B-64700, APRIL 2, 1947, 26 COMP. GEN. 729

B-64700: Apr 2, 1947

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DOES NOT REQUIRE THAT THE OLD ITEMS BE ACTUALLY SOLD WHEN THE NEW ARE ORDERED. THE PROCEEDS OF SALE MAY BE APPLIED TOWARD THE PURCHASE PRICE EVEN THOUGH THE SALE AND PURCHASE ARE NOT SIMULTANEOUS. PROVIDED THE TRANSACTIONS ARE SO IDENTIFIED WITH EACH OTHER AS TO PERMIT A DETERMINATION THAT THE ITEMS ARE SUFFICIENTLY SIMILAR TO FALL WITHIN THE PURVIEW OF THE STATUTE. 1947: I HAVE YOUR LETTER DATED MARCH 18. OR ANY OTHER ARTICLE OR ITEM THE EXCHANGE OF WHICH IS AUTHORIZED BY LAW. THE PROCEDURE FOLLOWED BY THE BUREAU HERETOFORE WHEN ASKING FOR BIDS ON THE NEW AUTOMOBILES IS ALSO TO REQUEST BIDDERS TO SUBMIT OFFERS ON THE USED AUTOMOBILES EITHER ON THE BASIS OF A TRADE-IN ALLOWANCE OR CASH.

B-64700, APRIL 2, 1947, 26 COMP. GEN. 729

EXCHANGE OR SALE OF USED VEHICLES, ETC. - APPLICATION OF PROCEEDS TO PURCHASE PRICE SECTION 8 OF THE ADMINISTRATIVE EXPENSE STATUTE OF AUGUST 2, 1946, AUTHORIZING APPLICATION OF THE PROCEEDS OF SALE OF USED VEHICLES, ETC., TOWARD THE PURCHASE OF NEW SIMILAR ITEMS, DOES NOT REQUIRE THAT THE OLD ITEMS BE ACTUALLY SOLD WHEN THE NEW ARE ORDERED, AND, THEREFORE, THE PROCEEDS OF SALE MAY BE APPLIED TOWARD THE PURCHASE PRICE EVEN THOUGH THE SALE AND PURCHASE ARE NOT SIMULTANEOUS, PROVIDED THE TRANSACTIONS ARE SO IDENTIFIED WITH EACH OTHER AS TO PERMIT A DETERMINATION THAT THE ITEMS ARE SUFFICIENTLY SIMILAR TO FALL WITHIN THE PURVIEW OF THE STATUTE.

ACTING COMPTROLLER GENERAL MCFARLAND TO THE SECRETARY OF THE TREASURY, APRIL 2, 1947:

I HAVE YOUR LETTER DATED MARCH 18, 1947, AS FOLLOWS:

BY CIRCULAR LETTER NO. B-20, REVISED, DATED FEBRUARY 21, 1947, COPY ATTACHED, THE BUREAU OF FEDERAL SUPPLY OF THIS DEPARTMENT HAS UNDERTAKEN THE PURCHASE OF ALL MOTOR VEHICLES FOR THE USE OF THE EXECUTIVE DEPARTMENTS AND INDEPENDENT ESTABLISHMENTS OF THE GOVERNMENT. IN THIS CONNECTION A QUESTION HAS ARISEN AS TO THE PROCEDURE TO BE FOLLOWED WITH RESPECT TO THE DISPOSITION OF THE USED AND UNSERVICEABLE EQUIPMENT AND THE ACCOUNTING FOR THE PROCEEDS THEREFROM.

SECTION 8 OF THE ACT OF AUGUST 2, 1946, PUBLIC LAW 600, 79TH CONGRESS, 2ND SESSION PROVIDES AS FOLLOWS:

"IN PURCHASING MOTOR-PROPELLED OR ANIMAL-DRAWN VEHICLES OR TRACTORS, OR ROAD, AGRICULTURAL, MANUFACTURING, OR LABORATORY EQUIPMENT, OR BOATS, OR PARTS, ACCESSORIES, TIRES, OR EQUIPMENT THEREOF, OR ANY OTHER ARTICLE OR ITEM THE EXCHANGE OF WHICH IS AUTHORIZED BY LAW, THE HEAD OF ANY DEPARTMENT OR HIS DULY AUTHORIZED REPRESENTATIVE MAY EXCHANGE OR SELL SIMILAR ITEMS AND APPLY THE EXCHANGE ALLOWANCES OR PROCEEDS OF SALES IN SUCH CASES IN WHOLE OR IN PART PAYMENT THEREFOR: PROVIDED, THAT ANY TRANSACTION CARRIED OUT UNDER THE AUTHORITY OF THIS SECTION SHALL BE EVIDENCED IN WRITING.'

IN SUBMITTING PURCHASE REQUISITIONS TO THE BUREAU OF FEDERAL SUPPLY, THE RESPECTIVE AGENCIES ALSO ADVISE THAT THEY DESIRE TO DISPOSE OF THE USED CARS SET FORTH THEREIN. THE PROCEDURE FOLLOWED BY THE BUREAU HERETOFORE WHEN ASKING FOR BIDS ON THE NEW AUTOMOBILES IS ALSO TO REQUEST BIDDERS TO SUBMIT OFFERS ON THE USED AUTOMOBILES EITHER ON THE BASIS OF A TRADE-IN ALLOWANCE OR CASH. HOWEVER, UNDER PRESENT CONDITIONS EXISTING IN THE INDUSTRY AND DUE TO THE LIMITED NUMBER OF AUTOMOBILES PRESENTLY BEING MANUFACTURED, THE ISSUANCE OF ADVERTISEMENTS IN THE USUAL MANNER SERVES NO USEFUL PURPOSE SINCE SUCH MANUFACTURERS ARE NOT INTERESTED IN ACQUIRING USED VEHICLES WITH A CONSEQUENT ALLOWANCE BY WAY OF TRADE-IN OR CASH. ACCORDINGLY, IN ORDER TO MEET THE REQUIREMENTS OF THE USING AGENCIES, IT HAS BEEN NECESSARY TO NEGOTIATE CONTRACTS DIRECTLY WITH SUCH MANUFACTURERS FOR SUCH VEHICLES AS THEY ARE IN A POSITION TO SUPPLY AND WITHOUT OBLIGATION ON THE PART OF SUCH MANUFACTURERS TO CONSIDER THE USED VEHICLES IN SUCH TRANSACTIONS. THE BUREAU OF FEDERAL SUPPLY, BY MAKING CONSOLIDATED PURCHASES, HAS BEEN ABLE TO OBTAIN VEHICLES AT A PRICE MUCH LOWER THAN THE COMMERCIAL PRICES AND IN MOST INSTANCES LOWER THAN WOULD BE AVAILABLE TO THE NEEDING AGENCY ON A DIRECT PURCHASE. FOR EXAMPLE, IN A RECENT PURCHASE FROM THE GENERAL MOTORS CORPORATION OF SOME 163 EIGHT CYLINDER PONTIACS THE PRICE PAID FULLY EQUIPPED WAS $1,203.67. THE APPROXIMATE COMMERCIAL PRICE FOR THE SAME CAR FULLY EQUIPPED WAS $1,800.

THE QUESTION CONCERNING THIS OFFICE AND ON WHICH YOUR DECISION IS REQUESTED IS THAT RELATING TO THE APPLICATION OF THE TRADE-IN ALLOWANCE OR THE CASH SALE PRICE OBTAINED FOR THE OLD AUTOMOBILES. AS YOU KNOW, AT THE PRESENT TIME THE CASH SALE PRICE FOR USED AUTOMOBILE EXCEEDS THE TRADE-IN VALUE. HOWEVER, SINCE PRACTICALLY ALL PURCHASES OF THE NEW AUTOMOBILES ARE MADE FROM THE MANUFACTURERS AND THE MANUFACTURERS ARE NOT INTERESTED IN AND WILL NOT MAKE OFFERS EITHER ON A TRADE-IN OR CASH SALE BASIS, IT IS NECESSARY TO DISPOSE OF THEM TO DEALERS. SUCH BEING THE CASE, THE SALE OF THE USED AUTOMOBILES, WHILE CONNECTED WITH THE PURCHASE OF THE NEW AUTOMOBILES, HAS NOT BEEN AND CANNOT BE, BECAUSE OF EXISTING DELIVERY SCHEDULES FOR NEW AUTOMOBILES, SIMULTANEOUS WITH THE PURCHASE. AS A RESULT, THERE IS SOME QUESTION AS TO WHETHER THE AMOUNT RECEIVED ON THE CASH SALE MAY BE USED IN PART PAYMENT EITHER BY THIS OFFICE OR THE OWNING AGENCY TOWARD THE PURCHASE OF THE NEW AUTOMOBILES.

IT WOULD SEEM THAT, PURSUANT TO THE PROVISIONS OF THE ACT OF AUGUST 2, 1946, SUPRA, THE PROCEEDS FROM THE SALE OF USED EQUIPMENT MAY BE APPLIED TO THE PURCHASE PRICE OF THE NEW EQUIPMENT ONLY TO THE EXTENT THAT THERE IS A RELATIONSHIP BETWEEN THE SALE AND THE PURCHASE. HOWEVER, SUCH PROVISION WOULD NOT APPEAR TO REQUIRE THAT THE RELATIONSHIP BE ESTABLISHED AS A RESULT OF SIMULTANEOUS TRANSACTIONS.

IN MANY INSTANCES BECAUSE DELIVERY OF THE NEW AUTOMOBILES CANNOT BE MADE FOR A PERIOD OF 90 DAYS AFTER EXECUTION OF THE PURCHASE CONTRACT, THE AGENCY CONCERNED IS UNWILLING TO SURRENDER THE USED AUTOMOBILE UNTIL THE NEW AUTOMOBILE HAS BEEN RECEIVED. IN VIEW OF THE PRESENT MARKET CONDITIONS WITH RESPECT TO USED AUTOMOBILES AND IN ORDER TO OBTAIN THE BEST PRICES FOR THE GOVERNMENT, IT WOULD APPEAR THAT THE ONLY PROCEDURE TO FOLLOW WOULD BE TO ISSUE A SEPARATE ADVERTISEMENT FOR SALE OF THE USED AUTOMOBILES EITHER BEFORE OR AFTER PURCHASE OF THE NEW AUTOMOBILE, IT BEING UNDERSTOOD OF COURSE THAT THE ADVERTISEMENT WILL IN ALL CASES PROPERLY INDICATE THAT SUCH SALE IS IN CONNECTION WITH AND RELATED TO THE PURCHASE OF THE NEW CAR UNDER CONTRACT OF A GIVEN DATE CONTAINING SIMILAR RELATING INFORMATION.

IF THIS PROCEDURE IS FOLLOWED AND THE TWO TRANSACTIONS ARE THUS RELATED, IT WOULD APPEAR THAT THE STATUTORY REQUIREMENTS WOULD BE COMPLIED WITH AND THE AGENCIES WOULD BE AUTHORIZED TO APPLY THE PROCEEDS OF SUCH SALES TO THE PURCHASE PRICE OF THE NEW AUTOMOBILES. YOUR EARLY DECISION IN THIS MATTER WILL BE APPRECIATED.

IN THE ABSENCE OF STATUTORY AUTHORITY TO DO OTHERWISE THE VALUE OF THE OLD EQUIPMENT DISPOSED OF BY EXCHANGE OR SALE IN CONNECTION WITH THE ACQUISITION OF NEW EQUIPMENT IS FOR DEPOSIT AND COVERING INTO THE TREASURY AS MISCELLANEOUS RECEIPTS IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 3618, REVISED STATUTES, THE GROSS PRICE OF THE NEW EQUIPMENT TO BE CHARGED TO THE APPROPRIATION. PRIOR TO THE ENACTMENT OF PUBLIC LAW 660, SEVENTY- NINTH CONGRESS, CERTAIN AGENCIES WERE GIVEN STATUTORY AUTHORITY TO EXCHANGE OLD EQUIPMENT IN WHOLE OR PART PAYMENT FOR NEW. THE EFFECT OF SUCH AUTHORITY WAS TO ELIMINATE THE REQUIREMENT FOR COVERING THE EXCHANGE VALUE OF THE OLD EQUIPMENT INTO THE TREASURY AS MISCELLANEOUS RECEIPTS SO THAT ONLY THE NET CASH PAID FOR THE NEW EQUIPMENT WAS CHARGEABLE TO THE APPROPRIATION. 18 COMP. GEN. 227. THE PURPOSE OF SECTION 8 OF PUBLIC LAW 600, SEVENTY-NINTH CONGRESS, 60 STAT. 808, WAS TO EXTEND TO ALL DEPARTMENTS HAVING AUTHORITY TO APPLY THE EXCHANGE ALLOWANCES OR THE PROCEEDS OF SALES OF SUCH EQUIPMENT TOWARD THE PURCHASE PRICE OF NEW EQUIPMENT.

IN CONSTRUING THE PROVISIONS OF SECTION 203 OF THE INDEPENDENT OFFICES APPROPRIATION ACT OF 1944, 57 STAT. 195, WHICH WERE SUBSTANTIALLY THE SAME AS THOSE CONTAINED IN SAID SECTION 8 OF PUBLIC LAW 600, IT WAS HELD, 23 COMP. GEN. 931, THAT THE EQUIPMENT TO BE EXCHANGED OR SOLD AND THE EQUIPMENT TO BE PURCHASED MUST BE OF THE SAME OR SUBSTANTIALLY THE SAME GENERAL CHARACTER; THAT IS, ONLY A TRUCK MIGHT BE EXCHANGED FOR A TRUCK, A BOAT FOR A BOAT, ETC. THUS, IT APPEARS THAT IT IS MANDATORY, IN THE CASE OF THE SALE OF OLD EQUIPMENT, THAT IN ORDER FOR THE PROCEEDS OF THE SALE TO BE APPLIED TO THE PURCHASE OF NEW EQUIPMENT, THE SALE AND THE PURCHASE BE IDENTIFIED WITH EACH OTHER. APPARENTLY THIS REQUIREMENT WAS RECOGNIZED IN THE PREPARATION OF CIRCULAR LETTER B-20, REVISED, TREASURY DEPARTMENT, BUREAU OF FEDERAL SUPPLY, WHICH PROVIDES IN PART, AS FOLLOWS:

IN THOSE CASES WHERE AN AGENCY DESIRES TO TRADE-IN OR SELL ITS MOTOR- PROPELLED VEHICLES IN ORDER TO APPLY THE EXCHANGE ALLOWANCE OR PROCEEDS OF SALE ON THE PURCHASE PRICE OF SIMILAR EQUIPMENT, THE BUREAU OR FEDERAL SUPPLY WILL, IF REQUESTED TO DO SO, ARRANGE FOR SUCH TRADE IN OR SALE. FOR THIS PURPOSE, THE AGENCY MUST STATE IN THE PURCHASE AUTHORITY, WHICH WILL BE RENDERED IN DUPLICATE, A COMPLETE DESCRIPTION OF THE VEHICLES TO BE EXCHANGED OR SOLD, INCLUDING MAKE, MODEL, ENGINE AND CHASSIS NUMBERS, YEAR OF MANUFACTURE, MILEAGE, CONDITION, LOCATION AND DATE WHEN AVAILABLE FOR SURRENDER. * * *

HOWEVER, THERE DOES NOT APPEAR TO BE ANY REQUIREMENT THAT THE EQUIPMENT TO BE SOLD MUST BE ACTUALLY SOLD OR SURRENDERED AT THE TIME THE ORDER FOR THE NEW EQUIPMENT IS PLACED; AND HAVING CONSIDERATION FOR THE PRESENT STATE OF THE AUTOMOBILE MARKET, IT WOULD SEEM THAT SUCH A REQUIREMENT MIGHT WORK A DEFINITE HARDSHIP ON AGENCIES SURRENDERING OLD EQUIPMENT. ACCORDINGLY, THIS OFFICE WILL NOT BE REQUIRED TO OBJECT TO THE USE OF THE PROCEEDS OF THE SALE OF USED EQUIPMENT TOWARD THE PURCHASE OF NEW EQUIPMENT EVEN THOUGH THE SALE BE AT A TIME NOT SIMULTANEOUS WITH THE PURCHASE OF THE NEW EQUIPMENT, PROVIDED THE EQUIPMENT SOLD IS SO IDENTIFIED WITH THE EQUIPMENT TOWARDS THE PURCHASE OF WHICH THE PROCEEDS OF THE SALE ARE TO BE APPLIED AS TO PERMIT A DETERMINATION THAT THE OLD AND THE NEW EQUIPMENT ARE SUFFICIENTLY SIMILAR TO FALL WITHIN THE PROVISIONS OF THE STATUTE.