B-103235, MAY 8, 1951, 30 COMP. GEN. 441

B-103235, MAY 8, 1951, 30 COMP. GEN. 441

CONTRACTS - AWARDS TO OTHER THAN LOW BIDDER - DEFENSE PROCUREMENT POLICY IN VIEW OF THE AUTHORITY CONFERRED UPON THE DEFENSE PRODUCTION ADMINISTRATION BY EXECUTIVE ORDER NO. 10200, IN ACCORDANCE WITH SECTION 2 (C) (1) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, TO ENTER INTO CONTRACTS FOR SUPPLIES WITHOUT ADVERTISING AS DETERMINED TO BE NECESSARY IN THE PUBLIC INTEREST DURING THE PERIOD OF A NATIONAL EMERGENCY DECLARED BY THE PRESIDENT OR BY THE CONGRESS, A DEFENSE PROCUREMENT POLICY CONTEMPLATING THE AWARD OF CONTRACTS TO OTHER THAN LOW BIDDERS IN ORDER THAT SMALL BUSINESS CONCERNS MAY SHARE IN SUCH AWARDS IS AUTHORIZED.

COMPTROLLER GENERAL WARREN TO ACTING ADMINISTRATOR, DEFENSE PRODUCTION ADMINISTRATION, MAY 8, 1951:

I HAVE YOUR LETTER OF MAY 7, 1951, RELATIVE TO THE MODIFICATION OF PROCUREMENT PROCEDURES IN ORDER TO SAVE THE PRODUCTIVE CAPACITY OF SMALL BUSINESS FOR PRESENT AND FUTURE PARTICIPATION IN THE PROGRAM WHICH HAS BEEN UNDERTAKEN TO DEVELOP AND MAINTAIN THE MILITARY AND ECONOMIC STRENGTH OF THE COUNTRY PURSUANT TO THE DEFENSE PRODUCTION ACT OF 1950, PUBLIC LAW 774, APPROVED SEPTEMBER 8, 1950.

YOUR LETTER REFERS TO THE PROVISIONS CONTAINED IN SECTION 701 OF THE SAID ACT, 64 STAT. 815, SETTING FORTH THAT IT IS THE SENSE OF THE CONGRESS THAT SMALL BUSINESS ENTERPRISES BE ENCOURAGED TO MAKE THE GREATEST POSSIBLE CONTRIBUTION TOWARD ACHIEVING THE OBJECTIVES OF THE ACT AND SETTING FORTH SOME OF THE THINGS THAT THE PRESIDENT SHALL DO IN ORDER TO CARRY OUT THIS POLICY. ALSO, YOUR LETTER STATES THAT, UNDER THE POWERS VESTED IN YOUR ADMINISTRATION BY THE DEFENSE PRODUCTION ACT OF 1950, AND EXECUTIVE ORDER 10200 DATED JANUARY 3, 1951, YOU HAVE DETERMINED THAT THE PRODUCTIVE CAPACITY OF THE MANY SMALL PLANTS THROUGHOUT THE COUNTRY WHICH MAY OTHERWISE BE LOST DUE TO CURTAILMENT OF NORMAL CIVILIAN PRODUCTION MUST BE PRESERVED. TO THIS END, YOU HAVE APPROVED A STATEMENT OF POLICY ENTITLED " PROCUREMENT POLICY FOR SMALL BUSINESS" AND A " RECOMMENDATION FOR IMPLEMENTATION OF BASIC PROCUREMENT POLICY.' YOUR LETTER STATES THAT, AT THE REQUEST OF THE MUNITIONS BOARD, THE MILITARY DEPARTMENTS HAVE ADOPTED REGULATIONS DESIGNED TO IMPLEMENT THIS POLICY. THE STATEMENT OF POLICY AS CONTAINED IN THE ATTACHMENT TO YOUR LETTER IS AS FOLLOWS:

THE POLICY FOR DEFENSE PROCUREMENT SHOULD ACCOMPLISH THE FOLLOWING WITH RESPECT TO SMALL BUSINESS:

1. SPREAD AVAILABLE PRODUCTION ACROSS AS WIDE BASE AS IS POSSIBLE BY BRINGING INTO THE DEFENSE EFFORT ON A PRIME CONTRACT, SUBCONTRACT OR PURCHASE PART BASIS, EVERY QUALIFIED PRODUCER WHO CAN BE USED.

2. CONTINUING AND INCREASING EFFORT MUST BE MADE TO SEARCH OUT AND USE THE PRODUCTIVE FACILITIES OF SMALL ENTERPRISES FOR THE CURRENT PROCUREMENT PROGRAM OF THE FEDERAL GOVERNMENT.

3. GOVERNMENT MUST MAKE AVAILABLE TO SMALL BUSINESS, INFORMATION ON REQUIREMENTS SO THAT THE SMALL MANUFACTURER WILL HAVE ADEQUATE KNOWLEDGE OF THE STEPS REQUIRED IN GETTING SUBCONTRACTS FROM PRIMES, AND PRIME CONTRACTS FOR HIMSELF WHEN THEY ARE WITHIN HIS CAPACITIES OR ABILITIES. THE INITIATIVE, HOWEVER, FOR GETTING DEFENSE WORK IN A SMALL PLANT RESTS ON THE SMALL MANUFACTURER.

4. PROCUREMENT PROCEDURES MUST BE SUCH AS TO ENCOURAGE PRIME CONTRACTORS TO BRING ABOUT THE MAXIMUM AMOUNT OF SUBCONTRACTING WITH SMALL BUSINESS CONCERNS.

5. DPA MUST ASSURE ITSELF THAT THESE SMALL BUSINESS POLICIES ARE PROPERLY IMPLEMENTED. EDUCATION AND EFFECTIVE FOLLOW-UP THROUGHOUT THE ENTIRE PROCUREMENT FUNCTIONS ARE ESSENTIAL TO THE PROGRAM.

THE LETTER STATES THAT THE POLICY WHICH YOU HAVE ADOPTED AND THE IMPLEMENTING REGULATIONS OF THE MILITARY DEPARTMENTS CONTEMPLATE THE FOLLOWING PROCEDURES WITH RESPECT TO NEGOTIATED PROCUREMENT:

1. THE MAKING OF AWARDS TO RESPONSIBLE CONCERNS OTHER THAN THE ONE SUBMITTING THE LOWEST OFFER, IN THOSE INSTANCES WHERE THE PUBLIC INTEREST DICTATES THE NEED FOR SO DOING IN ORDER TO RETAIN IN OPERATION EXISTING SMALL BUSINESS CAPACITY OR TO ENCOURAGE OR DEVELOP ADDITIONAL SMALL BUSINESS MANUFACTURING FACILITIES, PARTICULARLY THOSE REMOVED FROM THE SAME AREA IN WHICH FACILITIES CLASSED AS LARGE BUSINESS ARE PRODUCING OR MANUFACTURING SIMILAR MATERIALS.

2. THE MAKING OF AWARDS TO RESPONSIBLE CONCERNS OTHER THAN THE ONE SUBMITTING THE LOWEST OFFER, IN THOSE INSTANCES WHERE SO DOING WILL RESULT IN PRIME CONTRACTS WITH CONTRACTORS WHO WILL SUBCONTRACT TO SMALL BUSINESS IN THE MANNER DESIRED IN ORDER TO ACCOMPLISH THE OBJECTIVES STATED IN 1. ABOVE.

3. EXCEPT WHERE DISCLOSURE WOULD BE INIMICAL TO THE INTEREST OF THE GOVERNMENT, GIVING THE WIDEST POSSIBLE PUBLICITY, INCLUDING NOTICE THROUGH NEWSPAPERS, TO REQUESTS FOR THE SUBMISSION OF OFFERS, SO AS TO INSURE THE BROADEST POSSIBLE PARTICIPATION OF SMALL BUSINESS FIRMS IN THE SUPPLY OF ESSENTIAL MATERIALS AND SERVICES.

MY OPINION IS REQUESTED AS TO WHETHER THE METHODS OF AWARD OF CONTRACTS TO SMALL BUSINESS CONCERNS AND TO OTHER CONCERNS WHICH WILL SUBCONTRACT WITH SMALL BUSINESS CONCERNS, AS DESCRIBED ABOVE, ARE PROPER UNDER EXISTING LAW.

SECTION 2 (C) (1) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, 62 STAT. 21, REFERRED TO IN YOUR LETTER, PROVIDES THAT PURCHASES AND CONTRACTS FOR SUPPLIES MAY BE NEGOTIATED BY THE AGENCY HEAD WITHOUT ADVERTISING AS "DETERMINED TO BE NECESSARY IN THE PUBLIC INTEREST DURING THE PERIOD OF A NATIONAL EMERGENCY DECLARED BY THE PRESIDENT OR BY THE CONGRESS.' IT IS UNDERSTOOD THAT, PURSUANT TO THE NATIONAL EMERGENCY DECLARED BY THE PRESIDENT OF THE UNITED STATES ON DECEMBER 16, 1950, THE PROCUREMENT ASSISTANT SECRETARIES OF THE ARMY, NAVY, AND AIR FORCE, ON DECEMBER 18, 1950, MADE DETERMINATIONS IN ACCORDANCE WITH SAID SECTION 2 (C) (1) THAT IT IS NECESSARY IN THE PUBLIC INTEREST THAT PURCHASES AND CONTRACTS BE NEGOTIATED WITHOUT FORMAL ADVERTISING DURING THE PERIOD OF THE SAID NATIONAL EMERGENCY AND AUTHORIZED THE NEGOTIATION FOR PURCHASES AND CONTRACTS FOR SUPPLIES UNDER SECTION 2 (C) (1).

SECTION 2 (C) (3) OF EXECUTIVE ORDER NO. 10200 PROVIDES THAT, IN CARRYING OUT THE FUNCTIONS ASSIGNED TO HIM, THE DEFENSE PRODUCTION ADMINISTRATOR SHALL:

(3) MAKE DETERMINATIONS AS TO THE PROVISION OF ADEQUATE FACILITIES FOR DEFENSE PRODUCTION AND AS TO THE PROCEDURES AND METHODS FOLLOWED BY EXECUTIVE AGENCIES WITH RESPECT TO THE ACCOMPLISHMENT OF DEFENSE PRODUCTION PROGRAMS, INCLUDING THOSE WITH RESPECT TO PURCHASING, CONTRACTING, AND SPECIFICATIONS.

IN VIEW OF THE AUTHORITY VESTED IN THE DEFENSE ESTABLISHMENTS BY THE ABOVE-QUOTED PROVISION OF SECTION 2 (C) (1) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, AND OF THE DETERMINATIONS MADE BY THE PROCUREMENT ASSISTANT SECRETARIES OF THE DEFENSE DEPARTMENTS, AND IN VIEW OF THE AUTHORITY VESTED IN YOU BY EXECUTIVE ORDER 10200, AND OF YOUR DETERMINATION THAT THE PRODUCTIVE CAPACITY OF SMALL PLANTS THROUGHOUT THE COUNTRY MUST BE PRESERVED IN ORDER TO CARRY OUT THE PURPOSES OF THE DEFENSE PRODUCTION ACT OF 1950, YOU ARE ADVISED THAT THIS OFFICE WILL NOT QUESTION OTHERWISE PROPER PAYMENTS UNDER CONTRACTS AWARDED PURSUANT TO THE PROCEDURE QUOTED ABOVE, OR TO SIMILAR PROCEDURES WHERE THE PURPOSE IS TO BROADEN AND MAINTAIN THE INDUSTRIAL BASE OF SUPPLIERS. IT IS TO BE UNDERSTOOD, OF COURSE, THAT THIS OFFICE WILL QUESTION AND TAKE APPROPRIATE NECESSARY ACTION IN CASES COMING TO ITS ATTENTION OF AWARDS WHICH ARE MADE BY REASON OF COLLUSION, FRAUD, OR FAVORITISM OR WHERE THERE OTHERWISE APPEARS TO BE AN IMPROPER EXERCISE OF AUTHORITY TO NEGOTIATE CONTRACTS FOR THE PURPOSE SET FORTH.