B-231044.2, Feb 6, 1991, 70 Comp.Gen. 233

B-231044.2: Feb 6, 1991

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APPROPRIATIONS/FINANCIAL MANAGEMENT - Obligation - Payments - Estimates Communications systems/services APPROPRIATIONS/FINANCIAL MANAGEMENT - Obligation - Payments - Termination costs - Communications systems/services The General Services Administration (GSA) is authorized by 40 U.S.C. GSA is also authorized to recover termination costs that arose by virtue of GSA's authorized administrative practice regarding the Federal Telecommunications (FT) Fund. Which were incurred subsequent to merger of FT Fund into the Information Technology (IT) Fund. Nothing in the submission demonstrates that the amounts assessed by GSA are unreasonable or otherwise improper. Was authorized by section 110 of the Federal Property and Administrative Services Act of 1949.

B-231044.2, Feb 6, 1991, 70 Comp.Gen. 233

APPROPRIATIONS/FINANCIAL MANAGEMENT - Obligation - Payments - Estimates Communications systems/services APPROPRIATIONS/FINANCIAL MANAGEMENT - Obligation - Payments - Termination costs - Communications systems/services The General Services Administration (GSA) is authorized by 40 U.S.C. Sec. 757 (1988) to recover approximate costs of Federal Telecommunications System (FTS) services and facilities provided to Tennessee Valley Authority (TVA) as a result of TVA withdrawal from FTS. GSA is also authorized to recover termination costs that arose by virtue of GSA's authorized administrative practice regarding the Federal Telecommunications (FT) Fund, 40 U.S.C. Sec. 757 (1982), but which were incurred subsequent to merger of FT Fund into the Information Technology (IT) Fund, 40 U.S.C. Sec. 757 (1988).

GSA's Billing Tennessee Valley Authority for FTS Use and Termination Costs:

The decision responds to a request submitted by Raymond A. Fontaine, Comptroller of the General Services Administration (GSA), regarding the Tennessee Valley Authority's (TVA) refusal to pay GSA's billings for TVA usage of, and transition from, the Federal Telecommunications System (FTS). For the reasons set forth below, we concur with GSA that 40 U.S.C. Sec. 757 (1982, 1988) authorizes the charges. Nothing in the submission demonstrates that the amounts assessed by GSA are unreasonable or otherwise improper.

LEGAL AUTHORITY

In our decision on GSA's Billing Navy for FTS Use and Termination Cost, 69 Comp.Gen. 112 (1989), we held that the GSA method of computing agency billings for FTS usage, and assessing agency termination costs for leaving the FTS, was authorized by section 110 of the Federal Property and Administrative Services Act of 1949, as added by Pub.L. No. 87-847, 76 Stat. 1117 (1962) (40 U.S.C. Sec. 757 (1982)). We noted that the Federal Telecommunications (FT) Fund established in 1962 was available without fiscal year limitation for expenses, including personal services, other costs, and the procurement by lease or purchase of equipment and operating facilities necessary for authorized FT Fund purposes. GSA was required to credit the FT Fund with advances and reimbursements from available agency appropriations and funds for telecommunications services and facilities provided. The statute authorized GSA to charge agencies:

... at rates determined by the Administrator to approximate the costs thereof met by the fund (including depreciation of equipment, provision for accrued leave, and where appropriate, for terminal liability charges and for amortization of installation costs ... which expenses may be charged to the fund and covered by advances or reimbursements from such direct appropriations) ... . 40 U.S.C. Sec. 757 (1982).

Congress envisioned that the FT Fund would permit GSA to manage the FTS in a unified and businesslike manner. Under the law, GSA paid all FTS operational costs, and recovered these costs from agencies using the FTS. However, the basis of allocating FTS costs was not "actual" costs but merely "approximate" costs associated with providing agencies with FTS services. See also S. Rep. No. 2262, 87th Cong., 2d Sess. 1-2 (1962); H.R. Rep. No. 2164, 87th Cong., 2d Sess. 1-2 (1962).

Thus, we held that GSA's practice of billing agencies under 40 U.S.C. Sec. 757 (1982) for FTS service one quarter in advance based upon a statistical sampling of usage data provided by vendors to GSA for the last available quarter, was not unreasonable under the law. 69 Comp.Gen. at 113-116. This billing method had generally resulted in a two-quarter lag from the time the agency locations began using FTS to the time the agency received its first billing for FTS usage.

Additionally, we held that 40 U.S.C. Sec. 757 (1982) authorized GSA to assess an agency termination costs for large scale disconnects from the FTS, rather than requiring GSA to recover these costs through usage rates charged to the remaining agency FTS users. These termination charges are designed to recover the direct cost to FTS associated with disconnecting the serving access lines without disrupting service to other users and the direct cost of carrying surplus capacity during the downsizing of the FTS backbone network. The measures of costs associated with large scale withdrawals is computed by a formula generated by GSA from its experience in handling the first large scale withdrawal from FTS by the Postal Service and has been the basis for computing transition costs for other large scale withdrawals from FTS. We approved this approach for assessing termination costs as a reasonable approximation of such costs and authorized under 40 U.S.C. Sec. 757. 69 Comp.Gen. 116-118.

Though not at issue in 69 Comp.Gen. 112, our decision reflected tacit agreement with GSA's view that its authority to allocate costs based upon approximations of costs incurred in providing FTS service to individual agencies continued following creation of the Information Technology Fund on January 1, 1987, and applied to billings that arose shortly after this date.

Effective January 1, 1987, Congress amended section 110 of the 1949 Act and merged the FT Fund and the Automatic Data Processing Fund to establish the Information Technology (IT) Fund, which assumed all liabilities, obligations and commitments of the merged funds. Pub.L. No. 99-591, Sec. 101(m), 100 Stat. 3341, 3341-345 (1986); Pub.L. No. 99 500, Sec. 100(m), 100 Stat. 1783, 1783-345 (1986) (codified at 40 U.S.C. Sec. 757 (1988). The IT Fund is made available for "expenses, including personal services and other costs, and for procurement (by lease, purchase, transfer, or otherwise) for efficiently providing information technology resources to Federal agencies and for efficient management, coordination, operation, and utilization of such resources." 40 U.S.C. Sec. 757(b)(2) (1988).

The law provides that the Administrator shall determine the costs and capital requirements of the IT Fund for each fiscal year and shall obtain Office of Management and Budget (OMB) approval for the Fund's cost and capital requirements. Once approved, the Administrator is authorized to establish conforming rates for agencies provided, or to be provided, information technology resources through the IT Fund. 40 U.S.C. Sec. 757(a)(2) (1988). /1/ However, nothing in the law or its legislative history supports the conclusion that the Congress by amending the law was requiring that GSA change the way in which it allocated costs to FTS users (by formula based on statistical sampling), or that allocations based upon approximate costs were no longer authorized. See also H.R. Rep. No. 99-1005, 99th Cong., 2d Sess. 772, 776 (1986); S. Rep. No. 99-374, 99th Cong., Sess. 57-58 (1986). Thus GSA continued to allocate costs after January 1, 1987, in the same manner it had done prior to the amendments taking effect.

Finally the IT Fund can continue to recover termination costs even though the amended legislation does not specifically mention such costs. In our opinion, a specific statutory identification is not a prerequisite to the recovery of termination costs from the responsible agency, as long as the cost may reasonably be characterized as a cost to the Fund. See 69 Comp.Gen. at 117 n. 6 (1989). The FT Fund contained no reserves to pay for extraordinary costs associated with large scale withdrawals from the FTS. /2/This situation remained unchanged upon the creation of the IT Fund even though GSA continued to be responsible for paying such costs if and when they arose. Even if GSA changes its policy under the amended law to include large scale termination costs in the rates assessed users, the change would not become effective until GSA obtains OMB approval and adequate reserves are established to cover these costs. /3/ Thus, GSA's decision to continue to apply its prior administrative practice of recovering termination costs from agencies leaving the system appears reasonable and consistent with existing statutory authority. See, GSA's Billing National Trust for Historic Preservation For FTS Use and Termination Costs, B-238181, Jan. 9, 1991.

ANALYSIS

GSA billed TVA for fiscal year 1986 and the first two quarters of 1987 for FTS usage a total amount of $4,556,011.00 of which $1,665,620.09 remains unpaid. TVA has refused payment because it is of the opinion that GSA's method of allocating FTS costs by use of a 20 percent vendor's sample of agency call information that has been gathered under the Automatic Message Accounting (AMA) system results in GSA FTS usage billings that are less accurate than can be arrived at by using System Message Detail Recording (SMDR) data that TVA receives from the phone company regarding 100 percent of TVA's FTS usage. Therefore, TVA asserts that it's usage and FTS cost allocation should be based upon the SMDR data that it receives from the telephone company. TVA apparently has recomputed GSA billings using SMDR data paying the amounts the SMDR data shows to be appropriate and withholding amounts SMDR data indicates GSA has overcharged.

GSA contests the assertion that SMDR data provides a more accurate measure of TVA's FTS usage than is provided by the AMA system. According to GSA, the AMA system automatically records all data 24 hours a day, seven days a week, concerning completed long distance calls enabling GSA to prepare an itemized bill for subscribers. It generates data on the duration of completed FTS calls. On the other hand, the SMDR system records the number of attempted calls regardless of whether the calls are completed or uncompleted, and regardless of whether the calls are FTS or non-FTS. SMDR data is used for engineering rather than billing purposes.

We have found that GSA's method of allocating costs based upon the 20 percent vendor sample of AMA data is a reasonable method for GSA to allocate and bill FTS usage costs to an agency. 69 Comp.Gen. 112, 113 116. /4/ AMA system data serves as the established basis for billing FTS usage to all agency users. As we have previously held, the law only requires that GSA bill each agency the approximate cost of its usage of FTS and this GSA has accomplished through use of the 20 percent sample of the AMA system data. Thus, GSA having settled upon a reasonable basis for allocating costs to all FTS users, it retains no administrative authority to allocate FTS usage costs to all other agency users on the basis of AMA system data while allocating such costs to TVA on the basis of SMDR system data. While the TVA's use of SMDR data may result in payments for FTS usage that are less than GSA has billed using the statistical sample of the AMA system data, the contrary may hold true for other agencies. each agency is free to choose to pay bills based on the data that is most favorable to it financially, this would invariably result in the undermining of GSA's ability to finance FTS operations through the FT Fund (and its successor IT Fund). While GSA's system may not be perfect, it is reasonable, and as such should not be set aside on an ad hoc basis in favor of some other system merely because to do so might result in savings to an individual agency.

GSA also billed TVA for termination charges of $1,022,726 following TVA's withdrawal from FTS. /5/ The submission is unclear whether TVA's refusal is based on a denial of GSA's authority to assess termination costs or is based on a refusal to pay termination charges that are based on AMA system data. As noted above, we have held that termination charges are authorized under 40 U.S.C. Sec. 757. Furthermore, for the reasons given above, GSA's use of AMA system data rather than SMDR system data to compute termination charges is reasonable and authorized.

In addition, the submission reveals that GSA had billed TVA for FTS usage at certain locations immediately from the quarter during which the location joined FTS without the two-quarter lag in billing for FTS usage that is the GSA's general practice. /6/ TVA apparently viewed this discrepancy between GSA's asserted customary practice and the facts as they relate to the specific locations identified as providing a basis for questioning the validity of GSA's assessments generally (either for FTS usage, termination, or both). We do not agree.

Under GSA's procedure, FTS usage charges ceased and the FTS termination charges commenced with the quarter that TVA locations left the FTS. our opinion, the fact that the billings for certain locations were current as of the quarter billed (rather than based on a two-quarter lag) did not result in any adverse impact on TVA for either FTS usage charges or termination costs. /7/

As we noted above, GSA is authorized to recover the total costs it incurs in operating FTS, through usage and termination charges that reflect approximate costs (1) incurred by GSA in providing FTS service to an individual agency or (2) incurred by GSA as a result of an individual agency's withdrawal from FTS. While funding FTS in such a manner may at times work to the advantage or disadvantage of a particular agency, this does not provide a basis for invalidating individual billings since the overall approach used by GSA is reasonable and, therefore, authorized by 40 U.S.C. Sec. 757.

/1/ Even in the best of all possible circumstances, the earliest practical implementation of the amendment could not have taken place prior to the start of fiscal year 1988. However, a GSA official has advised this Office that OMB's first approval under this provision is applicable to FTS 2000 which became effective January 1, 1990. GSA continued to bill agencies based on prior practices in the absence of any OMB approval of costs or capital requirements.

/2/ GSA pointed out that reserves were not established to cover termination costs associated with large scale withdrawals from FTS since assessing such costs through FTS usage charges would have resulted in unnecessarily high rates to all system users. GSA contended that this would not have been businesslike since the FT Fund would be accumulating large amounts of moneys, the use of which would be contingent on a later event that might never occur.

/3/ We have been informally advised by an official of GSA that the IT Fund currently is not accumulating reserves.

/4/ See particularly, 69 Comp.Gen. n.2 at 114.

/5/ TVA began withdrawing from FTS during the fourth quarter of fiscal year 1986 and completed withdrawing from FTS during the fourth quarter of fiscal year 1987.

/6/ An official of GSA informally advised this Office of the following reasons for the apparent inconsistency between these billings and GSA's general practice. He noted that during the early years following the establishment of the FTS it was necessary to bill an agency for FTS usage immediately since the FT Fund did not have sufficient assets to cover the cost of carrying new locations for two quarters. However, once the FTS had grown to a large relatively stable configuration, this no longer posed a problem since assets were available in the FT Fund to carry the addition of new locations for the first two quarters. He also noted that the two- month lag is a customary practice under GSA's system of allocating FTS usage costs to agencies using the 20 percent vendor's sample of agency use provided by the AMA data. However, the AMA system did not become fully operational for billing FTS usage until 1968. The locations in question joined FTS prior to 1968 while the system was still growing.

/7/ For example, it does not represent a double billing for services.