B-141839, JULY 13, 1966, 46 COMP. GEN. 25

B-141839, JULY 13, 1966, 46 COMP. GEN. 25

PROPERTY - PRIVATE - FEDERAL FUNDS FOR IMPROVEMENTS, REPAIRS, ETC.. THE EXTENSIVE PLANT REARRANGEMENT COSTS CLAIMED BY A UNIQUELY QUALIFIED CONTRACTOR UNDER A COST-REIMBURSEMENT CONTRACT, RENEWED SEVERAL TIMES, FOR A LABORATORY FACILITY ESSENTIAL TO ACCOMPLISH THE RESEARCH WORK CONTEMPLATED MAY BE REIMBURSED TO THE CONTRACTOR FOR REQUIRED ITEMS, NOTWITHSTANDING THE ESTABLISHED POLICY THAT APPROPRIATED FUNDS MAY NOT GENERALLY BE USED FOR PERMANENT IMPROVEMENT OF PRIVATELY OWNED PROPERTY ABSENT EXPRESS STATUTORY AUTHORITY, ESSENTIAL PERMANENT IMPROVEMENTS BEING PERMITTED WHEN APPROPRIATIONS ARE AVAILABLE, EXPENDITURES ARE REASONABLE, AND THE IMPROVEMENTS ARE FOR THE PRINCIPAL BENEFIT OF THE GOVERNMENT, WHOSE INTERESTS ARE FULLY PROTECTED, AND THE COST OF THE IMPROVEMENTS CLAIMED, ESSENTIAL TO WORK UNDER THE CONTRACT AND REASONABLE, COMPRISING ONLY A SMALL PART OF THE ULTIMATE COST, THE TITLE VESTING IN THE GOVERNMENT, AND A PORTION OF THE COST OF THE ITEMS WHICH ARE NOT REMOVED UPON COMPLETION OF THE CONTRACT, RECOVERABLE, THE ITEMS PROPER FOR REIMBURSEMENT MAY BE PAID. APPROPRIATIONS - AVAILABILITY - EXPENSES INCIDENT TO SPECIFIC PURPOSES PRIVATELY OWNED PROPERTY IMPROVEMENT. IN THE ABSENCE OF SUCH STATUTORY AUTHORITY AS PUBLIC LAW 89-115, APPROVED AUGUST 9, 1965, AUTHORIZING FOR A LIMITED PERIOD OF TIME RESEARCH CONTRACTS WITH PROVISION FOR NEEDED RELATED FACILITIES, THE CRITERIA ESTABLISHED IN 42 COMP. GEN. 480 MUST BE STRICTLY COMPLIED WITH IN ORDER NOT TO CONTRAVENE THE GENERAL RULE THAT APPROPRIATED FUNDS MAY NOT BE USED FOR THE PERMANENT IMPROVEMENT OF PRIVATELY OWNED PROPERTY, THE CRITERIA REQUIRING THAT THE RESEARCH CONTEMPLATED BE NECESSARY TO ACCOMPLISH THE PURPOSES OF THE APPROPRIATION, THAT THE CONTRACTOR SELECTED POSSESS THE MOST ADEQUATE FACILITIES, PERSONNEL, AND PROFESSIONAL PROFICIENCY, THAT THE CLIMATE, IF IMPORTANT TO THE RESEARCH, BE IDEALLY SUITABLE FOR THE PROJECT, THAT THE COST OF THE PERMANENT IMPROVEMENTS MUST BE NOMINAL IN COMPARISON WITH TOTAL CONTRACT COST, AND THAT THE IMPROVEMENTS WILL NOT BE USEFUL OR BENEFICIAL TO THE CONTRACTOR AFTER COMPLETION OF THE CONTRACT.

TO JAMES A. HICKEY, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, JULY 13, 1966:

REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 30, 1965, ASKING WHETHER PAYMENT PROPERLY MAY BE MADE OF AN INVOICE SUBMITTED BY HEALTH RESEARCH, INC., FOR $148,064.81 REPRESENTING PLANT REARRANGEMENT COSTS INCURRED UNDER COST-REIMBURSEMENT CONTRACT PH43-63-43.

CONTRACT PH43-63-43 WAS ENTERED INTO ON AUGUST 6, 1962, AND PROVIDED FOR THE ESTABLISHMENT AND OPERATION OF A FACILITY FOR THE PROCUREMENT, PROCESSING, AND DISTRIBUTION OF HUMAN TISSUES IN CONNECTION WITH VIRUS STUDIES. ORGINALLY, THE CONTRACT WAS IN THE AMOUNT OF $305,568 AND COVERED THE PERIOD AUGUST 6, 1962, THROUGH AUGUST 5, 1963; HOWEVER, THE CONTRACT HAS BEEN RENEWED SEVERAL TIMES, AND THE TOTAL ESTIMATED COST OF THE CONTRACT, INCLUDING RENEWALS TO OCTOBER 6, 1966, IS NOW $697,468.

THE COSTS FOR WHICH THE CONTRACTOR NOW SEEKS REIMBURSEMENT APPEARED FROM YOUR LETTER TO HAVE BEEN INCURRED IN THE ALTERATION AND CONVERSION OF AN UNFINISHED BASEMENT INTO LABORATORY SPACE FOR USE IN PERFORMING THE CONTRACT WORK. WHILE THE CONTRACTING OFFICER HAS APPROVED ALL BUT $2,608.84 OF THE AMOUNT CLAIMED, YOUR DOUBT AS TO THE PROPRIETY OF PAYMENT IS SAID TO ARISE---

* * * BECAUSE OF THE POSSIBLE QUESTION AS TO WHETHER REARRANGEMENT COSTS CLAIMED BY THE CONTRACTOR CONSTITUTE TEMPORARY IMPROVEMENTS WHEN CONSIDERED IN THE LIGHT OF THE TOTAL CONSTRUCTION WORK PERFORMED OR WHETHER, WHEN THE REARRANGEMENTS ARE LOOKED AT IN TOTAL, A NEW FACILITY RATHER THAN A REARRANGED FACILITY HAS BEEN CREATED. * * * A FURTHER QUESTION REFERS TO THE FACT THAT THE RESIDUAL VALUE OF IMPROVEMENT TO THE CONTRACTOR'S PROPERTY. ALSO, IF THESE REARRANGEMENTS WERE REMOVED FOR THE BENEFIT OF THE GOVERNMENT UPON TERMINATION OF THE CONTRACT, THE PROCESS OF REMOVAL TOGETHER WITH THEIR USED CONDITION MIGHT TEND TO DIMINISH THEIR VALUE.

ARTICLE III E OF THE CONTRACT PROVIDES FOR PRIOR AUTHORIZATION IN WRITING BY THE CONTRACTING OFFICER FOR VARIOUS COSTS INCLUDING REARRANGEMENT, ALTERATION, RELOCATION, RECONVERSION OR REHABILITATION OFFACILITIES. JUSTIFICATION OF HIS APPROVAL OF THE COSTS NOW IN QUESTION, THE CONTRACTING OFFICER IN A MEMORANDUM DATED NOVEMBER 24, 1965, STATED THAT--

THE POLICY FOLLOWED (BY HIS OFFICE) IN AUTHORIZING REARRANGEMENT IS TO DETERMINE WHETHER SUCH IS BEING DONE FOR THE SOLE PURPOSE OF PERFORMANCE UNDER THE COGNIZANT NIH CONTRACT; THERE IS A DEFINITE SCIENTIFIC NEED; IT IS OF A TEMPORARY AND REMOVABLE NATURE; AND IS ALLOWABLE UNDER THE EXISTING APPROPRIATION ACT.

HE THEN POINTED OUT THAT REARRANGEMENT COSTS APPROVED FOR REIMBURSEMENT UNDER THE CONTRACT WERE OF THE FOLLOWING NATURE:

1. TEMPORARY AND REMOVABLE PARTITIONS, CEILING, HEATING AND AIR CONDITIONING DEEMED NECESSARY TO MAINTAIN CONSTANT TEMPERATURE AND PROVIDE ISOLATION AREAS IMPERATIVE TO THE SCIENTIFIC EFFORT.

2. EXTENSIONS OF THE EXISTING ELECTRICAL AND PLUMBING SYSTEM, INCLUDING LIGHTING, DETERMINED TO BE NECESSARY IN ACCOMPLISHING 1. ABOVE.

3. FLOOR COVERING AND PAINTING DETERMINED SCIENTIFICALLY ESSENTIAL TO MAINTAIN STRICT HYGENIC CONDITIONS NECESSARY FOR PERFORMANCE OF THE CONTRACT WORK.

AS INDICATED IN YOUR LETTER, QUESTION CONCERNING THE PRESENT CLAIM ARISES PRIMARILY BECAUSE OF THE ESTABLISHED RULE OF POLICY 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. SUCH RULE AND QUESTIONS REGARDING REIMBURSABLE CONTRACT COSTS SIMILAR TO THOSE HERE INVOLVED ARE DISCUSSED IN OUR DECISION OF MARCH 12, 1963, 42 COMP. GEN. 480.

WE NOTED IN THAT DECISION THAT THE RULE IS ONE OF POLICY AND NOT OF POSITIVE LAW SO THAT IMPROVEMENTS TO PRIVATE PROPERTY ARE NOT REGARDED TO BE PROHIBITED IN ALL CASES. RELATIVE THERETO, OUR DECISIONS HAVE RECOGNIZED THAT NOTWITHSTANDING THE RULE, IMPROVEMENTS OF A PERMANENT CHARACTER ARE PERMITTED TO BE MADE TO PRIVATE PROPERTY IN CASES WHERE APPROPRIATIONS ARE OTHERWISE AVAILABLE THEREFOR AND 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 INTERESTS OF THE GOVERNMENT ARE FULLY PROTECTED. RECOGNIZED ALSO THAT IT VERY OFTEN IS 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 THE CONTRACT.

WHILE WE HELD THAT THE PERMANENT IMPROVEMENTS INVOLVED IN THE DECISION IN 42 COMP. GEN. 480 WERE NOT IN CONTRAVENTION OF THE GENERAL RULE, THE FACTS IN THAT CASE DISCLOSED THAT (1) THE RESEARCH INVOLVED WAS DETERMINED NECESSARY FOR THE EFFECTIVE ACCOMPLISHMENT OF THE PURPOSES OF THE APPROPRIATION; (2) THE CONTRACTOR WAS SELECTED BECAUSE THE CONTRACTOR POSSESSED THE MOST ADEQUATE FACILITIES, PERSONNEL, AND PROFESSIONAL PROFICIENCY OF THE NATURE REQUIRED TO UNDERTAKE THE RESEARCH WORK; (3) THE CLIMATE IN THAT PARTICULAR AREA, AN IMPORTANT PART OF THAT RESEARCH, WAS IDEALLY SUITABLE FOR THE PROJECT; (4) THE COST OF THE PERMANENT IMPROVEMENTS INVOLVED WAS NOMINAL IN COMPARISON WITH THE TOTAL PRICE OF THE CONTRACT; AND (5) THE IMPROVEMENTS WOULD NOT BE USEFUL OR BENEFICIAL TO THE CONTRACTOR AFTER THE COMPLETION OF THE CONTRACT.

SINCE THE FACTS AND EXPLANATIONS SET FORTH IN YOUR LETTER WERE DEEMED TO BE INSUFFICIENT TO PERMIT A PROPER DETERMINATION TO BE MADE AS TO WHETHER THE IMPROVEMENTS INVOLVED WERE WITHIN THE RULE PERMITTING REIMBURSEMENT TO BE MADE TO THE CONTRACTOR, WE ADDRESSED A LETTER TO THE SECRETARY, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, IN WHICH WE POINTED OUT THAT

THERE IS NOTHING IN THE PRESENT RECORD TO SHOW WHY THE INSTANT CONTRACTOR, WHO APPARENTLY HAD NO LABORATORY SPACE AVAILABLE TO PERFORM THE WORK, WAS SELECTED. THE REARRANGEMENT COSTS FIRST AUTHORIZED IN THE LETTER OF SEPTEMBER 17, 1962, APPEAR TO BE MORE THAN NOMINAL SINCE THEY CONSTITUTED OVER 35 PERCENT OF THE THEN TOTAL CONTRACT PRICE ($119,650 OUT OF $305,568). EVEN IF THE FINANCING OF THESE PERMANENT IMPROVEMENTS COULD OTHERWISE BE DETERMINED LEGALLY PROPER, WE HAVE CONSIDERABLE DOUBTS THAT THE GOVERNMENT SHOULD BEAR THE FULL COST OF PLUMBING AND ELECTRICAL INSTALLATIONS AND OF SUCH ITEMS AS THE CEILING, AIR CONDITIONING AND FLOORING AND PERHAPS OTHERS WHEN SUCH ITEMS APPARENTLY CANNOT BE ECONOMICALLY REMOVED BY THE GOVERNMENT AND DOUBTLESS WILL BE USEFUL OR BENEFICIAL TO THE CONTRACTOR IF LEFT IN PLACE. THE RECORD HERE DOES NOT INDICATE THAT ANY AMOUNT HAS BEEN DEDUCTED FROM THE COST OF THESE MENTIONED ITEMS AND INSTALLATIONS BASED ON THE RESIDUAL VALUE TO THE CONTRACTOR.

WE THEN ASKED TO BE ADVISED OF THE OFFICIAL POSITION OF THE DEPARTMENT ON SEVERAL QUESTIONS, TWO OF WHICH ARE AS FOLLOWS:

(1) DOES THIS WORK QUALIFY FOR FEDERAL FINANCING FROM THESE RESEARCH FUNDS UNDER ALL OF THE LONGSTANDING CRITERIA SUMMARIZED IN OUR DECISION PUBLISHED AT 42 COMP. GEN. 480?

(2) IF THE ANSWER TO QUESTION (1) IS IN THE AFFIRMATIVE, WHAT PORTION OF THE COST OF THE IMPROVEMENTS IS ALLOWABLE?

IN THE ADMINISTRATIVE REPLY DATED JUNE 21, 1966, IT IS STATED THAT THIS CONTRACT WITH HEALTH RESEARCH, INC; WAS THE FIRST OF SEVERAL CONTRACTS FOR THE ESTABLISHMENT OF CENTERS FOR THE PROCUREMENT, PROCESSING AND DISTRIBUTION OF HUMAN TISSUES IN CONNECTION WITH CANCER RESEARCH. THE CONTRACTOR IS CLOSELY ASSOCIATED WITH ROSWELL PARK MEMORIAL INSTITUTE WHICH IS A CANCER HOSPITAL AND CONSTITUTES AN UNUSUAL SOURCE FOR COLLECTION OF MALIGNANT TISSUE. WHILE OTHER PROCUREMENT CENTERS HAVE BEEN SET UP TO SUPPLY THE CANCER RESEARCH PROGRAM NEEDS FOR OTHER VARIETIES OF HUMAN TISSUE, HEALTH RESEARCH, INC., REMAINS TO DATE THE SUPPLIER OF MORE THAN 80 PERCENT OF THE MALIGNANT TISSUE COLLECTED AND DISTRIBUTED UNDER THE TISSUE PROCUREMENT PROGRAM. IN ADDITION TO ITS ACCESS TO MALIGNANT TISSUE FROM CANCER PATIENTS, HEALTH RESEARCH, INC; POSSESSES A LARGE MEDICALLY ORIENTED COMPUTER CENTER CAPABLE OF PROCESSING DATA FOR THE ENTIRE TISSUE PROCUREMENT PROGRAM.

ALSO, IT IS POINTED OUT THAT TISSUE OF THE KIND REQUIRED FOR THE PROGRAM IS HIGHLY PERISHABLE, SENSITIVE TO TEMPERATURE CHANGES AND EASILY CONTAMINATED. THE WORKING AREA AT THE CENTER MUST BE COMPLETELY ASEPTIC, AIR HAS TO BE FILTERED, AND TEMPERATURE HAS TO BE CONTROLLED. THE TISSUE LABORATORY UNDER CONTRACT PH43-63-43 WAS SET UP IN THE KRESS BUILDING, WHERE HEALTH RESEARCH, NC., IS LOCATED, BECAUSE OF ITS CLOSE PROXIMITY TO THE TISSUE SOURCE. WITHIN 5 MINUTES, TISSUE CAN BE COLLECTED FROM SURGICAL OR AUTOPSY PROCEDURES AT ROSWELL PARK MEMORIAL INSTITUTE AND TRANSPORTED TO THE LABORATORY AREA IN THE KRESS BUILDING. IN SUMMARY, IT IS EXPLAINED THAT THE TISSUE PROCUREMENT PROGRAM WHICH WAS DEEMED BY THE NATIONAL INSTITUTES OF HEALTH TO BE ESSENTIAL TO CANCER RESEARCH COULD NOT HAVE BEEN ESTABLISHED WITHOUT EXTENSIVE REARRANGEMENT OF THE FACILITIES OF THE VARIOUS CONTRACTORS SELECTED FOR THE PROGRAM. ALTHOUGH HEALTH RESEARCH, INC. DID NOT HAVE THE SPECIALIZED LABORATORY FACILITIES REQUIRED FOR THE WORK, IT WAS OTHERWISE UNIQUELY QUALIFIED TO BECOME THE PRIME SOURCE OF MALIGNANT TISSUE.

IN VIEW OF THE FOREGOING EXPLANATION, WE WILL NOT FURTHER QUESTION THE SELECTION OF HEALTH RESEARCH, INC., TO PERFORM THE CONTRACT WORK.

TURNING THEN TO THE QUESTION AS TO WHETHER CERTAIN OF THE IMPROVEMENTS WERE PERMANENT RATHER THAN TEMPORARY AND WHETHER THE COST OF ALL IMPROVEMENTS WHETHER PERMANENT OR TEMPORARY ARE REASONABLE WHEN COMPARED TO THE ENTIRE CONTRACT COSTS, IT IS STATED IN THE LETTER OF JUNE 21, 1966, THAT---

* * * ALTHOUGH THE COST AND MAGNITUDE OF THE IMPROVEMENTS WERE CONSIDERABLE, THE CONTRACTING OFFICER APPROVED FOR REIMBURSEMENT UNDER THE CONTRACT ONLY THOSE REARRANGEMENT COSTS WHICH WERE DEEMED TO BE TEMPORARY. THIS IS EVIDENT FROM THE CONTRACTING OFFICER'S LETTER OF OCTOBER 5, 1965 TO HRI IN WHICH ITEMS TOTALING $11,174.98 WERE DISALLOWED FOR PAYMENT BECAUSE THEY CONSTITUTED PERMANENT IMPROVEMENTS. AMONG THE ITEMS DISALLOWED WERE FIRE DOORS, PARTITIONS, PLUMBING, AND CONCRETE FLOOR.

WE RECOGNIZE, HOWEVER, THAT AS THE COMPTROLLER GENERAL STATED IN 42 COMP. GEN. 480, 486,"IT IS OFTEN DIFFICULT TO DRAW A CLEAR LINE BETWEEN IMPROVEMENTS THAT ARE PERMANENT OR TEMPORARY IN CHARACTER;, EVEN ASSUMING THAT SOME OF THE ITEMS ALLOWED BY THE CONTRACTING OFFICER COULD BE DEEMED TO CONSTITUTE PERMANENT IMPROVEMENTS, WE BELIEVE THAT THESE ITEMS ARE PROPERLY REIMBURSABLE UNDER THE CRITERIA STATED IN 42 COMP. GEN. 480.

AS IN THE CASE OF THE CONTRACT INVOLVED IN THAT DECISION IN 42 COMP. GEN. 480, THE CONTRACTOR WAS SELECTED BY NIH BECAUSE OF ITS UNIQUE QUALIFICATIONS TO PERFORM THE REQUIRED WORK, WHICH IN THIS INSTANCE INCLUDED ITS CLOSE PROXIMITY TO, AND ASSOCIATION WITH, AN OUTSTANDING SOURCE OF MALIGNANT TISSUE. IN SELECTING HRI, IT WAS RECOGNIZED BY NIH THAT HRI DID NOT HAVE THE NECESSARY SPECIAL LABORATORY FACILITIES TO HANDLE THE TISSUE. * * * APART FROM THE WASHINGTON HOSPITAL CENTER WHICH WAS NOT A SUITABLE SOURCE FOR THE COLLECTION OF MALIGNANT TISSUE, NIH WAS NOT AWARE OF ANY POTENTIAL CONTRACTOR WHO COULD PERFORM THE REQUIRED WORK WITHOUT EXTENSIVE PLANT REARRANGEMENTS. THERE IS NO QUESTION THAT THE IMPROVEMENTS WERE ESSENTIAL FOR THE EFFECTIVE ACCOMPLISHMENT OF THE WORK.

UNLIKE THE CASE INVOLVED IN THE DECISION IN 42 COMP. GEN. 480, THE TOTAL COST OF THE IMPROVEMENTS TO HRI'S PROPERTY WAS OBVIOUSLY NOT NOMINAL, AND CONSTITUTED A LARGE PERCENTAGE OF THE ESTIMATED COST OF THE INITIAL CONTRACT. THE INITIAL CONTRACT WAS FOR A ONE YEAR PERIOD. THE TISSUE PROCUREMENT PROGRAM WAS, HOWEVER, ESTABLISHED TO SERVE THE NEEDS OF CANCER RESEARCH, AND IT WAS CLEARLY CONTEMPLATED THAT THE PROGRAM WOULD NOT BE LIMITED TO ONE YEAR, BUT WOULD CONTINUE INTO THE INDEFINITE FUTURE, SUBJECT, OF COURSE, TO THE AVAILABILITY OF APPROPRIATIONS. THE HRI CONTRACT HAS BEEN RENEWED SEVERAL TIMES, AND THE TOTAL ESTIMATED COST OF THE CONTRACT, INCLUDING RENEWALS TO OCTOBER 6, 1966 IS $697,468. THE COST OF THE IMPROVEMENTS IS NOW ABOUT 21 PERCENT OF THE TOTAL COST OF THE CONTRACT, AND THE PERCENTAGE WILL DECREASE FROM YEAR TO YEAR, ASSUMING THE PROGRAM IS CONTINUED. IT IS THEREFORE EXPECTED THAT THE TOTAL COST OF THE IMPROVEMENTS TO HRI'S PROPERTY WILL BE BUT A SMALL PART OF THE ULTIMATE COSTS OF THE ESTABLISHMENT AND OPERATION OF THE TISSUE PROCUREMENT CENTER. THIS COST RATIO WOULD BE EVEN SMALLER IF WE SUBTRACT FROM THE TOTAL COST OF THE IMPROVEMENTS THOSE ITEMS WHICH ARE CLEARLY TEMPORARY IN NATURE.

CONCERNING THE QUESTION AS TO WHETHER THE GOVERNMENT'S INTERESTS ARE FULLY PROTECTED WITH RESPECT TO THE IMPROVEMENTS, THE LETTER STATES THAT-- - * * * PARAGRAPH (C) OF CLAUSE 29,"GOVERNMENT PROPERTY" OF THE GENERAL PROVISIONS OF THE CONTRACT PROVIDES THAT "TITLE TO ALL PROPERTY PURCHASED BY THE CONTRACTOR, FOR THE COST OF WHICH THE CONTRACTOR IS TO BE REIMBURSED AS A DIRECT ITEM OF COST UNDER THIS CONTRACT, SHALL PASS TO AND VEST IN THE GOVERNMENT UPON DELIVERY OF SUCH PROPERTY BY THE VENDOR;, PARAGRAPH (D) OF THIS CLAUSE PROVIDES THAT "TITLE TO THE GOVERNMENT PROPERTY SHALL NOT BE AFFECTED BY THE INCORPORATION OR ATTACHMENT THEREOF TO ANY PROPERTY NOT OWNED BY THE GOVERNMENT, NOR SHALL SUCH GOVERNMENT PROPERTY, OR ANY PART THEREOF, BE OR BECOME A FIXTURE OR LOSE ITS IDENTITY AS PERSONALITY BY REASON OF AFFIXATION TO ANY REALTY;, PARAGRAPH (1) OF THIS CLAUSE PROTECTS THE INTERESTS OF THE GOVERNMENT IN THE EVENT OF REMOVAL OF THE GOVERNMENT PROPERTY BY PROVIDING THAT "THE GOVERNMENT SHALL NOT BEUNDER ANY DUTY OR OBLIGATION TO RESTORE OR REHABILITATE, OR TO PAY THE COSTS OF THE RESTORATION OR REHABILITATION OF THE CONTRACTOR'S PLANT OR ANY PORTION THEREOF WHICH IS AFFECTED BY THE REMOVAL OF ANY GOVERNMENT PROPERTY;, PARAGRAPHS (I) AND (J) OF THIS CLAUSE PROVIDE FOR THE SALE OR DISPOSITION OF THE GOVERNMENT PROPERTY AT THE DIRECTION OF THE CONTRACTING OFFICER.

THE CONTRACTING OFFICER DID NOT, AT THE TIME OF THE EXECUTION OF THE CONTRACT, MAKE ANY DETERMINATION AS TO THE DISPOSITION OF THE GOVERNMENT PROPERTY AT THE CONCLUSION OF THE CONTRACT. IT HAS BEEN THE PRACTICE OF NIH TO AWAIT THE CONCLUSION OF ITS CONTRACTS BEFORE DECIDING UPON THE DISPOSITION OF CONTRACTOR INVENTORY, INCLUDING TEMPORARY IMPROVEMENTS TO THE CONTRACTOR'S PROPERTY. WE RECOGNIZE THAT IN THIS INSTANCE IT MAY NOT BE ECONOMICALLY FEASIBLE TO REMOVE AND SELL SEVERAL OF THE ITEMS WHICH CONSTITUTE THE IMPROVEMENTS TO THE CONTRACTOR'S PROPERTY. SHOULD THIS BE THE CASE, IT IS EXPECTED THAT THE CONTRACTING OFFICER WILL, PURSUANT TO THE TERMS OF THE CONTRACT, SELL THE IMPROVEMENTS TO THE CONTRACTOR. * *

IN CONCLUSION, IT IS EXPLAINED THAT SINCE IT WAS ANTICIPATED THAT THE TISSUE PROCUREMENT PROGRAM WOULD BE OF INDEFINITE DURATION, IT WAS BELIEVED THAT IT WOULD HAVE BEEN IMPRACTICABLE, AT THE OUTSET OF THE CONTRACT, TO ARRANGE FOR THE CONTRACTOR TO SHARE IN THE COSTS OF THE IMPROVEMENTS BASED ON THEIR RESIDUAL VALUE TO THE CONTRACTOR. IN ANY EVENT, IT IS URGED THAT THE GOVERNMENT'S INTERESTS ARE PROTECTED BY THE TERMS OF THE CONTRACT CLAUSE DISCUSSED ABOVE.

AS STATED IN 42 COMP. GEN. 480, WE RECOGNIZE THAT IT VERY OFTEN IS 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 THE CONTRACT. IN VIEW OF THE ADDITIONAL INFORMATION AND EXPLANATION NOW FURNISHED, THERE APPEARS NO QUESTION THAT THE ITEMS INVOLVED WERE REQUIRED TO SUCCESSFULLY CARRY OUT THE PURPOSE OF THE CONTRACT. FURTHERMORE, TITLE TO THE PROPERTY FOR WHICH REIMBURSEMENT IS MADE TO THE CONTRACTOR VESTS IN THE GOVERNMENT, AND IT IS INDICATED THAT A PORTION OF THE COST OF SUCH ITEMS NOT REMOVED WILL BE RECOVERED UPON COMPLETION OF THE CONTRACT.

IN ADDITION, ALTHOUGH NOT AFFECTING THE CONTRACT HERE INVOLVED, WE NOTE THAT LEGISLATION SUCH AS THAT SUGGESTED IN 42 COMP. GEN. 480 AUTHORIZING RESEARCH CONTRACTS AND THE PROVISION OF RELATED FACILITIES FOR A LIMITED PERIOD OF TIME NOW HAS BEEN ENACTED AND IS CONTAINED IN PUBLIC LAW 89-115, APPROVED AUGUST 9, 1965, 79 STAT. 448, 42 U.S.C. 292C.

ACCORDINGLY, WE WILL NOT OBJECT TO PAYMENTS MADE TO THE CONTRACTOR IN REIMBURSEMENT FOR THE COST OF ITEMS CONSIDERED HEREIN WHICH THE CONTRACTING OFFICER HAS DETERMINED WERE REQUIRED IN THE COURSE OF THE RESEARCH PROGRAM AND TO BE PROPER FOR REIMBURSEMENT UNDER THE CONTRACT TERMS. IN THE ABSENCE OF STATUTORY AUTHORITY SUCH AS PUBLIC LAW 89 115, HOWEVER, WE MUST AND WILL INSIST IN THE FUTURE THAT ALL THE CRITERIA SET OUT IN OUR DECISION PRINTED AT 42 COMP. GEN. 480 BE STRICTLY COMPLIED WITH.