A-81581, A-86910, JULY 30, 1937, 17 COMP. GEN. 84

A-81581,A-86910: Jul 30, 1937

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IS ENTITLED TO ANY SAVING RESULTING FROM CONTRACTOR'S BREACH OF THE CONTRACT. ARE NOT IN CONFLICT. ARE COMPLEMENTARY. WHICHEVER ARE HIGHER. 1937: REFERENCE IS MADE TO LETTER OF JUNE 16. IN WHICH THERE WAS DEDUCTED FROM THE AMOUNT OTHERWISE FOUND DUE YOU UNDER CONTRACT T1PW-1954. EACH BIDDER FOR A GOVERNMENT CONTRACT WAS REQUIRED TO SUBMIT WITH HIS BID A CERTIFICATE THAT HE WAS COMPLYING WITH AND WOULD CONTINUE TO COMPLY WITH EACH APPROVED CODE OF FAIR COMPETITION TO WHICH HE WAS SUBJECT. EACH CONTRACT WAS REQUIRED TO CONTAIN A PROVISION TO THE EFFECT THAT THE CONTRACTOR WOULD COMPLY WITH EACH APPROVED CODE OF COMPETITION TO WHICH HE WAS SUBJECT. IT IS CLEAR. THE AGREEMENT BY THE UNITED STATES IN THE FORMAL CONTRACT TO PAY YOU SUCH BID PRICE WAS IN CONSIDERATION.

A-81581, A-86910, JULY 30, 1937, 17 COMP. GEN. 84

CONTRACTS - WAGE STIPULATIONS - PRICE ADJUSTMENT BECAUSE OF WAGE RATE VIOLATIONS DEDUCTION AUTHORIZED FROM CONTRACT PRICE OF AMOUNT SAVED BY CONTRACTOR THROUGH HIS FAILURE TO CONFORM WITH CONTRACT PROVISION REQUIRING COMPLIANCE WITH APPLICABLE APPROVED CODES OF FAIR COMPETITION, NOTWITHSTANDING DECISION OF THE SUPREME COURT OF THE UNITED STATES IN THE CASE OF SCHECHTER V. UNITED STATES, 295 U.S. 495, RELIEVED HIM FROM STATUTORY DUTY TO COMPLY WITH THE CODES, AS CONTRACT PRICE CLEARLY INCLUDED COST OF CODE COMPLIANCE, AND THE UNITED STATES, NOT THE CONTRACTOR, IS ENTITLED TO ANY SAVING RESULTING FROM CONTRACTOR'S BREACH OF THE CONTRACT. CONTRACT REQUIREMENTS OF COMPLIANCE WITH WAGE PROVISIONS OF APPLICABLE CODES OF FAIR COMPETITION, AND THAT RATES OF WAGES FOR ALL LABORERS, ETC., SHALL "BE NOT LESS" THAN THOSE BEING PAID IN LOCALITY INVOLVED, ARE NOT IN CONFLICT, BUT ARE COMPLEMENTARY, AND REQUIRE PAYMENT OF CODE RATES, OR PREVAILING LOCAL RATES, WHICHEVER ARE HIGHER.

ACTING COMPTROLLER GENERAL ELLIOTT TO JAMES I. BARNES, JULY 30, 1937:

REFERENCE IS MADE TO LETTER OF JUNE 16, 1937, IN EFFECT REQUESTING A REVIEW OF SETTLEMENT DATED MARCH 5, 1937, OF YOUR CLAIM 0419380 (9), IN WHICH THERE WAS DEDUCTED FROM THE AMOUNT OTHERWISE FOUND DUE YOU UNDER CONTRACT T1PW-1954, DATED APRIL 6, 1935, FOR THE CONSTRUCTION OF A POST- OFFICE BUILDING AT ROANOKE RAPIDS, N.C., THE SUM OF $847.04 FOR YOUR FAILURE TO COMPLY, AT LEAST TO THAT EXTENT, WITH THE PROVISIONS OF THE CONTRACT REQUIRING YOU TO PAY WAGES AS PRESCRIBED BY CERTAIN CODES OF FAIR COMPETITION.

PURSUANT TO EXECUTIVE ORDER NO. 6646, MARCH 14, 1934, EACH BIDDER FOR A GOVERNMENT CONTRACT WAS REQUIRED TO SUBMIT WITH HIS BID A CERTIFICATE THAT HE WAS COMPLYING WITH AND WOULD CONTINUE TO COMPLY WITH EACH APPROVED CODE OF FAIR COMPETITION TO WHICH HE WAS SUBJECT, AND EACH CONTRACT WAS REQUIRED TO CONTAIN A PROVISION TO THE EFFECT THAT THE CONTRACTOR WOULD COMPLY WITH EACH APPROVED CODE OF COMPETITION TO WHICH HE WAS SUBJECT. YOU SUBMITTED SUCH A CERTIFICATE WITH YOUR PROPOSAL TO PERFORM THE ADVERTISED CONTRACT WORK FOR A STIPULATED PRICE, AND YOU FORMALLY EXECUTED THE CONTRACT CONTAINING THE SAID PROVISION AS TO CODE COMPLIANCE. IT IS CLEAR, THEREFORE, THAT YOUR BID PRICE INCLUDED THE INCREASED COST OF CODE COMPLIANCE, INCLUDING THE PAYMENT OF CODE WAGES, AND THE AGREEMENT BY THE UNITED STATES IN THE FORMAL CONTRACT TO PAY YOU SUCH BID PRICE WAS IN CONSIDERATION, INTER ALIA, THAT YOU WOULD PAY SUCH CODE WAGES. TO THE EXTENT THAT YOU FAILED TO COMPLY WITH THIS CONTRACTUAL OBLIGATION THERE WAS FAILURE OF CONSIDERATION FOR THE AMOUNT THAT THE UNITED STATES HAD AGREED TO PAY FOR PERFORMANCE OF THE CONTRACT. UNDER SUCH CIRCUMSTANCES THE UNITED STATES WAS ENTITLED TO A REDUCTION IN THE CONTRACT PRICE TO THE EXTENT THERE HAD THUS BEEN FAILURE OF CONSIDERATION, FOR, OBVIOUSLY, THE UNITED STATES, AND NOT THE CONTRACTOR, IS ENTITLED TO ANY AMOUNT SAVED IN THE COST OF PERFORMANCE OF THE WORK BY NONCOMPLIANCE BY A CONTRACTOR WITH THE TERMS OF THE CONTRACT.

IN THE SAID LETTER OF JUNE 16, 1937, REFERENCE IS MADE TO YOUR LETTER OF JUNE 11, 1937, TO THE TREASURY DEPARTMENT, A COPY OF WHICH HAS BEEN TRANSMITTED TO THIS OFFICE, STATING THAT ALL WORKMEN AND EMPLOYEES ENGAGED BY YOU OR YOUR AGENTS ON THIS PROJECT WERE PAID THE LOCAL PREVAILING WAGE SCALE, AND THAT THIS SHOULD BE REGARDED AS STRICT COMPLIANCE WITH THE CONTRACT REQUIREMENTS.

IN ADDITION TO THE EXPRESS STIPULATION IN THE CONTRACT REQUIRING COMPLIANCE WITH CODES OF FAIR COMPETITION, THE CONTRACT CONTAINED A PROVISION PURSUANT TO THE BACON-DAVIS ACT OF MARCH 3, 1931, 46 STAT. 1494, THAT THE RATE OF WAGES FOR ALL LABORERS AND MECHANICS EMPLOYED ON THE PROJECT SHOULD "BE NOT LESS" THAN THE PREVAILING RATE OF WAGES FOR WORK OF A SIMILAR NATURE IN THE CITY, TOWN, VILLAGE, OR OTHER CIVIL DIVISION OF THE STATE IN WHICH THE BUILDING WAS LOCATED. THESE TWO SEPARATE PROVISIONS IN THE CONTRACT ARE NOT IN CONFLICT WITH EACH OTHER, BUT ARE COMPLEMENTARY, AND WHEN READ TOGETHER REQUIRED THE PAYMENT OF NOT LESS THAN EITHER THE CODE WAGES OR THE PREVAILING WAGES FOR THE PARTICULAR LOCALITY. PAYMENT OF THE PREVAILING WAGE RATES WHERE SUCH RATES WERE LESS THAN THE CODE RATES WAS NOT THE PERFORMANCE OF THE CONTRACT PROVISION REQUIRING CODE COMPLIANCE ON WHICH THE CONTRACT PRICE WAS FIXED, AND PROVIDES NO BASIS, EITHER LEGAL OR EQUITABLE, FOR PAYMENT OF THE ENTIRE CONTRACT PRICE AS FOR COMPLETE PERFORMANCE. SUCH ALLOWANCE, IN EFFECT, WOULD REWARD A CONTRACTOR, AT THE EXPENSE OF THE GOVERNMENT, FOR THE VIOLATION OF HIS CONTRACT WITH THE GOVERNMENT.

IN YOUR LETTER (BRIEF) OF DECEMBER 29, 1935, CONCERNING THIS AND TWO OTHER SIMILAR CLAIMS, THE ARGUMENT IS MADE THAT FOLLOWING THE DECISION OF THE SUPREME COURT OF THE UNITED STATES IN THE CASE OF SCHECHTER V. UNITED STATES, MAY 27, 1935, 295 U.S. 495, THE EXECUTIVE AND LEGISLATIVE BRANCHES OF THE GOVERNMENT RECOGNIZED THE INVALIDITY OF THE CODES OF FAIR COMPETITION PROMULGATED UNDER THE NATIONAL INDUSTRIAL RECOVERY ACT, 48 STAT. 195, AND THAT YOU WERE THEREBY RELIEVED FROM COMPLIANCE WITH SUCH CODES. THIS ARGUMENT OVERLOOKS THE CIRCUMSTANCE THAT YOU WERE CONTRACTUALLY OBLIGATED TO COMPLY WITH THE CODES, INCLUDING THE PAYMENT OF CODE WAGES IN THE PERFORMANCE OF YOUR EXISTING CONTRACTS, AND THAT THE AGREED CONTRACT PRICES INCLUDED THE INCREASED COST OF SUCH COMPLIANCE. ADMITTING THAT YOU WERE UNDER NO STATUTORY DUTY TO OBSERVE THE SAID CODES, YOU HAD CONTRACTUALLY BOUND YOURSELF TO COMPLY WITH THEM IN THE PERFORMANCE OF PARTICULAR CONTRACTS WITH THE GOVERNMENT, AND AS YOU WERE TO BE PAID FOR SUCH COMPLIANCE, YOU WERE NOT AT LIBERTY TO DISREGARD THEIR PROVISIONS, WITHOUT AN APPROPRIATE ADJUSTMENT OF THE CONTRACT PRICE. IS NOTED THAT THE CONTRACTUAL PROVISION IS THAT THE CONTRACTOR SHALL COMPLY WITH EACH CODE OF FAIR COMPETITION TO WHICH HE "IS SUBJECT," BUT CLEARLY THIS LANGUAGE WAS USED BY THE PARTIES WITH REFERENCE TO THE GENERAL SITUATION EXISTING AT THE TIME THE CONTRACTS WERE EXECUTED, WHEN A SUBSTANTIAL PART OF ALL BUSINESS IN THE COUNTRY WAS BEING CONDUCTED UNDER APPROVED CODES OF FAIR COMPETITON, AND NOT IN A TECHNICAL LEGAL SENSE WITH RESPECT TO THE POSSIBLE BASIC VALIDITY OR INVALIDITY OF THE CODES--- AS INDICATED BY THE CERTIFICATES SUBMITTED WITH THE BIDS THAT THE BIDDER WAS THEN COMPLYING WITH THE CODES TO WHICH HE WAS SUBJECT. THE CONTRACT PRICES WERE FIXED ON THAT BASIS, AND SUCH TERMS MAY NOT NOW BE GIVEN A DIFFERENT INTERPRETATION FOR THE PURPOSE OF EXCUSING PERFORMANCE OF THE STIPULATIONS IN THE SENSE CONTEMPLATED BY THE PARTIES WHEN THE CONTRACTS WERE MADE.

THIS SITUATION--- THAT BIDS ON GOVERNMENT CONTRACTS SUBMITTED BEFORE THE SCHECHTER DECISION INCLUDED THE INCREASED COST OF CODE COMPLIANCE ON THE BASIS THAT BIDDERS WERE SUBJECT TO THE CODES OF FAIR COMPETITION, AND BID ACCORDINGLY--- WAS RECOGNIZED BY THE CONGRESS IN THE PUBLIC RESOLUTION OF AUGUST 29, 1935, 49 STAT. 990, PROVIDING, IN EFFECT, THAT SUCH BIDS SHOULD NOT BE ACCEPTED UNLESS THE AMOUNTS THEREOF WERE APPROPRIATELY REDUCED TO ELIMINATE CODE COMPLIANCE COSTS. FOLLOWING THIS ENACTMENT, IT WAS HELD RESPECTING A LEASE CONTAINING A CODE COMPLIANCE PROVISION ENTERED INTO BEFORE THE SCHECHTER DECISION, THAT AS THE LESSOR WAS CONTRACTUALLY BOUND TO COMPLY WITH THE CODES AND THE RENTAL WAS FIXED ON THAT BASIS, THERE WAS NO AUTHORITY TO ELIMINATE THE CODE PROVISION FROM THE CONTRACT (LEASE) WITHOUT ADEQUATE CONSIDERATION TO THE UNITED STATES FOR SUCH RELEASE BY REDUCING THE RENTAL IN AN AMOUNT EQUAL TO THE ESTIMATED OR OTHERWISE FIXED ADDITIONAL COSTS OF CODE COMPLIANCE INCLUDED IN THE ACCEPTED PROPOSAL. COMP. GEN. 648. THE SAME PRINCIPLE APPLIES IN THE INSTANT CASE. IF, FOLLOWING THE SCHECHTER DECISION, BIDS CONTAINING CODE COMPLIANCE PROVISIONS COULD NOT BE ACCEPTED WITHOUT AN APPROPRIATE REDUCTION FOR NONCOMPLIANCE, AND CONTRACTS ALREADY MADE COULD NOT BE MODIFIED BY AGREEMENT OF THE PARTIES TO ELIMINATE THE CODE COMPLIANCE PROVISION WITHOUT AN APPROPRIATE REDUCTION OF THE CONTRACT PRICE, THEN THE FAILURE OF A CONTRACTOR TO PERFORM HIS CONTRACTUAL OBLIGATION TO COMPLY WITH THE CODES MAY NOT BE EXCUSED EXCEPT UPON AN APPROPRIATE REDUCTION OF THE CONTRACT PRICE TO COMPENSATE THE GOVERNMENT FOR THE INCREASED PRICE IT HAD AGREED TO PAY FOR CODE COMPLIANCE.

ACCORDINGLY, THE SETTLEMENT OF MARCH 5, 1937, MUST BE AND IS SUSTAINED. YOUR PENDING CLAIMS UNDER OTHER CONTRACTS INVOLVING SIMILAR CIRCUMSTANCES WILL BE SETTLED ON THE SAME BASIS.