B-84262, APRIL 1, 1949, 28 COMP. GEN. 553

B-84262, APRIL 1, 1949, 28 COMP. GEN. 553

CONTRACTS - DURATION - AUTOMATIC YEARLY RENEWAL IN VIEW OF THE TERMS OF SECTIONS 3732 AND 3679, REVISED STATUTES, AS AMENDED, WHICH, IN EFFECT, PROHIBIT THE INVOLVEMENT OF THE GOVERNMENT IN ANY CONTRACT OR OBLIGATION BEYOND THE EXTENT AND AVAILABILITY OF EXISTING APPROPRIATIONS UNLESS OTHERWISE AUTHORIZED BY LAW, THERE MAY NOT BE INCLUDED IN POST OFFICE DEPARTMENT CONTRACTS FOR THE STORAGE AND SERVICING OF GOVERNMENT-OWNED TRUCKS A PROVISION WHICH WOULD AUTOMATICALLY RENEW THE CONTRACTS FROM YEAR TO YEAR UNLESS SOONER TERMINATED BY THE GOVERNMENT. THE INCLUSION OF A PROVISION IN POST OFFICE DEPARTMENT CONTRACTS FOR THE STORAGE AND SERVICING OF GOVERNMENT-OWNED TRUCKS WHICH WOULD AUTOMATICALLY RENEW THE CONTRACTS FROM YEAR TO YEAR UNLESS SOONER TERMINATED BY THE GOVERNMENT MUST BE REGARDED AS OBJECTIONABLE IN THAT NO COMPLIANCE WOULD BE HAD, AFTER THE FIRST YEAR, WITH THE ADVERTISING FOR BIDS REQUIREMENTS OF SECTION 3709, REVISED STATUTES, AS AMENDED.

COMPTROLLER GENERAL WARREN TO THE POSTMASTER GENERAL, APRIL 1, 1949:

REFERENCE IS MADE TO YOUR LETTER OF MARCH 7, 1949, AND ENCLOSURES, REQUESTING A DECISION AS TO WHETHER THERE MAY BE INCLUDED IN POST OFFICE DEPARTMENT CONTRACTS FOR STORAGE AND SERVICING OF GOVERNMENT OWNED TRUCKS DURING THE FISCAL YEAR ENDING JUNE 30, 1950, A PROVISION WHICH WOULD AUTOMATICALLY RENEW THE CONTRACTS FROM YEAR TO YEAR UNLESS SOONER TERMINATED BY THE GOVERNMENT.

IT IS STATED IN YOUR LETTER THAT THE ISSUANCE OF ADVERTISEMENTS FOR THESE SERVICES FOR EACH FISCAL YEAR, THE REVIEWING OF BIDS, AND THE AWARD OF CONTRACTS INVOLVE CONSIDERABLE CLERICAL WORK BOTH IN THE FIELD AND IN YOUR DEPARTMENT, AND IN ORDER TO OBVIATE THE NECESSITY OF ADVERTISING FOR SUCH SERVICES AND FACILITIES EACH YEAR, IT IS DESIRED TO INCLUDE IN EACH CONTRACT A PROVISION WHICH WOULD AUTOMATICALLY RENEW THE CONTACT FROM YEAR TO YEAR. SECONDLY, YOU REQUEST TO BE ADVISED, IN THE EVENT THERE IS NO STATUTE PROHIBITING THE MAKING OF SELF-RENEWAL STORAGE AND SERVICING CONTRACTS, WHETHER THE CONTRACTORS UNDER THE TERMS OF THE PROPOSED CONTRACTS WOULD BE PERMITTED TO TERMINATE THE CONTRACTS BY GIVING 30 DAYS' NOTICE TO THE GOVERNMENT. ALSO, YOU REQUEST TO BE ADVISED, IN HE EVENT THE REPLY TO THE SECOND QUESTION IS IN THE NEGATIVE, WHETHER THERE WOULD BE ANY OBJECTION TO INCLUDING IN THE CONTRACT A PROVISION WHICH WOULD GIVE THE CONTRACTORS THE SAME CANCELLATION RIGHTS RESERVED TO THE GOVERNMENT.

THERE WERE FORWARDED WITH YOUR LETTER BLANK COPIES OF THE FORMS PROPOSED TO BE USED IN THE CONTRACTING FOR SUCH SERVICES, WHICH PROVIDE THAT THE POST OFFICE DEPARTMENT RESERVES THE RIGHT TO TERMINATE THE AGREEMENT AT ANY TIME UPON 30 DAYS' NOTICE, AND IN THE EVENT OF UNSATISFACTORY CONDITIONS OR SERVICE THE AGREEMENT MAY BE TERMINATED UPON ONE DAY'S NOTICE. IT IS STATED IN YOUR LETTER THAT THE EXPENDITURES UNDER SUCH CONTRACTS ARE CHARGEABLE AGAINST THE " VEHICLE SERVICE" APPROPRIATION.

THE RENEWAL PROVISION AS PROPOSED DOES NOT APPEAR TO BE AN OPTIONAL ONE, BUT ONE WHICH PLACES THE GOVERNMENT UNDER OBLIGATION TO RENEW THE CONTRACT BEYOND THE CURRENT FISCAL YEAR UNLESS THE GOVERNMENT EXERCISES ITS RIGHT TO TERMINATE IT UPON 30 DAYS' NOTICE OR UPON ONE DAY'S NOTICE FOR CAUSE.

SECTIONS 3732 AND 3679, REVISED STATUTES, AS AMENDED, SO FAR AS HERE PERTINENT, PROVIDE:

NO CONTRACT OR PURCHASE ON BEHALF OF THE UNITED STATES SHALL BE MADE, UNLESS THE SAME IS AUTHORIZED BY LAW OR IS UNDER AN APPROPRIATION ADEQUATE TO ITS FULFILLMENT, * * *.

NO EXECUTIVE DEPARTMENT OR OTHER GOVERNMENT ESTABLISHMENT OF THE UNITED STATES SHALL EXPEND, IN ANY ONE FISCAL YEAR, ANY SUM IN EXCESS OF APPROPRIATIONS MADE BY CONGRESS FOR THAT FISCAL YEAR, OR INVOLVE THE GOVERNMENT IN ANY CONTRACT OR OTHER OBLIGATION FOR THE FUTURE PAYMENT OF MONEY IN EXCESS OF SUCH APPROPRIATIONS UNLESS SUCH CONTRACT OR OBLIGATION IS AUTHORIZED BY LAW. * * * N LEITER V. UNITED STATES, 271 U.S. 204, 207, THE COURT HELD THAT---

* * * A LEASE TO THE GOVERNMENT FOR A TERM OF YEARS, WHEN ENTERED INTO UNDER AN APPROPRIATION AVAILABLE FOR BUT ONE FISCAL YEAR, IS BINDING ON THE GOVERNMENT ONLY FOR THAT YEAR. MCCOLLUM V. UNITED STATES, 17 CT.CLS. 92, 104; SMOOT V. UNITED STATES, 38 CT.CLS. 418, 427. AND IT IS PLAIN THAT, TO MAKE IT BINDING FOR ANY SUBSEQUENT YEAR, IT IS NECESSARY, NOT ONLY THAT AN APPROPRIATION BE MADE AVAILABLE FOR THE PAYMENT OF THE RENT, BUT THAT THE GOVERNMENT, BY ITS DULY AUTHORIZED OFFICERS, AFFIRMATIVELY CONTINUE THE LEASE FOR SUCH SUBSEQUENT YEAR THEREBY, IN EFFECT, BY THE ADOPTION OF THE ORIGINAL LEASE, MAKING A NEW LEASE UNDER THE AUTHORITY OF SUCH APPROPRIATION FOR THE SUBSEQUENT YEAR. ( ITALICS SUPPLIED.) SEE, ALSO, GOODYEAR CO. V. UNITED STATES, 276 U.S. 287; BROWNSTEIN-LOUIS CO. V. UNITED STATES, 90 C.1CLS.

THERE HAS BEEN FOUND NO PROVISION OF LAW SPECIFICALLY AUTHORIZING CONTRACTS OF THIS CHARACTER. SEE, HOWEVER, ACT OF APRIL 24, 1920, 41 STAT. 574, 578, AUTHORIZING LEASES FOR POST OFFICES FOR TERMS NOT EXCEEDING TWENTY YEARS.

THE CONTRACT HERE PROPOSED WOULD REQUIRE NO AFFIRMATIVE ACT ON THE PART OF AN AUTHORIZED CONTRACTING OFFICER TO CONTINUE IT BEYOND THE FISCAL YEAR FOR WHICH EXECUTED. NOR WOULD THE AUTOMATIC RENEWAL OF THE CONTRACT EXPRESSLY BE MADE CONTINGENT UPON THE AVAILABILITY OF FUTURE APPROPRIATIONS. MOREOVER, THE MERE RESERVATION OF RIGHT IN THE GOVERNMENT TO TERMINATE THE CONTRACT DOES NOT PROVIDE ANY BASIS FOR DISTINGUISHING THE CONTRACT--- AS A MATTER OF SUBSTANCE--- FROM A CONTRACT WHICH PURPORTS TO BIND THE GOVERNMENT UNCONDITIONALLY FOR AN INDEFINITE PERIOD IN THE FUTURE. CONSEQUENTLY, THE CONTRACT WOULD SEEM TO FALL SQUARELY WITHIN THE INHIBITION CONTAINED IN THE STATUTES QUOTED ABOVE.

THE INCLUSION OF SUCH A PROVISION IS OBJECTIONABLE FOR THE FURTHER REASON THAT, NOTWITHSTANDING THE PROPOSAL TO HAVE THE CONTRACT EXTEND INDEFINITELY INTO THE FUTURE, NO COMPLIANCE WOULD BE HAD, AFTER THE FIRST YEAR, WITH SECTION 3709, REVISED STATUTES, AS AMENDED, REQUIRING ADVERTISING FOR BIDS. SEE, GENERALLY, 9 COMP. GEN. 6; 14 ID. 59; 19 ID. 980.

ACCORDINGLY, THIS OFFICE WOULD BE REQUIRED TO OBJECT TO THE INCLUSION OF THE PROPOSED PROVISION IN CONTRACTS OF THE POST OFFICE DEPARTMENT FOR STORAGE AND SERVICING OF GOVERNMENT-OWNED TRUCKS. AS THE ANSWER TO THE FIRST QUESTION IS IN THE NEGATIVE, ANSWERS TO YOUR REMAINING QUESTIONS DO NOT APPEAR NECESSARY.