TITLE: General Services Administration:� Real Estate Brokers' Commissions
BNUMBER: B-291947
DATE: �August 15, 2003
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General Services Administration: Real Estate Brokers' Commissions, B-291947,
August 15, 2003
Decision
Matter of: General Services Administration: Real Estate Brokers'
Commissions
File: B-291947
Date: August 15, 2003
DIGEST
The General Services Administration (GSA) may enter into proposed
contracts with real estate brokers without augmenting its appropriations
since the proposed contracts do not contemplate the government receiving
funds from the brokers. Services rendered under a formal contract at no
cost to the United States do not constitute an acceptance of voluntary
services under 31 U.S.C. S: 1342.
DECISION
The Associate General Counsel, Office of General Counsel, Real Property
Division of the General Services Administration (GSA) requests a decision
from this Office regarding GSA's proposal to enter into a contract with
real estate brokers to represent GSA's interests in lease acquisition and
related services for which GSA would not pay the brokers. Instead, GSA
proposes to offer the brokers the right to represent GSA in their
respective real estate markets and brokers would receive commissions from
owners and landlords of real estate in accordance with industry practice.
As we understand GSA's proposal, we conclude that it may contract with
brokers for lease acquisition and related services at no cost to the
government without augmenting its appropriations. Also, the services
contemplated to be rendered under the brokers' contract at no cost to the
government would not constitute an acceptance of voluntary services under
31 U.S.C. S: 1342. This decision does not address the soundness of the
terms of the contract or advisability of entering into such contracts.
BACKGROUND
The General Services Administration awarded the National Real Estate
Services (NRES) contract in 1997. Under that contract, GSA paid real
estate brokers a fee from appropriated funds in exchange for their
performance of a variety of lease acquisition and other services. The
NRES contract prohibited brokers from receiving any compensation for these
services from sources other than GSA.
However, GSA explains that this method of paying brokers directly and not
allowing brokers to receive commissions from landlords or owners is not
common practice in the real estate industry. GSA advises that real estate
brokers are customarily considered the agents of sellers and landlords,
and while buyers and tenants certainly benefit from brokers' services,
sellers and landlords, not buyers and tenants, pay the brokers. The
payment is usually in the form of a commission for finding a suitable and
willing buyer or tenant for the property in question. The commission is
typically a percentage of the value of the lease. The landlords factor
the commissions into the rent charged to the tenants. The tenants
indirectly pay the commission through their rent payments. Payment of
commissions, according to GSA, is typically regulated by State regulatory
bodies and governed by various state laws that may require disclaimers to
the purchaser.
GSA now proposes to enter into a new contract with brokers to reflect
traditional industry practices. Under the proposed terms of this
contract, instead of paying brokers directly GSA would grant contract
awardees the right to represent GSA in their respective geographic markets
in exchange for the brokers' lease acquisition services in these
markets. The services the brokers would perform would be at *no cost to
the government.* The property owners and landlords would pay broker
commissions in accordance with common industry practice.
DISCUSSION
The main issue presented is whether GSA will improperly augment its
appropriation if it receives the benefit of the brokers' services without
paying for that benefit, thus making the appropriated funds that would
have been used under the previous arrangement to pay brokers available for
other purposes. We conclude that GSA's receipt of services under the
proposed contract without financial cost to the government (*no cost
contract*) would not constitute an improper augmentation of its
appropriation.[1]
It is unconstitutional for money to be drawn from the Treasury without an
appropriation, U.S. Const. Art. I, S: 9, cl. 7. By virtue of the
*miscellaneous receipts* statute, 31 U.S.C. S: 3302(b), an official or
agent of the government receiving money for the government from any
source, absent statutory authority to the contrary, must deposit the money
into the general fund of the Treasury. As a necessary corollary to these
well-established principles, government agencies are prohibited from
improperly augmenting their appropriation from outside sources without
specific statutory authority. B-286182, Jan. 11, 2001. The proposed NRES
contract, however, does not directly implicate these concerns.
First, we have held that agencies may receive the benefit of services
without obligating appropriated funds. B-281281, Jan. 21, 1999 (citations
omitted). Second, some of our cases have distinguished between the
receipt of money and the receipt of services, dealing with the former
under the augmentation rule and the latter under the voluntary services
prohibition. See B-13378 (November 20, 1940). For example, in 63 Comp.
Gen. 459, the Federal Communication Commission accepted donated space and
services at an industry trade show. The question was whether the
Commission could accept donated space and services rather than using its
own appropriations to pay for them. Id. at 460. We concluded that there
was no augmentation because the Commission accepted no funds. The
Commission's exhibit, we noted, was one of the drawing cards that resulted
in increased admission revenues for the promoters. For this reason, it
was to the advantage of the promoters to solicit the Commission's
participation and to waive the usual fees. In return, the Commission's
acceptance of the free space and services afforded it an additional
opportunity to inform the public about radio technology at no increased
cost to the agency. Id. at 461. Since GSA is receiving services and is
not receiving money for the government from the brokers under the proposed
NRES contract, the requirements of the miscellaneous receipts statute (to
deposit money for the United States into the Treasury) and the corollary
rule against augmentation of appropriations are not implicated.
Similarly, we do not believe GSA's proposed contract with brokers would
violate the limitation against voluntary services in 31 U.S.C. S: 1342.
That statute prohibits federal officers and employees from accepting
voluntary services except in certain emergencies, and is intended to
prevent agencies from forcing the Congress to appropriate funds to pay
volunteers who later submit claims for payment. 23 Comp. Gen. 272, 274
(1943). We have held that services received by an agency free of cost
pursuant to a formal contract or agreement do not constitute *voluntary
services* within the meaning of section 1342. 7 Comp. Gen. 810, 811
(1928)(services rendered under a formal contract free of cost to the
United States do not constitute voluntary services); B-13378, supra
(Secretary of Commerce could accept services from private agency rendered
under a cooperative agreement which specified that services would be free
of cost to the government). It would be difficult to characterize the
services contemplated from the brokers in the NRES contract as
*voluntary,* since the brokers' services would be rendered under a formal
contract that would presumably specify the no-cost nature of the contract
and contain mutually binding rights and obligations in the parties
including the exact services to be delivered thereunder in return for the
right to represent GSA in their respective markets. Thus, any potential
future claims for payment from the brokers would be defined by the scope
of the contractual agreement.
CONCLUSION
As we understand the proposal, GSA may enter into proposed contracts with
real estate brokers without augmenting its appropriations since the
contract does not contemplate the government receiving funds from the
brokers. Furthermore, services rendered under a formal contract at no
cost to the United States would not constitute an acceptance of voluntary
services under 31 U.S.C. S: 1342.[2]
/signed/
Anthony Gamboa
General Counsel
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[1] The term *no cost contract* is somewhat of a misnomer, since there
would be no valid contract without mutual consideration. We note that
there is ample consideration to support this arrangement. See T.V. Travel
Inc., 65 Comp. Gen. 109, 113 (1985) and 7 Comp. Gen. 810 (1928) (services
rendered under a formal contract free of cost to the United States do not
cause the contract to be void for lack of consideration when the contract
also contains mutual promises of the contracting parties by which each
contracting party obtains a substantial benefit).
[2] As noted earlier, this decision does not address the soundness of the
terms of the contract or advisability of entering into such contracts.
Also, GSA's submission indicates a possible issue of conflict of interest
between the government getting the best value and the brokers' interest in
getting the highest commission. Given the present request, we leave these
matters to GSA to resolve.