GAB Decision 474
Docket No. 83-168
November 9, 1983
Puerto Rico Office for Human Development;
Ford, Cecilia; Teitz, Alexander Settle, Norval
Background.
This case arose after a remand in Board Decision No. 430, May 31,
1983. In the latter case, the Board reviewed an appeal by the Puerto
Rico Office for Human Development (appellant) from a decision of the
Office of Human Development Services (OHDS) which disallowed $300,700
claimed under appellant's Head Start program. The claim was for an
expenditure for 620 waste receptacles (one for each Head Start center in
Puerto Rico). The Board determined that two of OHDS' bases for the
disallowance--a lack of prior approval allegedly required by regulations
and an improper use of "cost of living" funds--were not supported
by the
record. The Board also determined that OHDS' other substantial basis
for the disallowance--the supposed unreasonableness of the
purchase--could be significant but could not be reviewed given the
sparse record. The Board remanded the case to the parties with
instructions for further development. Based on circumstances explained
in the decision, the Board cautioned appellant that it had a burden to
show the reasonableness of the purchase. Appellant submitted further
information to OHDS. OHDS reduced the disallowance to $224,030.
Appellant challenged the reduced disallowance. Based on the record
below, we uphold the disallowance of the reduced amount.
The appellant's submission to OHDS on remand.
Following the Board's decision, appellant submitted its justification
of the reasonableness of the purchase to OHDS in the form of a
three-page memorandum with an addendum. Appellant's letter of August 8,
1983, Appendix II. Appellant's memorandum contained the following
arguments: that reasonableness, essentially, is in the eye of the
beholder; that the price appellant paid ($485.00 per trash can) was the
lowest price of four bids received from six suppliers solicited (the
bids ranged up to $510.00); that the trash cans are a "training tool"
in teaching children about sanitary conditions because the cans are the
type children may encounter in many municipalities; and that,
generally, appellant considered the purchase quite reasonable. The
addendum to the memorandum was a letter from the Puerto Rico Secretary
of Health which stated the following (in its entirety):
(2) Present regulations of the Health Department of Puerto Rico
require that trash and other refuse be kept in covered sturdy containers
for weekly collection. In schools, they also constitute an educational
instrument, in addition to their sanitary purpose.
The OHDS response.
OHDS responded that it still considered most of the purchase
unreasonable. Id., Appendix I. OHDS maintained that the Health
Department memorandum neither stated exact specifications for trash
cans, nor suggested that the particular cans purchased were the only
suitable option.
OHDS also obtained a letter from a Health Educator in the Dengue and
Rodent Control Program of the Puerto Rico Department of Health. The
letter contained some information, and an excerpt from a document on
sanitation control, dealing with what "regulations" required (an
easily-cleaned rust-resistant metal or plastic receptacle not exceeding
35 gallons with an adjustable top). /1/
Using the description of what health regulations required, OHDS
solicited price quotes from several hardware stores in Puerto Rico. The
quotes--for retail prices--ranged from $19 to $55. Using the $55
figure, OHDS computed the maximum allowable cost to be $28,655 for 521
containers. /2/
(3) OHDS also briefly restated its earlier finding that extra Head
Start funds should have been used to meet increased funding needs for
renovations and nutritional services. OHDS ended its determination
letter by stating that "we agree that Head Start centers should have
waste disposal equipment on hand" but that appellant had failed to
demonstrate that the costly trash cans were the only way of meeting
health and training needs.
The parties' arguments on appeal.
When it returned to the Board, appellant made little in the way of
new substantive arguments in response to the OHDS determination. Much
of appellant's presentation was directed at collaterally impeaching the
evidence presented by the Health Department employee. Appellant
suggested that the employee was disgruntled because she once sought a
position in the Head Start program and was not hired. Appellant claimed
that she once used an OHDS official involved in this dispute as a
personal reference, and appellant termed her a "personal friend" of
this
official. Appellant said that the Secretary of Health was "very much
upset about a minor official taking upon herself prerogatives which are
not hers." Appellant's letter of August 8, 1983, p. 2. Appellant
questioned whether the hardware stores which quoted prices offered trash
cans which were as durable as those purchased by appellant. Appellant
also argued, as it had earlier, that no other part of the Head Start
program was deprived of funds because of the use of funds for the trash
cans.
OHDS' arguments on appeal largely were a repeat of its determination
on remand. OHDS also argued that the attacks on the Health Department
employee were an attempt to divert attention from the issue of the
reasonableness of the purchase. OHDS reiterated its view that the
Secretary of Health had not stated any trash can specifications or that
the cans purchased were the only reasonable option. Stressing its
perception of its own reasonableness, OHDS argued that while appellant
probably would not have had to pay the $55 retail cost OHDS obtained as
the highest quote, OHDS "gave the appellant the benefit of the doubt and
utilized the higher figure as a reasonable per unit price." OHDS' Reply
Memorandum, p. 7.
Discussion.
Appellant has done little more than repeat its conclusory view of the
reasonableness of the purchase, and has provided nothing substantive to
rebut the affirmative findings arising from OHDS' investigation that
there was a less expensive, alternative way to meet identified needs.
This is so even if we ignore the uncontradicted hearsay testimony of the
Health Department employee about the views of Head Start administrators.
It is clear that the letter from the Secretary of Health states nothing
which supports (4) the proposition that only the high-priced trash cans
were appropriate to meet the appellant's needs, and nothing which
suggests OHDS' less expensive cans would be inadequate.
Unlike the earlier case, OHDS has conceded that purchase of some type
of trash can is appropriate. The dispute, now, essentially is over the
issue of whether a $55 trash can is good enough, or whether the
appellant was justified in buying 521 cans which cost over eight times
as much per can. One may speculate that there might be reasons to buy
the more expensive can, which clearly must have qualities beyond the $55
can proposed by OHDS. But on this issue, appellant simply has presented
nothing at all persuasive. Its only substantive attempt at rebuttal,
apart from its insistence that its view of reasonableness should be
taken at face value, is a five-line paragraph in which it asks the
question whether the hardware stores' trash cans meet the
"specifications" of the cans appellant purchased. They may not. But
appellant has not shown, nor made any attempt to show, that more
stringent "specifications" were necessary or appropriate in the
circumstances here. Indeed, it is not even clear what those
"specifications" were (beyond the general statements in the Secretary
of
Health's letter and the material submitted by OHDS). Appellant has not
rebutted, nor made any substantive attempt to rebut, OHDS' argument that
the cans it proposed were adequate to meet the needs appellant
identified. In short, appellant has not made anything remotely
approaching a case that its purchase was reasonable. /3/ For that
reason, we must uphold the disallowance in the amount of $224,030.
/1/ The letter also stated, based on the author's consultation
"with a group of Head Start supervisors," that there were a number
of
problems with the trash cans bought by appellant. For example, the
letter stated that children most frequently used small interior trash
cans, not these exterior cans "designed for refuse;" that the cans
had
locks and the keys were lost "most of the time;" and that there were
maintenance problems which meant the cans often were unclean and their
contents uncollected. This, of course, is all hearsay. The Board is
not precluded from considering hearsay evidence, although such evidence,
when admitted, is always weighed in relation to its apparent reliability
in the circumstances of the case. Here, while we need not (and do not)
treat this evidence as dispositive, we note that appellant never
attempted to contradict these specific allegations. /2/
Appellant stated after the remand that only 521 trash cans were
purchased, instead of the 620 originally claimed. Appellant's June 17,
1983, letter to OHDS, p. 3. This reduced the claim from $300,700 to
$252,685. Subtracting the $28,655 which OHDS allowed leaves $224,030,
the disallowed amount. /3/ We do not reach the issue of whether
appellant adequately met other Head Start needs, because neither party
developed the matter beyond conclusory (and diametrically opposed)
statements, and because the record supports OHDS' determination in this
case without further consideration of that issue.
NOVEMBER 14, 1984