A-72736, JUNE 23, 1936, 15 COMP. GEN. 1119

A-72736: Jun 23, 1936

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IS NOT IN CONFLICT. SPECIFICATIONS SO DRAWN AS TO EXCLUDE ALL BUT THE PRODUCT OF A SINGLE MANUFACTURER ARE BEYOND THE DISCRETION CONFERRED UPON THE TENNESSEE VALLEY AUTHORITY. AS FOLLOWS: THIS WILL ACKNOWLEDGE RECEIPT OF YOUR LETTER OF APRIL 29. IS AS FOLLOWS: "IT WOULD APPEAR FROM THE RECORD IN THIS CASE THAT THE SPECIFICATIONS WERE NOT ONLY UNDULY RESTRICTIVE. I HAVE TO ADVISE YOU THAT ON THE PRESENT RECORD. MONEYS OF THE UNITED STATES WILL NOT BE AVAILABLE FOR PAYMENTS UNDER ANY CONTRACT AWARDED PURSUANT THERETO.'. WE FIND IT IMPOSSIBLE TO CONCUR IN THAT CONCLUSION AND TRUST THAT UPON FURTHER CONSIDERATION OF THE LAW AND FACTS INVOLVED YOU WILL FIND IT POSSIBLE TO ACCEPT OUR VIEWS.

A-72736, JUNE 23, 1936, 15 COMP. GEN. 1119

CONTRACTS - RESTRICTIVE SPECIFICATIONS - TENNESSEE VALLEY AUTHORITY SECTION 9 (B) OF THE TENNESSEE VALLEY AUTHORITY ACT, AS AMENDED BY THE ACT OF AUGUST 31, 1935, 49 STAT. 1080, IS NOT IN CONFLICT, BUT IN HARMONY, WITH SECTION 3709, REVISED STATUTES, EXCEPT AS TO PURCHASES NOT IN EXCESS OF $500, AND SPECIFICATIONS SO DRAWN AS TO EXCLUDE ALL BUT THE PRODUCT OF A SINGLE MANUFACTURER ARE BEYOND THE DISCRETION CONFERRED UPON THE TENNESSEE VALLEY AUTHORITY, AND IN CONTRAVENTION OF THE STATUTES.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE CHAIRMAN, TENNESSEE VALLEY AUTHORITY, JUNE 23, 1936:

THERE HAS BEEN RECEIVED YOUR LETTER OF MAY 22, 1936, WITH ENCLOSURES, AS FOLLOWS:

THIS WILL ACKNOWLEDGE RECEIPT OF YOUR LETTER OF APRIL 29, 1936, WITH REFERENCE TO THE PROTEST OF THE MARMON-HERRINGTON COMPANY, INC.

YOUR CONCLUSION, AS EXPRESSED IN THE LAST PARAGRAPH OF YOUR LETTER, IS AS FOLLOWS:

"IT WOULD APPEAR FROM THE RECORD IN THIS CASE THAT THE SPECIFICATIONS WERE NOT ONLY UNDULY RESTRICTIVE, BUT IN FACT WHOLLY EXCLUSIVE OF COMPETITION, AND, THEREFORE, IN CONTRAVENTION OF THE STATUTORY REQUIREMENTS OF SECTION 3709, REVISED STATUTES, AND I HAVE TO ADVISE YOU THAT ON THE PRESENT RECORD, MONEYS OF THE UNITED STATES WILL NOT BE AVAILABLE FOR PAYMENTS UNDER ANY CONTRACT AWARDED PURSUANT THERETO.'

WE FIND IT IMPOSSIBLE TO CONCUR IN THAT CONCLUSION AND TRUST THAT UPON FURTHER CONSIDERATION OF THE LAW AND FACTS INVOLVED YOU WILL FIND IT POSSIBLE TO ACCEPT OUR VIEWS.

YOU STATE THAT THE SPECIFICATIONS WERE IN CONTRAVENTION OF THE STATUTORY REQUIREMENTS OF SECTION 3709, REVISED STATUTES. I DESIRE TO CALL YOUR ATTENTION TO THE FACT THAT PURCHASES BY THE AUTHORITY ARE NOT GOVERNED BY THE STATUTES CITED BY YOU BUT ARE CONTROLLED BY THE PROVISIONS OF SECTION 9 (B) OF THE TENNESSEE VALLEY AUTHORITY ACT, AS AMENDED. THERE ARE CERTAIN PROVISIONS OF THAT SECTION THAT HAVE A MATERIAL BEARING UPON THE MATTER UNDER CONSIDERATION. THE FIRST SENTENCE READS AS FOLLOWS:

"ALL PURCHASES AND CONTRACTS FOR SUPPLIES OR SERVICES, EXCEPT FOR PERSONAL SERVICES, MADE BY THE CORPORATION, SHALL BE MADE AFTER ADVERTISING, IN SUCH MANNER AND AT SUCH TIMES SUFFICIENTLY IN ADVANCE OF OPENING BIDS, AS THE BOARD SHALL DETERMINE TO BE ADEQUATE TO INSURE NOTICE AND OPPORTUNITY FOR COMPETITION.'

IT IS IMPORTANT TO NOTE THAT IT IS HERE PROVIDED THAT THE BOARD SHALL DETERMINE THE MANNER OF ADVERTISING THAT IS ADEQUATE TO INSURE NOTICE AND OPPORTUNITY FOR COMPETITION. IT WOULD SEEM CLEAR THAT THE PURPOSE OF VESTING THIS RIGHT OF DETERMINATION IN THE BOARD WAS TO ALLOW A DEGREE OF DISCRETION IN DETERMINING THE MANNER AND METHOD OF ADVERTISING DESIGNED TO MEET THE PARTICULAR REQUIREMENTS OF THE SERVICE WHILE BEARING IN MIND THE NECESSITY FOR A REASONABLE OPPORTUNITY FOR COMPETITION. THIS POLICY OF ALLOWING A REASONABLE DEGREE OF DISCRETION TO THE BOARD IS FURTHER EMPHASIZED IN THE SECOND PROVISO, WHICH READS AS FOLLOWS:

"PROVIDED FURTHER, THAT IN COMPARING BIDS AND IN MAKING AWARDS THE BOARD MAY CONSIDER SUCH FACTORS AS RELATIVE QUALITY AND ADAPTABILITY OF SUPPLIES OR SERVICES, THE BIDDER'S FINANCIAL RESPONSIBILITY, SKILL, EXPERIENCE, RECORD OF INTEGRITY IN DEALING, ABILITY TO FURNISH REPAIRS AND MAINTENANCE SERVICES, THE TIME OF DELIVERY OR PERFORMANCE OFFERED, AND WHETHER THE BIDDER HAS COMPLIED WITH THE SPECIFICATIONS.'

IT WOULD THEREFORE APPEAR THAT IN ORDER TO COMPLAIN OF THE ACTION OF THE BOARD EITHER IN DETERMINING THE MANNER AND METHOD OF ADVERTISING OR IN MAKING AWARDS, A PROTESTANT SHOULD BE REQUIRED TO SHOW THAT SUCH ACTION IS ARBITRARY AND WITHOUT FOUNDATION IN FACT. IN OUR OPINION, THE PROTESTANT HAS CLEARLY FAILED TO SUSTAIN ANY SUCH BURDEN OF PROOF IN THIS MATTER.

IN YOUR LETTER, YOU STATE THAT UNDER EXISTING LAWS GOVERNING THE PURCHASE OF EQUIPMENT FOR THE GOVERNMENT, THE CONTROLLING ELEMENT IS THE JOB TO BE DONE AND THAT THE REQUEST FOR BIDS SHOULD FAIRLY REFLECT THE ACTUAL REQUIREMENTS OF THE SERVICE. WE ARE IN COMPLETE AGREEMENT WITH THIS STATEMENT OF PRINCIPLE AND BELIEVE THAT IT IS EQUALLY APPLICABLE AS A GUIDE TO THE EXERCISE OF THE DISCRETIONARY POWERS CONFERRED BY THE TENNESSEE VALLEY AUTHORITY ACT AS IT IS TO REGULAR GOVERNMENT PURCHASING PROCEDURE UNDER SECTION 3709, REVISED STATUTES. AS WE UNDERSTAND THIS STATEMENT IN THE LIGHT OF YOUR PRIOR DECISIONS, THE PRINCIPLE IS THAT IT IS PROPER TO INCLUDE IN SPECIFICATIONS ANY REQUIREMENT THAT HAS A REASONABLY SUBSTANTIAL RELATION TO THE WORK TO BE PERFORMED BUT THAT IT IS CLEARLY IMPROPER TO ARBITRARILY INCLUDE REQUIREMENTS THAT HAVE NO SUCH RELATION AND RESULT MERELY IN RESTRICTING COMPETITION. IN YOUR LETTER YOU STRESS THE FACT THAT THE REQUIREMENTS INSERTED IN THE SPECIFICATIONS UNDER CONSIDERATION RESULTED IN A RESTRICTION OF COMPETITION. THAT FACT, WHILE UNFORTUNATE, MAY NOT BE RELEVANT. IF THE WORK TO BE PERFORMED BY THE EQUIPMENT TO BE PURCHASED REQUIRED SPECIFICATIONS OF THE CHARACTER UNDER CONSIDERATION, THERE WAS NO CHOICE BUT TO INCLUDE SUCH REQUIREMENTS. THE WORK TO BE PERFORMED IS THE FIRST AND PRIMARY CONSIDERATION. UNDER YOUR PRIOR DECISIONS, IT SEEMS CLEAR TO ME THAT UPON SUCH A SHOWING OF NECESSITY AS IS MADE IN THIS CASE, THE PURCHASE OF THIS EQUIPMENT WITHOUT ANY ATTEMPT TO SECURE COMPETITION UPON A PROPRIETARY BASIS WOULD HAVE BEEN ENTIRELY JUSTIFIED. IT IS THE UNANIMOUS OPINION OF THOSE WHO HAVE BEEN EMPLOYED BY THE AUTHORITY BECAUSE OF THEIR EXPERT KNOWLEDGE OF EQUIPMENT OF THIS CHARACTER THAT THE REQUIREMENT OF A CENTER DIFFERENTIAL TO BE MANUALLY CONTROLLED FROM THE DRIVER'S SEAT IS INDISPENSABLE IF THE EQUIPMENT TO BE PURCHASED IS TO ADEQUATELY PERFORM THE WORK FOR WHICH IT IS BEING ACQUIRED. IN VIEW OF THIS OPINION, IT SEEMS TO US THAT IT IS THE CLEAR DUTY OF THE BOARD IN THE EXERCISE OF THE DISCRETION CONFERRED UPON IT BY THE CONTROLLING LAW TO AWARD THIS CONTRACT TO THE ONLY BIDDER WHO HAS BEEN ABLE TO OFFER EQUIPMENT THAT WILL PERFORM THE WORK.

IN ORDER TO SUPPLEMENT INFORMATION ALREADY BEFORE YOU, I AM ENCLOSING HEREWITH COPIES OF TWO ADDITIONAL MEMORANDA UPON THE SUBJECT. IF THERE IS ANY FURTHER INFORMATION THAT YOU DESIRE CONCERNING THE FACTS, WE WILL BE GLAD TO ATTEMPT TO COMPLY WITH ANY REQUEST THAT YOU MAY MAKE. I SINCERELY TRUST THAT AFTER FURTHER CONSIDERATION YOU WILL FIND IT POSSIBLE TO CONCUR WITH THESE VIEWS.

SO FAR AS IS KNOWN NONE OF THE SEVERAL PARTIES PROTESTING THE SPECIFICATIONS INVOLVED HAS ENTERED OBJECTION, EITHER TO THIS OFFICE OR TO THE TENNESSEE VALLEY AUTHORITY, WITH REFERENCE TO THE TIME OR MANNER OF ADVERTISING IN THE INSTANT MATTER, AND DISCUSSION OF THE FIRST SENTENCE OF THE STATUTE QUOTED BY YOU WOULD APPEAR IRRELEVANT. THE PROTESTS HAVE BEEN DIRECTED TO SUBSTANTIVE PROVISIONS OF THE SPECIFICATIONS AND TO ADMINISTRATIVE ACTION IN THE AWARD OF CONTRACTS ON THE ITEMS RATHER THAN TO FORMAL PROCEDURE.

THERE IS NOTED YOUR STATEMENT THAT PURCHASES BY THE TENNESSEE VALLEY AUTHORITY ARE NOT GOVERNED BY SECTION 3709, REVISED STATUTES, BUT ARE CONTROLLED BY THE PROVISIONS OF SECTION 9 (B) OF THE TENNESSEE VALLEY AUTHORITY ACT, AS AMENDED, WHICH YOU QUOTE IN PART. SECTION 3709, REVISED STATUTES, IS A GENERAL STATUTE APPLICABLE TO PURCHASES BY ALL DEPARTMENTS AND INDEPENDENT AGENCIES OF THE GOVERNMENT. SECTION 9 (B) OF THE TENNESSEE VALLEY AUTHORITY ACT, AS AMENDED BY SECTION 14 OF THE ACT OF AUGUST 31, 1935 (49 STAT., AT P. 1080), IS A SPECIAL STATUTE APPLYING TO PURCHASES BY THE TENNESSEE VALLEY AUTHORITY, INSTRUMENTALITY OF THE GOVERNMENT. BOTH STATUTES DEAL WITH THE SAME SUBJECT, TO WIT, PURCHASES FOR GOVERNMENT NEEDS. IT IS A FAMILIAR CANON OF STATUTORY CONSTRUCTION THAT WHERE THERE IS ONE STATUTE DEALING WITH A SUBJECT IN GENERAL AND COMPREHENSIVE TERMS, AND ANOTHER STATUTE DEALING WITH A PART OF THE SAME SUBJECT IN A MORE MINUTE AND DEFINITE WAY, THE TWO STATUTES MUST BE READ TOGETHER AND HARMONIZED, IF POSSIBLE, WITH A VIEW TO GIVING EFFECT TO A CONSISTENT LEGISLATIVE POLICY. SWEET V. UNITED STATES (205 U.S. 563); STONEBERG V. MORGAN (246 FED. 98). APPLYING THAT RULE HERE IT IS MANIFEST THAT NO RECONCILIATION OF THE STATUTES INVOLVED IS NECESSARY IN ORDER TO GIVE EFFECT TO BOTH. SO FAR FROM BEING IN CONFLICT WITH SECTION 3709, REVISED STATUTES, THE SECTION OF THE TENNESSEE VALLEY AUTHORITY ACT FROM WHICH YOU QUOTE IS IN COMPLETE HARMONY THEREWITH. IT NEITHER ENLARGES, RESTRICTS, NOR VARIES THE REQUIREMENTS OF THE FORMER STATUTE EXCEPT AS TO PURCHASES NOT IN EXCESS OF $500. IT DECLARES NO NEW RULE AND AUTHORIZES NO DEPARTURE FROM THE OLD. IT CLEARLY REFLECTS THE PURPOSE OF THE CONGRESS TO MAKE THE GENERAL REQUIREMENTS GOVERNING PURCHASES FOR GOVERNMENT NEEDS APPLICABLE TO PURCHASES BY THE TENNESSEE VALLEY AUTHORITY, AND GIVES POSITIVE STATUTORY SANCTION TO PRACTICES LONG ESTABLISHED AND PRINCIPLES LONG RECOGNIZED AND APPROVED IN ADVERTISING AND PURCHASING FOR THE NEEDS OF VARIOUS DEPARTMENTS AND AGENCIES OF THE UNITED STATES. IF THERE WAS EVER DOUBT THAT THE TENNESSEE VALLEY AUTHORITY WAS TO BE SUBJECT TO THE STATUTORY PROVISIONS APPLICABLE TO CONTRACTING FOR GOVERNMENT NEEDS, SUCH DOUBT WAS SETTLED AND REMOVED BY THE ENACTMENT OF THE AMENDMENT HERE IN QUESTION. IT FOLLOWS THAT WHAT HAS HERETOFORE BEEN SAID IN THE DECISION AS TO THE REQUIREMENTS OF SECTION 3709, REVISED STATUTES, APPLIED WITH EQUAL FORCE TO THE REQUIREMENTS OF THE SAID SECTION 9 (B) OF THE TENNESSEE VALLEY AUTHORITY ACT, AS AMENDED, AND ITS CONSIDERATION NEITHER REQUIRES NOR AUTHORIZES ALTERATION OF THE PRINCIPLES LAID DOWN IN THE FORMER DECISION IN THIS CASE.

THE EXERCISE OF THE DISCRETION VESTED IN THE BOARD IN THE MATTER OF CONSIDERING CERTAIN NAMED FACTORS IN COMPARING BIDS AND MAKING AWARDS MUST BE REASONABLE AND IN THE LIGHT OF ESTABLISHED LAWS APPLICABLE TO ADVERTISING AND CONTRACTING FOR GOVERNMENT NEEDS AND MAY NOT BE FOR THE PURPOSE OF ACQUIRING WHAT IS ADMINISTRATIVELY DESIRED OR EVEN WHAT IS ACTUALLY PREFERABLE, RATHER THAN WHAT IS REQUIRED AND ADEQUATE FOR THE NEEDS OF THE GOVERNMENT. AS SAID BY THE SUPREME COURT IN PURCELL ENVELOPE CO. V. UNITED STATES (249 U.S. 313-318): "THERE MUST BE A POINT OF TIME AT WHICH DISCRETION IS EXHAUSTED. THE PROCEDURE FOR THE ADVERTISING FOR BIDS FOR SUPPLIES OR SERVICES TO THE GOVERNMENT WOULD ELSE BE A MOCKERY--- A PROCEDURE, WE MAY SAY, THAT IS NOT PERMISSIVE BUT REQUIRED.'

THE STATUTE HERE UNDER CONSIDERATION REQUIRES THAT ALL PURCHASES AND CONTRACTS FOR SUPPLIES OR SERVICES MADE BY THE TENNESSEE VALLEY AUTHORITY SHALL BE MADE AFTER ADVERTISING TO INSURE OPPORTUNITY FOR COMPETITION. IS NOT OPEN TO ARGUMENT THAT WHEN SPECIFICATIONS ARE DRAWN, AS IN THIS CASE, SO THAT ONLY THE PRODUCT OF A SINGLE MANUFACTURER CAN COMPLY THEREWITH, THUS EXCLUDING ALL COMPETITION, THERE IS A DEFINITE VIOLATION OF THE PLAIN MANDATE OF THE STATUTE.

IT WAS POINTED OUT IN THE DECISION TO YOU OF APRIL 29, 1936, THAT OF 11 MANUFACTURERS OF TRUCKS OF THE TYPE TO BE PURCHASED ONLY 1 FURNISHES A MANUALLY CONTROLLED CENTER DIFFERENTIAL LOCK, WHILE ONLY 2 OTHERS FURNISH A CENTER DIFFERENTIAL; THAT THERE ARE UNDOUBTEDLY HUNDREDS IF NOT THOUSANDS OF SIMILAR TRUCKS, UNEQUIPPED WITH CENTER DIFFERENTIALS IN DAILY USE THROUGHOUT THE COUNTRY, AND WHILE IT MIGHT BE CONCEDED THAT A CENTER DIFFERENTIAL, OR EVEN A MANUALLY CONTROLLED CENTER DIFFERENTIAL, IS A DESIRABLE FEATURE OF SPECIAL EQUIPMENT, IT CANNOT BE CONSIDERED AS ESSENTIAL TO THE REASONABLY SATISFACTORY OPERATION AND PERFORMANCE OF THE TRUCK. THE LISTS OF USERS FURNISHED BY OTHER BIDDERS ON VARIOUS ITEMS SHOW THAT TRUCKS WITHOUT THE CENTER DIFFERENTIAL ARE USED BY STATES, COUNTIES, AND MUNICIPALITIES, AND THE LIST OF USERS FURNISHED BY ONE BIDDER, THE WALTER MOTOR TRUCK CO., SHOWS AT LEAST FOUR UTILITY COMPANIES OPERATING TRUCKS WHICH DO NOT HAVE THE FEATURE OF MANUAL DIFFERENTIAL CONTROL. YET THE BID OF THAT MANUFACTURER, OFFERING A TRUCK WITH AN AUTOMATIC CENTER DIFFERENTIAL, WAS REJECTED AT AN EXCESS COST TO THE GOVERNMENT OF $922.84, APPROXIMATELY 19 PERCENT OVER THE LOW BID. AWARD WAS MADE FOR THE ONLY TRUCK WHICH COULD POSSIBLY MEET THE RESTRICTIVE SPECIFICATIONS, AND, AS SUGGESTED BY THE SUPREME COURT IN THE PURCELL ENVELOPE CO. CASE, SUPRA, THE PROCEDURE FOR ADVERTISING FOR BIDS WAS AN IDLE GESTURE. THE SPECIFICATIONS WERE CLEARLY IN CONTRAVENTION OF STATUTORY REQUIREMENTS AND BEYOND THE DISCRETION CONFERRED UPON THE TENNESSEE VALLEY AUTHORITY.

SINCE IT IS POSSIBLE TO ASSUME FROM YOUR LETTER THAT THE ACTION OF THE CORPORATION WAS PREDICTED IN SOME MEASURE AT LEAST UPON A MISCONCEPTION OF THE LAW, THIS OFFICE WILL NOT WITHHOLD APPROVAL OF OTHERWISE PROPER PAYMENTS UNDER THE CONTRACT IN THIS INSTANCE. HOWEVER, ADMINISTRATIVE PROCEDURE, BOTH AS TO THE PREPARATION OF SPECIFICATIONS, AND AWARD OF CONTRACTS SHOULD BE CORRECTED TO CONFORM HEREAFTER TO STATUTORY REQUIREMENTS AND THE CONCLUSIONS STATED HEREIN.