Defense Television-Audio Support Activity�Advance Payments, B-288013, December 11, 2001

B-288013 Dec 11, 2001 Jump To VIEW DECISION RELATED PAGES GAO CONTACTS Highlights Memberships without co-payment) for employees who are paid less than a specified rate of pay. Memberships with co-payment) for employees who are paid at or more than a specified rate of pay. /2/ Even though the contract uses the term "memberships. T-ASA is simply paying Ballston so that AFIS employees can have access to Ballston's fitness facilities (including equipment. The primary beneficiaries of the contract are the AFIS employees who use the facilities and receive the services. Before employees have used the fitness facilities or received related services. Agencies may not make advance payments on contracts unless the payments are specifically authorized by law. /3/ Under 10 U.S.C. Agencies are authorized to make advance payments under contracts for property or services. View Decision Defense Television-Audio Support Activity-Advance Payments, B-288013, December 11, 2001 Digest Agency payment of membership fees to private fitness center at the beginning of each option year under contract for providing fitness facilities and services for government employees before the agency employees use the contractor's facilities and services would violate the advance payment provisions of 31 U.S.C. Sec. 3324. DECISION The Television-Audio Support Activity (T-ASA), Department of Defense, requests an advance decision concerning the legality of proposed advance payments to be made to Ballston Common Sport & Health, under contract No. MDA112-01-D0001, for providing health and fitness facilities and related services to employees of the American Forces Information Service (AFIS). /1/ T-ASA awarded this commercial-item contract on March 1, 2001. As amended, the contract provides a total of 42 full-time memberships for AFIS employees. Under the contract, T-ASA pays the total cost of 12 full-time memberships (i.e., memberships without co-payment) for employees who are paid less than a specified rate of pay. T-ASA pays only part of the cost of the other 30 full-time memberships (i.e., memberships with co-payment) for employees who are paid at or more than a specified rate of pay. /2/ Even though the contract uses the term "memberships," under the contract, T-ASA is simply paying Ballston so that AFIS employees can have access to Ballston's fitness facilities (including equipment, lockers, and showers) and to obtain related services (such as health assessments and exercise prescriptions). Under the contract, AFIS officials control (through the use of authorization forms) which employees can use the facilities and receive the services. The primary beneficiaries of the contract are the AFIS employees who use the facilities and receive the services. T-ASA asks whether it may pay the government's portion of all full-time memberships fees at the beginning of each option year. T-ASA states that an alternative payment method--paying in monthly increments based upon the actual number of employees using the fitness facility in a given month--would be "more burdensome." We conclude that paying for full-time memberships at the beginning of each option year, before employees have used the fitness facilities or received related services, would violate the advance payment provisions of 31 U.S.C. Sec. 3324. Under 31 U.S.C. Sec. 3324, agencies may not make advance payments on contracts unless the payments are specifically authorized by law. /3/ Under 10 U.S.C. Sec. 2307, agencies are authorized to make advance payments under contracts for property or services, but they must obtain adequate security from the contractor and the head of the agency must first determine that the advance payments are in the public interest. 10 U.S.C. Sec. 2307(d). Security may be in the form of liens in favor of the federal government on any property being acquired, on the balance of advanced funds held by the contractor, or on property acquired for performance of the contract. Id. Advance payments made for commercial items may not exceed 15 percent of the contract price in advance of any performance of work under the contract. 10 U.S.C. Sec. 2307(f)(2). Section 32.202-1 of the Federal Acquisition Regulation (FAR) sets forth the government's financing policy and implements the advance payment authority of 10 U.S.C. Sec. 2307(f)(2) for purchases of commercial items. FAR section 32.202-1(b) provides, among other things, that advance payments may be used as a form of contract financing for acquisitions of commercial supplies or services where the agency determines that advance payment financing is in the best interest of the government, adequate security is obtained, and prior to any performance of work under the contract the total of commercial payments shall not exceed 15 percent of the contract price. Our review of the record reveals that T-ASA has not satisfied the requirements of either 10 U.S.C. Sec. 2307 or FAR Sec. 32.202-1(b).