A-12950, FEBRUARY 13, 1926, 5 COMP. GEN. 628

A-12950: Feb 13, 1926

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WHEN THE AMOUNT TO BE FURNISHED IS VALUED AT $500 OR LESS THE MATTER OF REQUIRING A BOND IS WITHIN THE DISCRETION OF THE ADMINISTRATIVE OFFICE. APPLIES ONLY TO PURCHASES MADE AFTER NEWSPAPER ADVERTISING AND DOES NOT APPLY TO PURCHASES WHERE THERE IS NOT ENOUGH TIME FOR NEWSPAPER ADVERTISING AND THAT IT IS BELIEVED TO BE A MATTER WITHIN THE DISCRETION OF THE ADMINISTRATIVE DEPARTMENT TO REGULATE THE QUESTION OF BONDS WITH SUCH CONTRACTS AND TO REQUIRE BONDS ONLY IN ACCORDANCE WITH ITS OWN DISCRETION AND EXPERIENCE. THE STATUTES GOVERNING THE LETTER OF CONTRACTS FOR THE NAVY DEPARTMENT ARE SECTIONS 3718 TO 3732. IF HIS BID IS ACCEPTED. WILL. SHALL FORTHWITH CAUSE THE DIFFERENCE BETWEEN THE AMOUNT CONTAINED IN THE PROPOSAL SO GUARANTEED AND THE AMOUNT FOR WHICH HE MAY HAVE CONTRACTED FOR FURNISHING THE SUPPLIES.

A-12950, FEBRUARY 13, 1926, 5 COMP. GEN. 628

NAVY - CONTRACTS - SURETY BONDS WHERE THE VALUE OF THE AGGREGATE AMOUNT OF SUPPLIES TO BE FURNISHED THE NAVY DEPARTMENT BY A VENDOR EXCEEDS THE SUM OF $500, THE AGREEMENT FOR THE FURNISHING OF SUCH SUPPLIES MUST NOT ONLY BE EXECUTED IN CONFORMITY WITH SECTION 3744, REVISED STATUTES, BUT THE CONTRACTOR MUST EXECUTE A PENAL BOND, OR DEPOSIT EITHER A CERTIFIED CHECK OR UNITED STATES BONDS TO INSURE FAITHFUL PERFORMANCE OF HIS CONTRACT. WHEN THE AMOUNT TO BE FURNISHED IS VALUED AT $500 OR LESS THE MATTER OF REQUIRING A BOND IS WITHIN THE DISCRETION OF THE ADMINISTRATIVE OFFICE.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF THE NAVY, FEBRUARY 13, 1926:

CONSIDERATION HAS BEEN GIVEN YOUR LETTER OF NOVEMBER 12, 1925, FILE NO. L4-3/20/-PD L13-1/1//L4-/5), IN WHICH YOU EXPRESS THE OPINION THAT SECTION 3719, REVISED STATUTES, WHICH REQUIRES GUARANTEES WITH PROPOSALS AND BONDS WITH CONTRACTS, APPLIES ONLY TO PURCHASES MADE AFTER NEWSPAPER ADVERTISING AND DOES NOT APPLY TO PURCHASES WHERE THERE IS NOT ENOUGH TIME FOR NEWSPAPER ADVERTISING AND THAT IT IS BELIEVED TO BE A MATTER WITHIN THE DISCRETION OF THE ADMINISTRATIVE DEPARTMENT TO REGULATE THE QUESTION OF BONDS WITH SUCH CONTRACTS AND TO REQUIRE BONDS ONLY IN ACCORDANCE WITH ITS OWN DISCRETION AND EXPERIENCE.

THE STATUTES GOVERNING THE LETTER OF CONTRACTS FOR THE NAVY DEPARTMENT ARE SECTIONS 3718 TO 3732, REVISED STATUTES, AND A PROVISION IN THE ACT OF MARCH 2, 1907, 34 STAT. 1193, THE PARTICULAR STATUTES RELEVANT TO THE QUESTION HERE PRESENTED BEING SECTION 3719, REVISED STATUES, AS FOLLOWS:

EVERY PROPOSAL FOR NAVAL SUPPLIES INVITED BY THE SECRETARY OF THE NAVY, UNDER THE PRECEDING SECTION, SHALL BE ACCOMPANIED BY A WRITTEN GUARANTEE, SIGNED BY ONE OR MORE RESPONSIBLE PERSONS, TO THE EFFECT THAT HE OR THEY UNDERTAKE THAT THE BIDDER, IF HIS BID IS ACCEPTED, WILL, AT SUCH TIME AS MAY BE PRESCRIBED BY THE SECRETARY OF THE NAVY, GIVE BOND, WITH GOOD AND SUFFICIENT SURETIES, TO FURNISH THE SUPPLIES PROPOSED; AND NO PROPOSAL SHALL BE CONSIDERED, UNLESS ACCOMPANIED BY SUCH GUARANTEE. IF, AFTER THE ACCEPTANCE OF A PROPOSAL, AND A NOTIFICATION THEREOF TO THE BIDDER, HE FAILS TO GIVE SUCH BOND WITHIN THE TIME PRESCRIBED BY THE SECRETARY OF THE NAVY, THE SECRETARY SHALL PROCEED TO CONTRACT WITH SOME OTHER PERSON FOR FURNISHING THE SUPPLIES; AND SHALL FORTHWITH CAUSE THE DIFFERENCE BETWEEN THE AMOUNT CONTAINED IN THE PROPOSAL SO GUARANTEED AND THE AMOUNT FOR WHICH HE MAY HAVE CONTRACTED FOR FURNISHING THE SUPPLIES, FOR THE WHOLE PERIOD OF THE PROPOSAL, TO BE CHARGED UP AGAINST THE BIDDER AND HIS GUARANTOR; AND THE SAME MAY BE IMMEDIATELY RECOVERED BY THE UNITED STATES, FOR THE USE OF THE NAVY DEPARTMENT, IN AN ACTION OF DEBT AGAINST EITHER OR ALL OF SUCH PERSONS.

AND THE PROVISION IN THE ACT OF MARCH 2, 1907, WHICH READS:

* * * THE PURCHASE OF SUPPLIES AND THE PROCUREMENT OF SERVICES FOR ALL BRANCHES OF THE NAVAL SERVICE MAY BE MADE IN OPEN MARKET IN THE MANNER COMMON AMONG BUSINESS MEN, WITHOUT FORMAL CONTRACT OR BOND, WHEN THE AGGREGATE OF THE AMOUNT REQUIRED DOES NOT EXCEED FIVE HUNDRED DOLLARS, AND WHEN, IN THE OPINION OF THE PROPER ADMINISTRATIVE OFFICERS, SUCH LIMITATION OF AMOUNT IS NOT DESIGNED TO EVADE PURCHASE UNDER FORMAL CONTRACT OR BOND, AND EQUALLY OR MORE ADVANTAGEOUS TERMS CAN THEREBY BE SECURED.

THE LANGUAGE USED IN SECTION 3719, REVISED STATUTES, MUST BE CONSTRUED AS IMPOSING UPON THE NAVY DEPARTMENT THE DUTY OF REQUIRING THAT A PENAL BOND WITH GOOD AND SUFFICIENT SURETY BE FURNISHED BY EVERY CONTRACTOR UNDERTAKING TO FURNISH SUPPLIES FOR THE USE OF THE NAVY, WHILE THE ACT OF MARCH 2, 1907, MAKES AN EXCEPTION IN THE CASE WHERE THE VALUE OF THE AGGREGATE AMOUNT OF THE SUPPLIES TO BE FURNISHED DOES NOT EXCEED THE SUM OF $500, PROVIDED THAT THE PROPER ADMINISTRATIVE OFFICERS ARE OF THE OPINION THAT THE LIMITATION OF $500 IS NOT DESIGNED TO EVADE COMPLIANCE WITH SECTION 3719, REVISED STATUTES.

BY THE ACT OF DECEMBER 11, 1906, 34 STAT. 841, THE SECRETARY OF THE NAVY WAS AUTHORIZED TO ACCEPT, IN LIEU OF A PENAL BOND, A CERTIFIED CHECK FOR FROM 25 PERCENT TO 50 PERCENT OF THE CONTRACT PRICE, WHILE SECTION 1320 OF THE ACT APPROVED FEBRUARY 24, 1919, 40 STAT. 1148, AUTHORIZED THE ACCEPTANCE OF BONDS OF THE UNITED STATES AT THEIR PAR VALUE TO THE AMOUNT OF THE PENAL BOND THAT WOULD OTHERWISE HAVE BEEN REQUIRED.

I AM THEREFORE CONSTRAINED TO HOLD THAT WHEN THE VALUE OF THE AGGREGATE AMOUNT OF SUPPLIES TO BE FURNISHED THE NAVY DEPARTMENT BY A VENDOR EXCEEDS THE SUM OF $500, THE AGREEMENT FOR THE FURNISHING OF SUCH SUPPLIES MUST NOT ONLY BE EXECUTED IN CONFORMITY WITH SECTION 3744, REVISED STATUTES, BUT THAT THE CONTRACTOR MUST EXECUTE A GOOD AND SUFFICIENT PENAL BOND, OR DEPOSIT EITHER A CERTIFIED CHECK OR UNITED STATES BONDS TO INSURE FAITHFUL PERFORMANCE OF HIS CONTRACT AS PROVIDED IN THE ACTS OF DECEMBER 11, 1906, AND FEBRUARY 24, 1919, SUPRA. WHEN THE AMOUNT TO BE FURNISHED IS VALUED AT $500 OR LESS, THE MATTER OF REQUIRING A BOND IS WITHIN THE DISCRETION OF THE ADMINISTRATIVE OFFICE.