Authority of Military Exchanges to Lease General Purpose

Office Space

The Navy Exchange Service Com m and, a nonappropriated fund instrumentality, and similar military 

exchange units constitute integral com ponents of the Department o f Defense, and their leasing 

authority, like that o f other DoD com ponents, is subject to the provisions of Reorganization Plan 

No. 18 of 1950, notwithstanding their status as NAFIs. Accordingly, they are not authorized to 

lease general purpose urban office space unless such authority is delegated to them by the General 

Services Administration.

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 t h e D e p a r t m e n t o f D e f e n s e

a n d t h e G e n e r a l S e r v i c e s A d m in i s t r a t i o n

This responds to your request for the Attorney General to resolve a disagreement 

between the Department of Defense (“ DoD” ) and the General Services Administration (“ 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 NonAppropriated Fund Instrumentality (NAFI) to Enter Into a Lease Without Delegation from GSA (Aug. 30, 1996) 

(“ DoD Memo” ). The GSA’s views are set forth in a letter to Robert S. Taylor, Deputy General Counsel, Department 

of 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 .SC §509 (1994) and provides in section 

1-402 thereof.

Whenever 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 disposition of building space by lease, with certain enumerated exceptions, were to be 

transferred from the “ respective agencies” in which such functions were previously 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 government 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 Department. Reorg. Plan § l(a)-(d).

The Federal Property and Administrative Services Act (“Property Act” ) separately 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) of the Plan providesWhen authorized by the Administrator of General Services, any function transferred to him by the provisions of this reorganization plan may be performed by the head of any agency of the executive branch 

of the Government or, subject to the direction and control of any such agency head, by such officers, 

employees, and organizational units under the jurisdiction of such agency head as such agency head may 

designate

Reorg Plan No 18 of 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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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 personnel), 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 recreation] 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, preserve, 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 pro4 That section provides (hat the Under Secretary of Defense for Personnel and Readiness, “ [sjubject to the 

authority, direction, and control of the Secretary of Defense, . shall perform such duties and exercise such powers 

as the Secretary of 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 foreign governments.

Special Subcomm. on Nonappropriated Fund Activities Within the Department 

of Defense of House Comm, on Armed Services, 92d Cong., Review of Nonappropriated 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.

ofC al. v. Johnson, 316 U.S. 481, 484, 62 S. Ct. 1168, 86 L.Ed.

1611 (1942) (“ post exchanges . . . are arms of the government. . . . They are integral parts of the war department . . . and

partake of 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 “ nonDoD” 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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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 delegation from GSA, DoD asserts three main arguments: (1) because military exchange 

NAFIs do not in themselves constitute “ federal agencies” as defined in the Property 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 explicitly 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 agencies” under the Property Act, DoD’s authority over their leases was never transferred 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 Property 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 respective agencies in which such functions are now vested to the Administrator of General Services,” exclusive of certain enumerated exceptions. Reorg. Plan §1 

(emphasis added). The specified exceptions from GSA’s comprehensive assumption 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 of office buildings.

This plan concentrates in the General Service Administration the 

responsibility for the leasing and assignment of what is termed general 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 “ federal agencies,” the argument continues, authority over their leases was not transferred under the Reorganization Plan. Id. at 8.6

We do not find this line of argument persuasive. The Reorganization Plan contains 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 sugges6 DoD supplements 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 

of “ 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” means any executive department, commission, council, independent establishment. Government corporation, board, bureau, division, service, office, officer authority, 

administration, or other establishment, in the executive branch of the G overnm ent. .

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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 contrary, the text of the Reorganization Plan and the accompanying Presidential statement 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 Reorganization 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 governmental 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 We note, for example, that section 3(b) of the Reorganization Plan provides that the GSA Administrator may 

authorize the head of 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. We 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 own 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 of 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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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 Reorganization 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 of 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 NAFIs’ status as integral and subordinate components of DoD is further confirmed and reinforced by the 

provisions of 10 U.S C § 2783 (1994), enacted in 1992, which directs the Secretary of Defense to “ prescribe regulations governing — (1) the purposes for which nonappropriated funds of a nonappropnated fund instrumentality of 

the United 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 Acting Assistant Solicitor General provided an assessment of Reorganization Plan No. 18 for the Attorney 

General’s consideration pnor to its adoption Memorandum for the Attorney 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 Military 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 of Appeals stated in considenng an antitrust suit against the Army and Air Force Exchange 

Service (“ AAFES” ), “ 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 News Agency, Inc v J L. Cummins News Co.,

632 F 2d 680, 692 (7th Cir 1980). We believe this applies generally to military exchange NAFIs

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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 Reorganization Plan. Although the Property Act authorizes GSA to enter into lease agreements “ 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 exclusive leasing authority over DoD and its components, NEXCOM’s failure to conform 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 effectuated 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 organization’s coverage under the Act proves too much. Insofar as relevant here, the Property 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 Matter 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 CICA’s definition of “ federal agency,” as adopted from 

the Property Act’s definition of 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 of the opinion in LDDS Worldcom — l e., its reliance on whether 

NAFIs independently meet the definition of a “ federal agency” rather than whether they constitute integral components of a federal agency for purposes of coverage under the Property Act — the resolution of that issue is not 

cntical here in light of our conclusion that NEXCOM’s leasing authority was transferred to GSA pursuant to Reorganization 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 satisfy 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 department” 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 maintained 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, however, that conclusion rested upon the court’s determination that AAFES did not 

satisfy the “ independent establishment” prong of the “ executive agency” definition because it “ is a part of the Department of 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 provisions 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.

l5Our discussion of the Property Act’s coverage of DoD and its components in this memorandum refers only 

to those portions o f the Property Act codified m Chapter 10 of title 40, United States Code (“ Management and 

Disposal of Government Property’’). We recognize that DoD and its components are explicitly exempted from the 

separate provisions of the Property Act governing the procurement of 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 Arm 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)

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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 encompassing 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 functions 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 liabilities 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 legislation, 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 necessary 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 provisions 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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commercial charges for comparable space); 41 C.F.R. § 101-21.6 (1996) (providing 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 standpoint, 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 financial 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 Reorganization 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 of Legal Counsel

17 We recognize that GSA is authorized to exempt agencies from lease reimbursement requirements if it “ determines 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

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