A-67056, NOVEMBER 13, 1935, 15 COMP. GEN. 400

A-67056: Nov 13, 1935

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IS UNAUTHORIZED. CONTRACT RIGHTS AND OBLIGATIONS SHOULD BE DEFINITELY FIXED AT THE TIME CONTRACTS ARE EXECUTED AND NOT LEFT FOR FUTURE DETERMINATION. AS FOLLOWS: THERE IS SUBMITTED FOR YOUR APPROVAL A PROPOSED CONTRACT PROVISION DESIGNED TO BE USED IN CONTRACTS FOR THE PURCHASE OF MILK AND ITS PRODUCTS. ITS CONTENTS WERE FOUND TO BE MUTUALLY SATISFACTORY. UPON SEVERAL FORMER OCCASIONS YOU HAVE RENDERED OPINIONS RELATIVE TO A REQUIREMENT OF THIS CHARACTER. WE HAVE ENDEAVORED TO OBSERVE THE REQUIREMENTS EMBODIED IN YOUR RULINGS ON THESE AND RELATED QUESTIONS AND TO INCLUDE SUCH PROVISIONS AS SEEM TO BE ADMINISTRATIVELY DESIRABLE. IT IS DEEMED ADVISABLE. TO DISTINGUISH BETWEEN THE CLAUSE AS NOW SUBMITTED AND CLAUSES EMBODIED IN QUESTIONS TO WHICH CERTAIN OF YOUR EARLIER DECISIONS WERE ADDRESSED.

A-67056, NOVEMBER 13, 1935, 15 COMP. GEN. 400

CONTRACTS - SPECIFICATIONS - MARKETING AND PRICE ADJUSTMENT PROVISIONS THE INCLUSION IN ADVERTISED SPECIFICATIONS AND CONTRACTS FOR MILK AND ITS PRODUCTS, OF A CLAUSE REQUIRING CONTRACTORS' COMPLIANCE WITH PRICE SCHEDULES TO BE PAID PRODUCERS, MADE EFFECTIVE BY THE SECRETARY OF AGRICULTURE UNDER THE PROVISIONS OF THE AGRICULTURAL ADJUSTMENT ACT, AS AMENDED, SUBSEQUENT TO THE SUBMISSION OF BIDS, THE CONTRACT PRICES TO BE ADJUSTED ACCORDINGLY, IS UNAUTHORIZED. ACCEPTABLE CLAUSE SUGGESTED. CONTRACT RIGHTS AND OBLIGATIONS SHOULD BE DEFINITELY FIXED AT THE TIME CONTRACTS ARE EXECUTED AND NOT LEFT FOR FUTURE DETERMINATION, THE MATTER OF ANTICIPATED FLUCTUATING PRICES TO BE MET BY CONTRACTS FOR COMPARATIVELY SHORT PERIODS OF TIME.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF AGRICULTURE, NOVEMBER 13, 1935:

THERE HAS BEEN RECEIVED YOUR LETTER OF OCTOBER 28, 1935, WITH INCLOSURE, AS FOLLOWS:

THERE IS SUBMITTED FOR YOUR APPROVAL A PROPOSED CONTRACT PROVISION DESIGNED TO BE USED IN CONTRACTS FOR THE PURCHASE OF MILK AND ITS PRODUCTS, WHICH REQUIRES THAT THE CONTRACTOR COMPLY WITH CERTAIN ENUMERATED REGULATIONS ISSUED BY ME PURSUANT TO THE AGRICULTURAL ADJUSTMENT ACT AS AMENDED, IN CASE SUCH REGULATIONS APPLY--- ACCORDING TO THE TERMS THEREOF--- TO ANY OF THE COMMODITIES FURNISHED BY THE CONTRACTOR. THIS PROPOSED CLAUSE HAS BEEN DISCUSSED INFORMALLY WITH REPRESENTATIVES OF THE PROCUREMENT DIVISION, TREASURY DEPARTMENT, AND ITS CONTENTS WERE FOUND TO BE MUTUALLY SATISFACTORY.

UPON SEVERAL FORMER OCCASIONS YOU HAVE RENDERED OPINIONS RELATIVE TO A REQUIREMENT OF THIS CHARACTER; NAMELY, ON SEPTEMBER 7, 1933 (13 COMP. GEN. 76); JANUARY 2, 1934 (13 COMP. GEN. 181); AUGUST 9, 1935, A 63153 AND A- 64398; AND SEPTEMBER 12, 1935, A-64860. IN DRAFTING THE ATTACHED PROPOSED CLAUSE, WE HAVE ENDEAVORED TO OBSERVE THE REQUIREMENTS EMBODIED IN YOUR RULINGS ON THESE AND RELATED QUESTIONS AND TO INCLUDE SUCH PROVISIONS AS SEEM TO BE ADMINISTRATIVELY DESIRABLE. IT IS DEEMED ADVISABLE, HOWEVER, TO DISTINGUISH BETWEEN THE CLAUSE AS NOW SUBMITTED AND CLAUSES EMBODIED IN QUESTIONS TO WHICH CERTAIN OF YOUR EARLIER DECISIONS WERE ADDRESSED, SINCE SOME OF THE MORE IMPORTANT DIFFERENCES ARE IN THE NATURE OF THE REGULATION TO WHICH COMPLIANCE IS NOW REQUIRED RATHER THAN IN THE WORDING OF THE CONTRACT CLAUSE ITSELF.

OBJECTION WAS MADE IN YOUR DECISION OF JANUARY 2, 1934, TO THE ADMINISTRATOR OF VETERANS' AFFAIRS, TO A PROPOSED CLAUSE DESIGNED TO PERMIT THE MODIFICATION OF A CONTRACT "TO CONFORM TO THE REQUIREMENTS OF SAID MARKETING AGREEMENT AND/OR LICENSE * * *" BY STATING THAT "THE EFFECT OF SAID PARAGRAPH WOULD BE TO REQUIRE THE UNITED STATES TO PURCHASE ITS SUPPLIES AT PRICES FIXED IN THE MARKETING AGREEMENTS OR LICENSES * * *" AND THUS BE IN CONTRAVENTION OF THE REQUIREMENT OF SECTION 3709, REVISED STATUTES. AT THE TIME THE QUESTION WAS PRESENTED BY THE ADMINISTRATOR OF VETERANS' AFFAIRS, AND ALSO AT THE TIME THE REPLY WAS SUBMITTED, ALL MARKETING AGREEMENTS AND LICENSES APPLICABLE TO FLUID MILK MARKETS CONTAINED PROVISIONS ESTABLISHING MINIMUM WHOLESALE AND RETAIL PRICE SCHEDULES IN ADDITION TO SCHEDULES OF MINIMUM PRICES TO BE PAID TO PRODUCERS. SALES OF MILK BY LICENSEES TO CERTAIN PUBLIC AGENCIES AND PRIVATE AGENCIES OF A CHARITABLE CHARACTER WERE EXEMPT FROM THE RETAIL PRICE REQUIREMENTS, BUT IN THIS FORMATIVE PERIOD SUCH EXEMPTION REFLECTED LOCAL CONDITIONS RATHER THAN A WELL-ESTABLISHED AND UNIFORM PRACTICE AMONG ALL MARKETS SO REGULATED. IN NO CASE WERE ANY SUCH AGENCIES, EITHER PUBLIC OR PRIVATE, COMPLETELY EXEMPTED BY THE TERMS OF SUCH AGREEMENTS OR LICENSES, ALTHOUGH GOVERNMENT AGENCIES, WHERE MENTIONED AT ALL, WERE USUALLY CONSIDERED AS WHOLESALE BUYERS.

ALL SUCH LICENSES WERE TERMINATED BY FEBRUARY 5, 1934, AND THE DEPARTMENT ANNOUNCED PUBLICLY THAT NEITHER RETAIL NOR WHOLESALE PRICE SCHEDULES CONTAINED IN THE AGREEMENTS THAT WERE PERMITTED TO REMAIN IN EFFECT, WOULD BE ENFORCED. THE MILK LICENSES WHICH GRADUALLY AND NOW HAVE LONG SINCE REPLACED THESE MARKETING AGREEMENTS, REFLECTED THIS POLICY OF ABANDONING ALL EFFORTS TO FIX AND ENFORCE RESALE PRICES. THE AGRICULTURAL ADJUSTMENT ACT, AS AMENDED BY THE 74TH CONGRESS, CARRIES NO PROVISION SPECIFICALLY AUTHORIZING THE FIXATION OF RESALE PRICES. EXISTING LICENSES AND CONTEMPLATED ORDERS--- AUTHORIZED BY THE RECENT AMENDMENTS TO THE ACT--- DO, AND WILL CONTAIN MINIMUM PRICE SCHEDULES WHICH MUST BE OBSERVED BY ALL HANDLERS SUBJECT TO SUCH LICENSES OR ORDERS IN THEIR PURCHASES OF MILK FROM PRODUCERS. PAYMENT OF HIGHER PRICES OR SPECIAL PREMIUMS BY HANDLERS IS PERMITTED IF CERTAIN SPECIFIED STANDARDS OF UNIFORMITY ARE OBSERVED. THE EFFECT OF SUCH REGULATION IS THEREFORE LIMITED TO THE COST OF MILK WHICH MAY BE RESOLD TO THE GOVERNMENT, BUT THE REGULATED HANDLER IS UNDER NO RESTRAINT IMPOSED BY SUCH ORDERS IN HIS BIDDING ON GOVERNMENT CONTRACTS. COMPETITION AMONG BIDDERS IS UNIMPAIRED, SAVE FOR THE REQUIREMENT THAT MILK SHALL BE PURCHASED AT NOT LESS THAN THE PRICE STIPULATED IN THE LICENSE OR ORDERS, IRRESPECTIVE OF THE PRICES AT WHICH THE BIDDER MAY CHOOSE TO SELL TO THE GOVERNMENT.

SUCH MINIMUM PRICE SCHEDULES AT WHICH MILK IS TO BE PURCHASED MUST NECESSARILY BE MODIFIED FROM TIME TO TIME TO MEET THE CONDITIONS PREVAILING IN THE INDUSTRY AND TO ACCOMPLISH THE PURPOSES OF THE AGRICULTURAL ADJUSTMENT ACT AS AMENDED. CONGRESS HAS PROVIDED FOR SUCH MODIFICATIONS BY SETTING FORTH EXPLICITLY THE PROCEDURE TO BE FOLLOWED AND THE STANDARDS TO BE APPLIED. IN THE PRESENCE OF REGULATION OF THIS CHARACTER, IT IS THOUGHT THAT THE PROVISION IN THE PROPOSED CONTRACT CLAUSE REQUIRING CONTINUED OBSERVANCE OF SUCH PRICE SCHEDULES OR MODIFICATIONS THEREOF BY THE CONTRACTOR THROUGHOUT THE LIFE OF THE CONTRACT, IS ESSENTIAL FOR THE SAME REASONS WHICH SUPPORT THE BASIC REQUIREMENT; NAMELY, THAT COMPLIANCE WITH REGULATIONS APPLICABLE TO THE COMMODITIES AND PERSONS FROM WHOM THE GOVERNMENT PURCHASES SUCH COMMODITIES, IS A REASONABLE AND NECESSARY CONDITION OF THE PURCHASE. ALSO, WHERE CONTRACTS RUN FOR A PERIOD OF SEVERAL MONTHS, AS MANY OF THEM DO, THE LACK OF SUCH A REQUIREMENT MIGHT EASILY DEFEAT THE ENTIRE PURPOSE AND CREATE AN INTOLERABLE SITUATION IN THE MARKETS WHERE SUCH REGULATIONS EXIST.

THE PROVISION FOR ADJUSTMENT SEEMS TO BE AN EQUITABLE INCIDENT TO THE BASIC REQUIREMENT. THE PHRASEOLOGY IS DESIGNED FOR THE BENEFIT OF THE GOVERNMENT AS WELL AS A REASONABLE PROTECTION TO THE CONTRACTOR AND FOR THE PURPOSE OF PERMITTING AN ADJUSTMENT ONLY WHERE CLAIMED BY THE CONTRACTOR PRIOR TO FINAL PAYMENT AND IN SUCH CASES WHERE IT CAN BE SHOWN THAT THE PRICE SCHEDULES IN THE STIPULATED REGULATIONS WERE THE CAUSE OF CHANGES IN COST TO THE CONTRACTOR AND IN THE AMOUNT OF SUCH DEMONSTRATED INCREASE OR DECREASE. IT IS OUR UNDERSTANDING THAT PREVAILING GOVERNMENT PRACTICE, AS APPROVED BY YOUR OFFICE, HAS BEEN TO PERMIT SUCH ADJUSTMENTS WHERE EQUITABLE CONSIDERATIONS SUPPORTED THEIR USE AND WHEN MADE IN THE MANNER REQUIRED BY LAW.

THE PROPOSED CONTRACT PROVISION SUBMITTED IS AS FOLLOWS:

CONTRACT PROVISION FOR COMPLIANCE WITH A.A.A.

THE CONTRACTOR SHALL COMPLY WITH THE PROVISIONS OF ALL MARKETING AGREEMENTS, LICENSES, ORDERS, AND AMENDMENTS THERETO, PERTAINING TO MILK AND ITS PRODUCTS, EXECUTED OR ISSUED BY THE SECRETARY OF AGRICULTURE PURSUANT TO THE AGRICULTURAL ADJUSTMENT ACT, AND AMENDMENTS THERETO, IN EFFECT ON THE DATE OF THE AWARD OF THIS CONTRACT, AND APPLICABLE TO THE CONTRACTOR UNDER THE TERMS OF SUCH REGULATIONS, REGARDLESS OF WHETHER THE CONTRACTOR IS A PARTY TO ANY SUCH MARKETING AGREEMENTS OR AMENDMENTS THERETO: PROVIDED, HOWEVER, THAT THE FOREGOING CONDITION SHALL APPLY ONLY WHERE SUCH MARKETING AGREEMENT, LICENSE, ORDER, OR ANY AMENDMENT THERETO IS APPLICABLE TO ANY OF THE COMMODITIES TO BE FURNISHED UNDER THIS CONTRACT: PROVIDED FURTHER, THAT IF ANY MARKETING AGREEMENT, LICENSE, ORDER, OR ANY AMENDMENT THERETO, PERTAINING TO MILK OR ANY OF ITS PRODUCTS, ESTABLISHING OR CHANGING SCHEDULES OF PRICES TO BE PAID BY THE CONTRACTOR FOR MILK BECOMES EFFECTIVE AFTER THE BID IS SUBMITTED, OR AT ANY TIME DURING THE LIFE OF THE CONTRACT, THE CONTRACTOR MUST COMPLY WITH SUCH PRICE SCHEDULES. ANY INCREASE OR DECREASE IN THE COST TO THE CONTRACTOR OF ANY OF THE COMMODITIES TO BE FURNISHED HEREUNDER, CAUSED BY SUCH PRICE SCHEDULES, SHALL CORRESPONDINGLY INCREASE OR DECREASE THE PRICES NAMED IN THIS CONTRACT WITH RESPECT TO DELIVERIES MADE AFTER THE EFFECTIVE DATE OF SUCH PRICE REGULATIONS, AND ANY AMOUNT DUE THE CONTRACTOR AS A RESULT OF SUCH CHANGE WILL BE CHARGED TO THE GOVERNMENT AND ENTERED ON VOUCHERS (OR INVOICES) AS SEPARATE ITEMS: PROVIDED, THAT ANY SUCH INCREASE IN PRICE SHALL BE MADE ONLY UPON SATISFACTORY SHOWING TO THE CONTRACTING OFFICER PRIOR TO FINAL PAYMENT.

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 UNLESS THE SUBCONTRACTOR OR SUPPLIER HAS 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 NOTIFIED IN WRITING BY 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 HERETO.

CERTIFICATE OF COMPLIANCE WITH A.A.A.

(TO BE EXECUTED BY SUBCONTRACTOR AND FILED WITH CONTRACTOR)

IT IS HEREBY CERTIFIED THAT, WITH RESPECT TO ANY REGULATIONS APPLICABLE TO ANY OF THE COMMODITIES FURNISHED FOR THE UNITED STATES UNDER THE CONTRACT BETWEEN THE PARTIES HEREINAFTER NAMED, THE UNDERSIGNED IS COMPLYING, AND WILL CONTINUE TO COMPLY, WITH (1) THE PROVISIONS OF ALL MARKETING AGREEMENTS, LICENSES, ORDERS, AND AMENDMENTS THERETO, PERTAINING TO MILK AND ITS PRODUCTS, EXECUTED OR ISSUED BY THE SECRETARY OF AGRICULTURE PURSUANT TO THE AGRICULTURAL ADJUSTMENT ACT, AND AMENDMENTS THERETO, NOW IN EFFECT AND APPLICABLE TO THE UNDERSIGNED OR TO THE INDUSTRY IN WHICH THE UNDERSIGNED IS ENGAGED, ACCORDING TO THE TERMS OF SUCH REGULATIONS; AND (2) PRICE SCHEDULES IN EFFECT AT ANY TIME DURING THE LIFE OF THE CONTRACT, AND EMBODIED IN MARKETING AGREEMENTS, LICENSES, ORDERS, AND AMENDMENTS THERETO, PERTAINING TO MILK AND ITS PRODUCTS. SUCH COMPLIANCE IS CERTIFIED TO IRRESPECTIVE OF WHETHER THE UNDERSIGNED IS A PARTY TO ANY SUCH MARKETING AGREEMENTS OR AMENDMENTS THERETO. ----------- ---------- --- (CONTRACTOR) --------------- (DEPT. OR AGENCY) EXECUTED --- ------- 19----. ------------------- --------------------------

(DATE) (SIGNATURE)

WITH THE EXCEPTION OF CERTAIN CHANGES IN PHRASEOLOGY DESIGNED TO BRING THE PARAGRAPH IN LINE WITH RECENT AMENDMENTS TO THE AGRICULTURAL ADJUSTMENT ACT, THE FIRST PARAGRAPH YOU PROPOSE FOR INCLUSION IN CONTRACTS FOR MILK AND ITS PRODUCTS APPEARS IDENTICAL IN SUBSTANCE WITH THE ONE PRESCRIBED IN CIRCULAR LETTER NO. 89, MAY 8, 1935, OF THE TREASURY DEPARTMENT, PROCUREMENT DIVISION.

THE OBJECTIONABLE FEATURES OF THAT AND SIMILAR REQUIREMENTS WERE CONSIDERED IN THE DECISIONS OF THIS OFFICE CITED BY YOU AND IN A-64615, OCTOBER 26, 1935, TO THE SECRETARY OF THE TREASURY.

A COPY OF THAT DECISION IS INCLOSED HEREWITH, AND WHAT WAS THERE SAID NEED NOT BE REPEATED. THE PARAGRAPH NOW PROPOSED IS OPEN TO THE SAME OBJECTIONS HERETOFORE FOUND TO THE ONE THERE CONSIDERED, AND, FOR THE REASONS ASSIGNED, ITS INCLUSION IN INVITATIONS FOR PROPOSALS AND CONTRACTS FOR MILK AND ITS PRODUCTS IS NOT AUTHORIZED.

THIS OFFICE HAS WITHHELD OBJECTION TO THE INCLUSION OF A PROVISION IN INVITATIONS FOR BIDS AND CONTRACTS THAT THE AMOUNT OF ANY TAX IMPOSED OR CHANGED BY THE CONGRESS AFTER THE DATE OF THE OPENING OF THE BIDS INVOLVED MAY BE ADDED TO THE CONTRACT PRICE. EVEN IN SUCH CASES, IT HAS BEEN HELD CONSISTENTLY THAT IN ORDER TO ENTITLE THE CONTRACTOR TO PAYMENT OF THE AMOUNT OF SUCH TAX, IT MUST BE SHOWN THAT SAID AMOUNT HAD BEEN PAID DIRECTLY TO THE GOVERNMENT BY THE CONTRACTOR AS A TAX, AND NOT TO A SUPPLIER AS AN INCREASE IN THE PURCHASE PRICE PAID BY THE CONTRACTOR FOR THE ARTICLE OR MATERIAL FURNISHED THE GOVERNMENT BY THE CONTRACTOR. (SEE LASH'S PRODUCTS COMPANY V. UNITED STATES, 278 U.S. 175.) THE PROPOSED PARAGRAPH DOES NOT INVOLVE THE CONTINGENCY OF A TAX ,IMPOSED OR CHANGED BY THE CONGRESS," BUT A POSSIBLE INCREASE IN PURCHASE PRICE OF THE MILK TO THE CONTRACTOR IN PURCHASING FROM THE PRODUCER. WHETHER SUCH INCREASED COST IS THE RESULT OF ACTION BY THE SECRETARY OF AGRICULTURE UNDER AUTHORITY OF THE AGRICULTURAL ADJUSTMENT ACT, AS AMENDED, OR THE RESULT OF CHANGED CONDITIONS OF SUPPLY AND DEMAND, OR OTHER CONSIDERATION, IS IMMATERIAL. THE FACT STILL REMAINS THAT ANY SUCH POSSIBLE ADVANCE IS MERELY AN INCREASE IN PURCHASE PRICE AND IS A HAZARD TO BE ASSUMED BY THE CONTRACTOR. CONTRACT RIGHTS AND OBLIGATIONS SHOULD BE DEFINITELY FIXED AT THE TIME CONTRACTS ARE EXECUTED, AND NOT LEFT FOR FUTURE AND UNCERTAIN CONDITIONS TO DETERMINE. THERE IS SUGGESTED IN LIEU OF THE FIRST PARAGRAPH PROPOSED BY YOU, THE FOLLOWING, WHICH IS NOT CONSIDERED OBJECTIONABLE, AND WOULD APPEAR TO INCLUDE ALL THAT PROPERLY MAY BE STIPULATED:

IF ON THE DATE OF THE OPENING OF THIS BID, THERE IS IN EFFECT A MARKETING AGREEMENT, LICENSE, AND/OR ORDER APPROVED, EXECUTED AND/OR ISSUED BY THE SECRETARY OF AGRICULTURE, UNDER THE PROVISIONS OF THE AGRICULTURAL ADJUSTMENT ACT, AS AMENDED, PERTAINING TO MILK AND ITS PRODUCTS, AND APPLICABLE TO ANY OF THE COMMODITIES TO BE FURNISHED UNDER THIS CONTRACT, THE CONTRACTOR SHALL COMPLY WITH ALL PROVISIONS OF SUCH MARKETING AGREEMENT, LICENSE, AND/OR ORDER, OR ANY AMENDMENT THEREOF, WITHOUT REGARD TO WHETHER THE CONTRACTOR IS HIMSELF A PARTY TO THE SAID MARKETING AGREEMENT AND/OR LICENSE.

THE FOREGOING PARAGRAPH, WHEN COMBINED OR READ IN CONNECTION WITH THE SECOND PARAGRAPH PROPOSED BY YOU FOR INCLUSION, WOULD DEFINITELY FIX THE RIGHTS OF THE CONTRACTOR AND THE GOVERNMENT IN THIS RESPECT, THE SAID SECOND PARAGRAPH PROPOSED APPEARING FREE FROM OBJECTION.

IT IS SUGGESTED THAT THE CERTIFICATE OF COMPLIANCE WITH THE AGRICULTURAL ADJUSTMENT ACT TO BE EXECUTED BY THE SUBCONTRACTOR AND FILED WITH THE CONTRACTOR, BE AMENDED TO READ AS FOLLOWS:

IT IS HEREBY CERTIFIED THAT, WITH RESPECT TO ANY REGULATIONS APPLICABLE TO ANY OF THE COMMODITIES FURNISHED TO THE UNITED STATES UNDER THE CONTRACT BETWEEN THE PARTIES HEREINAFTER NAMED, THE UNDERSIGNED IS COMPLYING, AND WILL CONTINUE TO COMPLY WITH THE PROVISIONS OF ALL MARKETING AGREEMENTS, LICENSES, ORDERS, AND AMENDMENTS THERETO PERTAINING TO MILK AND ITS PRODUCTS, EXECUTED OR ISSUED BY THE SECRETARY OF AGRICULTURE PURSUANT TO THE AGRICULTURAL ADJUSTMENT ACT, AS AMENDED, IRRESPECTIVE OF WHETHER THE UNDERSIGNED IS A PARTY TO ANY SUCH MARKETING AGREEMENTS OR AMENDMENTS THERETO. ----- ------------- (CONTRACTOR) ------ ---------------- (DEPT. OR AGENCY) EXECUTED ------------ 19-------. ------

(DATE) (SIGNATURE)

IN VIEW OF YOUR SUGGESTION THAT THE MINIMUM PRICE SCHEDULES AT WHICH MILK IS TO BE PURCHASED MUST NECESSARILY BE MODIFIED FROM TIME TO TIME TO MEET THE CONDITIONS PREVAILING IN THE INDUSTRY, AND TO ACCOMPLISH THE PURPOSES OF THE AGRICULTURAL ADJUSTMENT ACT, AS AMENDED, AND THE POSSIBILITY THAT SUCH CHANGES AND MODIFICATIONS WILL RESULT IN INCREASED OR DECREASED PRICES TO THE CONTRACTOR, IT WOULD APPEAR PROPER TO ENTER INTO CONTRACTS COVERING COMPARATIVELY SHORT PERIODS OF TIME, AT PRICES FIXED THEREIN, IN ORDER TO PROTECT THE CONTRACTOR FROM HARDSHIP BY REASON OF POSSIBLE INCREASE, AND TO SAFEGUARD THE GOVERNMENT AGAINST LOSS IN THE EVENT OF POSSIBLE DECREASE IN THE PURCHASE PRICE PAID BY THE CONTRACTOR TO THE PRODUCER.