B-132384, JULY 29, 1957, 37 COMP. GEN. 60

B-132384: Jul 29, 1957

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APPROPRIATIONS - FISCAL YEAR - ADVANCE PAYMENT PROHIBITION - LONG TERM CONTRACTS THE EXECUTION OF A LEASE AGREEMENT FOR THE RENTAL OF NITROGEN GAS CYLINDERS FOR A 25-YEAR PERIOD IS IN CONTRAVENTION OF THE ADVANCE PAYMENT PROHIBITION IN SECTION 3648. SINCE THE RENTAL AGREEMENTS ARE INCIDENT TO THE REGULAR AND CONTINUING PURCHASE OF GAS FROM THE LESSOR OVER THE LEASE PERIOD. SUCH AGREEMENTS ARE IN VIOLATION OF SECTION 3735. 1957: REFERENCE IS MADE TO YOUR LETTER OF JUNE 26. THE SERVICES AS COVERED BY THE LEASE WERE AUTHORIZED BY CONFIRMING PURCHASE ORDER NO. 43057. IS PROCURED FROM THE SUPPLIERS IN CYLINDERS CONTAINING 100 CUBIC FEET. IT IS STATED THAT THE CYLINDERS COULD BE PURCHASED OUTRIGHT FROM THE DEALERS AT A MINIMUM OF $40 PER UNIT.

B-132384, JULY 29, 1957, 37 COMP. GEN. 60

APPROPRIATIONS - FISCAL YEAR - ADVANCE PAYMENT PROHIBITION - LONG TERM CONTRACTS THE EXECUTION OF A LEASE AGREEMENT FOR THE RENTAL OF NITROGEN GAS CYLINDERS FOR A 25-YEAR PERIOD IS IN CONTRAVENTION OF THE ADVANCE PAYMENT PROHIBITION IN SECTION 3648, REVISED STATUTES, 31 U.S.C. 529; AND, SINCE THE RENTAL AGREEMENTS ARE INCIDENT TO THE REGULAR AND CONTINUING PURCHASE OF GAS FROM THE LESSOR OVER THE LEASE PERIOD, SUCH AGREEMENTS ARE IN VIOLATION OF SECTION 3735, REVISED STATUTES, 41 U.S.C. 13, WHICH PROHIBITS THE EXECUTION OF CONTRACTS FOR MORE THAN A YEAR, AND SECTIONS 3679 AND 3732, REVISED STATUTES, 31 U.S.C. 665 AND 41 U.S.C. 11, LIMITING THE OBLIGATION OF APPROPRIATIONS BY CONTRACT TO NEEDS ARISING WITHIN THE FISCAL YEAR COVERED BY THE APPROPRIATION TO BE CHARGED.

TO C. D. LEONETTI, DEPARTMENT OF THE INTERIOR, JULY 29, 1957:

REFERENCE IS MADE TO YOUR LETTER OF JUNE 26, 1957, WITH ENCLOSURES, REQUESTING AN ADVANCE DECISION AS TO THE PROPRIETY OF CERTIFYING FOR PAYMENT INVOICE NO. 2-408461, DATED DECEMBER 7, 1956, FOR $40.50, SUBMITTED BY THE AIR REDUCTION SALES COMPANY, COVERING THE RENTAL OF A NITROGEN GAS CYLINDER FOR A 25-YEAR PERIOD COMMENCING ON NOVEMBER 13, 1956, THE DATE OF A LEASE AGREEMENT BETWEEN THE CLAIMANT AND THE U.S. GEOLOGICAL SURVEY, SURFACE WATER BRANCH, FORT WORTH, TEXAS. THE SERVICES AS COVERED BY THE LEASE WERE AUTHORIZED BY CONFIRMING PURCHASE ORDER NO. 43057, ISSUED DECEMBER 6, 1956, BY YOUR FORT WORTH OFFICE.

IT APPEARS THAT THE NITROGEN GAS NEEDED IN THE "BUBBLER GAGE" MEDIUM FOR TRANSMITTING WATER PRESSURE TO A LINEAR MEASUREMENT GRAPH UTILIZED IN OBTAINING STREAM-FLOW DATA, IS PROCURED FROM THE SUPPLIERS IN CYLINDERS CONTAINING 100 CUBIC FEET, WHICH NORMALLY CONSTITUTES A 6 MONTHS' SUPPLY FOR A STANDARD STREAM-GAGING STATION. THE FEDERAL SUPPLY SCHEDULE ( CLASS 51, PART III) SPECIFIES A ,FREE-USE" PERIOD OF 30 DAYS ON EACH CYLINDER, AND AUTHORIZES A DEMURRAGE OR RENTAL CHARGE OF 3 CENTS A DAY PER CYLINDER, NORMALLY AMOUNTING TO $9 PER YEAR FOR EACH INSTALLATION. IT IS STATED THAT THE CYLINDERS COULD BE PURCHASED OUTRIGHT FROM THE DEALERS AT A MINIMUM OF $40 PER UNIT. HOWEVER, THE OUTRIGHT PURCHASE OF THE CYLINDERS IS NOT ADMINISTRATIVELY CONSIDERED TO BE ECONOMICALLY FEASIBLE, CONSIDERING THE MAINTENANCE AND REPAIR COSTS INVOLVED, PAINTING, PERIODIC TESTING REQUIRED BY INTERSTATE COMMERCE COMMISSION REGULATIONS, AND THE REQUIRED PROPERTY ACCOUNTING FOR SEVERAL HUNDREDS OF CYLINDERS.

AS AN ALTERNATIVE, IT IS PROPOSED TO FOLLOW THE ESTABLISHED COMMERCIAL PRACTICE OF ENTERING INTO LEASEHOLD OR RENTAL AGREEMENTS DIRECTLY WITH THE DISTRIBUTORS, WHEREBY PAYMENTS RANGING FROM $25 TO $40 PER CYLINDER WOULD BE MADE TO THE LATTER FOR THE CONTINUOUS USE OF A REPLACEABLE CYLINDER OVER A 25-YEAR PERIOD FREE OF DEMURRAGE, REPAIR, TESTING, MAINTENANCE, PICK-UP AND DELIVERY COSTS, AS STIPULATED IN THE FORM OF LEASE WITH THE AIR REDUCTION SALES COMPANY WHICH ACCOMPANIED YOUR LETTER OF JUNE 28. THE ADOPTION OF THIS ALTERNATIVE SUGGESTION WOULD RESULT IN AN ESTIMATED SAVING IN DEMURRAGE CHARGES OF $225 PER INSTALLATION OVER A 25-YEAR PERIOD, AND AN EVENTUAL ESTIMATED SAVING TO THE GOVERNMENT OF AROUND $500,000 ON YOUR EXPANDING OPERATIONS.

WE ARE FULLY APPRECIATIVE OF THE APPARENT ECONOMIC SOUNDNESS OF THE ARRANGEMENT AND OF THE DESIRE OF THE SURVEY OFFICIALS TO FURTHER THE INTEREST OF THE UNITED STATES IN THIS MATTER. NEVERTHELESS, THERE CAN BE NO SERIOUS DOUBT BUT THAT THE RENTAL AGREEMENTS REFERRED TO ARE IN CONTRAVENTION OF THE PROVISIONS OF SECTION 3648, REVISED STATUTES, 31 U.S.C. 529, WHICH STATES:

NO ADVANCE OF PUBLIC MONEY SHALL BE MADE IN ANY CASE. AND IN ALL CASES OF CONTRACTS FOR THE PERFORMANCE OF ANY SERVICE, OR THE DELIVERY OF ARTICLES OF ANY DESCRIPTION, FOR THE USE OF THE UNITED STATES, PAYMENT SHALL NOT EXCEED THE VALUE OF THE SERVICE RENDERED OR OF THE ARTICLES DELIVERED PREVIOUSLY TO SUCH PAYMENT. * * * ( ITALICS SUPPLIED.)

FURTHERMORE, SECTION 3735, REVISED STATUTES, 40 U.S.C. 13, PROHIBITS THE EXECUTIVE DEPARTMENTS FROM MAKING CONTRACTS FOR SUPPLIES FOR A TERM LONGER THAN ONE YEAR FROM THE DATE OF THEIR EXECUTION, AND SINCE THE RENTAL CONTRACTS IN QUESTION ARE IN ACTUAL FACT MEANINGLESS EXCEPT IN CONNECTION WITH REGULAR AND CONTINUING PURCHASES OF GAS FROM THE LESSOR OVER THE LEASE PERIOD IT SEEMS IMPOSSIBLE TO JUSTIFY THEM EXCEPT IN CONNECTION WITH AN OBLIGATION TO PURCHASE GAS, WHICH WOULD BE IN VIOLATION OF THAT SECTION.

CONCERNING THE MATTER OF OBLIGATION OF APPROPRIATIONS BY CONTRACT, IT IS THE GENERAL RULE THAT THE SUBJECT MATTER OF THE CONTRACT MUST CONCERN A NEED ARISING WITHIN THE FISCAL YEAR COVERED BY THE APPROPRIATION SOUGHT TO BE CHARGED. SEE 32 COMP. GEN. 565, 566; ALSO SECTIONS 3679 AND 3732, REVISED STATUTES, 31 U.S.C. 665 AND 41 U.S.C. 11. MANIFESTLY, THE RENTAL CONTRACTS UNDER CONSIDERATION PROVIDE FOR THE NEEDS OF THE SERVICE NOT ONLY FOR THE 1957 FISCAL YEAR, BUT ALSO FOR MANY YEARS IN THE FUTURE, CONTRARY TO THE PRINCIPLES OF THE DECISIONS AND STATUTES CITED. SEE LEITER V. UNITED STATES, 271 U.S. 204.

UNLESS A CONTRACTUAL ARRANGEMENT CAN BE MADE WITH THE DISTRIBUTORS WHEREBY THE SPECIFIC NEEDS OF THE BUREAU WOULD BE MET ON AN ANNUAL BASIS, WITH AN OPTION IN THE GOVERNMENT FOR RENEWAL FROM YEAR TO YEAR, WE ARE UNABLE TO SEE ANY WAY OF ACCOMPLISHING THE DESIRED OBJECTIVE WITHOUT SPECIFIC STATUTORY AUTHORIZATION.

THE INVOICE, AND RELATED PAPERS, ARE RETURNED HEREWITH, WITH THE ADVICE THAT PAYMENT THEREON IS NOT AUTHORIZED.