B-119766, JULY 23, 1954, 34 COMP. GEN. 39

B-119766: Jul 23, 1954

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UNLESS THE USE OF SUCH CONTRACTS IS OPTIONAL WITH THE MILITARY DEPARTMENTS. 1954: REFERENCE IS MADE TO YOUR LETTER OF APRIL 19. TERMINATE THE RIGHT OF SUCH CONTRACTOR TO PROCEED UNDER SUCH CONTRACT IF IT IS FOUND. BY THE SECRETARY OF THE MILITARY DEPARTMENT WITH WHICH THE CONTRACT IS MADE. OR OTHERWISE) WERE OFFERED OR GIVEN BY SUCH CONTRACTOR. (2) THAT IN THE EVENT ANY SUCH CONTRACT IS SO TERMINATED THE GOVERNMENT SHALL BE ENTITLED. WHICH WAS ORIGINALLY ENACTED AS SECTION 631 OF THE DEPARTMENT OF DEFENSE APPROPRIATION ACT OF 1952. IS THE FOLLOWING. ST SESSION): THE COMMITTEE HAS NOTED WITH CONCERN THE DISCLOSURE OF EVIDENCE INDICATING THAT OFFICIALS IN THE MILITARY DEPARTMENT WHO COULD INFLUENCE THE AWARDING OF CONTRACTS HAVE RECEIVED VARIOUS TYPES OF GRATUITIES FROM CONTRACTORS OR AGENTS OF CONTRACTORS SEEKING GOVERNMENT BUSINESS.

B-119766, JULY 23, 1954, 34 COMP. GEN. 39

FEES - PROCUREMENT OF GOVERNMENT BUSINESS - STATUTORY RESTRICTION - MILITARY, NAVAL ORDERS PLACED UNDER FEDERAL SUPPLY SCHEDULE CONTRACTS THE "GRATUITIES" CLAUSE PRESCRIBED BY SECTION 626 OF THE DEPARTMENT OF DEFENSE APPROPRIATION ACT OF 1954, WHICH GIVES THE GOVERNMENT THE RIGHT TO TERMINATE A CONTRACT IF THE SECRETARY OF THE MILITARY DEPARTMENT CONCERNED FINDS THAT THE CONTRACTOR OFFERED A GRATUITY TO A FEDERAL OFFICER OR EMPLOYEE IN ORDER TO OBTAIN THE CONTRACT, NEED NOT BE INCLUDED IN ORDERS PLACED BY THE MILITARY DEPARTMENTS UNDER FEDERAL SUPPLY SCHEDULE CONTRACTS AND AREA UTILITY CONTRACTS NEGOTIATED BY THE GENERAL SERVICES ADMINISTRATION, UNLESS THE USE OF SUCH CONTRACTS IS OPTIONAL WITH THE MILITARY DEPARTMENTS.

ACTING COMPTROLLER GENERAL WEITZEL TO THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, JULY 23, 1954:

REFERENCE IS MADE TO YOUR LETTER OF APRIL 19, 1954, REQUESTING A DECISION AS TO WHETHER THE " GRATUITIES" CLAUSE, PRESCRIBED BY SECTION 626 OF THE DEPARTMENT OF DEFENSE APPROPRIATION ACT OF 1954, 67 STAT. 354, PUBLIC LAW 179, APPROVED AUGUST 1, 1953, NEED BE INCLUDED IN FEDERAL SUPPLY SCHEDULE AND "AREA" UTILITIES CONTRACTS ENTERED INTO BY YOUR AGENCY, OR IN INDIVIDUAL ORDERS ISSUED BY THE DEFENSE DEPARTMENT ACTIVITIES UNDER SUCH CONTRACTS.

THE SECTION READS AS FOLLOWS:

NO PART OF ANY MONEY APPROPRIATED TO THE DEPARTMENT OF DEFENSE FOR THE CURRENT FISCAL YEAR SHALL BE EXPENDED UNDER ANY CONTRACT (OTHER THAN A CONTRACT FOR PERSONAL SERVICES) ENTERED INTO AFTER THE ENACTMENT OF THIS ACT UNLESS SUCH CONTRACT PROVIDES---

(1) THAT THE GOVERNMENT MAY, BY WRITTEN NOTICE TO THE CONTRACTOR, TERMINATE THE RIGHT OF SUCH CONTRACTOR TO PROCEED UNDER SUCH CONTRACT IF IT IS FOUND, AFTER NOTICE AND HEARING, BY THE SECRETARY OF THE MILITARY DEPARTMENT WITH WHICH THE CONTRACT IS MADE, OR HIS DESIGNEE, THAT GRATUITIES (IN THE FORM OF ENTERTAINMENT, GIFTS, OR OTHERWISE) WERE OFFERED OR GIVEN BY SUCH CONTRACTOR, OR ANY AGENT OR REPRESENTATIVE OF SUCH CONTRACTOR, TO ANY OFFICER OR EMPLOYEE OF THE GOVERNMENT WITH A VIEW TOWARD SECURING A CONTRACT OR SECURING FAVORABLE TREATMENT WITH RESPECT TO THE AWARDING OR AMENDING, OR THE MAKING OF ANY DETERMINATIONS WITH RESPECT TO THE PERFORMING, OF SUCH CONTRACT: PROVIDED, THAT THE EXISTENCE OF THE FACTS UPON WHICH SUCH SECRETARY MAKES SUCH FINDINGS SHALL BE IN ISSUE AND MAY BE REVIEWED IN ANY COMPETENT COURT,

(2) THAT IN THE EVENT ANY SUCH CONTRACT IS SO TERMINATED THE GOVERNMENT SHALL BE ENTITLED, (A) TO PURSUE THE SAME REMEDIES AGAINST THE CONTRACTOR AS IT COULD PURSUE IN THE EVENT OF A BREACH OF THE CONTRACT BY THE CONTRACTOR, AND (B) AS A PENALTY IN ADDITION TO ANY OTHER DAMAGES TO WHICH IT MAY BE ENTITLED BY LAW, TO EXEMPLARY DAMAGES IN AN AMOUNT NOT LESS THAN THREE NOR MORE THAN TEN TIMES (AS DETERMINED BY THE SECRETARY OR HIS DESIGNEE) THE COSTS INCURRED BY ANY SUCH CONTRACTOR IN PROVIDING ANY SUCH GRATUITIES TO ANY SUCH OFFICER OR EMPLOYEE.

THE ONLY EXPLANATORY STATEMENT FOUND IN THE LEGISLATIVE RECORD OF THE SECTION REFERRED TO, WHICH WAS ORIGINALLY ENACTED AS SECTION 631 OF THE DEPARTMENT OF DEFENSE APPROPRIATION ACT OF 1952, 67 STAT. 355, IS THE FOLLOWING, FROM THE SENATE COMMITTEE REPORT (S. REP. NO. 730, 82D CONGRESS, ST SESSION):

THE COMMITTEE HAS NOTED WITH CONCERN THE DISCLOSURE OF EVIDENCE INDICATING THAT OFFICIALS IN THE MILITARY DEPARTMENT WHO COULD INFLUENCE THE AWARDING OF CONTRACTS HAVE RECEIVED VARIOUS TYPES OF GRATUITIES FROM CONTRACTORS OR AGENTS OF CONTRACTORS SEEKING GOVERNMENT BUSINESS. IN AN ATTEMPT TO CHECK THIS PRACTICE, THE COMMITTEE HAS INTRODUCED A NEW SECTION 631 TO THE BILL WHICH WOULD GIVE THE GOVERNMENT CERTAIN DISCRETIONARY POWER TO TERMINATE CONTRACTS IF THE SECRETARY OF THE DEPARTMENT CONCERNED FINDS THAT ANY GRATUITY HAS BEEN OFFERED BY A CONTRACTOR, OR HIS REPRESENTATIVE, TO A FEDERAL EMPLOYEE OR OFFICER WITH A VIEW TOWARD SECURING A CONTRACT OR SECURING FAVORABLE TREATMENT WITH RESPECT TO THE AWARDING OR AMENDING, OR THE MAKING OF ANY DETERMINATIONS WITH RESPECT TO THE PERFORMING OF SUCH CONTRACT. PENALTIES ARE ALSO PROVIDED IN THE NEW SECTION AGAINST THE CONTRACTOR.

IN PREMISING THE REQUIREMENT OF THE "GRATUITIES" CLAUSE UPON EVIDENCE OF GRATUITIES RECEIVED BY OFFICIALS OF THE MILITARY DEPARTMENTS, AND IN REFERRING IN THE BODY OF SUBSECTION (1) TO "THE SECRETARY OF THE MILITARY DEPARTMENT WITH WHICH THE CONTRACT IS MADE," THE CONGRESS INDICATED THAT IT WAS UNDERTAKING TO DEAL SPECIFICALLY WITH CONTRACTS THE MAKING OF WHICH WAS UNDER THE CONTROL OF OFFICIALS OF THE MILITARY DEPARTMENTS. SO, WHILE IT IS POSSIBLE TO CONSTRUE THE LANGUAGE,"THAT GRATUITIES * * * WERE OFFERED OR GIVEN * * * TO ANY OFFICER OR EMPLOYEE OF THE GOVERNMENT" AS EMBRACING OFFICERS OR EMPLOYEES OF OTHER DEPARTMENTS OR AGENCIES, THIS WOULD NOT IN ITSELF JUSTIFY A BROAD INTERPRETATION OF THE CLAUSE AS APPLYING TO CONTRACTS THE MAKING OF WHICH IS NOT UNDER THE CONTROL OF THE MILITARY OFFICIALS. HAVING REGARD TO THE EVIL SOUGHT TO BE REMEDIED, THE MEANS CHOSEN TO THAT END, AND THE PUNITIVE NATURE OF THE SANCTIONS CREATED BY SUBSECTION (2) (B), I DO NOT FEEL THAT THE PRESCRIBED CLAUSE IS REQUIRED BY THE SECTION UNDER CONSIDERATION TO BE INCLUDED IN CONTRACTS THE AWARD OF WHICH IS NOT SUBJECT TO THE EXERCISE OF DISCRETION OR CHOICE BY OFFICERS OR EMPLOYEES OF THE MILITARY DEPARTMENTS.

ACCORDINGLY, WITH RESPECT TO ORDERS PLACED BY THE MILITARY DEPARTMENTS UNDER FEDERAL SUPPLY SCHEDULE CONTRACTS AND AREA UTILITY CONTRACTS NEGOTIATED BY YOUR AGENCY, AND WHICH ARE OBLIGATORY UPON THE MILITARY DEPARTMENTS, NO QUESTION WILL BE RAISED BY THIS OFFICE AS TO THE PROPRIETY OF PAYMENTS MADE FROM DEFENSE DEPARTMENT APPROPRIATIONS BECAUSE OF THE OMISSION FROM SUCH ORDERS OR CONTRACTS OF THE "GRATUITIES" CLAUSE.

HOWEVER, AS TO ORDERS OR CONTRACTS OF THE MILITARY DEPARTMENTS PLACED UNDER SUCH CONTRACTS AS ARE MADE BY YOUR AGENCY, WHERE THE USE THEREOF IS OPTIONAL WITH THOSE DEPARTMENTS, IT APPEARS THAT THE INTENT OF THE ENACTMENT WOULD REQUIRE INCLUSION OF THE CLAUSE IN QUESTION IN THE ORDER OR CONTRACT. WHETHER IN SUCH CASES THE ORIGINAL CONTRACT OF YOUR ADMINISTRATION SHOULD INCLUDE A STATEMENT TO THE EFFECT THAT THE CLAUSE WOULD BE REQUIRED IN ORDERS OR CONTRACTS PLACED BY ANY OF THE DEFENSE AGENCIES, OR LEAVE THE INCLUSION OF THE CLAUSE IN EACH INDIVIDUAL AGREEMENT AS A MATTER OF NEGOTIATION BETWEEN THE PARTIES--- WHICH WOULD IN EFFECT LEAVE THE CONTRACTOR UNDER NO OBLIGATION TO ACCEPT ORDERS FROM SUCH DEPARTMENTS--- APPEARS TO BE A MATTER FOR DETERMINATION BY YOU AND THOSE AGENCIES.