B-147843, FEBRUARY 5, 1962, 41 COMP. GEN. 522

B-147843, FEBRUARY 5, 1962, 41 COMP. GEN. 522

APPROPRIATIONS - AVAILABILITY - MAINTENANCE AND OPERATION - AUTHORIZATION REQUIREMENTS - CONTRACTS - NEGOTIATION - PROPRIETY THE USE OF OPERATION AND MAINTENANCE FUNDS APPROPRIATED TO THE DEPARTMENT OF ARMY FOR THE CONVERSION OF A HEATING PLANT FROM COAL TO GAS AT A COST GREATLY IN EXCESS OF THE $25,000 LIMITATION ON THE USE OF OPERATION AND MAINTENANCE FUNDS IN 10 U.S.C. 2674 AND IN SECTION 637 OF THE DEPARTMENT OF DEFENSE APPROPRIATION ACT, 1962, 75 STAT. 381, IS NOT PROPER IN VIEW OF THE LEGISLATIVE HISTORY OF THE LIMITATIONS WHICH EVIDENCE A CONGRESSIONAL INTENT THAT SUCH WORK COSTING MORE THAN $25,000 SHOULD BE SPECIFICALLY AUTHORIZED IN A MILITARY CONSTRUCTION AUTHORIZATION ACT AND FUNDED FROM APPROPRIATIONS MADE PURSUANT TO THE AUTHORIZATION. A CONTRACTUAL ARRANGEMENT FOR CONVERSION OF A HEATING PLANT AT A MILITARY INSTALLATION FROM COAL TO GAS AT A COST IN EXCESS OF $25,000 TO BE FINANCED FROM ANNUAL ARMY OPERATION AND MAINTENANCE FUNDS UNDER WHICH THE PUBLIC UTILITY SUPPLIER WOULD CONVERT THE EQUIPMENT WITHOUT COST TO THE GOVERNMENT, EXCEPT INDIRECTLY AS MAY BE REFLECTED IN SERVICE RATES, SUBJECT TO PAYMENT IN EVENT OF TERMINATION BY THE GOVERNMENT WITHIN 10 YEARS OF A NET TERMINATION CHARGE BASED ON COST OF THE FACILITIES AS DEPRECIATED ANNUALLY WOULD BE NOT ONLY AN EVASION OF SECTION 637, DEPARTMENT OF DEFENSE APPROPRIATION ACT, 1962, WHICH PROHIBITS THE USE OF OPERATION AND MAINTENANCE FUNDS FOR PROJECTS IN EXCESS OF $25,000, BUT ALSO OF THE COMPETITIVE BIDDING REQUIREMENTS OF LAW.

TO THE SECRETARY OF THE ARMY, FEBRUARY 5, 1962:

BY LETTER OF DECEMBER 21, 1961, THE DEPUTY ASSISTANT SECRETARY OF THE ARMY (I AND L), INSTALLATIONS, ASKED WHETHER, IN OUR OPINION, FUNDS APPROPRIATED FOR OPERATION AND MAINTENANCE PROPERLY MIGHT BE USED IN CONNECTION WITH A PROPOSED CONVERSION OF FOUR OF THE EIGHT BOILERS OF THE HEATING PLANT AT FORT RICHARDSON, ALASKA, FROM COAL BURNING TO NATURAL GAS EQUIPMENT. THE CONVERSION WILL INCLUDE INSTALLATION OF OIL BURNING EQUIPMENT IN THE FOUR BOILERS WHICH WOULD BE USED IN THE EVENT OF GAS SUPPLY FAILURE UNTIL THE FOUR STAND-BY COAL-FIRED BOILERS CAN BE PLACED IN OPERATION.

IT IS UNDERSTOOD THAT THE ALASKA PIPELINE COMPANY HAS SECURED A FRANCHISE FROM THE CITY OF ANCHORAGE TO SERVE THAT AREA AND FACILITATE TO SUPPLY GAS SERVICE ARE COMPLETE WITH AMPLE CAPACITY AVAILABLE FOR SERVICE TO GOVERNMENT INSTALLATIONS. THE FURNISHING OF GAS TO FORT RICHARDSON WOULD REQUIRE THE INSTALLATION OF A PIPELINE 41,000 FEET LONG AND A METERING STATION AT A COST OF $595,000. THE COST OF CONVERTING THE STEAM PLANT FROM COAL TO GAS IS ESTIMATED AT $318,397.

THE SCOPE OF THE CONVERSION WORK INVOLVED IS DESCRIBED AS INCLUDING THE FOLLOWING ITEMS:

REMOVAL OF STOKERS AND COAL CHUTES; INSTALLATION OF SIX COMBINATION GAS- OIL BURNERS IN THE FRONT WALL OF EACH BOILER; INSTALLATION OF FIREBRICK- COVER OVER GRATES; ALTERATION OF REAR FORCED-AIR DUCT AND INSTALLATION OF NEW DUCTS ALONG EACH SIDE OF BOILER; ERECTION OF PLATFORMS AND LADDERS FOR BURNER ACCESS; INSTALLATION OF DUAL FLAME PROTECTION DEVICES AND MODIFICATION OF COMBINATION CONTROL EQUIPMENT; AND INSTALLATION OF TWO 15,000 GALLON ABOVE-GROUND ARCTIC DIESEL OIL STORAGE TANKS: ALL AT AN ESTIMATED COST OF $318,397.

ONE OF THE PROPOSALS UNDER CONSIDERATION IS THAT THE COMPANY WILL INSTALL THE PIPELINE AND METERING STATION AND FURNISH THE GAS AT REASONABLE RATES WITH A MINIMUM METERING CHARGE DESIGNED TO ASSURE A RECOUPMENT OF ITS INVESTMENT. IT IS STATED THAT THE MINIMUM IS FAR BELOW GOVERNMENT CONSUMPTION REQUIREMENTS. THE RATES ARE SUBJECT TO RE NEGOTIATION AND ADJUSTMENT SO AS NOT TO EXCEED RATES TO ANY CUSTOMER OF THE COMPANY HAVING SIMILAR CONDITIONS OF SERVICE. ALSO, THE COMPANY WILL RETAIN TITLE TO THE PIPELINE AND METERING FACILITIES AND BE RESPONSIBLE FOR THE OPERATION AND MAINTENANCE THEREOF.

THE GOVERNMENT, IN CONSIDERATION OF FURNISHING THE CONNECTING PIPELINE AND METERING FACILITIES BY THE COMPANY, WILL AGREE TO PAY THE COMPANY A TERMINATION CHARGE IF SERVICE IS TERMINATED BY THE GOVERNMENT PRIOR TO EXPIRATION OF A PERIOD OF 10 YEARS FROM COMMENCEMENT OF SERVICE. IT IS EXPLAINED THAT THIS TERMINATION CHARGE IS BASED ON INITIAL COST OF THE FACILITIES, $595,000, SUBJECT TO ANNUAL DEDUCTIONS OF (1) DEPRECIATION AT RATE OF 3 PERCENT AND (2) FAIR SALVAGE VALUE, SO THAT AT THE END OF THE NINTH YEAR THE TERMINATION CHARGE WILL BE ABOUT 65 PERCENT OF COST. HOWEVER, AT THE END OF THE TENTH YEAR THE COMPANY AGREES TO WRITE OFF THE ENTIRE COST. ALSO, UNDER THIS PROPOSAL, THE GOVERNMENT WOULD PERFORM THE NECESSARY WORK OF CONVERTING THE STEAM PLANT FROM COAL TO GAS, THE COST THEREOF ESTIMATED AT $318,397, TO BE PAID FROM FUNDS APPROPRIATED FOR OPERATION AND MAINTENANCE.

THE SECOND PROPOSAL IS SUBSTANTIALLY SIMILAR WITH RESPECT TO CONDITIONS OF FURNISHING SERVICE, DETERMINATION OF RATES AND INSTALLATION OF THE CONNECTING PIPELINE ON A TERMINATION CHARGE BASIS. HOWEVER, UNDER THIS PROPOSAL, THE COMPANY WILL ALSO INSTALL THE CONVERSION FACILITIES WITH INCIDENTAL REQUIREMENTS AS ARE WITHIN THE SCOPE OF THE CONVERSION WORK DESCRIBED ABOVE. SINCE THE CONVERSION FACILITIES ARE PART OF GOVERNMENT STRUCTURES AND EQUIPMENT, THE FACILITIES WILL BECOME THE PROPERTY OF THE GOVERNMENT AND WILL BE MAINTAINED AND OPERATED AT GOVERNMENT EXPENSE.

IN CONSIDERATION OF INSTALLATION OF THE CONVERSION FACILITIES BY THE COMPANY, THE COST THEREOF, ESTIMATED AT $318,397, WILL BE ADDED TO AND BECOME A PART OF THE TERMINATION CHARGE AND WILL BE REDUCED AT THE RATE OF 5 PERCENT PER ANNUM. IT IS STATED, ALSO, THAT THIS COST WOULD PRESUMEDLY BE REFLECTED IN THE RATE CHARTED FOR GAS CONSUMED UNDER THE SAME AS IS USED FOR CONNECTION COSTS.

IT IS EXPLAINED THAT FUEL SELECTION STUDIES HAVE BEEN MADE AND IT IS ESTIMATED THAT SAVINGS TO THE ARMY OF $443,118 PER YEAR DURING THE FIRST 5 YEARS AND $345,923 PER YEAR DURING THE NEXT 5 YEARS WOULD RESULT FROM THE CONVERSION TO NATURAL GAS USING AS A BASIS FOR COMPARISON THE PRESENT ANNUAL COST OF COAL OPERATION IN THE SUM OF $1,963,000. THE LOSS OF FREIGHT REVENUE TO THE ALASKA RAILROAD, A GOVERNMENT-OWNED CORPORATION, FOR THE TRANSPORTATION OF COAL WOULD REDUCE THE OVERALL ESTIMATED SAVINGS TO $217,749 PER YEAR FOR THE FIRST 5 YEARS AND $120,554 PER YEAR FOR THE NEXT 5 YEARS.

THE TWO SPECIFIC QUESTIONS PRESENTED FOR DECISION ARE AS FOLLOWS:

A. WHETHER OR NOT OPERATION AND MAINTENANCE, ARMY, (O AND MA) FUNDS UNDER THE DOD APPROPRIATION ACT, 1962, MAY BE LEGALLY USED FOR EXPENDITURE OF APPROXIMATELY $318,397, THE ESTIMATED COST OF CONVERTING FOUR OF THE EIGHT BOILERS IN THE FORT RICHARDSON, ALASKA, POWER PLANT,FROM COAL BURNING EQUIPMENT TO NATURAL GAS USAGE INCLUDING THE INSTALLATION OF OIL BURNING EQUIPMENT WHICH WOULD BE USED IN THE EVENT OF GAS SUPPLY FAILURE UNTIL THE STANDBY COAL FIRED BOILERS CAN BE PLACED IN OPERATION.

B. WHETHER THERE IS ANY LEGAL OBJECTION TO A CONTRACT FOUNDED ON ANNUAL O AND MA APPROPRIATION, INVOKING LONG TERM CONTRACTUAL AUTHORITY CITED IN PARAGRAPH 1 HEREOF WHEREIN THE PUBLIC UTILITY SUPPLIER PERFORMS THE CONVERSION WORK WITHOUT COST TO THE GOVERNMENT (EXCEPT INDIRECTLY AS MAY BE REFLECTED IN THE RATE FOR SERVICE) SUBJECT TO PAYMENT, IN EVENT OF TERMINATION BY THE GOVERNMENT AT ANY TIME WITHIN 10 YEARS OF A NET TERMINATION CHARGE BASED ON COST OF THE FACILITIES AS DEPRECIATED ANNUALLY.

CONCERNING QUESTION A AS TO WHETHER OPERATION AND MAINTENANCE FUNDS MAY BE USED TO PAY THE COST OF THE CONVERSION WORK, IT IS SUGGESTED THAT THOSE FUNDS MAY BE USED FOR THIS PURPOSE UNLESS SUCH USE IS PROHIBITED BY SECTION 637 OF THE DEPARTMENT OF DEFENSE APPROPRIATION ACT, 1962, 75 STAT. 381, WHICH READS AS FOLLOWS:

SEC. 637. FUNDS APPROPRIATED IN THIS ACT FOR MAINTENANCE AND REPAIR OF FACILITIES AND INSTALLATIONS SHALL NOT BE AVAILABLE FOR ACQUISITION OF NEW FACILITIES, OR ALTERATION, EXPANSION, EXTENSION OR ADDITION OF EXISTING FACILITIES, AS DEFINED IN DEPARTMENT OF DEFENSE DIRECTIVE 7040.2, DATED JANUARY 18, 1961, IN EXCESS OF $25,000: PROVIDED, THAT THE SECRETARY OF DEFENSE MAY AMEND OR CHANGE THE SAID DIRECTIVE DURING THE CURRENT FISCAL YEAR, CONSISTENT WITH THE PURPOSE OF THIS SECTION.

THE DIRECTIVE REFERRED TO IN SECTION 637 DEFINES ALTERATIONS AS BEING:

THE WORK REQUIRED TO ADJUST INTERIOR ARRANGEMENTS, ON-BASE LOCATION, OR OTHER PHYSICAL CHARACTERISTICS OF AN EXISTING FACILITY SO THAT IT MAY BE MORE EFFECTIVELY ADAPTED TO OR UTILIZED FOR ITS DESIGNATED PURPOSE. ADDITIONS, EXPANSIONS AND EXTENSIONS ARE NOT INCLUDED IN ALTERATIONS.

IN CONSIDERING THE ABOVE PROVISION OF LAW AND THE DEFINITIONS CONTAINED IN THE DEPARTMENT OF DEFENSE DIRECTIVE REFERRED TO THEREIN, IT APPEARS DESIRABLE IN ORDER TO MORE CLEARLY UNDERSTAND THE PURPOSE OF SUCH PROVISION TO FIRST DISCUSS SOME OF THE BACKGROUND LEADING UP TO ITS ENACTMENT.

FOR A NUMBER OF YEARS UP TO AND INCLUDING FISCAL YEAR 1957, THE ANNUAL APPROPRIATION ACTS FOR THE DEPARTMENT OF DEFENSE INCLUDED UNDER THE APPROPRIATION FOR OPERATIONS AND MAINTENANCE, ARMY, A PROVISION MAKING SUCH APPROPRIATIONS AVAILABLE FOR "ALTERATION, EXTENSION AND REPAIR OF STRUCTURES AND PROPERTY.' AT THE SAME TIME THERE APPEARED IN THE GENERAL PROVISIONS OF SUCH ACTS, AS FOR EXAMPLE SECTION 605 OF THE DEPARTMENT OF DEFENSE APPROPRIATION ACT, 1957, 70 STAT. 467, A SECTION READING AS FOLLOWS:

SEC. 605. APPROPRIATIONS AVAILABLE TO THE DEPARTMENT OF DEFENSE FOR THE CURRENT FISCAL YEAR FOR CONSTRUCTION OR MAINTENANCE SHALL BE AVAILABLE FOR MINOR CONSTRUCTION (EXCEPT FAMILY QUARTERS), CONVERSION OF AND EXTENSIONS TO EXISTING STRUCTURES, AND IMPROVEMENTS, AT FACILITIES OF THE DEPARTMENT CONCERNED, BUT THE COST OF ANY PROJECT AUTHORIZED UNDER THIS SECTION WHICH IS NOT OTHERWISE AUTHORIZED SHALL NOT EXCEED THE FOLLOWING COST LIMITATIONS, BUT ONLY ONE ALLOTMENT SHALL BE MADE FOR ANY ONE PROJECT OR UNIT: (A) ANY SUCH PROJECT DETERMINED BY THE SECRETARY OF DEFENSE TO BE URGENTLY REQUIRED IN THE INTERESTS OF NATIONAL DEFENSE, $200,000; (B) ANY SUCH PROJECT DETERMINED BY THE SECRETARY OF THE DEPARTMENT CONCERNED TO BE URGENTLY REQUIRED IN THE INTERESTS OF NATIONAL DEFENSE, $50,000; AND (C) ANY OTHER SUCH PROJECT, $25,000: PROVIDED, THAT THE COST LIMITATIONS OF THIS SECTION SHALL NOT APPLY TO AMOUNTS AUTHORIZED TO BE EXPENDED FOR EMERGENCY EXPENSES ON THE APPROVAL OF THE SECRETARY CONCERNED: PROVIDED FURTHER, THAT THE COST OF CONVERTING EXISTING STRUCTURES TO FAMILY QUARTERS PURSUANT TO THE AUTHORITY CONTAINED IN THIS SECTION SHALL NOT EXCEED $50,000 DURING THE CURRENT FISCAL YEAR AT ANY SINGLE FACILITY OF THE DEPARTMENT CONCERNED.

THUS, FUNDS AVAILABLE FOR OPERATION AND MAINTENANCE AS WELL AS THOSE FOR CONSTRUCTION WERE AVAILABLE FOR THE CONVERSION OF AND EXTENSIONS TO EXISTING STRUCTURES AND IMPROVEMENTS IF AMONG OTHER THINGS THE COST OF EACH PROJECT DID NOT EXCEED $200,000. IT WILL BE NOTED THAT THE GENERAL PROVISIONS OF THESE ACTS MADE NO SPECIFIC MENTION OF THE TERM "ALTERATIONS.'

SUBSEQUENTLY, LANGUAGE SIMILAR TO THAT CONTAINED IN THE GENERAL PROVISIONS, SUCH AS THAT QUOTED ABOVE, WAS ENACTED INTO PERMANENT LAW BY SECTION 408 OF THE ACT OF AUGUST 3, 1956, PUBLIC LAW 968, 70 STAT. 1016, AND IS NOW CODIFIED IN 10 U.S.C. 2674.

THIS PERMANENT LANGUAGE, HOWEVER, DIFFERS FROM THAT PREVIOUSLY APPEARING IN THE GENERAL PROVISIONS OF THE ANNUAL ACTS IN THAT IT LIMITS THE USE OF OPERATION AND MAINTENANCE FUNDS FOR THE PURPOSES SPECIFIED THEREIN TO PROJECTS COSTING NOT MORE THAN $25,000.

THE PURPOSE OF THIS LANGUAGE CHANGE WAS EXPLAINED BY OFFICIALS OF THE DEPARTMENT OF DEFENSE, IN PART, AS FOLLOWS:

MR. FLOETTE. * * *

SECTION 408 IS A NEW PROVISION IN PUBLIC WORKS AUTHORIZATION BILLS. THE SUBSTANCE OF IT HAS BEEN REPEATED IN ANNUAL APPROPRIATION ACTS. THIS PROVISION WILL BE PERMANENT LEGISLATION AND WILL OBVIATE THE NEED FOR SUCH REPETITION.

MOREOVER, IT WILL CHECK THE USE OF APPROPRIATIONS FOR MAINTENANCE AND OPERATIONS WHICH SHOULD APPROPRIATELY BE TREATED AS CONSTRUCTION. THE RESULT IS THAT SUCH CONSTRUCTION WORK WILL THEREAFTER BE EVALUATED ON A PRIORITY BASIS WITH LINE ITEMS IN THE PUBLIC WORKS BILL.

MR. PIKE. THIS IS CORRECT. THE PRINCIPAL THING THAT THIS DOES IS TO INSURE THAT THIS TYPE OF CONSTRUCTION WILL BE FUNDED OUT OF CONSTRUCTION FUNDS. THIS SECTION ALSO PROVIDES THAT THOSE UNDER $5,000 ($25,000) WILL BE FUNDED OUT OF MAINTENANCE AND OPERATION FUNDS.

SENATOR CASE. HAS THAT LAST FEATURE BEEN A PART OF THE LIMITATION IN THE APPROPRIATION BILL?

MR. PIKE. THE APPROPRIATION BILL HAS PUT AN ALTERNATIVE PROVISION IN THERE PROVIDING THAT EITHER ONE OF THEM COULD BE FUNDED OUT OF EITHER APPROPRIATION. IN PRACTICE IT HAS NORMALLY BEEN FUNDED OUT OF MAINTENANCE AND OPERATION. WE ARE TRYING TO INSURE THAT THE LARGER PROJECTS BE FUNDED OUT OF CONSTRUCTION FUNDS.

SEE PAGE 56 OF THE SENATE HEARINGS ON MILITARY PUBLIC WORKS CONSTRUCTION, 1956. SEE ALSO PAGE 6110 OF THE RELATED HOUSE HEARINGS ( NO. 61) ON MILITARY PUBLIC WORKS.

FOLLOWING THE ENACTMENT OF THIS PERMANENT PROVISION OF LAW, THE WORDS "ALTERATION, EXTENSION AND REPAIR OF STRUCTURES AND PROPERTY" HAVE BEEN OMITTED FROM THE LANGUAGE OF SUBSEQUENT APPROPRIATIONS FOR OPERATION AND MAINTENANCE AND IN LIEU THEREOF THERE APPEARS MERELY THE PHRASE "REPAIR OF FACILITIES.' AN EXPLANATION OF THIS CHANGE IN LANGUAGE APPEARS AT PAGE 904 OF THE SENATE HEARINGS ON DEPARTMENT OF DEFENSE APPROPRIATIONS FOR 1958 AS FOLLOWS:

(A) THE PHRASE "REPAIR OF FACILITIES" HAS BEEN INSERTED IN LIEU OF THE PHRASE "ALTERATION, EXTENSION, AND REPAIR OF STRUCTURES AND PROPERTY; ACQUISITION OF LANDS (NOT EXCEEDING $5,000 FOR ANY ONE PARCEL), EASEMENTS, RIGHTS-OF-WAY, AND SIMILAR INTERESTS IN LAND.' THIS CHANGE IS BASED UPON THE FACT THAT SECTION 408 OF PUBLIC LAW 968, 84TH CONGRESS, PROVIDES PERMANENT AUTHORITY TO USE MILITARY CONSTRUCTION FUNDS FOR MINOR CONSTRUCTION IN AMOUNTS NOT EXCEEDING $200,000 FOR EACH PROJECT AND TO USE OPERATION AND MAINTENANCE FUNDS FOR SUCH MINOR CONSTRUCTION WHERE PROJECTS DO NOT EXCEED $25,000. THE EFFECT OF THE CHANGED WORDING WILL BE THAT ALTERATION OF BUILDINGS COSTING BETWEEN $25,000 AND $200,000 WILL HEREAFTER BE FUNDED FROM MILITARY CONSTRUCTION FUNDS RATHER THAN OPERATION AND MAINTENANCE FUNDS. ALTERATIONS OR EXTENSIONS OF BUILDINGS COSTING IN EXCESS OF $200,000 WILL HEREAFTER BE REQUIRED TO BE AUTHORIZED BY A CONSTRUCTION AUTHORIZATION ACT AND SPECIFICALLY FUNDED FROM THE " MILITARY CONSTRUCTION" APPROPRIATION. ( ITALICS SUPPLIED.) SEE ALSO PAGE 1463 OF THE RELATED HOUSE HEARINGS ON DEPARTMENT OF THE ARMY APPROPRIATIONS FOR 1958.

THUS, WHILE 10 U.S.C. 2674 MAKES NO SPECIFIC REFERENCE TO THE TERM "ALTERATIONS" IT IS APPARENT THAT THE CONGRESS CONSIDERED THAT SUCH TERM WAS ENCOMPASSED BY THE OTHER TERMS USED THEREIN.

IN THE MEANTIME THE GENERAL ACCOUNTING OFFICE MADE A REVIEW OF THE PROGRAMMING AND FINANCING OF SELECTED CONSTRUCTION ACTIVITIES AT A NUMBER OF MILITARY INSTALLATIONS AND THE REPORT THEREON WAS TRANSMITTED TO THE CONGRESS ON JANUARY 24, 1961. IN THAT REPORT WE ADVISED THAT CONGRESS THAT:

NOTWITHSTANDING THE LANGUAGE IN THESE STATUTES, OPERATION AND MAINTENANCE FUNDS IN EXCESS OF $25,000 ARE USED TO FINANCE VARIOUS TYPES OF CONSTRUCTION AND CONSTRUCTION-TYPE WORK OUTSIDE THE MILITARY CONSTRUCTION PROGRAM. IN USING OPERATION AND MAINTENANCE FUNDS TO FINANCE SUCH WORK, THE MILITARY DEPARTMENTS APPARENTLY RELY ON THE FACT THAT, IN THE COURSE OF PRESENTING THEIR JUSTIFICATIONS FOR SUCH FUNDS AT THE APPROPRIATION HEARINGS, GENERAL DISCLOSURES ARE MADE BY THE SERVICES TO THE CONGRESS THAT THE FUNDS ARE NEEDED FOR CONSTRUCTION AND CONSTRUCTION-TYPE IMPROVEMENT PROJECTS CATEGORIZED BY THEM AS PROJECTS FOR THE MAJOR REPAIR, EMERGENCY REPAIR, REHABILITATION, ALTERATION, OR MODIFICATION OF EXISTING FACILITIES.

WE FOUND THAT, UNDER EXISTING PRACTICE, PROJECTS FINANCED BY THE MILITARY DEPARTMENTS FROM OPERATION AND MAINTENANCE FUNDS INCLUDED CONVERSIONS OF EXISTING FACILITIES FROM ONE END USE TO ANOTHER, ADDITIONS OR EXTENSIONS TO EXISTING FACILITIES, AND EVEN NEW CONSTRUCTION; THAT, IN SOME INSTANCES, CERTAIN CONSTRUCTION PROJECTS ESSENTIALLY SIMILAR TO THOSE INCLUDED IN THE MILITARY CONSTRUCTION PROGRAM, WERE BEING ACCOMPLISHED OUTSIDE THE PROGRAM AS REPAIR, REHABILITATION, OR MODIFICATION PROJECTS; THAT, IN OTHER INSTANCES, OPERATION AND MAINTENANCE APPROPRIATIONS WERE USED TO COMPLETE PROJECTS WHEN AMOUNTS AVAILABLE UNDER CONSTRUCTION AUTHORITIES OR APPROVAL WERE NOT SUFFICIENT TO COMPLETE THE WORK; AND THAT THE COST OF PROCURING AND INSTALLING CERTAIN TYPES OF EQUIPMENT, WITHOUT WHICH THE FACILITY WOULD NOT BE USABLE, WAS NOT BEING FURNISHED TO THE CONGRESS FOR ITS CONSIDERATION AT THE TIME AUTHORIZATION FOR CONSTRUCTION WAS BEING SOUGHT.

WE ARE RECOMMENDING THAT THE CONGRESS, IN ORDER TO STRENGTHEN REVIEW AND CONTROL PROCESSES FOR MILITARY CONSTRUCTION AUTHORIZATIONS, AND TO BRING ABOUT A MORE COMPLETE DISCLOSURE AND CONSISTENT HANDLING OF ALL CONSTRUCTION BY EACH OF THE MILITARY DEPARTMENTS, CONSIDER THE DESIRABILITY OF ESTABLISHING, BY THE ENACTMENT OF APPROPRIATE LEGISLATION OR BY SUCH ACTION AS THE CONGRESS MAY OTHERWISE DETERMINE, UNIFORM DEFINITIONS AND BASIC POLICIES WHICH WILL GOVERN MILITARY CONSTRUCTION PROGRAM PRESENTATIONS BY THE MILITARY DEPARTMENTS. IT WOULD SEEM APPROPRIATE THAT ANY POLICIES THUS ESTABLISHED REQUIRE THAT PRESENTATIONS INCLUDE COMPLETE INFORMATION AS TO SCOPE AND FORESEEABLE COST OF ALL CONSTRUCTION WORK OF THE TYPE TO BE SPECIFIED BY THE CONGRESS. IN THE ESTABLISHMENT OF DEFINITIONS AND POLICIES, THE CONGRESS MAY WISH TO HAVE THE MILITARY DEPARTMENTS INCLUDE IN THEIR PRESENTATION NOT ONLY ALL NEW MAJOR CONSTRUCTION AND THE EQUIPMENT NECESSARY TO MAKE THE FACILITY USABLE FOR THE PURPOSE INTENDED BUT ALSO PROJECTS WHICH CONVERT AN EXISTING FACILITY FROM ONE END USE TO ANOTHER, MODIFICATIONS OR REHABILITATIONS WHICH SUBSTANTIALLY ALTER OR INCREASE THE VALUE OF AN EXISTING FACILITY, EXTENSIONS OR ADDITIONS TO EXISTING FACILITIES, AND CONSTRUCTION WORK OF A PERMANENT NATURE ACCOMPLISHED IN WHOLE OR IN PART BY MILITARY PERSONNEL.

NUMEROUS REFERENCES WERE MADE TO THIS REPORT DURING THE HEARINGS ON THE DEPARTMENT OF DEFENSE APPROPRIATIONS FOR 1962 AND IT HAS BEEN INSERTED IN THE HOUSE HEARINGS BEGINNING ON PAGE 107. AS A RESULT OF THIS REPORT THE HOUSE COMMITTEE ON APPROPRIATIONS INSERTED IN THE APPROPRIATION BILL SECTION 538 (SUBSEQUENTLY RENUMBERED AS SECTION 637) READING AS FOLLOWS:

SEC. 538. FUNDS APPROPRIATED IN THIS ACT FOR MAINTENANCE AND REPAIR OF FACILITIES AND INSTALLATIONS SHALL NOT BE AVAILABLE FOR REPAIR AND ALTERATION PROJECTS, AS DEFINED IN DEPARTMENT OF DEFENSE DIRECTIVE 7040.2, DATED JANUARY 18, 1961, IN EXCESS OF $25,000: PROVIDED, THAT THE SECRETARY OF DEFENSE MAY AMEND OR CHANGE THE SAID DIRECTIVE DURING THE CURRENT FISCAL YEAR, CONSISTENT WITH THE PURPOSE OF THIS SECTION.

IN COMMENTING ON THIS SECTION, THE COMMITTEE STATED, BEGINNING AT PAGE 29 OF HOUSE REPORT NO. 574, 87TH CONGRESS, THAT:

THE COMMITTEE HAS, IN THE HEARINGS, ATTEMPTED TO COPE WITH A MULTITUDE OF TERMS USED VARIOUSLY BY THE MILITARY SERVICES SUCH AS MAJOR REPAIR, ALTERATION, MODIFICATION, MODERNIZATION, IMPROVEMENT, REHABILITATION, AND SO FORTH. IN ONE WAY OR ANOTHER THESE VARIOUS TERMS REPRESENT THE WORK DONE TO MAKE OLD PROPERTIES SUITABLE FOR NEW USES, AND IN SOME CASES TO RESTORE SUITABILITY FOR THE MOST RECENT USES. * * *

THE DEPARTMENT OF DEFENSE IN JANUARY OF THIS YEAR ISSUED A DIRECTIVE WHICH ESTABLISHED FOR THE FIRST TIME SOME UNIFORM DEFINITIONS. THIS DIRECTIVE, OF COURSE, CAME TOO LATE TO HAVE AN EFFECT ON THE FORMAT OF THE BUDGET PRESENTATIONS, HOWEVER, IT PROVIDES A NEW MANAGEMENT TOOL AND MORE IMPORTANTLY A GUIDE TO COMPLIANCE WITH THE LETTER AND INTENT OF CONGRESSIONAL AND DEPARTMENTAL INSTRUCTION. NOT ONLY HAS THERE BEEN HERETOFORE A WIDE DISPARITY IN TERMINOLOGY, THERE HAS BEEN CONSIDERABLE LAXITY IN ADHERENCE TO THE ADMINISTRATIVE LIMITATIONS WHICH SUPPOSEDLY PROVIDED A SAFEGUARD FOR THE TAXPAYERS. THE RECORD OF THE HEARINGS THIS YEAR IS REPLETE WITH EXAMPLES OF ABUSE OF AUTHORITY, RANGING FROM THE UNAUTHORIZED CONSTRUCTION OF AN AIRFIELD TO THE ALTERATION OF ONE HOUSE AT A COST THREE TIMES THAT AUTHORIZED FOR NEW CONSTRUCTION.

* * * IN ADDITION, TO ENFORCE COMPLIANCE WITH THE SECRETARY'S DIRECTIVE, DEFINITIONS IN THAT DIRECTIVE HAVE BEEN INCORPORATED IN LAW, IN PART, BY THE PROPOSED SEC. 538 WHICH LIMITS FUNDS FOR REPAIR AND ALTERATION PROJECTS TO A MAXIMUM OF $25,000. IT IS THE INTENT OF THE COMMITTEE THAT THE SECRETARY APPLY STRICTLY THE CITED DEFINITIONS, AND FURTHER THAT HE ASSURE CLOSE ATTENTION TO THE CONTINUATION OF MAINTENANCE OF PHYSICAL FACILITIES AS THAT TERM IS PRESENTLY DEFINED. ( ITALICS SUPPLIED.)

THIS PROVISION OF THE BILL REMAINED UNCHANGED WHEN THE BILL WAS PASSED BY THE HOUSE. HOWEVER, DURING THE SENATE HEARINGS ON THE BILL, DEPARTMENT OF DEFENSE OFFICIALS URGED THAT SUCH LIMITATION ON REPAIR AND ALTERATION PROJECTS WOULD PROHIBIT ACCOMPLISHMENT OF MANY NEEDED REPAIRS AND ALTERATIONS. SEE PAGES 1102 AND 1635. THE SENATE COMMITTEE ON APPROPRIATIONS APPARENTLY AGREED WITH THAT VIEW AND RECOMMENDED THE DELETION OF THE WORDS "REPAIR AND ALTERATION PROJECTS" AND IN LIEU THEREOF THE INSERTION OF THE WORDS "ACQUISITION OF NEW FACILITIES OR EXPANSION, EXTENSION OR ADDITION OF EXISTING FACILITIES.'

IN EXPLAINING THIS CHANGE OF LANGUAGE THE COMMITTEE STATED AT PAGE 6 OF SENATE REPORT NO. 635, 87TH CONGRESS, THAT:

* * * THE HOUSE FURTHER ENACTED, IN SECTION 538, A LIMITATION ON THE AMOUNT THAT MAY BE SPENT FROM OPERATION AND MAINTENANCE FUNDS OF $25,000 PER PROJECT ON ALL REPAIR AND ALTERATION. THE SENATE COMMITTEE IS SYMPATHETIC TO THE PURPOSES OF THE ACTION TAKEN, BUT, IN THE LIGHT OF THE PROJECTED INCREASES IN THE STRENGTH AND READINESS OF OUR MILITARY FORCES REFLECTED IN THE JULY 26 AMENDMENTS, BELIEVES IT WOULD BE IMPRACTICAL AT THIS TIME TO ADOPT THE LIMITATION PROPOSED BY THE HOUSE, BUT HAS PROPOSED A SUBSTITUTE AMENDMENT UNDER " GENERAL PROVISIONS,SECTION 637.' AND AT PAGE 45 THEREOF IT ALSO STATED:

THE COMMITTEE IS DISTURBED WITH THE LACK OF CONTROL OVER THE EXPENDITURE OF MAINTENANCE AND OPERATION FUNDS USED FOR THE REPAIR, ALTERATION, MODIFICATION, ETC., OF FACILITIES. TESTIMONY REVEALED THAT THIS LAXITY PERMITTED EXPENDITURES FOR VARIOUS PROJECTS WHICH THE COMMITTEE FEELS WERE ABUSES OF THE FLEXIBILITY WHICH THE CONGRESS HAS PROVIDED TO ENABLE THE DEPARTMENT TO EFFICIENTLY MANAGE ITS OPERATIONS.

IT APPEARS THAT THE NEW DIRECTIVES ISSUED BY THE DEPARTMENT OF DEFENSE ON JANUARY 18, 1961, AND JUNE 30, 1961, COVERING THE CONSTRUCTION AND MAINTENANCE AND REPAIR OF FACILITIES SHOULD, IF STRICTLY ENFORCED, CORRECT THE CONDITIONS NOTED IN THE PAST. THE COMMITTEE WILL LOOK TO THE DEPARTMENT FOR SUCH STRICT ENFORCEMENT.

CONFERENCE ACTION ON THE BILL RESULTED IN HAVING THE WORD "ALTERATIONS" RESTORED IN SECTION 637 AND AT PAGE 8 OF THE CONFERENCE REPORT, HOUSE REPORT NO. 873, IT IS STATED THAT:

THE COMMITTEE OF CONFERENCE IS IN AGREEMENT THAT THE WORD "ALTERATION" AS PROPOSED IN THIS SECTION IS NOT SYNONYMOUS WITH REPAIR.

IN VIEW OF THIS LEGISLATIVE HISTORY OF SECTION 637 INCLUDING THE INTENT EXPRESSED BY BOTH COMMITTEES THAT THE DEPARTMENTAL DIRECTIVE BE STRICTLY ENFORCED, WE BELIEVE THERE CAN BE NO QUESTION BUT THAT THE CONGRESS INTENDED THAT WORK OF THIS NATURE AND COSTING IN EXCESS OF $25,000 SHOULD BE SPECIFICALLY AUTHORIZED IN A MILITARY CONSTRUCTION AUTHORIZATION ACT AND FUNDED FROM APPROPRIATIONS MADE PURSUANT TO SUCH AUTHORIZATION.

FURTHERMORE, IN VIEW OF THE SCOPE OF THE CONVERSION WORK, WE BELIEVE THERE CAN BE NO QUESTION BUT THAT IT WOULD CONSTITUTE AN "ALTERATION OF STRUCTURES AND PROPERTY" AS THAT TERM WAS USED IN EARLIER ANNUAL APPROPRIATION ACTS FOR THE DEPARTMENT OF DEFENSE AND WHICH PROPERLY MIGHT HAVE BEEN PAID FROM APPROPRIATIONS FOR OPERATION AND MAINTENANCE IF THE COST OF SUCH WORK DID NOT EXCEED $200,000. AS POINTED OUT ABOVE, THE USE OF OPERATION AND MAINTENANCE FUNDS FOR SUCH PURPOSES PRESENTLY IS LIMITED BY 10 U.S.C. 2674 TO PROJECTS COSTING LESS THAN $25,000.

CONSEQUENTLY, EVEN THOUGH THE CONVERSION WORK WAS TO BE CONSIDERED AS NOT BEING COVERED BY THE TERM "ALTERATIONS" AS DEFINED IN DOD DIRECTIVE OR EVEN IF SECTION 637 HAD NOT BEEN ENACTED, IT IS OUR VIEW THAT OPERATION AND MAINTENANCE FUNDS PROPERLY COULD NOT BE USED TO FINANCE THE COST OF SUCH WORK.

REGARDING QUESTION B, IT IS STATED BY YOUR DEPARTMENT THAT SUCH WORK IS SUSCEPTIBLE TO COMPETITIVE BIDDING AND THAT IT GOES BEYOND THE REQUIREMENTS OF THE USUAL UTILITY PROCUREMENT AND CONNECTION LINE PROCEDURES. IF THIS PROPOSAL WERE TO BE CONSIDERED PROPER THERE WOULD APPEAR ALMOST NO LIMIT TO WHICH THIS CONCEPT COULD BE CARRIED. THUS, IF THE ENTIRE COAL-BURNING FACILITIES WERE WORN OUT AND NEEDED REPLACEMENT, IT COULD BE ARGUED THAT THE ENTIRE REPLACEMENT COULD BE MADE BY THE COAL CONTRACTOR AND THE COST THEREOF REFLECTED IN THE PRICE OF THE COAL. SUCH PROCEDURE WOULD BE AN EVASION OF SECTION 637, QUOTED ABOVE, AS WELL AS THE COMPETITIVE BIDDING REQUIREMENTS, AND CLEARLY WOULD NOT BE PROPER.

ACCORDINGLY, BOTH QUESTIONS A AND B ARE ANSWERED IN THE NEGATIVE. STATUTORY AUTHORIZATION AND APPROPRIATIONS FOR THE CONVERSION OF THE HEATING FACILITIES ARE REQUESTED FROM THE CONGRESS, WE SUGGEST THAT THE FULL COST OF THE PIPELINE AND METERING STATION AND METHOD OF FINANCING BE DISCLOSED TO THE CONGRESS.