B-140850, OCTOBER 29, 1959, 39 COMP. GEN. 340

B-140850: Oct 29, 1959

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A CONDITIONAL CONTRACT WHICH SPECIFICALLY PROVIDES THAT THE GOVERNMENT'S LIABILITY IS CONTINGENT UPON THE FUTURE AVAILABILITY OF APPROPRIATIONS MAY BE ENTERED INTO PRIOR TO THE ENACTMENT OF AN APPROPRIATION ACT. SUCH CONTRACT WOULD BECOME OPERATIVE ONLY IF AND WHEN THE APPROPRIATION IS MADE AND SHOULD PROVIDE THAT NO LEGAL LIABILITY ON THE PART OF THE GOVERNMENT FOR ANY PAYMENT SHALL ARISE UNTIL THE APPROPRIATION HAS BEEN MADE. PROVIDED THAT A PROVISION IS INCLUDED TO THE EFFECT THAT NO LEGAL LIABILITY ON THE PART OF THE GOVERNMENT FOR PAYMENT OF ANY MONEY SHALL ARISE UNTIL THE APPROPRIATION HAS BEEN MADE. 1959: REFERENCE IS MADE TO LETTER OF SEPTEMBER 22. REQUESTING OUR DECISION ON SEVERAL QUESTIONS WHICH HAVE ARISEN IN CONNECTION WITH THE AUTHORITY GRANTED TO THE VIRGIN ISLANDS CORPORATION IN PUBLIC LAW 85-913.

B-140850, OCTOBER 29, 1959, 39 COMP. GEN. 340

APPROPRIATIONS - CONDITIONAL CONTRACTS SUBJECT TO SUBSEQUENT APPROPRIATION - VIRGIN ISLANDS ALTHOUGH THE GOVERNMENT MAY NOT BE OBLIGATED BY CONTRACT OR PURCHASE, UNLESS OTHERWISE AUTHORIZED BY LAW, UNTIL AN APPROPRIATION ACT PROVIDING FUNDS WITH WHICH TO MAKE PAYMENT HAS BEEN ENACTED, A CONDITIONAL CONTRACT WHICH SPECIFICALLY PROVIDES THAT THE GOVERNMENT'S LIABILITY IS CONTINGENT UPON THE FUTURE AVAILABILITY OF APPROPRIATIONS MAY BE ENTERED INTO PRIOR TO THE ENACTMENT OF AN APPROPRIATION ACT; HOWEVER, SUCH CONTRACT WOULD BECOME OPERATIVE ONLY IF AND WHEN THE APPROPRIATION IS MADE AND SHOULD PROVIDE THAT NO LEGAL LIABILITY ON THE PART OF THE GOVERNMENT FOR ANY PAYMENT SHALL ARISE UNTIL THE APPROPRIATION HAS BEEN MADE. UNDER AUTHORITY GRANTED TO THE VIRGIN ISLAND CORPORATION TO CONSTRUCT SALT WATER DISTILLATION FACILITIES IN ST. THOMAS, BY THE ACT OF SEPTEMBER 2, 1958, 48 U.S.C. 1407C (O), WHICH REQUIRES THAT THE PRINCIPAL CONTRACT FOR CONSTRUCTION BE SUBMITTED TO THE HOUSE AND SENATE COMMITTEES ON INTERIOR AND INSULAR AFFAIRS FOR A PERIOD OF 45 DAYS PRIOR TO EXECUTION, AND IN THE ABSENCE OF APPROPRIATIONS FOR SUCH CONSTRUCTION, A PROPOSAL TO ADVERTISE FOR BIDS, TO EVALUATE THE BIDS, AND TO PREPARE A CONDITIONAL CONTRACT SUBJECT TO APPROVAL OF THE RESPECTIVE CONGRESSIONAL COMMITTEES AND CONTINGENT UPON THE FUTURE APPROPRIATION BY THE CONGRESS OF SUFFICIENT FUNDS TO MAKE PAYMENT UNDER THE CONTRACT WOULD COMPLY WITH THE LAW AND PROTECT THE INTERESTS OF THE GOVERNMENT, PROVIDED THAT A PROVISION IS INCLUDED TO THE EFFECT THAT NO LEGAL LIABILITY ON THE PART OF THE GOVERNMENT FOR PAYMENT OF ANY MONEY SHALL ARISE UNTIL THE APPROPRIATION HAS BEEN MADE. UNDER THE ACT OF SEPTEMBER 2, 1958, 48 U.S.C. 1407C (O), WHICH AUTHORIZES CONSTRUCTION OF SALT WATER DISTILLATION FACILITIES IN ST. THOMAS, VIRGIN ISLANDS, BUT REQUIRES THE PRINCIPAL CONTRACT FOR CONSTRUCTION TO BE SUBMITTED TO THE HOUSE AND SENATE COMMITTEES ON INTERIOR AND INSULAR AFFAIRS, A CONDITIONAL CONTRACT FOR THE PURCHASE OF THE SALT WATER DISTILLATION UNIT--- AS DISTINGUISHED FROM A CONTRACT FOR POWER EQUIPMENT OR FOR INSTALLATION--- MAY BE REGARDED AS THE PRINCIPAL CONTRACT.

TO THE SECRETARY OF THE INTERIOR, OCTOBER 29, 1959:

REFERENCE IS MADE TO LETTER OF SEPTEMBER 22, 1959, WITH ENCLOSURES, FROM THE ADMINISTRATIVE ASSISTANT SECRETARY OF THE INTERIOR, REQUESTING OUR DECISION ON SEVERAL QUESTIONS WHICH HAVE ARISEN IN CONNECTION WITH THE AUTHORITY GRANTED TO THE VIRGIN ISLANDS CORPORATION IN PUBLIC LAW 85-913, APPROVED SEPTEMBER 2, 1958, 72 STAT. 1759, 48 U.S.C. 1407C, TO CONSTRUCT SALT WATER DISTILLATION FACILITIES IN ST. THOMAS, VIRGIN ISLANDS.

THE ACT OF SEPTEMBER 2, 1958, IN AMENDING THE VIRGIN ISLAND CORPORATION ACT, 63 STAT. 350, 48 U.S.C. 1407C (O), (P), PROVIDES IN SECTION 3 THEREOF AS FOLLOWS:

SEC. 3. SECTION 4 OF SAID ACT (63 STAT. 354) IS HEREBY AMENDED BY ADDING AT THE END THEREOF THE FOLLOWING NEW SUBSECTIONS (O) AND (P):

"/O) TO CONSTRUCT, OPERATE, AND MAINTAIN SALT WATER DISTILLATION FACILITIES IN SAINT THOMAS, VIRGIN ISLANDS. SUCH FACILITIES SHALL BE USED TO SUPPLY WATER FOR SALE TO THE GOVERNMENT OF THE VIRGIN ISLANDS AND TO PERSONS PURCHASING DIRECTLY FROM THE CORPORATION: PROVIDED, THAT THE PRINCIPAL CONTRACT FOR THE CONSTRUCTION OF SUCH FACILITIES SHALL NOT BE EXECUTED BY THE CORPORATION---

"/I) UNTIL THE GOVERNMENT OF THE VIRGIN ISLANDS HAS CONTRACTED TO PURCHASE A MINIMUM QUANTITY OF WATER AT A PRICE ESTABLISHED BY THE CORPORATION, AND THE PRICE ESTABLISHED BY THE CORPORATION FOR SALE OF WATER SHALL BE CALCULATED TO COVER, AS A MINIMUM, ALL COSTS OF CONSTRUCTION, OPERATION, AND MAINTENANCE OF SUCH WATER DISTILLATION FACILITIES, INCLUDING BUT NOT LIMITED TO DEPRECIATION AND PAYMENT OF INTEREST ON THE CORPORATION'S INDEBTEDNESS IN CONNECTION WITH SUCH FACILITIES;

"/II) UNTIL THE SECRETARY OF THE INTERIOR HAS CONCLUDED THAT SUCH FACILITIES WILL MOST ECONOMICALLY AND EXPEDITIOUSLY PROVIDE AN ADEQUATE SUPPLEMENTAL SUPPLY OF POTABLE WATER FOR ST. THOMAS; AND

"/III) IF THE SECRETARY SO CONCLUDES, UNTIL THE EXPIRATION OF FORTY-FIVE CALENDAR DAYS (EXCLUSIVE OF DAYS ON WHICH THE HOUSE OF REPRESENTATIVES OR THE SENATE IS NOT IN SESSION BECAUSE OF AN ADJOURNMENT OF MORE THAN THREE DAYS TO A DAY CERTAIN) FROM THE DATE ON WHICH SUCH CONSTRUCTION CONTRACT HAS BEEN SUBMITTED TO THE COMMITTEES ON INTERIOR AND INSULAR AFFAIRS OF THE HOUSE OF REPRESENTATIVES AND THE SENATE. WITH SUCH CONTRACT, THERE SHALL ALSO BE SUBMITTED TO SUCH COMMITTEES AN EXPLANATORY STATEMENT OF THE SECRETARY'S CONCLUSION TO (II) HEREOF, TOGETHER WITH THE REASONS THEREFOR AND SUPPLEMENTAL DATA CONCERNING ALTERNATIVE SOURCES OF WATER WHICH HAVE BEEN INVESTIGATED.

"/P) TO BORROW FROM THE TREASURY OF THE UNITED STATES, WITHIN SUCH AMOUNTS AS MAY BE APPROVED IN APPROPRIATION ACTS, FOR THE SOLE PURPOSE OF CONSTRUCTING, OPERATING, AND MAINTAINING THE FACILITIES AUTHORIZED IN SUBSECTION (O) OF THIS SECTION, SUMS OF MONEY NOT TO EXCEED A TOTAL OF $2,000,000.' * * *

THUS, AS POINTED OUT, THE STATUTE PLACES SEVERAL RESTRICTIONS UPON THE EXECUTION OF THE CONTRACT FOR CONSTRUCTION OF THE SALT WATER DISTILLATION FACILITIES. FIRST, THE GOVERNMENT OF THE VIRGIN ISLANDS MUST ENTER INTO A SUITABLE CONTRACT WITH THE CORPORATION TO PURCHASE A MINIMUM QUANTITY OF WATER AT A PRICE ESTABLISHED BY THE CORPORATION IN ACCORDANCE WITH THE TERMS OF THE ACT. SECONDLY, THE SECRETARY OF THE INTERIOR MUST CONCLUDE THAT SUCH FACILITIES WILL MOST ECONOMICALLY AND EXPEDITIOUSLY PROVIDE AN ADEQUATE SUPPLEMENTAL SUPPLY OF POTABLE WATER FOR ST. THOMAS. AND THIRDLY, THAT COPIES OF THE PRINCIPAL CONTRACT FOR CONSTRUCTION OF THE FACILITIES MUST BE SUBMITTED TO AND REST WITH THE HOUSE AND SENATE COMMITTEES ON INTERIOR AND INSULAR AFFAIRS FOR A PERIOD OF 45 CALENDAR DAYS PRIOR TO ITS EXECUTION.

IT IS FURTHER STATED THAT WHILE THE STATUTE ALSO DESIGNATES THE SOURCE OF FUNDS FOR USE BY THE CORPORATION TO CONSTRUCT THE FACILITIES, NAMELY, BORROWINGS FROM THE TREASURY OF THE UNITED STATES, AS MAY BE APPROVED IN APPROPRIATION ACTS, NOT IN EXCESS OF $2,000,000, THE CORPORATION HAS BEEN AUTHORIZED TO BORROW ONLY $125,000 OF THAT SUM. THE CORPORATION, IT IS SAID, CANNOT BUILD THE PROJECT IN THE ABSENCE OF ADDITIONAL AUTHORIZED BORROWINGS FROM THE TREASURY.

THE ADMINISTRATIVE ASSISTANT SECRETARY STATES THAT THE FIRST AND SECOND MENTIONED CONTRACT CONDITIONS HAVE BEEN MET OR PARTIALLY MET TO THE GREATEST EXTENT POSSIBLE AT THE PRESENT TIME. TO MEET THE REQUIREMENTS OF THE THIRD CONDITION IT IS PROPOSED TO ADVERTISE FOR BIDS, TO EVALUATE THEM, AND TO PREPARE AND EXECUTE A PROPOSED CONTRACT, COPIES OF WHICH WILL BE FURNISHED TO THE PERTINENT CONGRESSIONAL COMMITTEES AT THE OUTSET OF THE SECOND SESSION OF THE 86TH CONGRESS. ALSO, IT IS INTENDED TO INCORPORATE IN THE INVITATION FOR BIDS THE CONTRACT SPECIFICATIONS, AND IN THE PROPOSED CONTRACT THE FOLLOWING PROVISIONS:

FUNDS ARE NOT PRESENTLY AVAILABLE FOR THE DESIRED EQUIPMENT. ANY CONTRACT AWARDED AS A RESULT OF THIS INVITATION SHALL BE CONTINGENT UPON AND SHALL NOT BE EFFECTIVE UNTIL THE ENACTMENT OF LEGISLATION BY THE CONGRESS MAKING A SPECIFIC APPROPRIATION FOR SALT WATER DISTILLATION FACILITIES IN ST. THOMAS, VIRGIN ISLANDS.

PUBLIC LAW 85-913, WHICH AUTHORIZES THE CONSTRUCTION, OPERATION, AND MAINTENANCE OF SALT WATER DISTILLATION FACILITIES IN ST. THOMAS, PROVIDES THAT THE CONTRACT FOR THE CONSTRUCTION OF THE FACILITIES SHALL NOT BE EXECUTED "UNTIL THE EXPIRATION OF FORTY-FIVE CALENDAR DAYS (EXCLUSIVE OF DAYS ON WHICH THE HOUSE OF REPRESENTATIVES OR THE SENATE IS NOT IN SESSION BECAUSE OF AN ADJOURNMENT OR MORE THAN THREE DAYS TO A DAY CERTAIN) FROM THE DATE ON WHICH SUCH CONSTRUCTION CONTRACT HAS BEEN SUBMITTED TO THE COMMITTEES ON INTERIOR AND INSULAR AFFAIRS, OF THE HOUSE OF REPRESENTATIVES AND THE SENATE.' ACCORDINGLY, NO CONTRACT WILL BE EXECUTED AS A RESULT OF THIS INVITATION PRIOR TO THE EXPIRATION OF SUCH PERIOD.

THE FIRST TWO QUESTIONS PRESENTED FOR OUR DECISION GO TO (1) THE PROPRIETY OF PROCEEDING WITH THE DESCRIBED CONTRACTING PROCEDURES, AND (2) THE ADEQUACY OF THE ABOVE-QUOTED PROVISIONS, IN THE ABSENCE OF CONGRESSIONAL ACTION AUTHORIZING THE CORPORATION TO BORROW FUNDS NECESSARY TO COVER THE COST OF THE CONSTRUCTION CONTRACT.

IT IS WELL SETTLED THAT, UNLESS OTHERWISE AUTHORIZED BY LAW, THE GOVERNMENT MAY NOT BE COMMITTED BY CONTRACT OR PURCHASE UNTIL AN APPROPRIATION ACT PROVIDING FUNDS WITH WHICH TO MAKE PAYMENT THEREFORE HAS BEEN ENACTED. SECTIONS 3679, 3732, AND 3733, REVISED STATUTES, AS AMENDED, 31 U.S.C. 665, AND 41 U.S.C. 11 AND 12, RESPECTIVELY. SEE 19 COMP. GEN. 980; 28 ID. 553. HOWEVER, IT HAS BEEN HELD, IN PARTICULAR SITUATIONS, THAT A CONDITIONAL CONTRACT MAY BE ENTERED INTO PRIOR TO ENACTMENT BY THE CONGRESS OF AN APPROPRIATION THEREFOR--- THAT IS A CONTRACT WHICH SPECIFICALLY PROVIDES BY ITS TERMS THAT THE GOVERNMENT'S LIABILITY THEREUNDER IS CONTINGENT UPON THE FUTURE AVAILABILITY OF APPROPRIATED MONEYS WITH WHICH TO MAKE PAYMENT FOR THE CONTRACT PURPOSES. SEE 21 COMP. GEN. 864. SUCH A CONTRACT, OF COURSE, WOULD BECOME OPERATIVE ONLY IF AND WHEN THE APPROPRIATION SUBSEQUENTLY IS MADE.

THE SECOND SUPPLEMENTAL APPROPRIATION ACT, 1959, PUBLIC LAW 86-30, APPROVED MAY 20, 1959, 73 STAT. 33, 45, AUTHORIZED THE VIRGIN ISLANDS CORPORATION TO BORROW NOT TO EXCEED $125,000 FROM THE TREASURY FOR THE ENGINEERING AND DESIGN OF THE SALT WATER DISTILLATION AND RELATED FACILITIES IN ST. THOMAS, VIRGIN ISLANDS. IN REPORTING OUT THE BILL WHICH BECAME THIS APPROPRIATION MEASURE THE HOUSE AND SENATE COMMITTEE ON APPROPRIATIONS, WITH REFERENCES TO THE PROJECT, REJECTED THE ESTIMATE OF FUNDS REQUESTED TO CONSTRUCT THE FACILITIES, AND STATED THAT FUNDS FOR SUCH PURPOSES WOULD BE CONSIDERED AFTER THE REQUIREMENTS OF SECTION 3 QUOTED ABOVE HAVE BEEN MET. SEE HOUSE REPORT NO. 238, PAGE 12, SENATE REPORT NO. 207, PAGE 32, 86TH CONGRESS.

THUS, COMPLIANCE WITH THE THIRD CONDITION OF SECTION 3 REASONABLY ENTAILS THE SOLICITING OF BIDS AND AWARDING OF A PROPOSED CONTRACT TO BE CONDITIONED UPON THE APPROVAL OR DISAPPROVAL OF THE HOUSE AND SENATE COMMITTEES ON INTERIOR AND INSULAR AFFAIRS, AND ALSO CONTINGENT UPON THE FUTURE AUTHORIZATION BY THE CONGRESS OF SUFFICIENT FUNDS WITH WHICH TO MAKE PAYMENT UNDER THE TERMS OF THE CONTRACT. THE CONTRACTING PROCEDURES AND CONTRACT PROVISIONS AS PROPOSED IN THE LETTER WOULD APPEAR TO MEET THIS REQUIREMENT OF SECTION 3 AND THE APPLICABLE LAW CITED ABOVE, AND ADEQUATELY PROTECT THE INTERESTS OF THE UNITED STATES. THEREFORE, NO OBJECTION TO THEIR ADOPTION WILL BE INTERPOSED BY OUR OFFICE.

THE FIRST TWO QUESTIONS ARE ANSWERED ACCORDINGLY. IT IS SUGGESTED, HOWEVER, THAT SOME CLARIFICATION MAY BE DESIRABLE IN RESPECT OF THE GOVERNMENT'S LIABILITY UNDER THE CONDITIONAL CONTRACT BY THE ADDITION OF A SENTENCE TO THE FIRST QUOTED CONTRACT PROVISION TO THE EFFECT THAT ,NO LEGAL LIABILITY ON THE PART OF THE GOVERNMENT FOR THE PAYMENT OF ANY MONEY SHALL ARISE UNLESS AND UNTIL SUCH APPROPRIATION SHALL HAVE BEEN PROVIDED.'

SO FAR AS CONCERNS THE FINAL QUESTION, IT APPEARING FROM THE ENCLOSURES RECEIVED WITH THE LETTER OF SEPTEMBER 22, THAT THE CHAIRMAN OF THE HOUSE AND SENATE COMMITTEES ON INTERIOR AND INSULAR AFFAIRS HAVE EXPRESSED AGREEMENT THAT SUBMISSION BY THE CORPORATION TO THE COMMITTEES OF A CONTRACT COVERING PURCHASE OF THE SALT WATER DISTILLATION UNIT--- AS DISTINGUISHED FROM A CONTRACT FOR POWER EQUIPMENT OR FOR INSTALLATION--- MAY BE REGARDED AS THE "PRINCIPAL" CONTRACT WITHIN THE MEANING OF THAT TERM AS USED IN SECTION 3, YOU ARE ADVISED THAT WE PERCEIVE NO REASON TO OBJECT THERETO.