BNUMBER:  B-262168
DATE:  May 24, 1996
TITLE:  John Martino

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Matter of:John Martino

File:     B-262168

Date:May 24, 1996

DIGEST

The Claims Collection Act and 31 U.S.C.  sec.  3702(a) provide GAO with 
jurisdiction over claims submitted by employees against whom liability 
has been assessed by their agencies.  Our review is limited to a 
review of the agency's legal basis for assessing liability (i.e., the 
existence of statutory authority or appropriate regulations), whether 
the agency has followed the applicable statute and regulations, and 
whether the agency had a rational basis for assessing liability.  
Where the Panama Canal Commission found that the employee, a 
contracting officer, failed to comply with the Federal Acquisition 
Regulation requirement to conduct a market price study prior to 
extending a contract, a rational basis exists for assessing liability 
against him.  Employee was provided notice and a hearing pursuant to 
31 U.S.C.  sec.  3716 and agency regulations.  The Panama Canal Commission 
acted properly in using administrative offset procedures to set off 
his debt against his final salary payments and accumulated leave and 
is entitled to proceed through the Office of Personnel Management to 
collect the balance remaining against his Civil Service Retirement 
Fund account.
        
DECISION

This decision is in response to a letter from the attorney for John 
Martino concerning his indebtedness to the Panama Canal Commission 
(PCC).  Mr. Martino is contesting the validity of an $88,040 
assessment of indebtedness on his part to the PCC.
 
BACKGROUND

The case stems from the 1991 extension authorized by Mr. Martino of 
the PCC's contract PC-1p-1903 for liquid chlorine.  In January of 
1994, the PCC Inspector General reported irregularities in the 
procurement and the PCC subsequently found that Mr. Martino was 
obligated to pay the agency the sum of $88,040 as reimbursement for 
the unnecessary expenditure of commission funds for which he was 
alleged to be responsible.   

Mr. Martino retired from the PCC effective January 4, 1994.  In March 
1994, PCC sent Mr. Martino notice of his indebtedness.  The PCC 
partially offset the debt against his final salary payments and 
accumulated leave and informed Mr. Martino that the offset was in 
accordance with the Federal Claims Collections Standards, 4 C.F.R. 
Part 102 (31 U.S.C.  sec.  3716 (1994)).  PCC is seeking the balance of the 
debt through administrative offset against monies due to Mr. Martino 
from the Civil Service Retirement and Disability Fund.

Mr. Martino claims that the offset against his salary was required to 
be conducted pursuant to 5 U.S.C.  sec.  5514 (1994) and its implementing 
regulations found in 35 C.F.R. Part 256 which provide him the 
opportunity to question the validity of the debt by submitting a claim 
to our Office.

In response, the PCC asserts that GAO does not have jurisdiction over 
this matter.  In a letter to our Office, the PCC reiterates its 
assertion that the offsets were commenced after Mr. Martino's 
retirement and that its action is therefore an administrative offset 
against a former employee under 4 C.F.R. Part 102, not a salary offset 
against a current employee subject to further proceedings under 35 
C.F.R. Part 256.

ANALYSIS AND CONCLUSION

Under 31 U.S.C.  sec.  3702(a) (1994) the Comptroller General has the 
authority to settle all claims of or against the United States 
Government, except those claims which are under the exclusive 
jurisdiction of administrative agencies pursuant to specific statutory 
authority.  Our Office has recognized that the PCC has limited 
authority granted under the Panama Canal Act of 1979 to settle the 
claims arising against the government and the PCC relating to property 
damage and loss and personal injury or death arising from the 
operation of the waterway.  Panama Canal Commission Liability and 
Settlement Authority on Claims, B-197052, Apr. 22, 1980.  Our Office, 
however, has jurisdiction under 31 U.S.C.  sec.  3702(a) of other claims by 
or against the PCC in the absence of any statutory authority granting 
jurisdiction to the PCC over such claims.

Our jurisdiction over Mr. Martino's claim does not depend on whether 
the collection is taken as a "salary offset" under 5 U.S.C.  sec.  5514 or 
as an "administrative offset"  under 31 U.S.C.  sec.  3716.  However, in 
light of Veterans Administration, 64 Comp. Gen. 907 (1985), we agree 
with PCC that the offset against Mr. Martino's final salary 
appropriately was made under the Federal Claims Collection Act, 31 
U.S.C.  sec.  3716, i.e., "administrative offset." 

Turning to the merits of the dispute, we have limited our review of 
claims by agencies against employees to a review of the agency's legal 
basis for assessing liability (i.e., the existence of statutory 
authority or appropriate regulations) and whether the agency has 
followed the applicable statute and regulations.  We will not 
second-guess the agency's determination that a given set of facts 
constitutes negligence unless the agency's finding can be said to lack 
a rational basis.  Walter C. Stephenson, 65 Comp. Gen. 177, 179-80 
(1986).

The PCC assessed liability against Mr. Martino, the contracting 
officer, for failing to comply with the Federal Acquisition Regulation 
(FAR) requirement to conduct a market price study prior to extending a 
contract.  FAR  sec.  17.207.  PCC also relied on its acquisition 
regulations, set out in 48 C.F.R. Part 35, which state that personal 
liability may be assessed against the individual who has made an 
unauthorized commitment of government funds.  Panama Canal Commission 
Acquisition Rules (PAR)  sec.  3501.602-3(b)(1).

The basis for assessing the debt against Mr. Martino was the lack of 
evidence that he conducted or relied upon any kind of market survey in 
signing the contract extension as required by regulation.  PCC's 
Inspector General found substantial evidence to support the conclusion 
that the extension was made with the knowledge that it was not 
supported by fact and was contrary to law or regulation.  In 
particular, the contract extension was for $355/ton of liquid chlorine 
at a time when the producer price index was around $200/ton at the 
point of origin and the contractor was paying $165/ton to its 
supplier.  The PCC concluded that since prices were considerably lower 
than the PCC was paying, Mr. Martino could not have conducted the 
required investigation of market prices prior to extending the 
contract.  The PCC found that Mr. Martino's deliberate disregard of 
the FAR which required a market analysis made him responsible for the 
losses sustained by PCC as a result of his actions.  Given the wide 
disparity in prices between what the PCC paid and what it might have 
paid for the commodity in question, we conclude that the PCC had a 
rational basis for the finding it reached.

In collecting the debt through administrative offset under 31 U.S.C.  sec.  
3716, the PCC proceeded in accordance with 4 C.F.R. Part 102.  The 
procedural rights to which Mr. Martino was entitled included written 
notice of the nature and amount of the debt, notice of the agency's 
intention to collect the debt by offset, an opportunity to inspect and 
copy agency records pertaining to the debt, the opportunity to obtain 
review within the agency of the determination of indebtedness, and the 
opportunity to enter into a written agreement with the agency to repay 
the debt. 

Our analysis of the record indicates that the PCC followed the 
applicable statute and regulations in administering the offset.  Mr. 
Martino was provided notice of his indebtedness on March 2, 1994, 
PCC's intention to administratively offset the debt was provided in a 
June 14, 1994, letter to Mr. Martino; Mr. Martino was furnished 
documents on June 20, 1994; and a hearing was held with Mr. Martino 
present on October 18, 1994.  

Given the limited scope of our review in this case, there is no relief 
our Office can grant Mr. Martino.  As noted above, we conclude that 
the PCC had a rational basis for assessing liability against him.  
Moreover, it followed the applicable statute and regulations.  
Accordingly, the collection action taken through administrative offset 
was proper and the PCC may proceed through the Office of Personnel 
Management to collect on its claim against Mr. Martino's Civil Service 
Retirement and Disability Fund account. 

/s/Seymour Efros
for Robert P. Murphy
General Counsel