B-135782, APR. 24, 1958

B-135782: Apr 24, 1958

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GENERAL SERVICES ADMINISTRATION: REFERENCE IS MADE TO YOUR LETTER OF APRIL 9. THE CONTRACT TERM IS SPECIFIED AS FROM 10 TO 25 YEARS AND THE MAXIMUM RATE OF INTEREST IS STATED AS 4 PERCENT. FOR CONVENIENCE IN COMPARING THE ESTIMATED COSTS AS SET FORTH IN THE PROSPECTUS WITH THE ACTUAL COSTS BASED UPON THE LOW BIDS THERE WAS FORWARDED WITH YOUR LETTER A COMPARISON TABLE SHOWING THE COST. 642) WILL EXCEED THE ESTIMATED TOTAL COST OF $433. THAT THE ANNUAL COST OF PRINCIPAL AND INTEREST WILL EXCEED THE ESTIMATED COST AS SHOWN IN THE PROSPECTUS BY $958. THAT THE ACTUAL GROSS SQUARE FOOTAGE WILL BE 33 SQUARE FEET OVER THE AREA AS SHOWN IN THE PROSPECTUS. THAT THE ACTUAL NET AREA WILL BE 637 SQUARE FEET OR 4 PERCENT LESS.

B-135782, APR. 24, 1958

TO THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION:

REFERENCE IS MADE TO YOUR LETTER OF APRIL 9, 1958, WITH ENCLOSURES, REQUESTING TO BE ADVISED WHETHER WE CONCUR WITH YOUR CONCLUSION THAT THE COST VARIATIONS INCIDENT TO THE PROPOSED LEASE-PURCHASE PROJECT FOR THE CONSTRUCTION OF A POST OFFICE, ETC., AT DURHAM, NEW HAMPSHIRE, UNDER TITLE I OF PUBLIC LAW 519, 83D CONGRESS, KNOWN AS THE PUBLIC BUILDINGS PURCHASE CONTRACT ACT OF 1954 (68 STAT. 518), AS AMENDED, MAY BE REGARDED AS COMING WITHIN THE REASONABLE VARIATION RULE AS ANNOUNCED IN OUR DECISION OF OCTOBER 5, 1956, B-129326, TO THE POSTMASTER GENERAL.

THE ESTIMATES OF MAXIMUM COSTS AS SET FORTH IN THE PROSPECTUS AS APPROVED BY THE DIRECTOR OF THE BUREAU OF THE BUDGET AND THE SENATE AND HOUSE COMMITTEES ON PUBLIC WORKS AS REQUIRED BY THE STATUTE SHOW A TOTAL ESTIMATED COST OF $433,600, REPRESENTING $40,000 FOR ARCHITECTURAL COSTS, $13,600 AS THE VALUE OF GOVERNMENT-OWNED LAND AND LAND TO BE ACQUIRED AND $380,000 AS THE ESTIMATED MAXIMUM COST OF THE IMPROVEMENTS. THE CONTRACT TERM IS SPECIFIED AS FROM 10 TO 25 YEARS AND THE MAXIMUM RATE OF INTEREST IS STATED AS 4 PERCENT.

YOU STATE THAT ON JANUARY 28, 1958, THE JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, BOSTON, MASSACHUSETTS, SUBMITTED THE LOWEST BID FOR FINANCING, NAMELY, 4.625 PERCENT PER ANNUM AND THAT ON MARCH 13, 1958, THE FRANCHI CONSTRUCTION COMPANY OF WEST NEWTON, MASSACHUSETTS, SUBMITTED THE LOWEST ACCEPTABLE BID FOR CONSTRUCTION OF THE BUILDING.

FOR CONVENIENCE IN COMPARING THE ESTIMATED COSTS AS SET FORTH IN THE PROSPECTUS WITH THE ACTUAL COSTS BASED UPON THE LOW BIDS THERE WAS FORWARDED WITH YOUR LETTER A COMPARISON TABLE SHOWING THE COST, FINANCING, AND SCOPE OF THE PROJECT. AS INDICATED IN YOUR LETTER THIS TABLE SHOWS THE ACTUAL COST OF THE PROJECT ($443,642) WILL EXCEED THE ESTIMATED TOTAL COST OF $433,600 AS SET FORTH IN THE PROSPECTUS BY $10,042 OR AN INCREASE COMPUTED BY OUR AUDITORS TO BE SLIGHTLY IN EXCESS OF 2 PERCENT. YOU POINT OUT THAT THE INTEREST RATE OF 4.625 PERCENT PER ANNUM REPRESENTING THE LOWEST BID RECEIVED FOR FINANCING EXCEEDS THE ESTIMATE OF 4 PERCENT IN THE PROSPECTUS BY 0.625 PERCENT; THAT THE ANNUAL COST OF PRINCIPAL AND INTEREST WILL EXCEED THE ESTIMATED COST AS SHOWN IN THE PROSPECTUS BY $958; THAT THE ACTUAL GROSS SQUARE FOOTAGE WILL BE 33 SQUARE FEET OVER THE AREA AS SHOWN IN THE PROSPECTUS; AND THAT THE ACTUAL NET AREA WILL BE 637 SQUARE FEET OR 4 PERCENT LESS.

WE AGREE WITH YOUR CONCLUSION THAT THE VARIATIONS IN THIS CASE ARE REASONABLE BASED UPON THE DATA AS SHOWN IN THE APPROVED PROSPECTUS AND, THEREFORE, WE WOULD NOT BE REQUIRED TO OBJECT TO THE EXECUTION OF THE CONSTRUCTION AND FINANCING CONTRACTS, IF PROPER IN OTHER RESPECTS.

CONCERNING THE CONCLUSIONS AND OBSERVATIONS IN THE LAST PARAGRAPH PAGE TWO AND THE FIRST FULL PARAGRAPH PAGE THREE OF YOUR LETTER RELATING TO THE APPLICATION OF THE REASONABLE VARIATION RULE AS STATED IN OUR DECISION OF OCTOBER 5, 1956, TOGETHER WITH THE NECESSITY OR NONNECESSITY OF SUBMITTING HERE FOR APPROVAL INDIVIDUAL CASES INVOLVING VARIATIONS, YOUR ATTENTION IS INVITED TO THE GENERAL STATEMENT OF POLICY IN OUR DECISION OF MARCH 19, 1958, B-135465, TO YOU. IN THAT DECISION, IN ANSWER TO A GENERAL QUESTION AS TO THE ACTION TO BE TAKEN CONCERNING OTHER PROJECTS, WE STATED, IN EFFECT, THAT IN OUR VIEW DIFFERENT FACTS AND CIRCUMSTANCES INVOLVED IN EACH PROJECT PRECLUDE THE ESTABLISHMENT OF ANY FORMAL FIXED PATTERN OF AUTHORIZED VARIATIONS. SUCH A POLICY WE FEEL IS DICTATED BY MANY FACTORS INCLUDING AMONG OTHERS ECONOMIC CONDITIONS AND THE CIRCUMSTANCES UNDER WHICH THE VARIATIONS OCCUR. WE REPEAT, HOWEVER, THAT IN ANY INDIVIDUAL CASE WHERE A DOUBT EXISTS AS TO THE LEGALITY OR PROPRIETY OF ANY PROPOSED AWARD THE FACILITIES OF THE OFFICE OF THE GENERAL COUNSEL OF OUR OFFICE WILL BE AVAILABLE FOR INFORMAL DISCUSSIONS WITH APPROPRIATE OFFICIALS OF YOUR ADMINISTRATION.