A-13522, MARCH 25, 1926, 5 COMP. GEN. 762

A-13522: Mar 25, 1926

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SAID BOND NEED NOT BE FURNISHED IF DELIVERY OF SUPPLIES IS ACCOMPLISHED WITHIN SAID TIME. WHEREIN IT WAS HELD THAT WHEN THE AGGREGATE AMOUNT OF SUPPLIES TO BE FURNISHED THE NAVY DEPARTMENT BY A VENDOR UNDER A PROPOSAL OR CONTRACT EXCEEDS THE SUM OF $500. IT IS STATED IN THE COMMUNICATION OF THE PAYMASTER GENERAL OF THE NAVY TRANSMITTED WITH YOUR LETTER THAT NO DIFFICULTY IS ANTICIPATED IN REQUIRING BONDS ON CONTRACTS ENTERED INTO BY PURCHASING OFFICERS STATIONED ASHORE IN THE UNITED STATES BUT THAT IN THE CASE OF CONTRACTS ENTERED INTO BY PURCHASING OFFICERS AFLOAT. IT IS ANTICIPATED THAT CONSIDERABLE DIFFICULTY WILL BE ENCOUNTERED IN SECURING A BOND OR CERTIFIED CHECK FROM ONTRACTORS. THAT IN MANY PORTS VISITED BY NAVAL VESSELS THERE ARE NO FACILITIES FOR SECURING BONDS ON CONTRACTS AND IT IS THOUGHT THAT IN MANY CASES.

A-13522, MARCH 25, 1926, 5 COMP. GEN. 762

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 SECRETARY OF THE NAVY MAY PRESCRIBE A REASONABLE TIME WITHIN WHICH THE BOND FOR GUARANTEEING PERFORMANCE OF THE CONTRACT MAY BE FURNISHED, BUT SAID BOND NEED NOT BE FURNISHED IF DELIVERY OF SUPPLIES IS ACCOMPLISHED WITHIN SAID TIME. THE WRITTEN GUARANTEE, HOWEVER, WHICH SECTION 3719, REVISED STATUTES, REQUIRES TO ACCOMPANY THE PROPOSAL MAY NOT BE DISPENSED WITH, NOR MAY THE TIME FOR EXECUTION OF A BOND BE EXTENDED FOR SUCH PERIOD AS TO DEFEAT THE PURPOSES OF THE STATUTE REQUIRING A BOND FOR THE PROTECTION OF THE INTERESTS OF THE GOVERNMENT.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF THE NAVY, MARCH 25, 1926:

THERE HAS BEEN RECEIVED YOUR LETTER OF MARCH 15, 1926, RELATIVE TO DECISION OF FEBRUARY 13, 1926, 5 COMP. GEN. 628, WHEREIN IT WAS HELD THAT WHEN THE AGGREGATE AMOUNT OF SUPPLIES TO BE FURNISHED THE NAVY DEPARTMENT BY A VENDOR UNDER A PROPOSAL OR CONTRACT EXCEEDS THE SUM OF $500, SECTION 3719, REVISED STATUTES, AND THE ACTS OF DECEMBER 11, 1906, 34 STAT. 841, AND FEBRUARY 24, 1919, 40 STAT. 1148, REQUIRE THE EXECUTION BY THE CONTRACTOR OF A GOOD AND SUFFICIENT PENAL BOND, OR THE DEPOSIT OF A CERTIFIED CHECK OR UNITED STATES BONDS, TO INSURE FAITHFUL PERFORMANCE OF THE CONTRACT.

IT IS STATED IN THE COMMUNICATION OF THE PAYMASTER GENERAL OF THE NAVY TRANSMITTED WITH YOUR LETTER THAT NO DIFFICULTY IS ANTICIPATED IN REQUIRING BONDS ON CONTRACTS ENTERED INTO BY PURCHASING OFFICERS STATIONED ASHORE IN THE UNITED STATES BUT THAT IN THE CASE OF CONTRACTS ENTERED INTO BY PURCHASING OFFICERS AFLOAT, PARTICULARLY IN FOREIGN PORTS, IT IS ANTICIPATED THAT CONSIDERABLE DIFFICULTY WILL BE ENCOUNTERED IN SECURING A BOND OR CERTIFIED CHECK FROM ONTRACTORS; THAT IN MANY PORTS VISITED BY NAVAL VESSELS THERE ARE NO FACILITIES FOR SECURING BONDS ON CONTRACTS AND IT IS THOUGHT THAT IN MANY CASES, PARTICULARLY IN FOREIGN PORTS, A DEMAND FOR A BOND WOULD BE MET WITH A FLAT REFUSAL ON THE PART OF BIDDERS, WHO WOULD DECLINE TO SUBMIT BIDS OR ENTER INTO CONTRACTS. IT IS FURTHER STATED THAT MOST OF THE CONTRACTS ENTERED INTO BY PURCHASING OFFICERS AFLOAT ARE FOR IMMEDIATE DELIVERY, BUT THAT THERE ARE CASES WHEN THE MATERIAL PURCHASED MAY HAVE TO COME FROM A DISTANCE OR DELIVERIES MAY EXTEND OVER A PERIOD OF TIME DURING THE STAY OF THE VESSEL IN PORT AS IS THE CASE OF CONTRACTS FOR THE DAILY SUPPLY OF FRESH PROVISIONS AND THAT IT IS IN CONTRACTS OF THIS NATURE THAT DIFFICULTY IN SECURING BONDS IS ANTICIPATED.

THE INSTRUCTIONS RELATIVE TO BONDS WHICH IT IS PROPOSED TO INSERT IN THE MANUAL FOR THE SUPPLY CORPS ARE SUBMITTED FOR APPROVAL, SAID INSTRUCTIONS BEING TO THE EFFECT THAT BONDS MUST BE FURNISHED WITH EACH CONTRACT EXCEPT AS FOLLOWS:

WHEN COMPLETE DELIVERY IS TO BE MADE IMMEDIATELY--- I.E., WITHIN ONE WEEK OF DATE OF AWARD--- AND

WHEN IN A FOREIGN COUNTRY OR IN AN ISOLATED UNITED STATES PORT THE CONTRACTOR REFUSES TO FURNISH BOND OR CERTIFIED CHECK AND IT CAN BE ASCERTAINED THAT BONDS AND CERTIFIED CHECKS ARE NOT PROCURABLE, A STATEMENT TO THIS EFFECT TO BE ATTACHED TO THE CONTRACT BY THE PURCHASING OFFICER.

PROVISION IS MADE BY SECTION 3721, REVISED STATUTES, FOR THE PURCHASE BY THE NAVY DEPARTMENT WITHOUT ADVERTISING OF ORDNANCE, GUN POWDER, OR MEDICINES OR THE SUPPLIES WHICH IT MAY BE NECESSARY TO PURCHASE OUT OF THE UNITED STATES FOR VESSELS ON FOREIGN STATIONS, AND THE PROVISIONS OF SECTION 3719, REVISED STATUTES, HAVE NO APPLICATION TO SUCH PURCHASES. THIS CONNECTION SEE DECISION OF NOVEMBER 27, 1925, 5 COMP. GEN. 385. HOWEVER, PURCHASES "IN AN ISOLATED UNITED STATES PORT" ARE NOT COVERED BY SECTION 3721, AND SECTION 3719 IS APPLICABLE THERETO IF THE AMOUNT THEREOF IS IN EXCESS OF $500.

THE REQUIREMENT OF SECTION 3719, REVISED STATUTES, IS THAT EVERY PROPOSAL FOR NAVAL SUPPLIES INVITED BY THE SECRETARY OF THE NAVY UNDER THE PROVISIONS OF SECTION 3718, REVISED STATUTES, 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 THAT NO PROPOSAL SHALL BE CONSIDERED UNLESS ACCOMPANIED BY SUCH GUARANTEE.

IT IS THEREFORE LEGAL AND PROPER FOR THE SECRETARY OF THE NAVY TO PRESCRIBE A REASONABLE TIME WITHIN WHICH THE BOND SHALL BE FURNISHED, AND THAT BOND NEED NOT BE FURNISHED IF WITHIN SAID TIME DELIVERY IS COMPLETED, AS A BOND EXECUTED AFTER PERFORMANCE OF ITS CONDITION WOULD SERVE NO USEFUL PURPOSE. THE WRITTEN GUARANTEE, HOWEVER, WHICH THE STATUTE REQUIRES TO ACCOMPANY THE PROPOSAL CAN NOT BE DISPENSED WITH, NOR CAN THE TIME FOR EXECUTION OF A BOND BE EXTENDED FOR SUCH PERIOD AS TO DEFEAT THE PURPOSES OF THE STATUTE REQUIRING A BOND FOR THE PROTECTION OF THE INTEREST OF THE GOVERNMENT.