B-126023, JANUARY 12, 1956, 35 COMP. GEN. 391

B-126023: Jan 12, 1956

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PUBLIC BUILDINGS PURCHASE CONTRACT ACT OF 1954 - INSURANCE - LEASE PURCHASE CONTRACTS APPROPRIATED MONEYS ARE NOT AVAILABLE. 1956: REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 7. OR WHETHER IT IS AUTHORITY ONLY TO REIMBURSE THE CONTRACTOR FOR PREMIUMS COVERING INSURANCE TAKEN SOLELY FOR HIS OWN PROTECTION ON HIS INSURABLE INTEREST IN THE BUILDINGS. WILL BE SOLELY AND ENTIRELY RESPONSIBLE FOR ALL REPAIRS (STRUCTURAL OR OTHERWISE). IT IS NOT PROPOSED TO REQUIRE FIRE AND EXTENDED COVERAGE NOR TO PROVIDE FOR THE REIMBURSEMENT TO THE CONTRACTOR FOR SUCH COVERAGE. YOU REFER TO OUR DECISIONS CONCERNING THE GOVERNMENT'S ACCEPTED POLICY OF SELF -INSURANCE OF ITS PROPERTY AND TO OUR DECISIONS HOLDING THAT APPROPRIATED MONIES ARE NOT AVAILABLE FOR THE PAYMENT OF INSURANCE PREMIUMS ON SUCH PROPERTY IN THE ABSENCE OF SPECIFIC STATUTORY AUTHORITY THEREFOR.

B-126023, JANUARY 12, 1956, 35 COMP. GEN. 391

PUBLIC BUILDINGS PURCHASE CONTRACT ACT OF 1954 - INSURANCE - LEASE PURCHASE CONTRACTS APPROPRIATED MONEYS ARE NOT AVAILABLE, IN THE ABSENCE OF SPECIFIC STATUTORY AUTHORITY, FOR INSURANCE FOR THE PROTECTION OF THE GOVERNMENT, AND, THEREFORE, A LEASE-PURCHASE CONTRACT EXECUTED UNDER THE PUBLIC BUILDINGS PURCHASE CONTRACT ACT OF 1954 MAY NOT INCLUDE A PROVISION WHICH REQUIRES THE CONTRACTORS TO CARRY INSURANCE FOR THE PROTECTION OF THE GOVERNMENT. THE AUTHORITY IN SECTION 411 (D) (3) OF THE PUBLIC BUILDINGS PURCHASE CONTRACT ACT OF 1954 TO INCLUDE IN LEASE-PURCHASE CONTRACTS PROVISION FOR REIMBURSING THE OWNER FOR THE COST OF ,APPROPRIATE INSURANCE" DOES NOT AUTHORIZE THE GOVERNMENT TO INSURE THE PROPERTY IN ITS OWN RIGHT.

TO THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, JANUARY 12, 1956:

REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 7, 1955, REQUESTING A DECISION CONCERNING INSURANCE COVERAGE UNDER THE LEASE-PURCHASE PROGRAM AS AUTHORIZED BY THE PUBLIC BUILDINGS ACT OF 1949, 63 STAT. 176, 40 U.S.C. 352, AS AMENDED BY THE PUBLIC BUILDINGS PURCHASE CONTRACT ACT OF 1954, 68 STAT. 518, 40 U.S.C. 352.

YOUR LETTER PRESENTS A QUESTION AS TO WHETHER THE LANGUAGE OF SECTION 411 (D) (3) OF THE ACT CONSTITUTES SPECIFIC AUTHORITY FOR THE GOVERNMENT TO CARRY AND PAY PREMIUMS FOR FIRE AND EXTENDED COVERAGE INSURANCE FOR THE GOVERNMENT'S PROTECTION, OR WHETHER IT IS AUTHORITY ONLY TO REIMBURSE THE CONTRACTOR FOR PREMIUMS COVERING INSURANCE TAKEN SOLELY FOR HIS OWN PROTECTION ON HIS INSURABLE INTEREST IN THE BUILDINGS.

UNDER THE PROGRAM OF THE GENERAL SERVICES ADMINISTRATION, AS PRESENTLY CONCEIVED, THE GOVERNMENT, AFTER COMPLETION OF THE IMPROVEMENTS, WILL BE SOLELY AND ENTIRELY RESPONSIBLE FOR ALL REPAIRS (STRUCTURAL OR OTHERWISE), MAINTENANCE, CUSTODIAL AND PROTECTIVE SERVICES. IT IS NOT PROPOSED TO REQUIRE FIRE AND EXTENDED COVERAGE NOR TO PROVIDE FOR THE REIMBURSEMENT TO THE CONTRACTOR FOR SUCH COVERAGE. YOUR LETTER INDICATES THAT THE GENERAL SERVICES ADMINISTRATION REGARDS THE PURCHASE CONTRACT AS ESTABLISHING A VENDOR-PURCHASER RELATIONSHIP WITH EQUITABLE TITLE IN THE GOVERNMENT AND YOU STATE THAT, EVEN IF THE PURCHASE CONTRACT COULD BE CONSTRUED AS ESTABLISHING A LANDLORD-TENANT RELATIONSHIP, THE INCIDENT OF LOSS UNDER THE PROGRAM AS PRESENTLY CONCEIVED WOULD FALL ON THE GOVERNMENT. YOU REFER TO OUR DECISIONS CONCERNING THE GOVERNMENT'S ACCEPTED POLICY OF SELF -INSURANCE OF ITS PROPERTY AND TO OUR DECISIONS HOLDING THAT APPROPRIATED MONIES ARE NOT AVAILABLE FOR THE PAYMENT OF INSURANCE PREMIUMS ON SUCH PROPERTY IN THE ABSENCE OF SPECIFIC STATUTORY AUTHORITY THEREFOR.

IT IS PROPOSED TO INSERT A CLAUSE IN THE PURCHASE CONTRACT AS FOLLOWS:

"THE GOVERNMENT SHALL ASSUME SOLE RESPONSIBILITY FOR THE CONDITION, MAINTENANCE AND MANAGEMENT OF THE PREMISES; AND THE OWNER SHALL NOT BE REQUIRED TO BEAR ANY COST OR EXPENSE FOR REPAIRS TO THE PREMISES, INCLUDING BOILER, HEATING PLANT AND ALL OTHER EQUIPMENT THEREIN. AS USED IN THIS ARTICLE THE TERM "REPAIRS" INCLUDES REPAIRS OF EVERY CHARACTER, INTERIOR AND EXTERIOR, STRUCTURAL AND NONSTRUCTURAL, ORDINARY AS WELL AS EXTRAORDINARY, FORESEEN AS WELL AS UNFORESEEN, ALTERATIONS, CHANGES, REPLACEMENTS AND RENEWALS. NOTHING CONTAINED IN THIS ARTICLE SHALL BE CONSTRUED AS RELIEVING THE CONSTRUCTION CONTRACTOR FROM ANY OF HIS RESPONSIBILITIES UNDER THE CONSTRUCTION BID AND AWARD.'

AS POINTED OUT IN YOUR LETTER, SECTION 411 (A) OF TITLE I OF THE ACT AUTHORIZES THE ADMINISTRATOR, UNDER CONDITIONS THEREIN STATED, TO ACQUIRE TITLE TO REAL PROPERTY AND TO PROVIDE FOR THE CONSTRUCTION OF PUBLIC BUILDINGS THEREON BY NEGOTIATING AND ENTERING INTO PURCHASE CONTRACTS. SUCH CONTRACTS ARE REQUIRED TO BE FOR TERMS OF NOT LESS THAN 10 NOR MORE THAN 25 YEARS AND TO PROVIDE IN EACH CASE THAT TITLE TO THE PROPERTY SHALL VEST IN THE UNITED STATES AT OR BEFORE THE EXPIRATION OF THE CONTRACT TERM UPON FULFILLMENT OF THE STIPULATED TERMS AND CONDITIONS. SECTION 411 (D) PROVIDES THAT EACH PURCHASE CONTRACT SHALL INCLUDE SUCH PROVISIONS AS THE ADMINISTRATOR, IN HIS DISCRETION, SHALL DEEM TO BE IN THE BEST INTERESTS OF THE UNITED STATES AND APPROPRIATE TO SECURE THE PERFORMANCE OF THE OBLIGATIONS IMPOSED UPON THE PARTY OR PARTIES THAT ENTER INTO AGREEMENTS WITH THE UNITED STATES. ALSO, THE SECTION PROVIDES AS FOLLOWS:

* * * NO SUCH PURCHASE CONTRACT SHALL PROVIDE FOR ANY PAYMENTS TO BE MADE BY THE UNITED STATES IN EXCESS OF THE AMOUNT NECESSARY, AS DETERMINED BY THE ADMINISTRATOR, TO---

(3) REIMBURSE THE CONTRACTOR FOR THE COST OF ANY OTHER OBLIGATIONS ASSUMED BY HIM UNDER THE CONTRACT, INCLUDING (BUT NOT LIMITED TO) PAYMENT OF TAXES, COSTS OF CARRYING APPROPRIATE INSURANCE, AND COSTS OF REPAIR AND MAINTENANCE IF SO ASSUMED BY THE CONTRACTOR.

IT LONG HAS BEEN THE SETTLED POLICY OF THE UNITED STATES TO ASSUME ITS OWN RISKS. HENCE, APPROPRIATED MONIES OF THE UNITED STATES GENERALLY ARE NOT REGARDED AS AVAILABLE IN THE ABSENCE OF SPECIFIC STATUTORY AUTHORITY FOR THE PAYMENT OF INSURANCE PREMIUMS. SEE 13 COMP. DEC. 779; 4 COMP. GEN. 690; 19 ID. 211; 21 ID. 928. THIS RULE HAS BEEN HELD TO BE APPLICABLE TO INSURANCE AGAINST TORT LIABILITY AS WELL AS INSURANCE AGAINST FIRE, TORNADO AND SIMILAR INSURANCE. 19 COMP. GEN. 798. THE CONGRESS HAS MADE EXCEPTIONS TO SUCH RULE IN CERTAIN INSTANCES. SEE ACTS OF JULY 7, 1955, AND JULY 13, 1955, 69 STAT. 264, AND 69 STAT. 301, 314, RESPECTIVELY, PROVIDING FOR THE INSURANCE OF DEPARTMENT OF STATE AND DEPARTMENT OF DEFENSE OFFICIAL MOTOR VEHICLES IN FOREIGN COUNTRIES WHEN REQUIRED BY LAW OF SUCH COUNTRIES.

SECTION 411 (D) (3) AUTHORIZES YOU TO INCLUDE IN THE PURCHASE CONTRACT A PROVISION UNDER WHICH THE OWNER WOULD BE REIMBURSED FOR THE COST OF ANY OBLIGATION ASSUMED BY HIM UNDER THE CONTRACT, INCLUDING THE COST OF CARRYING "APPROPRIATE INSURANCE.' THE CITED SECTION DOES NOT, EITHER IN EXPRESS TERMS OR BY IMPLICATION AUTHORIZE OR REQUIRE THE GOVERNMENT TO INSURE THE PROPERTY IN ITS OWN RIGHT DURING THE TERM OF THE CONTRACT. UNDER THE PROPOSED REPAIR AND MAINTENANCE CLAUSE, QUOTED ABOVE, WHICH IS TO BE INSERTED IN THE PURCHASE CONTRACT, THE OWNER IS NOT REQUIRED TO ASSUME ANY RESPONSIBILITY FOR THE CONDITION, MAINTENANCE OR MANAGEMENT OF THE PREMISES. ON THE CONTRARY, SUCH RESPONSIBILITY IS TO BE BORNE BY THE UNITED STATES. AS INDICATED, APPROPRIATED MONIES GENERALLY ARE NOT REGARDED AS AVAILABLE FOR THE COST OF INSURANCE FOR THE PROTECTION OF THE GOVERNMENT. ACCORDINGLY, IT WOULD NOT APPEAR PROPER TO INCLUDE IN THE CONTRACT ANY PROVISION REQUIRING THE CONTRACTOR TO CARRY INSURANCE FOR THE GOVERNMENT'S PROTECTION.

IN THE CIRCUMSTANCES, CONSIDERATION OF YOUR QUESTION CONCERNING THE AVAILABILITY FOR REPAIRS OF THE PROCEEDS FROM AN INSURANCE POLICY CARRIED FOR THE GOVERNMENT'S PROTECTION IS NOT CONSIDERED TO BE NECESSARY.

THERE IS ENCLOSED FOR YOUR INFORMATION A COPY OF OUR DECISION OF TODAY TO THE POSTMASTER GENERAL, B-126202, 35 COMP. GEN. 393, CONCERNING THE AVAILABILITY OF INSURANCE PROCEEDS FOR RESTORATION OF DAMAGED OR DESTROYED PROPERTY UNDER THE POST OFFICE DEPARTMENT PROPERTY ACT OF 1954, 68 STAT. 521, 39 U.S.C. 902.