B-12894, NOVEMBER 13, 1940, 20 COMP. GEN. 259

B-12894: Nov 13, 1940

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SAMPLING CONTRACTING OFFICERS ARE NOT REQUIRED OR AUTHORIZED TO DENY THE PRIVILEGE OF BIDDING ON THE GOVERNMENT'S COAL REQUIREMENTS TO PERSONS OR FIRMS WILLING TO QUOTE PRICES BELOW MINIMUM PRICES ESTABLISHED BY THE BITUMINOUS COAL DIVISION. THERE IS NO OBJECTION TO THE INCLUSION IN INVITATIONS TO BID ON THE GOVERNMENT'S COAL REQUIREMENTS OF A PROVISION PRESCRIBING A BASIS FOR THE SUBMISSION OF BIDS BY THOSE BIDDERS ATTEMPTING TO COMPLY WITH THE MINIMUM PRICE PROVISIONS OF THE BITUMINOUS COAL ACT OF 1937. PROVIDED BIDDERS ARE NOT REQUIRED TO SUBMIT BIDS ON SUCH BASIS BUT ARE ADVISED THAT THEY MAY QUOTE SUCH FAVORABLE TERMS TO THE GOVERNMENT AS THEY DESIRE. THERE IS NO OBJECTION TO THE INCLUSION OF A PROVISION IN INVITATIONS FOR BIDS TO FURNISH BITUMINOUS COAL THAT THE BIDDER CERTIFY THE BID PRICE DOES NOT INCLUDE THE EXCISE TAX OF 1 CENT PER TON IMPOSED BY SUBSECTION (A) OF SECTION 3 OF THE BITUMINOUS COAL ACT OF 1937.

B-12894, NOVEMBER 13, 1940, 20 COMP. GEN. 259

CONTRACTS - COAL - SPECIFICATION PROVISIONS REGARDING MINIMUM PRICES, TAXES, ANALYSIS, AND SAMPLING CONTRACTING OFFICERS ARE NOT REQUIRED OR AUTHORIZED TO DENY THE PRIVILEGE OF BIDDING ON THE GOVERNMENT'S COAL REQUIREMENTS TO PERSONS OR FIRMS WILLING TO QUOTE PRICES BELOW MINIMUM PRICES ESTABLISHED BY THE BITUMINOUS COAL DIVISION, INTERIOR DEPARTMENT, OR TO SO FRAME AN INVITATION TO BID THAT SUCH PERSONS OR FIRMS COULD NOT SUBMIT QUOTATIONS BELOW THE ESTABLISHED MINIMUM PRICES. THERE IS NO OBJECTION TO THE INCLUSION IN INVITATIONS TO BID ON THE GOVERNMENT'S COAL REQUIREMENTS OF A PROVISION PRESCRIBING A BASIS FOR THE SUBMISSION OF BIDS BY THOSE BIDDERS ATTEMPTING TO COMPLY WITH THE MINIMUM PRICE PROVISIONS OF THE BITUMINOUS COAL ACT OF 1937, PROVIDED BIDDERS ARE NOT REQUIRED TO SUBMIT BIDS ON SUCH BASIS BUT ARE ADVISED THAT THEY MAY QUOTE SUCH FAVORABLE TERMS TO THE GOVERNMENT AS THEY DESIRE. THERE IS NO OBJECTION TO THE INCLUSION OF A PROVISION IN INVITATIONS FOR BIDS TO FURNISH BITUMINOUS COAL THAT THE BIDDER CERTIFY THE BID PRICE DOES NOT INCLUDE THE EXCISE TAX OF 1 CENT PER TON IMPOSED BY SUBSECTION (A) OF SECTION 3 OF THE BITUMINOUS COAL ACT OF 1937, AND THAT TAX EXEMPTION CERTIFICATES WILL BE FURNISHED. INVITATIONS FOR BIDS TO FURNISH COAL MAY BE SO PREPARED AS TO PROVIDE FOR CONSIDERATION OF BIDS WHICH ARE NOT SUBJECT TO THE PROVISIONS OF PARAGRAPHS 15 AND 16, STANDARD GOVERNMENT PURCHASE CONDITIONS ( COAL). PERTAINING TO ANALYSIS, SAMPLING, AND PAYMENT FOR COAL FURNISHED, IF BIDDERS WISH TO SUBMIT QUOTATIONS ON SUCH BASIS BECAUSE OF RESTRICTIONS IN THE BITUMINOUS COAL ACT OF 1937, PROVIDED SUCH PROVISIONS ARE RETAINED IN THE INVITATIONS FOR APPLICATION TO OTHER BIDDERS WHO MIGHT NOT OBJECT THERETO.

COMPTROLLER GENERAL WARREN TO THE ADMINISTRATOR OF VETERANS' AFFAIRS, NOVEMBER 13, 1940:

I HAVE YOUR LETTER OF OCTOBER 14, 1940, AS FOLLOWS:

IT IS NECESSARY THAT THE VETERANS' ADMINISTRATION IMMEDIATELY ADVERTISE FOR BIDS FOR FURNISHING BITUMINOUS COAL TO ITS FACILITIES THROUGHOUT THE COUNTRY DURING THE PERIOD DECEMBER 1, 1940, TO JUNE 30, 1941, AND IN ORDER TO COMPLY AS NEARLY AS POSSIBLE WITH THE BITUMINOUS COAL ACT OF 1937 ( PUBLIC NO. 48, 75TH CONGRESS) AND THE MARKETING RULES AND REGULATIONS PROMULGATED BY THE BITUMINOUS COAL DIVISION, DEPARTMENT OF THE INTERIOR, PURSUANT TO SECTION 4, PART 2 OF SAID ACT, THIS OFFICE, AFTER CONSULTATION WITH AND AT THE REQUEST OF THE BITUMINOUS COAL COMMISSION, PROPOSES TO INCLUDE IN ITS CONTRACTS THE FOLLOWING SPECIAL CONDITIONS IN ADDITION TO THE CONDITIONS IMPOSED BY SECTION 9 OF THE BITUMINOUS COAL ACT OF 1937:

A. IT IS UNDERSTOOD AND AGREED THAT ALL COAL DELIVERED UNDER ANY CONTRACT AWARDED AT A PRICE NOT BELOW THE APPLICABLE MINIMUM PRICE AS ESTABLISHED BY THE BITUMINOUS COAL DIVISION AT THE TIME OF AWARD (LESS THE EXCISE TAX OF ONE CENT PER NET TON) WILL BE PAID FOR AT THE CONTRACT PRICE OR AT THE APPLICABLE MINIMUM PRICE IN EFFECT AT THE TIME OF DELIVERY (LESS THE EXCISE TAX OF ONE CENT PER NET TON) IF SUCH APPLICABLE MINIMUM PRICE IS IN EXCESS OF THE PRICE AT WHICH THE CONTRACT WAS AWARDED: PROVIDED, IF THERE SHOULD BE AT ANY TIME DURING THE LIFE OF THIS CONTRACT NO EFFECTIVE MINIMUM PRICE ESTABLISHED BY THE BITUMINOUS COAL DIVISION APPLICABLE TO THE COAL TO BE FURNISHED HEREUNDER, THE RIGHT IS RESERVED TO ACCEPT COAL TO THE END OF THE CONTRACT PERIOD AT THE ORIGINAL CONTRACT PRICE OR TO TERMINATE THE CONTRACT WITHOUT LIABILITY TO EITHER PARTY. THE TERM "MINIMUM PRICE" AS USED HEREUNDER IS THE MINIMUM PRICE ESTABLISHED BY THE BITUMINOUS COAL DIVISION FOR THE MARKET AREA PLUS OR MINUS ANY FREIGHT ADJUSTMENT (REQUIRED OR PERMITTED AS THE CASE MAY BE) SET FORTH IN THE DIVISION'S APPLICABLE PRICE SCHEDULE COVERING SIZE OF COAL PRODUCED AT THE MINE NAMED IN THE CONTRACT FOR SHIPMENT TO DESTINATION WITHIN SUCH MARKET AREA.

B. THE GOVERNMENT SHALL NOTIFY THE SELLER IN WRITING OF ALL RECONSIGNMENTS AND/OR DIVERSIONS, EXCEPT THAT SUCH NOTIFICATION IS NOT NECESSARY WHERE THE COAL IS PURCHASED FOR AND USED AS RAILROAD FUEL AND THE RECONSIGNMENT AND/OR DIVERSION DOES NOT RESULT IN A CHANGE IN THE APPLICABLE MINIMUM PRICE. IN THE CASE OF ANY RECONSIGNMENT AND/OR DIVERSION, THE SELLER SHALL CHARGE AND THE GOVERNMENT SHALL PAY NOT LESS THAN THE APPLICABLE MINIMUM PRICE PRESCRIBED FOR SUCH COAL AT THE TIME OF THE RECONSIGNMENT AND/OR DIVERSION FOR DELIVERY TO THE DESTINATION TO WHICH SUCH SHIPMENT IS ACTUALLY DELIVERED AND FOR THE USE TO WHICH IT IS ACTUALLY APPLIED.

C. THE COAL SHIPPED PURSUANT TO THIS CONTRACT IS SOLD AND PURCHASED UPON THE FOLLOWING CONDITIONS:

(A) IF THE COAL IS SOLD FOR CONSUMPTION OR PROCESSING IT SHALL BE USED IN THE PLANT OR PLANTS NAMED HEREIN AND FOR THE USE STATED HEREIN.

(B) IN CASE THE COAL IS APPLIED BY THE GOVERNMENT TO A USE OTHER THAN THAT STATED HEREIN, THE GOVERNMENT SHALL NOTIFY THE SELLER IN WRITING AND THE SELLER SHALL CHARGE AND THE GOVERNMENT SHALL PAY NOT LESS THAN THE APPLICABLE MINIMUM PRICE FOR SUCH COAL IN EFFECT AT THE TIME OF SUCH CHANGE IN APPLICATION FOR THE USE TO WHICH IT IS ACTUALLY APPLIED.

D. IN ACCORDANCE WITH THE PROVISIONS OF SUBSECTION (E) OF SECTION 3 OF THE BITUMINOUS COAL ACT OF 1937, THE BIDDER CERTIFIES THAT THE BID PRICE DOES NOT AND IN EVENT OF AWARD THAT THE CONTRACT PRICE SHALL NOT INCLUDE THE EXCISE TAX OF ONE CENT PER TON OF TWO THOUSAND POUNDS IMPOSED BY SUBSECTION (A) OF SAID SECTION. A TAX EXEMPTION CERTIFICATE WILL BE FURNISHED.

IN REGARD TO SPECIAL CONDITIONS B AND C, SUPRA, PLEASE BE ADVISED THAT WHILE THIS ADMINISTRATION WAS INFORMED THAT UNDER THE MARKETING RULES AND REGULATIONS CODE MEMBERS COULD NOT SUBMIT QUOTATIONS OR CONSUMMATE CONTRACTS WITHOUT THESE CONDITIONS, SUCH CONDITIONS ARE NOT APPLICABLE TO PURCHASES BY THE VETERANS ADMINISTRATION, INASMUCH, AS IT DOES NOT RECONSIGN OR DIVERT ITS COAL; NEITHER DOES IT USE COAL FOR PURPOSES OTHER THAN STATED IN THE CONTRACT; NAMELY, BOILER FUEL.

THE BITUMINOUS COAL DIVISION HAS ALSO ADVISED THAT: "PARAGRAPH 16 TOGETHER WITH THE LAST SENTENCE IN PARAGRAPH 15 OF THE STANDARD GOVERNMENT PURCHASE CONDITIONS, IN EFFECT, PROVIDE FOR THE ENTERING INTO OF AN AGREEMENT UPON A PENALTY BASIS WHICH WILL PERMIT THE SALE OF COAL AT AN AGGREGATE CONTRACT PRICE BELOW THE APPLICABLE MINIMUM PRICE OR PRICES ESTABLISHED BY THE DIVISION FOR THE COAL SOLD AND DELIVERED UNDER SUCH AGREEMENT. SUCH AN AGREEMENT IS IN VIOLATION OF RULE 6 OF SECTION VIII OF THE MARKETING RULES AND REGULATIONS, WHICH RULE PROVIDES AS FOLLOWS:

" "FROM AND AFTER THE EFFECTIVE DATE OF THESE MARKETING RULES AND REGULATIONS NO CODE MEMBER, HIS SALES AGENT, OR A DISTRIBUTOR SHALL ENTER INTO OR PERFORM ANY AGREEMENT MADE UPON A PENALTY OR A PREMIUM AND PENALTY BASIS WHICH WILL PERMIT THE SALE OF COAL AT AN AGGREGATE CONTRACT PRICE BELOW THE APPLICABLE MINIMUM PRICE OR PRICES ESTABLISHED BY THE DIVISION FOR THE COAL SOLD AND DELIVERED UPON SUCH AGREEMENT SUBSEQUENT TO SAID EFFECTIVE DATE.'"

THERE IS ENCLOSED HEREWITH, FOR YOUR INFORMATION, COPY OF LETTER DATED OCTOBER 7, 1940 TO MR. ARNOLD LEVY, ASSISTANT GENERAL COUNSEL, BITUMINOUS COAL DIVISION, TOGETHER WITH COPY OF REPLY DATED OCTOBER 9, 1940 FROM MR. ABE FORTAS, GENERAL COUNSEL, BITUMINOUS COAL DIVISION, REGARDING THIS MATTER.

THERE IS ALSO ENCLOSED COPY OF STANDARD FORM NO. 43, STANDARDIZED GOVERNMENT PURCHASE CONDITIONS ( COAL.)

A DECISION IS REQUESTED AS TO WHETHER THE INCLUSION OF ANY OF THESE SPECIAL CONDITIONS IN COAL CONTRACTS AND THE DELETION OF THE LAST SENTENCE IN PARAGRAPH 15 AND THE ENTIRE PARAGRAPH 16 OF THE STANDARD GOVERNMENT PURCHASE CONDITIONS ( COAL) WOULD BE CONTRARY TO THE LAWS GOVERNING DISBURSEMENTS OF GOVERNMENT FUNDS.

IT WAS HELD IN DECISION PUBLISHED AT 19 COMP. GEN. 453, THAT CONTRACTING OFFICERS OF THE GOVERNMENT ARE NOT REQUIRED OR AUTHORIZED TO REJECT A BID FOR FURNISHING BITUMINOUS COAL TO THE GOVERNMENT ON THE GROUND THAT THE PRICES QUOTED THEREIN ARE BELOW THE MINIMUM PRICES ESTABLISHED PURSUANT TO THE BITUMINOUS COAL ACT OF 1937, 50 STAT. 72; THAT THERE SHOULD NOT BE FORECLOSED THE RIGHT OF THE GOVERNMENT TO OBTAIN THE COAL NEEDED IN THE PERFORMANCE OF ITS FUNCTIONS ON THE BEST TERMS AVAILABLE; AND THAT THERE IS NO LEGAL DUTY ON GOVERNMENT PURCHASING AGENTS TO INQUIRE INTO AND PREDETERMINE THE QUESTION OF POSSIBLE CODE VIOLATIONS. HAVING REGARD THEREFOR, THERE WOULD BE NO AUTHORITY IN CONTRACTING OFFICERS TO DENY THE PRIVILEGE OF BIDDING ON THE GOVERNMENT'S COAL REQUIREMENTS TO PERSONS WHO WOULD BE WILLING TO QUOTE PRICES BELOW MINIMUM PRICES ESTABLISHED BY THE BITUMINOUS COAL COMMISSION OR TO SO FRAME AN INVITATION TO BID THAT SUCH PERSONS OR FIRMS COULD NOT SUBMIT QUOTATIONS BELOW THE ESTABLISHED MINIMUM PRICES.

THE OBVIOUS PURPOSE OF PARAGRAPH A OF YOUR LETTER IS TO PRESCRIBE A BASIS PROVIDING FOR THE PAYMENT OF ESTABLISHED MINIMUM PRICES APPLICABLE TO THE COAL WHICH WOULD BE DELIVERED UNDER THE CONTEMPLATED CONTRACT. THE SAID PARAGRAPH WOULD APPEAR TO BE FOR THE PROTECTION OF THOSE BIDDERS WHO WISH TO COMPLY IN ALL RESPECTS WITH THE BITUMINOUS COAL ACT OF 1937 AND CONTRACT ON THE BASIS THAT ESTABLISHED MINIMUM PRICES WILL BE PAID FOR THE COAL DELIVERED. TO THAT EXTENT THIS OFFICE WOULD NOT QUESTION INCLUSION OF THE PARAGRAPH IN YOUR INVITATIONS TO BID, PROVIDED, OF COURSE THAT THE INVITATION CONTAINED SUITABLE PROVISIONS AUTHORIZING THE SUBMISSION OF BIDS ON AN ALTERNATIVE BASIS, I.E., ON THE BASIS OF A FIXED PRICE TO CONTROL DURING THE ENTIRE CONTRACT PERIOD IRRESPECTIVE OF THE QUESTION OF MINIMUM PRICES OR ON OTHER PRICE TERMS THAT A PARTICULAR BIDDER MIGHT CARE TO QUOTE. THE PARAGRAPH MAY BE CONSIDERED ONLY AS PRESCRIBING A BASIS FOR THE SUBMISSION OF BIDS BY THOSE BIDDERS ATTEMPTING TO COMPLY WITH THE MINIMUM-PRICE PROVISIONS OF THE BITUMINOUS COAL ACT BUT NOT AS FORECLOSING THE RIGHT OF THE GOVERNMENT TO OBTAIN THE COAL FROM ANY OTHER BIDDER ON THE BEST TERMS AVAILABLE.

HOWEVER, THE WORDS "UNDER ANY CONTRACT AWARDED AT A PRICE NOT BELOW THE APPLICABLE MINIMUM PRICE AS ESTABLISHED BY THE BITUMINOUS COAL DIVISION AT THE TIME OF AWARD (LESS THE EXCISE TAX OF ONE CENT PER NET TON)" APPEARING IN THE FIRST SENTENCE OF THE SAID PARAGRAPH A MAY PROVE TROUBLESOME IN ADMINISTRATION. AS NOW WORDED THE SAID PARAGRAPH WOULD NOT AUTHORIZE THE PAYMENT OF CURRENT MINIMUM PRICES OF COAL AT TIME OF DELIVERY IN THE EVENT A QUOTATION WAS BASED UPON EXISTING MINIMUM PRICES WHICH WERE INCREASED BETWEEN THE DATE OF SUBMISSION OR OPENING OF BIDS AND THE TIME OF AWARD. SINCE THE BIDDER PROBABLY COULD PROTECT ITSELF WITH RESPECT TO ANY CHANGE IN MINIMUM PRICES BETWEEN THE DATE OF SUBMISSION OF ITS BID AND THE DATE OF OPENING OF BIDS, IT IS SUGGESTED THAT THE PURPOSE OF THE PARAGRAPH MIGHT BE REALIZED MORE FULLY BY CHANGING THE QUESTIONED WORDS TO "UNDER ANY CONTRACT AWARDED AT A PRICE NOT BELOW THE APPLICABLE MINIMUM PRICE AS ESTABLISHED BY THE BITUMINOUS COAL DIVISION AT THE TIME OF OPENING BIDS.'

IF, AS YOU STATE, THE VETERANS' ADMINISTRATION DOES NOT RECONSIGN OR DIVERT ITS COAL, OR USE THE COAL FOR PURPOSES OTHER THAN BOILER FUEL AS STATED IN CONTRACTS, THERE WOULD APPEAR TO BE NO OBJECTION TO INCLUDING THE CONDITIONS OF PARAGRAPHS B AND C IN YOUR INVITATIONS TO BID, PROVIDED, OF COURSE, BIDDERS ARE NOT REQUIRED TO SUBMIT BIDS ON THE BASIS OF THOSE CONDITIONS BUT ARE ADVISED THAT THEY MAY QUOTE ON SUCH FAVORABLE TERMS TO THE GOVERNMENT AS THEY DESIRE, AS MORE FULLY EXPLAINED HEREINBEFORE.

THERE APPEARS NO OBJECTION TO THE INCLUSION IN YOUR ADVERTISEMENTS FOR BITUMINOUS COAL OF THE PROVISIONS OF PARAGRAPH D OF YOUR LETTER.

THE CONCLUDING SENTENCE OF PARAGRAPH 15 AND THE PROVISIONS OF PARAGRAPH 16, STANDARD GOVERNMENT PURCHASE CONDITIONS ( COAL), STANDARD FORM NO. 43, PERTAIN TO ANALYSIS, SAMPLING, AND PAYMENT FOR COAL FURNISHED, INCLUDING THE RIGHT OF THE GOVERNMENT TO MAKE DEDUCTION FROM THE CONTRACT PRICE IN THE EVENT THE COAL CONTAINS EXCESS ASH. IF A BIDDER WISHES TO SUBMIT A QUOTATION NOT SUBJECT TO SUCH PROVISIONS BECAUSE OF RESTRICTIONS IN THE BITUMINOUS COAL ACT NO REASON IS APPARENT WHY IT MAY NOT DO SO OR OR WHY THE ADVERTISEMENT SHOULD NOT BE SO PREPARED AS TO PROVIDE FOR THE RECEIPT AND CONSIDERATION OF SUCH BIDS SO LONG AS THOSE RESTRICTIONS ARE RETAINED IN THE ADVERTISEMENT FOR APPLICATION TO OTHER BIDDERS WHO MIGHT NOT OBJECT THERETO. IT IS TO BE OBSERVED, OF COURSE, THAT ACCEPTANCE OF A BID NOT SUBJECT TO THOSE CONDITIONS, APPARENTLY WOULD FORECLOSE THE RIGHT OF THE GOVERNMENT TO MAKE A REDUCTION IN THE CONTRACT PRICE IN THE EVENT THE COAL FAILED TO MEET SPECIFICATIONS. HOWEVER, IT APPEARS THAT SUCH COAL COULD BE REJECTED ON THAT ACCOUNT. IF SUCH A BID BE ACCEPTED THERE IS SUGGESTED THE ADVISABILITY OF HAVING TESTS OF THE COAL MADE PROMPTLY IN ORDER THAT THE COAL MAY BE REJECTED IN THE EVENT IT DOES NOT MEET SPECIFICATION REQUIREMENTS.