B-107532, FEBRUARY 29, 1952, 31 COMP. GEN. 431

B-107532: Feb 29, 1952

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A JOINT DETERMINATION IS MADE BY THE SMALL DEFENSE PLANTS ADMINISTRATION AND A CONTRACTING PROCUREMENT AGENCY THAT AN AWARD OF A CONTRACT TO A SMALL BUSINESS CONCERN IS IN THE INTEREST OF MOBILIZING THE NATION'S FULL PRODUCTIVE CAPACITY OR THE NATIONAL DEFENSE PROGRAM. 1952: REFERENCE IS MADE TO YOUR LETTER OF JANUARY 17. IT IS THE INTENTION OF YOUR ADMINISTRATION TO ENTER INTO A NUMBER OF JOINT DETERMINATIONS INDIVIDUALLY. TO BE ADVISED WHETHER THIS OFFICE WOULD OBJECT TO PAYMENTS MADE UNDER CONTRACTS AWARDED IN ACCORDANCE WITH THE VIEWS EXPRESSED IN THAT PART OF YOUR LETTER WHICH READS AS FOLLOWS: IT IS OUR VIEW THAT. WHERE SUCH A JOINT DETERMINATION IS MADE. IT IS MANDATORY UPON THE PROCURING AGENCY TO LET ONLY TO A SMALL BUSINESS CONCERN.

B-107532, FEBRUARY 29, 1952, 31 COMP. GEN. 431

CONTRACTS - AWARDS TO OTHER THAN LOW BIDDER - SMALL BUSINESS CONCERNS - DEFENSE PRODUCTION ACT OF 1950, AS AMENDED WHERE, PURSUANT TO SECTION 714 (F) (2) OF THE DEFENSE PRODUCTION ACT OF 1950, AS AMENDED, A JOINT DETERMINATION IS MADE BY THE SMALL DEFENSE PLANTS ADMINISTRATION AND A CONTRACTING PROCUREMENT AGENCY THAT AN AWARD OF A CONTRACT TO A SMALL BUSINESS CONCERN IS IN THE INTEREST OF MOBILIZING THE NATION'S FULL PRODUCTIVE CAPACITY OR THE NATIONAL DEFENSE PROGRAM, THE PROCURING AGENCY PROPERLY MAY CONTRACT WITH A SMALL BUSINESS CONCERN AT A HIGHER PRICE THAN OTHERWISE OBTAINABLE, BUT ONLY TO THE EXTENT DETERMINED NECESSARY TO GIVE SMALL BUSINESS CONCERNS A FAIR PROPORTION OF THE TOTAL OF GOVERNMENT PURCHASES AND CONTRACTS. THE AUTHORITY CONTAINED IN SECTION 714 (F) (2) OF THE DEFENSE PRODUCTION ACT OF 1950, AS AMENDED TO NEGOTIATE CONTRACTS WITH SMALL BUSINESS CONCERNS REQUIRES THAT A SEPARATE JOINT DETERMINATION BE MADE BY THE SMALL DEFENSE PLANTS ADMINISTRATION AND THE CONTRACTING PROCUREMENT AGENCY FOR EACH PROCUREMENT AND DOES NOT PERMIT BLANKET DETERMINATIONS BASED ON GENERAL FORMULAS OR PRICE DIFFERENTIALS WHICH COULD CONTROL THE AWARD OF FUTURE CONTRACTS WITHOUT FURTHER REGARD FOR THE FACTS AND CIRCUMSTANCES INVOLVED IN EACH PARTICULAR PROCUREMENT.

COMPTROLLER GENERAL WARREN TO THE ADMINISTRATOR, SMALL DEFENSE PLANTS ADMINISTRATION, FEBRUARY 29, 1952:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 17, 1952, STATING THAT PURSUANT TO SECTION 714 (F) (2) OF THE DEFENSE PRODUCTION ACT OF 1950, AS AMENDED ( DEFENSE PRODUCTION ACT AMENDMENTS OF 1951), 65 STAT. 143, IT IS THE INTENTION OF YOUR ADMINISTRATION TO ENTER INTO A NUMBER OF JOINT DETERMINATIONS INDIVIDUALLY, WITH VARIOUS CONTRACTING AGENCIES RELATIVE TO THE PLACING OF CERTAIN CONTRACTS WITH SMALL BUSINESS CONCERNS AND REQUESTING, IN EFFECT, TO BE ADVISED WHETHER THIS OFFICE WOULD OBJECT TO PAYMENTS MADE UNDER CONTRACTS AWARDED IN ACCORDANCE WITH THE VIEWS EXPRESSED IN THAT PART OF YOUR LETTER WHICH READS AS FOLLOWS:

IT IS OUR VIEW THAT, WHERE SUCH A JOINT DETERMINATION IS MADE, IT IS MANDATORY UPON THE PROCURING AGENCY TO LET ONLY TO A SMALL BUSINESS CONCERN, WITHIN THE MEANING OF SECTION 714, SUPRA, ANY CONTRACT FALLING WITHIN THE SCOPE OF THE DETERMINATION, PROVIDED, OF COURSE, THAT THERE ARE AVAILABLE SMALL-BUSINESS CONCERNS READY AND ABLE TO PERFORM THE CONTRACT. ACCORDINGLY, WE BELIEVE THAT, IN SUCH CASE, IF A CONTRACT CANNOT BE ENTERED INTO WITH ANY SMALL-BUSINESS CONCERN AT A PRICE AS LOW AS THAT WHICH MIGHT BE CHARGED BY A CONCERN NOT SO CLASSIFIED, IT WILL BE PROPER, WHERE OTHERWISE APPROPRIATE, FOR THE PROCURING AGENCY TO CONTRACT WITH THE SMALL-BUSINESS CONCERN AT A HIGHER PRICE THAN MIGHT OTHERWISE HAVE BEEN OBTAINED. WE REGARD THIS CONCLUSION AS APPLICABLE IRRESPECTIVE OF WHETHER THE CONTRACT IS ENTERED INTO THROUGH NEGOTIATION OR PURSUANT TO A REQUIREMENT OF ADVERTISING FOR BIDS, AND, IN THE LATTER CASE, IRRESPECTIVE OF WHETHER THE DETERMINATION IS MADE BEFORE OR AFTER THE ADVERTISEMENT.

SECTION 714 (F) (2) OF THE DEFENSE PRODUCTION ACT OF 1950, AS AMENDED, 65 STAT. 143, PROVIDES AS FOLLOWS:

(2) THE CONGRESS HAS AS ITS POLICY THAT A FAIR PROPORTION OF THE TOTAL PURCHASES AND CONTRACTS FOR SUPPLIES AND SERVICES FOR THE GOVERNMENT SHALL BE PLACED WITH SMALL-BUSINESS CONCERNS. TO EFFECTUATE SUCH POLICY, SMALL- BUSINESS CONCERNS WITHIN THE MEANING OF THIS SECTION SHALL RECEIVE ANY AWARD OR CONTRACT OR ANY PART THEREOF AS TO WHICH IT IS DETERMINED BY THE ADMINISTRATION AND THE CONTRACTING PROCUREMENT AGENCIES (A) TO BE IN THE INTEREST OF MOBILIZING THE NATION'S FULL PRODUCTIVE CAPACITY, OR (B) TO BE IN THE INTEREST OF THE NATIONAL DEFENSE PROGRAM, TO MAKE SUCH AWARD OR LET SUCH CONTRACT TO A SMALL-BUSINESS CONCERN.

IN OFFICE DECISION B-107536, JANUARY 31, 1952, 31 COMP. GEN. 347, IT WAS HELD IN PART, THAT, IN VIEW OF THE AUTHORITY CONTAINED IN THE ABOVE PROVISION OF LAW AND WHERE THERE OTHERWISE IS AUTHORITY TO NEGOTIATE CONTRACTS THERE WOULD BE NO OBJECTION TO THE NEGOTIATION OF SUCH CONTRACTS WITH SMALL-BUSINESS CONCERNS EVEN THOUGH A LOWER PRICE WERE OBTAINABLE ELSEWHERE, PROVIDED A JOINT DETERMINATION HAD BEEN MADE THAT THE AWARD TO THE SMALL-BUSINESS CONCERN WAS IN THE INTEREST OF MOBILIZING THE NATION'S FULL CAPACITY OR IN THE INTEREST OF THE NATIONAL DEFENSE PROGRAM.

WHERE ADVERTISING IS REQUIRED, HOWEVER, BOTH SECTION 3 (B) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, 62 STAT. 23, AND SECTION 303 (B) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, 63 STAT. 395, REQUIRE 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, AND IT HAS BEEN HELD THAT WHERE ADVERTISING IS REQUIRED SUCH PROVISIONS, AS WELL AS THE PROVISIONS OF SECTION 3709, REVISED STATUTES, AS AMENDED, 41 U.S.C. 5, PRECLUDE AWARD TO A SMALL BUSINESS CONCERN IF LOWER BIDS ARE RECEIVED FROM OTHER CONCERNS. 22 COMP. GEN. 1018, 28 ID. 662. YOU NOW PRESENT THE QUESTION AS TO WHETHER THE SAME CONCLUSION WOULD BE REQUIRED WHERE, PURSUANT TO THE ABOVE-QUOTED STATUTE, YOUR ADMINISTRATION AND THE PROCURING AGENCY HAVE DETERMINED THAT THE AWARD OF A PARTICULAR CONTRACT TO A SMALL BUSINESS CONCERN AT A HIGHER PRICE THAN OTHERWISE OBTAINABLE WOULD BE IN THE INTEREST OF MOBILIZING THE NATION'S FULL PRODUCTIVE CAPACITY OR IN THE INTEREST OF THE NATIONAL DEFENSE PROGRAM.

THE INSTANT PROVISION DOES NOT SPECIFICALLY REPEAL OR SUSPEND THOSE PROVISIONS OF LAW RELATING TO ADVERTISING FOR COMPETITIVE BIDS. HOWEVER, IT SEEMS APPARENT THAT IN ANY CASE WHERE THE FACTS WOULD SUPPORT SUCH A DETERMINATION IT WOULD FOLLOW THAT NEGOTIATION OF THE PROCUREMENT PROPERLY COULD BE DETERMINED "NECESSARY IN THE PUBLIC INTEREST DURING THE PERIOD OF A NATIONAL EMERGENCY," AS CONTEMPLATED BY SECTIONS 2 (C) (1) AND 302 (C) (1) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947 AND THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, 60 STAT. 21, 63 STAT. 393, RESPECTIVELY, WITH THE RESULT THAT, IF THE PROCUREMENT WERE BEING MADE PURSUANT TO EITHER OF THOSE ACTS, ADVERTISING WOULD NOT NECESSARILY BE REQUIRED AND THE HOLDING IN B 107536, SUPRA, WOULD APPLY. SIMILARLY, CONSIDERING THE MANDATORY NATURE OF THE ABOVE-QUOTED PROVISIONS OF THE STATUTE, REQUIRING AS THEY DO THAT SMALL BUSINESS CONCERNS "SHALL RECEIVE ANY AWARD OF CONTRACT OR ANY PART THEREOF" AS TO WHICH ONE OF THE SPECIFIED DETERMINATIONS IS MADE, IT SEEMS FURTHER APPARENT THAT IN ORDER TO EFFECTUATE THE PURPOSES OF THE ACT THOSE PROVISIONS MAY BE CONSTRUED AS CONSTITUTING AN ADDED EXCEPTION TO THE ADVERTISING REQUIREMENTS OF SECTION 3709, REVISED STATUTES, AS AMENDED. CONSEQUENTLY, WHILE I CANNOT AGREE THAT IT WOULD BE LEGALLY PROPER FOR A PROCURING AGENCY TO ENTER INTO A CONTRACT WITH A SMALL-BUSINESS CONCERN AT A HIGHER PRICE THAN OTHERWISE MIGHT HAVE BEEN OBTAINED IN INSTANCES WHERE ADVERTISING IS REQUIRED AND FORMAL BIDS ARE SOLICITED, IT IS MY OPINION THAT WHERE JOINT DETERMINATIONS SUCH AS REFERRED TO IN YOUR LETTER ARE MADE IN ADVANCE, THE PROCUREMENT LEGALLY MAY BE NEGOTIATED IN THE MANNER PROPOSED WITHOUT RESORT TO FORMAL ADVERTISING.

I DEEM IT PROPER TO POINT OUT, HOWEVER, THAT THE PROVISIONS OF LAW IN QUESTION AUTHORIZE ONLY THAT A "FAIR PROPORTION" OF THE TOTAL OF GOVERNMENT PURCHASES AND CONTRACTS BE NEGOTIATED WITH SMALL BUSINESS CONCERNS, SO THAT AWARDS MAY BE MADE THEREUNDER ONLY TO THE EXTENT DETERMINED NECESSARY TO ACHIEVE THAT RESULT. ALSO, SINCE THE SAID PROVISIONS REFER TO "ANY AWARD OR CONTRACT OR ANY PART THEREOF," IT APPEARS THAT A SEPARATE DETERMINATION IS REQUIRED FOR EACH PROCUREMENT. IN OTHER WORDS, IT IS THE VIEW OF THIS OFFICE THAT THE SUBJECT STATUTE DOES NOT AUTHORIZE BLANKET DETERMINATIONS BASED ON GENERAL FORMULAS OR PRICE DIFFERENTIALS WHICH WOULD CONTROL THE AWARD OF FUTURE CONTRACTS WITHOUT FURTHER REGARD FOR THE FACTS AND CIRCUMSTANCES INVOLVED IN EACH PARTICULAR PROCUREMENT.

FINALLY, IT IS DEEMED APPROPRIATE TO POINT OUT THAT THE AUTHORITY CONSIDERED HEREIN, UNLESS EXTENDED BY THE CONGRESS, WILL TERMINATE AT THE CLOSE OF JUNE 30, 1952. SEE SECTION 111 OF THE DEFENSE PRODUCTION ACT AMENDMENTS OF 1951, 65 STAT. 144.