A-63153, A-63295, A-64195, AUGUST 7, 1935, 15 COMP. GEN. 104

A-63153,A-63295,A-64195: Aug 7, 1935

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ADVERTISING - BIDS - CODE COMPLIANCE IN ALL CASES WHERE BIDS WERE REQUESTED ON THE BASIS OF CODE COMPLIANCE THEY MUST BE REJECTED OR THE CONTRACTS DISAPPROVED UNLESS THERE HAS HERETOFORE BEEN TAKEN THEREON SUCH ACTION AS HAS IMPOSED A LEGAL OBLIGATION ON THE GOVERNMENT. OR UNLESS THERE BE SUCH URGENT NEED FOR THE THING TO BE CONTRACTED FOR THAT THE INTERESTS OF THE GOVERNMENT WILL NOT PERMIT OF THE DELAY INCIDENT TO READVERTISING. ALL BIDS FOR GOVERNMENT WORK OR SUPPLIES UPON WHICH AWARDS ARE PENDING SHOULD BE REJECTED WITH READVERTISING. IF CERTIFICATES OF CODE COMPLIANCE WERE REQUIRED TO BE SUBMITTED WITH SUCH BIDS. THERE ARE PENDING IN THIS DEPARTMENT. TWO CLASSES OF CONTRACTS IN CONNECTION WITH WHICH CERTIFICATES OF CODE COMPLIANCE WERE SUBMITTED WITH THE BIDS AND UPON WHICH AWARDS WERE MADE PRIOR TO YOUR DECISION OF JULY 1.

A-63153, A-63295, A-64195, AUGUST 7, 1935, 15 COMP. GEN. 104

ADVERTISING - BIDS - CODE COMPLIANCE IN ALL CASES WHERE BIDS WERE REQUESTED ON THE BASIS OF CODE COMPLIANCE THEY MUST BE REJECTED OR THE CONTRACTS DISAPPROVED UNLESS THERE HAS HERETOFORE BEEN TAKEN THEREON SUCH ACTION AS HAS IMPOSED A LEGAL OBLIGATION ON THE GOVERNMENT, OR UNLESS THERE BE SUCH URGENT NEED FOR THE THING TO BE CONTRACTED FOR THAT THE INTERESTS OF THE GOVERNMENT WILL NOT PERMIT OF THE DELAY INCIDENT TO READVERTISING.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF THE INTERIOR, AUGUST 7, 1935.

THERE HAS BEEN RECEIVED YOUR LETTER OF JULY 25, 1935, AS FOLLOWS:

THERE HAS COME TO MY ATTENTION YOUR LETTER OF JULY 1, 1935, TO THE ADMINISTRATOR OF VETERANS' AFFAIRS IN WHICH YOU ADVISE THAT IN VIEW OF THE SCHECHTER DECISION INVALIDATING CODES OF FAIR COMPETITION UNDER TITLE I OF THE NATIONAL INDUSTRIAL RECOVERY ACT, ALL BIDS FOR GOVERNMENT WORK OR SUPPLIES UPON WHICH AWARDS ARE PENDING SHOULD BE REJECTED WITH READVERTISING, IF CERTIFICATES OF CODE COMPLIANCE WERE REQUIRED TO BE SUBMITTED WITH SUCH BIDS.

THERE ARE PENDING IN THIS DEPARTMENT, FOR EITHER EXECUTION OR APPROVAL, UNDER SECTION 3744 REVISED STATUTES, TWO CLASSES OF CONTRACTS IN CONNECTION WITH WHICH CERTIFICATES OF CODE COMPLIANCE WERE SUBMITTED WITH THE BIDS AND UPON WHICH AWARDS WERE MADE PRIOR TO YOUR DECISION OF JULY 1, 1935. IN VIEW OF THE MANDATORY STATUTORY REQUIREMENTS OF SECTION 3744 REVISED STATUTES, DOES YOUR DECISION OF JULY 1, 1935, APPLY TO:

1. CASES WHERE BIDS WERE RECEIVED AND AWARDS MADE BY LETTER OF THE ASSISTANT SECRETARY OF THE DEPARTMENT "CONTINGENT UPON EXECUTION OF FORMAL CONTRACT AND BOND.' IN THESE CASES BONDS HAVE BEEN EXECUTED BY THE CONTRACTORS AND SATISFACTORY SURETIES, WHICH BONDS ARE NOW SUBMITTED, TOGETHER WITH THE FORMAL CONTRACTS EXECUTED BY THE CONTRACTORS, FOR EXECUTION BY THE GOVERNMENT.

2. CASES WHERE BIDS WERE RECEIVED AND ACCEPTED IN THE FIELD, THE FORMAL CONTRACTS HAVING BEEN EXECUTED BY THE CONTRACTOR AND THE FIELD OFFICER OF THE GOVERNMENT, SUBJECT TO THE APPROVAL OF THE SECRETARY OR ASSISTANT SECRETARY OF THE DEPARTMENT. THESE CONTRACTS, TOGETHER WITH THE REQUISITE BONDS, HAVE NOW BEEN PRESENTED FOR THE REQUIRED APPROVAL.

IN ALL OF THESE CASES THE SUCCESSFUL BIDDER HAS INCURRED EXPENSE FOR THE PREMIUM ON HIS BOND, IN SOME INSTANCES HAS MADE PREPARATIONS TO UNDERTAKE THE WORK, AND IN OTHERS, I UNDERSTAND, HAS ACTUALLY COMMENCED WORK ON THE BASIS OF NEGOTIATIONS TO DATE. IN SOME OF THE FORMAL CONTRACTS NOW SUBMITTED FOR EXECUTION OR APPROVAL THE PORTIONS REQUIRING CODE COMPLIANCE HAVE BEEN DELETED AND THE APPROPRIATE PROVISION INSERTED FOR COMPLIANCE WITH ANY FUTURE STATUTORY REQUIREMENTS RELATING TO LABOR.

I SHALL APPRECIATE YOUR EARLY ADVICE IN ORDER THAT THE PROPER ACTION MAY BE TAKEN UPON THESE CONTRACTS.

ALSO, THERE HAS BEEN RECEIVED YOUR LETTER OF JULY 29, 1935, AS FOLLOWS:

I HAVE A COPY OF YOUR DECISION OF JULY 1, 1935 (A-63153, A-63252, A 63295), ADDRESSED TO THE ADMINISTRATOR OF VETERANS' ADMINISTRATION, ANSWERING CERTAIN INQUIRIES MADE BY HIM WITH REGARD TO THE PROCEDURE TO BE FOLLOWED BY THE EXECUTIVE DEPARTMENTS AND OTHER ESTABLISHMENTS IN CONNECTION WITH CIRCULAR LETTER NO. 100 PROMULGATED BY THE DIRECTOR OF THE PROCUREMENT DIVISION, TREASURY DEPARTMENT.

WITH PARTICULAR REFERENCE TO THE ADMINISTRATOR'S QUESTION NO. 3, YOU SAY,"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," ALSO IN YOUR DECISION OF JULY 2, 1935, A-62646 ADDRESSED TO THE PRESIDENT, BOARD OF COMMISSIONERS, DISTRICT OF COLUMBIA, YOU SAY,"UNDER THESE CIRCUMSTANCES, YOU ARE ADVISED THAT ALL SPECIFICATIONS ADVERTISED PRIOR TO MAY 27, 1935, FOR BIDS TO BE OPENED SUBSEQUENT TO THE OPINION OF THE SUPREME COURT OF THE UNITED STATES IN THE SCHECHTER CASE AND WHICH WERE NOT SUPPLEMENTED BY ADDENDA NOTIFYING THE BIDDERS THAT THEY NEED NOT ACCOMPANY THEIR BIDS WITH SUCH A CERTIFICATE OF CODE COMPLIANCE, SHOULD BE REJECTED WITH READVERTISEMENT ON THE BASIS OF THE SPECIFICATIONS ELIMINATING THE REQUIREMENT FOR THE SUBMISSION OF SUCH CERTIFICATES.'

FOR THE INDIAN SERVICE OF THIS DEPARTMENT THERE ARE PURCHASED ANNUALLY UNDER CONSOLIDATED CONTRACTS APPROXIMATELY 5,000 ITEMS. THE PROCEDURE FOLLOWED IN MAKING SUCH CONTRACTS ARE SIMILAR IN MANY RESPECTS TO THE PLAN UNDER WHICH THE PROCUREMENT DIVISION OF THE TREASURY DEPARTMENT OPERATES WITH REGARD TO ITS DEFINITE QUANTITY CONTRACTS. THE NEEDS OF EACH SCHOOL, AGENCY, AND OTHER ACTIVITY ARE PLANNED IN THE FIELD AND ESTIMATED FOR, TO THE WASHINGTON OFFICE; THE ESTIMATES OF SEVERAL HUNDRED ACTIVITIES ARE TABULATED, TOTALED, ADVERTISED, AND CONTRACTED FOR. ORDERS ARE THEN PLACED, THE SUPPLIES, EQUIPMENT, ETC., DELIVERED AND IF IN ACCORDANCE WITH THE CONTRACT ARE ACCEPTED AND SHIPPED TO 150 (APPROXIMATELY) DIFFERENT FIELD POINTS. ALL OF THIS INVOLVES A VAST AMOUNT OF DETAIL AND CONSIDERABLE TIME, USUALLY RUNNING FROM NOVEMBER 1, WHEN THE ESTIMATES ARE PREPARED AND SUBMITTED, TO APRIL, MAY, JUNE, AND JULY FOR ADVERTISING AND AWARDING OF CONTRACTS.

ALL OF THE ADVERTISEMENTS FOR THIS TYPE OF PROCUREMENT FOR THE FISCAL YEAR 1936 CARRIED THE PROVISION THAT CERTIFICATES OF COMPLIANCE WITH THE EXISTING CODES MUST BE FILED AND MANY OF THE CLASSES WERE COMPLETELY CONTRACTED FOR PRIOR TO MAY 27, 1935, THE DATE UPON WHICH THE SUPREME COURT MADE ITS RULINGS IN THE SCHECHTER CASE. THE REMAINDER OF THE SCHEDULES FALL APPARENTLY INTO THAT CLASS OF ADVERTISING AND BIDDING WHICH YOU CONCLUDE MUST BE READVERTISED, AFTER THE ORIGINAL BIDS ARE REJECTED. MAY I POINT OUT TO YOU THE HANDICAP UNDER WHICH THE INDIAN SERVICE WILL FIND ITSELF IF THE DEPARTMENT IS COMPELLED TO REJECT THE BIDS ON THIS LATTER GROUP OF SCHEDULES AND READVERTISE FOR THE JOINT REQUIREMENTS OF THE INDIAN SERVICE SCHOOLS, AGENCIES, HOSPITALS, ETC.

IT HAS BEEN THE AIM OF THE DEPARTMENT TO HAVE ALL OF THESE ANNUAL, NONPERISHABLE SUPPLIES DELIVERED EACH YEAR TO THE SCHOOLS BY THE TIME THEY OPEN FOR THE NEW TERM, WHICH IS ABOUT SEPTEMBER 1. BECAUSE OF THE EXTENSIVE INTEREST IN THIS BIDDING, AS INDICATED BY THE SUBMISSION OF PROPOSALS FROM ALL PARTS OF THE COUNTRY A LONGER PERIOD OF TIME IS ALLOWED BIDDERS TO SUBMIT PROPOSALS AND NECESSARY SAMPLES THAN WOULD BE NECESSARY WERE THE INVITATIONS SENT TO A MORE RESTRICTED AREA ONLY. AS WITH THE AWARDS MADE BY THE PROCUREMENT DIVISION OF THE TREASURY DEPARTMENT, CONSIDERABLE TIME IS REQUIRED IN WHICH TO COMPLETE THE AWARDS. THEN BECAUSE OF THE REQUIREMENT THAT THE QUANTITY OF EACH ITEM REQUISITIONED FOR EACH FIELD ACTIVITY MUST BE PACKED SEPARATELY FOR SHIPMENT TO THAT UNIT, CONTRACTORS REQUIRE MORE TIME IN WHICH TO MAKE DELIVERY THAN WOULD BE NECESSARY IF BULK DELIVERY WERE CONTRACTED FOR. THE DEPARTMENT CAN AND WILL READVERTISE OTHER PURCHASES IN ACCORDANCE WITH YOUR DECISIONS REFERRED TO HEREIN, BUT IF THESE PARTICULAR CONSOLIDATED PURCHASES MUST BE READVERTISED THE DELIVERY WILL NOT BE MADE BY THE TIME SCHOOLS OPEN, LOCAL PURCHASES WILL HAVE TO BE MADE AT HIGHER PRICES PENDING THE LATER DELIVERY UNDER CONTRACT AND ON THE WHOLE THE GOVERNMENT WILL SUFFER FINANCIALLY AND OTHERWISE BY NOT AWARDING THE CONTRACTS, WITH NO ASSURANCE THAT THE ELIMINATION OF THE CODE COMPLIANCE PROVISION WILL OPERATE TO REDUCE PRICES.

IT IS URGENTLY REQUESTED AND RECOMMENDED THAT THE CONSOLIDATED PURCHASES FOR THE INDIAN SERVICE FOR THE FISCAL YEAR 1936, ADVERTISED FOR PRIOR TO THE DECISION OF THE SUPREME COURT IN THE SCHECHTER CASE BE EXCEPTED FROM THE REQUIREMENT THAT SUCH PROPOSED PURCHASES MUST BE READVERTISED, AND THAT THE PURCHASING OFFICER OF THE DEPARTMENT BE PERMITTED TO AWARD CONTRACTS THEREON AFTER NOTIFYING THE SUCCESSFUL BIDDER THAT THE PROVISIONS IN THE ADVERTISEMENT REQUIRING COMPLIANCE WITH EXISTING CODES AND THE FILING OF THE CERTIFICATES TO THAT EFFECT ARE NOT APPLICABLE AND REQUESTING THEM TO AGREE TO SUBSTITUTE THEREFOR THE PROVISION SET FORTH IN THE CIRCULAR LETTER OF THE DIRECTOR OF PROCUREMENT NO. 100 (WHICH HAS BEEN THE PROCEDURE FOLLOWED SINCE THE ISSUANCE OF THE DIRECTOR OF PROCUREMENT'S CIRCULAR LETTER NO. 100, DATED JUNE 7, 1933) WITH THE UNDERSTANDING THAT IF THIS CLAUSE IS NOT ACCEPTABLE TO THE BIDDER, THE AWARD OF CONTRACT TO SAID BIDDER WILL STILL BE OBLIGATORY, IF ANY AWARD IS TO BE MADE.

THE DEPARTMENT IS SATISFIED THAT IN VIEW OF THE PECULIAR CONDITIONS SURROUNDING THIS VAST PURCHASING, THE GOVERNMENT WILL ACTUALLY SUFFER A LOSS THROUGH READVERTISEMENT AT THIS LATE DATE. AS TIME IS AN IMPORTANT ELEMENT FOR CONSIDERATION, IT IS HOPED YOU WILL BE IN A POSITION TO RENDER A DECISION IN THE MATTER VERY PROMPTLY.

THE PROCEDURE TO BE FOLLOWED IN THE MATTER OF AWARDING CONTRACTS AFTER MAY 27, 1935, WHERE THE BID CONTAINED PROVISIONS FOR CODE COMPLIANCE, WAS SET FORTH IN MY DECISION OF JUNE 17, 1935, 14 COMP. GEN. 905, TO THE BOARD OF TAX APPEALS, A COPY OF WHICH WAS SENT TO YOU. IN VIEW THEREOF IT IS NOT UNDERSTOOD WHY YOU REFER ONLY TO THE DECISION OF JULY 1. THE GENERAL RULE IS THAT THE ACCEPTANCE BY THE CONTRACTING OFFICER OF A BID IMPOSES ON THE CONTRACTOR AN OBLIGATION TO PERFORM IN ACCORDANCE WITH THE TERMS OF THE ACCEPTED BID OR TO PAY THE UNITED STATES ANY DAMAGES RESULTING FROM DEFAULT IN PERFORMANCE. UNITED STATES V. NEW YORK AND PORTO RICO S.S. CO., 239 U.S. 88. HOWEVER, WHERE THE ADVERTISED SPECIFICATIONS PROVIDE THAT THE CONTRACT SHALL NOT BE BINDING ON THE UNITED STATES UNTIL APPROVED BY THE SECRETARY OF THE INTERIOR, OR OTHER ADMINISTRATIVE SUPERIOR OF THE CONTRACTING OFFICER, THE ACTION OF THE CONTRACTING OFFICER IN ACCEPTING THE BID, ETC., IMPOSES NO OBLIGATION ON THE UNITED STATES UNLESS AND UNTIL THE CONTRACT IS SO APPROVED BY THE HEAD OF THE DEPARTMENT OR OTHER DESIGNATED ADMINISTRATIVE SUPERIOR OFFICER. SEE MONROE V. UNITED STATES, 184 U.S. 254, AND DARRAGH V. UNITED STATES, 33 CT.CLS. 377. A CONTRACTOR WHO COMMENCES WORK UNDER AN ACCEPTED BID WHEN THE SPECIFICATIONS REQUIRE APPROVAL OF THE CONTRACT BY THE HEAD OF THE DEPARTMENT OR OTHER ADMINISTRATIVE SUPERIOR OF THE CONTRACTING OFFICER, IS LEGALLY PRESUMED TO HAVE DONE SO WITH KNOWLEDGE THAT IN EVENT THE CONTRACT IS DISAPPROVED NO OBLIGATION IS IMPOSED UPON THE UNITED STATES.

APPLYING THESE GENERAL PRINCIPLES OF LAW TO THE FACTS STATED, YOU ARE ADVISED THAT IN ALL CASES WHERE THE BIDS WERE REQUESTED ON THE BASIS OF CODE COMPLIANCE THEY MUST BE REJECTED OR THE CONTRACTS DISAPPROVED UNLESS THERE HAS HERETOFORE BEEN TAKEN THEREON SUCH ACTION AS HAS IMPOSED A LEGAL OBLIGATION ON THE GOVERNMENT, OR UNLESS THERE BE SUCH URGENT NEED FOR THE THING TO BE CONTRACTED FOR THAT THE INTERESTS OF THE GOVERNMENT WILL NOT PERMIT OF THE DELAY INCIDENT TO READVERTISING.

IT IS BELIEVED THAT THE SITUATION REPORTED IN YOUR LETTER OF JULY 29, 1935, WITH RESPECT TO PURCHASES ON BEHALF OF THE INDIAN SERVICE WHERE IT IS NECESSARY TO HAVE NONPERISHABLE SUPPLIES DELIVERED EACH YEAR TO THE SCHOOLS BY THE TIME THEY OPEN FOR THE NEW TERM, WHICH IS ABOUT SEPTEMBER 1, MAY BE CONSIDERED AS SUCH AN EMERGENCY IN THE PUBLIC INTEREST AS WILL JUSTIFY THE ACCEPTANCE OF OTHERWISE PROPER BIDS SUBMITTED ON THE BASIS OF SPECIFICATIONS ADVERTISED PRIOR TO MAY 27, 1935, CONTAINING REQUIREMENTS OF CODE COMPLIANCE IN ALL THOSE INSTANCES WHERE THERE IS NOT SUFFICIENT TIME TO READVERTISE AND ENTER INTO CONTRACTS FOR THE DELIVERY OF SUPPLIES REQUIRED AND WHERE IT IS ADMINISTRATIVELY CERTIFIED THAT IT IS NOT BELIEVED READVERTISING WOULD RESULT IN LOWER PRICES TO THE UNITED STATES. THIS SITUATION COULD HAVE BEEN AVOIDED IF PROMPT ADMINISTRATIVE ACTION HAD BEEN TAKEN IMMEDIATELY AFTER THE DECISION OF MAY 27, 1935, TO READVERTISE FOR THE NECESSARY SUPPLIES FOR THE INDIAN SERVICE OR ADDENDA HAD BEEN ISSUED TO THE SPECIFICATIONS WHERE THE BIDS HAD NOT BEEN OPENED.

THE QUESTIONS STATED IN THE ABOVE-QUOTED LETTERS OF JULY 25 AND 29, 1935, ARE ANSWERED ACCORDINGLY.