A-63153, A-63252, A-63295, JULY 1, 1935, 15 COMP. GEN. 2

A-63153,A-63252,A-63295: Jul 1, 1935

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CONTRACTS - CODE COMPLIANCE - CONTINGENT ON SUBSEQUENT LEGISLATION THERE IS NO AUTHORITY OF LAW FOR REJECTION OF OTHERWISE PROPER BIDS FOR FAILURE OR REFUSAL OF BIDDERS TO AGREE TO THE MODIFICATION OF THEIR CONTRACTS IN THE EVENT SUBSEQUENT LEGISLATION SHALL REQUIRE OBSERVANCE OF MINIMUM WAGES AND/OR MAXIMUM HOURS OF EMPLOYMENT AND/OR LIMITATION AS TO AGE OF EMPLOYEES IN THE PERFORMANCE OF GOVERNMENT CONTRACTS. AS FOLLOWS: THE VETERANS' ADMINISTRATION IS IN RECEIPT OF CIRCULAR LETTER NO. 100 FROM THE DIRECTOR OF PROCUREMENT. OR CONSTRUCTION PROJECTS OF ANY CHARACTER INCLUDE THE FOLLOWING CLAUSE: " "BIDS ARE REQUESTED ON THE BASIS THAT IF SUBSEQUENT LEGISLATION SHALL REQUIRE OBSERVANCE OF MINIMUM WAGES AND/OR MAXIMUM HOURS OF EMPLOYMENT AND/OR LIMITATION AS TO AGE OF EMPLOYEES.

A-63153, A-63252, A-63295, JULY 1, 1935, 15 COMP. GEN. 2

CONTRACTS - CODE COMPLIANCE - CONTINGENT ON SUBSEQUENT LEGISLATION THERE IS NO AUTHORITY OF LAW FOR REJECTION OF OTHERWISE PROPER BIDS FOR FAILURE OR REFUSAL OF BIDDERS TO AGREE TO THE MODIFICATION OF THEIR CONTRACTS IN THE EVENT SUBSEQUENT LEGISLATION SHALL REQUIRE OBSERVANCE OF MINIMUM WAGES AND/OR MAXIMUM HOURS OF EMPLOYMENT AND/OR LIMITATION AS TO AGE OF EMPLOYEES IN THE PERFORMANCE OF GOVERNMENT CONTRACTS. EMERGENCY OR OPEN MARKET PURCHASES MAY BE MADE WITHOUT REGARD TO SUCH CONDITIONS.

COMPTROLLER GENERAL MCCARL TO THE ADMINISTRATOR OF VETERANS' AFFAIRS, JULY 1, 1935:

THERE HAS BEEN RECEIVED YOUR LETTER OF JUNE 27, 1935, AS FOLLOWS:

THE VETERANS' ADMINISTRATION IS IN RECEIPT OF CIRCULAR LETTER NO. 100 FROM THE DIRECTOR OF PROCUREMENT, PROCUREMENT DIVISION, TREASURY DEPARTMENT, READING IN PART AS FOLLOWS:

"UNTIL SUCH TIME AS THE PROPOSED LEGISLATION MAY BE ACTED UPON BY CONGRESS, THE DIRECTOR OF PROCUREMENT RECOMMENDS THAT IN LIEU OF THE CODE COMPLIANCE REQUIREMENTS STIPULATED IN PARAGRAPHS 1 TO 4, INCLUSIVE, OF EXECUTIVE ORDER 6646--- TEMPORARILY SUSPENDED BY ADMINISTRATIVE ORDER G.C. NO. 89, OF MAY 29, 1935--- ALL INVITATIONS TO BID FOR SUPPLIES, MATERIALS, OR CONSTRUCTION PROJECTS OF ANY CHARACTER INCLUDE THE FOLLOWING CLAUSE:

" "BIDS ARE REQUESTED ON THE BASIS THAT IF SUBSEQUENT LEGISLATION SHALL REQUIRE OBSERVANCE OF MINIMUM WAGES AND/OR MAXIMUM HOURS OF EMPLOYMENT AND/OR LIMITATION AS TO AGE OF EMPLOYEES, IN THE PERFORMANCE OF GOVERNMENT CONTRACTS ANY CONTRACT ENTERED INTO SHALL BE SUBJECT TO MODIFICATION TO ACCORD WITH SUCH STATUTORY REQUIREMENTS TO THE EXTENT AUTHORIZED OR REQUIRED BY LAW.'" AND CONTRACTS BASED THEREON TO BE ENTERED INTO ACCORDINGLY. (SIC)

"IT IS FURTHER SUGGESTED THAT AWARDS MAY BE MADE ON PENDING PROPOSALS IF THE BIDDER WILL AGREE TO THE INCLUSION IN THE CONTRACT OF THE STIPULATION ABOVE-QUOTED IN LIEU OF THE CODE COMPLIANCE REQUIREMENTS; AND, IF THE BIDDER DOES NOT AGREE, NEW PROPOSALS SHOULD BE ISSUED WHICH INCLUDE THE ABOVE STIPULATION.'

IN CONSIDERING THE RECOMMENDATIONS AND SUGGESTIONS OF THE DIRECTOR OF PROCUREMENT, THE FOLLOWING QUESTIONS ARISE AND IT WILL BE APPRECIATED IF YOU WILL ANSWER THEM IN ORDER THAT BIDS MAY BE PROPERLY ACTED UPON:

1. IN THE EVENT THE LOWEST BIDDER DELETES FROM HIS BID THE ABOVE QUOTED PROVISION OR OTHERWISE INDICATES WHEN SUBMITTING HIS BID THAT HE DOES NOT SUBSCRIBE TO THE SAID PROVISION, MAY THE BID BE REJECTED AS NOT BEING RESPONSIVE TO THE INVITATION, AND IF NOT WHAT DISPOSITION SHALL BE MADE OF THE BID?

2. IN THOSE INSTANCES WHERE AWARDS HAVE NOT BEEN MADE ON PENDING PROPOSALS WHICH DO NOT INCLUDE THE CODE COMPLIANCE REQUIREMENTS AND THE LOWEST ACCEPTABLE BIDDER REFUSES TO SUBSCRIBE TO THE CONDITION RECOMMENDED BY THE DIRECTOR OF PROCUREMENT, SHOULD ALL BIDS BE REJECTED AND NEW BIDS SOLICITED WHICH INCLUDE THE ABOVE QUOTED PROVISION, AND IF NOT, WHAT ACTION MAY BE TAKEN ON SUCH PROPOSALS?

3. IN THOSE INSTANCES WHERE AWARDS ARE PENDING AND THE BIDS SUBMITTED INCLUDE THE CODE COMPLIANCE REQUIREMENTS, WHAT ACTION SHOULD BE TAKEN IN THE EVENT THE LOWEST ACCEPTABLE BIDDER REFUSES TO SUBSCRIBE TO THE CONDITION RECOMMENDED BY THE DIRECTOR OF PROCUREMENT IN LIEU OF THE CODE COMPLIANCE REQUIREMENTS?

4. WHEN MAKING EMERGENCY OR OPEN MARKET PURCHASES AND IT IS NOT POSSIBLE OR PRACTICABLE TO GET THE VENDOR TO SUBSCRIBE TO THE CONDITION RECOMMENDED BY THE DIRECTOR OF PROCUREMENT, MAY SUCH PURCHASES BE MADE WITHOUT REGARD TO THE CONDITION INASMUCH AS TRANSACTIONS OF THIS CHARACTER DO NOT COVER AN EXTENDED PERIOD OF TIME BUT ARE NEGOTIATED AND COMPLETED IMMEDIATELY?

AS STATED IN DECISION OF JUNE 20, 1935, A-62730, 14 COMP. GEN. 912, THE DECISION DATED MAY 27, 1935, OF THE SUPREME COURT OF THE UNITED STATES IN THE SCHECHTER CASE DECLARED UNCONSTITUTIONAL SO MUCH OF THE ACT OF JUNE 16, 1933, 48 STAT. 195 ET SEQ., AS AUTHORIZED CODES OF FAIR COMPETITION, WITH THE RESULT THAT EVEN THOUGH BIDS MAY HAVE BEEN RECEIVED CONTAINING CERTIFICATES OF COMPLIANCE WITH APPLICABLE APPROVED CODES OF FAIR COMPETITION THERE ARE NOW NO SUCH CODES WITH WHICH THE CONTRACTOR COULD COMPLY, AND IT WOULD BE AN UNAUTHORIZED USE OF APPROPRIATIONS AND AN UNJUSTIFIED DRAIN UPON PUBLIC TREASURY TO AWARD CONTRACTS SUBMITTED ON THE BASIS OF COMPLIANCE WITH A CODE WHEN THE CONTRACTOR WOULD NOT BE REQUIRED TO SO COMPLY, BUT, NEVERTHELESS, WOULD RECEIVE SUCH ADDITIONAL COMPENSATION AS MIGHT ON THE BASIS OF CODE COMPLIANCE IN PERFORMING HAVE BEEN INCLUDED IN THE BID.

AFTER MAY 27, 1935, THE DIRECTOR OF PROCUREMENT, TREASURY DEPARTMENT, FORMULATED THE PROVISION TO BE INCLUDED IN ADVERTISING FOR BIDS, AS STATED IN THE ABOVE-QUOTED LETTER OF JUNE 20, 1935, AND IT WAS STATED BY THIS OFFICE ON JUNE 24, 1935, A-63153, THAT:

THE PROVISION EMPLOYED BY PROCUREMENT RESERVES THE RIGHT TO MODIFY THE CONTRACT IN THE EVENT SUBSEQUENT LEGISLATION SHOULD REQUIRE OBSERVANCE OF MINIMUM WAGES, MAXIMUM HOURS, ETC., AND, TO SUCH EXTENT AS THERE MAY BE INVOLVED IN ADJUSTMENTS, ADDITIONAL DRAINS ON APPROPRIATIONS, THERE SEEMS ESSENTIAL A STATUTORY REQUIREMENT AS BASIS THEREFOR ELSE ADJUSTMENTS MIGHT CREATE DEFICIENCIES IN CONTRAVENTION OF LAW AND THUS WOULD BE UNAUTHORIZED NOTWITHSTANDING ANY ADMINISTRATIVE RESERVATION IN CONTRACTING. CONTRACTS OBLIGATING APPROPRIATIONS MUST BE DEFINITE AND CERTAIN.

IN VIEW OF THE FACT THERE WAS CONTEMPLATED SEEKING LEGISLATION WITH RESPECT TO FIXING MAXIMUM HOURS AND MINIMUM RATES OF WAGES FOR WORKERS ON GOVERNMENT PROJECTS AND PROHIBITING THE EMPLOYMENT OF CHILDREN THEREON AND IT WAS ADMINISTRATIVELY DESIRED TO RESERVE, IN ENTERING INTO CONTRACTS PRIOR TO CONSIDERATION OF SUCH PROPOSAL BY THE CONGRESS, THE RIGHT TO MAKE MODIFICATION THEREIN TO BRING THEM INTO CONFORMITY WITH SUCH LEGISLATION, IF ENACTED, THERE SEEMED TO THIS OFFICE NOTHING TO PROHIBIT REQUESTING BIDS AND CONTRACTING IN SUCH MANNER THAT IF THE CONGRESS SHOULD BY LEGISLATION PROVIDE FOR FIXING MAXIMUM HOURS AND/OR MINIMUM RATES OF WAGES AND/OR LIMITING THE AGE OF EMPLOYEES ON GOVERNMENT PROJECTS, AND IN SUCH CONNECTION SHOULD SPECIFICALLY REQUIRE OR AUTHORIZE MODIFICATION OF EXISTING CONTRACTS TO CONFORM THEREWITH, WHERE THE RIGHT HAD BEEN SO RESERVED IN CONTRACTING, SUCH CONTRACTS COULD BE MODIFIED ACCORDINGLY, AND THE DIRECTOR OF PROCUREMENT WAS INFORMALLY SO ADVISED.

IT IS BELIEVED THE RESERVATION PROVIDED FOR IN CIRCULAR LETTER NO. 100, ISSUED BY THE DIRECTOR OF PROCUREMENT AND APPROVED BY THE SECRETARY OF THE TREASURY, WILL PERMIT MODIFICATION OF CONTRACTS WHEREIN EMPLOYED, WITH RESPECT TO THE MATTERS RESERVED, AND TO THE EXTENT AUTHORIZED OR REQUIRED BY SUBSEQUENT LEGISLATION, AND GOES AS FAR IN THE MATTER AS IS CONSISTENT WITH THE LAWS RELATING TO THE OBLIGATION OF APPROPRIATED MONEYS.

THE RESERVATION CONTEMPLATES--- IN THE EVENT SUBSEQUENT LEGISLATION SHALL REQUIRE OBSERVANCE OF MINIMUM WAGES AND/OR MAXIMUM HOURS OF EMPLOYMENT AND/OR LIMITATION AS TO AGE OF EMPLOYEES, IN THE PERFORMANCE OF GOVERNMENT CONTRACTS, AND SHALL AUTHORIZE MODIFICATION OF EXISTING CONTRACTS WHEREIN THE RIGHT TO SO MODIFY HAS BEEN THUS RESERVED--- MODIFICATION OF SUCH EXISTING CONTRACTS SO AS TO BRING THEM INTO CONFORMITY WITH THE TERMS OF SUCH LEGISLATION WITH RESPECT TO THE ELEMENTS RESERVED, WITH RIGHT IN CONTRACTOR TO BE REIMBURSED THE ACTUAL ADDITIONAL COSTS MADE NECESSARY THEREBY.

IN VIEW OF THE REQUIREMENTS OF SECTION 3709, REVISED STATUTES, THERE APPEARS NO AUTHORITY OF LAW FOR REQUIRING BIDDERS AND PROSPECTIVE CONTRACTORS OF THE UNITED STATES TO AGREE TO SUCH PROVISION AS A CONDITION PRECEDENT TO CONTRACTING WITH THE UNITED STATES. SEE DECISION OF JANUARY 2, 1934, A-50815, 13 COMP. GEN. 181, TO YOU AND JANUARY 10, 1931, A-34106, 10 COMP. GEN. 294, TO THE SECRETARY OF THE TREASURY. THE SAID PROVISION WHEN INCLUDED IN THE ADVERTISED SPECIFICATIONS MAY PROPERLY BE VIEWED UNDER SECTION 3709, REVISED STATUTES, ONLY AS A REQUEST TO BIDDERS ON THE PART OF THE ADVERTISING AND CONTRACTING AGENCIES OF THE UNITED STATES THAT BIDS BE SUBMITTED UPON THE BASIS THAT IN EVENT THERE SHOULD BE ENACTED LEGISLATION OF THE CHARACTER MENTIONED PRIOR TO THE COMPLETION OF THE CONTRACT TO BE AWARDED THE CONTRACTOR WILL AGREE TO MODIFICATION OF THE CONTRACT TO CONFORM WITH THE TERMS OF THE REQUIREMENTS OF SUCH LAW.

SPECIFICALLY, YOUR QUESTIONS NOS. 1 AND 2 ARE ANSWERED IN THE NEGATIVE; SUCH BIDS NOT BEING FOR REJECTION BECAUSE THE BIDDER DECLINED TO AGREE TO FUTURE MODIFICATION OF CONTRACTS ENTERED INTO BECAUSE OF SUBSEQUENT CHANGES IN THE LAW. AS TO YOUR QUESTION NO. 3--- WHERE BIDS WERE SUBMITTED ON THE BASIS OF CERTIFICATES OF COMPLIANCE WITH CODES AND AS THERE ARE NOW NO CODES WITH WHICH TO COMPLY--- SUCH BIDS SHOULD BE REJECTED WITH READVERTISING. SEE ABOVE REFERRED TO DECISION DATED JUNE 20, 1935, A-62730. YOUR QUESTION NO. 4 IS ANSWERED IN THE AFFIRMATIVE.