A-56185, SEPTEMBER 4, 1934, 14 COMP. GEN. 187

A-56185: Sep 4, 1934

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

CIVIL WORKS ADMINISTRATION - SUPPLIES AND MATERIALS FURNISHED BY MUNICIPALITIES WHERE SUPPLIES AND MATERIALS FOR THE PERFORMANCE OF FEDERAL CIVIL WORKS WERE FURNISHED BY THE MUNICIPALITY AND IN WHICH THE WORK WAS PERFORMED CONTRARY TO RULES AND REGULATIONS OF THE CIVIL WORKS ADMINISTRATION PROHIBITING PURCHASES FROM MUNICIPALITIES AND IN DISREGARD OF THE PROVISIONS OF SECTION 3709. THERE IS NO AUTHORITY FOR THE PAYMENT FROM FEDERAL FUNDS FOR SUCH SUPPLIES AND MATERIALS WHEN CLAIM THEREFOR IS BASED UPON AN ESTIMATE OF THE QUANTITY ALLEGED TO HAVE BEEN FURNISHED. ALLEGED TO HAVE BEEN FURNISHED ON SEVERAL CIVIL WORKS PROJECTS IN CHATTANOOGA DURING DECEMBER 1933 AND JANUARY AND FEBRUARY 1934.

A-56185, SEPTEMBER 4, 1934, 14 COMP. GEN. 187

CIVIL WORKS ADMINISTRATION - SUPPLIES AND MATERIALS FURNISHED BY MUNICIPALITIES WHERE SUPPLIES AND MATERIALS FOR THE PERFORMANCE OF FEDERAL CIVIL WORKS WERE FURNISHED BY THE MUNICIPALITY AND IN WHICH THE WORK WAS PERFORMED CONTRARY TO RULES AND REGULATIONS OF THE CIVIL WORKS ADMINISTRATION PROHIBITING PURCHASES FROM MUNICIPALITIES AND IN DISREGARD OF THE PROVISIONS OF SECTION 3709, REVISED STATUTES, REQUIRING ADVERTISING FOR COMPETITIVE BIDS, THERE IS NO AUTHORITY FOR THE PAYMENT FROM FEDERAL FUNDS FOR SUCH SUPPLIES AND MATERIALS WHEN CLAIM THEREFOR IS BASED UPON AN ESTIMATE OF THE QUANTITY ALLEGED TO HAVE BEEN FURNISHED, AND IT APPEARS THAT THE MUNICIPALITY PROFITTED BY THE TRANSACTION.

DECISION BY COMPTROLLER GENERAL MCCARL, SEPTEMBER 4, 1934:

THERE HAS BEEN PRESENTED TO THIS OFFICE FOR CONSIDERATION AND SETTLEMENT THE CLAIM OF THE CITY OF CHATTANOOGA, TENN., IN THE AMOUNT OF $27,981.51 FOR ROADBUILDING MATERIALS, SUCH AS CHERT, STONE, SCREENINGS, CINDERS, ASPHALT OIL, ETC., ALLEGED TO HAVE BEEN FURNISHED ON SEVERAL CIVIL WORKS PROJECTS IN CHATTANOOGA DURING DECEMBER 1933 AND JANUARY AND FEBRUARY 1934.

THE RULES AND REGULATIONS OF THE CIVIL WORKS ADMINISTRATION PROHIBIT PURCHASES FROM MUNICIPALITIES AND SECTION 3709, REVISED STATUTES, REQUIRES ADVERTISING FOR COMPETITIVE BIDS WHEN AND WHERE POSSIBLE. THESE REQUIREMENTS APPEAR TO HAVE BEEN DISREGARDED IN THIS INSTANCE. THE PURCHASING OFFICER HAS CERTIFIED, IN EFFECT, THAT THE MATERIALS WERE OBTAINED FROM THE CITY OF CHATTANOOGA TO GET THE MEN TO WORK AS QUICKLY AS POSSIBLE; THAT THE SOURCE OF SUPPLY WAS FOUND TO BE THE CHEAPEST; AND THAT HE HAD NO KNOWLEDGE OF THE REGULATIONS OF THE CIVIL WORKS ADMINISTRATION PROHIBITING PURCHASES FROM MUNICIPALITIES.

IN SUPPORT OF ITS CLAIM, THE CITY, UNDER DATE OF APRIL 9, 1934, SUBMITTED AN AFFIDAVIT SIGNED BY THE MAYOR OF THE CITY AND BY THE COMMISSIONER, DEPARTMENT OF STREETS AND SEWERS, IN WHICH, AFTER CITING THE EMERGENCY OF UNDERTAKING THE WORK AUTHORIZED BY THE CIVIL WORKS ADMINISTRATION, IT IS STATED, IN PART:

* * * CERTAIN MATERIALS SUCH AS CHERT, SCREENINGS, ROAD OIL, KEROSENE, AND GASOLINE NECESSARY TO THE CONDUCT OF CERTAIN PROJECTS COULD BE SECURED AT A MORE ADVANTAGEOUS PRICE FROM THE CITY ITSELF THAN IN THE OUTSIDE MARKET. SECONDLY, THE CITY WAS THE ONLY SOURCE OF SUPPLY IN A POSITION TO FURNISH THE LARGE QUANTITY OF THESE MATERIALS NEEDED IN PLACE ON THE JOB AS IT WAS NEEDED. WHILE COMPETITIVE BIDS WERE NOT SECURED, THE PURCHASING AGENT OF THIS DEPARTMENT WAS FAMILIAR WITH COMPETITIVE PRICES AND KNEW THEM TO BE HIGHER THAN THOSE WHICH THE CITY PROPOSED TO CHARGE THE CIVIL WORKS ADMINISTRATION.

THIRD. THE ITEMS SUPPLIED THE CIVIL WORKS ADMINISTRATION BY THE CITY OF CHATTANOOGA ARE AS FOLLOWS:

(A) CHERT AT A PRICE OF 75 CENTS PER YARD, DELIVERED, BLADED, AND ROLLED ON THE JOB. THE CITY CONTROLS ALL CHERT PITS WITHIN THE CITY LIMITS OF CHATTANOOGA. CHERT, OF COURSE, IS AN INDISPENSABLE ITEM IN STREET CONSTRUCTION, AND IF THE PROGRAM WAS TO BE GOTTEN UNDER WAY WITH SPEED THIS MATERIAL MUST HAVE BEEN BOUGHT FROM THE CITY, REGARDLESS. HOWEVER, THIS PRICE IS PRACTICALLY 50 CENTS PER YARD CHEAPER THAN IT COULD HAVE BEEN PURCHASED ELSEWHERE.

(B) STONE WAS SUPPLIED FROM A CITY-LEASED QUARRY. COMPETITIVE PRICE ON THIS MATERIAL WAS ABOUT 50 CENTS PER YARD MORE. THE CITY, OF COURSE, DID NOT USE CIVIL WORKS ADMINISTRATION WORKERS IN THEIR QUARRY.

(C) SCREENINGS WERE A PRODUCT OF OUR QUARRY. THEY WERE SUPPLIED ABOUT 25 CENTS PER YARD LESS THAN COMPETITION.

(D) ROAD OIL WAS PURCHASED IN TANK-CAR LOTS, DELIVERED BY THE CITY DISTRIBUTOR AT A PRICE OF 7 CENTS PER GALLON. A COMPETITIVE PRICE IN LARGE QUANTITIES IS 7.62 IN THE CAR.

(E) KEROSENE WAS SUPPLIED AT PRICE OF 10 CENTS PER GALLON, DELIVERED TO THE JOB, WHILE THE COMPETITIVE MARKET IS 12 CENTS PER GALLON. THE CITY WAS ABLE TO EFFECT THIS SAVING BY REASON OF ITS MUNICIPAL SERVICE STATION, WHICH, OF COURSE, SECURES THE BEST PRICE ON THIS MATERIAL.

(F) GASOLINE WAS SUPPLIED AT A PRICE OF 11 1/2 CENTS PER GALLON. THIS PRICE WOULD HAVE BEEN FROM COMPETITIVE SOURCE 13 1/2 CENTS. THE REASON FOR THIS SAVING IS, OF COURSE, THE SAME AS FOR THE SAVING ON KEROSENE.

FOURTH. IT WAS NOT POSSIBLE, IF THE CIVIL WORKS PROGRAM WAS TO BE PUSHED WITH THE SPEED REQUESTED BY MESSRS. HOPKINS, JOHNSON, AND THE PRESIDENT OF THE UNITED STATES, TO GO INTO THE COMPETITIVE MARKET AND SECURE PRICES ON EACH INDIVIDUAL ITEM FOR EACH INDIVIDUAL PROJECT. WE FEEL THAT PRICES CHARGED ARE MOST FAVORABLE AND ARE IN THEMSELVES AMPLE REASON FOR OUR ACTION IN THIS MATTER. JUST AS IMPORTANT, HOWEVER, AS THE MATTER OF PRICE WAS THE MATTER OF GETTING THE LARGEST NUMBER OF MEN AT WORK IN THE SHORTEST POSSIBLE TIME. THE DEPARTMENT OF STREETS AND SEWERS WORKED ABOUT 2,400 MEN OUT OF THE QUOTA OF 5,575 ASSIGNED TO HAMILTON COUNTY.

IN A REPORT OF THE CHIEF LIAISON OFFICER OF THE CIVIL WORKS ADMINISTRATION, UNDER DATE OF APRIL 12, 1934, IT IS STATED, IN PART, AS FOLLOWS:

AN INVESTIGATION WAS MADE AS TO PRICES OF THE RESPECTIVE MATERIALS AS OUTLINED IN EXHIBIT A AND FIND, ON THE WHOLE, THEY WERE APPROXIMATELY THOSE CHARGED BY COMMERCIAL FIRMS AND, IN SOME INSTANCES, SLIGHTLY LOWER. HOWEVER, I FEEL THAT THE FOLLOWING REMARKS ARE PERTINENT TO THE VARIOUS ITEMS AS OUTLINED IN EXHIBIT A.

ITEM 1. CHERT.--- FROM THE INFORMATION OBTAINED IT APPEARS THAT CHERT IS AVAILABLE TO ANYONE WHO WILL HAUL IT OFF WITHOUT CHARGE, AS IT IMPROVES THE VALUE OF THE PROPERTY AND, IN SOME INSTANCES, MAKES WHOLLY WORTHLESS PROPERTY A VALUABLE ASSET. IT WAS FURTHER RUMORED THAT IN INSTANCES CHERT WAS MOVED FROM ONE LOCATION ON THE ROAD FROM A CUT TO ANOTHER LOCATION NOT VERY FAR DISTANT TO A FIELD. THIS WAS NOT CONFIRMED. I WAS FURTHER ADVISED THAT A MR. LON WORSHAM ON THE BRAINARD ROAD FURNISHED A LARGE QUANTITY OF THIS MATERIAL FREE OF ALL CHARGE.

ITEM 2. STONE.--- AS STATED, THIS PRICE APPEARS TO BE FAIR IN COMPARISON WITH COMMERCIAL PRICES, BUT ATTENTION IS INVITED TO THE SITUATION AS EXISTS IN CHATTANOOGA, WHERE THE GRAVEL COMPANIES REQUIRE CONTRACTORS TO PURCHASE SAND AND GRAVEL TOGETHER, DUE TO THE FACT THAT QUANTITY SALES IN ONE ITEM WOULD LEAVE A SURPLUS IN THE OTHER, CAUSING A MATERIAL LOSS. WAS RELIABLY ADVISED THAT, DUE TO THE CONDITION AND THE USE OF SAND WITH THE CRUSHED STONE, THERE WAS A SHORTAGE OF SAND IN THE CHATTANOOGA VICINITY NECESSITATING THE PURCHASE OF SAND FROM ESTILL SPRINGS AT A MUCH HIGHER PRICE ON OTHER C.W.A. PROJECTS, THEREBY CAUSING A LOSS TO THE GOVERNMENT IN INCREASED PRICES,AS THE PRICE OF GRAVEL AND THE PRICE CHARGED FOR CRUSHED STONE WERE APPROXIMATELY THE SAME. ATTENTION IS FURTHER INVITED TO EXHIBIT E REGARDING STATEMENT OF COMMISSIONER TAYLOR THAT THE COST OF THE STONE RAN FROM 65 TO 70 CENTS A CUBIC YARD. I AM ADVISED THAT THE PRICE IN CHATTANOOGA AT THE TIME OF DELIVERY WAS APPROXIMATELY 60 CENTS, AND ASSUME THAT THIS STATEMENT OF 65 TO 70 CENTS IS CORRECT. AS TO THE DIFFERENCE BETWEEN THIS PRICE AS STATED IN THE INTERVIEW AND THE PRICE AS QUOTED IN EXHIBIT A, I CANNOT SAY.

ITEM 3. SCREENINGS.--- THE PRICE IN THIS INSTANCE SEEMS TO BE LOWER CONSIDERABLY THAN THE COMMERCIAL PRICES, BUT ATTENTION IS INVITED TO COPY OF THE CHATTANOOGA NEWS UNDER DATE OF AUGUST 11, 1933, MARKED IN RED,"EXHIBIT E," WHICH STATES: "THE 3 CENTS ROYALTY IS PAID FOR STONE MEASURED AFTER IT IS CRUSHED AND DOES NOT INCLUDE SCREENINGS, COMMISSIONER TAYLOR SAID. HE FURTHER SAID THAT THE CONTRACT PROVIDED THAT THE CITY GET 80 PERCENT OF THE SCREENINGS AND THE REMAINING 20 PERCENT WOULD GO TO PROPERTY OWNERS.' IN THIS IT APPEARS THAT IT IS VERY EASY FOR THE CITY TO MAKE A PRICE CHEAPER THAN COMMERCIAL FIRMS AND AT THE SAME TIME MAKE A MATERIAL PROFIT.

ITEMS--- 4, ROAD OIL; 5, KEROSENE; 6, GASOLINE.---THESE SEEM TO BE IN LINE AND THERE IS ONLY ONE CONSIDERATION AND THAT IS THE ONE ENUMERATED ABOVE, I.E., DELIVERIES.

GENERALLY: ATTENTION IS INVITED TO THE LAST PARAGRAPH IN EXHIBIT E WHICH, ALTHOUGH NOT A QUOTATION FROM COMMISSIONER TAYLOR, INDICATES A LOW COST OF PRODUCTION AT THE TIME OF THE ISSUE OF THE PAPER AS R.F.C. WORKERS WERE USED IN THE QUARRIES. AN INVESTIGATION WAS MADE TO ASCERTAIN IF C.W.A. WORKERS WERE USED IN THE QUARRIES, AND FIND THAT THERE WERE NONE. ATTENTION, HOWEVER, IS INVITED TO THE FACT THAT I WAS ADVISED THAT CONVICT LABOR WAS USED AND THAT, DUE TO THE FACT THAT MUNICIPALITIES DO NOT GO UNDER THE CODE, THEIR LABOR COST IS MUCH LOWER THAN THAT OF OTHER FIRMS WHO HAVE TO COMPLY WITH THE CODE. THIS APPEARS TO PUT THE CITY IN COMPETITION WITH THE TAXPAYER WITH AN UNFAIR ADVANTAGE OF LABOR COST.

ATTENTION IS FURTHER INVITED TO EXHIBIT D WITH REFERENCE TO A DEFICIT IN THE DEPARTMENT OF CITY GOVERNMENT FROM WHICH THIS INVOICE IS RENDERED, AND IT IS MY UNDERSTANDING A CITY ELECTION IS PENDING AT WHICH THE ENTIRE MATTER OF THE ROCK CRUSHER AND THE MANAGEMENT OF SAME WILL BE AN ISSUE, ESPECIALLY DUE TO THE POLITICALLY CLAIMED DEFICIT IN THAT DEPARTMENT.

MR. BAXTER BENDER, THE PURCHASING AGENT, WAS FURTHER INSTRUCTED TO PREPARE THE VOUCHERS AS OUTLINED IN EXHIBIT B AND C FOR PRESENTATION FOR PAYMENT BUT TO REQUIRE THE RESPECTIVE CITY OFFICIALS TO PRESENT THEIR STATEMENTS IN SYSTEMATIC FORM AS A FURTHER PROTECTION TO THE GOVERNMENT AND IN FAIRNESS TO THE VENDORS OF CHATTANOOGA WHO MIGHT HAVE BEEN GIVEN AN OPPORTUNITY TO BID ON THIS MATERIAL. AN ACCURATE ESTIMATE OF THE ACTUAL COST TO THE CITY OR WHAT IT SHOULD HAVE COST THE C.W.A. ON CONTRACT IS IMPOSSIBLE EXCEPT TO BE MADE BY AN ENGINEER.

A CONFIDENTIAL ESTIMATE WAS FURNISHED ME TO THE EFFECT THAT THE USE OF THE STONE COST THE ENTIRE C.W.A. PROGRAM FROM 25 TO 30 PERCENT IN INCREASED PRICE OF SAND DUE TO NOT USING THE GRAVEL. IT IS CERTAIN, WITH THE MEAGER INVESTIGATION, THAT HAD THE C.W.A. CONTRACTED FOR ITS OWN MATERIAL, USED ITS OWN RENTAL TRUCKS, AND OWN LABOR, A SAVING ON THE WHOLE WOULD HAVE BEEN ACCOMPLISHED IN ADDITION TO INCREASING THE PAY OF THE WORKERS AND PUTTING MORE MEN TO WORK AT BETTER PAY THAN THE CITY WAS ALLOWING, ESPECIALLY ITS CONVICT LABOR.

IT SHOULD BE APPARENT FROM THE FOREGOING THAT ASIDE FROM THE INHIBITION OF THE REGULATIONS AGAINST PROCUREMENTS FROM MUNICIPALITIES AND THE FAILURE TO COMPLY WITH THE LAW IN THE MATTER OF ADVERTISING, THERE ARE CERTAIN OTHER MATTERS FOR CONSIDERATION IN DETERMINING THE RIGHT OF THE CITY TO BE PAID THE AMOUNT CLAIMED TO BE DUE. FIRST, THERE IS THE FACT THAT SINCE NO RECORD CAN BE FURNISHED OF ACTUAL DELIVERIES OF THE SUPPLIES, THE CLAIM IS BASED UPON ESTIMATED OR APPROXIMATE QUANTITIES OF THE MATERIALS ALLEGED TO HAVE BEEN FURNISHED. IN ADDITION, IT IS SHOWN, AT LEAST AS TO SOME OF THE ITEMS, THAT THE PRICE CHARGED IS HIGHER THAN PRIVATE CONCERNS CHARGE FOR SUCH MATERIAL, AND THERE HAS BEEN NO SHOWING MADE THAT THE CITY DID NOT MAKE A SUBSTANTIAL PROFIT ON THE MATERIALS.

THERE IS FOR CONSIDERATION, ALSO, THE FACT THAT THE FEDERAL CIVIL WORKS PROGRAM UNDERTAKEN BY THE CIVIL WORKS ADMINISTRATION HAD FOR ITS MAIN PURPOSE THE RELIEF OF UNEMPLOYMENT AND OTHER KINDRED CONDITIONS EXISTING IN VARIOUS PARTS OF THE UNITED STATES, AND THAT THE MATERIALS HERE IN QUESTION WERE USED ON STREET AND SEWER IMPROVEMENT WORK IN THE CITY; THAT IS TO SAY, THE CITY RECEIVED THE ENTIRE BENEFIT OF THE MATERIALS USED.

A PROPER AND COOPERATIVE BASIS IN SUCH CASES OF RELIEF-GIVING WOULD SEEM TO HAVE REQUIRED THE LOCAL AUTHORITIES TO FURNISH THE NEEDED MATERIALS AVAILABLE TO THE MUNICIPALITY TO BE BENEFITED, FREE OF CHARGE OR, AT LEAST, ON A BASIS OF ACTUAL VALUE AND IN NO CASE GREATER THAN ACTUAL COST. CERTAINLY THERE WAS NOTHING IN THE PURPOSES OF THE FEDERAL CIVIL WORKS PROGRAM DESIGNED TO GIVE EMPLOYMENT TO THOSE IN NEED AND AS A RESULT OF WHICH MANY LOCALITIES, AS IN THIS INSTANCE, RECEIVED LASTING BENEFITS, CONTEMPLATING OTHER THAN COOPERATIVE ACTION WITH A VIEW TO GIVE THE WIDEST POSSIBLE RELIEF THROUGH SUCH EMPLOYMENT OF THE NEEDY; AND SUCH HIGH PURPOSE WOULD SEEM CLEARLY VIOLATED BY ANYTHING RESEMBLING PROFIT IN THE SUPPLYING OF MATERIALS BY THE MUNICIPALITY BENEFITING BY THE IMPROVEMENTS MADE THROUGH FEDERAL CONTRIBUTION. POSSIBLY IT WAS ON THIS ACCOUNT THERE WAS PROHIBITED BY REGULATIONS THE PURCHASING OF MATERIAL FROM MUNICIPALITIES.

UPON THE RECORD AS NOW SUBMITTED, ESPECIALLY IN VIEW OF THE CONJECTURAL BASIS UPON WHICH THE CHARGES ARE MADE BY THE CITY, PAYMENT OF THE CLAIM BY THE FEDERAL GOVERNMENT, OR EVEN THE RECOGNITION OF SUCH CLAIM AS A PROPER CHARGE IN ANY AMOUNT AGAINST FEDERAL PUBLIC FUNDS, IS NOT AUTHORIZED. UNDER THE CIRCUMSTANCES, THE CLAIM OF THE CITY OF CHATTANOOGA MUST BE, AND IS, DISALLOWED.