A-64860, SEPTEMBER 12, 1935, 15 COMP. GEN. 201

A-64860: Sep 12, 1935

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ADVERTISING - QUALIFIED BIDS - VETERANS' ADMINISTRATION THE PROVISIONS IN A BID EXPRESSLY EXCLUDING ALL REFERENCES TO THE AGRICULTURAL ADJUSTMENT ADMINISTRATION PROCESSING TAX BECAUSE THE LEGALITY OF SUCH TAX "IS NOW IN THE COURTS. " ARE NOT MATERIAL. IS NOT MATERIAL. AS FOLLOWS: THERE ARE FORWARDED PROPOSALS OF SWIFT AND COMPANY AND KINGAN AND COMPANY TO FURNISH THE VETERANS' ADMINISTRATION FACILITY. AN EARLY DECISION IN THE PREMISES WILL BE APPRECIATED. ATTACHED TO THE BID OF SWIFT AND COMPANY THERE IS THE FOLLOWING TYPED NOTATION: THIS CONTRACT AND/OR BID IS HEREBY MODIFIED SO THAT ALL REFERENCE. PRICES APPEARING HEREIN ARE NET AND NO DEDUCTION ON ACCOUNT OF A.A.A. INASMUCH AS THE PROCESSING TAX IN QUESTION IS NOW IN THE COURTS.

A-64860, SEPTEMBER 12, 1935, 15 COMP. GEN. 201

ADVERTISING - QUALIFIED BIDS - VETERANS' ADMINISTRATION THE PROVISIONS IN A BID EXPRESSLY EXCLUDING ALL REFERENCES TO THE AGRICULTURAL ADJUSTMENT ADMINISTRATION PROCESSING TAX BECAUSE THE LEGALITY OF SUCH TAX "IS NOW IN THE COURTS," SUBMITTED IN CONNECTION WITH ADVERTISED SPECIFICATIONS CONTAINING PROVISIONS WITH REFERENCE TO SUCH TAX CHANGES MADE "BY THE CONGRESS," ARE NOT MATERIAL, AND THE BID MAY BE CONSIDERED WITH OTHER BIDS RECEIVED. THE ELIMINATION, IN THE SUBMISSION OF A BID, OF A REQUEST, AND EXPLANATORY STATEMENTS RELATIVE THERETO, THAT BIDS SHOULD BE SUBMITTED SUBJECT TO MODIFICATION ON THE BASIS OF SUBSEQUENTLY ENACTED LEGISLATION, IF ANY, EFFECTING CHANGES IN MINIMUM WAGES AND/OR MAXIMUM HOURS OF EMPLOYMENT, IS NOT MATERIAL, AND THE BID MAY BE CONSIDERED WITH OTHER BIDS RECEIVED. THE ELIMINATION, IN THE SUBMISSION OF A BID, OF A PROVISION IN THE ADVERTISED SPECIFICATIONS REQUIRING COMPLIANCE ON THE PART OF THE BIDDER WITH ANY MARKETING AGREEMENTS AND/OR LICENSES APPROVED AND EXECUTED BY THE SECRETARY OF AGRICULTURE UNDER THE PROVISIONS OF THE AGRICULTURAL ADJUSTMENT ACT IN CONNECTION WITH ANY OF THE COMMODITIES LISTED IN THE PROPOSAL, JUSTIFIES REJECTION OF THE BID.

COMPTROLLER GENERAL MCCARL TO THE ADMINISTRATOR OF VETERANS' AFFAIRS, SEPTEMBER 12, 1935:

THERE HAS BEEN RECEIVED YOUR LETTER OF AUGUST 19, 1935, WITH INCLOSURES, AS FOLLOWS:

THERE ARE FORWARDED PROPOSALS OF SWIFT AND COMPANY AND KINGAN AND COMPANY TO FURNISH THE VETERANS' ADMINISTRATION FACILITY, ATLANTA, GA., CERTAIN ITEMS OF PACKING-HOUSE PRODUCTS DURING THE PERIOD SEPTEMBER 1 TO OCTOBER 31, 1935, WITH THE REQUEST THAT THIS OFFICE BE INFORMED AS TO WHAT ACTION PROPERLY MAY BE TAKEN ON THESE PROPOSALS IN VIEW OF THE QUALIFYING CLAUSES APPEARING THEREIN. SWIFT AND COMPANY HAS SUBMITTED THE LOWEST BIDS ON ITEMS 118 AND 129 AND KINGAN AND COMPANY ON ITEMS 112 AND 134.

AN EARLY DECISION IN THE PREMISES WILL BE APPRECIATED.

KINDLY RETURN THE ENCLOSURES WITH YOUR REPLY.

ATTACHED TO THE BID OF SWIFT AND COMPANY THERE IS THE FOLLOWING TYPED NOTATION:

THIS CONTRACT AND/OR BID IS HEREBY MODIFIED SO THAT ALL REFERENCE, EXPRESS OR IMPLIED, TO THE A.A.A. PROCESSING TAX SHALL BE CONSIDERED AS STRICKEN, ANYTHING TO THE CONTRARY NOTWITHSTANDING.

PRICES APPEARING HEREIN ARE NET AND NO DEDUCTION ON ACCOUNT OF A.A.A. PROCESSING TAX OR OTHERWISE SHALL BE ALLOWED.

INASMUCH AS THE PROCESSING TAX IN QUESTION IS NOW IN THE COURTS, IT IS NECESSARY TO ELIMINATE FROM BIDS AND CONTRACTS ALL REFERENCE TO IT, WHICH IS THE REASON FOR THE MODIFICATION WHICH WE HAVE MADE IN THAT REGARD.

THE AGRICULTURAL ADJUSTMENT ADMINISTRATION PROCESSING TAX ON MEAT PRODUCTS IS NOW IN FORCE, PROCESSORS ARE REQUIRED TO PAY IT, AND IT IS TO BE ASSUMED THAT ALL BIDS RECEIVED INCLUDE SUCH TAX AS PART OF THE PRICE SUBMITTED. IT IS GENERALLY KNOWN THAT THE LEGALITY OF SUCH PROCESSING TAX IS BEING CONTESTED IN THE COURTS, AND IT IS THE EVIDENT PURPOSE OF THE TYPED NOTATION TO PROTECT THE BIDDER FROM ANY REQUIREMENT OF REDUCTION IN CONTRACT PRICE IN THE EVENT THAT FINAL DETERMINATION SHOULD BE ADVERSE TO THE LEGALITY OF THE TAX AND FURTHER COLLECTION THEREOF ELIMINATED. SUCH A DETERMINATION BY THE COURTS WOULD NOT CONSTITUTE A CHANGE IN THE TAX "BY THE CONGRESS" AS CONTEMPLATED IN THE FORMAL INVITATION FOR BIDS, BUT A JUDICIAL DETERMINATION THAT A TAX THERETOFORE IMPOSED IS NOT LEGAL. WOULD APPEAR, THEREFORE, THAT THE QUALIFYING CLAUSE IN THE SUBMITTED BID RELATIVE TO THE PROCESSING TAX IS IMMATERIAL.

THERE APPEARS, ALSO, ON THE INVITATION FOR BIDS A REQUEST THAT BIDS BE SUBMITTED ON THE BASIS THAT IF SUBSEQUENT LEGISLATION REQUIRES OBSERVANCE OF MINIMUM WAGES AND/OR MAXIMUM HOURS OF EMPLOYMENT, MINIMUM AGE OF EMPLOYEES, ETC., THE CONTRACT SHALL BE SUBJECT TO MODIFICATION AS OUTLINED. THIS REQUEST AND THE EXPLANATORY STATEMENTS RELATIVE THERETO HAVE BEEN DEFACED APPARENTLY WITH THE INTENTION OF ELIMINATION. THE PROVISION APPEARS TO BE FOR THE BENEFIT OF THE CONTRACTOR RATHER THAN THE GOVERNMENT, AND IF THE BIDDER DOES NOT SEE FIT TO TAKE ADVANTAGE THEREOF, THERE WOULD APPEAR NO NECESSITY FOR OBJECTION ON BEHALF OF THE UNITED STATES.

YOU ARE ADVISED THAT THE BID OF SWIFT AND CO. MAY BE CONSIDERED WITH OTHER BIDS SUBMITTED.

THE BID SUBMITTED BY KINGAN AND CO. BEARS THE FOLLOWING TYPEWRITTEN NOTATION:

PRICES QUOTED ARE NET--- NO REFUND OR DRAWBACK, AND IF ACCEPTED MUST BE PAID IN FULL. THE BIDDER ACCEPTS NO LIABILITY AS TO PAYMENT OR REFUND OF PROCESSING TAX.

YOUR ATTENTION IS DIRECTED TO THE FACT THAT WE HAVE ELIMINATED CERTAIN PROVISIONS OF THE STANDARD FORM OF BID BY DRAWING INK LINES THROUGH THE SAME. WE ARE UNWILLING TO ENTER INTO ANY CONTRACT WITH THESE PROVISIONS INCLUDED, AND OUR BID MUST BE SO UNDERSTOOD.

WHAT HAS BEEN SAID RELATIVE TO THE BID OF SWIFT AND CO. IS EQUALLY APPLICABLE TO THE FIRST PARAGRAPH OF THE NOTATION, SUPRA.

THERE APPEARS ON THE INVITATION FOR BIDS THE FOLLOWING PARAGRAPH:

IF, ON THE DATE OF THE OPENING OF THIS BID, THERE IS IN EFFECT MARKETING AGREEMENT AND/OR LICENSE APPROVED AND EXECUTED BY THE SECRETARY OF AGRICULTURE UNDER THE PROVISIONS OF THE AGRICULTURAL ADJUSTMENT ACT FOR ANY OF THE COMMODITIES LISTED IN THIS PROPOSAL, THE CONTRACTOR SHALL COMPLY WITH ALL PROVISIONS OF SAID MARKETING AGREEMENT AND/OR LICENSE, OR ANY AMENDMENTS THEREOF, WITHOUT REGARD TO WHETHER THE CONTRACTOR IS HIMSELF A PARTY TO THE SAID MARKETING AGREEMENT AND/OR LICENSE. IF THE CONTRACTOR FAILS TO COMPLY WITH THE PROVISIONS OF THE MARKETING AGREEMENT AND/OR LICENSE, OR ANY AMENDMENTS THEREOF, THE GOVERNMENT MAY BY WRITTEN NOTICE TO THE CONTRACTOR TERMINATE THE CONTRACTOR'S RIGHT TO PROCEED WITH THE CONTRACT AND PURCHASE IN THE OPEN MARKET, OR OTHERWISE, THE UNDELIVERED PORTION OF THE COMMODITY OR COMMODITIES INVOLVED 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 OF ANY FAILURE OF THE CONTRACTOR TO COMPLY WITH THE TERMS OF THE MARKETING AGREEMENT AND/OR LICENSE FOR THE COMMODITY OR COMMODITIES INVOLVED SHALL BE FINAL AND CONCLUSIVE ON THE CONTRACTOR.

THIS PARAGRAPH HAS BEEN INK-LINED OUT AS WELL AS THE PROVISION THAT FEDERAL TAXES HERETOFORE IMPOSED ARE INCLUDED IN BID PRICE AND THE REQUIREMENT FOR CODE COMPLIANCE. THE QUOTED PARAGRAPH IS AN UNDERTAKING ON THE PART OF A BIDDER FOR GOVERNMENT BUSINESS TO COMPLY WITH A MARKETING AGREEMENT AND/OR LICENSE APPROVED AND EXECUTED BY THE SECRETARY OF AGRICULTURE UNDER THE PROVISIONS OF THE AGRICULTURAL ADJUSTMENT ACT. THE AGRICULTURAL ADJUSTMENT ACT IS THE LAW OF THE LAND. ITS VALIDITY OR INVALIDITY HAS NOT BEEN DETERMINED BY THE COURT OF LAST RESORT AND UNTIL THE QUESTION IS FINALLY DECIDED BY THAT COURT, THE ACT MUST BE LOOKED UPON AS BINDING UPON ALL CITIZENS. THE ACT AUTHORIZES THE SECRETARY OF AGRICULTURE TO ENTER INTO MARKETING AND/OR LICENSE AGREEMENTS WITH THE MEMBERS OF SPECIFIED INDUSTRIES AND WHEN SUCH AGREEMENTS HAVE BEEN CONSUMMATED THEY ARE BINDING UPON MEMBERS OF SUCH INDUSTRIES IRRESPECTIVE OF WHETHER OR NOT SUCH MEMBERS UNDERTAKE VOLUNTARILY TO COMPLY WITH THE LAW. THE REQUIREMENT IN THE INVITATION FOR BIDS FOR COMPLIANCE WITH SUCH MARKETING AND/OR LICENSE AGREEMENT IS NO MORE THAN A REQUIREMENT THAT THE BIDDER SHALL COMPLY WITH LAWS CONTROLLING INDUSTRIES AND THE INDIVIDUAL MEMBERS THEREOF. A REFUSAL ON THE PART OF THE BIDDER TO COMPLY WITH SUCH AGREEMENTS IS, THEREFORE, A REFUSAL TO UNDERTAKE COMPLIANCE WITH PREVAILING LAWS. UNTIL THE VALIDITY OF THE AGRICULTURAL ADJUSTMENT ACT IS FINALLY DETERMINED, THERE IS NO LEGAL OBJECTION TO A REQUIREMENT IN THE SOLICITATION FOR BIDS THAT THOSE SEEKING GOVERNMENT BUSINESS WILL VOLUNTARILY COMPLY WITH ITS PROVISIONS AND THE REFUSAL OF KINGAN AND CO. TO UNDERTAKE COMPLIANCE AT THIS TIME JUSTIFIES REJECTION OF ITS BID.

IN THIS CONNECTION IT MAY BE OBSERVED THAT SO FAR AS IS KNOWN NO CASE INVOLVING THE VALIDITY OF THE MARKETING AGREEMENT FEATURES OF THE AGRICULTURAL ADJUSTMENT ACT IS NOW PENDING BEFORE THE SUPREME COURT OF THE UNITED STATES. THE COURT IS NOT IN SESSION AND ORDINARILY WILL NOT CONVENE BEFORE OCTOBER. IT IS EXCEEDINGLY IMPROBABLE THAT ANY DECISION BY THAT COURT WITH REFERENCE TO THE VALIDITY OF THE AGRICULTURAL ADJUSTMENT ACT WOULD OR COULD BE RENDERED PRIOR TO OCTOBER 31, 1935. THE CONTRACTS PROPOSED TO BE ENTERED INTO PURSUANT TO THE BIDS UNDER CONSIDERATION ARE FOR THE PERIOD FROM SEPTEMBER 1 TO OCTOBER 31, 1935. IT IS MANIFEST, THEREFORE, THAT MARKETING AGREEMENTS HERETOFORE ENTERED INTO OR MODIFICATIONS THEREOF WILL BE IN EFFECT THROUGHOUT THE CONTEMPLATED CONTRACT PERIOD. IT IS UNDERSTOOD THAT OTHER BIDDERS HAVE SUBMITTED BIDS IN CONFORMITY WITH THE INVITATION THEREFOR. THE ACCEPTANCE OF THE BID OF KINGAN AND CO., DESPITE ITS REFUSAL TO COMPLY WITH THE EXISTING LAW, WOULD OPERATE TO THE DETRIMENT OF SUCH OTHER BIDDERS AND MIGHT DEPRIVE THE GOVERNMENT OF POSSIBLE ADVANTAGES TO BE DERIVED FROM COMPLIANCE WITH MARKETING AGREEMENTS BY A GOVERNMENT CONTRACTOR. THEREFORE, YOU ARE ADVISED THAT THE BID OF KINGAN AND CO. PROPERLY MAY BE REJECTED.