A-98035, OCTOBER 28, 1938, 18 COMP. GEN. 391

A-98035: Oct 28, 1938

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IS NO JUSTIFICATION FOR COMMERCIAL PURCHASE. 1938: YOUR ATTENTION IS INVITED TO CONTRACT NO. PURCHASE WAS MADE FROM A COMMERCIAL SOURCE INSTEAD OF FROM THE SAID FEDERAL PRISON INDUSTRIES. IN REPLY THERETO THERE WAS TRANSMITTED TO THIS OFFICE AN INDORSEMENT OF SEPTEMBER 1. HE IS ADVISED THAT CLEARANCE FOR THIS MATERIAL WAS NOT OBTAINED IN VIEW OF THE INFORMATION SET FORTH ON PAGE 48 OF SCHEDULE OF PRODUCTS (REVISED SEPTEMBER 1937) MADE IN FEDERAL PENAL AND CORRECTIONAL INSTITUTIONS (PUBLIC. SUCH PRODUCTS OF THE INDUSTRIES HEREIN AUTHORIZED TO BE CARRIED ON AS MEET THEIR REQUIREMENTS AND AS MAY BE AVAILABLE AND ARE AUTHORIZED BY THE APPROPRIATIONS FROM WHICH SUCH PURCHASES ARE MADE. * * *" ETC.

A-98035, OCTOBER 28, 1938, 18 COMP. GEN. 391

FEDERAL PRISON-MADE GOODS - PURCHASES OF SIMILAR ITEMS COMMERCIALLY WHERE LOWER IN PRICE THE FACT THAT AN ARTICLE CAN BE PURCHASED COMMERCIALLY AT A PRICE LOWER THAN THAT AT WHICH OBTAINABLE FROM FEDERAL PRISON INDUSTRIES, INC., IS NO JUSTIFICATION FOR COMMERCIAL PURCHASE.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF WAR, OCTOBER 28, 1938:

YOUR ATTENTION IS INVITED TO CONTRACT NO. W 741 ORD-2972, DATED FEBRUARY 8, 1938, WITH THE SANITARY WIPING CLOTH COMPANY, COVERING THE PURCHASE OF WIPING RAGS FOR DELIVERY F.O.B. ROCK ISLAND ARSENAL, ILLINOIS.

IN LETTER OF AUGUST 19, 1938, THIS OFFICE REQUESTED THE CHIEF OF ORDNANCE TO ADVISE WHY, IN THE ABSENCE OF A CLEARANCE FROM THE COMMISSIONER OF INDUSTRIES, FEDERAL PRISON INDUSTRIES, INC., PURCHASE WAS MADE FROM A COMMERCIAL SOURCE INSTEAD OF FROM THE SAID FEDERAL PRISON INDUSTRIES, INC., AS REQUIRED BY THE ACT OF MAY 27, 1930, 46 STAT. 391. IN REPLY THERETO THERE WAS TRANSMITTED TO THIS OFFICE AN INDORSEMENT OF SEPTEMBER 1, 1938, FROM THE COMMANDING OFFICER, ROCK ISLAND ARSENAL, AS FOLLOWS:

1. IN REPLY TO INQUIRY IN BASIC LETTER, HE IS ADVISED THAT CLEARANCE FOR THIS MATERIAL WAS NOT OBTAINED IN VIEW OF THE INFORMATION SET FORTH ON PAGE 48 OF SCHEDULE OF PRODUCTS (REVISED SEPTEMBER 1937) MADE IN FEDERAL PENAL AND CORRECTIONAL INSTITUTIONS (PUBLIC--- NO. 271--- 71ST CONGRESS, H.R. 7412), SECTION 7, WHICH STATES: "THE SEVERAL FEDERAL DEPARTMENTS AND INDEPENDENT ESTABLISHMENTS AND ALL OTHER GOVERNMENT INSTITUTIONS OF THE UNITED STATES SHALL PURCHASE AT NOT TO EXCEED CURRENT MARKET PRICES, SUCH PRODUCTS OF THE INDUSTRIES HEREIN AUTHORIZED TO BE CARRIED ON AS MEET THEIR REQUIREMENTS AND AS MAY BE AVAILABLE AND ARE AUTHORIZED BY THE APPROPRIATIONS FROM WHICH SUCH PURCHASES ARE MADE. * * *" ETC., ETC.

2. IN VIEW OF THE FACT THAT THE MATERIAL REFERRED TO IN BASIC LETTER, SHOWN AS STOCK ITEM NO. 27-C-2375 IN SCHEDULE OF PRODUCTS (REVISED SEPTEMBER, 1937) OF FEDERAL PRISON INDUSTRIES, INC., IS LISTED AT ?20 PER LINEAR YARD, OR A TOTAL WEIGHT OF 6.25 OUNCES PER SQUARE YARD; AND INASMUCH AS THIS MATERIAL WAS PURCHASED BY ROCK ISLAND ARSENAL AT $117 PER POUND, NO CLEARANCE WAS OBTAINED FROM FEDERAL PRISON INDUSTRIES, INC. IF THIS METHOD OF PROCEDURE IS NOT SATISFACTORY WITH REFERENCE TO FUTURE PROCUREMENTS, IT IS REQUESTED THAT THE ROCK ISLAND ARSENAL BE SO ADVISED, AND THE NECESSARY STEPS WILL BE TAKEN TO COMPLY WITH REQUIREMENTS.

UNDER THE ACT OF MAY 27, 1930, 46 STAT. 391, THE ATTORNEY GENERAL WAS AUTHORIZED AND DIRECTED TO PROVIDE EMPLOYMENT FOR ALL PHYSICALLY FIT INMATES IN THE UNITED STATES PENAL AND CORRECTIONAL INSTITUTIONS IN SUCH DIVERSIFIED FORMS AS WOULD REDUCE TO A MINIMUM COMPETITION WITH PRIVATE INDUSTRY OR FREE LABOR. SECTION 3 OF SAID ACT PROVIDES THAT THE ATTORNEY GENERAL SHALL ESTABLISH SUCH INDUSTRIES AS WILL PRODUCE ARTICLES AND COMMODITIES FOR CONSUMPTION IN UNITED STATES PENAL AND CORRECTIONAL INSTITUTIONS OR FOR SALE TO THE DEPARTMENTS AND INDEPENDENT ESTABLISHMENTS OF THE FEDERAL GOVERNMENT. SECTIONS 4 TO 6 HAVE TO DO WITH THE WORKING CAPITAL FUNDS AT ATLANTA PENITENTIARY AND LEAVENWORTH PENITENTIARY, THERE BEING CREATED A CONSOLIDATED PRISON INDUSTRIES WORKING CAPITAL FUND TO BE AVAILABLE FOR CARRYING ON INDUSTRIAL ENTERPRISES AT ANY OF THE SEVERAL FEDERAL PENAL AND CORRECTIONAL INSTITUTIONS HERETOFORE OR HEREAFTER ESTABLISHED, AND SECTION 7 OF THE SAID ACT PROVIDES:

THE SEVERAL FEDERAL DEPARTMENTS AND INDEPENDENT ESTABLISHMENTS AND ALL OTHER GOVERNMENT INSTITUTIONS OF THE UNITED STATES SHALL PURCHASE AT NOT TO EXCEED CURRENT MARKET PRICES, SUCH PRODUCTS OF THE INDUSTRIES HEREIN AUTHORIZED TO BE CARRIED ON AS MEET THEIR REQUIREMENTS AND AS MAY BE AVAILABLE AND ARE AUTHORIZED BY THE APPROPRIATIONS FROM WHICH SUCH PURCHASES ARE MADE. ANY DISPUTES AS TO THE PRICE, QUALITY, SUITABILITY, OR CHARACTER OF THE PRODUCTS MANUFACTURED IN ANY PRISON INDUSTRY AND OFFERED TO ANY GOVERNMENT DEPARTMENT SHALL BE ARBITRATED BY A BOARD CONSISTING OF THE COMPTROLLER GENERAL OF THE UNITED STATES, THE SUPERINTENDENT OF SUPPLIES OF THE GENERAL SUPPLY COMMITTEE, AND THE CHIEF OF THE UNITED STATES BUREAU OF EFFICIENCY, OR THEIR REPRESENTATIVES. THE DECISION OF SAID BOARD SHALL BE FINAL AND BINDING UPON ALL PARTIES.

SECTION 9 PROVIDES THAT "ALL ACTS AND PARTS OF ACTS IN CONFLICT HEREWITH ARE HEREBY REPEALED.'

THE FACT THAT THE PRICE AT WHICH THE RAGS WERE PURCHASED IN THIS INSTANCE WAS LOWER THAN THE PRICE AT WHICH THEY COULD BE OBTAINED FROM FEDERAL PRISON INDUSTRIES, INC., DID NOT AUTHORIZE THE PURCHASE AS MADE. SEE 17 COMP. GEN. 638. ALSO, ATTENTION IS INVITED IN THIS CONNECTION TO AN OPINION OF THE ATTORNEY GENERAL OF THE UNITED STATES, 33 OP.ATTY.GEN. 327, WHEREIN (PAGES 329 TO 330) IT WAS STATED:

* * * HAD IT BEEN THE INTENTION THAT THE DEPARTMENTS IN QUESTION SHOULD UTILIZE THE PRODUCTS OF THE MILL ONLY WHEN OFFERED AT PRICES LOWER THAN THOSE QUOTED BY PRIVATE MANUFACTURERS, AS WOULD BE THE CASE UNDER THE COMPETITIVE SYSTEM PRESCRIBED BY SECTION 3709, R.S. IT IS FAIR TO ASSUME THAT CONGRESS WOULD HAVE USED LANGUAGE APPROPRIATE TO THAT END; * * * BOTH THE LANGUAGE AND PURPOSE OF THE ACT, THEREFORE, ARE INCONSISTENT WITH THE IDEA THAT THE MILL ITSELF A PART OF THE GOVERNMENT, SHALL ENTER INTO COMPETITION WITH PRIVATE MANUFACTURERS IN BIDDING FOR THE BUSINESS OF OTHER GOVERNMENT ESTABLISHMENTS.

* * * WHAT IS CONTEMPLATED BY THE STATUTE, THEREFORE, IS NOT A SALE, BUT A TRANSFER OF PROPERTY FROM ONE GOVERNMENT ESTABLISHMENT TO ANOTHER. THIS WAS FULLY RECOGNIZED AND UNDERSTOOD BY THE HOUSE OF REPRESENTATIVES WHEN THE BILL WAS UNDER CONSIDERATION BY THAT BODY. THE SPONSORS FOR THE BILL EXPLAINED THAT, FOR THE REASON NOTED, THERE COULD BE NO SALE OF GOODS BY THE TEXTILE MILL TO OTHER GOVERNMENT DEPARTMENTS; AND THAT THE PROVISION FOR THE FURNISHING OF GOODS AT CURRENT MARKET PRICES AS DETERMINED BY THE ATTORNEY GENERAL WAS A MERE BOOKKEEPING ARRANGEMENT TO ENABLE THE CONGRESS FROM TIME TO TIME TO DETERMINE WHETHER THE MILL, RECEIVING APPROXIMATELY THE SAME PRICES AS OTHER MANUFACTURERS, IS A PAYING PROPOSITION (56 CONG.REC., PART 7, PP. 6374-6376). SINCE, THEN, NO "SALE" IS INVOLVED IN THE FURNISHING BY THE TEXTILE MILL OF ITS PRODUCTS AS CONTEMPLATED BY THE ACT, IT FOLLOWS THAT THERE IS NO "PURCHASE" OF SUCH PROPERTY WITHIN THE MEANING OF SECTION 3709, R.S., AND SIMILAR STATUTES, ALL OF WHICH ARE CLEARLY INTENDED TO APPLY TO PURCHASES BY THE GOVERNMENT INVOLVING THE ACQUIREMENT OF TITLE AND NOT TO THE MERE INTERDEPARTMENT TRANSFER OF PROPERTY, TITLE TO WHICH IS ALREADY IN THE UNITED STATES.

THE MATTER IS BROUGHT TO YOUR ATTENTION IN ORDER THAT PROPER INSTRUCTIONS MAY BE GIVEN TO THE COMMANDING OFFICER, ROCK ISLAND ARSENAL, AS TO THE PROPER PROCEDURE TO BE FOLLOWED IN ALL SUCH MATTERS.