TITLE: B-308010, Department of Agriculture--Cooperative Agreement for Use of Aircraft, April 20, 2007
BNUMBER: B-308010
DATE: April 20, 2007
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B-308010, Department of Agriculture--Cooperative Agreement for Use of Aircraft, April 20, 2007

   Decision

   Matter of: Department of Agriculture--Cooperative Agreement for Use of
   Aircraft

   File: B-308010

   Date:  April 20, 2007

   DIGEST

   The Animal and Plant Health Inspection Service (APHIS), a division in the
   U.S. Department of Agriculture, did not violate the bona fide needs rule
   when it used fiscal year 2000 funds to facilitate purchase of an aircraft
   as part of a cooperative agreement. APHIS had the authority to enter into
   a cooperative agreement with Wyoming Woolgrowers Association (WWGA), but
   made the payments prior to a written cooperative agreement. We do not
   endorse APHIS's actions in expending federal funds prior to executing a
   cooperative agreement and remind APHIS of its duty to protect government
   funds from potential loss.

   DECISION

   The Inspector General (IG), U.S. Department of Agriculture (USDA), asked
   whether expenditures of appropriated funds by the Wildlife Services (WS)
   program office of the Animal and Plant Health Inspection Service (APHIS)
   violated the bona fide needs rule. Letter from David R. Gray, Counsel to
   the Inspector General, USDA, to Anthony Gamboa, General Counsel, GAO, May
   30, 2006 (Request Letter). In August and December 2000, APHIS made
   payments to an aircraft owner to facilitate a purchase agreement between
   the owner and an industry group, Wyoming Woolgrowers Association (WWGA).
   Id. In August 2000, WWGA purchased the aircraft in anticipation of
   entering into a cooperative agreement with APHIS for use of the aircraft
   by WS for its wildlife predation program. Id.

   For reasons explained below, APHIS did not violate the bona fide needs
   rule when it obligated and subsequently expended fiscal year (FY) 2000
   funds to facilitate WWGA's purchase of the aircraft. The purchase
   agreement between WWGA and the aircraft owner credited a portion of
   APHIS's payment as reimbursements for past modifications to the aircraft
   in 1999, which the aircraft owner had made on his own initiative. While
   APHIS's payments reflected the costs the owner had incurred when he made
   the modifications, APHIS had neither instructed the owner to make
   modifications nor was the payment made to induce the owner into making the
   modifications. APHIS was making payments to the owner to defray a portion
   of WWGA's purchase price of the aircraft as measured by the cost of the
   1999 modifications.

   Also, APHIS had the authority to enter into a cooperative agreement for
   use of the aircraft, but APHIS should have definitized and executed its
   agreement with WWGA prior to paying part of the purchase price of the
   aircraft. Otherwise, APHIS risked losing the money it had paid to the
   aircraft owner on WWGA's behalf. However, sufficient evidence exists that
   at the time APHIS made the payments, APHIS and WWGA had already agreed to
   cooperate in the purchase and subsequent exclusive use of the aircraft by
   APHIS. We, however, do not endorse APHIS's actions in expending federal
   funds prior to executing a written cooperative agreement and we remind
   APHIS that it is the duty of all agencies to protect government funds from
   potential loss.

   Our practice when rendering decisions is to obtain the views of the
   relevant federal agency to establish a factual record and to elicit the
   agency's legal position in the matter. GAO, Procedures and Practices for
   Legal Decisions and Opinions, GAO-06-1064SP (Washington, D.C.: Sept.
   2006), available at www.gao.gov/legal.htm. In this case, the Agriculture
   Department's General Counsel provided us with a copy of a May 2005 legal
   opinion in this matter that was prepared for the WS program office. USDA,
   Office of the General Counsel Memorandum for William H. Clay, Deputy
   Administrator, Wildlife Services, Review of Wildlife Services Aircraft
   Expenditures for Violations of Appropriations Law, May 24, 2005 (GC Memo).

   BACKGROUND

   APHIS conducts programs, through its WS office, to eradicate and control
   predatory and other injurious wild animals for the protection of domestic
   livestock. GC Memo, at 1. WS cooperates with states and other cooperators,
   including industry groups, wherein both parties provide resources to meet
   the objectives of the program. Id.

   WS uses aircraft to implement the wildlife predation program. Id. Prior to
   FY 2000, APHIS leased its aircraft for the wildlife predation program in
   Wyoming by competitive solicitation. Id. Because of high leasing costs,
   APHIS sought other means of procuring use of aircraft and ultimately
   cooperated with an industry group, WWGA, who purchased an aircraft for
   APHIS's exclusive use. Id.

   APHIS helped WWGA locate an acceptable aircraft to purchase. Id. WWGA
   entered into a purchase agreement with Baker Air Service (Baker) for the
   aircraft on August 1, 2000. Id. at 2; USDA Inspector General, Audit
   Report: Animal and Plant Health Inspection Service, Wildlife Services,
   Aircraft Acquisition, USDA/OIG-A/33099-1-KC (Sept. 2004) (IG Report).
   APHIS had previously leased this particular aircraft from Baker in the
   summer of 1999. IG Report, at 4. Earlier in 1999, before leasing to APHIS,
   Baker had modified the aircraft to conform to APHIS standards. Id. Baker
   wanted to recoup the costs of these 1999 modifications as part of the
   purchase price of the aircraft. GC Memo, at 2. Also, Baker's aircraft
   required a new engine and other alterations in order to comply with APHIS
   standards. Baker agreed to upgrade the plane but added these costs to
   WWGA's purchase price. Id.

   The final cost of the aircraft exceeded WWGA's available funds, and APHIS
   agreed to pay the costs above what WWGA could afford to spend. Id.
   Therefore, as part of the negotiations for the purchase of the aircraft by
   WWGA, and written as terms of the purchase agreement between Baker and
   WWGA, Baker agreed to sell the aircraft to WWGA for $34,450 on the
   condition that APHIS pay Baker an additional $15,050 to cover the costs of
   Baker's modifications to the aircraft in 1999. GC Memo, at 2; IG Report,
   at 5. Additionally, the purchase agreement between Baker and WWGA made
   sale of the aircraft contingent on APHIS either furnishing or compensating
   Baker for other alterations Baker would make to the aircraft, including a
   new engine, in the amount of $33,450. GC Memo, at 2.

   WWGA paid Baker its share of the purchase price, $34,450, on August 8,
   2000. Id. In August and December 2000, APHIS paid its share of the
   purchase price. On August 9, 2000, APHIS issued a purchase order in the
   amount of $24,500 to an aircraft engine supplier, enabling Baker to
   acquire a new engine for the aircraft. Id.  On August 29, 2000, APHIS paid
   Baker $15,050, covering Baker's 1999 modifications to the aircraft. Id.
   APHIS paid Baker a total of $10,157.92 in December 2000 to cover Baker's
   costs of additional alterations completed in October 2000. Id.

   On November 20, 2000, 3 months after WWGA's purchase of the aircraft,
   APHIS entered into the cooperative agreement with WWGA for APHIS's use and
   management of an aircraft owned by WWGA for aerial hunting services under
   the wildlife predation program. Id.

   On September 30, 2004, the IG published the results of a review of the
   APHIS aircraft cooperative agreement. IG Report. The IG determined that
   APHIS personnel acted inappropriately in facilitating WWGA's purchase of
   the aircraft. Id. at 3. The IG determined that APHIS likely violated
   various appropriations law provisions and recommended that APHIS request a
   legal opinion from the USDA General Counsel's Office (GC) as to whether
   such violations occurred. Id. at 8. The GC determined that, while the
   transactions made by APHIS to facilitate the cooperative agreement, viewed
   in their individual parts, appeared problematic, APHIS did have the
   authority to enter into a cooperative agreement with the industry group
   and had available appropriations to fund the agreement.[1] GC Memo, at 3.
   The IG still questions the propriety of the expenditures of appropriated
   funds and requests our decision in this matter. Request Letter.

   DISCUSSION

   The issue presented to us by the IG is whether there was a bona fide need
   in FY 2000 for the payment for modifications of $15,050 that Baker made to
   the aircraft in FY 1999. Request Letter. We answer that question below.
   However, the facts presented to us raise additional questions about
   APHIS's actions. Therefore, we not only examine the bona fide needs
   question, but we look at APHIS's authority to enter into cooperative
   agreements for use of aircraft and the legality of APHIS's payments to
   facilitate WWGA's purchase of an aircraft at a time when APHIS had not
   definitized or executed a written cooperative agreement with WWGA. We
   start our discussion with the bona fide needs rule.

   Bona Fide Needs Rule

   The IG questions the propriety of the payments of appropriated funds by
   APHIS to Baker for improvements, modifications, and other upgrades to an
   aircraft purchased by WWGA. Request Letter. The GC identified three
   separate payments to Baker. GC Memo, at 2. Only one of the three payments
   is at issue here: the payment of $15,050 for modifications made by Baker
   to the aircraft in 1999.[2] APHIS obligated FY 2000 funds. The IG was
   specifically troubled by this payment because Baker made the improvements
   to the plane in 1999, over a year before the plane was bought by WWGA.
   Request Letter. This decision addresses whether APHIS violated the
   bona fide needs rule by obligating FY 2000 funds.

   The bona fide needs rule, derived from the time statute, 31 U.S.C. sect.
   1502,[3] addresses the availability of an agency's appropriation as to
   time. 73 Comp. Gen. 77, 79 (1994); 64 Comp. Gen. 410, 414--15 (1985). The
   rule is that an appropriation is available for obligation only to fulfill
   a genuine or bona fide need of the period of availability for which it was
   made. 73 Comp. Gen. at 79; B-289801, Dec. 30, 2002. It applies to all
   federal government activities carried out with appropriated funds enacted
   for a fixed period of time, including contract, grant, and cooperative
   agreement transactions. 73 Comp. Gen. at 78--79. An agency's compliance
   with the bona fide needs rule is measured at the time the agency incurs an
   obligation, and whether there is a bona fide need at the point of
   obligation depends on the purpose of the transaction and the nature of the
   obligation being entered into. 61 Comp. Gen. 184, 186 (1981). At issue
   here is whether APHIS's bona fide need arose when the modifications to the
   aircraft were made or whether the bona fide need arose when APHIS acted to
   facilitate WWGA's acquisition of the aircraft.

   The GC opined that APHIS's bona fide need arose at the time the purchase
   agreement was entered into on August 1, 2000, and not in FY 1999 when
   Baker modified the aircraft. GC Memo, at 9. The GC determined that when
   WWGA and Baker signed the purchase agreement, APHIS had a bona fide need
   to pay Baker in order to ensure that APHIS could successfully execute the
   later cooperative agreement with WWGA. Id. Therefore, according to the GC,
   the payments in August 2000 were necessary to guarantee the subsequent
   cooperative agreement, and thus FY 2000 funds were appropriately
   obligated. Id.

   We agree with the GC's determination. APHIS, during the negotiations for,
   and the signing of, the purchase agreement, acted in anticipation of the
   cooperative agreement. APHIS was neither paying for alterations nor
   directly reimbursing Baker for the costs of the alterations. Instead,
   APHIS was making a payment to facilitate WWGA's purchase of the aircraft,
   albeit in amounts related to specific improvements to the aircraft.
   Therefore, the proper event by which to measure the bona fide need was at
   that time when APHIS acted to facilitate WWGA's purchase of the aircraft.
   It was at that point, and not previously, that APHIS had a bona fide need,
   namely, the need to ensure that WWGA was able to purchase the aircraft.
   See 37 Comp. Gen. 155, 159 (1957) (bona fide need determination depends
   upon the facts and circumstances of the particular case). Therefore, the
   actual date that Baker completed the modifications is irrelevant in this
   situation.

   Cooperative Agreement for Use of Aircraft

   Notwithstanding our bona fide needs conclusion, questions remain regarding
   APHIS's decision to pay Baker to facilitate WWGA's purchase of an
   aircraft.[4] The facts of this case present an unusual chain of events
   leading up to the cooperative agreement between APHIS and WWGA. If APHIS's
   contribution to the cooperative agreement was a payment to Baker to
   facilitate WWGA's purchase from Baker, one would have expected APHIS to
   have entered into a written cooperative agreement with WWGA for the
   aircraft prior to paying Baker, and the cooperative agreement would have
   outlined APHIS's share of the costs. Without a written agreement in place,
   APHIS risked losing the money APHIS had paid to Baker on WWGA's behalf.
   However, the evidence indicates that at the time APHIS made the payment,
   APHIS and WWGA had already agreed to cooperate for use of the aircraft.

   Like contracts and grants, cooperative agreements are commonly used
   funding vehicles for agencies to provide financial assistance. 67 Comp.
   Gen. 13, 14--15 (1987); 64 Comp. Gen. 582, 584 (1985). The purpose of a
   contract is to acquire goods or services, 31 U.S.C. sect. 6303; the
   purpose of a grant is to provide financial assistance, id. sect. 6304.
   Generally, the purpose of a cooperative agreement is to provide financial
   assistance to a recipient to carry out a public purpose instead of the
   agency acquiring property or services directly, as the agency would under
   a contract. Id.  sect. 6305. Unlike grants, the agency as a party to a
   cooperative agreement is substantially involved with the recipient who is
   carrying out the activity contemplated in the agreement. Id.; 67 Comp.
   Gen. at 15. APHIS likens the cooperative agreement arrangement to a
   partnership between the agency and what it calls the nonfederal
   cooperator.[5]

     (1) Authority to enter into cooperative agreement for use of an aircraft

   Under the annual Agriculture appropriations acts, APHIS has long been
   authorized to use cooperative agreements with a state or cooperator "to
   carry out programs to protect the nation's animal and plant resources."
   See, e.g., Pub. L. No. 106-387, sect. 713, 114 Stat. 1549A-1, 1549A-29
   (Oct. 28, 2000). APHIS is authorized to conduct various animal control
   programs. 7 U.S.C. sections 426--426c. Section 426 authorizes the
   Secretary of Agriculture to "conduct a program of wildlife services with
   respect to injurious animal species and take any action the Secretary
   considers necessary in conducting the program." The Secretary is required
   to administer the program "in a manner consistent with all of the wildlife
   services authorities in effect on the day before October 28, 2000." Id.
   sect. 426. On October 27, 2000, section 426 authorized the Secretary to
   conduct investigations, experiments, and tests where necessary in order to
   determine, demonstrate, and promulgate the best methods of eradication,
   suppression, or bringing under control various injurious wildlife on areas
   of public and private land. 7 U.S.C. sect. 426 (2000). The Secretary was
   also directed to protect stock and other domestic animals from predatory
   and other animals and was to conduct campaigns for the destruction or
   control of these animals. Id. Section 426, at that time, also provided
   that "in carrying out the provisions of [section 426] the Secretary of
   Agriculture may cooperate with States, individuals, and public and private
   agencies, organizations, and institutions." Id.

   The GC argues that "WS entered into the Cooperative Agreement here to
   further the wildlife predation program, the purpose of which is to protect
   animal resources in the form of various livestock from predatory animals."
   GC Memo, at 5. We agree. The agreement itself says, "These aircraft will
   be used by WS primarily to provide aerial hunting services to Wyoming
   livestock producers and others requesting control of predatory animals."
   Cooperative Agreement Between Wyoming Wool-Growers Association (WWGA) and
   United States Department of Agriculture (USDA), Animal and Plant Health
   Inspection Service (APHIS), Wildlife Services (WS), Regarding Use of WWGA
   Fixed-Wing Aircraft by APHIS-WS, Nov. 2000. In our view, APHIS's authority
   to enter into cooperative agreements for this purpose was broad enough for
   use of aircraft, so long as the aircraft was used to carry out the section
   426 programs. See generally B-306748, July 6, 2006; B-303145, Dec. 7, 2005
   (appropriations are available for expenses which are necessary and
   incident to the proper execution or achievement of the object of the
   appropriation).

     (2) Authority to use appropriated funds for a cooperative agreement for
   use

   of aircraft

   Subsection 1343(d) of title 31, United States Code, prohibits an agency
   from using its appropriation to buy, maintain, or operate an aircraft
   unless its appropriation specifically authorizes the purchase,
   maintenance, or operation of an aircraft. At the time of this transaction,
   APHIS's annual appropriation was available for "the operation and
   maintenance of aircraft and the purchase of not to exceed four, of which
   two shall be for replacement only." See, e.g., Pub. L. No. 106-78, title
   I, 113 Stat. 1135, 1142--43 (Oct. 22, 1999).

   In this case APHIS was not purchasing aircraft; APHIS, instead, entered
   into a cooperative agreement for use of WWGA's aircraft. Because the
   prohibition of 31 U.S.C. sect. 1343(d) is on the purchase of aircraft and
   APHIS did not purchase the aircraft, the prohibition does not apply here.
   We presume that Congress carefully crafted the language of the prohibition
   and when it limited only the purchase of aircraft, it did not otherwise
   intend to limit agencies' use of aircraft. Compare, for example,
   subsection 1343(d) to subsection 1343(b), which prohibits agencies from
   buying or leasing passenger motor vehicles unless specifically provided by
   law. 31 U.S.C. sect. 1343(b)(2). The subsection (b) prohibition against
   leasing was added in 1946. At that same time, subsection (d) was enacted
   to establish the prohibition on the purchase of aircraft, but Congress did
   not mention the leasing of aircraft. "[W]here Congress includes particular
   language in one section of a statute but omits it in another section of
   the same Act, it is generally presumed that Congress acts intentionally
   and purposely in the disparate inclusion or exclusion." Russello v. United
   States, 464 U.S. 16, 23 (1983) (quoting United States v. Wong Kim Bo, 472
   F.2d 720, 722 (5^th Cir. 1972)). At the same time Congress amended
   subsection 1343(b) to include a prohibition on leasing passenger motor
   vehicles, it also added the provision to prohibit the purchase of
   aircraft, omitting any prohibition on the lease of aircraft. Therefore, we
   assume that Congress omitted the prohibition against leasing aircraft
   intentionally. Congress, having affirmatively limited agencies' purchase
   and leasing of passenger motor vehicles at the same time it limited only
   purchase of aircraft can be presumed not to have limited agencies' use of
   aircraft by lease or otherwise.

   Under Agriculture's annual appropriation, APHIS is authorized to use
   appropriated funds "to discharge the authorities of the Secretary of
   Agriculture under [7 U.S.C. sections 426--426b]." Pub. L. No. 106-78.
   Therefore, APHIS had authority to enter into a cooperative agreement with
   WWGA, and APHIS's appropriation is available to fund the costs under the
   agreement.

     (3) Authority to pay amounts to Baker in advance of the written
   cooperative

   agreement

    

   One final issue remains: whether APHIS had the authority to pay amounts to
   Baker in advance of the written cooperative agreement. If APHIS had
   entered into a cooperative agreement with WWGA prior to August 2000, under
   which APHIS agreed to make a payment to Baker to facilitate WWGA's
   purchase of the plane from Baker, we would not be presented with this
   issue. Unfortunately, this version of events is not what actually took
   place. APHIS, instead of making payments under a written, signed
   agreement, made its payments directly to Baker prior to the execution of
   the cooperative agreement with WWGA. In this case, however, it is
   important to examine the course of dealing between APHIS and WWGA because
   the record indicates that APHIS and WWGA had agreed to cooperate at the
   time APHIS made payments to Baker. "A course of dealing is a sequence of
   previous conduct between the parties to an agreement which is fairly to be
   regarded as establishing a common basis of understanding for interpreting
   their expressions and other conduct." Restatement (Second) of Contracts
   sect. 223 (1981). See also Brines v. XTRA Corp., 304 F.3d 699, 703 (7^th
   Cir. 2002).

   The course of dealing between APHIS and WWGA lends support to the finding
   that APHIS and WWGA had agreed to cooperate before APHIS made payments to
   Baker. First, it was APHIS that sought out WWGA as a cooperator. GC Memo,
   at 1. Apparently, because of rising aircraft leasing costs, APHIS was
   looking to enter into a cooperative agreement for use of an aircraft and
   approached an industry group that did not yet own an aircraft. Id. APHIS
   had worked with woolgrowers associations under cooperative agreements in
   several states to carry out the wildlife predation program, and WWGA was
   no exception. Id. APHIS helped WWGA find the aircraft. Id. When WWGA
   notified APHIS that it did not have the necessary funds to acquire the
   aircraft, APHIS agreed to share the cost of the aircraft, to the extent of
   the past modifications and future alterations that Baker made, in order to
   facilitate WWGA's acquisition. Id. at 2. Also, prior to the cooperative
   agreement with WWGA, APHIS had leased the same model plane from another
   party. On August 4, 2000, before making any payments to Baker and before
   entering into the cooperative agreement, APHIS notified the previous
   lessor that APHIS would not renew the option on the aircraft because it
   was transferring its requirement for a plane to WWGA under the cooperative
   agreement. See Baine Clark, B-289545, Feb. 5, 2002.[6] It is clear that
   APHIS made payments to Baker only to aid WWGA in procuring the plane for
   APHIS's exclusive use under the cooperative agreement, and sufficient
   evidence exists to show that APHIS and WWGA had agreed to cooperate before
   APHIS made any payments towards the aircraft purchase.

   While we acknowledge that no real harm came from APHIS's payments to
   Baker, we do not endorse APHIS's actions in expending federal funds prior
   to executing a written cooperative agreement. If something had prevented
   APHIS and WWGA from entering into the cooperative agreement, the
   government could have lost the money APHIS paid to Baker on WWGA's behalf.
   In addition, once executed, the cooperative agreement here did not clearly
   and affirmatively set out all of the duties and responsibilities of the
   two parties. APHIS's failure to put into writing the entirety of its
   relationship with WWGA required us to rely on WWGA's purchase agreement
   with Baker, and addenda thereto, and APHIS's course of dealing with WWGA.
   We remind APHIS that it is an agency's responsibility to protect
   governmental funds from potential loss.[7] See 65 Comp. Gen. 806, 809
   (1986); B-180713, Apr. 10, 1974. Going forward, APHIS should be aware of
   the dangers and take steps to alleviate the possibility of loss. Written
   agreements provide certainty and definition to any relationship between
   the government and another party.

   CONCLUSION

    

   We concur with the USDA GC that APHIS did not violate the bona fide needs
   rule when it obligated and subsequently made payments to Baker to
   facilitate WWGA's acquisition of Baker's aircraft. While APHIS had the
   authority to enter into the cooperative agreement for use of the aircraft,
   APHIS made payments prior to a written cooperative agreement. We do not
   endorse APHIS's actions in expending federal funds prior to executing a
   cooperative agreement and we remind APHIS that it is the duty of all
   agencies to protect government funds from potential loss.

    

    

   Gary L. Kepplinger

   General Counsel

    

    

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

   [1] Also, both the IG and the GC concluded that APHIS personnel violated
   purchase card rules by splitting the cost of the final payment of
   $10,157.92 into five invoices in order to allow for use of purchase cards.
   GC Memo, at 9-10; IG Report, at 10-11. The IG and GC agree that APHIS's
   use of purchase cards was improper, id., and, therefore, this question was
   not presented to GAO.

   [2] The IG examines APHIS's payments by looking at the specific objects
   for which the funds were used. Besides the $15,050 for 1999 modifications,
   APHIS also paid $24,500 to an engine supply company for Baker in FY 2000.
   APHIS obligated FY 2000 funds for this purchase. Therefore, the IG does
   not question the use of FY 2000 funds for this payment. APHIS made a final
   payment of $10,157.92 to Baker for charges for alterations on the aircraft
   in FY 2001. APHIS obligated FY 2001 funds for the final payment. Id. The
   GC directed AHPIS to deobligate the FY 2001 funds used for the final
   payment and obligate its FY 2000 appropriation. Therefore, this payment is
   also not at issue.

   [3] "The balance of an appropriation or fund limited for obligation to a
   definite period is available only for payment of expenses properly
   incurred during the period of availability or to complete contracts
   properly made within that period of availability." 31 U.S.C.
   sect. 1502(a).

   [4] The USDA GC memorandum provides a thorough discussion of APHIS's
   authority to enter into a cooperative agreement for the lease of an
   aircraft, to use appropriated funds for lease of an aircraft, and to pay
   amounts to Baker under the purchase agreement, and we find it unnecessary
   to repeat that discussion in full. See GC Memo.

   [5] USDA-APHIS-Marketing and Regulatory Programs Business Services,
   Frequently Asked Questions, available at
   www.aphis.usda.gov/mrpbs/fmd/agreements_faq.html (last visited Apr. 19,
   2007).

   [6] The previous aircraft lessor filed a bid protest with our Office
   protesting APHIS's decision to use a cooperative agreement for use of
   aircraft instead of a procurement contract for lease. The facts above were
   presented in that protest. We did not examine the merits of the case
   because it was dismissed due to a procedural deficiency.

   [7] See, for example, 31 U.S.C. sect. 3324, which generally prohibits
   advance payments under a contract. The primary purpose of this prohibition
   is to protect the government from nonperformance.