A-50815, JANUARY 2, 1934, 13 COMP. GEN. 181

A-50815, JANUARY 2, 1934, 13 COMP. GEN. 181

CONTRACTS - CODES OF FAIR COMPETITION - PRICE THE PURPOSE OF CONTRACTS WITH THE UNITED STATES IS TO MAKE DEFINITE AND CERTAIN THE TERMS THEREOF AND THIS PURPOSE MAY NOT BE DEFEATED THROUGH THE INCLUSION IN SUCH CONTRACTS OF INDEFINITE AND UNCERTAIN CHANGES IN THE CONTRACT PRICE BASED ON CONDITIONS SUBSEQUENT WHICH MAY OR MAY NOT OCCUR. UNDER SECTION 3709, REVISED STATUTES, CONTRACTS ARE REQUIRED TO BE LET TO THE LOWEST RESPONSIBLE BIDDER AND CODE CONDITIONS AS TO PRICE ARE NOT CONTROLLING ON THE UNITED STATES.

COMPTROLLER GENERAL MCCARL TO THE ADMINISTRATOR OF VETERANS' AFFAIRS, JANUARY 2, 1934:

THERE HAS BEEN RECEIVED IN REFERENCE TO DECISION OF SEPTEMBER 7, 1933, 13 COMP. GEN. 76, YOUR LETTER OF DECEMBER 5, 1933, IN PERTINENT PART, AS FOLLOWS:

INASMUCH AS THE SECRETARY OF AGRICULTURE IS ALMOST DAILY PROMULGATING MARKETING AGREEMENTS AND LICENSES, FOR VARIOUS AGRICULTURAL COMMODITIES AND PRODUCTS THEREOF, UNDER THE AUTHORITY OF SECTION 8 (2) AND SECTION 8 (3) OF THE AGRICULTURAL ADJUSTMENT ACT, THERE ARE SUBMITTED FOR YOUR CONSIDERATION THE FOLLOWING CONDITIONS WHICH, IT IS SUGGESTED, SHOULD BE INCLUDED IN ADVERTISEMENTS FOR BIDS FOR SUPPLYING AGRICULTURAL COMMODITIES AND PRODUCTS THEREOF, AND IT IS REQUESTED THAT YOU ADVISE WHETHER THESE CONDITIONS MAY BE INCLUDED IN SUCH ADVERTISEMENTS:

"IF, ON THE DATE OF THE OPENING OF THIS BID, THERE IS IN EFFECT A MARKETING AGREEMENT AND/OR LICENSE APPROVED AND EXECUTED BY THE SECRETARY OF AGRICULTURE UNDER THE PROVISIONS OF THE AGRICULTURAL ADJUSTMENT ACT FOR ANY OF THE COMMODITIES LISTED IN THIS PROPOSAL, THE CONTRACTOR SHALL COMPLY WITH ALL PROVISIONS OF SAID MARKETING AGREEMENT AND/OR LICENSE, OR ANY AMENDMENTS THEREOF, WITHOUT REGARD TO WHETHER THE CONTRACTOR IS HIMSELF A PARTY TO THE SAID MARKETING AGREEMENT AND/OR LICENSE. IF THE CONTRACTOR FAILS TO COMPLY WITH THE PROVISIONS OF THE MARKETING AGREEMENT AND/OR LICENSE, OR ANY AMENDMENTS THEREOF, THE GOVERNMENT MAY BY WRITTEN NOTICE TO THE CONTRACTOR TERMINATE THE CONTRACTOR'S RIGHT TO PROCEED WITH THE CONTRACT AND PURCHASE IN THE OPEN MARKET, OR OTHERWISE, THE UNDELIVERED PORTION OF THE COMMODITY OR COMMODITIES INVOLVED AND THE CONTRACTOR AND HIS SURETY SHALL BE LIABLE TO THE GOVERNMENT FOR ANY EXCESS COST OCCASIONED THE GOVERNMENT THEREBY: PROVIDED, THAT THE DETERMINATION OF THE ADMINISTRATOR OF VETERANS AFFAIRS OF ANY FAILURE OF THE CONTRACTOR TO COMPLY WITH THE TERMS OF THE MARKETING AGREEMENT AND/OR LICENSE FOR THE COMMODITY OR COMMODITIES INVOLVED SHALL BE FINAL AND CONCLUSIVE ON THE CONTRACTOR.'

THE INCLUSION OF THE CONDITIONS QUOTED, SUPRA, IN ADVERTISEMENTS FOR BIDS FOR SUPPLYING AGRICULTURAL COMMODITIES AND PRODUCTS THEREOF, WILL RESULT IN UNIFORM PROCEDURE FOR ALL VETERANS' ADMINISTRATION FACILITIES AND WILL PUT ALL BIDDERS ON NOTICE THAT THEY MUST CONFORM TO THE PROVISIONS OF ANY MARKETING AGREEMENT AND/OR LICENSE, OR ANY AMENDMENTS THEREOF, APPLICABLE TO ANY OF THE COMMODITIES CALLED FOR IN THE ADVERTISEMENTS.

IN CONNECTION WITH THE PERFORMANCE OF CONTRACTS FOR SUPPLYING AGRICULTURAL COMMODITIES AND PRODUCTS THEREOF, THE QUESTION HAS ARISEN AS TO WHETHER SUCH CONTRACTS MAY BE NEGOTIATED IN A MANNER THAT WILL PERMIT OF THEIR REVISION TO CONFORM TO THE PROVISIONS OF A MARKETING AGREEMENT AND/OR LICENSE THAT MAY BE APPROVED AND EXECUTED BY THE SECRETARY OF AGRICULTURE AFTER THE EFFECTIVE DATE OF A CONTRACT, IN ORDER THAT THE CONTRACT PRICE FOR AN AGRICULTURAL COMMODITY MAY BE INCREASED OR DECREASED DURING THE LIFE OF THE CONTRACT TO CONFORM TO THE PRICE STIPULATED FOR THE COMMODITY IN THE APPLICABLE MARKETING AGREEMENT AND/OR LICENSE. FOR INSTANCE, THE VETERANS' ADMINISTRATION MAY HAVE A CONTRACT FOR SUPPLYING MILK TO A FACILITY WHICH WAS ENTERED INTO PRIOR TO THE EFFECTIVE DATE OF A MARKETING AGREEMENT AND/OR LICENSE FOR MILK FOR THE MILK SHED IN WHICH THE FACILITY IS LOCATED AND THE CONTRACT PRICE FOR THE MILK MAY BE 32 CENTS PER GALLON, BUT THE MARKETING AGREEMENT AND/OR LICENSE FOR MILK FOR THE MILK SHED IN WHICH THIS FACILITY IS LOCATED, WHICH WAS APPROVED AND EXECUTED BY THE SECRETARY OF AGRICULTURE AFTER THE EFFECTIVE DATE OF THE CONTRACT, MAY PROVIDE THAT THE PRICE SHALL BE 40 CENTS PER GALLON. IN THE ABSENCE OF A PROVISION IN THE CONTRACT THAT WILL PERMIT OF AN ADJUSTMENT IN PRICE TO CONFORM TO THE PRICE STIPULATED IN THE APPLICABLE MARKETING AGREEMENT AND/OR LICENSE, THE CONTRACTOR CANNOT BE AFFORDED ANY RELIEF WHICH, OF COURSE, IS INEQUITABLE AND A REMEDY, IF LEGALLY POSSIBLE SHOULD BE PROVIDED. WITH THIS IN VIEW THERE IS SUBMITTED FOR YOUR CONSIDERATION THE RECOMMENDATION THAT THE FOLLOWING CONDITIONS SHOULD ALSO BE INCORPORATED IN THE CONTRACTS FOR SUPPLYING ANY AGRICULTURAL COMMODITY OR PRODUCT THEREOF:

"IF, ON THE DATE OF THE OPENING OF THIS BID, THERE IS NOT IN EFFECT A MARKETING AGREEMENT AND/OR LICENSE, APPROVED AND EXECUTED BY THE SECRETARY OF AGRICULTURE UNDER THE PROVISIONS OF THE AGRICULTURAL ADJUSTMENT ACT, FOR ANY OF THE COMMODITIES LISTED IN THIS PROPOSAL, BUT, DURING THE LIFE OF THIS CONTRACT, A MARKETING AGREEMENT AND/OR LICENSE IS APPROVED AND EXECUTED BY THE SECRETARY OF AGRICULTURE UNDER THE PROVISIONS OF THE AGRICULTURAL ADJUSTMENT ACT FOR ANY OR ALL OF THE COMMODITIES LISTED IN THIS PROPOSAL, THE TERMS OF THE CONTRACT SHALL BE AMENDED TO CONFORM TO THE REQUIREMENTS OF SAID MARKETING AGREEMENT AND/OR LICENSE AND, THEREAFTER, BEGINNING ON THE EFFECTIVE DATE OF SAID MARKETING AGREEMENT AND/OR LICENSE, THE CONTRACTOR SHALL COMPLY WITH ALL PROVISIONS OF SAID MARKETING AGREEMENT AND/OR LICENSE, OR ANY AMENDMENTS THEREOF, WITHOUT REGARD TO WHETHER THE CONTRACTOR IS HIMSELF A PARTY TO THE SAID MARKETING AGREEMENT AND/OR LICENSE AND, IF THE CONTRACTOR FAILS TO COMPLY WITH THE PROVISIONS OF SAID MARKETING AGREEMENT AND/OR LICENSE, OR ANY AMENDMENTS THEREOF, THE GOVERNMENT MAY, BY WRITTEN NOTICE TO THE CONTRACTOR, TERMINATE THE CONTRACTOR'S RIGHT TO COMPLETE THE CONTRACT AND TO PURCHASE IN THE OPEN MARKET, OR OTHERWISE, THE UNDELIVERED PORTION OF THE COMMODITY OR COMMODITIES INVOLVED AND THE CONTRACTOR AND HIS SURETY SHALL BE LIABLE TO THE GOVERNMENT FOR ANY EXCESS COST OCCASIONED THE GOVERNMENT THEREBY: PROVIDED, THAT THE DETERMINATION OF THE ADMINISTRATOR OF VETERANS' AFFAIRS OF ANY FAILURE OF THE CONTRACTOR TO COMPLY WITH THE TERMS OF SAID MARKETING AGREEMENT AND/OR LICENSE FOR THE COMMODITY OR COMMODITIES INVOLVED SHALL BE FINAL AND CONCLUSIVE ON THE CONTRACTOR.'

THE FIRST PARAGRAPH WHICH YOU HAVE SUGGESTED FOR INCLUSION IN ADVERTISEMENTS FOR BIDS AND CONTRACTS FOR SUPPLYING AGRICULTURAL COMMODITIES AND PRODUCTS THEREOF IS IN SUBSTANTIAL ACCORD WITH THE PARAGRAPH SUGGESTED IN THE DECISION OF SEPTEMBER 7, 1933, AND THE REQUIREMENT OF EXECUTIVE ORDER NO. 6246, DATED AUGUST 10, 1933, WHICH WAS QUOTED IN 13 COMP. GEN. 65. THERE APPEARS NO LEGAL OBJECTION TO THE INCLUSION OF SUCH PARAGRAPH IN ADVERTISEMENTS AND CONTRACTS FOR THE PURCHASE OF AGRICULTURAL COMMODITIES AND PRODUCTS THEREOF.

HOWEVER, THE SECOND PARAGRAPH WHICH YOU HAVE SUGGESTED FOR INCLUSION IN ADVERTISEMENTS AND CONTRACTS FOR THE PURCHASE OF AGRICULTURAL COMMODITIES AND PRODUCTS THEREOF--- THE CONCLUDING PARAGRAPH OF YOUR LETTER--- MAY NOT LEGALLY BE INCLUDED IN ADVERTISEMENTS AND CONTRACTS ON BEHALF OF THE UNITED STATES. IN THE FIRST PLACE, THE EFFECT OF SAID PARAGRAPH WOULD BE TO REQUIRE THE UNITED STATES TO PURCHASE ITS SUPPLIES AT THE PRICES FIXED IN THE MARKETING AGREEMENTS OR LICENSES, AND IT WAS HELD IN 13 COMP. GEN. 100, THAT SECTION 3709, REVISED STATUTES, REQUIRED PURCHASES ON BEHALF OF THE UNITED STATES TO BE MADE THROUGH COMPETITION AND THAT BIDS OFFERING TO THE GOVERNMENT DIFFERENT PRICES ON A DIFFERENT BASIS ARE NOT TO BE UNDERSTOOD IN CONTRAVENTION OF ANY CODE. SEE, ALSO, DECISIONS OF NOVEMBER 10, 1933, 13 COMP. GEN. 127, AND NOVEMBER 14, 1933, A-51800. THE SAME RULE APPLIES TO MARKETING AGREEMENTS. THE ADOPTION OF A CODE OF FAIR COMPETITION OR A MARKETING AGREEMENT FIXING PRICES GENERALLY DOES NOT CHANGE OR MODIFY THE HERETOFORE EXISTING LEGAL PROCEDURE FOR THE PURCHASE OF SUPPLIES ON BEHALF OF THE UNITED STATES; THAT IS, THROUGH ADVERTISING AND AWARDING OF CONTRACTS TO THE LOWEST RESPONSIBLE BIDDER. IN THE SECOND PLACE, THE EFFECT OF SUCH SUGGESTED STIPULATION WOULD BE TO RENDER INDEFINITE AND UNCERTAIN THE CONSIDERATION STIPULATED IN GOVERNMENT CONTRACTS, AND THE PURPOSE OF CONTRACTING IS TO MAKE THE RIGHTS OF THE PARTIES DEFINITE AND CERTAIN.

IT SEEMS PROPER TO SUGGEST THAT IN CONTRACTING FOR SUPPLIES WHERE THERE MAY BE A FLUCTUATION IN PRICES DUE TO ECONOMIC CONDITIONS OVER WHICH THE CONTRACTOR CAN EXERT LITTLE, IF ANY, CONTROL, THE PROCEDURE SHOULD BE FOR THE UNITED STATES TO CONTRACT FOR RELATIVELY SHORT PERIODS OF TIME--- ON A MONTH TO MONTH BASIS FOR SUPPLIES AND CERTAINLY NOT FOR LONGER THAN QUARTERLY PERIODS.