A-36035, APRIL 20, 1931, 10 COMP. GEN. 484

A-36035: Apr 20, 1931

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OR MANUFACTURE OF THE UNITED STATES ARE APPLICABLE ONLY TO DIRECT PURCHASES OR CONTRACTS FOR DIRECT PURCHASES. THERE IS NO REQUIREMENT IN CONTRACTS FOR THE CONSTRUCTION OF BUILDINGS. THE PHRASE "WITHIN THE LIMITS OF THE UNITED STATES" USED IN THESE PROVISIONS OF LAW IS CONSTRUED TO INCLUDE THE UNITED STATES PROPER. UNLESS IN HIS DISCRETION THE INTEREST OF THE GOVERNMENT WILL NOT PERMIT. WHETHER AND TO WHAT EXTENT THE STATUTORY PROVISION CITED IS APPLICABLE IN CASES OF PROCUREMENT OF ARMOR. ENTERING INTO THE COMPOSITION OF THE STEEL USED IN THE PRODUCTS ARE OBTAINED IN LIMITED QUANTITIES IN THIS COUNTRY ALTHOUGH AT A HIGHER PRICE AND IT IS THE USUAL COMMERCIAL PRACTICE TO PROCURE SUCH MATERIALS FROM ABROAD.

A-36035, APRIL 20, 1931, 10 COMP. GEN. 484

PURCHASES - PREFERENCE FOR DOMESTIC ARTICLES FOR MILITARY AND NAVAL PURPOSES THE PROVISIONS OF THE LAW IN THE ARMY AND NAVY APPROPRIATION ACTS FOR THE FISCAL YEAR 1932 TO THE EFFECT THAT THE SECRETARY OF THE DEPARTMENT SHALL, UNDER CERTAIN CONDITIONS, PURCHASE OR CONTRACT FOR ONLY ARTICLES OF THE GROWTH, PRODUCTION, OR MANUFACTURE OF THE UNITED STATES ARE APPLICABLE ONLY TO DIRECT PURCHASES OR CONTRACTS FOR DIRECT PURCHASES. UNDER THESE PROVISIONS OF LAW, THERE IS NO REQUIREMENT IN CONTRACTS FOR THE CONSTRUCTION OF BUILDINGS, OR OTHER STRUCTURES, OR FOR THE MANUFACTURE OF AN ARTICLE, ETC., THAT THE CONTRACTOR SHALL USE ONLY MATERIALS OR COMPONENT PARTS OF AN ARTICLE OF DOMESTIC ORIGIN. THE PHRASE "WITHIN THE LIMITS OF THE UNITED STATES" USED IN THESE PROVISIONS OF LAW IS CONSTRUED TO INCLUDE THE UNITED STATES PROPER, ALASKA, AND HAWAII, BUT NOT THE PHILIPPINE ISLAND, GUAM, PORTO RICO, OR THE CANAL ZONE.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF THE NAVY, APRIL 20, 1931:

THERE HAS BEEN RECEIVED BY YOUR FIRST INDORSEMENT OF MARCH 28, 1931 (FOLLOWED BY YOUR LETTER OF APRIL 11, 1931, REQUESTING EARLY DECISION), REQUEST FOR CONSIDERATION AND DECISION BY THIS OFFICE OF CERTAIN QUESTIONS SET FORTH IN LETTERS OF THE CHIEF OF THE BUREAU OF YARDS AND DOCKS, AND THE CHIEF OF THE BUREAU OF ORDINANCE, NAVY DEPARTMENT, RELATIVE TO THE CONSTRUCTION, INTERPRETATION, AND APPLICATION OF THE PROVISION CONTAINED IN THE ACT OF FEBRUARY 28, 1931, 46 STAT. 1450,AS FOLLOWS:

THAT IN THE EXPENDITURE OF APPROPRIATIONS IN THIS ACT THE SECRETARY OF THE NAVY SHALL, UNLESS IN HIS DISCRETION THE INTEREST OF THE GOVERNMENT WILL NOT PERMIT, PURCHASE OR CONTRACT FOR, WITHIN THE LIMITS OF THE UNITED STATES, ONLY ARTICLES OF THE GROWTH, PRODUCTION, OR MANUFACTURE OF THE UNITED STATES, NOTWITHSTANDING THAT SUCH ARTICLES OF THE GROWTH, PRODUCTION, OR MANUFACTURE OF THE UNITED STATES MAY COST MORE, IF SUCH EXCESS OF COST BE NOT UNREASONABLE.

THE SPECIFIC QUESTIONS PRESENTED MAY BE SUMMARIZED BRIEFLY AS FOLLOWS:

1. WHETHER AND TO WHAT EXTENT THE STATUTORY PROVISION CITED IS APPLICABLE IN CASES OF PROCUREMENT OF ARMOR, GUN FORGINGS, AND PROJECTILES WHERE SOME OF THE RAW MATERIALS SUCH AS CHROMIUM, MANGANESE, NICKEL, ETC., ENTERING INTO THE COMPOSITION OF THE STEEL USED IN THE PRODUCTS ARE OBTAINED IN LIMITED QUANTITIES IN THIS COUNTRY ALTHOUGH AT A HIGHER PRICE AND IT IS THE USUAL COMMERCIAL PRACTICE TO PROCURE SUCH MATERIALS FROM ABROAD, ALTHOUGH THE STEEL ITSELF, AS WELL AS THE FINISHED PRODUCTS, IS MANUFACTURED ENTIRELY IN THE UNITED STATES.

2. WHETHER THE PROVISION APPLIES TO (A) CONTRACTS FOR THE CONSTRUCTION OF BUILDINGS OR OTHER STRUCTURES, (B) CONTRACTS FOR THE FURNISHING OF MECHANICAL EQUIPMENT BY A PRIVATE CONTRACTOR AND INSTALLATION BY GOVERNMENT FORCE UNDER SUPERVISION OF THE CONTRACTOR'S REPRESENTATIVE, AND (C) CONTRACTS FOR THE DELIVERY AND INSTALLATION BY THE CONTRACTOR OF MECHANICAL EQUIPMENT.

3. WHETHER THE PHRASE "WITHIN THE LIMITS OF THE UNITED STATES" AS USED IN THE LAW INCLUDES THE TERRITORIES AND INSULAR POSSESSIONS--- I.E., ALASKA, HAWAII, THE PHILIPPINE ISLANDS, GUAM, PORTO RICO, AND THE CANAL ZONE.

IT IS STATED IN YOUR SUBMISSION THAT YOUR DEPARTMENT HAS BEEN FURNISHED WITH COPIES OF THE OPINION OF THE JUDGE ADVOCATE GENERAL OF THE ARMY RELATIVE TO THE INTERPRETATION OF AN IDENTICAL PROVISION IN THE ARMY STATUTES AS TO WHICH CONCLUSIONS WERE REACHED AS FOLLOWS:

THE AMENDMENT IN QUESTION APPLIES ONLY TO THE DIRECT PURCHASE OF SUPPLIES BY THE WAR DEPARTMENT AND DOES NOT APPLY TO CONTRACTS FOR THE CONSTRUCTION OF BUILDINGS OR OTHER STRUCTURES. HENCE IT FOLLOWS THAT THE QUARTERMASTER GENERAL NEED NOT REQUIRE CONTRACTORS BIDDING UPON WAR DEPARTMENT CONSTRUCTION WORK NOT TO USE, OR PERMIT THE USE OF, ARTICLES THAT ARE NOT OF THE GROWTH, PRODUCTION, OR MANUFACTURE OF THE UNITED STATES IN CARRYING OUT THEIR CONTRACTS.

(2) THAT THE LIMITS OF THE UNITED STATES, WITHIN THE MEANING OF THE STATED AMENDMENT TO CURRENT WAR DEPARTMENT APPROPRIATION BILL, INCLUDE THE STATES OF THE UNION, THE TERRITORIES OF ALASKA AND HAWAII, AND EXCLUDE ALL OTHER INSULAR POSSESSIONS AND THE CANAL ZONE.

THE SPECIFIC TERMS OF THE PROVISION OF LAW HERE IN QUESTION, STRIPPED OF THE QUALIFYING AND LIMITING CLAUSES, ARE THAT THE SECRETARY OF THE NAVY SHALL PURCHASE OR CONTRACT FOR ONLY ARTICLES OF THE GROWTH, PRODUCTION, OR MANUFACTURE OF THE UNITED STATES. THE WORDS "PURCHASE OR CONTRACT FOR" MUST BE CONSTRUED AND UNDERSTOOD AS MEANING DIRECT PURCHASES OR CONTRACTS FOR THE PROCUREMENT OF THE ARTICLES, AND NOT THE CONTRACTING FOR THE DOING OF A PARTICULAR THING IN WHICH THE CONTRACTOR MAY USE RAW MATERIAL OR COMPONENT PARTS OF ARTICLES WHICH MAY BE OF FOREIGN ORIGIN. IN OTHER WORDS, IN CASES AS SUMMARIZED IN QUESTION 1, SUPRA, THERE APPEARS TO BE NO REQUIREMENT UNDER THE LAW THAT, IN THE FURNISHING OF ARMOR, GUN FORGINGS, AND PROJECTILES, THE CONTRACTOR SHOULD BE REQUIRED TO FURNISH ONLY ARTICLES OR PRODUCTS THE RAW MATERIALS OR COMPONENT PARTS OF WHICH ARE OF DOMESTIC ORIGIN. IF THE STEEL AND THE FINISHED PRODUCTS ARE OF DOMESTIC ORIGIN AND THE FINISHED PRODUCT IS TO BE MANUFACTURED IN THE UNITED STATES, THERE WOULD APPEAR TO BE COMPLIANCE WITH THE LAW, AND THE ARTICLE COULD BE CONSIDERED OF DOMESTIC MANUFACTURE AND PRODUCTION WITHIN THE MEANING OF THE LAW.

LIKEWISE, THE SAME RULE IS APPLICABLE WITH RESPECT TO CONTRACTS FOR THE CONSTRUCTION OF BUILDINGS OR OTHER STRUCTURES. IN THIS CLASS OF CASES THERE WOULD APPEAR TO BE NO STATUTORY NECESSITY FOR REQUIRING THE CONTRACTOR TO USE MATERIALS OF DOMESTIC ORIGIN.

IN CONNECTION WITH THE MATTER OF PROCURING MECHANICAL EQUIPMENT, THE RULE WOULD APPEAR TO BE THE SAME WHETHER THE INSTALLATION IS BY A GOVERNMENT FORCE UNDER THE CONTRACTOR'S SUPERVISION OR BY THE CONTRACTOR UNDER THE GOVERNMENT'S SUPERVISION. IN EITHER CASE, IF THERE IS INVOLVED THE PROCUREMENT OF ARTICLES OF MECHANICAL EQUIPMENT BY CONTRACT OR DIRECT PURCHASE AS DISTINGUISHED FROM MECHANICAL EQUIPMENT INCIDENT TO OR TO BE USED IN THE CONSTRUCTION OF A BUILDING OR OTHER STRUCTURE, THE LAW HERE IN QUESTION REQUIRES THAT THE ARTICLE BE OF DOMESTIC ORIGIN OR PRODUCTION IF, WITHIN THE DISCRETION OF THE SECRETARY OF THE NAVY, THE PUBLIC INTEREST PERMITS AND IF FOUND ADMINISTRATIVELY NECESSARY FOR THE PURPOSE, AND A PROPER SHOWING SHOULD BE REQUIRED IN THE BIDS SO THAT A PROPER DETERMINATION MAY BE MADE IN ACCORDANCE WITH THE PREFERENTIAL LAW.

IN THE CONSIDERATION OF THIS MATTER, THERE HAS BEEN GIVEN ATTENTION, ALSO, TO THE LEGISLATIVE HISTORY OF THE PROVISION OF LAW HERE IN QUESTION AS CONTAINED IN THE NAVY AND WAR DEPARTMENT APPROPRIATION ACTS. IT IS CLEARLY APPARENT FROM THE DISCUSSIONS OF SAID PROVISION IN THE HEARINGS BEFORE THE SUBCOMMITTEE OF THE SENATE COMMITTEE ON APPROPRIATIONS THAT THE LAW WAS INTENDED TO HAVE TWO PRIMARY PURPOSES: (1) TO ENCOURAGE A PREFERENCE BEING GIVEN DOMESTIC INDUSTRIES IN THE NEEDS OF THE MILITARY AND NAVAL ESTABLISHMENTS IN SO FAR AS THE GOVERNMENT'S INTEREST WOULD PERMIT AND (2) TO ALLOW A CERTAIN DISCRETION IN THE ADMINISTRATIVE OFFICERS IN CARRYING OUT THE PROVISIONS OF LAW IN THAT RESPECT. IT IS BELIEVED, HOWEVER--- (AND THERE ARE STATEMENTS TO THE EFFECT IN THE HEARINGS) THAT IT WAS NOT INTENDED TO HAMPER UNDULY THE CARRYING OUT OF THE BUSINESS OF THESE TWO ESTABLISHMENTS, OR TO IMPOSE UNDUE BURDENS UPON THE ADMINISTRATIVE AND ACCOUNTING OFFICERS AND THE CONTRACTORS IN PRESCRIBING BURDENSOME REQUIREMENTS FOR THE USE OF RAW MATERIALS OR COMPONENT PARTS OF AN ARTICLE OF DOMESTIC ORIGIN, AS SUCH REQUIREMENTS WOULD IN THE FINAL ANALYSIS BE DETRIMENTAL TO THE DOMESTIC INDUSTRY, AND, THEREFORE, IN EFFECT DEFEAT THE VERY PURPOSE OF THE LAW.

BOTH THE ARMY AND THE NAVY PREVIOUSLY HAD PROVISIONS OF LAW REQUIRING GENERALLY THAT PREFERENCE BE GIVEN DOMESTIC INDUSTRIES IN THE PROCUREMENT OF SUPPLIES AND ARTICLES FOR MILITARY AND NAVAL PURPOSES (SECTIONS 3716 AND 3728, REVISED STATUTES), BUT THE PREFERENCE WAS SUBJECT TO THE PROVISION AS TO PRICE AND QUALITY BEING EQUAL. IT IS BELIEVED THE NEW PROVISION INSERTED IN THE WAR AND NAVY APPROPRIATION ACTS WAS DIRECTED PRIMARILY AT THIS PROVISION OF THE PRIOR LAWS AS TO EQUALITY OF PRICE AND QUALITY, AND THE NEW LAW PROVIDED THAT PREFERENCE SHOULD BE GIVEN THE DOMESTIC ARTICLE NOTWITHSTANDING IT MAY COST MORE, IF SUCH EXCESS BE NOT UNREASONABLE. IT IS NOT BELIEVED THAT TO CARRY OUT SUCH INTENT OF THE PRESENT LAW THERE SHOULD BE PRESCRIBED REQUIREMENTS WHICH WOULD RADICALLY CHANGE THE METHOD OF ADVERTISING, THE AWARDING OF CONTRACTS, ETC., EXCEPT IN SUCH CASES OF DIRECT PURCHASES OR CONTRACTING FOR A PARTICULAR ARTICLE, AS TO WHICH PRESENT PROVISION OF LAW SHOULD BE GIVEN FULL EFFECT.

AS TO THE IMPORT OF THE PHRASE "WITHIN THE LIMITS OF THE UNITED STATES" IT MAY BE SAID THAT IT IS VAGUE ENOUGH TO BE ALL COMPREHENSIVE AND AT THE SAME TIME RESTRICTIVE ENOUGH TO INCLUDE ONLY THE UNITED STATES PROPER AND NOT ITS TERRITORIAL AND INSULAR POSSESSIONS. AS A GENERAL RULE WHEN STATUTES ENACTED BY THE CONGRESS ARE INTENDED TO BE APPLICABLE TO INSULAR POSSESSIONS AND THE CANAL ZONE, SPECIFIC PROVISIONS ARE MADE THEREIN FOR THE PURPOSE. IN THE PRESENT MATTER, TAKING INTO CONSIDERATION THE SUBJECT MATTER INVOLVED AND THE LEGISLATIVE HISTORY HEREINBEFORE REFERRED TO, THERE WOULD APPEAR TO BE WARRANTED THE HOLDING THAT THE PROVISION WAS NOT INTENDED TO APPLY TO THE PHILIPPINE ISLANDS, GUAM, PORTO RICO, OR THE CANAL ZONE, BUT THAT IT SHOULD APPLY TO THE TERRITORIES OF ALASKA AND HAWAII. ALASKA MAY BE CONSIDERED IN FACT WITHIN THE LIMITS OF THE UNITED STATES AS THAT TERM IS GENERALLY UNDERSTOOD AND AS TO HAWAII, STATEMENTS MADE IN THE HEARINGS REFERRED TO ABOVE WOULD TEND TO INDICATE THAT THE PROVISION WAS TO BE APPLICABLE PARTICULARLY IN SO FAR AS THE ARMY IS CONCERNED, AND FOR THE SAKE OF UNIFORMITY, IF FOR NO OTHER REASON, IT WOULD APPEAR THAT THE MATTER SHOULD BE TREATED ON THE SAME BASIS BY THE NAVY.

IN SPECIFIC ANSWER TO THE THE QUESTIONS SUBMITTED, I HAVE TO ADVISE THAT THE LAW AS CONSTRUED AND AS PROPOSED TO BE APPLIED BY THE WAR DEPARTMENT APPEARS PROPERLY TO CARRY OUT THE INTENT AND PURPOSES OF THE NEW LAW, AND THAT THIS OFFICE WILL INTERPOSE NO OBJECTION TO ITS BEING SO APPLIED.