B-194135(1), NOV 19, 1979

B-194135(1): Nov 19, 1979

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ARMY DISCOVERED THAT ONE FACILITY HAD BEEN DEEDED TO LOCAL SCHOOL BOARD PRIOR TO DATE CONTRACT WAS EXECUTED. BECAUSE THERE IS NO SPECIFIC APPROPRIATION TO MAKE IMPROVEMENTS TO LOCALLY OWNED FACILITIES. THE ARMY DISCOVERED THAT THE PLANT AT OLD BRIDGE HAD BEEN DEEDED TO THE LOCAL SCHOOL BOARD PRIOR TO THE TIME THE CONTRACT WAS EXECUTED. THE ARMY'S CONTRACTING OFFICER AND INCUMBENT ENGINEER FOR THIS PROJECT WERE UNAWARE OF THE TRANSFER. THE ARMY HAS FOUND THAT THE CONTRACTOR'S WORK WAS COMPLETED SATISFACTORILY AND THAT THE CONTRACTOR WAS UNAWARE OF THE TRANSFER OF THE PLANT TO THE TOWNSHIP. IF PAYMENT IS ILLEGAL UNDER THE CONTRACT. THE RULE IS THAT APPROPRIATED FUNDS MAY NOT BE USED FOR THE PERMANENT IMPROVEMENT OF PRIVATELY OWNED PROPERTY IN THE ABSENCE OF EXPRESS STATUTORY AUTHORITY. 47 COMP.GEN. 61 (1967).

B-194135(1), NOV 19, 1979

DIGEST: ARMY AND CONTRACTOR ENTERED INTO AGREEMENT WHEREBY CONTRACTOR WOULD UPGRADE THREE WASTEWATER FACILITIES. AFTER CONTRACTOR SATISFACTORILY COMPLETED PERFORMANCE AND SUBMITTED BILL FOR FINAL PAYMENT, ARMY DISCOVERED THAT ONE FACILITY HAD BEEN DEEDED TO LOCAL SCHOOL BOARD PRIOR TO DATE CONTRACT WAS EXECUTED. BECAUSE THERE IS NO SPECIFIC APPROPRIATION TO MAKE IMPROVEMENTS TO LOCALLY OWNED FACILITIES, PAYMENT MAY NOT BE MADE. SEE 31 U.S.C. SECS. 628, 665, AND 41 U.S.C. SEC. 12. HOWEVER, EQUITIES WARRANT REPORTING OF CLAIM TO CONGRESS UNDER MERITORIOUS CLAIMS ACT, 31 U.S.C. SEC. 236 (1976).

CAMPANELLA CONSTRUCTION CO., INC.:

CAMPANELLA CONSTRUCTION CO., INC. (CAMPANELLA), HAS FILED A CLAIM FOR FINAL PAYMENT OF $38,935 UNDER DEPARTMENT OF THE ARMY CONTRACT NO. DABT 35 -76-C-0342. FOR THE FOLLOWING REASONS, OUR OFFICE MAY NOT AUTHORIZE PAYMENT; HOWEVER, WE DEEM THE SITUATION APPROPRIATE FOR US TO FILE A REPORT WITH THE CONGRESS UNDER THE MERITORIOUS CLAIMS ACT (ACT), 31 U.S.C. SEC. 236 (1976).

ACCORDING TO THE RECORD, THE CONTRACT CALLED FOR CAMPANELLA TO UPGRADE THREE GOVERNMENT-OWNED WASTEWATER TREATMENT PLANTS WITHIN NEW JERSEY AT OLD BRIDGE, LIVINGSTON, AND RAMSEY. CAMPANELLA SATISFACTORILY PERFORMED ALL REQUIRED WORK UNDER THE CONTRACT AND SUBMITTED ITS REQUEST FOR THE FINAL PAYMENT OF $38,935. AT THIS POINT, THE ARMY DISCOVERED THAT THE PLANT AT OLD BRIDGE HAD BEEN DEEDED TO THE LOCAL SCHOOL BOARD PRIOR TO THE TIME THE CONTRACT WAS EXECUTED. ALTHOUGH THE GENERAL SERVICES ADMINISTRATION HAD APPRISED THE ARMY OF THIS TRANSFER OF THE FACILITY, THE ARMY'S CONTRACTING OFFICER AND INCUMBENT ENGINEER FOR THIS PROJECT WERE UNAWARE OF THE TRANSFER. THROUGHOUT THE PERIOD OF CONTRACT PERFORMANCE BY CAMPANELLA, THE ARMY CONTINUED TO RUN THE FACILITY AT OLD BRIDGE.

THE ARMY HAS FOUND THAT THE CONTRACTOR'S WORK WAS COMPLETED SATISFACTORILY AND THAT THE CONTRACTOR WAS UNAWARE OF THE TRANSFER OF THE PLANT TO THE TOWNSHIP. THE ARMY HAS WITHHELD PAYMENT BECAUSE IT QUESTIONS WHETHER PAYMENT WOULD BE LAWFUL UNDER THE CONTRACT IN VIEW OF THE STATUTORY PROHIBITIONS CONTAINED IN 31 U.S.C. SECS. 628 AND 665 (1976). IF PAYMENT IS ILLEGAL UNDER THE CONTRACT, THE CONTRACTING OFFICER HAS RECOMMENDED THAT PAYMENT BE MADE ON A QUANTUM MERUIT/QUANTUM VALEBANT BASIS.

WITH MINOR EXCEPTIONS, NOT RELEVANT HERE, THE RULE IS THAT APPROPRIATED FUNDS MAY NOT BE USED FOR THE PERMANENT IMPROVEMENT OF PRIVATELY OWNED PROPERTY IN THE ABSENCE OF EXPRESS STATUTORY AUTHORITY. 47 COMP.GEN. 61 (1967). THE LEGAL BASIS FOR THIS RULE IS EXPLAINED IN 39 COMP.GEN. 388 (1959), WHICH INDICATES THAT SUCH USE OF APPROPRIATED FUNDS IN THE ABSENCE OF SPECIFIC STATUTORY AUTHORITY WOULD VIOLATE 31 U.S.C. SECS. 628, 655 (1976), AND 41 U.S.C. SEC. 12 (1976).

31 U.S.C. SEC. 628 (1976) STATES:

"EXCEPT AS OTHERWISE PROVIDED BY LAW, SUMS APPROPRIATED FOR THE VARIOUS BRANCHES OF EXPENDITURE IN THE PUBLIC SERVICE SHALL BE APPLIED SOLELY TO THE OBJECTS FOR WHICH THEY ARE RESPECTIVELY MADE, AND FOR NO OTHERS."

31 U.S.C. SEC. 665(A) (1976) STATES:

"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."

41 U.S.C. SEC. 12 (1976) STATES:

"NO CONTRACT SHALL BE ENTERED INTO FOR THE ERECTION, REPAIR, OR FURNISHING OF ANY PUBLIC BUILDING, OR FOR ANY PUBLIC IMPROVEMENT WHICH SHALL BIND THE GOVERNMENT TO PAY A LARGER SUM OF MONEY THAN THE AMOUNT IN THE TREASURY APPROPRIATED FOR THE SPECIFIC PURPOSE."

THIS LAST PROVISION OF LAW HAS BEEN INTERPRETED TO PRECLUDE THE FINANCING OF PUBLIC IMPROVEMENTS ON THE PROPERTY OF A STATE OR ONE OF ITS POLITICAL SUBDIVISIONS UNLESS THE CONGRESS HAS SPECIFICALLY MADE SUCH AN APPROPRIATION. 39 COMP.GEN. 388, 390 (1959).

THUS, THE RECORD DISCLOSES THAT THERE IS NO STATUTORY AUTHORITY (I.E., A SPECIFIC APPROPRIATION) WHICH ALLOWS THE ARMY TO PAY FOR IMPROVEMENTS TO THE LOCAL GOVERNMENT FACILITY AT OLD BRIDGE.

THE REMAINDER OF THE CONTRACT IS VALID BECAUSE IT CONCERNS IMPROVEMENTS TO GOVERNMENT FACILITIES FOR WHICH THE ARMY DOES HAVE AN APPROPRIATION. THEREFORE, CAMPANELLA IS ENTITLED TO PAYMENT FOR THE WORK DONE AT LIVINGSTON AND RAMSEY, $121,850 AND $126,400, RESPECTIVELY, BUT NOT FOR THE WORK DONE AT OLD BRIDGE WHICH IS $102,240 UNDER THE CONTRACT. DATE, CAMPANELLA HAS RECEIVED PARTIAL PAYMENTS FOR THE WORK DONE ON THE THREE FACILITIES OF $311,555, WHICH EXCEEDS THE AMOUNT AUTHORIZED FOR LIVINGSTON AND RAMSEY OF $248,250.

SINCE THERE IS NO APPROPRIATION UNDER WHICH PAYMENT OF THE CLAIM FOR THE WORK AT OLD BRIDGE COULD BE MADE LAWFULLY, CAMPANELLA IS INDEBTED TO THE UNITED STATES FOR THE EXCESS PAYMENTS RECEIVED. HOWEVER, WE BELIEVE THE SITUATION IS APPROPRIATE FOR US TO FILE A REPORT WITH THE CONGRESS REQUESTING CONSIDERATION OF THE CONTRACT AMOUNT FOR OLD BRIDGE AS A MERITORIOUS CLAIM. ACCORDINGLY, THE DEPARTMENT OF THE ARMY SHOULD TAKE NO COLLECTION ACTION UNTIL THE END OF THE NEXT SESSION OF CONGRESS.