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IS A PROPER CHARGE AGAINST APPROPRIATED FUND. ONE WHICH HAS NOT BEEN APPLIED WHERE THE IMPROVEMENTS ARE INCIDENTAL TO AND ESSENTIAL FOR THE ACCOMPLISHMENT OF THE PURPOSES OF THE APPROPRIATIONS. THE COST IS REASONABLE. THE INTERESTS OF THE GOVERNMENT ARE FULLY PROTECTED. IN VIEW OF THE FACT THAT UNDER THE PROPOSED CONTRACT THE PERMANENT IMPROVEMENTS TO THE CONTRACTOR'S PROPERTY ARE ESSENTIAL FOR THE CANCER RESEARCH. THE CONTRACTOR IS PARTICULARLY WELL QUALIFIED TO PERFORM. THE COST OF THE IMPROVEMENTS IS NOMINAL IN COMPARISON WITH TOTAL COSTS. THE CONTEMPLATED IMPROVEMENTS WILL NOT CONTRAVENE THE RULE. IN VIEW OF THE DIFFICULTY IN APPLYING THE ESTABLISHED RULE AGAINST THE USE OF GOVERNMENT FUNDS FOR THE PERMANENT IMPROVEMENT OF PRIVATELY OWNED PROPERTY TO DISTINGUISH BETWEEN IMPROVEMENTS THAT ARE PERMANENT OR TEMPORARY IN CHARACTER.

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B-141839, MARCH 12, 1963, 42 COMP. GEN. 480

APPROPRIATIONS - AVAILABILITY - EXPENSES INCIDENT TO SPECIFIC PURPOSES - NECESSARY EXPENSES. PUBLIC HEALTH SERVICE - PRIVATE PROPERTY IMPROVEMENT - AUTHORITY THE COST OF PERMANENT IMPROVEMENTS TO PRIVATE PROPERTY, AN ESTIMATED 10 PERCENT OF THE TOTAL SUM TO BE EXPENDED UNDER A PUBLIC HEALTH SERVICE COST -REIMBURSEMENT CONTRACT FOR THE EXPERIMENTAL BREEDING OF PRIMATES FOR CANCER RESEARCH BY THE NATIONAL INSTITUTES OF HEALTH, IS A PROPER CHARGE AGAINST APPROPRIATED FUND, NOTWITHSTANDING THE GENERAL RULE THAT IN THE ABSENCE OF SPECIFIC LEGISLATION APPROPRIATED FUNDS MAY NOT BE USED FOR PERMANENT IMPROVEMENT OF PRIVATE PROPERTY, THE RULE BEING ONE OF POLICY AND NOT OF POSITIVE LAW, AND ONE WHICH HAS NOT BEEN APPLIED WHERE THE IMPROVEMENTS ARE INCIDENTAL TO AND ESSENTIAL FOR THE ACCOMPLISHMENT OF THE PURPOSES OF THE APPROPRIATIONS, THE COST IS REASONABLE, AND THE INTERESTS OF THE GOVERNMENT ARE FULLY PROTECTED; HOWEVER, THE FACTS AND CIRCUMSTANCES OF EACH CASE MUST BE CONSIDERED, AND IN VIEW OF THE FACT THAT UNDER THE PROPOSED CONTRACT THE PERMANENT IMPROVEMENTS TO THE CONTRACTOR'S PROPERTY ARE ESSENTIAL FOR THE CANCER RESEARCH, THE CONTRACTOR IS PARTICULARLY WELL QUALIFIED TO PERFORM, AND IN A CLIMATE IDEALLY SUITABLE FOR THE PROJECT, AND THE COST OF THE IMPROVEMENTS IS NOMINAL IN COMPARISON WITH TOTAL COSTS, THE CONTEMPLATED IMPROVEMENTS WILL NOT CONTRAVENE THE RULE. IN VIEW OF THE DIFFICULTY IN APPLYING THE ESTABLISHED RULE AGAINST THE USE OF GOVERNMENT FUNDS FOR THE PERMANENT IMPROVEMENT OF PRIVATELY OWNED PROPERTY TO DISTINGUISH BETWEEN IMPROVEMENTS THAT ARE PERMANENT OR TEMPORARY IN CHARACTER, AND TO DETERMINE THE RESIDUAL VALUE OF THE IMPROVEMENTS THAT REMAINS AFTER CONTRACT COMPLETION, THE NATIONAL CANCER INSTITUTE, PUBLIC HEALTH SERVICE, SHOULD SEEK SPECIFIC STATUTORY AUTHORITY TO EXPEND APPROPRIATED FUNDS FOR PERMANENT IMPROVEMENTS ON PRIVATELY OWNED PROPERTY UNDER COST-REIMBURSEMENT CONTRACTS IN ORDER TO FACILITATE ITS AUTHORIZED CANCER RESEARCH WORK.

TO THE SECRETARY OF HEALTH, EDUCATION, AND WELFARE, MARCH 12, 1963:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 3, 1962, REQUESTING A DECISION AS TO WHETHER THE PUBLIC HEALTH SERVICE MAY REIMBURSE THE ZOOLOGICAL SOCIETY OF SAN DIEGO, CALIFORNIA, FOR CERTAIN ITEMS OF COST INVOLVING ALTERATIONS TO ITS PREMISES UNDER A COST-REIMBURSEMENT CONTRACT FOR THE EXPERIMENTAL BREEDING OF PRIMATES. YOU SAY IT IS ANTICIPATED THAT OUR DECISION WILL NOT ONLY RESOLVE THE QUESTION CONCERNING THIS CONTRACT, BUT WILL ALSO SERVE AS A GUIDE TO THE PUBLIC HEALTH SERVICE IN NEGOTIATING FUTURE RESEARCH CONTRACTS INVOLVING ALTERATIONS TO, AND REARRANGEMENTS OF, CONTRACTORS' PREMISES.

THERE ACCOMPANIED YOUR LETTER A MEMORANDUM OF THE GENERAL COUNSEL OF YOUR DEPARTMENT IN WHICH THE FACTS INVOLVED ARE STATED AS FOLLOWS:

THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE APPROPRIATION ACT, 1963, UNDER THE HEADING ,GENERAL RESEARCH AND SERVICES, NATIONAL INSTITUTES OF HEALTH" (PUBLIC LAW 87-582, 76 STAT. 373), PROVIDES THAT "ALL APPROPRIATIONS MADE TO THE PUBLIC HEALTH SERVICE IN THIS ACT, AND AVAILABLE FOR RESEARCH OR TRAINING PROJECTS, MAY BE EXPENDED PURSUANT TO CONTRACTS MADE ON A COST OR OTHER BASIS FOR SUPPLIES AND SERVICES. . . .' PURSUANT TO THIS AUTHORITY, AND TO CARRY OUT THE PROVISIONS OF SECTION 301 OF THE PUBLIC HEALTH SERVICE ACT, AS AMENDED (42 U.S.C. 241), THE PUBLIC HEALTH SERVICE HAS ENTERED INTO A COST-REIMBURSEMENT CONTRACT WITH THE ZOOLOGICAL SOCIETY OF SAN DIEGO, A NON-PROFIT CORPORATION, FOR THE EXPERIMENTAL BREEDING OF PRIMATES. IN ORDER TO ACCOMMODATE THE ANIMALS TO BE BRED, THE CONTRACTOR WILL BE REQUIRED TO PROVIDE FACILITIES TO HOUSE THEM. THE ANIMALS WOULD BE HOUSED IN CAGES WHICH WOULD BE LOCATED ON A STEEP SLOPE ON THE ZOO PROPERTY. IT WILL BE NECESSARY FOR THE CONTRACTOR TO HAVE THE FOLLOWING ALTERATIONS MADE TO HIS PROPERTY IN ORDER TO HAVE THE RESEARCH PERFORMED UNDER THE REQUISITE SCIENTIFIC CONDITIONS:

1. INSTALLATION OF THE CAGES, INCLUDING THE FOLLOWING WORK, AT A TOTAL ESTIMATED COST OF $9,918:

A. CLEARANCE OF THE SITE--- $300

B. EXCAVATION FOR FOOTINGS--- $585

C. FINE GRADING--- $633

D. CONCRETE FOOTINGS (35 CU.YDS./--- $1,220

E. CONCRETE SLAB (130 CU.YDS./--- $4,552

F. MASONRY RETAINING WALLS--- $2,628

2. INSTALLATION OF FLOOR DRAINS WITHIN THE CONCRETE SLABS SUPPORTING THE CAGES--- AT AN ESTIMATED COST OF $310.

3. INSTALLATION OF A WATER LINE, ABOVE GROUND, LEADING FROM THE ZOO'S ANIMAL HOSPITAL TO THE PROJECT SITE--- AT AN ESTIMATED COST OF $500.

4. INSTALLATION OF A CHAIN LINK FENCE SURROUNDING THE PROJECT SITE- - AT AN ESTIMATED COST OF $2,009.

THE TOTAL ESTIMATED COST OF THE CONTRACT IS $121,394, OF WHICH THE ESTIMATED SUM OF $12,737 IS FOR ALTERATIONS TO THE CONTRACTOR'S PREMISES. THE ESTIMATED COST OF THOSE ALTERATIONS WHICH MAY BE DEEMED TO BE PERMANENT IMPROVEMENTS IS $10,228 (INSTALLATION OF CAGES AND FLOOR DRAINS, ITEMS 1 AND 2 ABOVE). THE WATER LINE AND THE FENCE (ITEMS 3 AND 4 ABOVE) ARE BOTH REMOVABLE, AND UNDER THE TERMS OF THE CONTRACT, TITLE TO THESE ITEMS WOULD BE IN THE GOVERNMENT.

THE SPECIFIC QUESTION FOR DETERMINATION, BASED UPON THE FACTS QUOTED ABOVE, IS WHETHER THE TOTAL AMOUNT OF ITEMS 1 AND 2, $10,228, WHICH REPRESENTS THE ESTIMATED COST OF ALTERATIONS IN THE NATURE OF PERMANENT IMPROVEMENTS OF THE CONTRACTOR'S PROPERTY, IS A PROPER CHARGE AGAINST PUBLIC HEALTH SERVICE FUNDS IN VIEW OF THE ESTABLISHED RULE THAT APPROPRIATED FUNDS MAY NOT GENERALLY BE USED FOR THE PERMANENT IMPROVEMENT OF PRIVATELY OWNED PROPERTY BY AN AGENCY OF THE UNITED STATES IN THE ABSENCE OF EXPRESS STATUTORY AUTHORITY THEREFOR.

THE GENERAL COUNSEL STATES THAT WHILE YOUR DEPARTMENT ACKNOWLEDGES THE RULE REFERRED TO AND THE PRINCIPLE UPON WHICH IT IS BASED, NAMELY, THAT NO GOVERNMENT OFFICIAL, IN THE ABSENCE OF SPECIFIC LEGISLATION, IS AUTHORIZED TO GIVE AWAY GOVERNMENT PROPERTY, IT IS OF THE OPINION THAT THE RULE IS NOT APPLICABLE TO SITUATIONS IN WHICH THE IMPROVEMENTS ARE INCIDENTAL AND NECESSARY TO THE PERFORMANCE OF RESEARCH OR OTHER SERVICES FOR THE GOVERNMENT BY A CONTRACTOR. IN SUPPORT OF THAT VIEW THERE ARE CITED AND DISCUSSED A NUMBER OF PAST DECISIONS OF THE ACCOUNTING OFFICERS, IN WHICH THE RULE WAS CONSIDERED AND APPLIED, IN SOME OF WHICH THE RULE WAS INVOKED WHILE IN OTHERS THE RULE WAS HELD NOT TO APPLY.

IN FURTHER SUPPORT OF THAT VIEW THE GENERAL COUNSEL EXPLAINS THAT THE CONTRACT HERE INVOLVED WAS NOT ENTERED INTO FOR THE PURPOSE OF MAKING IMPROVEMENTS TO THE CONTRACTOR'S PROPERTY BUT TO SECURE AN END PRODUCT, VIZ., CERTAIN RESEARCH SERVICES. HE POINTS OUT THAT THE RULE WOULD NOT BE APPLICABLE WHERE THE SERVICES ARE OBTAINED ON A FIXED PRICE BASIS BY COMPETITIVE BIDDING, EVEN THOUGH THE CONTRACTOR HAS TO MAKE PERMANENT IMPROVEMENTS TO HIS PROPERTY IN ORDER TO PERFORM THE SERVICES, AND EVEN THOUGH THE BID PRICE REFLECTS THE COST OF SUCH IMPROVEMENTS. THE GENERAL COUNSEL EXPRESSES THE VIEW THAT THE FACTOR OF COMPETITIVE BIDDING DOES NOT AFFECT THE PRINCIPLE OF THE RULE, BUT RELATES TO THE QUESTION OF PRICE RATHER THAN ALLOWABILITY OF COST ELEMENTS.

WITH REFERENCE TO A FIXED-PRICE CONTRACT AWARDED AFTER COMPETITIVE BIDDING, HE SUGGESTS THAT IT COULD NOT BE SAID THAT A GOVERNMENT OFFICIAL HAS GIVEN AWAY GOVERNMENT PROPERTY AND CONTENDS THAT IF THE RULE IS NOT APPLICABLE TO SUCH A CONTRACT, THE DEPARTMENT SEES NO REASON WHY IT SHOULD BE APPLICABLE TO A COST-REIMBURSEMENT CONTRACT. HE EXPRESSES THE VIEW THAT IF THE PUBLIC HEALTH SERVICE FINDS IT IS IN THE BEST INTEREST OF THE GOVERNMENT TO ENTER INTO A COST-REIMBURSEMENT CONTRACT, THE CHOICE OF THIS TYPE OF CONTRACT SHOULD NOT RESULT IN THE DENIAL TO THE GOVERNMENT OF THE RIGHT TO REIMBURSE THE CONTRACTOR FOR EXPENDITURES FOR PLANT ALTERATIONS NECESSARY TO THE PERFORMANCE OF THE RESEARCH, IF SUCH EXPENDITURES WOULD HAVE BEEN PERMISSIBLE UNDER A FIXED-PRICE CONTRACT.

SUMMARIZING, THE GENERAL COUNSEL EXPRESSES THE VIEW THAT THE GENERAL RULE SHOULD NOT BE INVOKED IN THE CASE OF THE CONTRACT UNDER CONSIDERATION BECAUSE (1) THE PURPOSE OF THE CONTRACT IS TO SECURE AN END PRODUCT (RESEARCH SERVICES) RATHER THAN THE IMPROVEMENT OF THE CONTRACTOR'S PROPERTY; (2) THE EXPENDITURES FOR THE IMPROVEMENTS ARE NECESSARY TO ENABLE THE CONTRACTOR TO PERFORM THE REQUIRED RESEARCH; (3) THE TOTAL COST OF THE IMPROVEMENTS IS BUT A SMALL FRACTION OF THE TOTAL PRICE OF THE CONTRACT; AND (4) THE IMPROVEMENTS WILL NOT PROVE USEFUL OR BENEFICIAL TO THE CONTRACTOR AFTER THE COMPLETION OF THE CONTRACT.

THE APPROPRIATION "NATIONAL CANCER INSTITUTE, PUBLIC HEALTH SERVICE," CONTAINED IN THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE APPROPRIATION ACT, 1963, PUBLIC LAW 87-582, APPROVED AUGUST 14, 1962, 76 STAT. 373, IS PROPOSED TO BE CHARGED WITH THE COST OF THE RESEARCH PROJECT CONSIDERED HEREIN. THIS APPROPRIATION TOGETHER WITH THE LANGUAGE OF THE PREAMBLE TO APPROPRIATIONS FOR THE PUBLIC HEALTH SERVICE (76 STAT. 369), AUTHORIZES THE SURGEON GENERAL, UPON THE RECOMMENDATIONS OF THE NATIONAL ADVISORY CANCER COUNCIL, TO INCUR NECESSARY EXPENSES IN CONNECTION WITH A RESEARCH PROGRAM DESIGNED TO PREVENT, CONTROL AND ERADICATE CANCER AND TO OTHERWISE CARRY OUT THE PROVISIONS OF TITLE IV, PART A OF THE PUBLIC HEALTH SERVICE ACT, AS AMENDED.

SECTION 402 (A), TITLE IV OF THE PUBLIC HEALTH SERVICE ACT, APPROVED JULY 1, 1944, CH. 373, 58 STAT. 707, AS AMENDED, 42 U.S.C. 282 (A), PROVIDES THAT IN CARRYING OUT THE PURPOSES OF SECTION 301 OF THE ACT (42 U.S.C. 241) WITH RESPECT TO CANCER THE SURGEON GENERAL, THROUGH THE NATIONAL CANCER INSTITUTE AND IN COOPERATION WITH THE NATIONAL CANCER ADVISORY COUNCIL, SHALL CONDUCT, ASSIST AND FOSTER RESEARCHES, INVESTIGATIONS, EXPERIMENTS, AND STUDIES RELATING TO THE CAUSE, PREVENTION, AND METHODS OF DIAGNOSIS AND TREATMENT OF CANCER. BY THE TERMS OF SECTION 403 (A) OF THE ACT (42 U.S.C. 283 (A) ( ALL APPROPRIATE PROVISIONS OF SECTION 301 ARE MADE APPLICABLE TO THE AUTHORITY OF THE SURGEON GENERAL IN CARRYING OUT THE PROVISIONS OF SECTION 402 (A) INCLUDING, AMONG OTHER THINGS, THE AUTHORITY TO ENCOURAGE, COOPERATE WITH, AND RENDER ASSISTANCE TO OTHER APPROPRIATE PUBLIC AUTHORITIES, SCIENTIFIC INSTITUTIONS, AND SCIENTISTS IN SUCH ACTIVITIES.

WE FIND NOTHING IN THE CITED APPROPRIATION OR ENABLING LEGISLATION FOR THE NATIONAL CANCER INSTITUTE, PUBLIC HEALTH SERVICE, WHICH EXPRESSLY AUTHORIZES APPROPRIATIONS MADE TO THE INSTITUTE FOR CANCER RESEARCH TO BE EXPENDED, UNDER CONTRACTS ENTERED INTO EITHER AS A RESULT OF COMPETITIVE BIDDING OR ON A COST-REIMBURSEMENT BASIS, FOR THE ERECTION OF PERMANENT IMPROVEMENTS ON LAND WHICH IS NOT OWNED BY THE GOVERNMENT AND WHICH WOULD INURE TO THE BENEFIT OF PRIVATE PARTIES. HOWEVER, WE RECOGNIZE THAT, WHERE AS HERE, THE CONGRESS HAS AUTHORIZED THE PUBLIC HEALTH SERVICE TO UNDERTAKE AND CARRY OUT A COMPREHENSIVE CANCER RESEARCH PROGRAM, AND TO COOPERATE WITH AND ASSIST OTHER PUBLIC AND PRIVATE SCIENTIFIC AUTHORITIES, INSTITUTIONS AND SCIENTISTS IN AN EFFORT TO PREVENT, CONTROL AND ERADICATE CANCER, SPECIAL SITUATIONS OCCUR WHERE IT BECOMES ABSOLUTELY ESSENTIAL TO THE SUCCESSFUL ACCOMPLISHMENT OF THE RESEARCH PROGRAM THAT LANDS IN PRIVATE OWNERSHIP BE BENEFITED THEREBY.

AS STATED ABOVE, THE ESTABLISHED RULE IS THAT APPROPRIATED FUNDS ORDINARILY MAY NOT BE USED FOR PERMANENT IMPROVEMENTS TO PRIVATE PROPERTY UNLESS SPECIFICALLY AUTHORIZED BY LAW. 5 COMP. DEC. 478; 6 ID. 295; 2 COMP. GEN. 606; 15 ID. 761; 19 ID. 528. THE RULE IS ONE OF POLICY AND NOT OF POSITIVE LAW; CONSEQUENTLY, SUCH IMPROVEMENTS ARE NOT REGARDED TO BE PROHIBITED IN ALL CASES. SECTION 322 OF THE ECONOMY ACT, AS AMENDED, 40 U.S.C. 278 (A), RELATING TO THE AMOUNT THAT MAY BE EXPENDED FOR REPAIRS, ALTERATIONS AND IMPROVEMENTS, TO LEASED PREMISES, IN EFFECT, CONSTITUTES A LIMITED EXCEPTION TO THE RULE. 21 COMP. GEN. 906; 29 ID. 279.

IN ADDITION, THE DECISIONS OF THE ACCOUNTING OFFICERS HAVE RECOGNIZED THAT, NOTWITHSTANDING THE RULE, IMPROVEMENTS OF A PERMANENT CHARACTER ON LAND NOT OWNED BY THE GOVERNMENT ARE PERMISSIBLE IN EXCEPTIONAL CASES. THAT IS, IF APPROPRIATIONS ARE OTHERWISE AVAILABLE THEREFORE, PROVIDED SUCH IMPROVEMENTS ARE DETERMINED TO BE INCIDENT TO AND ESSENTIAL FOR THE EFFECTIVE ACCOMPLISHMENT OF THE AUTHORIZED PURPOSES OF THE APPROPRIATIONS; THAT EXPENDITURES FOR SUCH PURPOSES ARE IN REASONABLE AMOUNTS AND THE IMPROVEMENTS ARE USED FOR THE PRINCIPAL BENEFIT OF THE GOVERNMENT; AND PROVIDED THAT THE INTEREST OF THE GOVERNMENT ARE FULLY PROTECTED WITH RESPECT THERETO. 18 COMP. GEN. 463; 19 ID. 679; 20 ID. 927; 35 ID. 715; 38 ID. 143. IN APPLYING THE RULE, THESE ARE THE GENERAL PRINCIPLES WE CONSIDER IN DETERMINING THE PROPRIETY OF PROPOSED EXPENDITURES FOR PERMANENT IMPROVEMENTS TO PRIVATE PROPERTY FROM APPROPRIATIONS NOT MADE EXPRESSLY AVAILABLE THEREFOR.

IN LIGHT OF THESE GENERAL PRINCIPLES AND CONSIDERING THE VARIOUS PURPOSES AND EXTENT OF EXPENDITURE, IN CONNECTION WITH RESEARCH CONTRACTS INVOLVING REIMBURSEMENT FOR PERMANENT IMPROVEMENTS TO PRIVATE PROPERTY, THE FACTS AND CIRCUMSTANCES OF EACH PARTICULAR CASE MUST BE FOR CONSIDERATION IN DETERMINING THE PROPRIETY OF EXCEPTIONS TO THE RULE. CONSEQUENTLY, WE DO NOT AGREE WITH THE OPINION EXPRESSED BY YOUR GENERAL COUNSEL TO THE EFFECT THAT WHEN SUCH IMPROVEMENTS ARE INCIDENTAL AND NECESSARY TO THE PERFORMANCE OF RESEARCH OR OTHER SERVICES FOR THE GOVERNMENT BY A CONTRACTOR THE RULE PER SE IS NOT APPLICABLE. TO CONCLUDE OTHERWISE WOULD RENDER THE RULE INEFFECTIVE AGAINST PRESSURES TO REGARD ALL EXPENDITURES UNDER CONTRACTS FOR RESEARCH, WHICH INVOLVE PERMANENT IMPROVEMENTS TO PRIVATE PROPERTY, TO BE INCIDENTAL AND NECESSARY TO THE PERFORMANCE THEREOF, AND, WE TRUST YOU WILL UNDERSTAND THAT IT IS IMPRACTICABLE UNDER THE CIRCUMSTANCES TO EXPRESS MORE PRECISE PRINCIPLES OR GUIDES IN ADVANCE WHICH WOULD GOVERN IN ALL CASES.

FURTHERMORE, WE DO NOT AGREE WITH THE CONTENTION THAT SINCE PERMANENT IMPROVEMENTS TO PRIVATE PROPERTY MAY BE ACCOMPLISHED UNDER A FIXED-PRICE CONTRACT FOR RESEARCH SERVICES AWARDED AFTER COMPETITIVE BIDDING, SUCH IMPROVEMENTS SHOULD BE PERMITTED UNDER A COST REIMBURSEMENT CONTRACT WITHOUT REGARD TO THE RULE. UNDER A FIXED-PRICE CONTRACT AWARDED AFTER COMPETITIVE BIDDING THE GOVERNMENT'S OBLIGATION IS FIXED AND IT IS NOT CONCERNED WITH THE INDIVIDUAL ITEMS OF COST GOING TO MAKE UP THE LOWEST CONTRACT PRICE, BECAUSE IT HAS RECEIVED THE BENEFIT OF COMPETITION FROM BIDDERS WHO ARE INDUCED BY THE BIDDING PROCESS TO OFFER COMPETITIVE PRICES FOR THE CONTRACT WORK. ON THE OTHER HAND, UNDER A COST-REIMBURSEMENT CONTRACT THE GOVERNMENT HAS SELECTED THE CONTRACTOR AFTER HAVING DETERMINED THAT HE IS THE BEST QUALIFIED AVAILABLE CONTRACTOR FROM THE STANDPOINT OF PRICE, TECHNICAL COMPETENCY, PLANT FACILITIES AND OTHER FACTORS. THE QUESTIONS THEN ARISE, AS TO PROPOSED PERMANENT IMPROVEMENTS TO HIS PROPERTY, WHETHER THEY ARE ESSENTIAL FOR THE PERFORMANCE OF THE CONTRACT, WHAT PART OF THEIR COST IS ALLOCABLE TO THE CONTRACT, WHETHER THEY HAVE RESIDUAL VALUE AND WHAT STEPS CAN OR WILL BE TAKEN TO PROTECT THE GOVERNMENT'S INTEREST IN THEIR RESIDUAL VALUE IF THE CONTRACTOR WILL NOT AGREE TO AN ALLOCATION OF THEIR COST. THEREFORE, IT IS OUR VIEW THAT A COMPARISON OF A COMPETITIVELY AWARDED FIXED-PRICE CONTRACT WITH A COST REIMBURSEMENT CONTRACT, FROM THE STANDPOINT OF THE ITEMS OF COST PROPERLY PAYABLE THEREUNDER, DOES NOT OFFER A VALID BASIS FOR DISREGARDING THE REFERRED-TO RULE IN RESPECT OF A COST-REIMBURSEMENT CONTRACT.

REGARDING THE COST-REIMBURSEMENT CONTRACT ENTERED INTO WITH THE ZOOLOGICAL SOCIETY OF SAN DIEGO, CALIFORNIA, FOR THE EXPERIMENTAL BREEDING OF PRIMATES, THE RECORD DISCLOSES THAT THE RESEARCH PROVIDED FOR THEREUNDER WAS DETERMINED NECESSARY FOR THE EFFECTIVE ACCOMPLISHMENT OF THE PURPOSES OF THE APPROPRIATION; THAT THE CONTRACTOR WAS SELECTED BECAUSE THE SAN DIEGO ZOOLOGICAL GARDEN, WHICH IS UNDER THE MANAGEMENT OF THE CONTRACTOR, POSSESSED THE MOST ADEQUATE FACILITIES, PERSONNEL, AND PROFESSIONAL PROFICIENCY OF THE NATURE REQUIRED TO UNDER TAKE THE RESEARCH WORK; AND THAT THE CLIMATE IN THE AREA, AN IMPORTANT ASPECT IN THE RESEARCH, IS IDEALLY SUITABLE FOR THE PROJECT.

ON THE BASIS OF THESE FACTS, THE PERMANENT IMPROVEMENTS AUTHORIZED TO BE MADE TO THE FACILITIES, IN ORDER TO ENABLE THE CONTRACTOR TO PERFORM THE RESEARCH SERVICES FOR THE PRIMARY BENEFIT OF THE GOVERNMENT, REASONABLY APPEAR TO BE INCIDENT TO AND ESSENTIAL IN THE ACCOMPLISHMENT OF THE AUTHORIZED PURPOSES OF THE APPROPRIATION. IN ADDITION, IT APPEARS THAT THE COST OF THE PERMANENT IMPROVEMENTS IS NOMINAL IN COMPARISON WITH THE TOTAL PRICE OF THE CONTRACT AND THAT SUCH IMPROVEMENTS WILL NOT BE USEFUL OR BENEFICIAL TO THE CONTRACTOR AFTER THE COMPLETION OF THE CONTRACT.

IN APPLYING THE ESTABLISHED RULE AGAINST THE EXPENDITURE APPROPRIATED FUNDS FOR PERMANENT IMPROVEMENTS TO PRIVATE PROPERTY UNLESS SPECIFICALLY AUTHORIZED BY LAW TO THE FACTS OF RECORD IN THIS CASE, IT CLEARLY APPEARS THAT THE CONDITIONS OF THE GENERAL PRINCIPLES OUTLINED HEREINBEFORE FOR DETERMINING THE PROPRIETY OF THE PROPOSED EXPENDITURES IN QUESTION HAVE BEEN AFFIRMATIVELY MET AND SATISFIED. ACCORDINGLY, WE ARE OF THE OPINION THAT REIMBURSEMENT BY THE PUBLIC HEALTH SERVICE TO THE ZOOLOGICIAL SOCIETY OF SAN DIEGO, CALIFORNIA, FOR THE COST OF THE PERMANENT IMPROVEMENTS TO ITS PREMISES UNDER THE SUBJECT CONTRACT IS NOT IN CONTRAVENTION OF THE RULE AND, IF OTHERWISE PROPER, EXPENDITURES THEREFOR WILL NOT BE QUESTIONED HERE.

IN THIS CONNECTION, OUR CIVIL ACCOUNTING AND AUDITING DIVISION, IN REPORTING UPON THE CONTRACT CONSIDERED HEREIN, POINTED OUT THAT THE FACTS AND CIRCUMSTANCES IN THIS CASE ARE MUCH CLEARER THAN THOSE FOUND TO EXIST IN OTHER PUBLIC HEALTH SERVICE RESEARCH CONTRACTS INVOLVING MORE EXTENSIVE PLANT IMPROVEMENTS. REPRESENTATIVES OF OUR RESPECTIVE AGENCIES HAVE HAD A NUMBER OF INFORMAL DISCUSSIONS CONCERNING THE LEGAL PROPRIETY OF EXPENDING FUNDS UNDER A COST-REIMBURSEMENT CONTRACT FOR RESEARCH WORK WHICH INVOLVE PERMANENT IMPROVEMENTS TO CONTRACTORS' PREMISES.

AS A PRACTICAL MATTER IN APPLYING THE ESTABLISHED RULE AGAINST THE USE OF GOVERNMENT FUNDS FOR THE PERMANENT IMPROVEMENT OF PRIVATELY OWNED PROPERTY, IT IS VERY OFTEN DIFFICULT TO DRAW A CLEAR LINE BETWEEN IMPROVEMENTS THAT ARE PERMANENT OR TEMPORARY IN CHARACTER, AND TO DETERMINE THE RESIDUAL VALUE, IF ANY, OF THE IMPROVEMENTS THAT REMAIN AFTER COMPLETION OF A CONTRACT. IN VIEW THEREOF AND CONSIDERING THE EXTENSIVE PROGRAM OF RESEARCH PROVIDED BY THE CONGRESS FOR THE NATIONAL CANCER INSTITUTE, PUBLIC HEALTH SERVICE, IN THE FIELD OF CANCER, WE SUGGEST IT WOULD FACILITATE THE PROGRAM OF RESEARCH WORK IF THE MATTER WERE SUBMITTED TO THE CONGRESS WITH THE VIEW OF OBTAINING SPECIFIC LEGISLATIVE AUTHORITY THEREFOR. AS AN EXAMPLE OF SUCH LEGISLATION, SEE THE PROVISIONS OF 10 U.S.C. 2353, RELATING TO THE PERFORMANCE OF RESEARCH WORK BY CONTRACTORS UNDER CONTRACTS WITH THE MILITARY DEPARTMENTS.

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