A-27844, JULY 11, 1929, 9 COMP. GEN. 6

A-27844: Jul 11, 1929

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CONTRACTS - FISCAL YEAR UNDER AN ANNUAL APPROPRIATION AVAILABLE FOR THE CONSTRUCTION OF AN IRRIGATION DAM THE ACCEPTANCE OF A PROPOSAL FOR DELIVERY OF MATERIAL THEREFOR DURING A PERIOD OF 3.5 FISCAL YEARS IS NOT AUTHORIZED UNLESS SUCH ENTIRE QUANTITY IS NEEDED ON THE PARTICULAR JOB AND THE APPROPRIATION AVAILABLE AT THE TIME THE CONTRACT IS MADE IS ADEQUATE FOR THE ENTIRE PURCHASE. A COPY OF THE ADVERTISEMENT FOR PROPOSALS TO FURNISH THE CEMENT WAS NOT FURNISHED THIS OFFICE WITH THE REQUEST FOR DECISION. IT IS STATED ON BEHALF OF THE OREGON-PORTLAND CEMENT CO. THAT: AFTER THE RECEIPT OF THE BIDS THE PURCHASING AGENT AT DENVER STATED THAT YOU (THE COMPTROLLER GENERAL) OBJECTED TO THE ACCEPTANCE OF THE FIVE HUNDRED THOUSAND BID OF THE OREGON COMPANY BECAUSE IT IS FOR ESTIMATED JOB REQUIREMENTS FOR MORE THAN THE CURRENT FISCAL YEAR BUT THE INVITATION STIPULATED THAT IF ANY BID FOR REQUIREMENTS BEYOND SUCH YEAR WAS ACCEPTED THE CONTRACT SHOULD PROVIDE FOR RELEASE OF THE GOVERNMENT FROM BUYING AFTER SUCH YEAR.

A-27844, JULY 11, 1929, 9 COMP. GEN. 6

CONTRACTS - FISCAL YEAR UNDER AN ANNUAL APPROPRIATION AVAILABLE FOR THE CONSTRUCTION OF AN IRRIGATION DAM THE ACCEPTANCE OF A PROPOSAL FOR DELIVERY OF MATERIAL THEREFOR DURING A PERIOD OF 3.5 FISCAL YEARS IS NOT AUTHORIZED UNLESS SUCH ENTIRE QUANTITY IS NEEDED ON THE PARTICULAR JOB AND THE APPROPRIATION AVAILABLE AT THE TIME THE CONTRACT IS MADE IS ADEQUATE FOR THE ENTIRE PURCHASE. A PROPOSAL MAY BE ACCEPTED FOR DELIVERY OF MATERIAL NEEDED DURING THE CURRENT FISCAL YEAR ON SUCH A PROJECT WITH AN OPTION IN FAVOR OF THE GOVERNMENT TO PURCHASE AT A STIPULATED PRICE, SUBJECT TO APPROPRIATIONS THEREFOR BEING MADE, THE QUANTITY OF MATERIAL NEEDED DURING SUCCEEDING FISCAL YEARS IN THE EVENT ADVERTISEMENTS FOR PROPOSALS AT THE BEGINNING OF SUCH FISCAL YEARS SHOULD FAIL TO SECURE PROPOSALS LOWER THAN THE OPTION PRICE.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF THE INTERIOR, JULY 11, 1929:

THERE HAS BEEN RECEIVED YOUR REQUEST OF JUNE 3, 1929, FOR DECISION WHETHER IN THE AWARDING OF A CONTRACT FOR CEMENT FOR USE IN THE CONSTRUCTION OF THE OWYHEE DAM IN OREGON UNDER APPROPRIATIONS MADE IN THE ACTS OF DECEMBER 5, 1924, 43 STAT. 685; MARCH 3, 1925, ID. 1168; MAY 10, 1926, 44 STAT. 483; JANUARY 12, 1927, ID. 959; AND MARCH 4, 1929, 45 STAT. 1591, THERE MAY BE ACCEPTED THE PROPOSAL OF THE OREGON PORTLAND CEMENT CO., THE LOWEST BIDDER, UNDER ITEM 1, FOR THE DELIVERY OF 500,000 BARRELS OF CEMENT OVER A PERIOD OF APPROXIMATELY 3.5 CALENDAR YEARS INSTEAD OF SAID COMPANY'S BID UNDER ITEM 1-A COVERING ONLY THE ESTIMATED NEEDS FOR THE FISCAL YEAR 1930, IT BEING STATED THAT A SAVING OF APPROXIMATELY 10 CENTS PER BARREL MAY BE MADE THEREBY.

A COPY OF THE ADVERTISEMENT FOR PROPOSALS TO FURNISH THE CEMENT WAS NOT FURNISHED THIS OFFICE WITH THE REQUEST FOR DECISION, BUT IT APPEARS FROM THE SUBMISSION THAT THE ADVERTISEMENT REQUESTED PROPOSALS UNDER ITEM 1 FOR THE DELIVERY OF 500,000 BARRELS OF CEMENT DURING THE PERIOD OF 3.5 CALENDAR YEARS AND UNDER ITEM 1-A FOR THE DELIVERY OF 75,000 BARRELS OF CEMENT FOR THE FISCAL YEAR 1930 ONLY. IT IS STATED ON BEHALF OF THE OREGON-PORTLAND CEMENT CO. THAT:

AFTER THE RECEIPT OF THE BIDS THE PURCHASING AGENT AT DENVER STATED THAT YOU (THE COMPTROLLER GENERAL) OBJECTED TO THE ACCEPTANCE OF THE FIVE HUNDRED THOUSAND BID OF THE OREGON COMPANY BECAUSE IT IS FOR ESTIMATED JOB REQUIREMENTS FOR MORE THAN THE CURRENT FISCAL YEAR BUT THE INVITATION STIPULATED THAT IF ANY BID FOR REQUIREMENTS BEYOND SUCH YEAR WAS ACCEPTED THE CONTRACT SHOULD PROVIDE FOR RELEASE OF THE GOVERNMENT FROM BUYING AFTER SUCH YEAR, IF CONGRESS DID NOT MAKE NECESSARY APPROPRIATIONS FOR PURCHASES AFTER SUCH YEAR. THE BID OF THE OREGON COMPANY IS SUBJECT TO SUCH STIPULATION BUT ITS OFFICERS HAVE NO OBJECTIONS TO SUCH A CONTRACT PROVISION.

THE ACT OF AUGUST 13, 1914, 38 STAT. 690, PROVIDED:

THAT FROM AND AFTER JULY FIRST, NINETEEN HUNDRED AND FIFTEEN, EXPENDITURES SHALL NOT BE MADE FOR CARRYING OUT THE PURPOSES OF THE RECLAMATION LAW EXCEPT OUT OF APPROPRIATIONS MADE ANNUALLY BY CONGRESS THEREFOR, AND THE SECRETARY OF THE INTERIOR SHALL, FOR THE FISCAL YEAR NINETEEN HUNDRED AND SIXTEEN, AND ANNUALLY THEREAFTER, IN THE REGULAR BOOK OF ESTIMATES, SUBMIT TO CONGRESS ESTIMATES OF THE AMOUNT OF MONEY NECESSARY TO BE EXPENDED FOR CARRYING OUT ANY OR ALL OF THE PURPOSES AUTHORIZED BY THE RECLAMATION LAW, INCLUDING THE EXTENSION AND COMPLETION OF EXISTING PROJECTS AND UNITS THEREOF AND THE CONSTRUCTION OF NEW PROJECTS. THE ANNUAL APPROPRIATIONS MADE HEREUNDER BY CONGRESS FOR SUCH PURPOSES SHALL BE PAID OUT OF THE RECLAMATION FUND PROVIDED FOR BY THE RECLAMATION LAW.

SECTION 3733, REVISED STATUTES, PROVIDES THAT NO CONTRACT SHALL BE ENTERED INTO FOR ANY PUBLIC IMPROVEMENT WHICH SHALL BIND THE GOVERNMENT TO PAY A LARGER SUM OF MONEY THAN THE AMOUNT IN THE TREASURY APPROPRIATED FOR THE SPECIFIC PURPOSE, AND SECTION 3732, REVISED STATUTES, PROHIBITS ANY CONTRACT, WITH CERTAIN EXCEPTIONS NOT HERE MATERIAL, UNLESS THE SAME WAS AUTHORIZED BY LAW OR UNDER AN APPROPRIATION ADEQUATE TO ITS FULFILLMENT.

THE STATUTES HEREINBEFORE CITED, MAKING APPROPRIATIONS AND REAPPROPRIATIONS FOR THE INVESTIGATION AND CONTINUATION OF CONSTRUCTION OF THE OWYHEE PROJECT, ARE ACTS MAKING ANNUAL APPROPRIATIONS PURSUANT TO THE ACT OF AUGUST 13, 1914, SUPRA, AND THE LAW IS SETTLED THAT NO CONTRACT FINDING ITS BASIC AUTHORITY IN ANNUAL APPROPRIATIONS MAY BE ENTERED INTO FOR A LONGER PERIOD THAN THE CURRENT FISCAL YEAR. SEE DECISION DATED MAY 22, 1929, A-27004, TO YOU, CONCERNING CERTAIN CONTRACTS, WHEREIN IT WAS SAID:

IT HAS LONG BEEN THE ACCEPTED RULE OF THE ACCOUNTING OFFICERS OF THE GOVERNMENT AND THE COURTS THAT CONTRACTS EXECUTED BY OR ON BEHALF OF THE UNITED STATES PURPORTING TO BE FOR AN INDEFINITE PERIOD OF TIME, IN THE ABSENCE OF STATUTORY AUTHORITY OTHERWISE PROVIDING, ARE BINDING UPON THE UNITED STATES ONLY TO THE END OF THE FISCAL YEAR FOR WHICH THE APPROPRIATION AUTHORIZING THE CONTRACT WAS MADE, AND IN CASES OF LEASES FOR A NUMBER OF YEARS, FROM THE BEGINNING OF THE FISCAL YEAR FOLLOWING THAT FOR WHICH THE LEASE WAS MADE, THERE IS HELD TO BE MERELY AN OPTION IN THE GOVERNMENT FOR RENEWAL FROM YEAR TO YEAR UNTIL THE END OF THE TERM. BRADLEY V. UNITED STATES, 98 U.S. 104; CHASE V. UNITED STATES, 155 U.S. 489; UNITED STATES V. DOULLUT, 213 FED. 729; MCCOLLUM V. UNITED STATES, 17 CT.CLS. 92; REED SMOOT V. UNITED STATES, 38 CT.CLS. 418; 1 COMP. GEN. 10; 5 ID. 355; ID. 522; 6 ID. 295.

THIS RULE WAS REAFFIRMED IN THE RECENT CASES OF LEITER V. UNITED STATES, 271 U.S. 204; AND GOODYEAR TIRE AND RUBBER COMPANY V. UNITED STATES, 276 U.S. 287.

NECESSARILY, THEREFORE, YOUR QUESTION AS TO WHETHER THERE IS AUTHORITY TO ENTER INTO A CONTRACT FOR THE DELIVERY OF 500,000 BARRELS OF CEMENT OVER A PERIOD OF 3.5 CALENDAR YEARS MUST BE ANSWERED IN THE NEGATIVE, UNLESS THE APPROPRIATION FOR THE FISCAL YEAR 1930, AVAILABLE FOR THE PURCHASE OF CEMENT FOR THIS PROJECT, IS ADEQUATE FOR THE FULFILLMENT OF SUCH A CONTRACT, AND IT IS NOT AMISS TO POINT OUT IN THIS CONNECTION, AS INDICATING THE WISDOM OF THE PROVISIONS IN THE LAW LIMITING CONTRACTS TO ONE FISCAL YEAR WHERE THEY FIND THEIR BASIC AUTHORITY IN ANNUAL APPROPRIATION ACTS, THAT NO ONE IS ABLE TO DETERMINE WITH ANY DEGREE OF ACCURACY THE COST OF PRODUCTION OF CEMENT DURING THE COMING 3.5 YEARS, FOR THERE MAY BE MANY CHANGES IN THE COST OF LABOR, MACHINERY, TRANSPORTATION, ETC., DURING SAID PERIOD.

IT MAY BE STATED, IN CONCLUSION, THAT THERE IS NO LEGAL OBJECTION TO THE ACCEPTANCE OF THE LOW BID FOR DELIVERY OF 75,000 BARRELS OF CEMENT DURING THE FISCAL YEAR 1930, WITH AN OPTION IN THE UNITED STATES, SUBJECT TO APPROPRIATIONS BEING MADE, TO REQUIRE THE DELIVERY OF 425,000 BARRELS ADDITIONAL APPORTIONED OVER THE REMAINDER OF THE FISCAL YEAR PERIODS NECESSARY FOR THE CONSTRUCTION OF THE DAM BUT WITH NOTICE TO THE CONTRACTOR THAT SUCH OPTION WILL BE EXERCISED ONLY IN EVENT THE ADVERTISEMENTS FOR PROPOSALS AT THE BEGINNING OF EACH SUCCEEDING FISCAL- YEAR PERIOD SHOULD FAIL TO ELICIT PROPOSALS LOWER THAN THE OPTION PRICE STATED IN THE CONTRACT.