B-27341, AUGUST 13, 1942, 22 COMP. GEN. 140

B-27341: Aug 13, 1942

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OR SIMILAR BODY IS NOT REQUIRED TO BE IN SPECIFIC TERMS. OF A " BOARD OF ARBITRATORS" TO FIX THE AMOUNTS PAYABLE UNDER THE RENEWAL IS NOT OBJECTIONABLE EITHER AS BEING WITHIN THE STATUTORY PROHIBITION AGAINST PAYMENT OF EXPENSES OF BOARDS. 1942: THERE WAS RECEIVED YOUR LETTER OF JULY 10. THIS AUTHORITY IS CONTAINED IN SECTION 3 OF THE ACT AS FOLLOWS: "THE ADMINISTRATOR IS EMPOWERED TO LEASE. THE ABOVE ACT WAS DESIGNED PRIMARILY TO ENABLE THE ADMINISTRATOR TO LEASE SPACE OR PROPERTY AT THE WASHINGTON NATIONAL AIRPORT AT THE MOST ADVANTAGEOUS TERMS TO THE GOVERNMENT AND TO GIVE THE ADMINISTRATOR A BROAD DISCRETION TO DETERMINE THE TERMS UPON WHICH THE LEASES SHOULD BE MADE. PURSUANT TO THIS AUTHORITY THE ADMINISTRATOR OF CIVIL AERONAUTICS IS ABOUT TO ENTER INTO A LEASE FOR SPACE AT THE AIRPORT FOR THE PURPOSE OF OPERATING AN ^OUTSIDE EMPLOYEES' CAFETERIA FOR PERSONS EMPLOYED AT THE AIRPORT.

B-27341, AUGUST 13, 1942, 22 COMP. GEN. 140

COMMISSIONS, BOARDS, ETC.; ARBITRATORS THE AUTHORITY OF LAW CONTEMPLATED BY SECTION 9 OF THE ACT OF MARCH 4, 1909, AS A CONDITION TO PAYMENT FROM PUBLIC FUNDS OF THE COMPENSATION OR EXPENSES OF A COMMISSION, BOARD, OR SIMILAR BODY IS NOT REQUIRED TO BE IN SPECIFIC TERMS, IT BEING SUFFICIENT IF THE CREATION OF THE COMMISSION, OR SIMILAR BODY, BE AUTHORIZED BY LAW IN A GENERAL WAY. WHERE A PROPOSED LEASE OF A CONCESSION AT THE WASHINGTON NATIONAL AIRPORT, TO BE ENTERED INTO UNDER STATUTORY AUTHORITY TO LEASE SPACE THEREAT UPON SUCH TERMS AS MAY BE DEEMED PROPER, GRANTS THE CONCESSIONAIRE THE OPTION OF RENEWAL ON TERMS NO LESS FAVORABLE TO THE GOVERNMENT THAN FOR THE ORIGINAL PERIOD, A PROVISION IN THE LEASE FOR THE APPOINTMENT, IN CASE OF DISAGREEMENT, OF A " BOARD OF ARBITRATORS" TO FIX THE AMOUNTS PAYABLE UNDER THE RENEWAL IS NOT OBJECTIONABLE EITHER AS BEING WITHIN THE STATUTORY PROHIBITION AGAINST PAYMENT OF EXPENSES OF BOARDS, COMMISSIONS, ETC., UNLESS AUTHORIZED BY LAW OR AS BEING AN UNAUTHORIZED SUBMISSION TO ARBITRATION OF THE GOVERNMENT'S RIGHTS AND OBLIGATIONS.

COMPTROLLER GENERAL WARREN TO THE SECRETARY OF COMMERCE, AUGUST 13, 1942:

THERE WAS RECEIVED YOUR LETTER OF JULY 10, 1942, AS FOLLOWS:

THE ACT OF JUNE 29, 1940 (54 STAT. 686-688), PROVIDING FOR THE ADMINISTRATION OF THE WASHINGTON NATIONAL AIRPORT, AND FOR OTHER PURPOSES, EMPOWERS THE ADMINISTRATOR OF THE CIVIL AERONAUTICS AUTHORITY (NOW THE ADMINISTRATOR OF CIVIL AERONAUTICS, IN THIS DEPARTMENT, REORG. PLAN NO. IV, SEC. 7, EFFECTIVE JUNE 30, 1940) TO LEASE, UPON SUCH TERMS AS HE MAY DEEM PROPER, SPACE OR PROPERTY AT THE AIRPORT FOR PURPOSES ESSENTIAL OR APPROPRIATE TO ITS OPERATION. THIS AUTHORITY IS CONTAINED IN SECTION 3 OF THE ACT AS FOLLOWS:

"THE ADMINISTRATOR IS EMPOWERED TO LEASE, UPON SUCH TERMS AS HE MAY DEEM PROPER, SPACE OR PROPERTY WITHIN OR UPON THE AIRPORT FOR PURPOSES ESSENTIAL OR APPROPRIATE TO THE OPERATION OF THE AIRPORT.'

THE ABOVE ACT WAS DESIGNED PRIMARILY TO ENABLE THE ADMINISTRATOR TO LEASE SPACE OR PROPERTY AT THE WASHINGTON NATIONAL AIRPORT AT THE MOST ADVANTAGEOUS TERMS TO THE GOVERNMENT AND TO GIVE THE ADMINISTRATOR A BROAD DISCRETION TO DETERMINE THE TERMS UPON WHICH THE LEASES SHOULD BE MADE. (SEE HOUSE REPORT NO. 2507, 76TH CONG., 3D SESSION).

PURSUANT TO THIS AUTHORITY THE ADMINISTRATOR OF CIVIL AERONAUTICS IS ABOUT TO ENTER INTO A LEASE FOR SPACE AT THE AIRPORT FOR THE PURPOSE OF OPERATING AN ^OUTSIDE EMPLOYEES' CAFETERIA FOR PERSONS EMPLOYED AT THE AIRPORT. THIS AGREEMENT WILL BE WITH THE COMPANY NOW OPERATING THE RESTAURANT CONCESSION AT THE AIRPORT PURSUANT TO A LEASE ENTERED INTO WITH THE ADMINISTRATOR UNDER DATE OF FEBRUARY 19, 1941. IT IS PROPOSED TO INCLUDE IN THIS AGREEMENT, IN THE ARTICLE PROVIDING FOR THE RENEWAL THEREOF, AN ARBITRATION PROVISION TO THE EFFECT THAT IN THE EVENT THE COMPANY AND THE GOVERNMENT ARE UNABLE, PRIOR TO THE BEGINNING OF ANY RENEWAL TERM, MUTUALLY TO AGREE UPON THE CHARGES AND FEES FOR SUCH RENEWAL TERM, THE AMOUNT OF SUCH CHARGES AND FEES SHALL BE DETERMINED AND FIXED BY A BOARD OF ARBITRATORS, CONSISTING OF THREE MEMBERS, ONE OF WHOM SHALL BE APPOINTED BY THE COMPANY, ONE BY THE GOVERNMENT, AND THE THIRD BY THE TWO OTHER MEMBERS. THIS PARTICULAR ARTICLE OF THE PROPOSED LEASE IS HERE STATED IN FULL:

ARTICLE III

"THE COMPANY SHALL HAVE AND EXERCISE THE RIGHTS, POWERS, AND PRIVILEGES SET FORTH HEREIN FOR A PERIOD OF FIVE (5) YEARS BEGINNING THE ------------ -----DAY OF JULY, 1942, WITH AN OPTION FOR A RENEWAL OF THIS AGREEMENT FOR AN ADDITIONAL PERIOD OF FIVE (5) YEARS AT THE END OF SUCH PERIOD UNDER THE SAME CONDITIONS AS THE ORIGINAL TERM HEREOF, EXCEPT THAT THE PERCENTAGE OF GROSS RECEIPTS WHICH THE COMPANY AGREES TO PAY THE GOVERNMENT AND ALL OTHER CHARGES AND FEES PROVIDED FOR HEREIN SHALL BE FIXED BY MUTUAL AGREEMENT GETWEEN THE PARTIES PRIOR TO THE COMMENCEMENT OF THE RENEWAL TERM, WHICH PERCENTAGE OF GROSS RECEIPTS AND CHARGES AND FEES SHALL IN NO EVENT BE LESS FAVORABLE TO THE GOVERNMENT THAN THOSE PROVIDED FOR THE ORIGINAL TERM: PROVIDED, THAT THE COMPANY SHALL NOTIFY THE GOVERNMENT IN WRITING OF THE INTENTION SO TO RENEW THIS AGREEMENT NOT LESS THAN SIX (6) MONTHS PRIOR TO THE END OF THE FIRST FIVE (5) YEAR PERIOD. IN THE EVENT THE COMPANY AND THE GOVERNMENT ARE UNABLE, PRIOR TO THE BEGINNING OF SAID RENEWAL TERM, MUTUALLY TO AGREE UPON THE PERCENTAGE OF GROSS RECEIPTS AND CHARGES AND FEES FOR SUCH RENEWAL TERM, THE AMOUNT THEREOF SHALL BE DETERMINED AND FIXED BY A BOARD OF ARBITRATORS, CONSISTING OF THREE MEMBERS, ONE OF WHICH SHALL BE APPOINTED BY THE COMPANY, ONE BY THE GOVERNMENT, AND THE THIRD BY THE OTHER TWO MEMBERS. PENDING THE DECISION OF THE BOARD OF ARBITRATORS, WHICH DECISION SHALL BE FINAL, THE COMPANY SHALL CONTINUE TO PAY THE PERCENTAGE OF GROSS RECEIPTS AND CHARGES AND FEES SPECIFIED FOR THE ORIGINAL TERM.'

IN CONNECTION WITH THE FOREGOING ARTICLE, IT SHOULD BE POINTED OUT THAT THE USE OF THE ABOVE QUOTED ARBITRATION CLAUSE IS NECESSARY FOR ADMINISTRATIVE REASONS. IN ORDER TO INTEREST OUR RESTAURANT CONCESSIONAIRE IN THE OPERATION OF THIS ADDITIONAL CONCESSION, IT IS NECESSARY TO ASSURE THAT COMPANY OF A TERM OF SUFFICIENT LENGTH TO PERMIT AMORTIZATION OF THE ORIGINAL COST OF INSTALLATION OF EQUIPMENT. IT HAS BEEN DETERMINED THAT A TERM OF TEN YEARS IS NECESSARY TO PROVIDE SUCH AMORTIZATION. HOWEVER, THE CIVIL AERONAUTICS ADMINISTRATION IS UNDER DIRECTIVE FROM CONGRESS TO OBTAIN THE MOST ADVANTAGEOUS TERMS TO THE GOVERNMENT FOR THE OPERATION OF THESE CONCESSIONS. FOR THAT REASON IT IS NOT DEEMED ADVISABLE TO LET THE CONCESSION FOR THE FULL TEN YEARS AT A FIXED CHARGE. CHANGING CONDITIONS AT THE AIRPORT MAY MAKE IT ADVISABLE TO ESTABLISH OTHER CHARGES FOR THE OPERATION OF THE CONCESSION IN QUESTION. TO ACCOMPLISH THIS PURPOSE IT IS DESIRED TO USE THE ABOVE-QUOTED ARBITRATION CLAUSE WHICH PERMITS THE GOVERNMENT TO ADJUST THE CHARGE FOR THE CONCESSION AT THE END OF THE FIRST FIVE YEARS OF THE NECESSARY TEN- YEAR PERIOD.

WHILE THE STATUTORY AUTHORITY GIVEN THE ADMINISTRATOR TO ENTER INTO LEASES FOR SPACE AT THIS AIRPORT, UPON SUCH TERMS AS HE MAY DEEM PROPER, IS VERY BROAD AND WOULD APPEAR TO AUTHORIZE THE INCLUSION IN THE PROPOSED LEASE OF THE ARBITRATION CLAUSE ABOVE QUOTED, MY ATTENTION HAS BEEN DIRECTED TO YOUR DECISIONS IN 19 COMP. GEN. 700 AND 8 COMP. GEN. 96, IN WHICH YOU HELD THAT THERE WAS NO AUTHORITY TO ESTABLISH BOARDS OF ARBITRATORS OR TO INCLUDE PROVISIONS FOR SUCH BOARDS IN THE LEASES CONSIDERED BY YOU IN THOSE DECISIONS. ON THE OTHER HAND, IN YOUR MANUSCRIPT DECISION B-11756 UNDER DATE OF AUGUST 16, 1940, TO THE SECRETARY OF WAR YOU APPROVED THE INCLUSION OF A PROVISION FOR ARBITRATION IN THE WAR DEPARTMENT CONTRACTS REFERRED TO THEREIN.

YOUR DECISION IS ACCORDINGLY REQUESTED AS TO WHETHER THE ADMINISTRATOR OF CIVIL AERONAUTICS IS AUTHORIZED TO INCLUDE THE ABOVE QUOTED PROVISION FOR ARBITRATION IN THE PROPOSED LEASE OF SPACE FOR THE OUTSIDE EMPLOYEES' CAFETERIA ABOVE REFERRED TO.

THE DECISIONS, 19 COMP. GEN. 700 AND 8 COMP. GEN. 96, TO WHICH YOU REFER, AS WELL AS OTHERS OF LIKE IMPORT, APPEAR TO HAVE BEEN BASED LARGELY ON THE PROHIBITION CONTAINED IN SECTION 9 OF THE ACT OF MARCH 4, 1909, 35 STAT. 1027, 31 U.S.C. 673, TOGETHER WITH THE PROPOSITION THAT THERE IS NO GENERAL AUTHORITY OF LAW FOR THE DETERMINATION OF DISPUTES INVOLVING THE RIGHTS AND OBLIGATIONS OF THE GOVERNMENT EXCEPT BY THE COURTS AND ADMINISTRATIVE AGENCIES ON WHICH SUCH DUTIES DEVOLVE PURSUANT TO STATUTE. SECTION 9 OF THE ACT OF MARCH 4, 1909, PROVIDES:

NO PART OF THE PUBLIC MONEYS, OR OF ANY APPROPRIATION MADE BY CONGRESS, SHALL BE USED FOR THE PAYMENT OF COMPENSATION OR EXPENSES OF ANY COMMISSION, COUNCIL, BOARD, OR OTHER SIMILAR BODY, OR ANY MEMBERS THEREOF, OR FOR EXPENSES IN CONNECTION WITH ANY WORK OR THE RESULTS OF ANY WORK OR ACTION OF ANY COMMISSION, COUNCIL, BOARD, OR OTHER SIMILAR BODY, UNLESS THE CREATION OF THE SAME SHALL BE OR SHALL HAVE BEEN AUTHORIZED BY LAW; NOR SHALL THERE BE EMPLOYED BY DETAIL, HEREAFTER OR HERETOFORE MADE, OR OTHERWISE PERSONAL SERVICES FROM ANY EXECUTIVE DEPARTMENT OR OTHER GOVERNMENT ESTABLISHMENT IN CONNECTION WITH ANY SUCH COMMISSION, COUNCIL, BOARD, OR OTHER SIMILAR BODY. THE CONTEMPORANEOUS INTERPRETATION OF THIS SECTION WAS THAT THE WORDS "AUTHORIZED BY LAW" WERE NOT INTENDED TO MEAN THAT THE CREATION OF THE COMMISSION, COUNCIL, BOARD, OR OTHER SIMILAR BODY MUST NECESSARILY BE EXPRESSLY AND SPECIFICALLY AUTHORIZED BY STATUTE. COMP. DEC. 278; ID. 422; 27 OP. ATTY. GEN. 301; ID. 308; ID. 406; ID. 432; ID. 459. IN HIS OPINION OF JUNE 26, 1909, 27 OP. ATTY. GEN. 432, CONCERNING THE STATUS IN THIS RESPECT OF THE " NIAGARA FALLS COMMITTEE OF LANDSCAPE ARCHITECTS" WHICH, THOUGH NOT SPECIFICALLY AUTHORIZED BY STATUTE, HAD BEEN APPOINTED BY THE SECRETARY OF WAR IN CONNECTION WITH CERTAIN DUTIES IMPOSED ON HIM BY THE ACT OF JUNE 29, 1906, 34 STAT. 626, AS TO THE USE OF THE WATERS OF THE NIAGARA RIVER, THE ATTORNEY GENERAL REVIEWED THE LEGISLATIVE HISTORY OF SECTION 9 OF THE ACT OF MARCH 4, 1909, WHICH THEN JUST RECENTLY HAD BEEN ENACTED. HE POINTED OUT THAT AS ORIGINALLY OFFERED IN THE HOUSE AS AN AMENDMENT AND SEPARATE SECTION OF THE BILL THE LANGUAGE FORBADE THE USE OF PUBLIC MONEY FOR THE PAYMENT OF THE COMPENSATION OR EXPENSES OF ANY COMMISSION, ETC., "UNLESS THE CREATION OF THE SAME SHALL HAVE BEEN AUTHORIZED BY CONGRESS; " THAT THE MEMBER OFFERING THE AMENDMENT HAD SUBSEQUENTLY, ON THE FLOOR OF THE HOUSE, CHANGED THE LANGUAGE TO MAKE IT READ "UNLESS THE CREATION OF THE SAME SHALL HAVE BEEN IN SPECIFIC TERMS AUTHORIZED BY CONGRESS; " BUT LATER WITHDREW THE WORDS "IN SPECIFIC TERMS," AND THEN, BEING ASKED WHAT HE MEANT BY "AUTHORIZED BY CONGRESS," HE SAID THAT HE MEANT "AUTHORIZED BY LAW" AND MODIFIED THE PROVISION SO THAT IT SHOULD READ "AUTHORIZED BY LAW," WHICH IS THE FORM IN WHICH IT FINALLY PASSED. IN THE LIGHT OF THIS LEGISLATIVE HISTORY, AMONG OTHER CONSIDERATIONS, THE ATTORNEY GENERAL CONCLUDED "THAT CONGRESS DID NOT INTEND TO REQUIRE THAT THE CREATION OF THE COMMISSIONS, ETC., MENTIONED SHOULD BE SPECIFICALLY AUTHORIZED BY A LAW OF THE UNITED STATES, BUT THAT IT WOULD BE SUFFICIENT IF THEIR APPOINTMENT WERE AUTHORIZED IN A GENERAL WAY BY LAW," AND THAT THE ACT OF JUNE 29, 1906, AFFORDED AMPLE AUTHORITY FOR THE APPOINTMENT OF THE SO- CALLED " NIAGARA FALLS COMMITTEE OF LANDSCAPE ARCHITECTS.' IN DECISION OF NOVEMBER 2, 1909, 16 COMP. DEC. 278, THE COMPTROLLER OF THE TREASURY QUOTED FROM THE SAID OPINION OF THE ATTORNEY GENERAL AND AGREED WITH ITS CONCLUSIONS IN DECIDING THAT THE COMPENSATION AND EXPENSES OF THE MEMBERS OF THE SAID NIAGARA FALLS COMMITTEE OF LANDSCAPE ARCHITECTS WERE LEGALLY PAYABLE NOTWITHSTANDING SECTION 9 OF THE ACT OF MARCH 4, 1909. SEE, ALSO, 16 COMP. DEC. 422. THE LIMITATIONS ON THIS PRINCIPLE WERE INDICATED IN DECISION OF MARCH 18, 1914, 20 COMP. DEC. 643, WHERE IT WAS HELD THAT THERE WAS NO GENERAL AUTHORITY OF LAW FOR THE CREATION OF A SUPPLEMENTARY COMMISSION TO PERFORM CERTAIN DUTIES IMPOSED ON THE INTERNATIONAL BOUNDARY COMMISSION AND, HENCE, THAT PAYMENT OF THE SALARIES AND EXPENSES OF THE MEMBERS OF SUCH SUPPLEMENTARY COMMISSION WAS PROHIBITED BY SECTION 9 OF THE ACT OF MARCH 4, 1909. SUBSEQUENT DECISIONS APPLYING A MORE STRICT RULE ON THE BASIS THAT THE CREATION OF COMMISSIONS, BOARDS, AND SIMILAR BODIES MUST BE SPECIFICALLY AUTHORIZED BY STATUTE MAY NOT HAVE TAKEN COGNIZANCE OF THE EARLIER HISTORY OF THE MATTER. HOWEVER, IN DECISION OF JUNE 22, 1932, 11 COMP. GEN. 495, HOLDING THERE WAS NO AUTHORITY OF LAW FOR THE APPOINTMENT OF AN "ARCHITECTURAL COMPETITION JURY TO SELECT DESIGN FOR THE FEDERAL JAIL AT SANDSTONE, MINN., " IT WAS SAID, AFTER QUOTING SECTION 9 OF THE ACT OF MARCH 4, 1909:

THERE IS NO DISAGREEMENT WITH THE CONTENTION OF THE ACTING DIRECTOR, BUREAU OF PRISONS, TO THE EFFECT THAT A COMMISSION, BOARD, ETC., TO BE "AUTHORIZED BY LAW" DOES NOT NECESSARILY REQUIRE THAT ITS CREATION BE SPECIFICALLY PROVIDED FOR BY A STATUTE. 16 COMP. DEC. 278; ID. 424; 27 OP. ATTY. GEN. 432. HOWEVER, THERE MUST BE SUFFICIENT AUTHORITY IN GENERAL OR SPECIFIC TERMS FOR THE CREATION OF A COMMISSION, BOARD, ETC., SUCH AS AN AUTHORIZATION FOR WORK WHICH COULD BE ACCOMPLISHED ONLY BY A COMMISSION, BOARD, ETC., OR AUTHORIZATION FOR DUTIES OF SUCH A NATURE GENERALLY RECOGNIZED AS BEST PERFORMED BY A COMMISSION, BOARD, ETC.

THE DECISION OF AUGUST 16, 1940, B-11756, 20 COMP. GEN. 95, REFERRED TO IN YOUR LETTER, CONSIDERED THE PROPRIETY OF PROPOSED PROVISIONS IN WAR DEPARTMENT CONTRACTS FOR THE PROCUREMENT OF NATIONAL DEFENSE EQUIPMENT WHEREBY THE COST OF EXPANDED FACILITIES REQUIRED FOR THE MANUFACTURE OF SUCH EQUIPMENT WOULD BE SEGREGATED AND PAID FOR SEPARATELY ON CONDITIONS PERMITTING FUTURE RECOUPMENT BY THE GOVERNMENT. THAT DECISION WAS IN PART AS FOLLOWS:

* * * MOREOVER, THERE CAN BE NO DOUBT THAT WHERE A CONTRACTOR MUST INCUR COSTS FOR THE EXPANSION OF HIS PLANT FACILITIES FOR THE PERFORMANCE OF A PARTICULAR CONTRACT, OR PARTICULAR CONTRACTS, AND THE EXPANDED FACILITIES ARE, OR MIGHT BE, OF LITTLE OR NO EXPECTED FUTURE USE OR VALUE OTHERWISE TO THE CONTRACTOR, SUCH COSTS NATURALLY WOULD BE INCLUDED IN THE CONTRACT PRICE, AND, IF NOT SEGREGATED AS A SEPARATE ITEM, WOULD BE INCLUDED IN THE FORM OF INCREASED PRICES FOR THE CONTRACT SUPPLIES. IN VIEW OF THESE CONSIDERATIONS, THIS OFFICE PERCEIVES NO LEGAL OBJECTION TO PROVISIONS IN SUCH CONTRACTS FOR THE SEGREGATION OF SUCH COSTS AND FOR THE SEPARATE PAYMENT THEREOF, AS A PART OF THE CONTRACT CONSIDERATION, INSTEAD OF PAYING SUCH COSTS INDIRECTLY AS A PART OF THE UNIT PRICES OF THE EQUIPMENT OR SUPPLIES TO BE FURNISHED, PARTICULARLY AS THE GOVERNMENT MAY THEREBY BE PROTECTED BY THE PROPOSED CORRELATIVE PROVISION WHICH, IN EFFECT, WOULD REQUIRE THE CONTRACTOR (1) TO REBATE TO THE GOVERNMENT THE REASONABLE VALUE TO THE CONTRACTOR OF THE EXPANDED FACILITIES UPON COMPLETION OF THE CONTRACT OR CONTRACTS, OR (2) TO TRANSFER SUCH FACILITIES TO THE GOVERNMENT. IF EXPANSION COSTS ARE INCLUDED IN THE CONTRACT UNIT PRICES, THE GOVERNMENT WILL INDIRECTLY PAY FOR THE EXPANSION BUT WILL OBTAIN NO INTEREST IN THE FACILITIES SO PAID FOR, WHEREAS, BY SEGREGATING SUCH COSTS FOR DIRECT PAYMENT AS PROPOSED, THE GOVERNMENT'S EQUITABLE INTEREST IN SUCH FACILITIES WILL BE RECOGNIZED AND FIXED, AND WHATEVER MAY SUBSEQUENTLY BE RECOUPED THEREFROM WILL BE JUST SO MUCH ADDITIONAL ADVANTAGE TO THE GOVERNMENT, WITHOUT BEING UNFAIR TO THE CONTRACTOR. SUCH PROCEDURE OF SO APPORTIONING THE EQUITIES IN ADVANCE AND AGREEING ON A PROCEDURE FOR SUBSEQUENT ADJUSTMENT WOULD APPEAR BENEFICIAL TO BOTH PARTIES BY LARGELY REMOVING FROM SUCH TRANSACTIONS THE ELEMENT OF RISK AS TO FUTURE VALUE TO THE CONTRACTOR OF THE REQUIRED INCREASE OF PLANT FACILITIES. RESPECTING THE PROPOSED ARBITRATION PROVISIONS, IF, AS IS UNDERSTOOD FROM YOUR SUBMISSION, THEY GO NO FURTHER THAN TO PROVIDE FOR A DETERMINATION OF THE FACT OF REASONABLE VALUE, WITHOUT IMPOSING ANY OBLIGATION ON THE GOVERNMENT, AND LEAVE NO QUESTIONS OF LEGAL LIABILITY FOR DETERMINATION BY ARBITRATORS, THEY, ALSO, DO NOT APPEAR LEGALLY OBJECTIONABLE UNDER THE CIRCUMSTANCES HERE INVOLVED.

SIMILAR FACTORS APPEAR TO BE INVOLVED IN THE CIRCUMSTANCES STATED IN YOUR LETTER. IT IS UNDERSTOOD THAT TO JUSTIFY THE EXPENSE OF ESTABLISHING AND EQUIPPING THE CAFETERIA THE CONCESSIONAIRE MUST BE ASSURED OF A 10-YEAR TERM. ON THE OTHER HAND, THE CONCESSION MAY PROVE SUFFICIENTLY PROFITABLE THAT THE CONCESSIONAIRE MIGHT JUSTLY BE REQUIRED TO PAY THE GOVERNMENT A LARGER PERCENTAGE OF THE GROSS RECEIPTS THAN MAY NOW BE FIXED IN THE ORIGINAL LEASE, BUT A DETERMINATION OF THAT LIES IN THE UNCERTAINTIES OF THE FUTURE. AN OPTION IN THE CONCESSIONAIRE AT THE END OF 5 YEARS TO RENEW THE LEASE FOR 5 YEARS OBVIOUSLY WOULD BE NO OPTION AND NO PROTECTION TO THE CONCESSIONAIRE IF THE GOVERNMENT RESERVED TO ITSELF THE RIGHT THEN TO FIX THE TERMS FOR SUCH RENEWAL PERIOD. FOR THE SAME REASON, NO PROTECTION WOULD BE AFFORDED THE GOVERNMENT IF SUCH DETERMINATION WERE LEFT TO THE CONCESSIONAIRE. IT IS CLEARLY A SITUATION REQUIRING AN IMPARTIAL DETERMINATION, IF THE PARTIES SHOULD NOT BE ABLE TO AGREE, AND, THEREFORE, THE METHOD PROPOSED APPEARS WHOLLY APPROPRIATE IN CONNECTION WITH THE PERFORMANCE IN SUCH RESPECTS OF THE STATUTORY DUTIES OF THE CIVIL AERONAUTICS ADMINISTRATION. 11 COMP. GEN. 495, SUPRA. IT IS NOTED THAT WHILE THE CONTEMPLATED BOARD OF THREE TO DETERMINE THE MATTER, IF SUCH DETERMINATION BE REQUIRED, IS DESIGNATED A " BOARD OF ARBITRATORS" IN THE RENEWAL OPTION ARTICLE PROPOSED TO BE INCORPORATED IN THE LEASE, THE CONTEMPLATED DUTIES WOULD APPEAR TO BE MORE IN THE NATURE OF THOSE OF APPRAISERS THAN OF ARBITRATORS. SEE, IN THIS CONNECTION, OMAHA V. OMAHA WATER COMPANY, 218 U.S. 180. HOWEVER, A MORE IMPORTANT CONSIDERATION IS THAT UNDER THE PROPOSED ARTICLE ANY DETERMINATION WHICH SUCH A BOARD MAY MAKE CANNOT SERVE TO IMPOSE ANY ADDITIONAL OBLIGATION ON THE GOVERNMENT. THAT IS, AS IT IS EXPRESSLY PROVIDED THAT THE TERMS FOR THE RENEWAL PERIOD "SHALL IN NO EVENT BE LESS FAVORABLE TO THE GOVERNMENT THAN THOSE PROVIDED FOR THE ORIGINAL TERM," IT IS EVIDENT THAT THE GOVERNMENT CAN LOSE NOTHING, BUT MAY GAIN SUBSTANTIALLY, BY THE ARRANGEMENT. IT CAN EITHER LEASE FOR THE WHOLE 10 YEARS ON THE TERMS NOW POSSIBLE TO BE FIXED OR IT CAN LEASE FOR 5 YEARS ON SUCH TERMS WITH AN OPTION IN THE LESSEE TO RENEW FOR 5 YEARS UNDER CONDITIONS WHERE THE RETURN TO THE GOVERNMENT CANNOT BE LESS, BUT MAY BE MORE, FOR THE LAST 5 YEARS. IN THIS RESPECT THE SITUATION IS CLOSELY ANALOGOUS TO THAT INVOLVED IN THE DECISION OF AUGUST 16, 1940, SUPRA, WHERE IT WAS POINTED OUT THAT "WHATEVER MAY SUBSEQUENTLY BE RECOUPED THEREFROM WILL BE JUST SO MUCH ADDITIONAL ADVANTAGE TO THE GOVERNMENT, WITHOUT BEING UNFAIR TO THE CONTRACTOR," AND, ALSO, THAT AS THE ARBITRATION PROVISIONS THERE PROPOSED WENT NO FURTHER THAN TO PROVIDE FOR A DETERMINATION OF THE FACT OF REASONABLE VALUE, WITHOUT IMPOSING ANY OBLIGATION ON THE GOVERNMENT, AND LEFT NO QUESTIONS OF LEGAL LIABILITY FOR DETERMINATION BY ARBITRATORS, THEY DID NOT APPEAR LEGALLY OBJECTIONABLE UNDER THE CIRCUMSTANCES THERE INVOLVED.

ON THE FACTS PRESENTED IN YOUR LETTER, THE CONCLUSION APPEARS JUSTIFIED THAT THE PROPOSED ARTICLE COMES WITHIN THE PRINCIPLES APPLIED IN THE SAID DECISION OF AUGUST 16, 1940. ACCORDINGLY, YOU ARE ADVISED THAT THIS OFFICE WOULD NOT BE REQUIRED TO OBJECT TO THE INCLUSION OF SUCH ARTICLE IN THE LEASE. WHILE THERE WOULD SEEM LITTLE REASON TO DOUBT THE MEANING INTENDED IN SUCH RESPECTS BY THE LANGUAGE OF THE WHOLE ARTICLE AS STATED, IT WOULD BE MADE MORE SPECIFIC AND THE POSSIBILITY OF ANY MISUNDERSTANDING WOULD BE OBVIATED BY CONTINUING THE LAST SENTENCE BY THE ADDITION OF THE WORDS "IT BEING UNDERSTOOD, HOWEVER, THAT THE PERCENTAGE OF GROSS RECEIPTS AND CHARGES AND FEES SO DETERMINED TO BE PAID BY THE COMPANY FOR THE RENEWAL TERM SHALL IN NO EVENT BE LESS FAVORABLE TO THE GOVERNMENT THAN THOSE PROVIDED FOR THE ORIGINAL TERM AND, WHEN SO DETERMINED, SHALL RELATE BACK AND BE APPLIED FROM THE BEGINNING OF THE RENEWAL TERM.'