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B-161180, MAY 31, 1967

B-161180 May 31, 1967
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PRECIS-UNAVAILABLE SECRETARY OF THE NAVY: FURTHER REFERENCE IS MADE TO LETTER OF MARCH 6. THE REQUEST WAS ASSIGNED PDTATAC CONTROL NO. 67 -9 BY THE PER DIEM. THE UNDER SECRETARY SAYS THAT IN DETERMINING THE PRESENT INDEX METHOD OF HOUSING ALLOWANCES THE COMMITTEE GENERALLY HAS USED AN APPROXIMATION OF THE AVERAGE COST AS THE CRITERION AND AVERAGE ALLOWANCES ARE PRESCRIBED. HE SAYS THAT THIS TECHNIQUE WILL CONTINUE TO BE USED IN MOST PLACES. HE CONTINUES THAT THE REPORTS ARE POSTED AND THOSE CONTAINING UNRECONCILABLE ERRORS. OR THOSE WHICH APPEAR TO BE EXTRAORDINARILY HIGH OR LOW AS COMPARED TO THE BULK OF THE FORMS OR TO KNOWN CURRENT PRICES ARE ELIMINATED. THAT THE TOTAL COSTS SO ASCERTAINED ARE COMPARED AS A GROUP WITH THE TOTAL BASIC ALLOWANCES FOR QUARTERS OF THE MEMBERS REPORTING AND THE RELATIONSHIP.

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B-161180, MAY 31, 1967

PRECIS-UNAVAILABLE

SECRETARY OF THE NAVY:

FURTHER REFERENCE IS MADE TO LETTER OF MARCH 6, 1967, FROM THE UNDER SECRETARY OF THE NAVY PROPOSING CERTAIN TECHNIQUES OR PROCEDURES FOR DETERMINING RATES OF HOUSING ALLOWANCES FOR MEMBERS OF THE UNIFORMED SERVICES STATIONED OUTSIDE THE UNITED STATES AND REQUESTING A DECISION WHETHER 37 U.S.C. 405 PROVIDES AUTHORITY FOR THE USE OF ANY OR ALL OF SUCH TECHNIQUES OR PROCEDURES. THE REQUEST WAS ASSIGNED PDTATAC CONTROL NO. 67 -9 BY THE PER DIEM, TRAVEL AND TRANSPORTATION ALLOWANCE COMMITTEE.

THE UNDER SECRETARY SAYS THAT IN DETERMINING THE PRESENT INDEX METHOD OF HOUSING ALLOWANCES THE COMMITTEE GENERALLY HAS USED AN APPROXIMATION OF THE AVERAGE COST AS THE CRITERION AND AVERAGE ALLOWANCES ARE PRESCRIBED, THE NECESSARY DATA BEING OBTAINED BY A FULL REPORTING AT SMALL STATIONS (THOSE WITH 100 MEMBERS OR LESS) AND BY A SAMPLING TECHNIQUE AT LARGE STATIONS. HE SAYS THAT THIS TECHNIQUE WILL CONTINUE TO BE USED IN MOST PLACES. HE CONTINUES THAT THE REPORTS ARE POSTED AND THOSE CONTAINING UNRECONCILABLE ERRORS, THOSE OF ATTACHES WITH EXTRAORDINARY HOUSING REQUIREMENTS, OR THOSE WHICH APPEAR TO BE EXTRAORDINARILY HIGH OR LOW AS COMPARED TO THE BULK OF THE FORMS OR TO KNOWN CURRENT PRICES ARE ELIMINATED, THAT THE TOTAL COSTS SO ASCERTAINED ARE COMPARED AS A GROUP WITH THE TOTAL BASIC ALLOWANCES FOR QUARTERS OF THE MEMBERS REPORTING AND THE RELATIONSHIP, EXPRESSED AS A PERCENTAGE OF THE BASIC ALLOWANCE FOR QUARTERS, DETERMINES THE ALLOWANCE, AND THAT THE INCLUSION OF THE COSTS OF GOVERNMENT LEASED QUARTERS WHICH ARE INVARIABLY HIGHER, AND THE ELIMINATION OF EXTRAORDINARILY UNREPRESENTATIVE LOW REPORTS DOES GIVE THE COMMITTEE A MODICUM OF FLEXIBILITY IN MEETING MODERATE INFLATION AND SLIGHT CHANGES IN THE PRICES OF MONEY AND SERVICES.

THE UNDER SECRETARY FURTHER SAYS THAT:

"QUESTION HAS NOW ARISEN AS TO THE FURTHER LATITUDE WHICH THE STATUTE PROVIDES IN TECHNIQUES OF DERIVING THE HOUSING PER DIEM WITH PARTICULAR REFERENCE TO THOSE PLACES WHERE THE COSTS ARE DRAMATICALLY CHANGING. DURING RECENT YEARS, MANY INFLATIONARY TRENDS IN THE COST OF HOUSING HAVE MADE CURRENT ALLOWANCES GROSSLY INADEQUATE AT MANY OVERSEAS STATIONS. SOUTH AMERICA COMPRISES PERHAPS THE MOST IMPORTANT SUCH AREA, ALTHOUGH THE PROBLEM IS NOT NECESSARILY RESTRICTED TO THAT AREA. HOUSING COSTS RISE RAPIDLY, RENTAL CONTRACTS ARE SUBJECT TO RENEGOTIATION, ANCILLARY OR "CONDOMINIUM" COSTS ARE LEFT OPEN AS IN A COOP APARTMENT IN THE U. S. A., FIRM RENTAL CONTRACTS ARE NOT FINALIZED OR LEASES ARE MADE FOR ONLY 6 MONTHS OR 1 YEAR PERIODS. LOCAL LAWS PERMIT RENT INCREASES, AND AUTOMATIC ESCALATION HOOKED TO MINIMUM LOCAL WAGES OR LOCAL INDICES ARE COMMONLY INCLUDED IN MANY CONTRACTS. THE PROBLEM AND THE INEQUITY IS MAGNIFIED BY CURRENCY DEVALUATION. AT MANY STATIONS, RENT RANGES FROM RIDICULOUS LOWS TO OUTRAGEOUS HIGHS MAKING IT IMPRACTICABLE TO PRESCRIBE A SINGLE ALLOWANCE BY GRADE MEETING THE REQUIREMENTS OF BOTH. THE RESULT IS AN IMPOSSIBLE COMPROMISE WHICH FAILS TO MEET THE REQUIREMENTS OF THE HIGH RENTER AND GROSSLY OVERPAYS THE MEMBER IN LOW COST HOUSING. THIS UNREALISTIC FIGURE IS OUR CURRENT AVERAGE COST."

THEREFORE, "ALTHOUGH THE EXACT METHODS TO BE EMPLOYED HAVE NOT BEEN SELECTED," THE UNDER SECRETARY REQUESTS AN OPINION WHETHER ANY OR ALL OF THE FOLLOWING METHODS (WHICH WE HAVE NUMBERED) ARE WITHIN THE STATUTORY AUTHORITY OF 37 U.S.C. 405:

1. "*** ONE POSSIBILITY MOST SERIOUSLY CONSIDERED BY THE COMMITTEE IS AN ADAPTATION OF THE TECHNIQUES USED IN INDUSTRY IN SELECTED AREAS, AND ALSO BY THE STATE DEPARTMENT IN JAPAN. THIS METHOD WOULD PERMIT PAYMENT OF THE CURRENT HOUSING ALLOWANCE, COMPUTED ON THE AVERAGE COST BASIS (INCLUDING AN AVERAGE RENT, AVERAGE UTILITIES, AND AVERAGE MAINTENANCE AND ONE-TIME COSTS) TO ALL MEMBERS. FOR THOSE WHOSE RENT GROSSLY EXCEEDED THE AVERAGE RENT, A SUPPLEMENTAL PER DIEM ALLOWANCE LESS THE FOLLOWING AMOUNTS, WOULD BE PRESCRIBED TO COVER A PORTION OF THE GREATER RENT:

0-6 $30.00 0-3 $28.00 E-9 $30.00 E-5 $15.00

0-5 30.00 0-2 22.00 E-8 22.00 E-4 5.00

0-4 30.00 0-1 15.00 E-7 22.00

E-6 17.00

"THESE UNREIMBURSED AMOUNTS ARE THOSE DERIVED BY THE SECRETARY OF DEFENSE FOR THE PURPOSE OF DETERMINING WHEN THE COST OF LOCAL HOUSING AT HOME OR ABROAD IS SO EXCESSIVE AS TO WARRANT CONSTRUCTION OF GOVERNMENT HOUSING OR GOVERNMENT LEASING OF QUARTERS TO AVOID UNDUE HARDSHIP TO THE MEMBERS. THEY ARE REFLECTED IN THE 'MAXIMUM ALLOWABLE HOUSING COST' SHOWN IN DEPARTMENT OF DEFENSE INSTRUCTION 4165.45. THE ESTABLISHMENT OF APPROPRIATE CEILINGS, A SCHEDULE OF REVIEW IN EACH CASE AFFECTED, AND OTHER ADMINISTRATIVE CONTROLS ARE A CONCOMMITANT REQUIREMENT OF WHICH THE COMMITTEE IS FULLY AWARE."

2. "ANOTHER POSSIBILITY, REALLY A VARIATION OF THE ABOVE WOULD DEFINE THE EXTRA ALLOWANCE AS THE MEMBER'S EXCESS COST OF RENT, IF ANY, OVER THE AVERAGE RENTAL FOR THAT STATION. IN NO CASE, HOWEVER, WILL SUCH ADDITIONAL ALLOWANCE BE IN AN AMOUNT LARGER THAN THE AVERAGE EXCESS COST OF RENT OF ALL MEMBERS EXCEEDING THE STATION AVERAGE RENTAL COST."

3. "ANOTHER METHOD, SIMILAR TO THE TECHNIQUE USED IN RENTAL GUARANTEE HOUSING IN FRANCE, AND BANK OF TAIWAN HOUSING IN TAIWAN, WOULD PRESCRIBE ALLOWANCES FOR DIFFERENT RENTAL LEVELS AMOUNTING TO THE DIFFERENCE BETWEEN THE BAQ FOR EACH GRADE AND DEPENDENCY STATUS, AND THE AVERAGE TOTAL COSTS FOR THAT RENTAL LEVEL. FOR ANY GIVEN RENTAL LEVEL AND INVERTED SCALE OF ALLOWANCE WOULD OBTAIN. MAXIMUM RENT CEILINGS WOULD BE ESTABLISHED FOR EACH STATION WITH THE POSSIBILITY OF LOWER CEILINGS FOR LOWER GRADES."

4. "AS A FUNDAMENTAL VARIATION TO THE BASIC AVERAGE METHOD, THE COMMITTEE STUDIES OF SEVERAL THOUSANDS OF CASES INDICATE THAT A 'FAMILY PLAN' IS JUSTIFIED BY CONSIDERATION OF THE COSTS TO THE MEMBERS. THIS PLAN WOULD BE ESSENTIALLY SIMILAR TO THE PROGRAM EFFECTED BY THE STATE DEPARTMENT FOR CIVILIAN EMPLOYEES OCTOBER 1966. DIFFERENT RATES FOR THE VARIOUS SIZES OF FAMILIES WOULD BE INDICATED BY INCREMENTS, THE ALLOWANCE INDEX, RATHER THAN IN THE FLAT DOLLAR INCREMENTS OF THE STATE DEPARTMENT PLAN. ITSELF THIS STEP WILL GO FAR TO ELIMINATE BOTH, SOME OF THE HARDSHIPS AND SOME OF THE OVER-PAYMENTS ENCOUNTERED IN AREAS WITH MODERATE INFLATION, THUS REDUCING THE NEED TO APPLY THE MORE PRONOUNCED SUPPLEMENTARY ALLOWANCES DISCUSSED ABOVE."

5. "ON OCCASION WHEN THE EXIGENCIES OF THE SERVICE, INTERNATIONAL AGREEMENT, OR OTHER EXTENUATING CIRCUMSTANCES REQUIRED CERTAIN MEMBERS TO INCUR HOUSING COSTS DIFFERING GREATLY FROM THOSE OF THE MAJORITY OF OTHER MEMBERS, THE COMMITTEE HAS PRESCRIBED SPECIAL HOUSING ALLOWANCES INDICES. AN EXAMPLE IS THE SITUATION OF CERTAIN PUBLIC HEALTH SERVICE MEMBERS IN JAPAN WHO MAY NOT BE PROVIDED GOVERNMENT QUARTERS AND WHO ARE NOT COVERED UNDER EXISTING INTERNATIONAL AGREEMENTS. THIS EXCEPTION WOULD APPEAR TO BE PERMITTED UNDER THE PRINCIPLES DISCUSSED IN B-80534, OF 8 OCTOBER 1948."

SECTION 405 OF TITLE 37, U. S. CODE, PROVIDES THAT WITHOUT REGARD TO THE MONETARY LIMITATIONS OF THAT TITLE, THE SECRETARIES CONCERNED MAY AUTHORIZE THE PAYMENT OF A PER DIEM, CONSIDERING ALL ELEMENTS OF THE COST OF LIVING TO MEMBERS OF THE UNIFORMED SERVICES UNDER THEIR JURISDICTION AND THEIR DEPENDENTS INCLUDING THE COST OF QUARTERS, SUBSISTENCE, AND OTHER NECESSARY INCIDENTAL EXPENSES, TO SUCH A MEMBER WHO IS ON DUTY OUTSIDE THE UNITED STATES OR IN HAWAII OR ALASKA, WHETHER OR NOT HE IS IN A TRAVEL STATUS, EXCEPT THAT DEPENDENTS MAY NOT BE CONSIDERED IN DETERMINING THE PER DIEM ALLOWANCE FOR A MEMBER IN A TRAVEL STATUS.

THE STATUTE DOES NOT PROVIDE FOR PAYMENT OF ACTUAL EXPENSES, OR FOR THE REIMBURSEMENT OF RENTAL CHARGES, OR SUBSISTENCE, OR OTHER EXPENSES AS SUCH, BUT AUTHORIZES THE SECRETARIES TO PRESCRIBE A PER DIEM, CONSIDERING ALL ELEMENTS OF THE COST OF LIVING. CLEARLY, THE TERM "PER DIEM" AS USED IN THE STATUTE HAS REFERENCE TO ALL INCREASED LIVING EXPENSES AND WHEN PRESCRIBED IN ACCORDANCE WITH THE STATUTE IT REPRESENTS A COMMUTATION OF SUCH EXPENSES AND IS PAYABLE IN PROPER CASES WITHOUT REGARD TO ACTUAL COSTS.

THE OBVIOUS PURPOSE OF THE STATUTE IS TO PROVIDE SOME MEASURE OF REIMBURSEMENT TO THE INDIVIDUALS CONCERNED FOR THE AVERAGE EXCESS LIVING COSTS EXPERIENCED BY MEMBERS ON PERMANENT DUTY AT PLACES OUTSIDE THE UNITED STATES. IN OUR VIEW, THE STATUTE CONTEMPLATES THAT THE OVERALL PER DIEM RATE WILL BE DETERMINED ON A BASIS THAT TAKES INTO CONSIDERATION ALL ELEMENTS OF THE COST OF LIVING.

WHILE THE PRESENTLY PRESCRIBED PER DIEM IS PAYABLE IN TWO PARTS AS SEPARATE HOUSING AND COST-OF-LIVING ALLOWANCES, THE BASIS WHICH HAS BEEN USED FOR FIXING THE DIFFERENT ALLOWANCE RATES, AS EXPLAINED IN THE UNDER SECRETARY'S LETTER, SEEMS TO MEET THE STATUTORY REQUIREMENT THAT ALL ELEMENTS OF COST OF LIVING BE CONSIDERED WHEN THE RATE OF EITHER OF THOSE ALLOWANCES IS DETERMINED.

THE SEVERAL ABOVE-QUOTED PROPOSED METHODS OF ADJUSTING THE HOUSING ALLOWANCE RATES APPEAR DESIGNED TO PROVIDE A MEASURE OF FLEXIBILITY IN THE RATE FIXING PROCESS AND, BASED ON THE REPRESENTATIONS MADE, IT APPEARS THAT SOME SUCH FLEXIBILITY WOULD BE DESIRABLE.

A DETERMINATION OF THE LEGALITY OF ANY OF THE PROPOSED METHODS WOULD DEPEND PRINCIPALLY UPON THE ANSWER TO THE FOLLOWING QUESTIONS: (1) WOULD THE PROPOSED METHOD PROVIDE FOR PAYMENTS WHICH ARE REASONABLY WITHIN THE DEFINITION OF "PER DIEM" AND (2) WOULD THE PROPOSED METHOD PROVIDE FOR PAYMENT OF PER DIEM RATES WHICH REASONABLY COULD BE CONSIDERED AS BASED ON ALL ELEMENTS OF THE COST OF LIVING (AND NOT MERELY ACTUAL RENTAL CHARGES)? THESE ARE DIFFICULT QUESTIONS TO ANSWER UNDER ANY CONDITIONS AND WE DO NOT FEEL THAT WE SHOULD ATTEMPT TO ANSWER THEM IN RELATION TO ANY ONE OF THE PROPOSED METHODS WITHOUT HAVING THE COMPLETE REGULATIONS PROPOSED TO BE ISSUED ON THE BASIS OF THAT METHOD, PARTICULARLY SINCE AN AFFIRMATIVE ANSWER TO ANY PART OF THE QUESTION PRESENTED MIGHT POSSIBLY BE TAKEN AS CARRYING SOME IMPLICATION OF APPROVAL OF THE ADMINISTRATIVE AND CONTROL ASPECTS INVOLVED.

PRIOR TO THE RECEIPT OF THE UNDER SECRETARY'S LETTER, THE PROBLEM AT WHICH THE REQUEST FOR DECISION IS AIMED WAS DISCUSSED BY REPRESENTATIVES OF OUR OFFICE, THE PER DIEM, TRAVEL AND TRANSPORTATION ALLOWANCE COMMITTEE AND THE DEPARTMENT OF DEFENSE. DURING THE COURSE OF THAT DISCUSSION, THE COMMITTEE REPRESENTATIVES PRESENTED A PROPOSED SOLUTION TO THE PROBLEM WHICH, AS WE UNDERSTOOD IT, WOULD CONTINUE THE PRESENT METHOD OF FIXING THE HOUSING AND COST-OF-LIVING ALLOWANCES RATES ON THE BASIS OF THE OVER- ALL COST OF LIVING AS CONTEMPLATED BY THE STATUTE AND PROVIDE A SCALE OF PERCENTAGE INCREASES OVER THE HOUSING ALLOWANCE DETERMINED UNDER THE PRESENT METHOD IN ANY CASE WHERE HOUSING COSTS NECESSARILY INCURRED ARE UNREASONABLY IN EXCESS OF THAT ALLOWANCE. IN THIS REGARD, NO REASON IS APPARENT WHY A SCALE OF PERCENTAGE DECREASES SHOULD NOT ALSO BE PROVIDED TO COVER CASES WHERE ACTUAL HOUSING COSTS ARE UNREASONABLY BELOW THE ALLOWANCE DETERMINED UNDER THE PRESENT METHOD.

ACCORDINGLY, SHOULD REGULATIONS IMPLEMENTING THIS LAST PROPOSED SOLUTION TO THE PROBLEM BE SUBMITTED TO US, WE WILL RECONSIDER THE MATTER IN THE LIGHT OF SUCH PROPOSED REGULATIONS.

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