B-111633, NOVEMBER 20, 1952, 32 COMP. GEN. 251

B-111633: Nov 20, 1952

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TO NEGOTIATE CONTRACTS WITHOUT ADVERTISING WHEN IT IS DETERMINED BY AGENCY HEAD TO BE NECESSARY IN THE PUBLIC INTEREST DURING A PERIOD OF NATIONAL EMERGENCY. A CONTRACT MAY BE AWARDED TO A BIDDER LOCATED IN A SURPLUS LABOR AREA WHO WAS PERMITTED TO REDUCE HIS BID TO THAT OF THE LOWEST BIDDER. - EVEN THOUGH DEFENSE MANPOWER POLICY NO. 4 ISSUED TO CHANNEL GOVERNMENT CONTRACTS INTO SURPLUS LABOR AREAS WAS CLARIFIED TO PERMIT SMALL BUSINESS CONCERNS OUTSIDE SUCH AREAS TO BE AWARDED CONTRACTS. 1952: FURTHER REFERENCE IS MADE TO YOUR LETTER OF AUGUST 27. IT IS STATED IN YOUR LETTER THAT INFILCO. WAS CALLED IN AND ADVISED. THE AWARD WOULD BE MADE TO " IT IS STATED FURTHER THAT AFTER PROPORTIONEERS.

B-111633, NOVEMBER 20, 1952, 32 COMP. GEN. 251

CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS V. CONTRACTORS IN SURPLUS LABOR AREAS IN VIEW OF THE AUTHORITY IN SECTION 203 (C) (1) OF THE FEDERAL PROPERTY AND ADMINISTRATOR SERVICES ACT OF 1940, AS AMENDED, TO NEGOTIATE CONTRACTS WITHOUT ADVERTISING WHEN IT IS DETERMINED BY AGENCY HEAD TO BE NECESSARY IN THE PUBLIC INTEREST DURING A PERIOD OF NATIONAL EMERGENCY, A CONTRACT MAY BE AWARDED TO A BIDDER LOCATED IN A SURPLUS LABOR AREA WHO WAS PERMITTED TO REDUCE HIS BID TO THAT OF THE LOWEST BIDDER--- A SMALL BUSINESS CONCERN LOCATED OUTSIDE SUCH AN AREA--- EVEN THOUGH DEFENSE MANPOWER POLICY NO. 4 ISSUED TO CHANNEL GOVERNMENT CONTRACTS INTO SURPLUS LABOR AREAS WAS CLARIFIED TO PERMIT SMALL BUSINESS CONCERNS OUTSIDE SUCH AREAS TO BE AWARDED CONTRACTS.

COMPTROLLER GENERAL WARREN TO JOHN H. DORSEY, NOVEMBER 20, 1952:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF AUGUST 27, 1952, WITH ENCLOSURES, PROTESTING ON BEHALF OF INFILCO, INCORPORATED, THE AWARD BY THE GENERAL SERVICES ADMINISTRATION OF A CONTRACT PURSUANT TO INVITATION NO. 4D-14015-RN-6-25-52.

IT IS STATED IN YOUR LETTER THAT INFILCO, INCORPORATED, A SMALL BUSINESS CONCERN, SUBMITTED THE LOWEST BID IN RESPONSE TO THE INVITATION. PROPORTIONEERS, INCORPORATED, THE NEXT LOW BIDDER, LOCATED IN A SURPLUS LABOR AREA BUT NOT A SMALL BUSINESS CONCERN, WAS CALLED IN AND ADVISED, IN CONFORMITY TO GENERAL SERVICES ADMINISTRATION ADMINISTRATIVE ORDER NO. 122, DATED MARCH 31, 1952, THAT "IF IT WOULD LOWER ITS BID TO MEET THAT OF INFILCO INCORPORATED, THE AWARD WOULD BE MADE TO " IT IS STATED FURTHER THAT AFTER PROPORTIONEERS, INCORPORATED, AGREED TO REDUCE ITS BID TO THAT OF THE LOWEST BIDDER THE CONTRACT WAS AWARDED TO THAT CONCERN NOTWITHSTANDING THE FACT THAT THE OFFICE OF DEFENSE MOBILIZATION HAD IN THE MEANTIME FORWARDED TO THE ADMINISTRATOR OF GENERAL SERVICES A LETTER STATING THAT CONCERNS WITHIN AREAS OF CURRENT OR IMMINENT LABOR SURPLUS WHICH WERE NOT SMALL BUSINESS CONCERNS SHOULD NOT RECEIVE PREFERENCE OVER SMALL BUSINESS CONCERNS OUTSIDE SUCH AREAS. FINALLY, IT IS URGED THAT THE AWARD OF THE CONTRACT AS THUS MADE TO PROPORTIONEERS, INCORPORATED, IS ILLEGAL AND VOID AND DEMAND IS MADE THAT THE CONTRACT BE AWARDED TO INFILCO, INCORPORATED, AS REQUIRED BY LAW.

BY THE CITED INVITATION ISSUED JUNE 13, 1952, BIDS WERE REQUESTED FOR FURNISHING CERTAIN PORTABLE WATER PURIFICATION UNITS AND CENTRIFUGAL PUMPS TO BE IN ACCORDANCE WITH THE GOVERNMENT'S SPECIFICATIONS. BIDDERS WERE ADVISED ON PAGE 5 OF THE INVITATION FORM THAT AWARDS PURSUANT TO THE INVITATION WOULD BE NEGOTIATED UNDER SECTION 302 (C) (1) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, 63 STAT. 393, AS AMENDED; THAT DIRECTIVES ISSUED BY COMPETENT AUTHORITY PURSUANT TO THE DEFENSE PRODUCTION ACT OF 1952 (APPARENTLY SHOULD BE 1950), 64 STAT. 798, AS AMENDED, WOULD BE OBSERVED IN DETERMINING AWARDS; AND THAT---

* * * BIDDERS ARE THEREFORE REQUIRED TO STATE SPECIFICALLY BELOW, THE EXTENT TO WHICH PRODUCTION OR FABRICATION OF THE SUPPLIES OFFERED (OR SERVICES TO BE RENDERED) WILL OCCUR IN EACH AREA (NAMING THE AREA), OF CURRENT LABOR SURPLUS DESIGNATED BY THE DIRECTOR OF DEFENSE MOBILIZATION. (INFORMATION AS TO GEOGRAPHIC COVERAGE OF AREAS OF CURRENT LABOR SURPLUS MAY BE OBTAINED FROM ANY LOCAL OFFICE OF THE STATE EMPLOYMENT SERVICE.

THE STATED PURPOSE OF ADMINISTRATIVE ORDER NO. 122, DATED MARCH 31, 1952, WAS TO ESTABLISH THE PROCEDURE APPLICABLE WITHIN THE GENERAL SERVICES ADMINISTRATION FOR COMPLIANCE WITH DEFENSE MANPOWER POLICY NUMBER 4 ISSUED BY THE OFFICE OF DEFENSE MOBILIZATION TO CHANNEL GOVERNMENT CONTRACTS INTO SURPLUS LABOR AREAS. SAID ORDER ALSO WAS TO IMPLEMENT THE DETERMINATION BY THE ADMINISTRATOR OF GENERAL SERVICES AS SET FORTH IN ADMINISTRATIVE ORDER NUMBER 121, DATED MARCH 31, 1952, PURSUANT TO SECTION 302 (C) (1) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED, AS TO THE NECESSITY IN THE PUBLIC INTEREST OF NEGOTIATING CERTAIN CONTRACTS DURING THE PERIOD OF THE CURRENT NATIONAL EMERGENCY. BY LETTER DATED MAY 23, RELEASED MAY 27, 1952, THE DIRECTOR OF DEFENSE MOBILIZATION ADVISED THE CHAIRMAN OF THE MUNITIONS BOARD THAT IN ISSUING DEFENSE MANPOWER POLICY NUMBER 4, IT WAS NOT THE INTENTION THAT SAID POLICY BE INTERPRETED AS PRECLUDING AWARD TO A SMALL BUSINESS LOW BIDDER NOT LOCATED IN A SURPLUS LABOR AREA. THE LETTER STATED, BY WAY OF CLARIFICATION OF THE POLICY, THAT CONCERNS WITHIN AREAS OF CURRENT OR IMMINENT LABOR SURPLUS WHICH ARE NOT SMALL BUSINESS CONCERNS SHALL NOT RECEIVE PREFERENCE OVER SMALL BUSINESS CONCERNS OUTSIDE SUCH AREAS AND THAT SMALL BUSINESS CONCERNS WITHIN SUCH AREAS SHALL RECEIVE PREFERENCE OVER SMALL BUSINESS CONCERNS OUTSIDE SUCH AREAS. A SIMILAR LETTER DATED JUNE 6, 1952 WAS SENT TO THE ADMINISTRATOR OF GENERAL SERVICES. A REVISION OF ADMINISTRATIVE ORDER NUMBER 122 REFLECTING THIS CLARIFICATION OF POLICY WAS ISSUED ON SEPTEMBER 15, 1952, AFTER THE AWARD ON JUNE 20, 1952, OF THE CONTRACT IN THE PRESENT PROCUREMENT.

THE AUTHORITY FOR THE NEGOTIATION OF THE CONTRACT AWARDED TO PROPORTIONEERS, INCORPORATED, WAS SECTION 302 (C) (1) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED WHICH PROVIDES THAT CONTRACTS FOR PURCHASES AND 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.' SUCH A NATIONAL EMERGENCY WAS DECLARED BY THE PRESIDENT ON DECEMBER 16, 1950, AND THE ADMINISTRATOR OF GENERAL SERVICES BY THE ABOVE REFERRED-TO ADMINISTRATIVE ORDER NO. 121, MADE A DETERMINATION IN ACCORDANCE WITH THE SAID SECTION 302 (C) (1) THAT IT IS NECESSARY IN THE PUBLIC INTEREST TO NEGOTIATE CONTRACTS, AS THEREIN PROVIDED, DURING THE PERIOD OF THE NATIONAL EMERGENCY.

THERE IS NOTHING IN THE DEFENSE PRODUCTION ACT OF 1950, AS AMENDED, WHICH AUTHORIZES GENERALLY THE NEGOTIATION OF GOVERNMENT CONTRACTS OR A DISREGARD OF OTHERWISE LAWFULLY ESTABLISHED PROCUREMENT PROCEDURES, THE AUTHORITY IN SECTION 303 (B) OF THE ORIGINAL ACT TO MAKE PURCHASES AND COMMITMENTS TO PURCHASE WITHOUT REGARD TO EXISTING LAW BEING RESTRICTED TO SUBJECT MATTER NOT PERTINENT TO THIS PROCUREMENT. THE VARIOUS DIRECTIVES AND STATEMENTS ISSUED PURSUANT TO THE AUTHORITY OF THE PRESIDENT ( EXECUTIVE ORDER NO. 10193, DECEMBER 16, 1950) CONFERRED BY THAT ACT WERE CONFINED TO MATTERS OF POLICY AND MAY NOT BE REGARDED AS REQUIRING, IN AND OF THEMSELVES, THAT GOVERNMENT AGENCIES AWARD CONTRACTS TO SMALLER BUSINESS CONCERNS WITHOUT REGARD TO EXISTING LAWS RELATING DIRECTLY TO THE AWARD OF PUBLIC CONTRACTS. SEE 31 COMP. GEN. 279; ID. 349; ID. 431.

THE STATED PURPOSE OF MANPOWER POLICY NO. 4 IS TO PROVIDE FOR PROCUREMENT BY NEGOTIATED CONTRACTS AND PURCHASES WITH RESPONSIBLE CONCERNS WHICH ARE IN AN AREA OF CURRENT OR IMMINENT LABOR SURPLUS IN CASES WHERE THE PUBLIC INTEREST DICTATES THE NEED FOR DOING SO IN ORDER TO ACHIEVE CERTAIN STATED OBJECTIVES IN CONNECTION WITH THE MOBILIZATION OF THE NATION'S RESOURCES. NOTHING IS SAID IN THIS STATEMENT OF POLICY WITH RESPECT TO AWARDS OF CONTRACTS TO SMALL BUSINESS CONCERNS. SUCH POLICY IS SET FORTH IN ANOTHER STATEMENT OF POLICY APPROVED BY THE ADMINISTRATOR, DEFENSE PRODUCTION ADMINISTRATION ENTITLED " PROCUREMENT POLICY FOR SMALL (BUSINESS.' SEE 30 COMP. GEN. 441. IN THAT CONNECTION, IT WILL BE NOTED THAT THE STATED PURPOSE OF THE LETTER OF JUNE 6, 1952, WAS TO RECONCILE ANY POSSIBLE CONFLICT BETWEEN THE POLICY OF ENCOURAGING SMALL BUSINESS AS EXPRESSED IN THE DEFENSE PRODUCTION ACT AND THE POLICY OF PRESERVING THE DEFENSE POTENTIAL OF DISTRESSED AREAS BY PLACING PURCHASES WITHIN SAID AREAS AS EXPRESSED IN THE SAID DEFENSE MANPOWER POLICY NO. 4. THAT LETTER STATED, BY WAY OF CLARIFICATION OF POLICY ONLY, THAT CONCERNS WITHIN AREAS OF CURRENT OR IMMINENT LABOR SURPLUS WHICH ARE NOT SMALL BUSINESS CONCERNS SHALL NOT RECEIVE PREFERENCE OVER SMALL BUSINESS CONCERNS OUTSIDE SUCH AREAS AND THAT SMALL BUSINESS CONCERNS WITHIN SUCH AREAS SHALL RECEIVE PREFERENCE OVER SMALL BUSINESS CONCERNS OUTSIDE SUCH AREAS.

THE ACTION OF THE DIRECTOR OF OFFICE OF DEFENSE MOBILIZATION IN THUS CLARIFYING THE PRIOR STATEMENTS OF POLICY WERE, AS THE LETTERS OF MAY 23 AND JUNE 6, 1952, CLEARLY INDICATE, DIRECTORY ONLY AND DID NOT HAVE SUCH FORCE AND EFFECT OF LAW AS TO CONSTITUTE THE ACTION OF THE GENERAL SERVICES ADMINISTRATION IN AWARDING THE CONTRACT AN ILLEGAL ACT. SEE EMPLOYERS GROUP, ETC. V. NATIONAL WAR LABOR BOARD, 143 F.2D 145, 148. FURTHERMORE, THE STATEMENTS OF POLICY AND THE CLARIFICATIONS OF THOSE STATEMENTS AS SET FORTH IN THE LETTERS OF MAY 23 AND JUNE 6, 1952, WERE DIRECTED TO THE DEPARTMENT OF DEFENSE AND THE GENERAL SERVICES ADMINISTRATION. THEY CONFER NO RIGHTS UPON THOSE WHOSE BIDS ARE NOT ACCEPTED. AS STATED BY THE SUPREME COURT OF THE UNITED STATES IN THE CASE OF PERKINS V. LUKENS STEEL CO., 310 U.S. 113, IN DISCUSSING THE DUTY OF THE SECRETARY OF LABOR UNDER THE PUBLIC CONTRACTS ACT OF JUNE 30, 1936, 49 STAT. 2036---

LIKE PRIVATE INDIVIDUALS AND BUSINESSES, THE GOVERNMENT ENJOYS THE UNRESTRICTED POWER TO PRODUCE ITS OWN SUPPLIES, TO DETERMINE THOSE WITH WHOM IT WILL DEAL, AND TO FIX THE TERMS AND CONDITIONS UPON WHICH IT WILL MAKE NEEDED PURCHASES. ACTING THROUGH ITS AGENTS AS IT MUST OF NECESSITY, THE GOVERNMENT MAY FOR THE PURPOSE OF KEEPING ITS OWN HOUSE IN ORDER LAY DOWN GUIDE POSTS BY WHICH ITS AGENTS ARE TO PROCEED IN THE PROCUREMENT OF SUPPLIES, AND WHICH CREATE DUTIES TO THE GOVERNMENT ALONE * * *. * ** * *

THE ACT DOES NOT REPRESENT AN EXERCISE BY CONGRESS OF REGULATORY POWER OVER PRIVATE BUSINESS OR EMPLOYMENT. IN THIS LEGISLATION CONGRESS DID NO MORE THAN INSTRUCT ITS AGENTS WHO WERE SELECTED AND GRANTED FINAL AUTHORITY TO FIX THE TERMS AND CONDITIONS UNDER WHICH THE GOVERNMENT WILL PERMIT GOODS TO BE SOLD TO IT. THE SECRETARY OF LABOR IS UNDER A DUTY TO OBSERVE THOSE INSTRUCTIONS JUST AS A PURCHASING AGENT OF A PRIVATE CORPORATION MUST OBSERVE THOSE OF HIS PRINCIPAL. IN BOTH INSTANCES PROSPECTIVE BIDDERS FOR CONTRACTS DERIVE NO ENFORCEABLE RIGHTS AGAINST THE AGENT FOR AN ERRONEOUS INTERPRETATION OF THE PRINCIPAL'S AUTHORIZATION. FOR ERRONEOUS CONSTRUCTION OF HIS INSTRUCTIONS, GIVEN FOR THE SOLE BENEFIT OF THE PRINCIPAL, THE AGENT IS RESPONSIBLE TO HIS PRINCIPAL ALONE BECAUSE HIS MISCONSTRUCTION VIOLATES NO DUTY HE OWES TO ANY BUT HIS PRINCIPAL. THE SECRETARY'S RESPONSIBILITY IS TO SUPERIOR EXECUTIVE AND LEGISLATIVE AUTHORITY. * * *

MOREOVER, THERE IS NOTHING OF RECORD TO INDICATE THAT THE GENERAL SERVICES ADMINISTRATION HAS IN ANY MANNER CIRCUMVENTED THE EXPRESSED INTENT OF THE CONGRESS THAT A FAIR PROPORTION OF THE TOTAL PURCHASES AND CONTRACTS FOR SUPPLIES AND SERVICES FOR THE GOVERNMENT SHALL BE PLACED WITH SMALL BUSINESS CONCERNS. ON THE CONTRARY, THE ADMINISTRATOR OF GENERAL SERVICES REPORTS THAT 77.1 PERCENT OF THE DOLLAR VALUE OF CONTRACTS AWARDED BY THAT ADMINISTRATION FOR THE FISCAL YEAR 1952, WAS AWARDED BY THAT ADMINISTRATION FOR THE FISCAL YEAR 1952, WAS AWARDED TO SMALL BUSINESS CONCERNS.

ACCORDINGLY, IN VIEW OF THE REPORTED FACTS, THIS OFFICE WOULD NOT BE JUSTIFIED IN OBJECTING TO THE ADMINISTRATIVE ACTION TAKEN IN THE MATTER.