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B-174839 1 (1984-03-20)

handle is hein.gao/gaobadlpf0001 and id is 1 raw text is: r THE COMPTROLLER GENERAL OKOISION • P. o THE UNITED ETATES S WASHINGTON. 0. C. 20548 FILE: B-174839 DATE: March 20, 1984 MATTER OF: Navy Industrial Fund: Obligations in connection with long-term vessel charters DIGEST: Provision in Supplemental Appropriations Act, 1983, specifies that termination liability of Navy's TAKX and T-5 ship-leasing programs should be recorded as obligation in the Navy's current operations and maintenance appropria- tion, but only in an amount equal to 10 percent of outstanding gross termination liability. GAO agrees with Navy position that the enact- ment constitutes contract authority to cover remaining 90 percent of TAKX and T-5 termina- tion liability. The Comptroller of the Navy has requested our concurrence in his interpretation of a provision included in the Supple- mental Appropriations Act, 1983, concerning the recording of obligations for termination liability for the TAKX and T-5 ship-leasing programs. As discussed below, we agree with his view that the provision constitutes contract authority to cover all but 10 percent of the termination liability arising from the TAKX and T-5 ship charters. Consequently, we agree that, upon charter commencement, TAKX and T-5 obligations should be recorded against the Navy Industrial Fund in an amount equal to the charter costs of each vessel during the 5-year charter period, as well as against the Navy's operation and maintenance (O&M) appropriation for the then-current fiscal year, in an amount equivalent to 10 percent of the gross termination costs that would be due for failure to renew the charters after the initial 5-year contract period. In our decision 62 Comp. Gen. 143 (1983) we concluded that termination expenses in the TAKX charter agreements constituted one of two alternate obligations for which the Navy would be contractually liable at the end of the first 5-year lease period (the other obligation being the cost of continuing the charter agreement for a second 5-year lease period, plus costs of continuation or termination after 10 years). In order that the Navy's recorded obligation fully reflect this continuation of liability after the initial 5-year lease period, we deter- mined that the Navy should record an obligation to cover termination costs as the less expensive of the two alternate obligations. 62 Comp. Gen. at 147. We further noted that the obligational availability of the Navy Industrial Fund appeared to be insufficient to cover both base-period lease costs and

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