District of Columbia Eligibility for Local Public Works Grant Funds

GAO was requested to decide whether in administering the Local Public Works Program (LPW), the Economic Development Administration (EDA) may disallow the costs of architectural and engineering (A/E) project inspection performed by the District of Columbia employees as opposed to private contractors. Legislation authorizing this program contains a force account prohibition against the performance of construction, renovation, repair or other improvement of any public works project for which a grant was made under this act by any department, agency, or instrumentality of any State or local government. When the District entered into its grant agreement with EDA, the regulations describing the force account prohibition left "construction activities" undefined. The District interpreted "construction activities" to mean only the cost of actual physical construction exclusive of other costs, including the costs of A/E inspection. It contended that an EDA notice and amendment did not clarify the force account prohibition, but redefined it to disallow costs which were allowable when the District entered into its agreement with EDA. The District further contended that the EDA interpretation of the statutory force account prohibition was inconsistent with the Act, and that EDA approved some grant applications in which the District indicated it would use and expect to be reimbursed for its own employees performing the work. GAO found that the EDA interpretation of the force account prohibition to disallow the costs of A/E project inspection directly performed by District employees was not unreasonable or inconsistent with the statute, nor was it erroneous or inconsistent with agency regulations implementing the statute. Since there was no basis to object to the legality of this interpretation, these costs did not need to be allowed under the LPW grants program. However, any grant approval involving the use of the District's own employees to perform A/E inspections were binding on EDA.