B-121926, B-122682, FEB. 7, 1956

B-121926,B-122682: Feb 7, 1956

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GENERAL SERVICES ADMINISTRATION: REFERENCE IS MADE TO YOUR LETTER OF MAY 13. A COPY OF WHICH WAS FURNISHED YOU WITH OUR LETTER OF THE SAME DATE. THE LEGALITY OF CERTAIN PURPORTED CONTRACTS WHICH WERE EFFECTED BY MULTIPLE AWARDS WAS DISCUSSED AND IT WAS CONCLUDED THAT. THE MULTIPLICITY OF AWARDS IS IN ITSELF WHOLLY INCONSISTENT WITH THE EXISTENCE OF ANY OBLIGATION OF THE GOVERNMENT TO ANY INDIVIDUAL CONTRACTOR AND THAT SUCH CONTRACTS ARE ACCORDINGLY UNENFORCEABLE. WHEREIN IT WAS HELD THAT. WAS NOT OBLIGATED UNDER CONTRACT NO. YOU CONCUR IN THE LEGAL CONCLUSION THAT SUCH ENTIRELY OPTIONAL CONTRACTS ARE NOT "CONTRACTS" IN THE STRICT LEGAL SENSE. WITH THE CONCLUSION THAT THE NEGOTIATION OF SUCH "CONTINUING OFFERS" IS NOT WITHIN THE STATUTORY POWERS OR AUTHORITY OF YOUR AGENCY.

B-121926, B-122682, FEB. 7, 1956

TO HONORABLE EDMUND F. MANSURE, ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION:

REFERENCE IS MADE TO YOUR LETTER OF MAY 13, 1955, REQUESTING FURTHER CONSIDERATION OF OUR LETTER OF MARCH 21, 1955, B-121926, TO THE CHAIRMAN, SELECT COMMITTEE ON SMALL BUSINESS, UNITED STATES SENATE, A COPY OF WHICH WAS FURNISHED YOU WITH OUR LETTER OF THE SAME DATE. THE LEGALITY OF CERTAIN PURPORTED CONTRACTS WHICH WERE EFFECTED BY MULTIPLE AWARDS WAS DISCUSSED AND IT WAS CONCLUDED THAT, ON THE BASIS OF THE PRINCIPLES OUTLINED, THE MULTIPLICITY OF AWARDS IS IN ITSELF WHOLLY INCONSISTENT WITH THE EXISTENCE OF ANY OBLIGATION OF THE GOVERNMENT TO ANY INDIVIDUAL CONTRACTOR AND THAT SUCH CONTRACTS ARE ACCORDINGLY UNENFORCEABLE.

IN ADDITION TO THE FOREGOING, YOU REQUEST FURTHER CONSIDERATION OF OUR DECISION OF APRIL 12, 1955, B-122682, TO YOU, WHEREIN IT WAS HELD THAT, FOR THE REASONS STATED IN THE LETTER OF MARCH 21, 1955, REMINGTON-RAND, INC., WAS NOT OBLIGATED UNDER CONTRACT NO. GS-03S 13221 TO FURNISH THE OFFICE EQUIPMENT DESCRIBED UNDER ITEM 54-M-180 AT THE PRICES SPECIFIED IN THE BID.

REGARDING THE DECISION OF MARCH 21, 1955, B-121926, YOU CONCUR IN THE LEGAL CONCLUSION THAT SUCH ENTIRELY OPTIONAL CONTRACTS ARE NOT "CONTRACTS" IN THE STRICT LEGAL SENSE. YOU DISAGREE, HOWEVER, WITH THE CONCLUSION THAT THE NEGOTIATION OF SUCH "CONTINUING OFFERS" IS NOT WITHIN THE STATUTORY POWERS OR AUTHORITY OF YOUR AGENCY, IF DETERMINED TO BE ADVANTAGEOUS TO THE GOVERNMENT IN TERMS OF ECONOMY, EFFICIENCY, OR SERVICE, AND CONTEND THAT THERE IS NO VIOLATION OF APPLICABLE ADVERTISING STATUTES WHERE AN EXECUTIVE AGENCY ORDERS FROM A GSA CONTRACTOR UNDER AN ENTIRELY OPTIONAL CONTRACT AND THE AMOUNT OF THE ORDER IS WITHIN THE OPEN MARKET LIMITATION PRESCRIBED BY LAW.

THERE CAN BE NO ARGUMENT AS TO THE PRIORITY OF UNADVERTISED OPEN MARKET PURCHASES BY ANY EXECUTIVE AGENCY WHEN THE AMOUNT INVOLVED IS WITHIN THE LIMIT PRESCRIBED BY SECTION 3709, REVISED STATUTES, OR SECTION 302 (C) (3) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, WHERE APPLICABLE--- PROVIDED, OF COURSE, KNOWN NEEDS OF THE AGENCY IN EXCESS OF THE APPLICABLE LIMITATION ARE NOT DELIBERATELY DIVIDED INTO SMALLER UNITS SO AS TO AVOID THE INTENT OF THE STATUTES. THE AUTHORITY OF THE EXECUTIVE AGENCIES TO MAKE SUCH PURCHASES, HOWEVER, APPEARS TO BE ENTIRELY INDEPENDENT OF AND UNRELATED TO THE EXISTENCE OF OPTIONAL "CONTRACTS" OR "CONTINUING OFFERS" OF THE TYPE UNDER DISCUSSION. AS CLEARLY SHOWN BY THE AUTHORITIES CITED IN OUR DECISION, AND APPARENTLY CONCEDED BY YOU, THERE IS NO CONSIDERATION TO SUPPORT THE AGREEMENT OF SUCH ,CONTRACTORS" TO ACCEPT ORDERS AT THE PRICES QUOTED, AND THEY MAY THEREFORE WITHDRAW OR CHANGE THEIR "CONTINUING OFFERS" AT WILL. ASSUMING THAT AN ORDER PLACED BY A GOVERNMENT AGENCY PRIOR TO NOTICE OF WITHDRAWAL WOULD EFFECT A BINDING CONTRACT, SUCH "CONTINUING OFFERS" WOULD BE IN NO WAY DIFFERENT FROM AN OFFER OBTAINED BY THE PURCHASING AGENCY FROM ANY OTHER SUPPLIER, WHICH WOULD ALSO BECOME A BINDING CONTRACT UPON ACCEPTANCE. HOWEVER, IN VIEW OF THE AUTHORITY VESTED IN YOU BY SECTION 201 (A) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT, 63 STAT. 383, TO ,PRESCRIBE POLICIES AND METHODS OF PROCUREMENT AND SUPPLY OF PERSONAL PROPERTY AND NON-PERSONAL SERVICES," THE CONTINUATION OF SUCH "CONTRACTS" ON AN OPTIONAL BASIS, SUBJECT TO A LIMITATION OF ORDERS THEREUNDER TO AUTHORIZED OPEN MARKET LIMITATIONS, AS OUTLINED IN PARAGRAPH C OF YOUR PROPOSAL NO. 2, WOULD APPEAR TO BE UNOBJECTIONABLE. THE LIMITATION APPLICABLE TO SUCH ORDERS SHOULD BE INDICATED IN THE FORM OF AGREEMENT USED IN THESE CASES AND IN YOUR INSTRUCTIONS TO THE AGENCIES CONCERNING THEIR USE.

IT IS UNDERSTOOD IN THIS CONNECTION THAT, AFTER CONSIDERATION OF THE VARIOUS ALTERNATIVE METHODS OF SUPPLY FOR THE PURCHASE OF AUTOMOBILE AND MACHINERY PARTS AND FOR RENTAL, REPAIR AND MAINTENANCE OF OFFICE MACHINES, YOUR AGENCY HAS CONCLUDED THAT THE USE OF THE OPTIONAL SCHEDULE FOR THESE TWO CATEGORIES OF ITEMS OR SUPPLIES CANNOT BE DISPENSED WITH WITHOUT RESULTING IN SUBSTANTIAL ADDITIONAL PROCUREMENT AND ADMINISTRATIVE COSTS OCCASIONED BY THE NECESSITY OF THEN HAVING TO ENTER INTO NUMEROUS INDIVIDUAL CONTRACTS, MANY OF WHICH WOULD PROVIDE FOR HIGHER PRICES. THIS BASIS, WE WOULD NOT OBJECT TO PURCHASES IN EXCESS OF THE OPEN-MARKET LIMITATION UNDER THESE TWO TYPES OF OPTIONAL SCHEDULES WHERE SUCH PURCHASES ARE REASONABLY JUSTIFIABLE AS BEING MORE ADVANTAGEOUS TO THE GOVERNMENT.

THE ACTION PROPOSED IN PARAGRAPHS A AND B OF PROPOSAL NO. 2 WILL, OF COURSE, BE ENTIRELY PROPER CONCERNING CONTRACTS FOR SUPPLIES, SUBJECT TO THE VIEWS HEREAFTER STATED REGARDING MULTIPLE AWARDS.

NOTHING IN THE DECISIONS REFERRED TO WAS INTENDED TO INDICATE THAT OPTIONAL USE BY AN AGENCY OF A CONTRACT MANDATORY UPON SOME OTHER AGENCY OR AGENCIES WAS IMPROPER. ANY CONSIDERATION SUFFICIENT TO SUPPORT THE CONTRACTOR'S OBLIGATION TO FURNISH ALL THE REQUIREMENTS OF ONE AGENCY WOULD CLEARLY SUPPORT ALSO ANY ADDITIONAL OBLIGATIONS ASSUMED BY THE CONTRACTOR TO ACCEPT ORDERS FROM OTHER AGENCIES, AND WE NOT ONLY HAVE NEVER QUESTIONED THE PROPRIETY OF ANY NONMANDATORY PURCHASE UNDER A VALID GENERAL SUPPLY CONTRACT, BUT HAVE ENDORSED SUCH PURCHASING AS IN THE INTEREST OF ECONOMY AND GOOD ADMINISTRATION. SEE 21 COMP. GEN. 105.

CONCERNING THE MATTER OF MULTIPLE AWARDS, YOU STATE THAT THE LEGAL IMPLICATIONS INVOLVED IN SUCH CONTRACTS HAVE BEEN RECOGNIZED BY YOUR AGENCY, BUT THAT THEY HAVE BEEN EMPLOYED FOR MORE THAN 30 YEARS AS THE MOST PRACTICABLE METHOD OF SUPPLYING THE GOVERNMENT'S NEEDS IN CERTAIN CIRCUMSTANCES. AS A GENERAL RULE, YOU STATE THAT MULTIPLE AWARDS ARE MADE WHEN NECESSARY TO MEET THE GOVERNMENT'S REQUIREMENTS FOR ONE OR MORE OF THE FOLLOWING REASONS:

"1. WHEN NO SINGLE SUPPLIER CAN FURNISH THE TOTAL REQUIREMENTS.

"2. IN ORDER TO OBTAIN THE MOST EFFECTIVE UTILIZATION OF INDUSTRY PRODUCTION AND DISTRIBUTION FACILITIES, INCLUDING INDUSTRY TECHNICAL ADVICE AND SERVICE.

"3. WHEN THERE IS A NEED FOR A VARIETY OF SELECTION IN ORDER TO ACCOMPLISH OR PRODUCE REQUIRED END RESULTS.

"4. WHEN THERE IS A LACK OF OR THERE ARE INADEQUATE SPECIFICATIONS OR STANDARDS TO PERMIT FULL COMPETITION.'

THE FIRST CONDITION PRESENTS NO SERIOUS LEGAL DIFFICULTY, IT HAVING ALWAYS BEEN RECOGNIZED THAT IN THE EVENT NO SINGLE BIDDER OFFERS TO FURNISH A SUFFICIENT QUANTITY OF A DESIRED ARTICLE TO MEET THE GOVERNMENT'S NEEDS AWARDS MAY BE MADE TO THE LOW BIDDERS SUCCESSIVELY, FOR THE QUANTITIES OFFERED BY THEM, RESPECTIVELY, UNTIL THE REQUIRED TOTAL IS REACHED. IN ORDER TO AVOID THE SITUATION DEALT WITH IN THE CASE OF WILLARD, SUTHERLAND AND CO. V. UNITED STATES, 262 U.S. 489, IT WOULD SEEM THAT CONTRACTS AWARDED IN THIS SITUATION SHOULD CLEARLY LIMIT THE OBLIGATION OF THE GOVERNMENT, IN THE CASE OF OTHER THAN THE LOWEST BIDDER, TO ORDER ONLY ITS REQUIREMENTS IN EXCESS OF THE QUANTITY AVAILABLE FROM LOWER BIDDERS.

THERE WOULD REMAIN THE PRACTICAL DIFFICULTY OF ALLOCATING PURCHASES AMONG THE SEVERAL CONTRACTORS, AND IT IS REALIZED THAT IN MANY INSTANCES IT MAY BE VIRTUALLY IMPOSSIBLE TO KEEP ADEQUATE CENTRAL RECORDS TO INSURE AGAINST SOME PURCHASES BEING MADE FROM HIGHER PRICED CONTRACTORS BEFORE THE AVAILABLE LOWER PRICED SUPPLY HAD BEEN EXHAUSTED. WE WOULD THEREFORE REQUIRE IN SUCH CIRCUMSTANCES ONLY SUCH LIMITATIONS ON PURCHASING AUTHORITY AS COULD BE REASONABLY EXPECTED TO BE FEASIBLE FROM THE ADMINISTRATIVE STANDPOINT, WITH SUCH SUPERVISION AS COULD BE EXERCISED BY THE SUPPLY SERVICE TO MAINTAIN OVERALL PURCHASES AS NEARLY AS POSSIBLE IN ACCORDANCE WITH THE PROPER APPORTIONMENT.

THE SECOND GROUND STATED FOR MULTIPLE AWARDS APPEARS TO BE CAST IN SUCH BROAD AND GENERAL TERMS AS TO AFFORD A RATHER INADEQUATE GUIDE IN PRACTICAL APPLICATION, AND TO BE READILY SUBJECT TO MISINTERPRETATION AND ABUSE. IT WOULD SEEM THAT IT COULD PROPERLY APPLY TO SITUATIONS IN WHICH THE GEOGRAPHICAL AREA OF THE GOVERNMENT'S NEED AND OF THE CONTRACTOR'S FACILITIES CONSTITUTES A FACTOR MATERIAL TO THE SERVICE OF THE BEST INTERESTS OF THE GOVERNMENT, AND AWARDS OF SEVERAL INDIVIDUAL CONTRACTS, FOR EACH DIFFERENT AREA, WOULD UNDOUBTEDLY BE PERMISSIBLE.

IT IS UNDERSTOOD, HOWEVER, THAT THE PRINCIPAL ITEMS FALLING WITHIN THIS CATEGORY ARE TIRES AND ELECTRIC LIGHT BULBS, AND THAT THE PATTERNS OF DISTRIBUTION AND SERVICE FACILITIES IN THOSE FIELDS ARE NOT ADAPTED TO DIVISION OF AWARDS ON A GEOGRAPHICAL BASIS. IT IS ALSO UNDERSTOOD THAT THE PRINCIPAL SUPPLIERS IN THOSE FIELDS GENERALLY QUOTE IDENTICAL PRICES, WHICH, IN THE TIRE FIELD, ARE MORE FAVORABLE TO THE GOVERNMENT THAN TO ANY OTHER CLASS OF CUSTOMERS EXCEPT THE THREE LARGEST AUTOMOBILE PRODUCERS, AND THAT ANY OF THE SMALLER PRODUCERS WHICH MIGHT BE WILLING TO UNDERTAKE TO COMPETE PRICE WISE WOULD BE UNABLE TO SUPPLY MORE THAN A SMALL PART OF THE GOVERNMENT'S NEEDS, AND WOULD BE SO LACKING IN DISTRIBUTION FACILITIES AS TO BE UNABLE IN MOST CASES TO OFFER THE RAPID DELIVERY SERVICE NECESSARY TO AVOID STORAGE AND WAREHOUSING BY GOVERNMENT AGENCIES.

IN THESE CIRCUMSTANCES, THE ADVANTAGES OF THE EXISTING SYSTEM IN THE FIELDS MENTIONED ARE READILY APPARENT, BUT THE LEGAL DIFFICULTIES ARE NOT OVERCOME BY THE DESIRABILITY OF THE END IN VIEW. TO THE EXTENT THAT INDIVIDUAL PURCHASES OF SUCH ITEMS FALL WITHIN THE APPLICABLE OPEN MARKET LIMITATIONS--- WHICH NO DOUBT IS THE CASE IN A GREAT MAJORITY OF INSTANCES --- THE COMMENTS CONCERNING OPTIONAL CONTRACTS ARE APPLICABLE, AND CONTINUATION OF THE USE OF THE SUPPLY SCHEDULE FOR SUCH PURCHASES DOES NOT APPEAR TO BE SUBJECT TO OBJECTION, EVEN THOUGH IT BE CONCEDED THAT THE UNDERTAKINGS OF THE SUPPLIERS MAY NOT BE ENFORCEABLE.

WITH RESPECT TO LARGER PURCHASES, IN VIEW OF THE PECULIAR CIRCUMSTANCES AND WITH THE UNDERSTANDING THAT YOUR AGENCY WILL CONTINUE THE EFFORTS ALREADY IN PROGRESS, ALONG THE LINES MENTIONED IN YOUR PROPOSAL 1B, TO DEVELOP FORMS AND PROCEDURES OF PROCUREMENT IN THESE FIELDS WHICH WILL MEET THE LEGAL DIFFICULTIES OF WHICH YOU ARE FULLY AWARE, WE WILL, PENDING FURTHER DEVELOPMENTS, RAISE NO OBJECTIONS TO PROCUREMENTS UNDER THE CURRENT SYSTEM.

THE THIRD OF THE GROUNDS STATED BY YOU IN JUSTIFICATION OF MULTIPLE AWARDS RAISES MOST SQUARELY AND UNAVOIDABLY THE QUESTION OF MUTUALITY OF OBLIGATION. WE CAN PERCEIVE OF NO SOUND BASIS UPON WHICH THE VALIDITY OF A CONTRACT TO FURNISH THE GOVERNMENT'S NEEDS OR REQUIREMENTS FOR A PARTICULAR ARTICLE CAN BE SUPPORTED WHEN THERE IS IN EFFECT SIMULTANEOUSLY ANOTHER CONTRACT PURPORTING TO COVER THE SAME NEEDS. THE USE OF THE SUPPLY SCHEDULE MAY BE MADE MANDATORY UPON ANY OR ALL AGENCIES OF THE EXECUTIVE BRANCH OF THE GOVERNMENT BUT, IF THE SCHEDULE CONTAINS MORE THAN ONE SOURCE FOR A SINGLE CATALOG ITEM, THERE CAN OBVIOUSLY BE NO OBLIGATION TO ANY ONE OF THE SEVERAL SUPPLIERS.

AS TO THIS TYPE OF MANDATORY MULTIPLE AWARD CONTRACT, YOU STATE THAT SUCH CONTRACTS USUALLY COVER ITEMS OF EQUIPMENT, SUPPLIES, AND SYSTEMS WHICH ARE DESCRIBED IN BROAD CATEGORICAL TERMS, SUCH AS TYPEWRITERS, ADDING MACHINES, FILING AND ACCOUNTING SYSTEMS, ETC., WHICH ARE PRODUCED OR FURNISHED BY SEVERAL SUPPLIERS; THAT AS EACH ITEM OF EQUIPMENT, SUPPLY, OR SYSTEM DIFFERS AMONG THE SEVERAL MANUFACTURERS IN VARYING DEGREES IN DESIGN, CONSTRUCTION, METHOD OF OPERATION AND PERFORMANCE, EACH SUPPLIER OFFERS TO FURNISH THE GOVERNMENT WITH ITS OWN PARTICULAR BRAND OF ITEMS MEETING THE OVER-ALL REQUIREMENTS. ON THIS BASIS, YOU SUGGEST THAT EACH SUCH CONTRACT IS A ,SOLE SOURCE" CONTRACT FOR THE PARTICULAR PRODUCT OFFERED. YOU STATE FURTHER THAT THE FEDERAL SUPPLY SCHEDULE CONTRACT FOR OFFICE EQUIPMENT WITH REMINGTON-RAND, INC., WHICH WAS THE SUBJECT OF OUR DECISION OF APRIL 12, 1955, B-122682, WAS A MANDATORY TYPE CONTRACT IN THAT EACH AGENCY REQUIRING A REMINGTON-RAND PRODUCED ITEM WAS REQUIRED TO OBTAIN SUCH ITEM FROM THAT SUPPLIER, WHO IN TURN WAS OBLIGATED TO FURNISH THE AGENCY WITH ALL SUCH ITEMS REQUIRED UNDER THE TERMS OF THE CONTRACT. SIMILAR CONTRACTS ARE SAID TO BE MADE FOR TYPEWRITERS, FILING AND ACCOUNTING SYSTEMS, OFFSET DUPLICATING PLATES, DRUGS, MEDICINES, LABORATORY AND INDUSTRIAL CHEMICALS, SPECIAL LABORATORY APPARATUS AND SUPPLIES, ETC.

IT IS REALIZED THAT THE COMPLEXITY AND VARIETY OF OPERATIONS NOW CARRIED ON BY THE EXECUTIVE AGENCIES OF THE GOVERNMENT NECESSARILY PRODUCE A WIDE VARIETY OF NEEDS, AND THAT ITEMS ADEQUATE FOR THE NEEDS OF SOME, OR EVEN A MAJORITY, OF AGENCIES MAY BE INADEQUATE FOR OTHERS. HOWEVER, THE USE OF BROAD GENERAL SPECIFICATIONS AND MULTIPLE AWARDS UNDER THE SAME SPECIFICATIONS TO AFFORD ,A VARIETY OF SELECTION IN ORDER TO ACCOMPLISH OR PRODUCE REQUIRED END RESULTS" MAY NOT ONLY PRODUCE THE LEGAL CONSEQUENCE THAT THE AWARDS DO NOT EFFECT BINDING CONTRACTS, BUT TEND TO WEAKEN, IF NOT DEFEAT, THE ESTABLISHED RULE THAT GOVERNMENT PURCHASES MUST BE MADE FROM THE LOWEST RESPONSIBLE BIDDER, ON SPECIFICATIONS SO DRAWN AS TO STATE THE MINIMUM, OR AT MOST THE REASONABLE, NEEDS OF THE PURCHASING AGENCY. WHERE NEEDS DIFFER, THEY SHOULD ORDINARILY BE MET BY DIFFERING SPECIFICATIONS, ELSE THERE WILL INEVITABLY RESULT A WASTE OF FUNDS THROUGH THE PURCHASE OF ARTICLES SUITABLE FOR NEEDS IN EXCESS OF THOSE ACTUALLY EXISTING, AT CORRESPONDINGLY HIGHER PRICES. AN EXAMPLE OF THIS HAS RECENTLY BEEN CALLED TO THE ATTENTION OF YOUR REGIONAL DIRECTOR IN NEW YORK BY LETTER DATED AUGUST 29, 1955, FROM OUR REGIONAL AUDIT MANAGER IN NEW YORK, WHO FOUND THAT PURCHASES OF THREE ITEMS OF DRAFTING-ROOM AND OFFICE SUPPLIES, CLASS 53, PART 1, OVER A FOUR-MONTH PERIOD, IN THE AGGREGATE AMOUNT OF APPROXIMATELY $240,000, HAD BEEN MADE UNDER MULTIPLE- AWARD LISTINGS, AT A COST APPROXIMATELY $67,000 IN EXCESS OF THAT WHICH WOULD HAVE BEEN INCURRED IF ALL PURCHASES HAD BEEN MADE AT THE LOWEST PRICES AVAILABLE. THE PERCENTAGES OF PURCHASES MADE AT THE LOWEST PRICES UNDER EACH OF THE THREE SCHEDULES WERE 5.5, 0, AND 0.1. IT WAS NOT SUGGESTED THAT ALL PURCHASES SHOULD HAVE BEEN MADE AT THE LOWEST PRICES, BUT THE PERCENTAGES APPEAR TO BE SIGNIFICANT.

OUR DIVISION OF AUDITS HAS ESTIMATED THAT DURING THE FISCAL YEAR 1954 PURCHASES OF MULTIPLE AWARD ITEMS UNDER THE SUPPLY SCHEDULE AGGREGATED APPROXIMATELY $186,000,000, OR 68 PERCENT OF ALL PURCHASES FROM THE SUPPLY SCHEDULE. IT SEEMS PROBABLE THAT THE USE OF SUCH MULTIPLE AWARDS IS COSTING THE GOVERNMENT CONSIDERABLY MORE THAN WOULD A STRICTER ADHERENCE TO THE BASIC FORMULA OF AWARD TO THE LOWEST BIDDER. THERE APPEAR TO BE ADEQUATE EXCEPTIONS IN THE LAW TO PROVIDE THE LATITUDE NECESSARY TO MEET BONA FIDE REQUIREMENTS NOT COVERED BY STANDARD SPECIFICATIONS, AND WE BELIEVE THAT SUCH REQUIREMENTS SHOULD BE MORE GENERALLY TREATED AS EXCEPTIONS, RATHER THAN PROVIDED FOR BY SPECIFICATIONS AND CONTRACTS DRAWN TO MEET NEEDS IN EXCESS OF THE ORDINARY, BUT AVAILABLE EQUALLY FOR ORDINARY PURCHASES TO MEET LESS EXACTING REQUIREMENTS.

THE DUTIES AND RESPONSIBILITIES OF STANDARDIZING AND CATALOGING SPECIFICATIONS AND PURCHASING COMMON-USE ITEMS FOR THE EXECUTIVE AGENCIES ARE VESTED BY LAW IN YOUR AGENCY, AND WE HAVE NO DESIRE TO INTERFERE WITH THE FULL AND FREE EXERCISE BY YOU OF THE ADMINISTRATIVE DISCRETION NECESSARILY INVOLVED IN PERFORMING THOSE FUNCTIONS. AT THE SAME TIME, WE HAVE NO DOUBT THAT YOUR PURCHASING AND PROCUREMENT FUNCTIONS ARE LIMITED BY THE CONTRACTING PROCEDURES SPECIFICALLY PRESCRIBED IN TITLE III OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949. CONCLUDING, AS WE DO, THAT MULTIPLE AWARDS OF CONTRACTS UNDER THE SAME SPECIFICATIONS, UNDER SUCH CONDITIONS AS LEAVE THE GOVERNMENT UNDER NO BINDING OBLIGATION TO PURCHASE FROM ANY INDIVIDUAL CONTRACTOR EVEN IF IT HAS NEED FOR ARTICLES COVERED BY THE SPECIFICATIONS, DO NOT CONSTITUTE BINDING CONTRACTS, WE CANNOT AVOID THE FURTHER CONCLUSION THAT PURCHASES UNDER SUCH DEFECTIVE AWARDS DO NOT MEET THE STATUTORY REQUIREMENTS EITHER FOR ADVERTISED OR FOR NEGOTIATED CONTRACTS.

SO FAR AS VALIDITY OF CONSIDERATION IS CONCERNED, WE HAVE NO DIFFICULTY WITH THE PROPOSITION THAT A CONTRACT BETWEEN THE GOVERNMENT AND A MANUFACTURER OF SOME TYPE OF EQUIPMENT WHICH IS TO A SUBSTANTIAL DEGREE PROPRIETARY OR IN MATERIAL RESPECTS DIFFERENT IN FUNCTION, OPERATION, AND DESIGN FROM OTHER EQUIPMENT OF THE SAME GENERAL CHARACTER OR PURPOSE, UNDER WHICH THE MANUFACTURER AGREES TO FURNISH, AND THE GOVERNMENT AGREES TO PURCHASE, ALL THE NEEDS OF THE GOVERNMENT DURING A SPECIFIED PERIOD FOR THE PARTICULAR ARTICLES PRODUCED BY THE MANUFACTURER, WOULD BE VALID AND ENFORCEABLE. OUR DIFFICULTY WITH THE REMINGTON-RAND CONTRACT INVOLVED IN THE DECISION OF APRIL 12, 1955, IS THAT IN FORM AND CONTENT IT IS MORE READILY SUBJECT TO THE INTERPRETATION THAT THE GOVERNMENT IS OBLIGATED TO PURCHASE UNDER THE CONTRACT ALL ITS REQUIREMENTS OF ARTICLES OF THE GENERAL CHARACTER DESCRIBED IN THE SPECIFICATIONS. SINCE AN IDENTICAL CONTRACT WAS MADE WITH UNDERWOOD CORPORATION UNDER THE SAME GENERAL SPECIFICATIONS FOR ITS LINE OF EQUIPMENT, WE ARE FORCED TO CONCLUDE THAT, AS TO ANY PARTICULAR REQUIREMENT WHICH MIGHT BE MET EQUALLY BY AN UNDERWOOD ITEM OR A REMINGTON-RAND ITEM, EITHER THE GOVERNMENT IS NOT BOUND UNDER EITHER CONTRACT, OR IS BOUND BY BOTH, SO THAT AN ORDER UNDER ONE AUTOMATICALLY CONSTITUTES A BREACH OF THE OTHER.

WE UNDERSTAND, HOWEVER, THAT THE MULTIPLICITY AND COMPLEXITY OF EQUIPMENT OFFERED BY VARIOUS MANUFACTURERS, SUCH AS IN THE OFFICE EQUIPMENT FIELD, IS SO GREAT, AND THE DIFFERENCES IN PERFORMANCE CHARACTERISTICS SO DIFFICULT OF APPRAISAL, AS TO REQUIRE AN EXPERT SURVEY TO DETERMINE WHICH INDIVIDUAL MACHINE OR LINE IS BEST ADAPTED TO MEET THE REQUIREMENTS OF THE GOVERNMENT IN ANY PARTICULAR SITUATION. IN THESE CIRCUMSTANCES WE AGREE WITH THE CONCLUSION OF YOUR AGENCY THAT THE DRAFTING OF SPECIFICATIONS SUFFICIENTLY DETAILED TO DIFFERENTIATE BETWEEN THE VARIOUS ITEMS AND LINES IS IMPOSSIBLE FROM A PRACTICAL STANDPOINT, AND THAT THE ONLY FEASIBLE WAY OF FULLY PROVIDING FOR THE NEEDS OF ALL GOVERNMENT AGENCIES THROUGH THE SUPPLY SCHEDULE IS TO NEGOTIATE A SEPARATE CONTRACT FOR EACH MANUFACTURER'S EQUIPMENT. IF SUCH CONTRACTS ARE SO DRAFTED AS TO MAKE IT CLEAR THAT THE GOVERNMENT'S OBLIGATION TO EACH CONTRACTOR IS TO PURCHASE UNDER THE CONTRACT SUCH OF THE PRODUCTS OF THE PARTICULAR MAKE AS MAY BE REQUIRED DURING THE PERIOD OF THE CONTRACT, WE BELIEVE THAT SUCH "SOLE SOURCE" CONTRACTS WOULD BE VALID AND PROPER, EVEN THOUGH OTHER CONTRACTS SHOULD BE CONTEMPORANEOUSLY IN EFFECT FOR OTHER EQUIPMENT OF THE SAME GENERAL TYPE. IT SHOULD ALSO BE MADE CLEAR BOTH TO THE CONTRACTORS AND TO THE PURCHASING AGENCIES THAT THE CHOICE BETWEEN SIMILAR ITEMS OF THE SEVERAL LINES WOULD BE MADE BY THE GOVERNMENT ON THE BASIS OF ADMINISTRATIVE DETERMINATION AS TO THE ONE BEST SUITED TO THE PARTICULAR NEEDS OF THE AGENCY. THE AGENCIES SHOULD BE PUT ON NOTICE BY APPROPRIATE PROVISION IN EACH SCHEDULE THAT WHERE THE REQUIREMENTS IN ANY INSTANCE COULD BE SUBSTANTIALLY MET BY MORE THAN ONE MAKE OF EQUIPMENT THE CHOICE SHOULD BE GOVERNED BY PRICE, AND THAT THEY SHOULD BE PREPARED TO FURNISH PROPER JUSTIFICATION FOR ANY PURCHASES MADE OF SUCH EQUIPMENT AT OTHER THAN THE LOWEST PRICE AVAILABLE. ALSO WE FEEL THAT, FOR THE PURPOSE OF OBTAINING FULL AND FREE COMPETITION FOR THE GOVERNMENT AS REQUIRED, BIDDERS SHOULD BE ADVISED OF THIS INSTRUCTION IN CONNECTION WITH EACH INVITATION.

EXCEPT AS OTHERWISE INDICATED HEREIN, THE PROPOSALS OUTLINED IN YOUR LETTER AS TO ACTION TO BE TAKEN BY YOUR AGENCY ARE APPROVED, AND WE SHALL BE GLAD TO CONFER AND COOPERATE WITH YOUR REPRESENTATIVES IN THE CONSIDERATION OF SUCH MODIFICATIONS OF FORMS AND PROCEDURES AS MAY BE PROPOSED. WE FEEL THAT THE CONFERENCES HELD BETWEEN REPRESENTATIVES OF OUR RESPECTIVE OFFICES CONCERNING THESE QUESTIONS HAVE BEEN MOST HELPFUL FROM OUR STANDPOINT IN ASSISTING US TO A BETTER UNDERSTANDING OF THE PRACTICAL ASPECTS OF THE PROBLEMS INVOLVED.

OBVIOUSLY THE QUESTIONS INVOLVED ARE TOO NUMEROUS AND COMPLEX TO BE SOLVED BY PRESCRIBING ANY UNIFORM RULE OR FORMULA, BUT WE BELIEVE THAT CONTINUING REVIEW OF THE APPLICATION OF BASIC LEGAL PRINCIPLES AND STATUTORY MANDATES TO THE VARYING ASPECTS OF THE PROBLEMS WHICH HAVE BEEN TOUCHED ON HERE WILL RESULT IN THE AVOIDANCE OF MANY DIFFICULTIES AND THE ATTAINMENT OF MORE SATISFACTORY PURCHASING PRACTICES.

WITH RESPECT TO CURRENT SUPPLY SCHEDULE CONTRACTS OF THE SEVERAL CLASSES UNDER DISCUSSION, WE WILL FOR THE PRESENT TAKE NO EXCEPTION TO PURCHASES MADE IN ACCORDANCE WITH EXISTING PROCEDURES, UNLESS OTHER GROUNDS THAN THOSE DISCUSSED MAY BE FOUND IN PARTICULAR INSTANCES.