B-145318, MAY 3, 1961, 40 COMP. GEN. 608

B-145318: May 3, 1961

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WHICH FUNDS ARE AVAILABLE TO AMORTIZE THE PRINCIPAL AMOUNT OF THE MORTGAGE. THE SUCCESSFUL BIDDER FOR A HOUSING PROJECT IS REQUIRED TO PROVIDE FOR FINANCING THE CONSTRUCTION COSTS OF THE PROJECT AND UPON COMPLETION THEREOF IS REIMBURSED FROM THE PROCEEDS OF A MORTGAGE PLACED THEREON AND INSURED BY THE FEDERAL HOUSING ADMINISTRATION. THIS MORTGAGE IS PAID OFF BY THE MILITARY DEPARTMENTS OVER A PERIOD OF NOT TO EXCEED 30 YEARS FROM APPROPRIATIONS MADE FOR QUARTERS ALLOWANCES OF MILITARY PERSONNEL. THE TRANSACTIONS ARE HANDLED THROUGH A SEPARATE MORTGAGOR-BUILDER CORPORATION FOR EACH PROJECT. IS THE OWNER OF THE LEASEHOLD INTEREST IN LAND AND FACILITIES CONSTRUCTED THEREON. IS THE MORTGAGOR. WHEN THE PROJECT IS COMPLETED THE MILITARY DEPARTMENT TAKES OVER THE CAPITAL STOCK OF THE CORPORATION AND GUARANTEES PAYMENT OF THE MORTGAGE DEBT OF THE CORPORATION.

B-145318, MAY 3, 1961, 40 COMP. GEN. 608

HOUSING - CAPEHART HOUSING PROJECTS - MORTGAGE LIMITATION - EFFECT AS COST LIMITATION THE LIMITATION ON THE MORTGAGE OBLIGATION PER FAMILY HOUSING UNIT UNDER THE CAPEHART HOUSING PROGRAM, 12 U.S.C. 1748B (B) (3), MUST, IN VIEW OF THE LEGISLATIVE HISTORY, BE REGARDED AS A MAXIMUM COST LIMITATION PER HOUSING UNIT SO THAT ADDITIONAL COSTS, SUCH AS COSTS DUE TO CHANGE ORDERS, DELAYS BEYOND THE CONTRACTOR'S CONTROL, AND DISPUTES RESOLVED IN FAVOR OF THE CONTRACTOR, WHICH WOULD CAUSE THE STATUTORY LIMITATION TO BE EXCEEDED MAY NOT BE PAID FROM APPROPRIATED FUNDS AUTHORIZED UNDER SECTION 407 OF THE HOUSING AMENDMENTS OF 1955, 42 U.S.C. 1594D, WHICH FUNDS ARE AVAILABLE TO AMORTIZE THE PRINCIPAL AMOUNT OF THE MORTGAGE.

TO THE SECRETARY OF THE AIR FORCE, MAY 3, 1961:

BY LETTER OF MARCH 9, 1961, YOUR DEPUTY SPECIAL ASSISTANT FOR INSTALLATIONS ASKS OUR DECISION CONCERNING THE USE OF APPROPRIATED FUNDS TO PAY CERTAIN CLAIMS ARISING UNDER SO-CALLED CAPEHART HOUSING CONTRACTS.

BEFORE RESTATING THE FACTS IN THE CASE PRESENTED FOR DECISION IT APPEARS APPROPRIATE TO FIRST SET FORTH A BRIEF DESCRIPTION OF THE CAPEHART PROGRAM.

THE PROGRAM ORIGINATED IN LEGISLATION CONTAINED IN TITLE IV OF THE HOUSING AMENDMENTS OF 1955, 69 STAT. 646, 12 U.S.C. 1748A-1748G, WHICH, AMONG OTHER THINGS, REVISED TITLE VIII OF THE NATIONAL HOUSING ACT. THIS PROGRAM PROVIDES FOR THE CONSTRUCTION OF HOUSING FOR MEMBERS OF THE ARMED SERVICES. THE SUCCESSFUL BIDDER FOR A HOUSING PROJECT IS REQUIRED TO PROVIDE FOR FINANCING THE CONSTRUCTION COSTS OF THE PROJECT AND UPON COMPLETION THEREOF IS REIMBURSED FROM THE PROCEEDS OF A MORTGAGE PLACED THEREON AND INSURED BY THE FEDERAL HOUSING ADMINISTRATION. THIS MORTGAGE IS PAID OFF BY THE MILITARY DEPARTMENTS OVER A PERIOD OF NOT TO EXCEED 30 YEARS FROM APPROPRIATIONS MADE FOR QUARTERS ALLOWANCES OF MILITARY PERSONNEL.

IN ORDER TO FACILITATE THE RAISING OF FUNDS FROM PRIVATE LENDERS, THE TRANSACTIONS ARE HANDLED THROUGH A SEPARATE MORTGAGOR-BUILDER CORPORATION FOR EACH PROJECT. THIS CORPORATION LEASES THE LAND FROM THE MILITARY, IS THE OWNER OF THE LEASEHOLD INTEREST IN LAND AND FACILITIES CONSTRUCTED THEREON, AND IS THE MORTGAGOR. WHEN THE PROJECT IS COMPLETED THE MILITARY DEPARTMENT TAKES OVER THE CAPITAL STOCK OF THE CORPORATION AND GUARANTEES PAYMENT OF THE MORTGAGE DEBT OF THE CORPORATION.

SECTION 803 OF TITLE VIII, 12 U.S.C. 1748B (B) (3) (B), AS REVISED BY THE HOUSING AMENDMENTS OF 1955 ORIGINALLY PROVIDED THAT THE MORTGAGE SHALL INVOLVE A PRINCIPAL OBLIGATION IN AN AMOUNT NOT IN EXCESS OF AN AVERAGE OF $13,500 PER FAMILY UNIT. THIS SECTION SUBSEQUENTLY WAS AMENDED BY SECTION 505 OF THE HOUSING ACT OF 1956, 70 STAT. 1109, 12 U.S.C. 1748B (B) (3) (B), WHEREBY THE AMOUNT WAS RAISED TO $16,500. AT THIS POINT IT MAY BE PERTINENT ALSO TO NOTE THAT A PROVISION WAS ADDED TO THIS SECTION 803 BY SECTION 507 (C) OF THE MILITARY CONSTRUCTION ACT OF 1960, 74 STAT. 186, 12 U.S.C. 1748B (B) (3) (B), WHICH LIMITED THE COST OF ANY SINGLE HOUSING UNIT TO $19,800.

CONSEQUENTLY THE PRESENT PERTINENT PROVISION OF LAW RELATING TO THE AMOUNT OF THE MORTGAGE READS (QUOTING FROM 12 U.S.C., SUPP. II, 1748B (B) (3) ( AS FOLLOWS:

THE MORTGAGE SHALL INVOLVE A PRINCIPAL OBLIGATION IN AN AMOUNT---

(B) NOT TO EXCEED AN AVERAGE OF $16,500 PER FAMILY UNIT FOR SUCH PART OF SUCH PROPERTY OR PROJECT (INCLUDING RANGES, REFRIGERATORS, SHADES, SCREENS, AND FIXTURES) AS MAY BE ATTRIBUTABLE TO DWELLING USE: PROVIDED, THAT THE REPLACEMENT COST OF THE PROPERTY OR PROJECT AS DETERMINED BY THE COMMISSIONER, INCLUDING THE ESTIMATED VALUE OF ANY USABLE UTILITIES WITHIN THE BOUNDARIES OF THE PROPERTY OR PROJECT WHERE OWNED BY THE UNITED STATES AND NOT PROVIDED FOR OUT OF THE PROCEEDS OF THE MORTGAGE, SHALL NOT EXCEED AN AVERAGE OF $16,500 PER FAMILY UNIT: PROVIDED FURTHER, THAT SHOULD THE FINANCING OF HOUSING TO BE CONSTRUCTED PURSUANT TO A SINGLE INVITATION FOR BIDS BE ACCOMPLISHED BY TWO OR MORE MORTGAGES, THE PRINCIPAL OBLIGATION OF ANY SINGLE MORTGAGE MAY EXCEED AN AVERAGE OF $16,500 PER FAMILY UNIT IF THE SUM OF THE PRINCIPAL OBLIGATIONS OF ALL MORTGAGES FOR SUCH HOUSING DOES NOT EXCEED AN AVERAGE OF $16,500 PER FAMILY UNIT: AND PROVIDED FURTHER, THAT SUBJECT TO THE LIMITATIONS OF THIS PARAGRAPH NO FAMILY UNIT INCLUDED IN ANY MORTGAGED PROPERTY SHALL BE CONTRACTED FOR AFTER JUNE 8, 1960 IF THE COST OF SUCH UNIT EXCEEDS $19,800 * * *

SECTIONS 403 THROUGH 409 OF TITLE IV OF THE HOUSING AMENDMENTS OF 1955, 42 U.S.C. 1594 (A) THROUGH 1594E (A) AND (B), WHILE NOT MADE A PART OF THE REVISED TITLE VIII OF THE NATIONAL HOUSING ACT, CONTAIN PROVISIONS RELATIVE TO THE OPERATION AND ADMINISTRATION OF THE HOUSING PROGRAM WITHIN THE MILITARY SERVICES. PERTINENT TO THE MATTER PRESENTED FOR DECISION THE DEPUTY SPECIAL ASSISTANT FOR INSTALLATIONS INVITES ATTENTION TO SECTION 407, 42 U.S.C. 1594D (A) AND (B), WHICH PROVIDES AS FOLLOWS:

SEC. 407. (A) THERE ARE HEREBY AUTHORIZED TO BE APPROPRIATED SUCH SUMS AS MAY BE NECESSARY TO CARRY OUT THE PROVISIONS OF SECTIONS 403 THROUGH 406 OF THIS ACT.

(B) ANY FUNDS HERETOFORE OR HEREAFTER AUTHORIZED TO BE EXPENDED BY ANY OF THE MILITARY DEPARTMENTS OR THE COAST GUARD FOR THE PAYMENT OF ALLOWANCES FOR QUARTERS FOR MILITARY PERSONNEL MAY BE USED FOR THE PURPOSES SPECIFIED IN SUBSECTION (A) ABOVE.

IN THE SPECIFIC CASE PRESENTED FOR CONSIDERATION ANTHONY P. MILLER, INC., ENTERED INTO A CONTRACT FOR THE CONSTRUCTION OF A 250 UNIT CAPEHART HOUSING PROJECT AT NIAGARA FALLS MUNICIPAL AIRPORT, FOR AN AMOUNT OF $23,000 LESS THAN THE STATUTORY MORTGAGE LIMIT OF AN AVERAGE OF $16,500 PER UNIT. DUE TO CHANGE ORDERS PROCESSED DURING THE CONSTRUCTION PERIOD AND BECAUSE OF DELAYS BEYOND THE CONTRACTOR'S CONTROL, THE PRINCIPAL OBLIGATION OF THE MORTGAGE HAD BEEN INCREASED BY THE TIME OF FINAL CLOSING TO A SUM ONLY $15 LESS THAN THE STATUTORY MAXIMUM. ALSO PENDING AT THE TIME OF CLOSING WERE SEVERAL DISPUTES BETWEEN THE CONTRACTOR AND THE CONTRACTING OFFICER WHICH AT THAT TIME HAD NOT BEEN DISPOSED OF BY THE ARMED SERVICES BOARD OF CONTRACT APPEALS. THESE DISPUTES SUBSEQUENTLY WERE RESOLVED IN FAVOR OF THE CONTRACTOR.

WHILE THERE HAS BEEN A "FINAL CLOSING" SO AS TO PRECLUDE THE INCLUSION OF THESE AMOUNTS IN THE PRINCIPAL OBLIGATION OF THE MORTGAGE, IT IS CLEAR THAT SUCH AMOUNTS COULD NOT OTHERWISE HAVE BEEN INCLUDED THEREIN SINCE TO DO SO WOULD CAUSE THE STATUTORY LIMITATION OF $16,500 PER UNIT TO BE EXCEEDED. THUS QUESTION ARISES WHETHER SUCH AMOUNTS NOW MAY BE PAID FROM APPROPRIATED FUNDS REFERRED TO IN SECTION 407 OF THE HOUSING AMENDMENTS OF 1955.

AS INDICATED IN THE LETTER FROM THE DEPUTY SPECIAL ASSISTANT FOR INSTALLATIONS THE USE OF APPROPRIATED FUNDS TO SUPPLEMENT MORTGAGE PROCEEDS HAS BEEN INFORMALLY DISCUSSED AT SEVERAL MEETINGS WITH REPRESENTATIVES OF THE GENERAL ACCOUNTING OFFICE AND THE DEPARTMENT OF DEFENSE. WHILE NO AGREEMENT WAS REACHED CONCERNING THE USE OF APPROPRIATED FUNDS IN A SITUATION SUCH AS THAT NOW CONSIDERED, OUR REPRESENTATIVES DID AGREE THAT APPROPRIATED FUNDS COULD BE USED IN CERTAIN INSTANCES TO PAY CLAIMS RESOLVED IN FAVOR OF THE CONTRACTOR AFTER "FINAL CLOSING" AND WHERE TO DO SO WOULD NOT EXCEED AN AVERAGE PRICE OF $16,500 PER UNIT. IT WAS ALSO AGREED THAT COSTS OF A CONTRACT TERMINATED FOR THE CONVENIENCE OF THE GOVERNMENT COULD BE PAID FROM APPROPRIATED FUNDS WHERE A PROJECT WAS CANCELED BECAUSE THE INSTALLATION AT WHICH THE HOUSING WAS TO BE BUILT HAD BEEN CLOSED DOWN.

INASMUCH AS THE LIMITATION OF $16,500 PER UNIT APPEARED TO BE A LIMITATION ON THE COST OF THE HOUSING AND SINCE THE APPROPRIATION USED TO PAY THE CLAIMS IN THE CASES MENTIONED ABOVE IS THE SAME APPROPRIATION THAT WOULD OTHERWISE BE USED TO AMORTIZE THE PRINCIPAL AMOUNT OF THE MORTGAGE, IT WAS FELT THAT THE USE OF APPROPRIATED FUNDS IN THOSE CASES WOULD NOT DO VIOLENCE TO THE INTENT OF THE CONGRESS IN THE MATTER PARTICULARLY SINCE THE COST REMAINED LESS THAN AN AVERAGE OF $16,500 PER UNIT.

IN SUPPORT OF THE VIEW THAT APPROPRIATED FUNDS MAY PROPERLY BE USED TO PAY THE INSTANT AND SIMILAR CLAIMS, THE DEPUTY SPECIAL ASSISTANT FOR INSTALLATIONS REFERS TO THAT PART OF THE NATIONAL HOUSING ACT WHICH CONTAINS THE LIMITATION ON THE PRINCIPAL AMOUNT OF THE MORTGAGE AND STATES THAT:

WITH THE EXCEPTION OF ITS FINAL PROVISO, WHICH DIRECTLY LIMITS THE COST OF INDIVIDUAL FAMILY UNITS, THIS SECTION OF THE NATIONAL HOUSING ACT IS, ON ITS FACE, SIMPLY A LIMITATION ON THE DOLLAR AMOUNT OF THE MORTGAGE LOANS USED TO FINANCE THE CONSTRUCTION OF CAPEHART PROJECTS. SINCE THE COMPENSATION OF A CONTRACTOR WHO BUILDS A CAPEHART PROJECT NORMALLY COMES SOLELY FROM MORTGAGE PROCEEDS, THE LIMITATION ON THE MORTGAGE HAS THE PRACTICAL EFFECT OF LIMITING THE COST OF THE HOUSING ITSELF. (IN THE LEGISLATIVE HISTORY OF THE STATUTE, INDEED, THE PER UNIT DOLLAR LIMITATION IS SOMETIMES REFERRED TO AS A "COST" LIMITATION -- SEE, FOR EXAMPLE, SENATE REPORT NO. 2005, P. 30; HOUSE REPORT NO. 2363, P. 40; AND HOUSE REPORT NO. 2958, P. 28, ALL OF WHICH WERE ISSUED DURING THE SECOND SESSION OF THE 84TH CONGRESS IN CONNECTION WITH THE HOUSING ACT OF 1956.)

HE THEN REFERS TO SECTION 407 OF TITLE IV OF THE HOUSING AMENDMENTS OF 1955 AND STATES THAT:

* * * THE STATUTE FAILS TO SPECIFY CLEARLY THE SITUATIONS IN WHICH APPROPRIATED FUNDS MAY OR MAY NOT BE USED UNDER SECTION 407, AND IT IS THIS CIRCUMSTANCE WHICH GIVES RISE TO OUR PRESENT UNCERTAINTY. THE OVER- ALL STATUTORY SCHEME DOES SUGGEST TO US, HOWEVER, THAT CONGRESS EXPECTED THE MILITARY TO DESIGN PROJECTS THAT A BUILDER COULD REASONABLY PLAN TO CONSTRUCT FOR AN AMOUNT WITHIN THE STATUTORY MORTGAGE LIMIT; TO AWARD CONTRACTS IN AN AMOUNT NOT EXCEEDING THAT LIMIT; TO ARRANGE FOR THE BUILDER TO BE PAID FROM MORTGAGE PROCEEDS; AND TO PAY VALID CLAIMS UNDER THE CONTRACT WITH APPROPRIATED FUNDS IF MORTGAGE PROCEEDS SHOULD SUBSEQUENTLY BECOME UNAVAILABLE FOR SOME REASON. IF THIS ANALYSIS IS CORRECT, IT MAY NOT BE WITHOUT SIGNIFICANCE THAT THE STATUTE ITSELF MAKES THE $16,500 LIMITATION APPLICABLE ONLY TO THE MORTGAGE AND NOT TO THE APPROPRIATED FUNDS AVAILABLE UNDER SECTION 407.

IT IS OUR BELIEF THAT CONGRESS MIGHT WELL HAVE INTENDED THE AUTHORITY CONTAINED IN SECTION 407 TO BE EXERCISED IN A SITUATION SUCH AS THIS TO SATISFY THE ELIGIBLE BUILDER'S CLAIMS FROM APPROPRIATED FUNDS, NOTWITHSTANDING THE FACT THAT ADDITIONAL MORTGAGE MONEY COULD NOT HAVE BEEN BORROWED FOR THIS PURPOSE WITHOUT EXCEEDING THE STATUTORY MORTGAGE LIMIT. HAD CONGRESS INTENDED THE LIMITATION ON THE SIZE OF THE MORTGAGE TO GOVERN THE USE OF APPROPRIATED FUNDS IN CASES LIKE THESE, IT WOULD HAVE BEEN A SIMPLE MATTER TO PROVIDE IN THE STATUTE THAT THE TOTAL AMOUNT OF MORTGAGE PROCEEDS AND APPROPRIATED FUNDS PAID TO ANY ELIGIBLE BUILDER IN RESPECT OF A SINGLE PROJECT SHOULD NOT EXCEED AN AVERAGE OF $16,500 PER UNIT; AND HAD CONGRESS INTENDED THAT THE ELIGIBLE BUILDER ALWAYS BE PAID SOLELY FROM MORTGAGE PROCEEDS (THE BUILDER'S TOTAL COMPENSATION THEREBY AUTOMATICALLY BEING LIMITED BY THE MORTGAGE CEILING), SECTION 407 COULD SIMPLY HAVE BEEN OMITTED. THE FACT THAT THE STATUTE DOES AUTHORIZE THE USE OF APPROPRIATED FUNDS AND DOES NOT EXPRESSLY LIMIT THE EXPENDITURE OF SUCH FUNDS IN THE WAY THAT THE MORTGAGE ITSELF IS LIMITED STRONGLY SUGGESTS TO US THAT SPECIAL CIRCUMSTANCES MIGHT WARRANT PAYMENT OF AN ELIGIBLE BUILDER FROM APPROPRIATED FUNDS IN AN AMOUNT OVER AND ABOVE THE MAXIMUM INSURABLE MORTGAGE AMOUNT. IF WE ARE CORRECT IN SO THINKING, WE HAVE NO DOUBT THAT PAYMENT OF THE AMOUNTS TO WHICH ANTHONY P. MILLER HAS BEEN FOUND TO BE ENTITLED IN THE INSTANT CASES WOULD BE JUSTIFIED.

WE MUST AGREE THAT THE STATUTE IS NOT ENTIRELY CLEAR AS TO THE SITUATIONS IN WHICH APPROPRIATED FUNDS MAY BE USED UNDER SECTION 407. WE THINK, HOWEVER, THAT THE STATUTE AS WELL AS ITS LEGISLATIVE HISTORY CLEARLY REQUIRES THAT THE $16,500 LIMITATION ON THE PRINCIPAL AMOUNT OF THE MORTGAGE OBLIGATION BE CONSIDERED AS AN AVERAGE COST LIMITATION PER UNIT. THIS VIEW NOT ONLY IS REFLECTED IN THE CONGRESSIONAL REPORTS CITED IN THE ABOVE-QUOTED PORTION OF THE LETTER BUT IN NUMEROUS OTHER DISCUSSIONS REGARDING THIS LIMITATION. SEE PARTICULARLY PAGES 417 AND 418 OF THE SENATE HEARINGS ON THE HOUSING ACT OF 1955 WHEREIN THERE APPEAR THE FOLLOWING STATEMENTS BY SENATOR LEHMAN:

* * * IF I UNDERSTAND THE BILL CORRECTLY, BIDS ARE TAKEN ON A COMPETITIVE BASIS. THE BID IS AWARDED TO THE LOWEST RESPONSIBLE BIDDER. THAT IS, OF COURSE, DONE AT PRESENT. THEN IF THE BUILDING GETS CONSTRUCTED, MORTGAGES IN THE FACE AMOUNT OF THE BID ARE ISSUED.

IN REPLY THERETO SENATOR CAPEHART STATED THAT---

THE MORTGAGE WILL ALWAYS BE THE EXACT AMOUNT THAT THE GOVERNMENT PAID FOR BUILDING THE PROJECT. PERIOD. IT WILL BE NO MORE AND NO LESS. THE CONTRACTS WOULD BE AWARDED TO THE LOWEST RESPONSIBLE BIDDER.

ALSO, WHEN THIS PROPOSED PROVISION OF THE HOUSING AMENDMENTS OF 1955 WAS EXPLAINED ON THE FLOOR OF THE SENATE, SENATOR SPARKMAN, CHAIRMAN OF THE SUBCOMMITTEE ON HOUSING, STATED THAT---

CONTRACTS WOULD BE AWARDED TO BUILDERS WHO SUBMIT THE LOWEST ACCEPTABLE BIDS ON THE BASIS OF FHA-APPROVED PLANS AND SPECIFICATIONS. THE BUILDER WOULD FINANCE THE CONSTRUCTION OF THE HOUSING THROUGH MORTGAGE BORROWINGS INSURED BY THE FHA.

SEE 101 CONG. REC. 7724.

THAT THE DEFENSE DEPARTMENT ALSO CONSIDERED THE LIMITATION TO BE A LIMITATION ON THE COST OF THE HOUSING RATHER THAN A MERE LIMITATION ON THE AMOUNT OF THE MORTGAGE IS EVIDENT FROM STATEMENTS MADE BY MR. ARRINGTON, CHIEF, FAMILY HOUSING DIVISION, OFFICE OF THE SECRETARY OF DEFENSE FOR PROPERTIES AND INSTALLATIONS, DURING THE HEARINGS BEFORE THE COMMITTEE ON BANKING AND CURRENCY, HOUSE OF REPRESENTATIVES, 84TH CONGRESS, ON THE HOUSING ACT OF 1956. SEE FOR EXAMPLE PAGE 174 OF THOSE HEARINGS WHERE HE STATED THAT--- FURTHER, WITH RESPECT TO AVERAGE COSTS PER UNIT, THE DEPARTMENT OF DEFENSE BELIEVES THAT INCREASES SUCH AS PROPOSED IN H.R. 10157 ARE NECESSARY IN ORDER TO PROVIDE TITLE VIII UNITS WHICH ARE MORE NEARLY COMPARABLE TO UNITS BUILT WITH APPROPRIATED FUNDS. IT IS APPARENT THAT TITLE VIII QUARTERS UNDER A $13,500 CEILING WILL NOT BE COMPARABLE TO THOSE BUILT WITH APPROPRIATED FUNDS. THE REASON FOR THIS IS THAT THE TITLE VIII LIMIT COVERS ALL ON-SITE EXPENSES, SUCH AS UTILITIES, STREETS, SIDEWALKS, ETC; WHEREAS THE UNIT COST LIMITATIONS APPLICABLE TO THE MILITARY CONSTRUCTION PROGRAM APPLY ONLY TO THE STRUCTURE TO THE 5-FOOT LINE, AND ADDITIONAL FUNDS ARE USED TO COVER SITE IMPROVEMENT COSTS. RECENT EXPERIENCE ON APPROPRIATED FUNDS CONSTRUCTION SHOWS THAT TOTAL COSTS HAVE BEEN AVERAGING IN THE VICINITY OF $16,000 TO $16,500 PER UNIT. MOREOVER, THERE IS A CONTINUED GENERAL INCREASE IN CONSTRUCTION COSTS APPLICABLE TO BOTH PROGRAMS.

AND ON PAGES 182 AND 183 THERE IS REPORTED THE CONVERSATION BETWEEN MR. ARRINGTON AND MR. RAINS, AS FOLLOWS:

MR. RAINS. I HAVE VERY SERIOUS DOUBT ABOUT THAT RECOMMENDATION.

NOW, ON PAGE 12, AT THE BOTTOM OF THE PAGE, YOU MAKE THE RECOMMENDATION THAT $15,000 AVERAGE COST PER UNIT BE APPLIED TO A SERVICEWIDE BASIS. AND YOU ASK FOR THE AVERAGE COST SET AT $16,500.

FIRST OF ALL, LET ME ASK YOU, WILL THE QUARTERS ALLOWANCES AMORTIZE ON A 25-YEAR BASIS A $16,500 COST?

MR. ARRINGTON. YES SIR.

MR. RAINS. ALL RIGHT.

THEN WITH A $15,000 AVERAGE COST, WOULDN-T THAT BE EXTREMELY--- ALMOST IMPOSSIBLE TO ADMINISTER, THAT KIND OF A REQUIREMENT, WHERE YOU WOULD HAVE AN AVERAGE SERVICEWIDE COST BASIS OF $15,000?

MR. ARRINGTON. IT WILL IMPOSE DIFFICULTIES IN ADMINISTRATION, BUT WE CONSIDER IT TO BE FEASIBLE, SIR.

MR. RAINS. IS THAT $15,000 AVERAGE UNIT COST--- I HAVEN-T HAD THE OPPORTUNITY TO CHECK IT--- IS THAT THE SAME BILL, THE ONE THEY HAVE REPORTED, OR NOT?

SEE ALSO SIMILAR STATEMENTS MADE BY THE ACTING ASSISTANT SECRETARY OF DEFENSE (1PROPERTIES AND INSTALLATIONS) REPORTED ON PAGES 199 AND 200 OF THE HEARINGS ON THE HOUSING AMENDMENTS OF 1956 BEFORE A SUBCOMMITTEE OF THE SENATE COMMITTEE ON BANKING AND CURRENCY.

WHILE WE BELIEVE THE STATUTORY LANGUAGE INVOLVED CLEARLY SUGGESTS THAT THE AVERAGE COST PER HOUSING UNIT SHALL NOT EXCEED $16,500, THE NUMEROUS REFERENCES IN ITS LEGISLATIVE HISTORY TO THE LIMITATION AS BEING A "COST LIMITATION" AND STATEMENTS TO THE EFFECT THAT THE HOUSING WOULD BE FINANCED THROUGH MORTGAGE BORROWINGS, LEAVES, AT LEAST IN OUR MINDS, NO ROOM FOR DOUBT IN THE MATTER. CONSEQUENTLY, AND NOTWITHSTANDING THAT THERE MAY BE SOME QUESTION AS TO THOSE COSTS WHICH MAY BE PAID FROM APPROPRIATED FUNDS, WE SEE NO PROPER BASIS ON WHICH WE COULD AUTHORIZE THE USE OF APPROPRIATED FUNDS TO AUGMENT THE PROCEEDS OF THE MORTGAGE IN A CASE WHERE TO DO SO WOULD EXCEED AN AVERAGE OF $16,500 PER UNIT.

THE FACTS CONSIDERED HEREIN ARE SOMEWHAT ANALOGOUS TO THOSE GIVING RISE TO THE INTRODUCTION OF H.R. 13044, 86TH CONGRESS, PROPOSING AN APPROPRIATION FOR THE PAYMENT OF $45,500 TO THE SULZBACH CONSTRUCTION COMPANY COVERING ADDITIONAL AMOUNTS CLAIMED FOR WORK PERFORMED UNDER A CONTRACT FOR SITE PREPARATION AND CONSTRUCTION OF OFFSITE UTILITIES FOR A CAPEHART PROJECT AT SIOUX CITY AIR FORCE BASE, IOWA. THE 86TH CONGRESS TOOK NO ACTION ON THE BILL.

THAT CASE INVOLVED SECTION 505 OF PUBLIC LAW 155, 82D CONGRESS, 65 STAT. 365, 12 U.S.C. 1748I, WHICH PROVIDES THAT EXPENDITURE OF APPROPRIATED FUNDS FOR THE ACQUISITION OF LAND, INSTALLATION OF OUTSIDE UTILITIES AND SITE PREPARATION FOR THIS KIND OF PROJECT MAY NOT EXCEED $1,500 PER HOUSING UNIT.

IN THE COURSE OF PERFORMANCE UNDER THE CONTRACT THE CONTRACTOR, BECAUSE CONDITIONS WERE OTHER THAN AS ANTICIPATED BY THE PARTIES, WAS REQUIRED TO PERFORM ADDITIONAL WORK FOR WHICH THE ARMED SERVICES BOARD OF CONTRACT APPEALS FOUND THAT THE CONTRACTOR WAS ENTITLED TO $73,000. HOWEVER, SINCE PAYMENT OF THAT AMOUNT WOULD HAVE EXCEEDED $1,500 PER UNIT THE CONTRACTOR WAS PAID ADMINISTRATIVELY THE SUM OF ONLY $27,000 REPRESENTING THE DIFFERENCE BETWEEN THE STATUTORY CEILING AND THE AMOUNT SUBJECT TO SUCH CEILING THERETOFORE EXPENDED.

WE BELIEVE THAT THE SAME REASONS FOR THE ADMINISTRATIVE DISALLOWANCE OF THE EXCESS PORTION OF THAT CLAIM ARE EQUALLY APPLICABLE TO CLAIMS OF THE NATURE CONSIDERED HEREIN.