A-55879, JUNE 28, 1934, 13 COMP. GEN. 471

A-55879: Jun 28, 1934

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AN ADMINISTRATIVE REQUIREMENT FROM ALL BIDDERS FOR AN AFFIDAVIT THAT NO SUCH AGREEMENT WAS ENTERED INTO. IS AN ENFORCEABLE CONDITION OF THE SPECIFICATIONS. WILL REDUCE TO A MINIMUM THE FERTILE FIELD OF HIGH-PRESSURE SALESMANSHIP. 1934: THERE HAVE BEEN RECEIVED YOUR LETTERS OF JUNE 19 AND 26. WHERE THE BIDS WERE OPENED. TO HAVE SUBMITTED A BID OF $1. TO HAVE SUBMITTED A BID OF $1. (3) THAT WHEN THE BIDS WERE TABULATED AND AN ABSTRACT THEREOF PREPARED THE BID OF THE CHEVROLET MOTOR CO. WAS SHOWN AS $1. YOU HAVE REPORTED IN A LETTER OF JUNE 19. AS FOLLOWS: AMONG THE CONDITIONS CONTAINED IN THIS INVITATION WAS THE FOLLOWING: "6. SWORN AFFIDAVIT REQUIRED WITH THIS BID: "EACH BID SUBMITTED IN RESPONSE THERETO MUST BE ACCOMPANIED BY AN AFFIDAVIT THAT THE BIDDER HAS NOT EMPLOYED AND WILL NOT EMPLOY ANY PERSON.

A-55879, JUNE 28, 1934, 13 COMP. GEN. 471

SPECIFICATIONS - AGREEMENTS FOR SECURING ORDERS FROM THE GOVERNMENT - BIDS AN AGREEMENT MADE BY A BIDDER TO PAY FOR SERVICES IN SECURING ORDERS FROM THE GOVERNMENT FOR MOTOR TRUCKS, EITHER ON A CONTINGENT FEE BASIS OR IN THE FORM OF FAVORS OR BY MEANS OF A LIBERAL EXPENSE ACCOUNT, BEING AGAINST PUBLIC POLICY, AN ADMINISTRATIVE REQUIREMENT FROM ALL BIDDERS FOR AN AFFIDAVIT THAT NO SUCH AGREEMENT WAS ENTERED INTO, IS AN ENFORCEABLE CONDITION OF THE SPECIFICATIONS, AND ANY BID MAY BE REJECTED FOR FAILURE TO FURNISH THE AFFIDAVIT. FAITHFUL COMPLIANCE WITH SECTION 3709, REVISED STATUTES, IN STATING THE NEEDS OF THE UNITED STATES IN ADVERTISED SPECIFICATIONS--- THE JOB TO BE PERFORMED--- WITHOUT UNNECESSARY DETAILS OF CONSTRUCTION, DEVICES, LUBRICATION, ETC., WILL REDUCE TO A MINIMUM THE FERTILE FIELD OF HIGH-PRESSURE SALESMANSHIP.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF WAR, JUNE 28, 1934:

THERE HAVE BEEN RECEIVED YOUR LETTERS OF JUNE 19 AND 26, 1934, CONCERNING INVITATION BY THE WAR DEPARTMENT NO. 398-34-145, DATED MAY 16, 1934, FOR BIDS OPENED MAY 26, 1934, FOR THE DELIVERY OF 68 AMBULANCES AND CONCERNING WHICH PROTEST HAS BEEN SUBMITTED BY THE TREW MOTOR CO. WITH RESPECT TO THE ADMINISTRATIVE PROCEDURE FOLLOWED (1) IN THE REFUSAL OF THE OFFICERS AT CAMP HOLABIRD, WHERE THE BIDS WERE OPENED, TO PERMIT COMPETING BIDDERS TO EXAMINE THE BIDS AFTER THEY HAD BEEN OPENED; (2) THAT THE PRICES AS READ BY THE OFFICER OPENING THE BIDS SHOWED THE TREW MOTOR CO. TO HAVE SUBMITTED A BID OF $1,027.85 EACH, AND THE CHEVROLET MOTOR CO. TO HAVE SUBMITTED A BID OF $1,115 EACH; (3) THAT WHEN THE BIDS WERE TABULATED AND AN ABSTRACT THEREOF PREPARED THE BID OF THE CHEVROLET MOTOR CO. WAS SHOWN AS $1,015 EACH; AND (4) THAT THE TREW MOTOR CO. OBJECTED TO THE REQUIREMENT IN THE SPECIFICATIONS THAT THERE BE EXECUTED BY BIDDERS AN AFFIDAVIT TO THE EFFECT THAT THEY HAD NOT EMPLOYED, AND WOULD NOT EMPLOY, ANY PERSON ON A CONTINGENT FEE BASIS TO SECURE CONTRACTS WITH THE WAR DEPARTMENT FOR THE DELIVERY OF MOTOR VEHICLES.

WITH RESPECT TO THE LAST-NAMED OBJECTION OF THE TREW MOTOR CO., YOU HAVE REPORTED IN A LETTER OF JUNE 19, 1934, AS FOLLOWS:

AMONG THE CONDITIONS CONTAINED IN THIS INVITATION WAS THE FOLLOWING:

"6. SWORN AFFIDAVIT REQUIRED WITH THIS BID:

"EACH BID SUBMITTED IN RESPONSE THERETO MUST BE ACCOMPANIED BY AN AFFIDAVIT THAT THE BIDDER HAS NOT EMPLOYED AND WILL NOT EMPLOY ANY PERSON, OTHER THAN A BONA FIDE ESTABLISHED COMMERCIAL OR SELLING AGENCY MAINTAINED BY THE BIDDER FOR THE PURPOSE OF SECURING BUSINESS, TO SOLICIT OR SECURE AN AWARD OR CONTRACT HEREUNDER UPON ANY AGREEMENT FOR A COMMISSION, PERCENTAGE, BROKERAGE, OR CONTINGENT FEE.

"IF THE ARTICLES BID UPON ARE NOT MANUFACTURED BY THE BIDDER, THE BID MUST ALSO BE ACCOMPANIED BY AN AFFIDAVIT OF THE MANUFACTURER OF SIMILAR IMPORT. IF THE BIDDER OR MANUFACTURER IS A PARTNERSHIP, THE AFFIDAVIT MUST BE EXECUTED BY ONE OF THE PARTNERS. IF THE BIDDER OR MANUFACTURER IS A CORPORATION, THE AFFIDAVIT MUST BE EXECUTED BY AN OFFICER OF THE CORPORATION DULY AUTHORIZED TO MAKE SUCH AFFIDAVIT.'

THE BID SUBMITTED BY THE TREW MOTOR COMPANY IN RESPONSE TO THE INVITATION UNDER CONSIDERATION WAS NOT ACCOMPANIED BY SUCH AN AFFIDAVIT, AND THE ABSTRACT OF BIDS CONTAINS THE FOLLOWING OTATION:

"MR. A. H. FERRANDOU, REPRESENTATIVE OF TREW MOTOR CO. (BIDDER NO. 3), AT THE OPENING OF THESE BIDS WAS QUESTIONED WITH REFERENCE TO THE MISSING SWORN AFFIDAVIT, AND HE STATED TO THE OFFICER OPENING BIDS THAT HE COULD NOT FURNISH ASSURANCE THAT THE BUILDER WOULD FURNISH SWORN AFFIDAVIT CALLED FOR IN PARAGRAPH 6, PAGE 6 OF THIS BID, IF CALLED UPON TO DO SO.'

IN ITS LETTER TO YOU THE TREW MOTOR COMPANY STATES IN SUBSTANCE THAT FROM THE INFORMATION AVAILABLE IT APPEARS THAT IT IS THE LOW LEGAL BIDDER AND SHOULD RECEIVE THE AWARD, THAT AT THE TIME THE BIDS WERE OPENED THE PURCHASING OFFICER ASKED ITS REPRESENTATIVE IF IT WOULD FURNISH THE AFFIDAVITS CALLED FOR BY THE INVITATION AND ITS REPRESENTATIVE REPLIED THAT HE COULD NOT ANSWER.

THE COMPANY CONTENDS THAT THERE IS NO JUSTIFICATION OR REASONABLE PURPOSE FOR REQUIRING SUCH AN AFFIDAVIT. IT INVITES ATTENTION TO ARTICLE 11 OF THE STANDARD GOVERNMENT FORM OF CONTRACT, SUPPLIES (STANDARD FORM NO. 32), ENTITLED "COVENANT AGAINST CONTINGENT FEES," AND TO THE FACT THAT THE INVITATION UNDER CONSIDERATION REQUIRES THE SUCCESSFUL BIDDER TO AGREE TO EXECUTE A CONTRACT ON THAT FORM. IT CONTENDS THAT THE PROVISIONS CONTAINED IN ARTICLE 11 FULLY PROTECT THE GOVERNMENT AND THAT THE WAR DEPARTMENT HAS NO AUTHORITY TO ALTER OR CHANGE ANY OF THE ARTICLES OF STANDARD FORM NO. 32 WHICH WAS APPROVED BY THE PRESIDENT ON JUNE 10, 1927. THE COMPANY STATES THAT IT COMPLIES FULLY WITH THE REQUIREMENTS OF ARTICLE 11, THAT IT IS PREPARED TO SIGN A CONTRACT PREPARED ON STANDARD FORM 32, AND THAT IT HAS NOT EMPLOYED ANY PERSON TO SOLICIT THIS CONTRACT ON ANY AGREEMENT FOR A COMMISSION, PERCENTAGE, BROKERAGE OR CONTINGENT FEE. IT FURTHER STATES "* * * NEITHER, WE ARE RELIABLY INFORMED AND HAVE EVERY REASON TO BELIEVE, HAS THE MANUFACTURER; AND THAT THERE HAVE BEEN INCLUDED IN THE PRICES QUOTED THE GOVERNMENT ON THESE AMBULANCES NO AMOUNTS TO BE PAID AS SUCH FEE.'

THE STIPULATION AGAINST CONTINGENT FEES ORIGINATED DURING THE WORLD WAR, AS THE RESULT, IT IS UNDERSTOOD, OF CERTAIN ABUSES WHICH DEVELOPED IN CONNECTION WITH THE PROCUREMENT OF WAR SUPPLIES. SUPPLY CIRCULAR NO. 76, PURCHASE, STORAGE, AND TRAFFIC DIVISION, GENERAL STAFF, WAR DEPARTMENT, AUGUST 15, 1918, PROVIDED THAT:

"1. THE FOLLOWING COVENANT, PREPARED BY THE ATTORNEY GENERAL AND APPROVED BY THE PRESIDENT, SHALL BE INSERTED IN ALL CONTRACTS OF THE WAR DEPARTMENT:

"THE CONTRACTOR EXPRESSLY WARRANTS THAT HE HAS EMPLOYED NO THIRD PERSON TO SOLICIT OR OBTAIN THIS CONTRACT IN HIS BEHALF, OR TO CAUSE OR PROCURE THE SAME TO BE OBTAINED UPON COMPENSATION IN ANY WAY CONTINGENT, IN WHOLE OR IN PART, UPON SUCH PROCUREMENT; AND THAT HE HAS NOT PAID, OR PROMISED OR AGREED TO PAY, TO ANY THIRD PERSON, IN CONSIDERATION OF SUCH PROCUREMENT, OR IN COMPENSATION FOR SERVICES IN CONNECTION THEREWITH, ANY BROKERAGE, COMMISSION, OR PERCENTAGE UPON THE AMOUNT RECEIVABLE BY HIM THEREUNDER; AND THAT HE HAS NOT, IN ESTIMATING THE CONTRACT PRICE DEMANDED BY HIM, INCLUDED ANY SUM BY REASON OF ANY SUCH BROKERAGE, COMMISSION, OR PERCENTAGE; AND THAT ALL MONEYS PAYABLE TO HIM HEREUNDER ARE FREE FROM OBLIGATION TO ANY OTHER PERSON FOR SERVICES RENDERED, OR SUPPOSED TO HAVE BEEN RENDERED, IN THE PROCUREMENT OF THIS CONTRACT. HE FURTHER AGREES THAT ANY BREACH OF THIS WARRANTY SHALL CONSTITUTE ADEQUATE CAUSE FOR THE ANNULMENT OF THIS CONTRACT BY THE UNITED STATES, AND THAT THE UNITED STATES MAY RETAIN TO ITS OWN USE FROM ANY SUMS DUE OR TO BECOME DUE THEREUNDER AN AMOUNT EQUAL TO ANY BROKERAGE, COMMISSION, OR PERCENTAGE SO PAID OR AGREED TO BE PAID.'

THAT CIRCULAR ALSO PROVIDED THAT SUPPLIES SHOULD BE PURCHASED ONLY FROM MANUFACTURERS AND DEALERS WHO HAVE THE REQUIRED SUPPLIES IN STOCK.

BY SUPPLY CIRCULAR NO. 32, PURCHASE, STORAGE, AND TRAFFIC DIVISION, GENERAL STAFF, WAR DEPARTMENT, APRIL 29, 1919, CIRCULAR NO. 76 WAS AMENDED SO AS TO EXEMPT FROM ITS PROVISIONS SALES OF GOODS THROUGH A BONA FIDE COMMERCIAL REPRESENTATIVE EMPLOYED BY THE CONTRACTOR IN THE REGULAR COURSE OF HIS BUSINESS IN DEALING WITH CUSTOMERS OTHER THAN THE GOVERNMENT AND WHOSE COMPENSATION IS PAID IN WHOLE OR IN PART BY COMMISSIONS ON SALES MADE AND SALES OF GOODS THROUGH ESTABLISHED COMMERCIAL OR SELLING AGENTS OR AGENCIES REGULARLY ENGAGED IN SELLING SUCH GOODS.

GENERAL ORDERS NO. 10, WAR DEPARTMENT, MARCH 10, 1921, PRESCRIBED THAT THE FOLLOWING PROVISIONS SHOULD BE INSERTED IN ALL WAR DEPARTMENT CONTRACTS:

"COVENANT AGAINST CONTINGENT FEES.--- THE CONTRACTOR WARRANTS THAT IT HAS NOT EMPLOYED ANY PERSON TO SOLICIT OR SECURE THIS CONTRACT UPON ANY AGREEMENT FOR A COMMISSION, PERCENTAGE, BROKERAGE, OR CONTINGENT FEE. BREACH OF THIS WARRANTY SHALL GIVE THE UNITED STATES THE RIGHT TO ANNUL THE CONTRACT OR, IN ITS DISCRETION, TO DEDUCT FROM THE CONTRACT PRICE OR CONSIDERATION THE AMOUNT OF SUCH COMMISSION, PERCENTAGE, BROKERAGE, OR CONTINGENT FEE. THIS WARRANTY SHALL NOT APPLY TO COMMISSIONS PAYABLE BY CONTRACTORS UPON CONTRACTS OR SALES SECURED OR MADE THROUGH BONA FIDE ESTABLISHED COMMERCIAL OR SELLING AGENCIES MAINTAINED BY THE CONTRACTOR FOR THE PURPOSE OF SECURING BUSINESS WITH OTHERS THAN THE UNITED STATES.'

WITH VERY SLIGHT MODIFICATION OF ITS LANGUAGE THIS PROVISION BECAME ARTICLE 11 OF STANDARD FORM NO. 32, APPROVED BY THE PRESIDENT JUNE 10, 1927.

ACCORDING TO PUBLISHED NEWSPAPER REPORTS (THE EVENING STAR, WASHINGTON, D.C., THURSDAY, FEBRUARY 22, 1934; ID., THURSDAY, MARCH 1, 1934), IT DEVELOPED DURING THE RECENT INVESTIGATION BY THE GRAND JURY OF THE DISTRICT OF COLUMBIA CONCERNING ALLEGED ACTIVITIES OF CERTAIN PERSONS IN CONNECTION WITH PROPOSED PROCUREMENT OF MOTOR VEHICLES BY THE WAR DEPARTMENT THAT THE FARGO MOTOR CORPORATION, A DEALER IN DODGE TRUCKS, HAD ENTERED INTO A CONTRACT WITH A "WELL-KNOWN LAWYER LOBBYIST" UNDER WHICH THE LATTER WAS TO RECEIVE A COMMISSION FOR BUSINESS OBTAINED FROM THE WAR DEPARTMENT. LIKEWISE, ACCORDING TO NEWSPAPER REPORTS (THE EVENING STAR, WASHINGTON, D.C., THURSDAY, APRIL 19, 1934) THE GRAND JURY, IN ITS REPORT, SEVERELY CONDEMNED WHAT IT DESCRIBED AS ,THE REPREHENSIBLE CONDUCT OF A LARGE MOTOR MANUFACTURER IN THE MAKING OF A CONTINGENT CONTRACT PROVIDING FOR THE PAYMENT OF A CONTINGENT COMMISSION TO A PERSON NOT THEN A MEMBER OF THIS BAR, FOR ALLEGED SERVICES IN SECURING AN AWARD BY THE WAR DEPARTMENT ON CONTRACTS WHICH COULD BE AWARDED TO THE LOWEST BIDDER ONLY.'

IT IS UNDERSTOOD THAT THE FACTS WITH REFERENCE TO THE SAME ALLEGED CONTINGENT FEE CONTRACT, WERE DEVELOPED BY A SUPPLEMENTARY INVESTIGATION CONDUCTED BY THE COMMITTEE ON MILITARY AFFAIRS OF THE HOUSE OF REPRESENTATIVES.

ON APRIL 18, 1934, THE ASSISTANT SECRETARY OF WAR DIRECTED THAT THE SPECIAL PROVISION WITH REFERENCE TO CONTINGENT FEES CONTAINED IN INVITATION NO. 398-34-145 AND QUOTED ABOVE BE INSERTED IN ALL INVITATIONS FOR BIDS FOR MOTOR VEHICLES THEN OUTSTANDING OR THEREAFTER ISSUED.

THE POLICY REFERRED TO ABOVE WHICH WAS ORIGINALLY ESTABLISHED BY THE WAR DEPARTMENT AND SANCTIONED BY THE PRESIDENT, AND SUBSEQUENTLY WITH THE APPROVAL OF THE PRESIDENT EXTENDED TO ALL THE DEPARTMENTS OF THE FEDERAL GOVERNMENT, WAS BASED ON THE FIRM CONVICTION THAT EXPENDITURES FOR SUPPLIES SHOULD BE LIMITED TO LEGITIMATE ELEMENTS OF COST AND REASONABLE PROFITS AND SHOULD NOT INCLUDE SUCH A WHOLLY UNNECESSARY ITEM AS CONTINGENT FEES, AND WAS DESIGNED TO PREVENT ABUSES SUCH AS THOSE WHICH DEVELOPED IN CONNECTION WITH THE PROCUREMENT OF WAR SUPPLIES.

THE INSTRUCTIONS ISSUED ON APRIL 18, 1934, WERE DESIGNED TO EFFECTUATE THAT POLICY AND TO PREVENT ANY POSSIBILITY THAT INTERESTED PERSONS MIGHT ATTEMPT TO EVADE ITS EFFECT BY PERMITTING THEIR PRODUCTS TO BE OFFERED BY A SEPARATE LEGAL ENTITY WHICH HAD NOT ITSELF EMPLOYED ANYONE ON A CONTINGENT BASIS.

AT THE TIME THESE INSTRUCTIONS WERE ISSUED IT WAS ASSUMED THAT THE PRACTICE THUS PROHIBITED BY THE WAR DEPARTMENT AND CONDEMNED BY THE GRAND JURY WOULD BE DISCONTINUED AT ONCE AND THAT NO PROSPECTIVE BIDDER WOULD BE BARRED THEREBY. HOWEVER, THE PRESENT REFUSAL OF A BIDDER TO FURNISH AN AFFIDAVIT, WHILE OTHER BIDDERS HAVE COMPLIED WITH THIS REQUIREMENT WITHOUT QUESTION, SUGGESTS THAT THIS MAY NOT BE THE CASE. IF THE ASSERTION OF THE TREW MOTOR COMPANY THAT "* * * WE HAVE NOT EMPLOYED ANY PERSON TO SOLICIT THIS CONTRACT ON ANY AGREEMENT FOR A COMMISSION, PERCENTAGE, BROKERAGE OR CONTINGENT FEE; NEITHER, WE ARE RELIABLY INFORMED AND HAVE EVERY REASON TO BELIEVE, HAS THE MANUFACTURER; AND THAT THERE HAVE BEEN INCLUDED IN THE PRICES QUOTED THE GOVERNMENT ON THESE AMBULANCES NO AMOUNTS TO BE PAID AS SUCH FEE" IS CORRECT, NO SATISFACTORY REASON FOR THE COMPANY'S REFUSAL TO FURNISH AFFIDAVITS TO THAT EFFECT IS APPARENT.

WAR DEPARTMENT INVITATIONS IN CONNECTION WITH THE PROPOSED PROCUREMENT WHICH WAS CONSIDERED BY THE GRAND JURY PROVIDED THAT ANY CONTRACT RESULTING THEREFROM WOULD BE EXECUTED ON STANDARD FORM OF GOVERNMENT CONTRACT NO. 32, AND THE CONTINGENT FEE CONTRACT REFERRED TO BY THE GRAND JURY, IF MADE, WAS ENTERED INTO WITH KNOWLEDGE THAT THE SUCCESSFUL BIDDER WOULD BE REQUIRED TO EXECUTE A CONTRACT CONTAINING THE PROVISIONS OF ARTICLE 11 OF THAT FORM. IT IS THEREFORE APPARENT THAT THE WILLINGNESS OF A BIDDER TO EXECUTE A CONTRACT CONTAINING THOSE PROVISIONS DOES NOT NECESSARILY PRECLUDE THE POSSIBILITY OF AN UNKNOWN CONTINGENT FEE CONTRACT ENTERED INTO BY THE MANUFACTURER. THE FACT THAT, IN CONNECTION WITH AUTHORIZED INVITATION OR CONTRACT PROVISIONS, THERE CANNOT BE RECOGNIZED AN INDEPENDENT STATUS BETWEEN THE MANUFACTURERS OF AUTOMOBILES OR TRUCKS AND THE SALES AGENCIES OR DEALERS WHO CONTRACT TO SELL SAID AUTOMOBILES OR TRUCKS TO THE GOVERNMENT WAS RECOGNIZED IN YOUR DECISION (A-51737) OF NOVEMBER 10, 1933.

WITH THE EXPRESS APPROVAL OF THE INTERDEPARTMENTAL BOARD OF CONTRACTS AND ADJUSTMENTS (NOW THE FEDERAL CONTRACT BOARD) AND OF THE DIRECTOR OF THE BUREAU OF THE BUDGET BY AUTHORITY OF THE PRESIDENT, THE INSERTION IN GOVERNMENT STANDARD FORMS OF ADDITIONAL PROVISIONS NOT INCONSISTENT WITH THOSE APPROVED BY THE PRESIDENT IS AUTHORIZED.

THE QUESTION AS TO THE LEGALITY OF CONTINGENT FEE ARRANGEMENTS BETWEEN A MANUFACTURER OR DEALER IN SUPPLIES AND A LAWYER OR LAYMAN, BY WHICH SUCH LAWYER OR LAYMAN IS TO BE PAID A CONTINGENT FEE BASED ON A PERCENTAGE OF CONTRACTS OBTAINED WITH THE UNITED STATES OR BASED ON A PERCENTAGE OF APPROPRIATION SECURED TO PAY A PRIVATE CLAIM, HAS BEEN BEFORE THE SUPREME COURT OF THE UNITED STATES IN A NUMBER OF CASES. ONE OF THE EARLIEST CASES WAS THAT OF MARSHALL V. BALTIMORE AND OHIO RAILROAD COMPANY, 16 HOWARD 314, WHERE THERE WAS AN AGREEMENT TO SECURE THE PASSAGE OF A BILL BY THE STATE OF VIRGINIA LEGISLATURE AND SUIT WAS BROUGHT FOR THE FEE. THE COURT HELD THAT THE CONTRACT WAS VOID AS AGAINST PUBLIC POLICY, SAYING: INFLUENCES SECRETLY URGED UNDER FALSE AND COVERT PRETENSES MUST NECESSARILY OPERATE DELETERIOUSLY ON LEGISLATIVE ACTION, WHETHER IT BE EMPLOYED TO OBTAIN THE PASSAGE OF PRIVATE OR PUBLIC ACTS. BRIBES, IN THE SHAPE OF HIGH CONTINGENT COMPENSATION, MUST NECESSARILY LEAD TO THE USE OF IMPROPER MEANS AND THE EXERCISE OF UNDUE INFLUENCE. THEIR NECESSARY CONSEQUENCE IS THE DEMORALIZATION OF THE AGENT WHO COVENANTS FOR THEM; HE IS SOON BROUGHT TO BELIEVE THAT ANY MEANS WHICH WILL PRODUCE SO BENEFICIAL A RESULT TO HIMSELF ARE "PROPER MEANS; " AND THAT A SHARE OF THESE PROFITS MAY HAVE THE SAME EFFECT OF QUICKENING THE PERCEPTIONS AND WARMING THE ZEAL OF INFLUENTIAL OR "CARELESS" MEMBERS IN FAVOR OF HIS BILL. THE USE OF SUCH MEANS AND SUCH AGENTS WILL HAVE THE EFFECT TO SUBJECT THE STATE GOVERNMENTS TO THE COMBINED CAPITAL OF WEALTHY CORPORATIONS, AND PRODUCE UNIVERSAL CORRUPTION, COMMENCING WITH THE REPRESENTATIVE AND ENDING WITH THE ELECTOR. SPECULATORS IN LEGISLATION, PUBLIC AND PRIVATE, A COMPACT CORPS OF VENAL SOLICITORS, VENDING THEIR SECRET INFLUENCES, WILL INFEST THE CAPITAL OF THE UNION AND OF EVERY STATE, TILL CORRUPTION SHALL BECOME THE NORMAL CONDITION OF THE BODY POLITIC, AND IT WILL BE SAID OF US AS OF ROME--- "OMNE ROMAE VENALE.'

THE CASE OF PROVIDENCE TOOL COMPANY V. NORRIS, 2 WALLACE 45, WAS ANOTHER EARLY CASE WHEREIN THE TOOL COMPANY HAD ENTERED INTO A CONTRACT WITH THE SECRETARY OF WAR TO DELIVER 25,000 MUSKETS AT THE RATE OF $20 A MUSKET. THIS CONTRACT WAS SECURED THROUGH THE EXERTION OF NORRIS UNDER A PREVIOUS AGREEMENT WITH THE COMPANY TO THE EFFECT THAT IN EVENT HE OBTAINED THE CONTRACT HE SHOULD RECEIVE COMPENSATION FOR HIS SERVICES PROPORTIONATE TO THE AMOUNT OF THE CONTRACT. THERE IS RELATED IN THE OPINION OF THE COURT SOME OF THE INFLUENCES USED OR ATTEMPTED TO BE USED IN SECURING THE CONTRACT, AND WHEN NORRIS BROUGHT SUIT TO RECOVER HIS COMPENSATION THE COURT HELD THAT THE CONTRACT WAS VOID AS AGAINST PUBLIC POLICY, SAYING:

* * * WE HAVE NO HESITATION IN ANSWERING THE QUESTION IN THE NEGATIVE. ALL CONTRACTS FOR SUPPLIES SHOULD BE MADE WITH THOSE, AND WITH THOSE ONLY, WHO WILL EXECUTE THEM MOST FAITHFULLY, AND AT THE LEAST EXPENSE TO THE GOVERNMENT CONSIDERATIONS AS TO THE MOST EFFICIENT AND ECONOMICAL MODE OF MEETING THE PUBLIC WANTS SHOULD ALONE CONTROL, IN THIS RESPECT, THE ACTION OF EVERY DEPARTMENT OF THE GOVERNMENT. NO OTHER CONSIDERATION CAN LAWFULLY ENTER INTO THE TRANSACTION, SO FAR AS THE GOVERNMENT IS CONCERNED. SUCH IS THE RULE OF PUBLIC POLICY; AND WHATEVER TENDS TO INTRODUCE ANY OTHER ELEMENTS INTO THE TRANSACTION, IS AGAINST PUBLIC POLICY. THAT AGREEMENTS, LIKE THE ONE UNDER CONSIDERATION, HAVE THIS TENDENCY IS MANIFEST. THEY TEND TO INTRODUCE PERSONAL SOLICITATION, AND PERSONAL INFLUENCE, AS ELEMENTS IN THE PROCUREMENT OF CONTRACTS; AND THUS DIRECTLY LEAD TO INEFFICIENCY IN THE PUBLIC SERVICE, AND TO UNNECESSARY EXPENDITURES OF THE PUBLIC FUNDS.

THE PRINCIPLE WHICH DETERMINES THE INVALIDITY OF THE AGREEMENT IN QUESTION HAS BEEN ASSERTED IN A GREAT VARIETY OF CASES. IT HAS BEEN ASSERTED IN CASES RELATING TO AGREEMENTS FOR COMPENSATION TO PROCURE LEGISLATION. THESE HAVE BEEN UNIFORMLY DECLARED INVALID, AND THE DECISIONS HAVE NOT TURNED UPON THE QUESTION, WHETHER IMPROPER INFLUENCES WERE CONTEMPLATED OR USED, BUT UPON THE CORRUPTING TENDENCY OF THE AGREEMENTS. LEGISLATION SHOULD BE PROMPTED SOLELY FROM CONSIDERATIONS OF THE PUBLIC GOOD, AND THE BEST MEANS OF ADVANCING IT. WHATEVER TENDS TO DIVERT THE ATTENTION OF LEGISLATORS FROM THEIR HIGH DUTIES, TO MISLEAD THEIR JUDGMENTS, OR TO SUBSTITUTE OTHER MOTIVES FOR THEIR CONDUCT THAN THE ADVANCEMENT OF THE PUBLIC INTERESTS, MUST NECESSARILY AND DIRECTLY TEND TO IMPAIR THE INTEGRITY OF OUR POLITICAL INSTITUTIONS. AGREEMENTS FOR COMPENSATION CONTINGENT UPON SUCCESS SUGGEST THE USE OF SINISTER AND CORRUPT MEANS FOR THE ACCOMPLISHMENT OF THE END DESIRED. THE LAW MEETS THE SUGGESTION OF EVIL, AND STRIKES DOWN THE CONTRACT FROM ITS INCEPTION.

THERE IS NO REAL DIFFERENCE IN PRINCIPLE BETWEEN AGREEMENTS TO PROCURE FAVORS FROM LEGISLATIVE BODIES AND AGREEMENTS TO PROCURE FAVORS IN THE SHAPE OF CONTRACTS FROM THE HEADS OF DEPARTMENTS. THE INTRODUCTION OF IMPROPER ELEMENTS TO CONTROL THE ACTION OF BOTH IS THE DIRECT AND INEVITABLE RESULT OF ALL SUCH ARRANGEMENTS.

AS SPECIALLY PERTINENT IN THIS CONNECTION IS THE STATEMENT OF THAT COURT IN TRIST V. CHILD, 21 WALLACE 441, WHERE TRIST HAD ENTERED INTO A CONTRACT WITH CHILD FOR THE PURPOSE OF SECURING THE PASSAGE OF A PRIVATE BILL FOR REIMBURSEMENT OF EXPENSES INCURRED BY TRIST IN NEGOTIATING A TREATY WITH THE REPUBLIC OF MEXICO. THE FEE FIXED IN THE AGREEMENT FOR CHILD WAS A PERCENTAGE OF THE AMOUNT APPROPRIATED. WHEN SUIT WAS BROUGHT ON THE AGREEMENT THE COURT DENIED RECOVERY ON THE GROUND THAT THE CONTRACT WAS VOID AS AGAINST PUBLIC POLICY, SAYING, AMONG OTHER THINGS THAT:

THAT FOUNDATION OF A REPUBLIC IS THE VIRTUE OF ITS CITIZENS. THEY ARE AT ONCE SOVEREIGNS AND SUBJECTS. AS THE FOUNDATION IS UNDERMINED, THE STRUCTURE IS WEAKENED. WHEN IT IS DESTROYED, THE FABRIC MUST FALL. SUCH IS THE VOICE OF UNIVERSAL HISTORY. THE THEORY OF OUR GOVERNMENT IS THAT ALL PUBLIC STATIONS ARE TRUSTS, AND THAT THOSE CLOTHED WITH THEM ARE TO BE ANIMATED IN THE DISCHARGE OF THEIR DUTIES SOLELY BY CONSIDERATIONS OF RIGHT, JUSTICE, AND THE PUBLIC GOOD. THEY ARE NEVER TO DESCEND TO A LOWER PLANE. BUT THERE IS A CORRELATIVE DUTY RESTING UPON THE CITIZEN. IN HIS INTERCOURSE WITH THOSE IN AUTHORITY, WHETHER EXECUTIVE OR LEGISLATIVE, TOUCHING THE PERFORMANCE OF THEIR FUNCTIONS, HE IS BOUND TO EXHIBIT TRUTH, FRANKNESS, AND INTEGRITY. ANY DEPARTURE FROM THE LINE OF RECTITUDE IN SUCH CASES IS NOT ONLY BAD IN MORALS BUT INVOLVES A PUBLIC WRONG. PEOPLE CAN HAVE ANY HIGHER PUBLIC INTEREST, EXCEPT THE PRESERVATION OF THEIR LIBERTIES, THAN INTEGRITY IN THE ADMINISTRATION OF THEIR GOVERNMENT IN ALL ITS DEPARTMENTS.

THERE HAVE BEEN A NUMBER OF OTHER CASES INVOLVING SIMILAR POINTS, INCLUDING OPINION DATED JANUARY 2, 1934, OF THE COURT OF APPEALS OF THE DISTRICT OF COLUMBIA IN NOONAN V. GILBERT, WHEREIN THE COURT CONDEMNED AS AGAINST PUBLIC POLICY A CONTRACT TO OBTAIN A REDUCTION OF FARE FOR SCHOOL CHILDREN ON THE STREET RAILWAYS OF THE DISTRICT OF COLUMBIA, EITHER THROUGH THE ACTION OF THE PUBLIC UTILITIES COMMISSION OR THROUGH LEGISLATION WITH A PART OF THE FEE CONTINGENT UPON SUCCESS IN SECURING THE REDUCTION IN FARES.

IN VIEW OF THESE DECISIONS OF THE COURTS, IT WOULD SEEM THAT ANY CONTRACT TO PAY A PERSON ON A CONTINGENT-FEE BASIS, THAT IS, A PERCENTAGE ON CONTRACTS OBTAINED BY SUCH PERSON FOR HIS EMPLOYER FROM THE UNITED STATES, IS CONTRARY TO PUBLIC POLICY, AND THAT THERE WOULD BE NO NECESSITY FOR OBJECTION TO A REQUIREMENT IN A REQUEST FOR BIDS, IF ADMINISTRATIVELY CONSIDERED NECESSARY IN THE PUBLIC INTEREST, THAT EACH BIDDER MAKE AFFIDAVIT AS A CONDITION TO ELIGIBILITY FOR CONSIDERATION, THAT IT HAS NOT AGREED TO PAY ANY SUM FOR SERVICES IN SECURING THE BUSINESS AND CONTINGENT IN ANY MANNER UPON THE AWARD THEREOF. IN OTHER WORDS, WHILE THE LAW DOES NOT REQUIRE SUCH SHOWING, BUT--- INASMUCH AS SUCH AGREEMENTS ARE VOID AS BETWEEN THE CONTRACTING PARTIES BECAUSE AGAINST PUBLIC POLICY AND ARE CONDUCIVE TO IMPROPER PRACTICES--- WHEN IT IS THE ADMINISTRATIVE VIEW SUCH A REQUIREMENT IN CONNECTION WITH BIDDING IS NECESSARY IN THE PUBLIC INTEREST, IT MAY BE EMPLOYED.

HOWEVER, IN SUCH INSTANCES IT WOULD APPEAR THERE SHOULD BE GUARDED AGAINST LIKEWISE OTHER PRACTICES AND CONDITIONS EQUALLY IF NOT MORE DANGEROUS, SUCH AS THAT OF GIVING TO AND ACCEPTING FAVORS BY THOSE IN A POSITION TO INFLUENCE SPECIFICATION PROVISIONS OR THE MAINTENANCE OF SPECIAL SALES ORGANIZATIONS, GENEROUSLY FINANCED, BUT ABLE TO ESCAPE THE BAN BECAUSE "REGULARLY" EMPLOYED. IN ACTUAL RESULTS IT MIGHT BE THAT AN AGENT WITH COMPENSATION CONTINGENT UPON ACCOMPLISHMENTS WOULD DESERVE TO WIN SOLELY ON THE MERIT OF HIS WARES AND THE REASONABLENESS OF HIS PRICE, BUT WOULD BE DENIED BECAUSE OF DISCLOSURE OF THE BASIS OF HIS COMPENSATION; WHILE A COMPETITOR WHO HAS ACTUALLY EXERTED IMPROPER INFLUENCE MAY SECURE THE AWARD, AT A HIGHER COST TO THE GOVERNMENT, BECAUSE NO SIMILAR SHOWING IS REQUIRED OF HIM AND HIS PRACTICES ARE NOT OTHERWISE BROUGHT TO LIGHT.

IF IT IS A MATTER OF COMBATTING THE EFFECT OF HIGH-PRESSURE SALESMANSHIP AND THE EXERTING OF IMPROPER INFLUENCES ON THOSE ENTRUSTED WITH THE DUTY OF MAKING PURCHASES ON BEHALF OF THE UNITED STATES, THERE APPEARS VASTLY MORE INVOLVED THAN THE AGENT WHO OPERATES ON A CONTINGENT-FEE BASIS--- UNDESIRABLE AS IS SUCH METHOD.

BUT ALL THIS COULD BE LARGELY, IF NOT WHOLLY, CURED MERELY BY FAITHFUL ADMINISTRATIVE OBSERVANCE OF SECTION 3709, REVISED STATUTES. WHERE THE GOVERNMENT NEED--- THE JOB TO BE DONE, THE WORK TO BE PERFORMED--- IS FAITHFULLY AND FULLY DISCLOSED AND BIDDING IS PERMITTED THEREON, THERE WILL BE AFFORDED NO FIELD FOR HIGH-PRESSURE SALESMANSHIP. IT IS IN INSTANCES WHERE THE INTENT OF THE LAW IS AVOIDED AND INSTEAD OF DISCLOSING THE GOVERNMENT NEED--- THE PARTICULAR OR TYPE OF WORK TO BE DONE--- THERE IS ATTEMPT TO STIPULATE IN DETAIL, HIGH-PRESSURE SALESMANSHIP FINDS A FERTILE FIELD; INFLUENCE THAT WILL SECURE INCLUSION OR EXCLUSION OF A PARTICULAR DIMENSION, DEVICE, PLAN OF LUBRICATION, ETC., MAY FREQUENTLY DETERMINE THE SUCCESSFUL BIDDER.

AS HERETOFORE POINTED OUT, AND FREQUENTLY, THE WAR DEPARTMENT'S DIFFICULTY IN THESE MATTERS ARISES LARGELY FROM ITS FAILURE TO FAITHFULLY GIVE EFFECT TO SECTION 3709, REVISED STATUTES. SEE DECISION OF APRIL 19, 1934, 13 COMP. GEN. 284, 291. UNTIL THE ADMINISTRATIVE PRACTICE IN THIS RESPECT IS MADE TO CONFORM WITH THE PURPOSE OF THE LAW, THIS OFFICE WILL CONTINUE TO EXPERIENCE DIFFICULTY IN FINDING LEGAL BASIS FOR CREDITING PAYMENTS AND, UNFORTUNATELY, THE PUBLIC WILL HAVE BASIS FOR CREDITING ACCUSATIONS THAT IMPROPER INFLUENCES ARE SUCCESSFULLY EXERTED.

ANSWERING THIS QUESTION SPECIFICALLY, YOU ARE ADVISED THAT THE INCLUSION OR EXCLUSION OF THE REQUIREMENT IN REQUEST FOR BIDS IS FOR ADMINISTRATIVE DETERMINATION BASED UPON THE PUBLIC NEED IN THE PARTICULAR CASE, AND WHEN INCLUDED CONSTITUTES A MATERIAL REQUIREMENT AND WILL BE GIVEN SUCH WEIGHT AND EFFECT BY THIS OFFICE.

THE TREW MOTOR CO. FAILED TO FURNISH THE AFFIDAVIT IN THIS CASE AS TO CONTINGENT FEES BUT THE CLAIM IS NOT FOR ACCEPTANCE FOR THE REASON THAT THE BID SUBMITTED BY THAT COMPANY IS NOT THE LOW BID FOR THE DELIVERY OF THE MOTOR VEHICLES.

YOU HAVE TRANSMITTED, PURSUANT TO THE REQUEST OF THIS OFFICE, THE ORIGINAL BIDS SUBMITTED IN THIS CASE, AND AN EXAMINATION THEREOF SHOWS THAT THE BID OF THE CHEVROLET MOTOR CO. WAS IN THE SUM OF $1,015 EACH AND NOT $1,115 EACH, AND A CAREFUL EXAMINATION FAILS TO DISCLOSE ANY EVIDENCE OF ALTERATION, ERASURE, OR OTHER CHANGE IN THE BID OF SAID COMPANY. THE OFFICER OPENING THE BIDS HAS STATED IN AFFIDAVIT OF JUNE 26, 1934, THAT HE HAD NO RECOLLECTION OF ANY SUCH ERROR IN READING THE AMOUNT OF THE BIDS BUT THE BID ACTUALLY SUBMITTED BY THE BIDDER--- AND NOT THE ANNOUNCEMENT THEREOF BY THE OFFICER OPENING THE BIDS OR TABULATION THEREOF IN THE ABSTRACT OF BIDS OPENED--- IS THE CONTROLLING CONSIDERATION, AND EVEN THOUGH AN ERROR MAY HAVE BEEN MADE IN ANNOUNCING THE FIGURES SUBMITTED, THE TERMS OF THE BID AND NOT THE ANNOUNCEMENT ARE CONTROLLING.

POSSIBLY THE COMPLAINT AS TO THIS FEATURE OF THE MATTER WOULD NOT HAVE ARISEN HAD IT NOT BEEN FOR THE POSTED INSTRUCTIONS TO THE EFFECT THAT BIDDERS WOULD NOT BE PERMITTED TO EXAMINE THE BIDS AFTER THEY HAD BEEN OPENED. THE LAW DOES NOT CONTEMPLATE SECRECY IN THE AWARDING OF CONTRACTS FOR THE PURCHASE OF MOTOR VEHICLES. ON THE CONTRARY, THE LAW REQUIRES AN ADVERTISEMENT FOR BIDS IN SUCH TERMS AS TO PERMIT OF FULL AND FREE COMPETITION OF ALL QUALIFIED BIDDERS. ALSO, IT PROVIDES IN SECTION 3743, REVISED STATUTES, THAT ALL CONTRACTS MADE BY VIRTUE OF ANY LAW AND REQUIRING THE ADVANCE OF PUBLIC MONEY OR IN ANY MANNER CONNECTED WITH THE SETTLEMENT OF PUBLIC ACCOUNTS SHALL BE PROMPTLY DEPOSITED IN THIS OFFICE, AND IN SECTION 3744 AS AMENDED, THAT ALL BIDS RECEIVED BY THE WAR DEPARTMENT FOR THE DELIVERY OF SUPPLIES TO THE GOVERNMENT SHALL BE PROMPTLY DEPOSITED IN THIS OFFICE AVAILABLE FOR THE EXAMINATION OF ANY INTERESTED PERSON. THAT IS TO SAY, THE ADVERTISING AND LETTING OF CONTRACTS FOR THE PURCHASE OF MOTOR VEHICLES AND OTHER SUPPLIES BY THE WAR DEPARTMENT ARE REQUIRED BY LAW TO BE SO PUBLIC AND OPEN THAT THERE SHOULD BE NO SECRECY WITH RESPECT THERETO EXCEPT IN A LIMITED CLASS OF CASES WHERE, FOR REASONS OF NATIONAL DEFENSE, THE PROTECTION OF THE PUBLIC INTEREST SO REQUIRES. IT IS UNDERSTOOD THAT INSTRUCTIONS HAVE BEEN ISSUED TO DISCONTINUE THE PROCEDURE APPARENTLY FOLLOWED AT CAMP HOLABIRD IN REFUSING TO PERMIT BIDDERS TO EXAMINE THE BIDS OF THEIR COMPETITORS AFTER THEY HAVE BEEN OPENED BY THE GOVERNMENT, TO THE END THAT THERE MAY BE NO JUST CAUSE FOR COMPLAINT.