A-63153, A-64398, AUGUST 9, 1935, 15 COMP. GEN. 114

A-63153,A-64398: Aug 9, 1935

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CONTRACTS - NONCOMPLIANCE WITH MARKETING AGREEMENTS THERE IS NO AUTHORITY OF LAW FOR REJECTION OF AN OTHERWISE PROPER LOW BID FOR FAILURE OR REFUSAL OF THE BIDDER TO AGREE TO COMPLY WITH THE PROVISIONS OF ANY AND ALL EXISTING MARKETING AGREEMENTS. REGARDLESS OF WHETHER THE CONTRACTOR IS A PARTY TO ANY OF SUCH AGREEMENTS OR AMENDMENTS THERETO. OR IF THE SECRETARY OF AGRICULTURE HAS DETERMINED THAT SUCH SUBCONTRACTOR OR SUPPLIER IS FAILING IN THE COMPLIANCE TO WHICH HE HAS CERTIFIED AND THE CONTRACTOR HAS BEEN SO NOTIFIED IN WRITING THROUGH THE CONTRACTING OFFICER. NOT IN EFFECT AT THE TIME THE CONTRACT WAS MADE. INCLUDED IN WHICH WAS AN ITEM COVERING 120 POUNDS BUTTER FOR THE D.C. IT WILL BE NOTED FROM THE PROVISION.

A-63153, A-64398, AUGUST 9, 1935, 15 COMP. GEN. 114

CONTRACTS - NONCOMPLIANCE WITH MARKETING AGREEMENTS THERE IS NO AUTHORITY OF LAW FOR REJECTION OF AN OTHERWISE PROPER LOW BID FOR FAILURE OR REFUSAL OF THE BIDDER TO AGREE TO COMPLY WITH THE PROVISIONS OF ANY AND ALL EXISTING MARKETING AGREEMENTS, LICENSES, AND EXISTING OR FUTURE AMENDMENTS TO EITHER, ISSUED UNDER THE AGRICULTURAL ADJUSTMENT ACT OR SUPPLEMENTARY LEGISLATION.

COMPTROLLER GENERAL MCCARL TO THE PRESIDENT, BOARD OF COMMISSIONERS, DISTRICT OF COLUMBIA, AUGUST 9, 1935:

THERE HAS BEEN RECEIVED YOUR LETTER OF AUGUST 2, 1935, AS FOLLOWS:

THE DIRECTOR OF PROCUREMENT, UNDER DATE OF MAY 8, 1935, DIRECTED THAT THEREAFTER ALL PROPOSAL FORMS AND CONTRACTS COVERING DAIRY PRODUCTS CARRY PROVISION AS FOLLOWS:

"THE CONTRACTOR SHALL COMPLY WITH THE PROVISIONS OF ANY AND ALL MARKETING AGREEMENTS, LICENSES, AND AMENDMENTS TO EITHER, IN EFFECT ON THE DATE OF THE AWARD OF THIS CONTRACT OR THEREAFTER EXECUTED OR ISSUED BY THE SECRETARY OF AGRICULTURE UNDER THE AGRICULTURAL ADJUSTMENT ACT OR SUPPLEMENTARY LEGISLATION, APPLICABLE TO ANY OF THE COMMODITIES TO BE FURNISHED UNDER THIS CONTRACT AND TO THE CONTRACTOR UNDER THE TERMS OF SUCH MARKETING AGREEMENTS, LICENSES, AND AMENDMENTS, REGARDLESS OF WHETHER THE CONTRACTOR IS A PARTY TO ANY OF SUCH AGREEMENTS OR AMENDMENTS THERETO. THE CONTRACTOR SHALL NOT ACCEPT FROM A SUBCONTRACTOR OR SUPPLIER IN THE PERFORMANCE OF THIS CONTRACT ANY OF THE COMMODITIES TO BE FURNISHED UNDER THIS CONTRACT, IF THE SUBCONTRACTOR OR SUPPLIER HAS NOT FILED WITH THE CONTRACTOR A CERTIFICATE OF COMPLIANCE IN FORM AS REQUIRED BY THE CONTRACTING OFFICER, OR IF THE SECRETARY OF AGRICULTURE HAS DETERMINED THAT SUCH SUBCONTRACTOR OR SUPPLIER IS FAILING IN THE COMPLIANCE TO WHICH HE HAS CERTIFIED AND THE CONTRACTOR HAS BEEN SO NOTIFIED IN WRITING THROUGH THE CONTRACTING OFFICER. IF THE CONTRACTOR VIOLATES OR FAILS TO COMPLY WITH ANY OF THE FOREGOING REQUIREMENTS, THE GOVERNMENT MAY, BY WRITTEN NOTICE TO THE CONTRACTOR, TERMINATE THE CONTRACTOR'S RIGHT TO PROCEED WITH THE DELIVERIES UNDER THIS CONTRACT AND PURCHASE IN THE OPEN MARKET OR OTHERWISE PROCURE THE UNDELIVERED PORTION OF THE COMMODITY OR COMMODITIES TO BE FURNISHED, AND THE CONTRACTOR AND HIS SURETY SHALL BE LIABLE TO THE GOVERNMENT FOR ANY EXCESS COST OCCASIONED THE GOVERNMENT THEREBY: PROVIDED, THAT THE DETERMINATION OF THE SECRETARY OF AGRICULTURE AS TO THE FAILURE OF COMPLIANCE BY THE CONTRACTOR OR SUBCONTRACTOR SHALL BE FINAL AND CONCLUSIVE UPON THE PARTIES THERETO: PROVIDED FURTHER, THAT IF THE COST TO THE CONTRACTOR OF THE COMMODITY OR COMMODITIES TO BE PROCURED HEREUNDER SHALL BE INCREASED OR DECREASED BY ANY MARKETING AGREEMENT, LICENSE, OR AMENDMENT TO EITHER, NOT IN EFFECT AT THE TIME THE CONTRACT WAS MADE, THEN THE PURCHASE PRICE TO THE GOVERNMENT OF THE COMMODITY OR COMMODITIES AFFECTED BY SUCH AMENDMENT OR NEW AGREEMENT OR LICENSE SHALL BE INCREASED OR DECREASED ACCORDINGLY: PROVIDED FURTHER, THAT THE CONTRACTOR SHALL, BEFORE FINAL PAYMENT, FURNISH TO THE CONTRACTING OFFICER SATISFACTORY EVIDENCE OF ANY SUCH INCREASE.'

THE COMMISSIONERS, UNDER DATE OF JULY 9, 1935, SOLICITED BIDS FOR FURNISHING AND DELIVERING TO VARIOUS DISTRICT INSTITUTIONS DAIRY PRODUCTS FOR CONSUMPTION DURING THE ENSUING MONTH, INCLUDED IN WHICH WAS AN ITEM COVERING 120 POUNDS BUTTER FOR THE D.C. JAIL; DATE SET FOR RECEIPT AND OPENING OF BIDS JULY 15, 1935. THE PROPOSAL FORM AS ISSUED CARRIED THE PRESCRIBED PROVISION PERTAINING TO "COMPLIANCE WITH A.A.A.' BIDS RECEIVED AS FOLLOWS:

CHESTNUT FARMS DAIRY ------------------ $0.273 PER LB.

SWIFT AND COMPANY --------------------- .2722 PER LB.

THE LOW BIDDER, SWIFT AND COMPANY, DELETED FROM THEIR PROPOSAL FORM ALL REFERENCE TO THE PROVISION QUOTED.

IT WILL BE NOTED FROM THE PROVISION, THAT THE FOLLOWING TWO CONDITIONS ARE INCLUDED:

"THE CONTRACTOR SHALL COMPLY WITH THE PROVISIONS * * * IN EFFECT ON THE DATE OF THE AWARD * * * OR THEREAFTER EXECUTED OR ISSUED BY THE SECRETARY OF AGRICULTURE UNDER THE AGRICULTURAL ADJUSTMENT ACT OR SUPPLEMENTARY LEGISLATION * * *"

"* * * THAT IF THE COST TO THE CONTRACTOR OF THE COMMODITIES TO BE PROCURED HEREUNDER SHALL BE INCREASED OR DECREASED BY ANY MARKETING AGREEMENT, LICENSE, OR AMENDMENT TO EITHER, NOT IN EFFECT AT TIME THE CONTRACT WAS MADE, THEN THE PURCHASE PRICE TO THE GOVERNMENT * * * SHALL BE INCREASED OR DECREASED ACCORDINGLY.'

IN DECISION RENDERED JANUARY 2, 1934 (13 C.G. 181), IT WAS HELD THAT SUCH CONDITIONS "WOULD BE TO RENDER INDEFINITE AND UNCERTAIN THE CONSIDERATION STIPULATED IN GOVERNMENT CONTRACTS, AND THE PURPOSE OF CONTRACTING IS TO MAKE THE RIGHTS OF THE PARTIES DEFINITE AND CERTAIN.'

FURTHER BY DECISION DATED JULY 1, 1935 (A-63153, A-63252, A-63295), IT WAS, IN SUBSTANCE, RULED THAT THERE IS NOT AUTHORITY OF LAW TO REQUIRE BIDDERS TO SUBSCRIBE TO SUBSEQUENT AGREEMENTS OR LEGISLATION. STILL FURTHER, AS THESE BIDS WERE NOT SUBMITTED ON THE SAME BASIS, THERE HAD NOT BEEN TRUE COMPETITION.

IN VIEW OF THE DECISIONS CITED AND THE FAILURE TO RECEIVE TRUE COMPETITIVE BIDS, THE COMMISSIONERS REJECTED THE TWO BIDS RECEIVED AND SOLICITED NEW BIDS, UNDER SPECIFICATIONS AND CONDITIONS BEING WITHOUT REFERENCE TO THE QUOTED PROVISION; DATE SET FOR RECEIPT AND OPENING OF BIDS JULY 24, 1935, AT WHICH TIME BIDS WERE RECEIVED AS FOLLOWS:

SWIFT AND COMPANY -------------------- $0.345 PER LB.

CHESTNUT FARMS DAIRY ----------------- .27

THE LOWEST OF THE TWO BIDS RECEIVED JULY 24, 1935, HAS BEEN ACCEPTED AND ORDER PLACED.

HOWEVER, BEFORE SOLICITING BIDS FOR FUTURE REQUIREMENTS OF DAIRY PRODUCTS, IT IS RESPECTFULLY ASKED THAT YOU ADVISE AS TO THE PROPRIETY OF INCLUSION IN THE SPECIFICATIONS, THE PROVISION PERTAINING TO MARKETING AGREEMENTS, WORDED AS DIRECTED BY THE DIRECTOR OF PROCUREMENT. ALSO, IF INCLUSION IS PROPER, PLEASE ADVISE IF A BID SUBMITTED WITH THE PROVISION IN QUESTION DELETED THEREFROM, IS FOR CONSIDERATION, OR SHOULD SUCH BID BE REJECTED AND AWARD MADE TO THE NEXT LOWEST BIDDER.

THE SITUATION HERE IS NOT UNLIKE THAT CONSIDERED IN THE REFERRED-TO DECISION OF JULY 1, 1935, IN THE MATTER OF A STATEMENT IN ADVERTISED SPECIFICATIONS THAT BIDS WERE REQUESTED ON THE BASIS OF MODIFICATION OF ANY CONTRACT TO BE ENTERED INTO AS A RESULT THEREOF TO ACCORD WITH SUCH STATUTORY REQUIREMENTS AS THEREAFTER MIGHT BE AUTHORIZED OR REQUIRED BY LAW WITH RESPECT TO OBSERVANCE OF MINIMUM WAGES AND/OR MAXIMUM HOURS OF EMPLOYMENT AND/OR LIMITATION AS TO AGE OF EMPLOYEES. IT WAS THERE CONCLUDED, FOR REASONS THEREIN STATED, THAT THE LOW AND OTHERWISE PROPER BID COULD NOT BE REJECTED BECAUSE THE BIDDER REFUSED TO AGREE TO ANY SUCH STIPULATION IN THE CONTRACT, AND THE SAME CONCLUSION IS APPLICABLE--- IN THE ABSENCE OF SPECIFIC STATUTORY AUTHORITY TO THE CONTRARY--- TO THE PROPOSED REQUIREMENT THAT BIDDERS AGREE TO COMPLY WITH THE PROVISIONS OF ANY AND ALL EXISTING MARKETING AGREEMENTS, LICENSES, AND EXISTING OR FUTURE AMENDMENTS TO EITHER, ISSUED UNDER THE AGRICULTURAL ADJUSTMENT ACT OR SUPPLEMENTARY LEGISLATION. AS YOU HAVE INDICATED, THE PURPOSE OF THE LAW REQUIRING ADVERTISING AND CONTRACTING AS STATED IN 13 COMP. GEN. 181, IS TO MAKE DEFINITE AND CERTAIN THE OBLIGATION OF THE PARTIES THERETO. SEE CLARK V. UNITED STATES, 95 U.S. 539.

THE PROPOSED STIPULATION QUOTED IN YOUR LETTER OF AUGUST 2, 1935, PROPERLY MAY BE VIEWED, UNDER THE LAW REQUIRING ADVERTISING ON THE BASIS OF SPECIFICATIONS PERMITTING FULL AND FREE COMPETITION WITH AWARD OF CONTRACT TO THE LOWEST RESPONSIBLE BIDDER, ONLY AS A REQUEST TO BIDDERS ON THE PART OF THE ADVERTISING AND CONTRACTING AGENCIES OF THE GOVERNMENT THAT BIDS BE SUBMITTED UPON THE BASIS THAT THE CONTRACTOR SHALL COMPLY WITH THE PROVISIONS OF ANY AND ALL MARKETING AGREEMENTS AND LICENSES, AND AMENDMENTS TO EITHER, IN EFFECT AT THE TIME OF CONTRACTING OR THEREAFTER PLACED INTO EFFECT, AND THAT THE LOW BID, IF OTHERWISE PROPER, MAY NOT BE REJECTED BECAUSE SUCH BIDDER REFUSED TO AGREE TO ANY SUCH REQUIREMENT.