A-97514, NOVEMBER 4, 1939, 19 COMP. GEN. 486

A-97514: Nov 4, 1939

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ARE NOT CONTRACTS "FOR THE MANUFACTURE OR FURNISHING OF MATERIALS. ARE NOT FOR INCLUSION THEREIN. AS FOLLOWS: THIS IS IN REFERENCE TO THE OPINION OF THE ACTING COMPTROLLER GENERAL. IN THAT OPINION IT IS RULED THAT CONTRACTS FOR THE RENTAL OF TRUCKS ARE REGARDED AS NOT BEING SUBJECT TO THE PUBLIC CONTRACTS ACT FOR THE REASON. THAT THE PUBLIC CONTRACTS ACT REQUIRES "STIPULATIONS THAT THE CONTRACTOR IS THE "MANUFACTURER OF OR A REGULAR DEALER IN THE MATERIALS. ARTICLES OR EQUIPMENT TO BE SUPPLIED" AND AS THE ACT MAY NOT BE INTERPRETED AS INTENDED TO PROHIBIT RENTAL BY THE GOVERNMENT OF TRUCKS AND OTHER CONSTRUCTION EQUIPMENT FROM OWNERS THEREOF WHERE SUCH OWNERS ARE NOT MANUFACTURERS OF OR REGULAR DEALERS IN SUCH EQUIPMENT.

A-97514, NOVEMBER 4, 1939, 19 COMP. GEN. 486

CONTRACTS - EQUIPMENT, ETC., RENTED WITH AND WITHOUT OPERATOR - NONAPPLICABILITY OF WALSH-HEALEY ACT LABOR, ETC., STIPULATIONS CONTRACTS FOR THE RENTAL OF TRUCKS, CONSTRUCTION EQUIPMENT, AND PERSONAL PROPERTY GENERALLY, WITH OR WITHOUT OPERATOR, ARE NOT CONTRACTS "FOR THE MANUFACTURE OR FURNISHING OF MATERIALS, SUPPLIES, ARTICLES, AND EQUIPMENT" AND THEREFORE THE LABOR, ETC., STIPULATIONS OF THE WALSH-HEALEY ACT OF JUNE 30, 1936, 49 STAT. 2036, ARE NOT FOR INCLUSION THEREIN, THE WORD "FURNISHING," AS USED IN THE ACT, CONTEMPLATING THE "SELLING" OF PROPERTY TO THE GOVERNMENT AND IMPORTING, AS A GENERAL PROPOSITION, A TRANSACTION WHEREBY THE GOVERNMENT TAKES TITLE TO, AS WELL AS POSSESSION OF, THE ARTICLE OR THING INVOLVED.

COMPTROLLER GENERAL BROWN TO THE SECRETARY OF LABOR, NOVEMBER 4, 1939:

THERE HAS BEEN CONSIDERED YOUR LETTER OF SEPTEMBER 29, 1939, AS FOLLOWS:

THIS IS IN REFERENCE TO THE OPINION OF THE ACTING COMPTROLLER GENERAL, NO. A-97514, DATED OCTOBER 7, 1938, ADDRESSED TO THE CHAIRMAN OF THE TENNESSEE VALLEY AUTHORITY.

IN THAT OPINION IT IS RULED THAT CONTRACTS FOR THE RENTAL OF TRUCKS ARE REGARDED AS NOT BEING SUBJECT TO THE PUBLIC CONTRACTS ACT FOR THE REASON, AS STATED, THAT THE PUBLIC CONTRACTS ACT REQUIRES "STIPULATIONS THAT THE CONTRACTOR IS THE "MANUFACTURER OF OR A REGULAR DEALER IN THE MATERIALS, SUPPLIES, ARTICLES OR EQUIPMENT TO BE SUPPLIED" AND AS THE ACT MAY NOT BE INTERPRETED AS INTENDED TO PROHIBIT RENTAL BY THE GOVERNMENT OF TRUCKS AND OTHER CONSTRUCTION EQUIPMENT FROM OWNERS THEREOF WHERE SUCH OWNERS ARE NOT MANUFACTURERS OF OR REGULAR DEALERS IN SUCH EQUIPMENT, SUCH RENTAL CONTRACTS MAY NOT BE VIEWED AS FALLING WITHIN THE SCOPE OF THE LEGISLATION.'

THIS DEPARTMENT HAS ALWAYS REGARDED CONTRACTS FOR THE RENTAL OF PERSONAL PROPERTY AS BEING SUBJECT TO THE PUBLIC CONTRACTS ACT. BY ITS TERMS, THE ACT IS CLEARLY INTENDED TO APPLY TO ANY CONTRACT MADE OR ENTERED INTO BY ANY EXECUTIVE DEPARTMENT, INDEPENDENT ESTABLISHMENT, OR OTHER AGENCY OR INSTRUMENTALITY OF THE UNITED STATES, OR BY THE DISTRICT OF COLUMBIA, OR BY ANY CORPORATION ALL THE STOCK OF WHICH IS BENEFICIALLY OWNED BY THE UNITED STATES, FOR THE MANUFACTURE OR FURNISHING OF MATERIALS, SUPPLIES, ARTICLES, AND EQUIPMENT IN ANY AMOUNT EXCEEDING $10,000. THE FURNISHING OF EQUIPMENT UNDER A RENTAL CONTRACT IS REGARDED BY THE DEPARTMENT AS BEING CLEARLY WITHIN THIS STATUTORY PROVISION. ADDITIONAL REASONS FOR HOLDING THAT RENTAL CONTRACTS ARE SUBJECT TO THE ACT ARE THAT IN MANY INSTANCES THE EQUIPMENT TO BE FURNISHED TO THE GOVERNMENT UNDER SUCH CONTRACTS IS EITHER MANUFACTURED ESPECIALLY FOR THE GOVERNMENT OR REQUIRES CERTAIN ALTERATIONS OR ADJUSTMENTS TO MEET THE GOVERNMENT SPECIFICATIONS. UNDER CERTAIN OTHER CONTRACTS, THE RENTAL ACCRUES TO THE PURCHASE PRICE OF THE EQUIPMENT, AND TITLE PASSES TO THE UNITED STATES WHEN THE AMOUNT OF RENTAL PAID EQUALS THE PURCHASE PRICE.

IN THE OPINION OF THIS DEPARTMENT, THERE IS A DISTINCTION BETWEEN CONTRACTS FOR THE RENTAL OF EQUIPMENT AS SUCH AND CONTRACTS UNDER WHICH THE CONTRACTOR AGREES TO PERFORM CERTAIN WORK FOR THE GOVERNMENT BY USING HIS OWN EQUIPMENT. THIS LATTER CONTRACT IS REGARDED AS A SERVICE CONTRACT AND EXEMPT FROM THE ACT. FURTHERMORE, IT IS THE POSITION OF THE DEPARTMENT THAT MEN ASSIGNED BY THE CONTRACTOR TO OPERATE THE EQUIPMENT FURNISHED TO THE GOVERNMENT UNDER A CONTRACT FOR THE RENTAL OF EQUIPMENT, AS DISTINGUISHED FROM THE MEN ENGAGED IN THE MANUFACTURE OR FURNISHING OF THE EQUIPMENT TO THE GOVERNMENT, ARE NOT SUBJECT TO THE ACT.

IN CONNECTION WITH YOUR CONSIDERATION OF THIS MATTER, IT SHOULD BE NOTED THAT SECTION 6 OF THE ACT DELEGATES TO THE SECRETARY OF LABOR AUTHORITY TO GRANT EXCEPTIONS AND EXEMPTIONS WHEN REQUIRED. ANY PROBLEM RESPECTING THE QUALIFICATIONS UNDER SECTION 1 (A) OF THE ACT, OF A PROSPECTIVE CONTRACTOR WHO MIGHT OFFER TO RENT EQUIPMENT TO THE GOVERNMENT, CAN BE HANDLED ADEQUATELY IN ACCORDANCE WITH THE PROVISIONS OF SECTION 6.

IN VIEW OF THE FOREGOING, IT IS RESPECTFULLY REQUESTED THAT YOU RECONSIDER THAT PORTION OF OPINION NO. A-97514 WHEREIN IT IS RULED IN EFFECT THAT CONTRACTS FOR THE RENTAL OF EQUIPMENT ARE NOT SUBJECT TO THE PUBLIC CONTRACTS ACT.

THE DECISION OF OCTOBER 7, 1938, TO WHICH YOU REFER, CONSIDERED CERTAIN PROVISIONS AND OMISSIONS IN A CONTRACT OF THE TENNESSEE VALLEY AUTHORITY COVERING RENTAL OF DUMP TRUCKS WITH DRIVERS FOR USE IN CONNECTION WITH CONSTRUCTION PROJECTS OF THE AUTHORITY. THE FULL TEXT OF THE PARAGRAPH IN QUESTION WAS AS FOLLOWS:

IT HAS BEEN HELD BY THIS OFFICE THAT CONTRACTS FOR THE MERE RENTAL OF TRUCKS AND CONSTRUCTION EQUIPMENT WITH OPERATORS FOR HAULING, ETC., IN CONNECTION WITH CONSTRUCTION PROJECTS, ARE IN THE NATURE OF SERVICE RATHER THAN SUPPLY CONTRACTS, AND THAT THEY ARE CLEARLY NOT CONTRACTS "FOR THE MANUFACTURE OR FURNISHING OF MATERIALS, SUPPLIES, ARTICLES AND EQUIPMENT" UNDER THE PROVISIONS OF THE WALSH-HEALEY ACT OF JUNE 30, 1936. THAT ACT REQUIRED, INTER ALIA, STIPULATIONS THAT THE CONTRACTOR IS THE "MANUFACTURER OF OR A REGULAR DEALER IN THE MATERIALS, SUPPLIES, ARTICLES OR EQUIPMENT TO BE SUPPLIED" AND AS THE ACT MAY NOT BE INTERPRETED AS INTENDED TO PROHIBIT RENTAL BY THE GOVERNMENT OF TRUCKS AND OTHER CONSTRUCTION EQUIPMENT FROM OWNERS THEREOF WHERE SUCH OWNERS ARE NOT MANUFACTURERS OF OR REGULAR DEALERS IN SUCH EQUIPMENT, SUCH RENTAL CONTRACTS MAY NOT BE VIEWED AS FALLING WITHIN THE SCOPE OF THE LEGISLATION. HENCE, THERE WOULD APPEAR TO BE NO REQUIREMENT FOR THE INCLUSION IN SUCH CONTRACTS OF STIPULATIONS FOR COMPLIANCE WITH THE PROVISIONS OF SAID ACT. WHAT WAS THERE SAID HAD PARTICULAR REFERENCE TO RENTAL CONTRACTS COVERING TRUCKS AND CONSTRUCTION EQUIPMENT, AND DID NOT DEAL WITH THE APPLICATION OF THE WALSH-HEALEY ACT OF JUNE 30, 1936, 49 STAT. 2036, TO RENTAL CONTRACTS GENERALLY. THE CONCLUSION REACHED THAT CONTRACTS COVERING RENTAL OF TRUCKS OR CONSTRUCTION EQUIPMENT WITH OPERATOR FOR USE ON GOVERNMENT PROJECTS WERE NOT WITHIN THE PURVIEW OF THE WALSH-HEALEY ACT, FOR THE REASONS ASSIGNED, WOULD APPEAR TO HAVE BEEN UNQUESTIONABLY CORRECT, AND, IT MAY BE ADDED, THE TENNESSEE VALLEY AUTHORITY BY LETTER OF JANUARY 27, 1939, CONCURRED IN THAT VIEW, AND INFORMED THIS OFFICE THAT STIPULATIONS REQUIRED BY THE WALSH-HEALEY ACT, FOR THE REASONS ASSIGNED, WOULD APPEAR TO HAVE BEEN UNQUESTIONABLY CORRECT, AND, IT MAY BE ADDED, THE TENNESSEE VALLEY AUTHORITY BY LETTER OF JANUARY 27, 1939, CONCURRED IN THAT VIEW, AND INFORMED THIS OFFICE THAT STIPULATIONS REQUIRED BY THE WALSH-HEALEY ACT WOULD NOT BE INCLUDED IN SIMILAR CONTRACTS THEREAFTER.

THE RULE WOULD APPEAR TO BE EQUALLY APPLICABLE TO RENTAL OF TRUCKS AND CONSTRUCTION EQUIPMENT WITHOUT OPERATOR, AND TO THE MERE RENTAL OF PERSONAL PROPERTY GENERALLY WITH OR WITHOUT OPERATOR. IT WOULD BE UNREASONABLE TO SO CONSTRUE THE ACT THAT OWNERS--- PRIVATE PERSONS, FIRMS, OR CORPORATIONS--- OF PERSONAL PROPERTY OF ANY AND EVERY DESCRIPTION WHICH THE GOVERNMENT MAY REQUIRE FOR TEMPORARY USE, ARE OR MAY BE BARRED FROM FURNISHING THE USE THEREOF MERELY BECAUSE THEY ARE NOT THE MANUFACTURERS OF OR REGULAR DEALERS IN THE PARTICULAR EQUIPMENT OFFERED. THE OBVIOUS RESULT OF SUCH A CONSTRUCTION OF THE ACT WOULD BE TO DEPRIVE THE GOVERNMENT UNDULY OF THE BENEFITS WHICH FLOW FROM FREE COMPETITION AND TO DENY TO MANY OTHERWISE ACCEPTABLE OWNERS OF PERSONAL PROPERTY THE ,CHANCE FOR A BARGAIN.' PURCELL ENVELOPE CO. V. UNITED STATES, 249 U.S. 313, 318. SUCH CONSTRUCTION WOULD LEAD TO INJUSTICE OR AN ABSURD CONSEQUENCE. SEE UNITED STATES V. KIRBY, 7 WALL. 482, 486, IN WHICH THE COURT SAID:

ALL LAWS SHOULD RECEIVE A SENSIBLE CONSTRUCTION. GENERAL TERMS SHOULD BE SO LIMITED IN THEIR APPLICATION AS NOT TO LEAD TO INJUSTICE, OPPRESSION, OR AN ABSURD CONSEQUENCE. IT WILL ALWAYS, THEREFORE, BE PRESUMED THAT THE LEGISLATURE INTENDED EXCEPTIONS TO ITS LANGUAGE, WHICH WOULD AVOID RESULTS OF THIS CHARACTER. THE REASON OF THE LAW IN SUCH CASES SHOULD PREVAIL OVER ITS LETTER.

ALSO, THE RULE WOULD APPLY USUALLY IN CASES WHERE PERSONAL PROPERTY REQUIRING ALTERATION OR ADJUSTMENT TO MEET GOVERNMENT SPECIFICATIONS IS SO ALTERED OR ADJUSTED BY THE CONTRACTOR AT HIS OWN EXPENSE AS A PREREQUISITE TO FURNISHING THE USE OF HIS EQUIPMENT TO THE GOVERNMENT. IN SUCH A CASE THE ALTERATIONS, ETC., WOULD NOT BE A PART OF THE CONTRACT WITH THE UNITED STATES, BUT WOULD BE ACCOMPLISHED BY INDEPENDENT UNDERTAKINGS BY THE OWNER OF THE EQUIPMENT AND THE PERSON OR CONCERN EMPLOYED BY HIM TO MAKE THE ALTERATIONS, THE SOLE INTEREST OF THE GOVERNMENT BEING TO OBTAIN THE USE OF EQUIPMENT SUITABLE FOR ITS NEEDS.

THE WALSH-HEALEY ACT PROVIDES THAT CONTRACTS MADE OR ENTERED INTO BY ANY OF THE AGENCIES OF THE UNITED STATES FOR THE MANUFACTURE OR FURNISHING OF MATERIALS, SUPPLIES, ARTICLES, AND EQUIPMENT, HEREINAFTER REFERRED TO AS "EQUIPMENT" OR "PROPERTY," IN ANY AMOUNT EXCEEDING $10,000, SHALL INCLUDE CERTAIN STIPULATIONS RELATIVE TO (A) THE IDENTITY OF THE CONTRACTOR (MANUFACTURER OR REGULAR DEALER); (B) PAYMENT OF WAGES; (C) HOURS OF LABOR; (D) AGE AND IDENTITY OF EMPLOYEES (INFANTS, CONVICTS); AND (E) MANUFACTURING CONDITIONS AND SURROUNDINGS. THAT MERE PROPERTY RENTAL CONTRACTS ARE NOT CONTRACTS FOR THE MANUFACTURE OF EQUIPMENT FOR THE GOVERNMENT COULD NOT SERIOUSLY BE QUESTIONED. USUALLY EQUIPMENT OFFERED FOR RENTAL ALREADY HAS BEEN MANUFACTURED, AND, ALSO, PURCHASED FROM THE MANUFACTURER, A DEALER, OR SOME OTHER PERSON BY THE CURRENT OWNER, IS IN HIS POSSESSION, AND HAS BEEN MANUFACTURED UNDER CONDITIONS WITH WHICH HE IS WHOLLY UNFAMILIAR AND HAS HAD NO CONCERN.

THE COURTS HAVE POINTED OUT THAT THE WORD "FURNISH" OR "FURNISHING" IS A SOMEWHAT INDEFINITE TERM, VAGUE IN ITS SIGNIFICANCE; THAT ITS SIGNIFICANCE MAY VARY WITH THE CONNECTION IN WHICH IT IS FOUND, AND MUST BE DETERMINED IN ACCORDANCE WITH ITS CONTEXT AND SUBJECT MATTER, THE TERM HAVING BEEN APPLIED WITH VARIOUS MEANINGS FROM "GIVING" TO "SELLING" WHAT IS NECESSARY OR FITTING FOR THE PURPOSE TO BE SERVED. SEE, GENERALLY, 27 CORPUS JURIS 931 AND NOTES. APPLYING THE RULE OF INTERPRETATION TO THE WORD "FURNISHING" AS USED IN THE WALSH-HEALEY ACT, I AM CONSTRAINED TO THE CONCLUSION THAT IT IS PRIMARILY INTENDED IN THE SENSE OF SELLING PROPERTY, ETC., TO THE GOVERNMENT AND THAT IT IMPORTS, AS A GENERAL PROPOSITION, A TRANSACTION WHEREBY THE GOVERNMENT TAKES TITLE TO AS WELL AS POSSESSION OF THE ARTICLE OR THING INVOLVED, AND DOES NOT REASONABLY COMPREHEND MERE RENTAL CONTRACTS WHERE TITLE TO THE PROPERTY REMAINS IN THE CONTRACTOR AND POSSESSION IS RETURNED TO HIM AT THE CONTRACT'S END. THE STATUTE PERMITS BOTH MANUFACTURERS AND REGULAR DEALERS TO COMPETE. THE DEALER DOES NOT MANUFACTURE THE EQUIPMENT OFFERED BUT FURNISHES IT TO THE GOVERNMENT. WOULD APPEAR THAT THE WORD "FURNISHING" WAS USED IN THE CONTEXT IN CONTRADISTINCTION TO MANUFACTURE RATHER THAN TO EXTEND THE SCOPE OF THE ACT TO OTHER THAN SALE AND PURCHASE CONTRACTS.

THE WHOLE CONTEXT OF THE STATUTE, AS WELL AS ITS LEGISLATIVE HISTORY AND KNOWN PURPOSES AND INTENT, WHICH NEED NOT BE DISCUSSED HERE, SUPPORTS THIS VIEW. THE MANIFEST AIMS OF THE LAW ARE TO ELIMINATE "VEST POCKET," "FLY BY NIGHT," IRRESPONSIBLE, AND UNSCRUPULOUS CONTRACTORS, TO ASSURE PAYMENT OF PROPER WAGES, TO LIMIT LABOR HOURS, TO FORBID CHILD LABOR AND CONVICT EMPLOYMENT, AND TO AFFORD PROPER WORKING CONDITIONS FOR EMPLOYEES OF MANUFACTURERS AND OTHERS CONTRACTING TO SELL MATERIALS, SUPPLIES, EQUIPMENT, ETC., FOR GOVERNMENT NEEDS. MERE RENTAL CONTRACTS WHERE THE OWNER OF PROPERTY ALREADY MANUFACTURED FURNISHES THE USE THEREOF FOR A SEASON HAS NO BEARING UPON ANY OF THESE AIMS, AND NEITHER CONTRIBUTES TO NOR DETRACTS FROM THEIR ACCOMPLISHMENT.

UPON CAREFUL CONSIDERATION OF THE MATTER, I FIND NO VALID REASON REQUIRING OR JUSTIFYING ANY CONCLUSION OTHER THAN THAT REACHED IN THE DECISION OF OCTOBER 7, 1938, A-97514, TO THE TENNESSEE VALLEY AUTHORITY WHICH, AS HEREIN AMPLIFIED, IS AFFIRMED. SEE, ALSO, A-97514, APRIL 10, 1939.