Washington, D.C
U.S. Office of Personnel Management
Compensation Claim Decision
Under section 3702 of title 31, United States Code
U.S. Army Health Clinic Vilseck
Department of the Army
Vilseck, Germany
Damon B. Ford
Compensation and Leave Claims
Program Manager
Agency Compliance and Evaluation
Merit System Accountability and Compliance
07/06/2023
Date
The claimant was a Federal civilian employee at the U.S. Army Health Clinic Vilseck, U.S. Army Medical Command (USAMEDDAC) Bavaria, Department of the Army in Vilseck, Germany during the claim period.[1] She requests the U.S. Office of Personnel Management (OPM) reconsider the agency’s denial for full (rental and utilities portion) of living quarters allowance (LQA) for her personally owned quarters (POQ). We received the claim request on August 29, 2022, and the agency administrative report (AAR) on December 6, 2022. For the reasons discussed herein, the claim is denied.
On June 20, 2021, under a change-to-lower grade action, the claimant was reassigned from her position as a Health Technician (Audiology), GS-0640-07 with the USAMEDDAC in Fort Irwin, California, to a hard-to-fill position as a Health Technician (Audiology), GS-0640-06, with the USAMEDDAC Bavaria in Vilseck, Germany. The claimant was found eligible for LQA by the agency under the provisions of the Department of State Standardized Regulations (DSSR) section 031.11, as an employee recruited in the United States, and the Army in Europe Regulation (AER) 690-500.592, paragraph 7.a.(1), which excludes applicants from having to meet the minimum grade restrictions of GS-09 and above or equivalent, to qualify for the allowance under the local policy, if such applicants are selected for “hard-to-fill,” positions, as in the claimant’s case.
On September 27, 2021, the claimant entered into a purchase contract with a property developer for a new construction house which would be ready for occupancy three months from the date of signing the contract and completely finished with construction by April 30, 2022. On January 16, 2022, the claimant moved into the house with construction to meet personal preferences not yet completed and requested LQA for POQ under the provisions of DSSR section 136(a). However, the agency found the claimant ineligible for the rental portion of LQA pursuant to the provisions of the AER 690-500.592, paragraph 11.e.(1), which prohibits the grant of full LQA (rental and utilities portions) in instances where employees purchase quarters that are under construction, either in whole or in part, but allows for an exception to the policy in cases involving extraordinary circumstances.
In a memorandum dated January 24, 2022, written to the agency, the claimant requested an exception to the provision of the AER 690-500.592, paragraph 11.e.(1) based on misinformation and lack of knowledge on her part about the policy and stating, “At the moment of the purchase the house was a built structure. This house needed only some final work in the interior (finishing) and exterior (garden and driveway).” In a response memorandum dated February 7, 2022, although granting her the utilities portion of the LQA, the agency denied the claimant’s request for exception to the policy because her request did not make any mention of extraordinary circumstances involving her or any of her family members that may have caused her to determine that potential rental dwelling or other houses that were already constructed at or near her post of assignment would not meet her needs. In its AAR to OPM, the agency also states that while the claimant identified her personal situation with respect to her unemployed spouse and her father-in-law and the financial constraint resulting from only receiving the utilities portion of the LQA, she did not identify her spouse as disabled or her daughter as being special needs for the agency to address as she did in her claim to OPM.[2]
The claimant disagrees with the agency’s determination to deny her full (rental and utilities portion) LQA for her POQ. In her claim to OPM, she asserts that in accordance with AER 690-500.592, paragraph 11.e.(1), which provides that LQA for POQ may be paid for existing structures only, the house she purchased was an existing structure. She states that when she was first shown the house by her realtor on July 14, 2021, the house was already a built structure, “only needing finishing, which consisted of the flooring.” She asserts that before she entered into contract with the seller, except for the flooring, the house was completed, which she believes shows she “intended to use LQA for POQ on an already existing structure and not for the construction in whole or in part of said structure.” However, in its AAR to OPM the agency further explains:
We contacted the person identified in the purchase contract and representing the property developing company to gain an insight and a better understanding of the condition of the house in question. The response that we received from the developer, initially in a telephone conversation, and later in writing, the entire communication of which we offer as Enclosure 6 to this report, shows that a building contract is being entered into between the developer and the purchaser at a time when the property is nearly completed, but not yet habitable. Work that is being carried out as a result of personal desires and specifications by buyer(s) is then carried out. Thus, in other words, property developers build the houses, and at times before or during the construction look for potential buyers, with the latter being able to express their personal preferences to the construction, such as tiles, bathrooms, types of kitchens, flooring, etc. Here [claimant] bought the property when it was nearly finished with her having been able to bring in her personal preferences for the completion of the house. As a result, we considered her entering into a building contract purchasing a house that was still under construction, at least in part. (We note that the representative of the construction company did contact us again in writing and confirmed that when [claimant] entered into the notarized purchase contract, the exterior façade as well as the interior was completed, except the surface areas, such as tiles and laminate floors. Such work is carried out after the conclusion of the notarized contract to meet individual needs and preferences).
The DSSR contains the governing regulations for allowance, differentials, and defraying of official residence expenses in foreign areas. Under section 013 of the DSSR, within the scope of these regulations, the head of an agency may issue further implementing instructions for the guidance of the agency with regard to the granting of and accounting for these payments. Thus, Department of Defense Instruction (DoDI) 1400.25 V1250 and the AER 690-500.592, in effect during the period of the claim may impose additional requirements to further restrict LQA eligibility but may not exceed the scope of the DSSR, i.e., allow for the granting of LQA in cases not otherwise permitted under the DSSR. The claimant requests full LQA (rental and utilities portion) for POQ under DSSR section 136(a), which states:
When quarters occupied by an employee are owned by the employee or the spouse, or both, an amount up to 10 percent of original purchase price (converted to U.S. dollars at original exchange rate) of such quarters shall be considered the annual rate of his/her estimated expenses for rent. Only the expenses for heat, light, fuel (including gas and electricity), water, garbage and trash disposal and in rare cases land rent, may be added to determine the amount of the employee’s quarters allowance in accordance with Section134. The amount of the rental portion of the allowance (up to 10 percent of purchase price) is limited to a period not to exceed ten years at which time the employee will be entitled only to above utility expenses, garbage and trash disposal, plus land rent.
Relative to DSSR section 136(a), AER 690-500.592 paragraph 11.e.(1) authorizes LQA for POQ under the following condition:
LQA for POQ may be paid for existing structures only. LQA will not be authorized for the construction, in whole or in part, of POQ. LQA is intended to substantially offset the costs of quarters that exist at the time of the employee’s assignment oversees. In cases involving extraordinary circumstances, employees may request that the [Civilian Personnel Directorate] grant an exception to this policy.
The agency takes the position that the purpose of LQA is to provide suitable and adequate quarters for LQA eligible employees and their families within a short space following arrival at their post of assignment, and having a house built in Germany is an extensive overseas process which may take years from the purchase of the land to its development. This, the agency states, runs counter to DoD’s overseas rotation policy found in DoDI 1400.25-V1250, which limits overseas presence of employees in the competitive service to five years, if not extended by a competent authority. In other words, by the time the construction of a house would be finished, the employee may not have had the benefit to reside in those quarters. In the claimant’s case, although, the agency acknowledges that the house appeared to be substantially constructed and the claimant may have been able to move into the house still under construction relatively close to the time he purchased it (purchased it in September 2021 and moved into it in January 2022), the agency states this “does not alter the circumstance the claimant bought a house that was not yet habitable at the time of the purchase.” Furthermore, the agency asserts that its prohibition of the LQA grant to purchase quarters that are under construction, either in whole or in part was codified in its 2017 and 2018 versions of the AER 690-500.592, and no LQAs for constructed POQs have been authorized since then. Therefore, the agency states that while the situation the claimant finds herself in is rare, it has “consistently determined that granting full LQA (rental and utilities portion) under DSSR §136 in instances when employees enter into a building contract to have their homes constructed would be inappropriate.”
Moreover, the agency states that even though its regulation allows for an exception to its policy in instances where family may have a need to have their houses built for medical reasons, the claimant did not offer such a need to the agency for consideration. OPM may not grant a claim based on circumstances disallowed by the agency’s implementing regulations or otherwise waive its provisions. In addition, the use of the permissive term “may” in section 013 of the DSSR as opposed to the mandatory terms “shall” or “will” identifies these allowances as discretionary on the part of the agency. Therefore, the claimant’s request for exception to policy, and by extension the rental portion of LQA for POQ, is denied.
In addition, in her claim to OPM, the claimant states, “[t]his situation has affected me economically and mentally due to not having the proper monetary assistance to live in Germany. My savings are being depleted and economic assistance to my elderly father-in-law (dependent), disabled husband, and special needs daughter (dependent) are drastically affected.” However, the scope of OPM's authority under 31 U.S.C. 3702(a)(2) is narrow and limited to determining if monies are owed the claimant for the stated claim under the applicable statute and implementing regulations and does not extend to considering claims on the basis of financial hardship. Therefore, the claimant’s assertions about her financial situation has no applicability to our claim settlement determination.
The DoDI 1400.25 V1250 specifies that overseas allowances are not automatic salary supplements, nor are they entitlements. Furthermore, the statutory and regulatory languages are permissive and give agency heads considerable discretion in determining whether to grant LQA to agency employees. Thus, an agency may deny LQA payments when it finds that the circumstances justify such action, and the agency’s action will not be questioned unless it is determined that the agency’s action was arbitrary, capricious, or unreasonable. Under 5 CFR 178.105, the burden is upon the claimant to establish the liability of the United States and the claimant’s right to payment. Joseph P. Carrigan, 60 Comp. Gen. 243, 247 (1981); Wesley L. Goecker, 58 Comp. Gen. 738 (1979). In this case, the claimant has failed to do so. Since an agency decision made in accordance with established regulations and within its discretionary authority as is evident in the present case cannot be considered arbitrary, capricious, or unreasonable, there is no basis upon which to reverse the agency’s decision.
This settlement is final. No further administrative review is available within OPM. Nothing in this settlement limits the claimant’s right to bring an action in an appropriate United States court.
[1] Effective September 11, 2022, the claimant’s position was transferred to the Defense Health Agency.
[2] In her claim to OPM, the claimant discloses having a disabled husband and a daughter with special needs, however, she does so only within the context as the financial provider for her family members. She does not provide further details or documentation to establish whether her decision to purchase a new construction house was in connection with any special needs required by her or any of her family members.