B-164908(2), JANUARY 31, 1969, 48 COMP. GEN. 497

B-164908(2): Jan 31, 1969

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

PERMITTING REQUIREMENT CONTRACTS UNDER FISCAL-YEAR APPROPRIATIONS TO COVER 1-YEAR PERIODS EXTENDING BEYOND THE END OF THE FISCAL YEAR IS NOT TECHNICALLY CORRECT. THERE IS NO OBJECTION TO ITS CONTINUANCE. IS AVAILABLE WITHOUT FISCAL YEAR LIMITATION. REQUIREMENTS CONTRACTS FOR INDEFINITE QUANTITIES OF STOCK SUPPLIES THAT ARE CHARGED TO THE FUND SHOULD NOT BE MADE FOR PERIODS IN EXCESS OF 2 YEARS. EVEN THOUGH FUNDS ARE AVAILABLE FOR THE TOTAL ESTIMATED QUANTITIES REQUIRED. IN THE ABSENCE OF SPECIFIC LEGISLATIVE AUTHORITY OR PRIOR DETERMINATION BY THE UNITED STATES GENERAL ACCOUNTING OFFICE THAT THE PROCUREMENT WILL NOT BE IN DEROGATION OF THE PURPOSES OF THE ADVERTISING STATUTES. ARE PROHIBITED BY 41 U.S.C. 11.

B-164908(2), JANUARY 31, 1969, 48 COMP. GEN. 497

CONTRACTS - FEDERAL SUPPLY SCHEDULE - MULTI-YEAR PROCUREMENT PROPOSED MULTI-YEAR CONTRACTING FOR FEDERAL SUPPLY SERVICE REQUIREMENTS TO EFFECT SAVINGS IN THE REPAIR AND REHABILITATION OF BUSINESS MACHINES, TYPEWRITERS, AND FURNITURE, THE CONTRACTS TO BE FINANCED BY USING THE FEDERAL SUPPLY FUND AND THE AUTOMATIC DATA PROCESSING FUND AND BY REIMBURSING THE FUNDS FROM THE FISCAL YEAR APPROPRIATIONS OF THE REQUISITIONING AGENCIES WOULD VIOLATE THE APPROPRIATION RESTRICTIONS OF 41 U.S.C. 11; 31 ID. 665 (A); ID. 712A, AND ABSENT CONGRESSIONAL APPROVAL, A CONTRACT TERM MUST BE RESTRICTED TO A 1-YEAR PERIOD. ALTHOUGH A-60589, JULY 12, 1935, PERMITTING REQUIREMENT CONTRACTS UNDER FISCAL-YEAR APPROPRIATIONS TO COVER 1-YEAR PERIODS EXTENDING BEYOND THE END OF THE FISCAL YEAR IS NOT TECHNICALLY CORRECT, THE PRACTICE HAVING BEEN FOLLOWED FOR OVER 30 YEARS IN RELIANCE UPON THE DECISION, THERE IS NO OBJECTION TO ITS CONTINUANCE. CONTRACTS - REQUIREMENTS - MULTI-YEAR PROCUREMENT ALTHOUGH THE GENERAL SUPPLY FUND AUTHORIZED BY SECTION 109 OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED, IS AVAILABLE WITHOUT FISCAL YEAR LIMITATION, REQUIREMENTS CONTRACTS FOR INDEFINITE QUANTITIES OF STOCK SUPPLIES THAT ARE CHARGED TO THE FUND SHOULD NOT BE MADE FOR PERIODS IN EXCESS OF 2 YEARS, EVEN THOUGH FUNDS ARE AVAILABLE FOR THE TOTAL ESTIMATED QUANTITIES REQUIRED, IN THE ABSENCE OF SPECIFIC LEGISLATIVE AUTHORITY OR PRIOR DETERMINATION BY THE UNITED STATES GENERAL ACCOUNTING OFFICE THAT THE PROCUREMENT WILL NOT BE IN DEROGATION OF THE PURPOSES OF THE ADVERTISING STATUTES. EQUIPMENT - AUTOMATIC DATA PROCESSING SYSTEMS - LEASES - LONG TERM LONG-TERM LEASES FOR AUTOMATIC DATA PROCESSING EQUIPMENT UNDER FISCAL YEAR APPROPRIATIONS THAT WOULD COMMIT THE GOVERNMENT TO A MINIMUM RENTAL PERIOD OF MORE THAN 1 YEAR, AND WHOSE MULTI-YEAR CHARACTER WOULD NOT CHANGE UNTIL THE GOVERNMENT TOOK EFFECTIVE CANCELLATION ACTION, ARE PROHIBITED BY 41 U.S.C. 11; 31 ID. 665 (A); ID. 712A, AND OF THREE LEASE PLANS SUBMITTED ONLY THE ONE THAT DOES NOT OBLIGATE THE GOVERNMENT TO CONTINUE THE RENTAL PERIOD BEYOND THE FISCAL YEAR IN WHICH MADE, AND CONTAINS A RENEWAL OPTION, IS NOT LEGALLY OBJECTIONABLE. HOWEVER, REVOLVING FUNDS MAY BE USED TO FINANCE LEASES FOR REASONABLE PERIODS OF TIME IN EXCESS OF 1 YEAR, SUBJECT TO THE CONDITIONS THAT SUFFICIENT FUNDS ARE AVAILABLE AND ARE OBLIGATED TO COVER THE COSTS UNDER THE ENTIRE CONTRACT.

TO THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, JANUARY 31, 1969:

REFERENCE IS MADE TO YOUR LETTER OF JULY 22, 1968, CONCERNING THE SAVINGS WHICH MAY BE REALIZED THROUGH MULTI-YEAR CONTRACTING.

THE CONTRACTS YOU HAVE IN MIND ARE THOSE INVOLVING THE FEDERAL SUPPLY SERVICE. THESE CONTRACTS ARE FINANCED THROUGH (A) DIRECT CHARGE TO FUNDS OF REQUISITIONING AGENCIES AND (B) THE USE OF TWO REVOLVING FUNDS, NAMELY (1) THE GENERAL SUPPLY FUND (GSF), AUTHORIZED BY SECTION 109 OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, 63 STAT. 382, AS AMENDED (40 U.S.C. 56); AND (2) THE AUTOMATIC DATA PROCESSING FUND (ADPF), AUTHORIZED BY SECTION 111 OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT, 79 STAT. 1127, AS AMENDED (40 U.S.C. 759).

WHERE THE REVOLVING FUNDS ARE USED, AGENCIES REQUIRING SUPPLIES OR SERVICES MAY PLACE ORDERS WITH GSA AND THEIR CURRENT APPROPRIATIONS ARE THEN CHARGED TO REIMBURSE THE REVOLVING FUND. ALSO, CERTAIN CONTRACTS FOR STOCK SUPPLIES ARE MADE BY GSA AND CHARGED DIRECTLY TO THE GENERAL SUPPLY FUND. YOU BELIEVE THESE REVOLVING FUNDS (GSF AND ADPF) ARE NOT SUBJECT TO FISCAL YEAR LIMITATIONS, AND THEREFOREMULTI YEAR CONTRACTS ARE PERMISSIBLE.

THE CONTRACTS CHARGED DIRECTLY TO AGENCY FUNDS, ON THE OTHER HAND, USUALLY DO INVOLVE FISCAL YEAR APPROPRIATIONS. IT IS YOUR BELIEF THAT SUBSTANTIAL PRICE REDUCTIONS COULD BE OBTAINED ON CERTAIN TYPES OF THESE CONTRACTS IF THEY WERE ENTERED INTO ON A MULTI-YEAR RATHER THAN ON A YEARLY BASIS.

AS AN EXAMPLE, YOU REPORT THAT YOUR REPAIR AND REHABILITATION CONTRACTS, COVERING SUCH EQUIPMENT AS BUSINESS MACHINES, TYPEWRITERS AND FURNITURE, ARE GENERALLY OF THE REQUIREMENTS TYPE AND COVER AGENCY NEEDS FOR THE CONTRACT PERIOD, NORMALLY 1 YEAR. ORDERS FOR THE SERVICES ARE PLACED WITH THE CONTRACTORS DIRECTLY BY THE USING AGENCIES, AND THE FUNDS CHARGED ARE THOSE OF THE FISCAL YEAR IN WHICH THE SERVICES ARE REQUIRED. YOUR EXPERIENCE HAS INDICATED THAT PRICE REDUCTIONS AS HIGH AS 10 PERCENT MIGHT BE REALIZED IF CONTRACTS OF THIS TYPE WERE MADE FOR A 2-YEAR PERIOD INSTEAD OF A 1-YEAR PERIOD.

YOU REPORT THE SAME SITUATION IN THE LEASING OF AUTOMATIC DATA PROCESSING (ADP) EQUIPMENT. HERE AGAIN YOU BELIEVE THAT THE RESTRICTIONS ON THE DURATION OF CONTRACTS ARE NOT IN THE BEST INTERESTS OF THE GOVERNMENT AND THAT CONSIDERABLE SAVINGS MAY BE REALIZED FROM LONG-TERM LEASING. YOU STATE THAT ONCE A COMPLEX ADP SYSTEM IS INSTALLED, IT IS HIGHLY UNLIKELY TO BE REMOVED WITHIN 1 YEAR IN ANY CASE, BECAUSE (1) THE COST OF INSTALLING NEW EQUIPMENT IS HIGH AND (2) COMMITMENTS HAVE BEEN MADE TO THE EXISTING CONFIGURATION IN TERMS OF SOFTWARE, FACILITIES, TECHNICAL PERSONNEL, AND SO ON. THUS, WHILE THERE IS TECHNICALLY ONLY A 1-YEAR COMMITMENT, YOU FEEL THAT IN REALITY IT IS ALMOST IMPOSSIBLE TO REPLACE THE EQUIPMENT AT THE END OF ONLY 1 YEAR, AND THAT FOR ALL PRACTICAL PURPOSES THE EQUIPMENT ORIGINALLY INSTALLED BECOMES A SOLE SOURCE ITEM FOR THE PARTICULAR INSTALLATION FOR A CONSIDERABLE PERIOD OF TIME. ACCORDINGLY YOU BELIEVE THAT THE ADVANTAGES OF BEING ABLE TO CONTRACT FOR A LONG-TERM PERIOD TO REFLECT THE ACTUAL SITUATION RATHER THAN ON A 1-YEAR BASIS ARE MANIFEST.

PROPOSALS HAVE BEEN RECEIVED FROM VARIOUS COMPUTER COMPANIES OFFERING TO LEASE ADP EQUIPMENT FOR LONG-TERM PERIODS AT RENTAL RATES SUBSTANTIALLY BELOW THE RATES OFFERED BY THEM TO GOVERNMENT AGENCIES ON THE REGULAR ANNUAL BASIS UNDER THE FEDERAL SUPPLY SCHEDULE. ENCLOSED WITH YOUR LETTER ARE THREE SUCH OFFERS.

YOU WOULD LIKE TO USE MULTI-YEAR CONTRACTING IN SITUATIONS, SUCH AS YOU HAVE OUTLINED, WHERE IT IS CLEAR THAT SAVINGS WOULD RESULT AND THE BENEFITS WHICH MIGHT BE DERIVED FROM ANNUAL ADVERTISING ARE HIGHLY SPECULATIVE. HOWEVER, THERE ARE CERTAIN PROVISIONS OF LAW TO BE CONSIDERED, AND YOU HAVE REQUESTED OUR VIEWS ON THE MATTER.

THE LEGAL IMPEDIMENTS AGAINST THE USE OF FISCAL YEAR FUNDS FOR MULTI-YEAR CONTRACTING ARE DISCUSSED IN 42 COMP. GEN. 272. WE STATED THEREIN THAT IN APPLYING CERTAIN STATUTES DEALING WITH GOVERNMENT CONTRACTING, THE DECISIONS OF THE COURTS AND CONTRACTING OFFICERS HAVE CONSISTENTLY HELD THAT CONTRACTS EXECUTED AND SUPPORTED UNDER AUTHORITY OF FISCAL YEAR APPROPRIATIONS CAN ONLY BE MADE WITHIN THE PERIOD OF THEIR OBLIGATION AVAILABILITY AND MUST CONCERN A BONA FIDE NEED ARISING WITHIN SUCH FISCAL YEAR AVAILABILITY. ALSO, IT WAS SAID THAT CONTRACTS ENTERED INTO UNDER FISCAL YEAR APPROPRIATIONS PURPORTING TO BIND OR OBLIGATE THE GOVERNMENT BEYOND THE FISCAL YEAR INVOLVED MUST BE CONSTRUED AS BINDING THE GOVERNMENT ONLY TO THE END OF THE FISCAL YEAR UNLESS OTHERWISE AUTHORIZED BY LAW. IN THAT CASE, THE SUBJECT CONTRACT WAS A REQUIREMENTS CONTRACT WHICH OBLIGATED THE GOVERNMENT TO ORDER FROM THE CONTRACTOR SUCH REQUIREMENTS AS THE GOVERNMENT MIGHT HAVE DURING A 3-YEAR PERIOD. THIS OBLIGATION ALONE, WITHOUT CONSIDERING AN APPROPRIATION OBLIGATION, WAS VIEWED AS A VIOLATION OF SECTIONS 3732 AND 3679, REVISED STATUTES, AS AMENDED, AND SECTION 1 OF THE ACT OF JULY 6, 1949, DERIVED FROM SECTION 3690, REVISED STATUTES, CODIFIED AS 41 U.S.C. 11; 31 ID. 665 (A); ID. 712A, RESPECTIVELY.

SINCE THE REQUIREMENT CONTRACT CONSIDERED IN THE DECISION PUBLISHED AT 42 COMP. GEN. 272 ALSO REQUIRED THE CONTRACTOR TO KEEP CERTAIN EQUIPMENT AND PERSONNEL ON A STANDBY BASIS TO PERFORM ONLY GOVERNMENT WORK OVER A 3-YEAR PERIOD, WE DID NOT CONSIDER DECISION OF JULY 12, 1935, A-60589, AS SUPPORTING THE PROPRIETY OF THE CONTRACT THEN BEING CONSIDERED.

THE CONTRACTS FOR 2-YEAR PERIODS NOW PROPOSED BY YOU, HOWEVER, ARE REQUIREMENTS CONTRACTS SIMILAR TO THE ONE CONSIDERED IN THE JULY 12, 1935, DECISION, WHICH WAS AWARDED BY THE FORMER PROCUREMENT DIVISION OF THE TREASURY DEPARTMENT FOR THE GOVERNMENT'S REQUIREMENT FOR A CERTAIN GEAR OIL DURING THE PERIOD JANUARY 1, 1935, TO MARCH 31, 1936. THE PROCUREMENT DIVISION AT THAT TIME, IN ORDER TO STAGGER THE AWARD OF CONTRACTS FOR THE GOVERNMENT'S REQUIREMENTS TO PROVIDE AS EVEN A FLOW OF WORK AS POSSIBLE, CONTRACTED FOR PERIODS OF TIME BEYOND THE END OF THE CURRENT FISCAL YEAR AND SOMETIMES FOR PERIODS IN EXCESS OF 1 YEAR. THE THEN COMPTROLLER GENERAL RULED THAT WHILE SUCH REQUIREMENT CONTRACTS COULD COVER A PERIOD BEYOND THE END OF THE CURRENT FISCAL YEAR, THEY WERE PRECLUDED FROM COVERING A PERIOD IN EXCESS OF 1 YEAR BY SECTION 3735, REVISED STATUTES, 41 U.S.C. 13.

FOR THE REASONS STATED IN 42 COMP. GEN. 272, WE ARE NOT CONVINCED THAT THE DECISION OF JULY 12, 1935, A-605589, PERMITTING REQUIREMENTS CONTRACTS UNDER FISCAL YEAR APPROPRIATIONS TO COVER 1-YEAR PERIODS EXTENDING BEYOND THE END OF THE FISCAL YEAR IS TECHNICALLY CORRECT. SINCE THAT PRACTICE, HOWEVER, HAS BEEN FOLLOWED FOR OVER 30 YEARS APPARENTLY IN RELIANCE UPON THE JULY 12, 1935, DECISION, NO OBJECTION WILL BE MADE TO ITS CONTINUANCE.

IT IS REALIZED THAT YOUR ADMINISTRATION AND THE DEPARTMENT OF DEFENSE HAVE BEEN EXEMPTED FROM THE PROVISIONS OF SECTION 3735, REVISED STATUTES, 41 U.S.C. 13, PROHIBITING CONTRACTS FOR STATIONERY OR OTHER SUPPLIES FOR A LONGER TERM THAN 1 YEAR FROM THE TIME THE CONTRACT IS MADE. BUT SINCE THERE IS NOTHING IN THE LEGISLATIVE HISTORIES OF SUCH EXEMPTIONS INDICATING AN INTENT TO PERMIT YOUR ADMINISTRATION OR THE DEPARTMENT OF DEFENSE TO ENTER INTO CONTRACTS IN ADVANCE OF APPROPRIATIONS, IT IS NOT BELIEVED THAT SUCH EXEMPTIONS CAN BE VIEWED AS AUTHORIZING REQUIREMENTS CONTRACTS UNDER FISCAL YEAR APPROPRIATIONS FOR PERIODS IN EXCESS OF 1 YEAR. IT ALSO IS NOTED THAT THE DEPARTMENT OF DEFENSE OBTAINED STATUTORY AUTHORITY TO ENTER INTO MULTI-YEAR SERVICE CONTRACTS UNDER FISCAL YEAR APPROPRIATIONS BUT THE CONGRESS AUTHORIZED SUCH PRACTICE ONLY OUTSIDE THE FORTY-EIGHT CONTIGUOUS STATES AND THE DISTRICT OF COLUMBIA AND WITH VARIOUS RESTRICTIONS. SEE PUBLIC LAW 90-378, APPROVED JULY 5, 1968, 82 STAT. 289, 10 U.S.C. 2306 (G), AND THE LEGISLATIVE HISTORY OF THAT ACT.

ACCORDINGLY, WE ARE OF THE OPINION THE PROPOSED REPAIR AND REHABILITATION REQUIREMENTS CONTRACTS UNDER FISCAL YEAR APPROPRIATIONS MUST BE RESTRICTED TO 1-YEAR PERIODS UNLESS LEGISLATIVE AUTHORITY FOR CONTRACTS COVERING LONGER PERIODS IS OBTAINED FROM THE CONGRESS. ALSO, REQUIREMENTS CONTRACTS FOR INDEFINITE QUANTITIES OF STOCK SUPPLIES CHARGEABLE TO THE GENERAL SUPPLY FUND, EVEN THOUGH SUCH FUND IS AVAILABLE WITHOUT FISCAL YEAR LIMITATION, SHOULD NOT BE MADE FOR PERIODS IN EXCESS OF 2 YEARS EVEN THOUGH FUNDS ARE AVAILABLE FOR THE TOTAL ESTIMATED QUANTITIES, IN THE ABSENCE OF SPECIFIC LEGISLATIVE AUTHORITY THEREFOR OR PRIOR DETERMINATION BY THIS OFFICE THAT SUCH PROCUREMENT WILL NOT BE IN DEROGATION OF THE PURPOSES OF THE ADVERTISING STATUTES.

WE CONSIDER NEXT THE THREE ENCLOSED RENTAL PROPOSALS. COMPANY "A" OFFERS MINIMUM RENTAL PERIODS OF EITHER 3 OR 5 YEARS UNDER WHICH ITS EQUIPMENT IS MADE AVAILABLE AT REDUCED RATES (RATES BELOW ITS USUAL BASIC MONTHLY RENTAL RATES), BUT WITH THE CONDITION THAT THE RENTAL AGREEMENT MAY NOT BE DISCONTINUED DURING THE FISCAL YEAR IN WHICH MADE. AFTERWARDS, IT MAY BE DISCONTINUED WITHOUT RETROACTIVE ADJUSTMENT OF RENTAL CHARGES, BUT ONLY AT THE END OF SECOND SUBSEQUENT FISCAL YEAR EXCEPT WHERE THE DISCONTINUANCE IS REQUIRED EARLIER DUE TO EXTREME OPERATIONAL OR ECONOMIC NECESSITY. IS READILY APPARENT THAT THIS PLAN REQUIRES A MINIMUM RENTAL PERIOD OF MORE THAN 1 YEAR. MOREOVER, THE PROVISION OF THE AGREEMENT PERMITTING CANCELLATION DOES NOT CHANGE THE MULTI-YEAR TERM OF THE AGREEMENT UNTIL THE GOVERNMENT TAKES EFFECTIVE CANCELLATION ACTION. SUCH AN AGREEMENT UNDER FISCAL YEAR APPROPRIATIONS WOULD BE IN VIOLATION OF THE STATUTES MENTIONED ABOVE, EVEN IF IT COULD BE TERMINATED AT THE END OF THE FIRST FISCAL YEAR.

COMPANY "B" OFFERS A 15 PERCENTAGE REDUCTION IN ITS NORMAL GSA CONTRACT RENTAL CHARGE FOR ITS SYSTEMS IF IT RECEIVES A 5-YEAR USE DELIVERY ORDER. HOWEVER, IF THE GOVERNMENT SHOULD CHOOSE NOT TO COMPLETE THE FULL 5-YEAR TERM THE RENTAL PRICE WILL REVERT TO THE NORMAL MONTHLY RENTAL CHARGE SET FORTH IN THE CURRENT OR LAST CURRENT GSA CONTRACT AND, IN ADDITION, THE GOVERNMENT WILL BE REQUIRED TO REIMBURSE THE COMPANY FOR THE DIFFERENCE BETWEEN THE REDUCED 5-YEAR MONTHLY RENTAL CHARGE AND THE NORMAL MONTHLY RENTAL CHARGE FOR THOSE PERIODS THE EQUIPMENT WAS IN RENTAL UNDER THE 5- YEAR AGREEMENT.

UNDER THIS PROPOSAL THE GOVERNMENT WOULD BE COMMITTED TO A 5-YEAR CONTRACT FOR THE USE OF THE EQUIPMENT. A CONTRACT FOR THE FURNISHING OF SUPPLIES OR SERVICES FOR A PERIOD BEYOND THE CURRENT YEAR IS CONTRARY TO SECTIONS 3679 AND 3732 OF THE REVISED STATUTES EVEN THOUGH THE GOVERNMENT'S LIABILITY IS SPECIFICALLY MADE CONTINGENT UPON THE AVAILABILITY OF APPROPRIATIONS FOR FUTURE FISCAL YEARS. LEITER V UNITED STATES, 271 U.S. 204. THE ONLY CONTRACTUAL ARRANGEMENT WHICH WOULD SATISFY THE REQUIREMENTS OF THESE STATUTES, IN THE ABSENCE OF STATUTORY AUTHORITY OTHERWISE, WOULD BE A CONTRACT FOR THE FIRST FISCAL YEAR'S NEEDS WITH AN OPTION FOR RENEWAL FOR EACH SUCCEEDING YEAR UPON THE GIVING OF NOTICE TO THE CONTRACTOR. COMPANY "B-S" PROPOSAL DOES NOT MEET THIS REQUIREMENT.

THE FINAL PLAN SUBMITTED (COMPANY "C") SEEMS TO AVOID THESE LEGAL DIFFICULTIES. COMPANY "C-S" PLAN IS SIMILAR TO THE PRIOR PLAN IN THAT THE GOVERNMENT MUST COMPLETE THE FULL RENTAL PERIOD TO QUALIFY FOR THE BENEFITS OFFERED. HOWEVER, COMPANY "C" MAKES ITS BENEFITS AVAILABLE AT THE END OF THE FULL RENTAL PERIOD AND NOT DURING THE PERIOD OF THE RENTAL. MONTHLY RENTAL CREDITS ARE TO BE APPLIED DURING THE FINAL MONTHS OF A RENTAL PERIOD (A 24 TO 60-MONTH PERIOD MAY BE INVOLVED), IF THE PLAN IS CONTINUED ON A YEAR BY YEAR BASIS THROUGHOUT THE ENTIRE RENTAL PERIOD. UNDER THIS ARRANGEMENT THE GOVERNMENT WOULD NOT BE OBLIGATED TO CONTINUE THE RENTAL BEYOND THE FISCAL YEAR IN WHICH MADE, OR BEYOND ANY SUCCEEDING FISCAL YEAR, UNLESS OR UNTIL A PURCHASE ORDER IS ISSUED EXPRESSLY CONTINUING SUCH RENTAL DURING THE FOLLOWING FISCAL YEAR. IN EFFECT, THE COMPANY IS PROPOSING A 1-YEAR RENTAL CONTRACT WITH OPTION TO RENEW. ALSO, UNDER THIS PROPOSAL RENTAL FOR ANY CONTRACT YEAR WOULD NOT EXCEED THE LOWEST RENTAL OTHERWISE OBTAINABLE FROM COMPANY "C" FOR 1 FISCAL YEAR. HAVE NO LEGAL OBJECTION TO THIS TYPE OF RENTAL PLAN FOR ADP EQUIPMENT.

LEASES OF AUTOMATIC DATA PROCESSING EQUIPMENT UNDER FISCAL YEAR APPROPRIATIONS MUST BE RESTRICTED TO THE PERIOD OF AVAILABILITY OF THE APPROPRIATION INVOLVED. WITH RESPECT TO THE REVOLVING FUNDS WE HAVE NO LEGAL OBJECTION TO CONTRACTING FOR REASONABLE PERIODS OF TIME IN EXCESS OF 1 YEAR SUBJECT TO THE CONDITIONS THAT SUFFICIENT FUNDS ARE AVAILABLE AND ARE OBLIGATED TO COVER THE COSTS UNDER THE ENTIRE CONTRACT. SEE 43 COMP. GEN. 657, 661. NOR, AS STATED ABOVE, WOULD WE HAVE ANY OBJECTION UNDER REVOLVING FUNDS TO CONTRACTS FOR A BASIC PERIOD WITH RENEWAL OPTIONS, PROVIDED FUNDS ARE OBLIGATED TO COVER THE COSTS OF THE BASIC PERIOD, INCLUDING ANY CHARGES PAYABLE FOR FAILURE TO EXERCISE THE OPTIONS.