B-107236, JANUARY 14, 1952, 31 COMP. GEN. 279

B-107236: Jan 14, 1952

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

THE FACT THAT SUCH AN EMERGENCY WAS PROCLAIMED BY THE PRESIDENT ON DECEMBER 16. UPON A PROPER DETERMINATION THAT THE AWARD IS NECESSARY IN THE PUBLIC INTEREST. 1952: REFERENCE IS MADE TO YOUR LETTER OF JANUARY 2. REQUESTING TO BE ADVISED WHETHER CERTAIN PROCUREMENT PROCEDURES OUTLINED THEREIN ARE AUTHORIZED BY LAW SO AS TO PERMIT THE EXPENDITURE OF PUBLIC FUNDS UNDER CONTRACTS AWARDED IN ACCORDANCE THEREWITH. BEFORE SETTING FORTH SUCH MODIFIED PROCEDURES IT APPEARS DESIRABLE TO FIRST REVIEW THE AUTHORITIES REFERRED TO IN YOUR LETTER AS A BASIS THEREFOR AND THE PURPOSES THE SAID PROCEDURES ARE INTENDED TO ACCOMPLISH. IT IS THE OBJECTIVE OF THIS ACT TO PROVIDE THE PRESIDENT WITH AUTHORITY TO ACCOMPLISH THESE ADJUSTMENTS IN THE OPERATION OF THE ECONOMY.

B-107236, JANUARY 14, 1952, 31 COMP. GEN. 279

CONTRACTS - AWARDS - TO OTHER THAN LOW BIDDER - ARMED SERVICES PROCUREMENT ACT OF 1947 IN VIEW OF THE PROVISION IN SECTION 2 (C) (1) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, AUTHORIZING THE NEGOTIATION OF CONTRACTS WITHOUT ADVERTISING WHEN DETERMINED BY THE AGENCY HEAD TO BE NECESSARY IN THE PUBLIC INTEREST DURING A PERIOD OF NATIONAL EMERGENCY, AND THE FACT THAT SUCH AN EMERGENCY WAS PROCLAIMED BY THE PRESIDENT ON DECEMBER 16, 1950, MILITARY ESTABLISHMENTS MAY AWARD CONTRACTS FOR SUPPLIES AND SERVICES AT PRICES OTHER THAN THE LOWEST WHICH MIGHT BE OBTAINABLE, UPON A PROPER DETERMINATION THAT THE AWARD IS NECESSARY IN THE PUBLIC INTEREST.

COMPTROLLER GENERAL WARREN TO THE DIRECTOR, OFFICE OF DEFENSE MOBILIZATION, JANUARY 14, 1952:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 2, 1952, REQUESTING TO BE ADVISED WHETHER CERTAIN PROCUREMENT PROCEDURES OUTLINED THEREIN ARE AUTHORIZED BY LAW SO AS TO PERMIT THE EXPENDITURE OF PUBLIC FUNDS UNDER CONTRACTS AWARDED IN ACCORDANCE THEREWITH.

BEFORE SETTING FORTH SUCH MODIFIED PROCEDURES IT APPEARS DESIRABLE TO FIRST REVIEW THE AUTHORITIES REFERRED TO IN YOUR LETTER AS A BASIS THEREFOR AND THE PURPOSES THE SAID PROCEDURES ARE INTENDED TO ACCOMPLISH.

SECTION 2 OF THE DEFENSE PRODUCTION ACT OF 1950, APPROVED SEPTEMBER 8, 1950, 64 STAT. 798, DECLARES THE POLICY OF THE UNITED STATES TO BE TO OPPOSE ACTS OF AGGRESSION AND PROMOTE PEACE, AND TO DEVELOP AND MAINTAIN THE NECESSARY MILITARY AND ECONOMIC STRENGTH TO CARRY OUT THIS POLICY. THE SAID SECTION FURTHER STATES THAT---

* * * UNDER PRESENT CIRCUMSTANCES, THIS TASK REQUIRES DIVERSION OF CERTAIN MATERIALS AND FACILITIES FROM CIVILIAN USE TO MILITARY AND RELATED PURPOSES. IT REQUIRES EXPANSION OF PRODUCTIVE FACILITIES BEYOND THE LEVELS NEEDED TO MEET THE CIVILIAN DEMAND. IN ORDER THAT THIS DIVERSION AND EXPANSION MAY PROCEED AT ONCE, AND THAT THE NATIONAL ECONOMY MAY BE MAINTAINED WITH THE MAXIMUM EFFECTIVENESS AND THE LEAST HARDSHIP, NORMAL CIVILIAN PRODUCTION AND PURCHASES MUST BE CURTAILED AND REDIRECTED.

IT IS THE OBJECTIVE OF THIS ACT TO PROVIDE THE PRESIDENT WITH AUTHORITY TO ACCOMPLISH THESE ADJUSTMENTS IN THE OPERATION OF THE ECONOMY. IT IS THE INTENTION OF THE CONGRESS THAT THE PRESIDENT SHALL USE THE POWERS CONFERRED BY THIS ACT TO PROMOTE THE NATIONAL DEFENSE, BY MEETING, PROMPTLY AND EFFECTIVELY, THE REQUIREMENTS OF MILITARY PROGRAMS IN SUPPORT OF OUR NATIONAL SECURITY AND FOREIGN POLICY OBJECTIVES, AND BY PREVENTING UNDUE STRAINS AND DISLOCATIONS UPON WAGES, PRICES, AND PRODUCTION OR DISTRIBUTION OF MATERIALS FOR CIVILIAN USE, WITHIN THE FRAMEWORK, AS FAR AS PRACTICABLE, OF THE AMERICAN SYSTEM OF COMPETITIVE ENTERPRISE.

BY EXECUTIVE ORDER NO. 10193 OF DECEMBER 16, 1950, THE PRESIDENT ESTABLISHED THE OFFICE OF DEFENSE MOBILIZATION, AND PROVIDED THAT ITS DIRECTOR SHOULD, ON BEHALF OF THE PRESIDENT, DIRECT, CONTROL AND COORDINATE ALL MOBILIZATION ACTIVITIES OF THE EXECUTIVE BRANCH OF THE GOVERNMENT, INCLUDING BUT NOT LIMITED TO PRODUCTION, PROCUREMENT, MANPOWER, STABILIZATION AND TRANSPORT ACTIVITIES; THAT THE DIRECTOR SHOULD ISSUE SUCH DIRECTIVES, CONSONANT WITH LAW, ON POLICY AND OPERATIONS TO THE FEDERAL AGENCIES AND DEPARTMENTS AS MIGHT BE NECESSARY TO CARRY OUT THE PROGRAMS DEVELOPED, THE POLICIES ESTABLISHED, AND THE DECISIONS MADE BY THE DIRECTOR; AND THAT IT WAS THE DUTY OF ALL SUCH AGENCIES AND DEPARTMENTS TO EXECUTE THESE DIRECTIVES.

THE NATIONAL MANPOWER MOBILIZATION POLICY PROMULGATED BY THE PRESIDENT ON JANUARY 17, 1951, STATES, IN EFFECT, THAT THE PRIMARY AIM OF MANPOWER MOBILIZATION IS TO SAFEGUARD OUR NATIONAL SECURITY THROUGH PROPER USE OF OUR HUMAN RESOURCES; THAT THE MANPOWER NEEDED FOR THE ARMED FORCES, DEFENSE PRODUCTION, CIVILIAN DEFENSE, AGRICULTURE, AND ESSENTIAL CIVILIAN SUPPLY ARE INTEGRAL PARTS OF THE MOBILIZATION PROGRAM; AND THAT FAILURE TO UTILIZE MANPOWER PROPERLY WOULD REDUCE OUR DEFENSE POTENTIAL. THE POLICY ALSO STATES THAT---

PRODUCTION WILL BE SCHEDULED, MATERIALS ALLOCATED AND PROCUREMENT DISTRIBUTED WITH CAREFUL CONSIDERATION OF AVAILABLE MANPOWER. WHENEVER FEASIBLE FROM AN ECONOMIC AND SECURITY STANDPOINT, PRODUCTION FACILITIES, CONTRACTS, AND SIGNIFICANT SUBCONTRACTS WILL BE LOCATED AT THE SOURCES OF LABOR SUPPLY IN PREFERENCE TO MOVING THE LABOR SUPPLY.

DEFENSE MANPOWER POLICY STATEMENT NO. 1, EFFECTIVE AUGUST 2, 1951, ISSUED BY THE DIRECTOR OF DEFENSE MOBILIZATION, IMPLEMENTED THE NATIONAL MANPOWER MOBILIZATION POLICY BY DIRECTING, IN PART, THAT PRODUCTION AND PROCUREMENT AGENCIES SHOULD TAKE SPECIAL NOTICE OF CONDITIONS OF HIGH LEVELS OF CURRENT OR EXPECTED UNEMPLOYMENT IN GIVEN AREAS AS REPORTED BY THE DEFENSE MANPOWER ADMINISTRATION, AND CONSISTENT WITH OTHER PROCUREMENT CONSIDERATIONS, SHOULD MAKE EVERY EFFORT TO ASSIGN MATERIAL ALLOCATIONS AND PROCUREMENT CONTRACTS TO SUCH AREAS.

IT IS STATED IN YOUR LETTER THAT, UNDER THE AUTHORITY VESTED IN YOU AS THE DIRECTOR OF THE OFFICE OF DEFENSE MOBILIZATION, YOU HAVE DETERMINED THAT, IN ORDER TO CARRY OUT THE PURPOSES OF THE DEFENSE PRODUCTION ACT, EXECUTIVE ORDER NO. 10193, AND THE NATIONAL MANPOWER MOBILIZATION POLICY, YOU CONTEMPLATE THE IMPLEMENTATION OF SUCH POLICY STATEMENT WITH RESPECT TO PROCUREMENT IN CASES WHERE THE PUBLIC INTEREST DICTATES THE NEED FOR NEGOTIATION OF CONTRACTS AND PURCHASES IN ORDER TO (1) ACHIEVE COORDINATION OF CONVERSION FROM CIVILIAN TO MILITARY PRODUCTION, (2) MINIMIZE STRAINS AND DISLOCATIONS IN THE ECONOMY, (3) PRESERVE EMPLOYEE SKILLS, (4) MAINTAIN PRODUCTIVE FACILITIES, AND (5) ASSURE UTILIZATION OF THE NATION'S TOTAL MANPOWER POTENTIAL BY MAKING USE OF EACH AREA'S MANPOWER RESOURCES, BY THE PROCEDURES OUTLINED THEREIN AS FOLLOWS:

(A) PROCUREMENT BY NEGOTIATED CONTRACTS AND PURCHASES WITH RESPONSIBLE CONCERNS WHICH (1) ARE IN AN AREA OF CURRENT OR IMMINENT LABOR SURPLUS (INCLUDING A SURPLUS OF MANPOWER POSSESSING SKILLS NECESSARY TO THE FULFILLMENT OF DEFENSE CONTRACTS AND PURCHASES), OR (2) ARE IN AN INDUSTRY HAVING CURRENT OR IMMINENT CRITICAL UNEMPLOYMENT (INCLUDING UNEMPLOYMENT OF MANPOWER POSSESSING SKILLS NECESSARY TO THE FULFILLMENT OF DEFENSE CONTRACTS AND PURCHASES);

(B) THE MAKING OF SUCH CONTRACTS THROUGH COMPETITION WITHIN SUCH AREA OR INDUSTRY OR THROUGH NEGOTIATION WITHIN SUCH AREA OR INDUSTRY, ALTHOUGH LOWER PRICES MIGHT OTHERWISE BE OBTAINABLE;

(C) WHERE NECESSARY TO MAINTAIN PRODUCTIVE FACILITIES, THE MAKING OF AWARDS TO RESPONSIBLE CONCERNS, WITHIN SUCH AREA OR INDUSTRY, AT REASONABLE PRICES ALTHOUGH NOT THE LOWEST PRICES OBTAINABLE; AND

(D) PROCUREMENT BY NEGOTIATION AND IN SUCH PROCUREMENT THE MAKING OF AWARDS TO RESPONSIBLE CONCERNS AT REASONABLE PRICES EVEN THOUGH NOT THE LOWEST PRICES OBTAINABLE, IN CASES WHERE DOING SO WILL RESULT IN PRIME CONTRACTS WITH CONTRACTORS WHO WILL SUBCONTRACT IN A MANNER WHICH WILL ACCOMPLISH THE OBJECTIVES STATED IN THE PRECEDING PARAGRAPHS.

IT IS SUGGESTED IN YOUR LETTER THAT AUTHORITY FOR THE MAKING OF CONTRACTS BY NEGOTIATION, RATHER THAN BY ADVERTISING, IN ORDER TO PERMIT THE MILITARY DEPARTMENTS TO ACCOMPLISH THE OBJECTIVES DESCRIBED ABOVE, IS CONTAINED IN SECTION 2 (C) (1) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, 62 STAT. 21.

AS YOUR LETTER APPARENTLY RECOGNIZES, THERE IS NOTHING IN THE DEFENSE PRODUCTION ACT OF 1950, AS AMENDED, WHICH, OF ITSELF, AUTHORIZES GENERALLY THE NEGOTIATION OF GOVERNMENT CONTRACTS OR A DISREGARD OF NORMAL PROCUREMENT PROCEDURES. IN ITS SIMPLEST FORM, THEREFORE, THE QUESTION YOU PRESENT IS MERELY WHETHER THE ARMED SERVICES PROCUREMENT ACT OF 1947, AUTHORIZES THE PROCEDURE INVOLVED.

WHEN ADVERTISING IS REQUIRED, SECTION 3 OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, 62 STAT. 22, REQUIRES THAT AWARD BE MADE TO THAT RESPONSIBLE BIDDER WHOSE BID, CONFORMING TO THE INVITATION FOR BIDS, WILL BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED. HAS BEEN HELD, IN SUCH CASES, THAT THE STATUTE DOES NOT AUTHORIZE AWARD TO OTHER THAN THE LOW BIDDER SOLELY ON THE BASIS THAT A HIGHER BIDDER QUALIFIES AS A SMALL BUSINESS CONCERN. 28 COMP. GEN. 662. THE SAME REASONING, AND CONCLUSION, WOULD BE APPLICABLE WITH RESPECT TO A HIGHER BIDDER LOCATED IN A DISTRESSED LABOR AREA, ALTHOUGH A BIDDER IN A DISTRESSED LABOR AREA MIGHT HAVE AN ADVANTAGE IN THE CASE OF TIE BIDS, B- 88826, AUGUST 29, 1949. THEREFORE, IF AN AWARD IS MADE PURSUANT TO SECTION 3 OF THE ARMED SERVICES PROCUREMENT ACT OF 1947 THE FACT THAT A BIDDER IS LOCATED IN A DISTRESSED LABOR AREA MAY NOT BE CONSIDERED IN MAKING THE AWARD EXCEPT IN THE CASE OF TIE LOW BIDS.

ON THE OTHER HAND, SECTION 2 (C) (1) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947 AUTHORIZES THE NEGOTIATION OF CONTRACTS, WITHOUT ADVERTISING, WHEN DETERMINED BY THE AGENCY HEAD TO BE NECESSARY IN THE PUBLIC INTEREST DURING THE PERIOD OF A NATIONAL EMERGENCY DECLARED BY THE PRESIDENT. SUCH A NATIONAL EMERGENCY WAS PROCLAIMED BY THE PRESIDENT ON DECEMBER 16, 1950. DESPITE SUCH AUTHORITY, IT WOULD NOT NORMALLY APPEAR TO BE IN THE PUBLIC INTEREST FOR THE MILITARY DEPARTMENTS TO MAKE AWARDS OF CONTRACTS TO A FIRM OR GROUP OF FIRMS WHEN IT IS KNOWN AT THE TIME THAT THE SERVICES OR SUPPLIES ARE OBTAINABLE ELSEWHERE AT A LOWER PRICE. IF, HOWEVER, THE MILITARY ESTABLISHMENTS DETERMINE THAT, FOR THE REASONS SET FORTH IN YOUR LETTER, IT IS NECESSARY IN THE PUBLIC INTEREST THAT AWARDS BE MADE IN SPECIFIC INSTANCES AT PRICES OTHER THAN THE LOWEST WHICH MIGHT BE OBTAINABLE, THIS OFFICE WILL NOT BE REQUIRED TO OBJECT TO OTHERWISE PROPER PAYMENTS UNDER CONTRACTS SO AWARDED. IT IS UNDERSTOOD, OF COURSE, THAT, IF IN ITS REVIEW OF TRANSACTION OF THE TYPE HERE IN QUESTION, THIS OFFICE FEELS THAT THERE HAS BEEN AN IMPROPER EXERCISE OF AUTHORITY TO NEGOTIATE CONTRACTS AND MAKE AWARDS FOR THE PURPOSE INDICATED, IT MAY BE NECESSARY TO REPORT SUCH INSTANCES TO THE CONGRESS FOR ITS CONSIDERATION OR TO TAKE SUCH OTHER ACTION AS MAY BE WARRANTED.