B-237250, Apr 9, 1990

B-237250, Apr 9, 1990

DIGEST

Date: April 9, 1990:

To: Director, NSIAD, Security and International Relations Issues-- Joseph E. Kelley From: Associate General Counsel-- Robert H. Hunter Subject: Disposition of Equipment Provided to the Nicaraguan Resistance under AID Contracts and Grants (Code 463783). (B-237240)

This is in response to inquiries from your staff concerning the proper disposition of equipment purchased with U.S. funds provided by the Agency for International Development (AID) to aid the Nicaraguan Resistance under Public Law Nos. 100-276, 100-463, and 101-14. In its implementation of the program, AID entered into several arrangements with various organizations. The equipment in question was purchased under two contracts, a cooperative agreement, and a support grant.

We conclude that the two contract agreements provide that title to equipment procured is vested in the U. S. government and that the equipment should be turned over to AID on termination or completion of the contracts, or disposed of in accordance with AID's instructions. Pursuant to the grant and cooperative agreement, however, all property purchased with U. S. funds belongs to the recipient, subject to any conditions set out in the agreements. These two agreements limit the recipients' authority to dispose of nonexpendable equipment that has an appraised value of $1,000 or more.

Background: Public Law 100-276, 102 Stat. 62, Apt. l, 1988, authorized AID to initiate a program of nonlethal assistance, known as "Phase 1," to provide food, clothing, shelter, medical services and supplies, communications equipment, and payment for such goods and services to the Nicaraguan Resistance. Public Law 100-276 also authorized the President to transfer $17.7 million to AID to provide medical care and other relief for children victimized by the civil war in Nicaragua. Subsequently, Public Law 100-463, 102 Stat. 2270, Oct. 1, 1988, and Public Law 101-14, 103 Stat. 37, Apr. 18, 1989, authorized Phases II and III, which expanded the assistance to include nonmilitary training programs. These programs were to provide training in health, sanitation, and the" treatment of civilians in accordance with internationally accepted standards of human rights.

In its implementation of the assistance program, AID contracted with Creative Associates International, Inc. and International Medical Corporation, two U. S. firms, to provide various training programs and health care support for the Nicaraguan Resistance. AID also entered into a cooperative agreement with the Pan American Defense Foundation (PADF) to provide medical care and other relief to Nicaraguan children. To further nonmilitary training activities, AID extended grants to the Nicaraguan Association for Human Rights (ANPDH).

Analysis: In the event that the current AID program of nonlethal aid to the Nicaraguan Resistance is discontinued, proper disposition of the equipment acquired under the program is controlled by relevant provisions in the assistance instruments. The authorizing statutes are silent on the issue of disposition.

Through contracts with Creative Associates International, Inc. and the International Medical Corporation, AID furnished nonmilitary training and health care support to the Resistance fighters and their families in Honduras. The two contracts provided, in Section E. l, that all items of equipment procured by the contractors must be accepted initially by the AID project officer in Honduras. Upon acceptance, according to Section B.6 of the contracts, title to such property vests in the U. S. government. The contracts further specify, by incorporating an AID regulation, AIDAR 752.245-71, /1/ that all nonexpendable property, /2/ title to which is reserved to the U.S. government:

"shall be under the custody and control of Contractor until the owner of title directs otherwise, or completion of work under this contract or its termination, at which time custody and control shall be turned over to the owner of title or disposed of in accordance with its instructions."

Accordingly, under the two assistance contracts, AID is entitled either to take possession of equipment purchased with U.S. funds or to issue instructions to the contractor as to its disposition.

Under the assistance instruments used by AID, the PADF, and ANPDH, the recipients received title to property financed by AID. These agreements provided that title in the grantee is subject to the "Standard Provision entitled 'Title to and Use of Property (Grantee Title)., " See Section H, p. 6 of PADF grant; Section G, p. 8 of ANPDH agreement.

The Standard Provisions attached to the PADF agreement submitted to us require the PADF to use the property in the program for which it was acquired so long as needed, whether or not the program continues to be supported by federal funds. When the equipment is no longer needed for the original program, PADF is required to use the equipment in connection with its other activities sponsored by the U. S. government in the following order of priority:

1) AID-sponsored activities;

2) Activities sponsored by other federal agencies.

The agreement does not specify any particular disposition in the event that the PADF is not engaged in any other U.S.-- sponsored activity. light of the fact that the agreement provides that title to all property procured with program funds is held in the name of PADF, and because PADF is under no general duty to transfer such property to AID, it appears that PADF may dispose of the property without AID authorization if PADF is not engaged in other U.S. sponsored activities. For items of equipment costing less than $1,000, the agreement provides that PADF may use the property for other activities without reimbursement to the U.S. government or sell the property and retain the proceeds.

The grant to the ANPDH is subject to the standard provision governing title to and use of Property set forth in AID Handbook 13 (Appendix 4D,. p. 67), according to AID officials. This provision requires the grantee, within 30 calendar days after the end of the grant, to:

"provide a list to the grant officer of each item that has an appraised value of $1,000 or more, with a detailed proposal of what the grantee intends to do with that property. If the grant officer does not respond within 120 calendar days, the grantee may proceed with the disposition of the property. However, if the grantee uses the property for purposes other than those of the grant or sells or leases the property, AID shall be reimbursed for its share of the property unless the grant officer authorizes AID's share of the income from selling or leasing the property to be used as program income. This share is based upon the percentage of AID's contribution to the grantee's program. If AID paid 100 percent of the grantee's costs, then AID would receive 100 percent of the selling cost less a nominal selling fee of $100."

The standard provision also provides that ANPDH may dispose of items of equipment valued at less than $1,00 0 without AID authorization once the grant has terminated.

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/1/ 48 C.F.R. Sec. 752.245-71 (1989).

/2/ AIDAR 752.245-71 defines nonexpendable property as property which is complete in itself, does not lose its identity, has an expected service life of two years or more and a unit cost of $500 or more.