A-67598, NOVEMBER 20, 1935, 15 COMP. GEN. 428

A-67598: Nov 20, 1935

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CONTRACTS - BITUMINOUS COAL - STATUTORY TIME LIMITATION CONTRACTS FOR THE PURCHASE OF BITUMINOUS COAL FOR PERIODS IN EXCESS OF 30 DAYS ARE PROHIBITED BY THE BITUMINOUS COAL CONSERVATION ACT OF 1935. UNTIL THE PRICES OF COAL SHALL HAVE BEEN ESTABLISHED AS REQUIRED BY SAID ACT. AN OPTION FOR RENEWAL TO BE EXERCISED AT THE END OF EACH 30 DAYS UNTIL THE PRICES SHALL HAVE BEEN ESTABLISHED MAY PROPERLY BE INCLUDED IN THE CONTRACT. THE EXERCISE OF THE OPTION WILL NECESSITATE A SHOWING THAT SUCH ACTION WAS IN THE INTEREST OF THE UNITED STATES. WERE OPENED IN THE SUPPLY SERVICE ON SEPTEMBER 30. THE LOWEST BID RECEIVED WAS THAT OF THE GUNN-QUEALY COAL COMPANY AT $1.35 PER TON. AFTER PROPOSALS WERE SOLICITED AND BEFORE THE OPENING.

A-67598, NOVEMBER 20, 1935, 15 COMP. GEN. 428

CONTRACTS - BITUMINOUS COAL - STATUTORY TIME LIMITATION CONTRACTS FOR THE PURCHASE OF BITUMINOUS COAL FOR PERIODS IN EXCESS OF 30 DAYS ARE PROHIBITED BY THE BITUMINOUS COAL CONSERVATION ACT OF 1935, 49 STAT. 991, UNTIL THE PRICES OF COAL SHALL HAVE BEEN ESTABLISHED AS REQUIRED BY SAID ACT, BUT AN OPTION FOR RENEWAL TO BE EXERCISED AT THE END OF EACH 30 DAYS UNTIL THE PRICES SHALL HAVE BEEN ESTABLISHED MAY PROPERLY BE INCLUDED IN THE CONTRACT. HOWEVER, THE EXERCISE OF THE OPTION WILL NECESSITATE A SHOWING THAT SUCH ACTION WAS IN THE INTEREST OF THE UNITED STATES.

COMPTROLLER GENERAL MCCARL TO THE ADMINISTRATOR, VETERANS' ADMINISTRATION, NOVEMBER 20, 1935:

THERE HAS BEEN RECEIVED YOUR LETTER OF NOVEMBER 12, 1935, AS FOLLOWS:

PROPOSALS FOR FURNISHING 1,800 TONS OF BITUMINOUS SLACK OR SCREENINGS COAL TO THE VETERANS' ADMINISTRATION FACILITY, CHEYENNE, WYOMING, WERE OPENED IN THE SUPPLY SERVICE ON SEPTEMBER 30, 1935. THE LOWEST BID RECEIVED WAS THAT OF THE GUNN-QUEALY COAL COMPANY AT $1.35 PER TON, F.O.B. MINES, WITH A FREIGHT RATE OF $2.10.

AFTER PROPOSALS WERE SOLICITED AND BEFORE THE OPENING, PUBLIC, NO. 402, 74TH CONGRESS WAS ENACTED INTO LAW. SUBPARAGRAPH (E), PART 2, OF SECTION 4, OF THIS ACT, READS AS FOLLOWS:

"FROM AND AFTER THE DATE OF APPROVAL OF THIS ACT, UNTIL PRICES SHALL HAVE BEEN ESTABLISHED PURSUANT TO SUBSECTIONS (A) AND (B) OF PART II OF THIS SECTION, NO CONTRACT FOR THE SALE OF COAL SHALL BE MADE PROVIDING FOR DELIVERY FOR A PERIOD LONGER THAN THIRTY DAYS FROM THE DATE OF THE CONTRACT.'

IN VIEW OF THE ABOVE PROVISION PROHIBITING CONTRACTS FOR DELIVERY OF COAL FOR PERIODS LONGER THAN THIRTY DAYS PENDING ESTABLISHMENT OF PRICES PURSUANT TO SUBSECTIONS (A) AND (B) OF PART 2, SECTION 4, OF THE ACT, THE GUNN-QUEALY COAL COMPANY WAS FURNISHED WITH A PROPOSED SUPPLEMENTAL AGREEMENT WITH REQUEST THAT THEY EXECUTE SUCH AGREEMENT AND RETURN IT TO THIS OFFICE, BEING ADVISED AT THE SAME TIME THAT EXECUTION OF THE AGREEMENT COULD NOT BE TAKEN AS A GUARANTEE THAT THE PROPOSAL WOULD BE ACCEPTED, SINCE IT MIGHT BE NECESSARY TO SUBMIT THE MATTER TO HIGHER ACCOUNTING OFFICIALS OF THE GOVERNMENT IN ORDER TO SECURE AN OPINION ASTO THE LEGALITY OF SUCH AN AGREEMENT. COPY OF THE LETTER DATED OCTOBER 23, 1935, SUBMITTING THIS PROPOSED AGREEMENT TO THE GUNN-QUEALY COAL COMPANY, TOGETHER WITH THE PROPOSED AGREEMENT WHICH HAS BEEN EXECUTED BY THE GUNN- QUEALY COAL COMPANY, AND COPY OF LETTER DATED OCTOBER 28, 1935, FROM THE GUNN-QUEALY COAL COMPANY RETURNING THE EXECUTED AGREEMENT IS ATTACHED HERETO.

IN VIEW OF THE IMPRACTICABILITY OF SOLICITING PROPOSALS EVERY THIRTY DAYS THROUGHOUT THE BALANCE OF THE FISCAL YEAR OR UNTIL PRICES ARE ESTABLISHED UNDER THE ABOVE ACT, IT WOULD BE HIGHLY DESIRABLE TO ACCEPT THE PROPOSAL OF THE GUNN-QUEALY COAL COMPANY, TOGETHER WITH THE SUPPLEMENTAL AGREEMENT, WHICH HAS BEEN EXECUTED BY THEM. THIS WOULD MAKE A CONTRACT FOR DELIVERY FOR A PERIOD OF THIRTY DAYS FROM THE DATE OF ACCEPTANCE OF THE PROPOSAL, AND THE CONTRACT WOULD PROVIDE FOR RENEWAL BY MUTUAL AGREEMENT FOR SUCCESSIVE THIRTY-DAY PERIODS UNTIL JUNE 30, 1936.

IT WILL BE APPRECIATED IF YOU WILL FURNISH YOUR DECISION AS TO THE LEGALITY OF THIS PROPOSED AGREEMENT AT THE EARLIEST POSSIBLE DATE.

PENDING YOUR DECISION IN THIS MATTER THE FACILITY AT CHEYENNE IS PURCHASING ITS COAL FROM THE GUNN-QUEALY COAL COMPANY WITHOUT A CONTRACT INASMUCH AS THIS COMPANY SUBMITTED THE LOWEST ACCEPTABLE BID.

THE STATUTE QUOTED IN YOUR LETTER OF NOVEMBER 12, 1935, HAVING PROHIBITED CONTRACTS FOR THE SALE OF COAL FOR A PERIOD LONGER THAN 30 DAYS FROM THE DATE OF THE CONTRACT UNTIL PRICES SHALL HAVE BEEN ESTABLISHED PURSUANT TO THE TERMS OF THE BITUMINOUS COAL CONSERVATION ACT OF 1935, THERE IS NO LEGAL BASIS FOR THE VETERANS' ADMINISTRATION TO CONTRACT FOR A LONGER PERIOD THAN 30 DAYS FOR THE PURCHASE OF SUCH COAL. WHILE SUCH CONTRACT MAY PROPERLY CONTAIN AN OPTION FOR RENEWAL TO BE EXERCISED AT THE END OF EACH 30 DAYS DURING THE BALANCE OF THE CURRENT FISCAL YEAR, IT WILL BE NECESSARY TO SHOW IN CONNECTION THEREWITH THAT THE EXERCISE OF THE OPTION WAS IN THE INTEREST OF THE UNITED STATES AND DOES NOT IMPOSE ON THE UNITED STATES ANY GREATER COST FOR THE COAL THAN IF OBTAINED UPON COMPETITIVE BIDS EACH 30-DAY PERIOD UNTIL THE PRICES OF COAL SHALL HAVE BEEN ESTABLISHED IN ACCORDANCE WITH SUBSECTIONS (A) AND (B) OF PART II, SECTION 4, OF THE BITUMINOUS COAL CONSERVATION ACT OF 1935.