BNUMBER:  B-253202.3
DATE:  May 15, 1996
TITLE:  Deborah L. Childress--Reconsideration

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Matter of:Deborah L. Childress--Reconsideration

File:     B-253202.3

Date:May 15, 1996

DIGEST

Prior decision holding that a relocation service contractor's fee for 
purchasing a transferring employee's residence may not be paid is 
affirmed on reconsideration.  Relocation service contracts entered 
into pursuant to 5 U.S.C.  sec.  5724c (1994) are subject to the 
limitations and restrictions found in 5 U.S.C.  sec.  5724a and in Chapter 
302 of the Federal Travel Regulation.  Under these provisions, 
residence sales expenses may be reimbursed only if the transferring 
employee's residence is the one from which the employee regularly 
commuted to the old official station.  Since the residence purchased 
by the contractor here does not qualify as the employee's commuting 
residence at her old station, the agency lacks authority to pay the 
contractor, even though its agent had authorized the contractor to 
provide the service.  See Office of Personnel Management v. Richmond, 
496 U.S. 414 (1990).

DECISION

By letter of November 9, 1995, PHH Homequity Corporation (PHH), a 
relocation services contractor for the Federal Aviation Administration 
(FAA), asks us to reconsider our decision of March 9, 1995 
(B-253202.2), denying its claim of $82,834.50.

The claim covers PHH's contract fee for its purchase and resale of 
Mrs. Deborah L. (Phelps) Childress's residence in Corona, California, 
in connection with her transfer from the United States Customs Service 
at Tucson, Arizona, to the FAA, in San Pedro, California.  Since Mrs. 
Childress's residence in Corona, California, was not located at her 
old official station in Tucson, Arizona, we denied PHH's claim, even 
though the agency's representative had authorized PHH to provide the 
service.  We affirm our prior decision.

BACKGROUND

PHH was awarded contract No. DTFA01-89-D-00027, by FAA for relocation 
services effective March 1, 1989, for a term of 12 months with three 
12-month option periods.  The contract was a requirements-type 
contract calling for PHH to provide, among other relocation services, 
guaranteed home sale services.  In return, PHH received a fee based on 
the home appraisal value and on the period of time for which the home 
was in inventory prior to resale.  The home sale services involved 
here occurred in late 1992.

Deborah L. Phelps was employed by the Customs Service during 1992, 
stationed at Davis-Monthan Air Force Base, Tucson, Arizona.  On July 
16, 1992, Ms. Phelps, who was then engaged to marry Mr. Richard 
Childress, leased her residence in Tucson, starting in August.  On 
July 28, 1992, she vacated that residence and shipped her household 
goods to the residence of Mr. Childress in Corona, California, 
approximately 425 miles away.  On August 7, she married Richard 
Childress.

On August 23, Mrs. Childress began a temporary duty assignment for the 
Customs Service at March Air Force Base, which is near Corona, and 
where she remained until September 26.  During this period, she 
received a job offer from FAA for employment in San Pedro, California, 
which she accepted, and she reported for duty on October 5.

The FAA issued travel orders to her authorizing permanent 
change-of-station travel for herself, her husband, and stepson, from 
Corona to San Pedro, including real estate transaction expenses.  Mrs. 
Childress requested the use of relocation services, listing her home 
in Corona, California, as her address in the requesting documents.  On 
October 9, 1992, the FAA relocation services coordinator (RSC), the 
official responsible for determining eligibility of FAA employees for 
relocation services, authorized PHH to negotiate its purchase of the 
house owned by Mr. Childress in Corona.

On November 18, 1992, PHH contracted to purchase the Corona residence 
for $161,000, and closed the transaction on November 24, 1992.  PHH 
sold the house on August 9, 1993, for $149,500 and submitted fee 
invoices totaling $82,832.50, consisting of a 10 percent fee of 
$16,100, plus $66,734.50, as an additional fee provided by the 
contract of 41.45 percent of the sales price, for 264 days during 
which period the house did not sell.     

Thereafter, the FAA discovered that the Corona residence was not the 
residence from which Mrs. Childress had commuted to her old duty 
station in Tucson, Arizona.  Based on that finding, the FAA's Regional 
Accounting Manager concluded that there was no authority to pay real 
estate expenses and, therefore, no authority to pay PHH's fee.  
However, the FAA Director of Accounting argued that PHH had acted in 
good faith and should be paid.  The matter was submitted to us for 
resolution.

In our decision of March 9, 1995, we concluded as follows:

     "Although PHH Homequity seeks payment under the terms of a 
     contract, we believe the reasoning of Richmond [Office of 
     Personnel Management v. Richmond, 496 U.S. 414 (1990)] applies 
     equally to its claim.  The contract between the agency and PHH 
     homequity was entered into pursuant to the authority granted by 5 
     U.S.C.  sec.  5724c and subject to the restrictions in section 5724a 
     and in chapter 302, Part 12, of the FTR.  Under these provisions, 
     the FAA is only authorized to use its funds to pay real estate 
     expenses for the sale of an employee's residence at the 
     employee's old station.  The agency lacks authority to use its 
     funds to pay real estate expenses for the sale of an ineligible 
     residence or to arrange with a relocation service contractor for 
     the purchase and sale of an ineligible residence."

RECONSIDERATION REQUEST

PHH, through its counsel, offers several alternative legal arguments.  
It argues that:  (1) the RSC had lawful discretion to make a 
determination that Mrs. Childress's Corona residence was eligible for 
relocation services, which determination bound the FAA whether or not 
the RSC erred in determining Mrs. Childress's eligibility; (2) even 
assuming that the ordering of home sale services for Mrs. Childress 
was unauthorized, the order should not be deemed a nullity because it 
was neither plainly nor palpably illegal; (3) the RSC's failure to 
determine Mrs. Childress's eligibility prior to placing an order is a 
breach of the contract or, alternatively, a constructive contract 
change; and (4) at a minimum, PHH is entitled to relief under the 
doctrine of quantum meruit.  A discussion of each of these arguments 
follows below.

With respect to its first argument, PHH maintains that once the RSC 
determined eligibility, rightly or not, issued a service order, and 
the contractor performed, it became entitled to payment.  PHH cites 
Twin Pipeline Company v. Harding Glass Co., 283 U.S. 353, 356-357 
(1931), for the principle that contract agreements should be 
invalidated on grounds of public policy only in cases plainly within 
the reasons on which that doctrine rests.  PHH argues that there is no 
public policy against enforcement of its contract in view of the 
language of 5 U.S.C.  sec.  5724c, which broadly authorizes the 
discretionary use of agency funds to pay for services rendered under 
relocation services contracts.

PHH further argues that our reliance on Richmond in reaching our 
conclusion is misplaced.  That case involved a claim by a retired 
government employee who received erroneous advice from a government 
employee concerning disability benefits.  The Supreme Court held that 
the government is not estopped from denying benefits based on 
erroneous advice given by its agents because otherwise the 
Appropriation Clause of the U.S. Constitution could be rendered a 
nullity.  In PHH's view, its claim bears no resemblance to Richmond, 
since it is based on a contract rather than on a statutory 
entitlement.

The 1931 Supreme Court case cited by PHH (Twin Pipeline Company) is 
not relevant to this situation.  The Court there dealt with the 
attempt of a manufacturing company to avoid the consequences of a 
contract with a public utility on the ground that the contract 
violated State public policy against monopolies.  The Court rejected 
the argument, stating that it will not invalidate a contract on 
grounds of public policy unless the impropriety is convincingly shown, 
which it found not to be the case.  The question at issue here is not 
one of public policy versus contract rights, but whether the 
government is bound to pay for a service erroneously authorized by its 
agent under a contract.

The short response to PHH's argument concerning the RSC's discretion 
to authorize home sale services for Mrs. Childress's Corona residence 
is that he had no discretion to do so.  Section 5724a of title 5, 
United States Code, provides that under such regulations as the 
President may prescribe, appropriations or other funds available to 
the agency for administrative expenses are available for the 
reimbursement of all or part of the expenses of an employee for whom 
the government pays expenses of travel and transportation under 
section 5724(a) of this title, including "expenses of the sale of the 
residence . . . of the employee at the old station. . . ."

Section 5724c provides:

     "Under such regulations as the President may prescribe, each 
     agency is authorized to enter into contracts to provide 
     relocation services to agencies and employees for the purpose of 
     carrying out the provisions of this subchapter.  Such services 
     include arranging for the purchase of a transferred employee's 
     residence."

The regulations implementing these statutory provisions are found in 
Chapter 302, Part 12, of the Federal Travel Regulation (FTR).[1]  As 
stated in our prior decision, FTR  sec.  302-1.4(k) and 302-6.1(b) require 
that, in order for an employee to be reimbursed residence sales 
expenses, the residence must be the one from which the employee 
regularly commuted to and from the old official station.  See Roger W. 
Montague, B-251211, Feb. 4, 1993.  The performance of temporary duty 
away from the official station does not effect a change of station 
during the pendency of the temporary duty assignment.  John E. Wright, 
64 Comp. Gen. 268, 271-272 (1985).  Therefore, since Mrs. Childress 
never regularly commuted from her residence in Corona to her official 
permanent duty station in Tucson, the Corona residence did not qualify 
as her residence at her old official station.  

As PHH asserts, the Federal Circuit Court of Appeals has distinguished 
Richmond from a claim based on a contract.  That court held that the 
government generally is legally responsible for the mistaken contract 
actions of its contracting officials when they are acting within the 
scope of their authority and not contrary to an express limitation of 
law.  Burnside-Ott Aviation Training Center v. United States, 985 F.2d 
1574 (Fed. Cir. 1993).[2]  However, the court recognized in 
Burnside-Ott that an agency is not authorized to pay a contract claim 
contrary to statutory appropriations, even if its contracting officer 
agreed to the payment.  Id. at 1581.

That is the situation involved here.  An agency's authority to use its 
appropriation to provide home relocation services to a transferring 
employee is limited to services for the employee's residence at the 
old station.  See 5 U.S.C.  sec.  5724a(a)(4)(A) and FTR  sec.  302-12.6(b)(2).  
Mrs. Childress's Corona residence did not qualify for relocation 
services under the statutory and regulatory criteria.  Therefore, the 
agency's appropriation may not be used for the purpose of providing 
home sales services for that residence. 

Alternatively, PHH argues that it should be paid in accordance with 
the rule that a contractor who commits no wrongdoing, but who 
unwittingly performs under an unauthorized order, can still enforce 
the order if it is neither plainly nor palpably illegal.  PHH cites 
John Reiner & Co. v. United States, 325 F.2d 438 (Ct. Cl. 1963), cert. 
denied, 377 U.S. 931 (1964) and Trilon Educational Corp. v. United 
States, 578 F.2d 1356 (1978), as well as other court cases and GAO 
decisions in support.  
PHH argues that the rule applies here because it acted in good faith, 
did not contribute to the mistake in ordering the services, and had no 
notice that the FAA was not following procedures when it ordered the 
services for Mrs. Childress.  It argues that the order was not plainly 
or palpably illegal.

The rule cited by PHH applies to the situation where it has been 
determined that an erroneous award has been made.  Rather than declare 
the erroneously-awarded contract void, the contractor would be allowed 
to recover its costs of performance under a termination for 
convenience, unless the illegality involved is plain and palpable.  
See 52 Comp. Gen. 214 (1972).  This rule has no application where, as 
here, the action is outside the bounds of the agency's contract 
authority.  A contractor who enters into an arrangement with an agent 
of the government bears the risk that the agent is acting outside the 
limitation of his authority, even if both the agent and the contractor 
were unaware of the limitation.  See CACI, Inc., v. Stone, 990 F.2d 
1233 (1993).  Since the RSC had no authority to approve relocation 
services for Mrs. Childress's Corona residence, the FAA is not legally 
bound by that action.

PHH next argues that, even if the order for Mrs. Childress's 
relocation services is unenforceable, the agency, by issuing such an 
order, breached the contract or, alternatively, constructively changed 
the terms of the contract, entitling PHH to an equitable adjustment.  
This contention is not for our consideration.  Whether the RSC's 
failure to determine Mrs. Childress's eligibility prior to authorizing 
the service gives rise to a breach of the contract or to a 
constructive change of the contract are claims that must be submitted 
to the contracting officer for decision, pursuant to the provisions of 
41 U.S.C.  sec.  605 (1994).

Finally, PHH argues that, at a minimum, it is entitled to relief under 
the doctrine of quantum meruit.  It cites Prestex, Inc. v. United 
States, 320 F.2d 367, 373 (Ct. Cl. 1963) in support.  There, the 
government was held liable for the value of what it had received from 
the contractor before the contract was invalidated.  The quantum 
meruit doctrine is not applicable here.  Since the FAA had no 
statutory or regulatory authority to pay the expenses of selling Mrs. 
Childress's Corona residence, it received no benefit from PHH's 
services in connection with that residence.  

CONCLUSION

PHH's good faith in performing the service approved by the RSC is not 
in question.  It is clear, however, that the service was unauthorized 
and that the RSC exceeded his authority when he approved that service.  
Under the Supreme Court holding in Richmond, the government is not 
legally bound by the erroneous actions of its agents when such actions 
obligate the government to pay money out contrary to the clear 
direction of a statute.  Although the Federal Circuit Court of Appeals 
has distinguished Richmond from a claim based on the provisions of a 
contract, it has recognized that the Supreme Court holding does apply 
to a contract claim of entitlement contrary to a statutory 
appropriation.  Based on the existing precedent, we affirm our prior 
decision.

/s/Robert P. Murphy
for Comptroller General
of the United States

1. 41 C.F.R.  sec.  302-12.1 to 302-12.7 (1995). 

2. The contractor in Burnside-Ott sought an equitable adjustment 
because of having been required by the Department of Labor to pay an 
additional amount to employees due to their reclassification to a 
higher classification.  The contractor contended that the contracting 
agency had been responsible for the misclassification and that its 
contract price should be increased accordingly.  The Claims Court 
ruled against the contractor, concluding that, as a matter of law, 
even if government contracting officials had been responsible for the 
misclassification, the Richmond holding bars the application of 
equitable estoppel against the government for monetary claims.  The 
Federal Circuit Court reversed the lower court on the basis that the 
contractor's claim was based upon its contract and was not 
automatically barred as a matter of law.