B-165013, JAN. 16, 1969

B-165013: Jan 16, 1969

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WHICH WAS ISSUED TO FULFILL A REQUIREMENT FOR AN AUTOMATIC HYDROLOGIC RADIO REPORTING SYSTEM. ENCLOSED IS A COPY OF OUR DECISION OF TODAY DENYING THE COMPANY'S PROTEST. THE SOLICITATION WAS CANCELLED. THE REQUIREMENT WAS THEN AWARDED AS A FIVE YEAR LEASE-PURCHASE ORDER UNDER AIR FORCE LEASE-MAINTENANCE CONTRACT NO. 34-601-23068 ON MAY 29. WE WERE SUBSEQUENTLY ADVISED IN A SUPPLEMENTAL REPORT. SINCE THE FIRST MONTH'S RENT WAS NOT DUE UNTIL APRIL 1969. WE WERE ALSO ADVISED THAT RENTAL COSTS FOR 1970 AND BEYOND WOULD BE OBTAINED FROM APPROPRIATIONS IN SUBSEQUENT FISCAL YEARS. THE OBLIGATION WAS APPARENTLY CONSTRUED TO BE LESS THAN THE 60 MONTH DURATION OF THE LEASE SINCE THE PURCHASE ORDER STATED THAT IT WAS SUBJECT TO THE AVAILABILITY OF FUNDS AND THE AIR FORCE CONTRACT CONTAINED A PROVISION ENABLING TERMINATION OF THE LEASE UPON 30 DAYS NOTICE.

B-165013, JAN. 16, 1969

TO MR. SECRETARY:

ON SEPTEMBER 20, 1968, THE GENERAL COUNSEL, OFFICE OF THE CHIEF OF ENGINEERS, DEPARTMENT OF THE ARMY, FORWARDED A REPORT FROM COLONEL F. R. DAY, CONTRACTING OFFICER, CONCERNING A PROTEST FILED AT OUR OFFICE BY WISMER AND BECKER CONTRACTING ENGINEERS UNDER SOLICITATION NO. DACW33-68-B -0021, WHICH WAS ISSUED TO FULFILL A REQUIREMENT FOR AN AUTOMATIC HYDROLOGIC RADIO REPORTING SYSTEM. ENCLOSED IS A COPY OF OUR DECISION OF TODAY DENYING THE COMPANY'S PROTEST.

THE PROTESTING COMPANY SUBMITTED THE LOWEST BID UNDER THE REFERENCED SOLICITATION; HOWEVER, AS ITS PRICE EXCEEDED THE AMOUNT OF FUNDS THEN AVAILABLE TO PURCHASE THE SYSTEM, THE SOLICITATION WAS CANCELLED. THE REQUIREMENT WAS THEN AWARDED AS A FIVE YEAR LEASE-PURCHASE ORDER UNDER AIR FORCE LEASE-MAINTENANCE CONTRACT NO. 34-601-23068 ON MAY 29, 1968, FOR REASONS SET FORTH IN THE ADMINISTRATIVE REPORT OF SEPTEMBER 20.

WITH RESPECT TO THE PROPRIETY OF CONSUMMATING A LEASE FOR THE 60 MONTH PERIOD INVOLVED HERE, WE WERE SUBSEQUENTLY ADVISED IN A SUPPLEMENTAL REPORT, DATED OCTOBER 17, 1968, THAT NO FUNDS HAD BEEN OBLIGATED TO COVER THE ENTIRE RENTAL COST OF $728,365.80, SINCE THE FIRST MONTH'S RENT WAS NOT DUE UNTIL APRIL 1969, AND THAT FUNDS WOULD BE OBLIGATED AT THAT TIME EITHER ON A MONTH TO MONTH OR YEAR TO YEAR BASIS IN THE MANNER SET FORTH IN ARMY REGULATION 37-21. WE WERE ALSO ADVISED THAT RENTAL COSTS FOR 1970 AND BEYOND WOULD BE OBTAINED FROM APPROPRIATIONS IN SUBSEQUENT FISCAL YEARS. THE OBLIGATION WAS APPARENTLY CONSTRUED TO BE LESS THAN THE 60 MONTH DURATION OF THE LEASE SINCE THE PURCHASE ORDER STATED THAT IT WAS SUBJECT TO THE AVAILABILITY OF FUNDS AND THE AIR FORCE CONTRACT CONTAINED A PROVISION ENABLING TERMINATION OF THE LEASE UPON 30 DAYS NOTICE.

CONSIDERATION OF THE PROPRIETY OF THIS LEASE INVOLVES THE PROVISIONS OF SECTIONS 3732 AND 3679, REVISED STATUTES, AS AMENDED, CODIFIED AS 41 U.S.C. 11; 31 ID. 665 (A), RESPECTIVELY, IN PERTINENT PART AS FOLLOWS:

"NO CONTRACT OR PURCHASE ON BEHALF OF THE UNITED STATES SHALL BE MADE, UNLESS THE SAME IS AUTHORIZED BY LAW OR IS UNDER AN APPROPRIATION ADEQUATE TO ITS FULFILLMENT * * *.

"NO OFFICER OR EMPLOYEE OF THE UNITED STATES SHALL MAKE OR AUTHORIZE AN EXPENDITURE FROM OR CREATE OR AUTHORIZE AN OBLIGATION UNDER ANY APPROPRIATION OR FUND IN EXCESS OF THE AMOUNT AVAILABLE THEREIN; NOR SHALL ANY SUCH OFFICER OR EMPLOYEE INVOLVE THE GOVERNMENT IN ANY CONTRACT OR OTHER OBLIGATION, FOR THE PAYMENT OF MONEY FOR ANY PURPOSE, IN ADVANCE OF APPROPRIATIONS MADE FOR SUCH PURPOSE, UNLESS SUCH CONTRACT OR OBLIGATION IS AUTHORIZED BY LAW.' THESE STATUTES EVIDENCE AN INTENTION TO PROHIBIT EXECUTIVE OFFICERS, UNLESS OTHERWISE AUTHORIZED BY LAW, FROM MAKING CONTRACTS INVOLVING THE GOVERNMENT IN OBLIGATIONS FOR EXPENDITURES BEYOND THOSE CONTEMPLATED AND AUTHORIZED FOR THE PERIOD OF AVAILABILITY OF AND WITHIN THE AMOUNT OF THE APPROPRIATION UNDER WHICH THEY ARE MADE. COMP. GEN. 272. AS YOU KNOW, A BROAD EXCEPTION TO THESE STATUTES WAS RECENTLY SOUGHT BY THE DEPARTMENT OF DEFENSE WHEN IT REQUESTED 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 PUB.L. 90-378, APPROVED JULY 5, 1968, 82 STAT. 289, AND THE LEGISLATIVE HISTORY OF THAT ACT.

WE DO NOT AGREE WITH THE CORPS OF ENGINEERS' POSITION THAT THE SUBJECT LEASE DOES NOT CONSTITUTE AN EXTENDED TERM CONTRACT WHICH ATTEMPTS TO OBLIGATE FUNDS IN A MANNER PROHIBITED BY THE ABOVE STATUTES. IN LEITER V UNITED STATES, 271 U.S. 204, THE COURT HELD THAT AN EXTENDED TERM CONTRACT VIOLATED SECTIONS 3732 AND 3679 EVEN THOUGH IT WAS MADE CONTINGENT UPON THE AVAILABILITY OF FUTURE APPROPRIATIONS, AS IN THE INSTANT CASE. THE COURT HELD THAT EVEN WHERE A CONTRACT RESERVES AN OPTION IN THE GOVERNMENT TO RENEW FROM YEAR TO YEAR TO THE END OF THE STATED TERM CONTINGENT UPON THE AVAILABILITY OF FUTURE APPROPRIATIONS, AFFIRMATIVE ACTION IN EFFECT MAKING A NEW CONTRACT AND COMPLYING WITH THE ADVERTISING REQUIREMENTS IS REQUIRED TO EXERCISE THE OPTION OF RENEWAL. SEE ALSO GOODYEAR COMPANY V UNITED STATES, 276 U.S. 287; 33 COMP. GEN. 90.

SINCE WE HAVE NOT BEEN ADVISED OF ANY SPECIFIC STATUTORY AUTHORITY SANCTIONING LEASES OF THE TYPE INVOLVED HERE FOR FIVE YEAR PERIODS, AND SINCE THE CORPS HAS INFORMED US THAT APPROPRIATIONS TO COVER RENTAL COSTS BEYOND THE CURRENT FISCAL YEAR ARE NOT AVAILABLE AND WILL HAVE TO BE OBTAINED FROM APPROPRIATIONS IN SUBSEQUENT FISCAL YEARS, WE BELIEVE THE SUBJECT LEASE FALLS WITHIN THE PROHIBITION OF THE LEITER CASE, NOTWITHSTANDING THE AVAILABILITY OF SUFFICIENT "NO-YEAR" FUNDS TO COVER THE FIRST YEAR'S RENT. ADDITIONALLY WE DO NOT CONSIDER THE PROVISION ENABLING THE GOVERNMENT TO CANCEL THE LEASE UPON 30 DAYS NOTICE AT SOME INDEFINITE FUTURE TIME AS ENSURING THAT AFFIRMATIVE ACTION WILL BE TAKEN BY THE GOVERNMENT TO RENEW THE CONTRACT FROM YEAR TO YEAR. WE BELIEVE THAT THE ONLY CONTRACTUAL ARRANGEMENT WHICH WOULD SATISFY THE REQUIREMENTS OF THESE STATUTES, WOULD BE A CONTRACT FOR THE FIRST YEAR'S NEEDS WITH AN OPTION FOR RENEWAL FOR SUCCEEDING YEARS, FOLLOWING A DETERMINATION THAT SUCH ACTION WOULD BE IN THE GOVERNMENT'S INTEREST AND UPON GIVING OF NOTICE TO THE CONTRACTOR. 36 COMP. GEN. 683.

SINCE THE AWARD WAS MADE UNDER THE IMPRESSION THAT IT WAS NOT LEGALLY OBJECTIONABLE TO OUR OFFICE, WE WILL INTERPOSE NO OBJECTION TO COMPLETION OF THE CONTRACT TERM. IT IS RECOMMENDED THAT CORRECTIVE ACTION BE UNDERTAKEN IN ORDER TO PREVENT RECURRENCE OF THIS SITUATION, AND THAT THIS OFFICE BE ADVISED OF SUCH ACTION WHEN ACCOMPLISHED.