B-244564, Jan 17, 1992, 71 Comp.Gen. 155

B-244564: Jan 17, 1992

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Civil Service Committee on Governmental Affairs United States Senate Federally Funded Research and Development Centers (FFRDCs) are contractors of the United States. The government's policies on the establishment of FFRDCs were issued under the Office of Federal Procurement Policy's statutory authority to prescribe government wide procurement policies. The contractual relationship between the government and FFRDCs is reflected in legislation and cases involving FFRDCs. Certain agencies are statutorily required to consult with the Congress before sponsoring new FFRDCs. "Agents and instrumentalities of the United States" generally refers to parts of the federal government which are legally vested authorities to act on behalf of the United States or fulfill a statutory mission of the federal government.

B-244564, Jan 17, 1992, 71 Comp.Gen. 155

Miscellaneous Topics - Federal Administrative/Legislative Matters - Federal procurement regulations/laws - Authority - Federal research facilities - Establishment Honorable David Pryor Chairman, Subcommittee on Federal Services, Post Office, and Civil Service Committee on Governmental Affairs United States Senate Federally Funded Research and Development Centers (FFRDCs) are contractors of the United States. The government's policies on the establishment of FFRDCs were issued under the Office of Federal Procurement Policy's statutory authority to prescribe government wide procurement policies. Also, the contractual relationship between the government and FFRDCs is reflected in legislation and cases involving FFRDCs. Miscellaneous Topics - Federal Administrative/Legislative Matters - Agencies - Statutory restrictions - Applicability - Contract awards The provision of the Government Corporation Control Act stating that agencies may only establish or acquire corporations to act as agencies as specifically authorized by law (31 U.S.C. Sec. 9102) does not apply to agency contract awards to sponsor Federally Funded Research and Development Centers (FFRDCs). However, certain agencies are statutorily required to consult with the Congress before sponsoring new FFRDCs. Miscellaneous Topics - Federal Administrative/Legislative Matters - Government agents - Definition - Federal research facilities Federally Funded Research and Development Centers (FFRDCs) would generally not be considered "agents or instrumentalities of the United States." "Agents and instrumentalities of the United States" generally refers to parts of the federal government which are legally vested authorities to act on behalf of the United States or fulfill a statutory mission of the federal government. In contrast, FFRDCs perform limited duties as are specified in the contracts, and are prohibited from performing duties of a policy, decision-making, or managerial nature which are the responsibility of agency officials.

Mr. Chairman:

This responds to your June 12, 1991, request for our opinion on several questions regarding the authority of executive branch agencies to create Federally Funded Research and Development Centers (FFRDCs). In summary, you ask what law authorizes agencies to establish FFRDCs] whether the congressional approval requirement of the so-called "Government Corporation Control Act" applies to agency creation of new FFRDCs; and whether FFRDCs-- including the FFRDC which the Internal Revenue Service (IRS) plans to establish-- are agents or instrumentalities of the United States.

For the reasons stated below, we conclude that federal agencies are authorized to sponsor FFRDCs by virtue of their authority to award contracts. We also conclude that 31 U.S.C. Sec. 9102 (a provision of the "Government Corporation Control Act" stating that agencies may only establish or acquire corporations to act as agencies as specifically authorized by law) does not apply to agency contract awards for FFRDCs. However, certain agencies are statutorily required to consult with the Congress before sponsoring new FFRDCs, and we have enclosed draft legislation which would extend this requirement to all executive branch agencies. Finally, we conclude that FFRDCs, like other government contractors, generally are not agents or instrumentalities of the United States.

BACKGROUND

Office of Federal Procurement Policy (OFPP) Letter 84-1, 49 Fed. Reg. 14,462 (1984), and part 35 of the Federal Acquisition Regulation (FAR), 48 C.F.R. Sec. 35.017 to 35.017-7 (1990), set forth the federal government's policy regarding the establishment of FFRDCs. FFRDCs are sponsored by a federal agency and operated and administered by universities, nonprofit organizations, or industrial firms. 49 Fed. Reg. at 14,464. FFRDCs are established to meet some special long-term research and development need of an agency that can not be met as effectively by existing government or private resources. Id.

In accordance with the requirements of the FAR, the IRS announced that it intends to establish an FFRDC to conduct research and advise the IRS on technical aspects of the IRS' Tax Systems Modernization. E.g., 56 Fed. Reg. 31,124 (1991). The IRS' fiscal year 1991 appropriation for information systems made up to $15 million available until expended for establishing an FFRDC. Pub.L. No. 101-509, 104 Stat. 1389, 1395 (1990).

DISCUSSION

Authority to Establish FFRDCs

You first ask whether executive agencies have statutory authority to establish FFRDCs. Although FFRDCs have closer relationships with federal agencies than are typically found in the relationships between federal agencies and government contractors, it is well settled that FFRDCs are contractors of the United States. This contractual relationship is reflected in legislation /1/ and cases involving FFRDCs. /2/

Perhaps most importantly, OFPP policy letter 84-1, which sets out the government's policies on the establishment of FFRDCs, was issued under the OFPP's statutory authority to prescribe governmentwide procurement policies. 49 Fed.Reg. at 14,464. Thus, executive agencies have the authority to sponsor FFRDCs by virtue of their statutory authority to award contracts.

Applicability of the "Government Corporation Control Act" to FFRDCs You ask whether the "Government Corporation Control Act" requires agencies to obtain specific statutory authorization to establish an FFRDC. The Act provides that "an agency may establish or acquire a corporation to act as an agency only by or under a law of the United States specifically authorizing the action." 31 U.S.C. Sec. 9102 (1988). As discussed above, FFRDCs are contractors of the federal government. The contract which an agency awards an FFRDC does not make the FFRDC a corporation established or acquired to act as an agency.

In addition, we concluded in B-130515, Aug. 11, 1970, that the Act did not preclude the Office of Economic Opportunity (OEO) from awarding a grant to a private nonprofit corporation specifically created for purposes of carrying out OEO programs. In the context of the applicability of the Act, we see no distinction between awarding grants or contracts. Therefore, we conclude that 31 U.S.C. Sec. 9102 does not apply to an agency sponsoring an FFRDC through a government contract.

You express concern about an "absence of accountability to the taxpayers" if federal agencies may sponsor FFRDCs without obtaining congressional approval. As previously mentioned, the FFRDC the IRS plans to sponsor is an example where the agency received specific congressional approval to sponsor an FFRDC in an appropriations act. More generally, Congress provided for increased oversight in 1986 by enacting legislation which requires the Secretaries of Defense, Transportation, and the military departments, as well as the Administrator of National Aeronautics and Space Administration (NASA), to notify the Congress 60 days before obligating or expending appropriations for operating a newly created FFRDC. 10 U.S.C. Sec. 2367 (1982). Since there are existing processes for congressional oversight or "accountability" of agency plans for new FFRDCs, we have enclosed, in response to your request for draft legislation enhancing accountability over FFRDCs, a draft bill which would extend the type of requirement contained in 10 U.S.C. Sec. 2367 to all executive branch agencies.

Status of FFRDCs as Agents or Instrumentalities of the United States

Finally, you ask whether FFRDCs in general, and the IRS planned FFRDC in particular, act as agents or instrumentalities of the United States. general, "agents or instrumentalities of the United States" are component parts of the federal government which are vested, by law, with the authority to act on behalf of the United States, or to fulfill some statutory mission of the federal government. However, FFRDCs and other contractors perform specific and limited duties as are specified in their contracts rather than acting under some general legal authority to perform a governmental function. Further, agencies are prohibited from awarding FFRDC contracts to perform work of a policy, decision-making or managerial nature which is the direct responsibility of agency officials. Fed.Reg. at 14,464 and 14,466; OMB Circ. No. A-120, Jan. 4, 1988. this context, FFRDCs (like other federal government contractors) would generally not be considered agents or instrumentalities of the United States. /3/

CONCLUSION

FFRDCs provide special long-term research efforts for federal agencies. FFRDCs which are established and operated as provided in OFPP letter 84-1 are lawfully acting as contractors of the United States. Section 9102 of title 31, United States Code, does not require agencies to obtain specific statutory approval to award FFRDC contracts. Finally, FFRDCs generally would not be viewed as agents or instrumentalities of the United States.

We hope that this serves the purposes of your request.

/1/ E.g., Pub.L. No. 100-180, 227, 101 Stat. 1057 (1987)(authorizing the Department of Defense to "enter into a contract to provide for the establishment and operation of an FFRDC ... "); 10 U.S.C. Sec. 2304(b)(1)(C) and (c)(3)(B) (1988)(Competition In Contracting Act references to contracts awarded to FFRDCs).

/2/ E.g., Massachusetts Institute of Technology, Armed Services Board of Contract Appeals No. 23,079, Oct. 20,1981, reprinted in 81-2 B.C.A. Sec. 15,451 (CCH 1981)(deciding a dispute over allowable costs at Lincoln Laboratory, an FFRDC run by MIT, on the basis of the contract between the government and MIT).

/3/ The task order work requires a relatively small number of highly skilled and diversely experienced engineering and technical personnel to provide specialized technical services. The engineers and technicians test the effectiveness of Navy and foreign weapons against foreign and Navy aircraft using actual equipment and simulators. The weapons include assorted guns, missiles, and bombs while the target aircraft include numerous types of airframes and aircraft engines that arrive at China Lake in all states of repair. The technical personnel plan tests using aircraft and military equipment that they have refurbished to a useable state, install sensors to measure weapon effectiveness, conduct tests, and evaluate and report on the results. They also perform aerodynamic studies of weapon systems and conduct live fire test programs. These activities require expertise in fabrication, maintenance, modification, repair, and testing of simulators and equipment. Since typical delivery orders are of short duration (months), the contractor must be able to provide short term expertise.