A-96415, AUGUST 2, 1938, 18 COMP. GEN. 117

A-96415: Aug 2, 1938

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IS UNAUTHORIZED AS UNNECESSARILY RESTRICTIVE OF COMPETITION. SUCH EQUIPMENT THROUGH THE REGISTRATION OF OWNERS AND ASSIGNMENTS THEREUNDER BY A PROCESS OF ROTATION WHICH WILL EFFECTIVELY DISTRIBUTE THE WORK HAS NOT BEEN OBJECTED TO. IN THE FURTHERANCE OF THE PURPOSE FOR WHICH THE RELIEF FUNDS WERE APPROPRIATED. THERE IS NO OBJECTION TO A STIPULATION IN INVITATIONS FOR REGISTRANTS GIVING PREFERENCE TO BONA FIDE OWNERS OR PURCHASERS OF EQUIPMENT AS OF THE DATE OF THE CURRENT INVITATION. IS AS FOLLOWS: SINCE THE INCEPTION OF THE WORKS PROGRAM. THE FIRST AND MORE FREQUENTLY USED METHOD IS THAT OF ENGAGING AN OWNER-OPERATOR OF EQUIPMENT ON A PAY-ROLL BASIS AND PAYING SUCH OWNER-OPERATOR AT A COMBINED RATE FOR PERSONAL SERVICES AND THE USE OF THE EQUIPMENT.

A-96415, AUGUST 2, 1938, 18 COMP. GEN. 117

EQUIPMENT - OWNER-OPERATED - PROCUREMENT FOR USE ON RELIEF PROJECTS THE PROVISIONS OF SECTION 3709, REVISED STATUTES, THOUGH PRIMARILY FOR THE PROTECTION OF THE UNITED STATES AND NOT THE SELLER, BEING DESIGNED TO GIVE ALL QUALIFIED PERSONS EQUAL RIGHT TO COMPETE FOR GOVERNMENT BUSINESS AND TO PREVENT UNJUST FAVORITISM, COLLUSION, AND FRAUD, THE PROPOSED LIMITING OF THE PROCUREMENT OF TRUCKS AND EQUIPMENT FOR USE ON WORKS PROGRESS ADMINISTRATION RELIEF PROJECTS TO THOSE OWNER OPERATORS WHO CAN SHOW THAT THEY OWNED ONE OR MORE TRUCKS ON NOVEMBER 1, 1935, EXCEPT WHERE INSUFFICIENT TO MEET THE NEEDS OF THE PROJECT, IS UNAUTHORIZED AS UNNECESSARILY RESTRICTIVE OF COMPETITION, NOTWITHSTANDING THE EXISTING PROCEDURE OF INVITING BIDS FOR FURNISHING, AT ADMINISTRATIVELY ESTABLISHED RATES, SUCH EQUIPMENT THROUGH THE REGISTRATION OF OWNERS AND ASSIGNMENTS THEREUNDER BY A PROCESS OF ROTATION WHICH WILL EFFECTIVELY DISTRIBUTE THE WORK HAS NOT BEEN OBJECTED TO, THOUGH NOT IN STRICT CONFORMITY WITH SECTION 3709, IN THE FURTHERANCE OF THE PURPOSE FOR WHICH THE RELIEF FUNDS WERE APPROPRIATED, BUT THERE IS NO OBJECTION TO A STIPULATION IN INVITATIONS FOR REGISTRANTS GIVING PREFERENCE TO BONA FIDE OWNERS OR PURCHASERS OF EQUIPMENT AS OF THE DATE OF THE CURRENT INVITATION, WITH RECOURSE TO THE USUAL MODE OF PROCUREMENT BY ADVERTISING AND FREE AND OPEN COMPETITION AMONG ALL QUALIFIED OWNERS AND AWARDS TO SUCCESSIVE LOW BIDDERS SHOULD THE PROPOSED PROCEDURE PROVE UNAVAILABLE OR UNSATISFACTORY.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE ADMINISTRATOR, WORKS PROGRESS ADMINISTRATION, AUGUST 2, 1938:

YOUR LETTER OF JULY 8, 1938, IS AS FOLLOWS:

SINCE THE INCEPTION OF THE WORKS PROGRAM, THE WORKS PROGRESS ADMINISTRATION HAS USED ONE OF TWO METHODS OF SECURING TRUCKS FOR USE ON ITS PROJECTS. THE FIRST AND MORE FREQUENTLY USED METHOD IS THAT OF ENGAGING AN OWNER-OPERATOR OF EQUIPMENT ON A PAY-ROLL BASIS AND PAYING SUCH OWNER-OPERATOR AT A COMBINED RATE FOR PERSONAL SERVICES AND THE USE OF THE EQUIPMENT, IN ACCORDANCE WITH THE PROVISIONS OF THIS ADMINISTRATION'S HANDBOOK OF PROCEDURES LETTER, NO. 42, A COPY OF WHICH IS ATTACHED FOR CONVENIENT REFERENCE.

THE ALTERNATE METHOD HAS BEEN BY CONTRACT AND PAYMENT BY PUBLIC VOUCHER, IN ACCORDANCE WITH THE PROCEDURE SET FORTH IN SECTION III, CHAPTER X, PARAGRAPH 42 C (1) (C) OF THE MANUAL OF PROCEDURE OF THE PROCUREMENT DIVISION, BRANCH OF SUPPLY, TREASURY DEPARTMENT.

IT HAS DEVELOPED THAT, IN AT LEAST ONE STATE, TRUCK SALESMEN, FEELING REASONABLY ASSURED THAT OWNER-OPERATORS OF EQUIPMENT WOULD HAVE FAIRLY CONTINUOUS EMPLOYMENT, HAVE SOUGHT OUT ELIGIBLE PERSONS AND SOLD THEM TRUCKS WITHOUT, IN MANY CASES, REQUIRING THE USUAL DOWN PAYMENT OR OTHER NORMAL CREDIT PREREQUISITES. AS A RESULT, IT IS ALLEGED THAT MANY PERSONS WHO WERE NOT PREVIOUSLY ASSOCIATED IN ANY WAY WITH THE TRUCKING BUSINESS HAVE BECOME TRUCK OWNERS, THEREBY GREATLY INCREASING THE NUMBER OF SMALLER TRUCKS AVAILABLE FOR RENT.

ALTHOUGH THIS ADMINISTRATION NO LONGER GIVES PREFERENCE TO RELIEF OWNER- OPERATORS OF SUCH EQUIPMENT, PRACTICALLY ALL SMALL TRUCKS ARE SECURED ON A PAY-ROLL BASIS FROM THE OWNER-OPERATOR CLASS. THESE OWNER-OPERATORS ARE THUS ASSURED OF A FAIRLY STEADY INCOME WHICH, IT IS STATED, THEY AUGMENT BY TAKING PRIVATE TRUCKING WORK DURING THEIR OFF TIME AT RATES WHICH CANNOT BE MET BY ESTABLISHED COMMERCIAL TRUCKING CONCERNS. THE COMMERCIAL TRUCKING CONCERNS COMPLAIN, WITH SOME JUSTICE, THAT THE WORKS PROGRAM HAS BUILT UP AN ENTIRELY NEW CLASS OF TRUCK OWNERS WHO ARE SUBJECTING THE ESTABLISHED TRUCKING INTEREST TO UNFAIR COMPETITION AND ARE RAPIDLY FORCING THEM OUT OF BUSINESS.

IT HAS BEEN PROPOSED THAT THE OWNER-OPERATOR PAY-ROLL SYSTEM BE ABANDONED AND THAT ALL TRUCKS BE SECURED ON A CONTRACT BASIS AS OUTLINED IN THE ABOVE CITED SECTION OF THE PROCUREMENT MANUAL, WITH A SPECIAL PROVISION GIVING PREFERENCE TO THOSE OWNERS WHO CAN SHOW THAT THEY OWNED ONE OR MORE TRUCKS ON NOVEMBER 1, 1935, WHICH WAS APPROXIMATELY THE DATE OF THE BEGINNING OF THE W.P.A. CONSTRUCTION PROGRAM IN THE STATES. IN OTHER WORDS, WHAT IS PROPOSED IS THAT THE PROCUREMENT DIVISION MAKE ASSIGNMENTS OF EQUIPMENT ACQUIRED DURING THE OPERATION OF THE W.P.A. PROGRAM ONLY IN THOSE CASES WHERE THE NUMBER OF TRUCKS OBTAINABLE FROM PREVIOUSLY ESTABLISHED TRUCK OWNERS IS INSUFFICIENT TO MEET THE NEEDS OF THE PROJECT.

THE ESTABLISHMENT OF SOME SUCH ARRANGEMENT MAY BE JUSTIFIED, BUT THERE SEEMS TO BE FOR CONSIDERATION THE QUESTION AS TO WHETHER THE ESTABLISHMENT OF THE DEADLINE DATE MIGHT NOT BE HELD TO BE IN CONTRAVENTION OF THE PROVISIONS OF SECTION 3709 OF THE REVISED STATUTES.

YOUR OFFICE HAS HELD, GENERALLY, THAT THE PROVISIONS OF THE STATUTE REQUIRE FREE AND OPEN COMPETITION AND THAT ALL RECOGNIZED DEALERS MUST BE PERMITTED TO BID ON THE GOVERNMENT'S NEEDS. THERE IS FOR DETERMINATION HERE WHETHER THE PRACTICE OF GIVING PREFERENCE TO BIDDERS WHO WERE RECOGNIZED OWNERS OF EQUIPMENT BEFORE THE WORKS PROGRAM WAS INITIATED IS PERMISSIBLE WITHIN YOUR INTERPRETATION OF THE INTENT OF THE STATUTE.

YOUR EARLY DECISION IS RESPECTFULLY SOLICITED.

THE PURPOSES OF SECTION 3709, REVISED STATUTES, HAVE BEEN DEFINED BY THE COURTS AND THE ACCOUNTING OFFICERS OF THE GOVERNMENT TOO OFTEN TO REQUIRE EXTENDED DISCUSSION NOW. IT HAS BEEN HELD THAT THE REQUIREMENTS OF THE STATUTE ARE PRIMARILY TO PROTECT THE UNITED STATES AND NOT THE SELLER, AMERICAN SMELTING AND REFINING CO. V. UNITED STATES, 259 U.S. 75, BUT IT HAS BEEN STATED, ALSO, THAT, BY OBSERVANCE OF ITS REQUIREMENTS,"THE GOVERNMENT IS GIVEN THE BENEFIT OF THE COMPETITION OF THE MARKET AND EACH BIDDER IS GIVEN THE CHANCE FOR A BARGAIN.' PURCELL ENVELOPE CO. V. UNITED STATES, 249 U.S. 313, 318. ITS PROVISIONS ARE DESIGNED TO GIVE ALL QUALIFIED PERSONS EQUAL RIGHT TO COMPETE FOR GOVERNMENT BUSINESS; TO SECURE TO THE GOVERNMENT THE BENEFITS WHICH FLOW FROM FREE COMPETITION; TO PREVENT UNJUST FAVORITISM BY OFFICERS OF THE GOVERNMENT IN MAKING PURCHASES ON PUBLIC ACCOUNT, AND TO RAISE A BAR AGAINST COLLUSION AND FRAUD IN PROCURING SUPPLIES AND LETTING CONTRACTS. 5 COMP. GEN. 712. MAY BE SAID, THEREFORE, THAT EVERY CITIZEN QUALIFIED TO BID FOR GOVERNMENT BUSINESS IS ENTITLED TO CERTAIN CONSIDERATIONS UNDER THE STATUTE WHICH MAY NOT LEGALLY BE DISREGARDED OR IGNORED. AND SO IT HAS BEEN HELD CONSISTENTLY THAT INVITATIONS FOR BIDS AND SPECIFICATIONS SHOULD BE FREE FROM RESTRICTIVE PROVISIONS AND REQUIREMENTS WHICH DO NOT REFLECT ACTUAL NEEDS OF THE GOVERNMENT BUT WHICH SERVE TO LIMIT OR EXCLUDE THE VERY COMPETITION WHICH THE PROVISIONS OF THE STATUTE ARE DESIGNED TO PROMOTE AND ACCOMPLISH, SUCH RESTRICTIONS BEING ADVERSE ALIKE TO THE INTERESTS OF THE GOVERNMENT AND OTHERWISE QUALIFIED ASPIRANTS FOR GOVERNMENT BUSINESS.

SECTION III, CHAPTER X, PARAGRAPH C (1) (C), OF THE MANUAL OF PROCEDURE OF THE PROCUREMENT DIVISION, BRANCH OF SUPPLY, TREASURY DEPARTMENT, REFERRED TO IN PARAGRAPH 2 OF YOUR SUBMISSION, EMBODIES WHAT MAY BE CALLED THE "REGISTRATION" METHOD OF TRUCK AND EQUIPMENT RENTAL. IT PROVIDES FOR INVITING BIDS FOR FURNISHING, AT ESTABLISHED HOURLY RATES, THE SEVERAL TYPES OF EQUIPMENT EXPECTED TO BE UTILIZED DURING A SPECIFIED PERIOD, THE BIDDER INDICATING THE NUMBER OF UNITS OF EQUIPMENT HE CAN FURNISH. THE PROCUREMENT OFFICER IS REQUIRED TO ENTER INTO CONTRACTS WITH ALL QUALIFIED BIDDERS AT THE RATE SPECIFIED, THE EQUIPMENT TO BE CALLED FOR IF, AS, WHEN, AND FOR SUCH PERIOD AS IT MAY BE NEEDED. ALSO, IT IS PROVIDED THAT STATE PROCUREMENT OFFICERS, FROM THE LISTS OF AVAILABLE EQUIPMENT, SHALL, EXCEPT AS OTHERWISE PROVIDED, MAKE ASSIGNMENTS TO PROJECTS BY PURCHASE ORDERS, AND "SHALL ALLOT ASSIGNMENTS TO QUALIFIED CONTRACTORS BY A PROCESS OF ROTATION WHICH WILL EFFECTIVELY DISTRIBUTE THE BUSINESS SO THAT, INSOFAR AS PRACTICAL CONDITIONS WILL PERMIT, NO ONE CONTRACTOR WILL BE FAVORED TO THE DISADVANTAGE OF OTHERS.'

THIS METHOD IS NOT IN STRICT CONFORMITY WITH SECTION 3709, REVISED STATUTES, IN THAT THE PRICES TO BE PAID ARE FIXED IN ADVANCE BY THE GOVERNMENT, AND THERE IS NO COMPETITION BETWEEN EQUIPMENT OWNERS AS TO SUBMITTED PRICES. HOWEVER, THIS OFFICE, HAVING IN VIEW THE DECLARED PURPOSE OF THE EMERGENCY RELIEF APPROPRIATION ACTS TO PROVIDE RELIEF AND WORK RELIEF OVER AS WIDE A SPREAD AS POSSIBLE, HAS WITHHELD OBJECTION TO THE METHOD, THE SYSTEM APPEARING TO BE IN FURTHERANCE OF THE PURPOSE FOR WHICH RELIEF FUNDS WERE APPROPRIATED, AND GIVING EVERY OWNER OF SIMILAR AND SUITABLE EQUIPMENT EQUAL OPPORTUNITY FOR EMPLOYMENT AT PRESUMABLY REASONABLE RATES OF PAY. THE METHOD HAS BEEN IN OPERATION OVER AN EXTENDED PERIOD, AND, SO FAR AS IS KNOWN IN THIS OFFICE, HAS ENCOUNTERED NO SERIOUS OPPOSITION IN ANY OTHER PART OF THE COUNTRY.

WHAT IS SUGGESTED IN YOUR PRESENT SUBMISSION IS NOT IN CONFORMITY WITH EITHER THE COMPETITIVE PROCEDURE UNDER SECTION 3709, REVISED STATUTES, OR WITH THE WIDE SPREAD OF EMPLOYMENT PURPOSES OF THE SEVERAL EMERGENCY RELIEF APPROPRIATION ACTS. IT IS PROPOSED TO ADOPT THE PROCEDURE PROVIDED IN THE PROCUREMENT MANUAL AS ABOVE OUTLINED, THUS ELIMINATING COMPETITION AS TO PRICE AND, AT THE SAME TIME, TO ADOPT A STIPULATION THAT PREFERENCE SHALL BE GIVEN TO THOSE WHO OWNED ONE OR MORE TRUCKS ON NOVEMBER 1, 1935, ALMOST 3 YEARS AGO, THUS DEPRIVING ALL WHO HAVE ACQUIRED TRUCKS AND EQUIPMENT IN THE INTERIM OF THE RIGHT TO HAVE THEIR EQUIPMENT CONSIDERED ON EQUAL TERMS WITH THOSE "COMMERCIAL TRUCKING CONCERNS" WHICH WERE ORGANIZED AND IN OPERATION PRIOR TO THE SPECIFIED DATE, IRRESPECTIVE OF THEIR ABILITY TO PERFORM OR THEIR NEED FOR THE WORK.

THERE WOULD APPEAR TO BE NO LEGAL AUTHORITY FOR THUS MAKING USE OF A DATE LINE PRACTICALLY 3 YEARS OLD TO SHUT OFF OTHERWISE QUALIFIED PERSONS FROM PARTICIPATION IN THE BENEFITS OF GOVERNMENT BUSINESS. THIS WOULD APPEAR TO BE PECULIARLY TRUE IN VIEW OF THE FACT THAT, AS YOU STATE, MANY OF THOSE WHO HAVE ACQUIRED EQUIPMENT IN THE MEANTIME HAVE DONE SO, AND OBLIGATED THEMSELVES FOR PAYMENT THEREFOR, UPON THE FAITH OF THEIR BEING ABLE TO OBTAIN EMPLOYMENT UNDER THE WORKS PROGRESS PROGRAM ON AN EQUAL FOOTING WITH OTHER ASPIRANTS. SUCH A PROCEDURE WOULD NO DOUBT WORK MATERIAL HARDSHIPS ON THOSE WHO HAVE PURCHASED SUBSEQUENT TO NOVEMBER 1, 1935, AND, ALSO, WOULD OPERATE TO TURN PRACTICALLY ALL GOVERNMENT BUSINESS UNDER THE WORKS PROGRESS PROGRAM TO THOSE "ESTABLISHED TRUCKING CONCERNS" WHICH WERE IN EXISTENCE PRIOR TO THAT DATE.

HOWEVER, THERE WOULD APPEAR TO BE NO VALID OBJECTION TO A STIPULATION IN INVITATIONS FOR REGISTRATIONS THAT PREFERENCE WILL BE GIVEN TO THOSE REGISTRANTS WHO CAN SHOW THAT THEY WERE BONA FIDE OWNERS OF EQUIPMENT OFFERED FOR REGISTRATION AS OF THE DATE OF THE CURRENT INVITATION, OR HAD MADE A SUFFICIENT NUMBER OF PAYMENTS THEREON TO ESTABLISH THE BONA FIDES OF THE PURCHASE THEREOF. THE DATE THUS BEING CURRENT WOULD MAKE NO UNJUST DISCRIMINATION AND WORK NO HARDSHIPS ON THOSE WHO HAVE HERETOFORE PURCHASED EQUIPMENT UPON THE PROSPECT OF EMPLOYMENT ON WORKS PROGRESS PROJECTS. PROSPECTIVE REGISTRANTS PROPERLY MIGHT BE INFORMED THAT, HEREAFTER, PREFERENCE WILL BE GIVEN TO THOSE WHO ESTABLISH OWNERSHIP OF EQUIPMENT AS OF THE DATE THUS STIPULATED. THOSE WHO PURCHASE EQUIPMENT SUBSEQUENT TO THAT DATE WILL THUS BE ON NOTICE THAT THEY WILL RECEIVE ASSIGNMENTS ONLY WHEN EARLIER OWNED EQUIPMENT IS NOT AVAILABLE, OR, WHEN IT IS OTHERWISE IN THE INTEREST OF THE GOVERNMENT, THERE WILL BE NO SUCH UNWARRANTED DISCRIMINATION AS HERE PROPOSED, AND NO ONE OR MORE TRUCK OWNERS WILL HAVE JUST REASON FOR COMPLAINT.

WHEN THE ABOVE OUTLINED METHOD OF PROCEDURE IS NOT AVAILABLE OR IS UNSATISFACTORY IN OPERATION, ALL AWARDS OF CONTRACTS FOR TRUCKS AND EQUIPMENT SHOULD BE AFTER ADVERTISING AND OPPORTUNITY FOR FREE AND OPEN COMPETITION AMONG ALL QUALIFIED OWNERS OF TRUCKS AND EQUIPMENT, WITH AWARD TO SUCCESSIVE LOW BIDDERS AND ASSIGNMENTS ACCORDINGLY UNTIL THE REQUIREMENTS OF THE GOVERNMENT ARE FILLED.