B-107536, JANUARY 31, 1952, 31 COMP. GEN. 347

B-107536: Jan 31, 1952

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UPON A PROPER DETERMINATION BY THE AGENCY HEAD THAT THE AWARD IS NECESSARY IN THE PUBLIC INTEREST OR WHEN SUCH ACTION IS SUPPORTED BY A DETERMINATION UNDER THE DEFENSE PRODUCTION ACT OF 1950. THAT THE AWARD IS IN THE INTEREST OF MOBILIZING THE NATION'S PRODUCTIVE CAPACITY OR THE NATIONAL DEFENSE PROGRAM. EVEN THOUGH BIDS ARE FIRST SOLICITED AND SAID NEGOTIATION WITH A SMALL BUSINESS CONCERN RESULTS IN A HIGHER PRICE THAN OTHERWISE OBTAINABLE. 1952: REFERENCE IS MADE TO YOUR LETTER OF JANUARY 17. IT IS KNOWN THAT THE CONTRACTS COULD BE AWARDED TO OTHER CONCERNS AT A LOWER COST TO THE GOVERNMENT. YOU REFER TO THE FACT THAT THE MILITARY PROCUREMENT AGENCIES HAVE BEEN AUTHORIZED. IT IS STATED THAT NOTWITHSTANDING SUCH AUTHORITY.

B-107536, JANUARY 31, 1952, 31 COMP. GEN. 347

CONTRACTS - AWARDS - TO OTHER THAN LOW BIDDER - ARMED SERVICES PROCUREMENT ACT OF 1947 AND FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949 CONTRACTS MAY BE AWARDED TO SMALL BUSINESS FIRMS BY NEGOTIATION, UNDER SECTION 2 (C) (1) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947 AND UNDER SECTION 302 OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, UPON A PROPER DETERMINATION BY THE AGENCY HEAD THAT THE AWARD IS NECESSARY IN THE PUBLIC INTEREST OR WHEN SUCH ACTION IS SUPPORTED BY A DETERMINATION UNDER THE DEFENSE PRODUCTION ACT OF 1950, AS AMENDED, THAT THE AWARD IS IN THE INTEREST OF MOBILIZING THE NATION'S PRODUCTIVE CAPACITY OR THE NATIONAL DEFENSE PROGRAM, EVEN THOUGH BIDS ARE FIRST SOLICITED AND SAID NEGOTIATION WITH A SMALL BUSINESS CONCERN RESULTS IN A HIGHER PRICE THAN OTHERWISE OBTAINABLE.

COMPTROLLER GENERAL WARREN TO THE ADMINISTRATOR, SMALL DEFENSE PLANTS ADMINISTRATION, JANUARY 31, 1952:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 17, 1952, REQUESTING TO BE ADVISED WHETHER CERTAIN PROCUREMENT CONTRACTS MAY BE NEGOTIATED WITH SMALL BUSINESS CONCERNS WHEN, AFTER HAVING ADVERTISED FOR BIDS, IT IS KNOWN THAT THE CONTRACTS COULD BE AWARDED TO OTHER CONCERNS AT A LOWER COST TO THE GOVERNMENT.

YOU REFER TO THE FACT THAT THE MILITARY PROCUREMENT AGENCIES HAVE BEEN AUTHORIZED, PURSUANT TO SECTION 2 (C) (1) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, 62 STAT. 21, AND THE DECLARATION OF A NATIONAL EMERGENCY BY THE PRESIDENT ON DECEMBER 16, 1950, TO PROCURE THROUGH NEGOTIATION RATHER THAN BY FORMAL ADVERTISING. HOWEVER, IT IS STATED THAT NOTWITHSTANDING SUCH AUTHORITY, THE AGENCIES ARE IN MANY INSTANCES AWARDING CONTRACTS ON THE BASIS OF FORMAL ADVERTISING AND QUESTION ARISES AS TO WHETHER THE AWARDING OF SUCH CONTRACTS IS GOVERNED BY DECISION OF THIS OFFICE PUBLISHED AT 28 COMP. GEN. 662.

SUCH DECISION (QUOTING FROM THE SYLLABUS) HELD AS FOLLOWS:

THE PROVISION IN SECTION 2 (B) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, REQUIRING THAT A FAIR PROPORTION OF THE TOTAL PURCHASES AND CONTRACTS FOR SUPPLIES AND SERVICES FOR THE GOVERNMENT BE PLACED WITH SMALL BUSINESS CONCERNS, WHEN CONSIDERED IN THE LIGHT OF THE DECLARED LEGISLATIVE INTENT OF THE ACT AND THE REQUIREMENT IN SECTION 3 (B) THEREOF THAT AWARD BE MADE TO THE RESPONSIBLE BIDDER WHOSE BID WILL BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED, DOES NOT AUTHORIZE THE AWARDING OF CONTRACTS TO OTHER THAN A LOW BIDDER, IN THOSE CASES WHERE ADVERTISING IS REQUIRED, SOLELY ON THE BASIS THAT A BIDDER QUALIFIES AS A SMALL BUSINESS CONCERN.

IT IS STATED TO BE YOUR VIEW THAT SECTION 3 OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, 62 STAT. 22, WHICH EXPRESSLY APPLIES ONLY "WHENEVER ADVERTISING IS REQUIRED," HAS NO APPLICABILITY TO DISCRETIONARY PROCUREMENT BY ADVERTISING AS LONG AS THE DETERMINATION THAT PROCUREMENT BY NEGOTIATION IS NECESSARY IN THE PUBLIC INTEREST DURING THE PERIOD OF THE NATIONAL EMERGENCY, AND THAT THE REFERRED-TO DECISION IS NOT CONTROLLING WITH RESPECT TO NEGOTIATED PROCUREMENT. YOU STATE IT IS YOUR FURTHER VIEW THAT OFFICE DECISION 30 COMP. GEN. 441, WHEREIN IT WAS HELD THAT UNDER CERTAIN CIRCUMSTANCES CONTRACTS MAY BE NEGOTIATED WITH SMALL BUSINESS CONCERNS AT PRICES HIGHER THAN MIGHT OTHERWISE BE OBTAINED WHERE THE PURPOSE IS TO BROADEN AND MAINTAIN THE INDUSTRIAL BASE OF SUPPLIERS, IS APPLICABLE TO ALL CASES IN WHICH NEGOTIATION IS AUTHORIZED, EVEN THOUGH FORMAL BIDS ARE FIRST SOLICITED.

IN OFFICE DECISION 20 COMP. GEN. 194, THERE WAS CONSIDERED A SIMILAR QUESTION CONCERNING THE AUTHORITY OF THE THEN SECRETARY OF WAR TO ENTER INTO CERTAIN CONTRACTS, WITH OR WITHOUT ADVERTISING, AS PROVIDED IN SECTION 1 (A) OF THE ACT OF JULY 2, 1940, 54 STAT. 712, AND IT WAS HELD THAT:

THIS EXPRESS AUTHORITY TO NEGOTIATE WITHOUT ADVERTISING SUCH CONTRACTS AS MAY BE DEEMED NECESSARY TO CARRY OUT THE PURPOSES SPECIFIED IN THE SECTION COMPREHENDS THE LESSER AUTHORITY TO UTILIZE ADVERTISING TO THE EXTENT ADMINISTRATIVELY DEEMED APPROPRIATE IN MAKING CONTRACTS UNDER SUCH SECTION WITHOUT RESTRICTING FINAL ADMINISTRATIVE DETERMINATION OF THE BIDDER TO WHOM THE CONTRACT SHOULD BE AWARDED. HENCE, IN SUCH CASES, AN ADMINISTRATIVE ELECTION TO ADVERTISE, RATHER THAN TO NEGOTIATE WITH A SINGLE CONTRACTOR, DOES NOT NECESSARILY REQUIRE MAKING THE AWARD TO THE LOWEST BIDDER REGARDLESS OF ANY OR ALL OTHER CONSIDERATIONS. AS ALL BIDS MAY BE REJECTED AND A CONTRACT NEGOTIATED WITH ANY ONE OF THE BIDDERS OR WITH A NONBIDDER, ON THE TERMS ADVERTISED, OR ON MODIFIED TERMS, WITHIN THE AUTHORITY TO NEGOTIATE SUCH CONTRACTS WITHOUT ADVERTISING, THERE WOULD APPEAR NO LEGAL OBJECTION TO THE REJECTION OF THE BIDS OF ONE OR MORE LOWER BIDDERS AND THE AWARDING OF THE CONTRACT TO A HIGHER BIDDER CONSISTENTLY WITH THE PRINCIPLES WHICH PROPERLY MAY BE ADMINISTRATIVELY APPLIED IN THE NEGOTIATION OF CONTRACTS WITHOUT ADVERTISING. THE GREATER INCLUDES THE LESSER, AND TO THE EXTENT THAT SUCH CONTRACTS PROPERLY MAY BE NEGOTIATED WITHOUT ADVERTISING THEY MAY BE MADE ON THE SAME CONDITIONS AFTER ADVERTISING.

ON THE SAME BASIS, IF THE CONTRACTS HERE CONTEMPLATED PROPERLY MAY BE NEGOTIATED WITH SMALL BUSINESS FIRMS AT A HIGHER COST TO THE GOVERNMENT THAN IS OTHERWISE OBTAINABLE, THE FACT THAT BIDS ARE FIRST SOLICITED WOULD NOT PRECLUDE THE CONTRACTING AGENCY FROM NEGOTIATING THE CONTRACT WITH A SMALL BUSINESS CONCERN AT A HIGHER PRICE. IN THAT CONNECTION, IT WOULD APPEAR THAT IMPORTANT CONSIDERATION INDEED WOULD BE NECESSARY TO DETERMINE THAT THE PUBLIC INTEREST REQUIRES THE AWARD OF CONTRACTS TO SMALL BUSINESS CONCERNS WHEN IT IS KNOWN AT THE TIME THAT THE PROCUREMENT COULD BE MADE FROM OTHER SOURCES AT LESS COST TO THE GOVERNMENT. IN APPARENT RECOGNITION OF SUCH FACT, SECTION 714 (F) (2) OF THE DEFENSE PRODUCTION ACT OF 1950, AS AMENDED, 65 STAT. 143, PROVIDES THAT---

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 ( SMALL DEFENSE PLANTS 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 VIEW OF THE RESPONSIBILITIES THUS PLACED UPON YOUR ADMINISTRATION, THIS OFFICE WOULD NOT BE REQUIRED TO OBJECT TO OTHERWISE PROPER PAYMENTS UNDER CONTRACTS AWARDED TO SMALL BUSINESS CONCERNS UNDER SECTION 2 (C) (1) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, IN THE MANNER CONSIDERED HEREIN, PROVIDED, OF COURSE, THE AGENCY HEAD DETERMINES IT TO BE NECESSARY IN THE PUBLIC INTEREST OR SUCH ACTION IS SUPPORTED BY THE DETERMINATIONS REQUIRED BY (A) OR (B) OF THE STATUTORY PROVISION QUOTED ABOVE. SEE B- 107236, 31 COMP. GEN. 279, DATED JANUARY 14, 1952.

AS SUGGESTED IN YOUR LETTER, THE CONCLUSIONS REACHED HEREIN WOULD BE EQUALLY FOR APPLICATION WHEREVER NEGOTIATION IS PERMITTED PURSUANT TO SECTION 302 OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, 63 STAT. 393.