B-140850, MAY 17, 1960, 39 COMP. GEN. 776

B-140850: May 17, 1960

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UPON CONDITION THAT THE GOVERNMENT WILL NOT BE UNDER ANY OBLIGATION TO MAKE PAYMENT PRIOR TO THE AVAILABILITY OF THE APPROPRIATION. 1960: REFERENCE IS MADE TO LETTER OF APRIL 21. IT IS EXPLAINED THAT THE QUESTION PRESENTED FOR DECISION IS RELATED TO THE MATTERS CONSIDERED IN OUR DECISION TO YOU OF OCTOBER 29. AUTHORIZATION FOR THE CONSTRUCTION AND OPERATION OF THE INVOLVED FACILITIES WAS GRANTED BY PUBLIC LAW 85-913. (2) 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. IN OUR PRIOR DECISION IT WAS HELD. THE ADMINISTRATIVE ASSISTANT SECRETARY STATES THAT THE THREE CONDITIONS IN SECTION 3 OF PUBLIC LAW 85-913 HAVE BEEN MET.

B-140850, MAY 17, 1960, 39 COMP. GEN. 776

APPROPRIATIONS - COMMENCEMENT OF CONTRACT WORK PRIOR TO AVAILABILITY OF APPROPRIATIONS - PAYMENT APPROVAL DELAY NOTICE OF AWARD OF A CONSTRUCTION CONTRACT UNDER WHICH THE GOVERNMENT MIGHT BECOME OBLIGATED TO MAKE PAYMENT TO THE CONTRACTOR PRIOR TO JULY 1, WHEN THE APPROPRIATION FOR THE PROJECT BECOMES AVAILABLE, MAY NOT BE GIVEN, NOTWITHSTANDING THAT THE CONTRACTING OFFICER INDICATES THAT HE COULD DELAY APPROVAL OF THE PAYMENT SO THAT IT WOULD NOT BE MADE UNTIL AFTER JULY 1, SINCE SUCH DELAY BEYOND A REASONABLE TIME WOULD NOT BE EFFECTIVE AGAINST THE CONTRACTOR; HOWEVER, AN AGREEMENT WHICH PROVIDES FOR EARLY COMMENCEMENT OF WORK, UPON CONDITION THAT THE GOVERNMENT WILL NOT BE UNDER ANY OBLIGATION TO MAKE PAYMENT PRIOR TO THE AVAILABILITY OF THE APPROPRIATION, MAY BE MADE.

TO THE SECRETARY OF THE INTERIOR, MAY 17, 1960:

REFERENCE IS MADE TO LETTER OF APRIL 21, 1960, FROM THE ADMINISTRATIVE ASSISTANT SECRETARY OF THE INTERIOR, REQUESTING A DECISION CONCERNING THE PROPRIETY OF A PROPOSED NOTICE OF AWARD OF A CONTRACT TO CLEAVER BROOKS SPECIAL PRODUCTS, INC., FOR THE CONSTRUCTION OF SALT WATER DISTILLATION FACILITIES IN ST. THOMAS, VIRGIN ISLANDS. IT IS EXPLAINED THAT THE QUESTION PRESENTED FOR DECISION IS RELATED TO THE MATTERS CONSIDERED IN OUR DECISION TO YOU OF OCTOBER 29, 1959, 39 COMP. GEN. 340.

AUTHORIZATION FOR THE CONSTRUCTION AND OPERATION OF THE INVOLVED FACILITIES WAS GRANTED BY PUBLIC LAW 85-913, APPROVED SEPTEMBER 2, 1958, 72 STAT. 1759, 1761, 48 U.S.C. 1407C (O). AS POINTED OUT IN OUR PRIOR DECISION, SECTION 3 OF THE STATUTE PLACES SEVERAL CONDITIONS OR RESTRICTIONS UPON THE EXECUTION OF THE CONTRACT FOR CONSTRUCTION OF THE SALT WATER DISTILLATION FACILITIES, NAMELY, (1) 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; (2) 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 (3) 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 DAYS PRIOR TO EXECUTION.

IN OUR PRIOR DECISION IT WAS HELD, AMONG OTHER THINGS, THAT ALTHOUGH THE GOVERNMENT COULD NOT BE OBLIGATED BY CONTRACT OR PURCHASE, UNLESS OTHERWISE AUTHORIZED BY LAW, UNTIL ENACTMENT OF AN APPROPRIATION ACT PROVIDING FUNDS WITH WHICH TO MAKE PAYMENT, OUR OFFICE WOULD INTERPOSE NO OBJECTION TO THE EXECUTION OF A PROPOSED CONTRACT PRIOR TO THE ENACTMENT OF AN APPROPRIATION ACT IF SUCH CONTRACT SPECIFICALLY PROVIDED THAT THE GOVERNMENT'S LIABILITY WOULD BE CONTINGENT UPON FUTURE AVAILABILITY OF APPROPRIATIONS. WHILE WE POINTED OUT THAT SUCH A CONTRACT WOULD BECOME OPERATIVE ONLY IF AND WHEN THE APPROPRIATIONS SUBSEQUENTLY SHOULD BE MADE, WE SUGGESTED FOR CLARIFICATION PURPOSES THAT AN ADDITIONAL SENTENCE BE ADDED TO THE ABOVE PROVISIONS TO THE EFFECT THAT " NO LEGAL LIABILITY ON THE PART OF THE GOVERNMENT FOR PAYMENT OF ANY MONEY SHALL ARISE UNLESS AND UNTIL SUCH APPROPRIATION SHALL BE PROVIDED.'

THE ADMINISTRATIVE ASSISTANT SECRETARY STATES THAT THE THREE CONDITIONS IN SECTION 3 OF PUBLIC LAW 85-913 HAVE BEEN MET; THAT A CONTRACT HAS BEEN ENTERED INTO WITH THE VIRGIN ISLANDS GOVERNMENT FOR THE PURCHASE OF WATER; THAT THE SECRETARY HAS CONCLUDED THAT SALT WATER DISTILLATION FACILITIES WILL MOST ECONOMICALLY AND EXPEDITIOUSLY PROVIDE AN ADEQUATE SUPPLY OF POTABLE WATER FOR ST. HOMAS; AND THAT THE PROPOSED CONTRACT WITH CLEAVER- BROOKS SPECIAL PRODUCTS, INC., HAS BEEN BEFORE THE HOUSE AND SENATE COMMITTEES ON INTERIOR AND INSULAR AFFAIRS FOR THE REQUIRED TIME.

IT IS STATED THAT THE PROPOSED CONTRACT, WHICH HAS NOW BEEN SIGNED AND EXECUTED, CONTAINS THE FOLLOWING PROVISIONS PERTINENT TO THE PRESENT REQUEST FOR DECISION:

A-10. AVAILABILITY OF FUNDS. FUNDS ARE NOT PRESENTLY AVAILABLE FOR THE DESIRED EQUIPMENT. ANY CONTRACT SIGNED 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. 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.

A-11. SUBMISSION OF CONTRACT TO COMMITTEES OF CONGRESS. 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 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.' ACCORDINGLY, NO CONTRACT WILL BE SIGNED AS A RESULT OF THIS INVITATION PRIOR TO THE EXPIRATION OF SUCH PERIOD.

A-12. DEFINITIONS. AS USED THROUGHOUT THIS CONTRACT.

(B) THE PHRASE "NOTICE OF AWARD OF CONTRACT" SHALL MEAN THE NOTICE GIVEN BY THE CONTRACTING OFFICER TO THE CONTRACTOR AFTER APPROPRIATIONS ARE MADE AVAILABLE BY CONGRESS (A-10). THIS CONTRACT SHALL BE EFFECTIVE ON THE DATE OF RECEIPT OF SUCH NOTICE BY THE CONTRACTOR.

(C) THE "AWARD OF CONTRACT" SHALL BE DEEMED TO OCCUR WHEN THE CONTRACTOR RECEIVES SUCH NOTICE.

IT IS ANTICIPATED THAT THE CONTRACT RESULTING FROM THIS INVITATION WILL BE SIGNED AND EXECUTED FOLLOWING THE EXPIRATION OF THE PERIOD DESCRIBED IN PARAGRAPH A-11 HEREOF, BUT IT IS UNDERSTOOD THAT IT WILL NOT BE EFFECTIVE PRIOR TO THE NOTICE OF AWARD OF CONTRACT.

ALSO, IT IS STATED THAT UNDER THE TERMS OF THE PROPOSED CONTRACT, DELIVERY OF THE UNIT MUST BE MADE WITHIN 240 DAYS OF THE CONTRACTOR'S RECEIPT OF NOTICE TO PROCEED AND THAT SUCH NOTICE WILL BE GIVEN AT THE SAME TIME THE CONTRACTING OFFICER GIVES NOTICE OF AWARD.

IT IS STATED FURTHER THAT UNDER ANY CIRCUMSTANCES, A NOTICE OF AWARD WOULD NOT BE GIVEN PRIOR TO MAY 1, 1960, BECAUSE THE PROPOSED CONTRACT CONTAINS A PROGRESS PAYMENT PROVISION UNDER WHICH THE CONTRACTOR MIGHT BECOME ENTITLED TO PAYMENTS 60 DAYS AFTER RECEIPT OF NOTICE OF AWARD; THAT IT IS BELIEVED IRRELEVANT THAT THE CONTRACTOR COULD HYPOTHETICALLY BECOME ENTITLED TO PAYMENTS IN A LESSER PERIOD INASMUCH AS THE PERIOD OF TIME IS SUFFICIENTLY WITHIN THE CONTROL OF THE CONTRACTING OFFICER; THAT UNDER THE TERMS OF THE PROPOSED CONTRACT, WHICH PERMIT PROGRESS PAYMENTS AT THE CONTRACTOR'S OPTION, THE CONTRACTOR IS REQUIRED TO SUBMIT--- WITHIN 60 DAYS OF NOTICE OF AWARD--- A PROPOSED ALLOCATION OF THE TOTAL CONTRACT PRICE; AND THAT THIS ALLOCATION MUST BE APPROVED BY THE CONTRACTING OFFICER WHO, IT IS STATED, COULD REASONABLY DEFER HIS APPROVAL, AND WHO WILL DEFER HIS APPROVAL UNTIL AT LEAST 30 DAYS HAVE ELAPSED FROM THE DATE OF NOTICE OF AWARD. IN CONCLUSION IT IS STATED THAT EVIDENCE MUST BE SUBMITTED BY THE CONTRACTOR TO SUPPORT A PARTICULAR PROGRESS PAYMENT; THAT WITHIN 30 DAYS THEREAFTER, PAYMENT MUST BE MADE; THAT INASMUCH AS THE CONTRACTING OFFICER WILL ACT SO AS TO INSURE THAT AT LEAST 60 DAYS WILL ELAPSE, MAY 1 HAS BEEN SELECTED AS THE EARLIEST POSSIBLE DATE OF NOTICE OF AWARD; AND THAT, THEREFORE, NO FUNDS WILL BE REQUIRED TO BE EXPENDED UNTIL THE FISCAL YEAR 1961 HAS BEGUN.

IN LIGHT OF THE FOREGOING, A DECISION IS REQUESTED AS TO WHETHER THE CONTRACTING OFFICER MAY, BEFORE JULY 1, 1960, FOLLOWING ENACTMENT OF AN APPROPRIATION ACT CONTAINING A SPECIFIC APPROPRIATION FOR THE FACILITY, GIVE NOTICE OF AWARD TO CLEAVER-BROOKS SO THAT IT MAY BEGIN THE MANUFACTURE OF THE DISTILLATION UNIT. IT IS EXPLAINED THAT THE QUESTION ARISES BECAUSE IT NOW APPEARS THAT THE INTERIOR DEPARTMENT APPROPRIATION ACT FOR THE FISCAL YEAR 1961 MAY BECOME LAW WELL IN ADVANCE OF JUNE 30 OF THIS YEAR AND THAT IT APPEARS VIRTUALLY CERTAIN THAT SUCH ACT WILL CONTAIN A SPECIFIC APPROPRIATION FOR THE INVOLVED SALT WATER DISTILLATION FACILITIES ( PUBLIC LAW 86-455, APPROVED MAY 13, 1960, 74 STAT. 104, 119) AND THAT THE DEPARTMENT IS EXTREMELY ANXIOUS TO MOVE FORWARD WITH THE PROPOSED PLANT AND, IF POSSIBLE, TO GIVE THE PROPOSED MANUFACTURER NOTICE OF AWARD TO ENABLE HIM TO PROCEED SOME WEEKS IN ADVANCE OF JUNE 30, THUS FACILITATING EARLIER COMPLETION. SINCE IT WILL TAKE FROM 15 TO 18 MONTHS TO BUILD THE COMPONENTS NEEDED FOR THE FACILITY AND TO CONSTRUCT SAME, AND SINCE IT IS VITALLY IMPORTANT THAT THE PLANT BE IN OPERATION BY DECEMBER 1, 1961 (THE BEGINNING OF THE TOURIST SEASON), THE MATTER IS REPRESENTED TO BE URGENT BECAUSE THE RATIONING OF WATER DURING TOURIST SEASON HAS CONSISTENTLY HAD AN ADVERSE EFFECT UPON THE ECONOMY OF ST. THOMAS.

IN OUR DECISION OF OCTOBER 29, 1959, WE ADVISED THAT WE WOULD NOT BE REQUIRED TO OBJECT TO THE EXECUTION OF A CONTRACT PRIOR TO THE ENACTMENT OF AN APPROPRIATION ACT, PROVIDED CERTAIN CONDITIONS WERE MET. ONE OF THE SPECIFIC CONDITIONS WHICH WE MENTIONED WAS THAT THE CONTRACT MUST PROVIDE BY ITS TERMS THAT THE GOVERNMENT'S LIABILITY THEREUNDER BE CONTINGENT UPON THE "AVAILABILITY OF APPROPRIATED MONEYS WITH WHICH TO MAKE PAYMENT FOR THE CONTRACT PURPOSES.' IN TERMS OF THE USUAL ANNUAL APPROPRIATION ACT THIS CONDITION MEANS SIMPLY THAT THE CONTRACT MUST PRECLUDE ANY LIABILITY ON THE PART OF THE GOVERNMENT TO MAKE PAYMENT THEREUNDER AT LEAST UNTIL AFTER JUNE 30.

IN VIEW OF THE STATEMENT IN THE SUBMISSION OF APRIL 21, 1960, THAT THE CONTRACTOR COULD, HYPOTHETICALLY, BECOME ENTITLED TO PAYMENTS IN LESS THAN 60 DAYS AFTER RECEIPT OF NOTICE OF AWARD, IT SEEMS DOUBTFUL THAT THE CONTRACT HAS BEEN SO DRAFTED AS TO PRECLUDE ANY OBLIGATION ON THE PART OF THE GOVERNMENT TO MAKE PAYMENT TO THE CONTRACTOR PRIOR TO JULY 1, 1960, IF NOTICE OF AWARD SHOULD BE GIVEN 60 DAYS BEFORE THAT TIME. IT IS NOT ENOUGH THAT THE CONTRACTING OFFICER REFUSE TO GIVE HIS APPROVAL TO AN ALLOCATION OF THE CONTRACT PRICE FOR A PERIOD SUFFICIENT TO INSURE THAT PAYMENT WILL NOT BE MADE PRIOR TO JULY 1, 1960. HIS APPROVAL OF SUCH ALLOCATION MUST BE GIVEN WITHIN THE TIME REASONABLY NECESSARY FOR ITS APPROVAL, AND ANY DELIBERATE DELAY ON HIS PART BEYOND THAT TIME IN GIVING HIS APPROVAL WOULD NOT, IN OUR VIEW, BE EFFECTIVE AS AGAINST THE CONTRACTOR.

ACCORDINGLY, IT IS OUR OPINION THAT NO ACTION MAY BE TAKEN UNDER THE PROPOSED CONTRACT WHICH COULD IMPOSE AN OBLIGATION UPON THE GOVERNMENT TO MAKE ANY PAYMENT TO THE CONTRACTOR PRIOR TO JULY 1, 1960, REGARDLESS OF ADMINISTRATIVE INTENTION TO DISREGARD THAT OBLIGATION. OF COURSE, IF THE CONTRACTOR AND THE VIRGIN ISLANDS CORPORATION SHOULD ENTER INTO AN AGREEMENT PROVIDING FOR COMMENCEMENT OF THE WORK PRIOR TO JUNE 1, 1960, UPON CONDITION THAT THE GOVERNMENT WOULD BE UNDER NO OBLIGATION TO MAKE THE FIRST CONTRACT PAYMENT PRIOR TO THE TIME THE 1961 APPROPRIATION SHALL BE AVAILABLE FOR EXPENDITURE, THERE WOULD BE NO BASIS FOR OBJECTION THERETO.