B-121156, OCTOBER 13, 1954, 34 COMP. GEN. 175

B-121156: Oct 13, 1954

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PROVIDED THE CARRIER'S RATES ARE REGULARLY FIXED TO INCLUDE SUCH INSURANCE COSTS AND PROVIDED THE CARRIER WILL NOT ACCEPT GOVERNMENT SHIPMENTS AT A RATE EXCLUSIVE THEREOF. SOLICITATION OF BIDS FOR CONTRACTS TO TRANSPORT GOVERNMENT PROPERTY BETWEEN DIFFERENT STATES BY ARMORED MOTOR VEHICLE MAY PROPERTY BE LIMITED TO THOSE CARRIERS WHICH HAVE OBTAINED INTERSTATE COMMERCE COMMISSION PERMITS TO ENGAGE IN SUCH BUSINESS AND. WHILE IT WOULD BE PROPER IN AREAS WHERE THERE ARE NO PERMIT HOLDERS TO SOLICIT BIDS CONDITIONED UPON THE BIDDERS OBTAINING THE NECESSARY PERMIT PRIOR TO AWARD. NO CONTRACT SHOULD BE AWARDED TO ANY SUCH BIDDER UNTIL THE PERMIT IS OBTAINED. 1954: REFERENCE IS MADE TO LETTER DATED AUGUST 24.

B-121156, OCTOBER 13, 1954, 34 COMP. GEN. 175

INSURANCE - PUBLIC FUNDS AND PROPERTY - TRANSPORTATION OF FUNDS AND OTHER VALUABLES - GOVERNMENT LOSSES IN SHIPMENT ACT CHARGES FOR ARMORED CAR SERVICE FOR SHIPMENT OF COINS (VALUABLES) AT RATES WHICH INCLUDE THE COSTS TO THE CARRIER OF INDEMNITY INSURANCE MAY BE PAID AS TRANSPORTATION COSTS WITHOUT CONTRAVENING THE GOVERNMENT LOSSES IN SHIPMENT ACT WHICH PRECLUDES THE USE OF PUBLIC MONEYS FOR INSURANCE AGAINST LOSSES IN SHIPMENTS OF VALUABLES, PROVIDED THE CARRIER'S RATES ARE REGULARLY FIXED TO INCLUDE SUCH INSURANCE COSTS AND PROVIDED THE CARRIER WILL NOT ACCEPT GOVERNMENT SHIPMENTS AT A RATE EXCLUSIVE THEREOF. SOLICITATION OF BIDS FOR CONTRACTS TO TRANSPORT GOVERNMENT PROPERTY BETWEEN DIFFERENT STATES BY ARMORED MOTOR VEHICLE MAY PROPERTY BE LIMITED TO THOSE CARRIERS WHICH HAVE OBTAINED INTERSTATE COMMERCE COMMISSION PERMITS TO ENGAGE IN SUCH BUSINESS AND, WHILE IT WOULD BE PROPER IN AREAS WHERE THERE ARE NO PERMIT HOLDERS TO SOLICIT BIDS CONDITIONED UPON THE BIDDERS OBTAINING THE NECESSARY PERMIT PRIOR TO AWARD, NO CONTRACT SHOULD BE AWARDED TO ANY SUCH BIDDER UNTIL THE PERMIT IS OBTAINED.

ACTING COMPTROLLER GENERAL WEITZEL TO THE SECRETARY OF THE TREASURY, OCTOBER 13, 1954:

REFERENCE IS MADE TO LETTER DATED AUGUST 24, 1954, FROM THE ACTING SECRETARY OF THE TREASURY, REQUESTING A DECISION AS TO THE PROPRIETY OF ENTERING INTO CONTRACTS WITH CERTAIN CONTRACT CARRIERS OFFERING ARMORED CAR SERVICE FOR THE SHIPMENT OF COINS, AND REQUIRING SUCH CONTRACTORS TO CARRY INSURANCE IN A DESIGNATED AMOUNT.

THE LETTER OF THE ACTING SECRETARY STATES THAT TREASURY OFFICIALS, TOGETHER WITH OTHER PERSONS AND INSTITUTIONS, ARE ENGAGED IN A PROGRAM OF CONTRACTING WITH ARMORED CAR CONTRACT CARRIERS TO BE USED BY THE BUREAU OF THE MINT IN THE PERFORMANCE OF ITS FUNCTIONS PERTAINING TO THE DISTRIBUTION OF COINS AMONG THE MINTS, FEDERAL RESERVE BANKS AND BRANCHES. IT IS INDICATED THAT SHIPMENT BY SUCH ARMORED CAR SERVICE, AS COMPARED WITH FORMER DISTRIBUTION BY RAILWAY EXPRESS AND PARCEL POST, WILL EFFECT A SAVINGS TO THE GOVERNMENT IN EXCESS OF $100,000 PER YEAR. THE LETTER FURTHER STATES THAT A REQUEST FOR A DELEGATION, PURSUANT TO SUBSECTION 302 (A) (2) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, 63 STAT. 393, OF THE GENERAL SERVICES ADMINISTRATOR'S AUTHORITY TO NEGOTIATE CONTRACTS WITHOUT ADVERTISING UNDER SUBSECTIONS 302 (C) (2) AND (11) OF SUCH ACT, 63 STAT. 393, HAS BEEN MADE; AND ASSUMING THAT SUCH AUTHORITY IS RECEIVED, DECISION IS REQUESTED OF THE FOLLOWING TWO QUESTIONS:

(1) WILL A PROVISION IN THE NEGOTIATED CONTRACT (A) REQUIRING INSURANCE IN A DESIGNATED AMOUNT, NAMING THE TREASURY DEPARTMENT AS CO ASSURED WITH THE ARMORED CAR SERVICE, OR (B) REPRESENTING THAT THE CONTRACTOR DOES CARRY SUCH INSURANCE, BE VIEWED BY YOU AS IN CONTRAVENTION OF THE PROVISIONS OF THE GOVERNMENT LOSSES IN SHIPMENT ACT (5 U.S.C. 134-134H/?

(2) IN VIEW OF THAT ACT, CAN SUCH CONTRACT (A) REQUIRE, OR (B) REPRESENT THAT THE CARRIER HAS, INSURANCE WITH SPECIFIED PROVISIONS, E. G.:

IT IS UNDERSTOOD AND AGREED THAT IN THE EVENT OF LOSS OF ANY COIN CONTEMPLATED TO BE HANDLED UNDER THE TERMS OF THIS CONTRACT OF INSURANCE, THE CLAIM WILL BE SETTLED AT THE FACE VALUE RATHER THAN COST OF REPLACEMENT OF SUCH COIN.

IN ADDITION TO THE ABOVE, THE LETTER STATES THAT IN THE EVENT SUCH SERVICES ARE PROCURED THROUGH ADVERTISING, PURSUANT TO SECTION 3709 OF THE REVISED STATUTES--- WHETHER OR NOT A DELEGATION OF AUTHORITY TO NEGOTIATE SUCH CONTRACTS WITHOUT ADVERTISING IS OBTAINED--- THERE EMERGES THE ADDITIONAL QUESTION WHETHER A PROVISION SUCH AS THE ONE SET FORTH IN QUESTION 1 ABOVE IN THE CONTRACT OR INVITATION TO BID WOULD BE DEEMED IN CONTRAVENTION OF THE GOVERNMENT LOSSES IN SHIPMENT ACT AND, ALSO, WHETHER A REQUIREMENT OR REPRESENTATION IN THE CONTRACT OR INVITATION TO BID THAT THE CARRIER HAS INSURANCE WITH SPECIFIC PROVISIONS REFERRED TO IN QUESTION NO. 2 ABOVE WOULD BE DEEMED TO "INCUR ANY OBLIGATION * * * FOR INSURANCE" UNDER THAT ACT. IN THE EVENT SUCH SERVICES ARE PROCURED THROUGH ADVERTISING, THE ACTING SECRETARY ALSO INQUIRES WHETHER THIS OFFICE WOULD AUTHORIZE PAYMENTS UNDER A CONTRACT ENTERED INTO WHEN (1) FROM AMONG COMPETING CARRIERS THERE IS SOLICITED ONLY THAT CONTRACT CARRIER WHICH HAS OBTAINED A PERMIT FROM THE INTERSTATE COMMERCE COMMISSION AND (2) WHEN IT APPEARS THAT NO COMPETING CARRIER IN AN AREA HAS SUCH PERMIT AND THE CONTRACT IS MADE WITH THE LOWEST BIDDER CONDITIONED UPON THE OBTAINING OF SUCH PERMIT.

WHILE NOT SO STATED IN YOUR SUBMISSION, THIS OFFICE INFORMALLY HAS BEEN INFORMED THAT THE CARRIER ALREADY ARE COVERED WITH INSURANCE ADEQUATE TO PROTECT THE COINS IN QUESTION; THAT THE TRANSPORTATION COSTS INCLUDE AN ALLOWANCE FOR THE COST TO THE CARRIER OF PROVIDING INDEMNITY, BUT WITHOUT ANY SPECIFIC ALLOCATION BEING MADE IN THE RATE PAID BY THE GOVERNMENT FOR SUCH INDEMNITY FEATURES, AND THAT THE CARRIERS REFUSE TO ACCEPT THE SHIPMENT AT A RATE EXCLUDING SUCH COSTS. IT ALSO IS UNDERSTOOD THAT THE INSURANCE OF SUCH SHIPMENTS IN THE SO CALLED "REVOLVING FUND," PROVIDED FOR IN TITLE 5, SECTIONS 134-134H, U.S.C., WOULD NOT BE ADEQUATE FOR THE REASON THAT THE LOSS OF ONE INDIVIDUAL ARMORED CAR SHIPMENT CONCEIVABLY COULD EXHAUST THE RESERVE SET UP IN SUCH FUND. HENCE, IT IS THE OPINION OF YOUR DEPARTMENT THAT SINCE THE CARRIERS ALREADY ARE COVERED BY THE INSURANCE-- AND NOTWITHSTANDING THAT AN INTEGRAL PORTION OF THE TRANSPORTATION RATE OFFERED CONSISTS OF AN ITEM TO COVER THE INDEMNITY COSTS--- SUCH ITEM HAS LOST ITS IDENTITY AS AN INSURANCE PREMIUM IN CONTEMPLATION OF THE ACT. FURTHERMORE, IT IS EMPHASIZED THAT PROCUREMENT OF SUCH SERVICES AT A RATE ADMITTEDLY INCLUDING AN ALLOWANCE FOR SUCH INSURANCE EXPENSE WILL APPARENTLY RESULT IN A SUBSTANTIAL SAVINGS TO THE GOVERNMENT IN THE COURSE OF EACH YEAR.

AS YOU ARE AWARE, THIS OFFICE REPEATEDLY HAS HELD THAT APPROPRIATED MONEYS ARE NOT AVAILABLE FOR THE PAYMENT OF INSURANCE PREMIUMS ON GOVERNMENT-OWNED PROPERTY IN THE ABSENCE OF SPECIFIC STATUTORY AUTHORITY THEREFOR. SEE 21 COMP. GEN. 928. MOREOVER, SECTION 4 OF THE GOVERNMENT LOSSES IN SHIPMENT ACT SPECIFICALLY PROHIBITS ANY EXECUTIVE DEPARTMENT, AGENCY OR WHOLLY-OWNED CORPORATION FROM EXPENDING ANY FUNDS OR INCURRING ANY OBLIGATION FOR INSURANCE OR THE PAYMENT OF PREMIUMS ON INSURANCE AGAINST LOSSES IN SHIPMENTS OF VALUABLE EXCEPT AS SPECIFICALLY AUTHORIZED BY THE SECRETARY OF THE TREASURY, WHO MAY GIVE SUCH AUTHORIZATIONS WHEN HE FINDS THE RISK OF LOSS IN THE SHIPMENT CANNOT ADEQUATELY BE GUARDED AGAINST BY THE FACILITIES OF THE UNITED STATES OR ADEQUATE REPLACEMENT CANNOT BE PROVIDED. IT IS UNDERSTOOD FROM THE LETTER OF THE ACTING SECRETARY THAT NO EXCEPTION HAS BEEN MADE AS TO THE INVOLVED SHIPMENTS AND COINS ARE SPECIFICALLY DECLARED TO BE VALUABLES BY REGULATIONS OF THE SECRETARY, 31 C.F.R. 262.1, PROMULGATED PURSUANT TO SECTION 7 OF THE AMENDED ACT. ACCORDINGLY, IT SEEMS ENTIRELY CLEAR THAT NO FUNDS MAY BE USED FOR PAYMENT OF INSURANCE OR INSURANCE PREMIUMS, AS SUCH, IN CONNECTION WITH SUCH SHIPMENTS. HOWEVER, IN 17 COMP. GEN. 139, IT WAS HELD THAT:

WHERE CHARGES FOR TRANSPORTATION OF VALUABLES ARE REGULARLY FIXED AT A RATE WHICH INCLUDES COST TO CARRIER FOR INDEMNITY INSURANCE AND CARRIER WILL NOT ACCEPT GOVERNMENT SHIPMENT AT A RATE EXCLUSIVE OF SUCH COST, THE TOTAL SUM PAID FOR THE SHIPMENT MAY BE CONSIDERED AS COST OF TRANSPORTATION AND PAYMENT THEREOF AS NOT IN CONTRAVENTION OF THE GOVERNMENT LOSSES IN SHIPMENT ACT, APPROVED JULY 8, 1937, 50 STAT. 479.

THIS OFFICE ALSO HAS HELD THAT THE PAYMENT OF A TRANSPORTATION RATE BASED UPON THE REAL WORTH OF "VALUABLES" WOULD APPEAR TO BE IN LINE WITH THE PURPOSE OF THE GOVERNMENT LOSSES IN SHIPMENT ACT, WHICH PROVIDES THAT THE REGULATIONS REQUIRED THEREUNDER SHALL BE PRESCRIBED "WITH A VIEW OF MINIMIZING RISKS OF LOSS AND DESTRUCTION OF, AND DAMAGE TO, SUCH VALUABLES IN SHIPMENT.' 17 COMP. GEN. 741.

ACCORDINGLY AND PROVIDED THAT THE TRANSPORTATION RATES OFFERED IN CONNECTION WITH THE SHIPMENTS ARE REGULARLY FIXED TO INCLUDE THE COSTS TO THE CARRIER OF INDEMNITY INSURANCE, AND THE CARRIER WILL NOT ACCEPT THE GOVERNMENT SHIPMENTS AT A RATE EXCLUSIVE OF SUCH COSTS, THE TOTAL CHARGES PROPERLY MAY BE PAID AS TRANSPORTATION COSTS WITHOUT CONTRAVENING THE GOVERNMENT LOSSES IN SHIPMENT ACT. ALSO, ANY PROVISION IN A NEGOTIATED CONTRACT, SUCH AS THOSE SET OUT IN THE ABOVE QUOTED QUESTIONS 1 AND 2, WHICH MAY BE AGREED UPON BETWEEN YOUR DEPARTMENT AND THE CARRIER WITH A VIEW TO SECURING THE MAXIMUM POSSIBLE PROTECTION TO THE UNITED STATES WITHOUT INCREASING THE COSTS WOULD NOT BE VIEWED BY THIS OFFICE AS CONTRAVENING THE INHIBITION AGAINST USING PUBLIC MONEYS FOR INSURANCE AGAINST LOSSES IN CONNECTION WITH THE SHIPMENT OF SUCH VALUABLES. HOWEVER, ANY ADDITIONAL CHARGE FOR SUCH INCREASED PROTECTION WOULD CONSTITUTE A PAYMENT FOR INSURANCE WHICH WOULD FALL WITHIN THE PROHIBITION OF THE STATUTE.

WITH RESPECT TO THOSE CASES WHEREIN SERVICES ARE SOLICITED PURSUANT TO SECTION 3709 OF THE REVISED STATUTES, THE ANSWER WOULD REMAIN THE SAME RELATIVE TO THE INCLUSION OF A SPECIFICATION GOVERNING SUCH INSURANCE REQUIREMENTS IN BOTH THE INVITATION TO BID AND THE CONTRACT AS FINALLY EXECUTED.

IN ANSWERING THE QUESTIONS AS TO WHETHER THIS OFFICE WILL AUTHORIZE PAYMENTS UNDER A CONTRACT ENTERED INTO (1) AFTER SOLICITATION OF BIDS ONLY FROM THOSE CONTRACT CARRIERS WHICH HAVE OBTAINED A PERMIT FROM THE INTERSTATE COMMERCE COMMISSION AND (2) WHERE IT APPEARS NO COMPETING CARRIER IN AN AREA HAS AN INTERSTATE COMMERCE COMMISSION PERMIT, UNDER A CONTRACT MADE WITH THE LOWEST BIDDER (OR LOWEST SATISFACTORY BIDDER) CONDITIONED UPON THE OBTAINING OF SUCH PERMIT, IT WILL BE ASSUMED THAT THE SHIPMENTS ARE BETWEEN DIFFERENT STATES SO AS TO CONSTITUTE INTERSTATE OR FOREIGN COMMERCE WITHIN THE MEANING OF 49 U.S.C. 309 AND 310A. THESE SECTIONS PROVIDE GENERALLY THAT NO PERSON SHALL ENGAGE IN THE BUSINESS OF A CONTRACT CARRIER BY MOTOR VEHICLE IN INTERSTATE OR FOREIGN COMMERCE UNLESS THERE IS IN FORCE A PERMIT OR TEMPORARY AUTHORITY ISSUED BY THE COMMISSION AUTHORIZING SUCH PERSON TO ENGAGE IN SUCH BUSINESS. ON THIS ASSUMPTION, IT SEEMS CLEAR THAT ONLY THOSE PERSONS HAVING A PERMIT WOULD BE AUTHORIZED TO ENGAGE IN SUCH SHIPMENTS AND COULD MAKE A FIRM CONTRACTUAL OFFER. ALSO, EVEN THOUGH A CARRIER HAD A TEMPORARY AUTHORIZATION UNDER 49 U.S.C. 310A TO ENGAGE IN SUCH COMMERCE, THERE WOULD BE NO ASSURANCE THAT IT WOULD BE ABLE TO SECURE A PERMANENT PERMIT, AND HENCE, IT COULD NOT MAKE A FIRM OFFER WHICH WOULD RIPEN INTO A CONTRACT UPON ACCEPTANCE BY YOUR DEPARTMENT. THUS, THERE APPEARS TO BE A SUBSTANTIAL BASIS FOR THE VIEW THAT THE ONLY RESPONSIBLE BIDDERS WOULD BE SUCH PERMIT HOLDERS AND THIS OFFICE WOULD NOT BE REQUIRED TO OBJECT TO PAYMENTS DUE UNDER A CONTRACT RESULTING FROM SOLICITATION OF OFFERS ONLY FROM SUCH PERMIT HOLDERS. WHERE IN A PARTICULAR AREA THERE ARE NO PERMIT HOLDERS, ANY OFFER BY A COMPETING CARRIER COULD NOT RIPEN INTO A BINDING CONTRACT SIMPLY BY ITS ACCEPTANCE BY YOUR DEPARTMENT BECAUSE, WITHOUT THE PERMIT, THE CARRIER COULD NOT PERFORM THE TRANSPORTATION SERVICE INVOLVED. ACCORDINGLY, WHILE IT WOULD APPEAR PROPER TO SOLICIT BIDS IN SUCH CASES CONDITIONED UPON THE BIDDERS OBTAINING THE NECESSARY PERMIT PRIOR TO AWARD OF CONTRACT, NO CONTRACT SHOULD BE AWARDED TO ANY SUCH BIDDER UNTIL THE PERMIT IS OBTAINED.