B-306284, Architect of the Capitol--Payment for Electrical and Security the Thurgood Marshall Federal Judiciary Building, January 5, 2006

TITLE: B-306284, Architect of the Capitol--Payment for Electrical and Security the Thurgood Marshall Federal Judiciary Building, January 5, 2006
BNUMBER: B-306284
DATE: January 5, 2006
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B-306284, Architect of the Capitol--Payment for Electrical and Security Improvements at the Thurgood Marshall Federal Judiciary Building,
January 5, 2006

Decision

Matter of: Architect of the Capitol--Payment for Electrical and Security
Improvements at the Thurgood Marshall Federal Judiciary Building

File: B-306284

Date: January 5, 2006

DIGEST

1. The Administrative Office of the United States Courts (AOUSC) ordered
electric and security upgrades to the Thurgood Marshall Federal Judiciary
Building (the building) that were completed in 2000. Because both the
electrical and the security work benefited all tenants and enhanced the
value of the building and improved its capacity, we do not object to
viewing them as capital improvements.

2. Under the Trust Agreement establishing, among others, the Operating
Reserve Fund, such Fund was available to the extent of available funds for
improvements generally to the building. Although the Architect of the
Capitol (AOC) had other funding options available to it, so long as the
Operating Reserve Fund has adequate available balances, we would not
object to the AOC's use of the Operating Reserve Fund to cover the costs
of the electrical and security improvements.

3. Whether, under the circumstances present here, the Architect of the
Capitol (AOC) should seek reimbursement from the Administrative Office of
the United States Courts (AOUSC) for the electrical and the security work
performed is a discretionary judgment reposed in him. Failure to obtain
reimbursement would not be an augmentation of the AOUSC's funds because as
capital improvements the AOUSC's funds are not directly available and
because the AOUSC's appropriation does not constitute a specific and
exclusive funding source for all improvements to the building.

DECISION

On September 30, 2005, the Architect of the Capitol (AOC), as certifying
officer, requested an advance decision pursuant to 31 U.S.C. sect. 3529(a)
regarding certain fiscal matters related to the disbursement and
reimbursement of funds for electrical and security work performed at the
Thurgood Marshall Federal Judiciary Building (the building). Specifically,
the AOC asks the following three questions:

"(1) Whether the security and electrical upgrades are capital improvements
and not tenant improvements;

"(2) Whether the non-appropriated Operating Reserve Fund was an available
source of funds to pay for these upgrades as directed by my letter dated
June 22, 2005, or was there a more specific source of appropriated funds
that should have been used for either the upgrades to the security system
or upgrades to the electrical system; and

"(3) Whether the AOUSC must reimburse the Architect for any of these
disbursements from the Operating Reserve Fund?"

For the reasons discussed below, we do not object to the AOC's view that
both the electrical and the security work were capital improvements.
Second, we have no basis to object to the AOC's use of the Operating
Reserve Fund to cover the cost of the improvements at issue here. Third,
whether the AOC should seek reimbursement for the cost of the work is a
discretionary judgment for the AOC.

BACKGROUND

Pursuant to Public Law 100-480, 102 Stat. 2328 (Oct. 7, 1988), codified at
40 U.S.C. sections 6501--6507, the AOC, acting on behalf of the United
States, entered into a series of agreements to effectuate the financing,
construction, operation, and leasing of the Judiciary Office Building, now
named the Thurgood Marshall Federal Judiciary Building, 40 U.S.C. sect.
6502(a).

On August 15, 1989, the AOC entered into four agreements for the building
project--

o a Trust Agreement with the United States Trust Company of New York
(Trust Agreement) to finance building construction through the
issuance of certificates of participation and the repayment thereof
over 30 years based on payments from building tenants;
o a Ground Lease of the government land where the building would be
built to JOB Associates;
o a Development Management Agreement with Boston Properties, as agent of
JOB Associates, for the design, development, and construction of the
building (Development Management Agreement); and
o a Master Lease with JOB Associates, as owner of the building, leasing
the building for a 30-year term (Master Lease).

To supervise the building's design, construction, operation, maintenance,
structural, mechanical, and domestic care, and security, Congress created
the Judiciary Office Building Commission (Commission).[1] 40 U.S.C. sect.
6503(c). Congress authorized the Commission to issue rules and regulations
governing the AOC's actions related to the building and the building's use
and occupancy. The Commission issued rules and regulations on June 22,
1989 (Commission Rules and Regulations).

During the project construction phase, the Commission delegated to the AOC
the authority to take the necessary actions to execute the project. Rule 2
of the Commission Rules and Regulations. After completion of the building
by Boston Properties in 1992, the AOC entered into an Occupancy Agreement
on July 27, 1992, with the AOUSC for the use of the building space.
Finally, on August 1, 1996, the AOC entered into a management services
contract with Boston Properties to manage the building.[2] The Commission
also delegated to the AOC the authority, both during the project and
after, to enter into ancillary agreements necessary to carry out its
obligations under the approved Development Management Agreement, Master
Lease, and Occupancy Agreement, including any documentation required for
financing the transactions contemplated by the above agreements. Rule 2 of
the Commission Rules and Regulations.

Funding Sources and Accounting Process

Congress did not appropriate funds for the construction of the building
but, rather, authorized the use of private financing to cover its
construction. The Commission approved the use of trust funds, consisting
primarily of the proceeds from the sale of certificates, to finance the
cost of constructing the building. Rule 2 of the Commission Rules and
Regulations. To facilitate the financing, construction, operation, and
leasing of the building, the Trust Agreement created four accounts--a
Project Fund, an Operating Reserve Fund, a Fixed Rent Payment Fund and a
Certificate Fund. Article III and IV of the Trust Agreement. Two accounts,
the Project Fund and the Operating Reserve Fund, were created generally
for the costs of the project and are relevant to the issues here.[3]

The Trustee deposited the majority of the certificate proceeds in the
Project Fund to cover the costs of the project. Trust Agreement at sect.
3.01. The Project Fund was available, subject to the approval of the
Commission,[4] for the "costs of the project" as defined in the
Development Management Agreement. Trust Agreement at sect. 3.02. The
Development Management Agreement defines the "cost of the project" as the
"sum of development costs," which includes professional costs,
construction costs, financing costs, costs to be reimbursed to the
government, and reserves. Trust Agreement at sect. 3.02; Development
Management Agreement at sections 8.1 and 12.1. After building completion,
if any funds remained in the Project Fund, the Architect could expend such
funds "on the costs of construction of improvements, additions, changes or
renovations to the [building]" or transfer such remaining moneys to the
Operating Reserve Fund. Trust Agreement at sect. 3.02.

The Operating Reserve Fund received a portion of the certificate proceeds
($15,000,000), Trust Agreement sect. 3.01, and is available for, among
other things, "costs to own, manage, operate, maintain, and repair
premises" and for "costs of any improvements to the [building]." Trust
Agreement at sect. 3.04.

Apart from the accounts established by the Trust Agreement, Congress, in
Public Law 100-480, established a revolving fund to, among other things,
receive reimbursements from tenants, such as the AOUSC, and make lease
payments to the Trustee and to pay for the "structural, mechanical, and
domestic care, maintenance, operation, and utilities of the building and
other improvements" (revolving fund). 40 U.S.C. sect. 6507. Finally, the
AOUSC receives an annual appropriation for necessary expenses, as
authorized by law, for the courts, see, e.g., "Salaries and Expenses,
Court of Appeals, District Courts, and Other Judicial Services" in the
Judiciary Appropriations Act, 2005, Pub. L. No. 108-447, 118 Stat. 2809,
2892 (Dec. 8, 2004).[5]

The AOC's financial staff explained the flow of federal funds as
follows.[6] Annually, the AOC and the AOUSC agree on the cost of leasing
space in the building for that year. The lease payment is comprised of
three components--fixed costs, operating expenses, and special services,
all of which are defined in paragraph 8 of the Occupancy Agreement.[7]
Monthly, the AOC deposits into its revolving fund the monthly lease
payment received from the AOUSC. Also monthly, the AOC expends monies for
its operating costs (personnel, insurance, management fees, etc.) out of
the revolving fund. Semiannually, the AOC disburses from the revolving
fund monies to the Trustee for payment on the zero coupon certificates.
See Trust Agreement at sections 3.03 (Establishment and Application of the
Fixed Rent Payment Fund) and 4.02 (Transfers to Certificate Fund).

The Work Performed

In February 1998 and in June 2000, the AOUSC asked the AOC to approve
proposed security and electrical improvements to the building,
respectively. Memorandum from Peter M. Kushner, General Counsel, AOC, to
Gary Kepplinger, Deputy General Counsel, GAO, May 13, 2005 (hereafter
referred to as Kushner Memorandum). The AOUSC's request for the security
upgrades to the building was in response to a 1995 Department of Justice
Vulnerability Assessment of Federal Facilities Report. Kushner Memorandum.
The work, identified by the vulnerability assessment as needed for this
type of federal building, involved the addition of security cameras to the
exterior and interior of the building, adding guard booths at the loading
dock ramps, placing bollards around the front of the guard booths, and
upgrading the monitors at the existing north security desk. Id.

With respect to the electrical work, as early as 1999, the AOUSC
identified a need for additional circuitry and wiring to meet demands on
the building's electrical system's then existing capacity. AOUSC Response
to AOC Request. AOUSC officials also told us that the building was
designed and built to the 1980s era wattage-per-person standards.
Specifically, at the time the building was designed and built, the General
Services Administration (GSA) standard was 2 watts of power per square
foot of space; the current standard is 6-8 watts per square foot. For both
work requests, the AOUSC requested that the AOC cover the costs out of the
Project Fund.

The AOUSC ordered the security upgrades from Boston Properties in March
1999, and the electrical upgrades between April and September 2000. The
AOUSC accepted the security work in December 2001 and verbally accepted
the electrical work around June 2001. The work for both was completed in
late 2000 consistent with the AOUSC work orders. Boston Properties
invoiced the AOC in August 2001 for the electrical upgrade work in the
amount of $299,560 and in November 2001 for the security upgrade work in
the amount of $208,600.

Although the record is not complete, the AOC and the AOUSC agree that,
with respect to the security work, AOC staff approved the AOUSC work
request in July 1998, and with respect to the electrical work request,
while documentation is limited, AOC staff apparently gave verbal approval
sometime in June 2001. Because the process described in the Occupancy
Agreement was not strictly followed and questions were raised over who was
authorized to approve the requested work, the AOC's contracting officer
submitted the procurement actions for proposed ratification of
unauthorized commitments. In June 2005, the AOC ratified the unauthorized
commitments, evidencing the belief that had the proper procedures been
followed, the work orders would have been proper.[8]

ANALYSIS

Question 1: "Whether the security and electrical upgrades are capital
improvements and not tenant improvements?"

While the enabling legislation does not use the terms capital improvements
or tenant improvements, the various agreements entered into pursuant to
the authority granted in the enabling legislation use the term
"improvement" or "tenant improvement." Only the Occupancy Agreement uses
both the term "capital improvements" and "tenant improvements." The Master
Lease describes tenant improvements as those tenant improvements
constructed and installed pursuant to the terms and provisions of the
Development Management Agreement. Article 8.1 of the Master Lease. The
Development Management Agreement, executed on the same day as the Master
Lease, describes a tenant improvement as those tenant improvements that
are "designed, constructed and installed within the [building] in
accordance with the Construction Documents for . . . the Judiciary."
Development Management Agreement at sect. 3.1.4. While none of these
agreements uses the term capital improvements, the Master Lease uses the
term capital expenditures when describing those costs that the AOC, as the
tenant, must pay as part of its operating expenses[9] for operating,
maintaining, and repairing the building.[10] Article 5.2(h) of the Master
Lease.

It is within this framework that the terms and provisions in the Occupancy
Agreement are used. Paragraph 7 of the Occupancy Agreement describes
tenant improvements by referring to that term as it is used in Development
Management Agreement. Further, paragraph 7 of the Occupancy Agreement
contemplated these costs even after construction was complete and
distinguished tenant improvements between those that occur during the
initial construction of the building (pre-occupancy) and those that occur
after occupancy of the building, both envisioning that a tenant
improvement would be anything that was designed, constructed, and
installed within the building for the AOUSC (or other occupants).
Similarly, the term capital improvement in paragraph 8(d) of the Occupancy
Agreement is used synonymously with the term capital expenditure in the
Master Lease. Both documents include capital items as part of the
operating expense component of their reimbursement and envision tenants
requesting these capital items.

While these agreements use the distinct words of capital improvement and
tenant improvement and describe the term tenant improvement generally, the
specificity of those terms as they relate to actual expenditures is
absent. Absent a more specific definition, either in the agreements
between the parties or the applicable statutes, we resort to the common
usages of words and phrases to ascertain their meaning. B-302973, Oct. 6,
2004. In this regard, we used the general parameters defined in the
agreements as well as the common understanding of the concept of a capital
improvement, which is an improvement that extends the useful life of the
asset or enlarges or improves the asset's capacity.[11] A tenant
improvement in this instance would be an improvement that is designed,
constructed, and installed for the exclusive benefit of the AOUSC.

Regarding the electrical work, AOUSC officials informally advised us that
the electrical upgrades were in response to increased use of personal
computers and other computing demands on the original electrical system.
AOUSC officials also told us that the building was designed and built to
the 1980s era wattage-per-person standards. Specifically, at the time the
building was built, the GSA standard was 2 watts of power per square foot
of space. Now the current standard is 6-8 watts per square foot.
Regardless, the electrical upgrades are part of and functionally
indistinguishable from the base electrical systems. In our opinion, they
are as much an integral part of the building shell as the original
electrical system included in the building shell. As an increase in
capacity responding to increased computer usage consistent with normal
business practices and current standards, they benefit all tenants and
enhance the value of the building, both in the sense of the utility of the
building and presumably in a financial sense. Accordingly, we view the
electrical work as a capital improvement.

Regarding the security work, AOUSC officials informally advised us, and
the AOC agrees, that the security upgrades were in response to the 1995
DOJ vulnerability assessment that identified security upgrades needed to
secure a federal building of this type. Unlike the electrical upgrades,
the type of work as well as the items acquired and installed are not all
affixed to the building. For example, the AOUSC can easily remove the
cameras and camera monitors without damaging the cameras or the monitors
or their settings. Both these items have relatively short useful lives,
and, as proof of this proposition, the AOUSC advised us that they have
already replaced the cameras originally purchased as part of this work.
The bollards, the guard booths, and electrical wiring to connect the
cameras and the control monitors at the north guard desk arguably are more
in the nature of fixtures and, from a security perspective, improve the
value and capacity of the building security. Viewed from the perspective
of the various components of the security system, we appreciate that one
may doubt whether the security upgrades could be considered a capital
improvement. Viewed as a whole, however, we would not object to the
treatment of the security upgrade work as a capital improvement for two
reasons: first, we think the work can reasonably be said to enhance and
benefit the building and its tenants as a whole, and second, under similar
circumstances and time frames, the executive branch treated similar
security upgrades as capital improvements. With respect to the second
point, GSA[12] treated similar security upgrades made in response to the
DOJ vulnerability assessment to agency leased space as capital
improvements. In informal discussions with GSA, we learned that security
upgrades were needed to bring its federally occupied buildings into
compliance with minimum standards for a federal building, without which
the building would not be usable by federal tenants.

Question 2(a): "Whether the non-appropriated Operating Reserve Fund was an
available source of funds to pay for these upgrades as directed by [the
Architect's] letter dated June 22, 2005 . . . ?"

As discussed above, the Trust Agreement established the Operating Reserve
Fund, Trust Agreement at sections 3.01, 3.04, and provided for the deposit
to that Fund of $15,000,000 of the proceeds from the sale of the
Certificates of Participation. Id. at sect. 3.01. The Trust Agreement
provides that moneys in the Operating Reserve Fund may be expended solely
for any one or more of the following purposes:

"(a) to pay Operating Expenses (as that term is defined in the Master
Lease);

"(b) to pay Fixed Rent;

"(c) to pay the costs of any improvements to the Judiciary Office
Building; or

"(d) to pay to the Trustee any and all fees, costs and expenses (including

reasonable attorneys' fees) incurred in connection with any of the matters
referred to in Sections 6.03 and 9.04 of this Agreement."

Id. at sect. 3.04 (emphasis added). The issue of whether the electrical
and security upgrades are capital improvements is irrelevant to the
question of whether the Operating Reserve Fund is an available source of
funds to pay for the upgrades. The availability of the Operating Reserve
Fund does not depend on whether an upgrade is a capital improvement or a
tenant improvement. The sole issue is whether the security and electrical
upgrades are "improvements."

The Trust Agreement does not define or limit the meaning of the word
"improvement." To the contrary, the use of the adjective "any," in the
sense of "every; all,"[13] indicates that the parties understood the
Operating Reserve Fund to be available without limitation as to the type
of improvement. Both in informal discussions with the AOC staff and in the
Architect's request letter, the AOC took the view that both the security
and the electrical work were improvements, generally, to the building.
Given the common, ordinary meaning[14] of the word "improvements" as work
done to the building that makes the building more useful, profitable, or
valuable, whether benefiting one occupant or all, we would not disagree.
Accordingly, to the extent that there are adequate and available
balances,[15] we would not object to the use of the Operating Reserve Fund
for both the security and the electrical work.[16]

Question 2(b): "[W]as there a more specific source of appropriated funds
that should have been used for either the upgrades to the security system
or upgrades to the electrical system?"

We have long recognized that where Congress has made a specific
appropriation for a particular item or activity that such appropriation
reflects the judgment of Congress of the amount of public resources
available for such item or activity. 33 Comp. Gen. 214 (1953). The
exhaustion of the amount provided by the specific appropriation does not
authorize charging additional obligations or amounts to a more general
appropriation otherwise available to cover the items or activities. 64
Comp Gen. 138 (1984); 36 Comp. Gen. 526 (1957). To do so would constitute
an improper augmentation of the appropriation specifically available for
the items or activities. 57 Comp. Gen. 163 (1977); 4 Comp. Gen. 476
(A-5216, Nov. 25, 1924). It is these principles which underlie the above
question.

If we assume that these concepts are relevant to the circumstances present
here, there are possibly two appropriations that could be available for
the costs of the improvements at issue. In this regard, the AOUSC receives
annual appropriations for the Courts in the appropriation account
"Salaries and Expenses, Court of Appeals, District Courts, and Other
Judicial Services" (hereafter S&E appropriation). There is also an annual
appropriation for "Court Security, Court of Appeals, District Courts, and
Other Judicial Services" available for equipment and security services in
federal courthouses. Historically, the AOUSC has used the S&E
appropriation account for expenses related to the building, including
lease payments to the AOC, and does not believe that the Court Security
appropriation is available for the electrical and the security work
performed in the building. AOUSC Response to AOC Request Letter. The
AOUSC's rationale is straightforward--the Court Security appropriation is
limited to security for U.S. courthouses, and the building here is not a
courthouse.

The second appropriation that may be available to cover these expenses is
the revolving fund established in the legislation authorizing the project
and its private financing. 40 U.S.C. sect. 6507. The revolving fund
receives amounts transferred from the AOUSC as reimbursement for the costs
of space made available to them. See 40 U.S.C. sections 6506(f), 6507;
Occupancy Agreement at para. 8(a). (The Occupancy Agreement defines the
cost components of the reimbursement to include "special services," which
is defined as "including but not limited to tenant improvements made after
initial occupancy." Id. at para. 8(e).) The revolving fund is available
for paying expenses for "utilities" and "other improvements" of the
building without distinction between capital and tenant improvements. 40
U.S.C. sect. 6507(b)(1).[17] Accordingly, the revolving fund would appear
to be available to the AOC to pay for the electrical and the security
work. The only question is whether it is specifically and, in the
appropriation context discussed above, exclusively available for this
purpose.

The AOUSC's S&E appropriation is provided annually to cover, among other
things, AOUSC's costs of occupying the building. Congress established the
revolving fund as a general account to receive all funds to design,
construct, and operate the building, including rent payments and
reimbursements, and to disburse funds for the building's care,
maintenance, operations, utilities, and improvements generally. 40 U.S.C.
sect. 6507. The accounts established under the Trust Agreement were
created to facilitate the general financing arrangement for the building
as envisioned by chapter 65 of title 40 of the United States Code.

We do not view either of the two appropriation accounts noted above as
specifically available to the exclusion of the accounts established under
the Trust Agreement or each other. In our view the underlying principle of
a specific appropriation account being available to the exclusion of a
general account is inapposite since the accounts established under the
Trust Agreement are not appropriation accounts.[18] As we have explained,
the accounts mentioned above are generally interdependent and support the
financing arrangement Congress chose to cover building construction.
Significantly, the AOUSC's appropriation does not specifically and
exclusively cover all improvements to the building, tenant or otherwise,
but rather generally provides funding to cover the cost of the space
including space alteration projects in the courts of appeals, district
courts, and other judicial services. Further, the Occupancy Agreement
allows[19] the AOUSC to pay for capital improvements as part of the
operating expense component of the monthly lease payment and for tenant
improvements out of the special services component.[20] Moreover, the
statutory funding mechanism for the building envisioned the revolving fund
being available to accept lease payments and pay for expenses of the
building, some of which clearly could be interpreted to be tenant
improvements. 40 U.S.C. sect. 6507. However, we would not view any one of
these accounts as more specific than another, as we use that concept for
purposes of the rules discussed above. In our view, all these accounts
need to be understood as part of the general financing arrangement that
Congress adopted for the construction and operation of the building. As
such, we do not object to the AOC's use of the Operating Reserve Fund to
pay for the work.

Question 3: "Whether the AOUSC must reimburse the Architect for any of
these disbursements from the Operating Reserve Fund?"

After the invoices are paid, the AOC may seek reimbursement from the AOUSC
but is not required to do so. There is nothing in the various agreements
or in the enabling legislation that explicitly ties the availability of
the Operating Reserve Fund or the revolving fund for improvements to a
requirement that the AOC obtain reimbursement.[21] We do not read the
Occupancy Agreement, as discussed above, to preclude the AOC from
obtaining reimbursements from the AOUSC for the improvements as part of
the monthly lease payment, either as part of the operating expense
component for a capital improvement or as part of the special services
component for a tenant improvement. While reimbursement may be the norm,
it is not required for these expenses if the AOC so chooses. See paragraph
8(d) of the Occupancy Agreement.

A decision not to seek reimbursement from the AOUSC would not be an
augmentation of the AOUSC funds for two reasons. First, the AOC views the
work as capital improvements, which the AOUSC's funds are not directly
available for. See footnote 18. Secondly, as noted above, we do not view
the AOUSC's appropriation as providing specifically and exclusively for
all tenant improvements.

CONCLUSION

The electrical and the security work performed were definitely
improvements to the building. Because the improvements benefited all
tenants and enhanced the value of the building and improved its capacity,
we do not object to viewing them as capital improvements instead of tenant
improvements. The AOC had the option of funding the improvements from the
Operating Reserve Fund (and, indeed, from other accounts). Whether, given
the facts and circumstances present here, the AOC should seek
reimbursement from the AOUSC for the electrical and the security work
performed is a discretionary judgment reposed in the AOC.

/signed/

Anthony H. Gamboa

General Counsel

------------------------

[1] The Commission is comprised of 13 members as follows: (1) two
individuals appointed by the Chief Justice from among justices of the
Supreme Court and other judges of the United States; (2) the members of
the House Office Building Commission; (3) the majority and minority
leaders of the Senate; (4) the chairman and the ranking minority member of
the Senate Committee on Rules and Administration; (5) the chairman and the
ranking minority member of the Senate Committee on Environment and Public
Works; and (6) the chairman and ranking minority member of the Committee
on Transportation and Infrastructure of the House of Representatives. 40
U.S.C. sect. 6503.

[2] As of March 1, 2002, the building manager is now CESI. However, for
purposes of the matters at issue here, the building manager was Boston
Properties.

[3] The other two accounts, the Fixed Rent Payment Fund and the
Certificate Fund, are used to facilitate payment to the certificate
holders.

[4] Paragraph 8(c) of the Occupancy Agreement states that after
construction work is complete, the AOC shall make a recommendation to the
Commission for any uses of any excess funds in the Project Fund.

[5] The AOUSC also receives an appropriation for the salaries and expenses
of the AOUSC.

[6] The AOC's financial staff informally told us that there also have been
disbursements directly from the trust funds for improvements related to
the building, as authorized by the AOC, and the AOUSC confirmed this to
us. Electronic mail response from Robert Loesche, Deputy General Counsel,
AOUSC, to Jacquelyn Hamilton, Deputy Assistant General Counsel, GAO,
October 11, 2005 (hereafter referred to as AOUSC Response to AOC Request).

[7] Fixed costs, based on a per rentable square footage, is a pro rata
share of all costs involved in constructing the building; operating
expenses are the pro rata share of the AOC's (1) actual costs of managing,
operating, maintaining, servicing, cleaning, and repairing the building
and grounds for tenants in general, (2) cost of capital improvements to
the building requested by AOUSC, (3) actual costs of providing security,
and (4) actual costs of electricity and other utilities consumed; and
special services are for reimbursement of the AOC's actual expenses for
providing individual or nonrecurring services requested by the AOUSC,
including tenant improvements. Occupancy Agreement at para. 8(c), (d), and
(e).

[8] The AOC ratified these commitments based on its determinations that
the work for both improvements was ordered, apparently with the knowledge
and approval of staff of the AOC, and needed, performed, and accepted by
the AOUSC; Boston Properties, the contractor, performed in good faith in
accordance with the terms of the work orders; the amount claimed
represented a fair and reasonable value for the benefit received; and
there was no statutory prohibition that would preclude use of government
funds for this purpose. AOC Memorandum, Approval to Ratify Unauthorized
Commitment, June 1, 2005; See B-306353, Oct. 26, 2005.

[9] In addition to paying the operating expenses, the AOC was also
responsible for paying fixed rent as tenant under the Master Lease.

[10] Section 3.04(a) of the Trust Agreement expressly adopts by reference
the term capital expenditure for purposes of describing uses of the
Operating Reserve Fund.

[11] This common understanding is consistent with generally accepted
government accounting standards. See Federal Accounting Standards Advisory
Board, Statement of Federal Financial Accounting Standards No. 6,
Accounting for Property, Plant, and Equipment. See also 42 C.J.S.
Improvements sect. 2 (2005).

[12] While the relationship between the AOC and the AOUSC is similar to
the landlord-tenant relationship used by GSA with federal entities leasing
space from it, it is not identical and there are some significant
differences. Most notably is the statutory authority for tenants in space
leased by GSA to pay GSA for capital improvements. It is important
because, as discussed later, unless otherwise provided in law, agencies
are prohibited from entering into contracts and paying for the erection,
repair, or furnishing of any public building, or for any public
improvement to the building without specific statutory authority. 41
U.S.C. sect. 12.

[13] The Random House College Dictionary 61 (1980) ("4. every; all: Read
any books you find on the subject."). See also, B-302973, Oct. 6, 2004.

[14] A common definition of "improvement" is "5. a bringing into a more
valuable or desirable condition, as of land or real property; a making or
becoming better; betterment. 6. something done or added to real property
which increases its value." The Random House College Dictionary 669
(1980).

[15] The Trust Agreement at sect. 3.04 provides in effect for the AOC and
the Trustee to maintain a minimum balance in the Operating Reserve Fund of
$5,000,000 during the term of the Trust Agreement. The Trust Agreement
further provides that after payment of all amounts due to certificate
holders and all other obligations of the government under the Trust
Agreement, any amounts remaining in the Funds established under the Trust
Agreement shall be remitted to, or upon the order of, the AOC. Trust
Agreement at sect. 3.05.

[16] If we assume the various conditions on the use of the Project Fund
are satisfied, i.e., Commission approval and minimum remaining balance,
the reserves of the Project Fund are available (1) for the same reasons as
the Operating Reserve Fund and (2) because the electrical and the security
work would be considered an operating expense as defined by the various
agreements. See Occupancy Agreement at para. 8(c), Trust Agreement at
sect. 3.04, and Exhibit E (Glossary of Terms) of the Master Lease.

[17] Nothing in the legislative history enacting the revolving fund would
be inconsistent with this view.

[18] The accounts established under the Trust Agreement hold private funds
held for investment in trust in a commercial bank. Those funds are not
held in trust for the benefit of the federal government and their use is
governed by the Trust Agreement.

[19] While section 12 of title 41 of the United States Code prohibits
AOUSC from entering into contracts and directly paying for the erection,
repair, or furnishing of any public building, or for any public
improvement to the building, Congress did expressly provide for AOUSC's
reimbursement of such expenses through the revolving fund and the
Occupancy Agreement implements that authority by permitting the AOUSC to
pay for capital improvements as part of the operating expense component of
the monthly lease payment. See Occupancy Agreement at para. 8(d) and 40
U.S.C. sect. 6507.

[20] The Occupancy Agreement also allows the AOUSC to contract for
directly and to fund tenant improvements separately with the approval of
the AOC. Occupancy Agreement at para. 7(b).

[21] As noted above, the only requirement is that the Operating Reserve
Fund maintain a balance of $5,000,000. If the balance goes below
$5,000,000, the AOC must restore the balance with existing available
appropriations or seek in good faith an appropriation for such purposes
from Congress. See Trust Agreement at sect. 3.04.