymond Engineering, Inc., B-211046, July
12, 1983, 83-2 CPD Paragraph 83.
The Small Business Act, as amended, 15 U.S.C. Section 637(b)(7)(A)
(1982), requires a contracting officer's finding that a small business
is not responsible to be referred to the SBA which will conclusively
resolve the matter by issuing or refusing to issue a certificate of
competency. Skyline Credit Corp. B-209193, Mar. 15, 1983, 83-1 CPD
Paragraph 257. When a contracting officer makes a finding of
nonresponsiveness, however or determines that an offer is technically
unacceptable, the Act does not apply. See Rogar Manufacturing Corp.,
B-214110 Apr. 25, 1984, 84-1 CPD Paragraph 479 (referral is not required
when a bid is properly rejected as nonresponsive); Advanced
Electromagnetics, Inc., B-208271, Apr. 5, 1983, 83-1 CPD Paragraph 360
(a finding of technical unacceptability need not be referred to SBA).
Similarly, the Air Force's determination that it was unable to evaluate
Pacific Sky's offers because of lack of information was not required to
be referred to SBA, since the Air Force never reached the question of
the firm's responsibility.
Finally, Pacific Sky complains of the Air Force's failure to notify
it of the awards or to advise it of the reasons why it had not been
accepted, as required by DAR, Section 2-408.1. As we have often stated,
failure to notify an unsuccessful bidder is a procedural deficiency that
does not affect the validity of an otherwise proper award. Emerson
Electric Co., B-213382, Feb. 23, 1984, 84-1 CPD Paragraph 233. We note
that the record is replete with correspondence between the Air Force and
Pacific Sky concerning the additional information that the agency
believed should have been supplied in order for it to proceed with
qualification of Pacific Sky. The protest on these bases therefore is
also denied.
Pacific Sky's protests are denied. /3/
(1) Specifically, Pacific Sky's protests concern the following
purchase requests (in the order in which they were issued):
FD2060-83-32293; FD2060-84-58391; FD2060-84-58494; FD2060-84-58656;
FD2060-84-59527; FD2060-59528; N00383-83-MPZ-3838 (issued by Warner
Robins under a basic agreement negotiated by the Navy's Aviation Supply
Office); FD2060-84-59906; FD2060-84-59912 (issued under invitation for
bids No. F09603-B-0261, a 100 percent small business set-aside); and
FD2060-84-60919.
Pacific Sky filed, but subsequently withdrew, similar protests
against procurements by the San Antonio Air Logistics Center, Kelly Air
Force Base, Texas. See B-215758, B-217018, and B-217031, all closed
without action by our Office.
(2) In some cases, in submitting its unsolicited offers, Pacific Sky
advised the Air Force that it protested any award at a price lower than
its own. The agency did not regard these as valid protests. Neither do
we. See Precision Dynamics Corp., B-207823, July 9, 1982, 82-2 CPD
Paragraph 35, stating that a protest alleging a defect apparent on the
face of a solicitation, filed with a bid or included in a proposal, is
not a timely protest to the contracting agency.
(3) As noted, Pacifid Sky may have a greater opportunity to compete
in the future under legislation enacted by the 98th Congress: the Small
Business and Federal Procurement Competition Enhancement Act of 1984,
Pub. L. No. 98-577, Section 202, 98 Stat. 3066, 3069 (1984), and the
Department of Defense Authorization Act, 1985, Pub. L. No. 98-525,
Section 1216, 98 Stat. 2492 (1984). Both contain provisions concerning
prequalification, testing, and other equality assurance procedures and
require, among other things, that qualification be justified and
standards specified; that potential offerors be provided an opportunity
to demonstrate their ability to meet standards; and that agencies
promptly advise offerors whether qualification was attained and, if not,
why not. Potential offerors generally may not be denied the opportunity
to submit offers and have them considered for award solely because they
are not on lists of qualified bidders or manufacturers. Moreover, the
Department of Defense Authorization Act states that the opportunity to
qualify shall be "on a reimbursable basis," and both Acts state that in
certain circumstances, the contracting agency must bear the cost of
testing and evaluation for small business concerns.
B-217303, 64 Comp. Gen. 189
Matter of: United States Department of the Interior - Request for
Advance Decision; Ball & Brosamer, Inc. and Ball, Ball and Brosamer,
Inc., A Joint Venture; Grade-Way Construction, January 11, 1985
A bidder's failure to acknowledge a Davis-Bacon Act wage rate
amendment may be treated as a minor informality in the bid, thus
permitting correction after bid opening, if the effect on price is
clearly de minimis, and the bidder affirmatively evinces its intent to
be obligated to pay the revised rates by acknowledging the amendment as
soon as possible thereafter, but always prior to award. Modifies 62
Comp. Gen. 111.
An amendment which imposes no different or additional legal
obligations on the bidders from those imposed by the original invitation
is not material, and thus failure to acknowledge receipt of such an
amendment may be waived.
The United States Department of the Interior requests our advance
decision on protests filed with the contracting officer by Ball &
Brosamer, Inc., and Ball, Ball and Brosamer, Inc., A Joint Venture (Ball
& Brosamer), and Grade-Way Construction (Grade-Way) under invitation for
bids (IFB) No. 4-SI-20-04270/DC-7617, issued by the Bureau of
Reclamation, Mid-Pacific Region. The procurement is for the
construction of an earthfill dam and dike embankment. Ball & Brosamer
and Grade-Way, respectively the apparent low and second low bidders,
each protest that award of the contract to the other firm would be
improper.
Specifically, the agency asks whether Ball & Brosamer's failure to
acknowledge receipt of Amendments 5 and 6 to the solicitation requires
rejection of the firm's bid as nonresponsive, or whether these failures
properly may be waived as minor informalities.
The solicitation was issued on August 28, 1984, and six amendments to
the solicitation were subsequently issued. Bid opening took place on
October 30, 1984. Ball & Brosamer was the apparent low bidder with an
offered price of $11,487,445, with Grade-Way second low at $11,790,368.
/1/ However, the contracting officer noted irregularities in Ball &
Brosamer's bid since the firm had failed to acknowledge receipt of
Amendments 5 and 6, as required by both subsection B.2 of the IFB and
the amendments themselves. Grade-Way contends that Ball & Brosamer's
bid is accordingly nonresponsive and should be rejected, making
Grade-Way the remaining low, responsive bidder and therefore in line for
the contract award. The agency believes that Ball & Brosamer's failure
to acknowledge the two amendments is, in each case, a minor informality
which properly may be waived, because neither amendment has a material
effect upon the procurement. We essentially agree with the agency's
position in this matter, and conclude that Ball & Brosamer's bid may be
accepted, conditioned upon the firm's post-bid opening acknowledgement
of Amendment 5, which we understand has already occurred. The failure
to acknowledge Amendment 6 may be waived.
Amendment 5 incorporated a revised Department of Labor wage rate
determination under the Davis-Bacon Act, 40 U.S.C. Section 276a. (1982)
(the Act). The Act's principal purpose is to protect a contractor's
employees from substandard earnings by fixing a floor under wages on
Government projects. United States v. Binghamton Construction Co.,
Inc., 347 U.S. 171 (1953). Because of that purpose, the traditional
position of this Office has been that a bid which fails to acknowledge
an amendment revising the wage rate for a labor category to be employed
under the contract must be rejected. We have held that, without
acknowledgment of such an amendment, a bidder legally cannot be required
by the Government to pay the wages prescribed in the amendment, and the
bid is therefore nonresponsive. See, e.g., Morris Plains Contracting,
Inc., B-209352, Oct. 21, 1982, 82-2 CPD Paragraph 360; X-Cel
Constructors, Inc., B-206746, Apr. 5, 1982, 82-1 CPD Paragraph 311.
However, we have recognized that under some limited circumstances the
failure to acknowledge a wage rate amendment can be cured after bid
opening. Brutoco Engineering & Construction, Inc., 62 Comp. Gen. 111
(1983), 83-1 CPD Paragraph 9.
Brutoco was premised on the theory that where the failure to
acknowledge the wage rate amendment could properly be categorized as a
minor informality under the regulations, and where the interests of the
employees that the Act was designed to protect were in fact protected by
a union agreement to which the bidder was a party, the defect could be
properly cured after bid opening. We so concluded because we believed
that permitting the amendment to be acknowledged after bid opening in
these circumstances would neither adversely affect the competitive bid
system nor deny the affected employees the protection afforded by the
Act. Even without a union agreement, however, we think it obvious that
the interests of the affected employees will not suffer if the defect is
cured after bid opening since the wage rate will be incorporated into
the contract as a result. Hence, we see no reason to require the
existence of a union agreement as a condition to permitting a bidder to
cure the defect after bid opening if the conditions exist for invoking
the rules for correcting the defect as a minor informality under the
Federal Acquisition Regulation, Section 14.405(d)(2), 48 Fed. Reg.
42,102, 42,180 (1983) (to be codified at 48 C.F.R. Section
14.405(d)(2)). Brutoco Engineering & Construction, Inc., supra, is
modified to this extent.
Here, the parties generally agree that the only applicable labor
category affected by Amendment 5 was electricians, with the hourly
fringe benefits for that category being increased $1.00 by the revised
wage rate determination. Ball & Brosamer contends that electrical work
in the project is minor in terms of man-hours involved so that this
increase will only total approximately $500. The agency accepts this
estimate, but Grade-Way asserts that the increase will be closer to
$1500. Even assuming that the increased electricians' benefits will
total $1500, we note that this represents only .013 percent of Ball &
Brosamer's bid price, and .495 percent of the difference between the
bids. In our opinion, the total amount of increased electricians'
benefits involved here is so minimal, given Ball & Brosamer's $11.4
million bid price and the substantial difference between the two bids,
that we fail to see how Grade-Way would be prejudiced if Ball & Brosamer
now acknowledges Amendment 5.
Accordingly, we believe that a bidder's failure to acknowledge a wage
rate amendment upon submission of its bid may be treated as a minor
informality in the bid, thus permitting correction after bid opening, if
the effect on price is clearly de minimis, as here, and the bidder
affirmatively envinces its intend to be obligated to pay the revised
rates by acknowledging the amendment as soon as possible thereafter, but
always prior to award.
Amendment 6 incorporated numerous changes into the IFB, only two of
which are seriously disputed by Grade-Way as to their materiality.
Therefore, for purposes of our analysis, we will only address those two
issues.
Amendment 6 modified subsection H.1 of the IFB by informing bidders
that the rights-of-way for a particular quarry associated with the
project, and for haul roads between the quarry and the damsite, would
not be available for construction purposes until January 1, 1985.
Subsection H.1, as previously amended, provided that the contractor was
required to commence performance within 30 calendar days of receipt of
the notice to proceed, which was anticipated to be December 12, 1984.
Subsection H.1 further provided that the entire project was to be
completed within 840 calendar days after award, with a particular access
road from a local road to the dike to be completed no later than July 1,
1985.
Grade-Way urges that this modification to the solicitation was
material since, if Ball & Brosamer had had knowledge of the fact that
work could not commence until January 1, 1985, the firm's bid price
could have increased. It is Grade-Way's position that Ball & Brosamer,
anticipating that it could commence performance immediately upon receipt
of the notice to proceed, had not factored costs for additional
equipment and personnel into its bid that would be necessary to assure
timely completion of the project because of the delay in having access
to the quarry and haul roads.
To the contrary, both the agency and Ball & Brosamer assert that this
modification was immaterial because it was not conceivable that a
contractor would begin to perform immediately after receipt of the
notice to proceed. Ball & Brosamer urges that a certain period of time
would be required to marshal its equipment and personnel, to obtain the
necessary bonds, and to submit and receive approval of a safety program.
Also, the firm states that adverse weather conditions would preclude
working in the quarry or on the haul roads until the following spring.
The firm also notes that there are 10 non-work days between December 12,
1984, and January 1, 1985. In any event, the firm contends that
subsection H.1 only requires that work commence within 30 days of the
notice to proceed. Therefore, the 20-day delay in having access to the
quarry and haul roads does not affect the contractor's obligation to
commence performance within that period.
We do not think that this 20-day delay as incorporated by Amendment 6
is material. An amendment which imposes no different or additional
legal obligations on the bidders from those imposed by the original
invitation is not material, and thus failure to acknowledge receipt of
such an amendment may be waived. Emmett R. Woody, B-213201, Jan. 26,
1984, 63 Comp. Gen. 182, 84-1 CPD Paragraph 123.
The delay occasioned by the amendment did not alter Ball & Brosamer's
legal obligation to complete the entire project within 840 calendar days
after award, and the access road to the dike by July 1, 1985. In this
regard, subsection 1.3.1a. of the IFB, provides, in part that:
* * * rights-of-way * * * will be provided by the government.
* * * All work on the rights-of-way shall be performed by the
contractor.
* * * the unavilability of transportation facilities or
limitations thereon shall not become a basis for claims for
damages or extension of time for completion of work. * * *
Thus, despite its failure to acknowledge Amendment 6, Ball &
Brosamer, by signing and submitting its bid, legally obligated itself to
perform the work at its offered price within the contract period set
forth in subsection H.1, irrespective of the delay in the availability
of the rights-of-way to the quarry. The firm cannot now disavow its bid
by claiming that it had not intended to obligate itself to complete the
work within the slightly shorter period of time for performance that may
be occasioned by the unavailability of the quarry and haul roads until
January 1, 1985. Since Ball & Brosamer's legal obligation remains the
same, Amendment 6 in this respect cannot be said to be material. Emmett
R. Woody, supra.
Prior to the issuance of Amendment 6, subsection 4.3.2b. of the
solicitation had read as follows:
Materials-Zone 1 of the earthfill portions of the dam and dike
embankment shall consist of a mixture of CL (inorganic clays), SC
(clayey sands), SM (silty sands), and ML (inorganic silts and very
fine sands), available from borrow pits in borrow area C, and from
excavations required for the dam and appurtenant works.
Amendment 6 added the following last sentence to that subsection:
Fat clay (CH) material will not be allowed within earthfill,
zone 1, portions of the embankment.
Grade-Way urges that this constituted a material change because
bidders were now on full notice that fat clay material could not be used
at all in zone 1. This accordingly meant that more selective loading
and stockpiling of materials would be required than was originally
anticipated, so as to avoid any fat clay material being used
inadvertently, thus increasing costs with respect to methods of
operation and additional time necessary to perform the work. Grade-Way
also points out that the same prohibition against the use of fat clay
material had been added earlier by Amendment 3 to subsection 4.3.4b.,
which governed the materials to be used in zone 1A. Thus, Grade-Way
contends that bidders without knowledge of the specific prohibition
against its use in zone 1, as imposed by Amendment 6, would have
construed the two subsections in context to infer that the use of fat
clay material was permissible in zone 1, but not in zone 1A. We find no
merit in the firm's argument.
It is clear that bidders were always obligated to use a mixture of
only four types of soils in zone 1, that is, inorganic clays, clayey
sands, silty sands, and inorganic silts and very find sands. Even
though fat clay material was never specifically prohibited in zone 1
until the issuance of Amendment 6, we do not believe that bidders could
reasonably interpret subsection 4.3.2b. in its original form to mean
that the use of fat clay material was in fact permissible. In our view,
the additional language added by Amendment 6 was not material since, in
essence, it merely reiterated the requirements of the IFB as originally
set forth. Doyon Construction Co., Inc., B-212940, Feb. 14, 1984, 63
Comp. Gen. 214, 84-1 CPD Paragraph 194. Therefore, the legal obligation
of bidders to use the four specified soils in zone 1 never changed.
Emmett R. Woody, supra. We thus conclude that Amendment 6 was not
material, and Ball & Brosamer's failure to acknowledge it may properly
be waived.
Accordingly, it is our opinion that the Department of the Interior
would be legally correct in accepting Ball & Brosamer's low bid and in
awarding the firm the contract, if the firm is determined to be a
responsible prospective contractor.
(1) The government's estimate for the project is $14,801,320.
B-216170, 64 Comp. Gen. 185
Matter of: Walter E. Myers - Actual Subsistence Expenses -
Contributions From Private Sources, January 8, 1985
An employee who attended a meeting sponsored by a private
organization in a high rate geographical area was provided a lunch and
dinner without cost to the Government. Under 5 U.S. Code 4111 and
paragraph 4-2.1 of the Federal Travel Regulations, the employee's
reimbursement for actual subsistence expenses which is limited to $75
per day need not be reduced by the value of the provided meals.
Ms. Betty D. Gillham, an authorized certifying officer of the
Bonneville Power Administration (BPA), Department of Energy, requests a
decision concerning a claim for travel expenses filed by Mr. Walter E.
Myers, a BPA employee. The issue is whether the actual subsistence
expenses otherwise payable to Mr. Myers for his attendance at a meeting
sponsored by a private organization must be reduced by the value of
meals furnished without charge by the organization. Based on 5 U.S.C.
Section 4111, as implemented by para. 4-2.1 of Federal Travel
Regulations, FPMR 101-7 (September 1981) (FTR), we hold that the
authorized subsistence expenses are payable without a deduction for the
provided meals.
Mr. Myers was authorized actual subsistence expenses at the daily
maximum rate of $75 in order to attend a meeting in Boston,
Massachusetts, during the period September 10 to September 16, 1983.
The meeting was sponsored by the Electric Power Research Institute
(EPRI), a non-profit corporation established to coordinate the research
and development activities of contributing electric utilities. The EPRI
did not charge the Government a registration fee for the meeting, and it
furnished the attendees a dinner on September 14 and a lunch on
September 15 without charge. Mr. Myers filed a travel voucher showing
that he incurred lodging expenses of $68.64 on each of the 2 days in
question and that, even with the dinner and the lunch provided by EPRI,
he incurred meal expenses of $7.25 on September 14 and $28.56 of
September 15. Since Mr. Myers' subsistence expenses of $75.89 on
September 14 and $97.20 on September 15 exceed his maximum entitlement,
he limited his claim to $75 for each day.
The BPA reduced Mr. Myers' daily subsistence allowance of $75 by
$13.80 for September 14 and $6.90 for September 15, determining that
these deductions represented the reasonable value to him of the dinner
and lunch provided by EPRI. In determining the value of the meals, the
agency referred to its regulations prescribing a meal allowance of 46
percent of the maximum subsistence rate in high rate geographical area
($34.50 where the maximum rate if $75), and authorizing 20 percent of
that allowance ($6.90) for lunch and 40 percent ($13.80) for dinner.
In reducing Mr. Myers' subsistence allowance, the agency relied on
our decision in Judy A. Whelan, B-207517, April 13, 1983. In that
decision, we held that BPA properly reduced an employee's subsistence
expenses by the reasonable value of lunches which were included in a
registration fee paid by the Government and furnished to the employee as
an integral part of a training course. We further decided that, in
determining the reasonable value of lunches provided in a high cost
area, BPA could apply its regulations prescribing a $23 daily mean
allowance for per diem areas and requiring a 20 percent reduction of
this amount for a provided lunch. With respect to this latter aspect of
our decision in Whelan, BPA notes that it computed Mr. Myers' claim
under its regulations governing meal allowances in high rate
geographical areas rather than those pertaining to per diem areas.
However, the agency states that it recently began applying the per diem
guidelines approved in Whelan to determine the appropriate deduction for
meals furnished in high cost areas.
Mr. Myers reclaimed the amount of $20.70 disallowed by BPA,
maintaining that our decision in Whelan does not apply in this case
since the Government was not charged a registration fee or otherwise
required to pay for the meals furnished by EPRI. He further suggests
that any deduction for the provided means should be applied to his total
subsistence expenses for each day and not to his daily maximum
allowance, so as to permit reimbursement for lodging costs and other
actual expenses not exceeding $75 per day.
Against this background, BPA questions whether our decision in Whelan
requires an agency to reduce an employee's subsistence allowance by the
value of meals furnished by a private organization. The agency states
that its application of our Whelan decision in this context has had an
adverse effect on employee morale because the deduction for provided
meals further reduces reimbursement amounts which, in some high cost
areas, are insufficient to cover the full costs of official travel.
At the outset, we note that our decision in Judy A. Whelan, cited
above, concerned the Government's provision of meals to an employee as
an integral part of a training course. In that situation, we held that
the value of provided meals must be deducted from subsistence expenses
payable under the training expense provisions of 5 U.S.C. Section 4109
(1982). Different statutes and regulations apply in this case, since
the meals were furnished by a private organization without charge to the
employee or the Government.
As a general rule, a private organization's payment of an employee's
travel expenses either in cash or in kind represents an improper
augmentation of the employing agency's appropriations as well as an
unlawful supplementation of the employee's salary under 18 U.S.C.
Section 209 (1982). See 55 Comp. Gen. 1293 (1976), and cases cited
therein. One statutory exception to this general rule is contained in 5
U.S.C. Section 4111(a) (1982), which provides that an employee may
directly accept a private contribution for training or travel and
subsistence expenses for attendance at meetings if the constribution is
made by a tax-exempt organization described in section 501(c)(3) of the
Interal Revenue Code (26 U.S.C. Section 501(c)(3) (1982)). If the
employee is not authorized to accept contributions of travel expenses
under section 4111(a), the agency may accept such a contribution on his
behalf only if it has statutory authority to accept gifts or donations.
See 46 Comp. Gen. 689 (1967); and 36 Comp. Gen. 268 (1956). Rules
governing the acceptance of travel expenses under this latter criterion
are outlined in 46 Comp. Gen. 689 (1967), and become relevant only if
the provisions of 5 U.S.C. Section 4111(a) do not apply to the
contributions. See 49 Comp. Gen. 572 (1970).
In this case, the Internal Revenue Service has advised us that EPRI
is a tax-exempt organization described in 26 U.S.C. Section 501(c)(3).
Accordingly, Mr. Myers was authorized under 5 U.S.C. Section 4111(a) to
accept the meals provided without charge by EPRI. His entitlement to be
reimbursed for the balance of his travel and subsistence expenses is
governed by 5 U.S.C. Section 4111(b), which provides as follows:
When a contribution, award, or payment, in cash or in kind, is
made to an employee for travel, subsistence, or other expenses
under subsection (a) of this section, an appropriate reduction,
under regulations of the President, shall be made from payment by
the Government to the employee for travel, subsistence, or other
expenses incident to training in a non-Government facility or to
attendance at a meeting.
Regulations implementing 5 U.S.C. Section 4111(b), set forth in FTR
para. 4-2.1, provide as follows:
Agency responsibilities.
b. Agency heads shall provide adequate safeguards to
ensure that the following regulations are carried out:
(2) If an approved payment by a donor does not fully cover
expenses * * * (incident to training in a non-Government facility,
or travel, subsistence, or other expenses incident to attendance
at a meeting), the agency may pay an amount considered sufficient
to cover the balance of the expenses to the extent authorized by
law and regulation, including 5 U.S.C. Section 4109 and 4110. If
an amount in excess of such balance has previously been paid by
the agency, such amount shall be recovered from the employee * * *
.
The above-quoted statute and regulations accord agencies considerable
discretion to determine the extent to which travel allowances must be
offset by the amount of a private contribution. In this regard, we note
that section 4111(b) generally provides that an agency should make an
"appropriate reduction" in travel expenses payable by the Government,
and that the implementing regulations in FTR para. 4-2.1 allow agencies
discretion to pay "an amount considered sufficient to cover the balance"
of the employee's travel expenses. Neither the statute nor its
implementing regulations expressly require an agency to reduce an
employee's entitlement to other subsistence expenses actually incurred
by the value of a private contribution.
The legislative history of 5 U.S.C. Section 4111(b) shows that
Congress enacted that section in order to preclude the Government from
reimbursing travel expenses which have been covered by a private
contribution. See H.R. Rep. No. 1951, 85th Cong., 2d Sess. 6 (1958).
Consistent with this legislative intent, we have held that authorized
per diem must be reduced by the value of subsistence items furnished in
kind by a private organization. 49 Comp. Gen. 572, 576, cited
previously. Since per diem is a commuted daily allowance payable
without regard to actual expenses, payment of the full allowance would
necessarily duplicate a private contribution covering a portion of the
authorized subsistence expenses.
Actual and necessary subsistence expenses, however, are payable
instead of per diem in designated high cost areas or where unusual
circumstances make the per diem allowance inadequate. In contrast to
per diem, actual subsistence expenses are payable only for those lodging
and meal expenses which are actually incurred and itemized by the
employee. In accordance with these rules, an employee who accepts a
meal from a private source may not claim any reimbursement for the meal
since he did not actually incur a meal expense.
Since the rules governing reimbursement of actual subsistence
expenses effectively preclude any payment which would duplicate a
private contribution covering meals, we find no basis in 5 U.S.C.
Section 4111(b) for requiring an agency to reduce an employee's actual
expense entitlement by the value of provided meals. Under FTR para.
4-2.1, the agency may pay the employee an amount considered sufficient
to cover his claimed expenses, limited to the daily maximum rate of $75
stated in 5 U.S.C. Section 5702 (1982) or the rate prescribed in FTR
para. 1-8.6 for the particular high rate geographical area.
On this basis, we hold that the BPA was not required to reduce the
actual expenses payable to Mr. Myers by the value of the meals furnished
by EPRI. Under FTR para. 4-2.1, the agency may pay Mr. Myers an amount
considered sufficient to cover his actual expenses, not to exceed the
authorized rate of $75 per day.
We note that our holding in this case does not prevent an agency from
limiting an employee's entitlement to subsistence expenses if it
anticipates that some of those expenses will be covered by a private
contribution. Although FTR para. 1-8.6 prescribes daily rates for high
cost areas, FTR para. 1-8.1b(1) authorizes agencies to prescribe a per
diem allowance for an individual in a high cost area if an appropriate
official determines that any of the factors cited in FTR 1-7.3a would
reduce the employee's travel expenses.
For the reasons stated above, we hold that BPA was not required to
reduce the actual subsistence expenses payable to Mr. Myers by the value
of meals furnished by EPRI. The agency may adjust his actual expense
reimbursement in accordance with the standards prescribed above.
B-215102, 64 Comp. Gen. 179
Matter of: Crown Laundry and Cleaners, Inc., January 7, 1985
Protest by incumbent contractor providing laundry services from its
own facility is denied where the protester has not shown that the
procuring agency has unreasonably understated the cost to the government
of making an award on the basis of using a Government-owned facility.
Crown Laundry and Cleaners, Inc., protests the terms of invitation
for bids No. DABT01-84-B-1005, issued by the Department of the Army for
laundry services at Fort Ricker, Alabama. The specifications allowed
the contractor to provide the laundry services from either a
government-owned, contractor-operated (GOCO) facility using existing
equipment and space at Fort Ricker, or from a contractor-owned,
contractor-operated (COCO) facility. Crown, the incumbent COCO
contractor, challenges the provisions made in the solicitation for
adding to the evaluated total of a GOCO bid the costs the Government was
expected to incur if award was made on a GOCO basis, alleging that the
Army had understated such costs. The Army has postponed bid opening
pending our decision. We deny the protest.
As indicated above, the solicitation provided for the consideration
of offers submitted on either a GOCO or a COCO basis. In the event of
an award on a GOCO basis, the Army agreed to provide to the contractor
without charge (1) approximately 39,008 square feet of space for use as
a laundry plant, office space for the contracting officer's
representative, and a laundry pick-up point, (2) assorted laundry
equipment, and (3) support services for the GOCO facility, including
utilities (gas, electricity and water), insect and rodent control,
on-post telephone service, building maintenance, and operation of a
steam production and distribution system. However, the Army indicated
in the solicitation that certain costs associated with providing the
above space, equipment and services would be added to a GOCO bid for
purposes of evaluation, The Army set forth the estimated amount of nine
such costs, including among others, the costs of utilities, repairs and
maintenance, boiler start-up and rent. The nine costs total $146,914
(but stated to be $146,824) for the base year, $151,870 for the first
option year and $159,138 for the second option year. Bids were to be
evaluated by adding the total price for the option year items to the
total price for the base year items.
Prior to bid opening, Crown protested to our Office the amount of the
GOCO evaluation penalty, alleging that the actual cost to the Government
of award on a GOCO basis would total $358,937 for the base contract
year, $362,246 for the first option year and $379,936 for the second
option year. The Army subsequently amended the solicitation to provide
for a total of $162,180 for the base year, $159,947 for the first option
year and $167,751 for the second option year to be added to GOCO bids.
Crown initially observes that the Army provided in the prior
solicitation for laundry services at Fort Rucker $284,553 for fiscal
year 1983, $261,497 for fiscal year 1984 and $274,279 for fiscal year
1985 would be added to GOCO bids for purposes of evaluation. Crown
indicates that it can see no logical reason for the costs of award on a
GOCO basis to have decreased to the extent claimed by the Army.
The Army has generally explained that this reduction in estimated
costs resulted from such factors as (1) a reduction in the estimated
cost of utilities as a result of the exclusion from estimated
consumption of that portion associated with space not actually provided
but nevertheless previously charged to a GOCO contractor, (2) basing
estimates of future utilities consumption on prior meter readings rather
than on guesses as to the past consumption of utilities, (3) the
adjustment of other estimated costs to reflect only the space actually
to be provided to a GOCO contractor, and (4) the use of current prices.
In regard to the cost of utilities, Crown, considering the cost of
electricity, gas, water, and sewage, estimates that award on a GOCO
basis will result in a base year cost to the Government of $85,128.
Although the Army admits that the cost of utilities will exceed its
$38,437 base year estimate in the solicitation as issued, it maintains
that this cost will not exceed its $46,034 estimate in the amended
solicitation. The Army explains that its latest estimate is based on
the estimated cost of supplying electricity, steam (including the
natural gas, fuel oil and electricity consumed in producing the steam),
water and sewage disposal and it has provided us with a detailed
analysis of the various cost items involved.
We have previously held that elements of cost or savings to the
Government which are not included in the bid prices may properly be
considered in evaluating bid prices to determine which bid will result
in the most advantageous contract, provided that any amounts which are
for application in such evaluation must be fairly representative on an
actual or estimated basis of true costs or savings to the Government.
See also Clinton Engines Corp., 43 Comp. Gen. 327 (1963) (cost for
transporting, modifying, installing Government-owned equipment); cf.
Lanson Industries, Inc., 60 Comp. Gen. 661 (1981), 81-2 C.P.D. Paragraph
176; Yardney Battery Division, Yardney Electrical Corp., B-215349, Nov.
8, 1984, 84-2 C.P.D. Paragraph 511 (cost of Government-furnished
equipment and materials).
The base year estimates of the cost of utilities and most other items
for the base year are the critical estimates since the option year
estimates are primarily derived by adding an inflation factor to the
base year estimates. Accordingly, we will restrict our discussion to
whether the Army's estimate of base year costs is fairly representative
of those which will be incurred.
After examining the parties' explanations as to how they derived
their conflicting Estimates of the likely base year cost of utilities,
we conclude that Crown has failed to demonstrate that the Army has acted
unreasonably in reaching its estimate. Cf. Apex International
Management Services, Inc., B-212220.2, May 30, 1984, 84-1 C.P.D.
Paragraph 584 (A-76); Crown Laundry & Dry Cleaners Inc. -- request for
reconsideration, B-204178.2, Aug. 9, 1982, 82-2 C.P.D. Paragraph (A-76).
Crown's conflicting estimate of base year utility costs appears to be
based upon either unexplained, speculative or mistaken assumptions.
We note that the Army's estimate that base year electric costs will
total $5,068.82 is based on metered electrical consumption in past
years, adjusted downward to reflect the amount of electricity registered
on the same meter but consumed by printing facilities that would not be
provided to a GOCO laundry services contractor. The Army priced the
electricity consumed at the rate of $.0538 per kilowatt-hour found by
the Army to be the direct cost to the Government of purchsing power
wholesale at a rate of .0485 per kilowatt-hour and distributing it
throughout Fort Rucker. By contract, Crown bases its estimate of
$21,941 for electricity on a largely unexplained estimate of consumption
apparently priced at the purported commercial rate of $.258 per
kilowatt-hour, approximately five times the rate actually paid by the
Government.
Likewise, while the Army has explained that its $38,765.81 estimate
for the cost of steam to be provided in the base contract year was based
on actual past consumption, Crown has failed to explain how it arrived
at its estimate for the consumption of natural gas, the predominant fuel
in the generation of steam at Fort Rucker, and thus how it derived its
estimate that the gas would cost $58,411.20.
As for the cost of water and sewage disposal for the base contract
year, the Army explains that it assumed that each pound of laundry
processed would require the use of 3 gallons of "process water" the 1983
guideline established by the International Fabricare Institute for
allocating utility costs, and 0.63 gallons of "make-up water." The Army
indicates that it then derived its total estimated cost of providing the
water and disposing of the resulting sewage, $1,377, by reference to the
established rates for water and sewage disposal at Fort Rucker and it
has provided a detailed analysis of the costs considered in establishing
those rates.
By contract, Crown has based its estimate of $4,776.36 for water and
sewage disposal on (1) an undated and untitled article attributed to
"IFI" and which described "actual" consumption as amounting to 4.5
gallons per pound of laundry rather than the "theoretical" 3 gallons and
(2) an unexplained, speculative estimate of sewage treatment costs. Not
only has Crown failed to show that the Army acted unreasonably in using
a figure of 3.63 gallons, see Protek Industries, Inc., B-209905, Sept.
22, 1983, 83-2 C.P.D. Paragraph 359, but, in any case, the resulting
difference in cost is only $329.34 when the water is priced at the
established Fort Rucker rate.
Crown estimates that the base year cost for the maintenance and
repair of the facilities to be provided to a GOCO contractor will total
$62,088, well above the Army's estimate of $35,966. Crown admits that
its estimate is based solely on the assumption that maintenance and
repair costs are unlikely to decline below the $62,088 figure set forth
in the prior solicitation since the age of the facilities is increasing
and wages and repair costs generally are also increasing.
However, the Army reports that the decline in estimated costs in fact
reflected merely (1) the substitution of estimates based on past
recorded costs for prior speculation as to the costs of maintenance and
repair and (2) this year's reduction in the amount of space considered
in calculating the cost of maintenance and repair to only that actually
to be provided to a GOCO contractor. Since Crown has introduced no
evidence to the contrary, we find that Crown has again failed to carry
its burden of demonstrating the unreasonableness of the Army's estimate
of maintenance and repair costs.
Nor do we believe that Crown has shown the unreasonableness of the
Army's estimate that the start-up costs for a boiler to provide steam to
a GOCO contractor would total only $8,671. Crown's higher estimate of
$21,729 is based on the expenditure of $9,229 for labor to operate the
boiler plus the $12,500 in actual start-up costs identified in the prior
solicitation.
The Army, however, explains that the cost of labor to operate the
boiler was not included in its estimate of start-up costs because the
labor required totaled less than one man-year and Army directives
concerning cost comparisons require consideration only of whole
man-years of labor. Cf. Contract Services Company, Inc. B-210796, Aug.
29, 1983, 83-2 C.P.D. Paragraph 268. In any case, we note that in
establishing the rate for steam, the Army considered not only the cost
of fuel but also the cost of "Operations, other than fuel" and the
"Maint. (Maintenance) of boiler plants." Since the boiler was to produce
steam, this suggests that the cost of labor to operate the boiler was
already included in the cost of steam. In addition, the Army indicates
that $4,829 of the previously identified cost of start-up has already
been expended. Since these funds were expended before bid opening and
thus before any decision to award a contract to a GOCO firm, we do not
believe that the Army was unreasonable in not adding this sum to GOCO
bids for purposes of evaluation.
The Army provided in the amended solicitation that the rental value
and cost of ownership of the laundry equipment and space to be provided
to a GOCO contractor, estimated as $47,126 for the base year, would be
added to GOCO bids for purposes of evaluation. The Army explained in
its response to this protest that this estimate included $21,436 for the
rental value of the laundry equipment to be provided. Crown, however,
has replied that the rental value of the equipment in fact totals
$38,488.20, $17,052.20 more than estimated by the Army.
Although the Army now admits that it overlooked equipment, the base
year rental value of which totals $410.64, it nevertheless maintains
that its estimate is otherwise accurate. The Army indicates that, in
accordance with Department of Defnese, (DOD) policy, it calculated the
rental cost of individual pieces of equipment by first obtaining the
current official cost for similar new equipment, then applying to that
cost a standard DOD deflation factor to obtain the estimated initial
acquisition cost, and finally by multiplying the estimated acquisition
cost by a standard DOD monthly rental factor stated as a percentage of
the acquisition cost.
The Army explains that some of the discrepancy between the two
estimates of rental cost, a portion of which we estimate to total
approximately $3,200, resulted when Crown calculated the unit
acquisition cost by applying the standard deflation factor to the
current acquisition cost of similar new equipment as of July-August
1984, 4-5 months after the solicitation was issued and after Crown had
filed this protest. By contrast, the Army derived the rental value
based upon the acquisition cost of similar new equipment as of the time
when the solicitation was issued.
The Army explains that the discrepancy was increased, by a sum which
we estimate to total approximately $8,900, when Crown included in its
estimate the rental value of certain boiler plant equipment. Although
the boiler was scheduled to provide steam to a successful GOCO
contractor, the cost of generating that steam was already included in
the evaluation factor for the cost of utilities. Moreover, the Army
maintains, and the solicitation indicates, that the boiler plant
equipment would not be provided to a GOCO contractor.
The Army next identifies three laundry "Pressing Units, Coat,
Body-Bosom Ajax" for which Crown allocated a separate rental cost.
However, these units were in fact included as part of the laundry "Shirt
Unit" for which Crown and the Army had already allocated a rental cost.
This duplication added approximately $4,000 to Crown's estimate. The
Army also points out that Crown erroneously added over $270 to the
rental value of the laundry folding machines to be provided to a GOCO
contractor when it used an erroneous current acquisition cost figure for
the machines.
Finally, the Army refers to policy directives from the Controller of
the Army directing contracting activities to ignore depreciation and the
cost of capital for units with a replacement value of less than $1,000.
The Army cites this policy as justification for excluding from its
estimate approximately $1,100 in rental costs for equipment considered
by Crown in calculating its estimate.
We consider the $410.64 error which the Army admits to having made in
calculating the rental value of the laundry equipment to be provided to
a GOCO contractor to be de minimis. Furthermore, given the Army's
explanation as to the remaining discrepancies between the two estimates,
we do not believe that Crown has shown the Army's estimate to be
otherwise unreasonable.
The final issue is the reasonableness of the evaluation factor
intended to reflect the rental value and cost of ownership of the
equipment and space to be provided to a GOCO contractor. The Army
indicates that the $47,126 evaluation factor included $25,690 as the
rental value of the space calculated at a rate of $.60 per square foot.
Crown, however, contends that the true rental value of the space was
approximately $1.60 to $1.75 per square foot and has submitted
quotations from real estate agents in support of its claim.
The Army obtained from three commercial sources estimates of $.05,
$.75 and $1.00 per square foot as the rental value of a 42-year old,
"temporary" wooden structure with concrete foundation used for an
industrial/commercial activity and for which utilities were available.
The Army then derived the $.60 per square foot rental value used in its
evaluation by averaging these three estimates. As indicated above,
Crown contends that the Army has understated the rental value of its
property. Crown asserts that those who provided the Army with estimates
were not aware of all the requirements of the solicitation and has
furnished other, higher rental estimates in support of its assertion.
In particular, Crown contends that the real estate agent who had
provided the Army with the estimate of $.05 per square foot subsequently
increased his estimate to $2.00 per square foot upon being given
"additional information."
The Army responds that the "requirements" which it allegedly failed
to provide those who provided it with quotations were not in fact
requirements of the FBI, or were addressed in the contacts the Army made
with local realty sources, or were already present in the existing
structure. In addition, the Army asserts that Crown's rental quotations
appear to be based upon more modern and more substantially-constructed
buildings and include some higher-priced "office space" which under the
IFB the Government is not required to provide to the contractor. With
regard to the real estate broker who had provided a $.05 per square foot
quotation to the Army, his subsequent letter to Crown states in
pertinent part:
Modern buildings ranging in floor space from 1000 to 2500
square feet are presently leasing for from $2.50 to $3.50 per
square foot.
The same type structure ranging in square footage up to 15,000
square feet are presently leasing for approximately $2.00 per
square foot.
The source of this information is present lease cost of floor
space in existing shopping centers and office space.
The Army maintains that the $2.00 per square foot quotation is based
upon "modern buildings" consisting of "existing shopping centers and
office space" not comparable to the Ft. Rucker laundry building.
We do not believe Crown has shown the Army's estimate of the rental
value of its building to have been unreasonable. We recognize that the
estimate of $.05 per square foot given to the Army by one real estate
agent was substantially lower than the other two and that had it been
disregarded the estimated rental rate would have been $.875 per square
foot instead of $.60. This is approximately one-third higher than the
figure the Army used but still approximately half that which Crown
contends should be applied. We note, however, that in his letter
written to Crown after this protest was filed, which Crown has provided
in support of its contention, the agent who had initially quoted the
Army the figure of $.05 per square foot did not specifically repudiate
that figure or claim that he had given it on the basis of inadequate or
misleading information. He simply states that, based upon the "present
lease cost of floor space in existing shopping centers and office
space," "modern buildings" of 15,000 square feet are presently leasing
for approximately $2.00 per square foot. We do not believe that this
demonstrates that the Army's estimate of the rental value of a World War
II-era "temporary" building in fair condition was unreasonable.
The protest is denied.
B-216004, 64 Comp. Gen. 175
Matter of: C.W. Girard, C.M., December 26, 1984:
Where a procurement agency withdraws its request to the Small
Business Administration (SBA) to process a certificate of competency
(COC) for the protester because the value of the contract to be awarded
was less than $10,000, General Accounting Office (GAO) will review the
agency's negative determination of responsibility because the SBA has
made no determination with respect to the protester's responsibility.
In reviewing a negative determination of a protester's
responsibility, GAO will defer to the agency's discretion unless the
protester, who bears the burden of proof, shows that there was bad faith
by the procuring agency or no reasonable basis for its determination.
Protester's contention that unsatisfactory performance on one
contract is not sufficient to support a determination of
nonresponsibility is denied. While poor performance on one contract
does not necessarily establish nonresponsibility, the circumstances of
the prior deficiencies are for consideration, and a contracting officer
reasonably can determine that they are grounds for a nonresponsibility
determination.
Protester's challenge to the agency's withdrawal of COC referral is
denied where the withdrawal was made at the SBA's suggestion, based on
an SBA regulation which leaves to the discretion of the contracting
officer whether to refer to the negative determination of responsibility
to the SBA when the contract value will be less than $10,000. Further,
the SBA Administrator was authorized by statute to make such regulations
as he deemed necessary to carry out his authority, and there has been no
showing that the regulation was not reasonably related to the SBA's
statutory authority.
C.W. Girard, C.M. protests the Department of Justice's determination
that he was nonresponsible and therefore ineligible for award of a
contract for court reporting services under invitation for bids (IFB)
No. JVUSA-84-B-0026. Girard contends that there is no substantial
evidence supporting the agency's determination and that the agency's
withdrawal of its request to the Small Business Administration (SBA) for
certificate of competency (COC) was unauthorized.
We deny the protest.
The IFB was issued on March 2, 1984, as a total small business
set-aside. The agency found the apparent low bidder nonresponsible, and
the SBA denied a COC when the matter was referred to it as required by
15 U.S.C. Section 637(b)(7) (1982). Girard was the next low bidder, but
the agency also found Girard nonresponsible because he had a
unsatisfactory record of performance under a current contract for court
reporting services. When this determination was referred to the SBA for
a COC, the SBA pointed out that because of the low dollar value of any
contract (about $7,400) which could be awarded to Girard for the
remainder of the contract year, the agency had the authority to find
Girard nonresponsible without referring the matter to the SBA. The SBA
was apparently relying on 13 C.F.R. Section 125.5(d) (1984), which
leaves to the discretion of the contracting officer the matter of COC
referral when the contract value is less than $10,000. At the
suggestion of the SBA, the agency then withdrew the referral and awarded
a contract with an estimated value of $7,000 to the next low bidder.
In support of its determination of nonresponsibility, the agency
contends that Girard failed to comply with schedules for depositions and
grand jury proceedings, disrupted a grant jury proceeding on at least
one occasion by pretending to sleep and was late in the submission of
some of the transcripts. While Girard concedes the existence of some
problems, he explains that his schedule conflicts arose when the
sessions lasted longer than he had been told they would and that on the
day he was said to be pretending to sleep, he was actually falling
asleep because of a change of medication. Girard attributes the late
transcripts to the peaks and valleys in the court-reporting business and
that fact that his transcribers are independent contractors who are not
always available. Girard contends that the isolated incidents cited by
the agency do not amount to a serious performance deficiency when viewed
in the light of his overall record of excellent performance, and argues
that unsatisfactory performance on one contract is not sufficient to
support a nonresponsibility determination in any event.
As a preliminary matter, we point out that when the SBA reviews an
agency's determination of nonresponsibility and either issues or denies
a COC, its decision is by law conclusive. Our Office will not review
such a decision unless there is a prima facie showing of bad faith or
fraud, or information vital to a responsibility determination was not
considered. Georgetown Industries, B-214224, Feb. 22, 1984, 84-1 CPD
Paragraph 225. Here, however, the SBA has neither reviewed nor made any
decision with regard to Girard's responsibility. Therefore, we will
review the agency's negative responsibility determination. See United
Aircraft and Turbine Corporation, B-210710, Aug. 29, 1983, 83-2 CPD
Paragraph 267.
The determination of a prospective contractor's responsibility is the
duty of the contracting officer who, in making the determination, is
vested with a wide degree of discretion and business judgment. See
S.A.F.E. Export Corp., B-208744, Apr. 22, 1983, 83-1 CPD Paragraph 437.
We therefore defer to such discretion and judgment unless the protester,
who bears the burden of proving his case, shows that there was bad faith
by the procuring agency or a lack of a reasonable basis for the
determination. See John Carlo, Inc., B-204928, Mar. 2, 1982, 82-1 CPD
Paragraph 184.
Girard has not made the necessary showing here. There has been no
allegation of bad faith or fraud on the part of the procuring officials
and, in our view, the record reflects a reasonable basis for the
determination of nonresponsibility.
In support of its position that unsatisfactory performance on one
contract is not sufficient to find a bidder nonresponsible, Girard cites
B-166485, Apr. 23, 1969, where the second low bidder challenged the low
bidder's responsibility because the low bidder was delinquent on its
current contract. We stated that we would not question the affirmative
responsibility determination absent a showing of bad faith or lack of a
reasonable basis for the determination. We also stated that the failure
to perform satisfactorily under one prior contract was an insufficient
basis for rejection of a bid.
We therefore agree with Girard that the mere fact of unsatisfactory
performance under one prior contract does not necessarily establish a
lack of responsibility. Nevertheless, the circumstances of the
contractor's failure to perform properly and in a timely manner under
the contract are for consideration, and may provide a reasonable basis
for a nonresponsibility determination. 39 Comp. Gen. 705 (1960).
Here, the contracting officer based her nonresponsibility
determination on a number of instances of unsatisfactory and untimely
performance by Girard under his existing contract. Although the
protester suggests that these incidents were due to circumstances beyond
his control, we think the contracting officer could reasonably conclude
otherwise. The facts noted by Girard -- that court sessions sometimes
last longer than anticipated, that there are peaks and valleys in the
court-reporting business and that transcribers are independent
contractors -- are simply aspects of Girard's profession with which he
should be reasonably equipped to deal. Further, while we do not dispute
Giarard's explanation for sleeping during a grand jury session, the
contracting officer also noted that Girard had been noticed making
"disparaging facial antics" during other grand jury sessions.
Accordingly, we find that the contracting officer's nonresponsibility
determination was reasonable.
Girard next contends that the Small Business Act provides no dollar
threshold below which referrals to the SBA need not be made and that,
therefore, the agency's determination "in and absence of any SBA
referral, must be held to be unauthorized. . . ." The agency, however,
not only referred the matter of Girard's responsibility to the SBA but
withdrew its request only at the SBA's suggestion. Further, as
previously noted, 13 C.F.R. Section 125.5(d) permits a contracting
officer to make a negative responsibility determination without
referring it to the SBA when the contract value is less than $10,000.
We have never questioned the validity of this provision, see Amco Tool &
Die Co., 62 Comp. Gen. 213 (1983), 83-1 CPD Paragraph 246; United
Aircraft and Turbine Corp., supra; Columbus Jack Corp., B-211829, Sept.
20, 1983, 83-2 CPD Paragraph 348, and we see no basis to question it
now, since under 15 U.S.C. Section 634(b)(6), the SBA Administrator is
empowered to make such rules and regulations as he deems necessary to
carry out the authority vested in him by the Small Business Act, and
there has been no showing that section 125.5(d) is not reasonably
related to the SBA's statutory authority. See Mourning v. Family
Publications Services, Inc., 441 U.S. 356, 369 (1972). For the future,
however, we note that the authority of the SBA to establish exceptions
from the COC referral requirement has been eliminated by the Congress by
its enactment on October 30, 1984 of Pub. L. No. 98-577.
The protest is denied.
B-215305, 64 Comp. Gen. 173
Matter of: Thomas S. Swan, Jr., December 26, 1984:
An employee who is delayed by a breakdown of his authomobile en route
to a new duty station may be allowed travel time and be reimbursed for
an additional day of per diem where the agency determines that the
reason for delay was beyond the employee's control and was acceptable to
the agency.
An employee may be paid per diem expenses and afforded travel time
for the period he was delayed en route to his new duty station by the
breakdown of his automobile when the agency determines the delay was for
reasons beyond the employee's control or acceptable to the agency. /1/
Mr. Thomas S. Swan, Jr., an employee of the National Park Service,
Department of the Interior, was issued a travel authorization dated
September 26, 1983, for a permanent change of duty station from Point
Reyes National Seashore, California, to Yellowstone National Park,
Wyoming. Mr. Swan departed Petaluma, California, his old residence, at
10 a.m. on Saturday, October 15, 1983. On Sunday evening, October 16,
his vehicle broke down near Twin Falls, Idaho. He notified the Park
Service of his delay and received approval for the delay. Repairs took
all day Monday and were completed on Tuesday, October 18. He arrived at
Yellowstone National Park on Wednesday, October 19, at 12 noon.
Mr. Swan filed a voucher for his trip on November 15, 1983, claiming
per diem for 4 1/4 days. He included a statement explaining the delay.
He was initially allowed 3 1/4 days' per diem under Department of the
Interior regulation on the basis of 1 day of travel for every 350 miles
distance and LeRoy A. Ellerbrock, B-190149, December 23, 1977, which
denied additional per diem under similar circumstances. However, the
Park Service notes our recent decision Robert T. Bolton, 62 Comp. Gen.
629 (1983), permitted payment of additional per diem where an employee's
mobile home broke down en route to his new duty station. Therefore, the
certifying officer asks if Mr. Swan may now be reimbursed for an
additional day of per diem for the delay caused by repairs to his
automobile. He indicates that an appropriate official at the Park
Service has approved the delay and that the agency considers the delay
beyond control of the employee, since he was demonstrated that he
maintained his vehicle in good working condition.
The payment of travel, transportation, and relocation expenses of
transferred Government employees is authorized under 5 U.S.C. Sections
5724 and 5724a (1982), as implemented by the Federal Travel Regulations,
incorp. by ref., 41 C.F.R. 101-7.003 (1983). Among the expenses
authorized to be paid is per diem while en route to the new duty
station. In this connection the governing regulations provide a maximum
per diem allowance which may be paid when an employee uses a privately
owned vehicle in a transfer of station in the following terms:
(2) Maximum allowance based on total distance. Per diem
allowances should be paid on the basis of actual time used to
complete the trip, but the allowances may not exceed an amount
computed on the basis of a minimum driving distance per day which
is prescribed as reasonable by the authorizing official and is not
less than an average of 300 miles per calender day. An exception
to the daily minimum driving distance may be made by the agency
concerned when travel between the old and new official stations is
delayed for reasons clearly beyond the control of the travelers
such as acts of God, restrictions by Governmental authorities, or
other reasons acceptable to the agency; e.g., a physically
handicapped employee. In such cases, per diem may be allowed for
the period of the delay or for a shorter period as determined by
the agency. The traveler must provide a statement on his/her
reimbursement voucher fully explaining the circumstances which
necessitated the then en route travel delay. The exception to the
daily minimum driving distance requires the approval of the
agency's authorizing official. FTR para. 2-2.3d(2). (Italic
supplied.)
Prior to 1977 that provision did not specifically provide that
agencies could make an exception to the daily minimum driving distance
requirement when an employee was delayed en route for reasons beyond his
control or acceptable to the agency. Thus, we held in the case cited by
the agency, LeRoy A. Ellerbrock, B-190149, supra, that the regulation
did not permit payment of an increased per diem allowance due to
extenuating circumstances such as the breakdown of an employee's rented
truck en route to the new duty station. As amended in 1977, however,
FTR para. 2-2.3d(2) clearly provides that agencies may make exceptions
to the daily minimum driving distance and, therefore, allow additional
per diem when an employee is delayed en route to his new duty station
for reasons beyond his control or otherwise acceptable to the agency.
We held in Robert T. Bolton, 62 Comp. Gen. 629, supra, that
Ellerbrock would no longer be followed for transfers whose effective
date was on or after June 1, 1977. Under Bolton an employee who does
not meet the minimum daily mileage requirement may nevertheless be
authorized additional per diem if the agency determines that his delay
in traveling between duty stations was for reasons beyond his control or
acceptable to the agency. See also Oscar Hall, B-212837, March 26,
1984. However, we have not stated specifically that the breakdown of
the vehicle in which the employee is traveling to his new duty station
may be considered as a reason beyond the employee's control for purposes
of paragraph 2-2.3d(2). In cases involving temporary duty travel by
automobile when travel by that means is in the interest of the
Government we have held that per diem may be continued to be paid to an
employee whose travel is delayed due to the breakdown of his vehicle.
42 Comp. Gen. 436 (1963). We see no reason why the same rule should not
be applied in cases where the employee is traveling on permanent change
of station to permit vehicle breakdowns which delay an employee's travel
to be considered by an agency as valid reasons beyond an employee's
control which would justify payment of per diem for periods longer than
justified in the 300-mile-per-day rule.
The certifying officer indicates that the Park Service considers Mr.
Swan's delay to be beyond his control and additional per diem has been
approved by the authorizing official. Accordingly, Mr. Swan may be
allowed travel time and reimbursed for an additional day of per diem, if
otherwise proper.
B-216069.2, 64 Comp. Gen. 172
Matter of: ACS Construction Company, Inc., December 24, 1984:
General Accounting Office will not reopen a case which was closed
because the protester did not sent a timely indication of its continued
interest in the protest to GAO, where the failure to timely indicate
continued interest was caused by coounsel's moving offices.
ACS Construction Company, Inc. (ACS), requests that we reopen the
file on ACS's protest against the award of a contract by the Department
of the Army under invitation for bids No. DACA63-84-B-0110. We closed
our file because we did not receive a timely reply to our request for a
statement of continued interest in the protest after receipt of the
agency report on the matter. We find it would not be appropriate to
reopen the case.
ACS's counsel states that on or about October 23, 1984, he received
our letter of October 18, 1984, advising that the agency report had been
sent and that written comments or other written indication of continuing
interest in the matter had to be filed with us within 10 working days
after receipt of the report or the protest would be dismissed. See 4
C.F.R. Section 21.3(d) (1984). While ACS contracted GAO by phone on
November 13, 1984, to advise that a response had been mailed, the file
had been closed November 9, since our Office had not heard from the
protester within the prescribed time.
ACS acknowledges that comments or an indication of continuing
interest in the protest was due by November 6, 1984, but such interest
was not expressed until 1 week later. However, counsel requests that we
overlook the delay because counsel was moving his office and was unaware
of our 10-day rule until it was too late. It is also contended that the
delay has not prejudiced any party.
Both our published procedures and our letter of October 18 clearly
indicate that comments are to be filed with the GAO within 10 working
days and state the consequences of a failure to file in a timely manner.
Therefore, we consider it incumbent upon a protester to exercise the
due diligence and care necessary to meet these requirements. See Ikard
Manufacturing Company, B-213606.2, May 21, 1984, 84-1 C.P.D. Paragraph
533. Even if the alleged confusion of moving offices prevented counsel
from reading the letter received on October 23, since our procedures are
published in the Federal Register, protesters are charged with
constructive notice of their contents. Ikard Manufacturing Company,
B-213607.2, B-213608.2, May 21, 1984, 84-1 C.P.D. 534. Under these
circumstances, we find no basis to reopen the file.
We regard bid protests as serious matters which require effective and
equitable procedural standards both so that parties have a fair
opportunity to present their cases and so that protests can be resolved
in a reasonably speedy manner. See Ikard Manufacturing Company,
B-213606.2, supra; Edron, Inc. -- Reconsideration, B-207353.2, Sept. 8,
1982, 82-2 C.P.D. Paragraph 207. Our procedures are intended to provide
for expenditious consideration of objections to procurement actions
without unduly disrupting the government's procurement process. Ikard
Manufacturing Company, B-213606.2, supra.
Reopening the file on ACS's protest at this time would be
inconsistent with this purpose. Therefore, we will not reopen the case.
B-215039, 64 Comp. Gen. 171
Matter of: A Christmas Case, December 24, 1984:
On Dec. 23, 1982, the last workday before Christmas, the Installation
Commander of Fort Sheridan, Illinois, released the Installation's
civilian employees for the afternoon as a "holiday good-will gesture."
On Feb. 11, 1983, the Civilian Personnel Officer found the action to be
a humbug stating that the Commander had no authority to release
employees as a holiday good-will gesture. We are upholding the
Installation Commander's exercise of the discretionary authority to
grant excused absences in the circumstances as a lawful order under
existing entitlement authorities. It follows that the employees in
question are entitled to administrative leave -- every one of them.
On December 23, 1982, the last workday before Christmas, the
Installation Commander of Fort Sheridan, Illinois, released the
Installation's civilian employees for the afternoon as a "holiday
goodwill gesture."
On February 11, 1983, the Civilian Personnel Officer found the action
to be a humbug, stating that the Commander had no authority to release
employees as a holiday good-will gesture. This official determined that
the early release "contravened relevant provisions of the Federal
Personnel Manual Supplement" because, in order to comply with the
regulations, "if an employee's absence does not clearly serve the best
interests of the service, as compared to personal interests of the
employee, the employee's absence must be charged to the appropriate type
of leave."
Subchapter S11-1, Book 630, Federal Personnel Manual (FPM) Supplement
990-2 defines an "excused absence" as follows:
An excused absence is an absence from duty administratively
authorized without loss of pay and without charge to leave.
Ordinarily, excused absences are authorized on an individual
basis, except where an installation is closed, or a group of
employees is excused from work for various purposes. (Italic
supplied.)
Paragraph a of subchapter S11-5, Boo 630, FPM Supplement 990-2,
contains the following general instruction with regard to the tpe of
absence in question:
With few exceptions, agencies determine administratively
situations in which they will excuse employees from duty without
charge to leave and may by administrative regulation place any
limitations or restrictions they feel are needed. * * *
Thus, in the absence of statute, an agency may excuse an employee for
brief periods of time without charge to leave or loss of pay at the
discretion of the agency. See for example Administrative Leave,
B-212457, August 23, 1984, 63 Comp. Gen. 542, and decisions cited
therein.
Inasmuch as the Department of the Army has not specifically regulated
the granting of administrative leave, the examples listed in subchapter
S11, Book 630, FPM Supplement, supra, wherein agencies may excuse
employees from the performance of their official duties, have general
applicability to employees. However, this listing is not exclusive nor
does it purport to unsurp the discretion of agency heads or installation
commanders to make grants of short periods of administrative leave in
appropriate cases.
The controlling issue here is not the prudence of the release from
duty order, but rather, the validity and effect of that order. We find
nothing in the order to indicate that it was arbitrary in its
application or that it was otherwise contrary to law or specific
regulation. We are aware of some precedent for such a practice in both
the public and private sectors. Accordingly, we are upholding the
Installation Commander's exercise of the discretionary authority to
grant excused absences in these circumstances as a lawful order under
existing authorities.
It follows that the employees in question are entitled to
administrative leave -- every one of them.
B-215825, 64 Comp. Gen 163
Matter of: Army's Multiple Launch Rocket System Multiyear Contract,
December 21, 1984:
Advance procurement of economic order quantity (EOQ) materials and
components is authorized only to support end items procured through
authorized 5-year multiyear contract. Army improperly exercised option
for procurement of EOQ items for the needs of a 6th year and is
cautioned not to exercise an option for the needs of a 7th year as
presently contemplated, unless it obtains specific statutory authority
to do so.
"Bona fide needs" statute, 31 U.S.C. 1502(a), provides that an
appropriation may only be used to pay for program needs attributable to
the year or years for which the appropriation was made available, unless
the Congress provides an exception to its application. The only
exception for advance procurement of EOQ items is found in 10 U.S.C.
2306(h) but the exception is limited to procurement of items needed for
end items procured by means of a multiyear contract. Authorized
multiyear contracts may not cover more than 5 program years. 10 U.S.C.
2306(h)(8). Therefore, exercise of an option for advance procurement of
EOQ items for a 6th or 7th program year is unauthorized. General
Accounting Office does not accept Army contention that bona fide needs
statute is inapplicable to multiple or "investment type" procurements.
Although sufficient lump-sum missile procurement funds were
appropriated in FYs 1984 and 1985 for this purpose, Army cannot rely on
fact that cognizant congressional committees were aware of its intent to
exercise options for advance procurement of EOQ items for 6th and 7th
year end items. It cannot be said that the Congress as a whole intended
to provide an exception to the bona fide needs statute in addition to
the limited exception for 5-year multiyear contracts in 10 U.S.C.
2306(h) where this purpose was never stated in the legislation itself or
in the committee reports, and where the reports themselves created the
impression that the funds were to be used for an existing multiyear
contract.
By letter of February 14, 1984, the Chairman of the Subcommittee on
Defense, House Committee on Appropriations, requested that we assess the
Army's ongoing Multiple Lucnch Rocket System 5-year multiyear contract.
As part of our examination of the contract, we considered the legality
of the exercise of two options for the advance procurement of components
and other materials required to support end items for the needs of a 6th
and 7th year, respectively, which the United States has not yet
committed itself to procure. (There are two additional options for the
procurement of the end items needed for the 6th and 7th year, but there
has been no attempt to date to exercise these options before the 5-year
contract is completed.)
The Army exercised the first of these options on December 30, 1983,
and expects to exercise the second before December 28, 1984. As will be
explained below, we find that exercise of the first option was -- and
exercise of the second option would be -- unauthorized. Since the
contractor has already completed his obligations under the first option,
and received payment, no useful purpose would be served by cancelling
the exercise of the first option as void and seeking to recover the
funds. However, we recommend that the Army refrain from exercising the
second option unless or until the Congress enacts specific legislation
authorizing it to do so.
Public Law 97-377, December 21, 1982, appropriated $422,100,000 for
the purchase of the MLRS under a multiyear contract, to remain available
for obligation until September 30, 1985. The Senate Committee on
Appropriations had failed to approve any multiyear procurement authority
for the MLRS, S. Rep. No. 97-580, 97th Cong., 2d Sess. 73 (1982), while
the House Appropriations Committee had approved multiyear procurement
with the proviso that the contract be no longer than 5 years in
duration, with no options. The House report explained that the Army's
plan to begin procurement of economic order quantity items for the 6th
and 7th year options (fiscal years 1988 and 1989) beginning in fiscal
year 1984 resulted in a contract which was essentially 7 years in
duration. H.R. Rep. No. 943, 97th Cong., 2 Sess. 108 (1982).
The accompanying conference report stated with regard to the MLRS
contract that:
* * * The conferees are in agreement that the contract shall
extend for no more than five years. The two additional option
years proposed by the Army are unacceptable since procurement
would begin for items to be funded in those years during the basic
contract period. If the Army wishes to propose fixed price, fully
funded, and severable options for years six and seven, the
Committees on Appropriations of the House and Senate would
consider such a proposal. H.R. Rep. No. 980, 97th Cong., 2d Sess.
116 (1982).
In a letter dated February 22, 1983, the Under Secretary of the Army
informed the Chairman of the Subcommittee on Defense of the House
Committee on Appropriations that the Army intended "to continue with
execution of its acquisition strategy to award a 5-year multiyear
contract which contains options," notwithstanding the conference
committee's instruction. On September 15, 1983, the Army awarded a
fixed-price multiyear contract to Vought Corporation. The 5-year
contract contains four options: Options 1 and 2 are to purchase advance
materials in FYs 1984 and 1985 respectively in support of end items
needed in FYs 1988 and 1989; options 3 and 4 are to purchase the
balance of the 1988 and 1989 end items.
The question is whether the Army is authorized to procure in advance
economic order quantity (EOQ) items which are not needed for end items
procured during the basic 5-year term of the MLRS contract. The Army
has presented several interrelated arguments in support of an
affirmative response to this question. The Army argues that:
-- There is no statutory prohibition against the acquisition of
EOQ outside the period of a multiyear contract.
-- The advance acquisition of long lead items had been a
feature of DOD acquisitions for many years prior to enactment of
Public Law 97-86.
-- 10 U.S.C. Section 2301(a)(2) authorizes the advance
procurement of EOQ items.
-- 10 U.S.C. Section 2306(h)(4) provides for the advance
procurement of both long lead and EOQ under multiyear contracts,
but does not in any way state that the advance procurement must be
limited to the program years of the multiyear contract period.
-- In any case, the Congress knew and approved the exercise of
option 1 by making the necessary funds available for that purpose.
We will respond to these arguments in turn.
We cannot agree with the Army's assertion that there is no statutory
prohibition against the acquisition of economic order quantity items
outside the period of a multiyear contract. 31 U.S.C. Section 1502(a)
(popularly known as the "Bona Fide Needs Rule") provides that an
appropriation may only be used to pay for the bona fide needs
attributable to the year or years for which the appropriation was made
available. This funding restriction prohibits the advance procurement
of components and materials for use in subsequent fiscal years, unless
the Congress has otherwise provided for an exception to its application.
It is accordingly incorrect to suggest that Congress has not prohibited
the acquisition of EOQ outside the period of a multiyear contract
because it did not explicitly state that such acquisitions were
prohibited. Such acquisitions were already prohibited by 31 U.S.C.
Section 1502(a).
The Army does not regard the bona fide needs statute as having any
application to "investment accounts such as the Procurement
Appropriations." In its view, "the bona fide needs rule, from its
inception, has been applicable to operating or expense accounts and * *
* those appropriations made for the operation of the departments and for
the procurement of expendable items." However, the Army offers no
evidence, either in legislative history or otherwise, to support its
novel view of the limited applicability of the bona fide needs rule, a
rule which first appeared in 1789 in the very first general
appropriation act made for this country. On the contrary, as Army
acknowledges, the Comptroller General and his predecesor, the
Comptroller of the Treasury, have issued a great many decisions on this
topic, applying the rule to all types of procurements for which the
Congress has seen fit to limit the period of availablility of the funds
it appropriates to support them. The Army contends that all these
decisions are in error and should be reconsidered. We find the Army's
arguments on this point unpersuasive and decline to do so.
Accordingly, the next question is whether the references cited by the
Army constitute the necessary exceptions to the Bona Fide Needs Rule.
Army argues that advance procurement for long lead items is a well
established DOD practice and has been annually funded by the Congress in
most major systems acquisitions. We do not think that DOD policy with
regard to the advance acquisition of long lead items has any relevance
to the advance procurement of economic order quantities, which are
immediately available and are simply stored until needed. (Long lead
items are items described in DOD Directive 7200.4, September 6, 1983, as
"component parts and material whose lead times are significantly longer
than other components, parts and materials of the same end item or for
effort that must be funded in an advance procurement timeframe to
maintain a planned production schedule.") Army does not argue that it
has a long-standing practice of advance EOQ procurement. Even if Army
had so argued, it is our opinion that Public Law 97-86 would have
supplanted any previous departmental policy, and thus, as discussed
below, Army's authority to engage in the advance procurement of economic
order quantities is limited to that provided in that statute.
The Army's third argument is that U.S.C. Section 2301(a)(2)
authorizes the advance procurement of economic order quantities without
further limitations. Section 2301(a)(2), which was enacted as part of
section 909 of Public Law 97-86, provides:
It is also the policy of the Congress that contracts for
advance procurement of components, parts, and materials necessary
for manufacture or logistics support of a weapon system should, if
feasible and practicable be entered into in a manner to achieve
economic lot purchases and more efficient production rates.
This section is a statement of policy, and must be read in
conjunction with the implementing provisions of the legislation which it
introduces. No one would argue, for example, that because subsection
2301(a)(1) states that it is the policy of Congress that services and
property may be acquired by multiyear contracts, Army may therefore
enter into multiyear contracts whenever it deems this appropriate. The
Congress imposed all sorts of restrictions and conditions in
implementing the general policy in 10 U.S.C. Section 2306(h).
Similarly, the Congress implemented the policy which it set forth in 10
U.S.C. Section 2301(a)(2) in 10 U.S.C. Section 2306(h)(4). Accordingly,
we turn to the Army's next argument.
Army argues that 10 U.S.C. Section 2306(h)(4) provides for the
advance procurement of both long lead items and EOQ under multiyear
contracts, but does not in any way restrict the advance procurement to
the program years of the multiyear contract. We disagree, for the
following reasons.
Section 909(b)(2) of Public Law 97-86, 10 U.S.C. Section 2306(h),
provides an exception to the Bona Fide Needs Rule, 31 U.S.C. Section
1502(a), discussed supra. It authorizes agency heads to enter into
multiyear contracts (even though appropriations for all the years
involved are not yet available), for the purchase of property, including
weapon systems, and items and services associated with weapon systems,
provided that certain findings (which are not relevant for our purposes)
are made. However, Subpart (8) of subsection 2306(h) defines a
multiyear contract for purposes of the entire subsection as "a contract
for no more than five program years." Subpart (4) provides, in addition,
that:
Contracts made under this subsection may be used for the
advance procurement of components, parts, and materials, necessary
to the manufacture of a weapon system, and contracts may be made
under this subsection for such advance procurement, if feasible
and practical, in order to achieve economic lot purchases and more
efficient production rates. (Italic supplied.)
The references to "contracts made under this subsection" can only
refer to the multiyear contracts which are defined by subpart (8) as
limited to the needs of 5 program years. Moreover, the statute lends no
support to a contention that the advance procurement can be "free
standing;" that is, without relation to the basic 5-year multiyear
contract for the weapon system.
We do not think that the legislative history of section 2306(h)
supports the Army's contention that it authorizes the advance
procurement of economic order quantity items which will not be used
during the basic 5-year term of the MLRS contract, but which may be used
in support of "a" weapon system in later years.
In its report accompanying the Department of Defense Appropriation
Bill, 1983, the House Committee on Appropriations defined economic order
quantity procurement as "the advance procurement of material for future
year production requirements which is not required by material lead
times but is desirable for economic reasons." (Italic supplied.) H.R.
Rep. 943, 97th Cong., 2d Sess. 100 (1982). It is clear from this
definition that economic order quantity items must support end items
which are to be acquired during the basic term of the contract since
these are the only years for which production requirements exist. There
are no production requirements for option year quantities unless or
until the options are exercised. Thus economic order quantity items may
not be procured in advance for option year end items, the procurement of
which has not yet been approved by the Congress.
DOD's own definition of economic order quantity procurement also
indicates that economic lot purchases are to support items which will be
produced during the basic term of a multiyear contract. In a policy
Memorandum on Military Procurement addressed to the Secretaries of the
Multiyear Departments and Directors of the Defense Agencies, dated May
1, 1981, the Deputy Secretary of Defense described multiyear procurement
with expanded advance buy authority as multiyear with "advance
procurement of materials, components and their associated labor for end
items in the out-year portions of the contracts." Pursuant to this
definition, materials and components which are procured in advance must
support end items which will be produced during the terms of the
contract.
We note that our interpretation of the scope of the exception to the
bona fide needs rule is consistent with that set forth in DOD Directive
7200.4 (Full funding of DOD Procurement Programs.) Under the heading
"Advance EOQ Procurement (Multiyear Procurement)," the Directive states:
* * * It is the general policy of the Department of Defense not
to create unfunded contract liabilities for EOQ procurements
associated with multiyear contracts. Rather, funding for EOQ
procurements shall be included in advance procurement budget
requests unless an exception to the general policy is granted by
the Assistant Secretary of Defense (Comptroller) (ASD(C)). The
EOQ procurement may satisfy procurement requirements for no more
than 5 program years. * * * DOD components may not use the
advance procurement exception to the full funding policy to fund
EOQ procurements outside of multiyear contracts. (Italic
supplied.)
We have been informed by DOD that a request for an exception to DOD
Directive 7200.4 was submitted to the Assistant Secretary for Defense
(Comptroller) on December 12, 1983. The OSD Comptroller responded on
December 29, 1983, that a waiver was not required prior to exercise of
the options for advance procurement in FYs 1984 and 1985, since the
options had been "included in the congressional justification material,
supported at the OSD level, and thoroughly examined by the Congress." He
further noted that:
The intent of the restriction on EOQ procurements outside of
multiyear contracts is to preclude abuse of the EOQ strategy and
limit advance procurement requests to those requirements which are
based on procurement leadtimes. The FY 1984-85 EOQ options,
though not technically within the basic MYP, were approved within
the overall MLRS MYP acquisition strategy.
We disagree with the OSD Comptroller's contention that the "Congress"
had considered and approved exercise of the advance procurement options
in the MLRS contract. The Army also contends that the Congress
appropriated FYs 1984 and 1985 MLRS funds with the full knowledge that
they were to be used by the Army to procure EOQ for FYs 1988 and 1989
end items. Therefore, Army believes that its appropriations were and
are available for this purpose. We will respond to both the OSD
Comptroller'a argument and the Army's contention together.
As we noted in the background section of this decision, the
conference report which accompanied the initial MLRS appropriation
explicitly stated that:
* * * The conferees are in agreement that the contract shall
extend for no more than five years. The two additional option
years proposed by the Army are unacceptable since procurement
would begin for items to be funded in those years during the basic
contract period. H.R. Rep. No. 980, 97th Cong., 2d Sess. 116
(1982).
We recognize that the Under Secretary of the Army informed the four
cognizant Congressional Committees that the Army intended to retain the
advance procurement options despite the Conference Committee's
instruction. We are also aware that the Army was questioned about the
changes that it had made in its MLRS contracting strategy as a result of
the Conference Committee's direction, and that the Army made it quite
clear that it had not altered the structure of the contract. Hearings
before a Subcommittee of the Committee on Appropriations, House of
Representatives, 98th Cong., 1st Sess., Part 5, 778-780.
Finally, we have given due weight to the fact that the lump-sum MLRS
appropriation for fiscal year 1984 contains a $114.1 million component
which, according to the relevant committee reports, was intended for
"advance procurement." We note further that this figure of $114.1
million corresponds to the total amount requested for the purchase of
advance materials, including the exercise of option 1, during FY 1984.
However, it is not clear from the language of the House Armed Services
Committee or the Senate Appropriations Committee reports (the only two
reports which commented on the MLRS) how the rest of the Congress
(including members who in the past have been reluctant to expand
multi-year purchases beyond a 5-year term) could possibly realize that
they were approving funds for the exercise of option 1.
The House Armed Services Committee report accompanying the Department
of Defense Authorization Act for FY 1984 stated that the budget request
had included "$114.1 million for advance procurement of long lead
items." H.R. Rep. No. 107, 98th Cong., 1st Sess, 28-29 (1983). We do
not see how this language could have alerted members of Congress to the
fact that a portion of the $114.1 million was intended to fund EOQ items
for use in 1988. The Senate Appropriations Committee report,
accompanying the Department of Defense Appropriations Act for FY 1984,
recommended "$144,100,000 to procure advance materials in economic order
quantities as parts of a multiyear procurement strategy approved for
MLRS last year." S. Rep. No. 292, 98th Cong., 1st Sess. 84, 86 (9183).
Since the multiyear procurement strategy approved for MLRS the previous
year was a 5-year contract without options, we also do not see how this
language can be viewed as having notified the Congress as a whole that a
portion of the FY 1984 funds was to be spent on advance EOQ procurement
for FY 1988. We must conclude that the Congress did not appropriate FYs
1984 and 1985 funds with the full knowledge that they were to be used by
the Army to procure EOQ items for FYs 1988 and 1989 end items.
In our view, for all the reasons expressed earlier, a procurement for
items needed for fiscal years not included in an authorized multiyear
contract violates the prohibition in 31 U.S.C. Section 1502(a) unless
the Congress specifically enacted an exception. The mere fact that the
requisite funds are included in a lump-sum appropriation does not
constitute such an exception. We recommend that the Army seek explicit
legislative authority before attempting to exercise the second option
for EOQ procurements in support of the 7th year end items, as presently
contemplated.
B-212859.2, 64 Comp. Gen. 160
Matter of: Joint Committee on Printing of the Congress of the United
States - Request for Advance Decision, December 21, 1984:
In the absence of a specific statute or regulations mandating the
establishment of geographic regions, an agency generally must show that
its minimum needs define the scope of a geographic restriction in a
contract.
General Accounting Office has no objection to the Government Printing
Office's continued use of geographic restrictions in two Washington,
D.C. area contracts for an additional 6 months, since the sole purpose
is to gather data and to compare the results with unrestricted
procurements. If the results do not provide a justification for
limiting contracts to particular geographic regions, the restrictions
should be removed entirely.
The Joint Committee on Printing (JCP) of the Congress of the United
States requests our advance decision on whether the Government Printing
Office's (GPO) restriction of its printing contracts to contractors
within certain geographic regions is consistent with controlling laws,
regulations and policies. The Committee also asks whether the GPO may
maintain geographic restrictions in two of four Washington, D.C. area
contracts for the purpose of gathering data necessary for a reevaluation
of its policy on regional restrictions in the procurement of commercial
printing for the federal government by the GPO.
Although as a general rule geographic restrictions that are based on
regional boundaries, rather than on mileage or time, unduly restrict
competition, we have no objection to GPO's continuing their use in
certain Washington, D.C. area contracts for the next 6 months, so that
the JCP may determine whether an exception is justified here.
In 1971 the GPO, under the direction of the JCP, established a
nationwide program intended to coordinate and ensure the competitive
procurement of the government's printing needs from the private
commercial sector. The JCP directed the GPO to establish regional
printing procurement offices in 10 geographic areas in order to procure
quality printing services in a timely and cost-effective manner. The
JCP based its authority to develop the regional program on 44 U.S.C.
Section 103 (1982), which authorizes it to "use any measures it
considers necessary to remedy neglect, delay, duplication, or waste in
the public printing and binding and the distribution of government
publications," and on 44 U.S.C. Section 502, which authorizes the Public
Printer to commercially procure printing "under contracts made by him
with the approval of the Joint Committee on Printing."
The JCP maintains that the regional program, including its geographic
restriction, is necessary to meet the repetitive, short turn-around
needs of federal agencies throughout the country and to ensure adequate
preaward surveys, timely deliveries, an equitable price, quality
control, liaison with customer agencies and contractors, and protection
of smaller regional printers. Furthermore, the JCP believes that its
regional program has promoted more than adequate competition among
bidding printers.
The basic principle underlying federal procurement is that full and
free competition is to be maximized to the fullest extent possible,
thereby providing qualified sources an equal opportunity to compete for
government contracts. However, a procuring agency may impose legitimate
restrictions, including geographic limitations, on competition if, after
careful consideration of all relevant factors, including type of
services being procured, past experience, and market conditions, the
restrictions are deemed necessary to meet the agency's actual minimum
needs. Plattsburgh Laundry and Dry Cleaning Corp.; Nu Art Cleaners
Laundry, 54 Comp. Gen. 29 (1974), 74-2 CPD Paragraph 27; 53 Comp. Gen.
102 (1973). The validity of any such restriction depends not on whether
it restricts competition per se, but whether it unduly restricts
competition. Cf. Southwest Forms Management Services, 56 Comp. Gen. 953
(1977), 77-2 CPD Paragraph 183 (involving prequalification of offerors
for printing contacts). Thus, a geographic restriction would be unduly
restrictive only if it did not reflect the actual needs of the agency in
a particular situation. Norfolk Shipbuilding and Drydock Corp., 60
Comp. Gen. 192 (1981), 81-1 CPD Paragraph 46.
In the absence of a specific statute or regulation mandating the
establishment of geographic regions, an agency must show that its
minimum needs define the scope of each particular geographic
restriction. See Burton Myers Co., 57 Comp. Gen. 454 (1978), 78-1 CPD
Paragraph 354. Where the agency can demonstrate that its minimum needs
can only be satisfied by having a contractor located in the vicinity of
the contract performance, we have held that the agency must broadly
design its geographic restriction so as to extend the scope of the
competitive area. Burton K. Myers and Co., B-187960, Sept. 14, 1977,
77-2 CPD Paragraph 187. In order to overcome the presumption against a
geographic restriction the GPO therefore must show that its limitations
actually serve to ensure the timely delivery of goods or the adequate
performance of services, rather than merely to provide ease of
administration. See Burton Myers Co., 57 Comp. Gen. at 456, 78-1 CPD
Paragraph 354 at 3; Descomp Inc., 53 Comp. Gen. 522 (1974), 74-1 CPD
Paragraph 44; CompuServe, B-188990, Sept. 9, 1977, 77-2 CPD Paragraph
182.
In a 1971 opinion addressed to the Public Printer, our Office
recommended that the GPO reexamine its needs and consider broadening
competition by enlarging the area of performance beyond immediate field
office regions, so long as there was a reasonable expectation that
bidders located outside the area could maintain close liaison with CPO
and meet other requirements of the particular procurement. 50 Comp.
Gen. 769 (1971).
In its current request for an advance decision, the JCP justifies the
use of regional restrictions by stating that the restrictions are
necessary in order:
to induce a broad base of private printers * * * to bid
competitively on GPO contracts to supply repetitive, short
turn-around, locally-required federal agency printing requirements
* * * (and to) eliminate duplicative government printing
procurement activities, to reduce agency dependence on in-house
facilities, * * * to ensure service and timeliness to the customer
agencies as well as a fair price to the government * * *.
There is no question that the GPO can demand that printing contract
deadlines be met, that quality control be maintained, that liaison
between the GPO and the contractor be easily accomplished, or that the
government receive fair and reasonable prices. However, the means thae
GPO uses to achieve these ends should not arbitrarily exclude potential
contractors who are able to meet the agency's requirements. Whatever
geographical restrictions the GPO imposes on such contracts must be
justified on the bases of service and timeliness that the JCP has
articulated, since the use of arbitrary geographic boundaries is not
defensible under federal procurement statutes and regulations that
mandate full and free competition. See 10 U.S.C. Section 2305 (1982);
Federal Acquisition Regulation, Section 14.103-1(b), 48 Fed. Reg.
42,101, 42,171 (1983), to be codified at 48 C.F.R. Section 14.103-1(b);
Federal Procurement Regulations, 41 C.F.R. Section 1-2.102 (1984). For
example, a printing firm that is located outside of Printing Region 3-I,
which includes the District of Columbia, Northern Virginia, and Maryland
may -- due to existing metropolitan traffic patterns and availability of
interestate highways -- be just as accessible as one that is located
within the region.
We understand that the JCP has begun to reevaluate its policy with
regard to regional restrictions on contracts for the procurement of
commerical printing by the CPO. To that end, the JCP has completed the
first part of a two-part test comparing nongeographically restricted
with geographically restricted contracts in the Washington, D.C. area.
The analysis of the contract date gathered in the nonrestricted 6-month
test included trends in GPO's operations, the impact of contract
specifications, patterns of agency requirements, contractor
acceptance/rejection factors, contractor performance trends, and
statistically significant correlations between these factors. The JCP
maintains that the completion of the second part of the analysis is
necessary in order to obtain the comparative data required to formulate
a procurement policy that is consistent with its minimum needs, of
reasonable cost to the government, and fully and freely competitive.
In view of the fact that the sole purpose of retaining the geographic
regional restriction in the two Washington, D.C. area contracts is to
gather the complete data requested by the JCP for the development of a
permanent policy for the procurement of commercial printing for the
federal government by the GPO, we have no objection to the GPO's
proceeding with the second 6-month test. If the results do not provide
a justification for the restriction that is consistent with the general
rules regarding geographic restrictions outlined above, we believe the
restriction should be removed entirely.
B-215118, 64 Comp. Gen 155
Matter of: Claim of Hai Tha Truong, December 18, 1984:
A claim which arises from an action taken by the Agency for
International Development during a time of combat, and not from the
noncombat activites of the United States Armed Forces or its members or
civilian employees, is not cognizable under the Military Claims Act, 10
U.S.C. 2733, or the Foreign Claims Act, 10 U.S.C. 2734. However, it
would be cognizable under General Accounting Office's general claims
settlement authority, 31 U.S.C. 3702, had not the 6 year statute of
limitations specified in that section run.
The 6-year period of limitations in 31 U.S.C. 3702 was not tolled for
the 4 years that claimant was living in Socialist Republic of Vietnam
and may not have been prevented from bringing suit. Consistent with the
Supreme Court's construction of the Court of Claims 6-year statute of
limitations, Soriano v. United States, 352 U.S. 270, 273 (1975), this
Office should construe the 6-year period of limitation in section 3702
strictly.
The Agency for International Development (AID) asked this Office for
an advance decision about its liability for the $991,126.50 claim of Mr.
Hai Tha Truong, a Vietnamese refugee. Of this amount, only a portion
($53,573.40) represents losses directly attributable to alleged actions
by the United States. The remainder of the claim is for damages Mr.
Truong suffered when his letter of credit, factor, equipment, and
materials were seized by the Government of Vietnam and he was forced to
pay a fee to leave Vietnam. We do not see any connection between these
consequential losses and the actions by the United States of which Mr.
Truong complains. Therefore, we limit our consideration to the first
part of the claim.
The claim arose from loss of goods carried on two ships, both of
which were diverted from Vietnam because of the American evacuation from
that country in April 1975. For the reasons given below, we find that
the claim is barred by the statutes of limitations in the various laws
that could form a basis for Mr. Truong's claim. Accordingly, the claim
is denied.
According to AID, Mr. Truong's claim arose from his participation in
the Commodity Import Program, a program established by grant agreement
between the United States and the former Government of Vietnam. AID
informs us that under that program, importers, such as Mr. Truong, put
down 25 percent of the purchase price in Vietnamese piasters with the
Central Bank of Vietnam for goods to be imported into that country. The
bank then would loan the other 75 percent to the importer who, in turn,
would establish a letter of credit for payment for the goods.
Correspondingly, in the United States, AID provided complete financing
in dollars to the supplier of the goods by depositing funds in an
American bank. After the goods were shipped, the supplier was paid by
the bank. The monies deposited by Mr. Truong were put into a special
account pursuant to section 609 of the Foreign Assistance Act, 22 U.S.C.
Section 2359. The money was used for United States and Vietnamese
government programs.
Based on the material presented, it appears that Mr. Truong ordered a
quantity of acetate filament yarn and three tricot knitting machines at
a cost of some $50,000. These goods were shipped from the Untied States
to South Vietnam on two ships. However, due to the American evacuation
both ships were diverted from Saigon in April 1975. AID states that in
accordance with the grant agreement and the procedures under the
Commodity Import Program, the goods were sold at auction either in
Malaysia or Indonesia and the proceeds were deposited into the Treasury
as miscellaneous receipts.
Mr. Truong remained in the Socialist Republic of Vietnam until early
1979. He states that at that time he was allowed to purchase the right
for himself and his family to immigrate to Indonesia at a price of
$40,000, and that he reached Indonesia in June 1979. It appears that he
immigrated to Canada a year later where he now is a permanent resident.
By letter of December 28, 1982, Mr. Truong informed Congressman Peter
J. Rodino of his claim. Soon thereafter, Mr. Rodino referred the claim
to the Secretary of the Army who, in turn, referred it to the Navy as
that department had been assigned single service responsibility for
processing claims against the United States for loss or damage to
property in Vietnam. The claim, originally for over a million dollars,
sought not only compensation for the yarn, the knitting machines and the
related shipping charges, but also for the confiscation of Mr. Truong's
letter of credit and his factory, equipment and materials, as well as
his $40,000 emigration expense.
The Navy viewed the Military and Foreign Claims Acts, 10 U.S.C.
Sections 2733, 2734, as possible bases for the claim. Nevertheless, the
Navy suggested that the losses were not compensable under either Act
since (1) the 2-year statute of limitations in both appeared to bar the
claim, and (2) the losses did not appear to have been sustained incident
to the noncombat activities of the United State Armed Forces. The Navy
then forwarded the claim to AID on the basis that it arose from a
commodity credit transaction. Subsequently, in May 1984, AID submitted
the claim to us for an advance decision. On September 10, 1984, AID
agreed that we would decide the claim. Aside from the statute of
limitations issue, in its submission to us, AID presented numberous
substantive arguments essentially maintaining that Mr. Truong's
participation in the Commodity Import Program precludes his recovering
any money for the lost yarn and sewing machines.
Mr. Truong asserts his claim under both the Military and Foreign
Claims Acts. Assuming arguendo that the 2-year statutes of limitations
in those acts were tolled until Mr. Truong reached Canada in June 1980,
his filing a claim in late 1982 or early 1983 still would have exceeded
the 2-year period allowed by those acts for filing claims. In any
event, as suggested by the Navy, Mr. Truong's claim is not cognizable
under either of those statutes. Both cover loss of personal property
caused by the noncombat activities of the armed forces or by a member or
civilian employee of the armed forces. Id. Sections 2733(a), 2734(a);
see S. Rep. No. 243, 78th Cong., 1st Sess. 2 (1943); H. Rep. No. 312,
78th Cong., 1st Sess. 4 (1943). In this instance, the loss occurred as
a result of AID rather than the armed forces diverting ships from
Vietnam.
Assuming, therefore, that neither the Military Claims Act nor the
Foreign Claims Act applies, Mr. Truong's claim would be cognizable under
this Office's authority to settle claims against the United States, 31
U.S.C. Section 3702(a). That raises the issue of whether his claim
would be barred by the 6-year period of limitation set forth in section
3702. The issue turns on whether the statute ran or was tolled during
the 4-year period that Mr. Truong lived in the Socialist Republic of
Vietnam -- April 1975 to early 1979.
Section 3702 of title 31 requires that a claim "be received by the
Comptroller General within 6 years after the claim accrues except -- (A)
as provided in this chapter or another law * * *." Id. Section
3702(b)(1). It allows an extension of the 6-year period for claims of
members of the armed forces that accrue during war or within 5 years
before the war begins, or up to 5 years after peace is established. Id.
Section 3702(b)(2).
We have held that we are without authority to waive or modify
application of the 6-year period. E.g., B-190841, February 15, 1978.
Applying the statute strictly is consistent with the Supreme Court's
construction of the Court of Claims 6-year statute of limitations, 28
U.S.C. Section 2501, and, by implication, other statutes of limitations
pertaining to actions brought against the United States. Thus, Soriano
v. United States, 352 U.S. 270 (1957), the Court rejected the
plaintiff's contention that hostilities with the Japanese tolled the
statute and limited the exceptions to the 6-year period to those
provided in the statute -- "claims filed by persons under a legal
disability or beyond the seas at the time the claim accrued." /1/ The
Court reasoned:
To permit the application of the dotrine urged by petitioner
would impose the tolling of the statute in every
time-limit-consent Act passed by the Congress * * *. Strangely
enough, Congress would be required to provide expressly in each
statute that the period of limitation was not to be extended by
war. But Congress was entitled to assume that the limitation
period it prescribed meant just that period and no more. With
this intent in mind, Congress has passed specific legislation each
time it has seen fit to toll such statutes of limitations because
of war. And this Court has long decided that limitations and
conditions upon which the Government consents to be sued must be
strictly observed and exceptions thereto are not to be implied.
Id. at 275-76.
On the other hand, there is a line of cases supporting the view that
the 6-year period of limitation either never began to run or was tolled
for the time that Mr. Truong lived in the Socialist Republic of Vietnam.
Thus, it is generally held that whenever some paramount authority
prevents a person from exercising a legal remedy, the time during which
the person is thus prevented is not to be counted in determining whether
a statute of limitations has barred the right. /2/ Braun v. Sauerwein
77 U.S. (10 Wall.) 218 (1869); Yoder v. Nu-Enamel Corp., 145 F.2d 420,
427 (8th Cir. 1944); see B-200402, /3/ November 6, 1981. In Braun, the
Supreme Court held that a Maryland 3-year statute of limitations was
tolled for the period an Act of Congress prevented a plaintiff from
suing. In this regard, it found that the "running of a statute of
limitation may be suspended by causes not mentioned in the statute
itself." The Court noted with approval its decision in Hanger v. Abbott,
73 U.S. (6 Wall.) 532, 540-42 (1867), and decisions in various state
courts, that statutes of limitations in the confederate civil war states
were tolled while the courts of those states were closed by the war. It
stated that those decisions "all rest on the ground that the creditor
has been disabled to sue, by a superior power, without any default of
this own, and therefore, that none of the reasons which induced the
enactment of the statutes apply to his case * * *." 77 U.S. at 222.
Notwithstanding Braun and Hanger, we think Soriano governs Mr.
Truong's claim. In Soriano, the Court specifically distinguished Hanger
stating that Hanger pertained only to decisions between private
litigants but "has no applicability to claims against the sovereign."
352 U.S. at 275.
Our claims statute not only provides a forum for bringing claims
against the United States, but its legislative history shows that the
earlier 10-year period was changed to 6 years, among other reasons, to
conform it with that for the Court of Claims and United States courts.
H.R. Rep. No. 1300, 93d Cong., 2d Sess. 12-13 (1974); S. Rep. No. 1314,
93d Cong., 2d Sess. 5-6 (1974). Thus, the holding in Soriano would
likewise apply to our limitations period.
Consistent with our analysis, as the exception to the 6-year period
of limitations set forth in our claims statute -- that for members of
the United States Armed Forces -- does not apply to Mr. Truong, the
6-year period of limitation would not have been tolled for the 4 years
he lived in the Socialist Republic of Vietnam and, arguably, was
precluded from bringing a claim. /4/ Thus, as Mr. Truong's claim arose
in April 1975, the time when his goods were diverted from Vietnam,
filing of the claim in this Office some 9 years later, in Mary 1984,
conflicts with the 6-year period provided.
As we have held that the 6-year period of limitation in section 3702
is not a mere statue of limitations, but is a condition precedent to the
right to have the claim considered by our Office, B-148496, April 10,
1962, it follows that there is not reason to comment on the substantive
issues raised.
(1) The statute allowed and still allows for an additional 3 years
after the disability ceases.
(2) It would appear that the paramount authority argument is
strengthened by the principle that both governments that are not
recognized by the United States, and citizens of those governments, do
not have access to United States courts Pfizer Inc. v. India, 434 U.S.
308, 319-20 (1978); Banco Nacional de Cuba v. Sabbatino, 376 U.S. 398,
409 (1964). In this regard, the United States Court of Appeals for the
Second Circuit has held that a New York 6-Year statute of limitations
was tolled for the period during which the United States did not
recognize the German Democratic Republic. Kunstsamm lungen Zu Weimar v.
Elicofon, 678 F.2d 1150, 1164 (2d Cir. 1982), aff'g, 536 F. Supp. 829,
847 (E.D.N.Y. 1981). As we understand it, the Socialist Republic of
Vietnam still is not recognized by the United States.
(3) We suggested in B-200402, November 6, 1981, also a claim
involving a Vietnamese refugee, that the Statute could have been tolled
by a Vietnamese court order effectively precluding the United States
Army from paying what was owed the claimant. Nonetheless, the principal
basis for our finding that the statute had not run was that we could not
determine precisely when the cause of action accrued.
(4) Although the facts submitted to us are not conclusive on this
point, it is uncontroverted that Mr. Truong's factory was confiscated
either by the Viet Cong or by the government of the Socialist Republic
of Vietnam, and that he had to pay $40,000 so that he and his family
could emigrate from Vietnam.
B-216641, 64 Comp. Gen. 154
Matter of: National Guard Technicians - Military Leave, December 17,
1984:
Civilian employees who are reservists of the uniformed service or are
National Guardsmen who perform active duty for training are charged
military leave on a calendar-day basis, and there is no authority for
allowing the charging of military leave in increments of less than 1
day, regardless of the type of schedule the employee may work.
This action is in response to a request for clarification of the
provisions for charging of military leave for technician employees of
the National Guard. /1/ The technicians are currently charged leave on
a calendar-day basis, regardless of the number of scheduled hours in
their workday.
Military leave for reservists of the uniformed services and National
Guardsmen who are civilian employees of the Federal Government or the
District of Columbia is provided by statute. See 5 U.S.C. Section 6323.
Reservists and Guardsmen are entitled to leave without loss of pay,
time or performance or efficiency rating for up to 15 days in a fiscal
year, for training. 5 U.S.C. Section 6323(a). If called upon to
provide military aid to enforce the law, they are entitled to additional
military leave, not to exceed 22 days, for such service. 5 U.S.C.
Section 6323(b).
The National Guard Bureau asks whether its current procedure of
charging military leave for active duty for training, on a calendar-day
basis, is proper. We hold that military leave charged pursuant to 5
U.S.C. Section 6323(a) is properly being charged on a calendar-day
basis.
The question arises from the differences in the charging of leave
that occur when the employees working on compressed schedules perform
military duty. For example, if a technician who works a 4-day, 10-hour
workweek, Tuesday through Friday, goes on military duty for 15 days
beginning on a Saturday and ending on Saturday of the second week, he is
charged 11 days of military leave. Since the first 3 days and the last
Saturday are not his workdays, and are at the beginning and end of his
tour, they are not charged as military leave days. However, if a
technician worked a 5-day, 8-hour workweek, Monday through Friday, and
performed the same military duty, he would be charged 12 days because
only the first 2 days of his duty would be nonworkdays at the beginning
of his tour.
The work "days" as used in statutes generally has been regarded as
referring to "calendar days," in the absence of a clear intent to the
contrary. In the applicable statute, 5 U.S.C. Section 6323(a), there is
no indication that Congress intended "days" to mean anything other than
calendar days.
We have consistently held that military leave may not be computed in
hourly increments, and it should be computed on a calendar-day basis
instead of a workday basis except for the days at the beginning of the
active duty period. We are aware of no authority for allowing the
charging of military leave in increments of less than 1 day. See 52
Comp. Gen. 471 (1973); 27 Comp. Gen. 245 (1947); and George McMillian,
B-211249, September 20, 1983.
Until Congress enacts legislation which would allow the charging of
military leave on a basis other than a calendar-day basis, the National
Guard Bureau should continue its current procedure of charging military
leave on a calendar-day basis, despite disparate results based upon the
type of schedule worked by the employee.
(1) The question was presented to us by Thomas L. Link, Director of
Personnel, National Guard Bureau, Departments of the Army and Air Force,
Falls Church, Virginia.
B-215965, 64 Comp. Gen 152
To: The Librarisn of Congress, December 14, 1984:
Deficiencies in the Library of Congress imprest funds used for
foreign currency exchange transactions authorized by 31 U.S.C. 3342(a)
and (b) and which are attributable solely to currency devaluations may
be restored by the Department of the Treasury as authorized by 31 U.S.C.
3342(c) and implementing regulations. It is not necessary or
appropriate for Government agencies to seek relief for a physical loss
pursuant to 31 U.S.C. 3527, 61 Comp. Gen. 132 (1981).
GAO specifically finds that the term "agency" as used in 31 U.S.C.
3342 includes legislative as well as executive branch agencies of the
Federal Government. Therefore, disbursing officers of the Library of
Congress whose accounts are diminished solely by foreign currency
devaluations in the course of authorized currency exchanges may seek
restoration of the accounts from the Department of the Treasury pursuant
to 31 U.S.C. 3342. To the extent that they are inconsistent with this
decision, B-174244, Dec. 8, 1971, and B-174244, Dec. 17, 1974, will no
longer be followed.
This is in reply to your letter of July 30, 1984, requesting relief
pursuant to 31 U.S.C. Section 82a-1 (now recodified as 31 U.S.C. Section
3527 (9182)) for your disbursing officer, Edwin F. Krintz, for a loss in
the value of local currencies held in agent cashier accounts in seven
countries. The "loss" was discovered when the Library of Congress
reevaluated the funds in these accounts, measured by current conversion
rates, prior to effecting a transfer of responsibility for the funds
from the disbursing officer to the accounting officer, as requested by
the Department of the Treasury.
It is difficult to answer your request precisely because you state
that a total loss of $21,833.35 (not including currencies worth $2,450
when advanced, but which have not been evaluated at current rates) is
attributable "only (to) the continuing devaluation of local currencies
in these countries." However, in your next sentence you state, "The
losses reflected in the enclosure do not take into account the
possibility of loss by local theft or negligence." To the extent that
some portion of the loss can be attributed to local theft or negligence
of the accountable officer or his subordinates, your request for relief
is appropriate under 31 U.S.C. Section 3527, provided that you make the
necessary determinations required by the statute and send us sufficient
information to make an independent determination that relief is
warranted.
On the other hand, to the extent that the deficiency in the value of
the account is solely attributable to currency fluctations in the seven
countries involved, it is not necessary to seek relief for the
disbursing officer in order to restore the dollar value of the account.
See 61 Comp. Gen. 132, 134-135 (1981). A statute, first enacted in 1944
and later broadened and amended in 1953, specifically authorizes
disbursing officers stationed abroad to engage in various currency
exchange transactions for official or accommodation purposes. It also
establishes a Gains and Deficiencies Account in the Treasury to
reconcile gains and losses resulting from the fluctuations in value of
foreign currencies. This statute has been codified at 31 U.S.C. Section
3342. It permits agencies to offset deficiencies caused by currency
devaluation against a gain realized from an increase in value on a
fiscal year basis, returning to the Treasury any net gain. It then
authorizes the Treasury to adjust the agency's account for any remaining
net loss, payable from the Gains and Deficiencies Account.
The Department of the Treasury has issued regulations to implement
section 3342, and to provide guidance to disbursing officers throughout
the Government. See Treasury Circular No. 830, (revised June 16, 1980);
Treasury Fiscal Requirements Manual (T.F.R.M.), vol. 1, chap. 4-9000
(TL No. 320). You will find specific procedures for reporting gains and
deficiencies to the Treasury Department discussed in 1 T.F.R.M. Sections
4-9070.10, 4-9080. We suggest that you avail yourself of that authority
to restore the value of your disbursing officer's account.
We are aware that on several previous occasions we have granted
relief to the Library of Congress disbursing officers for similar
account deficiencies pursuant to the physical loss relief statute, 31
U.S.C. Section 3527. (See, e.g., B-174244, December 8, 1971; B-174244,
December 17, 1974.) At those times, we thought that section 3342 was not
applicable to the Library of Congress because it is a legislative branch
rather than an executive branch agency. Prior to the 1953 amendments,
the statute referred to "executive departments." The amendment
substituted the term "agencies" (without, however, defining the scope of
the term) and as presently codified, refers to the accounts of "a
disbursing official of the United States Government." We note further
that section 101 of Title 31, as revised and recodified in 1982, defines
the term "agency" as "any department, agency or instrumentality of the
United States Government," with an entirely separate definition for the
term "executive agencies."
We have been prompted by your request to reconsider our previous
position carefully. We now find that the Library of Congress is an
"agency" of the United States Government for purposes of section 3342
and is therefore entitled to request the Treasury to restore its
accounts for net deficiencies caused by currency devaluations pursuant
to that section and its implementing regulations. To the extent that
they are inconsistent, our decisions, B-174244, December 17, 1974, and
B-174244, December 8, 1971, will no longer be followed.
Nothing in this decision should be read to sanction practices and
procedures to handling local currencies that are not consistent with
Treasury requirements as set forth in its regulations, cited above. We
suggest that appropriate officials of your agency consult with Treasury
officials about alternative ways to manage your foreign currency imprest
funds so that future losses of this nature can be minimized.
B-215326, 64 Comp. Gen 149
Matter of: General Services Administration - Sale of Used Government
Vehicles by Private Section Auction Houses, December 14, 1984:
GSA proposal to sell used Government vehicles on consignment through
private section auction houses is not objectionable. The proposal does
not provide for an improper delegation of the inherent Government
function of fee setting since the Government will set a minimum bid
price on each vehicle and the final sales price will be determined by
the market. The security of Government funds is assured by a contractor
guarantee and bonding. 62 Comp. Gen. 339 (B-207731, Apr. 22, 1983), is
distinguished.
The General Services Administration (GSA) is currently implementing a
program to test the feasibility of selling used Government vehicles on
consignment through private sector auction houses. The General Counsel
of the GSA has requested our opinion on whether the program, as
outlined, would impermissibly place Government funds in the custody of
the contractor. As will be explained below, we do not object to the GSA
proposal since it does not provide for the improper delegation of an
inherent governmental function. Furthermore, the proposal incorporates
safeguards which are adequate to assure the security of Government
funds.
The submission explains that the Federal Property and Administrative
Services Act of 1949, as amended, authorizes the Administrator of
General Services to dispose of surplus property. 40 U.S.C. Section
484(a) (1982). The proceeds of such sales are available to pay the
direct expenses incurred in disposing of the property, and amounts not
used for this purpose are covered into the Treasury as miscellaneous
receipts. 40 U.S.C. Section 485 (1982). The Administrator is also
authorized to exchange or sell property and use the proceeds of such
transactions to acquire similar items. 40 U.S.C. Section 481(c) (1982).
GSA notes that virtually all of the vehicles that it sells are
classified as either exchange/sale or surplus property.
According to the submission, GSA currently sells approximately 30,000
vehicles each year, primarily by public auction. This figure is
expected to rise sharply due to the size of the fleet and a greater
turnover of vehicles. At the same time, the number of GSA personnel
available to conduct sales is being reduced. Although GSA currently
performs most of its vehicle sales function internally, it has, on
occasion, contracted with the private sector for transportation,
storage, reconditioning, and auctioneering services. It now proposes to
purchase these services as a package and to make the contractor, rather
than the purchaser, responsible for paying the Government.
GSA indicates that the proposed program will incorporate the
following elements:
-- Within five days of notification of vehicle availability,
the contractor will pick up vehicles and store them on contractor
controlled premises.
-- The contractor will recondition the vehicles to improve
marketability.
-- Approximately once a month the contractor will conduct a
sale. All cars are to be offered for sale within 45 days of pick
up.
-- The contractor will collect all money from the sales and
turn it over to GSA within three business days. (Three days are
allowed in recognition of the banking process.) The contractor
will be required to guarantee payment of sales receipts in full
regardless of the status of collections.
-- A GSA warranted contracting officer will be present at all
sales and will execute the documents necessary to transfer title
title to the purchaser.
-- The contractor, in turning over the sale proceeds and a
sales report to GSA, will also submit an invoice for services
rendered. Payment will be made from the appropriate agency
account and the net proceeds will be remitted to the owning agency
or to miscellaneous receipts of the Treasury depending on the
status of the vehicle sold.
GSA also indicates that precautions will be taken to protect the
Government's financial interests. The contractor will be bonded and
will be required to maintain property and liability insurance to
indemnify the Government in the event of any property damage or personal
injury. In addition, GSA proposes to file Uniform Commercial Code
financing statements to protect the Government against possible
third-party creditor claims against the contractor.
GSA notes that in a recent decision concerning the collection of
recreation user fees by National Forest volunteers, 62 Comp. Gen. 339
(1983), we held that the collection of fees owed the United States was
an inherent governmental function which could be performed only by
Federal employees. GSA argues that its proposal is distinguishable from
the Forest Service plan in that the contractor will assume full
responsibility by contract for payment to the Government and will be
fully bonded and insured to protect the Government against any potential
loss. We agree that our holding in the Forest Service case does not
control the outcome in the case currently before us.
Our conclusion that the collection of fees owed the United States was
an inherent governmental function was based on OMB Circular No. A-76,
March 29, 1979, "Policies for Acquiring Commercial or Industrial
Products and Services Needed by the Government." This circular defined
governmental functions which were required to be performed in-house "due
to a special relationship in executing governmental responsibilities" as
including "monetary transactions and entitlements." The Office of
Management and Budget has since revised Circular No. A-76 to define a
governmental function as:
(A) * * * function which is so intimately related to the public
interest as to mandate performance by Government employees * * *
(including) those activities which require either the exercise of
discretion in applying Government authority or the use of value
judgment in making decisions for the Government.
OMB Circular No. A-76, August 4, 1983. Although "monetary
transactions and entitlements" are still defined as inherently
governmental under the revised definition, it appears in the context of
this case that only the setting of a minimum fee should be viewed as an
inherently governmental function because it requires discretion and
judgment. The administrative task of collection, however, need not be
so considered, in our view. Since the GSA proposal provides for a
minimum bid price set by the Government below which the contractor will
not be permitted to sell the vehicle and, as in all auction sales, a
final sale price set by the market, we do not think that the GSA
proposal will result in the improper delegation of an inherent
governmental function. We note by way of analogy that the use of
contractors to collect Government debts is specifically authorized by 31
U.S.C. Section 3718 and thus is not classified as inherently
governmental by that law.
In our decision concerning the collection of recreation user fees by
National Forest volunteers, we also questioned the feasibility of
developing controls adequate to assure the security of the funds
collected. Although the Forest Service proposed to require that each
volunteer obtain a surety bond, we pointed out that such bonds would
need to indemnify against both non-negligent and negligent losses by the
volunteers and expressed doubts as to whether such coverage could be
obtained at a cost which a volunteer would be willing to bear.
GSA will require that the contractor guarantee payment of sales
receipts in full regardless of the status of collections. It will also
require that the contractor be bonded. Because profit-making
contractors rather than volunteers will be involved in the situation
discussed here, we do not question the availability of adequate bonding
in these circumstances. We think that these measures will adequately
assure the security of Government funds.
In conclusion, we do not object to the implementation by GSA of a
pilot program to test the feasibility of selling used Government
vehicles through private sector auction houses. The GSA proposal would
not delegate an inherent governmental function, and incorporates
safeguards adequate to assure the security of Government funds.
B-215128, 64 Comp. Gen 142
Matter of: Offset under statutes other than Debt Collection Act of
1982, December 14, 1984:
Sections 5 and 10 of the Debt Collection Act of 1982, codified at 5
U.S.C. 5514, and 31 U.S.C. 3716 (1982), respectively, provide
generalized authority to take administrative offset to collect debts
owed to the United States. Their passage did not impliedly repeal 5
U.S.C. 552, 5705, or 5724 (1982), or other similar preexisting statutes
which authorize offset in particular situations. This is because a
statute dealing with a narrow, precise, and specific subject is not
submerged or impliedly repealed by a later-enacted statute covering a
more generalized spectrum, unless those statutes are completely
irreconcilable.
Section 5 of the Debt Collection Act of 1982, 5 U.S.C. 5514, as
implemented in 49 Fed. Reg. 27470-75 (1984) (to be codified in 5 C.F.R.
550.1101 through 550.1106), authorizes and specifies the procedures that
govern all salary offsets which are not expressly authorized or required
by other more specific statutes (such as 5 U.S.C. 5522, 5705, and 5724).
Any procedures not specified in that statute and its implementing
regulations should be consistent with the provisions of the Federal
Claims Collection Standards, 49 Fed. Reg. 8898-8905 (1984) (to be
codified in 4 C.F.R. ch. II).
Except as provided in section 101.4 of the Federal Claims Collection
Standards (FCCS), when taking administrative offset under 5 U.S.C. 5522,
5705, or 5724, or other similar statutes, or the common law, agencies
should follow the procedures specified in section 10 of the Debt
Collection Act of 1982, 31 U.S.C. 3716 (1982), as implemented by section
102.3 of the FCCS, 49 Fed. Reg. 8889, 8898-99 (1984) (to be codified in
4 C.F.R. ch. II).
The Chief Counsel of the Internal Revenue Service has requested our
opinion on the procedures to be followed when collecting debts by
administrative offset under statutory authority other than that
contained in the Debt Collection Act of 1982, Pub. L. No. 97-365, 96
Stat. 1749, 5 U.S.C. 5514 note. In particular, the Chief Counsel
inquired about administrative offset authority contained in 5 U.S.C.
Sections 5522, 5705, and 5724. The question arises because sections 5
and 10 of the Debt Collection Act of 1982 (codified at 5 U.S.C. Section
5514 and 31 U.S.C. Section 3716 (1982), respectively) mandate specific,
yet differing, offset procedures. Most other statutes, including the
three cited above, do not address what, if any procedures must be
followed when taking offset under their authority.
For the reasons given below, we conclude that when effecting offset
under a statute which does not provide its own procedures, including 5
U.S.C. Sections 552, 5705, and 5724, agencies should comply with the
procedures prescribed by section 10 of the Debt Collection Act of 1982,
as implemented by section 102.3 of the Federal Claims Collection
Standards (FCCS), 4 C.F.R. ch. II, as amended, 40 Fed. Reg. 8889,
8898-99 (Mar. 9, 1984).
According to its legislative history, the Debt Collection Act of 1982
(DCA) was intended to "put some teeth into Federal (debt) collection
efforts" by giving the Government "the tools it needs to collect those
debts, while safguarding the legitimate rights of privacy and due
process of debtors." 128 Cong. Rec. S12328 (daily ed. Sept. 27, 1982)
(remarks of Sen. Percy). Two sections of the DCA, sections 5 and 10,
were concerned with the collection of debts by means of setoff. Section
5 amended 5 U.S.C. Section 5514, which authorizes agencies to take
offset against the salaries of Federal employees and military members.
Previously, section 5514 had been limited to erroneous payments, and did
not prescribe any procedural protections.
Section 5 expanded section 5514 by authorizing salary offset to
collect "(any) debts which the United States is entitled to be repaid."
5 U.S.C. Section 5514(a)(1). According to the legislative history,
Congress intended this change to provide the Government with the
authority to take salary offset in order to collect "general debts" --
that is, any debts owed to the United States. See, e.g., S. Rep. No.
378, 97th Cong., 2d Sess. 10-12, 22-24 (1982). At the same time,
section 5 imposed a number of procedural requirements upon salary
offsets undertaken pursuant to section 5514. 5 U.S.C. Section
5514(a)(2). It was explained that "(I)t is imperative * * * that
Federal employees be provided their full due process rights in any
setoff procedure. Accordingly, (section 5) provides for a series of
steps that must be taken prior to any setoff (under it)." S. Rep. No.
378, supra, at 12. The Office of Personnel Management (OPM) has
promulgated regulations to implement section 5. 49 Fed. Reg. 27470
(July 3, 1984), to be codified at 5 C.F.R. Part 550, Subpart K
(hereinafter, "Subpart K").
In addition to section 5, the DCA also addressed administrative
offset authority in section 10. This latter section amended the Federal
Claims Collection Act of 1966, codified in 31 U.S.C. ch. 37 (1982), to
provide that "(a)fter trying to collect (any) claim from a person under
(the provisions of the original 1966 act), the head of an executive or
legislative agency may collect the claim by administrative offset." 31
U.S.C. Section 3716(a). /1/ Like section 5, section 10 prescribes
certain procedural provisions that are required to be taken prior to
offset. Id. However, the procedures in section 10 differ from those in
section 5. Compare 31 U.S.C. Section 3716(c) with 5 U.S.C. Section
5514(a)(2). Section 10 has implemented by GAO and the Department of
Justice in amendments to sections 102.3 and 102.4 of the FCCS, 40 Fed.
Reg. at 8898-8899.
Prior to the enactment of the DCA, many other statutes had been
enacted which authorized or required offset against salary or other
amounts to be paid by the United States. /2/ Among those statutes are
the three cited by IRS. Under the first, 5 U.S.C. Seciton 5522(a),
setoff is authorized to recoup advance payments made to facilitate the
evacuation of employees or their families and dependents from places
where there is imminent military or other danger to their lives. Setoff
may be made "against accrued pay, amount of retirement credit, or other
amount due the employee from the Government." 5 U.S.C. Section
522(c)(1). Under the second statute, 5 U.S.C. Section 5705, agencies
are authorized to make travel advances to employees and to recover
unused or misused amounts by "setoff against accrued pay, retirement
credit, or other amount due the employee (or by) deduction from an
amount due from the United States." The third statute, 5 U.S.C. Section
5724, authorizes agencies to pay travel and transportation expenses in
connection with permanent changes of station. Subsection 5724(f)
provides that "an advance of funds may be made to an employee * * * with
the same safeguards required under section 5705 of this title." We have
previously interpreted this provision to authorize the use of
administrative offset. 58 Comp. Gen. 501, 502 (1979); B-194159,
October 30, 1979. None of these three statutes specifies the
procedures, if any, that must be followed when taking administrative
offset.
The first issue to consider is the effect of sections 5 and 10 of the
DCA on the various preexisting offset statutes. We begin our analysis
with the premise that sections 5522, 5705, and 5724 (as well as the many
other statutes which authorize administrative offset with regard to
particular types of debts and debtors) have survived the enactment of
sections 5 and 10 of the DCA. This premise follows from the
well-settled principle of statutory construction that a statute dealing
with a narrow, precise, and specific subject is not submerged or
impliedly repealed by a later-enacted statute covering a more
generalized spectrum, unless the intent to do so has been made
unmistakably clear. 58 Comp. Gen. 687, 691-92 (1974) (citing Morton v.
Mancari, 417 U.S. 535, 550-551 (1974)). Cf., e.g., 34 Comp. Gen. 170
(1954) (original enactment of the act codified at 5 U.S.C. Section 5514
did not impliedly repeal 5 U.S.C. Section 5513). Moreover, as this
Office has previously observed:
An act is not impliedly repealed because of a conflict,
inconsistency, or repugnancy between it and a later act unless the
conflict, etc., is plain, unavoidable, and irreconcilable, and the
two acts cannot be harmonized or both cannot stand, operate, or be
given effect at the same time. If it is possible to do so, by any
fair and reasonable construction, two seemingly repugnant acts
should be harmonized or reconciled so as to permit both to stand
and be operative and effective and thereby avoid a repeal of the
earlier act by implication. 53 Comp. Gen. 853, 856 (1974).
Under these longstanding rules, we find that the DCA did not
impliedly repeal or amend other preexisting offset statutes. This
conclusion was implicitly embraced in both Subpart K (which implements
section 5) and the FCCS (which implement section 10). See Subpart K,
Section 550.1102(b)(1), 49 Fed. Reg. at 27470, 27472; and FCCS, Section
102.3(b), 49 Fed. Reg. at 8898, respectively.
Under the definition contained in section 10 of the DCA, the term
"administrative offset" means "the withholding of money payable by the
United States or held by the United States on behalf of the person to
satisfy a debt owed the United States by that person." 96 Stat. at 1755.
In promulgating Subpart K, OPM expressly concluded that a salary offset
taken pursuant to section 5 if a kind of "administrative offset."
Subpart K, Section 550.1102(b), 49 Fed. Reg. at 27472. We agree. In
common parlance, the terms "salary offset" and "administrative offset"
have come to be associated with sections 5 and 10, respectively, of the
DCA. More accurately, however, the term "administrative offset" is a
general term embracing all offsets accomplished by other than judicial
process. Thus, in the sense that it is non-judicial, salary offset
under 5 U.S.C. Section 5514 is also a form of administrative offset.
Similarly, salary offset under statutes other than 5 U.S.C. Section 5514
is also a form of administrative offset. Nothing in the legislative
history of section 10 suggests the contrary. /3/
In promulgating Subpart K, OPM also concluded that "(b)ecause it is
an administrative offset, debt collection procedures for salary offset
which are not specified in (section 5) and these (OPM) regulations
should be consistent with the provisions of (the) FCCS." Subpart K,
Section 550.1102(b), 49 Fed. Reg. at 27472. We concur in this
conclusion as well. In fact, section 5 specifically provides that
"(t)he collection of any amount under (section 5) shall be in accordance
with the (FCCS)." 5 U.S.C. Section 5514(a)(3). Finally, OPM concluded
that "the procedures contained in (Subpart K) do not apply * * * to any
case where collection of a debt by salary offset is explicitly provided
for or prohibited by another statute (e.g., travel advances under 5
U.S.C. 5705 and employee training expenses under 5 U.S.C. 4108)."
Subpart K, Section 550.1102(b)(1), 49 Fed. Reg. at 27472. With this
conclusion we also agree. Since the other salary offset statutes
survive the enactment of section 5, and since section 5 does not
expressly purport to set the procedures governing offset under those
other statutes, we conclude, as did OPM, that section 5 and OPM's
implementing regulations do not apply to offsets taken under statutes
other than 5 U.S.C. Section 5514.
To summarize our conclusions thus far, we find that:
-- The Debt Collection Act did not repeal, either expressly or
by implication, other preexisting statutes authorizing or
mandating offset to collect debts owed to the United States.
-- Salary offset taken under the authority of 5 U.S.C. Section
5514 is governed by the procedures contained in that section and
OPM's implementing regulations. Any procedures for salary offset
under 5 U.S.C. Section 5514 that are not specified in that statute
or the OPM regulations should be consistent with the provisions of
the FCCS.
-- The procedures specified in 5 U.S.C. Section 5514 and OPM's
implementing regulations do not apply to offsets taken under other
statutes such as 5 U.S.C. Sections 5522, 5705, or 5724.
We have noted the broad definition of "administrative offset" in
section 10, and have established that all non-judicial offsets,
including offsets against the salary of Federal employees, are varieties
of "administrative offset." Therefore, and since salary offsets under
statutes other than 5 U.S.C. Section 5514 are not governed by section
5514 or OPM's implementing regulations, it is logical to look to section
10 and its implementing regulations, the FCCS, for relevant procedures.
The plain meaning of the "administrative offset" definition in
section 10 clearly suggests that it encompasses offsets taken pursuant
to other statutory or common law authority. However, section 10 also
specifically provides that it shall not apply in any case in which a
statute explicitly provides for or prohibits using administrative offset
to collect the claim or type of claim involved. 96 Stat. 1755.
Consequently, even though offsets taken pursuant to other statutes fall
within the definition of administrative offset, it may be argued that,
without more, the specific procedural provisions of that section do not
apply to the other statutory offsets. As we noted above, section 5 of
the DCA specifically provides that offsets taken under its authority
must be consistent with the FCCS. The other statutes cited by the Chief
Counsel have no similar provision. The FCCS address this concern.
Since 1966, GAO and the Department of Justice have taken the position
in the FCCS (based on an express provision in the 1966 act, /4/ that
nothing in the FCCS is intended to preclude agency disposition of any
claim under other applicable statutes and appropriate implementing
regulations. In those cases, the laws and implementing regulations
which are specifically applicable to the claims collection activities of
particular agencies (or particular classes of debts or debtors) take
precedence over the FCCS. E.g., FCCS, Section 101.4, 31 Fed. Reg. 13381
(Oct. 15, 1966); FCCS Section 101.4, 49 Fed. Reg. at 8897. However,
the FCCS has also provided since 1966 that "the standards set forth in
(the FCCS) should be followed in the disposition of civil claims by the
Federal Government * * * where neither the specific statute nor its
implementing regulations establish standards governing such matters."
Id. Cf. 62 Comp. Gen. 489, 494 (1983); 62 Comp. Gen. 599, 602 (1983);
63 Comp. Gen. 10, 11 n.1 (1983).
In accordance with this longstanding principle, the FCCS specifically
provide in pertinent part that "(e)xcept as provided in section 101.4
(as quoted above), * * * the standards in this paragraph shall apply to
the collection of debts by administrative offset under 31 U.S.C. Section
3716, some other statutory authority, or the common law." FCCS, Section
102.3(b), 49 Fed. Reg. at 8898. /5/ In other words, the FCCS provide
that, to the extent that a particular offset statute either specifically
addresses the procedures to be followed, or authorizes an agency to
specify procedures in its own regulations that are different from the
FCCS provisions (and the agency promulgates such regulations), then the
inconsistent provisions of the FCCS need not be complied with when
taking offset under the other statute and regulations. For example, in
62 Comp. Gen. 489 (1983), we found that the Economic Development
Administration (EDA) has independent statutory authority to compromise
debts owed to it. Therefore, EDA may legally sell its accounts
receivable at a discount, if it so chooses. Nevertheless, we pointed
out that, to our knowledge, EDA has not adopted regulations establishing
specific standards for collecting or compromising loans through the sale
of accounts receivable. Accordingly, we advised EDA that "unless and
until EDA adopts regulations establishing definite standards governing
the compromise of claims, it should follow the applicable standards and
guidelines set forth in the (FCCS)." Id. at 494. Compare 62 Comp. Gen.
599, 602 (applicability of FCCS to offset under the Social Security
Act); and 63 Comp. Gen. 10, 11 n.1 (applicability of FCCS to programs
and agencies specifically exempted from the DCA).
There is another reason why agencies taking offset under statutes
other than section 10 should look to the procedures in section 10 and
the implementing FCCS provisions. The fact that a statute or
implementing regulation is silent with regard to the need or substance
of procedural protections does not necessarily mean that none are
required. Based on our review of existing case law, we think there is a
high likelihood that the courts would conclude that a debtor-employee is
entitled to notice and an opportunity to be heard in some appropriate
form. See, for example, Sniadach v. Family Finance Corp., 395 U.S. 337
(1969); Atwater v. Roudebush, 452 F. Supp. 622 (N.D. Ill. 1976);
Coleman v. Block, 580 F. Supp. 194 (D.N.D. 1984). In Sniadach, the
Supreme Court expressly recognized that a person's entitlement to earned
wages is a property right. Thus, the question would seem to be not
whether procedural protections are required, but what form they should
take.
Again based on our reading of existing case law, it is our opinion
that the procedures set out in section 10, as implemented in section
102.3 of the FCCS, are fair and reasonable, and satisfy minimum
procedural requirements. /6/
For the foregoing reasons, we find that sections 5 and 10 of the DCA
of 1982 did not impliedly repeal 5 U.S.C. Sections 5522, 5705, or 5724,
or any other similar statutes. Those statutes continue to provide the
legal basis for the taking of administrative offset with regard to the
specific types of debts or classes of debtors with which those statutes
are concerned. We find further that 5 U.S.C. Section 5514 (as amended
by section 5 of the DCA and implemented in Subpart K, supra) provides
the authority for, and specifies the procedures that govern, all salary
offsets which are not expressly authorized or required by other more
specific statues (such as 5 U.S.C. Sections 5522, 5705, and 5724). We
also find that, except as provided in section 101.4 of the FCCS, when
taking administrative offset under 5 U.S.C. Sections 5522, 5705, 5724,
other similar statutes, or the common law, the procedures specified in
section 10 of the DCA, as implemented in section 102.3 or 102.4 of the
FCCS, should be followed. /7/
(1) The terms "debt" and "claim" have been interpreted to be
"synonymous and interchangeable" terms that refer to "any amount of
money or property * * * owed to the United States." FCCS Section
101.2(a), 49 Fed. Reg. at 8896. Cf. 31 U.S.C. Section 3701(b).
(2) E.g., 5 U.S.C. Sections 5511(b) (debts owed by employees removed
for cause), 5512(a) (setoff against accountable officers), 5513 (setoff
to recoup disallowed payments), 5522(a)(1) (setoff to recoup advance
payments for evacuations), 5705 (1) and (2) (setoff to recoup travel
advances), 5724(f) (setoff to recoup advances for travel and
transportation expenses); 37 U.S.C. Section 1007 (setoff against Army
and Air Force members); 42 U.S.C. Sections 300w-5 (setoff to collect
debts owed by states under the Preventive Health Services Block Grant);
300x-5 (setoff to collect debts owed by states under the Alcohol, Drug
Abuse, and Mental Health Block Grant).
(3) Cf., e.g., Perrin v. United States, 444 U.S. 37, 42 (1979); 38
Comp. Gen 812, 813 (1959) (plain meaning rule of statutory
construction).
(4) Federal Claims Collection Act, Pub. L. No. 89-508, Section 4, 80
Stat. 309 (1966), 31 U.S. Code 3711 note.
(5) An earlier version of the FCCS had expressly applied to offsets
under 5 U.S.C. Sections 5522, 5705, and 5724. 4 C.F.R. Section
102.3(b), 46 Fed. Reg. 39113 (1981).
(6) See e.g., Goss v. Lopez, 419 U.S. 565 (1975); Mathews v.
Eldridge, 424 U.S. 319 (1976); and Califano v. Yamaski, 422 U.S. 682
(1979).
(7) This decision should not be construed as prohibiting a debtor and
an agency from contractually agreeing to be bound by some alternative
procedures, or to waive procedural protections. See, e.g., D.H.
Overmeyer Co. v. Frick Co., 405 U.S. 174, 185-86 (1972), citing National
Equipment Rental Ltd. v. Szukhent, 375 U.S. 311, 315-16 (1964).
B-214718, 64 Comp. Gen 140
To the Fiscal Assistant Secretary, Department of the Treasury,
December 14, 1984:
Relief is denied to Secret Service Agent whose carry-on luggage
containing $1,000 cash advance was stolen when left unattended in
crowded Bogota, Colombia, airport. Advanced was for purchasing
counterfeit U.S. currency, and therefore was of the nature anticipated
in 61 Comp. Gen. 313 (1982). However, in this case, agent's negligence
in leaving bag unattended in a public place was the proximate cause of
the loss. Presence of armed police escort standing nearby does not
absolve agent of duty to personally safeguard Government funds entrusted
to his care. B-210507, April 4, 1983, distinguished.
Your letter of March 2, 1984, requested relief for Secret Service
Special Agent Marino Radillo. Agent Radillo was the accountable officer
for a $1000 cash advance made for the purpose of purchasing counterfeit
U.S. currency in Colombia. On September 3, 1982, the funds were stolen
in the Bogota, Colombia airport along with Agent Radillo's carry-on
luggage. An investigation by the Secret Service Special Investigation
and Security Division found that Agent Radillo was careless with the
funds, but ruled out negligence on the ground that Agent Radillo was
armed and had a police escort. We think Agent Radillo's careless
handling of the bag and its contents allow the theft to take place. His
negligence being the proximate cause of the loss, we must deny relief.
The facts stated in your submission, plus additional facts provided
informally by Mr. Balkenbush of your office, are as follows. Agent
Radillo was advanced $1000 cash to purchase counterfeit U.S. currency in
Cali, Colombia. Agent Radillo and his partner had $2000 collectively
which they had split between them to minimize the loss in case of theft.
At the time of the loss Agent Radillo was carrying the money in a small
shoulder bag. At the airport in Bogota, Agent Radillo needed to make
ticket arrangements for himself and his party to continue to Cali. The
airport was very crowded, and Agent Radillo stepped some distance away
from his partner and their Colombian police escort to approach the
Avianca ticket counter and conduct his business. Once at the ticket
desk, he put his shoulder bag down on the counter near where he was
standing and directed his attention to the ticket transaction. It took
an estimated 2 to 5 minutes to completely secure the tickets. On
completion of his business, Agent Radillo turned to pick up his bag. By
then, it was gone.
Our decision in 61 Comp. Gen. 313 (1982) allows law enforcement
agencies to write off as operating expenses certain thefts of funds
sustained while conducting criminal investigations. This treatment
dispenses with the need to seek relief for the accountable officers in
such cases. However, that decision applies only when the funds are
actually being used for the purposes for which they were entrusted
(i.e., paying an informant, purchasing controlled substances). Id. The
decision does not apply to funds stolen while on the way to the location
where the actual investigatory work is to take place. Id at 316,
B-210507, April 4, 1983. Under such circumstances the standard relief
analysis applies.
Relief may be granted under 31 U.S.C. Section 3527 if the Comptroller
General agrees with the agency head's decision that the accountable
officer was carrying out official duties when the loss occurred and that
the accountable officer did not cause the loss through fault or
negligence.
Agent Radillo was performing official duties while en route to Cali.
However, we think his admittedly careless actions in placing the bag on
the counter and directing his full attention elsewhere for 2 to 5
minutes allowed the bag to be stolen. We think Agent Radillo was
negligent and that his negligence was the proximate cause of the loss
because his inattention gave the thief a clear opportunity to steal the
bag and the funds.
We feel it is possible to distinguish this case from B-210507, cited
above, on the basis of the length of time the bag was unattended and the
reasonableness of the conduct. In the earlier case, we relieved a Drug
Enforcement Administration agent whose briefcase containing $2000 to pay
an informant was stolen when he set it down to remove his coat in the
Sao Paolo, Brazil airport. That briefcase was out of the agent's
control for only 15 to 20 seconds while he performed a reasonable task
which he could not easily accomplish while holding the briefcase. Here,
in contrast, the bag was left in plain sight for several minutes and
there was no apparent reason why it could not have been safeguarded
while the ticket arrangements were being taken care of.
Further, in the earlier case a Board of Inquiry had completely
exonerated the agent, while in this case the Investigation and Security
Division found that Agent Radillo handled the funds carelessly.
Finally, we do not agree that Agent Radillo should be relieved solely
because he was armed and had a police escort. As stated above Agent
Radillo was at some distance from his escort in a crowded airport at the
time of the theft, effectively negating any security they might have
provided. Even it they had been close by, however, it remains incumbent
on an accountable officer to devote his full personal attention to the
physical security of the Government funds entrusted to his care.
Under our decisions, an accountable officer is personally liable for
a loss of Government funds due to theft if the exercise of due care on
his part would have prevented the loss. See B-188733, March 29, 1979,
affirmed on reconsideration, January 17, 1980; and B-71445, June 20,
1949. If Agent Radillo had kept the bag under his immediate control, or
entrusted it to his fellow agent while he made ticket arrangements, this
theft would not have occurred. Accordingly, we deny relief.
B-214145, 64 Comp. Gen. 138
Matter of: Appropriations Chargeable with Expenses of
Representational Events at Foreign Posts, December 10, 1984:
Expenditures for hiring extra waiter and busboys to serve at official
functions at foreign posts must be charged to the State Department
representational allowance appropriation. The allotment for official
residence expenses, derived form the lump aum appropriations for
salaries and expenses, covers household servants who maintain the
official residence. State Department regulations do not appear to
include temporary help hired for specific events as household servants.
Even if expenses for temporary help could be considered generally to
be covered under regulations governing the appropriation allotment for
official residence expenses, such expenses should only be paid from the
representational allowance appropriation. Long-standing Comptroller
General decisions prescribe the use of an appropriation specifically
available for a purpose to the exclusion of a more general appropriation
that could encompass the same purpose. Moreover, section 454 of the
State Department Standardized Regulations forbids the use of official
residence expense allotments if there is any other appropriation that
covers the same purpose.
A Department of the State certifying officer has requested a decision
on the proper appropriation to be charged for the expense of hiring
extra waiters and busboys to serve at official parties and other
representational events hosted by United States principal
representatives serving at foreign posts.
The Department receives an annual line item appropriation for
"representation allowances as authorized by section 905 of of the
Foreign Service Act of 1980, as amended (22 U.S.C. Section 4085)." (See,
e.g., its fiscal year 1984 appropriation act, Pub. L. No. 98-166, 97
Stat. 1071, 1093, November 28, 1983.) The Department also receives an
annual lump sum appropriation for salaries and expenses for the
"administration of foreign affairs," a portion of which has been
administratively allotted for "official residence expenses" (ORE). The
latter account covers operation and maintenance cost of maintaining a
"suitable" official residence and includes the costs of supporting a
staff of household servants necessary to maintain the residence. (See
Standardized Regulations (Government Civilians, Foreign Areas)).
According to the certifying officer, the practice in Madrid and at other
posts in Spain has been to treat these two appropriations as
supplementary. Specifically, when the full amount allotted for
household servants has not been expended, the Bureau of European Affairs
has informally permitted the posts to charge the extra help needed for
special entertaining to the ORE account. The certifying officer
contends that this practice is unauthorized. The General Accounting
Office agrees with him.
The State Department has issued Standardized Regulations governing
the scope of expenditures covered by each of the two appropriations in
question. Representational allowances are covered under Chaptet 300 of
the Regulations (March 4, 1984). Although the hiring of temporary
waiters and busboys to provide extra help at specific functions is not
mentioned in so many words, the regulations appear to include a broad
range of expenditures associated with "entertainment of a pratoral
nature" or "entertainment undertaken by employees to promote personal
relationships necessary to the performance of their official duties."
Section 320 a. and b. This is consistent with the underlying
legislation (section 905 of the Foreign Service Act of 1980, supra),
which authorizes a specific appropriation "for official receptions and *
* * entertainment and representational expenses * * * to enable the
Department and the Service to provide for the proper representation of
the United States and its interests."
It is not disputed that the representational allowance appropriation
is specifically available for the "extra help" expenses at issue. The
question is whether the ORE allotment is equally available for the same
purpose.
Chapter 400 of the Standardized Regulations, which deals with
"official residence expenses" (ORE), defines the term broadly, and at
first reading appears to encompass the cost of hiring extra help for
official parties. However, the list of "allowable expenditures" under
sections 450-453 (April 29, 1984) is considerably more restricted. The
only applicable provision is for "wages and maintenance of household
servants" (section 451), and a "household servant" is "a servant
employed to perform household duties within the official residence."
Section 411(d). Such servants are entitled to "board, lodging,
clothing, local transportation, medical and dental care, social
security, and other assessments, gratuities, burial expenses, and so
forth, which are required in accordance with local law or custom to be
provided by the principal representative in addition to wages." Section
411(e). In this context, it seems apparent to us that the temporary
hire of extra waiters and busboys for particular representation
functions does not fit the definition of a household servant employed to
perform household duties on a regular basis and thus earning the fringe
benefits enumerated above.
Even if the ORE regulation could be read more broadly as encompassing
temporary held as well as household servants, the European foreign posts
are precluded from electing to charge their ORE funds by virtue of
section 454 of the regulations. That section prohibits charging any
expenditures to the ORE account if they could be "properly borne" by any
other appropriation. As mentioned above, there is no dispute that the
temporary help expenses could be "properly borne" by the
representational allowance appropriation.
This regulatory prohibition is consistent with a long-standing
principle that appears in a number of Comptroller General decisions.
(See, e.g., 36 Comp. Gen 526, 528 (1957) and B-202362, March 24, 1981.)
We have held that an appropriation made for a specific purpose is
available for that purpose to the exclusion of a more general
appropriation that might also include that purpose. Applying this
principle to the instant case, there is no question that the
representational appropriation is specifically available to cover the
expenses of representational functions. Compensation of waiters and
busboys hired only for particular representational functions is clearly
included. On the other hand, it is much less clear that these expenses
are covered, if at all, under the lump sum appropriation for salaries
and expenses from which the ORE allotment is derived.
Thus, under standard appropriation interpretations, in addition to
the Department regulations, we find that only the representational
allowances appropriation may be charged for the costs of hiring extra
waiters and busboys to serve at representational functions. The
certifying officer should make the appropriate accounting adjustments if
he has not already done so.
B-215493, B-215493.2, 64 Comp. Gen. 132
Matter of: Canon U.S.A. Inc. and Swintee Corporation, December 7,
1984:
Firms that did not submit offers or had their offers found
technically unacceptable are interested parties to pursue timely
protests against allegedly unduly restrictive specifications that
prevented them from competing or from having their offered items found
acceptable.
Where agency seeks to acquire new items and plans to solicit trade-in
allowances for the items being replaced, the agency must solicit offers
for the old items on an exchange (trade-in) basis and/or a cash basis,
unless circumstances indicate that permitting both types of offers will
not result in a better price than allowing one type.
Solicitation's listed method for evaluating the residual-value
element of typewriters' life cycle costs, by surveying sellers of used
typewriters to determine the current trade-in value of models and then
discounting that amount to represent a reduction in value for each year
of the machines' useful lives, is reasonable.
General Services Administration's decision to limit its Federal
Supply Service requirements contracts for typewriters to models with
15-inch carriages, based on anticipated savings from efficiency of
acquisition and allowing suppliers to realize the economies of scale and
larger production runs, is not a proper reason to restrict competition
similarly in other typewriter procurements where there is no evidence
that anticipated savings from standardizaiton would not be offset by
lower prices obtained through competition and other models would meet
the user agency's needs.
Decision to limit procurement of typewriters to models that
previously had undergone a lengthy life-cycle-cost (LCC) analysis was
reasonable where the procurement's urgency did not permit an LCC
analysis of other models.
Canon U.S.A., Inc. and Swintec Corporation protest that General
Services Administration (GSA) solicitation No. FGE-D3-75306-N-6-12-84,
requesting proposals to supply 600 electric single-element typewriters
for the Department of Defense Dependent Schools (Schools) in West
Germany, unduly restricts competition and unfairly favors an award to
International Business Machines Corporation (IBM). Both protesters
objects to the solicitation's provision for the evaluation of a trade-in
allowance for the government's old typewriters, because the old
equipment consists of 185 IBM typewriters for which IBM allegedly has
more use than do the protesters. Both protesters also challenge the
methodology set forth in the solicitation for evaluating life cycle
costs, particularly the typewriters' residual values, since IBM's
machines have significantly higher residual value than any of its
competitors' machines. In addition, Swintec complains that the
solicitation unreasonably restricts competition to offers of typewriters
with a minimum carriage length of 15 inches, since the solicitation
limits eligibility for award to offers of the 15-inch machines that GSA
has evaluated previously in its Life Cycle Costing (LCC) Qualification
Program.
We sustain the protest in part and deny it in part.
Initially, GSA has questioned whether Canon and Swintec meet our Bid
Protest Procedures' requirement that a protester be an "interested
party" in order to have its protest considered. 4 C.F.R. Section
21.2(a) (1984).
GSA maintains that neither protester has an interest in the award.
In Canon's case, the firm, after filing its protest, did not submit an
offer when GSA proceeded with the procurement in the face of the protest
because of the Schools' need to have the typewriters when the Schools
opened in August 1984. (A contract was awarded to IBM.) Regarding
Swintec, GSA points out that the procurement effectively was limited to
offerors of typewriters evaluated under the LCC Qualfication Program,
and Swintec does not offer such a product.
Both protesters contend, however, that their protests challenge
allegedly defective and unduly restrictive specifications that precluded
them from competing or from consideration for award, and that their
interest lies in an opportunity to compete under appropriately amended
specifications.
We have recognized that a nonbidding party, who would be a potential
competitor under a solicitation purged of the allegedly undue
restrictions, is an interested party for the purpose of our review.
E.g., Deere & Company B-212203, Oct. 12, 1983, 83-2 CPD Paragraph 456.
That clearly is the situation here, and the fact that GSA already
awarded a contract based on a public exigency does not defeat the
complainants' interest in having their protests resolved. We therefore
will proceed to consider the protests' merits.
The solicitation provided separate line items for offers to acquire
the Schools' old typewriters on the basis of an exchange or "trade-in
allowance that GSA would deduct from the offered price to supply the new
models. Canon complains that GSA's evaluation of trade-in allowances
gave IBM an unfair advantage since all the old typewriters were IBM
machines. The protester alleges that IBM maintains its own network of
dealers of used IBM typewriters, and thus enjoys, among suppliers of new
typewriter models, a "unique ability to economically use or dispose of
them and could quote much higher values to GSA." In this respect, both
GSA and IBM aver that there exists a sizeable third-party market of
used-typewriter dealers for whom the Schools' old typewriters have
substantial value. IBM suggests that anyone could resell the used
typewriters to these dealers at the same value as the used machines
represent to IBM.
Even assuming Canon is correct that IBM had an advantage for the
stated reason, the government has no obligation to eliminate a
competitive advantage that a firm may enjoy because of its own
particular circumstances unless such advantage results from a preference
or unfair action by the contracting agency. E.g., ADC Ltd., Inc.,
B-211117.3, Oct. 24, 1983, 83-2 CPD Paragraph 478. There is no
suggestion in the record that IBM's advantage resulted from any unfair
government action. Moreover, the Federal Property and Administrative
Services Act of 1949, as amended, 40 U.S.C. Section 481(c) (1982),
authorizes exchange allowances to be applied to the replacement
equipment's cost. Mid-Atlantic Industries, Inc. B-181146, Nov. 21,
1974, 74-2 CPD Paragraph 275.
Nevertheless, where an agency contemplates considering offers for the
government's old equipment in conjunction with an acquisition of new
equipment, we question whether it is fair or even in the government's
best interest to limit offers for the old equipment to firms also
offering to supply the new equipment, if there exists a third-party
market for the old equipment that might be willing to offer more on a
cash basis than the government could have obtained from any exchange
allowance. In this case, if GSA had made the Schools' old typewriters
available to any potential purchaser on a cash basis, as well as on an
exchange basis, a used-typewriter dealer might have offered more for the
old machines that IBM did in its trade-in allowance. Then, GSA could
have sold the old equipment to the used typewriter dealer while
acquiring the new typewriters at the lowest offered price without regard
to any offered trade-in allowance, and realized a savings.
In fact, though the parties have not addressed this point, GSA's own
regulations promulgated under the authority of 40 U.S.C. Section 481(c)
generally appear to require an agency to consider proceeding in this
manner. Those regulations require that the contracting agency solicit
bids for the property being replaced on a cash basis and/or an exchange
basis unless recent solicitation for identical items on both bases has
produced only one type of bid, indicating the futility of soliciting the
other type, or prior solicitation on one basis have proven clearly
ineffective in reducing the cost of the acquisition. Federal Property
Management Regulations (FPMR), 41 C.F.R. Section 101-46.402 (1983). The
objective of this requirement is to assure that the government obtains
the maximum return for the property to be sold or exchanged. Id.; 45
Comp. Gen 671 (1966).
The record in this case does not include any statement from GSA or
any other evidence to explain why the solicitation did not permit offers
for the old typewriters on a cash basis. In light of the regulations
requiring the agency to solicit offers on a cash and/or exchange basis
unless there exist circumstances showing little likelihood that
permitting both types of offers will benefit the government, the record
fails to demonstrate a proper basis for the procurement method used.
Since the contract already has been awarded and, as we have been advised
by GSA, the typewriters delivered, no corrective action is feasible in
this case. We nevertheless are recommending to the Administrator of GSA
that he take appropriate action to prevent a recurrence of this problem
in the future.
Canon points out that the regulations also require the contracting
agency to make a written administrative determination to apply the
exchange allowance to the acquisition, FPMR, 41 C.F.R. Section
101-46.202(a)(4), and alleges that GSA failed to do so. We believe,
however, that this requirement is procedural in nature, such that the
agency's failure to follow it would not prejudice any offeror nor affect
the validity of an award.
The crux of the protester's challenge to the solicitation's LCC
provisions is that the methodology for computing and evaluating residual
value, after an assumed useful life of 10 years, is unreasonable. The
provisions basically credit an offeror with the current market trade-in
or surplus-sale value of its models, ascertained through a survey of
companies that sell large numbers of used typewriters, and discount that
amount to reflect a compounded yearly 10-percent reduction in value over
a 10-year period. The protesters argue that an estimate of a machine's
residual value after 10 years that is based on current market values is
unreasonable and cannot bear any reasonable relationship to the
machine's actual value in 10 years. In this respect, both protesters
contend that the electrically powered mechanical typewriters involved in
this procurement will have practically no value in 10 years because of
the availability of more sophisticated electronic machines with such
features as automatic correcting memory.
We previously have rejected an objection to a similar GSA methodology
-- based principally on industry publications -- for evaluating
typewriters' residual values. See Remington Rand Corp., et al.,
B-204084, et al., May 3, 1982, 82-1 CPD Paragraph 408, at pages 12-13.
We held that residual value simply comprises a cost element that
logically cannot be ignored despite the observed difficulty in
determining the precise value of each model, and we found that GSA had a
reasonable, objective approach to the task. GSA's current method for
determining residual value is based on current value derived by survey
rather than on industry publications, which we note do not provide
actual residual values for all the eligible models since not all of them
have been available for 10 years. We believe the current method is at
least as objective and reasonable as the method discussed in Remington
Rand Corp., supra. We therefore deny the portions of the protest
concerning the method for calculating residual value. Regarding the
allegedly impending obsolesence of eletrically powered mechanical
typewriters, we point out that electronic typewriters are available
today, and there still exists a market for other typewriters. The
protesters have failed to demonstrate that such will not be the case in
the future.
Cannon also complains that the solicitation's provisions for
projecting residual value based on current market value are inconsistent
with what GSA said it was going to do when it started the LCC
Qualification Program. Since the current solicitation announced this
methodology for the purpose of this procurement, however, we do not
believe that any of GSA's alleged previous representations provides a
valid basis for protest.
Swintec complains that by limiting this procurement to models that
had been evaluated in the LCC Qualification Program, which itself was
limited to machines with a minimum carriage length of 15 inches, the
solicitation precluded Swintec from offering its model 1146CM, which
apparently has a carriage length of 14 3/4 inches.
GSA, in responding to the protest, does not contend that the Schools'
actual needs are for machines with carriage lengths greater than 14 3/4
inches. Rather, the agency's report explains that in September 1982 the
agency decided, for the purpose of making awards of Federal Supply
Schedule (FSS) contracts covering federal agencies' requirements for
electric single-element typewriters, to standardize future procurements
under the LCC Qualifications Program. The reason for standardization
was to increase the efficiency of acquisition, simplify the product
line, and promote better prices by enabling successful suppliers to
realize the economies of scale and larger production runs.
We see no basis to object to GSA's decision to standardize for
purposes of FSS contract awards. We believe it is logical that by
standardizing the government's requirements, to the extent possible, GSA
could reduce the number of typewriter contractors and anticipate
receiving lower-priced offers based on the larger estimated requirements
for the standardized typewriters.
The reason behind standardizing carriage size for purposes of the FSS
contract, however, does not support GSA's action here, since the
purchase is not from an FSS contract. The fact is that GSA could not
fulfill the Schools' need for 600 machines by placing an order against
the FSS contract because the dollar amount involved exceeded the
contract's maximum order limitation. This procurement therefore was
separate and distinct from any requirements contract or any other
procurement, and we do not understand how GSA's explained benefits
deriving from standardization apply to this case. We note in this
respect that GSA does not argue that standardization was necessary to
meet the government's functional requirements, but only to obtain lower
prices under a single FSS requirements contract.
The result of GSA's action here thus was to limit the competition to
models that previously had undergone LCC testing without regard to the
fact that the group of models that had done so was not necessarily
coextensive with the group of models that would satisfy the government's
functional requirements in this procurement. Models that might have
been able to meet the Schools' needs, but never had been accepted
previously for LCC testing because of their shorter carriage lengths,
were thus prevented from any opportunity to qualify for this
procurement. There is no evidence that savings flowing from
standardization would not be offset by lower prices obtained through
full competition for the 600 typewriters. See CPT Corporation,
B-211464, June 7, 1984, 84-1 CPD Paragraph 606.
The record, however, provides another, and in our view legitimate,
reason for limiting this procurement to typewriters that previously had
undergone LCC testing. While LCC testing was necessary to assure that
the government obtained the least costly typewriters, there was
insufficient time to conduct testing prior to the date the Schools
needed the typewriters. In this regard, we previously have held that
because GSA's confining competition for FSS contracts to typewriters
that have undergone LCC testing may well serve a legitimate need of the
government, GSA properly may preclude a firm from competing until its
model undergoes such testing. See Remington Rand Corp., et al., supra,
where we did not object to a restriction like the one here. We
therefore will not object to GSA's restricting this procurement to
LCC-tested models.
We point out, however, that implicit in our holding in Remington Rand
was recognition not only that the necessary testing was so extensive
that, as a practical matter, it could not be performed within the time
constraints of the procurement, but that an opportunity to make their
products eligible for the procurement was extended to all manufacturers
of models that would meet GSA's legitimate needs and were available for
testing reasonably in advance of the procurement. We therefore are
recommending to the Administrator, by separate letter, that if GSA
desires to limit future procurements to offers of models that have
undergone LCC testing, the agency should take steps to allow any model
capable of meeting the government's needs an opportunity to undergo LCC
testing sufficiently in advance of the upcoming procurements to be
eligible for evaluation. Otherwise, to strike a balance between the
desirability of LCC testing and the general requirement to maximize
competition, the agency should limit its evaluation of LCC factors to
those under which all potential offerors have a fair and equal
opportunity to offer any model capable of meeting the government's
needs.
We sustain the protest about the trade-in allowance to the extent
that GSA failed to solicit offers for the government's old typewriters
on a cash and/or exchange basis. The protesters' challenge to the
solicitation's methodology for computing and evaluating residual value
is denied. We also deny the portion of Swintec's protest complaining
that the solicitation in effect unduly restricted competition to offers
of models that had undergone LCC testing and had a minimum carriage
length of 15 inches.
B-215313, 64 Comp. Gen. 128
Matter of: Southern Air Transport, December 7, 1984:
When telex request for prices for movement of military air cargo does
not indicate how prices will be evaluated, protester is not free to make
assumptions as to method that will be used. Rather, it has a duty
either to inquire or to file a bid protest before submitting its prices.
General Accounting Office Bid Protest Procedures are intended to
resolve questions concerning the award or proposed award of particular
contracts, and allegation that evaluation criteria in future
solicitations may unduly restrict competition is premature.
Southern Air Transport, Inc. protests the Air Force's award of a
contract for movement of military air cargo by Hercules L-100 aircraft.
The firm alleges that the evaluation of prices by a method announced
after their submission resulted in an improper award to Transamerica
Airlines, Inc.
We deny the protest in part and dismiss it in part.
The protester and Transamerica were the only two vendors solicited by
telex on April 9, 1984. Each was advised that Headquarters, Military
Airlift Command, Scott Air Force Base, Illinois, required varying
amounts of cargo, expressed in tons per month, to be moved on specified
international routes and dates between June 1 and September 30, 1984. A
total of 138 trips on four different routes was involved. The telex
stated "Please submit information on available capability and estimated
cost. Also need pallet position for each L-100 series (aircraft)."
The following is an example of one of the line items in the telex:
Southern Air Transport indicates that it found the request unusual
because this was the first time that Military Airlift Command had not
specifically required L-100-30 aircraft. Representatives of the firm
state that before submitting their offer, they questioned the Air Force
and were told that either L-100-20 or L-100-30 aircraft would be
acceptable. Each has 23 tons available capacity; however, the L-100-20
can carry only 7 pallets, while the L-100-30 is configured to carry 8
pallets. /2/
On April 17, 1984, by telex, Southern Air Transport, which proposed
to use a mix of L-100-20s and L-100-30s, and Transamerica, which
proposed using all L-100-30s, submitted prices. On either a per-trip
basis or a package basis, i.e., a single price if all 138 trips were
awarded to one firm, Southern Air Transport's price was low:
The contracting officer states that in light of the different
capacities of the L-100-20 and L-100-30, he sought to evaluate proposals
in a fair manner that would reflect the best airlift/per dollar cost.
He further states that after submission of prices he learned that the
weight of the cargo to be loaded onto each pallet would average less
than their 4,000 pound capacity. He therefore decided to evaluate
prices on a cost-per-pallet basis, rather than according to cost per
ton. He states that he advised offerors of this by telephone and that
Southern Air Transport did not object. (Southern Air Transport, on the
other hand, denies that it knew of the evaluation method until after the
award to Transamerica.)
The contracting officer made the following calculations:
Thus, on cost-per-pallet basis, Transamerica's price was low, and on
April 24, 1984, the Air Force awarded it the contract.
Southern Air Transport protested, first orally and then in writing,
to the Air Force, but on May 11, 1984, the agency advised it that
evaluation based on pallets was a fair and appropriate method of
comparing the two types of aircraft offered. In the future, the Air
Force stated, all requests for L-100 service would specify the
evaluation method to be used. Southern Air Transport's protest to our
Office followed. The firm alleges that the award violates statutes and
regulations that generally require procurement by formal advertising and
award to the low, responsive, responsible bidder.
First, despite the contracting officer's repeated use of terms such
as "bid," the Air Force states that this was a negotiated procurement.
However, in most cases neither the formal advertising rules that
Southern Air Transport cites nor the procedures for negotiation permit a
contracting agency not to specify any method of evaluation and then
inform offerors, after proposal submission, of the evaluation scheme
that will be used without giving them an opportunity to revise their
proposals. See Parker-Kirlin, Joint Venture, B-213667, June 12, 1984,
84-1 CPD Paragraph 621. Here, the Air Force did not announce any method
of evaluation until after proposals had been submitted, and the
contracting officer apparently assumed that because Southern Air
Transport did not ask to revise its prices, an opportunity to do so need
not be announced.
This does not mean, however, that we sustain the protest. Southern
Air Transport must accept some responsibility for the situation in which
it found itself following the award to Transamerica. Given the unusual
telex solicitation, we do not believe Southern Air Transport was free to
assume that the low offeror would be determined by a comparison of
proposed prices per trip for all trips. Further, since the omission of
evaluation criteria was a defect that was apparent on the face of the
solicitation, it normally should have been protested either to the Air
Force or to our Office before the due date for submission of proposals.
(Another problem here is that the telex did not specify any due date.)
Nevertheless, we believe Southern Air Transport had a duty either to
inquire as to how offers would be evaluated or to file a bid protest
before submitting its prices to the Air Force. See Wilson & Hayes,
Inc., B-206286, Feb. 28, 1983, 83-1 CPD Paragraph 191.
The firm also protests that if the Air Force evaluates future offers
on a per-pallet basis, it will in effect be establishing a requirement
that can only be met by Transamerica with its L-100-30s. Our Bid
Protest Procedures, 4 C.F.R. Part 21 (1984), are intended to resolve
questions concerning the award or proposed award of particular
contracts. If the Air Force issues a solicitation with such evaluation
criteria, and if Southern Air Transport believes they are unduly
restrictive, we would entertain a timely protest. At present, however,
a protest on this basis is premature. D.J. Findley, Inc., B-214310,
Apr. 12, 1984, 84-1 CPD Paragraph 413. We therefore dismiss this aspect
of the protest.
Although Southern Air Transport has not complained of them, we find
other serious legal deficiencies in this procurement. We are concerned,
among other things, with the following:
-- failure of the solicitation to define the type of proposed
contract and to spell out its terms and conditions;
-- lack of information as to whether the tons of cargo to be
transported would be divided evenly among trips;
-- failure to advise offerors that they might revise their
prices when they were advised of the proposed method of
evaluation; and
-- qualification of both initial offers (Southern Air
Transport's was contingent upon aircraft availability, and
Transamerica's upon the government's providing war risk insurance
when and if Honduras was declared a war risk zone by
underwriters).
The Air Force has supplied us with copies of existing contracts for
movement of military air cargo held by Transamerica and Southern Air
Transport. These were negotiated under the defense mobilization base
authority contained in 10 U.S.C. Section 2304(A)(16) (1982). Under
these contracts, each airline is guaranteed a certain percentage of
airlift requirements for both passengers and cargo; each agrees to
provide required services at "class rates," negotiated using a formula
for cost analysis originally developed by the Civil Aeronautics Board.
Particular flights are scheduled by issuance of services orders, and the
contracts permit the Air Force to reroute, reschedule, or cancel flights
on short notice without penalty under certain conditions.
The Deputy for Contracting and Acquisitions, Military Airlift
Command, Scott Air Force Base, has advised us by telephone that since
there are no "class rates" for the routes covered by the protest, the
Air Force intended to conduct a price competition and then either to
issue a service order under one of the existing contracts or to
incorporate its terms and conditions in a new one. /3/
It is impossible to establish this from the telex solicitation, which
nowhere refers to the existing contracts. Much of the other missing
information may have been understood by the Air Force and the offerors
as a result of their previous course of dealing or because certain
practices are common in the military airlift trade. We are not aware,
however, of any statute or regulation that permits the Air Force to
obtain airlift services or to solicit prices on as vague a basis as
this.
By letter of today, we are advising the Secretary of the Air Force of
our concerns, so that future procurements will be conducted in a manner
that will meet requirements for full and free competition and permit
offerors to calculate their prices intelligently and on an equal basis.
The protest is denied in part and dismissed in part.
(1) According to Southern Air Transport, this route is from
Charleston, South Carolina, to Comayagua, Honduras, to Howard Air Force
Base, Panama Canal Zone, and return. The other routes were from
Charleston to Bermuda and return and from Norfolk, Virginia to either
Guantanamo Bay, Cuba, or Roosevelt Roads, Puerto Rico, and return, with
an outbound stop at the alternate destination.
(2) A pallet is a portable platform, designed to be handled by
forklift truck, on which cargo is loaded.
(3) After making the award to Transamerica, the Air Force actually
did issue a service order under the firm's existing contract, No.
F11626-83-C-0037.
B-216053, 64 Comp. Gen. 126
Matter of: CVL Forwarders, December 4, 1984:
Loss or damage not discovered within 45 days after delivery is
presumed, under the terms of a Military-Industry Memorandum of
Understanding, not to have occurred in the possession of the carrier in
the absence of evidence to the contrary. This presumption applies to a
government claim for unearned freight charges as well as a claim for
loss or damage.
CVL Forwarders (CVL) requests review of our Claims Group decision to
disallow CVL's claim for refund of freight charges of $245.67 that the
government recovered by setoff as unearned in connection with the
shipment of a United States Marine Corps (USMC) member's household goods
under government bill of lading No. AP-092, 475. The charges were
recovered because the USMC determined that a part of the shipment was
irreparably damaged in transit.
We find that CVL is entitled to the refund.
No exception to the condition of the household goods was noted on
delivery of the shipment, and the first notice to CVL of damage in
transit was receipt of a claim 77 days after delivery. CVL's claim is
based on its contention that pursuant to a Military-Industry Memorandum
of Understanding, damage is deemed not to have occurred in transit if
the damage is not discovered within 45 days after delivery. (In fact,
the USMC canceled a claim for the damage because the damage was not
discovered within the 45-day period.) The USMC contends, however, that
the 45-day reporting requirement applies only to a claim for damage to
the shipment and argues that failure to meet the 45-day reporting
requirement thus does not preclude a claim for unearned freight charges.
Our Claims Group agreed with the USMC.
The Interestate Commerce Commission regulations applicable to the
shipment, 49 C.F.R. Section 1056.26 (1983), provide that a common
carrier of household goods shall not collect or retain freight charges
on the portion of a shipment that is lost or destroyed in transit.
However, the shipper bears the burden of proving, inter alia, that the
carrier failed to deliver the same quantity or quality of goods at
destination as received at origin. Julius Klugman's Sons, Inc. v.
Oceanic Steam Nav. Co. Ltd., 42 F.2d 461 (1930). Ordinarily, this is
established by the notation of discrepancies on the bill of lading or
other delivery document at the time of delivery. United States v.
Mississippi Valley Barge Line Company, 285 F.2d 381, 388 (1960);
Sigmond, Miller's Law of Freight Loss and Damage Claims 206 (4th ed.
1974).
However, associations representing carriers of household goods have
entered into the Memorandum of Understanding with the military
departments, which provides:
To establish the fact that loss or damage to household goods
owned by members of the military was present when the household
goods were delivered at destination by the carrier, it is agreed
that the rules set forth below will be implemented * * *.
One of those rules is that all loss or damage is to be noted on the
delivery document, the inventory form, or the Defense Department
Statement of Accessorial Services, DD Form 619. The parties have also
agreed that if exception to the delivery has not been taken at the time
of delivery,
* * * later discovered loss or damage * * * dispatched not
later than 45 days following delivery, shall be accepted by the
carrier as overcoming the presumption of the correctness of the
(clear) delivery receipt.
On the other hand, loss or damage to household goods discovered more
than 45 days after the data of delivery will be presumed not to have
occurred in the possession of the carrier. This presumption is
rebuttable by the presentation of evidence substantiating intransit
damages.
By its express terms, the Memorandum of Understanding is for the
purpose of establishing the fact of loss or damage in transit in general
and is not, as the USMC suggests, limited in application to claims for
damage to household goods. Also, by the Memorandum's terms, loss or
damage not discovered within 45 days of delivery is presumed not to have
occurred in the carrier's possession in the absence of contrary
evidence. The USMC has not presented any contrary evidence.
Since the USMC has not shown that the irreparable damage occurred in
transit, DVL is entitled to refund of the freight charges collected by
the USMC from CVL as unearned.
B-215404, 64 Comp. Gen. 124
Matter of: Pennsylvania Avenue Development Corporation authority to
purchase and install memorial plaque on Federal land, December 4, 1984:
Pennsylvania Avenue Development Corporation (PADC) may install a
memorial plaque and designate a site within an area under its
jurisdiction and control in honor of a deceased former chairperson of
the PADC using funds donated to it. PADC has been vested with authority
to determine the character of and necessity for its obligations and
expenditures and to accept gifts of financial aid from any source and
comply with the terms thereof. These authorities are sufficient to free
PADC from restriction otherwise imposed upon Government agencies in the
expenditure of appropriated funds except where a statutory restriction
expressly applies to Government corporations. No law expressly
precludes proposed expenditure by PADC. Furthermore, no law precludes
PADC from designating property under its control in honor of deceased
former chairperson of PADC.
This decision responds to a request from the General Counsel of the
Pennsylvania Avenue Development Corporation (PADC), for a decision on
the PADC's authority to purchase and install a memorial plaque acquired
with donated funds and to dedicate the site of the plaque on Federal
land under its control to a deceased former chairperson of the PADC.
The PADC posed these questions:
1. Does the PADC have the authority to use public space within
the designated project area for the installation of a memorial
plaque to a former chairperson on public land?
2. Can private donations be legally spent for such a plaque
and its installation?
3. Is there a restriction as to how the memorial is designated
(i.e., can the site of the plaque be formally "named" for the
individual or can a plaque only be placed on a site which
otherwise carries a different name)?
For the reasons stated below, we find that the PADC may install a
memorial plaque and designate a site within an area under its
jurisdiction and control, in honor of a deceased former chairperson of
the PADC using funds donated to it.
Generally, the decisions of the accounting officers of the Government
have been to the effect that the purchase of medals, trophies, insignia,
etc., is not authorized under appropriations made in general terms
unless the purchase is specifically authorized by law. 45 Comp. Gen.
199 at 200 (1965) and decisions cited therein. These decisions are
based upon the rationale that awards such as these constitute personal
gifts to their recipients and appropriated funds are unavailable for
making personal gifts. Other decisions have held that appropriated
funds generally are unavailable for construction of memorials unless
specifically authorized. A-26628, April 11, 1929, 19 Comp. Dec. 100
(1912).
The PADC is a wholly owned Government corporation charged with the
responsibility of preparing and implementing a development plan in a
development area roughly corresponding to the corridor along
Pennsylvania Avenue between the White House and the U.S. Capitol in
Washington, D.C. 40 U.S.C. Section 874. In order to accomplish this,
the PADC is authorized and empowered to acquire, hold, maintain, use and
operate property within the development area necessary to carry out the
development plan. 40 U.S.C. Section 875(6). Furthermore, it may
construct improvements within the development area. 40 U.S.C. Section
875 (15) and (16). Additionally, the PADC has been vested with the
authority to determine the character of and necessity for its
obligations and expenditures. 40 U.S.C. Section 875(14). Finally, the
PADC is authorized to accept gifts of financial and other aid from any
source and to comply with the terms thereof. 40 U.S.C. Section 875(13).
These authorities are sufficiently broad to free the PADC from the
statutory restrictions otherwise imposed upon Government agencies in the
expenditure of appropriated funds except where the restriction expressly
applies to Government corporations. B-193573, December 19, 1979;
B-35062, July 28, 1943. The restrictions mentioned above have not been
made expressly applicable to Government corporations by statute.
We are unaware of any prohibitions in law precluding the PADC from
providing identifying designations to property under its jurisdiction
and control for the purpose of providing a means of identifying the
property. /1/ Further, it is authorized to receive and expend donations
for this propose.
However, we note that once the development plan is implemented, the
PADC is to dessolve, 40 U.S.C. Section 872(b), with property under its
jurisdiction and control to be transferred to other Federal and District
of Columbia Government agencies for administration. 40 U.S.C. Section
875(20). Thus, any agency assuming control of the property will be free
to redesignate the area or maintain or remove the plaque as it deems
appropriate. In the present case, this should not be a problem since
the governmental agencies which are likely to assume jurisdiction over
property in the development area (the Department of the Interior, the
General Services Administration and the District of Columbia government)
are all represented on the Board of Directors of the PADC. See 40
U.S.C. Section 872(c).
(1) It should be noted that the payment of expenses for cornerstone
ceremonies and for building dedication ceremonies are allowed even
though no appropriation or other law specifically authorizes them, since
the ceremonies are traditional practices associated with the
construction of public buildings. 53 Comp. Gen. 119 (1973); B-11884,
August 26, 1940. Naming public buildings or constructing markers
providing names to open areas under agency control similarly would seem
to be authorized either as traditional expenses connected with the
administration of such areas or as necessarily incident thereto. Thus,
a designation in the honor of someone should not change the character of
the expenditure.
B-216022, B-215284, 64 Comp. Gen 121
Matter of: Sergeants Mason and Smith, December 3, 1984:
Where two military members are divorced, or legally separated, the
children of the marriage are in the legal custody of a third party, and
each member is required to pay child support to the third party, only
one of the members may receive the increased basic allowance for
quarters ("with-dependent" rate) based upon these common dependents. If
the members are unable to agree as to which should claim the children as
dependents, the parent providing the greater or chief support should
receive the increased allowance, unless both members provide the same
amount of support, in which case the senior member should receive the
increased allowance.
This action responds to questions concerning the entitlement to basic
allowance for quarters at the "with-dependent" rate of Staff Sergeant
Kathleen Smith, USAF, and Staff Sergeant Bradley Smith, USAF, based on
their dependent children, and Staff Sergeant Mary A. Mason, USAF, and
Sergeant James E. Mason Jr., USAF, based on their dependent children.
/1/ The matter involves the situation where two service members having
been married to each other are separated or divorced, and their
dependent children are in the legal custody of a third party to whom the
members must pay child support.
We find that since the children of each couple are one class of
dependents, only one parent may claim the children of each couple for
purpose of entitlement to basic allowance for quarters at the
"with-dependent" rate. Absent an agreement between the parents, the
increased "with-dependent" allowance should go to the member providing
greater support. If the support payments are the same, the increased
allowance should to to the senior member.
Staff Sergeant Kathleen Smith is legally divorced from Staff Sergeant
Bradley Smith. Two children were born of their marriage. The divorce
decree, issued April 4, 1983, requires both members to pay child support
to the paternal grandparents, who have legal custody of the children.
Bradley Smith was ordered to pay $150 per month, Kathleen Smith, $100
per month. Bradley had been receiving basic allowance for quarters at
the "with-dependent" or increased allowance rate, and Kathleen at the
"without-dependent" rate. As a result of the divorce and the decree,
Kathleen has requested that she be paid at the "with-dependent" or
increased allowance rate, since she is also a non-custodial parent
required to pay child support. Both members are at the same pay grade
(E-5) and cannot agree upon who should receive the quarters allowance at
the increased rate.
Staff Sergeant Mary A. Mason and Sergeant James E. Mason, Jr. were
married members residing with the two dependent children of their
marriage in military family housing. The two members separated and
filed a legal separation agreement dated January 23, 1984. The
agreement gives custody of both children to their paternal grandmother,
Mrs. Betty H. Mason. It also requires each member to pay $200 per month
to Mrs. Mason for child support which both members are doing by
allotments from their pay.
Mary Mason terminated use of Government quarters on January 11, 1984,
and was authorized to reside in off-base housing and to receive basic
allowance for quarters at the "without-dependent" rate. After providing
additional information, apparently concerning her child support
obligation, she was authorized basic allowance for quarters at the
"with-dependent," or increased allowance rate. However, due to James
Mason's claim for the increased allowance, Mary Mason's quarters
allowance rate was reduced pending our decision on the matter.
James Mason is currently residing in Government single quarters, and
he is receiving only the partial rate quarters allowance payable to a
member in such circumstances.
If adequate Government quarters are not provided for the dependents
of a member of the uniformed services entitled to basic pay, that member
is entitled to an increased basic allowance for quarters, based upon his
or her dependents. 37 U.S.C. Section 403 (1982). The purpose of the
increased allowance is to reimburse the member for part of the expense
of providing private quarters for his or her dependents. 60 Comp. Gen.
399 (1981). See also, Airman Donna L. MCoy and Sergeant Marty L.
Cooper, 62 Comp. Gen. 315 (1983). As the Air Force has pointed out in
its submission, the implementing regulations in the Department of
Defense Military Pay and Allowances Entitlements Manual do not address
which member is entitled to basic allowance for quarters at the
"with-dependent" or increased allowance rate, when neither member has
custody, yet both are required to pay child support equal to or greater
than the difference between the "with-dependent" rate and the
"without-dependent" rate.
When two members are married to each other and have one or more
children born of their marriage, only one member is entitled to an
increased basic allowance for quarters based on their common dependents,
even though one of the members may already receive and increased
allowance on behalf of dependents acquired prior to the present
marriage. McCoy and Cooper, 62 Comp. Gen. at 317; Chief Warrant
Officer Ronald G. Hull and Petty Officer Doris H. Hull, 62 Comp. Gen 666
(1983); and 54 Comp. Gen. 665 (1975).
If the two members subsequently divorce, generally only one of the
members may receive the increased quarters allowance for their common
dependents. For example, the regulations provide that, when a
non-custodial member supports the common dependents, the member paying
the court-ordered support is entitled to claim the increased quarters
allowance for the common dependents. See Department of Defense Military
Pay and Allowances Entitlements Manual (DOD Pay Manual) para. 30236a;
and McCoy and Cooper, 62 Comp. Gen at 317. The rules in the DOD Pay
Manual are based on the assumption that the non-custodial member is
providing support pursuant to a legal obligation to common dependents
not residing with him or her. In addition, the amounts being paid must
be in excess of the difference between the quarters allowance at the
"with-dependent" rate and at the "without-dependent" rate. DOD Pay
Manual para. 30236.
Whether or not the allowance may be paid to both members depends upon
whether the dependents are common dependents and are living in one
household. When there are separate dependents or classes of dependents,
each member may be allowed an increased allowance for his or her
dependents. For example, in MCoy and Copper, 62 Comp. Gen. 315, supra,
each member was allowed to receive the increased allowance when each
member had custody and support of one or more of the children born of
the marriage and no support was to be paid by the other member. In that
case, the members had, in essence, set up two families, two separate
households and legally divided the common dependents.
In the present cases, neither member-parent has custody of the
children, and both are required to pay child support. The dependents
are in a common household in the custody of a third person. Thus, only
one of the members may receive the increased allowance based upon their
common dependents.
The question of who should receive the "with-dependent" allowance
should be decided between the members. If necessary, the members may
seek to have the child support payments adjusted accordingly. However,
when the members cannot agree between them, we suggest that as in the
case with illegitimate children (DOD Pay Manual para. 30238(d)), the
parent "providing the chief support," or the majority of support,
receive the increased allowance. In situations where the members pay
equal amounts, and cannot agree, the increased allowance should, as is
the general rule, go to the senior member (DOD Pay Manual para.
30232(a)). Thus, in the Smith case, Bradley is entitled to the quarters
allowance at the "with-dependent" rate since he is providing the chief
support. In the Mason case since they are both providing the same
amount of support, the quarters allowance at the "with-dependent" rate
should be paid to the senior member as determined by the service.
(1) The questions concerning the Smiths were submitted by the
Accounting and Finance Office, 354th Tactical Fighter Wing, Myrtle Beach
Air Force Base, South Carolina, and the questions concerning the Masons
were submitted by the Accounting and Finance Officer, United States Air
Force Academy, Colorado. Since they involve similar questions, the two
separate requests were approved and consolidated by the Department of
Defense Military Pay and Allowance Committee and assigned control number
DO-AF-1441.
B-215046, 64 Comp. Gen 118
Matter of: Masstor Systems Corporation, December 3, 1984:
A protest is sustained where the agency rejected a potential source
of supply for failure to demonstrate compliance with a requirement which
was neither set forth in a CBD "source "sought" synopsis nor otherwise
made known to the vendor.
Where the contracting agency concluded that a vendor's software was
not acceptable but found that the vendor's hardware was acceptable, and
there was no requirement for obtaining the hardward and software from
one vendor, a sole source award for the hardware was unreasonable.
Masstor Systems Corporation protests the Department of the Air
Force's sole source contract award to Network Systems Corporation (NSC)
for hardware and software to augment an existing government-owned
hyperchannel network. We sustain the protest.
Masstor responded to a synopsis published in the Commerce Business
Daily (CBD), which stated that sources were sought for:
(H)yperchannel network adaptor hardware and software as
described herein. The (agency) anticipates a sole source award
against a GSA schedule to (NSC) * * * for the equipment and
softward which will include: * * * f. Software that will provide
IBM MVS and DECVAX operating system users with facilities for
high-speed task-to-task communications via hyperchannel equipment
* * *. This hardware and software will augment an existing
government-owned hyperchannel network which interconnects a
Control Data Corp. Cyber 175, several Digital Equipment Corp. VAX
11/780s, two IBM 4341s, and other contractors' computational
hardware. The current (NSC) hyperchannel is a 50 megabyte/second
serial bus. Firms are invited to submit a complete description of
the capabilities of their proposed equipment for evaluation to
determine acceptability as a potential source to fulfill the
requirements of the above-described acquisition.
The agency states that the CBD notice was published pursuant to 15
U.S.C. Section 637(e)(2)(C) (Law. Co-op. 1984). This provision requires
that any proposed procurement of $10,000 or more be publicized in the
CBD at least 30 days before negotiations for a sole source contract are
commenced. /1/
Masstor responded to the CBD notice and stated that it could supply
NSC equipment to satisfy the hardware requirements and its own "MASSNET"
software to fulfill the software requirements. It enclosed a detailed
description of the MASSNET software.
The Air Force evaluated Masstor's response and found that the
hardware offered was identical to that it expected to acquire from NCS.
It concluded, however, that the MASSNET software was not acceptable
because it was not compatible with the existing "NETEX" software in use
by the agency. The Air Force found that in order to use MASSNET, the
existing software would have to be rewritten and modified to interface
with the MASSNET software. This would result in lengthy and costly
delays to all projects using the current system, including high priority
projects such as the Advanced Medium Range Air to Air Missile program.
Therefore, the agency found the MASSNET software unacceptable and
proceeded with an award to NSC.
Masstor contends that its MASSNET software is compatible with NETEX
and argues that as a result, the award to NSC was improper. The
protester asserts that it would have supplied a description of its NETEX
interfaces, which allow NETEX programs to be executed unmodified on a
MASSNET network, if it had known that a requirement for compatibility
with NETEX software existed. Masstor points out that the CBD notice
contained no mention of such a requirement. It also disputes the
agency's position that since the CBD notice stated that the software
would augment an existing hyperchannel network, the notice conveyed a
requirement for software which would be compatible with the existing
software.
We agree that the statement that the hardware would augment an
existing network does not specifically require compatibility, but we do
think it conveys a need for software which can be used with the existing
system. We therefore believe that an experienced vendor should have
been alerted to the possibility of a requirement for compatibility.
Nevertheless, the notice did not identify the existing software, and an
offeror obviously could not make any representation concerning
compatibility without that information. While the Air Force implies
that Masstor therefore had a duty to inquire about the existence of a
compatibility requirement, we disagree.
The CBD notice stated that it was for information and planning
purposes only and did not constitute a solicitation for bids or
proposals. It invited firms to submit a description of their equipment
so that the agency could determine their acceptability as potential
sources for fulfilling the requirement stated in the announcement.
Accordingly, we believe vendors reasonably could assume that so long as
they responded to the specific requirements contained in the CBD notice,
they would be supplying sufficient information for the Air Force's
stated purposes.
In our view, it was the Air Force's duty to make its essential
requirements clear to potential offerors and allow them an opportunity
to demonstrate their ability to comply before rejecting them as
potential sources of supply. Cf. U.S. Financial Services, Inc.,
B-197082, Aug. 7, 1981, 81-2 CPD Paragraph 104 at 7 (agency could not
properly reject a response to a CBD notice of intent to lease disk
drives, even though proposed lease to ownership and purchase plans
exceeded the agency's needs, because the agency had never limited offers
to lease plans). Since the CBD notice did not fully accomplish that
purpose here, the agency at least should have contacted Masstor for
further information concerning the compatibility of its software before
excluding it from further consideration. Without having done so, we
think the Air Force lacked a reasonable basis for rejecting Masstor as a
source of supply.
There is another procurement deficiency apparent from the record in
this case which has not been protested, but which we cannot ignore. The
agency states that the hardware Masstor could supply is identical to
that it intended to and later did acquire from NSC. Yet, despite the
clear availability of a competitor, the agency purchased the hardware
from NSC on a sole source basis. The CBD notice contained no indication
of any necessity for acquiring the software and hardware from the same
source. Nor is any justification for the agency's action apparent from
the record. We therefore conclude that the agency also lacked a
reasonable basis for the sole source hardware purchase.
The protest is sustained.
The agency advises us that the software and hardware were acquired on
a purchase basis and have been delivered. Therefore, it is
impracticable to recommend termination of the contract. By letter of
today, however, we are recommending to the Secretary of the Air Force
that steps be taken to prevent the recurrence of the procurement
deficiencies found in this case.
(1) The purpose of section 637(e) is to improve small business access
to federal procurement information.
B-193432, 64 Comp. Gen. 117
Matter of: Chandler Trailer Convoy, Inc. - Reconsideration, December
3, 1984:
Damage in transit to a mobile home caused by the combination of a
rust-weakened frame and flexing of the frame over the axle, aggravated
by an unbalanced load in the mobile home, resulted from a combination of
defects which are exceptions to common carrier liability for the damage.
This decision reverses B-193432, B-211194, Aug. 16, 1984.
Chandler Trailer Convoy, Inc. (Chandler), requests reconsideration of
our decision in Chandler Trailer Convoy, Inc. -- Reconsideration,
B-193432, B-211194, Aug. 16, 1984, 84-2 C.P.D. Paragraph 185,
disallowing the claim of Chandler for refund of $8,685 recovered by the
United States Marine Corps (USMC) for the destruction in transit of a
mobile home transported from Jacksonville, North Carolina, to Pittston,
Pennsylvania, under government bill of lading (GBL) No. K-0,997,949.
We reverse the decision.
In our prior decison, we denied Chandler's claim because, under the
Interstate Commerce Act, 49 U.S.C. Section 11707 (1982), commonly
referred to as the Carmack Amendment, a prima facie case of carrier
liability for the damage in transit was established by a showing that
the mobile home was in better condition when received by Chandler at
origin than when delivered by Chandler at destination and Chandler
failed to establish that the damage resulted solely from an exception to
carrier liability.
On pickup of the mobile home at Jacksonville, North Carolina, the
only defects noted by Chandler were a small buckle and small dent on the
right side, small dents in front, shower door broken inside and the
A-frame behind the hitch was bent and rusty. However, near Harrisburg,
Pennsylvania, the main framework under the trailer was buckling over the
axle, and the owner of the mobile home authorized the installation of a
third axle and reinforcement of the framework by Penn Welding and
Automotive Service (Penn Welding) at a cost of $2,814. The
transportation resumed, but was terminated at Pittston, Pennsylvania,
after traveling about 105 miles, because the walls appeared to be
collapsing. The USMC then issued a corrected GBL terminating the
shipment at Pittston because of "trailer disintegrating."
On request for reconsideration, Chandler contends that we erred in
holding that Chandler had "not shown the damages in transit to have
resulted solely from premove latent defects in the mobile home" and that
Chandler had not shown, therefore, "that the damage resulted solely from
an excepted cause," alleged by Chandler to be shipper fault, under the
decision in Missouri Pacific Railroad Company v. Elmore & Stahl, 377
U.S. 134 (1964). That is, that the shipper had tendered for shipment a
commodity, the mobile home, in a condition in which it could not be
safety transported and that the defects in the condition of the mobile
home were not apparent to Chandler on ordinary observation. Chandler
alleges that the
* * * evidence of record clearly and positively shows that the
damages were caused by broken springs, fracture in the hitch, main
framework bending and buckling over the axle necessitating welding
and reinforcement of the main beams with channels and new cross
beams and the installation of a third axle.
Although no new evidence of the cause of the structural failure has
been presented by Chandler, the USMC, in response to our request for
comments on the request for reconsideration, specifically our request
for information on the salvage value of the trailer, for the first time
advised our Office that the private insurance carrier of the owner of
the mobile home had denied liability under the insurance contract
because the damage was caused by a defective frame. The inspector for
the insurance carrier stated that, in his opinion, the damage was caused
by the severe rusting of the undercarriage which broke up in flexing
over the axle and that the rust-weakened condition of the undercarriage
would not have been apparent on ordinary observation. Penn Welding
confirmed the opinion of the insurance carrier and added that the
flexing of the mobile home in transit was aggravated by an unbalanced
overload of books in one end of the mobile home. There is no evidence
in the record that Chandler knew or should have known either of the
rust-weakened condition of the undercarriage or the unbalanced load in
the mobile home.
The record contains an affidavit by Michael L. Chandler attesting
that a review and examination of the documents, papers, records and
files kept in the normal course of business in connection with this
transportation disclose no record or evidence of collision, accident,
traffic violations, or any acts of omission or commission that would
indicate or constitute negligence of Chandler.
The record now establishes that the transportation was performed by
Chandler without negligence and that the damage in transit resulted
solely from acts of the shipper, the tender of the mobile home with an
unbalnced load and rust-weakened undercarriage. Consequently, Chandler
is not liable for the damage in transit, and the claim for refund of the
amount recovered by setoff for the damage is allowed.
B-214131, 64 Com. Gen. 114
Matter of: Elizabeth Smedley et al. - Supplemental Payments to SES
Rank Award Recipients, November 30, 1984:
Fiscal Year 1982 presidential rank awards were paid to members of the
Department of Energy Senior Executive Service on November 22, 1982,
although the checks were dated September 29, 1982. Under 5 U.S.C.
5383(b), the aggregate amount of basic pay and awards paid to a senior
executive during any fiscal year may not exceed the annual rate for
Executive Schedule, Level I, at the end of that year. For purposes of
establishing aggregate amounts paid during a fiscal year, at SES award
generally is considered paid on the date of the Treasury check. In this
case, however, since the agency can conclusively establish the actual
date the employee first took possession of the check, the date of
possession shall govern. 62 Comp. Gen. 675 distinguished.
This decision responds to the request of the Acting Assistant
Controller, Financial Systems and Accounting, Department of Energy
(DOE), for a decision as to whether members of the Senior Executive
Service (SES) of that agency who received two separate payments for
their awarded presidential ranks for fiscal year 1982 may retain the
total amount of their award payments in view of our decision Senior
Executive Service, 62 Comp. Gen. 675 (1983). /1/ For the reasons which
follow, we conclude that both the original payments and the supplemental
payments may be retained by the SES members.
According to the Acting Assistant Controller, SES members Elizabeth
Smedley, Percy Brewington, and Thomas Clark received initial rank award
checks at the time of the Distinguished Executive Award ceremony held at
the White Hosue on November 22, 1982. However, these checks were dated
September 29, 1982, and held in the control of DOE until the White House
ceremony. These initial checks were for less than the $20,000 amount
specified in 5 U.S.C. Section 4507(e)(2) because that amount when
combined with their respective base salaries would have resulted in
aggregate amounts in excess of $69,630 (the annual rate payable for
positions in the Executive Schedule, Level I, at the end of the fiscal
year 1982) in contravention of 5 U.S.C. Section 5383(b), which provides
as follows:
In no event may the aggregate amount paid to a senior executive
during any fiscal year under sections 4507 (rank awards), 5382
(basic pay), 5384 (performance awards), and 5948 (physicians
comparability allowances) of this title exceed the annual rate
payable for positions at level I of the Executive Schedule in
effect at the end of such fiscal year.
Effective December 18, 1982, the statutory annual salary rate payable
under Executive Schedule, Level I, was raised to $80,100. Public Law
97-377, Section 129(b), December 21, 1982, 96 Stat. 1830, 1914. Based
on this increase in the Executive Level I pay ceiling, DOE authorized
supplemental rank award payments on April 5, 1983, in the following
amounts: Elizabeth Smedley -- $7,701.52; Percy Brewington --
$4,013.84; Thomas Clark -- $5,941.52. /2/
The crucial question for the purposes of applying the aggregate
amount limitation in 5 U.S.C. Section 5383(b) is when payment took
place. We answered this question in Senior Executive Service, cited
above, as follows:
* * * We believe that the date of the check furnished the most
definite and certain answer to this question. That conclusion is
consistent with the Prompt Payment Act, Public Law 97-177, Section
6, May 21, 1982, 96 Stat. 85, which provides that a payment
thereunder is deemed to be made on the date a check for the
payment is dated. 31 U.S.C. Section 3901(a)(5).
Therefore, for purposes of establishing aggregate amounts paid
during a fiscal year under 5 U.S.C. Section 5383(b) a senior
executive is considered paid on the date of the Treasury check. *
* *
Since the DOE SES members who were awarded presidential ranks
received checks dated September 29, 1982, DOE asks whether the decision
quoted above requires the interpretation that these SES members received
the initial payment in fiscal year 1982 and are therefore limited to the
total salary ceiling of $69,630, thereby making DOE's supplemental
payments to them improper.
In Senior Executive Service, we were primarily concerned with fixing
the date of payment, for purposes of SES bonuses, where in the regular
course of business a Treasury check is scheduled for disbursement,
dated, and mailed to the intended recipient. As shown above, we decided
upon the date of the check as furnishing the most definite and certain
answer under those circumstances. We did not consider or decide the
question of fixing the date of payment when a check is not handled in
the regular course of business. We stated, 62 Comp. Gen. at 678, that
specific situations not covered by that case should be submitted for
decision.
In the present case, the Treasury checks to the three executives were
not handled in the regular course of business. Instead, they were dated
on September 29, 1982, and delivered to the DOE, whose officials
retained custody of the checks for almost 2 months. The checks were not
delivered to the employees until November 22, 1982. Where, as here,
there is no dispute that the checks were held in the control of the
employing agency, the date of the check is not controlling. In this
situation the date of payment for purposes of 5 U.S.C. Section 5383(b)
is the date the checks were delivered to the rank award recipients. The
decision Senior Executive Service is distinguished on the facts.
It is also significant to note than the amounts of the presidential
rank awards involved in this case are specific statutory entitlements as
set forth in 5 U.S.C. Section 4507(e)(2), which provides as follows:
Receipt by a career appointee of the rank of Distinguished
Executive entitles the individual to a lump-sum payment of
$20,000, which shall be in addition to the basic pay under section
5382 of this title or any award paid under section 5384 of this
title.
This specific statutory entitlement of $20,000 for Distinguished
Executives is limited only by the pay cap established by 5 U.S.C.
Section 5383(b) which is set forth above. Therefore, as was recognized
in Senior Executive Service, for presidential rank award recipients
under section 4507 whose initial payment was reduced because of the pay
ceiling of 5 U.S.C. Section 5383(b), an agency is required to make a
supplemental payment so that the senior executive receives the full
amount of the $20,000 statutory entitlement under section 4507(e)(2),
limited only by the new Executive Level I pay ceiling of $80,100. We
note that this conclusion is consistent with advice given to agency
directors of personnel by memorandum dated March 15, 1983, from the
Office of Personnel Management.
Accordingly, we conclude that the three DOE presidential rank award
recipients were paid their initial award payments in fiscal year 1983,
on the date the checks were given to them. Therefore, the supplemental
award payments made to them later in fiscal year 1983 were properly
made, subject only to the aggregate salary limitation for fiscal year
1983 of $80,100.
(1) B-212756, September 27, 1983.
(2) We note that all amounts required for the presidential rank
awards, including the supplemental payments, would be charged to fiscal
year 1982 appropriations even though some or all of such amounts are
paid in fiscal year 1983. See, e.g., 54 Comp. Gen. 472, 476 (1974).
B-214810, 64 Comp. Gen. 110
Matter of: Department of Agriculture Graduate School - Interagency
orders for training, November 29, 1984:
Graduate School of Department of Agriculture, as a non-appropriated
fund instrumentality (NAFI), is not a proper recipient of "interagency"
orders from Government agencies for training services pursuant to the
Economy Act, 31 U.S.C. 1535, or the Government Employees Training Act,
U.S.C. 4104 (1982). Interagency agreements are not proper vehicles for
transactions between NAFIs and Government agencies. Overrules, in part,
37 Comp. Gen 16.
This is in response to a request from the Secretary of Agriculture
for a decision regarding the propriety of "interagency agreements" under
which the Graduate School of the Department of Agriculture provides
education or training services to Federal agencies on a reimbursable
basis. As authority for these agreements, the Secretary cites
provisions of the Economy Act, 31 U.S.C. Section 1535, and the
Government Employees Training Act, 5 U.S.C. Section 4104 (1982). As set
forth below, we conclude that neither of these statutes constitutes
authority for the agreements in question.
The Graduate School of the U.S. Department of Agriculture conducts
academic courses and training programs in a large number of disciplines,
ranging from Arts and Humanities to Secretarial Studies. The Graduate
School is a nonprofit organization under the general supervision of the
Department of Agriculture. The Secretary of Agriculture appoints a
General Administration Board of 15 members (more than half of whom are
Department of Agriculture officials,) which functions similarly to a
university board of trustees. The Graduate School receives no
appropriated funds, but rather operates with funds derived from student
fees and revenue from training services. Full time employees of the
Graduate School are not Federal employees for purposes of the Federal
employment laws. Most of the instruction is conducted by independent
contractors.
It is the position of the Secretary that the Graduate School
constitutes a nonappropriated fund instrumentality (NAFI) of the
Department of Agriculture. NAFIs encompass a wide range of activities
and resist a general definition. They share common characteristics in
that they are associated with governmental entities, and, to some
extent, are controlled by and operated for the benefit of those
Government entities. However, the essence of a NAFI is that it is
operated with the proceeds of its activities, rather than with
appropriated funds. For purposes of this decision, we agree with the
Secretary's opinion that the Graduate School constitutes a NAFI.
As indicated above, the Department of Agriculture cites the Economy
Act, 31 U.S.C. Section 1535, and the Government Employees Training Act,
5 U.S.C. Section 4104 (1982), as authority for the "interagency
agreements" here under review. These two statutes, although not
interchangeable, are substantially similar in some respects. The first
statute authorizes reimbursable orders for goods or services between
agencies or major organizational units within agencies. The second
statute authorizes reimbursable agreements between agencies for training
services.
This Office consistently has taken the position that interagency or
intra-agency agreements are not appropriate vehicles for transactions
between NAFIs and Government agencies. We conclude that this position
is valid whether the transaction in question is purportedly based on the
Economy Act or the Training Act.
The leading case in this area is 58 Comp. Gen 94 (1978), wherein we
considered the propriety of procurement of services and merchandise by
the Army from Army-related NAFIs through the use of "intra-Army orders."
In that decision, we observed:
Although the NAFIs are recognized as being Government
activities, they differ significantly from other Governmental
activities, particularly with respect to budgetary and
appropriation requirements.
We believe that it is these differences, rather than the status
of NAFIs as Government instrumentalities, which must be
controlling here. In all three cases, what is involved is the
transfer of moneys from the Army's appropriation accounts to the
accounts of the NAFIs over which there is no direct control either
by the Congress (through the appropriation process) or this Office
(through the account settlement authority of 31 U.S.C. 71, 74
(1970)). Thus, for all practical purposes from an appropriation
and procurement standpoint, the obtaining of goods and services
from a NAFI is tantamount to obtaining them from non-Governmental,
commercial sources. 58 Comp. Gen. at 97-98.
Accordingly, because "obtaining goods and services from a NAFI is
tantamount to obtaining them from non-governmental commercial sources,"
a regular purchase order rather than an intra-agency or interagency
order should be used when services are furnished by a NAFI to an
appropriated fund activity. 58 Comp. Gen. at 98-99. See also B-199533,
August 25, 1980 (Army acted improperly in purchasing services from NAFI
without contract or regular purchase order processed through contracting
official); B-192859, April 17, 1979 (disposition form, amounting to
inter-office memorandum, is not proper vehicle for transaction between
NAFI and Army).
We have recognized that sole source procurement through a NAFI may be
permissible in certain circumstances such as when there are
"organizational or functional reasons which dictate the impracticability
of having services furnished by other than a NAFI" or when only a NAFI
can provide goods and services in "extreme exigency situations." 58
Comp. Gen. at 98. However, where such procurements are justified
"appropriate sole-source justifications" and the use of regular purchase
orders are required. 58 Comp. Gen. at 98-99. See B-148581, et al.,
September 2, 1980 (fact that NAFI had regular supply channel and
established transportation and warehouse system for items to be procured
was not itself sufficient to justify sole-source procurement).
Additionally, of course, a NAFI may compete in, and be awarded a
contract under a competitive procurement unless otherwise precluded by
its character from doing so.
The Department of Agriculture cites 37 Comp. Gen. 16 (1947) in
support of its position that the Graduate School is a proper recipient
of an "interagency" order. In that decision we considered a protest by
a disappointed bidder on a contract for laundry service ultimately
awarded to a NAFI. The contracting officer had solicited bids from
commercial services, but then procured the services from a NAFI on the
basis of a cost comparison. We decided to take no action on the
protest. However, we did state our view that "it would be solely a
matter of administrative discretion as to whether or not to procure the
work or service from another Government agency or instrumentality when
determined that its prices are lower than all bids received in response
to a formal advertisement." 37 Comp. Gen. at 18-19.
The decision in 37 Comp. Gen. 16 concerned the propriety of the
contracting officer's rejection of the submitted commercial bids. The
decision did not reach the issue of whether the procurement from the
NAFI was proper, and whether, if proper, such procurement could be done
by interagency agreement. Accordingly, to the extent our language in 37
Comp. Gen 16 suggests a different result than our holding in 58 Comp.
Gen. 94 (1978) and similar cases, discussed above, it should not be
followed.
Further, the Department of Agriculture contends that 58 Comp. Gen. 94
can be distinguished from the instant case. The Secretary specifically
points to language in that decision where we observed:
This does not mean that Defense Department NAFIs must now
compete with regular commercial contracting services. NAFIs exist
to help foster the morale and welfare of military personnel and
their dependents. DOD Directive 1330.2; Army Regulation 230-1.
Providing regular Defense Department operating activities with
goods or services is not directly related to that purpose. This
is particularly so with respect to the resale NAFIs such as the
exchanges, which operate for the purpose of selling goods and
services primarily to military personnel and dependents; they are
not expected to sell to the "Government" itself. Thus, as a
general proposition, we would view the sale of goods and services
by NAFIs to regular Governmental operating activities to be
outside the scope of the NAFIs' proper functions. Accordingly, as
a general rule there should be no competition between NAFIs and
commercial sources simply because NAFIs are not in the business of
supplying the Government with its procurement needs. 58 Comp.
Gen. at 98.
Agriculture infers from this paragraph that the "principle factor
leading to the conclusions (of 58 Comp. Gen. 94) is the fact that the
sale of goods and services to regular Governmental operating activities
is outside the scope of the authorized activities of the Defense
non-appropriated fund instrumentalities." On the other hand, the
Secretary observes, the mission of the Graduate School specifically
includes cooperation with other agencies. Accordingly, he concludes
that the rationale of 58 Comp. Gen. 94 is not applicable in the instant
case.
The analysis quoted above regarding the "scope of the NAFIs' proper
functions" was not the basis of our conclusion that interagency
agreements are not proper vehicles for transactions between NAFIs and
Government agencies. That conclusion was based on several critical
differences between NAFIs and Government agencies, including coverage
under the procurement and appropriation laws. 58 Comp. Gen. at 98. The
analysis regarding the "scope of the NAFIs proper function" was merely
an observation that, although military NAFIs for some purposes were not
required to compete with commercial enterprises, it seldom would be
appropriate for a Government agency to purchase goods and services from
Defense NAFIs, by any procurement method, "because NAFIs are not in the
business of supplying the Government with it procurement needs." 57
Comp. Gen. at 98.
We agree with the Secretary that this analysis would not be fully
applicable in the instant case, given the wide range of activities of
the Graduate School. However, our agreement in this regard indicates
that it is more likely that the Graduate School would be an appropriate
recipient of a sole source or competitive procurement contract. It does
not affect our conclusion that the Graduate School, as a NAFI, is not a
proper recipient of an interagency order.
Finally, Agriculture has included in its submission an internal Civil
Service Commission memorandum dated December 13, 1978. The memorandum
concludes that there is "no legal impediment to designation of DOA
(Agriculture) as the lead agency for Federal interagency training of
auditors" under the Economy Act or the Training Act. Further, it
concludes that there is "no legal problem with the assignment by DOA of
the training responsibility to the Graduate School." However, this
memorandum is not helpful to DOA's position in this case. As the
memorandum correctly points out, the "issue of whether the (training)
may be assigned to the Graduate School through DOA under section 601 of
the Economy Act without going through contracting-out procedures is
subject to the supervening authority of GAO to determine." In exercising
this authority, we have determined that training may not be obtained
from the Graduage School by interagency order either under the Economy
Act or under the Training Act.
Accordingly, it is our conclusion that neither the Economy Act, 31
U.S.C Section 1534, nor the Government Employees Training Act, 5 U.S.C.
Section 4104 (1982), constitutes authority for the Graduate School to
enter into "interagency agreements" with Federal agencies. However, in
view of the long-standing uncertainty in this area of the law, this
decision should be applied prospectively only, and the termination of
agreements now in effect will not be required.
B-213909, 64 Comp. Gen 103
Matter of: Agency for International Development - Interest Earned on
Grant Funds by Foreign Government, November 28, 1984:
The United States cannot recover interest earned by local and
provincial elements of the Egyptian Government on grant funds awarded by
the Agency for International Development (AID) to the Government of
Egypt in the Basic Village Services Project (BVSP). Since the statutory
provision under which the BVSP was funded contains broad program
authority and since the stated purpose of the grant was to support
Egypt's policy of decentralizing authority for development activities,
we believe that the disbursement of the grant funds by the Egyptian
Government to the lower governmental levels was a legitimate and proper
purpose of the grant entitling them to retain interest earned on the
grant funds.
This decision is in response to a request from the Inspector General
(IG) of the Agency for International Development (AID) for a legal
opinion from our Office as to whether the United States can recover
interest earned by a foreign government on AID grant funds. The IG's
specific question concerns interest earned by local and provincial
elements of the Egyptian Government on grant funds awarded by AID to the
Government of Egypt in the Basic Village Services Project (BVSP) in the
1981 fiscal year. /1/ For the reasons set forth hereafter, it is our
view that the interest was earned after the grant funds were applied to
a legitimate grant purpose and therefore cannot be recovered by the
United States.
The BVSP was authorized on August 28, 1980, pursuant to section 532
of the Foreign Assistance Act of 1961, as amended, 22 U.S.C. Section
2346a. Under the terms of the grant, AID agreed to provide $20 million
to the Arab Republic of Egypt to assist that country in implementing the
BVSP. Article 2 of the Grant Agreement describes the purposes of the
BVSP as follows:
The Project * * * consists of technical and capital assistance
for the design, management and construction of basic village
services in Egypt in support of the policy of the Grantee to
decentralize authority for development activities. It will focus
on improving and expanding a continuing capacity in governorates
and villages to plan, manage, finance, implement and maintain
locally chosen and constructed rural infrastructure projects. The
project will finance technical advisory services, training and
research and evaluation. In addition it will finance the
construction of locally selected infrastructure projects. * * *
Under the terms of the grant agreement, and its annexes, AID deposits
funds in the account of the organization for the Reconstruction and
Development of the Egyptian Village (ORDEV) after annual implementation
plans are approved for each of the designated governorates (or
provinces). ORDEV then allocates the funds to the governorates for
approved subprojects. Each governorate in turn disburses the funds to
the appropriate village council which makes payments to contractors as
the projects are being completed.
An audit report on the BVSP, dated April 29, 1982, issued by AID's
Regional IG in Cairo, indicated that as of December 31, 1981, AID has
disbursed approximately $31 million in BVSP grant funds to ORDEV. More
importantly, the audit found that as of that date the governorates and
village councils participating in the Project had earned over $1 million
in interest on the BVSP grant funds by depositing them in special
interest-bearing accounts at the governorate and village levels. The
audit report took the position that the BVSP Grant Agreement "requires"
that interest earned on grant funds in the governorate and village
accounts be returned to AID by the Egyptian Government. This
consideration was based primarily on section D(2)(e) of the Grant
Agreement's Standard Provisions Annex which reads as follows:
Any interest or other earnings on Grant funds disbursed by
A.I.D. to the grantee under this Agreement prior to the authorized
use of such funds for the Project will be returned to A.I.D. in
U.S. Dollars by the Grantee.
In response to the recommendation contained in the audit report that
AID recover all of the interest that was earned by the governorates and
village councils, AID's General Counsel took the position, in a
memorandum dated June 6, 1983, that once the grant funds had been
disbursed by ORDEV to the special accounts of governorates and village
councils "they are deemed to have been disbursed for an 'authorized use'
under the Grant." Accordingly, the General Counsel concluded that the
interest earned on the grant funds at these lower governmental levels
were not subject to refund under the grant agreement.
In light of the continuing dispute between AID's IG and General
Counsel, the IG submitted the question to our Office for our legal
opinion. The IG's submission states that under the so-called
"augmentation rule," which provides that an agency may not increase or
augment its appropriation from outside sources without specific
statutory authority, interest earned by a grantee on funds advanced by
the United States must be accounted for as funds belonging to the United
States. Therefore, the IG concludes that such funds must be recovered
and deposited in the Treasury as miscellaneous receipts. The IG rejects
the General Counsel's view that disbursements to the special account of
governorates and village councils constitute an "authorized use" of the
grant fund. In this respect, the IG summarized the position of his
office as follows:
The "augmentation rule" discourages the accumulation of U.S.
Treasury funds in grantee accounts by requiring a return of any
interest earned to the U.S. Government. However, in certain
instances AID has allowed an exemption from this rule by defining
the beginning of a project's authorized use" of funds as being
from the establishment of grant fund accounts for the purpose of
AID-financed projects. Project funds were then transferred from
the grant accounts to interest bearing host government time
deposit conduit accounts for long periods prior to use for project
purposes. By defining these host government conduit accounts as a
legal method of earning interest on AID grant funds, since they
were set up after the point of "authorized use of funds" had been
established, millions of dollars of interest earned by the conduit
accounts are lost to the U.S. Treasury each year. In addition,
this practice can be an incentive to delay use of U.S. funds for
the purpose for which provided and appears to be an attempt to
avoid the Congressional intent of the "augumentation rule."
The "augumentation rule" needs to be applied to these cases to
prevent the diversion of foreign assistance funds to interest
bearing host government bank accounts and to prevent this easily
manipulated definition from being extended to a broad range of
U.S. grant fund accounts.
Both the IG and the General Counsel agree that the determining factor
in a case of this type is whether interest was earned before or after
the grant funds were applied to an authorized grant purpose. Thus, in
this case the critical issue is whether the central Egyptian
Government's disbursement of the grant funds to the governorates and
village councils constituted an authorized use of grant funds under the
specific terms of the BVSP grand and the underlying legislation.
Ordinarily we would be reluctant to accept the premise advanced by
the General Counsel that the transfer of grant funds from a grantee to a
subgrantee, or perhaps only to a subunit of the grantee /2/ constitutes
a legitimate disbursement for grant purposes. Our reluctance in this
respect is based on the general rule that interest earned by a grantee
on funds advanced by the United States belongs to the United States
rather than the grantee and must be paid to the United States, except as
otherwise provided by law. 62 Comp. Gen. 701 (1983); 59 Comp. Gen. 218
(1980); 42 Comp. Gen 289 (1962), and cases cited therein. Grantees are
considered to hold the advanced funds in trust for the United States
pending their applications for grant purposes, id. The rationale for
this rule is that statutes authorizing grant programs contemplate that
grant funds are to be expended only for the purposes for which they were
awarded and are not intended to be used for the profit of the grantee
unless expressly agreed to or authorized. Agencies do not have the
authority to agree to allow the grantee to earn and retain interest on
grant funds prior to their expenditure unless such authority is
expressly provided. See 62 Comp. Gen. 701, 702 (1983). The major
source of authority allowing retention of interest is provided States
and State instrumentalities under the Intergovernmental Cooperation Act
of 1968, 31 U.S.C. Section 6503(a). In this case AID does not claim
that an exception to the general rule such as the Intergovernmental
Cooperation Act provides the basis for the grantee to retain the
interest. The AID position is that the general rule is satisfied
because the interest was accrued in furtherance of the grant purpose.
Section 531(a)(1) of the Foreign Assistance Act of 1961, as amended, 22
U.S.C. Section 2346(a)(1), under which the BVSP was authorized and
funded, contains very broad program authority:
The Congress recognizes that under special economic, political
or security conditions the national interest of the United States
may require economic support for countries or in amounts which
could not be justified solely under chapter I of part I of
subchapter I of this chapter. In such cases, the President is
authorized to furnish assistance to countries and organizations on
such terms and conditions as he may determine, in order to promote
economic or political stability. * * * (Italic supplied.)
Clearly this language was intended to provide the President, and by
extension AID, with a considerable degree of discretion in the design
and implementation of grant projects so as to best accomplish the
agency's programmatic objectives. We think that AID can make grants
under this authority for the purpose of providing grantees or
subgrantees with experience in managing, handling, and by implication,
investing project funds, including the right to earn and retain interest
thereon. In this respect it is significant that AID's program office
which designed the grant project here in question, and AID's General
Counsel, which provides legal guidance to that office, are convinced
that the grant was designed and implemented to accomplish such
objectives by making disbursement of grant funds to the lower
governmental levels -- governorates and village councils -- a material
purpose of this grant.
Our analysis of the grant agreement and supporting documentation
leads us to the same conclusion reached by the General Counsel. That
is, we believe that disbursement of the grant funds to the governorates
and village councils for their management was a legitimate and proper
purpose of this grant.
As mentioned above, the grant agreement states that the purpose of
the grant is to support the grantee's policy of decentralizing authority
for development activities in Egypt by focusing "on improving and
expanding a continuing capacity in governorates and villages to plan,
manage, finance, implement and maintain" locally selected projects. The
project description in Annex I of the grant agreement emphasizes that
the primary purpose the BVSP is "decentralization."
Descriptions and explanations of the purpose and objective of the
BVSP contained in the BVSP Paper, dated July 22, 1980, a document which
justifies and explains why the grant should be approved and how it would
be implemented, are more specific. For example, Annex III of the BVSP
Paper contains a cable dated June 9, 1980, from the Near East Bureau of
the State Department approving further development of the BVSP proposal.
The cable reads as follows:
* * * Project purpose must stress acceleration of
decentralization and increase of institutional capacity to plan,
implement, monitor and fund local development activities rather
than construction of rural infrastructure. If BVS project helps
capitalize governorate fund, AID monitoring will be essentially
concerned with evidence of expenditures at governorate level and
selection and implementation procedures to be used at that level.
* * *
Similarly, the goal of the project is described in the Project Paper
(p. 4) as follows:
The goal of this project is to expand decision making capacity
on the broadest possible basis, within the framework of Egyptian
policy of using the decentralization process as a means for
achieving its development objectives, by providing local
government decision-makers with experience in the allocation and
utilization of resources and in developing the financial and other
mechanisms to carry out development programs. Such
decentralization is premised on the assumption that increased
local government responsibility for local development activities
will result in a more equitable and self sustaining development
process relevant to both national and local interests.
The grant agreement and supporting documentation is replete with
other similar references that demonstrate that the primary purpose of
the BVSP grant was to provide decision-makers at the governorate and
village council levels with experience in all aspects of planning and
executing development projects, including those relating to the
handling, disbursement, and by implication, investment of funds needed
to finance those projects. Thus, we believe that disbursement of BVSP
funds by ORDEV to the governorate and subsequently to the village
council levels did constitute an "authorized use" of grant funds.
Other information in the grant agreement and supporting documentation
relating to the manner in which the BVSP funds were to be distributed
and accounted for at each stage of the process lends further support to
our conclusions. The following explanation of the intended funding
mechanism from the BVSP Paper is especially significant in this respect:
* * * When annual implementation plans are approved for each of
the designated governorates, USAID will provide the equivalent of
$15 million to be deposited to the account of ORDEV at the Central
Bank of Egypt. ORDEV in turn will issue a check for $5 million to
each of the three governorates upon certification by the
governorate that the 10% maintenance fund has been established.
Each governorate will then disburse the funds to the appropriate
village councils for their approved projects. * * *
The cash management aspects of disbursing the entire annual
allocation of $15 million up front prior to actual project
implementation were carefully considered. An incremental funding
mechanism with periodic reimbursement of replenishment was
considered and rejected. The project sites and the accounting
stations are so widespread, the financial reporting network so
diffuse, the need for funds at the provincial level in terms of
timing and amount so uncertain, it is imperative to have the funds
available at the nearest control point, which is the governorate.
The initial expenditure of $15 million will be a disbursement, not
an advance. Periodic reporting from the GOE will indicate how the
funds were used and will determine future allocations. (Italic
supplied.)
As this explanation indicates, an important aspect of the funding
mechanism was the disbursement of the funds to the lower governmental
levels -- especially the governorates -- so the funds would be available
where, when, and as needed. This explanation necessarily implies that
the grant funds would sometimes be held at the lower governmental levels
for some time until they were needed. In such circumstances, a
governorate or village council that did not keep the funds in an
interest-bearing account until they were needed would not appear to be
acting responsibly toward achieving the primary stated purpose of the
grant -- developing a capacity "to plan, manage, fund, implement, and
maintain" locally chosen projects.
As stated above, the primary purpose of the BVSP was to develop the
capacity of governorates and village councils to participate fully in
every aspect of planning, managing, and financing local development
projects. Accordingly, we agree with the position of the General
Counsel that the project's stated purpose would have been diminished if
the governorates and village councils were not afforded full control
over, and responsibility for, the BVSP grant funds once the funds were
disbursed by ORDEV of the central government. This necessarily
includes, in our view, the right to earn and retain interest on the
funds while they were deposited in the special governorate and village
council accounts required under the grant agreement.
As indicated above, we believe our conclusion is entirely consistent
with the relevant decisions of our Office. Both the General Counsel and
the IG argue that our holding in B-192459, July 1, 1980, involving a
grant by the Community Services Administration (CSA), support their
conflicting positions. The CSA case involved interest earned at two
different stages of grant implementation. The grant in that case was
made by CSA to a hospital for the purpose of assisting in the
construction of a new hospital facility. One "category" of interest was
earned by the grantee hospital prior to any transfer of the grant funds.
The other "category" of interest was earned by a trustee holding grant
funds in a special hospital construction trust fund. Our decision held
that while the interest earned by the hospital prior to the transfer of
grant funds to the trustee had to be returned to the Government, citing
the general rule in such cases, the interest earned by the trustee could
not be recovered since the transfer of grant funds to the trustee was
"an expenditure or disbursement for grant purposes." We reached the
latter conclusion because the grantee had given up possession and
control of the grant funds to an independent third party, from whom the
grantee had no right to demand return of the funds and because the
grantee had received something in exchange for the transfer of funds --
the promise of new hospital construction.
In the present case, the IG maintains that his office could not find
that any of the requirements established in the CSA case "were met in
establishing the special accounts which served mainly as conduits for
the funds to pass down the U.S. Treasury down to the project level." On
the other hand, the General Counsel maintains that the test set forth in
CSA was essentially satisfied in the BVSP.
The issue in this case is generally the same as the one in the CSA
case -- whether the transfer of funds to the governorates was a
disbursement for grant purposes. However, the analysis required to
resolve that issue is different because of the different purposes of the
two grants. If the primary purpose of the BVSP grant had been to build
or construct rural development projects -- roads, water works, canals,
sanitation systems, and so on -- the relevant issue would be whether the
transfer from the central government to the governorates satisfied the
requirements set forth in our CSA decision. However, as explained
above, the central purpose of the BVSP was to assist Egypt's effort to
decentralize the responsibility for planning and managing such projects
from the central government to the provincial and local governments.
Therefore, under CSA and our general rule in such cases, the test to be
applied is whether the transfer to the governorates and subsequently the
village councils was a legitimate means of accomplishing the general
grant purpose of decentralization. In our view, the grant agreement and
supporting documentation indicates that such was the case.
In accordance with the foregoing, it is our conclusion that in the
specific facts and circumstances of this case, AID has no legal basis to
attempt to recover interest earned by the governorates and village
councils on the BVSP grant funds that had been disbursed to them.
Nevertheless, in order to remove any possible doubt or ambiguity in the
future we recommend that new grant agreements for this or similar
programs more clearly address the question raised in this case. Rather
than answering this question by resorting to an analysis of the grant
documents, it would be clearly preferable to have a paragraph in these
documents that clearly connects the program purpose with the
circumstances under which a grantee or subrecipient may retain interest
income.
(1) The submission we received from the IG also raised questions
about the interest earned by the host government in two other grant
programs -- Development Decentralization and the Agriculture Cooperative
Marketing Project. However, the IG's office subsequently agreed
informally to limit the scope of the inquiry to the BVSP only.
(2) The precise relationship between the different elements of the
Egyptian Government is unclear to us. The IG and General Counsel
disputed this point as well. For example, we do not know how
independent the governorates and village councils are from the central
government and whether the central government had the right to demand
the grants funds be returned once they had been transferred to the
governorates and village councils. Based on our analysis of the case
however, it was not necessary for us to resolve this issue.
B-215268, 64 Comp. Gen 100
Matter of: Voice of America - Limitation on Pay Increase for Radio
Broadcast Technician Foremen, November 26, 1984:
Supervisors of prevailing rate employees who negotiate their pay
increases are subject to statutorily imposed pay limitation which
applies to most prevailing rate employees. These supervisors are within
the express terms of the pay increase limitation and are not covered by
the specific exclusions from the limitation. 60 Comp. Gen. 58 (1980) is
distinguished.
The issue in this decision is whether the pay increase for Radio
Broadcast Technician Foremen may be excluded from the pay increase
limitation imposed by law on most prevailing rate employees. We hold
that the pay increase for these supervisors is subject to the
statutorily imposed pay increase limitation even though their
subordinates negotiated higher wage increases and were excluded from the
pay increase limitation.
The decision is in response to a request from William E. Carroll,
Director of Personnel, Voice of America, United States Information
Agency.
The agency request states that Radio Broadcast Technicians are
prevailing rate employees who negotiate their wages as provided under
section 9(b) of Public Law 92-392 (August 19, 1972) and section 704 of
Public Law 95-454 (October 13, 1978), 5 U.S.C. Section 5343 note (1982).
While Public Law 92-392 established a statutory basis for the
prevailing rate system, section 9(b) of that law preserved the
provisions of negotiated contracts in effect on the date of its
enactment, as well as the renewal, extension or modification of such
provisions. Section 704(b) of Public Law 95-454, the Civil Service
Reform Act, (5 U.S. Code 5343(b)), clarifies the rights of employees
covered by section 9(b) of Public Law 92-392 to negotiate their wages.
58 Comp. Gen. 198 (1979).
The first-line supervisors of these employees, Radio Broadcast
Technician Foremen, are also prevailing rate employees, but as
supervisors they are excluded from the bargaining unit which negotiates
wages. Since 1981, the Foremen have had their wages set at 11.5 percent
of the journeyman rate for Radio Broadcast Technicians. However, by
applying the statutory pay limitation to the Foremen but not to the
Technicians who negotiate their wages, the agency has not been able to
maintain the 11.5 percent difference between the Foremen and their
subordinates.
The agency asks whether the Foremen may be excluded from the
statutory pay increase limitation since their wages are directly based
on a negotiated rate which is exempt from the limitation. The agency
cites our decision in Ableidinger and Walters, 60 Comp. Gen. 58 (1980),
where we held that the supervisors of Bureau of Reclamation employees
who negotiate their wages could be paid double overtime since the
supervisors' rates were based on the negotiated rates of their
subordinates. The agency states that the pay-setting procedure for the
Foremen is analogous to the one considered in our decision in
Ableidinger and Walters since the Foremen wage rate is established
directly from a negotiated pay rate; it attempts to preserve prevailing
rates in the private sector economy; and it is based on a past practice
which first existed 25 years ago.
Finally, the agency suggests that while the intent of the pay
limitation was to treat white collar and blue collar employees
equitably, it was not foreseen that application of the pay limitation
would allow the pay rates of subordinates "to reach virtual parity" with
supervisory rates, thereby causing adverse effects on morale and
recruitment for these supervisory positions.
The agency refers to the pay increase limitation of most prevailing
rate employees imposed by section 101(f) of Public Law 98-151 (November
14, 1983), 97 Stat 973, which incorporated the provisions of H.R. 4139,
as passed by the House of Representatives on October 27, 1983. /1/
Section 616(a) of H.R. 4139 provides in part:
Sec. 616. (a) Notwithstanding any other provision of law, no
part of any of the funds appropriated for the fiscal years ending
September 30, 1984, or September 30, 1985, by this Act or any
other Act, may be used to pay any prevailing rate employee
described in section 5342(a)(2)(A) of title 5, United States Code
* * * in an amount * * *
Subsection 616(a) goes on to specify formulas for determining the
amounts payable which, in effect, limit pay adjustments for prevailing
rate employees to comparable adjustments for General Schedule employees.
Both the Radio Broadcast Technicians and Foremen are considered
prevailing rate employees as describes in 5 U.S.C. Section 5342(a)(2)(A)
as follows:
An individual employed in or under an agency in a recognized
trade or craft, or other skilled mechanical craft, or in an
unskilled, semiskilled, or skilled manual labor occupation, and
any other individual, including a foreman and a supervisor, in a
position having trade, craft, or laboring experience and knowledge
as the paramount requirement * * *
Thus, both the Technicians and the Foremen are covered by the terms
of subsection 616(a) of H.R. 4139.
Section 616 than makes two exceptions to the pay increase limitation
imposed by subsection 616(a). The first exception is contained in
subsection 616(b) as follows:
(b) Notwithstanding the provisions of section 9(b) of Public
Law 92-392 or section 704(b) of Public Law 95-454, the provisions
of subsection (a) of this section shall apply (in such manner as
the Office of Personnel Management shall prescribe) to any
prevailing rate employee to whom such section 9(b) applies, except
that the provisions of subsection (a) may not apply to any
increase in a wage schedule or rate which is required by the terms
of a contract entered into before October 1, 1983. (Italic
supplied.)
This exception removes the Technicians from the limitation since,
according to the agency, their salary increases are required by the
terms of a contract entered into before October 1, 1983. On the other
hand, the Foremen are not covered by the contract and, therefore, are
not subject to the subsection 616(b) exception.
The second exception is contained in subsection 616(g) of H.R. 4139
as follows:
(g) Notwithstanding the limitations imposed on prevailing rate
pay pursuant to subsection (a) of this section, such limitations
shall not apply to wage adjustments for prevailing rate
supervisors provided by the supervisory pay plan published in the
Federal Register on March 30, 1983 (48 Fed. Reg. 13384).
The agency advises that the Foremen are not covered by the cited
supervisory pay plan; thus the subsection 616(g) exception likewise
does not apply to them.
In essence, therefore, the Foremen are subject to the pay increase
limitation by the express terms of subsection 616(a) of H.R. 4139, and
they are not covered by either of the exceptions to that limitation. We
do not believe that our decision in Ableidinger and Walters, cited
previously, provides a basis for removing the Foremen from the
limitation.
Ableidinger and Walters concerned a statutory provision, 5 U.S.C.
Section 5544 (1982), which limits overtime compensation for prevailing
wage employees to one and one-half the basic rate. In an earlier
decision we had held that, notwithstanding 5 U.S.C. Section 5544,
prevailing rate employees could negotiate double overtime pay pursuant
to section 9(b) of Public Law 92-392 and section 704(b) of Public Law
95-454. See 58 Comp. Gen. 198 (1979). We also had allowed double
overtime pay for many years even though it was not based on negotiation
under sections 9(b) and 704(b). See 59 Comp. Gen. 583 (1980).
Ableidinger and Walters extended these decisions to approve double
overtime for certain prevailing rate foremen who had received double
overtime for 20 years and whose basic pay was tied to the rates
negotiated by the employees they supervised. While these foremen were
not subject to sections 9(b) and 704(b), we concluded:
Since the broad purpose of section 9(b) and section 704(b) was
to preserve pre-existing prevailing rate practices, and since
there is no sound basis for distinguishing the foremen's situation
from that presented in 59 Comp. Gen. 583, supra, we hold that the
payment of double time for overtime to the foremen * * * is
proper. * * * 60 Comp. Gen 58, at 60.
The considerations underlying our decision in Ableidinger and Walters
do not apply in the face of the clear terms of the statutory pay
increase limitation here involved. As noted previously, section 616 of
H.R. 4139 expresses quite specifically both the basic coverage of the
limitation and the exceptions to it. The limitation applies by its
terms to the Radio Broadcast Technicians and the exceptions do not.
Moreover, subsection 616(b) of H.R. 4139 states that
"(n)otwithstanding the provisions of section 9(b) of Public Law 92-392
or section 704(b) of Public Law 95-454," the limitation applies to any
prevailing rate employees to whom section 9(b) applies except as
inconsistent with contracts entered into before October 1, 1983. Thus,
the basic approach of the limitation is to cover section 9(b) employees
along with other prevailing rate employees. In view of this, the
analogy to section 9(h) and section 704(b) relied on in Ableidinger and
Walters is unavailing here.
Accordingly, we find no basis to exclude the Radio Broadcast
Technician Foremen from the statutory pay increase limitation.
(1) We note that this pay increase limitation language is
substantially the same in section 202 of Public Law 98-270, 98 Stat.
158, April 18, 1984 (fiscal year 1984), (5 U.S. Code 5305 note), and in
section 101(j) of Public Law 98-473, October 12, 1984 (fiscal year
1985).
B-215237, 64 Comp. Gen. 96
Matter of: Agency for International Development - Interest Earned by
Subgrantees on Advanced Funding, November 20, 1984:
Advances in excess of immediate cash needs to a subgrantee of an
assistance award are not expenditures for grant purposes, and, under the
terms of the agreement, interest earned on these funds prior to their
expenditure for allowable costs must be paid to AID unless exempt under
31 U.S.C. 6503(a).
Interest earned by subgrantees on loans made as part of authorized
program efforts is program income and can be used to further program
objectives.
This decision is in response to a request from a certifying officer
in the Office of Financial Management of the Agency for International
Development (AID). The certifying officer requests that we decide (1)
whether subgrantees can retain interest earned on advances from A.T.
International, a primary recipient of an assistance award from AID, and
(2) whether subgrantees who earn interest on loans made as part of the
assistance program may retain this interest which according to the
cooperative agreement is to be added to a revolving fund for further
loans or program costs.
We conclude that under the terms of the cooperative agreement with
A.T. International interest earned by a subgrantee on assistance funds
prior to their expenditure for allowable costs are payable to AID. The
interest must be deposited in the U.S. Treasury as a miscellaneous
receipt. Interest earned by subgrantees on loans made under program
authority is program income.
According to the certifying officer, AID has negotiated a new
cooperative agreement (a form of financial assistance with A.T.
International under 22 U.S.C. Section 2395. The purpose of the
cooperative agreement is to strengthen A.T. International's capacity to
help develop appropriate technologies in developing countries. The
progrma is to be carried out through subprojects or subgrants entered
into with private organizations in cooperation with foreign countries.
Among the methods A.T. International is authorized to use under the
cooperative agreement is to provide capital contributions to subproject
revolving accounts from which subgrantees will make interest bearing
loans in furtherance of the program objectives. According to the
agreement this interest will be available for subgrant costs and
relending from the revolving fund.
The first question raised by the certifying officer is basically a
request that we respond to a position taken by the AID Office of General
Counsel concerning the legal consequences of a grantee obtaining an
advance of grant funds and immediately disbursing them to a subgrantee.
According to AID's Office of General Counsel, any interest earned on
grant funds held by the subgrantee in advance of cash needs is not
subject to the rule that interest earned on grant advances is held in
trust for the United States. The argument is based on the conclusion
that there has been a disbursement by the grantee. This view would
apply generally to grantee-subgrantee advances, if we understand the
Office of General Counsel's argument, and is not the result of any
special program authority peculiar to AID. Subgrantees are not required
to return interest to the United States where the grantee is a State or
State instrumentality not required to account for interest on advances
under the Intergovernmental Cooperation Act of 1968, 31 U.S.C. Section
6503(a).
It is a longstanding rule of this Office that interest earned by a
grantee on funds advanced by the United States belongs to the United
States rather than to the grantee and must be returned, except as
otherwise provided by law. 50 Comp. Gen. 218 (1980), 42 Comp. Gen. 289
(1962), and cases cited therein. The reason for this rule is that
statutes authorizing grant programs contemplate that recipients shall
not profit other than in the manner and to the extent provided by law.
Funds paid out to a grantee are not to be held, but are to be applied
promptly to the grant purposes. 1 Comp. Gen. 652 (1922). Where a
grantee holds advanced grant funds, he holds them in trust for the
United States and must pay any interest earned on them over to the
United States. 42 Comp. Gen. 289.
While we have never directly decided the question raised by the AID
Office of General Counsel, as suggested in an AID interoffice
memorandum, our decisions exempting subgrantees of States under the
States' exemption from returning interest contained in the
Intergovernmental Cooperation Act, id., have assumed that subgrantees
would otherwise be required to pay the interest earned on such advances
to the United States. The AID General Counsel's argument rests on two
difficulties with extending the trust theory to subgrantees. First, the
disbursement to the subgrantee resembles a disbursement for grant
purposes and, second, making the subgrantee responsible to the
Government for interest is difficult since the Government's relationship
is with the grantee not the subgrantee.
The advance as a disbursement. The advance of grant funds by a
grantee to a subgrantee is not a disbursement for grant purposes as we
have used that term in our decisions. While advancing grant funds to a
subgrantee may be an authorized disbursement under a grant, there has
been no disbursement for grant purposes in the sense that allowable
grant costs have been incurred. Were the subgrantee simply to retain
the funds in a bank account and never undertake the grant purposes, the
grantee would have to return these funds to the Government because no
allowable grant costs have been incurred. Under such circumstances it
would be hard to characterize the financial transactions of either
grantor or grantee as being for grant purposes.
In B-129459, July 1, 1980, we set forth four characteristics of a
disbursement or expenditure for grant purposes. There we said an
expenditure for grant purposes had occurred where (1) the grantee did
not retain grant funds; (2) the grantee could not get the funds back on
demand; (3) the organization that received the funds was independent of
the grantee and not its agent, and (4) the grantee received something in
exchange for the transfer of funds.
In applying these tests to the advance here in question, we think
there are a number of important distinctions to be made. While the
grantee in this case might not have been able to literally get the funds
back from the subgrantee on demand, the subgrantee had no claim to the
funds at the time interest was earned. In other words, it had no
legally enforceable right to obtain the advance or keep the money until
it was applied to grant purposes. The original grant does not authorize
the grantee to obtain funds in advance in order to make advances to
subgrantees before they are needed by the subgrantee. Also, unlike in
the instant case, the payment in B-192459, id., created legally
enforceable rights that directly related to carrying out the grant
purpose. Since the advance itself does not accomplish grant purposes,
the grantee obtained nothing from the sub-grantee in exchange for the
advance. The grant was made under Treasury's letter of credit
regulations, Treasury Circular 1075. These regulations made this point
clear. Circular 1075 requires recipients of grant funds to time
advances to subgrantees as closely as possible to their "actual
disbursements * * * for direct program costs and the proportionate share
of any allowable indirect costs." (Italic supplied.) 31 C.F.R. Section
205.4. See provision 7A of AID's standard grant provision.
Accordingly, unless the program statute under which the grant was made
specifically authorizes such transactions and this is incorporated in
the grant agreement, we do not think the advance has become a
disbursement for grant purposes.
Responsibility for Interest. The treatment of interest income of
grantees has for many years been a standard grant condition. 62 Comp.
Gen. 701, 706 (1983). We believe that the question raised here is
expressly answered by provision 3(a) of the AID Standard Provisions
attached to the award. This provision states:
(a) If use of the AID funds provided hereunder results in
accrual of interest to the Grantee or to any other person to whom
Grantee makes such funds available in carrying out the purposes of
the grant, the Grantee shall refund to AID an amount equivalent to
the amount of interest accrued.
Accordingly, there is no need to imply a trust relationship between
the grantee or the subgrantee for AID to recover the interest earned by
the subgrantee on the advanced funds. The grant agreement expressly
provides that the grantee is responsible for refunding an amount equal
to the amount of interest to AID.
The certifying officer says that there is a problem in AID and A.T.
International recovering the interest from subgrantees operating in
currency controlled countries. The certifying officer proposes that
recoveries of interest be handled by considering the interest earned in
such circumstances as a drawdown of the award to A.T. International.
AID will make adjustments with A.T. International's letter of credit
that will permit AID to account to the Treasury for the interest earned
that must be paid into Treasury as miscellaneous receipts. We have no
objection to such an arrangement for recovering these amounts since this
or similar means of recovery seen to be contemplated in AID's standard
grant conditions.
In the case of interest earned on loans made by subgrantees in
carrying out program purposes, it seems clear from the information
supplied that this is program income. The retention and use of this
interest is expressly provided for in the basic grant agreement.
Section 6, paragraph c(5)(d). As program income, it can be used as an
additional source of funds to carry out program purposes. See AID
Handbook 13, paragraph 1J, Program Income; Office of Management and
Budget Circular A-110, Attachment D.
B-214195, 64 Comp. Gen 93
Matter of: U.S. Forest Service - Claim under 31 U.S.C. 3721,
November 20, 1984:
Claim under the Military Personnel and Civilian Employees' Claims Act
of 1964, as amended, 31 U.S.C. 3721, for loss of Forest Service
employee's personal property due to burglary in rented Government
housing at remote ranger station is cognizable under the statute, since
housing may be viewed as "assigned" for purposes of 31 U.S.C. 3721(e).
Mr. W. D. Moorman, Authorized Certifying Officer, U.S. Department of
Agriculture, asked whether claims of Forest Service employees for loss
of personal property due to burglary in Government-owned quarters rented
by the employees, which occurs through no fault of the employees, are
cognizable under the provisions of the Military Personnel and Civilian
Employees' Claims Act of 1964, as amended, 31 U.S.C. Section 3721
(formerly 31 U.S.C. Section 241, recodified by Pub. L. No. 97-258,
September 13, 1982, 96 Stat. 973). As discussed below, we think they
are.
In the representative case submitted with the decision request,
personal property of a Forest Service employee residing in a
Government-owned house within the forest in which the claimant was
employed, was stolen during a burglary. There was no employee
negligence. The Forest Service charged and deducted rent from the
employee's salary for use of the Government-owned house. The employee's
claim, based on the stolen items, was approved in the amount of $178.99
by the Forest Service pursuant to 31 U.S.C. Section 3721. Since the
quarters were not "considered as part of the compensation in fixing the
salary rate" of the claimant (the significance of this phrase will be
discussed later), a question has arisen within the Forest Service as to
whether the claimed loss can be considered to have occurred at quarters
"assigned or provided in kind" by the Government, as provided in 31
U.S.C. Section 3721(e).
Subsection (b) of 31 U.S.C. Section 3721 authorizes the head of each
agency to settle and pay claims up to $25,000 for damage to, or loss of,
personal property incident to an employee's service. In addition, 31
U.S.C. Section 3721(e) states:
A claim may not be allowed under this section if the personal
property damage or loss occurred at quarters occupied by the
claimant in a State or the District of Columbia that were not
assigned or provided in kind by the United States Government or
the District of Columbia Government.
Further, 31 U.S.C. Section 3721(k) provides that "settlement of a
claim under this section is final and conclusive."
It is not within the jurisdiction of our Office to render decisions
relative to the merits of a claim under 31 U.S.C. Section 3721. In the
absence of any overall policies prescribed by the President pursuant to
31 U.S.C. Section 3721(j), such claims are for consideration under the
regulations of the employing agency. B-190106, March 6, 1978. However,
it is proper for our Office to consider the threshold question of
whether a claim is properly cognizable under the statute. 58 Comp. Gen.
291 (1979).
Specifically the certifying officer requests a clarification of the
meaning of quarters "assigned or provided in kind" by the Government.
According to the submission, the question in this case arose because of
some language in one our early decisions, 17 Comp. Gen. 207 (1937).
That decision dealt with section 3 of the Act of March 5, 1928, 45 Stat.
193, which required that the reasonable value of quarters furnished to
civilian employees be "considered as part of the compensation in fixing
the salary rate" of the employees. The requirement to consider the
value of Government-furnished quarters in fixing the employee's salary
rate was in lieu of charging rent to the employee, and applied only with
respect to quarters furnished without charge to the employee. See 42
Comp. Gen. 386 (1963). The 1928 statute was superseded in 1964 by
Public Law 88-459, 78 Stat. 557, now codified at 5 U.S.C. Section 5911
(1982), which contemplates the charging of rent for the furnishing of
Government-owned quarters to civilian employees. See B-164200, May 24,
1968. The requirement to consider the reasonable value of quarters in
fixing the employee's salary no longer appears in the statute -- there
is no longer a need for it since the employee is being charged rent --
and the 1928 statute was in fact repealed by section 8 of Public Law
88-459, 78 Stat. 558. Thus, 17 Comp. Gen. 207 and similar decisions
dealing with the 1928 statute are not relevant to the present inquiry.
In normal usage, the term "provided in kind" implies the furnishing
of an item in lieu of a cash payment. Thus, it may be questioned
whether quarters are "Provided in kind" where the employee is being
charged rent. A review of the legislative history of 31 U.S.C. Section
3721 fails to reveal a specific reference to this situation. However,
it is not unnecessary to further explore this point because, in our
opinion, the quarters in this case may be viewed as "assigned" for
purposes of 31 U.S.C. Section 3721(e).
The origin of 31 U.S.C. Section 3721 is the Military Personnel Claims
Act of 1945, 59 Stat. 225. This statute, in which the term "assigned or
provided in kind" first appeared, was broadened to encompass the
civilian agencies by the Military Personnel and Civilian Employees'
Claims Act of 1964, which in turn has evolved into the present 31 U.S.C.
Section 3721.
The scope of the "assigned or provided in kind" language was
considered in Fidelity-Phenix Fire Ins. Co. v. United States, 111 F.
Supp. 899 (N.D. Cal. 1953), aff'd sub nom. Preferred Ins. Co. v. United
States, 222 F.2d 942 (9th Cir. 1955), cert denied, 350 U.S. 837. An Air
Force B-29 aircraft had crashed near a trailer park on an Air Force
Base, causing considerable damage to personal property of Air Force
personnel who lived in the trailer park. The Air Firce paid property
loss claims by its personnel under the Military Personnel Claims Act, to
the extent that the losses were not insured. /1/
The trailer park was on Government property and was administered and
governed by Air Force regulations. The trailers were owned by the
individual members. The Air Force personnel stationed at that
particular base were not required to live in the trailer park or on the
base itself. Those who chose to live in the trailer park were charged a
fee for use of the trailer space and received a quarters allowance in
lieu of Government housing. Trailers were parked in specific locations
assigned by base personnel, and were connected to utility lines and
plumbing facilities provided and maintained by the Air Force.
On these facts, the court found that the trailer park constituted
"assigned" quarters within the meaning of the Military Personnel Claims
Act. 111 F. Supp. at 906.
In a 1960 memorandum to one our audit divisions (B-142446-O.M., June
3, 1960), we considered a Navy regulation which included a definition of
"assigned quarters" based on the Fidelity-Phenix decision. We concluded
that the court's interpretation of "assigned quarters" was "not an
untenable one" and that a claim paid under the Navy regulation therefore
need not be questioned.
Turning now to this case, the house in question is owned by the
Government and located at a remote ranger station within a national
forest. The employee, we have been informally advised, is not required
to live in the house as a condition of employment. However, because of
the remote location of the ranger station, it would be highly
impractical not to do so. Also, as noted earlier, the employee is
charged rent for the quarters.
Applying the rationale of the Fidelity-Phenix case, we conclude that
Government-owned rental housing located at a remote ranger station
within a national forest may properly be viewed as "assigned" for
purposes of 31 U.S.C. Section 3721. Accordingly, the claim of Forest
Service employee for a personal property loss occurring at such
quarters, rented by the employee and located within the forest at which
the claimant is employed, is cognizable under the statute and may be
considered at the discretion of the agency. Settlement thereof, if made
in accordance with the provisions of 31 U.S.C. Section 3721 and any
agency regulations promulgated thereunder, would be final and
conclusive. 47 Comp. Gen 316 (1967).
(1) Normally, settlements under 31 U.S.C. Section 3721 (and its
predecessor legislation) are not subject to judicial review. The
statute was relevant in the Fidelity-Phenix case because if the claims
in question were properly paid under the Military Personnel Claims Act,
then the claimants' insurers had no subrogation claim against the United
States under the Federal Tort Claims Act, which was the holding of the
case.
B-213539, 64 Comp. Gen. 86
Matter of: Angel F. Rivera - Deductions from Backpay - Waiver of
Erroneous Payments
An employee who was separated from his position pursuant to a
reduction-in-force was retroactively reinstated and awarded backpay when
it was determined that his position had been transferred to another
agency. Retirement contributions which previously had been refunded to
the employee were properly deducted from backpay because his retroactive
reinstatement and receipt of backpay removed the legal basis for the
refund. Net indebtedness resulting from deduction of the refund from
backpay may not be waived by this Office under 5 U.S.C. 5584, since the
refund did not constitute an erroneous payment of "pay or allowances."
Under 5 U.S.C. 8346(b), Office of Personnel Management has sole
authority to waive erroneous payments from the Civil Service Retirement
Fund.
An employee who was separated from his position pursuant to a
reduction-in-force was retroactively reinstated and awarded backpay when
it was determined that his position had been transferred to another
agency. Deductions from backpay for payments of severance pay and a
lump-sum leave payment resulted in a net indebtedness which is subject
to waiver under 5 U.S.C. 5584. Waiver is appropriate because, at the
time the erroneous payments were made, the employee neither knew nor
should have known that his separation was improper.
An employee who was separated from his position pursuant to a
reduction-in-force was retroactively reinstated and awarded backpay when
it was determined that his position had been transferred to another
agency. The employee must pay retirement fund contributions for the
period of the separation in order to receive service credit for that
period. Although backpay awarded to the employee is insufficient to
cover the amount of contributions he must pay, collection of that amount
is not subject to waiver under 5 U.S.C. 5584 since there has been no
erroneous payment of pay.
Mr. Angel F. Rivera, a former employee of the Community Services
Administration and the Department of Health and Human Services, requests
waiver of his indebtedness of $42,038.04. This indebtedness resulted
from the reduction of Mr. Rivera's $21,400 backpay award by deductions
of $34,092 for refunded retirement contributions, $20,235.60 for
payments of severance pay, $7,612.44 for a lump-sum payment for annual
leave, and $1,497.96 for retirement contributions covering the period of
his improper separation from Government service. Our Claims Group
forwarded Mr. Rivera's waiver request for our consideration, posing an
additional question as to whether refunded retirement contributions were
properly deducted from Mr. Rivera's backpay.
We hold that retirement contributions refunded to Mr. Rivera upon his
improper separation must be deducted from backpay, since his retroactive
reinstatement and receipt of backpay under 5 U.S.C. Section 5596 (1982)
removed the legal basis for the refund. The amount by which the
refunded retirement contributions exceed backpay is subject to waiver by
the Office of Personnel Management (OPM) under 5 U.S.C. Section 8346(b)
(1982), as implemented by 5 C.F.R. Part 831 (1984). Mr. Rivera's
indebtedness for severance pay and the lump-sum payment for annual leave
may be waived under 5 U.S.C. Section 5584 (1982), since there is no
indication that he was at fault in accepting the erroneous payments.
Collection of retirement fund contributions covering the period of Mr.
Rivera's separation is not subject to waiver under 5 U.S.C Sections 5584
or 8346(b), since his indebtedness for the contributions did not result
from an erroneous payment.
Effective September 30, 1981, Mr. Rivera was separated from his
position with the Community Services Administration (CSA) through a
reduction-in-force. After his separation he withdrew his retirement
contributions in the amount of $34,092, received a lump-sum payment for
annual leave in the amount of $7,612.44, and began receiving payments of
severance pay which eventually amounted to $20,235.60.
Mr. Rivera was one of approximately 750 employees who were separated
from CSA in response to the Omnibus Budget Reconciliation Act of 1981
("Budget Act"), Public Law 97-35, August 13, 1981, 95 Stat. 357, which
abolished CSA effective September 30, 1981. On October 1, 1981, the
Department of Health and Human Services (HHS) assumed responsibility for
administering the programs which previously had been administered by
CSA.
In anticipation of CSA's termination, the National Council of CSA
Locals, American Federation of Government Employees, filed suit in the
U.S. District Court for the District of Columbia in September 1981. The
union argued that the Budget Act transferred the functions of CSA to
HHS, and that, pursuant to the Veterans Preference Act of 1944, as
amended, 5 U.S.C. Section 3503 (1982), employees of CSA should be given
preference in HHS' selection of personnel to administer the transferred
programs. In National Council of CSA Locals v. Schweiker, 526 F. Supp.
861 (D.D.C. 1981), the district court ordered HHS to determine whether
there actually had been a transfer of functions from CSA to HHS. The
court stated that, if HHS determined that there had been a transfer of
functions, it would be required to afford former CSA employees
preference in accordance with the requirements of the Veterans
Preference Act.
Pursuant to the district court's order in National Council of CSA
Locals v. Schweiker, above, HHS conducted a review comparing the old
functions of CSA and the new functions assumed by HHS. The agency found
that the functions of CSA had been transferred to HHS, and that former
employees of CSA were eligible for appointment to the transferred
positions. Consequently, in November 1981, HHS notified former CSA
employees that they would be considered for positions in HHS based on
their retention standing and qualifications. Ultimately, HHS hired 150
of the 750 employees who had been separated from CSA, including Mr.
Rivera.
Mr. Rivera was reinstated by HHS effective February 26, 1982. Like
the other former CSA employees who had been appointed to positions in
HHS, his appointment was made retroactive to October 1, 1981, with
backpay. The HHS recredited Mr. Rivera's leave account with annual
leave covered by the $7,612.44 lump-sum payment he had received, and, in
accordance with Federal Personnel Manual (FPM) Letter 550-76, July 15,
1982, deducted the following items from his $21,400 backpay award: (1)
retirement contributions which previously had been refunded to Mr.
Rivera, in the amount of $34,092; (2) payments of severance pay
amounting to $20,235.60; (3) the lump-sum leave payment in the amount
of $7,612.44; and (4) unpaid retirement contributions for the period of
Mr. Rivera's separation, amounting to $1,497.96. Based on its backpay
computation, HHS determined that Mr. Rivera was indebted to the
Government for $42,038.04.
Shortly after his appointment to a position in HHS, Mr. Rivera
suffered a series of heart attacks and used most of the annual leave
which had been recredited to him. Effective November 12, 1982, Mr.
Rivera retired from Government service on account of disability. The
agency collected Mr. Rivera's last two paychecks in the respective
amounts of $1,162.73 and $1,369.76, and retained a lump-sum payment of
$165.84 for his unused annual leave.
The HHS forwarded Mr. Rivera's request for waiver of his indebtedness
for $42,038.04 to our Claims Group, with the recommendation that it not
be waived. Specifically, the agency states that collection of the
lump-sum leave payment paid to Mr. Rivera upon his separation would not
be against "equity" and "good conscience" within the meaning of 5 U.S.C.
Section 5584, since he was recredited with annual leave covered by the
lump-sum payment. Additionally, HHS maintains that our waiver standards
set forth in 4 C.F.R. Section 91.5(c) (1984) are not appropriate for
application where deductions from backpay result in a net indebtedness,
since those standards permit waiver if there is no indication that the
employee knew or should have known that he was being overpaid.
Our Claims Group questions whether waiver is appropriate in this
case, suggesting that Mr. Rivera may have known that he would be
reinstated when he withdrew his retirement contributions and received a
lump-sum payment for annual leave. In this regard, our Claims Group
notes that the action in National Council of CSA Locals v. Schweiker,
cited above, was pending at the time of Mr. Rivera's separation from
CSA. Additionally, our Claims Group questions whether HHS properly
deducted refunded retirement contributions from Mr. Rivera's backpay
award.
The two issues presented for our consideration are: (1) whether HHS
properly deducted refunded retirement contributions from Mr. Rivera's
backpay; and (2) whether Mr. Rivera's indebtedness for the amount by
which deductions from backpay exceed his backpay award may be waived
under 5 U.S.C Section 5584 (1982). These issues are addressed below.
The Back Pay Act of 1966, as amended, 5 U.S.C. Section 5596 (1982),
entitles an employee to backpay when he undergoes an unjustified or
unwarranted personnel action which results in the withdrawal or
reduction of all or part of his pay. If, as a result of the application
of section 5596, an employee is entitled to backpay, he is, "for all
purposes * * * deemed to have performed service for the agency * * *"
during the period of wrongful separation. 5 U.S.C. Section
5596(b)(1)(B). (Italic supplied.)
Implementing regulations contained in 5 C.R.F. Section 550.805(a)
(1984) provide that when an appropriate authority corrects an
unjustified or unwarranted personnel action, the agency must compute the
employee's pay and allowances as if the personel action had not
occurred. Under 5 C.F.R. Section 550.805(e)(2), the agency is required
to deduct from backpay, "(a)ny erroneous payments received from the
Government as a result of the unjustified or unwarranted personnel
action * * *."
The provisions of FPM Letter 550-76, July 15, 1982, explain that the
"erroneous payments" which must be deducted from backpay under section
550.805(e)(2) include retirement annuity payments, refunds of retirement
contributions, payments of severance pay, and lump-sum payments for
annual leave. With respect to refunded retirement contributions,
paragraph 5b of FPM Letter 550-76 provides that:
b. Refunds of retirement contributions. The retirement law (5
U.S.C. 8342(a)) authorizes the refund of an employee's retirement
contributions only upon absolute separation from the service or
transfer to a position not subject to the law. Therefore, when a
refund of retirement contributions is paid to an employee based on
a separation which is subsequently found to be erroneous and is
cancelled by restoring the employee to duty retroactively so that
there was no break in the service, the restoration to duty removes
the legal basis for the refund. A refund that was paid in error
represents a debt due the retirement fund that must be deducted
from any back pay entitlement. * * *
Although our Claims Group questions the requirement in FPM Letter
550-76 that refunded retirement contributions be deducted from backpay,
we believe that this deduction is necessary to achieve the make-whole
purposes of the Back Pay Act. As noted previously, 5 U.S.C. Section
5596 provides that an employee who is retoactively restored to duty and
awarded backpay must, "for all purposes," be regarded as having
performed service during the period of the corrective action. Since the
employee is regarded as never having been separated, he may not retain
retirement contributions which, under 5 U.S.C. Section 8342(a), are
refundable only upon separation from the service or transfer to a
position which is not covered by the Civil Service Retirement System.
We note that the rule requiring the deduction of refunded retirement
contributions is consistent with principles governing deductions for
lump-sump leave payments and payments of severance pay. Specifically,
we have held that an employee who is retroactively restored to duty and
awarded backpay under 5 U.S.C. Section 5596 may not retain a lump-sum
payment for annual leave, since 5 U.S.C. Section 5551(a) expressly
conditions payment of the lump sum on an employee's separation from
Government service. See Vincent T. Oliver, 59 Comp. Gen 395 (1980);
Ernest E. Sargent, 57 Comp. Gen. 464 (1978). Similarly, we have held
that payments of severance pay must be offset against backpay because 5
U.S.C. Section 5595(b)(2) authorizes severance pay only for an employee
who has been separated. Since the employee is regarded, "for all
purposes," as having performed service during the period of wrongful
separation, he may not simultaneously claim the status of a "separated"
employee. See Ernest E. Sargent, 57 Comp. Gen. at 466; Sammy H. Marr,
B-178551, January 2, 1976.
Accordingly, in line with the provisions of FPM Letter 550-76, we
conclude that a refund of retirement contributions must be offset
against backpay awarded under 5 U.S.C. Section 5596. On this basis, we
hold that HHS properly deducted from Mr. Rivera's backpay the amount of
retirement contributions he withdrew at the time of his improper
separation.
The provisions of FPM Letter 550-76 state that the computation of net
backpay is a three-step process. First, the agency must deduct any
outside earnings received by the employee during the period of the
unjustified or unwarranted personnel action. Second, the agency must
deduct erroneous payments the employee received as a result of the
improper personnel action. If the net amount of backpay is insufficient
to cover all deductions for erroneous payments, these payments must be
deducted in the following order: (1) retirement annuity payments; (2)
refunds of retirement contributions; (3) payments of severance pay;
and (4) lump-sum payments for annual leave. Finally, the agency must
deduct from backpay "other authorized deductions," such as unpaid
retirement contributions for the period of the separation, Federal and
state taxes computed on net backpay, and health benefits premiums, if
any.
Applying the provisions of FPM Letter 550-76, Mr. Rivera's backpay
award of $21,400 must first be reduced by refunded retirement
contributions in the amount of $34,092, resulting in a net indebtedness
of $12,692 for those contributions. Added to that indebtedness, in
order of precedence, are deductions of $20,235.60 for payments of
severance pay, $7,612,44 for the lump-sum leave payment, and $1,497.96
for retirement contributions covering the period of Mr. Rivera's
separation. These items of indebtedness are discussed below.
Mr. Rivera's net indebtedness for refunded retirement contributions
is not subject to waiver by this Office, since 5 U.S.C. Section 5584
limits our waiver jurisdiction to erroneous payments of "pay or
allowances." A refund of an employee's own contributions to the Civil
Service Retirement and Disability Fund does not constitute "pay" or an
"allowance" within the meaning of 5 U.S.C. Section 5584. See 4 C.F.R.
Section 91.2 (c) and (d).
Nevertheless, Mr. Rivera may request that OPM waive his net
indebtedness for the refunded contributions. The provisions of 5 U.S.C.
Section 8346(b), as implemented by C.F.R. Part 831, authorize OPM to
waive erroneous payments from the Civil Service Retirement and
Disability Fund.
Mr. Rivera's indebtedness for payments of severance pay in the amount
of $20,235.60 and the lump-sum leave payment in the amount of $7,612.44
is appropriate for waiver consideration under 5 U.S.C. Section 5584,
since those payments constitute "erroneous payments" within the meaning
of the waiver statute. See Vincent T. Oliver, 59 Comp. Gen. at 397;
see also FPM letter 550-76, July 15, 1982. Under the authority of 5
U.S.C. Section 5584, this Office may waive debts arising out of
erroneous payments to Government employees if collection "would be
against equity and good conscience and not in the best interests of the
United States." However, that authority may not be exercised if there is
an indication of fault on the part of the employee in the matter.
"Fault" is considered to exist if it is determined that the employee
knew or should have known that an error existed but failed to take
corrective action. See 4 C.F.R. Section 91.5(c).
The HHS maintains that the conditions for waiver outlined in 4 C.F.R.
Section 91.5(c) are not appropriate for application where deductions
from backpay result in a net indebtedness because, in the context of
backpay awards, employees will "always meet the 'knew or should have
known' test" and "this result could be very costly for the Government."
However, the concerns expressed by HHS have no bearing on an individual
waiver determination since 4 C.F.R. Section 91.5(c) requires that such a
determination be based on the particular facts and circumstances
surrounding the erroneous payment. See generally Ronnie C. Sutton and
John W. McKenzie, B-206385, December 6, 1982.
Applying the standards set forth in 5 U.S.C. Section 5584 and 4
C.F.R. Section 91.5(c) to this case, we find no indication that Mr.
Rivera was at fault in accepting payments of severance pay or the
lump-sum payment for annual leave. Although Mr. Rivera received the
lump-sum leave payment after the National Council of CSA Locals filed
suit alleging that CSA's functions had been transferred to HHS, he could
not have known that the union would prevail on the merits of the case.
Furthermore, the district court's determination in National Council of
CSA Locals v. Schweiker, cited previously, did not order the
reinstatement of former CSA employees, but merely directed HHS to
determine whether CSA's functions had been transferred to HHS. Even
after HHS determined that a transfer of functions had occurred, it
notified former CSA employees that selection for reemployment in the
transferred positions would depend upon their retention standing and
qualifications. Ultimately, HHS reinstated only 150 of the 750
employees who had been separated from CSA.
Under these circumstances, Mr. Rivera reasonably could not have known
that his separation from CSA was improper until he was notified that he
would be retroactively reinstated to one of the positions which had been
transferred to HHS. Accordingly, we hold that repayment of the lump-sum
leave payment and payments of severance pay which Mr. Rivera received
prior to the date of that notification may be waived under the
provisions of 5 U.S.C. Section 5584.
The HHS maintains, however, that it would not be against "equity" and
"good conscience" to collect the lump-sum leave payment from Mr. Rivera
because, at the time of his reinstatement, he was recredited with annual
leave covered by the lump-sum payment. We disagree. As indicated
previously, the determination to waive an erroneous payment for annual
leave turns on circumstances surrounding the erroneous payment at the
time it was made, and not on facts existing at a latter time when the
payment has been found to be erroneous and the leave recredited.
Furthermore, we note that the purpose of 5 U.S.C. Section 5584 is to
validate a payment or benefit to which an employee is not legally
entitled. If an employee is not recredited with annual leave covered by
the lump-sum payment, but repayment of the lump sum is "waived," the
employee is in the same position as he was prior to the "waiver."
Likewise, an employee receives no benefit if he is recredited with leave
and required to repay the lump-sum payment. Only when waiver of the
repayment is granted and leave recredited has the employee received the
additional, equitable benefit intended by the waiver statute.
Accordingly, we find no basis for concluding that collection of the
lump-sum leave payment from Mr. Rivera would be consistent with equity,
good conscience, or the best interests of the United States. Therefore,
collection of the erroneous lump-sum payment for annual leave and the
payments of severance pay is waived.
Under the Back Pay Act, an employee who is restored to duty following
an erroneous separation is deemed for all purposes to have performed
Government service during the period of the separation, and such service
is creditable for retirement purposes. See 5 U.S.C. Section
5596(b)(1)(B); and FPM Supplement 831-1, paragraph S3-4j (September 21,
1981). Therefore, all Federal pay that would have been earned during
the period of the separation is subject to deductions for retirement
fund contributions. Even if no amount of backpay is due the employee
because of excessive deductions, the employee must remit the appropriate
amount of retirement contributions to the agency in order to receive
full credit for the period of the separation. See 5 U.S.C. Section
8334(c) (1982).
Accordingly, Mr. Rivera must pay retirement contributions in the
amount of $1,497.96 in order to receive credit for service during the
period of his separation. Collection of that amount may not be waived
under 5 U.S.C. Section 5584, since no erroneous payment of pay has been
made. 55 Comp. Gen. 48 (1975).
For the foregoing reasons, we hold that the $34,092 in retirement
contributions previously refunded to Mr. Rivera must be deducted from
his $21,400 backpay award, and that his net indebtedness of $12,692 for
those contributions may be considered for waiver by OPM. Mr. Rivera's
indebtedness for payments of severance pay amounting to $20,235.60 and
the $7,612.44 lump-sum leave payment is waived under the provisions of 5
U.S.C. Section 5584. Mr. Rivera must pay $1,497.96 for retirement
contributions covering the period of his separation, and that amount is
not subject to waiver.
B-216731, 64 Comp. Gen. 84
Matter of: Nello Construction Company, November 19, 1984:
Bidder which certifies that it is not a small business was eligible
for award of the contract under an invitation for bids not set aside for
small business.
Nello Construction Company (Nello) protests award of a contract to
Jendoco Construction Company (Jendoco) under invitation for bids (IFB)
No. K0348078, issued by the Bureau of Mines, Department of the Interior
(Interior).
We deny the protest without obtaining a report from the contracting
agency, in accordance with section 21.3(g) of our Bid Protest
Procedures, 4 C.F.R. Section 21 (1984).
Nello contends that Jendoco, the low bidder, is ineligible for award
"as a small business concern under section "K," "Representations,
Certifications and other Statements of Offerors or Quoters" of the IFB.
In section "K" of its bid, Jendoco certified that it was not a small
business.
In response to a protest previously filed by Nello with Interior
involving this same allegation, the contracting officer held that since
the solicitation was not set aside solely for small business concerns,
the certification by Jendoco as a large business did not render Jendoco
ineligible for award. The contracting officer also stated that the
purpose of the "Small Business Size Standard" in a solicitation which is
not set aside for small business concerns is to inform all bidders of
the criteria for size determination for the proper execution of the
small business size certification. The certification is important for
proper application of the equal bid provision of the Federal Acquisition
Regulation (FAR) Section 14.407-6, 48 Fed. Reg. 42,102, 42,183 (1983)
(to be codified at 48 C.F.R. Section 14.407-6), and for implementation
of the Small Business and Small Disadvantaged Business Subcontracting
Plan required by FAR Section 52.219-9, 48 Fed. Reg. 42,102, 42,523
(1983) (to be codified at 48 C.F.R. Section 52.219-9).
The small business certification is required by FAR Section 52.219-1,
48 Fed. Reg. 42,102, 42,523 (1983) (to be codified at 48 C.F.R. Section
52.219-1), to be inserted in every solicitation when the contract is to
be performed in the United States, its possessions or territories,
Puerto Rico, the Trust Territory of the Pacific Islands, or the District
of Columbia. Therefore, inclusion of the certification and small
business standards in a solicitation does not, by itself, constitute a
set-aside for small business. FAR Section 19.508(c) and Section
52.219-6, 48 Fed. Reg. 42,102, 42,250 and 42,524 (1983) (to be codified
at 48 C.F.R. Section 19.508(c) and Section 52.219-6), require that a
solicitation, set aside for small business, contain the phrase "NOTICE
OF TOTAL SMALL BUSINESS SET-ASIDE." Nello has not alleged or shown that
the IFB contained the small business set-aside notice required by the
FAR. Since the procurement has not been set aside for small business,
the low bidder, which is not a small business, was eligible for the
award.
B-216516, 64 Comp. Gen. 71
Matter of: CACI, Inc.-Federal, November 19, 1984:
Contrary to the protester's contention that the agency improperly
"normalized" proposed levels of effort in cost realism evaluation, the
agency reviewed offerors' individual approaches and made its own
assessment of the level of effort, using the government estimate as a
guide.
Although cost evaluation document seems inconsistent with subsequent
Navy explanation of cost evaluation, upward adjustment in cost realism
analysis of 69 percent over proposed costs of technically acceptable and
equal low offeror, primarily because of evaluated low staffing levels --
a deficiency which was repeatedly pointed out in discussions -- was not
unreasonable in view of broad agency discretion, despite low offeror's
disagreement with government assessment of its staffing levels.
Although 69-percent upward adjustment in cost realism analysis,
primarily due to evaluated increase in staffing levels, on technically
acceptable and equal low offer is unusual, the technical evaluation was
done pursuant to evaluation criterion in request for proposals which did
not give great weight to staffing levels. Cost analysis can be function
entirely separate and not related to outcome of technical evaluation.
Upward cost adjustment of 69-percent of proposal in cost realism
analysis, primarily due to evaluated increase in staffing levels, did
not amount to rewriting proposal since agency only determined for
evaluation purpose what probably and realistic cost of contracting with
that offeror would be.
Agency erroneously added personnel as direct charge in probable
realistic cost analysis of offeror's cost proposal. Offeror was covered
by cost accounting standards (CAS) and proposed personnel as part of
indirect charge. Under CAS part 402, offeror must account for costs
incurred for same purposes in like circumstances as direct costs only or
as indirect costs only. Since offeror indicates that it always charged
offered personnel as indirect charge and since government cannot legally
dictate how offeror should establish accounting system, further
discussions should be held to verify offeror's accounting practice and
to clarify government requirements.
Award on cost-reimbursement contract made at proposed cost amount,
without further discussions, where cost analysis of successful proposal
shows realistic cost of proposal is $920,000 (5.5 percent) less than
proposed amount, is unusual and poor business practice, although
adjustments in cost analysis and evaluation that awardee's proposal was
lowest are not found unreasonable. Since protest is sustained on other
grounds, discussions concerning evaluated overstated or excessive costs
should be conducted.
Protest that proposed award fee should have been considered in
probable cost evaluation of proposals on cost-plus-award-fee contract,
where such evaluation is award determinative, is not meritorious, where
protester submitted proposal after being fully informed that this was
the way that proposals would be evaluated. Agency had reasonable basis
for not evaluating proposed award fee and this evaluation did not
violate any legal requirement.
Award of cost-plus-award-fee contract at proposed cost plus 10
percent award fee violates regulatory limit on award fee where
government evaluation of costs was that they should be $920,000 (5.5
percent) less than proposed costs because award fee is then 10.6 percent
of government evaluated reasonable cost of awardee's proposal.
On September 24, 1984, CACI, Inc.-Federal (CACI), protested the award
under a request for proposal (RFP) by the Naval Supply Center (Navy),
Oakland, California, of contract No. N00228-84-C-5005 to Bechtel
Operating Services Company (Bechtel). This cost-plus-award-fee contract
was for services and materials for the receipt and warehousing, kit
assembly, preservation, packaging, packing, crating, integration and
shipping of self-contained, relocatable modular hospital units.
On September 24, 1984, CACI also brought an action in the United
States District Court for the District of Columbia (Civil Action No.
84-2971, CACI, Inc.-Federal v. United States, et al.) requesting a
temporary restraining order and preliminary injunction against further
performance of the Bechtel contract pending disposition of this protest
and the ultimate review of the legality of the award by the court. By
memorandum order dated September 26, 1984, the court issued a temporary
restraining order requiring that the Navy issue a stop work order to
Bechtel to cease immediately any performance under its contract pending
a decision on the motion for preliminary injunction and that the General
Accounting Office give expedited treatment to the CACI protest. On
October 16, 1984, in a memorandum order, the court granted the motion
for preliminary injunction.
This opinion responds to the court's request. See Applicators, Inc.,
B-215035, June 21, 1984, 84-1 C.P.D. Paragraph 656. The record which
our Office considered in this matter was primarily the pleadings and
affidavits filed in the lawsuit, the Navy's cost analyses documents and
Bechtel's and CACI's proposals. The last arguments and documents were
received in our Office on October 19, 1984.
CACI's protest basically concerns the cost evaluation of CACI's and
Bechtel's proposals. CACI asserts that this evaluation was improperly
performed, and that either CACI should have received the award or
further negotiations should have been conducted.
We sustain the protest on two separate grounds. First, we believe
the Navy improperly performed the cost realism analysis because in the
analysis it added certain personnel as direct costs, despite the fact
that CACI proposed these personnel as indirect costs. We find that this
evaluation violated the Cost Accounting Standards (CAS), as further
discussed below. Second, as discussed below, the award fee proposed and
contracted for with Bechtel violated the applicable 10-percent
regulatory fee limitation.
The RFP was issued in December 1983 and solicited technical and cost
proposals for the performance of the integration, assembly and
warehousing services for 3 years and a phase-in period. The RFP also
encompassed a number of options for shelter outfitting and preassembled
module construction. The Navy states that this full complement of
services had not previously been procured from commercial sources.
Proposals were received on March 19, 1984, from CACI, Bechtel, Holmes
& Narver Services, Inc. (Holmes & Narver), and Pan-Am World Services,
Inc. (Pan-Am). Technical proposals and revisions thereto were evaluated
by a technical evaluation board. Cost proposals were separately
reviewed. Written and oral discussions were conducted with all
offerors. On August 14, 1984, the offerors were advised that their
proposals were "acceptable" and "substantially equal" technically and
that the predominant factor in determing the awardee would be the lowest
cost, as evaluated on the basis of the government's determination of a
realistic cost. Pan-Am dropped out of the competition because it was
unable to submit further proposal revisions by the required deadline.
The three remaining offerors were expressly advised that award fee
would not be considered part of the evaluated cost, although proposed
base fee would continue to be considered part of this cost. The Navy
states that it eliminated award fee from the cost evaluation to
encourage offerors to offer a larger award fee instead of base fee. The
option costs were also not part of the evaluated cost.
The best and final offers were received on August 31, 1984. The
final proposed costs (excluding options) and base fee (not award fee) of
CACI, Bechtel, and Holmes & Narver were as follows:
Bechtel........................................... $16,739,609
Holmes & Narver.................................. 12,666,127
CACI.............................................. 9,528,740
Holmes & Narver proposed a base fee equal to 1.5 percent of its
proposed costs and an award fee equal to 7 percent of its proposed
costs. Bechtel and CACI both proposed a zero-percent base fee but an
award fee equal to 10 percent of their proposed costs, that is,
$1,673,961 and $952,874, respectively.
The Navy evaluated the proposed costs, excluding award fee and
options, of the offerors as follows:
Bechtel.......................................... $15,818,637
Holmes & Narver................................. 16,220,008
CACI............................................. 16,123,757
The evaluated realistic cost of Bechtel is 5.5 percent below its
proposed costs, while the evaluated realistic costs of Holmes & Narver
and CACI are 28 percent and 69.2 percent, respectively, higher than
their proposed costs. Based upon this evaluation, the Navy awarded the
contract to Bechtel.
We have consistently held that considering evaluated costs instead of
proposed costs provides a sounder basis for determining the most
advantageous proposal, since the government is required -- within
certain limits -- to pay the contractor's actual allowable and allocable
costs. 52 Comp. Gen. 870, 874 (1974); Dynatrend, Inc., B-192038, Jan.
3, 1979, 79-1 C.P.D. Paragraph 4 at 22. A government determination of
evaluated realistic cost is no more than an informed judgment of what
costs should be reasonably incurred by acceptance of a particular
proposal. Grey Advertising Inc., 55 Comp. Gen. 1111, 1126 (1976), 76-1
C.P.D. Paragraph 325 at 17-18, and cases cited therein. Determining
whether submitted proposals are realistic as to cost must properly be
left to the informed judgments and administrative discretion of the
contracting agency, which is in the best position to judge the realism
of costs and must bear the major criticism for any difficulties or
expenses experienced by reason of a defective cost analysis. 50 Comp.
Gen 592, 600 (1971); Raytheon Company, 54 Comp. Gen. 169, 184 (1974),
74-2 C.P.D. Paragraph 137 at 19-20. These agency determinations should
not be second-guessed unless they are not supported by a reasonable
basis. Kentron-Hawaii, Limited v. Warner, 480 F.2d 1166, 1172 (D.C.
Cir. 1973); Management Services, Inc., 55 Comp. Gen. 715, 724 (1976),
76-1 C.P.D. Paragraph 74 at 10.
We will first discuss CACI's assertions concerning the evaluation of
its proposal which caused its costs to be evaluated 69.2 percent higher
than its proposed costs. CACI's proposal was rated technically
acceptable as well as technically equal to Bechtel's proposal. CACI
asserts, therefore, that no fair or rational cost realism analysis could
have produced such an extraordinary upward adjustment of CACI's proposed
costs. This adjustment was primarily caused by major evaluated
increases in CACI's proposed staffing levels. CACI believes its
staffing should have been considered sufficient in view of tis
acceptable technical rating and the Navy's actions were tantamount to an
impermissible rewriting of CACI's proposal. Additionally, CACI has
raised three specific concerns about its cost evaluation. First, CACI
asserts that the Navy improperly evaluated the proposals against a Navy
predetermined and undisclosed staffing estimate, that is, the proposed
staffing was "normalized" to this estimate without considering the
unique or differing performance approaches proposed by the various
offerors. CACI asserts that "normalization" of staffing was irrational
since the RFP solicited innovative approaches. CACI also asserts that
the cost evaluation improperly eliminated its proposed use of Amtech
Field Service Corporation (Amtech), a CACI affiliate with lower overhead
rates, in the cost evaluation. CACI asserts that the Navy's use of
higher CACI overhead rates in the evaluation caused its proposed costs
to be improperly evaluated higher. CACI further argues that various
personnel who were proposed as part of CACI's indirect costs were
treated in the Navy cost evaluation as direct charges, which violated
the CACI's CAS Disclosure Statement.
We have reviewed, in camera, the Navy cost evaluation of both CACI's
and Bechtel's proposals. Although the government cost estimate was used
by the Navy in evaluating CACI's proposal, it appears that the Navy
primarily considered CACI's technical approach in evaluating CACI's
costs proposal, both with regard to the level of effort proposed for
each category of work and compensation levels to be paid, using the
government estimate as a guide. In this regard, CACI's proposed
personnel in each job category were not automatically adjusted to the
government estimate of the needed personnel to perform the job. Some
job categories were accepted as proper and others were adjusted to
levels of effort different from the specific government estimate for
that category. We note that Bechtel's proposed levels of effort were
accepted by the Navy in most cases, even where the government estimate
was more or less than the Bechtel proposal. The final evaluated Bechtel
levels of effort in some cases exceeded and in some cases were less than
CACI's evaluated levels of effort. Consequently, we do not believe the
Navy "normalized" CACI's and Bechtel's proposed personnel costs without
consideration of the individual technical approaches.
We find, however, that the Navy's explanations of this matter are
somewhat misleading. From reading the Navy's arguments, one could
reasonably conclude that CACI's and Bechtel's proposals were only
innovative as to their individual "bar coding" approaches. ("Bar
coding" is a process for maintenance and control of inventory and
records through a machine readable representation of data.) Further, one
could conclude that adjustments were made to the proposals to bring them
in line with the government estimate, as adjusted to take into account
the lesser level of effort in certain categories of work thought
achievable by "bar coding." The Navy seems to indicate that it used this
"conservative" approach in evaluating CACI's proposal despite its
disbelief that CACI's "bar coding" approach would really achieve savings
in the level of effort. Therefore, we can see how Bechtel and CACI were
misled into believing that "normalization" occurred in the cost
evaluation.
It is apparent that the Navy and CACI disagree as to what level of
effort CACI would take to satisfactorily perform this work in accordance
with CACI's technical approach and the RFP requirements. It is also
clear that the Navy believed that CACI was trying to "buy-in" and obtain
this award with an unrealistically low level of effort and compensation
system. CACI asserts that it is not "buying in" and that its innovative
and proprietary "bar coding" approach would permit it to perform at its
proposed level of effort. The Navy has provided detailed reasons
critiquing CACI's particular "bar coding" approach, while CACI has
defended its approach and stated that the Navy misunderstood its
proposal. Based on the record, and in view of the broad discretion
vested in the contracting agency in these technical/cost matters, we
cannot say that the agency's position is unreasonable. See Electronic
Data Systems Federal Corporation, B-207311, Mar. 16, 1983, 83-1 C.P.D.
Paragraph 264.
Furthermore, the record indicates that during discussions, the Navy
repeatedly told CACI that it was significantly understaffed and
specifically indicated the areas where this understaffing was perceived
to exist. In this case, CACI submitted a number of proposal revisions.
CACI made some adjustments to its proposed levels of effort as a result
of these discussions and provided various explanations of why it could
perform the work with its propsoed level of effort. These adjustments,
however, did not satisfy the Navy and the explanations did not persuade
the Navy. Contrast Bank Street College of Education, B-213209, June 8,
1984, 63 Comp. Gen. 393, 84-1 C.P.D. Paragraph 607 at 14, where the
agency did not disclose concern to the protester over a low proposed
level of effort in discussions, but the agency's cost evaluation adding
significantly more staffing was upheld as reasonable.
It is admittedly unusual that the cost of a technically "acceptable"
and "equal" proposal would be adjusted upwards 69 percent, primarily
because of evaluated staffing. Under many procurements, this would be
considered in the technical evaluation as reflecting adversely on the
offerors' understanding of the government's requirements. However, a
cost analysis can be a function entirely separate and not related to the
outcome of a technical evaluation. Vinnell Corporation, B-203806, Aug.
3, 1982, 82-2 C.P.D. Paragraph 101 at 8. A review of the technical
evaluation criteria in this RFP shows how such a large adjuatment to a
technically acceptable offer could occur.
Under the RFP technical evaluation scheme, certain mimimum
requirements had to be met in order for proposals to be considered
acceptable -- none of which directly addressed proposed staffing levels.
Additionally, the offerors' technical approach was graded against
certain criteria in descending order of importance as follows:
a. Technical Approach
b. Resources Availability
c. Management Capability
d. Experience
e. Cost
Only under the "Resources Availability" criterion was proposed
staffing to be specifically judged and staffing levels were only one
subelement of that criterion. Consequently, under the Navy's technical
evaluation, a proposal with "unrealistically" low staffing levels could
be rated acceptable and equal to other proposals with much higher
staffing levels by virtue of receiving higher scores in the top ranked
"Technical Approach" evaluation criterion.
We have noted that technically equal proposals may be evaluated as
having very different realistic costs. The Bendix Corporation,
B-208184, Sept. 16, 1983, 83-2 C.P.D. Paragraph 332 at 5-6. Despite the
size of the upward adjustment of CACI's proposal, this does not amount
to rewriting CACI's proposal; the Navy only determined, for evaluation
purposes, what the probable and realistic cost of contracting with CACI
would be. Computer Sciences Corp., B-210800, Apr. 17, 1984, 84-1 C.P.D.
Paragraph 422 at 9. The characterization in the technical evaluation of
CACI's staffing as "average" does not bind the agency to accent that
staffing in the cost evaluation. See Vinnell Corporation, B-203806,
supra, at 8; Computer Sciences Corp., B-210800, supra, at 9.
Based upon our review of the cost evaluation and record (except for
our comments below on the Navy's treatment of CACI's proposed indirect
cost personnel), we cannot say that the adjustments to CACI's proposed
costs were irrational or not soundly based, despite our inability to
completely rationalize the cost evaluation document with the subsequent
Navy explanations. See PRC Computer Center, 55 Comp. Gen. 60 at 78
(1975), 75-2 C.P.D. Paragraph 35 at 22; Grey Advertising, Inc., 55
Comp. Gen., supra, at 1134-1135. In this regard, it appears that the
Navy has documented in the cost analysis document the reasons for each
adjustment in CACI's proposed levels of effort and compensation levels.
It also appears that these adjustments were based upon the Navy's
assessment of CACI's proposal using the government estimate as a guide
in the evaluation. Finally, it seems clear that CACI was adequately
apprised that its proposed level of effort was perceived to be
deficient.
CACI states that the Navy did not consider its use of Amtech in
calculating the indirect rates in the cost evaluation. However, our in
camera review substantiates the Navy's position that Amtech's proposed
rates were adopted for purposes of the cost evaluation, without
verification with cognizable audit agencies. Such verification may now
be achievable in view of the recommendation below.
As part of the cost analysis, the Navy added a certain level of
effort to CACI's proposed accounting function as a direct charge. CACI
proposed no level of effort for its accounting function because it
proposed charging this cost as an indirect cost.
CACI asserts that the Navy's treatment of its accounting function as
a direct charge would cause CACI to violate its CAS Disclosure Statement
filed pursuant to 50 U.S.C. app. Section 2168(h) (1982). The Navy
responds that since dedicated accounting personnel are necessary to
perform this contract, CACI's charging this cost to its indirect account
instead of as a direct cost probably violates CACI's CAS Disclosure
Statement. From our review, it appears that CACI consistently indicated
to the Navy that this function would not be a direct charge to the
contract under its accounting system, but rather would be included as a
part of CACI's indirect pool costs charged under the contract. The Navy
states that CACI's approach reflects a misunderstanding of the RFP's
extensive cost reporting requirements and that only a dedicated
accounting function can fulfill contract requirements. CACI states that
the RFP did not require a dedicated accounting function and to require
this now would necessitate an RFP amendment. This matter was discussed
on a number of occasions during negotiations in an obviously
inconclusive manner. Also, the parties apparently disagree as to what
level of effort will be required to perform this function, whether it be
a direct or indirect charge under the contract, and as to whether CACI's
existing accounting personnel in its indirect cost pool could properly
perform these contract functions. Finally, the Navy claims that it
asked CACI to certify that this charge would never be charged directly.
CACI denies this and questions whether such a request would have been
appropriate in any case.
We have reviewed the CACI CAS Disclosure Statement and have
determined that the accounting function is not clearly indicated to be
either a direct or indirect charge under that statement. It is notable
that neither the Navy nor CACI has pointed to a particular paragraph in
the Disclosure Statement which allegedly supports their respective
positions.
The Navy says that because dedicated accounting personnel are
necessary, its cost must be charged as a direct cost to the contract
because they can be identifiable with a particular final cost objective,
citing Defense Acquisition Regulation (DAR) Section 15-202(a) (Defense
Acquisition Circular (DAC) No. 76-33, Feb. 15, 1982). The Navy
contrasts "direct" charges with "indirect" costs which are incurred for
common or joint objectives, citing DAR Section 15.203(a) (DAC No. 76-33,
Feb. 15, 1982).
However, the Navy fails to recognize that part 402 of the CAS
supplements this general rule for CAS-covered contractors, such as CACI.
See DAR part 3-12 (DAC No. 74-46, Aug. 24, 1983); DAR Appendix "O"; 4
C.F.R. part 402 (1984). Section 402.40 of CAS, 4 C.F.R. Section 402.40
(1984), states:
Section 402.40 Fundamental requirement.
All costs incurred for the same purpose, in like circumstances,
are either direct costs only or indirect costs only with respect
to final cost objectives. No final cost objective shall have
allocated to it as an indirect cost any cost, if other costs
incurred for the same purpose, in like circumstances, have been
included as a direct cost of that or any other final cost
objective. Further, no final cost objective shall have allocated
to it as a direct cost any cost, if other costs incurred for the
same purpose, in like circumstances, have been included in any
indirect cost pool to be allocated to that or any other final
objective. (Italic supplied.)
CACI asserts that it always charges the accounting functions as an
indirect charge on all its contracts. There is no indication that the
Navy attempted to verify whether or not this was the case during the
audit or negotiations. Further, there is no indication that the Navy
attempted to ascertain whether CACI's existing accounting personnel
(apparently charged to its indirect cost pool) had any excess capacity
to accommodate the Navy's requirements. In any case, even assuming the
RFP required dedicated accounting personnel, CACI was required to cost
this function consistent with CAS part 402. If CACI has provided the
accounting function as an indirect charge on other contracts (government
or nongovernment), CAS part 402 (4 C.F.R. part 402 (1984)) would seem to
require CACI to charge this function to this contract as an indirect
charge. If this contract required something different from CACI's
ordinary accounting functions, it is possible that CACI could elect to
charge this as a direct charge. But, even in this event, it would be
CACI's initial election of how it wanted to manage its accounting
system, so long as CACI complied with CAS. The government cannot
legally dictate how an offeror should establish his accounting system.
Dynatrend, Inc., B-192038, supra, at 19.
In view of the foregoing, we find that the Navy improperly added the
accounting function as a direct charge without proper verification of
the appropriate treatment of this cost under CACI's accounting system
and the CAS. Therefore, we sustain this aspect of the protest and
recommend that revised proposals be submitted. From our review of
CACI's final cost proposal, CACI seemed to propose Amtech -- its
affiliate -- to perform this function and the costs for this function
would be part of Amtech's indirect cost pool. Since Amtech's CAS
Disclosure Statement was not provided this Office, we can only speculate
that Amtech's accounting system is similar to CACI's accounting system.
In any event, it is not clear what effect this would have on the cost
evaluation. Although CACI speculates that deletion of the direct charge
adjustment made for the accounting function would make it the low
evaluated offeror, it may be that the Navy had legitimate concerns about
CACI's proper satisfaction of the Navy's accounting requirements.
We have found so specific requirements in the RFP for a dedicated
accounting staff. The record is conflicting as to whether the Navy
wanted this "dedicated" function at the Navy's Oakland, California,
facility or in the CACI home office. Although the contracting officer
says in her affidavit that she did not say or convey to CACI that these
employees had to be located in California, the cost analysis document
justified adding accounting positions to the level of effort because
"the long distance accounting approach" cannot meet the stringent RFP
cost control and reporting requirements. Since this protest has been
sustained, if the Navy has a legitimate requirement for the accounting
function or any other function not specifically designated in the RFP to
have dedicated personnel, offerors should be advised and given an
opportunity to submit proposals on that requirement in accordance with
proper accounting practice and the Navy should evaluate the proposed
approaches in accordance with CAS.
In this regard, the Navy also added personnel to CACI's management
control function. We are unable to determine from the record whether
these added personnel would be proposed as part of CACI's or Amtech's
indirect cost pool.
Discussions should be conducted with CACI on this point to assure
compliance with CAS and that RFP requirements are met. The CACI CAS
Disclosure Statement does specifically indicate that "contract
administration" is treated as an indirect charge in CACI's accounting
system.
In any case, the Navy is entitled to perform a cost analysis and
conduct such discussions as required to verify that whatever approach is
proposed will satisfy the RFP's accounting, reporting, and/or contract
administration functions. Even it any of these cost areas are
eventually considered to be properly part of the indirect cost pool, the
Navy would be entitled to review the offerors' indirect cost rates to
ascertain what effect, if any, proper satisfaction of these requirements
would have on the indirect cost pool and rates.
CACI protests the award of a contract to Bechtel at its proposed
estimated cost of $16,739,609, because Bechtel's proposal was evaluated
to cost only $15,818,637 and the award amount exceeded CACI's evaluated
cost of $16,123,127. (Actually, the contract amount shown on the
contract document includes the unevaluated options, which may or may not
be exercised. Therefore, the total contract estimated cost is shown on
the contract document as $18,844,193.) From reviewing the cost analysis
document, it appears that large reductions in Bechtel's evaluated cost
from its proposed cost can be accounted for in two areas. First, there
was a significant reduction in the materials and supplies from those
proposed by Bechtel. The analysis attributes this reduction to the
determination that less materials and consumables for packing and
crating would be needed than were proposed. The second, and the
majority of the total $920,972 reduction from Bechtel's proposed cost,
is attributed to a reduction in the level of effort of a Bechtel
proposed subcontract with the BDM Corporation (BDM) for automatic data
processing. The Navy was so impressed by Bechtel's particular "bar
coding" approach that it believed the labor hour estimate proposed under
the BDM subcontract was excessive when compared to the government
estimate for this task.
The Navy and Bechtel assert that it is entirely proper to make an
award in an amount higher than the evaluated costs because the contract
is a cost-reimbursement type which only obligates the Navy to pay the
costs actually incurred by the contractor in accordance with certain
specific cost standards, provided they are reasonable, allocable and
otherwise allowable. See DAR Section 3-405.5 (1976 ed.). Additionally,
it is asserted that the Navy can control contract costs through use of
the technical direction clause, award fee mechanism, the Allowable Cost,
Fee and Payment clause (DAR Section 1-203.4 (DAC No. 76-17, Sept. 1,
1978)), the subcontract clause, and other contract provisions.
Consequently, the award amount is only a ceiling beyond which it may be
more difficult to get costs reimbursed. According to the Navy, the
evaluated cost, on the other hand, is the government's educated guess of
what the contract will really cost for the purpose of an award judgment.
The contracting officer also states that reopening negotiations after
evaluation of best and final offers appeared unnecessary because, under
the contract provisions, Bechtel required approval from the contracting
officer of the BDM subcontract so the costs were considered easily
controlled.
It is clear, as even CACI concedes, that adjustment to proposed costs
to determine realistic costs can be both downward and upward. Computer
Sciences Corp., B-210800, supra. Moreover, this Office has recognized
that contract awards can be in a different amount than the evaluated
costs. Bell Aerospace Company; Computer Sciences Corp., 54 Comp. Gen
352 (1974), 74-2 C.P.D. Paragraph 248, as explained in GTE Sylvania,
Inc., 57 Comp. Gen. 715 at 755 (1977), 77-2 C.P.D. Paragraph 422 at 49;
Prospective Computer Analysts, B-203095, Sept. 20, 1982, 82-2 C.P.D.
Paragraph 234 at 5. We do not agree with CACI that this large reduction
to Bechtel's proposed costs necessarily makes Bechtel's proposal less
than equal to CACI's under the technical evaluation criteria or is
tantamount to rewriting Bechtel's proposal. See Computer Sciences
Corp., supra, at 9. We have reviewed, in camera, the downward
adjustments made by the Navy to Bechtel's cost proposal in its cost
realism analysis and cannot say they are unreasonable. Grey Advertising
Inc., 55 Comp. Gen., supra, at 1134-1135. Consequently, based on the
foregoing, we cannot find the Navy's assessment that Bechtel's evaluated
costs were lower than CACI's evaluated costs was unreasonable.
However, award without further discussions under these circumstances
is certainly an unusual and poor business practice. Consequently,
inasmuch as we have sustained this protest on other grounds, we believe
the Navy should conduct discussions with Bechtel in an effort to
negotiate the evaluated overstated or excessive costs prior to award.
See Griggs & Associates, Inc., B-205266, May 12, 1982, 82-1 C.P.D.
Paragraph 458; Bank Street College of Education, 63 Comp. Gen. 393,
supra, at 23; Ikard Manufacturing Company, 63 Comp. Gen. 239 at 241
(1984), 84-1 C.P.D. Paragraph 266 at 4. As we stated in 50 Comp. Gen.
739, 745 (1971):
* * * the time for exploring the cost aspects of a proposal --
that is, all proposals within a competitive range -- is during the
course of negotiations and not at some time after receipt of best
and final offers * * *
CACI has complained that if the award fee had been considered in the
cost evaluation then it would clearly have been the low evualated
offeror because of Bechtel's significantly higher proposed award fee of
$1,673,961 as opposed to CACI's award fee of $952,874. However, CACI
was fully aware that the award fee would not be evaluated when it
submitted its best and final offer. Indeed, CACI took full advantage of
this evaluation scheme by proposing a maximum 10 percent award fee.
CACI cannot now complain about this evaluation scheme. See section
21.2(b)(1) of our Bid Protest Procedures, 4 C.F.R. Section 21.2(b)(1)
(1984). In any case, it is clear that the agency had a legitimate and
reasonable basis for not evaluating award fee as part of the total cost
in evaluating proposed costs, that reason being to encourage offerors to
propose less base fee and more award fee. In any case, there is no
legal requirement that award fee be evaluated as part of the cost
evaluation where the evaluation is in accordance with the scheme
disclosed to the offerors.
CACI also asserts that the award fee in the Bechtel contract violated
pertinent fee limitations. We agree. DAR Section 3-405.5(d) (1976 ed.)
states that "maximum fee (base fee plus award fee) (on a
cost-plus-award-fee contract) shall not exceed the limitations stated in
3-405.6(c)(2)." DAR Section 3-405.6(c)(2) (DAC No. 76-16, Aug. 1, 1978)
states in pertinent part:
(2) 10 U.S.C. 2306(d) provides that in the case of a
cost-plus-fixed-fee contract the fee shall not exceed ten percent
(10%) of the estimated cost of the contract, exclusive of the fee,
as determined by the Secretary concerned at the time of entering
into such contract. * * *
As indicated in DAR Section 3-405.6(c)(2), supra, the estimated cost
is to be determined by the government at the time of entering into a
contract. This government determination could only be done by a price
or cost analysis. See DAR Section 3-806 (DAC No. 76-7, Apr. 29, 1977);
DAR Section 3-803 (DAC No. 76-40, Nov. 26, 1982); DAR Section
3-807(a)(3) (DAC No. 76-16, Aug. 1, 1978); DAR Section 3-807(d) (DAC
No. 76-16, Aug. 1, 1978).
In this case, Bechtel's proposal for an award fee of $1,673,961 with
no base fee was based upon its proposed cost of $16,739,609. The Navy's
evaluated cost estimate of the contract, however, was only $15,818,637.
Consequently, since the Navy accepted Bechtel's proposal without further
discussions, Bechtel's fee is 10.59 percent of the Navy's evaluated
estimated cost.
The Navy and Bechtel themselves disagree on the maximum award fee
available under the contract. The Navy recognizes the contractually
agreed upon amount of $1,673,961 as the limitation, but argues that the
"estimated costs," on which the fees are based, referenced in the
regulation are those estimated amounts that have been contractually
agreed upon. The Navy analysis effectively ignores the requirement for
an independent government assessment of Bechtel's costs. The regulation
does not indicate that the contract's estimated costs is what is
referenced in determining the limit on fee; rather, the regulation
contemplates a separate government determination of the estimated costs.
Bechtel asserts that the maximum award fee would be 10 percent of the
Navy's cost realism estimate, i.e., $1,581,864, because DAR Section
3-405.5(d), supra, and Section 3-405.6(c)(2), supra, make this amount a
ceiling on the award fee "by definition" such that this limitation
cannot be violated by the award document. However, it certainly is not
proper to contract in violation of the regulations and rely upon the
regulations to reform the contract. Cf. B. B. Saxon Company, Inc., 57
Comp. Gen. 501, 506 (1978), 78-1 C.P.D. Paragraph 410 at 9. The very
disagreement of the parties on this point shows the need for further
negotiations. Finally, it is argued that Bechtel may not in fact earn
in excess of a 10-percent award fee because only "excellent"
performance, which is speculative, would allow Bechtel to earn all the
award fee permitted by the contract. However, DAR Section 3-405.5(d),
supra, and DAR Section 3-405.6(c)(2), supra, govern contracts as they
are awarded. Therefore, this argument has no merit and the protest is
sustained on this point.
Based upon the foregoing, CACI's protest is sustained. In accordance
with the guidance set forth in this decision, there should be further
negotiations with the offerors in the competitive range and revised cost
proposals should be solicited. Unless Bechtel is the successful offeror
on this recompetition, its contract should then be terminated.
B-215586, 64 Comp. Gen. 70
Matter of: Philip Rabin, November 14, 1984:
An employee stationed at Fort George G. Meade, Maryland, returning
from a temporary duty assignment obtained a meal and rented a motel room
near his residence when a snowstorm and icy roads prevented him from
continuing to his home. The claim for reimbursement must be denied
since an employee may not receive per diem or subsistence in the area of
his place of abode or his official duty station, regardless of unusual
circumstances.
An employee claims expenses incurred for dinner and lodging at a
location near his residence when a snowstorm interrupted his travel to
his home following a temporary duty assignment. /1/ The employee may
not be reimbursed for the meal or lodgings because he was in the city of
his residence when these expenses were incurred.
Mr. Philip Rabin, an employee of the Department of Defense employed
at Fort George G. Meade, Maryland, was assigned to temporary duty in
Camden, New Jersey. He returned by train to Baltimore, Maryland, at
approximately 6:40 p.m. on March 8, 1984, and proceeded by automobile
toward his home in a snowstorm. Finding the main road very difficult to
travel due to the intensity of the storm and secondary roads covered by
snow and ice, he determined that it would be impossible to continue to
his home. At 7:30 p.m. he stopped at a motel, ordered dinner and
registered. After learning at 11 p.m. that roads were passable, he
checked out of the motel and proceeded to his home.
Mr. Rabin filed a claim in the amount of $7.50 for the dinner meal
and for $86.58 for lodging expense which claim was denied on grounds
that the meal was consumed by him near his residence at or near his
official duty station and that he did not spend the night in the motel.
Mr. Rabin contends that his actions were justified and that he made a
good faith effort to reach his home before making the expenditures.
Per diem instead of subsistence may not be allowed an employee either
at his permanent duty station or place of abode from which he commutes
daily to the official station. Federal Travel Regulations, para. 1-7.6a
(Supp. 1, September 28, 1981), incorp. by ref., 41 C.F.R. Section
101-7.003 (1983). Reimbursement of actual and necessary subsistence
expenses follow the same rules as entitlement to per diem. FTR, para.
1-8.1.
We have consistently held that absent statutory authority, an
employee may not be paid per diem or actual subsistence at his
headquarters or at his place of abode from which he commutes daily to
his official duty station, despite unusual working conditions which may
be involved. 42 Comp. Gen. 149 (1962). Thomas R. Smith, B-186090,
November 8, 1976; Department of Commerce, B-188985, August 23, 1977;
and Joslin McIntosh, B-200779, August 12, 1981.
In the present case, Mr. Rabin made the expenditures in Baltimore,
Maryland, where he resides and where the terminal servicing Fort Meade
is located. We have previously denied payment to an employee who rented
a hotel room at the official duty station due to blizzard conditions
which prevented him from going home and payment to an employee for a
hotel room at the official duty station where travel was limited by
heavy snow and icy roads. Department of Commerce, B-188985, supra;
Joslin McIntosh, B-200779, supra.
Accordingly, Mr. Rabin may not be reimbursed for the cost of his
dinner meal and lodging.
(1) Mr. Kenneth F. Chute, Finance and Accounting Officer, National
Security Agency, Fort George G. Meade, Maryland, submitted this request
for a decision.
B-214584, 64 Comp. Gen. 67
Matter of: Fraudulently Received Flight Pay, November 14, 1984:
An Army officer, who was found to have fraudulently qualified for
flight pay and Aviation Career Incentive Pay by submitting falsified
flight physical examination records, is not entitled to such pay under
applicable statutes and regulations. The de facto rule will not be
applied to allow retention of flight pay and Aviation Career Incentive
Pay received by an officer who fraudulently qualfied for such pay.
Therefore, collection action should be taken to recover these payments.
This decision responds to a request for an advance decision
concerning the validity of payments of flight pay and Aviation Career
Incentive Pay made to an Army lieutenant colonel, and whether collection
action should be taken to recover these payments. /1/ We find that, in
view of the Army's investigation which indicates that the officer
fraudulently qualified for both flight training and flight duty, he was
not entitled to receive flight pay and Aviation Career Incentive Pay
under applicable statutes and regulations. In addition, there is not
basis for the extension of the de facto rule to allow the officer to
retain the flight pay and Aviation Career Incentive Pay where he
fraudulently qualified for such pay. Therefore, collection action
should be taken to recover the amount fraudulently received.
The Army reports that the officer involved received flight pay and
Aviation Career Incentive Pay in the total amount of $37,304 during the
period of May 22, 1969, through November 13, 1982. The Army has found
that the officer fraudulently qualified for this pay in that he had
someone other than himself take the initial eye examination to make
himself eligible for flight school, and that he falsified Standard Forms
89 and 93 (Report of Medical History), in that he indicated that he did
not wear contact lenses or glasses, and concealed his myopia. There is
no question, however, that the officer otherwise performed required
services as an Army aviator.
As a result of the allegations of fraud, supported by evidence
obtained in an investigation of the matter by the Army Criminal
Investigation Command, the Army began collection action against the
officer for the full amount of flight pay and Aviation Career Incentive
Pay he had received. The officer has protested the collection action.
He argues, in essence, that poor eyesight is a defect that could have
been waived by the Army, that he performed the required service, that
the Government has not suffered in any way by his actions, and that,
therefore, it would be unjust to rely on "technicalities" to collect
from him.
A service member's entitlement to pay is dependent upon statutory
right; accordingly, the rights of the affected member must be
determined by reference to the governing statues and regulations. Bell
v. United States, 366 U.S. 393, 401 (1961); United States v. Larinoff,
431 U.S. 864, 869 (1977).
The flight pay and Aviation Career Incentive Pay received by the
officer are authorized by 37 U.S.C. Section 301 (1970) and 37 U.S.C.
Section 301a (1982), respectively, /2/ subject to prescribed
regulations. Both statutes provide for incentive pay in addition to
basic pay for frequent and regular performance of flight duty required
by orders provided certain other conditions are met. These conditions
are prescribed in Executive Orders Nos. 11157, as amended, and 11800,
the Department of Defense Military Pay and Allowances Entitlements
Manual and various service regulations. Only members who meet these
requirements are entitled to the special pay for flying duty.
Among other conditions such as minimum flying time requirements, an
individual must meet certain medical fitness standards to qualify for
flight training and flying duty. See Army Regulation 40-501, Chapter 4.
If a member fraudulently qualfies for flight training and flying duty
by misrepresenting his medical fitness, he does not meet the conditions
as required by the authorizing statutes and regulations implementing
those statues. Therefore, he would not be entitled to flight pay or
Aviation Career Incentive Pay under those statutes and regulations.
We have recognized, in certain instances, that members of the
uniformed services may receive pay and allowances and other benefits
incident to a de facto status. In one case an individual, when he
enlisted in the service, fraudulently concealed the fact that he had
used drugs which, if known, would have disqualified him for enlistment.
He was discharged from the service based on his fraudulent enlistment
but we held that he could retain the pay he had received prior to the
discovery of the fraud. This was allowed by analogy to the de facto
officer rule. Richard A. Johnson, B-179517, May 15, 1974. See also
Leonard D. Ellison, B-185116, August 26, 1976; 44 Comp. Gen. 258
(1964); 41 Comp. Gen. 293 (1961).
We have noted, however, that an erroneous appointment to an office
which may still qualify a person as an officer de facto differs from an
assignment to flying duty. In the latter case there is no appointment
to any office, but merely an assignment of additional or special duty to
a member of the service. 23 Comp. Gen. 578, 581-582 (1944). Thus, we
have held that there is no basis for the extension of the de facto rule
to authorize retention of additional or special pay paid, when the
individual had not complied with specific provisions of law or
regulations necessary to qualify for such payments. 40 Comp. Gen. 642
(1961), and 23 Comp. Gen. 578, supra. See also 49 Comp. Gen. 51 (1969),
and B-148716, June 22, 1962.
While the officer in this case performed flying duties during the
period in question, to be entitled to the special pay for such duty, he
is required not merely to have been an Army officer, but also to have
met the specific requirements of the laws and regulations. He did not
meet those requirements because his orders to flight status were
invalid, having been obtained through fraud.
While we held in one case that an officer is entitled to flight pay,
although failing to satisfy the regulatory requirement of taking an
annual physical examination, 48 Comp. Gen. 81 (1968), that case is
distinguishable from the facts here. In that case, entitlement to
flight pay was based on the existence of competent orders and the
failure to take prescribed steps to effect a suspension or termination
of those orders. There was no allegation that the orders placing the
individual involved in that case in a flight status were issued as a
result of fraud. In the present case, from the beginning the officer's
flying orders were based on fraudulent information. Therefore, they
never could have been considered valid. See 41 Comp. Gen. 206 (1961).
Based on the information submitted, we agree with the Army's
determination that the officer is not entitled to payments of flight pay
and Aviation Career Incentive Pay he received from May 22, 1969, through
November 13, 1982. Accordingly, appropriate collection action should be
taken.
(1) The request for advance decision was submitted by S. Gast,
Finance and Accounting Officer, U.S. Army Aberdeen Proving Ground,
Maryland. It was assigned submission number DO-A-1432 by the Department
of Defense Military Pay and Allowance Committee.
(2) Pub. Law 93-294, May 31, 1974, 88 Stat. 177, added section 301a
to title 37, U.S. Code, providing Aviation Career Incentive Pay for
officers who hold, or are in training for, an aeronautical rating or
designation. Prior to the enactment of Pub. Law 93-294, such officers
were entitled to incentive pay under 37 U.S.C. 301 for duty as a crew
member participating in aerial flight (flight pay).
B-214458.3; B-214458.4, 64 Comp. Gen. 64
Matter of: Griffin-Space Services Company - Reconsideration,
November 14, 1984:
Analyses presented by an agency in its request for reconsideration of
a decision sustaining a protest against the determination of the agency
to continue to perform services in-house rather than by contracting out
for the services will not be considered since the agency declined to
present any comments or analyses at the time of the protest and the
information which forms the basis for the analyses was available at that
time.
Neither Office of Management and Budget (OMB) Circular No. A-76 nor
agency regulations preclude a protest to General Accounting Office from
an agency's administrative review of a contractor's appeal of an
in-house cost estimate.
The provision in OMB Circular No. A-76 concerning independent
preparation and confidentiality of government in-house cost estimate
does not preclude GAO from recommending, pursuant to a protest, that the
agency recalculate the cost of in-house performance.
Griffin-Space Services Company (Griffin) and the Department of the
Navy (Navy) request reconsideration of our decision in Griffin-Space
Services Company, B-214458.2, Sept. 11, 1984, 84-2 C.P.D. Paragraph 281,
where we sustained Griffin's protest and recommended corrective action.
We sustained Griffin's earlier protest against the Navy's
determination that the Navy could perform utilities plant operation and
maintenance for a 3-year period at the United States Naval Submarine
Base, New London, Connecticut, at a lower cost than Griffin, based on a
comparison of Griffin's low bid under a two-step formally advertised
solicitation, with adjusted cost estimates prepared by the Navy. The
Navy did not rebut Griffin's allegation that the Navy relied on
inaccurate and understated historical costs in developing its cost
estimates and violated the ground rules for the cost comparison.
In a letter dated April 24, 1984, responding to our request for an
agency report on Griffin's protest to GAO, counsel for the Navy
commented that its position is that it is precluded from commenting on
the issues raised in the protest. That letter stated:
The protest involves the administrative review made by the
Commander, Submarine Force, U.S. Atlantic Fleet, of the cost
comparison ancillary to the solicitation. Under DOD 4100.33,
paragraph 9.c., the administrative review is not subject to our
negotiation, arbitration, or agreements with affected parties.
Therefore we are precluded from commenting on the issues raised in
the protester's protest, or on the propriety of the final decision
rendered under the administrative review.
The Navy's request for reconsideration states that while the Navy was
constrained from commenting directly regarding the Navy's final
administrative determination of February 3, 1984, denying Griffin's
appeal against the results of the cost comparison, there is no such
constraint regarding GAO's September 11, 1984, decision.
The Navy, citing Office of Management and Budget (OMB) Circular No.
A-76 (Circular) and regulations, basically argues that the GAO does not
have jurisdiction to examine the results of a cost comparison after an
administrative review has occurred and, therefore, the Navy does not
have to defend through a report to the GAO the results of an
administrative review. We do not agree.
We have held that we will not review cost comparisons until the
administrative review process has been completed. See Halifax
Engineering, Inc., B-214379, Mar. 14, 1984, 84-1 C.P.D. Paragraph 308.
However, although we have recognized that the underlying determination
involved in cost comparisons, whether work should be performed in-house
by government personnel or performed by a contractor, is one which is a
matter of executive branch policy and not within our protest function,
we have stated that where, as here, a contracting agency utilizes the
procurement system to aid in its determination of whether to contract
out, by spelling out in a solicitation the circumstances under which a
contractor will or will not be awarded a contract, a protest from a
bidder alleging that its bid has been arbitrarily rejected will be
considered by our Office. See Jets, Inc., 59 Comp. Gen. 264 (1980),
80-1 C.P.D. Paragraph 152. While the finality provisions of the
Circular and the regulations preclude further administrative review, we
do not believe they can be interpreted to preclude an appeal to our
Office in appropriate circumstances.
Our initial decision was based on the record available to us at that
time. The Navy declined to comment on the protester's statements
concerning the cost comparison and the administrative review which
indicated that the cost comparison had been conducted in a faulty
manner. The Navy's attempt to now support the propriety of the cost
comparison will not be considered since the Navy could have presented
its analyses at the time of the protest, but chose not to. See
Development Associates, Inc. -- Reconsideration, B-205380.2;
B-205380.3, Mar. 28, 1983, 83-1 C.P.D. Paragraph 313. Our procedures do
not permit piecemeal presentation of information to our Office and we
have held that parties that withhold or fail to submit all relevant
evidence, information, or analyses for our initial consideration do so
at their own peril. Development Associates, Inc. -- Reconsideration,
B-205380.2; B-205380.3 supra.
The Navy's request for reconsideration is denied.
Griffin requests that we reconsider our recommendation that the Navy
recalculate the cost of in-house performance and thereafter make a
second comparison with Griffin's bid. Griffin argues that permitting
the Navy to recalculate its costs after learning Griffin's bid price
would be tantamount to giving the Navy a second chance to retain the
contract in-house. Griffin contends that this procedure is in conflict
with the provisions of the Circular which require that the government
must prepare its bid, as would any other contractor, independently and
without the knowledge of the prices of other bids. In support of its
position, Griffin cites the Circular, part IV, chapter I, paragraph "g,"
which states:
g. The confidentiality of all cost data, including the
contract price, must be maintained to ensure that Government and
contract cost figures are completely independent. For example,
the contracting officer will not know the in-house cost estimate
until the cost comparison is accomplished at bid opening date.
Griffin therefore requests that we recommend that the Navy award the
contract in question to Griffin without permitting the Navy a chance to
first recalculate its costs.
We believe that the above-quoted language applies only to the initial
bid opening procedure and not to the results of cost comparisons which
are appealed. In fact, chapter II, section (D)(6), of the March 1979
Cost Comparison Handbook (supplement No. 1 to the Circular), which is
applicable to this procurement, allows for changes to be made in the
government's estimate after the cost comparison has been conducted where
significant discrepancies are noted during the review process. We have
recognized on prior occasions the propriety of permitting the government
to recalculate its estimate after bids are exposed where significant
errors are found in its estimate. See Holmes & Narver Services, Inc.,
and Morrison Knudsen Company, Inc., B-212191, Nov. 17, 1983, 83-2 C.P.D.
Paragraph 585; RCA Service Company, B-208204.2, Apr. 22, 1983, 83-1
C.P.D. Paragraph 435; Satellite Services, Inc., B-207180, Nov. 24,
1982, 82-2 C.P.D. Paragraph 474.
Because Griffin has not shown any error of fact or law in the
recommendation which we made, it is affirmed.
B-216152.2, 64 Comp. Gen. 63
Matter of: Janke and Company, Incorporated - Request for
Reconsideration, November 13, 1984:
Protester requesting reconsideration of a General Accounting Office
decision must present a detailed statement of the factual and legal
grounds warranting reversal or modification, specifying any errors of
law or information not previously considered. When the only basis for
reconsideration cited by the protester is an unsupported allegation of
bad faith on the part of agency officials, the request for
reconsideration will be denied.
Janek and Company, Incorporated, requests reconsideration of our
decision in Janke and Company, Inc., B-216152, Aug. 30, 1984, 84-2 CPD
Paragraph 242, dismissing Janke's protest against the decision of the
Department of the Navy to award a contract to the Small Business
Administration (SBA) and the proposed award of a subsequent subcontract
to JWM Corporation pursuant to section 8(a) of the Small Business Act,
15 U.S.C. Section 637(a) (1982). We affirm our prior decision.
Section 8(a) authorizes the SBA to enter into contracts with any
government agency having procuring authority and to arrange for
performance by letting subcontracts to socially and economically
disadvantaged small business concerns.
In its initial protest, Janke alleged a possible failure to prepare
an adequate assessment, as required under SBA's Standard Operating
Procedures (SOP), of the impact on firms not in the 8(a) program of
reserving the contract for the program. We held that because SBA's SOP
merely provide internal policies and guidelines that complement the SBA
regulations implementing the 8(a) program at 13 C.F.R. part 124 (1984),
we would not review SBA's compliance with those internal procedures
absent a showing of possible fraud or bad faith. Since Janke failed to
allege fraud or bad faith, we dismissed the protest.
In its request for reconsideration, Janke now alleges that SBA and
the Navy have acted in bad faith in setting aside the procurement for
the 8(a) program. In particular, Janke refers to a letter from SBA it
received on or about August 21, 1984, and in which SBA informed Janke
that since the procurement was considered a first-time buy there could
be no adverse impact on Janke and thus there was no need for an impact
study. Janke contrasts this position with a June 19 letter from SBA
assuring Janke that SBA would conduct an impact study prior to accepting
a contract and with a July 19 letter from the Navy advising a member of
Congress of the SBA statement. Janek argues that this vacillation in
regard to the impact study, when considered with the allegedly
unannounced agency decision to set aside this procurement for the 8(a)
program even though it had been previously synopsized in the Commerce
Business Daily, demonstrates bad faith.
While Janke may believe that SBA and the Navy were acting solely to
deprive Janke of an opportunity to compete, it has submitted no evidence
that this was in fact the case. Rather, it essentially asks that we
infer bad faith from the actions of the SBA and the Navy. However,
inference and supposition is not sufficient. See Ebonex, Inc.,
B-213023, May 2, 1984, 84-1 CPD Paragraph 495 at 4. Consequently,
Janke's request for reconsideration falls short of making the requisite
showing of possible bad faith.
The request for reconsideration is denied.
B-215244, 64 Comp. Gen. 58
Matter of: John A. Byrd - Real Estate and Transportation of
Household Goods Expenses, November 13, 1984:
A transferred employee attampted to personally sell his residence at
his old duty station and incurred advertising expenses. Because he was
unsuccessful, he placed the sale in the hands of a real estate agent who
did sell the property. A commission paid to the agent on that sale was
reimbursed to the employee, but prior advertising costs were disallowed.
On reclaim, the disallowance is sustained. When a separate advertising
cost is incurred which does not result in the sale of a residence, para.
2-6.2 of the Federal Travel Regulations (FTR) precludes reimbursement.
A transferred employee owned a residence on a 10-acre tract at his
old duty station. In order to facilitate sale, the property was divided
into two parcels and sold to two separate buyers. Real estate expenses
of the parcel containing the residence were reimbursed to employee, but
expenses associated with the parcel not containing the residence were
disallowed. On reclaim, the disallowance is sustained. When separate
purchasers of divided property are involved, a parcel of land other than
that upon which the residence is situated is not considered as being
reasonable related to the residence as required by FTR para. 2-6.1f.
A transferred employee shipped household goods under the actual
expense method. The goods weighed in excess of the maximum allowable.
Under FTR para. 2-8.3b(5), the employee is liable for excess weight and
delivery costs as a percentage of the total expenses associated with
that shipment, based on the ratio of the excess weight to the total
weight of the goods shipped. These regulations have the force and
effect of law and may not be waived or modified, regardless of
circumstances.
This decision is in response to a request from an authorized
certifying officer, Internal Revenue Service, Southwest Region,
Department of the Treasury. The matter concerns the entitlement of one
of its employees, Mr. John A. Byrd, to be reimbursed certain relocation
expenses and excess weight and delivery charges for his household good
shipment incident to a permanent change-of-station transfer in August
1982. For reasons set forth below, we hold that Mr. Byrd may not be
reimbursed for the advertising or closing costs on the parcel of land
not containing his residence, and he is liable for the charges for
excess weight of household goods with the modification of the
computation set out below.
Mr. Byrd, an employee of the Internal Revenue Service, Southwest
Region, was transferred from Dallas, Texas, to Durango, Colorado,
effective August 23, 1982. At that time, he owned and occupied as his
residence a house on 10 acres of land in Canton, Texas. Immediately
following receipt of notice of his impending transfer, he attempted to
sell his home and all surrounding property without the assistance of a
real estate agent. As a result, he incurred advertising expenses in the
amount of $211.62. Because he was unsuccessful, he listed the property
with a real estate agent. In order to facilitate the sale, the real
estate agent divided the property into two parts. The first part was a
2.136-acre parcel containing Mr. Byrd's residence. The second parcel
was all of the remaining acreage. Both parts were sold on or about
August 22, 1983, to two separate buyers.
Mr. Byrd was reimbursed for the real estate expenses incurred
incident to the sale of the 2.136-acre parcel, but the expenses of
selling the second parcel were disallowed, based on our decision
B-171493, February 2, 1971. In addition to that disallowance, the
agency also disallowed reimbursement for the advertising expenses
incurred by Mr. Bryd prior to placing the property in the hands of the
real estate agent. This disallowance was based on provisions of the
Internal Revenue Manual (IRM), 1763, section 593(1)(b); paragraph
2-6.2b of the Federal Travel Regulations, FPMR 101-7 (September 1981)
(FTR); and 46 Comp. Gen. 812 (1967). Mr. Byrd has disputed the
disallowance of those two items.
The third expense item in dispute is the charge assessed against Mr.
Byrd for the excess weight of his household goods shipment and extra
delivery expense incurred. Based on provisions in the IRM and our
decision B-199780, February 17, 1981, the agency determined that the
excess weight and delivery charges owed by him were $548.49. Mr. Byrd
determined by his own computation that he owed only $315.22, from which
he deducted $25 for damages claimed to have been done to his personal
property by the movers and reimbursed the agency $290.22. The agency
not only disagrees with his computation, but claims that any such loss
or damage claim which he had must be made against the moving company.
Paragraph 2-6.2 of the FTR, which governs reimbursable and
nonreimbursable real estate expenses, provides:
a. Broker's fees and real estate commissions. A broker's fee
or real estate commission paid by the employee for services in
selling his residence is reimbursable, but not excess of rates
generally charged * * * in the locality fo the old official
station. * * *
b. Other advertising, selling, and appraisal expenses. Costs
of newspaper, bulletin board, multiple-listing services and other
advertising for sale of the residence at the old official station
are reimbursable if the employee has not paid for such services in
the form of a broker's fee or real estate agent's commission. * *
*
In our decision 46 Comp. Gen. 812 (1967), we considered a situation
similar to that involved in the present case, where the employee
incurred advertising expenses in an unsuccessful attempt to personally
sell his residence before securing the services of a broker. We ruled
there that where an employee is reimbursed a broker's fee or real estate
commission in connection with the sale of his residence, which fee
includes advertising cost, any other advertising expenses incurred by
the employee may not be reimbursed. See also B-178531, July 16, 1973.
While Mr. Byrd has asserted that his purpose for attempting to sell
his residence himself was to save himself and the Government the
commission expense, the focus of the quoted FTR provisions is the
reimbursement of expenses incurred in the successful selling of a
residence. Since the real estate commission charged for the
consummation of the residence sale apparently included advertising
expenses, there is no basis upon which additional advertising expenses
may be allowed in the present case.
Paragraph 2-6.1f of the FTR provides in part:
f. Payment of expenses by employee-pro rata entitlement. * *
* The employee shall also be limited to pro rata reimbursement
when he/she sells or purchases land in excess of that which
reasonably relates to the residence site.
Mr. Byrd contends that when he purchased the house at his old station
as his residence, it was on the 10 acres that he sold. Further, that
even though the property was sold in two parts to separate purchasers,
it was done in that manner only to facilitate the sale, and both tracts
were sold at the same closing.
In our decision 54 comp. Gen. 597 (1975), we set forth guidelines for
use by agencies to determine the amount of property which "reasonably
relates to the residence site" for which reimbursement of real estate
expenses may be made. These guidelines, while not exhaustively stated
therein, include examination of zoning laws appraisal by experts and
consideration of the location and topography of the land, as ways of
establishing reasonableness of the property size being sold.
In B-171493, February 2, 1971, we concluded that where an employee
divided his property into separate parcels for sale, the parcels other
than the lot on which the house was situated did not relate to the
residence site. In a line of decisions following 54 Comp. Gen. 597
(1975), we recognized that where separate parcels were conveyed to an
individual purchaser, the existence of separate transactions gave rise
to the rebuttable presumption that the parcel not containing the
residence was excess, thus warranting consideration of the factors
discussed in 54 Comp. Gen. 597 (1975). For example, in William C.
Sloane, B-190607, February 9, 1978, we considered a claim of an employee
who sold a 2-acre parcel on which the residence was situated and 3 days
later sold the adjacent 5-acre parcel to the same buyer. Based on the
considerations outlined in 54 Comp. Gen. 597, the agency determined that
a first parcel was deemed an adequate building site in the area and that
the remaining property sold could be developed separately for
residential purposes. We sustained the agency determination and
concluded that only the commission on the parcel of property containing
the residence was reimbursable. In W. Carl Linderman, 60 Comp. Gen. 384
(1981), the presumption arising from the sale of property in two parcels
was rebutted based upon the factors set out in 54 Comp. Gen. 597 (1975).
In cases where the separate parcels are sold to separate purchasers,
the analysis set out in 54 Comp. Gen. 597 (1975) will generally lead to
a finding that the lot without the residence is excess. See Franklin J.
Rindt, B-199900, February 10, 1981, and Harold J. Geary, B-188717,
January 5, 1978. While the "presumption of excess" analysis was not
explicitly applied in these cases, the results would have been the same
if it had been used.
In the present case, both the 2.136-acre parcel containing the house
as well as the remaining acreage satisfied the minimum lot size as a
residential site. Since each parcel was sold to a separate purchaser,
the situation in the present case is indistinguishable from that in the
Rindt and Geary cases. Therefore, we concur with the agency
determination that the parcel without the house was excess and that the
expenses related to its sale were not reimbursable.
The version of paragraph 2-8.2a of the FTR, in effect during the
period in question, provided that the maximum weight allowance for
household goods authorized for employees with immediate families was
11,000 pounds. /1/ When the actual expense method of shipment is used,
paragrah 2-8.3b(5) prescribes the procedure to be followed in
determining the charges payable by the employee for the excess weight.
That paragraph states:
(5) Excess weight procedures. When the weight of an employee's
household goods exceeds the maximum weight limitation, the total
quantity may be shipped on a Government bill of lading, but the
employee shall reimburse the Government for the cost of
transportation and other charges applicable to the excess weight,
computed from the total charges according to the ratio of excess
weight to the total weight of the shipment.
In our decision Brown and Schmidt, B-199780, February 17, 1981,
reconsidered and affirmed in William A. Schmidt, Jr., B-199780, April 8,
1982, 61 Comp. Gen. 341, we stated that when the actual expense method
of shipment is used, the excess weight charge computation provided in
the above paragraph is predicated on the actual net excess weight as a
percentage of the total charges for the shipment. Charges that would be
assessed even if the shipment did not exceed the limitation are to be
included in the total charges. Citing to Ronald E. Adams, B-199545,
August 22, 1980, we further stated therein that the FTR's have the force
and effect of law and may not be waived or modified regardless of the
existence of any extenuating circumstances.
As the foregoing relates to Mr. Byrd's case, we find the agency's
computation method as well as Mr. Byrd's computation method to be in
error. The actual weight of Mr. Byrd's household goods which were
shipped totaled 12,980 pounds, or 1,980 pounds over the maximum
allowable. The total cost of that shipment, including storage and
delivery charges, was $3,331.21. This results in an excess weight
charge of $508.15, computed as follows:
'FORMULA OMITTED'
With regard to the agency statement that Mr. Byrd improperly claimed
a $25 credit from the payment he made for damage to his personal
property, we concur. The provisions of FTR paragraph 2-8.2e and IRM
1763, section 564, provide that the limitations on the Government's
liability for loss or damage are contained in the Military Personnel and
Civilian Employee's Claims Act of 1964 (31 U.S.C. Section 3721 (1982)).
In situations where the Government is not responsible for the loss and
damage, the employee is to seek redress from the one who allegedly
caused the loss. In this case, if fault exists, it would be the
carrier.
In summary, Mr. Byrd is not entitled to be reimbursed for the expense
of advertising the sale of his residence and is not entitled to be
reimbursed for the real estate expenses which relate to the sale of the
parcel of land which did not contain his residence. He is, however,
only to be charged $508.15 for the cost of excess weight and extra
delivery and may not be credited the $25 for his loss or damage to his
shipment. Since he has already paid $290.22, recovery of an additional
$217.93 is to be sought from him.
(1) That maximum weight limitation was increased to 18,000 pounds,
effective November 14, 1983. See General Services Administration
Bulletin FPMR A-40, Supplement 10, March 13, 1984.
B-214405, et al., 64 Comp. Gen. 54
Matter of: Environmental Aseptic Services Administration, November
7, 1984:
Protester, alleging a liquidated damages provision imposes a penalty,
must show that there is no possible relationship between the liquidated
damages rate and reasonably contemplated losses. A solicitation
provision shown to authorize deductions for an entire lot of custodial
services, based on the contractor's unsatisfactory performance of only a
portion of the tasks, imposes a penalty if it authorizes deductions
without regard to what proportion of the services renders the entire lot
unsuitable for the government's purpose.
Application of Criteria for Deductions
Environmental Aseptic Services Administration (EASA) protests that
five invitations for bids (IFBs), issued by the General Services
Administration (GSA) for custodial services, contain provisions imposing
allegedly unfair monetary deductions for defective performance. /1/
We deny the protests.
Each of the solicitations contains a table, captioned "Criteria for
Deductions," that lists broad categories of services covered by the
specifications, and states an amount to be deducted for each category of
services when the contractor unsatisfactorily performs a specified unit,
or lot, of those services. For example, one specification lists a $1.23
deduction for the unsatisfactory cleaning of a toilet fixture, and a
$3.60 deduction for the unsatisfactory cleaning of 1000 square feet of
workroom space. In addition, the solicitations contain the following
clause:
A. Toilet Cleaning. In instances where toilet rooms are not
satisfactorily cleaned or policed and serviced as determined by
the contracting officer's designated representative, deductions
shall be made for the entire room at the rate indicated in the
Criteria for Deductions . . . multiplied by the number of fixtures
in the toilet room (fixtures are water closets, urinals, and
washbasins).
B. Room Cleaning. In instances where room cleaning has not
been satisfactorily performed, or where any portion or portions of
work have been omitted or inadequately performed, a deduction for
the entire room area shall be made at the rate indicated in the
Criteria for Deductions. . . . (NOTE: In large open areas, the
building support columns or other obvious dividers should be
considered in determining the composition of an individual office
when deductions are being made.)
The protester's contention that the solicitations impose penalties
relates to the fact that the provisions apparently authorize deductions
for an entire room based on the contractor's unsatisfactory performance
of a portion of the room. (The protester does not challenge the actual
rates of deductions listed.)
The challenged provisions, along with the Criteria for Deductions,
establish a system of liquidated damages -- that is, fixed amounts the
government can recover from the contractor upon proof of violation of
the contract, and without proof of the damages actually sustained.
Environmental Aseptic Services Administration and Larson Building Care
Inc., 62 Comp. Gen. 219 (1983), 83-1 CPD Paragraph 194. The Federal
Acquisition Regulation (FAR), like the Federal Procurement Regulations
(FPR) that it superseded, requires that a rate of liquidated damages be
reasonable in light of the solicitation's requirements since liquidated
damages fixed without any reference to probable actual damages may be
held to be a penalty and, therefore, unenforceable. FAR, Section
12.202(b), 48 Fed. Reg. 42,102, 46,160 (1983) (to be codified at 48
C.F.R. Section 12.202(b) and basically restating FPR, 41 C.F.R. Section
1-1.315-2(c) 1983)).
We will review a protest that a solicitation's liquidated damages
provisions impose a penalty because any solicitation providing penalties
for inadequate performance, in addition to violating applicable
procurement regulations, can adversely affect competition and
unnecessarily raise the government's costs. Environmental Aseptic
Services Administration and Larson Building Care Inc., supra. The
spectre of incurring substantial penalties might discourage potential
bidders from competing, or cause others not to offer as low a price as
they might otherwise to willing to offer. In this respect, the
protester did not submit a bid under any of the solicitations (although
it is not clear that the alleged penalties, by themselves, prevented the
protester from doing so.).
Before we will rule that a liquidated damages provision imposes a
penalty, however, the protester must show that there is no possible
relationship between the liquidated damages rate and reasonably
contemplated losses. See International Business Investments, Inc.,
B-213723, June 26, 1984, 84-1 CPD Paragraph 668. The contracting agency
is most familiar with the circumstances of its procurements, and our
standard of review has been fashioned to take this into account; the
protester, therefore, bears the burden of showing that the liquidated
damages rate is arbitrary or otherwise unreasonable. Eldorado College,
B-213109, Feb. 27, 1984, 84-1 CPD Paragraph 238.
Here, the protester complains about two features of the liquidated
damages provisions, which the protester contends establish that the
deduction rates are unresonable. Those are, first, that there is no
variation between the amounts deductible for a marginal failure and a
complete failure within a particular lot -- in either case, a deduction
may be taken for the entire room -- and second, as a consequence, the
deduction procedure deprives the contractor of credit for partial or
substantial performance.
We do not believe that liquidated damages are invalid, per se, simply
because the rates of deductions fail to vary in proportion to the extent
of inadequate performance. Rather, we believe that a liquidated damages
scheme properly may result in a deduction for an entire lot of services
based on the contractor's failure to satisfactorily perform only a
portion of the component tasks, if the nature of the deficiencies
renders the lot unsuitable for the government's purposes. See
Environmental Aseptic Services Administration and Larson Building Care
Inc., supra; see also Orlando Williams d/b/a Orlando Williams
Janitorial Service, Armed Services Board of Contract Appeals (ASBCA)
Nos. 26,099, 26,872, Nov. 28, 1983, reprinted in 84-1 B.C.A. Paragraph
16,983 (CCH 1984).
The solicitation provision authorizing a deduction for an entire
toilet room where the rooms "are not satisfactorily cleaned or policed
and serviced" is not inconsistent with this standard. The provision
leaves a determination of what proportion of the tasks renders the
entire room unsatisfactory to the inspector's discretion, which
presumably will be exercised in good faith and in compliance with
procruement laws and regulations. If GSA administers the provision by
taking deductions without regard to whether the deficiencies are of such
a proportion as to render the toilet room unsuitable for the
government's purpose, that would involve a matter of contract
administration, see United Food Services, Inc., B-215538, Oct. 23, 1984,
84-2 CPD 450, which the contractor could challenge pursuant to the
contract's disputes clause, but not before this Office.
The room-cleaning provision goes further than the toilet-cleaning
one, however, stating that in instances "where room cleaning has not
been satisfactorily performed, or where any portion or portions of work
have been omitted or inadequately performed, a deduction for the entire
room shall be made. . . ." This could be interpreted an authorizing a
deduction for a large room containing, for example, 20 work stations
because of the contractor's failure to clean one station adequately.
Absent circumstances where the unsatisfactory cleaning of one station
would render the entire room unsuitable for the government's purpose,
the provision would impose damages without regard to the proportion of
satisfactory performance and deny the contractor credit for substantial
performance. We believe that such an application of the provision would
result in a penalty. In this respect, the ASBCA has held that such an
"all or none" inspection procedure, employed to inspect rooms serviced
under a custodial contract, imposes an unfair and unreasonable penalty.
See Orlando Williams d/b/a Orlando Williams Janitorial Service, supra;
Clarkies, Inc., ASBCA No. 22,784, Aug. 13, 1981, reprinted in 81-2
B.C.A. Paragraph 15,313 (CCH 1981). While the threat of a penalty might
serve as a spur to satisfactory performance, it is well-settled that
such a penalty is improper and unenforceable. Priebe & Sons v. United
States, 332 U.S. 407 (1947).
GSA insists that the intent of the room-cleaning provision is to
permit deductions for entire rooms (or areas) where inspection of the
rooms reveals performance defects that render the entire rooms
defective. We do not think that this intention is manifestly or
reasonably apparent from the language of the solicitation and, by
separate letter, we are recommending to the Administrator of General
Services that future solicitations be amended to reflect the agency's
intention clearly in order to prevent the adverse effect a penalty
provision can have on competition.
We do not believe, however, that the defect in the room-cleaning
provision is of sufficient magnitude to require correction of the
current solicitations, under each of which bids already have opened or a
contract awarded. Under such circumstances in the past, we have advised
the contracting agency that it should avoid taking unreasonable
deductions in administering the contract; the presence of penalty
provisions by themselves, however, did not pose an obstacle to a valid
award. See Environmental Aseptic Services Administration and Larson
Building Care Inc., supra; Linda Vista Industries, Inc., B-214447, et
al., Oct. 2, 1984, 84-2 CPD Paragraph 380. We believe the same result
should obtain here, especially since the record shows that GSA obtained
adequate competition under each solicitation. See Linda Vista
Industries, Inc., supra.
We therefore deny the protest, but are recommending revision of
future solicitations.
(1) The solicitation numbers and our respective docket numbers are
listed below:
.................................................. GAO Docket No.
GS-07B-21621...................................... B-214405
GS-07B-21636...................................... B-214573
QPR-9PPB-84-01278................................. B-214575
GS-07B-21624...................................... B-214606
GS-04B-84622..................................... B-214790
B-216396.2, 64 Comp. Gen 48
Matter of: Keco Industries, Inc., November 2, 1984:
In a situation where a bidder violates an invitation for bids' level
pricing provision, the determinative issue as to the responsiveness of
the bid is whether or not this deviation worked to the prejudice of
other bidders. Therefore, an unlevel low bid will not be found to be
nonresponsive where it cannot be shown that the second low bidder
conceivably could have become low if it had been permitted to unlevel
its bid in the same manner as did the offending bidder. B-206127.2,
Oct. 8, 1982; 60 Comp. Gen. 202; B-195520.2, Jan. 7, 1980; 54 Comp.
Gen. 967; and 54 Comp. Gen 476, are distinguished.
Keco Industries, Inc., the second low bidder, has protested the award
of a contract for air conditioners to ATACS Corporation under invitation
for bids (IFB) No. DAA-J10-84-B-A182, issued by the Department of the
Army Troop Support Command. Keco contends that ATACS' apparent low bid
was nonresponsive due to a failure to bid certain preproduction units at
the same price bid for the base quantity units, contrary to the terms of
the solicitation, and therefore that the bid should have been rejected.
The protest was initially filed with this Office on September 13,
1984. By letter of October 4, Keco withdrew the protest. Shortly
thereafter, Keco filed a motion for a preliminary injunction before the
Federal District Court for the Eastern District of Virginia (Civil
Action No. 84-1023-A) which, by order of October 12, granted ATACS'
motion to intervene in the matter, denied Keco's motion for a
preliminary injunction, and requested an advisory opinion from this
Office.
We find Keco's position to be without legal merit.
The IFB was issued on July 13, 1984, as a 2-year solicitation for the
procurement of a total of 4,086 air conditioners. The solicitation was
structured so that the first-year base requirement was for 583
production units (item 0001 AA) and 2 pre-production units (item
0001AB), with an option for the government to purchase an additional 585
units (item 0002). Under the first-year requirement, bidders were also
to price various related technical manuals and test and validation
reports (items A001 through A011). The second-year base requirement was
for 1,458 production units (item 0003 AA) with an option to purchase an
additional 1,458 units (item 0004). Bids were to be submitted on a unit
price basis.
Under the terms of the solicitation, bidders were required to submit
the same unit prices for the base quantities for the 2 years, that is,
to level price those units, but could submit varying unit prices for the
option quantities for the 2 years. By a written clarification message
of July 26, which was never formally incorporated into the solicitation
by amendment, the contracting officer cautioned bidders that a failure
to level price the preproduction units would render a bid nonresponsive.
The solicitation also provided that bids were to be evaluated for
purposes of award by adding the total price for all option quantities to
the total price for the base quantities.
Bids were opened on August 22. ATACS' bid was low, with Keco's
second low, as follows: 7 TABLE OMMITTED
From the above, it can be seen that ATACS failed to level price item
0001 AB, the preproduction units. The Army, however, concluded that
this failure did not make the firm's bid nonresponsive, and awarded
ATACS the contract on September 11; the Army then exercised the
first-year option on September 22.
Keco urges that it was prejudiced by the Army's acceptance of ATAC's
allegedly nonresponsive bid. In this regard, the firm asserts that it
was the low, responsive bidder for the first-year requirement, although
admittedly not low for the entire contract period. Keco believes that
had it been permitted to bid in the same manner as ATACS, that is, by
submitting an unlevel bid, it might have been able to displace ATACS as
the low bidder. We do not agree.
In cases dealing with a bidder's failure to level price /1/ its bid,
the determinative issue is whether or not this deviation worked to the
prejudice of other bidders for the award. ABL General Systems
Corporation, 54 Comp. Gen. 476 (1974), 74-2 CPD Paragraph 318. We held
in ABL that a submitted bid was nonresponsive where it contained a unit
price for a base quantity and a higher unit price for an unevaluated
option quanity in violation of an IFB provision that the option unit
price was not to exceed the unit price for the base quantity. We found
this deviation to be prejudicial because, although ABL was the low
bidder on the base quantity, if the second low bidder had also been able
to unlevel its bid by increasing the unit price for the option quantity,
then the second low bidder conceivably could have reduced its unit price
bid for the base quantity with the dollar reduction being added to the
unevaluated option price. Since the IFB provided that evaluation was
only to be made on the base quantity price, the second low bidder, whose
bid price already was close to ABL's, could then have become the low
bidder. Id. at 479.
In Keco Industries, Inc., 54 Comp. Gen. 967 (1975), 75-1 CPD
Paragraph 301, Keco's multiyear bid deviated from the requirement that
like items be priced the same for each program year, because Keco had
submitted a higher unit price for the first-year requirement than it did
for the second and third-year requirements that it had included certain
nonrecurring costs in the first-year unit price. The second low bidder
protested that Keco's bid was nonresponsive because Keco had filed to
level price the first-year quantity. However, we noted that Keco's bid
was significantly low on all alternatives: the first program year
(including the nonrecurring costs), the second program year, the third
program year, and the aggregate amount. We saw no prejudice occasioned
by Keco's failure to level price the first-year quantity because the
second low bidder could not have become low if it had been permitted to
bid in a like manner. Id. at 970.
However, in Keco Industries, Inc., B-195520.2, Jan. 7, 1980, 80-1 CPD
Paragraph 17, we held that the agency's rejection of the firm's bid as
nonresponsive was proper where Keco had telegraphically reduced its unit
prices for particular first-year multiyear requirements prior to bid
opening, but had left the second-year unit prices for the same items
unchanged, thereby violating the IFB provision that unit prices for the
same items had to be identical for the 2 program years. We found the
possibility of prejudice to other bidders in this case because of the
closeness of the bidding -- Keco's evaluated bid, considering only the
items that had been reduced in the first-year, was 5 percent lower than
the awardee's bid on the first year, 2 percent higher on the second
year, and less than 2 percent lower in the aggregate. For the other
items, Keco was 6 percent lower on the first year, 1 percent lower on
the second year, and 4 percent lower overall. We concluded that Keco's
unleveled bid was nonresponsive and therefore properly rejected.
We held in Sentinel Electronics, Inc., et al., 60 Comp. Gen. 202
(1981), 81-1 CPD Paragraph 52, that a bid was properly rejected where,
although the bidder literally complied with the IFB's level option
pricing provision, a lump sum price reduction offered for the base
quantity had the potential for prejudice because it effectively reduced
the protester's per unit cost for the base quantity substantially below
that for the unevaluated option quantity, thereby circumventing the
level pricing requirement. We noted the possibility that other bidders
effectively could have reduced their base quantity unit prices below
that of the protester if they had been able to offer the same lump sum
price reduction as the rprtester did. Therefore, we concluded that the
protester's bid was properly rejected as nonresponsive, even though it
was apparent that the protester had not meant to violate the level
option pricing provision.
In Numax Electronics Inc., B-206127.2, Oct. 8, 1982, 82-2 CPD
Paragraph 317, a situation similar to that in ABL, supra, we held that
Numax's bid was properly rejected as nonresponsive where the firm had
violated the level option pricing provision by offering the same unit
price for the option quantity as it did for the base quantity only if
the agency exercised the entire option; Numax had increased the per
unit option price for progressively smaller increments of the option
quantity. We emphasized that the determinative issue was not that Numax
had violated the level option pricing provision, but whether this
deviation had prejudiced the other bidders. We concluded that there was
indeed the possibility of prejudice because, although Numax's bid was
low in the aggregate, it was conceivable that the second low bidder
could have underbid Numax on the base quantity with the dollar reduction
being added to its option price if it had been allowed to violate the
level option pricing provision as well. Since the IFB provided that
evaluation was to be made on the price of the base quantity only, the
second low bidder thus could have become apparent low bidder.
In the present matter, we find essential differences in the
structuring of the IFB from the structuring of the solicitations in
these prior cases. Significantly, there was no level option pricing
provision included in the IFB. Clause H3(b.) provided that:
* * * Varying prices may be offered for option quantities
depending on the quantities actually ordered and the date or dates
when ordered.
Clause H5(6) provided that:
The unit price of each item in the multiyear requirements shall
be the same for all program year included therein.
Therefore, bidders had to offer the same unit price for items 0001 AA
and 0003 AA, the base quantities for the 2 years, but could offer
varying unit prices for items 0002 and 0004, the option quantities.
ATACS' bid for the above items was properly made, the firm bidding a
unit price of $4,450 for the 2-year base quantities and $4,150 for the
2-year option quantities. The only issue, then, is whether ATACS'
failure to level price the preproduction units in the first year is
analagous to those cases where a true level option pricing provision was
violated to the prejudice of other bidders.
As indicated previously, the contracting officer informed bidders by
means of a July 26 clarification message that clause H5(6) required that
the unit price for the preproduction units had to be the same as that
for each item in the multiyear requirements, and that a failure to level
price the preproduction units would render the bid nonresponsive.
ATACS alleges that it never received this message, and correctly
observes that the message was never incorporated into the solicitation
by means of a formal amendment. Nevertheless, we will analyze the bids
to see whether or not this unleveling of ATACS' price for the
preproduction units may have worked to the prejudice of other bidders.
Our rationale is that, irrespective of the July 26 message, clause H5(6)
seemingly indicates that the two preproduction units, as they are part
of the base quantity, are to be priced the same, the interpretation
reached by the contracting officer.
A key point here is that, unlike the situation in previous cases such
as ABL, Sentinal Electronics, and Numax, supra, option prices submitted
under this solicitation were evaluated for purposes of award. Clause
M5(a.) specifically provided that:
Bids and proposals will be evaluated for purposes of award by
adding the total price for all option quantities to the total
price for the basic quantity. Evaluation of options will not
obligate the Government to exercise the option or options.
Therefore, under the evaluation scheme, award would only be made to
that bidder whose total price for the multiyear requirements, including
the option quantities, was low.
We fail to understand Keco's allegation that the firm was low for the
first year. It is true that Keco's bid was low in the first year as to
the combined prices for the base quantity, the preproduction units, and
the technical materials, /2/ but that fact is irrelevant because the
firm's price for the option quantity was also evaluated. /3/
Consequently, Keco's actual total bid for the first-year requirement,
which must include the option quantity prices, was $5,272,477 as opposed
to ATACS' bid of $5,211,600, a difference of $60,877. For the second
year, again including both the base and option quantity prices, Keco's
total bid was $13,095,756 against $12,538,800 for ATACS, a difference of
$556,956. In the aggregate, Keco's total bid for the 2 program years
was $18,368,233 versus $17,750,400 for ATACS, a difference of $617,833
in ATACS' favor.
Keco argues by way of affidavit from its president that the firm
would have increased its unit prices for the first-year requirement had
it been able to submit an unlevel bid. Keco contends that this
unleveling would have resulted in an increase of payments by the
government during the initial stage of the procurement, thereby
increasing the firm's "cash flow" so as to enable it to reduce its unit
prices for the second year. Accordingly, Keco believes that this manner
of bidding would have enabled it to bid a lower aggregate price than
ATACS. We see no merit in the argument.
We believe that Keco's statements as to how it would have structured
its bid had it been allowed to unlevel its unit prices are purely
speculative, and self-serving. More importantly, the determinative
issue in this type of case is, as we have indicated, whether the other
bidders could have lowered their bids below that of the offending bidder
if they had been permitted to unlevel their prices in the same manner.
See Keco Industries, Inc., 54 Comp. Gen., supra, at 970. The only
unleveling done by ATACS was to price its preproduction units at $18,000
each. Thus, under the standard to determine prejudice, Keco would only
be found to be harmed by ATACS' unleveling if Keco possibly could have
become low by bidding "in the same manner," that is, by also unleveling
its price for the preproduction units.
We fail to see the possibility of prejudice to Keco occasioned by
ATACS' limited deviation from the level pricing requirement. The effect
of ATACS' unleveling of its price for the preproduction units only
increased its bid for that item by $27,100, which is a de minimis amount
given the $617,833 difference between the firms' total bids for the
multiyear requirements. In our view, it is inconceivable that Keco
could have overcome this difference if it had been allowed to unlevel
its price for the preproduction units as well, and we note that the firm
does not even attempt to suggest that it could have done so.
Accordingly, since we fail to find any possible prejudice to Keco, we
believe the Army acted properly in accepting ATACS' low bid and in
awarding the firm the contract.
(1) The purpose of a level pricing provision is to prevent bidders
from lowering their prices in evaluated portions of the bid and
inflating their prices in unevaluated portions to the government's
detriment.
(2) For these 3 items Keco's bid was $2,645,242 versus ATACS' bid of
$2,783,850 for the same items.
(3) We note that evaluated options are included in a solicitation
with the expectation that they will be exercised. Here, the first-year
option was in fact exercised shortly after award.
B-213530, 64 Comp. Gen. 45
Matter of: Recording of Obligations for Employee Transfer Costs,
November 2, 1984:
Reimbursable expenses of an employee transferred in the interest of
the Government must be charged against the appropriation current when
valid travel orders are issued. B-122358, August 4, 1976 and 35 Comp.
Gen. 183 (1955) and other cases inconsistent with this decision are
overruled.
An authorized official of the Department of Transportation requests
that we reconsider our precedents holding that reimbursable expenses of
employees transferred in the interest of the Government must be
obligated against the appropriation current when the employee incurs the
expense. The official asks that the rule be changed so that the
obligation may be recorded against the appropriation current when the
employee is ordered to make the move. As will be explained below, we
conclude that these expenses should be recorded against the
appropriation current when valid travel orders are issued.
Federal agencies, such as the Federal Aviation Administration (FAA)
of the Department of Transportation, often must transfer employees for
the benefit of the Government. Generally, the transferred employees are
entitled to receive reimbursement of their travel and transportation
expenses as well as relocation expenses. See 5 U.S.C. Sections 5724 and
5724a. Often, employees do not incur all reimbursable transfer expenses
in the fiscal year in which they are transferred. For example,
employees have up to 3 years to sell their residence at the duty station
from which transferred and still be entitled to be reimbursed residence
transaction expenses of up to $15,000. See Federal Travel Regulations,
para. 2-6.1e (Supp. 4, August 23, 1982), incorp. by ref., 41 C.F.R.
Section 101-7.003.
The uncertainty of when a transferred employee will incur a
reimbursable expense creates problems for the employing agency. The
agency must set aside sufficient funds in a fiscal year to reimburse
employees for the maximum relocation expenses they may incur in that
year. This is done by tentatively recording an obligation against the
current fiscal year funds. That is, for each transferred employee, an
agency reserves sufficient funds to reimburse the employee for the
maximum estimated expenses of relocating. By the end of the fiscal
year, the agency adjusts the amounts tentatively recorded as obligations
so as to reflect the actual expenses incurred by the transferred
employee during that fiscal year. The problem is that the amount of
tentatively obligated funds in excess of the expenses actually incurred
must be deobligated and is lost to the agency, since the fiscal year is
over and these funds may not be carried over into the next fiscal year.
For agencies that transfer many employees, the amount of funds that may
be lost in this way can be substantial.
Furthermore, with the start of the new fiscal year, the agency must
again tentatively obligate sufficient funds to reimburse the transferred
employees for the potential maximum relocation expenses they may incur
in the new fiscal year. Thus, for example, upon receipt of its funds
for fiscal year 1982, the Southwest Region of the FAA tentatively
obligated $546,500 for reimbursement of relocation expenses authorized
but not incurred prior to fiscal year 1982.
The present system, as explained above, is set out in para. 25.1 of
Office of Management and Budget (OMB) Circular No. A-34, as revised.
When the FAA requested that OMB revise the Circular, the OMB
representative explained that the Circular was based on GAO decisions
and that any revision would require GAO to reconsider its previous
rulings. The FAA therefore has made this request that we overrule our
precedent and rule "that costs for PCS (permanent change of station)
moves be obligated against the specific appropriation current at the
time the employee is ordered to move and paid from that appropriation
regardless of when the individual events of the move occur."
The OMB Circular No. A-34 accurately reflects the rulings we have
made in this area. We have held that only when a transferred employee
actually incurs expenses is there a binding obligation. B-122358,
August 4, 1976; 28 Comp. Gen. 337, 338 (1948). The holding was based
on the rule that the issuance of travel orders pursuant to an employee's
transfer does not constitute a contractual obligation but is merely
authorization for the employee to incur the expense. We therefore
reasoned that until the employee incurred the expense the Government was
not obligated to reimburse. 35 Comp. Gen. 183, 185 (1955).
Consequently, we determined that to permit the charging of travel and
transportation expenses to the appropriation current at the time the
relocation was ordered would violate the language of 31 U.S.C. Section
1502a, "the so-called bona fide need rule," which states that an
appropriation limited in time for obligation is available only to pay
"expenses properly incurred during the period of availability or to
complete contracts properly made within that period of availability."
See 27 Comp. Gen. 25, 27 (1947). See also 31 Comp. Gen. 471, 472
(1952).
We have carefully reviewed our earlier cases and have concluded that
they were wrong. It is now our view that an agency should charge the
full amount of the reimbursable expenses against the appropriation
current when the employee is issued travel orders. As explained in more
detail below, this position results from our recognition that the
Government has incurred an obligation to pay relocation expenses at the
time it transfers an employee.
The reasoning in our earlier decisions, that there was no obligation
until the employee actually incurred reimbursable expenses, overlooked
the fact that the relocation statutes and the implementing regulations
create an obligation on the part of the Government to reimburse, within
limits, whatever expenses the transferred employee incurs. For example,
we have ruled that certain relocation benefits, such as reimbursement of
allowable, real estate expenses, are mandatory in nature and that an
agency's attempt to deny approval of these expenses is ineffective. See
55 Comp. Gen. 613 (1976); B-161583, June 15, 1967. Thus, the
Government's obligation is established when the employee is transferred.
In this regard, upon the transfer of an employee in the interest of the
Government, we have allowed reimbursement of residence transaction
expenses even in the absence of the agency's prior authorization for the
employee to incur these expenses. 55 Comp. Gen. 613; B-166681, July 9,
1969.
We recognize that until an employee actually incurs the relocation
expenses the Government is not required to reimburse them. This,
however, does not change our conclusion that the obligation to reimburse
these expenses arises at the time the employee is ordered to relocate.
In our opinion, regardless of when the expenses are actually incurred,
the transfer of the employee is a bona fide need of the year in which he
is ordered to transfer and the expenses must be charged against funds
current in that year.
What constitutes a bona fide need of a particular fiscal year depends
largely on the facts and circumstances of a particular case and there is
no general rule applicable to all situations. 44 Comp. Gen. 395, 401
(1965). In this case it is clear that the need for the relocation of
the employee and the resulting benefits and entitlements arises when the
employee is ordered to be transferred, even though for a number of
reasons beyond the agency's and employee's control certain relocation
expenses may not be incurred until a fiscal year subsequent to the
transfer. Accordingly, we conclude that there is a bona fide need for
the relocation expenses in the fiscal year in which the employee is
transferred.
We must address two other issues. The first is the statutory
requirement that an amount may only be recorded as an obligation if
there is documentary evidence of the expenses of travel under law. 31
U.S.C. Section 1501(a)(7). In view of the mandatory nature of
relocation expenses, we deem this statutory test to be met upon the
issuance of valid travel orders to the transferred employee.
The second matter concerns the amount to be obligated. This presents
no problem since this amount would not differ from the amount that
agencies have been recording tentatively as obligations under the
existing system, the estimated total costs of the relocation. See 35
Comp. Gen. at 185; OMB Circular No. A-34, para. 25.1. This method of
obligation means that the amount recorded as obligated may not be the
exact amount that is eventually spent; however, this is not unusual.
Of course, agencies must obligate sufficient funds and, therefore,
agencies should realistically estimate the probable reimbursement that
may accrue to the transferred employee. /1/
In overruling our previous decisions in this area, of which the
leading ones are 35 Comp. Gen. 183 and B-122358, August 4, 1976, we have
considered the possibility that the current procedure may result in
agencies inadvertently violating the so-called Antideficiency Act. 31
U.S.C. Section 1341(a)(1)(B). Under the law an officer or employee of
the United States may not commit the United States to make any payment
in advance of an appropriation. The potential for violation exists
because upon the transfer of the employee the agency commits itself to
pay certain expenses, such as residence transaction expenses. These
expenses, however, may not be paid for 2 or 3 years out of an
appropriation not in existence when the agency committed itself to pay.
This is, in effect, committing the Government to pay for an obligation
or liability out of a future appropriation. Cf. 42 Comp. Gen. 272, 277
(1962). Indeed, it is theoretically conceivable that there will be no
funds available when the expense is incurred, and yet we have deemed the
reimbursement of the expense mandatory. Thus, by overruling our
precedents and holding that the obligation is to be recorded against the
appropriation current when the travel orders are issued, we eliminate
the possibility of an Antideficiency Act violation.
Accordingly, we rule that for all travel and transportation expenses
of a transferred employee, an agency should rec ord the obligation
against the appropriation current when the employee is issued travel
orders. To the extent that prior cases are inconsistent with this
ruling, those cases are overruled.
(1) To ascertain these amounts, agencies should rely on past
experience and refer to FTR, ch. 2 (Supp. 1, September 28, 1981, as
amended).
B-216006, 64 Comp. Gen. 38
Matter of: Approval of Elderly and Handicapped Housing Loans,
October 31, 1984:
GAO investigation raised questions about the legality of seven loan
applications conditionally or finally approved by the Department of
Housing and Urban Development under the Housing for the Elderly and
Handicapped program authorized by 12 U.S.C. 1701q. Prohibited identity
of interest was involved in six of the seven projects; a serious
question about the financial responsibility of the seventh borrower was
also raised. HUD certifying officials are advised that no exceptions
will be taken by GAO to past or future disbursements under these loans
if HUD takes the actions it proposes to cure the conflict of interest
deficiencies and to verify financial responsiblity of the seventh
borrower before final loan approval.
By letter dated July 31, 1984, the Director, Office of Finance and
Accounting, U.S. Department of Housing and Urban Development, requested
a decision as to the legality of loans under the Housing for the Elderly
and Handicapped program authorized by 12 U.S.C. Section 1701q for seven
projects which had previously been approved by HUD. Loan disbursements
have been made on only one of the seven projects.
The questions as to the legality of the loans which are the subject
of the request for a decision arose as a result of written Informal
Inquiries issued by General Accounting Office audit staff to the HUD
Chicago Regional Office. The Informal Inquiries raised
identiy-of-interest questions about six of the seven projects and
questioned whether HUD financial responsibility regulations had been
followed in conditionally approving a loan to a sponsoring organization
on the seventh project. Because the certification of any improper
payments under the loans in question would result in personal liability
of HUD certifying officials, our decision was requested as to the
propriety of proceeding with each of the projects and as to the legality
of disbursements already made on one project conerning which
disbursements have been made.
As discussed below, we are satisfied with the actions HUD has
proposed to cure deficiencies in the loans about which
identity-of-interest questions were raised and do not intend to take
exception to past or future disbursements under those loans, assuming
that HUD carries through on its proposed actions.
With respect to compliance with financial responsibility regulations,
the ultimate authority to make a determination of financial
responsibility rests with HUD headquarters officials. Since this
ordinarily requires the exercise of judgment, GAO will not substitute
its judgment for that of agency officials. HUD should, however, verify
the financial responsibility of the applicant about which serious
questions were raised before the loan is finally approved.
Under the Housing for the Elderly and Handicapped program, commonly
referred to as the section 202 program, nonprofit sponsors may arrange
with corporate, nonprofit borrowers to secure direct loans from HUD for
the construction and management of housing projects for the elderly and
handicapped. Contracts for construction of the projects financed by the
HUD loans are entered into by the borrower with HUD-approved
construction contractors. HUD-approved contracts may also be entered
into with management companies for management of the projects, following
their construction.
12 U.S.C. Section 1701g(d)(2) requires that corporations eligible to
receive loans must be nonprofit and specifies that no part of the
earnings of the corporation may inure "to the benefit of any member,
founder, contributor, or individual."
24 C.F.R. Section 885.5 provides as follows with respect to the
financial interests of borrower corporations:
No part of the net earnings of the Borrower may inure to the
benefit of any private shareholder, contributor or individual and
the Borrower may not be controlled by or under the direction of
persons or firms seeking to derive profit or gain therefrom.
A virtually identical financial interest restriction is provided
under the definition of "sponsor" in the same section.
Finally, HUD's Building Loan Agreement provides:
No officer, director, trustee, member, stockholder nor
authorized representative of the Mortgagor shall have any
financial interest in any contractual arrangement entered into by
the mortgagor in connection with rendition of services, the
provision of goods or supplies, management of the project,
procurement of furnishings and equipment, construction of the
project, procurement of the site or other matters whatsoever.
Noncompliance with this provision entitles HUD to require corrective
action or to take more sever actions, including mortgage foreclosure.
The various projects which were the subject of GAO Informal Inquiries
are discussed below.
By Informal Inquiry dated June 19, 1984, the GAO Evaluator in Charge
of an audit investigation of the section 202 selection process stated as
follows:
It appears that there may be a conflict of interest under HUD
regulations 24 C.F.R. 885, with respect to payments made under
this loan agreement, in that the application file shows that the
sponsor, Salem Lutheran Foundation, the borrower, Somerset Lane,
Inc., the contractor, Northland Park Homes, Inc., and the proposed
management company, Deerwood Development are all affiliated with
one another, all having been created and apparently controlled by
the same individual. See attached documents from Somerset Lane,
Inc., project file.
At the time this inquiry was issued, approximately $638,372.45, or 60
percent, of the approved loan amount had been approved for disbursement.
A memorandum on the Somerset Lane project from HUD's Assistant General
Counsel, Assisted Housing Division, dated July 13, 1984, conceded an
apparent identify of interest between Homewood Corporation, the parent
company of the construction contractor, Northland Park Homes, Inc., and
Somerset Lane, Inc., the borrower. The memorandum concluded that an
identity of interest between borrower and construction contractor, if
documented, would not void the contract between those parties, but would
render contract amounts for contractor overhead and fee unallowable.
Since contract amounts for overhead and fee were stated to be
substantially less than the 10 percent of loan proceeds customarily
withheld pending completion of construction projects, and since the
project was substantially complete, the memorandum authorized the
continuance of progress payments under the loan, less the customary 10
percent holdback, pending final resolution of the identity of interest
issue. Further disbursements were halted, however, pending issuance of
this decision in response to the request of the Director, Office of
Finance and Accounting.
In response to subsequent representations that the Somerset Lane
project was more than 90 percent complete and that the delay in final
completion caused by the withholding of loan disbursements was
inconveniencing prospective tenants of the project, by letter dated
September 27, 1984, the Acting General Counsel of GAO assured HUD that
loan disbursements necessary to complete the project would not be
challenged by GAO. The letter stated that further disbursements should
"cover only the necessary costs of the contractor and * * * not include
any direct or indirect profits." We assume that disbursements sufficient
to allow project completion have since been authorized and/or made.
Information extracted from HUD files, including data included on
application forms submitted by the sponsor/borrower in this case,
demonstrates that there was, in fact, an impermissible identity of
interest between the sponsor/borrower and the construction contactor.
An identity of interest also existed between the sponsor/borrower and
the proposed management company.
In this regard, the Articles of Incorporation for Somerset Lane,
Inc., the borrower in this case, list as the sole corporate member the
Salem Lutheran Foundation, a charitable foundation trust which is the
sponsor in this case. The Salem Lutheran Foundation Trust Agreement
reflects that the Foundation was established by George A. Skestos and is
administered by Mr. Skestos and Kathryn M. Skestos as co-trustees. Mr.
Skestos is also listed as the President and Treasurer of Homewood
Corporation/Northland Park Homes, Inc., the construction contractor in
this case, and of Deerwood Management Company, the proposed management
company. He also has a substantial financial interest in these firms.
Because both Homewood Corporation/Northland Park Homes, Inc., and
Deerwood Management Company are for profit companies in which Mr.
Skestos has a financial interest, his interests in Salem Lutheran
Foundation, and in Somerset Lane Inc., at the time of loan approval were
in violation of 24 C.F.R. Section 885.5 and of the terms and conditions
of Somerset Lane's loan agreement with HUD, both quoted above, which
preclude any financial interest in a section 202 project on the part of
sponsor/borrowers.
The regulatory prohibition against an identify of interest between
sponsor/borrower and construction contractor or management contractor
was recognized by HUD's Assistant Secretary for Housing in a memorandum
dated June 14, 1984. That memorandum concluded with respect to three
other borrowers, discussed further below, controlled by Salem Lutheran
Foundation that "Section 202 regulations prohibit control of the sponsor
or borrower by any individual or entity seeking to derive profit from
the project."
We agree with HUD's Assistant General Counsel, Assisted Housing
Division, however, that in view of the advanced stage of contract
completion, the identify of interest in the Somerset Lane case does not
require termination of the construction contract. As mentioned above,
the loan agreement precludes any connection between the borrower and
profit making contractors connected with the project. The agreement
also provides for HUD to direct correction of any violations of the
agreement's terms and conditions. Audit and disallowance of contract
vouchers representing contractor overhead and profit will eliminate any
advantage gained by the identity of interest between contractor and
borrower while still carrying out the purpose of the section 202 program
on this project.
Our letter of September 22 suggested that care should be taken to
"assure that any subcontractor affiliated with the contractor or any
company with which the principal of the firm is associated will not
receive profits from the project." To the extent that post contract
audit determines that the 10 percent withheld from loan disbrusements
pending completion of the project is insufficient to recoup such amount,
HUD should take steps to recover them from the contractor.
Finally, HUD should require that a management company unaffiliated
with the sponsor/borrower be selected to manage the Somerset Lane
project.
Following receipt of GAO's informal inquiry on these two projects,
for which no loan funds had been disbursed, HUD agreed that an identity
of interest similar to that described above concerning the Somerset Lane
project existed between the sponsor/borrower and the proposed
construction and management contractors. By letter dated June 28, 1984,
HUD informed Salem Lutheran Foundation, the sponsor of these two
projects, that construction and management contractors unaffiliated with
Mr. Skestos must be selected and approved prior to issuance of firm loan
commitments by HUD. Additionally, in July 1984, Mr. Skestos
relinquished his trusteeship of Salem Luthern Foundation. Kathryn M.
Skestos apparently has also relinquished her trusteeship.
In our opinion, HUD's action in these cases was correct. So long as
contractors selected to replace Homewood Corporation/Northland Park
Homes and Deerwood Management Company are not affiliated with the
sponsor/borrower, such action will not be challenged by our Office.
Following receipt of GAO's Informal Inquiry on this project, it was
canceled by HUD because, in addition to an identity of interest between
the sponsor/borrower and the proposed construction and management
contractors, the land on which the project was to be built had been sold
to the borrower by Homewood Corporation.
GAO's Informal Inquiry on these two projects noted an affiliation
between the sponsor, Salem Lutheran Foundation, the two borrowers, and
Deerwood Management Company, the proposed management contractor. HUD's
request for our decision states that "the funds on these projects will
not be obligated until GAO inquiry is cleared." Although Mr. Skestos has
relinquished his trusteeship of Salem Lutheran Foundation, he apparently
is still President of Deerwood Management Company. Also, he was still
affiliated with the Foundation at the time the loan applications for
these projects were submitted. Accordingly, we conclude that HUD should
assure that Deerwood Management Company is not selected to manage these
projects in the event they go forward.
GAO's Informal Inquiry on this project, dated June 25, 1984, stated
as follows:
We have reviewed the above mentioned application file. It
appears that the financial data supplied does not show an ability
to support or insure repayment of the loan to the United States
Government. The sponsor has a delinquent tax liability which has
not yet been resolved and also recent financial data supplied
shows a negative current ratio. This financial data appears to
indicate the sponsor does not have the ability to suppor the
project as required by 24 CFR 277.3 and 24 CFR 885.5.
On August 10, 1984, a conditional commitment for a loan of $2,901,600
was issued for this project. The commitment may be accepted within 120
days but is subject to a number of conditions, including a requirement
that the applicant "Provide current financial statements under the HUD
requirements reflecting working capital sufficient for minimum capital
investment on the borrower corporation."
HUD file material on this case reflects a heated disagreement between
HUD regional and headquarters personnel as to the financial
responsibility of this applicant. The concerns expressed by HUD
regional personnel, including the institution of real estate foreclosure
actions in the past, several recorded court actions concerning
indebtedness, and past tax delinquencies, raise serious question as to
the applicant's financial responsiblity. No answer to our inquiry has
been provided by HUD to date. The ultimate authority to select loan
applicants rests with HUD headquarters officials. Our Office will not
take exception to the certification of any payments under a properly
approved loan on the ground that the sponsor/borrower did not comply
with financial responsibility requirements unless HUD's approval action
is clearly unreasonable.
B-216149, 64 Comp. Gen.34
Matter of: Cultural Property Advisory Committee - Members' Travel
Expenses, October 30, 1984:
Members of the Cultural Property Advisory Committee may not be
reimbursed for actual subsistence expenses exceeding the maximum amount
of $75 per day, as limited by 5 U.S.C. 5702(c). The Federal Advisory
Committee Act, Public Law 92-463, incorporated by reference in the
Advisory Committee's enabling legislation, provides that advisory
committee members are to be paid the same travel expenses as authorized
under 5 U.S.C. 5703 for intermittent employees. Under 5 U.S.C. 5703 and
the Federal Travel Regulations, intermittent employees serving as
experts or consultants may not be reimbursed for actual subsistence
expenses exceeding the maximum rate, absent specific statutory
authorization for the payment of a higher rate. We find that no such
specific statutory authority is included in the Advisory Committee's
enabling legislation.
This decision concerns the payment of travel expenses to members of
the Cultural Property Advisory Committee (Advisory Committee),
established by the Convention on Cultural Property Implementation Act
(Implementation Act), Pub. L. No. 97-446, Title III, Section 306, 96
Stat. 2329, 2356 (1983), 19 U.S. Code 2605. The issue for our
determination is whether members of the Advisory Committee may be
reimbursed for actual subsistence expenses which exceed the maximum rate
of $75 per day, as limited by U.S.C. Section 5702(c) (1982). We hold
that the committee members may not be reimbursed for actual subsistence
expenses in excess of the maximum rate expressed in section 5702(c),
absent specific statutory authorization for the payment of a higher
rate. Section 306(c) of the Implementation Act does not provide such
specific authority.
Mr. Woodward Kingman, Associate Director for Management of the United
States Information Agency (USIA), requested our decision on this matter.
Under section 306(e) of the Implementation Act, the Director of USIA is
responsible for providing assistance and support services to the
Advisory Committee.
Section 306 of the Implementation Act established the Advisory
Committee, composed of professional and public members, to assist the
President in imposing import restrictions on cultural property and on
other matters concerning the Implementation of the Convention on
Cultural Property. In order to carry out its statutory
responsibilities, the Advisory Committee meets periodically in
Washington, D.C., and in other locations.
The Associate Director for Management of USIA asks whether Advisory
Committee members performing official travel may be reimbursed for
actual subsistence expenses in excess of the maximum daily rate of $75
stated in 5 U.S.C. Section 5702(c). While he recognizes the normal rule
that members of advisory committees traveling on Government business are
subject to the provisions of 5 U.S.C. Chapter 57, Subchapter I, the
Associate Director suggests that section 306(c) of the Implementation
Act creates an exception to those provisions. Section 306(c), discussed
below, provides that, "(t)he members of the Committee shall be
reimbursed for actual expenses incurred in the performance of duties for
the Committee."
Reading section 306 of the Implementation Act as a whole, we note
that, as pointed out by the Associate Director, section 306(c)
authorizes reimbursement for "actual expenses" incurred by Advisory
Committee members in the performance of their official duties. However,
section 306(h) of the Act further provides that, with certain exceptions
not applicable here, the Committee's operations shall be governed by the
Federal Advisory Committee Act, Pub. L. No. 92-463, 86 Stat. 770 (1972),
5 U.S.C. Appendix (1982). Section 7(d)(1)(B) of the Federal Advisory
Committee Act states that members of advisory committees may be allowed
travel expenses, including per diem in lieu of subsistence, as
authorized under 5 U.S.C. Section 5703 for persons employed
intermittently by the Federal Government. Section 5703, in turn,
provides that:
An employee serving intermittently in the Government service as
an expert or consultant and paid on a daily when-actually-employed
basis, or serving without pay or at $1 a year, may be allowed
travel or transportation expenses, under this subchapter, while
away from his home or regular place of business and at the place
of employment or service. (Italic supplied.)
As indicated by the underscored language in 5 U.S.C. Section 5703,
individuals eligible for travel and transportation expenses under that
section are to be reimbursed such expenses under Chapter 57, Subchapter
I of Title 5, United States Code, that is, on the same basis, and
subject to the same general limitations, as Government employees
traveling on official business. Section 5701(2) of the same subchapter,
as amended by the Travel Expense Amendments Act of 1975, Pub. L. No.
94-22, 89 Stat. 84 (1975), defines an "employee" for the purposes of
sections 5701 through 5709 as including "an individual employed
intermittently in the Government service as an expert or consultant and
paid on a daily when-actually-employed basis and an individual serving
without pay or at $1 a year." In the Committee report accompanying the
Travel Expense Amendments Act of 1975, the House Committee on Government
Operations explained that it expanded the definition of the term
"employee" to include intermittent employees so that all individuals
traveling on Government business would be paid subsistence allowances on
the same basis. H.R. Rep. No. 94-104, 94th Cong., 1st sess. 6, 8,
reprinted in 1975 U.S. Code Cong. & Ad. News 152, 157, 159.
Paragraph 1-1.2b of the Federal Travel Regulations, FPMR 101-7
(September 1981) (FTR), further specifies that:
The provisions of this chapter also apply to official travel of
individuals employed intermittently in the Government service as
consultants or experts and paid on a daily when-actually-employed
(WAE) basis and of individuals serving without pay or at $1 a
year. These individuals are not considered to have a "permanent
duty station" within the general meaning of that term; however,
they may be allowed travel or transportation expenses under this
chapter while traveling on official business for the Government
away from their homes or regular places of business and while at
places of Government employment or service. Maximum rates
prescribed herein are applicable unless a higher rate is
specifically authorized in an appropriation or other statute.
(Italic supplied.)
The maximum rate for actual subsistence expenses of official travel
currently is set at $75 per day by 5 U.S.C. Section 5702(c), which
authorizes reimbursement of such expenses in lieu of a per diem
allowance. See FTR para. 1-8.2.
Neither section 306(c) of the Implementation Act, nor any other
provision of that Act, expressly authorizes the payment of actual
subsistence expenses of travel at a rate higher than the maximum daily
rate prescribed in 5 U.S.C. Section 5702(c). Accordingly, in the
absence of specific statutory authorization for the payment of actual
subsistence expenses of travel at a higher rate, the Cultural Property
Advisory Committee members may not be reimbursed for those expenses
which exceed the maximum amount of $75 per day.
The Associate Director, however, suggests that section 306(c) of the
Implementation Act creates an exception to the normal travel expense
rules. He states that the specific statutory provision in section
306(c) prevails over the more general travel provisions incorporated by
reference in section 306(h). Accordingly, he contends that the general
limitations otherwise applicable to persons traveling on official
Government business would not apply to members of the Cultural Property
Advisory Committee; rather, the Advisory Committee members would be
entitled to reimbursement of their actual expenses so long as the
expenses are reasonable in amount and character and allocable to
official duties.
We do not agree with the Associate Director's contention. While
section 306(c) provides for the payment of "actual expenses" incurred by
Advisory Committee members, the term "actual expenses" is not defined in
the statute or in the legislative history of the Implementation Act.
The term "actual expenses" does not necessarily connote actual
subsistence expenses of travel, as is suggested by the Associate
Director, but may be construed broadly to include other types of
expenses incurred by an Advisory Committee member in the performance of
official duties. Thus, section 306(c) does not by its terms negate
applcation of the travel expense rules incorporated by reference in
section 306(h) of the Implementation Act.
Furthermore, we note that nothing in the legislative history of the
Implementation Act indicates that Congress intended to exempt the
members of this Advisory Committee from the statutory limitations on
travel expenses that apply to members of all other advisory committees.
In fact, the legislative history of the Implementation Act reveals that
Congress enacted section 306(h) of the Act in order to ensure that, "in
operation the Advisory Committee will conform to the strictures of the
Federal Advisory Committee Act * * *." S. Rep. No. 97-564, 97th Cong.,
2d sess. 30, reprinted in 1982 U.S. Code Cong. & Ad. News 4078, 4107.
As discussed above, one of the strictures contained in the Federal
Advisory Committee Act is that advisory committee members are to be paid
travel allowances on the basis provided in 5 U.S.C. Section 5703.
Finally, we note that our interpretation of sections 306(c) and
306(h) of the Implementation Act is supported by a long-standing
principle of statutory construction. That principle holds that general
and specific statutory provisions concerning the same subject matter
should be construed harmoniously, if such a construction is possible.
C. SANDS, SUTHERLAND STATUTORY CONSTRUCTION Section 51.05 (4th ed.
1972).
Accordingly, we conclude that section 306(c) of the Implementation
Act does not create an exception to section 306(h) of that Act, which
incorporates by reference the travel expense provisions of the Federal
Advisory Committee Act. Therefore, the members of the Cultural Property
Advisory Committee may not be reimbursed for actual subsistence expenses
exceeding the maximum daily rate of $75 set forth in 5 U.S.C. Section
5702(c).
B-215703, 64 Comp. Gen. 32
Matter of: Four Square Construction Company, October 30, 1984:
Since the government made payment by issuing a check within 30 days
after the contracting agency received a proper invoice, payment of
interest is not authorized under the Prompt Payment Act even though the
contractor did not receive the payment until a substitute check was
issued where the failure to receive the initial payment was outside the
control of the contracting agency.
By letter of June 28, 1984, an authorized certifying officer of the
Department of Agriculture, Office of Finance and Management, requested
our opinion as to the propriety of paying interest on an account due
Four Square Construction Company (Four Square) in the following
circumstances.
Four Square has requested payment of interest from November 7, 1983,
the date the contract was completed, through March 7, 1984, contending
that the late receipt of the payment was not its fault, but was the
fault of the federal payment system. The certifying officer reports
that payment was made by the Department of Agriculture on November 17,
1983, by issuance of a check in the full amount of Four Square's
invoice. However, Four Square notified the Forest Service on December
12, 1983, that the firm had not received payment. The Department of
Agriculture submitted a request for issuance of a substitute or
replacement check to the Kansas City Disbursing Center on December 13,
1983. On January 17, 1984, Four Square notified the Forest Service that
it still had not received payment. The Forest Service then submitted
another request to the Disbursing Center and the Treasury issued a
substitute check on March 2, 1984.
We find that Four Square is not entitled to interest.
The Prompt Payment Act, Pub. L. No. 97-177 (May 21, 1982), codified
at 31 U.S.C. Sections 3901-3906 (1982), requires every federal agency to
pay an interest penalty on amounts owed to contractors for the
acquisition of property or services when the agency fails to pay within
30 days from receipt of a proper invoice. However, the Prompt Payment
Act provides that "a payment (owed by the government) is deemed to be
made on the date a check for the payment is dated." 31 U.S.C. Section
3901(a)(5). Here, the government "paid" Four Square within the meaning
of the Prompt Payment Act when the original payment was issued. In this
case, payment was made within 4 days after the agency received a proper
invoice and, therefore, there was no government "failure to pay" within
the required time. Everything required within the meaning of the Prompt
Payment Act was done by the contracting agency in this case.
The Prompt Payment Act provides that "the head of an agency acquiring
goods or services from a business concern, who does not pay the concern
. . . by the required payment date, shall pay an interest penalty to the
concern on the amount of payment due" at the Contract Disputes Act rate.
31 U.S.C. Section 3902(a). The interest penalty is to be paid from
funds available to carry out the program "for which the penalty is
incurred." The Prompt Payment Act therefore is a waiver of sovereign
immunity and, like all waivers of sovereign immunity, must be narrowly
construed. See, e.g., Phillips v. United States, 346 F.2d 999 (2d Cir.
1965).
The legislative history of the Prompt Payment Act indicates that
Congress did not intend to impose the interest "penalty" when the late
payment was not caused by the agency's failure to make timely payment
certification. H.R. Rep. 461, 97th Cong., 2d Sess. The purpose of the
Prompt Payment Act was to "provide incentives for the Federal Government
to pay its bills on time by encouraging improvement of bill payment
procedures by charging a penalty against program operating budgets."
There is no indication that Congress intended to insure contractors
against all eventualities, especially where there is no fault on the
part of the contracting agency in effecting the original payment. We
find no such fault here. The fact that Four Square did not receive the
original payment was not the fault of the contracting agency. We do not
think the Prompt Payment Act contemplated the payment of interest where
the contractor's delay in receiving payment was outside the contracting
agency's control.
Although Four Square notified the Forest Service on December 12,
1983, that it had not received payment, payment as defined in the Prompt
Payment Act had been made by the government within the time limits
prescribed by the act. While there was some delay in issuing a
replacement check, the Prompt Payment Act makes no provision for payment
of interest on an unpaid debt for the time taken to issue a replacement
check. Further, payment of interest by the government on its unpaid
accounts may not be made except where it is stipulated by contract or is
provided by the laws of the United States. See Mathews Furniture
Company, B-195123, July 11, 1979, 79-2 C.P.D. Paragraph 131. No law,
including the Prompt Payment Act, requires intrest to be paid in the
circumstances present here. Therefore, the payment of interest cannot
be authorized.
13-215616, 64 Comp. Gen. 30
Matter of: Norma Depoyan - Reimbursement for costs of shipping
privately owned vehicle specially equipped for use by handicapped
employee, October 30, 1984:
Employee without use of her arms who shipped her specially equipped
automobile between duty stations within the continental United States
may be reimbursed for shipping costs. The agency found, pursuant to the
Rehabilitation Act of 1973, that employee was a qualified handicapped
employee, that reimbursement was cost beneficial, that it constituted a
reasonable accommodation to the employee, and that such reimbursement
did not impose undue hardship on the operation of the personnel
relocation program. Authorization under the Rehabilitation Act
satisfies the "except as specifically authorized" language in 5 U.S.C.
5727(a)(1982).
Mr. John E. Totter, Chief, National Office, Financial Operations
Branch of the Internal Revenue Service (IRS), requests an advance
decision on the claim of a handicapped employee for reimbursement of
costs she incurred in shipping her specially equipped automobile from
California to her new duty station in Washington, D.C. We find payment
is authorized by the Rehabilitation Act of 1973.
On December 15, 1983, Mrs. Norma Depoyan was transferred from a GS-9
position in Fresno, California, to Washington, D.C., to assume duty as a
GS-11 Program Analyst. The same day, she shipped her personally owned
car to Alexandria, Virginia, at a cost of $1,154.
Mrs. Depoyan has sever physical disabilities caused by polio, and
does not have use of her arms. Although her car is specially equipped
to permit her to drive without use of her arms, Mrs. Depoyan did not
drive, or have her car driven cross-country to Washington, D.C. for two
reasons. First, she was physically unable to drive the long distance,
particularly through winter weather. Secondly, it could be dangerous
for an inexperienced driver to operate her vehicle and she sought to
avoid injury to the car, herself and a driver.
Mrs. Depoyan's doctor agreed that Mrs. Depoyan was physically unable
to drive to Washington, D.C. and stated that it would be "mandatory" for
her to travel by plane and to ship her car. The IRS authorized her
travel by airplane from California to Washington, D.C., and now requests
an advance decision regarding her request for reimbursement for shipment
of her car.
The agency recognizes that normally, consistent with 5 U.S.C. Section
5727(a), there is no authority to reimburse employees for shipment of a
privately owned vehicle between duty posts within the continental United
States. /1/ However, IRS recommends that payment in this case be
authorized pursuant to the Rehabilitation Act of 1973.
The agency argues that based upon her doctor's advice, Mrs. Depoyan
had no choice but to ship her automobile. The agency also notes that it
envisions few cases which would meet the same criteria as Mrs. Depoyan.
It includes a cost analysis showing that the salary, travel and per
diem of Mrs. Depoyan for the 8-day drive would have cost $1,461. Had
she been able to withstand the long drive, and had she been able to
locate a capable driver, the agency would have been authorized to pay
travel and per diem for the driver pursuant to Alex Zayoro, 59 Comp.
Gen. 461 (1980). This would have added $705 to the cost, for a total of
$2,166. In contrast, the total cost of Mrs. Depoyan's travel by plane
and shipment of her car was only $1,516, $650 less. Thus, shipment of
her vehicle was cost beneficial in these circumstances.
Federal policy regarding handicapped individuals requires Federal
agencies to formulate and implement programs for the employment and
advancement of handicapped individuals. 29 U.S.C. Section 791(b)
(1982). It also requires agencies to make reasonable accommodations to
known physical limitations of qualified employees unless such
accommodations would impose undue hardship on the operation of the
program. 29 C.F.R. Section 1613.704.
This commitment to assist the handicapped has been reflected in GAO
decisions. See discussion at 63 Comp. Gen. 270, 273 (1984). We have
held that an agency may, when acting under the authority of the
Rehabilitation Act of 1973, expend appropriated funds to accommodate the
physical or mental limitations of a qualified handicapped employee or
applicant, as defined in the Act or implementating regulations, unless
such accommodation would impose an undue hardship on the operation of
its program. 63 Comp. Gen. 115,116 (1982). See also B-213666, July 26,
1984.
In the present case, the IRS has clearly justified the expenditure
under the Rehabilitation Act of 1973 as a "reasonable accommodation,"
the nature and cost of which would not impose an undue hardship on the
travel program. It has clearly justified reimbursement of the costs of
shipping Mrs. Depoyan's automobile as authorized under the
Rehabilitation Act of 1973 and has determined that Mrs. Depoyan was
handicapped, as defined in the Act. 63 Comp. Gen. at 116.
The provisions of 5 U.S.C. Section 5727(a), which limit authorization
for shipment of personally owned vehicles to instances where such
shipment is "specifically authorized by statute," does not present a bar
to reimbursement in this case because the Rehabilitation Act of 1973
provides such authorization. See 63 Comp. Gen. at 116.
Furthermore, the legislative intent of 5 U.S.C. Section 5727(a) was
to eliminate the "unreasonable burden" which car shipment costs had
imposed on the Government. At that time, the cost of shipment often
exceeded the cost of the car. Senate Report No. 756, 72d Cong. 1st
Sess. 9 (1932). In the present case, the IRS has demonstrated that
shipment of the automobile was less costly than the alternative in this
case -- paying the expenses of Mrs. Depoyan and a driver to transport
the car from California to Washington, D.C.
Accordingly, we find that appropriated funds may be used to reimburse
Mrs. Depoyan for the cost of shipping her specially equipped car to her
new duty station.
(1) Section 5727(a) provides as follows:
"(a) Except as specifically authorized by statute, an
authorization in a statute or regulation to transport the effects
of an employee or other individual at Government expense is not an
authorization to transport an automobile."
B-215729, 64 Comp. Gen 28
Matter of: Larry Plummer - Request for Reimbursement for Airline
Ticket Unused Due to Cancellation of Annaul Leave, October 29, 1984:
A vacationing employee whose leave is interrupted by orders to
perform temporary duty at another location, and who afterwards returns
to his permanent duty station at Government expense, is not entitled to
be reimbursed for the cost of a personal return airline ticket that he
could not use because of the cancellation of his leave. As the
Government has paid the cost of his return, employee's claim is
comparable to that for the lost value of a vacation, and may not be
reimbursed.
This is in response to a request by Mr. Foon C. Lee, Authorized
Certifying Officer of the National Park Service, United States
Department of the Interior, for our decision as to whether Mr. Larry
Plummer, a Park Service employee, is entitled to be reimbursed for the
return portion of a personal airline ticket which he did not use due to
cancellation of his annual leave. For the reasons that follow, we hold
that Mr. Plummer is not entitled to reimbursement.
Mr. Plummer, an employee of the National Park Service Western
Regional Office in San Francisco, scheduled annual leave from May 2
through May 9, 1984, for a vacation in New York and Washington, D.C. He
purchased a round trip (San Francisco-Washington, D.C., New York-San
Francisco) "super-saver" airline ticket at a cost of $399. After
traveling to Washington, D.C., however, Mr. Plummer was informed that he
would have to interrupt his annual leave to attend a "Position
Classification and Wage Administration Workshop" in Hot Springs,
Arkansas, from May 8-10. On May 7, he traveled from Washington, D.C.,
to Hot Springs, Arkansas. He attended the workshop there, and returned
directly to San Francisco on May 11. His travel from Washington to Hot
Springs and Hot Springs to San Francisco was procured through use of a
Government Transportation Request (GTR); he also received subsistence
expenses (per diem) for the period May 7-11.
Mr. Plummer contends that, because of the interruption of his leave,
he is "out-of-pocket" the amount attributable to the return portion of
the super-saver ticket purchased for his vacation. His conclusion is
based on the fact that he was unable to use the ticket for his return to
San Francisco, and because he apparently could not receive a refund for
the unused portion of the ticket.
The National Park Service denied Mr. Plummer's request for
reimbursement on the basis of our decision 60 Comp. Gen 629 (1981).
There we concluded that there was no legal basis to reimburse an
employee for additional air travel expenses resulting from his
disqualification for "super-saver" rates when his official duties
required him to change his weekend travel plans. That case, however,
involved only personal travel, and was decided in light of other cases
involving an increase in personal expenses caused by cancellation of
annual leave. See, e.g., B-191588, January 2, 1979; B-190755, June 15,
1978. The present case, on the other hand, is comparable to situations
we have previously considered involving employees who, while already
away from their permanent duty station for a personal reason such as
annual leave, are ordered to perform temporary duty there or at another
location, interrupting, cancelling, or following the taking of annual
leave. See, e.g., B-190646, January 25, 1978; B-185070, April 13,
1976. As discussed below, our conclusion in this case, although based
upon different precedent, is the same as that reached by the National
Park Service.
It is a well established rule of this Office that an employee who
proceeds to a point away from his official duty station on annual leave
assumes the obligation of returning at his own expense. B-190646,
January 25, 1978; 11 Comp. Gen. 336 (1932). The rule is generally
applicable even in those cases involving employees who are called back
early to return to duty because of unforeseen requirements of an
official nature. See B-190646, January 25, 1978. We have, however,
recognized exceptions to this rule in cases where an agency recall of an
employee on annual leave is made within 24 hours of his or her
departure, where the recall substantially defeats the purpose of the
personal trip, or where it would be unreasonable to require the employee
to meet additional expenses created by the recall. In such cases, this
Office will not object to the agency's reimbursement of the employee's
return travel expenses. B-191588, January 2, 1979; 56 Comp. Gen. 96
(1976); 39 Comp. Gen 611 (1960).
In those cases in which an employee is interrupted while on leave by
directions to perform temporary duty at his permanent duty station or
elsewhere, and is required or chooses to return to his permanent duty
station after completion of the temporary duty, this Office has
generally held that the Government is chargeable "only with the
difference between the cost attributable to the temporary duty and what
it would have cost the employee to return to his headquarters direct
from the place where he was on leave." B-185070, April 13, 1976; 16
Comp. Gen. 481 (1936). Put another way, in such situations the employee
is still required to bear the cost of the return trip, except that any
incremental increase attributable to the temporary duty is to be paid by
the agency involved. Thus, if the agency pays the full travel costs of
the employee's return from his or her place of leave through the
temporary duty station, the employee would ordinarily be required to
reimburse the agency an amount equivalent to the cost of his or her
direct return, unless the agency agreed to cover the employee's return
fare under the exceptions previously described.
In the present case, the National Park Service paid for Mr. Plummer's
return to San Francisco through his temporary duty station, thus paying
both the cost of the employee's return to his permanent duty station and
the incremental costs of the temporary duty assignment. Under the
circumstances, we would not object to the agency covering that portion
of the return trip for which Mr. Plummer would ordinarily be liable.
Although the interruption of Mr. Plummer's leave did not take place
within 24 hours of his departure from San Francisco, the agency could
properly conclude it to be unreasonable to require Mr. Plummer to repay
the constructive cost of returning to San Francisco on the earlier date
(the full one-way economy fare) in addition to the costs he had already
incurred for the trip, particularly since the interruption prevented him
from reaching one of his two scheduled destinations. Compare B-191588,
January 2, 1979.
On the other hand, we cannot agree with Mr. Plummer that he is "out
of pocket" the cost of the unused return ticket, as his return fare was
in fact paid by the Government at no cost to him. Mr. Plummer's claim
for the lost value of the ticket is comparable to claims submitted by
others in similar circumstances for the "lost value" of vacations
interrupted by official duty requirements. We have held that agencies
have no authority to pay such claims. B-191588, supra.
Based on the foregoing, Mr. Plummer's request for reimbursement is
denied.
B-215206, 64 Comp. Gen 24
Matter of: William H. Hutchinson - Attorney's Fee Incident to
Settlement of Unexpired Lease, October 24, 1984:
An agency questions whether an employee can be reimbursed attorney's
fees and costs incident to litigation to settle an unexpired lease. The
employee may be reimbursed the litigation costs since the Federal Travel
Regulations do not preclude such expenses incurred incident to settling
an unexpired lease, the amounts claimed are reasonable, and the
potential liability of the Government was considerably greater than the
amount settled on. To the extent that B-175381, Apr. 25, 1972, is
inconsistent, it will no longer be followed.
Mr. Edward L. Davis, Assistant Director, Administration, Fish and
Wildlife Service, Department of the Interior, has requested an advance
decision on the propriety of a claim for reimbursement of attorney's
fees resulting from litigation to settle an unexpired lease when an
employee was transferred to a new duty station. The claim is allowed
since there is no prohibition in the regulation barring payment of legal
expenses incurred incident to litigation when an employee settles an
unexpired lease.
Mr. William H. Hutchinson, an employee of the Fish and Wildlife
Service, was transferred from Newton Corners, Maine, to Socorro, New
Mexico, pursuant to a travel authorization dated December 29, 1982. On
December 22, 1982, Mr. Hutchinson signed his employment agreement and
gave his landlord in New Hampshire oral notice that in February
(approximately 6 months prior to the expiration of the lease) he would
be vacating the property which he was leasing. A confirming written
notification was furnished on December 28, 1982. The agency states that
Mr. Hutchinson made no further attempt to negotiate a settlement with
his landlord.
Mr. Hutchinson's lease agreement contained the following pertinent
provisions:
1. Lessee will pay the sum of $700 * * * as security deposit
for the faithful performance by the Lessee of the terms and
provisions of this agreement.
2. The Lessee shall not assign nor sublet * * *
3. In the event of default of Lessee's obligations * * *
Lessee shall be responsible and liable for all attorneys' fees and
other costs to correct default * * *
Subsequently, the landlord went to court and obtained an order from
the court dated February 3, 1983, attaching $5,000 from Mr. Hutchinson's
bank account. The $5,000 represented $4,200 of unpaid rent (6 months x
$700) and $800 in attorney's fees. Mr. Hutchinson also received a
summons to appear in court. Mr. Hutchinson then retained an attorney to
represent him.
The property which Mr. Hutchinson had leased was sold on or about
April 15, 1983, and settlement was made on the landlord's complaint
against Mr. Hutchinson in late April as follows:
1. Unpaid rent for March and 1/2 April .............. $1,050.00
2. Gas for said time period ......................... 136.66
3. Electricity for said time period ................. 22.84
4. Advertisements ................................... 35.25
...................................................... $1,244.75
5. Plub 25% Attorney's Fees ......................... 311.19
6. Plus costs of filing suit and fees ............... 111.00
...................................................... $1,666.94
7. Less security deposit ............................ -700.00
FINAL OBLIGATION ..................................... $ 966.94
Mr. Hutchinson was reimbursed for items 1 through 4 totaling
$1,244.75, but he was not reimbursed for the landlord's attorney's fees
($311.19), the costs of filing suit and fees ($111.00) or for his own
attorney's fees of $282.00. The basis for the agency denial of the
above unreimbursed costs was paragraph 2-6.2c of the Federal Travel
Regulations FPMR 101-7 (FTR) (Supp. 4, October 1, 1982). That paragraph
provides reimbursement for certain legal and related expenses, but
states that the costs of litigation are not reimbursable.
However, the above-cited regulation is not applicable in Mr.
Hutchinson's case since the regulation refers to reimbursement of legal
fees incurred with respect to the sale and purchase of residences.
Therefore, that regulation may not have served as a basis to deny Mr.
Hutchinson's claim for expenses incurred incident to settlement of an
unexpired lease.
The applicable regulation here is FTR paragraph 2-6.2h (Supp. 4),
which provides for reimbursement of expenses incurred incident to the
settlement of an unexpired lease as follows:
Expenses incurred for settling an unexpired lease (including
month-to-month rental) on residence quarters occupied by the
employee at the old official station may include broker's fees for
obtaining a sublease or charges for advertising an unexpired
lease. Such expenses are reimbursable when (1) applicable laws or
the terms of the lease provide for payment of settlement expenses,
(2) such expenses cannot be avoided by sublease or other
agreement, (3) the employee has not contributed to the expense by
failing to give appropriate lease termination notice promptly
after he/she has definite knowledge of the transfer, and (4) the
broker's fees or advertising charges are not in excess of those
customarily charged for comparable services in that locality * *
*.
Attorney's fees for settlement of an unexpired lease have been
allowed where an employee hired an attorney because he was being
threatened with litigation. B-169526, May 22, 1970. In that case we
authorized reimbursement of both the landlord's and lessee-employee's
attorneys' fees incurred incident to arriving at a prelitigation
settlement of the lease. In a later case we allowed an attorney's fee
incident to the settlement of an unexpired lease but stated concerning
litigation expenses that "* * * there are no provisions made in section
4.2f of Circular No. A-56 for reimbursement of such expenses incident to
the settlement of an unexpired lease." B-175381, April 25, 1972.
Section 4.2f was the predecessor regulation of paragraph 2-6.2h of the
FTR, the regulation applicable in this case. Although paragraph 2-6.2h
is not identical in wording to section 4.2f, they are substantially the
same and neither regulation expressly provides for legal nor litigation
expenses incident to the settlement of an unexpired lease.
We think now, on reconsideration, that the better view would be to
allow litigation expenses where the applicable laws or terms of the
lease provide for payment of such expenses for settling an unexpired
lease and the evidential provisions of paragraph 2-6.2h are met. The
reason for this is that when an employee is transferred and is forced by
the Government's action to breach his contract to rent a home, legal
action by the landlord ro recover his damages may be taken even though
there is no fault on the part of the employee. The very nature of the
Government's actions, of transferring the employee, forces the employee
to break his contract thereby leaving the employee at the mercy of the
landlord as to the action to be taken to recover the landlord's damages.
If the landlord threatens litigation, we have allowed payment of the
landlord's and the employee's legal fees incident to the subsequently
arranged settlement. B-169526, supra. It would be anomalous to deny an
employee's legal expenses, incurred incident to litigation on the breach
of his lease, merely because the landlord chooses to force a result in
court rather than by settlement prior to the onset of litigation since
such a result could be dictated purely by chance. As noted above,
paragraph 2-6.2c of the FTR does not apply to the settlement of an
unexpired lease and the prohibition against reimbursing the costs of
litigation contained in that paragraph are inapplicable in these lease
settlement cases. Accordingly, there is no regulatory bar to the
payment of litigation expenses in lease settlement cases.
Mr. Hutchinson did not negotiate a settlement prior to the litigation
being initiated. However, in the circumstances of this case, we do not
see this as a failure to mitigate the damages. Mr. Hutchinson could
have retained an attorney as soon as he know he was to be transferred
but it is doubtful that a settlement could have been arranged at that
time on as good terms as were finally obtained. The landlord, had he
not subsequently sold or rented the house, could have demanded 6 months
rent, $4,200, instead of one and a half months rent ($1,050) which he
finally obtained. It is doubtful that the attorney could have
negotiated a lesser settlement since the landlord did not know exactly
what his losses were until the sale of the house was accomplished.
There is no showing, therefore, that Mr. Hutchinson acted imprudently or
to the Government's detriment. Further, the terms of the lease made Mr.
Hutchinson liable for the landlord's attorney's fees and costs. The
$422.19 landlord's attorney's fees and costs, and Mr. Hutchinson's own
legal fees of $282 are reasonable considering the potential liability to
the Government of $4,200 in rent.
In view of the above, the $704.19 in legal fees may be certified for
payment. To the extent that B-175381, April 25, 1972, is inconsistent
with this decision, it will no longer be followed.
B-214633, 64 Comp. Gen. 21
To The Honorable Don Edwards, House of Representatives, October 24,
1984:
The Office of Refugee Resettlement (ORR) did not impound funds under
the fiscal year 1984 continuing resolution so long as it made available
for obligation the full $585,000,000 appropriated for the refugee and
entrant assistance account. The continuing resolution appropriated a
lump-sum amount for the refugee and entrant assistance account, rather
than specific amounts for the various programs funded by that account.
Allocations specified in the congressional committee reports were not
binding on the ORR and it could allocate funds differently so long as it
did not withhold any of the total $585,000,000 appropriations.
The Office of Refugee Resettlement, in allocating funds appropriated
for refugee and entrant assistance under the fiscal year 1984 continuing
resolution, misinterpreted earlier decisions of this Office. "Current
rate" as used in continuing resolutions refers to a definite sum of
money rather than a program level. The different result reached in
B-197636, Feb. 25, 1980, was limited to the unusual facts in that case.
This responds to your letter, dated March 29, 1984, requesting that
we investigate an "unlawful rescission" of funds by the Department of
Health and Human Services, Office of Refugee Resettlement (Office). The
funds in question were appropriated for refugee and entrant activities
by the "Joint Resolution Making Further Continuing Appropriations for
Fiscal Year 1984," Pub. L. No. 98-151, 97 Stat. 964 (1983). You stated
in your letter that the Office has allocated $44,400,000 for one
particular refugee and entrant activity, namely the refugee/entrant
social services program. This amount was calculated in accord with the
Office's interpretation of the continuing resolution; namely, that
social services funding should be set at a level reflecting the
anticipated refugee arrival rate for 1984. See 49 Fed. Reg. 5383
(1984). According to your letter, this level of funding is lower than
the amount appropriated by the continuing resolution. As the resolution
provides that refugee and entrant activities are to be continued at
their "current rate," Section 101(c), 97 Stat. 972, you contend that the
1984 funding level for this program is equal to the amount appropriated
for this program in 1983, or as expressed in monetary terms, $80
million.
For the reasons indicated below, we cannot conclude that the amount
allocated by the Office for the social services program is improper and
thus constitutes an unlawful rescission. However, we also conclude that
the manner in which the Office calculated the total amount appropriated
for all refugee and entrant activities by the 1984 resolution is not in
accord with decisions rendered by our Office.
Section 101(c) of the continuing resolution appropriated for refugee
and entrant assistance activities such amounts as may be necessary for
continuing these activities at the "current rate." We have consistently
defined the term "current rate" as used by Congress in continuing
resolutions to refer to the total amount of funds that were available
for obligation for an appropriation account in the preceding fiscal
year. See e.g., 58 Comp. Gen. 530 (1979). In applying this definition
to those situations, such as the instant case, in which the funds
appropriated in prior years were available for obligation for a 1-year
period, the "current rate" for the subject appropriation account is the
amount of funds appropriated for the account in the previous year. See
id. at 533. Therefore, as Congress appropriated $585,000,000 in annual
funds for the refugee and entrant assistance activities account in 1983,
the continuing resolution for 1984 provides the same amount of money for
the equivalent 1984 appropriation account.
The GAO has consistently held that continuing resolutions, like
regular appropriation acts, appropriate money at the appropriation
account level rather than at the sub-account level. The refugee/entrant
social services program, for which you question the amount allocated, is
a sub-account of the appropriation account providing funds for all
refugee and entrant assistance activities. In allocating the
$585,000,000 appropriation among the various programs which make up this
appropriation account, the Office is not legally bound to adhere to the
amounts specified for each program in the applicable reports of the
House and Senate appropriation committees. See 55 Comp. Gen. 307
(1975). Therefore, even if the Office does not spend for
refugee/entrant social services the amount specified in committee
reports, there would be no impoundment so long as the entire
$585,000,000 was made available for obligation for other refugee
programs.
Having reached this conclusion, we nonetheless note that the Office,
in calculating the amount available for the refugee/entrant social
services program, interpreted the continuing resolution as appropriating
funds to support a given program level rather than a specific sum of
money. This interpretation was apparently based on our decision
B-197636, February 25, 1980. The Office has misinterpreted our
decision. That decision concerned the level of funding appropriated for
assistance to Indochinese refugees by the continuing resolution for
fiscal year 1980. That continuing resolution, Pub. L. No. 96-123,
Section 101(c), 93 Stat. 924 (1979), provided such amounts as may be
necessary for continuing this program at the "current rate." While
recognizing that we had repeatedly stated that an appropriation to
maintain operations at the "current rate" refers to an amount of money,
we nevertheless concluded that the amount of funds appropriated for
Indochinese refugee programs by the 1980 continuing resolution was
sufficient to sustain a program level of 14,000 refugees arriving in the
United States each month. We reached this conclusion because of the
"clear legislative statements from both the Appropriation and Budget
Committees indicating an intent to continue the program at a funding
level greater than the amount of funds available for the program in the
previous years."
The Office contends that our 1980 decision was not limited to the
unique circumstance surrounding the enactment of the 1980 resolution but
rather was intended to have prospective application as well. Relying on
this decision, the Office therefore argues that the level of funding for
the refugee/entrant programs, as provided in the continuing resolution
for 1984, should also be calculated on the basis of the money needed to
support the expected program levels for these activities in 1984. Under
that theory, the Office determined that the appropriate funding level
for the social services program was $44.4 million, that being a sum
sufficient to provide services for an anticipated lower number of
refugee arrivals this year.
We disagree with this interpretation of our 1980 decision. Contrary
to the views of the Office, the 1980 opinion was limited to its
particular facts. As we have said above, our decision in that case to
diverge from our normal interpretation of "current rate" was based on
the strong, clear expression of congressional intent that the particular
activities in question be funded at a specified program level.
On the other hand, the legislative history of the 1984 continuing
resolution does not contain any language indicating that Congress
intended that the current rate for the refugee/entrant social services
program or any of the other refugee assistance activities should be
calculated in a manner reflecting the program levels for these
activities. In fact, the only pertinent legislative history suggests
that officials of the Department of Health and Human Services, Office of
Refugee Resettlement were aware that the "current rate" for these
programs was to be calculated in accordance with our normal definition
for this term. See Departments of Labor, Health and Human Services,
Education, and Related Agencies Appropriations for 1984: Hearings
Before the Subcommittee on the Departments of Labor, Health and Human
Services, Education, and Related Agencies of the House Committee on
Appropriations, 98th Cong., 1st Sess., Part 5, 604, 624 (1983) (comments
of Phillip W. Hawkes, Director of Office of Refugee Resettlement in
response to questions posed by Chairman Natcher and Representative
Roybal concerning the funding level for the subject program if operating
at its current rate in 1984).
Therefore, we conclude that there was no impoundment of refugee and
entrant assistance funds for fiscal year 1984 so long as the Office of
Refugee Resettlement made the full $585,000,000 appropriated for the
lump-sum appropriation account available for obligation. On the other
hand, the manner in which the Office calculated its total appropriation
and the amount allocated for the refugee/entrant social services program
is not consistent with our decisions.
B-212077.3, B-212077.4, 64 Comp. Gen. 19
Matter of: CFE Servies, Inc.; Department of the Navy - Request for
Reconsideration, October 24, 1984:
Where time permits, an agency should undertake further consideration
of its determination of an offeror's nonresponsibility where it is
notified of a material change in a principal factor on which the
determination was based. Administrative inconvenience is not sufficient
reason to ignore a firm's financial resources at time of contract award
even in negotiated procurement conducted in conjunction with a cost
comparison review.
CFE Services, Inc. and the Department of the Navy request
reconsideration of our decision in Mercury Consolidated, Inc.,
B-212077.2, Aug. 17, 1984, 84-2 CPD Paragraph 186. In that decision, we
sustained Mercury's protest which contested the Navy's nonresponsibility
determination of that firm under request for proposals (RFP) No.
N00189-83-R-0088. The solicitation was issued in connection with a cost
comparison under Office of Management and Budget (OMB) Circular A-76 to
determine whether the operation of a Navy air terminal should be
contracted out. For various reasons, CFE and the Navy contend that our
prior decision was erroneous as a matter of law. We affirm our
decision.
Two proposals -- those aubmitted by Mercury and CFE -- were found to
be technically acceptable by the Navy. A preaward survey of Mercury,
the low offeror, was conducted after the first round of best and final
offers on November 29, 1983. Between early December and mid-January
1984, agency personnel requested Mercury on several occasions to provide
more current financial information, including a new bank commitment
letter. On January 20, the Navy contacted Mercury's bank directly and
was told that a new credit line for Mercury would not be forthcoming
until March 1984, when Mercury's annual report would be available.
Based primarily on these financial circumstances, the contracting
officer determined Mercury to be nonresponsible on January 25 and the
subsequent cost comparison was based on the proposed prices of the
second low offeror, CFE. On January 30, the contracting officer so
informed Mercury. Four days later, by letter of February 3, Mercury's
bank advised the government that it would commit $400,000 to finance
Mercury's contract subject to assignment of the contract proceeds.
Subsequent additional information was thereafter submitted by Mercury to
the agency, including a revised bank commitment letter forwarded by
letter of June 1, 1984. No award has been made.
In its protest, Mercury essentially argued that the agency was
required to consider the bank commitment letter which was obtained after
the completion of the cost comparison because responsibility must be
determined as near to the time of award as possible. It was not
disputed that the Navy had ample time due to CFE's successful appeal of
the Navy's initial cost comparison, to consider the additional
information prior to making award. We agreed with Mercury.
While acknowledging that information bearing upon a prospective
contractor's responsibility may generally be considered by an agency at
any time before award, CFE argues that application of such a rule here
would be inconsistent with regulatory provisions and would unnecessarily
disrupt OMB Circular A-76 procurements. Specifically, CFE and the Navy
direct our attention to the following provision of the Defense
Acquisition Regulation (DAR), reprinted in 32 C.F.R. pts. 1-39 (1983):
4-1203.4 Evaluation. After receipt of the sealed and dated
in-house cost estimate and the offers, the procedures for CITA
(Commercial or Industrial-Type Activities) contracting differ as
follows from conventional contracting procedures.
*
(b) Negotiation.
(1) The contracting officer shall receive proposals, evaluate,
negotiate and select the most advantageous proposal in accordance
with Section III. The contracting officer, together with the
preparer of the in-house cost estimate then open the Government
in-house cost estimate, complete the cost comparison form and make
a cost comparison. This cost comparison is made prior to public
announcement.
CFE argues that selection of the most favorable proposal in
negotiated A-76 procurements must include a consideration of
responsibility prior to any cost comparison and that the intent of this
provision is to preclude any consideration of proposals from
nonresponsible offerors. Similarly, the Navy argues that these
regulations prohibit an agency from considering the responsibility of an
offeror such as Mercury after the initial cost comparison is completed.
We fail to see why selection of a proposal for cost comparison
necessarily and conclusively precludes an agency from further
considering the financial responsibility of an offeror when ample time
remains prior to award. Certainly, a financially responsible offeror,
such as CFE, whose proposal is selected for cost comparison, may
suddenly and unexpectedly become financially nonresponsible after the
initial cost comparison is completed but prior to award. In this
respect, DAR Section 1-905.2 provides that "(i)nformation regarding
financial resources * * * shall be obtained on as current a basis as
feasible with relation to the date of contract award." Under such
circumstances, therefore, an agency, despite the completion of the
initial cost comparison, would be obligated to withhold award to the
nonresponsible offeror even though the offeror was found to be
responsible prior to the cost comparison. Our prior decision merely
followed this specific rule.
Further, we do not regard the possible administrative inconvenience
which may occur in the relatively few cases where a firm's
responsibility status significantly changes after the completion of the
initial cost comparison to be sufficient reason to ignore a firm's
financial situation as close as possible to the time of contract award.
The Navy also argues that we erred in "requiring" the contracting
officer to re-examine Mercury's responsibility rather than simply
leaving it to his descretion, citing permissive language ("may") in one
of our prior decisions, Guardian Security Agency, Inc., B-207309, May
17, 1982, 82-1 CPD Paragraph 471. However, regardless of the literal
language in our prior decisions, the fact remains that our Office has
consistently stated that where ample time permits, further consideration
of a prior determination of an offeror's responsibility should be made
where a material change occurs in a principal factor on which the
determination was based. Compare 53 Comp. Gen. 344 (1973) and 49 Comp.
Gen. 619 (1970). We continue to adhere to this rule.
Finally, CFE argues that Mercury improperly used our bid protest
mechanism to delay the award so that Mercury could gain time to improve
its financial condition. We merely note that the Navy received
notification from Mercury's bank of the approved line of credit on
February 3, only a few days after the completion of the initial cost
comparison, and that Mercury filed its initial protest shortly
thereafter. Since the Navy should have acted upon the notification at
that time, any subsequent delay is attributable to the Navy's refusal to
reconsider the protester's financial responsibility.
Our prior decision is affirmed.
B-215886, 64 Comp. Gen 17
Matter of: Banaag S. Novicio - Highest Previous Rate, October 23,
1984:
Army employee, a former local hire with the United States Government
in the Philippine Islands, appeals a decision of our Claims Group
disallowing his claim for salary adjustment based on the highest
previous rate rule. Employee contends that he should be placed at grade
and step that are equivalent in authority to grade and step he held in
Philippines. However, highest salary rate earned in prior employment
with Government, when converted to United States dollars, was less than
grade GS-1, step 1. Employee's claim is denied because employee's Army
salary exceeds the highest rate he previously earned. The highest
previous rate rule applies only to the salary rate earned by the
employee, not to his level of job responsibility.
Mr. Banaag S. Novicio appeals from Settlement Z-2850647, June 8,
1984, of our Claims Group disallowing his claim for a retroactive salary
adjustment based on the highest previous rate rule. We affirm the
Claims Group's disallowance, since Mr. Novicio's salary exceeds the
highest rate he previously earned.
Mr. Novicio was employed in varous positions with agencies of the
United States Government as a Foreign Service Local (FSL) in the
Philippine Islands from 1946 to 1975, when his position was abolished.
Though he was briefly a General Schedule employee (as a GS-3 and GS-4)
during the 1950's, for the majority of his employment he was classified
as a FSL employee. Mr. Novicio attained his highest salary rate in
1975, as an FSL-17F. Although the local grade was the counterpart to
GS-12 in terms of job responsibility, it paid less than the rate for
grade GS-1, approximately $3,423 per year.
In July 1981, Mr. Novicio accepted a civilian appointment with the
Department of the Army at the Presidio of San Francisco at grade GS-3,
step 1, $11,070 a year. He claims that proper application of the
highest previous rate rule would entitle him to a salary at GS-4, step
10 or $14,248 a year. He further alleges that he accepted the position
on the basis of an understanding with the Presidio personnel office that
he was entitled to receive such a salary. The Standard Form 50,
Notification of Personnel Action, documenting Mr. Novicio's appointment,
contains the notation "PAY RATE IS SUBJECT TO UPWARD RETROACTIVE
ADJUSTMENT UPON VERIFICATION OF PRIOR SERVICE." Additionally, the record
indicates that the Presidio personnel office sought permission from the
Office of Personnel Management (OPM) to appoint Mr. Novicio at a higher
level. That request was vigorously pursued, but was ultimately denied
by OPM.
Under the provisions of the "highest previous rate" rule, published
at 5 C.F.R. Section 531.203(c) (1984), an agency has discretionary
authority to set the salary of an employee at the lowest step of the
employee's grade that equals or exceeds the employee's highest previous
rate of pay. The rule applies only to the salary rate previously earned
by the employee, and not to the grade or step level the employee
previously attained. 34 Comp. Gen. 691, 694 (1955); Ronald L.
Fontaine, B-214885, August 20, 1984. Thus, since the salary set for Mr.
Novicio at the time of his appointment in July 1981 exceeded the highest
previous rate he had earned as a Federal employee, there has been no
violation of the highest previous rate rule.
Unfortunately, even if personnel officials mistakenly promised Mr.
Novicio a salary adjustment and retroactive pay, we cannot provide him
with relief. It is a well-established principle of law that in the
absence of specific statutory authority, the United States is not
responsible for the erroneous acts of its officers, agents or employees,
even though committed in the performance of their official duties.
Schweiker v. Hansen, 450 U.S. 785 (1981); Federal Crop Insurance Corp.
v. Merrill, 332 U.S. 380 (1947); German Bank v. United States, 148 U.S.
573 (1893); 54 Comp. Gen. 747 (1975); 53 Comp. Gen. 834 (1974).
For the reasons given above, we affirm the settlement of the Claims
Group.
B-215831, 64 Comp. Gen. 15
Matter of: Henry B. Jenkins - Waiver of Overpayment of Severance
Pay, October 18, 1984:
An employee, who received severance pay following separation due to a
reduction in force, was later granted a retroactive disability
retirement. Payment of the retroactive retirement annuity resulted in
an erroneous overpayment of the severange pay. Repayment of the total
amount of severance pay is waived under 5 U.S.C. 5584 (1982) where there
is no evidence the employee knew or should have known of the overpayment
either when he received the severance payments or when he received the
retroactive annuity payment. B-166683, May 21, 1969, is distinguished.
This responds to the request of Mr. Henry B. Jenkins for waiver of
repayment of severance pay he received after his position within the
Economic Development Administration (EDA) was eliminated in November
1980. Mr. Jenkins was later granted a retroactive disability
retirement, and thus the severance pay became an overpayment. We find
that the overpayment may be waived, as described more fully below.
In April 1980, Mr. Jenkins, a Public Information Officer for the EDA,
applied for disability retirement, and he used his accumulated sick
leave and annual leave from April 1980, until October 10, 1980. In
September 1980, the Office of Personnel Management (OPM) denied his
request for a disability retirement. Mr. Jenkins appealed the OPM
determination.
In November 1980, Mr. Jenkins' job was eliminated pursuant to a
reduction in force. He was separated from the EDA and started receiving
severance pay in November 1980. For the period from November 1980 to
November 1981, Mr. Jenkins received $50,112.50 in severance pay. He
received unemployment compensation thereafter.
In January 1982, OPM again denied Mr. Jenkins' request for disability
retirement. However, in May 1982, the Merit Systems Protection Board
reversed and ordered OPM to grant him a disability retirement. The
disability retirement was granted retroactive to October 11, 1980, and
Mr. Jenkins received a lump-sum retroactive annuity payment in the fall
of 1982. He was also notified by OPM in September 1982 that severance
pay is not payable where the requirements for an immediate annuity are
met. A separate notice from OPM was sent to the EDA advising that Mr.
Jenkins might be indebted to EDA for that severance pay.
Our Claims Group waived $34,405.18 of the severance pay claim on
February 28, 1984, an amount which represents the difference between the
severance payment and the retroactive annuity payment. In his appeal to
our Office, Mr. Jenkins requests waiver of the remaining balance of
$15,707.32.
Our Office is authorized to waive claims for overpayment of pay and
allowances under 5 U.S.C. Section 5584(a), where the collection of such
claims would be against equity and good conscience and not in the best
interests of the United States.
Implementing regulations issued by our Office elaborate upon these
standards as follows:
Generally these criteria will be met by a finding that the
erroneous payment of pay or allowances occurred through
administrative error and that there is no indication of fraud,
misrepresentation, fault or lack of good faith on the part of the
employee * * *. Any significant unexplained increase in pay or
allowances which would require a reasonable person to make inquiry
concerning the correctness of his pay or allowances, ordinarily
would preclude a waiver when the employee * * * fails to bring the
matter to the attention of appropriate officials. * * * 4 C.F.R.
Section 91.5(c) (1984).
The overpayment in Mr. Jenkins' case resulted from OPM's erroneous
denial of a disability retirement to him in September 1980. The record
indicates no fraud or misrepresentation on Mr. Jenkins' part. The
remaining issue is whether Mr. Jenkins is at fault for his overpayment,
that is, whether the payment of the retroactive annuity or the severance
pay constituted an "unexplained increase in pay or allowances which
would require a reasonable person to make inquiry concerning the
correctness of his pay * * *." 4 C.F.R. Section 91.5(c) (1984).
Our Office has held in previous cases that if an employee "knew or
should have known" that the overpayments were erroneous, waiver will be
denied, pursuant to the statute and the implementing regulations.
Philip W. McNany, B-198770, November 13, 1980; and Vivian J. Lucas,
B-190643, July 6, 1978.
In the present case, Mr. Jenkins states that while he was appealing
regulations. Philip W. McNany, B-198770, November 13, 1980; severance
pay he received from November 1980 to November 1981, and that when he
received the retroactive annuity payment, he spent that amount for
attorney fees, income taxes, and repayment of the unemployment
compensation he received since November 1981. There is no evidence
that, at the time Mr. Jenkins received the retroactive annuity payment,
he knew that the prior severance pay became an erroneous payment or that
the amount representing his retroactive retirement annuity might be
applied against his indebtedness for the severance pay. The document
Mr. Jenkins received from OPM concerning his disability retirement and
payment of severance pay does not, in our opinion, constitute notice of
an overpayment which would require him to inquire as to the correctness
of the payment.
The present case stands in contrast to our decision in B-166683, May
21, 1969, where we limited waiver under similar circumstances to the
amount of the net indebtedness, i.e., the difference between the
severance pay and the retroactive annuity payment. The basis for our
holding in B-166683, which was not clearly set forth in our analysis,
was that the annuitant recognized the overpayment and set aside the
money for refund. Since it appears that Mr. Jenkins did not recognize
the overpayment and there is no presumption that he should have known of
the overpayment, our holding in B-166683, cited above, is distinguished
on the facts presented in this case.
It is also clear in this case that, at the time Mr. Jenkins received
his severance pay, he had no knowledge that his recept of such pay would
become erroneous. His initial application for disability retirement was
denied by OPM in September 1980 and again in January 1982. He cannot
reasonably be expected to have foreseen the reversal of OPM's decision
by the Merit Protection Board. In fact, his severance pay was
completely exhausted before OPM reaffirmed its denial of his application
in January 1982, thus giving rise to his appeal to the Board.
Therefore, we find no evidence that Mr. Jenkins "knew or should have
known" at the time he received the severance payments that such payments
would be erroneous.
Accordingly, we hold that the entire amount of severance pay is
waived pursuant to 5 U.S.C. Section 5584 (1982) and 4 CFR Parts 91-93
(1984).
B-214409.2, 64 Comp. Gen 11
Matter of: Comdisco, Inc., October 18, 1984
Untimely protest against the evaluation of the cost of "technical
support services" in reviewing responses to the agency's announced
intention to place an order with a nonmandatory Automatic Data
Processing Schedule contractor will be considered on the merits as a
significant issue, since the matter is one of widespread interest that
General Accounting Office has not considered before.
Contracting agency's decision to issue a delivery order for automatic
data processing (ADP) equipment and "technical support services" to a
nonmandatory ADP Schedule contractor is improper where a response to a
Commerce Business Daily notice of the agency's intention to place the
order would have indicated a less costly alternative but for the
agency's unreasonable evaluation of the costs for the support services.
The evaluation of offers, or responses to a contacting agency's
announced intention to place an order with a nonmandatory Automatic Data
Processing Schedule contractor, should not include the consideration of
speculative advantages to the government, but should be confined to
matters that are reasonably quantifiable.
Comdisco, Inc. protests the Army's issuance of a delivery order under
the General Services Administration's Automatic Data Processing Schedule
to International Business Machines Corporation (IBM) for the lease,
installation, maintenance, and technical support of certain IBM
automatic data processing (ADP) equipment. The crux of the protest
involves the Army's requirement for technical support services over a
2-year period at Fort Polk, Louisiana, which the contracting activity
assumed IBM would provide at no cost under its Schedule contract, and
for which the activity imputed a significant cost factor to Comdisco's
quotation. The protester objects to the addition of this factor to its
quoted prices, and further argues that the Army failed to define its
requirement for support services in a manner that permitted fair
competition.
We sustain the protest.
This acquisition was initiated pursuant to the Defense Acquisition
Regulation, Sections 4-1104.4 and 4-1104.6 (Defense Acquisition Circular
No. 76-42, Feb. 28, 1983). The regulation basically provides that a
contacting agency may not place an order against a nonmandatory ADP
Schedule contract, as here, without first considering the availability
of other sources by publishing in the Commerce Business Daily (CBD) a
synopsis announcing the agency's intent to place the order, and then
determining whether placing the order would be the least costly
alternative based on the responses of non-Schedule vendors interested in
meeting the agency's requirements. If evaluation of the responses
indicates that placing the order would not be the least costly
alternative, but that a competitive acquisition would be more
advantageous, then the contracting agency normally should issue a formal
solicitation and invite all vendors, including Schedule contractors, to
compete. These requirements for seeking competition before placing a
delivery order against a Schedule contract like IBM's arise because
nonmandatory ADP Schedule contracts are not awarded on a competitive
basis. CMI Corporation, B-210154, Sept. 23, 1983, 83-2 CPD Paragraph
364.
In accordance with the synopsizing requirement, the contracting
activity had a notice published in the CBD announcing its intention to
place the order against IBM's Schedule contract for certain specified
requirements, including "local technical assistance to the government in
system configuration and installation planning." The notice also advised
interested sources that their responses would be evaluated regarding
"local technical assistance and support." The activity and determined
that it would require 40 days annually of local technical support,
although the record fails to specify the precise nature of the support.
Whatever the nature, the activity assumed that the support could be
acquired from IBM at no cost under Special Item 132-1, paragraph 10.c.
of IBM's Schedule contract, which provided:
As part of its technical support activity, IBM conducts
marketing presentations, executive briefings, product exhibitions
and demonstrations and seminars to conceptually familiarize
customers and potential customers with IBM solutions to
information processing problems. Also as part of its technical
support activity, IBM provides certain planning, installation
evaluation and improvements, and other advisory activities which
serve to facilitate the utilization of IBM products and services.
In accordance with established IBM practice, these activities are
provided at no charge. Contact your IBM Representative for
further information.
Comdisco submitted a price quotation for the Army's requirement
except for the support services, which Comdisco stated it could not
provide and suggested the Army procure separately from IBM. The
contracting activity then asked IBM to quote a price for the support
services alone and added the amount with which IBM responded, $24,000,
to Comdisco's quotation. The addition of $24,000 for the duration of
the lease caused Comdisco's quotation, which otherwise included lower
prices than IBM's Schedule prices, to be more costly than IBM's Schedule
contract. The agency therefore placed the delivery order against IBM's
contract.
Initially, there is a timeliness issue in this case. The protester
admits it filed the protest in an untimely fashion, /1/ but requests
that we consider it under our exception for issues which are significant
to procurement practices or procedures. 4 C.F.R. Section 21.2(c)
(1984). To be significant, the protest issue must involve a principle
of widespread interest to the procurement community, and not involve
issues the merit of which this Office has previously reviewed. E.g.,
Kearflex Engineering Company, B-212537, Feb. 22, 1984, 84-1 CPD
Paragraph 214. We consider the issue raised by Comdisco here to fall
within the significant issue exception.
In reviewing an agency's evaluation of responses to its announced
intention to place an order against a nonmandatory ADP Schedule, our
concern is whether there was a reasonable basis for the evaluation and
whether the evaluation was consistent with the mandate for competition.
See CMI Corporation, supra.
Here, the record simply fails to identify any specific support
services for which cost was evaluated. As a result, we have no way of
knowing whether the services the Army expects IBM to provide at no
additional cost under its Schedule contract are the same as those IBM
told the Army it would provide for $24,000 if Comdisco received the
contract. For the same reason, we have no way to determine the
reasonableness of the activity's assumption that IBM would supply needed
services at no cost, or decision to impute $24,000 to Comdisco's
quotation. /2/
Indeed, there appears to be an inherent contradiction between the
Army's depictions of the services; the CBD notice states a requirement
for configuration and installation planning whereas the Army's report on
the protest cites an ongoing requirement for 40 days annually of
technical support. Moreover, each description of the required services
is vague on its face, and nothing in the record indicates that such a
requirement is understood by the industry, or even by IBM, to represent
a specific type of service. IBM itself has stated with respect to this
protest that the exact type and amount of technical support provided to
a user agency under this paragraph "varies based on individual
circumstances and requirements, for example, customer experience and
sophistication."
Further, regarding the Army's assumption that it could order any
needed services from IBM at no cost, a reading of IBM's Schedule
contract in its entirety discloses that paragraph 10.c. obligates IBM to
provide user agencies few, if any, support services of significant
value. Paragraph 10.c. only provides user agencies with opportunities
to attend presentations and obtain information aimed at promoting future
sales by IBM, and with "advisory activities which serve to facilitate
the utilization of IBM products and services."
In contrast, substantive technical support, which we believe it is
most likely that the Army requires, is addressed in paragraphs 10.a. and
10.b., which describe training and technical services that expressly are
excluded from the scope of the contract. Those paragraphs stipulate
that training and technical services are not within the scope of the
contract except as provided under special item 132-30. Special item
132-30, in Appendix C, provides for the services of IBM systems
engineers, upon the government's request, to assist in the installation
and use of IBM equipment offered under the contract, including "special
studies, programming and application design and development, system
analysis and design, conversion and implementation planning, and
installation evaluation." The contract provides that the government
agrees to pay charges for these services in accordance with hourly rates
set forth in the contract. This special item also states that software
development and the maintenance of products are not offered under the
contract. Given these provisions expressly excluding virtually any type
of functional technical assistance, it appears that the services
paragraph 10.c. encompasses basically are marketing services and
demonstrating of products and are not likely to include substantive
technical support.
Even assuming that paragraph 10.c. might afford the activity some
needed support services, we regard any cost advantage accruing from them
to be entirely speculative since the record does not indicate what the
needed services are, as discussed above, and thus what the advantage
might be. The evaluation of the most advantageous offer in any
procurement should be confined to matters that are reasonably
quantifiable. See Continental Calbevision of New Hampshire, Inc., and
Satellite Systems Corporation, B-178542, July 19, 1974, 74-2 CPD
Paragraph 45.
In sum, Comdisco's response was less costly that IBM's contract price
but for the imputation, based on IBM input, of the cost of separately
securing support services from IBM. The record, however, contains no
indication of what services were desired, so that there can be no
substantive support, in our view, for either the presumption that they
were available from IBM at no cost, or for IBM's offered price for them
if the equipment were ordered from another vendor. We therefore believe
that the Army lacked a valid basis for the evaluation of technical
support services and for awarding the delivery order to IBM.
We do not recommend corrective action for this procurement, however,
since the protester failed to protest in a timely manner either the
Army's announced intention to evaluate local technical support or the
method of the Army's evaluation, and because we understand that a
termination of the lease would subject the government to significant
termination costs under IBM's ADP Schedule contract. We nevertheless
are recommending to the Secretary of the Army that he take appropriate
action to prevent the recurrence of these deficiencies in future cases.
The protest is sustained.
(1) Comdisco did not protest either the Army's announced intention to
evaluate technical support or the Army's actual evaluation of Comdisco's
response within 10 working days after the basis of protest was known, or
should have been known, as required by our Bid Protest Procedures. 4
C.F.R. Section 21.2(b)(2).
(2) We have held that a CBD notice should identify required services
in sufficient detail to permit intelligent competition. See Lanier
Business Products, Inc., 60 Comp. Gen. 306 (1981), 81-1 CPD Paragraph
188. Although it is clear that the failure to specify the services did
not prevent Comdisco from competing, since Comdisco stated it could not
provide local technical support in any event, so specifying obviously
would have assisted us in reviewing the evaluation.
B-215162, 64 Comp. Gen.8
Matter of: Industrial Design Laboratories, Inc., October 16, 1984:
The government is not required to eliminate any competitive advantage
that a firm might have as a result of federal, state or local programs
unless the advantage is the result of unfair government action.
Bids must adequately established who the true bidding entities are to
insure that bids are not submitted through irresponsible parties whose
principals then could avoid or support the bids as their interests might
dictate.
Protester's strong disagreement with contracting officer's finding
that the low bidder, which allegedly has no tooling or pertinent
experience, is responsible, is insufficient to show that contracting
officer acted fraudulently or in bad faith.
A bidder's failure to complete the contingent-fee and affiliation
certifications in the Standard Form 33 is a minor informality that can
be waived since completion of these certifications is not necessary to
determine the responsiveness of bid.
Industrial Design Laboratories, Inc. (IDL) protests any award to the
Confederated Salish and Kootenai Tribes, S&K Electronics (S&K), under
invitation for bids (IFB) No. DAAA09-84-B-0198, issued by the Department
of the Army for electric heaters for various armored combat vehicles.
IDL first contends that S&K had an unfair competitive advantage because
its land, building and equipment allegedly were secured through
government grants and its labor is subsidized by the government. IDL
next contends that while there is a federally chartered corporation
named "The Confederated Salish and Kootenai Tribes of the Flathead
Reservation" (the Tribes), there is no such entity as "Confederated
Salish and Kootenai Tribes, S&K Electronics," the name in which the bid
was submitted, and therefore no award can be made based on the bid.
Third, IDL contends that because S&K allegedly has no tooling, pertinent
manufacturing experience or facilities, other than an empty building,
finding S&K responsible was so grossly erroneous as to constitute
constructive fraud. Finally, IDL argues that S&K was nonresponsive
because of its failure to complete the contingent-fee and affiliation
certifications in the IFB.
We deny the protest.
Even if S&K has somehow been "subsidized," in terms of facilities or
personnel costs, because of its apparent affiliation with the Tribes,
the government is not required to eliminate any competitive advantages
that certain firms might have as a result of federal, state or local
programs unless the advantage is the result of unfair action by the
government. See Planning and Analysis, Inc., B-213941, Apr. 20, 1984,
84-1 CPD Paragraph 451. There is no suggestion of unfair government
action here, and since the procurement was unrestricted, we know of no
legal reason by S&K could not compete with IDL and other commercial
firms.
With respect to the identity of the bidder, our concern is whether
the bid reflects a binding commitment by the true bidding entity so that
the entity would not be able to avoid an award if it chose to do so
merely on the argument that it was not in fact the named bidder. See
Protectors, Inc., B-194446, Aug. 17, 1979, 79-2 CPD Paragraph 128.
Otherwise, bids could be submitted through irresponsible parties whose
principals then could avoid or support the bids as their interests might
dictate. See 33 Comp. Gen. 549 (1954). Thus, for example, in Martin
Company, B-178540, May 8, 1974, 74-1 CPD Paragraph 234, which IDL cites,
we held that an award to a sole proprietorship would be imporper because
the bidding entity certified itself as an Oklahoma corporation whereas
in fact no such corporation existed.
The record here shows that the Confederated Salish and Kootenai
Tribes of the Flathead Reservation is chartered by the federal
government and empowered to engage in any business to further the
economic well-being of the tribal members. The Tribes authorized the
formation of S&K on September 18, 1983, allocated startup funds to S&K
on October 18, hired a manager on November 14 and on March 9, 1984,
directed the development of a corporate charter for S&K to be approved
by the Tribal Council. The bid was submitted in the name of the
"Confederated Salish and Kootenai Tribes, S&K Electronics" /1/ and it
specifically stated that S&K was a wholly owned tribal enterprise. The
bid listed an employer identification number which belonged to the
Tribes. Although there is no indication that S&K has been incorporated,
it has a board of directors appointed by the Tribes, and has been
awarded another contract by the Army.
The record thus clearly shows that S&K is part of and subject to the
direction of the Tribes and that unless and until S&K is incorporated as
a separate entity, the Tribes are responsible for S&K's contractual and
financial obligations. In our view, the current status of S&K is
similar to that of separate corporate divisions or groups which have
their own names but no legal identities apart from the corporations of
which they are elements. Often the names of such divisions or groups
are included over or under the names of the corporate bidders to
identify which parts of the corporations will actually perform the
contract.
Accordingly, we think the identity of the bidder here is clear, and
that there is no reasonable basis to be concerned that the bidding
entity retained an option to avoid acceptance of its bid. See Oscar
Holmes & Son, Inc. et al., B-184099, Oct. 24, 1975, 75-2 CPD Paragraph
251.
IDL's contention that because S&K allegedly has no tooling or
pertinent experience and occupies an empty building, the pre-award
survey approving award to S&K is so tainted as to constitute
constructive fraud, is a challenge to the contracting officer's
affirmative determination of S&K's responsibility. Because such
determinations depend largely upon subjective business judgments, our
Office does not review them unless the solicitation contains definitive
responsibility criteria which allegedly have been misapplied or it is
shown that the procuring officials acted in bad faith or fraudulently.
See B&H Aircraft Company, Inc., B-210798, Apr. 1, 1983, 83-1 CPD
Paragraph 344.
The solicitation here contained no definitive responsibility
criteria, and the mere fact that IDL disagrees strongly with the
contracting officer's determination of responsibility does not show that
the contracting officer acted fraudulently or in bad faith. See J.F.
Barton Contracting Co., B-210663, Fed. 22, 1983, 83-1 CPD Paragraph 177.
The record clearly shows that the determination of responsibility was
reasonable and based on a recommendation of a preaward survey team
consisting of eight government specialists that visited S&K. The team
confirmed that S&K was established and owned by the Tribes and found
that although S&K was new, it had done a thorough job of planning and
was technically capable of performing the contract. It also found that
S&K had adequate financing and management, and a new building, and that
with its financial and labor resources, it could obtain whatever
additional labor and equipment it might need without progress payments
from the government.
We also find no merit in IDL's contention that S&K's bid was
nonresponsive because the required contingent-fee and affiliation
certifications were not completed. We have frequently held that these
certifications, which are found in the Standard Form 33, are not
necessary to determine whether a bid meets the specifications and,
therefore, the failure to complete them does not affect the
responsiveness of a bid. See Extinguisher Service, Inc., B-214354, June
14, 1984, 84-1 CPD Paragraph 629; K.P.B. Industrial Products, Inc.,
B-210445, May 24, 1983, 83-1 CPD Paragraph 561. Therefore, such
deficiencies may be waived as minor informalities. LePrix Electrical
Distributors, Ltd., B-212340.3, Oct. 28, 1983, 83-2 CPD Paragraph 513.
The protest is denied.
(1) Actually, the words "S&K Electronics" were printed directly
beneath the words "The Confederate Salish and Kootenai Tribes" both on
the bid form and on the bidder's stationery.
B-215222, 64 Comp. Gen. 6
Matter of: Tuxedo Rental, October 11, 1984:
Employee of the Department of Health and Human Services claims
reimbursement for the cost of renting a tuxedo for the purpose of
accompanying the Secretary of the Department to a function where formal
attire was required. The claim may not be allowed since ordinarily
payment by employees for formal attire is considered a personal expense.
The instant case does not present any special circumstances that
warrant a departure from this general rule.
The question presented by the Department of Health and Human Services
is whether an employee who accompanied the Secretary to a function where
formal attire was required may be reimbursed for the cost of renting a
tuxedo. /1/ For the reasons stated hereafter, the employee may not be
reimbursed the cost of the tuxedo rental.
The Department advises that an employee has submitted a claim in the
amount of $32 for the rental of a tuxedo. The employee recently
accompanied the Secretary to a function in the Washington, D.C. area
where formal attire was required. The individual's duties include
accompanying the Secretary to functions which the Secretary attends in
her official capacity. We have been advised informally that he performs
a variety of duties which include driving the Secretary to functions and
escorting her through crowds. Apparently, this employee is viewed by
Department officials as performing a "quasi/security" function.
However, primary responsibility for the Secretary's security is assigned
to other employees.
The agency asks whether our holding in 35 Comp. Gen. 361 (1955) would
be applicable to the present claim. That decision involved an official
of a Government agency who, while in a travel status, was invited to a
function related to official business for which a dinner jacket was
considered proper attire. We held that the employee's claim for the
cost of renting the dinner jacket should not be allowed. The decision
pointed out that appropriations generally are not available to pay for
personal clothing "reasonably required as part of the usual and
necessary equipment for the (employee's) work * * *." Id. at 361. The
decision concluded that a person occupying the official position there
involved could be expected from time to time to receive official dinner
invitations for which formal dress was appropriate. See also 45 Comp.
Gen 272 (1965).
Thus, the cost of formal attire ordinarily is not reimbursable even
when formal attire is necessary to be dressed in a socially acceptable
manner at an event the employee attends as part of his official duties.
However, in some cases where the use of formal attire was necessary for
the proper performance of the employee's duties beyond merely being
attired in a socially acceptable manner, we have authorized
reimbursement. See 48 Comp. Gen. 48 (1968), where we held that Secret
Service agents could be reimbursed for the cost of formal attire
necessary for security purposes to make them less readily identifiable
as Security Service agents. Also, see B-164811, July 28, 1969, which
held that Justice Department attorneys who were required to wear formal
cutaway coats and striped trousers when appearing before the United
States Supreme Court were entitled to be reimbursed such rental costs.
It was noted that individual attorneys are required to appear before the
Supreme Court only occasionally and that it would be unreasonable to
expect them to purchase such formal attire.
In the present case the agency has indicated that the employee
involved frequently accompanies the Secretary to various functions; it
is expected that from time to time his attendance will require formal
attire. Under these circumstances it is reasonable to expect the
employee to provide formal attire when needed in escorting the Secretary
to these functions. Moreover, there is no showing here that the
employee's use of formal attire at these functions is necessary for
reasons beyond presenting a socially acceptable appearance. We do not
regard the quasi-security role performed by the employee as sufficient
to invoke the exception for Secret Service agents set forth in 48 Comp.
Gen. 48, supra.
Since the tuxedo rental was for the purpose of being attired in a
socially acceptable manner, it does not fit the exception to the
ordinary rule against reimbursement made in our prior decisions
discussed above. Accordingly, there is no basis to allow payment to the
employee for the cost of the tuxedo rental.
(1) This request for an advance decision of the Comptroller General
was submitted by the Senior Advisor to the Secretary/Executive Officer,
Department of Health and Human Services.
B-215544, 64 Comp. Gen 4
Matter of: MISSO Services Corporation, October 2, 1984:
There is no requirement that equipment once acquired by an agency
under the 8(a) program be acquired by small business set-aside in future
procurements.
There is nothing per se improper in a contracting officer refusing,
after issuing a solicitation amendment, to extend the closing date for
submission of initial proposals in a negotiated procurement; the
determination whether an extension of the closing date is necessary is
laregly within the descretion of the contracting officer.
Contracting officer's failure to extend the closing date for proposal
receipt which allegedly precluded a potential offeror from competing
effectively does not render the procurement improper where adequate
competition was obtained and there is no showing that the price at which
the contract was awarded is unreasonable or that the agency was
deliberately attempting to prevent the firm from competing.
MISSO Services Corporation protests any award under request for
proposals (RFP) No. 00-84-4-51, issued by the Department of Agriculture
for IBM code compatible processors. We deny the protest.
Agriculture issued the solicitation on April 11, 1984, following
publication of a procurement synopsis in the Commerce Business Daily.
The original deadline for submission of initial proposals was May 11,
but the deadline ultimately was extended to June 15 after several
solicitation amendments. The sixth and final amendment was issued on
June 13 after Agriculture discovered it inadvertently had incorporated
by reference two unintended contract clauses that set the procurement
aside for small businesses and for labor surplus area concerns.
Amendment 6 deleted these clauses, eliminating both set-asides, but did
not extend the closing date.
Agriculture solicited 23 firms, 4 of which, including MISSO,
submitted proposals. Award was made to Vion Corporation at a price of
$193,000. /1/
MISSO, a small business concern, maintains that it was improper for
Agriculture to withdraw the small business set-aside and conduct the
procurement on an unrestricted basis. The processors being procured are
intended as replacements for computer equipment currently being
furnished by MISSO under an 8(a) contract, and it is MISSO's position
that under Federal Acquisition Regulation (FAR), Section 19.501(g), 48
Fed. Reg. 41,102, 42,171 (1983) (to be codified at 48 C.F.R. Section
19.501(g)), equipment once acquired by set-aside must in the future be
acquired by set-aside.
Section 19.501 of the FAR is inapplicable here. Where certain
exceptions do not apply, this section requires repetitive set-asides
only where (1) the requirement previously was satisfied through a small
business set-aside procurement; and (2) repetitive set-asides are
required by agency regulations. Neither circumstance is present here.
MISSO received its current contract for the requirement through the
Small Business Administration's 8(a) program, which is not covered by
the small business set-aside regulations and does not involve a small
business set-aside procurement. See FAR, Section 19.801 et seq., 48
Fed. Reg. 41,102, 42,171 (to be codified at 48 C.F.R. Section 19.801, et
seq.). In any event, Agriculture has promulgated no regulation
requiring repetitive set-asides. We note that the coordinator of
Agriculture's Office of Small and Disadvantaged Business Utilization
concurred in the contracting officer's determination that this
procurement was not appropriate for a small business set-aside.
MISSO asserts as an alternate basis of protest that Agriculture
should have extended the closing date for receiving initial proposals
after issuing Amendment 6, since removal of the small business set-aside
had the effect of invalidating the business arrangements on which MISSO
had based its intended proposal. MISSO states it was "unable to obtain
revised pricing and delivery terms in the time allowed" following the
amendment (2 days). Thus, although MISSO did submit a proposal, it
apparently believes it was prevented from competing effectively.
There is no requirement that the closing date in a negotiated
procurement be extended following a solicitation amendment. We have
recognized that contracting officers have broad discretion in deciding
whether such an extension is necessary. See, e.g., Tolica Construction
Co., B-213028, Feb. 28, 1984, 84-1 CPD Paragraph 244; Argus
Manufacturing Corp., B-208922, Oct. 28, 1982, 82-2 CPD Paragraph 389.
This discretion also is evident in the applicable regulation, FAR,
Section 15.410, 48 Fed. Reg. 41,102, 42,171 (to be codified at 48 C.F.R.
Section 15.410), which states only that "the contracting officer shall
determine if the closing date needs to be changed when amending a
solicitation." The regulation establishes no objective standards for
making this determination.
As the agency's refusal to extend the closing date was not per se
improper, we are left to review this aspect of the protest under the
standard we apply in considering all allegations to the effect that
agency action has precluded a specific concern from competing or
competing effectively. Under this standard, such agency action will not
be fatal to a procurement where adequate competition and reasonable
prices were obtained and there was no deliberate attempt to exclude the
potential offeror. See Argus Manufacturing Corp., supra.
Although it is not clear precisely why Agriculture would not extend
the closing date here, MISSO does not allege, and we find no evidence,
that Agriculture's actions were motivated by an intent to prevent MISSO
from competing. Agriculture's refusal to extend applied to all
offerors, not only MISSO. Agriculture solicited 23 firms to compete for
the award, and received 4 proposals. We consider this to be adequate
competition, and there is no allegation or indication that the price to
be paid Vion is unreasonable. While it is unfortunate that
Agriculture's actions may have made it difficult for MISSO to complete
effectively, it appears that all offerors were treated fairly and
equally. We therefore cannot object to the contracting officer's
refusal to extend the closing date to accommodate MISSO.
The protest is denied.
(a) Award was made on or about August 14 in the face of MISSO's
protest based, we have been advised, on the contracting officer's
determination that this was an urgent requirement. The current
equipment reportedly no longer is sufficient to meet Agriculture's
increasing computing capacity needs.
B-213886, 64 Comp. Gen. 1
Matter of: Thomas A. Donohue, et al. - Overtime Compensation for
12-hour Irregular Shifts - "Two-Thirds Rule," October 2, 1984:
The "two-thirds rule" permits an agency to compensate employees under
5 U.S.C. 5542(a) for only 16 hours of a 24-hour tour of duty which
includes substantial time in standby status, based on a presumption that
the remaining 8 hours represent sleep and mealtime. However, this
presumption, and hence the two-thirds rule, does not apply to shifts of
less than 24 hours. Therefore, Federal firefighters who work an
irregular or occasional overtime shift of 12 hours cannot be paid less
than 12 hours of overtime compensation based on the two-thirds rule.
However, bona fide mean periods may be excluded from compensable
overtime hours.
Mr. Conrad R. Hoffman, Controller, Veterans Administation (VA), has
forwarded for settlement claims submitted by Mr. Guy Colletti, Natioanl
Representative for the American Federation of Government Employees. The
claims are by five firefighters at the VA Medical and Regional Office
Center, White River Junction, Vermont (VA Center). The firefighters
request a decision on whether the so-called "two-thirds rule" can be
used to determine the number of compensable hours of work under section
5542(a), title 5, United States Code, for irregular overtime duty
periods of less than 24 hours, specifically 12-hour shifts in this case.
We conclude that use of the two-thirds rule for irregular overtime
shifts of less than 24 hours is improper. The rule presumes the
exclusion of sleep and mealtime from a shift of 24 hours or more;
however, this presumption is not reasonable for shifts of less than 24
hours. Therefore, we return the claims for reexamination and
calculation by the VA of overtime pay under 5 U.S.C. Sections 5542(a)
(1982) for the 12-hour overtime shifts at issue.
Firefighters at the VA Center are regularly scheduled for a 60-hour
workweek consisting of two 24-hour tours and one 12-hour tour. For this
extended tour of duty, which includes substantial time in "standby"
status, the firefighters receive their basic rate of pay and premium pay
on an annual basis for the regularly scheduled standby duty as
authorized by 5 U.S.C. Section 5545(c)(1) (1982). /1/ Sometimes the
firefighters work an additional 12-hour irregular or occasional overtime
shift outside of their regularly scheduled work-week. At issue is the
application of the "two-thirds rule" to this shift.
The "two-thirds rule" was approved by our Office in 25 Comp. Gen. 161
(1945) for use with respect to 24-hour standby shifts of firefighters
compensated under the Federal Employees Pay Act of 1945, Pub. L. 79-106,
Section 201, 39 Stat. 296, which is not codified, as amended, at 5
U.S.C. Section 5542(a) (1982). This rule also has been recognized and
applied for many years by the Office of Personnel Management (OPM) and
the courts. See, e.g., Federal Personnel Manual Supp. No. 990-2, bk.
610, S1-3d (Inst. 59 Aug. 18, 1978), discussed hereinafter; Collins v.
United States, 141 Ct. Cl. 569 (1958). Under the rule, 16 hours of a
24-hour shift involving substantial standby duty represent time in a pay
status, and 8 hours of the 24-hour shift are excluded from the
calculation of hours worked as time out of pay status for sleeping and
eating.
The VA has applied the two-thirds rule to the firefighters' 12-hour
irregular overtime shifts which were in addition to their regularly
scheduled workweek, thus excluding 4 hours from the overtime
compensation payable for each shift on the basis that the employees were
not in pay status during this 4 hours. According to VA, use of the
two-thirds rule here is based on the fact that the 12-hour shift
includes an element of standby duty. However, the firefighters contend
that applying the rule to shifts of less than 24 hours is inconsistent
with Comptroller General decisions and OPM regulations.
The issue of compensation for the VA firefighters who work these
irregular 12-hour overtime shifts surfaced as a Fair Labor Standards Act
(FLSA) complaint filed at the VA Center. /2/ In response to that
complaint, OPM in a letter dated January 20, 1983, concluded that VA was
not in violation of the FLSA with respect to its compensation practices
at the Center because VA was not excluding sleep and mealtime from FLSA
hours worked for employees engaged in fire protection for duty periods
of 24 hours or less. See 5 C.F.R. Section 551.432 (1984); Beebe v.
United States, 640 F.2d 1283 (Ct. Cl. 1981). However, in the same
letter OPM advised VA that, under title 5, United States Code, its
policy of applying the two-thirds rule to irregular overtime shift
periods of less than 24 hours was inconsistent with OPM policy as
expressed in FPM Supp. No. 990-2, bk. 610, S1-3d, supra, and by OPM's
Office of Pay and Benefits Policy in its advisory opinion dated January
26, 1982.
The OPM letter acknowledged that VA's planned changes in scheduling
the reular workweek for firefighters would eliminate irregular 12-hour
tours and, therefore, make the issue of the two-thirds rule academic in
the future. However, OPM suggested that the firefighters might pursue
with our Office their existing claims for additional compensation under
title 5. /3/
While the VA Center firefighters receive annual premium pay for their
regularly scheduled standby duty under 5 U.S.C. Section 5545(c)(1), the
additional irregular 12-hour tours here in question are compensable at
overtime rates in accordance with 5 U.S.C. Section 5542. See Federal
Personnel Manual Letter No. 551-5, January 15, 1975, Attachment 3(A) and
(B); see also 5 C.F.R. Section 550.163 (1984). As indicated above, OPM
guidance provides no basis for excluding sleeping and mealtime from
compensable hours worked in a shift of less than 24 hours. In this
regard, OPM's advisory opinion to VA of January 26, 1982, observes:
* * * the application of the "two-thirds" rule for determining
compensable hours of work for a tour of duty of less than 24 hours
is inappropriate. The "two-thirds" presumes the exclusion of
sleep and meal time from a tour of duty of 24 hours. To meet this
presumption it has been the interpretation of this office that the
employee must be on tour of duty of 24 hours or more. Thus, it
has been the policy of this office that the "two-thirds" rule is
appropriate for tours of duty of 24 hours and that it is
administered in increments of 24 hours for periods of service of
more than 24 hours (e.g., 48 hours, 72 hours). Of course, the
agency may deduct any bona fide meal periods during a period of
service of less than 24 hours to determine compensable hours of
work under 5 U.S.C. 5542.
We agree with OPM's interpretation and application of the two-thirds
rule in this context. Our approval of the two-thirds rule in 25 Comp.
Gen. 161 was premised on its application to a 24-hour shift. In a shift
of such a duration, it is reasonable to presume that a portion of the
employee's time will be spent sleeping and eating. We approved the
two-thirds rule as a convenient method for computing hours of employment
in consideration of that presumption. By contrast, in an irregular
overtime shift of 12 hours, which is akin to a long workday, it is not
reasonable to presume that a portion of the employee's time will be
spent sleeping. However, it is reasonable to expect that a portion of
the employee's time will be spent eating in a 12-hour irregular shift;
thus, bona fide meal periods may be deducted from a 12-hour irregular
overtime shift to determine compensable hours of work.
In accordance with the foregoing, the two-thirds rule does not apply
to irregular or occasional shift periods of less than 24 hours in
determining compensable hours of overtime work under 5 U.S.C. Section
5542. However, bona fide mealtimes may be deducted to determine
compensable hours of overtime. Therefore, we return the claims to VA
for reexamination and calculation of overtime pay under 5 U.S.C. Section
5542 for the 12-hour irregular or occasional shifts, to assure that the
firefighters receive all payments to which they are entitled.
(1) Office of Personnel Management regulations also address annual
premium pay for employees required regularly to stay at, or within the
confines of, their stations for longer than ordinary periods of duty
which include a substantial time in "standby" status. 5 C.F.R. Section
550.141 (1984). The regulations define "standby" status as those
periods when the employee "is not required to perform actual work and is
free to eat, sleep, read, listen to the radio, or engage in other
similar pursuits." Id., Section 550.143(e).
(2) Federal employees engaged in fire protection activities may be
entitled to compensation for overtime work under either 5 U.S.C. Section
5542 or the FLSA, 29 U.S.C. Section 201 et seq. If an employee is
entitled to compensation under both laws, that employee receives
compensation under whichever law provides the greater overtime benefit.
See, e.g., 54 Comp. Gen. 371 (1974). Payment for irregular overtime
periods of less than 24 hours will generally result in greater benefits
if calculated under the provisions of 5 U.S.C. Section 5542.
(3) It is not clear from the record before us whether VA implemented
its plan to eliminate 12-hour tours following receipt of OPM's letter.
B-129874, 63 Comp. Gen. 624
To The Honorable Jeremiah Denton, United States Senate, September 26,
1984:
Members of Congress complained that Federal judges have been
expending Federal funds to engage in lobbying activities on legislation
affecting the Federal judiciary through the Judicial Conference, the
Federal Judges Association and directly by contacting Members of
Congress regarding legislation. Allegations of lobbying were contained
in newspaper articles indicating that judges were contacting Members of
Congress on legislation. Federal judges are not prohibited by 18 U.S.C.
1913 and the anti-lobbying provisions contained in the annual Treasury,
Postal Service and General Government Appropriation Act from expressing
their views on legislation directly to Congress or the public. There
was no evidence that Federal judges expended appropriated funds to
engage in grass roots lobbying campaigns that are prohibited by these
statutory provisions.
This is in response to a March 2, 1984 joint letter from you,
Senators East and Symms, and a May 4, 1984 letter from you, requesting
this Office to determine whether the Federal judiciary is improperly
using Federal funds to lobby Congress. You cited information contained
in two newspaper articles as possibly constituting evidence of
improprieties on the part of Federal judges in utilizing Federal funds
to influence legislation pending before Congress. We obtained a report
from the Director, Administrative Office of the United States Courts,
concerning the issues raised in your letter. On the basis of our review
of the allegations and the information contained in the Administrative
Office Report, we have not found any evidence of violations of
anti-lobbying statutory restrictions.
The primary allegations of lobbying were contained in a Friday,
November 4, 1983, Los Angeles Times article entitled "U.S. Judges New
Court Legislators" by Jim Mann, a Times staff writer. The article
states that Federal judges are becoming more interested in influencing
legislation through such measures as individual direct contacts with
their congressional representatives, conducting grass roots campaigns,
and forming trade associations.
The Times article points out that Federal judges have two
organizations that keep track of legislation of concern to the judiciary
and represent their interests in Congress. The organizations are the
Judicial Conference of the United States and the Federal Judges
Association. The article recognizes that the Judicial Conference was
created by Congress as an official organization within the Federal
judiciary.
One statute that prohibits Federal officers and employees from using
Federal funds for lobbying activities is found in 18 U.S.C. Section
1913, entitled "Lobbying with appropriated moneys." It provides as
follows:
Section 1913. Lobbying with appropriated moneys
No part of the money appropriated by any enactment of Congress
shall, in the absence of express authorization by Congress, be
used directly or indirectly to pay for any personal service,
advertisement, telegram, telephone, letter, printed or written
matter, or other device, intended or designed to influence in any
manner a Member of Congress, to favor or oppose, by vote or
otherwise, any legislation or appropriation by Congress, whether
before or after the introduction of any bill or resolution
proposing such legislation or appropriation; but this shall not
prevent officers or employees of the United States or of its
departments or agencies from communicating to Members of Congress
on the request of any Member or to Congress, through the proper
official channels, requests for legislation or appropriations
which they deemed necessary for the efficient conduct of the
public business.
Whoever, being an officer or employee of the United States or
of any department or agency thereof, violates or attempts to
violate this section, shall be fined not more than $500 or
imprisoned not more than one year, or both; and after notice and
hearing by the superior officer vested with the power of removing
him, shall be removed from office or employment.
To our knowledge, there has never been a prosecution under this
statute. Moreover a review of the case law indicates that only a few
Federal court decisions have cited the statute. See for example,
National Association for Community Development v. Hodgson, 356 F. Supp.
1399 (D.D.C. 1973) where the court denied a motion to dismiss a cause of
action brought to enforce 18 U.S.C. Section 1913 and American Public Gas
Association v. Federal Energy Administration, 408 F. Supp. 640 (D.D.C.
1976) and American Trucking Association v. Department of Transportation,
492 F. Supp. 566 (D.D.C. 1980), where the courts denied injunctions
against these agencies distributing publications favoring deregulation
of the industries represented by the plaintiff associations.
Since the above statute contains fine and imprisonment provisions,
its enforcement is the responsibility of the Department of Justice. Six
years ago, the Attorney General requested his legal counsel to render an
opinion on the propriety of comments by judicial officers on legislation
directly affecting the judiciary in light of the restrictions contained
in 18 U.S.C. Section 1913. The Memorandum Opinion of the Attorney
General (Applicability of Anti-Lobbying Statute (18 U.S.C. Section 1913)
-- Federal Judges, 2 Ops O.L.C. 30, 31 (1978)) stated that:
The limited legislative history demonstrates that its enactment
was spurred by a single, particularly egregious instance of
official abuse -- the use of Federal funds to pay for telegrams
urging selected citizens to contact their congressional
representatives in support of legislation of interest to the
instigating agency. See 58 Cong. Rec. 403 (1919). The provision
was intended to bar the use of official funds to underwrite agency
public relaitons campaigns urging the public to pressure Congress
in support of agency views.
The Department of Justice, in analyzing the meaning of the exception
for official views, concluded that:
The thrust of this language is to recognize the danger of ultra
vires expressions of individual views in the guise of official
statements. Congress did not define the scope of the term
"official channels"; rather, it recognized the need for
monitoring the opinions expressed under color of office in order
to insure a consistent agency position. This difficulty is not
removed by a direct solicitation of an individual official's views
by a Member of Congress.
*
In light of the context in which the language was adopted, it
is particularly inappropriate to engage in legalistic arguments as
to whether a Federal judge, who lacks any direct superior, speaks
"through proper channels" whenever the judge takes a position with
respect to matters of judicial concern. Instead, it must be
recognized that Congress' intent was to leave to the other
branches of government the determination of what internal checks
and methods of clearance would be appropriate. Id. at 32.
The Department of Justice has interpreted the "official channels"
exception in 18 U.S.C. Section 1913 as permitting Federal judges to
expend appropriated funds for the purpose of contacting members and
committees of Congress to express their views on legislative issues.
Under this interpretation of the statute, judges would be permitted to
either utilize the Legislative Affairs Office of the Judicial Conference
to contact members or to contact the members directly to express their
views on legislation of interest to the judiciary. Unlike other Federal
officials and employees, Federal judges have no direct superior to
prescribe official channels of communication to express their views to
Congress. Accordingly, each Federal judge may arguably act as an agency
spokesperson and express his or her view on legislation that would have
an impact on the judiciary.
Since the early 1950's, various appropriation acts have contained
provisions prohibiting the use of appropriate funds for "publicity or
propaganda" purposes to influence legislation. The acts appropriating
funds for the Federal judiciary do not contain any such restrictions.
On the other hand, the annual Treasury, Postal Service, and General
Government Appropriations Act, provides:
No part of any appropriation contained in this or any other
Act, or of the funds available for expenditure by any corporation
or agency, shall be used for publicity or propaganda purposes
designed to support or defeat legislation pending before Congress.
(Italic supplied.)
The above-quoted provision applies to the use of any appropriation
"contained in this or any other Act." Thus, it is conceded by the
Administrative Office of the United States Courts to be applicable to
the use of appropriated funds by the Federal judiciary, which receives
its appropriations in the annual Departments of Commerce, Justice, and
State, the Judiciary, and Related Agencies Appropriations Act. /1/
In interpreting "publicity and propaganda" provisions such as the one
quoted above, this Office has recognized that every Federal agency has a
legitimate interest in communicating with the public and with Congress
regarding its policies and activities. This interpretation of the
"publicity and propaganda" provision applies to the Federal judiciary as
well as to agencies in the other branches of Government. If an
executive branch agency or the Federal judiciary is affected by pending
legislation, discussion by officials of the issues raised by the
legislation will necessarily, either explictly or by implication, refer
to it and will presumably be either in support of or in opposition to
it. An interpretation of the above-quoted provision which strictly
prohibited expenditures of public funds for dissemination of views on
pending legislation would consequently preclude virtually any comment by
Government officials on the policies of their agencies, a result we do
not believe was intended.
In our view, Congress did not intend, by enactment of measures such
as the one quoted above, to prohibit Government officials, including
Federal judges, from expressing their views on pending legislation.
Rather, the above-quoted prohibition applies primarily to expenditure
for grass roots lobbying campaigns involving appeals addressed to
members of the public suggesting that they contact their elected
representatives to indicate support of or opposition to pending
legislation, or to urge their representatives to vote in a particular
manner. The foregoing general considerations form the basis for our
determination in any given instance of whether there has been a
violation of the anti-lobbying restriction contained in the annual
Treasury, Postal Service, and General Government Appropriations Act. 56
Comp. Gen. 889 (1977) and 60 Comp. Gen. 423 (1981).
The following discussion of the allegations contained in the Times
article and the issues raised in the request letter is based on our
interpretation of the anti-lobbying appropriation restriction, discussed
above. In summary, the Times article indicates that Federal judges have
involved themselves in the following activities in an attempt to
influence legislation.
1. The Judicial Conference has established a legislative
affairs office to provide liaison with the Congress.
2. Federal judges have established the Federal Judges
Association, a private membership organization, designed to
promote the legislative objectives of Federal judges.
3. Federal judges, individually, have been contacting Members
of Congress in an attempt to influence legislation in which they
are interested.
4. The Federal Judges Association is attempting to organize a
grass roots movement.
The Judicial Conference is the policy making body of the Federal
Judiciary and acts under the authority contained in 28 U.S.C. Section
331. The Conference is vested with the primary responsibility for
formulating comments and recommendations on legislation affecting the
administration of justice. The Conference formulates its policy
recommendations through a system of eight standing and seven special
committees. Responses prepared by these committees to congressional
inquiries are coordinated by the Administrative Office of the United
States Courts. The Chief Justice of the United States, as presiding
officer, formally communicates recommendations and proceedings of the
Conference to the Congress biannually.
Preliminary analyses of proposed legislation which may impact upon
the judiciary or improve the administration of justice are performed by
members of one of the Conference committees. The chairperson of a
committee is authorized to present the views of the Judicial Conference
on matters within the jurisdiction of his or her committee or to
delegate that authority.
The Legislative Affairs Office within the Administrative Office,
which is staffed by four attorneys and three supporting personnel, is
responsible for responding to congressional requests, informing the
Conference and its committees of the status of legislation affecting the
judiciary, and coordinating the preparation of technical legal advice
and impact assessments of pending legislation on the judiciary.
The Administrative Office has advised us that with rare exceptions
the Conference limits its comments and recommendations to issues
directly affecting the administration of justice or the operation of the
Federal court system. That office has further advised us that the
Conference has taken action to insure that appropriated funds are not
expended for nonofficial purposes. In this regard, the Conference
adopted regulations in September 1982 that provide:
A judicial officer may be reimbursed for travel to testify
before a Congressional Committee on behalf of the Judiciary only
if he has been designated to do so by the Presiding Officer of the
Judicial Conference, a chairman of a Judicial Conference
Committee, or the Director of the Administrative Office. No
reimbursement may be made for appearances before a Congressional
Committee or subcommittee if a judicial official is representing a
private group or association, or himself, nor may reimbursement be
made for appearances in cases in which a judge solicits a
Congressional panel or Member to obtain an invitation to testify
for purposes of expressing his or her personal opinions. In the
latter two instances a judicial officer may choose to testify, but
reimbursement from funds appropriated for the administration of
the judicial branch may not be made. Proceedings of the Judicial
Conference of the United States, September 1982, at 75.
The Administrative Office states that it is unaware of any instances
in which a Federal judicial officer or employee has expended Federal
funds in violation of the anti-lobbying statutes or judicial conference
regulations.
The Administrative Office points out that the Judicial Conference has
occasionally expended appropriated funds to express its views on pending
legislation as follows:
* * * Funds have occasionally been expended in explaining
Judicial Conference views on legislation in response to legitimate
inquires from the organized bar where proposals under discussion
might have an impact upon the federal court system. Those
occasions have also, of course, permitted the bar to place before
the Conference its views, which the Conference should consider in
formulating recommendations. That mutual "information process"
has never involved a request by the Judicial Conference for public
support of legislation comporting with the Conference's
recommendations. The Judicial Conference and this Office will not
condone activity that goes beyond informing the Congress and the
legal profession of the Judiciary's views on the scope, terms and
impact of pending legislation.
In addition to recommendations made by the Conference,
individual judges often have a duty to inform the Congress of
problems peculiar to their districts or circuits. For example,
the Judicial Conference has historically deferred to district
courts on matters of particular local concern, such as
recommendations concerning statutorily designated places of
holding court. The impact of any such proposal upon a specific
court is best known to the judges who serve that particular
district court and the Representatives and Senators elected from
that particular state. Each judge's oath of office and Canon 4(b)
sustain the conclusion that they have a duty to communicate their
concern to Members of Congress concerning proposals that affect
the administration of justice in their own courts.
As mentioned earlier, we have not construed the anti-lobbying
appropriation restriction as prohibiting public officials from
expressing their views on pending legislation either to the Congress or
to the public. Accordingly, we do not believe that officials of the
Judicial Conference are prohibited by statute from expanding
appropriated funds to explain their views on pending legislation either
to the Congress or to the public. On the other hand, the anti-lobbying
restriction does apply to expenditures for grass roots lobbying
campaigns involving direct appeals addressed to the public exhorting
them to contact Members of Congress to indicate their support of or
opposition to pending legislation. There is no evidence presented by
the referenced articles that appropriated funds have been used by
officials of the Judicial Conference for grass roots lobbying
activities.
On page 2 of the request letter, the point is made that 28 U.S.C.
Section 331 requires the Chief Justice to "submit to Congress an annual
report of the proceedings of the Judicial Conference and its
recommendations for legislation." It is argued that this provision
should be interpreted as authorizing only the Chief Justice to recommend
legislation. Under the strict construction, the Chief Justice would
personally be required to submit recommendations for legislation and
other Federal judges would be prohibited from expressing recommendations
on legislation.
Based on a review of the provisions of the entire statute and its
legislative history, we find nothing to support such a rigid
interpretation. We believe Congress intended to make the Chief Justice,
as the senior official in the judicial branch and Chairman of the
Conference, responsible for submitting the annual report of the
Conference and its recommendations for legislation. However, this does
not mean that he is precluded from delegating portions of this function
to other members of the Conference and to the Administrative Office so
long as he remains responsible to insure that the requirements are
accomplished. The recommendations are not those of the Chief Justice
alone, but are a product of the collective effort of the members of the
Conference.
Congressional committees considering proposed legislation on subjects
of interest to the judiciary often request members of the appropriate
Conference committee, as expert witnesses, to provide testimony on the
matters contained in such legislation. The Administrative Office of the
Courts states that the interaction between the Judicial Conference and
the Congress is so extensive that it would be impossible for the Chief
Justice to personally satisfy these congressional requirements and to
accomplish his other responsibilities. For these reasons, we agree with
the Administrative Office that the provisions of 28 U.S.C. Section 331
should not be construed as precluding members of the Judicial Conference
from expressing their views on proposed legislation that affects the
judiciary.
With regard to the establishment of the Federal Judges Association,
that organization is a private, voluntary membership organization with
no official connection to the Federal Government. To our knowledge, it
receives no appropriated funds. The June 13, 1981 Washington Post
article "Judges Act to Organize for Salaries, Benefits" indicates that
the financial support of the Association is primarily derived from
membership dues. Although the Association engages in grass roots
lobbying activities, presumably with the assistance of its member
judges, we have not uncovered any evidence that Federal judges use their
official time, clerical staff, office supplies, or facilities in support
of this Association objective, which would involve the use of Federal
funds for an illegal purpose. Inasmuch as no Federal funds are
involved, the anti-lobbying restrictions would not be applicable to the
Association and similar organizations.
Finally, there is the issue of Federal judges directly contacting
Members of Congress in an attempt to influence pending legislation.
Although we have no evidence that any such direct contacts have
occurred, the Times article and the request letter raise the possibility
that Federal judges are expending appropriated funds through the use of
their office telephones, office equipment and secretarial staffs to
telephone or write letters to their congressional contacts expressing
their views on legislation. As explained earlier, we have never
construed the anti-lobbying appropriations restrictions as prohibiting
executive agency officials from expressing their views on legislation
either directly to Congress or to the public. We believe this exception
should apply to Federal judges on the same basis as it applies to
executive agency officials. Accordingly, we do not believe that a
Federal judge would be prohibited by the above-quoted anti-lobbying
appropriation restriction from expending appropriated funds to directly
contact a Member of Congress and express his or her views on pending
legislation. On the other hand, the appropriation restriction would
prohibit a Federal judge from expending Federal funds, by utilizing his
official time and office facilties, to organize a grass roots campaign
to influence legislation. However, we have no evidence that any Federal
judge has expended Federal funds to exhort the public to contact Members
of Congress in an attempt to influence legislation. While the Times
article indicates that the Federal Judges Association refers to itself
as a grass roots movement, it does not expend Federal funds on such
activities. Consequently, it does not come within the ambit of the
appropriation restriction.
In summary, our review of the Times article and an administrative
report that we obtained from the Administrative Office of the Courts
does not reveal any evidence that Federal judges have been violating
applicable anti-lobbying appropriation restrictions.
(1) The annual Treasury Department et al. apprwpriation act for
fiscal year 1984 (H.R. 4139) did not pass the Senate and was
incorporated by reference in Pub. L. No. 98-151, Nov. 14, 1983, 97 Stat.
964, a fiscal year 1984 continuing resolution. H.R. 4139 did not
contain the anti-lobbying appropriation restriction quoted above. Hence
the restriction was not applicable for most of fiscal year 1984.
B-215269, 63 Comp. Gen. 621
Matter of: Private Vincent A. Manaois, September 25, 1984:
A service member on emergency leave who was not advised that he was
authorized to travel on Government transportation in connection with his
leave obtained transportation at his own expense. Travel allowances are
not payable for the costs of the travel performed or necessitated solely
by reason of leave, since such travel is considered as performed for
personal reasons, rather than on public business, and although an Army
regulation authorizes military air transportation in kind, there is no
entitlement to commercial air transportation.
A service member on emergency leave was not informed prior to
departure that he could be authorized Government transportation in
connection with his leave and obtained transportation at his own
expense. We are asked whether he may be reimbursed for his purchase of
an airline ticket where travel was performed prior to the issuance of
leave orders. /1/ Members on emergency leave are authorized to travel
on military-owned or controlled aircraft on a space-required basis, but
travel allowances are not payable for travel on leave by commercial
carrier since such travel is performed for personal reasons rather than
on public business.
Private Vincent A. Manaois departed from Fort Bragg, North Carolina,
on emergency leave on December 5, 1983. He was not given proper
assistance or guidance prior to leaving because an inexperienced service
member was on duty at the time of his departure. Emergency leave orders
were not issued for him nor was he informed that he could be authorized
military transportation from California to his destination in Hawaii.
Further, he was informed that he would have to obtain transportation to
his leave address at his own expense. Thereafter, he purchased an
airline ticket from San Francisco, California, to Honolulu, Hawaii.
While in Hawaii Private Manaois was assisted in obtaining leave
orders and return transportation to Fort Bragg. Orders were issued by
the Commander, United States Army Support Command, Hawaii, dated
December 19, 1983, authorizing 22 days emergency leave effective
December 6, 1983, and directing travel by military-owned or controlled
aircraft from Honolulu, Hawaii, to Los Angeles, California. Private
Manaois claims reimbursement for transportation expenses to Hawaii since
he could have been authorized to travel by Government transportation if
he had been given correct information prior to his departure on leave.
The applicable Army Regulation (AR) provides in pertinent part:
Transportation for service members on emergency leave is
authorized at Government expense via military-owned or controlled
aircraft, on a space-required basis, from the port of embarkation
in the area of the member's duty station to the port of
debarkation in the area where the emergency exists, and return
when required, and between overseas areas. AR 630-5, paragraph
6-10a (change 3, May 15, 1979).
See also Department of Defense Regulation 4513.13-R, January 1980,
paragraph 3-3b(3).
Under regulations prescribed by the Secretaries concerned, a member
of a uniformed service is entitled to travel and transportation
allowances for travel under orders, upon permanent change of station or
otherwise, or when away from his designated duty station. 37 U.S.C.
Section 404. Joint Travel Regulations, Volume 1 (1 JTR), paragraph
M3050-1, issued pursuant to this authority, provides that members are
entitled to these allowances only while actually in a travel status and
they shall be deemed to be in a travel status while performing travel
away from their permanent duty station on public business, pursuant to
competent travel orders. And paragraph M6454, 1 JTR, expressly provides
that expenses incurred during periods of travel under orders not
involving public business are not payable by the Government. Further,
paragraph M6453, 1 JTR, provides that an order permitting a member to
travel as distinguished from directing a member to travel does not
entitle him to expenses of travel.
It is well established that travel allowances are for the purpose of
reimbursing members for expenses incurred in complying with travel
requirements imposed on them by the bona fide needs of the service and
are not intended to compensate members for the costs of travel
necessitated by solely personal considerations. Similarly, travel
allowances are not payable for travel performed or necessitated solely
by reason of leave, since such travel is considered as performed for
personal reasons rather than on public business. 49 Comp. Gen. 663, 666
(1970); and 54 Comp. Gen. 641, 643 (1975).
In a similar case we held that an Army member who was prevented from
using Government aircraft for travel on emergency leave because his
orders were incorrectly issued could not be reimbursed the cost he paid
for commercial travel. In that case, we noted that the enabling
regulation created only an eligibility for military air transportation
in kind and not an entitlement to reimbursement for air transportation
in general. See Staff Sergeant John Osterman, USA, B-205455, September
23, 1982.
Although Army Regulation 630-5 as quoted above authorizes air
transportation at "Government expense" it also provides that Government
expense refers to the amount which the sponsoring command is required to
pay Military Airlift Command for space required travel. We have not
viewed this internal financing of Government furnished air travel as
being prohibited under the rule discussed and have uniformly applied the
rule against payment of travel cost involved in leave taken by a member
of the uniformed services.
Private Manaois traveled under verbal or permissive orders on
emergency leave which is not considered on public business. Subsequent
orders merely created an eligibility for military transportation in kind
and did not authorize payment for the cost of a commercial carrier.
Staff Sergeant John Osterman, USA, B-205455, supra. Although Private
Manaois was not informed of his entitlement to Government transportation
by military aircraft from San Francisco to Honolulu, there is no
authority in the statutes or the regulations authorizing a travel
allowance to reimburse him for expense of commercial airline travel.
/2/
(1) Major D.C. Clagett, Jr., Finance Officer, Fort Bragg, North
Carolina, submitted this request for a decision and it has been assigned
POTATAC control number 84-10 by the Per Diem, Travel and Transportation
Allowance Committee.
(2) We note that round-trip commercial transportation for a member
assigned to a permanent duty station outside the United States may be
provided to the United States, Alaska, Hawaii, Puerto Rico, or
possessions of the United States, incident to emergency leave granted
for reasons of personal emergency. 1 JTR, paragraph M5800-1; 37 U.S.C.
Section 211d. However, that travel is specifically authorized by law
and no similar authorization exists for members assigned to duty
stations in the United States.
B-214559, 63 Comp. Gen. 620
Matter of: Coast Counties Express, Inc., September 25, 1984:
Motor common carrier transportation wholly within a single state,
preceded or followed by overseas transportation by privately owned
vessels in private carriage, is not interstate or foreign commerce under
the Interstate Commerce Act and is not subject to charges applicable to
interstate or foreign commerce.
Coast Counties Express, Inc. (CCEI), requests, pursuant to the
provisions of section 322 of the Transporation Act of 1940, as amended,
31 U.S.C. Section 3726(d)(1) (1982), and 4 C.F.R. 53 (1984), review of
the recovery by the General Services Administration (GSA) of $1,731.12
on 17 shipments of Government property.
We agree with the action by GSA.
Eight of the shipments in question were transported in
Government-owned ships from overseas points to the Naval Weapons
Station, Concord, California, and there tendered to CCEI for movement to
various points in California. The remaining shipments were tendered to
CCEI at various points in California and moved to Concord, California,
where the shipments were loaded onto Government-owned ships for movement
to overseas points. Each of the Government bills of lading (GBL's) was
marked either "imported" or "exported" with a code designation for the
overseas point of origin or destination together with the identity of
the ship.
For the transportation services rendered, CCEI collected charges
including a fuel-surcharge applicable to interstate or foreign commerce.
On audit of the payments, GSA determined that the transportation
services performed were intrastate and the fuel-surcharges were not
applicable. Therefore, GSA assessed overcharges in the amounts of the
fuel-surcharges, which were subsequently recovered by administrative
set-off.
In Ex Parte No. 311, June 1, 1979, June 14, 1979, and April 9, 1980,
the Interstate Commerce Commission (ICC) authorized regulated carriers
to publish a fuel-surcharge to be paid to the party which actually bore
the increased fuel costs. Apparently, CCEI provided for such
fuel-surcharges in rate tenders filed with the Government. Copies of
the tenders have not been made a part of the record. However, there is
no contention that the fuel-surcharges apply unless the transportation
services are interstate or foreign commerce regulated under the
Interstate Commerce Act, 49 U.S.C. Section 10101 (1982).
CCEI contends that the fuel-surcharge is applicable because the
shipments were either imported or exported from or to foreign overseas
points or territories or possessions of the United States. GSA contends
that the shipments are wholly intrastate because the transportation by
carrier for hire was wholly between points in California and the
overseas transportation was private carriage in Government-owned ships.
The Interstate Commerce Commission (ICC) has held that motor common
carrier transportation wholly within a single state following
transportation from overseas by privately owned vessels is not subject
to the economic regulation of the ICC. Allen-Investigation of
Operations and Practices, 126 M.C.C. 336 (1977).
CCEI contends that the ocean transportation was not private carriage
because the ships were not owned by the Government, they carried
property owned by others, for which a charge was made and, therefore,
should be treated as carriage by common carrier. However, no evidence
has been submitted by CCEI in support of these allegations and GSA
states the ships were owned by the Government, operated by the United
States Navy and are used solely for the transportation of explosives.
Accordingly, we conclude that the ships were privately owned rather than
common carriers.
Therefore, the transportation services performed by CCEI for GSA were
not interstate or foreign commerce under the Interstate Commerce Act, 49
U.S.C. Section 10101 (1982), and were not subject to the fuel-surcharge.
CCEI also contends that it relied on the notations on the GBL's
showing import and export and collected the fuel-surcharges which were
passed to the owner-operators who performed the transportation services
for CCEI. However, the GBL's also named intrastate origins and
destinations and, in connection with the export or import notations,
named the Government-owned ships involved.
Accordingly, we find the deductions to have been proper.
B-212703, B-212703.2, 63 Comp. Gen. 610
Matter of: Alan Scott Industries; Grieshaber Manufacturing Company,
Inc., September 25, 1984:
To the extent that the protester is arguing that the awardee cannot
perform the contract in accordance with all its terms, this allegation
involves a matter of the awardee's responsibility. This Office will not
review an affirmative determination of responsibility unless the
protester shows possible fraud on the part of contracting officials or
alleges that the solicitation contains definitive responsibility
criteria which have been misapplied.
Whether the awardee will perform the contract in accordance with all
its terms is a matter of contract administration, which is the
responsibility of the contracting agency and is not encompassed by our
bid protest function.
A determination concerning price reasonableness is a matter of
administrative discretion involving the exercise of business judgment by
the contracting officer. We will not question that determination unless
it is clearly unreasonable or there is a showing of bad faith or fraud.
Solicitation clause reserves to the Government the right to select
samples of supplies contracted for at any stage of production, for
testing at a Government laboratory, which shipment of the supplies to be
withheld until the contractor is advised of approval of the samples. We
determined in a previous decision that this clause meets a legitimate
agency requirement for verification of the suppliers' compliance with
its contractural obligation to test its own products prior to the
shipment to the Government.
While there way a delay in the protester's filing of its Freedom of
Information Act (FOIA) request, that delay was not sufficient to
constitute lack of due diligence.
The awardee did not correctly fill out its Buy American Act
certification to certify that its offered items were participating
country end products. However, the items offered could be identified as
participating country end products elsewhere in the offer and by
reference to other sources. Therefore, the awardee's offer was eligible
for foreign qualifying country status and was correctly evaluated on an
equal basis with an offer of domestic end product.
The concept of responsiveness, which applies to bids submitted in
formally advertised procurements, is not directly applicable to
proposals submitted in a negotiated procurement which are initially
determined to be technically acceptable.
Discussions occur if an offeror is given an opportunity to revise its
proposal or if the information requested and provided is essential for
determining the acceptability of a proposal.
Communications confirming on offeror's capability to perform are for
the purpose of determining responsibility and do not constitute
discussions under negotiated procurement if no opportunity is given to
modify a proposal.
Grieshaber Manufacturing Company, Inc. (Grieshaber), and Alan Scott
Industries (ASI) protest the award to the Surgical Instrument Company of
America (SICOA) by the Defense Logistics Agency (DLA) under request for
proposals (RFP) No. DLA120-83-R-0688. The contract was for the supply
of a quantity of retractors, which are surgical instruments.
We dismiss in part and deny in part both protests.
Eight offers were received in response to the RFP and four were
rejected. Of the offers remaining, SICOA's offer of $24.59 was lowest,
while Grieshaber's was the next low at $24.97. ASI's offer of $35.85
was the highest received.
The contracting officer determined that there was adequate price
competition and that there were no negotiable issues. Therefore,
according to DLA, no discussions were conducted and the evaluation and
award were based on initial offers.
Pursuant to the Buy American Act, 41 U.S.C. Section 10a-d (1982), and
implementing regulations, Defense Acquisition Regulation (DAR) Section
6-104.4, reprinted in 32 C.F.R. Pts. 1-39 (1983), the RFP provided that
offers of "domestic end products" and offers of foreign products from
"qualifying countries" would be preferred over offers of products from
sources in nondomestic, nonqualifying countries. This preference was to
be accomplished by the addition of an evaluation differential to offers
from nondomestic, nonqualifying country sources.
The contracting officer determined that SICOA did not offer a
domestic end product. It was also determined, however, that the items
offered by SICOA were "represented to be participating country end
products, as defined by DAR Section 6-001(f)" and no differential was
added to its offer for evaluation purposes. Since Grieshaber offered
domestic end products, no differential was added to its offer for
evaluation purposes.
The contracting officer requested a complete preaward survey of SICOA
and its subcontractors to assure that SICOA was capable of furnishing a
product complying with the specifications and qualifying as a
participating country end product. In its report to this Office, DLA
stated:
The report of the pre-award survey . . . indicated that SICOA
was capable of furnishing a conforming item and otherwise
complying with the representations and certifications contained in
its offer.
Award to SICOA was made on July 27, 1983.
ASI contends that SICOA cannot provide the required item in
accordance with the specifications at the agreed price of $24.59 if the
items are "totally produced in West Germany," the qualifying country.
ASI also argues that the price, $24.59, is excessive and offers to
provide the solicited items at a price of $15.85 each, "exclusive of
clause E33," which is discussed below.
To the extent that ASI is arguing that SICOA cannot perform the
contract in accordance with all its terms, this allegation involves a
matter of the awardee's responsibility. However, DLA determined SICOA
to be responsible. This Office will not review an affirmative
determination of responsibility unless the protester shows possible
fraud on the part of contracting officials or alleges that the
solicitation contains definitive responsibility criteria, which have
been misapplied. James M. Smith, Inc., B-213063, Oct. 12, 1983, 83-2
C.P.D. Paragraph 459.
Additionally, whether SICOA will perform the contract in accordance
with all of its terms is a matter of contract administration which is
the responsibility of the contracting agency and is not encompassed by
our bid protest function. Surgical Instrument Company of America,
B-214918, May 22, 1984, 84-1 C.P.D. Paragraph 551.
These bases of protest are dismissed.
ASI also contends that the agreed price of $24.59 is excessive.
However, the contracting officer determined $24.59 to be a fair and
reasonable price based on effective competition. We consistently have
held that a determination concerning price reasonableness is a matter of
administrative descretion involving the exercise of business judgment by
the contracting officer. We will not question that determination unless
it is clearly unreasonable or there is a showing of bad faith or fraud.
Honolulu Disposal Service, Inc. -- Reconsideration, 60 Comp. Gen. 642
(1981), 81-2 C.P.D. Paragraph 126.
As explained above, four of the eight offers submitted were found
unacceptable. After the rejection of these four offers, SICOA's offer
of $24.59 was the next lowest available. There was adequate competition
and the award price was determined reasonable.
To the extent that ASI is objecting to the inclusion of clause E33 in
the RFP, we have previously considered and denied this issue. See Alan
Scott Industries, B-199662, et al., Jan. 27, 1981, 81-1 C.P.D. Paragraph
44. Clause E33 (previously identified as clause I14) reserves to the
Government the right to select samples of the supplies contracted for,
at any stage of production, for testing in a Government laboratory, with
shipment of the supplies to be withheld until the contractor is advised
of approval of the samples. We determined in Alan Scott Industries,
B-199662, supra, at 2, that this clause meets a legitimate DLA
requirement for verification of the supplier's compliance with its
contractual obligation to test its own instruments prior to shipment to
the Government.
These bases of ASI's protest are denied.
Grieshaber contends that SICOA's proposal was not acceptable as
initially submitted and was not evaluated in accordance with the
solicitation. Grieshaber also contends that DLA conducted negotiations
with SICOA while not affording Grieshaber the same opportunity as
required by 10 U.S.C. Section 2304 (1982) and DAR Section 3-805,
reprinted in 32 C.F.R. pts. 1-39 (1983). Also, according to Grieshaber,
DLA improperly refused to consider it eligible for a labor surplus area
(LSA) evaluation perference on the ground that Grieshaber failed to
indicate in its offer that it was an LSA firm.
DLA argues that Grieshaber did not timely file its protest and did
not diligently pursue information necessary for its protest under the
Freedom of Information Act (FOIA), 5 U.S. Code 552 (1982). DLA points
out that notice of award was mailed to Grieshaber on July 27, 1983, and
that Grieshaber did not protest the LSA issue to DLA until August 19,
1983. DLA contends that this protest was received later than the 10
days allowed under our Bid Protest Procedures, 4 C.F.R. Section
21.2(b)(2) (1984). DLA also argues that if the protest to the agency is
considered timely filed, Grieshaber on July 27, 1983, and that
Grieshaber did not protest the initial adverse agency action as required
by 4 C.F.R. 21.2(a). DLA considers its letter, dated August 29, 1983,
to Grieshaber to be "initial adverse agency action" on the protest to
the agency. DLA also contends that since there was a 2-month delay
between notice of award and the request for information under the FOIA,
the protester did not diligently pursue information under the FOIA as
required.
Under our Bid Protest Procedures, a protest not received at GAO
within 10 working days after the protester knew or should have known the
basis of its protest is untimely. 4 C.F.R. Section 21.2(b)(2) (1984).
When a protest is filed initially with the contracting agency, a
subsequent protest to GAO must be filed within 10 working days after the
protester learns of the initial agency action on the protest. 4 C.F.R.
Section 21.2(a) (1984).
We find that Grieshaber untimely filed its protest of DLA's refusal
to consider it eligible for an LSA evaluation preference. In its
initial protest to the agency, Grieshaber raised the issue and, in a
letter dated August 29, the contracting officer stated that Grieshaber's
failure to complete the LSA clause precluded consideration of that firm
as an LSA. Grieshaber did not protest to this Office until November 10,
more than 10 days after the initial adverse agency action on its protest
to DLA. Crawford Technical Services Inc., B-215407, June 20, 1984, 84-1
C.P.D. Paragraph 653. Therefore, this basis of protest is untimely and
will not be considered.
However, Grieshaber is timely as to its other allegations. The other
three bases of protest concern SICOA's offer and communications between
DLA and SICOA. Grieshaber did not have notice of these bases for
protest until it received DLA's FOIA response on October 31, 1983. It
was not until this date that the protester became aware of the contents
of SICOA's offer and the communications between DLA and SICOA. Upon
receipt of the FOIA response, Grieshaber protested to this Office on
November 10, within 10 working days of discovering these bases of
protest.
We also find that Grieshaber pursued its protest and its FOIA request
with due diligence. By letter of July 27, Grieshaber learned only of
the award of the contract. In its August 29 letter, the contracting
officer responded to Grieshaber's protest to the agency. On September
23, Grieshaber filed its FOIA request. Grieshaber filed its protest
with GAO within 10 working days of the receipt of the material requested
under the FOIA. While there was a delay of approximately 1 month in
filing the FOIA request, we do not think that the delay was sufficient
to constitute a lack of due diligence. Work System Design, Inc. --
Reconsideration, B-200917.2, Dept. 29, 1981, 81-2 C.P.D. Paragraph 261.
Therefore, these issues will be considered on the merits.
Grieshaber's principal contention is that SICOA's offer was not
evaluated in accordance with the terms of the solicitation. Grieshaber
argues that, under a proper evaluation, Grieshaber's would have been the
low evaluated offer. Grieshaber also argues that certain omissions on
SICOA's part should have resulted in the rejection of SICOA's offer as
unacceptable.
First, Grieshaber argues that some Buy American Act price
differential should have been applied to SICOA's price since, according
to Grieshaber, SICOA failed to certify that itsoffered product was a
"participating country end item."
The RFP included the standard Buy American Act clause, DAR Section
7-104.3, and the standard Buy American Act certificate, DAR Section
7-2003.47. That certificate, clause K20 of the RFP, required that
offerors certify in part "a" that each "end product" was a domestic end
product except those that are listed as "Excluded End Products." SICOA
listed "ALL ITEMS" as "Excluded End Products," thereby certifying that
no end products offered were of domestic origin. The certificate also
required offerors to list the "Country of Origin" of all excluded end
products. In this blank, SICOA inserted "See Confidential Letter." The
referenced letter stated:
Please be advised that the items marked See Confidential Letter
in the above referenced bid is as follows:
Perfect Chirurgical Instruments Gmbh
Heidelberg, West Germany
Part "b" of the certificate stated in part:
Offers will be evaluated by giving certain preferences to
domestic end products and foreign qualifying country end products
over foreign nonqualifying country end products. In order to
obtain such preferences in the evaluation of each excluded end
product listed in (a) above, it is necessary that offerors
identify and certify, below, those excluded end products
identified above that are qualifying country end products or they
will be deemed nonqualifying country end products. Offers must
certify by inserting the applicable line item numbers in the
appropriate brackets:
Part "b" also contained three blanks to indicate that excluded end
products were "participating country end products," "FMS/offset
arrangement country end products," or "defense cooperation country end
products." SICOA's offer had no entries in part "b" of the certificate.
Part "a" of SICOA's offer indicated that no offered end products were
of domestic origin and Grieshaber contends that part "b" did not contain
a proper certification that SICOA's offered end products were qualifying
country end products. Therefore, according to Grieshaber, SICOA's end
products should have been deemed "non-qualifying country end products"
and, under part "b," some evaluation preference should have been given
to Grieshaber's all domestic offer.
DLA contends that SICOA's product could be identified as a
participating country end product despite the failure to certify it as
such in the certificate. DLA argues that SICOA's product was identified
as West German in the attached letter and that West Germany is
identifiable as a participating country by reference to other sources.
We agree with DLA.
Under part "b" of the Buy American Act certificate and DAR Section
6-104.4(b), a domestic offer and an offer of "qualifying country end
product" are evaluated equally, with no evaluation preference added.
Under part "b" of the certificate, "participating country end products"
are one type of qualifying country end product; therefore,
participating country end products are evaluated as equal to domestic
end products.
DAR Section 6-001.5(c) defines a "participating country" as:
A NATO country which has a Memorandum of Understanding (MOU) or
similar agreement with the U.S. and for which a blanket
Determination and Finding was made by the Secretary of Defense
waiving the Buy American Act restrictions. These countries are
listed at Section 6-1401.
The Federal Republic of Germany (West German) is listed in DAR
Section 6-1401 as a country with a Memorandum of Understanding with the
United States; therefore, West Germany is a participating country.
Since SICOA certified that all of its offered items were West German
"end products," those items are "participating country end products."
SICOA's offer of participating country end products or qualifying
country end products, as defined by part "b" of the certificate, was
correctly evaluated on an equal basis with Grieshaber's offer of
domestic end products. DAR Section 6-1401.4(b), supra.
Grieshaber also points out that SICOA failed to complete clause L36
of the RFP, which was to identify offered supplies to be accorded
duty-free entry. According to Grieshaber, this failure should have
resulted in DLA using SICOA's duty-inclusive price of $27.54 for
evaluation purposes rather than the duty-exclusive price of $24.59.
Grieshaber argues that since its price of $24.97 was lower than SICOA's
duty-inclusive price, the award to SICOA was improper.
We do not agree. Clause H75 of the RFP, "Duty Free Entry-Qualifying
Country End Products and Supplies" (DAR Section 7-104.32), provides for
the exclusion of duty from the price of all end items, which constitute
"qualifying country end products." As we explained above, SICOA offered
qualifying country end products. Therefore, SICOA's offer was evaluated
on the basis of its duty-exclusive price as required by clause H75.
Grieshaber also contends that SICOA's failure to complete clause K55
should have been cause for the rejection of its offer. Clause K55
required offerors to specify contract end items or supplies which had
been or would be imported and used for contract performance.
Although SICOA failed to complete clause K55, this information was
available elsewhere in the offer so this failure was not fatal. As we
explained above, SICOA in clause K20 of its proposal and in the enclosed
letter identified all end items to be of West German origin.
Grieshaber also contends that SICOA failed to properly complete
clause K39, which required offerors to list places of performance.
Rather than list its foreign source of supply, SICOA entered in clause
K39 "see Confidential Letter Enclosed," which was a reference to the
letter discussed above. Grieshaber contends that reference to the
enclosed letter "does not satisfy the requirement to identify the U.S.
source of specialty metal (i.e., steel)."
Grieshaber also argues that clause K76 of the RFP required the
rejection of SICOA's offer. That clause stated:
Bidders are cautioned that material elements of the bid --
those elements relating to price, quantity, quality or delivery --
must be subject to public disclosure. Submittal of such data as
privileged information will render the bid nonresponsive and the
bid will be rejected.
Contrary to Grieshaber's contention, there was no requirement that
SICOA list its source of specialty metal. Clause I42, "Preference For
Domestic Specialty Metals," only required that offerors certify that
specialty metals to be furnished had been or would be melted in the
United States. SICOA complied with this requirement.
Also, the provison quoted above did not require the rejection of
SICOA's offer. That provision uses the term "nonresponsive." The
concept of responsiveness, which applies to bids submitted in formally
advertised procurements, is not directly applicable to proposals
submitted in a negotiated procurement, which are initially determined to
be technically acceptable, as was the case here. Computer Network
Corporation; Tymshare, Inc., 56 Comp. Gen. 245, at 256 (1977), 77-1
C.P.D. Paragraph 31. Therefore, failure to comply does not require
rejection as would be required in an advertised procurement.
Grieshaber also contends that SICOA's proposal was not accepted as
initially submitted, but was revised following discussions with SICOA in
violation of 10 U.S.C. Section 2304(g) and DAR Section 3-805, which
require discussions with all offerors in the competititve range.
Grieshaber contends that the contract award document (Standard Form
26) contains evidence that SICOA's proposal was not accepted as
initially submitted. Block 26 of that document adds to the final
contract two letters from SICOA to contracting officials. Grieshaber
argues that the first letter, dated April 9, 1983, extended the
acceptance time and delivery schedule and the second letter, dated July
6, 1983, refers to talks with the agency concerning "such things as
matte finish versus mirror finish and whether the retractor offered by
SICOA contained variations from the solicitation specifications."
Grieshaber also contends that a May 13, 1983, letter to DLA from
SICOA is evidence of improper discussions. That letter identifies the
source of "US steel" in clause K39 of the RFP as Carpenter Technology
Corporation. Grieshaber argues that this information was necessary to
determine the compliance of the proposal with the mandatory requirement
that specialty metals be of United States origin.
As explained above, DLA asserts that no negotiations were conducted
with any offeror and that evaluation and award were made on the basis of
initial offers as allowed by the solicitation.
Although, generally, in negotiated procurements, discussions are
required to be conducted with all offerors in a competitive range, there
are exceptions to this rule. One such exception is where the record
shows the existence of adequate competition to ensure that award will
result in a fair and reasonable price, provided that the solicitation
advised offerors of the possibility that an award might be made without
discussions. D-K Associates, Inc., B-213417, Apr. 9, 1984, 84-1 C.P.D.
Paragraph 396. However, where discussions are held with one offeror,
they must be held with all offerors in the competitive range. New
Hampshire-Vermont Health Service, 57 Comp. Gen. 347 (1978), 78-1 C.P.D.
Paragraph 202. We have held that discussions occur if one offeror is
given an opportunity to revise or modify its proposal. Discussions also
occur when the information requested and provided is essential for
determining the acceptability of a proposal. John Fluke Manufacturing
Company, Inc., B-195091(1), Nov. 20, 1979, 79-2 C.P.D. Paragraph 367.
As Grieshaber contends, the April 9 letter extended the acceptance
time and the delivery date. However, this letter does not indicate that
discussions were held with SICOA, since SICOA was not given an
opportunity to revise its proposal. The letter merely confirmed that
the eventual delivery date would be extended in accordance with clause
F09 of the RFP. That clause based the delivery schedule on award of the
contract within 30 days after the initial closing date and automatically
extended the delivery schedule by the number of calendar days after the
closing date that the contract was in fact awarded.
The July 6 letter, which Grieshaber also contends was an indication
of discussions, concerned the evaluation of preaward samples. The
letter confirmed that SICOA's samples had "matte finish" rather than
"mirror finish" as required by the specifications.
The samples were submitted pursuant to clause M22, "Pre-Award
Sample(s)," which required the submission of samples prior to award.
That clause stated in part:
The samples referred to in the preceding paragraphs are not bid
samples; rather, these samples are for the purpose of
establishing the offeror's capability, if awarded a contract, to
produce items conforming to the specifications.
*
Offerors are cautioned that upon receipt of any award
hereunder, they are obliged to deliver supplies which comply with
the specifications regardless of whether any sample submitted
hereunder deviates in any way from the specification requirements.
As the quoted language indicates, the samples were for the purpose of
confirming the offeror's capability to produce conforming items -- in
other words, to determine the prospective awardee's responsibility.
Communications, such as the July 6 letter, confirming the offeror's
capability to perform, do not constitute discussions if no firm is given
an opportunity to modify its proposal. Con Diesel Mobile Equipment
Division, B-201568, Sept. 29, 1982, 82-2 C.P.D. Paragraph 294. Also, as
clause M22, supra, indicates, the submitted samples had no effect on
SICOA's obglication to comply with the specifications.
The May 13 letter to DLA indicated that the steel to be used by SICOA
was to be purchased from Carpenter Technology Corporation. Grieshaber
contends that this information was necessary to determine the compliance
of SICOA's proposal with the requirement that the steel offered, a
specialty metal, be of United States origin. We do not agree. As we
explained above, there was no requirement that offerors identify
suppliers of specialty metals; clause I42 only required offerors to
identify the country in which specialty metals were to be melted. The
purpose of the letter was to confirm the representation of United States
specialty metal in SICOA's offer and did not modify that offer, so it
did not amount to discussions. John Fluke Manufacturing Company, Inc.,
B-195091(1), supra.
For the reasons above, we dismiss the protests in part and deny them
in part.
B-216209, 63 Comp. Gen. 608
Matter of: Department of Army - Request for Advance Decision,
September 24, 1984:
Payment of withheld contract funds that are claimed by the
contractor's payment bond surety, which, pursuant to its obligation,
paid an amount to subcontractors in excess of the amount remaining to be
paid under the contract, may be made to the surety. Contractor's debts
to its subcontractors on a different contract do not impact on this
result because subcontractors do not have privity with the Government.
Payment of withheld contract funds should not be made except pursuant
to an agreement by the parties or pursuant to an order by a court of
competent jurisdiction where contracting officer failed to insure that a
valid Miller Act payment bond was furnished by the contractor, the
contractor has not fully paid its subcontractors, and where the relative
rights of the parties competing for the (limited) funds remain unclear.
By letter dated August 22, 1984, the Chief, Finance and Accounting
Division, Directorate of Resource Management, Army Corps of Engineers
(Army), requested a decision of our Office in regard to the disbursement
of funds withheld under two contracts, DACA65-82-C-0081 (contract 81)
and DACA65-82-C-0154 (contract 154), between Eastern Building Services,
Inc. (Eastern), and the Army.
Work under contract 81 was substantially completed, but Eastern
failed to pay all of its creditor-subcontractors. The Wausau Insurance
Company (Wausau) has claimed the balance to be paid under this contract,
$16,188, because pursuant to its obligations as Eastern's payment bond
surety, it paid out over $30,000 to Eastern's subcontractors. Citing
United Electric Corporation v. United States, 647 F.2d 1082 (Ct. Cl.
1981), cert. denied 454 U.S. 863, 102 S. Ct. 322 (1981), the Army
recognizes that since performance has been completed and since Wausau
has paid its principal's obligations, Wausau is subrogated to Eastern's
right to the unpaid portion under Eastern's contract. See also Pearlman
v. Reliance Insurance Company, 317 U.S. 132, 83 S. Ct. 232, 9 L Ed.2d
190 (1962).
What concerns the Army, however, is whether the unpaid amount under
contract 81 should be set off by the Government to pay Eastern's
subcontractors not protected by a surety bond under contract 154, rather
than being paid to Wausau.
Since the subcontractors under contract 154 lack privity of contract
with the United States, they do not have standing to sue the Government
for payment under contract 154. See United Electric Corporation v.
United States, supra. Therefore, the payment bond surety is entitled to
payment of the retained funds under contract 81. See Barrett v. United
States, 367 F.2d 834 (Ct. Cl. 1966); United Pacific Insurance Co. v.
United States, 319 F.2d 893 (Ct. Cl. 1963).
Approximately 4 1/2 months after award of contract 154 was made to
Eastern, the Army discovered that Eastern never submitted valid Miller
Act performance and payment bonds. Attempts to get Eastern to secure
valid bonds failed. With approximately $27,000 in work left to be
performed, Eastern ceased functioning as a corporate entity. Eastern
allegedly has no assets.
Eastern's subcontractors content that Eastern owes them a total of
$64,584. Eastern disputes the allegation that $30,363.56 is owed to one
of the subcontractors, H.D. Cleghorn Excavating Co. (Gleghorn), and
contends that Gleghorn is indebted to Eastern in an amount in excess of
$11,700.
According to the Army, exclusive of liquidated damages and the
estimated cost of completion of the contract, a balance of $14,569
remains to be paid under the contract. The Army requests that our
Office decide what to do with the remaining contract funds.
The Army informs us that at least one subcontractor plans to initiate
a tort claim against the Army under the Federal Tort Claims Act, 28
U.S.C. Sections 2764 et seq. (1976), for the value of the services
furnished to Eastern under its contract, basing its claim on the alleged
negligent failure of the contracting officer to require that Eastern
furnish a valid payment bond. We note, however, that such claims have
been held to be not cognizable under the Federal Tort Claims Act. See,
e.g., Bob Bates, B-205165, Jan. 8, 1982, 82-1 C P.D. Paragraph 25;
McMann v. Northern Pueblos Enterprises, 594 F.2d 784 (10th Cir. 1979);
Devlin Lumber & Supply Corp. v. United States, 488 F.2d 88 (4th Cir.
1973) (per curiam).
In view of the disagreement between at least one of Eastern's
subcontractors and Eastern regarding the amount owed by Eastern it would
not be possible to conclusively determine administratively the rights of
all the parties. The ascertainment of the facts regarding these issues
is properly for determination by a court. Although there is no privity
between the United States and materialmen (Eastern's subcontractors) so
as to warrant the settlement of their claims by the Government (see
B-174534, Dec. 10, 1971), it has been recognized that the Government has
a nonenforceable equitable obligation to see that subcontractors are
paid, which is generally released by the presence of reliable payment
bond sureties. See United States Fidelity & Guaranty Co. et al. v.
United States, 475 F.2d 1377 (Ct. Cl. 1973); United States v. Munsey
Trust Co., 332 U.S. 234 (1947), 67 S. Ct. 1599, 91 L. Ed. 2022. In the
circumstances of this case, where the contractor admits that it has not
fully paid its subcontractors, where there is no surety to pay the
subcontractors, where it appears that there will be excess retained
contract funds in the hands of the Government, and where the relative
rights of the parties competing for the funds remain unclear, we
recommend that Army retain the funds and not make payment except
pursuant to an agreement by all of the parties or pursuant to an order
by a court of competent jurisdiction. See B-158142, Feb. 14, 1966.
B-214781, 63 Comp. Gen. 603
Matter of: John J. Jennings, September 24, 1984
Under regulations in effect at the time an Internal Revenue Service
employee transferred to a new duty station in August 1981, lump-sum loan
origination fees paid in connection with the purchase of his new
residence are considered charges imposed as part of the cost of
obtaining credit, and as such are not reimbursable.
IRS employee cannot be reimbursed for local house-hunting travel
performed by private automobile over a several-month period incident to
buying a residence in the vicinity of his new duty station. The
regulations applicable at the time of his transfer allow one round trip
from old to new duty station and back prior to the employee's reporting
date at the new duty station. Local travel to be reimbursable must be
in connection with that one hosue-hunting trip.
Postage for correspondence with realtors incident to transfer to a
new duty station is allowable as a reimbursable miscellaneous expense.
Also, postage expense for notifying subscription publishers, financial
institutions, and the like, of change of address now may be allowed as a
reimbursable miscellaneous expense since such costs are inherent in a
change of residence. Overrules, in part, B-183789, Jan. 23, 1976.
Postage expenses incurred to obtain general information about the
environs of the new duty station to which an employee is being
transferred may not be reimbursed as a miscellaneous expense. While
such information may be desirable, the expense of obtaining it is not an
inherent part of the move.
The issues for our determination in this case are whether Mr. John J.
Jennings, an Internal Revenue Service employee, can be reimbursed for:
a loan origination fee incurred in purchasing a new residence, local
house-hunting travel via a privately owned automobile, and postage
stamps used for change of address notifications and correspondence with
agencies to secure information. /1/ We hold that, in accordance with
the applicable regulations of May 1973 which excluded reimbursement of
finance charges, the employee is not entitled to reimbursement of the
lump-sum loan origination fee since it was considered a finance charge
under 12 C.F.R. Section 226.4(a). Also, the employee may not be
reimbursed for local house-hunting travel. Postage costs for
correspondence with realtors and for notifying subscription publishers,
financial institutions, and the like, of change of address may be
included in reimbursable miscellaneous expenses. However, postage
expenses incurred to obtain general information about the environs of
the new duty station may not be included in miscellaneous expenses.
Mr. Jennings was officially authorized a change in duty post from
Augusta, Maine, to Louisville, Kentucky, in 1981. Mr. Jennings reported
to duty at Louisville on August 16, 1981, and his family arrived there
on December 1, 1981. A 6-day house-hunting trip was authorized in
connection with his relocation but he made no claim for this expense.
Instead, Mr. Jennings used his private automobile intermittently over a
several-month period after reporting to his new duty station to look for
permanent housing in the Louisville area. The agency disallowed Mr.
Jennings' milegage allowance claim for this travel citing sections
531(1) and 532(5) of Internal Revenue Manual IRM 1763 (Travel Handbook).
These sections allow an employee one round trip (from old duty station
to new station and back) to seek new residence quarters and then only
when the trip is accomplished prior to the employee's reporting date at
the new duty station. Reasonable expenses for local transportation at
the new duty station in connection with this house-hunting trip are also
allowed.
Mr. Jennings eventually purchased a residence on December 8, 1982,
and was paid allowable closing costs. He subsequently submitted a
voucher for a $400 lump-sum loan origination fee which was returned
unpaid. Although present Federal Travel Regulations (FTR) FPMR 101-7,
Part 6, Section 2-6.2(d) (October 1, 1982), allow reimbursement of loan
origination fees, the agency denied reimbrusement arguing that Mr.
Jennings' relocation entitlements and allowances should be determined by
using regulations in effect on the employee's effective date of
transfer, August 16, 1981, at which time the regulations did not provide
for reimbursement of lump-sum loan origination fees.
Mr. Jennings' claim for $22 in postage was denied because it combined
charges for postage for correspondence with realtors as well as postage
for correspondence with agencies to secure information and postage for
change of address notifications. The agency, citing Gregory J.
Cavanagh, B-183789, January 23, 1976, informed Mr. Jennings he could
only be reimbursed for the portion of the voucher covering postage for
correspondence with realtors.
The disagreement between the Internal Revenue Service and Mr.
Jennings concerning the loan originaiton fee stems from the
interpretation of present provisions of FTR paragraph 2-6.1 (effective
October 1, 1982), dealing with the conditions and requirements under
which expenses incurred in connection with residence transactions are
allowable. Paragraph 2-6.2(d)(1)(b) now includes loan origination fees
as an allowable expense. Mr. Jennings cites an October 14, 1982
Internal Revenue Service memorandum from the Deputy Commissioner and a
local Internal Revenue Service memorandum dated October 25, 1982, as
authority for his interpretation that the above regulations apply to him
and allow his reimbursement. In the latter memorandum the Assistant
Regional Commissioner described the time limitations controlling
reimbursement of relocation expenses under the present FTR:
I want to emphasize that these new regulations are effective
for all transfers where the reporting date to the new post of duty
is October 1, 1982 or later. However, transfers with earlier
reporting dates may benefit from one of the new regulations in
that an extension of an additional year to purchase or sell a
residence may be allowed, provided that the entitlement period for
the purchasing or selling of a residence has not expired before
August 23, 1982.
The Deputy Commissioner's memorandum includes similar language.
The Certifying Officer, however, indicates that it is his view that
only the new provision authorizing an extension of time to purchase a
residence applies to Mr. Jennings and not the new provision authorizing
reimbursement of loan origination fees. In this regard, FTR paragraph
2-6.1(e)(3) specifically provides the following guidance concerning the
effective date of the new provision added by Supplement 4 which was
effective October 1, 1982:
(3) Applicability. In addition to being applicable to those
employees transferred on or after the effective date of this
supplement (October 1, 1982), the provisions for extension of the
time limitation contained in (2), above (extension of time
limitation), shall also, be applicable to employees whose time
limitation will not have expired prior to the issuance date
(signature date) of this supplement 4 to these regulations;
provided that when such an extension is approved by an agency,
relocation entitlements and allowances shall be determined by
using the entitlements and allowances prescribed by regulations in
effect on the employee's effective date of transfer and not the
entitlements and allowances in effect at the time the extension of
the time limitation is approved.
The "effective date of transfer" for purposes of relocation
entitlement and allowances under the FTR is the date an employee reports
to his new duty station. See FTR paragraph 2-1.4j and Stephen J.
Musser, B-213164, February 22, 1984. The effective date of transfer for
Mr. Jennings, therefore, was August 16, 1981, the date he reported to
his new duty post in Louisville. As such Mr. Jennings has no
entitlement to reimbursement for his loan origination fee under the
present FTR. All of his allowable expenses must instead be provided for
by regulations in force at the time he reported to Louisville. James C.
Troese, B-211107, June 10, 1983; Harvey C. Varenhorst, B-208479, March
16, 1983.
In Musser an employee received a permanent change-of-station
assignment from Houston, Texas, to Dallas, Texas, effective August 23,
1981. In November 1982 he purchased a permanent residence in
Richardson, Texas. We found the applicable FTR paragraph 2-6.2(e) (May
1973), which was in effect at the time he reported to his new duty
station, prohibited reimbursement for any item of real estate expense
which was determined to constitute a finance charge under Regulation Z,
12 C.F.R. Section 226.4, which included a lump-sum loan origination fee.
See also Troese, B-211107, supra; and Varenhorst, B-208479, supra.
Accordingly, Mr. Jennings is not entitled to be reimbursed for the loan
origination fee.
Mr. Jennings states that upon arrival at his new duty station he "did
not charge the government for a (prior) six day house-hunting trip" but
instead he incurred expense searching for a permanent residence in the
vicinity of his duty station. His search was done on his "own time"
over an 18-month period. The $36 claimed represents "10 to 15% of (the)
total miles traveled." Mr. Jennings claims he saved the Government money
using this procedure. He indicates that the Internal Revenue Service's
interpretation of the regulations so as to preclude reimbursement to him
is unduly restrictive.
The statutory authority for reimbursement of travel incident to a
civilian employee's seeking permanent residence quarters is found at 5
U.S.C. Section 5724a(a)(2), which under such regulations as the
President may prescribe, allows payment of the expenses only for "one
round trip in connection with each change of station of the employee."
The implementing regulations applicable to Mr. Jennings' travel are
found in FTR Part 4 (May 1973). Paragraph 2-4.1 expressly conditions
reimbursement upon such house-hunting travel being completed prior to
reporting to the new official station. Sheryl Templeman, B-212261,
February 6, 1984. While paragraph 2-4.2 (Supp. 4, April 1977) allows
expenses for local transportation in the locality of the new official
station such transportation is in connection with the one house-hunting
round trip described in paragraph 2-4.1. Cecil D. Lewis, B-203196,
February 3, 1982.
Therefore, Mr. Jennings is not entitled to reimbursement for the
local house-hunting travel he claims.
Pursuant to the Internal Revenue Service's request for itemization
Mr. Jennings has submitted a listing of the postage expenses for which
he claims reimbursement:
Postage with realtors.........................................$9.00
Postage with agencies to secure information
re: Louisville, environs, schools, etc........................3.00
Postage incident to providing change of address notification
to financial institutions, subscriptions, etc..................10.00
..............................................................$22.00
The Internal Revenue Service advised Mr. Jennings that only the
expense of the postage for correspondence with realtors may be allowed.
Mr. Jennings argues that postage for change of address notifications
as well as for securing information relating to schools, local
government, etc., are an "integral part" of every relocation and as such
should be reimbursed. Applicable regulations, FTR paragraph 2-3.1(a)
(May 1973), state that miscellaneous costs will be allowed for expenses
"common to living quarters, furnishing, household appliances, and to
other general types of costs inherent in relocation of a place of
residence." This allowance does not cover "costs or expenses incurred
for reasons of personal taste or preference and not required because of
the move * * * expenses brought about by circumstances, factors or
actions in which the move to a new duty station was not the proximate
cause." Under FTR paragraph 2-3.3(a)(2) (May 1973) the allowable amount
of miscellaneous expense is equal to the lesser of $200 or the
equivalent of 2 weeks basic pay for an employee with immediate family.
An allowance in excess of this $200 amount must be documented and cannot
exceed the 2-week pay cap.
As the Internal Revenue Service recognizes, we have allowed postage
for correspondence with realtors as reimbursable miscellaneous expenses.
Erwin E. Drossel, B-203009, May 17, 1982. We have also allowed postage
expenses incurred to return an employee's license plates, as required by
law, to his previous state of residence. Bruce L. Burchman, B-194851,
April 8, 1980. However, we have disallowed claims for postage used to
notify magazine publishers and creditors because that expense did not
come within the "purview" of the applicable regulations and thus was not
allowable. Gregory J. Cavanagh, B-183789, January 23, 1976. We have
always considered the nature of the item claimed to determine whether it
was contemplated as reimbursable under the regulations. Cyrus E.
Phillips IV, B-205695, August 2, 1982.
We have reexamined our position concerning postage expenses incurred
to provide change-of-address notices for magazine subscriptions,
financial institutions, and the like. We now find that although such
expenses are not specifically provided for in the regulations, they are
expenses normally required in connection with and inherent in a change
of residence. Accordingly, we will no longer follow the rule stated in
the Cavanagh case concerning these expenses, and therefore, Mr.
Jennings' $10 claim for those expenses may be allowed if the agency
determines it to be otherwise proper.
Mr. Jennings' claim for postage expenses incurred to obtain general
information about Louisville and environs may not be allowed since,
although that information may have been desirable, it was not an
inherent part of the move.
(1) This matter was presented to us for advance decision by G.
Fannin, Authorized Certifying Officer, U.S. Department of the Treasury,
Internal Revenue Service.
B-213665, 63 Comp. Gen. 599
Matter of: Booz, Allen & Hamilton, September 24, 1984:
Issues raised after initial protest was filed are dismissed as
untimely because they are new grounds of protest and were not raised
within 10 working days of the protester's knowledge of them, as required
by General Accounting Office Bid Protest Procedures.
Protest that cost realism analysis performed by agency was
unreasonable is denied where agency generally used rates suggested by
Defense Contract Audit Agency and where possible errors resulted in
minor cost changes. Allegations of bias in cost realism analysis are
not supported by record.
Protest that awardee's hiring of an agency employee involved in this
procurement during procurement may have biased procurement is denied
where record shows no evidence of bias and protester has not provided
"hard facts" showing bias.
Booz, Allen & Hamilton (Booze, Allen) protests the award of a
contract to Rail Company (Rail) to provide support for the F-18 Program
and Avionics Systems Office, under request for proposals (RFP)
N00019-82-Q-0010, issued by the Department of the Navy, Naval Air
Systems Command (Navy). Booz, Allen argues that the award was improper
because the Navy's analysis of the realism of Booz, Allen's proposed
costs was flawed and because the Navy did not conduct meaningful cost
discussions, since it raised Booz, Allen's proposed cost without
resolving the differences with Booz, Allen. Booz, Allen also contends
that its proposal may have been compromised and the procurement biased
by a Navy employee who had worked on the program and then was hired by
Rail during the procurement. Booz, Allen also asserts that Rail should
have been barred from competing because it may have performed work under
a previous contract, including drafting personnel qualifications for
this solicitation, which may have given it an unfair advantage in this
procurement.
We dismiss the protest in part as untimely and deny it in part.
The RFP advised offerors that the contemplated contract would be a
cost-plus-fixed-fee contract, with a 3-year term. The solicitation
stated that technical factors were of primary importance, but that if
technical proposals were essentially equal, award could be made to the
low-cost offeror. The solicitation further provided that proposed costs
would be evaluated for realism.
After a competitive range determination and discussions, the first
best and final offers of Booz, Allen and Rail were evaluated thusly:
....................Technical.....Proposed.....Evaluated
......................Score.........Cost..........Cost
Rail..................78.8.......$9,856,006.....$10,016,062
Booz,Allen............75.6.......$9,824,541.....$11,118,579
After this evaluation, the Navy discovered that funds were not
available for a 3-year contract. The solicitation was amended to
provide for 1 base year and two 1-year options. The Navy then asked for
second best and final offers. In addition, the Navy provided written
statements of cost deficiencies to the offerors. The second best and
final offers were evaluated as follows:
....................Technical.....Proposed.....Evaluated
.......................Score........Cost.........Cost
Rail.................. 77.8........$9,808,979.....$9,752,743
Booz,Allen............ 72.1........$8,803,377.....$9,954,965
Rail was selected for award because it had the highest technical
score and the lowest evaluated cost.
We find Booz, Allen's arguments that meaningful cost discussions were
not held and that Rail should have been barred from competing to be
untimely. Booz, Allen first raised these issues in its comments on the
Navy's report -- several months after filing its protest. We have held
that separate grounds of protest raised after a protest has been filed
must independently meet our timeliness standards. Annapolis Tennis
Limited Partnership, B-189571, June 5, 1978, 78-1 C.P.D. Paragraph 412.
Booz, Allen knew of these grounds of protest at the same time that it
learned of the grounds raised in its initial filing at a debriefing. At
that time, Booz, Allen knew that Rail had been permitted to compete,
notwithstanding its work on a previous contract, of which Booz, Allen
was aware. Booz, Allen also knew the amount by which the Navy had
raised its proposed cost, and it obviously knew the extent to which cost
discussions had been held with it. While Booz, Allen apparently
received documents from the Navy after the debriefing that may have
provided the basis for some details of its meaningful discussions
protest, the basis of the protest was known at the time of the
debriefing. Since Booz, Allen did not protest these issues until months
after the debriefing they are untimely.
Concerning the Navy's cost realism analysis, Booz, Allen essentially
argues that the Navy did not use the General and Administrative (G&A)
rate and overhead rate recommended by the Defense Contract Audit Agency
(DCAA), but instead arbitrarily used higher rates. Booz, Allen also
argues that the Navy improperly increased Booz, Allen's fixed fee so
that the same proportionate relationship was maintained between fixed
fee and costs as Booz, Allen had proposed. Booz, Allen further contends
that the Navy improperly applied the DCAA-recommended rate for average
wage increases. Finally, Booz, Allen claims that the Navy was biased
against it in the cost analysis.
We have consistently held that, in cost-reimbursement contracts,
evaluated costs are a better basis for judging the likely contract cost
than are proposed costs. See, e.g., Group Operation, Inc., 55 Comp.
Gen. 1315 (1976), 76-2 C.P.D. Paragraph 79. We recognize that the
evaluation of cost proposals is inherently subjective due to the
conjectural nature of proposed costs. Consequently, the evaluation of
proposed costs requires the exercise of informed judgment on the part of
procurement personnel. Grey Advertising, Inc., 55 Comp. Gen. 1111
(1976), 76-1 C.P.D. Paragraph 325. Therefore, in reviewing cost realism
determinations, we will accept the agency's judgment unless the
protester shows it to be clearly unreasonable. Id. at 28.
In evaluating Booz, Allen's proposed costs, the Navy used an overhead
rate of 21 percent, rather than the 14.1 percent proposed by Booz,
Allen, and a G&A rate of 10 percent, rather than the proposed 9 percent.
According to the Navy, the DCAA audit of Booz, Allen's second best and
final offer recommended a wide range of possible overhead rates. The
Navy states that it contacted DCAA by telephone and asked for a firmer
rate to apply, and that the rates recommended by a named DCAA auditor
were 20-22 percent for overhead and 10 percent G&A. A handwritten note
by a Navy employee states that these rates were provided over the
telephone by DCAA. The Navy states further that it asked for a
confirmation of the rates in writing several times and finally received
the confirmation in a DCAA memorandum, which states, in pertinent part:
Our estimate of 20 to 22 percent for an indirect rate in the
Logistics Support Center pool remains the same and again is based
upon a confirmed award assigned to the pool. As we informed you
before, any additional awards assigned to the pool could change an
indirect rate significantly depending on the magnitude of a base
used to allocate the indirect expenses.
Booz, Allen contends that DCAA never provided the 21-percent overhead
and 10-percent G&A rates orally and that the above-quoted statement does
not confirm the rates. Booz, Allen claims that the DCAA employee that
the Navy says gave it the rates denies that she provided those rates.
Booz, Allen states that, if asked by GAO, she would provide an affidavit
to that effect. Booz, Allen also argues that the above-quoted statement
does not confirm the rates used by the Navy. At the time that Booz,
Allen was competing for this contract, it was awarded another large
contract. The Logistics Support Center and the proposed rates were
predicated on Booz, Allen being awarded that contract and this one.
Booz, Allen points out that the above-quoted statement states that the
20-22-percent overhead is based on the confirmed award and than an
additional award could drop the rate significantly. By using the
20-22-percent rate, the Navy was improperly assuming that Booz, Allen
would not win this contract and reduce the rate. Booz, Allen also notes
that the 10-percent G&A rate is not in writing anywhere in the record
other than in the handwritten note by a Navy employee.
We think that there is really no dispute as to what is referred to in
the quoted statement. As Booz, Allen argues, that statement provides a
20-22-percent overhead rate based on the award of the other contract for
which Booz, Allen was competing. The Navy does not argue otherwise. We
do not think, however, that it was unreasonable for the Navy not to
reduce the overhead rate based on the assumption that Booz, Allen would
win this contract. The statement says that the rate could drop if
another contract is added to the pool, not that it will drop.
Additionally, the statement provides no other rate that the Navy could
apply. As the Navy points out, DCAA audits are advisory only; the
degree to which they are used is a matter for the contracting officer to
decide. Robert E. Derecktor of Rhode Island, Inc.; Boston Shipyard
Corp., B-211922, B-211922.2, Feb. 2, 1984, 84-1 C.P.D. Paragraph 140.
Booz, Allen has not shown that a lower rate should have been used or
that the Navy's rate was too high. Essex Electro Engineers, Inc.,
B-206012.3, Oct. 4, 1982, 82-2 C.P.D. Paragraph 307. In any event, as
discussed above, such rates are advisory only.
Booz, Allen also argues that the Navy's increase of its fee in
proportion to the amount that the Navy increased its costs is improper
because it assumes an illegal cost-plus-percentage-of-cost contract.
The Navy argues that this was done only for evaluation purposes, and
that does not fall within the prohibition. We find that the Navy should
not have increased the fee. The purpose of a cost realism analysis is
for the contracting agency to have an as accurate as possible picture of
what the contract will ultimately cost. Since the fee is fixed as
proposed, it is irrational to increase it in a cost realism analysis
because it cannot increase during contract performance. However, this
error resulted in such a small increase in cost that is is
inconsequential.
Booz, Allen also argues that the Navy misapplied DCAA's recommended
average wage increase rates for direct labor. We have examined the
direct labor costs suggested by DCAA and those used by the Navy and,
while the Navy costs are higher, they are very close. We note that the
DCAA audit report stated that the direct labor costs might be higher
than that recommended by the audit report. In light of that, we cannot
say that the Navy's analysis in this area was clearly unreasonable.
Booz, Allen cites a handwritten document entitled "Footnotes," in
which a Navy employee states, in relation to Booz, Allen's first best
and final offer, that Booz, Allen may be "buying in" and that revisions
may be needed in Booz, Allen's cost accounting standards disclosure
statement. Booz, Allen contends that these are incorrect statements
which show bias against Booz, Allen.
There is no evidence in the record that those statements played any
part in the cost evaluation. In fact, the record shows the opposite --
that the cost evaluation did not consider them. Consequently, we see no
evidence of bias.
In summary, we find that the Navy's cost realism analysis was
reasonable.
We note that Booz, Allen's own calculation of its costs, using its
version of DCAA's recommendations, shows its evaluated costs as only
$66,085 less than Rail's evaluated costs. Since Rail's technical
proposal was superior to Booz, Allen's and technical factors were of
primary importance, we could not say that award to Rail would be
improper, even if Booz, Allen's figure is used in the cost comparison.
Finally, Booz, Allen argues that a Navy employee hired by Rail during
the procurement might have had access to Booz, Allen's proposal and
might have compromised it, thus biasing the procurement. Booz, Allen
provides no evidence to that effect. The Navy states that the person in
question did not have access to proposals. The Navy Inspector General
found that there was no evidence supporting Booz, Allen's accusations.
We have held that the opportunity for bias is not a sufficient basis to
question an award of a contract, but that the protester must provide
"hard facts" showing actual bias. Pinkerton Computer Consultants, Inc.,
B-212499.2, June 29, 1984, 84-1 C.P.D. Paragraph 694. Booz, Allen has
provided no such evidence, nor is it otherwise available in the record.
B-212645, 63 Comp. Gen. 594
Matter of: Jack C. Smith, et al. - Per Diem on Temporary Duty -
Government Furnished Quarters - Barring Act, September 24, 1984:
are entitled to per diem for tours of temporary duty performed
Five employees of the Forest Service claim per diem for temporary
duty performed at seasonal worksites in Boise National Forest for
periods ranging from Oct. 1, 1976, through Nov. 10, 1982. Claims were
received in the General Accounting Office (GAO) on Aug. 9, 1983.
Portions of claims of two employees arising prior to Aug. 9, 1977, may
not be considered since the Barring Act, 31 U.S.C. 3702(b) (1982), bars
consideration of claims received by GAO more than 6 years after date
claims first accrued.
Five employees of the Forest Service performed temporary duty at
seasonal worksites in Boise National Forest. They were denied per diem
allowances because they were furnished Government quarters in lieu of
per diem in accordance with Forest Service regulations. Since the
employees maintained residences at their permanent duty stations and
incurred additional expenses for meals and miscellaneous items during
their temporary duty assignments, they are entitled to payment of a
reduced per diem.
This decision is in response to a request from Mr. John R. Nienaber,
Authorized Certifying Officer, National Fianance Center, United States
Department of Agriculture, as to whether Mr. Jack C. Smith, and three
other employees and a former employee of Boise National Forest, Forest
Service, United States Department of Agriculture (David F. Hale, Hugh J.
Irsh, Walter W. Thomas, and Robert R. Goodin),
at seasonal worksites.
The issue presented is whether an agency may provide living quarters
and utilities to employees on temporary duty in lieu of any payment of
per diem allowances. We told that the claimants are entitled to the
payment of reduced per diem allowances, except for the portions of their
claims which are time-barred for the periods more than 6 years prior to
receipt of such claims by this Office on August 9, 1983.
The employees are claiming per diem on the basis of our holding in
Frederick C. Welch, 62 Comp. Gen. 80 (1982). In the Welch case, a
Forest Service employee was assigned to a seasonal worksite for 6 months
and furnished Government quarters, while at the same time he maintained
a home at his official duty station, and thus incurred additional
expenses while at the seasonal worksite. We agreed with the Grievance
Examiner's determination that the employee was in a temporary duty
status and was entitled to per diem in accordance with the regulations
of the Forest Service.
The agency, through officials of the Boise National Forest, has
stated that in cases where summer and winter duty stations are involved,
it has always considered the winter station as the official duty station
and the summer station as a temporary duty station. The agency also
states that for several years it has issued personnel actions at the
beginning of the season transferring the employees to the summer
station, and then it has transferred them back to the winter station in
the fall. The agency states that these personnel actions were in error
because its intent was that the winter station remain the official duty
station and the summer station a temporary one.
The agency does not believe that the Welch case is applicable to the
present claims since, unlike the situation in the Welch case, it never
considered any of its employees to have dual duty stations. Further,
the agency furnished the employees housing (including utilities) in lieu
of per diem for the time spent at the summer duty station in accordance
with paragraph 1-1.3c(1) of the Forest Service Handbook 6509.33, which
has been in effect since 1973. The agency says that this management
option was provided them by the Forest Service Manual 6445.6-6, which
states that "an employee in travel status may be furnished seasonal
housing in lieu of per diem."
The site of the summer duty station, located in Lowman, Idaho, is 74
miles from Boise, Idaho, over a paved, well-maintained road. The agency
reports that the houses at Lowman are basic but well maintained and
include indoor plumbing, electric lights, hot and cold running water,
gas heating, refrigerators, stoves, and other basic furniture to insure
comfortable living.
The agency issued a personnel action in April 1978 transferring Mr.
Hale to Lowman, Idaho, and did not issue a personnel action returning
him to Boise until May 1983. However, the agency states that this was
an error and that Mr. Hale's official duty station during this period of
time was Boise. A similar situation also occurred in the case of Mr.
Thomas. The case of Mr. Goodin differs slightly from the other cases in
that his official duty station was Mountain Home, Idaho, and his
temporary duty station was Lester Creek, Idaho. However, the agency
says that this situation is comparable to the Lowman site. Mr. Goodin
is no longer employed by the Forest Service.
Since the issuance of the Welch decision, the agency has negotiated
an agreement with the union whereby it has agreed to pay a "field rate"
per diem, currently $11 per day, while employees are assigned to their
summer duty stations.
With this background in mind the certifying officer asks the
following questions:
1. Would the fact that the Forest had written regulations
available to all employees indicating that employees would be
furnished housing in lieu of per diem, while at their summer duty
station, preclude payment of the enclosed claims?
2. On the claims where a personnel action was never issued
returning the employees to Boise, would Lowman be considered their
permanent duty station, thus precluding payment of per diem?
3. Since the Forest, subsequent to the issuance of the Welch
decision, negotiated an agreement to allow employees per diem
while at the summer duty station, (does this) indicate that their
past policy was in error thus allowing the claims for per diem?
The Barring Act of October 9, 1940, as amended, now codified at 31
U.S.C. Section 3702(b) (1982), provides that every claim or demand
against the United States presented to the General Accounting Office
(GAO) must be received in GAO within 6 years from the date the claim
first accrued. The record shows that portions of the claims asserted by
Messrs. Smith (May 12, 1977) and Hale (October 1, 1976) arose prior to
August 9, 1977, since the employees first began serving at Lowman on the
earlier dates. Even if these portions of the claims might otherwise be
valid, they are barred and may not be considered by this Office since
they accrued more than 6 years prior to the date (August 9, 1983) the
claims were received by GAO.
Prior to addressing the specific questions asked by the certifying
officer, we note that the failure of agency officials to issue formal
personnel actions to Messrs. Hale and Thomas transferring them from
Lowman (temporary duty station) to Boise (official duty station) does
not affect the status of the employees' worksites. The determination of
what constitutes an employee's permanent duty station or headquarters is
a question of fact and is not limited by administrative determination.
An employee's headquarters has been construed to be the place where the
employee expects to spend the greater part of his time. Such a
determination is made based upon the employee's travel orders and where
necessary, from the character of the assignment, particularly the
duration of the assignment and the nature of the duty performed. Welch,
supra, and cases cited therein.
The facts show and the agency admits that the failure to issue
personnel actions returning Messrs. Hale and Thomas to their official
duty post, Boise, was an administrative error. Further, it is clear
that both the agency and the employees regarded the assignments as being
temporary, and regarded Boise, the permanent residences of the
employees, as their official duty station. Also, the employees lived in
seasonal facilities at Lowman while maintaining their permanent
residences in Boise. We shall therefore regard Boise as their official
duty station and Lowman as their temporary duty post even though
personnel actions were not issued returning Messrs. Hale and Thomas to
Boise. Question 2 is therefore answered "no." As to Mr. Goodin, we
shall consider his claim along with the other four employees inasmuch as
his situation, though occurring at different worksites, is analogous to
the claims arising at the Boise-Lowman worksites.
The general statutory authority for the payment of per diem
allowances is contained in 5 U.S.C. Section 5702 (1982) and provides, in
pertinent part, that "an employee while traveling on official business
away from his designated post of duty * * * is entitled to * * * a per
diem allowance * * * ." The implementing regulations, Federal Travel
Regulations, FPMR 101-7 (September 1981), provide, at paragraph 1-7.1a,
that "(p)er diem allowances * * * shall be paid for official travel."
Thus, Federal employees have a basic statutory entitlement to be paid
per diem allowances while traveling on official business away from their
official duty stations. At the same time, paragraph 1-7.3a of the FTR
states that it is the responsibility of the agency to authorize only
such per diem allowances as are justified by the circumstances affecting
the travel. Further, we have upheld the refusal by an agency to
authorize or approve the payment of any per diem where the employee was
performing temporary duty in close proximity to his official duty
station for a relatively short period of time, and where the employee
incurred no additional expenses. See 55 Comp. Gen. 1323 (1976); 31
Comp. Gen. 264 (1952); B-176477, February 1, 1973.
In the situation where an employee is performing temporary duty a
substantial distance from his or her permanent duty station, our
decisions have recognized that the required use of Government quarters,
with a consequent lowering of the rate of per diem, is permissible where
an appropriate administrative determination has been made that the use
of Government quarters is essential to the accomplishment of the mission
of the employee. B-177752, May 17, 1983. The record in this case
reveals that the agency has made such a determination because of
inadequate housing facilities for its employees in Lowman.
This Office has denied the payment of any per diem where the
employees incurred no additional living expenses or were provided both
quarters and meals. B-180111, March 20, 1974; Barbara J. Protts,
B-195658, March 19, 1980. However, we have also held that it is
unreasonable to deny the payment of a per diem allowance where the
employee has incurred additional expenses over those he or she would
have normally incurred had he or she remained at his or her designated
post of duty. 28 Comp. Gen. 192 (1948); 24 Comp. Gen. 179 (1944);
B-161048, April 11, 1967. We believe that the latter decisions are
applicable here. In arriving at this conclusion, we point out that FTR
paragraph 1-7.6f applies where meals and/or lodging are furnished
without charge or at a nominal cost by an agency at a temporary duty
station, and it states that an appropriate reduction shall be made from
the authorized per diem rate. Again, the payment of a per diem
allowance, though reduced, is contemplated. Only in the unusual
circumstance where the employee has not incurred any additional living
expenses is an agency justified, under the law and regulations, in not
paying any per diem allowance.
With respect to the instant claims, additional expenses were, in
fact, incurred by the five employees in that they were required to eat
in restaurants and purchase groceries in Lowman while still maintaining
their own residences in Boise. Further, groceries and other items were
priced significantly higher in Lowman than in Boise. Thus, failure to
pay the employees any per diem allowances was an unreasonable exercise
of the agency's discretionary authority to restrict the payment of per
diem where the employees incurred additional expenses by virtue of their
temporary duty assignments. We therefore conlude that the employees are
entitled to the payment of reduced per diem allowances. Question 1 is
answered in the negative and, therefore, we need not discuss the effect
of the negotiated rate of per diem as presented by Question 3.
Accordingly, Messrs. Jack C. Smith, David F. Hale, Hugh J. Irsh,
Walter W. Thomas, and Robert R. Goodin, are entitled to payment of
reduced per diem allowances at the prevailing "field rates" in effect
for the periods during which they performed temporary duty at Lowman and
Mountain Home, Idaho, except for periods of time prior to August 9,
1977, which are barred from consideration by the provisions of the
Barring Act, 31 U.S.C. Section 3702(b) (1982).
B-215680, 63 Comp. Gen. 592
Matter of: Joel L. Morrison - Reimbursement of Government Employees
for Transportation Purchased Through Travel Agents, September 18, 1984:
An employee who pays for travel on official business with more than
$100 of personal cash, contrary to Federal Travel Regulations para.
1-10.2b (September 1981), may be reimbursed if he provides a receipt or
other evidence of purchase.
Employee who purchased airline ticket for travel in March 1984, from
travel agent, may be reimbursed to the extent amount paid does not
exceed cost of ticket procured directly from carrier, even though change
to Federal Travel Regulations (Supp. 9, May 14, 1984) (FTR),
specifically allowing this result, was issued after travel was
completed. This addition of FTR para. 1-3.4b(2)(b) was not revision of
regulations, but instead was a clarification to bring FTR into accord
with General Accounting Office cases and provisions of Joint Travel
Regulations. Since record shows that employee had no alternative but to
use travel agent, reimbursement is allowed as limited above.
The question presented is whether a Federal employee traveling on
Government business may be reimbursed for travel expenses when the
employee: (1) expended more than $100 in cash contrary to the
provisions of Federal Travel Regulations, FPMR 101-7, para. 1-10.2b
(September 1981) (FTR); and (2) made use of a travel agent for a second
time. We hold that the employee, Mr. Joel L. Morrison, may be
reimbursed up to the amount he paid as long as it does not exceed the
cost of the transportation if it had been procured directly from the
carrier, as he had no reasonable alternative and undertook the trip in
the conscientious performance of his duties.
Mr. Morrison, an employee of the U.S. Geological Survey, Reston,
Virginia, is responsible for providing curriculum assistance, when
requested, to Historical Black Colleges and Universities (HBCU's). On
Thursday, March 22, 1984, he returned to his office late in the day to
find a request that he attend a meeting of the geography department at
Jackson State University, an HBCU institution in Jackson, Mississippi,
on Tuesday, March 27.
By the time he received this request, Mr. Morrison had already made
arrangements to spend Friday in Baltimore, Maryland, at Morgan State
University and Monday in Champaign, Illinois. The latter trip was at
the request and expense of the University of Illinois, which had already
issued him an airline ticket. Mr. Morrison's secretary, away at a 3-day
training course, could not be contacted to coordinate the Mississippi
trip through the proper channels. Because of the late time of day and
the immediate need to acquire airline reservations to include the
Mississippi trip with the Illinois trip, Mr. Morrison went to a private
travel agent and purchased an additional airline ticket with $435 of
personal cash.
Under FTR para. 1-10.2b Federal employees are prohibited from
spending more than $100 in personal cash for transportation services for
travel on official business. We have held, however, that employees who
can prove their cash expenditures in excess of $100 through a receipt or
other documentation, may be reimbursed. Esther O. Kaloa, B-198950, July
18, 1980: Maurice A. Parker, B-195218(1), October 3, 1979. Assuming
that Mr. Morrison can provide a receipt or similar evidence of purchase,
his use of more than $100 of personal cash is not a bar to
reimbursement.
Mr. Morrison's use of a travel agent poses a further problem. At the
time of Mr. Morrison's travel, Federal employees were prohibited from
using travel agents to procure transportation within the United States
for travel on official business. 4 C.F.R. Section 52.3 (1983).
Although this particular section of the Code of Federal Regulations with
its general prohibition against the use of travel agents was repealed
effective May 25, 1984 (49 Fed. Reg. 17721, April 25, 1984), Federal
employees are still restricted in the use of most travel agents. By
regulation published at 49 Fed. Reg. 22085, May 25, 1984, the Acting
Administrator of General Services restricted the use of travel agents by
Federal employees to agents with whom the General Services
Administration has entered into contracts. Since there is no indication
in the record that Mr. Morrison's travel agent had such a contract, his
use of the travel agent is improper even under the revised rules now in
effect.
However, we also have held that employees who inadvertently violate
this rule may be reimbursed for the amount that the Government would
have been required to pay had the transportation services been procured
directly from the carrier. Ernest Michael Ward, 60 Comp. Gen. 445
(1981); Seymour Epstein, B-213340, February 23, 1984. Both of these
cases take note of paragraph C2207 of Volume 2 of the Joint Travel
Regulations (JTR) which provides that an employee may be reimbursed if
he inadvertently purchases transportation services through a travel
agent. This provision goes on to provide that the employee should be
advised that he will be denied reimbursement if he again uses a travel
agent unless he can demonstrate that he had no alternative. Mr.
Morrison falls into this latter classification since he had previously
used a travel agent and had been so admonished.
There was no provision in the FTR that was comparable to the above
paragraph of the JTR when Mr. Morrison performed the travel at issue
here. However, the General Services Administration has now incorporated
the provision into the FTR as paragraph 1-3.4(2)(b), through GSA
Bulletin FPMR A-40, Supp. 9, 49 Fed. Reg. 20372, May 14, 1984. In the
"Explanation of Changes" included in Supp. 9, two of our decisions are
cited as support for the inclusion of paragraph 1-3.4b(2)(b) in the FTR,
59 Comp. Gen. 433 and B-201777, May 6, 1981, which is published at 60
Comp. Gen. 445. Thus, we do not view this change in the FTR as stating
a new rule, but merely as a clarification of the existing regulations
promulgated to assure that the FTR is consistent with the JTR and our
cases.
As a clarification, this provision may be applied to Mr. Morrison's
case, and he may be reimbursed even though he had been previously
admonished, if he had no alternative other than use of a travel agent.
The circumstances of Mr. Morrison's travel are set out above. The
notice of his need to travel to Mississippi was very late in reaching
him; his other, previously scheduled, obligations restricted his
opportunities to use the usual procedures; and his secretary was
unavailable. Considering all the circumstances, we hold that Mr.
Morrison may be reimbursed. The record is not clear how much Mr.
Morrison's travel would have cost if it had been purchased directly from
the carrier. That cost should be determined and Mr. Morrison's
reimbursement should be restricted to that amount.
B-215106, 63 Comp. Gen. 585
Matter of: Litton Systems, Inc., Electron Tube Division, September
18, 1984:
In negotiated procurements there is no requirement that award be made
on the basis of the lowest cost. The procuring agency has the
discretion to select a higher rated technical proposal instead of a
lower rated, lower cost proposal if doing so is consistent with the
evaluation scheme in the solicitation. Consequently, the protester is
not automatically entitled to award merely because it had the lowest
proposed costs.
Where a solicitation does not indicate the relative importance of the
technical versus cost evaluation, it must be presumed that technical and
cost considerations will be approximately equal in weight. General
Accounting Office (GAO) finds that under the solicitation's evaluation
scheme, the technical aspects of the offerors' proposals and the cost
aspects of the offerors' proposals were to be given equal consideration.
Procuring officials enjoy a reasonable degree of discretion in the
evaluation of proposals and GAO will not disturb the evaluation unless
shown to be arbitrary or in violation of the procurement laws and
regulations. GAO finds that the agency's technical evaluation of the
protester's proposal was reasonable.
A firm, fixed-price contract is not subject to adjustment based on
the contractor's cost experience during performance and, thus, places
full responsibility, in terms of profits or losses for costs above or
below the fixed price, directly upon the successful offeror. GAO
questions the agency's adding $200,000 in costs for in-house effort to
the protester's low, firm, fixed-price offer as part of the agency's
cost realism determinations.
In negotiated procurements, an award to a firm offering a foreign
product at higher price can be made if the foreign offer is evaluated as
the best offer considering the combination of price, the Buy American
Act price differential, and technical approach.
Litton Systems, Inc., Electron Tube Division (Litton), protests the
award of a contract to Thomson-CSF Corporation (Thomson) under request
for proposals (RFP) No. SA-83-SPB-0025 issued by the Department of
Commerce (Commerce). The RFP was for the development of one prototype
and two preproduction models of a wideband Klystron tube with an
extended tuning range for use in weather radar.
Litton contends that by making an award to Thomson, Commerce accorded
more weight to technical factors than cost contrary to the award
criteria as set forth in the RFP. Litton also contends that Commerce
improperly evaluated its technical proposal. Finally, Litton contends
that Commerce misapplied the Buy American Act (41 U.S.C. Sections 10a-d
(1982)) and its implementing regulations in evaluating the cost of the
foreign-made Klystron tube offered by Thomson.
We sustain Litton's protest. Although the RFP contemplated a
cost-type contract, Litton and the other offerors proposed on a firm,
fixed-price basis. Commerce improperly added Litton's in-house costs of
development to its low firm, fixed-price offer.
The RFP was issued on August 26, 1983, and required that the tubes to
be developed had to be mechanically and electrically interchangeable
with a particular Klystron tube manufactured by Varian Associates
(Varian) that was in current use in the Federal Aviation
Administration's radar systems. The RFP also specified that the
preproduction tubes had to be supplied for use in validation testing.
At the September 26, 1983, closing date for the receipt of initial
proposals. Commerce received offers from Litton, Thomson, and Varian.
The initial evaluation by Commerce's source evaluation board (SEB)
placed all three offerors in the competitive range. The SEB then
addressed a series of written technical questions to the three offerors
in order to clarify certain aspects of their proposals. The offeror's
responses to these questions were received on December 22, 1983. The
responses were then considered by the SEB in its final evaluation, which
was conducted in January 1984.
On February 14, 1984, Commerce amended the RFP to provide for
multiple awards. Commerce's source selection official then approved the
selection of Thomson and Varian for award. A contract was awarded to
Varian on March 19, 1984.
Commerce notified Litton on April 2, 1984, of its failure to be
selected. Litton protested the selection of Thomson to Commerce on
April 3, 1984, which was denied by Commerce on April 19, 1984. On the
same date, a contract was awarded to Thomson and Litton thereafter
protested to our Office.
Litton contends that Commerce improperly made the technical aspects
of the offerors' proposals more important than the offerors' proposed
costs. Litton points out that paragraph M.4 of the RFP provided that
award would be made to the offeror determined to be within the
competitive range whose proposal was technically acceptable and whose
technical/cost relationship was the most advantageous to the Government.
In Litton's view, nothing in the RFP's award criteria made technical
more important than cost. Litton argues that its proposal was
technically acceptable and in the competitive range. Finally, Litton
asserts that its technical/cost relationship was more advantageous to
the Government than Thomson's because its proposed costs were
significantly lower than Thomson's.
Commerce takes the position that Litton's proposal was evaluated in
compliance with the RFP's stated criteria, but that Thomson's proposal
presented a more advantageous technical/cost relationship. More
specifically, Commerce states that the decision not to award to Litton
was a technical decision based on its analysis that Litton's proposal
represented substantially greater risk regarding the completion within a
restricted period of time of the RFP's required developmental work.
In this case, the RFP provided that an award would be made on the
basis of the most advantageous technical/cost relationship without
explicitly indicating the relative importance of cost versus technical
evaluation. We have frequently held that where an RFP does not indicate
the relative importance of the technical versus cost evaluation, it must
be presumed that technical and cost considerations will be approximately
equal in weight. Development Associates, Inc. -- Reconsideration,
B-205380.2 B-205380.3, Mar. 28, 1983, 83-1 C.P.D. Paragraph 313;
University of New Orleans, B-184194, May 26, 1978, 78-1 C.P.D. Paragraph
401; 52 Comp. Gen. 686, 690 (1973). Consequently, we find that the
RFP's award selection criteria provided for equal consideration to be
given to the technical cost aspects of proposals.
Litton contends that in evaluating its proposal Commerce failed to
take into consideration the "superior experience" of two of its design
personnel who originally developed the Varian Klystron tube. Litton
also contends that Commerce did not give it credit for proposing much
more stringent specifications for finding minute tube leaks than either
Varian or Thomson. Litton further asserts that Commerce wrongfully
refused to consider the experience that the Navy had with its L-3742
tube which, except for "minor changes in the electron optics," operates
at a 6-microsecond pulse length like the Varian tube. Finally, Litton
argues that by emphasizing that Litton was not currently producing the
Varian tube and, thus, could not meet the RFP's 18-month development
schedule, Commerce overstated the difficulty in developing the required
tube. Litton alleges that one of its design personnel led the Varian
development team in 1968 and developed the Varian tube in less than 1
year.
The determination of the relative merits of a proposal, particularly
with respect to technical considerations, is primarily a matter of
administrative discretion. Dynamic Science, Inc., B-188472, July 20,
1977, 77-2 C.P.D. Paragraph 39. Our function is not to evaluate anew
proposals submitted and make our own determinations as to their relative
merits. Houston Films, Inc. (Reconsideration), B-184402, June 16, 1976,
76-1 C.P.D. Paragraph 380. That function is the responsibility of the
contracting agency, which must bear the burden of any difficulties
resulting from a defective evaluation. MacMillian Oil Company,
B-189725, Jan. 17, 1978, 78-1 C.P.D. Paragraph 37. In light of this, we
have repeatedly held that procuring officials enjoy a reasonable degree
of discretion in the evaluation of proposals and that this will not be
disturbed unless shown to be arbitrary or in violation of the
procurement laws and regulations. Piasecki Aircraft Corporation,
B-190178, July 6, 1978, 78-2 C.P.D. Paragraph 10.
Additionally, the protester has the burden of affirmatively proving
its case. C.L. Systems, Inc., B-197123, June 30, 1980, 80-1 C.P.D.
Paragraph 448. The fact that the protester does not agree with the
agency's evaluation of its proposal does not in itself render the
evaluation unreasonable. Kaman Science Corporation, B-190143, Fed. 10,
1978, 78-1 C.P.D. Paragraph 117.
The RPF's technical evaluation criteria provided as follows:
1. Technical proposals will be evaluated in accordance with
weighted evaluation criteria to determine the relative merits of
the offeror's proposal. The Government will assign a numerical
score to the results of this evaluation.
2. The criteria to be used for the technical evaluation are as
follows:
A. Technical Development Factors to include:
Completeness of the proposed product specification
Completeness of the Development Plan
Completeness of the Test Plan approach
B. Management Factors to include:
Corporate experience
Personnel experience
Prior schedule/cost performance.
C. Schedule Factors to include:
Duration of the proposed effort
Completenss of milestone and activities descriptions
D. Production Factors to include:
Current capability to produce high powered S-band Klystrons.
3. The relative order of importance for the technical criteria
is as follows: Criteria 2.A is most important and is weighted
slightly more than the sum of the values for Criteria 2.B and 2.C,
which are approximately equal in weight. Criteria 2.D is the
least important and is weighted slightly less than eighter of
Criteria 2.B or 2.C.
The record reveals that the SEB found that Litton's proposed
development plan was clear and very unambiguous. However, the SEB also
found that while Litton's development plan was logical and complete,
Litton's product specification was incomplete. The SEB further noted
that Litton's development plan was very ambitious, given the extensive
development Litton would have to undertake in order to produce a basic
tube equivalent to the Varian tube and than modify that tube for
increased band width. The SEB recognized that although Litton was an
experienced, well-established manufacturer, there was a substantial risk
that the company could not meet the development schedule in view of the
fact that internal development of the Varian equivalent tube had been
barely begun by Litton.
In our opinion, the technical evaluation of Litton's proposal was
reasonable. The record indicates that except for receiving
substantially less points because of the extensive tube development that
would be required, Litton received nearly the same technical score as
Thomson in the area of technical development. Essentially then, Litton
received a lower technical score in the evaluation areas of corporate
experience and current capability to produce because the SEB felt that
Litton would first have to develop a tube equivalent to the Varian tube
before the company could undertake the task of modifying such a tube to
meet the RFP's requirements. In contrast, the record shows that Thomson
acquired a license from Varian and has been working for some time to
produce an equivalent of the Varian tube. With respect to Litton's
assertion that the board did not take into account Litton's experience
in developing its L-3742, Litton has not furnished any support for its
allegation that except for minor optics changes, the L-3742 is the
equivalent of the Varian tube. Therefore, we find that Litton has
failed to meet its burden of proof of this allegation. See C.L.
Systems, Inc., B-197123, supra.
Litton contends that Commerce did not properly evaluate the offeror's
costs. Litton argues that while a cost realism analysis may be
appropriate where there is the opportunity for considerable cost
overruns, Commerce's cost realism analysis was inappropriate here, where
Litton and the other offerors offered firm, fixed-price contracts and,
thus, assumed all the risk of cost overruns. Litton alleges that it
offered a fixed-price contract because it considered the possibility of
a cost overrun to be minimal in view of the expertise of its technical
people.
We agree with Litton that a firm, fixed-price contract is not subject
to adjustment based on the contractor's cost experience during
performance and, thus, places full responsibility, in terms of profits
or losses for costs above or below the fixed price, directly upon the
successful offeror. See National Veterans Law Center, 60 Comp. Gen. 223
(1981), 81-1 C.P.D. Paragraph 58.
The RFP provided that the use of a cost-plus-fixed-fee contract was
anticipated for the development effort. However, the record shows that
the SEB noted after receiving fixed-price offers from the offerors that
a fixed-price contract was the "preferred award instrument" even though
the RFP made no reference to this type of contract.
The record shows, however, that the SEB analyzed all three offerors'
costs to determine the "true cost of the development effort to the
individual contractor." The SEB found that Thomson's true development
costs were $174,105, compared with its best and final offer of $172,550.
With regard to Litton, the SEB determined that the true development
costs were $310,000, even thought Litton's best and final offer was only
$110,000, because the $200,000 difference represented the funds being
spent by Litton to develop in-house an equivalent to the Varian tube.
In addition, the record shows that the SEB criticized Litton for not
providing the labor hours associated with Litton's in-house development
effort. As a result of the SEB's cost analysis, Varian and Thomson were
ranked first and second and Litton was ranked third.
Furthermore, Commerce admits that the Buy American Act applies to
Thomson's offer since the company is a French firm offering non-American
supplies. Commerce further states that in order to ensure that Litton's
technical/cost relationship had been evaluated fairly, a 6-percent cost
adjustment factor prescribed by the Buy American Act regulations was
added to Thomson's evaluated costs. Commerce declares that even with
the additional price differential between Litton and Thomson, it was
still determined that Thomson's proposal presented a more advantageous
technical/cost relationship than did Litton's offer.
We fail to understand the SEB's ranking Litton third since Litton's
$110,000 offer on a fixed-price basis was significantly lower in terms
of cost to the Government than Thomson's. While the RFP did provide
that both development costs and production costs would be evaluated,
development costs were of "primary importance" in the evaluation.
Therefore, we feel that there is doubt as to whether Litton's costs were
properly evaluated by Commerce. We conclude that despite the technical
superiority of Thomson's proposal, the record does not support the award
to Thomson in view of the significantly lower fixed price offered by
Litton.
Accordingly, we sustain Litton's protest.
We note that this procurement is being conducted pursuant to OMB
Circular A-109, Major Systems Acquisitions, in order to encourage
maximum competition for further production of a wideband Klystron tube
with an extended tuning range to be used in the next generation Weather
Radar Program. Further, the RFP, as amended, provided for multiple
awards. Therefore, we recommend that Commerce reevaluate, in accordance
with our decision, Litton's proposal and consider whether an award to
Litton would be advantageous to the Government.
If it is determined that no award will be made to Litton, we
recommend that every effort be made to have Litton considered in
competitions for future production contracts for the wideband Klystron
tube. Litton advises us that it is now developing the tube in-house.
Accordingly, we see no reason why Commerce should not either consider
the technical data generated by Litton in developing the tube or have
Litton undergo validation testing of the developed tube at no cost to
the Government.
Since this decision contains a recommendation for corrective action
to be taken, we are furnishing copies to the Senate Committees on
Governmental Affairs and Appropriations and the House Committees on
Government Operations and Appropriations in accordance with section 236
of the Legislative Reorganization Act of 1970, 31 U.S.C. Section 720
(1982), which requires the submission of written statements by the
agency to the committees concerning the action taken with respect to our
recommendation.
(1) Our decision in that case, which involved a very similar
situation in which a Forest Service employee ordered an item from a
private contractor that was listed on a mandatory Federal Supply
Schedule contract, without requesting or obtaining a waiver from GSA,
provides a strong precedent for payment on a quantum valebant basis in
this case.
B-212256, 63 Comp. Gen. 579
Matter of: Propriety of certifying payment of purchase orders,
September 18, 1984:
Under 44 U.S.C. 501, 504, the Forest Service must obtain a waiver
from the Joint Committee on Printing (JCP) if it desires to have
printing done outside the Government Printing Office. While no waiver
is required if the items are preprinted, any questions concerning
whether or not an item involves a printing activity and requires a
waiver should be referred to the JCP. Since it was unclear whether the
procurement of habitat calendars required a waiver, the issue should
have been referred by the Forest Service to the JCP.
The Forest Service may not purchase even preprinted calendars and
pocket planners from non-General Services Administration (GSA) sources
without first obtaining a waiver from GSA. Calendars and pocket
planners are listed by GSA as stock items on the mandatory schedule.
Under 41 C.F.R. 101-26.100-2, a waiver from GSA is required prior to
purchasing these items from non-GSA sources. The contrary holding in 62
Comp. Gen. 556 (1983) will no longer be followed.
Although Forest Service may not ratify purchase of calendars and
pocket planners because it failed to obtain required waivers from the
JCP and the GSA before purchasing from non-GSA sources, General
Accounting Office will allow payment on a quantum valebant basis since
procurement of the items was not contrary to law, the Government
obtained a benefit from the items provided, and the contractor acted in
good faith. However, in determining the reasonable value of the items,
the Government may not exceed the amount that would have been charged
had the items been procured as GSA stock items. See B-213489, Mar. 13,
1984.
An authorized certifying officer at the United States Department of
Agriculture (USDA), National Finance Center (NFC), has requested an
advance decision under 31 U.S.C. Section 3529 concerning the propriety
of certifying for payment two Forest Service purchase orders totaling
$2,104.22 and $4,350, respectively. The first purchase order is for
2,100 calendars featuring forest habitat management (habitat calendars),
and the second purchase order is for 20,000 Smokey Bear Pocket Planners.
In addition, the certifying officer asks whether the payment of $420
made on another purchase order for 1,500 1983 Woodsy Owl Pocket Planners
was correct; if not, whether his office is required to recover the
erroneous payment. He also asks whether payment for the habitat
calendars and pocket planners could be made on a quantum valebant or
quantum meruit basis since the items have been received and used by the
Government.
For the reasons explained below, all the questioned procurements were
procedurally deficient because necessary determinations and waivers from
the Joint Committee on Printing (JCP) and/or from the General Services
Administration (GSA) were not obtained before contracting with
non-Government sources.
Although the two vouchers not yet paid should not be certified as
drawn, we find that the necessary elements for exercise of our equitable
jurisdiction are present. We therefore authorize payment to the two
suppliers on a quantum valebant basis (the reasonable value of goods
sold and delivered). The amounts of the payments, however, may not
exceed the amounts from which they should have been purchased under a
mandatory Federal Supply Schedule (FSS) contract through the GSA.
Because of the length of time which has elapsed since payment was
made on the Woodsy Owl Pocket Planner and the relatively small amount of
money involved, we do not require the Forest Service to institute
collection nor would we object if the Forest Service decides to
terminate collection action if already begun on the difference between
the amount paid and the FSS price, pursuant to 4 C.F.R. Parts 103-104.
In December 1982, the Director of the Wildlife and Fisheries staff of
the Forest Service requested the Director of the Office of Information
to obtain a waiver from the JCP to allow the Forest Service to procure
2,000 habitat calendars. The request for a waiver was based on
Agriculture Procurement Regulation (AGPR) 4-4.5012 which states:
In accordance with the Government Printing and Binding
Regulations published by the Joint Committee on Printing, Congress
of the United States, only standardized Government desk and wall
calendars may be obtained at Government expense. * * * Schedule
and appointment sheets are not considered to be calendars. Order
calendars for Washington, D.C. delivery from Central Supply;
otherwise from GSA Stores. (Italic supplied.)
Agriculture's regulation implements the Joint Committee on Printing's
Government Printing and Binding Regulation (GPBR) 22-1 which states:
Calendars, Date: Desk and Wall. -- Standardized Government
desk and wall calendars are the only calendars which departments
are authorized to obtain at Government expense, and shall be
ordered from the General Services Administration.
In response, the Director of the Public Information Office advised
the Forest Service that a JCP waiver was not required for preprinted
items. No mention was made of the need for a waiver from GSA. On the
basis of this information, the Forest Service issued a purchase order
dated December 27, 1982, to Calendar Promotions, Inc., for 2,000 habitat
calendars. The calendars have been received and distributed by the
Forest Service.
We would agree with the Director of Public Information that a waiver
from the JCP is not required prior to contracting for a preprinted
calendar. A preprinted item is one that is regularly carried in stock
by dealers, which requires no printing or binding after the receipt of
an order to fit them for the use of the purchaser. See 30 Comp. Gen. 1,
2 (1950). From the information furnished to us, it appears that the
habitat calendar was developed through the contribution of photographs
and descriptive texts by several agencies, one of which was the Forest
Service, to Calendar Promotions, Inc., which undertook to make it up as
a one-of-a-kind publication available only from the promoter.
Accordingly, it is unclear, in our view, whether or not the habitat
calendars would qualify as a preprinted item.
Section 501 of Title 44 of the United States Code requires, with
certain exceptions not pertinent here, that all printing and binding for
the Government be performed at the GPO, absent a waiver from the JCP.
44 U.S.C. Section 501. Section 504 of Title 44 further provides that
the JCP may permit the Public Printer to authorize an executive
department, independent office, or establishment of the Government to
purchase such printing directly if the GPO is not able or suitably
equipped to execute the printing or if it would be more economical or in
the best interest of the Government to have the printing performed
elsewhere. 44 U.S.C. Section 504.
If a legitimate doubt exists as to whether a particular item is
preprinted, we believe that the agency involved should submit the
question to JCP for its determination prior to procurement. Therefore,
prior to entering into a contract with Calendar Promotions, Inc., for
the habitat calendars, the Forest Service should have requested the JCP
to determine whether the calendar qualified as a preprinted item and if
so whether it would grant a waiver. Even if the JCP had granted a
waiver or determined that the calendar was preprinted, the procurement
would still have been deficient. A waiver from GSA was also required
under 41 C.F.R. Chap. 101 since calendars are an ordinary GSA stock item
listed on the mandatory schedule. The procurement of calendars and
other items available as GSA stock are governed by 41 C.F.R. Section
101-26.301 which states:
All executive agencies within the United States * * * shall
requisiiton from GSA needed stock items available from GSA supply
distribution facilities * * * except as provided in this * * *
(section).
Under 41 C.F.R. Section 101-26.301-1(b) an agency can request GSA to
waive this requirement as follows:
When an agency determines that items available from GSA stock
will not serve the required functional end-use purpose of the item
proposed to be procured, a request to waive the requirement to use
this source shall be submitted to GSA for consideration in
accordance with the provisions of Section 101-26.100-2.
The provision governing waiver, 41 C.F.R. Section 101-26.100-2(b), is
quite explicit:
Agencies shall not initiate action to procure similar items
from non-GSA sources until a request for a waiver has been
requested from and approved by GSA. The fact that action to
procure a similar item has been initiated will not influence GSA
action on a request for waiver.
The Forest Service indicates that the habitat calendars were
purchased in order to promote the National Forest Fish and Wildlife
Program. Although it would appear that the standard GSA calendar could
not serve the promotional and other specific "end-use purposes" for
which the Forest Service needed the habitat calendar, the FPMR
provisions cited above clearly provide that in such circumstances an
agency must request a waiver from GSA. In our view, an agency that
fails to do so cannot enter into a valid contract to procure these items
from non-GSA sources.
We note that, in the past, there has been some confusion as to
whether these regulations require an agency to seek a waiver whenever an
item similar to the desired one is available from non-GSA stock. In 62
Comp. Gen. 566 (1983), we considered a situation similar to the one at
issue here, in which calendars imprinted with program information were
purchased solely as a vehicle to disseminate the information from
non-GSA sources. GSA's Office of Commodity Management informally
advised us that agencies had not been required to request waivers unless
there was a legitimate doubt about the availability of similar items
from GSA. On the basis of that information, we held that since there
were no items available from GSA stock or the Federal Supply Center
which could fulfill the specific purpose for which the calendars were
needed, "a waiver request was not required."
When the same issue arose in this case, we requested a formal
interpretation of the waiver provision in 41 C.F.R. Section 101-26.100-2
from GSA. GSA advised us as follows, in its response dated April 30,
1984:
Our interpretation of that regulation is that agencies must
request a waiver from the General Services Administration (GSA)
before they acquire an item that is similar to one available
through GSA, from another source. A determination of similarity
depends on the facts of each situation, taking into account the
functions and use of the items involved. A waiver is required
unless it is clear that a similar item is not available from GSA.
In the fact pattern you cited from 62 Comp. Gen. 566 (1983), a
waiver would have been required. (Italic supplied.)
GSA also indicated that it will generally not grant a waiver
retroactively.
As explained above, our present interpretation of these regulations
is consistent with GSA's position as set forth in its April 30 letter.
We were incorrect in stating that a waiver was unnecessary in the 1983
calendar case. Accordingly, the holding in 62 Comp. Gen. 566 (1983)
will no longer be followed by our Office.
Since the Forest Service did not obtain the necessary waivers from
either the JCP or GSA (or a determination that such waivers were not
required), the purchase order for the habitat calendars was improperly
issued and cannot be certified for payment in accordance with its terms.
Prior to the procurement of the habitat calendars, the Forest Service
also had issued a purchase order for 20,000 Smokey Bear Pocket Planners.
At the time of the procurement, no questions were raised about the need
for waivers from either the JCP or GSA. However, we note from the
information furnished to us that in 1980 the Forest Service had
attempted to obtain Smokey Bear Pocket Planners but had been informed by
the JCP that such items were analogous to calendars and should not be
procured at Government expense.
It appears that the Smokey Bear Pocket Planners at issue here were
printed for the National Association of State Foresters and not at the
expense of the Government. Although the contractor's invoice did
include an additional charge of $150 for the printing of a special
insert to be enclosed with the pocket planners for the Forest Service,
this printing would be exempt from JCP requirements since the cost for
the insert was under $500. See GPBR 49-2 and Agriculture Policy
Regulation (AR), Title 3 (3 AR 93).
However, as we stated above with reference to the habitat calendars,
a waiver from GSA would have been required since pocket planners are
carried as GSA stock items on the mandatory schedule. 41 C.F.R. Section
101-26.100-2. Absent the necessary waiver the contract for the pocket
planners was also improper and the purchase order may not be certified
for payment according to its terms.
The Forest Service also had contracted and paid for 1,500 Woodsy Owl
Pocket Planners before questions arose about the purchase. Although we
have not seen a sample of this pocket planner, we have been informed
that it was not printed at Government expense, and there were no special
printed inserts and it was available from the Colorado State Forest
Service as a stock item generally available to the public.
As discussed above, preprinted items do not require a waiver from the
JCP. However, since pocket planners are GSA stock items on the
mandatory schedule, a waiver is required from GSA prior to entering into
a contract for such items from outside sources. 41 C.F.R. Chap. 101,
supra. Therefore, in view of the fact that no such waiver was
requested, this contract was also improper and payment of the invoice
should not have been made.
Having found that each of the questioned procurements was improper,
we turn now to the issue of equitable relief. Under GAO's claim
settlement authority, 31 U.S.C. Section 3702, the Comptroller General
may authorize payment on a quantum valebant basis under certain
conditions.
Where a performance by one party has benefited another, even in the
absence of an enforceable contract between them, equity requires that
the party receiving the benefit should not gain a windfall at the
expense of the performing party. The law thus implies a promise to pay
the receiving party whatever the goods are reasonably worth. See, e.g.,
Bouterie v. Carre, 6 So.2d 218, 220 (La. App. 1942); Kintz v. Read, 626
P.2d 52, 55 (Wash. App. 1981). However, before GAO will authorize a
quantum valebant payment, we must make a threshold determination that
the goods or services would have been a permissible procurement had the
proper procedures been followed. Next we must find that (1) the
Government received and accepted a benefit; (2) the contractor acted in
good faith; and (3) the amount claimed represents the reasonable value
of the benefit received. See 33 Comp. Gen. 533, 537 (1954); 40 Comp.
Gen 447, 451 (1961); and B-210808, May 24, 1984.
First, in order to make the threshold determination we must examine
and weigh the facts of each case. Here, we have already determined that
the three procurements were procedurally defective. Otherwise, we would
not even be considering an equitable remedy such as quantum valebant.
An equitable remedy is not considered appropriate when there is a clear
violation of a statutory prohibition. For example, in most of our
printing cases, equitable relief was not available since there was no
doubt that printing was involved and therefore no question that 44
U.S.C. Section 501 was violated. See, e.g., B-195566, March 17, 1980.
However, unlike these cases, we believe a strong argument can be made
that the procurement of the habitat calendars at issue here did not
necessarily violate the JCP standard. As stated earlier, we could not
even conclude that the statutory prohibition on printing in 44 U.S.C.
Section 501 was applicable to this procurement since the habitat
calendars may very well have been preprinted. Thus, while the Forest
Service should have submitted this matter to the JCP for its
determination, we cannot conclude in these circumstances that this
procedural defect necessarily resulted in an impermissible procurement.
Moreover, with respect to GSA, there is no statutory prohibition against
the Government purchasing preprinted calendars and pocket planners; nor
do the regulations absolutely prohibit such purchases from non-GSA
sources. Instead, the regulations set forth procedures whereby an
agency can request and obtain a waiver from GSA that will allow it to
properly make such purchases. As indicated above, a strong argument
could be made that the calendars and pocket planners available from GSA
could not possibly have fulfilled the specific end-use purposes for
which the Forest Service needed these items. Therefore, it is
reasonable to assume that had proper procedures been employed, a waiver
might have been obtained, and the procurement would have been
permissible. For this reason, we think the above-described threshold
test for equitable relief has been met.
Second, the Forest Service has received a benefit as a result of the
goods provided by the contractors, that were received, distributed, and
used by the Forest Service and its employees. Third, it appears that
the contractors acted in good faith and charged a reasonable amount for
their products. However, while the prices charged for the questioned
items seem reasonable, we have held that payment on a quantum valebant
basis in these circumstances cannot exceed the amount that would have
been charged for these items had they been procured as GSA stock items.
See B-213489, March 13, 1984. /1/
Accordingly, it is our view that while the purchase orders for the
habitat calendars and pocket planners cannot be certified for payment
since the procurements were improper, payment is permissible on a
quantum valebant basis. However, payment on that basis is limited to
the amount that GSA would have charged for comparable items. Similarly,
payment for the Woodsy Owl Pocket Planners was improper and could only
have been justified on a quantum valebant basis. However, even if the
contract price paid for the pocket planners exceeded the amount
allowable under a quantum valebant payment, we will not require the
Forest Service to institute collection action nor will we object to a
decision to terminate collection action for the price differential if
already begun in view of the time that has elapsed since payment and the
relatively small amount of money involved.
(1) Our desision in that case, which involved a very similar
situation in which a Forest Service employee ordered an item from a
private contractor that was listed on a mandatory Federal Supply
Schedule contract, without requesting or obtaining a waiver from GSA,
provides a strong precedent for payment on a quantum valebant basis in
this case.
B-215251, B-215294, 63 Comp. Gen 577
Matter of: Robinson Engineering, Inc. and John B. Guyton, September
10, 1984:
The Forest Service's prohibition of the use of tracer ammunition as a
technique in surveying the property boundaries National Forests in the
State of California is reasonable where state law forbids the use of
tracer ammunition and the technique poses a potential fire hazard.
Robinson Engineering, Inc. and John B. Guyton, surveyors, protest the
action of the Forest Servcie, U.S. Department of Agriculture,
prohibiting the use of the Magnesium Tracer Range Pole (MTRP) technique
in current and future offers to perform property boundary surveys of
Natioanl Forests in Forest Service Region 5 (California). Both the
Forest Service and the State of California regard the MTRP technique as
a fire hazard because it employs tracer ammunition. Robinson and Guyton
complain that the Forest Service has allowed its use before in Region 5
and therefore should do so now; that California law cannot be applied
to restrict contracts performed on Federal lands; and assert that
because the MTRP technique is a more accurate, efficient and
cost-effective surveying method, it is an abuse of discretion for the
Forest Service to take this course of action. We deny the protest.
A tracer bullet, made of magnesium or other incendiary components,
leaves a trail of light as it passes through the air. The MTRP
technique fires a tracer bullet vertically into the air, and from a
point somewhat distant, a surveyor sights in on the trail of light and
determines an angle and distance between the two points. This technique
is regarded by the protesters as a more accurate surveying method, and
as being much more efficient, especially in rugged and wooded terrain.
Further, because of savings in time and labor, the protesters assert
that it is more cost-effective. However, because the use of tracer
ammunition poses a fire hazard in the dry forested areas that exist in
California, and because of applicable state law addressing that concern,
the Forest Service in Region 5 will not accept surveying proposals which
employ the MTRP technique. We find nothing unreasonable in the Forest
Service's action in this matter.
Both Forest Service regulation and California state law prohibit the
use of tracer ammunition in forest areas. 36 C.F.R. Section 261.5(b)
(1984) provides that no kind of "tracer bullet or incendiary ammunition"
may be fired in the National Forest System. /1/ Cal. Public Resources
Code Section 4445 (Deering 1976) states, in part, that:
A person shall not fire or cause to be fired . . . any bullet,
projectile, or other ammunition which contains the components of
thermite, magnesium, or aluminum . . . commonly known as tracer or
incendiary ammunition within any forest-covered area. . . .
Despite any allowance of the MTRP technique in the past in Region 5,
the Forest Service states that it agrees with California that the
technique poses a fire hazard and, accordingly, chooses to recognize and
be bound by section 4445. According to the Forest Service, oen of the
prime considerations is that boundary surveys in National Forests often
necessitate entrance onto adjoining state or private lands. Therefore,
even if the Forest Servcie were to issue a permit under section 261.1a,
supra, to allow the use of the MTRP technique in a Region 5 National
Forest, the possibility of violating California law with respect to
adjoining non-Federal lands would still readily exist.
Our Office will not question an agency's decision concerning its best
method of accommodating its minimum needs absent a clear showing that
the decision is arbitrary or otherwise unreasonable. See, e.g., Duroyd
Manufacturing Company, B-213046, Dec. 27, 1983, 84-1 CPD Paragraph 28.
In our opinion, no such showing has been made here. It is our view that
the Forest Service is justified in prohibiting the MTRP technique in
Region 5, where the possibility of fire outweighs any restriction in the
surveying method that may have been imposed upon the protesters. In
that regard, as we believe the Forest Service correctly points out, this
action, has not prevented the protesters from competing, but rather
requires them to propose the use of an alternative surveying method.
FOOTNOTES
(1) It is not clear whether the Forest Service would waive or
otherwise suspend the operation of this subsection in order to permit
surveys using the MTRP technique in National Forests in other regions
where, because of climate or weather conditions, there is little fire
danger, and where there is no prohibitive state law. This subsection
(in effect since 1977) was not followed in 1980 in Region 5 when the
Forest Service allowed an MTRP survey to be conducted in the Sequoia
National Forest (a decision now essentially repudiated); however,
section 261.1a of the same title does authorize Forest Service officers
to issue conditional permits for otherwise prohibited acts, apparently
what was done in 1980.
B-214225, 63 Comp. Gen. 568
Matter of: Amarillo Aircraft Sales & Services, Inc., September 10,
1984:
Although General Accounting Office (GAO) generally will not review an
agency's determination to terminate a contract for the convenience of
the Government since this is a matter of contract administration,
nevertheless, where the contracting agency's action is based upon a
determination that the contract was improperly awarded, GAO will review
the validity of the procedures leading to award to the terminated
contractor.
A contracting agency's determination that award of a requirements
contract was improper is reasonable where reference prices selected by
offerors under the economic price adjustment provisions of the
solicitation were based upon different markets, the prices in which were
apparently subject to change at different rates, and were, as a result,
proposals could not be evaluated on a common basis and contracting
officials were unable to determine which proposal was most likely to
offer the lowest ultimate cost to the Government.
Where an offeror had properly selected in its best and final offer
reference prices for manufacturers under economic price adjustment (EPA)
provisions of the solicitation but had then been misled by contracting
officials into stating that any contract would be governed by the EPA
provisions for nonmanufacturers, and had subsequently submitted updated
reference prices without specifying whether they were offered under the
EPA provisons for manufacturers or those for nonmanufacturers, it would
have been improper for agency to reject the proposal as unacceptable
without clarification or discussion since the uncertainty as to
reference prices could have been easily resolved.
Language in Torncello v. United States, 681 F.2d 756 (Ct. Cl. 1982),
to the effect that termination of a contract for the convenience of the
Government requires some kind of change in the circumstances of the
bargain or the expectations of the parties, does not limit a termination
for convenience based on a determination that the award was improper.
The untimeliness of a protest to the contracting agency does not
render improper a subsequent agency determination to undertake
corrective action.
Amarillo Aircraft Sales & Services, Inc., protests the termination of
contract No. DLA600-83-D-0281, awarded to Amarillo by the Defense Fuel
Supply Center (DFSC), Defense Logistics Agency (DLA), for the supply of
aviation gasoline (AVGAS) and JP-4 jet fuel at the Amarillo Air
Terminal, Amarillo, Texas. The contracting officer decided to terminate
the contract, a requirements-type, fixed-price with economic price
adjustment (EPA) contract, on the ground that the EPA reference prices
selected by the offerors made it impossible for contracting officials to
determine which proposal offered the lowest ultimate cost to the
Government. We deny the protest.
By request for proposals (RFP) No. DLA600-83-R-0448,
DFSC solicited offers to meet the Government's requirement for refueling
and service at a number of airports, including a requirement for an
estimated 26,000 gallons of AVGAS and 3,600,000 gallons of JP-4, plus
necessary defueling and reservicing, at Amarillo Air Terminal over 2
years.
The RFP included EPA clauses allowing for economic price adjustments
of the contract price to reflect subsequent changes in the cost of fuel
over the duration of the contract. Manufacturers of refined petroleum
products were requested to complete EPA clause No. E19.05, pursuant to
which they were to select as a reference price for each subitem or type
of fuel the established catalog or market price of a commercial item
sold in substantial quantities to the general public. Fixed base
operators/refueling agents were requested to complete EPA clause No.
E19.08, pursuant to which they were to select as their reference prices
the current net price payable by the contractor to its supplier for the
product supplied. In the event of a change in the reference price, the
price payable under the contract for each unit of the appropriate fuel
would correspondingly increase or decrease, though in no case could it
exceed the original contract price plus 10 percent during the first year
or the effective contract price as of the start of the second year plus
10 percent during the second year.
Pride Refining, Inc. and Amarillo submitted offers for meeting the
Government's requirements at Amarillo Air Terminal. Although Pride is a
manufacturer of refined petroleum products, it indicated that it
intended to rely upon an agent at Amarillo Air Terminal to fuel and
service aircraft and it selected reference prices both under the EPA
provisions for manufacturers and those for fixed base
operators/refueling agents. As a manufacturer, Pride selected as its
reference price for JP-4 the weighted average of the high/low price of
regular gasoline and No. 2 fuel oil in the Dallas-Fort Worth, Texas,
area, as published in Platts' Oilgram, and as its reference price for
AVGAS Pride's own posted price for AVGAS. Under the provisions for
fixed base operators/refueling agents, Pride selected as its reference
prices for JP-4 and AVGAS its own invoice prices for those fuels.
Amarillo, a fixed base operator/refueling agent, selected as its
reference price for JP-4 the invoice price charged by Southern Union
Refining Company and as its reference price for AVGAS the invoice price
charged by the Phillips Petroleum Co. In support of its reference price
for JP-4, Amarillo submitted a letter from Southern Union in which that
firm agreed to supply JP-4 "for the purpose of supporting your bid" at a
price "based on our estimated crude cost plus $5.66 (per barrel) at the
time of delivery."
DFSC evaluated Pride's best and final proposal, which cited the
reference prices Pride offered as a manufacturer, as offering to meet
the Government's requirements at a price of $4,124,870, or $2,134.28
less than Amarillo's best and final proposal of $4,127,004.28. However,
since the RFP indicated that changes in the reference prices up to the
time of award would be considered in the evaluation of offers, DFSC
subsequently requested that Pride and Amarillo update their reference
prices. Although neither reported a change in its reference price for
AVGAS, each reported an increase in its reference price for JP-4. DFSC
then evaluated Pride's proposal as offering a total price of $4,199,120,
when adjusted for the change in the reference price for JP-4, and
Amarillo's proposal as offering an adjusted price of $4,132,152.28.
Accordingly, it made award on September 29 to Amarillo for its Amarillo
Air Terminal requirements.
On September 30, however, Pride protested to DFSC the award to
Amarillo. Pride subsequently alleged that award to Amarillo was
improper since there was no evidence that Amarillo's reference price for
JP-4, the price quoted by Southern Union, was determined by competitive
market pressures rather than subject to Southern Union's complete
discretion, so that the reference price provided no protection for the
Government against unwarranted price increases. Pride further alleged
that award was also improper because, among other reasons, allowing
Amarillo as a fixed based operator to select a "variable price" while
requiring Pride as a manufacturer to select an "established price"
denied Pride an opportunity to compete on an equal basis with Amarillo.
In response to Pride's allegations as to Amarillo's reference price
for JP-4, the contracting officer indicated that:
Assuming that the transactions between Amarillo and its
supplier are at arms length, the reference price is an objective
one and not susceptible to manipulation by Amarillo. While the
solicitation called for an invoice posting to substantiate the
price, neither was available in this case since Amarillo was not
purchasing JP-4 from Southern Union at the time.
Given the objectivity of the reference prices of both Pride and
Amarillo, both qualify as acceptable reference prices under the
terms of the request for proposals (RFP). I therefore disagree
with Pride that Amarillo's reference price was inadequate or
non-responsive to the solicitation. Amarillo furnished the
information that the Government requested.
Nevertheless, the contracting officer sustained Pride's protest. He
determined that in order meaningfully to compare proposals and to
ascertain which offered the Government the lowest ultimate cost, it was
necessary that the reference prices for each item substantially track
the same market. Since he found that over the 2-year period of the
contract changes in the invoice price paid by Amarillo to Souther Union
for JP-4 might radically differ from changes in reference prices based
upon the sale of refined fuels in the general product market, such as
Pride's reference price, he concluded that he was unable to determine
whether Amarillo had indeed submitted the low offer. Accordingly, the
contracting officer declared his intention of terminating Amarillo's
contract for the convenience of the Government and of resoliciting using
a common escalator in order to ensure that offerors would compete on a
common basis. Amarillo thereupon protested the proposed termination to
our Office.
As a general rule, our Office will not review an agency's decision to
terminate a contract for the convenience of the Government, since by law
this is a matter of contract administration for consideration by a
contract appeals board or by a court of competent jurisdiction.
However, where the contracting agency's action is based upon a
determination that the contract was improperly awarded, then our Office
will review the validity of the procedures leading to award to the
terminated contractor. Central Texas College, B-211167.3, March 2,
1984, 84-1 CPD Paragraph 259; Safemasters Company, Inc., 58 Comp. Gen.
225 (1979), 79-1 CPD Paragraph 38; see also Western Union Telegraph
Company, B-206979, April 22, 1982, 82-1 CPD Paragraph 372.
Amarillo asserts that the agency is mistakenly perceiving a problem
here. It states that the EPA provisions of the solicitation were
similar to those our Office and the courts have approved in the past,
that it selected an appropriate reference price under those provisions,
and that both Amarillo's and Pride's reference prices for JP-4 were
ultimately based upon the market price of crude oil.
Amarillo also asserts that even if there was a problem with comparing
its proposal with Pride's that was irrelevant because Pride's offer
could not have been accepted and such a comparison therefore was not
necessary.
In response, contracting officials and Pride maintain that the
Government was unable meaningfully to compare the proposals and to
determine which offered the lowest ultimate cost to the Government
because Amarillo and Pride submitted reference prices which, in DLA's
words, "vary with different markets."
DLA, pointing out that it generally has no problem with the use of
the EPA clauses because the different reference prices selected by
offerors will have a common basis in that they will substantively track
the price of the product being procured, states that the reference price
selected by Amarillo for JP-4, Southern Union's "estimated crude cost
plus $5.66 at the time of delivery," is not an acceptable reference
price for tracking the price of JP-4 because it does not track the same
market as does the reference price selected by Pride. Instead, DLA
states, Amarillo's reference price is tied to the crude oil cost of a
single supplier, whose means of calculating its crude costs are not
explained and whose costs are neither publicly posted nor subject to
verification. The contracting officer notes that while the risk to the
Government that Southern Union might "indiscriminately" raise its price
to Amarillo for JP-4 and thereby increase the price to the Government by
means of the EPA provisions is somewhat limited by the 10 percent yearly
ceiling on increases, nevertheless the potential liability to the
Government is large in absolute dollar terms since approximately 75
percent of the more than $4 million contract price is attributable to
product cost.
The RFP provided that a contract for all products and services
required at each location would be awarded to "that responsible offeror
whose offer conforming to the solicitation will be most advantageous to
the Government, price and other factors considered." We have generally
held that such language requires award on the basis of the most
favorable cost to the Government, assuming a conforming offer from a
responsible offeror, Norcoast-BECK Aleutian, 60 Comp. Gen. 625 (1981),
81-2 CPD Paragraph 84 (invitation for bids), and we have specifically
held that the Government must assure itself that the probable lowest
ultimate cost will be obtained prior to awarding any requirements
contract. Computer Machinery Corporation, 55 Comp. Gen. 1151 (1976),
76-1 CPD Paragraph 358 (request for proposals). Further, it is
fundamental Federal procurement law that offerors must be treated
equally, RMI, Inc., B-203652, April 20, 1983, 83-1 CPS Paragraph 423,
and that a solicitation must be drafted in such a manner that offers can
be prepared and evaluated on a common basis. Lawrence Johnson &
Associates, Inc., B-196442, March 11, 1980, 80-1 CPD Paragraph 188.
We believe that application of the above principles to this
procurement supports the agency's determination that the award to
Amarillo was improper. For contracting officials reasonably to
determine which proposal was most likely to offer the lowest ultimate
cost to the Government, the proposals must be susceptible of evaluation
on a common basis. The proposals submitted by Pride and Amarillo,
however, include reference prices which, despite Amarillo's contention
to the contrary, clearly do not reference the same market. Pride
selected a reference price for JP-4 based upon the established, public
price of regular gasoline and No. 2 fuel oil in the Dallas-Fort Worth
market. By contrast, Amarillo selected a reference price for JP-4 which
was directly based upon the price charged for JP-4 by its supplier in a
private transaction between a single seller and a single buyer, and
which was indirectly based upon the unexplained and unverifiable costs
to its supplier of crude oil. That these reference prices do not
reflect the same market was evidenced by Amarillo's displacement of
Pride as the apparent low offeror as a result of changes in the
reference prices between the time of the best and final offers and the
time of the update of the reference prices 2 months later. Given such a
displacement after only 2 months of competition for a contract scheduled
to run 2 years, given that approximately 75 percent of contract costs
are attributable to product cost, and given the mere $66,967.72
difference between the two offers for a contract in excess of $4
million, we cannot conclude that the contracting officials acted
unreasonably in determining that there was no reasonable assurance that
award to Amarillo would result in the lowest ultimate cost to the
Government.
We have considered the cases cited by Amarillo and we do not believe
that they require the conclusion that offerors may properly be asked to
select one of a number of reference prices where such reference prices
are based upon different markets. Although the solicitation considered
by the court in Steuart Petroleum Co. v. United States, 438 F. Supp. 527
(E.D. Michigan 1977), indeed allowed bidders to select a price escalator
from a number of market indicators, the court held that the contract
award there was improper because the awardee had chosen an upwardly
volatile price escalator likely to result in higher costs to the
Government than the escalators chosen by other bidders. Steuart
Petroleum, 438 F. Supp. at 533. Nor did we in our decisions in Ashland
Chemical Company, B-206882, Jan. 18, 1983, 83-1 CPD Paragraph 57, or in
Collins Telecommunications Products Division, B-199539, March 26, 1981,
81-1 CPD Paragraph 225, hold that offerors may properly be asked to
select from among reference prices based upon different markets.
Rather, in Ashland Chemical, we considered whether the solicitation
required the submission of information relative to an EPA clause which
was not provided by the successful bidder, Ashland Chemical Company,
B-206882, supra, 83-1 CPD Paragraph 57 at 3-5, while in Collins
Telecommunications we considered whether the agency reasonably evaluated
the accuracy of the successful bidder's certification that its product
entitled the bidder to use a particular EPA reference price, Collins
Telecommunications Products Division, B-199539, supra, 81-1 CPD
Paragraph 225 at 2, 6.
In Anchorage Telephone Utility, B-197749, Nov. 20, 1980, 80-2 CPD
Paragraph 386, also cited by Amarillo, the agency requested proposals
for the supply of telephone service over a 10-year period. Four
offerors submitted proposals in which they quoted tariffed rates while
Anchorage offered a price subject to annual price adjustments based upon
changes in the Consumer Price Index (CPI). While the contracting agency
escalated Anchorage's evaluated price to reflect likely increases in the
CPI over the 10-year period, it did not escalate the evaluated price of
the other four offerors to reflect possible future increases in the
tariffs. We denied Anchorage's protest against the agency's decision to
treat tariffed rates differently from prices subject to changes in the
CPI because the agency's specific historical experience with tariffed
rates indicated that the tariffs, unlike the CPI, were likely to remain
unchanged during the term of the contract. The difference between
Anchorage Telephone Utility and this case is that in Anchorage Telephone
Utility we found that the agency reasonably determined that it could
evaluate offers on a common basis and determine which was most likely to
offer the lowest ultimate cost to the Government, while here the agency
cannot reasonably determine which proposal was most likely to offer the
lowest ultimate cost to the Government.
With regard to the acceptability of Pride's offer, Amarillo alleges
that Pride's offer could not have been accepted at the time of award
because, while Pride had certified itself to be and was in fact a
manufacturer, it had nevertheless completed the EPA provisions for fixed
base operators/refueling agents as well as those for manufacturers and
has subsequently excluded from consideration the reference prices
submitted as a manufacturer. Amarillo therefore alleges that since only
its proposal conformed to the solicitation, "no evaluation of offers was
really required" and thus there existed no need to terminate the
contract with Amarillo.
Pride certified itself to be a manufacturer but selected reference
prices in its initial proposal both under the EPA provisions for
manufacturers and under those for fixed base operators/refueling agents.
In its July best and final offer Pride cited as its reference prices
those initially offered as a manufacturer. Then, on September 1, Pride
dispatched a telex to contracting officials in which it stated that
escalation under the contract would be in accordance with the EPA
provisions for fixed base operators/refueling agents to the exclusion of
the provisions for manufacturers. Pride alleges, and the agency has
failed to dispute, that it was urged to do this by contracting officials
on the ground that it intended to rely upon a refueling agent at
Amarillo Air Terminal. Pride did not expressly indicate in its
September 22 update of reference prices whether the reference prices
then submitted reflected any changes in the reference prices previously
submitted under the provisions for manufacturers or in those previously
submitted under the provisions for fixed base operators refueling
agents. However, the agency informs us that Platt's Oilgram was readily
available to contracting officials, that the updated reference price for
JP-4 was in fact the reference price based upon Platt's Oilgram, as
modified by changes in the intervening months, previously submitted
under the EPA provisions for manufacturers, and that Pride was
considered to be and was evaluated as a manufacturer submitting
reference prices under the EPA provisions for manufacturers.
We need not determine whether Pride's best and final offer was
acceptable as modified. Under these circumstances, where (1) Pride was
known to be a manufacturer and had certified itself to be such, (2)
Pride submitted with its best and final offers the reference prices
selected as a manufacturer, (3) Pride's updated reference price for JP-4
tracked the changes in the reference price for JP-4 based upon the
readily available Platt's Oilgram, (4) the confusion as to whether
Pride's offer was submitted under the EPA provisions for manufacturers
or under those for fixed based operators/refueling agents apparently
resulted in large part from erroneous advice from contracting officials,
(5) the confusion could have been easily resolved, and (6) exclusion of
Pride would have left only one offeror, we believe that the contracting
officer would have acted improperly if, without first holding further
discussions or requesting clarification, he had found Pride's proposal
to be unacceptable on the basis of the uncertainty as to the EPA
provisions. See Data Systems Division of Litton Systems, B-208241,
Sept. 29, 1982, 82-2 CPD Paragraph 297 (proposal was improperly found to
be unacceptable after best and final offers where alleged deficiencies
concerned requirements which offeror either essentially met or as to
which the agency never clearly communicated its concerns and the failure
to meet was readily resolvable). In other words, we do not believe
Pride's proposal had to be rejected for the reasons put forth by
Amarillo.
Amarillo argues that termination for convenience would be improper
under the holding of Torncello v. United States, 681 F.2d 756 (Ct. Cl.
1982). Amarillo cites the language in Torncello that a termination for
convenience requires "some kind of change in the circumstances of the
bargain or in the expectations of the parties," Torncello, 681 F.2d at
772, supra, and contends that the decision to terminate could not have
resulted from a change in circumstances or expectations since the
contracting officials were aware of the terms of the solicitation and
the details of the offers when award was made.
However, in setting forth those historical limits on the use of
termination for convenience which the court seeks to reaffirm, the court
cites with approval a line of cases illustrating the requirement for a
change in circumstances or expectations. Torncello, 681 F.2d at 766,
supra. Among the cases thus cited are several in which contracting
officials came to believe as a result of a protest subsequent to award
that the award had been improper and accordingly took corrective action
which the court held entitled the terminated awardee to recovery on the
basis that its contract had been terminated for the convenience of the
Government. Warren Brothers Roads Company v. United States, 355 F.2d
612 (Ct. Cl. 1965) (cancellation for improper rejection of bidder as
nonresponsible); Coastal Cargo Company v. United States, 351 F.2d 1004
(Ct. Cl. 1965) (cancellation for failure to refer responsibility
question to Small Business Administration); John Reiner & Company v.
United States, 325 F.2d 438 (Ct. Cl. 1963) (cancellation because of
defective solicitation). Accordingly, we do not believe that the
decision in Torncello limits a termination for convenience arising from
a post-award protest against the propriety of the award.
Amarillo also argues that termination is not in the best interests of
the Government since Amarillo has already begun performance and
termination costs allegedly would be substantial. It is true that the
determination as to whether an improperly awarded contract should be
terminated involves consideration of several factors other than cost,
including the seriousness of the procurement deficiency, the degree of
prejudice to other offerors or to the integrity of the competitive
procurement system, the good faith of the parties, the impact of
termination on the procuring agency's mission, and the extent of
performance. See Central Texas College, B-211167.3, supra, 84-1 CPD
Paragraph 259 at p. 3; United States Testing Company, Inc., B-205450,
June 18, 1982, 82-1 CPD Paragraph 604. These are matters we consider
when determining whether to recommend a termination for convenience;
they are also matters the agency takes into account when it decides, on
its own, whether to terminate a contract. Since an agency decision to
terminate a contract on its own, on the basis of those factors, is
largely a matter of discretion, we will not second-guess the agency's
decision in this respect.
Finally, Amarillo contends that Pride's protest to the agency was
untimely because it really involved a challenge to the EPA provisions of
the solicitation, and that therefore a termination of its contract as a
result of the untimely protest would be improper. Without deciding
whether Amarillo properly categorizes the Pride protest, we point out
that the untimeliness of a protest to the agency does not render
improper a subsequent agency determination to undertake corrective
action. See Orkand Corporation; Falcon Research and Development
Company, B-209662.2, and B-209662.3, April 4, 1983, 83-1 CPD Paragraph
349; NonPublic Educational Services, Inc., B-207306.2, Oct. 20, 1982,
82-2 CPD Paragraph 348.
Accordingly, the protest is denied.
B-214282, 63 Comp. Gen. 563
Matter of: Miquel Caban September 5, 1984
An employee who executed an agreement to remain in the service of the
Internal Revenue Service (IRS) in Puerto Rico for 24 months but who
obtained an appointment in Puerto Rico with Housing and Urban
Development (HUD) only 5 months later, did not satisfy the terms of his
original agreement by remaining with HUD for an additional 19 months.
An agency may condition return travel entitlement upon an employee's
satisfaction of an agreement to remain in the service of that particular
agency at a designated overseas post of duty for a specified period.
An employee who was locally hired for a position in Puerto Rico with
HUD after having served 5 months with IRS in Puerto Rico claims
entitlement to renewal agreement travel under 5 U.S.C. 5728(a), based on
his view that his place of actual residence is New Jersey where he had
lived prior to his transfer to Puerto Rico with the IRS. Based on
information evidencing his intent to relocate to Puerto Rico on a
permanent basis, HUD properly determined that the employee's residence
at the time of his app-intment was Puerto Rico. Any prior residency
determination made by IRS would not be binding on HUD.
Where agency determined that locally hired employee's actual place of
residence was Puerto Rico, his place of residence was the same as his
post of duty, and his employment in Puerto Rico does not constitute
"service abroad" under 5 C.F.R. 630.601(c) so as entitle him to home
leave under 5 U.S.C. 6305(a). Because of that residency determination
he was not given a return travel agreement and he, therefore, fails to
meet the condition of 5 U.S.C. 6304(b)(2)(ii) for entitlement to a
45-day leave ceiling.
This action is in response to a request from the United States
Department of Housing and Urban Development (HUD) for an advance
decision as to the home leave and renewal agreement travel entitlements
of a HUD employee stationed in Puerto Rico. /1/ The employee's claim
was denied by HUD, the second Federal agency to employ him in Puerto
Rico, based on an administrative determination that his actual place of
residence was Puerto Rico and that he, therefore, was not eligible for
home leave or tour renewal agreement travel. We uphold that denial
based on our finding that HUD's determination as to his place of
residence was reasonable and that HUD was not bound by the previous
employer's determination as to his actual place of residence or by the
service agreement he executed with that agency.
Mr. Miquel Caban was employed by the Interal Revenue Service (IRS) in
New York, New York, from August 1970 until January 1978. During that
time, he resided in New Jersey with his family. He was transferred to
Puerto Rico in January 1978 after having executed an Overseas
Transportation Agreement by which he agreed to remain in the service of
the IRS in Puerto Rico for a tour of duty of 24 months in order to be
eligible for return travel and transportation expenses to his place of
actual residence. Incident to his transfer to Puerto Rico, he submitted
a Voluntary Request for Downgrade by which he requested a change to a
lower grade "to take advantage of the opportunity to accept employment
in my homeland on a permanent basis."
Shortly after the IRS transferred him to Puerto Rico, Mr. Caban
applied for and was selected to fill a position with HUD in Puerto Rico.
He transferred to HUD on June 25, 1978, after serving only 5 months of
his 24-month tour of duty with IRS. Mr. Caban claims that before he
accepted this position, he inquired as to the transferability of his
service agreement with the IRS and was told by a HUD official that it
was binding on HUD.
After completing an aggregate of 24 months' service in Puerto Rico,
Mr. Caban asked HUD to grant him home leave and tour renewal agreement
travel based on his satisfaction of the IRS service agreement and his
willingness to execute an agreement with HUD for a further tour of duty
in Puerto Rico. His reqeust was denied based on the determination that
at the time of his appointment by HUD, his actual place of residence was
Puerto Rico.
The issue to be resolved, then, is whether HUD was justified in
determining that Mr. Caban's place of actual residence was Puerto Rico
and that he therefore was not eligible for home leave or tour renewal
agreement travel expenses.
Renewal agreement travel and transportation expenses are provided for
in 5 U.S.C. Section 5728(a), which provides in part that:
(a) Under such regulations as the President may prescribe, an
agency shall pay from its appropriations the expenses of
round-trip travel of an employee, and the transportation of his
immediate family, but not household goods, from his post of duty
outside the continental United States * * * to the place of his
actual residence at the time of appointment or transfer to the
post of duty, after he has satisfactorily completed an agreed
period of service outside the continental United States * * * and
is returning to his actual place of residence to take leave before
serving another tour of duty at the same or another post of duty
outside the continental United States * * * under a new written
agreement made before departing from the post of duty.
The implementing regulations, Federal Travel Regulations (FTR), para.
2-1.5h(1) (Supp. 7, July 15, 1983), incorp. by ref., 41 C.F.R. Section
101-7.003 (1983), set forth the following conditions of eligibility for
tour renewal agreement travel --
h. Overseas tour renewal agreement travel
(1) Eligibility. In order to be eligible to receive allowances
for travel and transportation expenses for returning home between
tours of duty overseas as authorized by 2-1.5h, an employee prior
to departure from his/her post of duty outside the conterminous
United States must have:
(a) Satisfactorily completed an agreed period of service or the
prescribed tour of duty as provided in 2-1.5a(1)(b) for return
travel entitlement, and
(b) Entered into a new written agreement as provided in
2-1.5a(1)(b) for another period of service at the same or another
post of duty outside the conterminous United States. * * *
FTR para. 2-15a(1)(b) provides in part --
* * * Except as precluded by these regulations upon separation
from service the expenses for return travel, transportation,
moving, and/or storage of household goods shall be allowed whether
the separation is for the purposes of the Government or for
personal convenience. However, such expenses shall not be allowed
unless the employee transferred or appointed to posts of duty
outside the conterminous United States shall have served for a
minimum period of not less than 1 nor more than 3 years prescribed
in advance by the head of the agency (or for 1 school year for
Department of Defense overseas dependents school system teachers
as determined under Chapter 25 of 20 U.S.C.) or unless separation
is for reasons beyond the control of the individual and acceptable
to the agency concerned. * * *
Essentially the same regulatory language has been in effect
throughout the period of Mr. Caban's assignment in Puerto Rico. See FTR
paras. 2-1.5h(1) and 2-1.5a(1)(b) (FPMR 101-7, April 30, 1973).
Thus, Mr. Caban's entitlement to tour renewal agreement travel is
dependent on his having satisfied an initial agreement to serve a
specified tour of duty as required by FTR para. 2-1.5h(1)(a) and upon
his having executed yet another such agreement for a subsequent period
of service in accordance with FTR para. 2-1.5h(1)(b). It is Mr. Caban's
contention that he satisfied the first condition of eligibility since he
served in Puerto Rico for the 24-month period to which he agreed when he
was transferred there by the IRS. Under the terms of the service
agreement he executed in December 1977, he specifically agreed to remain
"in the service of the IRS" at Hato Rey, Puerto Rico, for a minimum
period of 24 months. Although he remained in Puerto Rico for 24 months,
he in fact remained with the IRS for only 5 months. The critical
question then is whether the Overseas Transportation Agreement that Mr.
Caban executed with the IRS could have been satisfied only by service
with that particular agency or whether 24 months of Government service
satisified its conditions.
Where the application of a statute is expressly conditoned on an
agreement to remain "in the Government service" for a prescribed period
of time, an agency cannot restrict its applicability by requiring
service only with that particular agency. See, e.g., 50 Comp. Gen. 374
(1970) and authorities cited. Absent statutory or regulatory language
requiring Government service, however, an agency may limit service
agreements to service with the particular agency. Thus, where
employment "in the Government service" is not expressly required, an
agency is free to condition payment of expenses upon the employee's
agreement to remain in the service of that agency for a specified
period. Nobert J. Bengtson, B-191991, Dec. 1, 1978.
In contrast to other statutory provisions (see, e.g., 5 U.S.C.
Sections 5723(b) and 5724(i)), 5 U.S.C. Section 5728(a) does not
condition an employee's eligibility for renewal agreement travel upon
his satisfaction of an agreement to remain "in the Government service"
and upon his execution of an agreement for further "Government service."
The implementing regulations at FTR para. 2-1.5h require only that the
employee satisfy the return travel agreement required by para.
2-1.5a(1)(b) and execute another such agreement. As to the specific
terms of that agreement, FTR para. 2-1.5a(1)(b) contemplates only that
the employee serve a period of 1 to 3 years "prescribed in advance by
the head of the agency." Thus, where an employee executes an agreement
contemplated by 5 U.S.C. 5728(a), to remain in the service of a
particular agency at a designated location for a prescribed period of
time, the agreement is satisifed only by service with that agency. Mr.
Caban entered into a return travel agreement with the IRS that obligated
him to remain specifically in the employ of the IRS in Puerto Rico for
24 months. He left the IRS after only 5 months, thus failing to fulfill
this 24-month service requirement. Because, as indicated above, his
subsequent service for HUD does not satisfy the requirements of his
agreement with the IRS, he has not, on the basis of that agreement, met
the condition of FTR para. 2-1.5h(1)(a) that he complete an agreed
period of service as provided for in FTR para. 2-1.5a(1)(b).
Mr. Caban next argues that, without regard to the IRS agreement, HUD
was obligated to give him a return travel agreement when he was hired in
June of 1978 and to execute another agreement with him, based on his
view that his actual place of residence was New Jersey.
Under 5 U.S.C. Section 5728(a) an employee may only be granted
renewal agreement travel for the purpose of traveling "from his post of
duty outside the continental United States to the place of his actual
residence at the time of appointment or transfer to the post of duty."
On the Standard Form 171 Mr. Caban submitted when he applied for the
position with HUD, he listed his "legal and voting residence" as Puerto
Rico and he indicated that the purpose of his earlier transfer from New
York to Puerto Rico with the IRS had been to relocate to the island "on
a permanent basis." Based on that information evidencing Mr. Caban's
intent to abandon whatever residential relationship he may have had with
a location elsewhere, it was reasonable for HUD to determine that Mr.
Caban's actual place of residence at the time of appointment was Puerto
Rico. The determination of an employee's place of actual residence is
the administrative responsibility of the employing agency. Estelle C.
Maldonado, 62 Comp. Gen. 545 (1983); 45 Comp. Gen. 136 (1965); 39
Comp. Gen. 337 (1959); Rafael F. Arroyo, B-197205, May 16, 1980,
reconsidered February 16, 1982. We will not question any reasonable
determination made by the agency unless it is plainly erroneous or
inconsistent with the law or regulations. Estelle C. Maldonado, 62
Comp. Gen. at 552.
In addition, we have held that an agency is not bound by the actual
place of residence determination made by an individual's previous
employer at the overseas post of duty. Rather, it is within the
discretion of the hiring agency to make a determination of the
employee's actual place of residence based on the information made
available to that agency at the time of the appointment. Chester E.
Whitcomb, B-190590, February 21, 1979. Therefore, regardless of the
residency determination that the IRS may have made at the time of Mr.
Caban's transfer to Puerto Rico, HUD was free to make an independent
determination based on the information submitted by the individual
seeking employment. Since HUD reasonably determined that Mr. Caban's
actual place of residence was Puerto Rico at the time of his
appointment, his actual place of residence is the same as his post of
duty and he does not satisfy the statutory requirements for entitlement
to renewal agreement travel and transportation expenses. Accordingly,
we find that the agency had a proper basis for refusing to negotiate an
original and a renewal agreement with Mr. Caban and for denying his
request for renewal agreement travel under 5 U.S.C. Section 5728(a).
Entitlement to earn and accumulate home leave is governed by 5 U.S.C.
Section 6305(a), which provides in part that --
(a) After 24 months of continuous service outside the United
States, an employee may be granted leave of absence, under
regulations of the President, at a rate not to exceed 1 week for
each 4 months of that service without regard to other leave
provided by this subchapter. * * *
Authority to issue regulations regarding eligibility for home leave
has been delegated to the Office of Personnel Management. The
implementing regulations issued by that Office condition entitlement to
home leave on the employee's performance of "service abroad." See 5
C.F.R. Section 630.604 and Section 630.606. As in effect at the time of
Mr. Caban's appointment by HUD and currently, 5 C.F.R. Section
630.601(c) defines "service abroad" as:
* * * service, * * * by an employee at a post of duty outside
the United States and outside the employee's place of residence if
his place of residence is in the Commonwealth of Puerto Rico or a
territory or possession of the United States.
Since HUD determined that Mr. Caban's residence was Puerto Rico, his
post of duty is the same as his residence and his service with HUD does
not constitute "service abroad" as defined above. Thus, the employee
does not satisfy the statutory requirements to earn and be granted home
leave. For that same reason he was not given a return transportation
agreement and he, therefore, does not meet the applicable requirement of
5 U.S.C. Section 6304(b)(2)(ii) that his employment be under conditions
providing for his return transportation to the United States. Thus he
likewise is not entitled to the 45-day leave ceiling provided for by 5
U.S.C. Section 6304(b). Accordingly, the agency's denial of these leave
entitlements is also upheld.
(1) The request, dated January 27, 1984, was submitted by James A.
Rhoads, Director, Personnel Systems & Payroll Division, APS, Department
of Housing and Urban Development.
B-212150, 63 Comp. Gen. 560
Matter of: Panama Canal Commission - Responsibility for Saint
Elizabeths Hospital Services, September 5, 1984:
The Panama Canal Commission is not financially responsible for the
cost of care provided by Saint Elizabeths Hospital to two patients who
were adjudged insane and transferred from the Canal Zone to the Hospital
many years ago. The two men were transferred to Saint Elizabeths
pursuant to 24 U.S.C. 196, and became the responsibility of the Federal
Government because their legal residence in a state, territory, or the
District of Columbia could not be ascertained. No subsequent
determination of legal residence has ever been made, so they remain the
responsibility of the Federal Government.
The Administrator of the Panama Canal Commission has requested our
decision on whether the Commission should reimburse Saint Elizabeths
Hospital for the cost of care provided to two patients who were adjudged
insane and transferred to the Hospital many years ago by the Canal Zone
Government or its predecessor. The Superintendent of Saint Elizabeths
has provided us with a memorandum prepared by his staff addressing the
issue of financial liability for the costs of patients transferred from
the Canal Zone. As will be explained more fully below, we do not think
that the Panama Canal Commission is financially responsible for the cost
of the care provided to the two men.
According to the submission, the two patients, Warren A. Crussey and
Lawrence Adams, were adjudged insane in a civil commitment proceeding by
the U.S. District Court for the District of the Canal Zone under
authority of 4 C.Z.C. Section 1755 (1934 ed.). Crussey and Adams were
transferred from the Corozal Hospital in the Canal Zone, where they had
been committed, to Saint Elizabeths Hospital in 1945 and 1953
respectively, under authority contained in 4 C.Z.C. Section 1763 (1934
ed.). This section, now codified at 24 U.S.C. Section 196, provides:
Upon the application of the Governor of the Canal Zone, the
Secretary of Health and Human Services may transfer to Saint
Elizabeths Hospital, in the District of Columbia, for treatment,
any American citizen subject to a hospitalization order issued
under section 1637 of title 5 of the Canal Zone Code, whose legal
residence in one of the States, territories, the Commonwealth of
Puerto Rico or the District of Columbia for the purpose of
eligibility for public medical care it has been impossible to
establish. Upon the ascertainment of the legal residence of
persons so transferred to Saint Elizabeths Hospital, the
superintendent of that hospital shall thereupon transfer them to
their respective places of residence, and the expenses attendant
thereon shall be paid from the appropriation for the support of
Saint Elizabeths Hospital.
An Act of June 12, 1917, ch. 27, Section 1, 40 Stat. 179, as amended.
Both patients were cared for at Saint Elizabeths without charge to
the Canal Zone Government or the Panama Canal Commission until October
1982. Saint Elizabeths began billing the Commission at the rate of
$188.51 per day per patient when Federal agencies were instructed by OMB
Bulletin No. 82-9 that beginning on October 1, 1982, they would be
required to reimburse the Hospital for the cost of care provided to
their beneficiaries.
OMB Bulletin No. 82-9 (March 24, 1982) implemented 24 U.S.C. Section
168a, a provision originally enacted in 1947. Section 168a provides
that:
Any executive department of the Federal Government * * *
requiring Saint Elizabeths Hospital to care for patients for whom
such department is responsible, shall, except to the extent that
the expense of such care is authorized to be paid from
appropriations to the hospital for the care of patients, pay by
check to Saint Elizabeths Hospital * * * such amounts as the
Superintendent calculates to be due for such care on the basis of
a per diem rate approved by the Office of Management and Budget.
Pursuant to 22 U.S.C. Section 3611 (1982), the Panama Canal
Commission is within the executive branch. Bulletin 82-9 therefore
makes the Commission liable for the cost of care for any patient for
which it is legally responsible. We must accordingly determine whether
the Panama Canal Commission is "responsible" for Messrs. Crussey and
Adams.
Subsequent to the effective date of Bulletin 82-9, Congress enacted
Pub. L. No. 97-377, 96 Stat. 1887, December 21, 1982, which authorizes
the Secretary of Health and Human Services to "bill and collect from
(prospectively or otherwise) individuals, the District of Columbia,
Executive agencies, and other entities" for services provided by Saint
Elizabeths. The question of Commission "responsibility" for Messrs.
Crussey and Adams thus also arises in connection with Pub. L. No.
97-377. This provision from the Joint Resolution, Further Continuing
Appropriations, 1983, changed the practice of giving Saint Elizabeths an
appropriation that would cover the costs of patients for which other
agencies are responsible. In 63 Comp. Gen 44 (1983) we noted that, from
our review of the legislative history of the provision, there was
congressional support for the general concept proposed in the fiscal
year 1983 Budget of requiring "full payment from Federal agencies for
the cost of care provided at (Saint Elizabeths Hospital) to individuals
for whom they are responsible." Major Themes and Additional Budget
Details, Fiscal Year 1983, p. 102. See H. Rep. No. 97-894, 97th Cong.,
2nd Sess. 65 (1982); S. Rep. No. 97-680, 97th Cong., 2d Sess. 69
(1982). We interpreted "responsibility" in this context to mean
financial responsibility, and concluded that an agency which has a
statutory responsibility to provide financial support to a particular
class of individuals, which is relieved of a portion of that financial
responsibility due to the commitment of certain members of the class to
Saint Elizabeths, must reimburse the Hospital for those costs.
The Canal Commission concedes in its submission that if its
predecessor, the Canal Zone Government, would have been responsible for
the costs of caring for the two men, its appropriations for fiscal year
1983 permitting payment of liabilities of the Canal Zone Government
pending on September 30, 1979, or accruing thereafter, would be
available. However, the Commission requested our decision because it is
uncertain whether there is a basis for payment of the Saint Elizabeths'
bills.
At the time the two men were transferred, 24 U.S.C. Section 196 (1940
ed. and 1952 ed.) provided for the transfer to Saint Elizabeths of:
* * * all American citizens legally adjudged insane in the
Canal Zone whose legal residence in one of the States and
Territories or the District of Columbia it has been impossible to
establish.
The Commission notes that its records reflect that Adams had no legal
residence in any state, and that Crussey's residence apparently could
not be determined. It is nowhere suggested that Crussey and Adams had
their legal residence in the Canal Zone. When the men were transferred
to Saint Elizabeths, they became the responsibility of the Federal
Government. Had their legal residence in one of the states,
territories, or the District of Columbia later been ascertained, the
Federal Government would have ceased to be responsible for them. The
Hospital could then transfer the patients "to their respective places of
residence," or if medically unwise, continue to care for them but at the
expense of the jurisdiction then found to be responsible for them.
There is no evidence in the record that the patients' legal residence
in the Canal Zone has ever been established. The fact that Saint
Elizabeths began billing for their care after all these years of
assuming that they were a Federal responsibility may be attributable to
increased financial pressures resulting from the new method of
appropriating for the Hospital, beginning with fiscal year 1983. At any
rate, in the absence of a definitive determination of their legal
residence elsewhere, we think that the Federal Government must remain
responsible for the two men.
We accordingly conclude that any financial responsibility on the part
of the Canal Zone Government or its successors ceased at the time of the
transfers of the two men to Saint Elizabeths. The expenses incurred for
the care of Messrs. Crussey and Adams should continue to be paid from
the Federal appropriation to Saint Elizabeths Hospital.
No.
Routing Tons Month/Dates JUNE
KCHS-MHCG-MPHO- 1-4-6-8-11-13-15-
MHCG-KCHS /1/ 195 18-20-22-25-27-29
Price Per Trip
Route Southern Air
Transport Transamerica
Charleston -- Howard Air Force
Base (52 trips) $33,664 $37,464
Charleston -- Bermuda (34 trips) $15,581 $17,846.30
Norfolk -- Cuba (34 trips) $26,608 $29,067.50
Norfolk -- Puerto Rico (18 trips) $26,608 $29,067.50
Package Price
All Routes (138 trips) $3,610,243 $3,697,182.20
Pallet Miles Cost per
Offeror Package Price (miles x Pallets x Pallet
Trips) Mile
Southern Air
Transport $3,610,230 3.524.403 $1.0244
Transamerica $3,697,182 3,693,408 $1.0010