B-238181, Jan 9, 1991

B-238181, Jan 9, 1991

APPROPRIATIONS/FINANCIAL MANAGEMENT - Obligation - Payments - Estimates - Communications systems/services DIGEST: General Services Administration (GSA) is authorized by 40 U.S.C. Sec. 757 (1988) to recover cost of Federal Telecommunications System (FTS) services and facilities through charges based on statistical sampling formula that recovers approximate cost of providing FTS services to individual user agencies. 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 National Trust for Historic Preservation for FTS Use and Termination Costs:

This decision responds to a request submitted by Raymond A. Fontaine, Comptroller of the General Services Administration (GSA), regarding the National Trust for Historic Preservation's (NTHP) refusal to pay GSA's billings for NTHP's usage of, and withdrawal 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. 65 (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 (1949), as added by Pub. L. No. 87-847, 76 Stat. 1117 (1964) (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 service. 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 66 -69. 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.

Though not at issue in 69 Comp.Gen. 65, 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 Federal Telecommunications Funds 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. 101(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. 99-347, 99th Cong., 2d 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 70 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 be 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.

ANALYSIS

GSA billed NTHP $68,370 for the second quarter of fiscal year 1987 (January 1 through March 31) usage and $5,095.49 for usage during the third quarter from April 1 through April 10, the date of its withdrawal from FTS. NTHP paid $45,102.00 against this billing, leaving an unpaid balance of $28,363.49. NTHP has refused to pay because GSA used prior quarter usage data to compute its billings. As pointed out above, we have previously concluded that FTS billings, computed by reference to a statistical sampling of prior quarter usage, are reasonable. Therefore, agencies may not withhold payment either prior to or upon withdrawal from FTS on the basis of GSA's statistical sampling billing practice.

With regard to the $34,763.89 in termination costs assessed NTHP by GSA, the measure of costs associated with large scale withdrawals is computed using a GSA generated formula reflecting its experience handling the first large scale withdrawal from FTS by the Postal Service and has been used to compute termination costs for other large scale withdrawals from FTS. approved this approach for assessing termination costs as a reasonable approximation of such costs authorized under 40 U.S.C. Sec. 757. Comp.Gen. at 69-71.

Consequently, we do not consider NTHP's objection to the charge, namely, that it does not reflect actual incremental costs associated with NTHP's withdrawal from the system, an adequate basis for withholding payment. our opinion, GSA is not required to use actual incremental costs when assessing termination costs. Furthermore, the fact that NTHP would have withdrawn from FTS in any event because it did not plan to participate in FTS 2000 when it became operational does not provide a basis for withholding valid termination charges assessed for its voluntary withdrawal from FTS prior to that time.

While the NTHP views the 5-month base period used by GSA in its formula for computing termination costs (the period GSA indicates is an average for all downsizing operations) as excessive since NTHP is a small user, this does not serve to affect the legal propriety of GSA's use of a formula to compute the approximate costs. GSA is not required by statute to put in place a system geared to compute actual incremental costs, and cannot be expected to do so for individual agencies merely because it may work occasionally to one agency's disadvantage or another agency's advantage.

Finally, while the element of the formula relating to administrative costs may seem excessive to NTHP, nothing has been submitted demonstrating that the 20 percent figure based on GSA's experience in terminating agency service is unreasonable. This figure represents an adjustment to cover costs associated with updating the FTS sampling database, billing, and to compensate for reduced network efficiency. GSA officials have informally advised this Office that the primary reason for the size of the administrative cost element is the fact that GSA's procedure for downsizing the network and determining termination costs is labor intensive. Since GSA has employed the formula to recover the costs incurred by the FT Fund to pay only the operating costs incurred by the FT Fund, there is no unauthorized augmentation of the FT Fund as NTHP has alluded to. Consequently, there is no basis to hold that GSA should recompute costs either by using some other method or by using some other figure to reflect administrative costs.

Therefore, we find no basis for NTHP to withhold payment of GSA billings for FTS usage and termination costs.

/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.