A-61950, NOVEMBER 19, 1935, 15 COMP. GEN. 425

A-61950: Nov 19, 1935

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AS FOLLOWS: REFERENCE IS MADE TO YOUR DECISION OF AUGUST 2. BIDS WERE OPENED ON SEPTEMBER 5. IT WAS FOUND THAT THE LIGHTNING DELIVERY COMPANY. WAS THE LOWEST BIDDER. DID NOT HAVE A STATE PERMIT TO DO THE HAULING WORK AND APPLIED TO THE ARIZONA CORPORATION COMMISSION FOR PERMIT TO OPERATE TO THE EXTENT NECESSARY TO CARRY OUT THE TERMS OF THE BID. THE ARIZONA CORPORATION COMMISSION REJECTED THE APPLICATION ON THE GROUND THAT THE SUPREME COURT OF ARIZONA HAD HELD TRUCKING TO BE A REGULATED MONOPOLY AND THAT AS LONG AS A LEGALLY CERTIFICATED OPERATOR IS ABLE AND WILLING TO HANDLE ALL THE BUSINESS OFFERED HIM AT A REASONABLE RATE OF COMPENSATION. THIS COMMISSION MAY NOT GRANT ADDITIONAL CERTIFICATES OF CONVENIENCE AND NECESSITY THAT WILL MATERIALLY AFFECT HIS OPERATIONS.

A-61950, NOVEMBER 19, 1935, 15 COMP. GEN. 425

CONTRACTS - TRANSPORTATION OF FEDERAL SUPPLIES - STATE TRUCK-LINE LICENSES A STATE MAY NOT BY THE IMPOSITION OF LICENSES ON TRUCK LINES INTERFERE WITH THE RIGHT OF THE UNITED STATES TO OPERATE OVER THE PUBLIC ROADS EITHER BY MEANS OF A GOVERNMENT TRUCK OR A CONTRACTOR ENGAGED BY THE GOVERNMENT FOR THE EXCLUSIVE PURPOSE OF TRANSPORTING FEDERAL SUPPLIES, AND A CONTRACTOR MAY NOT BE EXCUSED FROM PERFORMANCE ON THE GROUNDS THAT THE STATE COMMISSION HAS REFUSED TO GRANT HIM A LICENSE. INVITATIONS FOR BIDS INVOLVING THE USE OF THE PUBLIC ROADS FOR THE EXCLUSIVE PURPOSE OF TRANSPORTING FEDERAL SUPPLIES IN A STATE IMPOSING A LICENSE ON TRUCK LINES, MAY NOT BE RESTRICTED TO FIRMS OR INDIVIDUALS HAVING SUCH STATE LICENSES.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF AGRICULTURE, NOVEMBER 19, 1935:

THERE HAS BEEN RECEIVED YOUR LETTER OF NOVEMBER 9, 1935, IN PERTINENT PART, AS FOLLOWS:

REFERENCE IS MADE TO YOUR DECISION OF AUGUST 2, 1935 (A-61950), RELATIVE TO SOLICITATION OF COMPETITION FOR HAULING IN CONNECTION WITH OFFICIAL WORK ON THE TONTO NATIONAL FOREST, ARIZONA.

IN CONFORMITY WITH THIS DECISION THE FOREST SUPERVISOR OF THE TONTO NATIONAL FOREST ON AUGUST 26, 1935, ADVERTISED FOR BIDS FOR HAULING DURING THE PERIOD OCTOBER 1 TO JUNE 30, 1936, MAILING INVITATIONS TO EIGHT INTERESTED PARTIES AND POSTING NOTICES IN CONSPICUOUS PUBLIC PLACES. BIDS WERE OPENED ON SEPTEMBER 5, 1935, AND IT WAS FOUND THAT THE LIGHTNING DELIVERY COMPANY, OF PHOENIX, ARIZONA, WAS THE LOWEST BIDDER, THEIR BID BEING APPROXIMATELY $2,000.00 BELOW THE NEXT LOWEST BIDDER. UNDER DATE OF OCTOBER 2 THE GRADY HARRISON TRUCKING COMPANY, PAYSON, ARIZONA, BY TELEGRAPH, PROTEST AWARDING OF ANY CONTRACT FOR SUCH HAULING, CONTENDING THAT LICENSED TRUCK LINES SHOULD BE ACCORDED THE SAME TREATMENT AS RAILROADS, BOTH BEING SUBJECT TO REGULATION BY THE SAME STATE AGENCY.

THE BID INCLUDED THE FOLLOWING CLAUSE: "THE SUCCESSFUL BIDDER AGREES WITHOUT ADDITIONAL EXPENSE TO THE GOVERNMENT, TO OBTAIN ALL STATE OR LOCAL LICENSES AND PERMITS REQUIRED IN CONNECTION HEREWITH.' THE LIGHTNING DELIVERY COMPANY, OF PHOENIX, ARIZONA, DID NOT HAVE A STATE PERMIT TO DO THE HAULING WORK AND APPLIED TO THE ARIZONA CORPORATION COMMISSION FOR PERMIT TO OPERATE TO THE EXTENT NECESSARY TO CARRY OUT THE TERMS OF THE BID. THE ARIZONA CORPORATION COMMISSION REJECTED THE APPLICATION ON THE GROUND THAT THE SUPREME COURT OF ARIZONA HAD HELD TRUCKING TO BE A REGULATED MONOPOLY AND THAT AS LONG AS A LEGALLY CERTIFICATED OPERATOR IS ABLE AND WILLING TO HANDLE ALL THE BUSINESS OFFERED HIM AT A REASONABLE RATE OF COMPENSATION, THIS COMMISSION MAY NOT GRANT ADDITIONAL CERTIFICATES OF CONVENIENCE AND NECESSITY THAT WILL MATERIALLY AFFECT HIS OPERATIONS. THE COMMISSION'S DECISION ALSO HELD THAT THE LIGHTNING DELIVERY COMPANY WAS NOT QUALIFIED TO BID ON THIS HAULING. IN VIEW OF DENIAL OF ITS APPLICATION THE BIDDER IS UNWILLING TO CARRY OUT THE TERMS OF THE CONTRACT, ALTHOUGH IT IS UNDERSTOOD THAT BUT FOR THE DENIAL OF PERMIT THE COMPANY WOULD BE AGREEABLE TO PERFORMING IN ACCORDANCE WITH ITS OFFER.

YOUR DECISION IS DESIRED REGARDING PROPER PROCEDURE IN THIS CASE AND IN FUTURE SIMILAR CASES, AND SPECIFICALLY AS TO THE FOLLOWING:

1. MAY THE LIGHTNING DELIVERY COMPANY BE PERMITTED TO WITHDRAW, WITHOUT BEING HELD RESPONSIBLE FOR THE ADDITIONAL COST TO THE GOVERNMENT INCIDENT TO PROCURING THE SERVICE ELSEWHERE?

2. SINCE IT IS APPARENT THAT THE ARIZONA CORPORATION COMMISSION WOULD NOT GRANT PERMITS SOLELY FOR THE PURPOSE OF UNDERTAKING A GOVERNMENT CONTRACT, MAY FUTURE BIDDING BE RESTRICTED TO FIRMS OR INDIVIDUALS HAVING SUCH STATE LICENSES?

ASIDE FROM THE FACT THAT THE UNITED STATES HAS MADE LARGE CONTRIBUTIONS TO THE VARIOUS STATES, INCLUDING THE STATE OF ARIZONA, FOR THE CONSTRUCTION OF PUBLIC ROADS, UNDER THE RULE STATED IN JOHNSON V. STATE OF MARYLAND (254 U.S. 51), AND THE EARLIER DECISIONS REFERRED TO IN THE OPINION IN THAT CASE, THE STATES ARE WITHOUT AUTHORITY TO INTERFERE WITH THE PERFORMANCE OF FEDERAL FUNCTIONS. WHILE UNDER ITS POLICE POWER A STATE MAY PRESCRIBE REGULATIONS FOR THE GOOD ORDER, PEACE, AND PROTECTION OF A COMMUNITY, YET ITS ACTION IS ALWAYS RESTRICTED BY THE NECESSARY LIMITATION THAT SUCH ACTION DOES NOT ENCROACH UPON THE FREE EXERCISE OF POWERS VESTED BY THE CONSTITUTION IN THE FEDERAL GOVERNMENT. (SEE WESTERN UNION TELEGRAPH CO. V. PENDLETON, 122 U.S. 347.) THE UNITED STATES HAS A RIGHT IN THIS CASE TO TRANSPORT ITS SUPPLIES OVER THE PUBLIC ROADS IN ARIZONA, AND PARTICULARLY OVER THE ROADS WHICH THE FEDERAL GOVERNMENT ASSISTED IN CONSTRUCTING, EITHER BY MEANS OF A GOVERNMENT-OWNED TRUCK OR BY THE EMPLOYMENT OF SUCH TRUCKING CONCERN AS MAY BE SATISFACTORY TO THE UNITED STATES. THE STATE OF ARIZONA MAY NOT INTERFERE THEREWITH BY DENYING TO THE UNITED STATES THE RIGHT TO OPERATE OVER THE PUBLIC ROADS EITHER BY MEANS OF A GOVERNMENT TRUCK OR A CONTRACTOR ENGAGED BY THE GOVERNMENT FOR THE EXCLUSIVE PURPOSE OF TRANSPORTING FEDERAL SUPPLIES.

BOTH OF THE QUESTIONS STATED IN YOUR LETTER ARE ANSWERED IN THE NEGATIVE.