B-238430, Apr 4, 1990, 90-1 CPD ***, Office of General Counsel

B-238430, Apr 4, 1990, 90-1 CPD ***, Office of General Counsel

PROCUREMENT - Contract Management - Contract modification - Leases - Propriety DIGEST: Real property owner who leases property to Postal Service seeks increase in rent due to increased costs of maintaining property. If further adequate consideration flows to Postal Service from owner to support contract modification, then rent conceivably could be increased; however, such a matter is for negotiation solely between Postal Service and the property owner.

The Honorable Tom DeLay

Member, United States House of Representatives:

This is in response to your letter of January 11, 1990, on behalf of Mr. Kenneth Whitt who is seeking a rental increase from the United States Postal Service for property it rents from him in Hallettsville, Texas.

It is our understanding that when Mr. Whitt purchased this property, he took it subject to an existing lease held by the Postal Service. Under this lease, the Postal Service's initial period of rental of the premises expired on March 14, 1985, with the lease providing the Postal Service with three 5-year options to rent the premises with no provision for an increase in the monthly rent. On October 24, 1984, Mr. Whitt wrote the Postal Service and requested that the monthly rent be increased by some type of negotiation or arbitration.

In a letter to Mr. Whitt dated October 30, 1984, an official of the Postal Service noted that the Postal Service had already exercised its first 5-year option. In regard to the matter of a rent increase, the official told Mr. Whitt that:

"In matters of this kind, within their purview the General Accounting Office has consistently held that no officer or employee of the Government may modify an existing Government contract or lease in favor of another party, or surrender or waive a vested contract right, absent compensating benefit to the Government."

The official then concluded that the lease agreement could not be modified.

Mr. Whitt asks for comments on the statement quoted above as well as the status of a Postal Service program entitled "Alternatives for Establishing Equity in the Postal Leases," which was discussed by our Office in a letter to the Postmaster General, B-197235, Dec. 31, 1979.

The rule is well established that no officer or agent of the government has authority to give away the money or property of the United States either directly or by the release of vested contractual rights, without adequate legal consideration. Bausch & Lomb Optical Company v. United States, 78 Ct. Cl. 584, 607, cert. denied, 292 U.S. 645 (1934). This rule is grounded in sound public policy and is not to be weakened. Pacific Hardware & Steel Company v. United States, 49 Ct. Cl. 327, 335 (1914). Thus, in B-169004, July 9, 1973 (copy enclosed), we stated that a higher rent could be paid the owner under the lease only if some further consideration or benefit was provided to the Postal Service.

Our comments in B-197235 relative to the proposed Postal Service program for equity in postal leases, among other things, again stated the basic rule that any increase in rent or other change beneficial to a lessor would not be effective without some change in the lessor's performance that was beneficial to the Postal Service. See B-197235, supra.

We have verified that presently the Postal Service has no formal or informal program similar to the one discussed in our letter in 1979. Nevertheless, even without such a program, Mr. Whitt and the Postal Service could enter into a contract modification provided that each party's modification was supported by adequate consideration.

We trust that the above information is responsive to your inquiry.