Federal Aviation Administration Negotiations with

B-260063 Jun 30, 1995 Jump To VIEW DECISION RELATED PAGES GAO CONTACTS Highlights The Federal Aviation Administration may pay a connection charge to Pacific Gas and Electric Company to connect electrical utility service to a remote FAA facility that includes an itemization of the increased federal and state income taxes that PG&E will incur incident to the transaction. FAA and PG&E are negotiating the amount that PG&E will be paid to connect electrical power to FAA's Rainbow Ridge Air Route Surveillance Radar site in a remote location near Eureka. (2) FAA may pay a connection charge to PG&E that includes an itemization of the increased federal and state income taxes that PG&E will incur incident to its agreement to connect electrical power to the Rainbow Ridge radar site. View Decision Matter of: Federal Aviation Administration Negotiations with Pacific Gas and Electric Company to Provide Electric Utility Service to a Remote Air Route Surveillance Radar Facility File: B-260063 Date: June 30, 1995 The Federal Aviation Administration violated 31 U.S.C. Sec. 3324 by making an advance payment to Pacific Gas and Electric Company for connecting electrical utility service to a remote FAA facility. FAA failed to obtain "adequate security" for making advance payments as required by 41 U.S.C. Sec. 255 or to follow the other requirements of the Federal Acquisition Regulations regarding advance payments. The Federal Aviation Administration may pay a connection charge to Pacific Gas and Electric Company to connect electrical utility service to a remote FAA facility that includes an itemization of the increased federal and state income taxes that PG&E will incur incident to the transaction. The enumerated amounts would reimburse PG&E for taxes imposed upon the utility and would not constitute impermissible taxes on the federal government. The Federal Aviation Administration should not accept as part of its agreement with Pacific Gas and Electric Company to connect electrical utility service to a remote FAA facility a clause offering PG&E an open- ended, unrestricted indemnity from FAA. The indemnity clause, through events that FAA cannot control, could produce a liability in excess of FAA's available appropriations in violation of the Antideficiency Act, 31 U.S.C. Secs. 1341 and 1517. DECISION The Assistant Chief Counsel, Western-Pacific Region, Federal Aviation Administration (FAA), has requested a decision on several issues raised during negotiations between the FAA and Pacific Gas & Electric Company (PG&E). FAA and PG&E are negotiating the amount that PG&E will be paid to connect electrical power to FAA's Rainbow Ridge Air Route Surveillance Radar site in a remote location near Eureka, California. For the reasons discussed below, we conclude that: (1) the FAA violated 31 U.S.C. Sec. 3324 by making an advance payment to PG&E for the connection of the Rainbow Ridge radar site to PG&E's electrical power lines; (2) FAA may pay a connection charge to PG&E that includes an itemization of the increased federal and state income taxes that PG&E will incur incident to its agreement to connect electrical power to the Rainbow Ridge radar site; and (3) FAA should not accept as part of its agreement with PG&E an open- ended, unrestricted indemnity clause that would require FAA to assume liability for damages that PG&E may incur in providing electrical service to the Rainbow Ridge site. Background The FAA (together with the U.S. Air Force) is currently constructing 43 Air Route Surveillance Radar sites across the continental United States to fulfill both civilian and military aviation radar needs. One of these sites is located at Rainbow Ridge, California. The Rainbow Ridge radar site is in a remote location, which has caused some difficulty for the FAA in procuring the electrical power needed to run the facility. In order to obtain power, the Rainbow Ridge radar site must be connected to power lines owned by PG&E, the sole provider of electrical power in the area. In December 1985, PG&E and the General Services Administration entered into a 10-year term areawide public utilities contract for PG&E to provide utility services to federal government facilities. Under Article 2(b) of the areawide contract, all federal agency procurements of utility services from PG&E were to be made under the contract. The areawide contract generally requires PG&E to provide utility services at PG&E's general tariff rates as approved by the California Public Utilities Commission (Commission). However, Article 2(b) of the areawide contract allows PG&E to provide "services of a special nature" to federal agencies at negotiated rates, provided that such rates and services are allowed by the Commission. FAA has been in negotiations with PG&E to connect the Rainbow Ridge radar site to PG&E's power line 7 miles away and to thereafter provide electrical service to the radar facility.