Authority of Military Exchanges to Lease General Purpose Office Space ( 1997 )

Authority of Military Exchanges to Lease General Purpose
Office Space
T he Navy E xchange Service Com m and, a nonappropriated fund instrum entality, and sim ilar m ilitary
exchange units constitute integral com ponents o f the D epartm ent o f Defense, and their leasing
authority, like that o f other D oD com ponents, is subject to the provisions o f R eorganization Plan
No. 18 o f 1950, notw ithstanding their status as NAFIs. A ccordingly, they are not authorized to
lease general purpose urban office space unless such authority is delegated to them by the G eneral
Services Adm inistration.
August 1, 1997
M e m o r a n d u m O p in io n f o r t h e G e n e r a l C o u n s e l s
o f the D epa r tm en t o f D efen se
and the G e n e r a l S e r v ic e s A d m in is t r a t io n
This responds to your request for the Attorney General to resolve a disagreement
between the Department of Defense (“ DoD” ) and the General Services Adminis­
tration (“ GSA” ) which has been submitted to her for resolution1 pursuant to
Executive Order No. 12146.2 The Attorney General has delegated her authority
to resolve such disputes to this Office pursuant to 28 C.F.R. § 0.25(a) (1996).
The disagreement centers on whether the Navy Exchange Service Command
( “ NEXCOM” ), a nonappropriated fund instrumentality (“ NAFI” ) within DoD,
has legal authority to lease general purpose office space in urban centers in the
absence of a delegation of authority to do so from GSA. DoD asserts that
NEXCOM has such authority, while GSA takes the contrary position.
We conclude that NEXCOM and similar military exchange units constitute
integral components of DoD and that their leasing authority, like that of other
DoD components, is subject to the provisions of Reorganization Plan No. 18 of
1950, notwithstanding their status as NAFIs. Accordingly, NEXCOM is not
authorized to lease general purpose urban office space for itself unless such
authority is delegated to it by GSA.
1 Letter for Janet Reno, Attorney General, from Judith A Miller, General Counsel, Department of Defense (Sept.
13, 1996) DoD’s views on the issue in question are set forth in Memorandum for the General Counsel, Department
of the Navy, from Robert S Taylor, Deputy General Counsel, Department of Defense, Re: Authority o f a Non-
Appropriated Fund Instrumentality (NAFI) to Enter Into a Lease Without Delegation from GSA (Aug. 30, 1996)
( “ DoD Memo” ). The G SA ’s views are set forth in a letter to Robert S. Taylor, Deputy General Counsel, Department
o f Defense, from Emily C. Hewitt, General Counsel, General Services Administration (Aug. 23, 1996) ( “ GSA
Letter” )
2 Executive Order No 12146 is reprinted as a note following 28 U .S C §509 (1994) and provides in section
1-402 thereof.
W henever two or more Executive agencies whose heads serve at the pleasure of the President are unable
to resolve . a legal dispute, the agencies shall submit the dispute to the Attorney General prior to
proceeding in any court, except where there is a specific statutory vesting of responsibility for resolution
elsewhere
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I. BACKGROUND
A.
Except insofar as delegated to the head of an executive branch agency pursuant
to 40 U.S.C. § 486(d) (1994) or section 3(b) of Reorganization Plan No. 18 of
1950 (“ Reorg. Plan” ),3 GSA is the sole authority for leasing general purpose
urban office space in the United States for any governmental entity that is covered
by the Reorganization Plan.
Reorganization Plan No. 18 was promulgated pursuant to the provisions of the
Reorganization Act of 1949, Pub. L. No. 81-109, 63 Stat. 203 (“ Reorg. Act” ).
It provided that all functions regarding the Government’s acquisition and disposi­
tion of building space by lease, with certain enumerated exceptions, were to be
transferred from the “ respective agencies” in which such functions were pre­
viously vested to the Administrator of General Services. Reorg. Plan § 1. Nothing
in the text of Reorganization Plan No. 18 indicates that NAFIs in general, or
military exchanges in particular, were to be excluded from its coverage. On the
other hand, the Reorganization Plan did enumerate specific categories of govern­
ment property that were excluded from its provisions: space in buildings located
in foreign countries or on military bases; space in hospitals, laboratories, factories,
and other .“ special purpose” buildings; and all leasing of the Post Office Depart­
ment. Reorg. Plan § l(a)-(d).
The Federal Property and Administrative Services Act (“ Property Act” ) sepa­
rately authorizes GSA to enter into lease agreements covering periods of not more
than twenty years “ for the accommodation of Federal agencies.” 40 U.S.C.
§ 490(h)(1) (1994). This leasing authority provision was not part of the original
Property Act (which was enacted in 1949, see Pub. L. No. 81-152, 63 Stat. 377),
but was added by amendment in 1958. See Pub. L. No. 85-493, 72 Stat. 294(1958). At the time the 1958 amendment was enacted, leasing authority for federal
agencies and departments had already been transferred to GSA on July 1, 1950,
pursuant to Reorganization Plan No. 18. Thus, the effect of the 1958 amendment
enacting § 490(h)(1) was to expand the GSA’s existing leasing authority to
increase the permissible duration of authorized leases from five years to ten years
(subsequently increased to 20 years). See Pub. L. No. 85-493, 72 Stat. at 294;
H.R. Rep. No. 85-1814, at 2-3 (1958), reprinted in 1958 U.S.C.C.A.N. 2877,
2879.
3 Section 3(b) o f the Plan provides-
When authorized by the Administrator of G eneral Services, any function transferred to him by the provi­
sions o f this reorganization plan may be performed by the head of any agency of the executive branch
o f the G overnment or, subject to the direction and control o f any such agency head, by such officers,
employees, and organizational units under the jurisdiction o f such agency head as such agency head may
designate
Reorg Plan No 18 o f 1950, §3(b), 15 Fed Reg. 3177, reprinted in 40 U S C §490 note (1994), and in 64 Stat
1270(1950)
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A u thority o f M ilitary Exchanges to Lease G eneral Purpose Office Space
B.
NEXCOM is a nonappropriated fund instrumentality established under the
authority of 10 U.S.C. §136 (1994),4 10 U.S.C. § 3013(b)(9) (1994) (Secretary
of the Navy’s responsibility to provide for the morale and welfare of Navy per­
sonnel), and DoD Directive 1015.1 (“ Establishment, Management, and Control
of Nonappropriated Fund Instrumentalities” ) (Aug. 19, 1981). DoD Directive
1015.1 defines a military exchange NAFI as follows:
An integral DoD organizational entity that performs an essential
government function. It acts in its own name to provide or to assist
other DoD organizations in providing [morale, welfare, and recre­
ation] programs for military personnel and authorized civilians. It
is established and maintained individually or jointly by the Heads
of DoD Components. As a fiscal entity, it maintains custody of
and control over its [nonappropriated funds]. It is also responsible
for the exercise of reasonable care to administer, safeguard, pre­
serve, and maintain prudently those appropriated fund resources
made available to carry out its function. It contributes, with its
[nonappropriated funds] to the [morale, welfare, and recreation]
programs of other authorized organizational entities, when so
authorized. It is not incorporated under the laws of any state or
the District of Columbia and it enjoys the legal status of an
instrumentality of the United States.
Id., Encl. 2.
We are advised that military exchange NAFIs are presently established under
the authority of the Assistant Secretary of Defense for Force Management Policy
or one of the Service Secretaries (or their respective designees). DoD Memo at
4—5 and n.2. Employees of a military exchange NAFI are classified as federal
employees within the Department of Defense. See Honeycutt v. Long, 861 F.2d
1346, 1349 n.3 (5th Cir. 1988). The House Armed Services Committee has
described the military exchange NAFIs as follows:
Nonappropriated fund activities of the Department of Defense
occupy a unique position. They render a service vital to the morale
of military personnel and their dependents. Nonappropriated funds
are instrumentalities of the Federal Government and are entitled to
the sovereign immunities and privileges of the United States as pro­
4 That section provides (hat the Under Secretary o f Defense for Personnel and Readiness, “ [sjubject to the
authority, direction, and control o f the Secretary of Defense, . shall perform such duties and exercise such powers
as the Secretary o f Defense may prescribe in the areas of . . exchange, commissary, and nonappropnated fund
activities.” Id
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vided in the Constitution, statutes, treaties, and agreements with for­
eign governments.
Special Subcomm. on Nonappropriated Fund Activities Within the Department
of Defense of House Comm, on Armed Services, 92d Cong., Review o f Non­
appropriated Fund and Other Resale Activities Within the Department of Defense
16615 (Comm. Print 1972).
The nature and status of the military exchanges (sometimes called “ post
exchanges” ) was further described as follows by the U.S. Court of Appeals for
the Fifth Circuit (there with particular reference to the Army and Air Force
Exchange Service (“ AAFES” ), the Army/Air Force equivalent of NEXCOM):
The AAFES is created by federal statute, 10 U.S.C. §§ 4779(c),
9779(c), and is under the military’s control. See Standard Oil Co.
o fC a l. v. Johnson, 316 U.S. 481, 484, 62 S. Ct. 1168, 86 L.Ed.
1611 (1942) ( “ post exchanges . . . are arms of the govern­
ment. . . . They are integral parts of the war department . . . and
partake o f whatever immunities it may have under the Constitution
and federal statutes.” ). Moreover, Congress controls the types of
goods and services that can be provided, establishes price ceilings,
and limits those who may use an AAFES. The purpose of the
AAFES is to provide low cost merchandise and services to military
personnel of the United States. The United States uses profits and
dividends from the AAFES to fund military welfare plans. It is thus
well established by the statutes and cases that the United States
contemplates and manifests supervision and control over the
AAFES and its property.
United States v. Sanders, 793 F.2d 107, 108-09 (5th Cir. 1986) (emphasis added;
citations omitted).
DoD acknowledges that NAFIs such as NEXCOM derive their powers and
authorities from regulations promulgated by DoD or the Service Departments and
“ cannot be given authority by the Secretary or the Secretaries of the Military
Departments . . . that they [i.e., the DoD and Service Secretaries] do not have.”
DoD Memo at 5. Further, as noted in DoD’s legal memorandum on this issue,
military exchange NAFIs may not enter into lease agreements for the use of “ non-
DoD” lands or buildings “ except upon specific approval by the head of the DoD
Component concerned.” Id. at 1 n.l (quoting DoD Directive 1015.6, Encl. 3
( “ Funding of Morale, Welfare, and Recreation Programs” ) (Aug. 3, 1984))
( “ DoD Directive 1015.6” ).
It is our understanding that NEXCOM has not been delegated authority from
GSA to enter into leases for general purpose office space in urban centers. The
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A u thority o f M ilitary E xchanges to Lease G eneral P urpose Office Space
question presented is whether, in the absence of such a delegation, NEXCOM
has legal authority to enter into such leases on its own.
D. ANALYSIS
In contending that NEXCOM has leasing authority independent of any delega­
tion from GSA, DoD asserts three main arguments: (1) because military exchange
NAFIs do not in themselves constitute “ federal agencies” as defined in the Prop­
erty Act, their leasing activities are not subject to GSA’s authority under that
act, DoD Memo at 2-4; (2) a federal statute’s applicability to NAFIs may not
be inferred from language encompassing federal entities in general, and neither
the Property Act nor Reorganization Plan No. 18 contain special provisions explic­
itly stating that they apply to NAFIs, id. at 2-3; and (3) NEXCOM retains a
residual leasing authority, derived through DoD, that is independent of both the
* Property Act and Reorganization Plan No. 18, id. at 4—8. The thrust of this latter
argument appears to be that, because NAFIs are not themselves “ federal agen­
cies” under the Property Act, DoD’s authority over their leases was never trans­
ferred to GSA under the Property Act or pursuant to Reorganization Plan No.
18, and such authority is therefore still retained by DoD or by the military
exchanges.5
In contrast, GSA contends that (1) whether or not NEXCOM satisfies the Prop­
erty Act’s definition of a “ federal agency” in its own right, it constitutes an
integral component of DoD and the Department of the Navy, and (2) inasmuch
as the leasing authority of DoD and the Department of the Navy was indisputably
transferred to GSA under the provisions of Reorganization Plan No. 18, so was
that of NEXCOM. GSA Letter at 1-2.
B.
Reorganization Plan No. 18 provides that “ [a]ll functions with respect to
acquiring space in buildings by lease . . . are hereby transferred from the respec­
tive agencies in which such functions are now vested to the Administrator of Gen­
eral Services,” exclusive of certain enumerated exceptions. Reorg. Plan §1
(emphasis added). The specified exceptions from GSA’s comprehensive assump­
tion of federal government leasing authority included space in buildings located
in foreign countries or on military bases, certain “ special purpose” properties
5 DoD also contends that certain other statutory restrictions on government acquisition of real property (including
leases) cited by GSA are not applicable to the leasing authority at issue here. DoD Memo at 9-12. Because we
conclude that authority over NAFI leasing is vested in GSA under Reorganization Plan No. 18, we need not address
these alternative sources of leasing restrictions. We do note that, whether or not the statutes cited by GSA are
applicable in this context, leases undertaken by NEXCOM pursuant to a valid delegation from GSA would be
“ authorized by law” within the meaning of such statutes. See, e.g., 10 U.S.C. § 2676(a) (1994).
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(such as hospitals and prisons), and space occupied by the Post Office Department.
President Truman described Reorganization Plan No. 18 as follows:
The plan transfers to the Administrator of General Services the
functions of the various Federal agencies with respect to leasing
and assigning general-purpose space in buildings and the operation,
maintenance, and custody o f office buildings.
This plan concentrates in the General Service Administration the
responsibility for the leasing and assignment of what is termed gen­
eral purpose building space; that is, space which is suitable for the
uses of a number of Federal agencies. It specifically excludes space
in buildings at military posts, arsenals, navy yards, and similar
defense installations and space in hospitals, laboratories, factories,
and other special purpose buildings.
Pub. Papers of Harry S. Truman 217—18 (1950).
It is not disputed that DoD’s leasing authority was transferred to GSA under
the Reorganization Plan. Moreover, DoD acknowledges that “ the divestiture of
[federal agency] leasing authority contained in Reorganization Plan No. 18 was
of all functions, as opposed to just those functions being exercised on behalf of
an agency,” DoD Memo at 7. Nonetheless, DoD argues that the leasing authority
of the military exchanges was implicitly excluded from the Reorganization Plan’s
wholesale divestiture of DoD leasing authority.
As in its contentions concerning the Property Act (see Part II.C, infra), DoD
primarily argues that NAFIs fall outside the coverage of the Reorganization Plan
because the Plan, and certain related official statements referring to it, used the
term “ agencies” or “ federal agencies” in referring to the entities affected by
it. DOD Memo at 6-7. Because NAFIs are “ instrumentalities” that are not “ fed­
eral agencies,” the argument continues, authority over their leases was not trans­
ferred under the Reorganization Plan. Id. at 8.6
We do not find this line of argument persuasive. The Reorganization Plan con­
tains no definition of “ agency” or “ federal agency,” and it does not incorporate
the definitions of the Property Act by reference or otherwise.7 There is no sugges­
6 DoD supplem ents this argument with the related contention that “ any intent to circumscribe the authority of
the NAFIs must be clearly evidenced ” DoD Memo at 8 We address this contention in Part II D, infra.
’ Because the Reorganization Plan was enacted pursuant to the Reorganization Act of 1949, that act’s definition
o f “ agency” could be considered relevant to the scope of that term as used in the Reorganization Plan. That defmiuon
provides in relevant part.
When used in this Act, the term “ agency” m eans any executive department, commission, council, inde­
pendent establishment. G overnment corporation, board, bureau, division, service, office, officer authority,
administration, or other establishment, in the executive branch o f the G overnm ent. .
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A uthority o f M ilitary E xchanges to Lease G eneral P urpose Office Space
tion in the Reorganization Plan or related materials that its reference to “ the
respective agencies,” Reorg. Plan § 1, was intended to exclude from coverage
those components or sub-units of an agency that do not themselves satisfy some
unspecified definition of the term “ agency” or “ federal agency.” On the con­
trary, the text of the Reorganization Plan and the accompanying Presidential state­
ment confirm that, apart from those discrete government programs and activities
that were specifically excepted, the Plan’s transfer of leasing functions was
intended to extend throughout the Federal Government.8
We believe that DoD’s argument that the leasing authority of the military
exchanges was implicitly excluded from the comprehensive sweep of Reorganiza­
tion Plan No. 18 is incompatible with the exchanges’ status as integral components
of DoD. That status is well-established and long-recognized. In Standard Oil Co.
v. Johnson, for example, the Supreme Court concluded that the military post
exchanges “ are arms of Government. . . essential for the performance of govern­
mental functions” and constitute an “ integral part[] of the War Department [now
DoD] . . . and partake of whatever immunities it may have under the Constitution
and federal statutes.” 316 U.S. at 485. Numerous other cases have similarly
acknowledged the status of the military exchanges as integral components of DoD.
See, e.g., Honeycutt v. Long, 861 F.2d 1346, 1349 (5th Cir. 1988) (holding that
the Secretary of Defense or the Service Secretaries are proper named defendants
in an employment discrimination suit brought by a NAFI employee, the court
stated, “ The AAFES is a part of the Department of Defense.” ); Ellsworth Bottling
Co. v. United States, 408 F. Supp. 280, 284 (W.D. Okla. 1975) (statutory exclusion
of DoD from procurement provisions of Property Act applies to AAFES as well
because it “ is an integral part of the Department of Defense” ). As observed by
the Seventh Circuit in Champaign-Urbana News Agency, Inc. v. J. L. Cummins
News Co., 632 F.2d 680 (7th Cir. 1980) (holding that NAFI post exchanges are
entitled to governmental immunity under the Robinson-Patman Act), “ [t]o try to
separate [a military exchange] from our military forces is to wholly ignore all
its unique features distinguishing it from private enterprise and to ignore the long
established views of both the Congress and the Executive Branch.” Id. at 692.9
Reorg Act §7, 63 Stat at 205 This definition is comprehensive and would appear to readily encompass military
exchange organizations such as NEXCOM.
8 W e note, for example, that section 3(b) o f the Reorganization Plan provides that the GSA Administrator may
authorize the head o f any executive branch agency to designate “ organizational units” under the jurisdiction of
such agency to perform the leasing and other functions covered by the Reorganization Plan. W e believe this provision
demonstrates that Reorganization Plan No. 18 applies not only to the “ respective agencies” referred to therein but
also to the organizational units and components comprising such agencies. In this regard, DoD’s ow n regulations
recognize that a military exchange NAFI is “ la]n integral DoD organizational entity.” DoD Directive 1015 1, Enel
2.
9 A NAFI’s status as an integral component o f its “ host” department has also been recognized by Congress.
As stated in the House Report accompanying Pub. L No. 91-350, 84 Stat 449 (authorizing Tucker Act jurisdiction
over claims against nonappropnated fund agencies), “ la] nonappropnated fund instrumentality may not be sued
because it has a privileged status as an integral part o f a department or agency o f the United States and is not
subject to suit unless consent thereto has been granted by Congress ” Letter for Emanuel Cellar, Chairman, House
Continued
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O pinions o f the O ffice o f L egal C ounsel in Volume 21
DoD itself acknowledges that “ when we talk about the authority of the NAFIs
we are always talking about the authority of the [Service] Secretaries acting
through the NAFIs.” DoD Memo at 8 n.6.'° The NAFIs’ status as subordinate
DoD components extends to their leasing authority as well as to other functions.
Thus, their leases of non-DoD land or buildings are subject to “ specific approval
by the head of the DoD Component concerned.” DoD Directive 1015.6, quoted
in DoD Memo at 1 n. 1.
Given these factors, we are not persuaded that leasing authority for DoD NAFIs
is independent and apart from DoD’s overall leasing authority. Accordingly, in
the absence of any provision or evidence to the contrary, the leasing authority
of the military exchanges would have been transferred to GSA along with that
of other DoD components under the terms of Reorganization Plan No. 18.
We find nothing in the text of the Reorganization Plan indicating that military
exchange facilities were to be excluded from its provisions.11 Although the
Reorganization Plan explicitly enumerates those particular functions and facilities
that were to be exempted — including facilities located on military bases — the
list makes no reference to NAFIs or military exchanges.12 Under the interpretative
canon expressio unius est exclusio alterius, the NAFIs’ absence from the Reorga­
nization Plan’s enumeration of excluded entities makes it difficult to conclude
that they were somehow implicitly excluded from its coverage. See TVA v. Hill,
437 U. S. 153, 188 (1978) (expressio unius canon applied to support Court’s
conclusion that the similarly enumerated exceptions to the Endangered Species
Act were exclusive).13
Judiciary Committee, from Spencer J Schedler, Assistant Secretary o f Che Air Force (Sept 24, 1969), reprinted
in H.R Rep No. 91-933, at 10 (1970), and in 1970 U.S C C-A N 3477, 3486 (emphasis added)
10 The N A FIs’ status as integral and subordinate components o f DoD is further confirmed and reinforced by the
provisions o f 10 U.S C § 2783 (1994), enacted in 1992, which directs the Secretary of Defense to “ prescribe regula­
tions governing — (1) the purposes for which nonappropriated funds o f a nonappropnated fund instrumentality of
the U nited States within the Department of Defense may be expended; and (2) the financial management of such
funds to prevent waste, loss, or unauthorized use ’’
" T h e A cting Assistant Solicitor General provided an assessment o f Reorganization Plan No. 18 for the Attorney
G eneral’s consideration pn o r to its adoption Memorandum for the A ttorney General from Abraham J Harris, Acting
Assistant Solicitor General, Re: Reorganization Plan No 18 o f 1950 and Message o f the President transmitting
the plan to the Congress (Mar 9, 1950) This memorandum noted the particular categories of property that were
to be excluded from the Plan’s coverage, but gave no indication that the leases or properties of NAFIs or military
exchanges were to be excluded On the contrary, the memorandum described the Plan’s coverage in comprehensive
terms, noting that it gave GSA leasing authonty over “ government-owned or government-leased general purpose
buildings ’ ’ Id. at 1
12 M ilitary exchanges are excepted from the Reorganization Plan’s provisions only insofar as they are located
in foreign countries or on military bases, Reorg Plan § l(a)-(b), but the leasing authonty of such military exchanges
is not in issue here.
13 As one U.S. Court o f Appeals stated in considenng an antitrust suit against the Army and Air Force Exchange
Service ( “ A A FES” ), “ when the Congress desires to modify the usual rule or to make special provision applicable
to AAFES operations it knows how to do it ” Champaign-Urbana N ew s Agency, Inc v J L. Cummins News Co.,
632 F 2d 680, 692 (7th C ir 1980). We believe this applies generally to military exchange NAFIs
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A uthority o f M ilitary Exchanges to Lease G eneral P urpose Office Space
c.
DoD’s argument initially focused on whether military exchange NAFIs
independently conform to the definition of a “ federal agency” under the Property
Act (DoD Memo at 1-4). The appropriate focus, however, is on the Reorganiza­
tion Plan. Although the Property Act authorizes GSA to enter into lease agree­
ments “ necessary for the accommodation of Federal agencies,” 40 U.S.C.
§ 490(h)(1) (1994), that section did not give GSA exclusive federal government
leasing authority or transfer previously existing agency leasing authority from the
agencies to GSA. Rather, the wholesale transfer of federal government leasing
authority from the federal departments and agencies to GSA was accomplished
by Reorganization Plan No. 18 in 1950, not by the Property Act in 1949. Had
the Property Act already transferred the departments’ and agencies’ leasing
authority to GSA when it was enacted in 1949, the Reorganization Plan’s transfer
of agency leasing functions in 1950 would have been redundant and unnecessary.
In this regard, it is significant to note that Reorganization Plan No. 18 was
promulgated pursuant to the Reorganization Act of 1949, not the Property Act.
Moreover, the particular GSA leasing provision contained in subsection 490(h)(1)
and relied upon by DoD was not added to the Property Act until 1958 — eight
years after the general transfer of agency leasing authority to GSA under the
Reorganization Plan. See Pub. L. No. 85-493, 72 Stat. 294 (1958). Because
Reorganization Plan No. 18, not the Property Act, is the source of GSA’s exclu­
sive leasing authority over DoD and its components, NEXCOM’s failure to con­
form to the Property Act’s definition of a “ federal agency” in its own right (i.e.,
apart from DoD) does not remove it from the transfer of leasing authority effec­
tuated by Reorganization Plan No. 18. An entity’s status as a “ federal agency”
under the Property Act was simply not a precondition to coverage under the
Reorganization Plan.14
Even if the Property Act (as opposed to the Reorganization Plan) were the
source of GSA’s exclusive government-wide leasing authority, DoD’s argument
that satisfying the Act’s definition of “ federal agency” is critical to an organiza­
tion’s coverage under the Act proves too much. Insofar as relevant here, the Prop­
erty Act defines “ federal agency” as “ any executive agency,” which includes
14 For ihe same reasons, DoD’s reliance on the Comptroller General’s opinion in M atter o f LDDS Worldcom ,
No B-270109, 1996 WL 45162 (C.G Feb 6, 1996), is unavailing That opinion concluded that NEXCOM’s contracts
are not subject to the Comptroller General’s bid protest jurisdiction under the Competition in Contracting Act
( “ CJCA” ) because NEXCOM did not independently meet C ICA ’s definition of “ federal agency,” as adopted from
the Property Act’s definition o f that same term Initially, we note that the Comptroller General’s rulings are not
binding on this Office or the executive branch in general, although they are generally informative sources on matters
within the Comptroller General’s authonty See Bowsher v Synar, 478 U.S. 714, 728-32 (1986); Implementation
o f the Bid Protest Provisions o f the Competition in Contracting Act, 8 Op O.L.C. 236, 246 (1984). Although we
have serious questions regarding the reasoning o f the opinion in LDDS Worldcom — l e., its reliance on whether
NAFIs independently meet the definition o f a “ federal agency” rather than whether they constitute integral compo­
nents of a federal agency for purposes o f coverage under the Property Act — the resolution of that issue is not
cntical here in light o f our conclusion that NEXCOM’s leasing authority was transferred to GSA pursuant to Reorga­
nization Plan No. 18.
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“ any executive department or independent establishment in the executive branch
of the Government, including any wholly owned Government corporation.” 40
U.S.C. § 472(a), (b) (1994). We agree that NEXCOM does not independently sat­
isfy that definition. Neither, however, do various other DoD components that are
indisputably covered by the Property A ct15 and the Reorganization Plan. The
Department of the Navy, for example, does not constitute an “ executive depart­
ment” or an “ independent establishment,” see 5 U.S.C. §§ 101, 104 (1994), but,
rather, constitutes a “ military department,” id. § 102. Yet it can hardly be main­
tained that the Navy Department falls outside the coverage of the Property Act
because it does not meet the Act’s technical definition of “ federal agency.” The
Navy Department is covered under the Property Act not because it independently
satisfies the Act’s definition of “ federal agency,” but because it is an integral
component of a larger federal agency, i.e., DoD. Because the military exchanges
are likewise integral components of DoD (discussed further, infra), see Standard
Oil Co. v. Johnson, 316 U.S. 481, 485 (1942), the same holds true for NEXCOM.
We recognize that in Ellsworth Bottling Co. v. United States, 408 F. Supp. at
284, a U.S. District Court held that the Army and Air Force Exchange Service
( “ AAFES” ), a NAFI, was not subject to the requirements of the Property Act
governing the procurement of goods and services, see 41 U.S.C. §§252, 253
(1994).16 The court reached this conclusion in part because it determined that
the AAFES did not constitute an “ executive agency” for purposes of 41 U.S.C.
§ 252(a), as defined in 40 U.S.C. §472 (1994). Id. at 283-84. Significantly, how­
ever, that conclusion rested upon the court’s determination that AAFES did not
satisfy the “ independent establishment” prong of the “ executive agency” defini­
tion because it “ is a part of the Department o f Defense” and therefore cannot
be an independent establishment. Id. at 284 (emphasis added). The court further
concluded that, because DoD was explicitly excluded from the procurement provi­
sions of the Property Act in question under 41 U.S.C. § 252(a)(1), AAFES was
also excluded as “ an integral part of the Department of Defense.” 408 F. Supp.
at 284—85. Thus, Ellsworth Bottling is consistent with the view that a NAFI’s
coverage under federal statutes like the Property Act is a function of its status
as an integral part of DoD rather than its status as an independent entity.
l5O ur discussion o f the Property A ct’s coverage o f DoD and its components in this memorandum refers only
to those portions o f the Property Act codified m C hapter 10 o f title 40, United States Code ( “ Management and
Disposal o f Government Property’’). W e recognize that DoD and its components are explicitly exempted from the
separate provisions o f the Property Act governing the procurement o f goods and services which are codified in
Subchapter IV ( “ Procurement Provisions’’), Chapter 4, of title 41, United Slates Code See 41 U S C §252(a)(l)
(1994)
i6See also M C I Telecommunications Corp v A rm y and Air Force Exch Serv , No Civ.A 95-0607 RMU, 1995
W L 317435, al *6 (D.D C May 9, 1995) (holding in accord with Ellsworth Bottling)
132
A uthority o f M ilitary E xchanges to Lease G eneral P urpose Office Space
D.
Citing a number of statutes where Congress has included specific provision for
the coverage of NAFIs, or expressly provided for distinct treatment of NAFIs,
DoD makes the additional contention that “ it is clear as a matter of statutory
interpretation that coverage of NAFIs is not to be inferred from language encom­
passing Federal entities in general.” DoD Memo at 2-3. By this reasoning, statutes
generally applicable to federal departments and agencies (like the Property Act
and Reorganization Plan No. 18) would not apply to NAFIs unless they make
explicit provision for such application. We think this argument proves too much.
As noted above, Reorganization Plan No. 18 went to considerable lengths in
enumerating the particular types of organizations and facilities whose leasing
authority was excluded from the Plan’s otherwise comprehensive coverage. Reorg.
Plan § l(a)-(d). Particularly detailed provision was made for exempting various
categories of military facilities and organizations from the transfer of leasing func­
tions to GSA. Id. § 1(b). It is therefore apparent that careful consideration was
given to identifying those categories of government and military leasing activity
that were unsuitable for transfer to GSA, yet military exchanges were not listed
among the exempted activities. Thus, although a specific provision for NAFIs
may arguably be required to support their coverage in some statutory contexts,
the carefully wrought provisions of Reorganization Plan No. 18 obviate the need
for following that approach here.
We recognize that special statutory provisions have sometimes been considered
necessary to support the Government’s assumption of a NAFI’s contractual liabil­
ities or financial obligations, such as the provision for the Tucker Act’s application
to military exchange contracts. See 28 U.S.C. § 1491(a)(1) (1994). As the Supreme
Court stated in United States v. Hopkins, A ll U.S. 123, 127 (1976):
The nonappropriated-fund status of the exchanges places them in
a position whereby the Federal Government, absent special legisla­
tion, does not assume the obligations of those exchanges in the
manner that contracts entered into by appropriated fund agencies
are assumed.
Although that observation explains why a specific amendment was considered nec­
essary to extend the Government’s liability for breach of contract under the Tucker
Act to military exchange NAFIs, its reasoning does not extend to the leasing provi­
sions of Reorganization Plan No. 18.
Under the Reorganization Plan and the Property Act, GSA assumes the NAFIs’
leasing functions, not its ultimate financial liabilities as a lessee. Reorg. Plan § 1;
40 U.S.C. § 490(h)(1). NEXCOM is required to reimburse GSA for space leased
by GSA and furnished to NEXCOM. 40 U.S.C. §490(j) (1994) (GSA directed
to charge those entities for whom it furnishes space at rates approximating
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O pinions o f the O ffice o f Legal C ounsel in Volum e 21
commercial charges for comparable space); 41 C.F.R. § 101-21.6 (1996) (pro­
viding billing procedures for rent charges to agencies occupying space furnished
under the leasing responsibilities of GSA).17 Thus, GSA’s assumption of
NEXCOM’s leasing functions would not require GSA to subsidize the leases of
the military exchanges with appropriated funds. Viewed from a functional stand­
point, GSA would be acting in the manner of a sub-lessor to NEXCOM — i.e.,
entering into lease agreements for NEXCOM’s “ accommodation,” see 40 U.S.C.
§ 490(h)(1) — rather than assuming lease liabilities undertaken by NEXCOM.
Accordingly, the concerns regarding the Government’s assumption of NAFI finan­
cial obligations that may justify a requirement for specific provision to make a
law applicable to NAFIs in other contexts are not applicable here.
Conclusion
In the absence of a delegation from GSA pursuant to section 3(b) of Reorganiza­
tion Plan No. 18, we conclude that NEXCOM and other military exchange NAFIs
lack independent authority to lease general purpose office space in urban centers.
DAWN E. JOHNSEN
Acting Assistant Attorney General
Office o f Legal Counsel
17 We recognize that GSA is authorized to exempt agencies from lease reimbursement requirements if it “ deter­
mines that such charges would be infeasible or impractical “ 40 U S C §490(j) However, we do not believe that
this limited, contingent provision authorizes the kind of liability assumption that might require Congress to make
specific provision in order tor it to apply to NAFIs
134