B-128172, JULY 18, 1956, 36 COMP. GEN. 48

B-128172: Jul 18, 1956

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POST OFFICE DEPARTMENT - LEASE-PURCHASE PROGRAM - REAL ESTATE OPTIONS THE PURCHASE OF AN ASSIGNABLE REAL ESTATE OPTION BY THE POST OFFICE DEPARTMENT IN CARRYING OUT ITS LEASE-PURCHASE PROGRAM IS NOT A PURCHASE OF LAND OR AN INTEREST IN LAND WHICH IS PROHIBITED BY STATUTE. 1956: REFERENCE IS MADE TO LETTER OF JUNE 7. IT IS EXPLAINED THAT WHENEVER IT IS DETERMINED A NEW POSTAL FACILITY IS REQUIRED. A SURVEY IS MADE TO DETERMINE THE SIZE OF THE NEEDED FACILITY AND THE BEST LOCATION THEREOF SERVICE-WISE SINCE. THE DEPARTMENT IS RESORTING TO THE PRACTICE OF SELECTING THE SITE UPON WHICH IT WISHES THE FACILITY TO BE CONSTRUCTED. IF AN OPTION WERE OBTAINED BY ONE PROSPECTIVE BIDDER. AFTER THE ASSIGNABLE OPTION IS OBTAINED.

B-128172, JULY 18, 1956, 36 COMP. GEN. 48

POST OFFICE DEPARTMENT - LEASE-PURCHASE PROGRAM - REAL ESTATE OPTIONS THE PURCHASE OF AN ASSIGNABLE REAL ESTATE OPTION BY THE POST OFFICE DEPARTMENT IN CARRYING OUT ITS LEASE-PURCHASE PROGRAM IS NOT A PURCHASE OF LAND OR AN INTEREST IN LAND WHICH IS PROHIBITED BY STATUTE.

TO THE POSTMASTER GENERAL, JULY 18, 1956:

REFERENCE IS MADE TO LETTER OF JUNE 7, 1956, FROM THE DEPUTY POSTMASTER GENERAL, REQUESTING OUR OPINION AS TO THE AUTHORITY OF THE POST OFFICE DEPARTMENT TO USE APPROPRIATED FUNDS TO PURCHASE ASSIGNABLE REAL ESTATE OPTIONS IN CARRYING OUT ITS LEASE PROGRAMS UNDER SECTIONS 11-14, 577, AND 794F OF TITLE 39, UNITED STATES CODE.

IT IS EXPLAINED THAT WHENEVER IT IS DETERMINED A NEW POSTAL FACILITY IS REQUIRED, A SURVEY IS MADE TO DETERMINE THE SIZE OF THE NEEDED FACILITY AND THE BEST LOCATION THEREOF SERVICE-WISE SINCE, WHEN THE DEPARTMENT DOES NOT ITSELF SELECT THE LOCATION, THE BIDDERS USUALLY OFFER DIFFERENT SITES WHICH MAY NOT BE SATISFACTORY FROM A SERVICE STANDPOINT. ACCORDINGLY, IN A GROWING NUMBER OF INSTANCES, THE DEPARTMENT IS RESORTING TO THE PRACTICE OF SELECTING THE SITE UPON WHICH IT WISHES THE FACILITY TO BE CONSTRUCTED. IF THE DEPARTMENT MERELY INFORMED THE PROSPECTIVE BIDDERS OF THE SELECTED SITE, THEY WOULD APPROACH THE OWNER OF THE SITE WHO COULD THEN PLAY OFF ONE AGAINST THE OTHER AND THUS INCREASE THE SALE PRICE. THE INCREASED SALES PRICE OF THE SITE WOULD ULTIMATELY BE REFLECTED IN A HIGHER RENTAL OF THE LEASED QUARTERS. TO ELIMINATE THIS BIDDING UP OF THE SALES PRICE, THE DEPARTMENT HAS BEEN ATTEMPTING TO OBTAIN AN ASSIGNABLE OPTION TO THE SITE. IN ADDITION, IF AN OPTION WERE OBTAINED BY ONE PROSPECTIVE BIDDER, THE DEPARTMENT WOULD BE COMPELLED TO DEAL WITH THE OPTIONEE IF IT DESIRED TO BUILD ON THE SITE, AND COMPETITION FOR THE ERECTION OF THE FACILITY WOULD BE EFFECTIVELY ELIMINATED.

AFTER THE ASSIGNABLE OPTION IS OBTAINED, THE DEPARTMENT DRAWS UP THE PLANS AND SPECIFICATIONS FOR THE FACILITY. IN SOME INSTANCES IT IS FOUND DESIRABLE TO PREPARE THESE IN A PRELIMINARY FASHION ONLY, LEAVING TO LEASE PROPONENTS THE WORKING OUT OF DETAILS. THE LEASE INSPECTORS AND OTHER POST OFFICE OFFICIALS CONCERNED IN THE PROCUREMENT OF LEASED QUARTERS THEN TRY TO INTEREST PEOPLE TO CONSTRUCT THE FACILITY. ALTHOUGH UNDER SECTION 794F OF 39 U.S.C., ADVERTISEMENT IS NOT REQUIRED EXCEPT WHEN LEASES ARE OBTAINED PURSUANT TO 39 U.S.C. 903, COMPETITION IS GENERALLY DEVELOPED BY MEANS OF ADVERTISEMENT, PERSONAL SOLICITATION OF PERSONS WHO MAY BE INTERESTED, OR BOTH. AFTER THE BIDS ARE RECEIVED, THEY ARE ANALYZED AND NEGOTIATIONS ARE OFTEN TIMES ENTERED INTO CONCERNING THE RENT, TERM OF YEARS, BUILDING SPECIFICATIONS, ETC. IF A MAJOR FACILITY IS INVOLVED, A GREAT DEAL OF TIME MUST NECESSARILY ELAPSE BETWEEN THE TIME THE OPTION IS GRANTED TO THE DEPARTMENT AND THE TIME THE DEPARTMENT ASSIGNS THE OPTION TO THE SUCCESSFUL BIDDER WHO IN TURN ACTUALLY EXERCISES THE RIGHT OR PRIVILEGE CONFERRED BY THE OPTION. WHEN THE DEPARTMENT'S PLANS AND SPECIFICATIONS ARE NOT COMPLETE, THE VARIOUS PROPONENTS MUST BEAR THE EXPENSE OF A PORTION OF THE ARCHITECTURAL AND ENGINEERING WORK. FOR THIS REASON ALSO, NEGOTIATION WITH BIDDERS WITH REGARD TO VARIOUS FEATURES OF THEIR PROPOSALS IS A NECESSITY, THUS PRECLUDING APPLICATION OF 41 U.S.C. 5, WHICH REQUIRES COMPETITIVE BIDDING.

IT IS EXPLAINED ALSO THAT WHILE THE OPTION RECITES THAT THE DEPARTMENT HAS PAID ONE DOLLAR AS A CONSIDERATION, THE DEPARTMENT DOES NOT IN FACT PAY THE ONE DOLLAR SINCE, GENERALLY, THE OPTION ORS DO NOT INSIST THAT IT BE PAID. IN CERTAIN INSTANCES, HOWEVER, WHEN THE OPTION OR HAS INSISTED UPON THE RECEIPT OF THE ONE DOLLAR, POSTAL OFFICIALS HAVE PAID IT OUT OF THEIR OWN FUNDS RATHER THAN SEE THE PROJECT FALL THROUGH. IN OTHER INSTANCES, REQUESTS BY WOULD-BE OPTION ORS FOR MORE THAN NOMINAL CONSIDERATION HAVE BEEN REFUSED.

IT IS STATED THAT SINCE, IN MOST STATES, AN OPTION UNSUPPORTED BY CONSIDERATION MAY BE WITHDRAWN AT ANY TIME PRIOR TO ACCEPTANCE, YOUR DEPARTMENT FEELS THAT INASMUCH AS THE ASSIGNABLE OPTIONS ARE SECURED IN AID OF A GOVERNMENT ACTIVITY, APPROPRIATED FUNDS MAY BE USED TO PROVIDE THE NECESSARY CONSIDERATION FOR SUCH OPTIONS. HOWEVER, DOUBT AS TO THE AVAILABILITY OF APPROPRIATED FUNDS IS SAID TO ARISE BY REASON OF THE PROVISIONS OF 41 U.S.C. 14 WHICH STATES:

NO LAND SHALL BE PURCHASED ON ACCOUNT OF THE UNITED STATES, EXCEPT UNDER A LAW AUTHORIZING SUCH PURCHASE.

IT APPEARS THAT AUTHORITY TO PURCHASE OPTIONS IS CONTAINED IN 39 U.S.C. 903. HOWEVER, AS INDICATED, THE DEPARTMENT HAS DETERMINED NOT TO USE THAT AUTHORITY IN CONNECTION WITH THE LEASE PROGRAM CONSIDERED HEREIN. WHILE THE PROVISIONS OF 39 U.S.C. 907 PROVIDE THAT LEASES NEGOTIATED UNDER 39 U.S.C. 903 ARE SUBJECT TO THE ADVERTISING REQUIREMENTS OF 41 U.S.C. 5, THAT AUTHORITY IS SUPPLEMENTAL TO THE PROVISIONS OF LAW UNDER WHICH THE DEPARTMENT DESIRES TO OPERATE.

IT IS GENERALLY AGREED THAT BEFORE AN OPTION IS EXERCISED THERE IS NO RELATION OF VENDOR AND PURCHASER AND THE OPTIONEE HAS NO LEGAL OR EQUITABLE INTEREST IN THE LAND. 55 AM. JUR., VENDOR AND PURCHASER, SECTIONS 28 AND 43. CONSEQUENTLY, IT APPEARS THAT THE PURCHASE OF LAND OR AN INTEREST IN LAND. THE NUMEROUS CASES CITED IN YOUR SUBMISSION SUPPORT SUCH CONCLUSION. HENCE, THE PROHIBITION AGAINST THE PURCHASE OF LAND CONTAINED IN 41 U.S.C. 14 WOULD NOT BE APPLICABLE TO PURCHASES OF ASSIGNABLE OPTIONS.

ACCORDINGLY, IF IT BE DETERMINED ADMINISTRATIVELY THAT IT IS NECESSARY TO PURCHASE SUCH OPTIONS AT A NOMINAL OR MORE THAN NOMINAL CONSIDERATION IN ORDER TO EFFECTIVELY CARRY OUT THE DEPARTMENT'S LEASE PROGRAM UNDER THE AUTHORITY HEREINBEFORE CITED, FUNDS PROVIDED FOR PAYMENTS UNDER THE LEASES WOULD BE AVAILABLE FOR SUCH PURCHASES. 35 COMP. GEN. 129.