B-131402, AUGUST 9, 1957, 37 COMP. GEN. 96

B-131402, AUGUST 9, 1957, 37 COMP. GEN. 96

GOVERNMENT CORPORATIONS - LEASES FOR OFFICE SPACE - ADMINISTRATIVE EXPENSES - ADVERTISING STATUTE COMPLIANCE INASMUCH AS RENT FOR REGIONAL OFFICE SPACE LEASED BY A GOVERNMENT CORPORATION--- WHOLLY-OWNED OR MIXED-OWNERSHIP--- IS AN ADMINISTRATIVE EXPENSE, THE SOLICITATION FOR THE LEASE OF THE SPACE MUST BE ADVERTISED IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 3709, REVISED STATUTES, 41 U.S.C. 5.

TO WALTER S. HILBORN, AUGUST 9, 1957:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF APRIL 5, 1957, QUESTIONING THE AUTHORITY OF THE FEDERAL NATIONAL MORTGAGE ASSOCIATION ( FNMA) TO DISREGARD THE LOW BID OF MILLIRON, YOUR CLIENT, AND TO NEGOTIATE A LEASE WITH A HIGHER BIDDER FOR 20,000 FEET OF SPACE IN LOS ANGELES, CALIFORNIA.

FNMA IS A GOVERNMENT CORPORATION. THE FREEDOM WITH WHICH A GOVERNMENT CORPORATION CAN ACT DEPENDS UPON THE LANGUAGE IN THE CORPORATION'S CHARTER AND IN THE GENERAL LAWS PERTAINING TO GOVERNMENT CORPORATIONS.

THE FEDERAL NATIONAL MORTGAGE ASSOCIATION WAS RECHARTERED IN 1954. SECTION 309 (A) OF THE CHARTER ACT, 68 STAT. 620, 12 U.S.C. 1723A (A), PROVIDES, INSOFAR AS PERTINENT, THAT FNMA SHALL HAVE THE POWER---

* * * TO ENTER INTO AND PERFORM CONTRACTS, LEASES * * * ON SUCH TERMS AS IT MAY DEEM APPROPRIATE * * * WITH ANY PERSON, FIRM, ASSOCIATION, OR CORPORATION; * * *

WHILE FNMA WAS THUS GRANTED BROAD AUTHORITY TO ENTER INTO AND PERFORM LEASES AND TO DETERMINE THE AMOUNT OF ITS CORPORATE OBLIGATIONS, SUCH AUTHORITY WAS LIMITED BY THE " SAVINGS CLAUSE" OF SECTION 309 (B), 12 U.S.C. 1723A (B), AS FOLLOWS:

EXCEPT AS MAY BE OTHERWISE PROVIDED IN THIS TITLE, IN THE GOVERNMENT CORPORATION CONTROL ACT, OR IN OTHER LAWS SPECIFICALLY APPLICABLE TO GOVERNMENT CORPORATIONS, THE ASSOCIATION SHALL DETERMINE THE NECESSITY FOR AND THE CHARACTER AND AMOUNT OF ITS OBLIGATIONS AND EXPENDITURES AND THE MANNER IN WHICH THEY SHALL BE INCURRED, ALLOWED, PAID, AND ACCOUNTED FOR.

THE REORGANIZATION ACT OF 1949, 63 STAT. 203, 5 U.S.C. 133Z ET SEQ., AUTHORIZED THE PRESIDENT TO EXAMINE THE ORGANIZATION OF ALL GOVERNMENT AGENCIES AND TO EFFECTUATE NECESSARY CHANGES. SECTION 7 OF THE ACT, 63 STAT. 205, 5 U.S.C. 133Z-5, INCLUDES " GOVERNMENT CORPORATIONS" WITHIN THE MEANING OF THE TERM "AGENCY.'

PURSUANT TO THE AUTHORITY CONTAINED IN THE ACT, PRESIDENT TRUMAN TRANSFERRED TO THE ADMINISTRATOR OF GENERAL SERVICES ALL THE RESPECTIVE AGENCIES' FUNCTIONS WITH RESPECT TO ACQUIRING SPACE IN BUILDINGS BY LEASE. SECTION 1 OF REORGANIZATION PLAN NO. 18 OF 1950, 64 STAT. 1270, 5 U.S.C. 133Z-15 NOTE AND 40 U.S.C. 304C NOTE. THE ADMINISTRATOR WAS AUTHORIZED TO DELEGATE HIS AUTHORITY. SECTION 3, IBID.

BY LETTER DATED JUNE 6, 1956, TO THE PRESIDENT OF FNMA, THE ADMINISTRATOR OF GENERAL SERVICES AUTHORIZED FNMA TO ACQUIRE GENERAL PURPOSE SPACE WITHOUT REFERENCE TO THE GENERAL SERVICES ADMINISTRATION. HOWEVER, FNMA WAS INVITED TO AVAIL ITSELF OF THE GENERAL SERVICES ADMINISTRATION'S CENTRALIZED PROCUREMENT SERVICE, IF IT SO DESIRED. SUBSEQUENTLY, FNMA REQUESTED THE GENERAL SERVICES ADMINISTRATION TO SOLICIT BIDS FOR 20,000 FEET OF SPACE IN LOS ANGELES, CALIFORNIA. THE BID OF MILLIRON WAS THE LOWEST RESPONSIVE BID RECEIVED; HOWEVER, FNMA CHOSE NOT TO AVAIL ITSELF OF ANY OF THE BIDS OBTAINED BY THE GENERAL SERVICES ADMINISTRATION AND NEGOTIATED A LEASE WITH ANOTHER BIDDER, APPARENTLY BECAUSE IT FOUND THE PREMISES AND LOCATION MORE SUITED FOR THE CORPORATION.

IN OUR VIEW, THE ACTION OF THE CORPORATION IN MAKING AN AWARD TO OTHER THAN THE LOWEST RESPONSIBLE BIDDER CONFORMING WITH THE ADVERTISED REQUIREMENTS WAS IMPROPER. BY THE TERMS OF SECTION 309 (B) OF THE CHARTER ACT, SUPRA, FNMA IS SUBJECT TO THE "LAWS SPECIFICALLY APPLICABLE TO GOVERNMENT CORPORATIONS.' THE ADVERTISING REQUIREMENTS OF SECTION 3709, REVISED STATUTES, AS AMENDED, 41 U.S.C. 5, ARE APPLICABLE TO THE ADMINISTRATIVE EXPENSES OF WHOLLY-OWNED GOVERNMENT CORPORATIONS. SECTION (C) OF THE ACT OF AUGUST 2, 1946, 60 STAT. 807, 809, 41 U.S.C. 5 NOTE. GENERICALLY SPEAKING, FNMA IS A WHOLLY-OWNED GOVERNMENT CORPORATION. SECTION 101 OF THE GOVERNMENT CORPORATION CONTROL ACT, AS AMENDED, 31 U.S.C. SUPP. II 846. AND THERE WOULD SEEM TO BE NO DOUBT THAT THE LEASING OF OFFICE SPACE FOR A FNMA REGIONAL OFFICE IS AN ADMINISTRATIVE EXPENSE. THEREFORE, THE CONTRACT FOR LEASING QUARTERS SHOULD HAVE BEEN AWARDED IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 3709, REVISED STATUTES.

WE HAVE ASCERTAINED THAT FNMA HAS NEGOTIATED A LEASE WITH A BIDDER WHO WAS NOT THE LOWEST BIDDER UNDER THE GENERAL SERVICES ADMINISTRATION INVITATION AND HAS MOVED INTO THE PREMISES COVERED BY THAT LEASE.

IN THESE CIRCUMSTANCES, WE DO NOT FEEL THAT WE WOULD BE JUSTIFIED IN HAVING THE LEASE VOIDED AT THIS TIME. HOWEVER, THE MATTER IS BEING BROUGHT TO THE ATTENTION OF FNMA FOR SUCH ACTION AS MAY BE NECESSARY TO ASSURE THAT IN FUTURE CASES AWARDS WILL BE MADE PROPERLY.