B-129326, OCT. 5, 1956

B-129326, OCT. 5, 1956

TO THE COMPTROLLER GENERAL OF THE UNITED STATES:

REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 25, 1956, REQUESTING TO BE ADVISED WHETHER THE DEPARTMENT PROPERLY MAY ACCEPT THE PROPOSAL OF HENRY CHAKFORD, SR., AND ROSE CHAKFORD, HIS WIFE, OF SOUTH EUCLID, OHIO, FOR A PROPOSED LEASE-PURCHASE PROJECT TO BE CONSTRUCTED ON A GOVERNMENT-OWNED SITE AT ST. MARYS, OHIO, UNDER THE POST OFFICE DEPARTMENT ACT OF 1954, 68 STAT. 525, AS AMENDED, 39 U.S.C. 901, AND FOLLOWING SECTIONS. ALSO, YOU REQUEST ADVICE AS TO WHETHER AND UNDER WHAT CIRCUMSTANCES THE DEPARTMENT CAN ACCEPT BIDS WHERE THE ESTIMATED MAXIMUM PURCHASE PRICE, BASIC ANNUAL PAYMENTS AND INTEREST RATES, OR ANY ONE OF THESE FACTORS, EXCEED THE MAXIMUM ESTIMATE THEREOF APPROVED BY THE CONGRESSIONAL COMMITTEES.

IT APPEARS FROM THE FACTS AS REPORTED IN YOUR LETTER THAT PURSUANT TO THE REQUIREMENTS OF SECTION 202 (G) OF THE ABOVE STATUTE (39 U.S.C. 902 (G) (, THE ABOVE PROJECT WAS APPROVED BY THE HOUSE AND SENATE COMMITTEES ON PUBLIC WORKS ON AUGUST 11 AND DECEMBER 14, 1954, RESPECTIVELY, BASED UPON A PROSPECTUS SHOWING "ESTIMATED MAXIMUM," AS FOLLOWS:

CHART

BASIC ANNUAL

PURCHASE PRICE PAYMENT INTEREST RATE

$82,500 $5,226 4 PERCENT

FOLLOWING COMMITTEE APPROVAL A CONSIDERABLE DELAY OCCURRED INCIDENT TO INAUGURATING THE PROJECT. IN THE MEANTIME A RISE IN MATERIAL AND LABOR COSTS NECESSITATED AN UPWARD REVISION OF MORE THAN 50 PERCENT OF THE ORIGINAL ESTIMATED COSTS. YOU STATE THAT IN VIEW OF SUCH INCREASE THE PROJECT WAS RESUBMITTED FOR APPROVAL BY THE COMMITTEES UNDER A "REVISED ESTIMATE" AS REQUIRED BY SECTION 202 (G) (2) OF THE ACT, AS FOLLOWS:

CHART

BASIC ANNUAL INTEREST RATE

PURCHASE PRICE PAYMENT

$126,400 $8,005.67 4 PERCENT

BASED ON THE REVISED PROSPECTUS THE PROJECT WAS APPROVED BY THE HOUSE AND SENATE COMMITTEES ON JULY 18 AND JULY 19, 1955, RESPECTIVELY. YOU STATE THAT THE COMPLETE LEASE-PURCHASE PROGRAM WAS NOT FINALIZED UNTIL THE SPRING OF 1956 AND THAT ON JUNE 20, 1956, THE DEPARTMENT ADVERTISED FOR BIDS ON THE PROJECT. THE HIGHEST BID IS STATED TO HAVE EXCEEDED THE MAXIMUM ESTIMATED COST OF THE PROJECT AS SHOWN IN THE REVISED PROSPECTUS IN ALL THREE OF THE ABOVE PARTICULARS. IT IS STATED, HOWEVER, THAT THE LOW BID SUBMITTED BY MR. AND MRS. CHAKFORD WAS LESS THAN THE ESTIMATED MAXIMUM PURCHASE AND BASIC ANNUAL PAYMENT BUT EXCEEDED THE "ESTIMATED MAXIMUM INTEREST RATE.' THE BID ON THE ABOVE ITEMS AS SHOWN IN YOUR LETTER IS AS FOLLOWS:

CHART

BASIC ANNUAL INTEREST RATE

PURCHASE PRICE PAYMENT

$107,000 $7,320.03 4 3/4 PERCENT

SECTION 202 (G) OF THE ACT, AS AMENDED BY PUBLIC LAW 667, 84TH CONGRESS, APPROVED JULY 9, 1956, PROVIDES THAT

"* * * NO APPROPRIATIONS SHALL BE MADE FOR LEASE-PURCHASE PROJECTS WHICH HAVE NOT BEEN APPROVED BY RESOLUTIONS ADOPTED BY THE COMMITTEES ON PUBLIC WORKS OF THE SENATE AND HOUSE OF REPRESENTATIVES, RESPECTIVELY, WITHIN THREE YEARS AFTER THE FATE OF ENACTMENT OF THIS ACT. FOR THE PURPOSE OF SECURING CONSIDERATION OF SAID APPROVAL THE POSTMASTER GENERAL SHALL TRANSMIT TO EACH SUCH COMMITTEE A PROSPECTUS OF THE PROPOSED PROJECT, INCLUDING (BUT NOT LIMITED TO/---

"/2) AN ESTIMATE OF THE MAXIMUM COST OF SITE AND BUILDING TOGETHER WITH THE TERM OF YEARS OVER WHICH PAYMENTS WOULD RUN AND THE MAXIMUM RATE OF INTEREST THAT WOULD BE ACCEPTABLE FOR ANY DEFERRED PART OF SUCH COST; * *

H.R. 6342 WHICH BECAME PUBLIC LAW 519, COMMONLY REFERRED TO AS THE LEASE- PURCHASE ACT, REQUIRED GENERAL SERVICES ADMINISTRATION AND THE POST OFFICE DEPARTMENT TO COME INTO AGREEMENT WITH THE ABOVE HOUSE AND SENATE COMMITTEES WITH RESPECT TO THE LEASE-PURCHASE CONTRACTS. SINCE THIS PROVISION RAISED A CONSTITUTIONAL QUESTION, THE BILL WAS AMENDED TO PROHIBIT THE APPROPRIATION OF FUNDS FOR LEASE-PURCHASE PROJECTS IN THE ABSENCE OF APPROVAL BY RESOLUTIONS ADOPTED BY THE ABOVE COMMITTEES, SECTION 411 (E), TITLE I, AND 202 (G), TITLE II. UNDER THE NEW LANGUAGE, FOR PURPOSE OF OBTAINING SUCH APPROVAL EACH OF THE AGENCIES IS REQUIRED TO SUBMIT TO THE COMMITTEES A PROSPECTUS OF THE PROPOSED PROJECT INCLUDING, BUT NOT LIMITED TO, THE DATA AS REQUIRED UNDER EIGHT SEPARATE ITEMS.

IT IS CONCLUDED IN YOUR LETTER THAT NOTWITHSTANDING THE VARIANCE IN THE INTEREST RATE AS SHOWN IN THE PROSPECTUS (4 PERCENT) AND THE INTEREST RATE AS SHOWN IN THE CURRENT LOW BID SUBMITTED BY MR. AND MRS. CHAKFORD (4 3/4 PERCENT), YOU ARE AUTHORIZED TO ACCEPT THEIR BID. WE ARE SUBSTANTIALLY IN ACCORD WITH THE ARGUMENTS AND REASONING FORMING THE BASIS OF YOUR CONCLUSION. PARTICULARLY SIGNIFICANT ARE THE FACTS THAT THE APPLICABLE APPROPRIATION ACT CONTAINS NO LIMITATION AS TO ANY SPECIFIC PROJECT, BUT ONLY AN OVER-ALL LIMITATION; THAT SECTION 202 (E) OF THE ACT (39 U.S.C. 902 (E) ( AUTHORIZES YOU TO INCLUDE IN LEASE-PURCHASE AGREEMENTS SUCH PROVISIONS AS YOU DEEM IN THE BEST INTEREST OF THE UNITED STATES; AND THAT SECTION 202 (E) (2) OF THE ACT (39 U.S.C. 902 (E) (2) ( PROHIBITS ANY AGREEMENT PROVIDING FOR PAYMENT IN EXCESS OF THE AMOUNT "AS DETERMINED BY THE POSTMASTER GENERAL" TO BE NECESSARY, AMONG OTHER THINGS, TO "PROVIDE A REASONABLE RATE OF INTEREST ON THE OUTSTANDING PRINCIPAL.'

IN VIEW OF THE FOREGOING, YOU ARE ADVISED THAT WE WOULD NOT BE REQUIRED TO OBJECT TO ACCEPTANCE OF THE CHAKFORD BID BECAUSE OF THE INTEREST RATE OF 4 3/4 PERCENT, IF OTHERWISE PROPER.

REGARDING YOUR SECOND QUESTION, WE SEE NO OBJECTION GENERALLY TO THE ACCEPTANCE OF A BID INVOLVING A SITUATION WHERE THE ESTIMATED PURCHASE PRICE, BASIC ANNUAL PAYMENT AND INTEREST RATE, OR ANY ONE OF THESE FACTORS, EXCEEDS THE MAXIMUM ESTIMATE THEREOF AS CONTAINED IN THE PROSPECTUS FORMING THE BASIS OF COMMITTEE APPROVAL, PROVIDED, OF COURSE, THE VACATION IS REASONABLE UNDER THE CIRCUMSTANCES, AND ACCORDS WITH YOUR DETERMINATION UNDER SECTION 202 (E) OF THE ACT.