A-77710, JULY 27, 1937, 17 COMP. GEN. 61

A-77710: Jul 27, 1937

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THERE IS A REASONABLE BASIS FOR SUSPECTING IRREGULARITY. IT IS THE PLAIN DUTY OF THE ADMINISTRATIVE. WHERE A DEALER HAD FURNISHED GASOLINE LOCOMOTIVES AT VARYING RENTAL RATES UNDER A SERIES OF AGREEMENTS AND HAD RECEIVED AN AWARD TO FURNISH SUCH LOCOMOTIVES AT A RENTAL RATE APPARENTLY CONSIDERABLY HIGHER THAN CURRENT RENTAL VALUE AND SUBSTANTIALLY EXCEEDING THE BID OF THE LOWEST RESPONSIBLE BIDDER WHICH WAS REJECTED APPARENTLY BECAUSE OF FAVORITISM AND DISCRIMINATION BY CERTAIN EMPLOYEES OF THE GOVERNMENT. WHERE THE SAID DEALER'S LOCOMOTIVES WERE NOT MAINTAINED IN GOOD REPAIR. THERE WAS NO REAL NEED FOR THE NUMBER FURNISHED. THERE IS A REASONABLE BASIS FOR SUSPICION OF FRAUD OR COLLUSION.

A-77710, JULY 27, 1937, 17 COMP. GEN. 61

QUESTIONABLE EQUIPMENT RENTAL AGREEMENTS - GENERAL ACCOUNTING OFFICE PAYMENT PROCEDURE WHERE, UPON THE RECORD PRESENTED, THERE IS A REASONABLE BASIS FOR SUSPECTING IRREGULARITY, COLLUSION, OR FRAUD IN THE MAKING OF, OR PERFORMANCE UNDER, ANY AGREEMENT ON BEHALF OF THE UNITED STATES, IT IS THE PLAIN DUTY OF THE ADMINISTRATIVE, ACCOUNTING, AND AUDITING OFFICERS TO REFUSE TO APPROVE AND TO PREVENT PAYMENT OF PUBLIC MONEYS THEREUNDER, THUS RESERVING THE MATTER FOR SCRUTINY IN THE COURTS WHERE THE FACTS MAY BE JUDICIALLY DETERMINED UPON SWORN TESTIMONY AND COMPETENT EVIDENCE, AND A FORFEITURE DECLARED OR OTHER APPROPRIATE ACTION TAKEN. WHERE A DEALER HAD FURNISHED GASOLINE LOCOMOTIVES AT VARYING RENTAL RATES UNDER A SERIES OF AGREEMENTS AND HAD RECEIVED AN AWARD TO FURNISH SUCH LOCOMOTIVES AT A RENTAL RATE APPARENTLY CONSIDERABLY HIGHER THAN CURRENT RENTAL VALUE AND SUBSTANTIALLY EXCEEDING THE BID OF THE LOWEST RESPONSIBLE BIDDER WHICH WAS REJECTED APPARENTLY BECAUSE OF FAVORITISM AND DISCRIMINATION BY CERTAIN EMPLOYEES OF THE GOVERNMENT, AND WHERE THE SAID DEALER'S LOCOMOTIVES WERE NOT MAINTAINED IN GOOD REPAIR, AND THERE WAS NO REAL NEED FOR THE NUMBER FURNISHED, THERE IS A REASONABLE BASIS FOR SUSPICION OF FRAUD OR COLLUSION, AND, IN THESE CIRCUMSTANCES, AND FOR THE FURTHER REASON THAT THE AWARD WAS NOT TO THE LOWEST RESPONSIBLE BIDDER, THE GENERAL ACCOUNTING OFFICE IS WITHOUT AUTHORITY TO APPROVE ANY PAYMENT.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE EQUIPMENT CORPORATION OF AMERICA, JULY 27, 1937:

ON MAY 13, 1937, THE COMMISSIONER OF ACCOUNTS AND DEPOSITS, TREASURY DEPARTMENT, FORWARDED FOR PREAUDIT BUREAU VOUCHERS R-607, R-608, AND R- 609, COVERING YOUR CLAIMS FOR PAYMENT OF RENTAL ON 7-TON GAS LOCOMOTIVES UNDER AN AGREEMENT DATED MAY 21, 1936, WITH THE STATE PROCUREMENT OFFICER OF ILLINOIS, FOR USE BY THE WORKS PROGRESS ADMINISTRATION IN CONNECTION WITH WORKS PROJECT NO. 1267 IN LINCOLN PARK, CHICAGO. THE MATTERS OF RECORD, HEREINAFTER SET FORTH, APPEARED TO PRECLUDE PREAUDIT APPROVAL AND, AS YOU ARE AWARE, THE VOUCHERS WITH SUPPORTING DOCUMENTS HAVE BEEN MADE THE SUBJECT OF A CAREFUL EXAMINATION WITH A VIEW TO SETTLEMENT OF THE CLAIM INVOLVED. YOUR MR. CATRON HAS INQUIRED REPEATEDLY AND HAS ASKED THAT YOU BE INFORMED OF MY ACTION.

BUREAU VOUCHER R-607 IS IN THE GROSS SUM OF $2,152 COVERING YOUR INVOICES FOR FURNISHING FOUR SUCH LOCOMOTIVES (ONE WHITCOMB AND THREE PLYMOUTHS) FROM MAY 21 TO JULY 20, 1936, AT $269 PER MONTH, PER UNIT, FOR SERVICES ALLEGEDLY RENDERED UNDER PURCHASE ORDER NO. 49999 AT CHURCH STREET AND MCCORMICK ROAD, EVANSTON, ILL., IN CONNECTION WITH EARTH FILLING IN LINCOLN PARK, INCLUDING THE SPREADING OF SAME BETWEEN NORTH AVENUE AND HARVARD STREET.

BUREAU VOUCHER R-608 IS IN THE GROSS SUM OF $1,076, AND COVERS YOUR INVOICE FOR FURNISHING THE SAME FOUR GAS LOCOMOTIVES FOR ALLEGEDLY SIMILAR SERVICES UNDER PURCHASE ORDER NO. 65515 FROM JULY 21 TO AUGUST 20, 1936, AT $269 PER MONTH, PER UNIT.

BUREAU VOUCHER R-609 IS IN THE GROSS SUM OF $807 COVERING YOUR INVOICE FOR FURNISHING THREE OF THESE GAS LOCOMOTIVES (ONE WHITCOMB AND TWO PLYMOUTHS) FOR ALLEGEDLY SIMILAR SERVICES UNDER PURCHASE ORDER NO. 71750 FROM AUGUST 21 TO SEPTEMBER 20, 1936, AT $269 PER MONTH, PER UNIT.

THERE ARE APPROXIMATELY 70 AGREEMENTS NOW ON FILE IN THE GENERAL ACCOUNTING OFFICE BETWEEN YOUR FIRM AND THE STATE PROCUREMENT OFFICER FOR ILLINOIS, DATED BETWEEN OCTOBER 1, 1935, AND JUNE 30, 1937, FOR RENTAL OF EQUIPMENT. AT LEAST FOUR OF THESE AGREEMENTS ARE FOR THE FURNISHING ON A RENTAL BASIS OF 7-TON GASOLINE LOCOMOTIVES WITH 3,500 POUND DRAWBAR PULL, 4 SPEEDS FORWARD AND REVERSE, FOR A 24-INCH GAGE TRACK, YOU IN EACH CASE TO MAINTAIN THE EQUIPMENT SUITABLE FOR OPERATION WITH EFFICIENT BRAKES, REMOVABLE BRAKE SHOES, ELECTRIC LIGHTING AND STARTING EQUIPMENT, SAND-BOX AND SANDING EQUIPMENT, SIGNAL DEVICES, TOOL BOX, AND ALL ACCESSORIES; ALL LICENSES, PERMITS, MAINTENANCE, AND REPAIRS TO BE FURNISHED AT YOUR COST, DELIVERY TO BE AT THE PROJECT SITES SPECIFIED, SUBJECT TO INSPECTION AND TO COMPLY WITH ALL FEDERAL, STATE, COUNTY, MUNICIPAL, AND WORKS PROGRESS ADMINISTRATION REGULATIONS GOVERNING SAFETY APPLIANCES, ETC., BUT OPERATORS, FUEL, AND LUBRICANTS TO BE FURNISHED IN EACH INSTANCE BY THE WORKS PROGRESS ADMINISTRATION.

THE LATEST SUCH AGREEMENT WHICH HAS BEEN FOUND ON FILE IS DATED OCTOBER 31, 1936, AND IS FOR THE FURNISHING OF TWO 7-TON WHITCOMB GAS LOCOMOTIVES AT $168 PER MONTH EACH, SUBJECT TO 2 PERCENT DISCOUNT FOR PAYMENT WITHIN 20 CALENDAR DAYS, FOR A MINIMUM PERIOD OF "1 MONTH RENTAL TIME" RENEWABLE AT THE OPTION OF THE STATE PROCUREMENT OFFICER FOR MONTH PERIODS THE "REQUIRED MAXIMUM RENTAL TIME AND PERIOD FOR THE EQUIPMENT IS TO DECEMBER 31, 1936," AND "PROVIDING THERE ARE FUNDS AVAILABLE FOR THIS PURPOSE AT THAT TIME; FOR MONTHLY PERIODS NOT TO EXCEED JUNE 30, 1937.' THIS AGREEMENT RECITES THAT IT WAS AWARDED TO YOU AS THE LOWEST BIDDER AS TO PRICE AFTER NOTICES HAD BEEN POSTED IN PUBLIC PLACES AND ADVERTISING BY CIRCULAR LETTERS SENT TO 36 DEALERS.

ANOTHER AGREEMENT FOR GAS LOCOMOTIVE RENTAL IS DATED JUNE 11, 1936, FOR THE FURNISHING OF TWO 4-TON PLYMOUTHS FOR SIMILAR SERVICES ON SIMILAR TERMS FOR 6 MONTHS EACH AT $149 PER MONTH PER UNIT.

PAYMENT ON YOUR PRESENT CLAIMS FOR RENTAL AT $269 PER MONTH ON EACH GAS LOCOMOTIVE HAS BEEN REFUSED ADMINISTRATIVELY, THIS OFFICE HAVING INFORMED THE SECRETARY OF THE TREASURY BY LETTER OF SEPTEMBER 5, 1936,"THAT, ON THE PRESENT RECORD, CREDIT MAY NOT BE ALLOWED FOR ANY PAYMENTS" TO YOU BY REASON OF THE IRREGULAR, UNAUTHORIZED, AND APPARENTLY ILLEGAL PROCEDURE WHICH HAD BEEN FOLLOWED IN AGREEING TO PAY YOU RENTAL AT $269 PER MONTH FOR EACH SUCH GAS LOCOMOTIVE; THAT IS, AT A RATE $101 PER MONTH PER UNIT GREATER THAN SPECIFIED IN THE LATER AGREEMENT OF OCTOBER 31, 1936, AND AT APPROXIMATELY $72 PER MONTH PER UNIT GREATER RENTAL THAN IT WAS APPARENTLY ESTABLISHED, SIMILAR EQUIPMENT IN BETTER MECHANICAL CONDITION COULD HAVE BEEN HAD ON A BONA FIDE COMPETITIVE BID BASIS AT THE TIME.

THE BASIS OF THE PRESENT CLAIMS AT $269 PER MONTH PER LOCOMOTIVE FROM MAY 21 TO SEPTEMBER 20, 1936, IS SET FORTH IN YOUR LETTER OF MARCH 17, 1937, AS FOLLOWS:

MARCH 17, 1937. MR. ROBERT H. DIGGES,

U.S. TREASURY DEPARTMENT, STATE PROCUREMENT OFFICE,

222 WEST NORTH BANK DRIVE, CHICAGO, ILLINOIS.

DEAR SIR: WE ARE ENCLOSING INVOICES COVERING THE RENTAL OF 24 INCH GAUGE 7-TON GASOLINE LOCOMOTIVES FROM MAY 21ST TO AUGUST 20TH, 1936, WHICH INVOICES ARE SUBMITTED TO YOU IN THE NATURE OF A CLAIM.

REVIEWING THE HISTORY OF THIS TRANSACTION, WILL STATE THAT WE ORIGINALLY BID ON INVITATION NO. 1558 FOR THE RENTAL OF---

6 7-TON GEAR DRIVEN GASOLINE LOCOMOTIVES, WITH 4 SPEEDS FORWARD AND 4 SPEEDS REVERSE, RENTAL PRICE, $275.00 PER MONTH EACH, OR RENTAL PRICE $1,650.00 PER MONTH FOR THE 6.

WE WERE THE SUCCESSFUL BIDDER ON THIS TRANSACTION, AND OUR LOCOMOTIVES WERE ON THE PROJECT FROM FEBRUARY 11TH ON. WE WERE THEN NOTIFIED THAT YOU WERE UNABLE TO GIVE US AN ADDITIONAL RENEWAL OF THIS ORDER, AND A NEW INVITATION WAS ISSUED FOR THE RENTAL OF 6 7-TON 4 SPEED GASOLINE LOCOMOTIVES FOR USE ON THIS SAME PROJECT FOR A PERIOD OF EIGHT MONTHS. MAY 15TH WE BID ON INVITATION NO. 7762---

6 LOCOMOTIVES, RENTAL PRICE, $269.00 PER MO. EACH.

BEFORE THE INVITATIONS WERE ISSUED WE WERE ASKED BY THE W.P.A. IF OUR BID WOULD (BE) APPROXIMATELY THE SAME AS IT WAS THE LAST TIME, OR IF WE WOULD TAKE INTO CONSIDERATION THE FACT THAT WE ALREADY HAD THEM ON THE JOB AND WOULD BID LESS ON ACCOUNT OF THE SAVING IN TRANSPORTATION. THIS WE AGREED TO DO, AND OUR BID WAS IN AMOUNT OF $269.00 PER MONTH EACH.

WE WERE ISSUED PURCHASE ORDER NO. 49999, REQ. NO. 66, FOR OFFICIAL PROJECT 65-54-2381, ALLOTMENT W.P. NO. 1267, COVERING 6 LOCOMOTIVES AT $269.00 PER MONTH EACH, FOR PERIOD OF TWO MONTHS, OR TOTAL $3,228.00.

AS OUR LOCOMOTIVES WERE ALL ON THE JOB AT THE TIME, AND WERE IN SERVICE, OUR RENTAL TIME NATURALLY STARTED AS OF THAT DATE.

THEY TOLD US ON THE JOB, HOWEVER, THAT THEY WOULD ONLY NEED FOUR LOCOMOTIVES, BUT WE LEFT TWO ADDITIONAL LOCOMOTIVES ON THE PROJECT, SO THAT, IF THEY EVER DID HAVE ANY TROUBLE WITH ANY OF THE LOCOMOTIVES AT ANY TIME, THERE WOULD BE NO TIME LOST AND THEY COULD USE ONE OF THE TWO SPARE LOCOMOTIVES THAT WE HAD THERE.

WE RENDERED INVOICE COVERING THESE MACHINES, DUPLICATES OF THAT WHICH WE ATTACH HERETO; NAMELY, IN AMOUNT $269.00 PER MONTH EACH. WE WERE THEN TOLD, IN A LETTER DATED JUNE 18TH, FILE NO. 35403, SIGNED BY MR. M. W. MILLIGAN, THAT:

"INASMUCH AS THE CONTRACT NO. ER-TPS-54-14513, AND PURCHASE ORDER NO. 49999, APPLYING THERETO, WERE EXECUTED AND FORWARDED TO YOU IN ERROR, THIS IS TO ADVISE THAT PAYMENTS ON THIS CONTRACT AND PURCHASE ORDER CAN BE VOUCHERED BY THIS OFFICE ONLY AT THE RATE INDICATED IN THE BID OF THE LOW BIDDER, NAMELY, ONE-HUNDRED AND NINETY-SEVEN DOLLARS ($197.00) PER MONTH, LESS TWO PERCENT (2 PERCENT) TEN DAYS, ONE PERCENT (1 PERCENT) TWENTY DAYS.'

OUR INVOICE NO. 38541 COVERED THE RENTAL OF 4 LOCOMOTIVES FROM MAY 21ST TO JUNE 20TH.

OUR INVOICE NO. 38540 COVERED THE RENTAL OF 4 LOCOMOTIVES FROM JUNE 21ST TO JULY 20TH.

OUR INVOICE NO. 38539 COVERED THE RENTAL OF 4 LOCOMOTIVES FROM JULY 21ST TO AUGUST 20TH, ON YOUR ORDER NO. 65515.

OUR INVOICE NO. 38538, FOR 3 LOCOMOTIVES FROM AUGUST 21ST TO SEPTEMBER 20TH, AMOUNT $269.00 PER MONTH EACH, TOTAL $807.00 ON YOUR PURCHASE ORDER NO. 71750.

THE ABOVE INVOICES, TOTALING $4,035.00, WE BELIEVE TO BE A CORRECT AND A JUST CLAIM.

HOWEVER, AT THE COMPLETION OF THE JOB, WHEN WE SUBMITTED THE INVOICES IN THE ABOVE AMOUNTS TO THE U.S. TREASURY DEPARTMENT, OUR MR. BROECKER WAS CALLED DOWN THERE TO SEE MR. JOHN DAVIS, AND HE ADVISED US THAT INVOICES IN AMOUNT $269.00 PER MONTH EACH WOULD NOT BE APPROVED. HE STATED THAT IF WE WERE TO RENDER THESE INVOICES IN AMOUNT $197.00 PER MONTH EACH, TOTAL $2,955.00 THEY WOULD BE APPROVED, AND THAT THE MONEY FOR SAME WAS AVAILABLE IMMEDIATELY.

RATHER THAN WAIT FOR THE SETTLEMENT OF THE CLAIM WE, THEREFORE,TOOK BACK OUR INVOICES AND RENDERED NEW INVOICES FOR $197.00 PER MONTH EACH, TOTALING $2,955.00. THIS WAS DONE LAST OCTOBER AND WE HAVE NEVER RECEIVED THE MONEY. WE THINK THAT WE ARE ENTITLED TO THE $269.00 PER MONTH EACH, WHICH IS WHAT OUR ORIGINAL ORDER CALLED FOR.

YOURS VERY TRULY, EQUIPMENT CORPORATION OF AMERICA.

JOS. V. SULLIVAN.

(SIGNED) JOSEPH V. SULLIVAN, SECRETARY.

THE SO-CALLED "NEW INVOICES" SAID TO HAVE BEEN RENDERED AT $197 PER MONTH FOR EACH LOCOMOTIVE DO NOT APPEAR TO HAVE BEEN FORWARDED TO THIS OFFICE. THE INVOICES WHICH WERE FORWARDED HERE ARE COMPUTED AT $269 PER MONTH STRAIGHT TIME FOR EACH LOCOMOTIVE, AND ARE CERTIFIED BY YOU TO BE ,CORRECT AND JUST, PAYMENT NOT RECEIVED.'

IT APPEARS THAT IN RESPONSE TO INVITATION NO. 255 OF THE ILLINOIS STATE PROCUREMENT OFFICE OF SEPTEMBER 28, 1935, YOU SUBMITTED A BID OCTOBER 5, 1935, AS FOLLOWS:

WE HAND YOU HEREWITH OUR BID IN QUADRUPLICATE COVERING:

1, 2, OR 3 WHITCOMB 7-TON 24 INCH GAUGE GASOLINE DRIVEN LOCOMOTIVES, TYPE MO, EQUIPPED WITH 4 CYL. 5 BY 6, WISCONSIN RADIATOR COOLED GASOLINE POWER UNIT, DEVELOPING MORE THAN 60 H.P. THIS LOCOMOTIVE HAS 4 SPEEDS FORWARD AND 4 REVERSE, GEAR TRANSMISSIONS, CHAIN DRIVE, 4 DRIVE WHEELS; EQUIPPED WITH SAND BOX AND SANDING EQUIPMENT, ELECTRIC HEADLIGHT, WARNING SIGNAL, HAND BRAKES, AND IS PROPERLY EQUIPPED FOR LUBRICATION OF PARTS. IT IS A HAND-CRANKED LOCOMOTIVE WITH CAB, WITH TOP. LOCOMOTIVE IS 127 INCHES LONG; WEIGHS 14,000 LBS. AND IF OUR BID IS ACCEPTED WITHIN FIVE DAYS FROM DATE OF THE OPENING, WE COULD DELIVER SAME WITHIN THREE DAYS FROM DATE OF ORDER.

THE LOCOMOTIVE IS GUARANTEED ABSOLUTELY FIRST-CLASS CONDITION, THOROUGHLY OVERHAULED, AND YOU COULD RELY UPON IT TO COME ON YOUR JOB AND PERFORM AS GOOD AS NEW.

AN AWARD WAS MADE TO YOU TO FURNISH THREE SUCH WHITCOMB LOCOMOTIVES FOR A MINIMUM OF 200 HOURS, AT 97 CENTS PER HOUR EACH, OR FOR 500 HOURS, AT 89 CENTS PER HOUR EACH, OR FOR 1,050 HOURS, AT 79 CENTS PER HOUR EACH, OVER A PERIOD OF EIGHT (8) MONTHS. SEE AGREEMENT ER-TPS-54 103, DATED OCTOBER 7, 1935.

YOU BID ON INVITATION NO. 1558, ISSUED NOVEMBER 25, 1935, BY THE ILLINOIS STATE PROCUREMENT OFFICE, TO FURNISH SIX LOCOMOTIVES (7-TON PLYMOUTHS OR WHITCOMBS), AT $275 PER MONTH EACH, FOR A TOTAL RENTAL TIME OF NOT TO EXCEED 2 MONTHS PER LOCOMOTIVE (WITH OPTION OF RENEWAL), PAYMENT TO BE MADE "BY THE MONTH * * * ONLY FOR ACTUAL OPERATING TIME ON THE PROJECT.' AGREEMENT ER-TPS-54-1992, DATED DECEMBER 12, 1935. ONE OF THE LOCOMOTIVES FURNISHED UNDER THIS AGREEMENT WAS IN SUCH POOR MECHANICAL CONDITION THAT IT BECAME USELESS AND ANOTHER LOCOMOTIVE WAS FURNISHED IN ITS PLACE, SO THAT YOU HAD SEVEN PLYMOUTH AND WHITCOMB GAS LOCOMOTIVES ON THE LINCOLN PARK PROJECT AT CHICAGO WHEN THE PURCHASE ORDER NO. 49999, ISSUED TO YOU MAY 21, 1936, ON THE BASIS OF WHICH YOU CLAIM RENTAL AT $269 PER MONTH.

IT IS REPORTED THAT THE DAILY LOG KEPT AT THE PROJECT TO SHOW THE ACTUAL OPERATING CONDITION OF THIS EQUIPMENT SHOWED THAT, ASIDE FROM THE ONE LOCOMOTIVE WHICH COMPLETELY FAILED, ALL OF THE LOCOMOTIVES WERE OUT OF COMMISSION DUE TO MECHANICAL FAILURE OF CERTAIN PARTS ON MANY OCCASIONS. NOT ONLY WAS THERE PROTRACTED AND UNEXCUSABLE LOSS OF WORK TIME BY REASON OF THESE MECHANICAL FAILURES IN YOUR LOCOMOTIVES, FOR WHICH CORRESPONDING DEDUCTIONS SHOULD HAVE BEEN MADE IN THE PAYMENTS OF RENTAL TO YOU, BUT THERE WAS FAILURE ON YOUR PART TO MAKE PROMPT REPAIRS, RESULTING IN THAT WORKS PROGRESS ADMINISTRATION ENGINEERS AND PERSONNEL HAD TO MAKE THE REPAIRS THEMSELVES IN ORDER THAT THERE MIGHT BE AVOIDED, TO THE EXTENT POSSIBLE, A RESULTANT DEMORALIZATION AND BREAKING DOWN OF THE LABOR PROJECT. ONE RESPONSIBLE OFFICIAL, UNDER WHOSE OBSERVATION THE OPERATION OF YOUR EQUIPMENT CAME AT THE TIME, STATED IT AS HIS OPINION THAT YOUR LOCOMOTIVE EQUIPMENT ON THE LINCOLN PARK PROJECT IN THE WINTER AND EARLY SPRING OF 1936 WAS NOTHING BETTER THAN "SCRAP IRON.'

ANOTHER RESPONSIBLE OFFICIAL HAVING KNOWLEDGE OF THE FACTS STATES THAT WHEN YOU PLACED YOUR LOCOMOTIVES ON THE LINCOLN PARK PROJECT IN THE WINTER OF 1935-36, THE BRAKES, FUEL TANKS, CARBURETORS, FUEL LINES, AND OTHER DEVICES WERE IN A POOR STATE OF ADJUSTMENT, AND BEFORE THE LOCOMOTIVES COULD BE USED AT ALL EFFECTIVELY OR WITH CONTINUITY IT WAS NECESSARY TO OVERHAUL AND REPAIR THE SAME WITH WORKS PROGRESS ADMINISTRATION PERSONNEL. IT APPEARS FURTHER THAT FIRST USE OF THE SAID EQUIPMENT WAS MADE JANUARY 14, 1936, AND ONE LOCOMOTIVE COULD NOT BE USED BECAUSE OF A FAULTY CLUTCH. WHEN THE CLUTCH WAS REMOVED IT WAS FOUND THERE WERE INSUFFICIENT PLATES AND THAT THE CLUTCH HAD NOT BEEN PROPERLY ASSEMBLED. ON JANUARY 16 THERE WAS FAILURE DUE TO OLD AND BURNED SPARK PLUGS AND THE CHARACTER OF TRANSMISSION GREASE, AND ALMOST DAILY THEREAFTER THERE WERE FAILURES DUE TO MAGNETO AND SPARK PLUG TROUBLES, BLOCKED OR LEAKING FUEL LINES, FAULTY VALVES, LACK OF A COUPLING DRAW-BAR FOR ONE OF THE LOCOMOTIVES, INEFFECTUAL STARTING DEVICES, DEFICIENT BATTERIES, DEFECTIVE CLUTCHES, GEAR GRIND IN TRANSMISSION, AND OTHER MECHANICAL INEFFICIENCIES.

THESE WERE THE LOCOMOTIVES ON WHICH YOU BID AT $269 EACH PER MONTH IN RESPONSE TO THE INVITATION NO. 7762, ISSUED MAY 12, 1936, INVITING BIDS ON APPROXIMATELY SIX LOCOMOTIVES FOR USE ON THE LINCOLN PARK PROJECT, YOUR BID BEING FOR THE FURNISHING OF FOUR PLYMOUTHS AND TWO WHITCOMBS FOR A MINIMUM OF 1 MONTH WITH RENEWAL OPTION. ANOTHER BIDDER OFFERED TO FURNISH WHITCOMB GAS LOCOMOTIVES AT $197 PER MONTH EACH SUBJECT TO CERTAIN DISCOUNTS FOR PROMPT PAYMENT, AND THE EVIDENCE APPEARS TO ESTABLISH THAT THE LOCOMOTIVES OFFERED BY THIS BIDDER WERE MECHANICALLY SUPERIOR TO THE LOCOMOTIVES WHICH YOU ALREADY HAD ON THE PROJECT.

THERE ARE MANY ATTENDANT CIRCUMSTANCES IN CONNECTION WITH THIS INVITATION AND THE ISSUANCE OF PURCHASE ORDERS TO YOU THEREUNDER WHICH INDICATE YOU MAY HAVE BEEN A PARTY TO AN ARRANGEMENT INTENDED TO PRECLUDE ANY BONA-FIDE COMPETITIVE BIDDING ON THE ACTUAL NEEDS OF THE SERVICE AND IT IS CLEAR THAT NO SUCH BONA-FIDE COMPETITION WAS HAD AS IS REQUIRED TO GIVE VALIDITY TO A PUBLIC TRANSACTION OF THIS CHARACTER OR TO ENABLE THIS OFFICE TO APPROVE PAYMENT THEREON; MOREOVER THE RECORD INDICATES THAT RENTAL PAYMENTS ALREADY MAY HAVE BEEN RECEIVED BY YOU FOR THE PERIODS COVERED BY YOUR CERTIFIED INVOICES SUBMITTED IN SUPPORT OF YOUR PRESENT CLAIMS.

THE INVITATION NO. 7762 OF MAY 12, 1936, FOR THE FURNISHING OF SIX GAS LOCOMOTIVES SPECIFIED THAT THE BIDS WOULD BE OPENED AT 2 P.M. EASTERN STANDARD TIME FRIDAY, MAY 15, 1936. WHEN THE BIDS WERE OPENED, HOWEVER, INSTEAD OF YOU BEING THE LOW BIDDER THE C. E. CARSON CO. UNDERBID YOU BY APPROXIMATELY $72 PER LOCOMOTIVE PER MONTH, WHICH APPARENTLY HAD NOT BEEN ANTICIPATED. MR. J. S. FARRELL, CHIEF OF THE COMMODITY GROUP NO. 3 ON MAY 16, 1936, HOWEVER, BY REQUISITION INFORMATION SHEET NOTIFIED THE WORKS PROGRESS ADMINISTRATION ILLINOIS STATE CERTIFYING OFFICER THAT THE C. E. CARSON CO., OF 601 SAINT CLAIR STREET, CHICAGO, OFFERING SIX WHITCOMB LOCOMOTIVES, WAS THE APPARENT LOW BIDDER AND ASKED FOR AN IMMEDIATE INSPECTION OF THEIR LOCOMOTIVES AND A REPORT OF ACCEPTANCE OR REJECTION WITH SPECIFIC REASONS IN CASE OF REJECTION. NO BONA-FIDE INSPECTION OF THE CARSON LOCOMOTIVES WAS MADE BETWEEN THE DATE OF THE OPENING ON MAY 15 AND MAY 21, 1936, THE DATE OF ISSUANCE TO YOU OF PURCHASE ORDER NO. 49999, AND THERE WAS NO WRITTEN REPORT OF ACCEPTANCE OR REJECTION DURING THIS INTERVAL.

RICHARD H. HYLAND, INSPECTOR OF EQUIPMENT ON THE PROJECT, AS A SUBORDINATE UNDER RALPH A. BONNELL, CHIEF ENGINEER, MADE A CURSORY INSPECTION OF THE CARSON EQUIPMENT ON OR ABOUT MAY 19, 1936, BUT ON MAY 28, 1936, WHEN ASKED, PRELIMINARY TO HIS SUSPENSION FROM DUTY FOR HIS PART IN THE TRANSACTION, WHY HE HAD NOT MADE A WRITTEN REPORT, STATED THAT "THIS IS A VERY HOT SUBJECT; " THAT HE "DID NOT REJECT THIS EQUIPMENT EITHER BY WORD OR IN WRITING" BUT THAT HE "WAS TOLD TO TURN THIS EQUIPMENT DOWN BY MR. BONNELL FOR THE REASONS AS STATED ABOVE.' THE SAID HYLAND STATED, ALSO, AT THAT TIME AS FOLLOWS:

* * * MR. BONNELL TALKED TO ME ABOUT THIS AND ASKED ME IF I HAD INSPECTED THE LOCOMOTIVES AND I TOLD HIM I HAD. MR. LOWELL ASKED ME ABOUT IT, TOO. I JUST DON-T KNOW WHERE ALL THE TALK ABOUT IT STARTED. EVERYONE SEEMED TO BE INTERESTED IN THE LOCOMOTIVES.

* * * I WOULD JUDGE THAT THE REJECTION OF THE EQUIPMENT WAS THE RESULT OF PERSONAL FEELING BETWEEN MR. BONNELL AND MR. CARSON.

MR. HYLAND THEN WAS ASKED THE GENERAL QUESTION:

HOW CAN YOU EXPLAIN THAT AFTER YOUR REPORTS ARE CHECKED THAT THERE ARE CONFLICTING STATEMENTS MADE BY YOU REGARDING CERTAIN VENDORS AND THAT TO ALL APPEARANCES ELIMINATION OF THE LOW BIDDER HAS BEEN MANIPULATED?

AND MR. HYLAND REPLIED: "I AM PREPARED TO FACE ANY FACTS.'

THE RECORD AS IT NOW APPEARS COMPELS THE CONCLUSION THAT, NOTWITHSTANDING THE OSTENSIBLE INVITATIONS FOR OPEN COMPETITIVE BIDDING ON SIX LOCOMOTIVES, THERE WAS NO BONA-FIDE NEED FOR THAT NUMBER OF LOCOMOTIVES ON THE PROJECT AND PRIVATE ARRANGEMENTS BETWEEN REPRESENTATIVES OF YOUR FIRM AND CERTAIN OFFICIALS WHICH AT THE TIME APPARENTLY WERE NOT KNOWN TO THE WORKS PROGRESS ADMINISTRATION OFFICIALS IN WASHINGTON OR TO THOSE IN CHARGE OF STATE PROCUREMENT WERE DESIGNED TO CONTINUE YOUR EQUIPMENT ON THE PROJECT AND TO PRECLUDE THE USE OF THE LOCOMOTIVES OF ANY OTHER BIDDER IRRESPECTIVE OF WHO MIGHT BE THE ACTUAL LOW BIDDER.

ON MAY 15, 1936, THE VERY SAME DAY THE BIDS WERE OPENED, J. W. LOWELL, ASSISTANT SUPERVISOR OF OPERATIONS ON THE PROJECT, ADDRESSED YOU, "ATTENTION: JOSEPH V. SULLIVAN, GENERAL SALES MANAGER," AS FOLLOWS:

I HAVE YOUR LETTER OF MAY 13TH REGARDING SITUATION AS TO CONTINUANCE OF YOUR LOCOMOTIVES AT PROJECT NUMBER 1267, CHURCH STREET, EVANSTON.

I WISH TO CALL YOUR ATTENTION TO THE FACT THAT I HAVE MADE ARRANGEMENTS WITH THE CHICAGO PARK DISTRICT TO CONTINUE THE RENTAL ON ONLY FOUR (4) OF YOUR LOCOMOTIVES AND NOT ON SIX (6), AS STATED IN YOUR LETTER. RENTAL THAT THEY WILL PAY YOU WILL BE AT THE SAME RATE PER MONTH OR CALCULATED FRACTION THEREOF DURING THE TIME, INCLUSIVE, BETWEEN THE END OF YOUR FORMER FEDERAL CONTRACT AND THE DATE ON WHICH THE NEW FEDERAL CONTRACT WILL GO INTO EFFECT.

PROPER PROCEDURE HAS BEEN INITIATED BY THE PARK DISTRICT TO TAKE CARE OF THE ITEM OF RENTAL AND YOU NEED, THEREFORE, HAVE NO APPREHENSION OF YOUR BEING PAID FOR THE USE OF THE FOUR LOCOMOTIVES DURING THE TIME IN QUESTION.

IF YOU ARE IN AGREEMENT REGARDING THE MATTER OF THE FOUR LOCOMOTIVES AND NOT THE SIX, AS STATED IN YOUR LETTER OF MAY 13TH, PLEASE SO STATE IN REPLY TO THIS LETTER.

NOTWITHSTANDING THERE HAD BEEN NO BONA FIDE INSPECTION OR WRITTEN REPORT ON ACCEPTANCE OR REJECTION OF THE EQUIPMENT OFFERED BY THE LOW BIDDER, AND IN THE ABSENCE OF ANY SITUATION OF EMERGENCY, CHIEF ENGINEER R. A. BONNELL, WHOSE SEPARATION FROM THE SERVICE WAS AT THAT TIME PENDING, ISSUED A MEMORANDUM MAY 21, 1936, AS FOLLOWS:

HAVING BEEN ADVISED THAT C. E. CARSON COMPANY ARE LOW BIDDER ON THIS REQUISITION AND ARE OFFERING SIX WHITCOMB LOCOMOTIVES, INSPECTION HAS BEEN MADE WITH THE FOLLOWING RESULTS:

TWO OF THE LOCOMOTIVES ARE IN SPRINGFIELD, ILL., AND THEREFORE CANNOT BE INSPECTED.

THE OTHER FOUR DO NOT HAVE ELECTRIC STARTER NOR HAVE THEY HEADLIGHTS. TWO OF THESE FOUR ARE THREE SPEED INSTEAD OF THE FOUR SPEED AS REQUIRED IN THE SPECIFICATIONS.

FOR THE ABOVE REASONS IT IS NECESSARY THAT ALL OF THE EQUIPMENT OFFERED BY C. E. CARSON COMPANY BE REJECTED.

HAVING BEEN ADVISED THAT THE EQUIPMENT CORPORATION OF AMERICA IS THE NEXT LOW BIDDER THE FOLLOWING REPORT IS TO BE MADE AS TO THE EQUIPMENT THEY BID ON:

THE EQUIPMENT IS ALREADY ON THE JOB PERFORMING THE WORK SATISFACTORILY UNDER PREVIOUS CONTRACT NO. ER-TPS-54-1992 AND ARE IN SUCH GOOD MECHANICAL CONDITION THAT THEY CAN BE ACCEPTED AS MEETING WITH REQUIREMENTS OF SPECIFICATIONS AND OPERATION ON THIS REQUISITION AND ARE THEREFORE APPROVED. IT IS ADVISABLE FOR EFFICIENCY OF OPERATION AND UPKEEP THAT THE AWARD BE MADE TO ONE CONTRACTOR.

WILL YOU KINDLY ISSUE PURCHASE ORDER FOR THE RENTAL OF THE SIX EQUIPMENT CORPORATION OF AMERICA LOCOMOTIVES FOR A PERIOD OF TWO MONTHS, CONTRACTING FOR A MAXIMUM PERIOD OF RENTAL FOR EIGHT MONTHS. IT IS REQUESTED THAT THIS PURCHASE ORDER BE ISSUED JUST AS SOON AS POSSIBLE IN ORDER TO PREVENT CLOSING DOWN OF THE JOB.

ON MAY 26, 1936, V. A. ANDERSON, SUPERVISOR OF OPERATIONS ON THE PROJECT, AND L. D. SUHR AND J. W. LOWELL, ASSISTANT SUPERVISORS OF OPERATIONS, IN A FORMAL REPORT TO THE STATE PROCUREMENT OFFICER, APPROVED BY A. P. DIPPOLD, VERIFICATION OFFICER FOR THE PROJECT, STATED AS FOLLOWS:

REFERRING TO OUR CONVERSATION OF MAY 25 RELATIVE TO THE ISSUANCE OF PURCHASE ORDERS FOR LOCOMOTIVES ON PROJECT 1267, SAID PURCHASE ORDERS HAVING BEEN ISSUED TO THE EQUIPMENT CORPORATION OF AMERICA, WE WISH TO ADVISE YOU THAT WE HAVE UNDER DATE OF MAY 26 MADE AN INSPECTION OF THREE LOCOMOTIVES DELIVERED ON THE JOB BY THE C. E. CARSON COMPANY OF CHICAGO. THESE LOCOMOTIVES WERE TESTED UNDER ACTUAL OPERATING CONDITIONS AGAINST FULL LOAD AND WERE FOUND TO BE SATISFACTORY IN ALL RESPECTS. THIS INSPECTION IS TO SUPERSEDE A PREVIOUS INSPECTION MADE WHEREIN IT WAS FOUND THAT THESE LOCOMOTIVES DID NOT CONFORM TO THE REQUIREMENTS SUBMITTED TO THE VENDOR.

THE REQUISITION ISSUED AND APPROVED FOR THE ACQUISITION OF LOCOMOTIVES FOR THIS PROJECT CALLED FOR SIX UNITS. THREE OF THESE UNITS HAVE BEEN DELIVERED TO THE JOB FOR TEST, AND THREE ADDITIONAL LOCOMOTIVES WILL BE FURNISHED ON A DAY CERTAIN AS DETERMINED BY THE ASSISTANT SUPERVISOR OF OPERATIONS IN CHARGE OF THIS PROJECT.

WE REQUEST THAT YOU TAKE THE NECESSARY STEPS TO CANCEL PURCHASE ORDERS ISSUED TO THE EQUIPMENT CORPORATION OF AMERICA, WHO WERE NOT THE LOW BIDDERS FOR THE MATERIAL REQUISITIONED FOR THE PROJECT, AND THAT THE NECESSARY PURCHASE ORDER BE ISSUED TO THE C. E. CARSON COMPANY, THE LOW BIDDER. COMPLETION OF PROCESSING TO MAKE THIS AWARD WILL EFFECT A SAVING TO THE FEDERAL GOVERNMENT OF SOME $435.00 PER MONTH.

YOUR FIRM RESISTED ANY EFFORT TO OUST YOUR EQUIPMENT FROM THE PROJECT, HOWEVER, ALTHOUGH THE RECORD SHOWS YOU WERE FULLY AWARE THAT YOUR FIRM WAS NOT THE LOW BIDDER ON THE INVITATION AND YOUR REPRESENTATIVES ARE SHOWN TO HAVE CONTRACTED VARIOUS SUBORDINATE OFFICIALS ON THE PROJECT URGING THE REJECTION OF THE CARSON EQUIPMENT ON VARIOUS GROUNDS. UNDER DATE OF JUNE 1, 1936, BY YOUR SECRETARY, JOSEPH V. SULLIVAN, YOU ADDRESSED THE STATE PROCUREMENT OFFICER FOR ILLINOIS, IN PERTINENT PART AS FOLLOWS:

WE WISH TO ACKNOWLEDGE RECEIPT OF YOUR LETTER OF MAY 28, REGARDING TELEPHONE CONVERSATION OF MR. J. S. FARRELL AND THE WRITER.

YOU DO NOT OUTLINE JUST WHAT THIS CONVERSATION CONSISTED OF, BUT MY UNDERSTANDING WAS THAT MR. FARRELL REQUESTED US TO REMOVE OUR OPERATORS FROM THE LOCOMOTIVES AND DISCONTINUE USING SAME. AS THE WRITER TOLD YOU, WHEN IN YOUR OFFICE, THE CONDITIONS OF OUR ORDER WERE EVIDENTLY OVERLOOKED, AS THE INVITATION TO BID, AND OUR ORDER, STATE THAT THESE LOCOMOTIVES WERE TO BE FURNISHED WITHOUT OPERATOR, GAS, FUEL, OR OIL.

AS THE WRITER TOLD YOU WHEN IN YOUR OFFICE, WE HAVE A CONTRACT COVERING THE RENTAL OF THESE SIX LOCOMOTIVES FROM MAY 21, 1936. * * *

WE ARE ADVISED THAT THERE IS NO PROVISION IN THIS CONTRACT FOR ITS SUSPENSION * * *.

BY ANOTHER LETTER, ALSO DATED JUNE 1, 1936, YOU INFORMED THE SAID ILLINOIS STATE PROCUREMENT OFFICER AS FOLLOWS:

FOR YOUR INFORMATION, THE LOCOMOTIVES HAVE BEEN IN SERVICE CONTINUOUSLY SINCE MAY 21ST, 1936, AND ARE STILL IN SERVICE AS THIS LETTER IS WRITTEN.

OUR LOCOMOTIVES CONFORM WITH THE SPECIFICATIONS AS OUTLINED IN INVITATION NO. 7762, AND WE HAVE MET ALL OTHER REQUIREMENTS. DISCLOSE IN THIS LETTER THAT THIS OPERATION WAS UNDER THE ARRANGEMENT MADE WITH THE CHICAGO PARK DISTRICT FOR PAYMENT TO YOU OF RENTAL BY THE SAID DISTRICT. THE OFFICIALS OF YOUR FIRM WELL KNEW, OR ARE CHARGED WITH KNOWLEDGE, THAT THE STATUTES OF THE UNITED STATES REQUIRE AWARD TO THE LOWEST RESPONSIBLE BIDDER AFTER BONA FIDE COMPETITION AND THAT THE ORDER NO. 49999 OF MAY 21, 1936, HAD NO VALIDITY TO OBLIGATE PUBLIC MONEYS OF THE UNITED STATES FOR PAYMENT TO YOU.

WHAT YOUR MR. SULLIVAN WITHHELD FROM THE STATE PROCUREMENT OFFICER WAS REPORTED TO THE SAID PROCUREMENT OFFICER BY THE DIRECTOR OF DISTRICT NO. 3, CHICAGO WORKS PROGRESS ADMINISTRATION, BY LETTER OF JUNE 2, 1936, AS FOLLOWS:

WE HAVE YOUR LETTER OF MAY 28, REGARDING NOTICE TO THE EQUIPMENT CORPORATION OF SUSPENSION OF CONTRACT NO. E.R. TPS.-54-14513.

THE EQUIPMENT IS NOW BEING OPERATED UNDER AN AGREEMENT BETWEEN THE CHICAGO PARK DISTRICT, SPONSOR OF THE PROJECT, AND THE EQUIPMENT CORPORATION. THIS ARRANGEMENT WAS MADE AT THE EXPIRATION OF THE PURCHASE ORDER WHICH PRECEDED THE CONTRACT REFERRED TO IN THIS LETTER, AND THE SPONSOR AGREED TO CARRY THE EXPENSE UNTIL SUCH TIME AS AN AGREEMENT WAS REACHED WHEREBY THE FEDERAL GOVERNMENT WOULD BEAR THE EXPENSE.

ON JUNE 4, 1936, YOU WERE INFORMED BY LETTER FROM W. I. BELL, APPARENTLY ASSISTANT GENERAL SUPERINTENDENT OF THE CHICAGO PARK DISTRICT, ADDRESSED TO THE ATTENTION OF YOUR JOSEPH V. SULLIVAN, AS GENERAL SALES MANAGER, AS FOLLOWS:

THIS LETTER IS TO NOTIFY YOU THAT THE ARRANGEMENT WE MADE WITH YOU AS EXPRESSED IN THE LETTER OF J. W. LOWELL OF MAY 15TH, AND PREVIOUSLY VERBALLY, REGARDING RENTAL ON LOCOMOTIVES, IS HEREBY CONCLUDED AS OF THE END OF TODAY, JUNE 4, 1936.

YOU WILL, THEREFORE, KINDLY REMOVE YOUR LOCOMOTIVES FROM THE PREMISES OF PROJECT NO. 1267 AS QUICKLY AS POSSIBLE.

ON JUNE 6, 1936, HOWEVER, THIS SAME W. I. BELL ADDRESSED YOU, FOR THE ATTENTION OF YOUR MR. SULLIVAN, AS FOLLOWS: ON JUNE 4TH WE WROTE YOU AND YOU RECEIVED A LETTER RESCINDING OUR ARRANGEMENT WITH YOU FOR THE RENTAL OF LOCOMOTIVES FOR PROJECT NO. 1267, AND DIRECTED YOU IN THAT LETTER TO REMOVE YOUR EQUIPMENT FROM THE PREMISES OF THE PROJECT.

THIS LETTER IS TO ADVISE YOU THAT WE RESCIND OUR LETTER OF JUNE 4TH, ABOVE REFERRED TO, AND WILL CONTINUE OUR FORMER ARRANGEMENT WITH YOU AS OF THE BEGINNING OF THE DAY, JUNE 5, 1936, UNTIL SUCH TIME AS WE MAY ADVISE YOU OTHERWISE.

I CALLED MR. SULLIVAN TODAY ON THE TELEPHONE AND IN HIS ABSENCE TALKED TO YOUR MR. BROCKER, GIVING HIM THE ABOVE INFORMATION WHICH HE PROMISED TO RELAY TO MR. SULLIVAN. UNLESS YOU AGREE TO THIS ARRANGEMENT IT, OF COURSE, WILL STILL BE NECESSARY FOR YOU TO REMOVE YOUR EQUIPMENT FROM THE PROJECT.

YOUR EQUIPMENT WAS NOT REMOVED FROM THE PROJECT.

IT IS NOT CLEAR WHY THE CHICAGO PARK DISTRICT, ANY MORE THAN A FEDERAL AGENCY, SHOULD PAY YOU RENTAL AT $269 PER MONTH, PER UNIT FOR YOUR EQUIPMENT, WHEN APPARENTLY SUPERIOR EQUIPMENT OF THE CHARACTER NEEDED WAS IMMEDIATELY AVAILABLE AT NOT MORE THAN $197 PER MONTH PER UNIT, AND FOR YOUR EQUIPMENT, MOREOVER, WHICH A FEW MONTHS LATER AT A TIME PREVAILING PRICES APPEAR TO HAVE BEEN GENERALLY HIGHER YOU FURNISHED AT $101 PER MONTH LESS RENTAL PER UNIT. BE THAT AS IT MAY,YOUR PRESENT INVOICES COVER A PERIOD FOR WHICH YOU HAVE BEEN PAID OR HAVE ARRANGED TO RECEIVE PAYMENT FROM THE CHICAGO PARK DISTRICT. WHETHER THE CIRCUMSTANCES AND CERTIFICATES ON YOUR INVOICES CONSTITUTE MISREPRESENTATION AND FRAUD REQUIRING THE FORFEITURE OF YOUR CLAIM OR ACTION TO IMPOSE SOME PENALTY UPON YOU UNDER THE STATUTES OF THE UNITED STATES IS NOT REQUIRED TO BE DECIDED IN THIS OFFICE. NEITHER IS IT NECESSARY TO CONSIDER THE LETTER OF JUNE 18, 1936, FROM THE ILLINOIS STATE PROCUREMENT OFFICER INFORMING YOU THAT THE AGREEMENT AND ORDER OF MAY 21, 1936, WERE ERRONEOUS AND THAT PAYMENTS COULD BE VOUCHERED TO YOU ONLY AT THE RATE INDICATED IN THE BID OF THE LOW BIDDER, AT $197 PER MONTH, PER UNIT, LESS DISCOUNTS, EFFECTIVE MAY 21, 1936, NOR TO CONSIDER THE NOTICE BEARING DATE OF JUNE 30, 1937, PURPORTING TO CANCEL THE AGREEMENT WITH YOU OF MAY 21, 1936, FOR THE STATED REASON,"EQUIPMENT NO LONGER REQUIRED.'

THE AGREEMENT AND PURCHASE ORDER DATED MAY 21, 1936, APPARENTLY WERE VOID AB INITIO. AS WAS SAID IN 33 OP.ATTY.GEN. 453, THE THEORY OF BIDDING FOR GOVERNMENT WORK IS THAT THE GOVERNMENT SHOULD HAVE ALL THE BENEFITS INCIDENT TO COMPETITION AND THAT THE CONTRACT SHOULD BE AWARDED TO THE LOWEST RESPONSIBLE BIDDER. SO, ALSO, IN 36 OP.ATTY.GEN. 33, 37, THE ATTORNEY GENERAL SAID THAT "THE PURPOSE OF CONGRESS IN REQUIRING THAT CONTRACTS SHALL BE LET AFTER PUBLIC ADVERTISEMENT IS TO PRESERVE OPEN COMPETITION" AND THAT "ANY COURSE OF ACTION WHICH HAS THE EFFECT OF DEFEATING THAT PURPOSE WOULD BE CONTRARY TO LAW * * *.'

IN AN OPINION OF JANUARY 12, 1935, IN REFERENCE TO THE PROCUREMENT OF AIRCRAFT, AT PAGES 7 AND 9, THE ATTORNEY GENERAL SAID:

COMPETENCE AND HONESTY OF PURPOSE ARE, OF COURSE, PREREQUISITE TO THE PROPER ADMINISTRATIVE APPLICATION OF SUCH PROVISIONS. * * * IF WRONGFUL INTENT IS PRESENT, WE MAY, IN THE WORDS OF THE COMMITTEE, TERM SUCH THINGS "SUBTERFUGES" AND "VIOLATIONS.'

* * * WHERE NO TRUE EMERGENCY IS INVOLVED, THE LAW CONTEMPLATES COMPETITION, NOT NECESSARILY WIDE PUBLICITY, BUT ALL ACTUAL COMPETITION THE INDUSTRY AFFORDS--- TO THE END THAT ALL IN A POSITION TO SUPPLY THE NEED MAY BE GIVEN OPPORTUNITY TO BID, AND THAT THE GOVERNMENT MAY HAVE THE ADVANTAGE OF THE LOWEST OFFER * * *. SEE, ALSO, SCOTT V. UNITED STATES, 44 CT.CLS. 524.

CONTRACTS MADE IN VIOLATION OF SUCH RULE HAVE BEEN HELD VOID. SCHNEIDER V. UNITED STATES, 19 CT.CLS. 547, CITING CLARK V. UNITED STATES, 95 U.S. 539; UNITED STATES V. SPEED, 8 WALL. 77.

THE RULE AND REASON OF THE MATTER, AS ESTABLISHED BY THE DECISIONS OF BOTH FEDERAL AND STATE COURTS, IS SUMMARIZED IN 30 L.R.A. (NS) 214, SYNOPSIS TO CASE OF HANNAN V. BOARD OF EDUCATION, C., AS FOLLOWS:

THE TRUE INTENT AND PURPOSE OF THE STATUTE REQUIRING CERTAIN CONTRACTS TO BE LET ONLY ON SEALED PROPOSALS TO THE LOWEST RESPONSIBLE BIDDER IS TO SECURE ECONOMY, AND PROTECT THE PUBLIC FROM COLLUSIVE CONTRACTS, FAVORITISM, OR FRAUD, AND TO PROMOTE ACTUAL, HONEST, EFFECTIVE COMPETITION IN THE CONSTRUCTION OF PUBLIC WORK BY REQUIRING OF BOARDS THE PRESENTATION OF A COMMON STANDARD PREVIOUSLY ASCERTAINED, TO THE END THAT EACH PROPOSAL OR BID RECEIVED AND CONSIDERED MAY BE IN COMPETITION WITH ALL OTHERS, AND TO PRECLUDE THE CONSIDERATION AND ACCEPTANCE OF PROPOSALS OR BIDS ON PLANS AND SPECIFICATIONS NOT OPEN TO ALL.

ALL OF THE OFFICERS OF THE GOVERNMENT, FROM THE HIGHEST TO THE LOWEST, ARE CREATURES OF THE LAW AND ARE BOUND TO OBEY IT. UNITED STATES V. LEE, 106 U.S. 196, 220.

ACTS OF A PUBLIC OFFICER IN EXCESS OF HIS AUTHORITY ARE VOID AND DO NOT BIND OR ESTOP THE GOVERNMENT. PIERCE V. UNITED STATES (THE FLOYD ACCEPTANCES), 7 WALL. 666; MAMMOTH OIL CO. V. UNITED STATES, 275 U.S. 13; PAN AMERICAN CO. V. UNITED STATES, 273 U.S. 456; UNITED STATES V. AMERICAN SALES CORP., 27 F./2D) 389, AFFIRMED 32 F./2D) STATES V. AMERICAN SALES CORP., 27 F. (2D) 389, AFFIRMED 32 F. (2D) 141, CERTIORARI DENIED, 280 U.S. 574.

INDIVIDUALS AS WELL AS COURTS MUST TAKE NOTICE OF THE EXTENT OF THE AUTHORITY CONFERRED BY LAW UPON A PERSON ACTING IN AN OFFICIAL CAPACITY. HAWKINS V. UNITED STATES, 96 U.S. 689.

UNDER EXISTING LAW NO OFFICER OF THE GOVERNMENT MAY SELECT ARTICLES FOR PUBLIC PROCUREMENT ON THE BASIS OF HIS OWN WHIM OR CAPRICE OR ON THE BASIS OF PERSONAL INTEREST BUT, EXCEPT WHEN OTHERWISE SPECIFICALLY PROVIDED BY STATUTE, MUST AFFORD OPPORTUNITY TO ALL THOSE DESIRING TO OFFER ARTICLES MEETING THE NEEDS AND REQUIREMENTS OF THE GOVERNMENT TO BID ON A BONA FIDE COMPETITIVE BASIS WITH THE ASSURANCE THAT THE BUSINESS WILL NOT BE AWARDED TO OTHER THAN THE RESPONSIBLE LOW BIDDER. IF AWARDS OR CONTRACTS ARE MADE UPON ANY OTHER BASIS THE MATTER IS TO BE RESERVED FOR JUDICIAL OR LEGISLATIVE REVIEW IN ALL CASES WHERE FRAUD OR COLLUSION ARE SUSPECTED, AND PAYMENT FROM APPROPRIATED MONEYS IS INHIBITED.

IT IS THE PLAIN DUTY--- OFTEN DECLARED--- OF ADMINISTRATIVE, ACCOUNTING, AND AUDITING OFFICERS OF THE GOVERNMENT TO REFUSE APPROVAL AND TO PREVENT PAYMENT OF PUBLIC MONEYS UNDER ANY AGREEMENT ON BEHALF OF THE UNITED STATES AS TO WHICH THERE IS A REASONABLE SUSPICION OF IRREGULARITY, COLLUSION, OR FRAUD, THUS RESERVING THE MATTER FOR SCRUTINY IN THE COURTS WHEN THE FACTS MAY BE JUDICIALLY DETERMINED UPON SWORN TESTIMONY AND COMPETENT EVIDENCE AND A FORFEITURE DECLARED OR OTHER APPROPRIATE ACTION TAKEN. LONGWILL V. UNITED STATES, 17 CT.CLS. 288, 291; CHARLES V. UNITED STATES, 19 ID. 316, 319& SEE ALSO HUME V. UNITED STATES, 21 ID., 328, AFFIRMED 132 U.S. 406; UNITED STATES V. ADAMS, 7 WALL, 463; 477-478, 479, 480; BEARD'S CASE, 3 CT.CLS. 122; MCKINNEY'S CASE, 4 CT.CLS. 537; NORTHERN PACIFIC R.R. CASE, 15 CT.CLS. 428.

STATE COURTS FREQUENTLY HAVE REFUSED TO ALLOW ANY PAYMENT UPON AGREEMENTS MADE UNDER THE CIRCUMSTANCES HERE APPEARING EVEN WHERE APPARENTLY THERE WAS NO SUSPICION OF COLLUSION, MISREPRESENTATION, OR FRAUD. RICE V. LAKE TWP., 40 PA.SUPER.CT. 337; MILAN V. BOWRON, 193 N.Y. 180, 85 N.E. 1012; BOURGEOIS V. ATLANTIC COUNTY, 82 N.J.L. 82, 81 ATL. 358; ANNOTATION L.R.A. 1915 A. PP. 904-906. THE REASON OF THE RULE IN THESE STATE CASES IS STATED IN BOARD OF COUNTY COMMISSIONERS OF PONTOTOC COUNTY V. CAREY, LOMBARD, YOUNG AND CO., NO. 26,461 IN OKLAHOMA SUPREME COURT DECIDED (PER CURIAM) OCTOBER 20, 1936, AS FOLLOWS:

IT SEEMS A HARSH RULE THAT IN ORDER TO PROTECT THE PUBLIC FROM THE ACTS OF ITS AGENTS A COURT MUST HOLD A COUNTY NOT LIABLE EVEN WHERE IT IS ADMITTED, AS IN THIS CASE, THAT THE COUNTY RECEIVED THE LUMBER AND HAD THE USE OF IT FOR THE BENEFIT OF THE PUBLIC AT LARGE, YET AT THE SAME TIME THE STATUTES HEREIN CITED HAVE BEEN PASSED FOR THE BENEFIT OF THE PUBLIC AT LARGE, AND SINCE EVERYONE IS REQUIRED TO TAKE NOTICE OF THESE STATUTES, IT IS NOT UNREASONABLE TO REQUIRE A PERSON DEALING WITH A PUBLIC AGENT TO FOLLOW THE STATUTES, AND THAT IF IN CONTRACTING ONE GOES BEYOND THE LIMITATIONS IMPOSED * * * HE DOES SO AT HIS OWN PERIL. IN RE TOWN OF AFTON, 43 OKLA. 720, 144 P. 184, L.R.A. 1915D, 978; CITY OF ENID V. WARNER -QUINLAN ASPHALT CO., 62 OKLA. 139, 161 P. 1092.

YOU ARE INFORMED, THEREFORE, THAT THIS OFFICE IS WITHOUT AUTHORITY TO APPROVE FOR PAYMENT FROM APPROPRIATED MONEYS THE VOUCHERS AND INVOICES WHICH HAVE BEEN PRESENTED.