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B-177095, FEB 16, 1973, 52 COMP GEN 517

B-177095 Feb 16, 1973
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GEN. 226 THAT THE DUAL SYSTEM OF CONTRACTING IS WITHIN THE LEGAL FRAMEWORK OF SECTION 5 OF THE PUBLIC BUILDINGS AMENDMENTS OF 1972 SINCE THE DECISION WILL BE EQUALLY APPLICABLE TO THE DUAL SYSTEM AS MODIFIED TO PROVIDE ALTERNATIVES IN THE METHOD AND TIMING OF CONSTRUCTION CONTRACTING. 1973: REFERENCE IS MADE TO LETTER OF FEBRUARY 5. THIS LAST-NAMED MEMORANDUM WAS THE SUBJECT OF OUR DECISION OF OCTOBER 19. WHEREIN WE CONCLUDED THAT THE CONTRACTING PROCEDURES SET FORTH THEREIN WERE WITHIN THE FRAMEWORK OF SECTION 5 OF THE PUBLIC BUILDINGS AMENDMENTS OF 1972 APPROVED JUNE 16. YOUR GENERAL COUNSEL ASKS WHETHER SUCH CONCLUSION IS EQUALLY APPLICABLE TO THE PROGRAM AS MODIFIED BY THE MEMORANDUM OF FEBRUARY 1.

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B-177095, FEB 16, 1973, 52 COMP GEN 517

PUBLIC BUILDINGS - CONTRACTS - DUAL SYSTEM OF CONTRACTING - CONSTRUCTION AND FINANCING THE PROPOSED MODIFICATIONS IN THE DUAL SYSTEM PROGRAM PROCEDURES FOR THE PROCUREMENT OF PUBLIC BUILDINGS, A PROCEDURE WHICH PROVIDES FOR SEPARATE CONSTRUCTION CONTRACTS AND PURCHASE CONTRACTS FOR FINANCING THE BUILDING PROJECTS, DOES NOT REQUIRE ANY CHANGE IN THE CONCLUSIONS REACHED IN 52 COMP. GEN. 226 THAT THE DUAL SYSTEM OF CONTRACTING IS WITHIN THE LEGAL FRAMEWORK OF SECTION 5 OF THE PUBLIC BUILDINGS AMENDMENTS OF 1972 SINCE THE DECISION WILL BE EQUALLY APPLICABLE TO THE DUAL SYSTEM AS MODIFIED TO PROVIDE ALTERNATIVES IN THE METHOD AND TIMING OF CONSTRUCTION CONTRACTING; THE TIMING OF ISSUANCE OF THE PARTICIPATION CERTIFICATES; AND THE TERMS OF REDEMPTION AND PURCHASE OF PARTICIPATION CERTIFICATES, AND THE COMMITTEES OF CONGRESS ADVISED OF THE ORIGINAL PLAN SHOULD BE INFORMED OF THE PROPOSED MODIFICATIONS TO THE PLAN.

TO THE ACTING ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, FEBRUARY 16, 1973:

REFERENCE IS MADE TO LETTER OF FEBRUARY 5, 1973, FROM YOUR GENERAL COUNSEL, FORWARDING FOR OUR CONSIDERATION A COPY OF A MEMORANDUM DATED FEBRUARY 1, 1973 ENTITLED "GENERAL SERVICES ADMINISTRATION/PURCHASE CONTRACT PROGRAM - DUAL SYSTEM/CERTAIN PROCEDURAL MODIFICATIONS." THIS MEMORANDUM SUPPLEMENTS AN EARLIER MEMORANDUM DATED SEPTEMBER 27, 1972, ENTITLED "GENERAL SERVICES ADMINISTRATION/PURCHASE CONTRACT PROGRAM - DUAL SYSTEM/GENERAL DESCRIPTION." THIS LAST-NAMED MEMORANDUM WAS THE SUBJECT OF OUR DECISION OF OCTOBER 19, 1972, 52 COMP. GEN. 226, WHEREIN WE CONCLUDED THAT THE CONTRACTING PROCEDURES SET FORTH THEREIN WERE WITHIN THE FRAMEWORK OF SECTION 5 OF THE PUBLIC BUILDINGS AMENDMENTS OF 1972 APPROVED JUNE 16, 1972, 86 STAT. 219, 40 U.S.C. 602A. YOUR GENERAL COUNSEL ASKS WHETHER SUCH CONCLUSION IS EQUALLY APPLICABLE TO THE PROGRAM AS MODIFIED BY THE MEMORANDUM OF FEBRUARY 1, 1973, AND SHOULD BE DEEMED TO APPLY TO THE PROGRAM AS SO MODIFIED.

UNDER THE DUAL SYSTEM PROGRAM PROCEDURE - SET OUT IN DETAIL IN OUR DECISION OF OCTOBER 19, 1972 - THE GENERAL SERVICES ADMINISTRATION (GSA) ISSUES SEPARATE INVITATIONS (A) FOR BIDS FOR THE CONSTRUCTION OF SPECIFIED BUILDING PROJECTS AND (B) FOR BIDS TO FINANCE AND SELL TO THE UNITED STATES THE GROUP OF PROJECTS. GSA THEN ACCEPTS THE MOST FAVORABLE CONSTRUCTION BID FOR EACH PROJECT BY ENTERING INTO A CONSTRUCTION CONTRACT WITH THE CONSTRUCTION BIDDER AND IMPLEMENTS THE MOST FAVORABLE FINANCING BID FOR THE PROJECTS BY ENTERING INTO A PUBLIC BUILDINGS PURCHASE CONTRACT AND TRUST INDENTURE ("PURCHASE CONTRACT") WITH A TRUSTEE. THE TRUSTEE RECEIVES THE NECESSARY FUNDS THROUGH ISSUANCE OF PARTICIPATION CERTIFICATES TO THE SUCCESSFUL FINANCIAL BIDDERS. EACH PARTICIPATION CERTIFICATE EVIDENCES AN UNDIVIDED INTEREST IN THE OBLIGATION OF THE UNITED STATES TO MAKE PAYMENT OF THE PURCHASE PRICE UNDER THE PURCHASE CONTRACT, AND SUCH OBLIGATION OF THE UNITED STATES INCLUDES THE OBLIGATION TO PAY SUCH AMOUNTS AS MAY BE NECESSARY TO ENABLE THE TRUSTEE TO PAY THE PRINCIPAL OF AND PREMIUM, IF ANY, AND INTEREST ON THE PARTICIPATION CERTIFICATES WHEN AND AS THE SAME BECOME DUE AND PAYABLE AS SPECIFIED THEREIN.

THE MODIFICATIONS IN THE DUAL SYSTEM PROGRAM PROCEDURES NOW PROPOSED IN THE MEMORANDUM OF FEBRUARY 1, 1973, CONSIST OF ALTERNATIVES IN RESPECT OF (1) THE METHOD AND TIMING OF THE CONSTRUCTION CONTRACTING, (2) THE TIMING OF ISSUANCE OF THE PARTICIPATION CERTIFICATES, AND (3) THE TERMS OF THE REDEMPTION AND PURCHASE THEREOF PRIOR TO MATURITY. SUCH MODIFICATIONS ARE SET FORTH IN THE MEMORANDUM AS FOLLOWS:

(1) METHOD AND TIMING OF CONSTRUCTION CONTRACTING. IT IS PROPOSED THAT A "PHASED CONSTRUCTION" METHOD OF CONSTRUCTION CONTRACTING BE PERMISSIBLE UNDER THE PROGRAM. UNDER THIS METHOD, INSTEAD OF A SINGLE PRIME CONTRACT FOR THE COMPLETE CONSTRUCTION OF EACH PROJECT, A NUMBER OF PRIME CONTRACTS WOULD BE ENTERED INTO FROM TIME TO TIME, EACH COVERING ONE OR MORE PHASES OF DESIGN OR CONSTRUCTION OF ONE OR MORE PROJECTS. THE PRIME CONTRACTS FOR EARLIER PHASES HAS BEGUN OR ENTERED INTO AFTER PERFORMANCE OF PRIME CONTRACTS FOR EARLIER PHASES HAS BEGUN OR BEEN COMPLETED. TYPICAL PHASES ARE DESIGN, FOUNDATION, STRUCTURAL FRAME, HEATING, VENTILATION AND AIR- CONDITIONING, PARTITIONS, ETC. SITE ACQUISITION WOULD IN SOME CASES OCCUR AFTER THE INITIAL DESIGN PHASE.

(2) TIMING OF ISSUANCE OF PARTICIPATION CERTIFICATES. IT IS PROPOSED THAT, WHERE PHASED CONSTRUCTION IS USED FOR A PROJECT, THE BIDS FOR THE PARTICIPATION CERTIFICATES TO BE ISSUED TO FINANCE THE PROJECT WOULD BE INVITED AT OR AFTER ISSUANCE OF THE INVITATION FOR BIDS OR PROPOSALS FOR THE PRIME CONTRACT FOR THE INITIAL PHASE OF DESIGN OR CONSTRUCTION, AND THE BIDS FOR THE PARTICIPATION CERTIFICATES COULD BE ACCEPTED PRIOR TO THE AWARD OF SUCH PRIME CONTRACT. AS HERETOFORE UNDER THE PROGRAM, THE PRINCIPAL AMOUNT OF THE PARTICIPATION CERTIFICATES FOR WHICH BIDS WOULD BE INVITED WOULD NOT EXCEED THE AMOUNT ESTIMATED BY GSA, AT APPROXIMATELY THE TIME OF THE INVITATION, AS THE MAXIMUM WHICH MIGHT BE REQUIRED TO COVER THE COSTS AND EXPONSES (INCLUDING CAPITALIZED INTEREST) TO THE TARGET DATE, AS MORE FULLY DESCRIBED IN THE SEPTEMBER 27, 1972, MEMORANDUM.

ALSO, UNDER THE PROPOSED MODIFIED PROCEDURES, WHETHER OR NOT PHASED CONSTRUCTION IS USED, THE TERMS OF INVITATION FOR FINANCIAL BIDS WOULD, IF AND WHEN DEEMED ADVANTAGEOUS BY THE ADMINISTRATOR, PROVIDE THAT THE PARTICIPATION CERTIFICATES BID FOR WOULD BE PURCHASED AND PAID FOR IN INSTALLMENTS AT SPECIFIED FUTURE DATES, RATHER THAN ON A SINGLE DATE.

AS AN ADDITIONAL ALTERNATIVE UNDER THE PROPOSED MODIFIED PROCEDURES, THE ADMINISTRATOR COULD, IN LIEU OF INITIALLY INVITING BIDS FOR THE PURCHASE OF A PRINCIPAL AMOUNT OF PARTICIPATION CERTIFICATES SUFFICIENT TO COVER THE MAXIMUM ESTIMATED COSTS AND EXPENSES FOR THE PROJECTS, INVITE BIDS INITIALLY FOR ONLY A PORTION OF THE ESTIMATED MAXIMUM, AND SUBSEQUENTLY FROM TIME TO TIME AS CONSTRUCTION PROGRESSES INVITE BIDS FOR ADDITIONAL AMOUNTS OF PARTICIPATION CERTIFICATES OF THE SAME OR NEW SERIES TO BE ISSUED UNDER THE SAME PURCHASE CONTRACT, APPROPRIATELY AMENDED OR SUPPLEMENTED EACH TIME TO REFLECT THE ADDITIONAL ISSUANCE. IN THE CASE OF ANY SUCH SUBSEQUENT INVITATION, THE PRINCIPAL AMOUNT FOR WHICH BIDS ARE INVITED WOULD NOT, HOWEVER, EXCEED THE AMOUNT ESTIMATED BY GSA, AT APPROXIMATELY THE TIME OF THE INVITATION, AS THE MAXIMUM WHICH MIGHT BE REQUIRED TO COVER FUTURE COSTS OF CONSTRUCTION AND OTHER APPLICABLE COSTS AND EXPENSES REFERRED TO ABOVE, AFTER TAKING INTO ACCOUNT ANY AVAILABLE FUNDS AT THE TIME REMAINING WITH THE TRUSTEE.

(3) REDEMPTION AND PURCHASE OF PARTICIPATION CERTIFICATES. EACH PURCHASE CONTRACT WOULD CONTAIN PROVISIONS FOR (1) THE MANDATORY REDEMPTION OF PARTICIPATION CERTIFICATES AT A SPECIFIED DATE WITHIN A YEAR AFTER THE TARGET DATE WITH ANY SUMS REMAINING IN THE CONSTRUCTION FUND AFTER ANY TRANSFER OF SUMS TO THE COMPLETION FUND FOR ANY UNCOMPLETED PROJECTS, AND (2) THE MANDATORY REDEMPTION OF PARTICIPATION CERTIFICATES AT A SPECIFIED DATE NOT LATER THAN ONE YEAR FOLLOWING FINAL COMPLETION (AS DETERMINED BY GSA), AND IN ANY EVENT NO LATER THAN THREE YEARS FOLLOWING THE TARGET DATE, WITH ANY SUMS REMAINING IN THE COMPLETION FUND. PROVISION WOULD ALSO BE MADE FOR A PURCHASE FUND TO PERMIT THE ADMINISTRATOR AT ANY TIME TO UTILIZE UNDER APPROPRIATE CIRCUMSTANCES FOR THE PURCHASE AND RETIREMENT OF PARTICIPATION CERTIFICATES SUMS HELD BY THE TRUSTEE IN THE CONSTRUCTION OR COMPLETION FUNDS AND NO LONGED DEEMED NECESSARY FOR CONSTRUCTION OR RELATED COSTS OR EXPENSES, AS WELL AS ADDITIONAL MONEYS WHICH MAY BE PAID BY THE GOVERNMENT TO THE TRUSTEE FOR THE PURPOSE OF PURCHASE AND RETIREMENT OF PARTICIPATION CERTIFICATES.

WE FIND NOTHING IN THE MODIFICATIONS SET FORTH ABOVE WHICH - FROM A LEGAL STANDPOINT - WOULD REQUIRE ANY CHANGE IN THE CONCLUSIONS REACHED IN OUR DECISION OF OCTOBER 19, 1972. ACCORDINGLY, THAT DECISION IS EQUALLY APPLICABLE TO THE PROGRAM AS SO MODIFIED.

INASMUCH AS THE INTERESTED COMMITTEES OF THE CONGRESS WERE ADVISED OF THE ORIGINAL PLAN BY YOUR AGENCY, WE SUGGEST YOU ADVISE THE SAME COMMITTEES OF THE INSTANT MODIFICATIONS.

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