A-82353, DECEMBER 18, 1936, 16 COMP. GEN. 605

A-82353: Dec 18, 1936

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IS SUBJECT TO REJECTION WHERE AWARDS UNDER THE INVOLVED INVITATION ARE IN EXCESS OF $10. NOT WHERE THE AWARDS ARE NOT IN EXCESS OF THAT AMOUNT. A TIME DISCOUNT OF 10 PERCENT TWENTY DAYS WAS OFFERED. THIS BID CONTAINED THE FOLLOWING STATEMENT: "IT IS EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES HERETO. WHERE THE MANUFACTURER IS A CORPORATION OR A PERSON OTHER THAN THE BIDDER HEREIN. THERE IS ALSO FOR REFERENCE YOUR LATER DECISION OF MAY 16. IN SOME CASES THE TOTAL AMOUNT OF THE BID WAS LESS THAN $10. IN SOME OTHER CASES THE TOTAL AMOUNT OF THE BID WAS MORE THAN $10. THE AMOUNT ON WHICH THIS BIDDER WAS LOW WAS LESS THAN $10. NO AWARD HAS BEEN MADE IN ANY CASE TO THE NORTHWEST MOTOR COMPANY WHERE THE BID CONTAINED THE STATEMENT REFERRED TO AND ALL SUCH CASES ARE BEING HELD PENDING AN AUTHORITATIVE DECISION ON THIS MATTER.

A-82353, DECEMBER 18, 1936, 16 COMP. GEN. 605

CONTRACTS - WALSH-HEALEY ACT REQUIREMENTS - QUALIFIED BIDS AND PRICE REDUCTIONS BELOW APPLICABILITY LIMITATION A BID BY AN AUTOMOBILE DEALER, F.O.B. MANUFACTURER'S SHIPPING POINT, EXCEEDING $10,000 IN AMOUNT, WHICH BY QUALIFICATION UNDERTAKES TO AVOID COMPLIANCE ON THE PART OF THE MANUFACTURER WITH LABOR, ETC., REQUIREMENTS OF THE WALSH-HEALEY ACT OF JUNE 30, 1936, 49 STAT. 2036, IS SUBJECT TO REJECTION WHERE AWARDS UNDER THE INVOLVED INVITATION ARE IN EXCESS OF $10,000, BUT NOT WHERE THE AWARDS ARE NOT IN EXCESS OF THAT AMOUNT. REDUCTION OF THE CONTRACT PRICE, OTHERWISE IN EXCESS OF $10,000, TO AN AMOUNT BELOW THAT LIMIT BY REASON OF A TRADE-IN ALLOWANCE DOES NOT AUTHORIZE THE NON-INCLUSION IN THE CONTRACT OF THE LABOR, ETC., REQUIREMENTS OF THE WALSH-HEALEY ACT OF JUNE 30, 1936, 49 STAT. 2036.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF THE INTERIOR, DECEMBER 18, 1936:

THERE HAS BEEN RECEIVED YOUR LETTER OF DECEMBER 12, 1936, AS FOLLOWS:

IN RESPONSE TO BID INVITATION U.S.D.I. 1916, COPY ENCLOSED, THE NORTHWEST MOTOR COMPANY, CHEVY CHASE, MARYLAND, SUBMITTED A BID OPENED NOVEMBER 23, 1936, ON ITEMS 1 TO 18, INCLUSIVE, IN THE TOTAL AMOUNT OF $19,135.74 LESS TRADE-IN ALLOWANCE $1,807.50, NET $17,327.84, F.O.B. CHICAGO, ILLINOIS, ALSO ON ITEM 19 IN THE TOTAL AMOUNT OF $12,547.92 LESS TRADE-IN ALLOWANCE $1,807.50, NET $10,740.42, F.O.B. DETROIT, MICHIGAN. A TIME DISCOUNT OF 10 PERCENT TWENTY DAYS WAS OFFERED. THIS BID CONTAINED THE FOLLOWING STATEMENT:

"IT IS EXPRESSLY UNDERSTOOD AND AGREED BY THE PARTIES HERETO, THAT THE MANUFACTURER OF THE ARTICLES DESCRIBED IN THIS CONTRACT, WHERE THE MANUFACTURER IS A CORPORATION OR A PERSON OTHER THAN THE BIDDER HEREIN, SHALL IN NO DEGREE OR MANNER BE BOUND BY THE TERMS AND CONDITIONS REOF.'

IN YOUR DECISION TO THE SECRETARY OF THE TREASURY, DECEMBER 11, 1933 (13 COMP. GEN. 169), YOU RULED AS FOLLOWS (QUOTED FROM THE SYLLABUS):

"WHERE BIDDERS ATTEMPT TO CONDITION THEIR BIDS BY STIPULATIONS NOT CONTAINED IN THE ADVERTISED SPECIFICATIONS, SUCH BIDS SHOULD BE DISREGARDED AS NOT RESPONSIVE TO THE TERMS OF THE CONTRACT OFFERED TO ALL BIDDERS IN THE ADVERTISED SPECIFICATIONS.'

THERE IS ALSO FOR REFERENCE YOUR LATER DECISION OF MAY 16, 1934, TO THE SECRETARY OF COMMERCE (13 COMP. GEN. 359) ARRIVING AT A SIMILAR CONCLUSION. IN VIEW OF THE WALSH-HEALEY ACT (PUBLIC, NO. 846, 74TH CONGRESS) AND ARTICLE 104 OF THE REGULATIONS NO. 504 PURSUANT THERETO, THE STIPULATION BY THE NORTHWEST MOTOR COMPANY IN THIS INSTANCE SEEMS TO REQUIRE YOUR DECISION AS TO ITS EFFECT ON THE ACCEPTABILITY OF THE BID.

DURING THE MONTH OF NOVEMBER THIS DEPARTMENT RECEIVED SEVERAL OTHER BIDS FROM THE NORTHWEST MOTOR COMPANY, EACH CONTAINING THE SAME STATEMENT QUOTED ABOVE. IN SOME CASES THE TOTAL AMOUNT OF THE BID WAS LESS THAN $10,000, AND IN SOME OTHER CASES THE TOTAL AMOUNT OF THE BID WAS MORE THAN $10,000, BUT THE AMOUNT ON WHICH THIS BIDDER WAS LOW WAS LESS THAN $10,000. NO AWARD HAS BEEN MADE IN ANY CASE TO THE NORTHWEST MOTOR COMPANY WHERE THE BID CONTAINED THE STATEMENT REFERRED TO AND ALL SUCH CASES ARE BEING HELD PENDING AN AUTHORITATIVE DECISION ON THIS MATTER.

IN VIEW OF THE FACTS PRESENTED, YOUR DECISION IS RESPECTFULLY REQUESTED WITH REGARD TO THE FOLLOWING SPECIFIC QUESTIONS:

1. IS THE STATEMENT QUOTED ABOVE AS IT APPEARED ON THE BID OF THE NORTHWEST MOTOR COMPANY SUFFICIENT CAUSE FOR REJECTION OF AN OTHERWISE ACCEPTABLE LOW BID REGARDLESS OF THE AMOUNT OF THE BID OR THE AMOUNT OF THE SUBSEQUENT CONTRACT?

2. IF THE ANSWER TO THE FIRST QUESTION IS IN THE NEGATIVE, IS "THE STATEMENT" QUOTED ABOVE AS APPEARING ON THE BID OF THE NORTHWEST MOTOR COMPANY SUFFICIENT CAUSE FOR REJECTION OF AN OTHERWISE ACCEPTABLE LOW BID IF THE TOTAL AMOUNT OF THE BID EXCEEDS $10,000, REGARDLESS OF THE AMOUNT OF THE SUBSEQUENT CONTRACT?

3. IF THE ANSWER TO QUESTION NO. 2 IS IN THE NEGATIVE, IS "THE STATEMENT" QUOTED ABOVE AS APPEARING ON THE BID OF THE NORTHWEST MOTOR COMPANY SUFFICIENT CAUSE FOR REJECTION OF AN OTHERWISE ACCEPTABLE LOW BID IF THE TOTAL AMOUNT OF THE ENSUING CONTRACT WOULD EXCEED $10,000?

4. IF THE TOTAL AMOUNT OF THE BID IS TO BE MADE CONTROLLING, IN REGARD TO THE $10,000 LIMIT IN THE LEGISLATION, IS THE AMOUNT OF THE BID SUBJECTTO DEDUCTION OF TRADE-IN ALLOWANCES AND TIME DISCOUNTS BEFORE THE LIMITATION IS APPLIED?

YOUR PROMPT CONSIDERATION OF THESE QUESTIONS IS EARNESTLY REQUESTED AND AN EARLY REPLY FROM YOU WILL BE GREATLY APPRECIATED. IN SOME CASES THERE ARE READVERTISEMENTS INVOLVED, DUE TO THE INABILITY TO OBTAIN ACCEPTABLE BIDS FOR OTHER REASONS, AND RESULTING IN ABNORMAL DELAYS ALREADY INCURRED IN THE PROCUREMENT OF THESE VEHICLES. THE DIFFICULTY HERE PRESENTED HAS AGGRAVATED THE SITUATION. IT WILL BE DIFFICULT TO PROCEED WITH PROCUREMENT OF MOTOR VEHICLES UNTIL THESE QUESTIONS ARE DECIDED.

IN DECISION OF DECEMBER 15, 1936, A-81763, 16 COMP. GEN. 583, TO THE SECRETARY OF AGRICULTURE, RESPECTING THE REQUIREMENTS OF THE WALSH HEALEY ACT AS APPLIED TO CONTRACTS FOR THE PURCHASE OF MOTOR VEHICLES AND THE EFFECT OF RESERVATIONS IN BIDS OF THE NORTHWEST MOTOR CO. THAT THE MANUFACTURER OF THE VEHICLE SHOULD NOT BE BOUND BY THE TERMS OR CONDITIONS STIPULATED, IT WAS SAID---

RELATIVE TO YOUR QUESTION AS TO THE EFFECT OF THE RESERVATION IN THE BIDS OF THE NORTHWEST MOTOR COMPANY REGARDING THE MANUFACTURER, IT IS TO BE OBSERVED THAT THE ACT OF JUNE 30, 1936, 49 STAT. 2036, KNOWN AS THE WALSH- HEALEY ACT, PROVIDES THAT IN ANY CONTRACT MADE AND ENTERED INTO BY ANY EXECUTIVE DEPARTMENT, INDEPENDENT ESTABLISHMENT, OR OTHER AGENCY OR INSTRUMENTALITY OF THE UNITED STATES, ETC., FOR THE MANUFACTURE OR FURNISHING OF MATERIALS, SUPPLIES, ARTICLES, AND EQUIPMENT IN ANY AMOUNT EXCEEDING $10,000, THERE SHALL BE INCLUDED REPRESENTATIONS AND STIPULATIONS WHICH MAY BE SUMMARIZED AS FOLLOWS:

(A) THAT THE CONTRACTOR IS THE MANUFACTURER OF OR REGULAR DEALER IN THE MATERIALS OFFERED.

(B) MINIMUM WAGE STIPULATION.

(C) MAXIMUM HOUR STIPULATION.

(D) MINIMUM AGE OF EMPLOYEES STIPULATION.

(E) SAFE AND SANITARY WORKING CONDITIONS AND SURROUNDINGS.

THE STATUTE IS MANDATORY, AND ITS MANIFEST PURPOSE IS THAT RECIPIENTS OF GOVERNMENT CONTRACTS COMING WITHIN ITS TERMS SHALL BE SUBJECT TO ITS REQUIREMENTS. ALL CONTRACTS TO WHICH THE STATUTE IS APPLICABLE "MUST INCLUDE THE PRESCRIBED REPRESENTATIONS AND STIPULATIONS IN EVERY INSTANCE" AND WITHOUT ANY QUALIFICATION WHATEVER. HENCE, INVITATIONS FOR BIDS SHOULD INFORM PROSPECTIVE BIDDERS THAT IF THE AMOUNT OF AN AWARDED CONTRACT--- NOT WITHIN ANY OF THE EXCEPTIONS PRESCRIBED UNDER SECTION 9 OR PROVIDED FOR UNDER SECTION 6--- EXCEEDS $10,000, THE CONTRACT SHALL CONTAIN THE REPRESENTATIONS AND STIPULATIONS REQUIRED BY THE SAID ACT, AND THAT ANY BID WHICH, BY QUALIFICATIONS, UNDERTAKES TO AVOID COMPLIANCE WITH THE STATUTE IN ANY WAY, OR BY ANY MEANS, WILL BE SUBJECT TO REJECTION. THE RESERVATION IN THE BIDS OF THE NORTHWEST MOTOR COMPANY HERE INVOLVED CANNOT BUT BE RECOGNIZED AS AN EFFORT TO RELIEVE THE FORD MOTOR COMPANY, THE MANUFACTURER AND ACTUAL FURNISHER OF THE AUTOMOBILES OFFERED, OF RESPONSIBILITY FOR COMPLIANCE OR NONCOMPLIANCE WITH THE REQUIREMENTS OF THE ACT, AND THE BIDS WOULD BE FOR REJECTION FOR THAT REASON.

FURTHERMORE, IT IS TO BE NOTED IN THIS CONNECTION THAT SECTION 4 OF THE SAID ACT OF JUNE 30, 1936, AUTHORIZES THE SECRETARY OF LABOR TO MAKE, AMEND, AND RESCIND SUCH RULES AND REGULATIONS AS MAY BE NECESSARY TO CARRY OUT THE PROVISIONS OF THE ACT. PURSUANT TO THAT AUTHORITY THE SECRETARY OF LABOR ISSUED A CIRCULAR LETTER TO THE HEADS OF DEPARTMENTS UNDER DATE OF NOVEMBER 10, 1936, IN PERTINENT PART AS FOLLOWS:

"AGENCY CONTRACTS.--- WHERE A DEALER INSTEAD OF FILLING A GOVERNMENT ORDER FROM HIS OWN STOCK, QUOTES A MANUFACTURER'S PRICE, AND HIS FACTORY SHIP DIRECT TO GOVERNMENT, DEALER WILL BE DEEMED AGENT ACTING FOR UNDISCLOSED PRINCIPAL. IN SUCH CASES IT WILL BE PRESUMED THAT MANUFACTURER IS PARTY TO CONTRACT AND CONSEQUENTLY RESPONSIBLE FOR CONFORMING TO LABOR STIPULATIONS THEREIN.' AND UNDER DATE OF NOVEMBER 24, 1936, AMENDED REGULATIONS NO. 504, SERIES A, DATED SEPTEMBER 14, 1936, BY ADDING THERETO AN ARTICLE AS FOLLOWS:

"ART. 104 (DEALER AS AGENT OF UNDISCLOSED PRINCIPAL). WHENEVER A DEALER TO WHOM A CONTRACT WITHIN THE ACT AND REGULATIONS (WALSH-HEALEY ACT) HAS BEEN AWARDED CAUSES A MANUFACTURER TO DELIVER DIRECTLY TO THE GOVERNMENT THE MATERIALS, SUPPLIES, ARTICLES, OR EQUIPMENT REQUIRED UNDER THE CONTRACT, SUCH DEALER WILL BE DEEMED THE AGENT OF THE MANUFACTURER IN EXECUTING THE CONTRACT. AS THE PRINCIPAL OF SUCH AGENT THE MANUFACTURER WILL BE DEEMED TO HAVE AGREED TO THE STIPULATIONS CONTAINED IN THE CONTRACT.'

THE BIDS OF THE NORTHWEST MOTOR COMPANY ARE FOR DELIVERY F.O.B. DETROIT, MICHIGAN, THE MANUFACTURING PLANT OF THE FORD MOTOR COMPANY, FOR SHIPMENT DIRECT TO THE GOVERNMENT. IT WOULD APPEAR THAT THESE BIDS COME SQUARELY WITHIN THE QUOTED RULES OF THE SECRETARY OF LABOR. THAT IS TO SAY, THE NORTHWEST MOTOR COMPANY, WHICH IS A RECOGNIZED FORD DEALER IN THIS SECTION OF THE COUNTRY, IS TO BE CONSIDERED UNDER SUCH RULES AS AGENT FOR THE FORD MOTOR COMPANY IN THE PROPOSED CONTRACT, AND RESPONSIBILITY FOR COMPLIANCE WITH THE WALSH-HEALEY ACT STIPULATIONS IN THE CONTRACT WOULD BE CONSIDERED AS RESTING UPON THE FORD MOTOR COMPANY IN THE MANUFACTURE OF THE AUTOMOBILES TO BE DELIVERED.

IN THE EVENT THAT A CONTRACT WERE TO BE AWARDED THE NORTHWEST MOTOR COMPANY IN EXCESS OF $10,000, THE STIPULATIONS REQUIRED BY THE ACT OF JUNE 30, 1936, 49 STAT. 2036, SHOULD BE INCLUDED, NOTWITHSTANDING THE FACT THAT PROMPT PAYMENT WOULD REDUCE THE ACTUAL EXPENDITURE BELOW THE $10,000 LIMIT. THE TOTAL PRICE NAMED IN THE CONTRACT IS THE CONTRACT PRICE, INSOFAR AS APPLICATION OF THE SAID ACT IS CONCERNED, ANY REDUCTION THEREIN BEING DEPENDENT UPON A CONDITION SUBSEQUENT TO THE CONTRACT.

IT IS AN ESTABLISHED PRACTICE IN THE DEPARTMENTS AND AGENCIES OF THE GOVERNMENT TO RECEIVE AND GIVE CONSIDERATION TO BIDS OFFERING A SMALLER NUMBER OF ARTICLES THAN REQUIRED BY THE SOLICITATION, WHEN IN THE INTERESTS OF THE GOVERNMENT TO DO SO, AND THE BIDS OF THE GENERAL MOTORS CORPORATION AND THE INTERNATIONAL HARVESTER COMPANY, IF OTHERWISE PROPER FOR ACCEPTANCE, ARE NOT TO BE REJECTED FOR THE SOLE REASON THAT THESE COMPANIES HAVE OFFERED PROPOSALS FOR LESS THAN THE ENTIRE NUMBER OF VEHICLES REQUIRED.

WHEN IT IS ANTICIPATED THAT INVITATIONS FOR BIDS WILL DEVELOP CONTRACTS IN EXCESS OF $10,000 IN AMOUNT, IT IS PROPER THAT THE ADVERTISEMENT GIVE NOTICE TO BIDDERS THAT THE ACT OF JUNE 30, 1936, WILL BE APPLICABLE TO SUCH CONTRACTS. WHEN, HOWEVER, AWARDS ARE MADE WHICH ARE LESS THAN $10,000 IN AMOUNT, THERE IS NO REQUIREMENT THAT THE STATUTORY STIPULATIONS BE INCLUDED IN THE CONTRACT. HOWEVER, WHEN SUCH AWARDS ARE MADE AND THERE IS LEFT THEREBY A BALANCE OF NOT MUCH MORE THAN $10,000 IN AMOUNT FOR POSSIBLE AWARD TO SOME OTHER BIDDER, THE INTERESTS OF THE GOVERNMENT WOULD SEEM TO REQUIRE A READVERTISING OF THE REMAINING NEEDS, BECAUSE IT MAY BE THAT BIDDERS UPON READVERTISEMENT, RECOGNIZING THAT A CONTRACT OF LESS THAN $10,000 IN AMOUNT WOULD NOT REQUIRE INCLUSION OF THE PROVISIONS OF THE WALSH HEALEY ACT, WOULD BE INFLUENCED TO OFFER THE GOVERNMENT A LOWER PRICE, WITH A VIEW OF COMING WITHIN THE EXCEPTION LIMIT OF THE ACT.

YOUR SUBMISSION RAISES THE FURTHER QUESTIONS (A) WHETHER BIDS OF A DEALER WHICH CONTAIN THE RESERVATION THAT THE MANUFACTURER SHALL NOT BE BOUND BY THE TERMS AND CONDITIONS THEREOF SHOULD BE REJECTED FOR THAT REASON WHERE THE AMOUNT OF THE CONTRACT IS NOT IN EXCESS OF $10,000, AND (B) WHETHER TRADE-IN ALLOWANCES SHOULD BE DEDUCTED FROM THE BID PRICE IN DETERMINING WHETHER THE CONTRACT PRICE IS IN EXCESS OF $10,000.

BOTH OF THESE MATTERS ARE ANSWERED IN THE NEGATIVE. WHERE CONTRACTS AWARDED ARE NOT IN EXCESS OF $10,000 IN AMOUNT, THERE IS NO REQUIREMENT THAT THE STATUTORY STIPULATIONS OF THE WALSH-HEALEY ACT BE INCLUDED IN THE CONTRACT. IN SUCH CASES THE STATED RESERVATION IN THE BID OF A DEALER IS SUPERFLUOUS AND DOES NOT GIVE THE BIDDER ANY COMPETITIVE ADVANTAGE OVER OTHER BIDDERS OR VARY THE OBLIGATIONS OF THE CONTRACT FROM THOSE WHICH OTHERWISE WOULD HAVE BEEN INCURRED. HENCE, THE RESERVATION IS WHOLLY IMMATERIAL IN SUCH CASES AND PROVIDES NO BASIS FOR THE REJECTION OF A BID OTHERWISE ACCEPTABLE. IN THIS RESPECT THE SITUATION INVOLVED IS ESSENTIALLY DIFFERENT FROM THOSE CONSIDERED IN THE DECISIONS OF DECEMBER 11, 1933, 13 COMP. GEN. 169, AND MAY 16, 1934, 13 COMP. GEN. 359, CITED IN YOUR LETTER, WHERE THE BIDS STIPULATED TERMS AND CONDITIONS WHICH WOULD HAVE CHANGED MATERIALLY THE OBLIGATIONS OF THE CONTRACT FROM THOSE OFFERED OR AVAILABLE TO OTHER BIDDERS.

RESPECTING THE MATTER OF DEDUCTING THE AMOUNT OF AN OFFERED TRADE-IN ALLOWANCE FROM THE BID PRICE IN DETERMINING WHETHER THE CONTRACT PRICE IS IN EXCESS OF $10,000, IT SEEMS CLEAR THAT THE GROSS BID PRICE IN SUCH CASES MUST BE CONSIDERED THE CONTRACT PRICE. THE CIRCUMSTANCE THAT THE PRICE OF THE NEW VEHICLES TO BE PURCHASED MAY BE PAID FOR PARTLY IN CASH AND PARTLY BY A CREDIT FOR THE AMOUNT OFFERED AS A TRADE-IN ALLOWANCE FOR OLD VEHICLES DOES NOT CHANGE THE AMOUNT OF THE TOTAL CONTRACT CONSIDERATION FOR WHICH THE GOVERNMENT IS OBLIGATED. SECTION 1 OF THE SAID WALSH-HEALEY ACT PROVIDES THAT THE ENUMERATED STIPULATIONS SHALL BE INCLUDED IN ANY CONTRACT "FOR THE MANUFACTURE OR FURNISHING OF MATERIALS, SUPPLIES, ARTICLES, AND EQUIPMENT IN ANY AMOUNT EXCEEDING $10,000," AND THERE APPEARS NO ROOM FOR DOUBT THAT THE CONTRACT PRICE OF THE GOODS TO BE MANUFACTURED OR FURNISHED, RATHER THAN THE MEANS OF PAYMENT, IS THE CONTROLLING FACTOR IN THIS RESPECT IN DETERMINING WHETHER THE STATUTORY STIPULATIONS ARE REQUIRED TO BE INCLUDED IN THE CONTRACT. ACCORDINGLY, THE FIRST AND SECOND OF THE FOUR QUESTIONS STATED IN YOUR LETTER ARE ANSWERED IN THE NEGATIVE; THE THIRD QUESTION IS ANSWERED IN THE AFFIRMATIVE; AND THE FOURTH QUESTION IS ANSWERED IN THE NEGATIVE.