oversight

Impoundment Control: President's Third Special Impoundment Message for FY 1990

Published by the Government Accountability Office on 1990-03-06.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                                                                             P
    Comptdler     General
    of the United lStafee
    Waohh#on,    D.C. 20648

     B-237297.3

    March 6, 1990
                                                                                 140998
    To the President of the Senate and the
    Speaker of the House of Representatives
    On February        6, 1990, the President          submitted     to the Congress
    his third       special     impoundment message for fiscal            year 1990
    covering      19 deferrals       of budget authority.           We concluded      in
    a letter      dated February 20, 1990, to the Honorable
    Robert C. Byrd and Mark 0. Hatfield                  of the Senate
    Appropriations          Committee that 14 of these deferrals               and a
    portion      of a fifteenth       deferral     are not authorized        under
    the Impoundment Control            Act of 1974, as amended, 2 U.S.C.
    S 681 et se             We have now concluded         that the remainder        of
    the fifteen
             ----z!* h deferral       and two other deferrals          are also
     unauthorized.          One deferral     is authorized       and we are in the
    process of ascertaining            the justifications         for another
    concerning       a classified      project.       Enclosure     I provides
    specific      information      with regard to 10 of the deferrals,
    which we believe          will   be useful     to the Congress in its
    examination        of the message.         Enclosure     II provides     a list     of
    the deferrals        as reported      by the President.

    BACKGROUND
    Section   1013 of the Impoundment Control     Act, as amended in
    1987 by Public    Law 100-119, 101 Stat.    754, permits the
    President   to defer budget authority    for only three purposes:
             "(1)    to provide        for   contingencies;
            "(2) to achieve savings               made possible       by or through
            changes in requirements               or greater    efficiency     of
            operations;  or
            "(3)     as specifically          provided        by   law.”

    2   U.S.C.      § 684(b).
    To place all 19 deferrals           in perspective,  we think   it
    useful    to discuss   the evolution       of the law which resulted     in
    this   provision,    particularly      recent changes resulting    .from
    the United States Court of Appeals decision            in City of New
    Haven v. United States,           809 F.2d 900 (D.C. Cir. 1987).
J




                                                                           GAO/OGC-90-4




                                                                                      ,
Before enactment        of the Impoundment Control          Act of 1974, the
President     asserted,    both on constitutional          and statutory
grounds,    the authority      to impound budget authority           for
"policy"    reasons.      At the time, the Antideficiency            Act
authorized     the establishment      of reserves       either  to provide
for contingencies        or to effect   savings made possible            by (1)
changes in requirements,         (2) greater     efficiency     of
operations,      or (3) "other developments          subsequent    to the
date on which such appropriation           was made available."
31 U.S.C. S 665 (1976).
The executive        branch maintained         that in order to effect
savings made possible             by "other developments,"         the
President      could defer budget authority             for 'policy"      reasons
inimical     to the purpose to be served by the appropriation
being withheld.           This Office      and the courts     held that the
executive      branch position        was inconsistent       with the
legislative       history     of the Antideficiency         Act as well as
prior     executive     practice.       See Letter    from the Comptroller
General to Chairman,           Subcommittee       on Separation      of Powers,
Committee      on the Judiciary,         United States Senate,         B-135564,
July 26, 1973, and cases cited               therein.      Nevertheless,      the
then existing        Administration       did not abandon its claim of
authority.
As a result,    in 1974 when the Congress enacted the
Impoundment Control       Act, it also amended the Antideficiency
Act to make clear that it could no longer be claimed                   as
authority    to make policy      deferrals.       Thus, the Impoundment
Control   Act amended the Antideficiency              Act  by deleting    the
authority    to establish     reserves      to effect     savings made
possible   by 'other     developments."        See Pub. L. No. 93-344,
88 Stat.   332 (1974).
The objective         of the amendment was to assure that "the
practice      of reservinq      funds does not become a vehicle        for
furthering      administration        policies and priorities     at the
expense of those decided by Congress.'                S. Rep. No. 688
93rd Conq., 2nd Sess., 75 (1974) (emphasis added).                   The'
legislative       history     of the amendment-makes      clear that it is
"perfectly      justifiable       and proper for all possible      economies
to be effected          and savings to be made.       But there is no
warrant      or justification       for the thwarting     of a major
policy      of Congress by the impounding         of funds."    Id. citing
H.R. Rep. No. 1797, 81st Cong. 2d Sess., p. 311 (1950).
The amendments to the Antideficiency         Act in affirming        the
President's    authority    to make routine   deferrals,     specified
that "[elxcept     as specifically   provided    by particular
appropriation     acts or other laws, no reserves        shall   be
2                                                                 GAO/OGC-90-4
established     otherwise    than by" the Antideficiency         Act.
Pub. L. No. 93-344,       5 1002, 88 Stat.       332 (1974).
Notwithstanding       the Antideficiency       Act or other authority,
deferrals     were required     to be reported     under section      1013
which provided      for either     House of Congress to disapprove
any deferral    --a so-called      legislative    veto.
 In 1987, the United States Court of Appeals for the District
of Columbia Circuit             invalidated        section    1013 of the
 Impoundment Control            Act because of the unconstitutional
 legislative       veto provision          in that section.           City of New
 Haven Connecticut          v. United States,            809 F.2d 900 (D.C. Cir.
 19873.      By invalidating          section     1013, the court removed the
sole general        legislative         authority      for "policy"       deferrals.
The court stressed            that were it to let section                1013 stand
and merely to sever the unconstitutional                        one-House veto
provision       from the section,            it would have given the
President       a license       to defer for policy           reasons without           any
congressional         control.        Id. at 909.         This would have
created      a situation        which required         the Congress to legislate
a second time to effect               and reconfirm        its budgetary         policies
already      set out in appropriation               acts.     Id.     The court
reasoned that such a result                  would have been completely
contrary      to the will         of Congress,       which in amending the
Antideficiency         Act sought to "remove any colorable
statutory       basis for unchecked policy                deferrals."        Id.      At
the same time,         however, the court upheld the President's
authority       to defer funds under the Antideficiency                     Act, that
is, for "routine          programmatic          impoundments,"        and his
responsibility         to report        such deferrals.           -Id at 906, 909.
In response to the New Haven decision,                Congress in 1987
enacted a new sectizlmhat                   permits     deferrals     only for
Antideficiency      Act reasons,     i.e.,    contingencies,         savings,    or
as specifically      provided    by law.      Pub. L. 100-119,          101 Stat.
754 (1987).      Since the 1987 amendment of section                 1013, until
the deferrals     at issue here, we have not had occasion                   to
object     to any deferrals    reported      by the President         as
Antideficiency      Act deferrals.         Accordingly,       we think    a
review of the characteristics            of a valid deferral          is in
order.
First,    the deferral       must be a temporary        withholding.
Second, the reasons for the deferral                 must be fLlly
explained.       Section     1013 requires       that the President    report
every deferral        to the Congress in a special           message that
provides     detailed     information       concerning   the basis and
effect    of the deferral,         including:
       "(6) all       facts, circumstances,    and considerations
Y      relating      to or bearing    upon the proposed deferral
3                                                                         GAO/OGC-90-4
       and the decision        to effect     the proposed deferral,
        including      an analysis   of such facts,
       circumstances,        and considerations      in terms of
       their     application     to any legal authority,      invoked
       to justify        such proposed deferral      . . . .*
2 U.S.C.    S 684(a)(6).
In our opinion,      one of the purposes of this       reporting
requirement     is to permit    Congress to determine      whether a
deferral    is, in fact,    a proper exercise    of the President's
authority     under the Act.     Indirect  or generalized       assertions
that fail     to provide   a discernible   nexus between the
proposed deferrals       and the asserted   reasons therefor        are not
sufficient.
Finally,    the executive      branch may not defer for "policy"
reasons.      Deferrals   intended     to further     executive branch
policies    or priorities      in place of those policies
established     in the legislative       process are, absent specific
statutory     authority,    unauthorized     deferrals.
ANALYSIS OF DEFERRALS OF FISCAL YEAR 1990 FUNDS
Although     the special         message   does not so indicate,        the
Administration          in its budget for fiscal        year 1991 has
proposed that the Congress transfer                 amounts in 16 of the
deferrals,      totalling        $1,359,050,000,     to finance     other
programs in fiscal            year 1991.      Of these funds, the
Administration         has proposed $860,300,000          for transfer       to
the appropriation            "Procurement     of Weapons and Tracked Combat
Vehicles,      Army,       for the M-l tank program.          The
Administration          also proposes that Congress transfer              the
remaining      $498,750,000        to the appropriation       "Aircraft
Procurement,       Air Force,"        to fund the F-15 aircraft         program.
Budget of the United States Government,                 Fiscal    Year 1991, at
A-577 and ~-583 (1990).
In our opinion,   dated February       20, 1990, we concluded     that
15 of these deferrals,    totalling       $1,251,050,000,  were
UnauthorizedlJ  and explained       that we were continuing     to


l/     The 15 deferrals       are D90-10, OV-ID Aircraft
modifications;         D90-12, M483 155 mm Artillery     Projectile:
D90-13, Termination          of Echelon Above Corps: D90-15, HARM
Missile,     Navy; D90-16, Fast Sealift      Ships;    D90-18, MH-6OG
Helicopter     and F-4G Wild Weasel; D90-19, HARM Missile,              Air
Force and Minuteman II modifications;            D90-20, Combined
Effects     Munitions;      D90-21, National Guard Reserve Equipment,
                                                         (continued...)
4                                                            GAO/OGC-90-4
gather information     on deferral    D90-23 and one other                 that    is
classified   for national    security   purposes.
The Administration's          entire     explanation       of the 15 deferrals
 in question      is that they are necessary because of “changes
in requirements         in view of the promising            developments        in the
Soviet Union and Eastern Europe."                  This is not the detailed,
reasoned explanation          for the deferrals           which section      1013
requires.       It is no more than a generalized                 assertion      that
provides     no direct     nexus between the proposed deferrals                    and
the asserted        reasons for them.          For example,       in deferral
D90-18, the President          has deferred        $181,700,000        of funds
appropriated        in the lump-sum "Aircraft             Procurement,      Air
Force,"     and intended      for MH60-G helicopters            and F-4G
aircraft.       The only justification            advanced is that the
deferral     is necessitated         by changed requirements            brought
about     by "promising      developments       in the Soviet Union and
Eastern Europe."          The justification         fails     to explain     how the
promising      developments      affect     the requirement         for these two
weapons systems.
Deferral     D90-24    is a more dramatic        example of the same
point.     There the President         has deferred     $3,200,000    in funds
appropriated       for "Military      Construction,     Army, because of
the same "promising          developments     in the Soviet Union and
Eastern Europe.“          The funds were provided         for construction
of an access road at the Tobyhanna,               Pennsylvania,    Army
Depot.     The justification         does not explain       how the events in
the Soviet Union and Eastern Europe relate                 to, let alone
justify,     the decision      to defer funds for construction            of an
access road in an Army Depot in Pennsylvania.
All the other deferrals       at issue similarly         fail   to provide
an adequate justification       directly      and specifically       relating
to the changes in East-West         relations      to the requirements
for the funds that are being deferred.                The level   of
generality    used to explain     these deferrals        could be employed
across a wide range of Department            of Defense accounts
suggesting    that the choice of activities            and programs being
deferred   relates   less to routine        operation    of the government


A/( . ..continued)
Defense;     D90-23, Research,        Development,    Test and Evaluation,
Defense ($13 million          for Defense Advance Projects          Research
Agency software       efforts);     D90-24, Military      Construction,
Army; D90-25, Military           Construction,     Navy: D90-26, Military
Construction,      Army National       Guard; D90-27, Military
Construction,      Air National       Guard; D90-28,     Military
Construction,      Army Reserve.
5                                                                    GAO/OGC-90-4
than to executive         policy  choices        concerning      activities      that
should or should         not be funded.
In addition,      as we noted earlier,       the President        has proposed
the deferred      funds for transfer       to the M-l tank and F-15
aircraft     programs.      The generalized     assertions      that are the
basis for the deferrals          could be equally      applicable     to the
M-l and F-15 programs,         adding support to the view that the
deferrals      are intended    to substitute     the President's
priorities      and policies     for those already       enacted in
appropriations       acts.
Further,      our examination     of the Administration's           budget
requests      and the committee      reports      accompanying    the fiscal
year 1990 Defense appropriation              act indicates     that most of
the deferrals       involve   appropriations        that were not requested
by the Administration         but rather      were added by the Congress
during the legislative         process.       The President's       choice to
defer these appropriations           rather     than others to.which       the
justification       for the deferrals        appears to be equally
applicable       is further   evidence that the deferrals            are for
reasons of policy.
Thus, the cryptic           explanation      that has been given for the
deferrals     proposed here, together               with the intended        uses
planned for the amounts deferred,                   makes these deferrals
highly    suspect.        Without     a sufficiently          detailed   explanation
underlying      the deferrals,          there is no basis for concluding
that they fall         within    the limitations          of the Act.       We
conclude     on the basis of the present                 record that these
deferrals     totalling       $1,251,050,000         dollars,       are not
authorized      under the Impoundment Control                  Act.
In addition  to these deferrals,      the President's                  message
proposed other deferrals    totalling    $942,800,000.
D90-22                              Research,    Development,   Evaluation
                                    and Testing,    Air Force
                                    Amount Deferred:     $100,000,000
                                    570/13600
The details     associated   with this deferral       are classified     and
require    special   access.     GAO is currently     in the process of
obtaining    the specific    facts and justifications        associated
with this deferral.        Our report     on this deferral    will   be'
issued under a separate        classified    cover.




6                                                                     GAO/OGC-90-4
D90-23                            Research,   Development,    Test and
                                  Evaluation,   Defense Agencies
                                  (University   Research Projects)
                                  Amount Deferred:    $21,000,000
                                  970/10400
Eight million      dollars    out of the $21,000,0002/           were provided
for university       research    grants.      In its justification       the
Administration       states   that the university       funds cannot be
obligated      due to "legal     constraints      and competition     policy
considerations       pursuant    to section      252 of the FY 1991
National     Defense Authorization         Act."
In the National      Defense Authorization          Act, fiscal      year 1989,
Congress added a competition           requirement      for the award of
grants to colleges        and universities.         Pub. L. No. 100-456,
S 220, 102 Stat.       1940, codified       at 10 U.S.C. S 2361 (1988).
The statute    prohibited     the Secretary        of Defense from making
a grant or awarding a contract            to a college      or University
for the performance        of research      and development       or
construction    of any research        or other facility        unless
competitive    procedures     were used.       Id.    The provision       became
effective    on October 1, 1989.          The requirement       for
competitive    procedures     was elaborated        in the National
Defense Authorization        Act for 1990 and 1991, wherein the
Congress amended 10 U.S.C. § 2361 to state:
        "The Secretary  of Defense may not make a grant or
       award a contract   to a college   or university  for
       the performance   of research   and development  or for
       the construction   of any research   or other facility
       unless-
         "(1) in the case of a grant,      the grant is made
         using competitive   procedures:     and
         "(2) in the case of a contract,       the contract
         is awarded in accordance     with section   2304 of
         this title  . . . ."
Pub.   L. No. 189,     S 252,   103 Stat.     1404 (1989).
The amendment was made retroactive                 to September 30, 1989 and
provided   that later       legislation        could supersede        it only by
specific    reference.        Id.     This amendment was meant to
clarify   Congress'      intent      regarding     competition       requirements
and to discourage        legislative        or executive      branch earmarking
in awarding     university        or college      research     grants thus

2/ The remaining  $13,000,000           deferred in this account          was
included in the 15 deferrals           we held improper  above.
7                                                               GAO/OGC-90-4
 ensuring     full   and open competition        except in very limited
 circumstances.        See H.R. Rep. No. 331, 1Olst Cong., 1st
 Sess. 532 (1989).        The conference       report   accompanying    the
the 1990 Defense appropriation           act enacted after
September 30, 1989, clearly          states     that the $8,000,000       at
 issue here was meant for a grant for the proposed center                    for
Commerce and Industrial        Expansion      at Loyola University        of
Chicago.       d.R. Rep. No. 345, 1Olst Cong,, 1st Sess. 122
 (1989).     However, there is no language in the appropriation
act itself       which would supersede 10 U.S.C. § 2361.              Thus,
although     the conference    report    indicates     an intention     that
the funds be granted        to Loyola,     the law requires       that the
grant be made using "competitive             procedures."
Nevertheless,       the Department's      argument that 10 U.S.C.
 § 2361, as amended, justifies           withholding      these funds from
obligation     is without    merit.      The law requires        only that
 $8,000,000    of grants    be made "using competitive             procedures,"
 regardless    of any directions       in the legislative         history.      It
does not prohibit       use of the funds.            According     to the
Department,      there is no competition          underway,    and the
transfers     proposed in the fiscal         year 1991 budget indicate
that there is no intent        to use these funds for grant
purposes.        It thus appears that in proposing             this deferral
the Administration       is substituting        its priorities       and
policies    for those of the Congress.             Therefore,     the deferral
is not authorized.
Dgo-11                     Department  of the Army
                           Procurement   of Ammunition,    Army
                           Amount Deferred:   $310,000,000
                           219/12034               218/02034
These funds were provided          for the design and construction            of
an RDX explosive      production       facility      at the Louisiana    Army
Ammunition   Plant.3/      The purpose of the facility             was to
respond to a "criEica1         shortfall        in the Army's mobilization
base requirement."        5. Rep. No. 235, 100th Cong.,
1st Sess. 130 (1987).


3/ This sum is the unobligated           balance which was provided
for construction      of the facility.       A total     of $262,700,000
was designated     out of the fiscal       year 1988 appropriation
"Procurement     of Ammunition,     Army,"     H.R. Rep. No. 498, 100th
Cong., 1st Sess. (1987).        An additional        $72,300,000   was
provided   in the 1989 Defense appropriation             from the same
account to fully     fund the facility.         H. R. Rep. No. 1002,
100th Cong., 2nd Sess. 42 (1988).

8                                                                 GAO/OGC-90-4
    / .

I




          As previously       stated,    the Impoundment Control        Act permits
          deferrals     "to achieve savings made possible            by or through
          changes in requirements."            2 U.S.C.  s 684(b).        The
          $310,000,000      is being deferred      here because of changes in
          requirements      in view of "promising       developments       in the
          Soviet Union and Eastern Europe."             The justification        for the
          deferral    further      states that:
                   "As a result      of these changes, the Department               is
                   in the process of conducting            a review of all
                   ammunition     and production     facilities,     including
                   the RDX facility,       to determine       future
                   requirements."
          The mere addition              of this sentence is not a sufficiently
          detailed       or reasoned explanation              for the deferrals.        As
          discussed        above, section          1013 of the Impoundment Control           Act
           requires      that the reasons for a deferral              be fully     explained
           in order to permit Congress to determine                   whether a deferral
          is, in fact,          a proper exercise          of the President's     authority
          under the Act.              Here, the Administration        gives no more than
          a generalized           assertion      that a "review"     of ammunition       and
          production         facilities       is being conducted.        Such a broad
           justification          could be asserted         for any number of military
          programs suggesting              that the choice of deferring          funds for
          this particular             program relates       less to the routine
          operation        of the government           than to an executive      policy
          choice concerning              whether the RDX facility        should or should
          not be funded.              Therefore,     this deferral    is not authorized.
          We note that the bulk of the amount deferred,                     $237,700,000,
          is only available         until     the end of this fiscal         year,
          September 30, 1990.             Therefore,    the review and decision
          regarding     the RDX facility          at such a late date effectively
          puts the RDX funds in jeopardy              of lapsing.        This could
          create    a situation      in which the time remaining             in the fiscal
          year would be insufficient              to prudently     obligate    the funds
          for construction         of the RDX facility         thus leading      to a
          potential    de
                       --    facto   rescission.
          D90-17                              Department   of the Navy
                                              Shipbuilding   and Conversion,             Navy
                                              Amount Deferred:   $324,800,000
                                              170/41611
          These funds were provided       for the procurement      of an     .
          icebreaker    for the United States Coast Guard (USCG).           The
          Congress specifically      appropriated     $329,000,000    for
          procurement     of the icebreaker.      Pub. L. No. 101-165,
          103 Stat.   1122 (1989).      The conference     report  accompanying
          the appropriation     act states:
          9                                                                    GAO/OGC-90-4
         "The conferees      agree that no contract      shall   be
         awarded for basic construction         of a new icebreaker
         until     30 days after  the President    forwards    to the
         Congress the report      on polar icebreaking       needs
         that was mandated by the 'Coast Guard Authorization
         Act of 1988 [Pub. L. 100-448,        102 Stat.    1847
         (1987)l."
H.R.     Rept.   No. 345,    1Olst    Cong.,    1st   Sess.    78 (1989).
The justification         states     that the proposed icebreaker                ship
design is being verified              in order to determine           whether the
construction       can be accomplished            within      the available
funding.       According     to the Department,             the Naval Sea Systems
Command is currently           reviewing      the proposed ship design for
this purpose.         The Senate proposed $488,000,000                  for the
icebreaker;       however, the conference              agreement provided          only
$329,000,000,       thus leading         to this design review.             An award
of the icebreaker        contract        is not expected until            April    of
1991.     Our Office      does not normally            consider    such contract
delays due to design modification,                   verification       or changes
in scope, as constituting               impoundments of budget authority
under the Impoundment Control                Act.      See GAO, VA Health Care,
Delays in Awarding Major Constructionontracts                           at 3
:;;;/HRD-84-74,        B-225048,       Mar. 11, 1988); B-221412,               Feb. 12,
       .
D90-14                               Department    of the Navy
                                     Aircraft   Procurement,     Navy
                                     Amount deferred:      $200,000,000
                                     179/11506
These funds,      available   until     September 30, 1991, are the
remainder     of $335,332,000       provided   for the advance
procurement     of the V-22 Osprey tiltrotor           aircraft    in the
fiscal   year 1989 lump-sum appropriation            for "Aircraft
Procurement,     Navy."     Pub. L. No. 101-463,        102 Stat.    2270-9
(1988).     See H.R. Rep. No. 1002, 100th Cong., 2nd Sess.
(1988).     -
The fiscal       year 1990 Defense appropriation          act provides       no
additional      funding   for V-22 production.         The conference
report     accompanying     the 1990 act notes that the Secretary               of
Defense ordered a cost and operations             effectiveness        analysis
on the V-22 and other helicopter           alternatives.         The
conferees      stated that 'study    should be used as a basis for a
decision     to begin production     of the V-22 in fiscal
year 1991."         H.R. No. 345, 1Olst Cong., 1st Sess. 73
(19!9).      However, the conferees      stated their        expectations:

10                                                                    GAO/OGC-90-4
       "that    the Department      obligate the remainder  of the
       fiscal     year 1989 advance procurement     funds in
       order to retain        the option to execute a production
       decision     in fiscal    year 1991.”
Congress subsequently             passed the National          Defense
Authorization          Act for 1990 and 1991, Pub. L. No. 101-189,
 103 Stat.     1352 (19891,          Section     151 of that act provides
that no funds appropriated               or otherwise       available       to the
Department       in fiscal       year 1990 under the 1990 and 1991
authorization          act or any later        enacted law may be obligated
for procurement           of the V-22.       Id.,    103 Stat.      1386.       The
statute,      on its face, does not apply to funds previously
made available          for V-22 procurement.            The conference          report
on the authorization            act confirms       that this provision            was
not to extend to the obligation                  of "prior-year        procurement
funds."       H.R. Rep. No. 331, 1Olst Cong., 1st Sess. 460
 (1989).      At the same time the conference                report     notes that
the "cost of the V-22 may prove unaffordable"                        and that the
“future     of the V-22 will          be considered       on the basis of the
information       that will       be provided      as a consequence           of
studies     and certification           of all reasonable         alternatives        to
the V-22."         Id.     Furthermore,      the authorization          act provides
an authorization           for not more than $255,000,000               for research
development,        test,     and evaluation       in connection        with the
V-22 program.           Pub. L. No. 101-189,          § 218, 103 Stat.           1397
 (1989).
As justification          for the deferral,      the impoundment message
states    that the President's         budgets for fiscal         years 1990
and 1991 proposed termination            of the V-22 program.
Furthermore,       since the Congress provided           no appropriations
in the fiscal        year 1990 Defense appropriations             act for
production       of the V-22, the message states            that a stop work
order was issued under the advance procurement                    contract  in
December 1989 as an efficiency              measure.     If the funds were
not deferred,        the message    notes,    "aircraft     components would
continue     to be procured      that could not be used for any
other aircraft         program . . . [therefore]         these funds are
deferred     as a contingency       against    incurring      additional
unnecessary       sunk costs."
We conclude this           is not a valid deferral      action.      Congress
clearly       provided     $335,000,000    for advance procurement         of the
v-22.       Although     Congress chose not to authorize         procurement
funding       for fiscal     year 1990 and 1991, indicatinq          some doubt
as to the future           of the V-22, Congress did not limit           the
availability         of the prior-year      procurement    funds at issue
here.       In the conference        on the National    Defense
Authorization         Act for 1990 and 1991 the conferees           rejected     a
Senate proposal          to prohibit    the obligation     of prior-year
11                                                                      GAO/OGC-90-4
    procurement        funds and a House proposal              to mandate
    procurement        funds in 1990.         H.R.   Rep.    No.    331, 1Olst Cong.,
    1st Sess 460 (1989).             This compromise agreement confirms                   the
    decision      reflected      in the conference          report    on the 1990
    appropriation         act, that the Department             "obligate     the
    remainder      of fiscal       year 1989 advance procurement               funds in
    order to retain          the option     to execute a production              decision
    in 1991."        H.R.    No.   345,  1Olst    Cong.,      1st   Sess.   73   (1989).
    Although      both the Administration            and the Congress have
    indicated      doubts about the future             of the V-22 procurement,
    Congress has made a policy              decision      to continue       advance
    procurement        for the V-22.        The   Impoundment        Control     Act does
    not authorize         the Administration         to substitute        its policy
    choices     for those of Congress under the guise of
    establishing         "a contingency       against     incurring      additional
    unnecessary        costs."      Accordingly,       the deferral       is
    unauthorized.




    Comptroller  General
    of the United States




*

    12                                                                     GAO/OGC-90-4
\



                                                                      ENCLOSURE I

                     COMMENTSON TEIRD SPECIAL MESSAGE

    DEPARTlrlENT OF DEFENSE:
    D90-10              Department    of the Army
                        Aircraft   Procurement,     Army
                        Amount Deferred:      $16,000,000
                        210/22031

    The latest     apportionment      statement    for this account,       dated
    January 31,     1990,   shows   total    budgetary     resources   of
    $3,804,380,000      and not $3,744,080,000         as noted in the
    message.     The  amount     shown    on the  apportionment      schedule
    includes    an additional      $60,300,000     in reimbursements       and
    other income.
    D90-12              Department   of the Army
                        Procurement   of Ammunition,    Army
                        Amount Deferred:    $90,000,000
                        210/22034
    The latest     apportionment   statement     for this account,     dated
    January 31, 1990, shows total         budgetary    resources   of
    $2,051,243,000      and not $2,011,243,000       as noted in the
    message.     The amount shown on the apportionment           schedule
    includes    an additional    $40,000,000    in reimbursements      and
    other income.
    D90-13              Department   of the Army
                        Other Procurement,   Army
                        Amount Deferred:    $11,000,000
                        210/22035
    The latest     apportionment      statement     in this account,      dated
    January 31,     1990,   shows   total    budgetary     resources   of
    $3,890,688,000      and not $3,666,488,000          as noted in the
    message.     The  amount     shown    on the  apportionment      schedule
    includes    an additional      $224,200,000       in reimbursements      and
    other income.
    D90-15              Department   of the Navy
                        Weapons Procurement,     Navy
                        Amount Deferred:     $13,900,000
                        170/21507
    The latest     apportionment   schedule    for this account,     dated
    January 31, 1990, shows total        budgetary    resources   of
    $5,456,380,000      and not $5,386,380,000     as noted in the
    message.     The amount shown on the apportionment          schedule
                                                              ENCLOSURE I

includes  an additional      $70,000,000    in   reimbursements   and
other income.
D90-16             Department   of the Navy
D90-17             Shipbuilding   and Conversion,    Navy
                   Amounts Deferred:    $592,398,000     (Sealift)
                                        $324,800,000    (Icebreaker)
                   170/41611
The latest    apportionment    schedule   for this account,    dated
January 31, 1990, shows total        bugetary   resources   of
$11,401,319,000      and not $11,400,061,000      as noted in the
message.     The amount shown on the apportionment        schedule
reflects    an upward adjustment     of amounts of budget authority
previously    reduced pursuant    to Gramm-Rudman-Hollings.
D90-18            Department    of the Air Force
                  Aircraft   Procurement,    Air Force
                  Amount Deferred:      $181,700,000
                  570/23010
The latest    apportionment   schedule    for this account,      dated
January 31, 1990, shows total        budgetary    resources   of
$15,920,159,000      and not $15,673,159,000     as noted in the
message.     The amount shown on the apportionment          schedule
includes    an additional   $247,000,000     in reimbursements      and
other income.
D90-19            Department    of the Air Force
                  Missile   Procurement,    Air Force
                  Amount Deferred:       $131,000,000
                  570/23020
The latest    apportionment      schedule   for this account,    dated
January 31, 1990, shows total          budgetary    resources for this
account to be $7,015,527,000          and not $6,763,755,000     as noted
in the message.       The amount shown in the apportionment
schedule   includes    an additional      $251,772,000     in
reimbursements      and other income.
D90-20            Department   of the Air Force
                  Other Procurement,   Air Force
                  Amount Deferred:    $70,000,000
                  570/23080
The latest     apportionment   schedule    for this account,   dated
January 31, 1990, shows total        budgetary    resources  to be
$9,043,320,000      and not $8,394,733,000     as noted in the
2"
i, :

                                                                                                  E2lcIQsm II



                                      CCNTENTS OF SPECIAL MESSAGE
                                         (in thousands of dollarr)
                                            (as.reported by the                    President)
                                                                                                                BUDGR
       DEFERRAL NO.                             ITEM                                                           AUTHORITY

                      Department of Detenae, Milw
       090-l 0         Aircraft Procurement, Army .................................................                16,000
       090-l 1         Procurement of Ammunltlon, Army ......................................                     310,000
       090-12          Procurement of Ammunltion, Army ......................................                      90,000
       090-13          Other Procunment, Army ...................................................                  11,000
       090-l 4         Aircraft Procurement, Navy .................................................               200,000
       090-l S         Weapons Procurement, Navy ..............................................                    13900
       090-l 6         Bhipbuilding and Conversion, Navy ......................................                   692,398
       090-l 7         ShipbuIlding and Conversion, Navy ......................................                   324,800
       090-l 8         Aircraft Procurement, Air Force ...........................................                181,700
       090-l 9         Missllo Procurement, Air Force ............................................                131,000
       090-20          Other Procurement, Air Force .............................................                  70,000
       090-21          NationalGuardandResewe Equipment,
                        Defense ...........................................................................        40,900
       090-22          Research, Development, lest and Evaluation,
                        Air Force ..........................................................................      100,000
       090-23          Research, Development, Test and Evaluation,
                        Defense Agencies .............................................................            21,000
       NO-24           Military Construction, Army .................................................               3,200
       090-25          Military Construction, Navy ..................................................             16,150
       090-26          Military Construction, Army National Guard ..........................                      18,301
       090-27          Military Construction, Air National Guard ..............................                   36,841
       090-28         Military Construction, Army Reserve ....................................                    16,660

                         Total, Deferrals ..........*.*......................................*............      2,193,850
 ensuring    full   and open competition        except in very limited
 circumstances.       See H.R. Rep. No. 331, 1Olst Cong., 1st
 Sess. 532 (1989).       The conference        report   accompanying    the
the 1990 Defense appropriation           act enacted after
September 30, 1989, clearly          states that the $8,000,000           at
 issue here was meant for a grant for the proposed center                    for
Commerce and Industrial        Expansion      at Loyola University        of
Chicago.       H.R. Rep. No. 345, 1Olst Cong., 1st Sess. 122
 (1989).     However, there is no language in the appropriation
act itself      which would supersede 10 U.S.C. S 2361.               Thus,
although     the conference    report    indicates     an intention     that
the funds be granted        to Loyola,     the law requires       that the
grant be made using 'competitive             procedures."
Nevertheless,        the Department's       argument that 10 U.S.C.
§ 2361, as amended, justifies              withholding      these funds from
obligation      is without     merit.      The law requires        only that
 $8,000,000    of grants      be made "using competitive             procedures,"
 regardless    of any directions         in the legislative         history.      It
does not prohibit        use of the funds.             According     to the
Department,       there is no competition           underway,    and the
transfers     proposed in the fiscal           year 1991 budget indicate
that there is no intent          to use these funds for grant
purposes.         It thus appears that in proposing              this deferral
the Administration         is substituting        its priorities        and
policies    for those of the Congress.               Therefore,     the deferral
is not authorized.
D90-11                      Department  of the Army
                            Procurement   of Ammunition,   Army
                            Amount Deferred:   $3lO,OOO,OOO
                            219/12034               218/02034
These funds were provided          for the design and construction            of
an RDX explosive      production       facility      at the Louisiana    Army
Ammunition   Plant.l/      The purpose of the facility             was to
respond to a 'critical         shortfall        in the Army's mobilization
base requirement.'        S. Rep. No. 235, 100th Cong.,
1st Sess. 130 (1987).


5/ This sum is the unobligated           balance which was provided
for construction      of the facility.       A total     of $262,700,000
was designated     out of the fiscal       year 1988 appropriation
"Procurement     of Ammunition,     Army,"     H.R. Rep. No. 498, 100th
Cong., 1st Sess. (1987).        An additional        $72,300,000   was
provided   in the 1989 Defense appropriation             from the same
account to fully      fund the facility.        H. R. Rep. No. 1002,
100th
   v    Cong.,   2nd  Sess.  42 (1988).

8                                                                   GAO/OGC-90-4
As previously       stated,     the Impoundment Control          Act permits
deferrals     "to   achieve     savings    made  possible     by   or through
changes in requirements."               2 U.S.C.  S  684(b).       The
$310,000,000      is being deferred         here because of changes in
requirements      in view of "promising          developments        in the
Soviet Union and Eastern Europe."                The justification         for the
deferral    further      states    that:
         "As a result      of these changes, the Department               is
         in the process of conducting           a review of all
         ammunition     and production    facilities,     including
         the RDX facility,       to determine      future
         requirements."
The mere addition             of this sentence is not a sufficiently
detailed       or reasoned explanation             for the deferrals.         As
discussed        above, section         1013 of the Impoundment Control            Act
requires       that the reasons for a deferral              be fully     explained
in order to permit Congress to determine                     whether a deferral
is, in fact,         a p;Eyzr exercise          of theaPresident's      authority
under the Act.                   , the Administration        gives no more than
a generalized          assertion      that a "review"      of ammunition       and
production        facilities        is being conducted.         Such a broad
 justification         could be asserted         for any number of military
programs suggesting              that the choice of deferring          funds for
this particular            program relates       less to the routine
operation        of the government          than to an executive       policy
choice concerning             whether the RDX facility          should or should
not be funded.             Therefore,     this deferral      is not authorized.
We note that the bulk of the amount deferred,                     $237,700,000,
is only available         until     the end of this fiscal         year,
September 30, 1990.             Therefore,    the review and decision
regarding     the RDX facility          at such a late date effectively
puts the RDX funds in jeopardy              of lapsing.        This could
create    a situation      in which the time remaining             in the fiscal
year would be insufficient              to prudently     obligate    the funds
for construction         of the RDX facility         thus leading      to a
potential     de
             --    facto   rescission.
D90-17                              Department   of the Navy
                                    Shipbuilding   and Conversion,             Navy
                                    Amount Deferred:   $324,800,000
                                    170/41611
These funds were provided       for the procurement      of an
icebreaker    for the United States Coast Guard (USCG).           The
Congress specifically      appropriated     $329,000,000    for
procurement     of the icebreaker.      Pub. L. No. 101-165,
103 Stat.   1122 (1989).      The conference     report  accompanying
the appropriation     act states:
9                                                                    GAO/OGC-90-4
       "The conferees   agree that no contract     shall be
       awarded for basic construction      of a new icebreaker
       until   30 days after the President    forwards   to the
       Congress the report   on polar icebreaking      needs
       that was mandated by the Coast Guard Authorization
       Act of 1988 [Pub. L. 100-448,     102 Stat.    1847
        (198711."
H.R.   Rept.    No. 345,     1Olst    Cong.,    1st   Sess.   78 (1989).
The justification         states     that the proposed icebreaker               ship
design is being verified             in order to determine           whether the
construction       can be accomplished           within      the available
funding.       According     to the Department,            the Naval Sea Systems
Command is currently           reviewing     the proposed ship design for
this purpose.         The Senate proposed $488,000,000                 for the
icebreaker;       however, the conference             agreement provided         only
$329,000,000,       thus leading        to this design review.             An award
of the icebreaker        contract       is not expected until            April    of
1991.     Our Office      does not normally           consider    such contract
delays due to design modification,                  verification       or changes
in scope, as constituting              impoundments of budget authority
under the Impoundment Control               Act.      See GAO, VA Health Care,
Delays in Awarding Major ConstructionContracts                         at 3
(GAO/HRD-84-74,        B-225048,       Mar. 11, 1988); B-221412,              Feb. 12,
1986.
D90-14                               Department    of the Navy
                                     Aircraft   Procurement,    Navy
                                     Amount deferred:      $200,000,000
                                     179/11506
These funds,      available   until     September 30, 1991, are the
remainder     of $335,332,000       provided   for the advance
procurement     of the V-22 Osprey tiltrotor          aircraft     in the
fiscal   year 1989 lump-sum appropriation            for "Aircraft
Procurement,     Navy."     Pub. L. No. 101-463,        102 Stat.    2270-g
(1988).     See H.R. Rep. No. 1002, 100th Cong., 2nd Sess.
(1988).     -
The fiscal       year 1990 Defense appropriation         act provides       no
additional      funding   for V-22 production.        The conference
report     accompanying     the 1990 act notes that the Secretary              of
Defense ordered a cost and operations            effectiveness        analysis
on the V-22 and other helicopter          alternatives.         The
conferees      stated that "study should be used as a basis for a
decision     to begin production     of the V-22 in fiscal
year 1991."         H.R. No. 345, 1Olst Cong., 1st Sess. 73
(1989).      However, the conferees     stated their        expectations:

10                                                                   GAO/OGC-90-4
       "that    the Department      obligate the remainder  of the
       fiscal     year 1989 advance procurement     funds in
       order to retain        the option to execute a production
       decision     in fiscal    year 1991.”
Congress subsequently             passed the National         Defense
Authorization          Act for 1990 and 1991, Pub. L. No. 101-189,
 103 Stat.     1352 (1989).          Section    151 of that act provides
that no funds appropriated              or otherwise       available      to the
Department       in fiscal       year 1990 under the 1990 and 1991
authorization          act or any later        enacted law may be obligated
for procurement           of the V-22.       IcJ., 103 Stat.       1386.      The
statute,      on its face, does not apply to funds previously
made available          for V-22 procurement.           The conference         report
on the authorization            act confirms      that this provision           was
not to extend to the obligation                 of "prior-year        procurement
funds."       H.R. Rep. No. 331, 1Olst Cong., 1st Sess. 460
 (1989).      At the same time the conference               report     notes that
the "cost of the V-22 may prove unaffordable"                       and that the
"future     of the V-22 will          be considered      on the basis of the
information       that will       be provided     as a consequence          of
studies     and certification          of all reasonable         alternatives       to
the V-22."         Id.     Furthermore,      the authorization         act provides
an authorizanon            for not more than $255,000,000              for research
development,        test,     and evaluation      in connection        with the
V-22 program.           Pub. L. No. 101-189,         § 218, 103 Stat.          1397
 (1989).
As justification          for the deferral,      the impoundment message
states    that the President's        budgets for fiscal          years 1990
and 1991 proposed termination            of the V-22 program.
Furthermore,       since the Congress provided           no appropriations
in the fiscal        year 1990 Defense appropriations             act for
production       of the V-22, the message states            that a stop work
order was issued under the advance procurement                    contract  in
December 1989 as an efficiency              measure.     If the funds were
not deferred,        the message notes,       "aircraft     components would
continue     to be procured      that could not be used for any
other aircraft         program . . . [therefore]         these funds are
deferred     as a contingency       against    incurring      additional
unnecessary       sunk costs."
We conclude this           is not a valid deferral       action.      Congress
clearly       provided     $335,000,000    for advance procurement          of the
v-22.       Although     Congress chose not to authorize          procurement
funding       for fiscal     year 1990 and 1991, indicating           some doubt
as to the future           of the V-22, Congress did not limit            the
availability         of the prior-year       procurement    funds at issue
here.       In the conference        on the National     Defense
Authorization         Act for 1990 and 1991 the conferees             rejected    a
Senate proposal          to prohibit    the obligation      of prior-year
11                                                                    GAO/OGC-90-4
    procurement        funds and a House proposal              to mandate
    procurement        funds in 1990.         H.R. Rep. No. 331, 1Olst Cong.,
    1st Sess 460 (1989).             This compromise agreement confirms                   the
    decision      reflected      in the conference          report    on the 1990
    appropriation          act, that the Department            "obligate     the
    remainder       of fiscal      year 1989 advance procurement               funds in
    order to retain           the option    to execute a production              decision
    in 1991."         H.R. No. 345, lOlst         Cong., 1st Sess. 73 (1989).
    Although      both the Administration             and the Congress have
    indicated      doubts about the future             of the V-22 procurement,
    Congress has made a policy              decision      to continue       advance
    procurement        for the V-22.        The Impoundment Control             Act does
    not authorize         the Administration         to substitute        its policy
    choices     for those of Congress under the guise of
    establishing         "a contingency       against     incurring      additional
    unnecessary        costs."      Accordingly,       the deferral       is
    unauthorized.




    Comptroller  General

f   of the United States




    12                                                                     GAO/OGC-90-4
                                                                 ENCLOSURE I

                 COMMENTSON TEIRD SPECIAL MESSAGE

DEPARTBSIWTOF DEFENSE:
D90-10              Department    of the Army
                    Aircraft   Procurement,    Army
                    Amount Deferred:      $16,000,000
                    210/22031
The latest     apportionment      statement     for this account,      dated
January 31,     1990,   shows   total    budgetary     resources   of
$3,804,380,000      and not $3,744,080,000          as noted in the
message.     The  amount     shown    on the  apportionment      schedule
includes    an additional      $60,300,000     in reimbursements       and
other income.
D90-12              Department   of the Army
                    Procurement   of Ammunition,    Army
                    Amount Deferred:    $90,000,000
                    210/22034
The latest     apportionment     statement   for this account,     dated
January 31,     1990,   shows  total   budgetary   resources   of
$2,051,243,000      and not $2,011,243,000       as noted in the
message.     The amount shown on the apportionment           schedule
includes    an additional     $40,000,000    in reimbursements     and
other income.
D90-13              Department   of the Army
                    Other Procurement,   Army
                    Amount Deferred:    $11,000,000
                    210/22035
The latest     apportionment   statement     in this account,      dated
January 31, 1990, shows total         budgetary    resources    of
$3,890,688,000      and not $3,666,488,000       as noted in the
message.     The amount shown on the apportionment           schedule
includes    an additional    $224,200,000      in reimbursements      and
other income.
D90-15              Department   of the Navy
                    Weapons Procurement,     Navy
                    Amount Deferred:     $13,900,000
                    170/21507
The latest     apportionment   schedule    for this account,     dated
January 31, 1990, shows total        budgetary    resources   of
$5,456,380,000      and not $5,386,380,000     as noted in the
message.     The amount shown on the apportionment          schedule
                                                               ENCLOSURE I

includes  an additional        $70,000,000   in   reimbursements   and
other income,
D90-16             Department   of the Navy
D90-17             Shipbuilding   and Conversion,    Navy
                   Amounts Deferred:    $592,398,000     (Sealift)
                                        $324,800,000    (Icebreaker)
                   170/41611
The latest    apportionment     schedule   for this account,     dated
January 31,     1990,   shows total   bugetary   resources    of
$11,401,319,000       and not $11,400,061,000      as noted in the
message.     The amount shown on the apportionment         schedule
reflects    an upward adjustment      of amounts of budget authority
previously    reduced pursuant      to Gramm-Rudman-Hollings.
D90-18            Department    of the Air Force
                  Aircraft   Procurement,    Air Force
                  Amount Deferred:      $181,700,000
                  570/23010
The latest    apportionment   schedule    for this account,      dated
January 31, 1990, shows total        budgetary   resources    of
$15,920,159,000      and not $15,673,159,000     as noted in the
message.     The amount shown on 'the apportionment        schedule
includes    an additional   $247,000,000     in reimbursements      and
other income.
D90-19            Department    of the Air Force
                  Missile   Procurement,     Air Force
                  Amount Deferred:       $131,000,000
                   570/23020

The latest    apportionment     schedule   for this account,    dated
January 31, 1990, shows total         budgetary    resources for this
account to be $7,015,527,000         and not $6,763,755,000     as noted
in the message.       The amount shown in the apportionment
schedule   includes    an additional     $251,772,000     in
reimbursements      and other income.
D90-20            Department   of the Air Force
                  Other Procurement,   Air Force
                  Amount Deferred:    $70,000,000
                  570/23080

The latest     apportionment   schedule    for this account,   dated
January 31, 1990, shows total        budgetary    resources  to be
$9,043,320,000      and not $8,394,733,000     as noted in the
                                                            ENCLOSURE I

message.   The amount       shown on the apportionment    schedule
includes  an additional       $648,587,000  in reimbursements     and
other income.
D90-22               Department   of the Air Force
                     Research,   Development,   Test and
                     Evaluation,   Air Force
                     Amount Deferred:     $100,000,000
                     570/13600
The latest     apportionment      schedule  for this account shows
total   budgetary     resources    of $16,405,672,000     and not
$13,625,564,000       as noted in the message.        The amount shown
in the apportionment         schedule includes     an additional
$2,780,108,000      in reimbursements      and other income.
D90-23      Office     of the Secretary    of Defense
                     Research,  Development,   Test and Evaluation,
                     Defense Agencies
                     Amount Deferred:    $21,000,000
                     970/10400
The latest     apportionment      schedule   for this account shows
total   budgetary     resources    of $8,366,291,000     and not
$8,131,793,000      as noted in the message.         The amount shown in
the apportionment        schedule   inclue  an additonal    $234,498,000
 in reimbursements       and other income.




3