B-231659, Sep 10, 1990, 69 Comp.Gen. 691

B-231659: Sep 10, 1990

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The Supreme Court held that this places the burden on the carriers to provide evidence to support their charges and the burden is not on the government to prove it has been overcharged. Or the fare selected by a traveler when a reservation is made or the ticket is issued generally is the applicable fare. GSA's position that the government is entitled to the lowest available fare for the service provided although another fare was requested has no reasonable basis in law. If GSA can establish that a lower fare applied and was requested but not furnished. The burden is then on the carriers to provide evidence to show why such fare was not available. Since such evidence is peculiarly within their knowledge and competence.

B-231659, Sep 10, 1990, 69 Comp.Gen. 691

PROCUREMENT - Payment/Discharge - Payment deductions - Propriety DIGEST: 1. An amendment made by the Civil Aeronautics Sunset Act of 1984 to 31 U.S.C. Sec. 3726(b)(1) does not limit GSA's long-standing authority to deduct overcharges for airline fares from current bills due the airlines. Other authority in 31 U.S.C. Sec. 3726(b)(2), encompassing rates based on all means of contractual arrangements or exemptions from regulation, supports such deductions. 2. Section 322 of the Transportation Act of 1940, now codified in 31 U.S.C. Sec. 3726, provides authority for the government to pay its transportation bills prior to audit and recover overcharges administratively determined in the post-payment audit by deduction from other bills. In United States v. New York, New Haven and Hartford Railroad Co., 355 U.S. 253 (1957), the Supreme Court held that this places the burden on the carriers to provide evidence to support their charges and the burden is not on the government to prove it has been overcharged. Deregulation of domestic air transportation has not changed this relationship. MISCELLANEOUS TOPICS - Transportation - Air carriers - Excursion rates - Availability 3. Under the airlines' deregulated pricing system the city-pair contract fare, if applicable, or the fare selected by a traveler when a reservation is made or the ticket is issued generally is the applicable fare. GSA's position that the government is entitled to the lowest available fare for the service provided although another fare was requested has no reasonable basis in law. However, if GSA can establish that a lower fare applied and was requested but not furnished, it may apply the lower fare. The burden is then on the carriers to provide evidence to show why such fare was not available, since such evidence is peculiarly within their knowledge and competence.

Alaska Airlines, Inc., et al. - Effect of Deregulation on Audit and Overcharge Collection - Burden of Proof:

DECISION

Alaska Airlines, Inc., together with 12 other airlines, /1/ requests that the Comptroller General, pursuant to 31 U.S.C. Sec. 3726(g)(1) (1988), review certain transportation audit actions taken by the General Services Administration (GSA) which resulted in deductions to recover overcharges from moneys otherwise due the carriers.

The matters presented for our review concern airline fares for passenger transportation between points in the United States and span approximately a 2-year period commencing in early 1985 and ending in late 1986. The airlines presented what they consider to be a representative sample of thousands of overcharges asserted by GSA, and they state that GSA continues to offset from the airlines' current revenues on the same basis. We are asked to consider several issues relating to GSA's audit positions, the answers to which will govern settlement of these thousands of items.

The following is a summary of the issues involved and of our conclusions concerning them. Following that is a detailed presentation of the case and our analysis and conclusions.

SUMMARY

GSA's Audit Positions

Under the current provisions of section 322 of the Transportation Act of 1940, as amended, 31 U.S.C. Sec. 3726 (1988), government transportation bills are paid upon presentation by the carrier prior to audit. GSA then is responsible for performing a post-payment audit of the bills and collecting any overcharges. In performing its audits, GSA takes the position that the government is entitled to the lowest available rate applicable to the type of service furnished by the carrier which provided it.

To determine the fares to be applied in its audits of airline bills, GSA uses the Airline Tariff Publishing Company (ATPCO), which publishes the Official Passenger Tariff listing airfares covering the United States, and the Passenger Interline Pricing/Prorate System (PIPPS), which is a computerized system with a data base similar to ATPCO's. From these sources the GSA auditors select the lowest available fare applicable to the carrier used for which the record shows the travel performed qualified. This fare may be one offered by the airline to the general public or a fare applicable only to government travelers set by contract between the airlines and the government covering travel between specified city-pairs. It is GSA's policy to apply a fare only if the travel meets any specific conditions applicable to the fare. For example, if the lower fare included a condition that the ticket be purchased a specified period in advance of travel, GSA would apply that fare only if the record showed that the time of ticket purchase met the requirement. In GSA's view, the burden is then on the airline to establish that the lower fare was not available.

A major point of contention between the parties involves GSA's application of so-called controlled-capacity fares. These are discounted fares whose availability can change frequently based on demand and competitive factors. Since at the time of its audit GSA does not have information as to seat availability at these fares, it assumes seats were available and applies these fares if they are the lowest applicable. GSA leaves it to the airlines to furnish evidence to the contrary if they wish to rebut GSA's action. In doing so, GSA applies the rule followed by the Supreme Court in interpreting the Transportation Act of 1940 that the burden is on the carrier to provide the necessary evidence to support its charges, particularly as to matters peculiarly within the carrier's competence and knowledge. GSA considers availability at a controlled- capacity fare to be such a matter.

Airlines' Objections

The airlines object to GSA's audit practices on several grounds. First, they argue that as a result of a 1984 amendment to 31 U.S.C. Sec. 3726, the statutory authority under which GSA conducts its post payment audits, GSA no longer has authority to collect overcharges it finds on domestic air transportation by setoff and to place the burden of proof on the airlines in reclaiming the amounts collected.

The airlines also disagree with GSA's position that the government is entitled to the lowest applicable fare. They assert that under their deregulated fare systems there are now many allowable fares and the government, like other users of their services, is entitled only to the fare selected at the time the reservation is made. The airlines argue that by presenting tickets showing that transportation at the selected fare was provided they have met the burden of establishing their entitlement to payment and the government cannot reasonably expect them to establish more than this. As to the controlled-capacity fares in particular, they argue that it is impossible for them to provide information on availability of seats at those fares long after the fact because their computerized reservation systems do not store that information after the flight departs.

GAO's Conclusions

While the 1984 legislation to which the airlines refer made some changes in 31 U.S.C. Sec. 3726, those changes only removed an obsolete reference to tariffs filed with the Civil Aeronautics Board (CAB), since the Board was abolished and the airlines are no longer required to publish their rates for domestic transportation in tariffs filed with the government. Those changes were not made for the purpose of affecting, nor did they affect, GSA's authority to audit airline bills for domestic air transportation and to collect overcharges by setoff, with the burden being on the airlines to provide evidence to support their charges. That authority clearly continues to exist under section 3726(b)(2), which covers charges derived from rates exempted from regulation or provided by contract. Therefore, we conclude that GSA's longstanding offset authority and the burden of proof between GSA and the airlines in that regard remain unchanged.

However, GSA's position that the government is entitled to the lowest applicable fare, whether or not it is the fare selected no longer has a reasonable basis in law. In the deregulated air transportation environment the government, like other passengers, generally is entitled only to the fare selected at time of reservation. If GSA seeks to apply a fare other than that shown on the ticket, it must first establish that the other fare was requested by the government or that the government was contractually entitled to that fare. If GSA does so, it may assert an overcharge based on that fare and collect by offset. The airline then has the burden of proving that such fare was not, in fact, available and justifying the application of the higher fare. This approach is consistent with the post-payment audit statute, as it has long been interpreted, and is reasonable since in most cases only the airlines have access to information necessary to establish non-availability of the lowest fare such as information concerning availability of seats at controlled capacity fares.

BACKGROUND

Pursuant to the provisions of 31 U.S.C. Sec. 3726 (1988), derived from section 322 of the Transportation Act of 1940, the government pays most of its bills for transportation services upon presentation by the carrier and prior to audit of the rates charged, subject to a post payment rate audit performed under the direction of GSA.

GSA's post-payment audit is performed using the information from documents relating to the type of transportation performed and charges for which the carrier was paid. In the case of airline bills for domestic transportation, these documents generally include vouchers and tickets issued by the airline and Government Transportation Requests issued by the government agency involved.

The GSA auditors check the fares charged by the airline against published listings of the airline's fares offered to the public and special fares offered to the government by contract for government travel between various cities in the United States, so-called city pairs contracts. Thus, in its audit of airline bills GSA uses two major sets of fares, those applicable only to government travel under the city-pairs contracts and those offered to the public.

GSA takes the position that the government is entitled to the lowest fare offered by the carrier for the type of service performed. It therefore reviews the documents applicable to each instance of travel and the fares offered by the airline used, both city-pair contract fares and those offered the public, and applies the lowest fare it finds applicable to the travel. When the GSA auditors find an overcharge on this basis they issue a notice to the airline advising it of the overcharge, and GSA collects it by setoff, if necessary, under authority of 31 U.S.C. Sec. 3726(b). GSA then considers the burden to be on the airline to provide evidence sufficient to overcome the presumption that the lower fare was applicable.

The airlines raise major issues concerning the effects of deregulation of the domestic airline industry in recent years which, they assert, have substantially changed the historic basis upon which GSA may conduct its post-payment audits of airline bills. These issues include the continued applicability of GSA's authority to collect stated overcharges by setoff, the fares applicable to government travel and the proof required to support airline billings.

APPLICABILITY OF 31 U.S.C. Sec. 3726

In conjunction with deregulation of domestic air transportation, including abolishing the CAB, the Civil Aeronautics Sunset Act of 1984, Pub.L. No. 98-443, Sec. 9(f), 98 Stat. 1707, 1984, made a number of miscellaneous amendments to other statutes. These included an amendment to 31 U.S.C. Sec. 3726, the codification of section 322 of the Transportation Act of 1940. Prior to the amendment by the Civil Aeronautics Sunset Act, the pertinent provisions of 31 U.S.C. Sec. 3726 read as follows:

"(a) A carrier or freight forwarder presenting a bill for transporting an individual or property for the United States Government shall be paid before the Administrator of General Services conducts an audit ... .

"(b) Not later than 3 years excluding time of war after the time a bill is paid, the Government may deduct from an amount subsequently due a carrier or freight forwarder an amount paid on the bill that was greater than the rate allowed under--

"(1) a lawful tariff on file with the Interstate Commerce Commission, the Civil Aeronautics Board, the Federal Maritime Commission, or a State transportation authority; or

"(2) sections 10721-10724 of title 49 or an equivalent arrangement or an exemption."

The amendment made by section 9(f) of the Civil Aeronautics Sunset Act deleted from 31 U.S.C. Sec. 3726(b)(1) the words "Civil Aeronautics Board" and inserted in lieu thereof the words "Secretary of Transportation with respect to foreign air transportation as defined in the Federal Aviation Act of 1958." /2/ It made no change, however, to section 3726(b)(2).

The airlines contend that this amendment to 31 U.S.C. Sec. 3726(b)(1) left GSA without authority to offset overcharges for domestic air transportation from bills currently due the airlines. They argue that the offset authority had been established when the allowable fare was readily ascertainable from tariffs filed with the CAB, but after deregulation tariffs were no longer required to be filed with the CAB. They contend that the allowability of a fare is no longer determined by referring to a single published tariff and the government can no longer easily determine the validity of a charge long after payment; therefore, Congress repealed the offset authority as it applied to domestic air transportation. They note that offset was specifically preserved for foreign air transportation since tariffs must still be filed for such transportation, and they contend that if Congress had intended the offset authority to be retained for domestic air transportation, it would have specifically so provided.

In addition, the airlines state that they are not subject to GSA's offset authority under section 3726(b)(2) because that authority refers to rates under 49 U.S.C. Secs. 10721 - 10724, which are provisions of the Interstate Commerce Act to which the airlines are not subject. Nor do their rates fall within the "equivalent arrangement" language of section 3726(b)(2), they argue, because if that were the case, section 3726(b)(1) would never have been necessary, and there is a strong presumption in statutory construction against rendering language meaningless.

GSA disagrees, asserting that the amendment to the statute was only a technical conforming amendment made to remove an obsolete reference to the CAB, which was abolished, and not to affect GSA's authority to audit airline bills and offset overcharges. GSA asserts that it continues to have offset authority applicable to domestic air transportation under the specific provisions of 31 U.S.C. Sec. 3726(b)(2), which covers the deregulated rates the airlines now offer the public as well as special rates they offer the government by contract. As explained below, we agree with GSA's position on this issue.

The airlines' position means that the amendment made by section 9(f) of the Civil Aeronautics Sunset Act radically changed in favor of the airlines the historical arrangement, in effect since the Transportation Act of 1940 was enacted, under which the government makes payment in advance of audit, then audits and collects overcharges on domestic air transportation. That arrangement was described by the Supreme Court in the case of United States v. New York, New Haven and Hartford Railroad Co., 355 U.S. 253, 260 (1957), as follows:

"The burden of the carriers to establish the correctness of their charges was to continue unabridged. The carriers were to be paid immediately upon submission of their bills but the carriers were in turn promptly to refund overcharges when such charges were administratively determined. The carrier would then have to recollect' the sum refunded by justifying its bills to the agency or by proving its claim in the courts. The footing upon which each of the parties stood when controversies over charges developed was not to be changed. The right of the United States to deduct overpayments from subsequent bills was the carriers' own proposal for securing the Government against the burden of having to prove the overpayment in proceedings for reimbursement."

If the airlines' position on this issue were adopted, however, it would mean that the provisions of 31 U.S.C. Sec. 3726(a) authorizing payment before audit of transportation bills would continue to apply to them, but the protection the government originally received in exchange, the right to set off overcharges along with the burden of proof being on the carriers to support their claims for amounts set off, would no longer exist as to domestic air transportation. This would place the government at a distinct disadvantage and accord the airlines substantially more favorable treatment than other carriers and, indeed, other types of government contractors. /3/

We have found nothing in the legislative history of the amendment to section 3726(b)(1), nor has any been cited to us, which supports the airlines' argument that Congress intended to work this result. Rather, the amendment is referred to in the House report only in a section-by section analysis of miscellaneous amendments, which merely states that:

"Conforming changes are also made in a number of other statutes to reflect the termination of the CAB ... ." H.R. Rep. No. 793, 98th Cong., 2nd Sess. 15 (1984); 1984 U.S. CODE CONG. & ADMIN. NEWS 2871.

Moreover, our reading of 31 U.S.C. Sec. 3726(b)(1) and (b)(2) indicates that they include generally all-encompassing provisions to allow the government to set off for any overcharges found in its post payment audit of carriers' rates, fares and charges. The language used was enacted when most carriers' charges were governed by tariffs filed with the appropriate regulatory body and subject to section 3726(b)(1). It was recognized, however, that the government was also entitled to some rates derived from other sources, such as rates allowed under section 22 of the Interstate Commerce Act, 49 U.S.C. Secs. 10721-10724, or other exemptions from regulation or by contract. Thus, the provisions now found in section 3726(b)(2) were included to provide broad coverage encompassing other such rates. This is made clear by reference to the prior codification, 31 U.S.C. Sec. 244 (Supp. IV 1980), which refers to "rates, fares and charges established pursuant to sections 10721 to 10724 of title 49 or other equivalent contract, arrangement, or exemption from regulation." /4/

This provision was added by the Transportation Payment Act of 1972, Pub.L. No. 92-550, Sec. 1(a), 86 Stat. 1163, Oct. 25, 1972, the legislative history of which shows that it was intended to "encompass all modes of transportation and all means of contractual arrangements or exemptions from regulations" and to "dissipate any concerns that certain segments of the carrier industry are being discriminated against." Rep. No. 1026, 92d Cong., 2d Sess. 5 (1972). See also, A 24222, Jan. 21, 1976, concerning the application of the statute of limitations contained in this statute, where we specifically held that the language was added to give the statute the broad coverage referred to above. Although some of the original language was dropped as surplusage when the statute was recodified and enacted into positive law as 31 U.S.C. Sec. 3726(b), the recodification is not to be construed to change the substance of the provision, and the recodification statute and its legislative history specifically so state. /5/

Since the airlines are no longer required to file their tariffs with the CAB, section 3726(b)(1) would no longer apply to them for domestic transportation whether or not the specific reference to the CAB had been removed. It appears to us that the purpose of that change was, as the legislative history indicates, a conforming amendment to remove an obsolete reference to the CAB and to include a current reference to the Secretary of Transportation in recognition of the requirement for airlines to file their rates for foreign transportation in tariffs with that official. Thus, rather than excluding domestic air transportation from GSA's offset authority, the amendment made it clear that such authority continues to apply to foreign air transportation.

The fares the airlines now offer for domestic transportation and the special fares they provide the government under contracts are included in GSA's offset authority as rates established by "other equivalent contract, arrangement or exemption from regulation." In other words, as GSA argues, they are included within the other types of rates meant to be encompassed by section 3726(b)(2).

BASIS FOR OVERPAYMENTS; BURDEN OF PROOF

Having concluded that GSA's right to offset overpayments under 31 U.S.C. Sec. 3726(b) continues after deregulation, we next consider the legal basis on which such overpayments are to be determined for purposes of GSA's audits. As noted previously, section 3726(b) authorizes GSA to deduct by offset "an amount paid on the bill that was greater than the rate allowed under" the pertinent arrangement. The parties differ fundamentally both on how the "rate allowed" under the arrangement is to be determined and who has the burden of proving whether such rate was available.

GSA takes the position that the government is entitled as a matter of law to receive the lowest rate on a particular flight for which its travel met the criteria identified in ATPCO or PIPPS data. According to GSA, it doesn't matter that the officials arranging for the travel may not have requested this fare since such officials have no authority to waive the government's entitlement to the lowest fare. In support of this position, GSA cites a series of judicial decisions and prior decisions of our Office. See e.g., Great Northern Railway Co. v. United States, 170 Ct. Cl. 188, 193-194 (1965), and cases cited therein; 58 Comp.Gen. 375 (1979); 57 Comp.Gen. 584, 586 (1978).

GSA concedes that it must establish from the ticket and other travel documents that the government travel met any conditions or restrictions attached to the fare, such as advance purchase requirements. However, GSA contends that once it has satisfied these facial criteria, the carrier has the burden of proving that this lowest fare was not, in fact, available and, therefore, that the carrier was entitled to charge a higher fare. this regard, GSA cites United States v. New York, New Haven and Hartford Railroad Co., 355 U.S. 253, supra, in which the Supreme Court held that the statutory provisions requiring payment of carrier bills upon delivery subject to post-payment audit and offset did not affect the carrier's burden of proof.

In particular, GSA maintains that if a carrier seeks to avoid application of the lowest fare on the basis that such fare was not available because of controlled-capacity seating restrictions, the carrier must affirmatively establish this fact, both because the carrier in general has the burden of proving its claim to a higher fare and because only the carrier has the information necessary to establish whether or not restricted seating was available.

The airlines first take issue with GSA's position that the government is legally entitled to the lowest applicable fare for a flight. They contend that the government's entitlement to the lowest fare applied only to the former regulated environment in which there generally was only one allowable fare for coach service, which could be readily ascertained from published CAB tariffs and had to be offered to all passengers including the government. However, they maintain that deregulation fundamentally changed this system. According to the airlines, under the competitive practices of the deregulated airline industry, air carriers set a standard coach fare for each flight and multiple discounts to the fare. The size of the discount and the number of seats available at that discount are determined by market forces, primarily demand, and these fares and their availability change frequently. Thus, the airlines assert, a typical flight might have dozens of fare categories, each with corresponding rules of eligibility, several of which may apply to an individual passenger.

According to the airlines, the government, like any other customer, is entitled only to the fare selected at the time the reservation is made. The airlines also note that there are specific provisions in the city- pairs contracts and in government regulations that mandate the procedures to be followed by government employees in purchasing airline tickets. these procedures are followed, the airlines say, the allowable fare will be selected at the time of reservation.

The airlines concede that they have the burden of establishing their right to payment for services provided. However, the airlines argue that the documentation they provide when they bill the government is sufficient to establish their right to payment by showing that (1) transportation was requested, (2) a specific flight and fare were selected, and (3) the flight and fare selected were actually used. They argue that they need not, as GSA would have them do, assume the burden of proving in each case that they applied the lowest fare that ever became available. particular, the airlines contend that information concerning the availability of controlled-capacity seats for a particular flight at various times between reservation and departure is not maintained in their computerized information systems and, therefore, could not be produced to rebut after-the-fact audit offsets by GSA. In any event, they assert that airline reservation systems generally can be relied on to produce accurate information at the time of reservation.

The airlines distinguish United States v. New York, New Haven and Hartford Co., supra, the principal case relied upon by GSA in support of its burden of proof argument. The airlines point out that in this case the government produced evidence showing that it requested shipment of freight under a specific tariff, but that the railroad charged a higher tariff. The airlines say that in the cases here in dispute, they billed the fares applicable at the time of reservation to the service requested and furnished as shown on the documentation provided with their billings, and that the government has not shown otherwise. Thus, they argue that they have provided all that is necessary to prove their claims, and GSA should not demand further proof that it knows they cannot furnish.

With respect to determination of the allowable rates, we note initially that there is no specific basis in the relevant statutes or case law to support the proposition that the government is per se entitled to receive the lowest fare applicable to air transportation. Section 3726(b) of title 31, supra, provides for recovery of payments "greater than the rate allowed" under an applicable tariff or equivalent arrangement; it does not state that this must be the lowest rate available.

Prior to deregulation the "rate allowed" under CAB tariffs generally did equate to the lowest rate applicable, but that was a result of the regulatory system rather than any rule peculiarly applicable to the government. As the airlines point out, the CAB tariffs contained very few rates for coach service and the application of these rates could be readily ascertained from the tariffs. The tariff system featured a prohibition against discrimination on the part of carriers in the rates they provided to any of their customers. Air carriers were generally precluded from receiving "a greater or less or different compensation for air transportation ... than the rates, fares, and charges specified in then currently effective tariffs ... ." 49 U.S.C. App. Sec. 1373(b)(1) (1982). They were also specifically precluded from subjecting any person to any "unjust discrimination." 49 U.S.C. Sec. 1374(b) (1982).

Likewise, the judicial decisions and decisions of our Office relied upon by GSA, all of which arose under the regulated tariff system, stand only for the proposition that the government is entitled to the same fares as those charged the general public for the same or similar services. Therefore, government officers have no authority to contract for discriminatory higher fares. These decisions do not suggest that the government ever had a special entitlement to the lowest fare. In sum, under 31 U.S.C. Sec. 3726(b), the government is now and was prior to deregulation entitled to recover overpayments in excess of the "rate allowed" for air transportation. Prior to deregulation, carriers generally were allowed to charge only one rate "for like and contemporaneous services under substantially similar circumstances and conditions." Aloha Airlines, Inc. v. Civil Aeronautics Board, 598 F.2d 250, 263 (D.C. Cir. 1979), and cases cited. However, there are many allowable rates for the same or similar services under the current deregulated system. Given these considerations, the government's fare entitlements must be determined on the basis of the specific contractual and other arrangements which now govern the carriers' provision of air transportation to it. As discussed hereafter, we conclude that these contracts and arrangements do not entitle the government to pay less for air transportation than the specific fares it has contracted for, where applicable, or such other fares as it actually requests and qualifies for.

Much of the government's air travel is covered by the city-pairs contracts, and we understand that a large portion of the individual disputes between the airlines and GSA concern the appropriate fares for city-pair travel. The city-pairs contracts /6/ require the contract carriers to offer an unrestricted government contract fare designated a "YCA" fare for each covered city-pair and permit contractors to offer an additional restricted government contract fare designated a "MCA" fare. The contracts provide that if, after award, the contractor offers commercial fares lower than the contract fare, the government "may use" the lower fares in lieu of the contract fare "if otherwise eligible" and provided that selecting the lower fare does not alter the relative position of the contract carriers where progressive awards are made.

The above provisions must be viewed in conjunction with a regulation issued by GSA-- Federal Property Management Regulation Temporary Regulation (FPMR Temp. Reg.) A-22-- to implement the city-pairs contracts. /7/ Paragraph 8 of FPMR Temp. Reg. A-22, captioned "Procedures for Obtaining Service," provides generally that when a reservation for contract air service is requested, the fare basis shall be identified as "YCA" or "MCA," as appropriate, "and the contractor's ticket agent shall be instructed to apply the appropriate fare basis and contract fare." Para. 8(d). It further provides that when a city pair published in the Federal Travel Directory indicates that only one contract is awarded and the contractor subsequently offers a fare lower than its contract fare, "the ordering agency may elect to use the lower fare if qualifications for obtaining the lower fare are compatible with the agency's travel requirements." Para. 8(f). Paragraph 10 of the regulation provides that when progressive contracts are awarded for a city -pair to more than one contract carrier and a contract carrier offers the general public a fare lower than the contract fare, ordering agencies "may elect" to use the lower fare but only on the basis of specified cost comparisons. Para. 10(b).

The clear effect of these contractual and regulatory provisions is that the government is legally entitled to receive "YCA" or "MCA" city pair fares for which it has contracted, and government travelers are generally expected to request these fares. While the contract terms permit the government to use fares lower than the contract fare if the eligibility criteria are met, use of these fares is optional and must be requested by the government. Moreover, in some circumstances use of lower fares is subject to conditions and limitations under the contract and regulations, such as cost comparisons. Therefore, we do not believe that GSA has any basis to object to city-pair billings at the contract fares unless it can first establish that a lower fare was requested by the government in accordance with the city-pair contracts and FPMR Temp. Reg. A-22. With respect to travel not covered by the city-pairs contracts, we are aware of no specific statutory, regulatory, or contractual provisions that address the government's entitlements and none has been cited by the parties. Therefore, we conclude that the government's rights here are the same as those of any member of the public who does business with an air carrier. In this regard, the airlines contend-- and GSA does not contest-- that customers are basically liable to pay the fare selected for the service provided.

It remains to consider the burden of proof issue in a situation where GSA can establish that the government requested the fare its auditors consider applicable and met the stated criteria, but the carrier's failure to provide that fare was based on the unavailability of controlled-capacity seating.

GSA does not dispute the validity of controlled-capacity seating restrictions on discount fares and concedes that the government is not entitled to such a restricted fare if seats were not available at that fare. However, GSA argues that since only the carrier has the information necessary to establish the unavailability of controlled capacity seating, the carrier must assume the burden of proving this fact by some affirmative evidence. GSA appears willing to accept specific certifications from the carriers that controlled-capacity seating was unavailable on particular flights at any time from reservation to flight departure. GSA is not willing to assume the unavailability of seating based on assurances by the airlines that their reservation systems are reliable.

The airlines' main objection to GSA's position on this point is that they do not, and cannot as a practical matter, maintain information to prove after the fact in response to GSA audits that controlled-capacity seating was not available on past flights. The airlines also object to GSA's position that they must establish that such seating remained unavailable even after the reservation was made.

We believe that when the government has requested a fare and met all eligibility criteria it can ascertain, the carrier must accept the burden of proving its basis for rejecting that fare. In our view, this should be regarded as part of the carrier's general burden to justify its claim to a higher fare. Also, placing this burden on the carrier falls squarely within the rule of United States v. New York, New Haven and Hartford Railroad Co., supra, where the Court required the carrier to support its action in charging the government a rate higher than the rate requested. On the other hand, it is not clear on what basis a carrier could be charged with a continuing burden to establish that controlled-capacity seating remained unavailable after the time of fare selection; nor is it clear what practical consequences would follow from such an approach. For example, if seating later became available, how or why would government travelers be favored over other passengers? Therefore, in our view, the carrier need only provide evidence that controlled-capacity seats were unavailable at the time the fare was selected. We believe that it is both reasonable and practical for carriers to assume this burden.

The airlines and GSA should resolve their individual disputes on the basis of the foregoing conclusions. We recognize that the offsets taken by GSA amount to well over $100 million and that our disposition of the issues probably invalidates most of the offsets. Nevertheless, we see no way to avoid the conclusion that GSA's basic audit positions do not have adequate support in the applicable law and, in some respects, even run counter to provisions GSA has adopted in its city pairs contracts and regulations. We recommend that GSA either fundamentally alter its audit practices, or, in the alternative, revise its current contractual and regulatory approaches if it is convinced that they are resulting in excessive air travel costs to the government.

/1/ Continental, Delta, Eastern, Frontier, Midway, Northwest, Pan Am, Piedmont, Republic, Trans World, United, and USAIR, in conjunction with the Air Transport Association of America. The airlines are represented by counsel, Schnader, Harrison, Segal & Lewis.

/2/ The requirement for tariffs to be filed for foreign air transportation was not repealed, but the place of filing had been changed from the defunct CAB to the Department of Transportation, effective January 1, 1985. 49 U.S.C. App. Sec. 1551(b)(1)(B) and (b)(2) (1982).

/3/ We note that Congress, in eliminating the similar requirement for certain freight forwarders to file tariffs with the Interstate Commerce Commission (ICC), made no provision for exempting them from GSA's setoff authority under 31 U.S.C. Sec. 3726(b). See Surface Freight Forwarders Deregulation Act of 1986, Pub.L. No. 99-521, 100 Stat. 2993, 1986. Since the ICC was not abolished and other carriers continue to file tariffs with it, the removal of the filing requirement for the freight forwarders did not make a technical conforming amendment to 31 U.S.C. Sec. 3726 necessary.

/4/ The full pertinent language was as follows:

"... The term "overcharges" shall be deemed to mean charges for transportation services in excess of those applicable thereto under tariffs lawfully on file with the Interstate Commerce Commission, the Civil Aeronautics Board, the Federal Maritime Commission, and any State transportation regulatory agency, and charges in excess of those applicable thereto under rates, fares, and charges established pursuant to sections 10721 to 10724 of title 49 or other equivalent contract, arrangement, or exemption from regulation ... ." 31 U.S.C. Sec. 244 (Supp. IV 1980), previously 49 U.S.C. Sec. 66(a) (1976).

/5/ See Pub.L. No. 97-258, Sec. 4(a) Sept. 13, 1982, 96 Stat. 877, 1067, which recodified and enacted as positive law title 31 of the U.S. Code. Section 4(a) of Pub.L. No. 97-258 states that its purpose was to "restate, without substantive change, laws enacted before April 16, 1982, that were replaced ..." and that the restated sections "may not be construed as making a substantive change in the laws replaced." See also H.R. Rep. No. 651, 97th Cong., 2d Sess. 140 (1982); 1982 U.S. CODE CONG. AND ADMIN. NEWS 2034.

/6/ The description here is taken from the city-pairs contract provisions in effect from October 1, 1985, through September 30, 1986. Substantively identical contract provisions applied at all other times relevant to the disputes before us.

/7/ We refer here to the version of FPMR Temp. Reg. A-22 in effect from October 1, 1985, through September 30, 1986. Again, substantively identical provisions applied at all other times relevant to the instant disputes.